Objectant, 29-11 Gillmore Street Funding Associates (“Funding Associates”) has filed a motion to modify and/or reject the referee’s report dated November 2, 2020, upon the grounds that the report contains erroneous findings of fact and conclusions of law (SCPA §506). In the alternative, Funding Associates seeks a temporary stay enjoining petitioner from making any distributions for thirty days, pending an application for an injunction (CPLR 2201).1 In support movant submits, inter alia, the affirmation of counsel; a copy of this court’s decision, dated December 5, 2019, in a related proceeding (File No. 2013-3550/C); notices of settlement of a decree and counter decree thereon together with correlating e-mails; a copy of the trial transcript dated August 11, 2020; a copy of a stipulation dated October 24, 2018; a copy of a letter from Abstract Incorporated dated July 21, 2020; and copies of post-trial memoranda of law by counsel for the respective parties. In opposition is submitted the affirmation of counsel; a copy of the referee’s report dated November 2, 2020; a copy of the proposed decree with a notice of settlement for December 4, 2020; and a copy of a December 28, 2015 mortgage. In reply is submitted the affirmation of counsel; a copy of a proposed counter decree with a notice of settlement for December 4, 2020; copies of various pleadings and papers from related Surrogate’s Court proceedings (File Nos. 2013-3550/A, B, C); and a photocopy of a summons and complaint filed in Supreme Court, Westchester County in July, 2020. SCPA §506 [6] [a] provides that the court “may confirm, modify or reject a referee’s report in whole or in part, may make new findings with or without taking additional testimony or may order a new hearing.” The underlying facts concerning the administration of decedent’s estate, upon which the referee’s report is based, are more fully set forth in the prior decision of this Court dated December 5, 2019. However, a brief recitation is required here to fully understand the arguments by counsel and the court’s analysis behind its decision. Decedent died intestate on September 28, 2000 as the sole owner of an unencumbered income producing two-family residence located in Elmhurst, Queens. A petition for letters of administration was filed by decedent’s nephew, George, falsely alleging that he was decedent’s sole distributee when, in fact, there were many others. George filed an affidavit of renunciation of letters in favor of a non-distributee Shaun, falsely identified as a “second cousin.” Unbeknownst at that time, George and Shaun had a written side-agreement. Pursuant to the side-agreement, Shaun utilized the letters of administration to first transfer the Elmhurst property by no-consideration deed to George on January 24, 2014. On the same day, George executed a second no-consideration deed conveying the property to Shaun’s company, D & A Development (“D & A”). In short order, D & A obtained two mortgages on the Elmhurst property totaling $400,000.00 which were consolidated by an agreement (“the Consolidated Mortgage”) with movant Funding Associates. D & A quickly defaulted on the consolidated mortgage prompting a foreclosure proceeding. This turn of events apparently caused George to find religion and he petitioned to vacate Shaun’s letters alleging, in essence, that he was duped into signing the fraudulent affidavit of renunciation prepared by Shaun’s attorney as well as the side-agreement entered into with Shaun, essentially revealing that their actions had defrauded decedent’s estate and its beneficiaries. By a decision dated January 18, 2018, the court granted the petition, vacated Shaun’s letters, and granted temporary letters of administration to the Public Administrator of Queens County. Upon a subsequent petition brought by the Public Administrator (File No. 2013-3550/C), the court issued a decision on April 24, 2018 vacating the two aforementioned deeds. Thereafter, and of significant importance to this matter, by decision dated December 5, 2019 the court determined that the consolidated mortgage was “entirely invalid” to the extent it was based on the first deed from Shaun to George which was obtained by false pretenses and void ab initio. With respect to the second deed from George to D & A, the court determined that since the real property had vested in decedent’s distributees by operation of law at the time of death, it was therefore void with respect to the interests of