Court Opinion

ID: 5490522
Source: CourtListenerOpinion
Date Created: 2022-01-10 02:28:58.817687+00
Date Added: 2024-06-11T08:33:45.082401
License: Public Domain

Stein, J.
(dissenting). While I generally agree with the majority’s articulation of the law of constructive fraud, I disagree with its application of that law to the circumstances here. In determining whether Keiko Aoki’s claim of constructive fraud was properly supported, the majority frames the issue, in part, as whether Darwin Dornbush and Norman Shaw (the attorneys) “were parties to the releases or stood to directly benefit from their execution” (majority op at 41). Regarding that same element, however, Keiko raised another possibility— that the attorneys acted as agents of two of Rocky Aoki’s children, Kevin and Kana Aoki (who, in turn, stood to benefit from the releases), when the attorneys allegedly breached their fiduciary duty to Rocky (see generally Kirschner v KPMG LLP, 15 NY3d 446, 465, 468 [2010] [acts of agents are imputed to their principals]). In my view, the existence of such an agency relationship would, if proved, bring this case within the doctrine of constructive fraud.
Initially, we must be cognizant of the procedural posture of this case and the burdens of proof attendant thereto. While Surrogate’s Court ultimately held a full bench trial after denying Devon and Steven Aoki’s motion for summary judgment, the Appellate Division’s reversal of the order of Surrogate’s Court was limited to its determination of the summary judgment motion; the Appellate Division did not reach the trial evidence or the Surrogate’s decision after trial. Thus, our review is necessarily so limited, as well. Accordingly, the ques*43tion before this Court is whether, as the Appellate Division found, Devon and Steven met their initial burden of establishing their entitlement to judgment as a matter of law and, if so, whether Keiko presented sufficient evidence to raise a triable question of fact in opposition (see Vega v Restani Constr. Corp., 18 NY3d 499, 503 [2012]). I agree with the majority’s conclusion as to the first part of that inquiry, but not the latter.
Pursuant to the law of constructive fraud, when a fiduciary relationship exists between the parties, the burden shifts from the party attempting to establish fraud to the party seeking to uphold the transaction, who then must demonstrate the absence of fraud (see Matter of Greiff, 92 NY2d 341, 345 [1998]; Matter of Paul, 105 AD2d 928, 929 [3d Dept 1984]). There can be no question in this case that the attorneys stood in a fiduciary relationship to Rocky, and I concur with the majority’s conclusion that there is no proof that they were, themselves, parties to the transaction or that they stood to gain, personally, from the execution of the releases. However, in my view, when we consider the evidence in a light most favorable to Keiko, as we must because she is the nonmoving party (see Vega, 18 NY3d at 503), a question of fact exists on the summary judgment record as to the attorneys’ possible agency relationship with Rocky’s children — who did stand to gain from the releases — such that the burden shifted to the children to establish the absence of fraud. Because that burden was not met, summary judgment was inappropriate.
Keiko asserts that the attorneys drafted the releases based on the wishes of Kevin and Kana — and thereby entered into an attorney-client relationship with them — rather than acting at the insistence of, and in the sole best interests of, their client Rocky. Although Keiko argues that the attorneys suffered from an impermissible conflict of interest if they represented both Rocky and the children, for our purposes here we need not make any such determination, as it is irrevelant whether an actual attorney-client relationship was formed with the children. That is, in the context of this summary judgment motion, even if the relationship was not one of attorney and client, the evidence was sufficient to create questions of fact as to whether the attorneys drafted the releases for the benefit of the children, rather than for Rocky, and, if they were acting for the children’s benefit, whether they should be considered agents for a party to the transaction and, thus, fall within the constructive fraud doctrine.
