BNY Mellon, N.A.
Cite as: BNY Mellon, N.A., 211P2008/D/F/G, NYLJ 1202587549112, at *1 (Surr., SUF, Decided August 29, 2012)
Surrogate John M. Czygier
Decided: August 29, 2012
Proceeding by Howard Mercer and David Mercer to revoke the Letters Testamentary and Letters of Trusteeship issued to Carol M. Mercer, Martin D. Newman and BNY Mellon, N. A. under the Last Will and Testament of Norman J. Mercer, Deceased.
Attorneys for BNY Mellon, N.A., Carol M. Mercer and Martin D. Newman, By: Damianos Markou, Esq., Moritt Hock & Hamroff, LLP, Garden City, New York.
Attorneys for Howard and David Mercer, By: Donald Novick, Esq., Novick & Associates, P. C., Huntington, New York.
Before the court is a motion and cross-motion seeking summary judgment and various other relief in a proceeding for contempt (File #211P2008/G) for the fiduciaries' alleged failure to comply with a decision/order of this court issued in a contested estate accounting proceeding (File #211P2008/D) and an application for the immediate suspension of letters testamentary and letters of trusteeship issued to the fiduciaries herein (File #211P2008/F).
Decedent died on November 20, 2007. After a contested probate proceeding involving these same parties, decedent's last will and testament and a codicil, dated September 21, 2004 and January 29, 2007, respectively, were admitted to probate by decree dated November 24, 2009. Letters testamentary and letters of trusteeship issued (December 1, 2009) to Carol Mercer (decedent's widow), Martin D. Newman and The Bank of New York n/k/a BNY Mellon, N.A. ("the fiduciaries"). Testamentary trusts
are established for the benefit of Carol Mercer, then, upon her death, they are divided into the "Norman's Family Share" (two-thirds) and "Carol's Family Share" (one-third). Of the Norman Family Share, forty-five percent (45 percent) is held in further trust for Howard Mercer, forty-five percent (45 percent) is held in further trust for David Mercer (and his wife), and ten percent (10 percent) is held in further trust for Mari Stadler. The Carol Family Share is to be held in further trust for the benefit of her sister. In each case, the named recipients are income beneficiaries entitled to discretionary distributions of principal. On the deaths of Howard and David Mercer, Mari Stadler and Noel Fischer (Carol Mercer's sister), the principal balances are distributable to their respective issue.
Howard and David Mercer ("the Mercer sons")filed objections to the estate accounting and are the petitioners in the contempt proceeding and the proceeding seeking the fiduciaries' removal.
The discovery process in the accounting proceeding has been contentious, leading the Mercer sons to seek court intervention on a number of occasions. As a result of a conference concerning such issues, the court issued a decision/order on April 19, 2012 allowing the fiduciaries to file a cross-motion for a protective order to a motion to compel previously filed by the Mercer sons, and adjourning both to May 15, 2012. The decision went on to direct that "…petitioners (the fiduciaries) will have until May 9, 2012 to respond in writing to the outstanding document demands, which are the subject of the motion to compel originally returnable March 13, 2012 and the more recent motion to compel currently returnable on May 15, 2012" (Estate of Mercer, File 211P2008/D/E, S. Czygier, 4/19/2012). According to the Mercer sons' contempt application, the directive has not been complied with and they seek a contempt finding with respect thereto. It is noted that a subsequent decision, issued July 10, 2012, addressed the motion to compel responses to demands served March 5, 2012 and the motion for a protective order.
In the application seeking the immediate suspension of the fiduciaries' letters, the Mercer sons recite numerous instances of misapplication of estate assets and conflicting statements under oath with respect thereto. Their primary complaint in this regard is that Carol Mercer has been less than completely
forthcoming with respect to her treatment of estate assets, converting them to her own personal use, and her co-fiduciaries have allowed this alleged behavior.
Application to Revoke Letters Testamentary and Letters of Trusteeship
The application to revoke the fiduciaries' letters also seeks the appointment of an independent fiduciary to complete the administration of the estate and administer the trusts. The application was brought on by verified petition and a responsive pleading has been filed. By order to show cause, dated May 25, 2012 and returnable June 5, 2012, the Mercer sons seek immediate suspension of the fiduciaries' letters and the appointment of a successor to complete the estate and trust administration. After a brief argument on the initial return date of the order to show cause, the court imposed a restraining order on Carol Mercer's ability to make "…any disbursements from the estate or testamentary trusts pending a determination of the motion for the fiduciaries' immediate suspension and sanctions, and the cross-motion filed June 5, 2012 for sanctions…" (Estate of Mercer, File 211P2008/F, S. Czygier, 6/6/2012).
