Wang v TIAA-CREF Life Ins. Co.

[*1] Wang v TIAA-CREF Life Ins. Co. 2012 NY Slip Op 50794(U) Decided on April 23, 2012 Supreme Court, New York County Madden, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 April 23, 2012
Supreme Court, New York County

Li-Shan Wang, Plaintiff,

against

TIAA-CREF Life Insurance Company a/k/a Teachers Insurance and Annuity Association, Merv Neftci and Emre Neftci, Defendants.



106689/09



Plaintiff is represented by

Daniel S. Perlman, Esq.

2 Rector Street, 20th Fl

New York, NY 10006

Defendant TIAA-Creff is represented by

Traub Liberman & Straus & Shrewsberry

Seven Skyline Drive

Hawthorne, NY 10532

Joan A. Madden, J.

In this action arising from a dispute concerning the rightful beneficiary of a life insurance policy, defendant TIAA-CREF Life Insurance Company a/k/a Teachers Insurance and Annuity Association ("TIAA") moves for an order dismissing the complaint against it pursuant to CPLR §3211(a)(10), for failure to join necessary parties. Plaintiff Li-Shan Wang ("Wang") opposes the motion.

Background

On or about February 12, 2002, Salih Nefci ("Decedent") applied to TIAA for a life insurance policy (the "Policy Application") for the sum of $500,000. Decedent was a professor of economics and taught at the New School, in New York, New York, as well as in Switzerland. Decedent was married to Gul Neftci, and they had two children, Emre Neftci and Merv Neftci (together, the "Adult Children"). Gul Neftci appears to have been a resident of New York at the time the Policy Application was made, but it is unclear where Gul Neftci currently resides. Both of the Adult Children have dual citizenship in the United States and Switzerland and are residents of Switzerland. Wang is a citizen of the United States residing in New York, New York. Wang asserts that she was a long-time friend/girl friend of Decedent.

The application originally listed Gul Neftci as the primary beneficiary; however, it appears that the designation of Gul Neftci was crossed out and replaced by Wang's name and information (TIAA's Affirmation in Support of Motion, Exh. A). TIAA issued a life insurance policy (the "Policy") to Decedent on or about March 20, 2002. (Id., Exh. B). The Policy [*2]provides that "beneficiaries are persons or entities you name in the [Policy Application] or on a form satisfactory to [TIAA]." Policy §3.

During 2008, Decedent was diagnosed with a brain tumor in Switzerland and underwent surgery, radiation, and chemotherapy. At this time, in addition to the two Adult Children, Decedent appears to have had two minor children, Kaya Neftci and Kaan Neftci (together, the "Minor Children"), with Michelle Xu a/k/a Yuan Menager-Xu a/k/a Michelle Yuan Xu ("Xu"), a citizen and resident of Switzerland. The Minor Children have dual citizenship in the United States and Switzerland and are residents of Switzerland.

After Decedent had undergone the procedures described above, on or about October 24, 2008, a change of beneficiary form was submitted designating Decedent's children, Kaya Nefci, Kaan Neftci, Merv Neftci, and Emre Neftci, as equal primary beneficiaries under the Policy. Xu and Gul Neftci were designated as contingent beneficiaries (Id., Exh. C). According to the affirmation of TIAA's counsel, on or about December 3, 2008, "[TIAA's] secure [website] was accessed and the death benefit distribution percentages were altered" so that each of the Minor Children was allocated a 40% share and each of the Adult Children was allocated a 10% share. (Id., ¶13).

