April 2, 2009
ESTATE OF BERNARD RITTERMAN, PLAINTIFF-APPELLANT,
CECILE RITTERMAN, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Chancery Division, Monmouth County, Docket No. C237-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted: January 14, 2009
Before Judges Axelrad and Messano.
Plaintiff, Estate of Bernard Ritterman (Estate), appeals from summary judgment dismissal of its complaint against decedent's wife seeking a constructive trust on the proceeds of the sale of the marital home she received following his death during the pendency of a divorce action. We affirm.
The parties were married in l978. It was the second marriage for both and while each had children from their prior marriages, they did not have any children together from this marriage. Shortly after the parties' marriage, husband retired and the parties lived on their assets, with their only income being social security. In l982 they purchased their marital home in Ocean Township as tenants by the entirety for the sum of $100,000, with no mortgage.
The parties each had health issues and wife claimed hers was exacerbated by the interference of husband's daughter from his first marriage. Accordingly, at the age of seventy-eight, wife left the marital home and went to her son's house, filing for divorce on January 30, 2007. Husband was eighty-nine years old at the time. Through counsel, the parties attempted to negotiate the equitable distribution of assets, the largest being the marital home.
It is undisputed that husband wanted to remain in the home and buy out wife's ownership interest after obtaining a reverse mortgage. Counsel attempted to reach an agreement on these and other issues and circulated several draft pendente lite consent orders; however, no agreement was signed. Regardless, in order to expedite husband's application for a reverse mortgage, on March 28, 2007, wife's counsel forwarded to husband's counsel a deed executed by wife signing over her share of the marital home for $226,937, consistent with the terms of the enclosed draft order, to be held in escrow until closing of the mortgage and payment of wife's interest.*fn1
Husband's counsel did not execute any consent order because, as she certified on January 28, 2008, "there were a few loose ends unrelated to the house," primarily involving confirmation of some accounts.*fn2 By their last meeting prior to June l4, 2007, "the resolution of the entire case was about 90% complete." Husband's counsel explained:
A few additional discovery requests were to be taken care of. The prior agreement concerning the house was confirmed except that the issue was raised on behalf of Mr. Ritterman that the mortgage appraisal had come in lower than the originally agreed upon market value and we were advised that Mrs. Ritterman and her attorney would consider taking a lower amount for the buyout since they acknowledged that the market had gone down. At all relevant points[,] however, the agreement was firm that Mr. Ritterman would buyout Mrs. Ritterman's share of the marital home for $226,937 or possibly less and that Mrs. Ritterman had executed the Deed already and the reverse mortgage proceeds would be used to pay this amount subject to any offsets owed Mr. Ritterman for the various accounts.
By early June, however, wife had received no notice of husband's obtaining a mortgage commitment, no closing date was set, the period for obtaining the mortgage was about to expire, and no pendente lite consent order or property settlement agreement had been signed. Counsel appeared at a case management conference on June 4, 2007, and an order for discovery was issued. A Matrimonial Early Settlement Panel (MESP) was scheduled for July 16, 2007. Husband died of a heart attack on June l4, 2007, and the MESP was adjourned to September. At that time, husband's counsel informed the court she would not be participating because of her client's death.
On August l0, 2007, wife, as owner of the marital home by operation of law, entered into a contract to sell the property to the next door neighbor for $415,000. The Estate recorded a lis pendens on September 6, 2007, however, it was not picked up by the title company until after closing on September 26, 2007.*fn3
On or about August l3, 2007, the Estate filed a complaint against wife in Chancery Division, Probate Part, to equitably divide the marital assets, essentially seeking imposition of a constructive trust on the proceeds from the sale of the marital property to effectuate the monetary equivalent of specific performance of the deed held in escrow by husband's counsel.*fn4
Wife filed a motion for summary judgment for dismissal of the lis pendens and the Estate's complaint for failure to state a cause of action. Wife argued that upon husband's death prior to the adjudication of divorce, all issues of equitable distribution abated and she became the sole owner of the marital residence they owned as tenants by the entirety with right of survivorship by operation of law. As a result, she retained her right to convey the property to the third party. Wife emphasized that there was no comprehensive agreement or divorce decree, and the deed was inoperative until closing of title of the reverse mortgage and payment of $226,937 to her, which did not occur prior to husband's death, or for that matter, at any time thereafter. She further contended there was no evidence of unjust enrichment or fraud warranting the imposition of a constructive trust as she and decedent had purchased the property in l982 and shared it for twenty-five of their almost thirty-year marriage. Accordingly, wife submitted, there was no legal basis for husband's heirs to convert the tenancy by the entirety into a tenancy in common and obtain an interest in the sales proceeds she received for the marital home.
