Opinion
File No: 2022-980/A
09-07-2023
In the MATTER OF the Petition of Moshe ZIV AS TRUSTEE OF the RICHARD L. WEISMAN 1996 TRUST.
Bond, Schoeneck & King, PLLC, Rochester (Edward C. Radin, Brian Laudadio and Kathleen H. McGraw of counsel), for petitioner. Morgan, Lewis & Bockius LLP, New York City (Peter C. Neger of counsel), for Richard L. Weisman, Jr., respondent.
Bond, Schoeneck & King, PLLC, Rochester (Edward C. Radin, Brian Laudadio and Kathleen H. McGraw of counsel), for petitioner.
Morgan, Lewis & Bockius LLP, New York City (Peter C. Neger of counsel), for Richard L. Weisman, Jr., respondent.
Michael G. Hayes, S. Background
By way of background, petitioner Moshe Ziv is the trustee of an inter vivos trust established on September 4, 1996, known as the Richard L. Weisman 1996 Trust. The Trust was amended and restated on May 13, 2013 and further amended on August 10, 2013. Petitioner was appointed successor trustee on October 14, 2022, by selection of a majority of the permissible distributees under Section 5.1.2.3 of the Trust. On November 10, 2022, petitioner commenced this discovery proceeding under SCPA § 2103. Specifically, the petition seeks information, and ultimately recovery of, alleged trust assets believed to be worth more than Twenty-Four Million Dollars. These alleged trust assets include: (1) ten paintings created by Andy Warhol called "Athlete Series-Red Ali Set" ("Red-Ali") with a total value in excess of Eighteen Million Dollars; and (2) two paintings ("Cartrip" and "Blueman" by Kenny Scharf), several items of jewelry and a carved marble sculpture, with a total value of Six Million Dollars (collectively, the "Disputed Art").
The Trust defines "permissible distributee" as "each trust beneficiary who is currently eligible to receive distributions of any portion or all of the income or principal of the trust, whether the distribution is mandatory or discretionary." [Trust, Section 8.13]
The petition alleges that trust beneficiary Richard L. Weisman, Jr. possesses the Disputed Art. The petition also alleges that title to the Disputed Art has never been lawfully transferred to Richard Jr., and that Richard Jr. has failed to respond to inquiries from predecessor trustees seeking an explanation for his retention of the Disputed Art. These allegations are all made upon information and belief.
The petition seeks an Order directing Richard Jr. to appear and to submit to an inquiry regarding the Disputed Art pursuant to SCPA § 2103. Upon such inquiry, the petition also seeks an Order directing Richard Jr. to return and deliver the Disputed Art to the Trust, or to pay its fair value.
Richard Jr. now moves, through his counsel, for an order dismissing the petition pursuant to SCPA § 102 and CPLR 3211. In the alternative, Richard Jr. moves for a stay of these proceedings pursuant to CPLR 2201, pending a determination of related proceedings in the Superior Court of the State of Washington, Kings County.
In support of this motion, Respondent's counsel alleges that the trust creator, Richard L. Weisman, was the trustee during his lifetime and that, as such, he possessed the power to withdraw the whole or any part of the trust estate, without notice and without consent. Respondent's counsel also asserts that it is "undisputable" that Richard Jr. took possession and control of the "Red Ali" paintings no later than May 2018, when those paintings were transferred to an art storage unit leased by Richard Jr. from Artech Industries at a facility located in Redmond, Washington. Respondent's counsel also asserts that, in 2019, the trust (through its then trustee, Alan Dlugash) and two of the principal beneficiaries of the trust (Richard Jr.’s siblings, Abby Jo Weisman and Robin Weisman Navrozov) were parties to a lawsuit in the Superior Court of the State of Washington, Kings County entitled Abby Jo Weisman, beneficiary, and Robin Weisman Navrozov, beneficiary v Alan Dlugash, Trustee, Watson Blair and Richard Weisman, Jr. (Case No. 19-4-21410-1 SEA). Respondent's counsel states that Ms. Weisman and Ms. Navrozov filed the 2019 Washington trust proceeding to prosecute their claim that Richard Jr. is not the legitimate owner of the "Red Ali" paintings.
Respondent's motion is limited to an affirmation of counsel, and copies of two unverified pleadings that Richard Jr. caused to be filed in Washington Superior Court six weeks after the commencement of this discovery proceeding in New York.
