Opinion
03-004.
Decided June 30, 2008.
Corbally, Gartland Rappleyea, LLP, Attorneys for Kimberly Messer.
Gellert Klein, P.C., Attorneys for Frederick Stiefel.
Rusk, Wadlin, Heppner Martuscello, LLP, Attorneys for Yvonne Sherman.
Frederick Stiefel, as successor trustee of the Evelyn S. Dickerman Revocable Living Trust dated October 17, 1996 (the Trust), has petitioned to trigger the in terrorem clause, for surcharges against the Estate of William Stiefel and against Kimberly Messer, and to assess attorneys fees and costs. In lieu of answering, Messer, William's daughter and sole distributee, individually and as administratrix of the Estate of William Stiefel, moves to dismiss that portion of the petition which requests relief for violations of the in terrorem clause. Petitioner opposes the motion and requests legal fees and disbursements for the litigation caused by William's wrongful transfer of Trust assets. Yvonne Sherman opposes the motion to dismiss and cross-moves for an order granting the petition and requesting identical and/or similar relief on her part. Respondent Messer opposes the cross-motion and requests for attorneys fees and costs.
Background: Evelyn S. Dickerman and William Stiefel were co-trustees of the Trust. The named beneficiaries of the Trust are Evelyn's three children, William Stiefel, Frederick Stiefel and Yvonne Sherman. The Trust directs that after Evelyn's death, William, as surviving [*2]trustee, had the right to retain real property known as the Stiefel Family Home in the Trust and to individually retain 100% of the revenues generated from the property, so long as he paid the expenses and kept it in good condition; if the real property was sold, the proceeds were to be distributed to William, Frederick and Yvonne according to the formula set forth in the Trust. The Trust also contains an in terrorem clause which states, " . . . if a beneficiary, or a representative of a beneficiary, or one claiming a beneficial interest in the Trust Estate, should legally challenge this Trust, its provisions, or asset distribution, then all asset distributions to said challenging beneficiary shall be retained in Trust and distributed to the remaining beneficiaries. . . ."
Evelyn died on May 19, 1997 and thereafter William, as surviving co-trustee, operated the Stiefel Family Home as a bed and breakfast. William died intestate on November 27, 2002. Prior to his death, William conveyed the Stiefel Family Home to himself as sole owner without the knowledge of the co-beneficiaries, without payment of consideration to the Trust or to the co-beneficiaries and without court approval.
According to the terms of the Trust, Frederick became the successor trustee. Upon learning that the home had been conveyed out of the Trust, Frederick and Yvonne obtained temporary injunctions to bar Messer's attempt to sell the Stiefel Family Home and its contents. Messer commenced a proceeding to construe the Trust arguing that William's 75% share of the Stiefel Family Home vested on the death of Evelyn or, in the alternative, William's life estate in the home and his 75% distributive share merged after Evelyn's death to give William an outright 75% ownership in the property; she also argued that certain language in the distributive share provision was ambiguous and should be disregarded, again resulting in a 75% distributive share for William or his heirs. In that proceeding, this Court determined by Decision/Order dated October 7, 2004 (Paul L. Gruner, Ulster County Surrogate) that there was no vesting on Evelyn's death, no merger and that William had no authority to transfer title as he did without either the consent of Frederick and Yvonne or the payment to them of the fair market value of their shares as stated in the Trust. The Court ordered that the real property be recouped into the Trust.
Messer also sought to disqualify Frederick from acting as successor trustee and the appointment of a third party to assume that role; and to obtain payment from Frederick, individually, pursuant to a certain note.
