Opinion
Index 2021-207/A
03-22-2022
In the Matter of the Estate of SALLY GROSSMAN, Deceased. In the Matter of the Estate of ALBERT B. GROSSMAN, Deceased. File No. 86130T
Nathan M. Courtney, Esq. (NYS Office of the Attorney General, Charities Bureau), statutory party Sean J. Denvir, Esq. (Ryan, Roach & Ryan, LLP), attorney for petitioner/beneficiary American Institute of Indian Studies Joshua N. Koplovitz, Esq. (Wapner, Koplovitz & Futerfas), attorney for executor Anna Megan Buehler Gerard F. Parisi, Esq. (Parisi, Coan &Saccocio, PLLC), attorney for trustee Peter M. Hoffman
Unpublished Opinion
Nathan M. Courtney, Esq. (NYS Office of the Attorney General, Charities Bureau), statutory party
Sean J. Denvir, Esq. (Ryan, Roach & Ryan, LLP), attorney for petitioner/beneficiary American Institute of Indian Studies
Joshua N. Koplovitz, Esq. (Wapner, Koplovitz & Futerfas), attorney for executor Anna Megan Buehler
Gerard F. Parisi, Esq. (Parisi, Coan &Saccocio, PLLC), attorney for trustee Peter M. Hoffman
DECISION/ORDER
HON. SARA W. McGINTY JUDGE.
Sally Grossman's last will and testament was accepted for probate and letters testamentary were issued to her nominated executor on May 13, 2021. In her will, Grossman ("decedent") exercised a power of appointment reserved to her in a testamentary marital trust ("Trust") created by her predeceased husband, Albert B. Grossman. Until her death, the decedent had served as co-trustee of the Trust with Peter M. Hoffman ("Hoffman"), having been appointed in that capacity on March 12, 1986. Hoffman also served as executor of Albert Grossman's estate.
Albert Grossman managed the early careers of many of America's preeminent folk and rock artists, including Bob Dylan, Peter, Paul & Mary, Janis Joplin and The Band. The Trust continues to be funded by commissions from the sale or licensing of their work. During decedent's lifetime, she received distributions from the Trust in excess of $14,500,000.
Decedent's will directed that the principal of the Trust be paid to the American Institute of Indian Studies ("AIIS"), an IRC 501 (c)(3) organization associated with the University of Chicago. Counsel to AIIS apparently reached out to Hoffman, then the Trust's sole trustee, regarding distribution of Trust assets to his client. Hoffman rejected AIIS's overture. He "did not recognize" the decedent's exercise of the power of appointment because she had exercised her power of appointment without "consulting" him (a requirement not found in the Trust) and because her choice of AIIS would cause "[Albert Grossman] to roll over in his grave" (a condition subsequent not found in the Trust).
Counsel to AIIS then filed a petition for relief against a fiduciary under SCPA 2102 on September 27, 2021, seeking turnover of the Trust's assets and an accounting by Hoffman. An order to show cause was issued by the Court to Hoffman. Petitioner's affidavit of service of the order to show cause was accompanied by a USPS Priority/Express Mail "proof of delivery" at Hoffman's long-time residence in Los Angeles on September 30, 2021.
A Teams invitation was sent to all parties for a virtual conference on the return date, October 6, 2021. All parties, including Hoffman, appeared virtually. He requested and was granted a 30-day adjournment to obtain counsel. The Court issued an order dated October 13, 2021 setting November 3, 2021 as the new return date on the AIIS motion to remove him as trustee. Hoffman was ordered to protect and preserve the assets of the Trust pending further order of the Court.
On October 21, 2021, the Court received information from petitioner's attorney which established that Hoffman had been convicted in 2018 after an 11-day trial in federal court of wire and mail fraud and conspiracy and had been disbarred as an attorney in California in 2017 (United States v. Hoffman, 901 F.3d 523 [5th Cir 2018]). Because Hoffman failed to advise this Court of his conviction for such crimes - which disqualified him from acting as a fiduciary under SCPA 707(1)[d] and [e] - the Court sua sponte ordered that he be removed as trustee and his letters of trusteeship be revoked (SCPA 719[6], [10]; 711 [8], [10]). He was ordered to turn over all assets of the Trust and to file an accounting by November 30, 2021.
