Court Opinion

ID: 4085578
Source: CourtListenerOpinion
Date Created: 2016-10-08 00:01:45.674251+00
Date Added: 2024-06-11T08:44:48.690423
License: Public Domain

SUPREME COURT OF THE STATE OF NEW YORK
           Appellate Division, Fourth Judicial Department

940
CA 11-01676
PRESENT: CENTRA, J.P., PERADOTTO, CARNI, LINDLEY, AND SCONIERS, JJ.

IN THE MATTER OF THE TRUSTS FOR STEPHANIE
MCDONALD AND KELLY MCDONALD CREATED IN THE
WILL OF IGNATIUS S. LUPPINO, DECEASED.
------------------------------------------         MEMORANDUM AND ORDER
STEPHANIE MCDONALD AND KELLY MCDONALD,
PETITIONERS-RESPONDENTS;
IDALYNN LUPPINO MCDONALD, TRUSTEE,
RESPONDENT-APPELLANT.
(APPEAL NO. 1.)

BARRY J. DONOHUE, TONAWANDA, FOR RESPONDENT-APPELLANT.

KEVIN T. STOCKER, TONAWANDA, FOR PETITIONERS-RESPONDENTS.

     Appeal from an order of the Surrogate’s Court, Erie County
(Barbara Howe, S.), entered December 20, 2010. The order found that
Idalynn Luppino McDonald had abused her fiduciary responsibilities as
trustee.

     It is hereby ORDERED that the order so appealed from is
unanimously reversed on the law without costs and the petition is
dismissed.

     Memorandum: In appeal No. 1, respondent (hereafter, trustee)
appeals from an order determining that she failed to observe the terms
of two testamentary trusts and abused her fiduciary responsibilities
with respect to each trust and setting forth a date upon which the
matter would be deemed finally submitted, whereupon Surrogate’s Court
would determine the affirmative relief to be granted. In appeal No.
2, the trustee appeals from an order that denied her motion for leave
to renew or reargue the “conclusion [of the Surrogate] that [she]
‘abused her fiduciary responsibilities.’ ” In appeal No. 3, she
appeals from an order that, following an evidentiary hearing, removed
her as trustee, bypassed the alternate trustee named in the subject
last will and testament and appointed a successor trustee. In appeal
No. 4, she appeals from an order that, inter alia, awarded attorney
fees to petitioners in the amount of $14,600.

     Petitioners, who are twin   sisters, commenced this proceeding
seeking, inter alia, to remove   their mother as the trustee of each
testamentary trust created for   them by the last will and testament of
their grandfather, who was the   trustee’s father. Petitioners were 19
years of age when the petition   was filed. Petitioners’ central claim
is that the trustee refused to   make discretionary distributions from
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                                                         CA 11-01676

the trusts for payment of their college expenses and for the purchase
of an automobile for each of them.

     Insofar as relevant to these appeals, the trusts provide that
“[t]he Trustee shall pay or apply to or for the use of each such
living grandchild of mine so much of the income, accumulated income
and principal of such share at any time and from time to time as the
Trustee deems advisable in [the Trustee’s] sole discretion not subject
to judicial review, to provide for such grandchild’s maintenance,
support, education, health and welfare, even to the point of
exhausting the same.” The trusts also provide for periodic fractional
distributions of principal and accumulated income when the
beneficiaries reach the ages of 30, 32 and 35, at which time the
trusts terminate. On the return date of the order to show cause that
initiated the proceeding, the trustee appeared with counsel who served
a letter response to the petition and made a representation in court
that it was to be considered as the trustee’s answer. No objection
was raised by petitioners thereto, and we thus conclude that they
“proceeded on the theory that [they] had to prove [their] claim as if
it stood controverted. [They] did not seek to proceed as if upon a
default” (Matter of Bemis v Larkin, 249 App Div 762, 763).
Petitioners further waived any objection to the lack of verification
by failing to reject the trustee’s pleading pursuant to CPLR 3022 in a
timely manner (see Matter of Rouson, 32 AD3d 956, 959). Thus, we
conclude that the Surrogate erred in sua sponte determining that the
trustee was in default in pleading and in proceeding to decide the
merits of the petition as if it was uncontroverted (see generally
DiPietro v Seth Rotter, P.C., 267 AD2d 1, 2).

