Interpleader plaintiff TRANSAMERICA FINANCIAL LIFE INSURANCE CO. (TRANSAMERICA) moves for an order, pursuant to CPLR § 1006 (f), permitting it to pay into the Court, or in the alternative to deliver to a person designated by the Court, the amount in dispute in the instant action, $211,884.83 plus interest accrued thereon from August 9, 2007, which are the proceeds of two TRANSAMERICA annuity policies purchased by decedent Mary H. Lawson. Further, TRANSAMERICA seeks to be discharged from liability to any party in the instant action because it is a mere stakeholder, with no claim or interest in the subject sum or any liability to any party in the instant action. Last, TRANSAMERICA seeks payment of $9,679.13 for attorneys' fees and disbursements to be deducted from the amount in dispute.

Interpleaded defendant SUE SIMMONDS as Administrator of the Estate of Mary H. Lawson (SIMMONDS), opposes the instant motion, claiming that TRANSAMERICA is independently liable for failing to follow its own procedures with respect to beneficiary changes on its annuity policies and, therefore, should not be allowed a discharge from liability in the subject action. SIMMONDS also objects to the attorneys' fees and disbursements sought by TRANSAMERICA as excessive.

Interpleaded defendant PHILIP LAWSON (P. LAWSON), decedent's son, also objects to TRANSAMERICA's motion, in that he possesses an independent claim against TRANSAMERICA, and that TRANSAMERICA is able to determine which interpleaded defendant is entitled to the sum at issue. P. LAWSON also contends that TRANSAMERICA is not entitled to legal fees or disbursements because they were accrued in part by TRANSAMERICA's failure to comply with its own internal rules with respect to beneficiary changes for its annuity policies.

Although the court has been unable to locate the opposition papers of interpleaded defendant YOLANDA COOKS (COOKS), decedent's home health attendant, the other parties acknowledge that the papers were served and COOKS' objection is solely with respect to TRANSAMERICA's application for attorneys' fees and disbursements. Interpleaded defendant CLARA LAWSON, decedent's daughter-in-law and P. LAWSON's wife, failed to appear in this action.

The Court grants the branches of TRANSAMERICA's motion that seek to deposit the annuity proceeds with the Court and discharges TRANSAMERICA from any liability to the interpleaded defendants. TRANSAMERICA's claims for legal fees and disbursements shall be referred to a Judicial Hearing Officer to hear and report to the Court the appropriate amount to be awarded to TRANSAMERICA for legal fees and disbursements in the instant matter.

TRANSAMERICA, in support of its motion, presented the chronology of events, the current status of the annuities at issue, and the reputed beneficiaries of the two annuity

policies at issue.

TRANSAMERICA, on June 16, 2003, received an "Annuity Policy Change Form [exhibit A-5 of affirmation in support of motion]," signed by Ms. Lawson, on June 11, 2003, seeking to amend Annuity 1 by naming interpleaded defendant COOKS as the primary and sole beneficiary of the policy. Interestingly, COOKS signed as the witness to decedent's signature. Pursuant to Ms. Lawson's request, TRANSAMERICA changed the policy to reflect that COOKS was the primary beneficiary and sent a confirmation letter to Ms. Lawson confirming this.

Then, on March 22, 2004, TRANSAMERICA received a second "Annuity Policy

Change Form [exhibit A-6 of affirmation in support of motion]," signed by Ms. Lawson, seeking to amend Annuity 2 by designating COOKS as the primary and sole beneficiary. In the change form section entitled "Required Signature," the signature and date of the policy owner is blank. Ms. Lawson signed and dated the form in the space provided for the witness' signature and date. Despite this, TRANSAMERICA changed the policy to reflect that COOKS was the primary beneficiary and sent a confirmation letter to decedent LAWSON to confirm this.

Subsequently, Ms. Lawson, then 88 years-old, died on March 23, 2006. Interpleaded defendants P. LAWSON and CLARA LAWSON filed with TRANSAMERICA, on May 8, 2006, an "Annuity Claimant's Statement [exhibit A-8 of affirmation in support of motion]," for 100% of the proceeds of both Annuity 1 and Annuity 2. Several weeks later, on May 30, 2006, COOKS filed her "Annuity Claimant's Statement [exhibit A-9 of affirmation in support of motion]" for 100% of the proceeds of both Annuity 1 and Annuity 2.