Respondent's counsel did not provide any pleadings or other court records from the 2019 Washington trust proceeding with his initial papers. Petitioner also did not provide any documents or records from that proceeding. In his reply papers, Respondent's counsel offers the petition and supporting declaration of Abby Jo Weisman from the 2019 proceeding. Those papers indicate that the 2019 proceeding sought a judicial determination that any action challenging the alleged gift of the Red Ali paintings would not violate the trust's "no-contest" clause. No party has provided any information as to the status or outcome of the 2019 Washington trust proceeding, other than a representation in the 2022 Washington quiet title petition that the 2019 Washington trust proceeding had been "dismissed without resolution of questions regarding ownership over the paintings" (¶32).
Respondent's counsel also states that, in March of 2022, another action related to the trust was filed in the Superior Court of the State of Washington, Kings County entitled Weisman v Dlugash (Case No. 22-4-02076-5 SEA). Respondent's counsel states that the 2022 Washington proceeding sought to remove Mr. Dlugash as trustee pursuant to the Trust and Estate Dispute Resolution Act.
No party has provided any information as to the outcome of the 2022 Washington removal proceeding in their respective motion papers. However, the Court takes judicial notice that Trustee Ziv has commenced a proceeding in Dutchess County Surrogate's Court seeking to compel Mr. Dlugash to provide a formal judicial accounting (File No. 2022-980). The verified petition in that proceeding alleges that Mr. Dlugash resigned as trustee in 2022, presumably sometime after the 2022 Washington removal proceedings were commenced.
On December 29, 2022, Richard Jr. filed an action in the Superior Court of the State of Washington, Kings County entitled Richard Weisman Jr. v Abby Jo Weisman, et al. (Case No. 22-2-21302-7 SEA). This action seeks to quiet title to the "Red Ali" paintings, and a declaratory judgment finding that Richard Jr. was gifted these items by his father. On December 30, 2022, Richard Jr. filed a separate action in the Superior Court of the State of Washington, Kings County entitled Richard Weisman Jr. v Abby Jo Weisman, et al. (Case No. 22-4-08925-1 SEA). This action seeks a declaratory judgment from the court stating that under Washington State's Trust and Estate Dispute Resolution Act, the Scharf Paintings, the jewelry and the sculpture all belong to Richard Jr. and are not assets of the trust.
On a motion to dismiss a cause of action pursuant to CPLR 3211(a)(5) on statute of limitations grounds, the movant bears the initial burden of establishing, prima facie , that the time in which to sue has expired (see Matter of Asch , 164 A.D.3d 787, 83 N.Y.S.3d 307 [2nd Dept. 2018] ). To satisfy this burden, the movant must establish, inter alia , the applicable limitations period, and when the cause of action accrued ( id. ).
Depending on the underlying circumstances, a SCPA article 21 discovery proceeding can be framed as an action for conversion, replevin, breach of fiduciary duty, fraud, constructive trust, or unjust enrichment. (Warren's Heaton on Surrogate's Court Practice , § 64.02[1]). A cause of action for conversion, replevin, or breach of fiduciary duty seeking only money damages has a three-year statute of limitations ( Matter of Chustckie , 203 A.D.3d 820, 165 N.Y.S.3d 93 [2nd Dept. 2022] ). A cause of action for fraud, constructive trust, or unjust enrichment has a six-year statute of limitations. ( id. ; Matter of Trombley , 137 A.D.3d 1641, 29 N.Y.S.3d 712 [4th Dept. 2016] ).
The motion to dismiss on statute of limitations grounds is premature. There are two stages to a discovery proceeding: the inquisitorial stage ( § 2103 ), and the trial stage ( §§ 2103, 2104 ). A discovery proceeding should not be dismissed during the inquiry stage "unless there is no aspect of the situation which would permit a finding of estate interest in the property sought." ( Matter of Mendelson , 15 Misc.2d 837, 183 N.Y.S.2d 470 [Sur. Ct. Nassau County 1959] [Bennett, S]). "The inquisitorial stage anticipates that the pleadings will be non-specific, and the petitioner is not required to set forth allegations sufficient to sustain a cause of action but only those that justify an inquiry." ( Matter of Fialkoff (Green) , 45 Misc.3d 1205(A), 2014 WL 4977415 [Sur. Ct. Queens County 2014] [Kelly, S]). Indeed, it is common practice in discovery proceedings to file an amended petition adding or withdrawing causes of action based upon information that was developed during the inquiry stage — often with different statutes of limitations and different accrual dates. ( Matter of Chung Li , 32 Misc.3d 1225(A), 2011 WL 3274233 [Sur. Ct. Queens County 2011] [Kelly, S]).
