Opinion
Civil Action No. 15276.
Submitted: April 6, 2000.
Decided: April 20, 2000.
Laraine A. Ryan, Hockessin, Delaware, Attorney for Plaintiff.
David J. Ferry, Jr. and Rick S. Miller of Ferry Joseph, Wilmington, Delaware, Attorneys for Defendants.
MEMORANDUM OPINION
Newly arrived Delaware father and mother nearing their seventies with limited English linguistic skills and without experience with America law and business transactions place $70,000 in the hands of their eldest daughter for the purpose of purchasing a residence for them in Delaware. With the understanding that their eldest daughter would handle not only this particular transaction for them but would live one block away and "take care of them" while they lived, the parents authorized the daughter to title their residence in her sole name.
Contrary to the expectations of the parents and eldest daughter, she predeceased them both and the parents found their residence owned by operation of law by their son-in-law. The mother sues in equity requesting imposition of a resulting trust. She testifies that she and her husband intended the property to be the eldest daughter's only if she survived them after "taking care of them" during their lives in Delaware. The son-in-law and grandson, now joint owners after a conveyance without consideration, claim the parents intended a gift to the eldest daughter at the time of the original transaction.
The Supreme Court has declared that the law in Delaware presumes that a parent who titles property in a child's name intended to make a gift to that child.
Where the surviving parent's credible sworn testimony regarding her intent and other circumstantial evidence combines to overcome the presumption that the parents intend a gift when they pay the purchase price but place title to property in their child's name, equity will impose a resulting trust on the real property.
I. Background
Plaintiff Anna Procek and the late John Procek are the parents of the late Helen Hudak. Defendant John Hudak, Jr. ("John") is Helen Hudak's widower. Defendant John M. Hudak ("John M.") is John and Helen Hudak's son.
Anna and John Procek are first-generation Americans who, before moving to Delaware, lived in a New Jersey community consisting primarily of recent immigrants. The Proceks did not speak English very well, and also were uncomfortable handling business transactions. As a result, they typically paid cash for even large purchases one would normally finance. It seems that the Proceks never became fully immersed in the "American" way of life.
In 1978, the Proceks, who at that time were nearing seventy years old, decided to move to Delaware to be near their oldest daughter, Helen. The Proceks elected to do so because Helen encouraged them by promising them that she would take care of them. When the Proceks arrived in Delaware, they gave Helen money to buy a house. The money they gave Helen, which was principally raised from the sale of their New Jersey home, represented virtually everything the Proceks had in the world. Helen took charge of the entire transaction, hired an attorney, attended the settlement alone and bought the property now in dispute with that money. The settlement attorney titled the property in Helen's name. The Proceks did not attend the settlement. The settlement attorney hired by Helen (but paid by the Proceks) died before trial so no one knows what Helen may have told him about the source of the funds, the fact that the home would be the Proceks' residence, or why the property should be titled in her name. The record is clear, however, that the settlement attorney never spoke to her parents and that no alternatives to deeding the property outright to Helen in order to effectuate or document the Proceks' intent were ever explored with the Proceks. The logical inference from the known facts is that Helen acting for her parents, could, but chose not to, have the attorney advise the Proceks carefully about several alternatives. There is, in fact, no record of a gift tax filing for the $70,000 nor any apparent discussion over whether one would be due and owing under the circumstances. After settlement, the Proceks moved into the house.
The Proceks lived one block from Helen and her husband John. From all accounts, Helen and her parents had a close relationship for the next twelve years. She took them shopping and to their doctor's offices. Helen managed their finances. Her parents gave her cash to pay bills and Helen wrote checks. John performed periodic maintenance on the house in which the Proceks lived. The Proceks, however, in addition to exclusive occupancy, paid all bills normally associated with the home: utilities, sewer, property taxes, insurance, upkeep and maintenance.
Like most parents, the Proceks expected that their children would outlive them. Unfortunately, Helen died from cancer in 1990. Shortly before her death, Helen offered to transfer title to the house to her parents. They refused. When Helen died, John inherited the property. The Proceks became concerned that John would eventually remarry and remove them from the house. To allay this concern, John Procek signed a paper providing that John granted the Proceks "permission" to live in the house for the rest of their lives. John Procek died in 1993 and Anna continued to live in the house until 1996, when she decided, for health reasons, to move in with her middle daughter, Irene Setz. Since Anna moved out, John has paid most of the expenses related to upkeep and maintenance of the house. John never asked Anna to leave, and apparently lived up to his promise to allow Anna to reside there for life. Notably, however, he never offered to transfer title to the Proceks, even though he knew that the Proceks had two other daughters besides Helen, and that they had no other substantial assets.
