Opinion
614060/2018
09-11-2020
Sandra Van DE WALLE, Carla Van De Walle, Alexa Van De Walle And James Van De Walle, Plaintiffs, v. Naheed Asad Van DE WALLE, individually and in her capacity as Executor of the Estate of Charles R. Van De Walle, Defendant.
PLAINTIFFS: JESSICA M. BAQUET, ESQ, JASPAN SCHLESINGER LLP, 300 GARDEN CITY PLAZA, GARDEN CITY, N.Y. 11530, 516-746-8000, JBACQUET@JASPANLLP.COM DEFENDANT: JOHN R. MORKEN, ESQ., ROBERT M. HARPER, ESQ., FARRELL FRITZ, P.C., 400 RXR PLAZA, UNIONDALE, N.Y. 11556, 516-227 0700, JMorken@FarrellFritz.com, BHarper@FarrellFritz.com
PLAINTIFFS: JESSICA M. BAQUET, ESQ, JASPAN SCHLESINGER LLP, 300 GARDEN CITY PLAZA, GARDEN CITY, N.Y. 11530, 516-746-8000, JBACQUET@JASPANLLP.COM
DEFENDANT: JOHN R. MORKEN, ESQ., ROBERT M. HARPER, ESQ., FARRELL FRITZ, P.C., 400 RXR PLAZA, UNIONDALE, N.Y. 11556, 516-227 0700, JMorken@FarrellFritz.com, BHarper@FarrellFritz.com
Antonio I. Brandveen, J.
The following papers have been read on this motion:
Plaintiffs' Notice of Motion, Affirmation and Exhibits 1-2
Defendant's Notice of Cross-Motion, Affirmation, Affidavit and Exhibits in Opposition and Support of Cross-Motion 3-5
Plaintiffs' Affirmation and Exhibits in Further Support of Motion and in Opposition to Cross-Motion 6
Defendant's Affirmation, Affidavit and Exhibits in Further Support of Cross-Motion 7-8
Plaintiffs' Sur-Reply Affirmation and Exhibits 9
Briefs: Plaintiffs' 10-11
Defendant's 12-13
The relief sought by the plaintiffs, against the backdrop of the compelling facts in this intra-family feud, mandate the invocation of the broad equitable power of this Court to correct a wrong. "Anything short of that would be a mockery of justice" ( Tutunjian v, Vetzigian , 299 NY 315, 319 [1949] ).
The plaintiffs move (sequence 002) pursuant to CPLR 3212 for an order: (1) granting summary judgment in favor of Carla Van de Walle ("Carla"), Alexa Van de Walle ("Alexa") and James Van de Walle ("James") against defendant Naheed Asad Van de Walle ("Naheed") as to liability on plaintiffs' first cause of action for the imposition of a constructive trust against certain property, and on their fourth and/or fifth causes of action against Naheed under the Debtor Creditor Law; (2) granting summary judgment in favor of Carla, Alexa and James against Naheed in her capacity as executor of the estate of Charles Van de Walle ("Charles") as to liability on their second cause of action for breach of contract or, alternatively, on their third cause of action for breach of the implied covenant of good faith and fair dealing, and (3) dismissing Naheed's affirmative defenses.
Naheed cross-moves (sequence 003) pursuant to CPLR 3212 for an order granting summary judgment dismissing the plaintiffs' amended complaint in its entirety.
The Court will address the motions seriatim.
FACTUAL BACKGROUND
Attorneys Sandra Van de Walle ("Sandra") and Charles were married in 1952. The couple had three children between 1953 and 1966: James, Alexa and Carla.
In 1978, Charles and Sandra began living apart when Charles sold the marital residence in which they resided. They maintained a relationship until, in 1983, Sandra became aware that Charles was dating the defendant. In May, 1984, Charles commenced an action for divorce against Sandra in Supreme Court, Nassau County, in which he alleged that Sandra had abandoned him and committed cruel and inhuman treatment. Sandra denied abandoning Charles or committing cruel and inhuman treatment.
In the statement of net worth Charles filed with the Court, he reported that he owned real property at 117 Mill River Road, Oyster Bay, New York (the "Mill River Property") and certain retirement accounts. Sandra filed an affidavit in the divorce action in which she averred, inter alia , that Charles initially funded his retirement accounts with their joint funds. She sought a trial on, among other issues, equitable distribution.
In the days before the November 28, 1984, trial date, then eighteen-year-old Carla reported to Sandra that Charles had threatened to commit suicide if the divorce was not granted or if Sandra received any of his money. Sandra subsequently changed her mind about opposing the divorce.
Sandra and Charles each appeared before the court with counsel on November 28, 1984, and negotiated a settlement in which the parties (1) agreed that an unopposed divorce would be granted to Charles on the grounds of abandonment, and (2) entered into a stipulation (the "Stipulation"), which was read into the record by Charles' attorney, wherein Sandra waived her rights to spousal maintenance and equitable distribution of the marital assets, in exchange for the following promise and future action by Charles:
[Charles] irrevocably agrees to make a will that will provide for half or 50 percent of the gross estate to be bequeathed in equal shares to the children of the parties hereto, to wit: James, Alexa and Carla, subject to such trust provisions as [Charles] may make, provided the remaindermen of any such trust shall be exclusively for said children or their issue, subject, further, to any other or different provisions provided [Sandra] shall consent thereto in writing.
On January 7, 1985, the Supreme Court, Nassau County, adopted and entered Charles' proposed judgment of divorce. With respect to the stipulation entered into between Charles and Sandra, the judgment of divorce stated the following:
It is ORDERED, ADJUDGED and DECREED, that the stipulation entered into between the parties on the record in open court on November 28, 1984, a copy of which is on file with the Court is hereby approved by the Court, and shall survive and not be merged in this judgment.
Shortly thereafter, on January 19, 1985, Charles married Naheed. Charles and Naheed had two daughters together. Naheed knew that Charles had reached an agreement with Sandra but did not ask him about its terms or how they would impact her. Naheed moved into the Mill River Property with Charles after their wedding, but Charles did not transfer any ownership interest in the Mill River Property to Naheed. Naheed did not contribute to paying the property's carrying costs.
It appears that Sandra, Carla, Alexa and James continued to enjoy a close relationship with Helen, Charles' stepmother, after Sandra and Charles were divorced. In 1987, Helen asked Sandra to refer her to a lawyer to prepare a new will because she was concerned about making provisions for her grandchildren (the "1987 Will"). Sandra referred Helen to Stanford Lotwin, Esq., a prominent Manhattan-based matrimonial attorney who represented her in the divorce from Charles. Sandra had no contact with Mr. Lotwin in connection with the 1987 Will, and Carla, Alexa and James purportedly did not learn of the 1987 Will until after it had been signed.
Helen's 1987 Will left Helen's estate in equal shares to the children of Charles' marriages to Sandra and Naheed, and stated the following regarding her stepson Charles:
I have made no provision for my stepson, Charles R. Van De Walle, because I am confident that he enjoys a high earning capacity and I desire to give all possible help to my grandchildren who will most need financial assistance.
Charles first learned of the existence of the 1987 Will and its provisions on or about July 8, 1991, when he wrote to Helen and suggested that she execute a revocable lifetime trust. His letter stated: "the trust instrument, which would be revocable by you at any time, would provide that trust income would be paid to you for life, plus any part of the trust principal that you may need or want. Upon your death, the remainder of the trust would be distributed in the same manner as your Will now provides, or any such other manner that you might direct."
Naheed testified at her deposition that Charles became angrier than she had ever seen him after he learned about the 1987 Will. Charles ultimately prepared a trust instrument for Helen's signature, which provided that, upon her death, the trust's assets would pass only to Charles and the children of his marriage to Naheed. It further provided that the trust could only be revoked with Charles' consent.
On July 16, 1991, Charles brought the trust instrument to Helen's apartment in Manhattan. Carla was there but left after a verbal atercation between her and Charles. Helen then signed the trust instrument in the presence of Charles' secretary while Naheed waited in another room.
