Legal Memorandum: Exercise of Powers by Joint Fiduciaries

Issue: Under the law of New York, are co-trustees liable for the conduct of the other absent a showing of participation in the wrongdoing by both trustees?

               There is no New York statutory law that provides that co-trustees are considered "one person" for purposes of making claims for breaches of fiduciary duty.  The only statute located that discusses the relationship of co-trustees is N.Y. Est. Powers & Trusts Law § 10-10.7, which deals with the exercise of powers by joint fiduciaries.  That statute provides that a co-fiduciary who is unable to act, or who dissents from a decision by the majority and then makes his or her dissent in writing, is not "liable for the consequences of any majority decision, provided that liability for failure to join in administering the estate or trust or to prevent a breach of the trust may not thus be avoided."  The statute does indicate that there is no intent to create a blanket rule that co-fiduciaries are to be regarded as one person.  See also N.Y. Surr. Ct. Proc. Act. § 2210 (3) (Co-fiduciaries who do not join in a petition for a voluntary accounting are necessary parties, and must separately be served with process).

There is some old case law that has been cited for the broad proposition that co-trustees are responsible for the acts of the other trustee, see, e.g., In re Executor and Trustee under Last Will & Testament of Mallon, 110 A.D. 61 (2d Dept. 1905).  Other cases have stated the rule more narrowly.  These cases hold that a co-trustee is liable for the wrongdoing of another co-trustee only if he or she acquiesced […]