Campbell v Campbell

[*1] Campbell v Campbell 2006 NY Slip Op 50850(U) [12 Misc 3d 1151(A)] Decided on March 6, 2006 Supreme Court, Suffolk County Baisley, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 6, 2006
Supreme Court, Suffolk County

Edward F. Campbell and Lucy A. Campbell, Plaintiffs,

against

Edward F. Campbell, Jr., and Carol A. Campbell, Defendants.



23391/2001



Plaintiffs' Attorney:

James D. Reddy, Esq.

873 South 7th Street

Lindenhurst, New York 11757

Defendants' Attorney:

Mark A. Peterson, Esq.

732 Smithtown By-Pass, Suite A54

Smithtown, New York 11787

Paul J. Baisley, J.

The plaintiffs are seeking to vacate a deed that transferred ownership of their residence located at 25 Fiddlers Green Drive ("Fiddlers Green"), Lloyd Harbor, Huntington, New York to the defendants on October 19, 1996. The transfer of title was in accordance with a Purchase Agreement ("the agreement") that the plaintiffs executed on September 27, 1995 and that the defendants executed on March 9, 1996. The agreement, among other things, granted plaintiffs the right to continue to live at Fiddlers Green for the rest of their lives, and required defendants to pay plaintiffs $1,000.00 a month.

The plaintiffs are requesting in their second cause of action that the Court find that the defendants breached the agreement and that they are entitled to money damages as a result.

The plaintiffs allege undue influence, duress and fraud in support of their claim to vacate the deed and unjust enrichment in support of the second cause of action. [*2]

The plaintiffs are the parents of defendant Edward F. Campbell, Jr. ("Edward Jr.") who is married to defendant Carol A. Campbell, plaintiffs' daughter-in-law. Plaintiff Edward F. Campbell ("Edward Sr.") is 85 years old and a retired airline pilot. After his retirement from the airline in 1980, Edward Sr., who had been admitted to the New York State Bar in the 1950's, was employed as an attorney, initially by a local negligence defense firm, and later in a solo practice consisting of occasional real estate closings. Plaintiff Lucy A. Campbell is 82 years old and the wife of Edward Sr. She has been recently employed as a part-time sales assistant in a local retail store. During most of her marriage she was a homemaker.

Edward Jr. is an experienced practicing trust and estates attorney and the eldest of eight [FN1] adult children raised by the plaintiffs at the family residence at Fiddlers Green. Following the retirement of Edward Sr. in 1980, the plaintiffs' finances slowly declined to the point where their sole remaining significant asset was Fiddlers Green. In recognition of their financial problems, the plaintiffs attempted to sell their house for $599,000.00 in the early 1990's. They received an offer of $549,000.00, but ultimately decided not to sell the property. During this period, Edward Sr.'s health began to decline, reportedly as a result of diabetes, depression and Alzheimer's disease. Although no medical evidence was presented at trial, the testimony of plaintiff Lucy A. Campbell regarding her husband's health was not otherwise contradicted.[FN2]

The plaintiffs received conflicting advice from their adult children regarding what to do about their increasingly precarious financial situation. According to the testimony adduced at trial, some advocated selling Fiddlers Green and moving to another location more suited to their advancing ages and their economic condition. Others urged that the parents not sell the house, but rather suggested ways in which they could remain in the house. Ultimately, the plaintiffs entered into discussions with the defendants regarding a transfer of plaintiffs' home that would permit plaintiffs to live their remaining lives in Fiddlers Green with the defendants. These discussions followed the funeral of the plaintiffs' son Michael and represented a rapprochement in the relationship between plaintiffs and defendants, since there had been no contact between them whatsoever for the preceding ten years.

The extended process of discussions and negotiations regarding the proposed transfer of Fiddlers Green was testified to by all parties and other witnesses at trial. The fact that the Campbell family consisted of the plaintiffs and their eight children and various in-laws, all well- educated and opinionated, and all with a putative desire to assist their parents, in combination with a declining financial picture into which the children had made various cash contributions and/or loans to their parents over a period of many years, rendered the effort to arrive at a fair agreement difficult and time consuming. [*3]

Edward Jr. drafted the purchase agreement and conducted the negotiations with the plaintiffs and the siblings to a point. He also negotiated with his brother James Campbell regarding the amount of money for which the plaintiffs were allegedly indebted to James. Apparently James had provided his parents with large amounts of money over the years and was insisting that part of any plan that the plaintiffs and their children embarked upon to alleviate the parents' financial problems would include repayment of such amounts to him in full. Although most of the witnesses testified that James "loaned" various sums to the plaintiffs, no evidence of any specific amount of any specific loan was submitted at trial, nor were any notes or loan documents ever signed by the parents and/or James. James was not called as a witness during the trial. Lucy A. Campbell testified that she thought that portions of the money given to her and her husband over the years were gifts and that she and her husband had also repaid significant sums to James.

