Matter of Herriott

[*1] Matter of Herriott 2014 NY Slip Op 50036(U) Decided on January 17, 2014 Sur Ct, Yates County Falvey, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 January 17, 2014
Sur Ct, Yates County

In the Matter of the Judicial Settlement of the Account of Beverly Snively and Bruce C. Mellen, Executors of the Estate of Elizabeth A. Herriott, Deceased.



2010-9790/A



Kenyon & Kenyon

(Edward C. Russ Kenyon, Esq., of Counsel)

For Petitioners,

Martin E. Muehe, Esq.

For Objectant, Wendy Mellen Hoff.

W. Patrick Falvey, J.

MEMORANDUM DECISION

HON. W. PATRICK FALVEY, Surrogate

The decedent died July 9, 2010, survived by four children, leaving a will dated February 10, 1998 and first codicil dated April 8, 2008, naming her four children as beneficiaries and nominating two of said children, to wit: Bruce C. Mellon and Beverly Snively f/k/a Beverly G. Mellon as executors. The Court granted probate and appointed the executors on October 21, 2010. Objectant, Wenda Mellon-Hoff, is a sister of the co-executors as well as a named beneficiary. Objectant initially sought to file objections to the appointment of the executors, but then failed to do so. She subsequently filed objections to the final accounting on December 21, 2011.

The Estate moves for Summary Judgment, dismissing the objections to the accounting and accepting the final account sworn to August 2 and 8, 2011 as submitted in this voluntary accounting proceeding brought pursuant to SCPA 2208, et seq. The Estate also moves that since the account, objections, and responses thereto have been made and discovery has been completed then the Objectant should be prohibited from introducing any evidence regarding her ability to purchase the subject real property.

Arguments were had on November 27, 2013 at the conclusion of which the court reserved decision.

FACTS

The Objectant makes the following objections to the accounting: [*2]

First - The sale of 947 and 950 S. Lake Road, for net proceeds of $226,032.40.

The decedent died seized of these two parcels of land located on Canandaigua Lake, in the Town of Middlesex, County of Yates. Objectant asserts that the estate improperly sold both parcels to one of the executors, to wit: Beverly Snively and her husband, for an insufficient price. The court takes judicial notice of the deed for this transaction dated January 5, 2011 and recorded in the Yates County Clerk's Office on January 19, 2011 in Liber 624 of deeds at page 289.[FN1] The two parcels included a lake parcel with cottage, and a parcel on the other side of the road, with a building (cabin/garage) located thereon. Objectant claims that she wished to purchase at least one of the parcels and would have paid a higher price for it. She states that the executors engaged in self-dealing by failing to report to the other residuary beneficiaries of the estate the terms and price of the contract entered into between Snively and the estate and by failing to obtain the Objectant's consent to the sale. She also argues that the Estate should have tried to sell the real estate on the open market; that it was inappropriate for Attorney Kenyon to act as buyer's and seller's attorney; that the parcels should have been divided and the "middle property" retained for the benefit of the residuary beneficiaries; and that under the circumstances the executors should have obtained court approval for the proposed sale.

Objectant asks the court to set aside the transfer or allow Objectant a period of time to purchase one or the other of the parcels at the same price or the appraised price of the parcels.

Second - Sale of the 2005 Subaru. This objection was withdrawn.

Third - Granting commissions to the executors. Objectant says no commissions should be paid regarding the real estate due to the executors' self dealing.

Fourth - Attorney fees for estate. Objectant asserts Mr. Kenyon had a conflict of interest in representing both the buyer and seller in the real estate transaction.

Fifth- Objectant did not receive her fair share of the estate personal property. This objection was withdrawn.

Sixth - Objectant seeks attorney fees from the co-executors.

In support of the summary judgment motion regarding the first objection, co-executor Mellen and estate attorney Kenyon provide affidavits, as well as copies of contemporaneous e-mails between the siblings regarding the various issues, and transcripts from the EBT of the Objectant. The September 1, 2010 (Ex C) appraisal as well as the August 2, 2010 correspondence from realtor Anne Caprini to Executor Mellen (Ex B) were also submitted. The two purchase contracts are set forth at Ex L and Ex M. Ex BB is the bank appraisal when co-executor Snively obtained a mortgage on the property showing a value of $467,000.

