Aoki v. Aoki

Facts

Rocky formed the Benihana Protective Trust (BPT) in 1998 to hold stock and other assets relating to Benihana. Rocky named his attorney, Darwin Dornbush, and two of his children, Kevin and Kana, as trustees. The trust instrument was prepared by [attorney Norman Shaw. It contained a provision that granted Rocky an unlimited power 'to appoint any of the principal and accumulated net income remaining at his death,' with such power of appointment being 'exercisable only by a provision in [Rocky's] Will specifically referring to and exercising the power.' Rocky married Keiko (Ono) Aoki (P). Kevin and Kana met with Dornbush to express their concerns that Rocky had married Keiko without first having Keiko execute a prenuptial agreement. Dornbush arranged a meeting with Kevin, Kana, and Rocky the following day. It was agreed that a potential solution to the problem was that Keiko execute a postnuptial agreement. She refused. Shaw proposed that Rocky execute a partial release of his power of appointment whereby Rocky could appoint only his descendants at the time of his death. Kevin, Kana, and Rocky met with Dornbush. Rocky reviewed a 'final draft' of the partial release and Rocky executed the partial release the following day. Three months later, due to changes in IRS regulations, Rocky executed a second release (December release) that further irrevocably restricted his power to appoint by excluding any descendants who were nonresident aliens. In August 2003, Rocky retained attorney Joseph Manson to draft a codicil to his will. The codicil made no mention of the September or December releases and appointed Keiko to receive 25% of the trust assets upon Rocky's death, and income from the remaining 75% for the rest of her life. It also provided that upon Keiko's death, Keiko had the power to bequeath the principal to one or more of Rocky's descendants in her will. Shaw's opinion was that the portion of the codicil granting Keiko a beneficial interest in the trust was invalid because the September release rendered Keiko an impermissible appointee of the trust. Rocky executed an affidavit stating that he did not realize that, by executing the September and December releases, he could no longer leave his Benihana stock to Keiko or any other party, and, had he known that that was the effect of the documents, he would not have signed them. Four years later, in September 2007, Rocky executed a new last will and testament, whereby he attempted to exercise his power of appointment consistent with the August 2003 codicil. His new will stated that f it was determined that the exercise of his power of appointment in that regard was 'invalid because, contrary to my desires, the [September and December releases] are found to be valid,' then he exercised his power 50% in favor of his daughter, Devon, and 50% in favor of his son, Steven. Rocky died in July 2008, survived by Keiko and his six children. The BPT trustees commenced this proceeding seeking a determination as to the validity of the September and December releases. Devon and Steven moved for summary judgment seeking an order declaring the releases valid and dismissing Keiko's affirmative defenses. Keiko asserted that there was a question of fact as to whether Rocky would have signed the releases had he known that in signing them he was foreclosed from changing his mind in the future. The Surrogate allowed a fraud affirmative defense to remain. As to that defense, the court held that there was a triable issue of fact on the issue of constructive fraud, and whether the proponents of the releases (as opposed to Keiko) could meet their burden of demonstrating that Rocky's signature on the releases was voluntary and not the result of misrepresentation or omission by attorneys Dornbush and Shaw. At trial, the Surrogate determined that a preponderance of the evidence established that Rocky was not aware that the releases were irrevocable, and that Devon and Steven failed to meet their burden of establishing that Rocky's execution of the releases was voluntary and not the result of the 'misrepresentation, omission or concealment' by Rocky's fiduciaries, Dornbush and Shaw. The Surrogate decreed the September and December releases invalid. The Appellate Division unanimously reversed because the Surrogate 'erroneously shifted the burden of proof to Devon and Steven to prove that the releases were not procured by fraud,' pointing out that neither Dornbush nor Shaw were parties to the releases and therefore could not benefit from them. The record demonstrated that Rocky understood that the releases were irrevocable (as evidenced by his deposition testimony) and that Dornbush and Shaw never represented to Rocky that the releases were anything but irrevocable. It held that a party who signs a document without any valid excuse for not having read it is bound by its terms. Kieko (P) appealed.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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