Matter of Sharon M. Houlihan
Annotate this CaseDecided on September 11, 2006
Sur Ct, Franklin County
In the Matter of the Petition of Thomas D. Houlihan Under SCPA Article 19 and RPAPL Article 16 for Permission to Sell Real Property of Sharon M. Houlihan Deceased.
27330
Robert G. Main, J.
This matter was brought on, by petition and citation filed April 6, 2005, by Thomas D. Houlihan, widower of the deceased, Sharon M. Houlihan. The testatrix died on June 12, 1994, a resident of the state of Minnesota. Testatrix's last will and testament was admitted to original probate in Minnesota and was duly admitted to ancillary probate in this Court on February 5, 2003. Petitioner seeks permission to sell real property located in this county which was left to him, in decedent's will, as the holder of a life estate. Should leave be granted, several other items of relief are also requested.
In response, respondents, Andrew R. Mayer, Kathryn A. Mayer, Jeanine Mayer, and John W. Mayer, nieces and nephews of the decedent, filed objections to the petition on May 18, 2005. Thereafter, both parties filed memoranda of law on June 23, 2005. Respondents filed an additional memorandum of law on June 28, 2005, and petitioner submitted a letter dated June 27, 2005, conceding one of the prongs of his petition.
Prior to the instant application, this Court decided a proceeding brought by this same petitioner to construe the decedent's will. Petitioner sought construction of that part of the will which deals with the disposition of the real property located in this county which petitioner now seeks permission to sell. This Court issued a judgment and decree, dated August 9, 2004, which provided, in part,
"that the testator intended to give the petitioner a life estate in the real property located in this state without the right to sell or to enjoy the proceeds therefrom, and intended to give the respondents a vested remainder subject to divestment."
The Court conducted several conferences in this matter with counsel and believed, on [*2]more than one occasion, that the parties were attempting to reach a settlement of the instant petition. As it has now been brought to the Court's attention that this does not seem likely, the petition will be decided on the merits. The Court will address each of the prongs of the petition, although not necessarily in the order in which they appear therein. Before turning to those prongs, however, the Court will address the two issues raised by respondents with regard to the statute of limitations and the jurisdiction of this Court.
Statute of Limitations
Respondents argue that the Surrogate's Court Procedure Act creates a ten year statute of limitations for actions such as this. They cite Surrogate's Court Procedure Act § 1903 (3) which provides,
"[a] proceeding under this article to satisfy a legacy expressly or impliedly charged on the real property must be instituted within 10 years from the date of the death of the decedent."
Respondents argue that since the decedent died in 1994, eleven years before the instant petition was filed, petitioner is barred by the statute of limitations. Petitioner counters with the argument that this particular statute of limitations does not apply to this petition because this is not a proceeding to satisfy a legacy. This Court agrees, although for reasons different than those urged by petitioner.
Surrogate's Court Procedure Act § 103 (9) defines a bequest or legacy as "[a] transfer of personal property by will." This matter deals with real property and not the transfer of personal property. The issue of real property, in the context of the statute of limitations provision, is referenced in the commentary to the statute, which provides,
"[s]ubparagraph (3) does create an actual statute of limitations: a proceeding to satisfy a legacy charged to real property must be commenced within ten years of the decedent's death" (Turano, Practice Commentaries, McKinney's Cons Laws of NY, Book 58A, Surrogate's Court Procedure Act
§ 1903, at 288).
This petition is not about the satisfaction of a legacy charged to real property. This Court views such a proceeding to be one, for example, in which a legatee is left a specific sum of money from the sale of a piece of property and the will itself directs that the realty be sold so as to satisfy the legacy. The property at issue was not dealt with in this manner in the will, as petitioner was left as life tenancy. As a result, this Court finds that the Surrogate's Court Procedure Act § 1903 statute of limitation provision is inapplicable.
Even if the Surrogate's Court Procedure Act article 19 statute of limitations were found to apply to the instant action, the petition would still survive because petitioner brought it under both this article as well as article 16 of the Real Property Actions and Proceedings Law. Petitioner seeks permission to sell the real property pursuant to Real Property Actions and Proceedings Law § 1602 which provides, in part,
"[w]hen the ownership of real property is divided into one or more possessory interests [*3]and one or more future interests, the owner of any interest in such real property or in the proceeds to be derived therefrom on a directed sale thereof, except the owner of a possessory estate in fee simple absolute therein, may apply to the court designated in section 1603 for an order directing that said real property, or a part thereof, be mortgaged, leased or sold."
