PROCEDURAL HISTORY The Decedent passed away a resident of Monroe County on December, 29, 2016, and his Will was admitted to probate by a decree of this Court dated October 3, 2017, which also issued letters testamentary to the co-Executors. Pursuant to the terms of the Will, half of the decedent’s residuary estate is left his son, Gary, and the balance is split equally among his daughters, Julie, Lori, and Wendy.Co-executors seek an order of this Court dismissing a claim filed by Ontario County Economic Development (hereinafter “OCED”) for the death benefit proceeds of decedent’s $300,000 life insurance policy originally issued by Union Central Life Insurance Company. OCED avers that the decedent assigned the policy proceeds to OCED by way of two assignment agreements, the first dated October 1, 1997, which was then superceded by a second assignment executed by the decedent on May 11, 1999.These policy assignments served as security for the decedent’s personal guaranties for two loans made by OCED in 1997 and 2002 to the decedent’s business, Westplex Industries, Corp. (hereinafter “Westplex”), the first for $300,000 and the second in the amount of $160,000. These loans were personally guaranteed by both the decedent and another Westplex principal named Richard Dillon in separate writings executed on December 31, 1997 and again in a writing dated July 9, 2002. Within its claim, OCED avers that Westplex defaulted on the loans in 2004 and OCED is now owed $279,559.70, with interest that continues to accrue. OCED seeks payment of the cash surrender value of the Union Central policy as both the policy assignee and as a claimant against the Estate for the Westplex indebtedness that was guaranteed by the decedent.On March 28, 2018, the Estate rejected the claim stating that recovery on the default of the Westplex loans, upon which the policy assignment is based, is time-barred. In the alternative, the Estate argues that OCED should be limited to recovery of only half the value of its claim as OCED permitted the policy insuring the other guarantor, Richard Dillon, to lapse and took no action to collect the amounts due from Dillon or to compel him to reinstate the life insurance policy. Furthermore, the Estate alleges the explicit limitations in the policy assignments preclude the assertion of OCED’s claim.By way of a letter dated, April 4, 2018, the Estate, though its counsel, contacted Ameritas Life Insurance (which now holds the decedent’s life insurance policy) to make a claim on the policy as the designated beneficiary had pre-deceased the decedent and there is no contingent beneficiary. The Estate acknowledged the assignment of benefits to OCED and asked that no payment be made until the resolution of OCED’s claim. Ameritas subsequently advised the Estate that no payment of the policy would be made until it received a release of the policy assignment from OCED.Thereafter, the Estate commenced this proceeding and alleges that the loans given by OCED to Westplex went into default on or about March 5, 2004, and OCED never commenced an action against Westplex to obtain a judgment or otherwise collect on the loans, nor did OCED commence an action against the decedent or Dillon as guarantors of the loans. Further, the Estate argues the six year statute of limitations pursuant to CPLR 213 precludes OCED from collecting the debt owed to it by Westplex or enforcing the guarantees made by the decedent and Dillon. Additionally, the Estate argues that the limitations of the policy assignment, which authorizes the carrier to pay the assignee the amount set out as then due, thwart any payment of the policy proceeds to OCED as it cannot legally establish an amount due under the loans or guaranties.OCED filed an Answer alleging the Estate’s relief is barred “by the doctrines of waiver, estoppel, laches, unclean hands, ratification and/or acquiesence” and also under the equitable principles of unjust enrichment and/or due to a violation of the duty of good faith and fair dealing. Additionally, OCED cross-petitioned for the dismissal of the Estate’s petition and for an order validating its claim.The Estate moved for summary judgment dismissing OCED’s claim and a declaration that the OCED is not entitled to any portion of the policy proceeds. OCED has cross-moved for an order declaring it is entitled to all of the insurance proceeds and attorney’s fees in connection with enforcing the guaranties.DECISIONIt is well settled that “[t]he proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. (Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851, 853[1985]). Summary judgment is a drastic remedy that should not be granted where there is any doubt as to the existence of factual issues or where an issue is “arguable.” (Braun v. Carey, 280 A.D.1019 (3rd Dept. 1952); Barrett v. Jacobs, 255 NY 520, 522 (1931). However, in this proceeding neither party disputes the facts as alleged and both contend they are entitled to judgment as a matter of law. (The Walton & Willet