Opinion
No. 2008–287/A.
2012-07-19
In the Matter of the ESTATE OF Hilda MARINO, Deceased.
Nobile, Magarian & DiSalvo, LLP, (Edward J. Mitchell, Esq., of counsel) for Marianne Pagano, executor-petitioner on the application to sell realty and for summary judgment dismissing the application to revoke her letters testamentary and respondent on the application to revoke her letters testamentary. George E. Margriples, Esq., for Elizabeth Maier and Robert Marino, respondents on the petitioner's applications and petitioners on the application to revoke the letters of administration that issued to the executor.
Nobile, Magarian & DiSalvo, LLP, (Edward J. Mitchell, Esq., of counsel) for Marianne Pagano, executor-petitioner on the application to sell realty and for summary judgment dismissing the application to revoke her letters testamentary and respondent on the application to revoke her letters testamentary. George E. Margriples, Esq., for Elizabeth Maier and Robert Marino, respondents on the petitioner's applications and petitioners on the application to revoke the letters of administration that issued to the executor.
LEE L. HOLZMAN, J.
In this estate, the parties agreed to submit three applications for determination pursuant to CPLR 3212:(1) a petition by the executor, Marianne Pagano, one of the decedent's two daughters seeking advice and direction on the sale of real property to herself, individually; (2) a petition by the decedent's other daughter, Elizabeth Maier, and one of the decedent's two sons, Robert Marino, for a decree revoking letters testamentary that issued to the executor and directing her to account, denying her statutory commissions, awarding them legal fees, costs and disbursements, and issuing letters of temporary administration to them; and, (3) a motion by the executor, pursuant to CPLR 3212, for summary judgment dismissing the petition for the revocation of her letters testamentary and related relief. The branch of the application by the son and daughter seeking an accounting is now academic as an interim accounting was filed by the executor.
The decedent died on August 22,2006 survived by a spouse, who post-deceased her on February 7, 2011 after a guardian ad litem was appointed for him in these proceedings as he was alleged to be under a disability, and by four children, two daughters and two sons. Although article SEVENTH nominated the executor and her brother Robert as co-executors, Robert renounced and letters testamentary issued solely to the executor pursuant to a decree dated June 4, 2008. The proper construction of article THIRD of the decedent's will concerning the disposition of the real estate where the decedent's spouse and the executor's husband practiced dentistry for almost 30 years, and the demonstrated inability of the four children to reach a majority decision on almost any issue, are significant factors in deciding whether the executor's application to sell the realty should be granted.
On January 8, 2004, the date the decedent's will was executed, the decedent's spouse executed a deed transferring real property in the Bronx to the decedent, reserving a life estate to himself in that deed. Article THIRD of the decedent's will provides:
“I give my real property [address] to my children [all four named] in equal shares subject to a life estate in favor of my husband, [named]. In the event that the premise is to be sold, subsequent to the death of my husband, [named] or in the event that he consents to such sale in his lifetime, that my daughter, [the executor], shall have the first right to purchase the premise at the then fair market value.”
On June 29, 2011, the guardian ad litem for the decedent's spouse filed a report seeking to be relieved indicating that her ward had lived in a nursing home from June 26, 2007 to the date of his death on February 7, 2011 and his life estate in the premises terminated on his death. She also indicated that by testamentary instrument dated September 7, 2001, the spouse left his entire estate to the four children equally. Other documents in the record reveal that on the same date of his testamentary instrument, the spouse executed a power of attorney in favor of his son, Robert. On February 2, 2008, after the decedent's death, the spouse executed a renunciation and disclaimer of all his interests in the decedent's estate, including his life estate in the premises; however, that notarized document was never filed with the court.
