Opinion
File No. 76397/C
07-22-2021
In the MATTER OF the Application of Mary G. SCRIPPS for an Interpretation, Construction and Related Relief regarding the James E. Scripps, III Family Trusts KeyBank National Association and Victoria M.D. Scrippscarmody, Respondents.
James M. Reilly, Esq., Attorney for Petitioner Mary G. Scripps, Herzog Law Firm P.C., Albany Leigh K. Phillips, Esq. and Mark E. Melendy, Esq., Co-counsel for Petitioner Mary G. Scripps, Sheehey Furlong & Behm P.C., Burlington, Vermont Richard D. Cirincione, Esq., Attorney for Respondent KeyBank National Association, Whiteman Osterman & Hanna LLP, Albany David J. Lorber, Esq., Attorney for Respondent Victoria M.D. Scrippscarmody, Setauket
James M. Reilly, Esq., Attorney for Petitioner Mary G. Scripps, Herzog Law Firm P.C., Albany
Leigh K. Phillips, Esq. and Mark E. Melendy, Esq., Co-counsel for Petitioner Mary G. Scripps, Sheehey Furlong & Behm P.C., Burlington, Vermont
Richard D. Cirincione, Esq., Attorney for Respondent KeyBank National Association, Whiteman Osterman & Hanna LLP, Albany
David J. Lorber, Esq., Attorney for Respondent Victoria M.D. Scrippscarmody, Setauket
Stacy L. Pettit, S.
Respondent Victoria M.D. Scrippscarmody (hereinafter respondent) is the beneficiary of a trust created under the "James E. Scripps III Family Trusts" agreement, (hereinafter the Trust). This proceeding was commenced by respondent's adoptive mother, Mary G. Scripps, (hereinafter petitioner), by order to show cause on June 16, 2020, a day before respondent turned 30 years of age and would have, presumptively, then been entitled to a distribution of one-half of her trust in the approximate sum of $2,000,000. The proceeding was brought to restrain respondent Key Bank National Association (hereinafter the independent trustee) from making a distribution to respondent due to her attaining age 30 on the basis that respondent is incapacitated as defined by the Trust terms, and therefore should not receive such distribution. The independent trustee has appeared and takes no position regarding the relief requested. Respondent filed objections alleging, among other things, that petitioner lacks standing in this proceeding and now moves to dismiss the proceeding on the same ground. The independent trustee takes no position with respect to the motion. Petitioner opposes the motion, and the motion has been submitted for decision.
Initially, the Court notes that section 6.1 of the Trust contains a choice of law provision which states that "[t]he trusts created hereunder have been established in the State of Michigan and all questions pertaining to their validity, construction and administration shall be determined in accordance with the laws of that State even though one or more trusts may at some time be administered elsewhere." Nonetheless, the Court concludes that "[u]nder conflicts of law principles, standing ‘goes to the jurisdiction of the court’ and is a procedural matter to be determined by New York law" ( Matter of Kosmo Family Trust , 61 Misc 3d 1224[A] [Sur Ct, Albany County 2018], appeal dismissed 176 AD3d 1465 [3d Dept 2019], *4, quoting City of New York v State of New York , 86 NY2d 286, 292 [1995] ; see also Tanges v Heidelberg N. Am., 93 NY2d 48, 54 [1999] ; Kilberg v Northeast Airlines , 9 NY2d 34, 41 [1961] ).
Respondent seeks dismissal pursuant to CPLR 3211 (a) (3) and argues that petitioner lacks standing to bring this proceeding because she does not have a "sufficient cognizable stake in the outcome" (Matter of Graziano v County of Albany , 3 NY3d 475, 479 [2004] quoting Community Bd. 7 of Borough of Manhattan v Schaffer , 84 NY2d 148, 155 [1994] ). Respondent contends that petitioner neither alleges nor has an interest in the Trust. Petitioner maintains that she has standing and relies upon that portion of the petition where she alleges that she is a beneficiary of the Trust and argues that, pursuant to the terms of the Trust, she is a contingent remainderman of respondent's trust.
