Before this Court is a motion for default judgment and summary judgment requesting the Court to: (1) issue an order and judgment holding respondent in default of the Court’s conditional order dated January 3, 2018; (2) determine that respondent has engaged in unlawful self-dealing and direct respondent to return $725,453 to the estate; (3) surcharge respondent for consequential damages, accrual damages, costs and attorneys’ fees suffered by the estate as a result of alleged self-dealing; and (4) direct the parties to appear for a hearing to determine the amount of any surcharges against respondent. Respondent opposed the motion, in part, and the matter was submitted for decision.William J. Smith (hereinafter decedent) died testate on May 19, 2003, a resident of Albany County. His Last Will and Testament dated March 1, 2001 was offered for probate by respondent on July 11, 2003, through his counsel Matthew J. Kelly, Esq. of the law firm Roemer Wallens Gold & Mineaux, LLP. This Court issued Preliminary Letters Testamentary to respondent on July 11, 2003, and subsequently admitted the will to probate and issued Letters Testamentary on February 7, 2006 (Doyle, S.). Pursuant to Article III of the will, 70% of decedent’s stock in Quailman Investors, Inc. was to be held in trust for distribution by the trustee “as he deems fit according to my instructions, and for the college education of various individuals as per my instructions.” Decedent’s will also left 15% of Quailman Investors to respondent and 5% to Aaron Berhaupt. By decision of this Court construing the will, Surrogate Doyle found “that the decedent’s testamentary intent is clear. His dominant plan of distribution was to place the majority of his assets — seventy percent (70%) of the stock in his closely held company, plus the remainder of his estate — in trust for a particular group of children.” The Court found fourteen individuals, many of them minors, to be the intended beneficiaries of the estate. Respondent was named as trustee under Article VI of said will, but did not obtain letters of trusteeship.At the time of his death, decedent owned 90% of Quailman Investors and the other 10% was owned by respondent. The probate petition and the application for preliminary letters testamentary filed by respondent listed the gross value of the assets in the estate to be greater than $100,000, but less than $250,000, and, in an incomplete accounting filed with this court in 2007, respondent listed the value of Quailman Investors as $20,000. A guardian ad litem was appointed by this Court (Nichols, S.) in a proceeding brought by respondent to terminate the trust as uneconomical, in January 2010. The guardian ad litem’s report revealed the net value of real property sales by Quailman Investors between October 31, 2003 and May 10, 2004 to be $960,184.41. Respondent retained his estate counsel, Matthew J. Kelly, of Roemer Wallens Gold & Mineaux, LLP, to assist with the real property sales by Quailman Investors. A supplemental report of the guardian ad litem revealed a corporate resolution, adopted at a special meeting of the Board of Directors of Quailman Investors and signed by respondent as Secretary of the Corporation on August 15, 2003, paying himself $435,000 in deferred compensation for the years 1973 through 2002, and a salary of $290,453 for the year 2003, without court authorization in an act of alleged self-dealing. Said resolution states:
The following is a true copy of a resolution adopted by the Board of Directors, Shareholders of Quailman Investors, Inc. at a special meeting of said board held on August 15, 2003.RESOLVED, that the corporation pay Jerold A. Nadel $15,000.00 per year commencing in 1973 and continuing through 2002 for services thereon for a total of $435,000.00 an after taxamount which amount to be paid pursuant to the sale of property herein, and further resolved that he be paid an appropriate salary for the year 2003.RESOLVED, that the Secretary of the Corporation be authorized on behalf of the corporation to execute any and all documents necessary to make such payments.The resolution was then signed “Jerold A. Nadel, Secretary.”