The Estate argues no question of fact has been raised that the estate acted inappropriately in selling the Canandaigua Lake property to co-executor Snively, in that a fair price was established by appraisal, and Objectant Hoff was given an opportunity to purchase, but never made a firm offer in the time the estate sought to sell the property. Hoff was informed of the time pressure to pay off an existing reverse mortgage in a timely manner in order to avoid [*3]foreclosure on the property. The Estate notes that the co-executors were appointed on October 21, 2010 and the real property was subsequently sold by the co-executors to co-executor Beverly Snively and her husband by deed recorded January 19, 2011.

As for the third objection, the estate argues that Snively was insulated from the estate's responsibilities regarding the real estate. Therefore there was no self-dealing.

Neither affidavit appears to address the fourth objection regarding recoupment of attorney fees paid by the estate due to the alleged conflict of interest of Mr. Kenyon, in preparing a purchase offer for Snively, and then representing the estate in the sale to Snively, although Mr. Mellen says he was assured at the time that there was no conflict of interest.

Executors do not address the Objectant's request for attorney fees set forth in the sixth objection.

Objectant and her attorney have offered their affidavits, with exhibits, in opposition.

LAW

In reviewing a motion for Summary Judgment, the court is charged to determine whether there is a question of fact, requiring trial. In order to do so the court must engage in issue finding rather than issue determining. Initially, the court must determine if the movant has made a prima facie case for Summary Judgment, by way of affidavit, transcripts of depositions, and any other available proof. Then assuming the movant makes such a showing, then the respondent must lay bare her proof to the contrary.

In the context of objections to an accounting, where the estate moves for Summary Judgement, the executors have the burden of proving that they have fully accounted for all assets of the estate. In re Anolik, 274 AD2d 515 ( 2nd Dept 2000). The Objectant then has the burden to show that the account is inaccurate or incomplete. In re Estate of Curtis, 16 AD3d 725 (3rd Dept 2005).

As to the First objection regarding the real estate sale where the Objectant asserts that the executors failed to obtain a fair price on the sale of estate assets, the Objectant has the burden of showing that property was sold by the executors for less than fair market value or that a better price could have been obtained by exercise of diligent effort. In re Barnett's Estate, 84 NYS 2d 105 (Surrogate's Court, Kings County 1948).

However, in the case at bar, not only is there an assertion of lack of a fair price, but there is also an objection to the sale of the real estate to one of the co-executors of the estate, asserting that this is prohibited self-dealing. Objectant cites Matter of Kinzler, 195 AD2d 464 (2nd Dept 1993), Mtr of Kilmer, 187 Misc 121 (Surrogate's Court, Broome County 1946) and Mtr of Parisi, 34 Misc 3d 1204(A), 2011 NY Slip Op. 52429(U) (Surrogate's Court, Queens County 2011).

The court in Birnbaum v Birnbaum, 117 AD2d 409,416 (4th Dept 1986) ruled:

One of the most stringent precepts in the law is that a fiduciary shall not engage in self-dealing and when he is so charged, his actions will be scrutinized most carefully. When a fiduciary engages in self-dealing, there is inevitably a conflict of interest; as fiduciary he is bound to secure the greatest advantage for the beneficiaries; yet to do so might work to his personal disadvantage. Because of the conflict inherent in such transaction, it is voidable by the beneficiaries unless they have consented. [*4]

Such a sale to an executor is voidable on the election of beneficiaries. Mtr of Kilmer, 187 Misc 121. The acquiescence of some of the beneficiaries of the will is not binding on a beneficiary who does object. Id. The Objectant here did not tacitly acquiesce or consent to the conveyance at the time it was made, or thereafter ratify it, nor was she guilty of latches. See Kilmer, at 128 - 129Here, the petition for judicial settlement of account was filed September 16, 2011. The objections were filed December 21, 2011. In his affidavit in support of the motion, Co-Executor Mellen, states in para 44 that the estate lawyer told him that Wenda did not need to consent to the sale or be informed of the sale details until the estate accounting was filed. Thus, the court concludes that the Objectant made a timely objection to the January, 2011 real estate sale.The court does not agree with the co-executors that Executor Snively was effectively insulated from the determination to sell the real estate to her by Executor Mellen. The executors can not, by agreement, divest themselves of their legal responsibilities. Matter of Jaffe, 32 AD2d 752 (1st Dept 1969). Further, the executors' exercise of discretion is limited to their absolute duty of impartiality to the beneficiaries of the estate. Mtr of Grawe, 32 AD3d 1309 (4th Dept 2006).

