October 20, 2008
IN THE MATTER OF THE ESTATE OF CATHERINE R. STORIONE SLUTSKY, DECEASED.
THE ESTATE OF ISAAC SLUTSKY, BY ITS EXECUTRIX SHEILA SLUTSKY, PLAINTIFF-APPELLANT,
CARMELLA PAPPERT AND JAMES MACH, DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Chancery Division, Probate Part, Gloucester County, Docket No. 05-108.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 9, 2008
Before Judges Wefing, Parker and LeWinn.
In this probate case, plaintiff Isaac Slutsky*fn1 appeals from a final judgment entered on March 8, 2007 after a bench trial in the Chancery Division, Probate Part. Isaac's wife, Catherine Storione Slutsky died during the pendency of a divorce action and Isaac sought a constructive trust and equitable distribution of the marital assets. We reverse and remand.
Isaac and Catherine were married in 1967. Defendant Carmella Pappert, Catherine's daughter from a previous marriage, was ten when Isaac and Catherine married. Isaac and Carmella apparently had a good relationship and he supported her until she married in 1974. Carmella has two sons, Jason and Joel, who were twenty-nine and twenty-seven years old at the time of trial. Isaac and Catherine purchased a home in Wenonah, Gloucester County, for $14,990 in 1968. Over the years of their marriage, Isaac supported the family while Catherine, who did not work outside the home, managed the family's finances and paid the bills.
Defendant James Mach is a Vietnamese immigrant who befriended Catherine in 1985. When he was eighteen, Catherine invited Mach to move into the marital home, over Isaac's objection, telling Isaac that it was temporary until Mach's mother came back from Vietnam. Mach contributed to the household by doing yard work and cleaning. When he was twenty-two, he obtained a job and began paying Catherine weekly rent of $125 to $150. Isaac was apparently unaware that Mach paid any rent.
Isaac worked for George Wallman's meat packing house from 1967 until 1982, and gave his paychecks to Catherine who, in turn, gave him $40 a week spending money. When Wallman's business closed in 1982, Isaac received $67,000 gross severance pay/profit sharing, which he gave to Catherine. Catherine used $10,000 of that money as a down payment for the joint purchase of a rental duplex in Philadelphia. Isaac and Catherine obtained a $25,000 mortgage for the balance of the purchase price for the Philadelphia duplex.
After the Wallman business closed, Isaac obtained employment with Mrs. Ressler's Food Products Company. He earned approximately $560 per week, which he gave to Catherine, who continued to give him an allowance.
After Mach moved into the marital home, Isaac's and Catherine's relationship deteriorated. Catherine took care of Mach, washing his clothes, cooking for him and teaching him to save money and be financially responsible. Isaac stopped attending family dinners and stayed in his own room after Mach moved into the marital home.
In 1993, Catherine told Isaac they needed money and they obtained an $81,000 home equity loan. Catherine used $19,000 of that money for a new car and approximately $25,000 to pay off the mortgage on the Philadelphia property. What happened to the balance of that money is unknown.
In 1999, Isaac was diagnosed with multiple sclerosis (MS) and was unable to continue working. Although he experienced unsteadiness, weakness, fatigue, falling episodes, tingling, numbness and episodes of vision loss, Catherine did not believe that he had MS and was angry when he stopped working. Isaac's health insurance terminated on January 1, 2000, and Catherine refused to pay his medical expenses. She reduced his allowance to $25 a week.
In January 2000, Catherine refinanced the marital home with a $58,600 mortgage. Although Isaac signed the papers, he did not recall the transaction.
In March 2000, Catherine purchased Certificates of Deposit (CDs) in her name alone for $12,669.82, $15,000 and $17,000. Isaac was not aware of these purchases.
In April 2000, Isaac began receiving $1,273 per month in social security disability benefits and had the checks deposited directly into his and Catherine's joint checking account at Commerce Bank, but Catherine still limited his allowance to $25 a week. Catherine also received her own social security payment of $617 a month.
When he left his employment at Mrs. Ressler's, Isaac received $26,000 in severance pay. With that money, he repaid a $13,000 loan from his sister and gave the remaining $13,000 to Catherine. Catherine deposited it in their joint checking account in October 2000. In November 2000, however, Catherine withdrew $13,000 from the joint account and purchased yet another CD in her name only. Isaac was unaware of that transaction.
