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THE CO-GUARDIAN SHOULD NOT HAVE BEEN REMOVED WITHOUT A HEARING; ALTHOUGH THE CO-GUARDIAN HAS A FELONY CONVICTION, SHE OBTAINED A CERTIFICATE OF RELIEF FROM DISABILITIES; THEREFORE, ALTHOUGH SURROGATE’S COURT CAN REMOVE THE CO-GUARDIAN IN THE EXERCISE OF DISCRETION, REMOVAL IS NOT AUTOMATIC (FOURTH DEPT).

The Fourth Department, reversing Surrogate’s Court, determined the co-guardians’ petition to remove co-guardian respondent Suzette Bonerb should not have been granted without a hearing. Petitioner and Suzette Bonerb were previously appointed co-guardians of their adult child, Whitney Bonerb, and co-trustees of the Whitney Bonerb Credit Shelter Supplemental Needs Trust. Although respondent Suzette had been convicted of a felony, which would allow removal by Surrogate’s Court sua sponte, Suzette had been granted a certificate of relief from disabilities. Therefore a hearing was required:

… [T]he certificate does not prevent the Surrogate “from revoking [respondent’s appointments] in the exercise of its discretion (see Correction Law § 701 [3]); it merely preclude[s] the automatic revocation of” those appointments … . * * *

… [R]espondent conceded that she had been convicted of a felony, but established that she disclosed that fact in the applications for appointments and that she later obtained a certificate of relief from disabilities with respect to that felony (see Correction Law § 701). … [S]he contended that she had been advised by counsel that she was eligible to be appointed a fiduciary at the time when she signed the statement to that effect. Consequently, the Surrogate must make a credibility determination concerning those issues, and then exercise her discretion concerning whether respondent should be removed from her appointments … . Matter of Bonerb, 2021 NY Slip Op 06487, Fourth Dept 11-19-21

 

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NOTING THE SPLIT OF AUTHORITY BETWEEN THE 2ND AND 4TH DEPARTMENTS, THE 3RD DEPARTMENT SIDED WITH THE 2ND AND HELD THAT, WHERE THE PROPERTY OWNER IS DECEASED, JURISDICTION OVER THE PERSONAL REPRESENTATIVE OF THE DECEDENT IS REQUIRED FOR AN IN REM TAX FORECLOSURE PROCEEDING (THIRD DEPT).

The Third Department, in a complex tax foreclosure case involving many other parties and many other issues, in a full-fledged opinion by Justice Lynch, over a dissent, determined the city could not proceed against property owned by a deceased party without jurisdiction over the personal representative of the decedent’s estate. The court noted a split of authority between the Second and Fourth Departments. The Fourth Department held that a tax foreclosure is an in rem proceeding (against the property) and the death of the owner is therefore irrelevant. The Third Department sided with the contrary ruling by the Second Department(requiring jurisdiction over the personal representative). The two-justice dissent argued the Fourth Department’s approach is the correct one:

Supreme Court properly granted Paul’s motion to vacate the default judgment. Paul is the adult son of Paywantie Allicock (hereinafter decedent), who purchased the property at 82 James Street in the City of Schenectady, Schenectady County (hereinafter the property) in 2004 and resided there with her son until she passed away in May 2015. Paul continues to reside at the premises. At issue is whether petitioner duly acquired jurisdiction over the property for purposes of this RPTL article 11 in rem foreclosure proceeding, commenced in April 2019. Pertinent here, there is a split between the Second and Fourth Departments as to whether a tax foreclosure proceeding may include a parcel where the owner is deceased at the time the action is commenced (compare Matter of Foreclosure of Tax Liens, 165 AD3d at 1116, with Hetelekides v County of Ontario, 193 AD3d 1414, 1419-1420 [2021]). We ascribe to the viewpoint expressed by the Second Department that such a proceeding may not be commenced until such time as the petitioner first acquires jurisdiction over the personal representative of the decedent’s estate … . Matter of City of Schenectady, 2021 NY Slip Op 06120, Third Dept 11-10-21

 

THE PROPONENT OF THE WILL DID NOT DEMONSTRATE DECEDENT KNEW THE NATURE AND EXTENT OF THE PROPERTY HE WAS DISPOSING AT THE TIME THE WILL WAS EXECUTED (SECOND DEPT).

