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Surrogate's Court Litigation - Will & Trust Contests - Revocable Trusts

2004 NY Slip Op 51773U, *; 6 Misc. 3d 1011A, **;

800 N.Y.S.2d 342, ***; 2004 N.Y. Misc. LEXIS 2933

[*1] In the Matter of the Proceeding of Co-Trustees SANFORD E. BECKER and BRUCE H. HOFFMAN to Enforce the Revocable Funded Inter Vivos Trust, Dated June 10, 1999, Settled by CHARLES H. HOFFMAN, Deceased

0269/03

SURROGATE'S COURT OF NEW YORK, WESTCHESTER COUNTY

2004 NY Slip Op 51773U; 6 Misc. 3d 1011A; 800 N.Y.S.2d 342; 2004 N.Y. Misc. LEXIS 2933

September 27, 2004, Decided

NOTICE: 

THIS OPINION IS UNCORRECTED AND WILL NOT BE PUBLISHED IN THE PRINTED OFFICIAL REPORTS.

DISPOSITION: Respondent's motion granted; that part of the petition seeking recovery of the NYSE seat as an asset of the Trust dismissed with prejudice.

CORE TERMS: seat, decedent, grantor, gift, lifetime, delivery, registration, affirmation, co-trustees, summary judgment, membership, ownership, transferred, inter vivos, guardian ad litem, sole trustee, purported, one-half, probate, summary judgment motion, constructive delivery, admissible evidence, income generated, issues of fact, prima facie, entitlement, inclusion, attendant, proponent, opposing

HEADNOTES: [***342] [**1011A] Trusts--Inter Vivos Trust--Petition to recover NYSE seat as trust asset dismissed.

COUNSEL: GORDON S. OPPENHEIMER, ESQ., Attorney for Rowena Hoffman, Larchmont, New York; McCARTHY, FINGAR, DONOVAN, DRAZEN & SMITH, LLP, Attorneys for Rowena Hoffman, White Plains, New York.

RICHARD S. BECKER, ESQ., Attorney for Bruce Hoffman and Stanford Becker, White Plains, New York; PISCIONERE & NEMAROW, P.C., Attorney for Bruce Hoffman and Stanford Becker, Rye, New York.

CLINTON SMITH, ESQ. c/o WORMSER, KILEY, GALEF & JACOBS, LLP, Guardian Ad Litem, White Plains, New York.

JUDGES: HON. ANTHONY A. SCARPINO, JR., Westchester County Surrogate.

OPINIONBY: ANTHONY A. SCARPINO, JR.

OPINION:

Anthony A. Scarpino, J.

This is a miscellaneous proceeding concerning an inter vivos trust created on June 10, 1999 ("Trust") by Charles H. Hoffman ("decedent"). Bruce Hoffman ("Bruce"), one of decedent's two sons, and Sanford Becker ("Becker"), who are the surviving co-trustees of the Trust (collectively "petitioners"), commenced the instant proceeding to enforce the Trust's ownership rights over certain assets otherwise passing by operation of law or under the terms of decedent's will, which was admitted to probate in April 2004. The asset at issue herein is a membership on the New York Stock Exchange ("NYSE seat").

Decedent's surviving spouse ("respondent"), the estate's executrix and legatee of the NYSE seat under the will, has moved for summary judgment, dismissing the petition insofar as petitioners seek to recover the NYSE seat as an asset of the Trust. While petitioners oppose the motion, the guardian ad litem appointed to represent the interests of Mark Hoffman, decedent's incapacitated son ("Mark"), joins in the motion.

The motion is granted, for the reasons set forth, infra.

Decedent died on January 13, 2003, at age 86, after complications from "end stage dementia". He was survived by respondent, whom he had married in the late 1970's, and Bruce and Mark, his two sons from a previous marriage.

From May 1999 through October 2000, decedent purportedly executed a series of five testamentary instruments. An instrument dated May 28, 1999 and the probated will, executed October 25, 2000 ("will"), favored respondent as primary beneficiary, while instruments dated June 10, 1999, May 26, 2000, and October 17, 2000 ("penultimate instrument") favored Bruce and his family as primary beneficiaries, to the exclusion of respondent and Mark.

