THOMAS, JOSEPH M., MTR. OF ( 2015 )

SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
1107
CA 13-01911
PRESENT: SCUDDER, P.J., FAHEY, CARNI, AND LINDLEY, JJ.
IN THE MATTER OF THE ESTATE OF ANTHONY J. THOMAS,
DECEASED.
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IN THE MATTER OF THE ESTATE OF DOROTHY THOMAS, MEMORANDUM AND ORDER
DECEASED.
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JOSEPH M. THOMAS AND GLORIA M. BORRELLI,
PETITIONERS-APPELLANTS;
TOM J. THOMAS, RESPONDENT-RESPONDENT.
(APPEAL NO. 1.)
BOND, SCHOENECK & KING, PLLC, ROCHESTER (JONATHAN B. FELLOWS OF
COUNSEL), FOR PETITIONERS-APPELLANTS.
ADAMS BELL ADAMS, P.C., ROCHESTER (ANTHONY J. ADAMS, JR., OF COUNSEL),
FOR RESPONDENT-RESPONDENT.
Appeal from an order of the Surrogate’s Court, Monroe County
(Edmund A. Calvaruso, S.), entered July 22, 2013. The order granted
respondent’s motion to dismiss the petition in part.
It is hereby ORDERED that the order so appealed from is
unanimously modified on the law by denying that part of respondent’s
motion to dismiss the claim for the imposition of a constructive trust
with respect to stock in the New York State Fence Company and
reinstating that claim and as modified the order is affirmed without
costs.
Memorandum: Petitioners, nonparty Daniel J. Thomas (Daniel), and
respondent are the four children of Anthony J. Thomas and Dorothy
Thomas (collectively, decedents), who died in April 2012 and August
2012, respectively. Petitioners, Daniel and respondent are named in
decedents’ wills as, inter alia, beneficiaries of either their
residuary estates or a trust that is itself a beneficiary of the
residuary estate. Respondent was the named executor under both wills,
and he was also appointed as trustee to numerous trusts created by
decedents’ wills. The wills were admitted to probate and letters
testamentary were issued to respondent.
In March 2013, petitioners commenced this proceeding challenging
numerous real estate transactions between respondent and decedents.
According to petitioners, respondent “exploited his close relationship
with [decedents] by inducing them to transfer to him certain
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properties they owned, with the promise of payment for, and/or re-
conveyance of, the parcels to [decedents] and/or his siblings.”
Inasmuch as respondent never paid for the parcels or reconveyed them
to decedents or his siblings, petitioners sought to impose a
constructive trust, inter alia, on monies received by respondent or
entities controlled by him related to the sale of property on North
Greece Road (NGR property), and on the Manitou Road property and any
monies received by respondent or entities controlled by him related to
a lease on that property.
Petitioners also challenged respondent’s failure to identify any
shares of New York State Fence Company (NYSFC) as being included
within the assets of decedents’ estates. According to respondent, he
was the sole shareholder of NYSFC, a company founded by decedent
Anthony J. Thomas in 1958 and incorporated in 1977. Due to the fact
that respondent had failed to produce any records reflecting the
transfer of NYSFC stock from Anthony to respondent or any records
reflecting respondent’s payments for the stock, petitioners contended
that a constructive trust should be imposed on “all stock certificates
in NYSFC owned by Anthony.”
In addition to seeking the imposition of a constructive trust,
petitioners also sought, inter alia, a partial distribution pursuant
to SCPA 2102 (5), information pursuant to SCPA 2102 (1), an accounting
pursuant to SCPA 2205 and revocation of letters granted to respondent
pursuant to SCPA 711 (1) and (2). After filing his answer, respondent
moved pursuant to CPLR 3211 (a) (5) and (7) to dismiss the petition
insofar as it sought relief pertaining to the real property and
respondent’s ownership of stock in NYSFC. Respondent contended that
any claims for relief pertaining to the real property and corporate
stock of NYSFC were time-barred and that the petition failed to state
a cause of action for relief related thereto.
In appeal No. 1, petitioners appeal from the order of Surrogate’s
Court (Calvaruso, S.) granting that motion. In appeal No. 2,
petitioners appeal from a subsequent order of Surrogate’s Court
(Owens, A.S.) directing that they may not inquire of the executor or
otherwise obtain disclosure concerning the NYSFC stock or the finances
or affairs of that company. We now modify the order in appeal No. 1
by denying respondent’s motion in part, and we reverse the order in
appeal No. 2.
We agree with petitioners that the petition sufficiently states a
cause of action for a constructive trust with respect to the NGR
property, the Manitou Road property and NYSFC stock. “On a motion to
dismiss pursuant to CPLR 3211, the pleading is to be afforded a
liberal construction . . . We accept the facts as alleged in the
[petition] as true, accord [the petitioners] the benefit of every
possible favorable inference, and determine only whether the facts as
alleged fit within any cognizable legal theory . . . In assessing a
motion under CPLR 3211 (a) (7), . . . a court may freely consider
affidavits submitted by the [petitioner] to remedy any defects in the
[petition] . . . and ‘the criterion is whether the proponent of the
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pleading has a cause of action, not whether he has stated one’ ” (Leon
v Martinez, 84 NY2d 83, 87-88; see Lawrence v Graubard Miller, 11 NY3d
588, 595).
