By: Gary E. Bashian, Esq. & Andrew Frisenda
The Bond That Never Was – And We Don’t Mean James
Greene v Greene involved a conversion action, in the Appellate Division Second Department, regarding government bonds allegedly gifted by Decedent to Plaintiff prior to death. Decedent had delivered to Plaintiff an envelope with instructions that it was not to be opened until after his death. Upon death, Plaintiff opened the envelope, and found a form and letter, witnessed by Defendant, regarding a change of ownership of the bonds from the Decedent and Defendant to Plaintiff and his daughter. Defendant’s refusal to turn the bonds over to Plaintiff inspired the action for conversion, which came before the Court on concurrent Motions for Summary Judgment.
As one would expect, the Court considered the elements of an inter vivos gift: intent to make an irrevocable, present transfer of ownership; acceptance; and delivery. Given these elements, the content of the letter enclosed with the change of ownership form only evidenced a future intent to transfer the property, and not a present transfer, Plaintiff could not establish that a gift had in fact been made. Furthermore, a testamentary disposition of the bonds could not be established as the instructions/letter included with the bond did not comply with the execution formalities required by EPTL 3-2.1.
As such, Plaintiff’s action for conversion was properly dismissed by the lower Court, and sustained by the Appellate Division.( Greene v Greene, 92 AD3d 838 [App Div 2nd Dept 2012]).
A Very Cubist Gift
Conversely, in Mirvish v Mott the Court of Appeals affirmed New York County Surrogate Roth’s determination that a completed gift was made of Jacques Lipchitz’ cubist sculpture “The Cry,” by his widow to her second husband.
As is often the case, a somewhat complicated factual background was distilled to a relatively straightforward ruling of law. Decedent had given her second husband a photo of a sculpture with the words “I gave this sculpture “The Cry” to my good friend Biond Fury.”
The High Court held that this photo clearly conveyed a donative intent on its face; that the possession of the gift (or a deed of gifting in the form of the photo) created the presumption of delivery (constructive or otherwise); and that in the absence of evidence that the gift was a product of coercion, that the donor did not have capacity, or that acceptance was not made. As such, a completed gift was found to have been made of the sculpture.
Interestingly, while the underlying Estate litigation was unfolding, the Decedent’s Executor had stipulated that all claims regarding the ownership of “The Cry” would be decided “on the merits.” As such, the Statute of Limitations defense he raised in an effort to avoid the return of the artwork to the donee were disregarded.
(Mirvish v Mott,18 N.Y.3d 510 ).
A Conflicted Disqualification
Although Motions to disqualify counsel are often derided in opposition papers as frivolous, unwarranted, and made simply in an effort to gain a strategic advantage over the other party, when employed properly they can protect the rights of parties by preventing counsel from representing a client under the cloud of conflicting interests.
Matter of McElory involved a situation where a law firm, having rendered legal services to multiple members of a family over many years, including Estate planning, sought to concurrently represent an incapacitated beneficiary named in Decedent’s Will and the Proponent in a contested accounting proceeding.
The beneficiary, who was the sole Distributee of the Decedent, relied upon Proponent’s Counsel to provide her with “financial management assistance” as he was her appointed guardian. As this was a Will Contest proceeding, and the beneficiary’s intestate share of the Estate would be larger than her testate share, the GAL appointed to protect the interests of the beneficiary moved to disqualify Proponent’s counsel on the grounds of a concurrent conflict of interest pursuant to RPC 1.7.
Exercising his discretion, the Westchester County Surrogate granted the Motion to disqualify Proponent’s counsel as the beneficiary’s interests were “clearly adversely effected by the relief requested in the probate proceeding.”
(Matter of McElory, 34 Misc 3d 689 [Westchester Sur Ct, 2011]).
Waiver on the Contingency Plan
Matter of Melnick involved a Petitioner trying to block Objections to Probate based in Objectant’s waiver of their right to do so. The waiver at issue, which would have precluded the filing of Objections, would have been effective based on two contingent factors, “if”: 1) the propounded Will was valid, and 2) if the valid Will limited Objectant’s inheritance to $35,000. The effectiveness of any waiver also being dependent on its clarity, any ambiguity being construed against its drafter, and that the plain language evidences a waiver of right.
