BACKGROUND

This is a contested intermediate account of the preliminary executor of the estate of Louis Rosen. The relevant facts underlying this motion for summary judgment have been set forth in the decision denying probate to the instrument dated October 6, 1988 and the affirmance of this decision upon appeal. Matter of Rosen, NYLJ, June 30, 2000, at 31, col 1 (Sur Ct, Kings County), affd 296 AD2d 504 (2d Dept 2002).

The decedent died May 17, 1992, at age 87. The decedent never married and had no children. He had invested wisely and left a residuary estate of over $7,000,000. His latest will, executed on October 6, 1988 (the "1988 will") left his residuary estate in equal shares to his sister Miriam Silverman ("Miriam"), his brother Hyman Rosen ("Hyman"), two children of his predeceased brother Irving Rosen and Miriam's three children - Richard Silverman ("Richard"), Warren Silverman ("Warren") and Karen Thurston ("Karen"). Miriam was named as executor. She predeceased the decedent, dying in 1992. Warren, the successor executor, filed a petition to [*2]probate the 1988 instrument and was appointed preliminary executor. Objections were filed by Hyman and Ronald Silverman ("Ronald") and Shelly Silverman ("Shelly"), the two children of the decedent's predeceased brother, Nathan (the "objectants"). The objections alleged lack of testamentary capacity, fraud and undue influence.

The objections to probate were tried before the Surrogate in a non-jury trial. The probate trial lasted nine days and was vigorously contested. Based on the record, the Court found that the decedent lacked testamentary capacity in 1988. It further found that the decedent was susceptible to undue influence due to his weakened physical condition, that Miriam's relationship with the decedent was motivated by her interest in the decedent's money, and that there was a confidential relationship between the decedent and Miriam created by her control over the decedent's finances. Critical to the finding that Miriam had actually exercised undue influence over the decedent in the probate contest were the findings made by the Court that prior to 1986, the decedent had given only small gifts to family members but that after Miriam began to exert influence over him, the decedent transferred almost $2,000,000 to trusts for the benefit of Miriam and her children between November 1988 and January 1990 and that she signed checks in 1989, totaling $9,985 to each of her children from an account the decedent established.

The Court denied probate to the 1988 will on the grounds of lack of testamentary capacity and undue influence. Warren appealed, but the decision of the Surrogate was affirmed. Significantly, the appellate court considered the creation of the totten trusts and the 1989 gift checks as the product of undue influence.

During the pre-trial discovery in the probate contest in 1993, the objectants filed a petition to remove Warren as preliminary executor. The objectants alleged that Warren should not be preliminary executor because he and his mother had improperly transferred monies from the decedent to themselves during the last years of the decedent's life. After a conference with the court, Warren agreed to file an interim account of his actions as preliminary executor. Warren filed an interim account, for the period from July 3, 1992 to March 31, 1994, to which the objectants filed objections.

Among their objections, was a challenge to the validity of totten trusts the decedent created for the benefit of Miriam and her children during the period when they alleged that he lacked capacity and was under Miriam's influence. The objectants claimed the transfers were estate assets. The account showed that each of the totten trusts created for Miriam's children on May 6, 1988 had a principal of $67,693.54. The January, 1990 totten trust account for Miriam and her children was valued at $1,535,747.60. The trusts were listed in an informational schedule in Schedule A as non-probate assets. In addition, the objectants objected to the failure to include the 1989 gifts of almost $10,000 to each of her children.^[FN1] The trial of the objections to the intermediate account was held in abeyance pending the determination of the objections to probate. [*3]

After the 1988 will was denied probate, letters of administration were issued to Bernice Rosen (Hyman's wife) and Barbara Yospe (a daughter of the decedent's predeceased brother, Irving) on April 18, 2001.^[FN2] The co-administrators reached a settlement with two of Miriam's three children, Richard and Karen, concerning the non-probate assets they received from the decedent. The co-administrators were not able to reach settlement with Miriam's third child, Warren.

The co-administrators and the objectants in the probate contest ("movants") now move for summary judgment against Warren. The objectants assert that although letters of administration have issued, they have standing because they are distributees who have an interest in the estate. The court finds that the objectants are proper parties in this proceeding by virtue of their interest in the estate. Furthermore, their objections were adopted by the co-administrators.

The movants seek an order compelling Warren to turn over non-probate assets he received from the decedent. This consists of the proceeds of the totten trust established for him in November 1988, his share of the totten trust established for the family in January 1990, as well as $9,985 taken from the decedent's assets which he received from Miriam between May, 1989 and December 1989 (the "inter-vivos transfers"). In addition, the movants seek to have Warren reimburse the estate for attorneys' fees he paid from the estate in the effort to probate the 1988 will. Finally, they seek to surcharge Warren for funds allegedly unaccounted for since the intermediate account was filed.

