Matter of Kelligrew

[*1] Matter of Kelligrew 2008 NY Slip Op 51010(U) [19 Misc 3d 1135(A)] Decided on March 24, 2008 Sur Ct, Westchester County Scarpino, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through May 23, 2008; it will not be published in the printed Official Reports.

Decided on March 24, 2008
Sur Ct, Westchester County

In the Matter of the Application of JOHN R. KELLIGREW, as Executor of the Estate of Sydna M. Kelligrew, a/k/a Sydna Marcus Kelligrew, Deceased.



2186/03



McGOVERN & AMODIO, ESQS.

Attorneys for Petitioner

Two William Street - Suite 306

White Plains, New York 10601

HOWARD DEAN, P.C.

Attorney for Respondents

150 White Plains Road

Tarrytown, New York 10591

Anthony A. Scarpino, J.

Before the court is a contested miscellaneous proceeding attendant to the estate of Sydna M. Kelligrew ("decedent"), commenced pursuant to SCPA 2103 by decedent's surviving spouse John R. Kelligrew ("petitioner"), as executor of decedent's estate, to recover certain funds from decedent's daughter Alicia W. Kelligrew ("Alicia"), Michael Love ("Love"), and/or Coffee Lab Roasters, Inc. ("CLR, Inc.") (collectively "respondents").

The subject of the instant proceeding is a transaction that occurred in June 2002, when decedent arranged for the transfer to Alicia of $195,231.21 by check. Alicia and Love used the subject funds to finance the establishment and operation of Coffee Lab Roasters ("CLR"), a café located in Tarrytown, Westchester County. According to petitioner, the subject transfer was a loan, while respondents maintain that the transfer was an inter vivos gift to Alicia.

Based on the credible evidence adduced at the non-jury trial attendant to the instant proceeding, the court hereby determines that the subject transaction was not a gift, and finds in favor of petitioner, for the reasons set forth, infra.

Background

Decedent, a resident of Pleasantville, Westchester County, died on December 4, 2002, survived by petitioner and their three children: Alicia, Marcus and Thomas. Decedent left a last will and testament dated June 17, 1975, under which petitioner is the sole beneficiary (Trial Transcript [T]: 380-381). After Alicia initially contested petitioner's appointment as executor of decedent's estate, on January 27, 2004, the court admitted the will to probate, and issued letters testamentary to petitioner.Petitioner, as executor, commenced the instant proceeding in March 2004 in the inquisitorial phase, alleging that the subject transaction was a loan and, therefore, requested Alicia, Love and/or CLR, Inc. to deliver to him the sum of $195,231.21, "plus interest at the statutory rate" [*2](Petition, at 5 - Pet. Ex. 1). In response, in the turnover phase, respondents filed an amended answer (see Decision and Order - August 15, 2005), in which they've claimed that the subject transaction was a gift, and have sought summary dismissal of the petition on several occasions, to no avail (see, Decision and Order - November 29, 2004; Decision and Order - September 11, 2007).

A non-jury trial of the instant matter was held on September 24, 25, 27 and 28, 2007, at which petitioner, Alicia, Love and several other witnesses offered testimony. The following is a summary of the pertinent testimony and evidence offered at the trial:

Petitioner's Case-In-Chief

Petitioner was admitted to the bar to practice law in New York in 1962. In March 2007, he was disbarred for professional misconduct predicated on allegations that he failed to properly maintain required bookkeeping records of his attorney operating and escrow accounts (T:357-358, 378-379, 384; see Matter of Kelligrew, 40 AD3d 66 [2007] [Resp. Ex. A]).

As to the original source of the funds used in the subject transaction, petitioner testified that the subject funds - $195,231.21 - represented decedent's one-third share of the distribution of the net proceeds emanating from the sale of real property owned by decedent's mother, Ina Rosenthal Marcus, at 200 Rockingstone Avenue, Larchmont, Westchester County, as part of the administration of decedent's mother's estate (T:337-338, 362-363, 387-389). According to petitioner, the aforementioned net sale proceeds were originally deposited into petitioner's attorney escrow account (T:360, 386-388). On June 7, 2002, petitioner wrote a check to Alicia in the amount of $195,231.21 from his attorney escrow account (T:360-361,388-389; Pet. Exs. 2 and 12). Petitioner also testified that, within a "couple of weeks" of his writing the aforementioned check, it was deposited into an account of a corporation named Juneau/Lakota, Inc. - a corporation of which Alicia was president ("Juneau/Lakota account") (T:366,426) and, thereafter, into the corporate account for CLR, Inc. to establish the latter account ("CLR, Inc. account") (T:369). According to petitioner, decedent was a co-signer on both the Juneau/Lakota account and the CLR, Inc. account (T:369).