Jurisdiction
Respondents next argue that this Court lacks jurisdiction and claim that petitioner should have filed the instant petition in Supreme Court. Respondents refer to Real Property Actions and Proceedings Law § 1603 which provides, in part, that
"[a]n application made pursuant to the provisions of either section 1601 or section 1602 shall be made to a term of the supreme court held within the judicial district in which the real property, or a part thereof, is situated."
However, as noted above, this Court properly had jurisdiction of the will construction proceeding, and the instant petition to sell real property flows from that proceeding. As such, this Court if fully familiar with this estate, the parties involved, the real property at issue, and, more particularly, with the issues surrounding the instant request (see, Matter of Perkins, 55 Misc 2d 834; Matter of Gardiner, 275 AD2d 413). Accordingly, this Court finds that it does have jurisdiction over the matter. In addition, since petitioner's motion is also made pursuant to Surrogate's Court Procedure Act article 19, there is amply justification and authority for this Court to exercise its jurisdiction.
Permission to Sell all of Decedent's Real
Property Located at Big Wolf Lake,
Town of Tupper Lake, New York
First, and foremost, petitioner seeks to sell real property in which, as this Court previously determined, he owns a life estate without the power to sell. As noted above, the instant proceeding was brought pursuant to two provisions of law, Surrogate's Court Procedure Act article 19 and Real Property Actions and Proceedings Law article 16.
Surrogate's Court Procedure Act §1902 (7) provides that real property, such as that at issue here, may be disposed of "[f]or any other purpose the court deems necessary." Where, as here, a party to the proceeding under article 19 holds a life estate,
"the court must determine whether the interests of all the parties will be better protected or a more advantageous disposition can be made of the real property by including the disposition of such right or interest" (Surrogate's Court Procedure Act § 1918 [1]).
Turning to article 16 of the Real Property Actions and Proceedings Law, § 1604 provides, in part, that
"[t]he court to which an application has been duly made pursuant to the provisions of either section 1601 or section 1602 is authorized to grant such application upon such terms as to it shall seem proper, if satisfied from the proceedings theretofore duly had, that the act to be authorized is expedient".
Respondents, as the remaindermen, oppose such a sale of the subject property. However, Real Property Actions and Proceedings Law § 1604, cited above, also provides that [*4]
"[t]he granting of such an application is not necessarily precluded by the fact that it is opposed by one or more persons having interests in the affected real property; or by the fact that the granting thereof will be in contravention of a provision contained in the instrument creating some or all of the interests in the affected real property."
As a result, this Court concludes that it has the authority to determine whether a sale of the property should be granted. As provided by the statute, if the petitioner can show that the act of selling the property at issue is expedient, then the relief may be granted pursuant to Real Property Actions and Proceedings Law article 16. It has been held that "[e]xpedient is defined as characterized by suitability, practicality, and efficiency in achieving a particular end; fit, proper or advantageous under the circumstances'" (Matter of Sauer, 194 Misc 2d 634, 638).
In the instant matter, petitioner's request that the property be sold and that the proceeds be distributed is based upon several grounds. He argues that the value of the property has escalated beyond any amount the decedent could have reasonably anticipated. The petition alleges that in the year of decedent's death, 1994, the property was assessed at approximately $106,800.00. In 2002 two summary appraisals were compiled showing respective values of $600,000.00 and $650,000.00. Petitioner further argues that a comparable property was placed on the market, at the time the petition was made, with an asking price of $2,250,000.00. The respondents do not argue these points.
The petition goes on to allege that the cost of maintenance is excessive given the amount of time that petitioner is able to utilize the subject property. Schedule "F", attached to the petition, shows an average yearly maintenance cost of $31,463.50. The petitioner asserts that he is retired and has limited resources to cover these expenses. The respondents do not argue these points.
The petition further provides that selling the real estate now would allow the ancillary estate in New York to be closed, thereby allowing the Minnesota estate to close, saving judicial resources.In their objections to the petition, respondents contest this point by stating that this reasoning is flawed and that "the executor should convey the property to himself as life tenant and to the four remainderm[e]n and then proceed to close the estate."[FN1] Upon this point, the Court would agree with the respondents.
Finally, the petitioner argues that, since the respondents are not entitled to receive the property at the end of the life estate, because the will directs that the property be sold and that the proceeds be distributed, "[t]his procedure will result in them receiving their fair portion of the asset earlier than they otherwise would." Respondents object to this reasoning and state in their objections to the petition, that
"[p]etitioner ignores the previous Judgment and Decree of this Court, which provides that the Petitioner has only a life estate, and the Will and Judgment and Decree clearly (sic) states that respondents will have the remainder interest."
