Opinion
2017-836/D, H
08-18-2020
In the Matter of the Proceeding to Discover Property Withheld or Obtain Information Pursuant to SCPA 2103 for the Estate of Joan F. Mahoney, Deceased. GEORGE D. MAHONEY and STEVEN D. MAHONEY, Petitioners, WILLIAM E. KOUGHN, Respondent.
Appearances: William F. Ryan, Jr., Esq., Attorney for Petitioners/Respondents George D. Mahoney and Steven D. Mahoney, Tabner, Ryan & Keniry, LLP, Albany Richard D. Cirincione, Esq., Co-Counsel for Respondent/Petitioner William E. Koughn, Whiteman, Osterman & Hanna, LLP, Albany Christina Tangredi, Esq., Co-Counsel for Respondent/Petitioner William E. Koughn, West Sand Lake
Appearances: William F. Ryan, Jr., Esq., Attorney for Petitioners/Respondents George D. Mahoney and Steven D. Mahoney, Tabner, Ryan & Keniry, LLP, Albany Richard D. Cirincione, Esq., Co-Counsel for Respondent/Petitioner William E. Koughn, Whiteman, Osterman & Hanna, LLP, Albany Christina Tangredi, Esq., Co-Counsel for Respondent/Petitioner William E. Koughn, West Sand Lake Stacy L. Pettit, J.
Decedent died testate a resident of Albany County on July 13, 2017. She was survived by six adult children and her "long-time beloved companion and dear friend," respondent/petitioner William Koughn. Prior to her death, decedent had lived with Koughn in Florida and her home in New York since the late 1990s. In February 2017, several of decedent's children unexpectedly removed her from her Florida home and brought her to New York where she was made the subject of a Mental Hygiene article 81 guardianship proceeding they had commenced. An order appointing petitioner/respondent George Mahoney as decedent's guardian was granted in June 2017, shortly before decedent's death.
This is decedent's description of Koughn as set forth in her will.
In May 2018, this Court admitted decedent's will, dated November 2016, to probate. Letters testamentary were issued to two of her children, George Mahoney and petitioner/respondent Steven Mahoney (hereinafter collectively petitioners). In addition, letters of trusteeship for the benefit of Koughn under paragraphs (d) and (e), and under paragraph (f) of article 15 of the will were issued to petitioners. Decedent's will left Koughn a life estate in her Florida condominium, where the two had cohabitated since 1998, and directed that an additional $250,000 be placed in trust to pay for all the condominium's real estate taxes, homeowners liability, casualty, wind, hurricane and flood insurance and any other costs of maintenance and repair for the condominium and its appurtenances. She also directed her fiduciaries to establish a trust in the amount of $250,000 and to make distributions from this trust in the amount of $50,000 to Koughn each January after decedent's death for five years. Decedent explained that these bequests were "in consideration for the love, health, guidance, care, support and assistance that [Koughn] ha[d] freely given [decedent] expecting nothing in return during the years of [their] relationship." Aside from a $5,000 gift to her sister, the rest of decedent's multimillion-dollar estate was left to her children.
At present time, the amount the trustees were to distribute pursuant to this article of the will amounts to $150,000, in January 2018, 2019 and 2020. An additional $100,000 should currently be in such trust for January 2021 and 2022 distributions.
In February 2018, petitioners, then acting as preliminary executors, commenced this discovery proceeding pursuant to SCPA 2103 and 2104 seeking the return of certain property that they alleged belonged to the estate and was being wrongfully held by Koughn. Specifically, they alleged that the following property was being held by Koughn and should be turned over to the estate: $20,000 from decedent's Capital Bank checking account; the contents of a safe deposit box at Capital Bank jointly owned by decedent and Koughn; approximately $36,000 from a Charles Schwab investment account jointly owned by decedent and Koughn; cash and gold coins kept in a safe in decedent and Koughn's home; certain household furnishings; a 2010 Ford Sport Trac motor vehicle that was jointly owned by decedent and Koughn; a boat trailer; a boat motor; a box utility trailer; and certain financial paperwork. Subsequently, in January 2019, Koughn commenced a proceeding pursuant to SCPA 2102 (4) against petitioners seeking to compel payment of the annual $50,000 distributions in accordance with decedent's will, which had not been paid by petitioners. Koughn alternatively sought the removal of petitioners as co-executors and co-trustees under SPCA 711 due to their refusal to make the annual distributions and their failure to establish either of the trusts in the will created for Koughn's benefit.
