Opinion
No. 2016-359/C
08-04-2022
In the Matter of the Accounting by David J. Salvati, as the Executor of the Estate of Gertrude A. Goldstein, a/k/a Gertrude Goldstein, Gertrude S. Goldstein, Deceased. In the Matter of the Accounting by David J. Salvati, as the Attorney-in-fact of Gertrude A. Goldstein, a/k/a Gertrude Goldstein, Gertrude S. Goldstein, Deceased. In the Matter of the Accounting by David J. Salvati, as the Attorney-in-fact of Gertrude A. Goldstein, a/k/a Gertrude Goldstein, Gertrude S. Goldstein, Deceased.
Piscionere & Nemarow, P.C. Attorneys for Michael Ciarlo and Lisa Brytus Greenfield Stein & Senior, LLP Attorneys for David J. Salvati
Unpublished Opinion
Piscionere & Nemarow, P.C. Attorneys for Michael Ciarlo and Lisa Brytus
Greenfield Stein & Senior, LLP Attorneys for David J. Salvati
Brandon R. Sall, J.
In these contested proceedings to judicially settle the accounts of David J. Salvati ("David"), as executor of the estate of Gertrude A. Goldstein (the "decedent") and as attorney-in-fact for the decedent, the objectants, Lisa Brytus ("Lisa") and Michael Ciarlo ("Michael") (collectively, the "objectants") move for an order granting summary judgment against David on their objections. David opposes the motion which is decided as set forth below.
Factual Background
The facts relating to these proceedings are as follows:
The decedent was widowed, and her only child, Joel Goldstein, predeceased her.
She resided alone in a house she owned, located at 51 Laurel Drive, Mt. Kisco, NY.
On January 9, 2006, the decedent executed a New York statutory short form durable power of attorney (the "POA"). The POA appointed David as the decedent's attorney-in-fact and Lisa as the successor agent. As to the duration and use of the POA, the preprinted document stated: "This durable General Power of Attorney may be revoked by me at any time." Added to the preprinted form with a typewriter was the following: "[t]his power will be effective only upon the disability of Gertrude Goldstein and spring into operation and be effective upon medical proof of her inability to care for her own needs and financial affairs."
The POA, once operative, provided for all transactions to be performed by the agent including the subdivision M gifting power which stated that the agent could "mak[e] gifts to [the decedent's] spouse, children and more remote descendants, and parents, not to exceed the aggregate $10,000 to each of such persons in any year." The decedent's signature was notarized by Gregory Monteleone. According to David, the POA and the instrument purporting to be the last will and testament of the decedent (the "instrument") (ultimately admitted to probate) were prepared by Anthony J. Monteleone, Esq.
On October 15, 2007, the decedent executed the instrument before two witnesses whose signatures were notarized by attorney Monteleone. In that document, the decedent: (1) left her residuary estate in four equal shares to David, his wife, Doreen Salvati ("Doreen"), Lisa and Michael; (2) nominated David to serve as her executor and Doreen and Lisa to serve as successor co-executors; and (3) instructed her fiduciary to distribute her personalty in accordance with a separate letter she was to leave.
On May 13, 2008, a "membership correction/update" form was completed by David and the decedent to a USAlliance Federal Credit Union checking account (the "USA account") to add David as a joint owner of the account.
In October 2014, the decedent suffered a stroke that led to a hospital admission on October 27, 2014. She remained in the hospital for five days.
At his deposition, David testified that, while the decedent was in the hospital, he and his sister, Carol Ciarlo ("Carol"), the mother of Lisa and Michael, contacted attorney Monteleone and inquired about the decedent's last will and testament. They agreed to meet at the attorney's home to review the dispositions in the instrument "to see what would happen if [the decedent] did pass in the hospital".
According to David, at the meeting, he learned that he would be the executor and was the decedent's attorney-in-fact and that the decedent's estate would be divided equally among himself, Doreen, Lisa and Michael. In addition, attorney Monteleone stated that: (1) as the attorney-in-fact, David could give annual gifts to the decedent's family members and when asked as to who the permissible recipients would be, responded himself, Doreen, their daughters Victoria Salvati ("Victoria") and Cassondra Salvati ("Cassondra"), Carol, Lisa and Michael and (2) although the POA limited annual gifts to $10,000, the law had since changed, and gifts could be made up to $14,000. David testified that he felt comfortable relying on attorney Monteleone's advice because he was the decedent's lawyer, and he knew about her financial affairs.
Doreen testified that David returned from the meeting with a copy of the instrument and the POA and that, she too, understood the provisions of the instrument including what would be the ultimate distribution of the decedent's estate.
On or about November 1, 2014, the decedent was transferred from the hospital to a nursing home. David testified that he needed a physician's letter to trigger his role as the agent under the POA and that he facilitated the decedent's admission to the nursing home by using the POA. While he could not remember who the doctor was or what position he held, he knew that he asked a physician for a letter regarding the decedent's condition.
On November 5, 2014, Mark Brauning M.D. of Mount Kisco Medical Group P.C. wrote a letter to whom it may concern regarding the decedent. It stated, in part, that the decedent was hospitalized after suffering a hemorrhagic stroke, she was unable to care for her financial and personal affairs, and she was not competent to make financial decisions at that time.
On November 10, 2014 , David paid himself $557 from the USA account.
There are some discrepancies between the dates on the checks, the dates of the checks as set forth in the account statements and the dates of the checks in the check registers. For sake of brevity in the decision and order, all check dates for these purposes are to be considered are "on or about".
On November 30, 2014, David paid himself $4,857.39 from the USA account.
On December 4, 2014, David sold the decedent's IBM stock for $96,852.51 (allegedly to have been at a loss of $14,222.13). David testified that he sold the stock on the advice of attorney Monteleone, and he deposited the proceeds of the stock sale at United People's Bank ("UPB POA account") where Doreen was employed as a manager.
