Opinion
105439/2010.
Decided November 22, 2010.
Richard K. Bernstein, Esq., Attorneys for Plaintiff, New York, New York.
Lally Mahon Rooney, LLP., Attorneys for the Defendant Audry Allen, Mineola, New York.
No info. on our database for defendant Chase (which took no part in the motion).
MEMORANDUM DECISION
This proceeding arises from an IRA purchased by the late Henry Marcuse ("Mr. Marcuse") with the Bank of New York ("BNY"), who died on November 28, 2009 at the age of 86.
The parties herein: plaintiff, Cecile Mury ("plaintiff"), Mr. Marcuse's alleged "former French mistress," with whom it is alleged he had an affair during his marriage, and designated in his Last Will and Testament as heir to his entire Estate; and defendant Audrey Allen ("defendant"), Mr. Marcuse's home health aide for five months preceding his death.
See Complaint, ¶¶ 2, 6.
The issue before the Court is whether plaintiff has standing to challenge the Beneficiary Change Request Mr. Marcuse submitted weeks before his death, designating defendant as his IRA beneficiary.
Factual Background
On January 18, 2006, Mr. Marcuse purchased the IRA, designating his wife, Susan Marcuse, as beneficiary pursuant to BNY's "Rollover IRA Adoption Agreement"(or "BNY IRA"). Pershing, LLC was named as the original custodian of the account. The BNY IRA provided that if there is no designated beneficiary, your assets would be distributed in order of "your surviving spouse, if any; your children, if any; your estate."
Chase Investment Services Corp. ("CISC") acquired BNY's retail banking business, and Pershing, LLC resigned as custodian of the IRA. BNY purportedly issued a letter, dated August 2006, advising its clients that BNY was transferring its retail brokerage business to CISC, and that BNY "will transfer your IRA to CISC on or about October 6, 2006." BNY also advised that the terms of the IRA were changed to provide that in the event the designated beneficiary pre-deceased the account owner, then the successor would be "the Estate" (the "Letter") (of which plaintiff is an heir). The Letter stated the following:
Please note a change to your current agreement, which states that if there is no designated beneficiary, your assets would be distributed in order of your surviving spouse, if any; your children, if any; your estate. Under the terms of this new IRA Agreement, if there is no designated beneficiary or if all primary beneficiaries predecease you, your estate will be the beneficiary of your IRA upon your death. If this is not what you intend, please be sure to complete the beneficiary section of the enclosed IRA Adoption Agreement and return the form in the enclosed postage-paid reply envelope. (Emphasis added).
The letter indicates that BNY was enclosing CISC Disclosures and Account Agreement ("CISC Agreement") containing the "terms and conditions that will govern your account" and a Private Label Traditional Adoption Agreement. The Letter further advised that if BNY did not "hear otherwise from you, we will assume you have consented to the transfer. . . ."
In 2008, Susan Marcuse died. As a result, Mr. Marcuse is survived by one daughter, Nicole Jespersen ("Jespersen"), who he disinherited in his will.
It is alleged that on November 4, 2009 defendant presented to CISC a Beneficiary Change Request allegedly signed by the decedent, and requested payment of the entire amount ($82,000) held by CISC. Twenty-four days later, Mr. Marcuse passed away. It is alleged that the signature on the Beneficiary Change Request was not that of Mr. Marcus, but was fraudulent, and that he nonetheless did not understand the details of his account.
On application by plaintiff, this Court issued a temporary restraining order enjoining CISC distributing the money it is holding from the IRA account until it is decided whether he signed the Beneficiary Change Request and, if so, what he knew about the account.
Defendant, Audrey Allen ("defendant") requests that the Court vacate the temporary restraining order previously issued, and deny plaintiff's application for a preliminary injunction because plaintiff lacks standing to commence this proceeding. Defendant argues that plaintiff lacks standing, as neither she, nor the estate is a designated beneficiary. Mr. Marcuse's daughter stands ahead of the Estate to assert any claim.
Defendant contends that the BNY IRA provided that if the designated beneficiary pre-deceased the account owner, then the order of succession would be: "a surviving spouse, if any; your children, if any; your estate." Beneficiaries under a will are not entitled to the assets of an IRA account unless they are actually designated as the IRA beneficiary. Under New York law, an IRA account with a designated beneficiary is not probate property, but a contract in which assets pass by operation of law. The formation of a legally binding contract requires an offer, definite terms, adequate consideration, and acceptance, and an offeree's silence is generally not acceptance of a contract. Since the IRA is a "contract," CISC cannot unilaterally change the terms of such contract executed by BNY without the acceptance of the other party, Mr. Marcuse, and he neither signed nor agreed to the subsequent amendment request by CISC when it acquired BNY. Therefore, since Mr. Marcuse never accepted their new terms, the order of distribution under the BNY and not the CISC agreement would control the allocation of Mr. Marcuse's assets.Plaintiff would only have standing if Mr. Marcuse did not have any children. Mr. Marcuse's daughter is the only person under the BNY IRA that has standing to bring this action.In opposition, plaintiff argues that she has standing to bring this action on behalf of herself and on behalf of the Mr. Marcuse's estate, and requests that the Court grant the Order to Show Cause for a Preliminary Injunction.
