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McGrath v. Hilding

Court of Appeals of the State of New York
Apr 7, 1977
41 N.Y.2d 625 (N.Y. 1977)


holding that a theory of unjust enrichment based upon a woman's expenditure of funds to remodel her ex-husband's home requires an analysis of the extent to which the enrichment was unjust under all of the circumstances, including the woman's conduct

Summary of this case from Fisse v. Garvie


Argued February 18, 1977

Decided April 7, 1977

Appeal from the Appellate Division of the Supreme Court in the Second Judicial Department, L. KINGSLEY SMITH, J.

Charles M. Schutzman, Wantagh, for appellant.

Herbert Sachs, Bellmore, for respondent.

Plaintiff Doreen McGrath, a wife of three months of defendant Hilding, having divorced him, and then evidently having remarried her former husband McGrath, sought equitable relief against Hilding based on a constructive trust. Relying on an oral premarital promise by Hilding to give her a tenancy by the entirety in the home owned by him, she contributed money to construct an extension with two additional bedrooms to accommodate her children by the former marriage. In lieu of the half interest in the property, if that were not available, she sought equitable relief either for half the value of the home or, at least, for the money she advanced.

Supreme Court, after trial, held that Hilding had been unjustly enriched, and granted plaintiff judgment for $3,950, the money the court found that she had advanced. From a divided affirmance at the Appellate Division, Hilding appeals.

The issue is whether a court of equity, called upon to remedy enrichment allegedly gained unjustly from abuse of a confidential relationship, may grant relief without regard to or examination of the conduct of plaintiff affecting the transaction from which the alleged unjust enrichment arose.

There should be a reversal and a new trial. The powers of a court of equity are not so circumscribed that the inequitable conduct of one who invokes its relief may escape its scrutiny and evaluation. From the unduly restricted and sparse record made at trial it is unclear whether Hilding was indeed unjustly enriched. Plaintiff's proof, accepted by the trial court and affirmed by the Appellate Division, does show that Hilding failed to convey, as he had orally promised, half his interest in his home in exchange for his new wife's contribution. But those facts do not conclude the matter. Repeatedly rejecting, as collateral, proof that plaintiff may have grievously breached the marital relationship, the trial court abrogated its responsibility to view the transaction realistically in its human setting, and, as a result, awarded equitable relief on too naked a record.

A widower with four children, Hilding met plaintiff in February, 1971. At the time, she was living apart from her then husband, McGrath, pursuant to a separation agreement. By summer, although plaintiff was not yet divorced from McGrath, she and Hilding became engaged. The new couple set a wedding date and discussed living arrangements. Hilding testified that, while he would have "preferred to wait until 1972", to accommodate plaintiff's desire to have the two families together by Christmas he suggested they move into his house. Plaintiff, however, was hesitant to occupy the bedroom her new husband had shared with his former wife and was also concerned about adequate sleeping arrangements for the two of her three children who were in her custody. It was finally decided that the couple would build an extension to Hilding's house.

In September, 1971, plaintiff and McGrath were divorced. In late October or early November, she received $8,900 of the proceeds from the sale of the McGrath home, jointly owned by the McGrath couple.

The addition to the Hilding home cost $7,900, half paid by plaintiff. It is an affirmed finding of fact, not reviewable by this court, that plaintiff's contribution was in reliance on Hilding's promise "to put her name" on the deed to his home. The contractor completed his work before November 27, the day the Hilding-McGrath couple were married.

After a one-week honeymoon, plaintiff and two of her children, as planned, came to live with defendant. The marriage was ill-fated. There is testimony that by early January the couple had already discussed divorce. Prompted by an argument at home some time around January 8, plaintiff met her ex-husband McGrath at a restaurant and went, with her children, to stay overnight in his apartment. She returned to Hilding the next morning. In short order Hilding found himself alone again when his wife went to Florida for a week. On February 6 plaintiff left Hilding for the last time, and the two obtained a quick divorce later that month in the Dominican Republic. Plaintiff, never having received a legal interest in Hilding's home, brought this action.

