Zimmerman v. Pokart

• Decision Date: 07 August 1997
• Parties: , 1997 N.Y. Slip Op. 7080 Kenneth ZIMMERMAN, Plaintiff-Appellant-Respondent, v. Joseph POKART, as Executor of the Estate of Murray Levy, Deceased, etc., Defendant-Respondent-Appellant, and Emanuel Pokart, et al., Defendants-Respondents.
• Court: New York Supreme Court — Appellate Division

Page 5

662 N.Y.S.2d 5

242 A.D.2d 202, 1997 N.Y. Slip Op. 7080

Kenneth ZIMMERMAN, Plaintiff-Appellant-Respondent, v. Joseph POKART, as Executor of the Estate of Murray Levy Deceased, etc., Defendant-Respondent-Appellant and Emanuel Pokart, et al., Defendants-Respondents.

Supreme Court, Appellate Division First Department.

Aug. 7, 1997.

Herman Schmertz, for Plaintiff-Appellant-Respondent.

Louise M. Cherkis, for Defendant-REspondent-Appellant.

Andrew L. Margulis, Thomas A. Leghorn, for Defendants-Respondents.

Before SULLIVAN, J.P., and ROSENBERGER, WALLACH and WILLIAMS, JJ.

MEMORANDUM DECISION.

Order, Supreme Court, New York County (Norman Ryp, J.), entered on or about December 14, 1995, which denied plaintiff's motion for summary judgment, granted the cross motions of defendant accountants and attorneys for summary judgment as against plaintiff, denied defendant co-executor/trustee's motion for summary judgment dismissing the complaint as against him, denied defendant co-executor/trustee summary judgment on his cross claims against the remaining defendants, dismissed the cross claims against defendant accountants without prejudice to renewal in an action for indemnification if a judgment were rendered in favor of plaintiff and dismissed the cross-claims against defendant attorneys with prejudice, unanimously modified, on the law, to dismiss the complaint against the co-executor/trustee defendant, to dismiss the cross claims against defendant accountants with prejudice, and, except as thus modified, affirmed, without costs or disbursements. The Clerk is directed to enter judgment in favor of defendant co-executor/trustee dismissing the complaint as against said defendant.

We disagree with the IAS court's conclusion that questions of fact as to whether the co-trustee's fiduciary duty was properly discharged preclude the grant of summary judgment in his favor dismissing the complaint. Plaintiff, a co-executor of decedent's will and co-trustee of the testamentary trust, sues his co-executor, also the trustee of an inter vivos trust of which plaintiff was a remainderman, and the estate's accountants and lawyers, for their failure to consider his eligibility for a Generation Skipping Transfer Tax (GST) exemption, causing the loss of the same and resultant $450,000 tax liability, roughly three times what plaintiff would have paid had he obtained the exemption. He seeks approximately $297,000 in damages. The will did not provide for the allocation of the exemption. It appears that neither plaintiff nor defendant co-executor had any knowledge of the GST exemption with respect to plaintiff's inter vivos trust interest prior to the signing of the estate tax return, which allocated the GST exemption to a testamentary trust, also eligible for the exemption, and as to which plaintiff was a co-trustee. Although the will and inter vivos trust were separate instruments, the trust assets were treated as taxable for the purpose of estate taxes. As trustee of the inter vivos trust, the co-executor defendant did not have the power to allocate estate tax exemptions to said trust. The primary responsibility for paying estate taxes lies with the executor. (Tax Law § 249-z [repealed subsequent to the testator's death].) Under Internal Revenue Code (26 USC) § 2631 the allocation of a GST exemption may be made only by the executors. Thus, this defendant's dereliction, if any, arises out of his role, with plaintiff, as a co-executor of the estate.

Co-fiduciaries are, of course, regarded in law as one entity. If plaintiff's obligations as co-fiduciary under the testamentary trust were in question, his protestations that he passively relied on the expertise of his co-fiduciary would not allow him to escape liability (see, e.g., Matter of Goldstick, 177 A.D.2d 225, 238, 581 N.Y.S.2d 165, modified, on reargument, on other grounds, 183 A.D.2d 684, 586 N.Y.S.2d 490, citing Brown v. Phelan, 223 App.Div. 393, 228 N.Y.S. 466). Where a fiduciary party has an obligation, he cannot prevail in a cause of action against co-fiduciaries for breach of the same obligation (see, Jones v. Blun, 145 N.Y. 333, 340, 39 N.E. 954, citing Knox v. Baldwin, 80 N.Y. 610). Plaintiff had as much of an obligation as his co-trustee to familiarize himself with the GST exemption, based on information equally available to both. No greater burden can be imposed on the defendant co-fiduciary, as argued. In that regard, plaintiff argues that, had he known of the GST exemption, he would have disqualified himself on conflict of interest grounds, leaving the co-executor/trustee as the sole fiduciary responsible for the decision as to the application of the exemption. This argument does not advance his cause because it ignores the fact that the obligation to be informed as to the exemption was as much the responsibility of plaintiff as it was of the co-executor/trustee.

Aside from being bound by his own actions as the estate's co-executor at a time when, individually, he was represented by independent counsel, plaintiff ignores the one essential...