[*2] Under the terms of the Trust, inter alia: (i) decedent, as grantor, and Bruce and Becker were named and acted as co-trustees until decedent's death; (ii) the trustees were to collect the income from the Trust's assets and pay the "net income" to decedent during his life; (iii) upon decedent's death, the Trust's remainder was to be distributed, in equal shares, to Bruce and Bruce's issue; and (iv) the Trust was revocable. Additionally, there are four assets delineated in "Schedule A" annexed to the Trust instrument ("Schedule A"). As to the NYSE seat, Schedule A provides:

"1. Membership in the New York Stock Exchange

The NY Stock Exchange does not permit registration of memberships in the name of trustees. Grantor and Trustees recognize this to be the case."

Under his will, decedent bequeathed: (i) all of his personal property to respondent; (ii) a subordinated loan account, the NYSE seat, and the difference, if any, of one-half of the net estate less the value of the NYSE seat to respondent; and (iii) his residuary estate, in equal shares, to Bruce outright (one-half) and to Mark, in further trust (one-half).

In January and February 2003, proceedings to probate both the will and the penultimate instrument were commenced. After numerous court appearances and conferences, by Decision and Order dated March 15, 2004, the court approved of a compromise to resolve the probate proceedings (SCPA 2106), and admitted the will to probate.

In the interim, in September 2003, petitioners commenced the instant proceeding, to exert the Trust's ownership over certain assets listed in Schedule A, including the NYSE seat. In her answer, respondent alleges that the property sought by petitioners cannot be Trust property, and the Trust was not properly funded.

In support of her motion, respondent claims that the NYSE seat was never an asset of the Trust, as: (i) the Constitution and Rules of the New York Stock Exchange prohibit a trust from owning a seat/membership in the Exchange; and (ii) in any event, in light of the co-trustees' failure to adhere to the applicable provisions of EPTL 7-1.18 for the funding of inter vivos trusts at the time the Trust was created in 1999, the NYSE seat was never properly transferred into the Trust.

Summary judgment is a drastic remedy, properly invoked only when it is clear that no genuine factual issues exist (see Andre v Pomeroy, 35 N.Y.2d 361, 320 N.E.2d 853, 362 N.Y.S.2d 131; Phillips v Kantor & Co., 31 N.Y.2d 307, 291 N.E.2d 129, 338 N.Y.S.2d 882). The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient admissible evidence to demonstrate the absence of any genuine material issues of fact (see Alvarez v Prospect Hosp., 68 N.Y.2d 320, 501 N.E.2d 572, 508 N.Y.S.2d 923; Winegrad v New York Univ. Med. Center, 64 N.Y.2d 851, 853, 476 N.E.2d 642, 487 N.Y.S.2d 316). Once such a prima facie showing has been made, the burden shifts to the party opposing the motion to lay bare his/her proof, producing admissible evidence sufficient to establish the existence of genuine material issues of fact which require a trial (see Alvarez v Prospect Hosp., supra, at 324; Zuckerman v City of New York, 49 N.Y.2d 557, 404 N.E.2d 718, 427 N.Y.S.2d 595). In opposing the motion, while a court must construe the facts in the light most favorable to the non-moving party (see Martin v Briggs, 235 A.D.2d 192, 663 N.Y.S.2d 184; McArdle v M&M Farms, 90 A.D.2d 538, 455 N.Y.S.2d 107), mere conclusions, unsubstantiated allegations, or expressions of hope are insufficient to defeat a summary judgment motion ( Zuckerman v City of New York, supra).

[*3] Ordinarily, a seat on a stock exchange, other security exchange, or commodity exchange may be held in trust, unless there is something in the rules of the exchange at issue to the contrary (see, IA Scott, Trusts § 82.7, at 467 [4th ed.]). As for the NYSE seat, at least one court in this jurisdiction has held that a NYSE seat is considered to be an unassignable intangible property interest (see e.g. Schwabacher v Ehrich, 168 Misc. 869, 6 N.Y.S.2d 316 [1938]; but see Matter of Gruner, 295 NY 510, 519, 68 N.E.2d 514 [1946] [no provision in Exchange's Constitution or Rules forbidding assignments]).

