Matter of Keriotis

[*1] Matter of Keriotis 2009 NY Slip Op 50212(U) [22 Misc 3d 1121(A)] Decided on January 9, 2009 Surrogate's Court, Kings County Johnson, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through February 18, 2009; it will not be published in the printed Official Reports.

Decided on January 9, 2009
Surrogate's Court, Kings County

In the Matter of the Petition of Keri Keriotis, to Terminate the Trust Created under the Last Will and Testament of Eleni Keriotis, Deceased.



3801/03



List of Appearances

For the Petitioner

Patrick S. Rogers, Esq.

Lissner & Lissner

250 West 57th Street

New York, New York 10107

Diana A. Johnson, J.

This is a petition to terminate a testamentary trust pursuant to EPTL 7-1.19.

The trust was established under the will of Eleni Keriotis, which was admitted to probate on January 23, 2004. Under her will, the testator left her residuary estate, consisting of her residence located at 2531 Ocean Avenue, Brooklyn, New York, in trust. The trustee was authorized to distribute the income to her daughters, Maria Stella Keriotis ("Maria") and Stella Keriotis ("Stella"), for their "maintenance, education, advancement, health, comfort or benefit, including but not limited to the need for a suitable residence of the two daughters.

Upon the death of the survivor of the two daughters, the trust terminates and the principal is distributed to the testator's son, George Keriotis ("George"), or, if he does not survive her sisters, to his children living at the testator's death. Dimitros Keriotis ("Dimitros") is named as trustee and Maria as successor trustee.

Article X of the will limits the trustee's discretion to manage the trust corpus.

The Trustee's discretion to manage the trust corpus shall be limited as follows:

(1) the Trustee shall not have the power to sell, assign, convey, transfer, pledge or otherwise hypothecate that portion of the trust corpus consisting of the real property known as 2531 Ocean Avenue, Brooklyn, New York.

(2) the beneficiary STELLA KERIOTIS shall have the right for the duration of her life to the use and occupancy of the basement unit as her residence, together with a maximum of five (5) animals, without any obligation to rent therefore.

Dimitros was issued letters of trusteeship by the Court on January 23, 2004. He purported to resign by document acknowledged on September 22, 2004, but took no steps to petition this Court for authority to resign. Nonetheless, Maria purported to assume the duties as successor trustee by document acknowledged on September 27, 2004.

On February 18, 2005, Maria entered into a contract to sell the Ocean Avenue property for $990,000. In April, 2005, Maria, Stella and George entered into a stipulation allowing Maria to borrow $175,000, secured by a mortgage on the property, to enable her to buy another home. The mortgage was to be satisfied upon sale of the property and the amount used to satisfy the mortgage charged to Maria's share of the sales proceeds.

Maria then filed a petition, as successor trustee of the trust, seeking authorization to sell the property. Stella and George consented to the termination of the trust and sale of the property. [*2]George had three children, who are contingent beneficiaries of the remainder of the trust upon the death of Maria and Stella. Two are adults and consented to the relief requested. One, however, was a minor and a guardian ad litem was appointed to protect her interests. The guardian ad litem filed objections to the petition. The matter was settled pursuant to a stipulation that provided for the distribution of the proceeds among the beneficiaries.

The guardian then recommended termination of the trust and sale of the property (the "stipulation"). The guardian ad litem recommended this course of action because her investigation revealed that the taxes on the property were in arrears and bills were unpaid; both sisters admitted to being unable to manage the property, claiming it was a financial burden and required too much upkeep; neither sister appeared to have steady income; and Stella expressed her desire to move to California to pursue an acting career. Accordingly, the Court entered a decision on July 9, 2007, whereby the Court: (1) accepted Dimitros' resignation and appointed Maria as successor trustee upon qualifying according to law; (2) authorized Maria, upon being issued successor letters of trusteeship, to sell the property pursuant to the contract of sale; and (3) terminated the trust and authorized Maria to distribute the proceeds as indicated pursuant to the stipulation. Maria was directed to settle a decree.

Maria never settled a decree or qualified as successor trustee, as required by the decision of the Court. She has now filed an amended petition" to terminate the trust and transfer the property to her and Stella upon paying the other beneficiaries (and the guardian ad litem's fee) the amounts due them under the stipulation. As before, Stella, George and George's adult children have consented to the relief.

Discussion

Although labeled an amended petition, the petitioner is actually bringing a new proceeding. The facts alleged in the new petition supporting the claim for relief are entirely different from the facts on which the decision in the prior proceeding was based.[FN1] As a result, the matter was treated as a new proceeding and a separate filing fee charged.

