Opinion
302942.
Decided May 25, 2004.
By order dated March 29, 2002, the court continued several motions arising from four hotly contested accounting proceedings. The motions have now been submitted for decision. As stated in the last decision and order, the procedural history of these proceedings does not lend itself to pithy summary. The contestants are three siblings who have been engaged in contentious litigation over the estates of their parents. There has been a construction proceeding in this court, a probate contest in New York County, a contested guardianship proceeding in New York County Supreme Court and the four contested accountings in this court. Those accountings were ostensibly concluded by a stipulation of settlement, so ordered by this court on June 13, 2001, followed by the court's order of August 13, 2001, which set the legal fees for counsel and the guardians ad litem. Finally, on September 11, 2001, the court signed a decree settling the account of Walter Klasson as follows:
as executor of the estate of his father, I. Jack Klasson; as trustee of the Article FIRST trust created under the trust agreement dated March 21, 1991, made by I. Jack Klasson and representing his final account;
as trustee of the Article SECOND trust created under the trust agreement dated March 21, 1991, made by I. Jack Klasson and representing his intermediate account as amended and supplemented to encompass the period from July 1, 1997, through March 31, 2000; and
as trustee of the Article THIRD trust created under the trust agreement dated March 21, 1991 representing his intermediate account as amended and supplemented to encompass the period from July 1, 1997 through March 31, 2000.
The fiduciary in these four accountings was Walter Klasson. The objectants were his sisters, Irene Klasson and Janet Klasson. The three siblings are the permissive income and principal beneficiaries of the Article SECOND trust as well as contingent remainder beneficiaries in the continuing trusts. They are also contingent remainder beneficiaries of the Article THIRD trust by virtue of various dispositions governed by Articles FOURTH and FIFTH of the original trust indenture. Another interested party in these proceedings was Sylvia Klasson, the surviving spouse of I. Jack Klasson and the mother of Walter, Irene and Janet. She was the permissible income and principal beneficiary of the Article SECOND trust and the permissible income and principal beneficiary of the Article THIRD trust. Sylvia Klasson died on October 27, 2001.
Walter Klasson initially filed four voluntary accountings for the period from January 2, 1992, through June 30, 1997, relating to his stewardship of his father's estate and the Articles FIRST, SECOND, and THIRD trusts. These intermediate accountings were settled by stipulation of settlement on April 5, 2000. Mr. Klasson next commenced four voluntary accounting proceedings for the estate and trusts for the period from July 1, 1997, through December 30, 2000. These accountings were settled by stipulation of settlement on June 13, 2001, that was reduced to a decree on September 11, 2004.
By order to show cause, dated July 18, 2001, Irene Klasson and Janet Klasson commenced a new proceeding pursuant to SCPA 711 seeking to remove Walter Klasson as trustee of each trust established by their father on March 21, 1991. By separate motion, Irene Klasson and Janet Klasson moved for an order modifying the decree dated September 11, 2001, and 1) striking from the decree those provisions that relate to the award of commissions to Walter Klasson and 2) striking from the decree provisions that approve the legal fees to the predecessor firm representing Walter Klasson in his fiduciary capacities.
Walter Klasson opposed these applications and moved for the following relief:
(1) dismissal of the new proceeding; 2) a permanent injunction against Irene Klasson and Janet Klasson and their counsel that will enjoin them from commencing any new actions, filing any motions, or seeking any relief from this court with respect to these Trusts without prior approval of the court and 3) an award of sanctions pursuant to 22 NYCRR 130-1 for alleged frivolous litigation conduct.
The litigation began in this court in 1997 when Janet Klasson and Irene Klasson commenced a proceeding to construe their father's will in favor of one of them so that she could retain her residence in a cooperative apartment in Manhattan. That proceeding was discontinued with prejudice after several conferences and extensive briefing of the legal issues raised by the construction.
The battle between the siblings began again when Walter Klasson filed his four intermediate accountings for the estate and the trusts for the period from January 2, 1992 through June 30, 1997.
