Matter of Deneny v Van Rossem
Annotate this CaseDecided on December 29, 2011
Supreme Court, New York County
In the Matter of the Application of John Francis Deneny a/k/a Sean Deneny, as Beneficiary and Co-Trustee, to Remove Barbara Van Rossem as Co-Trustee of The 518 Trust created under the John Deneny Living Trust dated February 28, 2002, pursuant to EPTL § 7-2.6(a)(2), Petitioner,
against
Barbara Van Rossem, as Co-Trustee of The 518 Trust, Respondent.
113205/10
For petitioner:
Thomas A. Cunnane, Jr., Esq.
Cuddy & Feder LLP
445 Hamilton Ave., 14th Fl.
White Plains, NY 10601
914-761-1300
For respondent:
William J. Garry, Esq.
Harris Beach PLLC
333 Earle Ovington Blvd., Ste. 901
Uniondale, NY 11553
516-880-8490
Barbara Jaffe, J.
By order to show cause dated November 9, 2010 and verified petition dated October 4, 2010, petitioner moves pursuant to CPLR 7701, et seq. and EPTL § 7-2.6(a)(2) for an order removing respondent as co-trustee of The 518 Trust (Trust). Respondent opposes and, by notice of cross motion dated September 1, 2011, moves pursuant to EPTL § 7-2.7 for an order directing petitioner to provide a full accounting of the Trust, and pursuant to EPTL § 7-2.2 terminating the Trust, directing the sale of all trust assets, and providing respondent with her beneficial share of the sale proceeds. Petitioner opposes the cross motion.
I. PERTINENT BACKGROUND[*2]
John Deneny, the parties' now-deceased father, created a Living Trust for the purpose of holding in trust some of his real property, including the building located at 518 East 83rd Street in Manhattan (the property), a 20-unit apartment building. The Living Trust provides that upon Deneny's death and after his estate has been settled, the trustees are to dispose of and distribute the trust's interest in the property to The 518 Trust. Deneny appointed petitioner and respondent to serve as the Trust's co-trustees and primary beneficiaries. (Verified Petition, dated Oct. 4, 2010 [Pet.], Exh. A).
By deed dated March 29, 2005, petitioner and respondent acquired title to the property as co-trustees of the Trust. (Id., Exh. B). Thereafter, respondent moved into the property as her primary residence, while petitioner, from June 2007 to August 2010, resided in California and, since August 2010, resides in Water Mill, New York. The parties agreed that respondent would be responsible for collecting rent checks from tenants residing in the property, addressing tenant-related issues, and keeping the property in good condition. (Id.).
II. CONTENTIONS
Petitioner alleges that respondent has failed to administer the Trust properly and maintain it in a safe and sanitary condition, alleging that approximately half of the apartments are not rented and are filled with excrement, vermin, and garbage. Moreover, he asserts, respondent claimed 10 of the 20 apartment units for her sole use and filled several of them with abandoned furniture and rotten food and garbage, leading to vermin, insects, and excrement, and depriving the Trust of substantial monthly rental revenue, resulting in a deficit. Although petitioner and respondent have funded the Trust with approximately $150,000 each, the Trust remains in default with some third-party creditors and is at risk of defaulting on its mortgage. Moreover, its bank account is almost empty and any revenue collected by the Trust is used to pay Trust expenses or is spent by respondent for personal shopping. He also cites the following incidents as reflecting negatively on respondent's management of the property:
(1)In July 2010, the New York City Water Board mailed respondent a new water bill, which she failed to pay, resulting in the Water Board accelerating all payments due by the Trust to $21,426.74, due immediately. After partial payments were made, the balance due is approximately $17,000;
(2)In June 2010, respondent was notified that the Trust was required to file a Real Property Income and Expense report (RPIE) by September 1, 2010, with the failure to do so subjecting the Trust to a penalty of up to three percent of the property's actual assessed value for the upcoming tax year. Upon respondent's failure to comply, a second and final notice dated July 29, 2010 was delivered to the Trust, warning that the RPIE was due on or before September 1, 2010. Respondent not only again failed to comply but mailed the notice to petitioner in a manner that did not permit him to receive it until August 30, 2010; and
(3)Respondent has created dangerous, unsanitary, and deplorable conditions in the property, leading to tenants complaining, breaking their leases early, and vacating the property.
