Like dandelions, disputed gift cases pop up every year. Three new decisions together constitute an excellent tutorial, particularly on the sometimes knotty issues of when is a relationship “confidential” and what is “clear and convincing” proof.

To begin, the three requirements for a valid inter-vivos gift remain the same. As stated by the Court of Appeals: “There must exist the intent on the part of the donor to make a present transfer; delivery of the gift, either actual or constructive to the donee; and acceptance by the donee.” Gruen v. Gruen.1

In Matter of Rella,2 New York County Surrogate Nora Anderson articulated the primer on the burden of proof, the core factor in determining whether the first two requirements were satisfied in a given case.

Where a gift is challenged, the donee bears the burden of proving by clear and convincing evidence that the donor made a present transfer knowingly or “understandingly” (Matter of Clines, 226 AD2d 269 [1st Dept. 1996], citing Gordon v. Bialystoker Ctr., 45 NY2d 692, 695-96):

In Estate of Urry,3 one of the key issues was the intent of the alleged donor, Alan Trustman, at the time of the alleged gift. Trustman had executed a deed of gift conveying to his stepson, Caleb Urry, Trustman’s interest in his deceased wife’s estate (his wife was Caleb’s mother). In his affidavit in support of a motion for summary judgment, Trustman denied that he delivered the original deed to Caleb although a photocopy was in Caleb’s possession. The original remained with Trustman’s lawyer, who had prepared the deed of gift. (Co-Author Gary Freidman was counsel to Trustman.)

Anderson ruled that Urry had not provided clear and convincing evidence of Trustman’s intent to make a present gift. The court held that “Trustman at one time intended to make a gift,” but “fleeting intent and presumptions of acceptance do not a gift make.” The finding of Trustman’s intent would rest on “Whether or not there was in fact actual or constructive delivery.” In sum, actual or constructive delivery can satisfy not only the delivery requirement for a gift, but also satisfy the intent requirement if the donor has the requisite capacity and the delivery was not the product of undue influence or duress. In view of the undisputed fact that the original deed of gift remained with Trustman’s counsel, the Surrogate further held that the alleged donee failed to prove (or establish a material issue of fact concerning) Trustman’s relinquishment of dominion and control such as to constitute delivery of the alleged gift. A Notice of Appeal has been filed by Urry.

In Matter of Rella, supra, an accounting proceeding, objectants to the account of executor Gilbert Rella claimed that a lifetime gift to Gilbert from the decedent, Gilbert’s mother, was the product of undue influence and that the decedent lacked donative capacity at the time of the gift. The court granted Gilbert’s motion to dismiss the objection that the donor lacked the requisite capacity holding that Gilbert had met his burden of clear and convincing evidence and that the objectants had failed to submit any evidence to create a genuine issue of fact.

Stating that the finding that the deceased donor had testamentary capacity is not the equivalent of donative capacity, Anderson noted that a donee’s burden “is lightened by the law’s presumption that individuals have capacity” (citations omitted)…”and is further eased by the law’s recognition that, ‘A person may be of old age and [even] mentally weak, and still be able to understand and comprehend the meaning of a deed or the transfer of property’ (Aldrich v. Bailey, 132 NY 85).”

An interesting twist in Rella was that on the same date that the decedent made the gift in issue, she executed a codicil which benefited both the donee and the objectants, which was unsuccessfully challenged by another sibling. On this issue the Surrogate noted that although on the trial of the probate contest the decedent was found to have capacity, the finding is not conclusive on the issue of donative capacity “since less mental acuity is required to support a will than is required to support a lifetime gift (citation omitted).” Nonetheless, the court noted that objectants failed to sustain their burden in opposing a summary judgment motion by laying bare their proof establishing that there was a genuine issue of fact concerning donative capacity.

Confidential Relationship

The Surrogate also dismissed the objectants’ claim that the gift was procured by undue influence. The objectants had alleged “the possibility of a confidential relationship” between Gilbert and his mother. Addressing the meaning of confidential relationship under Ten Eyck v. Whitlock,4 Gordon v. Bialystoker Center,5 and Cowee v. Cornell,6 the Surrogate stated:

[although] the law presumes in the case of guardian and ward, trustee and cestui que trust, attorney and client, and perhaps physician and patient, from the relation of the parties itself that their situation is unequal…[and] while the doctrine is without doubt to be extended to many other relations of trust, confidence or inequality, the trust and confidence, or the superiority on one side and weakness on the other must be proved in each of these cases; the law does not presume them from the fact for instance that one party is a grandfather and old and the other a grandson and young… The question as to parties so situated is a question of fact dependent upon the circumstances in each case. There is no presumption of inequality either way from these relations merely. Cowee v. Cornell, supra, 75 NY at 101.

Applying these principles, the court ruled that the objectants’ conclusory allegations failed to establish a confidential relationship and that Gilbert had submitted evidence that established freedom from undue influence.

