Accounting by Alina Kaganovsky, as Trustee of the Credit Shelter Trust under the Will of Lazar Kaganovsky, Deceased. v. << (2026)

The following papers were considered in the preparation of this decision:

Notice of Motion for Summary Judgment 1

Affirmation of Robert M. Harper in Support of Motion with Exhibits 2

Objectant Elina Kaganovsky's Memorandum of Law in Support of Motion 3

Affirmation of Alexander Kaganofsky in Support of Motion 4

Affirmation of Lois Bladykas, Guardian ad Litem, in Support of Motion 5

Before the court in this accounting proceeding is a motion filed by the objectants, Elina Kaganovsky (Elina), Alexander Kaganovsky (Alexander), and Lois Bladykas, the guardian ad litem for [XXXX Kaganovsky (XXXX)], for summary judgment: (1) sustaining Elina's objections to the account of Alina Kaganovsky (petitioner), as trustee of the Credit Shelter Trust created under the last will and testament of Lazar Kaganovsky dated June 25, 2025 (Trustee's Account), in their entirety; (2) sustaining Alexander's objections to the Trustee's Account in their entirety; (3) sustaining the guardian ad litem's objections to the Trustee's Account in their entirety; (4) surcharging the petitioner and awarding Alexander, as Successor Trustee of the CST, a money judgment against the petitioner in the principal amount of $1,224,381.72 plus statutory interest; and (5) awarding Elina and Alexander a money judgment against the petitioner in an amount equal to their respective attorney's fees and costs to be determined at an inquest or hearing.

Lazar Kaganovsky (the decedent) died a resident of Nassau County on March 4, 2020, survived by his spouse, Elina, and his two adult children (the petitioner and Alexander). The decedent's last will and testament dated May 11, 2010, was admitted to probate by decree of this court dated August 3, 2020, and letters testamentary issued to Elina. The will at Article 3 created a credit shelter trust (CST) and letters of trusteeship issued to the petitioner. Elina is the primary beneficiary of the CST.

On March 25, 2024, the petitioner filed her Trustee's Account, which covers the period from June 2, 2023 through December 31, 2023. It shows principal charges of $8,004,700.39 and realized increases in principal of $0.00. The charges were reduced by realized decreases in principal of $1,021,000.00, administration expenses of $11,511.28, and distributions of principal of $0.00, leaving a balance on hand of $6,972,189.11.

On July 3, 2024, the court suspended the petitioner as Trustee of the CST and appointed Alexander as the Temporary Successor Trustee. A guardian ad litem was appointed to represent the interests of Alexander's son, [XXXXX Kaganovsky (XXXXX)], and the petitioner's daughter, [XXXX Kaganovsky], who were infants.¹

By decree of the court dated February 26, 2025, letters of trusteeship previously issued to the petitioner were revoked and Alexander was appointed as Successor Trustee of the CST.

Objections were filed by Alexander, Elina, and the guardian ad litem. The objectants collectively allege that the petitioner procured a $1,000,000.00 loan in the name of Health Care Properties LLC, a CST-owned asset that owns real property located at 2700 Ocean Avenue, Brooklyn, New York, and used the proceeds of that loan to cover closing costs and prepaid interest on the loan in the amount of $340,288.61. The objectants allege that the petitioner transferred the net proceeds of that loan in the amount of $659,700.39 to the CST and then, as Trustee of the CST, loaned $529,236.22 of those proceeds to herself, individually, and $10,000.00 to the Kaganovsky Family Limited Partnership (FLP), also an asset of the CST. Alexander further asserts in his affirmation submitted in support of the motion for summary judgment that the Trust Account shows administrative expenses of $11,511.28 and that $108,952.89 remained in a Merrill Lynch bank account, however, by the time he was appointed Successor Trustee, the petitioner had depleted the Merrill Lynch account and withdrawn the remaining $108,952.89. Alexander further asserts that the FLP was required to expend $46,693.00 to make repairs to an apartment which was owned by the FLP, an asset of the CST, in which the petitioner resided, because the petitioner failed to properly maintain it. Alexander, Elina, and the guardian ad litem assert that the petitioner should be surcharged for: (1) engaging in self-dealing to mortgage CST-owned real property for $1,000,000.00, and then making unsecured loans of CST assets to herself, none of which has been repaid; (2) accruing significant and unreasonable legal fees in connection with her malfeasance, self-dealing, and waste of CST assets; (3) committing waste by paying unreasonable and unnecessary administration expenses; and (4) committing waste by damaging the apartment, resulting in an unnecessary loan from the CST to the FLP to pay for the damages. The objectants request that the court surcharge the petitioner $1,224,381.72 in damages (consisting of $988,488.72 in loan proceeds that the petitioner misused, $175,000.00 in legal fees to Kostelanetz, LLP that the CST paid, and $60,893.00 presumably with regard to the damage to the apartment), plus statutory interest and attorney's fees.

