Legal Memorandum: Accounting Decree and Res Judicata Effect

Issue: Under New York law, if a trustee furnishes all corporate records relating to each transaction, will the ‘accounting decree’ have res judicata effect with respect to claims contained in those corporate records?

Area of Law: Corporate & Securities, Estate Planning & Probate
Keywords: Accounting decree; Res judicata effect; Corporate records
Jurisdiction: New York
Cited Cases: 299 N.Y.S. 542; 213 A.D.2d 280; 151 N.Y.S.2d 561; 794 N.Y.S.2d 286
Cited Statutes: Restatement (Third) of Trusts § 83, cmt. c
Date: 09/01/2009

As a general matter, an accounting decree will be given preclusive effect with respect to those matters that “are clearly and specifically set out and which can be definitely ascertained from a reading of the account and decree.”  In re Williams’ Estate, 1 A.D.2d 1022, 151 N.Y.S.2d 561, 563 (2d Dep’t 1956).  If, based on the corporate records furnished, a beneficiary ought to be able to discern a claim and if he or she fails to raise the issue in the accounting proceeding, the beneficiary will be precluded from bringing the claim in future proceedings.  See In re Hunter, 4 N.Y.3d 260, 794 N.Y.S.2d 286, 293, 827 N.E.2d 269 (2005); Restatement (Third) of Trusts § 83, cmt. c (“[A] court order approving all or part of a trustee’s accounts discharges the trustee from liability (or further liability) for matters appropriately disclosed. (emphasis added)).

Conversely, if the trustee fails to provide information with respect to transactions engaged in by the corporation owned by the trust, the decree will have no res judicata effect with respect to such claims.  In re Adler’s Estate, 164 Misc. 544, 299 N.Y.S. 542, 552-53 (Sur. Ct. 1937).  Moreover, even if the transactions themselves are disclosed but the trustee fails to furnish enough information to suggest their unlawful nature, the decree will not have res judicata effect with respect to such claims. See In re Enger’s Will, 30 N.W.2d 694 702 (Minn. 1948); Restatement, supra, § 83 cmt. c (“Because a trustee has […]

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