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HALVORSEN v. SHEIVE

February 10, 2004.

NORRINE M. HALVORSEN, Plaintiff
v.
ELLEN A. SHEIVE, Defendants



The opinion of the court was delivered by: MARIAN W. PAYSON, Magistrate Judge

DECISION & ORDER

PRELIMINARY STATEMENT

Plaintiff, Norrine Halvorsen, a resident of New York, has filed suit against her sister, Ellen Sheive, a legal resident of Nevada, seeking recovery of the proceeds of an Individual Retirement Account ("IRA") established by their deceased father, Ivar Halvorsen, Pursuant to 28 U.S.C. § 636(c), the parties have consented to have a United States magistrate judge conduct all further proceedings in this case, including the entry of final judgment. (Docket # 9).*fn1 Currently before this Court is defendant's motion for summary judgment. (Docket # 16), For the reasons discussed below, defendant's motion is granted in part and denied in part. Page 2

  FACTUAL BACKGROUND

  Based upon a careful review of the record before this Court, the following facts appear undisputed.*fn2 Plaintiff and defendant are siblings and the adult daughters of Ivar Halvorsen, who died on December 9, 1999. At the time of his death, Ivar*fn3 was the owner of three real properties and several investment accounts, including a First Albany Corporation IRA that was worth approximately $240,000. From the date of the IRA's inception until April 1997, plaintiff was named as the sole beneficiary of the IRA. On April 21, 1997, Ivar Halvorsen executed a change of beneficiary form, substituting defendant as beneficiary of the IRA. (Docket ## 1, 16).

  During the period 1998 through June 1999, plaintiff lived with Ivar in his home. (Docket # 17, Ex. A at 4, 14). She moved in with her father after having lived for several years with her mother following the foreclosure of her own home. (Id. at 4-5, 25-26). Although they lived together during Ivar's later years, plaintiff admittedly had "very little contact" with him and "didn't interact with him routinely," (Id. at 13, 15). She did act as his power of attorney during his final months in a nursing home. (Id. at 19-20).

  Defendant describes her relationship with her father, variously, as having been "at best, cordial" (Docket # 16, Sheive Aff. at ¶ 8) and a "pleasant adult, friendly relationship." (Docket #17, Ex. B at 5-6). Defendant explained that she had moved out of her father's house in Page 3 1964 at the age of eighteen, married her husband and eventually established residence in San Diego, California. (Docket # 17, Ex. B at 5-6; Docket # 16, Sheive Aff. at ¶ 3). For the following thirty years, defendant's contact with her father was infrequent and irregular, consisting of sporadic visits (approximately six in twenty-one years) and infrequent telephone calls and letters. (Docket # 17 at 7-10; Docket # 16, Sheive Aff. at ¶¶ 4-7). Her last visit with her father occurred in June 1999 when she and her husband moved her father into a nursing home following his discharge from a hospitalization in Albany. (Docket # 17, Ex. B at 13-18), Defendant testified that it was during this visit that she first learned from, her father's broker that she was the beneficiary of Ivar's IRA and certain annuities he owned.*fn4 (Docket # 17 at 18). This testimony directly and disquietingly conflicts with the statement in her attorney's reply affirmation that defendant "did not know at any time prior to her father's death, that she was to be the beneficiary of the IRA funds." (Docket # 26 at ¶ 6).