Janice Wszolek, a representative from Citibank, N.A., where petitioner's attorney escrow account, the Juneau/Lakota account, and the CLR, Inc. account were maintained, authenticated certain of petitioner's exhibits (Pet. Exs. 2,3,4,5,12,13,14 and 15) and testified as follows with respect to the establishment of the CLR, Inc. account: (i) on June 13, 2002, the subject check was deposited into the Juneau/Lakota account (Pet. Ex. 2, 3, and 12); (ii) on June 27, 2002, the amount of $195,231.21 was transferred from the Juneau/Lakota account into the CLR, Inc. account, in order to establish the latter account (Pet. Exs. 4, 5, 13, 14 and 15); (iii) the co-signers on the Juneau/Lakota account were decedent and Alicia; and (iv) with respect to the CLR, Inc. account, Citibank issued an "ATM" card to decedent, as an authorized co-signer on the account, for decedent's personal use for "ATM" transactions (Pet. Ex. 15) (T:307-333).

Additionally, read into evidence were portions of Alicia's pre-trial examination testimony, wherein Alicia had testified, inter alia, that: (i) Love and Alicia were originally the sole co-owners (50% each), officers and directors of CLR, Inc.; (ii) decedent had "given" Alicia "approximately $190,000.00 for Alicia's "contribution to the capital " of CLR; (iii) the "source of [*3]the funds" for the establishment of the CLR, Inc. account, which was opened at Citibank, N.A., and the "purchase of the equipment" for CLR was "money received from" decedent; (iv) decedent was personally present at the banking transaction to establish the CLR, Inc. account; (v) decedent was a co-signer on the CLR, Inc. account, even though she maintained no ownership interest in CLR, Inc.; and (vi) decedent purchased a personal computer for herself using funds from the CLR, Inc. account (T:11-15, 412).

Respondents' Case-in-Chief

Kristen Springer,who worked with Alicia at the Dragonfly Café in Pleasantville prior to the opening of CLR, testified on respondents' behalf (T:25-53) that: (i) before decedent's death, she knew decedent for "a few months", and that decedent was an occasional customer at the Dragonfly Café (T:25); (ii) during one of decedent's visits there, Springer initiated a conversation with decedent about Springer's desire to open up her own café with her sister, and that she was working at the Dragonfly Café to learn the "ins and outs" of the café business (T:30); (iii) on this occasion, Springer, who, at the time of the subject conversation, was aware that Alicia and Love were looking to open their own café, told decedent that her father was going to loan her and her sister the money to start up her café (T:31); and (iv) in response, decedent stated to her, "I'm not loaning money. I'm giving [Alicia] money. I'm fortunate enough to be able to give her the money to start the café" (T:31). According to Springer, no one else was present at or heard the substance of the foregoing conversation (T:29, 39).

On cross-examination and on examination by the court, although Springer reiterated that decedent had told her that she was "giving", not "loaning", the money to Alicia (T:47-48), she testified that she did not recall the date of the foregoing conversation she had with decedent, or any other pertinent details thereof (T:32, 52).

Daniel Cooper, a pastry chef who was a "friend" of both Alicia and Love (T:58), also testified on respondents' behalf (T:53-83). Cooper, who had contemplated joining Alicia and Love in their business venture but decided not to do so, for financial reasons (T:63-64), testified that: (i) "once a week or so", he would visit both Alicia and Love at decedent's home in Pleasantville, where both Alicia and Love resided at the time (T:58-61); and (ii) on one occasion, while standing "in front of" the Dragonfly Café, in the presence of Alicia and Love (T:72-73), decedent said to him that she was "going to help them (i.e., Alicia and Love) out financially", and/or that decedent "would be giving them (i.e., Alicia and Love) funds to help" them with the financing of their café (T:62).

On cross-examination, Cooper did not remember when the aforementioned conversation with decedent had occurred, or whether decedent had discussed with him a specific sum of money she was going to provide to Alicia and Love (T:67, 70). Additionally, upon examination by the court, Cooper testified that he "understood" the subject transfer of funds from decedent to Alicia and Love to be a gift, based on the fact that decedent had not said anything about either Alicia or Love "making payments", or about decedent being a "silent partner or an investor" in the business (T:66-67, 80). Cooper also testified that he was aware that the source of the funds decedent was going to "give" to Alicia was "[f]rom the death of a grandparent" (T:79).

