BROTHERS ESTABLISHED CONSTRUCTIVE TRUST DEFENSE IN HOUSING COURT

The family dispute among the siblings continues after the Mother has passed.

Hampton v. Hampton, NYLJ January 02, 2020, Date filed: 2019-11-29, Court: Civil Court, Queens, Judge: Judge Julie Poley, Case Number: 55878/19:

"It is well settled that title cannot be determined in the context of a Housing Court summary proceeding, but that the Court is empowered with the jurisdiction to determine any “legal or equitable” defense for purpose of determining a right to possession. (Chopra v. Prusik, 9 Misc.3d 42 [App Term, 2nd Dep't 2015] citing, Nissequogue Boat Club v. State of New York, 14 AD3d 542 [2nd Dep't 2005]; see also, Decaudin v. Velazquez, 15 Misc.3d 45 [App Term, 2nd Dep't 2007]; RPAPL §743). Hence, even though parties are unable to challenge title in a summary proceeding, a licensee may defeat a summary proceeding by establishing an equitable affirmative defense such as constructive trust. (See, Paladino v. Sotille, 15 Misc.3d 60 [App Term, 2nd Dep't 2007]. Additionally, the statute of frauds is not applicable if the imposition of a constructive trust has been shown to be warranted. (Panetta v. Kelly, 17 A.D. 3d 163 [2005]; see also, Paladino v. Sotille, 15 Misc.3d 60 [App Term, 2nd Dep't 2007].² Therefore, the Court now turns to Respondents’ affirmative defense of constructive trust.

A constructive trust is a cause of action seeking to equitably assert an interest in real property. (A.G. Homes, LLC v. Gerstein, 52 AD3d 546 [2nd Dep't 2008]; see also, Scivoletti v. Marsala, 97 AD2d 401 [2nd Dep't 1983]). A “constructive trust may be imposed when property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest.” (Sharp v. Kosmalski, 40 NY2d 119,121 [1976] citing, Beatty v. Guggenheim Exploration Co., 225 NY 380,386 [1919] rev’d on other grounds). To satisfy the constructive trust doctrine four elements must be established: (1) a confidential or fiduciary relationship; (2) a promise, express or implied; (3) a transfer in reliance thereon; and (4) unjust enrichment. It has long been settled that although all four elements must be present, the elements are to be applied flexibly to satisfy the salutary purpose of preventing unjust enrichment to a transferee. (See, Giammona v. 72 Mark Lane, LLC, 143 AD3d 941 [2nd Dep't 2016]; see also, Bankers Sec. Life Ins. Society v. Shakerdge, 49 NY2d 939 [1980]; (Sharp v. Kosmalski, 40 NY2d 119 [1976]). To that end, to avail the defense, the burden of proof rests with the party asserting the constructive trust theory to prove all four elements of the defense. (See, Fireman’s Fund Ins. Co. v. Farrell, 57 AD3d 721 [2nd Dep't 2008]; see also Suissa v. Barron 24 Misc.3d 1236(A) [Dist Ct, Suffolk County 2009]).

Constructive Trust: Confidential Relationship

As the Court of Appeals in Sharp opined, “it is the existence of a confidential relationship which triggers the equitable considerations leading to the imposition of a constructive trust.” (Sharp v. Kosmalski, 40 NY2d 119,121 [1976]). A marital or other family relationship, although frequently present, is not an essential element to establish a confidential relationship. Instead, the moving party needs to demonstrate “a relationship of trust and confidence” to trigger the imposition of the obligation not to abuse that trust. (Id.) Here, the parties are siblings and children of the deceased, and by the nature of their relationship, are entrusted with trust and confidence to each other. Therefore, the family relationship between the parties, coupled with joint possession of the property from the inception of the ownership, dictates that a confidential relationship existed between the parties. (Id.)