Stone Block, LLC v. City of Oswego Community Dev. Off. & City of Oswego, 137 AD3d 1707 [4th Dept 2016]; Voss v. Netherlands, Ins. Co., 22 NY3d 728 [2014]).In contesting the validity of OCED’s claim, the Estate argues the claim is time-barred as OCED failed to commence an action or obtain judgment on either the Westplex debt or the guaranties, upon which the claim is premised. It is undisputed that Westplex defaulted in 2004 and OCED admits in its papers that its right to recover against Westplex “is extinguished by the passage of time.” (Respondent’s Memorandum of Law at 9). Additionally, the Estate argues that the recovery on the guaranties is also time-barred as more than six years has passed since the Westplex default.Indeed, the statute of limitations for repayment of a loan is six years from the date the cause of action accrues (CPLR 213[2]). The cause of action accrues on the date of the execution of each check. (Matter of Loew, 38 Misc 3d 1206[A] [Sur Ct, Nassau County 2012]). Where, as in the instant case, the statute of limitations has expired prior to death, the executor has a duty to reject the claim and has no authority to allow a time-barred claim (Matter of Skeele, 16 AD3d 1157 [4th Dept 2005]). Similarly, the statute of limitations period for breach of a guarantee is governed by the six-year period applicable to contracts. (Movado Group, Inc. v. Caseiko Trading Co. 912 F Supp 2d 109, 117 [SDNY 2012]; Am. Trading Co. v. Fish, 42 NY2d 20 [1977]).However, OCED argues its claim to the insurance proceeds is couched in the decedent’s guarantee, which it alleges is absolute, unconditional and remains enforceable. The pertinent language of the both the 1997 Guaranty and 2002 Guaranty read the same at paragraph 8, which states:“Guarantor waives any defense based on or arising out of any defense of Borrower other than payment in full of the indebtedness, including without limitation any defense based on or arising out of the disability of Borrower, or the unenforceability of the indebtedness or any part thereof from any cause, or the cessation from any cause of the liability of Borrower other than payment in full of the indebtedness.”(Petitioner’s Ex. E)OCED asserts the foregoing precludes the Estate from invoking the statute of limitations as an affirmative defense against its claim.Guaranties that contain language obligating the guarantor to payment without recourse to any defenses or counterclaims, i.e., guaranties that are “absolute and unconditional,” have been consistently upheld by New York courts. (Cooperatieve Centrale Raiffiesen-Boerenleebank, B.A. v. Navarro 25 NY3d 485 [2015]). Courts have determined that such absolute and unconditional guaranties can preclude guarantors from asserting a broad range of defenses. (see United Orient Bank v. Bao Lee, 223 AD2d 500[1st Dept 1996] [where guaranties contained waivers of all defenses other than payment, defendants precluded from asserting claims of release]; Gannett Co. v. Tesler, 177 AD2d 353, 353[1st Dept 1991] [defendant precluded from asserting any defenses or counterclaims, including "discharge in release"]; Walcutt v. Clevite Corp., 13 NY2d 48, 55 [1963] [guarantor may not raise as counterclaims or defenses those claims belonging to the principal obligor]).OCED argues that a guarantor may not assert as a defense “the expiration of the statute of limitations against the primary obligor.” (Sotheby’s Inc. v. Mao, 2016 NY Slip Op 30708[U] [Sup Ct, NY County 2016]). Furthermore, OCED asserts the decedent’s guaranties effectively provides that, even if Westplex is able to escape liability, they are still enforceable. (Hyman v. Golio, 134 AD3d 992 [2d Dept 2015]).However in Sotheby’s, the statute of limitations was not an issue before the New York County Supreme Court during special term as the proceeding had been timely commenced and the decision resulted in the denial of summary judgment. (Sotheby’s at 11, 18). The Appellate Division, Second Department in Hyman found there was a prima facie entitlement to judgment as a matter of law by proving the existence of a guaranty, the underlying debt, and the guarantor’s failure to perform under the guaranty and the defendant failed to establish, by admissible evidence, the existence of a triable issue with respect to a bona fide defense. However, there was no assertion of statute of limitations as a defense in Hyman. (Hyman v. Golio, 134 AD3d 992 [2d Dept 2015]).Moreover, the Estate counters, the General Obligations Law 17-103(1) obviates OCED’s interpretation that the guaranties preempt the invocation of a statue of limitations defense. General Obligations Law 17-103(1) addresses agreements waiving the statute of limitation and reads:1. A promise to waive, to extend, or not to plead the statute of limitation applicable to an action arising out of a contract express or implied in fact or in law, if made after the accrual of the cause of action and made, either with or without consideration, in a writing signed by the promisor or his agent is effective, according to its terms, to prevent interposition of the defense of the statute of limitation in an action or proceeding commenced within the time that would be applicable if the cause of action had arisen at the date of the promise, or within such shorter time as may be provided in the promise.