Opinion
2018-235
12-03-2018
In the MATTER OF the KOSMO FAMILY TRUST, dated July 18, 1994. Laura E. Knipe Wieland, Petitioner, v. Donna Savino, Respondent.
Richard D. Cirincione, Esq., McNamee Lochner, PC, 677 Broadway, Albany, New York 12207, Attorney for Petitioner William F. Ryan, Jr., Esq., Tabner, Ryan & Keniry, LLP, 18 Corporate Woods Blvd., Ste. 8, Albany, New York 12211, Attorney for Respondent
Richard D. Cirincione, Esq., McNamee Lochner, PC, 677 Broadway, Albany, New York 12207, Attorney for Petitioner
William F. Ryan, Jr., Esq., Tabner, Ryan & Keniry, LLP, 18 Corporate Woods Blvd., Ste. 8, Albany, New York 12211, Attorney for Respondent
Stacy L. Pettit, S.
Pending before this Court is respondent Donna Savino's motion for summary judgment to dismiss the petition brought by petitioner, Laura E. Knipe Wieland, which seeks an order determining that the first, second and third amendments to the Kosmo Family Trust are void due to the lack of capacity of Janet D. Kosmo (hereinafter decedent) or the exercise of undue influence upon her by respondent. Respondent argues that petitioner lacks the authority to challenge the trust amendments. Petitioner opposes the motion, and the matter is submitted for decision.
Decedent died in December 2017, a resident of Orange County, California. She was survived by two of her three children, petitioner and Richard X. Knipe. Her third child, Claudia Knipe, was diagnosed with Down's Syndrome and resided in a group home where respondent worked as a health care worker, until her death in 2006. Decedent was also survived by two adult grandsons, Brent Knipe and Steven X. Knipe. In 1994, decedent and her spouse, Joseph Kosmo, created the Kosmo Family Trust, naming themselves as the trustees of the trust upon its creation. Kosmo died a resident of California in January 2013, predeceasing decedent. Under the 1994 trust, after the death of Kosmo and decedent, petitioner was to receive the residue of decedent's half of the trust, after some general gifts to other family members.
In 2008, decedent and Kosmo executed the Amendment and Restatement of the Kosmo Family Trust dated August 25, 2008. Pursuant to the terms of the 2008 trust, after the death of Kosmo and decedent, the remaining trust assets would be divided in half, and decedent's half would be distributed 90% to Richard X. Knipe and 10% to Charles Wendel. Thereafter, decedent executed three amendments to the trust, in 2013, 2015 and 2016. Pursuant to the 2013 amendment, the residue of decedent's share was left in equal shares to Steven Knipe and Brent Knipe, after a $25,000 gift to respondent and to decedent's friends. The 2015 amendment kept the cash gift to decedent's friends and left the remainder to respondent. Finally, the 2016 amendment left decedent's entire share to respondent. The trusts contain a choice of law provision, which provides that California law shall apply to the validity of the trust and the construction of its beneficial provisions, regardless of any change in the residence of the trustee.
Petitioner alleges that respondent exercised undue influence over decedent which resulted in decedent executing the amendments to the 2008 trust, ultimately removing her friends and family as beneficiaries and leaving the entirety of the trust assets to respondent. In March 2018, petitioner commenced this proceeding to invalidate the 2013, 2015 and 2016 amendments to the 2008 trust. Thereafter, jurisdiction was obtained over all interested parties. Respondent answered the petition, raising several affirmative defenses including inconvenient forum, and contemporaneously moved to dismiss the petition pursuant to CPLR 327. By decision and order of this Court dated May 29, 2018, respondent's motion to dismiss for inconvenient forum was denied.
Respondent then brought this motion for summary judgment under CPLR 3212 to dismiss the petition. Respondent asserts that petitioner did not have the legal authority to challenge the amendments to the 2008 amended and restated trust because petitioner was not a beneficiary of the trust under Cal Prob Code § 17200 and she did not have an interest in the 2008 trust at the commencement of the proceeding in March 2018. In July 2018, after this motion was made, petitioner's brother, Richard X. Knipe, assigned 50% of his interest in the 2008 trust to petitioner pursuant to Cal Civ Code § 699. In response to the filing of the assignment, respondent argues that standing must be established at the outset of the proceedings and cannot be established retroactively through a later assignment of interest. Respondent further argues that the proceeding is time barred because the assignment of interest took place after the statute of limitations to challenge the trust amendments expired pursuant to Cal Prob Code § 16061.8. In opposition, petitioner argues that the assignment of her brother's interest in the trust gave her standing to contest the amendments to the 2008 trust. Petitioner also asserts that respondent is precluded from raising a defense that the proceeding was barred by the statute of limitations because it was not raised in her answer or pre-answer motion as required by CPLR 3211 (e). Finally, petitioner argues that New York's six-year statute of limitations should apply under conflicts of law rules.
