Opinion
21741/04.
Decided January 3, 2005.
Upon the foregoing papers in this action to impose a constructive trust and for a permanent injunction, plaintiffs Jacob Schwartz and Simeon Schwartz, as executors of the estate of Melvin Bergstein a/k/a Menachem Bergstein (plaintiffs) move, by order to show cause, pursuant to CPLR 6301, for a preliminary injunction, enjoining defendant Max Houss (defendant) and his agents, servants, employees, representatives, contractors, successors, and assigns from disposing of, wasting, assigning, or transferring the subject real property, located at 1670 59th Street, in Brooklyn, New York, and any proceeds which may be derived from the sale thereof, to any person or entity other than the estate of Melvin Bergstein a/k/a Menachem Bergstein. Defendant cross-moves for summary judgment dismissing plaintiffs' complaint as against him and vacating the notice of pendency filed herein.
By a January 1978 deed, Melvin Bergstein a/k/a Menachem Bergstein (Bergstein) co-owned the subject real property with his brother-in-law, Chaim Dachowitz (Dachowitz). Subsequently, Dachowitz mortgaged the property to secure various loans, became involved in criminal activities, and was convicted for certain crimes. The real property was foreclosed upon, and Bergstein and his wife acquired title to the property at a foreclosure sale by deed dated March 24, 1992. Bergstein allegedly became afraid of Dachowitz, who believed that the property should belong to him, and also feared Dachowitz's creditors. In addition, he wished to convert the property, which was a two-family dwelling, into a three-family dwelling.
Plaintiffs allege that due to Bergstein's fear of Dachowitz and Dachowitz's creditors, and in order to facilitate the conversion of the property from a two-family dwelling into a three-family dwelling, Bergstein and his wife, by deed dated March 28, 1995, transferred the property to defendant, who was his close friend. Plaintiffs assert that defendant paid no consideration for this transfer, and that the transfer was made pursuant to an agreement between Bergstein and defendant, whereby defendant would hold the property merely as Bergstein's nominee, defendant would arrange to have the property converted into a three-family dwelling, and upon completion of the conversion, defendant would transfer the property back to Bergstein and Bergstein would pay defendant back for all expenses incurred by him in performing the conversion.
Defendant claims that he paid Bergstein $5,000 for the transfer of the property to him, but he has not submitted any evidence of any such payment, and the deed does not recite that any consideration was paid. Defendant admits that an arrangement was made between him and Bergstein, whereby he would convert the property into a three-family dwelling, and that Bergstein proposed that the property would be transferred back to him and that defendant would be reimbursed for his expenses after the conversion, but defendant claims that the final details of this arrangement were never worked out. Defendant asserts that he and Bergstein agreed that the "working out of an amount would be premature" because he did not know the financial expenses that he would have to incur in this conversion, and that he and Bergstein decided to wait until the conversion was complete to work out a fair financial arrangement.
Defendant, by agreement dated June 26, 1995, first hired an architect to convert the property into a five-family multiple dwelling, which he alleges was agreed to by Bergstein. Defendant claims that after two years, that architect was unsuccessful, and that he, thereafter, hired a different architect to convert the property into a three-family house, and a work permit was issued to him for this work on February 27, 2001. During all of this time, Bergstein, his wife (until her death in 2000), and their daughters remained living at the property and paid no rent to defendant. While defendant claims that he lived on one floor of the house for "a while" and then did not like it and moved out, this is denied by plaintiffs. On November 9, 2003, Bergstein died. The conversion of the property was still ongoing and not completed at the time of Bergstein's death. When one of Bergstein's daughters contacted defendant to inquire as to the status of the conversion, he allegedly informed her that he had entered into a contract to sell the property. Plaintiffs claim that the property belongs to the estate of Bergstein, not to defendant, and seek to prevent the sale of the property. Consequently, on July 9, 2004, plaintiffs commenced this action, and plaintiffs have brought the instant motion for a preliminary injunction to enjoin such a sale. A temporary restraining order has been granted pending the determination of this motion. Defendant has cross-moved for summary judgment dismissing plaintiffs' complaint on various grounds, and to vacate the notice of pendency filed herein.
Defendant, in support of his cross-motion, contends that plaintiffs' claim is barred by the applicable Statute of Limitations and the equitable doctrine of laches. Such contention is without merit. The six-year Statute of Limitations for a constructive trust did not accrue until defendant announced in the summer of 2004 that he was treating the property as his own ( see CPLR 213; Dombek v. Reimen, 298 AD2d 876, 876; Matter of Arnold, 173 AD2d 699, 700). Thus, this action was timely commenced on July 9, 2004. The equitable doctrine of laches is similarly inapplicable since in view of defendant's only recent announcement of his intent to keep the property for himself, plaintiffs have not excessively delayed in commencing this action.
