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Genworth Life Insurance Co. of New York v. Dwaileebe

United States District Court, W.D. New York

March 20, 2017



          HON. MICHAEL A. TELESCA United States District Judge.


         Genworth Life Insurance Company of New York (“Plaintiff” or “Genworth”) brings this interpleader action under 28 U.S.C. § 1335, seeking, among other forms of relief, discharge from all liability in connection with two annuities it issued to Geraldine H. Dwaileebe (“the Annuitant”), who is now deceased.


         I. The Annuities and the Purported Beneficiary Change

         On August 9, 2011, and August 15, 2011, Genworth issued two Individual Single Premium Deferred Annuity Contracts (#431641842 and #431409864, respectively) (collectively, “the Annuities”) to the Annuitant. At the time, the Annuitant's youngest son, David J. Dwaileebe (“David” or “the Disclaiming Beneficiary”), was the designated beneficiary for 100% of the benefits payable under the Annuities upon her death (“the Death Benefit”). By means of a New York Statutory Short Form Power of Attorney dated March 24, 2011 (“the 3/24/11 POA”), the Annuitant designated her son, George N. Dwaileebe (“George”), as her attorney-in-fact. George then submitted Annuity Contract Change Forms, dated January 4, 2012, which purported to reduce David's interest in the Death Benefits from 100% to 30.25%, and to disburse 69.75% of David's interest in the Death Benefit among the remaining siblings, with each of them to receive 7.75%. By letter dated January 18, 2012, Genworth informed the Annuitant that the 3/24/11 POA did not grant George the authority to make beneficiary changes for the Annuities, and that the beneficiary changes set forth on the January 4, 2012 Annuity Contract Change Forms (“the Change Forms”) therefore could not be effectuated.

         The Annuitant passed away on January 23, 2012. Upon her death, a Death Benefit in the amount of $237, 986.04 (for Annuity #431641842), and a Death Benefit in the amount of $222, 037.47 (for Annuity #431409864) became payable.

         By letter dated January 25, 2012, Daniel G. Schum, Esq. (“Attorney Schum”), who represented the Estate of the Annuitant (“the Estate”), provided Genworth with a copy of a New York Short Form Power of Attorney, dated January 11, 2012, designating George as the Annuitant's attorney-in-fact (“the 1/11/12 POA”). In contrast to the 3/24/11 POA, the 1/11/12 POA included a Statutory Gifts Rider, which authorized the designated attorney-in-fact “to add, remove or otherwise change the named beneficiary(ies) of any contract of life . . . insurance or any combination of insurance procured by or on behalf of the principal prior to or after the creation of the agency.” However, as Genworth informed Attorney Schum by letter dated February 7, 2012, because the Change Forms were signed prior to execution of the 1/11/12 POA with the Statutory Gifts Rider, the change-of-beneficiary designations could not be effectuated. Genworth, in an attempt to resolve the competing claims, suggested to the Estate, that if David were willing to sign a Disclaimer and Release, the Death Benefit under the Annuities could be distributed in accordance with the Change Forms. Genworth subsequently received a Disclaimer and Release (“the Disclaimer”), [1] signed by David and dated March 2, 2012.

         Genworth received claim forms for the Annuities' Death Benefit from certain of David's siblings, namely, Linda A. Van Ness, Jenny S. Trapani, James A. Dwaileebe, George (individually), Laurie J. Overmeyer, Gary S. Dwaileebe, Michelle M. Azzi, and Michael G. Dwaileebe (individually). By Deferred Annuity Claim Form dated April 2, 2012, David also made a claim for the Death Benefit.

         In a letter to Genworth dated April 5, 2012, Mark C. Dwaileebe (“Mark” or “the Contesting Beneficiary”), disputed David's capacity to execute the Disclaimer.[2] The Contesting Beneficiary's letter stated, in pertinent part, as follows:

[P]lease be advised that David [the Disclaiming Beneficiary] signed over his shares without fully understanding what he was doing. It is and always has been that David was to be provided for in the event of both our parent's [sic] deaths. David does not have the ability to understand nor comprehend what he was signing over. He is 47 years of age and has always lived at home with both our parents because he has always needed guidance due to an illness at birth.
On or about January 16th 2012 my mother who was dying of cancer was coerced into changing her power of attorney so that the benefactor would be changed. This is not what she ever intended for 30 plus years.

(Compl. ¶ 33). In light of the adverse and conflicting demands for payment of the Death Benefit, and Genworth's inability to determine whether David was competent to execute the Disclaimer, Genworth commenced the instant interpleader action on June 19, 2012.

         II. The Federal Interpleader Action

         On September 11, 2012, an answer to Genworth's complaint was filed by six of David's siblings: Linda A. Van Ness; Jenny S. Trapani; James A. Dwaileebe; Laurie J. Overmyer; George, individually and as an executor of the Estate; and Michael G. Dwaileebe, individually and as an executor of the Estate (collectively, “the Objectants”). The Objectants' answer also was purportedly filed on behalf of David. On April 1, 2013, the Objectants filed a motion to settle this case consistent with the terms of the purported Disclaimer.

