2004 NY Slip Op 51773U, *; 6 Misc. 3d 1011A, **;
800 N.Y.S.2d 342, ***; 2004 N.Y. Misc. LEXIS 2933
[*1] In the Matter of the Proceeding of
Co-Trustees SANFORD E. BECKER and BRUCE H. HOFFMAN to Enforce the Revocable
Funded Inter Vivos Trust, Dated June 10, 1999, Settled by CHARLES H. HOFFMAN,
Deceased
0269/03
SURROGATE'S COURT OF NEW YORK,
2004 NY Slip Op 51773U; 6 Misc. 3d 1011A; 800 N.Y.S.2d 342; 2004 N.Y.
Misc. LEXIS 2933
September 27, 2004, Decided
NOTICE:
THIS OPINION IS UNCORRECTED AND WILL NOT BE PUBLISHED IN THE PRINTED
OFFICIAL REPORTS.
DISPOSITION: Respondent's motion granted; that part of the petition
seeking recovery of the NYSE seat as an asset of the Trust dismissed with
prejudice.
CORE TERMS: seat, decedent, grantor, gift, lifetime, delivery,
registration, affirmation, co-trustees, summary judgment, membership,
ownership, transferred, inter vivos, guardian ad litem, sole trustee,
purported, one-half, probate, summary judgment motion, constructive delivery,
admissible evidence, income generated, issues of fact, prima facie,
entitlement, inclusion, attendant, proponent, opposing
HEADNOTES: [***342] [**1011A]
Trusts--Inter Vivos Trust--Petition to recover NYSE seat as trust asset
dismissed.
COUNSEL: GORDON S. OPPENHEIMER, ESQ., Attorney for Rowena Hoffman,
Larchmont, New York; McCARTHY, FINGAR, DONOVAN, DRAZEN & SMITH, LLP,
Attorneys for Rowena Hoffman, White Plains, New York.
RICHARD S. BECKER, ESQ., Attorney for Bruce Hoffman and Stanford
Becker, White Plains, New York; PISCIONERE & NEMAROW, P.C., Attorney for
Bruce Hoffman and Stanford Becker, Rye, New York.
JUDGES: HON. ANTHONY A. SCARPINO, JR.,
OPINIONBY: ANTHONY A. SCARPINO, JR.
OPINION:
Anthony A. Scarpino, J.
This is a miscellaneous proceeding concerning an inter vivos trust
created on June 10, 1999 ("Trust") by Charles H. Hoffman
("decedent"). Bruce Hoffman ("Bruce"), one of decedent's
two sons, and Sanford Becker ("Becker"), who are the surviving
co-trustees of the Trust (collectively "petitioners"), commenced the
instant proceeding to enforce the Trust's ownership rights over certain assets
otherwise passing by operation of law or under the terms of decedent's will,
which was admitted to probate in April 2004. The asset at issue herein is a
membership on the New York Stock Exchange ("NYSE seat").
Decedent's surviving spouse ("respondent"), the estate's
executrix and legatee of the NYSE seat under the will, has moved for summary
judgment, dismissing the petition insofar as petitioners seek to recover the
NYSE seat as an asset of the Trust. While petitioners oppose the motion, the
guardian ad litem appointed to represent the interests of Mark Hoffman,
decedent's incapacitated son ("Mark"), joins in the motion.
The motion is granted, for the reasons set forth, infra.
Decedent died on January 13, 2003, at age 86, after complications from
"end stage dementia". He was survived by respondent, whom he had
married in the late 1970's, and Bruce and Mark, his two sons from a previous
marriage.
From May 1999 through October 2000, decedent purportedly executed a
series of five testamentary instruments. An instrument dated May 28, 1999 and
the probated will, executed October 25, 2000 ("will"), favored
respondent as primary beneficiary, while instruments dated June 10, 1999, May
26, 2000, and October 17, 2000 ("penultimate instrument") favored
Bruce and his family as primary beneficiaries, to the exclusion of respondent
and Mark.
[*2] Under the terms of the Trust, inter alia: (i)
decedent, as grantor, and Bruce and Becker were named and acted as co-trustees
until decedent's death; (ii) the trustees were to collect the income from the
Trust's assets and pay the "net income" to decedent during his life;
(iii) upon decedent's death, the Trust's remainder was to be distributed, in
equal shares, to Bruce and Bruce's issue; and (iv) the Trust was revocable.