The executor filed a petition seeking advice and direction from this court and authorization to sell the premises to herself, individually, pursuant to the first right to purchase granted in article THIRD, as well as authorization to manage the property in the interim. In support she averred that: (1) the premises is a multi-use building consisting of a three bedroom apartment on the top floor and a ground floor used one-half for dental offices and one-half for a family room, laundry room, half bathroom and storage area, all accessible from the top floor; (2) the decedent's spouse was a dentist whose practice was located in a portion of the ground floor from 1964 to 2002; (3) the executor's husband is also a dentist and, although he and the post-deceased spouse were not partners, from 1983 they had separate practices at the premises and, to date, her husband maintains his dental practice there; (4) the decedent knew the importance of the location of the business to the executor's husband and their family and intended to prevent the dispossession of her and her husband which resulted in the first right to purchase in article THIRD; (5) one solution is to determine the fair market value of the property and convey title to herself individually upon her purchase of the interests of her siblings; (6) to that end, she obtained estimates from two different realty companies, one for between & dollar;480,000 and & dollar;510,000 and another for & dollar;450,000, and she hired a real estate appraiser who appraised the property on October 31, 2008 at & dollar;510,000 and stated that the price would be & dollar;30,000 lower if there was no broker's commission; (7) as attorney-in-fact for the spouse, Robert would not agree to sell unless the price was & dollar;500,000, so she drafted a contract for that amount but then Robert refused to sign it; (8) subsequently, she found a purchaser who was willing to pay & dollar;460,000 and rent the same office space to her husband, and although Robert accepted that deal, the deal fell through; (9) Robert then proposed purchasing the property himself for & dollar;475,000 and, when she agreed to match that amount pursuant to her first right to purchase, he refused to consent; and, (10) since her appointment as executor, she initially charged & dollar;600 per month for her husband's use of 25 & percent; of the total square footage of the premises (the rent was increased while these proceedings were pending). The executor now seeks to purchase the realty for & dollar;500,000 with some adjustments.
Although the executor denominated her application as an SCPA 2107 petition for advice and direction as she seeks to sell the realty to herself, in a supporting memorandum of law the executor asserts that the court has the power, pursuant to SCPA 1902, to order a sale, and as it is clear that the children cannot function as tenants in common, the court should allow her to exercise her first right to purchase under the will. Consequently, the executor is seeking relief pursuant to both SCPA 2107 and 1902, and the court will consider both statutes in ruling upon the relief she requests.
In response to the executor's petition, Robert and Elizabeth filed joint objections and a petition seeking, inter alia, the executor's removal. They contend that the decedent's spouse obtained his life estate by deed, not by will, and the first right to purchase granted in article THIRD was intended to govern only if all parties with an interest in the realty consented to a sale. They urge that upon the decedent's death, all siblings became tenants in common of the realty subject to the life estate and Robert, as attorney-in-fact for the life tenant, had the superior right to control the realty. They assert that the executor's husband should pay fair market rent of & dollar;30,000 per year or & dollar;2,500 per month or move his practice, but the executor rejected that proposal and collects only a below market rent from her husband, leaving no reserve to maintain or improve the property. Based on these assertions, they allege that the executor: (1) wasted and improvidently managed estate assets; (2) lacks the qualifications required of a fiduciary by reason of improvidence and want of understanding; (3) is disqualified due to the acrimony and hostility she and her husband exhibited toward other estate beneficiaries; (4) has a conflict of interest which precludes her from acting in the best interests of all estate beneficiaries; (5) refused to convey the premises; and, (6) refused to deliver all of the decedent's tangible property to the spouse or his attorney-in-fact during the spouse's lifetime and refused to distribute over & dollar;200,000 to the residuary beneficiaries (a distribution of a portion of the cash was made while these proceedings were pending). In response to this petition, the executor filed an answer which, in three affirmative defenses, alleges failure to state a cause of action and that any losses to the estate are due to the culpable conduct of Robert and Elizabeth, who are also barred by the doctrine of estoppel.
