Matter of Neumann 2024 NY Slip Op 30497(U) January 10, 2024 Surrogate's Court, Bronx County Docket Number: File No. 725P2003/D Judge: Nelida Malave-Gonzalez Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. SURROGATE’S COURT, BRONX COUNTY
January 10, 2024
ESTATE OF ARTHUR J. NEUMANN, Deceased File Nos.: 725P2003/D and 725P2003/E
In this bitterly contested estate, Belinda Neumann-Donnelly
(“Belinda”), the decedent’s niece, filed a motion seeking partial summary
judgment on the remaining branch of her petition pursuant to SCPA 711
requesting that the court remove her father, Hubert G. Neumann (“Hubert”)
as the de facto trustee of the Appointed Neumann Descendants’ Trust
(ANDT), appointing a bank or trust company in his stead. She also asks that
the court reinstate all the directives contained in an order dated February 5,
2019, inter alia, staying him from taking any further actions as trustee, and
vacating partial modifications to said order pursuant to a stipulation and order
respectively dated February 15, 2019 and May 13, 2019. Hubert opposes
removal and requests to consolidate Belinda’s motion with a pending
proceeding seeking to judicially settle his amended intermediate account
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(File No. 725P2003/E). After several conferences were held with counsel
and a member of the court’s Law Department, the parties stipulated that
Hubert is to continue overseeing and controlling all of the art wheresoever
situated, including ANDT’s own art. Accordingly, Belinda no longer seeks to
remove Hubert from overseeing the ANDT art and its interests in the
Neumann Collection but wants him removed from the day-to-day trust
administration activities and certain investment decisions concerning ANDT.
Belinda and Melissa recently retained new counsel. A motion filed by Hubert
seeking to consolidate Belinda’s removal motion with the trustee’s pending
intermediate accounting proceeding has been held in abeyance (File No.
725P2003/E) pending determination on this motion. The court declines to
determine the summary judgment motion and directs its consolidation with
the pending accounting proceeding for the reasons stated below.
Opposition to Belinda’s motion was also filed by two other
nieces, Belinda’s sisters Melissa F. Neumann (“Melissa”) and Kristina
Neumann, who, along with Belinda, are the lifetime ANDT income
beneficiaries, as well as the guardian ad litem representing Melissa’s infant
daughter Eva Neumann Crichton. Jared Donnelly, Lita N. Crichton and
Lachlan N. Crichton, Belinda’s and Melissa’s children who were previously
respectively represented by the guardians ad litem and have attained
majority, and Miles Donnelly, Belinda’s other adult son, have not separately
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appeared or taken a position in these proceedings. All of these great nieces
and nephews are discretionary income and principal beneficiaries of ANDT
and its presumptive remainder persons.
In determining this motion the court reviewed, inter alia, the
affidavits of Belinda, her spouse, Jeffrey Donnelly, Hubert Neumann, Kristina
Neumann, Melissa Neumann, the affirmations of Judd Bernstein, John
Morken, Esq., Donald Novick, Esq., Steven R. Finkelstein, Esq., affidavits of
Christopher Gaillard and Darcy Katris, Esq. and the numerous exhibits
thereto. Oral argument was had and the motion was marked “submitted.”
BACKGROUND
Arthur Neumann died on August 22, 2003 without issue. His
spouse predeceased. His sole distributee is his brother Hubert. Arthur’s will,
dated October 25, 2002, nominates Hubert as executor. The will was
admitted to probate by decree and letters testamentary issued to Hubert on
September 23, 2003.
Arthur’s and Hubert’s parents, Morton H. Neumann and Rose
F. Neumann (“Morton” and “Rose”), emigrated from eastern Europe to the
United States over a century ago and established Valmor, a personal
products empire. During their lifetimes they purchased many paintings and
other works or art from established and striving artists. Upon their deaths,
Hubert assumed control of Valmor and various trusts for family members,
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including ANDT and Hubert’s separate trust, maintained the entire art
collection and acquired additional works of art, all of which have greatly
appreciated in value. The aggregate “Neumann Family Collection” (”the
Neumann Collection”), as depicted by Hubert, is a renowned privately held
art collection of 20th century art. Its value, as well as the extent of ANDT’s
interest in it, remains unknown. All parties herein, who have separate
interests in Valmor and other family trusts that have a stake in the Neumann
Collection, concede that the Neumann Collection is to remain intact and the
art therein is not to be specifically ascribed to ANDT, which also owns
separate artwork. Pursuant to a “so-ordered” stipulation, the identification
and valuation details of the artwork in the proceedings have been redacted
as potentially negatively impacting the provenance and value of the
Neumann Collection and ANDT’s separately owned art.
