Matter of Blumenstein

[*1] Matter of Blumenstein 2012 NY Slip Op 51362(U) Decided on July 24, 2012 Sur Ct, Bronx County Holzman, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on July 24, 2012
Sur Ct, Bronx County

Estate of Sarah Blumenstein, also known as SARAH ETHEL BLUMENSTEIN, Deceased



2008-1620



Reddy, Levy & Ziffer, P.C. (Jay H. Ziffer, of Counsel), for Bonnie Gould, Public Administrator, Bronx County, movant

Mary Ellen Sweeney, Esq., Guardian Ad Litem, for unknown distributees, objectant

Lee L. Holzman, J.

In this proceeding to judicially account the Public Administrator moves, in effect, pursuant to CPLR 3212, for summary judgment dismissing the objections to the account which were filed by the guardian ad litem appointed for unknown distributees. The guardian ad litem opposes the motion contending there are issues of fact, and requests the referral of such issues to a Special Referee to hear and report.

The court records for this estate and the facts set forth in the Public Administrator's initial and amended accounts reveal that the decedent died on March 24, 2005 at the age of 95, allegedly survived by three children, Frederick, Stanley and Marilyn. Four years after her death a creditor, the Bronx cooperative in which the decedent held an interest in an apartment, petitioned for the appointment of the Public Administrator as administrator of the estate. The creditor alleged that the two alleged sons were living in the apartment without paying rent, the alleged daughter had moved to an address in Florida and none of the children would cooperate in establishing an estate, apparently because they realized an eviction proceeding might ensue. Jurisdiction was obtained over all three alleged children in that proceeding, with Frederick ultimately being served by substituted service. Frederick appeared in the administration proceeding, indicated he intended to file an application to be appointed fiduciary and was granted time to make that application, but failed to do so (see Matter of Blumenstein, NYLJ, Aug. 7, 2009, at 37, col 4). As a result, by decree dated August 28 2009, letters of administration were granted to the Public Administrator.

In this accounting proceeding, the Public Administrator filed an initial account indicating a gross estate of $167,721.16 and a net distributable estate of $149,663.82 for the period March 24, 2005 through November 30, 2010. Schedule F of the account indicates US Treasury Bills of [*2]$142,000 that were due on February 15, 2007, and on February 20, 2007, prior to the appointment of the Public Administrator but after the date of the decedent's death, the sum of $143,995.93 was invested in The Reserve Yield Plus Fund, Class R. Schedule G indicates a total of $140,718.01 in a JPMorgan Chase estate checking account, and the sum of $8,945.91 remaining in The Reserve Yield Plus Fund, Class R. The initial account indicates that on August 12, 2010, the Public Administrator sold 289 shares representing the decedent's interest in the Bronx cooperative apartment for $13,000, with net proceeds of $11,315.80 after deducting closing expenses shown on an annexed closing statement. The citation and account indicate that the Public Administrator seeks to deposit all net distributable proceeds with the Commissioner of Finance, without distribution to the three alleged children.

The guardian ad litem, who was appointed on February 25, 2011, filed objections on August 31, 2011. A court-ordered conference with the guardian ad litem and Public Administrator was held on November 28, 2011 in an effort to resolve the objections (see Matter of Blumenstein, NYLJ, Oct. 27, 2011, at 27, col 2). At that conference, the guardian ad litem maintained that Public Administrator should recognize the three children as distributees, who, to date had failed to provide the Public Administrator with satisfactory proof of kinship to the decedent. The guardian ad litem was granted to March 5, 2012 to serve and file documents supporting her contention that any party should be recognized as a distributee and to indicate which, if any, objections she still wished to pursue (see Matter of Blumenstein, NYLJ, Jan. 17, 2012, at 22, col 1). In the event the guardian ad litem failed to timely notify the court and the Public Administrator prior to March 5, 2012 of her intention to pursue objections or notified same she did not intend to pursue objections by that date, the Public Administrator was authorized to settle a decree judicially settling her account (see id.)

