The following papers were considered in the preparation of this decision: Petition with Exhibits 1 Waivers and Consents (2) 2 Affirmations (2) 3 Correspondence with Exhibits 4 Attorney Affirmation of Urgency 5 DECISION Before the court is a miscellaneous proceeding filed by Mary Caroff (Petitioner), as the administrator of the Estate of Ronald S. Caroff. The Petitioner seeks an order authorizing her to continue a business owned by the Estate, Max Power, Inc. (MaxPower), an information technology business located in Nassau County. The Petitioner proposes continuing the operation of MaxPower in the form of an S Corporation until the corporate documents can be updated to reflect ownership by the Estate beneficiaries. The Decedent was the sole stockholder and officer of MaxPower prior to his unexpected death on January 26, 2023. No other individual was appointed by the Decedent prior to his death, nor are there outstanding stocks held by any other entity or individual. There are no objections to the relief sought. Maxwell Caroff and Garrett Caroff, the decedent’s adult sons, filed waivers. The Petitioner duly served a citation on the Office of the Secretary of the State of New York. There were no appearances on the return date of the citation. BACKGROUND The Decedent died intestate, survived by the Petitioner and two adult sons. On August 22, 2023, the Petitioner was granted letters of administration. The Decree Appointing Administrator provided that “the authority of such representative(s) be restricted in accordance with, and that letters herein issued contain, the limitation, that the decedent’s business, Max Power, Inc., may not be continued without a further order of the court.” THE PETITION The Petitioner advises the court that MaxPower was operating profitably prior to the death of the Decedent, and it must now renew the contracts of existing clients and address potential new clients. None of the Decedent’s distributees, including the Petitioner, has the authority to sign contracts or documents, the ability to access MaxPower’s business accounts, or the authority to manage its business affairs. As a result, the Petitioner cannot pay MaxPower’s employees and other business expenses. The papers filed in support of the Petition indicate that prior to the Decedent’s death, the Petitioner and the Decedent’s sons were assisting the Decedent with running the day-to-day operation of MaxPower and intend to do so in the future with the court’s approval. The Petitioner asserts that without court authorization to continue MaxPower, the company will lose its clients, reputation, and revenue. ANALYSIS The application before the court asks that the court authorize the Petitioner to continue the operation of MaxPower, a corporation of which the Decedent was the sole officer and shareholder. EPTL Article 11, which governs the powers, duties, and limitations of fiduciaries, does not expressly provide a fiduciary with the power to continue operating a business that was owned by a decedent, and the Petitioner’s powers were expressly limited by the court. SCPA 2108 is a proceeding by a fiduciary for the continuation of a business. It permits a fiduciary to “petition for the continuation of a business other than a profession, of which decedent or the person whose estate is being administered was sole owner and it is desired to continue it for the best interests of the estate….” (SCPA 2108). “[W]here the business of the decedent is a corporation, authority from the court is unnecessary” (5-66 Warren’s Heaton on Surrogate’s Court Practice §66.01 [2011], referring to SCPA 2108 [3]). Although MaxPower is in corporate form, court authorization is necessary for the Petitioner to continue its operation because of the limitation placed by the court on her letters of administration. “While SCPA 2108 has been held not to apply to a corporate business, the application may nevertheless be treated as one for advice and direction under SCPA 2107″ (Matter of Morales, NYLJ, Jan. 11, 2000, at 38, col 2 [Sur Ct, Nassau County] [internal citations omitted]). SCPA 2107 provides that a fiduciary may seek “advice and direction in extraordinary circumstances.” Typically, a request for advice and direction by a fiduciary involves property not held in corporate form but rather, directly by the estate (Matter of Pulitzer, 139 Misc. 575 [Sur Ct, New York County 1931], opinion supplemented, 140 Misc 572 [Sur Ct, New York County 1931], aff’d 237 A.D. 808 [1st Dept 1932]). However, courts will give advice and direction where an estate owns all the corporate shares, and does not hold a partial interest (Matter of Catalano, 2012 NY Slip Op 30015[U], *7-11 [Sur Ct, Nassau County 2012]). “[W]here the fiduciaries, through the medium of ownership of all of the shares of stock, control a close corporation, the Surrogate possesses the equitable power to disregard the corporate entity and may proceed to treat the estate fiduciaries and their corporate problems with respect to disposition of the corporate assets, and its effect upon the estate, upon the realistic basis that the fiduciaries and the management of the corporation are one and the same” (Matter of Weinstein, 25 AD2d 776, 776 [2d Dept 1966], citing Matter of Tuttle, 4 NY2d 159, [1958]; Matter of Hubbell, 302 NY 246 [1951]; Matter of Horowitz, 297 NY 252, [1948]; and Matter of Stulman, 146 Misc. 861 [Sur Ct, Kings County 1933]). “The doctrine that the Surrogate is differently to treat the problem of rendering advice and direction in instances where the estate owns the entire stock of a corporation and the cases where it owns less than all of the stock seems to be the rule followed by the courts’” (Weinstein at 776 [internal citations omitted]). “[W]here the entire stock of the corporation was owned by the estate…the court, in its equitable powers, might disregard the corporate entity” (Matter of Pulitzer, 139 Misc. 575, 585 [Sur Ct, New York County 1931], opinion supplemented, 140 Misc. 572 [Sur Ct, New York County 1931], aff’d 237 A.D. 808 [1st Dept 1932]). CONCLUSION The petition is GRANTED to the extent that Petitioner is authorized to continue operating MaxPower for a period of up to two years from the date of the decree to be issued. During that time period, the Administrator shall distribute the Estate assets, including the corporate shares of MaxPower, in accordance with EPTL 4-1.1, and the corporate documents shall be updated to reflect ownership of the shares of MaxPower by the Decedent’s distributees. If the assets have not been fully distributed at the conclusion of the two-year period, the Petitioner may not continue to operate the business in her capacity as administrator without further court authorization. Submit decree within sixty (60) days of the date of this decision. Failure to submit the decree as directed may result in the proceeding being deemed as abandoned (see 22 NYCRR 207.37). The remainder of the relief set forth in the petition is DENIED. Dated: February 28, 2024
