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Court Discusses Conflict of Creditor Acting as an Administrator

In this Estate Litigation action, a creditor of the deceased filed a petition. Petitioner asks the court to issue limited letters of administration to the Public Administrator of Nassau County so that he can defend the estate against creditor’s mortgage foreclosure action against decedent’s residential real property. The petition avers that the outstanding mortgage is in the amount of $373,954.81 and that there are no other outstanding debts or funeral expenses.

A New York Probate Lawyer said that deceased died sometime in September 2007 while visiting El Salvador. According to the petition before the court, decedent was survived by his wife and two minor children, all of whom are citizens and residents of El Salvador. The petition does not contain street addresses for these non-resident distributees. The petition further reflects that decedent was also survived by one adult child, who resides in decedent’s home, which is the subject of the foreclosure action underlying this petition.
Citation issued listing the wife and the Public Administrator, and was returnable. Affidavits filed with the court indicate that the citation was served. An affirmation in support of amending the petition and dispensing with service on wife was filed by counsel on behalf of the Bank one day prior to the return date of the citation. Counsel for petitioner affirms that the daughter advised his office that the wife lives in El Salvador but that the child was unable to provide the wife’s address. Counsel avers that wife’s residency in El Salvador was confirmed by the process server’s unsuccessful attempt to serve citation on the wife at decedent’s home. Attached to counsel’s affirmation is an affidavit of due diligence that reflects that in addition to attempting to serve the wife at decedent’s last address, counsel’s staff also ran a computer search for the wife using the on-line telephone directory for El Salvador, but did not find a listing for the wife’s name. The affidavit concludes by stating that “deponent duly exhausted all efforts to obtain jurisdiction over the defendant”

A New York Will Lawyer said that appearing before the court on the citation return date were counsel for petitioner, counsel for the Public Administrator, and the child. At a conference held before a court attorney-referee, the child advised the court and counsel for the other parties that decedent was also survived by a fourth child who is five years of age, and who is not listed under 7(b) of the petition for letters of administration. The child requested additional time to consult an attorney to determine her rights, if any, in connection with decedent’s home and whether she should apply for letters of administration. Counsel for the Public Administrator advised the court that the Public Administrator intended to ask the court to excuse him from serving as administrator of decedent’s estate.

Brooklyn Probate Lawyers said that a supplemental citation was issued and made returnable. The citation lists only the wife, and the record does not indicate that it was served. Accordingly, prior to consideration of the relief requested in the petition, the court must determine whether jurisdiction has been obtained over the non-appearing parties.

Jurisdiction in an administration proceeding requires that notice of the petition be given to those individuals who have a right to letters of administration equal or prior to that of petitioner. A Bronx Probate Attorney said the petitioner served the child and the Public Administrator with citation, but did not serve decedent’s wife or minor children. Petitioner asked the court to dispense with service upon the wife on the basis that counsel has been unable to ascertain wife’s whereabouts. While it is clear that the SCPA permits the court to dispense with service in the event that a distributee’s whereabouts cannot be ascertained with due diligence, it is substantially less clear whether petitioner has in fact exercised the requisite due diligence.

Generally, the due diligence standard “requires a thorough search and includes inquiries at such places as offices of vital statistics, armed services, voting polls, motor vehicle departments, banks, utilities, schools, churches, the census bureau, police missing persons bureaus, and telephone directories” Of course, only some of the above examples of due diligence would be apposite when the individual being sought lives outside of the United States, but the court need not rule on the adequacy of petitioner’s due diligence; the court may dispense with service based upon Gloria’s status as a non-domiciliary, irrespective of the ascertainability of her whereabouts. An “eligible petitioner may receive letters of administration without being required under SCPA 1003 (2) to serve process upon any nondomiciliary alien distributee unless such a distributee has both requested and received permission from the court to act as a fiduciary”. On the same basis, and because their infancy renders them ineligible to receive letters, service upon decedent’s minor children is unnecessary. The court therefore dispenses with the issuance and service of process on all four of these distributees, but directs that process must issue to Gloria and to decedent’s minor children, and the guardians of these minors, at the time of the judicial accounting proceeding. Jurisdiction in connection with this petition is thus complete.

