Court Enjoins Trustees from Going to Texas for a “Second Bite at the Apple” to Stop Beneficiaries from Inheriting
March 30, 2015
In a March 6, 2015 decision in Levien v Johnson, NYLJ 1202721296511, at *1 (Sur Ct, New York County), the New York County Surrogate’s Court enjoined the trustees of a testamentary trust from proceeding in Texas to challenge the adoptions of two adults, Parvin Johnson, Jr. and Kenneth Ives, by the grandsons of the Decedent, Arnold Levien. As the great-grandsons of the Decedent, Messrs. Johnson and Ives would be members of the class of remainder beneficiaries of the trust entitled to distributions. If this story sounds familiar, it should. This blog’s May 2014 post discussed the Court’s April 4, 2014 decision which dismissed the trustees’ argument that the court should disregard the “unique and unforeseeable” adoptions because they were contrary to the Decedent’s intent and were fraudulently kept secret from the trustees during settlement negotiations that occurred just months before.
In that April 2014 decision, the Court recognized the Texas adoptions, but explicitly stated that it could not opine on their validity, as that was an issue for the Texas Court. So, following that decision, and despite the dismissal of their claim that the grandsons fraudulently failed to disclose the adoptions, the trustees commenced an action in Texas to void the adoptions of Messrs. Johnson and Ives. However, in their Texas petition, the trustees alleged that the grandsons “committed fraud by failing to disclose their intentions to adopt two adults, Ives and Johnson, while litigating and negotiating the terms of the July 20, 2012 Stipulation of Settlement,” and asked the Texas Court to void the adoptions based on that alleged fraud (id. at *3). The Surrogate found that that was the very same claim that the trustees had previously made before it, and which was dismissed on the merits in the Court’s April 4, 2014 decision. Indeed, while the validity of the adoptions was an issue for the Texas Court, the issue of who benefits from the trust, the Surrogate found, was appropriately determined by the Surrogate’s Court, which continued to have jurisdiction. The Court then determined that because the Texas Court could issue a decision regarding the alleged fraud that conflicts with its April 2014 decision, an injunction was warranted. The Court thus enjoined the trustees from seeking any relief in Texas concerning the July 2012 Stipulation of Settlement with the grandsons, or who benefits under the trust. Interestingly, the Court “continue[d] to defer to the Texas court on the question of whether the Texas orders of adoption at issue can be vacated or voided based on any theory pled, cognizable, and proved in Texas” (id. at *5). The Court appears to have left open the possibility that the trustees could challenge the adoptions based on theories not previously advanced in the Surrogate’s Court involving Texas adoption law.