Surrogate Upholds Marriage Otherwise Void Under NJ Law

In Matter of Farraj, 23 Misc 3d 1109(A), 2009 NY Slip Op 50684(U) (Sur. Ct. Kings Co.), Surrogate López Torres applied modern conflicts of law principles to uphold the out of state marriage of two New York domicilliaries, even though the couple had not obtained a marriage license as required by local law. The marriage, however, was solemnized before a Imam.

The Surrogate citing the Restatement (Second) Conflict of Laws, as reflective of the modern view, held that she would apply the law which had the most significant relationship to the two spouses and to the marriage -- that law was unquestionably New York as it was where the spouses were domiciled at the time of the marriage. Under New York law as long as a religious ceremony occurs, the marriage is valid, regardless of whether a license has been obtained.

Proceeding to Confirm Arbitration Award Triggers Forfeiture Clause in Will

In Matter of Kalikow, 23 Misc 3d 1107(A), 2009 NY Slip Op 50624(U) (Sur. Ct. Nassau Co.), the will provided:

"In the event that any of my descendants shall, directly or indirectly, under any pretense or for any cause or reason whatever, in any jurisdiction, oppose the probate of my Will, or institute, abet, take, or share, directly or indirectly, in any action or proceeding against my estate to impeach, impair, set aside or invalidate any of the provisions of my Will, or make any agreement, direct or indirect, in connection with any of the foregoing, with any person instituting, abetting, taking or sharing in such action or proceeding, directly or indirectly, I do hereby revoke any and all dispositions, devises, bequests, trusts or other provisions, including the option provided in Article TENTH hereof, to or for the benefit of any such descendant, and I direct that any such dispositions, devises, bequests, trust or other provisions, to or for the benefit of any such descendant, shall become part of my residuary estate."

An issue in the estate was the decedent's right to bequeath certain partnership interest, without the consents required under the partnership agreement.

The respondent-beneficiaries demanded arbitration of the dispute and the arbitrator determined that the agreement precluded a transfer of a partnership interest by testamentary instrument. The beneficiaries then brought a proceeding to confirm the arbitration award.

The Surrogate held that the commencement of the proceeding to confirm the award, not the demand for arbitration, triggered the forfeiture clause:

"A forfeiture could not occur prior to a determination of petitioners' rights under the partnership agreement. In 2006, petitioner served a demand to arbitrate. By decision dated October 13, 2006, the court determined that the dispute was subject to arbitration. An arbitration hearing was conducted on April 9, 2008 followed by an award which concluded that the agreement prohibited a bequest by a partner without the consent of the other partners. At that point, petitioners were apprised of their standing to contest the bequest under Article "NINTH."

Thereafter, petitioners made a motion to confirm the award. They opposed a motion to vacate the award. These actions demonstrated petitioners' intention to enforce their rights under the partnership agreement which precluded a partner from conveying or transferring his or her partnership interest without the consent of the other partners. Their decision to enforce their rights under the partnership agreement did "impeach, impair, set aside or invalidate [one of the] provisions of [decedent's] will" in contravention of the terms of Article "EIGHTEENTH" of the will, thereby triggering the in terrorem clause. "

Surrogate Holds Non-Apportionement of Estate Tax Clause Void as to Attesting Witness

In Matter of Wu, 2009 NY Slip Op 29188 (Sur. Ct. New York Co.), in a matter of first impression, Surrogate Glen held that a clause directing that all estate taxes , imposed on all items included in the computation of the estate tax, "whether passing under this Will or otherwise" are to be paid from the general estate, was void as to an attesting witness (decedent's brother) who was a beneficiary of two life insurance policies with a $3,314,215 death benefit.

The Surrogate reasoned that "The policy animating the invalidation of a legacy to a person whose testimony is required for probate is equally applicable to a benefit conferred by a tax clause."

The Court pointed out that for purposes of determining forfeiture, the witness' interest is measured as of the time of execution of the will and that forfeiture is not be required where the witness is designated as a beneficiary of non-probate assets after the execution of the will.

Accordingly, the Court directed that estate taxes are to be apportioned against the life insurance proceeds in the manner provided in EPTL 2-1.8.

