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Petitioner Moves for Formal Accounting in Estate Litigation


A New York Probate Lawyer said that, the decedent, died a resident of Nassau County on December 28, 2010, survived by his sister, the petitioner; and by his brothers respondent and movant herein, and. The decedent’s last will and testament dated May 23, 2000 was offered for probate by the petitioner, who is named as the sole beneficiary of the decedent’s residuary estate, as well as the executrix in the propounded instrument. Preliminary letters testamentary issued to the petitioner by order of this court on January 13, 2011. Respondent and the movant have filed objections to probate of the will.

A New York Will Lawyer said that, the disputes presently before the court all relate to a supermarket, which was run by the decedent and his brother. The supermarket, located at 601 Old Country Road in Plainview, New York, is comprised of three separate closely held corporations: (1) 601 Corp., which operates the grocery and dry goods business within the supermarket, and was owned by decedent and his brother as equal 50% shareholders; (2) Captain Joe’s Fish Corp. (Captain Joe’s), which sells fish and seafood at John’s Farms, and was owned by decedent and his brother as equal 50% shareholders; and (3) BNC, which operates a meat market within John’s Farms, which was owned wholly by decedent.

A Nassau County Probate Lawyers said that, the decedent’s sister commenced a SCPA 2103 discovery proceeding against respondents and the CPA as the accountant for John’s Farms, in order to, inter alia, prevent the decedent’s brother interference with the operation of BNC and to compel him to turn over the cash receipts of BNC from the date of the decedent’s death to the present; to prevent him interference with the petitioner’s right to take part in the management of Captain Joe’s and 601 Corp. and to gain full access to the records of those corporations; to compel the brother to make available to the petitioner the books and records of the decedent, BNC, 601 Corp. and Captain Joe’s; and to compel the brother to turn over the computer and other items he took from the decedent’s home.

A Staten Island Probate Lawyer said that, by order of this court dated March 24, 2011, respondent and the movant were directed to deliver and turn over to the petitioner the computer taken from the decedent’s home on the date of his death. While certain computer components were eventually turned over to the petitioner, based on information on a Dell invoice for a computer sold to the decedent on May 26, 2009, the computer components turned over to the petitioner were not part of the home computer taken from the decedent’s home. When the decedent’s brother counsel was advised that the wrong computer had been turned over to the petitioner, he responded that “the brother has several computers used in the business and it is now difficult to differentiate.” In lieu of turning over the correct computer, he instead rather disingenuously offered to reimburse the estate for the value of the decedent’s computer equipment that was not delivered to the petitioner or her counsel. In view of the fact that the reason the petitioner sought the decedent’s home computer was to obtain any relevant business records of the decedent thereon, the court would note that an offer to pay for the value of such computer is largely meaningless. The petitioner now seeks to clone all of the computers at John’s Farms.

The issue in this case is whether petitioner’s motion to clone all the computer at the supermarket should be granted.

Computer data, electronic documents and computer memory may all be discoverable. “Whether the court is dealing with traditional paper discovery or electronic discovery, the first issue the court must determine is whether the material sought is subject to disclosure as ‘material and necessary’ in the prosecution or defense of the action”. Since the decedent owned all or part of each of the three corporations which operated their businesses at John’s Farms, the information on the computers at John’s Farms is properly discoverable by the petitioner as the preliminary executor of the decedent’s estate.

In response to the petitioner’s discovery request, the decedent’s brother had the technical director of the company which provides all computer related services for John’s Farms clone all of the cash registers at John’s Farms. A hard drive containing a clone of the cash registers was provided to the petitioner’s counsel. Petitioner’s counsel was also apparently provided with three CD ROM disks, one each for BNC, Captain Joe’s and 601 Corp., which purportedly contain each corporation’s Quick Books history, including sales and banking records. It is unclear from the papers submitted to the court whether counsel for the petitioner has reviewed the three CD ROMS or the cloned records and whether they contain the material sought by the petitioner. At this juncture, there is no evidence that the cloning performed was improper or incomplete.

In the absence of proof that a party intentionally destroyed or withheld evidence, the court should not direct the cloning of that party’s hard drives. Until the petitioner is able to review the cloned computer records and the CD ROMS, and demonstrate that the information provided by the respondents is incomplete, it would be precipitous of this court to order that the computers be cloned again. Therefore, so much of the petitioner’s order to show cause in the discovery proceeding as seeks to clone all of the computers at John’s Farms is denied at this time, with leave to renew. However, the respondents are ordered to refrain from removing or altering any data contained within the hard drives of the computers at John’s Farms, pending further order of this court.

