Summary Judgment Reversed: Claim That Lifetime Transfers Were Made To Avoid Decedent’s Obligations To Daughter Under Divorce Agreement Can Proceed

When he died in 2012, the decedent, retired physician Henry D. Rubenstein, left his insolvent estate to his second wife and her nephew. Although he and his second wife had a son, his will explicitly left no bequest to that son. The second wife claimed that the decedent’s extensive health problems had depleted the estate to the point of insolvency; the decedent’s first wife and family disputed this claim.

When the decedent and his first wife had divorced in the 1970s, they had entered into a property settlement agreement (“PSA”) obligating the decedent to leave bequests to their two children in an amount equal to any bequest he left for any of his subsequent children, or, if he had no subsequent children, an amount equal to one-eighth of his gross estate. The PSA also obligated him to maintain $100,000 in life insurance for his first wife.

At his death, neither his first wife nor their children received anything from the estate. Because he had disinherited the child from his second marriage, his children from the first marriage received nothing pursuant to the PSA; moreover, the life insurance policy he was to have maintained for his first wife did not exist at the time of his death.

The decedent’s first wife and their children sued the estate and the decedent’s second wife and son. They claimed breach of the PSA, intentional interference with contract, and violations of the Uniform Fraudulent Transfer Act (“UFTA”). They alleged that the decedent had disinherited the child of his second marriage in order to avoid a bequest to them; and that he intentionally depleted his estate through lifetime transfers to his second wife and their son. The children of the first marriage also alleged that, when the decedent’s father had died over 20 years before, he had left $15,000 to each of them, but the decedent withheld that information, and the bequests, from them.

After discovery ended, the defendants moved for summary judgment; the plaintiffs cross-moved to extend discovery.

The trial judge granted the defendants’ motion for summary judgment, with the exception of the claim regarding the $100,000 life insurance. In an oral decision, the trial court ruled that there was no “paper trial or any solid evidence” of lifetime transfers and that it “may be that there were, but there’s no evidence presented to the Court for any.” The trial court also refused to extend discovery.

One of the daughters from the first marriage appealed. Despite the defendants’ claim that she was barred from doing so based on procedural errors, the appeals court found that, because the plaintiff was not represented by counsel and the procedural history was “nuanced,” her appeal would be heard in the interests of justice.

Turning to the merits, the appellate court concluded that it was not clear from the record and the trial court’s “abbreviated oral ruling” that there were no genuine issues of material fact. Although the motion judge had stated that he did not see “any kind of paper trail or solid evidence” of lifetime transfers, he also acknowledged that “maybe” such transfers had occurred. Plaintiff’s appellate appendices included many documents that allegedly reflected lifetime transfers and the decedent’s intent to evade the PSA. Plaintiff also attached a letter from the decedent to his estate planning attorney that stated that disinheriting the son of his second marriage “will eliminate any problems with reference to my divorce settlement.” Plaintiff asserted that this evidence created an issue of material fact as to whether lifetime transfers were done to deprive her of her rights under the PSA. The appellate court noted that the trial judge had not commented on these documents, or on deposition testimony of the decedent’s estate planning attorney, in his oral ruling on the motion. Because the appeals court could not determine, from the oral opinion, whether the judge had considered this evidence, it reversed summary judgment and remanded these issues to the trial court.

The appellate court also rejected the defendants’ claim that the alleged improper transfers should be rejected because the UFTA only applies to commercial transactions. The court ruled that, although commercial transactions were the “primary focus” of the UFTA, the Act is not limited to commercial transactions.

With respect to the plaintiff’s claim regarding the $15,000 alleged bequest from her paternal grandfather, the appellate court found that the trial court failed to address the claim, and the record and briefs were inadequate to resolve the issue; consequently, that claim was also remanded.

Finally, because the trial court did not address the standard for extending the time to take discovery, plaintiff’s application to extend the discovery period was also remanded.

A copy of Rubenstein v. Estate of Rubenstein can be found here –  Rubenstein v. Estate of Rubenstein