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IN RE: the ESTATE OF Richard N. PANELLA (2022)

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Surrogate's Court, New York,

IN RE: the ESTATE OF Richard N. PANELLA, Deceased.

File No. 2017-441/A

Decided: September 21, 2022

For Petitioners Nicole A. Ivie and Stephen R. Panella, Byrne, Costello & Pickard, P.C., By: Jordan R. Pavlus, Esq., F. Scott Molnar, Esq., Syracuse. For Respondent Deborah Whalen, Panella, individually and as executor of the Estate of Richard N. Panella, Barclay Damon, LLP, By: Jon P. Devendorf, Esq., David G. Burch, Jr., Esq.

Pending before the Court is a petition brought by Nicole A. Ivie and Stephen R. Panella (collectively “Children”) to enforce the terms of a separation agreement entered into between their natural parents, Decedent Richard N. Panella (“Richard”) and Carol D. Jubenville (“Carol”), which terms were incorporated into a divorce decree (collectively “Agreement”). In particular, the Children seek to enforce a provision that they maintain obligated their father to bequeath 100% of the value of his estate to them.

After denying competing motions for summary judgment brought by the Children and Respondent Deborah Whalen Panella, individually and as executrix of Richard's estate (“Respondent”), the Court held a bench trial over the course of two days. The Children called Carol as their main witness. The Children each testified that they had no knowledge of the contents of their parents’ divorce decree prior to signing the waivers and consents to probate that were filed with this court when Richard's Last Will and Testament dated April 27, 2016 was proffered. Respondent did not present any evidence.

After transcripts of the hearing were received, the attorneys filed written summations to include proposed findings of fact and conclusions of law. By letter dated June 14, 2022 from the Principal Court Attorney, counsel for Petitioners and Respondent were asked to submit additional briefing on the topic of intended vs. incidental third party beneficiaries. Having considered the totality of the testimony and documentary evidence, as well as all arguments of counsel, the Court renders this decision.

Findings of Fact

The facts to be gleaned from the evidence are straightforward and essentially undisputed. Carol and Richard were married on April 22, 1972. The Children were born of the marriage. On different dates in 1985, but with the same attorney overseeing the process, Richard and Carol executed Wills that left their respective estates to each other. Upon the death of the last surviving spouse, the residual estate was left to the Children in equal shares.

In May 1986, less than a year after these Wills are executed, Richard and Carol separated. In the Fall of 1989, Richard and Carol signed a separation agreement. Richard was represented by the same attorney who attended to the 1985 Will executions. (See 10/7/21 Tr. at p.24, l.20-p.25, l.6). Most pertinent to the litigation pending before this Court, the agreement contained the following language:

ARTICLE XVIII

LAST WILL AND TESTAMENT OF PARTIES:

The parties agree to execute his or her Last Will and Testament, naming the two children as irrevocable beneficiary, the two children to receive a total of 100% of the existing assets of his or her gross estate. Each party shall provide the other with a conformed copy of the executed Will.

(Exhibit C, Separation Agreement at 10).

On December 15, 1989, a Final Decree of Divorce for Richard and Carol was filed in the Oneida County Clerk's Office. The identical language quoted above from the separation agreement appears in the divorce decree. (See Exhibit C, Divorce Decree at 11). The divorce decree further provides that the separation agreement “shall be incorporated by reference in this Judgment of Divorce, in all respects, but shall not be merged with this Judgment and shall survive and continue to be an independent contact [sic] binding upon the parties hereto.” (Id.). Neither the separation agreement nor the divorce decree makes mention of the existing Wills signed by Richard and Carol in 1985.

Carol remarried in July 1992, and Richard remarried in 2000. Each thereafter executed new Wills. Carol executed a Will on September 14, 2001, that revoked all prior Wills. (See Exhibit O). Its pertinent provisions left personal and household effects to Carol's second husband and, if he were to predecease Carol, then in equal shares to the Children and the children of Carol's second husband. The residue was devised to a revocable trust established by Carol and her second husband. Within the trust agreement, Carol and her second husband reserved a general power of appointment to change the beneficiaries. (See Exhibit P). Carol acknowledged in her testimony that she never provided a copy of this Will to Richard. (See 12/2/21 Tr. at p.25, l.20-25).

