New York Law Review

Tag: Gifts

  • Gorodetsky v. Bialystoker Center, 48 N.Y.2d 696 (1979): Burden of Proof in Cases of Gifts to Fiduciaries

    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.

  • In re Estate of Lefft, 44 N.Y.2d 915 (1978): Requirements for Establishing a Valid Gift

    In re Estate of Lefft, 44 N.Y.2d 915 (1978)

    To establish a valid gift, there must be clear and convincing evidence of donative intent, delivery of the gift, and acceptance by the donee.

    Summary

    This case addresses the requirements for a valid gift, particularly the element of delivery, when a decedent’s children claimed ownership of artwork based on an alleged gift from their father. The court found that while a trust created by the decedent was valid, it did not benefit his children. Furthermore, even if the testimony of a witness (the decedent’s former spouse) were admitted, the children failed to prove a valid gift due to lack of evidence of delivery of the artwork. The court emphasized that a gift must be established by clear and convincing proof, including delivery of the property.

    Facts

    Harold Lefft created a trust with himself, his wife Geraldine, and a third trustee. The trust agreement stated Harold’s intention to retain certain artwork for his children, but it didn’t provide for any disposition of the artwork (corpus) or proceeds from its sale to the children. Harold later executed a separation agreement with Geraldine, terminating the trust. After Harold’s death, his children claimed he had gifted them the artwork prior to his death. The Surrogate Court deemed Geraldine incompetent to testify about the alleged gift due to the dead man’s statute. The children appealed, arguing that Harold had made a gift of the paintings to them.

    Procedural History

    The Surrogate’s Court ruled against the children, finding that Harold Lefft did not create a valid trust for their benefit and that Geraldine Lefft was incompetent to testify about the alleged gift. The Appellate Division affirmed the Surrogate’s Court decision. The children then appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether Harold Lefft created a valid trust for the benefit of his children.

    2. Whether Geraldine Lefft was competent to testify regarding the alleged gift of paintings from Harold Lefft to his children under the dead man’s statute.

    3. Whether the children presented sufficient evidence to establish a valid gift of the paintings from Harold Lefft.

    Holding

    1. Yes, because the decedent, Harold Lefft, did create a valid trust.

    2. Yes, because Geraldine Lefft was not a person “from, through or under” whom the appellant would take the contested paintings if her testimony were credited.

    3. No, because even if Geraldine Lefft’s testimony were accepted, the children failed to establish a gift because of the absence of proof of delivery.

    Court’s Reasoning

    The Court of Appeals agreed with the lower court’s result but clarified its reasoning. It found that Harold Lefft did create a valid trust, but the beneficiaries were limited to Harold and Geraldine, not the children. The court noted that the trust agreement only expressed Harold’s intention to keep the artwork for his children but didn’t provide for any disposition to them.

    Regarding Geraldine’s competency to testify, the court held that the Surrogate erred in applying the dead man’s statute (CPLR 4519). The court reasoned that Geraldine’s waiver of her rights increased the children’s share of the estate, but they would take the paintings by gift from the decedent, not through the estate.

    However, the court ultimately affirmed the lower court’s decision because the children failed to prove a valid gift. The court emphasized that a gift must be established by clear and convincing proof, citing Hemmerich v Union Dime Sav. Inst., 205 NY 366, 369. Even if Geraldine’s testimony were accepted, the children failed to demonstrate delivery of the artwork, a necessary element for a valid gift, citing Matter of Szabo, 10 NY2d 94, 98. Without proof of delivery, the gift claim failed, regardless of intent.

  • Bulova v. Manufacturers Hanover Trust Co., 301 N.Y.S.2d 359 (1969): Determining Ownership of Personal Property After Purchase

    Bulova v. Manufacturers Hanover Trust Co., 301 N.Y.S.2d 359 (1969)

    When a person independently contracts to purchase property, their subsequent payment by another party does not automatically transfer ownership to the payor, but can be construed as a gift or loan.

    Summary

    Mrs. Bulova purchased a sculpture at auction. Mr. Bulova, her husband, paid for it. After their separation, Mr. Bulova gifted the sculpture to the Guggenheim Museum. Mrs. Bulova sued the estate and the museum, claiming ownership. The court held that Mrs. Bulova owned the sculpture because she initially contracted to buy it. Mr. Bulova’s payment was considered either a gift or a loan, neither of which transferred title to him. This case clarifies that the act of initially contracting for a purchase is a key factor in determining ownership, even if another party provides the funds.

    Facts

    • December 7, 1955: Mrs. Bulova bid on and won a Brancusi sculpture at an auction.
    • Mrs. Bulova was listed as the purchaser in the auction records, and the invoice was sent to her.
    • Mr. Bulova, upon learning of the purchase, expressed surprise at the cost but paid the invoice two weeks later.
    • The sculpture was delivered to their apartment.
    • October 1957: The couple separated, and Mrs. Bulova demanded the return of the sculpture.
    • March 18, 1958: Mr. Bulova died, leaving his estate to his sisters.
    • March 28, 1958: One of Mr. Bulova’s sisters, acting as executrix, donated the sculpture to the Guggenheim Museum.

