Opinion
536-P/97.
Decided September 12, 2008.
Howard W. Rachlin, Esq., for Gilbert F. Rella and Marie Ann Sedacca, co-executors.
Harry Amer, Esq., for Vincent Rella and Anthony Rella, objectants.
In this accounting proceeding, the executors, Gilbert and Marie, two of the decedent's children, move for the following relief with respect to the objections filed by two of the decedent's other children, Anthony and Vincent: (1) dismissal of the objections alleging that the account should reflect the decedent's 50% interest in Coliseum Fuel Distributors Inc. (Coliseum) on the ground that the objections are "time-barred; " (2) dismissal of the amended objections dated April 30, 2007 because they were filed without leave of the court after the time within which an amended pleading may be filed without leave; and (3) dismissal of the objections that the executors should be jointly and severally surcharged in an amount in excess of $150,000 for bank cash withdrawals of the decedent's funds which the executors utilized for their personal use or gave to their family members on the ground that such objections are "insufficiently specific." The objectants oppose all of the relief requested, and, for the reasons hereinafter stated, the court deems their opposition to be an application for leave to file the amended objections that were already served and filed.
The decedent died on April 15, 1997. Preliminary letters testamentary issued to the co-executors on April 29, 1998, and letters testamentary issued to them on January 17, 2002.
The objectants do not appear to dispute that on November 7, 1996, the decedent executed the necessary documents to transfer by gift to the co-executor, Gilbert, her 50% interest in Coliseum. However, the objectants contend that the alleged gift to Gilbert was invalid on the alternative grounds that the gift was made as a result of the exercise of undue influence upon the decedent by Gilbert or because the decedent lacked the understanding, knowledge and awareness to make such a gift. In fact, one of the objectants, Anthony, obtained limited letters of temporary administration pursuant to SCPA 702(9) on April 2, 1999, and, in that capacity, commenced an SCPA 2103 proceeding against Gilbert and Marie, by a petition filed with the court in June 2000, seeking to recover on behalf of the estate funds withdrawn from bank accounts and the decedent's 50% interest in Coliseum. Thereafter, the executors filed their account and, on October 29, 2003, the parties stipulated on the record in open court, inter alia, that: (1) Anthony's limited letters of temporary administration were revoked, and his SCPA 2103 proceeding as temporary administrator against Gilbert and Marie was dismissed without prejudice to Anthony's right, or the right of any other party, to raise "the same issue[s]" in the "accounting proceeding" that were or could have been raised in the SCPA 2103 proceeding; (2) objections, if any, in the accounting proceeding were to be served and filed by November 21, 2003; and, (3) all pre-trial procedures in the accounting proceeding should be completed by January 30, 2004 (see Matter of Rella, NYLJ, Nov. 12, 2003 at 25, col 1). The original objections were filed on November 20, 2003.
After the executors filed a note of issue and certificate of readiness in the accounting proceeding in March 2005, the objectants moved to strike those documents. Based upon the agreement of the parties, the court rendered a decision and order on May 10, 2005 which did not strike the note of issue but which did provide that: the executors, who had commenced an SCPA 2103 proceeding against Anthony, could depose him and, thereafter, the objectants could depose Marie, the co-executrix, in the accounting proceeding; the failure to strike the note of issue was without prejudice to the objectants' right to make a further application in the event that documents requested in connection with an earlier examination of Gilbert were not produced; and, the issues presented in the SCPA 2103 proceeding by the executors against Anthony were to be tried prior to the trial of the objections in the accounting proceeding (Matter of Rella, NYLJ, May 17, 2005 at 30, col 4).
Thereafter, the executors moved to strike the objections to their account based upon Anthony's alleged failure to comply with the court-ordered discovery. The objectants responded by moving for an order directing the production of documents and the depositions of both executors. In a decision and order dated October 31, 2006, the court denied the executors' motion to strike the objections and granted the objectants' motion to the limited extent that "as the executors previously consented to a deposition of Marie notwithstanding the filing of the note of issue and certificate of readiness, and they failed to set forth a valid basis to renege on this agreement, the branch of the objectants' motion seeking to depose Marie is granted" (Matter of Rella, NYLJ, Nov. 3, 2006 at 31, col 5). Marie was deposed on three dates between December 21, 2006 and April 18, 2007, and the amended objections, which are the genesis of the motion sub judice, were prepared 12 days thereafter. The executors' 2103 discovery proceeding against Anthony was settled in January 2007 (Matter of Rella, NYLJ, Jan. 29, 2007, at 33, col 5).