SIMMONDS, the Administrator of decedent's estate, sent TRANSAMERICA a letter, dated June 27, 2006 [exhibit A-11 of affirmation in support of motion], contesting payment of any proceeds to COOKS, alleging that COOKS took advantage of the sick and blind Ms. Lawson, and perpetrated a fraud by making herself the primary beneficiary for both annuity policies. On December 26, 2006, TRANSAMERICA received another letter [exhibit A-12 of affirmation in support of motion] from SIMMONDS, alleging that COOKS fraudulently made herself the primary beneficiary of both annuity policies, which deprived decedent's grandchildren of their rightful share of the proceeds of the annuity policies.

Therefore, TRANSAMERICA withheld release of payment of the death benefits for both Annuity 1 and Annuity 2, and notified both SIMMONDS and COOKS. TRANSAMERICA admits that the value of the annuity policies is due and owing to the proper beneficiary or beneficiaries, and claims no interest in the proceeds other than to which it is or may become entitled to by operation of CPLR § 1006 et seq. As of August 9, 2007, Annuity 1 was worth $190,625.80 and Annuity 2 was worth $21,259.03. Since TRANSAMERICA is unable to determine to whom the policies are payable, and it may be exposed to multiple liability, it brought the instant motion to: pay into the Court, or a person designated by the Court, the amount in dispute; be discharged from liability to any of the interpleaded defendants; and, be awarded $9,679.13 for reasonable attorneys' fees and disbursements.

SIMMONDS, in opposition to the instant motion, argues that the alleged beneficiary changes to the annuity policies were improper, because they did not comply with TRANSAMERICA's policies for such changes. Thus, TRANSAMERICA is independently liable because it neglected and refused to follow its own procedures in securing the appropriate signatures on the beneficiary [*3]change forms before processing the changes. SIMMONDS, in support of this claim, attached a copy of the contract for Annuity 1 [exhibit A of SIMMONDS affirmation in opposition], which states, on page 13, in relevant part:

No part of this annuity contract may be changed or waived unless

done in writing and signed by two of our authorized officers. We

will not make any change that reduces the amounts payable under

this annuity unless the change is required by law. We will give you

a copy of any changes we make to this annuity.

SIMMONDS also submitted both of the disputed Annuity Policy Change Forms, which have almost the same language with respect to indemnifying the insurance company and holding it harmless when changing beneficiaries. It states on the change form for Annuity 2:

Unless the Insurance Company has been notified of a community

or marital property interest in this policy, the Insurance Company will

rely on its good faith belief that no such interest exists and will assume

no responsibility for inquiry.

By requesting this change the policy owner(s), on his/her behalf

and that of his /her successors and assignees, agrees to indemnify

and hold the Company harmless from the consequences of accepting

this change.

The similar proviso for Annuity 1 uses "we" instead of "Insurance Company."

Annuity 1's contract states, in § 3 M, with respect to beneficiaries:

You have the right to designate the beneficiary. You may change

the beneficiary without consent unless irrevocably designated or

required by law. The notice of change must be in writing on a

form acceptable to us. If an irrevocable beneficiary dies, you may

designate a new beneficiary. The change will take effect as of the

date you sign it, whether or not you are living when we receive it.

We will not be liable for any payment we make before the notice

is received. If there is more than one beneficiary designated at your

death and you fail to specify their interests, they will share equally.

Accordingly, SIMMONDS contends that TRANSAMERICA is liable to the interpleaded defendants and not entitled to discharge, pursuant to CPLR § 1006 (f), because: two of its authorized officers did not authorize on the annuity contracts the change of beneficiary to COOKS; the decedent's signature on the change form for Annuity 2 was on the witness line, not the owner's line; and, COOKS acted as the witness on the change form for Annuity 1.