Court Permits Production of Documents in Electronic Form in Lieu of Paper

In Matter of Link, 2009 NY Slip Op 29160 (Sur. Ct. Westchester Co.), Surrogate Scarpino authorized the production of documents by electronic files, in lieu of paper, noting that although the most recent cases have focused on the production of electronic evidence, as opposed to the manner by which documents are turned over, the relevant statute, CPLR 3122 does not prohibit such production and that in federal practice, the courts have held that the production of documents by electronic files is routinely permitted, provided that the production is in a reasonably usable form, such as PDF format.

Accordingly the Court directed that the production be accompanied by an index where the producing party identifies the document(s) produced in response to each demand and the electronic file where the document has been stored, because without an index, it would be unduly burdensome to require the demanding party to read numerous documents (here, 6,000), some of which may not bear upon the objections.

New York Gets New Power of Attorney Legislation

Although not strictly speaking estate litigation news -- New York has a new power of attorney statute that makes sweeping changes to current law. As signed by the Governor, Ch. 644, Laws 2009, was to be effective on March 1, 2009. Legislation has recently been signed postponing the effective date until September 1, 2009.

New forms will be required and the attorney-in-fact will be required to sign the power of attorney.

I will post a link to the new legislation when one is available.

Surrogate Declines to Seal File from Public Access

In Matter of Goldman, 21 Misc 3d 1138(A), 2008 NY Slip Op 52419(U) (Sur. Ct. New York Co. 2008), the Executors of the Estate of Sol Goldman sought to seal the file relating to settlement of the third intermediate account of the executors. In support of the request the executors cited a 1992 order of the Appellate Division which directed sealing of the record in a proceeding to compel an interim distribution from this estate, and a 1994 order of a prior Surrogate allowing sealing of papers in related proceedings "to the extent they contain confidential information concerning inventories or valuation of estate property." In support of the current application the Executors claimed that the importance of keeping the financial information under seal has not changed.

In denying the application to seal the record, the Court first noted the strong public policy in favor of access to judicial records and that the Executors have have not met their burden, finding that they have alleged no facts from which any harm to the estate can be inferred, much less harm that outweighs the importance of public access to the files. The 1992 and 1994 sealing orders on which they rely are found distinguishable from the present circumstances in that the motion papers in support of the 1992 order detailed the specific danger to the estate of disseminating its then current financial status; the 1994 order expressly referred to confidential inventories and valuations. In the current accounting proceeding, however, the files contain no appraisals or inventories.

The Court noted that it was certainly not evident on its face that disclosure of 21 year old valuations would cause any harm to the estate, whether significant, concrete, or otherwise.

Court Conditions Attorney's Withdrawal on Commencement of Article 81 Proceeding for Client

In Cheney v. Wells, __ Misc.3d __, __ N.Y.S.2d __, (Sur. Ct. New York Co. 2008), the Surrogate conditioned the grant of an attorney's motion for leave to withdraw as counsel for respondent on the commencement of an Article 81 proceeding for a limited property guardian for the client within 30 days.

The attorney (one of a number of successor counsels for respondent) sought to withdraw on the ground that a substantial conflict exists between the firm and respondent precluding their continued representation of her in this matter. Following the submission of in camera affidavits, the Court met with respondent and her counsel and determined that it was apparent not only that respondent was incapable of managing the instant litigation, but also that she was unable to appreciate the consequences of that incapacity.

The Court wrote that "this is, of course, precisely the situation addressed by Mental Hygiene Law Article 81, our adult guardianship statute. * * * [which] permits appointment of a guardian only for those areas in which a person "is likely to suffer harm because" [she] "is unable to provide for personal needs and/or property management; and . . . the person cannot adequately understand and appreciate the nature and consequences of such inability" (MHL § 81.02[b][1], [2]). * * * Thus, a person who is adequately managing personal needs and most financial needs might, as may be the case here, need a guardian only for a specific and limited purpose * * * ."

The Surrogate then stated that ajudicial determination, based on an evidentiary hearing, was need to determine whether respondent is capable of managing this litigation within the definition of Article 81. If she is, then the case will be tried, with or without counsel representing her. If she is not, and the Article 81 court so determines, a limited property guardian can be appointed and the trial will proceed with that guardian directing the litigation, including any counsel she may choose to retain.

