Matter of Bender

[*1] Matter of Bender 2007 NY Slip Op 52478(U) [18 Misc 3d 1109(A)] Decided on December 21, 2007 Sur Ct, Nassau County Riordan, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 21, 2007
Sur Ct, Nassau County

In the Matter of the Application of Phyllis Edelheit, Petitioner, For Relief Against Michael Bender, Executor of the Estate of Abraham Bender, Deceased.



335860



The appearance of counsel is as follows:

Fox & Lefkowitz

666 Old Country Road

Suite 201

Garden City, NY 11530

(Attorneys for Respondent)

Garfunkel Wild & Travis

111 Great Neck Road

Great Neck, NY 11020

(Attorneys for Petitioner)

John B. Riordan, J.

This is a miscellaneous proceeding involving the Estate of Abraham Bender ("the decedent"). The decedent's daughter, Phyllis Bender ("Phyllis" or "petitioner") commenced a proceeding against her brother, Michael Bender, as executor of decedent's estate ("Michael" or "the executor"), seeking relief pursuant to SCPA 2102 to force the executor to disclose information and marshal assets for the benefit of Phyllis, who is a one-half residuary beneficiary of the estate. Before this court is Michael's motion to dismiss the petition and Phyllis' cross-motion for leave to amend her petition.

Factual Background

Phyllis and Michael are two of the three children of decedent, who died on April 8, 2004, leaving a will dated May 11, 1996. Pursuant to a stipulation of settlement entered into by all three of the decedent's children, Jeffrey Bender ("Jeffrey"), Phyllis, and Michael, dated October 3, 2006 (the "stipulation"), and a decree of probate dated January 5, 2007, limited letters in decedent's estate were issued to Michael as executor on January 8, 2007. Decedent's will made no provisions for Jeffrey but he received $10,000 pursuant to the stipulation. The will provides for the residuary estate to be divided evenly between Phyllis and Michael.

The primary focus of Phyllis' petition is (1) Bana Electric Corporation ("Bana Electric"), which was established by decedent in 1959, and taken over by Michael in 1980; (2) the property on which Bana Electric is situated, 45 Gazza Boulevard, Farmingdale, NY ("45 Gazza"); and (3) a real estate holding corporation, Bana Realty Corporation ("Bana Realty"), incorporated by Michael in 1980 to hold 45 Gazza.

Procedural Background

A. Petition for Relief Pursuant to 2102

The petition brought by Phyllis seeks information pursuant to SCPA 2102 to determine (1) decedent's interest, at the time of his death, in (a) Bana Electric, (b) Bana Realty and (c) 45 Gazza and (2) whether decedent was owed salary by Bana Electric pursuant to a 1986 document signed by Michael, in which Michael agreed to pay decedent an annual salary of at least $75,000 a year for life. Phyllis argues that Michael, as executor, must pursue recovery of decedent's interest in the above corporate entities and the related real estate as well as any unpaid salary owed to decedent pursuant to the 1986 writing. Additionally, Phyllis asks the court to grant her [*2]attorneys' fees, costs and disbursements.

B. Motion to Dismiss

The executor responded by filing a motion to dismiss, arguing that the documentary evidence conclusively establishes a defense pursuant to CPLR 3211(a)(1), and that the motion for discovery must be dismissed pursuant to CPLR 3211(a)(7) for failure to state a cause of action. In support of his motion to dismiss, the executor has submitted an affidavit, an affirmation from executor's attorney, and an affidavit from the accountant who prepared the tax returns of the decedent, Bana Electric and Bana Realty. The executor argues that the documentary evidence conclusively shows that the decedent did not have any interest in Bana Electric, since the decedent surrendered his remaining shares of stock to the corporate treasury on October 20, 1980. In his supporting affidavit, the executor refers to annexed photocopies of stock certificates showing the surrender of all of decedent's shares of Bana Electric. The executor also annexed a copy of the corporate minutes of a meeting of the shareholders of Bana Electric on August 10, 1977, when the services of the decedent as president, secretary and treasurer were terminated and it was agreed that decedent would no longer be employed by the corporation. The executor also attached a computer printout from New York State showing that Bana Realty was not incorporated until August 28, 2000.

