Opinion
No. 1999–P–851.
2012-11-9
Estate of Rosario P. DRAGO, also known as Rosario Drago, Deceased.
Bashian & Farber, LLP (Gary E. Bashian, Esq., of counsel) for Joseph R. Drago, movant. James G. Mermigis, Esq., for Mariann Casarella, objectant.
Bashian & Farber, LLP (Gary E. Bashian, Esq., of counsel) for Joseph R. Drago, movant. James G. Mermigis, Esq., for Mariann Casarella, objectant.
LEE L. HOLZMAN, J.
In this accounting proceeding one of the decedent's sons, who served as the executor of the estate until his letters were suspended (see Matter of Drago, NYLJ, Oct. 22, 2010, at 31, col. 2), moves, pursuant to CPLR 3211 and 3212, to dismiss the pro se objections to his account interposed by a daughter on the ground that she lacks standing to interpose objections. The movant also seeks costs and attorney's fees pursuant to the Rules of the Chief Administrator of the Courts (22 NYCRR) § 130–1.1. The objectant, who is now represented by counsel, opposes the motion, contending that she has standing to file objections.
The decedent died testate on October 16, 1999 survived by a spouse and six children, including the movant and the objectant. The will bequeaths one-half of the adjusted gross estate outright to the spouse and the residuary to a marital deduction trust with the income payable to the spouse during her lifetime. The trust also grants the trustee power to invade principal for the spouse's benefit. Upon the death of the spouse, any remaining trust principal is payable to the decedent's “then living issue, per stirpes” in the event that the spouse does not otherwise exercise her limited power to appoint the beneficiaries of the trust principal.
Letters testamentary and letters of trusteeship issued to the movant on December 9, 1999. After the objectant commenced a compulsory accounting proceeding the court directed the movant to file an account. He filed the instant accounting as executor for the period from October 16, 1999 to September 15, 2010.
The decedent's spouse, who lives in Florida, was determined to be totally incapacitated as of December 7, 2009 by the Circuit Court for Lee County, Florida. The plenary guardian appointed by the Florida court was authorized by order of that court, entered January 21, 2011, to abandon any claim the spouse might have to the estate and, thereafter, that guardian indicated he would not raise any objections and would abandon any claims of the spouse in connection with the judicial settlement of the estate. This decision appears to be based on the belief that pursuit of objections did not make practical sense because substantial judgments entered against the movant rendered it unlikely that any surcharge imposed against him in this proceeding actually could be collected.
The movant's “first intermediate account” reports “Total Charges” of $391,287.13 and, after credit for realized decreases of $11,540.62 and funeral and administration expenses of $90,919.44, the sum of $288,827.07 remained. Schedule E of the account indicates that the entire net distributable estate of $288,827.07 was distributed to the spouse in the period from December 24,1999 to February 28, 2000. Thus, although the movant refers to his accounting as “intermediate,” as there are no assets remaining to be administered, for all practical purposes it is a final accounting. Moreover, only $208,900 is reported to have been distributed to the spouse by check, with the balance of the distributions to the spouse allegedly paid in “cash.”
The objections allege, inter alia, that: (1) in the compulsory accounting and removal proceeding, the movant admitted that he transferred 500 shares of Consolidated Edison stock to himself and alleged that he gave the cash value of that stock to the spouse, but the sale of those 500 shares does not appear in the accounting and the value of that stock was higher than what allegedly was distributed to the spouse; (2) no credit should be allowed for administration and funeral expenses allegedly paid by Josario because, inter alia, it was an entity owned by the movant and the decedent and it ceased doing business nine years prior to the decedent's death; (3) considerable assets are not accounted for, such as the decedent's 1999 BMW and extensive coin and jewelry collections, including an 18 karat gold wrist watch worth approximately $25,000; (4) various administrative expenses listed in Schedule C should not be considered as funeral or administrative expenses such as the $317.64 paid to the brother-in-law of the movant, $135 paid to the movant's business secretary and $150.41 for “tapes;” (5) there is no explanation for cash transfers made to the spouse; and, (6) pursuant to the will, the movant was directed to fund a trust for the spouse with one half of the estate proceeds, and there is no evidence that he complied with that directive.
The movant now contends that the objectant lacks standing to object to the account as she is not a residuary or pre-residuary beneficiary under the will, so she cannot derive any personal benefit from objecting to an executor's accounting even if all her objections are sustained. He also asserts that: (1) assuming standing exists, the spouse was entitled to all trust funds in the trustee's discretion, distributions to the spouse were made, so the court could view those transfers as being made by the executor to himself in his capacity as trustee and then to the spouse; (2) there is no income or principal remaining in the trust and, even assuming there was, the spouse could exercise her power to make distributions among the issue as she saw fit; and, (3) to date, there is no evidence that the spouse exercised that power in favor of the objectant and, if she did so in her will, it is not effective until her death, at which time, the “then living issue” of the decedent can be determined. Alleging that the pleadings and objections to date are frivolous and intended solely to harass him, the movant seeks the imposition of sanctions against the objectant for costs and attorney fees.