Richard's Will dated April 27, 2016 was admitted to probate, with the consents of the Children. This Will left his entire estate to Respondent.1 Nothing in the record indicates that Richard provided Carol with a copy prior to his death on March 15, 2017.

After the date of Richard's death, Carol executed a new Will on May 30, 2017. Generally speaking, the entirety of her estate passes to the R & C Jubenville Irrevocable Trust. (See Exhibit Q). According to the terms of the Trust, it cannot be altered, amended, revoked or terminated in any way. (See Exhibit R, § 1.03). After the last of Carol and her second husband to die, the Trust directs distributions to include trusts not only for the Children and the children of Carol's second husband, but also trusts for other family members and specific bequests for educational institutions and community organizations. (See Exhibit R, § 3).

Sometime in 2019, Carol wanted to apply for a New York Enhanced driver's license and needed to find her divorce papers to document her name change. (See 10/7/21 Tr. at p.21, l.12-16, 24-25). She read through those papers and realized for the first time that Decedent's Will did not comply with the terms of the Agreement. (See id. at p.22, l.4-20). Carol alerted the Children accordingly. (See id. at p.22, l.21-23; p.39, l.10-14; p.42, l.7-13). They responded by initiating these proceedings shortly thereafter.

Conclusions of Law

The Children's theory of recovery rests on breach of contract, arguing that Richard breached the terms of the divorce decree and separation agreement when he executed the May 30, 2017 Will.2 The elements of a breach of contract claim are straightforward: (1) existence of a contract; (2) performance under the contract; (3) breach; and (4) resulting damages.3 As purported third-party beneficiaries of the Agreement, Petitioners also have the burden of proving that the obligation in question was intended for their benefit. (See Goresen v. Gallagher, 97 A.D.2d 626, 627, 468 N.Y.S.2d 940 [3d Dept. 1983] [“An intent to benefit the third party must be shown.”]).

Intent to Benefit the Children

Addressing this latter point first, “[a] person not a party to the contract acquires the status of donee beneficiary, and is entitled to enforcement of the contract, if and only if the promise is particularly exacted by the promisee for the benefit of such third person.” (See Matter of Conay, 29 Misc. 2d 1090, 1092-93, 121 N.Y.S.2d 481 [Sur Ct, N.Y. County 1953] [emphasis added]). Given that the Children allege breach of contract against their father, they need to establish that their mother procured this promise on their behalf. (See Black's Law Dictionary [11th ed 2019], promisee [“One to whom a promise is made.”]) [Note: online version]. Carol's testimony however, revealed she has no specific recollection of who asked to insert the language about the Wills in the Agreement, except that she knew she had not requested it. (See Tr. of Oct. 7, 2021, at p.33, l.22-p.34, l.3). Moreover, she was of the understanding that the provision was intended to benefit the Children only while they were minors. (See id. at p.23, l.18-25; p.34, l.8-11). Her actions confirm this understanding, as she said she waited until her children were no longer minors before changing her Will in 2001. (See Tr. of Dec. 2, 2021, at p.34, l.10-17).

In contrast, in cases where a third-party beneficiary was permitted to enforce the terms of a separation agreement, the promisee had negotiated the terms for the express purpose of benefitting the third party. For example, in Ferro v. Bologna, 31 N.Y.2d 30, 35, 334 N.Y.S.2d 856, 286 N.E.2d 244 [1972], the Court of Appeals found that the children of separated parents could enforce a term within the separation agreement requiring their father to name them as beneficiaries of a life insurance policy. The Court noted that in securing this promise, the children's mother did not ask for child support, waived her right to share in the father's estate, and made other concessions relative to the distribution of marital property.

In De Walle v. De Walle, 68 Misc. 3d 1224[A], 2020 WL 5638636, 2020 N.Y. Slip Op. 51064[U), at *10-11 [Sup Ct, Nassau County 2018], children of divorced parents brought a breach of contract claim against their father's estate as third-party beneficiaries. On the surface, the decedent abided by his obligation to execute a Will leaving half of his estate to his children. Meanwhile, the decedent adopted a strategy that essentially bankrupted his estate and provided for the transfer of assets with equity to his second wife outside the context of his estate, thereby leaving his children with nearly nothing. In granting summary judgment to the petitioners, the Court pointed out that their mother relinquished her rights to equitable distribution and spousal maintenance in exchange for a promise that her children receive one-half of their father's gross estate at the time of his death.

