Petition — Schanbarger v. Marine Midland Bank-Central

Supieme Court, U, & z

| — BILLED

| | JUN 20 J9T7 |

| Y

IN T MICHAEL ROOAK, JR. CLERIC

8

wand

SUPREME COURT OF

October Term, 1976

No. 477197

DONALD SCHANBARGER,

Petitioner,

V

| MARINE MIDLAND BANK-CENTRAL (Executor of

Harriet Hendry Estate),

, Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

NEW YORK STATE SUPREME COURT, APPELLATE

DIVISION OF THE FOURTH DEPARTMENT

|"

f

| ‘a DONALD SCHANBARGER

June 1, 1977

Salem, New York 12865

INDEX

page

Opinion Below 1

Jurisdiction 2&3

Question Presented 5&4

Issues 4&5

Statement of Case 5 & 6

Reason To Grant Writ 6

Conelusion 6

Surrogate's Court opinion Al - Al2

Surrogate's Decree Al3 - A22

AD Affirmance Order A23 - A24

Denied pemission to appeal to

N.Y.S. Court of Appeals Order A25 -

Cases cited:

City Bank v Cannon, 349 NYS2d 870

Meinhard v Salmon, 249 NY 458

Statute: 28 U.S.C. 1257

U.S. Constitution:

Article 3

Article 6

A26

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1976

No.

DONALD SCHANBARGER,

Petitioner,

V

MARINE MIDLAND BANK-CENTRAL (Executor of

Harriet Hendry Estate),

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

NEW YORK STATE SUPREME COURT, APPELLATE

DIVISION OF THE FOURTH DEPARTMENT

The petitioner Donald Schanbarger re-

spectfully prays that a writ of certiorari

issue to review the Order of the New York

State Supreme Court, Appellate Division

of the Fourth Department entered in its

clerk's office on December 10, 1976.

— 2

OPINION BELOW

Opinion of Herkimer County Surrogate’s

Court of New York State appears in the

Appendex pp 1 - 10 hereto. There is no

opinion by the Appellate Division of the

New York State Supreme Court.

JURISDICTION

This Court's jurisdiction is claimed

under 28 U.S.C. 1257 (3). The December

10, 1976 Order (A 23&24) of the New York

State Supreme Court, Appellate Divisiion

of the Fourth Department affirmed the A-

pril 23, 1976 Decree (A 13-22) of Herkin-

er County Surrogate's Court. The aforsaid

Order of the Appellate Division was mailed

to the Petitioner on February 2, 1977.

On February 28, 1977 Petitioner made time.

ly motion to the New York State Court of

Appeals for leave to Appeal which was de-

nied by Order (A 25&26) of March 29, 1977,

—

thereby exhausting petitioner's N.Y.S.

judicial review of the damages herein with

the 14th Amendment question below on this

page raised in all courts, which was

raised for the first time at the court of

first instance in objections to account

with assurted Articials 3. Section 2, and

6 of the federal Constitution.

QUESTION PRESENTED

Whether a state Court that fails to com-

pella fiduciary under its supervision to

make good lost purchasing power of funds

under their control that could had been

distributed to legatee before lost value

and damages incured for failure to dis-

tribute, violates the prohibited state

conduct, equal protection and due process

clauses of the 14th amendment of the fed-

eral Constitution, when predictable in-

flation runs over 10% and the cost to a

—

legatee to get a loan to have funds that

could and should had been distributed to

legatees for investment and/or enjoyment

could run as much as 25%?

ISSUES

(1) Whether a bank executor taking around

2 years to move for settlement of account

of a money estate of which part was self

lent, is entitled to any fees and/or ex-

penses as as executor, and should be sur-

charged damages to purchasing power of

an estate due to delay in making distri-

bution?

(2) Whether a legatee's failure to prompt-

ly move for accounting after 6 mos. after

probation of a Will is constructive per-

mission for an executor to retain control

over estate funds, and/or is a bar to sur-

charge for loss do to delay in distribu-

tion of funds, when a legatee's move fcr

~~

accounting has around 50% cost.

