Opinion
2015-547
02-09-2016
In the Matter of the Estate of John D. Shaw, Jr. Deceased.
Frederick J. Meagher, Jr. Esq. for petitioner Linda M. Dardis, Esq., for defendant Kurt D. Schrader, Esq. for the Estate
Frederick J. Meagher, Jr. Esq. for petitioner Linda M. Dardis, Esq., for defendant Kurt D. Schrader, Esq. for the Estate David H. Guy, J.
John D. Shaw, Jr. died a resident of Broome County on August 5, 2015. A petition for the probate of his Last Will & Testament, dated December 28, 2011, was submitted by Penny Heath, the named Executor. The Will was admitted to probate and Letters Testamentary were issued to Ms. Heath on August 27, 2015.
At the time of his death, decedent had been divorced from his former spouse, now known as Lorajane Rought, since February 11, 1993. The divorce decree, filed with the probate petition, discloses that decedent's "substantial firemen's retirement policy" was to be distributed between the parties pursuant to a Qualified Domestic Relations Order (QDRO), the terms of which were to be established pursuant to the Majauskas case. At the time of the divorce, and in a subsequent proceeding brought in 1996 by Ms. Rought, then counsel for decedent was directed to prepare the QDRO, but it was never completed or submitted. Decedent retired January 14, 2005, electing a retirement payout based on his own life only. Ms. Rought commenced further proceedings to try to enforce her rights under the divorce decree, ultimately resulting in a decision of the Supreme Court dated May 1, 2015 (Hon. Joseph F. Cawley, AJSC) in the action Shaw v. Shaw, Broome County Supreme Court Index 1991-2009. That order again directed the production of a QDRO by Mr. Shaw's counsel, within 60 days.
While the matter of the enforcement of Ms. Rought's rights under the divorce decree was pending in front of Judge Cawley, Ms. Rought commenced a separate action in the Supreme Court against Mr. Shaw, seeking to set aside as fraudulent his conveyance, by deed dated December 28, 2011, of an undivided one-half interest as a joint tenant with right of survivorship in property at 138 West End Avenue in the City of Binghamton, New York, to his daughter, Lori Jackson. That matter was commenced by the filing of a summons and notice in the Broome County Clerk's Office on July 16, 2014. Ms. Rought also filed a lis pendens against the property on West End Avenue. On August 20, 2014, Ms. Rought amended the proceeding to add the deed grantee, Lori Jackson, as a defendant.
Ms. Rought moved for a summary judgment in the Supreme Court action to set aside the deed on January 30, 2015. A cross-motion requesting denial of summary judgment as premature and consolidation of the action to set aside the deed with the pending action on the divorce decree was made by the defendants on June 3, 2015.
On September 18, 2015, following Mr. Shaw's death, there was a hearing before Judge Cawley on the proceeding brought by Ms. Rought for the enforcement of her rights under the separation agreement. At that hearing, the parties stipulated to the rendering of a judgment in favor of Ms. Rought against the Estate of John D. Shaw, Jr., for the sum of $72,500. That judgment was entered in the Broome County Clerk's Office on September 28, 2015. Ms. Rought then petitioned in this Court for a determination of the validity of that judgment, as a claim against the estate. That petition was granted without opposition by decision of this Court dated and filed November 6, 2015.
After multiple adjournments, the Supreme Court action commenced by Ms. Rought to set aside the 2011 deed was transferred to this Court by Order of the Supreme Court dated October 20, 2015.
The estate proceedings were before the Court on November 23, 2015, on, among other matters, Ms. Rought's summary judgment motion to set aside the 2011 deed. By this time, co-defendant Lori Jackson had secured separate counsel. An Order was entered allowing Ms. Jackson's counsel until December 14, 2015 (later extended to December 18, 2015) to file responsive papers to the summary judgment motion.
On December 18, 2015, Ms. Jackson submitted an affirmation in opposition to the motion for summary judgment to set aside the 2011 deed, together with a supporting attorney's affirmation. The matter was again before the Court on December 22, 2015. The Court denied summary judgment on the grounds that Ms. Rought's failure to specifically state allegations of fraudulent intent on the part of decedent, or Ms. Jackson, as well her failure to set forth specific evidence that the 2011 deed rendered the decedent insolvent, precluded it. Estate of Steele, 85 AD3d 1375 (3rd Dept., 2011). The matter was set down for a trial on the petition to set aside the 2011 deed.
The Court also determined that counsel for Ms. Jackson would be able to represent the estate in that proceeding. Counsel for the estate, the attorney who facilitated the preparation and execution of the 2011 deed, is disqualified as a fact witness. A pre-trial and trial schedule was set by the Court, confirmed by Order dated and filed December 22, 2015.