Plaintiff argues that defendant misinterprets the documentary evidence. As a result of CISC's acquisition of BNY, the BNY IRA was terminated and replaced with CISC's IRA agreement, and a change was made concerning the default distribution of the funds. Defendant's argument that CISC amended the default distribution plan without Mr. Marcuse's consent, overlooks the fact that the original agreement was terminated and replaced with CISC's "new IRA Agreement." Plaintiff points out that the "Private Label Beneficiary Change Request," which forms the very basis for defendant's fraudulent claim to Mr. Marcuse's IRA, specifically amends CISC's IRA agreement. Accordingly, defendant's argument is fatally flawed. CISC's IRA agreement provides that, "[I]f no beneficiary survives me. . ., then the Custodian shall distribute any remaining balance in my IRA to my estate." Therefore, if defendant's beneficiary status is nullified, the IRA will pass through Mr. Marcuse's estate and, ultimately, to plaintiff (as heir of the entire estate). This is conclusive evidence of plaintiff s standing to bring this action.
In reply, defendant argues that plaintiff failed to produce any documentary evidence that Mr. Marcuse affirmatively accepted CISC's proposed beneficiary succession order.
Defendant argues that it is uncontested that an IRA is a contract made between a depositor and a custodian. As a contract, any amendment to the terms of the IRA, such as the beneficiary succession order, would necessarily require proper acceptance by all parties. Plaintiff has failed to produce any documents which show that Mr. Marcuse accepted the proposed CISC beneficiary succession plan, which purports to amend the BNY plan to which he agreed.
In response to plaintiff's Notice of Discovery and Inspection served upon CISC, CISC produced inter alia a Rollover IRA Adoption Agreement between Mr. Marcuse and Pershing, LLC, dated January 18, 2006; a blank form letter from BNY, not even addressed to Mr. Marcus, stating that BNY would be transferring its business to CISC; and a blank, unsigned and undated copy of Chase's Private Label IRA Adoption Agreement. Defendant contends that these documents are not even addressed to Mr. Marcus, and fail to demonstrate that Mr. Marcuse ever accepted the new CISC beneficiary plan; nor is there any proof that Mr. Marcuse ever saw them.
The language contained in the CISC Agreement itself also precludes a silent acceptance of CISC's new terms, as it required a signature for a depositor to be bound by the new terms. However, no such signature exists. Thus, it cannot be argued that Mr. Marcuse's silence, to documents not even addressed to him, constituted an acceptance of CISC's terms.
In contrast, BNY Rollover Adoption Agreement (through Pershing, LLC) is duly signed and executed by Mr. Marcuse. The BNY Agreement expressly states "I understand that the terms and conditions which apply to this Individual Retirement Account are contained in this Pershing LLC Individual Retirement Custodial Account Plan and Disclosure Statement. I agree to be bound by those terms and conditions." As noted above, under those terms, the only person who would currently have standing to bring this action would be Jespersen.
The CISC Private Label IRA Adoption Agreement contains similar language, and states that "I have received, read and agree to the terms contained in the Private Label Traditional IRA Custodial Agreement and Disclosure Statement." It also states "[I]f no beneficiary survives me, if this section is incomplete or if I have not designated a beneficiary, then the Custodian shall distribute any remaining balance in my IRA to my estate." However, the decisive difference between the BNY Adoption Agreement and the CISC Adoption Agreement is that Mr. Marcuse actually filled out and signed the BNY Adoption Agreement. The fact that Mr. Marcuse never signed the CISC Agreement is prima facie evidence that he never agreed to the CISC beneficiary order.
Furthermore, the Beneficiary Change Request designating defendant as the sole beneficiary of the IRA at issue states that "the beneficiary designation on this agreement supersedes all previous designations and applies to the entire Private Label IRA." As stated, this clause serves only to notify the account holder that they are changing the IRA's named beneficiary. Neither this clause nor the document as a whole does anything to change the beneficiary succession order or inform the account holder that they are changing anything relating to the beneficiary succession order. Therefore, Mr. Marcuse's signature on this form can only be read as a designation of a new IRA beneficiary and not as an adoption of the CISC order for beneficiary succession.
The Beneficiary Change Request also states that if a beneficiary does not survive the Account Holder, the percentage of that designated beneficiary's share shall be divided equally among the surviving applicable beneficiaries. Therefore, even assuming that the Court held the designation of Audrey Allen to be invalid, Mr. Marcuse's daughter, as a surviving applicable beneficiary under the BNY succession order, would stand in-line ahead of Mr. Marcuse's Estate, and consequently the plaintiff herein.