“[I]t is well settled that [a] constructive trust may be imposed
when property has been acquired in such circumstances that the holder
of the legal title may not in good conscience retain the beneficial
interest . . . In order to invoke the court’s equity powers, [a
petitioner] must show a confidential or fiduciary relationship, a
promise, a transfer in reliance thereon, a breach of the promise, and
[the respondent’s] unjust enrichment . . . Inasmuch as a constructive
trust is an equitable remedy, however, courts do not rigidly apply the
elements but use them as flexible guidelines . . . In this flexible
spirit, the promise need not be express, but may be implied based on
the circumstances of the relationship and the nature of the
transaction” (Beason v Kleine, 96 AD3d 1611, 1613 [internal quotation
marks omitted]; see generally Sharp v Kosmalski, 40 NY2d 119, 121-122;
Moak v Raynor, 28 AD3d 900, 902).
The facts as alleged in the petition and set forth in the
corresponding affidavits establish the existence of a confidential and
fiduciary relationship between respondent and decedents. The facts
with respect to the NGR and Manitou Road properties establish that
respondent promised to pay decedents for the NGR property and to
reconvey the Manitou Road property to decedents after it was
subdivided by respondent. The petition further alleges that the
properties were transferred to respondent as a result of those
promises, and that respondent breached those promises and was thereby
unjustly enriched.
With respect to the NYSFC stock, the petition and corresponding
affidavits allege that Anthony believed, until the day that he died,
that he still owned the company and that respondent had made promises
to “allow all of [decedents’] children to share in NYSFC.” While the
allegations of an express promise are lacking, “[e]ven without an
express promise, . . . courts of equity have imposed a constructive
trust upon property transferred in reliance upon a confidential
relationship. In such a situation, a promise may be implied or
inferred from the very transaction itself. As Judge Cardozo so
eloquently observed: ‘Though a promise in words was lacking, the
whole transaction, it might be found, was “instinct with an
obligation” imperfectly expressed’ ” (Sharp, 40 NY2d at 122). Based
on the circumstances of the relationship between respondent and
decedents and the nature of their multiple transactions, we conclude
that there are sufficient facts from which we can conclude that there
was an implied promise made by respondent to decedents; that the
transfer of stock, if indeed there was a transfer, was made in
reliance upon that promise; and that the promise was thereafter
broken, resulting in an unjust enrichment to respondent.
We reject respondent’s contentions that CPLR 4519 precludes us
from considering the statements of Dorothy Thomas to her accountant
and to Anthony’s sisters, all of which lend support to the allegations
that respondent made certain promises to decedents related to the
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property and stock. That statute precludes a party, an interested
person or a person “from, through or under whom” a party or an
interested person derives his or her interest from being examined as a
witness concerning personal transactions or communications between the
witness and the deceased person (CPLR 4519). The accountant and
Anthony’s sisters are not parties, persons interested in the event or
persons “from, through or under whom” petitioners derive their
interest (id.). In any event, any issue concerning the admissibility
of statements under CPLR 4519 “is premature at this time, as its bar
is not operative until trial” (Hagerman v Hagerman, 21 Misc 3d
1142[A], 2008 NY Slip Op 52481[U] [Sup Ct, Nassau County 2008], *3;
see generally Phillips v Kantor & Co., 31 NY2d 307, 313-315). That is
the case because the issue whether petitioners “can ultimately
establish [their] allegations is not part of the calculus in
determining a motion to dismiss” (EBC I, Inc. v Goldman, Sachs & Co.,
5 NY3d 11, 19; see Cohn v Lionel Corp., 21 NY2d 559, 562).
Even if we were to assume, arguendo, that the petition fails to
allege facts sufficient to support one of the elements of a
constructive trust, we note that those elements “ ‘serve only as a
guideline, [and] a constructive trust may still be imposed even if all
of the elements are not established’ ” (Quadrozzi v Estate of
Quadrozzi, 99 AD3d 688, 691). We thus conclude that the Surrogate in
appeal No. 1 erred in concluding that the petition “fails to state a
cause of action upon which the relief of the imposition of a
constructive trust can be granted.”
