Matter of Young

[*1] Matter of Young 2019 NY Slip Op 51901(U) Decided on November 27, 2019 Surrogate's Court, Sullivan County LaBuda, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 27, 2019
Surrogate's Court, Sullivan County

In the Matter of the Estate of Judith E. Young, Deceased.



2017-92



Frank J. Gobes, Esq.

DelBello Donnellan Weingarten Wise & Wiederkehr, LLP

1 North Lexington Avenue, 11th Floor

White Plains, New York 10601

M. Angelos Genova III, Esq.

485 Madison Avenue, 16th Floor

New York, New York 10022
Frank J. LaBuda, J.

This matter comes before the Court by way of a Petition filed by Montgomery Nursing and Rehabilitation Center (hereinafter Petitioner) a creditor of the Estate asking for a Compulsory Accounting and related Relief. The Court conferenced the matter on several occasions, the most recent of which was held on August 22nd, 2019, at which time counsel for the Estate, Frank J. Gobes (hereinafter Respondent or Respondent's counsel), and counsel for Petitioner, M. Angelo Genova III (hereinafter Petitioner or Petitioner's counsel), by Order dated September 26th, 2019 were directed by this Court to file a "Memorandum of Law" and further directed that the Executor be restrained from selling or encumbering the Florida property pending a final determination of this matter.

Issue:

1. Does the New York Surrogate have jurisdiction over the decedent's Florida real property?

2. Is the Florida real property subject to liquidation to satisfy New York creditors if the Estate is insolvent in New York?

3. Must the New York Creditor file for Ancillary Probate in Florida in order to secure its claim?

History

At the time of decedent's death (October 5th, 2016) she was a resident of Sullivan [*2]County [FN1] , New York. The Petitioner herein Montgomery Nursing Home is a New York entity with offices in Orange County, New York. The outstanding debt arises from nursing home goods and services rendered to the Decedent between November 11, 2015 and October 5, 2016.

Letters Testamentary were issued to Mark Adler, the Decedent's cousin and Executor under her Last Will and Testament. The Creditor/Petitioner Montgomery filed a Notice of Claim on May 1st, 2017 setting forth its claim against the Estate which was served upon the Executor/Respondent in New York State. At the time of the Decedent's death she owned several parcels of land in New York State and a condominium located at 1206 Admiralty House, 140 Seaview Court, Marco Island, Florida (hereinafter the Florida property). Under paragraphs Second and Third of the Decedent's Last Will and Testament the Florida property was bequeathed specifically to decedent's brother Jerome M. Young and decedent's cousin, Mark Adler, the Executor herein, share and share alike in equal shares.[FN2]

Discussion and Analysis

In the instant matter, the Executor/Respondent argues that the Estate consists of a few thousand dollars in cash [FN3] and the Decedent's last residence located at 497 Mountain Road, Bloomingburg, New York which is pending foreclosure or possible sale [FN4] . Executor/Respondent further argues that title to the Florida property, upon the death of the property owner, by operation of Florida law, immediately vested in the specific devisees and the devisees placed the property on the market for sale. Respondent indicates that a list of all known claims against the estate has been served upon the Petitioner herein and that the Petitioner's claim against the Estate is unlikely to be satisfied. Furthermore, the Respondent argues that this Court has no jurisdiction to affect title to the Florida real estate. And finally that the Petitioner should have filed an Ancillary Probate in Florida to address the Florida property and that the Petitioner is now time barred due to their failure to timely file a Notice of Claim in Florida.

The Petitioner/Nursing Home Creditor argues that the Executor has allowed certain New York Creditor's claims to the value of $127,624.67 as outstanding and unpaid. Therefore, the New York assets of the Estate are insufficient to satisfy all the creditors of the Estate in full. [*3]Based upon the New York assets alone, the Estate is therefore insolvent. Petitioner argues that when an Estate is insolvent and unable to pay all creditors, the Surrogate may order that a specific devise be made available to satisfy outstanding claims against the Estate. Until, such a determination is made, the title cannot vest in a specific devisee.