The Estate argued the court had the equitable power to effectuate the parties' clear intention and essentially complete the transfer of the deed by distributing a portion of the sales proceeds of the marital property to the Estate for the benefit of husband's two adult children from his prior marriage.
In an oral decision set forth on the record on February l9, 2008, Judge Cavanagh granted wife's motion for summary judgment. The court began with the general principle that the equitable distribution statute does not authorize the distribution of marital assets except upon the parties' divorce and that divorce proceedings and claims for equitable distribution abate with the death of one of the parties absent highly unusual circumstances, citing Carr v. Carr, 120 N.J. 336, 342 (1990), and Castonguay v. Castonguay, 166 N.J. Super. 546, 550 (App. Div. l979). The court discussed instances of unusual circumstances in which equity and public policy require some aspects of statutory equitable distribution and related forms of relief to survive a spouse's death before divorce. See Carr, supra, 120 N.J. 336 (allowing surviving wife in long-term marriage, whose husband left his entire estate to his children from a prior marriage and died during the divorce litigation, to pursue equitable remedy of constructive trust as means to receive a portion of marital estate, as she was disqualified both under the equitable distribution statute because husband's death had terminated divorce action and from widow's elective share because she was living apart from her husband during the divorce proceedings at the time of his death); Olen v. Melia, 141 N.J. Super. 111 (App. Div.) (disposition of the marital property does not abate where one party died after the matter was tried to conclusion and the judge granted divorce and signed judgment, but before entry of an amended judgment), certif. denied, 71 N.J. 518 (1976); Jacobson v. Jacobson, 146 N.J. Super. 491 (Ch. Div. l976) (husband who murders wife during pendency of divorce may not object to equitable distribution).
After setting forth a detailed recitation of the facts in the present case, the court concluded there was no basis in equity to "intercede . . . and alter the distribution set forth under the law." The court gave due regard to the fact that there appeared to be "a fundamental agreement" that husband was going to remain in the marital home and buy out wife's interest, and that a deed was executed by wife and placed in escrow to expedite husband's mortgage application. However, the record reflected "there were uncertainties involved, as opposed to absolute certainties involved, which seemed to highlight the other cases where the courts became an agent for completing what was in effect done, but hadn't been officially recorded" and thus "[t]his case would be the furthest step from the line that anyone has ever taken . . . with all the problems inherent in the situation, and all of the uncertainties presented. . . ."
Clearly, there was no trial or adjudication of divorce. Nor was any consent order signed regarding equitable distribution because, as husband's attorney conceded, the details were not fully worked out. A fact "most important" to the court was the further acknowledgement by husband's attorney of ongoing negotiations regarding a reduction of the price that would be necessary to pay to secure wife's one-half interest because of an apparent lower subsequent appraisal. Judge Cavanagh stated:
As I read the paperwork, it would appear that the parties cannot even verify that the $26,000 and change originally intended to be Mrs. Ritterman's share and, in fact, the amount in the deed, [and] in the proposed agreement would have been the final number. Apparently, the parties were in the process of discussing whether that amount should be reduced.
[I]t would appear that the final price Mrs. Ritterman was going to receive was never fully finalized, and never agreed upon to the point where there was no negotiation further involving that amount. . . .
Moreover, husband's counsel's actions in the matrimonial matter following his death undercut the Estate's claim that the parties had agreed on equitable distribution prior to Mr. Ritterman's death. The court commented:
In fact, in September, counsel for Mr. Ritterman was still writing to the Court, even though he had been dead for several months, indicating that because of his death there was no need to go any further, and there was no mention of the fact that there was an agreement in principle, or anything else going on.
In addition, although husband's counsel represented that at the time of husband's death he had been approved for a mortgage, the court found relevant that no details or documentation were provided as to whether it was obtained within the sixty-day period the agreement contemplated or afterwards. Moreover, the court found what spoke volumes, both as evidence of a lack of finalized agreement and basis in equity to intervene, was the fact that at no time was wife ever paid the $226,937, nor was it ever offered, either prior to husband's death or even between his death and the filing of the lis pendens.