(3) Meinhard v Salmon, 249 N.Y. 456 punc-

tilo of an honor, and City Bank v Cannon,

349 NYS2d 870 divtded loyalty.

STATEMENT OF THE CASE

The proceedings of the case is for Ju-

dicial Settlement of executor's account,

for results to distribute total funds to

residuary legatees. Objections to account

are: (a) Lost purchasing power of funds

thru failure to make distribution of funds

that executor self lent, (b) Payment of

taxes of income with reduced purchasing

power, (c) Administration expense should

be based on funds of proper distribution,

(d) Accounting & commissions should be

denied because of delayed distribution of

funds self lent, (e) Accounting not index

to 1/1/1974, (g) Accounting fails to as

sign all claim of the estate to petitioner

=

for the use of legatees, (f) 25% interest

surcharge per yr. until distribution for

lost investment & enjoyment opportunities.

REASON TO GRANT WRIT

To establish actual remedy not govern-

ed by the doctrine of waste, against the

long standing practice of surrogate courts

permitting executors (banks) and lawyers

working over estates to their interest

which causes delay in distribution of an

estate to the damage of the legatee's joy

and purchasing power.

CONCLUSION

For that reason, a writ of certiorary

should issue to review the Order, to the

N.Y.S. Supreme Court Appellate Division,

Fourth Department.

Submitted,

DONALD SCHANBARGER

June 1, 1977 Petitioner Pro Se

OPINION Al

SURROGATE'S COURT - HERKIMER COUNTY

In the matter of the Judicial Settlement

of the account of Marine Midland Bark-

Central as Executor of the Estate of

HARRIET I. HENDRY,

a/k/a Harriet E. Hendry,

Deceased.

SCHNEIDER, S.:

Objections to the account of the Marine

Bank-Central, as Bxecutor of the Estate

of the above named decedent, were filed by

Donald Schanbarger, one of the residuary

legatees under the Last Will and Testament

of the above named testator. Upon the

return date of the citation said Donald

Sehanbarger appealed in person and was

advised by the Court of the provisions of

SCPA 2211, and offered to adjourn the pro-

ceedings should he desire to examine the

fiduciary under oath in reference to its

OS RE eon we eee oe

oo ee ee peo

OPINION A2

account and the objections thereto filed

by him. The objectant stated he did not

wish to examine the fiduciary nor did he

desire an adjournmert, and stated he wish-

ed to proceed and to be given an opportu-

nity to be heard ir reference to the ob-

jections he had filed, whereupon the Court

permitted him to proceed with his argu-

ment. In so doing the Court requested that

he discuss each objection separately and

in the order set forth in the objections.

In reply to abjection "A", the attorney

for the fiduciary stated that he believed

the decedent did own an interest in some

real property which was of very little

value. The objectant then stated he re-

ally was not interested in the real pro-

perty objection and that he would go ahead

with the other objections. The Court, how.

ever, instructed the fiduciary's attorney

ee eee

_

OPINION A 3

to file an answer in reference to the in-

terest of the testator in any real proper:

ty. Such an answere was filed, which

shows that the testator's husband, at the

time of his death, owned a lot in the Town

of Forestport, appraised for the sum of

two hundred fifty dollars. It further

appears that the testator’s husband's dis.

tributees were a son by a previous mar-

riage and the testator herein. The where-

abouts of the son is unknown. The answer

further points out that the cost of legal

proceedings to permit the sale of said

property would far exceed the amount for

which the property could be sold.

The title to all real property of a

decedent that has not been disposed of by

Will vest immediately upon his death in

his distributees, (Matter of Roberts, 414

W.Y. 369; Kingsland v. Murray, 133 N.Y.