(General Obligations Law 17-103[1]).The Court of Appeals observed that while the “statute of limitations is invoked as defense ‘to afford protection to defendants against defending stale claims’, it also serves societal interest giving closure to human affairs.” (John J. Kassner & Co. v. New York, 46 NY2d 544 [1979]; citing Flanagan v. Mt. Eden Gen. Hosp., 24 NY2d 427, 429 [1969]).Because of the combined private and public interests involved, individual parties are not entirely free to waive or modify the statutory defense. (Id at 550).Pursuant to the strictures of the General Obligations Law, parties may enter into enforceable agreements to extend the Statute of Limitations, provided the underlying action arises out of contract, that the action has already accrued, and the agreement is in writing, executed by the promisor. (General Obligations Law 17-103[1]).However, an agreement to “waive” or extend the Statute of Limitations made at the inception of liability it is unenforceable because a party cannot “in advance, make a valid promise that a statute founded in public policy shall be inoperative” (Shapley v. Abbott, 42 NY 443, 452 [1887]).The general concern shared by courts is that the inception of the obligation or contract, there is a greater likelihood that a “waiver” or extension of the defense is the result of ignorance, improvidence, an unequal bargaining position, or was simply unintended. John J. Kassner & Co. V. New York 46 NY2d 544, 551[1979]). Thus, an extension agreement made prior to the accrual of the cause of action “has no effect.” (General Obligations Law, 17- 103[3]). As such, OCED’s assertion that decedent waived the statute of limitations defense when he executed the guaranties is without merit.In the alternative, OCED argues that notwithstanding the provisions of GOL 17-103[3], the exception found in GOL 17-103 allows for Courts “to find that by reason of the conduct of the party to be charged it is inequitable to permit him to interpose the defense of the statute of limitation.” (General Obligations Law 17-103(4)[b]). However, this argument is unavailing as OCED has not set forth such facts that could serve as a basis to deny the Estate’s statute of limitations defense. The record shows at no point in the 14 years that elapsed from the default on the Westplex loans to the death of the decedent did the decedent wrongfully or fraudulently induce OCED to delay collection on that debt. (Adelman v. Friedman, 80 Misc 2d 946, 949 [Civil Ct., Queens County 1975]; Erbe v. Lincoln Rochester Trust Co., 13 AD2d 211 [4th Dept. 1961]).In its Amended Answer, OCED avers that every time the decedent paid the regular premium for his life insurance policy, he reaffirmed and acknowledged the debts owed to OCED and therefore the statute of limitation would not be a defense to the claim. OCED cites a case from 1888 wherein the debtor had assigned his life insurance policy to the creditor as security. (Miller v. Magee, 49 Hun. 10 [3d Dept. 1888]). In Miller, the insured/debtor regularly paid the policy premiums and these renewal receipts had been annually sent by him to the creditor, to whom the policy also was delivered at the time of the assignment. The Third Department held that the certificates of renewal and “the payment of those premiums by the defendant was for the benefit of the plaintiff, and the delivery of the renewal certificates was as unequivocal an acknowledgment of the indebtedness and promise to pay as was the delivery of the policy thereof. The only theory upon which the delivery of the policy saves the operation of the statutes is that the debtor, by such an act, acknowledges the debt, and evinces a willingness to pay.”(Miller v. Magee, 49 Hun. 10 [3d Dept. 1888]. However, this theory postulated in Miller and promoted by OCED is unpersuasive as the facts in this proceeding are decidedly different. In the six years prior to his passing, the decedent never made an unequivocal acknowledgment of the debt similar to that the debtor made in the Miller case. (Id at 10).OCED admits in the Amended Answer that the policy premiums were paid using the dividends and/or cash value of the policy, therefore the decedent did not affirmatively pay the annual premiums nor provide OCED with proof of payment. The decedent never sent the renewal certificates to OCED to show the policy was in effect, and it is alleged by the Estate that the decedent was incapable of reaffirming the debt due to his physical and mental deterioration that resulted in the appointment of a Power of Attorney to manage his affairs in 2010. (Peterson Aff.). Therefore there is no evidence of an acknowledgment of the debt or guaranties that would serve to toll the statute