On April 5, 2000 the parties entered into a stipulation of settlement covering this initial accounting period. The stipulation, which was "so-ordered" by the court, provided for the withdrawal and discontinuance with prejudice of the objections contained in the accounting. For the purposes of this decision, the objections filed by the Klasson sisters contained the following allegations:
Walter Klasson . . . misus[ed] and abus[ed] the discretion according him in the Trust Agreement by withholding distributions from . . . [the Klasson sisters] from the Article SECOND trust distributions which had theretofore been made at the rate of $20,000.00 per year. He also cut off $10,000.00 per annum in gifts which had theretofore been made from Sylvia [Klasson's] assets to each of . . . [the Klasson sisters] . . .
The April 5, 2000 "so ordered" stipulation provided in pertinent part as follows:
The objections [which included the allegations of abuse of discretion in discontinuing the making of $20,000.00 discretionary annual distributions from the Article SECOND trust and $10,000.00 annual gifts from Sylvia Klasson's assets] are withdrawn and discontinued with prejudice.
Soon after the settlement of the accountings covering the interim accounting period, the attorney for Irene Klasson and Janet Klasson wrote to the court requesting the sua sponte removal of Walter Klasson as trustee because of the trusts' payments to an attorney representing Mr. Klasson in the contested guardianship proceedings in Supreme Court, New York County. These payments were reflected in an update of the interim accounting for the period through March 31, 2000 and constituted an alleged admission of wrongdoing.
Walter Klasson next served and filed supplemental accountings for the estate and trusts for the period from July 1, 1997 through December 30, 2000. His sisters again filed objections for this supplemental accounting period. The objections contained the following allegations:
A. [Walter] misappropriated (stole) monies from each of the estate account, the Article SECOND trust account and the Article THIRD trust account, a total of forty (40) times beginning before these Surrogate's Court proceedings were commenced through March 31, 2000 . . . to pay his personal debt to Robert Projansky, Esq. . . . for services by Projansky to Walter in the Supreme Court,
Article 81 proceeding involving his mother, Sylvia . . .
The Klasson sisters repeat their claims — that Walter should be removed as trustee because he made payments from the trust to Mr. Projansky and to Court Reporters throughout their objections to the Supplemental Accounting Period . . .
After extensive litigation, protracted negotiations, and a day of trial testimony, the objections for this supplemental accounting period were resolved and a stipulation of settlement was concluded and "so-ordered" by the court on June 13, 2001. The stipulation provided in pertinent part as follows:
This stipulation and the decree to be entered herein shall be deemed to resolve the supplemental accountings for the period July 1, 1997 through December 31, 2000 and the objections raised in respect thereof . . .
Approximately two weeks after this stipulation was concluded, Irene Klasson verified the instant petition (since amended) to remove Walter Klasson as trustee of these same trusts. The allegations contained in the amended petition focus on four types of wrongdoing: 1) Walter Klasson used trust money to pay a portion of Mr. Projansky's legal fees and court reporters; 2) Walter Klasson exercised his discretion to discontinue $20,000.00 annual distributions from the Article SECOND trust and $10,000.00 annual gifts from Sylvia Klasson's assets; 3) Walter Klasson disclosed the trust payments to Mr. Projansky and the court reporters only in the accountings but not each time a payment was made; and 4) the April 4, 1997 retainer letter between Mr. Projansky and Walter Klasson was a subsequent fabrication.
Walter Klasson makes the following arguments in support of his motion to dismiss the SCPA 711 amended petition: 1) the proceeding is barred by the doctrines of res judicata, collateral estoppel, or contractual release; 2) the allegations contained in the petition are insufficient to support the relief demanded; and 3) the petition is a bad faith attempt to circumvent the June 13, 2001 stipulation and settlement.
The Klasson sisters deny that their amended petition is barred or legally insufficient and point to the following language in the stipulation of settlement as preserving their right to seek relief pursuant to SCPA 711:
8. This stipulation and the decree herein shall be deemed to resolve the supplemental accountings for the period July 1, 1997 through December 31, 2000 and the objections raised in respect thereof; provided, however, that neither this stipulation nor the decree to be entered herein shall be asserted as a bar to the consideration of the facts and evidence herein considered in any further proceedings.
