Matter of Lasdon

[*1] Matter of Lasdon 2012 NY Slip Op 51424(U) Decided on June 8, 2012 Sur Ct, New York County Glen, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 8, 2012
Sur Ct, New York County

In the Matter of the Judicial Settlement of the First and Final Account of Proceedings of JEFFREY SCOTT LASDON as Co-trustee and Preliminary Executor of the Estate of GENE LASDON, deceased Co-trustee, of the Trust Created for the Benefit of MICHAEL B. ABRAMS Under Article FIFTH of the last Will and Testament of Stanley S. Lasdon, Deceased. In the Matter of the Judicial Settlement of the First and Final Account of Proceedings of JEFFREY SCOTT LASDON as Co-trustee and Preliminary Executor of the Estate of GENE LASDON, deceased Co-trustee, of the Trust Created for the Benefit of DANIEL A. ABRAMS Under Article FIFTH of the last Will and Testament of STANLEY S. LASDON, Deceased. In the Matter of the Judicial Settlement of the First and Final Account of Proceedings of SUSAN LASDON ABRAMS as Co-trustee of the Trust created for the Benefit of MICHAEL B. ABRAMS Under Article FIFTH of the last Will and Testament of STANLEY S. LASDON, Deceased. In the Matter of the Judicial Settlement of the First and Final Account of Proceedings of SUSAN LASDON ABRAMS as Co-trustee of the Trust created for the Benefit of DANIEL A. ABRAMS Under Article FIFTH of the last Will and Testament of STANLEY S. LASDON, Deceased.



703-1993



For Beneficiary-Objectants, Michael B. Abrams and Daniel A. Abrams:

Richard E. Hahn, Esq., Llorca & Hahn, LLP

For Co-Trustee Jeffrey S. Lasdon:

Charles F. Gibbs, Esq., Brian Corrigan, Esq. & Faith Carter, Esq. of Holland & Knight LLP

For Co-Trustee Susan Lasdon Abrams:

Lansing R. Palmer, Esq. of Putney, Twombly, Hall & Hirson LLP

Kristin Booth Glen, J.

In each of four final trust accountings, the parties have submitted competing proposed decrees along with supporting affirmations.

The two trusts at issue were established under the will of decedent Stanley Lasdon for the benefit of Michael Abrams ("Michael") and Daniel Abrams ("Daniel"), children of decedent's daughter, Susan Lasdon Abrams ("Susan"), who served as co-trustee of the trusts. The trusts terminated when their respective beneficiaries turned 35 years of age. Susan accounted for both trusts and her brother, Jeffrey Lasdon ("Jeffrey"), objected to her accounts. Jeffrey also served as co-trustee and separately accounted,[FN1] and Michael and Daniel objected to his accounts, primarily on the ground that Jeffrey improperly delayed distribution of the remainders upon termination. Most of the controversies were resolved in a decision on the parties' motions for partial summary judgment and in a decision on reargument thereof (Matter of Lasdon, NYLJ, June 29, 2010, at 37, col 1 [Sur Ct New York County]; Matter of Lasdon, NYLJ 1202474997186, *1 [Sur Ct, New York County, Nov. 1, 2010, No. 1993-703]), familiarity with which is assumed.

Jeffrey was to be surcharged for failure to timely distribute, but certain issues remained for trial, including the precise dates on which distributions of the respective remainders could have been made. The parties made certain motions in limine regarding legal issues as to the proper calculation of Jeffrey's surcharge. To avoid the time and expense of a trial, the parties stipulated to additional facts, including the times at which distributions should have been made (the "Stipulation"). The Stipulation, however, left for resolution the issues raised in the motions in limine, requiring another decision in this matter (Matter of Lasdon, 2001 NY Slip Op 51710(U), 32 Misc 3d 1245(A) [Sur Ct, New York County, Aug. 23, 2011, No. 1993-703]). [*2]That decision, familiarity with which is also assumed, addressed the appropriate measure of surcharge against Jeffrey, including the rate of interest to be imposed. Upon settling a decree thereafter, the parties discovered various differences in the final calculations in light of the court decisions and their Stipulation. The present decision resolves the four issues raised by the respective counter decrees and submissions, which, as relevant here, are essentially the same for each trust.

The first is whether interest — by prior decision to be imposed at the rate of 6% per annum — is to be awarded on (1) the difference between the fair market value of the Pfizer Incorporated stock, which constituted the bulk of both remainders, when it should have been distributed (in Michael's trust, on November 19, 2004; and in Daniel's, on May 18, 2007) and the fair market value of that stock when it was in fact distributed (for both trusts, on March 4, 2008), or (2) the fair market value of the Pfizer stock at the time it should have been distributed.The same issue is raised with the other stock holdings retained in each trust after the Pfizer stock was distributed.

