In re Epstein

2022 NY Slip Op 00658

In the Matter of Sal Epstein, etc., deceased. Elena Eckhouse, appellant; Anita Taormina, et al., Respondents.

Nos. 2018-12997, 2018-12999

File No. 1881/08

Supreme Court of New York, Second Department

February 2, 2022

Argued - November 4, 2021

D68317 G/afa

Novick & Associates, P.C. (Albert V. Messina, Jr., Donald Novick, and Haley Weinblatt & Calcagni, LLP, Islandia, NY [Richard A. Weinblatt], of counsel), for appellant.

Joseph J. Sciacca (Mauro Lilling Naparty LLP, Woodbury, NY [Seth M Weinberg] of counsel), for respondents.

VALERIE BRATHWAITE NELSON, J.P. REINALDO E. RIVERA LINDA CHRISTOPHER LARA J. GENOVESI, JJ.

DECISION & ORDER

In two probate proceedings in which Elena Eckhouse petitioned, inter alia, to revoke the letters testamentary and letters of trusteeship, respectively, issued to Anita Taormina, Elena Eckhouse appeals from (1) a decree of the Surrogate's Court, Suffolk County (Stephen L. Braslow, S.), dated August 20, 2018, and (2) a decree of the same court, also dated August 20, 2018. The first decree, insofar as appealed from after a nonjury trial, denied that branch of Elena Eckhouse's petition which was to revoke the letters testamentary issued to Anita Taormina. The second decree insofar as appealed from, after the nonjury trial, denied those branches of Elena Eckhouse's petition which were to revoke the letters of trusteeship issued to Anita Taormina and for an award of attorneys' fees and costs.

ORDERED that the first decree is reversed insofar as appealed from, on the law, and that branch of the petition of Elena Eckhouse which was to revoke the letters testamentary issued to Anita Taormina is granted; and it is further, ORDERED that the second decree is modified, on the law, by deleting the provision thereof denying that branch of the petition of Elena Eckhouse which was to revoke the letters of trusteeship issued to Anita Taormina, and substituting therefor a provision granting that branch of the petition; as so modified, the second decree is affirmed insofar as appealed from; and it is further, ORDERED that one bill of costs is awarded to the appellant payable by the respondents personally.

The decedent died on August 17, 2008, survived by two daughters, Anita Taormina and Elena Eckhouse, and three grandchildren. Pursuant to the decedent's will, the Surrogate's Court appointed Taormina and Eckhouse as co-executors of his will.

The decedent's will devised a sum equal to his generation skipping transfer tax exemption (hereinafter GST exemption) to his grandchildren, in equal shares, to be held in trust for each of them with the principal to be distributed in thirds as each attained the ages of 25, 30, and 35 (hereinafter the GST trusts). The parties agree that, at the time of the decedent's death, his remaining GST exemption was $1, 991, 350. The will appointed Taormina and Eckhouse as co-trustees of the GST trusts. The decedent bequeathed the remainder of his estate to Taormina and Eckhouse in equal shares.

Among the decedent's assets at the time of his death were a 37.87895% share in ME&A Realty Co., LLC (hereinafter ME&A), and a 35.35% share in MM&I Realty Co., LLC (hereinafter MM&I) (hereinafter together the LLCs). In 2009, the estate distributed a 10% interest in the LLCs to both Taormina and Eckhouse. In the same year, the estate deposited $150, 000 into each of the GST trusts in partial satisfaction of the decedent's bequests to the grandchildren.

Thereafter, disagreements arose regarding the distribution of the decedent's assets, particularly with respect to the funding of the GST trusts. On July 31, 2011, Taormina and Eckhouse entered into an agreement (hereinafter the July 2011 agreement) to distribute to the estate's beneficiaries the estate's assets, including the remaining 17.87895% of ME&A, the remaining 15.35% of MM&I, and $680, 000 in cash, by giving 2% of each of the LLCs to each grandchild and dividing the remaining interests between Taormina and Eckhouse. Each of the beneficiaries of the estate signed the July 2011 agreement before a notary and each of the grandchildren, together with Taormina and Eckhouse in their role as co-trustees, thereafter executed a release relating to the distribution of shares of the LLCs (hereinafter the LLC releases).