The stipulation was reduced to a decree and that decree is certainly subject to res judicata principles. However, the fact remains that the foregoing language alleges to reserve certain rights that were not litigated in the prior proceedings. Clearly, any new proceeding arising from subsequent facts or transactions would not be barred by this decree and the facts that were relevant to the prior litigation may be relevant to show, for instance, a custom or practice of conduct. It is noted that res judicata and collateral estoppel have entered the legal vernacular in tandem, a matched pair that describe distinct concepts although the practitioner is usually hard-pressed to define the distinction. This may be the reason that the courts now favor the term "claim preclusion" for "res judicata" and "issue preclusion" for "collateral estoppel" ( see People v. Evans, 94 NY2d 499). The facts before the court in this decision involve application of the doctrine of claim preclusion. This doctrine of former adjudication is designed to conserve judicial resources and to promote finality to adjudicated disputes. It is designed to prevent just the sort of circumstances that are before the court, the artful splitting of causes of action so that no repose can ever be had by the parties.
There are four elements to claim preclusion: 1) a second cause of action is barred between the parties on any related claim that was or could have been litigated in the prior action; 2) the theories of recovery in the two actions need not be identical, but they must arise from the same claim or transaction; 3) the parties must be the same parties as in the prior litigation (or in privity with them); and 4) the prior determination must have been final and on the merits, with the party precluded having had a full and fair opportunity to contest the claim ( 930 Fifth Avenue v. King, 42 NY2d 886; O'Brien v. City of Syracuse, 54 NY2d 353; Reilly v. Reid, 45 NY2d 24; Restatement [Second] of Judgments § 24 [1982]). The case law in New York now adopts the Restatement's transactional methodology, enlarging the scope of the claim preclusion to include the totality of the factual circumstances of the parties' relationship rather than the theory of recovery or selective choice of remedy. Of primary importance is the identity of facts surrounding the occurrence which constitutes the cause of action, as opposed to the legal theory within which a complaint is framed. Whether or not the first decree will have preclusive effect depends in part on whether the same transaction or connected series of transactions is at issue, whether the same evidence is needed to support both claims, and whether the facts essential to the second were present in the first. Therefore, the analysis will proceed along a three prong test: were the facts, circumstances, and transactions before the court; did the parties have an adequate opportunity to litigate their claims or claims they could have made against the facts; and did the litigation end in a final disposition. It is in this light that the Court of Appeals ruled, "once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or seeking a different remedy" ( O'Brien v. City of Syracuse, 54 NY2d 353, 357). The critical aspect of the instant proceeding is that there are essentially no new facts in the amended petition, there was more than adequate opportunity to litigate all the issues raised in the instant petition, and the previous matters ended in a comprehensive final decree.
Stipulations of settlement in litigated matters have been given preclusive effect. In Nottenberg v. Walber 985 Co. ( 160 AD2d 574) the First Department ruled that a stipulation of settlement has the same preclusive effect as a judgment on the merits ( see also Waldman v. Village of Kiryas Joel, 39 F Supp2d 370, for an extensive discussion on this very topic, as the district court interprets New York law). Some may say that there is case law that holds to the contrary, but the apparent discrepancy disappears when one recognizes the case-by-case transactional analysis that the courts must apply to the issue (see Maurischat v. County of Nassau, 305 AD2d 470 and Stuart Realty Co. v. Rye Country Store, Inc., 296 AD2d 455, standing for the proposition that once a sufficient factual basis is prepared, which was not done in these cases, a stipulation of settlement will be given preclusive effect). The critical issue in determining whether a stipulation of settlement is given preclusive effect is the opportunity the parties had to litigate all potential claims arising from the pleaded facts and the extent of litigation that preceded it ( see e.g., G.J. DiBenedetto, M.D., P.C. v. Nationwide Assocs., 297 AD2d 740, Zollner v. Zollner, 263 AD2d 454). For example, in Drago v. Buller ( 60 AD2d 518) an action by a stockholder against other stockholders for an accounting and related relief was discontinued with prejudice by a written stipulation dividing the corporation's properties, a subsequent action was commenced by the plaintiff identical to the first action except for the addition of a cause of action for rescission of the agreement of settlement;
however, since the transactions claimed to provide a basis for rescission all took place and were known to the plaintiff prior to the inception of the first action, which was discontinued with prejudice, the doctrine of res judicata barred the action for rescission.
Here, the same allegations that are alleged to support the removal were the same facts that were before this and other courts. That is why the Klasson sisters attempt to interject a new fact by their allegation of a fabrication of the retainer letter.