The Court then addressed the issue of whether a client's attorney may be the petitioner in such an Article 81 Proceeding. Finding the soon to be replace Code of Professional Responsibility "decidedly unhelpful" in reesolving the issue, the Court looked at the soon to enacted (April 1, 2009) Model Rules of Professional Responsibility and held that such action would be permitted under Model Rule 1.4. Accordingly, motion to withdrawwas granted contingent upon the attorney commencing an Article 81 proceeding for a limited property guardian for the respondent within 30 days of the date of the Order.

Donees of Gifts Within 3 Years of Death Responsible for Estate Tax Attributable to Inclusion of Gift Tax Paid

At issue in Matter of Rhodes, __ Misc.3d __, __ N.Y.S.2d __, 2008 NY Slip Op 28472 (Sur. Ct. Westchester Co. 2008), was whether donees of gifts made within three years of death are responsible for paying estate tax attributable to the inclusion of the gift tax paid on such transfers

Prior cases (Matter of Meltzer, 176 AD2d 15 [1992]; Matter of Coven, 148 Misc 2d 132 [1990]) had held that since the gifts themselves do not form a part of decedent's "gross tax estate" because such gifts are added after the tax computation schedule. Concerning the gift tax paid, the Surrogate noted that unlike adjusted taxable gifts which are added to the tax calculation in a separate step after the gross estate has been determined, the gift taxes paid are a component of the gross estate as defined by IRC 2035 (and thus for application of EPTL 2-1.8) and as such are subject to tax apportionment. Accordingly, the Court held that the donees of the gifts made within three years of decedent's death are responsible for paying their ratable share of the estate tax attributable to the inclusion of the gift tax paid. A secondary issue was whether the donees would be responsible for paying any additional gift tax if imposed by the IRS following the audit of the gift tax return. The Surrogate directed that this shall be addressed in a proceeding to determine its validity or as an incident to a judicial accounting.

Executor Allowed Commission Despite Will Provision, with Consent of Beneficiaries

In Matter of Ostrer, __ Misc.3d __ 2008 NY Slip Op 28534 (Sur. Ct. Nassau Co. 2008), the Surrogate awarded commissions to an executor even though the will expressly provided that "any person, including an attorney, who serves as an executor or as a trustee for me under the provisions of this Last Will and Testament shall not be entitled to receive commissions"

The Surrogate held that since all of the beneficiaries were adult and competent and had executed a knowing consent to the payment, the executor would be allowed the commission. The Court noted that there appeared to be prior case so holding but he reasoned that since the courts have permitted full statutory commissions, e.g., to an executor who is only entitled to half a commission pursuant to SCPA 2307-a where all of the beneficiaries of the estate have consented there is no reson to deny the payment under these circumstances.

Arbitration Agreement Binding on Decedent's Estate

In Matter of Kalikow, __ A.D.3d __, __ N.Y.S.2d __, 2009 NY Slip Op 00539 (2d Dep't 2009), the Second Department affirmed the Surrogate's holding that a decedent's agreement to arbitrate a controversy is binding on the representative of the decedent's estate and finding that contrary to the estate's contention , the demand to arbitrate does not concern the construction of the decedent's will or the administration of her estate.

The decedent had been a party to a partnership agreement that, inter alia, required the prior written consent of the other partners before a partner could make certain types of transfers of all or part of his partnership interest. The decedent's propounded will specifically bequeathed her 1% general partnership interest to a charitable foundation which also was bequeathed the residuary estate. The residuary estate included the decedent's 50% limited partnership interest. The other partners contended that the purported bequests of the decedent's interests in the Partnership under the propounded will violated the restrictions on transfer contained in the partnership agreement, requiring the prior written consent of the other partners, which was not obtained and served the demand for arbotration which was challenged by the estate.