In the annexed affidavit of the accountant, he states that decedent had told him that decedent had retired and had sold his interest in Bana Electric to Michael. The affidavit further states that at no time did the decedent's tax returns reflect ownership of any interest in Bana Electric or Bana Realty. Photocopies of the personal returns prepared for the decedent for 1996-2003 are attached, along with tax returns for Bana Electric for the same years and for Bana Realty from 2000 to 2003. Further, the affiant states that decedent never claimed to hold any interest in Bana Electric or Bana Realty or to be owed salary by these companies.

C. Cross-Motion to Amend

In response to the executor's motion to dismiss, Phyllis submitted a cross-motion for an order pursuant to CPLR 3025(b) for leave to amend her petition, along with an affidavit in opposition to the motion to dismiss the petition and in support of the cross-motion to amend the petition. The cross-motion seeks to add a claim for repayment of loans allegedly made to Bana Electric out of a joint account that decedent held with his late wife. Petitioner maintains that the documents filed with the court do not fully resolve the claims that she has raised.

Phyllis argues that the decedent's surrender of two stock certificates is not determinative of whether he held any other ownership interest in Bana Electric at the time of his death. Petitioner points out that the tax returns submitted in support of the executor 's position are unsigned photocopies (with the exception of 1996), as are the tax returns submitted for Bana Electric and Bana Realty. Additionally, Phyllis notes that tax returns would not reflect an ownership interest in any year in which the taxpayer did not receive income or dividends, and corporate tax returns would not list a shareholder who did not receive corporate compensation in the pertinent tax year. The corporate minutes from 1977 which were submitted to the court similarly do not address the issue of decedent's ownership interest.

Petitioner further argues that the question of decedent's interest in 45 Gazza, presently held by Bana Realty, is unresolved due to two seemingly conflicting transactions which took place on December 20, 1959. Before the court is an agreement dated December 20, 1959 [*3]between the decedent and Mary Spiegel and Bernard Spiegel. The agreement reflects that Mary Spiegel and Bernard Spiegel were doing business as M.J.P. Associates Co., a partnership, the principal asset of which was 45 Gazza. Pursuant to the agreement, Bernard Spiegel sold his one-half interest in the partnership to the decedent for $17,500, and the agreement states that simultaneously with the execution of the document, Bernard Spiegel will deliver a fully executed full covenant and warranty deed to decedent and Mary Spiegel. Another document before the court, of same date, is an indenture transferring 45 Gazza from Mary Spiegel and Bernard Spiegel doing business as M.J.P. Associates Co., to Bana Electric, in a transfer for no consideration. Petitioner argues that these seemingly conflicting documents cloud title to 45 Gazza, and require further discovery.

In connection with her claim that decedent was owed unpaid salary by Bana Electric pursuant to the 1986 writing, petitioner refers to Michael's admission in a Reply Affidavit filed in Suffolk County Surrogate's Court, in connection with the estate of decedent's wife, Bertha Bender, that Bana Electric paid decedent $125,000 per year until the late 1990's. Phyllis is seeking access to the corporate records of Bana Electric to determine whether the decedent was owed salary at the time of death and to force the executor to bring a claim against Bana Electric if the salary was not paid.

In her last claim, omitted from the original petition, Phyllis claims that the decedent made two loans totaling $100,000 to Bana Electric, and asks to review Bana Electric's corporate records to determine whether the loans were repaid.

