Tag: Practice and Procedure

Does Kapon authorize unlimited access to a party’s financial records?

In Matter of Kapon v Koch, 23 NY3d 32, 38 (2014), the Court of Appeals concluded that a party seeking disclosure from a nonparty is not required to show “special circumstances”.  Rather, the Court held that the statute “allow[s] for the discovery of any person who possesses material and necessary evidence[.]” 

Does this mean that a litigant is entitled to unlimited access to a party’s financial records?  Not necessarily.

First, the information subpoenaed must be material and necessary, and “the subpoenaing party [must] state, either on the face of the subpoena or in a notice accompanying it, ‘the circumstances or reasons such disclosure is sought or required’” (id. at 39, citing CPLR 3101).  If the subpoena requests irrelevant information, the Court will quash it.  Similarly, if the subpoena served on a nonparty fails to set forth the circumstances or reason for the disclosure, a litigant may argue that the subpoena is non-compliant and should be quashed accordingly.

In addition, there are several related objections that are subparts of the material and necessary standard.  A party for instance may object to a subpoena on grounds that it is overbroad or constitutes a fishing expedition (see e.g. Saratoga Harness Racing v Roemer, 274 AD2d 887, 889 [3d Dept 2000] [improper “demand for … all of defendant’s balance sheets, income statements, cash flow statements, general ledger statements, expense reports and bank account statements for a period of more than three years” (citation omitted)]; Matter of American Express Prop. Cas. Co. v Vinci, 63 AD3d 1055, 1056 [2d Dept 2009]). 

The trial court also has “the authority to impose, in its discretion, appropriate restrictions on demands which are unduly burdensome . . . and to prevent abuse by issuing a protective order where the discovery request may cause unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice to any person or the courts” (Rawlins v St. Joseph’s Hosp. Health Ctr., 108 AD3d 1191, 1192 [4th Dept 2013] [internal quotation marks and citation omitted]; see CPLR 3103).

A more aggressive litigant may further attempt to argue that the standard is or should be higher in cases involving sensitive information such as tax returns and personal financial records.  The court in Reintsema v Johnson, 2018 NY Slip Op 33612(U) (Sup Ct, Saratoga County 2018), for instance, concluded that “the scope of discovery of personal financial records and specifically income tax returns, is narrow, and such records to be disclosed, must be found indispensable to a party’s claim and unavailable from other sources … [and that] [c]ourts do not allow an adversary to ‘freely roam’ through an opponent’s financial records, except in certain limited circumstances for example when income diversion is alleged and again the relevant information is not available from any other source” (citations omitted).

Can a beneficiary recover the cost of attorney’s fees from estate litigation?

Generally, the fiduciary is entitled to recover the cost of attorney’s fees as a reasonable and necessary administration expense.  However, SCPA 2110 also authorizes the court to award attorney’s fees for legal services rendered to a beneficiary.  The court may direct payment directly from the estate generally or from certain funds in the hands of the fiduciary (SCPA 2110 [2]).

            In Matter of Rose BB., 35 AD3d 1044, 1045 (3d Dept 2006), for example, the court reiterated the well-recognized rule that “Surrogate’s Court may award counsel fees in situations where the misconduct of a fiduciary brings about the expense.”   There, the court affirmed the fee award, pointing to the other party’s “numerous instances of obstructing and prolonging an otherwise uncomplicated proceeding and his violation of his fiduciary duties.”  The record evidence also supported Surrogate’s Court’s finding that “with the exception of the ordinary administration of decedent’s estate, the proceedings … were necessitated by and attributable to … improper conduct.”

            Similarly, in Matter of Graves, 197 Misc 638, 639-640 (Sur Ct, Monroe County 1950), the court awarded fees out of the estate where, “without the performance of the services, the estate would have been charged additional commissions in the sum of $11,245.31.”  The court held that “where legal services have been rendered for the benefit of the estate which result in enlargement of the distributive shares of the estate beneficiaries, reasonable compensation should be granted out of the estate for such services” (id.).  “In such case the personal interests of the executors cause them and their counsel, in effect, to step aside and permit those whose interests are not inimical to the estate in general to protect the rights of the estate” (id.; see also Matter of Berg, 91 Misc 2d 939 [Sur Ct, New York County 1977] [awarding fees even though the court sustained only 3 of the objections and denied approximately $89,000 of the $100,000 surcharge requested]; Matter of Geller, 167 Misc 578, 578 [Sur Ct, Kings County 1938] [holding that the court may allow fees of an attorney for an interested party to be charged against the estate if the services were necessitated by the neglect of the fiduciary of his duties]).