SUMMARY JUDGMENT

Summary judgment may be granted only when it is clear that no triable issue of fact exists (Alvarez v Prospect Hosp., 68 NY2d 320 [1986]; Dorival v DePass, 74 AD3d 729 [2d Dept 2010]). The court's function on a motion for summary judgment is issue finding rather than issue determination (Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395 [1957]; Trio Asbestos Removal Corp. v Gabriel & Sciacca Certified Pub. Accountants, LLP, 164 AD3d 864 [2d Dept 2018]). Consequently, it is incumbent upon the moving party to make a prima facie showing that she is entitled to summary judgment as a matter of law (CPLR 3212 [b]; Zuckerman v City of New York, 49 NY2d 557 [1980]; Gesuale v Campanelli & Assoc., P.C., 126 AD3d 936 [2d Dept 2015]). The papers submitted in connection with a motion for summary judgment are always viewed in the light most favorable to the non-moving party (Smarkucki v Kleinman, 171 AD3d 1118 [2d Dept 2019]). If there is any doubt as to the existence of a triable issue, the motion must be denied (Rotuba Extruders, Inc. v Ceppos, 46 NY2d 223 [1978]; Trio Asbestos Removal Corp. v Gabriel & Sciacca Certified Pub. Accountants, LLP (164 AD3d 864 [2d Dept 2018]).

If the moving party meets the initial burden, the party opposing the motion must produce evidentiary proof in admissible form sufficient to establish the existence of a material issue of fact that would require a trial (Stonehill Capital Mgt. LLC v Bank of the W., 28 NY3d 439 [2016]). In doing so, the party opposing the motion must lay bare his or her proof in opposition to the motion (Emigrant Funding Corp. v Agard, 121 AD3d 935 [2d Dept 2014]). "[M]ere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient" to overcome a motion for summary judgment (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; accord Rios v New York City Hous. Auth., 48 AD3d 661 [2d Dept 2008]).

"When petitioning for judicial settlement of an account, the party submitting the account has the burden of proving that he or she has fully accounted for the entire estate. 'While the party submitting objections bears the burden of coming forward with evidence to establish that the account is inaccurate or incomplete, upon satisfaction of that showing the accounting party must prove, by a fair preponderance of the evidence, that his or her account is accurate and complete' " (Matter of DiGiovanna, 148 AD3d 699, 700 [2d Dept 2017][internal citations omitted]).

Mortgage on 2700 Ocean Avenue

In the instant proceeding, the moving parties have set forth evidentiary facts to establish their objections to the petitioner's accounting sufficiently to entitle them to judgment as a matter of law on the breach of the trustee's duty by obtaining a mortgage in the name of the CST's property located at 2700 Ocean Avenue and using the proceeds to make loans to herself (Winegrad v NYU Medical Center, 64 NY2d 851 [1985]). The accounting and the movants' submissions show that the petitioner procured a $1,000,000.00 loan in the name of HLP, a CST-owned asset which owns 2700 Ocean Avenue and used the proceeds thereof to pay closing costs and pre-pay interest on the loan in the amount of $340,288.61. The petitioner then transferred the net proceeds of that loan in the amount of $659,700.39 to the CST and, as Trustee of the CST, made unsecured loans in the amount of $529,236.22 from those proceeds to herself and $10,000.00 to the FLP.

A trustee cannot properly lend trust funds to himself or herself (IIA, Scott, Trusts [4th ed], Sec. 170.17; Bogart, Trusts and Trustees [2d ed] § 543[J]). Such a loan is improper even where the terms of the trust give the trustee the widest power of investment (Carrier v. Carrier, 226 NY 114 [1919] because it places the trustee in a position where his personal interest may conflict with the interests of the beneficiaries (Matter of Garrasi, 33 Misc 3d 1224 [A] [Sur Ct, Schenectady County 2001]). This is particularly egregious where the loans are made without any security for the trust.

Having stated these fundamental principles of a trustee's duty, the objectants have made a prima facie showing of entitlement to summary judgment sustaining their objections on the ground of self-dealing by the petitioner in violation of her fiduciary duties. Since the petitioner has not filed any opposition to the instant motion and no triable issue of fact is raised in opposition to the objectants' prima facie showing, the motion for summary judgment sustaining the objections is GRANTED as unopposed and the petitioner is surcharged $988,488.72, plus pre-judgment interest (Matter of Rothko, 43 NY2d 305, 322 (1977)]).

