Kazaras v. Manufacturers Trust Co.

• Decision Date: 28 June 1957
• Citation: Kazaras v. Manufacturers Trust Co., 164 N.Y.S.2d 211, 4 A.D.2d 227 (N.Y. App. Div. 1957)
• Parties: Hilda Simons KAZARAS, Plaintiff-Appellant, v. MANUFACTURERS TRUST COMPANY, Ruth L. Niden, Executrix under the Last Will and Testament of Zivel B. Niden, deceased, Lester L. Jay, et al., Defendants-Respondents.
• Court: New York Supreme Court — Appellate Division

Page 211

164 N.Y.S.2d 211

4 A.D.2d 227

Hilda Simons KAZARAS, Plaintiff-Appellant, v. MANUFACTURERS TRUST COMPANY, Ruth L. Niden, Executrix under the Last Will and Testament of Zivel B. Niden deceased, Lester L. Jay, et al Defendants-Respondents.

Supreme Court, Appellate Division, First Department.

June 28, 1957.

Leonard Hemley, New York City, of counsel (Sol A. Liebman, New York City, with him on the brief, House, Grossman, Vorhaus & Hemley, New York City, attorneys), for appellant.

William Piel, Jr., New York City, of counsel (Gordon R. Erickson, New York City, with him on the brief; Sullivan & Cromwell, New York City, attorneys), for respondent Manufacturers Trust Co.

Lester Lewis Jay, New York City, respondent pro se.

Nathaniel Katz, New York City, for respondents Kazaras.

Before BREITEL, J. P., and BOTEIN, RABIN, FRANK and BERGAN, JJ.

BREITEL, Justice Presiding.

In this action, the settlor, who is also the life beneficiary, of an inter vivos trust seeks rescission of the trust on grounds of fraud, duress and undue influence. After trial, it was held that there had been fraud, duress, and undue influence, but, because of subsequent ratification by the settlor-beneficiary, the trust was held valid and subsisting. From the judgment dismissing the complaint plaintiff appeals. The trustee, a defendant in the action, argues for affirmance, and also that the findings by the trial court with respect to fraud, duress and undue influence are erroneous.

The judgment should be affirmed, on the ground that there was no fraud, duress or undue influence, and, even if there were, as developed in the concurring opinion of Mr. Justice Rabin, there was a ratification thereafter by the settlor-beneficiary.

The case is an unusual one. Involved is an intimate relationship between father and daughter, and a transaction occurring entirely in a family milieu. Concededly, the actors were dealing with one another out of love and affection, and with deepest concern for each other.

This is what happened.

The father, now dead, had come to this country as an immigrant and prospered greatly. By this first wife he had the daughter who is the plaintiff in this action. When only six months of age, she was a victim of poliomyelitis, as a result of which she was to be forever physically disabled. However, mentally, she is of bright and vigorous mind. She had been an outstanding student and had engaged in graduate university studies. For most of her life she walked in braces. In her early thirties, after a lifetime of extended medical treatment, including surgery, she was able to walk without braces, but still required the aid of two canes.

When 33 years of age, plaintiff met a man on a cruise ship. He was three years her junior, with intellectual and artistic interests, but without regular employment or income. A romance developed, and, in 1949, they were married.

The record is unclear whether this marriage was welcomed by the father. Plaintiff says that the father never objected to the son-in-law, but there are many circumstances which indicate that he had strong reservations.

The newly married couple spent most of their time in France, with infrequent visits by the daughter to her parents at their home here in New York. By January, 1952 many things had happened. Plaintiff was pregnant, and because of her physical condition it was known that the child could only be delivered by Caesarean section. The father, sick with diabetes, had sustained a coronary thrombosis. The husband was seriously ill, in a Paris hospital, suffering from ulcers and requiring critical surgery, with no assurance of successful outcome. During the week preceding the event with which we are most concerned, the daughter sustained a sprained ankle. She was then staying in her father's apartment in Manhattan, while the father and his wife were in Florida. It was during this time, on January 17, 1952, that plaintiff signed the trust indenture which she seeks to annul on the grounds of fraud, duress and undue influence. The agent of her father in procuring this execution was one Niden, the father's accountant, also now dead, who is supposed to have used threats and made statements on the basis of which plaintiff grounds her action.