Although this litigation is nominally on behalf of her ninety-two year old mother, Irene, as Anna's current caregiver probably instigated it. When Irene learned the house was in John's name, she requested that John sell the house and divide the proceeds among Anna's two surviving children and John. John refused. Anna then filed this action. Before Anna filed suit, however, John transferred title to himself and his son, John M., as joint tenants, for no consideration, complicating title and making any claim by Anna more difficult to resolve.
When Anna was asked why she filed this action, she stated she did not know.
No evidence indicates John M. took title as a bona fide purchaser for value in ignorance of the circumstances or that John Hudak, Jr. could convey any interest he did not legitimately possess.
I issued a post-trial opinion in this case on June 18, 1998. In that opinion, I presumed that the party who supplied the consideration for the property intended to retain beneficial ownership. Accordingly, I found the evidence presented did not support a finding that the Proceks intended to give the property to Helen as a gift, and I granted Anna's petition for imposition of a purchase money resulting trust.
Procek v. Hudak , Del. Ch., C.A. No. 15276, 1998 WL 388403, Steele, V.C. (June 18, 1998).
John Hudak appealed that decision. The Supreme Court reversed and remanded the case, instructing that there is a rebuttable presumption that parents intend to make a gift to their child when the parents provide the consideration but place title in the name of their child. The Supreme Court found no error in my determination that laches did not bar Anna's claim, but did not prohibit the laches question from being revisited on remand. Finally, the Supreme Court ruled that John M. must be joined as a party because he is a record owner of the property at issue. I, of course, having determined in the original opinion that equity should intervene to impose a resulting trust as of the date Helen took title had found John M.'s latter day contrived claim to title irrelevant. The parties have submitted briefs discussing the ramifications of the Supreme Court decision, and John M. has since been joined as a defendant.
Hudak v. Procek , Del. Supr., 727 A.2d 841, 843 (1999).
Id .
II. Contentions
Anna contends that the house has been held in a resulting or constructive trust since 1978 for the benefit of the Proceks who paid the purchase price. She adds that any interpretable gift should be considered a contingent remainder, conditioned on Helen taking care of her parents until both her parents died. Implied in this condition is that Helen had to survive both her parents in order for the gift to vest.
John and John M. argue that Procek gave Helen $70,000 to purchase the property with the present intent to make her a gift of the real property. They also allege Anna's claim is barred by laches. The issue is thus drawn. What evidence, if any, exists to support or rebut the presumption that when the Proceks allowed Helen to title the property in her name that they intended to give Helen their $70,000 residence at settlement? But before focusing on the real issue, I will deal with the defendants' laches claim.
III. Analysis
A. Anna's claim is not barred by laches
Laches is an equitable defense, available when a person, knowing of a wrong affecting her rights unreasonably delays in bringing her action. Laches, however, is not an effective defense unless the plaintiffs delay in bringing the claim somehow prejudices the defendant. While statutes of limitation are generally considered in equity, "strictly speaking, a statute of limitations at law is not binding in a court of equity."
Skouras v. Admiralty Enters. Inc. , Del. Ch., 386 A.2d 674, 682 (1978).
Nationwide Mutual Ins. v. Starr , Del. Supr., 575 A.2d 1083, 1089 (1990).
DONALD J. WOLFE, JR. MICHAEL A. PITTENGER, CORPORATE AND COMMERCIAL PRACTICE IN THE DELAWARE COURT OF CHANCERY §§ 12-7(c), (c)(1), at 858-60(1998).
Defendants contend that Anna's delay was unreasonable and that they were prejudiced as a result. If the record supported these contentions, then both prongs of the laches test would be satisfied.
