In the Matter of Kaskawits, 2009 NY Slip Op 52317(U) (N.Y. Surr. Ct. 10/5/2009)

Decision Date05 October 2009
Docket Number1993-1820/E
PartiesIN THE MATTER OF THE ACCOUNTING OF INGRAM S. CARNER AS TRUSTEE OF A TRUST CREATED UNDER PARAGRAPH FOURTH OF THE LAST WILL AND TESTAMENT OF IRWIN KASKAWITS, DECEASED, FOR THE BENEFIT OF CARA ALSWANGER.
CourtNew York Surrogate Court

Arthur Levine, Esq., New York, NY, Attorney for Petitioner

Burton Citak, Esq., Citak & Citak, Esqs., New York, NY, Attorneys for Objectants

Elmira J. Jackson, Esq., New Rochelle, NY, Guardian ad litem.

ANTHONY A. SCARPINO, J.

Pending before the court are four contested intermediate accounting proceedings by Irgram S. Carner (Petitioner), the former trustee of trusts created under Article FOURTH of the will of Irwin Kaskawits (decedent). The parties have submitted the matter for determination based upon an agreed statement of stipulated facts and exhibits.

Petitioner seeks to settle his accounts for the period from April 15, 1994 through June 30, 2008 and requests that: (i) the court fix and allow professional fees and disbursements; (ii) allow him to repay the trust excess commissions which he took without court order; and (iii) allow him to pay a stated amount of interest on money he borrowed from the trust, also without court order.

Decedent died testate on July 29, 1993. Under his will, decedent gave the sum of $50,000 to each of his grandchildren to be held in separate trusts until each grandchild attains the age of 30. Four grandchildren survived decedent: Cara Alswanger (Cara) born April 25, 1985 and Julie Alswanger (Julie) born October 9, 1992, issue of decedent's daughter Susan; and Daniel Kaskawits (Daniel) born June 28, 1981 and Stephen Kaskawits (Stephen) born February 15, 1984, issue of decedent's son Richard. Julie is an infant for whom a guardian ad litem was appointed. Objections to the accounts have been filed by the respective beneficiary of each trust and by Susan Alswanger, as guardian of the property of her daughter Julie.

Letters of trusteeship issued to petitioner on April 15, 1994. In a related proceeding, petitioner resigned as trustee. Successor letters of trusteeship issued as follows: Susan Alswanger as trustee of the trusts for the benefit of Cara and Julie; and Richard Kaskawits as trustee of the trusts for the benefit of Stephen and Daniel.

Under his will, decedent granted the trustee discretion to pay income and/or principal for a grandchild's health, support, maintenance and education. Upon a grandchild attaining the age of 21, he or she is entitled to annual distributions of income. Each beneficiary is also entitled to distributions of principal as follows: 1/3 at age 21; ½ of the balance at age 24; and the balance at age 30. Decedent specifically restricted the investment of the trust assets to municipal bonds rated at the time of investment as Double-A or better, U.S. Treasury Bills or notes, government insured bank certificates, and government insured bank deposits (Article EIGHTH [b]). He also directed the trustee to provide the beneficiary of his and her respective trust with an annual cash statement for each trust (Article NINTH [E]).

Over the course of the accounting period, the beneficiaries repeatedly sought information from petitioner. Petitioner disregarded their requests. In May, 2008 objectants commenced proceedings to remove petitioner and to compel him to account. Following a conference with the court, the parties entered into an agreement whereby petitioner agreed to resign as trustee and to file his accounts. Thereafter, counsel for the beneficiaries filed four separate proceedings for petitioner's resignation and for the appointment of a successor trustee of each trust. Petitioner filed his accounts in November, 2008.

Objectants seek to deny petitioner commissions and to surcharge him for the following acts i) the failure to create separate trusts; ii) the failure to fully fund the trusts in the amount of $50,000 each for a total of 200,000; iii) taking commissions without court order; iv) making an unauthorized loan to himself in the amount of $137,000; v) paying himself administrative fees without court order; vi) failing to maximize the return on investments; vii) failing to provide the beneficiaries with annual statements as directed under the will; viii) failing to distribute trust funds in accordance with the will; ix) failing to file timely income tax returns; and x) for their legal fees related to these proceedings.

