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Moscato v. C.B.P.B. Associates

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


August 7, 2007

KATHERINE MOSCATO, PLAINTIFF-RESPONDENT,
v.
C.B.P.B. ASSOCIATES, LLC, A NEW JERSEY LIMITED LIABILITY COMPANY, FRANCES MOSCATO AND THE ESTATE OF FRANK MOSCATO, DEFENDANTS-APPELLANTS.

On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Essex County, Docket No. C-60-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 15, 2007

Before Judges Weissbard, Payne and Lihotz.

Defendants appeal from a final judgment entered by the Chancery Division imposing a constructive trust in favor of plaintiff, Katherine Moscato (Katherine), on realty located at 6285 Sand Hill Circle, Lake Worth, Florida, titled to her daughter-in-law, defendant Frances Moscato (Frances). We are required to recite a detailed statement of the facts surrounding not only the parties' familial relationship, but also their financial interactions, as taken from the trial record.

Katherine and her late husband, Leonard, had four children: Camille, Phillip, Frank, and Maryann. Leonard owned a variety of family businesses, including a hardware store, a lakeside recreation area and restaurant, a demolition business, a trash collection business, and a gas station. Leonard and his sons worked in these family enterprises. Leonard pooled the income from the family businesses and used the money to pay his own living expenses, along with those of his wife and his adult children, including payments for their cars and homes. In some instances, the primary cars and homes of the family members were actually titled to the family businesses, rather than to the individuals who used them.

In 1961, Leonard contracted to purchase a home at 86 Hazelwood Avenue, Bloomfield, New Jersey (New Jersey property) for $26,000. Because Leonard was in poor health, he titled the New Jersey property to Frank. After its purchase, Leonard, Katherine, and Maryann resided in the New Jersey property.

Frank, who was married to his first wife, Dorothy Lee, never lived in the home. Each month, Leonard gave Frank money from the family businesses to pay the mortgage and other expenses of the New Jersey property.

In 1971, Leonard died. Using income from the family businesses, which he was now running, Frank paid the mortgage and taxes, and transferred money to Katherine to pay the utility and other bills associated with the New Jersey property. By 1981, the mortgage on the New Jersey property was paid-off. Katherine and Maryann continued to live in the New Jersey property until 2000.

In 1985, Frank divorced Dorothy Lee and a year later, married Frances. While Frances initially stated Frank gave the New Jersey property to her "because he loved [her]," she later acknowledged that the realty was transferred to her in 1991, for one dollar because of Frank's poor health, his pending surgery, and his likely incarceration. Neither Katherine nor Maryann, who still resided in the home, were aware that the title to the realty had been transferred by Frank to Frances.

Frank and Frances moved to Florida. Frank suggested to his mother that she too, should move south. He instructed her to arrange for the sale of the New Jersey property with the expectation that the proceeds from the New Jersey property would be used to buy Katherine a new home in Florida.

In May, 2000, Urbano C. Dickel contracted with Frances to purchase the New Jersey property for $255,000. While trying to effectuate the sale of the realty, Katherine and Maryann learned that Frances was listed as the owner of record. Maryann testified that Frank told her this was done to accommodate the fact that he had been in legal and medical trouble. Frank assured Maryann that Frances knew the house belonged to Katherine. At closing, a title search revealed a lien against Frank arising from an obligation of one of the businesses, and prevented the transfer; consequently, Dickel and Frances entered into a "lease purchase agreement," under which his rent payments were credited toward his purchase of the house at the time of the lien's expiration in 2008.

Frances later transferred her interest in the New Jersey property, in exchange for one dollar, to C.B.P.B. Associates, L.L.C. (C.B.P.B), which is owned by Frances and her two children.

Katherine and Maryann moved to Florida and oversaw the construction of a new home in Lake Worth, Florida (Florida property). Upon the home's completion, on September 26, 2001, Frank and Frances took title to the Florida property. Following the same pattern as was done with the New Jersey property, neither Frank nor Frances lived in the Florida property, yet Frank paid the home's expenses. Katherine, then in her late nineties, was in ill health, as she was legally blind and suffering from dementia resulting from Alzheimer's disease. Katherine lived in the Florida property and was cared for by Maryann, who also managed the home.

Frank died in 2002. Title to the Florida property passed to Frances. During the first two years after Frank's death, Frances continued to follow the same financial arrangement Frank had practiced with Katherine. Frances testified that the Florida property was bought for "investment purposes," but admitted that she "knew that Katherine would live there" throughout her life. In September 2004, Frances advised Maryann and that she would no longer provide Katherine with financial support or unrestricted use of the Florida property. Frances told Maryann that she and Katherine would need to assume responsibility to pay the expenses of the Florida property or vacate the home so it could be sold.

On February 7, 2005, Katherine, by her attorney in fact, Maryann, filed a complaint against C.B.P.B., Frances, and the Estate of Frank Moscato, asserting claims for breach of contract, fraudulent conveyance, and fraud. Defendants filed an answer and counterclaim on May 4, 2005.