DISCUSSION
To determine whether petitioner has the legal authority to challenge the amendments to the 2008 amended and restated trust, it must be found by the Court that petitioner has both the legal capacity and standing to bring this proceeding. Capacity and standing are related, but distinguishable, legal concepts. Capacity is a threshold matter that seeks to determine whether "the legislature invested [petitioner] with authority to seek relief in court," whereas standing relates to "whether a party has suffered an injury in fact conferring a concrete interest in prosecuting the action" (Matter of World Trade Ctr. Lower Manhattan Disaster Site Litig. , 30 NY3d 377, 384 [2017] [internal quotation marks omitted]; see also Community Bd. 7 of Borough of Manhattan v Schaffer , 84 NY2d 148, 155 [1994] ; Socy. of Plastics Indus. v. County of Suffolk , 77 NY2d 761, 772-773 [1991] ).
The Court must first consider whether California or New York law applies to the capacity and standing issues raised in respondent's motion to dismiss. Article VIII (E) and (F) of the Declaration of Trust dated July 18, 1994, along with all of the amended and restated trusts, contain a choice of law provision which states that "[t]he validity of this trust and the construction of its beneficial provisions shall be covered by the laws of the State of California in force on the date of execution of this instrument." A choice of law provision such as this one operates to apply California law to substantive issues, however, procedural matters are left to the forum state (see Tanges v. Heidelberg N. Am., Inc. , 93 NY2d 48, 54 [1999] ; Kilberg v. Northeast Airlines Inc. , 9 NY2d 34, 41 [1961] ). In determining whether an issue is substantive or procedural, the law of the forum applies (see Tanges v. Heidelberg N. Am., Inc. , 93 NY2d at 54 ; see also Nestor v. Putney Twombly Hall & Hirson, LLP , 153 AD3d 840, 842 [2d Dept 2017], lv denied , 30 NY3d 907 [2017] ).
Under New York law, capacity is a substantive issue to be determined by California law (see Matter of World Trade Ctr. Lower Manhattan Disaster Site Litig. , 30 NY3d at 384 ). Respondent argues that petitioner lacks capacity to bring this proceeding, citing Cal Prob Code § 17200. This section provides that "a trustee or beneficiary of a trust may petition the court ... concerning the internal affairs of the trust or to determine the existence of the trust" ( Cal Prob Code § 17200 [a] ). As explained by the court in Barefoot v. Jennings , (27 Cal App 5th 1, 237 Cal Rptr 3d 750, 753 [2018], review filed [Oct. 19, 2018] ), "[t]he plain language of section 17200 makes clear that only a beneficiary or trustee of a trust can file a petition under [this section]." However, this section is intended to allow beneficiaries and trustees operating under a trust agreement to resolve their disputes, and is not dispositive in the dispute before this Court because "[s]eparate proceedings against [a] trustee in his or her official or personal capacities are already available to resolve disputes regarding the validity of proffered trust agreements and are not foreclosed by the existence of section 17200" ( Barefoot v. Jennings , 27 Cal App 5th 1, 237 Cal Rptr 3d at 753-754 ; see Lintz v. Lintz , 222 Cal App 4th 1346, 167 Cal Rptr 3d 50, 59-60 [2014] ). Trust contests under California law on the basis of incapacity, undue influence and fraud may be brought by an "interested person" as defined in Cal Prob Code § 48, including "[a]n heir, devisee, child, spouse, creditor, beneficiary, and any other person having a property right in or claim against a trust estate or the estate of a decedent" ( Cal Prob Code § 48 ; see Lintz v. Lintz , 222 Cal. App 4th 1346, 167 Cal Rptr 3d at 59-60 ). Petitioner, as decedent's intestate heir, has capacity to bring this proceeding under the applicable law of California.
Under New York law, petitioner would also have capacity to challenge the amendments to the 2008 trust (see Matter of Davidson , 177 Misc 2d 928, 930 [Sur Ct, NY County 1998] ).
