A person who executes a valid agreement to make a testamentary disposition as to a specific item of property is precluded from making an alternative disposition, either during lifetime or upon death. This blog post discusses Schwartz v Bourque, 2017 NY Slip Op 31621(U) (Sur Ct, Nassau County June 14, 2017), a recent decision involving an agreement to make a testamentary disposition as to a specific parcel of real property, a later agreement between the same parties concerning that property (that was alleged to have superseded the earlier agreement), and a deed transferring that same property which was contrary to the terms of the earlier agreement, but not the later one. In vacating the deed, Surrogate Reilly engaged in a comprehensive analysis of the applicable rules of contract construction, agreements to make testamentary dispositions, the termination of joint tenancies, and the statutory and case law governing fraudulent conveyances.
Schwartz involved three generations of women in one family and a dispute over title to the real property where they all resided together. The property was initially owned by the Decedent alone. The agreements and deeds Decedent executed concerning that property led to the dispute between her daughter, Brenda, and her granddaughter, Christine (Brenda’s daughter), both individually and as executor of Decedent’s estate.
The 1978 Agreement
Brenda claimed Decedent was unable to pay the carrying charges on the residence which led to Brenda assuming responsibility for those expenses. Brenda’s concern that she had no ownership interest or contractual assurance that she could remain living there, despite her financial investment in the property, led to the execution of an agreement with her mother in 1978 (the “1978 Agreement”). The 1978 Agreement provided that Brenda agreed to pay all carrying charges on the property and, in return, she could reside there as long as she desired. The 1978 Agreement contained a provision whereby Decedent agreed to make a will giving the premises to Brenda in fee simple absolute.
The 1984 Agreement and 1984 Deed
Brenda claimed that, as time passed and her financial stake in the property continued to increase, she was concerned that she did not have any current ownership interest in the property. The Decedent and Brenda executed another agreement in 1984 (the “1984 Agreement”) which provided that in consideration of Brenda’s past payment of carrying charges, and her promise to do so in the future, Decedent would convey one-half of her interest in the property to Brenda. A deed from Decedent to Decedent and Brenda, as joint tenants with right of survivorship, was recorded (the “1984 Deed”).
The 2012 Deed
In 2012, Decedent executed a deed by which she purported to convey her remaining one-half interest in the property to her granddaughter Christine, thereby severing the joint tenancy between Decedent and Brenda that was created by the 1984 Deed.
Did the 1984 Agreement Supersede the 1978 Agreement?
A later contract will not supersede an earlier contract unless either: (1) the later contract contains definitive language reflecting the parties’ intent to supersede the earlier contract or (2) the two contracts deal with precisely the same subject matter (Globe Food Services Corp. v Consolidated Edison Co., 184 AD2d 278 [1st Dept 1992]).
As the 1984 Agreement contained no language expressing an intent to supersede the 1978 Agreement, the only issue was whether the two agreements deal with “precisely” the same subject matter. Christine argued that they do, that being what consideration Decedent would provide Brenda in recognition of Brenda’s past payments towards the residence and her promise to continue those payments. Brenda argued that they do not deal with “precisely” the same subject matter because the 1978 Agreement was intended to assure Brenda that the property would be hers upon Decedent’s death, while the 1984 Agreement was intended to provide Brenda with a current interest in the property without affecting the earlier 1978 Agreement.
The court noted, “[b]oth arguments are plausible but only one can prevail.” Although there was no integration and merger clause and while the two agreements appear to address the same general rights, the Court found, “it is clear that there is nothing that would prevent the two agreements from coexisting or working in tandem.” The Court found the 1978 Agreement is clearly a contract to make a testamentary disposition and satisfies all the criteria necessary to establish an enforceable agreement, that is, the agreement is in writing and subscribed by the party to be charged (EPTL § 13-2.1[a]). Moreover, the 1978 Agreement identifies the specific property that is to be the subject of the testamentary disposition, thereby precluding Decedent from making an alternate disposition, either during lifetime or upon death.
The Surrogate then proceeded to analyze Brenda’s arguments in support of her summary judgment motion.
Breach of Contact Claims
As to Brenda’s cause of action for Decedent’s breach of the 1978 Agreement, the Court found the proof established all of the elements, except as to Brenda’s performance. Because Brenda offered no proof in admissible form that she complied with her obligations under that contact (i.e., paying all expenses associated with the upkeep of the premises), the Court denied summary judgment.
As to Brenda’s cause of action for Decedent’s breach of the 1984 Agreement, the Court noted while Decedent transferred 50% of her interest in the property to Brenda under that contract, it is silent regarding Decedent’s other 50% interest. Although the 1984 Deed conveyed the property to Decedent and Brenda “as joint tenants with right of survivorship”, such a conveyance did not constitute a promise not to sever the joint tenancy. The Court noted Real Property Law § 240-c provides to the contrary and allows a joint tenancy to be terminated by a deed that conveys legal title to the severing joint tenant’s interest to a third person. Thus, the Court found if the 2012 Deed to Christine is a breach of contract, it is of the 1978 Agreement, not the 1984 Agreement.
The Fraudulent Conveyance Claims
Brenda alleged Decedent’s making of the 2012 Deed, and Christine’s acceptance of that deed, constituted a breach of the 1978 Agreement and sought the application of Debtor and Creditor Law §§ 275 and 276 to vacate the deed.
Debtor and Creditor Law § 275 provides:
“Every conveyance made and every obligation incurred without fair consideration when the person making the conveyance or entering into the obligation intends or believes that he will incur debts beyond his ability to pay as they mature, is fraudulent as to both present and future creditors.”
The Court noted that where a transfer is made without consideration, as was true of the 2012 Deed, a rebuttable presumption arises of insolvency and a fraudulent transfer, thereby placing the burden on the transferee, Christine, to overcome the presumption.
Debtor and Creditor Law § 276 provides:
“Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors.”
As to the actual fraudulent intent contemplated by that statute, courts recognize the difficulty of proving actual fraudulent intent and permit the pleader to rely on “badges of fraud” (Wall Street Assoc. v Brodsky, 257 AD2d 526, 529 (1st Dept 1999). Among these “badges of fraud” are: a close relationship between the parties to the transfer; inadequate or no consideration; the transferor’s knowledge of the creditor’s claim; and retention of the property by the transferor after the conveyance (id.).
The Court found Decedent and her granddaughter Christine had a close family relationship; the conveyance was without consideration; the 2012 Deed was executed days after Brenda filed her original complaint evincing that Decedent was aware of Brenda’s claim when the transfer was made; and Decedent continued to reside in the property after the conveyance to Christine. The Surrogate noted that the only explanation given for the transfer is that Decedent had the right to do so. Thus, defendants failed to offer any legitimate explanation for the conveyance, rendering the defendants’ actual fraudulent intent “readily inferable” (Machado v A. Canterpass, LLC, 115 AD3d 652, 654 [2d Dept 2014]).
Significantly, as an exception to the so-called “American Rule” on attorneys’ fees, where intent to defraud under Debtor and Creditor Law § 276 has been established, Debtor Creditor Law § 276-a provides an award of attorneys’ fees to plaintiff against defendants which the Court granted.
Thus, although Brenda did not succeed in vacating the 2012 Deed based upon a breach of the 1978 Agreement to make a testamentary disposition, she succeeded in doing so based upon the fraudulent conveyance causes of action which resulted in her being awarded counsel fees, relief she may not have received based upon the breach of contract claim.
 Brenda commenced the action in Supreme Court during Decedent’s lifetime and it was transferred to the Surrogate’s Court following Decedent’s death.