Later that same day (October 21, 2021) Hoffman efiled a Notice of Removal of this proceeding to the U.S. District Court for the Northern District of New York. Citing the "probate exception" to its federal diversity jurisdiction, the Northern District remanded the case back to this Court by its Memorandum Decision and Order dated December 8, 2021.
The federal court also ordered the parties to file letter briefs by January 4, 2022 addressing whether a companion case (Hoffman v. American Institute of Indian Studies, No. 21-cv-1105) should be dismissed on the "probate exception" or under the principles of abstention as elucidated in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817-18 [1976]).
This proceeding having been restored to its calendar, the Court thereafter issued its December 10, 2021 order requiring turnover, transfer or assignment of Trust assets to the Court for safekeeping by December 15, 2021 and adjourned the deadline for Hoffman's accounting to January 17, 2022. On December 15, 2021, Hoffman deposited $3,385.80 with the Ulster County Commissioner of Finance, as required. Hoffman then filed a motion to dismiss AIIS's SCPA 2102 petition, arguing that the Court lacked both subject matter jurisdiction and personal jurisdiction over him and seeking to stay this Court's December 10 order until adjudication of his motion.
On January 20, 2022, Hoffman filed a petition for judicial settlement of his account. The account covered the period March 25, 1999 to December 20, 2021, as required under the terms of the December 10 order.
Hoffman Motion to Dismiss.
The Court finds that personal jurisdiction was obtained over Hoffman by service of the September 28, 2021 Order to Show Cause, which was effected in accordance with its terms. The affidavit of service created a presumption that proper service was completed (De Leonardis v. Gaston Paving Co., 271 A.D.2d 839, 840 [3d Dept 2005]) and Hoffman has offered no evidence to rebut this presumption (see, also, Strober King Bldg. Supply Centers, Inc v Merkley, 266 A.D.2d 203 [2d Dept 1999](a "sworn affidavit of service ordinarily constitutes prima facie evidence of proper service").
The manner of service of the order was required under the terms of the administrative orders of Chief Administrative Judge Lawrence Marks in response to the COVID-19 global pandemic and by virtue of this Court's Order for Alternative Service and Appearance Rule under SCPA 307(3).
Subject matter jurisdiction over these proceedings is conferred on this Court by operation of New York State Constitution Article VI Section 12(d) and SCPA 201(3): the petition for relief against a fiduciary relates to the "affairs" of two decedents, Albert Grossman and Sally Grossman, as described in Matter of Piccione, 57 N.Y.2d 278 [1982]("forthe 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 of the administration of his estate.")
The dispute before the Court relates to (1) the conduct and qualifications of a testamentary trustee nominated in a will accepted for probate in this Court and to whom letters of trusteeship were issued by this Court; and (2) the exercise of a power of appointment of Trust assets in a will accepted for probate in this Court with the consent of the trustee.
The Court finds that it has subject matter jurisdiction over these proceedings because they affect the affairs of decedents and/or the administration of their estates in this Court. The Court further finds that Hoffman was duly served in a manner that conferred upon the Court personal jurisdiction over him in the SCPA 2102 proceeding initiated by AIIS.
MIS Cross-Motion.
The cross-motion of AIIS seeks the return of funds removed by Hoffman from the Trust accounts in apparent defiance of the Court's October 13, 2021 order (the "October 13 Order"); a determination by the Court that decedent's exercise of her power of appointment was valid and enforceable; and confirming that AIIS has all necessary power and authority to contract for the sale of certain Trust assets on terms agreed to by Hoffman during his tenure as trustee.
