By: Gary E. Bashian & James G. Yastion
IN A CONSTRUCTION PROCEEDING, THE
COURT WILL GO ONLY SO FAR IN
INFERRING THE CREATION OF A TRUST
The petitioner in this proceeding sought a construction of the decedent’s Will as creating a trust for her benefit. Estate of Louis Arancia, NYLJ, April 9, 2003, p. 24 (Surr. Ct. Kings Co.). Her petition was denied.
The petitioner was the executrix of the decedent’s Will and his surviving spouse. She claimed that paragraph THIRD of the Will created a trust for her benefit. She cited paragraph THIRD which gave the decedent’s securities to the petitioner for her life and the remainder to their daughter, and further provided that the assets would be held “in trust during [the petitioner’s] lifetime.”
The petitioner offered other evidence including an affidavit by the attorney-draftsman. The attorney stated that the decedent said he wanted a trust for his wife’s benefit. Before the Will was executed, however, the attorney gave the decedent the computer disk containing the draft Will. The decedent took the disk home, made numerous revisions to the Will, and independently executed the revised Will.
The petitioner also notes that the Will, in numerous places, makes reference to a “trust,” in places providing that certain assets would go into the “trust,” and also providing that the executor would not be permitted to handle the assets in the “trust.” The Will also notes in several places that a description of the trust would be forthcoming.
At the conclusion of petitioner’s proof, the Court refused to construe the Will as creating a trust. The purpose of a construction proceeding is to ascertain the testator’s intent, see Matter of Fabbri, 2 N.Y.2d 236, which is to be gleaned from the will in its entirety. Courts try to stay within the four corners of the will in ascertaining intent. Courts, however, are more flexible in ascertaining intent where the will was drafted by a layman.
Even though the Will was allegedly drafted by a laymen, the Court concluded that to find a trust would be to replace the language the testator used with its own which it could not do. Although there were numerous references to a trust, there were no provisions in the Will specifically establishing any trust for the decedent’s wife. Moreover, even though the Will several times promised that a description of the trust would be “hereinafter provided”, the Will never accomplished this task and the Court did not create or construct a trust.
PARTIES TO SEPARATION AGREEMENT MUST DO MORE
THAN CROSS ‘T’S AND DOT ‘I’S TO RESULT IN A WAIVER
OF ONE PARTY’S RIGHTS TO TOTTEN TRUST FUNDS
The Court of Appeals in Eredics v. Estate of Nicholas, 100 N.Y.2d 106 (May 8, 2003) held that a separation agreement between the decedent and plaintiff, which contained fairly broad language regarding restrictions on inheritance, etc., did not constitute a waiver by the plaintiff of rights to certain Totten trust funds.
The Plaintiff and the Decedent were married in 1975 and later divorced in 1990. They executed a Separation Agreement in 1995. In paragraph 3, the parties agreed that they each owned and would own for the future all of their property free of the claims of the other. In paragraph 5, they agreed that all bank accounts had been distributed equally to their satisfaction, and in paragraph 9, each party made mutual waivers against each other’s estates.
The Decedent died leaving a Will giving everything to his siblings. During their marriage, the Decedent had created several bank accounts “in trust for” the Plaintiff (i.e. Totten trust accounts) and he had not made any changes to the accounts prior to his death. Upon Decedent’s death, the Plaintiff claimed she was entitled to these bank accounts because they had not been revoked. The Estate countered arguing that the Plaintiff had waived any entitlement to the bank accounts by virtue of the terms of the Agreement.
On the issue of revocation, the court held, and the Estate conceded, that none of the three statutory grounds under EPTL § 7-5.2 for a revocation of the Totten trust could be proved.
On the issue of Plaintiff’s alleged waiver, the Court drew direction from the recent case of Silber v. Silber, 99 N.Y.2d 395 (February 18, 2003) holding that a waiver must be expressed in clear, unequivocal terms and since no such explicit waiver was contained in the agreement, no waiver would be recognized. The Court required such specificity because of the legislature’s concern for certainty in laws affecting Totten trusts.
