To be argued by:
Robert L. Adams, Esq.
(Time requested: 10 minutes)
APL-2015-00337
Appellate Division Case No. 518885
Schenectady County Surrogate's Court File No. 2011-64/D
ourt of ~ppeals
of the
~tate of jF!etu ~ork
In the Matter of the Estate of
EDMUND FELIX HENNEL a/k/a EDMUND HENNEL,
Deceased
GREGORY HENNEL, et al.
Petitioners-Respondents,
HAZEL HENNEL, as Executor of the Estate of
EDMUND FELX HENNEL, Deceased
Respondent-Appellant.
BRIEF FOR PETITIONERS-RESPONDENTS
Martin, Shudt, Wallace, DiLorenzo & Johnson
Robert L. Adams, Esq
Veronika Grochowalski, Esq.
Attorneys for Petitioners-Respondents
25 8 Hoosick Street
Troy, New York,
TEL: (518) 272-6565
FAX: (518 272-5573
Dated: August 10, 2016
Table of Contents
Table of Cases, Statutes, Authorities and Treatises ............................................................ ii
Questions Presented ................................................................................................. iii
Procedural History ................................................................................................... iv
Preliminary Statement. ............................................................................................... 1
Statement of Facts .................................................................................................... 3
POINT I
THE ELEMENTS OF PROMISSORY ESTOPPEL
WERE ESTABLISHED BY UNCONTROVERTED EVIDENCE
AND IT WOULD BE UNCONSCIONABLE TO ALLOW
THE ESTATE TO NULLIFY THE AGREEMENT
WITH A STATUTE OF FRAUDS DEFENSE ...................................................... 9
POINT II
APPELLANT ERRONEOUSLY CONTENDS THAT
THE AMBULATORY NATURE OF WILLS
PRECLUDES RESPONDENTS FROM
ASSERTING PROMISSORY ESTOPPEL IN THE
ABSENCE OF AN AGREEMENT NOT TO
ALTER THE 2006 WILL ............................................. ~ ......................................... ..
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Table of Cases, Statutes and Authorities
Cohen v. Brown, Harris, Stevens, 64 NY2d 728 [1984] ................................................ 10
Mandel v. Liebman, 303 NY 88 [1951] ......................................................................... 16
Kent v. Quicksilver Min. Co., 78 NY 159 [ 1879] ........................................................... 20
Lobdell v. Lobdell, 36 NY 327 [1867] ............................................................................ 20
Castellotti v. Free, 138 AD3d 198, [1st Dept. 2016] ...................................................... 12
Fleet Bank v. Pine Knoll Corp., 290 AD2d 792 [2002] .................................................. 10
Melwani v. Jalin, 281 AD2d 276, 277 [1st Dept. 2001] .................................................. 12
Rogers v. Town of Islip, 230 AD2d 727 [2nd Dept. 1996] ............................................. 10
Steele v. Delverde S.R.L., 242 AD2d 414 [1st Dept. 1997] ............................................ 12
R. Freedman & Son Inc. v. A.I. Credit Corp., 226 AD2d 1002, [3rd Dept. 1996] .......... 11
WE Transp. v. Suffolk Transp. Serv., 192 AD2d 601 [2nd Dept. 1983] ........................ 12
Buddman Distrib. v. Labatt Importers, 91 AD2d 838 [4th Dept. 1982] ......................... 12
Swerdloffv. Mobil Oil Corp., 74 AD2d 258,261 [2nd Dept. 1980] ............................... 13
Matter ofThoens, 88 Mise 2d 1006, 1008-1009 [1975] affd 51 AD2d 691 [1976] affd
41 NY2d 823 [1977] ........................................................................................................ 20
Educational Center for New Americans, Inc. v. 66th Ave. Realty Co., 40 Misc. 3d
1222(A) [Queens County July 23, 2013] ........................................................................ 11
ii
QUESTION PRESENTED
Whether promissory estoppel bars a statute of frauds defense where enforcing the
promise is the only way to avoid injustice and unconscionability, and the promise was
broken without notice to the promisees.
