In connection with the final account of Orin A. McCluskey, as the sole surviving trustee of a trust created under the will of Allan S. Lehman, a motion for summary judgment has been filed by the trust beneficiaries and objectants, Susan Carmichael, Brooke Lehman and Sage Lehman, for an order sustaining objections numbered (2), (3), (4), (8), (9), (10), (11), (12), and (13) to the trustee's account. Along with opposition to the motion, the trustee has filed a cross-motion for partial summary judgment for an order dismissing objections (8), (9), (11), (12) and (13).

For the reasons set forth below, the motion is denied and the cross-motion is denied.

As noted in this court's previous decision issued on September 27, 2012 (Dec. No. 28040), the trust before the court was created under Article Tenth of the will of Allan S. Lehman (hereinafter, "decedent"), dated January 25, 1950. The will was amended by two codicils, dated [*2]October 3, 1950 and April 10, 1952. Decedent died on November 8, 1952.

Under his will, decedent created a trust for the lifetime benefit of his son, Orin Lehman (hereinafter, "Lehman"). Decedent also gave Lehman a testamentary power of appointment over the remaining principal contained in the trust at the time of his death. Lehman exercised this power in Article Fifth (A) of his own last will and testament, dated February 26, 2003.

Lehman died on February 22, 2008 and his will was admitted to probate by the Surrogate's Court of New York County. In exercising the power granted to him under decedent's will, Lehman appointed all of the principal and accrued and accumulated income of the trust created for his benefit to the trustees named under his own will, for the benefit of his children who survived him, with a further share for the issue of a predeceased child. The trustees named in Lehman's will were directed to pay one share outright to each of the testator's children who survived him and reached the age of 30.

All three of Lehman's children, Susan Carmichael, Brooke Lehman and Sage Lehman (hereinafter, "the objectants"), survived him and have attained the age of 30. The trust, which was to terminate upon Lehman's death on February 22, 2008, was thus to be divided into three equal shares, with one share to be distributed to each of decedent's children. The amended petition to settle the account reflects that the gross value of the trust principal and income was $8,893,803.32.

No distributions to the beneficiaries were made for more than one year following Lehman's death. Distributions were then made in 2009, 2011 and 2012.

Orin A. McCluskey (hereinafter, "the trustee") filed his account on January 20, 2011; it was amended on March 8, 2011. On July 18, 2011, the objectants filed thirteen objections to the account (the "objections").

The motion filed on behalf of the objectants seeks an order granting summary judgment, pursuant to SCPA 102 and CPLR 3212, sustaining the following objections:

1. As set forth in objection (2), finding the trustee liable for breach of his fiduciary duty to maintain complete and accurate trust records, with respect to Schedule A of the Account;2. As set forth in objection (3), finding the trustee liable for breach of his fiduciary duty as a result of his unreasonable delay after the termination of the trust at the death of the income beneficiary, on February 22, 2008, in winding up the trust administration and in making an expeditious distribution of trust assets to the remaindermen;

3. As set forth in objection (4), finding the trustee liable for negligence in failing within a reasonable time after the death of the income beneficiary to wind up the trust administration and to make an expeditious distribution of trust assets to the remaindermen, with respect to Schedule B of the Account;

4. As set forth in objection (8), finding the trustee liable for making payments as reflected in Schedule C of the account in the amount of $69,029.21 to "Frederick M. Sembler, Esq." for legal fees and disbursements on the grounds that such payments are not properly chargeable to the trust and/or are excessive and unreasonable;

5. As set forth in objection (9), finding against the trustee for any payments made or to be made to "Farrell Fritz PC" for legal fees and disbursements on the grounds that such payments are not properly chargeable to the trust and/or are excessive and unreasonable; [*3]

6. As set forth in objection (10), with respect to Schedule G of the trustee's account, finding the trustee liable for his negligent retention of a substantial portion of the $3,173,329.36 in "cash" and his continued failure to distribute a substantial portion of such "cash" to the remaindermen within a reasonable time after the death of the income beneficiary;

7. As set forth in objection (11), with respect to Schedule I of the trustee's account, finding against the trustee as to the proposed payment of the trustee of principal paying commissions of $58,763.90 on the grounds that the trustee is not entitled to such commission by reason of the trustee's breaches of trust;

8. As set forth in objection (12), with respect to Schedule I of the trustee's account, finding against the trustee as to the proposed payment to the trustee of an annual principal commission of $129,447.70 and annual income commissions of $4,473.51, on the grounds that the trustee is not entitled to such commissions by reason of the trustee's breaches of trust; and

9. As set forth in objection (13), finding the trustee liable with respect to his improper investment in and retention of the Windrush Fund, LP ("Windrush"), on the grounds that (a) the trustee was (and continues to be) the general partner of Windrush (see Schedule J, Item IV, page 4, of the account); (b) the trustee failed to obtain the remaindermen's consent to such investment; (c) any and all commissions claimed by the trustee based on the value of the trust's investment in Windrush are improper in that the trustee was the general partner of Windrush and, as such, was already receiving a "20 percent participation interest in profits" from the trust's investment in Windrush.