In support of their claim that the totten trusts for Warren's benefit and the 1989 gift to him are void, the movants attach copies of documents showing that on November 3, 1988, the decedent created a totten trust for Warren's benefit to which $51,857.39 was transferred. The intermediate account shows that the date of death value of the trust was $68, 440.87. In addition, the decedent created a totten trust for the benefit of Miriam and her children in January, 1990. The value of the 1990 totten trust as reflected in the intermediate account was $1,5061,442.48. The movant's calculate that Warren's share of this trust was $520,480.83. His share of the estate taxes paid from the totten trusts was $270,680.00. Based on these figures, the movants calculate that Warren received a total of $318,241.70 from the totten trusts.^[FN3] Warren does not dispute these facts but argues that the transfers were valid, relying on the presumption of validity embodied in section 675 of the Banking Law.

B. The 1989 Gifts

As for the gifts of cash, the movants attach copies of the checks signed by Miriam [*4]between May and October 1989. These checks establish that each child received a total of $9,985 during 1989 (the "1989 gifts"). Warren does not dispute receiving $9,985, but argues that he had no knowledge of any impropriety.

A totten trust becomes a completed gift when the creator dies without revoking the totten trust or withdrawing all the funds. Matter of Totten, 179 NY 112 (1904). Where the creator establishes a totten trust at a bank, there is a presumption that a valid gift has been made, subject only to the donee surviving the donor. Banking Law 675(a); see Matter of Praczkajlo, 143 Misc 2d 667 (Sur Ct, Erie County 1989). However, this is a refutable presumption. Matter of Riley, 261 AD 690 (3d Dept 1941). The burden of proof is on the party challenging the validity of the totten trust. Matter of Connelly, 193 AD2d 602 (2d Dept 1993), lv denied 82 NY2d 656 (1993).

Where the transfer is by gift, the donee bears the burden of proving, by clear and convincing evidence, that the gift was voluntary and knowingly made by the donor, uninfluenced by fraud, duress or coercion. Gordon v Bialystoker Ctr., 45 NY2d 692 (1978); Matter of Clines, 226 AD2d 269 (1st Dept 1996). Moreover, where the gift is made by an agent, the donee has the burden of showing that the agent was operating in the interests of the decedent in making the gifts. Matter of Roth, 283 AD2d 504 (2d Dept 2001).

The movants claim that they are entitled to summary judgment because the court has already found that the gifts were the result of undue influence and lack of capacity. In making this argument, they rely on the evidence adduced at the trial and the decision of the court denying probate to the 1988 will. Warren claims the decision denying probate to the 1988 will has no bearing on the issue of lack of capacity and undue influence in the disputed gifts. He argues that the administrators cannot rely on the prior probate proceeding, under the doctrine of collateral estoppel, to establish the invalidity of the transfers. He has submitted an affidavit in opposition to the motion stating that he did not exercise undue influence on the decedent. Therefore, he argues that there are issues of fact that preclude granting summary judgment.

The movants' motion for summary judgment depends upon whether the findings of lack of testamentary capacity and undue influence made in the probate contest apply in a later proceeding challenging the validity of inter vivos transfers, under the doctrine of collateral estoppel. The doctrine of collateral estoppel provides that a party is precluded from re-litigating an issue in a subsequent proceeding that was clearly raised in a prior proceeding and decided against that party, whether or not the two causes of action are the same. Ryan v New York Tel. Co., 62 NY2d 494 (1984). The public policy behind the doctrine of collateral estoppel is the prevention of re-litigation of issues necessarily decided in the prior litigation. Restatement (Second) of Judgments § 27. The doctrine applies to findings of fact and issues of law. Ryan v New York Tel. Co., supra; see 9 CW2d § 63:445 at 398.

In order to apply the doctrine of collateral estoppel, it is necessary to show: (1) that the issue on which preclusion is sought is identical with the issue litigated in the prior proceeding and that the issue was necessarily determined in the prior proceeding; and (2) that the litigant who will be held precluded in the present proceeding had a full and fair opportunity to litigate the issue. Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640 (1993); Shanley v Callanan Indus., 54 NY2d 52, 55 (1981); Gilberg v Barbieri, 53 NY2d 285 (1981). The burden of [*5]showing the first requirement is on the party seeking to impose collateral estoppel and the burden of disproving the second requirement is on the party opposing collateral estoppel. Forcino v Miele, 122 AD2d 191, 193 (2d Dept 1986).

