In re Deyette

Full title: In the Matter of the Application of Irene Deyette Successor Trustee of the…

Court: SUPREME COURT - STATE OF NEW YORK IAS PART 7

Date published: Aug 15, 2007

2007 N.Y. Slip Op. 34552 (N.Y. Sup. Ct. 2007)

Opinion

INDEX NO. 14926/05

08-15-2007

In the Matter of the Application of Irene Deyette Successor Trustee of the Trust Created U/T/W of JAMES B. MAGNOR for leave to undertake enforcement procedure upon a money judgment against James B. Magnor, Jr., surcharged Trustee of the Trust Created U/T/W of JAMES B. MAGNOR, Deceased.

Farrell Fritz, P.C. Attn: Frank T. Santoro, Esq. Attorneys for Petitioner Irene Deyette 1320 Reckson Plaza Uniondale, NY 11556-1320 Forchelli, Curto, Schwartz, et al. Attorneys for Carolyn Magnor and Jamie Magnor 330 Old Country Road P. O. Box 31 Mineola, NY 11501

Justice Thomas P. Phelan

MEMORANDUM By: Justice Thomas P. Phelan NASSAU COUNTY ORIGINAL MOTION DATE: 03/23/07
SUBMISSION DATE: 06/15/07 MOTION SEQUENCE #6, 7 Motion [sequence #6] by respondents Carolyn Magnor and Jamie Magnor for renewal of their prior motion for judgment dismissing the petition for lack of jurisdiction pursuant to CPLR 3211(a)(8), in accordance with this Court's order dated March 7, 2006, and found at 11 Misc. 3d 1060(A), is granted now that discovery has been completed, and upon renewal, the motion is denied as to respondent Carolyn Magnor and granted as to respondent Jamie Magnor. Cross-motion [sequence #7] by the successor trustee Irene Deyette for summary judgment against respondent Carolyn Magnor is granted in part and denied in part as set forth below. In addition, the cross-motion is deemed to include a request for leave to conform the pleadings to the proof in the record herein, and this request is granted. The facts underlying the petition herein have been thoroughly set forth in this Court's two prior decisions, found at 11 Misc. 3d 1060(A) and 13 Misc.3d 1237(A). In the first decision, this Court held: "Petitioner's allegations that respondents received funds or property or both from Magnor Jr's misappropriation of funds, if otherwise established after disclosure, will afford this court jurisdiction over respondents pursuant to SCPA 210(2)(b)." At this time respondents Carolyn and Jamie Magnor (respectively the wife and daughter of former trustee James Bruce Magnor Jr.) move for dismissal alleging lack of personal jurisdiction, as neither of them are domiciliaries of New York. Any analysis of personal jurisdiction requires a two-part inquiry: first, whether the state law basis for personal jurisdiction has been met, and second, whether the exercise of state law jurisdiction in a particular case comports with due process [La Marca v Pak-Mor Mfg. Co., 95 NY2d 210, 214 (2000); Opticare Acquisition Corp. v Castillo, 25 AD3d 238, 247 (2^nd Dept. 2005)]. Due process requires that in order to subject one to a judgment in personam, the person must be present within the territory of the forum or have certain minimum contacts with it, such that the maintenance of the lawsuit does not offend traditional notions of fair play and substantial justice [International Shoe Co. v State of Washington, 326 US 310, 316 (1945)]. The test for minimum contacts is whether a defendant's conduct and connection with the forum state are such that it "should reasonably anticipate being haled into court there" [World-Wide Volkswagen Corp. v Woodson, 444 US 286, 297 (1980)]. As previously held, one state law basis for personal jurisdiction may be found in the Surrogate's Court Procedure Act at 210(2)(b), as follows:

The receipt and acceptance of any property paid or distributed out of and as part of the administration of an estate subject to the jurisdiction of the court, . . . shall constitute a submission by such recipient to the jurisdiction of the court as to any matter concerning the payment or distribution, including proceedings for the recovery thereof.

