In re Estate of Wallens
| Decision Date | 18 October 2007 |
| Citation | 877 N.E.2d 960,9 N.Y.3d 117 |
| Parties | In the Matter of the ESTATE OF Burton WALLENS, Deceased. Maggie Wallens, Appellant; Charles Wallens, Respondent. |
| Court | New York Court of Appeals Court of Appeals |
In this proceeding seeking judicial settlement of accounts of a cotrustee, we conclude that an issue of fact exists concerning whether the cotrustee breached his fiduciary duty to the trust beneficiary. Accordingly, we direct Surrogate's Court to conduct an evidentiary hearing on this matter.
The trust further provided that it would terminate when Maggie turned 30 years old with any remaining principal and accumulated income being distributed to her.
In March 1995, after the execution of the testator's will, but prior to his death, Maggie's mother and father divorced. At that time, Maggie was 13½ years old and attending a private school. A year earlier, the parents had entered into a separation agreement in which father agreed to pay mother child support and certain education and health care costs for Maggie, including the cost of the private school education. The 1995 judgment of divorce, which incorporated, but did not merge, the provisions of the separation agreement, required father to pay, among other things, (1) "all educational expenses for [Maggie] at Elmwood Franklin School, Nichols and/or any other private day school the child shall attend, and at college and/or university" and (2) "any and all uninsured medical and dental expenses for the child."
In March 1997, the testator died. The will was admitted to probate and father was appointed cotrustee of the testamentary trust, together with Richard Yellen (who later resigned in 2002). At this time, father, as cotrustee, began distributing payments out of the trust for Maggie's private school education expenses. These payments were authorized by cotrustee Yellen. After Maggie began living with her father, he petitioned for a reduction/elimination of his child support obligations. In August 2000, Supreme Court issued an order relieving father of his child support obligations and directing that "the trust established by the [testator] for the benefit of the child shall be used to pay for normal and customary college costs and expenses."
In April 2003, pursuant to a petition for an accounting filed by Maggie, Surrogate's Court directed father to judicially settle his account as cotrustee. Father filed his account and Maggie objected, as pertinent to this appeal, to father's payment of her secondary school education and certain health care expenses from the trust. In her objections, Maggie alleged that the 1995 judgment of divorce required father to personally pay for certain educational and medical expenses, rather than use trust funds that would be distributed to her on her 30th birthday.
In March 2005, Surrogate's Court directed an evidentiary hearing, but a review of the record reveals that no such hearing was held. The court nevertheless sustained Maggie's objections to the use of trust funds for her private secondary school education, health care expenses and reimbursements for her personal allowance and ordered repayment to the trust. It rejected however, her claim that the expenditures related to her college education were improper, finding that such expenditures were authorized under the August 2000 Supreme Court order.
On appeal, the Appellate Division modified the order, dismissed the objections in their entirety, and remitted the matter to Surrogate's Court for further proceedings consistent with its decision. The Appellate Division concluded that "[father] did not engage in self-dealing, in breach of his fiduciary obligations to [Maggie] by his use of trust funds in precisely the manner authorized by the testator in the will provision establishing the trust" (Matter of Wallens, 30 A.D.3d 962, 965, 816 N.Y.S.2d 793 [4th Dept.2006]). Upon remittal, Surrogate's Court approved the account. For the reasons that follow, we conclude...
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