[*3]
Petitioner thus contends that respondent has mismanaged the property and Trust. He additionally maintains that the relationship between him and respondent has deteriorated over the years, that respondent is physically, emotionally, and verbally abusive toward him and his children, has refused to reveal Trust expenses and pay the property's mortgage payments timely, and, until recently, refused to permit petitioner access to the property. Petitioner thus asserts that respondent's mismanagement and conduct warrants her removal as co-trustee of the Trust. (Id.).
Respondent denies petitioner's allegations, and contends that when the Trust took possession of the property, the rental units were in a state of disrepair, and there were ten vacant units that were not fit for habitation. She asserts that petitioner was in charge of the Trust's finances but failed to pay for necessary repairs, that she thus attempted to rehabilitate the property with her own limited resources and was able to repair all but four of the units as of August 2010, and she disputes the condition of the units as reflected in petitioner's photographs. Respondent also alleges that petitioner failed to manage the Trust's finances properly, that he failed to fulfill his responsibility for paying vendors and taxes and filing the RPIE, that he has refused to provide her with a full accounting of the Trust's finances, and that as she has received no income from the property, the purpose of the Trust has ceased to exist. She thus seeks to terminate the Trust and asks that any proceeds from it be equally divided between her and petitioner. (Affidavit of Barbara Van Rossem, dated Sept. 1, 2011).
In reply, petitioner maintains that when respondent took over the management of the property, all of the units were rented and the property was in good condition, but thereafter and due to respondent's actions, only half of the units were rented and the property is in a poor and unsafe condition. He denies having had financial control of the property or that he mismanaged the finances, and asserts that since he took over managing the property, he has substantially rehabilitated it, rented out five vacant units, thereby increasing the income generated by the property, and eliminated unnecessary expenses and paid costs and bills. Petitioner alleges that as the property is now able to generate a profit, there is no basis upon which to terminate the Trust. (Affidavit of John Francis Deneny, dated Sept. 21, 2011).
III. ANALYSIS
Pursuant to CPLR 7701 et seq., a special proceeding may be brought to determine a matter relating to an express trust, and pursuant to EPTL § 7-2.6(a)(2), this court has the power, on the application of any person interested in the trust estate, to suspend or remove a trustee who has violated or threatens to violate the trust or who for any reason is unsuitable to execute the trust.
Here, notwithstanding the condition of the property before respondent took over its management, it is essentially undisputed that respondent has been unable to maintain the property sufficiently or manage the property's finances, leading to unsanitary conditions, loss of revenue, and the potential default of the property's financial obligations, and that she is abusive of petitioner. Consequently, petitioner has established that respondent has impeded his efforts to manage and maintain the property. (See Matter of Mergenhagen, 50 AD3d 1486 [4th Dept 2008] [court should have removed trustee as hostility between him and other trust beneficiaries conflicted with his duty toward trust as hostility interfered with proper administration of trust, and as he failed to fulfill trust duties]; Matter of Hall, 275 AD2d 979 [4th Dept 2000] [co-trustees should have been removed as their actions prevented petitioner from performing duties as co-[*4]trustee]). And, given the deterioration of the parties' relationship, they are apparently unable to co-manage the property. (See Matter of Duell, 258 AD2d 382 [1st Dept 1999] [court properly removed co-trustee upon showing of antagonisms between co-trustee and his co-trustee and trust beneficiaries, which resulted in co-trustee's actions that interfered with proper administration of estate, and that future cooperation was unlikely]; Matter of Angell, 268 AD 338 [3d Dept 1944], affd 294 NY 923 [1945] [removal of co-trustee justified where differences of opinion between co-trustees made future cooperation improbable]).
Petitioner has thus shown that respondent's actions have violated the Trust and/or that she is unable to execute the Trust as a co-trustee with him, thus warranting her removal as co-trustee. And, absent any dispute that the property is now generating an income, there is no ground upon which to terminate the Trust. (EPTL § 7-2.2 [when purpose of express trust ceases, estate of trustee also ceases]).
IV. CONCLUSION
Accordingly, it is hereby
ORDERED and ADJUDGED, that the petition is granted, and respondent is hereby removed forthwith as co-trustee of The 518 Trust; and it is further
ORDERED and ADJUDGED, that respondent's cross motion is denied.
ENTER:
_______________________________
Barbara Jaffe, JSC
DATED:December 29, 2011
New York, New York
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