Grace's Estate, In re

• Decision Date: 16 February 1970
• Citation: 308 N.Y.S.2d 33,62 Misc.2d 51
• Parties: In re GRACE'S ESTATE. In the Matter of the Judicial Settlement of the Account of Proceedings ofJoseph P. GRACE, Jr., Michael P. Grace II and Charles Macdonald Grace, asExecutors of the Estate of Joseph P. Grace, Deceased. Surrogate's Court, Nassau County
• Court: New York Surrogate Court

Page 33

308 N.Y.S.2d 33

62 Misc.2d 51

In re GRACE'S ESTATE In the Matter of the Judicial Settlement of the Account of Proceedings ofJoseph P. GRACE, Jr., Michael P Grace II and Charles Macdonald Grace asExecutors of the Estate of Joseph P. Grace, Deceased.

Surrogate's Court, Nassau County.

Feb. 16, 1970.

Cahill, Gordon, Sonnett, Reindel & Ohl, New York City, by John Young, New York City, of counsel, for petitioners Joseph P. Grace, Jr., and Charles Macdonald Grace.

Michael R. Todd, New York City, for objectant Michael P. Grace II, as Exr. and individually.

Null & Cooperstein, Garden City, of counsel, to attorney Todd.

Friedman & Fischman, New York City, for objectant Michael P. Grace II, as legatee.

Louis J. Lefkowitz, Atty. Gen., New York City, for charities.

Charles E. Lapp, Jr., Cedarhurst, guardian ad litem for infants and incompetent.

Sprague, Dwyer, Aspland & Tobin, Mineola, for decd. guardian ad litem of infants and incompetent.

Sullivan & Cromwell, New York City, by Donald C. Christ, New York City, of counsel, for respondent Marine Midland Grace Trust Co. of N.Y.

Francis Currie, New York City, former atty. for petitioners.

Frederick K. Hackett, Farmingdale, for Michael P. Grace II as Exr. and individually.

William Edward Murray, New York City, of counsel, and Milton M. Rosenbloom, New York City, Associate Counsel, to Frederick K. Hackett.

Morton M. Bass, New York City, for respondent Michael P. Grace II.

William S. Downard, Dallas, Tex., claimant, by Jack Korshin, Mineola, of counsel.

JOHN D. BENNETT, Surrogate.

In this contested accounting proceeding, two of the executors, Joseph P. Grace, Jr. and Charles Macdonald Grace, have filed their final account for the period December 31, 1959 to December 31, 1963 and brought such account down to October 25, 1968 by affidavits. Their brother, Michael P. Grace II, a co-executor, has filed numerous objections.

Although there was a prior intermediate accounting, this final account follows the decedent's death on July 15, 1950 by more than nineteen years. The protracted litigation which has developed between the two accounting executors and their co-executor has affected the rights and interests of their sister, a judicially declared incompetent, charities, and a number of infants represented by a guardian ad litem. Because of the somewhat peculiar nature of the estate and the manner in which it has developed, some general observations amply supported by the record are in order prior to a determination of the objections.

The two accounting executors, it would seem, have obviously hoped that by ignoring their brother his objections to their method of handling the estate would disappear. History has proved them wrong. Their actions demonstrate they never fully comprehended or conceded that the objecting executor was entitled to the same rights and privileges afforded them. The antagonisms that have ensued as a result of the accounting executors locking out the objecting executor from much of the intricate matters dealing with this estate have been a catalyst to the litigation.

On the other hand, the court in previous decisions has not hesitated to express its opinion concerning the litigious and contentious behavior of the objecting executor, and its observations herein are not an attempt to make a quantum determination of fault but to indicate its dissatisfaction with the actions of all of the executors. Had the accounting executors immediately proceeded to account and wind up the administration of this estate, rather than permit time to pass without taking positive actions, this estate could have been terminated years ago.

However disposed the objecting executor was to litigation, he nonetheless faithfully appeared before this court, took the stand numerous times to offer information which he had, subjected himself to cross-examination and succeeded in bringing additional assets into the estate. The accounting executors, on the other hand, never made an appearance during the hearing of the objections. The evidence is clear that one of the accounting executors, if not the alter ego of his father, was certainly the alter ego of the estate in that he was in effect the chief executive officer of some of the corporations in which the decedent had an interest. Since the decedent often owned property in the names of others and a great deal of inside information was necessary to determine the assets of his estate, it was necessary to take testimony to establish what interests the estate had in various corporations, real estate, manuscript rights, etc. Had the accounting executors, who obviously possessed a wealth of information, come forth rather than rely on third parties, whose knowledge of the facts was often second hand, this accounting proceeding would have been less complicated and many of the questions raised by their brother readily answered.