Whether petitioner has the legal authority to bring this proceeding also requires a determination that petitioner has standing. Under conflicts of law principles, standing "goes to the jurisdiction of the court" and is a procedural matter to be determined by New York law (see Matter of World Trade Ctr. Lower Manhattan Disaster Site Litig. , 30 NY3d at 384, quoting City of New York , 86 NY2d 286, 292 [1995] ). To establish standing, New York courts require that a "litigant have something truly at stake in a genuine controversy" ( Saratoga County Chamber of Commerce, Inc. v. Pataki , 100 NY2d 801, 812 [2003] ; see also Socy. of Plastics Indus. v. County of Suffolk , 77 NY2d at 772 ). Under New York's Surrogate's Court Procedure Act, a "person interested" includes "[a]ny person entitled or allegedly entitled to share as a beneficiary in the estate" ( SCPA 103 [39] ). The definition of "estate" under SCPA 103 (19) includes the property of a trust (see Matter of Stephen Dehimer Irrevocable Trust , 52 Misc 3d 1203[A] [Sur Ct, Oneida County 2016], affd 155 AD3d 1600 [4th Dept 2017] ). The beneficiaries of a trust are defined as "the persons or classes of persons, or the successors in interest of persons ... upon whom the settlor manifested an intention to confer beneficial interests (vested or contingent) under the trust, ... [including] persons who have succeeded to interests of beneficiaries by assignment, inheritance or otherwise" (Matter of Wells Fargo Bank , 2018 NY Slip Op 31883[U] [Sup Ct, NY County 2018], citing Restatement [Third] of Trusts § 48, Comment a] ). Although petitioner is the assignee of a beneficial interest under the 2008 trust, the assignment did not occur until four months after the commencement of this proceeding. While interests in trusts may be assigned under California law (see Cal Civ Code §§ 699 ; 1458), petitioner did not have an interest in the 2008 trust in March 2018 when this proceeding was commenced and therefore lacked standing to bring this proceeding (see Matter of Brown , 144 AD3d 587, 587 [1st Dept 2016] ). Post-filing events do not cure standing defects that exist at the time a proceeding is filed (see Shareholder Representative Servs. LLC v. Sandoz Inc , 46 Misc 3d 1228[A], 2015 NY Slip Op 50326[U] [Sup Ct, NY County 2015] ). Accordingly, respondent's motion to dismiss is granted, without prejudice, given petitioner's lack of standing at the outset of this proceeding. It is noted that petitioner now has standing to commence a proceeding on the facts of this case, given the assignment of an interest in the trust. The dismissal of this proceeding is not on the merits.
Although unnecessary to the determination of this motion, the Court will address respondent's argument that, by the time petitioner had a pecuniary interest in the trust, the statute of limitations to challenge the trust amendments had expired under Cal Prob Code § 16061.8 because the 120-day time period to challenge the trust had expired. Under conflicts of law principles, statutes of limitations are procedural matters to be determined by the law of the forum because they are considered "as pertaining to the remedy rather than the right" ( Portfolio Recovery Assoc., LLC v. King , 14 NY3d 410, 416 [2010], quoting Tanges v. Heidelberg N. Am. , 93 NY2d at 54-55 ). In New York, the statute of limitations to set aside a revocable trust on the basis of undue influence and fraud is six years from the settlor's death (see Tilimbo v. Posimato , 20 Misc 3d 1116 [A], 2008 NY Slip Op 51366[U] [Sur Ct, Bronx County 2008] ; CPLR 213 ). Respondent argues that even if the statute of limitations were to be determined under New York law, the Court must apply the shorter of the two time-periods pursuant to CPLR 202 because the cause of action accrued in California. This rule, which states that the shorter of the time limits should be applied except "where the cause of action accrued in favor of a resident of [New York]," is designed to prevent forum shopping by a non-resident and is inapplicable in this case (see CPLR 202 ). Petitioner is a resident of New York, and CPLR 202 requires the application of the New York statute of limitations in that case. Finally, even if California law did apply, respondent waived the statute of limitations defense by failing to raise it in her answer or in a motion to dismiss pursuant to CPLR 3211 (e). Because this proceeding has not been dismissed on the merits and the Court has determined that the statute of limitations has not expired, petitioner may re-file this proceeding. Any remaining contentions, to the extent not specifically addressed, have been considered and found to be lacking in merit.
It is noted that Respondent is also a resident of New York.
Accordingly, it is
ORDERED that respondent's motion to dismiss for lack of standing is granted, without prejudice.
This constitutes the Decision and Order of the Court.
Papers Considered:
1) Respondent's Notice of Motion, Memorandum of Law and Affirmation of William F. Ryan, Esq. in Support of Respondent's Motion for Summary Judgment, with exhibits, dated June 29, 2018;
2) Assignment of Interest in Trust dated July 16, 2018;
3) Affirmation of Richard D. Cirincione, Esq., with exhibits, in Opposition to Respondent's Motion for Summary Judgment, dated July 25, 2018;
4) Reply Affirmation of William F. Ryan, Jr., Esq., with exhibits, and Memorandum of Law in Support of Respondent's Motion, dated August 1, 2018;
5) Petitioner's Sur-reply in Opposition to Respondent's Motion for Summary Judgment, dated August 8, 2018;
6) Respondent's Memorandum of Law in Further Support of Summary Judgment, dated October 17, 2018;
7) Supplemental Affirmation of Richard D. Cirincione, Esq., with exhibits, and Supplemental Memorandum of Law in Opposition to Respondent's Motion, dated October 17, 2018.