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Surrogate's Court Litigation - Property Turnover Proceedings - Motion for Summary Judgment/Dismissal

Surrogate Anthony A. Scarpino

ESTATE OF DONALD A. LYON, 2008-2637/A, Decided 09/15/09—

Attorneys for petitioners: McCarthy Fingar LLP

Attorneys for respondent: Keane & Beane, P.C.


In this miscellaneous proceeding for the discovery of property withheld, the respondent Arlyne L. Lyndsy (‘Arlyne‘) moves for an order dismissing the petition filed by James D. Lyon, Christine Germani and Samantha Lyon (collectively, the ‘Lyons‘), as limited administrators of the estate of Donald Lyon (‘Donald‘). The Lyons oppose the motion. The motion is decided as set forth below.

The undisputed background facts are as follows: Donald and his son, David Lyon (‘David‘), resided together in Donald's home in Mamaroneck, NY. Donald also owned property in Andes, NY. In 1999, an attorney prepared powers of attorney, health care proxies, and living wills for Donald and David, and deeds to transfer Donald's real estate to David. At about the time the documents were to be executed, Donald was either hospitalized or in a nursing home. On January 29, 1999, Donald executed the power of attorney, and on that same day and again on February 3, 1999, David, as attorney-in-fact for Donald, executed deeds transferring Donald's realty to David. The attorney testified that she did not supervise the execution of these documents.

On October 21, 1999, Donald executed an instrument in which he left (1) small general bequests to each of the Lyons, his three grandchildren who are the children of his predeceased son, Lee Lyon, and (2) his residuary estate to David. On May 22, 2000, Donald died, leaving David and the Lyons as his distributees. The 1999 instrument was not offered for probate. Arlyne and David were friends for over 20 years. On August 12, 2008, David died testate. On July 7, 2009, Arlyne received preliminary letters testamentary in David's estate.

The Lyons have received limited letters of administration in Donald's estate and have filed a petition pursuant to SCPA 2103, citing Arlyne as the fiduciary of David's estate. The petition alleges generally that Donald's Mamaroneck and Andes realty and his personalty are in Arlyne's hands as the fiduciary of David's estate but that these assets belong in Donald's estate.

The Lyons further allege that Donald did not have capacity to sign the power of attorney form; that if he had capacity, then David exerted undue influence over him or fraudulently induced him to sign the power of attorney form; that regardless of the validity of the execution of the power of attorney, David violated his duties as agent by utilizing the power to gift the property to himself and that these transfers were not in Donald's best interests.

Arlyne moves to dismiss the petition based on (1) CPLR 3211[a][1] [documentary evidence]; (2) CPLR 3211[a] [5] [statute of limitations]; and (3) CPLR 3211[a][7] [failure to state a cause of action].[FN1] As to that portion of the motion which seeks to dismiss on the basis of documentary evidence, Arlyne asserts that the medicaid notification letter ‘reveals that the transfer of Donald's real estate was in his best interest since it resulted in Medicaid eligibility and that these documents rebut any claim that the transfers of the realty were not in Donald's best interests. Arlyne also asserts that the while the fraud claims are not pleaded with specificity, no matter what type of fraud is intended to be asserted, it would be barred by the statute of limitations and that these claims should be dismissed for failure to plead with particularity.

In response, the Lyons argue that the Medicaid documents do not negate the fact that David perpetuated a fraud on Donald and on them; that the statute of limitations on their claims has not expired because they learned of the manner of the transfers only after David's death and that they have pleaded fraud in sufficient detail to clearly inform Arlyne of their claims.

The motion to dismiss based on documentary evidence is denied. On this record, the two notices of intent and the notice of decision (all concerning Donald's medicaid eligibility and liability) are not conclusive on the issue of whether David breached a fiduciary duty by conveying Donald's realty to himself. Issues of fact exist including whether David properly used the power of attorney to transfer the properties to himself, whether these transfers were in Donald's best interests and whether adequate notification was given to the Department of Social Services regarding Donald's assets.

As to the statute of limitations, the correct limitations period to be applied in a discovery proceeding against David's estate for actions he took as an attorney-in-fact is found in CPLR 213[1] which states that ‘an action for which no limitation is specifically prescribed by law... must be commenced within six years‘. As to when that limitations period begins to run, in the case of a fiduciary, Judge Cardozo wrote in Spallholz v. Sheldon (216 NY 205, 209 [1915]):

While an express trust subsists and has not been openly renounced, the Statute of Limitations does not run in favor of the trustee. But after the trust relation is at an end, and the trustee has yielded the estate to a successor, the rule is different. The running of the statute then begins, and only actual or intentional fraud will be effective to suspend it.

Therefore, for the statute to commence, there has to be an open repudiation of trust by the fiduciary in the administration of an estate or a judicial accounting by the fiduciary (see Matter of Barabash, 31 NY2d 76, rearg denied, 31 NY2d 963 [1972]; Matter of Cipriani, 24 M3d 1204[A] [2009]). The law requires proof of a repudiation by the fiduciary which is clear and made known to the beneficiaries (see Matter of Barabash, at 80; see also Tydings v. Greenfield, Stein & Senior, LLP, 11 NY3d 195 [2008] [limitations period began to run in compel account proceeding when trustee resigned and surrendered her trusteeship to a successor trustee]).

The death of the principal revokes the authority of the attorney-in-fact (see Ferrentino v. The Dime Savings Bank, 159 Misc2d 690 [1993]; Matter of Weber, 163 Misc 81 [1937]), logically concludes the responsibilities of the attorney-in-fact for the principal, and hence, seemingly would commence the limitations period. However, in this case, on this record, there is no evidence that the Lyons were aware of the agency. Therefore, the motion to dismiss based on statute of limitations is denied.

That portion of the motion which seeks to dismiss the petition because it fails to state a claim also is denied. The petition is sufficiently particular to give the court and the parties notice of the transactions intended to be proved (see Foley v. D'Agostino, 21 AD2d 60 [1st Dept 1964]). In all other respects, the motion is denied.

Settle order.

FN1. CPLR 2214[a] provides that the notice of motion must specify the grounds for the relief demanded. Here, the notice of motion does not seek dismissal based on a laches defense. However, since laches is noted as a ground in the affidavit and memorandum in support of the motion, there is adequate notice to the Lyons (see 7B McKinneys Civil Practice Rules and Procedure, C3211:37).

9/28/2009 NYLJ 22, (col. 3)