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Deutsche Bank National Trust Co. v. Sidden

Supreme Court, Queens County

February 24, 2017

Deutsche Bank National Trust Co., et al., Plaintiff,
v.
Olioe Sidden, et al., Defendants. Queen's Park Oval Asset Holding Trust, Plaintiff,
v.
Veronica Matthews, et al., Defendants.

          For Plaintiff in Deutsche Bank National Trust Company v. Sidden: Aldridge Pite LLP, by Douglas S. Thaler

          For Plaintiff in Queen's Park Oval Asset Holding Trust v. Matthews: Schiller, Knapp, Lefkowitz & Hertzel, LLP, by Kari R. Smith, Esq.

          Salvatore J. Modica, J.

         The above-captioned two cases are combined solely for the purpose of this Memorandum Decision, raising a common issue on these two otherwise unrelated mortgage foreclosure actions. They both have a common denominator in that the movants, the mortgagors, seeks the appointment of a substitute referee for various grounds. In both of the cases combined for decision, this Court's independent research shows that the judge, now retired, who appointed both of the referees, selected an attorney as the referee who did not qualify as not being on the Part 36 List of eligible fiduciaries.

         The importance of the issue, since it is hard to find any reported decisions discussing New York's institution of a "Part 36" List of eligible fiduciaries in several denominated categories, has led to this Memorandum Decision. This decision demonstrates the pitfalls of going beyond the Part 36 List in appointing a fiduciary, such as a referee, although a judge is well within her or his rights in doing so - - if done properly, as discussed herein.

         Part 36 of the Rules of the Chief Judge 922 NYCRR Part 36) governs the following judicial appointments made by justices and judges of the Unified Court System of new York State: guardians; guardians ad litem, including their counsel and assistants; privately paid law guardians where authorized; court evaluators; attorneys for alleged incapacitated persons; court examiners; supplemental needs trustees; receivers; referees, e.g., a referee to sell property - - excluding referees who perform quasi-judicial functions such as those who hear and report [CPLR 4201], hear and determine [CPLR 4301], or supervise discovery [CPLR 3104]; secondary appointees of guardians and receivers, e.g., attorney, accountant, appraiser, etc.; and certain public administrators and counsel to public administrations in certain regions. See, "The Rules of the Chief Judge Part 36: Questions and Answers, " found at https://www.nycourts.gov/ip/gfs/FAQsPart36.pdf.

         In December, 2011, New York State's Commission on Fiduciary Appointments issued an important report found at https://www.nycourts.gov/ip/gfs/fidcommreport.html. The Report's introduction even candidly indicates that "[o]ver 130 years ago, Benjamin Cardozo's father, Manhattan Supreme Court Justice Albert Cardozo, was harshly criticized and ultimately forced to leave the bench in large part because of his repeated appointment of relatives and political cronies as fiduciaries." Id. The late Judith S. Kaye, Chief Judge of the New York Court of Appeals observed: ""[P]ublic confidence in the courts is put at risk when judicial appointments are based on considerations other than merit. Simply put, the public must have faith that the courts operate free of favoritism and partiality." Id.

         In a beautifully written and scholarly article, "Understanding Fiduciary Duty, " (Fla. B.J., March 2010, at 20, 22), Florida lawyers John F. Mariani, Christopher W. Kammerer, and Nancy Guffey-Landers, Esqs., discuss the fiduciary duty:

The most basic duty of a fiduciary is the duty of loyalty, which obligates the fiduciary to put the interests of the beneficiary first, ahead of the fiduciary's self interest, and to refrain from exploiting the relationship for the fiduciary's personal benefit. This gives rise to more specific duties, such as the prohibition against self-dealing, conflicts of interest, and the duty to disclose material facts. Perhaps the most famous description of the duty of loyalty is by Chief Judge Benjamin Cardozo in Meinhard v. Salmon, 249 NY 458, 464, 164 N.E. 545, 546 (1928):
Many forms of conduct permissible in a workaday world for those acting at arm's length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.
In addition to a duty of loyalty, a fiduciary also owes a duty of care to carry out its responsibilities in an informed and considered manner and to act as an ordinary prudent person would act in the management of his or her own affairs. If the fiduciary has special skills, or becomes a fiduciary on the basis of representations of special skills or expertise, the fiduciary is under a duty to use those skills.

         John F. Mariani, Christopher W. Kammerer, Nancy Guffey-Landers, "Understanding Fiduciary Duty, " Fla. B.J., March 2010, at 20, 22 (footnote references omitted).

         Aside from Cardozo's famous statement in Meinhard, made in 1928, for the New York Court of Appeals, the Supreme Court of Florida, one year earlier, in Quinn v. Phipps, 93 Fla. 805, 113 So. 419 (1927), articulated, with equal polish:

Stripped of all embellishing verbiage, it may be confidently asserted that every instance in which a confidential or fiduciary relation in fact is shown to exist will be interpreted as such. The relation and duties involved need not be legal; they may be moral, social, domestic or personal. If a relation of trust and confidence exists between the parties (that is to say, where confidence is reposed by one party and a trust accepted by the other, or where confidence has ...

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