In the instant case, the Court found that family members noticed changes in the decedent's behavior in 1987 and 1988. Matter of Rosen, No. 3012/92, slip op, at 3 (Sur Ct, Kings County, May 19, 2000 ("Rosen decision"). At this time, the decedent lost interest in personal hygiene and became unable to keep his apartment in order. Id. at 9; 296 AD2d at 505. Significantly, he was unable to keep his financial records in order. The changes were noted by the decedent's relatives and other witnesses. Rosen at 10, 11; 296 AD2d at 505.

Prior to this time, Miriam had little contact with her brother, but Warren had maintained contact with the decedent. Rosen at 2. Miriam used Warren to establish a relationship with the decedent. Id. When his mother informed him that she was taking over the decedent's affairs, Warren ceased his visits. Id. By the spring of 1988, Miriam was able to exert control over the decedent's finances. Rosen at 3; 296 AD2d at 505. This was noticed by the decedent's tax preparer in April, 1988, when he observed Miriam bossing the decedent. Rosen at 3, 10. On May 3, 1988, the decedent set up a trust account for which Miriam had authority to write checks. Rosen at 3; 296 AD2d at 505. She used her authority to give $9,985 to her children between May, 1989 and October 1989. Rosen at 3, 5; 296 AD2d at 505. In May 1989, the decedent established totten trusts for the benefit of Miriam and her children. Rosen at 4.

In January, 1989, the decedent was taken to a clinic after becoming dizzy and falling. Id; 296 AD2d at 506. In April, 1989, the decedent had a stroke. Rosen at 15. He was seen by the doctors at his clinic, who documented the deterioration of his mental condition. In January, 1990, the decedent established a totten trust for Miriam and her children and ultimately transferred over $1,500,000 to it. Rosen at 5; 296 AD2d at 506. In December, 1990, the decedent was found wandering in the Port Authority Bus Terminal. Rosen at 5. Warren arrived at the terminal and returned the decedent to his apartment. Id. However, the decedent was soon discovered walking outside his apartment in his underwear. Id at 6. The police took him to a hospital, where tests showed organic brain syndrome of the Alzheimer's type. Id. He was placed in the Thomas Jefferson Nursing Home for Adults, an adult care facility. Id. The decedent was hospitalized again in February of 1991, where he was diagnosed as having advanced dementia and atrophy of the brain. Id. The decedent was discharged to an adult health care center. Richard brought a proceeding to be appointed the decedent's conservator. Id. He and Hyman were appointed as co-conservators. Hyman arranged for his brother to be transferred to a facility in California, where he died a few days later, on May 17, 1992. Id.

The Court found that the decedent lacked testamentary capacity as of October 1988, when the 1988 will was executed. Id at 16, 18. The elements of testamentary capacity is an understanding that one is making a will, awareness of the nature and extent of one's property and the objects of one's bounty. See Matter of Kumstar, 66 NY2d 691, 692 (1985); Matter of Esberg, 215 AD2d 655 (2d Dept 1995). Less mental capacity is required to execute a will than any other legal instrument. Matter of Coddington, 281 AD 143 (3d Dept 1952), affd 307 NY 181 (1954); Mater of Seagrist, 1 AD 615 (1st Dept 1896), affd 153 NY 682 (1897). The capacity necessary to create a valid trust, on the other hand, is the same as capacity to make a valid contract. Matter of ACN, 133 Misc 2sd 1043 (Sur Ct, NY County 1986); 76 Am Jur2d Trusts § 49. This is the same [*6]standard as the capacity to make a valid gift. See Matter of Creekmore, 1 NY2d 284.(1956). Therefore, a finding that the decedent lacked testamentary capacity necessarily precludes a finding that the decedent had the capacity to create a valid totten trust or gift.Once lack of capacity is shown, there is a presumption that it continues until overcome by clear and satisfactory evidence of capacity. Matter of Widmayer, 74 AD 336 (1st Dept 1902). There is no evidence that the decedent's mental condition ever improved. Indeed, it became progressively worse. Accordingly, the Court's finding of lack of capacity in the probate contest establishes the decedent's lack of capacity when the totten trusts and gifts were made.