On or about January 21, 2009, a request to transfer ownership and change of beneficiary forms, which appear to have been executed by the Decedent were submitted to TIAA (Id., Exh. D). These forms transfer ownership of the Policy to Xu and designated Xu's children, i.e. the Minor Children, as equal irrevocable primary beneficiaries of the Policy's death benefit proceeds and designated Xu as the sole contingent beneficiary of the Policy (Id. ).[FN1]

On or about March 10, 2009, TIAA received correspondence in Decedent's name, which included a request to transfer ownership of the Policy from Decedent to Wang (Id., Exh. F). TIAA also received a change of beneficiary form, which purported to make Wang the sole primary beneficiary under the Policy (Id). Although TIAA initially executed such request to transfer ownership, TIAA explained in a letter to Wang, dated April 6, 2009, that the transfer was void as Decedent was no longer the owner of the Policy (Id., Exh. G), apparently referring to the January 21, 2009 transfer of ownership of the Policy to Xu.

Decedent passed away on April 15, 2009. It appears that the value of the Policy at that time was $619,067.48.

On April 17, 2009, Wang's counsel wrote to TIAA claiming to be the rightful beneficiary of the Policy and seeking the death benefits (Id., Exh. K). By letter dated May 8, 2009, TIAA informed Wang that it would not honor her claim, noting that while Wang was initially a beneficiary when the Policy was issued in 2002, that in October 2008, she was removed as a beneficiary and that Transfer of Ownership received by TIAA in March 2009, was ineffective since at the time Decedent purportedly signed the transfer documents he was no longer the owner of the Policy (Wang's Affirmation in Opposition, Exh. L).

On or about May 12, 2009, this action was commenced by filing and service on the Superintendent of Insurance. TIAA was the only named defendant. In the initial complaint (the [*3]"Initial Complaint"), Wang asserts that the change of beneficiaries made by Decedent [FN2] was the result of undue influence exerted upon Decedent and that she remains the rightful beneficiary under the Policy. The Initial Complaint seeks a declaration that she is the rightful beneficiary under the Policy and judgment against TIAA in the sum of $615,000.

On or about May 14, 2009, after an internal review, TIAA issued two checks to Xu, as guardian of the estates of each of the Minor Children ((TIAA's Affirmation in Support of Motion, Exh. L). By letter dated May 27, 2009, Emre Neftci, one of the Adult Children, informed TIAA that he claimed an interest in the Policy and that he was unaware of a change in beneficiaries and "feared a fraudulent act" (Wang's Affirmation in Opposition, Exh. K). According to TIAA, after it was served with the Initial Complaint in this action, it "immediately attempted to stop payment on the checks that were en route to [Xu] in Switzerland."[FN3] (Id., ¶25). Nevertheless, Xu negotiated the checks on or about June 1, 2009, and the funds were disbursed. TIAA asserts that it did not become aware that Xu negotiated the checks until November 2010.

In the meantime, on or about May 27, 2009, Wang commenced another action in the New York State Supreme Court (the "Primerica Action") against Primerica Life Insurance Company ("Primerica"). The Primerica Action also involved a life insurance policy (the "Primerica Policy") taken out by Decedent, which Wang claims to have been designated as the sole beneficiary and which she claims was subsequently altered due to undue influence or Decedent's diminished capacity. Primerica interpleaded the Adult Children and Xu (in an individual capacity and as a guardian for the Minor Children) and removed the action to the Southern District of New York. The Primerica Action was disposed of in June 2011, after the parties reached a settlement.

TIAA served its answer in this action on January 21, 2010 as well as a petition for interpleader and joinder of necessary parties (the "Interpleader Complaint"), naming as interpleader defendants (i) Xu, (ii) Kaya Neftci, (iii) Kaan Neftci, (iv) Merv Neftci, and (v) Emre Neftci ("the Additional Defendants"). However, TIAA asserts that in November 2010,[FN4] upon discovering that Xu had negotiated the checks, it determined that it lacked standing to maintain an action in interpleader and informed Wang that Xu had negotiated the checks. In light of the above, the parties executed a stipulation pursuant to CPLR §1003, permitting Wang to file a supplemental summons and complaint (the "Supplemental Complaint").

