JPMorgan Chase Bank, N.A. v Irrevocable Trust for the Benefit of the Issue of Renata Black

[*1] JPMorgan Chase Bank, N.A. v Irrevocable Trust for the Benefit of the Issue of Renata Black 2017 NY Slip Op 50588(U) Decided on May 4, 2017 Supreme Court, New York County Reed, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 May 4, 2017
Supreme Court, New York County

JPMorgan Chase Bank, N.A., and J.P. Morgan Securities, LLC, Plaintiffs,

against

The Irrevocable Trust for the Benefit of the Issue of Renata Black, Bernard S. Black and Samuel H. Black, as Trustees, Bernard S. Black, Samuel H. Black, David H. Black, Benjamin H. Black, Rebekah H. Black, Sarah H. Black, Daniel L. Black, Jacob L. Black, Joanne Black, Anthony Dain, and John Does 1 Through 25, Defendants.



156343/16



For Plaintiffs:

Moran Karamouzis, LLP

265 Sunrise Highway, Suite 61

Rockville Center, NY 11570

By: Andrew P. Karamouzis, Esq.

For Defendants:

Sharan R. Abraham, Esq., PLLC

37 South Street

Roslyn Heights, NY 11577

By: Sharan R. Abraham, Esq.
Robert R. Reed, J.

Plaintiffs JPMorgan Chase Bank, N.A. (Chase Bank) and J.P. Morgan Securities, LLC (collectively, Chase) bring this interpleader action to resolve disputed claims to defendant The Irrevocable Trust for the Benefit of the Issue of Renata Black (the Issue Trust). At issue are nine accounts maintained at Chase (the Issue Trust accounts), held by the Issue Trust, which, along with two other trusts established by decedent Renata Black, have been the subject of extensive litigation between defendants Joanne Black, Bernard S. Black (Bernard Black), and Anthony Dain among others, in numerous states.

Motion sequence nos. 001 and 002 are consolidated for disposition. In motion sequence No. 001, defendants the Issue Trust, Bernard Black and Samuel H. Black (Samuel Black), as trustees, and Bernard Black, Samuel Black, David H. Black, Benjamin H. Black, Rebekah H. Black, Sarah H. Black, Daniel L. Black, and Jacob L. Black (the Issue Trust defendants) move, pursuant to CPLR 327, 3211 (a) (1), (2) and (8), for dismissal of the complaint.

In motion sequence no. 002, the Issue Trust defendants move, pursuant to CPLR 3211 (a) [*2](2), (5), (7) and (8), for dismissal of the cross-claims of defendant Joanne Black. Joanne Black cross-moves for an order, pursuant to CPLR 2201, staying this proceeding should the court determine res judicata, based upon a Colorado court proceeding, is an appropriate basis to grant the application of the other defendants in this matter.

For the reasons set forth below, the Issue Trust defendants' motions to dismiss the complaint and Joanne Black's cross-claims are granted, and the cross-motion is denied as moot.

FACTS

This interpleader action relates to certain assets and funds in the nine Issue Trust accounts that are currently maintained at Chase by the Issue Trust (complaint, ¶ 15). The Issue Trust was funded from the Estate of Renata Black, who was the mother of defendants Bernard Black and Joanne Black. Renata Black died on May 1, 2012, and her will was subsequently admitted to probate in the Surrogate's Court of the State of New York, County of Westchester (Joanne Black answer and cross-claims, ¶ 2, see exhibit B). Defendant Bernard Black was appointed executor of the will (id.).

Under the terms of the will, two thirds of the residuary estate was to pass to a Supplemental Needs Trust for the benefit of Joanne Black, and the remaining 1/3 was to pass to the Issue Trust, a trust for the benefit of Bernard Black and his children (id.). Defendants Bernard Black, Samuel Black and Anthony Dain are the trustees of the Supplemental Needs Trust. The Issue Trust designates Bernard Black and Anthony Dain as trustees. Anthony Dain subsequently resigned, and was replaced by Samuel Black.

