Gorodetsky v. Bialystoker Center and Bikur Cholim, Inc., 48 N.Y.2d 696 (1979)
When a fiduciary relationship exists, the donee of a gift bears the burden of proving by clear and convincing evidence that the gift was made voluntarily, understandingly, and free from fraud, duress, or coercion.
Summary
The administrator of Ida Gorodetsky’s estate sought to recover funds transferred to a nursing home shortly before her death. Gorodetsky, elderly and infirm, was admitted to the nursing home after a stroke. The nursing home solicited and received a substantial gift from her. The court held that because a fiduciary relationship existed between Gorodetsky and the nursing home, the nursing home had the burden of proving the gift was voluntary and free from undue influence. Since the nursing home failed to meet this burden, the funds were returned to the estate. This case highlights the heightened scrutiny applied to transactions between fiduciaries and those they serve, particularly concerning gifts.
Facts
Ida Gorodetsky, 85, suffered a stroke and was admitted to a hospital in August 1972. She had limited contact with her relatives. While hospitalized, she was confused, drowsy, and partially paralyzed. A social worker from Bialystoker Center, a nursing home, contacted her and arranged for her admission. The nursing home learned Ida had significant funds. Before her admission, a social worker obtained Ida’s mark on a withdrawal slip for $15,000, which was deposited into the nursing home’s general fund as a donation. Upon admission to the nursing home on November 13, 1972, Ida, within an hour and a half of admission, signed documents (by making her mark) that assigned her remaining funds to the home, designating any balance after her care and funeral expenses as a donation. Ida died less than a month later.
Procedural History
The administrator of Ida’s estate sued the nursing home to recover the funds. The Supreme Court dismissed the complaint, placing the burden on the plaintiff to prove fraud or undue influence. The Appellate Division reversed, holding that the nursing home bore the burden of proving the gift was voluntary due to the fiduciary relationship. The Court of Appeals affirmed the Appellate Division’s ruling.
Issue(s)
Whether the nursing home, as the donee of a gift from a patient under its care, bore the burden of proving that the gift was made freely, voluntarily, and understandingly.
Holding
Yes, because a fiduciary relationship existed between the nursing home and Ida Gorodetsky, arising from the nursing home’s complete control, care, and responsibility for its resident. The nursing home, therefore, bore the burden of proving the gift was made freely, voluntarily, and understandingly.
Court’s Reasoning
The Court of Appeals emphasized the fiduciary relationship that arose when the nursing home assumed complete care for Gorodetsky. Residents of nursing homes are dependent on the home for their very existence, creating a relationship of trust and reliance. The court applied the doctrine of constructive fraud, stating that “transactions between them are scrutinized with extreme vigilance, and clear evidence is required that the transaction was understood, and that there was no fraud, mistake or undue influence.” Citing Cowee v. Cornell, 75 N.Y. 91, 99-100, the court reiterated, “[W]herever the relations between the contracting parties appear to be of such a character as to render it certain that they do not deal on terms of equality… there the burden is shifted, the transaction is presumed void, and it is incumbent upon the stronger party to show affirmatively that no deception was practiced, no undue influence was used, and that all was fair, open, voluntary and well understood.” The court rejected the argument that as a charitable organization, the nursing home should be exempt from this evidentiary burden. The court also determined that even if the initial withdrawal slip was executed before a formal fiduciary relationship existed, the inequality of position between the hospital patient and the nursing home at that time warranted shifting the burden of proof to the nursing home. Ultimately, the nursing home failed to demonstrate that the gift was from a willing and informed donor, untainted by impermissible initiative on its part.