Surrogate Erred in Appointing Temporary Administrator

In Matter of Lurie, __ A.D.3d __, __ N.Y.S.2d __, 2009 NY Slip Op 00446 (1st Dep't 2009), The First Department reversed the Surrogate's appointment of a corporate fiduciary as Temporary Administrator of the Estate of Boris Lurie over the executor nominated in the will, holding that since the 'Petitioner was a nominated executor, and as such his petition should have been granted 'unless there are serious and bona fide allegations of misconduct or wrongdoing.'" The Court found that record does not establish that petitioner is unfit by reason of "want of understanding" (see SCPA 707[1][e]), that there was no particular reason to doubt his qualifications, or the qualifications of those he would employ to assist him in the task of uncovering and handling the decedent's oversees assets and the existence or identity of distributees, any more than there is reason to doubt the qualifications of the corporate fiduciary's employees who will be assigned those tasks and that The asserted business relationship between petitioner and the decedent does not constitute such a conflict as could disqualify him as nominated executor.

Executor in Prior Will Denied Leave to File Objections to Probate

In Matter of Eshagian, __ A.D.3d __, __ N.Y.S.2d __, (2d Dep't 2008) the Second Department reversed an order of the Queens County Surrogate's Court and denied the application of an executor named in a prior will to file objections to probate. The Appellate Division held that the executor's conclusory and speculative allegations concerning decedent's lack of testamentary capacity and susceptibility to undue influence were insufficient to establish "good cause." Even though the application was supported by the affirmation of a neurologist, the Court noted that the expert never met the decedent, never examined or treated him and never spoke to the decedent's treating physician. The expert based his opinions on an examination of the decedent's medical records and on one conversation with a brother of the decedent, who was not even present when the challenged instrument was executed.

The Court further held that the executor's 's waiver of the commissions was insufficient, in and of itself, to establish that his proposed objections were prompted solely by the obligation to see that the decedent's wishes were not frustrated.

No New SCPA 2307-a Statement Required Where Codicil Executed Following 2004 Amendment of SCPA 2307-a

In Matter of Moss, __ Misc.3d __, _ N.Y.S.2d __, 2008 NY Slip Op 028338 (Sur. Ct. New York Co. 2008) (decided with Matter of Hess), Surrogate Roth held that where a testatrix had executed a SCPA 2307-a disclosure statement that complied with the then applicable disclosure requirements, her execution of a codicil following the 2004 amendment of the statute (2004 NY Laws ch. 709), which inter alia, added the requirement that the testatrix be informed that by executing a disclosure statement she was freeing the attorney from the l50% limitation on his commissions that would otherwise be applied. The Court held that since the changes made by the codicil did not involve a fiduciary appointment and thus not an occasion for discussion of fiduciary compensation. Query whether the result would have been different if the codicil appointed an attorney as an additional fiduciary or substituted one for another.

Attorney-Drafter’s Partner Cannot Serve as SCPA 2307-a Disclosure Statement Witness

In Matter of Hess, __ Misc.3d __, _ N.Y.S.2d __, 2008 NY Slip Op 028338 (Sur. Ct. New York Co. 2008) (decided with Matter of Moss), Surrogate Roth held that a partner of the attorney-drafter is not qualified to serve as a witness to an SCPA 2307-a disclosure statement. The Surrogate reasoned that since the drafter and his partner are “affiliated,” he/she is not disinterested in the transaction and therefore ineligible to act as a witness.

Surrogate Grants Standing to Conduct SCPA 1404 Discovery to Temporary Administrator

In Matter of Astor, __ Misc.3d __, _ N.Y.S.2d __, 2008 NY Slip Op 28317 (Sur. Ct. Westchester Co. 2008), Surrogate Scarpino held that the corporate temporary administrator of the estate, which was not named as a fiduciary in any prior instrument, could nonetheless participate in SCPA 1404 discovery. The Court held because of the rather unique facts of the case – the executors named in prior wills had renounced their nominations – the bank had demonstrated good cause to conduct the discovery. Among the reasons cited by the Court were the serous allegations of lack of due execution, lack of capacity and undue influence, and the radical change in testamentary given the decedent’s strong charitable intent reflected in prior wills.

Another interesting issue presented was whether the decedents son, who was then under indictment for alleged crimes relating to decedent’s finances and estate plan was required to produce documents in discovery in the face of is assertion of his Fifth Amendment privilege against self-incrimination. The claim was not only that the documents sought were testimonial in nature, but that the very act of production could be incriminating. The Surrogate directed that he would review, in camera, all documents over which a privilege was asserted.