On December 23, 2015, counsel for Ms. Rought wrote the Court and opposing counsel asserting the issue before the Court was purely a legal issue, controlled by Gallagher v. Kirschner, 220 AD2d 948 (3rd Dept., 1995). It is evident from counsel's correspondence that, while Ms. Rought's petition seeks to set aside the 2011 deed, what she is actually asserting is that the transfer of the remaining undivided one-half interest in the property by operation of law upon Mr. Shaw's death is fraudulent as a matter of law, pursuant to Debtor and Creditor Law (DCL) §273. The deed was drawn in 2011. The transfer of Mr. Shaw's retained half interest occurred by operation of law upon his death in 2015. These are distinct transactions.
In the interest of moving this estate forward, the Court determined to treat counsel's December 23, 2015 letter as a summary judgment motion by Ms. Rought to set aside the transfer by operation of law of Mr. Shaw's retained interest upon his death. All parties were so advised and the defendants were given until January 29, 2016 (later extended to February 1, 2016) to submit papers in response to this summary judgment motion. The Court set forth certain stipulated facts relevant to the transfer by operation of law upon death and gave the parties the opportunity to dispute or re-stipulate any of those facts. No such dispute or re-stipulation was received.
An affidavit from the executor of decedent's estate and an attorney affirmation in response to the motion were transmitted to the Court on February 1, 2016 and filed on February 8, 2016. The matter is now before the Court for a decision on submission.
The stipulated facts relevant to this summary judgment motion are as follows: Lorajane Rought has a valid and enforceable claim against the estate of John D. Shaw, Jr. in the amount of $72,500, as determined by the proceedings in Broome County Supreme Court (Hon. Joseph F. Cawley, September 18, 2015), a valid judgment in that amount filed in the Broome County Clerk's Office on September 28, 2015, and Order of this Court November 6, 2015. The only probate assets of the estate of Mr. Shaw are accounts at Horizons Federal Credit Union and M & T Bank, totaling approximately $17,000.
The narrow issue now before the Court is whether the transfer of the remaining undivided one-half interest as a joint tenant with the right of survivorship in the property at 138 West End Avenue by operation of law upon decedent's death can be set aside by a creditor under Debtor & Creditor Law §273. Gallagher v. Kirschner, supra and Matter of Granwell, 20 NY2d 91 (1967) are controlling and binding precedents upon this Court. The stipulated facts that decedent's liabilities exceeded the assets of his estate as of his date of death confirm his estate is insolvent. It is not disputed that the transfer by operation of law upon death was without consideration, at that time. The fact that this obligation was not reduced to a judgment before Mr. Shaw's death makes it no less a liability of his, or his estate. The liability was originally incurred by Mr. Shaw in 1993, upon entry of the divorce decree. Ms. Rought's efforts to enforce this obligation, late though they were, commenced well before Mr. Shaw's death. The estate, as transferor, or more accurately successor in interest to the transferor, has the burden of establishing solvency because there was no consideration at the time of the transfer upon death. Estate of Steele, supra. Defendants make no such allegation.
Decedent's intention with respect to his creditors is not relevant to the DCL §273 analysis. Gallagher v. Kirschner, supra.
Cases cited by defendants are not pertinent. Queens Boulevard Extended Care Facility, Inc. v. Campanaro, 33 Misc 3d 1228 (A) (Civil Court, Kings County, 2011) stands for the proposition that a transfer before a debt is incurred is not fraudulent. Here, the liability was incurred decades before the disputed transfer. The Court in Estate of Steele, supra, found the transfer of property with a retained life use was not constructive fraud. Here, decedent retained not a life use but an undivided one-half interest, factually distinguishable.
The Court is not aware that counsel for Ms. Rought has requested fees, but if such request was or is made, defendants are correct that such an imposition by this Court would require a finding of actual intent to defraud. Schoenberg v. Schoenberg, 90 AD2d 827 (2nd Dept., 1982). Such finding is not considered or made here, as it is not relevant to this decision.
The transfer of an undivided one-half interest in 138 West End Avenue in Binghamton, New York by decedent to Lori Jackson, by operation of law upon decedent's death, is set aside. Defendant Lori Jackson is directed to execute and deliver a deed conveying an undivided one-half interest as a tenant in common to the Estate of John D. Shaw, Jr., as well as the supporting papers to allow the recording of such deed, within 30 days of the date of this Order.
This Decision constitutes the Order of the Court. This matter is set down for an attorney conference on February 23, 2016, at 9:30 am, at which point the trial on the validity of the 2011 deed at the time of its execution will be rescheduled. Counsel for the estate and Ms. Jackson may participate in that conference by phone. Dated: February 9, 2016 Hon. David H. Guy Surrogate