D. Affirmation in Opposition to the Cross-Motion

In response to Phyllis' cross-motion, Michael's attorney submitted an affirmation in opposition in which he raises an additional defense, namely, that all of the claims filed by Phyllis are time-barred, including all of the original claims and the claim for repayment of the loans subsequently raised in the cross-motion to amend. In support of this defense, the attorney notes that if these claims were valid, decedent could have chosen to assert them during his lifetime. He maintains that decedent surrendered all of his stock more than sixteen years prior to his death, as evidenced by the documentary proof submitted, which proof also demonstrates conclusively that decedent held no interest in Bana Realty, which was not incorporated until 2000. The affiant then argues that the 1977 minutes of Bana Electric, reflecting the termination of decedent's services, provide documentary proof that decedent was not promised a salary of $75,000 per year for life, and that the deed dated December 20, 1959 which transfers 45 Gazza from Bernard Spiegel and Mary Spiegel, doing business as M.J.P. Associates Co., to Bana Electric, irrefutably shows that Bana Electric, and not decedent, held title to the property since that date. The affidavit charges Phyllis with knowingly filing a false claim and asks for reimbursement of fees, costs and expenses.

Issues

Thus, the following issues are now before the court:

(1) Whether to grant Michael's motion to dismiss based upon documentary evidence

and failure to state a claim;

(2) Whether to grant Phyllis' cross-motion for leave to amend her petition; and

(3) Whether to grant Michael's motion to dismiss based upon the additional defense that all of Phyllis' claims are barred by the statute of limitations.

[*4]Analysis

The motion to dismiss is based upon CPLR 3211(a)(1), a defense founded on documentary evidence, and CPLR 3211(a)(7), failure to state a cause of action. The executor asserts that the evidence annexed to his affidavit and the affidavit of the accountant which accompany the motion prove that petitioner's contentions are inaccurate and unfounded. The documents include (1) photocopies of two Bana Electric stock certificates issued to and apparently surrendered by the decedent, (2) minutes of a shareholder meeting of Bana Electric held on August 10, 1977, in which the services of decedent as president, secretary, treasurer and employee were terminated, (3) a computer printout which reflects the incorporation of Bana Realty in 2000, and (4) photocopies of personal tax returns prepared for the decedent from 1996 through 2003, as well as corporate returns for Bana Electric for the same years and for Bana Realty from 2000-2003.

In reviewing a motion to dismiss, the court must interpret the pleadings in favor of the party moved against (Cron v Hargro Fabrics, 91 NY2d 362, 366 [1998]; Ozdemir v Caithness Corporation, 285 AD2d 961 [3d Dept 2001]). The court must determine whether, "accepting as true the factual averments of the complaint, plaintiff can succeed upon any reasonable view of the facts stated" (People v New York City Transit Authority, 59 NY2d 343, 348 [1983]). A petition will not be dismissed where a cause of action may exist if the petitioner is given every benefit of the doubt (Hallman v Horowitz, 160 Misc 2d 225 [Nassau County Dist Ct, 1994]; Rovello v Orofino Realty Co., 40 NY2d 633, 634 [1976]). If a motion to dismiss is to succeed pursuant to CPLR 3211(a)(1) based upon a defense of documentary evidence, the respondent must "establish a defense as a matter of law" (Fils-Aimme v Ryder TRS, Inc., 11 Misc 3d 679, 683 [Sup Ct, Nassau County 2006]) and show that the evidence is sufficient to completely dispose of the claim and fully resolve all of the issues raised (Unadilla Silo Co. v Ernst & Young, 234 AD2d 754, 754 [3d Dept 1996]).

As to decedent's interest in Bana Electric, the executor has produced a photocopy of stock certificate No.1, representing 200 shares of stock, which was issued to the decedent on January 2, 1959. The photocopy reflects that it was surrendered on September 3, 1968. On that date, stock certificate #2, reflecting 102 shares of stock, was issued to the decedent. A photocopy of this certificate is also annexed, and it reflects that it was surrendered on October 20, 1980. Petitioner has offered no evidence to support her claim that decedent may have had some other ownership interest in the company. Accordingly, the court grants the motion to dismiss as to this claim pursuant to CPLR 3211(a)(1).