Although the property at issue is located in Florida, this Court previously determined that, "[a]s decedent was a New York domiciliary whose will was probated in Albany County, this Court has subject matter jurisdiction of all of decedent's tangible and intangible personal property at issue in this proceeding, whether located in Florida or elsewhere" (Matter of Mahoney, 62 Misc 3d 522, 526 [Sur Ct, Albany County 2018]; see Southeast Bank v Lawrence, 66 NY2d 910, 912 [1985]).
Decedent's will does not name any successor executors or trustees.
Issue was joined in both proceedings and discovery, motion practice and settlement discussions ensued. Ultimately, a consolidated trial of both proceedings was held over several days in early March 2020. After petitioners rested on their discovery petition, the Court granted in part and denied in part Koughn's motion for a directed verdict (see CPLR 4401). The Court granted the directed verdict in favor of Koughn with respect to petitioners' allegations that he wrongfully held the following property: the boat trailer, boat motor, box utility trailer, the contents of the jointly owned safe deposit box, and the jointly owned motor vehicle. The Court denied the motion and reserved decision with respect to petitioners' allegations regarding the $20,000 transfer from decedent's Capital Bank checking account to Koughn's personal account, the contents of the safe located in the Florida condominium and the approximately $36,000 withdrawal from the jointly held investment account at Charles Schwab. Posttrial briefs have been filed with respect to the discovery petition and the resolution of these remaining property issues is now submitted for decision. In addition to determining ownership of the disputed property, Koughn requests that the Court impose the statutory rate of interest on his past-due $50,000 distributions and award him attorneys' fees.
Although petitioners have addressed these items in their posttrial brief, the Court declines to reconsider its decision on the directed verdict.
At the conclusion of the trial, it was agreed that Koughn would not submit a posttrial brief on his application to remove the petitioners as trustees until the discovery proceeding had been determined. Petitioners moved for a directed verdict dismissing Koughn's petition to remove the trustees and the Court reserved decision pending receipt of the parties' written submissions on Koughn's petition.
As is relevant here, "SCPA 2103 establishes a discovery procedure by which a fiduciary can identify and recover estate assets held by a third party" (Dwyer v Valachovic, 137 AD3d 1369, 1370 [3d Dept 2016]). "In a turnover proceeding, the burden of establishing that the property was that of the decedent rests with the petitioner, and once that burden is met, it shifts to the respondent to establish that it was a gift" (Matter of Kelligrew, 63 AD3d 1064, 1065 [2d Dept 2009]; accord Matter of Voyiatgis, 110 AD3d 911, 912 [2d Dept 2013]; see Dwyer v Valachovic, 137 AD3d at 1370). In order to establish that a transaction was a gift, the recipient must show, by clear and convincing evidence, "'the intent on the part of the donor to make a present transfer; delivery of the gift, either actual or constructive to the donee; and acceptance by the donee'" (Mirvish v Mott, 18 NY3d 510, 518 [2012], quoting Gruen v Gruen, 68 NY2d 48, 53 [1986]; see Matter of Clouse, 292 AD2d 675, 677 [3d Dept 2002]). "Delivery may be effected by a physical transfer, or may be constructive or symbolic, but must 'vest the donee with control and dominion over the property'" (Randall v McGrath, 53 AD3d 736, 737 [3d Dept 2008], quoting Matter of Szabo, 10 NY2d 94, 98 [1961]; accord Matter of Fenlon, 95 AD3d 1406, 1407 [3d Dept 2012]). Surrogate's Court has "'broad discretion in discovery proceedings to accomplish justice'" (Dwyer v Valachovic, 137 AD3d at 1373, quoting Margaret Valentine Turano, Practice Commentaries, McKinney's Cons Laws of NY, Book 58A, SCPA 2103 at 301).