Surrogate Rejects Breach of Fiduciary Claims Against Bank

In Matter of David Small Trust, 19 Misc 3d 1135(A), __ N.Y.S.2d __, 2008 NY Slip Op 51014(u) (Sur. Ct. Onondaga Co. 2008), the Surrogate dismissed objections concerning the investment of the trust assets and the alleged failure to employ prudent trust management practices. Objections had been filed by the two individual trustees and their issue to a corporate fiduciary’s final accounting in connection with its resignation. First, since the trust instrument required a majority of the three trustees to act and that the corporate fiduciary never acted without the approval of at least one of the individuals, citing Matter of Bloomingdale, (see, post of February 14, 2008), the Surrogate held that the individual trustees have acquiesced in the conduct and are bound thereby. Concerning mismanagement, the Court rejected the testimony of the objectants’ expert and held that none of the investments made were unreasonable or outside of the scope of the powers granted. The Court emphasized the prevailing wisdom that it is not sufficient that hindsight would have suggested a different investment and that a mere error of investment judgment does not mandate a surcharge — investment infallibility is not required and trustees need not have prescience in investment decisions.

Constructive Trust Claim Governed by Six-Year Statute of Limitations

In Reiner v. Jaeger, 50 A.D.3d 761, __ N.Y.S.2d __, 2008 NY Slip Op 03188 (2d Dep’t 2008), the Appellate Division, Second Department affirmed the dismissal of a action to impose a constructive trust where the claim was that the parties were supposed to have acquired the property as co-owners, not in the defendant’s name alone, more than six years before the commencement of the action. The Court held that the cause of action accrued “upon the occurrence of the wrongful act giving rise to a duty of restitution” which in this case was the defendant’s acquisition of title in her name alone. The Court rejected the claim of an equitable estoppel against invoking the statute of limitations defense, because there was no showing that it was the defendant’s affirmative wrongdoing which caused the long delay between accrual of the cause of action and the commencement of suit.

Executor Did Not Violate Her Fiduciary Duty by Failing to Relinquish a Personal Interest in Favor of Estate

In Matter of Rockefeller, 44 A.D.3d 1170, 843 N.Y.S.2d 732, 2007 NY Slip Op 07949 (3d Dep’t 2007), the executor owned property abutting that of the estate. One of the estate’s beneficiaries claimed that the estate’s property had a perpetual easement over the executor’s property, which would have greatly enhanced the value of the estate’s parcel. Held: The executor was not obligated to relinquish her personal property rights in favor of th estate by acknowledging the existence of an easement when there was no deeded basis for such a claim.

Dependent Relative Revocation Alive in NY?

In Matter of Sharp, 19 Misc.3d 471, 2008 NY Slip Op 28066 (Sur. Ct. Broome Co. 2008), Surrogate Peckham held that even thought the decedent’s 2001 was denied probate because it was not properly witnessed and the originals of her 1977 and 1979 wills could not be located and were presumed revoked as decedent had access to them before her death, a 1974 will which was properly executed would be admitted to probate. Noteworthy of course is the fact that accepted law in New York is that the 1977 will, even though it could not be located revokes the prior 1974 will. However, the Surrogate in a rare application of “dependent relative revocation” in New York held that the decedent’s revocation of the 1974 will was conditional in nature and since the condition (the probate of a later will) was not being fulfilled, the revocation of the prior will is not effective.

Surrogate Declines to Seal Records

In Matter of Schwartz, (2008 NY Slip Op 28301) (Decided August 19, 2008) Sur. Ct. Kings Co.), a proceeding pursuant to SCPA 1401 to compel production of documents purporting to be wills turned over to the Surrogte's Court by the NYC Police Department, Surrogate López Torres declined to seal the probate file, nothing that public access to the courts is a hallmark of our dispute adjudication system and that a sealing application will only be granted where an overriding compelling interest is demonstrated. The Surrogate looked to Uniform Rule, 22 N.Y.C.R.R. 216.1 and held that the conclusory submissions from the Police Department that failure to seal "may serve to impede" homicide investigations" and the decedent's children's argument that the documents contain information that is potentially embarrassing to the decedents' memory were insufficient to establish good cause to justify sealing of the records.