Morton executed an inter vivos trust agreement that was
restated on June 30, 1980 and amended multiple times, which is referred to
in the documents as the “amended paternal 1980 trust agreement” (“the
Morton Trust”), which became irrevocable upon Morton’s death on April 8,
1985. At that time, certain assets held by the Morton Trust were placed in
a trust for Arthur’s benefit, the Arthur J. Neumann Trust dated February 16,
1987 (the “Arthur Trust”), of which Hubert is the sole trustee. Upon Rose’s
death on May 13, 1998, a portion of the assets held during her lifetime under
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the Morton Trust were also placed into the Arthur Trust. Arthur failed to
exercise the power of appointment designating Hubert as trustee of the
Arthur Trust during his lifetime.
However, Arthur’s will exercises a limited appointment over the
Arthur Trust and said trust refers to ANDT and nominated Hubert as its
trustee. Accordingly, Arthur’s residuary estate was technically paid to
Hubert as the de facto trustee of ANDT (hereinafter “trustee”) to be held in
further trust for the benefit of Hubert’s descendants. Arthur’s will also
nominates Melissa as successor trustee, with a limited power of appointment
to designate a bank, trust company or Belinda to serve as co-trustee with
her. Should Melissa not serve, the will nominates Belinda to serve jointly with
a bank or trust company. An individual fiduciary is authorized to replace a
bank or trust company serving as co-trustee with a successor corporate
trustee upon ten days’ notice. Commissions could not be taken with respect
to the works of art and any interest in the stock of a corporation whose
primary assets consist of works of art. Upon the death of all three nieces,
the remaining assets and income in ANDT are to be paid to Hubert’s then
living grandchildren or their issue, should they fail to survive. Adopted or
non- marital issue are excluded as beneficiaries. The final distributions of
trust principal to Hubert’s surviving grandchildren are to be paid upon their
attaining the age of thirty-five, although the entire net income of the trust is
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to be distributed annually to the income beneficiaries.
BELINDA’S ARGUMENTS
In support of removing Hubert as trustee of ANDT, Belinda
notes that it is uncontroverted that Hubert controls the entire art collection for
the Valmor entities, ANDT, Hubert’s own trust and other family trusts as one
global unit. The [redacted] valuation of the ANDT interests therein is but an
estimate of its approximate relation to the value of all works of art. She
asserts that Hubert believes that the total collection is priceless and the
individual interests of ANDT and its beneficiaries are insignificant in
comparison. When pressed, Hubert begrudgingly sells -art but not enough
to retain comfortable liquidity to pay ANDT expenses or make distributions,
and systematically siphons off ANDT funds for his personal benefit. For
example, she alleges that he spent over $1 million of ANDT funds to acquire
a fifty percent interest in a non income producing townhouse jointly owned
by ANDT and the Hubert Trust and has ANDT pay half of the expenses of
a full-time housekeeper at the townhouse who primarily performs personal
tasks for Hubert and his present companion, Deborah Purden. Hubert pays
Ms. Purden significant funds from ANDT accounts to accompany him to
dinner parties and travel globally with him under the guise of promoting the
Neumann Collection and overpays her for alleged art curatorial services. As
an example of poor fiduciary judgment jeopardizing ANDT’s assets, Hubert
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wilfully refused to insure the art collection for many years. It was only after
Belinda filed the removal proceeding that he obtained insurance coverage
Belinda continues that, although he had his own trust and
significant personal assets, Hubert also loaned a former girlfriend $1,225,000
to purchase her own apartment from ANDT funds, of which $122,500 was
interest-free. There was no promissory note evidencing the debt. The rest
of the loan was held in a 30-year mortgage at a below-market interest rate.
Because ANDT lacked liquidity, Hubert sold $376,058.98 in stocks held by
ANDT at a loss to make the loan, noting that these stocks would have greatly
appreciated in value had they continued to remain part of ANDT’s portfolio.