Finally, the caselaw cited by plaintiff is dicta, and actually supports defendant's position, in that when determining the identity of a proper beneficiary, the Court must look to the terms as stated in the IRA Adoption Agreement between the depositor and the custodian. Here, the BNY IRA unequivocally proves that the only party with standing is Jespersen, and not plaintiff herein. Discussion
Whether plaintiff has standing to challenge the subject Beneficiary Change Request turns on whether the initial BNY IRA (which would deprive plaintiff of standing in light of Mr. Marcuse's surviving daughter) or the CISC IRA (which would give plaintiff, the heir to Mr. Marcuse's estate, a colorable claim of standing) governs the subject funds. As such, the Court must determine which agreement is enforceable.
The burden of proof on a motion remains with the movant (see, Siegel, NY Prac. § 248, at 373 [2d ed]). Thus, defendant bears the burden of presenting facts sufficient to demonstrate that petitioner lacks standing (see Blostein v Bauer, 218 AD2d 912, 630 NYS2d 814 [3d Dept 1995] [on his motion challenging petitioner's standing, respondent had the burden of presenting facts sufficient to demonstrate that petitioner was ineligible to vote in the mayoral election in Troy]; Hellander v State Farm Ins. Co. , 6 Misc 3d 579, 785 NYS2d 896 [N.Y.City Civ. Ct. Richmond County 2004] [The burden of proving an affirmative defense of lack of standing should be on the defendant.]).
It is noted that to establish the existence of an enforceable agreement, a plaintiff must establish an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound ( Kowalchuk v Stroup , 61 AD3d 118 , 873 NYS2d 43 [1st Dept 2009], citing 22 NY Jur. 2d, Contracts § 9). That meeting of the minds must include agreement on all essential terms ( Kowalchuk, citing 22 NY Jur. 2d § 31).
As to the CISC IRA, it bears noting that under New York law, the failure of one party to sign an agreement does not immediately render the contract unenforceable. "[O]ne who accepts and acts under a written agreement is bound by it even though he fails to sign it" ( Zurich American Ins. Co. v Whitmore Group, Ltd., 11 Misc 3d 1070, 816 NYS2d 702 [Sup Ct New York County 2006]; Colonia Ins., A.G. v D.B.G. Property Corp., 1992 WL 204376 [SDNY 1992] citing Steinberg v Goldstein, 116 NYS2d 6, 7 [Sup Ct 1952]). In Allen v National Video, Inc., 610 F Supp 612, 631 [SDNY 1985]), the court stated, "A written contract need not be signed to be binding against a party, so long as the party indicates through performance of its terms or other unequivocal acts that it intends to adopt the contract" ( see also, Zurich American Ins. Co., supra). Thus an unsigned written agreement may be enforceable . . . if the party attempting to enforce the contract shows (1) that there was part performance under the contract, and (2) that the performance was "unequivocally referable" to the alleged agreement ( American Bartenders Sch., Inc. v 105 Madison Co., 463 NYS2d 424, 424). Therefore, that the CISC IRA was not signed by Mr. Marcuse is not dispositive on the issue of whether he intended to be bound by its beneficiary designation terms.
While it is clear that Mr. Marcuse initially agreed to the BNY IRA by virtue of his signature thereon, it is unclear whether Mr. Marcuse agreed to the terms of the subsequent CISC IRA.
At the outset, the record is unclear as to whether BNY issued the purported "superseding" Letter to Mr. Marcuse. Further discovery is necessary to determine whether the unaddressed Letter, containing no identifiable features to Mr. Marcuse's account, was in fact issued by BNY to him. In the event evidence demonstrates that BNY issued the Letter to Mr. Marcuse, the terms of the Letter and accompanying documents, including the CISC Disclosures and Account Agreement, as well as the Private Label Traditional Adoption Agreement, would govern the funds in his account, unless there is a showing that he expressly indicated his intent "otherwise." In this latter regard, the Letter clearly states that unless BNY hears from Mr. Marcus otherwise, BNY will assume that he consented to the transfer, which would include, a consent to the new governing documents. Defendant failed to demonstrate that the Letter was sent to Mr. Marcuse and not responded to by him so as to bind him to the CISC IRA.
It also appears that from the time Mr. Marcuse's IRA was transferred to CISC "on or about October 6, 2006" until a little more than three years later on November 28, 2009 when he died, there was part performance under the CISC IRA by both Mr. Marcus and CISC by virtue of the fact that the IRA remained in the account managed and maintained by CISC. It also appears that both CISC and Mr. Marcuse's "performance" or handling of the subject funds was "unequivocally referable" to the CISC IRA. Unless proven otherwise, these two elements demonstrate that the unsigned CISC Agreement would govern the subject funds, thereby conferring upon plaintiff, an heir of his estate, to standing to challenge the purported Beneficiary Change Request form.
Conclusion
Therefore, at this juncture, defendant, who raised plaintiff's lack of standing, failed to establish through sufficient facts that the CISC IRA does not govern the disputed funds as a matter of law.
This constitutes the decision and order of the Court.
Based on the accompanying Memorandum Decision, it is hereby
ORDERED that defendant, who raised plaintiff's lack of standing to commence this proceeding, failed to establish through sufficient facts that the subject CISC IRA does not govern the disputed funds as a matter of law.
This constitutes the Interim Decision and Order of the Court.