New York Probate and Estate Administration Lawyer Blog
This is an estate case where the proceeding raises an issue of virtual representation of unborn contingent remaindermen. The purpose of the virtual representation statute (SCPA 315) is to dispense with the necessity of service of process on necessary or proper parties.
The Testator was survived by his widow and one son. The son is unmarried. His unborn children are contingent remaindermen of two trusts.The first is the usual marital deduction A trust with power in the widow to appoint the principal. In default of the exercise of such power, the son is the remainderman. If he should predecease his mother, his unborn children are the contingent remaindermen. The second is a B trust. The widow and son share the income. Upon the death of the widow, the son receives the principal if then living; and if not, then his as yet unborn children are the remaindermen.
The interests of the unborn contingent remaindermen which may be adversely affected arises in this as in most cases not from the nature of the proceedings or of the trusts but from the predictable impact of the decree. It suffices simply to note that the sole assets of both trusts are shares of stock in a family corporation which represent a controlling interest in the hands of the trustee.
The most interesting aspect of the question is that the petitioners, mother and son, are demanding the appointment of a guardian ad litem and resisting virtual representation. The respondent trustee makes two contentions: (1) the unborn contingent remaindermen can be adequately represented by their father, and (2) a guardian ad litem cannot be appointed for unborns.
When ‘persons under disability’ are protected in a proceeding by a guardian ad litem appointed for that purpose ‘the proceeding shall be binding upon such person to the same extent as if such person was under no disability’. Absent fraud by the guardian ad litem, a resulting decree is ‘final’ and safe from subsequent direct or collateral attack. No case is reported in which a decree has been set aside for fraud.
Virtual representation is a doctrine which permits one who is a party (the ‘representor’) to represent the interests of persons or classes of persons (the ‘representees’) who otherwise would be necessary parties, without serving them with process or making them actual parties. The whole theory underlying the doctrine is similarity of economic interests. It is presumed that the representor in pursuing his own economic self-interest will necessarily protect the rights of the representees having the same interest. The doctrine was recognized by the courts long before the adoption of the statute. The present statute (SCPA 315) is borrowed from the similar statute applicable to Inter vivos trust.
Despite concerns expressed in the cited articles, there is no question of the constitutionality of the statute under substantive or procedural due process standards. Like the guardian ad litem statute, it provides for all necessary fundamental safeguards of notice and opportunity, etc., albeit by the representor instead of by the guardian. The sole problem is representation by one party of another party and the possibility inherent in such representation of resulting conflict of interest–a consequence never present where representation is by a guardian ad litem.
Even if the Court rightly concludes that the statute authorizes virtual representation, there is never any absolute assurance that the decree will not be vulnerable. If the decree results in an advantage to the representor Vis a vis the representee, this is Prima facie proof of either inadequacy of representation or conflict of interest.
Section 315 is drafted to assure adequacy of representation and to prevent conflict of interest. To an extent, the requirements that representor and representee be of the ‘same class’ or represent the ‘same interest’, or be ‘related’ to one another are effective safeguards. If these safeguards in fact result in adequate representation ‘the decree or order entered in any such proceeding shall be binding and conclusive on any person upon whom service of process is not required’.
Recognizing that in some proceedings, the safeguards will not adequately protect the representees, the statute gives the Court absolute discretion to require service of process upon the contingent remaindermen, if adults, or to appoint a guardian ad litem, if persons under disability.
Where the safeguards are present, the virtual representation statute has its uses–for example when the number of parties required to be served are numerous or unwieldy or widely scattered. But as noted there must also be some assurance that there is no present or potential danger of conflict of interest between representor and representees.
The trustee contends that the interest of the son and his yet unborn children are the same interest and since representator and representees are related, the Court is justified in applying the virtual representation statute.
The son however is both an income beneficiary and a contingent remainderman. Technically one who is a combined income beneficiary-remainderman does not represent the ‘same interest’ as straight remaindermen. As the cases establish, the threshold determinations turn not on whether the interests are technically the same but whether the interest of the representor in the particular proceeding is, or is likely to become, adverse to that of the representees.
These decisions do establish that courts are extremely cautious in allowing virtual representation. Justifiably so if finality is the goal. In the instant case it is evident at the threshold that the interests are likely to be adverse. This may be conclusively presumed since the son as the presumptive representor so indicates by demanding the appointment of a guardian ad litem for his unborn children.
The trustee contends that a guardian ad litem cannot be appointed for persons not in being, i.e., ‘unborns’. In a thoroughly researched and well supported decision, the Surrogate held that the unborns were virtually represented by persons in being in 1934 who were presumptively entitled to the ‘same interest’ as the then unborns. This was the major premise of the decision.
Preliminarily, however, the Surrogate had considered a contention by the petitioners that they should have been represented in 1934 by a guardian ad litem. He held (1) that there was not in 1934 any statutory authority for the appointment of special guardians for unborns, and (2) that such a guardian may not be appointed until jurisdiction is obtained by service of process which of course cannot be effected upon unborns. This latter preliminary finding is of dubious precedent since the cases and statutes cited did not so hold. It seems certain that the affirmance by the Court of Appeals without opinion was on the major premise rather than the preliminary premise. For at the very same term that Court had affirmed an opinion below in which unborns had been represented by guardians ad litem.
The virtual representation statute recognizes that guardians ad litem can be appointed for unborns Viz. ‘if it appears that there is no certain or presumptive remainderman in being or ascertained the court shall appoint a guardian ad litem to represent or protect the persons who eventually may become entitled to the interest.’
SCPA 2106 (‘compromise of controversies’) specifically provides (subd. 2)–‘A person under disability or a person not in being (unborns) who has a future contingent interest is a necessary party and shall be represented by a guardian ad litem–‘ (It is observed in this regard that since most proceedings end in compromise, an unborn who is virtually represented initially will require the appointment of a guardian ultimately).
SCPA 311 is such a statute. While applicable by its terms solely to ‘persons under disability’ and not ‘to persons not in being’ it may nevertheless be utilized as a means of effecting service upon and appearance by unborns. That statute is construed by this Court to permit the guardian to receive process In the first instance.
It it concluded that guardians ad litem may be appointed for unborns either under SCPA 311 or under authority inherent in the Court. Upon the finding heretofore made that the co-petitioner son cannot adequately represent his unborn children (as he himself contends) the Court directs that process be served upon such unborns by delivery of a supplemental citation to the guardian ad litem to be appointed by the Court.
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