P. LAWSON, in his opposition to the instant motion, makes many of the same points made by SIMMONDS. He argues that the execution of the beneficiary change form for Annuity 2 was defective, with the decedent not signing as the owner, but as the witness. Further, P. LAWSON argues that the improper execution of the form by decedent raises questions as to her mental competency when the form was executed. Similarly, he argues that the change of beneficiary form for Annuity 1 was invalid

due to a conflict of interest created by COOKS, the putative new beneficiary, serving as the witness. Further, Lawson maintains that the interpleaded defendants have [*4]

independent claims against TRANSAMERICA, based upon TRANSAMERICA's alleged failure to enforce the requirements of their annuity policy change forms, and TRANSAMERICA is not free from blame with respect to the adverse claims which currently exist among the potential beneficiaries of the subject annuity policies. P. LAWSON also opposes granting legal fees and disbursements to TRANSAMERICA because its negligent failure to conduct due diligence with respect to the beneficiary change forms directly contributed to the current dispute and the instant discharge action.

Interpleaded defendant COOKS, as noted earlier, does not oppose TRANSAMERICA's discharge, but maintains, as does SIMMONDS, that the attorneys' fees and disbursements for TRANSAMERICA should be no higher than 50% of the amount requested.

TRANSAMERICA, in its reply, argues that it has sustained prejudice and incurred additional legal fees due to: delay by the interpleaded defendants in opposing the instant motion; and, P. LAWSON's assertion of counterclaims based upon the alleged malfeasance or nonfeasance of TRANSAMERICA with respect to its handling and processing of the disputed change of beneficiary forms. Also, TRANSAMERICA maintains that it is entitled to discharge and not independently liable to the interpleaded defendants because defendants "rely on the incredible proposition that Transamerica is able to determine the rightful beneficiary on the basis of paperwork in its possession alone [plaintiff's reply - page 6]." Further, TRANSAMERICA contends that it cannot be held liable for allegedly failing to follow its own internal procedures for changing beneficiaries because such policy provisions are solely for its benefit as insurer. TRANSAMERICA claims that the interpleaded defendants were not damaged by any alleged noncompliance by TRANSAMERICA because it didn't rely on the change of beneficiary forms or distribute any funds pursuant to these forms. Similarly, TRANSAMERICA argues that a breach of contract claim cannot be sustained against it based upon the allegedly defective change of beneficiary forms. The salient issue is whether the decedent, Ms. Lawson, the owner of said annuities, intended to change the beneficiary of the annuities, an issue which must be litigated between the defendants and does not implicate TRANSAMERICA. Therefore, TRANSAMERICA maintains that it "does not owe any liability to any party to this action over and above the stake, which it has stood ready, willing and able to deposit with the Court since August 2007. Transamerica is entirely disinterested in the dispute and respectfully requests discharge so that the parties can pursue their respective claims to the contested funds [plaintiff's reply - page 9]."

TRANSAMERICA also contends that it is entitled to discharge due to the untimeliness of the interpleaded defendant's serving and filing of their answers and/or opposition to the instant motion and the prejudice allegedly incurred as result of this delay. The Court notes that the instant matter was adjourned to allow for such opposition. TRANSAMERICA failed to demonstrate any prejudice resulting from the delay for motion practice, and given the well-settled public policy that it is preferable to decide cases on the merits, the Court accepted the opposition papers filed by the interpleaded defendants and grants leave for the complained-of late filing of any answers interposed by the interpleaded defendants prior to the adjourned date. (See Li Gang Ma v Hong Guang Hu, 54 AD3d 312 [2d Dept 2008]; Verde Elec. Corp. v Fed Ins. Co., 50 AD3d 672 [2d Dept 2008]; Cooney v Cambridge Management and Realty Corp., 35 AD3d 522 [2 Dept 2006]).

[*5]Discussion

It is clear that TRANSAMERICA established that it is a mere stakeholder

with respect to the annuity policies at issue. CPLR§ 1006 (a) states:

A stakeholder is a person who is or may be exposed to multiple

liability as the result of adverse claims. A claimant is a person who

has made or may be expected to make such a claim. A stakeholder

may commence an action of interpleader against two or more claimants.TRANSAMERICA, in the instant case, demonstrated that it is the issuer of the two subject annuity policies, competing claims have been made by the interpleaded defendants with respect to their putative status as beneficiaries of said annuities, and TRANSAMERICA has no independent interest in the proceeds of these annuity policies at issue.

