Kriebel v Munsey

[*1] Kriebel v Munsey 2008 NY Slip Op 50840(U) [19 Misc 3d 1124(A)] Decided on April 2, 2008 Supreme Court, Kings County Jacobson, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 April 2, 2008
Supreme Court, Kings County

Marilyn Kriebel, as Temporary Trustee of the Trust Agreement for the Nelson Emory Munsey 2000 Trust, Plaintiff,

against

Morgan Markeith Munsey a/k/a Morgan M. Munsey, Julian N. Munsey, Julian N. Fairweather, Esq. a/k/a Julianne Fairweather & Associates, P.C., Bear Sterns Securities Corp., H. Beck, Inc., J. P. Morgan Chase & Co. and Ohio Savings Bank, Defendants.



35156/03

Laura Lee Jacobson, J.

Plaintiff moves for an order pursuant to CPLR §§ 3212 granting summary judgment in favor of plaintiff and against defendant Morgan Markeith Munsey a/k/a Morgan Munsey (hereinafter "Morgan Munsey") for the relief demanded in the complaint plus interest from November 1, 2000, plus compensatory and punitive damages or, alternatively, the scheduling of an inquest to determine such damages and disbursements of this action, and for such other and further relief as this court deems just and proper .

Plaintiff alleges that defendant, Morgan Munsey as former Trustee of the Nelson Emory Munsey 2000 Trust ( hereinafter "Trust"), breached his fiduciary duty as trustee and as a result, plaintiff seeks damages and the return of trust funds. Defendant Morgan Munsey was apparently the trustee of his father's trust which was established in the state of California [FN1]. Plaintiff herein is [*2]the court-appointed temporary trustee of said Trust. This action was commenced on October 1, 2003. Defendants Ohio Savings Bank (hereinafter "Ohio") and Julian N. Fairweather (hereinafter "Fairweather") moved to dismiss the complaint and plaintiff moved to consolidate this action with a related foreclosure proceeding entitled Ohio Savings Bank v Morgan M. Munsey et. al, Index no. 34007/03. By decision and order dated May 14, 2004, this Court denied defendant Fairweather's motion and plaintiff's motion to consolidate. However, the Court granted defendant Ohio's motion to dismiss it from the action but ordered that the proceeds from the foreclosure sale be placed in escrow in court pending the outcome of this action. On April 7, 2006, plaintiff settled its claim against defendants Ohio, Fairweather, Bears Sterns Securities Corp., H. Beck, Inc. and J.P. Morgan Chase & Co. for the sum of $140,000.00. By Order dated June 14, 2007, I directed that the proceeds from the sale in the amount of $368,868.45 that were deposited into the Court, should remain on deposit and not be released until further order from the court. The note of issue in this matter was filed on July 9, 2007. By decision and order dated July 31, 2007, defendant Morgan Munsey's attorney was granted leave to withdraw as defendant Munsey's counsel and this action was stayed for ninety days. On October 30, 2007, plaintiff filed the instant motion for summary judgment.

The complaint alleges six causes of action against defendant Morgan Munsey. The first two causes of action seek compensatory damages of $37, 544.39, plus punitive damages for defendant's alleged breach of his fiduciary duties; the third cause of action seeks damages for defendant Morgan Munsey's alleged conversion of trust assets; the fourth cause of action seeks damages for defendant Morgan Munsey's alleged fraud perpetrated against the Trust; the fifth cause of action requests the placement of a constructive trust on the real property that he allegedly purchased in his own name with trust monies together with an accounting of the rents and profits therefrom; and the sixth cause of action seeks repayment of the sum of $1,125.00 allegedly owed to the Trust representing a sanction imposed by order of the Superior Court of California for his failure to account for his administration of the Trust.

