Opinion
File No. 2020-217/D
10-17-2022
PETITION TO INVALIDATE the WILLIAM P. BAIRD REVOCABLE TRUST DATED NOVEMBER 29, 2019
Alison Arden Besunder, Esq., Goetz Fitzpatrick, LLP, Attorneys for Petitioners, One Penn Plaza, Suite 3100, New York, New York 10119 Brian M. Newman, Esq., Blustein, Shapiro, Frank & Barone, LLP, Attorneys for Respondents, 10 Matthews Street, Goshen, New York 10924
Alison Arden Besunder, Esq., Goetz Fitzpatrick, LLP, Attorneys for Petitioners, One Penn Plaza, Suite 3100, New York, New York 10119
Brian M. Newman, Esq., Blustein, Shapiro, Frank & Barone, LLP, Attorneys for Respondents, 10 Matthews Street, Goshen, New York 10924
Timothy P. McElduff Jr., J. Background
Petitioner Mary Louise Baird Cardelli ("Mary") is one of Decedent's four surviving children. Respondents W. Robert Baird, Allen Baird and Charles Baird are the other three children of the Decedent. Petitioner Elizabeth Cardelli is Mary's daughter and granddaughter of the Decedent.
In a prior, pending proceeding, Respondents sought to admit Decedent's purported last will and testament dated October 31, 2019 (the "Purported Last Will") to probate. The Petitioners herein filed objections to probate.
The objections to probate stemmed from the Decedent's alleged departure from his prior testamentary plan, whereby he previously named Petitioner Mary Louise Baird as co-executor and 25% residuary beneficiary, in equal shares with her Respondent siblings, as evidenced by at least four prior wills and as recently as June 6, 2019. In contrast, Decedent's Purported Last Will (dated October 31, 2019) no longer names Petitioner Mary Louise Baird as co-executor and limits her beneficial interest to a specific bequest of $100,000.00, which is subject to an in terrorem clause.
Shortly after the Purported Last Will dated October 31, 2019, Decedent allegedly created his Revocable Lifetime Trust dated November 29, 2019 (the "Purported Trust"). The Purported Trust duplicated the testamentary plan of the Purported Last Will, limiting Petitioner Mary Louise Baird Cardelli to a bequest of $100,000.00, which was to be received one-time-only, under either the Purported Trust or the Purported Last Will. Similarly, Petitioner Elizabeth Cardelli was the recipient of a single bequest in the amount of $1,000.00 under either the Purported Trust or the Purported Last Will. In the above-captioned proceeding, the Petitioners have sought to invalidate or set-aside the Purported Trust due to alleged lack of proper creation as to its execution and funding, lack of capacity to contract, undue influence, duress and fraud.
Respondents filed a pre-answer motion to dismiss the petition pursuant to CPLR § 3211. Petitioners opposed the motion to dismiss and filed a cross motion for leave to file an amended petition pursuant to CPLR § 3025(b), which Respondents have opposed. Analysis
A. Applicable Legal Standards
On a motion to dismiss pursuant to CPLR 3211(a)(7) for failure to state a cause of action, the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff/petitioner the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory. Clarke v. Laidlaw Transit, Inc. , 125 A.D.3d 920, 921, 5 N.Y.S.3d 138 (2d Dept. 2015). Whether the plaintiff/petitioner can ultimately establish the allegations of the pleading is not part of the calculus in determining a motion to dismiss. Lewis v. DiMaggio , 115 A.D.3d 1042, 1044, 981 N.Y.S.2d 844 (3d Dept. 2014).
On a motion for leave to amend a pleading pursuant to CPLR § 3025(b), the motion should be freely granted in the absence of prejudice or surprise, so long as the proposed amendment is not palpably insufficient or devoid of legal merit on its face and, thus, would withstand a motion to dismiss under CPLR § 3211(a)(7). Lucido v. Mancuso , 49 A.D.3d 220, 225, 851 N.Y.S.2d 238 (2008).