*44In this regard, the record reflects several instances of conflicting evidence with respect to the nature of the relationship between the attorneys and Rocky’s children and, ultimately, whether the releases should be set aside as the product of improper conduct by the attorneys. For example, Dornbush testified at his deposition that, after Keiko refused to sign a postnuptial agreement, Kevin and Kana asked him and Shaw if anything could be done to protect the business for the children. Dornbush admitted that he was receptive to their concerns, although he was not sure if they sought legal advice, business advice, or “parental” advice because they considered him to be like an uncle. Shaw testified that he performed some legal work for Kevin and Kana as trustees, as well as for Kana, individually.
According to Shaw’s deposition testimony, the attorneys’ aim in generating possible solutions to Keiko’s refusal to sign a postnuptial agreement was to assuage concerns being raised by the children, both directly and as transmitted through Rocky, that Rocky’s assets would be vulnerable to Keiko after his death. Shaw acknowledged that he formulated the idea for the releases, purportedly for the purpose of relieving family strain caused by the lack of a prenuptial agreement, without consulting with Rocky or anyone else other than Dornbush. Shaw further testified that he may have had a conversation with Kevin about relieving this family strain. In a September 13, 2002 outline for a meeting with Rocky, Shaw listed several options, including a postnuptial agreement and releases, to insulate Rocky against pressure to appoint shares away from the children; it is unclear who asked the attorneys for these options, or who mentioned this supposed pressure on Rocky. Shaw also testified that he and Dornbush represented Rocky and the children, but that the attorneys saw a potential conflict once Rocky’s new lawyer asked them to review the proposed codicil to Rocky’s will for validity. When questioned about the September 2002 release, Dornbush testified that he did not have any notion as to whether or not it was beneficial to Rocky; this raises a question as to why he would have had his client sign such a document. In addition, Dornbush wrote in a memo that “fur will fly” when Rocky and Keiko discovered the existence of the executed releases, suggesting that Dornbush believed that Rocky was unaware of the releases, or at least their meaning, even though he had signed them.
As further evidence that the attorneys may not have been acting on Rocky’s behalf in the drafting and execution of the *45releases, Keiko points to the statement in Rocky’s will that it would be “contrary to [his] desires” for the releases to be found valid. In addition, Rocky’s affidavit stated that he did not understand that, after he signed the releases, he would be unable to change his will to select his wife or any unrelated person as a stock beneficiary, and that he never intended to limit his ability to makes those choices. While the majority aptly notes the suspect nature of that affidavit — and the same can arguably be said about some of the other evidence — it is beyond cavil that courts are not at liberty to make credibility determinations or weigh evidence on a summary judgment motion (see Vega, 18 NY3d at 505; Forrest v Jewish Guild for the Blind, 3 NY3d 295, 315 [2004]; Bliss v State of New York, 95 NY2d 911, 913 [2000]).
To be sure, nothing in the record provides uncontroverted proof that the attorneys drafted, and arranged to have Rocky execute, the releases at the behest of the children, only, and in the absence of a request by Rocky. In fact, there is some evidence to indicate that Rocky was present at all of the meetings attended by Kevin and Kana, perhaps demonstrating that the attorneys were not in an attorney-client or agency relationship with the children, but met with them only in furtherance of their professional and fiduciary obligations to Rocky. Nevertheless, all of the conflicting evidence, considered together, is sufficient to create a triable question of fact regarding whether the attorneys were acting on behalf of — or as agents of — the children, and not Rocky, when they drafted the releases and supervised their execution (see McLenithan v McLenithan, 273 AD2d 757, 758-759 [3d Dept 2000]; Matter of Paul, 105 AD2d at 930). Accordingly, I would reverse the Appellate Division order granting summary judgment to Devon and Steven Aoki, and remit the case to that Court for a review of the Surrogate’s decision after trial.*
Chief Judge DiFiore and Judges Abdus-Salaam, Fahey and Garcia concur; Judge Stein dissents in an opinion in which Judge Rivera concurs.
Order affirmed, with costs.

 In light of the Appellate Division’s determination on the summary judgment motion, that Court never addressed the trial evidence or the Surrogate’s decision after trial, although it had been asked to do so. Thus, it would be appropriate for the Appellate Division to conduct such a review based on the full trial record.