Judicial oaths require that judges rule on the law, putting their personal feelings aside.  Indeed, judges’ personal opinions are presumed to be non-factors in judicial decision making as judges are charged to uphold the letter of the law regardless of their personal beliefs. The decision in Matter of the Estate of Durcan is a case in point.

Before the Surrogate’s Court, New York County was a petition by James Durcan (“James”), the administrator of the decedent’s estate, seeking the turnover of certain IRA proceeds.   In Durcan, Joan Durcan (the “Decedent”), was survived by two siblings, her brother James, and her sister Mary Anney Cunney (“Cunney”). Following Decedent’s death, Merrill Lynch & Co., Inc. (“Merrill Lynch”) distributed the proceeds of four IRA accounts (“Accounts”) owned by Decedent to Cunney.   Shortly thereafter, James petitioned for the turnover of the Account proceeds, claiming that they belonged to Decedent’s estate (the “Estate”).

The Accounts were created by the Decedent in 2002, designating Cunney as the sole beneficiary. In 2014, Decedent sought to have the Accounts transferred from Merrill Lynch to Morgan Stanley. To effectuate the transfer Morgan Stanley sent Decedent certain transfer forms, which she completed and sent back, once again designating Cunney as her one hundred (100%) beneficiary.   Shortly thereafter, additional transfer forms were sent to Decedent, including an IRA Adoption Agreement. The Adoption Agreement included a provision for designating a beneficiary for the new accounts. At his deposition, the Decedent’s financial advisor testified that when discussing the forms with the Decedent, she reiterated her desire to designate Cunney as the sole beneficiary. Decedent died unexpectedly a few days later. Critically, the second set of documents sent by Morgan Stanley, including the beneficiary designations contained in the Adoption Agreement, were neither received by Morgan Stanley nor found among Decedent’s papers. Following Decedent’s death, Morgan Stanley transferred the proceeds of the IRAs, valued at approximately $2 million, to Cunney, as Morgan Stanley recognized Cunney as the beneficiary on the basis of the information provided by Decedent.

Relying on EPTL 13-3.2 (e), James argued that Decedent failed to execute a valid beneficiary designation for her IRAs after the new accounts were opened at Morgan Stanley and, therefore, that the proceeds of each of the accounts should be paid to Decedent’s estate to be distributed among her intestate distributees. Section 13-3.2 specifically requires that a beneficiary designation be made in a writing signed by the person making the designation (id.). The Morgan Stanley transfer documents failed to comply with this requirement.  In her own motion and in opposition to James’s motion, Cunney asked the court to apply the equitable doctrine of substantial compliance and determine that Morgan Stanley’s decision to waive its right to require strict compliance with the beneficiary designation provisions of its IRA Plan should not be disturbed (Durcan, at 4). Surrogate Mella ruled in James’s favor, and directed Cunney and Morgan Stanley to turn over to James, as administrator of Decedent’s estate, the proceeds of the IRAs (id. at 8).

The result in Durcan exemplifies the longstanding belief that it is a judge’s duty to set aside one’s personal feelings so that he or she can blindly administer justice according to the letter of the law. Judges take oaths to uphold the law, regardless of personal beliefs. Faced with this onerous burden, Surrogate Mella “reluctantly conclude[d] that compliance with the statutory requirement that a beneficiary designation be in writing and signed by the designator may not be disregarded  As explained by the Court of Appeals in McCarthy, such requirement is critical to serve the essential goal of preventing the courts and parties from speculating regarding the wishes of the deceased” (id. at 7).

 

A recent post to this blog titled You’ve Got (E-)Mail! Can Your Survivors Access It After Your Death?, discussed New York’s recently-enacted digital assets legislation, and Surrogate Mella’s decision in Matter of Serrano, regarding whether the fiduciary of a decedent’s estate had a statutory right to access his deceased spouse’s Google email, contacts and calendar information in order to ‘be able to inform friends of [the decedent’s] passing’ and ‘close any unfinished business’” (see Serrano, supra).

As readers may recall, Surrogate Mella found that the requested disclosure was warranted and directed Google to make it (see id.). The Surrogate explained that “disclosure of the non-content information is permitted, if not mandated, by Article 13-A of the EPTL and does not violate [the governing federal privacy law]” (see id.). However, Surrogate Mella denied the fiduciary’s request to access the contents of the decedent’s Google email account.

In a recent decision, Surrogate Czygier of Suffolk County addressed this very issue. In Matter of White,10/3/2017 NYLJ p. 25, col. 1, a fiduciary sought access to a decedent’s Google e-mail account, contending the information would identify assets and aide in the administration of the estate. The fiduciary believed that the decedent may have owned a business at the time of his death and that an assessment of the business could not be completed without obtaining access to the information contained in the decedent’s Google account. She indicated that there were no other authorized users to the account and that Google refused to grant her access without a court order. No one appeared in opposition.