all the other co-tenant/distributees who did not sign that deed. George, however, was estopped from denying the transfer of his intestate share by the second deed. Consequently, the Consolidated Mortgage was held to be valid only to the extent that Funding Associates had “security up to the interest of the mortgagor,” which was equivalent to “that part of George’s share in the Elmhurst property that he conveyed to D & A Development.” Finally, the court granted the Public Administrator summary judgment dismissing Funding Associates’ affirmative defense claiming it was a bonafide encumbrancer for value on the entirety of the Elmhurst property (Matter of Rosenblatt (Solomon), 65 Misc 3d 1232 [A] [Sur Ct, Queens County 2019]; see also Matter of Dorthy, 160 NY 39, 56 [1899]; Matter of Bowser, 167 AD3d 1001 [2d Dept 2018]; Solar Line, Universal Great Bhd. v. Prado, 100 AD3d 862, 863 [2d Dept 2012]; ABN AMRO Mtge Group, Inc. v. Stephens, 91 AD3d 801, 803 [2d Dept 2012]; Cruz v. Cruz, 37 AD3d 754 [2d Dept 2007]; see also First Natl. Bank of Nev. v. Williams, 74 AD3d 740, 742 [2d Dept 2010]; GMAC Mtge. Corp. v. Chan, 56 AD3d 521, 522 [2d Dept 2008]). Upon the Public Administrator’s filing of this proceeding for judicial settlement of her account, Funding Associates filed objections and the court designated a referee to hear and report. Specifically, Funding Associates objected to the Public Administrator’s payments of funeral and administrative expenses, counsel fees, an HRA claim, debts, commissions and proposed distributions (Schedules C, C-1, D-2, I and J of the account) prior to payment of their claim seeking reimbursement for payoff of a tax lien as well as their claim for payment of the mortgage debt. Funding Associates alleged that both claims were superior to the interests of all other proposed payees, and that such payments were prohibited by a stipulation of the parties dated October 24, 2018 (“the stipulation”). Funding Associates’ claim seeking reimbursement for payoff of the tax lien was settled during the trial. As to the remaining objections, the referee found that the Public Administrator was required to pay funeral and administrative expenses, counsel fees, claims, debts and commissions in the order of priority set forth by SCPA §1811, before distribution of the net proceeds realized from the sale of the Elmhurst property to decedent’ distributees, namely, twenty-one nieces, nephews, grand-nieces and grand-nephews. The referee concluded that Funding Associates’ first affirmative defense objecting to all such payments as prohibited by the stipulation should be dismissed, and also that its first counterclaim alleging that the Public Administrator breached the stipulation should be dismissed. The referee further found that the contingent and possible claim of Funding Associates set forth in Schedule D-4 of the amended account should be disallowed. Funding Associates now moves to challenge the referee’s report and seeks that the court modify or reject it. The first branch of Funding Associates’ motion seeks to delete parts of the report claimed to contain factually incorrect statements. Specifically, Funding Associates contends that the statements on pages 19, 20 and 21 that neither party “has settled an order or decree on the December 5, 2019 decision” (File No. 2013-3559/C) are incorrect. Funding Associates contends that, in fact, a decree and counter-decree were mailed to the court in May, 2020, and it submits a copy of a date-stamped envelope from the Public Administrator as well as copies of e-mail inquiries made to the court clerk. The proposed decree and counter-decree sent by postal mail service were, in fact, never received, processed or filed with the court in May, 2020 primarily due to protocols implemented as a result of the Covid19 pandemic and closure of the physical offices to court staff as of March, 2020. Irrespective of the exhibits attached to the motion, court records reflect that a proposed decree and counter-decree were filed electronically with the clerk in December, 2020, after the conclusion of the virtual trial herein and issuance of the referee’s report. More pointedly, this branch of Funding Associates’ motion is utterly irrelevant to the court’s analysis of the referee’s conclusions and rationale in this accounting proceeding. In fact, it is akin to a complaint about an allegedly erroneous description of the location of deck chairs on the Titanic in a referee’s report concerning