On July 17, 1991, Charles wrote to Carla and accused her of trying to "deprive [him] of [his] patrimony" and "disinherit" him. He claimed that it was "unfair" that his Stipulation with Sandra required him to leave half of his estate to Carla, Alexa and James, while his "patrimony" was "diverted" to them. He further stated that he was "embarrassed and ashamed" to have Carla as his daughter, and cautioned that, unless Carla promised that she would "never again participate in a scheme to deprive [Charles] of what [was] rightfully his, [he would] do what [had] to be done to deal with the cancer of a disloyal and treacherous child."
On August 23, 1991, a lawyer representing Helen wrote a letter to Charles requesting that he consent to the revocation of the trust. On August 30, 1991, Charles commenced an action in this court against Helen, Sandra, Carla, Alexa and James. In his verified complaint, Charles acknowledged receipt of Helen's attorney's August 23, 1991, letter. He alleged that Helen breached a purported verbal promise to leave her assets to him by "attempting to revoke" the trust, and that Sandra, Carla, Alexa and James had influenced Helen's decision making.
On September 4, 1991, Helen commenced a proceeding against Charles in the New York County Surrogate's Court, seeking to vitiate the trust instrument on the grounds that he had coerced her to sign it. Both the litigation commenced by Helen and the lawsuit brought by Charles were settled by a stipulation dated September 25, 1991. According to the stipulation's terms, Charles consented to the revocation of the trust instrument and acknowledged the instrument to be void, returned all principal and interest of the trust to Helen and acknowledged that those funds belonged solely to Helen.
On October 16, 1991, Helen executed a new trust instrument prepared by her attorneys (the "HEV Trust"). The HEV Trust left Helen's assets to Charles' children of both marriages and James' only daughter. It did not leave any assets to Charles.
The day before the HEV Trust was executed, Charles changed the beneficiary designation on his retirement accounts, naming Naheed the sole beneficiary. Over the ensuing years, Charles consolidated his retirement accounts and moved the funds to different institutions. In each case, he again named Naheed his beneficiary. Naheed testified at her deposition that Charles never told her that he had done so.
On October 29, 1992, Charles sent James a letter requesting that he execute a "partial assignment" of his interest in the HEV Trust. A draft assignment was enclosed, which proposed that James declare that the HEV Trust's provisions were "unfair and improper," and that James assign part of his interest to the children of Charles' marriage to Naheed. James declined to sign the partial assignment.
James was a stockbroker with SmithBarney and, prior to 1992, Charles had arranged for James to act as the broker for some of his law firm's clients, as well as for Charles' law firm's Keogh accounts. After James declined to sign the partial assignment, Charles directed SmithBarney to remove James as the broker on all of those accounts, which ultimately resulted in James leaving SmithBarney. On January 23, 1992, Charles wrote to James, stating in part: "I just cannot bring myself to do business with someone who ‘eats my lunch’, even if that person is my son."
Naheed testified that Charles did not want to have anything to do with Carla, Alexa or James after these events. He never spoke to Carla again, had only one brief phone call with James over the next twenty-six years, and had minimal contact with Alexa in or around the early 2000s.
It appears that Charles's subsequent actions against the plaintiffs were based upon an article authored by matrimonial law commentator Leonard G. Florescue, Esq., and published in the New York Law Journal on June 8, 1992, entitled "Separation Agreements and Provisions for Estates." Charles clipped a copy of the article from the newspaper and saved it among his papers for the rest of his life. The article addressed separation agreements that obligate one spouse to leave a portion of his estate to his children or his ex-spouse upon death. It acknowledged that "some persons [may] look for a way around the contractual obligation." It concluded that "there is no real protection against the testator who determines to strip his estate of every asset by absolute inter vivos transfers. After all, you cannot get blood out of a turnip, and an uncollectible judgment against a dead man's estate is not worth much." The article cited certain judicial decisions which Charles photocopied and kept.
On June 29, three weeks after the publication of Florescue's article, Charles executed a deed (the "Deed"). purporting to transfer the Mill River Property to himself and Naheed, as tenants by the entirety, for no consideration. Naheed testified at her deposition that Charles never told her that he transferred an interest in the Mill River Property to her, that she never saw the Deed while Charles was alive, and that she only found out about the transfer after his death. Even after signing the Deed, Charles continued to pay all the carrying costs for the Mill River Property and Naheed never made any financial contribution to those expenses.
On July 2, 1992, three days after Charles signed the Deed, Charles executed a last will and testament ("1992 Will").Article First of the 1992 Will provides that Charles' executor must pay all debts subsequent to his death, including debts secured by assets passing outside of his estate, before calculating what is due his beneficiaries. Article Second of the 1992 Will bequeaths to Naheed all Charles' items of personal, household or domestic use or adornment, including jewelry and automobiles. In Article Third of the 1992 Will, Charles left half of the "additional portion of his estate, if any" to Naheed. Articles Sixth, Seventh and Eighth of the 1992 Will directs that the other half of the remainder of Charles' estate was left in equal shares to James, Carla and Alexa, subject to certain trust provisions. In Article Ninth of the 1992 Will, Charles stated that he left assets to James, Carla and Alexa because of his obligations under the Stipulation but that, "because of [their] disloyalty, betrayal and ingratitude," he desired that the 1992 Will "be construed and interpreted so as to provide the minimum for James, Alexa and Carla."
However, Charles executed another will in 2002 ("2002 Will"), which revoked the 1992 Will. The above-cited provisions in the 1992 Will were set forth again in the 2002 Will. The only differences between the two wills concern Charles' nominated fiduciaries.
In April 2009, Charles acquired from Chase Bank a home equity line of credit ("HELOC") in the amount of $250,000, which was secured by the Mill River Property. At the time, Charles was receiving social security benefits, continuing to be paid for legal work performed, and had more than $2 million in his retirement accounts. Naheed also continued to be actively employed as a physician. During her deposition, Naheed claimed that she did not know why Charles acquired the HELOC even though she was exempted from liability under the loan documents.
Charles died on September 15, 2018.
In March 2019, Charles' 2002 Will was admitted to probate and letters testamentary were issued to Naheed by the Nassau County Surrogate's Court.
In response to interrogatories served by the plaintiffs in this action, Naheed attested that Charles' gross estate, as that term is defined by the Internal Revenue Code, consisted of the following assets at the time of his death:
(a) The Mill River Property
(b) JP Morgan IRA ending in x0887, valued at $1,088,850.27
(c) JP Morgan IRA ending in x7667, valued at $1,218,590.14
(d) Valley National joint checking account ending in x0953, valued at $3,054.38
(e) Chase checking account ending in x8257, valued at $3,028.29
(f) Two Calder paintings
(h) Frank Roth painting
(i) Gottlieb painting
(j) Various household furnishings and antiques
(k) Hunting trophies
According to Naheed, assets (a) through (d) will pass to her outside of Charles' probate estate. The remaining assets will pass under Charles' 2002 Will. Naheed filed an Inventory of Assets with the Nassau County Surrogate's Court estimating the value of the remaining assets at less than $100,000. Naheed testified at her deposition that Charles's probate estate is subject to at least $300,000 in liabilities, including the HELOC, and that James, Alexa and Carla do not stand to inherit anything.
THE ACTION AT BAR
The plaintiffs commenced this action in October 2018, but subsequently amended their complaint on April 1, 2019, asserting five causes of action.
Plaintiffs' first cause of action, against Naheed individually, seeks to impose a constructive trust against the Mill River Property and Charles' retirement accounts. Plaintiffs' second and third causes of action respectively claim that Naheed, as executor of Charles' estate, breached the terms of the Stipulation, and breached the implied covenant and good faith and fair dealing. The fourth and fifth causes of action respectively seek damages against Naheed, individually and as executor of Charles' estate, for violating Debtor Creditor Law §§ 273 and 276.
The defendant's April 18, 2019, answer to the amended complaint denies that she is liable to the plaintiffs and asserts eleven affirmative defenses including: (1) failure to state a cause of action; (2) statute of limitations; (3) statute of frauds; (4) laches; (5) waiver; (6) estoppel; (7) ratification; (8) unclean hands; (9) bad faith and wrongful conduct; (10) lack of culpable conduct; and (11) unjust enrichment.
