The Fall-Out: Litigating After The Death of the Alleged "Incapacitated"

By Eric W. Penzer

Overview

This outline addresses some of the more common judicial proceedings in which a decedent’s capacity may be at issue. Among the topics addressed are contested proceedings, proceedings to determine the validity of lifetime trusts, proceedings involving lifetime gifts, and proceedings involving the execution of other documents, including powers of attorney, deeds, and beneficiary designations, as well as applicable and burdens of proof.

1. Contested Probate Proceedings

a. Capacity required to execute a will

i. Testamentary capacity is the lowest acceptable level of cognitive ability required by -- lower than contractual capacity.

1. In re Seagrist’s Will, 1 AD 615, 620 (1st Dept 1896), aff’d, 153 NY 682 (1897): “The same clearness of comprehension and ability of expression which is required to enable a man to enter into a need not exist to enable him to make a valid will.”

2. Clapp v Fullerton, 34 NY 190, 197 (1866): “The right of a to dispose of his estate, depends neither on the justice of his prejudices nor the soundness of his reasoning. He may do what he will with his own; and if there be no defect of testamentary capacity, and no or , the law gives effect to his will, though its provisions are unreasonable and unjust.”

3. In re Delmar’s Will, 243 NY 7, 10-11 (1926): “The law jealously guards the right of a person to dispose of his property by will, whatever his condition of health may be, but there comes a time when the ordinary death-bed will, prepared when the testator is sinking slowly but surely to his end, must be submitted to careful scrutiny to determine whether it indeed meets the tests of testamentary capacity.”

1 ii. As stated in Matter of Kumstar, 66 NY2d 691, 692 (1985), and numerous other cases, in order to make a will the testator must have:

1. understood that she was making a will and the scope of its dispositive provisions;

2. knew and understood the nature and extent of her assets; and

3. knew those who would be considered the natural objects of her bounty and her relations with them. iii. “‘While a court must look to [the three prongs of the Kumstar text] when considering capacity ... they are but rough guides’ and each case must be decided upon its particular facts and circumstances” (In re Will of Khazaneh, 15 Misc 3d 515, 522 n.17 [Sur Ct, NY County 2006], quoting 2B Warren’s Heaton, Surrogates Courts § 186–c[1][c] at 32–238 [6th ed.]). iv. Capacity is measured at precise time of execution (see Matter of Williams, 13 AD3d 954 [3d Dept 2004]; Matter of McCloskey, 307 AD2d 737 [4th Dept 2003]).

1. relating to the condition of the testator before or after the execution is significant, but only “insofar as it bears upon the strength or weakness of mind at the exact hour of the day of execution” (id.).

a. See Matter of Partridge, 141 Misc 2d 159, 159-60 (Sur Ct, Rockland County 1988) (expanding scope of discovery in probate proceeding pursuant to 22 NYCRR § 207.27 to encompass tape recordings of conversations between objectant and decedent occurring six to nine months prior to will’s execution; “The court finds that the contentions raised by petitioner constitute special circumstances to enable petitioner to utilize the tape recordings at an examination before trial.”).

v. A testator must only experience a “lucid interval” of adequate capacity to execute a valid will, and that interval “can occur even contemporaneously with an ongoing diagnosis of dementia . . . or even incompetency” (Matter of Petix, 2007 WL 1532288, at *4 [Sur Ct, Monroe County May 29, 2007]).

1. “[O]ld age, physical weakness and senile dementia are not necessarily inconsistent with testamentary capacity as long as the testatrix was acting rationally and intelligently at the time the [instrument] was prepared and executed” (Hedges, 100 AD2d 586, 588 [2d Dept 1984], appeal dismissed 63 NY2d 944 [1984]).

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2. “With respect to persons of unsound mind having lucid intervals, it is sufficient if the evidence adduced in support of the will shall establish that the party afflicted had intermissions, and that there was an intermission at the time of the act” (In re Greeley’s Will, 15 Abb Pr NS 393, 401 [Sur Ct, Westchester County 1873]). b. Burden of proving capacity

i. The will proponent has the burden of proving that testator possessed sufficient capacity (see Matter of Kumstar, 66 NY2d at 692).

ii. However, “[a]s a general rule and until the contrary is established a testator is presumed to be sane and to have sufficient mental capacity to make a valid will” (In re Beneway’s Will, 272 AD 463, 467 [3d Dept 1947]).

1. As Surrogate Anderson noted in Matter of Roberts, 34 Misc 3d 1213(A), 2011 WL 7069561, at *2 (Sur Ct, NY County Dec. 5, 2011), the proponent’s burden of proving capacity “is eased by the law’s that a testator has the capacity to execute a testamentary instrument.” c. Proving capacity

i. The proponent’s burden can often be satisfied through self-proving affidavits.

1. A self-proving affidavit “constitutes prima facie evidence of the facts attested to therein by the ” (Matter of Schlaeger, 74 AD3d 405, 407 [1st Dept 2010] [“Proponent met his burden of establishing the decedent’s testamentary capacity with the self-proving affidavit of the attesting witnesses stating that the decedent was of ‘sound mind, memory and understanding” and was not incompetent]).

a. Such affidavits often recite, in sum and substance, that the testator was “of sound mind, memory and understanding” and “not suffering from any defect of sight, hearing, or speech, or from any other physical or mental impairment which would affect his capacity to make a valid Will.”

2. However, “something more” may be required where a testator is of impaired capacity.

a. Authority establishes that the presumption of regularity may be insufficient to prove the validity of a will where a testator is of impaired capacity – mental or physical.

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i. In Weir v Fitzgerald, 2 Bradf. 42, 68-69 (1851) (testator’s vision impaired; presumption of regularity insufficient to prove validity of will), the Court of Appeals stated that “[s]omething more is necessary to establish the validity of the will in cases where, from the infirmities of the testator, his impaired capacity, or the circumstances attending the transaction, the usual inference cannot be drawn from the mere formal execution. Additional evidence is therefore required that the testator’s mind accompanied the will, that he knew what he was executing, and was cognizant of the provisions of the will.” ii. Citing Weir, the Court applied this principal again, in Matter of Creekmore, 1 NY2d 284 (1956), where it was called upon to determine the validity of an instrument creating a joint bank account between the decedent and her daughter, established at a time when the decedent was fatally ill. iii. The rule has been applied most often to physical infirmities -- blindness and deafness.

