From Casetext: Smarter Legal Research

Matter of Burke

Surrogate's Court, Cattaraugus County
Jul 31, 1985
129 Misc. 2d 145 (N.Y. Surr. Ct. 1985)


July 31, 1985

Michael Consedine for estate.

Raymond W. Bulson, guardian ad litem, for Myra Burke.

Steven A. Wright, guardian ad litem, for children.

In this proceeding for judicial settlement for the accounts of the estate of the decedent, there is presented a question of the action taken by one person who was both the executrix of the estate and one of two testamentary trustees named in decedent's will. It is her performance of duties in this dual capacity that gives rise to the issues. A review of Warren's Heaton on Surrogates' Courts discloses that there is little or no precedent in this common area of probate law. (See, vol 2B, § 201, ¶ [1] [c], [d]; § 204, ¶ [1] [c] [6th ed].)

Under his will the testator created two trusts. The first was a trust for grandchildren. Into this trust the testator devised all of his real property "whether residential or commercial, improved or unimproved" that he owned in Cattaraugus County, State of New York.

The second testamentary trust created was a trust for the benefit of Myra P. Burke, a mentally retarded daughter of the testator. This trust was funded with the testator's entire residuary estate.

Mary L. Wolfman, a sister of the decedent, was named executrix of the decedent's will. She has been duly appointed and has served in that capacity.

The trustees of the two trusts named by the decedent were two in number. They were Mary L. Wolfman who was also named as executrix and the First Trust Union Bank. Both have been appointed by the court.

Following her appointment as executrix, Mary L. Wolfman, together with Armand Burke, a son of the decedent, inspected the houses owned by the decedent which formed the real property corpus of the trust for grandchildren. Such inspection disclosed that one of the houses was in an advanced state of deterioration.

Mary L. Wolfman, acting through the decedent's son, Armand Burke, solicited estimates for repairs. One Arthur T. Yehl was the low bidder and was hired to effect the repairs. His bill in the amount of $6,955 has been submitted but remains unpaid.

For resolution are the following questions:

(1) Did Mary L. Wolfman have authority to contract for the repairs of the real property conveyed to a trust for the grandchildren?

(2) If Mary L. Wolfman had such authority, did she have it in her capacity as executrix or as a trustee or in both or in neither such capacity?

(3) If authorized, to whom should the cost and expense of the repairs be charged; to the estate generally as an administration expense or to the trust for the grandchildren?

Prior to any statute enactment the general rule by case decisions was that the personal representative of a decedent, whether executor or administrator, had the power to make such repairs to real property as were reasonably necessary for the proper preservation of that property. However, it had to appear that the executor or administrator had taken the property into his possession either pursuant to the provisions of the decedent's will or if in intestacy, pursuant to statute. (See, 3 Warren's Heaton, Surrogates' Courts § 254, ¶ 5 [6th ed]; 9C Rohan, N Y Civ Prac ¶ 11-1.1 [11].)

It is stated that prior to statutory enactment and under decisional law a trustee had similar power and authority to that of an executor, viz., to effect necessary repairs and incur expenses in maintaining realty that was trust property. (9C Rohan, N Y Civ Prac ¶ 11-1.1 [11]; Third Report of Temp St Commn on Modernization, Revision and Simplification of the Law of Estates, at 491 [1964 N.Y. Legis Doc No. 19].)

In addition to authority under decisional law an executor or trustee can be given express authority under the terms of a will to effect repairs. Such authority is effective either as a supplement to the authority under decisional and statutory law or as an independent basis therefor.

All of the rights and powers of an executor, administrator and trustee referable to the repair of real property was codified into law in 1967 upon the enactment of EPTL 11-1.1. That statute provides in relevant part that a "fiduciary" (defined by statute to include executors, administrators, trustees of express trusts and others) is authorized "[t]o make ordinary repairs to the property of the estate or trust." (EPTL 11-1.1 [b] [6].) The cited statute represents the state of the law today in New York.