  Eleven months before he died, Ivar Halvorsen executed a new will. (Docket # 23, Ex. G). The will named defendant as executor and bequeathed to her all of his real and personal property. (Id.) In addition, the will provided that 60% of his residuary estate was to be distributed to defendant, with 40% left in trust for the benefit of plaintiff, with defendant named as trustee. (Id.). The residuary estate trust was Ivar's sole bequest to plaintiff under his will. (Id.) Page 4

  The will specifically defined the residuary estate to "includ[e] [Ivar's] investments at Brighton Securities Corp." (Docket # 23, Ex, G at ¶ 4), At the time of his death, Ivar held various investment accounts through Brighton Securities, which included the IRA, six annuities (as to which defendant and her daughter were the named beneficiaries) and a money market fund. (Decision of Hon. Edmund Calvaruso, Surrogate's Court Judge, dated August 21, 2001 (hereinafter referred to as "Surrogate Court Decision") at 2, submitted herewith by plaintiff), While the record is not entirely clear on this point, it appears that the value of the IRA and other annuities — which passed outside his estate — totaled in excess of $300,000. (Docket # 23, Affidavit of Jeffrey Weiss, Esq. at ¶ 22). The value of the money market fund, by contrast, which constituted the principal asset making up the residuary estate, totaled only approximately $5,000. (Surrogate Court Decision at 2). Defendant subsequently renounced her interest under the will, thus leaving plaintiff to inherit the real properties, the personal property and defendant's interest in the residuary estate, (Docket #17, Ex, B at 28).

  Both plaintiff and defendant testified that Ivar's decision, to establish a trust for the benefit of plaintiff grew out of his concern over plaintiffs perceived inability to manage finances.*fn5 (Docket # 1 at 15-16, 24; Docket #17, Ex, B at 31-32). According to defendant, Ivar told her that he intended to leave his estate to her because he trusted her to manage it well and to "bail" out plaintiff with the funds "if she needed it." (Docket # 17, Ex. B at 31-32). As defendant testified at her deposition: Page 5

 
[Ivar] felt that to leave [plaintiff] the money was to doom her to eventually being out of money again, and on the street. He felt that she couldn't handle the dealing with principal or being responsible for principal. So he gave it to me. He said also, I have never given you any money, I never helped you with anything in your life. He said, I would like to give it to you, you would be able to manage it well. I trust that . . . if your sister needs bailing, this will help you to bail her. That's basically what he wanted, her to be bailed if she needed it. But he didn't feel like she had proven herself capable of handling the inheritance.
(Docket #17, Ex. B at 31-32). Similarly, the attorney who drafted Ivar's will testified that it had been Ivar's intent to leave plaintiffs share in trust because of his concern that "she was not capable of managing her money." (Docket #17, Ex. D at 7-8).

  With respect to the IRA, both plaintiff and defendant stated that they did not discuss the IRA beneficiary change specifically with Ivar, At her deposition, defendant stated that she understood that Ivar's intention was that the IRA proceeds be used "to help take care of [plaintiff]" (Docket #17, Ex. B at 30) — a statement which she argues in no way constitutes an admission that she understood that they were left in trust for the benefit of plaintiff. (Id. at 32). Indeed, whether Ivar left the IRA funds in trust, as he did with the assets in his residuary estate, is the very essence of the parties* dispute. Plaintiff contends that he did; defendant disagrees.

  In claiming entitlement to the IRA proceeds, plaintiff relies on two legal theories. First, plaintiff contends that Ivar created a constructive trust with respect to the IRA. According to plaintiff, Ivar intended that the proceeds of the ERA be used to "bail" her out, and, to effectuate that intent, he changed the beneficiary upon defendant's assurance that she would use the IRA to take care of and provide for her sister. (Docket # 1). While defendant concedes that such an Page 6 understanding existed with respect to the residuary estate, she disputes that such an. understanding existed with respect to the IRA.

  Second, plaintiff claims that defendant exerted undue influence over her father in order to compel him to change the beneficiary of his IRA. According to the complaint, Ivar's mental capabilities had been diminished as the result of age and illness, making him particularly susceptible to the influence of family members. Defendant preyed on that susceptibility, plaintiff maintains, by promising him that the proceeds from the IRA would be used to benefit plaintiff after his death. Plaintiff contends that defendant's influence was so great as to override Ivar's intentions and decision-making ability, (Docket #1).

  Defendant now moves this court for summary judgment on both ...


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