As for undue influence, the Court has specifically held that the inter-vivos gifts were the result of undue influence. Rosen at 24. This finding was expressly adopted by the Appellate Division in its opinion affirming the trial decision:

Finally, the Surrogate properly considered events which occurred after the execution of the will as relevant in determining the issue of undue influence. Before Miriam's involvement in his financial affairs, the decedent had given only small gifts to his relations. In addition to the large outright gifts to her children which Miriam made from the decedent's accounts, in January 1990, the decedent set up a joint account with right of survivorship in Miriam's three children to which he transferred approximately $1.5 million from his other accounts. Thus, as the Surrogate found, there was sufficient evidence not only that Miriam had a motive and opportunity to exercise undue influence, but that such influence was actually utilized. Matter of Rosen, supra, 296 AD2d 504, 506 (citations omitted).

Nonetheless, Warren argues that collateral estoppel is not available because each of the disputed gifts represent separate transactions which must be resolved independently. It is true that the findings made in a probate proceeding, which is a proceeding in rem to establish the validity of a will, may not satisfy the requirements needed to apply the doctrine of collateral estoppel. Matter of Antoinette, 291 AD2d 733 (3d Dept 2002); Forcino v Miele, 122 AD2d 191 (2d Dept 1986); Matter of Smith, 175 Misc 545 (Sur Ct, Kings County 1940), op adhered to after re-argument 175 Misc 688 (1940). However, the doctrine can be applied if the requirements are met.

One ground asserted for denying collateral estoppel is that the issues in a probate contest are not identical to the issues raised in a later proceeding to invalidate inter-vivos transfers. Matter of Antoinette, supra; Forcino v Miele, supra; Matter of Smith, supra. However, where, as in the instant case, the issues of capacity and undue influence in the making of the disputed inter-vivos transfers were litigated in the probate proceeding, and the other requirements of collateral estoppel have been met, these issues should not be re-litigated. See Malloy v Trombley, 50 NY2d 46 (1980); Forcino v Miele, supra, at 198 (dicta).

Warren argues that the burden of proof is different in a probate contest and a proceeding to invalidate a gift or trust. In a probate contest, the burden of establishing capacity is on the proponent of a will. Warren alleges that the burden of proving lack of capacity to the inter-vivos gifts is on the movants. However, the burden of proving the elements of a valid gift is on the donee, who must satisfy the burden by clear and convincing evidence. Matter of Gruen, 68 NY2d 48 (1986). Where undue influence is alleged, the burden is on the party alleging undue influence, whether in a probate proceeding or proceeding challenging the validity of the transfer. [*7]Therefore, this is no basis to deny application of the doctrine.

Some courts have declined to apply the doctrine of collateral estoppel against a person appearing in his or her individual capacity who had earlier litigated an issue in a representational capacity as the executor of an estate. Hellstern v Hellstern, 279 NY 327 (1938); Matter of Antoinette, supra; Matter of Smith, 175 Misc 545 (Sur Ct, Kings County 1940), op adhered to after re-argument 175 Misc 688 (1940).^[FN4] However, an exception to this rule is made if the non-party contested or substantially controlled the prior litigation. Matter of Juan C v Cortines, 89 NY2d 659 (1997); Watts v Swiss Bank Corp., 27 NY2d 270 (1970); Restatement (Second) Judgments § 39. If the non-party's interests were fully and fairly represented, the doctrine may apply. 10 Weinstein-Korn-Miller, NY Civ Prac ¶ 5011.32 at 50-195. As a corollary, a person who appears in his or her representative capacity that includes his or her own individual interests will be bound, by virtue of their representative status in the first proceeding. Watts v Swiss Bank Corp, supra; Restatement (Second) Judgments,§ 36, comment c.

Courts have declined to apply the doctrine of collateral estoppel to probate proceedings when a litigant to be charged did not have a full and fair opportunity to defend the inter-vivos transactions in the prior probate proceeding. See Matter of Antoinette, supra; Forcino v Miele, supra. However, if the litigant had a full and fair opportunity to litigate the disputed issue, there is no reason to allow her or him a second trial. Among the factors used by the courts in deciding whether the litigant has had a full and fair opportunity to litigate the issue are: the size of the claim, the forum of the prior litigation, the extent of the litigation, the competence and experience of counsel, the availability of new evidence, difference's in applicable law and the forseeability of later litigation. Hinchley v Sellers, 7 NY2d 287, 294 (1959); Shanley v Callanan Indus., 54 NY2d 52 (1981); 10 Weinstein-Korn-Miller, NY Civ Prac ¶ 5011.26.