The executor then moved for summary judgment dismissing the petition seeking to revoke the letters testamentary that issued to her contending that Robert and Elizabeth failed to allege any facts warranting her removal. She asserts that most of the decedent's bank accounts were held in trust for all four children or jointly with some of the children and, prior to her fiduciary appointment, Robert liquidated all of the decedent's bank accounts, commingled the decedent's assets with his own and used the money for his own personal needs before making distributions. She maintains that she does not know whether any of those accounts were held in the decedent's name alone, and she asked Robert to account for all money he collected between the date of the decedent's death and her appointment as executor, but he failed and refused to do so, thereby compromising her ability to fully account and marshal assets. The executor alleges that she divided her mother's jewelry for distribution among the children, but Elizabeth refused to sign an acknowledgment and receipt. Annexed to her motion is a log of actions taken as executor, and a January 7, 2009 letter from her attorney to Elizabeth concerning the distribution of tangible property in the estate.
In opposition to the summary judgment motion, Robert and Elizabeth annex previously submitted affidavits and documents and assert there are issues of fact precluding any grant of the summary judgment motion and, by the executor's own admission, she has a conflict of interest as she is protecting only her husband's interests, and she is improvident and unfit because she commingled non-estate assets and refused to turn over personal property.
Summary judgment cannot be granted unless it clearly appears that no material issues of fact exist (see Phillips v. Joseph Kantor & Co., 31 N.Y.2d 307 [1972] ). The movant must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence in admissible form to demonstrate the absence of any material issue of fact (see Alvarez v. Prospect Hosp., 68 N.Y.2d 320 [1986];Friends of Animals, Inc. v. Associated Fur Mfrs. Inc., 46 N.Y.2d 1065 [1979] ). When the movant has made out a prima facie case, the burden shifts to the party opposing the motion to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact (see Zuckerman v. City of New York, 49 N.Y.2d 557 [1980] ). Summary judgment is a drastic remedy which requires that the party opposing the motion be accorded every favorable inference and issues of credibility may not be determined on the motion but must await the trial (see Glick & Dolleck, Inc. v. Tri–Pac Export Corp., 22 N.Y.2d 439 [1968] ). The papers submitted in the summary judgment application are scrutinized in a light most favorable to the party opposing the motion (see F. Garofalo Elec. Co. v. New York Univ., 300 A.D.2d 186[2002).
SCPA 2107 authorizes a surrogate to entertain a petition for advice and direction where a fiduciary is faced with uncertainty over the propriety of selling estate property or under extraordinary circumstances, such as dealing with complex valuation issues, tax elections or where there is a conflict among interested parties (see Matter of Scherer, 24 Misc.3d 363 [2009];Matter of Smathers, 19 Misc.3d 337, 343 [2008] ). Absent extraordinary circumstances, the court will not intervene to substitute its judgment for the business judgment of a fiduciary (see Matter of Smathers, 19 Misc.3d at 343; see also Matter of Scherer, 24 Misc.3d at 364–365, quoting Cox, Arenson and Medina, New York Civil Practice, SCPA 2107.01, at 21–238). Nonetheless, where, as here, the executor is of the opinion that a self-dealing transaction is in accord with the decedent's instructions, she should not be required to act at her own peril, thus making it appropriate for the court to give advice and direction (see Matter of Weinstein, 25 A.D.2d 776 [1996], appeal dismissed 19 N.Y.2d 599 [1967] ).
The reserved life estate of the spouse gave him the sole right to enjoy and possess the realty during his lifetime, but is now extinguished as a result of his death (see Matter of Schepps, NYU, Apr. 8, 1998, at 30, col 3). Article THIRD of the decedent's will specifically devises the realty to the four children and, as a result, upon admission of the will to probate, title to the realty vested in them, as tenants in common, dating back to the moment of her death (see Waxson Realty Corp. v. Rothschild, 255 N.Y. 332 & lbrac;1931]; Matter of Seviroli, 31 AD3d 452 [2006] ). Where the will does not specifically devise realty or contain a specific direction to the contrary, an executor, without seeking court approval, may manage or dispose of the realty (EPTL 11–1.1[b][5] ). With regard to specifically devised realty, an executor has no power to manage or dispose of the realty without the approval of the surrogate, which shall be granted only “where such power is necessary for the purposes set forth in SCPA 1902” (EPTL 11–1.1[b][5][E] ). SCPA 1901 grants to a surrogate authority to approve a disposition of the decedent's realty for any of the purposes set forth in SCPA 1902, including “[f]or the payment and distribution of their respective shares to the persons entitled thereto” (SCPA 1902[6] ), and “[f]or any other purpose the court deems necessary” (SCPA 1902[7] ).
