Lauder v Jacobs

[*1] Lauder v Jacobs 2005 NY Slip Op 51882(U) [10 Misc 3d 1052(A)] Decided on November 10, 2005 Surrogate's Court, Westchester County Scarpino, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on November 10, 2005
Surrogate's Court, Westchester County

Karen Jacobs Lauder, as Administratrix of the Estate of Bernard Jacobs, Plaintiff,

against

Ingrid Andersson Jacobs, a/k/a Ingrid Andersson, Defendant.



11611/04



Joseph A. Maria, P.C.

Attorney for Plaintiff / Administratrix

301 Old Tarrytown Road

White Plains, New York 10603

Traub Eglin Lieberman Straus, LLP

Attorney for TIAA-CREF

Mid-Westchester Executive Park

Seven Skyline Drive

Hawthorne, New York 10532

Law Offices of Fred Ehrlich, P.C.

Attorneys for Defendant

60 East 42nd Street - 46th Floor

New York, New York 10165-0006

Anthony A. Scarpino, J.

This is an action originally commenced in the Supreme Court, Westchester County by Karen Jacobs Lauder ("plaintiff"), as administratrix of the estate of Bernard Jacobs ("decedent"), against Ingrid Andersson Jacobs ("defendant"), decedent's surviving spouse. Plaintiff seeks a money judgment following a determination that defendant is a constructive trustee of certain assets transferred from decedent to defendant both prior and subsequent to decedent's death in 1992, and that defendant should account for and surrender the subject assets.

By Order to Show Cause dated August 31, 2004, plaintiff has moved to obtain an order of attachment with respect to certain of decedent's retirement funds transferred to defendant, currently held by Merrill Lynch and the Teacher's Insurance and Annuity Association - College Retirement Equities Fund ("TIAA-CREF"). [FN1] The foregoing Order to Show Cause contains a temporary restraining order ("TRO"), pursuant to which TIAA-CREF and Merrill Lynch are prohibited from transferring or disposing of any of the assets in question, including assets in individual retirement [*2]accounts ("IRA") purportedly established by defendant in her own right, pending the determination of the instant motion. Defendant opposes the motion, and has cross-moved to dismiss the instant action, on the basis of the pendency of a discovery proceeding (SCPA 2103) currently pending in this court concerning the subject assets. Defendant, who currently resides in Sweden, also seeks the imposition of monetary sanctions against plaintiff for commencing the instant action without disclosing to the Supreme Court the pendency of the existing discovery proceeding. TIAA-CREF also opposes the foregoing motion and supports defendant's cross motion.

By Decision and Order dated February 14, 2005 ("February 2005 Order"), the Supreme Court (Dillon, J.) transferred the pending action, motion and cross motion to this court, and continued the TRO until this court determines the issues before it.

The motion is denied, and the cross motion is granted, to the extent set forth, infra, and the action shall be consolidated with the pending discovery proceeding.

The relevant background facts and history attendant to the instant action and motion are fully set forth in this court's Decision and Order of March 25, 2004 ("March 2004 Order") and the Supreme Court's February 2005 Order.

In support of her motion, plaintiff alleges that attachment of the subject TIAA-CREF accounts and IRA account at Merrill Lynch is the only way to secure funds for any prospective judgment against defendant, especially in light of, inter alia: (i) defendant's status as a non-domiciliary non-resident of this state; (ii) her scheme of unauthorized transfers of decedent's funds; and (iii) her willingness to absent herself from the pending discovery proceeding until she was on the verge of default.

In opposing the motion and in support of the cross motion, defendant and TIAA-CREF contend that the instant action should be dismissed pursuant to CPLR 3211(a)(4), or, at the very least, consolidated with the existing discovery proceeding. Defendant and TIAA-CREF further contend that the motion should be denied, inasmuch as: (i) plaintiff's application for attachment is barred under the doctrines of res judicata and/or collateral estoppel; (ii) the subject pension and IRA funds are exempt from attachment under applicable provisions of federal and state law; and (iii) plaintiff has failed to set forth sufficient grounds to warrant attachment of the subject funds on the merits.