As this was a Will Contest proceeding, no determination had yet been made as to the validity of the Will offered for Probate. Accordingly, as the first contingency of the waiver agreement had not been fulfilled, i.e.: the validity of the Will had not been upheld, the waiver was not deemed effective at the time Summary Judgment was made, and Objectant was allowed to pursue their efforts to deny the instrument Probate.
(Matter of Melnick, 94 AD3d 472 [App Div 1st Dept. 2012]).
A Flexible Guardian
The strength of the common law is often best illustrated by its flexibility. In few places is such flexibility commonly exhibited to suit the individual needs of particular clients as in the Guardianship part of the Supreme Court. Although the strict statutory and procedural requirements of Mental Hygiene Law Article 81 are always observed, the Guardianship Court is nevertheless empowered, if not mandated, to craft solutions that best meets the needs of an incapacitated individual based on the circumstances at hand.
In the Matter of G.V.S., this flexibility was used to great effect. G.V.S. involved a stroke victim whose daughter had Petitioned the Court for Guardianship over his person and property. Petitioner and her siblings’ relationship was not on the best of terms, and testimony was offered which indicated that Petitioner failed to inform the siblings of their father’s medical condition, and when they learned of such, that she had directed health care providers to provide no information to them when requested. As there were considerable assets at stake (some of which Petitioner failed to disclose), Petitioner’s siblings objected to her being appointed guardian, and proposed an alternative – G.V.S.’ partner of over eighteen years.
Based on the Court evaluator’s recommendations; the nuanced relationship between those involved; and the established record, the Court nevertheless appointed G.V.S.’ daughter as sole guardian. However, the Court further directed that she must allow her siblings and his partner access to him, his health information, and his whereabouts, conditioned upon penalty of her removal for failure to do so. Relying upon its discretionary powers, the Court ensured the best outcome for G.V.S., and made the best of a potentially explosive situation.
(In the Matter of G.V.S, NYLJ 1202538983666)
Presumptions and Joint Accounts
In the world of Trusts and Estate litigation, pitched battles over the ownership of Joint Bank accounts arise often. While The Estate of Grancaric offers no exception to this rule. It does however provide a succinct discussion regarding the burdens of proof, or lack thereof, when arguing the ownership of a joint account.
Grancaric involved a situation where Decedent and his partner’s sister held several bank accounts jointly, the funding of which was evidently made by Decedent’s partner in an effort to save for retirement and protect her assets from business related liability. Two, of four, accounts included survivorship language on the signature cards, two did not.
In the case of the accounts with clear rights of survivorship, there exists the legal presumption that the parties intended to create a joint account; a presumption that can be refuted by a showing of clear and convincing evidence that the accounts were not intended to be owned jointly and enjoy rights of survivorship (i.e.: were the product of fraud, undue influence, or that one of the signatory did not have capacity). Notably, this presumption is also defeated where it is found that the account was established for the convenience of the co-tenants, and that no joint tenancy was intended.
Alternatively, the accounts that do not have signature cards evidencing joint tenancy and rights of survivorship, no such presumption arises, and the burden is effectively shared by each party to prove their respective positions. This can involve the use of extrinsic evidence, such as an agreement or disclosure statement, to establish what the intended tenancy of the account was.
As it was established that two of the accounts were clearly joint tenancies, and extrinsic evidence established that the remaining two were also intended as joint tenancies, the funds passed to the joint account holder as a right of survivorship, and not to the Estate as Petitioner (Decedent’s estranged brother) had sought.
(The Estate of Grancaric, 91 AD3d 1104 [App Div 3rd Dept 2012]).
Are all “Books”, “Books”?
Although, or perhaps because, lawyers live and die by their words, it is needless to say that there are countless construction proceedings that make their way through the Surrogate’s Courts every year. One such case, Matter of Gourary, the Court considered if an article of Decedent’s Will specifically bequeathing “books” to a spouse was intended to include a rare book collection valued at approximately $5.2M.
Unsurprisingly, the Court undertook the construction proceeding with the overriding task of determining Decedent’s intent. However, this was not so simple as the Court found no presumptions at law, or authority allocating a burden of proof to one party or the other, in a situation where there was ambiguity in the language of the instrument such as this, i.e.: did the Testator intend a high value collection of books, to be included in the single word “books.”
