State of New York
Supreme Court : County of Monroe

This opinion is uncorrected and is subject to revision in the official Reports

ANDREW V. SIRACUSE, J.

The legal relationship between a receivership created during someone's life and the estate to be administered after death is the direct subject matter of this case, but the factual background is so complex that it must be discussed in detail. The subject of the proceedings is Gladys Spiegel. Ms. Spiegel neither married nor had children. Near her, in the Rochester area, lived a number of her sisters. As they grew older some of the sisters took upon themselves the obligation of caring for Ms. Spiegel. Two of their children--Christine Amico and Frederick Dalberth--eventually began caring for their aunt in their place.

In 1995, with the help of attorney David DeLuca, Ms. Spiegel drew up a will giving all of her estate to Ms. Amico and Mr. Dalberth. In 1996 she signed a durable power of attorney giving all listed powers on the form to Christine Amico. Because of a change to the General Obligations Law this power was renewed in 1998. In the same period Ms. Spiegel deeded over several properties in Florida to Ms. Amico and Mr. Dalberth, deeded her house to them while retaining a life tenancy, and directed Mr. DeLuca to transfer her Kodak stock to them. During that period, too, Ms. Amico, acting under what she and Mr. DeLuca thought was the power granted her by the two powers of attorney, gave substantial gifts to herself and Mr. Dalberth, who were to be the legatees under Ms. Spiegel's will.

In addition, Mr. Dalberth, a contractor, took the lead in repairing Ms. Spiegel's house, which had been substantially damaged by the "improvements" done by an unscrupulous roofer. (Acting through the office of the Attorney General he secured a partial reimbursement for the damage.) One other transaction that Ms. Spiegel executed was a $50,000 loan to Ms. Amico secured by a 30-year promissory note on generous terms.

During this period, though, Ms. Spiegel began to show signs of dementia. Defendants believed that the contract with the crooked roofer was one clue to her deteriorating condition. This was not unexpected; the power of attorney and the actions Ms. Amico took under it were done with an eye to Ms. Spiegel's eventual need for nursing home care.

Later in 1998, however, Lucille Finger, Ms. Spiegel's last surviving sister, came to the area from Connecticut and with the help of her grandchildren Kristine Thomas and Karen Knotts took Ms. Spiegel to Connecticut, where they had been appointed conservators. Ms. Finger and her children then commenced this action, claiming that defendants were looting the estate, had taken advantage of Ms. Spiegel's alcoholism to induce her to sign over the properties, and much more. The court appointed Alan Biernbaum as receiver pending resolution of this case, and defendants placed all the property they had received from Ms. Spiegel in his hands.

The issues between the parties remain unresolved. While there has been extensive discovery, no deposition testimony was taken of Ms. Finger, as in the interim she, too, became demented. Ms. Spiegel then died while still in Connecticut. A new will naming Ms. Finger's children as beneficiaries that she had executed there was admitted to probate in that state. The probate judge in Connecticut found that Ms. Spiegel had testamentary capacity when she signed that will.

Now the defendants, through Mr. Dalberth's counsel, have moved to dismiss the Finger complaint and to obtain the property currently in the receiver's control that they claim was properly transferred to them either by Ms. Spiegel directly or by gift pursuant to the power of attorney. They also seek reimbursement for monies spent on real estate taxes and property insurance they paid during Ms. Spiegel's life tenancy of the house. They want an accounting from the plaintiffs. They note that after a fire in Ms. Spiegel's house the Fingers--who had brought her to Connecticut by the time the claim was resolved--never put in claims for living expenses and other sums that could have gone into the estate.

The plaintiffs, who have no evidentiary material concerning either Ms. Spiegel's competency before 1998 or in support of most if not all of the claims in their complaint, argue in reply that the receivership assets must be paid over to the probate court in Connecticut, that the gifts made under the power of attorney were void and that the direct gifts cannot be approved without a trial, and that such a trial must be held by the probate court. Requests for taxes and insurance premiums must be made to that court. The defendants argue that the receivership has not terminated, that it proceeds until final judgment, and that the plaintiffs' original submission to this court's jurisdiction does not terminate with Ms. Spiegel's death.

The court finds that the receivership remains in effect because the action does not terminate automatically, and that the defendants are entitled to the property turned over to the receiver. Ms. Amico, however, were not empowered to gift either herself or Mr. Dalberth under either the 1996 or 1998 power of attorney. The defendants are therefore to pay back into the receivership assets all those monies. The receiver will then pay the funds in his possession to the Connecticut court.

There appear to be only two options before the court. Neither of them will have the exact effect hoped for by their respective proponents. Both the plaintiffs and Mr. Biernbaum maintain that the receivership terminates at the moment of Ms. Spiegel's death. The receivership, however, was established under an ongoing action brought by the plaintiffs, and the defendants placed property under the receivership only during the pendency of the proceeding and for the purposes of securing any order that would issue from that proceeding. In other words, the defendants did not return property to the estate; their payment was conditional, and the condition was that the court would determine if that property was theirs or Ms. Spiegel's.