Hubert also charged ANDT for petty personal expenses such as polishing
silver and cleaning bathrooms throughout the house and the cost to buy new
pants in Paris because he failed to adequately pack for a trip abroad. He
misappropriated significant ANDT funds to pay his personal legal fees and
disbursements for himself and his girlfriend in other litigations to which
neither ANDT nor Hubert as its trustee were parties. He misused his position
as chief operating officer of Valmor to transfer funds to himself from Valmor,
which owns assets in excess of $500 million and is indebted to ANDT for
over $100,000 and committed tax fraud utilizing ANDT, placing it at grave
risk by failing to distribute shares of stock in Valmor and declaring fictitious
debts and loans. He depleted Rose’s estate by undervaluing Valmor stock
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and fraudulently transferring it to a marital trust, and delayed distributing it to
Rose’s own trust. Belinda urges that all of these self-serving transactions
were detrimental to the interests of ANDT and its beneficiaries.
Belinda appears to have had a good relationship with
Hubert prior to the death of her mother Dolores, from whom Hubert was
estranged for many years. Belinda was the primary beneficiary and
nominated executor of Dolores’ last will and testament dated March 4, 2015,
which disinherited Hubert and left modest shares to Melissa and Kristina.
Hubert and Melissa mounted a probate contest in Dolores’ estate, also
involving Kristina, that resulted in a jury verdict in favor of Belinda. Hubert
unsuccessfully attempted to enjoin the sale of a valuable painting by Dolores’
estate at Sotheby’s that was individually owned by Dolores by
misrepresenting that it was part of the Neumann Collection. Belinda avers
that as a result of the probate litigation, Hubert commenced retaliating
against her in 2018, refused to make distributions from ANDT to her or for
her children’s education and wrongly opined that they had to first deplete
their individual trusts. In contrast, Hubert made significant distributions to
Melissa and Melissa’s children during this time period because she sided
with Hubert in the probate contest. He belatedly made several distributions
for Belinda’s daughter’s private school tuition but does not pay for the
college expenses of her two sons.
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Belinda concludes that, although the Morton Trust directs a
trustee to consider all other income and resources of a beneficiary seeking
a distribution, the ANDT instrument does not require consideration of a
beneficiary’s financial circumstances. Significantly Article VII § 5 of the
Morton Trust Instrument, which is incorporated by reference in the ANDT
Instrument, directs that the use of funds for the income beneficiaries shall be
given priority over the conservation of the trust estate for the benefit of the
remainder beneficiaries. In contrast, Hubert is warehousing the ANDT
assets and ignoring the income beneficiaries’ interests.
Belinda’s former attorneys corroborate that Hubert, acting in his
capacity as ANDT trustee, ignored the Morton and Arthur Trust mandates
that the use of funds for the income beneficiaries (Belinda, her two sisters
and the grandchildren/grand nieces and nephews) should be given priority
over the preservation of the trust estate for the benefit of the remainder
beneficiaries. Accordingly, he is obligated to use ANDT funds for the income
beneficiaries’ health, education, support and maintenance, which takes
precedence to preserving the Neumann Collection for the remainder
beneficiaries. Notwithstanding this mandate, Hubert improperly requires
consideration of a beneficiary’s financial condition prior to making
distributions for the purposes permitted in the ANDT instrument, but does not
take financial wherewithal into consideration when making permissible
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distributions to enable the purchase of art.
In 2010 Hubert improperly transferred undivided 50% interests
in both the Trust art and the townhouse to ANDT and the Hubert Trust.
These transfers gave Hubert, in his capacity as trustee and primary income
beneficiary of the Hubert Trust, the power to veto any sales of art necessary
to fund distributions to ANDT’s beneficiaries. By giving himself this control,
he breached his duty of loyalty and created an inherent conflict of interest.
Counsel urges that in the event that Hubert is removed as trustee, Melissa
should likewise be disqualified from serving as successor trustee because
her animus towards Belinda exceeds Hubert’s. Moreover, Hubert has
separately “funneled” significant sums to her in the past several years.
Melissa is undoubtedly the successor Trustee of the Hubert Trust, and she
and her children are beneficiaries of Hubert’s estate. Accordingly, Melissa
is motivated to continue to preserve an intact Neuman Collection at Belinda’s
and Belinda’s children’s expense. In further support of allegations of
Hubert’s retaliation against Belinda and her family, counsel annexes exhibits
concerning New York County Family Court and Criminal Court proceedings
resulting in the issuance of orders of protection against Hubert.