Defendant's additional contention that plaintiffs have failed to join Bergstein's wife as a necessary party to this action because she was also a party to the agreement, is devoid of merit. Since prior to the transfer, she jointly owned the property with Bergstein, her interest in the property automatically passed to Bergstein upon her death ( see EPTL 6-2.1, 6-2.2 [b]).
Defendant further contends that there was no agreement reached between him and Bergstein, and that plaintiffs' allegations are absurd. As evidence of the purported agreement, however, plaintiffs have submitted a three-page document dated April 4, 1995, which they state was written by defendant. It sets forth that Bergstein and his wife, "as owners, . . . decided to sell [their] . . . [two-] family building without exchange of money . . . to [defendant] with the understanding between [them] that [defendant] w[ould] perform a conversion to [it] from the current [status of a two-] family c[ertificate] of o[ccupancy] to a [three-] family c[ertificate] of o[ccupancy]." It states that "all costs from evicting [the] tenant, architect [costs], and filing plus any and all structural and extension, including sidewalk modifications, permits, taxes, water bills, and unknown expenses [would] be repaid to [defendant] upon transfer of [the property] and [three-]family c[ertificate] of o[ccupancy] and title to . . . Bergstein." It further states that "[s]ince the final cost of the conversion from the [two-]family c[ertificate] of o[ccupancy] to the [three-]family c[ertificate] of o[ccupancy] is unknown and as the time needed [for] the construction by [defendant] and his contractor is unknown, be it etched in memoriam that within 30 days of completion of the conversion and [obtaining] the approved [three-]family certificate of occupancy . . . [defendant] is mandated to transfer/sell the [property] back to . . . Bergstein." It also states that Bergstein will opt to either pay defendant in cash or opt to give him a mortgage note "as payback to [defendant] for his expenses."
Defendant, in opposition, claims that this three-page document was never executed by anyone, that its contents are an absurdity, and that he cannot identify in whose handwriting it was written. Plaintiffs, however, in response, have submitted a cover letter to the three-page document dated January 8, 2003, which states that defendant hopes that Bergstein is able "to enjoy the efforts relating to the house," and that he is "frustrated at how long and how much it took for [him] to do this favor for [him]." The cover letter refers to "a draft of the text [of three] pages" which he needs "to conclude this task," and states that it is back-dated due to tax implications.
While defendant, in his opposition papers, had denied knowledge as to who wrote the three-page document setting forth the purported agreement between him and Bergstein, defendant, in his reply papers, does not deny that he wrote and executed the cover letter, which appears to be in the same handwriting as the three-page document. "Facts appearing in the movant's papers which the opposing party does not controvert, may be deemed to be admitted" ( Kuehne Nagel, Inc. v. Baiden, 36 NY2d 539, 544).
Plaintiffs, as further evidence of the existence of an agreement between Bergstein and defendant, have also submitted the handwritten Last Will and Testament of Bergstein dated January 20, 2003, executed by Bergstein, which sets forth his understanding of the terms of his agreement with defendant, which are the same as those shown in the three-page document. In addition, plaintiffs have submitted memos and receipts to show that Bergstein had paid for part of the construction involved with the conversion of the property.
Defendant also argues that the three-page document cannot form the basis of an agreement at the time of the transfer of the deed to him on March 28, 1995, because plaintiffs, by the cover letter, have conceded that it was back-dated and not actually written until the year 2003. Such argument is unavailing. A writing memorializing an oral agreement need not be made contemporaneously with that oral agreement ( see General Obligations Law § 5-701; Matter of Urdang [Atlas-Wittkin], 304 AD2d 586, 587). Therefore, contrary to defendant's argument, the cover letter executed by defendant, which refers to the back-dated three-page document, along with said document, evidences that the oral agreement was entered into in 1995.
Defendant additionally contends that the alleged contract is unenforceable for lack of definiteness because there was merely an agreement to agree, in which a material term, i.e., the amount of his compensation for the work that he was to do and had done, was never reached. He asserts that he and Bergstein constantly postponed the matter of his compensation as the situation changed and that, as a result, the purported contract cannot be binding upon him. Such contention is without merit. As discussed above, the terms of the oral agreement, as evidenced by the three-page document, state that defendant was "mandated to transfer" the property back to Bergstein, that Bergstein would repay to him all costs and expenses upon such transfer, and that he would opt to accept a mortgage note or cash as payback for his expenses. Thus, the agreement sufficiently sets forth the terms of defendant's compensation as being the expenses incurred by him. While the parties postponed the actual calculation of the amount of these expenses, this arithmetical computation can be ascertained by documentary proof of these expenses.