On December 15 and 16, 2014, David made gifts of $13,700.00 each to himself, Doreen, Victoria, Cassondra, Carol, Lisa and Michael from the UBP POA account.
On December 18, 2014, David issued a $170 check to Doreen from the USA account.
On January 7, 2015, David signed a check payable to Doreen from the decedent's Wells Fargo account (the "WF account") for $10,000.
On January 8, 2015, David issued a check to himself from the decedent's Bank of America (the "BOA account") for $14,000.00, and he testified that the distribution was a gift. The check register states, "David Salvati gift Monteleone".
The decedent had an account at Key Bank (the "KB POD account") which was payable on death to Lisa. In 2014, this account had a balance of approximately $109,210.19. David testified that the decedent had instructed him to use this account to pay her bills before she had her stroke and that he used this account to pay the decedent's nursing home bills.
The decedent had an account at Bank of America (the "BOA IT account") which was in trust for Michael. The BOA IT account contained $41,000 at around the time the decedent went into the nursing home. David testified that he transferred the proceeds in this account to an account at PUB and that he used the money prior to and subsequent to the decedent's passing.
On January 12, 2015, David issued checks on the KB POD account as follows: (1) $14,000 to Cassondra; (2) $14,000 to Victoria; and (3) $4,000 to Doreen.
On March 1, 2015, David issued the following checks from the KB POD account: (1) $500 to Cassondra and (2) $500 to Victoria.
On March 15, 2015, David issued a $500 check from the USA account to Cassondra.
David claims that all checks he issued from the USA account payable to him, Doreen, Cassondra and Victoria were for reimbursement of expenses made on behalf of the decedent.
On March 16, 2015, David issued a $500 check from the USA account to Victoria.
On March 21, 2015, David issued a $500 check to Doreen from the KB POD account.
On March 23, 2015, David issued a $500 check to Doreen from the USA account.
On April 21, 2015, David issued a $6,500 check from the USA account to himself.
On May 3, 2015, David issued a $5,000 check from the USA account to himself.
On June 3, 2015, David issued a $500 check from the USA account to himself.
On July 13, 2015, David issued a check from the decedent's WF account for $298,000, payable to an account at USAlliance Federal Credit Union which belonged to him (leaving a balance in the decedent's account of $465,556.96). This check, no. 103, states at the top "Gertrude Goldstein" and underneath the decedent's name, it reads "David Salvati POA". David testified that he used the funds to pay off his mortgage, he understood that if the funds remained in the decedent's name at the time of her death, Lisa and Michael would have shared one-half of the amount, and he did not recall whether or not he filed a gift tax return for the money. On this issue, Doreen testified that she wrote the check at David's instruction, she thought she paid some personal expenses with the proceeds of that check, including a mortgage payment on her home, the decedent insisted on gifting the money to her and David while she was in the nursing home, and the conversations with the decedent about this gift took place before and after her stroke.On August 19, 2015, David issued a $1,000 check from the KB POD account to Doreen.
On September 23, 2015, David issued a $1,000 check to Victoria from the USA account.On that same day, he issued a $500 check to Doreen from the same account.
An invoice dated September 23, 2015 from G-Rock Productions (G-Rock"), a contractor, was generated for services in the amount of $12,012, alleged to have been performed on the decedent's house prior and subsequent to her death.
On September 26, 2015, David issued two checks on the KB POD account: (1) $1,000 to Doreen and (2) $1,000 to Victoria.
On September 27, 2015, David issued an $8,000 check to himself from the KB POD account which he testified was to pay for outstanding taxes on an unimproved lot owned by the decedent and that he did not know why he wrote the check to himself.
With a check bearing the date September 27, 2015, from the BOA IT account, David paid himself $12,000. The check register states "G-Rock-Cash-Repairs-Consulting-Cleaning-Dump". David stated that the check was cashed and the proceeds paid to G-Rock because the principal of the company preferred to be paid in cash. The BOA account statement dated the check as of September 29, 2015.
Also on September 29, 2015, at the age of 91, the decedent died at the nursing home.
She was survived by eight nieces and nephews, as her distributees.
On January 4, 2016, (and again on May 2, 2016), IBM issued several checks payable to the decedent.
Procedural History
The Probate and the Administration of Estate Assets
On February 10, 2016, David filed a petition for probate of the instrument. Citation issued directed at the decedent's distributees. The probate petition set forth that the decedent's assets included: her home ($495,000), unimproved realty ($120,000) and personal property ($468,420). No objections were filed to the petition, and the proceeding went to decree on June 1, 2016, at which time, the court issued letters testamentary to David.
Once David received letters testamentary, he opened two estate accounts, one at Wells Fargo Bank (the "WF estate account") and the other at People's United Bank (the "PUB estate account").
On March 22, 2016, April 12, 2016, May 18, 2016 and June 6, 2016, payments were made by David to G-Rock from the estate account.
On June 6, 2016, David wrote a $285.85 check from the WF estate account to Doreen.On July 14, 2016, David wrote a $19,722.00 check to Doreen on the WF estate account.
At some point, David held a tag sale for the decedent's personal property. David testified that he received approximately $500 from the sale.
In 2018, Doreen wrote a check to the decedent's estate in the amount of $10,970.50. David testified that he has no idea why she paid that amount to the estate.
The Compel Account Proceedings
By orders dated September 12, 2017, this court granted the petitions filed by Lisa and Michael to compel David to account as the executor of the decedent's estate and as attorney-in-fact for her and ordered him to file both accounts within 60 days of the date of service of the order on him. On November 4, 2017, David was served with the orders.