In addition, the accounting executors often advanced the position of interest inimical to the estate rather than coming to its defense and thereby raised serious conflict of interest questions. This was especially so in regard to the bank claim, certain claims to real property, and the question of ownership of the Marquis James manuscript.

The foregoing observations should not be considered as a rebuff to the present attorneys representing the accounting executors. On the contrary, the court finds that more has been done since they have been retained to bring this estate to a conclusion than has been done in the past nineteen years. They have cooperated in giving detailed information to all parties concerned and, by their actions, many of the objections can now be summarily disposed of. As stated above, these observations are not made to emphasize the accounting executors' faults merely, but to point out that their assumption that the fault lies Solely with their litigious brother is mistaken.

Under item 31 of Schedule A. the executors designate property as parcel 'J' and indicate the estate's interest as one-quarter. The objectant contends the estate's interest in the property is three-quarters.

The executors take the position that they are not required to account for real property; that the issue involved was determined in a prior proceeding and the facts indicate that the estate has only a one-quarter interest.

Historically, title to real property did not pass to the personal representative upon qualification but the title thereto passed directly to the decedent's distributees and devisees. Accordingly a fiduciary was not required to account for real property (Matter of Sergant, 62 Misc. 173, 116 N.Y.S. 273; Matter of Green, 63 Misc. 638, 118 N.Y.S. 747; 4 Warren's Heaton, Surrogates' Courts, (6th ed.), § 351, par. 1(a); McKinney's Practice Commentary to Art. 13, EPTL 13--1.3). Changes, however, have occurred in our law relative to the powers of a fiduciary in disposing of real property, distributing it in kind and treating some real estate assets as personalty (EPTL 11--1.1, 5, 6, 7, 2.1, etc.; SCPA Art. 19; EPTL 13--1.1; SCPA 2216). While the Temporary State Commission on Estates considered giving the personal representative title to all property of a decedent, this was abandoned in preference to other changes (33 Bklyn.L.Rev. 419; EPTL 13--1.3; EPTL 1--2.15) whereby the distinctions between personal and real property would be virtually eliminated. As Professor Hoffman stated in his commentary to EPTL 13--1.3 in McKinney's, the historic principle is still viable. However, the changes in the law brought about by our modern society have caused its status to ebb.

If a fiduciary sells real property, he must account for the proceeds. If all or part of an interest in real property is owned by the decedent but title is in the name of another as the result of a joint venture, partnership agreement or merely an understanding with the decedent (for brevity all such arrangements are hereinafter referred to as partnership interests), it is doubtful if the historic rule vesting title in the decedent's devisees or distributees should apply. Such an interest in real property should be marshalled and then distributed.

A surviving partner must ordinarily wind up the partnership account and distribute. Unless all the realty is sold, the surviving partner must distribute an interest in real property. The only logical person for the surviving partner to account to for such an asset, especially where title to the property is nominally held and there are many legatees and distributees who are warring with one another, would be the fiduciary of the decedent's estate. While we need not go so far, as is done in England, and give title to real property to the personal representative, it would nonetheless be better practice to have him intervene and gain title for the devisees and distributees. The personal representative should pursue the estate's claim by having the surviving partner account to him after the partnership is wound up so that the personal representative can distribute to the legatees, devisees or distributees (3 Harris, Estates Practice Guide (3d ed.) § 753). It would often be impractical in an estate such as the decedent's to require the devisees or distributees to commence an independent action in another forum against the surviving partner or one holding property nominally. Accordingly the court finds there are instances where a fiduciary must account for real property.

In the prior intermediate account by the two accounting executors herein, Michael P. Grace II filed objections to their account on Jury 13, 1955. Objection 1 dealt with real property listed under Schedule A and his objection was to the effect that the accounting executors listed the incorrect acreage and valuations of the parcels owned by the estate. Objection 4 dealt with the selling expenses for some of the property listed under Schedule A--1. Subsequently he reached an agreement with his brothers and entered into a...