Currently, there is extensive litigation across the country regarding these trusts between and among Bernard Black, Samuel Black, Anthony Dain and Joanne Black, including:

1. A probate proceeding entitled In re the Interest of Joanne Black, Case No. 2012PR1772 (Denver Probate Court, Denver County, Colorado) (the Colorado proceeding);2. A turnover proceeding entitled Petition for the Turnover of Property Belonging to Joanne Black by the Estate of Renata Black pursuant to SCPA 2105, File No. 2012-1209/B (Surrogate's Court, Westchester County);3. A civil action entitled Samuel H. Black, et al. v Cherie Wrigley, et al., Case No. 16-CV-0430 (ED NY);4. A civil action entitled Samuel H. Black, et al. v Anthony Dain, et al., Case No. 16-CV-1238 (ED NY)

(complaint, ¶ 18).

In addition, there were two other litigations involving various of the defendants herein, including Bernard Black and Joanne Black, that have recently been dismissed:

1. A guardianship proceeding concerning Joanne Black entitled In the Matter of the Application of Bernard Black, Petitioner and Cherie Wrigley, Cross-Petitioner, for the Appointment of a Guardian of the Person and Property of Joanne Black, Index No. 80253/2014 (Sup Ct, Richmond County); and2. A civil action entitled Bernard S. Black, et al., v Joanne Black, Case No. 16-Civ-1763 (ND Ill)

(id., ¶ 19).

Joanne Black has asserted in many of these litigations, and now in cross-claims in this [*3]action, that Bernard Black, while purporting to act on her behalf and in her best interests, converted approximately $3.5 million that rightfully belonged to her and used such money, at least in part, to fund the Issue Trust accounts that are the subject of the interpleader complaint. Specifically, Joanne Black alleges that Bernard Black, while purporting to act on her behalf and in her best interests, disclaimed her rights to directly receive: (1) the proceeds of approximately $3 million "Payable Upon Death" (POD) securities accounts established by her mother, decedent Renata Black, for which Joanne Black was the sole beneficiary; and (2) the proceeds of approximately $500,000 from a Vanguard Roth IRA, of which she was also the sole beneficiary (see cross-claims, ¶¶ 6-7). Joanne Black further alleges that, after Bernard Black fraudulently obtained these disclaimers from the Colorado court, he then converted the funds and transferred the proceeds into the Estate of Renata Black, and used the converted funds, in part, to fund the Issue Trust and the nine Issue Trust accounts at issue here, for the exclusive benefit of Bernard Black and his children (id.). In her cross-claims in this action, Joanne Black asserts causes of action for monies had and received, unjust enrichment and conversion against Bernard Black and the other Issue Trust defendants.

Joanne Black brought two causes of action against Bernard Black in the Denver Probate Court. The first was to void the disclaimer, and the second was for civil theft. On September 28, 2015, after four days of hearing, the court issued an order finding that Bernard Black, who is both a trustee and beneficiary of the Issue Trust, had breached his fiduciary duties to Joanne Black as her conservator, and committed civil theft by disclaiming Joanne Black's right to the $3.5 million proceeds of the securities accounts and the Roth IRA. Specifically, the court held that Bernard Black "knowingly used the POD account funds to fund the Issue Trust . . . and it is clear . . . that he intended to and still intends to permanently deprive her of those funds" (Colorado Hearing order at 11 [aff of Andrew P. Karamouzis, exhibit A]). The court surcharged Bernard Black for the full amount of the funds he converted from Joanne Black, and entered judgment against him for treble damages in the amount of $4,534,068, based on its finding that Bernard Black had committed civil theft (id. at 11). Despite finding for Joanne Black on her civil theft motion, the court did not void the disclaimer, which remains in force. Bernard Black is currently appealing this order, and has not paid the damages award.

Chase asserts that, based on the significant competing claims of the defendants to the funds in the Issue Trust accounts, it placed a hold on the Issue Trust accounts in order to maintain the status quo, and to prevent the dissipation of any assets or funds (complaint, ¶ 20). Chase further asserts that, because it is exposed to potential multiple liability regarding the assets and funds held by Chase in the Issue Trust accounts, it commenced this interpleader action, pursuant to CPLR 1006, seeking an order directing Chase to deposit the proceeds of the nine Issue Trust accounts, which total $1,246,737, into the court (id., ¶ 24).