After many discussions, Edward Jr. and James agreed to the amount of the parents' obligation to James. Edward Jr. borrowed the money to pay off James and then drafted the purchase agreement to require that his parents repay him by way of a deduction from the $1,000.00 per month that they were to receive under the agreement, although, again the amount of the purported debt was not reflected in the agreement. The testimony is undisputed that the deduction as calculated by Edward Jr. was $600.00 and the monthly net payment to the parents since December 1996 has been $400.00.

At the behest of Mary Ann Ruppert (one of the plaintiffs' daughters) the parents consulted Thomas Larounis, Esq. during the negotiation process in February 1995. Mr. Larounis was not formally retained by the parents and he was not paid any fee in connection with his consultation. Apparently, after consulting with Mr. Larounis, Edward Sr. wrote a letter to Edward Jr. that proposed changes to the draft purchase agreement. The credible testimony establishes that Edward Jr. then decided that he and his wife would not go forward with the planned purchase.

According to Edward Jr., approximately four months later Edward Sr. contacted him and expressed a desire to proceed with the planned purchase without the changes he had previously asked for. According to Edward Jr. he informed his father that the transaction could proceed, but only on the basis that it would be a permanent arrangement. Previously, the parties had been negotiating a purchase agreement and a supplemental agreement, which provided for either party to the transaction to opt out of the deal within a five-year period. Now, according to Edward Jr., the only way that he and his wife would enter into the purchase agreement would be if there was no five year "opt-out" period. Edward Jr. claims that he told his father that he could not uproot his family from its present home in Baldwin and move to the Fiddlers Green house without the security of permanency. He also states that he expressed this clearly to his parents, and also indicated to them that their financial situation was continuing its steady decline.

The testimony establishes that the plaintiffs decided to accept the defendants' terms and they signed the purchase agreement on September 29, 1995. The plaintiffs claim that they thought they signed the supplemental agreement and the purchase agreement. After they signed [*4]the documents, they both forwarded them to the defendants, and did not make any copies for themselves.

The defendants then circulated a release among the siblings that purported to insulate defendants from future litigation regarding the purchase agreement that might be initiated by disgruntled members of the extended Campbell clan. Edward Jr. testified that he and his wife were not going to execute the agreement unless and until they obtained a signed release from all the other siblings. Over a period of months, the various brothers and sisters provided executed releases that had been demanded by Edward Jr.[FN3] It is significant to note that Edward Jr. admitted that he did not circulate copies of the purchase agreement that his parents had already executed along with the releases. Finally, on March 9, 1996, the defendants executed the purchase agreement and gave the plaintiffs a fully executed copy.

During the spring and summer of 1996, the defendants placed their home in Baldwin on the market and successfully sold it. The plaintiffs then transferred title to Fiddlers Green from themselves to the defendants on October 19, 1996 and the defendants moved in with the plaintiffs in late November 1996. The deed which was drafted by Edward Jr. specified in pertinent part the rights retained by the plaintiffs with the following language:

"This conveyance shall be subject to the right of the parties

of the first part [plaintiffs] to occupy the above described

premises, during their respective lives, on a non-exclusive,

rent-free basis with the parties of the second part [defendants],

their heirs, successors or assigns, provided, however, that such

right shall be personal to the parties of the first part; shall be sub-

ordinate to any mortgage now or hereafter affecting the above

described premises, and shall be released as to both parties of

the first part by an acknowledged instrument executed by either

of such parties or by an attorney-in-fact for either of such parties."

The defendants immediately and unilaterally reduced the agreed upon monthly payments of $1,000.00 to $400.00 per month. The reduction was the result of Edward Jr.'s requirement that he be reimbursed for the loan he obtained to pay off the debt claimed to be owed by his parents to his brother James. The precise amount of the debt was apparently never disclosed to his parents and was the result of the previous bilateral negotiations between James and Edward Jr., that occurred over the preceding 18 to 24 months.

The credible evidence presented reflects that over the years following the consummation of the purchase agreement frictions developed in the parties' living arrangements. Despite the provision in the agreement that required all parties to use their "best efforts to resolve any such [*5]problems among themselves,"[FN4] the instant litigation was brought in 2001. An extensive amount of conflicting testimony was presented regarding the living conditions that the plaintiffs claim that they are subjected to, including but not limited to allegations of not being permitted to have a window air conditioner in their bedroom during the summer, not being given a key to the front door, not having food or meals available, not being allowed to use the clothes washer and not being allowed to have visitors.