SUMMARY JUDGMENT
The plaintiffs have moved, and the defendant's have cross-moved, for summary judgment, pursuant to CPLR 3212. "[T]he proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact ( Winegrad v. New York Univ. Med. Ctr. , 64 NY2d 851, 853 ; Zuckerman v. City of New York, 49 NY2d 557, 562 ; Sillman v. Twentieth Century-Fox Film Corp, 3 NY2d 395, 404 ). Failure to make such prima facie showing requires the denial of the motion, regardless of the sufficiency of the opposing papers (Winegrad v. New York univer. Med Center, supra at p. 853).Once this showing has been made, however, the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of a material issue of fact which require a trial of the action (Zuckerman v. City of New York, supra, at p. 562)" (Alvarez v. Prospect Hosp., 86 NY2d 320, 324) [1986]). Mere conclusions or unsubstantiated allegations will not defeat the moving party's right to summary judgment (Zuckerman v. City of New York , supra at 562).
The court will first consider plaintiffs' motion for summary judgment.
PRELIMINARY EVIDENTIARY DETERMINATION
CPLR 4519, commonly referred to as the Dead Man's Statute, bars the testimony of a person with a pecuniary interest in the outcome of the litigation from testifying as to a transaction or communication with the decedent. However, where a party is not "interested in the event," his or her testimony is not inadmissible pursuant to CPLR 4519 ( Stone v. Stone , 76 AD2d 833 [2d Dept 1980] ). Sandra is not "interested in the event" because she does not have a direct pecuniary interest in the outcome of this action (see Estate of Levinsky , 23 AD2d 25, 30 ( [2d Dept 1965]; Croker v. NY Trust Co. , 121 Misc 725, 726-727 [Sup Ct NY Cty [Dec. 1, 1923] ). Therefore, the plaintiffs were not barred from relying upon Sandra's testimony. Additionally, as to the documents that plaintiffs relied upon which were authenticated by Sandra, or Naheed during discovery, the Court finds that the defendant's argument that the plaintiffs' motion is supported by admissible evidence.
THE BRANCH OF PLAINTIFFS' MOTION FOR AN ORDER GRANTING SUMMARY JUDGMENT IN PLAINTIFFS' FAVOR ON THEIR FIRST CAUSE OF ACTION FOR THE IMPOSITION OF A CONSTRUCTIVE TRUST
"A constructive trust is a legal fiction imposed in equity where "the holder of legal title [to property] may not in good conscience retain the beneficial interest" ( Simonds v. Simonds , 45 NY2d 233, 241 [1978] ). In such instances, "equity converts [the title owner] into a trustee" (Id. ; Rowe v. Kingston, 94 AD3d 852, 853 [2d Dept. 2012] ). The doctrine's purpose is to "satisfy the demands of justice," and its applicability is "limited only by the inventiveness of men who find new ways to enrich themselves unjustly by grasping what should not belong to them" (Id. ; see Nastasi v. Nastasi , 26 AD3d 32, 37 [2d Dept 2005] ).
Generally, the elements to be established for the imposition by the court of a constructive trust are: "(1) a confidential or fiduciary relation, (2) a promise, (3) a transfer in reliance thereon and (4) unjust enrichment" ( Nastasi v. Nastasi, 26 AD3d at 37 ). However, since these elements serve as a guideline and do not have to be rigidly applied, a constructive trust may be impressed even where not all of the elements are met (see Estate of Harold , 112 AD3d 929, 931 [2d Dept 2013] ; Quadrozzi v. Estate of Quadrozzi , 99 AD3d 688, 691 [2d Dept 2012].
As to the first element, the plaintiffs argue in support of their motion for summary judgment that Charles and Sandra were in a confidential relationship at the time of the Stipulation because they were a married couple negotiating the disposition of their assets. The defendant counters that a confidential relationship ceases to exist once spouses become adversaries in litigation and, in this case, the relationship terminated when Sandra abandoned Charles.
The Court of Appeals has held that "there is a duty of fairness in financial matters extending even past the contemplated separation of the spouses" ( Simonds , 45 NY2d at 242 ). That relationship may serve as the predicate for the imposition of a constructive trust (Id. ; see Walsh v. Walsh , 91 AD2d 1198, 1198 [4th Dept 1983] ). Consequently, the plaintiffs have satisfied their burden of establishing, as a matter of law, that a confidential relationship existed between Charles and Sandra at the time of the Stipulation.
As to the second element, the plaintiffs maintain that Charles breached his irrevocable promise to make a will leaving one-half of his gross estate to Carla, Alexa and James. They contend that the term "gross estate" unambiguously carries the meaning set forth in section 2031(a) of the Internal Revenue Code ("IRC"), i.e. , "the value at the time of [decedent's] death of all property, real or personal, tangible or intangible, wherever situated" ( 26 U.S.C. § 2031 [a] ). This includes jointly titled real property and individual retirement accounts that pass to a designated beneficiary, even though those assets are not part of the decedent's probate estate ( 26 U.S.C. §§ 2039, 2040 [2020] ). The plaintiffs argue that this promise was breached because Naheed stands to inherit the entirety of Charles' gross estate, the most valuable assets of which are the Mill River Property and Charles' retirement accounts, while Carla, Alexa and James stand to inherit nothing.
In view of the fact that the Stipulation survived and was not merged into the judgment of divorce, it is subject to principles of contract construction and interpretation ( Meccico v. Meccico , 76 NY2d 822, 823-24 [1990] ). Agreements are construed in accordance with the parties' intent, and the best evidence of that intent is the written instrument ( Greenfield v. Philles Records , 98 NY2d 562, 569 [2002] ). "Where an agreement is complete, clear and unambiguous on its face, the intent of the parties to the agreement must be gleaned from within the four corners of the instrument and the agreement must be enforced according to the plain meaning of its terms" ( Estate of Pozsonyi , 2018 NY Misc LEXIS 4617 at *4, 2018 WL 5085140 [Surr Ct NY Cty Oct. 12, 2018] ).
Whether an agreement is ambiguous "is a question of law to be resolved by the courts" ( W.W.W. Assoc. v. Giancontieri , 77 NY2d 157, 162 [1990] ). "A contract is unambiguous if the language it uses has a definite and precise meaning" ( Van Kipnis v. Van Kipnis , 43 AD3d 71, 77 [1st Dept 2007] ). To make that determination, the court must "examine the entire contract and consider the relation of the parties and the circumstances in which it was executed" ( Kass v. Kass , 91 NY2d 554, 566 [1998] ). Relatedly, contracts must be interpreted in accordance with the reasonable expectations of the parties at the time of contracting ( Herzfeld v. Herzfeld , 50 AD3d 851, 852 [2d Dept 2008] ).
Several cases in the Second Department have held that the term "gross estate," when used in a marital agreement to make a testamentary disposition, carries the definition ascribed to the term by the IRC (see Estate of Newfield , 1998 NYLJ LEXIS 2597 at *1-2 [Surr. Ct. Nassau Cty. Aug. 5. 1998]; see also Estate of Rosen , 128 AD2d 878, 880 [2d Dept 1987] ). The defendant has not cited any authorities to the contrary.
The Stipulation required Charles to "make a will" leaving one-half of his gross estate to Carla, Alexa and James. All of the assets that comprised Charles' gross estate under the IRC (i.e. , all of his property, real or personal, tangible or intangible, wherever situated) could, as admitted by Naheed, have passed under a will drafted in compliance with the Stipulation. Title to the Mill River Property also would have passed through Charles' probate estate if he had not signed the Deed.
It appears that the only reason that these assets did not pass under Charles' 2002 Will is because he signed the Deed and he designated Naheed as the beneficiary of his retirement accounts. Naheed admitted in her responses to the plaintiffs' interrogatories that these assets remained a part of Charles' gross estate, as that term is defined by the IRC, and she also admitted that Carla, Alexa and James will not inherit any portion of these assets under the 2002 Will. This constitutes a breach of the Stipulation.
