Opinion
No. 2013–1867/B.
09-30-2014
In the Matter of the Application of Susan FIALKOFF as Administrator of the Goods, Chattels and Credits of Andrew Green, Deceased, to Discover and Turnover Property Withheld.
Jason W. Stern, Esq., Forest Hills, for Petitioner. Richard S. Bonfiglio, Esq., Brooklyn, for Respondents.
Jason W. Stern, Esq., Forest Hills, for Petitioner.
Richard S. Bonfiglio, Esq., Brooklyn, for Respondents.
Opinion
PETER J. KELLY, J.
In this SCPA § 2103 proceeding, the limited administrator Susan Fialkoff (hereinafter “petitioner”) seeks an inquiry and turnover of personal property from respondents Morgan Stanley (hereinafter “Morgan Stanley”) and Tyler Lombardo, Skye Saetta, Jane Denuto, Michael Candan, Mark Zeller and the New England Old English Sheepdog Rescue, Inc. (hereinafter “the Lombardo respondents”).
Decedent Andrew Green died intestate on March 9, 2013 survived by two sisters: petitioner and Kathryn Green. Limited letters of administration were granted to petitioner by decree dated May 20, 2013 based upon a petition which sought an inquiry and turnover of certain brokerage accounts from respondent Morgan Stanley. After conclusion of the inquiry of Morgan Stanley, petitioner filed and served an order to show cause dated April 9, 2014 with an amended petition adding the Lombardo respondents, seeking a date for their inquiry, the turnover of a Morgan Stanley transfer-on-death account (hereinafter “T.O.D. account”), and temporarily restraining Morgan Stanley from distributing the funds in that account.
Rather than proceed with examinations, the Lombardo respondents filed a verified answer on May 6, 2014 together with a “cross motion” seeking, inter alia, to dismiss the petition for failure to state a claim (CPLR 3211[a] [7] ), to grant summary judgment dismissing the amended petition and declaring them to be owners of the Morgan Stanley T.O.D. account (CPLR 3212 ), to vacate the temporary restraining order (CPLR 6314 ), to schedule a hearing to determine whether a preliminary injunction should issue and an undertaking posted (CPLR 6301 ; CPLR 6312 ), to direct petitioner to post a surety bond (SCPA 805 ), to direct petitioner to advise Lombardo respondents of the status of federal and New York State estate tax returns, to establish a discovery schedule and appoint a referee to supervise disclosure, to direct reimbursement of funeral expenses and for an award of sanctions (22 NYCRR 130–1.1 [a] ).
Initially, the petitioner contends that the cross motion is procedurally improper because a motion has not been submitted on her behalf. While the Lombardo respondents contend they were served with a motion and their cross motion is proper, in actuality petitioner did not serve a motion, but rather joined the Lombardo respondents in this proceeding by serving an amended petition by order to show cause. Respondents were joined because they are necessary parties for the determination of the issue of ownership of the Morgan Stanley T.O.D. account (SCPA 312 ; SCPA 2103[4] ). The proceeding was deemed commenced against the Lombardo respondents when petitioner filed the amended petition and personal jurisdiction was obtained over them when service of process was accomplished (SCPA 203 ; see e.g. Matter of Foley, 199 A.D.2d 672, 673 ; cf. Matter of Pavese, 195 Misc.2d 1, 5–6 ). “Process” under the SCPA includes an order to show cause as well as a citation (SCPA 103 [43 ] ). Thus, the captioning of the papers as a “cross motion” is improper since petitioner had not served a motion (CPLR 2215 ), irrespective of the existence of an order to show cause.
Regardless of this defect in respondents' papers, however, this Court can consider the merits of the Lombardo motion, mislabeled as a “cross motion,” since petitioner has not suffered any prejudice and has had ample opportunity to be heard on the merits (see Kleeberg v. City of New York, 305 A.D.2d 549, 550 ).
The first branch of the motion seeks to dismiss the petition for failure to state a cause of action (CPLR 3211[a][7] ). Movants allege, inter alia, that petitioner failed to plead the elements of fraud and undue influence with sufficient particularity (CPLR 3013 ; CPLR 3016[b] ) and failed to plead the material elements of lack of capacity sufficient to give notice of the claim (CPLR 3013 ).
