KATHLEEN DOLAN v. ALEXANDER MUZYKA, JR

N

 

OT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

 

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4521-11T2

KATHLEEN DOLAN,

Plaintiff-Appellant,

v.

ALEXANDER MUZYKA, JR.,

Defendant-Respondent.

________________________________________

April 18, 2013

 

Argued January 22, 2013 - Decided

 

Before Judges Graves, Espinosa, and Guadagno.

 

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket Nos. L-1767-10 and L-5669-11.

 

Victoria M. Brown argued the cause for appellant.

 

Joseph V. Meyers argued the cause for respondent.

PER CURIAM

Plaintiff Kathleen Dolan appeals from portions of a February 27, 2012 Law Division order awarding defendant Alexander Muzyka, Jr., the right to continue to receive rental income from the second-floor unit of a two-family home. The order also denied her motion to compel defendant to make a formal accounting of monies received and expended. She also appeals from orders entered April 4, 2012, denying her motion for reconsideration, and April 19, 2012, dismissing the remainder of her complaint. For the reasons that follow, we affirm.

I.

The following facts are gleaned from the record. Plaintiff and her husband purchased a two-family home on Everett Place in Englewood (the property) in May 1973. Plaintiff's husband died in 2003. In November 2004, plaintiff was injured and displaced when a fire damaged the property. After recovering from her injuries, plaintiff moved in with a friend. During this time, plaintiff met defendant's parents, Anna and Alexander Muzyka, Sr. (the Muzykas). In August 2005, plaintiff moved into the Muzykas' home.

Almost immediately after moving in with the Muzykas, plaintiff executed a will, leaving the Muzykas and defendant the majority of her estate, to be divided in equal shares. She appointed defendant as her attorney-in-fact for "all financial and personal matters" and to "exercise general control and supervision" over the property. Shortly thereafter, defendant and his father began working to repair plaintiff's home. They obtained permits and hired contractors to perform the work.

On October 13, 2005, plaintiff executed a quitclaim deed, conveying her interest in the property to defendant and retaining a life estate interest for herself. The deed provides, in pertinent part:

While the Grantor, [plaintiff], conveys her interest in the subject property to [defendant], the Grantor retains a life estate interest in the subject property and premises entitling the Grantor to the exclusive right of possession during her lifetime. The Grantee will assume full responsibility for any and all carrying costs and maintenance expenses thereof in accordance with [the] Agreement . . . .

 

On the same day, the parties entered into a maintenance agreement whereby defendant agreed to:

assume all financial responsibilities for carrying costs and maintenance associated with the subject premises as part and parcel of supporting the life estate which Kathleen Dolan has retained and said costs would include, but not be limited to, property taxes, homeowners insurance, all utilities, phone service, maintenance costs, permits associated with any improvements or repairs stemming from the November 2004 fire . . . .

 

Both the deed and the maintenance agreement were silent as to the parties' respective rights to any rental income derived from the property during plaintiff's lifetime.

By mid-2006, defendant's father became ill1 and defendant continued the repairs to the property himself, completing them by the end of the year. Defendant negotiated and collected an insurance payment in excess of $100,000 for fire damage to the property. In addition, defendant borrowed $70,000 by taking out a mortgage on property he owned. The insurance and mortgage proceeds were used by defendant to restore the property. By January 2007, the repairs were completed and the property was ready for occupancy. Defendant advised plaintiff that she could return to her home, but she elected to remain with the Muzykas.

A tenant first moved into the second-floor unit of the property in January 2007 and began paying rent to defendant. Defendant and his children moved into the first-floor unit of the property later in 2007. Between January 2007 and September 2011, defendant received a total of $84,000 in rental income from the second-floor tenants.

In November 2010, plaintiff told her friend, Marilyn Chaus, that Anna Muzyka had accused her of stealing. Chaus's caretaker, Kathleen Case, went to the Muzyka home and took plaintiff to live with Chaus. On May 25, 2011, plaintiff revoked the will and power of attorney she had executed in 2005.

On July 1, 2011, plaintiff filed a complaint and order to show cause in the Chancery Division seeking all rental income defendant had received from the property since 2005. Plaintiff also sought to compel defendant to produce an accounting of all rents received and expenses paid for the property; to restrain defendant from the property for the duration of her life estate; to direct the tenants to submit all future rent payments to her; and to compel defendant to continue paying all costs, expenses, maintenance and repairs on the property.

