In the Matter
of the Petition of Eleanor Dietz as the Administratrix of the Estate of Dominic Swaldi,
Deceased.
|
2012-3062/A & /B
ARCANGELO J. PETRICCA, ESQ.
Attorney for Administrator,
Eleanor Dietz
GERALD J. VELLA, ESQ.
Attorney for Robert
Swaldi
Barbara Howe, J.
Decedent died intestate on June 2, 2012, survived by seven siblings and the three
children of a pre-deceased sister. His sister, Eleanor Dietz [hereafter, "Eleanor"], was
appointed administrator of the estate on October 1, 2012.
On January 29, 2014, Eleanor filed a petition pursuant to SCPA 2103, seeking discovery
from decedent's brother and former attorney-in-fact, Robert Swaldi [hereafter, "Robert"].
The petition also seeks return to the estate of decedent's assets which Eleanor contends
Robert improperly used and has retained (in whole or in part). Eleanor puts the amount
of the estate's claims against Robert at approximately $380,000 >SUP<>A HREF=#1FN
NAME="1CASE"<>B<]FN1[>/B<>/A<>/SUP<
, and she seeks interest against him from December 4, 2008. Robert filed an answer to
the petition on June 23, 2014, essentially disclaiming any liability to the estate.
In September, 2014, Eleanor filed a motion for summary judgment, limiting her request
to recovering the nearly $380,000 amount (at this time). Robert has filed answering
papers opposing the motion, to which the estate ultimately replied. The motion is now
finally submitted, and I find and decide as follows.
(I)
Decedent was admitted to the Erie County Medical Center [hereafter, ECMC] in
November, 2008, "in an increasingly confused mental state." He was diagnosed with
dementia, stabilized, and transferred to the Erie County Home (which was part of
ECMC's operations). See [*2]September 8, 2009 petition
of ECMC to have a guardian appointed for decedent [Supreme Court file
#SF2009-902083, of which I take judicial notice (see Schmidt v. Magnetic Head,
97 AD2d 151, 158, fn 3 [1983])].
On December 4, 2008, while in an ECMC
facility, decedent executed a statutory power of attorney [POA] appointing Robert as his
attorney-in-fact. The POA granted Robert broad powers, including a power to make
gifts.[FN2]
On April 11, 2009, Robert cashed in a GMAC demand note owned by decedent in the
amount of $517,906.08. Robert then deposited those funds into a Union National Bank
[hereafter, "UNB"] checking account held jointly by him and decedent.[FN3]
It is undisputed that Robert made several gifts with the UNB checking
account funds, as documented in an account ledger kept by him. On May 5, 2009, he
gifted $25,000 to "Brian and Amber Swaldi." On May 7, 2009, Robert took a total of
$339,583.98 to pay off his own mortgage.[FN4]
On July 31, 2009, Robert gifted $9,200 to a "William Neilson," and on September 1,
2009, he gifted $5,500 to a "Mr. Seibert." These gifts total $379,283.98.
In
September, 2009, ECMC filed a Mental Hygiene Law article 81 petition in Erie County
Supreme Court seeking the appointment of a guardian for decedent.[FN5]
On September 10, 2009, Supreme Court [Sedita, Jr., J.] appointed Arcangelo Petricca,
Esq. as temporary guardian of decedent's personal needs and property, and thereafter
made the appointment permanent. Petricca requested an accounting of decedent's assets
from Robert, but that was apparently never provided.
On October 20, 2009,
Justice Sedita conducted a record proceeding, at which both Robert and decedent spoke.
When Justice Sedita asked Robert about the location of decedent's money, the following
exchange occurred:
"Q. Where is the money, Mr. Swaldi. Mr. Robert Swaldi,
where is this man's money? Cut right to the chase.A. I have a complete list here.
Q. Mr. Swaldi, in a prior proceeding, Mr. Robert Swaldi, Mr. Dominic Swaldi told
me he never gave permission to do the things that you did and, in fact, he asked you for
the money back [*3]and you didn't give to him.
A. My brother —
Q. That's what he said last hearing."
Robert then stated that decedent had given him permission to use the money:
"A. He also said to help yourself, help your family.Q. Help yourself out with his
money.
A. He told me that. He said because he didn't want the lawyers and the state to get
it."
At this point, decedent interjected and stated:
"No, I didn't say anything like
that."