The temporary trustee, Marilyn Kreibel alleges that she was appointed by the California Superior Court of San Diego County concomitant with the suspension of defendant Morgan Munsey's powers on October 3, 2002. Plaintiff Kreibel alleges that she is familiar with the affairs of the trust as handled by defendant Morgan Munsey based on her review of the trusts finances during his [*3]tenure as trustee. She alleges that the beneficiary of the subject Trust, Nelson Emory Munsey was a professional football player who retired in 1977. He received a pension from the National Football League that was increased to $11,000.00 a month due to his diagnosed psychiatric disability of severe chronic paranoid schizophrenic disorder. Nelson Emory Munsey's attorneys at the time arranged for the creation of a Trust by the California Superior Court of San Diego County for the deposit and administration of his pension and disability funds for his benefit. Plaintiff asserts that the first trustee maintained the trust's assets which consisted solely of cash, in an account with Charles Schwab & Co. According to plaintiff Kreibel, after the first trustee resigned, the beneficiary's son, defendant Morgan Munsey became trustee on November 1, 2000. Plaintiff Kreibel contends that as trustee, defendant Morgan Munsey misappropriated and converted trust property for his own use and gain, leaving the trust in disarray and debt. Plaintiff Kreibel alleges that when defendant Morgan Munsey took over as trustee the beneficiary's Schwab One Trust Account consisted of deposits totaling $666,310.43. She contends that the account balance rose to $669,292.68 shortly after Mr. Morgan Munsey became signatory on the account. According to Ms. Kreibel, in March of 2001, defendant Morgan Munsey made two withdrawals from the account. The first withdrawal totaling $250,000.00 was used to purchase an annuity from ING. The second withdrawal totaling $410,000.00 was deposited in a money market account maintained by Bear, Stearns in New York. On July 11, 2001, defendant Morgan Munsey transferred $125,000.00 from the Reserve Fund to the ING annuity bringing its total to $375,000.00. Ms. Kreibel alleges that in September of 2002, defendant Morgan Munsey withdrew a net of $215,000.00 from the ING annuity which resulted in the imposition of an early redemption penalty totaling $49,000.00. She asserts that the $215,000.00 was deposited in the reserve fund. Plaintiff Kreibel contends that this transaction accomplished nothing other than costing the Trust $49,000.00. According to plaintiff Kreibel, from November 7, 2000 through September 27, 2002, defendant Morgan Munsey wrote checks on the Reserve Fund account for his own personal use. She alleges that he wrote checks in the amount of $20,753.80 and 36,678.44, respectively as payment for his student loan; a $10,000.00 check payable to himself as a "trust fee" and other sums payable to him personally ranging from $300.00 to $5,000.00. Additionally, plaintiff Kreibel contends that $150,000 was designated as a Trust Loan. She also contends that defendant Morgan Munsey wrote a check for $191,015.00 payable to Julian N. Fairweather, as attorney. Plaintiff Kreibel contends that this money was used by the defendant to buy a brownstone for [*4]himself located at 105 St. Marks Avenue in Brooklyn, New York. Plaintiff Kreibel contends that defendant Munsey purchased the brownstone with a down payment of $116,250.00 which she alleges he admitted came from the Trust. She contends that during the time he owned the brownstone, defendant Morgan Munsey never accounted to the Trust for the rents and profits that he received from the property and he never paid the mortgage. As a result, the property was lost in foreclosure. Plaintiff Kreibel alleges that over $537,544.39 in trust monies were paid to or used for the benefit of defendant Morgan Munsey. Plaintiff Kreibel alleges that defendant Morgan Munsey failed to file income taxes for the Trust which resulted in liability for the Trust for back taxes, interest and penalties totaling $465,400.22. Plaintiff Kreibel contends that defendant Munsey has caused the Trust a total loss in excess of $1,002,944.61.

