To be Argued by:
JESSE WILKINS
(Time Requested: 10 Minutes)
CTQ 2015-00001
Second Circuit Court of Appeals Docket No. 14-1021-cv
Court of Appeal
of the
State of New Yor
NO 97.
THE MINISTERS AND MISSIONARIES BENEFIT BOARD,
Interpleader Plaintiff,
—against—
LEON SNOW, et al.,
Appellants,
—against—
THE ESTATE OF CLARK FLESHER, et al.,
Respondents.
REPLY BRIEF FOR APPELLANTS
PRESTON & WILKINS, LLC
Attorneys for Appellants
3000 Hempstead Turnpike, Suite 317
New York, New York 11756
Tel.: (212) 809-5808
Of Counsel: Fax: (212) 898-9034
JESSE T. WILKINS
GREGORY R. PRESTON
Date Completed: August 20, 2015
TABLE OF CONTENTS
Pages
TABLE OF AUTHORITIES ii
PRELIMINARY STATEMENT .1
ARGUMENT 1
I. RESPONDENTS HAVE FAILED TO SHOW THAT THE
DISPUTED FUNDS ARE DECEDENT'S PERSONAL
PROPERTY WHICH REQUIRE THE APPLICATION OF
ESTATES, POWERS AND TRUSTS LAW § 3-5.1(B)(2)
A. The Disputed Funds Are Not Personal Property
Belonging to the Decedent and Therefore Are Not
to be Deemed Assets of the Decedent's Estate That
Otherwise May Be Subject to the Jurisdiction
of the Colorado Probate Court 2
B. The MMBB Plans Are Contracts and the Decedent and the
Plan Administrator Were the Contracting Parties Entering
Into the Death Benefit Plan and the Retirement Plan 6
CONCLUSION 10
TABLE OF AUTHORITIES
Cases Pages
Colavito v. Colavito,
7 NYS3d 241, 2015 N.Y. Misc. LEXIS 94
[Sup Ct Jan. 22, 2015] 4
In re Estate of Donahue,
262 AD2d 840 [3rd Dept 1999] 2, 3
In re Lewis,
25 NY3d 456 [2015] .7, 8
In re Sugg,
2015 N.Y. Misc. LEXIS 2265 [Sur Ct Jun. 29, 2015] 4
In re Thomas,
63 AD3d 1081 [2nd Dept 2009] .3
In re Walker,
117 AD3d 838 [2nd Dept 2014] 4, 5
Southeast Bank, N.A. v. Lawrence,
66 NY2d 910 [1985] .2
Statutes
Estates Powers and Trusts Law § 3-5.1(b)(2) passim
Estates Powers and Trusts Law § 5-1.4 5, 7, 9
Estates Powers and Trusts Law § 5-1.4(a) 8
ii
PRELIMINARY STATEMENT
This Brief is submitted on behalf of the Appellants, Leon Snow and LeAnn
Yowell Snow in reply to the Brief of the Respondents, The Estate of Clark Flesher,
and Michele Arnoldy, Individually and as Personal Representative of the Estate of
Clark Flesher.
ARGUMENT
I. RESPONDENTS HAVE FAILED TO SHOW THAT THE
DISPUTED FUNDS ARE DECEDENT'S PERSONAL PROPERTY
WHICH REQUIRE THE APPLICATION OF ESTATES, POWERS
AND TRUSTS LAW § 3-5.1(B)(2).
The Respondents' leading premise is that the district court correctly applied New
York's governing law, pursuant to Estates Powers and Trusts Law § 3-5.1(b)(2), to
determine the appropriate disposition of the Disputed Funds from the MMBB plans
and to award the Disputed Funds to the decedent's estate. The Respondents have
yet to cite any legal authority for the proposition that the Disputed Funds are personal
property belonging to the decedent, but rather, continue to rely on the definition of
personal property within the statutory provision. See, e.g., Resp Br at 20, 23.
Furthermore, the Respondents rely upon the district court's erroneous decision
below to further the Respondents' argument that Estates Powers and Trusts Law §
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3-5.1(b)(2) is the statutory provision that this Court should apply to determine that
the Disputed Funds are "personal property... not disposed of by will".
A. The Disputed Funds Are Not Personal Property Belonging to the
Decedent and Therefore Are Not to be Deemed Assets of the
Decedent's Estate That Otherwise May Be Subject to the Jurisdiction
of the Colorado Probate Court.
The limited case law cited by the Respondents in support of their argument that
the Disputed Funds are the decedent's personal property are readily distinguishable.
The personal property at issue in Southeast Bank, N.A. v. Lawrence, 66 NY2d 910
[1985], was the "right to publicity" which this Court found was descendible in nature
under Florida law, but such a right could only be possessed by the decedent in his
lifetime or by his surviving spouse and children. In Southeast Bank, the decedent
had no surviving spouse or children, nor was there before the Court any issue of
designated beneficiaries in regards to life insurance policies or other death benefits.