CPLR 3211 (a) (3) provides that a motion to dismiss may be made on the ground that "the party asserting the cause of action has not legal capacity to sue." "Standing and capacity to sue are related, but distinguishable, legal concepts" ( Wells Fargo Bank Minn., N.A. v Mastropaolo , 42 AD3d 239, 242 [2d Dept 2007] ; see also Silver v Pataki , 96 NY2d 532, 537 [2001] ; Community Bd. 7 of Borough of Manhattan v Schaffer , 84 NY2d at 154-155 ). Capacity is a threshold matter that seeks to determine whether "the legislature invested [petitioner] with authority to seek relief in court," whereas standing relates to "whether a party has suffered an injury in fact conferring a concrete interest in prosecuting the action" (Matter of World Trade Ctr. Lower Manhattan Disaster Site Litig. , 30 NY3d 377, 384 [2017] [internal quotation marks omitted]; see also Community Bd. 7 of Borough of Manhattan v Schaffer , 84 NY2d at 155 ; Society of Plastics Indus. v County of Suffolk , 77 NY2d 761, 772-773 [1991] ). "Where a [party] moves to dismiss the complaint for lack of standing, the burden is on the moving [party] to establish, prima facie, the plaintiff's lack of standing" ( HSBC Bank USA, N.A. v Bermudez , 175 AD3d 667, 668 [2d Dept 2019] ; see also Blostein v Bauer , 218 AD2d 912, 913 [3d Dept 1995] ).
"[F]or purposes of the waiver rule set forth in CPLR 3211(e), standing and capacity to sue are sufficiently related that they should be afforded identical treatment" (Wells Fargo Bank Minn., N.A. , 42 AD3d at 243 ). Thus, "an argument that a plaintiff lacks standing, if not asserted in the defendant's answer or in a pre-answer motion to dismiss the complaint, is waived pursuant to CPLR 3211(e)" (id. at 242 ; see Matter of Fossella v Dinkins , 66 NY2d 162, 167-168 [1985] ; Dougherty v City of Rye , 63 NY2d 989, 991-992 [1984] ; Matter of Prudco Realty Corp. v Palermo , 60 NY2d 656, 657 [1983] ; HSBC Bank USA, N.A. v Pacyna , 112 AD3d 1246, 1247 [3d Dept 2013] ). Here, respondent raised in her answer an objection to petitioner's standing and has therefore preserved the argument.
Respondent is a Beneficiary of a Separate Subtrust of Ann F. Scripps's Separate Trust
The Trust was created in 1966 by Grantor Robert W. Scripps. In it, he created separate irrevocable trusts for the benefit of his nephew, James E. Scripps, III, and each of his nephew's three children, Ann F. Scripps, James E. Scripps, Jr. (IV), and Mary G. Scripps. The Trust plainly provides at the outset that Grantor's nephew and his nephew's three children "shall be considered ... "initial ‘beneficiar[ies]’ " of their separate trusts, and accords the term "beneficiary" a "restricted meaning referring only to such a person or to one who actually succeeds to part or all of a beneficiary's interests under the provisions of Section 1.6 (b)." Section 1.6 (b) (1) of the Trust gives a beneficiary of a separate trust the right to appoint successor beneficiaries to his or her trust, providing in relevant part, that
"[u]pon the death of a beneficiary of a separate trust ... who is a lineal descendant of James E. Scripps, III, such individual ... may designate by his or her Last Will and Testament ... a beneficiary or beneficiaries of such separate trust."