1. The Underlying Action

Pursuant to CPLR 3211(a)(4), a party may move for judgment dismissing one or more causes of action asserted against him/her on the ground that "there is another action pending between the same parties for the same cause of action" in another state or federal court". However, the court deciding the motion "need not dismiss on this ground but may make such order as justice requires" (CPLR 3211[a][4]).

In the instant case, while the disputed transactions are essentially identical to those set forth in the existing discovery proceeding, the relief sought in the instant action (constructive trust, accounting) is not identical in scope to that sought in the discovery proceeding (turnover of assets). Under the circumstances, the court finds that dismissal of the instant action is unwarranted. Instead, given the common questions of law and fact to be determined in both the instant action and the discovery proceeding, the court hereby consolidates the instant action with the discovery proceeding (see SCPA 501[2][a]). [*3]

2. Attachment

Pursuant to CPLR 6201, an order of attachment may be granted in any action, except a matrimonial action, where the plaintiff has demanded and would be entitled, in whole or in part, to a money judgment against one or more defendants, and when, inter alia, the defendant is a nondomiciliary residing without the state (CPLR 6201[1]). Upon a motion for an order of attachment, the plaintiff shall show, by affidavit and such other written evidence as may be submitted, that: (i) there is a cause of action; (ii) it is probable that the plaintiff will succeed on the merits; (iii) at least one ground for attachment provided in CPLR 6201 exists; and (iv) the amount demanded from the defendant exceeds all counterclaims known to the plaintiff (see CPLR 6212[a]). Additionally, the plaintiff must give an undertaking, in an amount fixed by the court (see CPLR 6212[b]).

Attachment is a harsh remedy, and must be construed strictly in favor of those against whom it may be employed. Thus, even if the plaintiff makes out a requisite case for attachment under the foregoing standards, the court still retains the discretion not to grant the remedy (Siegel, NY Prac § 317, at 507 [4th ed] [and cases cited and quoted]).

As to assets which are subject to pre-judgment attachment under CPLR article 62, CPLR 6202 provides that "[a]ny debt or property against which a money judgment may be enforced as provided in [CPLR 5201] is subject to attachment". Pursuant to CPLR 5201, a money judgment may be enforced against any property which could be assigned or transferred * * * unless it is exempt from application to the satisfaction of the judgment" (CPLR 5201[b]).

i. Res Judicata / Collateral Estoppel:

Initially, the court rejects defendant's and TIAA-CREF's contention that the doctrines of res judicata and/or collateral estoppel bar plaintiff from seeking an order of attachment, given this court's denial, in the March 2004 Order, of plaintiff's application for a preliminary injunction with respect to the assets currently controlled by TIAA-CREF. [FN2] To the contrary, New York law is well settled that since the denial of an application for preliminary injunction is not an adjudication on the merits, that denial does not act as either res judicata or collateral estoppel in a subsequent case (see e.g. Coinmach Corp. v Fordham Hill Owners Corp., 3 AD3d 312; J.A. Preston Corp. v Fabrication Enterprises, Inc., 68 NY2d 397).

ii. Assets Exempt From Attachment

However, the court credits defendant's and TIAA-CREF's contention that applicable federal and state law prohibit attachment of the funds in question.

As to the applicable federal law, to assure uniformity in the creation and administration of private retirement pension programs, Congress enacted the Employee Retirement Income Security Act of 1974 ("ERISA") (29 USC § 1001 et seq.). In doing so, Congress eliminated the potential for conflicting or inconsistent State regulation by including a "supersedure clause", stating that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" (29 USC § 1144[a]; see Planned Consumer Mktg. v Coats & Clark, 71 NY2d 442, [*4]448). ERISA also requires that each pension plan within its purview provide that its benefits may not be assigned or alienated (29 USC § 1056[d]). This "anti-alienation" provision defines "assignment" and "alienation", in pertinent part, as " any direct or indirect arrangement * * * whereby a party acquires from a participant or beneficiary a right or interest enforceable against the plan in, or to, all or any part of a plan benefit which is, or may become, payable to the participant or beneficiary" (Weiner v Levine, 2003 WL 21402034 [App Term, 2d & 11th Jud. Dist; May 20, 2003], quoting 26 CFR 1.401[a]-13[c][1][iii] [emphasis in original]).

