Matter of Ross
Annotate this CaseDecided on March 23, 2005
Surrogate's Court, Nassau County
In the Matter of the Application of Steven Ross, Executor of the Estate of Patricia Colletta Ross, Deceased.
328416
John B. Riordan, J.
In this discovery proceeding (SCPA 2103), the petitioner moves for summary judgment. The respondents oppose the motion and cross-move for summary judgment. The petitioner is Steven Ross, the decedent's surviving spouse and executor of her estate. The respondents are Grace Colletta and John Colletta, the decedent's mother and brother. The petitioner alleges they are withholding estate assets and must be compelled to turn them over to the him as the executor. There are three items at issue:
(1) $40,000.00, representing the proceeds of an April 8, 2003 check that was made payable to the decedent's mother but deposited by the mother after the decedent's death;
(2) $6,433.00, representing the proceeds of a May 21, 2003 check that was made payable to the decedent's mother and deposited by her after the decedent's death; and
(3) $119,445.00 representing the proceeds of a life insurance policy owned by the decedent's pension plan that was received by the decedent's brother after an allegedly improper change of the policy's beneficiary by the decedent.
Patricia Colletta Ross died on April 9, 2003, after a long illness. She was survived by her husband, Steven Ross, and their infant daughter, Ryan. Her Will was admitted to probate in this court and letters testamentary were issued to Steven Ross, the decedent's surviving spouse.
Mr. Ross is the sole beneficiary of the probate estate.
The following facts are uncontroverted and are relevant to the first two branches of the petitioner's motion. On April 8, 2003, the day before she died, the decedent signed a check drawn on her account in the amount of $40,000.00 and made it payable to her mother. It was endorsed and deposited by the decedent's mother after the decedent's death. Also on April 8, 2003, the decedent signed another check made payable to her mother but with the amount blank. The mother added the amount of $6,433.00 (the balance remaining in the account) and deposited it in her personal account after the decedent died. These facts are sufficient for the court's purposes on an application for summary judgment. The remaining allegations made by the parties are irrelevant.
It is well settled that summary judgment may be granted only where it is clear that no triable issue of fact exists (see, e.g., Alvarez v Prospect Hosp., 68 NY2d 320 [1986]; Phillips v Joseph Kantor & Co., 31 NY2d 307 [1972]). The key to summary judgment is "issue finding" rather than "issue determination" (Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395 [1957], quoting Esteve v Avad, 271 App Div 725, 727 [1947]; Brunetti v Musallam, 11 AD3d [*2]280 [2004]), because issues of fact require a hearing for determination (Matter of Giacomo, 14 NY2d 615 [1964]). Consequently, it is incumbent upon the party moving for such relief to make a prima facia showing that he or she is entitled to summary judgment as a matter of law (CPLR 3212[b]; Zuckerman v City of New York, 49 NY2d 557 [1980]); Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065 [1979]; Zarr v Riccio, 180 AD2d 734 [1992]). The papers submitted in support of and in opposition to a request for summary judgment are always scrutinized in a light most favorable to the party opposing the motion (Robinson v Strong Memorial Hosp., 98 AD2d 976 [1983]). If there is any doubt as to the existence of a triable issue, the motion must be denied (Hantz v Fishman, 155 AD2d 415 [1989]).
The party opposing a motion for summary judgment must produce evidentiary proof in admissible form sufficient to establish the existence of a material issue of fact which would require a trial of the action (see, Zuckerman v City of New York, 49 NY2d 557, 562 [1980])). In doing so, the party opposing the motion must lay bare his or her proofs (see, Towner v Towner, 225 AD2d 614 [1996]). '[M]ere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient' (Zuckerman v City of New York, 49 NY2d 557, 563 [1980]); see also, Prudential Home Mtge. Co., v Cermele, 226 AD2d 357 [1996]).
The court notes that the decedent's mother described the two checks as representing both a gift and compensation for services rendered. While the analysis differs with regard to each, the results are the same.