OPPOSITION TO REMOVAL
Hubert counters that the Neumann Collection contains over
2,000 works owned by various Neumann family members. Approximately 60
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to 70 percent of the art is owned by ANDT and the Hubert Trust in equal
shares. As trustee of both trusts, he is obligated to maintain the entire art
collection. Hubert realizes that he must “consider family first” and has never
lost sight of the individual interests. Hubert denies that distributions ceased
to two of Belinda’s children as a result of the litigation in Dolores’ estate. In
fact, he spent $800,000 of his own personal assets to fund trusts for
Belinda’s two sons that now respectively have $324,00 and $450,000 prior
to making distributions for their benefit from the ANDT. Commencing in
2020, he made annual distributions for the education of Belinda’s infant
daughter. There were additional distributions totaling $300,000 each to
Belinda, Melissa and Kristina in 2022.
Hubert urges that he does not harbor hostility toward Belinda.
While he is saddened by her rancor, his requesting financial disclosure as a
predicate for distributions is to ascertain the beneficiaries’ wealth in
accordance with trust mandates. The petty accusations concerning charging
ANDT for de minimis personal expenditures pale in comparison to the fact
that Belinda and her family lived with Hubert in the townhouse rent-free for
over six years and were well aware that ANDT assets paid for its acquisition
and maintenance. Hubert asserts that the First Department expressly held
that he is permitted as a beneficiary and trustee of the Morton Trust to live
there rent-free and doing so does not constitute a distribution of income or
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principal to him. The townhouse is a valuable ANDT asset and, like the
artworks, has substantially increased in value. It was expressly purchased
to display the Neumann Collection to auction houses, artists, art critics and
historians and it engenders relationships and viewings advantageous to the
ANDT beneficiaries because it cultivates demand for the artwork. His
companion, Ms. Purden, was an art consultant for Morton and Rose in 1982,
and has acted as a curator for Neumann Collection since the late 1990s.
Her services have been indispensable in securing and increasing ANDT’s
assets.
The original decision not to insure the art collection was made
in consultation with Belinda and her sisters who concurred that the art was
secured in various locations. Instead of having to sell other rapidly
appreciating art works, the saved premiums were used to purchase
additional art for ANDT. In any event, all of the art is now insured. Hubert
also avers that he never used ANDT funds to pay the legal fees in Dolores’
probate litigation or personal legal bills. The lawsuit seeking to enjoin the
sale of the painting in Dolores’ estate was brought on behalf of the Neuman
Collection, which includes the ANDT art.
The allegations of tax fraud concerning the sale of two works
of art by ANDT that should have been ascribed to the Hubert Trust and
Valmor are likewise false given that Hubert has a much greater stake in his
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own trust and Valmor. In any event, Hubert always appropriately consulted
with counsel and accountants when making financial decisions.
In further opposition, Hubert’s attorney affirms that nothing
novel has occurred since the court reinstated Hubert’s powers and authority
as ANDT trustee. In accordance with this court’s orders, Hubert has faithfully
submitted monthly reports to Belinda’s counsel detailing the administration
expenses of ANDT made during the prior month and notice of legal fees and
sale of art. Should Hubert be suspended from making business decisions
or authority to act on the day to day trust activities, ANDT and its
beneficiaries will be irreparably harmed. Belinda has commenced 18 actions
against Hubert and her sisters in various forums seeking similar relief.
Additionally, the removal of Hubert as ANDT trustee would subvert Arthur’s
intent, as well as that of Rose and Morton, especially since there is no
showing of misconduct that endangers ANDT. Under Hubert’s helm, the
ANDT assets have prodigiously appreciated in value, benefitting all
beneficiaries. The potential damage to ANDT by installing a successor
trustee lacking Hubert’s experience and contacts would irreparably damage
its rare, irreplaceable assets.
In further opposition, counsel submits an affidavit from Darcy
Katris, Esq., one of Hubert’s estate attorneys, that there was a delay in
distributing assets from Rose’s trust to the ANDT and Hubert trusts because
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of tax issues. Also annexed is the affidavit of Christopher Gaillard, Chairman
of an art appraisal and advisory company, confirming that because the ANDT
and Hubert’s Trust have different beneficiaries, Hubert prudently distributed
50% interests in the artwork owned by Rose’s marital trust to each trust,
ensuring that the trusts were equal in value because artworks appreciate at
different rates. He also opines that all art works, whether belonging to
Valmor, ANDT or the Hubert Trust, are sold at auction as part of the
Neumann Collection, which enhances their value by assuring potential
bidders of their quality and provenance.