Rebutting the Estate’s arguments, the Court held that the language of paragraph 3, albeit broad, did not effectuate a waiver because it did not explicitly state that the Plaintiff desired to waive her rights to the Totten trust bank accounts. Paragraph 5, instead of being an argument favorable to Plaintiff, the court read as preserving the status quo, which was that the Decedent was the creator and Plaintiff was the beneficiary of the Totten trust accounts. Finally, the release of any claim against each other’s estate contained in paragraph 9 did not affect a waiver because Totten trust accounts are deemed non-testamentary assets and, therefore, outside the scope of this provision.
FATHER DEEMED TO HAVE ABANDONED SON WHERE HE
DISCONTINUED SUPPORT AS PER AGREEMENT WITH MOTHER
AND HE SPOKE WITH SON TWO TIMES IN TWELVE YEARS
In Estate of Daniel Hal Crisman, NYLJ, May 30, 2003 (Surr. Ct. New York Co.), the Court held that the Decedent’s father abandoned the Decedent and was therefore disqualified from inheriting as an intestate distributee.
Daniel Crisman (Decedent) died on September 11, 2001, without a Will. His mother, the Petitioner, was appointed administratrix. After her appointment, she moved the Court for summary judgment seeking to disqualify Daniel’s father, the Respondent, from taking a distributive share of Daniel’s estate, claiming that the father had abandoned him.
The Petitioner and Respondent were married and gave birth to the Daniel in 1976. In 1980 they divorced and the family court ordered that Daniel was to live with his mother but permitted the father to visit every other weekend. The father was ordered to pay $20 per week in child support. Upon the mother’s insistence in 1983, the Petitioner and Respondent agreed that Daniel’s last name would be changed from the father’s surname to the mother’s maiden name and in return the Respondent would discontinue making the child support payments. In or about 1983, the mother moved to New Jersey with the Decedent and allegedly never told Respondent their new address and telephone number. The Respondent claimed this made visitation difficult. Between 1983 and 1989, the Respondent occasionally visited with Daniel when the boy was spending the weekend with his mother’s parents, totaling approximately 20 times in this time period. Apart from the Daniel’s high school graduation, the Respondent never had a face to face contact with his son after 1989. They had two telephone conversations between 1989 and the Decedent’s death, one of which Daniel initiated himself.
A parent will be disqualified from taking a distributive share of a deceased child’s estate under EPTL § 4-1.4 where the parent “has failed or refused to provide for, or has abandoned such child while such child is under the age of twenty-one years, unless the parental relationship and duties are subsequently resumed and continue until the death of the child.” Infrequent payments of child support and intermittent contacts do not qualify as support, even where another person voluntarily takes on the sole obligation of support. See Matter of Brennan, 169 A.D.2d 1000.
The Court held that the Petitioner had met her burden of proof finding that there was no question of fact as to whether the Respondent had abandoned the Decedent. The Court found that the Respondent’s contacts, especially for the years 1989 to the Daniel’s death, were so infrequent as to amount to an abandonment. Also, citing Matter of Brennan, supra, the Court held that even though the parties agreed in 1983 that the father could cease making support payments, this did not legally relieve the father of this obligation. Also, the Court distinguished cases where one parent has impeded the ability of the other parent to visit, thereby excusing the other parent’s lack of visitation. Here, although the Petitioner and Daniel moved to New Jersey in 1983, the Respondent did not seek the aid of the Court to enforce his right to visitation. Finally, the Court gave little credence to the Respondent’s arguments that he had resumed his parental relationship with Daniel after 1989 in light of the dearth of contacts during this period.
