Opinion
No. 2009–97672.
2012-05-31
In the Matter of TRUST UNDER ARTICLE SECOND OF the WILL OF Katharine J. BOYER, Deceased.
Allan B. Rappleyea, Esq., Corbally, Gartland & Rappleyea, LLP, for Petitioners. Peter Boyer and Marion Boyer, Richard R. Duvall, Esq., McCabe & Mack, LLP, Poughkeepsie, for Barbara Strickland.
Allan B. Rappleyea, Esq., Corbally, Gartland & Rappleyea, LLP, for Petitioners. Peter Boyer and Marion Boyer, Richard R. Duvall, Esq., McCabe & Mack, LLP, Poughkeepsie, for Barbara Strickland.
Cynthia R. Rosenzweig, Esq., Van Dewater & Van DeWater, LLP, Poughkeepsie, for Carol Strickland.
JAMES D. PAGONES, J.
Peter Hill Boyer and Marion Boyer, two of the three trustees of the trust under Article Second of the Will of Katharine J. Boyer, petition pursuant to SCPA § 2107 for advice and direction regarding the following: (1) approval of the listing for sale of real property owned by the trust; (2) a determination that two of the three trustees may take such action over any objection of the third; and (3) a determination that Barbara Strickland has no right to occupy the real property unless permitted to do so by a majority of the trustees and that she is subject to eviction proceedings. Barbara Strickland and Carol Strickland oppose the instant petition. Carol Strickland also cross-petitions to compel an accounting from Peter Hill Boyer and Marion Boyer and for the removal of the trustees and appointment of new successor trustees. Peter Hill Boyer and Marion Boyer consent to file an intermediate accounting, but move for an order pursuant to CPLR R3211(a)(7) and the doctrines of res judicata and collateral estoppel dismissing the cross-petition as it relates to removal. Carol Strickland opposes the motion to dismiss. For the reasons stated more fully herein, it is ordered that the petition for advice and direction is denied. It is further ordered that the motion to dismiss the cross-petition to remove the trustees is granted. It is further ordered that the Boyer trustees are directed to file their intermediate accounting on or before August 2, 2012.
Katharine J. Boyer died on January 15, 2009 with a Will dated December 3, 2008, which was admitted to probate on February 2, 2009. The Will named Jean Maurice Boyer as trustee and Heather Braun Boyer as successor trustee of any trusts created thereunder. Subject to certain provisions not applicable to the within applications, the Will granted the trustees, without limitation, all the powers granted to fiduciaries in EPTL § 11–1.1. In addition to the statutory powers, the Will also specifically grants the trustees the absolute discretion to “sell, on such terms and conditions and at such time or times as they may determine, the whole or any portion or portions of any property, real or personal, which may at any time form part of my estate or any trust estate ...”.
A trust for the benefit of Barbara Strickland was created under Article Second of the Will. Specifically, the Will states:
HIDDEN LAKE FARM
SECOND: If my friend, BARBARA J. STRICKLAND (“BARBARA”) survives me, I give the real property I own at my death in Staatsburg, New York, known as Hidden Lake Farm, including all buildings thereon and all rights, easements and insurance policies relating thereto as well as the Farm Property customarily located there, and the sum of One Hundred Thousand Dollars ($100,000.00) to the Trustees hereinafter named, to hold said property, IN TRUST, to manage, invest and reinvest the same, to collect the income, and to pay over or apply so much of the net income and principal (including the whole thereof) at such time or times as the Trustees may determine, exercising absolute discretion, to or for the benefit of BARBARA. Any net income not so paid over or applied shall be accumulated and added to the principal of the trust at least annually and thereafter shall be administered and disposed of as part thereof. Upon the death of BARBARA, I direct that the principal of the trust, as it is then constituted, shall be paid over pursuant to the terms of Article THIRD.
Jean Maurice Boyer resigned as trustee and Heather Braum Boyer renounced as successor trustee. On June 3, 2009, Peter Hill Boyer, Marion Boyer and Carol Strickland were appointed as co-trustees of the Article Second trust on consent of all interested parties, including Barbara Strickland who executed a waiver of consent dated May 12, 2009.
Hidden Lake Farm consists, inter alia, of a horse farm on approximately 67 acres of land. Prior to her death, the decedent operated a horse boarding business on the farm. Barbara Strickland also resided on the farm and was a friend and longtime employee of the decedent during the decedent's lifetime. Presently, Barbara Strickland operates the horse boarding business and continues to reside on the farm.