Michael F. Love, Alicia's "significant other" (T:416) and one of thetwo co-founders of CLR, testified as to his lengthy criminal history, including numerous arrests and/or convictions in Florida over the course of the 1980's and 1990's for offenses such as burglary, aggravated assault, [*4]aggravated battery, burglary of a conveyance, forging of checks, and obstruction of justice by retaliating against a witness (T:88-91,155-163). He also testified as to multiple professional awards and accolades he had received as well as to his membership on certain professional boards and his extensive involvement with the local community in Tarrytown since CLR opened in May 2003 (T:96-98,134).

In order to surmount petitioner's objection to Love's testimony at trial based on the application of CPLR 4519 (T:100-110), Love stated that, about one month prior to trial, he had irrevocably transferred his entire 50% ownership interest in CLR, Inc. to Alicia and had resigned as an officer of CLR, Inc. (T:100-101,149-153,181 [Resps. Ex. E]).

Love testified that he met Alicia in December 2000, while he was a free-lance caterer and she was a waitress (T:92-94). As to his relationship with decedent, the establishment of CLR and the subject transaction, Love testified that: (i) in or around April 2001, he and Alicia began doing research about the café business (T:96); (ii) he first met decedent and petitioner after he and Alicia had been dating for a "couple of months", and he resided with petitioner, decedent and Alicia at the family's home for approximately one year (T:98, 100); (iii) during that time, he had numerous conversations with decedent about his and Alicia's plans to establish a café (T:111-113); (v) even though Alicia had investigated the possibility of obtaining a "small business loan" for that purpose, decedent told Alicia that decedent was going to receive an inheritance from her mother, and that she would "give" Alicia the money to establish the café (T:113-114,127-128); (vi) both decedent and petitioner told Alicia not to tell anyone about the transfer, especially Alicia's two brothers, as decedent wanted to explain the transfer to Alicia's brothers "in her own way" (T:129-132, 195); (vii) decedent told Love that she was "happy" to make the subject transfer (T:135); (viii) she did it so that petitioner would not "get his hands on" the subject funds, in light of the fact that, according to an entry decedent had made in her diary in May 2002, petitioner had diverted a portion of a past inheritance decedent had received on a previous occasion (T:135-136, 148 [Resps. Exs. B and D]); and (viii) during the six months between the subject transfer and decedent's death, petitioner never discussed the subject transfer with Love, nor did he deliver any documents to either Alicia or him which purported to characterize the transfer as a loan (T:132-133).

Love further testified that, sometime in late July or early August 2003, petitioner appeared at CLR and presented him with the following documents: (i) a two-page type-written memorandum on petitioner's professional letterhead, with a handwritten date of March 1, 2003 [FN1] ; (ii) a multi-paged proposed shareholders' agreement among CLR, Inc., Alicia, Love and petitioner; (iii) a two-page proposed promissory note; (iv) a three-page proposed guaranty of payment; (v) a three-page proposed UCC financing statement; and (vi) a three-page proposed security agreement / chattel mortgage between CLR, Inc. and petitioner ("alleged loan documents") (T:134, 187-188 [Pet. Ex. 6]). At that time, petitioner told Love, "[L]ook these over. Do not find a family attorney. This is a business deal. And if you don't find a family attorney, then all bets are off. Family means nothing." (T:134, 200-201). Thereupon, Love took the alleged loan documents and reviewed them [*5]with Alicia, then gave them to an attorney / "friend", and, ultimately, gave them to trial counsel, Howard Dean, Esq. ("Dean") (T:134, 188-189). Love testified that Alicia was "surprised" when he showed her the alleged loan documents (T:202), which neither he nor Alicia ever executed (T:134-135).

Love testified that petitioner acted as attorney for Love and Alicia in establishing CLR, Inc. and negotiating the lease for the space they eventually obtained for CLR in Tarrytown (T:100-101). Love also testified that, without consulting either Alicia or him, petitioner listed himself in the original corporate minutes as secretary of CLR, Inc., in order to obtain health insurance benefits for himself (T:115-116,131 [Resps. Ex. C]). Love further testified that CLR, Inc. paid for decedent's funeral, as petitioner claimed that he didn't have sufficient funds to do so (T:148,199).

On cross examination and upon examination by the court, Love testified that, even though he had fully divested himself of his ownership in CLR, Inc., he still drew a monthly salary from CLR, Inc., was its "head coffee roaster", still signed for deliveries at the café, and was a co-signer on CLR, Inc.'s operating account (T:151-152, 182-184). He also admitted that he was a personal guarantor on a $40,000.00 loan CLR, Inc. had obtained to secure additional construction costs for the café, as well as on CLR, Inc.'s lease for the premises (T:165-175 [Pet. Exs. 9 and 10]).