ANSWER: The Schenectady County Surrogate's Court (Versaci, J.) and the
Appellate Division Third Department both determined that an enforceable promise
existed between decedent and respondents and concluded that the enforcement of the
promise is necessary in order to avoid an unconscionable result.
iii
PROCEDURAL HISTORY
The decedent passed away on December 1, 2010. (R. 56). His wife and executrix
of his estate, Hazel Hennel (hereinafter "Appellant") sought probate in Schenectady
County Surrogate's Court on January 4, 2011. (R. 23). On April26, 2011, a Decree
Granting Probate was issued by the Honorable Vincent W. Versaci of Schenectady
County Surrogate's Court. (R. 70).
On June 28, 2013, Respondents filed a Verified Notice of Claim SCPA 1803
asserting that they had entered into bargained for consideration and promise with
decedent whereby they agreed to maintain and care for decedent's Jackson Avenue
property during his lifetime in exchange for receiving the property free and clear of the
mortgage the encumbered it. This promise was delineated in decedent's Will, indicating
that any remaining mortgage at the time of decedent's death would be satisfied using the
assets ofhis estate. (R. 73-84).
On August 3, 2011, Appellant rejected the claim (R. 168).
On November 20,2012, Respondents filed a Motion for Summary Judgment
seeking satisfaction of the mortgage and reimbursement of the payments made since
decedent's death. (R. 283).
The Schenectady County Surrogate's Court entered a Decision and Order on June
15, 2013 granting summary judgment in favor ofRespondents after reasoning that any
other result would be unconscionable given the evidence presented. (R. 15-17).
Appellant filed a Notice of Appeal on July 1, 2013 (R. 3).
iv
On November 23, 2015, the Appellate Division Third Department affirmed the
decision of the Surrogate's Court. Appellant filed a Notice of Appeal to the New York
State Court of Appeals on December 16, 2015.
v
PRELIMINARY STATEMENT
Petitioners-respondents filed a proceeding pursuant to SCP A § 1809 to
enforce of a promise made with their grandfather ("the decedent") four years prior
to his death, in which decedent promised to deed his property at 233 Jackson
Avenue, Schenectady, New York ("Jackson Avenue") to Respondents if they
maintained it during his lifetime. The property was encumbered with a mortgage
that decedent used to provide gifts to Respondents and four other family members
no longer involved in a family business. Decedent assured Respondents that, at the
time of his death, the mortgage would be paid for with the assets of his estate. It
was only under this condition that Respondents agreed to take over the property
and manage it for the lifetime of decedent. Decedent drafted a Will in September
2006 in the presence of Respondents and his long-time family attorney, Frank
Parisi, Esq. which provided Jackson Avenue was to be free and clear of the
mortgage upon his death, and simultaneously signed the deed over to Respondents
while retaining a life estate. In 2008, decedent executed a subsequent Will,
prepared and witnessed by attorney for Appellant, which made no reference to
Jackson Avenue or the provisions of the 2006 Will, which documented the promise
to convey the property to Respondents free and clear of a mortgage. Decedent
passed away in 2010 without ever having mentioned to Respondents that he altered
his Will, and Respondents continued to maintain the property as agreed.
1
Appellant does not contest the existence of the promise or the testimony of
Mr. Parisi, in which that decedent informed him that the deed would convey
Jackson Avenue to Respondents and that the 2006 Will should indicate that
mortgage was to be paid for from estate assets. Decedent never expressly revoked
the provision to pay off the mortgage on the property and did not inform
Respondents of intentions to do so other than those to which they had agreed in
2006.
The Schenectady County Surrogate's Court and the Appellate Division,
Third Judicial Department majority both determined that application of the statute
of frauds as a defense to Respondents' enforcement of decedent's promise would
cause an unconscionable result and concluded that the decedent's estate was
obligated to convey the Jackson Avenue property free and clear ofthe mortgage.
The dissent in the Appellate Division agreed with the majority's legal analysis, but
viewed the facts presented as insufficient to reach the level of unconscionability.
As noted in the dissent, both the majority and the dissenters in the Appellate
Division agreed on all issues other than whether Respondents satisfied their burden
to establish promissory estoppel by demonstrating egregious harm and
unconscionability. Appellant's efforts to reargue issues other than the application
of promissory estoppel, such as equitable estoppel should be disregarded and the
two lower courts' decisions in favor or Respondents should be affirmed.