At the conclusion of the two-day bench trial, the trial judge rendered an oral decision on April 13, 2006, determining that Frank had held the New Jersey property in trust for his parents, who were the true beneficial owners of the realty, and that the Florida property replaced the New Jersey property in this trust arrangement. The court imposed a constructive trust on the Florida property and ordered its conveyance to Katherine within thirty days. C.B.P.B. retained its interest in the New Jersey property.

Defendants present the following arguments for our consideration on appeal:

POINT I

PLAINTIFF FAILED TO ESTABLISH BY CLEAR AND CONVINCING PROOF THAT SHE HAS AN ENFORCEABLE INTEREST IN THE NEW JERSEY PROPERTY.

POINT II

THE TRIAL COURT ERRED IN IMPOSING A CONSTRUTIVE TRUST ON THE FLORIDA PROPERTY AND REQURING ITS TRANSFER TO PLAINTIFF.

A. The Trial Court Did Not Find by Clear and Convincing Evidence That Frank Moscato Committed a Wrongful Act That Unjustly Enriched Defendant Moscato At Plaintiff's Expense.

B. The Trial Court Erred in Imposing Any Trust On the Florida Property.

C. Defendant Moscato Has Not Been Unjustly Enriched By Ownership of the Florida Property.

POINT III

THE TRIAL COURT ERRED IN ADMITTING FRANK MOSCATO'S STATEMENTS IN THE DIVORCE PROCEEDINGS.

POINT IV

PLAINTIFF'S ACTION WAS BARRED BY THE STATUTE OF LIMITATIONS AND BY LACHES.

The scope of appellate review of a trial court's factfinding function is limited. The general rule is that findings by the trial court are binding on appeal when supported by "adequate, substantial, credible evidence." Cesare v. Cesare, 154 N.J. 394, 411-12 (1998). Where a judge articulates sufficient reasons justifying those determinations, they should not be disturbed on appeal by our court engaging in an independent review. State v. Locurto, 157 N.J. 463, 471-73 (1999). Credibility is always for the factfinder to determine. Ferdinand v. Agric. Ins. Co. of Watertown, N.Y., 22 N.J. 482, 492 (1956). However, we do not give special deference to a "trial court's interpretation of the law and the legal consequences that flow from established facts." Manalapan Realty v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995).

Applying these principles in reviewing this matter, we affirm.

Defendants first argue that Katherine had not properly proven that she acquired an equitable interest in the New Jersey realty sufficient to overcome the Statute of Frauds (SOF).

N.J.S.A. 25:1-13; see Morton v. 4 Orchard Land Trust, 180 N.J. 118, 125 (2004). It is undisputed that no writing exists evidencing Katherine's equitable interest in the New Jersey realty. Katherine's assertion was that Frank held title to the realty for her benefit.

Defendants recognize that an oral agreement to hold an interest in real property for the benefit of another may be enforceable if proven by clear and convincing evidence.

N.J.S.A. 25:1-13b. That same standard of proof is recited in the "Dead Man's Statute," to establish a decedent's oral promise, statement or act. N.J.S.A. 2A:81-2. The function of each statute is to prevent "fraudulent practices which are commonly endeavored to be upheld by perjury and subornation of perjury." Carlsen v. Carlsen, 49 N.J. Super. 130, 134 (App. Div. 1958) (citations omitted). Defendants suggest, however, the trial judge's finding that there were "credibility problems" with all of the witnesses prevents the proofs from being clear and convincing. We disagree.

"Clear and convincing" evidence falls somewhere between the civil standard of a "preponderance of the evidence" and the criminal standard of "beyond a reasonable doubt." Aiello v. Knoll Golf Club, 64 N.J. Super. 156, 162 (App. Div. 1960). Evidence is clear and convincing when it produces in the mind of the trier of fact "a firm belief or conviction as to the truth of the allegations sought to be established." Matter of Purrazzella, 134 N.J. 228, 240 (1993) (quoting Aiello, supra, at 64 N.J. Super. 162). It must be "so clear, direct and weighty and convincing as to enable [the factfinder] to come to a clear conviction, without hesitancy, of the truth of the precise facts in issue." Matter of Seaman, 133 N.J. 67, 74 (1993) (quoting Aiello, supra, 64 N.J. Super. at 162). The clear and convincing standard does not imply absolute certainty or that the evidence is uncontested. See Matter of Jobes, 108 N.J. 394, 408 (1987). Evidence may be clear and convincing despite the fact that it has been contradicted. Ibid.

We discern that the record contains sufficient credible evidence clearly and convincingly demonstrating an agreed arrangement between Frank and Leonard that title to the New Jersey property was held by the son for the benefit of the parents. Specifically, Frank's affidavit and certified interrogatory answers, both filed in his divorce action, stated unequivocally that his father provided the down payment and monthly costs such that his parents were the true owners of the New Jersey property. The trial testimony of Phillip and Maryann reinforced these facts. Frances provided no facts to contradict this evidence. Additionally, Katherine's possession of the home, and Frank's continual payment of all expenses from the family businesses after his father's death, are consistent with the performance of the asserted oral agreement. See e.g., Cauco v. Galante, 6 N.J. 128, 137-38 (1951); Kufta v. Hughson, 46 N.J. Super. 222, 227-29 (Ch. Div. 1957). Finally, Katherine's actions of controlling the listing and negotiations for sale of the property with the intent to use the proceeds to buy a new property in Florida, further evince her equitable interest in the realty.