Thus, the plaintiffs have made a prima facie showing satisfying the second element for the imposition of a constructive trust - that Charles breached the written promise embodied in the Stipulation (see, Rogers v. Rogers , 63 NY2d 582, 584 [1984] ; Schwartz v. Horn, 31 NY3d 275, 280).
In opposition to the plaintiffs' prima facie showing, the defendant makes several arguments. Defendant asserts that Charles only promised to leave Carla, Alexa and James one-half of his probate estate, insofar as the Stipulation states that Charles will "make a will" leaving "one-half or fifty percent of his gross estate" to Carla, Alexa and James. Naheed posits that all Charles needed to do to comply with his obligation was make a last will and testament containing the required provision, which she maintains he did.
Naheed further argues that the Stipulation did not specifically require Charles to leave the Mill River Property or the retirement accounts to Carla, Alexa and James. Naheed claims that Charles was authorized to transfer those assets to her during his lifetime because paragraph six of the Stipulation (the "Separate Property Provision") states:
Each party shall own, free of any claim or right of the other, all of the items of personal and real property of any kind, nature or description, and wheresoever situated, which are now owned by him or her, or which are now in his or her name, or to which he or she is, or may be, beneficially entitled, or which may hereafter belong to or come to him or her with full power to him or to her to dispose of the same, as fully and effectually, in all respects, for all purposes, as if he or she were unmarried.
The plaintiffs argue in response that the Separate Property Provision means that Charles and Sandra each waived their ability to assert marital property rights to each other's separate property after the divorce, and that the Separate Property Provision, if construed to authorize Charles to make inter vivos transfers of his entire gross estate, would effectively nullify Charles' obligations to make a testamentary disposition in their favor.
The Court finds that the Separate Property Provision. by its plain terms, pertains only to the property rights of Charles and Sandra vis-à-vis each other. Further, contracts must be interpreted "as a whole" ( Marin v. Constitution Realty, LLC , 28 NY3d 666, 673 [2017] ) and that the court must "adopt an interpretation which gives meaning to every provision or, in the negative, no provision should be left without force and effect" ( Muzak Corp. v. Hotel Taft Corp. , 1 NY2d 42, 46 [1956] ). Courts have long rejected the argument that a provision in a marital agreement requiring one spouse to "make a will" only requires that spouse to make a testamentary instrument without ensuring that the instrument actually results in an inheritance for the marital agreement's intended beneficiaries. Charles' 2002 Will leaves them only one half of his net residuary estate, not one half of his gross probate estate.
If the Separate Property Provision authorized Charles to transfer all of his assets to a third person, his obligation to make a testamentary disposition in favor of Alexa, Carla and James would be rendered meaningless. This is an untenable result (see Leonardi v. Leonardi , 35 Misc 3d 1205(A) [Sup Ct Kings Cty Mar. 29, 2012] ; Estate of Wenzel , 2010 NY Misc LEXIS 6779 [Surr Ct NY Cty Sept. 2, 2010]; Estate of Offerman , 1995 NY Misc. LEXIS 725 [Surr Ct NY Cty Mar. 21, 1995])
Accordingly, the Court finds that plaintiffs have established that Charles breached the promise embodied by the Stipulation, and that Naheed has failed to raise a triable issue of fact in opposition as to the second element for the imposition of a constructive trust.
As to the third element for the imposition of a constructive trust, a transfer in reliance on that promise, plaintiffs assert that Sandra relinquished her rights to spousal maintenance and equitable distribution of the marital assets, including but not limited to Charles' retirement accounts and the Mill River Property, in exchange for Charles' promise to make a will leaving one-half of his gross estate to Carla, Alexa and James.
Naheed did not oppose this portion of the plaintiffs' motion, and therefore failed to raise a triable issue of fact as to this element of the plaintiffs' constructive trust claim ( Salamon v. Alpine Acres Condominium , 172 AD3d 1668, 1670 [3d Dep't 2019] ; Zabari v. Zabari , 93 AD2d 527, 527 [1st Dept 2012] ).
Finally, as to the fourth element necessary for the imposition of a constructive trust, plaintiffs maintain that Naheed will be unjustly enriched in the absence of a constructive trust, as she will accede to the entirety of Charles' gross estate and they will receive nothing. They also argue that Naheed would be unjustly enriched even if the plaintiffs succeed on their constructive trust claim since their inheritance would be reduced by the HELOC since Charles procured that debt solely to defeat their rights.
Unjust enrichment "does not require the performance of any wrongful act by the one enriched" ( Simonds , 45 NY2d at 242 ). Rather, "[w]hat is required, generally, is that a party hold property under such circumstances that in equity and good conscience he ought not to retain it." (Id. ). As such, a decedent's second wife is unjustly enriched where she receives property from her husband notwithstanding his agreement to leave such property to his first wife or the children of his first marriage (Id. ; see Leonardi v. Leonardi , 35 Misc 3d 1205(A) [Sup Ct Kings Cty Mar. 29, 2012] ; Estate of Wenzel , 2010 NY Misc LEXIS 6779 [Surr Ct NY Cty Sept. 2, 2010]; Estate of Offerman , 1995 NY Misc. LEXIS 725 [Surr Ct NY Cty Mar. 21, 1995]).
Consequently, since the Stipulation entitled Plaintiffs to receive one-half of Charles' gross estate, and Naheed admits that she will receive the entirety of Charles' gross estate while Carla, Alexa and James presently stand to receive nothing, the Court finds that the plaintiffs have made a prima facie showing of that Naheed will be unjustly enriched in the absence of a constructive trust.
In opposition to plaintiffs' prima facie showing, Naheed argues Charles had the right to make inter vivos transfers in favor of his second wife of more than thirty years.
However, Naheed's opposition does not address the plaintiffs' argument that the HELOC should be disregarded because it was wrongfully procured by Charles, and thus Naheed has failed to raise a triable issue of fact with respect to that issue ( Salamon , 172 AD3d at 1670 ; Zabari , 93 AD2d at 527 ).
It is also clear that Charles' conduct was motivated by his anger over Helen's decision to name Charles' children as the beneficiaries of her estate, and not any legitimate belief on Charles' part that his actions were permitted by the Stipulation. There is no other conclusion that can be drawn from Charles' own correspondence to his children and their decades-long estragement, the proximity of his actions to Helen's establishment of the HEV Trust, the subject matter of the legal research Charles performed and its proximity to his signing of the Deed and the 1992 Will, the statements Charles made about Carla, Alexa and James in the 1992 and 2002 Wills, the 2002 Will's failure to comply with even Naheed's interpretation of the Stipulation to the extent it only left Carla, Alexa and James a share of Charles' net residuary estate after specifically bequeathing all of Charles' personal property to Naheed, and the fact that Charles acquired a HELOC in 2009 that would render his probate estate insolvent. Naheed has proferred no evidence to the contrary and, in fact, has denied knowing why Charles acted as he did.
Accordingly, the Court finds that the plaintiffs have met their burden of making a prima facie showing of Carla's, Alexa's and James' entitlement to summary judgment as a matter of law on their first cause of action for the imposition of a constructive trust against the Mill River Property and Charles' retirement accounts, to the extent that Carla, Alexa and James are awarded a total of fifty per cent of the value of Charles' gross estate as of the date of his death (see , Rogers v. Rogers, supra at 584).
Defendant, however, for the reasons stated above, and in the section below pertaining to the branch of plaintiffs' motion dismissing the affirmative defenses and defendant's cross-motion dismissing the complaint, failed to meet her burden of raising a triable issue of fact as to the first cause of action regarding the imposition of a constructive trust.
THE BRANCH OF PLAINTIFFS' MOTION FOR AN ORDER GRANTING SUMMARY JUDGMENT ON THEIR SECOND CAUSE OF ACTION FOR BREACH OF CONTRACT
In support of this branch of their motion, asserted against Naheed in her capacity as executor of Charles' estate, the plaintiffs were required to show the existence of the contract, performance of the contract by the party asserting the claim, breach by the adverse party, and damages ( Palmetto Partners, L.P. v. AJW Qualified Partners, LLC , 83 AD3d 804, 807 [2d Dept 2011] ).