The Petitioner argues that the Florida property remains titled to Judith E. Young, decedent, and is assessed at $370,500.00. It is currently listed for sale at $575,000.00. It is admitted by the Petitioner that it is well settled law in New York that specifically devised real property is not considered part of the administrable estate of a decedent because title in such property vests in the beneficiary immediately upon the death of the testator. However, it is argued by the Petitioner, that such vesting is subject to the "right of the executor to use the specifically devised real property for the payment of debts if necessary" (in Re Estate of Burke, 492 NYS2d 892 [Sur.Ct. Cattaraugus Ctny, 1985].) Further, Petitioner argues that the Courts of both Florida and New York have held that Executors of Estates have a duty under EPTL §13-1.3 "to liquidate estate assets in order to satisfy debts of the decedent and administration expenses of the estate, even if this acts to the detriment of [those] who are specific devisees or intestate distributees of the estate" (Matter of Krolick, 9 Misc 3d 1115A [Sur. Ct. Nassau Cty, 2005].)

With regard to whether this Court has jurisdiction over the Florida property the Petitioner concedes that the New York Surrogate does not have jurisdiction over real property situate outside New York State for the purpose of directing its sale, but argues that the New York Surrogate does have broad power to direct the fiduciary to take appropriate action with regard to the abatement of out of State realty. Abatement of a specific devise is allowed by Statute in both New York State and the State of Florida.

Opinion

The Court will first address the issue of jurisdiction over the Florida real property because without that all else is moot. The NY CLS Surrogate's Court Procedure Act §201 (3) confers broad subject matter jurisdiction upon the Surrogate Court in pertinent part as follows:

"The court shall continue to exercise full and complete general jurisdiction in law and in equity to administer justice in all matters relating to estates and the affairs of decedents, and upon the return of any process to try and determine all questions, legal or equitable, arising between any or all of the parties to any action or proceeding, or between any party and any other person having any claim or interest therein, over whom jurisdiction has been obtained as to any and all matters necessary to be determined in order to make a full, equitable and complete disposition of the matter by such order or decree as justice requires."

It is well established that pursuant to this jurisdiction that the Court has broad powers with regard to the Fiduciaries appointed by it and it may direct such Fiduciary to take appropriate action with respect to out of state realty. Although it is true that this Court does not exercise jurisdiction over real property situate outside New York State for the purpose of directing its sale, this Court retains full authority and broad power to direct the Fiduciary to take appropriate action with regard to any such out of state realty.

In the case at bar, the Interim Accounting appears to show that the Estate, at least as far as the New York assets are concerned, is insolvent. New York State Estate Powers and Trust Law [*4](hereinafter EPTL) sets forth a hierarchy of asset distribution in just such a case. EPTL §13-1.3(c ) sets forth in pertinent part the order of abatement when the property of an estate is insufficient to satisfy the Estate's obligations.:

"(c) Whenever such property is insufficient to satisfy both the estate obligations described in subparagraph (a)(1) and all dispositions under the will, interests in the decedent's estate abate, for the purpose of paying such estate obligations, in the following order:(1) Distributive shares in property not disposed of by will.(2) Residuary dispositions.(3) General dispositions. Demonstrative dispositions shall be treated as general dispositions to the extent that the property or fund charged with a demonstrative disposition has adeemed.(4) Specific dispositions, and any income derived therefrom, ratably, in accordance with the value of the respective interests of the beneficiaries of such dispositions. For the purposes of this section, a demonstrative disposition shall be treated as a specific disposition if the property or fund charged with any demonstrative disposition has not adeemed, to the extent of the value of such property or fund [Emphasis Added].(5) Any disposition to a surviving spouse which qualifies for the estate tax marital deduction."

