By: Gary E. Bashian, Esq.*
Both veteran and novice litigators alike know the potential and the pitfalls that come with moving for Summary Judgment pursuant to CLPR § 3212.
Arguably once hostile to its use, the New York Surrogate’s Courts appear to be increasingly receptive to Summary Judgment Motions in order to expedite litigation, eschew issues that can be addressed before trial, and frame issues for settlement negotiations.
An area of Estate litigation not regularly considered for Summary Judgment are Accounting proceedings, more specifically, an Objectant’s motion for Summary Judgment in an Accounting proceeding against an Accounting.
The great majority of case law regarding Summary Judgment in Accounting proceedings are from the perspective of a fiduciary moving to dismiss Objections. Indeed, the Surrogate’s Courts have increasingly been more active in dismissing Probate Objections if not totally, then at least in part. However, given the shifting burden of proof when objections to Accountings are made, moving for Summary Judgment on behalf an Objectant can be surprisingly effective.
An Accounting fiduciary bears the burden of proof to establish that they have fully accounted i.e.: prepared a complete and accurate accounting. This initial burden is met by the Petitioner simply by the filing of the Account. The burden then shifts to the Objectant to establish that the Account is inaccurate or incomplete. If the Account is shown to be inaccurate or incomprehensive, then the burden to prove the Account’s accuracy and/or completeness shifts back to the Petitioner to prove that their submission is in fact adequate.
The insufficiency of an Account can be established in a number of ways. It is of course the Objectant task to establish that the Account is insufficient as a matter of law. One way to do this is show where the Account fails to actually account; i.e.: if it is inconsistent, fails to include necessary information, or does not include the specificity needed to make clear the financial history and reasonable expenditures of the Estate. If this is the case, Summary Judgment for an Objectant should be sought.
In addition, an Objectant should also move for Summary Judgment regarding an Executor’s breaches of fiduciary duty to the Estate as evidenced in the Account. Depending on the facts, the nature of the fiduciary’s actions during the administration of the Estate, and the lack of specificity in the Account, an Objectant may be able to move for a surcharge and suspension of an Executor based on illegitimate, excessive, duplicative, and/or expenses attributable to self-dealing by the fiduciary. Improper, and prohibited, expenses such as these, and the breach of a fiduciary duty which occurs if they are undertaken, are often not questions of fact, but of law, and are appropriate issues for Summary Judgment.
Fiduciaries are held to one of the highest duties of loyalty at law, the propriety of their actions are rightfully scrutinized by the Court. Where a breach of duty in the form of an improper expense is uncovered, the Court has the power to impose not only a surcharge of the improper expense, but to also impose interest at the statutory rate of 9% per annum.
This technique can be employed with great effect where there is evidence of self-dealing in an Account. Self-dealing, where a fiduciary profits or reaps some benefit from the administration of the Estate which in turn causes harm to the Estate itself, is strictly forbidden. Where there is sufficient Evidence of such self-dealing, affording a windfall to the fiduciary, it is appropriate for an Objectant to move for a surcharge and have restitution made to the Estate.
Our firm has recently has been successful using Summary Judgment as a tool to surcharge a duplicitous fiduciary based on the insufficient, and ultimately incriminating Account which was filed.
The facts in this recent case, decided in our favor by the Westchester County Surrogate’s Court, were simple, but at times extraordinary as they exhibited the worst examples of fiduciary impropriety. The fiduciary was the brother of the Decedent. The Will residuary was to be distributed to the Decedent’s two daughters. The Decedent owned a hundred plus acre tract of land in corporate form which he called “the farm,” and which served as a place to store his excavation equipment. The Decedent did no farming. Instead of selling the “farm” property immediately, the brother-fiduciary expended hundreds of thousands of dollars paying himself personally, his corporation, his children, and relatives to rehabilitate the “farm,” in what he described as administration expenses. Out of a liquid Estate, post-sale of real estate, of approximately $1.7M, less the usual administration expenses and debts, there remained only approximately $300,000.
The Court found, inter alia, that due to the fiduciary’s “self-dealing,” “failure to substantiate payments with proof other than his own statements,” and “failure to meet his burden,” that he should be surcharged for improper expenses totaling approximately $500,000 plus interest at 9%.
I recommend that Estate litigators take note of this technique, and consider it the next time they have an appropriate opportunity to move for Summary Judgment when representing an Objectant in an Accounting proceeding.
*Gary E. Bashian is a partner in the law firm of Bashian P.C. with offices in White Plains, New York and Greenwich Connecticut. Mr. Bashian is a past President of the Westchester County Bar Association, he is presently on the Executive Committee of the New York State Bar Association’s Trust and Estates Law Section as Vice Chair of the Estate Litigation Committee, and is a past Chair of the Westchester County Bar Association’s Trusts & Estates Section.
Mr. Bashian gratefully acknowledges the contributions of Andrew Frisenda, an associate at Bashian P.C. for his assistance in the composition of this article.