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BJARSCH v. DIFALCO

June 8, 1970

Marianne BJARSCH and Werner Kleiner, Plaintiffs,
v.
S. Samuel DiFALCO and Samuel J. Silverman, Surrogates of the County of New York, and Bank of North America, as Trustee under the Last Will and Testament of Hanna Elizabeth Cosgrove, Deceased, Defendants



The opinion of the court was delivered by: PALMIERI

PALMIERI, District Judge.

The plaintiffs in this action are German nationals and residents of the German Democratic Republic. They are remaindermen of a trust established in the will of a New York resident, Hanna Elizabeth Cosgrove, and are now entitled, under the terms of the trust, to immediate distribution of the remainder. The estate is presently subject to supervision of the New York County Surrogate's Court. This suit, against the two Surrogates of that county named as the defendants herein, seeks a summary judgment requiring the payment to the plaintiffs of money due them under a trust which the defendants caused to be paid into court under section 2218 of the New York Surrogate's Court Procedure Act. The plaintiffs seek a declaration that section 2218 is unconstitutional on its face and as applied. Plaintiffs also seek a permanent injunction restraining the enforcement of that section.

The late Judge Herlands of this Court granted plaintiff's application for the convening of a three judge court pursuant to 28 U.S.C. §§ 2281, 2284.* After the untimely death of Judge Herlands in August, 1969, Judge Pollack was designated to sit as a member of this Court. For the reasons which follow we deny the motions for summary judgment and a permanent injunction, and order that the complaint be dismissed.

 By decree dated May 16, 1968, Surrogate DiFalco found that plaintiffs were the legatees under the will of the deceased and ordered a partial distribution to them of their legacies. Subsequently, effective June 22, 1968, the New York legislature amended NYSCPA § 2218 by the addition of a new subdivision 1. *fn1" The trustee of the estate, the defendant Bank of North America, filed its final account on October 16, 1968, and plaintiffs then consented to a final decree providing for the deposit into court (pending the outcome of this action) of the amounts of the legacies remaining after the earlier distribution.

 Plaintiffs have made no application for withdrawal of funds from the court depositary after June 22, 1968, the effective date of subdivision 1, nor have the defendants denied any such application pursuant to section 2218 of the NYSCPA. Plaintiffs argue that any application to the Surrogate's Court in this case would be futile because the express language of section 2218(1)(a) requires deposit of funds into court due an alien in plaintiffs' position.

 Section 2218 is a "benefit, use and control" provision relating to the right of alien legatees and beneficiaries to receive funds from the estates of New York decedents. The section permits the Surrogate to direct that money or property due an alien beneficiary be paid into court, where it appears that the proposed recipient would not have the benefit, use or control of the funds; further payments are authorized only if made upon court order or judgment. NYSCPA § 2218(2). Where there is uncertainty as to benefit, use and control, the burden is placed on the putative alien recipient to show that he would have such benefit, use and control. NYSCPA § 2218(3). Section 2218(1)(a), effective June 22, 1968, requires the Surrogate to direct payment into court of funds to which an alien beneficiary would otherwise be immediately entitled where the alien is a resident or domiciliary of a country to which funds of the United States may not be transmitted under any federal order, regulation or similar determination; *fn2" the Surrogate has no discretion in regard to the initial payment of the money or property into court. However, the subdivision goes on to provide that any such money or property shall be paid out only pursuant to an order of the Surrogate or an order or judgment of a court of competent jurisdiction. Section 2218(1)(b) relates to the effect of an assignment by an alien beneficiary of funds paid into court under section 2218(1)(a).

 This case brings before the federal courts once more the problem of state legislation governing the distribution of decedents' estates where such legislation involves beneficiaries resident in foreign countries, particularly the so-called Iron Curtain countries. It is abundantly clear that a state has a valid interest in supervising the distributions of its decedents' estates. The state, in doing so, acts to protect the integrity of such distributions and to implement, so far as possible, the intent of its testators and the intendment of its laws of distribution. As a matter of public policy, New York seeks to make certain that beneficiaries receiving distributions from New York estates will have the benefit, use and control of the funds or property left to them. In furtherance of this policy, New York has provided, in section 2218, for an inquiry into benefit, use, and control where the beneficiaries are residents of foreign countries, and especially those nations under Communist governments.