In determining whether a pleading is sufficient to withstand a motion to dismiss pursuant to CPLR 3211(a)(7), “the sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law a motion for dismissal will fail” (Guggenheimer v. Ginzburg, 43 N.Y.2d 268, 275 ; see Leon v. Martinez, 84 N.Y.2d 83, 87–88 ; Matter of Baugher, 98 AD3d 1111, 1112 ). “The [pleading] must be construed liberally, the factual allegations deemed to be true, and the nonmoving party granted the benefit of every possible favorable inference” (Hense v. Baxter, 79 AD3d 814, 815 ). It has been a longstanding tenet in Surrogate's Court practice that “the sufficiency of a petition in a discovery [proceeding] must be considered in light of the purpose of the proceeding which is primarily inquisitorial” (In Re Shapiro's Will, 95 N.Y.S.2d 430, 433 ).
The moving papers herein demonstrate a fundamental misunderstanding of the purpose of an SCPA 2103 proceeding and the applicable legal procedures. Unlike other actions and proceedings, this proceeding is “an information-gathering vehicle for a fiduciary attempting to garner information as to potential estate assets” (Matter of Hendershot, 16 Misc.3d 1125[A] ; see Matter of Granowitz, 150 A.D.2d 446 ). The broad purpose of the statute allows the fiduciary to perform his or her duty to identify and marshal estate assets and effectuate their return (see e.g. Matter of Granowitz, 150 A.D.2d 446 ; Matter of Laflin, 128 Misc.2d 348, 349 ).
The typical discovery proceeding has two stages: the inquisitorial stage and the trial stage. The inquisitorial stage “anticipates that [the] pleadings will be non-specific” (Matter of Hendershot, 16 Misc.3d 1125[A] ; see Matter of Tesser, 4 Misc.2d 712, 713–714 ) and the petitioner is not required to set forth allegations sufficient to sustain a cause of action but only those that justify an inquiry (see e.g. Estate of Lukele, NYLJ, July 18, 2014 at 41, col 1 [Sur Ct, N.Y. County]; Estate of Edwin Valentin, NYLJ, Aug. 1, 2005 at 1, col 1 [Sur Ct, Suffolk County); Estate of Frances E. Francis, NYLJ, Nov. 10, 2005 at 4, col 4 [Sur Ct, Westchester County]; Estate of Vincent Boccia, NYLJ, Feb. 23, 2001 at 17, col 3 [Sur Ct, Nassau County]; see also e.g. Matter of Rosenkrantz, 5 Misc.2d 308 ). The petitioner should be allowed the broadest latitude in deposing a respondent to obtain information to aid the fiduciary in administering the estate and determining whether recovery of assets should be pursued (Estate of Olive Waters, NYLJ, June 13, 2000 at 34, col 5 [Sur Ct, Westchester County]; 5 Warren's Heaton, Surrogate's Court Practice § 64.03[2] [a] at 64–21 [7th ed 2006] ).
With respect to the sufficiency of the petition, an SCPA 2103 petition may be stated upon knowledge or upon information and belief and the allegations only need show that any property or the proceeds or value thereof which should be paid or delivered to the petitioner is:
1. In the possession or control of a person who is withholding it from him; or
2. Within the knowledge or information of a person who refuses to tell the fiduciary where it is or disclose any other fact that will aid in its recovery (SCPA 2103 ).
Here, the petition specifically identifies the subject Morgan Stanley T.O.D. account, it states upon information and belief that it was improperly titled to create an interest in third parties rather than the decedent's estate, and it identifies the individual respondents with knowledge of the account whom are sought to be examined. Thus, the petition complies with the pleading requirements of SCPA 2103.