Counsel notes that where there is a pending accounting
proceeding, the courts are extremely reluctant to remove a fiduciary until the
conclusion of the proceeding to avoid multiple tracks of litigation involving the
same subject matter. Accordingly, he requests that the removal proceeding
be held in abeyance pending resolution of the accounting proceeding, as it
would also offer appropriate recourse to Belinda for her numerous unjustified
grievances. Removal without a hearing is appropriate only when the
fiduciary’s misconduct is established by undisputed facts or concessions.
Here, all of the facts are disputed and it is uncontroverted that all of the
ANDT assets are well taken care of and secured, they have appreciated over
eight times after Rose’s death under Hubert’s stewardship and there is no
showing of harm.
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Counsel also urges that there is no retaliation or animosity
towards Belinda. In fact, she and her family occupied two floors of the
Riverside Drive townhouse rent-free and Hubert distributed approximately
$550,000 in cash and over $1,000,000 in art to Belinda prior to this litigation,
greatly exceeding the amounts paid to Kristina and Melissa during this time
period. Belinda and her husband commenced proceedings in the New York
County Family and Criminal Courts against Hubert only after he requested
that they leave the townhouse. In fact, Hubert had to file an eviction
proceeding against Belinda and her family, and both the Family Court and
Criminal Court proceedings were dismissed.
Counsel rebuts the assertion that reimbursement is appropriate
only for the storage, maintenance and insurance of art. Since Arthur’s will
is silent on that issue, the Morton Trust Agreement controls, in that in
addition to receiving reasonable compensation for services as trustee,
reimbursement may be made for all proper expenses incurred in the
management, protection and distribution of the trust estate, including agents’
and attorneys’ fees. Counsel concludes that Hubert halted distributions for
Belinda’s adult children because ANDT distributions are not mandatory and
depend on the financial circumstances of all of Hubert’s descendants.
Belinda’s impending wealth from her mother’s estate was also taken into
account, and Hubert’s repeatedly asking for financial documents was not in
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any way related to litigation commenced by Belinda. In any event, counsel
avers that Belinda’s claims are barred by the doctrines of estoppel,
ratification and laches.
In further opposition, Melissa’s attorney notes that there is
nothing in Belinda’s application supporting Hubert’s removal or that Melissa
should be by-passed as successor trustee despite Arthur’s testamentary
intent that she should serve in that capacity. Even if the application were
granted, there is no other trustee who could effectively manage the complex
trust assets even on a temporary basis. Should Hubert step down or be
incapable of continuing to serve, Melissa is fully qualified by reason of her
excellent education and experience as an active art collector and financial
manager.
The guardian ad litem originally appointed for Melissa’s infant
daughter and a son who has since attained majority, affirms that his wards
are remainder persons and have significant interests that may be affected
by the relief sought herein. He urges that any change of Trustee, even on an
interim basis, would wreak havoc on the Trust and the beneficiaries and a
corporate or individual trustee would lack the expertise, time and willingness
to deal with such a considerable and unique trust corpus. This would
jeopardize his wards’ substantial remainder interest in the trust and likely
cause chaos in a market already affected by world events. Moreover, the
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ANDT assets have grown exponentially under Hubert’s stewardship, and
there is no showing of fact that the trust or its assets are in danger of loss or
dissipation. Finally, there is a pending accounting proceeding and should
Belinda prevail in any of her allegations, monetary relief is available.
BELINDA’ S REPLY
Belinda’s former attorney affirms that after refusing to pay any
distributions for years, Hubert only commenced making them in 2022 as a
quid pro quo for Belinda’s withdrawing a motion seeking to suspend him for
all purposes. In fact, Hubert remains hostile to her. In any event, Belinda
does not request consolidation, and the removal and accounting proceedings
are on different time tracks.
As a fiduciary is held to a much higher standard than an
ordinary litigant, a showing of self-dealing or gross misconduct, including a
conflict of interest, is sufficient to warrant the suspension of a fiduciary
without any additional showing of irreparable harm. Hubert has not fully
complied with the court’s directives. He is only permitted to pay normal trust
administration expenses and give notice of any payment exceeding $10,000
within seven days and of legal fees within 72 hours. Although Hubert
furnished monthly reports, he failed to timely disclose nearly $2.8 million in
ANDT payments during the past three years. He recently made substantial
capital improvements to the townhouse, including creating a garden. Since
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Hubert only sold two works of art owned by ANDT since 2019, removing him
as trustee should not interfere with ANDT’s art “business.”