Capital Bank Telephone Transfer
Turning first to the $20,000 Capital Bank transfer, it is petitioners' burden to establish that the $20,000 transferred from decedent's account to Koughn's account in September 2016 is an estate asset (see Matter of Voyiatgis, 110 AD3d at 912). Petitioners argue that decedent did not authorize the withdrawal of $20,000 from her account and that Koughn improperly transferred the funds from decedent's account to his own. The reasoning for their argument is that the transaction was conducted by telephone, which was, they contend, inconsistent with decedent's banking practices. Petitioners further argue that there is no evidence that the transfer from decedent's account to Koughn's account was a gift.
The evidence established that $25,911.35 was transferred into decedent's personal Capital Bank checking account on September 21, 2016. The funds came from a Janus account that was jointly owned by Koughn and decedent. According to a Janus statement for that time period, all the shares held in that joint account were redeemed in the amount of $25,911.35 on September 19, 2016. Koughn testified that the withdrawal went from their joint Janus account into decedent's Capital Bank account because decedent was listed first on the Janus account and was responsible for payment of the taxes. The purpose of the transfer was to put sufficient funds into Koughn's account to permit him to purchase certain coins which he had already agreed to purchase. A couple of days after the deposit from the joint account to decedent's account cleared, on September 23, 2016, $20,000 was withdrawn from decedent's Capital Bank account and transferred to Koughn's Capital Bank account. The transfer was authorized by telephone using decedent's social security number and her mother's maiden name. A check dated September 22, 2016, payable to American Eagle Reserve for coin purchases in the amount of $11,050, was paid from Koughn's account on September 26, 2016, indicating that the transfer to Koughn's account needed to be accomplished in a short time, and may have been done by telephone for that reason. Koughn provided the invoice from American Eagle Reserve corroborating his coin purchase with the funds. He also testified credibly that he did not know decedent's mother's maiden name, one of the requirements for executing the phone transfer from decedent's account at Capital Bank. At some point thereafter, George Mahoney, as decedent's attorney-in-fact, requested that Capital Bank review whether the transfer was fraudulent. Capital Bank reviewed the transaction and did not find that it was fraudulent.
The remaining $5,911.35 deposited in decedent's account from the joint Janus account remained in decedent's Capital Bank account.
Although petitioners contend that decedent would not conduct telephone bank transfers, Steven Mahoney testified that he did not have any documentary evidence to establish that decedent did not make the transfer, but rather, was "going by being her son for 60 years." He also testified, however, that he "was not involved . . . in [decedent's] finances" because "she knew what she was up to and [he] had nothing to offer." As petitioners' argument is based primarily on their impression of the kind of financial transactions they believed decedent would make, it must also be noted that testimony from all witnesses at trial established that decedent was a "great file, record keeper," a "meticulous bookkeeper," and a "detailed record keeper," who would regularly review her account statements and balance her checkbook, up until February 2017 when she was removed from her home by petitioners. George Mahoney described decedent as "a self-made accountant" in her work as the bookkeeper for his father's law firm for many years.
It should also be noted that decedent executed a power of attorney in favor of George Mahoney in September 2016, and executed her will, leaving the bulk of her large estate to her children, in early November 2016, after the telephone transfer was made. Petitioners have not questioned decedent's competency to execute either of those documents in this proceeding or any other proceedings related to decedent in this Court.
In further support of the allegation that decedent would not have authorized this transaction, George Mahoney testified that decedent "never gifted or gave money to anybody." Documentary evidence from decedent's checking account, however, shows that she often gifted cash to family members for birthdays, holidays and other celebrations such as graduations. While many checks contain notations such as "Merry Xmas," others do not have any explanation. Additionally, George Mahoney recounted that, in the 1980s, decedent hid away enough money from petitioners' father to purchase a sports car in cash and gift it to him for the 30th anniversary of his admission as an attorney. Furthermore, decedent had been paying for Koughn's health insurance from one of her own personal bank accounts, a fact acknowledged by George Mahoney. Importantly, the evidence as a whole indicates that decedent desired to share her assets with Koughn during her lifetime and for him to receive the remainder of their joint assets upon her death. This is illustrated by the fact that she either added Koughn as a joint tenant with right of survivorship, or created ownership jointly with him, with respect to several bank accounts, a safe deposit box and a motor vehicle. The evidence also suggests that decedent was generous towards Koughn in a way that she may not have been with her children during her lifetime.
