| Matter of Hennel |
| 2015 NY Slip Op 08670 [133 AD3d 1120] |
| November 25, 2015 |
| Appellate Division, Third Department |
[*1]
| In the Matter of the Estate of Edmund Felix Hennel,Also Known as Edmund Hennel, Deceased. Gregory Hennel et al., Respondents; HazelHennel, as Executor of Edmund Felix Hennel, Deceased,Appellant. |
Englert, Coffey, McHugh & Fantauzzi, LLP, Schenectady (Peter V. Coffey ofcounsel), for appellant.
Martin, Shudt, Wallace, DiLorenzo & Johnson, Troy (Robert L. Adams ofcounsel), for respondents.
Devine, J. Appeal from an order of the Surrogate's Court of Schenectady County(Versaci, S.), entered June 5, 2013, which, in a proceeding pursuant to SCPA 1809,among other things, partially granted petitioners' motion for summary judgmentdetermining the validity of their claim against decedent's estate.
Edmund Felix Hennel (hereinafter decedent) owned rental property in the City ofSchenectady, Schenectady County and, in 2001, he took out a loan for gifting purposessecured by a mortgage on the property. The 2001 mortgage was satisfied as part of a2003 refinancing transaction that, in turn, left a new mortgage on the property. In 2006,after decedent tired of maintaining the property and dealing with tenants, petitioners, hisgrandsons, agreed to assume those responsibilities. Decedent, as a result, executed a deedthat reserved to him a life estate and granted the remainder interest to petitioners.Petitioners were assured by decedent that they would not be burdened by the mortgagewhen they entered into possession of the property, and [*2]decedent contemporaneously executed a will directing "thatthe mortgage . . . if any, in existence at the time of [his] death,. . . be paid from the assets of [his] estate."
Decedent executed a will in 2008 that revoked the prior will and made no provisionfor discharging the mortgage. Decedent passed away on December 1, 2010 and, after the2008 will was admitted to probate, petitioners filed a notice of claim asserting that theestate was obliged to satisfy the mortgage. Respondent, decedent's widow and theexecutor of his estate, rejected the claim. Petitioners responded by commencing thisSCPA 1809 proceeding, asserting that the claim should be allowed. Petitionerssubsequently moved, and respondent cross-moved, for summary judgment. Surrogate'sCourt granted petitioners' motion in part and held, among other things, that decedent hadagreed to satisfy the mortgage out of estate assets and that his estate was obliged to honorthat agreement. Respondent now appeals.
We affirm. A will is ambulatory in nature, and the testator is generally free to alter orrevoke its provisions prior to his or her death (see Matter of American Comm. for Weizmann Inst. of Science vDunn, 10 NY3d 82, 92 [2008]; Blackmon v Estate of Battcock, 78NY2d 735, 739 [1991]). A testator may validly surrender that right, but "the law requires,as a threshold, a showing of clear and unambiguous evidence of the intent to" do so (Matter of Murray, 84 AD3d106, 116 [2011], lv dismissed and denied 18 NY3d 874 [2012]; seeMatter of American Comm. for Weizmann Inst. of Science v Dunn, 10 NY3d at 91).Petitioners were accordingly obliged to demonstrate that "decedent's alleged promise wasmade and understood, not as a mere expression of intention, but as the assumption of abinding obligation in consideration of a promise given by [petitioners] in return, or ofperformance by [petitioners] of a stipulated act" (Frankenberger v Schneller, 258NY 270, 273 [1932]; accord Matter of Versailles Found. [Bank of N.Y.], 202AD2d 334, 334 [1994]).
Here, Frank Parisi was the attorney who represented decedent and petitioners in their2006 dealings, and respondent acknowledged the accuracy of his deposition testimony.Parisi testified that the 2006 will resulted from decedent committing, in return forpetitioners taking over management of the property, to convey title of the property tothem and to ensure that his estate would satisfy the mortgage burdening it. Decedentgave petitioners money to cover a mortgage payment due after the transfer of title.Petitioners thereafter paid the mortgage out of the rent they collected—rent thatbelonged to decedent as life tenant—rather than from their own assets.