Additionally, there are four assets delineated in "Schedule A"
annexed to the Trust instrument ("Schedule A"). As to the NYSE seat,
Schedule A provides:
"1. Membership in the
The NY Stock Exchange does not permit registration of memberships in
the name of trustees. Grantor and Trustees recognize this to be the case."
Under his will, decedent bequeathed: (i) all of his personal property
to respondent; (ii) a subordinated loan account, the NYSE seat, and the
difference, if any, of one-half of the net estate less the value of the NYSE
seat to respondent; and (iii) his residuary estate, in equal shares, to Bruce
outright (one-half) and to Mark, in further trust (one-half).
In January and February 2003, proceedings to probate both the will and
the penultimate instrument were commenced. After numerous court appearances and
conferences, by Decision and Order dated March 15, 2004, the court approved of
a compromise to resolve the probate proceedings (SCPA 2106), and admitted the
will to probate.
In the interim, in September 2003, petitioners commenced the instant
proceeding, to exert the Trust's ownership over certain assets listed in
Schedule A, including the NYSE seat. In her answer, respondent alleges that the
property sought by petitioners cannot be Trust property, and the Trust was not
properly funded.
In support of her motion, respondent claims that the NYSE seat was
never an asset of the Trust, as: (i) the Constitution and Rules of the New York
Stock Exchange prohibit a trust from owning a seat/membership in the Exchange;
and (ii) in any event, in light of the co-trustees' failure to adhere to the
applicable provisions of EPTL 7-1.18 for the funding of inter vivos trusts at
the time the Trust was created in 1999, the NYSE seat was never properly
transferred into the Trust.
Summary judgment is a drastic remedy, properly invoked only when it is
clear that no genuine factual issues exist (see Andre v Pomeroy, 35 N.Y.2d 361,
320 N.E.2d 853, 362 N.Y.S.2d 131; Phillips v Kantor &
[*3] Ordinarily, a seat on a stock exchange, other
security exchange, or commodity exchange may be held in trust, unless there is
something in the rules of the exchange at issue to the contrary (see, IA Scott,
Trusts § 82.7, at 467 [4th ed.]). As for the NYSE seat, at least one court in
this jurisdiction has held that a NYSE seat is considered to be an unassignable
intangible property interest (see e.g. Schwabacher v Ehrich, 168 Misc. 869, 6
N.Y.S.2d 316 [1938]; but see Matter of Gruner, 295 NY 510, 519, 68 N.E.2d 514
[1946] [no provision in Exchange's Constitution or Rules forbidding
assignments]).
As to respondent's first asserted ground, she has failed to make a
prima facie case entitling her to summary judgment. More particularly,
respondent cites numerous provisions of the Exchange's Constitution and Rules
in support of her contentions that ownership of a NYSE seat by the Trust is
prohibited, or, in the alternative, decedent and petitioners failed to take
appropriate measures to have the purported transfer approved within the
parameters of the Constitution and Rules. Since respondent has failed to submit
a copy of the Constitution and Rules, she has failed to submit sufficient
evidence in admissible form to meet her initial burden of establishing her
entitlement to summary judgment on the first asserted ground.
However, as to respondent's second asserted ground, the court finds
that respondent is entitled to summary judgment on the record presented.
Enacted in 1997 (L 1997, ch 139) as part of comprehensive legislation
to "impose some formal requirements on the execution of lifetime
trusts" (Turano, Practice Commentaries, McKinney's Cons Laws of NY, Book
17B, EPTL 7-1.14, at 331), EPTL 7-1.18, applicable to all lifetime trusts
created on or after December 25, 1997, provides:
"A lifetime trust shall be valid as to any assets therein to the
extent the assets have been transferred to the trust. For the purposes of this
section, (a) transfer is not accomplished by recital of assignment, holding or
receipt in the trust instrument, and (b) in the case of a trust of which the creator
is the sole trustee, transfer shall mean in the case of assets capable of
registration such as real estate, stocks, bonds, bank and brokerage accounts
and the like, the recording of a deed or the completion of registration of the
asset in the name of the trust or trustee, and in the case of other assets a
written assignment describing the asset with particularity."
