As explained in our prior post from May, “Summary Judgment in a Contested Accounting Proceeding – Disposing of Meritless Objections“, the high standard imposed on a fiduciary creates a low burden for a party to contest the fiduciary’s accounting. Thankfully, the fiduciary may move for summary judgment to dismiss objections that ultimately turn out to be meritless.
But what happens when the opposing party questions the reasonableness of a fiduciary’s conduct. Is the appropriate exercise of the fiduciary’s discretionary power always a question of fact necessitating a hearing? The simple answer is no.
The general rule in New York is that a court will not interfere with the exercise of a trustee’s discretion except in limited circumstances (see e.g. Matter of Hilton, 174 App Div 193 [1st Dept 1916]; Matter of Mitchell’s Will, 30 Misc 2d 781 [Sur Ct, Kings County 1961]; Matter of Irrevocable, 2005 NY Misc LEXIS 3899 [Sur Ct, New York County Dec. 14, 2005]). A party therefore may generally not advocate that the court should substitute its judgment for that of the Trustee’s. This is not the appropriate standard (see Matter of Hilton, 174 App Div at 193; Restatement [Third] of Trusts § 50). Rather, the party opposing summary judgment should tender evidence of fraud, bad faith, or an abuse of discretion to justify a hearing (see e.g. Matter of Hilton, 174 App Div 193 [1st Dept 1916]; Matter of Mitchell’s Will, 30 Misc 2d 781 [Sur Ct, Kings County 1961]; Matter of Irrevocable, 2005 NY Misc LEXIS 3899 [Sur Ct, New York County Dec. 14, 2005]).
In Matter of Hilton, 174 App Div 193 (1st Dept 1916), for example, the appellate court reversed an order of the court below for an increase in annual trust payments to the beneficiary, based on the lack of any evidence demonstrating an abuse of discretion (see also Matter of Irrevocable, 2005 NY Misc LEXIS 3899 [Sur Ct, New York County Dec. 14, 2005]; Restatement [Third] of Trusts § 50). Similarly, Matter of Mitchell’s Will, 30 Misc 2d 781 (Sur Ct, Kings County 1961), the court declined to set the matter down for a hearing unless the Objectant submitted proof that “the trustees’ action amounts to an abuse of discretion, bad faith, arbitrary action or fraud.”
In short, there are numerous cases granting summary judgment in favor of the fiduciary in accounting proceedings. This is especially true where the trust agreement provides the Trustee with discretion and there is no evidence of any abuse of that discretion.