The State of Florida has a similar provision in Fla. Stat. § 733.805 as follows:

Order in which assets abate:

(1) Funds or property designated by the will shall be used to pay debts, family allowance, exempt property, elective share charges, expenses of administration, and devises, to the extent the funds or property is sufficient. If no provision is made or the designated fund or property is insufficient, the funds and property of the estate shall be used for these purposes, and to raise the shares of a pretermitted spouse and children, except as otherwise provided in subsections (3) and (4), in the following order:

(a) Property passing by intestacy.

(b) Property devised to the residuary devisee or devisees.

(c) Property not specifically or demonstratively devised.

(d) Property specifically or demonstratively devised. 733.805. Order in which assets abate [Emphasis added].

In the case at bar, since this Estate, at least as far as the New York assets are concerned appears to be insolvent and unable to satisfy the creditors, the Florida property falls squarely within NY EPTL §131.3 (c)(4) "specific dispositions" and Fla. Stat. § 733.805 (d) "property specifically devised or demonstratively devised." As such, it is subject to liquidation when distributions 1-3 and a-c have been exhausted.

The fact that the Florida property is outside New York is of no import since it is a New York Decedent, a New York Estate and a Fiduciary who was granted Letters Testamentary by the New York Surrogate's Court. The Court's authority extends to the marshaling of the assets of all of Decedent's property regardless of its location. This is particularly true when the New York Estate is insolvent and unable to meet the obligations of the Estate. It is then that the abatement [*5]order pursuant to EPTL §13-1.3 and Fla. Stat. § 733.805 is decisive.

Whether or not title to the Florida property vested in the specific devisees at the time of the Decedent's death is not determinative here. If the Executor has the power to abate a specific bequest pursuant to EPTL §13-1.3c 4 and Fla. Stat. § 733.805 to satisfy the Estate's obligations "whenever such property is insufficient to satisfy the estate obligations", then it naturally follows that title to that specific devise cannot vest in the devisee until and unless the Executor releases the asset after a full accounting has been rendered and a determination made that this asset is not subject to abatement.

With regard to whether the Creditor must file an Ancillary Probate in order to obtain the relief requested herein, the Court holds that it does not. To force a New York creditor to file an Ancillary Probate for relief when they have timely filed a Notice of Claim in the New York proceeding would be burdensome and contrary to the law. To rule otherwise would effectively time bar the Creditor from pursuing a valid claim incurred during the Decedent's lifetime in New York State with a New York Creditor.

The Court will not address at this time the need for the Executor to post a bond or to account for the use of the Florida property pending a resolution of this matter. The Executor has an obligation as a Fiduciary to diligently and honestly account for the administration of the Decedent's Estate which by this Order includes the Florida property of the Decedent.

Based on the foregoing, it is

ORDERED that Petitioner's motion for an Accounting of the Florida assets is approved; and it is further

ORDERED that the Executor is directed to account for the Florida property as part of the Administration of this Estate, and it is further

ORDERED that should the marshaling of the Florida assets require an Ancillary Probate to be filed by the Executor then the Executor is directed to do so.

This shall constitute the Decision and Order of this Court

DATED: November 27st, 2019

Monticello, New York

____________________________________

Hon. Frank J. LaBuda

Sullivan County Surrogate Footnotes

Footnote 1:Ms. Judith Young was also a practicing attorney in New York State.

Footnote 2:Paragraphs Second and Third of the Decedent's Last Will and Testament specifically bequeathed the Florida property to her husband William Mark Bower if he survived her and if at the time of her death he "resides with me full-time as husband and wife". If not, the Florida property was to pass to Mark Adler and Jerome M. Young, share and share alike in equal shares.

Footnote 3:It is alleged that most of the cash was used to make a partial payment of the funeral expenses of the Decedent.

Footnote 4:An Interim Accounting by Respondent shows that a Contract of Sale was signed for a sale price of $199,000.00. The property however is apparently encumbered by a first lien mortgage of $155,953.32 and an additional encumbrance of $8,611.15 for a fee of a Court Evaluator.