Manufacturers and Traders Trust Company (hereinafter M & T) has petitioned for approval of its account as executor in the estate of John Clarke Adams for the period from September 10, 2000 to December 5, 2005. Said petition was filed with this Court on December 22, 2005.

In his will decedent directed that his residuary estate was to be divided equally as follows: one third to his son Peter, one third to his son Marc, and one third to be shared equally by his daughter-in-law Cynthia and his grandchildren, Armand and Maxine.

By terms of the will, since both grandchildren were under the age [*2]of twenty-five their bequests were placed in separate trusts with their parents Peter and Cynthia the designated trustees. The will further provided in paragraph THIRD(E):

If at the time of my death I own property located in Italy which passes by a separate last Will and Testament of mine, the value of my said Italian property owned by me at the time of my death is to be added to the value of my residuary estate herein and is to be considered as an integral part of my residuary estate for the purposes of the equal distribution of my assets as specified herein between my two sons, Marc Peter Adams and Peter David Adams or their descendants then surviving as the case may be.

In paragraph FOURTH of the will decedent noted in part, "I also own real property in Northern Italy for which I have a Will made in Italy devising all of my said real property in Italy to my son Marc Peter Adams". In its account M & T evaluated the Italian realty at $384,648.00 and utilized this value to determine the equal distribution of assets as specified in paragraph THIRD(E) recited hereinabove.

Decedent made no provision in the will for his wife Helen who survived him and on May 9, 2001 Helen exercised her right of election pursuant to EPTL § 5-1.1A. She died in 2004.

Objections to the account have been filed by Peter Adams, his wife Cynthia, and on behalf of their children Armand and Maxine. Marc Adams filed objections in which he joined in Objections numbered 2, 4, 5, 6, 9, 10, 11, 12, 13 and 14 of the other objectants. Supplemental Objections were subsequently filed by Peter & Cynthia and on behalf of their children.^[FN1]

Peter and Cynthia Adams individually and as trustees for their children Armand and Maxine in their Supplemental Objections 1 and 8 challenge the valuation of $384,648.00 set forth in the account for the realty located outside of Florence, Italy as being a gross under valuation of the property.

In a contested accounting proceeding the accounting fiduciary has the burden of establishing that all estate assets have been accounted for and that the account is accurate and complete in all respects (Matter of Schnare, 191 AD2d 859, lv to app denied 82 NY2d 653). This showing is typically done by offering the account into evidence with sworn testimony by the fiduciary that the account is true and accurate. This was the course followed by M & T in this proceeding with respect to the Italian property. The objectant then has the burden of proving that the account is inaccurate or incomplete. Upon an evidentiary showing that assets have been incorrectly characterized in the account, the burden shifts back to [*3]the accounting fiduciary to prove by a fair preponderance of the evidence that the account is in fact accurate.

In support of these objections objectants presented the testimony of Anthony J. Wells an officer with American Appraisal Associates, Inc., which has affiliated offices worldwide including one in Florence, Italy. Mr. Wells testified that he was certified and licensed as an appraiser in several states including New York.

He visited the site on one occasion for approximately an hour and one half in the summer of 2006. He stated that the team approach was utilized in the evaluation of the property as set forth in his appraisal. The team included an architect and three appraisers from the Florence office.

Mr. Wells testified that the property at issue was via Cassia 233-235 located approximately ten miles south of Florence, Italy in the municipality of Impruneta. It contained 57,740 square meters or approximately 14 1/4 acres. At the time of the decedent's death the property consisted of woodlands and grazing land together with about 3/4ths of an acre of vineyards. He further characterized it as being an agricultural-type property with various structures including two residential units, sheds, stables, and garages. The zoning of the property allowed its subdivision for residential units. Utilizing two comparable sales from the year 2000 he compared each of the important attributes of those properties to the corresponding features of the subject property. After making adjustments for location, size, life tenancy, topography, condition and utility Mr. Wells arrived at an appraised value of the subject premises as of September 10, 2000, the date of decedent's death, of $732,804.41.

