In re Oakley
| Citation | 2022 NY Slip Op 30557 (U) |
| Decision Date | 09 February 2022 |
| Docket Number | File 2018-346/B |
| Parties | ESTATE OF KENNETH CLYDE OAKLEY, deceased. |
| Court | New York Surrogate Court |
Unpublished Opinion
Sean Denvir, Esq. (Ryan, Roach &Ryan) for Kathleen Roland and Susan Christiana, objectants William Collier, Esq. (Collier & Berger) and Peter F. Matera, Esq. for Kenneth Clarence Oakley, executor
DECISION/ORDER
When Kenneth Oakley died on May 30, 2017, his son and nominated executor was facing a serious health crisis of his own. His siblings were understanding when he put off filing a petition for probate to deal with his medical issues. When he did petition for letters testamentary, a year later, all of the beneficiaries waived their appearances and consented to his petition.
The decedent's will gave his property in equal shares to his six surviving children and the only child of his predeceased daughter. Letters testamentary were issued to Kenneth Clarence Oakley, the named executor in the will ("executor") on October 5, 2018. Unfortunately, the executor's appointment did not spur him to take up his fiduciary duties. The estate languished for years and it was only at the insistence of Kathleen Rowland and Susan Christiana (the "objectants") that the executor finally undertook to marshall assets.
Decedent's real property in Ulster County was the estate's single most valuable asset. Decedent's home was located on approximately 35 acres improved by a barn and two houses only one of which was habitable (the "farm") appraised at $315, 000. A second, unimproved parcel, which the parties refer to as "the back yonder," was sold in March 2021 for $135, 000. The remaining assets, valued at about $300, 000, included bank accounts, savings bonds proceeds from life insurance and stocks in IBM and Prudential.
A few months after his appointment, the objectants began asking their brother questions about the extent of the estate and his plans for sale of the farm and the back yonder. They followed up with texts and letters to the executor and to his attorney, to which they received no reply. The executor testified that while he kept his other siblings up to date about the estate, he did not extend this courtesy to Kathleen and Susan, because they were "hostile." He recalled in particular a conversation that turned "confrontational" when the objectants informed him that they had hired a lawyer.
In October 2019, Kathleen Roland and Susan Christiana ("objectants"), petitioned to compel an accounting by the executor and for related relief under SPCA § 2205. On the Court's order, the executor filed an intermediate accounting for the period from date of death to August 31, 2020. After settlement negotiations stalled in the spring of 2021, objections were filed.
The Court conducted a hearing on September 30 and October 1 2021, taking testimony from the objectants and the executor. Two beneficiaries - William Oakley (decedent's son) and Brandon Buck Pra (decedent's grandson) - testified in support of the executor, expressing their consent to the $95, 000 gifts he received from the decedent. At the conclusion of the hearing, the parties' attorneys were given the opportunity to file written summations, which they did.
The purpose of an accounting is to tell the story of an estate in dollars and cents. In it is found virtually every expression of a fiduciary's duty to those whose interests they have sworn to protect. A fiduciary's work begins at the "moment of death/' when their duty to preserve the assets of the estate is created (Estate of Donner, 82 N.Y.2d 574, 584 [1983]). Their accounting will reflect the extent to which they managed the estate's assets with the "diligence and prudence which an ordinary [person] would exercise in his [their] own affairs" (Matter of Shambo, 169 A.D.3d 1201, 1205 [3d Dept 2019]).
As estate administration proceeds, there is an on-going duty to maintain "clear and accurate accounts of the estate", which is critical to the duty to account (Matter of Jewett, 145 A.D.3d 114, 115 [3d Dept 2016], citations omitted). An accounting will also shed light on the extent to which a fiduciary may have strayed from the duty of "undivided and undiluted loyalty" to beneficiaries (Birnbaum v. Birnbaum, 73 N.Y.2d 461, 466 [2012]) or has failed to treat all legatees in like manner, making distributions impartially and without favor (Estate of Muller, 24 N.Y.2d 336, 344 [1969]). Fiduciary self-dealing violates this final essential precept and carries with it a presumption of impropriety (Estate of Naumoff 301 A.D.2d 802, 803 [3d Dept 2003]).