For the reasons discussed above, the plaintiffs have established that the Stipulation is a binding contract, that Sandra performed her obligations thereunder by relinquishing her rights to equitable distribution and spousal maintenance, that Charles breached the Stipulation(see , Schwartz v. Horn, supra) and that the Carla, Alexa and James have been damaged in an amount equivalent to one-half of the value of Charles' gross estate at the time of his death.
In opposition to plaintiffs' prima facie showing of their entitlement to summary judgment as a matter of law on the second cause of action for breach of contract, the defendant has failed to meet her burden of raising a triable issue of fact. Defendant's affirmative defenses which sound in equity (i.e., the fourth affirmative defense of laches and the eleventh affirmative defense of unjust enrichment) are not available as against a claim at law for breach of contract ( Fifth Line, LLC v. Fitch , 167 AD3d 847, 849 [2d Dept 2018] ). A further determination on defendant's affirmative defenses is made infra.
THE BRANCH OF PLAINTIFF'S MOTION FOR AN ORDER GRANTING SUMMARY JUDGMENT ON PLAINTIFFS' THIRD CAUSE OF ACTION FOR BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING
In view of this Court's granting supra the branch of plaintiffs' motion for summary judgment on their second cause of action for breach of contract, the plaintiffs' third cause of action is dismissed as academic.
THE BRANCH OF PLAINTIFFS' MOTION FOR AN ORDER GRANTING SUMMARY JUDGMENT ON PLAINTIFFS' FOURTH CAUSE OF ACTION FOR VIOLATING DEBTOR CREDITOR LAW §§ 273 and 278.
The court notes preliminarily that the Debtor Creditor Law was recently repealed and replaced by the Uniform Voidable Transactions Act ("UVTA") effective April 4, 2020. However, the UVTA does not apply to transfers, such as those at issue here, which occurred prior to its enactment (see Laws 2019, ch 580, § 7). Thus, the Court analyzes the plaintiffs' fourth and fifth causes of action under the version of Debtor Creditor Law §§ 273, 276 and 278 which was in effect prior to April 4, 2020.
Plaintiffs move for an order granting summary judgment on plaintiffs' fourth cause of action, asserted against Naheed individually and in her capacity as executor of Charles' estate, for violating Debtor Creditor Law §§ 273 and 278.
Debtor Creditor Law § 273 provides that:
Every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration.
Plaintiffs have made a prima facie showing of entitlement to summary judgment as a matter of law on their fourth cause of action by establishing that Charles' retirement accounts were transferred from his gross estate to Naheed upon his death. This transfer rendered Charles gross estate insolvent and unable to satisfy his obligations to Carla, Alexa and James under the requirements of the Stipulation (see , Granwell v. Granwell 20 NY3d 91, 94 [1967] ). However, defendant did not meet her burden of raising a triable issue of fact. Consequently, for the reasons discussed below, the plaintiffs are entitled to disregard the transfer of Charles' retirement accounts to Naheed and instead levy execution upon Charles' retirement accounts in an amount equal to one-half of Charles' gross estate under Debtor Creditor Law § 278.
THE BRANCH OF PLAINTIFFS' MOTION FOR AN ORDER GRANTING SUMMARY JUDGMENT IN THEIR FAVOR ON THEIR FIFTH CAUSE OF ACTION AGAINST NAHEED INDIVIDUALLY, AND IN HER CAPACITY AS EXECUTOR OF CHARLES' ESTATE, FOR VIOLATING DEBTOR CREDITOR LAW §§ 273 and 278
Debtor Creditor Law § 276 provides that "every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay or defraud either present or future creditors, is fraudulent as to both present and future creditors" ( Debtor Creditor Law § 276 ). This type of conduct violates the statute regardless of whether it rendered the transferor insolvent (see Wall Street Assocs. v. Brodsky , 257 AD2d 526, 529 [1st Dept 1999] ).
A creditor asserting a claim under Debtor Creditor Law § 276 bears the burden of proof by clear and convincing evidence ( U.S. Bancorp Equip. Fin., Inc. v. Rubashkin , 98 AD3d 1057, 1060 [2d Dept 2012] ). "[F]raudulent intent, by its very nature, is rarely susceptible to direct proof and must be established by inference from the circumstances surrounding the allegedly fraudulent act" ( Marine Midland Bank v. Murkoff , 120 AD2d 122, 128 [2d Dept 1986] ).
A creditor asserting a claim under the statute "may rely on badges of fraud to establish intent" ( Dowlings Inc. v. Homestead Dairies, Inc. , 88 AD3d 1226, 1231 [3d Dept 2011] ) citing Matter of Shelly v. Doe , 249 AD2d 756, 758 [3d Dep't 1998] ). Badges of fraud include: "(1) a close relationship between the parties to the transaction, (2) a secret and hasty transfer not in the usual course of business, (3) inadequacy of consideration, (4) the transferor's knowledge of the creditor's claim and his or her inability to pay it, (5) the use of dummies or fictitious parties, and (6) retention of control of the property by the transferor after the conveyance" ( Matter of Shelly , 249 AD2d at 758 ).
In support of the branch of their motion for an order granting summary judgment in their favor on their fifth cause of action, the plaintiffs argue that five of the six badges of fraud identified above are present in this case with respect to the transfer of the Mill River Property and the transfer of Charles' retirement accounts to Naheed upon his death. First, there was a close relationship between the parties to the transfer, as Naheed and Charles were married. Second, the transfers were secret and not in the usual course of business, as Charles never told Naheed about either one despite the fact that she was the transferee. Third, the transfers were made for no consideration. Fourth, Charles knew about the claims of Carla, Alexa and James under the Stipulation, as he referred to them in his July 17th letter to Carla and in his 1992 and 2002 Wills. Plaintiffs assert that Charles actively sought ways to avoid those obligations, as evidenced by the legal research he performed and saved through the end of his life. Plaintiffs further argue that the proximity of the publication of Mr. Florescue's article to the date of the Mill River Property transfer and the execution of the 1992 Will provides further evidence of Charles' malintent. Finally, Charles retained control over the Mill River Property until his death—continuing to assume the sole responsibility for its carrying costs and the decision to encumber it with the HELOC. The plaintiffs posit that Charles also retained sole control over his retirement accounts at all times.
Consequently, plaintiffs argue, the Court should enter judgment against Naheed as to in an amount equivalent to one-half of the value of Charles' gross estate as of his date of death, without deduction for the fraudulently procured HELOC, and, pursuant to Debtor Creditor Law § 278, permit Carla, Alexa and James to levy execution on the funds that were in Charles' retirement accounts, which Naheed has since transferred to accounts in her own name. They also assert that they are entitled to recover their attorneys' fees and costs incurred in the prosecution of this action under Debtor Creditor Law § 276-a, which provides, in relevant part, as follows:
In an action or special proceeding brought by a creditor to set aside a conveyance by a debtor, where such conveyance is found to have been made by the debtor and received by the transferee with actual intent, as distinguished from intent presumed in law, to hinder, delay or defraud either present or future creditors, in which action or special proceeding the creditor shall recover judgment, the justice or surrogate presiding at the trial shall fix the reasonable attorney's fees of the creditor...in such action or special proceeding, and the creditor shall have judgment therefor against the debtor and the transferee who are defendants in addition to the other relief granted by the judgment ( Debtor Creditor Law § 276-a )
Accordingly, based on the foregoing, and the analysis of Charles' intent set forth
above relating to the plaintiffs' first cause of action, the Court finds that the plaintiffs have satisfied their burden of establishing a prima facie entitlement to judgment as a matter of law on their claims under Debtor Creditor Law § 276.
However, Naheed has failed to demonstrate the existence of a genuine issue of a material fact requiring a plenary trial on plaintiffs' fifth cause of action pursuant to Debtor Creditor Law § 276.