The petition seeks an Order directing inquiry regarding possession of the Disputed Art, and an Order directing Richard Jr. to attend the inquiry and to be examined, pursuant to SCPA § 2103. Although the petition also seeks an Order directing Richard Jr. to deliver and return the Disputed Art, that request falls within the scope of relief that may be sought under SCPA § 2103, and does not remove this proceeding from the inquiry stage. Once the inquiry stage is complete, petitioner will have the option of withdrawing the petition, proceeding with the petition as pled, or seeking leave to amend the petition. (id. ). Accordingly, the motion to dismiss on statute of limitations grounds is denied, without prejudice to filing such a motion after the inquiry stage is complete.
Even if the motion was not premature, it would be denied because Richard Jr. has failed to meet his initial burden of establishing, prima facie , when the statute of limitations accrued. As to the Red Ali paintings, Respondent's counsel makes an unsworn representation in the supporting memorandum of law that "It is indisputable that Richard Jr. took possession and control of the Red Ali Paintings no later than May 2018 ..." Respondent's counsel also provides a copy of the petition filed in the 2022 Washington Red Ali quiet title action asserting that these paintings were gifted to Richard Jr. no later than the spring of 2018. Respondent's counsel also provides a copy of the petition that was filed in the 2022 Washington declaratory judgment action, which asserts that the other items of Disputed Art were always owned by Richard Jr., and that they were never assets of the trust.
Like the memorandum of law filed in this SCPA § 2103 proceeding, the unverified 2022 Washington petitions are limited to the unsworn representations of counsel. None of these representations are based upon personal knowledge, nor are they supported by any other form of proof capable of satisfying the movant's initial burden of establishing that the time in which to bring this SCPA § 2103 proceeding has expired. Therefore, the motion to dismiss is denied. (see generally Chaplin v. Tompkins , 173 A.D.3d 1661, 103 N.Y.S.3d 713 [4th Dept. 2019] ; Berger v. Stolzenberg , 158 A.D.3d 738, 71 N.Y.S.3d 558 [2nd Dept. 2018] ).
On reply, Respondent's counsel submitted a copy of a petition that was filed in the 2019 Washington trust proceeding, and a sworn declaration that Abby Jo Weisman filed in support of that petition. Respondent cannot rely on evidence that was submitted for the first time in its reply papers to sustain its prima facie burden of showing that the statute of limitations has expired. (Daguerre, S.A.R.L. v. Rabizadeh , 112 A.D.3d 876, 978 N.Y.S.2d 80 [2d Dept., 2013] ).
Richard Jr. also seeks a stay of these SCPA § 2103 proceedings pending a determination in the 2022 Washington actions.
Except where otherwise prescribed by law, the court in which an action is pending may grant a stay of proceedings in a proper case, upon such terms as may be just (see CPLR 2201 ; Ingram v. Miller , 114 A.D.3d 908, 980 N.Y.S.2d 824 [2nd Dept. 2014] ). The Court has broad discretion to grant a stay in order to avoid the risk of inconsistent adjudications, application of proof and potential waste of judicial resources (see Zonghetti v. Jeromack , 150 A.D.2d 561, 541 N.Y.S.2d 235 [2nd Dept. 1989] ).
"A stay of an action can easily be a drastic remedy, on the simple basis that justice delayed is justice denied" (see Patrick M. Connors, Practice Commentaries, McKinney's Cons. Law of NY, Book 7B, CPLR C2201:7). "It should therefore be refused unless the proponent shows good cause for granting it. Nothing but good cause would make for a ‘proper case.’ " (id. ). "Some excellent reason would have to be demonstrated before a judge is asked to bring to a halt a litigant's quest for a day in court." (id. ) (See also Matter of Eshagian , 48 Misc.3d 920, 923, 15 N.Y.S.3d 560 [Sur. Ct., Queens County 2015] ).
Respondent's counsel asserts that a stay of this proceeding is proper because: (1) a determination in the Washington actions would be dispositive in these proceedings; (2) there is a substantial identity of the parties and claims in the actions; (3) the State of Washington has a greater nexus to this matter, as the "Red Ali" paintings and other items are physically located in the State of Washington; (4) the situs of the trust is the State of Washington and the trust is governed by Washington law; and (5) this proceeding and the Washington actions are sufficiently similar so that granting a stay would preserve judicial resources, further the interest of justice by preventing inequitable results, and promote orderly procedure.
In opposition, petitioner maintains that a stay of this matter is inappropriate because Richard Jr. only commenced the Washington proceedings after the SCPA § 2103 petition was filed. While petitioner concedes that a determination in the Washington proceedings "has some bearing on the issues asserted in this proceeding and that there is identity of parties and conceivably an identity of claims," he maintains that the SCPA § 2103 petition seeks broader relief by asking the Court to protect the trust and its assets so that it may be administered and distributed pursuant to its terms. Petitioner contends that respondent's argument that Washington has a greater nexus than New York ignores the authority that the trust agreement expressly provides the trustee to administer the trust in this Court. Petitioner argues that respondent is essentially forum shopping, and that it would be unjust to reward that effort by ignoring the general rule that the first-filed proceeding takes precedence.
