When is an Essential Fact Not a Fact at All?

• Posted on: Jul 6 2022

The question above was recently answered by Justice Francois A. Rivera in Reid v. Service, 2022 N.Y. Slip Op. 32017(U) (Sup. Ct., Kings County June 9, 2022) (here). As discussed below, the alleged fact – a claimed misrepresentation – was only an allegation, refuted by the undisputed facts of the case.

Reid involved the administration by defendant over the Estate of Edgar Reid, Sr. (the “Estate”). Defendant had been granted limited letters of administration by the Kings County Surrogate Court. Pursuant to those letters, defendant sought to collect the decedent’s assets and ultimately distribute them his beneficiates. Among the assets that defendant marshalled was an annuity contract.

Plaintiffs alleged that defendant misrepresented her authority as administrator of the Estate and that she did so to receive the proceeds of the annuity along with the other beneficiaries of the Estate.¹ Plaintiffs maintained that the proceeds should have been paid directly to the Estate and not to the decedent’s children, which included defendant. 

Defendant moved to dismiss, claiming that there was no fraud in the administration of the Estate and that defendant did not misrepresent her authority to the issuer of the annuity – that is, plaintiffs failed to satisfy the first element of a fraud claim.² The Court agreed.

In granting the motion, the Court found that “an essential fact alleged in [plaintiffs’] claim for fraud, namely, that [defendant] misrepresented her authority, [was] not a fact at all.”³ The Court explained that defendant was in fact appointed by the Surrogate as “administrator of Edgar Reid Sr.’s estate.”⁴ As such, defendant “had authority as the duly appointed administrator of Edgar Reid Sr.’s estate to assess and gather his assets and debts and to distribute those assets to his entitled beneficiaries under the supervision of the Surrogate.”⁵ And, “pursuant to the authority granted by the letters of administration,” defendant “submitted a claim under the annuity on behalf of Edgar G. Reid, Sr., estate” to the insurance carrier, which processed and paid the amount due under the contract.⁶ “Consequently,” concluded the Court, “an essential fact alleged in the claim for fraud, namely, that [defendant] misrepresented her authority, is not a fact at all. Any alleged mistakes in the administration of the estate of Edgar Reid Sr. performed by [defendant] was not based on a knowing misrepresentation by her.”⁷

Takeaway

In Reid, plaintiffs acknowledged that the annuity in question was payable to the Estate. They also acknowledged that the Surrogate granted defendant letters of limited authority, which named defendant a fiduciary of the estate and “authorize[d] and empower[ed]” her to “perform all acts requisite to the proper administration and disposition of the estate/trust.” With these acknowledgments, plaintiffs’ fraud claim was missing an “essential” element – a misrepresentation of fact. For this reason, the Court granted defendant’s motion to dismiss the fraud claim against her.

Footnotes

1. The insurance carrier processed two checks made payable to the estate of Edgar Reid Sr. One in the amount of $99,450.34 on February 26, 2014, and another a few days later for $1,072.34.
2. To state a claim for fraud, a plaintiff must allege a material misrepresentation of fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages. Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 558 (2009). The allegations must be stated with particularity to satisfy CPLR § 3016(b). Id. Thus, the plaintiff must provide sufficient facts to support a “reasonable inference” that the allegations of fraud are true. Id. at 559-60. Conclusory allegations will not suffice. Id.
3. Slip op. at *6.
4. Id.
5. Id.
6. Id.
7. Id.