New York Law Review

Tag: Right of Survivorship

  • V.R.W., Inc. v. Klein, 68 N.Y.2d 560 (1986): Effect of Divorce on Mortgagee’s Interest in Tenancy by the Entirety

    V.R.W., Inc. v. Klein, 68 N.Y.2d 560 (1986)

    A divorce between spouses holding property as tenants by the entirety transforms a mortgagee’s interest (derived from only one spouse) from a right subject to survivorship to an ordinary tenancy in common, extinguishing the right of survivorship.

    Summary

    This case addresses the impact of divorce on a mortgagee’s rights when the mortgage is only on one spouse’s interest in a property held as tenants by the entirety. V.R.W., Inc. (plaintiff) provided a loan to Richard Klein, secured by a mortgage on property he owned with his wife (defendant) as tenants by the entirety. The wife’s signature was later found to be a forgery. After the mortgage was executed but before foreclosure, the Kleins divorced. The court held that the divorce transformed the tenancy by the entirety into a tenancy in common, thereby extinguishing the wife’s right of survivorship and allowing the foreclosure to proceed against the husband’s interest without being subject to that survivorship right. The court reasoned that the mortgagee’s rights are not immutably fixed and can be altered by subsequent events like divorce, just as they would be by the death of a spouse.

    Facts

    • June 22, 1981: V.R.W. gave Richard Klein a $50,000 business loan.
    • The loan was secured by a mortgage on real property owned by Richard and his wife as tenants by the entirety.
    • The wife’s signature on the mortgage was later determined to be a forgery.
    • Richard defaulted on the loan, and V.R.W. commenced a foreclosure action in October 1981.
    • December 1981: Richard conveyed his interest in the property to his wife during the pending foreclosure action.
    • Richard and his wife subsequently divorced.

    Procedural History

    • The trial court found the wife’s signature on the mortgage was a forgery.
    • The trial court dismissed the foreclosure action against the wife’s interest.
    • The trial court ordered the sale of the husband’s former interest as a tenancy in common, with all rights of survivorship extinguished.
    • The Appellate Division affirmed the trial court’s judgment.
    • The wife appealed to the New York Court of Appeals, challenging the extinguishment of survivorship rights.

    Issue(s)

    Whether a divorce between spouses, who hold property as tenants by the entirety, after one spouse has mortgaged his interest, transforms the mortgagee’s interest in the property by extinguishing the right of survivorship that existed during the marriage?

    Holding

    Yes, because the divorce dissolved the tenancy by the entirety, converting it into a tenancy in common, which eliminates the right of survivorship for both the former spouses and any third party who had a claim on one of their interests.

    Court’s Reasoning

    The Court of Appeals reasoned that the nature of a mortgagee’s interest in a tenancy by the entirety is not fixed immutably at the time the mortgage is executed. While the rights of a mortgagee are generally fixed at the time the mortgage is executed and cannot be impaired by subsequent acts of the mortgagor, this principle is not absolute. The court explicitly rejected the holding in Ryan v. Fitzsimmons, which reached a different conclusion. The court stated, “The mortgagor’s rights and obligations at the time of the mortgage conveyance were subject to change upon a termination of the marriage; the interest conveyed to the mortgagor should be deemed similarly transmutable.” The court emphasized that a mortgagee’s interest is subject to change upon the occurrence of events like the death of a spouse. Similarly, a divorce decree should also alter the mortgagee’s interest. Allowing the wife to retain her right of survivorship against the mortgagee after the divorce would give her a windfall due to the husband’s actions, placing her in a more advantageous position than if the mortgage had never occurred. The court noted that it would make little sense to allow partition at the instance of a third party to whom one spouse has conveyed, since to do so would be, in effect, to authorize the destruction of the nonconveying spouse’s possessory rights as a consequence of the unilateral action of the other spouse. The court concluded that after the divorce, the purchaser at the foreclosure sale acquires the rights of an ordinary tenant in common, including the right to seek partition.

  • Lang v. Lang, 397 N.Y.S.2d 324 (1977): Rights of Joint Bank Account Holders During Lifetime

    Lang v. Lang, 397 N.Y.S.2d 324 (1977)

    When a joint bank account is established, each tenant immediately gains title to one-half of the funds, and withdrawal of more than one’s moiety creates a right of recovery for the other tenant during their joint lifetimes; however, this right can be negated by consent or ratification of the withdrawal.

    Summary

    This case addresses the legal complexities surrounding joint bank accounts, particularly concerning the rights of each tenant during their lifetimes. Jessie Lang created a joint bank account with her niece, Harriet Heller. Heller withdrew the entire balance. Lang’s estate sued Heller for the amount exceeding Heller’s half. The court examines the nature of joint tenancies in bank accounts, emphasizing that each tenant possesses an immediate, unconditional property interest in half the funds. However, one tenant’s withdrawal of more than their share gives rise to a claim by the other tenant *during their lifetimes*, which can be defeated by proof of consent. The court reversed the Appellate Division’s decision, remanding for factual review on the issue of consent.

    Facts

    Jessie Lang opened a joint savings account with her niece, Harriet Heller, in 1969. All funds deposited belonged to Lang. In August 1970, shortly after Lang entered a nursing home, Heller withdrew $1,094.90 from the account, allegedly for Lang’s benefit, but the nursing home records did not support this. In March 1971, Heller closed the account, withdrawing the remaining $5,469.89 and transferring it to an account in her and her husband’s name. Lang’s accountant discovered the closing withdrawal shortly before Lang’s death. The estate demanded Heller return the amount exceeding her half.

    Procedural History

    The Surrogate’s Court ruled that Heller was required to return the excess amount withdrawn. The Appellate Division reversed, holding that Heller was not required to return the funds. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether Heller, by withdrawing the entire balance of a joint bank account during Lang’s lifetime, was required to return the amount exceeding her one-half interest to Lang’s estate after Lang’s death, absent Lang’s consent to the withdrawal.

    Holding

    Yes, because while each joint tenant has the right to withdraw their moiety, withdrawing more than that creates a right of recovery for the other tenant during their lifetime, which then accrues to their estate after death, unless the withdrawal was consented to, or ratified by, the other tenant.

    Court’s Reasoning

    The court emphasized that opening a joint account creates an immediate property interest for each tenant in an undivided one-half of the funds, regardless of who deposited the money. Citing *Matter of Bricker [Krimer] v Krimer, 13 NY2d 22, 27*, each tenant has the right during the lifetime of the other to withdraw up to the full amount of their moiety. However, the court also noted that withdrawing more than one’s moiety establishes an absolute right in the other tenant, during the lifetime of both, to recover such excess. The court explicitly states: “[W]here a joint tenant withdraws more than his or her moiety, as was the case here, there is an absolute right in the other tenant, during the lifetime of both, to recover such excess.” However, the court also stated that the aunt could have consented to the withdrawal, or ratified it later, which would negate the right of recovery. Such consent can be express or implied, and is often discerned from circumstantial evidence. The court listed factors to consider in determining consent, including: the relationship between the parties; commingling of funds; testamentary dispositions; amounts and patterns of withdrawals; the age and condition of each tenant; the source of funds; knowledge of the withdrawal; and any protest or lack thereof. Since the Appellate Division’s reversal was based solely on the law (inviolability of the right of survivorship) without addressing the factual question of consent, the Court of Appeals reversed and remanded the case for a review of the facts to determine whether the niece met her burden of proving the excess withdrawal was with the direct or implied consent of the aunt, or had been ratified by her.