Opinion
2014-05-22
Accounting of Lawrence KALIK, et al. Accounting of Carl Wagman, etc. Loretta Wagman, Plaintiff–Appellant–Respondent, v. Lawrence Kalik, etc., et al., Defendants–Respondents, Chemical Bank, et al., Defendants, Chase Manhattan Bank as successor-in-interest to Chemical Bank, Defendant–Respondent–Appellant.
Benjamin Z. Holczer P.C., West Hempstead (Benjamin Z. Holczer of counsel), for appellant-respondent. Hahn & Hessen LLP, New York (Jonathan M. Proman of counsel), for respondent-appellant.
Benjamin Z. Holczer P.C., West Hempstead (Benjamin Z. Holczer of counsel), for appellant-respondent. Hahn & Hessen LLP, New York (Jonathan M. Proman of counsel), for respondent-appellant.
Katten Muchin Rosenman, New York (Jay W. Freiberg of counsel), for Lawrence Kalik, respondent.
Weil, Gotshal & Manges LLP, New York (Gregory Silbert of counsel), for Weil, Gotshal & Manges and Mildred Kalik, respondents.
TOM, J.P., RENWICK, RICHTER, FEINMAN, GISCHE, JJ.
Order, Surrogate's Court, New York County (Renee Roth, S.), entered on or about January 2, 2009, which resubmitted this matter to a referee for further findings of fact, and order, same court (Nora Anderson, S.), entered on or about March 6, 2012, which confirmed the referee's report, unanimously affirmed, without costs.
In this action, arising out of a trust created by Louis Wagman (Louis) in 1977, Carl Wagman, Louis' son, was substituted as plaintiff after Louis' widow (plaintiff's mother), Loretta Wagman, died. Although plaintiff contends the referee was biased, he did not seek the referee's recusal and may not raise this argument for the first time on appeal ( see People v. Kirsh, 176 A.D.2d 652, 653, 575 N.Y.S.2d 306 [1st Dept.1991], lv. denied79 N.Y.2d 949, 583 N.Y.S.2d 203, 592 N.E.2d 811 [1992];see also Gottesman Bus. Brokers v. Goldman Fire Prevention Corp., 238 A.D.2d 250, 656 N.Y.S.2d 610 [1st Dept.1997] ).
Plaintiff waived his argument that the Surrogate should not have sent the Supreme Court action (which Supreme Court had previously transferred to Surrogate's Court) to a referee by failing to appeal from the order of reference ( see 587 Dev., Inc. v. Pizzuto, 8 A.D.3d 5, 777 N.Y.S.2d 494 [1st Dept.2004]; Law Offs. of Sanford A. Rubenstein v. Shapiro Baines & Saasto, 269 A.D.2d 224, 225, 703 N.Y.S.2d 110 [1st Dept.2000], lv. denied95 N.Y.2d 757, 713 N.Y.S.2d 1, 734 N.E.2d 1212 [2000] ).
Plaintiff lacks standing to object to the part of the accounting that covers the period when his father, the grantor, was alive, i.e. the period when the trust was revocable ( see Matter of Malasky, 290 A.D.2d 631, 632, 736 N.Y.S.2d 151 [3d Dept.2002]; see also Matter of Central Hanover Bank & Trust Co. [Momand], 176 Misc. 183, 186, 26 N.Y.S.2d 924 [Sup.Ct., N.Y. County 1941], affd.263 App.Div. 801, 32 N.Y.S.2d 128 [1st Dept.1941], affd. 288 N.Y. 608, 42 N.E.2d 610 [1942] ).
Although the referee found that plaintiff lacked standing to make objection 17, he nonetheless reached the merits by recommending that the Surrogate might wish to direct the amendment of the account sua sponte. This recommendation was to incorporate the defendant bank trustee's admitted inability to explain why approximately $600 in interest for the PBT Tax Exempt Bond Fund had not been credited for December 1977 and March 1978. Although the Surrogate did not abide by that recommendation, there was no reason for her to reach the merits of that objection since plaintiff lacked standing to raise it.
Plaintiff contends that the referee should have rejected the testimony of Lawrence Kalik, a trustee and executor of Louis' estate, that he was not actively involved in the management of Butterflake Bakery. However, the referee “was in the best position to weigh the evidence and make credibility determinations” ( Winopa Intl., Ltd. v. Woori Am. Bank, 59 A.D.3d 203, 204, 873 N.Y.S.2d 37 [1st Dept.2009] [internal quotation marks omitted]; see also Anonymous v. Anonymous, 289 A.D.2d 106, 107, 735 N.Y.S.2d 26 [1st Dept.2001] ).
Plaintiff failed to preserve his argument that defendants should be surcharged for $61,000 because they cannot produce a cancelled check from Butterflake for the settlement amount and because their accounting states that the Butterflake obligation was retired as worthless. Similarly, plaintiff failed to preserve the portion of his spoliation argument that involves Butterflake. Although he preserved the portion of his spoliation argument that addresses documentation for the withdrawals that his father made during his lifetime, the argument is unavailing since, as noted above, plaintiff lacks standing to object to the part of the accounting that covers the period during which Louis was alive.
Plaintiff contends that the decree approving defendant Kalik's account as executor is not res judicata because “fiduciaries can find no shelter in prior decrees on judicial settlement where ... disclosure of necessary facts is withheld” (Matter of Van Deusen, 24 Misc.2d 611, 614, 196 N.Y.S.2d 737 [Sur.Ct., Columbia County 1960] ). However, the referee found that plaintiff's mother was aware of the tax audits. Therefore, defendant Kalik did not withhold necessary facts by failing to disclose the tax audits in his accounting for Louis's estate.
The referee addressed the arguments that plaintiff reiterates on appeal regarding the trust's repayment of a loan made by plaintiff's mother and its treatment of tax refunds, the alleged distinction between mandatory and discretionary payments, and the decision to reserve for trust expenses from 1994 onward, and the Surrogate properly exercised her “broad power” to accept his report ( see Taveras v. General Trading Co., Inc., 73 A.D.3d 659, 660, 901 N.Y.S.2d 263 [1st Dept.2010] [internal quotation marks omitted] ). We defer to the referee's conclusions since they turn on a determination of witness credibility ( see id.).
Plaintiff contends that defendants should be surcharged because the Bank made no suggestions about diversifying the trust's assets between 1994 and 2001. Even if, arguendo, the trustees (including plaintiff himself) violated EPTL 11–2.3(b)(3)(c) and the Bank violated EPTL 11–2.3(b)(6), no surcharge is warranted because plaintiff failed to prove damages. He presented no evidence as to the date on which the Bank should have diversified the trust's assets or the value of the trust corpus on the date it should have been diversified ( see Margaret Valentine Turano, Practice Commentaries, McKinney's Cons. Laws of N.Y., Book 17B, EPTL 11–2.3).
In the alternative, plaintiff contends that the court should deny some or all of defendants' commissions due to their failure to diversify. He may make this argument before the Surrogate, whose 2012 order indicates that she will try the issue of commissions.
Contrary to plaintiff's contention, the referee correctly found that he abandoned any objections as to which he presented no proof ( see Schulman v. Levy, Sonet & Siegel, 302 A.D.2d 321, 754 N.Y.S.2d 876 [1st Dept.2003] ).
We have considered plaintiff's remaining arguments and find them unavailing.