Aoki v. Aoki

117 A.D.3d 499, 985 N.Y.S.2d 523
CourtAppellate Division of the Supreme Court of the State of New York
DecidedMay 13, 2014
StatusPublished
Cited by2 cases

This text of 117 A.D.3d 499 (Aoki v. Aoki) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Aoki v. Aoki, 117 A.D.3d 499, 985 N.Y.S.2d 523 (N.Y. Ct. App. 2014).

Opinion

Decree, Surrogate’s Court, New York County (Rita Mella, S.), entered March 5, 2013, after a nonjury trial, invalidating two partial releases of a power of appointment executed by decedent Rocky Aoki, and bringing up for review an order, same court (Kristin Booth Glen, S.), entered April 27, 2010, which, insofar as appealed from, denied the motion of respondents-appellants Devon Aoki and Steven Aoki for summary judgment declaring said releases valid, based on the alleged constructive fraud of Rocky’s attorneys, unanimously reversed, on the law, without costs, the decree vacated, the motion granted, and it is declared that the releases are valid.

In 1998, decedent Rocky Aoki, the founder of the Benihana restaurant chain created the Benihana Protective Trust (BPT) to hold stock and other assets relating to Benihana. The BPT trust agreement gave Rocky the power to appoint the beneficiaries of the BPT through his will. He selected as trustees of the BPT two of his six children (petitioners Kevin Aoki and Kana Aoki) and his longtime attorney, Darwin C. Dornbush.

In July 2002, Rocky married respondent Keiko Ono Aoki. A few months later, Kana and Kevin met with Dornbush to express their concern that their father did not have a prenuptial agreement. Dornbush advised them that a postnuptial agreement would resolve their concerns. Rocky discussed this issue with Keiko but she refused to consent to such an agreement. Rocky thereafter met with Dornbush, Kevin and Kana to discuss their concerns regarding possible claims by Keiko against Benihana assets in the event of Rocky’s death.

[500]*500Norman Shaw, Dornbush’s partner and an attorney experienced in estate work, recommended that Rocky could partially release his power of appointment under the BPT agreement so that he could appoint only to his descendants or trusts for his descendants, thereby restricting Benihana assets to members of his direct family. Rocky, Kana and Kevin again met with Dornbush on September 23, 2002 and they reviewed what Dornbush characterized as a “close to final draft” of the partial release. The following day, Rocky met with all three again and signed the one-page document captioned “Partial Release of power of Appointment Under New York Estates, Powers & Trusts Law § 10-9.2.” The pertinent terms of the release are: “I hereby irrevocably partially release the power of appointment [in Article V (a) of the BPT agreement] so that, from now on, I shall have only the following power: I shall have a testamentary power to appoint any of the principal and accumulated net income remaining at my death to or for the benefit of any one or more of my descendants.”

Rocky’s relationship with his children began to deteriorate and reached the point where he commenced litigation against them and Dornbush in their capacities as trustees of the BPT. At his deposition in that litigation, Dornbush testified that he explained to Rocky that upon signing the release, disposition of the Benihana assets would now be limited to his children and their descendants, whereas before his appointment powers were unlimited. In that same action, Rocky testified that Dornbush just told him “sign here.” However, both Rocky and Shaw testified that Shaw explained that the effect of the release was that Rocky could appoint only to his descendants. It is also undisputed that Rocky had sufficient opportunity to read the one page release before signing it. On the same day that he signed the release, Rocky signed a codicil to his will and a consent to an amendment to the BPT agreement.

Because of a change in IRS regulations concerning bequests to nonresident aliens, Shaw prepared a “Further Partial Release of Power of Appointment Under New York Estates, Powers & Trusts Law § 10-9.2” to cover that eventuality. This second release again provided that Rocky was “irrevocably” partially releasing his power of appointment under the BPT agreement, restricting his power to appoint only to his descendants, provided that they were not nonresident aliens. Rocky was given the opportunity to read this release before he signed it on December 27, 2002.

On August 4, 2003, Rocky executed a codicil which purported to exercise his power of appointment, giving 25% of the BPT [501]*501outright to Keiko, and the income from the remaining 75%, to her for her lifetime. It also gave her the power to appoint the principal to one or more of Rocky’s descendants in her will, and designated her as the executrix. The codicil was drafted by Keiko’s regular counsel, Joseph Manson.

Manson thereafter wrote to Dornbush, advising him of the provisions of the codicil. He advised Dornbush that, at Rocky’s suggestion, the two should meet to discuss the will “and other matters concerning the Aoki family.” At their meeting, Manson asked Dornbush for an opinion from his firm as to whether Rocky’s purported exercise of his power of appointment in the codicil was valid. On September 8, 2003, Shaw responded, opining that the portion of the codicil giving Keiko a beneficial interest in the BPT was invalid because the partial release signed by Rocky rendered Keiko an impermissible appointee of the trust. On September 22, 2003, Rocky executed an affidavit in which he stated that he did not understand that by signing the releases he could not leave his Benihana stock to anyone he chose through his will. He further stated: “If I had known that these documents prevented any changes to the disposition of my stock, I never would have signed the documents.” The purpose of preparing this affidavit is unclear, in light of the fact that at no time prior to his death in July 2008 did Rocky take any steps to declare the releases invalid, or otherwise challenge their execution.

In fact, on September 7, 2007, almost four years after executing that affidavit, Rocky executed a new last will and testament. In it, he again purported to exercise his power of appointment in the same manner as in his August 3, 2004 codicil. However, he added: “In the event that it is finally determined that the [above] exercise of my power of appointment... is invalid because, contrary to my wishes, the [September and December 2002 partial releases] are found to be valid, ... I hereby exercise said power fifty percent... in favor of DEVON AOKI, . . .and fifty percent ... in favor of STEVEN AOKI.”

In February 2009, the trustees of the BPT brought this action to determine the validity of the partial releases. Devon and Steven answered. Keiko answered and asserted affirmative defenses, claiming, inter alia, that the proposed releases “are invalid as they are the product of fraud or were obtained through fraudulent devices.”

After discovery was conducted, Devon and Steven moved for summary judgment to dismiss Keiko’s affirmative defenses and to declare the releases valid. The Surrogate granted the motion in part and denied it in part, finding that Keiko had raised a tri[502]*502able issue of fact as to her affirmative defense of constructive fraud. After a bench trial, although the Surrogate found that Keiko had adduced no direct evidence that Rocky was unaware that the releases were irrevocable, the court held that the circumstantial evidence was sufficient to meet Keiko’s burden and that Devon and Steven failed to meet their burden of proving that Rocky’s signing of the releases was voluntary and not the result of omission by his counsel. The Surrogate declared the releases invalid. We now reverse.

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Cite This Page — Counsel Stack

Bluebook (online)
117 A.D.3d 499, 985 N.Y.S.2d 523, Counsel Stack Legal Research, https://law.counselstack.com/opinion/aoki-v-aoki-nyappdiv-2014.