By stipulation between counsel for the parties, filed on January 23, 2018, it was agreed that Lisa and Michael would not seek to enforce the orders to compel until sometime after February 6, 2018.
On February 5, 2018, David filed his accountings and petitions for judicial settlement. The petitions and accounts were amended, and thereafter, citations issued , . Lisa and Michael appeared by counsel, and pre-objection discovery was conducted. After pre-objection discovery was completed, Lisa and Michael filed objections to both accounting petitions.
The amended petition in the estate accounting is for the period September 29, 2015 to October 31, 2017. The petition was amended again to reflect the period September 29, 2015 to March 31, 2019. It was then amended a third time to reflect the period September 29, 2015 to September 30, 2020.
The petition and account as attorney-in-fact are for the period October 1, 2014 to September 29, 2015.
The POA Accounting
The Account
The following is reflected in the asset schedules: (1) A- $1,165,334.53- consisting largely of cash and securities (including $110,804.64 worth of IBM stock); (2) A-1- $1,255.59; and (3) A-2- $54,385.28.
Schedule C reflects $189,319.96 in paid administration expenses, consisting mainly of:(1) expenses paid from the USA POA account including $17,414.36 to David; (2) repairs and maintenance expenses including payments to Doreen ($670), Cassondra ($500) and Victoria ($1,500); and (3) professional office supply and help expenses to Doreen of $1,500 and $500.
Schedule E reflected distributions of $449,900 as follows: (1) David $325,700; (2) Carol $13,700; (3) Doreen $27,700; (4) Cassondra $27,700; (5) Victoria $27,700; (6) Lisa $13,700 and (7) Michael $13,700.
Schedule G reflected a balance on hand of $556,369.73.
The accounting petition and citation pray for the judicial settlement of David's account as attorney-in-fact.
The Objections
The objections to the POA accounting included the following: David should be surcharged with 9% interest as follows for: (1) the following unlawful gifts- $298,000; $26,000; and $17,414.39; (2) $54,800 for the portion of IBM stock which he sold and transferred to himself and his family; (3) $109,210.19 for unlawfully removing the funds from the KB POD account; and (4) $41,141.59 for unlawfully removing the funds from the BOA IT account.
The Estate Accounting
The Account
The following is reflected in the asset schedules: (1) A- $1,084,721.80, consisting largely of real property (improved and unimproved) and securities; tag sale receipts of $500 and personalty of $1,000; (2) A-1- $9,868.37; and (3) A-2- $18,913.45.
Schedule C reflects $235,440.16 in paid administration expenses, consisting mainly of professional fees: (1) accounting fees ($24,475 to Strictly Accounting ) and (2) attorneys' fees (Alan Lichtenstein [$1,400]), (Enea Scanlan & Sirignano LLP [the "Enea firm"] [$63,957.04]), (Donald Hendel [$6,485]), and (Greenfield Stein & Senior [the "Greenfield firm"]) [$60,800.15]). Schedule C also reflected payments to G-Rock ($9,150.67); reimbursements to David for $23,180.81, and $297.44 for office supplies from Staples.
David testified that Cassondra was employed by Strictly Accounting.
Unpaid administration expenses in schedule C-1 reflected: (1) $2,500 (estimated) to Strictly Accounting; (2) $10,800.15 and $50,000 (estimated) to the Greenfield firm; and (3) commissions of $36,826.88.
Schedule E reflected distributions of $150,000 each to David, Doreen, Lisa and Michael.
Schedule G reflected a balance on hand of $362,651.53 (including $500 of personalty).
The accounting petition and citation pray for the approval of professional fees and commissions.
The Objections
The objections to the estate accounting included that David should be surcharged nearly $500,000, all professional fees and commissions because: (1) of his improper behavior in self-dealing by unlawfully withdrawing that amount from the decedent's accounts for the benefit of himself and his family and to the detriment of the objectants and (2) the professional fees were excessive, duplicative and improperly charged against the estate because of his malfeasance.
Pursuant to an order dated April 29, 2021, post-objection discovery was conducted, and it has been completed.
By an October 18, 2021 order of this court, the two proceedings were consolidated for discovery and trial.
David filed a note of issue on or about October 26, 2021.
The Motion and the Opposition
As noted above, the objectants filed a combined motion for summary judgment on their objections in both accounting proceedings. David filed combined answering papers.
Discussion
Summary Judgment Standard and Rules Governing Its Application
The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law by tendering sufficient evidence to demonstrate the absence of any material issue of fact which requires a trial (see Alvarez v Prospect Hosp., 68 N.Y.2d 320 [1986]). Issue finding, rather than issue determination, is the key to summary judgment (see Krupp v Aetna Life & Cas. Co., 103 A.D.2d 252 [2d Dept 1984]). The papers should be scrutinized carefully in the light most favorable to the party opposing the motion (see Robinson v Strong Mem. Hosp., 98 A.D.2d 976 [4th Dept 1983]).
The party opposing a motion for summary judgment must produce evidentiary proof in admissible form sufficient to establish the existence of a material issue of fact which would mandate a trial of the proceeding (see Zuckerman v City of New York, 49 N.Y.2d 557 [1980]). In doing so, the party opposing the motion must lay bare his proofs (see Towner v Towner, 225 A.D.2d 614 [2d Dept 1996]). "[M]ere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient" (Zuckerman v City of New York, 49 N.Y.2d at 562).
On a motion for summary judgment in a contested accounting proceeding, the burden of the accounting party consists of a showing that he has accounted fully for all of the assets of the estate (see Matter of Schnare, 191 A.D.2d 859 [3d Dept], lv to appeal denied, 82 N.Y.2d 653 [1993]; see also Matter of Witherill, 37 A.D.3d 879 [3d Dept 2007]) by demonstrating that the account is complete and accurate (see Matter of Magnor, NYLJ, March 29, 2000, at 32, col 5). This is accomplished by submitting the accounting along with a good faith affidavit (Id.).