In 2000, Catherine asked Mach if he was interested in purchasing the marital home. She claimed she was struggling financially and could not manage the payments. Mach agreed and said that Catherine and Isaac could remain in the house after he purchased it. An undated contract of sale with both Isaac's and Catherine's signatures as sellers and Mach's signature as buyer stated a purchase price of $100,000. Isaac did not recall signing the contract, nor did he recognize his signature on the document.
In August 2000, Isaac, Catherine and Mach went to a title company and, with a title clerk present, signed the closing documents. Isaac had never seen any of the documents before and there was no lawyer present to explain them to him. Isaac recalled that he and Catherine received a check at the time of the closing, but he did not remember the amount. The deed and settlement statement, dated August 9, 2000, state that Isaac and Catherine sold the Wenonah home to Mach for $100,000 and received a check for $40,623 at settlement. Mach financed his purchase of the home with a $90,000 mortgage. The deed, which recited that Catherine had prepared it, did not provide for a life estate to Isaac and Catherine.
After the closing, Catherine kept the utility bills in her name and continued to pay them. Mach agreed to whatever improvements Catherine wanted to make in the house and contributed what he could afford. Isaac had no part in discussions about household finances. In August 2000, Catherine signed a receipt stating that she had sold "all home furnishings to Jimmy Mach for the amount of $1,000." Isaac was not aware that the furnishings had been sold until after Catherine died.
Between July 2001 and March 2004, Catherine wrote checks from the joint checking account payable to Mach, totaling $8,313.77. A $500 check in July 2001 was designated a "loan." Other checks payable to Mach included $400 in February 2003, $2,000 in June 2003, $2,000 in July 2003, $800 in September 2003 and $650 in December 2003.
In September 2001, Catherine opened a money market account at Wachovia with $45,292.67. She designated Carmella's two sons as beneficiaries of the account upon her death. By June 2002, the account had a balance in excess of $90,000. Some of the monies deposited in that account were from Catherine's mother's estate.
In January 2003, Isaac redirected his social security disability checks into his own account, but the rental proceeds from the Philadelphia property continued to be deposited in the joint account.
In August 2003, Isaac left the marital home after Mach told him to do so. He moved into Catherine's sister's home because he was concerned about Mach's temper and did not want to cause problems in the house. Mach claimed, however, that Isaac moved out of the house voluntarily.
In April 2004, Isaac, who was then living in Philadelphia, filed a complaint for divorce in Pennsylvania. In May 2004, he filed a petition to prevent dissipation of the marital assets. At the time, Isaac had no idea of the marital assets or liabilities, nor did he have any knowledge of the family's finances.
By 2004, Catherine was in poor health, suffering from lung cancer. Carmella told her mother not to worry about the divorce because she would retain an attorney to take care of it. Carmella retained Michael Fioretti, who never saw Catherine because of her illness but talked to her on the telephone. Isaac, not wanting to upset Catherine while she was undergoing chemotherapy, told his attorney, David Steerman, not to push the divorce.
The day after Catherine received the complaint for divorce, Mach drove her to two banks to make withdrawals. She withdrew $80,197.88 from the Wachovia money market account and closed it. She then withdrew $7,506.80 from the joint checking account in Commerce Bank, but did not close that account. Mach claimed that Catherine told him to keep the withdrawn cash in a chest in his bedroom because she was in and out of the hospital at the time.
According to Mach, the Commerce Bank money was used to pay household bills, although Catherine continued to pay for food and utilities in lieu of rent to Mach from the Commerce Bank checking account. Catherine's social security checks and the income from the Philadelphia rental property were still flowing into that account. Mach testified that he still had $74,000 of Catherine's cash when she died.
On June 29, 2004, the Philadelphia family court ordered Catherine to account to Isaac for all the marital bank accounts as of May 2003, all marital bank accounts that Catherine closed since 1999, and all rents collected from the Philadelphia rental property. Catherine was enjoined -- unfortunately too late -- from removing any funds from the Wachovia account and ordered to remove Isaac's name from all utility accounts for the former marital home.