This special proceeding is brought to enforce the recovery of commissions in the amount of $50,790.72, and accountant fees in the amount of $54,297.00, improperly paid on behalf of the trust created by the Estate of James B. Magnor Sr. (hereafter "James Sr."). Pursuant to the Interim Decree dated April 18, 2002, (Exhibit B to the cross-moving papers) by the Honorable John B. Riordan, Surrogate of Nassau County, Robert Magnor and James B. Magnor Jr. (hereafter "James Jr."), were held jointly and severally liable for such commissions and fees. According to petitioner, the value of the Surrogate Court's judgment, with interest as of April 18, 2007, is $155,157.25. The whereabouts of Robert Magnor are unknown. James Jr. died on April 20, 2002, and his estate was rendered insolvent due to the transfer of assets to his wife Carolyn by operation of law upon his death. Petitioner now seeks to enforce the Surrogate Court's judgment against Carolyn and Jamie Magnor, on the theory that petitioner's rights as a judgment creditor are superior to the rights of Carolyn and Jamie in the property of James Jr. For jurisdictional purposes, petitioner must trace property from the Estate of James Sr., which was misappropriated by James Jr., and from there paid to Carolyn or Jamie Magnor or both. Petitioner submits the deposition transcript of Carolyn Magnor (Exhibit D to the cross-moving papers). Mrs. Magnor testified that her husband received commissions as the executor of the Estate of James, Sr., and that he deposited the commissions into a joint checking account (Carolyn Magnor transcript, p. 121). This evidence shows the requisite transfer of misappropriated property from the Estate of James, Sr. to James, Jr., and simultaneously to Carolyn Magnor. This evidence meets the requirements of SCPA 210(b)(2), and establishes a state law basis for this Court's jurisdiction over respondent Carolyn Magnor with respect to all matters relating to the payments of commissions from the Estate of James, Sr. to James, Jr. [Matter of Casey, 145 AD2d 632, 633 (2^nd Dept. 1988); Matter of Estate of Schreiter, 169 Misc. 2d 706 (Sur. Ct, NYCty, 1996)]. Furthermore, because the recipient of estate monies pursuant to SCPA 210(b)(2) consents to jurisdiction in this state with respect to the monies received, and jurisdiction by consent satisfies constitutional requirements of due process [see generally National Union Fire Ins. Co. of Pittsburgh, PA. v Frasch, 751 F Supp 1075, 1078 (SDNY 1990)], no due process issues are presented in connection with this state law basis for jurisdiction. Petitioner further argues that Carolyn Magnor's status as a de facto trustee for the Estate of James, Sr., provides an additional state law basis for this Court's jurisdiction. In support of this claim petitioner submits copies of various letters (Exhibits K, L, M, N, O, P, Q, and R to the cross-moving papers) by James, Jr., and by Carolyn herself, showing Carolyn's involvement in the administration of the Estate of James, Sr. Petitioner also submits copies of checks (Exhibits S and T to the cross-moving papers) drawn on the trustees' account and signed by Carolyn. Petitioner argues that these letters and checks establish Carolyn's involvement to such an extent that Carolyn was a de facto trustee, and she allegedly "transacted" business within this state for the purposes of CPLR 302(a)(1). In opposition, Carolyn insists that her residence has always been in either Florida or Washington D.C., and her involvement with the Estate of James, Sr. was in the nature of minor clerical or other ministerial tasks. She asserts that she never participated in any of the decision-making for the trust. Where a party acts like a trustee and assumes the duties of a trustee, that party will be considered a de facto trustee [Accounting of Sakow, 219 AD2d 479 (1^st Dept. 1995)] and held to account for trustee-related activities, the same as a de jure trustee [Matter of Application of Beiny, N.O.R. 2003 WL 21729779 (Surr. Ct, Bronx Cty, 2003), app dsmd , In re Beiny, 16 AD3d 221 (1^st Dept. 2005); see also In re Allustiarte, 786 F2d 910, 914 (9^th Cir. 1986), cert. den. Allustiarte v Cooper, 479 US 847 ]. Personal jurisdiction over foreign defendants under CPLR 302 may be satisfied by proof of one transaction in New York, even though the defendant never sets foot in New York, so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted [Kreutter v McFadden Oil Corp., 71 NY2d 460, 467 (1988)]. A defendant may transact enormous volumes of business within a state without physically entering it [Deutsche Bank Securities, Inc. v Montana Board of Investments, 7 NY3d 65, 71 (2006), cert den by Montana Board of Investors v Deutsche Bank Securities, Inc., 127 SCt. 832]. Whether a foreign defendant has engaged in sufficient purposeful activity to confer jurisdiction in New York requires an examination of the totality of the circumstances [Farkas v Farkas, 36 AD3d 852 (2^nd Dept. 2007)]. Here, although Carolyn testified at her deposition that she never assisted her husband in any way in administering the trust (Carolyn Magnor transcript, p. 117), discovery has proven the opposite. When she took it upon herself to act as a trustee because the two appointed trustees either wouldn't or couldn't, Carolyn Magnor was transacting the business of a New York trust. Overall, on this record