An application under SCPA 1902(6) to sell realty for the purpose of making a cash distribution to the devisees under the will should not be denied solely on the ground that, as title to the specifically devised realty vested in the devisees, it is a dispute between living parties mandating that the tenants in common seek partition in another forum. To so hold would render the provisions of EPTL 5–1.1(b)(5)(E) and SCPA 1902(6) meaningless and also would be contrary to the holding in Matter of Piccione (57 N.Y.2d 278 [1982], rehearing denied 58 N.Y.2d 824 [1983] ), the seminal case expanding the jurisdiction of the surrogate's court. Specifically, Piccione instructs: (1) the rationale for Matter of Lainez (79 A.D.2d 78 [1981], affd 55 N.Y.2d 657 [1981] ) holding that the surrogate's court lacks jurisdiction to adjudicate the validity of a claim asserted against a beneficiary of the decedent's estate by an alleged creditor of the beneficiary is not because the claim is a dispute between living persons but, instead, because the claim is a controversy between living parties “independent” of any matter “affecting” the estate of the decedent (57 N.Y.2d at 289–290); and, (2) where the issues relate to the affairs of a decedent or the administration of that estate, the surrogate's court may exercise jurisdiction over the matter notwithstanding that such a proceeding is not enumerated in the SCPA or that the surrogate's court is not a forum denominated in the statute authorizing the commencement of such a proceeding.
Accordingly, the courts have liberally granted SCPA 1902(6) and (7) applications to sell realty over the objections of some of the co-tenants in common who derived their interest in the realty from the decedent, provided that there is a sufficient nexus between the relief requested and the administration of the decedent's estate (see Matter of DiNapoli, 210 A.D.2d 42 [1994], lv. denied 85 N.Y.2d 804 [1995] [granting the administrator's SCPA 1902(6) application, over objections by decedent's son who was residing at the premises, where the financial condition of the estate was deteriorating, thus requiring that the realty be sold so that a meaningful distribution could be effected]; Matter of Lynch, 80 A.D.2d 959 [1981], lv. denied 53 N.Y.2d 606 [1981] [granting the administrator's SCPA 1902(6) application even though 18 years had elapsed after the decedent's death, over the objections of the heirs of a post-deceased child, on the ground that the estate will be served best by the proposed sale and to avoid the expense of a partition]; Matter of Sauer, 194 Misc.2d 634 [2002] [granting the sale under SCPA 1902(7) requested by the decedent's spouse, who was devised a life estate in the marital residence, over the objections of the executor, one of the decedent's three children who were the devisees of the remainder interest, so that the spouse might receive value from the life estate that the decedent granted to him, and noting that as SCPA 1907(2) allows the property to be disposed of “for any other purpose the court deems necessary,” the sale could be authorized under that section notwithstanding that RPAPL 1603 provides that an application for such a sale is to be made in the supreme court] ). In Matter of Torricini (249 A.D.2d 401 [1998] ) [where the will provided that the decedent's three children were to hold the “property as tenants in common or divide it amongst them in such fashion as they agree” and that a decision “made by a majority ... shall be final and binding”] ) the court denied an application to authorize a sale under either SCPA 1902(6) or (7), apparently because the decedent, as established by the directions in her will, did not intend for the specifically devised property to be part of the “administrable estate.”
Thus, the issue of whether the court should authorize a sale under SCPA 1902(6) or (7) hinges upon whether authorizing the sale: (1) would carry out or defeat the decedent's intent as gleaned from the provisions of her will; and, (2) would facilitate the administration of her estate. The decedent's will clearly provides for the executor to have the first option to purchase the property whenever the property was to be sold, and that the property should not be sold during her husband's life without his consent. Although the two children who oppose the sale correctly note that the will does not explicitly provide that the executor may unilaterally demand a sale upon the death of the decedent's spouse, it also does not state that the executor loses her first option to purchase in the event that the realty must be sold because the parties are unable to co-exist as tenants in common.