As to respondent's first asserted ground, she has failed to make a prima facie case entitling her to summary judgment. More particularly, respondent cites numerous provisions of the Exchange's Constitution and Rules in support of her contentions that ownership of a NYSE seat by the Trust is prohibited, or, in the alternative, decedent and petitioners failed to take appropriate measures to have the purported transfer approved within the parameters of the Constitution and Rules. Since respondent has failed to submit a copy of the Constitution and Rules, she has failed to submit sufficient evidence in admissible form to meet her initial burden of establishing her entitlement to summary judgment on the first asserted ground.

However, as to respondent's second asserted ground, the court finds that respondent is entitled to summary judgment on the record presented.

Enacted in 1997 (L 1997, ch 139) as part of comprehensive legislation to "impose some formal requirements on the execution of lifetime trusts" (Turano, Practice Commentaries, McKinney's Cons Laws of NY, Book 17B, EPTL 7-1.14, at 331), EPTL 7-1.18, applicable to all lifetime trusts created on or after December 25, 1997, provides:

"A lifetime trust shall be valid as to any assets therein to the extent the assets have been transferred to the trust. For the purposes of this section, (a) transfer is not accomplished by recital of assignment, holding or receipt in the trust instrument, and (b) in the case of a trust of which the creator is the sole trustee, transfer shall mean in the case of assets capable of registration such as real estate, stocks, bonds, bank and brokerage accounts and the like, the recording of a deed or the completion of registration of the asset in the name of the trust or trustee, and in the case of other assets a written assignment describing the asset with particularity."

In essence, the aforementioned statute provides that all lifetime trusts created on or after December 25, 1997 are valid "only in regard to assets actually transferred to the trusts" (4 Rohan, NY Civ. Prac-EPTL, P 7-1.18[1], at 7-324.10[5]). However, while the statute provides for the methods of "actual transfer" when the grantor is also the sole trustee of a trust, it does not specifically address the method of transfer when the grantor is not the trust's sole trustee. In the latter case, one commentator has suggested that "ideally", the grantor should comply with the methods of transfer set forth in the statute (see Turano, Practice Commentaries, McKinney's Cons Laws of NY, Book 17B, EPTL 7-1.18, at 336). Another commentator has suggested that "physical transfer of the asset to a trustee other than the [grantor] would seem to be sufficient" (4 Rohan, NY Civ. Prac-EPTL, P 7-1.18[1], at 7-324.10[5]). Other commentators indicate that the case law applicable to the completion of transfers of assets should govern, to wit: the transfer of the asset becomes complete when the grantor has delivered the asset to the other trustee(s) with the intent to make a transfer to [*4] the trust (see Fox, Revocable Trusts Offer Flexibility In Planning, NYLJ, April 1, 2002, at 9, col. 4; Carp and Draper, Analysis of New Law Governing Lifetime Trusts, NYLJ, July 21, 1997, at 1, col 1; see also 13 Warren's Heaton on Surrogates' Courts § 210.02[5], at 210-10 [6th ed. rev.] ["In the case of a trust where there is a trustee other than the grantor, transfer will be governed by the existing rules as to intent and delivery (the elements of a gift)"]). In the last instance, such commentary appears consistent with the intent of the Legislature to require a grantor to "initiate the legal formalities of re-registration or other transfer of a gift" in order to complete the transfer of an asset to a lifetime trust (Senate Introducer Mem in Support, L 1997, ch 139, at 3). In order to validate an inter vivos gift, the proponent of the gift must show, by clear and convincing evidence: (i) the intent on the donor's part to make a present transfer; (ii) delivery of the gift, either actual or constructive; and (iii) acceptance by the donee ( Gruen v Gruen, 68 N.Y.2d 48, 53, 496 N.E.2d 869, 505 N.Y.S.2d 849).