With respect to the contention that the petition must also state the circumstances of the alleged fraud and undue influence in detail (CPLR 3016 ), the heightened pleading requirements of CPLR 3016 do not necessarily apply in Surrogate's Court since the controlling provision in the SCPA only requires that pleadings be “sufficiently particular to give the court and parties notice of the claim” (SCPA 302[2] ; see David D. Siegel and Patrick M. Connors, Practice Commentaries, McKinney's Cons Laws of NY, Book 58A, SCPA 302 ; Harris 6th Edition New York Estates: Probate, Administration and Litigation, §§ 24.51–24.52 and § 26–104 [2013]; see e.g. Matter of Schneider, 64 Misc.2d 299, 300–301 ). With respect to the allegation of decedent's lack of capacity, no heightened pleading requirements apply pursuant to statute.
Even if the factual or procedural setting did require further detail of fraud, undue influence or lack of capacity in order to comply with SCPA 302(2), the petition would not be dismissed since the circumstances of the alleged fraud or undue influence are, at this time, peculiarly within respondents' knowledge, the inquisitorial stage of this proceeding has just commenced, and none of the respondents have even submitted to an examination by the fiduciary (see generally Pludeman v. Northern Leasing Sys., Inc., 10 NY3d 486, 491–492 ; Jered Contr. Corp. v. New York City Tr. Auth., 22 N.Y.2d 187, 194 ; Matter of Reiner, 86 Misc.2d 511, 514–515 ). Additional discovery is also necessary to investigate the issue of decedent's capacity. If necessary, further amplification of the petition can be made after completion of respondents' examinations by either a motion for leave to amend or to compel a response to a demand for a bill of particulars (see e.g. Matter of Rungo's Estate, 74 Misc.2d 239, 242 ; Matter of English, 24 Misc.2d 531, 534 ; Matter of Grotsky, 12 Misc.2d 385, 386 ).
As stated succinctly in Matter of Granowitz (150 A.D.2d 446, 447 [2d Dept 1989] ): “In general, discovery proceedings should not be dismissed without adequate opportunity for the full development of the facts.” At this juncture in the inquisitorial phase of the proceeding, petitioner has an absolute right to conduct the Lombardo respondents' examinations which should not be curtailed (see e.g. Estate of John Giardina, NYLJ, May 22, 1989 at 25, col 6 [Sur Ct, Queens County]; see also Estate of Arthur Lichtman, NYLJ, Oct. 22, 2005 at 29, col 5 [Sur Ct, Kings County] ).
Accordingly, the branch of the motion to dismiss the petition for failure to state a cause of action is denied.
The Lombardo respondents also seek to dismiss the petition on the grounds that it fails to consist of plain and concise statements in consecutively numbered paragraphs (CPLR 3014 ). This argument is raised for the first time in the reply memorandum of law by counsel. “The function of reply papers is to address arguments made in opposition to the position taken by the movant, not to permit the movant to introduce new arguments or new grounds for the requested relief” (Matter of Allstate Ins. Co. v. Dawkins, 52 AD3d 826, 827 ; see Matter of Harleysville Ins. Co. v. Rosario, 17 AD3d 677 ). Accordingly, as the argument is improperly raised by counsel for the first time in reply papers, the Court declines to address it except to state that stylistic shortcomings are usually not remedied by dismissal.
The next branch of the motion seeks summary judgment dismissing the amended petition (CPLR 3212 ). The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law by tendering sufficient evidence to eliminate any material issues of fact from the case. To grant summary judgment, it must clearly appear that no material and triable issue of fact is presented (Sillman v. Twentieth Century–Fox Film Corporation, 3 N.Y.2d 395, 404 ). The movant has the initial burden of proving entitlement to summary judgment, and the failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers (Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853 ). Once such proof has been offered, the burden then shifts to the opposing party who, in order to defeat the motion for summary judgment, must proffer evidence in admissible form and show that there is a triable issue of fact (Zuckerman v. City of New York, 49 N.Y.2d 557, 562 ).
In support of the motion, the Lombardo respondents submit a copy of the Morgan Stanley T.O.D. agreement, executed less than two weeks prior to decedent's death, which appears to show that they are the nominated beneficiaries thereof. Also submitted are the pleadings, and the affidavits of non-party Nicolas Puglisi and respondent Tyler Lombardo who purportedly witnessed the execution of the agreement. Affidavits of the other Lombardo respondents and the transcript of the examination of Morgan Stanley employee David Gallagher are also submitted.