B. Standing, Capacity and Ripeness
Contrary to Respondents’ arguments, the Petitioners have the legal capacity to challenge the validity of the Purported Trust because the Petitioners are beneficiaries thereof. See SCPA § 103(8), (19), (39) ; Matter of Kosmo Fam. Tr., dated July 18, 1994 , 72 Misc. 3d 1214(A), 2021 WL 3409360 (Sur. Ct. 2021), aff'd sub nom. Matter of Kosmo Fam. Tr., 207 A.D.3d 934, 172 N.Y.S.3d 501 (3d Dept. 2022) ; Constantine v. Lutz , 204 A.D.3d 1328, 1329, 168 N.Y.S.3d 134 (3d Dept. 2022). Thus, regardless of standing, as discussed below, Petitioners’ petition would not be dismissed since their interest gives them capacity to challenge the instrument.
Standing relates to having a stake or pecuniary interest in the matter being adjudicated. See Matter of Kosmo Fam. Tr., supra ; Constantine, supra. Respondents argue that Petitioners have no stake or pecuniary interest in the Purported Trust litigation because, even if successful in voiding the trust, Petitioners would be left with the bequests in the Purported Last Will, which are identical to those in the Purported Trust. Respondents’ argument, however, assumes the validity of the Purported Last Will, which has not yet been established in the pending probate proceeding. See, e.g., SPCA § 1408. Further, Respondents’ argument overlooks the substantial overlap of issues in these pending proceedings. For example, if the Petitioners were able to establish their undue influence claim to void the trust, they would likely be able to establish their undue influence objection to the probate of the will. In that instance, Petitioners would realize a change in stake/pecuniary interest in the estate. While, at this stage, it is hypothetical to say that the Petitioners’ claims/objections will defeat the Purported Trust and the Purported Last Will, it is equally hypothetical to say that they will not.
Respondents fail to present any relevant authority stating that the Petitioners must wait for the Purported Last Will to be invalidated in order to challenge the Purported Trust. The Stoller case, cited by the Respondents, is distinguishable. In In re Estate of Stoller [4 Misc. 3d 538, 780 N.Y.S.2d 861 (Sur. Ct. 2004) ], the court refused to entertain ancillary discovery proceedings until the probate proceeding was completed and the beneficial interests in the decedent's estate had been determined. However, the Stoller case concerned a beneficiary's attempted use of limited letters under SCPA § 702 to avoid triggering a no-contest clause in a will while, at the same time, building a case against the will or pressure for settlement concessions by the will's proponent. The Stoller court found that conduct to be contrary to the statutory purpose of SCPA § 702. Ultimately, the Stoller court did not permit that end-run around the will's no-contest clause by use of limited letters of administration pursuant to SCPA § 702 and neither did this Court in its previous Decision and Order, dated December 23, 2021, dismissing Petitioners’ SCPA § 702(9) proceeding under File No. 2020-217/B. The instant matter, however, is distinguishable from Stoller because, here, the Decedent created not only a will but a separate trust document, which is subject to its own challenges/attacks. While the Petitioners’ trust litigation may ultimately aid their probate litigation, Petitioners’ challenge of the Purported Trust comes as a result of Decedent's creation of the trust document, itself — not as a result of Petitioners’ abuse of a statute.
C. Declaratory Judgment
Petitioner's proposed amended petition contains a request for a declaratory judgment concerning the Purported Trust's allegedly invalid formation/funding. Respondents have failed to argue that this request was palpably insufficient or devoid of legal merit.
D. Lack of Contractual Capacity
To be competent to enter into a contract, such as a trust, the grantor must comprehend and understand the nature of the transaction and be able to make a rational judgment concerning the particular transaction. Ortelere v. Teacher's Retirement Board of the City of New York , 25 N.Y.2d 196, 303 N.Y.S.2d 362, 250 N.E.2d 460 (1969) ; Matter of Lewis , 59 Misc. 3d 1217(A), 2018 WL 1885708 (Sur. Ct. 2018).