1. See, e.g., In re Regan's Will, 206 AD 403, 406 (2d Dept 1923) (collecting authority and stating: “It seems to me that there is no evidence in the record upon which the learned surrogate could reach the conclusion that the paper in question was read to the decedent, or that its terms and conditions were disclosed to her prior to the making of her mark. I do not say that it is necessary to prove these precise facts in all cases, but in the case of an illiterate testator who cannot read or write there must be something more than the mere fact that the testator affixed his mark to the will.”).

2. See also In re Alfaya’s Will, 122 Misc 771, 774 (Sur Ct, Westchester County 1924) (“In the case of persons who are ill, or otherwise disabled, as well as in cases of illiteracy, there is no presumption that the testator knew what he was doing, but the knowledge of the contents of a will and the character of the paper have to be proven”).

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iv. More recently, Judge Radigan applied the “something more” requirement -- and determined that it was satisfied -- in Matter of Richtman, 1994 WL 16854449 (Sur Ct, Nassau County April 26, 1994) (“Ordinarily when a will is duly executed, the fact of such execution is sufficient proof that the instrument speaks the testator’s language and expresses his will, but when a testator is under some disability such as illness or inability to read or write and speak, something more is demanded. There must then be proof not only of the factum of the will but also that the instrument expresses his intention”) ii. Testimony of attesting witnesses

1. In contrast to the rule applicable to lay witnesses generally, attesting witnesses to a will are permitted to testify whether a person was of sound or unsound mind (see Prince, Richardson on Evidence § 7– 202[m] [Farrell 11th ed.], cited in Crawn v Sayah, 31 AD3d 367, 369 [2d Dept 2006]). iii. Expert testimony

1. While the opinions of non-treating expert physicians are admissible, they are generally afforded very little weight.

a. See Matter of Slade, 106 AD2d 914, 915 (4th Dept 1984) (“Proponents’ reliance on the testimony of Dr. Caine in favor of the testatrix’s testamentary capacity is misplaced. The doctor did not see or examine her and did not discuss her condition with any of her attending physicians or nurses. He only reviewed her medical records. Such testimony is the weakest and most unreliable kind of evidence.”).

b. See Matter of Estate of Buchanan, 245 AD2d 642, 646 (3d Dept 1997) (“Moreover, the psychiatrist’s testimony was based almost exclusively upon decedent’s medical records and was thus ‘the weakest and most unreliable type of evidence’” [citation and quotation marks omitted]).

2. Such evidence, standing alone, has been held insufficient to warrant denial of summary judgment in a proponent’s favor.

a. Matter of Kumstar, 66 NY2d 691, 692 (1985): “Here, there was insufficient evidence adduced at trial to warrant submitting that issue to the jury. The subscribing witnesses and those who

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were close to decedent when the will was drafted each testified that decedent was alert and capable of understanding the nature of her actions. Decedent’s treating physician testified that it was his opinion, based on a reasonable degree of medical certainty, that decedent was competent when she signed the will. By contrast, a physician called by the objectant who reviewed decedent’s medical records was unable to state with a degree of medical certainty that decedent was incompetent at the time in question.”

b. Matter of Estate of Van Patten, 215 AD2d 947, 948 (3d Dept 1995): “When the proponent of a will meets the burden of establishing testamentary capacity with evidence which demonstrates that the testator understood the nature and consequences of executing a will, knew the nature and extent of the property disposed of by the will, and knew those who would be considered the natural objects of his bounty and his relations with them, the testimony of an objectant’s expert who has reviewed the testator’s medical records and is unable to state with a degree of medical certainty that the testator was incompetent is insufficient to warrant submission of the issue to the jury.” iv. Recording of execution ceremony as proof of capacity

1. Provided a proper foundation is established, recordings of the decedent’s execution of the will are generally admissible as proof of testamentary capacity

a. See Matter of Burack, 201 AD2d 561, 561 (2d Dept 1994) (“Contrary to the appellants’ contention, the trial court did not improvidently exercise its discretion by admitting into evidence a videotape of the will execution. The videotape was not offered in an attempt to probate the document as a will; rather, it was offered as evidence of the decedent's testamentary capacity. A proper foundation was laid; the three witnesses to the will execution and the attorney who supervised the will execution testified that the videotape was a fair and accurate depiction of the events which were filmed. Moreover, the attorney who supervised the will execution also testified extensively as to the chain of custody of the videotape and testified that the tape did not appear to have been tampered with” [citations omitted]).

b. See In re Estate of Makitra, 101 AD3d 1579, 1580-81 (4th Dept 2012): “Here, there was ample evidence that decedent

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was of sound mind and memory when he executed his November 2007 will. Aside from the trial testimony of several disinterested witnesses to that effect, petitioner’s introduced in evidence at trial a videotape that was made of decedent as he reviewed and signed the will. The tape was reviewed by the Surrogate before she rendered her decision. Based upon our review of the record, including the videotape, we perceive no reason to disturb the Surrogate’s findings, which are entitled to great weight inasmuch as they hinged on the credibility of the witnesses” (citations omitted).

c. See Matter of Scher, 137 AD2d 605 (2d Dept 1988) (appeal from grant of petitioner’s motion for judgment during trial as a matter of law admitting will to probate): “The decedent, an 89- year-old blind woman, executed a will in an attorney’s office in the presence of three subscribing witnesses. The entire execution of the will was tape-recorded. The tape affirmatively demonstrated the decedent’s testamentary capacity; to wit: she knew the nature and extent of her property; she named the natural objects of her bounty, her children and grandchildren; and she stated her reason for leaving her house to one daughter and providing a $1,000 bequest to each of the others, rather than dividing her estate equally.”

v. Explanatory writing by decedent

1. In re Estate of Feller, 26 Misc 3d 1205(A), 2010 WL 10954 (Sur Ct, Monroe County Jan. 4, 2010): “Here, the proponent has offered a prima facie case of requisite testamentary capacity. The decedent herself sought out the services of proponent to have him draft her last . She met with him for that purpose with specific, detailed notes of how she wanted her estate devised. . . . In fact, when decedent reviewed proponent’s draft of her will, she made changes to it adding accurate addresses and a middle name of a residuary beneficiary, which in the Court’s view is further indicia of her capacity.” d. Right to jury trial

i. The right to a jury trial is provided by (SCPA 502[1]).