Defendant, in support of his cross motion, further argues that plaintiffs have failed to satisfy any of the elements necessary to impose a constructive trust. It is well settled that in order to set forth a valid cause of action to impose a constructive trust, the following four elements must be alleged: "(1) a confidential or fiduciary relationship, (2) a promise, express or implied, (3) a transfer in reliance thereon, and (4) unjust enrichment" ( Matter of Urdang [Atlas-Wittkin], 304 AD2d at 586; see also Sharp v. Kosmalski, 40 NY2d 119, 121; Cilibrasi v. Gagliardotto, 297 AD2d 778, 779; Gottlieb v. Gottlieb, 166 AD2d 413, 414; Spodek v. Riskin, 150 AD2d 358, 361).
Defendant contends that no confidential or fiduciary relationship existed between him and Bergstein. A confidential or fiduciary relationship, however, has been described as a "relation arising out of a close and intimate association which creates and inspires trust and confidence between the parties so associated" (106 NY Jur 2d, Trusts § 157). "[A] fiduciary relationship is one founded upon trust or confidence reposed by one person in the integrity and fidelity of another" ( Penato v. George, 52 AD2d 939, 942). "The relationship exists in all cases in which influence has been acquired and abused, in which confidence has been reposed and betrayed" ( id.).
The existence of a fiduciary relationship may be found to exist where there are either technical fiduciary relations or simply "those informal relations which exist whenever one [person] trusts in, and relies upon, another" ( id.; see also Cody v. Gallow, 28 Misc 2d 373, 374). Indeed, it has been held that a fiduciary relationship "might be found to exist, in appropriate circumstances, between close friends . . . or even where confidence is based upon prior business dealings" ( Penato, 52 AD2d at 942; see also Levine v. Chussid, 31 Misc 2d 412, 415; Cody, 28 Misc 2d at 374).
Here, defendant admits that he and Bergstein were close friends, and plaintiffs have alleged that Bergstein trusted defendant because of their prior financial dealings as well as defendant's financial dealings with Bergstein's father for numerous years. Thus, contrary to defendant's argument, plaintiffs have adequately alleged that defendant and Bergstein were not merely social friends, and that the absence of a formal written agreement was a consequence of the close relationship between defendant and Bergstein ( compare Bontecou v. Goldman, 103 AD2d 732, 733). Consequently, plaintiffs have made a sufficient showing of a confidential relationship between Bergstein and defendant to preclude the granting of defendant's cross-motion on this basis ( see Sharp, 40 NY2d at 121; Brand v. Lipton, 274 AD2d 534, 535; Penato, 52 AD2d at 942).
Plaintiffs have also alleged that defendant made a promise to reconvey the property to Bergstein, and that Bergstein transferred the property to him in reliance thereon, and the submitted cover letter, three-page document, and Bergstein's will are probative on this issue ( see Sharp, 40 NY2d at 121; Matter of Urdang [Atlas-Wittkin], 304 AD2d at 587-588; Cilibrasi, 297 AD2d at 779; Gottlieb, 166 AD2d at 414; Spodek, 150 AD2d at 361).
Defendant's denials and allegations to the contrary merely create triable issues of fact and are insufficient to warrant dismissal of plaintiffs' claims ( see Brand, 274 AD2d at 535).
Plaintiffs have also sufficiently alleged that defendant will be unjustly enriched if a constructive trust is not imposed with respect to the property. While defendant claims that it is plaintiffs who would be unjustly enriched by a transfer of the property to them because he has incurred substantial expenses and has also performed services in connection with the work to improve the property, there is no showing whatsoever by defendant that the expenses incurred by him exceed the value of the property. In this regard, it is noted that the terms of the alleged agreement provide for recovery of defendant's expenses, and defendant is not precluded by the alleged agreement's terms, from interposing a defense and/or counterclaim to recover the costs of his expenses or from proving the value of any services performed by him in connection with the property.
Defendant additionally argues that the Statute of Frauds bars plaintiffs' claims. Such argument is rejected. It is well established that the Statute of Frauds is not a defense to a cause of action for a constructive trust ( Dombek, 298 AD2d at 877; Cilibrasi, 297 AD2d at 779; Gottlieb, 166 AD2d at 414; Spodek, 150 AD2d at 361).