A valid inter vivos gift requires donative intent, delivery, and acceptance (Green v Green, 68 NY2d 48 [1986]). When the gift is made by a negotiable instrument such as a check, then a distinction must be drawn between the delivery of the check to the donee and the donee's negotiation and deposit of that check. Because many things can happen between the delivery and the deposit of the check by the donee, the New York Uniform Commercial Code provides that a check does not of itself operate as an assignment of any funds in the possession of the donor's bank available for its payment and the bank is not liable on the instrument until it accepts it (UCC §3-409). This statute, designed to protect banks, also recognizes common law standards relevant to gifts by check and when such are completed. New York follows the prevailing rule that a donor's check is not the subject of a valid gift prior to acceptance by the donor's bank and the check is not a valid gift if the donor dies before payment or acceptance because the donor's death operates to revoke such a gift (62 NY Jur2d §64). The gift is incomplete if the check is unpaid at the time of the donor's death (Matter of Gibbon, 234 App Div 153 [1931]; Matter of Ludlam, 158 Misc 283 [1930]). Therefore, the funds in the hands of the decedent's mother claimed to be a gift are really estate assets and must be returned to the estate (Matter of Mead, 90 Misc 263 [1995], aff'd 173 App Div [1916], aff'd 221 NY 645 [1917]). There is a surprising paucity of cases on this issue. One that is of recent vintage is Matter of McCallister (NYLJ, Nov. 27, 2000 at 37). In McCallister, the court ruled that the donee of a gift by check does not have an enforceable claim against the donor's estate for the gift if the donee fails to cash the check prior to the donor's death. The decedent had given a check to his son for $ 10,000, but the son did not deposit the check until two days before the death of the decedent. Several days after the decedent's death the check was dishonored for insufficient funds and the son filed a claim against the decedent's estate. In rejecting the claim, the court ruled that a gift is not complete until the check is honored, and if the decedent dies before the check is honored, then the gift remains [*3]incomplete and is void. While the facts are somewhat different here, the principle remains the same. The funds in the hands of Grace Colletta from these two checks represent, at best, the proceeds of an invalid gift (see also, Harris, Probate and Administration of Estates, 5th ed. § 22:114.5, Gift Not Complete until Check Has Cleared Bank). The funds must be returned to the estate.
The result is no different if the check was given to the decedent's mother in consideration of services provided and with the understanding between mother and daughter that compensation was to be given. A transaction of this sort implicates a debtor-creditor relationship and is governed by UCC § 4-405(2). In such a situation, the death of the drawer of the check (here, the decedent) again acts as revocation of the authority of the the decedent's mother to collect (Matter of Greene, 47 Misc 2d 140 [1965]; Matter of Kolben, 203 Misc 1012 [1953]; see also, 4 Warren's Heaton on Surrogate's Court Practice, 6th ed. rev'd § 71.02(2)(c)(ii)). Of course, revocation of such authority does not terminate the decedent's liability, if any. It merely puts the funds back in the estate account pending determination of any claim that Grace Colletta may have. As a practical matter, the court must note that this result is also mandated by the fact that the funds may be needed for administration expenses of the estate, and these expenses would have priority over claims that could be proven against the estate. Said claim or claims will be addressed in the accounting or in a proceeding commenced pursuant to SCPA 1809.
Based upon the foregoing, the petitioner's motion for summary judgment as to the checks in the amounts of $40,000.00 and $6,433.00 is granted. The respondent is directed to return those funds to the executor within thirty (30) days of service of the decree.