1. Court may still direct verdict at trial if evidence insufficient to support jury’s determination (see Matter of Slade, 106 AD2d 914 [4th Dept1984] [affirming grant of contestants’ motion for directed verdict on issue of lack of testamentary capacity, renewed after the jury’s

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verdict finding, inter alia, that decedent possessed testamentary capacity]).

e. Federal courts

i. Actions that require determinations concerning a decedent’s mental capacity may be litigated in federal courts where, for example, diversity jurisdiction exists.

1. See, e.g., Sun Life Assur. Co. of Can. (U.S.) v Gruber, 05 CIV. 10194 (NRB), 2007 WL 4457771, at *14-15 (SD NY Dec. 14, 2007) (federal interpleader action commenced by insurance company concerning three competing beneficiary designations), affd sub nom. Sun Life Assur. Co. of Can. v Gruber, 334 Fed Appx 355 (2d Cir 2009).

ii. However, in accordance with the “probate exception” to federal diversity jurisdiction, a federal court will not probate a will, administer a decedent’s estate, or entertain an action seeking to dispose of property in the custody of a state probate court.

1. See Marshall v Marshall, 547 US 293, 311-12 (2006) (“Thus, the probate exception reserves to state probate courts the probate or annulment of a will and the administration of a decedent’s estate; it also precludes federal courts from endeavoring to dispose of property that is in the custody of a state probate court. But it does not bar federal courts from adjudicating matters outside those confines and otherwise within federal jurisdiction.”).

2. Proceedings To Invalidate Lifetime Trusts

a. Context in which determination may be made

i. Stand-alone action/proceeding

1. See, e.g., In re Tognino, 87 AD3d 1153 (2d Dept 2011) (proceeding to contest the validity of amendments to decedent’s living trust); In re Ranaldo, 104 AD3d 857, 857 (2d Dept 2013) (appeal from determination in “simultaneous” trial of contested probate proceeding and related proceeding, inter alia, to invalidate an amendment to a trust); In re Doman, 68 AD3d 862, 863 (2d Dept 2009) (proceeding to invalidate Qualified Personal Residence Trust); Gregory v Wilkes, 26 Misc 2d 641 (Sup Ct, NY County 1960) (proceeding to set aside provision of trust instrument as invalid on grounds of fraud and undue influence).

8 ii. Discovery/turnover proceeding

1. See Matter of Davidson, 177 Misc 2d 928, 932 (Sur Ct, NY County 1998) (“The fiduciary may choose to bring an action to rescind the trust or may commence a discovery proceeding to obtain information needed to determine whether there are assets of the estate contained in such a trust or to reclaim for the estate assets held by the .”).

2. See In re DelGatto, 98 AD3d 975 (2d Dept 2012) (SCPA 2103 proceeding seeking turnover of house decedent deeded to lifetime trust; petitioner alleged that decedent executed the trust while not mentally competent and subject to undue influence). iii. Guardianship proceeding (pre-death)

1. Mental Hygiene Law § 81.29 authorizes court to modify, amend, or revoke, inter alia, any previously executed contract, conveyance, or disposition during lifetime or to take effect upon death, made by the incapacitated person prior to the appointment of the guardian while the person was incapacitated.

a. See In re Rita R., 26 AD3d 502, 503 (2d Dept 2006) (affirming, as modified, court’s invalidation, pursuant to MHL § 81.29(d), of various legal instruments executed by alleged incapacitated person, including various trusts and amendments).

i. Notably, in Rita R., the Second Department modified order to invalidate will executed during period of incapacity; prior to amendment of statute prohibiting such a determination.

1. By amendment to statute effective 2008, the statute expressly prohibits courts from invalidating or revoking a will or a of an incapacitated person during the lifetime of such person.

b. See Matter of Nicoll, 191 AD2d 444, 444 (2d Dept 1993) (proceedings pursuant to Mental Hygiene Law article 77 for the appointment of a conservator and for the nullification of a trust agreement executed by the proposed conservatee).

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iv. Accounting Proceeding

1. See Matter of Donna Lee Beanland Trust, Sur Ct, Suffolk County, April 5, 2015, Czygier, J., File No. 2009-607/A (determining validity of amendment/restatement of trust in the context of trust accounting proceeding). b. Standing to maintain proceeding to invalidate lifetime trust

i. See SCPA 103(39) (“Person interested. Any person entitled or allegedly entitled to share as beneficiary in the estate or the trustee in bankruptcy or receiver of such person.”).

1. Only a person who has “a pecuniary interest to protect, either as an individual or in a representative capacity” has standing to prosecute a claim (see Matter of Davis, 182 NY 468 [1905]). An interest “resting on sentiment or sympathy, or on any basis other than the gain or loss of money or its equivalent” will not suffice (id.).

ii. Those with standing to maintain a proceeding to invalidate a lifetime trust include:

1. A distributee of the grantor’s estate (see In re Heumann, 2006 WL 6897055 [Sur Ct, Westchester County Sept. 25, 2006]; Matter of Davidson, 177 Misc 2d 928, 931 [Sur Ct, NY County 1998]);

2. The fiduciary of the grantor’s estate, including:

a. Executor/administrator ; and

b. Person to whom limited letters have issued pursuant to SCPA § 702 (see Matter of Davidson, 177 Misc 2d at 932 (“Where a fiduciary will not pursue such relief on behalf of decedent's estate, the court may appoint a second fiduciary to carry out those duties that decedent’s nominee is unable or unwilling to perform.”). c. Capacity required to execute trust

i. Courts have examined whether the lower testamentary capacity or higher contractual capacity is required to execute a trust.

1. Contractual capacity is lacking where the party is “wholly and absolutely incompetent to comprehend and understand the nature of the transaction’” (Ortelere v Teacher's Retirement Board, 25 NY2d 196, 202 [1969] [citation and quotation marks omitted]).

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a. The relevant inquiry is whether the party was capable of making “a rational judgment concerning the particular transaction” (id. at 203). ii. The first New York court to address the standard of capacity required to create a lifetime trust was Matter of ACN, 133 Misc 2d 1043 (Sur Ct, NY County 1986) (determining that contractual capacity required to execute irrevocable trust).