The Second Department, over a strong dissent, determined that Alice, the decedent’s sister, did not prove the decedent knew the nature and extent of the property he was disposing at the time the will was executed:

Alice testified that the decedent told her his total assets amounted to $200,000. The decedent then told the attorney who prepared the will that his total assets amounted to $1.5 million, when in fact, with the annuity, his assets, including nonprobate property consisting of an IRA in the amount of $258,299, are valued at more than $2.6 million. This amount does not include the CDs the decedent claimed were held in trust for his grandchildren, which are not listed on the inventory of assets filed with the Surrogate’s Court. * * *

On the day he executed the will [December 15], the 83-year-old decedent, who had stage IV prostate cancer, had been a patient at WPH for two weeks, since December 1, 2014. He was admitted with a fever, generalized weakness, pneumonia, bilateral pleural effusion, and a 30-to-40-pound weight loss over the prior three to four months. During those two weeks, he had a choking incident on December 4, which caused respiratory and cardiac arrest and resulted in intubation and transfer to the ICU, and a second incident on December 13, two days prior to executing the will, during which he developed respiratory arrest, was transferred to the CCU, and was sedated with morphine. At times, during the day before he executed the will, as well as on the morning of the day of the execution, the decedent exhibited an inability to follow instructions, disorientation, confusion, inability to benefit from education, impulsive behavior, and a potential to injure himself. On both the day prior to the execution of the will and the day the will was executed, the decedent was intubated and on a ventilator and unable to speak. The decedent was also sedated with lorazepam the day before the execution of the will. Matter of Falkowsky, 2021 NY Slip Op 05122, Second Dept 9-29-21

 

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THE GRANTOR WAS NOT THE SOLE HEIR OF THE TITLE HOLDER; THEREFORE THE DEED PURPORTING TO TRANSFER A 100% INTEREST IN THE PROPERTY WAS VOID AB INITIO (SECOND DEPT).

The Second Department determined a deed was null and void because the grantor was not the sole heir of the title holder:

By a deed dated July 25, 2012, Colie Gallman, Jr., alleged to be the sole heir of Lillian Hudson, purportedly transferred his 100% interest in certain real property owned by Hudson to the defendant. In January 2015, the plaintiff commenced this action against the defendant seeking a judgment declaring that the July 25, 2012 deed is null and void. * * *

A misrepresentation in a deed that the seller of the property is the sole heir of the holder of the title to the property renders the conveyance void ab initio … . Here, the evidence and affidavits submitted by the plaintiff to the Supreme Court during the course of motion practice in this action established that Colie Gallman, Jr., was not the sole heir of Hudson as of the date of the subject deed, and thus, the deed purporting to convey all of the interest in the subject property is void ab initio … . In opposition, the defendant failed to raise a triable issue of fact. 23A Vernon, LLC v Oneal, 2021 NY Slip Op 05017, Second Dept 9-22-21

 

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THE NONDOMICILIARY DID NOT HAVE MINIMUM CONTACTS WITH NEW YORK; NEW YORK DID NOT HAVE PERSONAL JURISDICTION OVER THIS TRUST LITIGATION (FOURTH DEPT).

The Fourth Department, reversing Surrogate’s Court, determined New York did not have jurisdiction over this trust litigation:

In the petition, the settlor and beneficiary of the trust (decedent) sought an accounting and removal of respondent, a Virginia resident, as trustee. The trust was created in 1996 in New Jersey. At the time the trust was created, decedent was a resident of Illinois and respondent was a resident of Georgia. Respondent administered the trust from Georgia until he relocated to Virginia, and he administered the trust from Virginia thereafter. Decedent relocated to New York in 2016. Solely as a consequence of decedent’s choice of residence, respondent sent to New York occasional trust-related correspondence, including “five or six” checks disbursing trust assets.