While this is correct, the respondents fail to read the will as a whole. This Court did [*5]strike ambiguous language from the decedent's will at paragraph 2.04.4. However, this change does not alter the language found in the will at paragraph 2.04, which provides,
"Real Property in New York State I give and bequeath a life estate in my real property in the State of New York to my Spouse. I direct that upon the death of my Spouse, or upon my death if my Spouse predeceases me, the property shall be sold in the following manner:".
The will then sets forth the manner in which the property is to be sold upon either the death of the latter of the decedent or the petitioner. As a result, the respondents are not entitled to the real property itself, at the end of petitioner's life estate, but, rather, to the proceeds therefrom.
This Court has turned to case law for guidance on the issue of expedience. Although the reported cases are not numerous, several are helpful in providing guidance with regard to what other courts have deemed to be expedient.
In Matter of Gaffers, 254 AD 448, the Third Department affirmed the trial court's determination that a sale of property by the life tenant was expedient where (1) there was a purchase offer for the property in excess of the appraised value, (2) the rental income derived from the property was insufficient to meet the expenses, (3) the property was unoccupied, and (4) the property would be a burden to the life tenant which would subject him to unnecessary expenses.
Citing Gaffers, the Nassau County Surrogate granted a petition by the life tenant to sell real property in Matter of Sauer, 194 Misc 2d 634. The court held,
"[i]n the instant proceeding, the life tenant's purported reasons for selling the real property are that the real estate market is high and he desires to relocate. . . Granting the application is expedient, as well as suitable, practical and efficient in reaching the end which is to allow the life tenant to sell the real property, the power of which he was given pursuant to the decedent's will" (Sauer, supra, at 638).
The same court revisited the subject in Matter of Strohe, 5 Misc 3d 1028A, and applied Sauer holding that the life tenant can sell real property over the objections of the remaindermen if it is expedient and would carry out the provisions of the will. In Strohe the life tenant requested the right to sell based upon a strong real estate market, the burdensome upkeep of the property, the petitioner's residence in an assisted living facility, the availability of the proceeds of a sale to defray the cost of the assisted living facility, and the petitioner's desire to avoid the burden of being an absentee landlord. The court held,
"[t]he Will evidences an overall intention to benefit the petitioner and provide him with a suitable residence for his lifetime. A sale would allow the petitioner to pay the expenses of the assisted living facility, thereby carrying out the provisions of the Will and benefitting the petitioner. Granting the application is also expedient, as well as suitable, practical and efficient in reaching the decedent's purpose which was to provide her companion of thirty years with a place to reside for his lifetime" (Strohe
supra, at 6).
Unlike the will in Sauer, the instant will, as construed by this Court in the previous proceeding, does not give the petitioner, as life tenant, the right to sell the property. This Court has reviewed the will in an effort to ascertain the intentions of the decedent with respect to the parties and the real property involved. A similar review was made in the construction [*6]proceeding, and this Court held in its judgment and decree of August 9, 2004, that,
"[i]t is evident that the testatrix desired to leave much of her estate to her spouse. It is also evident, however, that she wished to leave the respondents with several significant bequests.
With regard to her personal property, the testatrix bequeathed two rings and family silver to her stepdaughter and former step children with the remainder of all of her jewelry bequeathed to two of the respondents, Kathryn Mayer and Jeanine Mayer. All of her remaining personal property was left to the petitioner if he survived her and, if he did not, then to the respondents herein. The testatrix also left, if in existence at the time of her death, all GMAC demand note funds and a certificate of deposit worth $15,000.00 to the respondents. As to her residuary estate, the testatrix bequeathed her remaining assets to petitioner, if surviving, and if not, then to the respondents herein."
It is obvious to this Court that the decedent wished to primarily benefit the petitioner, her spouse. While the respondents were the recipients of valuable bequests, it was to the petitioner that the decedent left the bulk of her estate. Her desire to benefit him in this fashion would be thwarted were he to be forced to continue with the life estate. He has shown, in his papers, that the maintenance and upkeep is unduly costly given the amount of time he is able to enjoy the actual use of the property. The decedent's will, as construed by this Court, evidences her desire to give the respondents herein the value of this property upon the death of the petitioner. Obviously, she wished for them to also benefit from this asset. On this issue, petitioner points out, in his petition,
"[a] sale and distribution will allow the residuary beneficiaries to take their allocated shares sooner rather than later. The residuary beneficiaries will be able to invest such sums as they see fit, rather than having it invested for them in a non-diversified manner."