1. ACN involved an irrevocable trust, a charitable remainder unitrust, and the parties disagreed on the standard of capacity to be applied. The court determined that it would look to analogous transactions for guidance.

2. It noted that “[a] will, by nature, is a unilateral disposition of property whose effect depends upon the happening of an event in futuro. A contract is a bilateral transaction in which an exchange of benefits, either present or deferred, is exchanged” (id. at 1047).

3. The court determined that the standard for contractual capacity would apply, as “[a] charitable remainder unitrust is a bilateral transaction between the settlor and trustee in which the settlor transfers a present interest in property in return for an annual fixed percentage of income based on the fair market value of the corpus (and a tax deduction). As such, it is more analogous to contract than to a will” (id.). iii. Courts have also applied the contractual capacity standard to revocable trusts as well.

1. See Matter of Donaldson, 38 Misc 3d 841 (Sur Ct, Richmond County 2012) (“It is abundantly clear after reviewing the documents executed by the Decedent that they are more comparable to a contract and therefore require a higher mental capacity than that of a will.”).

a. Notably, the decision in Donaldson does not reveal whether the subject trust was revocable or irrevocable; research has confirmed that it was a revocable trust.

2. See Estate of Edson, 7/14/97 NYLJ 31 (col. 1) (Sur Ct, Suffolk County) (to create a valid inter vivos trust, the grantor must have possessed an intelligent understanding of the contents of the trust agreement).

3. See Estate of Roth, NYLJ 9/15/06, at 33 (col. 1) (Sur Ct, Suffolk County) (“While there is some authority for the proposition that the

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level of capacity for the execution of a trust agreement should be the same as that required for the execution of a will, it has been accepted that contractual capacity, an ability to comprehend and understand the nature of the trust agreement and any amendments thereto, is required for the execution of a trust instrument” [citing Aronoff, infra, and Edson]). iv. However, authority exists suggesting that the lower, testamentary capacity standard, should apply to revocable trusts.

1. In Matter of Aronoff, 171 Misc 2d 172, 177 n.6 (Sur Ct, NY County 1996), the court addressed the right to a jury trial in a proceeding to determine the validity of a revocable trust (an issue discussed separately below).

a. Citing ACN, the court noted that “[t]he level of capacity required to avoid set aside of a will is lower than that required to avoid set aside of an irrevocable trust on the same grounds” (id. [citation omitted]).”

b. It noted, in dicta, that “[t]here appears to be no controlling authority as to which standard should apply to a revocable trust, although persuasive authority suggests that the will standard ought to apply to revocable trusts” (id., citing Restatement [Third] of Trusts § 11 [2] [Tentative Draft No. 1]).

2. In Matter of Estate of Tisdale, 171 Misc 2d 716, 721 (Sur Ct, NY County 1997), the court also addressed the right to a jury trial in trust contest, noting the “substantial similarity between revocable trusts and wills (and the illusory concept of a revocable trust as a contract).”

3. Restatement (Third) of Trusts § 11 (Capacity of a Settlor to Create a Trust) provides that “[a] person has capacity to create a revocable inter vivos trust by transfer to another or by declaration to the same extent that the person has capacity to create a trust by will.”

4. The “6th Report”

a. In May of 2012, the EPTL-SCPA Legislative Advisory Committee sent its 6th Report to the New York State Legislature, recommending that the Legislature enact the Uniform Trust Code (UTC), as modified.

b. Section 7-A-6.1., titled “CAPACITY OF SETTLOR OF REVOCABLE TRUST” provides as follows: “The capacity required to create, amend, revoke, or add property to a

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revocable trust, or to direct the actions of the trustee of a revocable trust, is the same as that required to make a will.”

d.

i. “The general rule is that the burden of proof in a proceeding to set aside a trust instrument is upon the objecting party as to all issues, including the issue of mental competency” (In re DelGatto, 98 AD3d 975 [2d Dept 2012]).

1. Compare with probate proceedings where the will proponent has the burden of proving that testator possessed sufficient capacity (see Matter of Kumstar, 66 NY2d at 692).

e. Right to jury trial

i. In Matter of Aronoff, 171 Misc 2d 172 (Sur Ct, NY County 1996), and Matter of Estate of Tisdale, 171 Misc 2d 716, 721 (Sur Ct, NY County 1997), the two New York County Surrogates at the time reached different determinations regarding the right to a jury trial in proceedings to determine the validity of revocable lifetime trusts.

ii. But in 2003, SCPA 502(1) was amended to grant a right to a jury trial in a proceeding to contest the validity of a revocable lifetime trust.

1. The right only applies in a proceeding commenced after the death of the creator of the trust and only if “a controverted question of fact arises.”

2. The amendment also emphasizes that any right to a jury trial granted under SCPA 502(1) must be “duly demanded.”

3. “Gift” Litigation

a. Context in which capacity to make gift may be raised

i. Accounting proceeding

1. See In re Gordon's Estate, 17 AD2d 165 (1st Dept 1962) (estate accounting proceeding; reversing Surrogate’s determination after trial upholding gifts decedent allegedly made to administrator).

a. “On the record as a whole, it is not clear that the mental condition of the decedent was such on the precise occasions of the alleged giving that she was capable of formulating and carrying out an intent to presently divest herself of ownership of the several items” (id. at 167).

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2. See In re Silverman, 17 Misc 3d 1103(A), 2007 WL 2792153 (Sur Ct, Kings County Sept. 13, 2007) (objectant in accounting proceeding challenged validity of Totten trusts decedent created when he allegedly lacked capacity).

ii. SCPA 2103 proceeding

1. See Matter Clines, 226 AD2d 269, 269 (1st Dept 1996) (executor of estate sought to recover $250,000 in assets in possession of decedent’s niece; niece maintained that property was gifted; executor contended, inter alia, that decedent lacked the mental capacity to make such a gift).

2. See Matter of Mirsky, 154 Misc 2d 278 (Sur Ct, Bronx County 1992) (administrator of estate brought discovery proceeding seeking to recover funds withdrawn from decedent’s bank accounts; court determined that evidence was insufficient to establish that money withdrawn were valid gifts).

iii. Guardianship proceeding

1. See MHL § 81.43 (“To the extent that it is consistent with the authority otherwise granted by the court a guardian may commence a proceeding in the court which appointed the guardian to discover property withheld”).

