Opinion
308062.
Decided June 29, 2005.
Roberts Holland, Esqs., 825 Eighth Avenue, 37th Floor, New York, NY 10019.
Davidoff Malito, Esqs., 605 Third Avenue, 34th Floor, New York, NY 10158.
Edward I. Sussman, Esq., 122 East 42nd Street — Suite 606, New York, NY 10168.
The court has before it a pre-answer motion to dismiss a petition submitted pursuant to SCPA 2103 seeking relief against the corporate respondent in which the decedent had a 50% interest.
The decedent died on September 12, 2001. The decedent's Last Will and Testament was admitted to probate on October 10, 2001. Letters testamentary issued to Thomas H. Schwartz, Amy Speilman and Jane Stein to act as co-fiduciaries.
Co-fiduciary Thomas H. Schwartz brought this discovery/turnover proceeding against Helmsley-Spear, Inc. (hereinafter HSI). HSI, a New York corporation, provides management and leasing services for real property in various jurisdictions, including New York. At the time of his death, the decedent was a 50% shareholder in HSI together with Irving Schneider (also a 50% shareholder). By Shareholders' Agreement dated September 24, 1997, the shareholders agreed that "[i]n the event of the death of either Shareholder (the 'Deceased Shareholder'), the estate of the Deceased Shareholder shall sell, and the corporation or the surviving Shareholder, at the election of the surviving Shareholder, shall purchase all of the stock of the Deceased
Shareholder. . . ." By Managed Properties Agreement, also dated September 24, 1997, the shareholders agreed that each would continue to act as account executive for each of the properties for which each had served as account executive for Helmsley, Spear, Inc. and would be entitled to receive the benefits associated therewith. The shareholders further agreed that each "shall have the right to designate in any writing, including, without limitation, a Last Will and Testament, an account executive to replace him in the event of his death or incapacity, and their respective heirs, executors, administrators or representatives, as applicable, shall be entitled to designate a replacement account executive in the event that Schneider or Schwartz shall fail to designate such replacement prior to his death or incapacity (the 'Designated Representative'). The rights set forth herein shall survive for the duration of the Management Period." On February 5, 2003, by letter from counsel, the estate apparently designated Thomas H. Schwartz as the Designated Representative of the decedent, effective as of the date of the decedent's death. The record reflects that there are ongoing negotiations concerning the purchase of the decedent's stock in HSI.
Petitioner alleges that both prior to and continuing beyond the date of the decedent's death, he or his estate was entitled to receive a percentage of the gross revenue realized by HSI on various properties, including properties the identity of which are unknown to petitioner. Petitioner seeks the examination of Robert Hecht, an officer of HSI, regarding the commission arrangement as well as the identity of all of the properties subject to the arrangement. Petitioner also seeks payment to the estate of all monies due from respondent HSI.
HSI has filed the instant motion to dismiss on various grounds, including the failure to join a necessary party, dismissing so much of the petition as seeks an inquiry and turnover to the estate of commissions purportedly due the estate post-death, and dismissing the petition in the exercise of the court's discretion pursuant to SCPA 2103(3) on the basis that petitioner has already obtained the necessary information.
Robert Hecht, an officer of HSI, states that decedent and Irving Schneider were each 50% shareholders of HSI. Mr. Hecht avers that during his lifetime decedent was the account executive for certain properties and was entitled to various percentages of gross revenues realized by HSI with respect thereto. Hecht states that at the time of his death, decedent was entitled to the sum of $880,757.95 and Irving Schneider was due commissions in the amount of $6,236,905.13. Hecht further states that the commissions were unpaid pursuant to an understanding between decedent and Irving Schneider. When payments were made, they were allocated pro rata and to be paid on a pari passu basis, i.e., neither would receive commissions unless the other received commissions simultaneiously. Payments were made on this basis until May 1, 2001, the last date of such payments. HSI does not dispute that approximately $881,000.00 is due decedent but asserts such payment cannot be made without direction by Irving Schneider and such direction would trigger HSI's obligation to pay Irving Schneider over 6.2 million dollars. Hecht asserts that HSI does not have sufficient assets to pay such commissions.
