Opinion
Index No. 1998-125/A Mot. Seq. No. 1
12-23-2022
In the Matter of the Application of CLARE M. RUIZ, made pursuant to SCPA 2205for a Compulsory Accounting in the Estate of:LAWRENCE T. SMITH, Deceased.
MCCARTHY FINGAR LLP, Attorney for Respondent Maureen T. Walsh, Attn: Michael S. Kutzin, Esq. GULLOTTA & SHILINSKI, LLP, Attorney for Petitioner Clare M. Ruiz Attn: Michael T. Shilinski, Esq.
Unpublished Opinion
MCCARTHY FINGAR LLP, Attorney for Respondent Maureen T. Walsh, Attn: Michael S. Kutzin, Esq.
GULLOTTA & SHILINSKI, LLP, Attorney for Petitioner Clare M. Ruiz Attn: Michael T. Shilinski, Esq.
DECISION & ORDER
HON. ANTHONY R. MOLE, SURROGATE.
The following papers were read and considered in accordance with CPLR 2219 (a) and 22 NYCRR 207.7 on the motion by respondent MAUREEN T. WALSH (Mot. Seq. No. 1) to dismiss the petition of CLARE M. RUIZ for a compulsory accounting under SCPA 2205 with respect to the estate of Lawrence T. Smith:
Papers:
Order to Show Cause (signed Sept. 13, 2022), Affidavit of Maureen T. Walsh, Exhibits A-G
Affirmation in Opposition, Affidavit of Clare M. Ruiz, Exhibits 1-23
Reply Affirmation, Exhibits A-G, Reply Affidavit (Respondent's Exhibit C)
Upon review of the foregoing papers, the Court finds and determines as follows:
I. Factual Background & Procedural History
Lawrence T. Smith (hereinafter decedent) is the deceased uncle of the parties: Clare Ruiz (hereinafter petitioner) and Maureen Walsh (hereinafter respondent), who are sisters. In 1998, decedent made a will nominating respondent as the executor of her estate. Decedent's will was admitted to probate in 1998. Letters testamentary were accordingly issued to respondent.
Under the terms of his will, decedent created a life estate in favor of his nephew, the parties' brother, Thomas Walsh, for decedent's home consisting of 6.34 acres in the Town of Carmel known as 27 Sandy Street (hereinafter interchangeably referred to as the subject premises). Insofar relevant here, decedent's will provides that upon Thomas Walsh's death, the subject premises "shall become part of [the] residuary estate." The will further divides decedent's residuary estate into 10 shares with two shares each to be distributed to petitioner, respondent, and the "James S. Walsh Trust" (the trust) - for which the parties and another person, Margaret Walsh Alborn, are cotrustees.
In 2000, respondent signed a release, dated November 15, 2000, which acknowledges receipt of her share of the liquid assets in connection with decedent's estate after the executor assertedly made a final accounting thereof. Relevant here, the release states that petitioner shall "remise, release, and forever discharge" respondent receiving "payment and satisfaction for [petitioner's] partial interest . . . in connection with [the administration of decedent's] estate."
In May 2022, petitioner, through counsel, filed a petition for a compulsory accounting pursuant to SCPA 2205 with respect to decedent's estate. The Court accordingly issued a citation returnable for August 19, 2022. After having received correspondence from the parties' attorneys that they were attempting to resolve the matter, this Court adjourned the citation to September 16, 2022, whereat only counsel appeared.
On September 13, 2022, respondent filed this pre-objection motion to dismiss the petition, by order to show cause, on the ground that petitioner had received a full accounting in 2000 and executed a full release relative to her full share of the liquid assets. The Court signed the Order to Show Cause setting forth a briefing schedule therein with respect to said motion.
Respondent's main contention in support of dismissal is that petitioner signed a release in 2000, in conjunction with the informal final accounting, which is thus fatal to her petition. Respondent urges that petitioner should be precluded from now demanding a formal accounting and that doing so would be a needless waste of the estate's resources.