In November 2012, ME&A sold its primary asset, a parcel of real property, for $46.5 million. In December 2012, Eckhouse, through counsel, instructed the managing member of the LLCs to allocate and disburse the estate's shares in the LLCs pursuant to the terms of the July 2011 agreement. The LLCs recorded the beneficiaries' interests in their books and disbursed profits and sale proceeds as instructed. Taormina objected to disbursement of the assets of the LLCs assets pursuant to the July 2011 agreement.

Meanwhile, disputes arose regarding filing and payment of the estate's taxes. Eckhouse eventually sought, and received, court assistance in compelling Taormina to permit the payment of taxes.

Additional disputes arose as a result of Taormina's claim that appreciation in the value of the assets of the LLCs resulted in the amounts transferred to the GST trusts exceeding the decedent's bequests, her refusal to distribute funds to the grandchildren from their GST trusts, and her refusal to create additional GST trust accounts so that the sum deposited in each could remain within the $250, 000 insurance limit of the Federal Deposit Insurance Corporation (hereinafter FDIC). In 2016, the latter issue was resolved via a stipulation to split the trust fund assets into separate accounts, each of which would hold assets under the FDIC limit. The youngest grandchild eventually petitioned for certain distributions from his GST trust, which the Surrogate's Court granted, and, on appeal, this Court affirmed (see Matter of Epstein, 155 A.D.3d 729).

Eckhouse petitioned, inter alia, to revoke the letters testamentary issued to Taormina. She separately petitioned, among other things, to revoke the letters of trusteeship issued to Taormina and for an award of attorneys' fees and costs. Taormina petitioned to remove Eckhouse as both executor and trustee and to compel the grandchildren to return to the estate amounts which represented the alleged overfunding of the respective GST trusts and overpayments of cash distributions. After a lengthy nonjury trial, in two decrees, both dated August 20, 2018, the Surrogate's Court denied Eckhouse's petitions and Taormina's petition. Eckhouse appeals.

"A testator or testatrix has the right to determine who is most suitable among those legally qualified to settle his or her affairs, and that selection is not to be lightly discarded" (Matter of Venezia, 25 A.D.3d 717, 718; see Matter of Berlin, 135 A.D.3d 746, 750). Indeed, the removal of a fiduciary pursuant to SCPA 711 and 719 is equivalent to a judicial nullification of the testator's choice and may only be decreed when the grounds set forth in the relevant statutes have been clearly established (see Matter of Duke, 87 N.Y.2d 465, 473; Matter of Steward, 193 A.D.3d 940, 942; Matter of Kaufman, 137 A.D.3d 1034, 1035). Accordingly, while courts have the power to remove a fiduciary, that power is exercised "sparingly" and only where the record demonstrates a danger to the estate or trust if removal is denied (Matter of Petrocelli, 307 A.D.2d 358, 359; see Matter of James H. Supplemental Needs Trusts, 172 A.D.3d 1570, 1572-1573; Matter of Joan Moran Trust, 166 A.D.3d 1176, 1179). However, notwithstanding the deference due a testator's choice of fiduciary, evidence of conflict and animosity between fiduciaries which impedes the orderly administration of the estate or trust is a valid ground upon which to remove a fiduciary (see Matter of Steward, 193 A.D.3d at 943; Matter of Kaufman, 137 A.D.3d at 1035; Matter of Berlin, 135 A.D.3d at 750; Matter of Venezia, 71 A.D.3d 905, 906).

Here, during the administration of this estate, Eckhouse and her representatives repeatedly presented to Taormina prepared estate tax returns and checks for her countersignature which she refused to sign despite having been warned, including by the Internal Revenue Service (hereinafter IRS) itself, of the risk that penalties and interest would be imposed. Taormina claimed that the alleged overfunding of the GST trusts precluded the filing of accurate estate taxes and that the estate owed more taxes than calculated by Eckhouse's representatives. As a result of Taormina's delay, penalties and interest were imposed by the IRS. Taormina also threatened to sue the estate's bank for honoring checks for tax payments issued by Eckhouse, prompting the bank to freeze the estate's accounts so that Eckhouse was forced to seek a court order directing the bank to release funds to the taxing authorities.

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