2
STATEMENT OF FACTS
Edmund Felix Hennel (hereinafter "decedent") was the owner of a four-unit
house located at 233 Jackson Avenue, Schenectady New York (hereinafter
"Jackson Avenue") and lived in one of the units (R. 48, 56, 193, 237, 388). The
Jackson Avenue property was encumbered by a mortgage (R. 110) to secure a
$100,000 loan decedent had taken in 2001 to fund cash gifts to six family
members, including Respondents (R. 77 -78). The six individuals were, at that
time, shareholders in the Stadium Golf Course business. The purpose of the gifts
was to provide working capital to the business with the six family members
loaning the gifts from their grandfather to the business. In March of 2001, the
gifted money was tendered to the golf course business and recorded as a note
payable by the business to the six shareholders (R. 243). Within a matter of four
months, the shareholders were no longer able to agree on how to operate the
business and, as a result, over the next five years, the four shareholders other than
Respondents were paid out and ceased to be shareholders in the business (R. 244).
Within a few months after the buyout of the four other shareholders,
decedent approached Respondents and told them that he wanted Respondents to
take over the management of the apartment building while he continued to live
there maintaining a life estate. (R. 23 7, 266). Respondents stated that they would
only be interested in taking ownership of the building free and clear of the existing
3
mortgage on the property. (R. 237, 434). Respondents had no intention to assume
any part of the mortgage as it would mean that they would be subsidizing the gifts
to the four former shareholders of the golf course business (R. 244). In addition,
Respondents already had significant debt from the golf course business and did not
want to take on more debt associated with the apartment building, which was
essentially a break-even business (R. 238).
Decedent clearly and unequivocally agreed that Respondents would receive
the apartment building free and clear of any debt, with the mortgage to be paid off
at his death (R. 78-79). In return, Respondents' as owners, would take over new
responsibilities of management of the building, maintaining the leases, arranging
and paying for repairs, managing cash flow, dealing with tenant defaults and
evictions, payment of taxes, and assumption ofliabilities for tenant claims (R. 78).
Respondents paid the mortgage from the rental proceeds with decedent taking the
interest deduction on his tax returns (R. 81).
In September 2006, decedent, together with the Respondents, met with
Frank Parisi, Esq. a long-time family attorney and friend to further discuss and
implement the transfer of Jackson Avenue. This was accomplished by the
simultaneous execution of a new Will (R. 95) and a warranty deed (R. 85) Mr.
Parisi was deposed by the parties to this proceeding (R. 259). He confirmed that
Respondents were taking over responsibilities related to Jackson A venue, with the
4
decedent maintaining a life estate. Mr. Parisi was directed by decedent to include a
provision in the will which stated as follows:
I redirect that the mortgage on the property at 233 Jackson
Avenue, Schenectady, New York, of any, in existence at the time
of my death shall be paid from the assets of my estate.
The deed did not reflect that the conveyance was subject to an existing mortgage
and the consideration for the transfer was reported as zero because the
Respondents were not assuming the mortgage (R. 79).
Two years later, after Respondents had undertaken all of the responsibilities
for the Jackson Avenue apartment building, on October 22, 2008, a new Will was
executed by decedent, in which he made no mention of the mortgage on the
property-neither expressly revoking it nor ensuring that the promise would
continue as agreed (R. 35). While Respondents were advised that a new Will had
been executed to further benefit decedent's wife, they were assured that nothing
had changed with respect to the Jackson Avenue property (R. 81 ). Respondents
continued to perform their side of the 2006 agreement by assuming all of the
responsibilities associated with the Jackson Avenue apartment building.
Based on these facts, Respondents moved for summary judgment on their
claim against the estate to require satisfaction of the mortgage (R. 283). The
motion was based, in part, on a claim of promissory estoppel and was supported by
a sworn statement from one of the respondents and deposition transcripts from
5
attorney Frank Parisi, both of whom had direct and personal knowledge of the
facts. In addition, documentary evidence was submitted in support of the motion.
