IN RE: the Application of Nicholas TEGLAS (2018)

In a proceeding for the turnover of assets in the estate of Marjorie S. Priestly (the “decedent”), brought by Nicholas Miklos Teglas (“Nicholas”), as limited administrator, Joan C. Priestly (“Joan”), the administrator c.t.a. of the estate and the attorney-in-fact for the decedent, moves to dismiss the petition. Nicholas opposes the motion. The motion is decided as set forth below.

The facts in this matter have been set forth by the court in many prior decisions. Those facts relevant to the motion is as follows:

The decedent was married to Henry Priestly, and together, they had one child, Joan. The Teglases were neighbors of the decedent and Henry. Henry died on November 30, 2006, and his will was probated by decree of this court.

On February 26, 2008, the decedent executed an instrument, purporting to be her last will and testament. The instrument provided for general bequests to 10 people. She left her home at 135 Orchard Street, White Plains, NY (the “house”) to Nicholas and her residuary estate to Joan. Joan lives in Alaska.

On February 13, 2009, the decedent executed a power of attorney in favor of Joan.

On October 13, 2009, Joan used the power of attorney to transfer the house from the decedent to the Priestley Family Foundation (the “Foundation”). The Foundation is listed as an Alaska not-for-profit corporation. On November 30, 2009, the deed was recorded.

On September 9, 2010, the decedent died at the age of 93. The nominated executor under the decedent's will renounced, and thereafter, petitions for probate were filed by Joan and Nicholas. The contest was resolved between Joan and Nicholas by stipulation, and letters of administration c.t.a. issued to Joan.

On June 7, 2012, a summons and a complaint were filed in the Supreme Court action, by Joan, as administrator c.t.a., alleging, among other claims, that Nicholas owed the estate $217,045.54 plus interest (the “Supreme Court action”).

By citation returnable September 5, 2012, in this court, Nicholas, as a specific beneficiary, requested that Joan, as administrator c.t.a., pursuant to SCPA 2102[4], show cause why she should not turn over the house to him. On September 16, 2012, Joan answered the petition, generally denying the allegations and asserted three defenses (house transferred on October 13, 2009, fraud claim lacks specificity, laches, estoppel and unclean hands).

On October 20, 2012, the Teglases answered the complaint in the Supreme Court action, generally denying the allegations and asserting affirmative defenses (failure to mitigate damages, existence of a confidential relationship between Joan and the decedent, paintings belonged to Nicholas, laches, estoppel, unclean hands, and statute of limitations) and two counterclaims: (1) conversion of personalty (valued at $185,400) belonging to the decedent which was left to the Teglases and (2) monies in the amount of $500,000 were converted by Joan and should be in the decedent's estate.

On November 20, 2012, Joan moved to amend the complaint in the Supreme Court action to, among other things, increase the damages. By order dated January 3, 2013, the Supreme Court, Westchester County granted the motion to amend the complaint. On January 5, 2013, the Teglases answered the amended complaint, generally denying the allegations, and raising the same affirmative defenses and counterclaims.

On January 18, 2013, the Supreme Court ordered that the Supreme Court action be removed to this court.

Joan then moved for summary judgment to dismiss the miscellaneous petition and the first counterclaim in the Supreme Court action. By decision and order dated July 14, 2015, this court (Walsh, Acting Surrogate) dismissed the miscellaneous petition for lack of standing, holding that Nicholas's remedy was to have served and filed an SCPA 2103 proceeding against the Foundation, which if successful, would cause the house to be returned to the estate and that if the house was not turned over once restored to the estate, he should then institute an SCPA 2102 proceeding. Summary judgment also was granted, dismissing the first counterclaim in the Supreme Court action. The court held that the counterclaim was not properly before the court in that Nicholas should have sought limited letters in Henry's estate and commenced a discovery proceeding there.

By petition dated August 16, 2016, with a citation to Joan, Nicholas instituted a proceeding to compel Joan to account as attorney-in-fact for the decedent. Joan largely denied the allegations in the petition and asserted affirmative defenses (barred by a six year statute of limitations; lack of standing to compel an account as a beneficiary of the decedent's estate; laches, estoppel and unclean hands).

By petition filed September 6, 2016, Nicholas sought limited letters of administration to commence an SCPA 2103 proceeding. An accompanying affidavit of his attorney stated that Joan set up the Foundation and then used her power of attorney to transfer the decedent's home to the Foundation to fraudulently defeat the devise left by the decedent in her will to Nicholas.