At one point during cross-examination, Love was shown an unexecuted, two-page document entitled, "AGREEMENT by and between [CLR] and ESTATE OF SYDNA KELLIGREW", which, petitioner alleges, was respondents' response to the alleged loan documents he had delivered to Love and Alicia (T:190 [Pet. Ex. 7]). The document ("alleged counter loan agreement") is dated "____ day of April, 2003", and contains the following pertinent information: (i) a provision that decedent had "invested" in CLR, Inc. "the sum of $170,000" on "June 20, 2002"; (ii) a provision that CLR, Inc. "desires to pay back the investment upon the terms and conditions agreed upon between [decedent] and the officers of [CLR, Inc.] at the time the investment was made"; (iii) an "agreement" that: (1) "[decedent] would invest $170,000 in consideration of having the money paid back when [CLR, Inc.] becomes profitable over a period of [15] years at 6% interest", (2) CLR, Inc. would "start to pay back the money when it became profitable and could afford to start the monthly payments to return [decedent's] investment out of the profits of [CLR, Inc.]", (3) CLR, Inc. would agree to carry life insurance on the lives of Alicia and Love "in the amount of the balance due on the investment", and upon the death of either Alicia or Love, the life insurance proceeds would be used "to return the full investment", (4) if CLR was sold, decedent's "investment" would be "returned from the proceeds of sale", (5) interest on the "investment" would start when CLR became "profitable", and (6) the parties would agree to submit to arbitration any dispute arising under the terms of the document (Pet. Ex. 7). Love testified that he had never seen the alleged counter loan agreement, did not know where it came from, and had never discussed it with Alicia (T:190-191).

Respondent Alicia Kelligrew, co-founder (with Love) of CLR, Inc. and its sole owner at the time of the trial, testified that petitioner wrote a check from his attorney escrow account, payable to her, in the approximate amount of "$190,000[.00]", which was deposited into the Juneau/Lakota account without her ever seeing it (T:418-419, 425 [Pet. Ex. 12]). She also testified that, subsequent to that transaction, Alicia, Love and decedent went to Citibank and established the CLR, Inc. account by transferring the subject funds from the Juneau/Lakota account in that account, [*6]of which Alicia and decedent were the sole co-signers (T:426-427). She testified that, as a "requirement of the gift" by decedent, Love was not made an original co-signer on that account (T:427-428).

Over an objection by petitioner pursuant to CPLR 4519, Alicia testified that, on more than one occasion prior to decedent's death, she had conversations with decedent, possibly in Love's presence, during which decedent told her: (i) the subject funds were a gift; (ii) decedent "didn't care" if Alicia ever paid the money back, unless, perhaps, decedent "needed to be taken care of"; and (iii) decedent asked Alicia not to discuss the subject transfer with her brothers until decedent "figure[d] out how to tell them", because the money "was going to be a gift", and decedent wanted to make sure her sons were not "upset" by the subject transaction (T:423-424, 432-433, 455). She also testified that, while petitioner was not present during these conversations, he also told her not to tell her brothers of the "gift" (T:427), and, at the time of the transfer of funds in June 2002, petitioner did not ask either Alicia or Love to sign any promissory note, financing statement, loan agreement, assignment, or any other legal document with respect to the transfer (T:424-425). She further testified that she had originally explored the possibility of obtaining a business loan, using decedent's money as collateral, but decedent insisted on giving her the subject funds. Decedent was very "excited" about the opening of the café, and decedent never asked Alicia to repay the money during her lifetime (T:433-434).

As to the alleged loan documents, Alicia also testified that, after decedent had died, petitioner approached her with these documents (Pet. Ex. 6), which she gave to Love (T:425). Thereafter, she and Love turned the alleged loan documents over to an attorney / "friend", who referred them to Dean (T:436). Thereupon, in an attempt to "keep the peace" in the family, Alicia and Love had Dean draw up a "contract" (i.e., the alleged counter loan agreement) and had it sent to petitioner, although "nothing came of it" (T:436, 437; Pet. Ex. 7).

Alicia's testimony was similar to Love's testimony in several respects, to wit: (i) petitioner had acted as lawyer for Love, herself and CLR, inc. at the time CLR, Inc. was established (T:416-417); and (ii) even though he was never a stockholder, officer or director of CLR, Inc., petitioner had listed himself as corporate secretary of CLR, Inc., without permission from either her or Love, in order to gain insurance benefits (T:417-418, 431-432). She also testified that, on two different occasions, petitioner had obtained and used credit cards in her name, without her permission (T:438-439).