sufficient evidence has been presented to demonstrate that Carolyn's active involvement with the administration of the Estate of James, Sr., rose to the level of rendering her a de facto trustee for the purposes of this enforcement proceeding. Consequently Carolyn Magnor is subject to the long-arm jurisdiction of CPLR 302(a)(1) in connection with issues arising from the trust, including this enforcement procedure. Furthermore, to the extent that Carolyn Magnor acted as a de facto trustee, minimum contacts with this state are established. Where one acts as a de facto trustee of a New York trust, one may reasonably expect to be haled into court in this state on trust business and payments. In contrast, the record contains no evidence of any conduct on the part of Carolyn's daughter, Jamie Magnor, that could be construed as transacting business in this state. Indeed there is no evidence of any connection whatsoever between Jamie Magnor and this state, wherein the Estate of James, Sr. is involved. Based on the foregoing, the motion by respondents Carolyn and Jamie Magnor for judgment dismissing the petition for lack of personal jurisdiction pursuant to CPLR 3211(a)(8) is denied as to Carolyn Magnor and granted as to Jamie Magnor. Petitioner requests summary judgment against respondent Carolyn Magnor pursuant to CPLR 5208, 5225, Debtor Creditor Law 273, 273-a, 276, and EPTL 13-3.6. CPLR 5208 permits a judgment creditor to seek leave in Supreme Court to execute on a judgment against a deceased judgment debtor when no letters testamentary or letters of adrninistration have been issued within 18 months of a decedent's death [Matter of Strassberg, 181 AD2d 1070 (4^th Dept. 1992)]. That is the case here, where three years had passed and no personal representative was appointed for the Estate of James Jr., because the Estate of James Jr. had no assets. CPLR 5225(b) provides for the commencement of a special proceeding such as that herein, against a person in possession of property in which a judgment debtor, here James Jr., had an interest. Where the judgment creditor can show that its rights to the property are superior to those of the transferee, the Court has the authority to order the transferee to satisfy the judgment. CPLR 5225(b) does not require a finding of fraud against the transferee, only a superior right in the judgment creditor [Hoenlein v Kaplan, 37 AD3d 298 (1^st Dept. 2007)]. According to the petition, the transfers that are at issue in this special proceeding are the transfers to Carolyn that occurred as a matter of law when James Jr. died, because the assets were held jointly. As noted by this Court in the prior decision at 13 Misc. 3d 1237(A), when the form of ownership is property held by spouses in a tenancy by the entirety, there is no transfer upon death; the interest of the deceased spouse simply drops away [Kozyra v Goldstein, 146 Misc. 2d 25, 27 (Sup Ct., Suffolk Cty, 1989); see Tompkins County Hosp. v Tomassini, 157 Misc 2d 42, 44 (Sup Ct, Tompkins Cty, 1993)]. In New York this form of ownership is available only for real property [see generally In re Albrecht's Estate, 136 NY 91 (1892); Kozyra]. Therefore, if the real property at issue were governed by New York law and this proceeding, Carolyn's right to such real property would be superior to the petitioner's, as to all of the real property owned by Carolyn and James Jr as a tenancy by the entirety at the time of James Jr.'s death. However, the real property owned by Carolyn and James Jr. at the time of James Jr.'s death is not within the jurisdiction of this Court because there has been no showing that any of the real property is connected to the improper commissions distributed to James Jr. as part of the administration of the Estate of James Sr, or Carolyn's conduct as a de facto trustee. The personal property at issue includes the following jointly held property listed on the Schedule E Exhibit to the US Estate Tax Return for the Estate of James Jr.: (1) U.S. State Department Thrift Plan Account # 9K47712783, valued at $70,588.81; (2) U.S. State Department Credit Union checking and savings account, valued at $72,329.62; and (3) a 1974 Yamaha RD60A60 motorcycle, valued at $350. The extent of James Jr.'s interest in these banks account, and what happened to these accounts, is unclear from the papers. The Estate tax return also lists an IRA account solely in the name of James Jr. that was allegedly rolled over into an IRA account in Carolyn's name (Schedule C to the same US Estate Tax Return) and a retirement survivorship benefit from the U.S. Department of State Foreign Service Retirement and Disability Fund (Schedule I to the same US Estate Tax Return). Petitioner and respondent Carolyn Magnor argue about federal and New York exemptions for these items (see CPLR 2505(c)(2); 22 USC 4060(c) governing the Foreign Service Retirement and Disability System; New York Retirement and Social Security Law 110; Matter of King, 196 Misc. 2d 250, 254 (Sur. Ct., Broome Cty, 2003) quoting Estate of Gallet, 196 Misc. 2d 303, 309 (Sur. Ct., NYCty, 2003)). Petitioner's various claims against Carolyn for improprieties in the receipt of personal property from the Estate of James Jr. are also not within the jurisdictional ambit of this proceeding. This Court's jurisdiction extends only to the monies improperly received from the Estate of James