The guardian ad litem failed to file any documents or updated objections by March 5, 2012. As a result, on March 20, 2012, the Public Administrator updated her account which was served and filed with a proposed decree judicially settling the account. The updated account reveals a gross estate of $170,305.79, and a net distributable estate of $141,175.36, reflecting an $8,308.89 decrease in principal due to the recognition of a loss after liquidation of The Reserve Yield Plus Fund, Class R. In an amendment to Schedule F, the Public Administrator explains that the shares of The Reserve Yield Plus Fund, Class R were purchased in the decedent's TDAmeritrade account on February 20, 2007, prior to the Public Administrator receiving letters of administration. In September, 2008, the shares became virtually worthless when the money market fund was "broken;" i.e., its assets fell below the $1 share value of the fund. Upon the Public Administrator's appointment, on September 1, 2009, the Public Administrator promptly investigated and liquidated the decedent's assets; however, the Class R shares of The Reserve Yield Plus Fund remained frozen. The estate did receive a series of income and capital distributions from that fund, as reflected in Schedules A-2 and B of the original account, as its assets became more liquid and it clarified its liabilities. On March 11, 2011, the shares in that fund were converted to shares of The Reserve Yield Plus Fund in Liquidation, and the estate received 5,293.176 shares of the fund in liquidation in exchange for its original 8,016.320 shares of The Reserve Yield Plus Fund, Class R. While the fund in liquidation technically remained in administration, the liquidation updates reflected that the liabilities exceeded the assets on hand and, according to the Public Administrator, the estate is "extremely unlikely" to receive any further distribution. As a result, in its updated account, the Public Administrator reflects a loss on the remaining value of the 5,293.176 shares of the fund in liquidation as of the exchange [*3]date.

The guardian ad litem, who failed to file documents or modified objections by March 5, 2012, repeatedly requested and was granted extensions of time to file same. Ultimately, she served and filed an application to withdraw, repeating the same objections, and the Public Administrator opposed that application but sought to have her objections disregarded. By letter dated April 23, 2012, this court advised the guardian ad litem that she would not be permitted to resign while apparently attempting to leave her objections pending, and she had a choice of either resigning without any award of compensation, as any fee would have to be paid to a successor guardian ad litem, or continuing as guardian ad litem through the entry of a final decree. On April 30, 2012, the guardian ad litem served and filed "renewed GAL Objections" wherein she consented to continuing as GAL pending decision on her original objections and adding new objections.

The initial objections by the guardian ad litem to the account filed by the Public Administrator are, in essence, that: (1) there is no explanation as to why the decedent's apartment was sold when one son, Frederick, resided there or why there was a net sale price of only $11,315.80; (2) there is no explanation as to why "the Public Administrator" purchased shares valued at $140,221.84 with the decedent's $142,000 in US Treasury bills that were due on February 15, 2007, and why it seeks approval of "its" investment of $143,995.93 in a fund which, over 23 months, returned only $9,801.35; (3) there is no explanation as to why $140,718.01, or 90% of the assets, sat in a checking account for three years; (4) to date, there is no proof of the funeral bill to support payments; (5) there may be a problem with the mental and physical competency of the alleged three children; (6) there was no effort to locate a will even though the son Frederick lived in the apartment with the decedent, appeared and claimed the decedent executed one; and, (7) the Public Administrator should be required to file a supplemental account updating the present value of the property and explain her safeguarding of the property. The additional objections to the account filed after the Public Administrator updated her account are that: (1) the Public Administrator failed to do a "jurisdictional search" for the decedent's relatives other than known children; (2) the Public Administrator failed to address any of the prior objections; (3) the Public Administrator already received legal fees; and, (4) there is no support for the contention of the Public Administrator that the children are competent to protect their own interests without appointing individual guardians for them.