The motion asks that the court also enter the following further relief in favor of the objectants against the trustee: (a) awarding damages to the objectants by surcharging the trustee individually, for losses sustained by objectants in accordance with the objections; (b) awarding interest on the amount of the delayed distributions and on the amount of the improperly retained and currently held trust assets, reduced by the amount of the dividends and interest collected by the trustee during the applicable periods; (c) denying the trustee annual commissions and principal paying commissions; (d) denying compensation from the trust to Frederick M. Sembler for legal services rendered pursuant to the objections; (e) denying compensation from the trust to Farrell Fritz PC, and any other lawyer or law firm, including Kornstein Veisz Wexler & Pollard, for legal services rendered to the extent such services relate to the objections; (f) awarding statutory interest and costs; and (g) otherwise awarding damages to objectants with respect to the objections and denying such relief sought in the trustee's petition.

The motion is supported by the affidavit of Bruce A. Langer, with 42 exhibits attached; the affidavit of Paul C. Lambert, with 23 exhibits attached; a memorandum of law; the reply affidavit of Paul C. Lambert in further support of objectants' motion for summary judgment and in opposition to petitioner's cross-motion for partial summary judgment; and the objectants' reply memorandum of law in further support of motion for summary judgment and in opposition to petitioner's cross-motion for partial summary judgment.

The trustee's cross-motion seeks partial summary judgment in the trustee's favor, pursuant to SCPA 102 and CPLR 3212, dismissing objections (8), (9), (11), (12) and (13) (described above in paragraphs [4] through [10]) of the objections dated July 18, 2011.

The cross-motion is supported by the affidavit of the trustee with 14 attached exhibits; the [*4]affidavit of George Williamson ( a non-party who served as the investment advisor for the trust from 1980 until the Spring of 2009); the affidavit of Raymond Beplat (a trust professional from Wyoming who was engaged by counsel for the trustee to give his opinion as to the timeliness of the distributions made by the trustee); and a memorandum of law in opposition to the objectants' motion for summary judgment and in support of the cross-motion for partial summary judgment.

If the moving party meets his burden, the party opposing the motion must produce evidentiary proof in admissible form sufficient to establish the existence of a material issue of fact that would require a trial (see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). In doing so, the party opposing the motion must lay bare his proof (see Towner v Towner, 225 AD2d 614, 615 [2d Dept 1996]). "[M]ere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient" to overcome a motion for summary judgment (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; see Prudential Home Mtge. Co., Inc. v Cermele, 226 AD2d 357, 357-358 [2d Dept 1996]).

Objectants' motion before the court is based upon the trustee's alleged (A) failure to maintain records (objection [2]); (B) delay in distributing trust assets to the remaindermen (objections [3] and [4]); (C) payment of improper legal fees (objections [8] and [9]); (D) failure to invest trust assets (objection [10]); (E) breaches of trust so as to not be entitled to commissions (objections [11] and [12]); and (F) self-dealing (objection [13]).

(A) Failure to maintain records

The objectants claim, in objection (2), that the trustee failed to maintain adequate records in his fiduciary role. In support of this position, objectants point to the following questions and answers during their counsel's examination of the trustee:

Q: Is it your understanding that a trustee owes a legal duty to beneficiaries to keep clear and accurate records?

A; No.

Q: You don't have an understanding or you don't agree?

A: I don't have such an understanding. [*5]

Whether the trustee understands record keeping to be a legal duty may or may not be reflected in the actual records he kept; whether the trustee maintained adequate records is a question of fact. This portion of the motion for summary judgment is denied.

(B) Delay in distributing assets

Objectants maintain that the trustee's delay in distributing the assets to the beneficiaries after the termination of the trust upon Lehman's death was unreasonable. Due to market conditions, particularly in October of 2008, the assets substantially declined in value during the period from the decedent's date of death until the date the distributions began on March 6, 2009.

The New York State Legislature has not established a statutory time frame within which assets must be distributed upon the termination of a trust. Whether the timing of a trustee's distribution of assets upon termination of a trust is reasonable is a fact-sensitive determination which must take into account all of the relevant factors and surrounding circumstances, including the interests of the beneficiaries. In this particular instance, objectants claim that a period of thirteen months from date of death was unreasonable, as the trusts were not complicated and there were no legitimate reasons for an extensive delay. However, while it is possible that thirteen months might be determined to be an unreasonable delay, that determination is a triable issue of fact. As the moving parties have failed to demonstrate that they are entitled to summary judgment as a matter of law, the portion of the motion for summary judgment which pertains to objections (3) and (4) is denied.

(C) Payment of improper legal fees

In objectants' reply memorandum of law in further support of the motion for summary judgment and in opposition to the trustee's cross-motion for partial summary judgment, counsel for the objectants argues, with reference to objections (8) and (9), that the trustee must bear the burden of his own legal fees, which are not properly chargeable to the trust. In support of this position, counsel for the trustee cites Matter of Lasdon, (32 Misc 3d 1245A [Sur Ct, New York County 2011]), in which the court required that the trustee pay his own legal fees in connection with an unsuccessful defense of a charge of breach of trust. Lasdon is distinguishable from the present case in that Surrogate Glen's requirement that the trustee pay his own legal fees was imposed only after the court had ruled in favor of the objectants on the issue of the trustee's breach of fiduciary duty. The court also notes that the Surrogate in Lasdon permitted the trustee's reimbursement of reasonable legal fees expended in connection with the petition to compel the trustee to account (Matter of Lasdon, 32 Misc 3d 1245A [Sur Ct, New York County 2011]).