Then, the objectants have the burden to show with reasonable certainty that the estate has more assets than are accounted for and the accounting party failed to act prudently with regard to handling the administration of the estate (see Matter of Donner, 82 N.Y.2d 574 [1993]). Conjecture and suspicion are insufficient (see Matter of Mann, 41 A.D.2d 861 [3d Dept 1973]; Matter of Rudin, 2005 NYLJ LEXIS 4991 [Sur Ct, NY County]).
If that showing is met by the objectants, the accounting party must prove by a fair preponderance of the evidence that his account indeed is accurate and complete (see Matter of Schnare, 191 A.D.2d at 860).
If the fiduciary fails to satisfy his burden of proving the accuracy or completeness of the account, he will be surcharged (see Matter of Schnare, 191 A.D.2d at 861). The redress may include denial of commissions in whole or in part and imposing interest on the surcharge (see Matter of Kaskawits, NYLJ, Oct. 28, 2009, at p.31, col.3; see also Matter of Gourary, 94 A.D.3d 672 [1st Dept 2012]; Matter of Carbone, 101 A.D.3d 866 [2d Dept 2012]). The Surrogate has broad discretion to "make such order or decree as justice shall require" (Matter of Schnare, 191 A.D.2d at 861 quoting SCPA 2211[1]).
Furthermore, as a rule, summary judgment may not be granted on a claim that has not been pleaded (see Matter of Pappas, 2017 NYLJ LEXIS 1938 [Sur Ct, NY County 2017]).
Finally, where there are issues of credibility presented in the record before the court, a summary judgment motion must be denied because those determinations must be made by the trier of fact (see S.J. Capelin Assocs. v Globe Mfg. Corp., 34 N.Y.2d 338 [1974]; Phillips v Joseph Kantor & Co., 31 N.Y.2d 307 [1972]; Matter of Jacobs, NYLJ, April 18, 2000, at 27, col. 4 [Sur Ct, Westchester County]).
Fiduciary Responsibility and Standard of Care
A fiduciary owes his beneficiaries the duty of loyalty which mandates that he not self-deal. As the Court of Appeals wrote in Meinhard v Salmon, "a trustee is held to something stricter than the morals of the marketplace. Not honesty alone, but the punctilio of an honor most sensitive, is then the standard of behavior" (Meinhard v Salmon, 249 NY 458 [1928]). It is a "sensitive and inflexible rule of fidelity, barring not only blatant self-dealing, but also requiring the avoidance of situations in which a fiduciary's personal interest possibly conflicts with the interest of those owed a fiduciary duty" (Matter of Wallens, 9 N.Y.3d 117, 122 [2007], quoting Birnbaum v Birnbaum, 73 N.Y.2d 461, 466 [1989]).
Under a power of attorney, the agent has a fiduciary duty to act with the utmost good faith and undivided loyalty toward the principal (see Matter of Ferrara, 7 N.Y.3d 244 [2006]), and this power is given to the agent with the intent that he will utilize it for the benefit of the principal (see Mantella v Mantella, 268 A.D.2d 852 [3d Dept 2000]; Matter of Swaldi, 47 Misc.3d 1202[A] [Sur Ct, Erie County 2015]).
The fiduciary duty belonging to the agent includes the obligations:
(1) to act according to any instructions from the principal or, where there are noinstructions, in the best interest of the principal and to avoid conflicts of interest.
(2) to keep the principal's property separate and distinct from any other property owned or controlled by the agent.... The agent may not transfer the principal's property to himself... without specific authorization.
(3) to keep a record of all receipts, disbursements, and transactions entered into by the agent on behalf of the principal...(GOL §5-1505[2]).
As to gift giving, the Court of Appeals in Matter of Ferrara has interpreted the "best interests of the principal" to include the "minimization of income, estate, inheritance, generation-skipping transfer or gift taxes" (Matter of Ferrara, 7 N.Y.3d 244 at 252, quoting GOL §5-1502H[1])." The Court wrote:
the purpose of the gift-giving authority is to allow an attorney-in-fact to carry out the principal's intentions to use gifts as part of a financial or estate plan, which will often involve taking advantage of certain tax provisions. In fact, the amount the attorney-in-fact is permitted to gift under subdivision (M) of the form-$ 10,000 per qualified beneficiary per year-tracks the federal annual gift-tax exclusion in effect in 1996. In short, the Legislature sought to empower individuals to appoint an attorney-in-fact to make annual gifts consistent with financial, estate or tax planning techniques and objectives-not to create gift-giving authority generally, and certainly not to supplant a will.Id. at 253.
In contrast, the best interests of the principal do not include "such unqualified generosity to the holder of the power of attorney especially where the gift virtually impoverishes a donor whose estate plan, shown by a recent will, contradicts any desire to benefit the recipient of the gift" (Matter of Gargani, 43 Misc.3d 1211[A] [Sur Ct, Nassau County 2014], quoting Matter of Ferrara, 7 N.Y.3d at 254).
The making of unauthorized gifts by an agent to himself or others carries a presumption of impropriety and self-dealing (see Matter of Naumoff, 301 A.D.2d 802 [3d Dept 2003]; Matter of Hoerter, 15 Misc.3d 1101 [A] [Sur Ct, Nassau County 2007]). That presumption can be rebutted by a showing of clear intent on the part of the principal to make the gift (see Matter of Naumoff, supra; Matter of DeBelardino, 77 Misc.2d 253 [Sur Ct, Monroe County, 1974]).