2. See Frank A.L. v Vaccarelli, 117 AD3d 740, 741 (2d Dept 2014) (guardian of incapacitated person commenced proceeding to recover property in possession of person’s sisters; “Here, the determination that Rose did not have the mental capacity to voluntarily transfer or gift her assets to the sisters is warranted by the facts”). b. Capacity required to make gift

i. The capacity required to make an inter vivos gift is the same capacity required to enter into a contract.

1. This is consistent with the Matter of ACN “unilateral v. bilateral” analysis, inasmuch as “[a] gift is a bilateral transaction and demands a donee as well as a donor” (Porter v Commr. of Internal Revenue, 60 F2d 673, 674 [2d Cir 1932], aff’d, 288 US 436 [1933]).

a. See Rudolf Nureyev Dance Found. v Noureeva-Francois, 7 F Supp 2d 402, 416 (SD NY 1998) (applying “more rigorous contract standard for mental capacity” to gifts)

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b. See Whalen v Harvey, 235 AD2d 792, 794 (3d Dept 1997) (Plaintiff also alleges decedent’s lack of capacity and defendant's undue influence. The evidence submitted by defendant, however, demonstrated that decedent was mentally alert despite his physical impairment and fully comprehended the nature of the transaction.”). c. See In re Bassin, 28 AD3d 549, 550 (2d Dept 2006) (“Further, clear and convincing evidence established that the decedent made a valid inter vivos gift . . . or, more specifically, that the decedent was alert and aware, and understood the nature of the transaction at the time she executed the deed”). d. See In re Rinchiuso’s Estate, 20 AD2d 254, 255 (4th Dept 1964), affd, 15 NY2d 865 (1965) (proceeding by administrators of estate to recover moneys withdrawn from decedent’s bank accounts by respondents).

i. Id. at 255 (citations omitted): “The mental competency of decedent has been established by the aid of the inference which arises that a person is competent unless there is some proof to the contrary; and by the testimony of witnesses . . . Peterson and Runfola. Peterson, who saw her three or four times a week before and after the alleged gift was made, testified: ‘she always talked clearly to me.’ Lawyer Runfola, who talked with decedent two days after the date of the alleged gift, testified: ‘She looked at me when she discussed this matter, and here was a woman that told me she remembered my father. She picked me out, and told me where my family lived. There was nothing wrong with her.’ This evidence sufficiently established decedent's mental capacity.” e. See In re Kiley’s Estate, 197 Misc 36 (Sur Ct, Westchester County 1949) (discovery proceeding brought to recover proceeds of bank account).

i. Id. at 38-39: “The evidence satisfactorily established that decedent was competent to make a gift. The hospital records indicating a poor or weakened physical condition and the occasional irrationality of decedent fail to establish lack of mental capacity at or about the time the alleged gift was made. On the contrary, the circumstances surrounding the alleged gift and the

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manner in which decedent regained custody of the passbook and selected from several passbooks that which was to symbolize the subject of the gift, the clear expression of intent to make the gift, accompanied by the instruction that the passbook should be taken to a designated person at the bank, clearly reveal her subjective mental condition at the time the gift is alleged to have been made.” c. Burden of proof

i. A donee bears the burden of proving all elements of a valid gift by clear and convincing evidence.

1. “In an action to recover property transferred as a gift the donee bears the burden of proving by clear and convincing evidence that the gift was voluntary and understandingly made by the donor, uninfluenced by fraud, duress or coercion” (Clines, 226 AD2d at 270).

2. “Inasmuch as decedent can no longer give his version of the transactions, respondent had the burden of establishing all of the elements of each gift by clear and convincing evidence, including that the deceased donor had the capacity to make a gift” (Mirsky, 154 Misc 2d at 280 [citations omitted]).

ii. Additional burden where donor and donee in a fiduciary/confidential relationship

1. Where there was a fiduciary or confidential relationship between the donor and the donee, there is a presumption of undue influence that must be overcome by clear and convincing evidence.

a. See Gordon v Bialystoker Ctr. and Bikur Cholim, Inc., 45 NY2d 692, 698 (1978) (“where a fiduciary relationship exists between parties, ‘transactions between them are scrutinized with extreme vigilance, and clear evidence is required that the transaction was understood, and that there was no fraud, mistake, or undue influence. Where those relations exist there must be clear proof of the integrity and fairness of the transaction, or any instrument thus obtained will be set aside, or held as invalid between the parties’” (citing Ten Eyck v Whitbeck, 156 NY 341, 353 [1898]).

b. See Estate of Schneiderman, 105 AD3d 602, 602 (1st Dept 2013) (“Defendant served as decedent's attorney on personal and corporate matters for more than 40 years and thus held a

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fiduciary relationship with decedent. Defendant therefore had the burden of proving by clear evidence that there was no fraud or undue influence in connection with decedent's gift of $1 million, made weeks before his death at the age of 82, and deposited in a trust account held jointly by decedent and defendant, clearly for defendant's benefit”).

c. See In re Estate of Nealon, 104 AD3d 1088, 1088-89 (3d Dept 2013) (“Under the doctrine of constructive fraud, where a confidential relationship exists between two parties to a transaction such that they were dealing on unequal terms due to one party’s weakness, dependence or trust justifiably reposed upon the other and unfair advantage is rendered probable, the burden of proof with respect to allegations of undue influence will be shifted to the stronger party to show, by clear and convincing evidence, that no undue influence was used” [citations omitted]), affd, 22 NY3d 1045 (2014).

4. Power of Attorney Litigation

a. Context in which issue of principal’s capacity may be raised

i. Guardianship proceeding (pre-death)

1. Guardianship courts have authority to revoke a variety of instruments, including powers of attorney.

2. The courts are also authorized to revoke any contract, conveyance, or disposition made by the incapacitated person if the court finds that it was made while the person was incapacitated or if there was a breach of fiduciary duty by the previously appointed agent.

a. MHL § 81.29(d) provides in part: “If the court determines that the person is incapacitated and appoints a guardian, the court may modify, amend, or revoke any previously executed appointment, power, or delegation under section 5-1501, 5- 1505, or 5-1506 of the general obligations law . . . or any contract, conveyance, or disposition during lifetime or to take effect upon death, made by the incapacitated person prior to the appointment of the guardian if the court finds that the previously executed appointment, power, delegation, contract, conveyance, or disposition during lifetime or to take effect upon death, was made while the person was incapacitated or if the court determines that there has been a breach of fiduciary duty by the previously appointed agent.”