            “The theory which justifies payment by the estate to the attorney of a beneficiary is that the attorney has represented the fiduciary who has defaulted in protecting or collecting the assets of the estate and, therefore, what would have been a proper charge for legal fees if the executor had acted, is a proper charge when the executor fails to act because of an adverse interest, disinclination or neglect” (Matter of Bellinger, 55 AD2d 448, 449-454 [4th Dept 1977]; see e.g. Matter of Berg, 91 Misc 2d at 939 [awarding fees even though the court sustained only 3 objections and denied approximately $89,000 of the $100,000 surcharge requested]; see also e.g. Matter of Del Monte, 37 AD2d 827, 827 [1st Dept 1971] [benefit to the estate for saving the estate disallowed commissions])

Does the Surrogate’s Court Have Jurisdiction Over Lifetime Trusts after the Grantor’s Death?

A decedent may create a trust during his or her lifetime.  What happens after the decedent dies?  Does the Surrogate’s Court have jurisdiction to compel a trustee to account to a beneficiary or determine other matters relating to the trust?   

      SCPA § 207 provides two separate grounds upon which the Surrogate’s Court may exercise jurisdiction over lifetime trusts after the grantor’s death.  Under SCPA § 207, the Surrogate’s Court “has jurisdiction over the estate of any lifetime trust which has assets in the state … or of which a trustee then acting resides in the state or, if other than a natural person, has its principal office in the state.” 

      It is therefore important to determine whether trust assets exist in New York and whether the trustee resides in New York.  If either one of these two grounds exist, SCPA § 207 provides the Surrogate’s Court with jurisdiction to entertain the proceeding.  See SCPA § 207(1); see e.g. Matter of Srozenski v Porcelli, 78 AD3d 1596 (4th Dept 2010); Matter of Jensen, 39 AD3d 1136 (3d Dept 2007).

Can I object to the estate paying the fiduciary’s legal fees?

There are several grounds to object to the estate paying the fiduciary’s legal fees.  One of the most basic objections is to challenge the reasonableness and necessity of the legal services performed (see Matter of Bradley, 128 Misc 2d 240, 241 [Sur Ct, Nassau County 1985] [reducing the attorney’s fee because “some of the work performed was totally unnecessary and the time spent on the balance excessive and unjustified”]; Matter of Bloomingdale, 172 Misc 218, 228 [Sur Ct, New York County 1939] [reducing the attorney’s fee for charges where most of the work of the attorney “involved was unnecessary and of no advantage to the estate and was a duplication of the work of the attorneys who had represented both the executor and executrix in prior years”]; see also JK Two LLC v Garber, 171 AD3d 496, 496-497 [1st Dept 2019] [reduction of the amount requested to eliminate work that was duplicative or was unnecessarily performed; holding that the determination of a reasonable attorney’s fee can take into account whether a party has engaged in conduct or taken positions resulting in delay or unnecessary litigation]; Matter of Rose BB., 35 AD3d 1044, 1045 [3d Dept 2006]). 

            This may be accomplished by reviewing the billing invoices and considering each time entry individually and collectively.  Also review the attorney affidavit discussing the services performed and consider the following:  the time and labor required, the difficulty of the questions involved, and the skill required to handle the problems presented; the lawyer’s experience, ability and reputation; the amount involved and benefit resulting to the client from the services; the customary fee charged by the Bar for similar services; the contingency or certainty of compensation; the results obtained; and the responsibility involved. 

            You may also challenge the fiduciary’s fee request based on the lack of supporting documentation.  The courts have reduced fees, for example, where the fee request is based upon generalized descriptions of the legal services rendered rather than contemporaneously recorded time charges for the work (see Matter of Phelan, 173 AD2d 621, 621-622 [2d Dept 1991]; Matter of Kelly, 187 AD2d 718, 718-719 [2d Dept 1992] [“We have repeatedly emphasized the importance of contemporaneously-maintained time records as a key component of an attorney’s affirmation of legal services”]; Matter of Quade, 121 AD2d 780, 782 [3d Dept 1986] [acknowledging the importance of time records and holding that the Surrogate’s Court is not obligated to accept unsupported testimony regarding the amount of time claimed to be compensable”]; 22 NYCRR § 207.45 [a] [requiring information regarding “the services rendered, in detail; the time spent; and the method or basis by which the requested compensation was determined”]). 