Obviously, the whole story leading to Hilding's failure to convey a half interest in his home to plaintiff has never been told and is therefore not reflected in the record. A number of times Hilding tried, without success, to introduce evidence of plaintiff's conduct. For example, Hilding was precluded from showing that plaintiff arranged to purchase a house with her former husband, McGrath. In fact, in the contract of sale, dated February 3, 1972, while married to and still living with Hilding, plaintiff was described as the wife of McGrath. So, too, when defendant's lawyer tried to discover what the Hilding-McGrath couple had discussed before plaintiff went alone to Florida, or whether plaintiff went back to live with McGrath after she left Hilding and before the Dominican divorce, the trial court stopped the inquiry as bearing only on a collateral matter. It is unfortunate but evident that the trial court was of the view that beyond the paltry facts surrounding the agreed-upon extension, the marital relationship of the parties was not relevant to whether plaintiff was entitled to equitable relief.

The applicable law is clear. The Statute of Frauds will ordinarily prevent enforcement of an oral agreement to convey an interest in land (General Obligations Law, § 5-703). A constructive trust will be impressed, however, when an unfulfilled promise to convey an interest in land induces another, in the context of a confidential or fiduciary relationship, to make a transfer resulting in unjust enrichment (Foreman v Foreman, 251 N.Y. 237, 240 [CARDOZO, Ch. J.]). As restated plainly by this court just recently, there must be "(1) a confidential or fiduciary relation, (2) a promise, (3) a transfer in reliance thereon and (4) unjust enrichment" (Sharp v Kosmalski, 40 N.Y.2d 119, 121; accord Vassel v Vassel, 40 A.D.2d 713, affd 33 N.Y.2d 533; Sinclair v Purdy, 235 N.Y. 245, 252-253).

The principles are not disputed by the parties. In fact, the trial court purportedly applied them. The problem lies instead in the apparent misunderstanding of the term "unjust enrichment".

A variety of circumstances may be posited in which, through an unfulfilled promise and abuse of a confidential relationship, one party induces another to make a transfer resulting in the first party's enrichment. But the law is adamant. Enrichment alone will not suffice to invoke the remedial powers of a court of equity. Critical is that under the circumstances and as between the two parties to the transaction the enrichment be unjust. (Restatement, Restitution, § 1, Comments a, c; see, generally, 5 Scott, Trusts [3d ed], § 462.2.) Hence, whether there is unjust enrichment may not be determined from a limited inquiry confined to an isolated transaction. It must be a realistic determination based on a broad view of the human setting involved (cf. Sinclair v Purdy, 235 N.Y. 245, 254, supra; Janke v Janke, 47 A.D.2d 445, 448, affd 39 N.Y.2d 786).

On the above analysis, the infirmity in a contrary approach is the narrow view taken of the events culminating in Hilding's failure to convey an undivided half interest in his home. With self-imposed restrictions, the trial court repeatedly excluded from consideration evidence bearing upon plaintiff's conduct in a relationship based supposedly on mutual trust and fidelity. And yet, without regard to plaintiff's conduct it cannot be determined whether Hilding's enrichment, if that it be, was in fact unjust.

There is an analogue in other branches of the law, especially in the field of contracts. A promisee may not recover for a broken promise unless he has performed his obligations, usually categorized as a condition precedent (see 5 Williston, Contracts [3d ed], § 676). Certainly, the promisee seeking to establish a constructive trust must show that he has not been guilty of an equivalent breach of the trust and fidelity upon which the constructive trust is to be based (see 20 N.Y. Jur, Equity, §§ 106-107).

Giving Hilding the benefit, as one must, of the inferences to be drawn from the excluded evidence, plaintiff herself may have breached the relationship, supposedly based on mutual trust and fidelity, upon which she relies. Illustrative is the offer of proof that plaintiff, while married to and, more important, still living with defendant, signed a contract to purchase a house with her former husband and was described in that contract as the wife of McGrath.

Involved here is more than a technical question of evidence. In excluding proof of plaintiff's possibly grievous fault in the reciprocal relation between husband and wife, the trial court lapsed. In the hectic abbreviated period of this so-called marriage, punctuated perhaps with grievous breaches of the relationship by the wife, none would, let alone a court of equity, expect the hapless husband to deed half his home to the wife.

In the discussion, thus far, it has been assumed that Hilding was indeed enriched. Actually, the home he had, so far as is known from this record, may have been ample for his purposes, if the McGrath family were not added. A larger house is not necessarily better than a small house. A man who needs and wants a compact car is not enriched by a limousine, especially if its saleability may be more difficult. Actually, Hilding has since sold the enlarged house, but there is no evidence, except for plaintiff's inexpert opinion, that it was worth more than before it had been altered, or that any increase in economic value was reflected in the sale price. Nor was there evidence that the physical addition increased the esthetic value or livability of the house. To the contrary, the addition may have increased the burdens of maintaining and furnishing it. There is evidence that Hilding was put to additional expense for carpeting, for which he had to borrow the money, as he had had to borrow money to provide his share of the extension.

