Opinion
19736-02.
Decided March 4, 2005.
Joseph A. Minniti, Esq., Mamaroneck, New York, Attorney for Plaintiffs.
Patrick J. Bliss, Esq., White Plains, New York, Attorney for Defendant.
Plaintiffs/siblings initiated this action against Alice Nicolais ("Alice"), the widow of their deceased brother, Ralph Nicolais ("Ralph"), seeking (1) to establish a constructive trust in favor of Salvatore Nicolais ("Salvatore") of an undivided one-half interest in this mixed use premises located at 729-731 West Boston Post Road, Mamaroneck, New York, requiring Alice to turn over and deliver title to Salvatore of an undivided one-half interest in the subject premises, enjoining and restraining Alice from selling, transferring, encumbering, or otherwise disposing of the subject premises pending the Court's determination, and for punitive damages against Alice.
In the second prong of the complaint, plaintiffs Anna V. Della Posta ("Anna") and Bernard Nicolais ("Bernard") demand judgment against Alice decreeing that Alice honor an alleged undertaking made by Alice's late husband, Ralph, to pay the principal balance due on a bond executed by Ralph and her brother-in-law, Salvatore, and that judgment be entered against Alice in the amount of Twenty-five Thousand, Eight Hundred Fifty-five and 23/100 ($25,855.23) Dollars, together with interest at the rate of ten percent per annum from June 1, 1998 to the date of payment. Anna and Bernard also seek punitive damages.
To the extent relevant to the disposition of these motions, the premises was originally purchased by the parties' father, Benedetto Nicolais, who, thereafter, conveyed it to himself and his wife (the parties' mother), Maria Nicolais ("Maria"), as tenants-by-the-entirety. Upon Benedetto's death, title to the property vested in Maria. As part of Maria's estate plan, the premises was transferred in February 1978 to Maridsons Realty Corp. ("Maridsons"). As per plaintiffs, all four children were given a 25% interest in Maridsons. Plaintiffs further allege that, thereafter, Ralph and Salvatore acquired Ben and Anna's respective 25% interests in the property.
In addition to the more equivocal deposition testimony as to Salvatore's financial condition at the time of the acquisition, Bernard, Anna, and Salvatore have submitted affidavits to the Court in support of their motion wherein they state the following:
At the time, however, . . . Salvatore . . . was involved in some financial problems with the Internal Revenue Service and . . . Ralph . . . offered to hold Salvatore's Fifty (50%) Percent in the premises in trust for Salvatore's benefit. We all agreed to this arrangement.
(Affidavit of Bernard Nicolais dated December 9, 2004 [Exhibit "B" to Affirmation in Support of Plaintiffs' Motion]). Anna's affidavit is identical in this regard (Exhibit "E" to Affirmation in Support of Plaintiffs' Motion), as is Salvatore's (Exhibit "C" to Affirmation in Support of Plaintiffs' Motion).
Interestingly, Salvatore's Amended Affidavit in Support dated December 15, 2004 makes no mention of the reason for the asserted 50% transfer of the premises to Ralph on Salvatore's behalf.
As per plaintiffs, consideration for the transfer to Ralph, for Salvatore and Ralph, was accompanied by Salvatore and Ralph's execution and delivery of a $70,000 bond to Anna and Bernard. As security for the loan, titleholder Ralph executed a related mortgage against the premises in favor of Anna and Bernard. The mortgage was then recorded.
In mid-1998, Anna and Bernard executed and filed a satisfaction of mortgage. As per Anna and Bernard, the satisfaction was executed and filed upon Salvatore and Ralph's promise to pay the $25,855.23 balance of the loan, together with accrued interest, when the property was sold.
In August 1998, Ralph transferred the premises to himself and his wife, Alice, as tenants-by-the-entirety. Upon Ralph's death on September 23, 2000, title to the premises vested in Alice as the surviving joint tenant, but allegedly burdened with Salvatore's 50% interest.
In October 2002, Alice advised Salvatore that she intended to sell the premises and that he would have to pay rent to the new owner for his occupancy of one of the two residential units. Alice also refuses to acknowledge any debt to Anna and Bernard on the "satisfied" note.
Alice takes the position that she is the sole owner of the premises, having acquired title as the surviving tenant-by-the-entirety of her late husband, Ralph. She denies that Salvatore ever owned any interest in Maridsons or in the premises, or that he ever contributed to its expenses, other than paying a very low rent of $500 to live there with his family. As to the mortgage, Alice claims that the satisfaction is conclusive evidence that nothing more is owed.
I. DEFENDANT'S AFFIRMATIVE DEFENSES:
A. Statute of limitations
To the extent argued and briefed by defendant, the Court finds that this action is timely, having been commenced within six years (CPLR § 213) of "the occurrence of the wrongful act giving rise to a duty of restitution" ( Sitkowski v. Petzing, 175 AD2d 801, 802; Krauss v. Iliescu, 259 AD2d 468, 469 [2nd Dept., 1999]), here Alice's October 2002 refusal to acknowledge Salvatore's asserted one-half interest in the premises.
As to the alleged note, the action is timely since, as per plaintiffs' allegations alone, the debt does not come due until the premises is sold.