Although Messer did not prevail on her vesting or merger theories, the Court determined that the language which expressed the fractional shares to be distributed was ambiguous and required an interpretation by the Court. The Court determined that as the sale of the real property and distribution of the proceeds was to be made after the death of William, the settlor intended that 25% would pass to Messer as heir of William, 40 % to Frederick and 35% to Yvonne. The Court also ordered distribution of the contents of the home. The Appellate Division affirmed the lower Court's decision ( Matter of Stiefel, 24 AD3d 994, [3d Dept 2005]); leave to appeal to the Court of Appeals was denied ( In re Estate of Stiefel, 6 NY3d 843). The Stiefel Family Home was returned to the Trust by deed dated June 17, 2005.
Petitioner now asserts, inter alia, that when William transferred title of the property into his name alone, he violated the terms of the Trust, challenged the Trust by means of a legal instrument recorded in the Ulster County Clerk's Office and forfeited his share, and any share his daughter may have become entitled to on his death, pursuant to the in terrorem clause. [*3]
Messer moves to dismiss the petition on the grounds of judicial estoppel and res judicata in that she interprets the October 7, 2004 decision/order of this Court as determining the in terrorem issue; she also asserts the statute of limitations and failure to state a cause of action.
In terrorem clause: Messer argues: (1) that the Court's decision in the prior proceeding granted Messer a 25% share of the property; (2) that although they could have argued a violation of the in terrorem clause in the prior proceeding, Frederick and Yvonne failed to assert a counterclaim based on the in terrorem clause or to argue a violation of the in terrorem clause on the summary judgment motion and, instead, argued for a construction giving Messer a 25% share of the real property; and (3) now, they have changed positions and are seeking to preclude Messer from any share.
Frederick and Yvonne state that William's wrongful taking legally challenged the Trust by altering the disposition scheme and that Messer continued the challenge when she refused to voluntarily return the home to the Trust and commenced the prior proceeding for the purpose of keeping 75% of the Stiefel Family Home for herself and leveraging a settlement with Frederick on the business claims. Frederick and Yvonne assert that their present position is not inconsistent with their posture in the prior proceeding, wherein they argued that William wrongfully transferred the Stiefel Family Home and that it should be returned to the Trust; they also assert that because the Stiefel Family Home is the principal asset of the Trust, the construction proceeding had to be completed and the property returned to the Trust before the in terrorem clause would have meaning and could be invoked. They argue that their positions on the prior proceeding are reconcilable with their positions in this petition and, therefore, judicial estoppel does not apply ( citing Estate of Gallagher, 238 NYLJ 83 [Surrogate's Court, Kings County, September 26, 2007]). They also argue that in the prior proceeding, the in terrorem clause was not an issue, and that they opposed Messer's interpretation of William's share, arguing for a construction that would allow 25% to Messer, "at most."
In construing a lifetime trust, the prime objective is to determine the intention of the grantor as evidenced by the trust instrument, unless contrary to public policy or law ( see Gilbert v Gilbert, 39 NY2d 663, 666; Oakes v Muka, 31 AD3d 834 [3d Dept 2006]). The doctrine of judicial estoppel precludes one from adopting a position which is contrary to or inconsistent with a position previously adopted in the same proceeding ( Maus v Cornell University, 253 AD2d 1, 7 [3d Dept 1990], affd 94 NY2d 87).
The Court has reviewed the papers in the prior proceeding and finds that Messer's interpretation of the prior decision and order fails because the in terrorem issues were not before the Court at that time. Frederick and Yvonne's position offering an alternative construction of the ambiguous trust language in response to Messer's prior petition does not constitute a waiver of the right to invoke the in terrorem clause. Their position in that proceeding was a response to Messer's interpretation of the provision regarding William's distributive share and is reconcilable with their position in this proceeding which seeks to preclude Messer from any share in the Trust. As the in terrorem clause was not an issue in the summary judgment motion on Messer's construction proceeding, the Court did not consider, nor determine, whether Messer's acts violated the in terrorem clause.
Further, neither Frederick nor Yvonne interposed a counterclaim, nor argued on the summary judgment motion, that William had violated the in terrorem clause and forfeited all [*4]rights to the Trust property. Accordingly, the Court did not consider, nor determine, whether or not William's wrongful transfer violated the in terrorem clause.
