174 A.D.2d 331 | N.Y. App. Div. | 1991
—Order, Surrogate’s Court, New York County (Marie Lambert, S.), entered September 13, 1989, which, inter alia, granted respondents’ motion to dismiss petitioners’ application to compel respondents, trustees of the marital trust under the will of Khedoury A. Zilkha, to account for the period prior to September 1, 1973 or preclude petitioners from questioning the acts of respondents, as trustees, prior to that date, but granted petitioners’ application with respect to the period commencing September 1, 1973, and denied respondents’ motion to dismiss for lack of standing and on the basis of the applicable statute of limitations, unanimously affirmed, without costs or disbursements.
In 1957, the trustees decided to sell one of the trust assets, American Nile Corporation, a closely-held corporation, to the decedent’s three sons and petitioned for judicial permission. As then required, all interested parties, including a special guardian for the infant contingent remaindermen, were notified. The court granted the petition and settled the account of the trustees. Subsequently, in 1973, Louise executed a waiver and release with respect to an intermediate accounting of the trust from 1957 through August 1973. Waivers and receipts and releases were exchanged.
Louise died on April 2, 1985 and, in her will, exercised her general testamentary power of appointment by directing that the assets of the trust "be distributed to my [e]xecutors to be disposed of as part of my estate under the terms of this [w]ill.” Louise bequeathed 20% of the residue of her estate, including the property subject to the power of appointment, to the three children (two of whom are petitioners herein) of her deceased daughter, Berthie, and 40% to each of her two surviving daughters, Helene and Hanina, who are the executrices of her will. Louise expressly made no provision for her sons and their issue who were "otherwise amply provided for.” Respondents have advised the executrices of Louise’s will that the trust over which Louise had a power of appointment no longer has any assets. Thus, petitioners have received nothing for their 13.3% interest therein.
By a petition dated September 21, 1987, petitioners sought to compel the surviving trustees, Ezra and Selim, to account. By separate petition, they also sought information regarding the decedent’s assets from the date of death to the present. Specifically, petitioners challenged the actions of the trustees, who have never accounted judicially and are alleged to have failed to marshal and account for decedent’s interest in spe
We agree essentially with the Surrogate’s ruling that the 1962 decree settling the executors’ accounts and the 1957 judicial order authorizing the sale of assets are final and binding on petitioners. The 1962 decree was entered only after review of a voluminous account and submission of a special guardian’s report. The decree noted citation and proof of service to no less than 16 individuals, including petitioners’ mother, aunts, uncles, cousins and the Attorney-General of the State of New York. The decree is, thus, res judicata as to the funding of the trust. So too is the court’s December 6, 1957 order authorizing the sale of assets. Res judicata precludes relitigation by the parties to an action and their privies of any matters that were necessarily decided in the prior action. (Matter of Shea, 309 NY 605, 616.) As holder of the trust’s general testamentary power of appointment, Louise actually represented the interests of all potential appointees, including petitioners. (See, Matter of Levy, 130 Misc 2d 370,
With respect to the Surrogate’s unexplained determination allowing the petitions to stand as to the period subsequent to September 1, 1973, respondents raise only the issue of petitioners’ standing and the statute of limitations. As to the former issue, respondents argue that where, as here, a party has no direct legal interest in a trust that party may not commence a proceeding for an accounting or information. (See, SCPA 103 [39]; 2205.) In that regard, respondents claim, petitioners are neither beneficiaries of the decedent’s will nor, since any interest they might have in the trust merged with the remainder of Louise’s estate (see, e.g., In re Camp’s Estate, 64 NYS2d 755, 756), beneficiaries of the trust created thereunder. In Matter of Miller (99 AD2d 780), however, where the donee had merged the property subject to her general testamentary power of appointment with her estate, the court, although it did not specifically discuss the issue of standing, upheld the objections filed by the residuary legatees of the donee’s will to the computation of commissions under the donor’s will. Petitioners are in a position similar to that of the residuary legatees in Miller. Moreover, since the executrices of Louise’s estate refuse to do so, petitioners, as residuary legatees of the estate, have standing to compel an accounting and seek information regarding the assets and affairs of the trust. (See, Matter of Brandt, 81 AD2d 268.) Inasmuch as the executrices cannot adequately represent their interests, petitioners are not barred by any merger of their interest in the trust with the remainder of the estate from compelling an accounting of the trustees’ activities since September 1,1973.
Nor are petitioners barred, as claimed, by the running of the six-year statute of limitations (CPLR 213 [1]), since the statute does not begin to run with respect to assets never collected or previously accounted for by a fiduciary. "[T]he [s]tatute of [l]imitations does not commence to run in favor of a trustee until he openly repudiates the trust and asserts and exercises individual ownership over the trust property.” (Matter of Ashheim, 111 App Div 176, 177, affd 185 NY 609.) In the case of an omitted asset, which is essentially what peti