The within petition seeking the fiduciaries' removal stresses not only the allegations of conversion, mismanagement and self-dealing alluded to herein, but also the extreme hostility the Mercer sons assert Carol Mercer has expressed toward them. As noted in the court's decision dated July 10, 2012, the testamentary instruments admitted to probate contain very specific directives with respect to the decedent's tangible personal property. The machinery, art objects and inventory located in decedent's studio or in storage were to be sold and the proceeds distributed with the estate residue (Article III(A)). Jewelry and articles of personal adornment were bequeathed to the decedent's surviving children (named as Howard, David and Mari), although the executors were also empowered to sell the property and distribute the proceeds to each child (Article III(B)). The specified contents of the Park Avenue cooperative apartment were to be distributed to the trustees of the Credit Shelter and Marital Trusts created by Articles v. and VI (Article III(C)). Carol Mercer was bequeathed all remaining items of tangible personalty (Article III(D)). The shares of the cooperative apartment and proprietary lease
were to be delivered to the trustees of either trust in the executors' discretion (Article III(H)). Carol Mercer is given "the right to use the cooperative apartment as a residence, for life, together with such …furniture, furnishings, paintings and other art objects that are held in such Trusts as set forth in Article III…" (Article III(H)(1)(a)).
The Mercer sons point out that distributions of tangible personalty to the Article v. and Article VI trusts shown in the accounting were never made; personal property from the cooperative apartment, which the will directed should have been sold in the event the cooperative apartment was sold, were delivered to Carol Mercer's home in East Hampton and later sold by her. Similar treatment was accorded the nautical instruments left by the decedent. Estate assets were sold in Carol Mercer's name through Doyle New York and Elliot Galleries. The Mercer sons also make reference to the decedent's unredeemed American Express Rewards Points, which they claim were worth over $4,000, and were redeemed by Carol Mercer personally; antique watches among the jewelry distributable to the Mercer children and still in Carol Mercer's possession; $50,000 in Carol Mercer and Martin Newman's personal legal fees paid from the estate; reimbursement to Carol Mercer for $30,000 in "memorials"; sculptures (the number is in dispute given a 2009 appraisal and Carol Mercer's testimony) on the premises of Carol Mercer's East Hampton home, which have not been offered for sale. It is alleged that Carol Mercer's hostility to the Mercer sons is preventing the sculptures from being sold. It is also alleged that the executors have overvalued the decedent's "S" corporation (Import Associates Art Limited) in order to increase their commissions, and that the executors have improperly delegated all record keeping with respect to the tangible personalty to Carol Mercer's bookkeeper (Debbie Mansir). Casualty insurance was allegedly purchased through Bank of New York Mellon without obtaining any competitive quotes.
The Mercer sons, therefore, claim that the foregoing requires the fiduciaries' removal, pursuant to SCPA 711(2), (8) and (10).
The fiduciaries' answer to this petition and response to the application for immediate relief is the continuing argument that the Mercer sons are simply trying to harass the decedent's
elderly widow and force another settlement. It is their claim that the Mercer sons have exaggerated their claims, misrepresented their interest under decedent's will and failed to support their allegations with proof.
They have cross-moved for sanctions on the grounds that the application is frivolous within the meaning of 22 NYCRR §130- 1.1, et seq. Among the arguments asserted in support of the cross-motion and in opposition to the application for immediate suspension of the fiduciaries' letters, the fiduciaries argue that the Mercer sons have utterly failed to support their request for injunctive relief using the applicable standards (i.e. likelihood of success on the merits, irreparable harm, balancing of the equities in their favor). They also note that full recompense may be obtained in the form of monetary relief, which makes any injunctive relief unnecessary.
The fiduciaries argue that suspending their authority would constitute judicial nullification of the decedent's choice of fiduciary, which requires, at a minimum, an evidentiary hearing.
Concerns expressed by the Mercer sons over a possible misappropriation of $800,000 in proceeds from the sale by Christies of personal property are addressed as the result of missing the cut off date for the April Trust Account statements. A copy of the check, which the fiduciaries assert was delivered on May 2, 2012, payable to the trusts, is attached as Exhibit #1 to the fiduciaries' counsel's affirmation. With respect to allegations of excess income accumulations distributed to Carol Mercer, the fiduciaries assert that a review of the account statements show accumulated income in excess of $142,000 distributed from the estate to the trusts and then to Carol Mercer. Similar arguments are made with respect to earlier distributions of $250,000 to Carol Mercer in March, 2010. These are issues more properly resolved in the context of the accounting proceeding.
The fiduciaries argue that this is merely one in a series of "baseless" proceedings and that it warrants the imposition of sanctions. They also argue that restricting the fiduciaries from making disbursements and forcing them to obtain court approval in order to do so would put the court in the position of substituting its judgment for that of the fiduciaries.