The Attorney General has filed an affirmation in support of AIIS's cross-motion. Hoffman opposes the cross-motion and urges that the Court conduct a hearing because the decedent's exercise of the power of appointment was for a "purpose foreign to the power" and thus a "fraud on the power" under In re Carroll's Will, 274 NY 288 [1937].
In an attachment to Hoffman's reply memorandum of law in opposition, his counsel references additional relief beyond the four corners of his motion to dismiss. Here counsel indicates that the will of Albert Grossman does not reflect the testator's intention with regard to the ultimate distribution of his assets. For this reason, he argues, the will - which was accepted for probate in 1986 - must be examined anew by the Court in a construction proceeding. This is the very instrument that Hoffman offered for probate and under whose terms Hoffman has served as fiduciary for 35 years. It should go without saying that any concerns Hoffman had about Albert Grossman's testamentary intent should have been raised in 1986, when he offered the will for probate: he will not be heard on this subject now.
As to the decedent's will, Hoffman signed a waiver and consent to the probate of this instrument (which includes the decedent's exercise of the power of appointment) on April 28, 2021. The former trustee has not disavowed or attempted to rescind his consent. Indeed, such a waiver may rescinded after probate only if it was "obtained by fraud or overreaching, was the product of misrepresentation or misconduct, [or] newly-discovered evidence, clerical error or other sufficient cause" is found to justify ... reopening of the probate proceeding" (Matter of Gifford, 28 A.D.3d 953, 954 [3d Dept 2006]). Hoffman has made no such showing. Instead, he shares only his "visceral shock and dismay" that decedent chose a donee whose commitment to West Bengali folk music mirrored her own, a decision he claims that would have caused Albert Grossman "great distress." Hoffman himself derides the artform which captivated the decedent as merely "pleasing to Bengalis".
In a curious turn, Hoffman's attorney reports that his client appointed a "successor trustee" on March 13, 2021, prior to his execution of a waiver and consent in his capacity as trustee. As a result, Hoffman's attorney suggests that "any turnover of funds should be made to the successor trustee" instead of Hoffman. The purported successor trustee appears to be Hoffman's wife, Susan. She has provided no notice to the Court of her appointment as required under the terms of Article 4B of the Albert Grossman will, nor has Hoffman filed his own resignation with the Court as required under Article 4F of that instrument. Again, if Hoffman resigned in March 2021, he had no standing to sign the waiver and consent or to appear in any proceeding on the will other than his own petition to account.
Hoffman's visceral shock and dismay notwithstanding, the Court find that AIIS is an "organization ... contributions to which are deductible for federal income and estate tax purposes" and is therefore among the class of organizations the decedent was expressly authorized to appoint under the terms of her late husband's will.
The Court's October 13 Order barred Hoffman from assigning or spending Trust assets or the proceeds thereof without further order of the Court. Notwithstanding the clear directive of the Court, Hoffman reports he expended over $35,000 in Trust funds after the October 13 Order was issued.
Hoffman admits the disputed payments without apology. He reports that Trust funds were used after October 13, 2021 to prepare the accounting, which "was one major expense paid by Mr. Hoffman as well as on-going legal fees." Hoffman also unhelpfully reiterates his claim to $960,000 in "deferred" executor and trust fees, and argues that AIIS should be required to object to the $960,000 sought by Hoffman before it asserts a violation of the October 13 Order.
Hoffman having waived and consented to the probate of decedent's will, he is barred from objecting to the exercise of the power of appointment found therein. He offered no defense to his violation of the October 13 Order in transferring over $35,000 in Trust moneys to pay for the accounting, his legal defense and other unknown purposes.
Finding no material opposition to AIIS's cross-motion, the Court grants it and finds as follows:
1. AIIS is an "organization . . . contributions to which are deductible for federal income and estate tax purposes" is therefore among the class of organizations the decedent was expressly authorized to appoint under the terms of Albert Grossman's will.