            Where the fiduciary is guilty of a breach of fiduciary duty or self-dealing, object.  In such cases, the attorney’s fee incurred in defending the illegal acts should not be charged to the estate (see Matter of Hildreth’s Will, 274 AD 611, 615-616 [2d Dept 1949], affd 301 NY 705 [1950]; Matter of Kenney, 64 Misc 3d 1232[A], 2019 NY Slip Op 51389[U], *9 [Sur Ct, Albany County 2019] [holding that inasmuch as the legal fees were incurred to defend petitioner for his wrongdoing, and the associated legal services benefitted him and not the estate, the legal fees were the responsibility of petitioner personally, and not the estate]; see also Matter of Newhoff, 107 AD2d 417, 423 [2d Dept 1985]; Chiesa v Keogh, 23 AD2d 562, 562 [2d Dept 1965] [“the services of counsel to represent an executor against a charge of self-dealing may not be charged to the estate”]).

            Similarly, consider objecting to the payment of attorney’s fees for legal services which were necessitated by the mistake, neglect, and/or misconduct of the fiduciary (see e.g. Matter of Newhoff, 107 AD2d at 423; Chiesa, 23 AD2d at 562 [“Although the erroneous computation of commissions by the executors was the result of an honest mistake, the beneficiaries of the estate should not be penalized by the payment of legal services for defending the executors with respect to such mistake”]; Matter of Hildreth, 274 App Div at 611; Matter of Terranova, NYLJ, July 11, 2012, at 25, col 5 [Sur Ct, Queens County] [denying fee application where found the need for the fiduciary to retain new counsel resulted solely from his own misconduct and holding that the trust should not have to pay for incoming counsel’s learning curve]; 8 Warren’s Heaton on Surrogate’s Court Practice § 106.04 [1] [a] [LexisNexis 2020]). 

            In addition, where the services benefitted only the fiduciary, you may object to them being recoverable against the estate (see Matter of Shambo, 169 AD3d 1201, 1207-1208 [3d Dept 2019] [“Given the minimal, if any, benefit to the estate derived from the years of legal representation …Surrogate’s Court did not abuse its discretion when it denied the payment of counsel fees from the estate”]; Matter of Rodken, 2 AD3d 1008, 1009 [3d Dept 2003] [“An attorney may be compensated from estate funds only for services that benefit the estate”]; Matter of Baxter, 196 AD2d 186, 186 [4th Dept 1994] [reversing attorney’s fee award where the legal services did not benefit the estate but only benefitted the individuals whom the attorney represented];  Matter of Klenk, 151 Misc 2d 863, 863 [Sur Ct, Suffolk County 1991], affd 204 AD2d 640 [2d Dept 1994] [holding that the attorneys who represented the co-fiduciaries in a contested accounting proceeding were not entitled to be paid from the estate since their services were rendered to support the co-fiduciaries in litigation regarding commissions and not to further the interest of the estate]; see also Matter of Gutchess, 117 AD2d 852, 855[3d Dept 1986] [reducing the attorney’s fee and holding that “the evidence does not support the conclusion that petitioner’s representation on [a particular claim] produced significantly favorable results”]; Matter of Schwartz, N.Y.L.J., Oct. 17, 2017, at 22, col. 5, 2017 NY Misc. LEXIS 3890 [Sur Ct, New York County] [holding that the attorney failed to show that the time purportedly spent by him benefited the estate in any way]).

Case Study No. 2: The Discovery Process in Surrogate’s Court

We received a call one day from two brothers complaining of their sister.  Their father had a long term, prior estate plan providing for his children equally.  Right before his death, the plan changed, and their father cut them down and provided a much larger portion of his estate to their sister.   

Around the time of the change, their father had experienced significant tragedy in his life.  His wife had passed away, his dog had died, and he was in and out of the hospital.  The daughter and her husband had also driven him to the attorney appointments to make the change to the will. 