At the time of the summary judgment motion, Respondents had paid
$13,238.34 in mortgage payments following the death of the grandfather and the
principal balance due under the mortgage was $82,194.57 (R. 372).
Opposition to the summary judgment motion consisted of a cursory one page
affidavit from the executrix of decedent's estate which contained no factual
allegations contesting the sworn statements made in support of the summary
judgment motion (R. 377). An attorney's affirmation was also submitted in
response to the summary judgment motion (R. 380), but like the affidavit of the
executrix, the attorney lacked any personal knowledge of the transactions between
the decedent and Respondents in 2006 when the agreement relative to the Jackson
A venue property and the mortgage was reached. In the attorney's affirmation, it is
repeatedly contended that Respondents do not have a viable legal claim against the
estate, but no basis for that contention is found within the affirmation. In its
Decision/Order, the Schenectady County Surrogate's Court found that the estate
had "failed to dispute any of the relevant facts" presented by Respondents in
support of their summary judgment motion (R. 11 ). While not referenced in the
record, from the Decision/Order it can be gleaned that the estate's opposition to the
summary judgment motion was based on a statute of frauds defense (R. 11 ).
6
In a lengthy and well-reasoned decision, the Schenectady County
Surrogate's Court analyzed the 2006 transaction between the parties and concluded
that a combination of the deed, the contemporaneous Will and the testimony of
attorney Frank Parisi as a disinterested witness established that that there was a
valid agreement between the parties (R. 13). The court further found that there
was consideration for the agreement consisting of the performance by the
Respondents which was characterized by the court as "undisputed" by the estate
(R. 15). The court then applied the doctrine of promissory estoppel identifying the
reasonable reliance of Respondents on the express and unequivocal promise of
their grandfather to convey the Jackson Avenue property to them free and clear of
the mortgage to be paid upon his death (R. 17). The court concluded that upon the
facts before it, which were uncontested by the estate's response to the summary
judgment motion, it would be unconscionable for the Respondents to have to pay
off a sizable mortgage that they never agreed to assume and granted summary
judgment in favor of Respondents (R. 18).
The estate pursued an appeal to the Supreme Court Appellate Division,
Third Judicial Department. The majority of that court following the analysis of the
Surrogate's Court Decision/Order and affirmed on the theory of promissory
estoppel. The Third Department majority concluded that Respondents were
entitled to the "very consideration they bargained for" with their grandfather by
7
managing and maintaining the apartment building during his lifetime on the
understanding that the mortgage would be satisfied by his estate (R. 455). The two
dissenting judges differed from the majority solely on the issue of whether the
benefit that Respondents received in the equity in the apartment building subject to
the mortgage was so egregious and unjust to reach the level of unconscionability.
As is addressed below, the imposition ofliability for the mortgage goes
against the articulated intent of the parties. The prejudice to Respondents is not
simply the reduction of the value of the real property by the mortgage, but the fact
that if Respondents are obligated to undertake responsibility for the mortgage, the
gifts paid by the decedent are nullified and Respondents are paying not only for
their own gifts, but also are paying for the gifts bestowed upon the other four
family members by decedent using the mortgage proceeds. Against the
uncontested facts which have been reviewed by two prior courts, their conclusion
that the Appellant should not be able to rely upon the statute of frauds to unjustly
enrich the estate should be affirmed by this Court.
8
POINT I
THE ELEMENTS OF PROMISSORY ESTOPPEL
WERE ESTABLISHED BY UNCONTROVERTED EVIDENCE
AND IT WOULD BE UNCONSCIONABLE TO ALLOW
THE ESTATE TO NULLIFY THE AGREEMENT
WITH A STATUTE OF FRAUDS DEFENSE.
This appeal comes before the Court from a decision and order granting
Respondents summary judgment on their claim against the Estate of Edmund Felix
Hennel for enforcement of an agreement to convey title to a four unit apartment
building free and clear of a mortgage used by the decedent to fund gifts to family
members. As Appellant did not raise any factual issues in its response to the
summary judgment motion in the Surrogate's Court, all of the facts asserted in
support of the summary judgment motion were undisputed and should be accepted
as true and accurate upon appeal. The appeal to this Court follows a three-judge
majority affirmance in the Appellate Division, Third Department in which both the
majority and the dissenters concurred regarding the facts of the case. Any effort by
Respondent's to now revisit, recast, re-characterize or supplement the facts should
not be permitted.