Wang filed the Supplemental Complaint on or about December 29, 2010, naming as defendants TIAA and the Additional Defendants. The Supplemental Complaint alleges that the beneficiary and policy ownership changes were the result of undue influence or of Decedent's diminished capacity. As relief, Wang seeks a declaratory judgment that she is the rightful beneficiary of the Policy and judgment jointly and severally against Xu and TIAA, in the sum of $619,067.48 (plus interest). [*4]

Wang asserts that she served copies of the Supplemental Complaint upon the respective attorneys in the Primerica Action for Xu and the Adult Children, and that this service was sufficient to obtain jurisdiction over the Additional Defendants pursuant to CPLR 303.

By notice of motion dated February 17, 2011, Xu moved to dismiss the Supplemental Complaint against her individually and as the mother and guardian of the Minor Children for lack of jurisdiction. By decision and order dated March 15, 2011, the court granted the motion on default, and a judgment was entered on April 26, 2011, dismissing the complaint as against Xu, individually and as mother and guardian of the Minor Children.

By letter dated March 31, 2011, counsel for the Adult Children in the Primerica litigation, informed counsel for Wang that "it was his position that [the Adult Children had not been] served in this action." ((Wang's Affirmation in Opposition, Exh. S).

On or about September 7, 2011, TIAA made this motion to dismiss, based on Wang's alleged failure to join and serve all necessary parties to this action, namely the Adult Children, the Minor Children, Xu, and Gul Neftci. TIAA argues that each of these parties is necessary as each has been named as a beneficiary under the Policy while it was in effect and would be adversely affected by a judgment that Wang is the rightful beneficiary. See TIC Holdings v. HR Software Acquistion Group, 194 Misc 2d 106 (Sup Ct NY Co. 2002), aff'd, 301 AD2d 414 (1st Dept 2003)(noting that a court may refuse to enter a declaratory judgment in the absence of necessary parties); CPLR 1001(a).

TIAA further argues that the circumstances here do not warrant that joinder be excused under CPLR 1001(b) since Wang has not shown that jurisdiction cannot be obtained over the these parties, and that, in fact, Wang has never attempted to properly serve them. Accordingly, TIAA asserts that pursuant to CPLR 1003, the failure to join these parties warrants dismissal of the complaint.

In opposition, Wang asserts that Gul Neftci, as a contingent beneficiary is not a necessary party. Wang also asserts that she properly served the Supplemental Complaint upon the Additional Parties, pursuant to CPLR §303, by delivering copies Supplemental Complaint to their respective attorneys in the Primerica Action. Additionally, Wang argues that the burden of joining third parties in order to protect a defendant insurer, like TIAA, from conflicting claims is on the defendant insurer, rather than on the plaintiff. See Bergman v. Liverpool & London & Globe Ins. Co., 269 A.D.103 (1st Dep't 1945).

Wang alternatively asserts that complete relief can be accorded between the parties and therefore the Additional Defendants are not necessary parties under CPLR 1001(a), and that in any event, the court should permit this action to proceed with these defendants based on an evaluation of the circumstances as provided for under CPLR 1001(b).

In reply, TIAA argues that it is not required to join necessary parties and that as Xu has possession of the insurance proceeds, it lacks standing to bring an interpleader action. TIAA also argues that Wang could not make proper service by delivering copies of the Supplemental Complaint to the Adult Children's attorney in the Primerica Action, since CPLR 303 only provides for service upon plaintiffs in a related action and the Adult Children were defendants in the Primerica Action, and notes that the action was previously dismissed against Xu for lack of jurisdiction.

