Surrogate's Court, Monroe County, April 6, 2022

Kroll Law Firm, LLP, Rochester (Marcus W. Kroll of counsel), for Richard Maloy and another, petitioners.

Finger Lakes Legal, Victor (Michael A. Rose of counsel), for Charles T. Maloy, respondent.

Pullano & Farrow, PLLC, Rochester (Christian Valentino of counsel), for Canandaigua National Bank, respondent.

Richard Maloy and Laurie Maloy, two of the three contingent remainder beneficiaries under a trust created by their late mother, Ann B. Maloy, brought a proceeding by way of a verified petition seeking to hold the executor of their mother's estate, Charles T. Maloy,^[FN1] liable for breach of fiduciary duty for allowing estate funds to "lay fallow," i.e., uninvested, in an account that should not only have been actively invested but turned over to the trustee of the trust created by their mother's last will and testament. Damages are sought equal to what the account value would be if it had been invested, plus statutory interest.

Responding to the petition, Charles as executor filed an answer with affirmative defenses, and [*2]then an amended verified answer,^[FN2] claiming among other things that he had dementia at the time he was appointed which worsened and that he could not function as executor.{**75 Misc 3d at 393}

Petitioners now move for summary judgment awarding them the relief requested in the petition and dismissing the affirmative defenses.

For the reasons below the petitioners' motion for summary judgment is granted, the affirmative defenses are dismissed, and the executor Charles T. Maloy is surcharged and held liable for damages for breach of fiduciary duty. Damages will be set at a hearing.

Requirement of a Statement of Material Facts

As a preliminary matter, the court needs to determine whether the parties are required to file a statement of material facts pursuant to Uniform Rules for Trial Courts (22 NYCRR) § 202.8-g and what consequence follows from the failure to do so.

That section provides that a party moving for summary judgment shall attach "to the notice of motion a separate, short and concise statement, in numbered paragraphs, of the material facts as to which the moving party contends there is no genuine issue to be tried" (Uniform Rules for Trial Cts [22 NYCRR] § 202.8-g [a]).

The facts in each numbered paragraph are "deemed to be admitted unless specifically controverted by a correspondingly numbered paragraph in the statement required to be served by the opposing party" (Uniform Rules for Trial Cts [22 NYCRR] § 202.8-g [c]).

[1] Here, presumably pursuant to that section, the petitioners—a moving party—filed a statement of material facts. The respondent (the executor) did not file a responsive statement. Thus, the facts set forth in the petitioners' statement would be "deemed to be admitted" if the rules regarding service of a statement of material facts were to apply to motions in surrogate's court.

Surrogate's Court Procedure Act § 102 states, "The CPLR and other laws applicable to practice and procedure apply in the surrogate's court except where other procedure is provided by this act." Practice commentary explains that the "order of priority" in surrogate's court practice is "the SCPA first, including rules that implement the SCPA; then the CPLR; and, last, rules that do not conflict with either the SCPA or CPLR" (Deborah S. Kearns, Practice Commentaries, McKinney's Cons Laws of NY, SCPA 102).{**75 Misc 3d at 394}

Uniform Rules for Surrogate's Court (22 NYCRR) § 207.7 (e) (Service and filing of papers; motions) states that a "moving party" shall serve "affidavits and briefs upon all other parties" and that "[a]ffidavits shall be for a statement of the relevant facts." This rule mirrors the requirements of CPLR 3212 (b), which states that motions for summary judgment shall be supported by "affidavit" which "shall recite all the material facts."

 As the requirements of Uniform Rules for Trial Courts (22 NYCRR) § 202.8-g supersede the plain language of CPLR 3212 with regard to the required submissions on a motion for summary judgment, and as the purpose of the rule requiring a statement of material facts is to "vindicate substantial judicial economy interests for both bar and bench" (Amos Fin. LLC v Crapanzano, 73 Misc 3d 448, 452 [Sup Ct, Rockland County 2021]), an interest no less beneficial to surrogate's court practice than [*3]to civil practice in supreme court,^[FN3] and since there is in the Surrogate's Court Procedure Act no comparably specific procedure to the requirement of a statement of material facts, it is held that the provisions of Uniform Rules for Trial Courts (22 NYCRR) § 202.8-g apply to motions for summary judgment in surrogate's court.

Because this appears to be a matter of first impression (the court could find no case addressing the issue), and no clear direction is provided by the relevant statutes, the respondent here, Charles T. Maloy, will not be held to have admitted the facts set forth in the moving party's numbered paragraphs, despite not having submitted his own statement of material facts.

Facts

Regardless, the following facts are undisputed.