17 ii. Accounting proceedings

1. See Matter of Estate of Cohen, 139 Misc 2d 1082 (Sur Ct, Rensselaer County 1988) (Surrogate’s Court had jurisdiction to grant coexecutor’s request to compel accounting of coexecutor for her activities as attorney-in-fact of decedent).

2. See In re Conklin, 48 Misc 3d 291, 292 (Sur Ct, Nassau County 2015) (“The issues at the hearing were whether the agent[s] appointed by the decedent in these powers of attorney acted appropriately when they: closed out multiple accounts; sold the decedent’s specifically bequeathed cooperative apartment; paid $20,000.00 allegedly for the renovation of one of the agent’s bathrooms; and paid themselves compensation as agents.”).

3. See In re Garrasi, 33 Misc 3d 1224(A), 2011 WL 58430282011 (Sur Ct, Schenectady County 2011), aff’d sub nom, In re Samuel A. Garrasi and Mary H. Garrasi Family Trust, 104 AD3d 990 (3d Dept 2013) (“Despite some lay testimony from Robert Garrasi and Gail Aggen that their father was very ill and physically debilitated in or around December, 2001, no medical records were offered into evidence, nor was any expert testimony or opinion offered to establish that Samuel Garrasi did not have the capacity to execute the Power of Attorney on December 4, 2001. Accordingly, the Court declines to make such a finding, and therefore will not void the initial deposit into the Trust on this ground or any alternative grounds alleged by the Objectant as set forth above.”). iii. SCPA 2103 discovery/turnover proceeding

1. See In re Batlas, 2016 NY Slip Op 07317 (2d Dept Nov. 9, 2016) (ancillary administrator of decedent’s estate petitioner for turnover of annuity funds disbursed to attorney in fact pursuant to beneficiary designation executed by attorney in fact; affirming grant of summary judgment determining that power not duly acknowledged). iv. Special proceeding pursuant to GOL § 5-1510(2)(b) to determine capacity

1. “A special proceeding may be commenced pursuant to this section . . . to determine whether the principal had capacity at the time the power of attorney was executed” (GOL § 5-1510[2][b]).

a. Standing to maintain proceeding

i. “A special proceeding may be commenced pursuant to subdivision two of this section by any person identified

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in subparagraph three of paragraph (a) of subdivision two of section 5-1505 of this title,1 the agent, the spouse, child or parent of the principal, the principal’s successor in interest, or any third party who may be required to accept a power of attorney (id. § 5-1510[3]).

v. Special proceeding pursuant to GOL § 5–1510(2)(i) to compel acceptance of a power of attorney

1. See In re Imre B.R., 40 Misc 3d 1237(A), 2013 WL 4766759 (Sup Ct, Dutchess County Sept. 5, 2013) (“Prior to compelling Merrill Lynch to accept the power attorney at issue herein, this Court must examine whether a valid power of attorney exists. Merrill Lynch asserts that Ilona R. may have lacked capacity at the time the power of attorney was executed.”).

vi. Other

1. Thomas v Laustrup, 21 AD3d 688, 689 (3d Dept 2005) (action for specific performance of real estate contract; defendants alleged, inter alia, that the power of attorney pursuant to which contract was signed was invalid due to principal’s incompetency at the time of its execution and that agent’s use of such document to sign the disputed contract made it void).

2. Coulter v Seneca Fed. Sav. and Loan Ass’n, 171 AD2d 1046, 1046 (4th Dept 1991) (plaintiff alleged defendant bank improperly permitted agent to make unauthorized withdrawal from account of decedent; “Plaintiff, however, in opposition to defendant’s motion for summary judgment, introduced admissible evidence that raised a factual question concerning whether the decedent had the capacity to confer such power of attorney.”).

b. Purposes of capacity determination

i. To determine principal’s capacity to execute power of attorney

1. Capacity required

a. GOL § 5-1501B(1)(b) requires that a power of attorney be executed by a principal with capacity.

1 Section 5-1505(2)(a)(iii) identifies the persons entitled to a record of all receipts, disbursements, and transactions entered into by the agent on behalf of the principal, and a copy of the power of attorney.

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b. The statute defines capacity as the “ability to comprehend the nature and consequences of the act of executing and granting, revoking, amending or modifying a power of attorney, any provision in a power of attorney, or the authority of any person to act as agent under a power of attorney” (GOL § 5- 1501[2][c]).

c. As in a probate proceeding, capacity is determined as of the time the power of attorney is executed.

i. In re Imre B.R., 40 Misc 3d 1237(A), 2013 WL 4766759 (Sup Ct, Dutchess County Sept. 5, 2013): “Initially, this Court notes that there is no medical evidence offered as to Ms. R.'s state of mind at the time of the signing of the power attorney, i.e. December 18, 2010. Nor, does this Court seek to supplant its intellect for that of a physician, so as to indicate whether or not a lack of capacity may or may not be inferred by a statement that Ilona R. suffered from “moderate to severe dementia,” a month following her execution of a power of attorney.”

2. Burden of proving capacity/incapacity

a. In Pruden v Bruce, 129 AD3d 506 (1st Dept 2015), a patient executed a power of attorney designating her mother attorney- in-fact. The mother then brought a medical malpractice action pursuant to the power of attorney. The defendants moved to dismiss, arguing that the patient was not competent to execute the power of attorney.

b. The court explained that the defendants had burden of proving the patient’s lack of capacity to execute the power of attorney.

i. “A party’s competence to enter into a transaction is presumed, even if the party suffers from a condition affecting cognitive function, and the party asserting incapacity bears the burden of proof” (id. at 507 [citations omitted]).

ii. “Since Montefiore failed to submit any evidence concerning Spinner’s competence at the time she executed the power of attorney, other than the document itself, it did not meet its initial burden in

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support of the motion, and the burden did not shift to plaintiff to demonstrate competency” (id.) ii. To determine whether the principal had capacity to provide direction and authorization of transactions

1. In In re Carl R.P., Jr., 44 Misc 3d 1219(A), 2014 WL 3871204 (Sup Ct, Suffolk County Aug. 6, 2014), the petitioner brought a guardianship proceeding, alleging that his sister failed to utilize the power of attorney that her mother had given her to take control of her mother’s assets “after indications of his mother’s mental decline became apparent. . . .” The court dismissed the petition, concluding that despite some impairment, the mother was cognizant of what she was doing and in fact was directing the agent-daughter in her spending.