Further, the fiduciaries claim that the Mercer sons have failed to establish that the safety of the estate is endangered by their actions.
In opposition to the cross-motion, the Mercer sons assert that misappropriations, even if only in the amount of $3,500, still constitute grounds for the fiduciaries' removal. Among their continuing claims: 1) estate property bequeathed to Howard Mercer, David Mercer and Mari Stadler valued in excess of $50,000 was never delivered to them and was retained by Carol Mercer; 2) estate property was sold through Elliot Galleries for $3,500 and the proceeds retained by Carol Mercer; 3) property consigned to Doyle New York was consigned in Carol Mercer's name; 4) decedent's clothing valued at $13,000 was donated to charity in Carol Mercer's name; 5) estate property in the cooperative apartment was taken to Carol Mercer's East Hampton home where it remains; 6) acrylic sculptures admittedly sellable without Carol Mercer's consent were not sold unless Carol Mercer agreed and remain in her possession.
The fiduciaries respond by asserting that allegations expressed herein are false and unsubstantiated, and that the Mercer sons continue to make motions and applications without reasonable inquiry or allowing for time to submit an appropriate response to demands made.
Submissions after depositions were conducted in August, 2012
Subsequent to the most recently conducted depositions, counsel requested an opportunity to submit additional papers on their applications. As a result, the Mercer sons reiterate their allegations concerning the alleged theft by Carol Mercer of $3,500 in estate proceeds for tangible personalty sold by the Elliott Galleries, which were deposited to her personal account. Deborah Mansir, Carol Mercer's bookkeeper, testified that she was directed to do so by Carol Mercer. The estate officer from the corporate fiduciary, BNY/Mellon (Hess) testified that they did not follow their own internal procedures for handling tangible personalty in this case. Notably, the guidelines, which were produced prior to the August depositions, contain 3300 pages, less 100 pages which were apparently relevant to the bank's procedure with respect to tangible personalty. This
allegation does not appear to be opposed by counsel for the fiduciaries.
In addition, it is asserted that this most recent testimony reveals that the acrylic sculptures number closer to 70 than the 50 reflected on the estate's appraisal, that approximately five were sold after the decedent's death, and that eight worth $50,500 were placed in consignment with a dealer in the State of New Hampshire. Therefore, not only has property been removed from New York, but the Mercer sons complain that they still lack a complete or accurate inventory, and that the sculptures are presently uninsured.
There was, apparently, conflicting testimony from Carol Mercer and Deborah Mansir over the location of and Carol Mercer's knowledge with respect to the location of said watches.
The fiduciaries have supplemented their submissions by detailing the corrective actions they have taken; to wit, the sculptures are being returned from New Hampshire, the watches were turned over to BNY/Mellon in July, the tangible personalty from the New York cooperative apartment was turned over to BNY/Mellon in July, $3,500 was restored to the trusts by Carol Mercer, BNY/Mellon has instructed Doyle Galleries to sell the remaining personalty on behalf of the trusts and BNY/Mellon has instructed Christie's to make any payments from property in their possession for auction to the trusts.
The fiduciaries also contest the Mercer sons' motives, as well as their factual allegations, claiming that they are trying to force another settlement by harassing the fiduciaries, that there was no formal delegation of authority as outlined under Article XXVI of decedent's will, that the removal of the sculptures from the state did no harm to the estate, that Doyle's subpoenaed records reflect that Carol Mercer was selling some of her own personalty with estate personalty. Finally, they argue that whether any of the foregoing was intentional requires a hearing and that the submission of unexecuted, unsigned deposition transcripts to the Mercer sons' papers was improper (additional papers from counsel to the Mercer sons have addressed this contention).
The basis for the contempt proceeding, as previously indicated, is this court's order dated April 19, 2012. The Mercer sons seek summary judgment on their application on the grounds that the records and documents whose production they sought in their demands dated September 13, 2011 and January 18, 2012 were not provided by May 9, 2012. The fiduciaries claim that the contempt proceeding is procedurally defective, pursuant to SCPA 607, since they were never personally served with the aforementioned order. They also argue that the order complained of does not constitute an unequivocal mandate capable of enforcement as a contempt of court, and that a determination that it has been disobeyed would require a hearing.
Noting that the contempt petition was filed the day after the compliance date of the order, the fiduciaries claim that this, as well as the significant motion practice in this estate, demonstrates the Mercer sons' bad faith, entitling the fiduciaries to sanctions.