OPINION A4

170), subject, of course, to the rights of

a fiduciary under EPTL 11-1.1. Accord-

ingly, the real property which Delbert

Hendry owned at the time of his death

vested in his wife, the testator herein,

an¢ his son, approximately twentyeight

years before the decedent's death. The

property was not income producing and had

the fiduciary herein exercised any control

thereover, it could not have disposed of

the same because of the outstanding inter.

est therein in the decedent's husband's

son. Wot having exercised any control

over the same nor received any income

therefrom the fiduciary was not required

to include the interest of the decedent

in said real property in Schedule A of its

account, since the title had already vest-

ed in those entitled thereto ard there re-

mained nothing for the fiduciary to do in

OPINION A 5

reference thereto. The objection to

Schedule A of the fiduciary's account is

therefore dismissed.

Objection "2" is based upon the pre-

sumed loss of sneene reason of said

executor “self lending" the estate assets

at a lower rate of interest than might be

realized by investing the assets in Unit-

ed States Treasury bills.

Schedule A of the account sets forth

the estate assets received by the execu-

tor. They consisted of two bank accounts

and Series E U.S. Savings Bonds. Schedule

A-2 of the account shows that the total

income received was $2411.47, representing

an over-all earning of approximately eight

percent, much greater than would have been

received had the original assets been re-

tained. The executor's reply to the ob-

jections in reference to the Certificates

OPINION A6é

of Deposit in which the funds were invest-

ed states, "The interest rate during the

period of time these funds were invested

fluctuated in accordance with the invest.

ment market but during a period of time

the interest rate yield was 11.45%."

EPTL 11-1.1(b)(3) empowers a fiduciary

to invest and reinvest property of the

estate "under the provisions of the Will

. « . OF as otherwise provided by law."

The fiduciary's reply states that “part

of the estate funds were invested in Cer-

tificates of Deposit of Marine Midland

Bank - Central", and that such deposits

were insured and paid the same interest

rate as certificates in “other banks or

financial intitutions in the area," and

were invested "together with other trust

funds from other estates and fiduciary

accounts. . .. and this gave a larger

OPINION A?

yield on interest income than the ordin-

ary investment."

The Courts have long recognized that

"the advantages that are frequently to be

secured by combining trust funds to make

a@ larg and more satisfactory investment

than can be made of the funds of one trust

without combination are of sufficient im-

portance and value to the several trust

funds to overcome any disadvantage that

may arise from the fact that several own-

ers of the investment may thereafter dif-

fer in the manner of handling the same.

Trust funds have been from time to time

combined for investment with satisfactory

results and the practice is generally rec.

ognized as proper for a trustee. (11 Rul-

ing Case Law, 143; Barry v. Lambert, 98

N.Y. 300)". (Above cited in Matter of

Union Trust Co. (Hoffman Estate), 219 N.Y.

OPINION A 8

514, 518) (1916). It would appear that

"self dealing" is condemned only when it

is shown that it is improper or improvi-

dently done resulting in a loss to those

interested thereir.. (Matter of Bausch,

280 A.D. 482).

The burden of establishing derelection

of duty as a basis for a surcharge is on

the objectant. (Re Weinberg's Will, (Sur)

69 N.Y.S. 2d 748). No evidence was pre-

sented that the rate of interest received

by the executor from its investment of the

estate assets was "at a lower rate than

U.S. Treasury bills and does not maintain

purchasing power of prinoiple through in-

flation, when partial distribution to le-

gatees for their investment or enjoyment

should have issued." Schedule A-2, notwith.

standing objectant's statement to the con-

trary, does, in fact represent the true

OPINION AQ

income received from the investment of the

estate assets. The objectant's statement

to the contrary is based upon pure spec-

ulation, conjecture and surmise.

The fiduciary, under the law, is not

required to make partial distribution of

the assets of the estate unless so direct-

ed by the testator's Will, or pursuant to

order of the Court. SCPA 2102(5) gives to

any beneficiary of an estate the right to

commence a proceeding for the payment of

"all or part of any testamentary provis-

ion." SCPA 2205 also gives to any person

interested in an estate the right to bring

@ proceeding to require a fiduciary to

file an intermediate or final account

within such time and in such manrer as

directed by the Court. The objectant did

not avail himself of either of those two

rights, and should not now be permitted

OPINION A 10

to object to something he himself could

had prevented or accomplised had he de-

sired to under the above provisions of

the law. Under the circumstances, number

"2" of the objections is dismissed.