DISCUSSION

"The scope of a court's inquiry on a motion to dismiss under CPLR 3211 is narrowly circumscribed" (P.T. Bank Cent. Asia, NY Branch v ABN AMRO Bank N.V., 301 AD2d 373, 375 [1st Dept 2003]). Thus, on "a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction" (Leon v Martinez, 84 NY2d 83, 87 [1994]). The court "must accept as true the facts as alleged in the complaint and submissions in opposition to the motion, accord plaintiffs the benefit of every possible favorable inference and determine only whether the [*4]facts as alleged fit within any cognizable legal theory" (Sokoloff v Harriman Estates Dev. Corp., 96 NY2d 409, 414 [2001]).

The Issue Trust Defendants' Motion to Dismiss the Complaint (Motion Sequence No. 001)

The Issue Trust defendants make several arguments in support of their motion to dismiss the complaint, asserting, inter alia, that the complaint is based on inaccurate information, that plaintiffs are barred from bringing this action due to an agreement to arbitrate, and that this court should decline to hear this action based on the principle of forum non conveniens. The court must first address the threshold issues of personal and subject matter jurisdiction, which are dispositive.

Plaintiffs bear "the ultimate burden of proof" to establish personal jurisdiction over defendants. "[T]o defeat a CPLR 3211 (a) (8) motion to dismiss a complaint, the plaintiff need only make a prima facie showing that the defendant is subject to the personal jurisdiction of the court" (Whitcraft v Runyon, 123 AD3d 811, 812 [2d Dept 2014]).

With respect to personal jurisdiction, the Issue Trust defendants contend the complaint fails to allege a basis for the direct exercise of jurisdiction over them, because none of them are citizens of New York (see complaint, ¶¶ 4, 16; aff of Bernard Black, ¶¶ 17-21).

Nevertheless, despite this fact, there is no question that New York has personal jurisdiction over the Issue Trust defendants. Surrogate's Court Procedure Act (SCPA) 210 (2) (b) grants in personam jurisdiction in New York over any person or entity receiving property from a New York estate regarding any matter concerning such distribution:

"The receipt and acceptance of any property paid or distributed out of and as part of the administration of an estate subject to the jurisdiction of the court . . . shall constitute a submission by such recipient to the jurisdiction of the court as to any matter concerning the payment or distribution, including proceedings for the recovery thereof"

(id.).

"This provision confers in personam jurisdiction in a case in which a nondomiciliary has received estate or trust property with respect to all matters relating to such payment" (Matter of Schreiter, 169 Misc 2d 706, 710 [Surrogate's Court, NY County 1996] [internal citation omitted]; Matter of Magnor, 11 Misc 3d 1060[A], 2006 NY Slip Op 50291[U], *2 [Sup Ct, Nassau County 2006] [same]).

Thus, this court has personal jurisdiction over the Issue Trust defendants because they received a distribution of property from the Estate of Renata Black, which was, and still is, administered in New York, and because this interpleader action concerns such distribution, as well as Joanne Black's claim that the funds that passed through the Estate and were distributed to the Issue Trust were converted by Bernard Black.

The Issue Trust defendants claim that SPCA 210 (2) (b) is only applicable when the Estate seeks recovery of assets, and thus does not apply here, because the Estate itself is not looking to recover the distributions. The court rejects this argument, as the language set forth in SPCA 210 (2) (b) does not specifically limit jurisdiction only to actions where the estate is seeking the recovery of a distribution. To the contrary, the plain language of the statute gives a broad grant of jurisdiction in New York, providing personal jurisdiction over a non-resident who receives a distribution from a New York estate "as to any matter concerning the payment or distribution" (SCPA 210 [a] [b] [emphasis added]).

Even though personal jurisdiction exists, this action must, nevertheless, be dismissed because this court lacks subject matter jurisdiction.