Petitioners Peter Hill Boyer and Marion Boyer assert that Barbara Strickland's business does not generate sufficient income to cover the farm's expenses and that the $100,000.00 left in trust to cover the farm's expenses will be exhausted by 2013. Therefore, petitioners Peter Hill Boyer and Marion Boyer seek to liquidate the farm. The third trustee, Carol Strickland, asserts that she does not necessarily oppose the sale of the farm but that she does not agree with the manner in which it is being handled. Carol Strickland also asserts that her status as Barbara Strickland's sister and the Boyer trustees' status as remainderman of the trust, in the case of Peter Hill Boyer, and a spouse of another remainderman, in the case of Marion Boyer, have resulted in “potential and actual conflicts of interest inherent among and between all of the parties”. Carol Strickland therefore requests the removal of all three trustees and the appointment of disinterested successor trustees.
SCPA § 2107 PETITION
In the absence of contrary or limiting provisions in a court order or decree or in the trust document, trustees have broad powers to administer a trust. (EPTL § 11–1.1). Included in this broad grant of powers is the authority to take possession of property owned by the trust, unless such property is specifically disposed of, and sell the same at public or private sale on such terms as the trustees opine will be most advantageous to those interested therein. (EPTL § 11–1.1[5].) In carrying out their duties, trustees are charged with the duty of equal loyalty to all beneficiaries whom they represent, whether lifetime beneficiaries or remaindermen. (In re Hubbell's Will, 302 N.Y. 246 [1951].)
In certain instances, a fiduciary may petition the court for advice and direction in the administration of the trust. SCPA § 2107 permits a fiduciary, including a trustee, to ask the court for advice and direction when he or she is selling property whose value is uncertain and “in other extraordinary circumstances such as complex valuation issue, or tax elections, or where there is a conflict among interested parties.” The statute gives the court discretion whether to entertain the petition or not and courts are loath to substitute their judgments for those of the fiduciary and frequently decline such petitions. ( See, e.g. Matter of Lovell, 23 AD3d 386 [2nd Dept.2005]; In re Osterndorf, 75 Misc.2d 730 [Surr. Ct., Nassau County 1973]; In re Ebbets, 139 Misc. 250 [Surr. Ct., Kings County 1931].)
The Boyer petitioners' request for advice and direction falls into two categories: (1) direction pursuant to SCPA § 2107(1) regarding the sale of the farm and (2) direction pursuant to SCPA § 2107(2) based on conflict among interested parties regarding the sale of the farm and a finding from the court that Barbara Strickland has no right to occupy the farm and may be evicted if a majority of the trustees deem such a proceeding necessary.
SCPA § 2107(1) permits a fiduciary to petition the court for advice and direction concerning the propriety, price, manner and time of a sale “[w]henever the value of property of an estate is uncertain or dependent upon the time and manner of sale thereof”. The Boyd petitioners assert that the court's advice and direction is warranted because they received three different opinions as to the farm's value from four different brokers and because Barbara Strickland resides on the farm and may attempt to thwart its sale. The estimated values of the farm were as follows: (1) $1,150,000.00; (2) $975,000.00; (3) $975,000.00; and (4) $750,000.00. While the estimated values differ, there are no novel or complex valuation issues and the discrepancies between the estimated valuations do not rise to the level of an uncertain value as contemplated by the statute. It is doubtless that any fiduciary soliciting multiple broker valuations of real property would receive differing opinions. Here, differing opinions alone are an insufficient basis for the court's advice and direction in the sale of the farm and the court would merely be substituting its business judgment for that of the fiduciaries. In the event the farm is listed for sale, the question of the proper listing and sale price must be determined by the trustees who are obligated to use their business judgment in carrying out their fiduciary duties. ( See, Matter of Lovell, supra.)
The Boyer petitioners have also failed to articulate any manner in which Barbara Strickland's occupancy of the farm relates to its value or the timing and manner of its sale. Where fiduciaries are given authority to sell a decedent's property, decisions as to the time and manner of such sales involve questions of pure business judgment with which the surrogate's courts are reluctant to interfere. (In re Chapman's Will, 32 N.Y.S.2d 290 [Surr. Ct., Westchester County 1941]; In re Kopff's Will, 32 N.Y.S.2d 85 [Surr. Ct., Westchester County 1941].) Therefore, the Boyer petitioners' request for advice and direction pursuant to SCPA § 2107(1) is denied.