In this type of case, the clients want to know what happened and why the decedent decided to suddenly change his estate plan.  As with a lot of probate disputes, the first step is therefore to ascertain what occurred.  To accomplish this, we generally appear on the citation date and request a scheduling order to obtain document discovery prior to the 1404 examination.   

After obtaining the scheduling order, we served an extensive document demand on the estate.  We requested items such as the estate’s case file, the father’s medical records, financial information, phone records, and written communications and emails.  As in every case, we were particularly interested in communications between the decedent and the key players – the drafting attorney, the fiduciary, and the beneficiaries. 

The estate in this case did not timely serve responses to our document demands.  It sought to delay and ask for several adjournments. To address this problem, we could have gotten the court involved.  The problem was that it could take several months for the court to resolve the issue. 

We elected instead to go around the estate for much of the information requested by engaging in third-party discovery.  So instead of waiting for the estate’s production, which could have taken months and which would likely produce only some of the documents, we simply obtained the estate file from the drafting attorney and served third party subpoenas to get the rest of the information we wanted.  As a result, we obtained much more information from the third parties in a much shorter period of time.

When we finally received the estate’s document response, we noticed that certain documents were unsigned, incomplete, or missing.  We made follow up requests with the estate and after several attempts to obtain the missing information and an office visit by me to inspect the original file, we ended up obtaining additional records and electronic data that had been omitted from the earlier production.  That information included important attorney records and notes, making them highly relevant and useful for cross examination.

So, to sum up the two main lessons from this case study, 1. we insist on receiving the complete estate case file from the drafting attorney prior to the exam, and 2. we go on a scavenger hunt for as much information as possible.

Preparing for the SCPA 1404 Exam: Case Study

Prior to filing objections to the validity of a decedent’s will, we conduct a thorough investigation into the facts of the case.  This requires us to examine the estate case file, the fiduciary’s records, and the decedent’s personal papers and communications.  We review the drafting attorney’s work product, criticize it, and try to tear it apart.  At the end of the day, our goal is to provide our clients with answers and advice about whether to file objections.

            In one particular case, we were confronted with a situation where the decedent disinherited his family members and left the bulk of his estate to someone he had met on the internet and knew for a very short period of time.  Sadly, the decedent ended up committing suicide shortly after. 

            We conducted a very thorough investigation into the facts of this case to prepare for the 1404 exam.  We first served an extensive document demand on the estate.  We requested items such as the estate’s case file and the decedent’s medical records, financial information, and written communications.  As in every case, we were particularly interested in communications between and among the decedent, the drafting attorney, the fiduciary, and the beneficiaries.

            We also served subpoenas on third party entities to obtain records, including the decedent’s phone records, emails, internet dating messages, and social media communications.  We were also able to obtain the case file of the police investigation into the decedent’s suicide.

            In this case, we went a step further than we normally do.  We hired a computer forensic examiner to examine the decedent’s computer.  As a result, we were able to view snapshots of emails and messages, as well as numerous word documents, PDFs and photographs that were located on the computer.  We were also able to view a list of the internet sites the decedent visited, the internet searches he conducted, and the places he may have driven based the addresses he typed into Google maps.

            By the time we got to the 1404 exam, we had a wealth of information to use for cross examination.

Disinheritance Problem Solved – Part 2

Solution

New York law permits a person making her estate plan to cut a pre probate deal with the person who will be cut out.  More specifically, this includes before the testator’s or parent’s death or lack of capacity.  This means that the person to be cut out can be dealt with directly by the testator or parent during the testator’s or parent’s life and on the testator’s own terms.  There are many benefits to this.  First, the person being cut out is required to deal directly with the testator or parent during the testator’s life – rather than fighting with siblings after the testator has died.  The strategy can reduce family strife after the decedent has died.  The commonly asked “why question” in connection with the testator’s estate plan, is answered during the testator’s life, i.e. by the parent, rather than in the court room in the context of a 1404 hearing.  There is immediacy.  In fact, the person cut out of the estate receives his funds (the carrot absent the string) first and before all those sharing in the estate.  There is certainty.  Attorney’s fees and the substantial costs of litigation are curtailed or eliminated. 