The defendants maintain that these claims are manufactured to support the litigation and/or are instigated by jealous siblings. Rather than determining the credibility of each of these claims, it is sufficient to find that the living conditions at Fiddlers Green are not satisfactory to the plaintiffs. The evidence does not support the defendants' opinion of these claims, but instead points to the quotidian stresses of older parents living with an adult child and his family. In this particular case, however, those stresses are heightened by the nature of the agreement under which the parties live and the inequities of that agreement as perceived by the other adult siblings.

In order to assess claims of undue influence regarding the transfer of a deed the Court must examine initially whether a confidential or family relationship existed between the parties. 43A NY Jur 2d, Deeds  201. Obviously, the parties in this action have a family relationship. The plaintiffs have raised credible allegations of undue influence and, as a result, the transaction is presumptively void. Hennessey v. Ecker, 170 AD2d 65 or, 567 NYS2d 74 (2d Dept. 1991), Loiacono v. Loiacono, 187 AD2d 414, 589 NYS2d 560, (2d Dept. 1992). The defendants may overcome the presumption by presenting clear and convincing evidence that the purchase agreement was "fair, open, voluntary and well understood" (Cowee v. Cornell, 75 NY 91 (1878)) and not the product of undue influence or fraud. Loiacono, supra .

The defendants have not demonstrated that the agreement with the plaintiffs is fair. A glaring example is found in paragraph 4(b), which permits the defendants the unfettered right to deduct any amounts they deem to be the plaintiffs' debts from their required monthly payments of $1,000.00. The agreement does not provide any obligation on the part of the defendants to document any loans or advances that they decide to impose on plaintiffs. The agreement does not require that the plaintiffs consent to such loans or advances, nor does it even provide that the plaintiffs have the right to question or even be made aware of the precise amount of any alleged debts they incurred or might incur in the future. The result of this provision was to reduce plaintiffs' anticipated monthly income from the transaction from $1,000.00 to $400.00.

The agreement is unfair in that it requires that the plaintiffs to obtain the consent of the defendants before the plaintiffs may receive or entertain guests, but does not impose a similar requirement upon the defendants. Although this provision may not appear to be of great importance, it does loom large when viewed in the context of the dynamics of the extended Campbell family. The evidence showed that from time to time tensions are created at Fiddlers Green by the presence of certain family members and friends. [*6]

The agreement also provides that after closing, the defendants were not obligated to pay any lump sum to plaintiffs, but were merely required to expend the lesser of $50,000.00 or the net amount [FN5] realized by them from the sale of their Baldwin home for "initial improvements."The conclusion is inescapable, that the consideration given by defendants for Fiddlers Green was woefully inadequate, given that the parents had received an offer of $549,000.00 for it several years earlier. Although the defendants argued vigorously that the consideration also included "meals on the table" and having someone in the house to assist the aging plaintiffs, it is clear from the testimony that the value of this aspect of the claimed consideration has not proved to be significant to the plaintiffs.

The unfairness of the agreement is magnified when one considers the relationship of the parties. Since both Edward Jr. and Edward Sr. are attorneys the defendants argue that it follows that they dealt with each other on an equal footing. The credible evidence, however, demonstrates otherwise. Edward Sr. entered into the practice of law late in life as a personal injury defense attorney. The evidence is overwhelming that he does not possess the expertise in estate planning and related areas to the extent that his son does. The imbalance was apparently recognized and addressed by the fact that the plaintiffs consulted an attorney during the negotiations. The evidence is clear, however, that plaintiffs did not retain the attorney and decided instead to proceed on their own, after Edward Jr. refused to accept the changes in the agreement suggested by the attorney.

The direct communications and negotiations conducted thereafter by Edward Sr. and Edward Jr. were tainted by Edward Jr.'s conflict of interest. Throughout the long process that culminated in the execution of the purchase agreement, Edward Jr. clearly acted in the dual role of his parents' attorney/financial advisor and as attorney for himself and his wife. Before and during the negotiations with the plaintiffs, Edward Jr. was privy to his parents finances and gave advice to them. The process by which Edward Jr. directly negotiated with James regarding the debt that his parents owed demonstrates that he acted as their representative in financial matters.

In a letter dated September 28, 1995 that he wrote to James,[FN6] Edward Jr. acknowledges the difficulty of his position by stating that communicating with James' attorney regarding the parents' debt "...puts me in the position of representing' or speaking for the parents...." Again, in a letter to James' attorney dated January 19, 1996,[FN7] Edward Jr. indicates that he "had [his] mother name him [James] as co-owner of the car she bought last year and the title will have to be changed." It is evident from these examples that the posture that Edward Jr. maintained while dealing with his brother on this issue on behalf of his parents and his own proposed transaction was that of an attorney for his parents. On the one hand claimed that he was trying to be fair and arrive at a reasonable amount that his parents could agree to pay James, and on the other hand he [*7]knew that whatever the amount finally turned out to be, it would be paid to James in a lump sum that he (Edward, Jr.) would recoup from the plaintiffs in the form of deductions written into the purchase agreement. The role played by Edward Jr. in these negotiations should have been fulfilled by an independent attorney on behalf of the plaintiffs engaging directly with James or his counsel.

