Matter of Doman
Annotate this CaseDecided on June 26, 2007
Sur Ct, Suffolk County
In the Matter of the Application of Paul Green, Preliminary Executor of the Estate of Judith N. Doman, Nicholas R. Doman, Deceased, To Take an Elective Share Against the Provisions of the Decedent's Will.
In the Matter of the Application of Cynthia P. Schneider and Lee James Perrin) Beneficiaries of the Estate of 1029 P 2006 ............. Judith Doman, Deceased, To Invalidate the Purported Doman Qualified Personal Residence Trust andQualified Annuity Trust.
313 P 2004
Arnold & Porter, Esqs.
By: Charles G. Berry, Esq.
Attorneys for Petitioners
Cynthia P. Schneider
and Lee James Perrin
399 Park Avenue
New York, New York 10022
Novick & Associates
Attorneys for Respondents
Alexander Doman and Arlene Harris
202 East Main Street, Suite 208
Huntington, New York 11743-2993
Farrell Fritz, P. C.
Attorneys for Paul Green 1320 Reckson Plaza
Uniondale, New York 11556
John M. Czygier, J.
These companion estates involve husband and wife decedents. The estates are treated herein as consolidated for the purposes of this decision only. The issues before the Court in both estates involve the funding of an inter vivos trust and the execution of a post-nuptial agreement. Oral argument on the pending motions was recently held. During oral argument, the Court raised certain issues and reserved decision allowing counsel for the parties time to submit additional memoranda of law. Said submissions have now been received and decision is rendered herewith.
Pending Applications
In the Estate of Judith Doman there is a proceeding to invalidate an inter vivos trust she created, brought by the children of her first marriage, petitioners Cynthia P. Schneider and Lee James Perrin. Respondent in this proceeding, Alexander Doman, is the child of Nicholas Doman, Judith's predeceased husband, and trustee of the Doman Home Trust, the ultimate beneficiary of the subject Qualified Personal Residence Trust (QPRT). The motion before the Court is a pre-answer motion to dismiss the petition on grounds that petitioners lack standing to bring the proceeding, that the proceeding is barred by the applicable statute of limitations and that there is a failure to plead with the specificity required for fraud.
For the reasons set forth herein, the motion to dismiss is granted for petitioners' lack of standing.
In the Estate of Nicholas Doman, the original petitioner was his surviving spouse Judith, who had filed a proceeding for a judicial determination as to the validity and effect of the assertion of her elective share. The answer filed by the co-fiduciaries of Nicholas' Estate (Alexander Doman and Arlene Harris) asserted that she waived her elective share in a post-nuptial agreement executed during the marriage for which she received "valuable consideration." In a reply to respondents' answer, petitioner asserted that the post-nuptial agreement entered into during the marriage was obtained through fraud, duress and coercion; and that it was not properly acknowledged [*2]under EPTL 5-1.1-A and DRL §236. Upon Judith's death, her fiduciary was substituted as petitioner. Respondents Doman and Harris have made a motion for partial summary judgment seeking dismissal of the allegations sounding in fraud, coercion and misrepresentation. Petitioner cross-moved for summary judgment.
For the reasons set forth herein, the motion for partial summary judgment dismissing the claims for fraud, coercion and misrepresentation is granted. The cross-motion for summary judgment is denied.
Background
Nicholas (age 79) and Judith (age 63) were married in June, 1992; Nicholas died on January 25, 2004. Both had children from a prior marriage. It is alleged that they had known each other before they married other people and were not allowed to marry each other in their youth. In fact, it is asserted that the reason for the especially intense hostility between Nicholas' children and Judith was that these decedents were communicating with each other while Nicholas' wife was dying with cancer. Nicholas was an attorney in private practice, whose judgment Judith is alleged to have never questioned. An inter vivos trust, the aforementioned QPRT dated August 24, 1998, was to have been funded with shares in a cooperative corporation and proprietary lease for the Fifth Avenue (New York City) apartment in which the couple resided. In fact, Judith continued to reside there after Nicholas' death until the apartment was sold later in 2004 for $1,610,000. Judith and Paul Green were co-trustees of the QPRT. The trust terms provide for its conversion to a Qualified Annuity Trust should it cease to qualify as a QPRT; this conversion has, in fact, taken place. Upon the trust's termination, the remainder is payable to the Doman Home Trust of which Alexander Doman is trustee. None of the beneficiaries of the Doman Home Trust are Judith's heirs. In fact, it is alleged that Alexander Doman is the primary beneficiary of this trust. In her petition to invalidate the QPRT, the grounds recited are (1) that the trust is illusory and a nullity which never came into force and effect because the property shown as funding the trust was not in Judith's name on the date of its creation; (2) that the establishment of the trust was the result of undue influence, fraud and duress; (3) that Judith executed the trust without the advice of independent counsel; (4) that Judith lacked understanding of the import of the instrument she was signing; (5) and that there was a mistake as to the nature of document.