Plaintiff contends that defendant Morgan Munsey breached his fiduciary duty to the Trust based on his failure to manage it in the best interest of his father. According to plaintiff, defendant Morgan Munsey's diversion of the funds crossed the line into self-dealing and conversion. Plaintiff argues that the monies converted by defendant Morgan Munsey can be traced from a review of the checks written by defendant Morgan Munsey and later confirmed by him at his deposition. Plaintiff argues that the checks show that defendant Morgan Munsey transferred funds from the Trust to himself directly or to third parties for his own benefit. Plaintiff asserts that trust monies used to purchase the brownstone are directly related to the surplus monies derived from the sale of the property during foreclosure. However, plaintiff alleges that defendant Morgan Munsey continues to make claim to the surplus monies to the exclusion of the trust. Plaintiff contends that the manner of defendant Morgan Munsey's use and control of the assets was unauthorized, improper and illegal. Plaintiff argues that defendant Morgan Munsey's self-dealing as trustee is a fraud upon the Trust. Plaintiff contends that defendant Morgan Munsey's actions, undertaken as trustee, were not merely accidental or poorly discharged. She asserts that they were calculated and intentional, as he systematically depleted the trusts' funds for his own enrichment. Plaintiff further argues that defendant Morgan Munsey grossly mismanaged the Trust by imprudently purchasing the ING annuity and then making an early withdrawal that cost the trust $49,000,00. Furthermore, plaintiff contends that defendant Morgan Munsey's failure to file trust income taxes or to pay the income taxes due resulted in costs to the trust of $465,400.22. Plaintiff contends that if defendant Morgan Munsey's actions were not completely intentional, his mismanagement of the trust was in large part grossly negligent. Plaintiff contends [*5]that as a direct result of defendant Morgan Munsey's breach of fiduciary duty, conversion and mismanagement, the Trust is entitled to compensatory damages and punitive damages.

In opposition, defendant Morgan Munsey, appearing pro se, alleges that he and his father have been robbed and victimized by lawyers. He contends that his father's attorney Ron Mix and the current trustee, Ms. Kreibel have looted the majority of the trust assets through their contrived legal fees. He insists that if Ms. Kreibel had paid taxes instead of legal fees his father would not have his current tax problems. Mr. Morgan argues that since the money for the brownstone was purchased with the money from the Trust the property, by law it legally remained an asset of the Trust under a "purchase money resulting trust". Defendant alleges that Ms. Kreibel either knew or should have known this and that she has needlessly generated legal fees and compromised the value of an asset of the Trust. Defendant Morgan Munsey alleges that he invested in the brownstone to make it more difficult for the lawyers to steal his father's money and to acquire an asset for the trust that was poised for significant capital appreciation. He alleges that the brownstone did increase in value and the appreciation in value more than made up for the surrender charges on the annuity. He alleges that Ms. Kreibel and Mr. Mix and others caused the Trust to lose most of the capital appreciation by sabotaging his trusteeship on the day that the loan closed. Defendant Morgan Munsey alleges that it was his father's idea that he take money from the Trust for his college education. He further alleges that pursuant to the Federal tax tables, during his tenure as trustee, the Trust would have to have earned in excess of $3,000,000 in income to generate the amount of tax liability alleged by Ms. Kreibel. According to defendant Morgan Munsey, the Trust only earned 5% of that amount. He contends that plaintiff Kreibel provides no accounting to show why that amount is owed. Defendant Morgan Munsey alleges that he put money into an annuity to make it much less accessible to creditors and because the stock market was very vulnerable. He contends that if he had known about the opportunity to buy the brownstone prior to the investment in the annuity, he would have opted for the purchase of the brownstone. Defendant Morgan Munsey requests that this matter be fully litigated and that Ms. Kreibel be immediately removed as trustee. He contends that she has failed to act in the best interest of his father in that she has given the majority of the Trust money and his father's monthly income to her "lawyer cronies". According to defendant Morgan Munsey, his father is badly in need of surgery and medical attention. However, he alleges that in spite of this fact, the bulk of his father's money is being spent on legal fees. [*6]

In reply, Plaintiff alleges that defendant Morgan Munsey forced the Trust to take legal actions and he alone is the reason that this matter has continued for over four years. Plaintiff asserts that numerous demands have been made to the defendant to give up his claims to the brownstone and later, his claims to the surplus monies. Plaintiff contends that since defendant Morgan Munsey continued to persist in his claims, the Trust had no choice and indeed, was obligated to pursue its legal action(s) against him.

