The Facts:
On 3 March 1994, a decedent died. He was survived by his ex-wife and their four children. Under the decedent’s will dated 3 August 1988, he left his estate to the daughter (“the daughter”) of one of his sons (“son-one”).
On 3 November 1994, the will was admitted to probate and letters testamentary were issued to the son-one’s wife, the nominated executor.
The primary asset of the estate was his one-half interest in his former marital home, located at Hampton Bays, New York (the “Hampton Bays property”). The other one-half interest was owned by the ex-wife.
A New York Probate Lawyer said that on 18 October 1995, the ex-wife died testate and her will was admitted to probate in Suffolk County. Under the ex-wife’s will, she left her one-half interest in the Hampton Bays property in trust for the benefit of her son (“son-two”) who is a person under a disability. Upon son-two’s death, the property passes equally among the three remaining children. Son-three was named executor and trustee. In addition, he has been appointed guardian for his brother, son-two. Since the ex-wife’s death, son-three and son-two have resided in the house. They have not paid any rent for the occupancy, although they paid the current charges.
The claim proceeding:
The decedent and the ex-wife were married twice. They were first divorced on 8 August 1985. In the divorce decree, the decedent was ordered to pay the ex-wife per week maintenance beginning 10 May 1983. On 8 August 1984, the ex-wife obtained a judgment against the decedent in the amount of $7,000 for arrears for the period from 10 May 1983 to 7 August 1984. The decedent and the ex-wife remarried on 10 February 1986. They were divorced for the second time on 7 July 1988. The second divorce decree required the decedent to pay the ex-wife maintenance of $60 per week, beginning one week after the judgment of divorce. The divorce decree provided that th ex-wife was to have exclusive use and occupancy of the Hampton Bays property for herself and their son, son-two, as well as custody of him.
Sometime in April 1995, the ex-wife filed a claim against the estate for $ 143,684.63. Included in the claim were $7,000 owed under the judgment, an additional $7,800 unpaid maintenance under the first divorce decree, $14,406 in unpaid maintenance under the second divorce decree, $44,014.32 for the decedent’s one-half of the real estate taxes, mortgage payments, insurance and capital improvements the ex-wife paid on the Hampton Bays property, $ 10,000 for her share of refunds on joint tax returns the decedent allegedly received and $23,000 for her share of the settlement proceeds of a personal injury action the decedent allegedly received.
By petition verified 10 September 1996, and filed 2 October 1996, son-three, as executor of the ex-wife’s estate, brought a proceeding to determine the validity of the claim. The petition sought payment of the ex-wife’s claim, with a number of modifications. The claim for back maintenance sought interest at the legal rate. The claim for contribution for expenses was increased to $47,067.57 and son-three asked for reimbursement of $2,580 allegedly paid for funeral expenses of the decedent. The total claimed was $111,853.57.
Son-one’s wife filed objections to the petition. NYC Probate Lawyers said she denied that the estate owed the ex-wife’s estate for the claims arising from the judgment and first divorce decree, on the ground that the re-marriage negated any alimony arrears. Son-one’s wife denied that the $14,400 alimony, due as a result of the second divorce, was not paid. She denied any knowledge of the facts on which the claims for one-half of income tax refunds and personal injury settlements were based. She denied that the ex-wife’s estate was owed any monies for the expenses on the Hampton Bays property, on the ground that the ex-wife had been living in the residence and receiving alimony. Finally, son-one’s wife alleged that if the ex-wife’s estate did have the right to reimbursement for one-half of the ex-wife’s expenses, the decedent’s estate was entitled to one-half of the fair market rental value of the property, alleged to be $126,000, as an offset. Son-one’s daughter was cited in the proceeding. She was a minor and a guardian ad litem was appointed to represent her.
Sometime in December 1997, son-one’s wife moved for summary judgment denying the ex-wife’s claim and granting son-one’s wife her counter-claim of $126,000. For the first time, son-one’s wife asked that the Court authorize her to bring a partition action to sell the property and receive 50% of the proceeds, as executor of the decedent’s estate. Son-three opposed the motion. A Staten Island Probate Lawyer said there were a number of court conferences to settle the proceeding. As part of the settlement negotiations, an appraisal was made of the Hampton Bays property, which showed that the fair market value of the property, as of 10 January 200 was $155,000. After it became clear that the parties would not be able to settle their differences, the parties agreed to forego a decision on the motion for summary judgment and to have the claims and counter-claim adjudicated before a court attorney-referee. The matter was then set down for a hearing on 12 November 2002.
The 12 November 2002 Stipulation:
The parties entered into a stipulation in settling the claim and counterclaim (the “2002 Stipulation”). Pursuant to the stipulation, son-three agreed to pay son-one’s wife, as executor of the decedent’s estate, $70,000 to purchase the decedent’s interest in the Hampton Bay property. The claim and counter-claim would be withdrawn. The $70,000 was to be paid to the attorney of son-one’s wife within sixty days. After the stipulation was read into the record, the court conducted an allocution of the parties to assure that the agreement was entered into voluntarily and that the parties understood its terms.
