Long Island Sav. Bank v. Savage

• Citation: 497 N.Y.S.2d 914,116 A.D.2d 512
• Parties: The LONG ISLAND SAVINGS BANK, Plaintiff-Appellant, v. Alice SAVAGE, etc., et al., Defendants-Respondents.
• Decision Date: 23 January 1986
• Court: New York Supreme Court Appellate Division

Page 914

497 N.Y.S.2d 914

116 A.D.2d 512

The LONG ISLAND SAVINGS BANK, Plaintiff-Appellant, v. Alice SAVAGE, etc., et al., Defendants-Respondents.

Supreme Court, Appellate Division,

First Department.

Jan. 23, 1986.

R.F. Meehan, New York City, for plaintiff-appellant.

J.L. Greenup, New York City, I.E. Weiner, for defendants-respondents.

Before MURPHY, P.J., and SANDLER, ROSS, ASCH and ELLERIN, JJ.

MEMORANDUM DECISION.

Order, Supreme Court, New York County (Seymour Schwartz, J.) entered September 18, 1984, which granted the motion of defendant Alice Savage to dismiss the complaint as against her; which severed and dismissed the counterclaims and cross-claims of defendants Robinson and Farrar insofar as they relate to Alice Savage; and, which denied plaintiff's motion for a default judgment and for a finding of contempt, affirmed, without costs.

We affirm this order recognizing, as the dissent points out, that we are invoking a highly technical requirement of the law. However, the statute involved, EPTL § 7-5.2, was clear and unambiguous in providing the only means by which a "Totten Trust" could be revoked at the time in question. Moreover, contrary to the assertion in the dissent, the result we reach is far from unjust under the circumstances giving rise to this action.

The facts, which are presented in detail in the dissent, indicate that Roxanna Edwards had opened a Totten Trust account at plaintiff Long Island Savings Bank in May, 1978, in trust for her niece, defendant Alice Savage. Subsequently, in July, 1981, Edwards sought to add two other family members as additional equal beneficiaries and requested that the plaintiff bank do so. Plaintiff bank prepared a "Supplemental Agreement" for Edwards' signature, and the bank also changed the title of the account on the signature card and bank book.

After the death of the depositor, the originally named beneficiary, Alice Savage, sought payment of the proceeds of this trust account by appearing at the bank, together with representatives of other members of the deceased depositor's family, and presenting the bank book together with the death certificate of Roxanna Edwards, the depositor. The bank refused to transfer the monies at that time. Instead, Savage was told that before such could be done it would be necessary for her to obtain letters of administration and a tax waiver and it was suggested that she retain an attorney for such purpose. Savage undertook these steps and returned to the bank, accompanied by a representative of her attorney's office, on November 10, 1982, fully armed not only with all of the specifically requested documentation but with the death certificates of the other two "beneficiaries" as well. On this second appearance, however, the bank refused to pay the money to Savage in her capacity as administratrix of the estate, the capacity it had earlier indicated was necessary, but instead insisted upon paying the proceeds of the account to her individually. Bank personnel advised Savage's attorney, in a telephone conversation, that they were "acting upon the advice of their Legal Department" in maintaining that the funds should be paid to her individually rather than in a representative capacity.

Some months later, after inquiries from the representatives of the other estates, the Bank instituted the instant action reflecting yet another change of position on its part with respect to the account in question. Despite its earlier determination, upon advice of counsel, that payment of the proceeds of the account should be made to defendant Savage individually, thereby implicitly recognizing, albeit belatedly, that its own initial procedures were inadequate to effectively modify the trust account, it now alleges that Savage has been unjustly enriched by payment of the monies "by mistake" and, charging her with conversion, it seeks recovery of two-thirds of the amount which it paid to her.

We conclude that, despite itself and its erratic behavior, the plaintiff bank correctly paid over the entire proceeds of the trust account to Alice Savage individually. We find, as did the Justice at Special Term in his careful and thorough analysis, that the trust account in question was not properly changed in accordance with the mandate of EPTL § 7-5.2(1), as then in effect, and that Alice Savage remained the sole beneficiary of the subject "Totten Trust". Accordingly, we affirm the dismissal of the plaintiff bank's complaint.

We note that no appeal has been taken by the representatives of the estates of the 2 decedent "beneficiaries" from the provision directing severance and dismissal of their "counterclaims and cross-claims" against Alice Savage, contained in the order entered by Special Term on September 18, 1984. Notwithstanding the inartful use of the term "counterclaims", the impact of that order is limited solely to claims directed against Alice Savage and cannot be construed as finally disposing of any counterclaims asserted against the plaintiff bank and we affirm the order in that context.

During the period in question, EPTL § 7-5.2(1) provided: "The trust can be revoked, terminated or modified by the depositor during his lifetime only by means of, and to the extent of, withdrawals from or charges against the trust account made or authorized by the depositor".

This statute clearly delineated the only means by which modification of a Totten Trust might be effectuated--that is, either by withdrawal or charges against the account, neither of which here took place. Reference to the legislative history of the statute confirms that a strict construction of such requirements was intended. The Recommendation of the Law Revision Commission, which led to the enactment of the section, noted the frequent litigation engendered in construing the Totten Trust device and urged the adoption of legislation to impose "objective standards to govern Totten trusts, in place of the case by case interpretation based on the depositor's subjective intent". The purpose of establishing such exclusive statutory standards was "to achieve certainty and predictability in this area of the law". (See Memorandum of the Law Revision Commission, reprinted in 1975 McKinney's Session Laws of N.Y., pp. 1534-6.)

The dissent places emphasis on the fact that the reported cases dealing with the interpretation of this statute involve situations of attempted revocations of Totten Trusts by means of the depositor's will. While such factor is not distinguishing, these cases afford instructive insight into the manner in which the statute before us has been applied. In Matter of Silberkasten, 102 Misc.2d 227, 229, 423 N.Y.S.2d 141, Surrogate Bloom recognizing that the statute was to be strictly construed, noted that: "No longer will the question of intent or extenuating facts and circumstances be allowed to cloud the issue as it had done in the past. Either the depositor revoked the account in the prescribed statutory manner or it was not revoked at all." Stressing the legislative intent of the statute to provide certainty and predictability in this area, the court held that "the question to be determined in this and all like cases is not what the depositor intended, but whether he complied with the provisions of the statute." 102 Misc.2d at 230, 423 N.Y.S.2d 141.

In Matter of Estate of Neuman, 106 Misc.2d 135, 431 N.Y.S.2d 256 Surrogate Midonick, citing and quoting from the decision in Silberkasten, also found literal compliance with the terms of the statute to be necessary, with the depositor's intent not an issue. Similarly, Surrogate Gelfand, after reviewing the legislative history, held in Matter of Flynn, 119 Misc.2d 561, 563, 463 N.Y.S.2d 719 that the "explicit and definitive statutory procedure ... completely encompasses the subject matter."

That these cases arose in factual contexts different from the present situation in no way diminishes the fact that a strict application of this exclusive statute had been required almost without exception prior to the amendment of the law.

What is particularly unfortunate in this case is that it is plaintiff bank itself that engendered the problems resulting in this litigation. It was the bank that established the procedure for adding additional beneficiaries and supplied the forms, which it had prepared for that purpose, that were on their face statutorily inadequate to effectively modify the trust in accordance with the depositor's desire. Having acted improperly in that regard, it exacerbated the situation by providing incorrect information and directives to the lawful beneficiary, Alice...