Specific Relief Sought on the Motion
Surcharge against David for $298,000 plus interest from July 15, 2015, to present for making an unlawful gift to himself
The objectants argue that surcharge should be granted on this objection because: (1) David engaged in self-dealing by writing a check as attorney-in-fact to himself and exceeded the $10,000 cap set forth in the POA; (2) he used the proceeds for his own purposes; (3) he knew at the time that he wrote the check that the funds would no longer be part of the decedent's assets; (4) he included the distribution on Schedule E of the POA accounting; (5) he acted pursuant to the POA and not pursuant to a conversation with the decedent; and (6) he did not exercise gift giving authority with the best interests of the decedent in mind.
David contends that: (1) there is an issue of fact created by his testimony and that of Doreen as to whether in conversations, the decedent directed him to make the $298,000 gift on her behalf and told him that she wanted to gift him as much as half the proceeds of her WF account to assist him with the payment of his mortgage, college expenses and taxes and (2) the objectants do not dispute that the decedent had sufficient capacity to direct him to effectuate a gift.
David argues that Doreen's testimony supports his claim that the decedent told him to make the gift. Doreen testified that the decedent was always interested in making gifts to him and his family, that the decedent asked her whether or not the gift had been made, and that, after it was made, she told the decedent that a check for $298,000 was given to David, and the decedent was satisfied. He further contends that her testimony is not barred by CPLR §4519 because it was made against Doreen's pecuniary interest as a ¼ beneficiary of the estate who would receive more if she testified against her husband.
Analysis and Conclusion
The New York Dead Man's statute excludes testimony by an interested witness concerning a personal transaction or communication between the witness and a decedent only upon the trial of an action or a hearing on the merits of a special proceeding (see Phillips v Joseph Kantor & Co., 31 N.Y.2d 307 [1972]; see also CPLR §4519). Evidence incompetent under CPLR §4519 cannot be used as the basis for granting summary judgment but such evidence may be considered in determining whether a triable fact exists and maybe used to defeat summary judgment (see Phillips v Joseph Kantor & Co., supra).
Furthermore, '"[r]ules of evidence should be guardedly and cautiously applied on an application for summary judgment, particularly where there are many exceptions to general rules and where the application of a rule of evidence or the exceptions thereto can be best determined upon evidence offered at trial"' (Phillips v Joseph Kantor & Co., 31 N.Y.2d 307, 312 quoting Exchange Leasing Corp v Bundy, 29 A.D.2d 828 [4th Dept 1969]).
Based on the law as set forth above, generally testimony which otherwise runs afoul of CPLR §4519 could be used to defeat a motion for summary judgment. However, here, the court finds that the testimony of David and Doreen regarding their conversations with the decedent do not accomplish that purpose.
As a preliminary matter, the court notes that there was no specific authorization from the decedent that David could make a gift in excess of the POA amount, $298,000 was substantially above the federal gift tax exclusion for 2015, and David wrote the $298,000 check as an attorney-in-fact on an attorney-in-fact account. Furthermore, the court rejects David's argument that, although he signed the check as the attorney-in-fact, the gift was actually directed by the decedent to be made by him to himself not using the POA. This contention defies logic, and the evidence in the record other than his self-serving testimony and that of Doreen, does not support it.
David's argument that Doreen's testimony should be considered to defeat summary judgment because she stood to benefit from David losing on this claim is completely disingenuous. They both stood to benefit, and they both acknowledged in their testimony that the proceeds were used to pay at least some part (Doreen) if not all (David) of their mortgage.
Moreover, David has not demonstrated the elements of the making of a gift outside the use of a power of attorney. To make a valid inter vivos gift, there must exist the intent on the part of the donor to make a present transfer, delivery of the gift, either actual or constructive to the donee, and acceptance by the donee (see Gruen v Gruen, 68 N.Y.2d 48 [1986]). A showing of intent to make a gift is insufficient, there must be actual or constructive or symbolic delivery (see, eg, Matter of Cohn, 187 AD 395 [1st Dept 1919]).
As to the delivery of a gift, the "law requires proof [thereof] to protect alleged donors and their estates from 'ill-founded and fraudulent claims of gift, resting only on the assertion of oral words of gift, concerning which the evidence maybe doubtful or open to controversy'" (Elyachar v Gerel Corp., 583 F.Supp. 907 [SDNY 1984], citations omitted).
David cannot show delivery except by use of the POA, and as shown, the POA limited the amount of gifts.
Based on the above, summary judgment on this objection is granted. The court is comfortable stating, as a matter of law, that this transaction constituted self-dealing.
David is ordered to return $298,000 to the estate account within 30 days of this decision and order. The court will reserve on the amount and the type of surcharge until after the trial of these proceedings.
Surcharge against David for $96,582.51 and $14,222.13 (loss amount) plus interest from December 4, 2014, to present for unlawfully selling IBM stock and making unauthorized gifts from the sale proceeds
The objectants contend that David should be surcharged because: (1) he sold the decedent's IBM stock at a loss; (2) he is responsible for that loss; (3) the gifting of the stock proceeds exceeded the authority in the POA; and (4) he did not include an affidavit from attorney Monteleone to corroborate his allegations that his reliance on the attorney's advice negates any potential misfeasance.
David argues that: he did not sell the stock at a loss but at a price which was consistent with the stock price at the time; there is an issue of fact as to whether the stock was sold negligently or in good faith; he sold the stock at the recommendation of attorney Monteleone, who advised him to liquidate the securities and make gifts from the proceeds to effectuate the decedent's estate plan; and, in any event, the objectants do not allege any negligence on the part of David and are not entitled to the loss as a surcharge.