Thereafter, the guardian ad litem filed a report recommending the settlement and a decision was entered dismissing the proceeding and fixing the fee of the guardian ad litem. The guardian ad litem prepared a decree incorporating the stipulation which was signed on 16 January 2003.
The Guardian Ad Litem’s Motion for Contempt:
Son-three arranged to obtain the $70,000.00 due under the settlement from his brother, son-one. Son-one gave son-three a cashier’s check for the amount due, payable to son-one’s wife. Son-three then forwarded the cashier’s check to his attorney for transmittal to the attorney of son-one’s wife. The cashier’s check, however, was payable to son-one’s wife, personally and her attorney refused to accept the check. He agreed to accept a replacement check, payable to him, as provided in the stipulation. The replacement check, however, was never sent. Instead, son-three sent the cashier’s check to son-one’s wife.
When the guardian ad litem tried to confirm the receipt of the settlement proceeds, son-one’s wife claimed to have returned the check to the maker. The guardian ad litem then brought a motion to hold son-three in contempt. Son-three’s attorney filed an affidavit in opposition, stating that he sent the $70,000 check to son-one’s wife directly and that she had cashed it. Subsequently, son-three filed a copy of the $70,000 check showing that it had been negotiated by son-one’s wife.
The guardian ad litem then moved to hold son-one’s wife in contempt for refusing to place the funds in the estate account. Son-one’s wife appeared by a new attorney. The matter was set down for a hearing on the two motions on 14 June 2005. At the hearing, son-one’s wife was represented by a third attorney. Son-one testified that he provided the $70,000 check paid to his wife pursuant to the settlement. Son-one testified that son-three asked him to provide the money to purchase the decedent’s interest in the Hampton Bays property pursuant to the stipulation and that he agreed to do so, in the belief that he was purchasing the decedent’s one-half interest. Later, after he realized that he was only advancing the funds for the benefit of the trust under the ex-wife’s will, and that he would receive only his pro rata share of the Hampton Bays property when the trust terminated, son-one changed his mind. Son-one testified that he told son-three that he was not going to provide the $70,000 under those circumstances. He then told his wife that she should consider the $70,000 check already received as a gift from him to her for her and their daughter’s benefit.
At the conclusion of the hearing, son-three stated that he did not realize that son-one had reneged on his agreement and that he was willing to pay the $70,000. A stipulation was placed on the record, requiring son-three to pay the $70,000 previously agreed to, plus interest at the legal rate, from the original date of the stipulation until the funds were delivered. Son-one’s wife agreed to this but insisted on preserving her right to challenge the original stipulation. The parties agreed to allow her to challenge the stipulation, on the proviso that the motion be made within sixty days. Son-one’s wife then made the instant motion to set aside the 2002 stipulation, the decree entered on 16 January 2003, based upon the 2002 stipulation, and the 2005 modification of the 2002 stipulation entered into in open court on 14 June 2005. Son-three’s attorney has submitted an affirmation in opposition to the motion as has the guardian ad litem.
The Ruling:
Son-one’s wife challenges the 2002 stipulation, as modified by the 2005 stipulation (hereinafter referred to collectively as the “stipulation”) on a number of grounds.
One: that the 2005 stipulation gave her the unilateral right to void the earlier stipulation.
Such a construction would give son-one’s wife the option of agreeing to the stipulation (or not), depriving the stipulation of any binding force.
As defined by law, a stipulation is a contract. As such, it is subject to the rules governing the construction of contracts for its interpretation and effect. The court’s task, as in the interpretation of any contract, is to determine the intent and purposes of the stipulation. To glean the intent, the court must examine the record as a whole. Whether an agreement is a binding contract or an option is to be determined, like any other issue of contract interpretation, from the four corners of the agreement.
Here, there is nothing in the 2005 stipulation that indicates an option-a bargain to merely give son-one’s wife time to decide whether to agree to the stipulation or not. If the parties truly intended to grant her such an option, there would have been no need to provide for interest until the time for her to exercise her option and disavow the settlement had elapsed. There would have been provision for what was to happen if she did disavow the stipulation. The only reasonable construction of the stipulation is that the parties were modifying the original stipulation solely to provide for interest so as to make the estate of the decedent whole for the unintentional delay in receiving the settlement proceeds. The record shows that son-one’s wife agreed to the stipulation but wished to preserve her right to move to vacate it.
Thus, the motion to construe the 2005 settlement as giving son-one’s wife the unilateral right to disavow the settlement is denied.
Two: that the stipulation is void because son-three never furnished a check payable to her attorney, in breach of the stipulation. Instead, son-three delivered the check to her, payable to her.
Here, the provision for payment to the attorney of son-one’s wife and deliver it to such attorney, was primarily for the benefit of her attorney, to ensure that he was paid. There is no basis for her to complain if she received the check directly.
When son-one’s wife received the check, she did not return it to son-three or protest that it was payable to the wrong payee. Instead, she deposited the check into her personal account.