When questioned about this, George Mahoney admitted he saw no evidence in decedent's financial paperwork that Koughn was repaying decedent for his medical insurance, or for other payments she made for his benefit. He nonetheless maintained that it "highly unlikely" that these payments were gifts by decedent to Koughn as decedent "gifted nothing to anybody."
The testimony and documentation indicate that decedent personally transferred the $20,000 to Kough's account after she and Koughn liquidated their joint Janus account and deposited it in her account, and there is only baseless speculation by petitioners to suggest otherwise. Capital Bank's records establish that the transfer was done by telephone using decedent's social security number and her mother's maiden name for verification. Decedent, a retired accountant and meticulous record keeper by all accounts, continued to use her Capital Bank account for several months after this transaction and there is no evidence that she — or either of the banks involved — questioned the transaction or attempted to recoup the funds from Koughn at any time. Based on the witnesses' depictions of decedent, the Court finds it unlikely that she would not have noticed these large transactions affecting two of her accounts.
Petitioners have not met their burden of establishing that the property at issue was an estate asset (see Dwyer v Valachovic, 137 AD3d at 1370). Instead, the weight of the evidence supports the conclusion that decedent authorized this transfer of funds from the joint Janus account to Koughn's account, retaining $5,911.35 of the joint funds in her own account. While petitioners focus on the transfer from decedent's Capital Bank account to Koughn's account, Koughn explained that the funds originated in the Janus account held by him and decedent jointly. Koughn credibly testified that the transaction was carried out in this manner due to decedent's name being listed first on the Janus account for tax purposes. Documentary evidence confirmed that the amount transferred to Koughn's account satisfied an already-issued check to purchase certain coins. While telephonic transfers may not have been decedent's usually course of business, it is reasonable to infer that this option was chosen due to the timing of the transactions and the need to add funds to Koughn's account before the balance for the coins was withdrawn. The Court also finds that it is more reasonable to conclude, based on the evidence, that decedent conducted the phone transfer than to conclude, as petitioners suggest, that Koughn or another person impersonated decedent over the phone in order to steal $20,000 transferred from joint funds to the checking account that she regularly used and monitored.
As petitioners have not met their initial burden of establishing that the $20,000 is an estate asset, the burden does not shift to Koughn to establish that the transfer was a gift (see Dwyer v Valachovic, 137 AD3d at 1373). Even assuming that the transfer was a gift from decedent to Koughn, although the funds originated from a joint account, the Court would still find that the funds belong to Koughn. Decedent's intent to make a present transfer is met by the evidence that decedent called the bank and requested a transfer of funds from her Capital Bank checking account to Koughn's Capital Bank checking account. The transfer was verified by Capital Bank using decedent's personal information, and Capital Bank never determined that this transfer was fraudulent after having been asked to review it by George Mahoney. Furthermore, there is no evidence that decedent questioned this transfer or tried to recoup the funds from Koughn in the months following the transfer, when she continued to do her own banking and executed her will. Petitioners do not argue that decedent lacked capacity, nor have they suggested that Koughn exercised any undue influence over her (see Mirvish v Mott, 18 NY3d 510, 519 [2012], supra). It is undisputed that decedent, a former bookkeeper, enjoyed keeping track of her financial assets and regularly reviewed her banking records. To the extent petitioners argue that there is no notation in decedent's records that the transfer was a gift, the Court observes that decedent wrote checks to family members that did not include explanations. Furthermore, there is no evidence that decedent recorded the transfer as a loan, despite George Mahoney's testimony that decedent would regularly document loans made to family members by drafting notes with interest. The remaining elements of a gift, if it were a gift, have also been met, as delivery of the gift was made by transfer from decedent's Capital Bank account to Koughn's account, and it was accepted by Koughn who then used it to satisfy his bill for coins he had purchased. Petitioners do not raise any specific arguments that these elements were not met. The Court finds Koughn's explanation of this transaction was credible and supported by the documentary evidence. Accordingly, the petition is denied with respect to the request that Koughn return $20,000 to the estate.