WHERE SHAREHOLDERS AGREEMENT GAVE ONE SHAREHOLDER OPTION
TO PURCHASER OTHER’S SHARES, THERE WAS A VALID EXERCISE OF OPTION EVEN WHEN EXERCISED AFTER DEATH OF OTHER SHAREHOLDER
At issue in Estate of Max Berman, NYLJ, April 17, 2003, p. 25 (Surr. Ct. Richmond Co.) was whether an option contained in a shareholder’s agreement to purchase shares was properly exercised by the Petitioner. The court held it was exercised properly.
Martin Kirshner (Petitioner) and Max Berman (Decedent) were sole shareholders of a closely held corporation. A shareholders agreement gave Kirshner the option of purchasing all of Berman’s shares for $1,000.00. The agreement provided the following method for exercising the option:
“MARTIN KIRSHNER shall notify MAX BERMAN in writing of his intention to purchaser said shares and shall tender a check therewith for the purchaser price. MAX BERMAN agrees within three (3) days to deliver all of his shares in this Corporation to MARTIN KIRSHNER. This shall be binding on the heirs, successors and assigns of MAX BERMAN.”
When Berman died, Kirshner had not yet exercised the option. Approximately twenty days after Berman’s death, Kirshner sent a letter to the executors of the Berman’s estate stating his intention to exercise the option and enclosing a check for $1,000.00. The executors refused to honor his request arguing that the option had to be exercised during the Decedent’s life. Kirshner petitioned the Court for an Order validating the exercise of the option.
The Court held that Kirshner properly exercised the option and further held that the agreement did not require Berman to be alive at the time it was exercised. When parties set down their agreement in clear and unambiguous terms, the agreement should be enforced according to its terms. See W.W.W. Assoc., Inc. v. Giancontieri, 77 N.Y.2d 157. Only if the terms are ambiguous will a court resort to other means of interpretation. See Western Union Tel Co. v. American Communications Assn., 299 N.Y. 177. The question of whether a contract’s terms are ambiguous is a question of law for the court to determine. See W.W.W. Assoc., Inc., supra.
The Court held that the shareholder’s agreement was clear and unambiguous on the issue of whether Berman had to be alive when the option was exercised. The Court particularly cited Article 10.5 which provided that any reference to a shareholder includes his heirs, executors, legal representatives, successors and assigns. Therefore, the letter exercising the option could be tendered to Berman himself or his executors. The Court further observed that if the Decedent wanted the option to expire on his death, he would have stated same in equally clear terms as the terms in Article 10.5.
MUTUAL FUNDS NOT DEEMED “CASH” FOR
PURPOSES OF WILL CONSTRUCTION
A proceeding was brough to construe the decedent’s Will in Estate of Henry E. Poppe a/k/a Henry Poppe a/k/a Henre Poppe, NYLJ, Jan. 2, 2003, p. 22 (Surr. Ct. Nassau Co.) in which the Court had to decide whether the terms “cash,” “cash on deposit,” or “cash accounts” should be construed to include mutual fund shares. It was held that they should not.
The decedent left a Will in which he bequeathed in Article SECOND “all the remaining cash on deposit in any accounts to which I have title at the time of my death” (emphasis added) to his children and gave all the rest and residue to his partner. At his death, the decedent’s sole probate asset was a Morgan Stanley Dean Witter mutual fund account.
The children claimed they were entitled to the mutual funds under Article SECOND because the mutual fund account was the equivalent of cash. Decedent’s partner, on the other hand, contended that the mutual fund account was not cash and, therefore, should go to her through the residuary clause.
In ascertaining intent, the Court is to give the testator’s words their normal meaning. See Matter of Jones, 38 N.Y.2d 189. Courts have generally held “cash” to be ready money, money available on command, subject to free disposal and not tied up in a fixed state such as coins, paper money, as well as checking and savings accounts and certificates of deposit, see Matter of Feist, 170 Misc. 497, and not stocks or bonds. Sometimes courts will give cash a broader meaning where other language in the will would indicate a broader meaning is intended or where part of the estate would not be disposed of, but for a broader meaning. See 27 ALR 3rd 1406.