Although Catherine's attorney sent at least three letters to her explaining the accounting she was required to provide, Catherine never gave him any financial information. Catherine's attorney told Isaac's attorney that Catherine was so ill she was unable to comply with the court order.
In a handwritten will dated October 16, 2004, Catherine appointed Carmella executrix of her estate and directed that (1) any funds remaining in Catherine's bank accounts be applied to her funeral expenses; (2) the Philadelphia rental property be sold and Catherine's fifty percent share of it be divided between Carmella's sons; and (3) all of Catherine's "personal belongings" and "any other possessions, including [her] vehicle," be distributed to Carmella. Isaac was not a beneficiary under the will.
When Catherine prepared the will, Carmella asked if there was any money and Catherine responded that there was none, except for the checking account. Although Mach was present for that conversation and had possession of the cash withdrawn from the Wachovia and Commerce accounts, he said nothing.
Catherine died on December 1, 2004. Mach, who had been signing Catherine's name to checks prior to her death, continued to do so after her death and signed checks on December 2, 2004 and December 6, 2004. He had also signed a check on November 30, 2004 -- the day before Catherine died -- for $4,000, which he claimed he gave to Carmella. He also indicated that after Catherine died, he gave the remaining cash in the house to Carmella. Carmella denied that Mach gave her the cash and claimed she did not know there was any money left in the house.
Isaac and Catherine had jointly owned a Cadillac, which Catherine used. In July 2004, Isaac transferred title to Catherine alone to enable her to register the car in New Jersey. The transfer was "without prejudice to [Isaac's] equitable distribution." After Catherine died, Carmella gave the car to Mach, who signed Catherine's name as seller on the motor vehicle transfer document.
After Catherine died, her attorney had checks for the Philadelphia rental property sent directly to Isaac. On December 29, 2004, the Pennsylvania family court abated the divorce action and authorized Isaac to file an action in another court to protect his right to marital assets. The order further restrained Catherine's family from dissipating marital bank accounts.
In May 2005, Isaac filed the complaint in the Chancery Division, Probate Part, seeking (1) appointment as administrator of Catherine's estate; (2) establishment of a constructive trust consisting of all the marital property, including the marital home; (3) rescission of the deed conveying the home from Isaac and Catherine to Mach; (4) rescission of any gifts from Catherine to Mach or Carmella; (5) an accounting of all assets that Catherine possessed from 1999 until her death; and (6) distribution to Isaac of his equitable share of the marital estate. Isaac alleged a civil conspiracy among Catherine, Carmella and Mach to convert the marital assets; conversion and fraudulent transfer of the marital assets; and misrepresentation and breach of contract regarding conveyance of the marital home.
Mach claimed he disposed of Catherine's financial records in February 2005 because he did not think he needed them. He also disposed of records indicating what he did with Catherine's money. But, in a January 2006 deposition, Mach admitted that he falsely stated he did not know what happened to the funds Catherine withdrew from the Wachovia account. He claimed that Carmella told him to lie in return for paying his counsel fees. Carmella denied this. Mach also admitted that he lied about checks he had written on Catherine's account after her death.
Mach testified in his deposition that Carmella told him that they were going to say they took Catherine to a casino "where she blew the money." In a letter from Mach to Carmella dated May 4, 2006, Mach told Carmella what he said in his deposition and told her it would be "wise" for her not to tell the casino story in her deposition. He also told Carmella that the trial was beginning on June 12 and he was "going to commit perjury."
On May 17, 2006, Isaac was appointed administrator of Catherine's estate. Catherine's estate was not represented in the action, however, so the court had no authority to distribute her estate.
At trial, Mach and Carmella denied all alleged misdeeds. Mach denied that he and Catherine had discussed disposition of proceeds from the sale of the house; he denied that he ever discussed removing Isaac's name from the Philadelphia rental property; he denied having any discussions about keeping the Cadillac from Isaac; and he denied planning with Carmella to take assets from Isaac. Carmella denied arranging with Mach to have Catherine clean out the bank accounts; and she denied planning with Mach to ensure that Isaac never received any assets.
