Estate of Cullen

• Decision Date: 24 January 1985
• Citation: 127 Misc.2d 105,485 N.Y.S.2d 454
• Parties: Accounting of Manufacturers Hanover Trust Company, Ralph F. Hayden, John B. Cullen and James A. Cullen, Jr., as surviving executors of the ESTATE OF James A. CULLEN a/k/a James Cullen a/k/a James Aloysius Cullen, Deceased. Surrogate's Court, Suffolk County
• Court: New York Surrogate Court

Page 454

485 N.Y.S.2d 454

127 Misc.2d 105

Accounting of Manufacturers Hanover Trust Company, Ralph F.

Hayden, John B. Cullen and James A. Cullen, Jr., as

surviving executors of the ESTATE OF James A. CULLEN a/k/a

James Cullen a/k/a James Aloysius Cullen, Deceased.

Surrogate's Court, Suffolk County.

Jan. 24, 1985.

Pitaro, GiGangi & Gallagher, Forest Hills, for petitioners.

Joseph L. Rhodie, Westhampton Beach, Guardian ad litem.

ERNEST L. SIGNORELLI, Surrogate.

In this contested executors' accounting proceeding, the court has been requested to determine the amount of commissions to which the petitioners are entitled as fiduciaries of the decedent's estate.

Jurisdiction has been obtained over the necessary parties to this proceeding, who have, by stipulation, waived a hearing and consented to submit this matter to the court for decision based upon an agreed statement of facts, and the following documentation: (1) the last will and testament of the decedent, (2) the intermediate account of the petitioners, and the decree, dated September 8, 1980, rendered in connection therewith, (3) petitions by two of the petitioners for an advance payment of commissions and the court orders, dated October 27, 1975 and September 29, 1976, respectively, approving said requests, (4) the instant account of the petitioners and the pleadings filed in response thereto, (5) a letter written by counsel for the petitioners dated October 31, 1983, and (6) memoranda of law.

The decedent died, testate, on the 28th day of October, 1974, survived by a spouse, nine (9) children and twenty-seven (27) grandchildren. His estate, at death, primarily consisted of stocks and bonds, cash and jointly held property. In particular, the decedent's corporate holdings included 197,137 shares of stock in four (4) corporations, of which he was a substantial owner with other members of his family, to wit, King Kullen Grocery Company, Jacul Realty Corporation, Cullen's Service Station, Inc., and James Cullen Service Corporation.

With the exception of two specific cash bequests in favor of friends, the terms of the decedent's last will and testament bequeath his tangible and real property to his spouse (Articles Third and Fourth), and divide the balance of his estate into two separate trusts, a marital deduction trust and a residuary trust, for the benefit of his spouse and each of his surviving children (Article Seventh).

In addition to the powers granted to them by law, the pertinent provisions of Article Ninth of the decedent's will confer upon his fiduciaries the discretionary authority to retain any property or investment owned by him at death, to sell at public or private sale, and to exchange or otherwise dispose of any stocks, bonds, securities or other personal property constituting part of his estate, to make payment of any legacy or distribute any portion of his estate, either in cash or in kind, and to exercise all powers in the management of his estate which any individual could exercise in the management of similar property owned in their own right.

Moreover, with respect to his interests in King Kullen Grocery Company, Jacul Realty Corporation, Cullen's Service Station, Inc. and James Cullen Service Corporation, Article Twelfth of the decedent's will specifically empowers the fiduciaries, in their absolute and uncontrolled discretion, with the authority to direct, control, supervise, manage or operate the business of such corporations, to determine the degree of their active participation in the management of such corporations, and to delegate all or any part of their powers with respect to same.

The decedent's will was admitted by this court to probate on December 2, 1974, and letters testamentary and of trusteeship were issued thereon to his spouse, his son, his brother, the controller of King Kullen, and Manufacturers Hanover Trust Company as the fiduciaries nominated and appointed to act thereunder.

