Estate of Rothko

• Citation: 84 Misc.2d 830,379 N.Y.S.2d 923
• Parties: , 18 UCC Rep.Serv. 1191 ESTATE of Mark ROTHKO.
• Decision Date: 18 December 1975
• Court: New York Surrogate Court

Page 923

379 N.Y.S.2d 923

84 Misc.2d 830, 18 UCC Rep.Serv. 1191

ESTATE of Mark ROTHKO.

Surrogate Court, New York County.

Dec. 18, 1975.

Breed, Abbott & Morgan, New York City, for Kate Rothko, petitioner (Edward J. Ross, and James R. Peterson, New York City, of counsel).

Hall, Dickler & Howley, New York City, for Barbara Northrup, general guardian of Christopher Rothko, infant, petitioner (Gerald Dickler, and Paul Sarno, New York City, of counsel).

Louis J. Lefkowitz, Atty. Gen., New York City, for ultimate charitable beneficiaries, cross-petitioner (Gustave Harrow, Asst. Atty. Gen., of counsel).

Richenthal, Abrams & Moss, New York City, for Bernard J. Reis and Theodoros Stamos, respondents (Arthur Richenthal, New York City, of counsel).

Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for Morton Levine, respondent (Bernard H. Greene, New York City, of counsel).

Eaton, Van Winkle & Greenspoon, New York City, for the Mark Rothko Foundation, Inc., intervener (Samuel N. Greenspoon, and Charles G. Mills IV, New York City, of counsel).

Sullivan & Cromwell, New York City, for Marlborough Gallery, Inc., Marlborough A.G. and Francis K. Lloyd, respondents (David W. Peck, John W. Dickey, Dvid M. Olasov, and Pamela S. Dwyer, New York City, of counsel).

MILLARD L. MIDONICK, Surrogate.

The decedent in this case was Mark Rothko. He was one of the foremost painters of the New York school, also known as abstract expressionists, and at the time of his death on February 25, 1970 he was considered a first ranking artist of long time standing in one of the leading schools of art then recognized as such throughout the art world. His reputation and the cultural impact of this artist and his school upon the world are detailed later in this opinion when the discussion turns to the value of his various paintings owned by his estate.

The petitioners, the two children of the testator, seek to set aside two agreements date May 21, 1970, made by the three executors, with two respondent Marlborough corporations whose business transactions are admittedly directed and controlled by Francis K. Lloyd. The petitioning children also seek restitution to the decedent's estate of 798 paintings executed by the testator and owned by him at the time of his death, 100 of which were sold by the executors to the respondent, Marlborou A.G., a Liechtenstein corporation, by one of said agreements marked Pet. Exh. 1, and the balance of 698 were consigned for sale by the executors by the other of said agreements marked Pet. Exh. 2, to the respondent Marlborough Gallery, Inc., a New York corporation. The term of the consignment agreement is for 12 years. To the extent that restitution of all of the paintings cannot be achieved by reason of passage of good title to non-party purchasers from either of respondent Marlboroughs, 71 paintings of the 100 sold under Pet. Exh. 1 and 69 of the 698 consigned under Pet. Exh. 2, the children of the testator pray that the estate should be restored to its original condition by restitution payments, by damages imposed upon the contracting Marlboroughs and Francis K. Lloyd for alleged violation of a restraining order of this court affirmed by the Appellate Division, and by other remedies, and they demand that Marlboroughs and Lloyd pay the children's counsel fees as well. These petitioning children also seek the removal of the three executors, denial of their commissions and their counsel fees from the estate, and payment by the executors of the children's own counsel fees, and that they be surcharged for breach of their fiduciary duties. The Attorney General of the State of New York who intervened representing the public as ultimate charitable beneficiaries of half of the estate, seeks essentially the same relief by cross-petition. Another intervenor, the Mark Rothko Foundation, Inc., beneficiary of half of the estate for charitable uses, with these executors on its board of directors in varying proportions from time to time, opposes the basic relief demanded by the children and the Attorney General, urging that the Marlborough respondents retain control of the estate paintings.

The three petitioners allege and have sought to prove that the respondent executors Bernard J. Reis and Theodoros Stamos have each been involved in a conflict of interest and duality of position in the making and performance of the said agreements with the respondents Marlboroughs. The third executor, the respondent Morton Levine, not charged with a conflict of interest, was alleged to have acted improvidently and with negligence in joining in the sale and consignment to the Marlboroughs, with knowledge of alleged conflicts of interest of his co-fiduciaries. All the executors are jointly and severally charged with failure to enforce the performance of the said agreements properly, whether or not the agreements are vulnerable as voidable.