 A premise basic to plaintiffs' position is the constitutional principle that the federal government has been entrusted with exclusive competence in the conduct of the foreign relations of the United States. U.S. Const. Art. 2 § 2, cl. 2; United States v. Curtiss-Wright Export Corp., 299 U.S. 304, 57 S. Ct. 216, 81 L. Ed. 255 (1936); Latvian State Cargo & Passenger SS Line v. McGrath, 88 U.S. App. D.C. 226, 188 F.2d 1000, 1002, cert. denied 342 U.S. 816, 72 S. Ct. 30, 96 L. Ed. 617 (1951). It can be generally stated that a state may not intrude into the exclusive federal domain of foreign relations. One of the questions before this Court is whether section 2218 constitutes a prohibited state interference in the foreign relations field. In their remaining contentions, plaintiffs claim that section 2218(1) deprives them of their property without the due process of law and the equal protection of the laws required by the Fourteenth Amendment.

 The Supreme Court has had several opportunities to pass upon the constitutionality of section 2218, but to date the Court has declined to interfere with the operation of the statute. In In re Estate of Leikind, 22 N.Y. 2d 346, 292 N.Y.S. 2d 681, 239 N.E. 2d 550 (1968), the New York Court of Appeals upheld section 2218(2) and (3) against a challenge that the statute was an unconstitutional interference with the foreign relations power. The court held that the section could stand if the New York courts, in applying it, "simply determine, without animadversions, whether or not a foreign country, by statute or otherwise, prevents its residents from actually sharing in the estates of New York decedents." 22 N.Y. 2d at 352, 292 N.Y.S. 2d at 685, 239 N.E. 2d at 554. The Supreme Court dismissed an appeal from this decision for lack of finality, Leikind v. Attorney General of New York, 397 U.S. 148, 90 S. Ct. 990, 25 L. Ed. 2d 182 (March 2, 1970). The Leikind appeal was sub judice before the Supreme Court at the time this case was argued before us, and counsel appeared to agree that any decision on the merits would necessarily dispose of the issues raised here. In view of the inconclusive result in the Leikind case, however, it becomes necessary for us to decide substantially the same questions.

 In Goldstein v. Cox, a three judge panel of this Court refused to hold section 2218(2) and (3) unconstitutional without some indication in the case before it that the statute had been improperly applied. 299 F. Supp. 1389 (S.D.N.Y. 1968). There the plaintiff contended only that section 2218, as it existed prior to the enactment on June 22, 1968 of subdivision (1), constituted an unconstitutional intrusion into the domain of foreign relations; claims of deprivation of due process and equal protection were not raised. The Supreme Court dismissed the appeal from this decision on jurisdictional grounds. 396 U.S. 471, 90 S. Ct. 671, 24 L. Ed. 2d 663 (1970).

 Additionally, in In re Marek's Estate, 11 N.Y. 2d 740, 226 N.Y.S. 2d 444, 181 N.E. 2d 456 (1962), the New York Court of Appeals affirmed a Surrogate's dismissal of a Czechoslovak beneficiary's application to withdraw funds deposited into court under the predecessor provision to section 2218. The Supreme Court dismissed the appeal for want of a substantial federal question, Justice Douglas dissenting. Ioannou v. New York, 371 U.S. 30, 83 S. Ct. 6, 9 L. Ed. 2d 5 (1962). Six years later, the Supreme Court again declined to intervene and denied a motion for leave to file a petition for rehearing. Ioannou v. New York, 391 U.S. 604, 88 S. Ct. 1864, 20 L. Ed. 2d 843 (1968). See also In re Braier's Estate, 305 N.Y. 148, 111 N.E. 2d 424, appeal dismissed sub nom. Kalmane v. Green, 346 U.S. 802, 74 S. Ct. 32, 98 L. Ed. 334 (1953).

 By contrast, the Supreme Court has twice reviewed analogous provisions in the laws of other states. In Clark v. Allen, 331 U.S. 503, 67 S. Ct. 1431, 91 L. Ed. 1633 (1947), the Supreme Court was faced with a challenge to the California alien beneficiary statute, also relating to claimants residing within territory now included in the German Democratic Republic. The California statute was a general reciprocity provision, permitting alien beneficiaries to take property of a California decedent if a United States citizen had the same rights to receive property from an alien under the laws of the foreign jurisdiction. In rejecting the claim that the statute was unconstitutional on its face as an intrusion into the power of the federal government to conduct foreign relations, Justice Douglas set out the Court's general thesis:

 
Rights of succession to property are determined by local law * * *. Those rights may be affected by an overriding federal policy, as where a treaty makes different or conflicting arrangements * * *. Then the state policy must give way * * *. But here there is no treaty governing the rights of succession to the personal property. Nor has California entered the forbidden domain of negotiating with a foreign country * * * or making a compact with it * * *. What California has done will have some ...

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