The personal property in In re Estate of Donahue, 262 AD2d 840 [3rd Dept 1999]
included a trailer, a motor vehicle, and a bank account, all of which at the time of
the decedent's death, were held in the name of the decedent, along with the name of
the girlfriend of the decedent. The ruling in Estate of Donohue turned on the
operative finding by the court that the property was held as a tenancy in common,
and consequently, the decedent continued to retain an ownership interest in these
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items of personal property. See, id. Accordingly, no issue of the rights of designated
beneficiaries was before the Donahue court.
While the residuary benefits of a New York pension plan were at issue in In re
Thomas, 63 AD3d 1081 [2nd Dept 2009], it was the decedent's widow who
challenged the rights to the pension plan benefits. The decedent was domiciled in
the State of Nevada, at the time of the decedent's death, and the widow's claim to
the pension benefits was based upon a detettit ination that the pension plan benefits
constituted community property to which the widow had some entitlement. Thus,
the court detet ined that the decedent could not have rightfully designated another
to receive the entirety of the pension plan benefits, given that the decedent's
surviving widow had a prior entitlement to some share of the benefits. Arguably, the
surviving widow's right to the survivor benefits would not be defeated even if New
York law had been applied.' Nonetheless, the designated beneficiary retained the
right to that portion of the survivor's benefits from the pension plan that would not
be deemed to be part of the community property that jointly belonged to the decedent
and the decedent's widow.
Appellants would note that the surviving spouse was initially named as the administrator of the
decedent's estate In the New York probate proceeding, and the designated beneficiary had
challenged the appointment within that proceeding.
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Respondents contend that the transfer of non-probate assets is a regular part of
the probate process and Respondents cite to a few cases in support thereof. Several
of the cases cited by Respondent are also distinguishable from the matter presently
before this Court. In the Surrogate Court matter, In re Sugg, 2015 N.Y. Misc. LEXIS
2265 [Sur Ct Jun. 29, 2015], the former spouse was named as the designated
beneficiary on a life insurance policy for the decedent. In the divorce settlement, the
former spouse was initially given a percentage interest in the policy, with the
decedent retaining the balance of the interest in the annuity policy. A subsequent
court order netted out the payment owed to the former spouse and ordered that the
entire policy would now be owned solely by the decedent. Thereafter, the insurer
paid out the policy proceeds to the former spouse who had not been removed as the
designated beneficiary. Arguably, the fact that the former spouse's interest was
recognized as being bought out pursuant to the court order was relevant to the court's
determination that the former spouse was not entitled to the policy proceeds.
In Colavito v. Colavito, 7 NYS3d 241, 2015 N.Y. Misc. LEXIS 94 [Sup Ct Jan.
22, 2015], while the rights to life insurance policy proceeds were challenged by the
decedent's surviving widow, the matter was brought initially on an order to show
cause in Supreme Court. In re Walker, 117 AD3d 838 [2nd Dept 2014] is similarly
distinguishable in that it is an appeal in Supreme Court, albeit from a Surrogate Court
order. Furthermore, at issue in the Surrogate Court was a death benefit, for which
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there was no designated beneficiary. In the turnover proceeding brought by the estate
administrator in the Surrogate Court, a motion to dismiss was granted in favor of the
plan administrator who had paid the plan proceeds to the decedent's sister. The
appellate court ruled that the motion should have been denied, in part, because the
court found that the evidence submitted did not establish the defense of prior
payment of the benefits as a matter of law. See, id. at 839.
Accordingly, the cases cited by Respondents do not conclusively establish that
the transfers of non-probate assets are routinely considered in probate matters.
Respondents seemingly ignore a basic tenet of insurance law and designated
beneficiaries on life insurance and retirement plans. But for the "revocation statutes"
similar to Estates Powers and Trusts Law § 5-1.4, such insurance and retirement
plans automatically pass on the plan benefits to the designated beneficiaries. These
plan benefits, therefore, are not deemed part of the probate process. Neither are such
benefits, when designated beneficiaries are named to receive them, even remotely
deemed as part of the decedent's estate. The Disputed Funds, therefore, cannot be
deemed to be the personal property of the decedent, whose ultimate disposition are
to take place entirely within the probate process. This Court should rule that the right
to the Disputed Funds as between the Snows and the Estate are properly determined
by applying New York substantive contract law to the Plans' provisions, and
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accordingly, award the Disputed Funds to LeAnn Snow, or alternatively to Leon
Snow.
B. The MMBB Plans Are Contracts and the Decedent and the Plan
Administrator Were the Contracting Parties Entering Into the Death
Benefit Plan and the Retirement Plan.
The Respondents contend that the parties (to the underlying dispute) do not
dispute that the Plans' governing law provisions require the application of New York
law. See, Resp Br at 14. The Appellants, however, respectfully submit, that the
governing law provisions require the application of the applicable New York
contract principles. See, App Br at 14-18. As an initial matter, the decedent and the
plans' administrator entered into two contractual agreements. In so doing, the
contractual parties contemplated the applicable New York law would certainly
encompass New York contract principles in deciding any disputes, including a
proper determination of the rightful beneficiaries to the plans' benefits, essentially,
the Disputed Funds.