On January 1, 1994, Ann died survived by her three children, including respondent, then age three. Thereafter, petitioner, Ann's sister, adopted respondent. The independent trustee petitioned for an intermediate judicial settlement of its accounts and a determination of the proper distribution of trust assets following Ann's death. On October 19, 1995, the parties to the accounting and their attorneys, including the guardian ad litem appointed for respondent, executed a stipulation, followed by the Court's decree, determining that Ann effectively exercised in her Last Will and Testament the power of appointment granted by section 1.6 (b) (1) of the Trust to designate the beneficiaries of her separate trust when her will left to her three surviving issue, including respondent, "all the rest, residue and remainder of [her] property and estate ... including the balance of any trust." Thus, there can be no dispute that, pursuant to the terms of the Trust and the parties’ stipulation, respondent is a beneficiary of a separate trust derived of Ann's separate trust.
Petitioner is a Contingent Remainderman of Respondent's Separate Trust
On June 25, 2018, respondent married Dajuan Williams. On June 15, 2020, the instant application was filed with the Court. The order to show cause was issued by the Court the following day, and on June 17, 2020 respondent turned 30 years old: a condition precedent to respondent's ability to request establishment of a subaccount of one-half of respondent's separate trust for respondent's exclusive benefit pursuant to the terms of the Trust. More specifically, section 1.5 of the Trust, titled "Certain Beneficiaries’ Withdrawal Rights After Certain Age" provides, in relevant part, that
"with respect to each beneficiary of such separate trust who is a lineal descendant of [James E. Scripps, III] and who shall have then attained at least thirty (30) years of age ... upon the date he or she attains such an age, its Trustee shall segregate into a subaccount of such separate trust (which subaccount shall be for such beneficiary's exclusive benefit) that portion of the net assets then contained in such separate trust ... which is indicated by such beneficiary's then attained age, as follows:
Thirty (30) years of age- One-half (1/2) thereof.
Thirty-five (35) years of age - The entire balance thereof."
Section 1.5 of the Trust further provides that upon establishment of the subaccount, respondent may "freely withdraw[ ]" therefrom "any part or all of the net assets then contained therein, including the income and accumulated income" "if not then incapacitated."
Pursuant to sections 1.5 and 1.6 (b) (1), in the event of respondent's death, any amounts remaining in her subaccount or remaining in the separate trust shall be distributed to beneficiaries designated by respondent in her Last Will and Testament. If respondent dies intestate, section 1.5 provides that any amounts remaining in her subaccount
"shall cease to be segregated as a subaccount of that separate trust and, for the purposes of Section 1.6 [of the Trust], shall be treated as such deceased beneficiary's interest, or shall be added to the amount of his or her interests in the undivided net assets of such separate trust. In all other respects the assets which have been thus segregated into a subaccount shall be continued as a part of the separate trust as if no such segregation had occurred."
The amounts remaining in respondent's separate trust in the event she dies intestate will be distributed in accordance with section 1.6 (b) (2) titled "Designation in Default of Appointment" which provides, among other things, that
"[i]n the event that no such designation of a successor beneficiary can be or has been made, then upon the death of a beneficiary of a separate trust under this ARTICLE, the surviving spouse, if any, of such deceased beneficiary, if they were lawfully married and not separated at the date of such death and if such deceased beneficiary was a lineal descendant of JAMES F SCRIPPS, III, shall become a beneficiary, and until such surviving spouse remarries, will remain a beneficiary, of such separate trust to the extent of one-half (1/2) of such deceased beneficiary's then interest in the undivided net assets of such trust. The beneficiary or beneficiaries of the balance of such deceased beneficiary's then interest in the undivided net assets of such trust (i.e., either one-half or all of such interest, as the case may be depending on whether or not there is a surviving spouse of such deceased beneficiary who has not then remarried) shall be:
(i) Those of the lineal descendants of such deceased beneficiary who are also lineal descendants of JAMES E. SCRIPPS, III and who are then living, per stirpes, the then living surviving spouse as defined above, if any, of a then deceased lineal descendant of such deceased beneficiary to become a beneficiary to the same extent he or she would if his or her deceased spouse had survived to become a beneficiary and had then immediately died; or otherwise
(ii) Those of the lineal descendants of JAMES E SCRIPPS, III who are then living, per stirpes, the then living surviving spouse as defined above, if any, of a then deceased lineal descendant of JAMES E. SCRIPPS, III to become a beneficiary to the same extent he or she would if his or her deceased spouse had survived to become a beneficiary and had then immediately died; or otherwise
(iii) Those of the lineal descendants of NINA D. SCRIPPS who are then living, even though not now living, per stirpes, or if there are not, then
(iv) The person or persons who are already beneficiaries of any trust under the provisions of this ARTICLE, in equal shares if there be more than one."