In the motion for summary judgment, the Public Administrator contends that: (1) the Public Administrator has no burden to establish the identity of decedent's distributees, and jurisdiction was acquired over unknown distributees by publication; (2) letters of administration issued upon the creditor's application when no maintenance was paid between the date of the decedent's death in March, 2005 and the date of the administration proceeding and, as of August 1, 2010, a year after the appointment of the Public Administrator, there were accrued maintenance and other charges totaling $45,774 (tenant ledger annexed); (3) the alleged son Frederick refused access to the Public Administrator's investigators and appraisers, the three children refused to provide kinship information, and an internet search of the name "Blumenstein" returned over 37,000 persons in New York; (4) because Frederick refused the Public Administrator and its personnel and appraisers access to the apartment, the superintendent of the cooperative finally gained access using a ruse, which enabled the appraiser to appraise the apartment for $60,000 due to its poor condition (appraisal annexed); (5) any return on the sale of the cooperative would be further reduced because the sale was [*4]subject to a flip tax of the greater of $9,000 or 10% of the sale price, resulting in gross equity of $51,000, and the building also restricted financing to 75% of the purchase price; (6) as these factors reduced the equity to only $11,000, and the alleged son Frederick refused to vacate which would require a costly eviction proceeding that could take two years, the estate's equity interest was zero after such expenses and charges; (7) as a result, the Public Administrator acted in the best interests of the estate in accepting the cooperative's offer to purchase the apartment for $13,000 (up from zero) subject to Frederick's occupation with the estate having no further liability for his occupancy, and the sale occurred with much lower costs, commissions and legal fees that it would have otherwise; (8) the guardian ad litem reviewed the TDAmeritrade account which the PA located and marshaled, the T-Bills remained there until their maturity, and on November 10, 2006, before the appointment of the Public Administrator, one of the alleged children illegally accessed the account and sold 5 securities and then attempted to withdraw the balance, but TDAmeritrade noticed unusual activity and stopped the check; (9) another fund in that account, The Reserve Yield Plus Fund Class R, was also purchased prior to the appointment of the Public Administrator, and when its value fell below the $1 market fund value known as "breaking the buck," the Public Administrator could do nothing to liquidate that asset and the fund is now in liquidation and deemed worthless absent any class action recovery; (10) the guardian ad litem was informed that the "estate checking account" is not a typical bank account, the Public Administrator uses a pooled system and did not maintain estate funds in a "no interest" estate checking account; (11) to date, the Public Administrator has not received any proof of claim for a funeral bill, so there is no reimbursement for funeral expenses, and it served possible creditors such as the funeral home but no objections were filed; (12) there is no evidence the alleged three children are incapacitated and, in any event, there is no prejudice from a deposit with the Commissioner of Finance; (13) the Public Administrator paid counsel 60% of the total legal fee at the time of the accounting (as was permissible prior to May1, 2012); and, (14) the court should consider the actions of the guardian ad litem throughout this proceeding when fixing her fee, if any.

After receiving a short extension, the guardian ad litem served and filed her opposition to the motion. In sum, she contends that there are issues of fact for reference to a Special Referee to hear and report as no guardian ad litem was appointed for the three alleged children who may be incompetent. Additionally she claims that the Public Administrator seeks to place the burden of representing known distributees on her, which she declines to accept, and there is an issue of fact as to "the jurisdictional issue of [the Public Administrator's] noncompliance with the requirement of kinship documentation." She maintains that testimony should be taken on the Public Administrator's failure to account for all realty and personal property including possible jewelry, and a hearing is warranted on why only $13,000 was obtained for the decedent's cooperative apartment, even though another apartment in the cooperative with a similar number of shares sold in 2008 for $128,000, and the appraisal submitted by the Public Administrator valued the decedent's apartment at $60,000.

Summary judgment cannot be granted unless it clearly appears that no material issues of fact exist (see Phillips v Joseph Kantor & Co., 31 NY2d 307 [1972]; Glick & Dolleck, Inc. v Tri-Pac Export Corp., 22 NY2d 439 [1968]). The movant must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence in admissible form to demonstrate the absence of any material issue of fact (see Alvarez v Prospect Hosp., 68 NY2d 320 [1986]; Friends [*5]of Animals, Inc. v Associated Fur Mfrs. Inc., 46 NY2d 1065 [1979]). When the movant makes out a prima facie case, the burden shifts to the party opposing the motion to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact (see Zuckerman v City of New York, 49 NY2d 557 [1980]). Summary judgment is a drastic remedy which requires that the party opposing the motion be accorded every favorable inference and issues of credibility may not be determined on the motion but must await the trial (see F. Garofalo Elec. Co. v New York Univ., 300 AD2d 186 [2002]).

The accounting party has the burden of proving that she fully accounted for all of the assets of the estate, and the objectant has the burden of coming forward with evidence to establish that the account is inaccurate or incomplete (see Matter of Winston, 39 AD3d 765 [2007], lv denied 9 NY3d 806 [2007]; Rudin v Heimlich, 34 AD3d 371 [2006]; Matter of Curtis, 16 AD3d 725 [2005]). The Public Administrator, as fiduciary, had the duty to safeguard and protect assets of the estate, including the decedent's residence (see Matter of Skelly, 284 AD2d 336 [2001]; Matter of Yarm, 119 AD2d 754 [1986]). Pursuant to EPTL 11-1.1 (b) (5) (B), a fiduciary has the power to sell property of the estate, except for that which is specifically bequeathed, at a "public or private sale, and on such terms as in the opinion of the fiduciary will be most advantageous to those interested therein." In an accounting proceeding, to warrant a surcharge, an objectant must demonstrate that the fiduciary acted negligently or failed to exercise prudence in managing estate assets, resulting in a loss (see Matter of Donner, 82 NY2d 574, 585 [1993], citing Matter of Hahn, 93 AD2d 583 [1983], affd 62 NY2d 621 [1984]).