Numerous documents were also created to effectuate the agreement, and instruments"executed at substantially the same time, [and] related to the same subject-matter,. . . must be read together as one" (Nau v Vulcan Rail & Constr.Co., 286 NY 188, 197 [1941]; see Patton v Ferrara, 46 AD3d 1203, 1204 [2007]). The2006 will directs that the mortgage be satisfied out of the assets of decedent's estate,while the deed grants a remainder interest to petitioners without any mention of themortgage.[FN*] Theparties further executed a real property transfer report that [*3]listed the full sale price for the transaction as "N/A,"notwithstanding that the form defines full sale price as "the total amount paid for theproperty including . . . the assumption of mortgages or other obligations."The foregoing proof, in short, demonstrates that decedent acknowledged a legalobligation to satisfy the mortgage out of estate assets in return for the managementservices performed by petitioners during his lifetime (see e.g. Matter ofWhiteman, 268 App Div 591, 593-595 [1944]; Matter of Bradbury, 105 AppDiv 250, 255-256 [1905]; compare Pershall v Elliott, 249 NY 183, 185-187[1928]).
Respondent points out that "a contract to make a testamentary provision. . . must be in writing and subscribed by the party to be charged with itsperformance" (Aaron vAaron, 64 AD3d 1103, 1104 [2009], lv denied 13 NY3d 714 [2010];see EPTL 13-2.1 [a] [2]; General Obligations Law § 5-701 [a] [1];Brown v Brown, 12 AD3d176, 176 [2004]). She argues that decedent never gave up his right to revoke theprovision of the 2006 will regarding the satisfaction of the mortgage in writing, and thathis oral commitment to do so runs afoul of the statute of frauds. Inasmuch as neither the2006 will nor any other written document makes that promise explicit, we agree (seeMatter of Thoens, 88 Misc 2d 1006, 1008-1009 [1975], affd 51 AD2d 691[1976], affd 41 NY2d 823 [1977]). Therefore, petitioners were obliged to bringthis case within an exception to the statute of frauds, "such as an admission by the otherparty to the essential terms and actual existence of the oral contract or waiver orestoppel" (Fleet Bank v Pine Knoll Corp., 290 AD2d 792, 795 [2002] [citationomitted]).
Petitioners invoked the doctrine of promissory estoppel in order to do so, whichrequires "(1) a clear and unambiguous promise, (2) reasonable and foreseeable relianceby the party to whom the promise is made, and (3) an injury sustained in reliance on thepromise" (Rogers v Town of Islip, 230 AD2d 727, 727 [1996]; see Clifford R. Gray, Inc. vLeChase Constr. Servs., LLC, 31 AD3d 983, 986 [2006]). It suffices to say that,given the undisputed facts regarding the arrangement between petitioners and decedent,those elements were established.
A more troubling issue arises because promissory estoppel is generally unavailable tobar a statute of frauds defense (see Cohen v Brown, Harris, Stevens, 64 NY2d728, 730 [1984]). As such, petitioners were further obliged to show that this case fellwithin the limited set of circumstances that would permit the doctrine to be applied(see Tribune Print. Co. v 263 Ninth Ave. Realty, 88 AD2d 877, 879 [1982],affd 57 NY2d 1038 [1982]). Petitioners endeavor to do so by arguing that "itwould be unconscionable to invoke the statute of frauds to bar [their] claim" (FleetBank v Pine Knoll Corp., 290 AD2d at 797; see Bernard v Langan PorscheAudi, 143 AD2d 495, 496 [1988]; Buddman Distribs. v Labatt Importers, 91AD2d 838, 839 [1982]).
Petitioners have profited to some degree from their dealings with decedent, as theynow own encumbered property valued at $235,000. That being said, decedent sought tobecome a life tenant on the property, which allowed him to "enjoy[ ] the rents and profitsof the land, [but also obliged him to] pay the taxes and make all ordinary, reasonable andnecessary repairs required to preserve the property and prevent its going to decay orwaste" (Matter of Gaffers, 254 App Div 448, 451 [1938]). Decedent desired toretain the financial advantages of life tenancy while avoiding many of the obligations,and petitioners enabled that desire by agreeing to manage and maintain the propertyduring his lifetime. Petitioners performed that work upon the understanding that themortgage would be satisfied by decedent's estate and, despite having performed theirduties in full, respondent now takes the position that they are not entitled to the [*4]very consideration they bargained for in return. This,plainly, is "so strong and manifest [an inequality] as to shock the conscience andconfound the judgment of any [person] of common sense" (Mandel v Liebman,303 NY 88, 94 [1951] [internal quotation marks and citation omitted]). Thus, anapplication of the statute of frauds would wreak an unconscionable result in this case,and Surrogate's Court properly estopped respondent from invoking the defense.