To the extent that the Lombardo respondents offer their own affidavits concerning personal transactions and communications with the decedent, they consist of hearsay statements which violate the Dead Man's statute (CPLR 4519 ) and can not be relied upon in support of the motion for summary judgment (see Phillips v. Kantor & Co., 31 N.Y.2d 307, 313 ; Beyer v. Melgar, 16 AD3d 532 ; Friedman v. Sills, 112 A.D.2d 343, 344 ; Ditkoff v. Prudential Sav. Bank, 245 AD 748 ). Moreover, in light of the fact that the Lombardo respondents' SCPA 2103 examinations have not yet been conducted and it appears from the affidavits and exhibits submitted by petitioner that facts essential to justify opposition may exist but cannot now be stated, the branch of the motion for summary judgment dismissing the amended petition is denied (CPLR 3212(f) ; see Sepulveda v. Cammeby's Management Co. LLC, 119 AD3d 927 ; Juseinoski v. New York Hosp. Medical Ctr. of Queens, 29 AD3d 636, 637 ; see also Estate of Priscilla Martin, NYLJ, August 31, 2006 at 31, col 1 [Sur Ct. Kings County] ).
The motion also seeks summary judgment declaring the Lombardo respondents to be the title owners of the proceeds of the Morgan Stanley T.O.D. account. It is fundamental that summary judgment can not be granted on a claim that has not been affirmatively pled. Any claim of title to property that formerly was owned by decedent is required to be pled in a verified answer (SCPA 2104[2] ). The Lombardo respondents fail to allege title to the proceeds of the Morgan Stanley T.O.D. account in their verified answer. Accordingly, this part of the motion is denied as procedurally defective.
The motion also seeks an order vacating the temporary restraining order in the order to show cause dated April 9, 2014 (CPLR 6314 ), setting this matter down for a hearing to determine whether a preliminary injunction should issue (CPLR 6301 ) and, if so, directing the petitioner to post an undertaking (CPLR 6312 ).
In an SCPA 2103 proceeding, the court typically will grant a temporary restraining order when there is disputed property in respondent's possession if such is necessary to maintain the status quo pending trial (see e.g. Matter of Clement M. Hakim, NYLJ, December 20, 1996 at 25, col 5 [Sur Ct, New York County]; Matter of Ralph J. Whalen, NYLJ, November 23, 1994 at 29, col 2 [Sur Ct, New York County] ). On the return date of the petition a respondent will have the opportunity to address a petitioner's application seeking the continuation of the restraint (see Harris 6th Edition New York Estates: Probate, Administration and Litigation, § 26.42 [2013] ).
The Lombardo respondents are entitled to a hearing on the issue whether the restraint on the subject T.O.D. account should continue (CPLR 6301 ) and the amount of an undertaking, if any (CPLR 6312 ). Accordingly, the branch of the motion to set this matter down for a hearing to determine whether this Court should issue a preliminary injunction and direct an undertaking is granted to the extent that a hearing on the issue whether a preliminary injunction shall issue and an undertaking directed will be held on October 15, 2014, 11:00 AM, Courtroom 62. No adjournments shall be granted without prior Court approval.
The branch of the motion to vacate the temporary restraining order is denied.
That branch of respondents' motion to compel the petitioner to post a bond pursuant to SCPA 805 is denied as such statute only applies to administrators, administrators c.t.a. and temporary administrators. It does not require the bonding of a limited administrator such as the petitioner.
The respondents have also moved for an order pursuant to SCPA 2102(1) to direct the petitioner to advise the Court as well as the respondents, in writing, of the status of Federal and New York State Estate tax returns that were due to be filed on or before December, 2013. Relief pursuant to SCPA 2102(1) must be initiated by petition which, in turn, must be entertained by the Court (SCPA 2101[1] ). The movants have failed to comply with this statute. In any event, the requested relief is not relevant to this SCPA 2103 proceeding and any claims concerning the apportionment of tax liability are properly raised at the time of the judicial settlement of the account of a fiduciary. Accordingly, this branch of the motion is denied.