On the other hand, one should not conclude that one who parts with valuable assets, like the wife, is necessarily debarred from equitable relief just because she may have been guilty of misconduct, even grievous misconduct. There may be cases where the "enrichment" may be so disproportionately great in favor of the offended spouse that it would be equally disproportionate to permit the offended spouse to retain the assets or benefits received, as for example, the bulk of the assets previously owned by the offender transferred for some reason to the spouse offended.

The point is that no intelligent determination can be made unless all of the relevant facts are explored, including the excuses and justifications rooted in the reciprocal relation of trust and fidelity. Then, upon such exploration, a nice balancing is required. None of that happened or was permitted to happen in this case. Instead a simplistic analysis based on the superficial application of equitable principles was employed. And, of course, the issue is not, as some might mistakenly assume, whose fault caused the marriage to terminate, but whose fault it was that the oral promise was not performed.

If Hilding is to be believed and his proffers of proof credited to the full, Hilding was not only bedeviled by an ill-fated marriage, but perhaps by the venal co-operation of wife and former husband, presumably remarried. Before he may be held in judgment a new trial should be had exploring the issues.

Accordingly, the order of the Appellate Division should be reversed and a new trial granted, with costs to abide the event.

There should be an affirmance.

We are once again presented with the question of the availability of the remedy of constructive trust in an action for, and based upon, unjust enrichment.

The facts may be briefly stated and are not in serious dispute. Defendant was a widower who lived with his four children in a house which he owned. Plaintiff was a divorcee with three children. The parties met in 1971 and in the summer of that year, became engaged. In connection with their plan for marriage, they discussed living arrangements for their respective families following marriage and it was decided that an extension would be constructed on defendant's house to provide additional space to accommodate both families. A contractor was engaged in October, 1971 and the work was completed in November of that year.

The cost of adding the extension was $7,900 and from her own funds plaintiff contributed $3,950, or one half of this sum, which, incidentially, was paid directly to the contractor. Both the Trial Judge and the Appellate Division found there was an oral agreement between the parties that defendant would convey a joint interest in the property to the plaintiff in return for her contribution for the enlargement of the house. The parties were married on November 27, 1971 but serious marital problems arose shortly thereafter. On two occasions in the following January, the parties temporarily separated and plaintiff left the marital residence. Ultimately, the parties permanently ceased living together and on February 17, 1972 were divorced. The house in which the parties resided, formal title to which had remained in defendant, was eventually sold by him.

Plaintiff commenced this action alleging, inter alia, that the defendant had been unjustly enriched because he received the benefit of plaintiff's contribution toward the improvement of the property without making her a co-owner of the property as he had promised. She thus sought to impose a constructive trust on the proceeds of the sale of the house, claiming that defendant's equity was increased by the improvements, and was granted a judgment, following a nonjury trial, of $3,950 representing the funds she expended for the improvements in what had been the parties' marital residence. The Appellate Division affirmed.

Recently, in Sharp v Kosmalski ( 40 N.Y.2d 119, 121), we articulated the rules governing the applicability of the equitable remedy of constructive trust, and we held that there must be (1) a confidential relationship; (2) a promise; (3) a transfer in reliance thereon, and (4) unjust enrichment. The Trial Judge found that "there existed between plaintiff and defendant at the times the oral understanding was reached a relation of trust and confidence by reason of their status of an engaged couple formulating plans for adequate housing for themselves and their children". This finding was affirmed by the Appellate Division and thus we conclude that the first requirement has been satisfied (see Sharp v Kosmalski, supra, p 121). In addition, there are also affirmed findings of fact that plaintiff tendered funds for the improvements to defendant's property in reliance on a promise that she would receive a joint interest therein. The parties' marital problems prevented fulfillment of that promise but defendant, however, retained the benefit of plaintiff's performance in reliance thereon. Under these circumstances, we agree with the conclusion of the courts below that the defendant was unjustly enriched for he "has received a benefit * * * the retention [of which] would be unjust" (Restatement, Restitution, § 1, Comment a; Sharp v Kosmalski, supra, p 123; see, also, 50 N.Y. Jur, Restitution, § 3).