Petitioners rely heavily on the fact that Koughn testified at one point that this transfer was a gift; however, he did so in response to questioning by petitioners' counsel as to whether the transfer was a loan or a gift. He later clarified that the money was not a loan, but a transfer from the Janus account held jointly by decedent and him.
In support of their argument that there is no proof that decedent gifted these funds to Koughn, petitioners repeatedly point out that no gift tax return has been filed. As decedent's fiduciaries, it would generally be petitioners' responsibility to file the gift tax return (see 26 USCA § 2502 [c]).
Bill's Safe
Next, the Court shall consider petitioners' claim that Koughn kept possession of certain property belonging to decedent contained in a safe — referred to by all as "Bill's safe" — in their shared residence, including more than $20,000 cash and several valuable coins. It should be noted that "Joan's safe" was also in the same shared residence containing a large amount of cash, jewelry and coins. A sheriff's deputy was present with decedent's children at Koughn's residence in February 2017, immediately after petitioners had removed decedent without Koughn's prior knowledge to bring her to New York. Decedent's children wanted access to the residence and decedent's property at that time, and the deputy recorded the events with a body camera. During that visit, Joan's safe was emptied by petitioners' sisters Laurie Kramer and Debbie Mahoney, without Koughn's knowledge and while Koughn was outside the residence speaking to the deputy. Under the guise of collecting decedent's clothing and personal items from her closet, they secretly removed the cash, jewelry and other contents from Joan's safe in her bathroom prior to it being inventoried and hid it in their vehicles while Koughn and the sheriff's deputy were preoccupied. They only returned decedent's property when the sheriff's deputy, having realized what occurred, threatened to arrest them for larceny. George Mahoney then took possession of the property purportedly constituting all the contents of Joan's safe after the sisters returned property from their vehicles. The sisters knew the combination to Joan's safe; however, they did not have the combination to Bill's safe. Although George Mahoney was aware of Bill's safe and he now alleges that its contents belonged to decedent, he declined to inventory it that night. Koughn voluntarily opened his own (Bill's) safe while decedent's children were there and George Mahoney commented that if there was anything in the second safe that belonged to decedent, he would retrieve it later. Koughn was clearly upset at the removal of decedent by her children and the children's examination of his home and removal of property in the presence of a sheriff's deputy, but he evidenced no attempt to hide anything despite the very difficult situation shown in the deputy's video. Bill's safe was not fully inventoried until after decedent's death, in September 2017, when a local sheriff's deputy was also present. He could not have removed anything from Joan's safe and placed it in Bill's safe between the visits, because the contents of Joan's safe had all been removed by decedent's children on the first visit.
As noted, petitioners bear the initial burden of proving that the contents of Bill's safe are an estate asset (see Dwyer v Valachovic, 137 AD3d at 1370). Petitioners point to Koughn's statements recorded on video which indicated that some but not all the contents of the safe were his. With respect to these statements, a viewing of the stressful video shows that Koughn, who has some hearing loss and was being questioned by decedent's children at the time, may not have understood the questions being posed to him. Petitioners also argue that the contents of Bill's safe resembled the contents of Joan's safe with respect to the way cash was packaged in bank envelopes allegedly bearing decedent's handwriting in both safes.
There was a third safe in the condominium which is not at issue in this proceeding.
George Mahoney testified that, with respect to the coins in Bill's safe, petitioners assert that a canister of 10 Queen Elizabeth $50 gold coins found in the safe belonged to decedent. This is based on a reference to coins in a handwritten note by decedent dated September 2013, several years before her death. They also claim that an Etocian coin found in Bill's safe belonged to decedent based on George Mahoney's recollection that decedent obtained the coin from a diver who recovered coins from wrecked ships. Petitioners assert that a single American Eagle coin found in Bill's safe belonged to decedent based on the fact that Joan's safe contained a pack of 19 American Eagle coins when there allegedly should have been 20. Petitioners also assert that coins contained within a Crown Royal bag found in Bill's safe belonged to decedent. This is based on George Mahoney's recollection that his father used to keep items in a Crown Royal bag.
Joan's safe was unexpectedly inventoried in February 2017, when petitioners removed her from her and Koughn's home. The coins were already separated in this manner — the pack in Joan's safe and the single coin in Bill's safe — at that time, while decedent was alive and the couple was cohabitating. Petitioners' suggestion that Koughn stole one coin from the pack in decedent's safe and kept it in his own safe while the two were cohabitating — as opposed to the couple agreeing to that arrangement — is nonsensical and purely speculative.
