Richard A. Mahler, Jr., was the executor of the estate of Margaret Van Cortlandt Billmyer, also known as Margaret V. Billmyer (hereinafter the decedent), who owned a brownstone residence on Washington Avenue in Brooklyn. In her will, the decedent named four Lutheran charities and Adelphi University as residuary beneficiaries of her estate. The decedent died on March 31, 2009. According to Mahler's application for preliminary letters testamentary, filed on April 15, 2009, the estate's real property, consisting of the brownstone residence (hereinafter the property), had an approximate value of $1.5 million.
In July 2012, Mahler filed an amended petition for the judicial settlement of his account. The residuary beneficiaries, along with the Attorney General of the State of New York, who is a necessary party representing beneficiaries of gifts for charitable purposes (hereinafter collectively the objectants), filed objections to Mahler's account. Following depositions, the objectants Adelphi University and the Attorney General separately moved for summary judgment granting their respective objections which alleged that Mahler sold the property below fair market value, and surcharging him accordingly. They contended that Mahler's sale of the property below fair market value constituted a breach of fiduciary duty. In opposition, Mahler argued that the property required extensive structural and cosmetic repairs, and that he sold it for a fair price after obtaining the written consent of the residuary beneficiaries. He had no explanation for how the property resold within three days for almost twice the price paid by the LLC. The Surrogate's Court granted the motions and imposed a surcharge on Mahler in the sum of $630,000, plus 6% interest from April 12, 2011, through the date of remittance.
A fiduciary acting on behalf of an estate is required to employ such diligence and prudence to the care and management of the estate assets and affairs as would prudent persons of discretion and intelligence in their own like affairs (see Matter of Carbone, 101 A.D.3d 866, 868 ; cf. Matter of Hahn, 62 N.Y.2d 821, 824 ). "[A] fiduciary owes a duty of undivided and undiluted loyalty to those whose interests the fiduciary is to protect" (Birnbaum v Birnbaum, 73 N.Y.2d 461, 466 ; see Matter of Wallens, 9 N.Y.3d 117, 122 ; Matter of Schultz, 104 A.D.3d 1146, 1148 ). In performing his fiduciary duty as the executor of the decedent's estate, Mahler was required to use good business judgment (see Matter of Lovell, 23 A.D.3d 386, 387 ). To the extent that the sale of the property does not meet this standard, the beneficiaries of
Here, the objectants offered proof that Mahler, as the executor of the estate, chose a real estate agent based in Staten Island who was not knowledgeable about the Brooklyn real estate market and who did not actively market the property. They also offered proof that Mahler did not obtain an appraisal of the property at the time of the sale or learn the fair market value of comparable neighborhood properties, failed to visit the property for an extended period of time prior to the sale, and did not know how the property was being marketed. He sold the property to the LLC of Basile, an acquaintance, when there was an unrelated third-party buyer willing to buy the property for nearly double the price paid by the LLC. The objectants thereby established, prima facie, that Mahler breached his fiduciary duty and acted negligently with respect to the sale of property. Mahler failed to submit evidence in opposition sufficient to raise a triable issue of fact. Accordingly, the Surrogate's Court properly granted the objectants' separate motions for summary judgment on their respective objections which were based on their claim that Mahler, as executor of the estate, breached his fiduciary duty and was negligent with regard to the sale of the property.
Where a surcharge is imposed for a breach of fiduciary duty, it is a matter within the discretion of the trial court whether to award interest upon the surcharge, and at what rate (see CPLR 5001 [a]; Matter of Janes, 90 N.Y.2d 41, 55 ; Matter of Marsh, 106 AD3d at 1011). Here, the Surrogate's Court providently exercised its discretion in awarding 6% interest on the surcharge upon the proof that three days after Mahler sold the property, it resold for nearly twice the original purchase price (see Matter of Carbone, 101 AD3d at 869).