Estate of Rothko

• Decision Date: 20 February 1979
• Citation: 414 N.Y.S.2d 444,98 Misc.2d 718
• Parties: ESTATE OF Mark ROTHKO. Surrogate's Court, New York County
• Court: New York Surrogate Court

Page 444

414 N.Y.S.2d 444

98 Misc.2d 718

ESTATE OF Mark ROTHKO.

Surrogate's Court, New York County.

Feb. 20, 1979.

Breed, Abbott & Morgan, New York City (Edward J. Ross and James R. Peterson, New York City, of counsel), for Kate Rothko Prizel as administratrix c.t.a. of the estate of Mark Rothko, deceased.

Patterson, Belknap, Webb & Tyler, New York City (Christopher C. Angell, New York City, of counsel), special counsel, for purposes of the fee application, to Kate Rothko Prizel as administratrix c.t.a. of the estate of Mark Rothko, deceased.

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

Cleary, Gottlieb, Steen & Hamilton, New York City (George E. De Sipio, New York City, of counsel), for the Mark Rothko Foundation.

Butler, Jablow & Geller, New York City (Stanley Geller, New York City, of counsel), for Herbert Ferber as executor of the estate of Mary Alice Rothko, deceased.

Robert Abrams, Atty. Gen., State of New York, New York City (Gustave Harrow, Asst. Atty. Gen., for ultimate charitable beneficiaries.

MILLARD L. MIDONICK, Surrogate.

This is an application by Kate Rothko Prizel, as administratrix c.t.a. of the estate of Mark Rothko, deceased, for instructions as to the percentage of the estate to be distributed to the Mark Rothko Foundation, Inc. as charitable beneficiary, pursuant to Section 5-3.3 of the Estates, Powers and Trusts Law. The petitioner seeks a construction of EPTL 5-3.3 and instructions as to how to compute whatever such percentage share of the estate to which the Mark Rothko Foundation, Inc., hereinafter called the Foundation, is entitled. In addition, petitioner seeks a determination of whether certain expenses for legal and other services may be charged to the estate as a whole and thereby in effect be deducted on a pro rata basis from the Foundation's percentage share.

The decedent Mark Rothko, a world-renowned artist, died on February 25, 1970, leaving an estate which consisted primarily but not entirely of 798 of his paintings. He was survived by his wife, Mary Alice Rothko, and by his two children, Kate Rothko and Christopher Rothko, both then minors. His will, admitted to probate on March 27, 1970, contained specific bequests and one general bequest. The bulk of the estate was bequeathed to the Foundation under the will's residuary clause, which provided in relevant part as follows:

"SIXTH: All the rest, residue and remainder of my property, I give and bequeath to the MARK ROTHKO FOUNDATION . . . . "

By notices dated July 30, 1970, the two children, as the testator's surviving issue, made a timely election under EPTL 5-3.3 to contest the gift to the charity as excessive. EPTL 5-3.3 provides, in relevant part, as follows:

"(a) A person may make a testamentary disposition of his entire estate to any person for a benevolent, charitable, educational, literary, scientific, religious or missionary purpose, provided that if any such disposition is contested by the testator's surviving issue or parents, it shall be valid only to the extent of one-half of such testator's estate, wherever situated, after the payment of debts, . . . ."

By decision dated August 31, 1972 (Matter of Rothko, 71 Misc.2d 74, 336 N.Y.S.2d 130 (Sur.Ct.N.Y.Co., 1972), affd. 43 A.D.2d 819, 351 N.Y.S.2d 940 (1st Dept., 1974) and decree entered January 5, 1973, this court sustained the validity of the children's election. The decree did not fix the precise amounts to be received by each beneficiary, but rather provided "that the exact amounts of the respective shares of Kate Rothko and Christopher Rothko shall be fixed and determined in the decree to be entered settling the final account of proceedings of the executors of Mark Rothko's will or in such other manner as this court may direct."

Since the death of the decedent, the value of estate has risen substantially. This is primarily attributable to the increase in the value of the paintings following the death of the decedent, a noted artist.