The court noted that Article 13-A of EPTL sets forth the grounds for access, as it is applicable to an administrator acting for a decedent who died after the enactment of the statute. The court further noted that although Google “provides an ‘online tool’ to grant access to ‘trusted contacts’ after a period of inactivity, it does not appear that decedent activated this feature; nor did decedent address disclosure of his digital access via a will, trust or other record” (see id.). Petitioner averred that access should be granted as there was no state or federal law prohibiting disclosure of the contents stored in decedent’s account.

Surrogate Czygier disagreed, denying the fiduciary’s request to access the contents of the decedent’s Google account. The Surrogate wrote: “Although no one has appeared in opposition to the requested relief, in this evolving area, the undersigned is concerned that unfettered access to a decedent’s digital assets may result in an unanticipated intrusion into the personal affairs of the decedent or disclosure of sensitive or confidential data, for example, information unrelated to his business or corporation. Thus, the court must balance the fiduciary’s duty to properly administer this estate, while avoiding the possibility of unintended consequences” (see id.).

Consistent with Surrogate Mella’s decision in Matter of Serrano, the Court granted the relief solely to the extent that Google should disclose the contact information stored and associated with the account, noting that to the extent greater access to the account appeared warranted an application may be made to expand the authority. This decision reaffirms Surrogate Mella’s application of Article 13-A in Matter of Serrano. 

 

In the past, New York Courts have demonstrated a willingness to apply the theory of promissory estoppel, to overcome the legal requirements of the Statute of Frauds. The Restatement (Second) of Contract, Section 139, endorses this principle, providing:

“A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce the action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise”

However, a recent decision from the New York Court of Appeals, limited the purview of applying the theory to overcome the statutory requirements of the Statute of Frauds.

In the Matter of Hennel, the Court of Appeals rendered a decision, reversing an order of the Appellate Division, holding that Petitioners’ claim against the decedent’s estate seeking to enforce an oral promise was barred by the Statute of Frauds. In overturning the Appellate Division, the Court held that the most important factor in overcoming the Statute of Frauds is whether the resulting injustice is in fact unconscionable.

In Hennel, the decedent’s grandsons allegedly reached an oral agreement with the decedent, whereby the parties agreed that the grandsons would ultimately acquire ownership of a parcel of real property in exchange for assuming all management and maintenance duties of the property. The Petitioners further asserted that the parties reach an agreement whereby the mortgage on the property would be satisfied from the estate’s assets.

To effectuate the oral bargain, Petitioners and decedent executed a warranty deed in which decedent granted ownership of the property to Petitioners. At the same meeting, the decedent executed a will which contained terms supporting the alleged oral agreement – namely that any mortgage in existence at the time of the decedent’s death would be paid off from the assets of the decedent’s estate. Following the meeting, the Petitioners assumed all management and maintenance duties in accordance with the agreement with decedent. However, in 2008, the decedent executed a new will, revoking all prior wills and codicils, which omitted all provisions concerning the satisfaction of the mortgage.

Following the decedent’s death, the Petitioners commenced a proceeding, pursuant to SCPA 1809, seeking to determine the validity of their claim against decedent’s estate.   The Respondent objected, asserting that the claim was barred by the Statute of Frauds. However, the Surrogate’s Court ordered the estate to pay off the mortgage and satisfy the claim, reasoning that the claim fell “squarely within that limited class of cases where promissory estoppel should be applied to remedy a potential injustice.” The Appellate Division later affirmed the Surrogate Court’s decision.

However, the Court of Appeals disagreed, reasoning that even assuming the Petitioners were able to satisfy the elements of promissory estoppel, they would not suffer unconscionable injury if the Statute of Frauds were enforced. The Court went on to state:

“The strongly held public policy reflected in New York’s Statute of Frauds would be severely undermined if a party could be estopped from asserting it every time a court found that some unfairness would otherwise result. For this reason, the doctrine of promissory estoppel is properly reserved for that limited class of cases where the circumstances are such as to render it unconscionable to deny the promise upon which the plaintiff has relied”

(Hennel, 2017 WL 2799828 [2017]).

Applying those principals to the facts before it, the Court found the Petitioners’ evidence was insufficient to demonstrate an unconscionable injury to overcome the Statute of Frauds. Importantly, the Petitioners were able to make all mortgage payments entirely from the rental income generated by the property. Moreover, the court noted that the Petitioners had the option of selling the property, satisfying the balance of the mortgage, and claiming the $150,000 of equity remaining in the property.

The Court conceded that the Petitioner’s loss was unfair. However, in overturning the Appellate Court’s decision, the Court reasoned that wherever an oral agreement is rendered void by the statute of frauds, some unfairness will typically result.   The Court concluded that “what is unfair is not always unconscionable.   For these reasons, cases where the party attempting to avoid the statute of frauds will suffer unconscionable injury will be rare” [id.].

Consequently, it is clear that applying the principles of promissory estoppel, to overcome the legal requirements of the Statute of Frauds, is a high standard that places a significant burden on the promisee.   The promisee must demonstrate not merely gross injustice or unfairness but the showing of an unconscionable injury.