The defendant admits that there was a close relationship between her and Charles and that she did not provide any consideration in exchange for an interest in the Mill River Property. She also does not dispute that Charles retained control of the Mill River Property at all times prior to his death. However, Naheed argues that the transfer of the property was not a secret, or out of the ordinary course of business, because Charles recorded the Deed in 1992. She also argues that Charles "likely did not know" about the plaintiffs' potential claims to the Mill River Property because he believed that the Separation Property Provision authorized him to do what he did, and the legal research Charles performed shows that he wanted to ensure compliance with the Stipulation.
The defendant further argues that neither Charles' designation of her as a beneficiary of his retirement account, nor the payment of the proceeds of those accounts to her upon Charles death, constitute actionable "conveyances" for purposes of the Debtor Creditor Law.
Naheed does not dispute that there was a close relationship between her and Charles or that she did not provide consideration for an interest in Charles' retirement accounts. In opposition to the plaintiffs' argument that Charles' designation of Naheed as a beneficiary of his retirement accounts was secret and not in the ordinary course, Naheed avers that Charles properly completed all beneficiary designation forms required by law and that, upon Charles' death, the custodian of the retirement accounts properly transferred the funds to her. Naheed asserts that Charles likely did not know that the plaintiffs had a claim to his retirement accounts, and insists that Charles did not have control over the accounts since there could have been adverse tax consequences in the event that he made withdrawals therefrom.
The plaintiffs finds that both the Deed and the transfer of Charles' retirement accounts were kept secret from Naheed, and therefore were not ordinary in character. Naheed's repeatedly testified that she never had any discussions with Charles about any intention on his part to transfer an interest in the Mill River Property to her or to designate her as the beneficiary of his retirement accounts, and that she only found out about such matters after Charles died. Naheed herself put evidence before the Court's that Charles explicitly told James "that he would give all of his money away and not leave Plaintiffs a dime" and that Charles was a "vengeful person."
As to the retirement accounts, the cases Naheed relied upon to support her contention that there were no actionable "conveyances" are inapposite since those cases concerned claims by creditors who only had a claim against a decedent's probate estate, and that the retirement accounts would not have reverted to the decedent's probate estate even if the beneficiary designations were set aside. Instead, plaintiffs are creditors of Charles' gross estate rather than his probate estate, and therefore that they can reach his retirement accounts to satisfy their claims. Beneficiaries of divorce agreements have been permitted to reach retirement accounts, unlike the commercial creditors that were the subject of the cases Naheed cites.
Thus, the plaintiffs are entitled to an order granting summary judgment on their fifth cause of action pursuant to Debtor Creditor Law § 276 (see, Machado v. A. Canterpass, LLC, 115 AD3d 652, 654 [2nd Dept. 2014; the defendant does not have a viable affirmative defense to this cause of action, as discussed below.
THE BRANCH OF PLAINTIFFS' MOTION FOR AN ORDER GRANTING SUMMARY JUDGMENT DISMISSING DEFENDANT'S AFFIRMATIVE DEFENSES, AND THE CROSS-MOTION BY DEFENDANT FOR AN ORDER GRANTING SUMMARY JUDGMENT IN HER FAVOR DISMISSING THE COMPLAINT
Turning now to consider both the branch of plaintiffs' motion for an order dismissing defendant's affirmative defenses, and to the defendant's cross-motion for an order granting summary judgment dismissing the complaint, the Court notes that in the defendant's memorandum of law the defendant withdrew her affirmative defenses of estoppel, unclean hands, bad faith and wrongful conduct and lack of culpable conduct. Consequently those affirmative defenses are dismissed.
The defendant's first affirmative defense of failure to state a cause of action is also dismissed as her submissions failed to make any arguments addressed to the sufficiency of the plaintiffs' amended complaint and, moreover, the plaintiffs, for the reasons set forth above, made a prima facie showing of entitlement to judgment as a matter of law.
As to defendant's second affirmative defense that the plaintiffs' first cause of action is barred barred by the statute of limitations, the defendant argues that, as to the Mill River Property, the plaintiffs' constructive trust claim accrued on the date Naheed wrongfully acquired an interest in the property (i.e. , when the Deed was signed) and expired six years later. With respect to the retirement accounts, Naheed asserts that plaintiffs' cause of action accrued on the date in 1991 when Charles first designated her as the beneficiary of those accounts and expired six years thereafter.
In opposition to defendant's cross-motion for the dismissal of plaintiff's first cause of action based upon the statute of limitations, the plaintiffs contend that their first cause of action did not accrue until Naheed wrongfully withheld one-half of Charles' gross estate from them upon his death. They posit that, prior to Charles' death, they had only an expectancy interest in his estate and that an action brought by them during his lifetime would have been dismissed as premature. The plaintiffs further argue that, until Charles died, it was uncertain whether he would breach the Stipulation because he always could have changed the designated beneficiary of his retirement accounts, and a variety of other contingencies could have occurred to cause him to come into compliance with the Stipulation.
The plaintiffs further argue that, even if the date of acquisition is relevant, Naheed did not acquire the funds in Charles' retirement accounts until they passed to her on his death, and that she did not become the absolute owner of the Mill River Property until his death, if at all. They also aver that the Deed is void because Charles never delivered it to Naheed and she never accepted it.
"A determination of when the wrongful act triggering the running of the statute of limitations occurs depends upon whether the constructive trustee acquired the property wrongfully, in which case the property would be held adversely from the date of acquisition or whether the constructive trustee wrongfully withholds property acquired lawfully from the beneficiary, in which case the property would be held adversely from the date the trustee breaches or repudiates the agreement to transfer the property" ( Zane v. Minion , 63 AD3d 1151, 1153 [2d Dept 2009] ).
Where a promisor obligates himself to make a testamentary disposition in favor of a specified person, the promisee's cause of action for a breach of that obligation does not accrue until the promisor dies (see, e.g. , Matter of Thomas , 124 AD3d 1235, 1239 [4th Dept 2015] ; Matter of Arnold , 173 AD2d 699, 700 [2d Dept 1991] ; Matter of Halbert , 2010 NY Misc. LEXIS 4351 at * * *16, 2010 WL 3529511 [Surr Ct. Sullivan Cty Sept. 7, 2010] ; Lewis v. Lewis , 59 Misc 2d 525, 526 [Civ Ct NY Cty Apr. 10, 1969] ). Insofar as Carla, Alexa and James had no right under the Stipulation to receive any of Charles' assets until he died, their constructive trust claim could not have accrued at any time before September 15, 2018 (see Brown v. Brown , 12 AD3d 176, 176 [1st Dept 2004] ).
Accordingly, the defendant's second affirmative defense is dismissed.
The defendant's third affirmative defense asserts that the plaintiffs' claims are barred by the statute of frauds. In the branch of plaintiff's motion for an order granting summary judgment dismissing this affirmative defense, the plaintiffs argue that Charles' promise to make a testamentary disposition in favor of Carla, Alexa and James was embodied in a written Stipulation and allocated on the record when the matrimonial case between Charles and Sandra was settled; Charles' attorney thereafter submitted a judgment of divorce which acknowledged the Stipulation. Domestic Relations Law § 236(B)(3) requires that marital agreements, including "contracts to make a testamentary provision of any kind," must be in writing, and the Appellate Division has held that stipulations read into the record in open court satisfy this requirement.
The defendant does not oppose the plaintiffs' argument that the Stipulation is sufficient to satisfy the requirement of a writing for purposes of Domestic Relations Law § 236(B)(3) ( Harrington v. Harrington , 103 AD2d 356, 360-61 [2d Dept 1984] ). However, the defendant alleges that neither that statute, nor EPTL § 13-2.1, was complied with since the Stipulation did not specifically require Charles to leave an interest in his retirement accounts or the Mill River Property to Carla, Alexa and James.
The defendant's contention - that the Stipulation's use of the term "gross estate" is insufficient to impose upon Charles an obligation to leave Carla, Alexa and James any share of the Mill River Property or his retirement accounts - is a question of contract interpretation rather than enforceability ( Horn Waterproofing Corp. v. Horn Constr. Co. , 104 AD2d 851, 853 [2d Dept 1984] ). As discussed above, the meaning of the term "gross estate" clearly encompasses "all of [Charles'] property, real or personal, tangible or intangible, wherever situated." 26 U.S.C. § 2031(a).