The Boyer petitioners also contend that advice and direction is warranted under SCPA § 2107(2) because extraordinary circumstances exist in the form of conflict among interested parties. The presence of extraordinary circumstances is the sine qua non, otherwise the use of proceedings under SCPA § 2107 concerning the sale of real property may unduly create in the minds of some a limitation of the powers afforded to fiduciaries under EPTL § 11–1.1 and place unnecessary clouds on title. (In re Osterndorf, 75 Misc.2d 730 [Surr. Ct., Nassau County 1973].)
Unless limited by or contrary to the provisions of a will or trust document, when three or more co-fiduciaries have discretion to act, a majority of them must agree. (EPTL § 10–10.7). Here, the will does not alter either EPTL § 10–10.7 nor the fiduciaries' statutory powers set forth in EPTL § 11.1. Therefore, the trustees remain tasked with the use of their business judgment in determining the proper administration of the subject trust. Moreover, the circumstances present here are not so extraordinary as to warrant court intervention. While the court can appreciate the Boyer trustees being cautious in their decision to sell the farm because of the strained relationship between the Boyer petitioners and the Stricklands, the question here still deals with one of business judgment and not law and the trustees should make the business judgment and utilize the powers afforded to them. As with the Boyer petitioners' SCPA § 2107(1) request for advice and direction, the Boyer trustees must use their business judgment in determining the best course of action involving the farm property, including whether to commence an eviction proceeding against trust beneficiary Barbara Strickland. Therefore, it is ordered that the Boyer petitioners' request for advice and direction pursuant to SCPA § 2107(2) is denied.
CROSS–PETITION FOR REMOVAL/MOTION TO DISMISS
It is well settled that on any motion pursuant to CPLR Rule 3211, the court “must take the allegations (of the petition) as true and resolve all inferences which reasonably flow therefrom in favor of the pleader.” (Cron v. Hargro Fabrics, Inc., 91 N.Y.2d 362, 366 [1998]. To dismiss a petition pursuant to CPLR Rule 3211(a)(7) on the ground that the petitioner has failed to state a cause of action, the court must liberally construe the petition and accept all facts as alleged therein to be true, accord the petitioner the benefit of every favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory. (Fishberger v. Voss, 51 AD3d 627 [2nd Dept.2008].)
Res judicata “operates to preclude the renewal of issues actually litigated and resolved in a prior proceeding as well as claims for different relief which arise out of the same factual grouping or transaction and which should have or could have been resolved in the prior proceeding.' “ (Union Street Tower, LLC v. Richmond, 84 AD3d 784 [2nd Dept.2011] [citations omitted.) To determine whether a claim arises out of the same “factual grouping” or “transaction”, the court must determine if “the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether ... their treatment as a unit conforms to the parties' expectations or business understanding or usage.” (Smith v. Russell Sage Coll., 54 N.Y.2d 185, 192–193 [1981] quoting Restatement, Judgments 2d [Tenth Draft No. 1], § 61). New York's transactional approach to the doctrine of res judicata mandates that “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 if seeking a different remedy.' “ (Union Street Tower, LLC, 84 AD3d at 785 [citations omitted].)
Collateral estoppel, or issue preclusion, operates to preclude relitigation of discrete issues of law and fact determined, or necessarily determined, in a prior action or proceeding. (Kret v. Brookdale Hospital Medical Center, 93 A.D.2d 449 [2nd Dept.1983].) For collateral estoppel to apply, (1) the issue as to which preclusion is sought must be identical with the issue decided in the prior proceeding, (2) the issue must have been necessarily decided in the prior proceeding, and (3) the litigant who will be held precluded in the present proceeding must have had a full and fair opportunity to litigate the issue in the prior proceeding. ( Id. at 455, citing Gilberg v. Barbieri, 53 N.Y.2d 285 [1981].)
Fiduciaries are typically removed only in cases of serious misconduct or where the safety of the fund is endangered. ( Matter of Anderson, 16 Misc.3d 1101A [Surr. Ct., Dutchess County 2007], citing Turano & Radigan, New York Estate Administration, 2007 Edition, § 14.04[a][1][A].) A petitioner's allegation that a fiduciary has a conflict of interest with the estate is not sufficient to justify removal. ( Id., see also Matter of Weiss, 33 Misc.2d 773, 776 [Surr. Ct., New York County 1962].) A fiduciary cannot be removed from office or enjoined in anticipation of a possible wrongdoing. ( Matter of Weiss, supra.)