With respect to the branch of the motion seeking the Court to set a discovery schedule pursuant to 22 NYCRR 207.29 [c] ), it appears the citation to 22 NYCRR 207.29 [c] is an error as that section of the Uniform Rules for the Surrogate's Court does not pertain to discovery schedules, but rather, court calendars and the scheduling of hearings, pretrial conferences and trials. Additionally a discovery schedule shall be established, in the usual custom, at the conclusion of the inquisitorial stage of the proceeding if an issue of title concerning the subject property is shown to exist. Accordingly, this branch of the motion is denied.
The branch of the motion seeking the appointment of a judicial hearing officer or a referee to supervise disclosure pursuant to CPLR 3104 is denied as a showing for the appointment of a judicial hearing officer is not demonstrated and the appointment of one of the Court's own referees to supervise disclosure at this juncture would be a waste of scarce judicial resources.
Turning to the branch of the motion for reimbursement of funeral expenses to Michael Candan and non-party Laura Gee, it is elementary that the reasonable funeral expenses of the decedent are preferable to all debts and claims and shall be paid out of the first moneys received by the fiduciary, subject to the expenses of administration (SCPA 1811 ). The moving papers fail to include proof of presentation of the claim (SCPA 1803 ) or a copy of a paid funeral bill. Moreover, the motion is procedurally improper since this relief should be obtained either by petition or in the judicial settlement of the account of the fiduciary. There is no accounting proceeding pending and movants have failed to commence the requisite statutory proceeding. Accordingly, this branch of the motion is denied.
The movants also seek sanctions against petitioner pursuant to 22 NYCRR 130–1.1(a) ; which provides a court, “in its discretion, may award to any party or attorney in any civil action or proceeding before the court ... costs in the form of reimbursement for actual expenses reasonably incurred and reasonable attorney's fees, resulting from frivolous conduct” (22 NYCRR 130–1.1 [a] ). The party seeking sanctions has the burden to demonstrate that its opponent's conduct was frivolous within the meaning of 22 NYCRR 130–1.1 [c] ) (see Miller v. Miller, 96 AD3d 943, 944 ).The Lombardo respondents contend that petitioner engaged in frivolous conduct by advancing claims that lack legal merit. Although the advancement of a claim lacking legal merit may serve as the basis for a finding of frivolous conduct, the standard for such a showing is high: a position will be deemed frivolous only where it is “completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law” (22 NYCRR 130–1.1 [c][1]; see Stone Mountain Holdings, LLC. v. Spitzer, 119 AD3d 548 ; Kucker v. Kaminsky & Rich, 7 AD3d 491, 492 ). As discussed above, the allegations of the amended petition conform to the pleading requirements of SCPA 2103 and, therefore, are not frivolous. If anything, the request for sanctions herein would appear more likely to satisfy the subject rule than the pleading complained of.
The Lombardo respondents also contend that petitioner engaged in frivolous conduct by making attempts to personally serve the amended petition between the dates April 23, 2014 and April 25, 2013, after a notice of appearance was filed and a verified amended answer was served by overnight delivery on April 22, 2014. Contrary to this contention, petitioner was complying with a lawful order of this Court (the order to show cause dated April 9, 2014) by attempting to effectuate service as directed therein. Significantly, the movants' attorney had not filed authorizations to appear on behalf of his clients until May 15, 2014, and such filing was required since the Lombardo respondents had not been personally served with process within the State of New York (SCPA 401[3] ; 22 NYCRR 207.9 [b] ). Thus, petitioner's attempts to comply with this Court's order were not completely without merit in law.
Accordingly, after oral argument and based upon the evidence submitted, the part of the motion seeking sanctions against petitioner pursuant to 22 NYCRR 130–1.1(a) is denied.
The Lombardo respondents have not yet submitted to SCPA 2103 examinations. Accordingly, the SCPA 2103 examinations of the Lombardo respondents shall commence on October 20, 2014, 10:00 AM at this courthouse and continue day-to-day until completion. No adjournments shall be granted without prior Court approval.
This is the decision and order of this Court.