Contrary to Respondents’ arguments, the Petitioners need not establish incapacity at this pleading stage but, instead, allege circumstances that would put into question Decedent's ability to understand the nature of the transaction and to make a rational decision concerning the transaction. Petitioners have alleged sufficient circumstances concerning, among other things, the Decedent's age and health, as well as his sensory and communication abilities. Such allegations may be far from the point of establishing a claim of incapacity but they are also far from palpably insufficient or devoid of legal merit.
E. Undue Influence
Upon a reading of the petition, it is reasonable to infer that the exertion of undue influence upon the Decedent was possible given the relationship, circumstances and transactions alleged. See Aponte v. Estate of Aponte , 172 A.D.3d 970, 973, 101 N.Y.S.3d 132 (2d Dept. 2019) (noting that upon a motion to dismiss pursuant to CPLR § 3211[a][7], the facts pleaded are accepted as true and the pleader is accorded every possible favorable inference). Whether such exertion of undue influence can be established in this proceeding is a question of proof, which does not have to be answered at the pleading stage. Estate of Aponte , 172 A.D.3d at 973, 101 N.Y.S.3d 132 (noting that whether a party can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss under CPLR § 3211[a][7] ).
F. Duress
In order to maintain a claim of duress, there must ultimately be a demonstration that the threat of an unlawful act deprived a party of their free will and compelled that party's performance of an act which the party the legal right to abstain from performing. Polito v. Polito , 121 A.D.2d 614, 614—15, 503 N.Y.S.2d 867 (2d Dept. 1986).
Here, Petitioners’ allegations concerning duress describe a potential environment of physical and/or psychological intimidation that could, if true, establish duress relevant to the execution of the Purported Trust or, alternatively, contribute to elements of Petitioners’ undue influence claim. See Matter of Lewis , 59 Misc. 3d 1217(A), 2018 WL 1885708 (Sur. Ct. 2018) ; Polito v. Polito , 121 A.D.2d 614, 614—15, 503 N.Y.S.2d 867 (2d Dept. 1986). Thus, it cannot be said that Petitioners’ pleading of duress is palpably insufficient or completely devoid of merit at this pleading stage.
G. Fraud
Respondents argue that Petitioners fail to state a cause of action for fraud because the alleged false statements were made to a third party, i.e., the Decedent, rather than being made to the Petitioners themselves.
In support of their argument, Respondents cite to the New York Court of Appeals case of Pasternack v. Laboratory Corp. of America Holdings [27 N.Y.3d 817, 59 N.E.3d 485 (2016) ]. The Pasternack case concerned a claim seeking monetary damages for fraud and recited the commonly known elements thereof: (1) a misrepresentation or a material omission of fact, (2) which was false and (3) known to be false by the defendant, (4) made for the purpose of inducing the other party to rely upon it, (5) justifiable reliance of the other party on the misrepresentation or material omission, and (6) injury to the plaintiff. The significance of the Pasternack case was that the Court of Appeals settled the law on the issue of whether the "reliance" element of fraud could be satisfied where the alleged fraud was perpetrated on a third party (i.e., not upon the plaintiff himself/herself, but upon some other person or entity), which later resulted in harm to the plaintiff. In Pasternack , the plaintiff (a pilot and physician) alleged that a drug testing lab made a false statement to the Federal Aviation Administration concerning his failure to complete a drug test, which the Federal Aviation Administration then relied upon to revoke the plaintiff's airman certificates and terminate his aviation medical examiner certification. Ultimately, the Court of Appeals held that the plaintiff may not establish the reliance element of a fraud claim under New York law by showing that a third party relied on the defendant lab's false statements. Thus, in order to state a fraud claim seeking damages against a defendant, the plaintiff must allege that the plaintiff , as opposed to anyone else, relied on the defendant's false statement or omission to his or her detriment.