In response, petitioner counters that she executed a partial release in 2000 to an incomplete informal accounting for partial payment toward her legacy. She advances that it was not a full accounting since respondent has inexplicably failed to sell two pieces of real property from the estate: (1) the subject premises (as improved real property); and (2) a large parcel of unimproved property consisting of approximately 3.1 acres which is located on 5 Memory Lane in the Town of Carmel (hereinafter referred to as the Memory Lane property) - which is a vacant wetland. Petitioner asserts that respondent's documentary submissions on this motion are misleading or patently false, thus supporting the need for a court-ordered judicial accounting.
At the center of this motion is the parties apparent dispute as to whether the release at issue constitutes a full or partial release, thus barring petitioner's claims and precluding her from pursuing a compulsory accounting. Having reviewed the motion papers and considered the arguments asserted therein, the Court disposes of the motion in accordance with this decision.
II. Legal Analysis and Discussion
A. Respondent Walsh's Motion to Dismiss
In support of her motion to dismiss, respondent submits, among other things, two affidavits including one in reply; decedent's will; the release at issue; an undated "final accounting" of decedent's estate; multiple photographs depicting the exterior and interior of the subject premises; correspondence from August 2022 respondent's attorney requesting petitioner's counsel to voluntarily withdraw the compulsory accounting petition on the basis of the release and future efforts to sell subject premises based on a belief that the real property has increased in value; and tax maps of the subject premises and Memory Lane property.
In her initial affidavit submitted in support of her motion, respondent urges that petitioner "acknowledge[d] receipt of her share of the liquid assets" from decedent's estate vis-à-vis the release and has no right to an accounting. Respondent also asserts that the "only asset" to which petitioner has an interest is the subject premises that must still be sold or distributed and that decedent created a life estate for Thomas Walsh under the will in the event the latter survived the former, which ultimately occurred. Respondent avers that Thomas Walsh "left the house" in 2012 and died in 2014, that he left the subject premises in "shambles" which has not been rented since, and that there was "no money available to make [decedent's] house habitable." Respondent further adds that she has paid all real estate taxes since 2014.
Petitioner, in opposition, submits, among other things, her affidavit; the two-page informal accounting from 2000; the report filed by respondent, in September 2021, pursuant 22 NYCRR 207.42 ("Report of estates not fully distributed"), in connection with decedent's estate; interrogatories served by petitioner upon respondent's attorney in August 2022; land records, including tax bill information and a property description report of decedent's residence; a drafted copy from 2005 of a purportedly, unexecuted residential contract of sale concerning the Memory Lane property; and voluminous photographs depicting the interior and exterior of the subject premises.
In her affidavit, petitioner maintains that she executed a partial release to which an incomplete accounting was provided by respondent. Petitioner asserts that the figures contained therein contain discrepancies, claiming that the informal accounting reflects 10 shares of the liquid assets worth $39,500 each (totaling $197,500); and that while she is entitled to two shares per her legacy in the will, she only received a $39,500 payment in 2000 for one share. Petitioner also questions the accuracy of the informal accounting, stating that it indicates $395,000 was available for distribution in 2000, yet it excluded the appraisals of the subject premises (improved), the Memory Lane property (unimproved), and a reserve of $6,711.00. Petitioner attacks respondent's assertion that there were no monies available to make the subject premises habitable, claiming that respondent's informal accounting tend to contradict her documentary submissions, inasmuch as the 2000 accounting reflects that respondent maintained a reserve of $6.711.10, paid $13,500 to install a new roof on the subject premises, and that respondent paid herself $22,586 in commissions despite the fact that the estate was never informally closed.
Also, petitioner states in her affidavit that respondent has failed to sell the Memory Lane property for more than two decades, that it was valued at $98,000 in 1998, and she failed to take advantage of selling it in 2005 when there was an offer for it. The proposed, unexecuted copy of the contract reflects that it was being sold by respondent, in her capacity as the estate executor, to a developer with a stated purchase price of $200,000. Petitioner faults respondent's inexplicable failure to sell the Memory Lane property since 1998 as a potential reason why respondent was unable to obtain monies to make the subject premises habitable or to retain the sale proceeds from the Memory Lane property as a reserve account to maintain the subject premises.
Petitioner largely blames respondent and her inactions for the deplorable conditions of the subject premises, asserting that respondent neglected to inspect in which, in turn, has led to its further deterioration. Petitioner states in her affidavit that if respondent checked on the subject premises every year or so, she could have taken "timely corrective measures" to, for example, make any necessary repairs. Lastly, petitioner rejects in her affidavit the notion that respondent's payments of real estate taxes on both real properties are a basis to deny the compulsory judicial accounting.
