The role of an executor or administrator at its most basic level is to read the will and do what it says. However, not every appointed fiduciary does so. What happens if a fiduciary “goes rogue” and transfers a decedent’s real property in a way not provided for under the will? This was addressed by the New York Appellate Division Second Department in the recent decision of Rhiney v. Rhiney.
In Rhiney, the decedent’s will left her entire estate, including a piece of real property, to her grand-niece. In 2003, the beneficiary’s mother was appointed as “administrator C.T.A” by the Bronx County Surrogate’s Court. An administrator C.T.A is appointed where the will names an executor who is not willing or able to serve.
In 2004, the administrator C.T.A. transferred the property to herself and her daughter as joint tenants with rights of survivorship. In 2020, the beneficiary saw a copy of the will (apparently for the first time) and realized that the property was to be left only to her, and not jointly with her mother.
Subsequently, in 2021, the beneficiary brought an action to quiet title to the property and declare that the deed was “void ab initio”. She claimed that her mother, as the administrator C.T.A., misrepresented the terms of the will, telling her that the will left the property jointly to both of them, which wasn’t the case.
The administrator C.T.A. disputed this, stating that the beneficiary had requested that the property be transferred to both of them because the beneficiary was in college and did not want to manage the property on her own.
The issue on appeal was whether the deed was void ab initio or only voidable. When a deed is found to be void ab initio, it is treated as though it never existed, and no transfer ever occurred. In contrast, a deed can also be considered “voidable,” which means that the deed is not automatically void. The transfer is deemed to have occurred but can be legally challenged.
The Court held that the deed was voidable, stating that a deed is only considered to be void ab initio if it is the result of a forgery or if a legitimate signature was obtained by “false pretenses”. However, where a deed was obtained based upon a fraud, or an actionable mistake, as in this case, it is voidable.
The reasoning for this is that a third party must be able to rely on a deed from an appointed fiduciary. Fiduciaries have “apparent authority,” and if an improper transfer could be voided as if it never happened in a case such as this one, it would affect the orderly administration of estates. Therefore, where a fiduciary ignores the terms of a will and transfers real property contrary to what the will provides, the resulting deed is voidable, not void ab initio.
What does this mean to a beneficiary who is wrongfully deprived of the real property that they were due to inherit? It may leave the beneficiary with no recourse for recovering the property if innocent third parties relied upon, or took action based on, the understanding that the fiduciary had the authority to transfer the property. For example, if the party who received the property improperly (in this case, the administrator C.T.A) sold it to a third-party good-faith purchaser, the good-faith purchaser’s deed would be valid, and the property could not be recovered by the rightful beneficiary.
Similarly, if the party who received the property (again, the administrator C.T.A) borrowed funds and gave a mortgage on the property as security, the lender would still be able to look to the property to satisfy the debt if or when the borrower does not pay.
In these cases, the wronged beneficiary may be able to sue the rogue fiduciary for monetary damages. However, the beneficiary could be left with nothing if the statute of limitations expired or the judgment wasn’t collectible.
If you are a fiduciary, consult an attorney about your legal obligations to minimize the risks of liability. Beneficiaries should also ensure that they read the will or trust and get legal advice if they don’t understand the terms or have concerns about the fiduciary’s conduct.
Contact one of our attorneys for help with any estate administration matter.