In the instant will the testator specifically authorized either the executrix or the trustees "to make repairs, replacements and improvements, structural or otherwise of any such property and to charge the expense thereof to principal or income as they may deem proper."

We pause at this point to consider that what we are dealing with is repairs to real property which were devised under the testator's will. Nothing is more important than to note that the title to real property which is specifically devised passes at the decedent's death to the specific devisees named. Specifically devised realty is not a part of the administrable estate. The title to the specific testamentary devisee vests in the beneficiary immediately upon the death of the testator. Such vesting is complete except for the limited right of the executor to use the specifically devised real property for the payment of debts if necessary. (30 Carmody-Wait 2d, N Y Prac § 170:35; Matter of Strasenburgh, 136 Misc. 91, affd 228 App. Div. 880, affd 255 N.Y. 549; 30 Carmody-Wait 2d, N Y Prac § 169:4, and cases there cited.)

While it is true that EPTL 11-1.1 contains provisions which permit an executor to take possession of real property, collect rents, and manage it, to sell it, to lease it for not to exceed three years and to mortgage it, such authority does not apply "where such property or any estate therein is specifically disposed of". (See, EPTL 11-1.1 [b] [5].) Thus, there is no conflict between the statutory and decisional law.

In sum, an executor lacks authority to repair at the expense of the estate real property which is not under his management. He may repair only the real property which he has the power to sell or manage. (See, 9C Rohan, N Y Civ Prac ¶ 11-1.1 [11]; Third Report of Temp St Commn on Modernization, Revision and Simplification of the Law of Estates, at 491 [1964 N.Y. Legis Doc No. 19].)

The rules noted when applied to the case at bar compel the conclusion that Mary L. Wolfman, as executrix, could not exercise the authority to effect repairs to that real property which was specifically devised under the will. Not being a part of the administrable estate and not subject to the imposition of debts of the decedent, she had no authority to manage it as the estate representative.

If Mary L. Wolfman were the sole single trustee-devisee of the specifically devised realty, it is readily apparent that she could have exercised the authority of a trustee to effect necessary repairs.

However, the real estate in issue was not specifically devised to Mary L. Wolfman as a single trustee. Rather, it was devised to her and the First Trust Union Bank as cotrustees. So devised the cotrustees held the property as joint tenants. This is now provided by statute. (EPTL 6-2.2 [d].) It was previously recognized in decisional law. (See, Matter of Morrisey, 170 Misc. 1016, 1019 [Sur Ct, Kings County 1939] [opn by Wingate, S., reviewing earlier precedent]; 26 Carmody-Wait 2d, N Y Prac § 154:46.)

The general rule is that in the instance of two or more trustees, they must exercise their powers collectively. (See, 3 Warren's Heaton, Surrogates' Courts § 225, ¶ [3] [6th ed], and cases cited; to same effect see, 9B Rohan, N Y Civ Prac ¶ 10-10.7 [2].) However, in Matter of Luckenbach ( 303 N.Y. 491) our Court of Appeals acknowledged certain exceptions to the general rule. One of the exceptions noted was that in the case of emergency, some of the trustees may act in behalf of all to protect the trust. (See, Matter of Luckenbach, 303 N.Y., at p 497 [reviewing the early New York decisions]; Restatement of Trusts § 194 comment a, cites a similar exception.)

For all that appears in the accounting the contract for repairs was entered into by Mary L. Wolfman alone. It does not appear that the cotrustee, First Trust Union Bank, was consulted or agreed. Neither does it appear that such bank objected or now excepts to the repairs.

However, Armand Burke, who arranged for the repairs as agent of Mary L. Wolfman, recites that the subject real property "had suffered water damage, was rotted and was in danger of collapse into the cellar" and "the front porch was unsafe and rotting and could not be walked upon". Such conditions in the judgment of this court presented a situation for emergency repairs to protect the trust property. As a consequence, the absence of united action by Mary Wolfman and the First Trust Union Bank is of no consequence. The court holds under the circumstances that Mary L. Wolfman as one of the two trustees had the authority to contract for the necessary repairs.