Defendant contends that plaintiff is not entitled to equitable relief because she abused the parties' relationship and was the party at fault in the failure of the marriage. He thus argues that the Trial Judge erred in refusing to admit into evidence a contract for the purchase of a home entered into by plaintiff and her former husband on February 3, 1972 and a deed to the premises, dated February 14, 1972, designating plaintiff and her former husband as husband and wife. We agree with the Trial Judge that this proof was collateral. That transaction occurred when the parties' marital relationship was beyond salvage. The record reveals that plaintiff and defendant discussed the likelihood of divorce in early January, 1972. It cannot be concluded from the evidence sought to be admitted that plaintiff was the party responsible for the termination of the marriage, or that she did not act in good faith or was guilty of inequitable conduct toward the defendant (see, generally, 20 N.Y. Jur, Equity, §§ 103-104, 107). Thus, the equitable maxim of "clean hands" may not be here invoked to bar plaintiff from obtaining relief in equity.

The determination here does not require or entail a moral judgment that one or the other party is at fault but merely that there has been an irreconcilable breakdown of the parties' relationship. The majority and dissenters are not at odds regarding the applicable legal principles, and the majority concede that misconduct on the part of the plaintiff, if such there be, does not foreclose recovery based on unjust enrichment. Nonetheless, the majority embark upon an analysis of the facts, replete with conjecture as to the "possible grievous" misconduct of the plaintiff, and casting defendant in the role of the abandoned or injured spouse at a point when the parties' relationship, for whatever reason, had proceeded beyond the point of reconciliation. As the philosopher Pascal wrote, "love has its reasons which reason cannot know". It is not our task, as the majority recognize, to evaluate and weigh the reasons why the parties' marriage failed. Rather, I only conclude that it would result in unjust enrichment to permit the defendant to retain the sums advanced by the plaintiff for improvements to the defendant's property on the unfulfilled understanding that the parties and their children would reside there together and that plaintiff would receive a joint interest in the property.

The majority intimate that there should be evidence that the defendant's house actually increased in value in order for plaintiff to recover. However, it is important to note that the courts below awarded plaintiff only the sum she advanced for the cost of the addition on the house, a sum of money which no one can deny clearly enriched the defendant. It is axiomatic that "[i]n an action in restitution in which the benefit received was money, the measure of recovery for this benefit is the amount of money received" (Restatement, Restitution, § 150, Comment a). Thus, it is irrelevant whether defendant's house increased, or for that matter decreased, in value following the addition.

Judges JASEN, JONES, WACHTLER and COOKE concur with Chief Judge BREITEL; Judge GABRIELLI dissents and votes to affirm in a separate opinion in which Judge FUCHSBERG concurs.

Order reversed, etc.

Summaries of

McGrath v. Hilding

Court of Appeals of the State of New York
Apr 7, 1977
41 N.Y.2d 625 (N.Y. 1977)

holding that a theory of unjust enrichment based upon a woman's expenditure of funds to remodel her ex-husband's home requires an analysis of the extent to which the enrichment was unjust under all of the circumstances, including the woman's conduct

Summary of this case from Fisse v. Garvie

In McGrath v. Hilding (41 N.Y.2d 625, 629), the court stated: "Enrichment alone will not suffice to invoke the remedial powers of a court of equity.

Summary of this case from Fallica v. Town of Brookhaven

In McGrath v. Hilding, 41 NY2d 625 (1977), an oral pre-marital promise to create a tenancy by the entirety was followed by a subsequent contribution of funds to construct a two-bedroom addition to the home.

Summary of this case from Bolender v. Ronin Prop. Partners, LLC

In McGrath v. Hilding, 41 N.Y.2d 625, 394 N.Y.S.2d 603, 363 N.E.2d 328 (1977), an oral pre-marital promise to create a tenancy by the entirety was followed by a subsequent contribution of funds to construct a two-bedroom addition to the home.

Summary of this case from Bolender v. Ronin Prop. Partners, LLC
Case details for

McGrath v. Hilding

Case Details

Full title:DOREEN McGRATH, Respondent, v. ROY F. HILDING, Appellant

Court:Court of Appeals of the State of New York

Date published: Apr 7, 1977


41 N.Y.2d 625 (N.Y. 1977)
394 N.Y.S.2d 603
363 N.E.2d 328

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