Matter of Damiano: Sanctions for Frivolous Trustee-Removal Petitions Require a “Reasonable Opportunity to Be Heard” on the Amount of Counsel Fees

1. Introduction

Matter of Damiano (Appellate Division, Third Department, Jan. 22, 2026) arises from a conflict over the administration of two testamentary trusts created under the will of Jennifer Damiano (the decedent). The decedent, who shared two children with petitioner Delia Maroney, left her property in separate trusts for each child until age 25 and appointed respondent Janet Dunn—her longtime friend—as trustee. The will granted the trustee “complete discretion” over core trust-management decisions, including retaining or investing assets, making distributions, and employing legal counsel.

After the decedent’s death, petitioner became administrator of the estate and guardian of the children. Respondent became trustee, retained counsel, and funded the trust accounts in March 2023. Relations deteriorated. Petitioner then commenced an SCPA article 7 proceeding to remove respondent as trustee, seek reimbursement of alleged excessive legal fees, and recover petitioner’s own counsel fees. Surrogate’s Court dismissed the petition, found it lacked good faith and legal/factual basis, and ordered petitioner to personally pay respondent’s legal fees; it then granted respondent’s fee affirmation in full. Petitioner appealed both orders.

The Third Department’s decision is notable for (1) reaffirming the demanding standard for removal of a trustee—especially where the testator conferred broad discretion—and (2) enforcing the procedural safeguard in 22 NYCRR 130-1.1(d): even where sanctions are justified, the sanctioned party must have a “reasonable opportunity to be heard” on the amount and propriety of counsel fees sought as a sanction.

2. Summary of the Opinion

  • Trustee removal denied (affirmed): The court held petitioner failed to meet her burden under SCPA 711(10) to demonstrate serious misconduct, endangerment to the trusts, or unsuitability warranting removal. Alleged delay in placing funds into interest-bearing accounts, disputed distributions, and alleged excessive legal fees did not justify removal on this record—particularly given the trustee’s “complete discretion.”
  • Sanctions in principle upheld; fee award procedure reversed (remitted): The court agreed Surrogate’s Court could impose financial sanctions (reimbursement of reasonable counsel fees) under 22 NYCRR 130-1.1(a), (c) after finding frivolous conduct. However, it reversed the order fixing the amount because petitioner was not afforded a “reasonable opportunity to be heard” on the fee affirmation, and remitted for further proceedings consistent with 22 NYCRR 130-1.1(d).

3. Analysis

A. Precedents Cited

1) Removal standards and the judiciary’s reluctance to override the testator’s choice

  • Matter of Joan Moran Trust, 166 AD3d 1176 (3d Dept 2018): Cited for the SCPA 711(10) removal framework and burden of proof. The Third Department uses it to emphasize that removal requires competent evidence of statutory grounds or unsuitability, not mere dissatisfaction.
  • Matter of James H. Supplemental Needs Trusts, 172 AD3d 1570 (3d Dept 2019): Supplies two key principles applied here: (i) the core inquiry is whether the trustee negatively impacted the trust or failed the trust’s purpose; and (ii) interpersonal conflict, standing alone, is usually insufficient unless it thwarts proper administration or subverts the trust’s purpose.
  • Matter of Levinson, 166 AD3d 1196 (3d Dept 2018): Reinforces the “impact on the trust/purpose” lens rather than focusing on isolated alleged missteps.
  • Matter of Collins, 36 AD3d 1191 (3d Dept 2007): Quoted for the caution that removing a fiduciary “constitutes a judicial nullification of the testator’s choice,” supporting the court’s restrained approach.
  • Matter of Duke, 87 NY2d 465 (1996): The Court of Appeals’ formulation anchors the opinion: removal is to be exercised “sparingly” and only on a “clear showing of serious misconduct that endangers the safety of the estate.”
  • Matter of McNeil, 233 AD3d 1231 (3d Dept 2024): Cited as a recent Third Department application of Duke’s “sparingly” principle.

2) Delay in investing/interest-bearing placement: surcharge versus removal

  • Cooper v Jones, 78 AD2d 423 (4th Dept 1981): Distinguished by the court. There, a roughly four-year delay resulted in a surcharge, not removal. The Third Department uses it to show that even substantial delay may warrant monetary adjustment rather than ouster, and that petitioner’s reliance on such authority does not translate into a removal remedy here.
  • Matter of d'Espinay-Durtal, 4 AD2d 141 (1st Dept 1957): Similarly distinguished; a delay exceeding four years led to a remand for surcharge determination, not removal.

3) Reasonableness of counsel fees in trust/estate matters

  • Matter of Drossos, 26 AD3d 602 (3d Dept 2006): Provides the deferential standard—fee reasonableness is within the Surrogate’s “sound discretion” due to superior vantage on time, effort, and skill required. This is central to rejecting petitioner’s “excessive fees” argument as a basis for trustee removal.
  • Matter of Ellen C. Stark Charitable Trust, 223 AD3d 951 (3d Dept 2024) and Matter of Klein, 285 AD2d 718 (3d Dept 2001): Cited to support affirmance of Surrogate’s Court’s discretion in approving counsel fees.

4) Sufficiency of proof for removal; deference to record-based determinations

  • Matter of Giles, 74 AD3d 1499 (3d Dept 2010) and Matter of Epstein, 202 AD3d 674 (2d Dept 2022): Used to reinforce that removal requires competent evidence and that courts will not remove absent a demonstrated statutory or functional failure.

5) Sanctions procedure: the right to be heard

  • Pilatich v Town of New Baltimore, 170 AD3d 1463 (3d Dept 2019): Applied to hold that 22 NYCRR 130-1.1(d) requires a “reasonable opportunity to be heard.” The Third Department uses Pilatich to justify reversal and remittal when the fee affirmation was granted before petitioner had an opportunity to respond.