Thereafter, on or about July 25, 1975, the decedent's federal estate tax return was filed reflecting his gross estate at death to be worth approximately $2,173,351.00. Significantly, Schedule B thereof indicated the value of his stock in King Kullen Grocery Company, Jacul Realty Corporation, Cullen's Service Station, Inc. and James Cullen Service Corporation, to be $1,671,754.88, on the date of his death.

Upon audit, this value was increased by the I.R.S. to $3,631,329.50. The petitioners subsequently appealed this determination to the U.S. Tax Court where, pursuant to the terms of a so-ordered stipulation of settlement between the parties, dated April 1, 1981, the decedent's interest in the four corporations was finally assessed at $1,712,191.39.

On October 27, 1975, a petition was filed by one of the executors of the decedent's estate, requesting that he and two of his co-fiduciaries be allowed an advance payment of commissions in the total sum of $28,600.00. A similar application for commissions totaling $15,000 was filed by the fiduciaries on September 29, 1976. Each of the said requests were subsequently granted by the court, upon the fiduciaries posting a bond in the applicable amounts, and the payments pertaining thereto were thereafter made on November 5, 1975 and September 29, 1976 respectively.

The decedent's spouse died on May 10, 1978. As a consequence thereof, an intermediate account was filed by the executors of the decedent's estate for the period commencing with the date of the decedent's death (October 28, 1974) and ending with the date of death of his spouse.

Using the values of assets as originally reported on the decedent's federal estate tax return, Schedule A of said account reflects the amount of principal received by the fiduciaries as $1,895,908.46, inclusive of the $1,671,754.88 of stock owned by the decedent in King Kullen Grocery Co., Jacul Realty Corporation, Cullen's Service Station, Inc. and James Cullen Service Corporation.

Executors' commissions, as shown on Schedule J, incorporated these figures and were calculated, on the basis of the 1976 statutory rates set forth in SCPA § 2307, to amount to $67,809.39. The final page of Schedule J concludes with the following proviso with respect to the compensation, award and payment of said commissions:

"The Executors do not seek payment of their commissions on this accounting proceeding and reserve the right to claim them on a future accounting proceeding."

As a consequence of this addendum, the court's decree, dated September 20, 1980, failed to contain a decretal paragraph as to executors' commissions, and ordered the account, as filed and adjusted, final insofar as the estate of the decedent's spouse was concerned, and intermediate with respect to the remaining fiduciaries.

The instant accounting proceeding was filed on December 6, 1982. The various schedules thereof reflect an upward adjustment of the value of the decedent's shares in King Kullen Grocery Co., Jacul Realty Corporation, Cullen's Service Station, Inc. and James Cullen Service Corporation, to the values as stipulated to, as aforesaid, by the petitioners and I.R.S. before the Tax Court in April, 1981.

Commensurate with this revaluation, Schedule J of the account sets forth and, in part, recomputes total executors' commissions due upon the assets of the estate, from the date of the decedent's death to the date of the account, to be approximately $253,136.

The said commissions were calculated on the basis of the amended statutory rates set forth in SCPA § 2307, effective July 27, 1981.

On May 25, 1983, the court appointed a guardian ad litem to represent the infant beneficiaries of the decedent's estate in the context of the aforesaid accounting proceeding. Subsequent thereto, the guardian filed objections to the petitioners' account contesting the propriety of the commissions sought by the fiduciaries. More specifically, the guardian contends that the commissions shown on Schedule J of the account are excessive on the grounds that: (1) they fail to reflect a credit for the commissions previously set forth on Schedule J of the petitioners' intermediate account, (2) they are calculated on the basis of the amended statutory rates with respect to assets received and distributed by the petitioners prior to the date of their intermediate account, (3) they are predicated upon an improper valuation of estate assets, and (4) they encompass assets and an award for services performed by the petitioners, which may not properly form the basis for fiduciary compensation.

Paramount to the court's resolution of the guardian's objections is a determination of the effect of the decree entered in the intermediate accounting proceeding.

Citing, as authority, the decisions in Matter of Barrett, 124 Misc. 699, 209 N.Y.S. 678 (1925) and Matter of Abbott, 187 Misc. 264, 61 N.Y.S.2d 863 (1946) the guardian ad litem maintains that said decree was a final...