Mindful of the above precedent, the Court directed the mutual funds to be distributed to the partner under the residuary clause, holding that the mutual funds were not the equivalent of “cash” because they did not fall within the traditional meaning of “cash” which includes checking or savings accounts, coins or bills. The Court further found the argument unpersuasive that the mutual funds should be deemed cash because they could readily be converted to cash holding that one would not call a ring or a painting cash even though one could quickly convert such assets to cash by a sale. The Court also rejected the argument that the decedent must have intended the funds to equal cash since he had no cash at the time he executed his will and such a construction would give the testator’s bequest meaning. It was equally possible that he anticipated that he would have cash at his death.
ADMINISTRATOR APPOINTED FOR THIRTEEN HOUR
OLD BABY WHO DIED IN CAR ACCIDENT
In Estate of Ricardo N. Herrera a/k/a Baby Boy Herrera, NYLJ, Jan. 14, 2003, p. 21 (Surr. Ct. Kings Co.), the Court granted the public administrator’s application to be appointed administrator of the Estate of a thirteen hour old baby for purposes of commencing an action for pain and suffering and wrongful death.
On a summer evening in August of 2001, a police officer ran a red light and collided into a pregnant woman crossing the street. The woman was rushed to the hospital and the doctor treating her detected a fetal heartbeat. The doctor performed an emergency cesarean on the mother and delivered the baby at 9:40 p.m. It was fully developed but did not have a heart beat. The baby was treated by a trauma doctor and a heart beat and blood pressure were established. After being transferred to another hospital, the baby was breathing on a ventilator and was sustaining its own heart beat and blood pressure. Later the ventilator was removed and the heart continued to beat on its own for approximately fifty minutes after which the heart stopped. The baby was pronounced dead at 10:50 a.m., approximately thirteen hours after its birth.
The Court held that an action could be maintained on behalf of the baby for pain and suffering. One may recover damages for pain and suffering when the person had “some level of awareness.” McDougald v. Garber, 73 NY2d 246. While case law is not clear on what “some level of awareness” means, courts have held that it is not necessary that the person be able to appreciate the nature of the injury or verbalize pain. See Ledogar v. Giordano, 122 AD2d 834. The Court’s inquiry, however, was limited to whether the Plaintiff could make out an action for pain and suffering and not, as Defendant claimed, whether the Plaintiff could prove pain and suffering.
The Court also granted the administrator’s application to be appointed for purposes of commencing a wrongful death action. Where a child is born alive, it has a cause of action in its own right for the damages which it suffered. See EPTL § 5-4.1. Cases have held, however, that an action may not be maintained for wrongful death on behalf of a stillborn baby. The key element is that the baby be born alive because the purpose of the cause of action is to compensate the decedent’s potential distributees for economic support which they would have received from the decedent had he/she not died. Only a person who was living at some point could have lived longer so as to support his/her distributees. Since the baby was born living, albeit for thirteen hours, the Court held that a cause of action for wrongful death was maintainable.
COURT HOLDS THAT SUBPOENA MUST STATE WITH
SPECIFICITY HOW THE ITEMS SOUGHT ARE RELEVANT
In Estate of George Gould, NYLJ, Oct. 8, 2002, p. 22 (Surr. Ct. Westchester Co.), the Court granted a motion quashing a third party subpoena on the grounds that it sought evidence that was completely irrelevant to the underlying accounting proceeding.
In this contested accounting proceeding, the decedent’s widow filed objections to the accounting of the executrix. The widow later served a third-party subpoena on the executrix’s spouse, who had holdings in a certain corporation. The subpoena demanded that the spouse appear and bring with him all corporate records. The spouse filed a motion contending that the documents sought were completely irrelevant to the accounting proceeding since the estate never owned any assets of the corporation. The widow claimed that she was entitled to discover information about “possible” estate assets and, in particular, stated that the decedent had allegedly made a loan the corporation and, therefore, the estate had an interest in the corporation.
