Opinion
2003-433/C.
Decided June 30, 2010.
Edmund C. Grainger, Esq., III, McCullough, Goldberger Staudt LLP, Attorney for William Mueller, White Plains, NY.
Theodore J. Brundage, Esq., Assigned counsel: Donald Maloney, Harrison, NY.
This decision follows a hearing held on June 1, 2010 to hold Donald Maloney in contempt (SCPA 607; CPLR § 753).
The application is by William Mueller (petitioner), as administrator of the estate of Frances E. Francis (decedent), to hold Donald Maloney (Maloney) in contempt for failing to pay him the sums of $637,160.97 plus interest at the rate of 9% from November 24, 2002 (decedent's date of death), and $85,036.15, pursuant to this court's decision dated April 28, 2009 and decree thereto dated October 14, 2009.
In January, 2005, petitioner commenced a discovery proceeding against Maloney seeking information concerning alleged transfers by Maloney of decedent's assets to himself and/or himself and his mother, pursuant to a power of attorney (POA). By order dated November 10, 2005 Maloney was restrained from withdrawing, transferring or otherwise affecting any property that belonged to decedent.
The underlying facts surrounding Maloney's transfer of decedent's assets to himself, or himself and his mother, are fully set forth in this court's decision March 4, 2008 wherein the court granted petitioner summary judgment. By its March 4, 2008 decision, the court set aside any and all transfers of decedent's assets made by Maloney as an attorney-in-fact pursuant to a POA he drafted. Decedent, at the age of 98, signed the POA on June 12, 2001. Following the execution of the POA, Maloney transferred decedent's assets to himself or himself and his mother. The court directed Maloney to turn over all assets which were held by decedent, and transferred by him, and to file an account of his acts as attorney-in-fact. In the event Maloney failed to account, petitioner was authorized to take and state an account. Upon establishing decedent's ownership of assets, petitioner would be entitled to recover from respondent those assets no longer in existence, or the value thereof. A decree was signed on April 3, 2008. Petitioner filed a notice of entry of such decree on April 17, 2008.
The court records reveal that on May 1, 2008 Maloney filed a notice of appeal, however he did perfect such appeal.
Thereafter, Maloney failed to turn over any assets, nor did he file an account. An amended decision and decree dated January 13, 2009 issued setting the matter down for a hearing on petitioner's application to take and state respondent's account. At the hearing dated April 1, 2009, petitioner appeared with his attorney. Maloney appeared by his attorney. Counsel for both parties consented to admit into evidence petitioner's account. Respondent did not offer any proof whatsoever in response, or opposition, to the account.
By decision dated April 28, 2009, this court determined that prior to the improper transfers by Maloney, decedent owned assets which totaled $637,160.97, none of which could be located after her death. Maloney failed to present any proof that the transfer of decedent's assets was in her best interests ( Matter of Ferrara , 7 NY3d 244 ) or that such funds were used for her benefit. As a result, Maloney was surcharged in the amount of $637,160.97 plus interest from November 24, 2002. In view of Maloney's gross misconduct, he was also surcharged for petitioner's legal fees related to the discovery proceeding and accounting proceeding in the amount of $85,036.15. A decree on account was signed on October 14, 2009. Petitioner served a copy of the decree upon Maloney and his then attorney on October 14, 2009. Notice of entry of such decree was filed on October 26, 2009. On December 8, 2009 the decree was also personally served on Maloney (SCPA 607). No notice of appeal has been filed with this court.
The pending proceeding for contempt followed.
An order to show cause for contempt was signed on December 28, 2009. It was personally served on Maloney January 6, 2010. On the return date of February 17, 2010, Maloney appeared, and filed a verified answer in which he avers that he has not willfully disobeyed the court's order. Maloney's stated defense is that he has no money to pay the judgment and that the court failed to consider money he purportedly expended on decedent's behalf. The record is clear, Maloney had opportunities to present such proof; by filing an accounting, and/or presenting proof at the hearing on petitioner's proceeding to take and state an account. He failed to offer any such proof.
The court was closed on February 10, 2010, the original return date.
Prior to the contempt hearing, Maloney was assigned counsel. Thereafter, a discovery order issued and the matter was set down for a hearing on June 1, 2010.
