Matter of Bank of New York (as Trustee of the Trustee Under Article Sixth of the Will of Max Blumenkranz) v. Marshal Feldman, Appellate Division, First Department
When a bank acts as a trustee for an estate, it is held to a higher standard of care. In a longstanding matter before the Surrogate’s Court, Adam Leitman Bailey was called in in the middle of trial to represent brothers whose interests in inherited real property had been adversely affected by the bank’s acts and failure to act. The Surrogate sustained the objections relating to the foreclosure sale. Among other things, the bank claimed that releases that the brothers had signed earlier barred their claims. The Surrogate did not find this argument persuasive and the Appellate Division, in large measure agreed. In sustaining several of the objections to the Bank’s accounting, the court indicated that when there is a breach of duty of fiduciaries of a trust, the beneficiaries of the trust are entitled to be put into the position they would have occupied if no breach had been committed. The Court also noted that “if the Tenant had decided to reject the new Fixed Rent(as it had a right to do under the lease)’ petitioner would have had to find a new tenant upon very short notice,” as the original lease was set to expire in a little over a week. “While a court should not view each act or omission aided or enlightened by hindsight, a court may, nevertheless, examine the fiduciary’s conduct over the entire course of the investment in determining whether it has acted prudently.”
As a result of this ruling, the brothers will now return to Surrogate’s Court to press their claims for damages for all of the sustained objections they made to the bank’s accounting.
Adam Leitman Bailey’s Jeffrey R. Metz represented the client on Appeal and Colin E. Kaufman before the Surrogate’s Court.