On August 5, 2006, Isaac was examined by Dr. David York, a clinical psychologist. York testified as to Isaac's competency at trial. He noted that Isaac had an avoidant personality leading him to avoid conflict and defer to decisions of others. While Isaac's MS may have impaired his working memory and his ability to respond quickly, York concluded that it did not affect his competency or intellectual functioning.
After hearing all of the testimony, the trial court found no reason to set aside the conveyance of the marital home because Isaac was not incapacitated at the time of the transfer, he voluntarily signed the deed, and Mach paid valid consideration for the property. The proceeds from the sale belonged to Isaac and Catherine, however. The court found that Catherine "took complete control of those proceeds" and improperly deposited them in the Wachovia account, which was payable to Carmella's sons upon her death.
The court found further that Catherine and Mach "improvidently" liquidated the Wachovia account in response to letters from Isaac's attorney and a Pennsylvania court order, "to keep it from equitable distribution to [Isaac]."
The court declined, however, "to categorize these actions as a 'conspiracy,'" noting that, "[i]n the context of a heated marital dispute and under the specific facts of this case, the [c]court cannot find that the actions of Jimm[y] Mach and [Catherine] give rise to any fraudulent conspiracy." The court found that Mach was acting under Catherine's direction and that there was no evidence that Mach exerted undue influence over Catherine.
The court addressed the specific assets that would have been subject to equitable distribution if Catherine had survived and found that the proceeds of the sale of the marital home ($40,623.14), as well as the joint Commerce Bank account, were marital assets subject to equitable distribution. These assets were divided equally between Isaac and Catherine, and Mach was ordered to pay the sums to Isaac and to Catherine's estate.
The court further found the "[p]roofs . . . in equipoise regarding the nature and valuation" of the other assets, and concluded that Isaac failed to prove that "the remaining $40,000 in the Wachovia account over and above the proceeds from the sale of the house" was subject to equitable distribution. The court noted defendants' claim that part of these funds consisted of an inheritance that Catherine received, which would not be subject to equitable distribution but would be part of her estate. The Cadillac "was not the subject of the trial," because there was no evidence of its value and no basis to invalidate the transfer of title to Mach -- even though Mach signed Catherine's name to the title after her death. There was also no "detailed opposition" or evidence of any higher value of the household furniture, which Catherine sold to Mach for $1,000 in "a satisfaction of a debt." Because there was no evidence of the value of the Philadelphia rental property, the court directed that the parties stipulate its value, "or the record will be opened for additional evidence," after which the property or its value "will be divided equally" between Isaac and Catherine's estate.
The court concluded that Isaac was entitled to: (1) $20,312 from the sale of the marital home, (2) $3,500 from the Commerce Bank account, and (3) $7,500 in counsel fees, totaling $31,312. Catherine's estate was entitled to: (1) $20,312 from the sale of the marital home, (2) $40,000 from the Wachovia account, and (3) $3,500 from the Commerce Bank account, totaling $63,812. Without making relevant findings or attempting to remedy the situation, the court noted: "The major problem in this case is that all of the assets are 'missing.' Jimm[y] Mach testified that he gave the funds to Carmella Pappert. Carmella categorically denies that. There is no other independent evidence as to the disposition of the funds." The court then held that Mach and Catherine's estate were equally liable for the funds, because Mach took responsibility for "the cash deposited in his bedroom drawer," and Catherine "participated in the withdrawal of the funds and the scheme to hold those funds in cash in the house." Mach and Catherine's estate each were liable for one half of the $31,312 due to Isaac; Mach was liable for one half of the $63,812 due to Catherine's estate; and there was "no basis for any liability on Carmella Pappert."
In this appeal, Isaac argues that the trial court erred:
(1) in its application of the law of equitable distribution to claims against Mach; (2) in failing to apply a presumption against the validity of the transactions benefiting Mach; (3) in failing to consider the unlawful and fraudulent purpose of the transfer of marital property; (4) in failing to find that Mach engaged in equitable fraud warranting rescission of the deed; (5) in failing to find Mach and Carmella jointly liable for their participation in the conspiracy; (6) in finding Mach liable for $40,062 of the $91,704.68 he held in cash; and (7) in failing to award counsel fees and costs to Isaac because of Mach's wrongful conduct.