Petitioners further contend that the Surrogate in appeal No. 1
erred in concluding that their claims for a constructive trust were
time-barred. We agree in part. Addressing first the claims related
to the NYSFC stock, we conclude that the Surrogate erred in granting
that part of respondent’s motion to dismiss, as time-barred, the claim
for a constructive trust related to the stock. We therefore modify
the order in appeal No. 1 accordingly, and we reverse the order in
appeal No. 2, which denied petitioners the right to any SCPA 2221
examination or disclosure concerning the NYSFC stock. “The equitable
claim for the imposition of a constructive trust is governed by the
six-year [s]tatute of [l]imitations of CPLR 213 (1) . . . , which
begins to run at the time of the wrongful conduct or event giving rise
to a duty of restitution . . . A determination of when the wrongful
act triggering the running of the [s]tatute of [l]imitations occurs
depends upon whether the constructive trustee acquired the property
wrongfully, in which case the property would be held adversely from
the date of acquisition . . . , or whether the constructive trustee
wrongfully withholds property acquired lawfully from the beneficiary,
in which case the property would be held adversely from the date the
trustee breaches or repudiates the agreement to transfer the property”
(Maric Piping v Maric, 271 AD2d 507, 508 [internal quotation marks
omitted]; see Tampa v Delacruz, 77 AD3d 910, 911). Petitioners
contend that, if respondent in fact owns all of the NYSFC stock as he
claims, then he acquired it based on a promise, express or implied,
that he would share that stock with his siblings upon the death of
decedents. That promise was thus not breached until 2012, when
decedents died and respondent failed to share that stock with his
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siblings. Inasmuch as this proceeding was commenced in 2013, the
claim for a constructive trust over the NYSFC stock therefore is not
time-barred.
With respect to the NGR and Manitou Road properties, however, we
conclude that the Surrogate in appeal No. 1 properly determined that
the claims for the imposition of a constructive trust related to those
properties are time-barred and thus properly granted respondent’s
motion to that extent. Affording the pleadings the most liberal
construction, we conclude that the statute of limitations began to run
with respect to the NGR property sometime between 1989 and 1992, which
is when the promised payments for the property were due and owing.
The six-year statute of limitations thus expired, at the latest, in
1998, which is 15 years before this proceeding was commenced. With
respect to the Manitou Road property, petitioners alleged that
respondent had promised to reconvey the property to decedents
following the subdivision of the property, which occurred in 1994 and
again in 1998. The six-year statute of limitations thus expired, at
the latest, in 2004, which is nine years before this proceeding was
commenced.
While petitioners contend that they may seek the imposition of a
constructive trust with respect to the NGR and Manitou Road properties
as an equitable remedy for other causes of action, that contention
lacks merit. “[A]n equitable remedy, such as the imposition of a
constructive trust sought by [petitioners], is not available to
enforce a legal right that is itself barred by the statute of
limitations” (Benedict v Whitman Breed Abbott & Morgan, 77 AD3d 867,
869, lv denied 16 NY3d 706; see MRI Broadway Rental v United States
Min. Prods. Co., 242 AD2d 440, 444, affd 92 NY2d 421). Here, the
legal right to enforce the promises related to the real property is
barred by the statute of limitations and, therefore, petitioners
cannot seek the equitable remedy of a constructive trust to enforce
that time-barred legal right.
Petitioners contend that respondent should be equitably estopped
from asserting the statute of limitations as a defense. We reject
that contention insofar as it applies to the NGR and Manitou Road
properties. There are two distinct theories of equitable estoppel
(compare Matter of Gill v New York State Racing & Wagering Bd., 50
AD3d 494, 495, with Matter of Watson, 8 AD3d 1092, 1094). According
to the first theory, equitable estoppel precludes a party from
asserting the statute of limitations as a defense where the party
commencing the action or proceeding was “induced by fraud,
misrepresentations or deception to refrain from filing a timely
[petition]” (Gill, 50 AD3d at 495; see Mitchell v Nassau Community
Coll., 265 AD2d 456, 457; see generally Putter v North Shore Univ.
Hosp., 7 NY3d 548, 552-553). The second theory of equitable estoppel
provides that, “[w]here . . . a fiduciary relationship exists and
there are colorable allegations of concealment, the doctrine of
equitable estoppel may apply to toll the statute of limitations”
(Watson, 8 AD3d at 1094; see Matter of Piccillo, 19 AD3d 1087, 1089).
In support of their contention that respondent should be
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equitably estopped from asserting the statute of limitations as a
defense to the claims concerning the NGR and Manitou Road properties,
petitioners alleged that, when decedents reminded respondent of his
obligations to repay them or to reconvey the property, respondent made
oral promises to pay them or to reconvey the property to them in the
future. Inasmuch as petitioners are the beneficiaries of decedents’
estates, petitioners contend that those promises to decedents
equitably estop respondent from asserting the statute of limitations
defense against petitioners. Mere promises to pay in the future,
however, are insufficient to support a theory of equitable estoppel
where, as here, “[t]here is no evidence that the . . . promises to pay
were intended to lull [decedents] into inactivity until after the
expiration of the [s]tatute of [l]imitations” (Erlichman v Ventura,
271 AD2d 481, 481; see Joseph Gaier, P.C. v Iveli, 287 AD2d 375, 375;
Donahue-Halverson, Inc. v Wissing Constr. & Bldg. Servs. Corp., 95
AD2d 953, 954; see also Baratta v Kozlowski, 94 AD2d 454, 457).
Petitioners made no allegations related to the second theory of
estoppel insofar as it concerns the real properties.
In light of our determination that the statute of limitations has
not expired with respect to the claim for a constructive trust on the
NYSFC stock, we do not address petitioners’ equitable estoppel claims
related thereto.
Entered: January 2, 2015 Frances E. Cafarell
Clerk of the Court