The executors contend that the three-year limitations period embodied in CPLR 214 for the commencement of a cause of action for conversion is applicable to the objectants' claim to set aside the Coliseum gift. Thus, they assert that the statute of limitations bars this claim because the objectants did not interpose their objections on this issue until November 2003, more than seven years after November 7, 1996, the date of the alleged gift and the date that the cause of action accrued. Furthermore, they contend that even if the Coliseum objections are deemed to be governed by the six-year limitations period set forth in CPLR 213(1) for "an action for which no limitation is specifically prescribed by law," such objections are still barred by the statute of limitations.
The objectants counter that the Coliseum objections are governed by a six-year limitations period and their amended objections relate back to Anthony's SCPA 2103 petition of June 2000. Consequently, they assert that their claim is not barred by any limitations period.
The executors also contend that as all disclosure in the accounting proceeding was to be completed by the end of January 2004, and the note of issue was filed in March 2005, even if the objectants had properly requested leave to file amended objections in April 2007, the court should have denied such application. They note that: (1) the objectants were dilatory in pursuing their objections; (2) some of the objections lack the requisite specificity; and, (3) it would be unfair to require the executors to defend against new issues raised in the amended objections.
The objectants counter that both sides knew that discovery was continuing in the accounting proceeding and that the accounting proceeding would not be tried until the executors' SCPA 2103 proceeding against Anthony was tried. They contend that the court should grant them leave to file the amended objections because: (1) discovery in the accounting proceeding was completed shortly after the executors' SCPA 2103 proceeding was settled in January 2007; (2) the amended objections were prepared within 12 days of completion of discovery in the accounting proceeding; and, (3) the amended objections do not raise any completely new issues.
The statute of limitations defense will be considered first. Equity tolls a statute of limitations for a claim that beneficiaries of an estate have against a fiduciary, individually, for the period of time within which the fiduciary, in his fiduciary capacity, could have commenced such a claim on behalf of the estate against himself individually (Matter of Vergo, 137 Misc 2d 619, 622, affd 145 AD2d 935, citing Bancus v Stoer, 89 NY 1; Matter of Shaefitz, 6 Misc 2d 704). However, here, Anthony became a fiduciary in April 1999 so he could pursue the Coliseum claim on behalf the estate and, in fact, did commence such a proceeding in June 2000. Consequently, the court finds that the limitations period for the Coliseum claim to be interposed was tolled for slightly more than 11 months, to wit, from April 29, 1998, when preliminary letters testamentary issued to Gilbert and Marie, to April 2, 1999, when limited letters of temporary administration issued to Anthony so that he could pursue claims against Gilbert and Marie.It is clear that the October 29, 2003 stipulation of the parties, providing that Anthony's SCPA 2103 proceeding was dismissed without prejudice to Anthony's right or the right of any other party to raise "the same issue" with respect to the decedent's alleged gift of Coliseum to Gilbert in the "accounting proceeding" that had or could have been raised in the SCPA 2103 proceeding, and that any objections to the recently filed account of the executors were to be interposed by the objectants within 23 days of the stipulation, reflects the parties' intention that Anthony's claim on behalf of the estate in his SCPA 2103 proceeding to recover the decedent's interest in Coliseum would be merged into the accounting proceeding through the filing of objections, thereby reducing the outstanding litigation in this court by one proceeding. Thus, in essence, the parties agreed on October 29, 2003 that Anthony could pursue the Coliseum claim by filing objections within 23 days in the accounting proceeding, preserving the same rights to make this claim as he had in his SCPA 2103 proceeding, including that it was timely commenced as of the date that his SCPA 2103 proceeding was filed (see SCPA 301). Similarly, the executors preserved their right to raise the same statute of limitations defense that they could have raised in Anthony's SCPA 2103 proceeding. Any other interpretation of the October 29, 2003 stipulation would render Anthony's right to pursue the Coliseum claim in the accounting proceeding meaningless if the claim were to be barred by the statute of limitations due to the 23-day period between the dismissal of Anthony's 2103 proceeding and the time that he was required to raise such an objection to the account. Moreover, such a harsh result would be inequitable, and the doctrine of equitable estoppel would bar the executors from relying upon the statute of limitations as a defense (see Robinson v City of New York, 24 AD2d 260). Accordingly, the issue to be determined is whether