The interpleaded defendants do not dispute TRANSAMERICA's stakeholder status, but argue that an order discharging TRANSAMERICA from liability, pursuant to CPLR § 1006 (f), is inappropriate, because TRANSAMERICA is independently liable

to the interpleaded defendants. CPLR § 1006 (e) states "[w]here the issue of an

independent liability of the stakeholder to a claimant is raised by the pleadings or upon motion, the court may dismiss the claim of the appropriate claimant, order severance or separate trials, or require the issue to be tried in the action."

It is well settled that courts have consistently declined to discharge interpleading stakeholders where such parties are potentially independently liable to the interpleaded defendants. In Inovlotska v Greenpoint Bank (8 AD3d 623, 624-625 [2d Dept 2004]) the Court held that Supreme Court, Kings County improvidently exercised its discretion by discharging defendant bank, pursuant to CPLR § 1006 (f), given that plaintiff asserted independent liability on the part of defendant bank and questions existed with respect to the defendant bank's reasonableness in refusing to honor decedent's withdrawals from subject accounts based upon its determination that decedent was subject to undue influence at the time she sought to make such withdrawals. In Birnbaum v Marine Midland Bank, N.A. (96 AD2d 776, 777 [1d Dept 1983]), the Court affirmed that the discharge of defendant bank, pursuant to CPLR § 1006 (f), "would be inappropriate and unwarranted" in light of allegations that the bank had acted improperly and inconsistently with its depositor's instructions in honoring checks drawn against certain accounts by an individual with no authority to do so, thereby potentially exposing the bank to independent liability with respect to a conversion claim brought against it by plaintiff depositor.

In the instant case, the interpleaded defendants have not demonstrated any independent liability on the part of TRANSAMERICA. Rather, TRANSAMERICA merely received change of beneficiary forms purporting to establish interpleaded defendant COOKS as the new beneficiary for each of the two annuities at issue. TRANSAMERICA then informed Ms. Lawson by mail of its receipt of such changes and its related revision of the policies to reflect this change. Subsequent to Ms. Lawson's demise, TRANSAMERICA received conflicting claims concerning the distribution of the two annuities from the interpleaded defendants. TRANSAMERICA, rather than making its own determination as to the validity of the change of beneficiary forms, decedent's state of mind at the time of the execution of the change of beneficiary forms and the potential existence of undue influence upon decedent, recognized that multiple claims existed with respect to the annuities and brought the instant interpleader action seeking discharge of its [*6]own liability. This is not a case where the party bringing the interpleader action distributed funds in its possession, or made its own determination as to the rightful owner of the annuity policies at issue, and acted or failed to act on such basis to the detriment of the interpleaded defendants, thereby potentially rendering itself independently liable to them. Instead, the subject funds remain intact and ready to be distributed to the rightful beneficiary, with appropriate interest, upon adjudication by the Court.

In addition, despite SIMMONDS' and P. LAWSON's claims that TRANSAMERICA failed to comply with its own procedures concerning the purported change of beneficiaries, it is, in any event, not claimed by either interpleaded defendant that TRANSAMERICA actually acted upon such forms, other than making written changes to the annuities with respect to the named beneficiaries. This did not lead to any actual distribution of the policy proceeds by TRANSAMERICA and any determination by TRANSAMERICA, despite various purported deficiencies in the execution of the beneficiary change forms, the underlying issues of decedent's competency and whether COOKS exerted undue influence upon Ms. Lawson when Ms. Lawson executed the change of beneficiary forms. It is well settled that "the formal procedures for a change in beneficiary are for the benefit of the insurer; thus, strict compliance with the formalities to change the beneficiary can be effectively waived by the insurer and the proceeds can be distributed with the insured's manifested intent." (Kornacki v Mutual Life Ins. Co. of New York, 195 AD2d 847, 848 [3d Dept 1993]). "The insurer who has brought the proceeds of the policy into court and requested the court to adjudicate the rights of contesting parties may no longer insist upon strict compliance with policy provisions." (McCarthy v Aetna Life Ins. Co., 92 NY2d 436, 442 [1998]). Relying upon McCarthy v Aetna Life Ins. Co., the Court, in Lincoln Life and Annuity Co. of New York v Caswell, 31 AD3d 1, 5-6 [1d Dept 2006], held:

