A New York Probate Lawyer said in this Probate action, an Order and decree (one paper), Surrogate’s Court, New York County, entered on or about May 22, 1995, which removed the preliminary coexecutors, and appointed as temporary administrators, affirmed, without costs.
A Kings County Probate attorney said that the Surrogate’s removal of the preliminary coexecutors pursuant to SCPA 711 and 719 was a proper exercise of discretion, and no evidentiary hearing was required under the particular circumstances. While the Surrogate’s characterization of the facts as “undisputed” may not have been technically accurate, the unfitness of the coexecutors was established by a combination of documentary proof and the coexecutors’ own concessions, and the totality of written submissions failed to raise any triable issue of fact.
The unfitness of the coexecutors to take responsibility for this $1.2 billion estate, bequeathed primarily to charity, was manifest. While “courts will not undertake to make a better will nor name a better executor for the testator”, the standard of behavior of a fiduciary is “[n]ot honesty alone, but the punctilio of an honor the most sensitive”.
A New York Estate Lawyer said the Surrogate properly concluded that the individual coexecutor, the decedent’s former butler wasted estate assets by collecting a substantial salary and lavish fringe benefits, supposedly as a “live-in” estate employee, living as if the estate properties were his own. There was no justification for these emoluments, since he was also entitled to lucrative executor’s commissions. This also constituted self-dealing, since this dual capacity was authorized by no one except himself, and the corporate coexecutor appointed and removable under the terms of the will.
Nassau County Probate Lawyers said the Surrogate also properly concluded that the coexecutor routinely commingled personal and estate assets, a serious breach of fiduciary duty for which repayment is no defense.
The Surrogate also properly concluded that the corporate coexecutor created a conflict of interest by granting coexecutor unsecured loans in the amount of $825,000, to pay for his “personal needs,” i.e., still more luxuries. This gave the corporate coexecutor a financial stake in his continued service as an executor, so that he could repay the loans out of his commissions, a conflict which was actual and not theoretical, since it was apparent that the corporate coexecutor improperly acquiesced in Lafferty’s assorted misconduct.
A Staten Island Probate Lawyer said that whether removal of the co-executors will ultimately be warranted is an issue not properly before the Court at this juncture. In view of the failure to conduct an evidentiary hearing, the various reasons advanced by the Surrogate to support replacement of the co-executors are not sustained by proof of serious misconduct, which the law requires to justify supplanting the decedent’s choice of executors. Moreover, because the record is devoid of findings of fact, it is insufficient to permit appellate review of the adequacy of the proposed grounds for removal. Finally, without a judicial accounting, the current record is insufficient to support even the imposition of a surcharge against the co-executors.
The interests of the residual charitable beneficiaries of decedent’s estate are represented by the Attorney General, who submits that while, “on its face, invests the Surrogate with sweeping power its exercise must be used only in egregious cases in which the facts are truly undisputed. Because the Surrogate’s order was entered without a hearing and is plainly contested over what the order called ‘undisputed facts,’ it should be reversed.” His brief further notes that permitting the removal of a designated executor absent demonstrated substantial grounds sets an unfortunate precedent with an undesirable result.
As a practical matter, the Attorney General maintains that litigation of this preliminary matter, involving the administration of the estate, will generate “greater expense than the alleged financial malfeasance referred to in the order”, with the ultimate cost borne by the residual charitable beneficiaries.
There is considerable merit to this position. The statutory language providing that “the court may make a decree suspending, modifying or revoking letters issued to a fiduciary without a petition or the issuance of process” should be read to mean only that no formal notice is required to bring on a hearing for removal. It does not mean that the dismissal of an executor by the Surrogate may rest on less than compelling grounds; and it certainly does not mean that such action may be based on a record that is less than adequate to permit appellate review.
As a consequence of the failure to conduct an evidentiary hearing, the record on appeal is insufficient to permit adequate review of the Surrogate’s determination. The “clear showing of serious misconduct that endangers the safety of the estate”, and the convincing demonstration of misconduct that would warrant the removal of the corporate fiduciary is not supported by any evidence in the record before us. United States Trust Company, in its brief, asserts that there is no reported case in this jurisdiction in which a corporate fiduciary has been removed as an executor of an estate, and no such case has been brought to the attention of this Court by any other party.
It has long been recognized that a testator is entitled to designate who will settle her estate from among those qualified by statute. Case law therefore holds that “the power to revoke should be exercised sparingly”. “Removal is a draconian step and the courts remove fiduciaries sparingly, typically when the estate fund has been jeopardized or the fiduciary has seriously impeded estate administration. Less drastic alternatives includes [sic] directing the fiduciary to post a bond, surcharging her for damages caused by her negligent or wrongful behavior, or denying her commissions”.
