COURT REINSTATES EXECUTORS OF HEIRESS'S ESTATE.

Byline: Joseph P. Fried The New York Times

The state's highest court Thursday reversed a surrogate's decision to remove Doris Duke's butler and the U.S. Trust Co. as executors of her $1.2 billion estate.

The Court of Appeals said the removal of the executors by Manhattan Surrogate Eve Preminger was based largely on "untested hearsay."

The court ordered Preminger to hold a hearing at which the butler, Bernard Lafferty, and U.S. Trust could challenge allegations that led to their dismissal.

Duke, the reclusive tobacco heiress who died in October 1993, left most of her huge fortune to charity.

In May, Preminger found that Lafferty was spending money lavishly on clothes, jewelry and antiques, that he traveled in Duke's private Boeing 737 jet and her chauffeured Cadillac at estate expense, and that he had renovated the bedroom of her Los Angeles mansion, where he was sleeping, to add a spa.

Preminger concluded that Lafferty, a barely literate man in his 40s who has said that he is an alcoholic, was using the estate to finance his own "profligate life style" and was thus unfit to be an executor.

Duke had named Lafferty as an executor in her last will, written six months before she died at the age of 80. Pending challenges argue that the will should be ruled invalid because drugs and age made her mentally incompetent.

As for the trust company, one of the oldest and most respected in the nation, the surrogate ruled that it had not lived up to its fiduciary responsibilities as co-executor because it had failed to "rein in" Lafferty's spending, and that it had created a conflict of interest for itself by lending Lafferty nearly $825,000 for his expenses while the will was in probate.

But writing for a unanimous Court of Appeals, Judge Vito Titone held Thursday that in reaching her decision without granting Lafferty and U.S. Trust the hearing they sought on the accusations - which they dispute - Preminger had "abused her discretion" in the "unique circumstances of this case."

Titone noted that instead of granting the hearing, the surrogate had appointed Richard Kuh, a lawyer and former Manhattan district attorney, to investigate the accusations of misconduct in an inquiry that, in her words, was to be "informal and expeditious," avoiding the "inevitable delays, squabbles over evidence and witnesses, and time and resources which would be consumed by a formal hearing."

Titone said that while the surrogate's desire for efficiency was understandable, it resulted in a flawed decision "based largely on the untested hearsay assembled here."

The ruling drew praise from lawyers for Lafferty and U.S. Trust.

"We are delighted that we will have the opportunity to cross-examine under oath people who have been saying untrue and inaccurate things about Mr. Lafferty," said Lafferty's lawyer, Herbert J. Stern.