The Court quashed the subpoena first holding that while a party must disclose “all evidence material and necessary in the prosecution or defense of an action,” see CPLR 3101(a), mere assertions that the documents sought “might prove relevant” are insufficient to require disclosure. Richie v. Carvel Corp., 180 A.D.2d 788. The widow’s proof was defective insofar as she failed to state in what manner the corporate books were relevant to the alleged debt or estate asset. Moreover, the Court held that, if in fact the estate was a creditor of the corporation, such information was not customarily available to creditors.
If anything is to be drawn from the Court’s holding above, it is that the draftsperson of a subpoena should be careful to be specific as to the relevancy of the items sought or else hazard the chance of the subpoena being quashed.
LIMITED POWER OF APPOINTMENT IN IRREVOCABLE TRUST DOES
NOT MAKE TRUST ASSETS AVAILABLE TO CREATOR AND
THEREFORE PART OF THE MEDICAID-AVAILABILITY EQUATION
In Verdow v. Sutkowy, 209 F.R.D. 309 (N.D.N.Y. 2002) the Plaintiffs were elderly nursing home residents who created irrevocable trusts in which they held limited powers of appointment. The trusts did not allow for invasions of principal. The Plaintiffs filed Medicaid applications but they were denied on the grounds that the Plaintiffs were potential beneficiaries of self-settled trusts in which they held limited powers of appointment and, therefore, the trust assets were available for Medicaid eligibility purposes. Plaintiffs brought a 42 U.S.C. 1983 suit against the Medicaid program and later filed a motion for summary judgment.
At issue was the Defendant’s policy that a limited power of appointment makes the trust assets “available” resources for purposes of determining Medicaid eligibility even where a trust is irrevocable and the trustees have no discretion to invade principal.
The Court granted the Plaintiff’s summary judgement motion holding that the trust assets were not “available” resources for Medicaid eligibility purposes. Pursuant to 42 U.S.C. 1396a(a)(17)(B), a State plan for medicaid assistance must contain “reasonable standards for determining … eligibility … taking into account income and resources as are … available to the applicant.” In the case of an irrevocable trust, where there are circumstances where assets may be paid to the individual from the trust, those assets will be considered in determining what resources are available. 42 U.S.C. 1396p(d)(3)(B)(i). The Defendant contended that in these circumstances, the trust corpus was an available resource.
The Court agreed with Plaintiffs and rejected the Defendant’s numerous arguments. Of particular note was Defendant’s argument that the assets were available because the trust could be revoked by the creators using their retained power to remove beneficiaries. Then, the Defendant claimed, the creator could find new beneficiaries who would consent to a revocation of the trust thereby making the assets available for Medicaid eligibility purposes. The Court held that absent evidence of bad faith, the decision of whether or not to provide Medicaid benefits should not be based on the remote possibility of collusion between the creators and beneficiaries of an irrevocable trust.
WHERE CONFLICTING TESTIMONY BETWEEN A DISINTERESTED
WITNESS AND A PARTY, COURT CHOOSES DISINTERESTED WITNESS
In this administration proceeding in the Estate of Garland, NYLJ, Nov. 4, 2002, a traverse hearing was held to determine whether a citation was served and jurisdiction was properly obtained over all interest parties.
The Decedent had two daughters. The first daughter (Respondent) filed a petition and was appointed administrator of her mother’s estate. Letters of administration were issued to her. Later, the second daughter (Petitioner) started an action seeking to revoke the letters claiming that she was never served with a citation in the administration proceeding.
At the traverse hearing, the process server testified with specificity regarding her experience in serving the Petitioner including driving to the residence, knocking on the door and asking for the Petitioner by name. She recalls bringing a photograph of the Petitioner for purpose of identifying the person she was to serve. She also recalls her conversation with the Petitioner. In opposition, the Petitioner testified that while she was at the house on the date of the alleged service, she never answered the door.
