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Petitioner Claims Fiduciary is Unable to Serve

A New York Probate Lawyer said the decedent died in January 2008 in Moscow, Russia, leaving a purported will which nominates the decedent’s attorney, and respondent, as executors. Preliminary letters testamentary issued to them by decree of this court in April 2008. The purported will bequeaths the decedent’s 75% interest in the Corporation to Petitioner, who allegedly owns the other 25% interest in the Corporation. The lawyer claims that he is the president of the Corporation and has been so since its formation in 2005. At the time of the decedent’s death, the Corporation owned real property and two automobiles. The purported will also include a $300,000.00 cash bequest to the respondent.

A New York Will Lawyer said that Petitioner is one of three women who were allegedly married to the decedent at the time of his death. She claims she married the decedent in December 2007, after his divorce from a former spouse became finalized in September 2007. The former spouse has filed suit in Russia attempting to invalidate the marriage between the petitioner and the decedent on the grounds that the divorce was invalid. The parties disagree over the status of the Russian proceeding. The preliminary executors contend that the Russian courts have determined that the divorce was not valid and that the determination is final. Both of them have filed a Notice of Right of Election in the probate proceeding.

Suffolk County Probate Lawyers said the petitioner has filed objections to the will, limited to the appointment of the fiduciaries. A guardian ad litem was appointed for the decedent’s child, who is eight years old. The child lives with the petitioner at the Peachtree Lane property. The guardian ad litem has filed his report wherein he has stated that he will not be filing objections to the purported will pursuant to a stipulation of settlement. Pursuant to the terms of that stipulation, the lawyer has agreed to assign to the son one-half of whatever she ultimately receives under the will. The court has authorized the guardian ad litem to sign the stipulation on behalf of his ward.
Thereafter, a number of conferences were held in an attempt to resolve the issues raised by petitioner concerning the Corporation. A stipulation of settlement was drafted, but not executed. As a result, the preliminary executors, by order to show cause returnable, asked for the court’s permission to accept an offer on the property in the amount of $3.6 million. After oral argument, the court granted the preliminary executors permission to enter into a contract of sale.
A thorough analysis of the issues presented must begin with a discussion of the duties which a fiduciary owes to an estate and the beneficiaries thereof. With this in mind, however, the court recognizes that a testator’s wishes regarding the appointment of a fiduciary even on a temporary basis will be honored unless there are serious and bona fide allegations of misconduct or wrongdoing. It is well-settled that an executor has an absolute duty of impartiality to the beneficiaries of the estate. “[A]n executor owes a duty to all beneficiaries to be fair and impartial in all transactions that affect them; not preferring one to the detriment of others or conferring a benefit upon one at the expense of another. Hence, neither beneficiary has a right to expect that the executor will discriminate in his or her favor to the detriment of another. The executor must act in the best interests of the estate as a whole, which may incidentally benefit some beneficiaries more than others but not because of any partiality on his part”. A “fiduciary is under a duty of absolute loyalty to all beneficiaries and of fairness and impartiality to all. If in dealing with the respective beneficiaries their interests are so conflicting that the fiduciary cannot deal fairly with respect to them, he cannot properly act without applying to the court for instructions”.
In addition, SCPA 702(8) provides that limited letters may be issued, “in the discretion of the court, to represent the estate in a transaction in which the acting fiduciary could not or should not act in his or her fiduciary capacity because of conflict of interest.” SCPA 702(10) provides that limited letters may issue for “any other purpose or act deemed by the court to be appropriate or necessary in respect of the affairs of the estate, the protection thereof or to the proper administration thereof.” Thus, the application of SCPA 702(8) is discretionary with the court.
SCPA 702 was amended in 1993 to add subdivision (8) (L. 1993, c.514). “The new subdivision was enacted upon the recommendation of the EPTL-SCPA Legislative Advisory Committee, which suggested that while the authority to issue limited or restrictive letters in cases of potential or actual conflict already existed by virtue of the catch-all provision, the under-utilization of such a mechanism in those circumstances merited its explicit mention in the statute”, Surrogate Roth noted that the additions of subdivisions (8) and (9) “reflect the Legislature’s understanding that the individual interests of fiduciaries may at times be at odds with the interests of the estates they have been appointed to serve, and they embody the Legislature’s practical response to such reality.”