As for the prior proceeding, the failure to timely file a decree in the prior proceeding terminated that proceeding for abandonment. See Matter of Jones, NYLJ, Oct. 31, 1996, at 31, col 3 (Sur Ct, Queens County). Moreover, the initiation of a subsequent proceeding is deemed an abandonment of the prior proceeding. See Matter of Vega, NYLJ, Oct. 19, 1995, at 29, col 3 (Sur Ct, Bronx County).

The instant petition asks that the Court terminate the trust subject to the payments authorized in the stipulation in the prior proceeding. The petitioner now alleges that she and Stella wish to either improve the property, sell the property in the future or use the property, in whatever way they see fit as the beneficiaries of the Trust, without the requirement of future Court approval. This is not a valid basis to terminate a testamentary trust, even with the consent of all the beneficiaries.

A New York testamentary trust is an irrevocable expression of the testator's intent, which [*3]is to be respected by the Court. Matter of Wentworth, 230 NY 176 (1920); Matter of Abel, NYLJ, Aug. 22, 2000, at 29, col 5 (Sur Ct, Bronx County). "Its duration may not be foreshortened by judicial fiat or by act of the interested parties." In re Duignan's Will, 85 NYS2d 846 (Sur Ct, Westchester County 1948). While EPTL 7-1.9 permits termination of a trust upon consent of all interested persons, the statute is limited to terminations during the lifetime of the settlor of the trust. Therefore, except in limited circumstances (see EPTL 7-1.19), a testamentary trust is indestructible. In re Duignan's Will, supra .

In recognition of the difficulty of terminating a testamentary trust, the legislature enacted EPTL 7-1.19. L. 2004, ch. 359. EPTL 7-1.19 provides that the court may terminate a testamentary trust if it finds that: (1) the continuation of the trust is economically impracticable, (2) the express terms of the disposing instrument do not prohibit its early termination , and (3) such termination would not defeat the specified purpose of the trust and would be in the best interests of the beneficiaries.

In the instant case, the gravaman of the petition, that Maria and Stella wish to own the property free of the restrictions of the trust, contradict the purpose for which the testator established the trust, i.e., ensuring that Maria and Stella would have a place to live. Moreover, the petition does not allege that continuation of the trust is uneconomical and in the best interests of all of the benficiaries. This is not a valid basis to terminate a testamentary trust, even with the consent of all the beneficiaries. See In re Duignan's Will, supra .

Moreover, the petition assumes that the stipulation in the prior proceeding is still effective to value the other beneficiaries' interests. The general rule is that stipulations of settlement are judicially favored and will not be lightly set aside. Hallock v State of New York, 64 NY2d 224 (1984); Cooper v Hempstead General Hospital, 2 AD3d 566 (2d Dept 2003), appeal dismissed 2 NY3d 823 (2004); Kelly v Chavez, 33 AD3d 590 (2d Dept 2006). This is based upon the public policy that, unless public policy is affronted, parties to a civil dispute are free to chart their own course. Mitchell v New York Hosp., 61 NY2d 208 (1984); J & A Vending, Inc. v JAM Vending, Inc., 303 AD2d 370 (2d Dept 2003).

In the instant case, there is a countervailing public policy, namely the Court's responsibility to promote the testator's testamentary intent as described in his or her will. In the prior proceeding, the Court found that the termination of the testamentary trust fell within the ambits of EPTL 7-1.19, so that the trust could be terminated. Under the facts of the case, therefore, the agreement of the beneficiaries on the distribution of the trust raised no public policy issues. In this proceeding, the petition fails to state a cause of action to terminate the trust. Therefore, the agreement of the parties as to its distribution is irrelevant. Moreover, there is a question as to whether a stipulation that was never performed can be binding upon all of the parties. See Matter of Benn, 20 Misc 3d 1107(A) (Sur Ct, Kings County 2008). For all of the above reasons, the petition is denied.

However, the purported resignation of Dimitros was never effectuated. He died on May 5, 2008 and there is currently no trustee of the trust. Maria, the named successor trustee, has never qualified for letters of successor trusteeship. Accordingly, she is directed to qualify for appointment as successor trustee within thirty days of the mailing of a copy of the decision and order to be entered herein. If she fails to do so, any other beneficiary or their designee, may file a petition to be appointed successor trustee. [*4]

The clerk of the court is directed to mail a copy of this decision to petitioner's attorney and the other beneficiaries of the trust, at the addresses designated in the petition.

This constitutes the decision and order of the Court.

_/s/____________________________

HON. Diana A. Johnson

S u r r o g a t e

Dated: January 9, 2009

List of Appearances

For the Petitioner

Patrick S. Rogers, Esq.

Lissner & Lissner

250 West 57th Street

New York, New York 10107 Footnotes

Footnote 1: The prior proceeding was based upon the a specific contract of sale, the inability of the sisters to manage the property and the desire of Stella to move to California. None of these facts are alleged in the instant proceeding.