the Coliseum claim was barred by the applicable statute of limitations as of June 2000, when Anthony's SCPA 2103 proceeding was filed in the court.Even assuming, arguendo, that the executors are correct in their contention that the Coliseum objections are causes of action sounding in conversion, subject to a three-year limitations period, the court holds that the objectants' Coliseum objections are not barred by the applicable statute of limitations. It is true that if there were no event which tolled the three-year limitations period, the Coliseum claim was barred three years after November 7, 1996, the date of the purported gift of Coliseum to Gilbert. However, here, the statute of limitations was tolled for slightly more than 11 months, during the period when Gilbert was the preliminary executor and Anthony had no authority to pursue the claim (see Matter of Vergo, 137 Misc 2d at 622). Based upon this tolling period, the limitations period expired October 2000 instead of November 1999 and, therefore, Anthony's June 2000 SCPA 2103 petition was filed before the expiration of the three-year limitations period. Of course, if the objectants are correct in their contention that the applicable limitations period is six years because the Coliseum objections seek equitable relief for which no limitations period is specifically prescribed (see Augusta v Augusta, NYLJ, April 18, 2007 at 22, col 3 [relying upon Kazaras v Manufacturers Trust Co., 4 AD2d 227, 237, affd 4 NY2d 930, for holding that a six-year limitations period is applicable to an action to rescind a deed based upon undue influence because the relief requested is equitable in nature]; see also Matter of Francis, 19 Misc 3d 536, 540 [noting that whether the three-year limitations period for conversion or the six-year limitations period for breach of a fiduciary duty governs depends upon the "character of the claim"]), then Anthony's SCPA 2103 proceeding was commenced well within the applicable limitations period without the benefit of any tolling.
The court also holds that the executors are not entitled to any of the other requested relief. Although each side accuses the other of dilatory tactics, it appears that both sides engaged in spurts of activity followed by a hiatus during which they might have been exploring a global settlement. What is clear is that both sides agreed that the SCPA 2103 proceeding that the executors commenced against Anthony was to be tried before trial of the issues in the accounting proceeding. It is also clear that notwithstanding that a note of issue was filed in the accounting proceeding in 2005, the parties contemplated and agreed that further discovery could be conducted in the accounting proceeding. Furthermore, it was shortly after the executors' SCPA 2103 proceeding against Anthony was settled that the parties completed the deposition of Marie in the accounting proceeding. Shortly thereafter, the objectants served and filed the amended objections which the executors now seek to have dismissed.
It is beyond question that in the absence of a stipulation, the objectants should have sought leave of the court before they filed amended objections more than three years after their original objections were filed (see CPLR 3025). However, in light of the entire history of this accounting proceeding, including the agreement that it was not to be tried until another proceeding was concluded, and that the executors moved to dismiss the amended objections instead of rejecting them which might have prompted the objectants to seek leave to file the amended objections, the objectants' opposition to this motion shall be deemed to include a request for leave to file amended objections.
In the absence of any prejudice or surprise to the opposing party, leave to amend a pleading should be freely granted at any stage of the proceeding, even after trial, unless the amendment is palpably insufficient or patently devoid of merit (see CPLR 3025[b]; Whalen v Kawasaki Motors Corp., USA, 92 NY2d 288; Peach Parking Corp. v 346 W. 40th Street, LLC, 42 AD3d 82). Here, the executors did not complain about the specificity of the objections until almost two years after they filed a note of issue indicating that they were ready to proceed to trial on the original objections filed. Inasmuch as the amended objections contain significantly more detail than the original objections, it is somewhat ironic that the executors are now complaining about the specificity of the amended objections. Moreover, none of the amended objections refer to any transaction which was not noted in some manner in the original objections or in Anthony's SCPA 2103 proceeding. Finally, a review of the exhibits marked in connection with the deposition of Marie, which deposition concluded shortly prior to the filing of the amended objections, reflects that the objections do not raise any issues which would result in surprise or unfair prejudice to the executors.
Accordingly, the court grants leave nunc pro tunc to the objectants to file the amended objections that were already served and filed.
Settle an order incorporating the determinations herein, and selecting a regular calendar date of the court for a pre-trial conference at which a date certain for trial shall be set.