Joan moved to dismiss both petitions. By decision and order dated February 27, 2017 (Onofry, Acting Surrogate) denied both motions, and on that same date, limited letters of administration were issued to Nicholas to commence an SCPA 2103 proceeding against the Foundation and any person claiming title or interest in the house (Matter of Priestley, 54 Misc. 3d 1220[A], 2017 WL 758341 [Sur. Ct. Westchester Co. 2017] ).

On April 28, 2017, Nicholas filed a petition, citing the Foundation and Joan, in her individual capacity, as attorney-in-fact and as administrator c.t.a., seeking the turnover of the house or the value thereof. The petition was amended to delete the references to Joan in her individual capacity. Citation was issued on August 24, 2017, returnable on September 28, 2017.

As noted above, Joan now moves to dismiss the turnover proceeding on the ground that Nicholas is time-barred from bringing this proceeding in accordance with CPLR 3211[a][5] and CPLR 213[8].

In opposition, Nicholas argues, among other things, that he is not barred by the statute of limitations because the proceeding was commenced on April 28, 2017, and there was no one that had standing to bring the proceeding before that time.

On a motion to dismiss a proceeding in accordance with CPLR 3211, a court must take the allegations in the petition as true and resolve all inferences in favor of the petitioner (see Cimino v. Dembeck, 61 A.D.3d 802, 876 N.Y.S.2d 893 [2d Dept. 2009]; Matter of Hiletzaris, 33 Misc. 3d 1214[A], 2011 WL 5061544 [Sur. Ct. Queens Co. 2011], affd 105 A.D.3d 740, 962 N.Y.S.2d 623 [2d Dept. 2013] ). Furthermore, when the dismissal is sought pursuant to CPLR 3211[a][5] on the ground that it is barred by the statute of limitations, the respondent bears the burden of establishing prima facie that the time in which to sue has expired (see Savarese v. Shatz, 273 A.D.2d 219, 708 N.Y.S.2d 642 [2d Dept. 2009] ).

As this court previously noted in its decision and order dated February 27, 2017, a beneficiary does not have an independent cause of action to seek to recover assets withheld from an estate (see McQuaide v. Perot, 223 N.Y. 75, 119 N.E. 230 [1918] ). Therefore, an individual must obtain letters of administration before suing on behalf of the decedent's estate (see Brandon v. Columbian Mut. Life Ins. Co., 264 A.D.2d 436, 694 N.Y.S.2d 134 [2d Dept. 1999] ). There is no limitation per se as to the period in which a party is entitled to receive limited letters of administration.

Nicholas was awarded limited letters of administration on February 27, 2017, and he instituted this proceeding on April 28, 2017, with a citation returnable on August 24, 2017.

Generally, the statute of limitations in a discovery proceeding is a three year period for conversion (SCPA 102), with the accrual date being the date the conversion of the property took place (see Matter of Rausman, 50 A.D.3d 909, 855 N.Y.S.2d 263 [2d Dept. 2008] ). If actual fraud is alleged in a discovery proceeding, the statute of limitations is the later of six years from the commission of the wrong or two years from the discovery of the fraud or the date on which it could have reasonable been discovered (see Matter of Kraus, 208 A.D.2d 728, 617 N.Y.S.2d 817 [2d Dept. 1994] ). The statute of limitations on a breach of fiduciary duty claim is six years (see Matter of Francis, 19 Misc. 3d 536, 853 N.Y.S.2d 245 [Sur. Ct. Westchester Co. 2008] ).

The claim set forth in Nicholas's petition is a breach of fiduciary duty by Joan in her capacity as attorney-in-fact in using the power of attorney to transfer the house to the Foundation to defeat the decedent's estate plan and in violation of the decedent's rights.

As a matter of equity, if the respondent in a discovery proceeding is the fiduciary, and the proceeding is commenced by a limited administrator, the statute of limitations is tolled for the period of time within which the fiduciary, in his fiduciary capacity, should have commenced such a claim on behalf of the estate against herself individually (see Matter of Rella, 20 Misc. 3d 1143[A], 2008 WL 4182388 [Sur. Ct. Bronx Co. 2008] ).