Objection "3" is in reference to pay-

ment ef taxes on income when the estate

lost purchasing power through foreseeable

inflation during the stwardship of the

said executor." The payment of taxes on

income received by a fiduciary is manda-

tory under the law, and is a proper ad-

ministration expense. The argument that

the estate "lost purchasing power thru

foreseeable inflation" does not constitute

a valid objection to the payment of in-

come taxes on income received. Objection

numbered "3" is dismissed.

The Court does rot believe there is any

merit to objection "4" and therefore dis-

OPINION All

misses the same.

In reference to objection "5", the ob-

jectant has failed to establish derelic-

tion of duty or loss to the estate occas-

ioned by any acts of the fiduciary, Again,

the objectant has submitted no facts or

proof, and bases his assertions warranting

@ surcharge upon an arbitrary interest

rate selected by him and objections "i"

through "4" discussed above. Objection

"5" is, therefore, dismissed. The cases

cited by the objectant have no application

in the present situation.

The Court construes objection "6" as

an attempt on the part of the objectarnt to

obtain control of the estate assets in

order to manipulate the same according to

his whim ard desire. He will, of course,

be paid on this accounting the share of

the astate which he is entitled to receive

OPINION A 12

under the testator's Will. The other

residuary legatee also is entitled to and

will receive the share which is due her

under the testator's Will. Accordingly,

no reason exists for the objectant's re-

quest. Also, there is no provision of

law which would permit the Court to grant

the objectant what he requests. Objection

"6" is denied.

It is believed that the remaining ob-

jections are, in part, a reiteration of

some of the preceding objections and need

not be further discussed, except to say,

the Court is of the opinion that neither

the objectant nor the other residuary

legatee have been denied any constitution-

al rights. Objections "7" and "9" are

dismissed.

Dated, August 25, 1975.

/s/ Albert W. Schneider

Surrogate

DECREE A 13

SURROGATE'S COURT - COUNTY OF HERKIMER

In the Matter of the Judicial Settlement

of the Account of Marine Midland Bank-

Central as Executor of the Estate of

HARRIET I. HENDRY a/k/a

Harriet E. Hendry, :

deceased.

Sle: Cs OUND iy heed Pole been ag eee

MARINE MIDLAND BANK-CENTRAL, the Ex-

ecutor of the Estate of Harriet I. Hendry,

late of the Village of Ilion, in Herkimer

County, New York, deceased, having hereto-

fore presented to this Court the account

of the proceedings as such Executor

together with its petition praying for a

judicial settlement thereof, and process

having been thereupon duly issued, pursu-

ant to statute, directed to all persons

interested in the estate of said deceased,

requiring them to show cause before this

Court at the Court House thereof on the

a I ee a ee Oe ee

00a + Res ee ee

DECREE Al4

28th day of July, 1975, at 10:00 o'clock

in the forenoon of that day why the said

account should not be judicially settled,

and said proces having been returned with

proof of service thereon on Evelyn R.

Schanbarger and an admission of service

of citation having been duly executed and

filed on behalf of Donald Schanbarger, and

the Executor having agpeereg Jack Mar-

ley, of Carter & Marley, its \counsel, and

the said Evelyn R. Schanbarger having

failed to appear in person or by courisel

on the return day of said process, and

the said Donald Schanbarger having appear:

ed in person Pro Se on the return day of

said process and having filed objections

to said account, and the Court offered the

objectant the opportunity to adjourn the

proceedings in order to examine the fiduc.