On cross-examination, Alicia was shown the alleged loan documents, the alleged counter loan agreement, and a three-page, undated memorandum, handwritten by petitioner, entitled, "Coffee Labs Proposed Loan Terms, etc.", which was accompanied by a one-page loan amortization schedule at a rate of 9% interest per month ("alleged loan memorandum") (Pet. Ex. 16; Resps. Ex. F), which petitioner has alleged was a component of the alleged loan documents (T:345-348). The alleged loan memorandum contains, inter alia: (i) specific information regarding a proposed loan of $170,000.00 over 15 years at a rate of 9% interest, which required monthly payments of $1,724.26, with a "balloon payment" after two years; (ii) information about Alicia and Love obtaining insurance and the setting up of the shares for CLR, Inc.; and (iii) a notation by petitioner that CLR, Inc. had enjoyed "use of this [money] for sometime without paying any interest" (Pet. Ex. 16; Resps. Ex. F). Initially, Alicia testified that she recalled receiving the alleged loan documents and alleged loan memorandum from petitioner, and, in response thereto, Dean had drafted the [*7]alleged counter loan agreement and sent it to petitioner, with both events occurring in July 2003 (T:440-441).[FN2]However, after being shown the date on the alleged counter loan agreement (i.e., April 2003), she testified that she must have been "wrong" about the date she thought she had received the alleged loan documents and alleged loan memorandum (T:441). As to the alleged counter loan agreement, Alicia testified that, although "we drew it up" (T:442), she did not know who had delivered the document to petitioner (T:443). She also testified that decedent had used funds from the CLR, Inc. account to purchase a personal computer for herself (T:447-448).

Upon examination by the court, Alicia testified decedent "trusted" her with the subject funds instead of her brothers because, on past occasions, decedent had loaned money to her brothers and they had failed to pay her back, while Alicia had borrowed money from decedent and had paid decedent back, though decedent was "concerned" that Marcus might get "upset" if one sibling was favored over the others (T:451-453).

Petitioner's Rebuttal Case

Mary Kelligrew Kassler, petitioner's sister and decedent's sister-in-law since the early 1960s, and Haskell Kassler, her spouse, both testified on petitioner's behalf (T:211-224; 224-253). Mary, the director of the Division of Nutritional Services of Massachusetts, and Haskell, an attorney in Massachusetts for nearly 50 years, testified that they traveled from Massachusetts to decedent's home shortly after being notified of decedent's death (T:214, 227-228). They both testified that, during a family gathering at decedent's home shortly after they arrived, Mary had initiated a conversation with Alicia at the dining room table, where, among others, Mary, Haskell, Alicia, Marcus, Marcus' spouse, and Marcus' two children were present (T:215-216, 229). During the conversation, Mary asked Alicia what was "going on " in her life and what her "plans" were, to which Alicia responded that she and Love were "looking into opening a coffee house" (T: 216, 229). At that point, Mary, who had known that Alicia and Love were interested in opening a café through the "family grapevine" (T: 222) and was interested in the coffee business because her daughter was seeking to open a restaurant in California, asked Alicia where she was going to get the money to invest in a "coffee house" (T:217). Alicia's response was that decedent had "loaned" her the money (T:217, 229), although there was no mention as to the amount of the "loan" (T:244-245). Both Mary and Haskell characterized Alicia's demeanor as "together" at the aforementioned family gathering, and they testified that Alicia was an "active" participant in the funeral arrangements (T:218, 230).

On examination by the court, Haskell testified that he would be "surprised" if the subject transaction constituted a loan without petitioner having prepared appropriate documents to memorialize it in that respect (T:242, 250). However, he also testified that his opinion in the foregoing respect would "change" if he was aware that decedent had "maintained the ability to access" the subject funds (T:252-253). Haskell also testified that he and Mary "knew" that the likely source of the subject funds were the proceeds decedent had obtained from the sale of her deceased mother's home (T:245).

Marcus Kelligrew, decedent's and petitioner's oldest child, testified to the occurrence [*8]of the aforementioned conversation between Mary and Alicia much as Mary and Haskell had testified as to Alicia's statement that the subject transfer was a "loan" from decedent to her (T:286, 292). Marcus also testified that, even though he was "surprised" when he heard this information (T:292), as well as "upset" and "shocked", he did not approach petitioner to inquire about the subject transaction until about one week after decedent's death, at which time petitioner told him that decedent had "loaned" Alicia the money (T:293-295). Marcus further testified that he had never asked either decedent or Alicia to lend him money at any time (T:295, 297-298).[FN3]

Lesley Wenger , a real estate broker for nearly 35 years, also testified on petitioner's behalf (T:256-281). Wenger, who was a client of petitioner for 10 years (T:258), testified that, sometime in the summer of 2002, petitioner introduced Alicia and Love to him, and, on that occasion, all four of them had dinner together in Tarrytown (T:258-259). According to Wenger, the purpose of the meeting was for him to listen to the "business plan" of Alicia and Love regarding their café, and for him to assist them in "finding a location" for the café (T: 259). Eventually, after taking "three or four" trips with Alicia and Love to scout locations for the café, Wenger found its present location (T:260-261). Wenger testified that, over the course of several conversations during these trips, Alicia and Love told him that decedent was getting an "inheritance" from the sale of her mother's house, and that decedent was "lending" them approximately $195,000.00 to finance the café's establishment (T:261-262, 266-267, 273).