As a party and a fiduciary, son-one’s wife had an obligation to accept the check in settlement and deposit it into an estate account or to inform son-three why she was not accepting it. Instead, she deposited it into her personal account on the advice of his husband without informing son-three.
The failure of son-one’s wife to be candid to the guardian ad litem compounded the confusion. This was a breach of her duty to act in good faith as a party to the contract. As with all contracts, there is an implied covenant of fair dealing and good faith between the parties. A party cannot use her own breach of contract as a basis for cancelling the contract. A party in breach of her duty under a contract cannot complain of breach by the other side, especially where the other side had no knowledge, or reason to know of the original breach. When a party breaches an executory contract, the other has the choice of treating the contract as breached and to immediately sue for breach of contract or continue to treat the contract as valid.
Once it was established at the June 2005 hearing that son-one had disavowed funding the settlement, son-three agreed to provide a new check for the settlement proceeds, with interest from the date of the first settlement. The provision for interest was intended to protect the estate of the decedent for the loss of income until payment was received.
Thus, son-one’s wife’s claim that the stipulation is void because of the breach of son-three is denied.
Third: the stipulation should be vacated because the consideration was grossly unfair.
This is not one of the usual grounds to vacate the settlement. As with any contract, a stipulation of settlement should not be set aside absent fraud, collusion, mistake or duress. The burden is on the party challenging the stipulation.
In this case, the record shows that son-one’s wife has not acted in good faith in this matter. When the guardian ad litem sought to ensure that the settlement proceeds were received, son-one’s wife denied that she received the settlement check and later claimed that she returned the check to the maker. Not until the hearing on the motion for contempt did she admit that she received the check and deposited it in her personal account. Finally, son-one’s wife had no objection to her ex-husband (or herein referred to as husband) purchasing the decedent’s share for $70,000. Only when it was clear that the $70,000 was to be used for all of their children (of son-one’s wife) did she claim that the stipulation was unjust.
Thus, son-one’s wife has failed to establish a claim for unjust enrichment.
Fourth: that the equitable doctrine of laches acts as a bar to enforcing the stipulation.
Here, the only element of laches alleged is the passage of time. However, the mere passage of time is insufficient to establish laches.
Fifth: that the settlement should be vacated because her daughter had become of age by the time the stipulation had been entered into, so that the guardian ad litem was without authority to agree to it.
The law is not clear whether the guardian ad litem’s authority ceases once the ward reaches eighteen years of age. The rule adducible from authorities is that where no suggestion or motion is made during the pendency of the action, the validity of the proceedings or the judgment entered will not usually be affected by the failure to strike out a guardian for an infant party who has become of age.
Here, the court need not reach a determination of which rule to apply in this motion because, on the facts of the case, the validity of the stipulation does not depend solely on the authority of the guardian ad litem, for a number of reasons. First, it is not the daughter who has moved to set aside the stipulation, but her mother or son0one’s wife. There is no basis to allow the fiduciary to try to nullify her own actions by asserting the rights of the former minor. Second, even if the guardian ad litem lacked authority to represent his or her ward, the stipulation is not void. It is at most voidable, subject to the election of the former infant. This election must be seasonably made. Finally, the stipulation is not subject to attack by the daughter because her consent was not required. This was, after all, a proceeding to determine the validity of the claim, which was settled. Son-one’s wife, as executor of the estate of the decedent had full authority to settle the claim.
Son-one’s wife claims that her authority is limited by the fact that legal title to the decedent’s interest in the Hampton Bays property devolved to the daughter as a matter of law upon the death of the decedent. This is not determinative of the authority of the fiduciary. While the court agrees that title to real property is deemed to pass to the devisee as a matter of law, such devolution is always subject to the right of the executor to sell real property to pay debts, funeral expenses and administrative expenses. The law expressly authorizes an executor to sell real property on such terms as the fiduciary deems beneficial to the, even if the beneficiary objects.
The question of whether the realty should be sold and under what terms is a matter of business judgment. Every fiduciary has the obligation to pay expenses of estate administration or estate litigation.
It is not disputed that the only funds to pay administration expenses and claims was from the sale of the property. Therefore, even if the guardian ad litem was without authority to bring the motions for contempt, son-one’s wife still had full authority to agree to the stipulation to settle the claim and pay the administration expenses, including the fee of the guardian ad litem.
Stipulations are favored by the courts and not lightly case aside especially where the stipulation was agreed to in open court. Stipulations are especially favored by the courts when counsel represented the party seeking to vacate the stipulation. Stipulations not only provide litigants with predictability and assurance that courts will honor their agreements, but also promote judicial economy by narrowing the scope of issues for trial. To achieve these policy objections, a stipulation is generally binding on parties that have legal capacity to negotiate, do in fact freely negotiate their agreement and either reduce their stipulation to a properly subscribed writing or enter the stipulation orally on the record in open court.
Henceforth, the motions of the guardian ad litem for contempt are denied and the motion of son-one’s wife to vacate the stipulation is denied.
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