Surrogate’s Court Procedure: In-Depth Review, Recommendations

by Hon. C. Raymond Radigan

After my first report in 1991 as chairman of the EPTL Advisory Committee, in which we focused on the revision of the Right of Election statute, we recommended an examination and revision of the remaining articles of the Estate, Powers and Trusts Law (“EPTL”) and the Surrogate’s Court Procedure Act (“SCPA”).  Upon the Senate and Assembly’s adoption of the EPTL Advisory Committee’s expanded scope, our committee evolved into the EPTL-SCPA Legislative Advisory Committee (the “Committee”).  In my last column I indicated I would now cover what is set forth in our Second Report dealing with an in depth review and recommendations concerning SCPA.

In this column, I discuss various aspects of the estate fiduciary’s eligibility and qualifications to serve, the circumstances in which a court may limit or restrict a fiduciary’s authority and the suspension, modification or revocation of letters or removal of a fiduciary.  Following is a discussion of our recommended revisions to SCPA Article 7 that, upon passage by both Legislative houses, were signed into law.   

Fiduciary Eligibility
Prior to the adoption of the Committee’s recommendations regarding a fiduciary’s eligibility to receive letters, SCPA 707(1)(c) required that a nondomiciliary alien satisfy several criteria in order to qualify.  The statute provided that letters would not issue to a nondomiciliary alien unless such person was a foreign guardian as provided in SCPA 1716(4) or such person was of the same or closer degree of consanguinity to the decedent than a first cousin twice removed and served with one or more co-fiduciaries, at least one of whom is a New York State (“State”) resident.  SCPA 1716(4) permits the issuance of ancillary letters to a fiduciary appointed outside of the United States, its territories or possessions upon a satisfactory showing of statutorily required proof.  The section addresses the situation in which the nondomiciliary alien guardian of an infant, which infant resides in a foreign country and claims entitlement to property within the State or seeks to maintain an action or proceeding with respect to such property, makes an application for ancillary letters to act as guardian of the infant’s property within the State.

During our review of SCPA 707(1)(c), several Committee members recounted instances where testators sought to appoint non-family member, non-resident aliens as executors or guardians of their minor children.  Under SCPA 707(1)(c) as it stood before our recommendations, such appointees were ineligible to serve as fiduciaries (unless qualified as SCPA 1716(4) foreign guardians).  In an effort to effectuate the intent of such testators, the Committee proposed that the statute authorize the issuance of letters to a non-resident alien fiduciary who serves with one or more resident co-fiduciaries. 

In addition, prior to the adoption of our recommendations, conflict existed as to whether the language within SCPA 707(1)(c) referring to fiduciary appointments contained in a will, without any mention therein of intestate decedents, intended to completely exclude nondomiciliary aliens from the class of persons eligible to serve as administrators of an intestate’s estate.  SCPA 1001 sets forth the classes of persons eligible and the order of priority among such persons entitled to receive letters in an estate wherein the decedent died intestate.  The classes and priorities for eligible persons under SCPA 1001 are wholly derived from and identical to the descent and distribution rules for a decedent’s property that is not disposed of by will as such are contained in EPTL 4-1.1. 

The Court in In re Cowen, 134 Misc2d 972 (1987), addressed a matter in which the decedent’s statutory distributees, one of which was a nondomiciliary alien, consented to the designation of a nondistributee to receive letters of administration.  The Kings County Public Administrator objected to the designation contending that one of the distributees was ineligible to render such consent.  In construing SCPA 707(1)(c), as revised in 1986, the Court held that the statute’s authorization of nondomiciliary aliens to receive letters does not extend to intestate administrations.  As such, the Court declared the nondomiciliary alien ineligible to designate an alternative recipient thereof.  