With regard to the claims concerning the decedent's interest in Bana Realty and 45 Gazza, which are both, in essence, claims that decedent held an interest in the real property known as 45 Gazza, the documentary evidence before the court is less clear. It certainly appears that the 1959 transfer of 45 Gazza to Bana Electric does not conform to the terms of the 1959 contract between the decedent and Bernard Spiegel and Mary Spiegel, doing business as M.J.P. Assoc. Co. The executor's attorney, in his affirmation in opposition to the cross-motion, has raised the statute of limitations as a defense. Contracts are governed by a six year statute of limitations (CPLR 213[2]), and the time in which a proceeding must be commenced is counted from the time the cause of action accrues (CPLR 203[a]). A contractual cause of action accrues when there is a breach of contract (Matter of Hollenbach, 16 Misc 3d 1106A [Sur Ct, Nassau County 2007]). If a breach occurred, it took place when 45 Gazza was transferred to Bana Electric on December [*5]20, 1959. Accordingly, the statute bars any cause of action on this claim after December of 1965. A motion to dismiss may be granted on the basis that an action is time-barred (Williamson v PricewaterhouseCoopers LLP, 9 NY3d 1 [2007]; Putter v North Shore Univ. Hospital, 7 NY3d 548 [2006]; State v Fenton, 68 AD2d 951 [3rd Dept 1979]). The executor's motion to dismiss is granted as to these claims.

The petitioner has also raised a claim concerning salary which may be owed to the decedent pursuant to a document signed on December 8, 1986 by the executor as corporate president of Bana Electric. The document, which is entirely handwritten on notepaper headed "FROM THE DESK OF BERTHA BENDER," has the date of 12/8/86 in the upper right corner and states in its entirety:

"This document confirms to Abraham Bender the Permanent

Position of Vice President of Bana Electric Corp. for the salary

of at least $75,000.00 per year for as long he shall live.

Bana Electric Corp.

Michael Bender Pres.

Witness - Stephen Bender 12/8/86."

The document appears to be signed by Michael Bender on behalf of Bana Electric and witnessed by Stephen Bender. The document was not signed by the decedent.

In paragraph (5)(c) of his affidavit dated August 31, 2007, the attorney for the executor responded to the claim based upon the 1986 writing by referring to the 1977 minutes in which decedent's position at the company was terminated, even though these minutes reflect a meeting which occurred nine years prior to the document which is the basis for the current claim. The minutes are insufficient to support dismissal of this claim.

Additionally, the attorney for the executor argues that this claim is time-barred since it is based upon a document executed in 1986. As discussed above, the statute of limitations applicable to a contract is six years, pursuant to CPLR 213(2). In this case, the document calls for performance over an extended period of time, namely, annual payments of at least $75,000.00, beginning in 1986 and continuing yearly until the stated terminating event, the death of decedent. Where a contract creates a continuing obligation, a separate cause of action may accrue for each year in which a payment becomes due (Pagano v Smith, 201 AD2d 632 [2nd Dept 1994]), and each breach of the contract may trigger the statute of limitations running anew (Bulova Watch Co., Inc. v Celotex Corp., 46 NY2d 606 (1979); Kerr v Brown, 283 AD2d 343 [1st Dept 2001]). Thus, each year between 1986 and 2004, when Abraham Bender died, may give rise to a separate cause of action and potential breach of the contract. Accordingly, the court grants the motion to dismiss with respect to that portion of the claim which is based upon breaches that may have occurred more than six years prior to the commencement of this proceeding, but denies the motion to dismiss as to that portion which is based upon breaches of this document which petitioner claims occurred in 2001, 2002, 2003 and 2004, all of which are within six years prior to 2007.

As to the claim for repayment of loans made by decedent to Bana Electric, which is the subject of the cross-motion for leave to amend, the court notes that leave to amend may be granted at the [*6]discretion of the court, which is generally exercised freely (Matter of Sabha, 65 AD2d 917 [4th Dept, 1978]). The court will consider (1) how long the amending party knew the facts raised in the amendment and whether a reasonable excuse is offered for the delay (Matter of Goggins, 231 AD2d 634 [2d Dept, 1996]); (2) whether the amendment plainly lacks merit (Matter of Carvel, NYLJ Apr. 16, 2002 at 23 [Sur Ct, Westchester County]; Seamen Corp. v Binghamton Sav. Bank, 243 AD2d 1027 [3d Dept 1997]; and (3) whether the amendment would cause prejudice to the other party (Matter of Carvel, NYLJ Apr. 2, 2002 at 23 [Sur Ct, Westchester County]; Seamen Corp. v Binghamton Sav. Bank, 243 AD2d 1027 [3d Dept 1997]; Matter of Goggins, 231 AD2d 634 [2d Dept 1996]; Wyso v City of New York, 91 AD2d 661 [2d Dept, 1982]; Matter of Sabha, 65 AD2d 917 [4th Dept 1978]).