Ann Maloy died on June 8, 2013, survived by her husband, Charles T. Maloy, and children Richard B. Maloy, Laurie Maloy Sheller, and William J. Maloy, III. The children are the issue of Ann Maloy and her predeceased husband, William J. Maloy II (cousin of Charles T. Maloy).

In her last will and testament, Ann named Charles as the executor of her estate.

She directed her residuary assets to pass into a trust, entitled the "Charles T. Maloy Trust Under the Will of Ann B. Maloy ('the Trust')," for the benefit of her husband Charles, with the remainder of the assets upon his death to pass one third to{**75 Misc 3d at 395} Richard, one third to a trust for the benefit of Laurie, and one third to a trust for the benefit of William III.

By decree dated June 26, 2013, the will was admitted to probate and letters testamentary were issued to Charles T. Maloy and letters of trusteeship were issued to the Canandaigua National Bank (CNB).

On January 15, 2014, Charles filed an inventory of assets, and on July 28, 2015, he filed a petition for judicial settlement of Ann's estate, which resulted in this court issuing a decree judicially settling the estate on December 16, 2015.

On November 2, 2020, Charles filed with the court an "Affidavit to Reopen (Ann's) estate," in which he stated that he had "just learned" that "the funds" in the estate account "were never transferred to the Ann B. Maloy Testamentary Trust, the residuary beneficiary of the Estate,"^[FN4] and requested that the court issue "a current certificate of Letters Testamentary."

The account holding the funds was an estate account held in the executor's name as fiduciary and had a CNB account number ending in 2892. Its value was $152,658.88 at the time the affidavit was filed in 2020. On December 9, 2020, the sum of $151,378.88 was transferred to Canandaigua National Bank and Trust Company.

Standard on a Motion for Summary Judgment

It is well-settled that the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact necessitating a trial (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; 2006905 Ontario Inc. v Goodrich Aerospace Can., Ltd., 197 AD3d 1008 [4th Dept 2021]; Oddo v City of Buffalo, 159 AD3d 1519, 1520 [4th Dept 2018]). The failure to make such prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers. (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; CPLR 3212 [b]; see also Malamas v Toys "R" Us-Delaware, Inc., 94 AD3d 1438, 1438 [4th Dept 2012] [a moving party must affirmatively demonstrate the [*4]merits of its cause of action or defense and does not meet its burden by noting gaps in its opponent's proof].)

Proof offered by the moving party must be in admissible form. Further, the evidence should be viewed in the light most{**75 Misc 3d at 396} favorable to the party opposing the motion. (See Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; Dix v Pines Hotel, 188 AD2d 1007, 1007 [4th Dept 1992].) Once a prima facie showing has been made, however, the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form, sufficient to establish the existence of material issues of fact which require a trial of the action (Alvarez, 68 NY2d at 324; Mortillaro v Rochester Gen. Hosp., 94 AD3d 1497 [4th Dept 2012]). Conclusory and speculative assertions are insufficient to defeat a motion for summary judgment (Trahwen, LLC v Ming 99 Cent City #7, Inc., 106 AD3d 1467 [4th Dept 2013], lv dismissed 21 NY3d 1066 [2013]).

A summary judgment motion "shall be granted if, upon all the papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party" (CPLR 3212 [b]).

Standing

[2] The petitioners devote considerable time in their submissions to the proposition that they have standing to bring this action. As the respondent Charles T. Maloy did not raise standing as a defense in his answer, the petitioners are deemed to have standing as remaindermen of the Charles T. Maloy Trust to allege breach of fiduciary duty on the part of the executor, who had a duty to transfer assets into the trust (see 9 Warren's Heaton on Surrogate's Court Practice § 111.09 [2] [2022] ["When a defendant does not challenge a plaintiff's standing, the plaintiff is not required to, nevertheless, demonstrate that it is the proper party to seek the requested relief. . . . To the extent that the defendant fails to address the issue, the defense is waived pursuant to CPLR 3211(e) . . . inasmuch as he had failed to raise it at the appropriate time"], citing Downey Sav. & Loan Assn., F.A. v 162 Grand Newburgh LLC, 27 Misc 3d 674 [Sup Ct, Kings County 2010]).

Even if Charles had raised standing as an issue, it would not have availed him. As the remaindermen of a marital trust into which was to be poured residuary assets from an estate, the petitioners have standing to question the actions by the fiduciary (SCPA 2205 [2] [b]; Benjamin v Morgan Guar. Trust Co. of N.Y., 163 AD2d 135, 137 [1st Dept 1990]; Matter of Wadsworth, 158 AD2d 919, 920 [4th Dept 1990]).{**75 Misc 3d at 397}

Breach of Fiduciary Duty

[3] Turning to the issue of whether the respondent breached his fiduciary duty, the petitioners have established their entitlement to judgment as a matter of law.