In In re Albagli, 141 Misc2d 1073 (Surr. Ct. Bronx County 1988), Petitioner, the nondomiciliary alien distributee brother of the intestate decedent, sought to designate a non-distributee New York domiciliary administrator who was neither a distributee nor a trust company.  The Public Administrator entered an objection thereto reasoning that SCPA 707(1)(c) did not permit nondomiciliary aliens to serve as fiduciaries of intestate decedents’ estates.  As such, the Public Administrator contended, the designation was ineffective since the decedent’s nondomiciliary alien brother himself must have been eligible to receive letters of administration in order to designate another therefor.  The Court held that, pursuant to SCPA 707(1)(c), it had discretion to appoint as administrator a nondomiciliary alien distributee.  Upon such determination, the Court logically concluded that the nondomiciliary alien distributee possessed the right to designate as sole administrator the New York domiciliary.  

After In re Albagli, case law uniformly held that SCPA 707(1)(c) permitted the issuance of letters of administration to nondomiciliary aliens that otherwise qualified under the subsection.  See In re Valencia, N.Y. L.J., October 22, 1990 (Surr. Ct. New York County 1990) (following Albagli and urging that legislature clarify confusion).  As such, our amendment thereto excluded the language from the subsection relating to a decedent’s will so as to clarify the legislature’s intention that a nondomiciliary alien be eligible to serve in any fiduciary capacity, provided that such person serve with one or more resident co-fiduciaries. 

Limited, Restrictive Letters
Upon the issuance of letters to a fiduciary, the Surrogate’s Court, effectively, verifies the authenticity of the fiduciary’s right to act in his or her capacity as legal representative of the estate.  At times, however, the Court (SCPA 702(10)) or a petitioning party may seek the appointment of a fiduciary for a very specific and limited purpose, rather than for that of general estate administration. 

Among those purposes for which the Court may grant limited or restrictive letters are: commencement or defense of a personal or wrongful death action, collection of a stated sum of money or specific property or for the performance of an act necessary to discharge a decedent’s estate from liability.  See SCPA 702(1), (2), (4).  Subdivision 8 of SCPA 702 (now subdivision 10) contained the “catch-all” provision through which the Court derived broad discretionary authority to issue letters limited to any purpose the Court deemed necessary.  Upon examining the various Courts’ utilization of SCPA 702(8) in circumstances where potential or actual conflicts of interest arise among fiduciaries or between fiduciaries and the estate, the Committee concluded that such situations warranted the addition of a specific and overt subdivision to so address this situation. 

Our goal was to permit a limited fiduciary appointment to represent the estate under circumstances in which it would be improper for the fiduciary currently in place to act, due to an actual, potential or ostensible conflict of interest.  For example, if the primary fiduciary or a familial or business relation of his/hers desires to enter into a transaction with the estate, such action will likely display an appearance of impropriety for self-dealing.  Neither the allegations nor the improper appearance need arise under the recommended amendment, since the Court would be able to appoint a representative with authority restricted to performance of the contemplated transaction.  See Second Report to the Legislature of the EPTL-SCPA Legislative Advisory Committee, pp 13-15; see also Warren’s Heaton, Surrogate’s Courts § 33.09, at 33-62 [6th ed rev].  Our recommendation was signed into law and now exists as SCPA 702(8) (former subdivision 8 is current subdivision 10).     

In addition to the new subdivision 8, upon the Committee’s recommendation, a new subdivision 9 was enacted.  The Committee deemed it necessary for SCPA 702 to provide for the issuance of limited letters to a fiduciary so that the same may duly commence and maintain an action or proceeding against the primary estate fiduciary, in either the latter’s legal or individual capacity if there be a plausible basis to bring a proceeding or action against the fiduciary in chief.  In In re Oppman, N.Y. L.J., November 30, 2001 (Surr. Ct. Westchester County 2001), the Court approved the issuance of limited letters to the decedent’s daughter where the nominated fiduciary, the decedent’s second wife, advanced conflicting interests to the detriment of the estate.  I examined a similar situation in In re Zuckerman, N.Y L.J., June 1, 1994 (Surr. Ct. Nassau County 1994), where a trustee alleged that the co-executrixes, both of who were also beneficiaries, engaged in self-dealing transactions with the decedent prior to his death.  The trustee sought limited letters to pursue claims against the co-executrixes in their legal and individual capacities.  Accordingly, I directed that the trustee petition for the issuance of limited or restrictive letters in the estate pursuant to SCPA 702(9). 