In this case, the amending party does not state how long she knew of the checks paid by decedent to Bana Electric in 1995; she simply notes, in paragraph (38) of the cross-motion, that the claim was "inadvertently left out of the Petition previously filed." In any event, the time between the filing of the original petition and the cross-motion for leave to amend is less than three months, which is not a significant period of time in this matter, and discovery has not been completed. Typically, denial of a motion for leave to amend might occur after a lengthy delay following the filing of the original petition or just before commencement of a trial (Gallo v Aiello, 139 AD2d 490 [2d Dept 1988]). As to the merit of the claim, the court finds that a threshold level has been met (C.F.J. Assoc. of NY v Hanson Industries, 260 AD2d 917 [3d Dept 1999]; 626 East 9 Street Housing Dev. Fund Corp. v Collins, 185 Misc 2d 628 [NY Civ Ct, 2000]). No prejudice would be caused to the executor by allowing this amendment; there has been no loss to him or expense that he incurred as a result of this claim not being included in the original petition (Wyso v City of New York, 91 AD2d 661 [2d Dept 1982]; Siegel, New York Practice, §237). Accordingly, leave to amend is granted pursuant to the cross-motion.

Petitioner's amendment introduces a claim for repayment to the estate of loans allegedly made by decedent to Bana Electric. The burden of proof rests with the person claiming that a loan was made (Matter of McNally, 54 AD2d 1103 [4th Dept 1976]). In the absence of documentation evidencing the creation of a loan, the delivery of a check is assumed to be the repayment of a preceding debt rather than the creation of a new loan (Matter of McNally, 54 AD2d 1103 [4th Dept 1976]). To determine whether a loan was actually created, a court will consider whether there are notes or acknowledgments, whether collateral was given, and whether there is a plan for or proof of repayment (Matter of Palma, 17 AD3d 817 [3d Dept 2005]). When a claim involves an estate, the burden of proof is particularly high, because of the inability of the decedent to testify (Matter of Gorden, 8 NY2d 71 [1960]; McKeon v Van Slyck, 223 NY 392 [1918]; Matter of Matranga, 25 AD2d 782 [2d Dept 1966]).

Petitioner's claim that decedent made loans to Bana Electric is based upon bank records reflecting that two checks, each in the amount of $50,000, were paid by the decedent to the company in 1995. Petitioner provides no further support for her argument that these checks constituted loans to the company. Generally, where there is no documentary evidence that a transfer constituted a loan, the court must make a factual determination (Walther v O'Connell, 72 Misc 2d 316 [NY Civ Ct, 1972]). However, because the purported loan was made in 1995, the court must first consider executor's defense that this claim is time-barred. The applicable statute of limitations, CPLR 213(2), provides six years for the commencement of an action upon a [*7]contractual obligation or liability. This may be tolled by a written acknowledgment of a debt and a promise to pay, which would serve to revive the loan (General Obligations Law §17-101; Matter of Walsh, NYLJ, Oct 22, 2002 at 23, col. 6 [Sur Ct, Westchester County]). Petitioner has offered no indication that the applicable statute of limitations may have been tolled for any reason. Consequently, the court grants the motion to dismiss on the grounds that this claim is time-barred.

For the reasons stated above, the cross-motion to amend is granted. The motion to dismiss is granted except as to whether decedent was owed salary by Bana Electric for the years 2001-2004.

Settle order.

Dated: December 21, 2007

JOHN B. RIORDAN

Judge of the

Surrogate's Court