The Foundation and the Attorney General (as representative of the ultimate charitable beneficiaries) have taken the position that the Foundation's one-half interest in the estate is not determined as of date of death but as of current date of distribution of the assets, and that the Foundation is thereby entitled to its pro rata portion of the appreciation in the value of the estate after the date of death. Kate Rothko and Barbara Northrup, as guardian of Christopher Rothko, still a minor, have taken the position that the Foundation's one-half interest is determined as of date of death and not as of date of distribution, and that the substantial increment in the estate's value belongs solely to the two individual beneficiaries. The Foundation also has taken the position that under New York law, its one-half interest in the estate is to be determined prior to the deduction of legal expenses incurred in preserving and adding to the assets of the estate since the date of death, these not being "debts" but instead administration expenses.

The decedent's children concede that if the value of the Foundation's interest in the estate is determined as of date of death, which they claim is required by the proper interpretation of EPTL 5-3.3, then the Foundation should not pay any portion of the legal expenses, since it will not have benefitted from such legal services; but the children urge that if the Foundation's share is determined as of the current date of distribution, then the legal expenses, and all administration expenses, past and future, should be considered in determining said share.

EPTL 5-3.3 was derived from Section 17 of the Decedent Estate Law. Early decisions interpreting Section 17 of the DEL held that gifts to charities were converted into general legacies for a fixed sum. This was the case in both Matter of Brooklyn Trust Co., 179 App.Div. 262, 166 N.Y.S. 513 (2d Dept., 1917) in which a residuary estate was left to charities, and in Matter of Seymour, 239 N.Y. 259, 146 N.E. 372 (1925) which involved a remainder estate bequeathed to charity. However, the court in Seymour made clear that it was dealing with a case where payment of the charitable legacy was postponed by the terms of the will for an intervening life estate, and that it was not dealing with a situation involving payment of a legacy not postponed by the terms of the will but which might nevertheless be held by the estate for more than the statutory period (then one year), where the increase in value might be attributable in part to what was held for more than one year. The court indicated that the result might be different in the latter case.

"We have not before us a case where the amount which the (charitable) corporation is to receive is fixed and is presently payable, but where for one reason or another it has not been paid within the year after the testator's death, and where the executors so used the estate in their hands, including the part to which the corporation is entitled, so as to increase its value. We do not decide that under such circumstances the corporation might not share in the increase caused in part by the use of its funds." (239 N.Y. at p. 263, 146 N.E. at p. 373. (Emphasis added.))

In 1949, the Court of Appeals decided Matter of Mayers, 299 N.Y. 388, 87 N.E.2d 422, and in essence abandoned the general legacy rationale of Seymour And Brooklyn Trust. The facts and issue in Mayers were essentially the same as in Seymour, i. e., the residue of the estate was left in trust for certain life beneficiaries, with the remainder to charity. The court in Mayers decreed that, first, the amount of the remainder to go to charity and the amount of the remainder to go to other distributees was to be determined by using the present value of the remainder at date of death, and that upon distribution of the remainder by the trustees after termination of the life estates, the trust assets were to be distributed in the same ratio. Therefore, if 80 per cent of the value of the remainder at time of death was to go to charity and 20 per cent to contesting distributees, 80 per cent of the remainder valued at time of distribution was to be distributed to the charity and 20 per cent to the contesting distributees. This meant that the charity shared in increases after death in the value of the corpus. In this respect, the result was directly contrary to Seymour, supra.

The Court of Appeals realized that the result it would reach in Mayers depended upon whether the general legacy theory remained valid following enactment by the legislature in 1929 of an amendment to DEL Section 17. The court expressly held that the general legacy theory was abrogated by the amendment. In referring to Matter of Apple, 141 Misc. 380, 252 N.Y.S. 580, it said at pp. 397-398 of 299 N.Y., at p. 426 of 87 N.E.2d:

"Clearly Surrogate Foley, who had been chairman of the commission, felt that the general legacy theory had been abrogated entirely, for the charity was to receive all of the residue less the fixed amount of the excess at date of the testator's death.

"It is obvious that the amendment of 1929 has done away with the theoretical transformation of an excessive gift to charity into a general legacy in a fixed amount. It is also clear that under either of the two rules evolved since 1929 the charity will receive eventually a gift whose value at the date of the testator's death is either more Matter of Buck's Estate, supra, (158 Misc. 111, 114, 285 N.Y.S. 515, 518), or less Matter of Miranda's Estate, supra, (151 Misc. 459, 271 N.Y.S. 913), than one half the gross estate less debts. Apart from the anomalous consequences noted by the Surrogate which would result from the rule which appellants advocate, we cannot burke the fact that the charities would receive less than one half, when the statute commands that the charitable...