In support of her motion, respondent contends that, during disclosure, petitioners failed to produce any physical evidence, other than Schedule A, that decedent purported to transfer the NYSE seat according to either the explicit guidelines or implicit legislative intent attendant to EPTL 7-1.18. In this respect, respondent produced evidence that, following the creation of the Trust: (i) the income generated from decedent's lease of the NYSE seat was deposited into two bank accounts decedent held jointly with respondent, with right of survivorship, instead of any account attendant to the Trust; and (ii) decedent, as lessor, continued to lease the NYSE seat in his individual capacity.

In opposing the motion, petitioners contend, inter alia, that the Exchange does not issue a certificate of registration for ownership of an NYSE seat in the name of trustees. They further contend that, in any event, the language in Schedule A and language found in testamentary instruments executed simultaneously with and subsequent to the Trust clearly indicate decedent's intent to make a transfer of the NYSE seat at the time the Trust was executed. The court finds that petitioners' conclusory contentions and analysis are insufficient to defeat summary judgment.

Initially, petitioners, too, have failed to produce a copy of the Exchange's Constitution or Rules in support of their allegations that the Exchange cannot register the NYSE seat in the names of trustees. In any event, assuming the validity of that contention, it is clear that, notwithstanding the "disclaiming" language accompanying the listing of the NYSE seat on Schedule A, the mere inclusion in Schedule A of the NYSE seat as an asset of the Trust, without more, was insufficient to constitute a valid transfer of the seat to the Trust under EPTL 7-1.18(a) (see Matter of Rothwell, 189 Misc.2d 191, 730 N.Y.S.2d 664). Moreover, it is clear that decedent failed to "deliver" the NYSE seat to himself and petitioners, as co-trustees of the Trust, under the prevailing common law standards for the validity of inter vivos gifts, which the court shall apply here (see Gruen v Gruen, 68 N.Y.2d 48, supra, at 56 [what is sufficient to constitute delivery 'must be tailored to suit the circumstances of the case']). More particularly, even assuming arguendo, as petitioners' claim, that the NYSE seat was not subject to transfer, or "delivery", via assignment, recording or registration, the court concludes that decedent's failure to yield control of the income generated by the NYSE seat to himself and petitioners, as co-trustees, at anytime after the Trust was created indicates that there was no constructive delivery of the NYSE seat to the Trust at any time after it was created ( Gruen v Gruen, supra [delivery, either by physical delivery of the subject of the gift or a constructive delivery, such as by an instrument of gift, must be sufficient to divest the donor of dominion and control over the [*5] property]). In fact, the record establishes that, other than the inclusion of the NYSE seat on Schedule A, nothing implicit or explicit was ever done to formalize the Trust's ownership of the seat.

Finally, the court has reviewed petitioners' contentions with respect to any purported inconsistency between EPTL 7-1.15 and 7-1.18, and find that these contentions are belied by the legislative history of the Laws of 1997, chapter 139, and are, therefore, without merit.

Accordingly, respondent's motion is granted, and that part of the petition by which petitioners seek recovery of the NYSE seat as an asset of the Trust is hereby dismissed, with prejudice.

The instant proceeding is restored to the court's calendar of Wednesday, October 6, 2004, at 9:30 a.m. All counsel, including the guardian ad litem, shall appear for an all-purpose conference immediately after the matter is called that day.

THIS IS THE DECISION AND ORDER OF THE COURT.

The following papers were reviewed:

1. The Notice of Motion, filed May 28, 2004, with supporting affirmation and affidavits, and memorandum of law;

2. The Affirmation in Opposition, filed June 16, 2004, with supporting affidavits, affirmations, and memorandum of law;

3. The Reply Affirmation, filed June 30, 2004, with supporting reply affidavits, affirmation, and memorandum of law;

4. The Sur Reply Affirmation, filed July 7, 2004; and

5. The Affirmation of the Guardian Ad Litem, filed July 13, 2004.

Dated: White Plains, NY

September 27, 2004

HON. ANTHONY A. SCARPINO, JR.

Westchester County Surrogate