Summary judgment should only be granted where there are no triable issues of fact (Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957]). In order to prevail on a motion for summary judgment, the movant must present a prima facie case demonstrating entitlement to judgment as a matter of law (Prince v Di Benedetto, 189 AD2d 757, 759 [1993]; Zarr v Piccio, 180 AD2d 734, 735 [1992]). Once the movant has established his or her prima facie case, the party opposing the motion bears the burden of "produc[ing] evidentiary proof in admissible form sufficient to require a trial of material questions of fact . . . mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient" (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]. "A fiduciary owes a duty of undivided and undiluted loyalty to those whose interest the fiduciary is to protect" ( Birbaum v. Birbaum, 73 NY2d 461, 466 [1989]). Moreover, a trustee is required to administer the trust solely in the interests of the beneficiary (see Astro Mechanical Contracting, Inc.v Fleet Bank, N.A., 1 NY3d 324 [2004]). Furthermore, a trustee is required to act reasonably and in good faith in attempting to carry out the terms of the trust even when the trust instrument vests the trustee with broad discretion to make decisions regarding distribution of the trust funds (see in Re Estate of Wallens, 9NY3d 117 [2007]). Further, to establish conversion, the plaintiff must show legal ownership or an immediate superior right of possession to a specific identifiable thing and must show that the defendant exercised an unauthorized dominion over the thing in question to the exclusion of the plaintiff's rights. Tangible personal property or specific money must be involved (Fiorenti v. Central Emergency Physicians, PLLC, 305 Ad2d 453 [2nd Dept. 2003]). Additionally, a constructive trust may be imposed in favor of one who transfers property in reliance on a promise originating in a confidential relationship where the transfer results in the unjust enrichment of another( Rogers v. Rogers, 63 NY2d 582, 585-586 [1984]). Here, plaintiff has made a prima facie showing of entitlement to summary judgment as a matter of law which defendant Morgan Munsey has failed to rebut with competent proof in admissible form. Plaintiff has established through documentary evidence and defendant Morgan [*7]Munsey's own affidavit and deposition testimony, that the defendant breached his fiduciary duty during his tenure as trustee, by engaging in a pattern of mismanagement and self-dealing that any prudent person would have known was detrimental to the interests of the beneficiary, his father Nelson Emory Munsey. Furthermore, plaintiff has established that defendant Morgan Munsey converted the Trust's assets for his own personal use. Those assets, according to defendant Morgan Munsey's own affidavit, included the brownstone which was purchased with Trust fund monies. Furthermore, if as Mr. Munsey suggests, he considered the brownstone a wise investment for the Trust, why did he allow the property to go into foreclosure? Consequently, the surplus proceeds from the sale of the brownstone are also assets of the Trust. As such, plaintiff has established that the Trust is entitled to the imposition of a constructive trust on the surplus monies from the sale of the brownstone.

Accordingly, plaintiff's motion for summary judgment is granted to the extent that summary judgment is granted in plaintiff's favor on the issue of liability; plaintiff is granted the imposition of a constructive trust on the surplus proceedings being held in escrow in the court in the amount of $368,868.45; and this matter is ordered set down for an inquest on the issue of damages to be held before me on May 21, 2008 at 10:00 am at 360 Adams Street, room 961 in Brooklyn, New York.

This constitutes the decision and order of this court.

Enter:

________________Laura Jacobson, JSC Footnotes

Footnote 1:At some point, defendant Morgan Munsey transferred the situs of the Trust to New York. As such, pursuant to Article 15. 2 of the trust agreement, the administration of the Trust shall be governed by the laws of the state of the new situs. Consequently, the issues in this action shall be determined in accordance with New York Law.