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Miriam Kaller Family Irrevocable Trust v. Lincoln Benefit Life Co.

Supreme Court, Kings County

February 6, 2017

The Miriam Kaller Family Irrevocable Trust, by and through its trustee Moshe Freund, Plaintiff,
Lincoln Benefit Life Company, Defendant.

          Ellen M. Spodek, J.

         The following e-filed papers read herein:

         NYSCEF No.

         Notice of Motion/Order to Show Cause/ Petition/Cross Motion and Affidavits (Affirmations) Annexed 5 - 14

         Opposing Affidavits (Affirmations) 17

         Reply Affidavits (Affirmations)

         Affidavit (Affirmation)

         Other Papers Memoranda of Law 18, 20 - 25


         Upon the foregoing papers, in motion sequence number 1, defendant Lincoln Benefit Life Company (Lincoln or the Insurer) moves for an order, pursuant to CPLR 3211(a), dismissing all claims interposed by plaintiff, The Miriam Kaller Family Irrevocable Trust (the Trust), by and through its Trustee Moshe Freund, with prejudice. Plaintiff opposed the motion.


         Plaintiff commenced this action on April 2, 2014 seeking to recover damages for breach of contract premised upon defendant's refusal to pay a death benefit of ten million dollars ($10, 000, 000) or unjust enrichment seeking the return of premiums in the amount of approximately five hundred thousand dollars ($500, 000) paid on a life insurance policy. The subject policy was issued on December 10, 2007 (the Policy) insuring the life of Miriam Kaller (the Insured). At the time of issuance, the Trustee was Abraham Kaller, the Insured's grandson. Plaintiff contends that Mr. Kaller resigned as Trustee and on November 10, 2008, Mr. Freund was appointed to replace him.

         The Trust paid all the premiums on the Policy as they became due. On October 12, 2009, during the period when the Policy was in full force and effect, the Insured died. To date, the Insurer refuses to pay the death benefit or to refund the premiums paid.

         On February 6, 2013, the Insurer filed a complaint in the Federal District Court in New Jersey (the District Court) seeking a declaratory judgment holding that the policy was void due to material misrepresentations in the application concerning the Insured's financial condition and/or that there was a lack of an insurable interest at the inception (Lincoln Benefit Life Company v Abraham Kaller, as Trustee of The Miriam Kaller Family Irrevocable Trust dated October 4, 2007, United States District Court, District of New Jersey, Civil Action No. 3:13-CV-00767) (the Federal Action). More specifically, Lincoln alleges that the Policy was issued as the result of fraud and deceit and was intended to benefit strangers with no interest in the continuing life of the Insured.

         On February 13, 2013, a summons and complaint commencing the Federal Action was personally served on Mr. Kaller by serving his wife at his home in Brooklyn and mailing a copy to him. When Mr. Kaller failed to appear, Lincoln filed and served a request for entry of a default. The Clerk entered the requested default on March 11, 2013. On June 24, 2013, having heard nothing further from the Trust, Lincoln moved for a default judgment; that motion was returnable August 5, 2013. The motion was granted by Order and Judgment dated July 16, 2013 which provided that the Policy was void, that no death benefits are or shall ever become due and payable under the Policy and that the Insurer was not obligated to return the premiums paid to the Trust (the Default Judgment).

         Defendant's Contentions

         In support of its motion, defendant argues that the Trust is precluded from maintaining the instant action pursuant to the doctrine of res judicata, i.e., by the time the Trust commenced the instant action, the Policy had already been declared void in the Federal Action. Defendant further asserts that the District Court had subject matter jurisdiction over the instant dispute pursuant to the court's diversity jurisdiction since the Insurer has its principal place of business in Lincoln, Nebraska; Mr. Kaller is a resident of New York State; and the amount of money in controversy exceeds seventy five thousand dollars ($75, 000) (28 USC § 1332[a][1]). Defendant goes on to argue that the District Court had personal jurisdiction over Mr. Kaller under New Jersey's long arm statute. Lincoln further notes that pursuant to its terms, the Policy is governed by law of the state in which the application is signed; the application indicates that it was signed in Lakewood, New Jersey. [1] Defendant also argues that plaintiff fails to offer any proof that Mr. Kaller resigned as Trustee prior to the commencement of the Federal Action.

         Plaintiff's Contentions

         In opposition, the Trust alleges that: (1) the District Court did not have personal jurisdiction over the Trust or its sole Trustee, Mr. Freund, because Lincoln did not serve Mr. Freund in that action, either in his individual capacity or as Trustee; (2) there is no legal support for Lincoln's contention that the due process requirements of the United States Constitution are to be disregarded in this case because Lincoln named and served an individual who had resigned as Trustee more than four years before the action was commenced; (3) neither the current Trustee, Mr. Freund, or the former Trustee, Mr. Kaller, appeared in the Federal Action; and (4) the District Court disregarded its own procedural rules when it entered the default judgment.

         More specifically, plaintiff argues that at all times, the owner and beneficiary of the Policy was the Trust, as provided in the application and the Policy. Plaintiff also asserts that the Policy provided addresses in Brooklyn for the Insured, Mr. Kaller and the Trust. Plaintiff therefore concludes that the District Court could not properly premise jurisdiction over Mr. Kaller or the Trust in reliance upon the long arm statute, since Mr. Kaller had no contact with New Jersey.

         Moreover, plaintiff claims that the District Court did not have jurisdiction over the Trust, since Lincoln served Mr. Kaller, who had resigned as the Trustee four years earlier. Thus, since the Federal Court did not have personal jurisdiction over the Trust, which did not appear in the action, the Default Judgment is null and void. From this it follows that the Judgment is not entitled to full faith and credit, so that the doctrine of res judicata is inapplicable.

         Plaintiff further alleges that the Default Judgment should not be given res judicata effect because the District Court did not follow its own rules in issuing the judgment. More specifically, the civil docket for the case indicates that on July 3, 2013, the court held an ex parte telephone conference with Lincoln. Thereafter, a Default Judgment was signed on July 16, 2013, 20 days before the motion was returnable, six days before Mr. Kaller's deadline to respond to the motion expired and without having received an affidavit or certificate attesting to the fact that Mr. Kaller had even been served with that motion.

         In this regard, the Trust points out that the affidavit of service for the motion states that Mr. Kaller will be served; there ...

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