Mrs. Cook and Her Niece

Here is how the rule evolved from the thoughtful estate planning efforts of a widow.  In the early 1920s the Court of Appeals decided In re Cook’s Will 244 NY 63, a case which arose in Washington County.  Mrs. Cook was an elderly widow of wealth and decided to make a will disposing of her property to charities.  Her only heirs and next of kin were a sister, a niece and two nephews.  They all were all adults and not close with her.  In preparing for the disposition of her property, she wrote to her niece as follows:

Dear Katherine:

In making my will, it was my intention to bequeath you something.  After consideration, it occurred to me that it will give me greater pleasure to give it now, and you to receive it now, and in doing so I am asking you if you would be willing to sign and receipt an agreement, agreeing that in consideration of this gift now, that you agree that you will not at any time contest or join with others in contesting my will.  The same conditions apply to your (2) brothers, who must also sign such an agreement. *** Kindly let me have full names and addresses of your brothers.

Her niece’s reply indicated that she was glad to receive the gift from her Aunt as her brothers and herself were trying to secure a home for their respective families.  Having failed to state, however, anything about contesting the will, another letter followed on February 8, 1924, written by G.E Knowlton, on behalf of Mrs. Cook, where he stated:

Dear Mrs. Russell:

Mrs. Robert H. Cook has handed me your letter of January 21st in which you state that you would appreciate a gift from her, but you do not say that you will refrain from contesting her will.

May I ask you to be good enough to advise Mrs. Cook as to your attitude in this matter.

A few days afterwards her niece replied:

Dear Aunt Julia:

I am sorry that I omitted to state in my letter that I would agree to the agreements mentioned in your letter. I both appreciate and agree to those conditions.

Thereafter, her niece signed and sent to Mrs. Cook the following agreement:

Dated March 5, 1924.

Received from: Francis Julia Cook

….Dollars

As a gift from her and in consideration of this gift, I agree that I will not at any time contest or join with others in contesting her Will.

The court was confronted with the question:  Having received the advances or gifts under the circumstances, can these heirs and next of kin of Mrs. Cook now contest her will? 

Despite these writings they tried to do so. They alleged that Mrs. Cook was incompetent, and that her will was procured by fraud and undue influence.  In upholding the validity of the agreements not to contest Mrs. Cook’s will, the court held that agreements not to contest another’s will are not void as against public policy.  Further, the court stated that agreements made between heirs and next of kin after the death of the decedent have always been found valid when made in good faith.  Agreements made before the death of the testator regarding the future disposition to be made of the estate are akin to those implied in the taking of a legacy bequeathed upon the condition stated in the will that no contest shall be made.

The rule in New York, is that where a distributee in consideration of a gift from the family member (testator/decedent) during her lifetime, has agreed not to challenge the decedent’s will, he shall not file objections.  The central element of the rule is that by contracting with the decedent for the present day benefit, the distributee divests himself of legal standing to challenge the will.

The effective solution is an arrangement structured as a deal or a contract.  The deal is that the distributee receives present day benefit (payment) in exchange for the agreement not to the challenge the parent’s will on death.  The problem person or child is required to contract away, relinquish and waive the right to challenge the decedent’s will.  The approach is well founded in New York law such that it must be considered as an alternative to years of potential litigation between the disinherited distributee and the estate after the testator has died.

There are some important steps to be followed to avoid litigation.  The proper approach is significant because the ultimate arbiter of the validity of the agreement will be the Surrogate Judge after the testator has died and the distributee attempts to get out of the agreement.  It is recommended that experienced and strong lawyers be involved in the process.  To this end, it is important to have the distributee represented by his own lawyers.  He should not be represented by the decedent’s lawyers.  If money is an issue, the gift can include payment of the distributee’s legal fees under certain circumstances.  The process should be considered as one involving the negotiation of a contract or in the planning context, similar to negotiation of a waiver of a spousal right of election.

As was the case for Mrs. Cook, when done correctly a pre mortum and pre probate gift to a problem person or child can be efficacious and highly successful strategy to avoid estate litigation.

Disinheritance Problem- Solved

Intentions to disinherit in connection with the making of wills are not uncommon.  Disinheritance circumstances give rise to acrimony and much litigation.  In many cases, children and family members often find themselves dealing with these circumstances.

Clients planning their estates often are confounded with how to deal with a formed intention to cut someone out of sharing in the estate.  Putting feelings and emotions aside, it is a matter of carrying out the decedent’s intentions, money and fairness. 