The court entered an order on the same date, discharging the lis pendens and granting summary judgment in favor of wife dismissing the Estate's complaint with prejudice. The Estate appealed.
On appeal, the Estate argues the court erred in failing to consider the parties' intentions prior to husband's death as evidenced by wife's delivery of the deed; wife no longer has a survivorship interest in the marital home because her interest was transferred to her husband upon delivery of the deed; and based on the equities, the parties' intentions should supersede the formality of a divorce decree not being entered prior to husband's death.
The Estate argues that a deed takes effect upon delivery and an unrecorded deed is only void against subsequent bona fide purchasers and creditors, not parties who know about the deed. N.J.S.A. 46:22-1; Siligato v. State, 268 N.J. Super. 21, 28 (App. Div. l993). The Estate contends the present case is analogous to H.K. v. State, Dep't of Human Servs., 184 N.J. 367, 384 (2005), in which the Court held that a mother effectively transferred her home to her children when the deed was delivered to them even though the deed was not recorded for another two years because the parties intended the transfer upon delivery of the deed but because of miscommunication it was not timely recorded. If the property was not transferred until the later date, the mother would have been ineligible for Medicaid benefits because of the disqualification "look back" period for the transfer of realty for less than fair market value. Id. at 386-87. The Estate emphasizes the similarities of the cases --the deed was delivered and both parties intended transference and recordation, but were simply awaiting a closing date. According to the Estate, the consent order here clearly indicates the parties intended the deed to take effect and but for husband's death, the deed would have been recorded. Thus it urges us to effectuate the parties' intentions and conclude, as did the Court in H.K., that wife's interest in the marital home was effectively transferred when the deed was delivered to husband's counsel in March 2007.
The Estate further cites to Carr and the cases in which New Jersey courts have utilized equitable remedies such as constructive trusts to permit equitable distribution after the death of a party in a divorce proceeding. The Estate submits that in the present case wife is being unjustly enriched at the expense of husband's two children from his former marriage. Accordingly, it urges that fairness and equity demand the intentions of the party be honored by placing the marital home in a constructive trust.
In light of the record and applicable law, we reject the Estate's arguments. The cases cited by the Estate are totally inapposite factually and contain policy and equitable considerations that are not present here. Unquestionably, there was no trial or divorce judgment entered prior to husband's death. Nor is this a case in which there is evidence of a "meeting of the minds" between the parties respecting the transfer of the marital home but they inadvertently did not formalize their agreement; or husband informed wife's counsel he obtained mortgage approval and a date was set for the buy out, and husband died before the closing and recordation of the deed. To the contrary, the record is clear there was no firm agreement respecting equitable distribution of the marital home at the time of husband's death. Husband's counsel intentionally did not sign the proposed consent orders and acknowledged she was continuing to negotiate the buy-out price. The May draft of the consent order contained new terms setting deadlines for closing on the buy-out and, if it did not occur, required sale of the premises, which might have also been problematic. Moreover, although we note that husband signed the deed on May 7, 2007, a month before his death, no steps were taken to effectuate the transfer. Wife never received the funds to buy out her interest in the marital home, which was an express condition of recordation of the deed and, in fact, her counsel was never even informed that husband received a mortgage commitment. Nor were steps taken after husband's death to consummate what the Estate now claims was an unequivocal agreement to equitably distribute the marital home.
Furthermore, this case has the direct opposite policy considerations of Carr, in which a constructive trust was imposed on marital assets to avoid the decedent husband's children being unjustly enriched at the expense of the dependent, surviving wife of the long-term marriage. Here, the parties were married almost thirty years and spent almost twenty-five of those years in the subject property. The Estate has presented no facts to convince us why husband's adult children would have an interest in the only significant marital asset of the parties and how the surviving spouse is being unjustly enriched at their expense. The Estate may view it as a windfall that wife received the entire marital estate due to the untimely death of husband during the pendency of the divorce. However, for the reasons articulated by Judge Cavanagh, there is no basis in law or equity under the facts of this case for the court to complete a transaction that the parties chose not to and interfere with the surviving spouse's right to inherit by operation of law.