Estate of Venner, Matter of

• Decision Date: 16 January 1997
• Citation: Estate of Venner, Matter of, 653 N.Y.S.2d 150, 235 A.D.2d 805 (N.Y. App. Div. 1997)
• Parties: In the Matter of the ESTATE OF Robert VENNER, Deceased. Ernestine Venner et al., Appellants, Marine Midland Bank N.A., as Trustee of the Estate of Robert Venner, Deceased, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 150

653 N.Y.S.2d 150

235 A.D.2d 805

In the Matter of the ESTATE OF Robert VENNER, Deceased Ernestine Venner et al., Appellants Marine Midland Bank N.A., as Trustee of the Estate of Robert Venner, Deceased, Respondent.

Supreme Court, Appellate Division Third Department.

Jan. 16, 1997.

Bucci & Lockwood (Linda M. Cook, of counsel), Baldwinsville, for appellants.

Coughlin & Gerhart (David H. Guy, of counsel), Binghamton, for respondent.

Before CARDONA, P.J., and MERCURE, CASEY, SPAIN and CARPINELLO, JJ.

CARDONA, Presiding Justice.

Appeals (1) from an order of the Surrogate's Court of Broome County (Thomas, S.), entered October 4, 1995, which granted respondent's motion for summary judgment and dismissed the petition for removal of respondent as trustee, and (2) from the judgment entered thereon.

Robert Venner (hereinafter decedent) died in August 1988, leaving a last will and testament which bestowed a pecuniary bequest to his grandchildren and directed that all of his real estate and tangible personal property pass to his surviving spouse, petitioner Ernestine Venner (hereinafter Venner). Decedent bequeathed the remainder of his estate as follows: 25% to his two children, petitioners Robert D. Venner Jr. and Jacqueline Keenan, to be shared equally, and 75% to be divided into two equal shares, with each share paid to respondent as trustee. Two trusts were provided for by the will, one of which was for the use and benefit of Venner and Venner Jr., and the second of which was for the use and benefit of Venner and Keenan. The will further provided that, upon the death of Venner, the trusts were to terminate and the principal and any accumulated income were to be paid to the respective surviving trust beneficiary (i.e., Venner Jr. and Keenan). There were no specific powers or investment direction provided in the will.

In September 1988, decedent's will was admitted to probate and respondent was granted letters of trusteeship. Subsequently, in May 1994, petitioners petitioned for a decree revoking the letters and removing respondent as trustee. Petitioners argued that respondent had improperly applied the assets of the trusts, made improvident and unauthorized investments, and had a conflict of interest. Thereafter, respondent moved for summary judgment dismissing the petition. Surrogate's Court granted respondent's motion and petitioners appeal.

Initially, we reject petitioners' argument that Surrogate's Court was without jurisdiction to determine respondent's motion for summary judgment because the notice of motion contained no return date. The record indicates that petitioners received a letter informing them of the return date within a week after they had received respondent's motion papers. We find, since no substantial right of a party was prejudiced, that Surrogate's Court properly disregarded the procedural irregularity (see, CPLR 2001; see also, Henry v. Gutenplan, 197 A.D.2d 608, 604 N.Y.S.2d 757; Matter of Brown v. Casier, 95 A.D.2d 574, 577, 469 N.Y.S.2d 165; Todd v. Gull Contr. Co., 22 A.D.2d 904, 255 N.Y.S.2d 452; Coonradt v. Walco, 55 Misc.2d 557, 558, 285 N.Y.S.2d 421).