Faced with conflicting testimony, the Court favored that of the process server holding that where there is conflicting testimony of a party and a non-party witness on the issue of whether service was properly effectuated, great weight is to be afforded the testimony of the legally disinterested witness. See Rowlan v. Brooklyn Jewish Hosp., 100 A.D.2d 844. In light of this holding, the Petitioner’s motion to revoke the letters was denied.
MISREPRESENTATION OF THE LAW BY FIDUCIARY COULD
AMOUNT TO FRAUD WHERE BENEFICIARIES WERE THEREBY
INDUCED TO EXECUTE WAIVERS AND CONSENTS
This was a case in which the executor of the decedent’s estate obtained waivers and consents from the decedent’s nieces and nephews under circumstances which could have potentially amounted to fraud. Estate of Mary J. Voza, NYLJ, Sept. 25, 2002, p. 23 (Surr. Ct. Nassau Co.)
The decedent died survived by his brother, the Petitioner, who was the nominated executor of his Will, who happened to be a lawyer. He was also survived by four nieces and nephews (Respondents) who were children of the decedent’s other sibling who was predeceased. The Will was admitted to probate based on waivers and consents which the Petitioner obtained from the nieces and nephews. The Will gave most of the residuary estate to the Petitioner and left nothing for Respondents.
The Respondents later sought an Order vacating the Decree admitting the Will to probate and permitting the withdrawal of their waivers and consents.
The issue before the Court was whether there were any grounds to set aside the waivers and consents. The Court held that ordinarily where a party reads and signs a document, he is bound by its terms even though his mind may have never assented to its terms. See Wigmore on Evidence, § 2415. A waiver and consent, however, may be set aside on the grounds that it was obtained under circumstances amounting to undue influence and/or fraud.
While the Court determined there were no facts proving undue influence, it did find that the facts warranted a further hearing on the issue of fraud. It came to light that a letter was sent to one of the Respondents from the Petitioner in which the Petitioner advised her that she would not receive any of the estate if there were no Will. This was plainly false given the fact that under the laws of intestacy (EPTL § 4-1.1), where there are two siblings of the decedent, one having predeceased, but having issue, half the estate would pass to the decedent’s living sibling and half to the issue of the predeceased sibling to be divided equally amongst them.
The Court reserved any decision on the issue of the validity of the waivers and consents but expressed its concern with the letter and the likelihood that it in fact mislead the Respondents.
UPON A FINDING OF EXTENUATING CIRCUMSTANCES,
COURT EVALUATOR CAN ALSO BE CO-GUARDIAN
IN ARTICLE 81 GUARDIANSHIP PROCEEDING
Despite the potential conflict of interest, the Court in this Article 81 guardianship proceeding appointed the court evaluator as the co-guardian of the alleged incapacitated person’s (AIP) property upon finding the requisite “extenuating circumstances.” Matter of GLM, NYLJ, May 6, 2003, p. 19 (Surr. Ct. Kings Co.).
The AIP suffers from cerebral palsy and was awarded $56,700,000 in a medical malpractice action. The Petitioner, the AIP’s natural mother, was appointed guardian of the person and co-guardian of the property. The Court evaluator was appointed the other co-guardian of the property.
All parties agreed that an independent third party guardian of the property was needed in light of the animosity between the AIP’s natural parents and because of the inexperience of the Petitioner in finances. The only unresolved issue, however, was whether the court evaluator was the appropriate third party in light of the “Birnbaum Commission” report of December, 2001.
The report notes that the appointment of a court evaluator might pose a conflict of interest. (Report of the Commission of Fiduciary Appointments, p. 23-24; 38-39, December, 2001). This notion spurned the recent amendment to the Rules of the Chief Judge which prohibits the appointment of the court evaluator as guardian except under extenuating circumstances. Rule 36.29(c)(10). (Emphasis added).
The Court found the requisite “extenuating circumstances” citing the fact that the court evaluator was well versed in the relevant law and in financial matters, he was on good terms with both of the AIP’s parents, the parents consented to his appointment, his office was located close to the parties’ residences, and the Court had the utmost confidence in his general abilities.