The Court's primary concern on the prior proceeding was to determine the intent of the testator as expressed in the distributive share provision ( see Gilbert v Gilbert; Oakes v Muka). It would have been premature to determine the application of the in terrorem clause until the distribution provision was settled. Accordingly, judicial estoppel does not apply to bar this petition as petitioners' positions in this proceeding are reconcilable with their positions on the prior proceeding.
Likewise, res judicata and collateral estoppel also do not apply ( see Oakes v Muka) because, in the prior proceeding, the Court was not asked to and did not consider or determine whether the in terrorem clause was violated by either William's or Messer's actions.
Statute of limitations: A fiduciary may request a determination as to the validity or effect of a provision of a Trust when it becomes necessary ( see SCPA 1420, 1501[c]), either in a separate proceeding, as in this petition, or in an accounting. There is no specific statute of limitations which controls the application. Generally, it will be invoked prior to or at the time of distribution, as that is when it becomes "necessary." No distribution or accounting herein could be made until the Stiefel Family Home was returned to the Trust (by deed dated June 17, 2005) and the prior construction proceeding concluded (leave to appeal to Court of Appeals denied, March 28, 2006). This petition was commenced on November 13, 2007, approximately one year and six months thereafter (during which time other issues between the parties were resolved), which the Court considers to be reasonable.
Failure to state a cause of action: Finally, a request to determine whether or not there was a violation of an in terrorem clause is a valid cause of action ( see SCPA 1420, 1501[c]). On a motion to dismiss pursuant to CPLR 3211(a)(7), " . . . the sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law a motion for dismissal will fail. . . ."( Guggenheimer v Ginsburg, 43 NY2d 268, 275). Pleadings are to be liberally construed (CPLR 3026). The pleading must apprise the defendant of the nature of the plaintiff's grievances and the relief the defendant seeks ( Shapolsky v. Shapolsky, 22 AD2d 91 [1st Dept 1964]). Petitioner has adequately articulated the conduct alleged to be the basis of his claim for invoking the in terrorem clause.
Yvonne's cross-motion: Yvonne cross-moves for an order directing Messer, either as administratrix or individually, to deliver to Yvonne certain items of personal property or to pay Yvonne their fair market value and for attorneys fees and costs. The cross-motion shall be treated as a cross-petition for turnover of property and for attorneys fees and costs. The cross-petition adequately sets forth the personal property demanded and the basis of her claim for attorney's fees and costs.
Yvonne's cross-motion for summary judgment of Frederick's petition is denied as premature as issue has not been joined by Messer (CPLR 3212 [a]), nor have the all the parties laid bare their proof and charted a summary judgment course ( see Yule v New York Chiropractic Coll., 43 AD3d 540, 541 [3d Dept 2007]).
For the reasons stated above, Messer's motion to dismiss is denied; Yvonne's cross-motion for return of her personal property and for attorneys fees and costs is converted to a cross-[*5]petition; Yvonne's cross-motion for summary judgment is denied, without prejudice, as pre-mature. All other relief requested is denied at this time. Messer's time to serve and file her answers to the petition and the cross-petition is extended pursuant to CPLR 3211(f) until ten days after service of notice of entry.
This shall constitute the decision and order of the Court. The Court has filed all papers with the Clerk of the Surrogate's Court and entered the Decision/Order. Counsel is not relieved from the applicable provisions of CPLR 2220 relating to notice of entry.
So Ordered.
Papers Considered:
1.Notice of motion and affirmation of Allan B. Rappleyea, Esq., dated January 10, 2008.
2.Affidavit of Lillian S. Wiegert, Esq., dated February 4, 2007.
3.Notice of cross-motion and affidavit of Yvonne Sherman dated February 6, 2008, affirmation of John G. Rusk, Esq., dated February 7, 2008.
4.Reply of Allan B. Rappleyea, Esq., dated February 12, 2008.