The objections regarding coexecutor Mr. Lafferty’s suitability to serve as executor are a criticism of his lifestyle. But none of his alleged shortcomings, from his alcoholism to his extravagance, is purported to have been unknown to the testatrix when she appointed him executor in her will. As suggested in a case, the rules respecting disqualification of a fiduciary are susceptible to more stringent interpretation, “particularly if he had been named as sole executor by the testator with full knowledge of his present condition”. Where, as here, the individual executor is assisted by a capable corporate fiduciary, disqualification requires proof tending to show that he is incapacitated by the “want of understanding”, which “implies an entire lack of mental capacity”
The objections regarding United States Trust Company center on unsecured personal loans extended to its co-executor. It is suggested that such a course was improvident and creates the appearance of impropriety. From a purely commercial perspective, however, it can hardly be regarded as unsound to loan money–even the better part of a million dollars–to a man receiving a salary of $100,000 a year, who is expected to receive trust income of $500,000 a year for the duration of his life and a commission of $5 million for his services as executor.
While the corporate fiduciary may have complicated its relationship with its co-executor by making him its debtor, it has not yet been established that its integrity in carrying out fiduciary responsibilities has been compromised in any way. As the Court stated in a case: “In the event that the co-executor’s apparent conflict of interest should lead to misconduct–the presumption being strongly to the contrary–objectants will not be left without remedy.
“It would be a serious matter to make any claim of conflict of interest a ground for disqualifying designated executors. Not only would it threaten to substitute the legatees’ desires and views for the views of the testator, it would also undoubtedly engender a multitude of proceedings. Few estates would be certain to be free from such attack. Many estates would be subjected to extended proof-taking to determine whether the claimed conflict in fact existed.
“Misconduct, not conflict in interest, merits removal of a fiduciary. The statute provides for resolving claims between the estate and its representative. This is reasonable. Any other view would automatically disqualify from appointment as executor a partner, a joint owner of property, a legatee, a creditor, a debtor, a distributee, a spouse, or one who is a party to an executory contract with the testator. Few would remain eligible.”
It should be noted that no objection to the executors nominated by the decedent has been raised by the residual charitable beneficiaries, which will receive the bulk of the estate. Objections to the preliminary executors were raised by motion of an executor in the codicil to a prior will dated July 28, 1987. Other objections were raised by Irwin Bloom, decedent’s former accountant, who is embroiled in a dispute with the estate over payments under a severance agreement. Still other allegations have been advanced by three disgruntled former employees of decedent who have commenced separate actions against each appellant. Their action against Mr. Lafferty was largely dismissed for failing to state a cause of action. Their action against United States Trust Company for defamation was dismissed outright for similar reasons, and sanctions were imposed against the parties and their attorney for bringing a frivolous lawsuit. The court noted: “It is apparent that plaintiffs’ sole motive in bringing the suit against this defendant is to obtain a cash recovery from the deepest pocket available” With respect to allegations raised by the former employees against appellants and their counsel, the court stated: “Plaintiffs’ efforts to convince this court that, along with coexecutors were ‘Co-Fiduciaries working together to conceal massive criminal wrongdoing from the public’ totally missed the mark, in light of the complete lack of factual support that exists for these extravagant claims”
While the Court has the highest regard for the temporary administrator appointed by the Surrogate and would consider him a far superior executor than him, that is simply not the criterion to be utilized in setting aside the testatrix’s choice of fiduciary. As ample precedent makes clear, a testator’s selection of an executor is not readily set aside. While the executor is often referred to as a butler, the relationship far exceeded that of employer and employee. As the limited temporary administrator pointed out in his investigative report, it was “akin to a tender and devoted mother-son relationship.” Her accountant noted that the property and department managers began to report directly to him at a time when the testator was still making the ultimate decisions regarding her affairs. Removal of her chosen executor, without a hearing or the requisite proof of malfeasance and injury to the estate, is contrary both to the wishes of a sophisticated, strong-willed and determined testatrix and to fundamental principles of decedent-estate law.
The testator still enjoys the right to determine who is most suitable among those legally qualified to settle his affairs and execute his will, and his solemn selection is not lightly to be disregarded. Appointment is not to be refused merely because the testator’s selection does not seem suitable to the judge. The courts will not undertake to make a better will nor name a better executor for the testator.”
A hearing is required to decide if any injury to the estate has been occasioned or is threatened by the alleged excesses of the executor or by the conduct of the corporate fiduciary. Accordingly, the order of the Surrogate should be reversed, without costs, and this matter remanded for findings of fact and conclusions of law whether grounds exist for the removal of the preliminary co-executors designated in decedent’s will.
For cases involving an heir, whose right was deprived by reason of the provisions of an executed last will and testament, we have our Kings County Probate Attorneys, who will file an Opposition for its probate. If there was a question on the proper partition of the properties of a deceased, our Kings County Estate Lawyers will help you.