In the event the foregoing federal laws do not pre-empt this court from deciding whether the assets in question are subject to attachment, the applicable New York laws subject to the court's review are CPLR 5205 and the CREF Enabling Act (L 1952, ch 124).

Pursuant to CPLR 5205(c), assets held in certain "trusts" are exempt from the normal remedies available to creditors seeking either pre-judgment attachment and/or post-judgment enforcement of money judgments. Among the assets which are exempt in this regard are IRAs, whether the funds in such accounts were derived from a "roll-over" of otherwise exempt pension plans or established with funds traceable directly to the "judgment debtor" or "defendant" (CPLR 5205[c][2], CPLR 6202; see Pauk v Pauk, 232 AD2d 392). The foregoing exemption is unavailable where: (i) the asset is transferred within 90 days before commencement of the action upon which the judgment is entered; and (ii) the transfer is deemed fraudulent under Debtor and Creditor Law article 10 (CPLR 5201[c][5]). Additionally, the CREF Enabling Act provides, in pertinent part (L 1952, ch 124, § 9): "[N]o money or other benefit provided or rendered by [CREF] * * * nor any rights or interest of any participating person in any benefit provided by [CREF] shall be subject to assignment, pledge or be liable to attachment, * * * to pay any debt or liability of any such person" (Weiner v Levine, 2003 WL 21402034 [App Term, 2d & 11th Jud. Dist; May 20, 2003], supra).

Before deciding wether to apply the exemption provisions of either ERISA or the foregoing applicable New York laws, the court must review the nature of the assets and accounts which are the subject of the instant application. In this respect, it appears undisputed that the TIAA-CREF contracts at issue contain prohibitions upon alienation or assignment in accordance with the applicable provisions of ERISA (see Aff. of Leigh A. Slaton, Ex. D to Cross Motion). Also, the papers submitted in support of the cross motion indicate that: (i) the accounts controlled by TIAA-CREF which plaintiff seeks to attach consist not only of assets which were the subject of the alleged fraudulent change of beneficiary transaction attendant to decedent's account, but also of assets which defendant contributed toward her own individual TIAA-CREF pension plan; and (ii) the assets currently controlled by Merrill Lynch appear to consist, in part, of defendant's personal funds which are not the subject of the instant action (Aff. of Defendant, Nov. 23, 2004, at 3, ¶ 9). Finally, to date, there has been no determination that the subject transfers were fraudulent under Debtor Creditor Law article 10, in any respect.

Addressing first the issue of any funds currently controlled by TIAA-CREF, the court finds that, for the purposes of attachment, the pension plans governing such funds are "ERISA-qualified" plans (see Matter of Bennett, 185 BR 4 [EDNY; June 27, 1995]). Therefore, under the prevailing authority of the United States Supreme Court with respect to the interplay between this state's attachment/garnishment provisions and ERISA's "anti-alienation" provisions (see Boggs v Boggs, 520 US 833; Patterson v Shumate, 504 US 753; Guidry v Sheet Metal Workers Natl. Pension Fund, [*5]493 US 365), ERISA's anti-alienation provisions exempt such funds from attachment (see e.g. Majteles v AVL Corp., 182 Misc 2d 140; cf. Planned Consumer Mktg. v Coats & Clark, 71 NY2d 442, supra). Even in the event the applicable provisions of ERISA did not control, the court finds that the provisions of the CREF Enabling Act would exempt from attachment the subject assets under the control of TIAA-CREF (see e.g. Weiner v Levine, 2003 WL 21402034 [App Term, 2d & 11th Jud. Dist; May 20, 2003], supra).