This court finds that the sale of the real estate to co-executor Snively and her husband, is clearly self-dealing, and so the First objection must be sustained, even though the Objectant has not made a cross motion for Summary Judgment herein. However, in this regard the court may search the record when a Summary Judgment motion is made and even though Objectant did not herself move for Summary Judgment, the court concludes that she is entitled to summary judgment regarding her First objection. CPLR §3212(b).

The First objection is granted, and the deed transferring the realty from the estate to Beverly and Lawrence Snively should be voided and cancelled of record. See Estate of Jones, 25 Misc 3d 1241(A), 2009 WL 4840220 (NYSurr 2009). However, the court notes that this court's jurisdiction is limited, and in reaching this determination, the court may not determine the rights of any party who was not served with process in this proceeding, nor the rights that any such individual or entity may have against the co-executors. Here, there is a non-party spouse, and non-party mortgagee with interests in the real estate.

The Second and Fifth objections were withdrawn, therefore each is denied as moot.

As to the Third objection the Objectant says no commissions should be paid regarding the real estate. The court agrees with Objectant, since the sale is being set aside.

As to the Fourth objection the Objectant asserts the estate attorney had a conflict of interest in preparing a purchase contract for the purchaser and also representing the estate in acceptance of the offers and transfer of title. Rule 1.7 of the Professional Conduct Rules (22 NYCRR Rule 1.7) provides that an attorney has an ethical duty to decline employment if the exercise of his independent professional judgment on behalf of his client will be adversely affected by the acceptance of the employment or is likely to involve him in representing differing interests. However, an attorney may represent multiple clients if it is obvious that he can adequately represent each client's interests, and each client consents to the multiple representation after full disclosure by the lawyer of the possible effects of the multiple representation on his independent professional judgment. The consent is to be in writing. Id. See also Warren's Weed New York Real Property §10.06[3][d]. Here, the petitioners have not provided proof of such informed consent, and given the court's finding regarding the executors' [*5]self - dealing with the real estate, Summary Judgment is denied regarding the Fourth objection.

The Objectant in the Sixth objection seeks attorney fees from the co-executors resulting from their conduct. Where the estate is benefited when there is an increase in the value of the estate due to the actions of the attorney for an Objectant, the court may grant attorney fees. See Mtr of Kinzler, 195 AD2d 464 ( 2nd Dept 1993), citing Mtr of Burns, 126 AD2d 809, 812 and SCPA 2110. This determination must await the final account, distribution and any application for surcharges or legal fees.

CONCLUSIONS

1.The Estate's motion to prohibit the Objectant from introducing any new evidence regarding her ability to purchase the real estate is denied as moot.

2.The Estate's motion for Summary Judgment that the court accept the final accounting is denied, except for that part of the accounting concerning the personal property and vehicle, which is accepted and Summary Judgment is granted to the Petitioner regarding objections two and five as they were withdrawn by Objectant at argument.

3.As to the sale of the real estate (First Objection) the Objectant is granted Summary Judgment and the deed transferring the realty by the co-executors to Beverly Snively and her husband dated January 5, 2011 and recorded on January 19, 2011 in the Yates County Clerk's Office in Liber 624 of Deeds at page 289 should be voided and cancelled of record. In reaching

this determination the court in no way passes on the rights of any party or entity that was not served with process in this proceeding or on the rights that any such individual or entity may have against either or both of the petitioners.

4.As to the Third objection, the Objectant is granted Summary Judgment denying any requested commissions due the executors subject to recalculation upon final accounting.

5.Summary Judgment is denied to both parties regarding the Fourth and Sixth objections without prejudice to an application for legal fees for the estate, Objectant and or any surcharges.

Objectant's attorney to submit judgment within twenty (20) days, upon notice and approval of petitioners' attorney.

SO ORDERED.

Dated: January 17 , 2014_____________________________

W. Patrick Falvey

Yates County Surrogate Footnotes

Footnote 1:Although neither party presented proof concerning the deed, this court may take judicial notice of a matter of public record, and has done so herein by obtaining a copy of the recorded deed from the Yates County Clerk's Office. See Headley v NYC Transit Authority, 100 AD3d 700 (2nd Dept 2012)