The 22 NYCRR 207.42 report signed and filed by respondent, dated September 28, 2021, reflects that the gross value of the estate is approximately $740,000, that she has distributed approximately $415,000 to the beneficiaries, that respondent presently has about $325,000 in her fiduciary control, and that the subject premises "is now being readied for sale." Petitioner claims that those figures are inaccurate inasmuch as there is a $20,000 discrepancy in the 2021 report and the 2000 informal accounting relative to the distributed amount. Further, petitioner assails respondent's representation of readying the subject premises for sale, claiming that the house's current declined state gives no indication that it is being prepared to be sold because, relying on the photographs she provides in opposition, the subject premises is in a dilapidated condition and only respondent has full access to the premises. According to the photos provided by her, petitioner avers that the subject premises is uninhabitable and its present condition make it incapable of being sold.
Finally, petitioner claims that respondent has failed to demonstrate that she distributed the two shares owed to the "James S. Walsh Trust" amounting to $79,000. Being a cotrustee of said trust, petitioner avers that she sought information from respondent whether such a distribution was made around 2000; however, respondent has not provided information or documentation in this regard, thus providing a further need for a complete accounting.
In her reply affidavit, respondent further faults Thomas Walsh, the life tenant, for leaving the subject premises in "a state of dilapidation" and in an "abysmal" condition. She claims that it would have taken "countless thousands of dollars" in order to make it salable. While pressing about the poor condition of the subject premises, respondent concedes in reply that she "erred in making cash distributions to [the] beneficiaries" including petitioner.
Respondent's affidavit in reply is annexed as Exhibit C to her reply papers.
In regard to the Memory Lane property, respondent states that she made an effort to sell it shortly after decedent's passing when she contacted a broker who, in turn, advised her that any permits that could be obtained to build on the property would limit the size of the house since the parcel consists of "2/3 to 3/4" wetlands. Respondent avers that at the broker's suggestion, she consulted engineers who advised her that an evaluation of the Memory Lane property would be expensive and based on wetland regulations, that area could not be developed. Respondent adds that one engineer informed her that doing an evaluation of the Memory Lane property "would not be worth the cost." Respondent avers that she has "never . . . seen [nor] had any knowledge of the purported contract of sale" of the Memory Lane property. Respondent alleges that she "strongly suspects" petitioner was attempting to orchestrate a prospective sale of the of the Memory Lane property, despite having no authority to do so and because it was "essentially unmarketable at that time."
Respondent, ultimately, reasserts in her reply that compelling her to account "is a useless exercise" that would waste time and resources of a small estate. The Court disagrees.
It is well settled that the Surrogate has the authority to require a fiduciary to file an accounting where it appears to be in the best interests of the estate and that certain interested persons may seek to compel an intermediate or final accounting (see SCPA 2205; Matter of Mastroianni, 105 A.D.3d 1136, 1138 [3d Dept 2013]; Matter of Morrison, 268 A.D.2d 435, 436 [2d Dept 2000], lv dismissed and denied 95 N.Y.2d 845 [2000]). It is incumbent upon a fiduciary to maintain "clear and accurate records," absent which all presumptions and all doubts are to be resolved against him or her (see Matter of Mink, 91 A.D.3d 1061, 1063-1064 [3d Dept 2011]; see Matter of Carbone, 101 A.D.3d 866, 869 [2d Dept 2012]). The burden of proof as to the propriety of all claims and expenses is upon the accounting party (see Matter of Shulsky, 34 A.D.2d 545, 547 [2d Dept 1970]).
"While formal accountings of an estate are done in the context of a judicial proceeding, a fiduciary may also account informally by obtaining receipts and releases from interested parties regarding the handling of the estate or trust. Such an informal accounting is as effectual for all purposes as a settlement pursuant to a judicial decree. If a fiduciary gives full disclosure in his or her accounting, to which the beneficiaries are parties[,] they should have to object at that time or be barred from doing so after the settlement of the account. Where the validity of a release is challenged, the fiduciary must affirmatively demonstrate that the beneficiaries were made aware of the nature and legal effect of the transaction in all its particulars" (Matter of Spacek, 155 A.D.3d 747, 748 [2d Dept 2017] [internal quotation marks, brackets, ellipses, and citations omitted] [emphasis added]).