B. Unclean hands
Where an action is brought to compel reconveyance of property which admittedly was transferred with the intent to defraud a legitimate creditor, the basis of such a suit is immoral and one to which equity will not lend its aid . . . [citations omitted].
( Muscarella v. Muscarella, 93 AD2d 993, 994 [4th Dept., 1983]). The doctrine of unclean hands is so ingrained in our system of jurisprudence that it may be raised sua sponte, even for the first time on appeal (id.), "not to favor defendant, but as a matter of public policy" ( Janke v. Janke, 47 AD2d 445, 450 [4th Dept., 1975] aff'd 39 NY2d 786). "[U]nclean hands in participating in a course of conduct of deception and deceit is an effective bar to [an action]" ( Chun Wang v. Chun Wong, 163 AD2d 300, 302 [2nd Dept., 1990], appeal denied 77 NY2d 804, cert denied 501 U.S. 1252) "in law or equity, to protection or recourse in a dispute involving their accomplice in that very scheme" ( id. citing Sayres v. Decker Automobile Co., 239 NY 73; 60 N.Y.Jur.2d, Fraud and Deceit, § 175). One "seeking to invoke the doctrine of unclean hands has the initial burden of showing, prima facie, that the elements of the doctrine have been satisfied" ( Fade v. Pugliani/Fade, 8 AD3d 612, 614 [2nd Dept., 2004]).
While the affidavits of all of the plaintiffs ( see, supra) admit to their complicity in the alleged transfer of Anna and Bernard's respective 25% interests to Ralph and Salvatore, in Ralph's name only, to protect Salvatore from Federal Income Tax problems, no proof in admissible form has been adduced that any Federal Income Tax problems actually existed at or about the time of the transfer, or that there existed any "legitimate creditor" ( see, Muscarella v. Muscarella, supra.) or a "debt or charge which could have been hindered or delayed, nor that there was a creditor who could be defrauded" ( Valenti v. Valenti, 279 A.D. 677 [2nd Dept., 1951]). In short, there is no evidence that the Federal Income Tax that Salvatore sought to avoid was ever due ( see, Valenti v. Valenti, 279 A.D. 677 [2nd Dept., 1951]), or that any other "legitimate" debt was ever asserted or shown to exist (6 ALR 4th 862).
Furthermore,
it is "not every potential claim against a transferor that will bring the unclean hands doctrine into play"; the claim must be "of substance." Palumbo v. Palumbo, . . . 284 NYS2d at 889.
( Bistricer v. Bistricer, 659 F. Supp. 215 [E.D.NY, 1987]). Such is neither asserted nor shown to be the case here. "[T]he court cannot infer from the fact the transfer was made that the claim is of substance" ( id. citing Palumbo v. Palumbo, supra at p. 890).
Finally, the Court notes that the applicability of the unclean hands doctrine to this case is questionable.
Whatever may be said of the deterrent efficacy of [the unclean hand doctrine] in cases involving private parties, there is little reason to apply them to a case where the allegedly improper conduct has the purpose of hiding funds from government authorities . . . [including situations where the asserted] purpose was to cheat the tax collector . . . . . . Such a holding would hardly add significantly to the weapons, both criminal and civil, that the government has to require compliance with the tax laws. Moreover, the determination of tax liability is often a difficult, intricate and time consuming task. It would not be wise policy to permit private parties to litigate such liability in the absence of the government and in a case otherwise wholly unrelated to tax issues . . . [citations omitted].
( Bistricer v. Bistricer, 659 F. Supp. 215, 217-218 [E.D.NY, 1987]).
C. Statute of Frauds
Defendant has failed to establish entitlement to summary judgment in her favor, as a matter of law, on her affirmative defense of statute of frauds. Among other things, there is a question as to whether Ralph ever promised to satisfy his portion of the note to Bernard and Anna upon the sale of the premises and whether Bernard and Anna relied upon said promise upon the execution and filing of the satisfaction ( see, T.T.S.G. v. Kubic, 226 AD2d 132 [1st Dept., 1996]).
II. MOTION AND CROSS-MOTION FOR SUMMARY JUDGMENT
on the remaining issues
When viewing the admissible evidence in a light most favorable to the party or parties opposing the respective motions and upon bestowing the benefit of every reasonable inference to such parties ( Boyce v. Vasquez, 249 AD2d 724, 726 [3rd Dept., 1998]), the Court finds that neither side has established entitlement to judgment in their favor as a matter of law. There are material questions of fact as to whether all of the elements of a constructive trust have been established including most particularly and without limitation whether there was a promise by Ralph and a transfer by Salvatore in reliance thereon ( see, Janke v. Janke, 47 AD2d 445, 448 [4th Dept., 1975] aff'd 39 NY2d 786); Bontecou v. Goldman, 103 AD2d 732, 733 [2nd Dept., 1984]).
Based upon the foregoing, it is hereby
ORDERED, that the motion and cross-motion are denied, except that, pursuant to CPLR § 3212(e) reverse summary judgment is granted in favor of plaintiffs dismissing defendant's affirmative defenses of statute of limitations and unclean hands.
The parties are reminded to appear before the Central Calendar Part on March 10, 2005.
The foregoing constitutes the Opinion, Decision, and Order of the Court.