Cross-petitioner Carol Strickland alleges removal is warranted as a result of a conflict of interest based on the Boyer trustees' status as trustees and remainderman/spouse of a remainderman and their failure to include petitioner Strickland in discussions regarding the sale of the farm. Assuming all of the allegations to be true, the court finds petitioner Strickland has not alleged misconduct severe enough to constitute serious misconduct; has failed to demonstrate a substantial conflict of interest or establish on a prima facie basis that the Boyer trustees are unfit to continue to act as trustees. Moreover, any argument that the trustees must be disqualified because of their relations to the trust beneficiaries is barred by res judicata and collateral estoppel based on the waiver and consent to their appointment by all interested parties, including Carol Strickland and Barbara Strickland. Moreover, the cross-petitioner has not offered plausible proof which would suggest that either Carol or Barbara were, in some fashion, coerced, duped or mislead into executing their respective waivers and consents. While Carol Strickland surmises that Barbara Strickland may not have been in a proper state of mind when she executed the waiver and consent, no documentation has been submitted by Barbara Strickland to support such an allegation and the issue is not properly before the court at this time.
Additionally, Carol Strickland's attempt to bolster her removal petition by expanding on her assertions concerning the actual or potential conflicts and setting forth additional circumstances allegedly warranting the trustees' removal for the first time in her reply papers may not be properly considered by this court. (Hoyte v. Epstein, 12 AD3d 487 [2nd Dept.2004].)
That does not mean that the Boyer trustees' conduct may not be further scrutinized by court. Carol Strickland's concerns, including the question of the propriety of certain expenses, may properly be raised in an accounting proceeding where she may seek to surcharge the Boyer trustees by showing that they “acted negligently, and with an absence of diligence and prudence which an ordinary man would exercise in his own affairs.” ( Matter of Lovell, supra at 387, citing Matter of Shurtleff, 206 Misc. 255 [NY Sur. Ct.1954].)
Therefore, it is ordered that the motion to dismiss the cross-petition to remove the trustees is granted. On consent of the Boyer trustees, the cross-petition to compel an accounting is granted and the Boyer trustees shall file their accounting by August 2, 2012. Adjournments are only granted with leave of the court.
Counsel for the Boyer petitioners is directed to submit a decree on notice consistent with the foregoing within ten (10) days of the date of this decision.
The court read and considered the following documents upon these applications:
+------------------------------------------------------+ ¦ ¦PAGES ¦NUMBERED ¦ +--+----------------------------------------+----------¦ ¦1.¦Verified Petition ¦1–2 ¦ +--+----------------------------------------+----------¦ ¦ ¦Exhibits ¦1–12 ¦ +--+----------------------------------------+----------¦ ¦ ¦Memorandum of Law ¦1–4 ¦ +--+----------------------------------------+----------¦ ¦2.¦Verified Answer–Barbara Strickland ¦1–3 ¦ +--+----------------------------------------+----------¦ ¦ ¦Affirmation in Opposition–DuVall ¦1–5 ¦ +--+----------------------------------------+----------¦ ¦3.¦Cross–Petition and Verified Answer- ¦ ¦ +--+----------------------------------------+----------¦ ¦ ¦Carol Strickland ¦1–8 ¦ +--+----------------------------------------+----------¦ ¦ ¦Exhibits ¦A–C ¦ +--+----------------------------------------+----------¦ ¦4.¦Reply Affirmation–Rappleyea ¦1–4 ¦ +--+----------------------------------------+----------¦ ¦ ¦Exhibits ¦13–14 ¦ +--+----------------------------------------+----------¦ ¦5.¦Notice of Motion ¦1–2 ¦ +--+----------------------------------------+----------¦ ¦ ¦Affirmation–Rappleyea ¦1–5 ¦ +--+----------------------------------------+----------¦ ¦ ¦Exhibits ¦A–B ¦ +--+----------------------------------------+----------¦ ¦6.¦Affidavit in Opposition–Carol Strickland¦1–5 ¦ +--+----------------------------------------+----------¦ ¦ ¦Memorandum of Law ¦1–6 ¦ +--+----------------------------------------+----------¦ ¦7.¦Reply Affirmation–Rappleyea. ¦1–6 ¦ +--+----------------------------------------+----------¦ ¦ ¦Reply Affidavit–Marion Boyer ¦1–4 ¦ +--+----------------------------------------+----------¦ ¦ ¦Exhibit ¦C ¦ +------------------------------------------------------+
The foregoing constitutes the decision of this court.