Respondent contends that Irving Schneider is a necessary party to the proceeding and moves pursuant to CPLR 3211(a)(10) to dismiss the proceeding for failure to join an indispensable party. Respondent further contends that so much of the petition that seeks to recover post-death commissions should also be dismissed as HSI asserts that such dispute concerning post-death commissions involves living parties and is, therefore, beyond this court's jurisdiction. Finally, respondent contends that it has furnished the petitioner all the necessary information that can be obtained in this proceeding and, therefore, the proceeding should be dismissed in this court's discretion (SCPA 2103(3)). Petitioner counters that Irving Schneider is not a necessary party to this proceeding and that this court has subject matter jurisdiction as the interpretation to be accorded the Properties Management Agreement (and the payments governed thereby) is a matter for the court.
With respect to this court's subject matter jurisdiction, the law is clear that if a matter relates to the affairs of a decedent or the administration of an estate, the Surrogate's Court has jurisdiction (NY Const, art VI, § 12[d]; Matter of Piccione, 57 NY2d 278; Matter of Pavese, 195 Misc 2d 1). The Court of Appeals has broadly construed the Surrogate's Court's jurisdiction, stating "for the Surrogate's Court to decline jurisdiction, it should be abundantly clear that the matter in controversy in no way affects the affairs of a decedent or the administration of his estate" ( Matter of Piccione, 57 NY2d 278, 288, quoting Matter of Young, 80 Misc 2d 937, 939). In Piccione, the court held that the Surrogate's Court had subject matter jurisdiction over an eviction proceeding wherein the estate sought to evict the tenants in order to sell the property and wind up the administration of the estate. Noting that the proceeds of the sale were to go to the estate, the court observed that "it can hardly be said that this controversy 'in no way affects the affairs of the decedent or the administration of the estate'" ( Matter of Piccione, 57 NY2d 278, 290). Since one of the issues herein is whether the estate is entitled to post-death commissions and the interpretation to be accorded the Managed Properties Agreement entered into between the shareholders, the Surrogate's Court has jurisdiction ( cf. Matter of Bernstein, 169 AD2d 719 wherein the court affirmed the order of the Surrogate's Court granting discovery in a proceeding pursuant to SCPA 2103 involving inter alia, the interpretation of a shareholders agreement; see also Matter of Granowitz, 150 AD2d 446). Moreover, pursuant to SCPA 2104(5), if it is determined that the petitioner is not entitled to the post-death commissions pursuant to the Managed Properties Agreement, the court may determine the respective interests of the other claimants thereto.
The purpose of SCPA 2103 is to "provide a vehicle through which the fiduciary can obtain information needed to determine the assets of the estate or the value of the assets of the estate, as well as to effectuate a return of the property to the fiduciary" ( Matter of Laflin, 128 Misc 2d 348, 349). Since there is an issue as to the estate's entitlement to post-death commissions involving the interpretation to be accorded the September 24, 1997 Managed Properties Agreement, contrary to the respondent's contention, the court finds that there are reasonable grounds to conduct the examination.
With respect to that branch of the motion seeking dismissal of the proceeding pursuant to CPLR 3211(a)(10), CPLR 1001(a) provides that necessary parties include those "who ought to be parties if complete relief is to be accorded between the persons who are parties to the action or who might be inequitably affected by a judgment in the action" ( cf. Matter of Castaways Motel v. Schuyler, 24 NY2d 120; Spector v. Toys "R" Us, Inc., 12 AD3d 358). Joinder is indicated where there is a possibility that a judgment rendered without a party could have an adverse practical effect on said party and where rights in the subject matter would be jeopardized ( cf. Llana v. Town of Pittstown, 234 AD2d 881). Guided by such principles, the court determines that Irving Schneider is a necessary party as it appears that he has a large financial stake in HSI and may be otherwise adversely affected by a judgment herein. That branch of the respondent's motion to dismiss the proceeding pursuant to CPLR 3211(a)(10) is granted unless petitioner serves an amended petition and supplemental citation upon Irving Schneider within 30 days of the date hereof ( see 3 Weinstein-Korn-Miller, New York Civil Practice, § 1003.04).
The above constitutes the order of the court.