Here, however, the Petitioners have not sought a judgment awarding damages as a result fraud but, rather, a judgment invalidating or setting-aside the Purported Trust as result of fraud perpetrated upon the Decedent in connection with the trust's creation. Significantly, the elements of a claim to set aside an inter vivos trust for fraud are different than the elements of a common law claim to recover damages for fraud. The claim to set aside an inter vivos trust for fraud has evolved from fraud objections litigating in the context of will contests. To invalidate a will based upon fraudulent misrepresentations made to the testator, a plaintiff/petitioner must allege (1) that someone knowingly made a false statement to induce the testator to execute a will and (2) that the will disposed of the testator's property or changed the testamentary plan in a manner differently than the testator would have otherwise done in the absence of that false statement. Matter of Gross , 242 A.D.2d 333, 333—34, 662 N.Y.S.2d 62 (2d Dept. 1997) ; Matter of Bianco , 195 A.D.2d 457, 458, 600 N.Y.S.2d 136, 137 (2d Dept. 1993) ; Matter of Est. of Evanchuk , 145 A.D.2d 559, 560, 536 N.Y.S.2d 110 (2d Dept. 1988).
Many courts have applied this test outside of will contests to invalidate or set-aside an inter vivos trust after the settlor's death. See, e.g., In re Ranaldo , 104 A.D.3d 857, 961 N.Y.S.2d 500 (2d Dept. 2013) (in a contested probate proceeding and related proceeding to invalidate an amendment to an inter vivos trust, the Appellate Division reversed the jury's verdict after trial, which found that the will and trust amendment were products of fraud, finding that the jury's verdict was not supported by legally sufficient evidence); In re Tognino , 87 A.D.3d 1153, 930 N.Y.S.2d 46 (2d Dept. 2011) (concerning a proceeding to contest the validity of amendments to an inter vivos trust on the grounds that the amendments were the products of fraud and/or undue influence); Matter of Lewis , 59 Misc. 3d 1217(A), 2018 WL 1885708 (Sur. Ct. 2018) (applying the fraud ground of invalidation to both a deed and inter vivos trust; failing to find evidence of fraud and, instead, invalidate both the deed and the trust due to undue influence); In re Est. of Donaldson , 38 Misc. 3d 841, 843, 956 N.Y.S.2d 840, (Sur. Ct. 2012) (finding that petitioner failed to present substantial evidence of a knowingly false statement concerning the drafting of the inter vivos trust documents and, thus, petitioner could not void the trust documents based upon fraud); Matter of Est. of Tisdale , 171 Misc. 2d 716, 655 N.Y.S.2d 809 (Sur. Ct. 1997) (concerning proceeding to set aside revocable inter vivos trust for fraud, lack of due execution, lack of capacity and undue influence). Nowhere is reliance by anyone other than the testator or settlor an element to invalidate a will or trust as a result of fraud.
Although no court has directly explained why the fraud arguments in will contests have also been used to challenge inter vivos trusts, at least one court has explained the similarity of wills and inter vivos trusts and why the rights and remedies of the parties should be the same when wills and inter vivos trusts are challenged:
Although no court has expressly addressed the issue, in view of the standing allowed a distributee to object to the probate of a will there is good reason to allow a distributee standing to contest a revocable trust instrument after its settlor has died. As this court concluded in Matter of Tisdale , 171 Misc. 2d 716, 655 N.Y.S.2d 809, revocable trusts—used increasingly as devices to avert will contests—function essentially as testamentary instruments (i.e., they are ambulatory during the settlor's lifetime, speak at death to determine the disposition of the settlor's property,
may be amended or revoked without court intervention and are unilateral in nature) and therefore must be treated as the equivalents of wills in the eyes of the law. On the premise that form must yield to substance in such matters, this court in Tisdale also concluded that the rights and remedies of the parties interested in a revocable trust must be consistent with the rights and remedies of the parties interested in a decedent's will, including the right to a jury trial. Thus, a distributee who is entitled to file objections to probate should also be accorded standing to commence an action to set aside a revocable trust, since the latter is but another part of the decedent's testamentary plan.