Discussion

Necessary parties are those who might be inequitably affected by a judgment in the action or who "ought to be joined" if complete relief is to be accorded to the parties in an action. [*5]CPLR 1001(a). "The primary reason for compulsory joinder of parties is to avoid multiplicity of actions and to protect nonparties whose rights should not be jeopardized if they have a material interest in the subject matter." Joanne S. v. Carey, 115 AD2d 4, 7 (1st Dept 1986)Here, Wang's allegations in the Supplemental Complaint show that the Xu, the Minor Children and the Adult Children are necessary parties since they were previously listed as beneficiaries of the Policy and their legal rights could be affected by the outcome of this action which seeks a declaration as the parties' rights under the Policy. Likewise, Gul Nefiti may also be affected by the outcome of this action and should be named as a party and served.[FN5] See Ahders v. Ahders, 176 AD2d 230 (2d Dept 1991)(holding that decedent's estate and current owner of disputed property were both necessary parties in an action brought for a judgment declaring plaintiff to be owner of certain real property dispute based on her alleged status as a beneficiary under either the first, second or third will of decedent); State of New York v. Wolowitz, 96 AD2d 47, 55 (2nd Dep't 1983)(holding that landlord's claim against the State seeking declaration that certain of his leases were legal and proper would be dismissed due to landlord's failure to join the tenants who were parties to the leases); Williams v. Somers, 91 AD2d 545 (1st Dep't 1982)(action seeking declaratory judgment against broker alleging broker's negligent failure to procure professional liability coverage requested by plaintiffs, the insurance companies through which the broker allegedly procured inadequate coverage were necessary parties since any determination as to the scope of the policies would affect the rights of the insurers).

Furthermore, contrary to Wang's position, TIAA does not have the burden of joining the necessary parties, and TIAA's failure to serve them with the interpleader complaint is irrelevant to the issues on this motion. In this connection, Wang's reliance on Bergman v. Liverpool & London & Globe Ins. Co., supra is misplaced. In Bergman, the court found that an assignor of an insurance policy was not a necessary party to an action brought by the plaintiff assignee to recover under the policy, and therefore that the defendant had the burden of impleading the assignor to protect its interests. Here, as the court has found that the defendants at issue are necessary parties, the holding in Bergman is not controlling.

Next, while Wang has named the Additional Parties as defendants in the Supplemental Complaint, she has failed to effect proper service of the Supplemental Complaint upon them. Contrary to Wang's arguments, her service of the Supplemental Complaint on counsel for the Additional Parties in the Primerica Action does not establish jurisdiction over them, pursuant to CPLR 303.

CPLR 303 provides, in relevant part, that "[t]he commencement of an action in [New York] by a person not subject to person jurisdiction is a designation by him of his attorney appearing in the action ... as agent, during the pendency of the action, for service of a summons ... in any separate action in which such a person is a defendant and another party to the action is a plaintiff if such separate action would have been permitted as a counterclaim had the action been brought in the supreme court." The basis for jurisdiction under CPLR 303 "is, not the defendant's presence in the state, but the fact that [the defendant] elected to use our courts." Waterman S.S. Corp. v. Ranis, 141 Misc 2d 772, 774 (Sup Ct New York Co. 1988)(internal citations and quotation omitted).

In this instance, CPLR 303 is inapplicable as none of the Additional Defendants elected to [*6]use New York's courts by commencing an action in New York, but rather were named as defendants in the Primerica Action and in this action. See Coutts Bank (Switzerland) v. Anatian, 275 AD2d 609, 613 (1st Dept 2000)(where party sought to be joined has not commenced a parallel action but had been joined as a defendant CPLR 303 had no application). Furthermore, the claims in the instant action would not have been permitted as counterclaims in the Primerica action, since the two actions relate to different insurance policies. Id. Thus, Wang did not properly serve the Additional Defendants through service on their attorneys in the Primerica action. Moreover, the court has already dismissed the claims against with respect to Xu and the Minor Children, on default, for lack of jurisdiction, and Wang did not appeal or seek to vacate that dismissal.

Wang's alternative argument, that this action should proceed in the absence of necessary parties pursuant to CPLR 1001(b), is also unavailing. In determining whether a proceeding can go forward in the absence of a necessary party the court considers "(1) whether the plaintiff has another effective remedy in case the action is dismissed on account of non-joinder; (2) the prejudice which may accrue from non-joinder to the defendant or to the person not joined; (3) whether and by whom prejudice might have been avoided or may in the future be avoided; (4) the feasibility of a protective provision by order of the court or in the judgment; and (5) whether an effective judgment may be rendered in the absence of the person who not joined." Red Hook/Gowanus Chamber of Commerce v. New York City Board of Standards and Appeals, 5 NY3d 452, 458 (2005); CPLR 1001(b).

