In the Matter of Armstead v. Morgan Guaranty Trust Company

• Decision Date: 28 December 2004
• Docket Number: 4506.,4506A.
• Citation: 787 N.Y.S.2d 38,13 A.D.3d 294,2004 NY Slip Op 09697
• Parties: In the Matter of KIRAN ELIZABETH BUCKNER ARMSTEAD et al., Appellants, v. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, Respondent, et al., Respondents.
• Court: New York Supreme Court — Appellate Division

13 A.D.3d 294

787 N.Y.S.2d 38

2004 NY Slip Op 09697

In the Matter of KIRAN ELIZABETH BUCKNER ARMSTEAD et al., Appellants, v. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, Respondent, et al., Respondents.

4506.

4506A.

Appellate Division of the Supreme Court of the State of New York, First Department.

December 28, 2004.

Order, Supreme Court, New York County (Bruce Allen, J.), entered August 27, 2003, which, in this proceeding for an accounting, removal of the institutional trustee, recovery of lost profits as the result of commission overcharges, and disgorgement of commissions received, granted Morgan Guaranty Trust Company's motion for summary judgment dismissing the petition,

unanimously affirmed, without costs. Appeal from order, same court and Justice, entered January 9, 2004, which denied petitioners' motion for reargument, unanimously dismissed, without costs, as taken from a nonappealable order.

Defendant Morgan administered 12 separate trusts for the settlor's grandchildren. Although the trustee's compensation was subject to the provision that it "shall be computed as if all the separate trusts hereunder constituted a single undivided trust," Morgan charged commissions based on the existence of 12 individual trusts, thereby collecting over $2.5 million in excess commissions over a 14-year period. When the error came to light in 2001, Morgan, after a two-month delay, repaid the amount overcharged with 9% interest. Petitioners commenced this proceeding to recover investment profits of some $900,000, alleged to have been lost due to the unavailability of the funds, asserting that Morgan had acted in bad faith by intentionally charging excessive commissions. The petition also sought removal of Morgan as institutional trustee and disgorgement of all commissions it had received for acting in that capacity.

The relief sought by petitioners was properly denied. Significantly, the petition does not allege that Morgan's conduct endangered the trusts, which appreciated considerably under its stewardship. Thus, this matter is readily distinguishable from those cases relied upon by petitioners, in which a trustee exhibited reckless disregard for the beneficiaries' interests or engaged in intentional wrongdoing (see Lubell v Samson Moving & Stor., 307 AD2d 215, 216-217 [2003]). Rather, this dispute involves the largely commercial question of how much the trustee is entitled to receive as payment for its faithful performance of its duties.

Even under circumstances warranting a surcharge, a trustee is entitled to commission where "there is no fraud . . . no gross neglect of duty, no intentional harm to the trust or sheer indifference to the rights of others or disloyalty as would, in addition to answerability, call for punishment of the...