As is detailed in the statement of facts above, it is uncontroverted that
Respondents and the decedent reached a clear and complete agreement that
decedent would transfer the real estate to Respondents while retaining a life estate
and in return, Respondents undertake all of the duties, responsibilities and assume
9
all of the financial risks and burdens as owners of rental property on the condition
that a mortgage of approximately $100,000.00 used by decedent to fund gifts to
family members, a purpose wholly unrelated to the real property. It is also
uncontested that Respondents performed their end of the bargain, but that without
notice to Respondents, either before or after the fact, decedent changed his will two
years later by failing to include the provision which provided for his estate to pay
off the mortgage. The decedent continued to accept Respondent's performance for
two more years thereafter until his death. On appeal, his estate seeks to evade the
obligation to live up to the agreement based on a statute of frauds defense to
Respondent's claim of promissory estoppel.
A. Respondents established the elements of promissory estoppel and
demonstrated that a statute of frauds defense would result in egregious
unconscionability.
The doctrine of promissory estoppel requires "( 1) a clear and unambiguous
promise, (2) reasonable and foreseeable reliance by the party to whom the promise
is made, and (3) an injury sustained in reliance on the promise." (Rogers v. Town
of Islip, 230 AD2d 727, [2nd Dept. 1996]). While promissory estoppel is generally
not a bar to a statute of frauds defense (Cohen v. Brown, Harris, Stevens, 64 NY2d
728, 730 [1984]), under circumstances, such as those presented here, it will be
applied to enforce an oral agreement where there is proof that it would be
unconscionable to invoke the statute of frauds to bar such a claim. (Fleet Bank v.
10
Pine Knoll Corp., 290 AD2d 792, 797 [3rd Dept. 2002]). This case falls within the
circumstances that permit promissory estoppel to act as a bar to the statute of
frauds.
In R. Freedman & Son Inc. v. A.I. Credit Corp., 226 AD2d 1002, 1003 [3rd
Dept. 1996], the Appellate Division Third Department stated that in order to
prevail on a promissory estoppel claim, "the party advancing it must demonstrate
that the opposing party made a clear and unambiguous promise, upon which the
former reasonably relied, to its detriment." The Supreme Court in Queens County
provided that "promissory estoppel is not available as an exception to the statute of
frauds unless the acts taken in detrimental reliance are unequivocally referable to
the ... oral agreement." (Educational Center for New Americans, Inc. v. 66th Ave.
Realty Co., 40 Misc. 3d 1222(A) [Queens County July 23, 2013]). Both of these
prerequisites are present in this case. The promise by the decedent was clear an
unambiguous and there is no question but that Respondents reasonably relied upon
the promise based upon the decedent's initial performance of his obligations by
executing both the 2006 Will and the deed. Their continued reliance was
reasonable in view of the lack of any communication from the decedent that he had
prepared a new Will with an attorney other than Mr. Parisi who had implemented
the agreement with the earlier Will. There is similarly no question but that
Respondents' reliance was detrimental in that they fully performed their
11
obligations but received significantly less than the full amount of consideration as,
in the absence of judicial relief, they became liable for an unpaid mortgage which,
at the time of the summary judgment motion had a principal balance due or
$82,194.57 and on which Respondents had paid $13,238.34 in mortgage payments
following the death of their grandfather.
In the present case, the Appellate Division majority determined that
Respondents' receipt of the property encumbered with a mortgage contrary to the
express terms of the agreement between Respondents and their grandfather, the
elements of promissory estoppel were nonetheless established. (R. 454-55).
Contrary to Appellant's assertions, the Appellate Division found as a matter of fact
that Respondents relied upon the agreement and promise by decedent that the
mortgage encumbering the property would be satisfied using estate proceeds upon
decedent's death. (R. 455).
