WHEN A NON-MARITAL RELATIONSHIP SOURS - CONSTRUCTIVE TRUSTS

Unmarried couples may purchase homes, etc. but, for various reasons, keep title in one name. If the relationship ends, and since they are not married, the home is not marital property but the doctrine of constructive trusts may apply.

GRIFEL v. Madsen, 2020 NY Slip Op 33118 - NY: Supreme Court September 23, 2020:

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A constructive trust is an equitable remedy that "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" (Watson v. Pascal, 65 AD3d 1333, 1334 [2d. Dept. 2009]). A constructive trust cause of action includes four elements: "(1) a confidential or fiduciary relationship; (2) a promise; (3) a transfer in reliance on that promise; and (4) unjust enrichment" (Id.). Since constructive trust is an equitable remedy, "courts do not rigidly apply the elements but use them as flexible guidelines" (Beason v. Kleine, 96 AD3d 1611, 1613 [4th Dept. 2012]; see also Hernandez v. Florian, 173 AD3d 1144, 1145 [2d. Dept. 2019] (stating that since "the elements serve only as a guideline, a constructive trust may still be imposed even if all of the elements arc not established")). Courts have held that the transfer in reliance element "is not limited to instances in which the plaintiff has actually transferred title to the property to the defendant, but may also include instances where the plaintiff has provided substantial funds for the maintenance and improvement of it" (Hairman v. Jhawarer, 122 AD3d 570, 572 [2d. Dept. 2014]; see also Washington v. Defense, 149 AD2d 697, 698-99 [2d. Dept. 1989]; Lester v. Zimmer, 147 AD2d 340, 342 [3d. Dept. 1989]). Cases have indicated that unjust enrichment may be established where the plaintiff contributed money for the down payment, mortgage payments, and for maintenance of the property (Diaz v. Diaz, 130 AD3d 560, 562 [2d. Dept. 2015]).

A constructive trust claim is governed by a six-year statute of limitations (See CPLR 213(1); Zane v. Minion, 63 AD3d 1151, 1153 [2d. Dept. 2009]). If the plaintiff alleges that the defendant acquired the property wrongfully, then the constructive trust claim accrued on the date it was acquired (Id.). If the plaintiff contends that the defendant wrongfully withheld property, then the claim accrued on the "date the trustee breache[d] or repudiate[d] the agreement to transfer the property" (Id. at 1153-54, indicating that "the plaintiff's claim accrued when the defendant allegedly failed to honor her promises, which according to the complaint, occurred in late 2005 or early 2006").

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Plaintiff's cause of action for constructive trust should not be dismissed, since plaintiff has stated a valid claim to impose a constructive trust. Plaintiff has adequately pleaded the first element, a confidential or fiduciary relationship, as the complaint alleges that defendant and plaintiff were in a romantic relationship since 2006, had cohabitated since 2007, and were registered as domestic partners in the State of New York as of 2014 (Complaint ¶ 11). Plaintiff has also adequately pleaded the second element, a promise, since the complaint states that when the property was purchased in December 2013, "Defendant Madsen promised plaintiff that the Premises belonged to both of them, that defendant Madsen would hold title to the Premises for the benefit of plaintiff, and that defendant Madsen would add plaintiff's name to the deed to the Premises at the first possible opportunity" (Id. at ¶ 28). Defendant does not contest that plaintiff has adequately pleaded the first two elements of a constructive trust claim.

Defendant maintains that the plaintiff has failed to adequately plead the third and fourth elements of a constructive trust claim: a transfer in reliance on the promise and unjust enrichment, because the down payment was not directly transferred from plaintiff to defendant, and defendant was not unjustly enriched, since plaintiff benefited by living in the home, and from the improvements she made to the property (Chatterton Affirmation ¶¶ 45, 55). Although plaintiff's mother transferred the money for the down payment directly to defendant's bank account, the complaint alleges that plaintiff asked her mother to loan the funds, and that the mother loaned the funds to the defendant "on behalf of plaintiff' (Id. at ¶¶ 19, 25). Since constructive trust is an equitable remedy, and not all elements need to be present to impose a constructive trust, the court declines to dismiss the cause of action merely because the down payment was not directly transferred from the plaintiff to the defendant. In any event, the transfer in reliance element has been adequately pleaded, since the plaintiff contends that she "contributed her personal funds to the costs of renovations" and "gave [money] to defendant Madsen on a nearly monthly basis for payment of the costs of the premises, including the mortgage and other carrying costs" (See Lester, 147 AD2d at 342 (stating that "a constrictive trust may be imposed ... where the proponent has extended funds or effort in reliance on a promise")).