Petitioner's point is well taken and is not in contravention of the intentions of the decedent. The decedent intended that the petitioner receive a life estate in the property and certainly never intended for that life use to become a burden to him. A sale of the property would relieve the petitioner of that burden and, at the same time, allow for a distribution for both the life tenant and the remaindermen to enjoy and utilize in the present. As the petitioner states in his memorandum of law,
"[f]orcing petitioner to keep the real property as he gets older and less able to absorb the financial burden is likely to result in deferred maintenance which could affect the residual value of the property. It is in everyone's interest to go forward with a sale."
This Court agrees and finds that the petitioner has met his burden, under both Surrogate's Court Procedure Act article 19 and Real Property Actions and Proceedings Law article 16, for this Court to direct a sale of the real property in which he holds a life estate.
Holders of First and Second Rights to Purchase to Show Cause
Why Notice Periods Should not be Shortened
The will provides, at paragraph 2.04.1, the following,
"[a] first right of purchase at fair market value shall be given to David W. Mernan, Sr. Such right shall lapse 150 days after he is provided written notice of his rights by my Personal Representative."
The will further provides at paragraph 2.01.2, [*7]
"[a] second right of purchase at fair market value shall be given jointly to my former stepchildren, Charlin Phillips, Linda Mont Marquet, Andrea Mernan and David Mernan, Jr., who survive me as they may agree. Such right shall lapse 120 days after each survivor has been provided written notice by my Personal Representative that David W. Mernan Sr. has not exercised his first right of purchase."
Petitioner argues that the time periods provided in the will are excessive, particularly given the fact that the petitioner believes that none of those to be provided with a first or second right of purchase have any interest in doing so. The Court believes this to be true as each mentioned person was cited in the instant proceeding and none appeared. In addition, the respondents do not object to this relief. As a result, the Court will direct that those individuals granted a first or second right of purchase show cause why the notice periods should not be shortened. The petitioner shall submit a proposed order to show cause to this Court, together with a supporting affidavit precisely defining how he wishes the notice periods to be shortened.
Ancillary Executor to Give Notice of Proposed Sale,
at Fair Market Value to be Determined by Appraisal,
to those Entitled to First and Second Rights
of Purchase, With Abbreviated Notice
Respondents do not object to this prong of relief in the petition. The Court will order that the Ancillary Executor immediately obtain an appraisal of the subject property so that a fair market value can be reached for the sale thereof. Notice of the sale, to those entitled to first and second rights of purchase, will be held in abeyance pending the return of the order to show cause discussed above.
Authorizing the Ancillary Executor to Sell the Property
to those Entitled to First and Second Rights
of Purchase, if Either are Exercised
This prong of the petition will also be held in abeyance pending the return of the order to show cause discussed above.
Should those Entitled to First and Second Rights of Purchase
not Exercise Their Rights, Ancillary Executor
Take Steps Reasonably Appropriate and Necessary
to Sell the Real Property
This prong of the petition will also be held in abeyance pending the return of the order to show cause discussed above.
Directing the Net Proceeds from Sale of Property be Deposited
in an Estate Checking Account Opened and Maintained
for Sole Purpose of Holding Such Assets
As the respondents do not object to this request, and it appearing to be an appropriate means to handle the proceeds of the future sale of the real property, the petitioner, as ancillary executor, will be directed to deposit the net proceeds from the sale in an estate checking account opened and maintained exclusively to hold such assets.
Net Proceeds from Sale of Property be Valued Pursuant to the
New York State Insurance Department Pursuant to
[*8]
Real Property Actions and Proceedings
Law Article 4 [FN2]
Real Property Actions and Proceedings Law § 967 provides that,
"[a] party who has a right of dower, or is a tenant for life or for years, in or of an undivided share of the property sold, . . . is entitled to have a proportion of the proceeds of the sale invested, secured or paid over, in such manner as the court deems calculated to protect the rights and interests of the parties."
The statute continues with Real Property Actions and Proceedings Law § 968, which further provides, in part,
"the power to determine whether the owner of the particluar estate shall receive, in satisfaction of his estate or interest, a sum in gross or shall receive the earnings, as they acrue, of a sum invested for his benefit in permanent securities at interest, rests in the discretion of the court. . . The application of the owner of any such particular estate for the award of a sum in gross shall be granted unless the court finds that unreasonable hardship is likely to be caused thereby to the owner of some interest in the affected real property."