Of course, the argument addressed to the effect of the stipulation is mooted by the fact that the stipulation was reduced to a decree. A final decree, like an order of discontinuance, is accorded the same res judicata effect as the entry of judgment on the merits ( See e.g., Chadbourne Parke LLP v. Warshaw [In re Will of Hofmann], 287 AD2d 119). Therefore, once a thoroughly litigated matter is settled and that settlement is reduced to decree, the parties are barred from re-litigating those facts and circumstances. Otherwise, there would be no judicial repose from any settled matter and the strong public policy favoring settlements in New York would be undermined ( see Hallock v. State of New York, 64 NY2d 224). As Judge Cardozo noted in Schuylkill Fuel Corp. v. Nieberg Realty Corp. ( 250 NY 304, 306-307): "[a] judgment in one action is conclusive in a later one not only as to any matters actually litigated therein, but also as to any that might have been so litigated, when the two causes of action have such a measure of identity that a different judgment in the second would destroy or impair rights or interests established by the first."
To accept the argument made by the Klasson sisters one would have to acknowledge the total ineffectiveness of the stipulation, the subsequent decree, and the years of litigation that preceded both. After all, if one were to accept this argument, then the decree is meaningless and the Klasson sisters are free to begin the whole process again. The stipulation was intended to resolve years of litigation on issues that arose or could have arisen in the accountings. In this regard, it is relevant to note that the very same allegations that form the basis of this removal proceeding were litigated in the prior two accountings. For example, the allegation regarding the discretionary distributions to the Klasson sisters was the subject of the initial set of accountings and was resolved with the April 5, 2000, stipulation that provided:
. . . the objections [-including the Klasson sisters' claim that Walter discontinued making $20,000.00 discretionary annual distributions to a class of people which included the Klasson sisters from the Article SECOND Trust, and $10,000.00 annual gifts to a class of people which included the Klasson sisters from Sylvia's assets-] are withdrawn and discontinued with prejudice.
Likewise, the subsequent accountings included demands that Walter should be removed as trustee. Paragraph 8 of the June 13, 2001, order and stipulation of settlement provides, in pertinent part, as follows:
This stipulation and decree entered herein shall be deemed to resolve the supplemental accountings for the period . . . and the objections raised in respect thereof [-including the Klasson sisters' claim that Walter should be removed as Trustee for having paid court reporters and a portion of Mr. Projansky's fees from the Estate/Trusts-].
Finally, and dispositively, the court notes the following language from the September 11, 2001 decree:
ORDERED, ADJUDGED AND DECREED that upon complying with the directions of this decree and the filing of the receipts for the payments herein directed, Walter Klasson be and he hereby is released and discharged from all further liability and responsibility as Trustee of the Article FIRST Trust, the Article SECOND Trust and the Article THIRD Trust, as to all matters and things contained in the accountings herein for their respective Trusts in this decree.
Although not expressly argued by the parties, the court notes that the amended petition could also be analyzed as an attempt to split a cause of action, a concept that is closely associated with claim preclusion, but with an independent line of authority. As Weinstein, Korn Miller points out:
Claim preclusion and its prohibition against splitting a cause of action even prevents a successful plaintiff from seeking, in a second proceeding, relief which could have and should have been sought in the first . . . Defining what is meant by the same 'claim' or 'cause of action' is crucial, for there can be no claim preclusion if the claims are different. The New York courts have gradually developed a broad, functional, transactional test, equivalent to that of the Restatement (Second) of Judgments.5 It emphasizes the totality of the factual circumstances of the parties' relationship rather than the theory of recovery or remedy. (Weinstein, Korn Miller, CPLR Manual § 25.02 [Scope of Claim Preclusion]).
Clearly, the totality of the circumstances here militate against the petitioners' interpretation of the stipulation of settlement. Whatever the effect of this language may be, without an express reservation of right to bring this proceeding, it does not have the effect of revisiting the very same facts and allegations of wrongdoing that were resolved in prior stipulations and decrees of this and other courts.