If the court is divested of its authority to make that determination by Ms. Spiegel's death, then the condition under which the defendants acted is no longer valid. It follows that if the action and receivership terminated at that point, so too did the receiver's power over the property that was held in the name of the defendants. The receiver would pay to the estate administrator only those monies over which there was no dispute. Anything paid to him by the defendants would be returned to them. If the plaintiffs wished to continue their challenge to the defendants' actions, then, they would be compelled by the logic of their own position to seek relief through the probate court in Connecticut. Since the property is here in New York State, the parties have submitted to the court's jurisdiction and discovery has been undertaken, this would seem like a substantial waste of judicial resources.

If the court remains seized of the subject matter, on the other hand, the issues may be disposed of and the probate court may undertake its duties of administering the estate. The receivership is primary in time to the admission of the will to probate. Its assets are not estate assets but security for a chose in action. The estate will receive any proceeds from the lawsuit, but as proceeds, not as security. Both logic and judicial economy demand that the court determine the issues placed before it by the parties.

The defendants are absolutely correct that the plaintiffs have produced no evidence in support of their claims. In contrast, the defendants have presented numerous affidavits and the deposition testimony of Mr. DeLuca. These establish to the court's satisfaction that Ms. Spiegel was lucid during the period from 1996 to 1998 and that she knowingly made the real property transfers, the gifts of stock, the life tenancy and deed over of her home, and the $50,000 loan. The court's conclusion is bolstered, not undermined, by the Connecticut court's finding that Ms. Spiegel had testamentary capacity even after these transactions. Nor does the court see any evidence that the powers of attorney were improperly obtained.

The defendants are entitled to the return of the property given to them by Ms. Spiegel and later delivered to the receiver. Unfortunately for them, however, the case does not end here. Although the court has no doubt that Christine Amico thought in good faith that she had the power to gift herself and Mr. Dalberth, and though she may have done so as a form of Medicaid planning, there is no doubt whatsoever that she did so in violation of the terms of the powers of attorney.

It is black letter law that an attorney-in-fact may spend the principal's monies only for the benefit of the principal. None of the listed powers in General Obligations Law §§ 5-1501 et seq. grants the unlimited power to make gifts, and the 1998 amendment adding an optional power to make limited gifts to those who would take under an intestacy does not apply here, as neither defendant is a descendant of Ms. Spiegel's. The phrase "all other powers" in the form for power of attorney must be read within the context of the purpose of the document; it does not allow the attorney-in-fact to treat the funds as her own.

Gifts made to oneself or to others and not intended for the benefit of the principal are presumed void. This presumption may be overcome "only with the clearest showing of intent on the part of the principal to make the gift" (Semmler v Naples, 166 AD2d 751, 751; see also, Matter of Naumoff, 301 AD2d 802, Mantella v Mantella, 268 AD2d 852, and Moglia v Moglia, 144 AD2d 347).

The defendants' case here is complicated by the fact that Ms. Spiegel's communications to them are barred the Dead Man Statute (CPLR 4519). Neither Ms. Amico nor Mr. Dalberth can testify to what Ms. Spiegel wanted. Only Mr. DeLuca can, and the deposition testimony shows that gifts were never authorized by Ms. Spiegel. It is clear from this document that she did not even know about them. Mr. DeLuca recalled that in 1995 he discussed Medicaid planning in general terms with Ms. Spiegel, and advised her that gifts should not exceed $10,000 (EBT, 11). He did not talk with Ms. Spiegel in detail about the power of attorney, but his deposition testimony strongly suggests that the major reason for the 1996 document was to consolidate a number of small accounts to facilitate spending down the estate (EBT, 27). He stated several times, though, that he made no specific recommendations regarding gifts (EBT, 29, 63).

Mr. DeLuca advised Ms. Amico that she had the power to "make gifts to anyone" under the 1996 and 1998 powers of attorney (EBT 35), and he believed that both defendants were descendants within the meaning of the 1998 gift clause (EBT, 37). This advice was incorrect. All of the gifts made pursuant to the power of attorney are completely void. The defendants have failed to overcome the extremely strong presumption against self-dealing. Although the monies in the estate may end up subject to liens in Connecticut, this is not an equitable reason for overlooking a very clear violation of the purpose of a power of attorney.

The amount of these gifts must be balanced against the real estate and stock gifts that are to be paid back to Ms. Amico and Mr. Dalberth and the sums they expended for maintenance and tax costs on Ms. Spiegel's residence during her life tenancy up to the date she was removed to Connecticut. The court directs the receiver to make the appropriate accounting. He should remit the balance of the receivership funds to the administrator of Ms. Spiegel's estate. This will terminate both the receivership and the case itself, and because of the peculiar balance between the parties' positions the court orders the receiver to prepare the order. No costs or disbursements are payable to either party.

DATED: Rochester, New York

July 16, 2003

Andrew V. Siracuse, J.S.C.

This opinion is not available for publication in any official or unofficial reports, except the New York Law Journal, without the approval of the State Reporter or the Committee on Opinions (22 NYCRR 7300.1)

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