This is an executorial accounting proceeding by the executrix of the estate of George Plotkin ("decedent"). Frank Plotkin ("claimant" or "objectant") filed a claim on a promissory note with the executrix for $63,000 and interest, acknowledging three payments of $795 each. The executrix rejected this claim and accordingly claimant Frank Plotkin objected to the accounting. (Frank having died, the objection and the claim are prosecuted by the executor of Frank's estate.)
After a hearing, Surrogate Cox disallowed the claim and dismissed the objection. On appeal, the Appellate Division reversed this decision (28 A.D.2d 528 [May 25, 1967]). The Appellate Division directed that the proceeding be "remanded to the Surrogate to determine the amount due to objectant." The Appellate Division further said: "Objectant concedes that the checks given subsequent to the note were in part payment. It also appears that objectant has realized on certain funds claimed to be security. These sums should be determined and the resulting credit on the claim established, and for that purpose the matter is remanded to the Surrogate." Pursuant to that mandate a hearing has been held and the court now decides the issues on that hearing. A. Direct Payments by George Plotkin
The promissory note, the basis of objectant's claim, is dated June 1, 1963.
Although the notice of claim seems to concede that there have been three payments each for $795, the record shows that only two such payments were made after the date of the note. Accordingly I find that during his lifetime, decedent paid to the claimant, Frank Plotkin, $1,590 on account of the obligation represented by the note.
B. Proceeds of Aberdeen and Fidelity Funds
The note claimed on recites that it was "to replace all prior notes." There is a history going back several years of prior notes from decedent George to claimant Frank Plotkin. In May, 1961, the date of the Aberdeen transaction to be described, the notes theretofore given by decedent to claimant totaled $45,000 and there was apparently an outstanding check from decedent to claimant for $5,000. In September, 1961, the date of the Fidelity transaction referred to below, the notes totaled $55,000 and there was the outstanding check for $5,000 making a total liability presumably of $60,000.
Aberdeen Fund is an open-end mutual common stock trust fund which issues securities known as Aberdeen Fund Shares. Such shares also constitute the corpus of another common-law trust known as Aberdeen Investment Programs. The latter is essentially a device whereby investors may subscribe on a systematic installment payment plan for Aberdeen Shares.
There is a very similar device with respect to another common-law trust referred to as Fidelity Capital, in which the "Fidelity Capital Investment Plan" plays the same role as Aberdeen Investment Programs, with respect to shares of Fidelity Capital Fund, which is analogous to Aberdeen Fund.
On May 2, 1961, decedent George Plotkin became an investor in Aberdeen Investment Programs. The face amount of the program, i.e. the amount he obligated himself to invest, was $30,060 payable in 180 monthly payments of $167 each. The payments so made were to be applied to the purchase of shares of Aberdeen Fund. At the end of the period covered by the agreement, the investor (decedent) had the right to receive from a custodian bank all funds, shares and cash, if any, held for his account. There were also provisions for partial withdrawal of shares after at least 13 monthly payments. The program also called for life insurance on investor-decedent's life. Upon death of the investor the unpaid balance of the monthly program would immediately become due and payable as an obligation of the estate of the investor to the sponsor Aberdeen Investor Programs. "It is the function of the life insurance to provide solely for the foregoing obligation".
Under date of May 6, 1961, pursuant to one of the options contained in the program, decedent George Plotkin executed and filed (with Aberdeen Investor Programs or the custodian bank) a "Designation of Beneficiary" which directed the custodian bank on termination or liquidation of the program or on receipt by the bank of proof of the investor George Plotkin's death or legal incapacity to transfer to the beneficiary such fund shares as might then be held under the program. The beneficiary named was claimant Frank Plotkin.
Decedent George Plotkin apparently entered into a similar arrangement with Fidelity Capital. Again, he made a designation of beneficiary in Frank Plotkin's favor dated September 18, 1961. The form of designation of beneficiary for Fidelity Capital appears to be word for word the same as that for Aberdeen and the amount that George obligated himself to buy was $30,000.
After George's death, on September 17, 1963, the life insurance issued in connection with the Aberdeen Plan was paid and applied to satisfy decedent's obligation on his contract. In January, 1964 Frank Plotkin, exercising his rights as designated beneficiary of the Aberdeen Investor Programs, liquidated his interest in the Aberdeen Fund shares and received a check for $27,776.61 in liquidation of the then held 11,775 shares. Of this amount, Frank Plotkin's attorney retained $2,776.61 as a fee. The Frank Plotkin estate concedes that the George Plotkin estate is entitled to a $25,000 credit on the $63,000 promissory note obligation.
There is a dispute as to whether the George Plotkin estate was entitled to receive or retain any part of the $27,776.61 and if so whether the credit should be the entire $27,776.61 or only $25,000. There is a further dispute between the parties as to whether the Aberdeen and Fidelity Funds constitute security for the indebtedness to George Plotkin and as to what the rights of the parties are with respect to these securities.
1. The remand from the Appellate Division in terms merely required this court to determine the amounts realized and the resulting credit on the claim and to determine the amount due to claimant-objectant. But I think to do that I will have to determine what the rights of the parties are with respect to the Aberdeen and Fidelity Capital Funds. Specifically it may well be that the right of the claimant to deduct attorneys' fees may depend upon whether claimant is a secured creditor (cf. Spadaro v. Chenango County Nat. Bank & Trust Co., 156 Misc. 230, 232 [Sup. Ct., 1935]).
This court has subject matter jurisdiction to determine the rights of the parties with respect to the securities. (SCPA 209, subd. 4; SCPA 202; ...