As a final matter, respondent asserts that the provision of the 2008 will directingpayment of all "just debts" owed by decedent's estate was inapplicable to petitioners'claim. Even assuming that she is correct, Surrogate's Court remained well within its right"to determine all matters both legal and equitable necessary to the settlement of adecedent's estate" by directing respondent to satisfy a valid claim against the estate(Matter of Garofalo, 141 AD2d 899, 901 [1988]; see SCPA 201 [2];Matter of Raymond v Davis, 248 NY 67, 71-72 [1928]; Matter ofMaijgren, 193 Misc 814, 821 [1948]).
Respondent's remaining contentions have been examined and found to be lacking inmerit.
Rose and Clark, JJ., concur.
Garry, J.P. (dissenting). We respectfully dissent. Although we agree with themajority in large part, we disagree with the final and critical step in the analysis. Weagree that the 2006 transaction in which Edmund Felix Hennel (hereinafter decedent)signed the deed and executed the will constituted his acknowledgment of an agreementthat the mortgage would be satisfied from estate assets in exchange for petitioners'services in managing the property during his lifetime. We further agree that the statute offrauds applies here, as there was no written promise that decedent would not revoke the2006 will or would include a direction to satisfy the mortgage in any future will(see EPTL 13-2.1 [a] [2]; General Obligations Law § 5-701 [a] [1]).It bears specifically noting that there was no evidence that decedent expressed any suchpromise in any form. On the contrary, the entire transaction was structured to berevocable; in addition to the ambulatory nature of decedent's 2006 will, the deedconveying the remainder interest in the premises to petitioners specifically reserved apower of appointment and, thus, decedent remained entirely free to transfer that interestto someone else at any time before he died (see EPTL 10-4.1). For these reasons,we wholly agree with the majority that petitioners cannot enforce decedent's promise tosatisfy the mortgage with estate assets unless they prove that promissory estoppel wasproperly applied for this purpose. We depart from the majority as we find that this heavyburden was not satisfied.
The doctrine of promissory estoppel is applied to enforce an oral agreement onlyupon proof "that it would be unconscionable to invoke the statute of frauds to barsuch a claim" (Fleet Bank v Pine Knoll Corp., 290 AD2d 792, 797 [2002][emphasis added]). In the larger context of contract law, an unconscionable agreement isone deemed to be "grossly unreasonable," where there is "some showing of an absence ofmeaningful choice on the part of one of the parties together with contract terms which areunreasonably favorable to the other party" (Warren Elec. Supply v Davidson, 284AD2d 869, 870 [2001] [internal quotation marks and citations omitted]). It is a contractthat "no person in his or her senses and not under delusion would make on the one hand,and as no honest and fair person would accept on the other, the inequality being so strongand manifest as to shock the conscience and confound the judgment of any person ofcommon sense" (Lounsbury v Lounsbury, 300 AD2d 812, 814 [2002] [internalquotation marks, [*5]brackets and citations omitted];see LaSalle Bank N.A. v Kosarovich, 31 AD3d 904, 906 [2006]). A similarlydemanding standard applies in the context of promissory estoppel.