Sr. (SCPA 210(2)(b)), and claims that arise from Carolyn's limited transaction of business as a de facto trustee. Indeed, the only claim made in the cross-moving papers that this Court may entertain is petitioner's claim that the rights of the Estate of James Sr. as a judgment creditor, are superior to the rights of Carolyn Magnor pursuant to New York Debtor and Creditor Law 273-a with respect to a transfers of monies that took place in July 1998. At that time monies in an account in the joint names of James Jr. and Carolyn were moved to an account in Carolyn's name only. The elements of a claim pursuant to Debtor and Creditor Law 273-a are: (1) a transfer made without consideration; (2) the transferor is a defendant in an action for money damages (or a judgment is such action has been docketed against him); and (3) the defendant has failed to satisfy the judgment (Grace v Rosenstock, 228 F3d 40, 54 (2^nd Cir. 2000), cert. den. Grace v Genser, 532 US 923 (2001); Taylor-Outten v Taylor, 248 AD2d 934, 935 (4^th Dept. 1998)]). In this case petitioner has submitted records demonstrating transfers of monies in July 1998, from the Magnors' joint Merrill Lynch Account #705-11539 to an individual account, #705-58747, in Carolyn's name only totaling $52,419.00 (Exhibits X and Y to the cross-moving papers at pages 7 and 10 respectively). Carolyn Magnor testified that the transfers were made because James Jr. "had recently undergone medical treatment" and therefore "certain liquid assets" were placed in her name so that she would have monies at her disposal to assist both herself and James Jr. together, and for her own use (see Carolyn Magnor affidavit dated June 4, 2007, at par.9). It is clear that no consideration was paid for the transfers, which were made after James Jr. had become a respondent in the proceeding for an accounting of the Estate of James Sr. before the Surrogate (see verified petition dated Dec. 24, 1997, annexed as Exhibit C to the cross-moving papers) (Miller v Doniger , 28 AD3d405 (1 ^st Dept. 2006)). Because the judgment remains unpaid, petitioner commenced this special proceeding. On this record, petitioner has made a prima facie case that the transfers of assets in July of 1998, are presumptively fraudulent pursuant to Debtor and Creditor Law 273-a. In opposition Carolyn Magnor argues that any claim regarding transfers of monies in July, 1998, is time-barred, as the claim would have accrued more than 6 years prior to the commencement of this proceeding [CPLR 213(1)]. However the existence of an unsatisfied judgment is an essential element of a claim pursuant to Debtor and Creditor Law 273-a (Frybergh v Weissman, 145 AD2d 541 (2^nd Dept. 1988)), and therefore, the six-year limitations period begins to run, at the earliest on the date of the unsatisfied judgment (Grace v Rosenstock at 54; Carey v Crescenzi, 923 F2d 18, 20-21 (2^nd Cir. 1991); see Williams v Infra Commerc Anstalt, 131 F. Supp. 2d 451, 457 (SDNY 2001)). Accordingly, this claim in not time-barred. Carolyn also argues that this transfer did not render James Jr. insolvent, but insolvency is not the criteria for application of Debtor and Creditor Law 273-a. That this claim is not alleged in the petition, which focuses entirely on transfers that occurred by operation of law upon James Jr.'s death, is not fatal because the transfer from the joint account to Carolyn's individual account was revealed during discovery and vigorously litigated in the cross-moving papers and the opposition thereto. A court may permit pleadings to be amended to conform to the evidence (CPLR 3025(c)), and such leave to amend the pleadings should be freely granted absent prejudice or surprise resulting directly from the delay ( Diaz v New York City Health & Hospitals Corp., 289 AD2d 365 (2^nd Dept. 2001); Ford v Martina, 281 AD2d 587 (2^nd Dept. 2001)). In this special proceeding, respondent Carolyn Magnor cannot allege prejudice or surprise because she was the recipient of the monies that were transferred to her individual account in July, 1998. Under these circumstances, the Court deems the cross-moving papers to include a request for leave to conform the petition and the answer to the proof presented, and such motion is granted. As respondent Carolyn Magnor has failed to raise any triable issue of fact in opposition to petitioner's motion for summary judgment with respect to the $52,419.00 transfers of assets in July of 1998, petitioner is entitled to summary judgment. Based on the foregoing, petitioner is entitled to summary judgment directing respondent Carolyn Magnor to satisfy the Surrogate's judgment against James Jr. to the extent of the amount of the transfers in July, 1998, from the joint Merrill Lynch account in the name of Carolyn and James Jr. to the Merrill Lynch account in Carolyn's name only totaling $52,419.00, together with interest on said sum as of April 18, 2002, the date of the Surrogate Court's judgment (see CPLR 5001(a)). No basis for attorneys fees has been established, and therefore none are awarded. Settle order and judgment. 8-15-07
Date

/s/_________

J.S.C. Farrell Fritz, P.C.
Attn: Frank T. Santoro, Esq.
Attorneys for Petitioner Irene Deyette
1320 Reckson Plaza
Uniondale, NY 11556-1320 Forchelli, Curto, Schwartz, et al.
Attorneys for Carolyn Magnor and Jamie Magnor
330 Old Country Road
P. O. Box 31
Mineola, NY 11501