Petitioners argue that Koughn has not provided documentary proof that he owns all the contents of Bill's safe. It is petitioners' burden, however, to first establish that the items are decedent's property. Significantly, petitioners have failed to provide any convincing documentary proof, such as receipts, bank statements or invoices, to show that decedent purchased the coins in Bill's safe or that the money in his safe came from her accounts. Instead, petitioners rely on some handwritten notes of decedent's that are dated many years before the safes were inventoried, which the Court finds are of little probative value due to the significant passage of time. Furthermore, the Court is not convinced by petitioners' argument that the holding of cash in the very envelopes used by banks for providing cash withdrawals to customers, or the use of velvet bags to hold coins, are such unique practices as to prove that these items were owned solely by decedent. Notably, George Mahoney attributed the use of velvet bags to store coins to his father, a habit which he implied decedent adopted. It is certainly reasonable for cohabitating couples to follow each other's practices in this way, including here, where Koughn and decedent lived together for nearly 20 years and shared a mutual interest in coin collection.
Koughn, on the other hand, was able to provide some documentary proof establishing ownership of certain items in his safe. He also testified that the cash in the safe was income he saved during his years working as a handyman.
The Court found Koughn's testimony to be more credible than petitioners' testimony, particularly considering the circumstances surrounding the inventorying of the safes. Koughn voluntarily opened Bill's safe for inspection by George Mahoney, both in February 2017 and again in September 2017, after decedent's death. Notably, when George Mahoney inventoried Bill's safe in September 2017, Koughn had not removed any property from that safe. George Mahoney repeatedly stated during the February 2017 visit that he trusted Koughn and did not believe he would take decedent's property. In contrast, the persons that exhibited an intent to take estate property for their own personal benefit were decedent's daughters Laurie Kramer and Debbie Mahoney, who pilfered Joan's safe during the February 2017 visit.
As petitioners have failed to establish that the contents of Bill's safe are estate assets being withheld by Koughn (see Matter of Elam, 140 AD3d 754, 755 [2d Dept 2016]), the burden does not shift to Koughn to establish that the property is his own (see Dwyer v Valachovic, 137 AD3d at 1370; Matter of Voyiatgis, 110 AD3d 911, 912 [2d Dept 2013], supra). Accordingly, the contents of Bill's safe belong to Koughn.
Charles Schwab Joint Account
The final property issue in dispute is the withdrawal/closure of a Charles Schwab investment account that was jointly owned by decedent and Koughn. The parties agree that the account was held by decedent and Koughn as joint tenants with the right of survivorship. It is also undisputed that all the funds from the joint Charles Schwab account were deposited into a separate account held by Koughn alone before her death. Had the funds not been removed prior to her death, the entire account would have vested in Koughn as surviving owner. At issue is whether Koughn is required to return funds to the estate as a result of the withdrawal. Petitioners argue that Koughn's closure of the account by withdrawal of the entire balance and deposit into his own account was improper and, as a result, he should turnover half of the account to the estate.
When a joint tenancy is created in a bank account, the tenants are each permitted to withdraw their one-half interest in the account, regardless of who funded the account (see Matter of Civiletto, 101 AD3d 1585, 1586 [4th Dept 2012]; Matter of Mullen, 268 AD2d 313, 314 [1st Dept 2000]; Matter of Giacalone, 143 AD2d 749 [2d Dept 1988]). "Upon withdrawal of an excess over moiety, the withdrawing joint tenant becomes subject to suit for the excess and, as a result, the joint tenancy is terminated" (Matter of Mullen, 268 AD2d at 314; see Matter of Civiletto, 101 AD3d at 1586; Lopez v Fenn, 90 AD3d 569, 572 [1st Dept 2011], lv dismissed 19 NY3d 1022 [2012]). "As to any excess moneys withdrawn, the withdrawing joint tenant has the burden of proving by clear and convincing evidence that the withdrawals were with the decedent's consent" (Matter of Giacalone, 143 AD2d at 750; see Matter of Civiletto, 101 AD3d at 1586). "[W]here withdrawals in excess of the joint tenant's moiety are made with the consent of or for the benefit of the decedent, the surviving tenant will not be required to return the excess to the decedent's estate" (Matter of Gilgore, 55 AD2d 734, 735 [3d Dept 1976]; see Matter of Kleinberg v Heller, 38 NY2d 836, 843 [1976, Fuchsberg, J., concurring]).