Although the fiduciaries complain that the contempt proceeding addressed to enforcement of the court's April 19, 2012 order is procedurally defective for the failure to serve them personally with a copy of said order, they clearly had actual notice or knowledge of the order, which satisfies any concerns over due process (see McCormick v. Axelrod, 59 NY2d 574, 583). Therefore, this court finds that the application was not procedurally defective.
It is also noted that a subsequent application for contempt premised upon this court's July 10, 2012 order was filed on August 3, 2012 and is currently returnable on October 2, 2012.
As heretofore noted, the court's April 19, 2012 order directed the fiduciaries "…to respond in writing to the outstanding document demands, which are the subject of the motion to compel originally returnable March 13, 2012 and the more recent motion to compel currently returnable on May 15, 2012" by May 9, 2012 (Estate of Mercer, supra). While the Mercer sons may not be happy with the responses they received, written responses appear to have been provided.
In order to make a finding of contempt, it must be determined that a lawful order of the court clearly expressing an unequivocal mandate, was in effect and has been disobeyed (see McCormick v. Axelrod, supra). Civil contempt is designed to vindicate a private right of a party to litigation and compensate the injured party for loss or interference with such right; criminal contempt is designed to protect the dignity of the judicial system and to compel respect for its mandates, as determined by the level of willfulness in the alleged behavior (Ibid). As counsel for the fiduciaries notes, the willfulness or intent of the parties should not be determined in a summary fashion.
Of course, the parties are entitled to a hearing on these allegations. Given the fact that the current contempt proceeding and the contempt application returnable October 2nd are premised upon similar allegations and two court orders which involve many of the same responses and/or alleged failure to provide responses, they will be consolidated and heard together on a date to be scheduled by the court, either in the context of the contested accounting or upon its resolution.
With respect to the cross-motion for sanctions, as the court previously ruled all applications for sanctions (or for attorneys' fees consistent with the holding in Matter of Hyde, 15 NY3d 179) will be reserved for the conclusion of the underlying accounting proceeding (Estate of Mercer, File 211P2008/D, S. Czygier, 7/10/2012).
With respect to the request for the immediate suspension of the fiduciaries' authority, while this court finds the behavior of these fiduciaries troubling on a number of levels, including the possible editing of the corporate fiduciary's guidelines prior to providing same to the Mercer sons' counsel and the somewhat lackadaisical regard for the treatment of tangible personalty in apparent deference to Carol Mercer's wishes, counsel for the Mercer sons essentially urges this court to remove the fiduciaries without a hearing and substitute its judgment for that of the decedent's chosen fiduciaries by making them come to court each time an action is required on behalf of this estate and the testamentary trusts flowing therefrom. Whether the acts complained of have harmed the estate and ultimately the trusts, and whether there is so much friction or
hostility between Carol Mercer and the Mercer sons as to interfere with the administration of these entities requiring the suspension and removal of all the fiduciaries are issues which require a hearing (In re Estate of Palma, 40 AD3d 1157; Matter of Duke, 87 NY2d 465; In re Petrocelli, 307 AD2d 358). Further, the issues raised herein are so inextricably intertwined with the issues in the contested accounting, which is currently scheduled for trial by the end of this year, that the removal of these fiduciaries would be better addressed in that context.
The court is also mindful of the fact that the terms of the decedent's will give Carol Mercer certain rights during her lifetime in the trusts which will be funded with these estate assets, which total approximately $8,500,000, according to the filed accounting petition. Of course, total deference to this lifetime interest without regard to the interests of the successor beneficiaries or remainder persons will not be ignored. However, in arriving at an appropriate remedy, the court cannot overlook the relative size and temporal nature of the Mercer sons interest, as well as the fact that all of the items raised herein will be addressed at the accounting trial presently scheduled for the end of this year. In an effort to strike the appropriate balance here, the court will continue the restraining order against Carol Mercer imposed in its decision/order of June 6, 2012 (Estate of Mercer, supra), pending resolution of the accounting and removal proceedings before the court. Accordingly, upon the papers submitted and for the reasons set forth herein, it is
ORDERED that the motion and cross-motion seeking summary judgment and various other relief in a proceeding for contempt (File #211P2008/G) are denied, without prejudice; and it is Further
ORDERED that the pending application for contempt (File #211P2008/G) is consolidated with another application for like relief (File #211P2008/H) presently returnable on October 2, 2012; and it is further
ORDERED that the application for the immediate suspension
of letters testamentary and letters of trusteeship issued to the fiduciaries herein is denied; and it is further
ORDERED that the restraining order against Carol Mercer imposed in the court's decision/order of June 6, 2012 (Estate of Mercer, supra) is continued, pending resolution of the accounting and removal proceedings referred to herein; and it is further
ORDERED that the court will consider the application for removal upon the conclusion of the trial in the contested accounting proceeding (File #211P2008/D) currently pending before this court.