Opinion
96 Civ. 8892 (JSM)
June 18, 2002
MEMORANDUM OPINION AND ORDER
Plaintiff, Jeffrey D. Silverstein, as executor of the estate of his father Marvin Silverstein, brought this action seeking the partitioning of a brokerage account containing securities once owned by Marvin Silverstein, and his sister and brother, Rita Chase and Edward Silverstein, as tenants in common. Defendants Rita and Jack Chase, Rita Chase's husband, have counterclaimed alleging that Marvin Silverstein agreed to pay $33,333 to Rita Chase for money she spent on behalf of their ailing father and $5,800 for other money they loaned to Marvin Silverstein. Since that time, the Court has entertained partial summary judgment motions, various evidentiary motions, held a bench trial and issued an opinion dismissing Plaintiff's Complaint with prejudice. Plaintiff appealed the Court's ruling and the Second Circuit issued an opinion reinstating the Complaint and instructing the Court to retry the case. See Silverstein v. Chase, 260 F.3d 142 (2d Cir. 2001). The factual background of this dispute and the Court's Findings of Fact are set forth in two earlier opinions and will not be repeated here. See Silverstein v. Smith Barney, Inc., No. 96 Civ. 8892, 1999 WL 33291 (S.D.N.Y. Jan. 22, 1999); Silverstein v. Smith Barney, Inc., No. 96 Civ. 8892, 2000 WL 420558 (S.D.N.Y. April 18, 2000).
At issue during the trial and on appeal was whether a document entitled "Cancellation of Indebtedness" ("COI") which had Edward and Marvin Silverstein's name on it, but was signed only by Edward, was admissible. The document stated that:
We, EDWARD SILVERSTEIN and MARVIN SILVERSTEIN for ourselves, our heirs and assigns do transfer all of our rights, title and interest, to our sister RITA SILVERSTEIN CHASE, in the brokerage account number 359-07795-12-215, maintained as Tenancy in Common with or at SHEARSON LEHMAN BROTHERS at 2 Greenwich Plaza, Greenwich, CT. 06830.
We authorize our Financial Consultant TIMOTHY F. NULAND to make such transfer on the books of Shearson Lehman Brothers, either to an account solely in the name of RITA SILVERSTEIN CHASE or by deleting our names from the above said account or by any other method.
This transfer is made in recognition of the expenditures for labor and services made by RITA SILVERSTEIN CHASE since October 1981, for our mutual interest, in the estate of our father MORRIS SILVERSTEIN.
We, EDWARD and MARVIN SILVERSTEIN had agreed to reimburse RITA SILVERSTEIN CHASE at the time of the settlement of the MORRIS SILVERSTEIN estate matter with MARION SILVERSTEIN.
This transfer is in consideration of the cancellation of all prior indebtedness and interest thereon owed by either of us to our sister RITA SILVERSTEIN CHASE.
Had Edward been able to testify at trial, he would have testified to the contents of the document. However, Edward was too ill to attend the trial and since he was unavailable, the Court ruled that the document was admissible under Rule 804(b)(3) of the Federal Rules of Evidence as a statement against pecuniary interest.
On appeal, the Second Circuit held that "none of the portions of the COI that pertain to Marvin (and are therefore not against the declarant's interest) are admissible pursuant to Rule 804(b)(3)." Silverstein, 260 F.3d at 148. On remand, the Second Circuit instructed the Court to consider:
whether the portion of the COI that states "[w]e Edward and Marvin Silverstein had agreed to reimburse Rita Silverstein Chase at the time of the settlement of the Morris Silverstein estate matter with Marion Silverstein" is admissible pursuant to Rule 807 or Rule 803 (15).
Silverstein, 260 F.3d at 143-44.
At a conference, the parties agreed that no new evidence was necessary and, instead, the parties briefed the issue of whether the COI, signed by Edward Silverstein, and not Marvin Silverstein, was admissible under either Rule 803 (15) or 807.
Discussion
I. Federal Rule of Evidence 803 (15)
Federal Rule of Evidence 803 (15) allows a statement "contained in a document purporting to establish or affect an interest in property" to be admitted, even if the declarant is available, if:
the matter stated was relevant to the purpose of the document unless dealings with the property since the document was made have been inconsistent with the truth of the statement or the purport of the document.
Although there is little case law on this exception to the hearsay rule, the "COI" signed by Edward Silverstein meets the requirements of the rule. Documents detailing property interest in stock have been admitted under Rule 803 (15). In United States v. Weinstock, 863 F. Supp. 1529, 1531 (D. Utah 1994), the court entered the affidavit of a deceased man. The affidavit stated that the individual was the owner of shares of stock and that he needed new certificates because the old ones had been lost or stolen. The court, on admitting the affidavit, noted that Federal Rule of Evidence 803 (15) "should be applied where the document is seriously related to a carefully planned transaction." Weinstock, 863 F. Supp. at 1533. This rationale was reiterated in Compton v. Davis Oil Co., 607 F. Supp. 1221, 1229 (D. Wyo. 1985). In Compton, the issue being litigated was whether a couple who lived together in the 1920s and who was now dead, had been legally married. The documents were warranty deeds, but were admitted in the case because they stated that the two individuals were husband and wife. In admitting the document as evidence of the couple's valid marriage, the court noted that:
Such instruments are executed in relation to serious and carefully planned transactions, and the financial stake in the transaction, plus the obvious reliance upon the truth of statements made in such instruments by third parties are adequate to at least imply that the recitals in such instruments are trustworthy.