With regard to making gifts from the proceeds, David contends that: (1) although the decedent executed the POA in 2006 (when the annual exclusion amount was $12,000), the form she signed was a September 2000 form (when the exclusion was $10,000); (2) the $13,700 gifts were consistent with the decedent's intent to make annual exclusion gifts to her family; (3) from the face of the POA, it was clear that the decedent intended David to make gifts up to the annual exclusion amount for gift tax purposes which was an advantage to the estate; (4) the objectants ratified these gifts by accepting them without raising any issue concerning the authority to make them; (5) because this contention is not pleaded in their objections, summary judgment may not be granted on this claim; and (6) if the court decides the gifts were improper, there should be no surcharge on the gifts to the objectants or Carol.
Analysis and Conclusion
A fiduciary is not held responsible for investment losses unless the loss was due to his imprudence (see Matter of Kopec, 25 Misc.3d 901 [Sur Ct, Monroe County 2009]). Because the standard of prudence looks to the fiduciary's actions, good faith on the part of the fiduciary is the overriding concern, and therefore, errors of judgment will not be surcharged (Matter of Kopec, 25 Misc.3d 901; see also Matter of Clark, 257 NY 132 [1931]).
The objectant bears the burden to prove that any losses were the result of the fiduciary's negligence or failure to exercise the duty to preserve the assets by exercising such prudence as is required (see Matter of Cuddeback, 168 Misc. 698 [Sur Ct, Orange County 1938]; see also Matter of Clark, 257 NY 132, 136] ["the purchase of a speculative stock by a trustee is one thing; the retention of such a stock awaiting the arrival of a favorable opportunity to sell is quite another; the former would constitute negligence; the latter, regarded prospectively, might be prudent, although in retrospect it might seem to have been a grievous error"]).
The court finds that there is an issue of fact with respect to whether David acted prudently when he sold the decedent's shares of IBM which needs to be determined at the trial of these proceedings.
Furthermore, as to the alleged unpleaded objection concerning the invalidity of the making of gifts by David above the amount set forth on the POA, summary judgment cannot be granted on an unpleaded claim (see Matter of Pappas, 2017 NYLJ LEXIS 1938 [Sur Ct, NY County 2017]). The objectants do plead the unauthorized gift giving as to David and his family, they did not, however, plead it with respect to gifts made to themselves. Based on the record before the court, the POA objections are deemed amended to allege that the $13,700 gifts to all recipients were made outside the scope of David's authority as agent. There is no significant prejudice or surprise to David on account of this amendment (see Edenwald Contr. Co. v City of New York, 60 N.Y.2d 957 [1983]; Fahey v County of Ontario, 44 N.Y.2d 934 [1978).
As to the merits of that part of the objection which concerns the excess gift by David of $13,700 to himself, each of his family members, Carol, Lisa and Michael, the court finds that there are issues of fact, including whether, because the decedent did not update the POA form, she wanted her attorney-in-fact to be able to give no more than $10,000 or whether it was her intention that the yearly gift exclusion amount would control and which of these was in her best interest (see Matter of Hoerler (15 Misc.3d 1101[A] [Sur Ct, Nassau County 2007] [had the agent had power to make gifts, he would have been limited to the $10,000 annual exclusion amount in 2003] contrast Matter of Ramirez (2014 NYLJ LEXIS 6270 [Sur Ct, NY County 2014] [gift giving provision in a power of attorney is limited by its explicit terms]). The court cannot say as a matter of law, that these transactions constituted self-dealing. That determination is for the trier of fact at the hearing.
Surcharge of $14,000 plus interest from January 7, 2015, to present for an unlawful gift from the decedent's BOA IT account and of $12,000 plus interest from September 27, 2015, to present for unlawful issuance of a check to David from the BOA IT account for an alleged reimbursement of expenses that he failed to include on the POA Accounting
The objectants contend that surcharge should be ordered because: (1) these two checks exceeded the $10,000 restriction on the POA; (2) David cannot meet his burden that he has accounted for all of the assets of the decedent's estate because he failed to include the $12,000 payment in the POA account, and this means the account is not complete; and (3) David provided no evidence from G-Rock as to the payment allegedly made to it.
Again, David contends that: (1) although the $14,000 gift exceeded the POA amount, the decedent intended to grant David the right to make gifts up to the annual exclusion amount; (2) to the extent the court finds that the gift should not have exceeded $10,000, David should only be surcharged $4,000; and (3) the transaction was made at the instruction of attorney Monteleone and was in the decedent's best interest as part of her estate plan.
As to the $12,000 check, David alleges that: because he wanted to maintain the decedent's home for her or for a future sale, he incurred a $12,000 charge for construction services rendered by G-Rock, once he established that the expense was reasonable, the burden shifted to the objectants to show it was not, he inadvertently failed to include the payment in his POA accounting, and there is an issue of fact as to whether he properly reimbursed himself and Doreen for expenses he alleged were made for the estate.
Analysis and Conclusion
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]). Once a fiduciary establishes that an expense was fair and reasonable, the burden shifts to the objectant to show it was unreasonable (Matter of Seabury, NYLJ, May 17, 1995 [Sur Ct, Bronx County]). A written statement containing the factual basis of the expense and the amount thereof is sufficient to shift the burden to the objectant (see Matter of Alles, 2019 NY Misc. LEXIS 12575 [Sur Ct, Erie County 2019]).
Furthermore, it is incumbent upon a fiduciary to maintain clear and accurate records, absent which all presumptions and all doubts are to be resolved adversely to him (see Matter of Mink, 91 A.D.3d 1061 [3d Dept 2011], quoting Matter of Camarada, 63 A.D.2d 837, 837 [4th Dept 1978]; Matter of Carbone, 101 A.D.3d 866 [2d Dept 2012]).