Damage to Apartment

The accounting and the movants' submissions show that the FLP expended $46,693.00 to make repairs to an apartment that it owned because the petitioner failed to properly maintain it. Since the petitioner has not filed any opposition to the instant motion and no triable issue of fact is raised in opposition to the objectants' prima facie showing, the motion for summary judgment sustaining the objections is GRANTED as unopposed and the petitioner is surcharged $46,693.00, plus pre-judgment interest. The additional $4,000.00 in fees related to the mortgage loan sought by the objectants to be surcharged is encompassed in the $988,488.72 surcharge for the mortgage loan, as set forth above. The additional $10,000.00 loan from the CST to the FLP to pay for the damage to the apartment sought by the objectants to be surcharged is encompassed in the $46,693.00 surcharge for the cost to repair the damage, as set forth herein. The court declines the objectants' request to surcharge the petitioner $200.00 for reimbursement for travel expenses between Manhattan and Brooklyn.

Trustee's Commissions

The objectants contend that the petitioner should be denied commissions because of her self-dealing and waste of the CST's assets. SCPA 2307[1] directs the payment of statutory commissions to a fiduciary absent a showing of misconduct or mismanagement of an estate on the part of the fiduciary. Such decision is within the discretion of the Surrogate (see Matter of Smith, 91 AD2d 789 [3d Dept 1982]; Matter of Klenk, 151 Misc 2d 863 [Sur Ct, Suffolk County 1991]). Inasmuch as the court has found malfeasance on the petitioner's part with respect to the mortgage loan, the court denies trustee commissions to the petitioner (see SCPA 2307[1]).

Attorneys' Fees for Alexander and Elina

Alexander and Elinas request attorney's fees from the petitioner under SCPA 2110 based on, among other things, the alleged breach of her fiduciary duties and for what they believe has been protracted litigation caused by the petitioner. The Surrogate's Court has broad discretion under SCPA 2110 to consider a wide range of factors in fixing attorneys' fees. It must consider various factors, including "the amount of time involved, the degree of difficulty of the matter in which services were rendered, the amount of money involved, the extent of the attorney's experience, and the results obtained" (Matter of Wallace, 68 AD3d 679, 680 [1st Dept 2009]). "Where the legal services rendered did not benefit the estate but benefitted only the individuals whom the attorney represented, the attorney must seek compensation from the clients individually" (id. at 680-681; see Matter of Baxter [Gaynor], 196 AD2d 186, 189-190 [4th Dept 1994], lv denied 84 NY2d 808 [1994]). Generally, "courts will consider: time spent; complexities of the tasks involved; customary fee charged by the Bar for similar services; lawyer's experience and reputation; nature of the services provided; amount of litigation required; and the size of the estate" (Matter of Persaud, 70 Misc 3d 1221[A], *2 [Sur Ct, Queens County 2021] [internal citations omitted]).

In seeking attorneys' fees from the petitioner here, neither Alexander nor Elina supplied the Court with any information. For example, they did not detail any of the legal services performed, describe the nature of the services provided, or the number of hours spent in connection with this matter. Hence, the court has very limited information before it regarding their application. Despite the difficulties inherent in this case based on the contested facts and legal issues, the court declines to make an order fixing the value of legal services and awarding counsel fees to Alexander or Elina. At this juncture, the Court is without critical information to apply and balance any factors. Consequently, that branch of the objectants' motion requesting an award of attorneys' fees is denied (see Matter of Garrasi, 29 Misc 3d 822, 830-831 [Sur Ct, Schenectady County 2010]; see generally Matter of Bejjani, 2023 NY Slip Op 32302[U], 19-23 [Sur Ct, New York County 2023]).

Trustee's Legal Fees

With respect to the legal fees for services rendered by the law firm of Kostelanetz, LLP (Kostelanetz), which performed legal services to the petitioner in her capacity as Trustee for the period from April 2020 through July 2024, the court notes that in a decision of the court dated March 30 2026, the court approved a settlement agreement entered into among the parties dated December 19, 2025 (the Settlement Agreement), wherein they agreed to accept the amount of $175,000.00 in full satisfaction of the claim for legal fees, which Settlement Agreement included mutual releases from liability. The court fixed the Kostelanetz legal fees in the amount of $175,000.00, and directed that the fees be paid, pursuant to the Settlement Agreement, out of the CST assets. Since the issue of the Kostelanetz legal fees had already been resolved by the Settlement Agreement, which included mutual releases from liability, and by the order dated March 30, 2026, approving the Settlement Agreement, the court declines the objectants' requests to surcharge the petitioner for the Kostelanetz legal fees in the amount of $175,000.00.

Accordingly, the branches of the motion which were for summary judgment on the objections are GRANTED. The branches of the motion which were for attorneys' fees and to surcharge the petition for the Kostelanetz legal fees are DENIED.

Settle decree in accordance with this decision and order.

This constitutes the decision and order of the court.

Dated: July 9, 2026

Mineola, New York

E N T E R:

HON. DAVID P. SULLIVAN

Judge of the Surrogate's Court

FOOTNOTES

1.   XXXXX has since attained the age of majority.

David P. Sullivan, J.