The express governing law provision of the Retirement Plan provides as follows:
12.10 Governing Law. The provisions of the Retirement Plan shall
be governed by and construed in accordance with the laws of the
State of New York. [A-96].
The Death Benefit Plan contains similar language stating that the provisions of the
Plan shall be governed by and construed in accordance with the laws of the State of
New York. [A-113]. Each plan, therefore, includes express provisions on how the
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designated beneficiaries are to be determined, and ultimately, to be paid the plan
benefits, i.e., the Disputed Funds.
Admittedly, Estates Powers and Trusts Law § 5.1-4, on its face, would preclude
LeAnn Snow, as the former spouse, from an award of the Disputed Funds. This
statutory provision, however, does not preclude an award of the Disputed Funds to
Leon Snow, the only contingent beneficiary ever designated by the decedent.
Respondents seemingly contend, by way of further argument, that LeAnn Yowell
Snow seeks to claim the Disputed Funds through her father, Leon Snow. See, Resp
Br at 22. This assertion by the Respondents is entirely without merit because Leon
Snow was always the designated contingent beneficiary on each of the MMBB
plans.
Invoking the language "this type of mercenary scenario", the Respondents
erroneously aver that this Court rejected Respondents' language characterization in
In re Lewis, 25 NY3d 456 [2015]. Regrettably, Respondents go to greatly
exaggerated lengths to advance this ill-conceived argument. The Respondents
would merely gloss over the fact that the underlying dispute in In re Lewis turns on
whether the decedent's will was revoked, presumably by the decedent's destruction.
Upon the decedent's death, it appeared that no will had been left, as none was found
in the home of the decedent. Subsequently, the decedent's father-in-law sought to
probate a duplicate will which had been located by the former spouse, which was
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executed prior to the divorce of the decedent and the former spouse, and which left
the decedent's real property to the former spouse (husband at the time of execution
of the will) and to the decedent's father-in-law, alternatively, as the contingent
beneficiary.' This Court determined that Surrogate Court should have allowed a
rebuttal the presumption of revocation of the will by destruction, and in so finding,
the Court remanded the matter to the Surrogate Court to afford the will proponent
the opportunity for rebuttal on the issue of the potential will revocation by presumed
destruction. See, In re Lewis, 25 NY3d at 463. Nowhere in this Court's opinion, is
there the merest suggestion of the Respondent's characterization of "this type of
mercenary scenario". Rather, this Court simply remanded the matter to the
Surrogate Court to allow the relevant issues to be fully litigated. See, id. at 463.
In order to advance Respondents' argument that Estates Powers and Trusts Law
§ 3-5.1(b)(2) is the controlling statutory provision, Respondents would evidence a
complete disregard for New York contract principles and their applicability to the
underlying dispute. Yet, Respondents have provided only minimal, if any, legal
authority to establish that the Disputed Funds are personal property belonging to the
decedent.
The Court noted that the petitions were brought not by the foiiiier spouse, the named beneficiary
and executor in the will who would have been disqualified pursuant to Estate Powers and Trusts
Law 5-1.4 (a), but rather by his father (the decedent's former father-in-law named as contingent
beneficiary and executor) who was not so disqualified by New York law.
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Respondents, however, contend that the crux of this action is whether "victims
of human trafficking" or Leon Snow, the foi fuer father-in-law of the decedent, will
receive the Disputed Funds. This particular characterization by Respondents is
somewhat disingenuous, given that the underlying dispute herein, in the first
instance, is between LeAnn Snow, the designated primary beneficiary, and Michele
Arnoldy, the decedent's sister, in her individual capacity, and as the personal
representative of the estate. Furthermore, Michele Arnoldy, in fact, is the estate
beneficiary.
Appellants respectfully submit that this Court should adopt the IRB-Brasil
rationale and apply the New York substantive law of contracts in deciding which of
the competing claimants, the Snows or the Estate, are entitled to the Disputed Funds
that flow directly from the underlying contracts, the death benefit plan and the
retirement benefit plan. This approach would recognize the limitation imposed
pursuant to Estate Powers and Trusts Law § 5.1-4 as the applicable revocation
statute. Such an approach, therefore, would obviate the need to resort to Estates
Powers and Trusts Law § 3.5-1(b)(2), which inherently invokes a probate scenario
that is not only convoluted, but unnecessary, as well. Accordingly, this Court should
find that there is no need to apply Estates Powers and Trusts Law § 3.5-1(b)(2) in a
determination of the right to the Disputed Funds as between the Snows and the
Estate.
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CONCLUSION
The Appellants respectfully request that this Court answer the two certified
questions presented in the negative.
Dated: Levittown, New York
August 20, 2015
Respectfully submitted,
PRESTON & WILKINS, LLC
Attorneys for Interpleader-Defendants-Appellants
B
Jesse T. Wilkins
Gregory R. Preston
3000 Hempstead Turnpike — Suite 3017
Levittown, New York 11756
Tel. (212) 809-5808
Fax. (212) 898-9034
iwilkins(&,pwlawlic.corn
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