The new statute also permits the appointment of a fiduciary with restrictive letters to pursue an action or proceeding against any third party where the primary or acting fiduciary fails or refuses to do so, provided that such action or proceeding is arguably meritorious.  A remainder beneficiary in In re Teah, 166 Misc2d 976 (Surr. Ct. Bronx County 1996), sought to commence a proceeding against one of the nominated executors and a third party with which the former allegedly transacted business.  The beneficiary contended, inter alia, that the executor and a third party engaged in self-dealing transactions with the decedent and, as such, the executor was incapable of adequately discharging his fiduciary duties.  Citing SCPA 702(9), the Court granted limited letters to the trustee for the purpose of commencing and pursuing such claims. 

As demonstrated by the caselaw discussed supra, the new SCPA 702(9) provides an efficient means for parties interested in an estate to pursue their interests when not otherwise adequately represented.

Letters, Removal
SCPA 711 sets forth the only permissible grounds, in proceedings on notice, for the entering of a decree to affect a fiduciary’s letters.  Among the numerous permissible removal grounds enumerated therein is ineligibility arising after issuance of letters, improvidence, contempt of court and the failure to file an accounting ordered by the Court.  See SCPA 711(1)-(12).  It is essential to note that our Courts have repeatedly held, however, that the mere fact that a fiduciary has a claim against the estate or a conflict of interest with the estate is insufficient to warrant removal.  See In re Nelson, 125 Misc2d 451 (Surr. Ct. New York County 1984); In re Weiss, 33 Misc2d 773 (Surr. Ct. New York County 1962); In re Kent, 22 Misc2d 66 (Surr. Ct. New York County 1959); In re Woodworth, 165 Misc 770 (Surr. Ct. New York County 1937). 

After the issuance of letters, a petition on notice may be filed praying for the suspension, modification or revocation thereof.  Prior to our recommendation, the Section listed as those persons having standing to petition: a creditor or person interested, any person in behalf of an infant or any surety on a bond of a fiduciary.  Consistent with our recommendation discussed supra that 702 be revised to include a subsection specifically authorizing the issuance of limited or restrictive letters to maintain an action against the estate’s primary fiduciary, in our Supplement to the Second Report we recommended that the class of persons with standing to petition under SCPA 711 be expanded to include co-fiduciaries.  Our rationale for including co-fiduciaries was that no other person is ever in a better position to monitor the conduct of a fiduciary.  In addition, we sought to create for the Court another mechanism by which fiduciaries may be monitored.     

Even with the addition of co-fiduciaries, this list is not comprehensive since SCPA 719 grants the Court authority to remove a fiduciary ex parte when such fiduciary has acted in complete contravention of his or her duties or upon the advent of circumstances obviating the necessity for a fiduciary.  Please note that the Court considers the removal of a fiduciary a grave matter and, as such, is very cautious in exercising its removal power under SCPA 719. 

SCPA 711 and 719 enable the Courts to preserve the sanctity of the fiduciary office by specifically providing for the removal thereof whenever the requirements of utmost good faith and perfect candor are departed from.     

In the Future
In my next article I will discuss additional Committee recommendations contained in our Second Report, to wit, those with respect to SCPA Article 14 regarding probate proceedings. 
_____________
C. Raymond Radigan is former surrogate of Nassau County and serves as counsel to the Trusts and Estates Department at Ruskin Moscou Faltischek.  He also is chairman of the advisory committee to the Legislature on estates powers and trusts law and the Surrogate’s Court Procedure Act.  Judge Radigan can be reached at 516-663-6602 or crayradigan@rmfpc.aw-develop.com.
Michael A. DiOrio, Esq., an associate in the Trusts and Estates Department at Ruskin Moscou Faltischek, assisted in the preparation of this article.
_____________
Reprinted with permission from the Wednesday, July 30, 2003 issue of the
New York Law Journal (c) 2003, ALM Properties, Inc.

Back to Press Releases Print