Isaac contends that the trial court erred in equitably distributing the marital property. He maintains that his claim, both individually and as administrator of Catherine's estate, was against Mach and Carmella for conversion of assets, and that equitable distribution was not an available remedy for that claim.
In its decision, the trial court noted that the complaint included 128 paragraphs and requested relief "involv[ing] numerous complex legal and equitable arguments." Regardless of the complexity of the matter, it is our role to sort through the arguments and proofs to reach a fair and just result.
The trial court recognized the equitable remedy of constructive trust established by the Supreme Court in Carr v. Carr, 120 N.J. 336 (1990), but then short-circuited the constructive trust remedy by ordering Mach to pay monies directly to plaintiff and to Catherine's estate. That remedy, however, neither identified nor preserved the marital estate.
In Carr, the husband died during the pendency of a divorce. The parties had no children but the husband left his entire estate to his children of a prior marriage, leaving the wife in a "black hole." Id. at 340. Under the circumstances, equitable distribution was not available to the wife, because "[d]ivorce proceedings abate with the death of one of the parties," and equitable distribution may be made only in a divorce proceeding, N.J.S.A. 2A:34-23. Id. at 342 (citations omitted). Moreover, the statutory elective share was not available to the parties because they were not residing together when the husband died, N.J.S.A. 3B:8-1. Id. at 344. Accordingly, the Court held that
[A] spouse may acquire an interest in marital property by virtue of the mutuality of efforts during marriage that contribute to the creation, acquisition, and preservation of such property. This principle, primarily equitable in nature, is derived from notions of fairness, common decency and good faith . . .
Accordingly, we hold that marital property does not lose its essential and distinctive nature as property arising from the joint contributions of both spouses during marriage because of the death of one spouse during the pendency of divorce proceedings. [Id. at 349-50.]
The Court determined that a "constructive trust . . . is an appropriate equitable remedy in this type of case . . . to prevent unjust enrichment or fraud." Id. at 351. The "constructive trust should be invoked and impressed on the marital property under the control of the executor of [the] estate." Id. at 353. Here, the trial court erred in failing to invoke a constructive trust and to impress it upon the marital assets, as instructed in Carr.
We disagree with the trial court's finding that there was no "evidence that any other assets existed that would have been subject to equitable distribution" and that the "[p]roofs are in equipoise regarding the nature and valuation of those assets." In our view, there is ample evidence demonstrating that additional marital assets must be included in the constructive trust.
We agree with the trial court, however, that the sale of the marital home was valid. The evidence demonstrated that plaintiff was competent and voluntarily signed the closing documents. Similarly, the sale of the furnishings was a valid transfer to Mach but the proceeds should be included in the marital estate. The transfer of the Cadillac to Mach was valid because Isaac had transferred his interest in the car to Catherine.*fn2 The notation that he did so "without prejudice to equitable distribution" put the parties on notice that this was an asset to be considered. The absence of evidence of its value, may be remedied during a remand hearing.
We disagree with the court's finding that Isaac acquiesced to Catherine's co-mingling joint marital funds with her funds to the extent that Isaac's interest in the joint marital funds was extinguished.
The Wachovia account had a balance of $80,198 when Catherine withdrew the monies the day after she was served with the divorce complaint. Mach acknowledged that he still had $74,000 in his possession when Catherine died. The court concluded that the proceeds of the marital home sale were included in that account, which was opened a year after the marital home was sold. Tracking the funds deposited in the Wachovia account leads to the inevitable conclusion that joint funds were included in that account: Catherine's income consisted of $617 in social security payments and the joint rental income from the Philadelphia property. Until January 2003, Catherine had access to Isaac's social security benefits, which were more than double the amount of hers. Because the social security benefits were deposited in the joint account, they are joint assets. Ryan v. Ryan, 283 N.J. Super. 21, 25 (Ch. Div. 1993). Although $52,709 deposited in March 2002 was clearly from her mother's estate, the evidence demonstrated that Catherine withdrew $52,000 that same month and opened an estate account, leaving a balance of $68,639 in the Wachovia account.
