If one reads enough litigation cases, the frequency of intra-family discord over money is striking. If one speaks with potential clients, the frequency is even more striking. Brother against brother, sibling against sibling and parents against children are more the norm than the exception. Kaplan v Valley Natl. Bank 2016 NY Slip Op 51108(U) Decided on July 20, 2016 Supreme Court, Suffolk County Emerson, J. is as good an example as there is.
Mom puts her estate into a trust for the father, with the remained to the children. Good so far? It is a recipe for years of discord. “The plaintiff’s mother, Marilyn Kaplan, executed a will in 1994, leaving her interest in the home that she shared with her husband, Donald, in trust to him and giving him a life estate therein (the “Jericho property”). She also left approximately $250,000 in cash and securities (the “Family Part Sum”) in trust to Donald to be used for his benefit. She appointed Donald and their two sons, Bruce and Daniel, as the trustees. Bruce and Daniel were also the remaindermen of the trust. The trust allowed Donald to withdraw up to 5% of the principal each year and allowed Bruce and Daniel to make discretionary withdrawals to ensure that Donald enjoyed the same standard of living that he enjoyed when Marilyn’s will was executed in 1994. Marilyn died shortly after executing the will. By 2005, the Family Part Sum was depleted and, except for the real property, there was no principal remaining in the trust.
The Jericho property was sold in 1997, and the trust used the proceeds of the sale to purchase a home in Melville, New York, which was sold in 2003. The trust used the proceeds of the second sale to purchase a two-thirds interest in another home in Melville (the “Altessa property”), the one-third owner of which was Donald’s second wife, Elaine Britvan. Elaine died in 2012, and the Altessa property was sold in 2013 for $1.33 million. Bruce was not advised of the sale. After the closing costs were paid, the proceeds of the sale were divided as follows: $174,310.28 to Bank of America to satisfy a mortgage on the property, $670,494.39 to the trust, and $422,410.33 to the Britvan estate. Donald and Daniel then opened a new trust account at Valley National Bank (the “Valley National account” or “trust account”) without making Bruce a signatory thereon and without disclosing to the bank that Bruce was a beneficiary and trustee of Marilyn’s trust. They deposited $670,494.39 into that account.[FN1] In January 2014, $83,500 was transferred from the Valley National account to Donald’s personal account. When Donald died in September 2014, there was approximately $588,000 remaining in the Valley National account. The balance was distributed to Bruce and Daniel pursuant to the terms of Marilyn’s will. On [*2]December 5, 2014, Bruce and Daniel executed a mutual release acknowledging their receipt of $212,500 and $360,500, respectively, and releasing each other from any and all claims with respect to the trust’s principal and accumulated interest. $15,000 was held in escrow to pay, inter alia, legal fees and other expenses. After the escrow was released, Bruce received another $6,500 for a total of $219,000.”
“The plaintiff’s claims against the Bodian defendants are based on their purported plan to siphon equity away from the House Trust to Donald for his personal use, culminating in the undisclosed sale of the Altessa property and diversion of the proceeds of the sale. The plaintiff alleges causes of action against the Bodian defendants sounding in conversion, aiding and abetting conversion, tortious interference with Marilyn’s will and trust, negligence, malpractice, and violation of Judiciary Law § 487.
To establish a cause of action for legal malpractice, the plaintiff must demonstrate the existence of an attorney-client relationship (see, Gleason v Chase, Sup Ct, Westchester County, Sept. 15, 2009, Scheinkman, J. [2009 WL 6849874] [and cases cited therein]). When the relationship of the parties fails to reveal actual privity or a relationship that closely resembles privity, no cause of action for malpractice exists (Id.). Privity does not depend on an express agreement or payment of a fee (Id.). Instead, courts look to the actions of the parties to ascertain the existence of such a relationship to see if there was an explicit undertaking to perform a specific task (Id.). In addition, the plaintiff must allege that the attorney was aware that his services were being used for a specific purpose, that the plaintiff relied upon those services, and that the attorney engaged in some conduct evincing an understanding of the plaintiff’s reliance (Id.).
Clearly the plaintiff, who was not even aware of the sale of the Altessa property, cannot demonstrate the existence of a relationship of actual privity, or even one that closely resembles privity, with the Bodian defendants. Instead, he argues that he had an attorney-client relationship with the Bodian defendants because he was a trustee of Marilyn’s trust.
Marilyn’s will gave the trustees the power “to sell any stock, bond, security, or other real or personal property.” When, as here, there are three or more trustees and nothing to the contrary in the will, a majority is needed to exercise a power (see, EPTL 10-10.7). Since Donald and Daniel were a majority of the three trustees, they properly exercised the power to sell the trust’s two-thirds share of the Altessa property, which was owned by the trust and the Britvan estate. The Bodian defendants represented the sellers in connection with the sale. Thus, any cause of action for malpractice arising out of the sale must be maintained by the trust and/or the Britvan estate. The plaintiff cannot commence an action on the trust’s behalf without the consent of the other surviving trustee. As previously discussed, when there are two surviving fiduciaries and nothing to the contrary in the will, the two fiduciaries must act together (see, EPTL 10-10.7). Since the plaintiff may not act alone on the trust’s behalf, he does not have standing to maintain an action against the Bodian defendants in connection with the sale.
The plaintiff argues that, at the very least, he had an attorney-client relationship with the Bodian defendants as a third-party remainder beneficiary of the trust.
Absent a showing of fraud or collusion or of a malicious or tortious act, an attorney is not liable to third parties for purported injuries caused by services performed on behalf of a client or advice offered to that client (Four Finger Art Factory, Inc. v Dinicola, US Dist Ct, SDNY, Jan. 9, 2001, Koeltl, J. [2001 WL 21248] at *7 [and cases cited therein]). Liberally construing the complaint, accepting the alleged facts as true, and giving the plaintiff the benefit of every possible favorable inference (Leon v Martinez, 84 NY2d 83, 87-88), the court finds that the plaintiff’s allegations do not support an inference that the Bodian defendants acted in bad faith, committed fraud, or acted in an otherwise tortious or malicious way. The plaintiff’s allegations that the Bodian defendants colluded with Donald and Daniel to divert the proceeds of the sale of the Altessa property are conclusory and unsupported by the evidence. The record does not support an inference that the Bodian defendants acted other than in their capacity as attorneys for the trust and the Britvan estate. As previously discussed, Donald and Daniel, as two of the three trustees, had the power act on behalf of the trust and to sell its two-thirds share of the Altessa property. Moreover, the documentary evidence reflects that the proceeds of the sale were used to pay the expenses of the sale, the mortgage on the property, and the Britvan estate. The remaining funds were deposited into the Valley National trust account. There is no evidence in the record to suggest that the Bodian defendants retained any of the proceeds of the sale. When, as here, an attorney acts within the scope of an agency relationship and is not motivated by personal gain, the attorney is not liable to third parties (Four Finger Art Factory, supra, citing Kartiganer Assoc. v Town of New Windsor, 108 AD2d 898; see also Pancake v Franzoni, 149 AD2d 575). Accordingly, the eighth cause of action for malpractice is dismissed.
In view of the foregoing, the plaintiff’s remaining claims against the Bodian defendants, which arise from the same facts and allege the same damages, are also dismissed. Accordingly, the ninth cause of action is dismissed, and the fourth through seventh causes of action are dismissed insofar as they are asserted against the Bodian defendants.”