Israel's Estate, In re

• Decision Date: 29 October 1970
• Citation: 315 N.Y.S.2d 453,64 Misc.2d 1035
• Parties: In re ISRAEL'S ESTATE. In the Matter of the Judicial Settlement of the Account of Proceedings of Maurice GOODMAN, as Co-Executor of the Estate of Betty Blumberg Israel, also known as Betty Blumberg, also known as Betty Israel, Deceased. Surrogate's Court, Nassau County
• Court: New York Surrogate Court

Page 453

315 N.Y.S.2d 453

64 Misc.2d 1035

In re ISRAEL'S ESTATE In the Matter of the Judicial Settlement of the Account of Proceedings of Maurice GOODMAN, as Co-Executor of the Estate of Betty Blumberg Israel, also known as Betty Blumberg, also known as Betty Israel, Deceased.

Surrogate's Court, Nassau County.

Oct. 29, 1970.

Joseph A. D'Addario, New York City, for Maurice Goodman, executor.

Gordon, Brady, Keller & Ballen, New York City, for Maurice Goodman, individually, by Melvin A. Albert, New York City, of counsel.

Jerome Teich, New York City, for objectants Bernard and Lillian Blumberg.

Edward R. Neaher, U.S. Atty. for the United States by Joseph Rosenzweig, Asst U.S. Atty., Brooklyn, of counsel.

Simon Presant, New York City, for objectant Irving Israel by Howard B. Presant, New York City, of counsel.

Mona Oppenheim, Kings Point, Guardian ad litem for Iris and Gary Blumberg, Infants.

Emanuel Blumberg, pro se.

Sally Blumberg, pro se.

Doris Blumberg, pro se.

Howard Blumberg, pro se.

Jacobs, Hirsch, Jacobs & Tinkler, New York City, for creditor Corboe furs.

Hauptman & Hauptman, Brooklyn, for Herman Cohen, trustee in bankruptcy of Bernard Blumberg.

Wolf, Popper, Ross, Wolf & Jones, New York City, for receiver pendente lite of B.S.F. Company.

JOHN D. BENNETT, Judge.

In this intermediate accounting of an essentially poorly administered estate, the central theme has been a failure to encounter and resolve the conflicting claims between the estate and one of its executors, Maurice Goodman, whose financial dealings with the decedent, his executive secretary at the time, has left a tangled web of numerous transactions.

Mr. Goodman is characterized in his brief as having once been a millionaire and his interests seem to have been primarily in securities and the investment world. He appears to have engaged heavily in borrowing funds from numerous banks and pledging as collateral much of his stock.

Approximately a year before her death on November 8, 1962, the decedent married Irving Israel. During most of her employment by Mr. Goodman, however, she was known simply as Betty Blumberg. The relationship between Mr. Goodman and Betty Blumberg was obviously one of trust and confidence imposed in him by her as is evidenced by her letter of April 18, 1957 (Ex. 32) addressed to her brother in which she said: 'You can trust Maurice Goodman.'

The various issues raised by the objections and the claims both by and against Mr. Goodman have been divided into headings for clarification.

Title to stock in the name of the decedent.

Paragraph 10 of Mr. Goodman's petition alleges that the stock listed in that paragraph in the name of the decedent was pledged by him for loans and that, when the stock is sold, the proceeds should be paid to the estate after payment of 'cost and interest charges.' The stocks listed are 200 shares of United Industrial Corporation, 42 shares of Emhart Manufacturing Company and 1,150 of Savoy Industries, Inc. This apparent concession of title in the petition was again repeated by Mr. Goodman's counsel (s.m. 20--21) when he withdrew any claim by Mr. Goodman of ownership of the shares of stock. While it is clear up to that point that no claim of ownership had been made by Mr. Goodman to the shares of stock, the balance of the record reveals Mr. Goodman's ambivalent position on ownership of the above listed shares of stock and others that were pledged by him as collateral for loans made to him. At one point, Mr. Goodman's counsel stated: 'There is no concession that this (stock) belongs to the Estate of Betty Israel. It may be in the name of Betty Israel.' (s.m. 193). When Mr. Goodman was asked why he had not sold the securities in the decedent's name, which were pledged, he answered: 'Well, I didn't have any particular urgency to sell them. The securities actually belong to me.

'Q. You owned all the securities?

'A. I paid for the securities.' (s.m. 351)

Either Mr. Goodman claims he owns or owned the stock beneficially notwithstanding their purchase in the decedent's name or, more consistently with his pleadings, that the decedent owned the stock but may have borrowed the money from him for their purchase. His lack of candor and consistency only tend to cast suspicion on either position. Notwithstanding Mr. Goodman's confusing stand on the question of ownership of the stock, the evidence adduced fully supports the conclusion that all of the stock in the decedent's name and pledged as security for Goodman's loans were owned by her. The first recorded evidence of an obvious course of dealing between Mr. Goodman and his executive secretary is his exhibit 24, a letter addressed to him and on his stationery, signed by both the decedent and himself, which states in part: 'I (Betty Blumberg) have received a total of $7,388 cash advances and $1,422 equity, received for the purchase of securities.