1. Unreasonable Delay
After her husband died in 1993, Anna continued to live in the house for three years. She was eighty-eight years old when she moved in with Irene in 1996. Until that time, Anna had no reason to know that John claimed a fee simple interest in the property. Given her level of sophistication in legal matters, it is more reasonable to conclude that she thought that John held the property for her benefit at least until John made his belief clear that he owned the property outright. Anna, however, did not know of the potential wrong affecting her rights until 1996, three years after John Procek died. Perhaps if Anna had learned of the need to file a complaint to assert her rights several years before her husband died but failed to assert those rights until several years after his death, laches might apply if defendants were unfairly prejudiced by her unreasonable delay. But, that is not the case here.
Chancellor Chandler recently stated that "the limitations period is tolled until such time that persons of ordinary intelligence and prudence would have facts sufficient to put them on injury, which, if pursued, would lead to the discovery of the injury." In re Dean Witter Partnership Litig. , Del. Ch., C.A. No. 14816, mem. op. at 20, Chandler, C. (July 17, 1998).
Although discussed later, I emphasize here that Anna never signed the paper purporting to confirm John's promise that the Proceks could live in their residence until they "decease."
2. The Claim they were Prejudiced by the Delay.
Specifically, defendants argue that the death of two key witnesses, Helen and John Procek, makes it much more difficult for them to present their case. They cite two Delaware cases for the proposition that death of a key witness can constitute prejudice in a laches analysis. Death of a potential witness does not automatically cause prejudice to a defendant, however. The particular circumstances of the case must be considered as well as the significance of the deceased's likely testimony. Certainly, if Helen had not died, there would be no case or controversy. She could have told us much about the circumstances surrounding the purchase and her parents' intentions. Most importantly, she could have explained what she told the settlement attorney and her understanding of her parents' intent and how she tried to effectuate that intent with appropriate legal documentation. Nonetheless, her death does not work unfair prejudice on the defendants. Defendants' argument here is akin to arguing that the second prong of the laches test is met in a will contest because the testator is not available to explain his intent. Surely that argument can not succeed. The focus of this case, in any event, is Anna and John Procek's intent in 1978 — not Helen's interpretation of it.
Defendants cite Cooch v. Grier , Del. Ch., 59 A.2d 282, 287 (1948) (barring plaintiffs claim by laches where plaintiff acquiesced in purported fraudulent transfer and failed to file suit until after transferee died); Fike v. Ruger , Del. Ch., C.A. No. 16791, 1999 WL 1083881, Lamb, V.C. (Nov. 19, 1999) (defendants suffered prejudice due to the death of important witnesses before plaintiff brought. Suit, therefore plaintiffs' unreasonable delay barred their claims).
See Skouras v. Admiralty Enterprises, Inc. , Del. Ch., 386 A.2d 674, 682 (1978) (death of witness does not work prejudice because deceased's testimony not significant).
More difficult to resolve is the question of whether John Procek's death works an unfair prejudice on the defendants. His testimony could potentially be helpful to either party and the court in resolving this dispute. The circumstantial evidence and Anna's unobjected to testimony about his intent does not support the defendants' contentions, however, as explained later in this Opinion.
Accordingly, defendants fail to convince me that laches bars Anna's claim.
B. Anna Procek's clear and straightforward testimony overcomes the presumption that the Proceks intended to make a gift in 1978 to Helen, only one of three children.
On appeal, the Supreme Court announced that equity presumes "absent contrary evidence, that the person supplying the purchase money for property intends that its purchase will inure to his benefit, and the fact that title is in the name of another is for some incidental reason." But the Court cautioned that this presumption is inapplicable "where the person supplying the money is a husband who places title to the property in the name of his wife. Under those circumstances, there is a rebuttable presumption that the husband intended to make a gift to his wife." The Court found the same presumption applies when parents supply consideration but place title in the name of their child. The only conceivable purpose in applying a presumption in the first place is to provide some reasonable basis to determine the intent of an owner who places property in the name of another in the absence of any other plausible evidence of that intent. The issue in this case is: what did the Proceks intend when they gave Helen the money in 1978? The only logical answer is what Anna explained at trial — that they never intended to make a present gift of all their liquidity in order to become mere tenants in Helen's second house.
Hudak v. Procek , Del. Supr., 727 A.2d 841, 843 (1999), citing Adams v. Jankouskas , Del. Supr., 452 A.2d 148 (1982).
Hudak v. Procek , 727 A.2d at 843, citing Hanby v. Hanby , Del. Supr., 245 A.2d 428 (1968).