Koughn testified that he owned a brokerage account at Charles Schwab Bank. He stated that the account was initially in his name alone, but he later added decedent to his account as a joint owner. Koughn testified that, in February 2017, after decedent was taken to New York by her children, he received a telephone call from a representative of Charles Schwab, who informed him that someone was trying to access his account. According to Koughn, it was decided that the account should be closed to prevent anyone else from accessing it. He then received a check from Charles Schwab in the amount of $36,287.51, payable to him and decedent. He deposited that check into his own personal checking account. He testified that he used most of the money to visit decedent in New York in the months prior to her death.
The parties agree that the presumption as to joint accounts set forth in Banking Law § 675 applies to brokerage accounts (see Matter of Corcoran, 63 AD3d 93, 96 [3d Dept 2009]).
Apparently using his power of attorney from decedent after she was moved to New York, George Mahoney contacted Charles Schwab and requested that the joint account between decedent and Koughn be frozen. He explained that he was trying to gather all of decedent's assets prior to or during the guardianship proceeding. George Mahoney testified that he received a check from decedent and Koughn's joint Charles Schwab account and deposited it into decedent's individual Charles Schwab account. The check was returned for insufficient funds, however, because Koughn had requested that the bank stop payment on the check and issue a new check to him, which was done by the bank. The Court regards George Mahoney's testimony with respect to his involvement in causing these events by trying to have the joint account frozen as misleading and deceptive. It appears it was actually decedent, through George Mahoney as her attorney-in-fact, who first attempted to take the entire balance of the Charles Schwab account, whether by trying to freeze the account or by depositing the first check in decedent's separate account. Koughn did not consent to decedent's withdrawal of more than her moiety and he attempted, successfully, to recoup the funds. It appears that Koughn's actions in closing the account and transferring it to his own account were defensive to protect the assets from being taken by George Mahoney. Thereafter, neither decedent, nor George Mahoney as her attorney-in-fact, immediately attempted to recover the funds from Koughn, although George Mahoney was certainly aware of what had transpired. George Mahoney did not seek to recover the funds until nearly a year later, when this discovery proceeding was commenced. Nonetheless, it is undisputed that Koughn kept the entire balance of the joint account for himself.
George Mahoney acknowledged that he was not appointed as decedent's guardian until June 1, 2017. He then stated that he was acting pursuant to the power of attorney on behalf of decedent.
Koughn argues that the funds were used for the benefit of decedent and, therefore, were not improperly taken by Koughn. "[W]here withdrawals in excess of the moiety are used for the support and care of the decedent, they are deemed to be 'with her consent and for her benefit' and 'the surviving tenant will not be required to return the excess to the decedent's estate'" (Matter of Mullen v Linnane, 218 AD2d 50, 55 [1st Dept 1996], quoting Matter of Gilgore, 55 AD2d at 735; see Matter of Leisner, 25 AD2d 844, 845 [1st Dept 1966], affd, 19 NY2d 869 [1967]). Koughn testified that he used most of that money to visit decedent in New York, which he did approximately seven times between February 2017 and her death in July 2017. The Court finds this explanation too vague and indirect to establish that the excess funds, more than $18,000, were used for decedent's benefit (see Matter of Lang, 53 AD2d 836, 836 [1st Dept 1976]).
