Opinion
335060.
Decided March 16, 2006.
Groman, Ross Tisman, P.C. (Attorneys for Petitioner), Carle Place, NY.
Eliot Spitzer (Attorney for Ultimate Charitable Beneficiaries), Attorney General of the State of New York, New York, NY.
The executor has petitioned for an order determining the disposition of funds in a certificate of deposit, which names a dissolved charitable corporation as the beneficiary.
The decedent, Barbara Bottjer, died on October 20, 2004, a domiciliary of the State of New York. Her Last Will and Testament dated June 29, 1998, was admitted to probate by a decree of this Court dated August 16, 2005 and letters testamentary issued to petitioner.
In 1999 decedent purchased a certificate of deposit from the Greenpoint Bank (now North Fork). The certificate indicates that it is a "trust account" naming the National Paralysis Foundation as beneficiary. The value of the certificate at the date of decedent's death was $106,214.34.
The executor states that he is unable to locate any charity with the name "The National Paralysis Foundation." He alleges that the only entity with the words "National Paralysis Foundation" in its name is the "Kent Waldrep National Paralysis Foundation," a charity incorporated under the laws of Texas. The petition states that the corporation dissolved in 2003. The articles of dissolution of the Kent Waldrep Foundation provide for the distribution of its remaining assets to the "Kent Waldrep Fund for Clinical Research for Spinal Cord Research," at the University of Texas Southwestern Medical Center. The Attorney General has filed an answer to the petition wherein he contends that the decedent intended the Kent Waldrep National Paralysis Foundation, Inc. to be the beneficiary of the subject certificate of deposit and that the Kent Waldrep Fund for Clinical Research for Spinal Cord Research has a right to claim the proceeds of the certificate of deposit. St. Jude's Children's Research Hospital, the residuary beneficiary under the decedent's Will, received service of citation but has not appeared in the proceeding.
The Court is satisfied that the decedent intended the "Kent Waldrep National Paralysis Foundation" to be the beneficiary of the account. The question then is whether the substitution of a dissolved charitable organization, as the beneficiary of a certificate of deposit, is governed by EPTL 8-1.1.
EPTL 8-1.1 subdivision (a) provides in part:
"No disposition of property for religious, educational or benevolent purposes otherwise valid under the laws of this state, is invalid by reason of the indefiniteness or uncertainty of the persons designated as beneficiaries."
EPTL 8-1.1 is derived from Personal Property Law § 12 which referred to a "gift, grant or bequest" and Real Property Law § 113 which referred to a "gift, grant or devise." Likewise, the Act of 1893 [The Tilden Act], which first codified the doctrine of cy pres, referred to a "gift, grant, bequest and devise" (L 1893 ch 701).
Under the common law, the doctrine of cy pres applied to outright gifts to charitable corporations. The purpose of the Act of 1893 was to prevent the failure of express trusts by reason of the indefiniteness of the beneficiaries. In addition, the statute reinforced the protection extended under the common law, to gifts which are absolute ( Lefkowitz v. Lebensfeld, 68 AD2d 488 affd 51 NY2d 442; see also, 18 NY Jur 2d, Charities, § 4). The result is that EPTL 8-1.1 applies to both gifts and express trusts ( Lefkowitz v. Lebensfeld, 68 AD2d 488 affd 51 NY2d 442).
This certificate of deposit is a "trust account" as defined in EPTL 7-5.1. Commonly referred to as a "Totten trust," title vests in the beneficiary immediately upon death of the donor ( Eredics v. Chase Manhattan Bank, N.A., 100 NY2d 106). Alternatively, a Totten trust is described as a tentative gift which is completed upon the death of the donor ( Matter of Totten, 179 NY 112). Whether a certificate of deposit is characterized as a "gift" or a "trust," EPTL 8-1.1 applies where the beneficiary is a charitable corporation. In the case of a gift to a dissolved New York charitable corporation, the Not-For-Profit Corporation Law would govern the selection of a substitute beneficiary (N-PCL 1005[a][3][A]).
In this case, the Texas corporation selected its successor pursuant to the Texas Non-Profit Corporation Act (Tex Rev Civ Stat Ann 1396-6.02[A][3]). Both the New York and Texas statutes codify elements of cy pres ( Gravure, Inc. v. Knapp, 64 NY2d 458 and ensure that assets are utilized for activities similar to that of the dissolved corporation ( see Hansmann, Reforming Nonprofit Corporation Law, 129 U. Pa. L. Rev. 497 [1981]). The statutes are not identical but the policy behind both is the same.
The Estates Powers and Trusts Law provides that questions concerning personal property rights are to be determined by reference to the substantive law of the decedent's domicile (EPTL 3-5.1 [b][2], [e]; Southeast Bank, N.A. v. Lawrence, 66 NY2d 910).
The statute provides in part:
"The intrinsic validity, effect, revocation or alteration of a testamentary disposition of personal property . . . are determined by the law of the jurisdiction in which the decedent was domiciled at death." (EPTL 3-5.1 [b][2]) The law of the jurisdiction in which the decedent was domiciled is EPTL 8-1.1.
However, there may be limitations on the application of EPTL 3-5.1 ( see 18 NY Jur 2d Charities, § 8). The limitation is imposed by the rule that the law of the state of incorporation determines the status of the corporation and its nature and functions ( Ministers Missionaries Benefit Bd. v. McKay, 64 Misc 2d 231). Likewise, the termination of a corporation is controlled by the law of the state of incorporation (Restatement [Second] of Conflicts of Law § 299).
In this case, any choice of law issue is moot because the result is the same under both the New York statute and the Texas statute. If the court were to exercise authority under EPTL 8-1.1, it would select the same beneficiary designated by the dissolved corporation. The selection of the Kent Waldrep Fund will effectuate the charitable intent of the decedent.
Upon submission of a copy of the certificate of dissolution (Tex Rev Civ Stat Ann 1396-6.06) and a statement of the costs incurred in this proceeding, the court will enter a decree directing payment of the funds on deposit to petitioner, with directions that he distribute the net funds to the "Kent Waldrep Fund for Clinical Research for Spinal Cord Research," at the University of Texas Southwestern Medical Center.
Proceed accordingly.