Guardian of Person Lacks Standing to Object to Trust Accounting

In Matter of Mary XX, __ A.D.3d __, __ N.Y.S.2d __ (3d Dep't 2008) the Appellate Division, Third Department held that although a guardian of the person appointed pursuant to MHL Article 81 ("Article 81 Guardian") has standing to compel an accounting on behalf of the ward, the Article 81 Guardian lacks standing to object to the account after it has been filed.

On a prior appeal, the Court had held that the Article 81 Guardian had standing to compel the account, because otherwise no one would have had standing to compel the account during the ward's lifetime and because the Article 81 Guardian is entitled to information as to available resources. However, since in the later commenced voluntary accounting proceeding, the Court had appointed a guardian ad litem to represent the ward's interest and the order appointing the Article 81 Guardian contained no authority concerning property management, the Article 81 Guardian lacked standing to contest the account.

Elective Share Claim Upheld - Post-Death Challenge to Marriage Rebuffed

In Matter of Berk, 2008 NY Slip Op 28247 (Decided July 3, 2008) (Sur. Ct. Kings Co.) Brooklyn Surrogate Diana Johnson upheld a spouse's elective share claim in the face of a challenge to the competence of a 100 year old decedent's marriage to his 47 year old nurse, twelve months before his death. The Court reasoned that even if the marriage could be successfully annulled, EPTL 5-1.2 provides that a spouse is ineligible only if a "final decree or judgment of divorce, annulment, declaration of nullity or dissolution of marriage recognized as valid under New York law was in effect when the deceased spouse died." Hence, it rejected the estate's argument that if the marriage is annulled it will be voided nunc pro tunc and be void from inception, because under Domestic Relations Law §7 a marriage is voidable, not void if one of the parties thereto was incapable of consenting to the marriage for want of understanding -- and a voidable marriage is only void from the time its nullity is declared by a court.

Surrogate Authorizes Guardian ad litem to Retain Expert

In Matter of Greene, 2008 NY Slip Op 28220 (Sur. Ct. Westchester Co.) Westchester County Surrogate, Anthony A. Scarpino, Jr. granted the application of a guardian ad litem to retain the services of a medical expert to be paid from the estate. The Court found that the guardian has demonstrated that the expert's services fall outside his expertise and that the services are necessary to enable him to effectively represent his ward and that even though there is no express provision which authorizes payment to an expert retained by a guardian ad litem, sections 405 and 2111 of the SCPA provide for compensation of a guardian ad litem and authorize the advance payment of such fees. The Court noted: "It is clear from these statutes that the court has latitude to fix and determine the legal fees and disbursements of a guardian ad litem at any time during a proceeding." Accordingly, the application was granted.

DRL §250 and the Time to Challenge a Prenuptial Agreement

In Brody v. Brody, 2008 NY Slip Op (Decided May 6, 2008) the Supreme Court, Nassau County (Ross, J.) held although recently enacted Domestic Relations Law §250 which provides that the statute of limitations for commencing a proceeding "that arises from" a prenuptial agreement or marital agreement is tolled until either process is served in a matrimonial action or proceeding or one of the parties to the agreement dies, by its terms does not apply to any agreement where the commencement of an action was time-barred on the effective date (July 3, 2007), the defendant may attack the validity of the time barred prenuptial agreement, but only as a defense raised in her answer, only as a shield for recoupment purposes, and not to obtain affirmative relief.

Presumption Overcome: Lost Will Admitted to Probate

In Matter of Gillen, 2008 NY Slip Op 50942 (Decided May 7, 2008), Nassau County Surrogate John B. Riordan, admitted a photocopy of a 27 year old will to probate, even though it appeared that the original was last in possession of the decedent. In implicitly finding that the presumption of revocation was overcome, the Court focused on the facts that (1) the will was executed only about one month prior to the decedent's death, (2) the sole legatee was the only natural object of her bounty, (3) although the decedent's death was many years ago, no search was made for her will until recently, (4) a the photocopy of the will was found among the decedent's papers, and (5) the will was executed in the decedent's home two days before her admission into the hospital where she died one month later.

On these facts the Surrogate found it "extremely unlikely that the decedent, knowing that her death was near, would go to the trouble of having a will prepared and executed, which left her estate to her only child, and then destroy the will within 48 hours. What seems infinitely more likely is that the original will was accidentally lost or destroyed, either when the home was cleaned out after the decedent's death, or in the ensuing 27 years since then."