Since June 26, 1972, the respondents Marlboroughs and the executors, and their agents, have been restrained by this court from 'selling or otherwise disposing' of any of the paintings affected by the two agreements, except with the express permission of this court, which permission has not been sought (Matter of Rothko, 71 Misc.2d 320, 336 N.Y.S.2d 130, mod. and aff'd 40 A.D.2d 965, 338 N.Y.S.2d 854.)

The more recent (1974) allegations by the petitioners accuse the respondents Marlboroughs, and have for this aspect added Francis K. Lloyd personally for the first time as a party respondent, of violation of the said injunctive restraints against selling or otherwise disposing of estate paintings, and now seek findings of contempt and damages against Lloyd as well, restitution against him as well for many paintings allegedly sold or disposed of shortly after the temporary restraining order of June 26, 1972, and after the injunction Pendente lite of September 1972, and they seek against him as well judgment for the petitioners' own counsel fees.

The respondents Marlboroughs and Lloyd and the respondents-executors Reis and Stamos deny all of the allegations of wrongdoing. The respondent-executor Levine, who is not involved in conflict of interest allegations, denies his responsibility for any wrongdoing by his co-executors and of the Marlboroughs. He claims to have been misled by his co-executors by their concealment of facts from him.

The will gave the children nothing in the event of survival of the testator by his widow, their mother, who died six months after the testator, having received under testator's will $250,000 and the family residence and its contents. However, the testator's children successfully elected to take against the excessive charitable disposition of more than one-half of the estate (71 Misc.2d 74, 335 N.Y.S.2d 666, aff'd 43 A.D.2d 819, 351 N.Y.S.2d 940). As a result of the elections of the children, the respondent, Mark Rothko Foundation, Inc., a charitable foundation, is limited in its benefits to the extent of one-half of the net estate after debts. The Foundation intervened as a party respondent. Of its seven directors, the testator was one until his death, and the three executors were also directors until 1972, when Levine resigned during the course of this proceeding, leaving Reis and Stamos still in office. The Foundation has denied allegations of wrongdoing levelled against the executors and the Marlboroug and asserts that rescission of the agreements may result in diminution of the estate. The Foundation, unlike the petitioning children of the testator, does not seek to receive paintings from the estate in kind, or restitution or damages. Nor does it contend, as do petitioners, that estate paintings, at least some of them, should be sold, lent or given to museums to preserve for public access the cultural heritage of the testator's masterpieces. The Foundation, whose purposes were expressed vaguely during the testator's lifetime, amended its certificate of incorporation after his death, to confine its purposes to the financial assistance of mature artists in need of such help.

The will, probated without objection, was drafted, and its execution supervised on September 13, 1968, solely by Bernard J. Reis, one of the respondent-executors. He was 79 years of age in 1974, has been for all of his professional life a certified public accountant licensed by the State of New York, was graduated from law school but has not been licensed to practice law. Bernard Reis was an intimate friend and confidant of the testator, and acted for years as his business and professional advisor.

According to the corporate minutes and other evidence before the court, Bernard Reis was elected a director, secretary and treasurer of Marlborough Gallery, Inc., the New York corporate consignee, hereafter sometimes called MNY, on January 30, 1970. On February 25, 1970, the testator took his life. On April 30, 1970, Reis' salary commenced at the rate of $20,000 per year for part time services to MNY as such corporate officer. He paid the salary of his own personal secretary, amounting to $12,000 per year. The contracts complained of were signed by Reis and the other two executors on May 21, 1970 and by the respondents Marlboroughs shortly thereafter.

The contention that the testator knew of Reis' conflict of interest, as set out above, is further supported by the circumstances that Reis' independent accounting firm, of which he was a partner, served MNY for its accounting work for some years before the testator's death and until Reis joined the staff of MNY. But it is not a defense to prove that a testator knew of a conflict of interest when and after he named Reis in his will as his fiduciary. The classic and everyday example of such estate planning, occurs when testamentary instruments are executed naming a spouse as executor or executrix, together with provision that the spouse-fiduciary be one of several beneficiaries of the decedent's estate. That self-evident conflict of interest is...