Hudak v. Procek , 727 A.2d at 843, citing McCafferty v. Flinn , Del. Ch., 125 A. 675, 677 (1924).
On what basis do I reach this conclusion? I point out the rather undisguised fact that the surviving purchaser of the property in issue testified live before me on the very subject of her intent in 1978. I heard and saw Anna testify honestly and straightforwardly at trial when carefully questioned about her intent. Remember, in 1978 the Proceks, although senior citizens, were still relatively active seventy-somethings with more years to live. Indeed, Anna is still alive at ninety-two and seemingly going strong. Absent some reason to disbelieve Anna, who at ninety plus years was subjected to vigorous but uneventful cross-examination, why would any reasonable trier of fact depend upon a logical, but necessarily artificial presumption?
Despite her advanced age, Anna appeared quite competent when she testified at trial. Further, she did not seem to be unfairly influenced by Irene nor did I believe her to be untruthful when describing her intent in 1978. I found her English to be plain spoken and understandable, despite the fact that she spoke with a heavy accent. In short, I believe she knew exactly what was demanded of her at trial, and that she was completely honest when she described the events of 1978.
Anna testified, without objection, about her and her husband's intent at the time they entrusted Helen with the obligation to take care of their affairs. Both she and John Procek were unsophisticated about the complexity of the law and legal documentation necessary to confirm that intent, but Anna could not have been clearer in her testimony. I observed both Anna and Irene carefully when they testified. I have no doubt that Irene encouraged Anna to take legal action and that Anna might have been content to leave well enough alone without some urging from her surviving daughters. Nonetheless, when it came time for Anna to state under oath what she intended to happen as a result of placing $70,000 in Helen's hands in 1978, she came through loudly and clearly. After deciding to move to Delaware to be close to Helen, Anna and John Procek intended that Helen would watch over them in their remaining years and in exchange, at the death of the survivor, she would obtain both beneficial and legal title to the Proceks' residence in Delaware. In the Proceks' minds, this guaranty of ownership in the house made them more confident that Helen would live up to her end of the bargain and take care of them until their deaths.
Helen died before she could fulfill that commitment. Unfortunately, Helen failed, while acting for her parents, to explore through the settlement attorney any alternative that could have addressed this unanticipated development. Any reasonably prudent attorney who knew of the Proceks' intent would have advised a different course of action. Helen, however, arranged the transaction without any contact between counsel and the Proceks. Any objective reading of Anna's testimony and her response to intense cross leads to the conclusion that the Proceks did not intend to make an outright gift at the time Helen had the title placed in her name.
See Trial Tr. at 21.
See Trial Tr. at 31, 36-38.
Defendants argue that the Proceks clearly wanted Helen to have the property outright. It strains credulity to imagine this to be the case. The Proceks sold the only substantial asset they had before moving to Delaware. They gave Helen the proceeds from that sale to buy a residence for them. Helen took record title in the form she did because the Proceks were intimidated by the American legal process. Like many immigrants to this country, they preferred that a trusted family member handle the details. I have no doubt that the Proceks intended Helen to own the property if she took care of them and survived them. But, I must conclude that they never wanted the house in which they invested the entire fruits of their lifelong labors to go entirely to their son-in-law if their daughter predeceased them.
Finally, I realize that Helen took care of many items of personal business for her parents for twelve years. And, I recognize that only her untimely death prevented Helen from fulfilling the promises I believe she made to her parents.
There is also evidence that Helen did much to help her parents even before they moved to Delaware.
I acknowledge that the two other principal parties who knew the circumstances surrounding the initial transaction in 1978 will never be heard because they have since died. I would have liked to have heard from the settlement attorney to learn what Helen did or did not tell him about the $70,000 Procek transaction, but he too died before trial. Nonetheless, I find that the Proceks intended that beneficial as well as legal title to the house would pass to Helen after, and only after, she survived both her parents. Despite her twelve years of service she did not meet that condition. Even substantial performance is not sufficient to meet an express condition of this nature.
See Restatement (Second) of Contracts § 237, cmt. d.
C. Later conduct likewise overcomes gift presumption
The rights of the parties must be determined as of the time of the transfer, and later acts, "unless so closely connected therewith as to throw some light on that transaction, are ordinarily of little importance."