Robert was later asked again by the Court what he had done with decedent's
money:
"Q. You took $500,000 from him?A. I have a complete list
here.
Q. Here is a complete list? . . . This is the list of what you paid?
A. Yes, Your Honor.
Q. Okay. You say you paid a — a note on his car for $1,000? Is that right?
A. Yes.
Q. What happened to $33,918, what's that, Wachovia Bank, what's that all
about?
A. That was a new account I started.
Q. Yeah, you took — you sold Reynolds stock and you put $33,000 in your
account.
A. Yes, sir.
Q. Then a checking account from Wachovia, these are the assets you took 5,000
bucks, right?
A. Right.
Q. Then Union National Bank there was $517,000.
A. Right.
Q. And what did you do with that $517,000?
A. I paid off my mortgages.
Q. You paid off the mortgage where?
A. On my home.
Q. Why would you pay off a mortgage - - that's the - - that's the bulk of his estate,
right?
A. No, there's a little over - -
Q. Why would you take $517, 000 - -
A. He said - -
Q. - - pay the mortgage off on your home, how does that benefit him?
A. He says there's more than enough to help myself and still take care of his
needs" (emphasis added).[FN6]
On May 10, 2010, Justice Sedita conducted an evidentiary hearing at which
decedent testified:
"MR. WEBB: Mr. Swaldi, do you know why we're here
today?THE WITNESS: Yes, I'll be blunt and firm and to the point. Your Honor, I'm
here because my brother tried to swindle my lifetime savings. I — that's all I
— Judge, I've got to say.
THE COURT: I'm here because someone swindled my lifetime savings, is that what
you said?
THE WITNESS: He's trying to swindle my lifetime savings.
THE COURT: Who's trying to swindle your lifetime savings?
THE WITNESS: Robert Swaldi. Never worked in a factory, never done any
employment.
THE COURT: You're talking about your brother, is that right?
THE WITNESS: Yeah, I'm talking about him.
THE COURT: Okay. Okay.
THE WITNESS: Yet he learned that I was — when I was working at Chevrolet
Tonawanda, I was depositing my paycheck being held by the company."
On September 10, 2010, Justice Sedita directed Robert to provide Petricca with an
accounting of decedent's assets. Rather than a formal accounting, Robert provided copies
of the UNB checking account ledger, copies of cashier's checks, and statements from
decedent's other banking and investment accounts.
(II)
(a)
The legal standards for deciding a motion such as that pending
before me are clear. Procedurally:
"Summary judgment may be granted only
where it is clear that no triable issues of material fact exists. (see, e.g. Alvarez v.
Prospect Hosp., 68 NY2d 320, [1986]; Phillips v. Joseph Kantor & Co.,
31 NY2d 307 [1972]). Because summary judgment is in derogation of the parties' right to
a jury trial, the rubric applied to the court's analysis had always been issue finding' rather
than issue determination' (Stillman v. Twentieth Century Fox Film Corp., 3
NY2d 395 [1957]). Therefore, it is incumbent on the Eleanor to make a prima facie
showing that he or she is entitled to summary judgment as a matter of law' (CPLR
3213[b]; Zuckerman v. City of New York, 49 NY2d 557 [1980]; Friends of
Animals v. Associated Fur Mfrs., 46 NY2d 1065 [1979]). The papers submitted in
support of and in opposition to the motion are scrutinized in a light most favorable to the
party opposing the motion (Robinson v. Strong Memorial Hosp., 98 AD2d 976
[1983]). If there is any doubt as to the existence of a triable issue of fact, then the motion
must be denied. (Id.)To defeat a motion for summary judgment, the opponent
must assemble and lay bare affirmative proof to demonstrate the existence of a genuine
triable issue of fact. (Stainless, Inc. v. Employers Fire Ins. Co., 69 AD2d 27
[1979], aff'd 49 NY2d 924 [1980]). Allegations must be specific and detailed,
substantiated by evidence in the record; mere conclusory assertions will not suffice.
(Matter of Neuman, 14
AD3d 567 [2005]). Moreover, the court is required to search the record when it
is engaged in the process of issue finding. (Fullan v. 142 E. 27th St. Assocs., 1 NY3d 211 [2004];
Insurance A.G. v. Moor-Jankowski, 77 NY2d 235 [1991])." (Matter of Zirinsky, 10 Misc 3d
1052[A] [2005], emphasis added, aff'd 43 AD3d 946 [2007]; see also Matter of Colverd, 52
AD3d 971 [2008]).