Here, Koughn was faced with a situation where the bank notified him that someone was trying to access his and decedent's account. George Mahoney admitted that he, as decedent's attorney-in-fact, tried to freeze the entire account, which would have prevented Koughn from accessing any of the funds. Nonetheless, Koughn was not entitled to the entirety of the joint account, just as decedent, through George Mahoney's actions as attorney-in-fact, was not entitled to take the entire account balance either. Whether the joint tenancy was broken prior to decedent's death by George Mahoney's actions or by Koughn's actions, it was broken, and Koughn and the estate are each entitled to half of the account, or $18,143.75 (see Matter of Mullen, NYLJ, Jan. 16, 1998 at 30, col 1, 1998 NYLJ LEXIS 6579, *4 [Sur Ct, NY County 1998]; see also Matter of Mullen, 268 AD2d at 315). While the Court is sympathetic to Koughn's situation, and believes as a matter of fairness that the entire account should belong to him, the law directs that he must return the withdrawal in excess of his moiety (compare Matter of Mullen v Linnane, 218 AD2d at 59).
To the extent Koughn relies on Matter of Filfiley (63 Misc 2d 824 [Sur Ct, Kings County 1970]), this decision appears to have been implicitly overruled by the Court of Appeals in Matter of Kleinberg v Heller (38 NY2d 836 [1976], revg 45 AD2d 514 [1st Dept 1974]).
Interest on Distributions
Koughn requests that the Court impose the statutory interest rate of 9% on his three past-due $50,000 distributions. Having heard the testimony of both fiduciaries, the Court finds there is merit to Koughn's arguments that petitioners brought this proceeding to harass him and did not act with good intentions or have the best interests of the estate or decedent's intent in mind. Petitioners had minimal evidence in support of their claims against Koughn, primarily relying on their own feelings or impressions to support their allegations. They commenced this proceeding before the will was even admitted to probate and have likely cost the estate more in legal fees than the sum recovered in this proceeding. Importantly, much of the property at issue in this proceeding was held jointly by decedent and Koughn — a fact which petitioners readily acknowledged, yet they still argued such property should be returned to the estate. Furthermore, over the three years since decedent passed away, petitioners have deprived Koughn of the financial security she sought to provide for him. It is clear that decedent cared deeply for Koughn and wished to take care of him financially both during her life and after. Accordingly, the Court finds that Koughn is entitled to statutory interest on his yearly distributions in the amount of 9% to the date of this order. As petitioners made the decision to engage in this litigation and to withhold distributions that Koughn was entitled to receive, it is petitioners who should bear the consequences of their choice (see Matter of Braasch, 140 AD3d 1341, 1343 [3d Dept 2016]). Accordingly, the interest shall be a surcharge against petitioners' shares of the estate (see Matter of Marsh, 106 AD3d 1009, 1011-1012 [2d Dept 2013]). Koughn's first distribution of $50,000 was due January 2018 but could not have been made by petitioners until they received full letters from this Court on May 10, 2018. From the $50,000, the amount of $18,143.75 due from Koughn to the estate should first be deducted, and the Court awards the balance of the first payment in the sum of $31,856.25 plus statutory interest in the sum of $6,535.33, totaling $38,391.58. Koughn's second distribution was due January 15, 2019. He is due $50,000 plus statutory interest of $7,175.34 on that payment totaling $57,175.34. The third distribution of $50,000 was due January 15, 2020. He is due that amount plus statutory interest of $2,675.34, totaling $52,675.34. Although this decision and order does not finally determine the pending proceedings in total, as discussed below, petitioners are hereby
ORDERED to pay to Koughn the sums calculated, totaling $148,242.26 within 10 days of the date of this decision and order.
Petition for Removal of Fiduciaries and Attorneys' Fees
As previously discussed, the determination as to whether petitioners should be removed as trustees has been reserved for decision after determination of the issues in this decision and order, and counsel may, within 30 days of this decision and order, submit posttrial written submissions for consideration on the removal issue. Finally, Koughn seeks to have his attorneys' fees for this proceeding paid by the estate under SCPA 2110 on the ground that the petition was frivolous. It is well settled that "Surrogate's Court may award counsel fees in situations where the misconduct of a fiduciary brings about the expense" (Matter of Rose BB., 35 AD3d 1044, 1045 [3d Dept 2006], appeal dismissed 8 NY3d 936 [2007]). The Court will decide attorneys' fees upon the conclusion of these proceedings, after submission by Koughn of a petition pursuant to SCPA 2110 for determination by this Court.
This constitutes the decision and order of the Court. Dated and Entered: August 18, 2020 Signed/Stacy L. Pettit Hon. Stacy L. Pettit, Surrogate