The court must next consider the relief requested by petitioner for the issuance of limited letters to the Public Administrator and the responsive filing of the Public Administrator. Petitioner has asked the court to appoint the Public Administrator so that he can represent the estate in petitioner’s foreclosure proceeding. In his answer and objection, the Public Administrator advised the court that decedent’s residential property has an estimated market value of $382,200.00, according to the Nassau County Department of Assessment, or $338,000.00. Since the outstanding mortgage lien is $373,954.81, the value of the property is insufficient to yield the total payoff amount required to stop foreclosure, which is $412,201.41, according to the payoff letter. The estate appears to be insolvent.

“When no eligible distributee can be located or no one takes the necessary steps to qualify the court will issue letters to the public administrator”. A Public Administrator who is reluctant to accept a fiduciary appointment is not empowered by statute to unilaterally reject letters issued by the court.
“Letters may be issued to another person or persons in the discretion of the court only when the Public Administrator has been excused from acting. As the Public Administrator cannot renounce his right to letters and can be relieved from his duty to administer such an estate only by order from the court there can be no such thing as a de facto renunciation by the Public Administrator”
In the proceeding before the court, the Public Administrator has asked to be excused from the issuance of letters of administration on the basis of good cause pursuant to SCPA 1003 (3), and because the Public Administrator avers that during the court conference held on February 18, 2009, a distributee, the child, indicated her willingness to serve. As an alternative to his own appointment, the Public Administrator asks that the court consider issuing letters to petitioner as a creditor of the estate. According to the Public Administrator, each of these two parties, the child and petitioner, has a tangible interest in the foreclosure action. The Public Administrator cites two decisions issued by this court in which letters could have been issued to the Public Administrator but were not, and instead were issued to the party best able to proceed and expend the necessary funds.

Before the court can consider granting the relief requested by petitioner or the alternative relief requested by the Public Administrator, it must first consider whether another eligible person would be available and willing to serve as administrator. Decedent’s adult daughter has priority to receive letters. In fact, “if there is any eligible person entitled to share in decedent’s estate who will accept the appointment, the public administrator has no rights”. Although the child appeared at the conference, which was held on the first return date for this matter, and indicated to those present that she would consider serving as administrator of her father’s estate, she did not file a petition for letters, despite being given ample time to consult with legal counsel and qualify.

Petitioner, as a creditor of the estate, is also an interested party who can receive letters at the discretion of the court pursuant to SCPA 1001 (8) (b), but a creditor will not be issued letters of administration where next of kin is available and willing to serve. Petitioner’s right to receive letters is subordinate to that of the adult child and the Public Administrator. However, in the event that the child abjures her right to letters and the Public Administrator is excused from serving, the court may grant letters to petitioner or to any other person.

In a case decided by this court in 2002, letters of administration were granted to a creditor of the estate where the surviving spouse, who was the only distributee able to qualify, renounced her appointment as executrix. The court addressed the potential conflict of interest faced by a creditor serving as administrator, but noted that a conflict of interest is not grounds for ineligibility to receive letters. A “court can grant limited letters to a fiduciary who has a conflict of interests with the estate”.
The court grants the child thirty days from the date of this decision in which to petition to qualify for letters; if the child does not petition to qualify within that time period, the court will proceed on the assumption that child has chosen not to qualify and serve. In that event, the Public Administrator would have priority to receive letters of administration, but has asked to be excused.

The court declines to appoint the Public Administrator to administer this possibly insolvent estate when there are two interested parties who can serve as administrator. Therefore, the court grants the request of the Public Administrator and excuses him from serving.

An estate of a person should be divided in accordance with law. Here in Stephen Bilkis and Associates, through our Nassau County Estate attorneys, we will determine the amount of estate which will be entitled to an heir. Our Nassau County Probate lawyers will present the will of a testator to the court for proper division of the estate.

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