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Motion for Summary Judgment Filed for Removal of Fiduciaries


Before the court is a motion for summary judgment filed in connection with petitions for the removal of fiduciaries MRK and TOM in the related estates of Mr. KJJ and Mrs. JJ.

BACKGROUND Decedents Mr. KJJ and Mrs. JJ were a husband and wife who tragically died together in an automobile accident on April 22, 2005. They were survived by their three adult sons, CC, VV and SS, movants herein. Both decedents executed wills on November 19, 1986, and both wills provide that in the event that Mr. KJJ or Mrs. JJ is not survived by a spouse, then Mrs. JJ’s brother, MRK, shall serve as Executor.

The wills were filed for probate on October 13, 2005 and admitted to probate on March 1, 2006. Letters testamentary in each estate issued to MRK on March 3, 2006. At the same time, MRK received letters of trusteeship in Mr. KJJ’s estate.

Prior to their deaths, the decedents had also created two inter vivos trusts which are pertinent to this proceeding. The first is the JF Trust, created simultaneously with the execution of decedents’ wills, under agreement dated November 19, 1986 between Mrs. JJ as grantor, and Mr. KJJ and MRK as co-trustees. Pursuant to the terms of the instrument, TOM, also Mrs. JJ’s brother, succeeded Mr. KJJ as a co-trustee upon Mr. KJJ’s death. In Article Fifth of Mrs. JJ’s will, she directs her executor to distribute her residuary estate to the trustees of the JF Trust. Article Fifth of Mr. KJJ’s will provides that upon the death of Mrs. JJ, his executor shall distribute Mr. KJJ’s residuary estate to his sons, except that if any son is then a beneficiary of a trust fund created under Article First of the JF Trust, then such son’s share shall be added to the principal of such trust. The second inter vivos trust is the JFS Trust, subsequently created under agreement dated September 20, 1989 between Mrs. JJ and Mr. KJJ as grantors, and MRK and TOM as co-trustees.

On November 1, 2007, movants filed petitions seeking (1) the revocation of letters testamentary issued to MRK in each of the two estates; (2) the revocation of letters of trusteeship issued to MRK in the estate of Mr. KJJ; (3) the appointment of CC, VV and SS as co-administrators, c.t.a. of each estate; and (4) a court order directing MRK to file accounts as executor of both estates and trustee in the estate of Mr. KJJ. In the petition for revocation of letters filed in connection with Mrs. JJ’s estate, the movants further ask that the court direct (5) MRK and TOM to account as co-trustees of the JF Trust and the JFS Trust; (6) MRK and TOM to make the distribution to VV which movants assert should have been made on March 11, 2007 pursuant to the terms of the JFS Trust; and (7) the removal of MRK and TOM as co-trustees of the JF Trust and the JFS Trust.

Movants aver that there was intense hostility between the respondents and decedents (and decedents’ sons, movants herein) since 1997, due to disputes over family business interests. According to movants, respondents were not permitted to attend decedents’ funerals. Despite this history, prior to their unexpected deaths in 2005, the decedents never revoked their 1986 wills or executed new estate planning documents. In their affirmation in opposition, respondents claim that they hold no animosity toward movants.

The motion for summary judgment presently before the court seeks an order: (a) granting summary judgment removing MRK as executor of the estates of Mrs. JJ and Mr. KJJ; (b) granting summary judgment removing MRK and TOM as co-trustees of the JF Trust and the JFS Trust due to misconduct including self-dealing, conflict of interest and waste of estate and trust assets, and directing respondents to account as executors and co-trustees; (c) compelling respondents to comply with discovery demands served on September 28, 2009; (d) compelling respondents to make distributions in accordance with Mrs. JJ’s will, Mr. KJJ’s will, the JF Trust and the JFS Trust; (e) compelling the distribution of income in accordance with the JF Trust and the JFS Trust; (f) removing respondent’s counsel, Mr. MER, P.A., on the grounds of conflict of interest and misconduct and fixing their legal fees, if any; and (g) surcharging the fiduciaries for payment of excessive legal fees and accounting fees and for losses to the estate and trusts resulting from their misconduct, self-dealing and conflict of interest.

ANALYSIS The motion before the court presents seven requests for relief in connection with four different entities, namely, the estate of Mr. KJJ, the estate of Mrs. JJ, the JF Trust, and the JFS Trust. Each of these requests will be addressed separately below.

Remove MRK as executor of the estates of Mrs. JJ and Mr. KJJ.

This request for relief has been rendered moot, by the death of MRK on or about October 14, 2010, and the subsequent issuance of letters of administration, in both estates, to CC, VV and SS.