Here, the realty and first option to purchase are inextricably intertwined with the administration of the estate. The realty appears to have been the decedent's most valuable asset. Numerous issues are raised in the proceedings before the court with respect to the realty including, inter alia, the rent to be paid by the decedent's husband, and even though all parties appear to agree that the premises is in need of repairs, they disagree as to where the funds should be obtained to make those repairs. The children clearly cannot agree upon who should manage the realty. Under these circumstances it is necessary for the property to be sold either to the executor, or if she decides not to exercise her option, to another. The sale of the property is the only practical way to carry out the decedent's intent that the executor, her daughter, have the first option to purchase and that all of her children receive a beneficial distribution from the realty devised to them. Accordingly, the executor's application for the court to order a sale is granted (see SCPA 1902(6) and (7); Matter of DiNapoli, 210 A.D.2d at 42;Matter of Lynch, 80 A.D.2d at 959;Matter of Sauer, 194 Misc.2d at 634). The procedure for ascertaining the sale price for the realty will be addressed infra after the court determines the application of Robert and Elizabeth for the revocation of the letters testamentary that issued to the executor. The decedent's choice to serve as executor will not be nullified unless a statutory ground for removal is clearly established (see SCPA 711; Matter of Duke, 87 N.Y.2d 465, 473 & lbrac;1996]; Matter of Leland, 219 N.Y. 387 [1916] ). Here, there is no evidence of conduct that warrants removal of the executor, and the application that her letters testamentary be revoked is denied (see SCPA 711; Matter of Haber, 30 Misc.3d 1225[A], 2011 N.Y. Slip Op 50199[U] [2011] ), without prejudice to the same issues raised in support of the revocation application being raised as objections in the accounting proceeding of the executor.
Although the application to remove the executor is denied, Robert and Elizabeth stand on firmer terrain when they assert that the executor, who seeks to purchase the realty, has an inherent conflict of interest should she be the one who is charged with the responsibility of obtaining the highest sale price. It might very well be that the sum of & dollar;500,000 remains the fair market value for the property as it appears that, fairly recently, the executor and Robert orally agreed upon this price based upon an appraisal that was previously obtained. Nonetheless, Robert and Elizabeth should be afforded a limited opportunity to seek purchasers for the realty. Accordingly, in the event that Robert and Elizabeth execute and file oaths and designations, letters of temporary administration shall issue to them for a period of 100 days from the date of this decision with the limited power to show the realty and enter into a contract for its sale (see SCPA 702[8] ). The contract shall contain a provision that the sale is subject to the executor's right of first refusal. Robert and Elizabeth may enter into such a contract with any third party or any one of the four tenants in common. In the event that there is no contract for the sale of the realty within the 100–day period, the limited letters of temporary administration issued to Robert and Elizabeth are revoked, and the executor may transfer title to the property to herself, individually, if she so desires, based upon the property having a fair market value of & dollar;500,000. Under all of the circumstances, equity dictates that none of the devisees shall receive commissions on the proceeds of the sale if the realty is sold to one of the tenants in common or a member of their family. The fact that the court is now authorizing the executor to otherwise manage the realty (see EPTL 11–1.1[b][5]; [E]; SCPA 1901 and 1902) does not necessarily mean that the executor will not be surcharged for her past management of the property or that the present rent charged to her husband is, or is not, appropriate under all of the circumstances.
In the pending accounting proceeding, the issues raised by the objections may be placed upon the ready for trial calendar of the court upon compliance with Uniform Rules for Surrogate's Court (22 NYCRR) §§ 207.29 and 207.30. This decision constitutes the order of the court. The Chief Clerk is directed to mail a copy of this decision and order to all counsel.
Proceed accordingly.