iary under oath in reference to the ac-

Le ten 8 a Sabla: ¢ wage

ee ea

- ee er

DECREE A 15

count and the objections filed thereto and

the said objectant Donald Schanbarger in

open Court thereupon waiving the right to

examine the fiduciary and stating he did

not desire an adjournment and desired to

be heard concerning his objections, and

the objectant Donald Schanbarger having

thereupon heard by the Court upon his

objections to the account, and the Court

having directed the fiduciary to file an

answer to the objections in reference to

the interest of the testator in any real

property and otherwise, and the matter

having been adjourned until the 19th day

of August, 1975, and the Executor having

filed its reply to the objections duly

sworn to August 11, 1975 and upon filing

due proof of service upon the objectant

Donald Schanbarger of the Executor's Reply

to the objections, and upon the adjourned

CS ON ee Ce woke Or

DECREE A 16

date on the 19th day of August, 1975, the

Executor having appeared by Jack Manley

of Carter & Manley, counsel, and the ob-

jectant Donald Schanbarger not then ap-

pearing in person or by counsel, and the

Court having made and filed its decision

herein on August 25, 1975, finding that

the objectant Donald Schanbarger has tro

valid objections to the account of the

Executor filed herein and directing the

dismissal of the objections filed by said

objectant,

NOW, upon motion of Jack Manley, Esq.,

of Carter & MWanley, counsel for the

Executors, it is

ORDERED, ADUDGED AND DECREED, that the

objections filed by the said Donald

Sehanbarger, be and the same hereby are

dismissed;

AND the Court, after having examined

DECREE A 1’?

the said account, now here finds the state

and condition of the said account to be

as stated and set forth in the following

summary statement thereof, to-wit:

A SUMMARY STATEMENT of the account of

Marine Midland Bank-Central as Execu-

tor of the estate of Harriet I. Hen-

dry, deceased, made by the Court as

judicially settled and allowed:

The said Executor is chargeable as

follows:

With the amount of principal

assets shown in Schedule A $19,435.18

With increase, as shown by

Schedule A-1 None

With amount of income collect-

ed as shown by Schedule A-2 2,411.27

Total $21,847.08

The said Executor is credited as fol-

lows:

Se a ere cee 6 a ed

DECREE A 18

With the amount of Schedule B None

With the amount of Schedule C 951.32

With the amount of Schedule C-1l 942.00

With amount of Schedule D 6,023.82

With amount of Schedule E 300.00

With amount of Schedule F None

Total 8,217.14

Leaving a balance in the Execu-

tor's hands of $13,629.94

AND it appearing that said Executor has

fully accounted for all the moneys and

property of the estate of the above named

deceased which have come into its hands

as such Executor, and his account having

been adjusted by this Court, and a summary

statement of the same having been made as

above to be recorded herewith and to be

taken as part of this Decree;

AND, the said Executor having filed the

receipt of the Treasurer of Herkimer Coun-

ieee

DECREE A 19

ty, sealed and countersigned by the State

Tax Commission, for the sum of $246.00, in

the amount of estate tax which was found

to be due from and assessed against the

property or interest in property, passing

or transferred from the estate of said

deceased, it is further

ORDERED, ADJUDGED AND DECREED, that

the said Executor, Marine Midland Bank-

Central, be relieved from all liability,

personal or otherwise, on account of such

estate tax; and it is further

ORDERED, ADJUDGED AND DECREED, that the

legacy of $100.00 bequeathed by paragraph

THIRD of the Will to Howard Schanbarger or

in event he shall predecease the Testatrix

to his distributees in accordance with the

provisions of the Decedent's Estate Law,

shall be distributed by the payment of the

sum of Fifty Dollars ($50.00) to Evelyn

—

DECREE A 20

R. Schanbarger, widow of the said Howard

Schanbarger and Fifty ($50.00) to Donald

R. Schanbarger, son and only child of

Howard Schanbarger; and it is further

ORDERED, ADJUDGED AND DECREED, ~- that

said Executor retain the om of $873.88

for the commissions to which it is enti-

tled, and it is further

ORDERED, ADJUDGED AND DECREED, that the

sum of $325.00 i« hereby allowed to Carter

& okey. counsel for the said estate and

Executor as part of the taxable costs and

disbursements of the accounting proceed-

ing herein which shall be paid by the Ex-

ecutor herein;