… “Due process requires that a nondomiciliary have ‘certain minimum contacts’ with the forum and ‘that the maintenance of the suit does not offend traditional notions of fair play and substantial justice’ ” … A nondomiciliary has minimum contacts with New York if he or she “purposefully avails” himself or herself of “the privilege of conducting activities within” New York … . thereby ” ‘invoking the benefits and protections’ ” of New York’s laws … . Our focus is on ” ‘the relationship among the [respondent], the forum, and the litigation’ “… . We conclude that respondent lacks the requisite minimum contacts with the New York forum. He does not live, own property, or conduct business in New York. The first and only relationship that New York had to the subject trust was 20 years after its creation, when decedent became domiciled in New York and respondent disbursed trust assets to her in New York … . Matter of Murad Irrevocable Trust, 2021 NY Slip Op 04823, Fourth Dept 8-26-21

 

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IN THIS FORECLOSURE ACTION THE DEATH OF THE MORTGAGOR/PROPERTY OWNER DID NOT TRIGGER AN AUTOMATIC STAY BECAUSE THE MORTGAGOR/PROPERTY OWNER DIED INTESTATE AND THE ACTION COULD CONTINUE AGAINST THE DISTRIBUTEES WITHOUT THE APPOINTMENT OF A REPRESENTATIVE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the death of the mortgagor/property owner in this foreclosure action did not divest the court of jurisdiction because the mortgagor/property owner died intestate and the suit could continue against the distributees without the appointment of a representative:

“Generally, the death of a party divests a court of jurisdiction to act, and automatically stays proceedings in the action pending the substitution of a personal representative for the decedent” … . “In most instances a personal representative appointed by the Surrogate’s Court should be substituted in the action to represent the decedent’s estate”  … . “However, if a party’s death does not affect the merits of a case, there is no need for strict adherence to the requirement that the proceedings be stayed pending substitution” … . “Where a property owner dies intestate, title to real property is automatically vested in his or her distributees” … . Under such circumstances, “a foreclosure action may be commenced directly against the distributees” … . Thus, where a mortgagor/property owner dies intestate and the mortgagee does not seek a deficiency judgment, the mortgagor/property owner’s death “does not affect the merits of a case, [and] there is no need for strict adherence to the requirement that the proceedings be stayed pending substitution” … . Wells Fargo Bank, N.A. v Miglio, 2021 NY Slip Op 04780, Second Dept 8-25-21

 

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SUPREME COURT, PURSUANT TO CPLR ARTICLE 77, PROPERLY RESOLVED THE DISTRIBUTION OF A $4.5 BILLION GLOBAL SETTLEMENT PAYMENT BY JP MORGAN CHASE IN THIS RESIDENTIAL-MORTGAGE-BACKED-SECURITIES-RELATED ACTION (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Manzanet-Daniels, determined Supreme Court properly resolved the distribution pursuant to CPLR article 77 of a $4.5 billion global settlement payment by JPMorgan Chase to investors to be made by residential mortgage-backed securities (RMBS) trusts. The opinion is detailed, fact-specific and cannot be fairly summarized here.  The rulings are specific to provisions included in or absent from the relevant pooling and servicing agreements (PSA’s). Matter of Wells Fargo Bank v Aegon USA Inv. Mgt., LLC, 2021 NY Slip Op 04740, First Dept 8-19-21

 

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ALTHOUGH DOMINICA, THE EXECUTRIX OF JOSEPHINE’S ESTATE, WAS NEVER SUBSTITUTED FOR JOSEPHINE AFTER JOSEPHINE’S DEATH, DOMINICA APPEARED AND ACTIVELY LITIGATED A MOTION TO VACATE; THE FAILURE TO EFFECT SUBSTITUTION IN THAT CIRCUMSTANCE IS A MERE IRREGULARITY; TWO-JUSTICE DISSENT (FOURTH DEPT).