B. Legal Reasoning

1) Why removal failed under SCPA 711(10)

The court begins with the statutory removal standard: petitioner had the burden to show respondent “has violated or threatens to violate” the trust, is insolvent (or insolvency is apprehended), or is “for any other cause deemed an unsuitable person to execute the trust” (SCPA 711[10]). The court then applies the governing removal philosophy from Matter of Duke: removal is exceptional and requires a clear showing of serious misconduct endangering the estate, because removal nullifies the testator’s selection.

Applying these principles, the Third Department rejects each asserted ground:

  • Alleged delay in interest-bearing placement: The record showed the trustee deposited distribution checks the day received, researched accounts, consulted counsel, and transferred portions into an interest-bearing savings account within months while keeping some funds in checking for near-term expenses. Given the will’s grant of “complete discretion” to “retain” or “invest,” the court found no unreasonable delay or lack of diligence and noted petitioner’s delay-based cases concerned surcharge—not removal.
  • Alleged improper refusal to make distributions: The court credits the record that petitioner did not comply with reasonable requests for invoices/bills supporting proposed disbursements. Instead, communications became hostile and expanded to contacts with the trustee’s counsel and law firm—conduct that predictably increased legal work. Under Matter of James H. Supplemental Needs Trusts, discord alone does not justify removal absent interference with proper administration; on this record the court did not find the trustee thwarted the trust’s purpose.
  • Alleged excessive legal fees: Even though the GAL expressed concern about the magnitude of fees relative to the trust corpus, the GAL also concluded the fees were incurred in “good faith” to protect the trustee from petitioner’s “litigiousness.” The Third Department defers to the Surrogate’s fee assessment under Matter of Drossos and finds no abuse of discretion in concluding the fees were not excessive.

With no competent evidence of serious misconduct, endangerment, or unsuitability, the court holds Surrogate’s Court properly denied removal.

2) Sanctions: authority to impose, but procedure matters

The Third Department then addresses Surrogate’s Court’s order requiring petitioner to personally pay respondent’s defense counsel fees as a sanction. It upholds the authority to sanction under 22 NYCRR 130-1.1(a), (c) given Surrogate’s Court’s findings that the petition lacked good faith, had no basis in law, and asserted untrue facts.

The procedural defect lies in the fixing of the amount. Surrogate’s Court required respondent’s affirmation of legal services “on notice” to petitioner’s counsel, but entered the order granting the affirmation in full three days later, with no response from petitioner in the record. The appellate court holds that, on this record, petitioner did not receive the required “reasonable opportunity to be heard” under 22 NYCRR 130-1.1(d). Accordingly, it reverses the fee order and remits for further proceedings so petitioner can be heard as to the propriety and amount of the requested legal services.

C. Impact

  • Reinforcement of high barriers to trustee removal: The decision continues the Third Department’s consistent insistence—rooted in Matter of Duke—that removal is a drastic remedy, particularly when the testator granted broad discretion and there is no showing of harm to the trust purpose.
  • Guidance on “delay” claims: By distinguishing Cooper v Jones and Matter of d'Espinay-Durtal, the opinion signals that delay allegations often sound in surcharge/accounting remedies rather than removal, absent additional proof of endangerment or bad faith.
  • Fee disputes and beneficiary/guardian friction: The court recognizes that contentious, invoice-free, or hostile demands for distributions can generate legitimate legal work. Trustees who seek documentation and use counsel defensively may be protected from removal, provided the conduct is in good faith and connected to proper administration.
  • Procedural safeguard for sanctions in Surrogate’s Court practice: The remittal underscores that courts must not only find frivolous conduct but must also provide a meaningful chance to contest the fee submission. Practitioners should expect that “on notice” must be paired with an actual opportunity to respond before amounts are fixed.

4. Complex Concepts Simplified

  • Testamentary trust: A trust created by a will, taking effect at death, often to hold assets for children until a stated age.
  • Trustee “complete discretion”: Language giving the trustee wide latitude in investing, retaining assets, and making distributions—courts are generally reluctant to second-guess these discretionary choices absent abuse or bad faith.
  • Removal vs. surcharge: Removal replaces the trustee (a drastic remedy). A surcharge is a monetary remedy (charging the fiduciary for losses or foregone gains, such as interest), often used when the issue is financial mismanagement without showing unfitness to serve.
  • Guardian ad litem (GAL): A court-appointed advocate for minors’ interests in litigation affecting them (here, the children beneficiaries).
  • Frivolous conduct and sanctions (22 NYCRR 130-1.1): A court may award costs/fees as a sanction when claims are baseless or pursued in bad faith, but the sanctioned party must have a “reasonable opportunity to be heard,” including on the amount sought.
  • Remittal: The appellate court sends the matter back to the trial court for further proceedings—here, to conduct a process that allows petitioner to challenge the fee affirmation before the amount of sanctions is fixed.

5. Conclusion

Matter of Damiano delivers two interlocking lessons. Substantively, it reaffirms that trustee removal under SCPA 711(10) is an extraordinary remedy, especially where the will grants “complete discretion,” and that acrimony and fee disputes—without proof of serious misconduct or harm to the trust’s purpose—will not suffice. Procedurally, it clarifies that even when sanctions are warranted under 22 NYCRR 130-1.1, courts must still provide a “reasonable opportunity to be heard” before fixing counsel fees as the sanction. The decision thus strengthens both deference to the testator’s fiduciary choice and the due-process protections embedded in New York’s sanctions framework.