A court will bar the statute of frauds defense "where unconscionable injury
results from the reliance placed on the alleged promise." (Castellotti v. Free, 138
AD3d 198, 204 [1st Dept. 2016] citing Fleet Bank, supra at 796-97; Melwani v.
Jalin, 281 AD2d 276, 277 [1st Dept. 2001]; Steele v. Delverde S.R.L., 242 AD2d
414, 415 [1st Dept. 1997]; WE Transp. v. Suffolk Transp. Serv., 192 AD2d 601,
602 [2nd Dept. 1983]; Buddman Distrib. v. Labatt Importers, 91 AD2d 838 [4th
Dept. 1982]).
12
B. Evidence Provided by Respondents is Consistent with the Restatement of
Contracts in that Injustice May Only Be Avoided by Enforcing the Promise
Made by Decedent.
The Appellate Division Second Department utilized the Restatement of
Contracts Second to discuss the ways in which promissory estoppel bars the
assertion of the statute of frauds. Comment (a) provides in relevant part "(1) A
promise which the promisor should reasonably expect to induce action or
forbearance on the part of the promisee or a third person which does induce the
action or forbearance is enforceable notwithstanding the Statute of Frauds if
injustice can be avoided only by enforcement of the promise." (Swerdloffv. Mobil
Oil Corp., 74 AD2d 258, 261-62 [2nd Dept. 1980]). The Court in Swerldoff
references the list of circumstances provided for in the Restatement to determine
whether injustice may only be avoided by enforcing the promise:
(a) The availability and adequacy of other remedies,
particularly cancellation and restitution;
(b) The definite and substantial character of the action or
forbearance in relation to the remedy sought;
(c) The extent to which the action or forbearance
corroborates evidence of the making and terms of the
promise, or the making and terms are otherwise
established by clear and convincing evidence;
(d) The reasonableness of the action or forbearance;
(e) The extent to which the action or forbearance was
foreseeable by the promisor.
13
Id. at 262.
The listed factors are all present here.
(a) The availability and adequacy of other remedies,
particularly cancellation and restitution;
Here, cancellation is not an available remedy as
Respondents have already performed their obligations.
The only adequate remedy is specific performance so that
the Respondents can benefit from the continue ownership
of real property which is a unique asset.
(b) The definite and substantial character of the action or
forbearance in relation to the remedy sought;
The performance by Respondents has been substantial in
terms of work and risk and definite in terms of
compliance with the agreement.
(c) The extent to which the action or forbearance
corroborates evidence o_f the making and terms of the
promise, or the making and terms are otherwise
established by clear and convincing evidence;
The terms of the promise were established by
uncontested evidence from not only the Respondents but
a disinterested third party attorney. The fact of the
promise and its terms were never contested by Appellant.
(d) The reasonableness of the action or forbearance;
It was reasonable for Respondents to perform their side
of the bargain as to their knowledge, the decedent fully
intended to perform his obligations.
(e) The extent to which the action or forbearance was
foreseeable by the promisor.
The decedent, by virtue of his continued residence in the
14
apartment building and his receipt of financials could not
only foresee that Respondents would perform their side
of the bargain, but had actual knowledge that they were
doing so.
Finally, the Court cites to the Restatement stating that reliance upon the promise
"must be foreseeable by the promisor, and enforcement must be necessary to avoid
injustice." I d. "All authorities ... require that 'the circumstances (be) such as to
render it unconscionable to deny the oral promise upon which the promise had
relied." I d. at 263.
C. Contrary to Appellant's Position, the Courts Have Interpreted the
Correct Promise Entered Into And Relied Upon By Respondents.
Appellant erroneously claims that the Respondents rely solely upon the Will
executed in 2006 which stated that any remaining mortgage shall be paid for by
decedent's estate. (Appellant's Briefp. 18; R. 96). In fact, Respondents rely on
the promise made that they would receive the consideration bargained for during
the summer of 2006 when decedent agreed to convey the property to Respondents
free and clear of the mortgage-the sole condition under which Respondents
agreed to assume responsibility for the property. The 2006 Will accompanied by
the deed are simply evidence confirming the intentions of the parties, which were
notably not contested by the estate in its response to the summary judgment
motion.