A party who refuses or wilfully neglects to pay money, as directed by an order of the court, may be held in civil contempt ( see Matter of Gross, NYLJ, Nov 23, 2005, at 36, col 3; Matter of Kahr, 85 Misc 2d 363; see also Matter of Storm, 28 AD2d 290 ; Weslock v Weslock, NYLJ, Dec 19, 2000, at 27, col 4; SCPA 607; Judiciary Law § 753). Petitioner must establish that a lawful order of the court, known to the parties, has been disobeyed (Judiciary Law § 753; Matter of McCormick v. Axelrod, 59 NY2d 574), and that the actions of the alleged contemnor have been calculated to, or actually defeated, impaired, impeded or prejudiced the rights or remedies of the other side ( Farkas v. Farkas, 209 AD2d 316).
At the contempt hearing, petitioner's counsel offered into evidence the court's record of this proceeding. Upon the consent of counsel, the pleadings were deemed marked into evidence. Petitioner then rested. Upon presentation of such proof petitioner met his burden.
Maloney took the witness stand in his own behalf. Maloney asserted that in fixing the surcharges against him, the court failed to consider expenses he purportedly paid on decedent's behalf. In response to the court's question, Maloney admitted that he had opportunities to present such proof and failed to do so. On cross-examination, Maloney admitted that none of the assets he transferred from decedent to himself and/or himself and his mother exist. He also acknowledged that certain funds he derived from decedent, which were held in an account in his name jointly with his mother, no longer exist notwithstanding that such funds were in existence at the time this court issued a restraining order against him (the November 10, 2005 restraint). In other words, Maloney violated the restraint issued in November, 2005 and has failed to account for such assets.
Maloney testified that he did not have any assets and was unable to pay the judgment against him. He argues that this fact militates against a finding of wilfulness on his part. A contemptor has the burden of not only proving his financial inability to comply with a court's mandate, but also that his own conduct did not contribute to this condition ( see Matter of Garrity, 149 Misc 180; Matter of Kempisty, NYLJ, June 1, 1989, at 28, col 4).
Maloney failed to offer any proof, beyond his self-serving statement, of his purported inability to pay. Nor did Maloney establish that it was not his own conduct, e.g., his use of decedent's assets, which rendered him unable to pay the money judgment. In sum, Maloney has not offered a scintilla of evidence in opposition to the request to hold him in contempt. Moreover, the record is clear that after issuing the November, 2005 restraint, Maloney again transferred funds he had taken from decedent.
Following the hearing, counsel for both sides were given an opportunity to present summations to the court. Maloney's attorney asserted as a defense that the "legislature made his client act in such manner." Essentially, Maloney argues that in the absence of any warning under the General Obligations Law setting forth the possible consequences of misuse of a principal's assets, he must be relieved of any duty or obligation to the principal. This court has already rejected such argument.
This is not a matter where an agent acted in good faith and in the best interests of his principal, by utilizing funds for the principal's benefit, which he is no longer able to substantiate. There is no proof whatsoever that at any time Maloney acted in decedent's interests. Rather, the record here is clear that Maloney drafted a POA which authorized him to make gifts to himself, he then obtained the signature of decedent upon such power (a 98 year old woman), and the following day he utilized the POA to deplete decedent of her assets which he then used for his own benefit. Following decedent's death and the commencement of this discovery proceeding, Maloney violated the restraint against him. Maloney then violated the court's decision and order directing him to account, and failed to present any proof in opposition to petitioner's proceeding to take and state an account. Next, Maloney violated the court's decree directing him to pay a sum certain to Mueller. At all times, Maloney's conduct was calculated to and did defeat, impair, impede and prejudice Mueller's interest as the sole beneficiary of decedent's estate.
Based upon all of the foregoing, Donald Maloney is found in contempt of the decision and decree of this court dated April 28, 2009 and decree thereto dated October 14, 2009 respectively. Maloney is given leave to purge himself of contempt by paying William Mueller the sums of $637,160.97 together with interest at the rate of 9% from November 24, 2002, and $85,036.15, within ten days of service by mail of a certified copy of this decision and order upon him and his attorney.
Upon the failure of Donald Maloney to comply with this decision and order, a warrant of commitment shall issue, without notice, to the Sheriff of any county where he may be found and such commitment shall continue until the sums ordered to be paid by him are paid (CPLR § 774).
THE FOREGOING CONSTITUTES THE DECISION AND ORDER OF THE COURT.