Here, respondent appears to have done an informal accounting which was provided to petitioner. In support of her motion, respondent proffers the release purportedly executed by petitioner in November 2000 which states that petitioner shall "remise, release, and forever discharge" respondent upon "being in . . . payment and satisfaction for [petitioner's] partial interest . . . in connection with [the administration of decedent's] estate." Notably, the document reflects that the word "full" was stricken from the language provision and instead the word "partial" was added. Since petitioner emphasizes the instrument itself reflects that it was only a partial release relative to her interest, respondent must show otherwise and demonstrate that petitioner was wholly "made aware of the nature and legal effect of the transaction in all its particulars" (Matter of Spacek, 155 A.D.3d at 748; accord Matter of Lifgren, 36 A.D.3d 1042, 1044 [3d Dept 2007]; Matter of Birnbaum v Birnbaum, 117 A.D.2d 409, 416 [4th Dept 1986]).
The Court finds, in the present case, that respondent did not affirmatively demonstrate petitioner was fully aware of the nature and legal effect of the release at that time (see Matter of Lee, 153 A.D.3d 831, 833 [2d Dept 2017]; Matter of Spacek, 155 A.D.3d at 748; Matter of Hunter, 190 Misc.2d 593, 599-600 [Sur Ct, Westchester County 2002]). On the motion submissions, the Court is unable to ascertain whether the release at issue that was executed by petitioner in connection with the informal settlement of the estate is a full release or partial release. Respondent has not clearly shown that petitioner executed the subject release and intended it to be a full and complete release from any and all claims, nor did respondent show that petitioner confirmed receipt of an informal final accounting and discharged the respondent-executor from all liability and any claim for a formal judicial accounting, after the advice of negotiations with legal counsel (compare Matter of Lee, 153 A.D.3d at 833-834). The submissions before this Court do not unquestionably prove that petitioner was provided with documentation and information supporting the informal account, without schedules annexed thereto, before she executed the release; or that petitioner freely signed it after consulting with counsel or being given an opportunity to retain counsel and an accountant of her choosing (see e.g. Matter of Cozza, NYLJ, July 21, 2017 at 25, col 3, 2017 NYLJ LEXIS 2020, *3-4 [Sur Ct, Bronx County 2017]). Those critical facts are absent from the record before this Court (see Matter of Hunter, 190 Misc.2d at 600).
To the extent that respondent argues that it would be a waste of the estate's resources based on the time and expense involved in a judicial accounting due to petitioner's interest being a one-fifth interest in the two real properties, the Court finds that contention to be unavailing. In that same vein, the Court disagrees that the case relied on by respondent is "instructive" or analogous to the present matter at hand (Matter of Gonzalez, NYLJ, May 12, 2010 at 33, col 2, 2010 NYLJ LEXIS 2198, *1-2 [Sur Ct, New York County 2017]).
In Gonzalez, the interested party only had a one-seventh of the remaining one-half of the residuary estate (see id. at *1). The main asset of the Gonzalez estate was a piece of real property valued at $248,000, thus equating the interested party's share to be approximately $14,000 (see id. at *1; see also EPTL 4-1.1 [a] [1]). In contrast here, respondent concedes that petitioner has a one-fifth interest in the real properties which could be worth up to $93,671.70 based on the most recent estimated fair market values of the real properties. That is a considerable amount. While respondent advances that the Memory Lane property is mainly wetlands and is mostly covered by a pond, that parcel still adds to the total value of the estate, however minimal it may be worth. The Court thus rejects respondent's argument that it would be a "waste of time and money" for her to account. With the foregoing in mind, the Court turns to the merits of petitioner's motion.