The second option, urged by Michael and Daniel, is the proper one as per the decision in Matter of Saxton (274 AD2d 110 [3d Dept 2000]). In upholding the surcharge, and the interest thereon, for a trustee's overly concentrated holding of one security (IBM), that court modified the lower court's holding, explaining: "[W]e conclude that Surrogate's Court erred in computing interest on only the lost capital, i.e., the difference between the amount that would have been realized had 90% of the stock of the IBM stock been sold on September 10, 1987 and the value of the stock when it was actually distributed to respondents in July[,] 1993, and then deducting the amount of dividends, and other income attributable to the retained stock. The court should have employed the damages methodology of Matter of Janes [91 NY2d 41 (1997)] and computed interest on the full value of the stock at the time when it should have been sold and then deducted the value of the stock when actually distributed, as well as the dividends and other income attributable to the retained stock" (Saxton, 274 AD2d at 121).

The court rejects Jeffrey's argument that the distinction between Saxton and the present case on another issue makes Saxton distinguishable from this one for all purposes. Unlike in Saxton where a sale was a necessary consequence of the negligent over-concentration determination there, this court determined that the possible capital gains tax to be imposed on a hypothetical sale need not be taken into account here in determining the surcharge for failure to timely distribute the remainders in kind that the beneficiaries had requested. However, there is no call in logic for the court to also reject the Saxton holding (based on the Court of Appeals decision in Janes) that lost capital interest is awarded on the fair market value of the stock when it should have been sold — or the analog here, when it should have been distributed (until actually distributed or an accounting filed).[FN2] [*3]

Consequently, interest is to be imposed on the fair market value of the Pfizer and other stock holdings as of the time they should have been distributed, up to, in the case of the Pfizer holdings, the date they were actually distributed, or March 4, 2008, and in the case of the other stock holdings, the date of the filing of Jeffrey's accounts, or October 16, 2008.[FN3]

A second issue, also related to the imposition of interest, is whether the objectants, the remainder beneficiaries, are entitled to interest on lost capital after the trustees distributed the Pfizer stock to them. Objectants seek such interest from that time, March 4, 2008, to the date of decision, August 22, 2011. They also seek interest on the lost capital amounts in respect of the other securities held by Jeffrey from the date of the filing of the accountings (October 16, 2008) to the date of the decision (August 22, 2011).[FN4]

Jeffrey claims that once the Pfizer stock was distributed no interest should be awarded, and that the court decisions in this matter do not provide for such interest after the Pfizer holdings were distributed. Michael and Daniel, for their part, rely on the text of CPLR § 5001 for the proposition that while the decision to impose interest and, if so, the choice as to the date from it should run, rests with the discretion of the court in equitable proceedings such as these, the court has no discretion to limit any interest imposed from running to the date of the decision. The text of subsection (a) of CPLR § 5001 provides that "interest and the rate and the date from which it shall be computed shall be in the court's discretion." Subsection (c) continues: "The date from which interest is to be computed shall be specified in the ... decision.... The amount of interest shall be computed by the clerk of the court, to the date ... the decision was made, and included in the total sum awarded."

The court need not reach the issue of whether the statute prohibits a court from limiting, on some equitable grounds, the imposition of interest to a time before the date of a decision because in this instance the award of interest to the date of decision is appropriate. As the court noted in the August 22, 2011 decision, the imposition of interest is designed to make a party whole, and having been deprived of the lost capital amounts — whether measured from the dates the holdings should have been distributed to the date when they were distributed (Pfizer) or to the [*4]date of filing the accounting (the other stock holdings) — objectants rightly should be allowed interest as an element of repair for their injury.

Jeffrey attempts to use two statements in the court's August 22, 2011 decision regarding the offset against interest for ordinary income/dividends received (discussed more fully in third issue below) as a barrier to the imposition of interest to the date of decision. This court noted that: "All further agree that such award [of interest], if any, should be offset by income realized (during the period of delayed distribution) on the assets whose distribution were unduly delayed" (Slip Op. At 9 [emphasis supplied]), and this was reiterated in setting forth the court's conclusion. This language, however, does not purport to set the end date for the imposition of interest on the surcharges for lost capital.