Thus, Nassau County Probate Lawyers said the SCPA 702(8) recognizes that, under certain circumstances, a fiduciary may be unable to carry out his duties because of a conflict of interest. SCPA 702(8) and (9) have typically been used to protect an estate from the prospect of self-dealing by the fiduciary. The court is mindful, however, that insofar as the conflict of interest is a situation created by the decedent’s will, it will not be a basis for removal.

Here, the Petitioner has failed to establish a conflict of interest. The conflict alleged in the dual capacities of the lawyer as an officer and director of the Corporation and as nominated fiduciary under the purported will was created by the testator. Moreover, this does not involve a typical case of self-dealing where the fiduciary acts in his interest to the detriment of the beneficiaries. Thus, Petitioner’s request for the issuance of limited letters of administration is denied.

Concerning the remaining relief requested in Petitioner’s order to show cause and the preliminary executor’s motion to sell the property, the court finds as follows. The stay on meetings of the directors and shareholders of the Corporation is hereby lifted. Nevertheless, the court agrees with the guardian ad litem that the preliminary executors have failed to show the necessity for the sale of the property upon the papers submitted. Additionally, the issue of the validity of the alleged $7.1 million loan may moot such issues. Accordingly, the parties are to appear for a conference on January 5, 2010, at 9:30 a.m., to set down a date for a hearing to determine the validity of the alleged loan and to schedule discovery, if necessary.

SCPA 707(1)(e) contemplates disqualification on the grounds that a fiduciary is “likely to jeopardize estate property”. The party alleging ineligibility has the burden of proof. The dishonesty contemplated in the statute “must be taken to mean dishonesty in money matters from which a reasonable apprehension may be entertained that the funds of the estate would not be safe in the hands of the executor”.

The allegations regarding the lawyer may fall within the purview of SCPA 707(1)(e) and require an evidentiary hearing. The allegations against the lawyer are that he has misrepresented his role in the Corporation in sworn statements to the court and that he usurped $61,000.00 in funds belonging to the Corporation.

The court notes that the documents submitted in connection with the cross motion are conflicting. There are documents which identify the decedent as the president of the Corporation and there are others that identify the lawyer as the president. He however, has stated that he has been the president of the Corporation since its inception. Moreover, the lawyer stated initially that he maintained the books and records for the Corporation and that the Corporation’s only assets were the two pieces of real property and two automobiles. Now, however, he alleges the existence of a $7.1 million loan to the Corporation from the decedent despite having kept the books and records since the inception of the Corporation. These discrepancies, as well as the allegation regarding the withdrawal of $61,000.00, require further inquiry and necessitate a limited hearing concerning these issues. Thus, the branch of the preliminary executors’ motion to dismiss the objections which seeks an order directing that the propounded will be admitted to probate is granted; however, letters will not issue at this time.

Concerning the other relief requested in the cross motion, the court finds as follows. The branch of the cross motion seeking an order compelling distribution of the specific bequest under Article THIRD is not procedurally proper, but should be the subject of a separate proceeding on notice to all interested parties after the issuance of permanent letters. The requests for the turnover of records and assets of the Corporation are also not properly before the court nor are the branch of relief seeking the removal of the lawyer as an officer and director of the Corporation, since these matters are properly the subject of a special proceeding commenced by petition. As to the issues concerning discovery, these matters will be discussed at the conference.

It is a sad reality that in estate-related litigations, family members’ relationships were strained by reason of the properties left by the decedent provided in his last will and testament. Here in Stephen Bilkis and Associates, our Nassau County Estate attorneys will draft your last will and testament to ensure that the dispositions provided therein are in accordance with what the law requires. In case there is already a Will, we can refer you to our Nassau County Probate lawyers, who will assist you in court proceedings for the allowance of the will.

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