In a contested accounting, the fiduciary has the burden of proving that they have fully accounted for the entire estate (Matter of DiGiovanna, 148 A.D.3d 699 [3d Dept 2017]). A party contesting the accounting must then come forward with evidence of the inaccuracy of the account or the executor's improper exercise of his fiduciary duties (Estate of Rubin, 30 A.D.3d 668, 669 [3d Dept 2006]). Should that evidence be produced, the accounting fiduciary must establish, by a preponderance of the evidence, that their account is accurate and complete (Matter of DiGiovanna, 148 A.D.3d at 700.)
The executor had met his initial burden of proving that he had "fully accounted for the entire estate" by filing the petition, account schedules and affidavits of accounting parties, which are complete on their face (Matter of Cook, 177 A.D.3d 1214, 1216 [3d Dept 2019]).
The Court now turns to the objections to his conduct. The objectants cite the executor's self-dealing and negligence as the principal grounds for the relief sought. In addition, Kathleen Rowland, in her capacity as a claimant, seeks to compel the executor to deed a 6-acre portion of the farm in accordance with an oral agreement made with the decedent.
The principal acts which the objectants characterize as "self-dealing" took place in the final hours of decedent's life, when $95, 000 was transferred from decedent's bank accounts to the nominated executor's personal account. In addition, the objectants cite the executor's use and occupancy of the farm, without compensation to the estate, as his residence and for his son's beef and poultry business. The objectants refer the Court to multi-year delays in marshalling assets, filing income tax returns, depositing dividend checks, paying real estate taxes, insuring the farm and selling decedent's stock as evidence of the executor's negligence.
GIFTS/SELF-DEALING. The objectants contend that $95, 000 transferred from decedent to executor in the last few days of his life were not gifts, but were engineered by the executor for his exclusive benefit.
The requirements for a valid inter vivos gift are (1) an intent on the part of the donor to make a gift; (2) acceptance by the donee, and (3) delivery of the gift (Matter of Szabo, 10 N.Y.2d 94 at 98 [1961]). A donee who claims an inter vivos gift of an asset that would otherwise be part of an estate faces a heavy burden: "[t]he proof must be of great probative force and must clearly establish every element of a valid gift" (Matter of Kennedy, 36 A D 2d 549 [1971]).
The $95, 000 gift was accomplished by means of 2 checks drawn on decedent's accounts.[1] When a payment or gift is made by check, an agency relationship is created: the payee of the check is authorized, as the payor's agent, to deposit the check to complete the transfer of funds. The moneys are not "delivered" and payment is not deemed complete until the payee's bank credits it to their account. Death of the principal terminates the agency. A gift by check is thus complete only if the check has been deposited and credited to the payee/donee's account during the lifetime of the payor/donor (Matter of Mead, 90 Misc. 263 [Sur Ct NY Cty 1915]; aff'd 173 Ad 982 [1916]; aff'd 221 NY 645[1917]); see, also Estate of Horowitz, 2006 NY Misc. LEXIS 6597 [Sur Ct West Cty 2006]). Where such a check is not so delivered prior to the payor/donor's death, "the gift is incomplete and no valid transfer of the fund is effectuated" (Braunstein v. Russo, 2014 NY Misc. LEXIS 1048, *3 [2d Dept 2014]; quoting Matter of Grauds, 43 N.Y.S.2d 803, 817 [Sur Ct NY County 1943]).
The bank records offered into evidence reflect that a $45, 000 check drawn on decedent's account was deposited into the executor's personal KeyBank account on May 30, 2017.[2] KeyBank did not credit it to his account until May 31, 2017, five days after his father's death. This gift was therefore not complete at the decedent's death and the proceeds must be returned to the estate.
The executor testified that the $50, 000 transfer was also accomplished by check. The KeyBank records indicate that the check was deposited at the branch on May 26, 2017, the day his father died. The transfer was not credited to the executor's account on that date. The Court has not been provided with a record of when the $50, 000 was actually credited to the executor's account, but it must have occurred after May 26th. This payment, too, reflects an incomplete gift and must be reversed by the executor's payment to the estate in this amount.
Even if the checks had been "delivered" by being deposited and credited to the executor's personal account before the decedent's death, the executor has not met the burden of proving that his father was possessed of donative intent when the putative checks were signed (Mirvish v Mott, 18 N.Y.3d 510, 518 [2012]). When, as here, the donee claims "title to property through a gift inter vivos as against the estate of a decedent," the clear and convincing standard of proof must be supported by evidence of "great probative force" (Estate of Kennedy, 36 A.D.2d 549, 550 [3d Dept 1971]). At trial, the executor had the opportunity to meet the...
To continue reading
Request your trial