Therefore, the defendant's third affirmative defense of the statute of frauds is dismissed.
The defendant asserts laches as her fourth affirmative defense. The plaintiffs moved for summary judgment dismissing this defense on the basis that Naheed cannot establish that the plaintiffs delayed in asserting their claim, nor can she prove that she was prejudiced by any such delay. Moreover, the plaintiffs posit that their constructive trust claim was not ripe until Charles' death and that they promptly commenced this action five weeks thereafter. Furthermore, they maintain that Naheed cannot establish that she changed her position based on the plaintiffs "failure" to commence an action sooner since Naheed denied during her deposition that she ever knew she owned the Mill River Property or that she was the beneficiary of Charles' retirement accounts prior to his death.
In support of her cross-motion, Naheed admits that she "testified [during her deposition] that she had no knowledge of Charles's obligations under the Stipulation, or the transactions about which Plaintiffs complain here." Nonetheless, she argues that she was prejudiced because Charles is now dead and unavailable "to testify and explain the steps that he took."
However, in Naheed's reply in further support of her cross-motion, she submits an errata sheet to her deposition transcript dated July 1, 2020, in which she purported to change her deposition testimony. Naheed's errata sheet purports to change her testimony to state that Naheed "does not recall" whether Charles ever told her about the Deed or that he designated her as the beneficiary of his retirement accounts. Her basis for the change is listed as "clarification." Naheed also submits a reply affidavit stating: "I justifiably planned for my own retirement, based upon my understanding that I am the owner of the [Mill River] Property and the Individual Retirement Accounts that Charles established."
This Court granted the plaintiffs an opportunity to file a sur-reply. In that submission, the plaintiffs asserts that Naheed's errata sheet was belatedly served, and that it and her reply affidavit amounted to an impermissible attempt to alter her deposition testimony in order to create a feigned issue of fact.
It is well-established that a party is not permitted to make material changes to her own deposition testimony in order to raise an issue of fact in opposition to a motion for summary judgment (see Ashford v. Tannenhauser , 108 AD3d 735, 736 n. 2 [2d Dept 2013] ). Additionally, a deponent may not make material changes to her deposition transcript for reasons such as "clarification" (see Torres v. Bd. of Educ. of City of New York , 137 AD3d 1256, 1257 n. 3 [2d Dept 2016) ].
It is clear that Naheed's proposed changes were not merely a "clarification," as Naheed maintained in her opposition to the plaintiffs' summary judgment motion. Her errata sheet, submitted to the Court approximately three weeks later, amounts to an impermissible attempt to feign an issue of fact (see S.J. Capelin Assoc. v. Globe Mfg. Corp. , 34 NY2d 335, 341 [1974]; Blochl v. RT Long Island Franchise, LLC, 70 AD3d 993 [2nd Dept. 2010] ; Madtes v. Bovis Lend Lease LMB , 54 AD3d 630, 630 [1st Dept 2008] ). Similarly, the statement in Naheed's reply affidavit attempting to establish that she planned her own retirement, based upon information she previously denied prior to 2018, fails to create a genuine issue of fact (see Fresier v. Stop & Shop Supermarket Co., LLC , 84 AD3d 1307, 1308-09 [2d Dept 2011] ).
Accordingly, the defendant's fourth affirmative defense of laches is dismissed.
The defendant asserts a fifth affirmative defense of waiver, and a seventh affirmative defense of ratification. In their motion, the plaintiff's moved for summary judgment dismissing these defenses on the grounds that they did not intentionally relinquish their rights under the Stipulation because they commenced this case within weeks of their claims becoming actionable. The plaintiffs also argue that the terms of the Stipulation provide that a waiver could only be effectuated by a writing signed by Sandra, and that no such writing exists.
In opposition and in support of her cross-motion, Naheed argues that the plaintiffs had constructive knowledge of the Deed because it was recorded in 1992, and that Alexa testified that she and James came to have actual knowledge of the Deed five years before Charles' death but did not file suit at that time. Naheed further posits that James testified that he actually knew about the change of the beneficiary of Charles' retirement accounts in 1991.
"Waiver is an intentional relinquishment of a known right and should not be lightly presumed" (see Gilbert Frank Corp. v. Federal Ins. Co. , 70 NY2d 966, 968 [1988] ); Kamco Supply Corp. v. On the Right Track, LLC , 149 AD3d 275, 280 [2d Dept 2017] ). The party alleging waiver must establish that the alleged waiving party had knowledge of the right being waived and intentionally relinquished said right ( Werking v. Amity Estates , 2 NY2d 43, 52 [1956] ). Similarly, "ratification impl[ies] to legal minds, knowledge of a defect in the act to be confirmed, and of the right to reject or ratify it" ( Matter of Levy , 69 AD3d 630, 632 [2d Dept 2010] ).
As discussed above, the plaintiffs did not have a viable cause of action prior to Charles' death. Therefore, it cannot be said that they intentionally relinquished their rights by declining to file a futile lawsuit during Charles' lifetime. Further, Naheed's characterization of the deposition testimony of James and Alexa is inaccurate and does not compel a different outcome.
Consequently, the defendant's fifth and seventh affirmative defenses of waiver and ratification are dismissed.
In support of the branch of plaintiffs' motion to dismiss defendant's eleventh affirmative defense of unjust enrichment, the plaintiffs argue that a defense of unjust enrichment is unavailable since the parties' rights are controlled by a contract. The plaintiffs further argue that they have submitted sufficient proof that it was Naheed who would be unjustly enriched in the absence of a constructive trust, and not Carla, Alexa and James.
In opposition and in support of her cross-motion for summary judgment dismissing the complaint, Naheed argues that the plaintiffs would be unjustly enriched if a constructive trust were imposed because she was Charles' "longtime spouse" and Carla, Alexa and James already received an inheritance from Helen.
The theory of unjust enrichment "is an obligation the law creates in the absence of any agreement" ( Goldman v. Metro Life Ins. Co. , 5 NY3d 561, 572 [2005] ). There can be no claim for unjust enrichment where the matter is controlled by contract (Id. ).
Here, the Stipulation is a binding agreement controlling Charles' obligation to make a testamentary disposition in favor of Carla, Alexa and James. Therefore, it cannot be said that the plaintiffs will be unjustly enriched by receiving that which Charles promised to give them. This is true notwithstanding the fact that Naheed and Charles were married for many years, or that Helen left some of her assets to Carla, Alexa and James after Charles entered into a settlement agreement in 1991 permitting Helen to do exactly that.
Accordingly, the defendant's eleventh affirmative defense of unjust enrichment is dismissed.
Accordingly, the defendant's first, third, fourth, fifth, sixth, seventh, eighth, ninth, tenth and eleventh affirmative defenses must be dismissed for the reasons discussed supra .
The defendant's second affirmative defense of the statute of limitations is now addressed in further detail pertaining to a claim under Debtor Creditor Law § 276, distinct from the statute of limitations affirmative defense applicable to claims for a constructive trust or breach of contract.
A cause of action based on actual fraud pursuant to Debtor Creditor Law § 276 must be brought within six years of the date that the fraud or conveyance occurs, or within two years of the date that the fraud should have been discovered, whichever is longed (see Brodksy , 257 AD2d at 529 ).
In support of the statute of limitations defense and the portion of defendant's cross-motion dismissing the plaintiffs' fifth cause of action under the Debtor Creditor Law, the defendant argues that, in order to establish an entitlement to relief under the Debtor Creditor Law, the creditor must prove that there was a "conveyance." She contends that there was no such "conveyance" of the Mill River Property upon Charles' death because, upon the creation of a tenancy by the entirety, both spouses are seized of the whole and, upon the death of one of them, the decedent's interest is extinguished and the surviving spouse continues to be seized of the whole. The only conveyance, according to Naheed, occurred in 1992 when Charles signed the Deed. Because this action was commenced more than six years later, Naheed avers that the plaintiffs' claim under Debtor Creditor Law § 276 is untimely to the extent it concerns the Mill River Property. She further asserts that, even if the plaintiffs' claim accrued when they should have discovered the transfer with reasonable diligence, that date was in November 1992 when the Deed was recorded, and the statute of limitations thus expired two years later.