Nevertheless Mr. Wells did concede that at the time of his inspection that the property had undergone considerable redevelopment since the death of decedent and was in the midst of being subdivided into nine residential units. Moreover he learned that a potential encumbrance of a tenant's life estate in a unit had already been resolved by the time of his appraisal. Furthermore he was aware that Marc Adams had sold the property on November 12, 2004 for $1,614,765.00. Wells conceded that these factors were elements of his analysis as to value. Additionally Marc Adams testified that the property abutted a four lane highway.

I find that the evidence produced by these objectants regarding the evaluation of the Italian property was credible and sufficient to shift the burden back to M & T to present further evidence that its account was accurate in this regard. This it failed to do. M & T relied solely upon the account as submitted.

Accordingly based upon all the credible evidence I find the value of the Impruneta property located at via Cassia 233-235 as of September 10, 2000 to be $625,750.00 and petitioner is directed to amend its account accordingly, including the distribution of assets to reflect this valuation of the Italian realty. [*4]

Supplemental Objections 2, 4, and 10 are each based upon the activities of M & T with respect to the IBM stock in this estate. The evidence disclosed that decedent owned 16,120 shares of IBM stock (hereinafter MSDW block) that was held in his account at Morgan Stanley Dean Witter. M & T was aware of this block of stock from the outset of its involvement with this estate. Robert Farrell, the M & T trust officer assigned to oversee this matter for M & T, determined early in 2001 that these shares should be sold to provide liquidity to meet the administrative expenses occasioned by the monetary size of the estate, (in excess of $5,000,000.00), to satisfy the right of election, and also since this block of stock constituted in his opinion an "over-concentration" in one company in a volatile market. Accordingly because of these concerns M & T sold the MSDW block in three increments with sales on February 28, 2001, March 7, 2001, and July 13, 2001.

It is hornbook law that there is not an arbitrary and rigid standard by which to measure the reasonable time within which an executor must convert assets into cash. It has long been the law of New York that reasonable time should be given and what is reasonable is to be determined by the circumstances existing in each case (Matter of Weston, 91 NY 502). A fiduciary needs to analyze the risks of the portfolio, the marketability of its holdings, its volatility and the prevailing market conditions (Matter of Janes, 165 Misc 2d 743, (revd on other grounds) 90 NY2d 41). In light of the credible evidence the Court finds that the actions of M & T were reasonable with respect to its disposition of the MSDW block.

The proof further disclosed that decedent owned an additional

16,120 shares of IBM (hereinafter second block) that M & T failed to discover until July 2004, almost four years after the death of John Clarke Adams and more than three years after M & T received its letters testamentary. This block of stock was acquired as a result of a stock split and was held by Equiserve, the transfer agent for IBM, in decedent's name. The dividends thereon were forwarded to Northern Trust Company which maintained a custodial account with respect to a revocable living trust that decedent had established with himself as its trustee.

Mr. Farrell admitted that he knew that this second block of stock existed by April or May of 2001 but he assumed it was not an estate asset. He conceded that he took no action to ascertain its status and essentially ignored its existence. He made no inquiries in this regard of any Adams family member, IBM, Equiserve or Northern Trust Company.

Mr. Farrell did testify that in January 2001 he obtained a box of records purporting to set forth the assets of decedent from Attorney Grinnals who had received the same from Peter Adams. Simultaneously Farrell also obtained decedent's income tax records [*5]and returns from his accountant. The data from Grinnals included numerous financial account statements from Northern Trust Company that disclosed under "miscellaneous receipts" that it was receiving quarterly dividends from the IBM stock and also listed the assets of the trust which did not reference any IBM shares as a trust asset. The tax records also referenced IBM dividends. Merely dividing the IBM dividend total by the IBM dividend rate would have disclosed the number of IBM shares generating this dividend.

On June 21, 2001 Mr. Farrell wrote a letter (Exhibit 23) to the Adams advising them "that the executor has completed the inventorying of all disclosed probate assets of John Clarke Adams". However it was the duty of M & T as executor to discover and marshal all probate assets and not merely those that may have been disclosed. Moreover M & T was obliged to do so promptly. Even if others were non-cooperative or erected roadblocks in this regard M & T itself was bound to fulfill this obligation. (see generally 5 Warren's Heaton, Surrogate's Court Practice § 62.02 [Seventh Edition]). It is elemental that the failure of a fiduciary to properly search for and locate discoverable estate assets constitutes negligence.