With respect to the objection, in essence, that the Public Administrator has a duty to prove the three alleged children are the decedent's distributees and make distributions to them, "[i]n estates administered by the Public Administrator, the Public Administrator is obligated to make efforts to ascertain who are the possible distributees and obtain jurisdiction over them so they can prove their status; however, it is not the role of the Public Administrator to prove the status of the distributees" (Matter of Cassiano, 29 Misc 3d 553 [2010]). Here, although given many opportunities to prove their status, the three alleged children failed to do so, and it appears the guardian ad litem was equally unable to gain their cooperation in this regard. There is no evidence whatsoever that any of the alleged children were under a disability which requires the appointment of a guardian ad litem on their behalf. As a result, the Public Administrator is granted summary judgment dismissing this objection.

With respect to the objection based on the price obtained for the sale of the decedent's cooperative, the affidavit of the Public Administrator in support of the motion and the documents forming part of the account reveal that the decedent's interest in the cooperative apartment was appraised at only $60,000 due to its condition, there was overdue maintenance and other accumulated charges due to the failure of the alleged children to pay maintenance from the date of the decedent's death in 2005 to the date the apartment shares were sold in August, 2010, and the alleged son Frederick refused to vacate the apartment or assist in any sale thereof. The Public Administrator met her burden of demonstrating that the sale price obtained, $13,000, and the charges in connection with the closing were prudent and reasonable considering all of these factors. The evidence also demonstrates that from 2005 through August, 2010 the alleged children, not the Public Administrator, had exclusive access to any tangible personal property contained in the decedent's apartment, and Frederick continued in occupancy even after the Public Administrator became [*6]fiduciary, and refused access to the Public Administrator. As the guardian ad litem failed to raise any issue of fact relating to the sale price of the cooperative or an alleged failure to account for personal property and any jewelry allegedly contained therein, the Public Administrator is granted summary judgment dismissing those objections.

With respect to the proceeds in the liquidated fund on which there was a loss, the record demonstrates that from 2005 until the appointment of the Public Administrator in 2009, someone , presumably one of the alleged children, had access to and invested the decedent's proceeds in the fund that ultimately went into liquidation and, following the appointment of the Public Administrator, the proceeds could not be retrieved as they were frozen in the fund in liquidation and, ultimately, a loss was realized. Based on this record, the Public Administrator is entitled to summary judgment dismissing all objections relating to the decedent's TDAmeritrade and Reserve Fund investments.

With regard to the objection to the advance payment of a portion of legal fees to the Public Administrator, prior to May 1, 2012, no law, regulation or rule prohibited the Public Administrator from paying its counsel an advance on counsel fees or limited the amount of that advance. Moreover, EPTL 11-1.1 (b) (22) specifically confers authority on every fiduciary, including the Public Administrator (see SCPA 1108 [2] [b]), absent a contrary provision in a court order or decree or will, to pay any reasonable counsel fees that the fiduciary necessarily incurs. Of course, the ultimate determination as to the reasonableness of the final legal fee paid to counsel for the Public Administrator is made by this court (see also SCPA 1108 [2] [c]). As the Public Administrator made a partial payment of 60% of the projected legal fee on November 30, 2010, when an accounting had been prepared and was ready to be filed, which was 17 months prior to the May 1, 2012 Guidelines of the Administrative Board for the Offices of the Public Administrator (the Guidelines provide that, absent a court order, an advance payment of legal fees should not be made to counsel to the Public Administrator until jurisdiction is complete in the accounting proceeding and such advance payment should not exceed 50% of the projected legal fee), the Public Administrator is granted summary judgment dismissing the objection of the guardian ad litem to the advance payment of a portion of the legal fee.

Accordingly, this decision constitutes the order of the court granting the motion of the Public Administrator dismissing the objections. The Chief Clerk shall mail a copy of this decision and order to the Public Administrator and the guardian ad litem. The guardian ad litem shall serve and file an affirmation of services within fifteen days of the date this decision and order is mailed to her by the Chief Clerk. The court will fix the compensation of the guardian ad litem in the final decree already noticed for settlement.

Proceed accordingly.

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SURROGATE