As for self-dealing, Hubert used ANDT funds to pay his
girlfriend for personal tasks such as accompanying him to parties and
vacations and for his own personal legal fees in litigating against auctioning
art in Dolores’ estate. He also used ANDT assets to fund a loan to a former
girlfriend, a portion of which was interest-free, and sold securities belonging
to ANDT at a loss to fund that loan. He transferred money from Valmor to
the Hubert trust at a time when Valmor owed ANDT $112,257. With respect
to Melissa’s suitability as a trustee, counsel notes that, despite being
depicted as having a solid business background, she is in fact a medical
doctor with a busy practice and is “too busy to assume the additional
obligations of ANDT trustee.”
ORAL ARGUMENT
In addition to the arguments by counsel highlighting the
contentions in their documents, the guardian ad litem for Melissa’s infant
daughter notes that it is ANDT’s remainder persons who are ultimately
bearing the cost of the multitude of litigations herein and those in New York
County. Hubert has grown the corpus of ANDT exponentially to his ward’s
benefit. Counsel notes that the loan to the girlfriend was paid in full with
interest, and there was no loss to ANDT. Because it has such a
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sophisticated corpus, there is no bank trust department or individual who is
going to properly manage the assets and, in any event, a replacement
fiduciary would seek millions of dollars in compensation for trying to do so.
The guardian ad litem avers that none of the remainder persons or other
income beneficiaries want the court to change the fiduciary. Separate
counsel for Melissa and Kristina urge that Hubert has credibly managed
ANDT, and that it is Belinda who has created the alleged hostility and does
not recognize that there are other beneficiaries. In any event, counsel for
Hubert and the other beneficiaries concur that there are issues of fact
precluding summary judgment and there should be a full evidentiary hearing.
DISCUSSION AND DETERMINATION
Summary judgment cannot be granted unless it clearly appears
that no material issues of fact exist (see Phillips v Joseph Kantor & Co., 31
NY2d 307 [1972]; Glick & Dolleck, Inc. v Tri-Pac Export Corp., 22 NY2d 439
[1968]). The movant must make a prima facie showing of entitlement to
judgment as a matter of law, tendering sufficient evidence in admissible form
to demonstrate the absence of any material issue of fact (see Alvarez v
Prospect Hosp., 68 NY2d 320 [1986]; Friends of Animals, Inc. v Associated
Fur Mfrs. Inc., 46 NY2d 1065 [1979]). When the movant has made out a
prima facie case, the burden shifts to the party opposing the motion to
produce evidentiary proof in admissible form sufficient to establish the
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existence of material issues of fact (see Zuckerman v City of New York, 49
NY2d 557 [1980]). Summary judgment is a drastic remedy which requires
that the party opposing the motion be accorded every favorable inference
and issues of credibility may not be determined on the motion but must await
the trial (see F. Garofalo Elec. Co. v New York Univ., 300 AD2d 186 [1 st Dept
2002]).
As a general rule, the testator’s selection of a fiduciary must be
given deference and the power of the court to remove a fiduciary chosen by
the testator should be exercised only upon a clear showing of serious
misconduct that endangers the welfare of the estate; it is not every breach
of fiduciary duty that will warrant removal (see Matter of Duke, 87 NY2d 465,
474 [1996] citing Matter of Israel, 64 Misc 2d 1035 [Sur Ct, Nassau County
1970]; Matter of Leland, 219 NY 387 [1916]; see also Matter of Aoki, NYLJ,
Apr. 19, 2023 at 7, col 3 [Sur Ct, NY County 2023]; Matter of Miller, 48 Misc
2d 815 [Sur Ct, NY County 1965]). A potential conflict of interest between
a fiduciary and a party interested in the estate does not warrant the denial of
letters to or removal of, a fiduciary unless it interfered with the proper
administration of the trust (see Matter of Rothman, 183 AD3d 553 [2 nd Dept
2020]; Matter of Rudin, 15 AD3d 199 [1 st Dept 2005]; Matter of Shaw, 186
AD2d 809 [2nd Dept 1992]).