Notably, there is no proof before the Court that, as of the commencement of this application, respondent duly executed a Last Will and Testament exercising her power of appointment to designate remainder beneficiaries of her trust in the event of her death. Thus, pursuant to section 1.6 (b) (2) of the Trust, upon respondent's death intestate, her surviving spouse will presumptively, subject to the conditions in the trust, be entitled to one-half of respondent's interest in the undivided net assets of her separate trust. The beneficiaries of the other half of respondent's interest will be determined by application of the alternative provisions contained within section 1.6 (b) (2) (i) — (iv) above. Section 1.6 (b) (2) (i) does not apply because there is no proof before the Court that respondent has any issue. However, application of alternative provisions (ii) through (iv) each result in the identification of petitioner as a contingent remainderman to a portion of respondent's trust if respondent dies intestate. Petitioner is the daughter of James E. Scripps, III pursuant to section 1.6 (b) (2) (ii), the great granddaughter of Nina D. Scripps pursuant to section 1.6 (b) (2) (iii) and, pursuant to section 1.6 (b) (2) (iv), she is a beneficiary of her own separate trust under the terms of the Trust.
Petitioner, as a Contingent Remainderman, is an Interested Person with Standing
To establish standing, New York courts require that a "litigant have something truly at stake in a genuine controversy" ( Saratoga County Chamber of Commerce v Pataki , 100 NY2d 801, 812 [2003] ; see also Society of Plastics Indus. v County of Suffolk , 77 NY2d at 772 ). Under the SCPA, a "person interested" includes "[a]ny person entitled or allegedly entitled to share as beneficiary in the estate" ( SCPA 103 [39] ). The definition of "estate" includes the property of a trust ( SCPA 103 [19] ; see also Matter of J. Stephen Dehimer Irrevocable Trust , 52 Misc 3d 1203[A] [Sur Ct, Oneida County 2016], aff'd 155 AD3d 1600 [4th Dept 2017] ). The beneficiaries of a trust are defined as "the persons or classes of persons, or the successors in interest of persons ... upon whom the settlor manifested an intention to confer beneficial interests (vested or contingent) under the trust, ... [including] persons who have succeeded to interests of beneficiaries by assignment, inheritance or otherwise" ( Matter of Wells Fargo Bank, N.A. , 2018 NY Slip Op 31883[U], **10 [Sup Ct, NY County 2018], quoting Restatement [Third] of Trusts § 48, Comment [a]). EPTL 6-4.10 defines a "future estate subject to a condition precedent" as "an estate created ... in favor of one or more presently ascertainable persons upon the occurrence of an uncertain event." Moreover, a litigant's interest in a trust is determined at the time the proceeding is commenced (see Matter of Brown , 144 AD3d 587, 587 [1st Dept 2016] ; HSBC Bank USA, N.A. v Bermudez , 175 AD3d at 668 ; Matter of Kosmo Family Trust , 61 Misc 3d at *4).