Frances's acquisition of the New Jersey property was not for value, but as a result of a gratuitous transfer to accommodate Frank's needs when he faced ill health and incarceration. Therefore, Frances's title to the property was no different than Frank's, which was subject to Katherine's equitable claims. See e.g., Bajek v. Polack, 120 N.J. Eq. 104, 108 (Ch. Div. 1936).

Regarding the trial court's decision to impress the Florida realty with a constructive trust, it is fundamental that a constructive trust should be impressed to "prevent an unjust enrichment and force a restitution of something that, in good conscience, [does] not belong to the defendant." Flanigan v. Munson, 175 N.J. 597, 608 (quoting Dan B. Dobbs, Remedies § 4.3, at 246 (1973)); see also D'Ippolito v. Castoro, 51 N.J. 584, 588 (1968). The rule is well settled that a subsequent legal titleholder to land, in order to prevail over a prior equitable titleholder, must not only have acquired the realty in good faith and without notice of the prior equity interest, but must also have obtained it for value. See Hirsch v. Travelers Ins. Co., 134 N.J. Super. 466, 470-71 (App. Div. 1975).

In Flanigan, the Court held that a two-prong test applies when determining whether a constructive trust is warranted in a particular matter. 175 N.J. at 608. First, a finding must be made that a party has committed "a wrongful act"; second, the wrongful act must unjustly enrich the recipient. Ibid.

We find no error in the trial court's determination to impose the constructive trust on the Florida property. Once it was established that Leonard and Katherine were the true beneficial owners of the New Jersey property, and that Frank held it in trust for them, it was reasonable for the trial court to conclude that Frank committed a wrongful act and violated that trust agreement when he conveyed title to Frances. Under such circumstances, Frances cannot defeat Katherine's equitable interest in the New Jersey home. See ibid.; see also Hirsch, supra, 134 N.J. Super. at 470-71. Because it was anticipated that the Florida property would replace the New Jersey property, Frances would be unjustly enriched were she able to retain title to both the New Jersey property and the Florida property.

Understanding that "[a] constructive trust is the formula through which the conscience of equity finds expression," Moses v. Moses, 140 N.J. Eq. 575, 581 (E. & A. 1947), it was not inappropriate to substitute Katherine's Florida home for her interest in the New Jersey property, now under Frances's control. See Hirsch, supra, 134 N.J. Super. at 470-71; Restatement (First) of Restitution, § 202, comment (f), (1937). The constructive trust imposed on the Florida property provides a proper equitable remedy to resolve Frank's wrongful transfer in violation of Katherine's equitable interest in the realty.

We next address the hearsay challenge advanced by defendants. Defendants had filed a motion in limine to exclude as hearsay two documents executed by Frank in his matrimonial case. In an affidavit, Frank asserted that, although titled to him, the New Jersey property was not a marital asset subject to equitable distribution, stating:

With respect to documentation concerning 86 Hazelwood Road, Bloomfield, New Jersey . . . although I appear on [the bond, mortgage and real estate closing documents], the real property was possessed by my parents, LEONARD and KATHERINE MOSCATO. Title to said property was placed in my name, but at no time did I reside at said property. In addition, the deposit with respect to said property was paid by my mother and father.

Payment of the bond and mortgage on said property, were likewise, made by my mother and father.

The trial court denied defendant's motion and admitted the documents under N.J.R.E. 803(b)(1), which allows the admission of a hearsay statement if it is "offered against a party . . . [and] is . . . the party's own statement, made either in an individual or in a representative capacity." Ibid. Thereafter, the trial court concluded that the documents were admissible against Frances because she was the representative of the Estate, the Estate's "sole beneficiary" and essentially, "standing in the shoes of [Frank]" for purposes of the litigation.

Defendants concede the documents were admissible against Frank's estate, but argue that the trial court abused its discretion in admitting these hearsay documents "against [Frances], the defendant against whom the constructive trust was imposed." We disagree and conclude that the evidence was properly admitted.

As we have noted, Frances, in acquiring the realty from Frank, cannot be regarded as an innocent recipient of the transfer; instead, she was the recipient of a gratuitous transfer from Frank, and, therefore, holds the property subject to any equitable claims, in the same manner as did Frank. See e.g., Hirsch, supra, 134 N.J. Super. at 470-71. Thus, we determine Frank's statements regarding the status of the property were binding on Frances and properly admitted.

Defendants' arguments asserting the defenses of statute of limitations and laches are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). As to Frances's claim for reimbursement of expenses paid for the Florida property on behalf of Katherine, she failed to produce sufficient documentation to sustain her burden of proof on this issue. She admitted her testimony was based upon a review of her checkbook, which she declined to produce in the litigation.

Affirmed.

20070807

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