The petitioner herein has not made reference to whether he seeks his share of the distribution in a lump sum or in earnings from an investment. The respondents, obviously, have not provided this Court with their position on the issue because it was not raised in the petition. The Court will direct the petitioner to include in the affidavit supporting his application for the order to show cause referenced above his position with regard to his share of the proceeds from the sale of the real property. Petitioner shall also include, in the proposed order to show cause, a decretal paragraph directing that the respondents show cause why petitioner should not receive his share of the proceeds in the manner he requests them to be paid in the supporting affidavit.
The Court must turn now to how the life estate should be valued. On this issue, the parties agree and ask the Court to utilize the New York State Insurance Department pursuant to Real Property Actions and Proceedings Law article 4. Pursuant to Real Property Actions and Proceedings Law § 406, the Superintendent of Insurance is authorized to compute, without charge, the value of a life estate and certify the same to the requesting court.
Case law on the issue of the valuation of a life estate in real property clearly follows article 4 of the Real Property Actions and Proceedings Law and provides that the life tenant's interest shall be valued based upon his age at the time the real property is sold (Matter of Fisher, 169 Misc 2d 412; Matter of Strohe, 7 Misc 3d 853). As a result, once the real property in this matter is sold, this Court will direct the New York State Superintendent of Insurance to compute the value of petitioner's life estate in the property based upon the his age at the date of the sale of [*9]the property.
For the reasons set forth herein, it is
ADJUDGED AND DECREED that the petitioner be, and he hereby is, authorized to sell the real property located at Big Wolf Lake, Town of Tupper Lake, New York, in which he holds a life estate pursuant to the last will and testament of the decedent; and it is further
ORDERED AND DECREED that the petitioner submit, within twenty (20) days from the date of this judgment and decree, a proposed order to show cause directing those individuals vested with first and second rights of purchase under the will to show cause why the notice periods provided in the will should not be shortened, together with a supporting affidavit which defines precisely how the petitioner proposes the notice provisions be shortened; and it is further
ORDERED AND DECREED that the petitioner, within five (5) days from the date of this judgment and decree, commence any and all actions required to obtain an appraisal of the real property; and it is further
ADJUDGED AND DECREED that the petitioner's request that the ancillary executor give notice of the proposed sale of the real property to those entitled to first and second rights of purchase, with abbreviated notice, be held in abeyance pending the return of the order to show cause directed above; and it is further
ADJUDGED AND DECREED that the petitioner's request that the ancillary executor sell the real property to those entitled to first and second rights of purchase, if either are exercised, be held in abeyance pending the return of the order to show cause directed above; and it is further
ADJUDGED AND DECREED that the petitioner's request that, should those entitled to first and second rights of purchase not exercise their rights, the ancillary executor take steps reasonably appropriate and necessary to sell the real property be held in abeyance pending the return of the order to show cause directed above; and it is further
ORDERED AND DECREED that any and all net proceeds from the sale of the real property shall be deposited in an estate checking account opened and maintained by the ancillary executor for the sole purpose of holding such assets; and it is further
ORDERED AND DECREED that the petitioner shall include in the proposed order to show cause directed above that respondents show cause why petitioner should not receive his share of the proceeds of sale in the manner that he requests in the supporting affidavit thereto; and it is further
ADJUDGED AND DECREED that, upon the sale of the real property, the New York State Superintendent of Insurance compute the value of petitioner's life estate based upon petitioner's age at the date of the sale of the real property and certify the same to the Court.
ENTER
_________________________
Surrogate
[*10]
Dated at Malone, New York, the 11th day of September, 2006.
Footnotes
Footnote 1:As this has not been done, to date, this ancillary estate remains open, giving this Court jurisdiction over the instant proceeding. If, however, the ancillary estate had been closed, this Court would have agreed with respondents, as discussed above, that it lacked jurisdiction to hear this matter pursuant to Real Property Actions and Proceedings Law article 16.
Footnote 2:Petitioner originally requested that any net proceeds from a sale of the property be divided between petitioner and respondents pursuant to Internal Revenue Code § 7520 and the Internal Revenue Service Table S, Part 1, using an interest rate equal to 120% of the Federal Mid Term Rate published by the Internal Revenue Service for the month in which the sale of the property takes place. Respondents objected to this prong of the petition, arguing that the Superintendent of Insurance should determine the valuation of the life estate. By letter dated June 27, 2005, petitioner conceded this point and agreed that the life estate should be valued pursuant to the New York State Insurance Department pursuant to Real Property Actions and Proceedings Law article 4.
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