Greenly v. Greenly , Del. Ch., 49 A.2d 126, 130 (1946).
Anna states that conduct after the 1978 property settlement demonstrates that she and John Procek never intended to make a present gift. Anna points to several occurrences after 1978 that make that clear. She argues that since she and her husband occupied the premises exclusively, paid taxes, insurance, maintenance, and repairs on the property that they retained control of the property. It is true that these payments are typical of fee simple ownership and not necessarily so of a life estate or other tenancy.
Helen knew she was dying and asked her parents if they wanted her to transfer title to the house to them. By making this offer, Helen implicitly expressed her confirmation that she knew her parents never really intended her to take title to the house if she did not take care of and survive her parents. Helen's offer to transfer title is tantamount to an admission that she knew her parents never intended a present gift in 1978.
Defendants make much of the Proceks' rejection of this offer to transfer title. Unsurprisingly, they argue that the Proceks' refusal reconfirmed the earlier gift. There are, however, more logical if more worldly inferences to draw. Judges, like juries, sitting as finders of fact, must look to their own experiences in and with life to draw appropriate inferences. Would any, even a legally sophisticated, mother or father of a child dying of cancer suggest to that child that property be retitled in their name in anticipation of that child's assumed imminent death? I have seen Anna Procek and have paid particular attention to her manner on the stand, her apparent fairness and frankness in giving her testimony and observed her response to excruciatingly painful questions about her regard for her deceased daughter, Helen, and her remaining children. I can not imagine her insisting that her dying daughter retitle the property in the parents' name simply to protect their ownership rights even when Helen) aware of the circumstances, may have suggested so.
Likewise, defendants point to the paper signed by John and John Procek after Helen's death as evidence that both the Proceks intended to make an irrevocable, present gift in 1978. After Helen's death, the Proceks purportedly became concerned that John might remarry and force them out of the house. It is unclear why they may have thought this, but there is little reason to assume that they, then in their eighties, had suddenly become any more sophisticated about their legal rights in the property than they had been in 1978. John Procek and John Hudak, nonetheless, signed a paper acknowledging that John "grants" the Proceks "permission to reside" in the property. Defendants astutely ask if Mr. Procek did not believe that the defendant owned the property, why would he have signed a paper acknowledging permission to remain? This is a difficult question, particularly when I do not know who framed the issue or how it was presented to John Procek.
In pertinent part, that paper reads:
It is understood and agreed that Mr. John Hudak, Jr. grants permission to Mr. John Procek and Mrs. Anna Procek, his father and mother-in-law, to reside in [the property] until they both decease.
Anna did not sign the paper.
I do know that the Proceks never became truly "Americanized." Even when they lived in New Jersey, they lived in a community where English was not widely spoken. By the time John Procek entered into the agreement with John they were in their eighties, and had recently lost their eldest daughter who had and, they believed, would be able to continue to take care of them. They had always lived sheltered lives in which they were dependent on family members and neighbors. These were not the sort of people so common in today's litigious America willing to march to a lawyer's office at the slightest hint of legal conflict. The Proceks just wanted a place to live with the fewest cares for their final years. The easiest way to achieve that goal would be to avoid confrontation with John. John Procek signed and the problem seemingly went away. Equity can not penalize him for making a decision that avoided (at that time) family strife, and solved the Proceks' immediate dilemma.
I am satisfied that Anna's lucid testimony coupled with logical inferences drawn from circumstantial evidence are sufficient to overcome the presumption of a parental gift. No objectively reasonable person placed in Helen's position in 1978, presented with all the facts I just described, would have interpreted the transfer of the $70,000 to be a present irrevocable gift.
Accordingly, recognizing that the entire focus of this case is on the Proceks' intent in 1978, I conclude that Anna's clear testimony about that intent as well as later events rebut the presumption of a parental intent to make a gift. I conclude that the Proceks supplied the entire proceeds for the purchase of their residence and that they intended that Helen arrange the purchase and title the deed in her name with the hope and understanding that she would take care of them, survive them and then receive the merged beneficial and legal interest in the property.
IV. Conclusion
For the reasons stated above, I grant plaintiffs petition for imposition of a purchase money resulting trust. Counsel will attempt to agree on a form of order effectuating this Opinion which addresses any and all remaining ancillary issues of administration of the transfer of title.
IT IS SO ORDERED.