Opinion
No. P–475/05/L/M/N.
2013-01-23
In the Matter of the ESTATE OF Marie M. DeSANTIS, Deceased.
Michael J. DeSantis, Esq., Helbock, Nappa & Gallucci, LLP, for Petitioner. Susan R. Schneider, The Behrins Law Firm PLLC, for Respondent.
Michael J. DeSantis, Esq., Helbock, Nappa & Gallucci, LLP, for Petitioner. Susan R. Schneider, The Behrins Law Firm PLLC, for Respondent.
ROBERT GIGANTE, J.
In this pending proceeding, Danielle DeSantis–Libretti (hereinafter “Petitioner”) petitioned to remove her father, Steven DeSantis (hereinafter “Respondent”), as Trustee of a testamentary trust created for her benefit. This proceeding is presently in the discovery stage. The within motion was filed by the Respondent pursuant to CPLR 3103(a) to prevent disclosure of his personal tax returns for the years 2006 through 2011, all of the years for which he served as Trustee. Opposition papers were filed by the Petitioner and oral argument on the motion was heard on January 9, 2013, at the conclusion of which, decision was reserved.
Respondent argues that the tax returns are private and confidential in nature, and cannot be disclosed because Petitioner has failed to establish that they are relevant to the issues in the case or that the information contained within the tax returns cannot be obtained through other means. Further, Respondent argues that the documentation supporting his voluntary accounting sufficiently explains and substantiates all the transactions set forth in the accounting. Any further information Petitioner desires can be obtained through other means.
In response to the motion, Petitioner alleges that Respondent's tax returns are in fact discoverable because of Respondent's status as a fiduciary and the nature of the allegations at issue. Petitioner's July 2011 petition to remove respondent as Trustee alleged that Respondent defrauded the beneficiary of the Trust, diverted Trust funds to his own accounts, and failed to deposit rental income from properties owned by the Trust into the Trust created for Petitioner's benefit. Petitioner cites case law standing for the proposition that where substantial allegations of fraud and self-dealing on the part of a fiduciary are at issue, personal tax returns are discoverable.
Article 31 of the CPLR determines the items that are discoverable. Generally the test for disclosure under CPLR 3101 is whether the information sought is “material and necessary.” This test is one of relevance, usefulness and reason (Allen v. Crowell–Collier Publ'g. Co., 21 N.Y.2d 403 [1968] ). While case law has liberally construed the scope of material that is discoverable, there is also a long recognized exception holding that an individual's income tax returns are not discoverable absent a “strong showing that the information is indispensable to the claim and cannot be obtained from other sources' “ (Matter of Zirinsky, 26 Misc.3d 625 [Sur Ct Nassau Cty Oct. 16, 2009, quoting Latture v. Smith, 304 A.D.2d 534 [2d Dept 2003] ).
An exception to this exception also exists, however, where the conduct of a fiduciary is at issue. In Zirinsky, the Court permitted discovery of a trustee's tax returns at the discovery phase of a contested accounting proceeding because the “high duty of conduct” of a fiduciary was at issue, due to the allegations of divided loyalty, self-dealing and usurpation of trust opportunities (26 Misc.3d at 629). The Court held that under the facts presented, the individual income tax returns were discoverable and their production did not violate the safeguards given to such disclosure (26 Misc.3d at 628). The same conclusion was reached in Matter of Morrell, 154 Misc. 356 (Sur Ct Kings Cty Jan. 31, 1935), where there were allegations that the fiduciary commingled the funds of the trust with his own, and in Matter of Romano, 8 Misc.3d 1010, 18 (Sur Ct Nassau Cty Jun. 29, 2005), wherein the facts are most analogous to the current proceeding. In a contested accounting proceeding, the court permitted personal tax returns to be introduced into evidence to determine the amount of income received from rental properties.
Here, Petitioner seeks to review the Respondent's tax returns in order to corroborate the amount of rental income reported in the accounting and the amount he was paid for labor and other services he provided to these properties. Alternatively, Petitioner alleges that the exclusion of this income from the tax returns is also relevant as to Respondent's credibility. The Court agrees. Based upon the serious allegations of fiduciary misconduct at issue, and the relevancy of the tax returns to both corroborate information and the Respondent's credibility, the information sought is relevant to the accounting proceeding and cannot be obtained through other documentary sources.
Accordingly, Respondent's motion for a protective order is denied, without costs. Petitioner's request for costs and fees incurred for the within motion is also denied. The parties are directed to continue discovery with their previously scheduled depositions, at the conclusion of which, counsel are not to leave before seeing a member of the Law Department.
This decision shall constitute the Order of the Court.