Upon questioning by the court, Wenger also testified that he did not discuss with either Alicia or Love the terms of any repayment or interest rate attendant to the alleged loan (T:268). He also testified that since the alleged "loan" by decedent to Alicia was not "attached to the premises" (i.e., there was no "mechanic's lien" involved) (T:271-272), he was able to convince the landlord of the subject premises that the café would be a viable tenant there (T:263, 268-271, 279-280). [FN4]

On rebuttal, petitioner testified that, at the initial meeting among himself, Alicia, Love and Wenger, whom he characterized as a "good friend" (T:391), Alicia and Love told Wenger that the subject funds "were being loaned to them" by decedent (T:340-341). He also testified that he was present during the "dinner table" conversation at his home where Alicia told Mary Kassler that decedent had "loaned" her the subject funds (T:342). Additionally, petitioner testified that on separate occasions over the same weekend in early March 2003, he delivered a copy of the alleged loan documents and alleged loan memorandum (Pet. Ex. 6 and 16, Resps. Ex. F) to both Alicia (at petitioner's home) and Love (at the café) (T:343-351, 375-376). At the time each received his/her [*9]copy of the documents, neither one acted "surprised", and each indicated to petitioner that he/she would take the documents to a lawyer (T:350-351).

Over respondents' objection under CPLR 4547, petitioner further testified that about a month later, Love delivered the alleged counter loan agreement to petitioner at petitioner's home (T:352-355). Thereupon, petitioner read the alleged counter loan agreement and, without speaking with either Alicia or Love, went to see his trial counsel, Michael Amodio, Esq. ("Amodio") and told Amodio that the "terms of the conditions of the repayment of the loan were unacceptable" to him (T:355-356). The probate litigation ensued shortly thereafter (T:356).

On cross examination, petitioner admitted that, at the time CLR, Inc. was formed, he acted as counsel for CLR, Inc., Alicia, Love and decedent (T:358). He also testified that, although he would have ordinarily drawn up a loan agreement for any client at the time a loan was made, at the time of the subject transaction, he could not have drawn up or have Alicia or Love, either individually or on behalf of CLR, Inc., sign any documents indicating that the subject transaction was a loan (T:364-367). His reason - at that time (i.e., June 2002), it was not known how much money Alicia and Love would actually need to finance the establishment of the café (T:369, 403, 405).

Petitioner admitted that he had opened a credit card account in Alicia's name, but stated that he had done so with her permission (T:379). He also admitted that he had drawn up the corporate minutes for CLR, Inc. and listed himself as secretary, without permission from either Alicia or Love, in order to obtain personal health insurance coverage (T:382-384).

Applicable Law and Conclusions

In the context of a proceeding commenced pursuant to SCPA 2103, ordinarily, the petitioner has the initial burden of proving the estate's right to the subject property by establishing, by a fair preponderance of evidence, that the property at issue was owned by the decedent at the time of death (Matter of Balsamo, NYLJ, Sept. 25, 1998, at 32, col. 6 [Suffolk]). However, if the respondent claims ownership of the subject property by a gift from the decedent, the respondent bears the burden on that issue (Matter of Rabinowitz, 5 Misc 2d 803; see generally Turano, Practice Commentaries, McKinney's Cons Laws of NY, Book 58A, SCPA 2104, at 415).

In the foregoing respect, in the absence of other proof, a presumption arises from the delivery of a check that it was delivered in payment of an antecedent debt (see Koehler v Adler, 78 NY 287). However, evidence of delivery plus proof that there was no pre-existing debt establishes prima facie a loan (Nay v Curley, 113 NY 575; see Matter of McNally, 54 AD2d 1103). Having alleged a gift, the recipient of the check has the burden of proving all three elements of a valid gift by "clear and convincing" evidence, to wit: (1) intent on the part of the donor to make a present transfer; (2) delivery of the gift, either actual or constructive, to the donee; and (3) acceptance by the donee (see Gruen v Gruen, 68 NY2d 48, 53; Matter of Szabo, 10 NY2d 94, 98; Matter of Abramowitz, 38 AD2d 387, affd 32 NY2d 654). These elements must always be present, since a gift is never presumed, and the evidence must be inconsistent with any other intention or purpose (Matter of Bolin, 136 NY 177).