Matter of Est. of Davidson , 177 Misc. 2d 928, 930—31, 677 N.Y.S.2d 729 (Sur. Ct. 1998).
Nevertheless, Respondents cite to the recent Third Department case of Constantine v. Lutz [204 A.D.3d 1328, 168 N.Y.S.3d 134 (3d Dept. 2022) ], arguing that the pleading standard for a fraud claim for damages now applies in the context of setting aside an inter vivos trust. The Constantine case did, in fact, concern challenges to an inter vivos trust that was alleged to have been created as a result of false statements made to the decedent/testator, similar to the allegations present in this case. Citing to the Court of Appeals in Pasternack, supra , the Third Department held as follows:
As to plaintiffs’ cause of action asserting fraud, plaintiffs allege that defendants and the son told decedent that the daughter-in-law killed the deceased son, a falsehood upon which decedent relied when he created the trust and conveyed his assets thereto. Even accepting that allegation as
true (see Matter of Lewis v. Dagostino, 199 A.D.3d at 1222, 158 N.Y.S.3d 304 ), plaintiffs cannot state a cause of action for fraud because the Court of Appeals has expressly declined "to extend the reliance element of fraud to include a claim based on the reliance of a third party" ( Pasternack v. Laboratory Corp. of Am. Holdings, 27 N.Y.3d 817, 829, 37 N.Y.S.3d 750, 59 N.E.3d 485 [2016] ).
Constantine v. Lutz , 204 A.D.3d 1328, 1330—31, 168 N.Y.S.3d 134 (3d Dept. 2022).
Accordingly, the Respondents have argued and concluded as follows:
To put it plainly, Petitioners have no ability to invalidate the Trust on grounds of fraud. They do not allege any statements were made to them, and they do not allege that any statements made to a third-party were related to them, and they do not allege that any of their supposed injuries were caused by their reliance on anything. What they allege is that one or more Respondents lied to Decedent, and because of that [the] Decedent created the Trust to largely exclude the Petitioners.
(See Petitioners’ Memorandum of Law in Support, pp.17-18).
Notwithstanding its departure from well-settled New York law, if this Court were located in the Third Department, or if there were no other appellate-level authority, it would be bound by the Third Department's decision in Constantine , regardless of its correctness or incorrectness. This Court, however, is located in the Second Department, which applies a distinct pleading standard for a claim to set-aside an inter vivos trust for fraud. The Court of Appeals has not yet addressed the disagreement between the Judicial Departments on this issue. As a result, this Court is bound to follow the Second Department's pleading standards for a claim to set-aside an inter vivos trust for fraud. See Douglas v. Latona , 61 Misc 2d 859, 864, 306 N.Y.S.2d 992 (Sup. Ct. 1970) ; In re Weinbaum's Est. , 51 Misc. 2d 538, 273 N.Y.S.2d 461 (Sur. Ct. 1966).
Therefore, Petitioners’ allegations that Respondent Allen Baird made false statements to the Decedent, which ultimately induced the Decedent to change his previously long-standing testamentary plan benefitting his daughter, Petitioner Mary Louise Baird Cardelli, sufficiently state a cause of action to invalidate or set-aside the Purported Trust.
H. Due Execution
While, on its face, the Purported Trust appears to comply with the due execution requirements of EPTL § 7-1.17(a), Petitioners have argued that there are irregularities and inconsistencies among the witnesses relating to the execution of the Purported Trust, which raise credibility issues reserved for the trier of fact. See Matter of Ramirez , 68 Misc. 3d 1207(A), 2020 WL 4432916 (Sur. Ct. 2020).
Conclusion
For the foregoing reasons, it is hereby
ORDERED that Respondents’ motion to dismiss is denied in its entirety; and it is further
ORDERED that Petitioners’ motion for leave to file an amended petition in the above-captioned proceeding is granted.
This constitutes the Decision and Order of the Court.