The Issue Trust is a lifetime trust, which was created and initially funded in 1997, during Renata Black's lifetime (Bernard Black aff, ¶ 2). New York Surrogate's Court can assert jurisdiction over the trust estate "of any lifetime trust which has assets in the state, or of which the grantor was a domiciliary of the state at the time of the commencement of a proceeding concerning the trust, or of which a trustee then acting resides in the state or, if other than a natural person, has its principal office in the state" (SPC 207 [1]).

The New York Supreme Court's jurisdiction over lifetime trusts is the same as that of the Surrogate's Court (see Matter of Witherill, 306 AD2d 674, 675 [3d Dept 2003] [New York Supreme Court lacks jurisdiction over lifetime trust if the "jurisdictional predicate(s) listed in SCPA 207 (1)" are absent]; Matter of Hummel, 20 Misc 3d 879, 885 [Sup Ct, Albany County 2008] [internal quotations and citation omitted] ["the [Surrogate's C]ourt has the same jurisdiction and power as the Supreme Court has over lifetime trusts and trustees"]; see also SCPA 1501 [1] [c] [Surrogate's Court has jurisdiction over "(a) lifetime trust of which the supreme court would also have jurisdiction"]).

Here, neither the Surrogate's Court nor the Supreme Court has subject matter jurisdiction over the Issue Trust. The first basis for jurisdiction fails, as the Issue Trust has no assets in New York. The entirety of the Issue Trust assets are in Illinois bank and brokerage accounts (Bernard Black aff, ¶ 12).

The second basis for jurisdiction also fails. Although Renata Black, the grantor of the trust, was a New York resident, she died in 2012 (id., ¶ 4). With respect to a lifetime trust, the grantor's domicile as a basis for jurisdiction "'evaporates with the death of the grantor as the grantor has no domicile after death'" (Matter of Witherill, 306 AD2d at 675 [citation omitted]). Therefore, Renata Black's domicile in 1997, when the trust was created, cannot serve as a basis for jurisdiction, as it was not her domicile at the commencement of this proceeding.

Finally, the third basis for jurisdiction also fails. Bernard and Samuel Black, the trustees of the Issue Trust, are natural persons, neither of whom resides in New York.

Chase does not dispute the fact that the requirements for SPCA 207 are not met. Rather, Chase contends that this court has subject matter jurisdiction under SCPA 201, which provides that New York courts have "full and complete" jurisdiction "to administer justice in all matters relating to estates and the affairs of decedents" (SCPA 201 [3]). Chase argues that, because the claims at issue here clearly relate to the matters of an estate of a New York decedent and its administration, there is no question that this court has subject matter jurisdiction.

The court rejects this argument. This is not a dispute as to the administration of an estate. Rather, in her cross-claims, Joanne Black alleges that the assets at issue should never have gone to the Estate of Renata Black (answer, ¶ 8). She does not allege that the assets were not distributed according to Renata Black's will upon reaching the Estate.

More importantly, the issue of subject matter jurisdiction has already been decided. The Surrogate's Court, which is currently reviewing the Estate of Renata Black (Bernard Black aff, ¶ 50), has already determined that there is no subject matter jurisdiction over the Issue Trust and Joanne Black's cross-claims. During this review, Joanne Black attempted to bring in that proceeding the same cross-claims she brings here. The Surrogate's Court specifically held that [*5]there was no subject matter jurisdiction for her to bring claims against the Issue Trust or the individual beneficiaries (see Joanne Black answer, ¶ 8 [alleging that she "commenced a Surrogate's Court proceeding against the Estate of Renata Black for multiple claims including conversion, breach of fiduciary duties, monies had and received and unjust enrichment, but . . . was required to amend my Petition to remove the claims against Bernard S. Black, Samuel H. Black, David H. Black, Benjamin H. Black, Rebekah H. Black, Sarah H. Black, Daniel H. Black and Jacob L. Black and the Issue Trust because [her] counsel was informed by the Court that the Surrogate's Court lacked subject matter jurisdiction for [her] to pursue those claims in Surrogate's Court against the Issue Trust and the individual beneficiaries"]).