a. “Here, Claire C. testified that she discusses all of her mother's financial matters with her mother and has permitted her mother to continue to sign checks after they make financial decisions together. Since there is no credible evidence establishing that the AIP was not capable of understanding what she was doing, Claire C. has not breached her fiduciary duty by allowing the AIP to maintain some semblance of control by signing checks or by spending her own money the way the AIP sees fit. The court evaluator testified that she has reviewed all of the AIP's banking records and finds no indication of any misappropriation by Claire C. of her mother’s assets. She further stated that although the spending could be considered extravagant, some months approaching $15,000.00, it does not amount to financial irresponsibility as all bills and expenses are all being paid. Moreover, the court evaluator concludes that the AIP understands what she is doing and wants to spend her money on family members.”

b. “While the AIP does spend large sums of money on possessions, travel, and gifts (for her daughters and grandchildren mainly), she does so of her own volition and the Court finds that she possesses the requisite capacity to know what she is doing.” iii. To determine effective date of “springing” power of attorney

1. GOL § 5-1501B(3)(b): “If the power of attorney states that it takes effect upon the occurrence of a date or a contingency specified in the document, then the power of attorney takes effect only when the date or contingency identified in the document has occurred, and the

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signature of the agent acting on behalf of the principal has been acknowledged. If the document requires that a person or persons named or otherwise identified therein declare, in writing, that the identified contingency has occurred, such a declaration satisfies the requirement of this paragraph without regard to whether the specified contingency has occurred.”

2. As explained in Professor Rose Mary Bailly in her 2011 Supplementary Practice Commentaries to GOL § 5-1501B: “The type of power of attorney described in section 5-1501B(3)(b), formerly called a ‘power of attorney effective at a future time,’ is known colloquially as a ‘springing power of attorney’ because it ‘springs’ into effect ‘upon the occurrence of a date or a contingency specified in the document’ and upon the agent's signature on the document. A springing power of attorney gives the principal more control over when the agent can begin to act. The ‘springing’ event may be one that can occur immediately or one that may occur in the future, such as the principal’s incapacity. In the springing power of attorney, the principal may choose to name a person who is charged with declaring that the ‘springing’ event has occurred. The effectuation of the springing power of attorney does not require that the person be correct in stating that the event has occurred. In essence, the principal is delegating the determination of when the power of attorney becomes effective to another person.”

a. In Moon v Darrow, 30 Misc 3d 187 (Sup Ct, Delaware County 2010), the Commissioner of the county’s social services department brought an action against, on behalf of incapacitated person, against the person’s son, mortgagor, and mortgagee, asserting claims arising out of son’s alleged misuse of power of attorney to transfer incapacitated person’s real property to mortgagor to satisfy his own debt to mortgagor.

b. The power of attorney provided that it only became effective when a physician made a statement that the principal suffered from “diminished capacity that would preclude [him] from conducting [his] affairs in a competent manner” (id. at 189).

c. Prior to the transaction at issue, a physician, at the request of the Department of Social Services, filled out and delivered to that department a form for Social Security entitled “Physician's Statement of Patient’s Capability to Manage Benefits” in which the physician stated that the principal had dementia and did poorly on the dementia questionnaire administered to him. The physician further stated “I don't think he is in any position to manage his money.” He also checked boxes on that form

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stating that the principal was not capable of managing his benefits and that he was not expected to be able to manage funds in the future.

d. The plaintiff argued that the defendants did not have a copy of the physician’s statement, which should have put them on notice that the principal’s rights were being violated (see id. at 191). The court rejected that argument, noting that while the statute requires a written statement that the principal is incapacitated, it does not require a person dealing with the holder of the power to determine whether the principal is actually incapacitated; and it follows, according to the court, that a person dealing with the holder of the power does not have to inquire about the existence of the statement itself. The court concluded that “the mere fact that the transfer to Ulmer was done with a ‘springing power’ was not sufficient to require either the purchaser, Ulmer, nor the mortgagor, Community Bank, to make further inquiry about the transaction” (id.).

e. The court nevertheless ruled in favor of the plaintiff against the purchaser, as it was undisputed that the purchaser was aware that the holder of the power of the attorney was repaying his own debt with property belonging to the principal, which constitutes a breach of fiduciary duty (see id. at 192).

5. Other Proceedings

a. “Bank account” cases

i. Determining validity of joint account

1. See Matter of Waldron, 240 AD2d 507 (2d Dept 1997) (jury determination that decedent was competent at time he changed bank accounts to joint accounts was not against weight of evidence; executors failed to overcome the presumption of competency).

a. “Persons suffering from disease, such as Alzheimer's disease, are not presumed to be wholly incompetent” (id. at 508). “Rather, in such cases it must be shown that, because of the affliction, the person was incompetent at the time of the transaction” (id.)

ii. Determining validity of Totten trust designation

1. See In re Silverman, 17 Misc 3d 1103(A), 2007 WL 2792153 (Sur Ct, Kings County Sept. 13, 2007) (objectant in accounting proceeding

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challenged validity of Totten trusts decedent created when he allegedly lacked capacity).

2. See Matter of Bryman’s Will, 14 Misc 2d 187 (Sur Ct, Kings County 1958) (discovery proceeding to recover proceeds of bank account from decedent’s widow).

a. “[T]here is an absence of competent proof that testator lacked the mental capacity to make a gift in the form of the Totten Trust account on October 25, 1955. While the testator may have been incompetent at the end of November 1955, there is no evidence that he was incompetent in October 1955. The burden of petitioner to establish the plea of testator’s incompetency was not sustained.” b. Proceeding where validity of beneficiary designation is at issue

i. See Cohen v Fiene, 38 Misc 3d 1229(A), 2013 WL 842099 (Sup Ct, Suffolk County Feb. 27, 2013) (action concerning ownership of annuity accounts).

ii. See Sun Life Assur. Co. of Can. (U.S.) v Gruber, 05 CIV. 10194 (NRB), 2007 WL 4457771, at *14-15 (SD NY Dec. 14, 2007), affd sub nom. Sun Life Assur. Co. of Can. v Gruber, 334 Fed Appx 355 (2d Cir 2009).