As to the foregoing burden of proof by "clear and convincing" evidence, it has long been held that one who claims title to property by an inter vivos gift against a decedent's estate must bear a "heavy burden", which must be supported by evidence of "great probative force, which clearly establishes every element of a valid gift" (Matter of Kaminsky, 17 AD2d 690, 691 [other citations omitted]). In essence, "[t]he burden of proof upon a claimant against an estate, while no [*10]different than that imposed in any civil litigation * * * , is subject, nevertheless, to closer scrutiny" (Matter of Van Alstyne, 207 NY 298; see Matter of Hicks, 82 Misc 2d 326, 333 [other citations omitted]).

Based on the testimony and evidence adduced at trial, while it is undisputed that decedent was not indebted to Alicia, nevertheless, the court finds that Alicia failed to sustain her burden of proving that the subject check was, in fact, a gift. Accordingly, in the instant case, the presumption that the check represented a loan from decedent to Alicia must prevail.

As a preliminary matter, petitioner claims that, pursuant to CPLR 4519, the court should not have permitted testimony from either Love or Alicia as to their respective conversations with decedent. Having reserved determination as to both of the foregoing objections (T:100, 105-108; 420-422), the court now rejects these contentions, and allows the testimony of both Love and Alicia as to their conversations with decedent to stand.

As to Love, the trial record indicates that Love divested himself of his ownership interested in CLR, Inc. approximately one month prior to trial. Since Love is not otherwise a "person from, through or under whom such a party or interested person derives his interest or title by assignment or otherwise" (CPLR 4519), he was not a "person interested" in the outcome of this proceeding at the time of his testimony. Therefore, Love's testimony as to his conversations and transactions with decedent was not barred under CPLR 4519 (see Friedrich v Martin, 294 NY 588).

As to Alicia, the record indicates that petitioner's counsel read into the record certain portions of Alicia's pre-trial examination, as previously set forth herein (supra, at 4). More specifically, one portion Alicia's pre-trial examination testimony specifically sets forth that decedent had "given" Alicia "approximately $190,000.00 for Alicia's "contribution to the capital" of CLR (T:12). Therefore, the court concludes that, by introducing this specific portion of Alicia's pre-trial examination which references the subject transaction, petitioner waived the protection of CPLR 4519 and "opened the door" to the otherwise incompetent testimony of Alicia at trial with respect to her conversations and/or transactions with decedent as to the nature of the subject transaction (see Matter of Lamparelli, 6 AD3d 1218; see also Nay v Curley, 113 NY 575, supra; Matter of Radus, 140 AD2d 348, 349; compare Matter of Wood, 52 NY2d 139).

In any event, even having allowed the foregoing testimony of Love and Alicia to stand, the court finds that respondents have failed to sustain their burden of proving, by "clear and convincing" evidence, that the subject transaction was a gift.

Initially, based primarily on credible trial testimony offered by petitioner, Mary and Haskell Kassler, Lesley Wenger and Janice Wszolek, as well as the relevant documentary evidence admitted at trial (i.e., Pet. Ex. 2,3,4,5,12,13,14 and 15) and relevant pre-trial deposition testimony of Alicia read into the trial record, contrary to respondents' allegations, the court finds that petitioner clearly established that decedent was the "owner" of the funds at issue prior to the subject transaction, as the recipient of her distributive share of the net proceeds of the sale of her deceased mother's residence.

As to the proof adduced at trial regarding the nature of the subject transaction, the court notes that the prior personal "transgressions" of both petitioner and Love had no significant bearing on the court's ultimate determination regarding the nature of the subject transaction. Instead, the court finds that testimony of the independent witnesses produced by petitioner (i.e., Mary and [*11]Haskell Kassler, Marcus Kelligrew, and Lesley Wenger) was significantly more credible than that of the independent witnesses who testified for respondents (i.e., Kristen Springer and Daniel Cooper) with respect to any conversations decedent may have had in their presence regarding the nature of her intent in undertaking the subject transaction (i.e., whether she intended to make a loan or gift). In this respect, the court notes that the independent witnesses produced by respondent were much less specific in their recollection of the pertinent details of the conversations in question than were petitioner's independent witnesses. Moreover, in the case of Daniel Cooper, his conclusion that the subject transaction was a "gift" was based primarily on his own speculation regarding decedent's statement to him rather than on his recollection of the actual conversation he had with decedent. Furthermore, the court finds that Alicia's failure to recall whether her purported conversations with Lesley Wenger and Mary Kassler ever occurred undermines her credibility as to the substance of the conversations she had with those witnesses.

Moreover, the evidence adduced at trial that decedent retained an ATM card with respect to the CLR, Inc. account and that she purchased a personal computer with funds from CLR, Inc. is contrary to an intent to make a gift and undermines respondents' contention that decedent "delivered" the funds to Alicia. Clearly, decedent's actions do not indicate that she divested herself of "dominion and control over" the subject funds (Matter of Szabo, 10 NY2d 94, supra, at 98-99).