It is alleged that during 1998 Nicholas had several brain surgeries and experienced a general decline in his health of an [*3]unspecified nature. In late 1998, he allegedly presented Judith with a post-nuptial agreement for her signature, which he had also drafted. She signed same without advice of independent counsel on November 23, 1998. This was actually the third post-nuptial agreement the parties executed; two prior instruments were dated August 11, 1992 and January 1, 1996, which contained similar terms conferring benefits on Judith in exchange for her waiver of her right of election. This latest agreement reflected that the shares of the cooperative apartment on Fifth Avenue, which were in Nicholas' name were transferred into Judith's name. The parties disagree over whether this had already occurred or whether the transfer was not effective until some months later.
When Nicholas died on January 25, 2004, he was domiciled in Shelter Island, New York (Suffolk County). He was survived by Judith, and sons Alexander and Daniel. His will, dated April 1, 2002, was admitted to probate on June 30, 2004. Letters issued to Doman and Harris. At the time of his death, the value of Nicholas' estate was estimated to be $5,500,000. His will, in conformity with the most recent post-nuptial agreement, bequeathed tangible personalty in the amount of $200,000, use of the Shelter Island property for one year and $1,000,000 in trust to Judith. He also left $100,000 to law firm associate Viraf Udwadia. The residue of his estate is left to his children (Alexander and Daniel). Of significance to the parties' relative positions is the fact that Udwadia signed the post-nuptial agreement as notary and continued Nicholas' law practice after his death. Judith filed a notice of election on April 28, 2004; and, on May 4, 2006, Judith filed the petition seeking a determination of the validity and effect of the assertion of her elective share. Judith died on May 5, 2006, and her will, dated April 7, 2006, was admitted to probate on July 20, 2006, whereupon letters testamentary issued to Paul Green.
Arguments on the Motion to Dismiss the Proceeding to Invalidate the Trust
[Judith Doman Estate]
Respondent argues that petitioners lack standing to bring suit on the trust (CPLR 3211[a][3]). As beneficiaries under their mother's will, they cannot bring suit on behalf of the estate seeking to invalidate the trust and have trust assets turned over to Judith's estate.
He also argues that the proceeding is barred by the statute of limitations (CPLR 3211[a][5]; CPLR 213) on fraud, which is six years from the event or two years from discovery. As noted, the date of the trust's execution was August 24, 1998. Nicholas died on January 25, 2004 and Judith died on May 5, 2006. Thus, it is [*4]asserted that Judith had more than two years from Nicholas' date of death within which time she could have discovered with reasonable diligence the fraud he allegedly exercised to obtain her signature on the post-nuptial agreement.
It is also respondent's contention that the pleadings do not sufficiently specify the acts complained of constituting the fraud to satisfy CPLR 3016(b).
In opposition, petitioners argue that their standing is rooted in the fact that Green is the sole executor of Judith's estate and cannot sue himself as trustee of her trust. They further argue that Judith thought she owned the cooperative apartment outright and would never have deprived her heirs (petitioners) of their rightful inheritance. They also claim that there has been no discovery and no documents have been produced bearing on the transfer of title to the subject cooperative apartment, which they claim is crucial to their claims regarding the trust's validity.
In reply, respondent notes that petitioners have not adequately addressed the standing issue. The cases cited in their memo of law were decided prior to the enactment of SCPA 702. With respect to the trust res, it was always clearly identifiable and was, in fact, subsequently transferred to the trust. Since petitioners never discussed Judith's intent when she created the QPRT, respondent maintains, they cannot specify any alleged acts of fraud inducing her to execute the trust agreement.
After respondent's reply and over his objection, petitioners subsequently submitted an affidavit asserting that the Occupancy & Assignment Agreement for the cooperative apartment "raises more questions than it answers," that it is unclear when or how Judith became fee owner of the apartment, and that there is no valid reason for respondent's supposition that Judith had an opportunity to consult independent counsel.
Arguments on the Motion and Cross-Motion for Summary Judgment in the Proceeding to Determine the Validity of Elective Share
[Nicholas Doman Estate]
At the heart of the parties' dispute, which to a degree relates to both proceedings, is the 1998 post-nuptial agreement.