The Court further agreed with Respondents that it would be unconscionable
15
to permit Appellant to invoke the statute of frauds in order to bar the claim. (R.
455). The Appellate Division correctly found Appellant's assertion that
Respondents are not entitled to that same consideration is "so strong and manifest
an inequality as to shock the conscience and confound the judgment of any
[person] of common sense." (R. 455 citing Mandel v. Liebman, 303 NY88, 94
[1951]).
While Respondents received property from decedent valued at $235,000, in
exchange for the promise that it would be free and clear of the mortgage, they
performed, as agreed with decedent, the responsibilities of management of the
building, maintaining the leases, arranging and paying for repairs, managing cash
flow, dealing with tenant defaults and evictions, payment of taxes, and assumption
of liabilities for tenant claims (R. 78). Respondents paid the mortgage from the
rental proceeds with decedent taking the interest deduction on his tax returns (R.
81 ). The outcome sought by Appellant is even more unjust because the decedent
continued to accept performance of the agreement by Respondents after he
executed the new Will two years prior to his death. Had Respondents been made
aware of the change, they could have brought an action seeking enforcement, or
revoked their promise to decedent. However, decedent was aware that
Respondents continued to maintain his property and residents, relying on the
promise and consideration made in 2006 to pay the mortgage with the assets of his
16
estate. The Third Department stated the Respondents continued to perform the
work agreed upon in 2006, and enforcing the promise made by decedent is the only
way prevent an unconscionable result. (R. 455).
The refusal of the estate to perform decedent's end of the bargain is
particularly egregious, not only because of the breach of the agreement, but
because this outcome would result in Respondents funding gifts made by decedent
to them and to other family members from the mortgage proceeds, thereby vitiating
the donative intent of the decedent after the fact.
Against these facts, this case meets the definition of unconscionability as
"no man in his senses and not under a delusion would make on the one hand, and
as no honest or fair man would accept, on the other." (Mandel v. Liebman, 303 NY
88,94 [1951]). No one would enter into an agreement expecting to receive the
property free and clear of any encumbrance in exchange for the burdens of
ownership and management only to find that the grantor has not only encumbered
the property upon his death, but left the grantees with the obligation to pay off
grantor's gifts to grantee's former business partners who have left the business due
to conflicts and have been bought out by grantees. The dissenting opinion of the
Third Department is primarily concerned with the value of the property
notwithstanding the mortgage by which it is encumbered. (R. 458). The dissent
states that the equitable value of the property is about $150,000 after the $92,000
17
mortgage and, it reasons, that this is still a "significant benefit in exchange" for
their services. (R. 456). The Appellate Division discussed further that
Respondents are not so burdened by management of the premises so as to neglect
their other responsibilities, or that the mortgage on the property transforms it into a
losing business. (R. 456). The uncontroverted proof established that the property
was a break-even business with income from the property applied to the mortgage
and interest deducted by the decedent on his taxes.
The question before this Court was not whether the encumbered property has
some value and whether Respondents benefited to some degree from the
conveyance. The issue is whether a bargained for consideration and promise
should be satisfied where one party continues to uphold its end of the bargain and
the other party has defaulted. It would be wholly unconscionable to permit a
revocation of decedent's promise after his death.
This Court should affirm the rulings of the Surrogate's Court and the
Appellate Division Third Department in that a statute of frauds defense would
"wreak an unconscionable result" by not honoring the promise made by decedent.
(R. 455).
18
POINT II
APPELLANT ERRONEOUSLY CONTENDS THAT
THE AMBULATORY NATURE OF WILLS
PRECLUDES RESPONDENTS FROM
ASSERTING PROMISSORY ESTOPPEL IN THE
ABSENCE OF AN AGREEMENT NOT TO
ALTER THE 2006 WILL.
Appellant contends that the Surrogate's Court and the majority in the
Appellate Division, Third Department both erred in their analysis by focusing on
the agreement between the parties that the decedent would transfer the apartment
building to his two grandsons free and clear of any mortgage by having his estate
pay off the mortgage in exchange for his retention of a life estate and Respondents
promise to take over all of the responsibilities of ownership and management of the
property. That, of course is the exact agreement which was made by the parties
and found to have been established as a matter of fact by both of the prior courts.