The evidence further disclosed that M & T prepared a Form 1041 worksheet (Exhibit 19) that set out in detail all income attributable to this estate from September 11, 2000 to May 31, 2001. Included in this exhibit was data which disclosed that there was no stock in IBM among the trust assets held in the Northern Trust Company account. Nevertheless this exhibit too set forth, under the heading "Dividend Income", the receipt of IBM dividends by Northern Trust Company. Mr. Farrell admitted that he saw this dividend entry and he himself noted on the exhibit "picked up twice?". He then conceded that he did nothing further to ascertain the answer to his own question. Instead of relying on his unfounded assumption that this dividend had been generated by a trust asset, a simple inquiry to IBM, the issuing corporation, would have then revealed the existence of the second block of stock as an estate asset at that time rather than three years later.

EPTL § 11-2.3(b)(6) provides that a bank which acts in a fiduciary capacity must "...exercise such diligence in investing and managing assets as would customarily be exercised by prudent investors of discretion and intelligence having special investment skills". The Court concludes that the conduct of M & T with respect to the second block did not comply with this statutory mandate. The same rationale set forth hereinabove that justified M & T's disposition of the MSDW block is applicable to this second block which the Court finds should likewise have been sold by July 13, 2001. In this regard it must be borne in mind that this is not a case solely of a negligent retention of stock that should have been sold but rather the failure of the fiduciary in the first instance to promptly marshal estate assets. The failure of M & T to [*6]do so was imprudent.

Under these circumstances the damage sustained by the objectants is determined by calculating the income that would have been generated by the proceeds of the sale of the second block on July 13, 2001 and then reducing this amount by the income actually earned by the retained second block(Matter of Saxton, 274 AD2d 110, 121). There is no dispute among the parties that the sale of the second block on July 13, 2001 would have produced proceeds of $1,639,356.00. The parties likewise agree that the dividends paid on the second block during this period amounted to $87,854.00 (see Exhibits 42,43,44,45,45a, and 119). The parties are also in accord that the interest rate to be applied to determine the lost income is discretionary with the Court.

Objectants assert that the statutory interest rate of nine percent compounded annually applies, while petitioner maintains that damages, if any, should be determined by applying a M & T money market rate to the sale proceeds amount. On this record, the Court, in the exercise of its discretion (CPLR 5001(a)), determines that the proper standard to be applied is simple interest at the statutory rate of nine percent. Accordingly petitioner is surcharged $797,921.00 through November 27, 2007 in this regard (see Ex 45a).

As a result of the delayed disposition of the second block the estate had to file amended Federal and State Estate Tax returns. Schedule J of the account reflects that this resulted in an interest payment to Internal Revenue Service of $68,283.70 as well as an interest payment to the New York State Commissioner of Taxation and Finance of $19,496.94 on November 22, 2004. On Schedule J M & T proposes to reimburse the estate for the interest thus incurred minus a credit for the money market earnings on the interest amount to November 22, 2004 in the sum of $20,266.35. In reliance upon IRS Code § 2053(a)(2) M & T seeks an additional credit against the interest paid pursuant to the amended returns in the sum of $48,279.38 based upon the interest deductions occasioned thereby on the estate tax returns. The end result is that M & T grants a net offset of $19,234.91 against its executor's commission.

Supplemental Objection 18 contests the Schedule J computation and seeks to recover the interest incurred by the estate with respect to the amended estate tax returns together with statutory interest thereon to the date of reimbursement by M & T.

Based upon this record the Court finds that the adjustments made by M & T herein, and as set forth on Schedule J of the account, put the estate in the monetary position that would have occurred had the estate tax attributable to the second block been timely paid. There was no credible evidence presented that proved to the contrary any other monetary damage to the estate in this regard. Accordingly Supplemental Objection 18 is dismissed. [*7]Nevertheless M & T is directed to amend Schedule I of its account to reflect the $19,234.91 offset to its commissions.