Two weeks separated the conclusion of the prior litigation from the commencement of this proceeding. The allegations contained in the instant SCPA 711 proceeding were known to the parties and made part of the prior accounting litigation. Indeed, the Klasson sisters recognize the tenuous nature of their pleadings by attempting to assert a novel factual allegation; i.e., that the Projansky retainer letter was a subsequent fabrication. This rank speculation is contradicted by the fact that the letter was admitted into evidence at the trial without objection from the attorney for the Klasson sisters. It is undeniable that the allegations made in the instant proceeding are almost identical to allegations made and relief demanded in objections to the initial accounting period and in objections made to the supplemental accounting period (as diagramed in Walter Klasson's memorandum of law in support of the motion to dismiss at pp. 9-13). More relevant to the transactional analysis that New York applies to issues of claim preclusion, the facts and circumstances that were specifically alleged and subject to proof at the hearing are the very same facts and circumstances that are now used to support the removal petition ( see e.g. Boronow v. Boronow, 71 NY2d 284 [plaintiff, former wife of defendant, held barred from maintaining a declaratory judgment action seeking title to the former marital home, because she had a full and fair opportunity to contest the title in the prior divorce action, even though the issue of the title had not been decided there]). As Surrogate Di Falco wrote in Matter of Heilbronner ( 22 Misc2d 424, 426) "[t]he [removal] proceeding may not be used for the purpose of reopening and re-litigating adjudicated issues or keeping the estate and its executor in endless litigation."
The amendment to the instant petition does not salvage the Klasson sisters' effort to continue this litigation. The amendment contains the following addition:
As specifically detailed in documents produced by Walter for the first time at the end of July 2001, long after the last objections to Walter's accountings were filed, Walter from time to time made payments to and/or for himself from various accounts which he opened and had entitled, "Walter Klasson for Sylvia Klasson," into which moneys from the Article THIRD trust were deposited.
Each time Walter so covertly misappropriated said funds (i) he wasted or improperly applied assets of said trust, (ii) he was guilty of misconduct in the execution of his office, (iii) he was dishonest, and (iv) he was improvident, all within the contemplation and purview of SCPA § 711.
This attempt to allege newly discovered evidence must fail for a variety of reasons. Walter Klasson argues that the amendment is fatally defective because it lacks the requisite specificity, as required by CPLR 3016(b). Walter Klasson's argument based on CPLR 3016 is well-placed and highlights the Klasson sisters' proclivity to put old wine in new bottles. The court finds
Mr. Klasson's argument based on res judicata even more persuasive. The key to this analysis is to remember that any acts complained of in the amended petition occurred during the time period of the prior two set of accountings and could only involve facts that were known or should have been known to the Klasson sisters prior to the time they entered into the final stipulation of settlement, which was "so-ordered" by the court and reduced to decree.
Couched in vague and conclusory language, this amendment to the petition could only allude to two allegations of wrongdoing on the part of Walter Klasson: 1) payments made from Sylvia's assets to pay a part of Robert Projansky's fee in the New York County guardianship proceeding; and 2) payments Walter made to himself for services he provided his mother. Neither of these allegations are outside the scope of the transactions, errors, or omissions that formed the basis of all prior litigations, not just the two contested accountings in this court, but the contested guardianship in New York County. Indeed, it is disingenuous for the Klasson sisters to make allegations in this court regarding Walter's handling of his mother's affairs while she was alive. While these allegations may be new to this court, they are not new to the many separate litigations between the siblings. The Klasson sisters thoroughly litigated these issues in the New York County guardianship proceeding. They may not re-litigate them here. These proceedings, when considered together clearly bar the Klasson sisters from maintaining this proceeding. It is for this reason that Reilly v. Reid ( 45 NY2d 24) and its progeny are important precedents in the law of claim preclusion (res judicata) in that the law in New York now requires the courts to consider the broad transactional analysis that has long been a feature of the Restatement view of the doctrine. As the Second Department recently stated in Matter of Hunter (AD2d, 755 NYS2d 42, 46) "an accounting decree is conclusive not only as to issues which were actively presented and determined, but as to those which could have been raised regarding all matters set forth in the accounting." Moreover, Reilly v. Reid ( 45 NY2d 24) also stands for the strong public policy considerations that favor finality in the resolution of disputes of all kinds to assure parties that they will not be vexed by further litigation.
The petition to remove Walter Klasson as fiduciary is dismissed (CPLR 3211[a][5]). Mr. Klasson's application for sanctions and an injunction enjoining future litigation is denied. Janet and Irene Klasson's separate motion to modify the decree of September 11, 2001, is denied as being entirely derivative of the merits to their SCPA 711 petition.
Settle decree.