The Fourth Department, over a two-justice dissent, determined the failure to substitute the executrix of Josephine’s estate, Dominica P., after Josephine’s death did not nullify the proceedings. Dominca P appeared and actively litigated a motion to vacate brought by Kathleen. In that circumstance the failure to effect substitution was deemed a mere irregularity:

Josephine died at some point before the entry of the order on appeal, and the executrix of her estate, Dominica P., was never formally substituted as the petitioner in this proceeding. There is no dispute, however, that Dominica was properly served with Kathleen’s motion to vacate, and Dominica never objected to adjudicating Kathleen’s motion in the absence of a formal substitution order. To the contrary, Dominica—acting in her capacity as the executrix of Josephine’s estate—appeared and successfully opposed Kathleen’s motion on the merits. Dominica likewise appeared in this Court to oppose Kathleen’s appeal. Because Dominica appeared and actively litigated Kathleen’s motion on the merits, it is well established that any “defect in failing to first effect substitution was a mere irregularity” … . Moreover, to formally correct this irregularity, we now modify the order by substituting Dominica as the petitioner in this proceeding … . Matter of Robinson v Kathleen B., 2021 NY Slip Op 04320, Fourth Dept 7-9-21

 

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DIFFERENCES BETWEEN AN ACTION TO IMPOSE A CONSTRUCTIVE TRUST AND AN ACTION ALLEGING UNJUST ENRICHMENT EXPLAINED (THIRD DEPT).

The Third Department explained the differences between an action to impose a constructive trust and an action alleging unjust enrichment, here in the context of a couple’s investment in building a new house and the allegation one party put in 800 hours of unpaid labor which benefitted the other party.  The court held the constructive trust action was properly dismissed, but the unjust enrichment action should not have been dismissed:

Although the equitable claims of constructive trust and unjust enrichment are elementally related and involve overlapping proof, certain essential elements differ. “[A] constructive trust may be imposed when property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest” … . “The elements of a constructive trust are a confidential relationship, a promise, a transfer in reliance on that promise and unjust enrichment” … .As relevant here, with respect to the promise element, it may be express or implied, as determined by the circumstances … . “Finally, a person . . . is unjustly enriched when retention of the benefit received would be unjust considering the circumstances of the transfer and the relationship of the parties” … .

Importantly, and as relevant here, “the constructive trust doctrine serves as a fraud-rectifying remedy rather than an intent-enforcing one” … . By contrast, an action based on unjust enrichment, which would only result in a money judgment rather than a judicially imposed lien, requires the plaintiff to establish that “(1) the other party was enriched, (2) at [the plaintiff’s] expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered” … . Clark v Locey, 2021 NY Slip Op 04176, Third Dept 7-1-21

 

DECEDENT, WHO DIED TESTATE IN 2004, WAS AWARDED COMPENSATION BY CONGRESS IN 2015 BECAUSE HER HUSBAND HAD BEEN HELD IN IRAN AS A HOSTAGE FROM 1979 TO 1981; BECAUSE THE COMPENSATION WAS AWARDED AFTER HER DEATH, IT DOES NOT PASS BY WILL, BUT RATHER BY THE LAWS OF INTESTACY (FOURTH DEPT).

The Fourth Department, reversing Surrogate’s Court, in a full-fledged opinion by Justice Centra, determined the funds awarded by Congress to the decedent, after the decedent’s death, do not pass by decedent’s will, but rather by the laws of intestacy. Decedent, who died in 2004, was the wife of a man held hostage in Iran from 1979 to 1981. In 2015 Congress awarded compensation to the hostages’ families:

Regarding property acquired by an estate after the death of the testator, case law is sparse, but is consistent with the language in EPTL 3-3.1 providing that only property that a testator is entitled to devise “at the time of his [or her] death” may be distributed pursuant to the terms of the will … . We are particularly persuaded by the decision in Shaw Family Archives Ltd. , which involved a dispute over ownership interest in Marilyn Monroe’s right of publicity after her death. The court determined that New York law did not permit a testator to dispose by will of property that she did not own at the time of her death … . The court cited to EPTL 3-3.1 and held that “[t]he corollary principle recognized by the courts is that property not owned by the testator at the time of his [or her] death is not subject to disposition by will” … .

We agree with the reasoning in Shaw Family Archives Ltd. that the New York rule is grounded in the testator’s lack of capacity to devise property he or she does not own at the time of death … . Matter of Keough, 2021 NY Slip Op 03948, Fourth Dept 6-17-21

 

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