AND, it appearing that the balance in

the hands of the Executor, and the ex-

penses and allowances herein provided are

recapitulated as follows:

Belance in the Executor's

6 ee owe henna + aman a 4 te

ee at i ee rere oe

ee ee eee

DECREE A 21

hands $13,629.94

LESS: Legacy to Evelyn

R. Schanbarger 50.00

Legacy to Donald

Schanbarger 50.00

Executor's Com-

missions 873.88

Allowance to

Carter & Manley 525.00

Total 1,298.88

Balance $12,331.06

Leaving a balance in the

hands of the Executor of $12,331.06

for distribution; it is further

ORDERED, ADJUDGED AND DECREED, that

the said Executor after making the deduc-

tions and payments aforesaid dispose of

the balance of $12,331.06 then remaining

by paying to the following named persons

the sums set opposite their respective

I aN i Nec A il le SY tient ntl

DECREE A 22

names, which said sums are hereby judged

to be the amounts due said persons respec-

tively, on this accounting:

To Evelyn R. Schanbarger,

two-thirds of residue $8,220.70

To Donald Schanbarger, one-

third of residue $4,110.36

IT IS FURTHER ORDERED, ADJUDGED AND

DECREED, that upon making the payments

aforesaid and taking and filing receipts

thereof, the said Marine Midland Bank-

Central be and it hereby is released

and discharged from all further liability

and responsibility as such Executor and

as to all matters embracecd in this ac-

count and determined by this Drecree.

ENTER

April 23, 1976

/s/ Albert W. Schneider

Albert W. Schneider

Surrogate

AFFIRMANCE ORDER A 23

788

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE DIVISION, FOURTH JUDICIAL DE-

PARTMENT

PRESENT: MARSH, P.J., MOULE, CARDAMONE,

SIMONS, GOLDMAN, JJ.

In the Matter of the Account of Marine

Midland Bank-Central as Executor of the

Estate of Harriet I. Hendry a/k/a Har-

riet E. Hendry, Deceased.

Donald Schanbarger, Appellant,

4

-vs-

Marine Midland Bank-Central (Executor),

Respondent.

Donald Schanbarger, a residuary legatee

in this proceeding, having appealed to

this Court froma Decree of the Surrogate’s

Court of the County of Herkimer, made

and entered on April 23, 1976 and the said

AFFIRMANCE ORDER A 24

appeal having been submitted by Donald

Schanbarger, the appellant, and by Jack

“Manley of counsel for the respordent, and

due deliberation having been had thereon,

It is hereby ORDERED, That the Decree

so appealed from be, and the same hereby

is unanimously affirmed without costs for

the reasons stated in the Memorandum of

Herkimer County Court Surrogate's Court,

Schneider, S.

Entered: December 10, 1976

/s/ Mary F. Zoller

MARY F. ZOLLER, Clerk

ORDER A 25

STATE OF NEW YORK, COURT OF APPEALS

At a session of the Court, held at

Court of Appeals Hall in the City

of Albany on the twenty-ninth day

of March A.D. 1977

PRESENT, HON. CHARLES D. BREITEL, Cheif

Judge, presiding.

4 Mo. No. 228

In the Matter of the Judicial Settlement

of the Account of Marine Midland Bank-

Central, as Executor &c. of Harriet I.

Hendry &c., Dec'd.

Donald Schanbarger,

' Appellant,

vs.

Marine Midland Bank-Central (Executor),

Respondent.

A motion for leave to appeal to the

Court of Appeals in the above cause hav-

ORDER A 26

ing heretofore been made upon the part of

the appellant herein and papers having

been submitted thereon and due deliber-

ation having been thereupon had, it is

ORDERED, that the said motion be and

the same hereby is denied.

/s/ Joseph W. Bellacosa

Joseph W. Bellacosa

Clerk of the Court