Executor Held Liable for Breach of Fiduciary Duty – Lack of Due Diligence in Sale of Real Property

Surrogate's Court, Kings County
Surrogate’s Court, Kings County

The executor, Mahler, entered into a contract to sell the estate’s real property with Basile, the executor’s personal acquaintance. The real estate agent, Azzato, was also an acquaintance of the executor. Basile purchased the property for $670,000 and sold it three days later for $1.3 million. Adelphi University and the New York State Attorney General moved for partial summary judgment in the contested accounting proceeding alleging that Mahler breached his fiduciary duty to the estate by selling the real estate for a price that was grossly below its fair market value. They further alleged that Mahler failed to exercise due diligence to assess the property or similar ones to discover comparable prices before selling the property. Adelphi and the Attorney General sought to surcharge the executor for $630,000 in damages to the estate.

Mahler argued that the house was in dilapidated condition and in need of major repairs. However, Mahler failed to explain how the real estate was resold for double the purchase price in only three days. The Kings County Surrogate’s Court held that Adelphi and the Attorney General established that the executor breached his fiduciary duty by failing to maximize the benefit for the estate’s beneficiaries by exercising diligent efforts  and care in selling the property. The court ruled that Mahler’s conduct as executor was negligent and “utterly devoid of the requisite diligence and prudence attendant to serving as executor.” Therefore, a surcharge of $630,000 (the difference between the sale price and fair market value) against Mahler was justified.

Matter of Mahler, 2009-1485/B, (Surrogate’s Court, Kings County, April 14, 2014)

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