In opposition to the motion the objectant states, inter alia, that: (1) at the hearing in Florida on the waiver and abandonment issue, the plenary guardian acknowledged irregularities in the accounting relating to Josario, but as there was no money in the trust, no bond, and the movant had unrelated multi-million dollar judgments against him, the plenary guardian did not want to expend legal fees that he could not recover; (2) despite her service of document demands, the movant failed to provide any discovery so summary judgment is premature; (3) the movant distributed to himself under the guise of Josario a significant amount of money, and failed to account for possessions not held jointly with the spouse such as a 1999 BMW auto; and, (4) as the standing issue was not raised previously the issue was waived and, in any event, she has standing to object to the account as a contingent remainderman of the trust.
Here, even assuming, arguendo, that the movant did not waive the standing issue by failing to raise it in the prior compulsory accounting proceeding, the objectant has a contingent remainder interest in the testamentary trust. Moreover, there is no independent trustee to represent the interest of any person who might ultimately receive the remainder interest in the trust, and there is no satisfaction and release signed by the spouse who is presently incapacitated.
Any person or entity who is required to be served with process in an accounting proceeding under SCPA 2210 has the right to conduct discovery and interpose objections to the account (see SCPA 2211[2] ). Here, it is clear that the objectant, as a contingent remainderman of the trust, had to be served with process in this accounting proceeding for the following reasons: (1) the movant as the executor of the estate cannot account to himself as the sole trustee of the testamentary trust, and instead, is required to serve process upon all persons interested in the trust (see SCPA 2210[10]; Matter of Ziegler, 157 Misc.2d 423 [1993] ); (2) the persons interested in a testamentary trust are those “who are entitled absolutely or contingently by the terms of the will” to share in the trust (SCPA 2210[9] ); and, (3) the fact that the movant labeled his account as an executor's accounting does not relieve him of the requirement that he serve the contingent beneficiaries of the testamentary trust, where, as here, he reports the invasion of principal of the marital trust in his executor's accounting proceeding (see Matter of Seidman, 124 Misc.2d 1053 [1984] ).
The movant's reliance upon Matter of Malasky (290 A.D.2d 631 [2002] ) for the proposition that the objectant lacks standing to object to any action taken by the trustee with regard to the trust until the death of the spouse is misplaced. The Malasky court held that the remainderman of a lifetime trust had no right to object to the acts of the trustees during the period that both settlors of the trust were alive because during that period “they acted as trustees, received the income from the trust and explicitly retained the power to revoke or amend the trust at any time,” and consequently, those with a remainder interest had no interest in the trust until “the trust became irrevocable” when one of the settlors died (290 A.D.2d at 632). Here, unlike Malasky, as the trustee is not the creator of a lifetime trust with the right to use all of the income and to terminate the trust at his will, he does not have the right to preclude the contingent remainderman from seeking to surcharge him if, in fact, he did not properly distribute all of the trust principal to the spouse. The movant's contention that a person or an entity may be a necessary party to a proceeding who must be served with process but has no right to file any objections with regard to any act of the fiduciary in that accounting proceeding makes is illogical. It is true that testamentary beneficiaries who receive only a general disposition (see EPTL 1–2.8) or a specific disposition (see EPTL 1–2.17) lack standing to interpose objections that relate only to the residuary estate. Similarly, testamentary beneficiaries whose bequests would abate even if their objections were sustained (see EPTL 13–1.3) lack standing to interpose such an objection. Nonetheless, the cases where respondents are served with process in an accounting proceeding and lack standing to file objections with regard to matters that will not affect their interests under any circumstances, are clearly distinguishable from this proceeding where the objectant's contingent interest may vest in the future and she might suffer irreparable losses if she is not allowed to pursue her objections now. Thus, parties with a contingent remainder interest, such as the objectant, may not be precluded from interposing objections that relate to the trust principal where there is a possibility that their interest ultimately might vest (see SCPA 2210[9], [10]; SCPA 2211[2]; Matter of Seidman, 124 Misc.2d at 1053). Moreover, now that process was served upon the objectant in this proceeding, she could be precluded in any subsequent trustee accounting proceeding from raising any objection that could have been interposed herein but was not (see Matter of Hunter, 4 NY3d 260 [2005] ).
Accordingly, for the reasons stated herein, the court finds that the objectant has standing to interpose objections that could affect trust principal, and this decision constitutes the order of the court denying the movant's motion. In light of the determination herein that the objectant has standing to interpose objections that affect her contingent remainder interest, the movant's motion for costs and attorney's fees based on frivolous litigation is also denied. The parties are directed to appear for a discovery conference to be held during the court's calendar of December 12, 2012 which commences at 9:30 a.m. in courtroom 406. The Chief Clerk is directed to mail a copy of this decision and order to all counsel.
Proceed accordingly.