Edward Jr. also testified that in the early 1980's he reviewed some of his father's retirement investments with an eye toward protecting him from any unsavory brokers or salesmen. The evidence demonstrates that Edward Jr., from the early 1990's at least, was cognizant of his parents deteriorating finances and was obviously in a position of sufficient trust and confidence to be able to have such an awareness. The evidence also suggests that the plaintiffs relied on Edward Jr. Indeed, Edward Sr., when asked why he did not keep copies of the documents he and his wife signed and returned to the defendants, replied "he was our son, I didn't think he would sell us down the river."

It was this attitude of trust that lends credence to the testimony of the plaintiffs that Edward Jr. agreed to revive the proposed transaction in September 1995 on the condition there be no charges to the original proposal and that "no lawyers be involved." The testimony also reflects that the plaintiffs were in a weakened and somewhat dependent state owing to their awareness of their increasingly declining finances and Edward Sr.'s declining faculties. Edward Sr. appeared in court for every day of trial and gave brief, uncontradicted testimony. Although no medical proof was submitted regarding his alleged condition, it was apparent to the Court that he was the weaker personality in the direct negotiations with Edward Jr., notwithstanding the fact that both men were attorneys. It should be noted that Lucy A. Campbell testified that she was responsible for the plaintiffs' day-to-day financial matters, not her husband.

The defendants have also not met their burden of establishing that the conveyance was open. The defendants admitted that they obtained releases from the other siblings without providing them with a copy of the executed purchase agreement. No explanation was offered as to why the agreement was not made available for review by any of the siblings. No copies of the closing documents were provided to the plaintiffs. No evidence was presented regarding the circumstances surrounding the actual transfer of title on October 19, 1996.

The defendants, finally, have not met their burden of proving that the transaction was voluntary and well understood. No evidence was presented that the plaintiffs understood the purchase agreement. On the contrary, the plaintiffs testified credibly that they thought they signed a supplemental agreement that allowed for either party to terminate the arrangement within the first five years. No evidence was presented that the plaintiffs understood that their $1,000.00 per month payment under the agreement was to be reduced by whatever amount Edward Jr. ultimately decided to settle James's debt for. On the contrary, the plaintiffs testified credibly that they were unpleasantly surprised to find that they were only receiving $400.00 per month.

The defendants did not establish that the agreement was entered into voluntarily. Under [*8]the circumstances, considering the disparate levels of expertise between Edward Sr. and Edward Jr., the considerable anxiety resulting from the plaintiffs' knowledge of their bleak financial position, Edward Sr.'s health concerns, the pressure from James that he be repaid with interest for so-called loans with no documentation, and the conflicting roles of Edward Jr. as mediator, attorney and financial advisor, there is a serious question about the voluntariness of the conveyance.

The defendants have failed to overcome the presumption of undue influence as alleged by the plaintiffs. Accordingly, the conveyance of October 19, 1996 is annulled and the purchase agreement and the deed are vacated and declared void.

A hearing will be scheduled as set forth hereinafter in order to determine the respective rights and obligations of the parties in light of the foregoing determination. Pending the hearing, and/or further order of this Court, the plaintiffs are stayed from commencing any proceedings designed to enforce the terms of this decision. The parties are further directed to continue the status quo ante with regard to all financial matters, including but not limited to the payment of any mortgages, taxes, utilities and usual expenses of maintaining the property, as well as any monthly payments currently being made by defendants to the plaintiffs.

A conference will be held before the undersigned on March 23, 2006 at 9:30 a.m. for the purpose of scheduling a hearing and establishing the issues to be determined thereat.

Dated:March 6, 2006____________________________

J.S.C.

Footnotes

Footnote 1: The plaintiffs had nine children, but one died in 1990.

Footnote 2: Apparently, these issues were raised before the Individual Assignment Justice to whom this matter was assigned and it was assertedly determined that Edward Sr. was competent. However, no evidence was presented regarding this determination by the Court.

Footnote 3: The parties presented evidence that threats were made by James Campbell in an effort to obtain certain signatures, but a determination by the Court regarding these claims is not necessary.

Footnote 4: Paragraph 5 (d) of the purchase agreement

Footnote 5: According to the testimony, this amount amounted to less than $100,000.00.

Footnote 6: Trial exhibit 42.

Footnote 7: Trial exhibit 40.