the cause of its sinking. Accordingly, the branch of the motion to modify the referee’s report to delete language claimed to be factually incorrect is denied. Funding Associates next moves to reject the findings and conclusions in the referee’s report that its first affirmative defense and first counterclaim alleging breach of contract should be dismissed, and demands that the court make a new finding that the Public Administrator breached the stipulation dated October 24, 2018. Upon review of the moving papers and exhibits submitted, including the trial transcript and referee’s report as well as the post-trial memoranda of law, the court concurs with the referee’s report for the reasons stated therein. Accordingly, this branch of the motion is denied. Funding Associates next moves to reject the findings and conclusions in the referee’s report which set forth the priority of claims against decedent’s estate for funeral and administrative expenses, counsel fees, taxes, claims including the H.R.A. claim debts and commissions (Schedules C, C-1, D-2 and I). Most importantly, Funding Associates also seeks to reject the conclusion that their contingent claim (Schedule D-4) be disallowed and demands that the court make a new finding that it be allowed. In essence, Funding Associates asserts its claim for repayment of its mortgage in full should be satisfied prior to any other claims or estate administrative expenses. SCPA §1811 requires the Public Administrator to proceed with diligence in collecting and distributing decedent’s estate assets and to pay expenses of administration, funeral expenses, claims and debts in the order of priority set forth by the statute. Top priority is given to payment of administrative expenses which include those amounts itemized by the Public Administrator in Schedules C and C-1, including the “reasonable fee” of her counsel (SCPA §1123 [2] [I] [5]; SCPA §1128) as well as statutory commissions set forth in Schedule I (SCPA §1106 [4]; SCPA §2307). Next to be paid are reasonable funeral expenses which are preferred to all other debts and claims and are paid out of “the first moneys received” by the fiduciary (SCPA §1811 [1]). The Public Administrator was then charged for paying Federal and New York State taxes which were set forth in Schedule C and are preferred claims against decedent’s estate (SCPA §1811 [2]; see In re Karl, 266 AD2d 392 [2d Dept 1999]). Finally, the claim of HRA as set forth in Schedule D-2 of the account is payable as a debt of a preferred creditor pursuant to New York State law (SCPA §1811; Social Services Law §104 [1]). Also, any claim by Funding Associates determined to be valid would then be paid. The remaining net proceeds are payable to decedent’s distributees who, by operation of law, became the owners of the Elmhurst property at the time of decedent’s death (see Waxson Realty Corp. v. Rothschild, 255 NY 332, 336 [1931]; Matter of Blango, 166 AD3d 767, 768 [2d Dept 2018]; Kraker v. Roll, 100 AD2d 424, 429 [1984]). Notwithstanding the controlling statutes and case law establishing the priority for payment of claims by the fiduciary, Funding Associates continues to prosecute its contingent claim (Schedule D-4) with the astonishing argument that it must be paid prior to all the above mentioned expenses, commissions and claims. The statutory authority and case law Funding Associates presents in support of its argument is identical to what was originally submitted to the referee,2 which was found to be factually distinguishable and inapplicable to the case at bar. Crucially, in this case, the undisputed facts established that decedent owned the Elmhurst property free of any mortgage debt at the time of her death. The consolidated mortgage was neither her debt nor a debt of her estate, nor did Funding Associates’ lien exist during decedent’s lifetime. Moreover, a judgment for non-payment of the mortgage debt was never docketed against the Elmhurst property prior to decedent’s death or thereafter. The mortgage debt at issue was owed by D & A Development and George, not the estate. Fundamentally, Funding Associates’ claim is especially illogical in light of the December 5, 2019 decision which held that the deed by Shaun to George “was procured by false pretenses and is void ab initio.” Longstanding precedent provides that any subsequent grantee or encumbrancer receives nothing thereby ( see Faison v. Lewis, 35 NY3d 220, 225-226 [2015]; Matter of Dorthy, 160 NY at 