This leaves us with only the consideration of the liability of a trustee on contracts. The general rule applicable to all fiduciaries prior to 1979 was that a fiduciary could not enter into a new and independent contract and bind the estate he represented even though such contract was made in the interest and for the benefit of such estate. The fiduciary was held to be personally liable upon such contracts. (See, O'Brien v Jackson, 167 N.Y. 31; East Riv. Sav. Bank v 245 Broadway Corp., 284 N.Y. 470; 27 Carmody-Wait 2d, N Y Prac § 157:40.)

In 1979, however, upon the recommendation of the Law Revision Commission, EPTL 11-4.7 was adopted by the Legislature. It effectively changed the prior law on personal liability of a personal representative of an estate. It provides that personal representatives of an estate will no longer be personally liable on contracts entered into in their fiduciary capacity, unless they fail to reveal their representative capacity.

Nothing is more important to note, however, than is the fact that EPTL 11-4.7 only changed the law insofar as contracts made by "personal representatives" of decedent's estates, i.e., contracts made by executors or administrators. The Commission specifically noted that the statute did not address the question of personal liability of other fiduciaries. In particular it did not change the law in reference to trustees. As to them, personal liability upon contracts continued in force and effect. (See, 1979 Report of N Y Law Rev Commn, Doc No. 65 [K-3], at 1 [recommendation of the Law Revision Commission to the 1979 Legislature wherein it was stated: "(t)his bill changes this common law rule of individual liability, but only insofar as personal representatives of decedents' estates are concerned * * * (t)he Commission may in future address the question with respect to trustees generally, but chooses to confine the scope of this bill to the question of liability of the representative of a decedent's estate"].) The general ignorance of Bench and Bar to the change effected by EPTL 11-4.7 and its limitations is attested by the fact that there does not appear to be a single citation of decisional law to it.

Because of the limiting effect of EPTL 11-4.7 the court holds that the contract for repairs made by Mary L. Wolfman as a cotrustee imposed personal liability upon her.

However, as cotrustee, she is not without redress. Despite the rule that she incurred no liability on the part of the trust estate but only her own personal liability, it appears equally well established that if the expenditure was necessary and proper in the interest of the trust estate, she is entitled to be indemnified from the assets of the trust. (Matter of Damsky, 175 Misc. 460 [Sur Ct, Kings County 1940]; to the same effect see, Philco Radio Tel. Corp. v Damsky, 250 App. Div. 485.) Carmody-Wait 2d (NY Prac, vol 27, § 157:40) contains the following applicable statement: "It is well established that although the fiduciary, in legal theory, is responsible in the first instance for satisfying the contractual obligation from his own funds, yet if the expenditure was necessary and proper in the interest of the estate, he is entitled to be reimbursed or indemnified therefor from its assets. The propriety of the charges and liability thereby incurred are required to be determined in the accounting of the fiduciary."

Since it appears clear to this court (1) that the cotrustee, Mary L. Wolfman, contracted for emergency repairs to the real property, and (2) that such repairs were necessary and (3) that the trust estate of that trust created of testator's real property was the beneficiary of such repairs, that Mary L. Wolfman as cotrustee should be indemnified for the cost of the repairs from the assets of the trust of real property created for the testator's grandchildren. That trust and not the estate generally must bear the cost and expense of the repairs.

Summaries of

Matter of Burke

Surrogate's Court, Cattaraugus County
Jul 31, 1985
129 Misc. 2d 145 (N.Y. Surr. Ct. 1985)
Case details for

Matter of Burke

Case Details

Full title:In the Matter of the Estate of JOHN P. BURKE, Deceased

Court:Surrogate's Court, Cattaraugus County

Date published: Jul 31, 1985


129 Misc. 2d 145 (N.Y. Surr. Ct. 1985)
492 N.Y.S.2d 892

Citing Cases

Williams v. Continental Stock Transfer Trust Co.

However, under the common law, "trustees have an inherent equitable right to be reimbursed all expenses which…

Matter of Estate of Torricini

Reading the will as a whole and construing its language in accordance with its plain meaning ( see generally,…