Aoki v. Aoki

117 A.D.3d 499 (2014)

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Nature of the Case

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Facts

Rocky created the Benihana Protective Trust (BPT) to hold stock and other assets relating to Benihana. Rocky had the power to appoint the beneficiaries of the BPT through his will. He selected as trustees of the BPT two of his six children (Kevin and Kana) and his longtime attorney, Darwin C. Dornbush. In July 2002, Rocky married Keiko Ono Aoki. Kana and Kevin met with Dornbush to express their concern that their father did not have a prenuptial agreement. Dornbush advised them that a postnuptial agreement would resolve their concerns. Keiko refused to consent to such an agreement. Rocky thereafter met with Dornbush, Kevin, and Kana to discuss their concerns regarding possible claims by Keiko against Benihana assets in the event of Rocky's death. Norman Shaw, an attorney experienced in estate work, recommended that Rocky could partially release his power of appointment under the BPT agreement so that he could appoint only to his descendants or trusts for his descendants, thereby restricting Benihana assets to members of his direct family. Rocky signed the one-page document captioned 'Partial Release of power of Appointment Under New York Estates, Powers & Trusts Law § 10-9.2.' The pertinent terms of the release are: 'I hereby irrevocably partially release the power of appointment [in Article V (a) of the BPT agreement] so that, from now on, I shall have only the following power: I shall have a testamentary power to appoint any of the principal and accumulated net income remaining at my death to or for the benefit of any one or more of my descendants.' Rocky's relationship with his children began to deteriorate, and Rocky commenced litigation against them and Dornbush in their capacities as trustees of the BPT. Dornbush testified that he explained to Rocky that upon signing the release, disposition of the Benihana assets would now be limited to his children and their descendants, whereas before his appointment powers were unlimited. On the same day that he signed the release, Rocky signed a codicil to his will and a consent to an amendment to the BPT agreement. On August 4, 2003, Rocky executed a codicil which purported to exercise his power of appointment, giving 25% of the BPT outright to Keiko, and the income from the remaining 75%, to her for her lifetime. It also gave her the power to appoint the principal to one or more of Rocky's descendants in her will and designated her as the executrix. In February 2009, the trustees of the BPT brought this action to determine the validity of the partial releases. Devon and Steven moved for summary judgment to dismiss Keiko's affirmative defenses and to declare the releases valid. After a bench trial on the issue of constructive fraud, the court held that the circumstantial evidence was sufficient to meet Keiko's burden and that Devon and Steven failed to meet their burden of proving that Rocky's signing of the releases was voluntary and not the result of omission by his counsel. The Surrogate declared the releases invalid. This appeal resulted.