"Fiduciaries may not permit funds in their possession to lie fallow, if they are not required for the payment of claims or expenses and are not necessary for distribution within a reasonably short time" (Matter of d'Espinay-Durtal, 4 AD2d 141, 142 [1st Dept 1957] [ancillary executor to be surcharged for his neglect]; see also Cooper v Jones, 78 AD2d 423 [4th Dept 1981] [executor should be surcharged for loss of interest by allowing cash to remain in a non-interest bearing account]).

"To obtain . . . a surcharge, it is not enough for the contestants to show that the representatives of the estate did not get the highest price obtainable; it must be shown that they acted negligently, and with an absence of diligence and prudence which an ordinary [person] would exercise in his [or her] own affairs" (Matter of Billmyer, 142 AD3d 1000, 1002 [2d Dept 2016]).

The respondent admits in his answer that as fiduciary he created an estate account at Canandaigua National Bank bearing account number 2892. After the sale of the marital residence he shared with the decedent, the respondent acknowledges that he deposited the sale proceeds of approximately $152,684.88 into that account. The December 2015 decree of judicial settlement directed the [*5]respondent to pay the assets in the account to CNB for inclusion in the trust, thereby imposing upon the respondent as fiduciary an obligation to collect that asset. He admits he did not, but rather, allowed them to sit uninvested.

Having shown by admissible evidence that the fiduciary utterly neglected the funds in the estate account, the petitioners have established their entitlement to judgment as a matter of law, and a surcharge for breach of fiduciary duty is appropriate.

The burden thus shifting to the respondent Charles to raise a material issue of fact, he has failed to do so.

He submits in opposition to the motion an attorney's affirmation which has attached an unsworn email from a physician who states that in 2014 he recalls seeing Charles and felt that he had exhibited "mild cognitive deficits." Even if the statement were admissible, which it isn't as it is unsworn (see CPLR 2106; Cook v Peterson, 137 AD3d 1594, 1597 [4th Dept 2016];{**75 Misc 3d at 398} Feggins v Fagard, 52 AD3d 1221, 1223 [4th Dept 2008]), it would be inadequate to exonerate Charles from his responsibilities as executor.

It has been held (in the context of a Mental Hygiene Law art 81 proceeding) that a person's incompetency relieves responsibility for a transaction only if "the person's mind was so affected as to render him [or her] wholly and absolutely incompetent to comprehend and understand the nature of the transaction" (Matter of Mildred M.J., 43 AD3d 1391, 1392 [4th Dept 2007] [internal quotation marks omitted]). "Moderate dementia" does not create a presumption "that a person suffering from dementia is wholly incompetent. Rather, it must be demonstrated that, because of the affliction, the individual was incompetent at the time of the challenged transaction" (id. [internal quotation marks and citation omitted]). It is noted that Charles had an attorney in 2015 who prepared the intermediate accounting and who presumably met with him and witnessed Charles signing the account.

Beyond the "mild cognitive deficits" apparently diagnosed by the physician, Charles T. Maloy Jr. also asserts that his father Charles T. Maloy was diagnosed with "Alzheimer's" and that somewhere between 2015 and 2020 his father "forgot about the account due to advancing Alzheimer's."

None of this raises a material issue of fact. Charles T. Maloy Jr.'s assertions about the mental capacity of his father, the executor, are inadmissible. They lack foundation, context and specifics, and are merely speculative. No details of his father's illness are given—such as, "I remember my father kept repeating things," or "my father at that time could not read documents," or "my father could not recall names and faces of friends." Thus, the purely conclusory assertion of lack of mental capacity cannot stand to defeat the motion for summary judgment. "[M]ere conclusory statements without factual substantiation are insufficient to withstand summary judgment" (Matter of Coons, 161 AD2d 930, 931 [3d Dept 1990]; see also Trahwen, LLC v Ming 99 Cent City #7, Inc., 106 AD3d 1467 [4th Dept 2013], lv dismissed 21 NY3d 1066 [2013]).

Separately, even if accepted as true, there is no authority for the proposition that an executor's diminishment of mental capacity, after his appointment as fiduciary, exonerates his mishandling of estate assets. To that end the petitioners have moved under CPLR 3211 (b) to dismiss the first and second affirmative defenses, which allege lack of mental capacity, as having on their face no merit.{**75 Misc 3d at 399}

A party moving pursuant to CPLR 3211 (b) for an order dismissing an affirmative defense bears the burden of demonstrating that the defense is without merit as a matter of law (Santilli v Allstate Ins. Co., 19 AD3d 1031 [4th Dept 2005]). In deciding a motion to dismiss a defense, the respondent "is entitled to the benefit of every reasonable intendment of the pleading, which is to be liberally construed. . . . A defense should not be stricken where there are questions of fact requiring trial" (534 E. 11th St. Hous. Dev. Fund Corp. v Hendrick, 90 AD3d 541, 542 [1st Dept 2011] [citations omitted]).