In Matter of Carvel Foundation, 8 Misc. 3d 1025[A], 2002 WL 32872391, 2002 N.Y. Slip Op. 50733[U] [Sur. Ct, Westchester County 2002], the Thomas and Agnes Carvel Foundation was a third-party beneficiary of a reciprocal agreement between Mr. and Mrs. Carvel to sign irrevocable wills and avoid making gratuitous lifetime transfers of property out of their estates. Mrs. Carvel post-deceased her husband, and the Foundation sued her estate for breach of contract based upon multiple property transfers made after Mr. Carvel's death but before her own passing. In granting the Foundation the relief it requested, the Court considered the reciprocal agreement to have benefitted Mr. Carvel (the promisee in this case) because it gave him reason to believe his wife would carry out their mutual estate plan favoring the Foundation. (See id. at *2). Mr. Carvel's consideration was to provide more for his wife than the right of election afforded her, as well as to give up his right to change his will at any point prior to his death. (See id. at *7).

As compared to these cases and previously noted, Carol by her own admission neither initiated nor negotiated that portion of the Agreement providing for irrevocable wills. Equally important, Carol has never abided by this particular provision. Although the Children became the residual beneficiaries of her 1985 Will by operation of law, in that the divorce had the effect of negating any bequest by Carol to Decedent, she never has executed an irrevocable will. Instead, she executed two subsequent wills that did not name her children the sole beneficiaries of her estate, while also keeping intact her right to execute future wills. The Court further finds it telling that Carol — and not Decedent — was the first to change her will after the divorce, because it suggests that Carol (promisee) did not intend to confer upon the Children the benefit they now seek to enforce against Decedent's estate. Without such an intent on the part of the promisee, the Children cannot prevail as third-party beneficiaries.

Performance Under the Contract

Even assuming arguendo that Carol did act with the requisite intent when entering into the Agreement, the Children's claim fails for lack of performance. Incorporating the preceding section by reference, Carol not only failed to execute an irrevocable will as promised, but also was the first to execute a new will naming beneficiaries other than the Children. Carol is also unable to abide by the terms of the Agreement at this point, since her ability to provide a conformed copy to Decedent is foreclosed by his death. Furthermore, given that Carol and Decedent each changed their wills without providing notice to the other, the Court cannot help but think that neither parent was cognizant of this particular obligation under the Agreement. Given that Decedent also never executed an irrevocable will as required by the Agreement, the Court finds this particular provision cannot be enforced by the Children due to lack of performance on the part of their parents.

Equitable Relief

In their petition, the Children ask the Court to “exercise its discretion to fashion a remedy in the interests of justice.” Considering that children generally have no right of inheritance in New York, and since neither Carol nor Decedent acted in a manner following their divorce to suggest they considered themselves bound by the Agreement to execute irrevocable wills favoring their Children exclusively, the Court declines this invitation to award equitable relief under these circumstances.

Conclusion

After considering the totality of the evidence before the Court, and for the above-stated reasons, the Court concludes that Petitioners Nicole A. Ivey and Stephen R. Panella have failed to establish a basis for recovery against the Estate of Richard N. Panella. As the Court of Appeals noted more than 100 years ago, “the right of a third person to recover upon a contract made by other parties for his benefit must rest upon the peculiar circumstances of each case rather than upon the law of some other case. The case at bar is decided upon its particular facts.” (Seaver v. Ransom, 224 N.Y. 233, 241, 120 N.E. 639 [1918]). The facts in this case fail to sustain the Children's petition — under either a legal or equitable theory — and as such, it is hereby

ORDERED that the petition filed by Nicole A. Ivie and Stephen R. Panella is DISMISSED in its entirety.

This constitutes the Decision and Order of the Court.

FOOTNOTES

1.   Had Respondent predeceased Richard, then his estate would have passed to the Children in equal shares.

2.   Petitioners previously withdrew their first, second and third claims as stated in their petition.

3.   The parties agreed to bifurcate the issue of damages, dependent upon the Court's decision as to liability.

Louis P. Gigliotti, S.

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