Most critically, the court finds that the parties' exchange of the alleged loan documents and alleged loan memorandum for the alleged counter loan agreement in March and April 2003 significantly undermines the veracity of respondents' allegation that decedent intended the subject transaction to constitute a gift to Alicia. More specifically, despite his disbarment and his testimony as to other matters which might call into question his propensity for truthfulness, the court credits petitioner's testimony as to the timing of his creation of the alleged loan documents and alleged loan memorandum, his delivery of those documents to Love and Alicia, and his rejection of the alleged counter loan agreement as consistent with the subject transaction constituting a loan. Further undermining respondents' position is Alicia's admission as to her knowledge of the genesis of the alleged counter loan agreement (Pet. Ex. 7).[FN5]

Moreover, respondents' reliance on the relevant portion of decedent's diary (entry of May 24, 2002) which sets forth that she transferred the money to Alicia so that petitioner would not "get his hands on" the subject funds (T:135-136, 148 [Resps. Exs. B and D]) not only has no direct bearing on whether decedent intended the transaction to be a loan or a gift to Alicia, but also is undermined by further entries on the same day which indicate that she was contemplating whether to "give some to Marcus" or "blow it on [her]self" [Resps. Exs. B and D]).

In short, the court cannot conclude that respondents' have met their burden of proving, by "clear and convincing" evidence, that decedent's intent was to make "an irrevocable present [*12]transfer of ownership" (Gruen v Gruen, 68 NY2d 48, supra, at 53) of the subject funds, so that it can find that the subject transaction amounted to a gift from decedent to Alicia.

The court has considered respondents' remaining contentions, as set forth in their Post-Trial Brief and Memorandum of Law, and find that these contentions are either wholly speculative or insufficient to allow them to meet their burden of proving a gift by "clear and convincing" evidence.

Accordingly, petitioner is entitled to recovery from respondents the principal sum of the subject transaction - $195,231.21.

As to the imposition of interest, pursuant to CPLR 5001, prejudgment interest "shall be recovered upon a sum awarded because of * * * an act or omission depriving or otherwise interfering with title to, or possession or enjoyment of, property, except that in an action of an equitable nature, interest and the rate and date from which it is computed shall be in the court's discretion" (CPLR 5001[a]). In this respect, an award of interest is not a penalty, but simply the cost of having another person's money for a specified period (Love v State of New York, 78 NY2d 540, 544; see Siegel, NY Prac § 411, at 695 [4th ed]).

The instant discovery proceeding is akin to an action in replevin, which is considered an action at law (Matter of O'Brien, 54 AD2d 880; Matter of Patenotre, 16 Misc 2d 64, 68; Matter of Sichel, 162 Misc. 2). Accordingly, pursuant to the applicable provisions of CPLR article 50, petitioner is entitled to interest at the statutory rate of 9% per annum from the date of the subject check - June 7, 2002, which is the date decedent initiated the subject transfer of funds to Alicia - until full payment is remitted (see CPLR 5001[a], [b]; 5004). Settle decree.

Dated:White Plains, NY

March 24 , 2008

_________________________________

Hon. Anthony A. Scarpino, Jr.

Westchester County Surrogate

TO:

Footnotes

Footnote 1:The memorandum, which references and describes all of the other alleged loan documents, states, inter alia: "[r]emaining issues are the amount of the loan, the interest on the loan, the length of time for repayment, the amount of the payments, and when the payments are to begin" (Pet. Ex. 6; Resps. Ex. F).

Footnote 2:The court notes that, as of December 26, 2002, the balance in the CLR, Inc. account was approximately $172,000.00 (Pet. Ex. 5.).

Footnote 3:Notably, during her cross examination, Alicia testified that she did not recall the "dinner table" conversation with Mary about the subject funds at the family gathering at decedent's home (T:444, 445, 449).

Footnote 4:Notably, during her cross examination, Alicia testified that while she recalled that Wenger helped she and Love find the café s present location, she did not recall having any conversations with Wenger about how the café was going to be financed (T:446-447, 448-449).

Footnote 5:Respondents' contention at trial that the alleged counter loan document should not have been allowed into evidence in light of CPLR 4547 (T: 352-355; Post-Trial Memorandum - Point D) was previously raised and rejected by the court prior to the trial (see Decision and Order - August 31, 2006).

Additionally, respondents' post-trial contention as to the application of the attorney-client privilege (Point E) must fail, as they fail to specifically set forth any trial evidence or ruling which may have triggered the application of the privilege.