In essence, the aforementioned statute provides that all lifetime
trusts created on or after December 25, 1997 are valid "only in regard to
assets actually transferred to the trusts" (4 Rohan, NY Civ. Prac-EPTL, P
7-1.18[1], at 7-324.10[5]). However, while the statute provides for the methods
of "actual transfer" when the grantor is also the sole trustee of a
trust, it does not specifically address the method of transfer when the grantor
is not the trust's sole trustee. In the latter case, one commentator has
suggested that "ideally", the grantor should comply with the methods
of transfer set forth in the statute (see Turano, Practice Commentaries,
In support of her motion, respondent contends that, during disclosure,
petitioners failed to produce any physical evidence, other than Schedule A,
that decedent purported to transfer the NYSE seat according to either the
explicit guidelines or implicit legislative intent attendant to EPTL 7-1.18. In
this respect, respondent produced evidence that, following the creation of the
Trust: (i) the income generated from decedent's lease of the NYSE seat was
deposited into two bank accounts decedent held jointly with respondent, with
right of survivorship, instead of any account attendant to the Trust; and (ii)
decedent, as lessor, continued to lease the NYSE seat in his individual
capacity.
In opposing the motion, petitioners contend, inter alia, that the
Exchange does not issue a certificate of registration for ownership of an NYSE
seat in the name of trustees. They further contend that, in any event, the
language in Schedule A and language found in testamentary instruments executed
simultaneously with and subsequent to the Trust clearly indicate decedent's
intent to make a transfer of the NYSE seat at the time the Trust was executed.
The court finds that petitioners' conclusory contentions and analysis are
insufficient to defeat summary judgment.
Initially, petitioners, too, have failed to produce a copy of the
Exchange's Constitution or Rules in support of their allegations that the Exchange
cannot register the NYSE seat in the names of trustees. In any event, assuming
the validity of that contention, it is clear that, notwithstanding the
"disclaiming" language accompanying the listing of the NYSE seat on
Schedule A, the mere inclusion in Schedule A of the NYSE seat as an asset of
the Trust, without more, was insufficient to constitute a valid transfer of the
seat to the Trust under EPTL 7-1.18(a) (see Matter of Rothwell, 189 Misc.2d
191, 730 N.Y.S.2d 664). Moreover, it is clear that decedent failed to
"deliver" the NYSE seat to himself and petitioners, as co-trustees of
the Trust, under the prevailing common law standards for the validity of inter
vivos gifts, which the court shall apply here (see Gruen v Gruen, 68 N.Y.2d 48,
supra, at 56 [what is sufficient to constitute delivery 'must be tailored to
suit the circumstances of the case']). More particularly, even assuming
arguendo, as petitioners' claim, that the NYSE seat was not subject to
transfer, or "delivery", via assignment, recording or registration,
the court concludes that decedent's failure to yield control of the income
generated by the NYSE seat to himself and petitioners, as co-trustees, at
anytime after the Trust was created indicates that there was no constructive
delivery of the NYSE seat to the Trust at any time after it was created ( Gruen
v Gruen, supra [delivery, either by physical delivery of the subject of the
gift or a constructive delivery, such as by an instrument of gift, must be
sufficient to divest the donor of dominion and control over the [*5]
property]). In fact, the record establishes that, other than the
inclusion of the NYSE seat on Schedule A, nothing implicit or explicit was ever
done to formalize the Trust's ownership of the seat.
Finally, the court has reviewed petitioners' contentions with respect
to any purported inconsistency between EPTL 7-1.15 and 7-1.18, and find that
these contentions are belied by the legislative history of the Laws of 1997,
chapter 139, and are, therefore, without merit.
Accordingly, respondent's motion is granted, and that part of the
petition by which petitioners seek recovery of the NYSE seat as an asset of the
Trust is hereby dismissed, with prejudice.
The instant proceeding is restored to the court's calendar of
Wednesday, October 6, 2004, at 9:30 a.m. All counsel, including the guardian ad
litem, shall appear for an all-purpose conference immediately after the matter
is called that day.
THIS IS THE DECISION AND ORDER OF THE COURT.
The following papers were reviewed:
1. The Notice of Motion, filed May 28, 2004, with supporting
affirmation and affidavits, and memorandum of law;
2. The Affirmation in Opposition, filed June 16, 2004, with supporting
affidavits, affirmations, and memorandum of law;
3. The Reply Affirmation, filed June 30, 2004, with supporting reply
affidavits, affirmation, and memorandum of law;
4. The Sur Reply Affirmation, filed July 7, 2004; and
5. The Affirmation of the Guardian Ad Litem, filed July 13, 2004.
Dated:
September 27, 2004
HON. ANTHONY A. SCARPINO, JR.
Westchester