The next issue concerns the life insurance. It is uncontroverted that the decedent had a pension plan (the "Patricia Colletta, M.D. Profit Sharing Plan and Trust"). The executor is the plan's trustee and beneficiary. The plan was the owner and beneficiary of a $100,000.00 life insurance policy on the decedent's life and paid the premiums on that policy. On February 4, 2003, the decedent signed a change of beneficiary form for the life insurance policy, changing the beneficiary of the policy from the plan to her brother, John Colletta, in his capacity as "trustee of the Ryan Ross Trust as dated 2/04/03." The form was sent to the insurance company that issued the policy and was honored after the decedent's death. The proceeds of the policy are being held by the respondent as trustee. The change in beneficiary was made without the knowledge or consent of the petitioner. Moreover, the pension plan explicitly provided that the insurance policy was to be owned by the trust and required its proceeds to be paid to the plan trustee (Plan, Article 2.5.3[b][ii]). According to the plan, if there was any conflict between the terms of the pension plan and the terms of the insurance policy, the plan provisions were to control (Plan, Article 2.5.3[b][ii]). The relevant sections of the plan provide, in pertinent part, as follows: "2.5.3. Nature of Distributions. . . (b) Insurance Policies. In the event that the Trustee has purchased Life Insurance Policies on the life of the Participant . . . the values and benefits available with respect to each such Policy shall be distributed as follows: ...(ii) If the Participant's employment terminates by reason of death, [*4]the Beneficiary designated by the Participant . . . shall be entitled to receive from the Trustee the full amount of the proceeds thereof.(A) Participant's spouse will be the designated beneficiary of the proceeds of such Policies . . . In the event of any conflict between the terms of the Plan and the terms of any Policies purchased hereunder, the Plan provisions shall control.
3.6.1. Designation of Beneficiaries . . . Each Participant shall have the right to designate a Beneficiary or Beneficiaries . . . The Beneficiaries may be changed at any time or times by the filing of a new designation with the Plan Administrator . . .Notwithstanding the foregoing . . . the Designated Beneficiary shall be the surviving spouse of the Participant unless such surviving spouse consents in writing to an alternate designation and the terms of such consent acknowledge the effect of such alternate designation and the consent is witnessed by a representative of the Plan or by a notary public.
The foregoing language is clearly designed to benefit the surviving spouse and impose upon the plan's participant an obligation regarding life insurance policies that, once purchased, remain subject to the terms of the plan. The petitioner argues that this result is mandated by the Employee Retirement Income Security Act of 1974, 29 USC §§1101, et seq. (ERISA), which is designed to favor surviving spouses. While the petitioner offered no proof that the decedent's pension plan is governed by ERISA, the court notes that the respondents offered no opposition or legal argument to refute this allegation. Assuming, arguendo, that the plan is covered by the federal statute, the court notes that ERISA does not allow a designation of beneficiary or a change of beneficiary to other than a spouse without the spouse's consent. As Surrogate Roth ruled in Matter of Sexcius (NYLJ, March 20, 1998 at 27), "under ERISA he [the husband] was required to designate his surviving spouse as beneficiary unless she waived her interest in the fund (29 USC 1055 [a] [I]; [c] [2])."
Regardless of the applicability of ERISA, there is also an adequate contractual basis to grant summary judgment. The terms of the plan bind the decedent to such a degree that her change of beneficiary on the life insurance policy, conceded to have been purchased for the plan, was improper and must be reversed (see, Rogers v Rogers, 63 NY2d 582 [1984] [obligation regarding insurance arising from a separation agreement]; see also 71 NY Jur2d §2122).
Based upon the foregoing, the petitioner's motion for summary judgment as to the proceeds from the insurance policy is granted. The respondent, John M. Colletta, as trustee of the Ryan Ross Trust, is ordered to return the proceeds of the insurance policy to the Trustee of the pension plan for distribution in accordance with the terms of the plan. Said transfer shall be made within thirty (30) days of service of the decree.
The respondents' cross-motion for summary judgment is denied. The respondents are directed to return the proceeds of the two checks and the insurance policy together with accrued [*5]interest. Insofar as the petitioner's motion for summary judgment seeks recovery of the attorney's fees and disbursements, that part of the application is denied.
This is the decision and order of the court. Because the checks and insurance policy were the only items demanded in the discovery proceeding, the petitioner may settle a decree. Any claims the decedent's mother may have against the estate may be resolved in any subsequent accounting proceeding or a proceeding under SCPA 1809.
Settle decree.
Dated: March 23, 2005
JOHN B. RIORDAN
Judge of the
Surrogate's Court
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