Supplemental Objection 9 seeks to deny all commissions to M & T in this matter. It is well established that "in the absence of mathematical error in the computation of commissions or allegations of fiduciary misconduct", Surrogate's Court must award executor's commissions (SCPA 2307; Matter of Reohr, 71 AD2d 161). Indeed the denial of commissions is not within the Court's discretion unless the fiduciary has been found "derelict in the performance of his or her duties" (Matter of Smith, 91 AD2d 789), guilty of "complete indifference" (Matter of Schaich, 55 AD2d 914, lv denied 42 NY2d 802) or "bad faith" (Matter of Acher, 128 AD2d 867). In the opinion of the Court the imprudence of M & T does not rise to such level as to mandate the denial of its commissions, especially in light of the surcharges that have been assessed against it herein. Supplemental Objection 9 is therefore dismissed.

Each of the objectants filed objections to the account regarding 1) payment by the executor of fees to Price Waterhouse Coopers for tax preparation on behalf of the estate; 2) the reimbursement of taxes paid to Northern Trust Bank in the amount of $23,240.00; and 3) the failure to account for certain dividends on shares of Mattel, Inc. and H. J. Heinz Company that remain uncollected. Furthermore each objectant, except Marc Adams, objected to the valuation set forth in the account for the decedent's personalty located at the Italian premises as well as the payment of Italian real estate taxes and maintenance fees incurred with respect to the Italian realty after the death of decedent. No proof was presented as to any of these objections. However in post trial briefs objectants assert that these objections as a matter of law need no proof.

It is again noted that the accounting party has the burden of proving by a preponderance of the evidence that the account is accurate and complete. This burden may be met, prima facie, by the fiduciary merely testifying that the account is true, complete and accurate and it then becomes incumbent upon objectants to establish any shortcomings in the account (see Estate of Russell, NYLJ, Feb. 10, 1998, at 31 col 1). Petitioner supplied such testimony and its account was received in evidence, thereby satisfying its burden.

There can be no question but that an objection is a pleading (SCPA § 302(a)). It is likewise elemental that pleadings are not proof and must be established through competent evidence. (Small v. Sullivan, 245 NY 343, rearg denied 245 NY 621; Matter of Kipfer, Surrogate's Court, Onondaga County, Wells S., file no 98-1101, aff'd 306 AD2d 829). Inasmuch as no proof was presented as to Supplemental Objections 3, 5, 6, 7, and 11, the same are hereby dismissed.

Petitioner asserts that any recovery attained by objectants must be reduced by an application of the pro tanto rule since [*8]neither decedent's spouse nor her estate interposed any objection to its account. In response objectants assert that there is no party who has an interest in this estate who is not now before the Court. They further maintain that the spouse or her estate would be a "nominal party" elevating form over substance since objectants are the beneficiaries of the deceased spouse's estate.

The Court notes that Helen Hendricks Adams, the surviving spouse of decedent, filed a right of election pursuant to EPTL § 5-1.1-A with the Court on May 14, 2001. Her exercise of the right of election was not opposed by any parties interested in this estate. Thereafter a Decree approving the application to exercise said right of election was filed with the Court on April 16, 2002, more than three years prior to petitioner submitting this account.

The April 16, 2002 Decree, which was drafted by counsel for petitioner herein, provided that "....exercise of her Right of Election is granted in all respects, and as it pertains to the Estate of John Clarke Adams it is granted in the amount, and under the conditions herein above stated...." (emphasis added). The condition stated in said Decree was:

And the amount due and owing the Petitioner

[Helen Hendricks Adams], pending review, revision and Court approval of the final accounting of the Estate of John Clarke Adams is $1,452,383.42, said amount reflecting an additional agreed deduction of $75,000.00 to be held in escrow by M & T Bank, with $75,000.00 in estate funds, as a contingency for changes revealed by a Court approved accounting.

(emphasis added).

Implicit in this language is the fact that the parties agreed that the final right of election amount was dependent upon the resolution of the accounting in the John Clarke Adams estate. To apply the pro tanto rule under these circumstances would result in this petitioner being unjustly enriched and accordingly the Court declines to do so.

Any objections or parts of objections not specifically addressed herein are dismissed for failure of objectants to sustain their burden of proof with respect thereto (Matter of Curtis,

16 AD3d 725).

This Decision shall serve as the Order of this Court in this proceeding.

Dated: September 9, 2008____________________________

Peter N. Wells,

Surrogate [*9]