On June 16, 2020, the date of commencement of this proceeding, petitioner had standing to seek the instant relief because she was a beneficiary of a remainder interest subject to a condition precedent of respondent's separate trust. Pursuant to the terms of this irrevocable trust, it was the grantor's intention that, in the event of respondent's death before termination of the trust and without having executed a will naming beneficiaries or having produced any surviving lineal descendants, petitioner would share in respondent's "then interest" in her separate trust. Based on the information received by the Court in connection with this application, the circumstances as described existed at the time of its commencement, and petitioner had standing as a contingent remainder beneficiary (see SCPA 103 [19], [39] ; see also Matter of Wells Fargo Bank , 2018 NY Slip Op 31883[U] at **10). And "even when a beneficial interest in a trust is subject to a condition precedent, that uncertainty is not enough to deny standing to the party who seeks to protect the trust property to which such interest relates" ( Matter of Svenningsen , 105 AD3d 164, 176-177 [2d Dept 2013], quoting Matter of Morse , 177 Misc 2d 43, 46 [Sur Ct, New York County 1998] ; see also Benjamin v Morgan Guar. Trust Co. , 163 AD2d 135, 137 [1st Dept 1990] [testator's descendants as contingent remaindermen of trust in event of default or invalid exercise of power of appointment by testator's wife had standing to object to probate of will]; Matter of Epstein , 277 AD2d 452, 453 [2d Dept 2000] ).
The Court declines to consider respondent's argument, newly raised in her reply, that petitioner is without standing as a remainderman to challenge withdrawals by respondent from her separate trust because she has reached the age of 30 (see Gulledge v Jefferson County , 194 AD3d 1155, 1156 [3d Dept 2021]. In any event, respondent had not reached the age of 30 upon commencement of the instant application. Nor does the Court find relevant the prior determination dated March 30, 2001 by Surrogate Doyle and relied upon by respondent in opposition to the instant motion. The specific question before that Court, prompted by Ann's death and the 30th birthday of her daughter Alexandra, was whether or not the portion of section 1.5 of the Trust which reads "upon the first date after the death of James E. Scripps, III that no child of his is then a beneficiary of such separate trust" proscribed "creation of a subaccount [for the benefit of Alexandra] upon the death of one child if other children of James E. Scripps, III are still living." The Court (Doyle, S.) determined that the testator did not intend such a prohibition and made it clear that each subtrust was to be exclusively for the benefit of each of James E. Scripps, III's children. Consequently, the Court (Doyle, S.) concluded that creation of a subaccount for Alexandra need not await the deaths of all three of James E. Scripps, III's children. Were that the question presently before this Court, it would agree with the prior Court's interpretation of section 1.5. Here, however, the issue before the Court is different. Unlike Ann, who named her three children as beneficiaries of her trust by power of appointment in her will, respondent has not exercised her power to appoint beneficiaries, thereby implicating section 1.6 (b) (2) of the Trust. Rather, the issue is whether, pursuant to the express terms of that section, which governs the designation of beneficiaries in the event of respondent's default of appointment, petitioner is in line to become a successor beneficiary of respondent's separate trust.
The Court has considered respondent's remaining arguments and concludes that they are without merit.
Accordingly, it is hereby
ORDERED that respondent's motion to dismiss is denied in its entirety.
This constitutes the decision and order of the Court.
Papers Considered:
1) Respondent Scrippscarmody's Notice of Motion to Dismiss dated May 5, 2021;
2) Affirmation in Support of David J. Lorber, Esq. dated May 5, 2021, with exhibits;
3) Affidavit in Opposition by Mary G. Scripps dated June 1, 2021;
4) Affirmation in Opposition to Motion to Dismiss of James M. Reilly, Esq. dated June 2, 2021, with exhibits;
5) Memorandum of Law in Opposition to Motion to Dismiss dated June 2, 2021;
6) Affirmation of Richard D. Cirincione, Esq. on behalf of Respondent KeyBank National Association dated June 2, 2021, taking no position with respect to the motion;
7) Affirmation in Reply of David J. Lorber, Esq. dated June 9, 2021, with exhibits;
8) Sur-reply Affirmation of James M. Reilly, Esq. dated June 16, 2021, with exhibits; and
9) Petitioner's Sur-reply Memorandum of Law dated June 16, 2021.