## Facts

- Charles F. Freihofer, a resident of Albany County, New York, died testate on January 11, 1981, survived by his wife, Phoebe, and two sons, Andrew and Stephen.
- Charles’s will was admitted to probate on January 21, 1981. Under the will’s terms, the entire estate passed to Phoebe, but she filed a renunciation on March 4, 1981.
- Because of the renunciation, a portion of the estate—primarily property affiliated with Freihofer Baking Company, Inc.—passed into testamentary trusts for Andrew and Stephen.
- Alan E. Steiner, Charles C. Freihofer III, and Phoebe B. Freihofer were appointed executors of the estate. Letters of trusteeship were issued to Steiner as the sole trustee of the testamentary trust on April 3, 1981.
- Freihofer Baking Company stock constituted the bulk of the trust assets.
- Over time, Steiner served in multiple roles connected to the trust and its principal asset, including trustee of the testamentary trust, executor, attorney for Andrew individually, attorney for Freihofer Baking Company, and a member of the company’s board of directors. Steiner also acted as attorney and fiduciary in other Freihofer family trusts and estates.
- The Surrogate’s Court file reflected estate tax proceedings and an order fixing estate tax based on a gross estate of approximately $1.4 million, and it reflected that substantial estate assets remained under fiduciary control years after probate.
- The court file did not contain receipts or releases closing out the fiduciary administration, and no accounting had been filed with the court. A March 25, 1983 report filed under then-existing court rules indicated the fiduciaries still held significant estate assets at that time.
- Andrew signed documents styled as a release of claim and a “receipt, release and waiver” purporting to discharge Steiner.
- On August 30, 1996, Andrew petitioned the Surrogate’s Court to compel Steiner, as trustee, to render and file an accounting of the trust.
- Steiner opposed and moved to dismiss (or, alternatively, for summary judgment), arguing that the release barred the petition, that documentary evidence defeated the claim, and that a related action between the parties was pending in Supreme Court.

## Issues

1. Whether a beneficiary’s release and waiver purporting to discharge an attorney-trustee bars a petition to compel an accounting when the attorney-trustee did not fully disclose multiple conflicts and interests tied to the trust and its primary asset.
2. Whether Surrogate’s Court should compel a formal accounting by the trustee despite the asserted release and despite related litigation pending in Supreme Court.

## Decision

- The court denied Steiner’s motion to dismiss and denied his alternative request for summary judgment.
- The court declined to treat the beneficiary’s release and waiver as a bar to compelling an accounting, given the circumstances surrounding its execution and Steiner’s multiple conflicting roles.
- The court granted Andrew’s application to compel Steiner, as trustee, to render and file a formal accounting in Surrogate’s Court.
- The court rejected Steiner’s argument that a Supreme Court action between the parties required dismissal or prevented the Surrogate’s Court from ordering an accounting.

## Legal Principles

- A trustee owes beneficiaries a duty to account, and Surrogate’s Court may require a fiduciary to render a formal accounting where the court concludes an accounting is warranted in the administration of a testamentary trust.
- Releases obtained by fiduciaries are subject to close judicial review, especially where the fiduciary seeks to obtain a discharge from liability to the beneficiary.
- An attorney serving as fiduciary is held to a higher standard than a nonlawyer fiduciary in matters of loyalty, fairness, and disclosure, including disclosure of conflicts and personal interests connected to trust property or trust administration.
- Where an attorney-fiduciary obtains a release from a beneficiary while also acting as that beneficiary’s lawyer (and while holding other positions that may conflict with the beneficiary’s interests), the fiduciary bears a heavy burden to show the beneficiary’s informed consent after full and candid disclosure.
- The existence of related Supreme Court litigation does not, by itself, deprive the Surrogate’s Court of authority to supervise testamentary trust administration and compel a trustee’s accounting.

## Conclusion

The Surrogate’s Court ordered the trustee to account and refused to dismiss the proceeding based on a beneficiary release because Steiner—an attorney-trustee with multiple roles tied to the trust and its principal corporate asset—did not establish the full disclosure and informed consent needed for the release to bar an accounting, and parallel Supreme Court litigation did not prevent the Surrogate’s Court from requiring the fiduciary to account.


In re Freihofer, 658 N.Y.S.2d 811 (1997)