     Turning to the merits of the orders in appeal Nos. 1 and 3, we
conclude on this record that the Surrogate erred in determining in
appeal No. 1 that the trustee had failed to observe the terms of the
trusts and had abused her fiduciary responsibilities with respect to
each trust. The Surrogate further erred in appeal No. 3 in granting
affirmative relief, i.e., ultimately removing the trustee and
summarily bypassing the alternate trustee named by the testator,
petitioners’ grandfather, in order to appoint a successor trustee not
named in the will. We therefore reverse the order in appeal No. 1 and
dismiss the petition, and we vacate the order in appeal No. 3 inasmuch
as the petition has been dismissed. “As a general rule the courts of
this State will respect and not interfere with a trustee’s decision
unless it can be shown that the decision constituted an abuse of the
discretion given the trustee by the testator” (Matter of Hoelzer v
Blum, 93 AD2d 605, 612). The judicial deference afforded trustees
under this rule is particularly broad where the testator has
manifested an intention to grant the trustee greater than ordinary
latitude in exercising discretionary judgment (see Restatement [Third]
of Trusts § 50, Comment c on Subsection [1]). Here, the testator
manifested a clear intention to grant the trustee the greatest
latitude permitted by law in exercising discretionary judgment. While
the phrase used by the testator, “as the Trustee deems advisable in
[the Trustee’s] sole discretion not subject to judicial review,” does
not relieve the trustee of all accountability, it manifests the
testator’s clear intent to grant the trustee the broadest extended
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                                                        CA 11-01676

discretion in making discretionary distributions of income and/or
principal (see Matter of Maul v Fitzgerald, 78 AD2d 706, 707-708;
Matter of Damon, 71 AD2d 916, 916-917; Matter of Moloshok v Blum, 109
Misc 2d 660, 661; Restatement [Third] of Trusts § 50).

     Notwithstanding the extended discretion granted to the trustee by
the testator, the exercise of the trustee’s judgment in making
discretionary distributions should be evaluated in light of the
availability of other resources, including public benefits and the
parental duty of support (see Restatement [Third] of Trusts § 50,
Comment e on Subsection [2]; Matter of Roberts [New York City Health &
Hosps. Corp.], 61 NY2d 782, 783-784; Matter of Escher, 52 NY2d 1006,
1008). Here, the record establishes that the trustee, in her capacity
as petitioners’ parent, was the custodian of a New York 529 College
Savings account for each petitioner and that the account balances were
more than adequate to provide for petitioners’ college expenses. We
also note that the college costs of petitioner Kelly McDonald for the
2010-2011 academic year were fully paid by public benefits and that,
notably, Stephanie McDonald failed to complete the necessary
applications for public college benefits and tuition assistance for
that academic year. We thus conclude that the trustee did not abuse
the extended discretion granted to her by the testator by declining to
make distributions from the trust for college costs payable through
other sources or in furtherance of the desires of petitioners to
purchase automobiles. While we are mindful of the friction between
the teenaged petitioners and their mother, we nonetheless adhere to
the sound rule that mere friction or disharmony between a trustee and
one or more beneficiaries is not a sufficient ground to justify the
removal of the trustee (see Burke v Baudouine, 190 App Div 186, 187,
affd 232 NY 532; Matter of Edwards, 274 App Div 244, 247-248; Matter
of Graves, 110 NYS2d 763, 767 [Sur Ct]). “If it were, an obstreperous
malintentioned beneficiary could cause the removal of a competent
trustee through no fault on the latter’s part” (Graves, 110 NYS2d at
767).

     Finally, we dismiss the appeal from the order in appeal No. 2,
and we reverse the order in appeal No. 4. Insofar as the order in
appeal No. 2 denied that part of the motion for leave to reargue, no
appeal lies from the order (see Empire Ins. Co. v Food City, 167 AD2d
983, 984) and, insofar as the order in appeal No. 2 denied that part
of the motion for leave to renew, the appeal is moot in view of our
determination in appeal No. 1 (see McCabe v CSX Transp., Inc., 27 AD3d
1150, 1151). With respect to the award of, inter alia, attorney fees
to petitioners in appeal No. 4, we note that “it is well settled that
a Surrogate has the discretion to order a fiduciary to pay [attorney]
fees” (Matter of Manufacturers & Traders Trust Co. [Adams], 72 AD3d
1573, 1574; see generally Matter of Garvin, 256 NY 518, 521-522), but
such fees are not awarded “where there is no agreement, statute or
rule providing for such fees and where the losing party has not acted
maliciously or in bad faith” (Matter of Saxton, 274 AD2d 110, 121).
In light of our determination in appeal Nos. 1 and 3, we conclude that
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                                                         CA 11-01676

petitioners are not entitled to an award of attorney fees.

Entered:   November 9, 2012                     Frances E. Cafarell
                                                Clerk of the Court