Legal Memorandum: Corporation Doctrine in NY

Issue: Whether the ‘corporation doctrine’ will help protect a trustee from scrutiny about whether he or she has faithfully executed his or her duties ?

Area of Law: Business Organizations & Contracts
Keywords: Corporation doctrine; Trustee's fiduciary duties; Veil
Jurisdiction: New York
Cited Cases: 97 N.E.2d 888; 172 N.Y.S.2d 57; 233 N.Y.S.2d 968; 222 N.Y.S. 532
Cited Statutes: None
Date: 02/01/2012

Under the “corporation doctrine,” a court will look past the veil of an entity to determine whether a trustee has faithfully executed his or her duties.  A computer-assisted legal search for the term “corporation doctrine,” revealed no case that used the term in the sense it is used here.

The Court of Appeals recognized that:

It is well-established that where a trustee holds a working control of the stock in an estate corporation he is accountable in probate court for the administration of the corporate affairs.  His cestuis que trustent may require him to treat the corporate transactions as though they were his transactions as trustee.

In re Hubbell’s Will, 302 N.Y. 246, 97 N.E.2d 888, 891 (1951).

Many other New York cases are to similar effect, some specifically noting that where the trust or trustee owns or controls a corporation, the trustee’s duty to account should include the corporation’s activities.  See, e.g., In re Sylvester’s Estate, 5 A.D.2d 970, 172 N.Y.S.2d 57, 58 (1st Dep’t 1958) (“There can be no question that where an estate fiduciary is a controlling stockholder in a corporation by reason of holding such stock in a fiduciary capacity, he can be compelled to disclose the details of the corporate activities.”); In re Topping’s Estate, 36 Misc. 2d 991, 233 N.Y.S.2d 968, 971 (Surr. Ct. 1962) (where fiduciary owned all the stock in corporation on behalf of estate, “the fiduciary is under […]

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