Constructive Trust: Transfer and Promise

Unquestionably there was a transfer of property as ownership in its entirety vested to Petitioner upon her mother’s demise. The center of the dispute is whether there was a promise made to Respondents by their mother that they have an interest in the subject premises and whether Petitioner was entrusted with holding the deed for her own benefit and that of her brothers. For purposes of forming a constructive trust, a promise does not need to be in writing and does not even need to be expressly made. Court have imposed constructive trusts from implied promises, or a promise inferred from the transaction itself. (See, Paladion v. Sotille, 15 Misc.3d 60 [App Term, 2nd Dep't 2007]; see also, (Sharp v. Kosmalski, 40 NY2d 119,122 [1976]).

It is undisputed that Linda Hampton died intestate and that she did not leave any written instructions regarding the distribution of her interest in the subject property. The Court, however, credits Respondents’ undisputed testimony that Linda Hampton told both Respondents that she is purchasing a two-family house for the benefit of the family, that she asked both sons whether they would like to be part of the family enterprise, and once they agreed they all moved into the house from inception of its purchase.³ At the time of purchase, Linda Hampton was 62 years old, recovering from a debilitating stroke, and Respondents credibly testified that it was her lifelong dream to purchase a home for her entire family. Both Respondents testified that after the purchase they assumed their role in the family enterprise by contributing money to be applied toward the mortgage. Particularly relevant is the undisputed credible testimony that Linda Hampton assured her sons that although the deed for the premises did not contain their names, they had nothing to worry about because she would never do anything for the benefit of one child. Furthermore, Respondents testified that their mother’s employment with the MTA, her credit, and her income, contributed to secure the down payment for the house and mortgage approval because Petitioner’s credit or income alone was insufficient to secure the purchase.

Although Petitioner testified that it was her employment and her personal finances that secured the down payment for the house, she did not rebut Respondents testimony by way of documents or testimony to substantiate her claim that the purchase was made for her sole benefit. Petitioner admitted that the “right of survivorship” clause in the deed was not something that was contemplated by the parties prior to the closing, and that the language was added by hand at the closing at the suggestion of the title company, possibly for the purpose of ensuring the loan commitment by the financial institution. Additionally, even though both Respondents conceded that they did not contribute toward the down payment, Petitioner acknowledged that both Respondents financially contributed toward the house by giving money to their mother. Petitioner testified that she did not know how much money Respondents contributed or how their mother applied the contributions, but that she and her mother equally split the expenses associated with the house up until she passed away. Finally, Petitioner did not offer testimony or any evidence to rebut Respondents’ claim that although their names did not appear on the deed, the purchase was made with an implied promise that they have an interest in the purchase. Therefore, based on the testimony and the evidence provided, the Court find that a promise existed as an element of a constructive trust.

Constructive Trust: Unjust enrichment

Unjust enrichment exists where the retention of a benefit received from a transaction would be unjust. (See, Sharp v. Kosmalski, 40 NY2d 119 [1976]).). Here, without the imposition of a constructive trust, Petitioner would benefit from ownership and possession of the entire property. In turn, Respondents would lose any possessory interest they have in what they call a “family home,” including losing their financial interest based on contributions made toward the mortgage and any beneficial interest in the property as distributees which stems from their late mother’s ownership interest. Therefore, Respondents have demonstrated unjust enrichment and Respondents have satisfied all four elements of their defense of constructive trust.

Accordingly, both licensee proceedings are dismissed with prejudice as Petitioner has failed to prove a cause of action pursuant to relevant provisions of the RPAPL. As discussed, although Respondents have established their affirmative defense of constructive trust, this Court does not have jurisdiction to determine issues of title or the division of interests in the property.

This is without prejudice to both parties seeking appropriate relief in a Court of competent jurisdiction.

1. It has been held in Heckman v. Heckman, 55 Misc 3d 86 [App Term, 2nd Dep't 2017], when asserting a familial exception, absent a "legal support obligation" there is no bar to the maintenance of a licensee proceeding in situations in which the occupant can properly be held a licensee.
2. The statute of frauds, codified in General Obligations Law 5-703(1), provides the general rule that any transfer in interest in real property must be made by deed or a conveyance in writing.
3. The Court notes that Petitioner did not raise any objections during Respondents' testimony pursuant to New York's "dead man statute" codified in CPLR §4519, and that Petitioner did not offer any testimony to challenge Respondents' assertions regarding interactions with their mother concerning the property."