With regard to the petitioner’s request that her forensic accountants be given access to John’s Farms, such request is also denied at this time, with leave to renew, upon a showing that the respondents have failed to provide the petitioner with the documentation and data requested.

The petitioner also seeks a discovery conference in this matter, a request which the court deems reasonable, given the difficulties being encountered by the parties in completing discovery herein. A conference is therefore scheduled before a member of the law department on January 26, 2012 at 3:15 p.m. for the purpose of scheduling all further discovery in this matter.

Regarding the petitioner’s request for costs and sanctions, the court declines to grant this request at this time. However, the court is disturbed by the cavalier attitude that Joseph Catalano and his counsel have taken with regard to the court-ordered production of the home computer removed from the decedent’s home after his death. If after reviewing the information on the Dell invoice provided by the petitioner as “Exhibit B” of her order to show cause and conducting a renewed search for the computer identified therein, Joseph Catalano still cannot produce such computer, then he is ordered to provide the petitioner and this court with a detailed statement, under oath, by someone with direct knowledge of the facts, setting forth the means and methods used to conduct the search for the decedent’s home computer. Such affidavit must be submitted to the court before the date of the conference scheduled herein.

The court will first address respondents’ motion seeking summary judgment or dismissal. The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, offering sufficient evidence to demonstrate the absence of any material issues of fact. Failure to make such a prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers. Once this showing has been made, the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action.

(i) In support of their motion for summary judgment, respondents claim that the petition has no merit and there are no facts in dispute. However, as noted previously, petitioner disputes the brother’s assertion that there is no lease or other binding agreement by which BNC operates at 601 Old Country Road. This is an outstanding material issue of fact which will not be resolved until after petitioner obtains the information and documents she is seeking. This precludes granting respondents’ motion for summary judgment. (ii) In support of their motion for dismissal, respondents argue that this court lacks subject matter jurisdiction over what is essentially a corporate governance dispute, even where 50% of the shares are held by a decedent’s estate. The court disagrees. The subject matter jurisdiction of the Surrogate’s Court was expanded by the New York Constitution almost 50 years ago, and this expansion was codified five years later by Article 2 of the SCPA. This article grants the court “full and complete jurisdiction in law and in equity to administer justice in all matters relating to estates and the affairs of decedents”.

Respondents argue that the mere fact of stock ownership by an estate may not necessarily be sufficient to confer jurisdiction on the Surrogate’s Court to determine a conflict in the management of the corporation. In this proceeding, however, it is not the mere fact of ownership of corporate shares that brings this matter under this court’s jurisdiction. Decedent was a 50% shareholder of 601 Corp.; he was also a director, as well as president and treasurer of the corporation. The dispute arose as a result of the death of decedent, and it concerns the rights of decedent’s personal representative in connection with the management of 601 Corp., the interaction between 601 Corp. and BNC, and the selection of decedent’s replacement on the board of directors of 601 Corp. (iii) Respondents argue that the sister lacks standing to challenge the brother’s conduct because she offered to sell the estate’s shares in 601 Corp. to him and she therefore lacks an equitable interest in the company. No agreement was reached on the sale of the proffered shares; they remain in decedent’s estate. The court finds that the sister as the personal representative of decedent’s estate, has standing to bring these proceedings.

The court finds that the sister’s petition is not precluded on the basis of unclean hands, waiver, estoppel or laches.

So much of the petition of the sister pursuant to SCPA 2103 to permit cloning all of the computers at John’s Farms is denied with leave to renew, as is the request that her forensic accountants be given access to John’s Farms. Her request for a discovery conference is granted; the request for costs and sanctions is denied.

The petition of the sister seeking authorization to continue BNC is granted; the application for specific authority to hire an employee is denied. The application for an order directing the brother to stop interfering with the management of BNC, to turn over all BNC cash receipts that are in his possession, to stop taking, transferring or disposing of BNC cash receipts, and to make available, deliver or turn over the books and records of BNC and the decedent to the sister as preliminary executor of decedent’s estate, is granted, except as to those records previously provided to petitioner.

The petition of the sister to protect the assets of the estate is decided as follows: The request to enjoin respondents from seeking to vacate an agreement between BNC and 601 Corp. is denied as unnecessary, with leave to renew should injunctive relief become necessary.

Accordingly, the court held that the request to vacate the selection of a replacement director is granted. The request to nullify the meeting of the board of directors of 601 Corp., which was held on February 28, 2011, is granted. The motion of for summary judgment or dismissal of the petition of the sister is denied.

If you are involved in a similar situation seek the help of a Nassau Estate Litigation Attorney and Nassau Probate Attorney at Stephen Bilkis and Associates in order to handle your day in court.

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