1. Federal interpleader action commenced by insurance company concerning three competing beneficiary designations.

2. The decedent’s capacity to execute one of the designations was challenged on the grounds, inter alia, that the decedent, who at the time was receiving treatment for prostate cancer, lacked capacity because he signed it at 6:30 at night, after he had experienced a full- day of intravenous Lasix (a drug described by the court as having “heavy side effects”), and at a time when he did not have the glasses he required to read.

3. On a motion for summary judgment, the court began its analysis of the “lack of capacity” argument by stating the proposition that, under New York law, parties to any contract are presumed to be competent, and a party asserting incapacity has the burden of proving incompetence.

4. It then recited the Ortelere standard for mental capacity, i.e., whether the person’s mind was “so affected as to render him wholly and absolutely incompetent to comprehend and understand the nature of the transaction.”

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a. Citing authority, it made clear that illness alone does not give rise to a presumption of incapacity.

5. The court then reviewed the three related pieces of evidence offered in an effort to show that the decedent lacked capacity to execute the challenged designation.

a. First, that the decedent signed the designation late in the day after receiving chemotherapy, the side effects of which allegedly included dizziness, confusion, drowsiness and blurred vision.

i. Notably, the party contending that the decedent lacked capacity conceded that the decedent was alert earlier in the day, but argued that by 6:00 or 7:00 p.m., the decedent had been worn down by the drugs.

ii. The court concluded, however, that the fact that the decedent was taking drugs that have the side effects of dizziness and confusion was irrelevant to New York’s test for incapacity under Ortelere. It stated that the source of the incapacity is irrelevant, only a party’s resulting cognitive abilities are relevant.

b. Second, that when the decedent signed the designation he did not have his glasses, which he required to read.

i. The court noted, however, that “New York courts have expressly held that so-called reading glass claims fail to raise a triable issue on the question of capacity” (id. at *15, quoting Daniel Gale Associates, Inc. v. Hillcrest Estates, Ltd., 283 AD2d 386, 387 [2d Dept 2001]).

c. Third, three days later the decedent told the party challenging the designation that he was unsure of what he had signed on that date.

i. The court held that this, too, failed to raise an issue of fact, because incapacity must be shown at the time of the disputed transaction. “Whether Charles had a recollection of the event three days later is a separate question” (id.).

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c. Proceedings where validity of a deed is at issue

i. See Crawn v Sayah, 31 AD3d 367, 367 (2d Dept 2006) (action, inter alia, to cancel deed and set aside conveyance of real property on the ground that the decedent lacked mental capacity).

1. The complaint alleged that decedent was 79 years old, was suffering from a critical illness and from “an extreme form of dementia” with “no understanding of the nature of his surroundings” (id. at 368-369). It was further alleged that, while decedent was in such condition, the defendant removed him from a health care facility and transported him to an attorney's office to execute the deed (id. at 369).

2. The Appellate Division relied on the presumption of a party’s competence, stating that the defendant had the burden of proving incompetence (see id. at 368).

3. It held that the defendant met her initial burden of demonstrating that the deed was properly executed, through the submission of the affirmation of the attorney who prepared the deed and witnessed its execution (see id.).

4. It held, further, that the plaintiff “failed to raise a triable issue of fact as to the decedent’s mental capacity on the day he signed the deed because the papers submitted in opposition lacked any probative value” (id.).2

ii. See also Troutman v Washburn, 197 AD2d 876, 876 (4th Dept 1993) (action for partition of real property; “There are triable questions of fact warranting the denial of plaintiff’s motion for summary judgment. Defendant adduced proof tending to show that he may have lacked capacity to enter into the transaction [i.e., execute a deed] as a result of a recent stroke and severe depression”); Picard v Fish, 139 AD3d 1331 (3d Dept 2016) (action seeking rescission of deed to property to executor before mother’s death based on fraud, undue influence and coercion, or lack of capacity); Schlage v Barrett, 259 AD2d 691 (2d Dept 1999) (action to set aside deed; “the plaintiff did not meet her burden of proving her incompetence at the time the gift was given”).

2 While the decision does not identify the papers the plaintiff submitted or explain why they “lacked any probative value” (id. ), the brief of the defendant-respondent identifies those papers as “the affirmation of appellant’s attorney [that] merely outlin[ed] the proof counsel might present at trial” and “the narrative report of plaintiff’s medical expert, Dr. Roger Harris, [that] was not affirmed or sworn” (2005 WL 4747234, at *8-9).

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d. Other real property actions

i. Smith v Comas, 173 AD2d 535 (2d Dept 1991) (action for specific performance of contract for sale of real property; party to contract alleged he lacked capacity to enter into contract because of his alleged mental incompetency).

e. Proceeding to annul marriage

i. DRL § 140(c) (“[a]n action to annul a marriage on the ground that one of the parties thereto was a mentally ill person may be maintained at any time during the continuance of the mental illness, or, after the death of the mentally ill person in that condition, and during the life of the other party to the marriage, by any relative of the mentally ill person who has an interest to avoid the marriage”).

1. Annulment of marriage is also an available remedy in an article 81 proceeding (see, e.g., In re Joseph S., 25 AD3d 804, 806 [2d Dept 2006]).

f. Proceeding to determine validity of right of election

i. See In re Berk, 71 AD3d 883 (2d Dept 2010) (proceeding pursuant to SCPA 1421, inter alia, to determine the validity and effect of an election).

1. Opposing the petitioner’s motion for summary judgment, the decedent’s sons provided evidence that the petitioner, “knowing that a mentally incapacitated person [was] incapable of consenting to a marriage, deliberately [took] unfair advantage of the incapacity by marrying that person for the purpose of obtaining pecuniary benefits that become available by virtue of being that person’s spouse, at the expense of that person’s intended beneficiaries” (id. at 885 [citing Campbell v Thomas, 73 AD3d 103 (2d Dept 2010)]).

2. The Appellate Division reversed the Surrogate’s Court’s grant of summary judgment for the petitioner, stating that “[s]hould the trier of fact so determine [that the petitioner engaged in the conduct alleged], equity will intervene to prevent the petitioner from becoming unjustly enriched from her wrongdoing, as a court cannot allow itself to be made the instrument of wrong” (id. at 886 [citation omitted]).

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