In any event, the Statute of Frauds specifically provides an exception to the writing requirement where there is part performance that is "unequivocally referable" to an oral agreement ( see General Obligations Law § 5-703; Anostario v. Vicinanzo, 59 NY2d 662, 664; Burns v. McCormick, 233 NY 230, 232; Spirt v. Spirt, 209 AD2d 688, 689; Spodek, 150 AD2d at 360; Uskokovic v. Radunovich, 127 AD2d 830, 830). Here, as discussed above, the parties' conduct includes: Bergstein transferring the property to defendant with no consideration recited on the March 28, 1995 deed; defendant actually performing extensive work to convert the property into a three-family dwelling; Bergstein and his family continuing to reside at the property after the transfer; defendant's mailing of a handwritten letter signed by him, along with a draft of the alleged agreement; written memos and receipts indicating Bergstein paid for part of the construction involved with the conversion of the property; and Bergstein's setting forth the terms of the purported agreement in his Last Will and Testament. Such conduct is probative on the issue of part performance, and plaintiffs have, thus, stated sufficient facts to raise triable issues of fact as to whether the acts of defendant and Bergstein were "unequivocally referable" to the alleged oral agreement between them ( see Spirt, 209 AD2d at 689; Spodek, 150 AD2d at 360; Uskokovic, 127 AD2d at 830).
In turning to plaintiffs' motion for a preliminary injunction, it is noted that "in order to prevail on a motion for a preliminary injunction, the movant has the burden of demonstrating (1) a likelihood of ultimate success on the merits, (2) irreparable injury absent the granting of the preliminary injunction, and (3) that a balancing of equities favors the movant's position" ( Walter Karl, Inc. v. Wood, 137 AD2d 22, 26; see also W.T. Grant Co. v. Srogi, 52 NY2d 496, 517; Hightower v. Reid, 5 AD3d 440, 440-441).
Defendant, in opposition to plaintiffs' motion, asserts that plaintiffs cannot obtain a preliminary injunction herein because no one except him has personal knowledge of the facts. Contrary to this assertion, however, plaintiff Simeon Schwartz has submitted his affirmation, wherein he states that he personally met with defendant and Bergstein regarding their agreement for the conversion of the property, and plaintiff Jacob Schwartz has submitted his affirmation, wherein he states that he also attempted to discuss the agreement with defendant, but was repeatedly rebuffed. Additionally, contrary to defendant's further argument, plaintiffs are not precluded by the Dead Man's Statute from testifying as to their transactions and communications with defendant, as defendant is not deceased ( see CPLR 4519). Thus, based upon plaintiff's submissions (as discussed above), plaintiffs have established a likelihood of ultimate success on the merits with respect to their cause of action to impose a constructive trust on the real property at issue ( see Sharp, 40 NY2d at 121; Hightower, 5 AD3d at 441; Ostriker v. Ostriker, 203 AD2d 343, 345).
Plaintiffs have also demonstrated that they would be irreparably injured absent the granting of a preliminary injunction, and that a balancing of the equities lies in their favor ( see W.T. Grant Co., 52 NY2d at 517; Hightower, 5 AD3d at 441). "[D]enial of the motion for a preliminary injunction would . . . be inconsistent with the purposes of the equitable doctrine of constructive trust namely, to prevent a breach of trust, and to restore to the plaintiff[s] real property which [they] allege rightfully belongs to [the estate of Bergstein]" ( Hightower, 5 AD3d at 441). Furthermore, a preliminary injunction is "necessary to maintain the status quo pending a determination on the merits" ( Abed v. Zach Assocs., 124 AD2d 531, 532; see also Wendling v. 136 E 64th St. Assocs., 128 AD2d 419, 421). On the other hand, defendant, in whom title to the real property is vested, will suffer no great hardship as a result of the issuance of the preliminary injunction, provided a mandatory undertaking is filed by plaintiffs ( see CPLR 6312 [b]; Hightower, 5 AD3d at 441; Livas v. Mitzner, 303 AD2d 381, 383; Schwartz v. Gruber, 261 AD2d 526, 527; Carter v. Konstantatos, 156 AD2d 632, 633). Therefore, plaintiffs have satisfied their burden of demonstrating the required elements to warrant a preliminary injunction, and their motion for a preliminary injunction must be granted ( see Spirt, 209 AD2d at 689; Cilibrasi, 297 AD2d at 778).
Accordingly, plaintiffs' motion for a preliminary injunction, is granted. The granting of such preliminary injunction is conditioned upon the posting of a good and sufficient undertaking by plaintiffs in an amount to be fixed by the court, pursuant to CPLR 6312 (b), after a hearing, which shall be held for that purpose at 360 Adams Street, Brooklyn, New York, in Room 356 at 9:30 a.m. on January 27, 2005, unless the parties stipulate to an amount. Defendants' cross-motion for summary judgment dismissing plaintiffs' complaint as against him and vacating the notice of pendency filed herein, is denied.
This constitutes the decision and order of the court.