The court finds that there are issues of fact with respect to whether it was in the decedent's best interest to make the gift up to the exclusion amount and whether the expenses alleged to have been made by David were proper. Therefore, summary judgment is denied. However, that portion of the objection which reflects the failure to include the expense is granted to the extent that David is directed to amend his accounting to reflect it.
Surcharge of $17,414.39, plus interest from dates of each of five transactions that total this amount, as set forth in Schedule C of the POA Accounting, to present, for improper reimbursements for alleged expenses from the USA account
Objectants argue that there was no evidence demonstrating that the USA account was a joint account which passed outside the probate estate, if the account was joint, David would not have reimbursed himself from this account, and because David did not produce any documents in response to their demand for documents on this issue, the issue should be resolved against him.
David contends that, in 2008, at the decedent's suggestion, he was added to her USA account, there is an issue of fact as to how this account was held between him and the decedent, it was funded with money from both of them, while he was acting as the decedent's agent, he paid certain of her expenses from his personal assets and then reimbursed himself from this account, he was entitled to transfer money from his joint checking account with the decedent to his account for reimbursement of expenses, the objectants lack standing to object to any of the transfers since this account was payable to him by operation of law and is not an estate asset, and any dispute over the account title would be time barred or a bar to summary judgment.
Analysis and Conclusion
Again, as to the alleged failure to produce relevant documents, record keeping is a primary function for a fiduciary (see Matter of Strong, 41 Misc.3d 1231[A] [Sur Ct, Monroe County 2013]). Broad disclosure against a fiduciary is permitted because of the "high duty of conduct" of a fiduciary and the requirement that he explain his actions to the persons interested in an estate (see Matter of Zirinsky, 26 Misc.3d 625 [Sur Ct, Nassau County 2009]).
Additionally, where a fiduciary has failed to keep or produce clear and accurate accounts and records of his conduct and transactions, then all doubts and presumptions are resolved adversely against his conduct at trial (see Matter of Mink, 91 A.D.3d 1061 [3d Dept 2012]). Furthermore, the failure to provide demanded information will preclude the party from offering any proof regarding that information at trial.
As to the bank account, the best evidence of its title is the signature card (see Matter of Fenelon, 262 NY 308 [1933]; Matter of Leeds, 2007 NY Misc. LEXIS 9207 [Sur Ct, Nassau County 2007]). Absent the words of survivorship on the card, the presumption of a joint tenancy afforded by Banking Law §675 does not apply (see Matter of Donahue, 262 A.D.2d 840 [3d Dept 1999]; Matter of Klecar, 207 A.D.2d 732 [1st Dept 1994]). In such cases, the party asserting the title of the survivor has the burden of proving that the decedent intended to create a joint tenancy (see Matter of Thomas, 43 A.D.2d 446 [3d Dept 1974]). Once a prima facie showing is made, the burden shifts to the party challenging the title of the survivor who may prevail only by presenting clear and convincing evidence of fraud, undue influence, lack of capacity, or other evidence sufficient to support an inference that the account was created for convenience only (see Matter of Sabatino, 66 A.D.2d 937 [3d Dept 1978]; see also Matter of Coddington, 56 A.D.2d 697 [3d Dept 1977]).
David made no such prima facie case. The one-page modification form attached to David's affidavit in opposition to the motion does not make a definitive case, however, questions of fact exists as to the decedent's intention with respect to whether the USA account was a joint account with the right of survivorship or a convenience account and whether the expenses and reimbursements made by David were appropriate.
Surcharge of $285.85 plus interest from June 6, 2016, to present, and $19,722, plus interest from July 14, 2016, to present for improper issuance of checks to Doreen from the estate checking account
The objectants contend that David should be surcharged because neither check was set forth on the estate accounting, these checks were written to Doreen and were therefore improper, and there was no explanation as to why these reimbursements were made to Doreen.
As to the $285.85 check, David contends that, while this payment to Doreen is not explicitly stated in the estate accounting, the expenses which comprise the total amount are set forth there and, while Doreen could not testify as to the nature of the expense, the estate account shows a payment in that amount for a purchase of supplies at Staples.
As to the $19,722 check, David contends that there are 29 entries listed on the spread sheet for estate expenses which total that amount, David produced checks, invoices and receipts to support the spreadsheet entries, the objectants have failed to meet their burden of demonstrating that the account is inaccurate or incomplete, and although the accounting does not indicate that these expenses were initially paid by Doreen and reimbursed to her, the objectants have offered no evidence that the funds were not for proper estate expenses.
Analysis and Conclusion
The court finds that there are issues of fact with respect to whether the expenses set forth in the estate accounting are the same as those for which Doreen received reimbursement and whether these expenses were appropriate in the first instance.
Surcharge for failing to properly account for the decedent's IBM stock and/or retirement account in the estate accounting, plus interest
The objectants contend that there must be missing IBM stock since David accounted for IBM retirement and dividend checks received after the decedent died, there is no explanation as to why the decedent continued to receive these checks, and because David had no idea whether the decedent owned additional stock when he reported the additional IBM checks, the account must be inaccurate.
David contends that there is an issue of fact as to whether the estate has any additional interest in IBM stock or an IBM retirement account, the objectants have proffered no evidence that the decedent still owned IBM stock at her death or that the checks were related to a continued ownership interest in IBM stock, and he sold all the shares belonging to the decedent which he could locate at market value.
Analysis and Conclusion
The court finds that there is an issue of fact on this objection as to why the estate received these additional funds and the manner in which they were accounted for, which precludes summary judgment on this issue.
Surcharging for failing to properly account for the amount received at the tag sale, plus interest
The objectants argue that a surcharge should be assessed against David because his estate account is inaccurate and incomplete on the amount received at the tag sale, and there is no issue of fact with respect to the tag sale.
David does not address this issue in his opposition papers.
