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In re Trust Made by Giles

June 10, 2010


The opinion of the court was delivered by: Cardona, P.J.


Calendar Date: April 19, 2010

Before: Cardona, P.J., Mercure, Peters, Kavanagh and Garry, JJ.

(1) Cross appeals from an amended order of the Surrogate's Court of Schuyler County (Argetsinger, S.), entered April 3, 2008, which, among other things, dismissed petitioner's application, in a proceeding pursuant to SCPA 209 (6), to remove respondent as trustee, and (2) appeals from an order of said court, entered September 30, 2008, which, among other things, ordered that the trust's real property be sold as one parcel.

In 1990, decedent, Merle L. Giles, executed a declaration of trust whereby he created an inter vivos trust naming Margaret Buchanan, his daughter and respondent herein, as successor trustee, and his nine grandchildren as beneficiaries. Five of the beneficiaries are respondent's children, all of whom have appeared in this proceeding as interested parties (hereinafter the Buchanan beneficiaries). The four remaining beneficiaries are the children of respondent's deceased brother (hereinafter the Giles beneficiaries). Decedent assigned all of his assets to the trust, and also deeded to the trust a 52-acre mostly vacant parcel of land located on Seneca Lake in the Town of Hector, Schuyler County. In addition, decedent made a will naming respondent the executor and bequeathing his estate to the trust.

Shortly before his death in 1992, decedent executed an amendment, designated the first amendment to declaration of trust, which modified paragraph 3 of the declaration of trust. The original paragraph 3 provided:

"Upon my death . . . my Successor Trustee is hereby directed forthwith to transfer the said trust estate and all right, title and interest in and to said trust estate unto the beneficiar[ies] named herein absolutely and thereby terminate this trust."

The amendment to paragraph 3 provided:

"Upon my death, I hereby direct my Successor Trustee to continue to hold my Trust Estate in Trust for the longest term provided by law after my death so that the [Seneca Lake] property located in Schuyler County . . . shall continue to be used by my family members for so long a term as is permissible by law or until my Successor Trustee and all beneficiaries of the Trust are in agreement that it is in the best interest of the beneficiaries that the property be sold and the Trust terminated and disbursed according to the terms of the Trust. The Successor Trustee shall have the right to use income from other trust assets as well as the trust assets themselves to pay for the maintenance and upkeep and taxes and other expenses of said property."

Following decedent's memorial service in 1992, respondent met with the beneficiaries and gave each of them, among other things, a check for $5,000 drawn from the trust's assets and a letter from decedent, stating his wish that his heirs and their heirs enjoy the Seneca Lake property as a vacation spot for as long as possible. Approximately a year later, petitioner, who is one of the Giles beneficiaries, contacted respondent, accusing her of violating her fiduciary duties by failing to immediately dissolve the trust and distribute the assets to the beneficiaries. After conversations between respondent and petitioner, respondent issued each of the Giles beneficiaries a check for $40,000 from the trust assets, and issued each of the Buchanan beneficiaries stocks, bonds and cash totaling $40,000.

Thereafter, there was little contact between respondent and the Giles beneficiaries until the spring of 2005, when they began communicating about the possibility of selling the Seneca Lake property. The beneficiaries had made little use of the property over the intervening years. Meanwhile, the taxes, as well as the value of the property, had increased substantially, while the trust assets available to support the property had dwindled to about $15,000. Respondent polled all of the beneficiaries seeking their approval of a sale, but the Giles beneficiaries refused to consent. In November 2005, petitioner commenced this proceeding seeking, among other things, an order enjoining the sale of the Seneca Lake property, removing respondent as trustee, and compelling her to provide an accounting of the trust. Respondent answered and interposed a counterclaim seeking the permission of Surrogate's Court to sell the Seneca Lake property and distribute the trust assets to the beneficiaries, effectively dissolving the trust. Surrogate's Court then issued a probate citation to all of the beneficiaries.

In May 2006, Buchanan filed an interim accounting. A bench trial commenced, continuing intermittently until January 2007. The parties thereafter stipulated that the pleadings be deemed to include a petition for judicial settlement of the interim account and objections thereto.

In April 2008, Surrogate's Court issued an amended order which determined that petitioner's allegations of bad faith and dishonesty on respondent's part were not proven, but that some of the expenses claimed in her account were not authorized. The court also recognized that the trust assets were no longer sufficient to carry out the purpose of the trust. Accordingly, the court (1) denied petitioner's demand to remove respondent as trustee, (2) disallowed certain items in the account -- totaling $46,100 -- and ordered respondent to reimburse the trust and serve an amended account, (3) settled the interim account as modified above, (4) ordered that all parties' counsel fees be paid out of the trust assets, and (5) ordered that within 60 days the parties submit either a stipulated plan, or each party's recommended plan, for the sale, partition or other disposition of the Seneca Lake property. Petitioner, respondent, and the Buchanan beneficiaries cross-appeal from that amended order.

The parties were unable to stipulate to a plan for the Seneca Lake property within the allotted time. Consequently, in September 2008, Surrogate's Court ordered, among other things, that the Seneca Lake property be sold in one parcel with the Giles beneficiaries having 60 days after determination of a price within which to exercise an option to buy it, and, if they chose to exercise said option, two years within which to complete the purchase. The court further ordered that if the Giles beneficiaries failed to exercise the option or to complete the purchase within the set times, the trustee must sell the property for the best price obtainable and ...

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