The issue, thus, is whether Eleanor has established her prima facie entitlement to
a summary judgment as a matter of law, and, if so, whether Robert has raised one or
more triable issues of material fact which would require denial of the motion.
(b)
Whether Robert can be found
to have misappropriated, illegally converted, fraudulently misappropriated, and/or
negligently managed and disbursed decedent's funds, as Eleanor alleges, is, in essence,
determined by whether he breached his fiduciary duties as decedent's attorney-in-fact.
General Obligations Law [GOL] §5—1505[2][a] currently in effect
[FN7]
provides that:
"An agent acting under a power of attorney has a fiduciary
relationship with the principal. . . . [An agent must] act according to any instructions
from the principal or, where there are no instructions, in the best interest of the principal
and to avoid conflicts of interest . . . The agent may not make gifts [of] the principal's
property to himself or herself without specific authorization in a power of attorney."
In considering the exercise of an attorney-in-fact's authority to make gifts under
section "M" of a pre-2009 POA similar to the one before me, our Court of Appeals, in Matter of Ferrara, 7 NY3d
244, 252-254 [2006], explained that:
"Section 5—1502M
construes this gift-giving authority to mean that the principal authorizes the agent . . .
[t]o make gifts . . . either outright or to a trust for the sole benefit of one or more of [the
specified] persons . . . only for purposes which the agent [*4]reasonably deems to be in the best interest of the
principal, specifically including minimization of income, estate, inheritance,
generation-skipping transfer or gift taxes' (General Obligations Law
§5—1502M [1] [emphasis added] ). . . . Thus, section 5—1502M
unambiguously imposes a duty on the attorney-in-fact to exercise gift-giving authority in
the best interest of the principal. . . . Section 5—1502M, the constructional
section governing gift giving, explains at subdivision (1) that authority to make gifts in
the best interest of the principal includes minimization of income, estate, inheritance,
generation-skipping transfer or gift taxes.' As this language shows, the purpose of the
gift-giving authority is to allow an attorney-in-fact to carry out the principal's intentions
to use gifts as part of a financial or estate plan, which will often involve taking advantage
of certain tax provisions. . . . In short, the Legislature sought to empower individuals to
appoint an attorney-in-fact to make annual gifts consistent with financial, estate or tax
planning techniques and objectives—not to create gift-giving authority generally .
. . . Finally, the best interest requirement is consistent with the fiduciary duties that courts
have historically imposed on attorneys-in-fact. [A] power of attorney . . . is clearly given
with the intent that the attorney-in-fact will utilize that power for the benefit of the
principal' (Mantella v. Mantella, 268 AD2d 852, 852 [3d Dept. 2000] [internal
quotation marks and citation omitted] ). Because [t]he relationship of an attorney-in-fact
to his principal is that of agent and principal . . . the attorney-in-fact must act in the
utmost good faith and undivided loyalty toward the principal, and must act in accordance
with the highest principles of morality, fidelity, loyalty and fair dealing' (Semmler v.
Naples, 166 AD2d 751, 752 [3d Dept.1990] [internal quotation marks and citations
omitted])" (emphasis added).
Thus, the law is clear that an attorney-in-fact
must act in the principal's best interest even when he or she is given gifting authority in a
POA. There is no dispute that the December 4, 2008 POA gave Robert broad powers,
including the power to make gifts, and there is likewise no dispute that Robert made gifts
to others and to himself. The central question is whether Robert acted in
decedent's best interest when he made those gifts.
In Eleanor's verified SCPA 2103 petition, she alleges the following in
paragraph 14:
"Attached as Exhibit F' are copies of two cashier's checks
dated May 7, 2009, one in the amount of $168,046.74 and one in the amount of
$171,527.24 which went to pay [Robert's] mortgage and funds came from Union
National Bank Account 114803201. [*5]Decedent
derived no benefit from these payments" (emphasis added).
Robert's June
23, 2014 verified Answer to the petition states, inter alia, that he "[a]dmits the
allegations contained in paragraph . . . 14". Thus, Robert has admitted under oath that he
used $339,583.98 in decedent's monies to pay off his own mortgages, and he has also
admitted that "[d]ecedent received no benefit from these payments."