The first and second affirmative defenses allege lack of mental capacity. Even assuming Charles [*6]as executor was incompetent in 2015, the point at which he should have transferred the funds to the trust, his lack of mental capacity does not raise a meritorious defense to the claim of breach of fiduciary duty. As ably argued and briefed by counsel for the petitioners (and reproduced here), there is ample precedent in the English common law and century-old American case law supporting the imposition of civil liability for tortious conduct upon an individual who allegedly suffers from diminished capacity (see e.g. Weaver v Ward, [1616] 80 Eng Rep 284 [KB]; Williams v Hays, 143 NY 442, 448 [1894], citing Shearman & Redfield on Negligence § 57 ["Infants and persons of unsound mind are liable for injuries caused by their tortious negligence; and, so far as their responsibility is concerned, they are held to the same degree of care and diligence as persons of sound mind and full age. This is necessary, because otherwise there would be no redress for injuries committed by such persons"]; see also Worwa v Vann, 231 AD2d 849 [4th Dept 1996] [Fourth Department rejected the contention that defendant may not be held liable in negligence for conduct allegedly resulting from his withdrawal from prescription drugs]).

"Generally, under New York law, as a matter of public policy, a person disabled by reason of mental illness . . . is held to the standard of care which would be exercised by a normal and reasonably prudent person under the same circumstances. An insane person is generally liable for his or her torts, except as to certain torts requiring malice or scienter as a necessary element. Insanity is otherwise not a defense." (Kreindler et al., New York Law of Torts § 19:39 [16 West's NY Prac Series, Aug. 2021 Update] [internal footnote references omitted].){**75 Misc 3d at 400}

The respondent's mental state or capacity is not relevant to his liability for any damages sustained as the result of his admitted failure to marshal the bank account at issue. The petitioners satisfied their burden of demonstrating, prima facie, that the respondent's affirmative defenses are without merit as a matter of law, and the respondent has not rebutted the contention (see e.g. Lucas v J&W Realty & Constr. Mgt., Inc., 97 AD3d 642 [2d Dept 2012]).

Petitioners also move to dismiss the third and fourth affirmative defenses.

The third affirmative defense alleges that decedent Ann B. Maloy, in her last will and testament, included a clause directing that the nominated executor—Charles—as well as the trustee "shall not be liable for any losses or depreciation by or resulting from the retention."

It is a matter of statutory authority that such a clause is "void as against the public policy of this State" (In re Estate of Rimland, 2003 NY Slip Op 50966[U], *5 [Sur Ct, Bronx County, June 3, 2003], citing EPTL 11-1.7, Matter of Stralem, 181 Misc 2d 715 [Sur Ct, Nassau County 1999], and Matter of Allister, 144 Misc 2d 994 [1989]).

In the fourth affirmative defense, respondent asserts that Ann's last will and testament contains a clause at paragraph "X" that is essentially an in terrorem clause that provides that a beneficiary shall cause his benefits to be revoked if he "institutes any proceeding to prevent any provisions thereof from being carried out in accordance with its terms" and that "each benefit conferred herein is made on the condition precedent that the beneficiary share, accept, and agree to all of the provisions of the Last Will and Testament."

Somehow, the respondent argues, the instant petition violates this clause. It clearly does not. An in terrorem clause is "designed to prevent attacks on the validity of a will and . . . [does] not come into play where the issue is whether a fiduciary nominated in the will is qualified to serve in that capacity" (In re Estate of Rimland, 2003 NY Slip Op 50966[U], *5, citing Matter of Stralem, 181 Misc 2d 715).

Accordingly, executor Charles T. Maloy breached his fiduciary duty in failing to turn over to CNB as trustee residuary assets of Ann B. Maloy's estate under his control. He was directed to do so in this court's judicial decree of settlement{**75 Misc 3d at 401} dated December 16, 2015, yet he did not transfer the assets until [*7]five years later, in December of 2020. The undisputed facts thus establish the petitioners' entitlement to judgment as a matter of law and the fiduciary is to be surcharged in an amount to be determined. The petitioners' motion for summary judgment is granted.

The petitioners' motion pursuant to CPLR 3211 (b) dismissing the respondent's affirmative defenses is granted.

Any additional relief requested by the respective parties but not specifically addressed herein is denied. A hearing is directed for the respective parties to submit proof of damages.