'While I am indebted to you in this sum, you agree to indemnify me against any losses incurred resulting from the sales of said securities.'

There follows a listing of shares of various corporations. The second paragraph has obvious reference to Mr. Goodman's practice of pledging securities in her name for his loans by its reference to his obligation to 'indemnify' her against any losses incurred resulting from the sales of the securities. In addition, Mr. Goodman's exhibit 27, consisting of six books containing records of checks drawn on his account and deposits made, contain numerous notations from which it is clearly inferable that checks payable to Betty Blumberg were loans made to her by Goodman for the purpose of purchasing securities. For example, the entries for checks numbered 801, 812 and 852 contain the decedent's name as payee and the word 'loan' followed in two cases by the number '100' and the letters 'BSF', and in the third case by the number '50' and the letters 'BSF', having undoubted reference to the shares of BSF Corporation. While resort under the circumstances to presumptions is probably unnecessary, it is clear that ownership of stock is presumed to be in the registered owner (Miller v. Silverman, 221 App.Div. 697, 224 N.Y.S. 609, mod. 247 N.Y. 447, 160 N.E. 910). On all the evidence, the court finds that the stock in the decedent's name, which was pledged as collateral for loans to Mr. Goodman, is owned by her estate as to those shares still held by the bank and that she also owned all other shares so pledged which have either been released or otherwise disposed of. The former group includes 200 shares of the United Industrial Corporation, 5% Preferred; 101 shares of Emhart Manufacturing Company and 1,150 shares of Savoy Industries, Inc., presently held by Irving Trust Company as collateral for Mr. Goodman's loans. As to other shares pledged and disposed of, 245 shares of BSF Company were sold on July 20, 1962, and 100 shares of Soss Manufacturing Company were released to Mr. Goodman on September 6, 1961, all before the decedent's death.

Stock pledged as collateral for Mr. Goodman's loans.

As indicated above, certain of the securities owned by Betty Blumberg are still held for Goodman's loans. This was testified to by a representative of the Irving Trust Company and readily admitted by Mr. Goodman. When asked whether he had taken any steps to redeem the stock, he stated he requested their release at a very early date following her death, but Mr. Sprafkin (the then attorney for his coexecutor) said it should not be done (s.m. 182). At another point when again pressed on this subject he stated that he had requested counsel for permission to sell the stock 'but, that he had specifically asked me not to until the estate was settled because of the apparent dissension.' In sharp contrast to these two statements, Bernard Blumberg, his coexecutor, testified that Mr. Sprafkin demanded that the stocks held as collateral for Mr. Goodman's loans be released, but that absolutely nothing happened (s.m. 430--431). The records of this court indicate that Bernard Blumberg in fact sought to commence a removal proceeding against Mr. Goodman as his coexecutor in June of 1964, part of the allegations being that Mr. Goodman had, in effect, declined to assist in releasing the securities pledged with the banks. Certainly, in view of Mr. Goodman's obvious divided loyalty and self interest in continuing the pledge, his attempt to shift the blame for non-action to his coexecutor or his former attorney, can be given little credence.

Had Mr. Goodman not been an executor of this estate and not been in a position of divided loyalty, what would have been the remedies for him logically to pursue to extricate the pledged securities? Betty Blumberg, Goodman and the banks shared the relationship of surety, principal and creditor (Vose v. Florida Railroad Company, 50 N.Y. 369; Restatement, Security § 36; 53 N.Y.Jur., Secured Transactions § 110; 57 N.Y.Jur., Suretyship and Guaranty § 26; Stearns on Suretyship (5th ed.), § 21; Hagendorn on Suretyship, § 4). Among a surety's rights there is that of reimbursement, exoneration, contribution and subrogation, each having its own peculiar elements ('Suretyship in the Code' by Clark, 46 Tex.L.Rev. 453 (1968)). The remedies of reimbursement, contribution and subrogation are only available after the surety has paid or discharged the principal's obligation and not before (Restatement, Security §§ 112, 141, 149--164). However, even before any payment by the surety and after maturity of the debt, the right of exoneration enables a surety to commence an equitable action to compel the principal to discharge his obligation (Restatement, Security § 112; Stearns on Suretyship, § 11.38; Spencer on Suretyship § 177). This remedy has been held to include the right to compel the creditor to proceed against the principal where special circumstances are shown (Hayes v. Ward, 4 Johns. Ch. 123). In Thompson v. Taylor, 72 N.Y. 32, the Court of Appeals stated at page 34: 'These...