Analysis and Conclusion
Since David did not adequately detail the assets received on Schedule A, the court grants summary judgment sustaining this objection to the extent that David is directed to amend his account to accurately reflect precisely what assets were received by him including those relevant to the tag sale. As the officially promulgated instructions to the petition for a judicial account clearly state, Schedule A requires a detailed statement of "money and other personal property" received.
Denying David's request for legal fees in the estate accounting and surcharging him for any fees paid from the decedent's estate, plus interest from the date of each payment to present
Denying David's request for accounting fees in the estate accounting and surcharging him for any fees paid from the decedent's estate, plus interest from the date of each payment to present
As to legal fees, the objectants contend that the court should not approve them because of David's conduct and because they are excessive, they are not allocated properly between the two accounts, the services provided by the two law firms were duplicative of each other and that of the work of the accountants, the objectants should not be responsible for fees paid to the Enea firm for its inability to get an accounting filed, the Greenfield firm did not provide contemporaneous time records until they filed their opposition to this motion, and the records were not turned over in discovery, the estate should not bear the exorbitant cost of these fees, and Enea and Lichtenstein both waived a hearing as to legal fees.
As to the accounting fees, the objectants argue that the fees should not be approved because were not divided properly between the two accountings and that the fees were excessive and some of the services were duplicative.
David contends that there is an issue of fact as to whether the legal and accounting fees are reasonable and that a hearing is necessary because, given the significant contested issues of fact, it would be impossible for the court to determine on summary judgment whether all of the professional fees should be disallowed.
Analysis and Conclusion
David, as the petitioning party, has the burden of establishing the reasonable value of the legal services for which compensation is sought (see Matter of Spatt, 32 N.Y.2d 778 [1973]), and the Surrogate bears the ultimate responsibility to decide what constitutes reasonable professional compensation in estate matters (see Matter of Stortecky, 85 N.Y.2d 518 [1995]).
A fiduciary may not be awarded counsel fees if he has breached his fiduciary duty (see Matter of Brown, NYLJ, Oct. 29, 1999, at 29, col. 3; Matter of Saxton, NYLJ, Feb. 11, 1999, at p. 29, col. 5). Additionally, the court may fix legal fees incurred by a party as a surcharge against an errant fiduciary where it is established that such fees reflect services solely to establish the fiduciary's misconduct and to recover funds from him or her (Matter of Kaskawits, 25 Misc.3d 1228 [A] ; Matter of Buxton, NYLJ, Oct, 13, 2006, at 32, col. 3).
The court finds that the fixation of professional fees and their allocation between costs of administration to be borne by estate assets or to be assessed against David personally must await a trial of the merits of the objections and a determination at that time as to the extent of the surcharge to be ordered against David.
Denying David his commissions in the estate accounting
The objectants contend that David should be denied commissions because of his self-dealing and his failure to properly account for the decedent's assets.
David contends that he is entitled to commissions absent a showing of misconduct or mismanagement arising from his administration of the estate, objectants have not made such a showing, and the decision to deny him commissions is in the discretion of the Surrogate.
Analysis and Conclusion
SCPA §2307[1] directs the payment of statutory commissions to a fiduciary absent a showing of misconduct or mismanagement of an estate on the part of the fiduciary. Such decision is within the discretion of the Surrogate (see Matter of Smith, 91 A.D.2d 789 [3d Dept 1982]; Matter of Klenk, 151 Misc.2d 863 [Sur Ct, Suffolk County 1991]).
While the court has found malfeasance on David's part with respect to the $298,000 transfer, the court finds that the determination as to surcharge and denial of commissions will await a trial of the merits of the objections.
Surcharge of $109,210.19 plus interest from October 1, 2014, to present for unlawful use of the decedent's KB POD account that should have passed to Lisa
Surcharge of $41,141.59, plus interest from October 1, 2014, to present for improper use of the decedent's BOA IT account that should have passed to Michael
The objectants contend that David improperly used these accounts for expenses and for his own benefit because he knew that they were payable to Lisa and Michael on the decedent's death, he could have used other assets to pay expenses, and there is no evidence other than David's testimony that the decedent told him to use these accounts to pay expenses.
David contends that the objectants cite no case law to support their position that these accounts could not be used to pay expenses and that David testified that the decedent expressly directed him to use these account to pay her expenses.
Analysis and Conclusion
The court finds that there issues of fact and credibility which need to be determined at trial regarding David's actions as fiduciary in using these accounts to pay expenses as opposed to other accounts which he used to make gifts and reimbursements to himself and his family and the propriety of those expenses in the first place (see Matter of Gargani, 43 Misc.3d 1211[A] [Sur Ct, Nassau County 2014] [denying summary judgment and finding issues of fact as to the best interests of the principal where the underlying issue was the agent's deposit of certain of the decedent's funds which were in trust for another into an account of the decedent thereby divesting the trust benefit to the intended beneficiary]).
Conclusion
Based on the above, the motion is granted in part as outlined above. Any amendments to the accounts to be made pursuant to this decision and order must be made and filed with the court no later than September 19, 2022. Objectants are required to file an amended set of objections 10 days after the service and filing of the amended pleadings.
These matters are restored to the calendar of October 26, 2022, at 9:30 a.m.
This is the decision and order of the court.
The papers considered by the court are as follows:
Notice of Motion filed on or about November 5, 2021, with exhibits and Memorandum of Law in Support;
Affidavit in Opposition by David Salvati, filed on December 16, 2021, with exhibits and Memorandum of Law in Opposition;
Affirmation in Opposition by John Guccione filed on December 16, 2021, with exhibits and Memorandum of Law in Opposition; and
Reply Affirmation in Support by Piscionere filed on December 28, 2021, with Reply Memorandum of Law in Support.