56; Matter of Bowser, 167 AD3d at 1002; Solar Line, Universal Great Bhd. v. Prado, 100 AD3d at 863-864; ABN AMRO Mtge Group, Inc. v. Stephens, 91 AD3d at 803; First Natl. Bank of Nev. v. Williams, 74 AD3d at 741-742; GMAC Mtge. Corp. v. Chan, 56 AD3d at 522; Cruz v. Cruz, 37 AD3d at 754). As stated above, the court held that “Funding Associates’ consolidated mortgage is…entirely invalid to the extent that it is based on the void deed.” It is already the law of the case that the consolidated mortgage is invalid against the interests of decedent’s distributees and that Funding Associates only has “security up to the interest of [D & A Development],” the amount thereof equivalent to “that part of the George’s share in the Elmhurst property” that he conveyed to D & A by his own deed. As correctly observed in the report, the denial of the contingent claim of Funding Associates is “in accordance with the court’s decision dated December 5, 2020.” The court finds that the referee correctly set forth the statutory priority of claims pursuant to SCPA §1811 for payment of funeral and administrative expenses of decedent’s estate (Schedule C), counsel fees (Schedule C-1), taxes (Schedule C), commissions (Schedule I), and claims (Schedule D) (see SCPA §1811). The court finds no basis to disturb the findings and conclusions set forth in the referee’s report for the reasons stated therein, including that H.R.A. is a preferred creditor and that Funding Associates’ purported claim against decedent as set forth in Schedule D-4 should be disallowed. Accordingly, this branch of the motion is denied. Upon review of the moving papers submitted and the referee’s report, the court finds that the referee did not misapprehend the pertinent facts or misapply the relevant law. Further, the referee clearly defined the issues and the findings of fact and conclusions of law are substantially supported by, and consistent with, the evidence adduced (see e.g. Matter of Cincott, 139 AD3d 1058, 1059-1060 [2d Dept 2016]; Hudson v. Smith, 127 AD3d 816 [2d Dept 2015]; Spodek v. Feibusch, 55 AD3d 903 [2d Dept 2008]). Accordingly, the report of the referee is confirmed. Finally, Funding Associates moves for a stay pursuant to CPLR 2201 enjoining the Public Administrator from making any payments or distributions upon the judicial settlement of its account. A stay pursuant to SCPA 2201 may be granted in the discretion of the trial court, but the stay should only be exercised if there exists some articulable reason why the failure to impose such a stay might result in some prejudice to Funding Associates (see generally e.g. Robert Stigwood Organization Inc. v. Devon Co., 44 NY2d 922, 923 [1978]; Estate of Salerno v. Estate of Salerno, 154 AD2d 430 [2d Dept 1989]). Funding Associates avers that it intends to appeal the decree in the prior related proceeding brought under File No. 2013-3550/C and that, if they are successful, it would alter the distribution set forth in the decree settling the judicial account for the estate of Agatha Solomon. First of all, the court finds no articulable reason for imposing a stay as a matter of course upon decrees judicially settling accounts in decedents’ estates. Second, even upon consideration of the court’s discretion as applied to the underlying facts at hand, it is clear that the balance of prejudice has been and will be suffered by decedent’s distributees and the claimants herein who have suffered extraordinary delay in excess of eight years in realizing any distribution from decedent’s estate due to the fraud and false pretenses practiced on this court as set forth in the decision of this court dated December 5, 2019, and as determined by the court on this motion in the accounting proceeding. To be successful on an appeal, Funding Associates would have to establish that the legislatively mandated system created for the distribution of estate assets and payment of claims in Article 18 of the SCPA is, for some reason, inapplicable to them or that the court should ignore precedent and somehow legitimize the fraudulent actions described above, thereby stripping decedent’s family members from their equity interests in this real property. Equity and logic can not support such a result. Accordingly, in the discretion of the court, that branch of the motion seeking to stay petitioner from making distributions as set forth in the account is denied. This is the Decision and Order of this Court. Settle Decree. Dated: May 20, 2021