Before her marriage, plaintiff had always been supported by her father. After the marriage, the couple lived in France, supported entirely by him. The husband's medical bills, in the past and those to come, were being paid, or were to be paid, by the father. The daughter was supplied with many additional facilities and aids required by reason of her physical handicaps. The impending Caesarean delivery was to be financed by the father. He, as noted before, was himself an ill man.

Niden, the father's agent and accountant, is supposed to have told plaintiff, according to plaintiff, that unless she signed the trust indenture, the father would be angry, his health would be jeopardized, and he would undoubtedly cut off all support for her, her husband, and the child to come. He is said to have raised his voice in accomplishing his objective. At the time of the signing of the indenture, concededly, there was no annex attached specifying the property that was covered in the trust indenture. The annex was to be signed later, within one day after the birth of her child in a New York hospital, following a Caesarean section. On the occasion of signing the indenture she was told that she had no recourse but to sign. It is true that, then, when she wished to ask some questions concerning the content of the indenture, which was a technical document defining future interests, she, at Niden's suggestion, telephoned her father's lawyer, a senior partner in a prominent law firm. Her question with regard to what provisions could be made for future children that might be born to her was narrowly answered by the lawyer. She says she was refused the opportunity to consult with a lawyer of her own choosing. Finally, being ill, distraught and desperate, she signed.

Before resuming narration of the facts, the nature of the trust indenture and the objections to it by plaintiff require consideration. There is no claim that the trust indenture was made for the purpose of benefitting the father or any third person. ¹ Indeed, the daughter concedes that her father's conduct was motivated only by love and affection. The correspondence between the father and daughter amply sustains this conclusion. But the trust indenture does have certain unusual aspects. It placed under the trust, assets, the title to which the father had transferred to the daughter on prior occasions by way of gift. These assets consisted of a note of one of the family corporations, stock in the family corporations, some mortgage bonds, and the remainder interest of plaintiff in a life insurance trust that the father had previously established. These assets were, or are now, worth something between $100,000 and $200,000.

Apart from what the daughter was to receive by way of savings bank Totten trust and under the will of the father, the entrusted assets comprised all of the assets expected to be received by her in the event of her father's death.

The trust provided that she was to receive an income of $650 per month for her life, with power to invade principal for the purpose of making or applying payments. Any excess income was to be accumulated for the child that was then en ventre sa mere, and such accumulation was to be paid over to the child at his majority.

In the event of the death of the settlor, the principal of the trust estate was to be divided into as many equal shares as there were then living children of the daughter, including the child en ventre sa mere. As to that child the income was to be paid directly to him for his life, and on his death the principal was to be paid over to the then living issue of the daughter's sister, Norma Zucker. With respect to the other children that the settlor might have, since they were not in being, the income was to be applied or paid over after majority, so long as they should live, or until the death of the younger of the children of the daughter's sister, Norma Zucker, whichever occurred sooner. The remainders in these instances, too, would pass to the issue of Norma Zucker. The effect of these provisions was that the corpus of the trust, except as it might be invaded, was never to go to the daughter's children, but would go to her nieces by her siser, Norma Zucker.

Plaintiff says that she did not know that her own assets were being placed in trust, and that she believed that the father was providing assets of his own for that purpose. She even testified that Niden so told her. In any event, she contends that she would have never consented that any of her assets be so placed that they would never descend to her own children. Moreover, she would never have willingly consented to the discrimination between the child she was then bearing and any children that she might subsequently have. Apart from her knowledge or understanding, she says that all that she did she did under duress and undue influence: in fear of her father's health, in fear of her husband's health, in fear of the effects upon her unborn child and her husband, and in a personal state of physical and mental distress.

The daughter has had a second child, also by Caesarean section. Her father died on November 19, 1954. The daughter and her enlarged family have been living on payments provided from the trust, including invasion, to some extent, of principal, and also on assets that she received under her father's will or at his death. ² Until her father's death he, concededly, supplied funds beyond the income of the trust assets, as he had done before. Her husband is now employed at a salary of $60 per week. Just about one year after her father's death this action was brought to set aside the trust.

Returning now to the evidentiary facts which bear...