Left in a quandary without appellate guidance, the Surrogate looked to extrinsic evidence when crafting its Decision. The rare book collection in question took a lifetime to curate, included multiple types of printed media – not exclusively books (pamphlets, prints, manuscripts, etc.), and was properly considered not in an atomized and disjointed manner, but as a “scholarly, historical, bibliographical and aesthetic” whole, i.e.: a true collection which was much more than the mere sum of its parts.
Given that the collection was best understood as an academic and aesthetically valuable “whole,” and importantly, that the bequest to Decedent’s wife which referred to “books” was most reasonably understood to pass items of household and personal use to the spouse – failing to include any reference to the collection which was lovingly assembled, and did not merely include books, over many years – the Court reasoned that it was “difficult to believe that decedent intended to include this, his life’s avocation in the pedestrian phrases “books, pictures…and other items of personal and household use.”
Accordingly, the Court determined that the term book in fact did not include the rare book collection, and thus it passed through the residuary Estate, and not as a specific bequest to the spouse.
(Matter of Gourary, 34 Misc 3d 486 [NY Sur. 2011]).
Duty to the cestui
Stewart v Stewart is yet another reminder to all practitioners and fiduciaries alike that the ethical and professional duties incumbent upon them are taken very seriously by the Court.
The allegations made by Plaintiffs (this matter was initiated in the Supreme Court but later transferred to the Surrogate’s) included claims that the Defendants, one a Trustee and one the attorney draftsman who was also acting as counsel to the Trustee, were liable for: conversion, fraud, improper termination of the Trust. Furthermore, that they aided and abetted a breach of fiduciary duty, and refused to disclose the whereabouts of Trust assets.
Defendants moved to dismiss, arguing Plaintiffs failed to state a cause of action, and that the statute of limitations had run.
New York County Surrogate Anderson agreed with the Defendants regarding the causes of action sounding in fraud, but not with regard to the other allegations. Indicating that Plaintiffs had established a prima facie cause of action on their other claims, the Surrogate cited a key passage form a Court of Appeals decision from 1962 which remains as important today as it was over 50 years ago: “An attorney for a fiduciary has the same duty of loyalty to the cestui as the fiduciary himself.” (Matter of Clarke, 12 NY2d 1983, 187 ). Accordingly, as both the Defendant fiduciary and attorney were implicated in the various causes of action, and each had an equal duty to the cestui, they were both potentially liable for damages to the Estate that might be proven.
(Stewart v Stewart, NYLJ 1202566794801).
Surrogate’s Court Compromise Orders and Legal Fees
After settlement has been approved by the Supreme Court, either the Supreme Court or the Surrogate’s Court must issue a Compromise Order directing Defendant to pay “all sums payable under the order of compromise.” Although the Supreme Court can issue these Orders upon their own authority, their unfamiliarity to with the procedural requirements of the EPTL often slow this process. In re Stokes highlights this persistent issue, which seems to plague both practitioners and the judiciary alike.
Pursuant to EPTL 5-4.6, any such Compromise Order must direct that these monies be held in an interest bearing escrow account. Moreover, if a distributee suffers from an incapacity, the court “…shall determine if whether a guardian ad litem is required before any payments are made…” Critically, the failure to escrow settlement funds, or the failure to appoint a GAL for an incapacitated distributee, will result in a facially defective Compromise Order that should not be enforced by the Surrogate’s Court.
In the Stokes matter, the initial Order submitted to the Surrogate from the Supreme Court not only failed to direct that settlement funds be deposited in an interest bearing escrow account, and no GAL was appointed by the Surrogate’s Court to protect the rights of the incapacitated parties before the compromise Order was entered with the the Supreme Court. Notwithstanding these deficiencies, Petitioner also failed to serve required parties in either the Surrogate’s Court or the Supreme Court proceedings, further exacerbating the procedural and jurisdictional problems involving the release of funds.
Accordingly, the Surrogate required counsel to return all fees taken pursuant to the Order, and directed that the Petition be amended to include all necessary parties and a request that legal fees be paid from the Estate.
As a takeaway, practitioners involved in wrongful death actions must be sure to follow the mandates of EPTL 5-4.6 closely, or find themselves divested, however temporarily, of their fees, and dealing with an undoubtedly frustrated client who must continue to wait until the Estate can proceed with distributing its funds.
(In re Stokes, NYLJ, 5/30/12, p27 [Queens Cnty Sur])