Hubert Neumann is not only the de facto trustee of ANDT but
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trustee of the Hubert Trust, President of Valmor and the sole manager of the
Neumann Collection. Upon the assent of all parties, the art therein,
estimated in excess of a billion dollars, is treated as one global unit and
Hubert is to remain its custodian with authority to make all business
decisions, inter alia, concerning its situs, maintenance, sale and acquire
additional works of art. With this mandate, removal at this juncture with
sharply disputed issues of fact and without a full evidentiary hearing is
inappropriate (see SCPA 711, 719; Matter of Bolen, 166 AD3d 1367 [3 rd Dept
2018]; Matter of Mercer 119 AD3d 689 [2 nd Dept 2014]) and may cause
irreparable harm to ANDT and the other family holdings. That is not to say
that Hubert is not accountable for his actions concerning ANDT. There is a
pending amended accounting proceeding covering the period from August
22, 2013 through December 31, 2018, a time line that covers many of the
allegations raised by Belinda as to Hubert’s fitness to serve as trustee.
Where there are common issues of law or fact, the discovery needed is
nearly the same, the parties are identical, and the interests of judicial
economy and litigant resources will be served, the court may consolidate
these proceedings to avoid unnecessary cost or delay (see SCPA 501 [2] [a];
Matter of Mercer, 119 AD3d at 689; Matter of Moran, 166 AD3d 1176 [3 rd
Dept 2018]).
Accordingly, on this state of the record, this decision constitutes
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the order of the court declining to determine that branch of Belinda’s
summary judgment motion seeking to remove Hubert as trustee of ANDT
and, sua sponte, consolidating said motion with Hubert’s pending amended
intermediate accounting proceeding (File No. 725P2003/E) (see SCPA 501
[2] [a]; Matter of Leyden, NYLJ, Apr. 15, 2019 at 22, col 6 [Sur Ct, NY County
2019]; Matter of Tsangaris, NYLJ, Sep. 14, 2020 at 17, col 2 [Sur Ct,
Westchester County 2020]). This will afford the parties complete discovery
to enable determination of removal and the extent of surcharge, if any.
The court has concerns over the lack of distributions in the
trust. It was only after many conferences were held with counsel and a
member of the court’s Law Department that Hubert made the noted
distribution to the three nieces in 2022. However, at a recent conference
Hubert refused to discuss distribution whatsoever despite strong requests
from Belinda’s and Kristina’s attorneys. It is inconceivable that a trust with
these significant assets does not generate regular distributions benefitting
the income beneficiaries. As counsel noted, the 2022 distributions
represented a fraction of one percent of the value of the trust’s assets.
Although Hubert employs the mantra that he does not want to facilitate “trust
babies” that is not the case here. Hubert is the beneficiary of his own
substantial trust and has diligently attended to the Neumann Collection.
Belinda and Melissa are highly educated with gainful careers. They also
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have six children enrolled in private schools and universities and incur
significant tuition costs. Kristina’s attorney notes that her client is ill and
needs assistance. Given these facts, it is demeaning to have to implore the
trustee to make distributions. Moreover, failure to make distributions might
give rise to an inference of hostility interfering with the administration of the
trust (see Matter of Epstein, 202 AD3d 669 [2 nd Dept 2022]). Where a
discretionary power involves the ongoing exercise of judgment concerning
the needs of the beneficiaries for the distribution of income or principal, the
courts have appointed a co-trustee to make such decisions (see Matter of
Alpert, 129 AD2d 444 [1 st Dept 1987; Matter of Seidman, 58 AD2d 72 [2 nd
Dept 1977]; Matter of Horner, NYLJ, Mar. 21, 1996 at 29, col 3 [Sur Ct, NY
County 1996]).
Counsel for the respective parties are directed to appear for a
virtual conference with Laura Adams, Court Attorney-Referee to be held on
the court’s Teams platform at 3 p.m. on Wednesday, January 31, 2024 to
address outstanding issues, schedule discovery and submissions in the
accounting proceeding and discuss distributions. If the issue of distributions
cannot be satisfactorily resolved, the court will consider appointing one or
more co-trustees of ANDT with limited authority to effectuate the same, who
may be granted additional authority to address other trust administration
[* 23] 24
deficiencies that might arise. .
The Chief Clerk shall mail a copy of this decision and order to
respective counsel.
Proceed accordingly.
______________________________ HON. NELIDA MALAVÉ-GONZALEZ SURROGATE
[* 24]