As for the assets transferred or "rolled over" into and/or currently in defendant's IRA account at Merrill Lynch, the court finds that the issue of whether those assets are susceptible to attachment is governed by New York law, rather than the applicable provisions of ERISA (see Long Island Jewish Hillside Med. Ctr. v Prendergast, 134 Misc 2d 93). Accordingly, in light of the explicit provisions of CPLR 5205(c)(2) and (5), under the circumstances of this case, the court finds that any assets currently in defendant's IRA account at Merrill Lynch, from whatever source derived, are exempt from attachment (see Pauk v Pauk, 232 AD2d 392, supra).

iii. Merits of Attachment:

Even if the court did not determine that the applicable provisions of ERISA and New York law exempted the subject assets from attachment, the court finds that petitioner has failed to make the requisite showing under CPLR 6212(a) and (b) to warrant attachment of the subject assets. In doing so, the court specifically points to plaintiff's failure to affirmatively state that the amount demanded from defendant exceeds all known counterclaims asserted; and to timely file the surety bond, as set forth in the Order to Show Cause. Additionally, upon a thorough examination of the affidavits submitted, the court finds that plaintiff has failed to sufficiently establish a probability that she will succeed on the merits as to her claims of fraud and/or undue influence regarding the subject transfers.

Notwithstanding the foregoing determination, the court is mindful that plaintiff's ability to secure enough assets to satisfy a money judgment in the event plaintiff is successful in prosecuting her claims is a concern, given defendant's past record of recalcitrance in appearing here, and her professed desire to withdraw some of the subject funds for her daily sustenance. Accordingly, until further order of the court, defendant, TIAA-CREF and Merrill Lynch are hereby directed to notify plaintiff and the court, in writing, of withdrawals defendant makes from the subject accounts, to wit: (i) individual withdrawals in excess of $2,500.00; and/or (ii) aggregate withdrawals in excess of $25,000.00.

3. "Stay" and Sanctions

The court finds that, to the extent plaintiff seeks a "stay", she has failed to prosecute that application and it is, therefore, denied, with prejudice.

Also, defendant's application for monetary sanctions is denied, inasmuch as the court cannot conclude that plaintiff's actions in commencing the instant action and making the instant motion were "frivolous" as a matter of law (22 NYCRR part 130-1.1).

The consolidated proceedings are hereby restored to the court's calendar of Wednesday, December 7, 2005, at 9:30 a.m. The parties, either pro se or with counsel, shall appear for a status conference immediately after the matter is called that day.

THIS IS THE DECISION AND ORDER OF THE COURT.

The following papers were considered:

1. The Order to Show Cause, dated August 31, 2004, with supporting affidavits and exhibits; [*6]

2. The Notice of Cross Motion, dated December 1, 2004, with supporting affidavits and exhibits;

3. The Affirmation of TIAA-CREF in opposition to Motion, with supporting exhibits and memorandum of law;

4. The Affirmation in Reply, dated January 5, 2005, with supporting exhibits and memorandum of law;

5. The Supplemental Reply Affirmation of William Greenberg, Esq., dated June 29, 2005, with supporting affidavits and memorandum of law;

6. The Supplemental Reply Memorandum of Fred Ehrlich, Esq., dated August 11, 2005, with supporting exhibits; and

7. The Supplemental Affirmation of TIAA-CREF, dated August 12, 2005.

Dated:White Plains, NY

November 10, 2005_________________________________

HON. ANTHONY A. SCARPINO, JR.

Westchester County Surrogate

TO: Footnotes

Footnote 1:TIAA and CREF are not-for-profit corporations which provide retirement insurance and annuities to members who are current or retired employees of colleges, universities and related organizations. The purpose of these organizations is to provide for the diversified investment of contributions by employers and employees, which are deposited with TIAA and CREF during the years of employment, and to pay benefits during the years of retirement based upon such accumulated contributions (L 1952, ch 124, § 2; see Tompkins County Tr. Co. v Gowin, 163 Misc 2d 418).

Footnote 2:By Decision and Order dated September 13, 2004, this court denied plaintiff's motion to reargue her application for a preliminary injunction which resulted in the March 2004 Order.