Instead, Appellant seeks to change the issue from whether that agreement is
enforceable as against a statute of frauds defense to asserting a new claim that the
absence of an express promise not to alter the 2006 Will is an absolute bar to
enforcement of the agreement between the parties.
However, it is erroneous to view the arrangement between the parties in this
manner. The promise was for each side to fulfill the bargained for exchange to
which they agreed in the summer of2006. Decedent's alteration of the Will does
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not relieve him of the duty to satisfy the mortgage on the property and
simultaneously expect Respondents to continue caring for his property. The
degree of benefit to which the parties agreed is not what they ultimately received
upon decedent's passing. Similar to the factual analysis in Lobdell v. Lobdell, (36
NY 327 [1867]) since the promise to convey land was made upon a valuable
consideration, namely "if you bestow certain work and labor on this piece of land,
I will convey it to you" the consideration is sufficient. The Court of Appeals has
further stated that "an unconscionable arrangement will not be disturbed where
there has been a ratification of it, with knowledge of all its bearings, after time has
been had for consideration." (Kent v. Quicksilver Min. Co., 78 NY 159 [1879]).
The Third Department disposed of this issue raised by Appellants in that
court in the majority decision the same analysis of promissory estoppel applied to
the 2006 agreement. As held by the Third Department, if viewed from the
standpoint of the ambulatory nature of wills, the statute of frauds controls unless
the elements of promissory estoppel are established citing Matter of Thoens, 88
Mise 2d 1006, 1008-1009 [1975] affd 51 AD2d 691 [1976] affd 41 NY2d 823
[1977]; and Fleet Bank v Pine Knoll Corp., 290 AD2d 792,795 [2002]. In sum, the
attempted redirection of the question still results in the same answer: whereas
here, there is a clear and unambiguous agreement, reasonable and foreseeable
reliance, and injury as a result, promissory estoppel applies with the added burden
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to show unconscionability where there is no written agreement as otherwise
required by the statute of frauds.
CONCLUSION
It is undisputed that Respondents and decedent had made a bargained for
agreement in which decedent promised to convey Jackson Avenue to Respondents
free and clear of a mortgage in exchange for their care and maintenance of the
property during decedent's life. This promise was further implemented in
decedent's Will, stating that any remaining mortgage was to be paid for using
assets from decedent's estate. The Will was drafted contemporaneously to the time
the deed was signed over to Respondents in September 2006. In October 2008,
decedent executed a second Will which was entirely devoid of any mention of
Jackson A venue or the promise to pay the mortgage, however decedent assured
Respondents that he intended to uphold his end of the bargain.
The Surrogate's Court and Appellate Division, Third Department agreed that
the elements of promissory estoppel were established and that it would be
unconscionable to permit appellant to invoke the statute of frauds as a defense to
promissory estoppel in an attempt to relieve herself from the obligation of fulfilling
decedent's promise. Given the Respondents' reliance on decedent's promise and
their continued maintenance of Jackson Avenue, the Appellate Division stated that
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the only way to avoid injustice and unconscionability is for Respondents to receive
the consideration they bargained for.
The Third Department's dissent primarily claims that notwithstanding the
encumbering mortgage, Respondents received a substantial benefit in exchange for
their promise and were not so burdened by receiving the property as to forego
other opportunities and responsibilities. The benefit received by Respondents is
significantly lower than that for which they bargained and were promised by
decedent. Appellant's refusal to honor decedent's promise would be particularly
egregious as it would require Respondents to fund a $100,000 gift to decedent's
family members.
Based on the foregoing, Respondents respectfully request that this Court
affirm the findings of the Appellate Division and Surrogate's Court and enforce the
promise that was agreed upon between Respondents and decedent.
Dated: August 10, 2016
MARTIN, SHUDT, WALLACE,
DiLORENZO & JOHNSON
Robert L. Adams, Esq. of Counsel
Veronika Grochowalski, Esq. of Counsel
Attorneys for Respondents
Office and P.O. Address:
258 Hoosick Street I Suite 201
Troy, New York 12180
TEL.: (518) 272-6565
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