         On June 7, 2013, Mark filed his pro se answer, alleging, among other things, that David was “not aware of the documents presented to him to sign on or about March 2, 2012 [i.e. the Disclaimer] and April 2, 2012, and furthermore does not have the mental capacity to understand what he was signing away.” (Answer of Mark C. Dwaileebe (Dkt #3), ¶ 3). On June 17, 2013, Gary S. Dwaileebe filed his pro se answer, requesting that this Court order a comprehensive psychological evaluation of David and further order that David receive 100% of the Annuities' Death Benefit. (Answer of Gary S. Dwaileebe (Dkt #38) at 5).

         On June 17, 2013, Brian Laudadio, Esq. (“Attorney Laudadio”) was substituted as David's counsel of record and, on June 19, 2013, he moved to stay (Dkt #39) this action pending the adjudication of a petition pursuant to New York Mental Hygiene Law (“M.H.L.”) Article 81 (“the Article 81 Proceeding”) in the Monroe County Surrogate's Court (“Surrogate's Court”). On June 19, 2013, this Court entered an order (Dkt #41) denying the Objectants' motion to approve the proposed settlement and staying the action in its entirety pending the resolution of the Article 81 Proceeding in Surrogate's Court.

         III. The Surrogate's Court Proceedings

         By means of an Article 81 petition filed on June 17, 2013, David's sister, Michele M. Azzi (“Azzi”), sought a finding that David was likely to suffer harm because he lacked the capacity to manage his financial affairs. Azzi requested that she be appointed as the guardian of his property. The co-defendants in the federal interpleader action all were named in the Article 81 proceeding as interested parties.

         On August 15, 2013, Andrew R. Randisi, Esq., counsel for the Objectants, filed a response to the Article 81 petition asserting that David did not require appointment of a guardian. On April 8, 2014, one of the Objectants, Jenny S. Trapani (“Trapani”), filed a pro se cross-petition in Surrogate's Court alleging that while he required some assistance with financial and other personal matters, David did not require the appointment of a guardian. Trapani alternatively requested that if David were found to require a guardian, that Azzi should not be appointed to serve in that capacity. On April 17, 2014, Azzi moved to dismiss the cross-petition. The Honorable Edmund A. Calvaruso (“Surrogate Calvaruso”) granted Azzi's motion to dismiss the cross-petition on August 18, 2014.

         On November 20, 2014, a hearing was held before the Surrogate Calvaruso, without notice to the Objectants. (See Transcript of Hearing (Dkt #59-7, pp. 23-35 of 35)). At that time, Surrogate Calvaruso accepted into evidence, inter alia, a Psychological Evaluation, prepared by Tricia L. Peterson, Ph.D., ABPP, following her examination and testing of David (Dkt #59-5; also Dkt #59-13); and the report of the independent court-appointed evaluator, Loren H. Kroll, Esq., dated November 12, 2014 (Dkt #59-6). At the conclusion of the hearing, Surrogate Calvaruso determined, among other things, that it was necessary to appoint a guardian for David because he “is not able to provide for his property management, is incapacitated as that term is defined in § 81.02 of the Mental Hygiene Law, and is at risk of suffering harm due to his functional limitations and inability to adequately understand and appreciate the nature and consequences of the limitation.” (Order and Judgment Appointment Guardian of the Property (Dkt #59-7, pp. 3-4 of 35)). Consequently, Azzi was appointed to serve as the guardian of David's property. Surrogate Calvaruso further determined that David suffered from the same functional limitations on March 2, 2012, and sua sponte, declared the purported Disclaimer and Release signed by David on March 2, 2012 revoked, null, void, invalid and without legal effect, pursuant to N.Y. M.H.L. § 81.29. (Id., p. 7 of 35)

         The Objectants appealed the Former Surrogate's order and judgment to the Appellate Division, Fourth Department, of New York State Supreme Court (“the Fourth Department”). In a decision dated July 8, 2016, the Fourth Department concluded, inter alia, that the Former Surrogate erred in dismissing Trapani's cross-petition based on the Objectants' lack of standing, and found that the Objectants were “interested parties” under Article 81. Further, the Fourth Department found, since Azzi's Article 81 petition did not seek to have the Disclaimer invalidated, the Objectants reasonably expected that the issue of its validity to be resolved in the federal interpleader action-not in the Surrogate's Court proceeding. Given the Objectants' financial interest in the validity of the Disclaimer, the Fourth Department held that the Former Surrogate's failure to provide notice to them before ruling on the Disclaimer's validity deprived the Objectants of notice and an opportunity to be heard. The Fourth Department further found that the Former Surrogate erred in not appointing independent counsel to represent David, and in denying without a hearing the Objectants' motion to disqualify Attorney ...

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