As the law has evolved, the courts, recognizing that a primary

purpose of specifying a procedure for changing beneficiaries is

to protect the insurer from double liability, have come to hold that

exact compliance with the contractual procedure will be waived

where the insurer, faced with conflicting colorable claims to the

policy proceeds, pays the proceeds into court in an interpleader

action so that the opposing claimants may litigate the matter between

themselves.

(See New York Life Ins. Co. v Lowy, 40 AD3d 295, 297 [1d Dept 2007]; Sun Life Ins. and Annuity Co. of New York v Braslow, 38 AD3d 529 [2d Dept 2007]; American Intern. Life Assur. Co. of New York v Ansel, 273 AD2d 421 [2d Dept 2000]).

The Court finds that TRANSAMERICA, in the instant action, was faced with colorable competing claims concerning the legal beneficiary or beneficiaries of the subject annuities. TRANSAMERICA need not be constrained to demand strict compliance with requirements for a change of beneficiary, meant for its own protection, and incur liability if such requirements are not entirely complied with by the owner of the annuities. Rather, TRANSAMERICA is entitled to pay the proceeds of the annuities into court, be discharged from any further liability concerning subject annuity policies, and allow the claimants to the proceeds of the annuities to litigate the issue of who are the valid beneficiaries to the subject annuities.

In addition, to the extent that the interpleaded defendants claim breach of contract on a [*7]third-party beneficiary theory, such argument is unavailing. The Court of Appeals, in Mendel v Henry Phipps Plaza West, Inc., (6 NY3d 783, 786 [2006]), held that:

Parties asserting third-party beneficiary rights under a contract

must establish (1) the existence of a valid and binding contract

between the other parties, (2) that the contract was intended for [their]

benefit and (3) that the benefit to [them] is sufficiently immediate, rather

than incidental, to indicate the assumption by the contracting parties of

a duty to compensate [them] if the benefit is lost' (Burns Jackson

Miller Summit & Sptizer v Lindner, 49 NY2d 314, 336 [1983]).

(See Mid-Valley Oil Company, Inc. v Hughes Network Systems, Inc., 54 AD3d 394 [2d Dept 2008]; Engineers-Architects, P.C. v State, 51 AD3d 1355 [3d Dept 2008]; Kings Choice Neckwear, Inc., v DHL Airways, Inc., 41 AD3d 117 [1d Dept 2007]). "The law is settled that an intended beneficiary may maintain an action as a third party but an incidental beneficiary may not." (Alicea v The City of New York, 145 AD2d 315, 317 [1d Dept 1988]). Further, "as the party who seeks the status of a third-party beneficiary [it] has the burden of demonstrating that [it] has enforceable rights thereunder . . . which the

. . . parties to the contract intended [it] to have.'" (City of Amsterdam v Law, 270 AD2d 603, 605 [2000], lv denied 95 NY2d 757 [2000]).

Further, the interpleaded defendants have failed to identify a breach of any of the provisions of the annuities in question which would be sufficient to support such a cause of action. In any breach of contract action, the specific breach relied upon must be identified (see generally Murrin v Ford Motor Co., 303 AD2d 475, 477 [2d Dept 2003]).