Here, as it appears from the record Wang has not attempted service on the Additional Defendants, except through their attorneys, and sets forth no facts regarding whether there is jurisdiction over the Additional Defendants, it cannot be said at this juncture that joinder should be excused under CPLR 1001(b). See e.g., Williams v. Somers, 91 AD2d 545

That being said, however, "[d]ismissal for failure to join a necessary party should eventuate only as a last resort." Leeward Isles Resorts, Ltd. v. Hickok, 61 AD3d 622, 622 (1st Dept), appeal dismissed, 13 NY3d 814 (2009)(internal citation and quotation marks omitted). Accordingly, Wang shall be accorded an opportunity to join the Gul Nefci as a party and to serve her and the other Additional Defendants as directed below. Moreover, if Wang is unable to join/serve any of the necessary parties, Wang may move to be excused from such joinder under CPLR 1001(b). Finally, in the event Wang fails to join the necessary parties and/or to seek to be excused from such joinder as directed below, TIAA may renew its motion to dismiss the complaint for failure to join necessary parties.Conclusion

In view of the above, it is

ORDERED that the motion is granted to the extent that the court finds that Michelle Xu a/k/a Yuan Menager-Xu a/k/a Michelle Yuan Xu, Kaya Neftci, Kaan Neftci, Merv Neftci, Emre Neftci, and Gul Neftci are necessary parties under CPLR 1001(a); and it is further

ORDERED that, within 60 days of service of a copy of this decision and order with notice of entry, Wang shall serve Michelle Xu a/k/a Yuan Menager-Xu a/k/a Michelle Yuan Xu, Kaya Neftci, Kaan Neftci, Merv Neftci, Emre Neftci, and Gul Neftci with the Supplemental Complaint as amended to name Gul Neftci as a defendant; and it is further

ORDERED that, if Wang is unable to serve any of the necessary parties, Wang shall move, within 75 days of service of a copy of this decision and order with notice of entry, to be excused from such joinder under CPLR 1001(b), and such motion shall be supported by affidavits explaining Wang's efforts to serve the necessary parties and why such service could not be made; and it is further [*7]

ORDERED that if Wang fails to comply with the above directives, TIAA may renew its motion to dismiss for failure to join necessary parties; and it is further

ORDERED that a status conference in this action scheduled to be held on April 19, 2012 in Part 11, room 351, 60 Centre Street, New York, NY is adjourned to July 26, 2012 at 9:30 am.

A copy of this decision and order is being mailed by my chambers to counsel for the parties.

Dated: April 23, 2012__________________________

J.S.C. Footnotes

Footnote 1:On or about February 22, 2009, TIAA received correspondence purportedly from Decedent requesting that a particular security code be sent on all of his TIAA products and that TIAA ask for the code for any subsequent requests or phone inquiries related to these products (Id., Exh. E).

Footnote 2: The only change of beneficiaries referenced in the Initial Complaint is the one that allegedly occurred during October 2008.

Footnote 3: According to counsel for TIAA, TIAA was advised by its bank that its request to stop payment on the checks had been processed, and that it advised Xu that it had instructed the bank to stop payment on the checks by telephone on May 22, 2009 and in writing by letter dated May 26, 2009.

Footnote 4:In Paragraph 31 of the moving affirmation of TIAA's counsel, TIAA erroneously indicates that this discovery was made in November 2011 as opposed to November 2010.

Footnote 5:While identified by the parties as "a contingent beneficiary," the record shows that Gul Nefiti was identified as the primary beneficiary in the application for life insurance until her name was crossed out and replaced with that of Wang.