Joanne Black's cross-claims against the Issue Trust and the individual beneficiaries are at the heart of this interpleader action. CPLR 1006 (a) enables a stakeholder who faces multiple liabilities as a result of conflicting claims to an asset, but has no interests in that asset, to commence an interpleader action against the competing claimants, and compel them to litigate the matter among themselves. Chase contends that the fact that Joanne Black has filed cross-claims against Bernard Black and Samuel Black in this action claiming, inter alia, that they converted funds belonging to her and transferred such funds to the Issue Trust, is conclusive evidence that the Issue Trust accounts are subject to competing claims. Thus, Chase argues that the funds in those accounts should be paid into this court, so that the interested parties may otherwise assert their rights and litigate their claims to the funds in dispute among themselves.

However, because the Surrogate's Court has already determined that there is no subject matter jurisdiction over Joanne Black's cross-claims, Chase is barred, by the doctrine of collateral estoppel, from basing this action on these competing claims to the funds in the Issue Trust accounts (Ryan v New York Tel. Co., 62 NY2d 494, 500 [1984] [doctrine of collateral estoppel, or issue preclusion, is a "narrower species of res judicata," which "precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same"]; see also Pinnacle Consultants v Leucadia Natl. Corp., 94 NY2d 426, 431-432 [2000]). Interpleader is not proper where, as here, the interpleading party cannot show that it reasonably faces multiple liabilities (see Royal Bank of Can. v Weiss, 172 AD2d 167, 169 [1st Dept 1991]; CMI II, LLC v Newman & Newman, P.C., 17 Misc 3d 1107[A], 2007 NY Slip Op 51865[U], *9 [Sup Ct, NY County 2007]).

Thus, the Issue Trust defendants' motion to dismiss must be granted for lack of subject matter jurisdiction.

In light of this determination, it is unnecessary to consider the parties' remaining arguments. The court does note, nonetheless, that this action would also be barred because of the parties' written agreement to arbitrate. The account agreement for the brokerage account opened by the trustees for the Issue Trust in 2013 specifically states that "all controversies arising under or relating to . . . any activity between me and . . . [Chase] and their principals, agents or affiliates . . . regarding my Account(s) including, but not limited to, orders, transactions, performance or breach of other agreements between the parties shall be resolved through arbitration" (brokerage account agreement at 6 [Black aff, exhibit 3]).

New York law dictates that, because "[a] written agreement to submit any controversy . . . to arbitration is enforceable," the court "shall direct the parties to arbitrate" when "there is no [*6]substantial question whether a valid [arbitration] agreement was made" (CPLR 7501, 7503 [a]). It must be "evident from the totality of circumstances that the parties intended to be bound by documents containing arbitration obligations" (Flores v Lower E. Side Serv. Ctr., Inc., 4 NY3d 363, 370 [2005]). Given that Chase drafted the brokerage account agreement, there can be no question about Chase's intention to arbitrate. Thus, Chase is barred from bringing this action in New York Supreme Court.

The Issue Trust Defendants Motion to the Cross-Claims (Motion Sequence No. 002)

The Issue Trust defendants' motion to dismiss Joanne Black's cross-claims is granted, because, as previously discussed, there is no subject matter jurisdiction over these cross-claims. It is thus unnecessary to consider the parties' remaining arguments, including defendants' argument that Joanne Black's attempt to void Bernard Black's disclaimer has already been determined by the Denver Probate Court, and is barred by res judicata. Accordingly, Joanne Black's cross-motion for a stay of this proceeding, should this court grant dismissal based on the res judicata argument, is denied as moot.

Accordingly, it is

ORDERED that defendants' motion to dismiss the complaint (motion sequence no. 001) is granted, and the complaint is dismissed with costs and disbursements to defendants as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further

ORDERED that defendants' motion to dismiss the cross-claims of defendant Joanne Black (motion sequence No. 002) is granted, and the cross-claims are dismissed with costs and disbursements to the remaining defendants as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further

ORDERED that the cross-motion of defendant Joanne Black for a stay of this proceeding (motion sequence no. 002) is denied as moot; and it is further

ORDERED that the Clerk is directed to enter judgment accordingly.

Dated: May 4, 2017

Hon. Robert R. Reed

J.S.C.