In resolving a motion to dismiss predicated on CPLR 3211 (a) (7), a court must liberally construe the pleading, accept the facts as alleged in the petition as true, and accord the petitioner the benefit of every possible favorable inference (see Matter of Steinberg, 183 A.D.3d 1067, 1068 [3d Dept 2020]). In this procedural context, whether petitioner "can ultimately establish [her] allegations is not part of the calculus in determining a motion to dismiss" (Cortlandt St. Recovery Corp. v Bonderman, 31 N.Y.3d 30, 38 [2018] [emphasis added]). This Court is to "merely examine[] the adequacy of the pleading[]" (id., quoting Davis v Boeheim, 24 N.Y.3d 262, 268 [2014]). A motion to dismiss should be granted only if, upon viewing the allegations as true, the petitioner cannot establish a cause of action as a matter of law (see Leon v Martinez, 84 N.Y.2d 83, 87-88 [1994]; Hartman v Morganstern, 28 A.D.3d 423, 424 [2d Dept 2006]; Cayuga Partners, LLC v 150 Grand, 305 A.D.2d 527, 527 [2d Dept 2003]).
Here, respondent met her initial burden by demonstrating that petitioner executed a release and ought to be precluded to compel an estate accounting. However, in opposition to the motion to dismiss, petitioner's submissions raise questions of fact as to, among other issues, whether the release is intended to be full or partial, the present assets and value of the estate, why the estate has yet to be closed, and the inability to sell the subject premises over the course of several years (cf. Matter of Castellucci, 147 A.D.3d 826, 827 [2d Dept 2017]). That the respondent-executor filed a partial informal accounting over 20 years ago is of no consequence.
The parties' submissions on this motion raise issues about the estate. Specifically, petitioner avers that the subject premises, which is part of the estate, has fallen into despair and is not being readied for sale, nor did respondent make diligent efforts to sell the Memory Lane property. It also appears that respondent has failed to finalize her account to date. Even assuming, arguendo, that the release in question can be deemed a full release and the informal accounting was sufficient at the time in 2000, that does not mean that respondent is totally excused from providing a full accounting now where, as here, the estate has not been completed and informally closed and the alleged discrepancies in the respondent-executor's report filed in September 2021 pursuant to 22 NYCRR 207.42. Moreover, the report filed by respondent herself provides an additional ground to deny the motion and order the accounting. 22 NYCRR 207.42 (e) states that a report filed in accordance with that section "shall not limit the power of the court to direct an accounting at any time on its own initiative or on petition pursuant to SCPA 2205" (see generally Matter of Shore, 19 Misc.3d 663, 665-667 [Sur Ct, New York County 2008]).
While this Court may theoretically order the parties to engage in informal document discovery and establish a tentative schedule in connection thereto, the Court believes such would be impractical under the circumstances of this case and the sharply disputed facts contained in this sparse record (see generally Matter of Brown Bros. Harriman Trust Co. N.A. [Schulte], 41 Misc.3d 1222[A], *2 [Sur Ct, New York County 2013]; Matter of Otto, 32 Misc.3d 1244[A], *4 [Sur Ct, New York County 2011], affd 96 A.D.3d 433 [1st Dept 2012]). And to that end, petitioner asserts that she already attempted to settle this matter to no avail by a serving limited discovery request upon respondent in the form of interrogatories, to which she received a partial response from respondent. The parties were unable to resolve the matter as petitioner asserts that the executor did not provide much of the informal discovery concerning the estate's administration, insofar as petitioner's counsel requested an informal document exchange shortly after this proceeding was commenced.
The Court adds that accountability is an essential element of all fiduciary relationships (see Matter of Malasky, 290 A.D.2d 631, 632 [3d Dept 2002]; Bauer v Bauernschmidt, 187 A.D.2d 477, 478 [2d Dept 1992]; see generally EPTL 11-1.7). "A fiduciary acting on behalf of an estate is required to employ such diligence and prudence to the care and management of the estate assets and affairs as would prudent persons of discretion and intelligence, accented by not honesty alone, but the punctilio of an honor the most sensitive. Where the beneficiary of an estate has demanded an accounting, the party submitting the account has the burden of proving that he or she has fully accounted for all the assets of the estate, and this evidentiary burden does not change in the event the account is contested" (Matter of Carbone, 101 A.D.3d at 868).