"The strongly held public policy reflected in New York's [s]tatute of [f]rauds wouldbe severely undermined if a party could be estopped from asserting it every time a courtfound that some unfairness would otherwise result" (Philo Smith & Co., Inc. vUSLIFE Corp., 554 F2d 34, 36 [2d Cir 1977]). Thus, to warrant the application ofpromissory estoppel as a bar to the statute of frauds, a party must demonstrate egregiousharm beyond the ordinary financial losses that would result from a breached agreement(see e.g. Carvel Corp. v Nicolini, 144 AD2d 611, 612-613 [1988] [loss was notunconscionable when licensee relinquished another business, incurred various expensesand worked to develop business goodwill in reliance on an oral promise to renew alicensing agreement]; American Bartenders School v 105 Madison Co., 91 AD2d901, 902 [1983], affd 59 NY2d 716 [1983] [loss was not unconscionable whenschool reduced its staff, student body and general operation in reliance on landlord's oralpromise to reduce its rent]; Ginsberg v Fairfield-Noble Corp., 81 AD2d 318,320-321 [1981] [employee did not sustain unconscionable injury by giving up a goodposition in reliance on the promise of a better job]).
This Court previously found issues of fact as to whether a debtor incurredunconscionable injury when, relying upon a lender's broken promise to provide businessfinancing, the debtor not only lost part of her business, but also incurred more than$100,000 in debt, exhausted her personal resources, depleted her child's college savingsaccount, lost her home to foreclosure and had to sell her car (Fleet Bank v Pine KnollCorp., 290 AD2d at 797; see also Buddman Distribs. v Labatt Importers, 91AD2d 838, 838-839 [1982]). This record reflects no such severe and "irremediablechange in position" (Philo Smith & Co., Inc. v USLIFE Corp., 554 F2d at36). Petitioners sustained a loss, in that the building that they now own is worth less thanthey thought it would be when they agreed to repair, maintain and manage it duringdecedent's lifetime. Nevertheless, they realized a significant benefit in exchange for theirservices. Despite the mortgage, the building retains substantial value; its appraised valueis $235,000, the mortgage balance was about $92,000 at the time of the 2006 transfer andtimely mortgage payments were made thereafter, leaving equity of about $150,000 whendecedent died.
Moreover, petitioners did not personally absorb all of the building's expenses. As thelife tenant, decedent was entitled to collect and keep the rental income, but did not do so;instead, petitioners used the rental payments to pay the mortgage and cover otherexpenses, and decedent took tax deductions for these sums. Petitioners did not specifyhow much time they invested in maintaining the premises during the four years thatelapsed between the agreement and decedent's death and, significantly, there was noclaim that petitioners' management responsibilities were so overwhelming that they wereforced to neglect other business responsibilities or sacrifice other opportunities. Further,they do not claim that the continuation of the mortgage encumbrance after decedent'sdeath transformed the building into a losing business proposition, or that they are nowsuffering any hardships resulting from the mortgage debt, such as difficulty in obtainingother business financing. Petitioners' work undoubtedly benefitted decedent by relievinghim of the responsibility of keeping up the property, but it likewise benefitted petitionersby protecting and enhancing the value of the building that they now own. They could sellthe building, pay off the mortgage, escape the responsibilities of its management andrealize the benefit of the equity at any time they choose.
If the mere fact that a promisee sustained a loss of any degree is found sufficient,without more, to invoke the doctrine of promissory estoppel, the requirement ofunconscionability will have no meaning, and the policy objectives served by the statuteof frauds will then be "severely undermined" (Philo Smith & Co., Inc. v USLIFECorp., 554 F2d at 36). [*6]Petitioners weresubstantially compensated for their services. Their losses "represent[ed] nothing morethan that which flowed naturally from the nonperformance of the remaining term[s] ofthe unenforceable agreement," and the fact that they did not receive the full benefit thatthey expected to derive from the bargain is simply not so egregious or unjust as to reachthe level of unconscionability (Stainless Broadcasting Co. v Clear ChannelBroadcasting Licenses, L.P., 58 AD3d 1010, 1013 [2009]; see Coleman v CMITransp., 222 AD2d 285, 285 [1995]; Swerdloff v Mobil Oil Corp., 74 AD2d258, 263-264 [1980], lvs denied 50 NY2d 803, 913 [1980]). Accordingly, wewould reverse.
Lynch, J., concurs. Ordered that the order is affirmed, with costs.
Footnote *:Although petitionerswere deeded the remainder interest, decedent retained a limited power to appoint "anyone or more of [his] issue" to receive the remainder interest instead (see EPTL10-4.1). The fact that he did not do so, and allowed petitioners to continue performingmaintenance duties on the property, is certainly suggestive of his belief that petitionerswere living up to their end of the arrangement.