There are numerous factors that a court may consider in determining whether to issue a stay: 1) which forum will offer a more complete disposition of the issues; 2) which forum has greater expertise in the type of matter; 3) which action was commenced first and the stage of the litigations; 4) whether there is substantial overlap between the issues raised in each court; 5) whether a stay will avert duplication of effort and waste of judicial resources; and 6) whether the petitioner has demonstrated that it would be prejudiced by a stay (see Matter of PPDAI Group Sec. Litig. , 64 Misc.3d 1208[A], 2019 WL 2751278 [Sup. Ct., New York County 2019] ).
The record before this Court establishes that there is a substantial identity of the parties and claims in this proceeding and the Washington actions. The Washington actions seek a declaration that the contested trust assets are Richard Jr.’s property, either because his father gifted them to him (in the case of the Red Ali paintings), or because they always belonged to Richard Jr., and were never trust assets (in the case of the remaining Disputed Art). Despite petitioner's arguments to the contrary, the determinations sought in the Washington actions will resolve the entirety of this proceeding, through a determination of ownership of the Disputed Art.
The nexus between the State of Washington and the trust and its alleged assets is also significant. The Disputed Art is in the State of Washington. And the trust agreement expressly declares that the State of Washington shall be the situs and place of administration of the trust, and that the laws of the State of Washington shall govern its validity, meaning and legal effect. (see e.g., ¶¶5.3, 7.12). Petitioner correctly points out that the trust agreement also expressly grants the trustee the discretion to transfer the place of administration of the trust, and the law governing its administration, to another jurisdiction (¶5.4.8). However, that discretion is not unlimited. Rather, the trust agreement only provides the trustee with that authority "if the transfer will facilitate the economic and convenient administration of the trust, if the transfer will not materially impair the interests of the beneficiaries of the trust, and if the new situs has sufficient contacts with the trust to support jurisdiction. " (id. [emphasis supplied]). The trust also expressly states that the situs and place of administration shall be as determined by the trust agreement, even though the trustee or a beneficiary may be domiciled elsewhere. (id. )
Tellingly, these standards track the statutory criteria for the transfer of trust assets or administration under Washington law ( RCW § 11.98.045 ). Here, the trustee has made no showing that changing the situs and governing law of the trust would satisfy these standards. Nor has the trustee provided any information regarding the method and manner by which he changed the situs and governing law, and whether he provided the trust beneficiaries with any notice of his intent to make that change.
Instead, petitioner contends that this Court is bound to follow the first-in-time-rule, which generally holds that the court which has first taken jurisdiction is the one where the matter should be determined. (see XL Specialty Ins. Co. v. AR Capital , 181 A.D.3d 546, 121 N.Y.S.3d 269 [1st Dept. 2020] ). However, chronology is not dispositive, especially, where as here, these actions are in the early stages of litigation and filed within close proximity ( id. ). Petitioner's emphasis on the first-in-time rule also conveniently ignores the 2019 Washington no-contest proceeding and the 2022 Washington trustee removal proceeding that were filed in the Superior Court of the State of Washington before this SCPA § 2103 proceeding was filed in New York. Moreover, the 2022 Washington proceedings were filed prior to the citation return date in the SCPA § 2103 proceeding.
Finally, the Court notes that Richard Jr. has also indicated that he intends to contest the appointment of Trustee Ziv as successor trustee, and Trustee Ziv's purported change in the situs and place of administration of the trust and the governing law. Washington's Probate and Trust Law vests the Superior Court with "original subject matter jurisdiction over trusts and all matters related to trusts." ( RCW § 11.96A.040 [2]). By statutory definition, a "matter" includes "any issue, question, or dispute involving the determination of any question arising in the administration of an estate or trust including without limitation, questions related to a change of personal representative or trustee; (and) a change of the situs of a trust. ( RCW § 11.96A.030 [2][c][ii, iii]).
Balancing all of these factors, and seeking to avoid the risk of potential inconsistent adjudications and wasted judicial resources, the Court finds that a stay of this proceeding is appropriate, pending a determination or determinations by the Superior Court of the State of Washington, Kings County.
Based upon the foregoing, it is
ORDERED, the respondent's motion seeking dismissal of the petition is denied, it is further
ORDERED, the respondent's motion seeking a stay of this proceeding pending an adjudication of the actions currently before the Superior Court of the State of Washington, Kings County is granted.
The foregoing constitutes the decision and order of the Court.