2. The decedent's power of appointment in her last will and testament accepted for probate, was valid and effectively exercised to appoint American Institute of Indian Studies as donee of the residue of the Trust; and American Institute of Indian Studies was thereby vested outright with all right, title and interest as owner of the
residue of the Trust, including, without limitation, (1) the authority to negotiate and execute all documents necessary to sell any or all assets remaining in the Trust, such as "Future Management Commissions" as that term is referred to in Hoffman's pleadings; and (2) all Trust funds held by the Ulster County Clerk.
3. Hoffman expended Trust monies after October 13, 2021 without obtaining the Court's prior consent.
It is, therefore, ORDERED, DECIDED and DECREED that the motion of the former trustee to dismiss the SCPA 2012 petition of American Institute of Indian Studies and to stay the Court's December 10, 2021 order is denied; and it is further
ORDERED, DECIDED and DECREED that AIIS, an "organization ... contributions to which are deductible for federal income and estate tax purposes," is among the class of organizations the decedent was expressly authorized to appoint under the terms of Albert Grossman's will; and it is further
ORDERED, DECIDED and DECREED that the exercise of decedent's power of appointment in her last will and testament accepted for probate, was valid and effective, appointing American Institute of Indian Studies as donee of the residue of the Trust; and American Institute of Indian Studies is thereby vested outright with all right, title and interest as owner of the residue of the testamentary trust, including, without limitation, the authority to negotiate and execute all documents necessary to sell any or all assets remaining in the Trust, such as the assets referred to in the "Memorandum of Agreement" referenced in Hoffman's pleadings; and it is further
ORDERED, DECIDED and DECREED, Peter M. Hoffman shall, within 30 days of the date hereof, amend his petition for judicial accounting to seek the Court's ratification of any and all uses of Trust funds which occurred after the Court's October 13, 2021 order forbidding such transactions, which petition shall include an affirmation of services for any legal fees paid in connection therewith.
This constitutes the order of the Court. All papers, including this Order, are hereby entered and filed with the Clerk of the Surrogate's Court. Counsel is not relieved from the applicable provisions of CPLR Section 2220 relating to service and notice of entry.
Documents reviewed:
1. Petition for Relief Against at Fiduciary (SCPA 2102) filed by Sumathi Ramaswamy for AIIS, as amended, filed September 27, 2021.
2. Attorney Affirmation by Sean J. Denvir, Esq. filed October 21, 2021.
3. Notice of Removal of Civil Action by Joseph F. Castiglione, Esq. filed October 21, 2021.
4. Order of Hon. Brenda K. Sannes, U.S. District Judge (NDNY) filed December 13, 2021.
5. Notice of Motion to Dismiss by Gerard F. Parisi, Esq. filed December 15, 2021.
6. Affidavit in Support of Motion by Peter M. Hoffman filed December 15, 2021.
7. Memorandum of Law by Gerard F. Parisi, Esq. filed December 15, 2021.
8. Notice of Cross Motion by Sean J. Denvir, Esq. filed January 4, 2022.
9. Affirmation in Opposition to Motion to Dismiss/Support of Cross Motion by Sean J. Denvir, Esq. filed January 4, 2022.
10. Affirmation in Opposition to Motion to Dismiss by Nathan M. Courtney, Esq., Assistant Attorney General filed January 5, 2022.
11. Memorandum of Law in Support of Opposition to Motion by Nathan M. Courtney, Esq., Assistant Attorney General filed January 5, 2022.
12. Cross-Reply Memorandum of Law in Opposition to the Cross-Motion of AIIS by Gerard F. Parisi, Esq. filed January 10, 2022.
13. Affirmation in Support of Cross Motion by Nathan M. Courtney, Esq., Assistant Attorney General filed January 11, 2022.
14. Petition for Judicial Settlement of Account, with Schedules, by Peter M. Hoffman filed January 10, 2022.
15. Affidavit by Willis Vermilyea in support of Petition for Judicial Settlement filed by Gerard F. Parisi, Esq. on January 26, 2022.