Mirvish v. Mott,7 addresses the requirement for delivery. In Mirvish, the donor of a famous sculpture signed a deed of gift stating “I gave this sculpture ‘The Cry’ to my good friend Biond Fury.” She handed the deed of gift and a photograph of The Cry to Fury. Plaintiff was Fury’s assignee. The Surrogate determined that the gift was valid. The issue was whether there had been constructive delivery, appropriate for “a monumental work of art such as The Cry.” The Cry was described as a 1,100-pound bronze sculpture, which was, at the time of the alleged gift, in storage in the custody of a New York art gallery. The Appellate Division, reversing the Surrogate’s Court, granted defendant Mott summary judgment on the grounds that the only evidence of delivery of the deed of gift was Fury’s testimony, which was incompetent under CPLR 4519, and that the claim of plaintiff Mirvish, Fury’s assignee, was barred by the statute of limitations.

The Court of Appeals reversed the Appellate Division holding that Fury’s “mere possession of [the deed] gift after the donor’s death creates a presumption of delivery to the donor during the donor’s lifetime.” The court held that the defendant had waived his statute of limitations defense and that CPLR 4519:

creates no impediment to reliance on the presumption of delivery created by Fury’s possession of the gift instrument, which was specifically addressed to him, after Yulla’s [donor] death.

Clear and Convincing

The burden of a challenged donee is to provide “clear and convincing evidence” of each of the three requirements for a gift. We understand that this burden is higher than the normal civil law burden for a prevailing party to provide a preponderance of the evidence. But what does higher mean in practice? Is it a quantum test or a quality test, or both? Perhaps, it is as Justice Potter Stewart said about the difficulty in defining obscenity in Jacobellis v. Ohio,8 “But I know it when I see it.” Pattern Jury Instruction (PJI) 7:65 supports the meaning of both quantitative and qualitative superiority. Thus:

clear and convincing evidence means evidence that satisfies you that there is a high degree of probability that, at the time the decedent, AB [donor] delivered the [property] to CD, (he, she) intended to give immediate ownership to CD by way of a gift. In deciding whether CD has met this burden of proof you must consider the evidence offered by each side and in that process you may consider the fact that AB is dead and cannot testify.

A preponderance of the evidence need satisfy you only that the evidence supporting his or her case more nearly represents what actually happened than the evidence that is opposed to it.

A better explanation may be found in the PJI’s general charge, PJI 1:64:

To decide for the plaintiff it is not enough to find that the preponderance of the evidence is in the plaintiff’s favor. A party who must prove (his, her) case by a preponderance of the evidence only need satisfy you that the evidence supporting (his, her) case more nearly represents what actually happened than the evidence which is opposed to it. But a party who must establish (his, her) case by clear and convincing evidence must satisfy you that the evidence makes it highly probable that what (he, she) claims is what actually happened.

Among the many helpful comments to PJI 7:65 are that the subject of the gift need not be in existence as long as the three requirements of intent, delivery (physical or constructive or symbolic), and acceptance have been proven by clear and convincing evidence. As noted above, proof of delivery will also satisfy proof of intent in applicable cases, i.e., where the donor has capacity and has not been subjected to undue influence or duress. Further, acceptance will be presumed when the gift is beneficial to the donee—which is our segue into gifts made by an attorney-in-fact for the donor.

Gifts by Attorneys-in-Fact

In Matter of Ferrara,9 the Court of Appeals construed General Obligations Law §5-1502 M with respect to gift giving authority under the statutory power of attorney as follows in pertinent part:

to mean that the principal authorizes the agent…[t]o make gifts…either outright or to a trust for the sole benefit of one or more of [the specified] persons…only for purposes which the agent reasonably deems to be in the best interest of the principal, specifically including minimization of income, estate, inheritance, generation-skipping transfer or gift taxes” (General Obligations Law §5-1502M [1] [emphasis added by Court]).

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[2] Thus, section 5-1502M unambiguously imposes a duty on the attorney-in-fact to exercise gift-giving authority in the best interest of the principal. Nothing in section 5-1502M indicates that the best interest requirement is waived when additional language increases the gift amount or expands the potential beneficiaries pursuant to section 5-1503.

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[5] In short, whether the gift-giving power in a statutory short form power of attorney is limited to the authority spelled out in lettered subdivision (M) in section 5-1501(1), or augmented by additional language in conformity with section 5-1503, the best interest requirement remains.

In short for a gift made by an attorney-in-fact the donee must prove the mandatory donative intent, delivery and acceptance and also that the gift was in the best interest of the donor.

Charles F. Gibbs is a partner at Holland & Knight. Gary B. Freidman is a partner of Greenfield, Stein & Senior. Both authors are Fellows of the American College of Trust and Estate Counsel. Freidman was counsel to Trustman in ‘Estate of Urry,’ discussed in this article.

Endnotes:

1. 64 NY2d 48 (1986).

2. NYLJ, April 10, 2012, p. 22., col. 6 (Surr Ct., New York Co.).

3. NYLJ March 15, 2012, , p. 22, col. 5 (Surr Ct. New York Co.).

4. 156 NY 341 (1898).

5. 45 NY2d 692, 699 (1978).

6. 75 NY 91, 99 (1878).

7. 18 NY3d 510 (2012).

8. 378 U.S. 184, 197 (1964).

9. 7 NY3d 244, 252 (2006).