Turning to the merits, we conclude that Supreme Court properly granted respondent's motion for summary judgment and dismissed the petition. Contrary to petitioners' argument, we find that respondent has demonstrated, as a matter of law, that the petition fails to establish a claim upon which relief may be granted and that petitioners have failed to offer proof sufficient to require a trial of any issue of fact (see, CPLR 3212[b] ). Significantly, while Surrogate's Court is given discretion to revoke letters of a testamentary trustee pursuant to SCPA 711, courts are required to exercise the power of removal sparingly and to nullify the testator's choice of fiduciary only upon a clear showing of serious misconduct that endangers the safety of the estate (see, Matter of Braloff, 3 A.D.2d 912, 913, 162 N.Y.S.2d 620, affd. 4 N.Y.2d 847, 173 N.Y.S.2d 817, 150 N.E.2d 243).

Here, we have examined the various arguments advanced by petitioners in opposition to respondent's motion and find them to be unpersuasive. According to petitioners, respondent has invested approximately 95% of the trust funds in its own mutual funds, namely the Tax Exempt Income and Equity Funds of Marine Midland Bank Diversified Investment Funds. Noting that the will does not provide any authorization for investment in mutual funds, petitioners contend that the investment was improper pursuant to EPTL 11-2.2. ¹ However, respondent submitted proof establishing that the investments were common trust funds rather than mutual funds; therefore, they were not required to be registered pursuant to EPTL 11-2.2. Notably, the investment of trust funds in common trust funds is authorized when the instrument under which the funds are held does not forbid such investments (see, Banking Law § 100-c) and it is not improper per se for a trustee to invest in its own common trust funds (see, e.g., Matter of Estate of Sundheimer, 29 Misc.2d 179, 217 N.Y.S.2d 269; Matter of Dugmore, 23 Misc.2d 792, 199 N.Y.S.2d 630). Since decedent's will does not forbid such investments, petitioners' arguments were properly rejected. While petitioners also contend that the common trust funds themselves invested in mutual funds and other unauthorized investments, such allegations, even if true, do not implicate the trustee's fiduciary responsibilities so as to justify removal (cf., Matter of OnBank & Trust Co. [Hartnett], 227 A.D.2d 20, 649 N.Y.S.2d 592). At most, the trustee would have to absorb any unauthorized fees (see, id.).

Next, petitioners assert that it is a conflict of interest for respondent, who receives a trustee's commission, to receive a further indirect economic benefit by investing the trust assets in funds which are managed by Marinvest (now known as HSBC Asset Management Americas Inc.), a former subsidiary and now affiliate of respondent. Surrogate's Court noted that respondent pays for Marinvest's services out of its own trustee's commissions and no additional commissions are charged to the various trusts; thus, respondent's actions do not violate the fee restrictions set forth in3 NYCRR 22.20 (see, Banking Law § 100-c [3] ).

Petitioners maintain, however, that respondent has violated the requirement that "[a] trust company administering a common trust fund shall have the exclusive management thereof" (3 NYCRR 22.20; see, Matter of Bankers Trust Co. [Siegmund], 219 A.D.2d 266, 270, 636 N.Y.S.2d 741, lv. dismissed 87 N.Y.2d 1055, 644 N.Y.S.2d 146, 666 N.E.2d 1060). However, in fulfilling this mandate, a bank is apparently not forbidden from utilizing investment agents and advisers as long as the trustee bank reviews and approves all investment recommendations and does not delegate any discretionary responsibility (see, Comptroller Staff Interpretive Letters, 1978-1979 Transfer Binder, Banking L Rep [CCH] p 85,053; see also, 3 NYCRR 22.2). ² Nevertheless, even if there was some merit to petitioners' conclusory claims of improper delegation, we find no evidence of serious misconduct warranting respondent's removal.

Petitioners also raise a number of additional arguments relating to, inter alia, respondent's assessment of fees, expense charges and commissions. ³ Regardless of the merit of these contentions, Surrogate's Court held that, even if they were true, such conduct did not rise to the level of fiduciary mismanagement which would jeopardize the trust funds and warrant the drastic action of revocation of respondent's letters of trusteeship (see, SCPA 711(2); see also, Matter of Israel's Estate, 64 Misc.2d 1035, 1043, 315 N.Y.S.2d 453; Matter of Parker's Will, ...