Summary Judgment in a Contested Accounting Proceeding – Disposing of Meritless Objections.

Courts often use the term “punctilio of honor” to describe the high level of care and attention required of a fiduciary. The fiduciary must always act cautiously and carefully. But even the most careful fiduciary may still encounter an objection to her actions. There may be a disgruntled family member looking to harass the fiduciary or a party looking to squeeze the estate for some extra cash. Whatever the motive behind the objection, the “punctilio of honor” standard creates a low burden for a party to contest the account. Thankfully, the fiduciary may move for summary judgment to dismiss meritless objections in a contested accounting proceeding.

The summary judgment standard is the same as in any other case. The standard is found in CPLR 3212 and outlined in Zuckerman. First, the fiduciary must establish her defense sufficiently to warrant the court as a matter of law to direct judgment in her favor, and she must do so by tendering evidentiary proof in admissible form (see CPLR 3212 [b]; Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). If the fiduciary meets this burden, the burden shifts to the opposing party to show facts sufficient to require a trial of any issue of fact (see CPLR 3212 [b]; see Zuckerman, 49 NY2d at 562).

In terms of practice, the fiduciary satisfies her initial burden by showing that the account is complete and accurate (see Matter of Assimakopoulos, 2017 NY Slip Op 32821[U] [Sur Ct, New York County 2017]). This is often done by submitting the account with an affidavit attesting to its accuracy (id.; see Estate of Curtis, 16 AD3d 725 [3d Dept 2005]). The fiduciary should therefore submit the pleadings, the account, and the affidavit in support of the account. To avoid any doubt, the fiduciary should also submit additional affidavits addressing each specific objection to the account and tender sworn testimony and other exhibits in support of her position. This will provide the fiduciary with the best chance of success on the motion.

If the fiduciary meets her initial burden, the objectant will have to tender admissible evidence to establish that the amounts set forth in the account are inaccurate or incomplete (Estate of Curtis, 16 AD3d at 726; Matter of Assimakopoulos, 2017 NY Slip Op 32821[U] [Sur Ct, New York County 2017]). This procedure smokes out the weak objections from the strong ones and requires the objectant to prove that each objection is strong enough to justify conducting a trial.

As part of the motion strategy, the fiduciary should always serve the motion with enough notice to permit her to demand that answering papers be served at least a week before the return date. This will provide the fiduciary with a chance to review the answering papers and provide a reply. The fiduciary’s reply should highlight the lack of evidentiary support behind the objections and the golden rule set forth in CPLR 3212 and Zuckerman that “mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient” for an objectant to withstand dismissal (Zuckerman v City of New York, 49 NY 2d at 562).

Goodbye, objections. Goodbye.

Do You Trust Your Brother?

The names are different, but the facts are often the same. Unfortunately, more often than not, the outcome is also the same. The outcome does not have to be the same in every case. The maxim: an ounce of prevention is worth a pound of the cure is sadly most fitting.

Illness / Rely on family

Floyd W. Fisher was diagnosed with stage IV lung cancer in July 2015. Shortly after his diagnosis Floyd named his brother Larry Duane Fisher as his agent under a durable power of attorney. This document, which is very common, gave Larry complete control over his brother’s affairs. Presumably this was a sound decision. Larry had been a deputy for the Kit Carson Sheriff’s office. Larry told Floyd’s daughter not to worry and promised her that when her father died, he would handle the estate and file a probate case with the court. Certainly, the family was relieved that Floyd’s affairs would be handled in a competent trustworthy manner by a family member with a law enforcement background.

Death / Suspicion

Later that year in December, Floyd died. With no probate having been filed by Larry, Floyd’s daughter petitioned the court to handle his estate. After her appointment she found out the truth.

The truth

Larry stole from his deceased brother’s estate. He drained a bank account with more than $200,000, established for his brother’s care and treatment, down to $13.59.

He sold a piece of real property that had been in his brother’s wife’s family for generations to obtain funds for Floyd’s care. Almost $200,000 from that sale was earmarked for “the sole purpose of Floyd’s care and benefit and to pay his medical bills”. Larry changed the address on the account to his home and began to transfer the funds to several different accounts, including one for his teenage son.

Larry bought a Toyota truck for about $45,000 and purchased multiple guns with his brother’s money.

The outcome

In the end, the total amount spent from the account on Floyd’s care was $13,192.15, which included the cost of his funeral, $4,870.

In May 2017, Floyd’s daughter filed a criminal complaint against her uncle Larry. On December 6, 2018, Larry was found guilty by a jury in Denver Colorado of felony theft.

While the outcome may be just, it is unfair to the victims and leaves the family of the decedent with no real remedy if they cannot cover the assets.

What can be done to prevent this?

Prevention

The outlook and suggestions presented on prevention is based upon experience in litigation of this nature.

Retain a respected and experienced lawyer knowledgeable in the planning practice area. Great resources for referrals to those professionals are other lawyers, CPA’s, bankers and asset or investment advisors.

Do not make the decision to grant a power of attorney to anyone lightly – including family and particularly, “friends”. In many instances, friends and family are unsuitable agents due to conflicts, family animosity, jealousy and insatiable temptation. Professional advice concerning suitability of the intended agent is highly beneficial and can prevent a bad outcome. Using a professional can allow for a background check, credit check or other appropriate inquiry into the proposed agent – before the documents are signed.

Consider appointment of a disinterested person. Family members often are willing to serve for free. Why? Indeed, in many instances the principal does get what he pays for. When family members or friends offer to serve for free the professed altruism must be critically assessed. An agent can be compensated by the principal. Fair, but nevertheless relatively modest compensation has the potential to expand the class of persons suitable to serve as an agent.

Consider utilizing more than one person. New York law allows for more than one agent to be nominated and for the principal to decline to allow them to act separately. At the outset two individuals may be appointed to act together. Consider checks and balances and perhaps a monitor to review and supervise the actions of the agent. Any agent suitable for consideration for appointment must be a person absolutely trusted.

Split the duties among a small number of trusted people or create some redundancy so that more than one person has knowledge of the finances and the transactions as they occur. An easy measure that affords a lot of potential protection is requiring that more than one account statement be issued each month and that they be mailed to different persons. For example, the agent and the principal’s accountant.

Do not appoint a person susceptible to creditors, predators, greed or temptation.

Avoid new “friends” who are merely acquaintances. For example, a new home health aide, handyperson or other similar service provider or helper.

Involve professionals. Consider utilization of a banker, lawyer, CPA or other similar professionals who are regulated, supervised or licensed, and often insured.

Another option to consider is a springing power of attorney instead of a present grant of total control. The benefit of this technique is that the power is not granted to the agent until the happening of an event – often a medical or capacity related decline.

Conclusion

With counsel, Floyd might have been better advised to establish a trust. There was no indication that he lacked the capacity to do so. He certainly had sufficient assets to justify the effort and the work. A trust for his benefit during his life might well have prevented all of the harm. He could have nominated a local bank to act as the trustee during his life. This approach would have almost certainly prevented the outcome here.