Indeed, we are satisfied that the evidence amply demonstrates the $80,198 withdrawn from the Wachovia account the day after Catherine was served with the divorce complaint was a marital asset that must be included in the constructive trust because the account was established during the marriage and the only monies available to Catherine were joint funds -- except for the estate money that passed into and out of the account in March 2002. Since there was only $74,000 left in Mach's possession when Catherine died, the difference should be charged against Catherine's share of the marital estate because the evidence indicated that Catherine had used those funds for Mach's and her household expenses.
With respect to the Commerce Bank joint account, the checks written by Mach the day before and in the days after Catherine's death must also be included in the marital estate.
Moreover, the evidence supports a finding that the CDs purchased by Catherine in her own name were purchased with joint funds and should be included in the marital estate. In March 2000 -- just two months after Catherine and Isaac refinanced the marital home with a $58,600 mortgage -- Catherine purchased three CDs in her name for $12,669.82, $15,000 and $17,000 (totaling $44,669.82). The evidence further supports a finding that the $13,000 CD purchased on November 3, 2000 was purchased with Isaac's severance pay from Mrs. Ressler's.
Thus, the marital estate should include the following assets on which the constructive trust should be impressed:
$80,198 from the Wachovia account, which includes $40,623.14 proceeds from the sale of the marital home 4,000 check signed by Mach November 30, 2004 340 check signed by Mach December 2, 2004 267 check signed by Mach December 6, 2004 12,669.82} CDs purchased in Catherine's name in 15,000.00} March 2002 17,000.00} 13,000.00 CD purchased in Catherine's name in November 2002 $142,474.82 marital estate
The marital estate also includes the Philadelphia property, which must be valued. The rents from that property since Catherine's death should also be included in the marital estate. The constructive trust should be impressed on these assets, which should be distributed equitably between Isaac and Catherine's estate. We remand the matter to the trial court to effect the distribution of these assets and determine the value of the Cadillac and the Philadelphia property.
Although the court did not make findings of credibility with respect to Carmella or Mach, it found no conspiracy. The court awarded Isaac $7,500 in counsel fees to be paid by Mach because "Mach held cash and [im]plicated himself in the disappearance of the cash" and necessitated plaintiff having to proceed to trial.
Isaac argues "that Mach should be responsible to [p]laintiff for the full amount of the costs and fees associated with this action" -- $72,081.18. We agree that $7,500 is a de minimis award of fees given the evidence of Mach's conduct in writing checks after Catherine's death, holding cash withdrawn from the Commerce Bank and Wachovia accounts in violation of a court order and his May 4, 2006 letter acknowledging complicity with Carmella in hiding the assets. Accordingly, on remand, plaintiff's counsel shall submit an affidavit of services in accordance with Rule 4:42-9(a)(3) and (b), and the court shall determine a reasonable award of fees and costs to plaintiff in light of Mach's conduct.
In its decision, the trial court noted that Isaac was appointed administrator of Catherine's estate. The decision further noted that Catherine's purported will had not yet been admitted to probate:
In addition to being the Administrator, assuming that no will is submitted for probate, [plaintiff] would also be a beneficiary to the intestate succession of [Catherine's] assets. Therefore, the Court's scenario for equitable distribution will create a situation where one-half of the marital assets will belong to [plaintiff] and one-half of the marital assets will belong to [Catherine's] Estate of which [plaintiff] is the Administrator and primary beneficiary in accordance with the intestate statute.
Although Catherine's estate is not represented in this appeal, we make the following observations with respect to it:
1. A new administrator must be appointed for Catherine's estate in light of Isaac's death.
2. The marital assets in the constructive trust must be distributed before a determination of the assets in Catherine's estate can be made.
3. We make no determination regarding the admission of Catherine's will to probate because that matter is not before us. We note, however, that if the will is not admitted to probate, Isaac takes her entire estate under the intestacy statute, N.J.S.A. 3B:5-1 to -16. We have not been advised as to whether Isaac had a will. If he did not, his estate must also be distributed in accordance with the intestacy statute. Otherwise, Isaac's will would be subject to probate.
We have carefully considered the remaining issues raised by Isaac in light of the record and the applicable law. We are satisfied that these remaining issues lack sufficient merit to warrant further discussion in this opinion. R. 2:11-3(e)(1)(E).
Reversed and remanded for further proceedings in accordance with this opinion. We do not retain jurisdiction.