Given the resolution of the above two issues, the third issue — whether the anti-netting rule limits the offset against interest in respect of stocks that declined in value during the relevant period for income/dividends received on stocks that did not decline in value — does not arise. The "anti-netting rule," which this court held applicable, prevents Jeffrey from offsetting the surcharge amount by the amount of gains in stock holdings by the respective trusts due to his improper retention of the remainders; it does not bar Jeffrey from offsetting the interest on the surcharge by the ordinary income/dividends received on all the trusts' assets during the period of improper retention (see Matter of Buck, 55 NYS2d 841 [Sur Ct Westchester County 1945] [applying the "anti-netting rule," but noting that "any dividends received on such securities" would be credited against the interest awarded]). In this regard, Jeffrey's point is that, if a stock did not decline in value during the relevant period, then any income realized on that stock holding can be used to offset the interest imposed on another stock holding that did decline in value. However, such an offset becomes possible, under the particular facts and stock holdings involved here, only if interest is awarded on the difference between the fair market value of when the stock should have been distributed and, as the case may be, when it was distributed or when Jeffrey accounted for it as an asset of the trust. That is not the case here.

As explained, objectants are entitled to interest on the fair market value of each stock improperly retained as of the date it should have been distributed, and this is so regardless of whether it declined in value. In light of this interest award, there is no additional ordinary income available with respect to any one holding to offset the interest awarded on a stock that did in fact decline in value. As it happened, the income generated on a particular stock holding was never so large as to offset the entire interest award for that stock holding, and, consequently, there is no "surplus" income from one stock to offset the award of interest in respect of another stock holding. The decrees proposed by Michael and Daniel, however, do properly include, for each stock holding, an offset against the interest awarded for income realized.

The fourth and final issue is a dispute regarding whether the Stipulation is binding as to the amount of commissions to which Jeffrey is entitled from each trust. The court's summary judgment decision held that income was accumulated as principal and that Jeffrey was entitled only to paying out commissions and to commissions payable from principal. However, the Stipulation failed to include the proper amount of commissions in listing the "total" commissions to which Jeffrey was entitled from each trust because it did not take into account the court's decision that income was accumulated as principal and did not include paying out commissions. "Total" commissions were thus mistakenly listed in the Stipulation in amounts less than those to [*5]which Jeffrey would otherwise be entitled. The amount of commissions listed in each instance was first provided in a draft by Michael and Daniel's counsel more than a week prior to execution, and these provisions were reviewed both by counsel and Jeffrey himself. Jeffrey's counsel suggested specific changes, not related to the dollar amount of the commissions, to these particular provisions that were adopted in the final Stipulation.

Michael and Daniel claim that Jeffrey is bound by the terms of Stipulation as to commissions to be taken by him. Jeffrey claims that the Stipulation is not binding as to commissions because it was not necessary to include the mistaken statements as to their total in the Stipulation; it was only designed to resolve factual questions requiring trial. Such factual issues concededly did not include questions regarding the calculation of commissions, but this is no defense. It may have been unnecessary to agree to commissions in the Stipulation, but Jeffrey did so in a manner sufficient to comply with CPLR § 2104 that provides the standards for determining whether a stipulation is binding. Moreover, unilateral mistake, without some showing of additional inequitable conduct or fraud, provides no basis for avoiding the terms of a stipulation (see Surlak v Surlak, 95 AD2d 371, 384 [2d Dept 1983], appeal dismissed 61 NY2d 906 [1984]; see also Marren v Nathan, 2 AD3d 230, 231 [1st Dept 2003]). Jeffrey has offered nothing to counter the evidence submitted by Michael and Daniel that the Stipulation was the product of arms-length negotiations between counsel. Consequently, Jeffrey is bound by the Stipulation as to the amount of commissions to be taken by him from both trusts.

Decrees signed.

Dated: June 8, 2012________________________________S U R R O G A T E Footnotes

Footnote 1:Jeffrey also accounted as fiduciary of deceased co-trustee, Gene Lasdon, who was the mother of Susan and Jeffrey.

Footnote 2:Jeffrey's attempt to read a statement in the court's decision that the "surcharge in this case is subject to interest at an annual rate of six per cent" as indicating that interest is to be awarded only on the difference in value between when the holdings should have and were distributed (or accounted for) is rejected. Likewise unavailing is Jeffrey's claim that Michael and Daniel did not seek the specific imposition of this interest award in their objections. While relief should be demanded, the CPLR makes clear that, except in situations involving default judgments, "the court may grant any type of relief within its jurisdiction appropriate to the proof whether or not demanded, imposing such terms as may be just" (CPLR § 3017[a]). Here it was clear from the objections that the remainder beneficiaries were seeking surcharge for lost capital.

Footnote 3:A prior controversy as to whether interest should run in this instance on the value of the other stock holdings to a later date has been resolved with Michael and Daniel agreeing that the date of Jeffrey's filing of the accounts is the proper end date for the imposition of this particular interest award.

Footnote 4:According to Jeffrey, Michael and Daniel do not seek interest on the lost capital surcharge amounts for the other stock holdings that lost value during the relevant time periods, but that is not accurate.