In Matter of Rella, Surrogate Holzman tolled the statute of limitations for the 11 month period from when the fiduciaries received preliminary letters to the time an estate beneficiary received limited letters of administration to institute a discovery proceeding (see also Matter of Vergo, 137 Misc. 2d 619, 522 N.Y.S.2d 423 [Sur. Ct. Monroe Co. 1987], affd, 145 A.D.2d 935, 536 N.Y.S.2d 613 [4th Dept. 1988] [court found that the statute of limitation was tolled because the obligor on a note owed to the estate was the fiduciary, and the obligor was not allowed to benefit from allowing time to lapse so as to set up an assertion of the statute of limitations] ).

In Vergo, the court wrote:

Clearly enough, the failure of a fiduciary to collect debts owed to the estate should not and cannot work to his advantage so as to permit time to lapse and a Statute of Limitations to bar such a claim. EPTL 13–1.2 sets forth and is explicit in stating that the designation by will of a person as executor does not operate as a discharge or other disposition of any claim which the testator had against him (executor). It goes on to state that such claim must be included as an asset of the estate. This section does prohibit the respondent Vergo from asserting the defense of gifts or other defenses he might have. Assertion by him as a former fiduciary of the defense of the Statute of Limitations however is untenable.

(see also Baucus v. Stover, 89 N.Y. 1 [1881] ).

Therefore, on this basis, to the extent the claim is against Joan, as administrator c.t.a., the statute of limitations did not commence until February 27, 2017, the date Nicholas received limited letters of administration.

The cases cited by Joan are inapplicable here (see Singh v. New York City Health and Hospitals Corp., 107 A.D.3d 780, 970 N.Y.S.2d 33 [2d Dept. 2013] [statute of limitations is not tolled for the period of time a plaintiff seeks and receives limited letters of administration on behalf of a decedent to institute a wrongful death and personal injury action in Supreme Court]; Wilson v. New York City Health and Hospitals Corp., 36 A.D.3d 902, 829 N.Y.S.2d 178 [2d Dept. 2007] [same] ).

To the extent the petition asserts a breach of fiduciary duty against Joan in her role as attorney-in-fact, it is also not time barred. As noted above, the statute of limitations on a breach of fiduciary duty claim is six years (see Matter of Francis, 19 Misc. 3d 536, 853 N.Y.S.2d 245).

CPLR 206[a][1] provides a tolling provision which applies to claims in which a right grows out of the receipt or detention of money or property by a trustee, agent, attorney or other person acting in a fiduciary capacity. When a power of attorney is at issue, the statute commences to run on either of the following: (1) death of the principal (see Ferrentino v. The Dime Savings Bank, 159 Misc. 2d 690, 606 N.Y.S.2d 554 [Sup. Ct. N.Y. Co. 1993]; Matter of Weber, 163 Misc. 81, 296 N.Y.S. 433 [Sur. Ct. N.Y. Co. 1937] ); (2) a judicial accounting by the fiduciary; or (3) an open repudiation of trust by the fiduciary (see Matter of Cipriani, 24 Misc. 3d 1204[A], 2009 WL 1741851 [Sur. Ct. Bronx Co. 2009] ). The law requires proof of a repudiation by the fiduciary which is clear and made known to the beneficiaries (see Tydings v. Greenfield, Stein & Senior, LLP, 11 N.Y.3d 195, 868 N.Y.S.2d 563, 897 N.E.2d 1044 [2008] ). Judge Cardozo wrote in Spallholz v. Sheldon, 216 N.Y. 205, 209, 110 N.E. 431 (1915):

While an express trust subsists and has not been openly renounced, the Statute of Limitations does not run in favor of the trustee. But after the trust relation is at an end, and the trustee has yielded the estate to a successor, the rule is different. The running of the statute then begins, and only actual or intentional fraud will be effective to suspend it.

In this case, the fiduciary, after having been compelled (see Matter of Priestley, 54 Misc. 3d 1220[A] ), has filed an accounting as attorney-in-fact as of June 28, 2017. That proceeding is ongoing. Based on the above, the statute of limitations on the claim of breach of fiduciary duty against Joan as attorney-in-fact has not run.

With regard to the Foundation, the allegations against it are that it is the record owner of the house, that Joan is its president, and that Joan shares an address in the State of Alaska with the Foundation. Based on the allegations set forth is a necessary party to this proceeding.

THIS CONSTITUTES THE DECISION AND ORDER OF THE COURT.

Robert A. Onofry, S.