It is well established that the court bears the ultimate responsibility for approving legal fees that are charged to an estate and has the discretion to determine what constitutes reasonable compensation for legal fees rendered in the course of the administration of an estate (Matter of Stortecky v Mazzone, 85 NY2d 518 [2d Dept 1995]; Matter of Vitole, 215 AD2d 765 [2d Dept 1995], Matter of Phelan, 173 AD2d 621 [2d Dept 1991]). This remains true even in the event that the parties have consented to the requested fee (Matter of Stortecky v Mazzone, 85 NY2d 518, 525 [1995]; Matter of Phelan,173 AD2d 621, 622 [2d Dept 1991]. Inasmuch as SCPA 2307 (1) authorizes the payment of only those legal fees that are just and reasonable, the trustee will ultimately bear the burden of proving that the requested amount for legal fees represents expenditures that were necessary, fair, and reasonable.

The court denies that portion of the motion for summary judgment and that portion of the [*6]cross-motion which pertain to objections (8) and (9).

(D) Failure to invest trust assets

Objectants move for summary judgment on the issue of the trustee's retention of trust assets in cash and his failure to distribute the cash held in the trust. The proportion of trust assets which should have been held in the form of cash, as measured against assets otherwise invested, is a triable issue of fact. The court denies that portion of the motion for summary judgment and that portion of the cross-motion which pertain to objection (10).

(E) Breaches of trust so as to not be entitled to commissions

With reference to that portion of objectants' motion which seeks to deny the trustee commissions for the trustee's alleged failure to wind up the trust and distribute the trust assets, and that portion of the cross-motion which seeks to dismiss objections (11) and (12), pertaining to objectants' request for the denial of trustee's commissions, counsel for the objectants again cites Matter of Lasdon, (32 Misc 3d 1245A [Sur Ct, New York County 2011]), this time for the proposition that a court has the discretion to deny commissions when a fiduciary neglects the trust and acts indifferently toward the trust beneficiaries. In response, trustee's counsel maintains that he is entitled to his statutory commissions.

While the court has discretion to deny commissions, statutory commissions "must be awarded in the absence of mathematical error in their computation or allegations of misconduct amounting to dereliction, complete indifference or other comparable acts of misfeasance" (Matter of Drier's Estate, 245 AD2d 787, 788 [3d Dept 1997], lv denied 91 NY2d 812 [1997]). As there has not yet been a finding of misconduct, dereliction of duty, negligence, malfeasance or breach of trust, the court denies that portion of the motion for summary judgment which asks the court to deny the trustee statutory commissions, as it is premature, and also denies that portion of the cross-motion which seeks to dismiss the pertinent objections.

(F) Self-dealing

In objection (13), objectants ask the court to find the trustee liable for investing trust funds in Windrush. The cross-motion for partial summary judgment seeks dismissal of objection (13). Counsel for the objectants, in opposition to the cross-motion and in support of the motion for summary judgment, notes that the trustee revealed, in his June 24, 2011 deposition, that his firm, Equity Value Ventures, is the general partner and manager of Windrush, and received a 20% interest in the net profits of the limited partnership.

Counsel for the trustee concedes that Windrush is a limited partnership of which the trust and the trustee individually were two of the limited partners, and the trustee, in his individual capacity, was the general partner. The trustee invested $100,000.00 of trust funds in Windrush in December of 2002 and $150,000.00 in December of 2003. The trustee maintains that the investment was approved by Lehman, who was cognizant of the connection between Windrush and the trustee. Counsel for the trustee also maintains that Article Fourteenth of decedent's will grants the trustee broad investment powers and that the following language, contained in Article Nineteenth of decedent's will, specifically authorizes the investment of trust assets in entities in which the fiduciaries hold an interest:

"My Executors and Trustees are likewise authorized and empowered to deal with and to invest in the securities of any other firm or corporation in which my Executors and my Trustees or any of them may be interested either as a partner, stockholder, officer or director or otherwise, [*7]notwithstanding that my Executors and my Trustees or any of them may be so interested in such firm or corporation."

Whether the investment in Windrush was authorized by trust beneficiaries or by the decedent is not a question of law, but a triable question of fact. Nor has it been proven as a matter of law that the investment in Windrush resulted in a loss to the trust. The portions of the motion and cross-motion which pertain to the objection to the trustee's investment in Windrush are denied.

The objections and petitioner's responses thereto raise numerous disputed and material factual issues which cannot be resolved as a matter of law. Accordingly, the motion and cross-motion are denied.

Dated:June 28, 2013

EDWARD W. McCARTY III

Judge of the

Surrogate's Court