Remove MRK and TOM as co-trustees of the JF Trust and the JFS Trust.

The portion of this relief that relates to MRK is mooted by his death.

That portion of the motion which seeks to remove TOM as co-trustee is based upon charges of misconduct including unreasonable delay, self-dealing, conflict of interest and waste of trust assets.

Pursuant to EPTL 1-2.7 a trustee is a fiduciary. As a fiduciary, a trustee “owes a duty of undivided and undiluted loyalty to those whose interests the fiduciary is to protect”. A trustee is duty-bound to act in good faith in the administration of a trust, with honesty and undivided loyalty to the beneficiaries and avoid any circumstances whereby the trustee’s personal interest will come in conflict with the interest of the beneficiaries. The purpose of this rule is to ensure that the trustee’s acts are above suspicion and that the trust receives the trustee’s uninfluenced judgment.

The conduct of the trustee, TOM, as reflected in both the charges made by movants and the response thereto, is the subject of a factual dispute, namely, whether the withdrawal of principal from the JF Trust on behalf of DD was proper pursuant to a corporate agreement or whether the agreement was limited to an insurance policy that had long ago been surrendered. This dispute cannot be determined in the context of this motion. This portion of the motion is denied.

The present motion also seeks an order compelling the trustees to account, but the record reflects that six intermediate accounts were filed on July 24, 2009 in connection with the trusts created under the JF Trust for the benefit of CC, VV and SS, respectively, and the trusts created under the JFS Trust for the benefit of CC, VV and SS, respectively. In addition, accounts were filed by MRK as the executor of both estates. Objections to each of these accounts have been filed on behalf of movants and were being held in abeyance pending the outcome of this motion.

Compel respondents to comply with discovery demands served on September 28, 2009.

This request for relief stems from a discovery schedule established in connection with the intermediate accounts filed by MRK and TOM as fiduciaries of the estates and trusts. Movants’ counsel concurs that respondents turned over many documents responsive to movants’ demand for discovery and inspection, but that respondents refused to supply retainer agreements and time and billing records for the attorneys and accountants who had rendered services to the estates and trusts, or the retainer agreements between attorneys Mr. MER, P.A., and DD and any related entities. These refusals were made on the grounds of attorney client privilege, as expressed in a letter dated March 26, 2010. Subsequently, counsel for respondents agreed, at a court conference held on July 21, 2010, to provide billing records from Mr. MER, P.A., and the records were provided to movants’ counsel on September 1, 2010. However, all pertinent information was redacted from the billing records provided by respondents, making it impossible for movants to determine or object to the reasonableness of the fees charged.

Ordinarily if a party objects to a discovery demand, that party is to serve a response which states with reasonable particularity the reasons for each objection. If objection is made to part of an item or category, the part is to be specified. Here, the fiduciaries objected to certain disclosures, by use of redactions, but failed to state the reason for such; providing materials in redacted form with a brief mention that the documents attached are “redacted” does not constitute as a valid reason for an objection to the disclosure.

When a claim of privilege is presented, it may be advisable to conduct an in camera review of documents claimed to be privileged. The court may defer determination of a motion to compel discovery until after an in camera inspection of certain materials by the court since it does not affect substantial rights.

The attorney-client privilege seeks to insure that one seeking legal advice will be able to confide fully and freely in his attorney, secure in the knowledge that his or her confidences will not later be exposed to his or her legal detriment. The attorney-client privilege has been codified in CPLR 4503(a)(1), which bars disclosure of any confidential communications between a client and his/her attorney.

Because a determination of whether documents are privileged is fact-specific, an in camera review of such documents may have to be undertaken before resolving the issue. The burden of proving that all the requisites of the privilege are present falls on the person asserting the privilege.

A final determination on the motion for summary judgment to compel production of un-redacted copies of the billing records and production of the requested retainer agreements is held in abeyance pending an in camera review of all of the pertinent documents in un-redacted form.

Compel respondents to make distributions in accordance with Mrs. JJ’s will, Mr. KJJ’s will, the JF Trust and the JFS Trust; and Compel respondents to distribute income in accordance with the JF Trust and the JFS Trust.

The proper computation of distributions from the trusts is an issue of fact rather than an issue of law. As noted above, accountings have been filed by the trustees, and the information contained in the accounts and in the objections thereto will be pertinent to a final computation. This portion of the motion for summary judgment is denied.

Whenever a trustee named in a will act to the disadvantage of the beneficiary or performs acts adverse to the interest of the latter, you may consult Stephen Bilkis & Associates to help you with your legal remedies before courts.

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