According to respondent in this proceeding, bills of particulars have been served and filed and depositions have been held.
Respondent argues that the fraud claim is barred by the [*5]statute of limitations. There is no indication that Judith was prevented from discovering fraud prior to the expiration of the statute of limitations. While continuing duress may toll the statute, conclusory allegations will not suffice, and there is no allegation in the pleadings that the alleged duress extended beyond the execution of the post-nuptial agreement. To wit; Judith could always have obtained copies of the income tax returns after Nicholas' death to determine the extent of his assets.
In the cross-motion, petitioner argues that the post-nuptial agreement was neither acknowledged nor witnessed, pursuant to EPTL 5-1.1-A(e)(2), and therefore the waiver contained therein of Judith's right of election is ineffective. In the event the cross-motion is denied, petitioner asks for leave to re-plead by amending the reply, presumably with more specificity.
In essence, petitioner argues that there are factual issues to be determined on the fraud and misrepresentation claims, and that he should be allowed to complete discovery. Of some significance, as previously noted, is the fact that legatee Udwadia signed as notary on the agreement's "verification" and that the agreement itself contained no disclosure schedule. In spite of the fact that petitioner claims that Udwadia cannot cure the alleged deficiencies in the acknowledgment with testimonial evidence, petitioner claims that his testimony and responses from the Fifth Avenue cooperative's board to subpoenas served upon them are crucial in order for the fraud claims to be proven. Petitioner also seems to be making the argument that the failure to commence the proceeding within the applicable time period under the statute of limitations was due to the fact that the parties had been engaged in settlement discussions, which ultimately proved to be fruitless.
In response, respondents argue that petitioner cancelled Udwadia's scheduled deposition and cannot now claim to require it before decision may be rendered in this matter. They also argue that Judith chose to close her eyes without making inquiry into the information she needed in order to make an informed choice and further chose not to consult independent counsel. Her fiduciary cannot benefit from this posture, it is asserted. They also maintain that the acknowledgment substantially complies with RPL §309-a.
Petition to Invalidate Trust
Applicable Law
The first issue the Court must address on this application is the issue of petitioners' standing to seek the relief requested. [*6]Petitioners' only interest in the trust at issue is as beneficiaries of Judith's estate. Presumably, the ultimate goal of the proceeding would be to bring assets back into Judith's estate in a manner contemplated by SCPA 2103, which is designed to either bring property within the possession or control of another person back into the estate or to obtain knowledge or information from such person with respect thereto. However, as the Court noted during oral argument, SCPA 2103 specifically empowers "a fiduciary" to bring such a proceeding. The logic of this is indisputable, since only a fiduciary would be in a position to bring the items in dispute back into the estate, in spite of the fact that counsel for petitioners argues that the case law cited in his memorandum of law supporting petitioners' ability to bring such a proceeding has not been overruled. In addition, it is well-settled that a beneficiary does not have an independent cause of action to recover assets withheld from the estate (Estate of Moran, 9/10/2004 NYLJ 25 (col. 2), citing, McQuaide v. Perot, 223 NY 75; see also, Jackson v. Kessner, 206 AD2d 123). Further, while their argument that the estate fiduciary could not bring such an application against himself as trustee is valid, there is no adequate explanation for petitioners' failure to seek limited letters of administration pursuant to SCPA 702 for this purpose.
Thus, the Court concludes that petitioners lack standing to bring the underlying proceeding to invalidate the trust.
Petition to Invalidate Trust
Conclusion
Accordingly, the motion to dismiss the petition premised upon petitioners' lack of standing is granted without prejudice to the commencement of further proceedings by the proper party or parties. In view of the Court's finding on petitioners' lack of standing, there is no finding with respect to the merits of their claim.
Petition to Determine Validity of the Waiver of the
Right of Election
Applicable Law
While it is true that when pure defenses are raised as a shield, and not as a sword, the statute of limitations cannot be raised (See, Bloomfield v. Bloomfield, 97 NY2d 188), the Court finds counsel for respondents' argument with respect to this issue most persuasive (See, Transcript of Oral Argument on Motions, p. 52, ¶¶3 and 4). Petitioner brought the proceeding without specifically attacking the agreement, allowing the answer to the petition to raise the waiver of the right of election. Since the petitioner cannot be successful without attacking the validity of [*7]the post-nuptial agreement, presumably on the basis of fraud and misrepresentation, it would be illogical to claim that the statute of limitations is being raised as a shield in the context of the allegations before the Court on these issues. Even the Court of Appeals in Bloomfield, supra opined in dicta that an independent action brought by the spouse who successfully argued that the statute of limitations could not be raised therein to bar her claims, would be time-barred. Accordingly, the Court finds the statute of limitations to be a proper defense to the pleadings on the validity of the subject post-nuptial agreement and the waiver of elective share contained therein.