Common Ineffective Solution Attempt

In estate cases in New York, many challenged estate plans contain an in terrorem clause with an additional provision stating that the particular person is cut out or left nothing.  It is not uncommon for a will to make specific reference to the fact that the decedent specifically considered and deliberately intended to leave the person out of the plan.  In some instances, no reasons are stated.  In other cases, no mention of the person is made. 

There are other cases where the will expressly states that the person cut out will not benefit from the will and advances the intended double whammy threat that if the person cut out challenges the will, that person is automatically cut out.  The client drawing the will feels satisfied.

This is a failing strategy and plan.  Coupling the in terrorem clause with a provision that the ditributee, problem person or child receives nothing sets up a guaranteed challenge to the will.   The double whammy threat is empty, meaningless and ineffectual.  In fact, in practice the attempted solution often invites litigation and has no estate litigation deterrent effect whatsoever.

Better Solution Attempt

Quite simply and more properly the in terrorem clause should actually be coupled with a sufficient and enticing incentive.  Think of the cart driver dangling the carrot in front of the mule on the stick extended in front of the animal’s mouth.  For illustration, include in the will an in terrorem clause with a specific bequest of say $20,000 for the problem person.  The incentive of a specific bequest in the plan coupled with the potential for enforcement of the in terrorem clause creates significant risk of forfeiture of the bequeathed sum.  The particular sum in each case must be thoughtfully determined, and often it is not or circumstances change.

This solution is entirely acceptable but in the context of litigation, can be a failure. The carrot and stick approach still subjects the plan to risk and chance – up in the air for future lawsuits.  There is a better approach, which will be discussed in the next blog post.

Defending Against A Guardianship Petition under MHL Article 81

In a proceeding under Mental Hygiene Law Article 81, the alleged incapacitated person (“AIP”) is served with a petition alleging that she is incapacitated and requires a guardian. If the AIP disputes the allegations and objects to the guardianship, she should exercise her right to engage legal counsel to defend (see MHL § 81.10).

At the start of the case, the AIP’s counsel should immediately review the petition to determine whether it is legally sufficient. To state a claim, the petitioner is required to provide specific factual allegations that the AIP (1) is unable to provide for her personal needs or unable to manage her property and financial affairs, and (2) cannot adequately understand and appreciate the nature and consequences of such inability (see MHL §§ 81.02; 81.08).

If the allegations are conclusory or contradicted by documentary evidence, counsel should consider making a motion to dismiss pursuant to CPLR 3211 (see SRW Assocs. v Bellport Beach Prop. Owners, 129 AD2d 328, 331 [2d Dept 1987]; Matter of Parker, 162 Misc 2d 733, 734-735 [Sup Ct, Onan Co 1994] [holding that a petition that does not detail the specific functional limitations of the AIP, as required by MHL § 81.08, deprives the AIP of his right to due process as he is “left in the dark as to his purported incapacities thereby effectively precluding him from mounting any meaningful defense thereto”]; see also Matter of K.B. [D.B.], 50 Misc 3d 1219[A], *1 [Sup Ct, Dutchess County 2016]; Matter of Teitelbaum, 10 Misc 3d 659, 660 [Sup Ct, Kings County 2005]).

In Matter of K.B. [D.B.], for example, the court dismissed an Article 81 petition alleging that the AIP:

“does not have the physical or mental ability to manage her role in the divorce action and property, and having suffered from mental illness earlier in her life and cannot understand the nature and consequences of such inability. The AIP does not have the physical or mental ability to obtain, administer, protect and dispose of real or personal property, intangible property, benefits or income. In addition, she does not have the ability to budget or allocate resources for herself or her family, nor does she have the ability to direct others to do the same on her behalf. She has no knowledge of her existing debts, her bank account balances, income or her resources” (Matter of K.B. [D.B.], 50 Misc. 3d at *1).

The court concluded that the petition was insufficient to state a claim because it lacked meaningful detail and “specific factual allegations” of incapacity, as required by MHL § 81.08(a)(4) and (5) (id.). Similarly, in Matter of Parker the court dismissed the petition where the petitioner provided a physician’s note stating that the AIP did not understand his medical condition and that his ability to understand his affairs was impaired. The Court held that this conclusory opinion was insufficient. There were no references to any medical test results or any specific evaluations of the AIP’s mental or physical condition or functional level (see 162 Misc2d at 734).

Summary Judgment in a Contested Accounting Proceeding- Part II

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.