Respondent, as the designated executor, must continue to fulfill her fiduciary duties and be transparent with respect to the estate's affairs over the last 22 years. Respondent cannot escape such an obligation. Contrary to her argument, compelling a judicial account of an estate which mainly consists of two unsold real properties - approaching almost $500,000 in value as respondent concedes in her papers - would not be an entirely needless exercise. The Court thus concludes that the unclear status of the estate's assets warrants the need to order a formal judicial accounting. Such, in the undersigned's view, would serve the best interests of the estate (see SCPA 2205; Matter of Mastroianni, 105 A.D.3d at 1138; see also 22 NYCRR 207.42 [e]). Under these contested facts, the Court denies respondent's motion to dismiss (see SCPA 2205; Matter of Steinberg, 183 A.D.3d at 1068-1076).
B. Ruiz's Petition for a Compulsory Accounting
Turning to the petition at hand, a fiduciary, such as respondent here as the estate executor, is "obligated to account for . . . her decisions and actions in administering [decedent's] estate" (Matter of Spacek, 155 A.D.3d at 748 [2d Dept 2017] [internal brackets omitted]; accord Matter of Lee, 153 A.D.3d 831, 832 [2d Dept 2017]). As already discussed, the court may order a fiduciary to complete an accounting if it serves the best interests of the estate and the issue of whether to grant a petition to compel an accounting is a matter squarely within the Surrogate's discretion (see SCPA 2205; 2206; see also Matter of Mastroianni, 105 A.D.3d at 1138; Matter of Taber, 96 A.D.2d 890, 890 [2d Dept 1983]).
SCPA 2211 grants this Court broad authority to "take the account, hear the proofs of the parties respecting it[,] and make such order or decree as justice shall require" (SCPA 2211 [1]). "The Surrogate's Court is empowered to state the account and make such a decree as justice requires notwithstanding the failure or refusal of a fiduciary to file an amended account. Moreover, because the Surrogate's Court is governed by principles of equity as well as of law, it is not prevented by any legal restriction from doing exact justice to any of the parties" (Matter of Carbone, 101 A.D.3d 866, 868 [2d Dept 2012] [internal quotation marks, brackets, and citations omitted]).
Here, the Court finds it to be in the best interests of the estate to compel respondent to complete a formal judicial accounting (see SCPA 2205 [1]). Matters related to the decedent's estate have been pending in this Court since 1998 and there is no indication when the subject estate will be completed and close. In view of the difficulties which this estate has encountered in the marshalling of its assets and in the administration of the estate affairs, the Court, while not its own initiative, shall require the fiduciary to file a formal judicial account. Therefore, the Court grants so much of the petition to the extent that it directs respondent to account as the executor of decedent's estate (see SCPA 2205, 2206 [2]; Matter of Mastroianni, 105 A.D.3d at 1138; Matter of Taber, 96 A.D.2d at 890).
Accordingly, respondent must file the formal account, petition for its judicial settlement, and include any other submissions necessary for the issuance of citation in the accounting within 60 days after service of this Order. Respondent shall then cause citation to be issued and service to be made without undue delay on the persons interested in the accounting proceeding, so as to expeditiously obtain jurisdiction over all necessary parties pursuant to SCPA 2210. The Court directs the executor to proceed accordingly. The Clerk of the Court shall email a copy of this Decision and Order to all counsel.
The Court has reviewed and considered the additional contentions of the parties not squarely addressed herein. To the extent any other relief requested by the parties was not specifically addressed, it is denied. Accordingly, it is hereby:
ORDERED that the motion by respondent MAUREEN T. WALSH (Mot. Seq. No. 1), made by Order to Show Cause signed September 13, 2022, to dismiss the underlying petition is denied in its entirety; and it is further
ORDERED AND ADJUDGED that so much of the petition of CLARE M. RUIZ requestine a compulsory accounting in connection with the estate of Lawrence T. Smith (deceased), is granted; and it is further
ORDERED that MAUREEN T. WALSH is directed to file her formal account together with a petition for its judicial settlement, within sixty (60) days after service of this Order; and it is further
ORDERED that petit ion er CLARE M. R IZ shal l cause a co py ofthi 'Decision and Order" to be served with notice of entry up on respondent MAUREE T. WALSH within ten (10) days from the date herein; and res pondent shall fi le proof of such ervice with the Court; and it is further
ORDERED that the instant proceeding is disposed; and the Clerk of the Court shall accordingly mark the same.
The foregoing constitutes the decision and order of this Court.