Eleanor has established prima facie that Robert's use of decedent's funds for
himself provided no benefit to decedent. Indeed, no benefit to decedent is even
alleged by Robert. Rather, Robert's contention here is (a) that the POA gave him
unlimited gifting power, and (b) that decedent told him to use the money for Robert
himself and for Robert's family.
Robert relies solely on inadmissible
hearsay about what decedent allegedly told him. Moreover, to the extent Robert attempts
to justify his use of $339,583.98 in decedent's assets to pay off his own mortgage, he
does so only by statements from decedent which are barred by the so-called Dead
Man's Statute (see CPLR 4519). No other "proof" in this regard has been
submitted by Robert. Finally, I note that nothing Robert advances as to what decedent
told him has been submitted in sworn fashion, and, thus, cannot be considered for
any purpose.
In Matter of Ferrara, supra, at 254, our
Court of Appeals explained that an attorney-in-fact's claim that he made gifts "[i]n
furtherance of [decedent's] wishes" to give him "all of his assets to do with [it] as [he]
pleased" is not enough to meet the "best interest" requirement. Ferrara elaborated
by saying:
"The term best interest' does not include such unqualified
generosity to the holder of the power of attorney" (at 254).
I further find that Robert has provided no proof that his gift-making
pertained to financial, estate or tax planning for decedent's estate, or that it provided
any benefit to decedent. I conclude, therefore, that Robert has failed to raise any
triable issue of material fact.
Accordingly, I conclude that Robert breached
his fiduciary duties as decedent's attorney-in-fact, and that he misappropriated decedent's
funds in the amount of $379,283.98.
(c)
Turning now to
the issue of whether Robert must return funds to the estate, fiduciaries are accountable
for breaching their duties and courts have issued money judgments against them in the
amount of the improperly used funds. See, e.g., Matter of Babb, 36 Misc 3d 1209(A) [2012]
[directing an attorney-in-fact to pay decedent's estate all monies she withdrew from the
decedent's bank accounts and placed into her personal banking accounts], Matter of Francis, 19 Misc 3d
536 [2008] [setting aside an attorney-in-fact's transfers of a decedent's assets where
the attorney-in-fact failed to offer any evidence that decedent derived any benefit from
the transfers], and Matter of Zielinski, 208 AD2d 275, 280 [1995] [affirming a
money judgment against an attorney-in-fact in the amount of savings bond redemption
proceeds improperly gifted to herself].
I conclude, therefore, that Robert must repay the funds misappropriated by
him.
>/Head<[*6](III)
Accordingly, and for the reasons stated, I conclude that Eleanor's motion for
summary judgment must be, and it hereby is, granted, and Robert is directed to pay the
estate the sum of $379,283.98, together with interest thereon from the date each payment
out of decedent's funds which total to that amount was made, at the statutory rate of
interest.
This decision shall constitute the Order of this Court and no other or
further order shall be required.
DATED: March 25, 2015
BUFFALO,
NEW YORK
HON. BARBARA HOWE
Surrogate Judge
Footnotes
Footnote 1:The petition actually has
a range of improperly used assets, which go from roughly $380,000 to $517,000, and it
also includes a request for $1,000,000 to be assessed against Robert for allegedly
creating (or adding to) tax liabilities of decedent's.
Footnote 2:The gifting authority
under the POA permitted gifts, in effect, to family members "not to exceed in the
aggregate $12,000 to each of such persons in any year" (see paragraph M). That authority
was modified under paragraph P to permit gifts in excess of $12,000 per person
and to "mak[e] gifts to an acting agent".
Footnote 3:Robert's name was listed
as "Robert J. Swaldi, POA" on the checking account.
Footnote 4:Two cashier checks were
obtained for this purpose, one for $168,046.74 and the other for $171,537.24.
Footnote 5:ECMC's petition
discusses Robert's alleged improper use of the UNB checking account funds.
Footnote 6:In reviewing the
transcript of the October 20, 2009, proceeding, I can find nothing to indicate that either
decedent or Robert had been placed under oath when being questioned by the Court (or
otherwise).
Footnote 7:The POA statutory
provisions were completely revised by the laws of 2008 and made effective in 2009.
However, GOL §5-1505, containing general standards of care to be observed by an
attorney-in-fact, was expressly made applicable to any POA entered into prior to
the effective date of the new statute. Thus, these new standards apply to the December 4,
2008 POA given to Robert by decedent.