Opinion
212-P/1961.
Decided March 12, 2009.
McCanliss Early, LLP (Philip M. Chiappone, Esq., of counsel) for Bank of New York, trustee.
David L. Silverman, Esq., for Marshall Feldman and Gary Feldman, objectants.
In this trustee accounting proceeding, the trustee, the Bank of New York, moves to strike the jury demand contained in the objections filed by the remaindermen of a trust established under Article SIXTH of the decedent's will.
The trust at issue was established for the benefit of the decedent's daughter, Lillian Feldman, and her issue.Lillian Feldman died on February 8, 2000. On January 9, 2008, the trustee filed an accounting and objections were filed by the remaindermen, Lillian's surviving issue, her two sons, Gary and Marshall. The 32 objections relate to the alleged negligence or gross negligence of the trustee during the administration of the trust between 1997 and 2007. The majority of the objections concern the alleged mismanagement and disposition of real property resulting in, inter alia: 1) unnecessary payment of attorneys' fees; 2) payment of certain commissions; 3) failure to pay certain income and make certain distributions; 4) payment of certain taxes; and, 5) failure to provide critical information and documents to the objectants resulting in significant financial losses to the trust.
The trustee contends that the objections relate to the trustee's actions as fiduciary and are equitable in nature, so no trial by jury is permitted. Responding first that the motion to strike the jury demand is untimely or premature, the objectants assert that, because the trustee failed to produce a knowledgeable person at a deposition, further discovery is necessary which might result in additional objections that would warrant a jury trial; the objections are predicated on the trustee's negligence, an action at law, entitling them to trial by jury; and, in any event, the court should exercise its discretion to permit a jury trial on the numerous factual issues.
As an initial matter, the objectants' contention that the motion to strike is untimely is without merit, as it is settled law that "a motion to strike [a jury demand] may be made at any time up to the opening of trial" [and should] "be made within a reasonable period prior thereto" (A. J. Fritschy Corp. v Chase Manhattan Bank, 36 AD2d 600; see also Matter of Fagan, NYLJ, June 25, 1999, at 26, col 5). Therefore, the motion to strike, made within two weeks of the objections being filed, is timely.SCPA 502 (1) governs a party's entitlement to a trial by jury in surrogate's court. It provides, in pertinent part, that a party is entitled to a trial by jury in any proceeding "in which any controverted question of fact arises as to which any party has a constitutional right of trial by jury . . . " Courts reviewing a party's request for a jury have consistently found that resolution of this issue depends upon whether the "nature and the substance of the relief requested is in law or equity" (Matter of Sackler, 222 AD2d 9,12 [1996]; Matter of Luria, 63 Misc 2d 675, 682). As this court previously noted in Matter of Hernandez ( 139 Misc 2d 137, 138):
"If the relief requested is one traditionally cognizable in law and included among those causes where [a] jury trial is historically mandated by the constitution or by statute, a jury trial must be had on demand. On the other hand, if the relief sought is traditionally cognizable in equity, then no right to jury trial exists since none was available at common law."
Generally, an accounting proceeding involving a fiduciary relationship invokes the court's equitable powers (see Matter of Jane S., 15 Misc 3d 1037, 1040, quoting Matter of Luria, 63 Misc 2d at 682; cf. Matter of Garfield, 14 NY2d 251 [executrix in compulsory accounting proceeding entitled to jury trial as she had no fiduciary relationship with the claimants]). Where, as here, the claims against a trustee are made by trust beneficiaries and are grounded in allegations of mismanagement of the trust assets, courts consistently hold that the claims are equitable in nature, and do not entitle the beneficiaries to a trial by jury (see Margesson v Bank of New York, 291 AD2d 694), amended 2002 Slip Op 04812 [U], 2002 WL 1289474, *1 [3d Dept 2002]; Pasqua v Pasqua, 212 AD2d 356; Magill v Dutchess Bank Trust Co., 150 AD2d 531; Matter of Coyle, 34 AD2d 612; Matter of Shane, 18 Misc 3d 1125 [A] [2008]; Matter of Nelson, 105 Misc 2d 747[1980]).
The objectants' contention that the actions of the trustee sound in negligence entitling them to trial by jury lacks merit. The standard objections in an accounting proceeding, as is the case with most, if not all of the objections herein, seek a monetary surcharge against the fiduciary based upon allegations that the fiduciary improperly performed its fiduciary duties. The standard to be applied herein in determining whether or not the trustee acted as a prudent fiduciary (see EPTL 11-2.3) is similar to the standard that is employed in common-law negligence cases; i.e., whether or not the defendant acted as an ordinary reasonable person under the circumstances. Nonetheless, whether a trustee should be surcharged for failing to fulfill its fiduciary duties involves equitable considerations including that the standard of behavior for a trustee is "[N]ot honesty alone, but the punctilio of an honor most sensitive" (Meinhard v Salmon, 249 NY 458, 464). As explained in Magill v Dutchess Bank Trust Co. ( 150 AD2d at 532, quoting Matter of Coyle, 61 Misc 2d 548, 549, affd as modified 34 AD2d at 612), in reviewing a jury demand made by beneficiaries of a testamentary trust,
"[t]he fact that the beneficiaries predicate their breach of trust claim upon the trustee's alleged negligent performance of its fiduciary duties does not convert an action in equity into one cognizable in law. To be sure negligence is in the case, but only as an element in the breach of fiduciary duty; no common-law action in negligence is available to the [beneficiaries].'"
The fact that objectants are entitled to a jury trial on objections in an accounting proceeding seeking relief only "sounding in law," such as seeking a surcharge against the fiduciary on the ground that the fiduciary, in its individual capacity, breached a contract that it entered into with the decedent (see Matter of Garfield, 14 NY2d at 251), does not entitle the objectants herein to a jury trial. Here, the objectants are precluded from having a right to a jury trial, not because the issues were raised in an accounting proceeding, but because the issues raised involve fiduciary duties. The objectants are not entitled to a jury trial on these issues in the supreme court or any other court (see Matter of Jane S., 15 Misc 3d at 1037).
Moreover, to the extent that any of the objections do state a cause of action at law, or that additional objections might be filed stating causes of action at law, the objectants waived their right to a jury trial of those issues by joining their requests for equitable and legal relief in this proceeding (see Margesson v Bank of New York, 291 AD2d at 694; Phoenix Garden Rest., Inc. v Chu, 234 AD2d 233; Hudson View II Assoc. v Gooden, 222 AD2d 163). Consequently, the motion to strike the jury demand is not premature even if the objectants file additional objections subsequently. Finally, the court finds no basis to grant the objectants' request for a jury trial under its discretionary authority.
Accordingly, the motion to strike the jury demand is granted.
Settle order.