    Procedural History

    • Mrs. Bulova filed a claim against Mr. Bulova’s estate for the sculpture.
    • The claim was rejected, and Mrs. Bulova sued the estate and the Guggenheim Museum.
    • The trial court found for the defendants, stating title resided in the party supplying consideration.
    • The Appellate Division affirmed the judgment in favor of the Guggenheim Foundation.
    • The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether a husband’s payment for an item purchased by his wife at auction, without any prior agreement, is sufficient to vest title in the husband.

    Holding

    No, because Mrs. Bulova contracted to purchase the sculpture before Mr. Bulova’s payment, establishing her ownership regardless of the source of funds.

    Court’s Reasoning

    The court reasoned that Mrs. Bulova initiated and completed the purchase contract when her bid was accepted. The auctioneer’s memorandum satisfied the Statute of Frauds, obligating the gallery to deliver the sculpture to Mrs. Bulova, making her solely liable for the price. Mr. Bulova’s payment was construed either as a gift or a loan to his wife. The court emphasized that Mrs. Bulova acted on her own initiative and had a personal connection to the artwork, differentiating her position from one of agency. The court cited Personal Property Law § 31, subd. 6 (now General Obligations Law, § 5.701, subd. 6) regarding the Statute of Frauds. The court also noted the inadmissibility of Mr. Bulova’s self-serving hearsay statements about owning the sculpture, quoting Matter of Berardini, 238 App. Div. 433, 435, stating “'[D]eclarations of a deceased person in his own favor are no more competent than those of a living person, particularly when they relate to a past event such as making a gift; and they are unavailing to divest a title.’” The court concluded that the lower courts erred in presuming title vested in the payor, especially where a prior contract existed. The court further suggested that even if the husband had contracted for the purchase in the wife’s name, the presumption would be a gift to her, absent evidence to the contrary.

  • Reoux v. Reoux, 17 N.Y.2d 14 (1966): Standard of Proof for Gifts and Newly Discovered Evidence

    Reoux v. Reoux, 17 N.Y.2d 14 (1966)

    When a confidential relationship exists between the donor and donee, the donee bears the burden of proving a gift was valid and voluntary by clear and convincing evidence, and newly discovered evidence that does not refute prior admissions of undue influence is insufficient to warrant a new trial.

    Summary

    This case concerns a son, who was also an attorney, attempting to prove a valid gift from his mother. The court held that the son, acting in a confidential capacity, failed to meet the burden of proving the gift was valid and voluntary by clear and convincing evidence. The court further ruled that newly discovered evidence, consisting of the mother’s will disinheriting the son and a letter explaining the disinheritance, did not refute the son’s prior admissions of undue influence or establish donative intent regarding the securities in question, therefore it was insufficient to warrant a new trial.

    Facts

    Harry Reoux, an attorney, received securities from his mother. After the mother’s death, a dispute arose regarding the ownership of these securities. A prior appeal established that Harry, acting as both attorney and son, had the burden to prove by ‘clear and satisfactory’ evidence that the transfer of the securities was a valid and voluntary gift from his mother.

    Procedural History

    The Supreme Court, Warren County, initially granted recovery on the counterclaim against the son. This decision was appealed. The Appellate Division found in favor of the mother. The New York Court of Appeals affirmed that decision (4 N.Y.2d 1022), establishing the law of the case regarding the burden of proof. After the initial judgment, the son sought to introduce newly discovered evidence. The lower courts reversed the original judgment based on this new evidence. This appeal to the Court of Appeals challenged that reversal.

    Issue(s)

    Whether the newly discovered evidence (the mother’s will and accompanying letter) was sufficient to overturn the prior determination that the son had failed to prove the gift was valid and voluntary.

    Holding

    No, because the newly discovered evidence did not refute the son’s prior admissions of undue influence, nor did it reveal any donative intent on the part of the mother regarding the securities in question.

    Court’s Reasoning

    The court emphasized the son’s prior burden to show the gift was valid and voluntary, a burden established in a prior appeal of the same case. The court stated that the law of the case was that the plaintiff had the burden of establishing by “clear and satisfactory” evidence that the transfer of the securities in question was a “valid and voluntary gift” on the part of his mother. The court found the newly discovered evidence (the will and letter) did not satisfy that burden. The court reasoned that the will and letter did not refute the son’s own admissions of undue influence and overreaching. Importantly, the court highlighted that the new evidence did not demonstrate any donative intent on the part of the mother concerning the specific securities at the heart of the dispute. The court implicitly held that disinheriting the son in a will does not automatically equate to a valid gift of specific assets before death. Without evidence directly linking the will to the transfer of securities, the original determination stood: the son failed to prove a valid gift by clear and convincing evidence. The court, therefore, reinstated the original judgment in favor of the deceased’s estate.