Defendant's claim that plaintiff has not adequately pleaded unjust enrichment is incorrect. The cases defendant cites in support of this contention are distinguishable. Henning v. Henning, 103 AD3d 778 (2d. Dept. 2013) involved a constructive trust cause of action by a wife against her husband's parents, contending that defendants were unjustly enriched by her improvements to the property. This case can be differentiated, since defendants moved pursuant to CPLR 4401 for judgment as a matter of law "dismissing the complaint," "at the close of plaintiff's case at a nonjury trial" (Id. at 778). Similarly, Wilson v. La Van, 22 NY2d 131 (1968) is distinguished, since it involves an oral agreement for the transfer of real property, not a constructive trust claim. In Onorato v. Lupoli, 135 AD2d 693 (2d. Dept. 1987), the judge merely states in reference to a cause of action for specific performance, that "the fact that plaintiff made mortgage, taxes and other payments on the property during the period in which he resided in his brother-in-law's house, could be considered as rent for the use of the property" (Id. at 694). The judge denied plaintiff's motion to amend the pleadings to add a cause of action for the imposition of a constructive trust based on the fact that plaintiff "failed to establish that he had a prior interest in the subject property, nor [did] he [establish] the existence of an oral promise to convey title to the property" (Id. at 695). The judge never addressed unjust enrichment in his opinion. Marini v. Lombardo, 79 AD3d 932 [2d. Dept. 2010] is inapplicable since the judge made the decision to dismiss the constructive trust cause of action after a nonjury trial.

Plaintiff has adequately pleaded all three elements for unjust enrichment in her complaint. The first two elements, that the other party was enriched at her expense, are supported by plaintiff's allegations that she asked her mother to loan money to defendant for the down payment, and she also spent money, and dedicated her time and effort to maintaining and renovating the premises, and acquiring tenants (Complaint ¶¶ 30, 32). Plaintiff's complaint sufficiently alleges the third element, "that it is against equity and good conscience" to permit the defendant "to retain what is sought to be recovered." Plaintiff maintains that without her mother's contributions, defendant would not have acquired any interest in the premises, and that if the court dots not grant her an equitable interest in the premises, defendant would be unjustly enriched by her monetary contributions and the time and labor she devoted to finding and managing tenants for the premises (Id. at ¶¶ 62-64).

Defendant's contention that plaintiff has merely stated an unenforceable oral agreement for the transfer of property that is barred by the Statute of Frauds is without merit. As stated above, plaintiff has adequately pleaded a cause of action for imposition of a constructive trust. The Statute of Frauds is not a defense to a cause of action to impose a constructive trust (Vanasco v. Angiolelli, 97 AD2d 462, 462 [2d. Dept. 1983]).

The cause of action to impose a constructive trust is not barred by the statute of limitations. Although defendant contends that plaintiff's claim accrued in 2013 when the property was purchased, since there was no legal impediment to adding plaintiff's name to the deed, the parties had an agreement that plaintiff's name was left off the deed due to her prior bankruptcy filing (Chatterton Affirmation ¶ 40-42; Complaint ¶ 27). In light of the fact that a court is required to give the plaintiff the "benefit of every favorable inference" on a motion to dismiss, the court declines to interpret the statement in the complaint that defendant promised to add plaintiff to the deed "at the first possible opportunity" literally. The language, "the first possible opportunity" can be interpreted to mean when plaintiff's prior bankruptcy filing was no longer included in her credit history, which according to the complaint was in mid-2017 (Id. at ¶ 57). Since defendant did not wrongfully acquire the property, plaintiffs claim accrued on the date defendant wrongfully withheld it, which was in mid-2017. Therefore, since a cause of action to impose a constructive trust is governed by a six-year statute of limitations, plaintiff's first cause of action is not time-barred."