As previously discussed, the only breach identified by the defendants in the instant action is TRANSAMERICA's alleged acceptance of two change of beneficiary forms which failed to comply entirely with certain TRANSAMERICA requirements. However, these requirements have already been identified as existing solely for the benefit of the insurer, TRANSAMERICA. They do not serve to create any obligations or liabilities with respect to duties owed by TRANSAMERICA to the annuity owner. In addition, at the time such changes were made, the owner, Ms. Lawson, possessed certain unfettered ownership rights in the subject annuities, "including the right to change beneficiaries without restriction" with "the designated beneficiary obtain[ing] no vested interest in the proceeds of the policy" but instead remaining subject to divestiture by the insured at will "of all interest in the proceeds of the policy without the permission - or indeed, even the knowledge of the beneficiary." (Kamens v Utica Mutual Ins. Co., 6 AD3d 1237, 1244 [4th Dept 2004], affd 4 NY3d 460 [2005]). Moreover, the instant subject beneficiary change forms, as noted earlier, state that "[b]y requesting this change the policy owner(s), on his/her behalf and that of his /her successors and assignees, agrees to indemnify and hold the Company harmless from the consequences of accepting this change." In the instant action, the competing beneficiaries obtained no vested interest in the annuities at the time of their initial designation or pursuant to the subsequent alleged change of beneficiaries purportedly effected by the subject change forms. The claimants have not identified any breach of the annuities' terms on the part of TRANSAMERICA vis-a -vis Ms. Lawson, and the funds remain intact and ready to be distributed pursuant to Ms. Lawson's intent, once it can be determined by the Court, pursuant to litigation between the interpleaded defendants. Thus, [*8]TRANSAMERICA's discharge from liability is warranted.

Therefore, this Court finds that since TRANSAMERICA has demonstrated that it is a neutral stakeholder with no interest in the disputed annuities and the interpleaded defendants have failed to raise an issue of independent liability on the part of TRANSAMERICA, a discharge of liability, pursuant to CPLR § 1006 (f), is the appropriate resolution to TRANSAMERICA's role in the underlying transactions.

With respect to attorneys' fees and disbursements claimed by Morgan, Lewis & Bockius, LLP, counsel for TRANSAMERICA, counsel has submitted four statements [exhibit H of affirmation in support of motion], of which three are invoices for "fees" and "disbursements and other related charges." The fourth document is a computer time sheet printout, listing 7.70 hours of work by an associate billing at $315.00 per hour and .10 hours of work by a paralegal billing at $230.00 per hour. Counsel has failed to present an affirmation with any itemized detailed of the actual legal services performed and an explanation of the billing rates. The Court cannot countenance $9,679.13 for attorneys' fees and disbursements, which will come out of the annuity proceeds for the rightful beneficiary or beneficiaries, without a hearing to determine the appropriate amount for attorneys' fees and disbursements. Therefore, the Court will refer the issue of the appropriate amount of attorneys' fees and disbursements to be paid to TRANSAMERICA to a Judicial Hearing Officer to hear and report to this Court. (Judiciary Law Article 22; 22 NYCRR § 122; New York Life Ins. Co. v Lowy, supra; Lincoln Life and Annuity Co. of New York v Caswell, supra; American Intern. Life Assur. Co. of New York v Ansel, supra.)

Accordingly, it is

ORDERED, that the motion by interpleader plaintiff TRANSAMERICA FINANCIAL LIFE INSURANCE CO., pursuant to CPLR § 1006 (f), to pay into Court, the amount in dispute in the instant action, $211,884.83 plus interest accrued thereon from August 9, 2007, which are the proceeds of two TRANSAMERICA annuity policies purchased by decedent Mary H. Lawson, policy numbers 0100MS34338 and 26617834, is granted; and it is further

ORDERED, that branch of interpleader plaintiff TRANSAMERICA FINANCIAL LIFE INSURANCE CO.'s motion seeking attorneys' fees and costs, pursuant to CPLR 1006 (f), "as may be just and which may be charged against the subject matter of the action," is granted; and it is further

ORDERED, that in accordance with the Judiciary Law, Article 22 and 22 NYCRR § 122, this Court shall refer this matter forthwith, with the filing of the requisite forms and the approval of the Administrative Judge, to a Judicial Hearing Officer to conduct a hearing in the JHO Part and report to this court the appropriate amount of attorneys' fees and disbursements, if any, that [*9]"may be just and which may be charged against the subject matter of the action."

This constitutes the Decision and Order of the Court.

ENTER

___________________________

Hon. Arthur M. Schack

J. S. C.