of limitations.OCED alleges that the Assignment executed by the decedent on May 11, 1999 entitles it to the full value of the decedent’s life insurance policy and further alleges its collection as the policy beneficiary is not susceptible to the statute of limitations. In response, the Estate argues the Assignment is “partial and conditional”. The pertinent part of the Assignment reads as follows:It is expressly agreed:(b) that after the maturity of the policy, the Company is authorized to pay the assignee the amount set out as then due to it in a statement from the assignees without the requiring of a waiver or consent from the any beneficiary and to pay any balance remaining over the amount of the assignee’s claim to the beneficiaries of record in the manner directed.(Petitioner’s Ex. C to Exhibit 1).Based on the foregoing language, the Estate asserts, when the policy matured upon the decedent’s passing, the amount then due to the OCED as the assignee was zero as the Westplex debt and the guaranties were time-barred under the CPLR and thus unenforceable. The decedent’s wife was the sole beneficiary of the policy, however she predeceased. Therefore, except for the portion of the policy proceeds that is allegedly assigned to OCED, which is the issue before this Court, the balance of the policy is payable to the Estate.“An insured has the right to designate the person who shall be the beneficiary under the insurance contract and such person is entitled to the insurance proceeds as a third-party beneficiary in accordance with the intention of the insured which is usually ascertained from the contract itself (2 Appleman, Insurance Law & Practice, §771)”. (In re Estate of Tanenblatt, 160 Misc 2d 490 [Sur Ct, Nassau County 1994]). The decedent could designate anyone as the beneficiary of his policy, and may also, as he did here, assign the policy to OCED, and that the policy will continue valid in the hands of the assignee, although OCED has no interest whatever in the life insured. (2 Appleman, Insurance Law & Practice, §771). A creditor may take out a policy on the life of his debtor, and the policy will continue valid although the creditor has been paid and has thus ceased to have an interest in the life of the insured.” (Olmstead v. Keyes, 85 NY 593 [1881]).However, in situations where the intention of the insured is ascertainable from evidence other than the insured’s mere designation of the beneficiary, an exception to the rule in New York becomes operative.” (Estate of Tanenblatt, 160 Misc 2d 490 [Sur. Ct. Nassau County 1994]). The plain language of the Assignment is clear evidence that the decedent intended to assign only so much of the policy proceeds which were due to OCED when he passed.None of the cases cited by OCED involve the conditional assignment that is present in this proceeding. OCED cites a case out of Municipal Court of New York County in 1951 that involved the a bank which purchased a life insurance policy on its borrower’s life and when the borrower died shortly after taking out the loan, the insurance proceeds were used to satisfy the debt as the policy was “a contract to pay a certain sum in the event of death.” (Alperstein v. National City Bank,201 Misc 47 [Mun. Ct. NY County 1951]). However, the facts of this case are different from those in Alperstein as OCED does not own the policy issued by Union Central Life Insurance Company. The decedent owned the policy, retained control of the policy, and maintained the authority to designate beneficiaries and assign conditional interests under the policy. Unlike the bank/creditor in Alperstein, OCED was never the sole beneficiary of the decedent’s policy, nor did it ever own the subject policy. OCED’s reliance on the Court of Appeals decision in Angel v. Chase National Bank, is also misplaced as the insurance policies in that case were assigned to the bank pursuant to a collateral agreement for the payment of a note and all other liabilities and obligations of the insured and the language of that collateral agreement was “not susceptible to any other inference.” (Angel v. Chase National Bank, 279 NY 250 [1938]). Here, the Assignment of the policy is limited to “an amount set out as then due” and there can be no such sum as OCED’s claim for the original indebtedness is time-barred.Based on the foregoing, the Estate’s motion for summary judgment is granted. The claim presented by OCED is barred by the statute of limitations and therefore OCED has no entitlement to any of the death benefits of the decedent’s life insurance held by Union Central Life Insurance Company (also referred to as the Ameritus Life Insurance Company policy No.U000014229) and said proceeds are to be payable to the named beneficiary, or in absence thereof, the Estate. Furthermore, OCED’s motion for summary judgment is denied and its cross-claim made within its Answer is dismissed.Counsel for the Estate is directed to submit a proposed Order consistent with this Decision.Dated: May 3, 2019Rochester, New York