In the instant case, there is no basis for the court not to apply collateral estoppel to void the inter-vivos transfers. As noted above, the decedent's mental condition from 1988 through 1990 was litigated. This is the time period when the inter-vivos transfers were made. The objections to probate challenged the validity of the inter-vivos transfers as part of the circumstantial proof of undue influence. Warren, as the beneficiary under a will that left him over $1,000,000 and as the beneficiary of equally substantial totten trusts and gifts, had a substantial and direct interest in litigating the decedent's mental condition and in establishing the validity of the inter-vivos transfers to him. Warren was afforded a full and fair opportunity to litigate the validity of the inter-vivos transfers. Indeed, he litigated these issues agressively at trial and on appeal. Warren does not allege any facts that would validate the disputed inter-vivos transfers which were not already raised in the probate proceeding. Warren's statement that he never saw his mother unduly influence the decedent is not sufficient to create an issue of fact, especially because he testified at trial that he rarely saw his uncle after his mother came into the [*8]picture in 1986. Therefore, application of the doctrine of collateral estoppel precludes re-litigation of this finding in the instant accounting proceeding.

Based on the above, there is no basis to re-litigate the issue of capacity and undue influence. In its decision after trial, the court found the decedent lacked testamentary capacity as of October, 1988. Warren has produced no evidence that the decedent ever regained capacity. Indeed, the evidence produced established that the decedent's condition got progressively worse. In its decision, this court found that the subject transfers were evidence of Miriam's undue influence on the decedent to benefit herself and her children. Rosen at 30-31; 296 AD2d at 506. Based on the above, the inter-vivos transfers should be voided. See Gordon v Bialystoker Ctr., 45 NY2d 692 (1978); Matter of Burke, 82 AD2d 260 (2d Dept 1982).

Whereas the doctrine of collateral estoppel refutes all triable issues of facts suggested by the pleadings and supporting documents, the administrators' motion for summary judgment is granted. Schwartz v Public Administrator, 24 NY2d 65 (1969); McWhorter v Stevens, 282 AD 806 (3d Dept 1953), lv denied 306 NY 757 (1954); Herr's Motor Exp., Inc. v A.R. Midway Truck & Trailer Sales, 90 AD2d 54 (4th Dept 1982).

The movants allege that between October 17, 1994 and February 9, 2000, Warren paid $194,593.77 in attorneys fees. Of this amount, $151,960.59 was paid directly to the attorneys and $42,633.18 was paid by Warren, Richard and Karen, who were then reimbursed by the estate. The movants seek to have the moneys returned.

These transactions are outside the scope of the original account. As a result, this objection was not raised in the original pleading. Even if this court were to consider the objection on its merits, summary judgment must be denied. The fiduciary has the burden of showing that the claimed expense for attorneys fees were necessary and reasonable. Matter of McCranor, 176 AD2d 1026 (3d Dept 1991). That said, a preliminary executor is entitled to be reimbursed for the reasonable expenses of counsel in propounding a will, even if the will is ultimately denied probate. As the nominated executor, Warren had the obligation to offer the 1988 will for probate and he retained attorneys to effectuate that purpose.

The movants argue that a proponent who is found to have used undue influence in the execution of the will is responsible for the legal fees expended in defending its validity, on the ground that the person guilty of undue influence is acting in bad faith. However, where the proponent of an instrument denied probate because of undue influence is not the person guilty of undue influence, the proponent is entitled to the reasonable legal fees expended in defending the validity of the instrument, unless the proponent is found to have acted in bad faith. Whether Warren acted in bad faith or not is a question of fact. The only evidence of bad faith offered by the movants is the fact that this Court denied probate because of Miriam's undue influence. No evidence has been offered that Warren exercised undue influence over the decedent. Therefore, the movants are not entitled to summary judgment ordering the return of the legal fees paid from estate assets.

The movants allege that Warren paid $24,074.79 from estate funds after preliminary [*9]letters had been revoked.^[FN5] They seek summary judgment surcharging Warren for making these payments. Warren has submitted an affidavit in opposition in which he states that he had no recollection of ever making payments out of estate funds after his letters were revoked. No evidence has been provided establishing that Warren made the disputed expenditures. As in the previous objection, this objection is outside the scope of the pleadings. Considering the motion for reimbursement on its merits, it is clear that Warren has raised an issue of fact, precluding the granting of summary judgment.

Based on the above, the court grants the motion for summary judgment on the objections to the creation of the totten trust for Warren's benefit on November 3, 1988 and January 10, 1990 and to the inter-vivos transfers from the decedent's account in 1989. The motion is otherwise denied.

The clerk of the court is directed to mail a copy of this decision to all parties who have appeared in this proceeding.

Settle order.

Dated: September 13, 2007

________________________________

HON. Margarita López Torres

S u r r o g a t e