A cause of action alleging that a party was fraudulently induced into entering into an agreement accrues upon execution of said agreement. The action must be commenced within six years of the date of execution or within two years of the date when such fraud could reasonably have been discovered (See, In re Neidich, 290 AD2d 557; see also, Estate of Blake, 282 AD2d 905, citations omitted).
Even if petitioner could establish that Judith was unable to ascertain the alleged fraud during the initial six years of the applicable statute of limitations, as respondents' argue, there is no indication that Judith was prevented from discovering such fraud prior to the expiration of the statute of limitations, certainly not during the more than two years after Nicholas' death. Her failure to do so must bind the fiduciary of her estate.
With respect to petitioner's argument that the post-nuptial agreement was neither acknowledged nor witnessed, and cannot constitute an effective waiver of Judith's right of election, pursuant to EPTL 5-1.1-A(e)(2), petitioner has failed to establish that the "acknowledgment" is insufficient on its face or incapable of being proven under existing case law.
As has been observed, there are two parts to an acknowledgment for a valid waiver under EPTL 5-1.1-A(e)(2): an oral declaration of the subscriber of the document to an officer before whom the declaration is made, and the certificate of the officer, who is generally a notary (Rogers v. Pell, 154 NY 518; Matter of Seviroli, 9 Misc 3d 1116(A); citations omitted). Where the acknowledgment is defective, it may be cured by subsequent proof from the notary as a subscribing witness (Ibid; Matter of Felicetti, 1/22/98 NYLJ p. 31 (col. 3)). Surrogate Radigan has observed that the Real Property Law (§§292, 303) does not specify the format an oral acknowledgment must take, that the circumstances surrounding the execution of the document could prove that it was properly acknowledged and that determinations premised upon common sense are [*8]preferable to determinations governed by a ceremonial format (Matter of Cerrito, 6/12/95 NYLJ p. 36 [col. 6]).
The statement in question, referred to by the parties as a "verification," contains the signatory's oath that she is the person described in the instrument, that she has read the instrument and that the statements contained therein are true except as to matters therein alleged to be on information and belief. Her signature was then apparently notarized.
It is true, as petitioner argues, that a failure to acknowledge an agreement waiving inheritance rights may not be cured after the death of one of the spouses, however a waiver of such rights that has been acknowledged, but contains an improper certificate of acknowledgment or subscribing witness certificate may be corrected (Estate of Menahem, 13 Misc 3d 1226(A); citing, Matter of Felicetti, supra, other citations omitted). None of the pertinent statutory provisions (EPTL 5-1.1-A(e)(2), RPL §292, RPL §303) specify the format that an acknowledgment must take. If the primary purpose of an acknowledgment is to prove the identity of the person whose name appears on the document and that such person signed the instrument and if substantial compliance with the statutory requisites of an acknowledgment is sufficient (Matter of Cerrito, supra; citations omitted; (Weinstein v. Weinstein, 36 AD3d 797; citing, RPL §309-a[1]; other citations omitted), then it would appear that the subject instrument is capable of being proved under EPTL 5-1.1-A(e)(2).
In connection therewith, while counsel's arguments regarding the competence of witnesses under CPLR 4519 are well-taken, whether Udwadia is incompetent to testify will have to await a trial or hearing on this matter, pursuant to the terms of the statute; just as his recollection regarding execution of the post-nuptial agreement, if such recollection is sought, should be demonstrated by more than the hearsay statement of a party to these proceedings.
The Court will not specifically address the other arguments raised on these motions, with the exception of the assertion of the statute of limitations, as it appears that sufficiency of the "acknowledgement" at issue requires resolution as a threshold issue.
Petition to Determine Validity of the Waiver of the
Right of Election
Conclusion
In view of the Court's finding that petitioner's allegations sounding in fraud, coercion and misrepresentation are time-barred, [*9]respondents' motion for partial summary judgment seeking dismissal of any claims premised on these grounds is granted.
Petitioner's cross-motion seeking summary judgment is denied.
Accordingly, counsel for the parties in this proceeding shall appear for conference in the Law Department of the Surrogate's Court on Wednesday, July 25, 2007 at 9:30 a.m. in order to schedule any outstanding discovery and/or a trial/hearing date(s).
The foregoing decision constitutes the order of this Court.
________________________
John M. Czygier, Jr.,
Surrogate
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