With respect to Charles' retirement accounts, the defendant argues that James had actual knowledge in October 1991 that Charles designated the beneficiary of his retirement accounts, and therefore that the Plaintiffs' claim accrued at that time and expired two years thereafter.
In opposition to the cross-motion, the plaintiffs argue that their actual fraud claim could not have accrued before Charles died, because the statute of limitations does not accrue until all of the factual circumstances necessary to establish a right of action have occurred such that a plaintiff would be entitled to relief. According to the plaintiffs, because they had no right to relief until Charles died, their cause of action could not have accrued until then. They further argue that they had no way of knowing before Charles died whether he had breached the Stipulation, since, despite the Deed, he always could have left them other assets with a value equivalent to one-half of his gross estate. He also retained the power to change of beneficiary on his retirement accounts through the time of his death.
Additionally, the plaintiffs argue that the Deed is void for lack of delivery and acceptance. They contend that Naheed's deposition testimony establishes that Charles never gave her a copy of the Deed or told her about it, and that she only found out about it by chance after he died. They argue that the Court may treat their claim as one to vitiate the Deed and award summary judgment on said claim. The plaintiffs note that they did not know until Naheed's deposition that she would deny having known about the transfer of the Mill River Property. Plaintiffs maintain that their fifth cause of action is therefore timely.
Finally, as it relates to the retirement accounts, the plaintiffs cite James' deposition transcript in which he testified that he did not actually know about Charles' change of the designated beneficiary on his retirement accounts, but instead learned the information from his attorney during the pendency of this litigation. They further argue that those accounts were not actually conveyed to Naheed until Charles died, and that they timely commenced this action just five weeks later.
In her reply in further support of her cross-motion, Naheed objects to the plaintiffs' arguments concerning the validity of the Deed. Naheed asserts that this argument is raised belatedly, that it contradicts the plaintiffs' amended complaint, and that, had she known of the plaintiffs' theory, she would have searched government records in preparation for her deposition, including Combined Real Property Transfer Gains Tax Affidavit, Real Estate Transfer Tax Return, Credit Line Mortgage Certificate. She states that such records are not available for viewing at this time due to the COVID-19 pandemic.
Naheed relies on her errata sheet in an attempt to convince the Court that it is not the case that Charles never told her about the Deed, but rather that she simply does not remember whether he did, and thus there may have been delivery and acceptance of the Deed.
The court finds that that the transfer of the subject retirement accounts did not occur and become actionable until Charles' death (see City Bank Farmers Trust Co. v. Cannon , 291 NY 125, 133 [1943] ), and thus the statute of limitations with respect to those accounts did not accrue until September 15, 2018.
With respect to the Mill River Property, regardless of whether the plaintiffs knew or should have known of the Deed at some time prior to Charles' death, the Court concludes that it was not possible for them to know that the transfer resulted in a breach of the Stipulation, or was part of a larger fraudulent scheme to deny them the benefits of the Stipulation, until Charles died. Prior to that time, Charles always could have changed his 2002 Will or the designated beneficiary of his retirement accounts in order to ensure that Carla, Alexa and James would receive one-half of his gross estate in compliance with the Stipulation, despite having signed the Deed.
Moreover, even if the plaintiffs could have discovered Charles' fraud with respect to the Mill River Property at some time prior to Charles death, the court finds that that the Deed is void for lack of delivery and acceptance (see M & T Real Estate Trust v. Doyle , 20 NY3d 563 [2013] ; Manhattan Life Ins. Co. v. Continental Ins. Cos. , 33 NY2d 370 [1974] ) and that, therefore, the statute of limitations for the plaintiffs to challenge it has not expired (see Faison v. Lewis , 25 NY3d 220, 226-27 [2015] (holding that there is no statute of limitations for challenging a void deed, as "a statute of limitations cannot grant legal significance to a document expressly rejected under the law; it cannot be deployed to validate what the law has never recognized."); Avalon LLC v. Coronet Props. Co. , 306 AD2d 62, 63 [1st Dept 2003] (limitations period did not begin to run until when conveyance was final and "rights vested")).
Naheed's assertion that Charles retained the Deed in a file cabinet in their bedroom to which she had access does not change the outcome (see, e.g. , Estate of Kennedy , 36 AD2d 549 [3d Dept 1971] (delivery of deed was not accomplished where it was retained by testator in a safe deposit box and he continued to pay for all taxes, insurance, maintenance and improvements to the property during his lifetime); Estate of Ross , 2010 NY Misc LEXIS 3086 [Surr Ct Nassau Cty Jun. 30, 2010] (concluding that a deed was invalid for failure of delivery where the grantee's "own conduct overwhelmingly establishe[d] that [she] was completely unaware of the deed's existence until she happened to find it somewhere after the decedent's death.").
As discussed above, the Court rejects Naheed's attempt to change her testimony that she never knew of the Deed or any transfer of the Mill River Property, which testimony she represented to be true and correct as recently as June 11, 2020, in the memorandum of law she submitted to the Court.
The Court also rejects Naheed's contention that she would be prejudiced if the Court declares the Deed void ( Weinstock v. Handler , 254 AD2d 165, 166 [1st Dep't 1998] ). Naheed had a sufficient opportunity to address the plaintiffs' arguments in her reply submissions in further support of her cross-motion. However, Naheed cannot overcome the fact that she testified spontaneously and under oath that she never knew she had an ownership interest in the Mill River Property before Charles died. It is unavailing for her to suggest that, if she knew the viability of the Deed relied upon her having had such knowledge, she might have testified differently.
Accordingly, defendant's statute of limitations affirmative defense applicable to Debtor Creditor Law §§ 276 and 278 is dismissed, summary judgment is granted in plaintiffs' favor on their fifth cause of action, and consequently the plaintiffs are awarded reasonable attorneys' fees and costs under Debtor Creditor Law § 276-a.
CONCLUSIONS
Based on the foregoing, it is hereby ordered that the plaintiffs' motion for summary judgment is granted to the following extent on the issue of defendant's liability:
(1) the Court grants summary judgment in plaintiffs' favor against the defendant individually on plaintiffs' first cause of action for the imposition of a constructive trust against the Mill River Property and Charles' retirement accounts, and awards plaintiffs Carla, Alexa and James a total of fifty percent of the value of Charles R. Van de Walle's gross estate as of Charles' date of death;
(2) the Court grants summary judgment in plaintiffs' favor, and against defendant in her capacity as the executor of the estate of Charles R. Van de Walle, on plaintiffs' second cause of action for breach of contract, and awards plaintiffs Carla, Alexa and James fifty percent of the value of Charles' gross estate as of the date of Charles' death;
(3) the Court grants summary judgment in plaintiffs' favor, and against the defendant individually and in her capacity as the executor of the estate of Charles R. Van de Walle, on plaintiffs' fourth and fifth causes of action for violating Debtor Creditor Law §§ 273, 276 and 278, and awards the plaintiffs reasonable attorneys' fees and costs pursuant to Debtor Creditor Law § 276-a ;
(4) the Court grants the branch of plaintiffs' motion for an order granting summary judgment dismissing defendants' affirmative defenses;
(5) the Court dismisses plaintiffs' third cause of action as academic;
(6) the remaining issue assessing the damages sustained by the plaintiffs, i.e., fifty percent of the value of Charles R. Van de Walle's gross estate on the date of his death (including the Mill River Property and Charles' retirement accounts), together with reasonable counsel fees and costs, shall be heard and determined by the Justice assigned by the Calendar Control Part ("CCP");
The plaintiffs shall file a note of issue and serve a copy of this order on the Clerk of Case Management and CCP, who is respectfully directed to place this matter on the CCP trial calendar for November 9, 2020, at 9:30 a.m.
The defendant's cross-motion for an order granting summary judgment dismissing the complaint is denied in its entirety.
The foregoing constitutes the decision, and order, of this Court.