• Estate of Donna Miller, 2008 N.Y. Misc. LEXIS 6332 (2008)
  • May 7, 2009 | Authors: Ronald D. Aucutt; Dennis I. Belcher; W. Birch Douglass; Dana G. Fitzsimons; Charles D. "Skip" Fox; William Michael Long; Michele A. W. McKinnon
  • Law Firms: McGuireWoods LLP - McLean Office ; McGuireWoods LLP - Richmond Office ; McGuireWoods LLP - Charlottesville Office ; McGuireWoods LLP - Chicago Office ; McGuireWoods LLP - Richmond Office
  • Donna Miller, a vice president of JP Morgan Chase, died in 2000 survived by a spouse and three sons. Her will was admitted to probate and JP Morgan Chase qualified as executor (the Executor) and as trustee of one of the trusts under the will. Barbara Filner and Harry Rosenberg qualified as co-trustees of the other trust (the Article Fifth Trust) under the will.

    Under her will, Ms. Miller gave a Waterhouse Securities account and her jewelry to her sons, tangible personal property to her spouse, JP Morgan stock and stock options to the Article Fifth Trust for her sons, and the remainder in trust for her husband.

    The family petitioned the surrogate’s court to compel the Executor to file an accounting, and the Executor filed the accounting. The family and the Article Fifth Trustees filed numerous objections to the accounting, including claims that the Executor (1) failed to marshal assets, (2) failed to timely liquidate, distribute, and diversify assets, (3) violated the prudent investor rule, (4) improperly demanded releases prior to making distributions, (5) incurred excessive legal and expert fees, and (6) committed self-dealing. The objections also sought denial of fees, certain apportionment of taxes, removal and surcharge of the Executor, and other relief.

    Following partial discovery, the Executor moved for summary judgment or in the alternative for leave to file cross-objections against the Article Fifth Trustees. Certain of the objections to the accounting were dismissed at an earlier hearing. The family responded by moving to compel compliance with discovery requests and for denial of the motion for summary judgment. The Article Fifth Trustees moved for summary judgment on their objections to the Executor’s accountings, for denial of the motion for summary judgment, and for denial of the motion to file cross-objections.

    In one of its objections to the Executor’s accountings, the family objected to the payment of $7,500 to a valuation firm to value the JP Morgan stock and stock options in the estate. The Executor moved for summary judgment on the basis of the terms of the will and also the Treasury regulations requiring the appraisal of the assets for estate tax purposes and the risk of interest and penalty charges for improper valuation of the assets. The Surrogate’s Court acknowledged the right to obtain the valuation, but refused to grant the Executor summary judgment on the basis that the fee charged for the valuation is a fact matter best reserved for trial.

    The Executor moved for summary judgment on the objections to the investment of $275,000 in its own money market account on the basis that the terms of the Will and state law support the Executor’s authority to invest in its own fund. The Surrogate’s Court denied summary judgment on the basis that the family’s objection was to the rate of interest paid on the account, and the prudence of maintaining a large balance in that account if it was underperforming, which are issues of fact.

    The most significant objection to the Executor’s account was based on the drop in value of the JP Morgan stock and stock options between the date of death and the date of the accounting in an amount of $290,000. The Executor moved for summary judgment on the basis that the stock and stock options were specifically bequeathed to the Article Fifth Trust and therefore the Executor did not have ownership of these assets and the prudent investor rules do not apply. The Article Fifth Trustees had requested funding of the Article Fifth Trust in February of 2001. Counsel for the Executor stated in response that the Executor would make a partial distribution to fund the Article Fifth Trust upon the trustees signing a receipt, release, refunding, and indemnification agreement and waiver of citation for partial distribution. Counsel for the trustees raised concerns about the very broad language of the release drafted by counsel for the Executor, and the fact that the trustees were being asked to grant a release without the Executor providing any accounting, even an informal one. The Surrogate’s Court found the trustees concerns well-founded and their refusal to sign the release to be “beyond reproach”, and noted that with prior partial funding the Executor had requested a much more narrowly tailored release. Accordingly, the Surrogate’s Court denied the Executor’s motion for summary judgment.

    The Surrogate’s Court granted the family’s motion to compel the Executor to respond to discovery, including compelling the Executor to produce all records related to the invest of all cash assets, all records of discussions or memorandum related to whether or not to liquidate or distribute the JP Morgan stock and stock options, and disclosure of the highest net investment returns of all of those trust funds managed by JP Morgan.

    The Article Fifth Trustees moved for summary judgment against the Executor on its objection that the Executor violated its fiduciary duty by conditioning the distribution of the JP Morgan stock and stock options on the signing of the receipt, release, and refunding agreement. The Surrogate’s Court denied summary judgment finding that the Executor raised legitimate factual questions concerning the need to provide for the payment of administration expenses and taxes, and unresolved issues of apportionment of estate expenses.