Compton, 607 F. Supp. at 1229.
In the instant case, the document transferring stock from Edward and Marvin Silverstein to their sister Rita Chase bears every indicia of a carefully planned transaction. It is not in dispute that Edward agreed that if the siblings were awarded a recovery from the estate, he would compensate Rita one third of $100,000 for the monies she expended on behalf of their father. (Trial Transcript "Tr." 3:10-20). The COI is the manifestation of the intended transfer and indicates that Edward believed Marvin was also reimbursing his sister for the debt they owed her.
Finally, Marvin's subsequent activities with respect to the stocks did not contradict the statements in the COI that Marvin, too, was transferring his share of the stocks. Marvin did not object to the opening of the joint tenancy account at Shearson. ("Tr." 25:9-25.) He did not withdraw his share of the stock from the account. (Tr. 28:17-21.) He never had account statements sent to him (Tr. 31:22-25.) He never requested dividends be credited to him. (Tr. 32:1-4.) The Estate did not declare the dividends as income. (Tr. 33:10-14.)
The COI meets the definition of a document affecting an interest in property. Martin Silverstein's activities with respect to the stocks were not contrary to the COI and so the document is admissible under Rule 803 (15).
II. Federal Rule of Evidence 807
The COI is also admissible under the residual exception to the hearsay rule. To be admissible under the residual exception to the hearsay rule, evidence must "fulfill five requirements: trustworthiness, materiality, probative importance, the interests of justice and notice." United States v. Harwood, 998 F.2d 91, 98 (2d Cir. 1993) (quoting Parsons v. Honeywell Inc., 929 F.2d 901, 907 (2d Cir. 1991) (citations omitted). In discussing the admissibility of the COI, the Second Circuit directs this Court to look specifically at the statement: "We, Edward and Marvin Silverstein had agreed to reimburse Rita Silverstein Chase at the time of the settlement of the Morris Silverstein estate matter with Marion Silverstein."
This Court recognizes that the residual exception to the hearsay rule should be applied sparingly. Robinson v. Shapiro, 646 F.2d 734, 742 (2d Cir. 1981). Yet, in this case, the interests of justice point in favor of its application. Edward Silverstein was unavailable at trial and Marvin Silverstein was dead. In a case where two of the three contracting parties are unavailable and the testimony of the third may be inadmissible because of the Dead Man's Statute, this statement by Edward is the most reliable piece of evidence before the Court. See id. at 742; see also Ark-Mo Farms, Inc. v. United States, 530 F.2d 1384 (Ct.Cl. 1976) (admitting hydrologic study under the residual exception in non-jury trial when it was "best evidence reasonably available" and had "assurances of accuracy and reliability").
The statement also meets the other four requirements of the residual hearsay exception. Most notably, it has independent indicia of trustworthiness. In order to allow the statement under the residual exception, the Court must find that the trustworthiness of the statement regarding Edward and Marvin's intent to transfer their stocks to Rita Chase has reliability commensurate with that found in other statements that are admitted under exceptions to the hearsay rule. Schering Corp. v. Pfizer, Inc., 189 F.3d 218, 233 (2d Cir. 1999) ("The traditional exceptions to the hearsay rule, in turn, provide the benchmark against which the trustworthiness of evidence must be compared in a residual hearsay analysis.").
The statement about Edward and Marvin's agreement meets the trustworthiness benchmark as set out in the present mental condition exception to the hearsay rule. Fed.R.Evid. 803(3). This exception allows hearsay to be admitted if the statement is "[a] statement of the declarant's then existing state of mind . . . (such as intent, plan, motive, design . . .)." Fed.R.Evid. 803(3). The exception does not admit a statement of memory. The statement within the COI describes Edward's intent and plan with respect to signing over his interest in the stock account. He clearly intended, at the time he signed the document, that he and his brother both were signing over their interest. Although the statement does include a memory element, and while the memory element might preclude admission of the statement under 803(3), it is not necessarily excluded under the residual exception because the residual exception includes additional checks by requiring materiality, probative importance and that the interests of justice be served, before a statement can be admitted. Schering Corp., 189 F.3d at 232. Further supporting the trustworthiness of this statement within the COI is that it reflects Edward's reasoning at the time that he is transferring the stock. See Huff v. White Motor Corp., 609 F.2d 286, 292 (7th Cir. 1979).
Finally, the Defendants satisfied the notice requirement of the residual hearsay exception. See United States v. Ruffin, 575 F.2d 346, 358 (2d Cir. 1978).
The statement in question is highly probative of Marvin's intent to transfer the stock. It is the best evidence available as to how and what agreement was reached with respect to the repayment of expenses incurred by Rita Chase in advocating for their father. Therefore, the statement regarding Edward and Marvin's agreement to reimburse Rita is admissible under 807.
Thus, all of the statements contained in the COI are admissible under 803 (15) and, alternatively, the statement "[w]e, Edward and Marvin Silverstein had agreed to reimburse Rita Silverstein Chase at the time of the settlement of the Morris Silverstein estate matter with Marion Silverstein," is admissible under the residual exception. Since that statement establishes that Marvin did relinquish his interest in the securities in exchange for settlement of the debt he owed his sister, the Executor's Complaint is dismissed with prejudice in all respects and the Defendants' counterclaims are dismissed as moot.