It is well established that the most fundamental duty owed to the beneficiaries by a trustee is the duty of loyalty. Implicit in a trustee's duty of loyalty is the duty not to self deal. As the Court of Appeals held in Meinhard v Salmon, 249 NY 458 [1928], "a trustee is held to something stricter than the morals of the marketplace. Not honesty alone but the punctilio of an honor most sensitive, is the standard of behavior." More recently in Matter of Wallens, 8 NY3d 806 [2007], the Court of Appeals applied such standard noting that the trustee's standard is a "sensitive and inflexible rule of fidelity, barring not only blatant self-dealing, but also requiring the avoidance of situations in which a fiduciary's personal interest conflicts with the interest of those owed a fiduciary duty. . . . The trustee must administer the trust for the benefit of the beneficiaries and cannot compete with the beneficiaries for the benefits of the trust corpus."

To prevail on a surcharge, objectants must show that petitioner failed to act prudently with regard to handling the administration of the trusts (Matter of Donner, 82 NY2d 574 [1993]; Matter of Janes, 90 NY2d 41 [1997]). Where such showing is made, SCPA 2211 grants the court broad discretion to make "such order or decree as justice shall require." (See Matter of Acker, 128 AD2d 867 [1987].) Applying such rule, the court may fashion any remedy it deems necessary to redress a successful objectant including but not limited to: surcharge; denial of all or some commissions; and imposing interest on a surcharge. Where warranted, the court may grant all of the available remedies (Matter of Lippner, 135 Misc 2d 34 [1987]).

The four accounts reflect petitioner's attempt to reconstruct the administration of the funds as though four separate trusts were created. Each account is replete with the euphemism "to record" for transfers which petitioner concedes he must make but has failed to. For example, petitioner characterizes his withdrawal of $137,000 from the trust as a "loan" and the interest he still owes is referred to as "to record interest owed on Ingram S. Carner's loan of [a specified date]." Four years after taking the money, petitioner returned the funds to the trust without paying any interest. Similarly, petitioner paid himself excessive commissions without court order. He has not refunded the conceded excess, nor has he paid any interest. On Schedule J of each account (Other Pertinent Facts) petitioner attempts to balance the four accounts and indicates an amount he has computed as due and owing for the respective beneficiary's share of the overpayment of commissions and unpaid interest.

Objectants prepared the stipulated facts and exhibits which are in effect an attempt to reconstruct petitioner's actions during the sixteen year period he acted. The exhibits include statements of the account where petitioner held the funds. Objectants have in effect taken and stated petitioner's accounts.

The undisputed facts are as follows.

Petitioner never established separate trusts for each grandchild as directed under decedent's will. In April, 1994 petitioner received from the executor a check in the amount of $200,000 which he deposited into his personal account at Citibank. On July 20, 1994 petitioner opened an account with Gruntel and Company, now GMS Group (GMS account) entitled "Trust UW Irwin Kaskawits, Ingram Carner TTEE." From August 10, 1994 through November 21, 1994 petitioner made numerous withdrawals from his Citibank account and deposited such funds into the GMS account for a total of $199,427.24. With respect to the discrepancy in the funds, petitioner contends that the "Estate of Irwin Kaskawits," not him, owes the trust the difference which he sets forth as $143. The correct discrepancy is $572.06.

From 1994 through June 28, 2002, when Daniel turned 21 years of age, petitioner did not make any distributions to the beneficiaries. Following Daniel's 21st birthday, petitioner did make two distributions of principal to Daniel and thereafter made distributions to Stephen and Cara upon their attaining the age of 21. At no time did petitioner provide any of the beneficiaries, or their respective parents, with annual cash statements.

During the period of the trust, petitioner withdrew funds to pay himself commissions and what he characterizes as administration fees. Petitioner took annual commissions notwithstanding his failure to provide the beneficiaries with annual statements. The total of the commissions taken far exceed what may be allowed under the governing statute, SCPA 2309.

On May 12, 2004 petitioner withdrew $137,000 and deposited the funds into an account entitled "Ingram S Carner Rev Trust." In an undated letter to GMS, petitioner wrote "[t]his loan will be repaid within the next four (4) weeks with interest." Petitioner did not repay the loan as promised. After objectants commenced the proceeding to compel him to account and for related relief, on June 11, 2008 petitioner paid $137,000 to the trust without interest. Five days later on June 16, 2008 petitioner paid himself $49,663 which he deposited into his personal account. Petitioner states that he was advised by an accountant, Raymond J. Passero, CPA, that he was owed such funds as commissions and administrative fees.

During the period petitioner acted, the beneficiaries sought on numerous occasions to obtain distributions and information concerning the trust. The following exchange reflects petitioner...

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