The Chancery judge permitted defendant to continue collecting rent and to use the rental income to satisfy all expenses and carrying costs associated with the property. Any excess was to be held in trust pending further court order. The court also ordered defendant to provide plaintiff with an accounting of all rental income received and all expenses incurred since 2005. The court denied plaintiff's claim for a restraining order against defendant and transferred the case to the Law Division.

The Law Division judge conducted a hearing on February 2 and 14, 2012. Both parties testified, as well as Christopher Leyden, the attorney who drafted the deed and maintenance agreement; Adam Feuer, a friend of defendant's; Harry Kraus, another friend of the Muzyka family who worked on the renovations; Oneida Valera, a friend of plaintiff s; defendant s aunt, Danuka Chnielewska; and Kathleen Case.

Plaintiff testified that shortly after she moved into the Muzykas' home, they began to mistreat her. She claimed that they were "very violent people," and she became "isolated" in the Muzyka home. Plaintiff testified that she told several people about their mistreatment of her, including her doctor and his wife, her cardiologist and his nurse, and three friends, including Chaus and Case. Plaintiff admitted that she had access to a telephone while she was living with the Muzykas, but claimed that she only used it when the Muzykas were not there because she was afraid of them. She conceded that she once called the police to report Mrs. Muzyka was mistreating the family cat.

Plaintiff acknowledged that defendant was obligated to pay various expenses on the property including property taxes, premiums on the homeowner's policy, and utility bills, but claimed that she did not give defendant permission to pay these bills from the rental income he received. Plaintiff also claimed that she told several people that she wanted to return to her home after the repairs were completed but did not tell the Muzykas because she was afraid of them.

On February 27, 2012, Judge Rachelle L. Harz filed an order and written decision. Judge Harz identified the primary issue before her as the intent of the parties regarding rental income when the deed and maintenance agreement were executed.

Judge Harz rejected plaintiff's testimony that she was forced to remain in the Muzyka home against her will, as lacking credibility. The judge reasoned that if plaintiff had actually told three medical professionals that she was being abused, as she testified, the authorities would have been notified. The judge found that plaintiff had called the police regarding Mrs. Muzyka's treatment of the cat, and this demonstrated that she had access to a telephone and the ability to call the police. The judge also found that plaintiff had regular contact with many different people and that she had ample opportunity "to express her dissatisfaction" to them, but did not. The court determined that plaintiff was alone with Kathleen Case on several occasions for extended periods of time, and Case's testimony did not provide any support to plaintiff's claims that she experienced "a violent or threatening living situation" in the Muzyka home.

Judge Harz rejected plaintiff's claim that defendant did not provide consideration for the agreement, finding that the Muzykas provided plaintiff "with living quarters and an assisted living situation for a period of approximately six years" and defendant negotiated and received an insurance settlement, obtained permits, acted as the general contractor of the rebuilding of the property, and paid all maintenance expenses and costs associated with the property.

Finally, Judge Harz found that, although the deed purported to reserve a life estate for plaintiff in the property, she received "a form of a life estate interest . . . in that she was given a place to live with the Muzykas." Judge Harz found defendant's testimony, that he reasonably anticipated receiving rental income from the second-floor unit in order to pay the costs and expenses related to the property, and would not have undertaken the project without it, to be credible.

The court determined that plaintiff was entitled to the rental income received from the first-floor unit between March 2011 and February 2012, which totaled $13,800, as defendant never anticipated receiving this rental income at the time the agreement was signed. The court also found that defendant was entitled to continue utilizing the rental income from the second-floor unit "for expenses and costs incurred at the premises," as he would continue to be responsible for all "duties and obligations attendant to the premises."

Satisfied with the documentation provided by defendant as to expenses and costs incurred since August 2005, the court denied plaintiff's request for a formal accounting.

On March 2, 2012, defendant filed a motion for summary judgment, seeking disposition of the remaining issues before the court. Plaintiff then filed a motion for reconsideration of the February 27, 2012 order and a cross-motion for summary judgment. On March 29, 2012, the court denied plaintiff's motion for reconsideration and granted defendant's motion for summary judgment, dismissing the remaining issues in plaintiff's complaint by order and decision dated April 4, 2012.

On April 19, 2012, the trial court issued an amended decision and order, which was identical to the April 4 order, except that the amended order dismissed the matter.

On appeal, appellant raises the following points for our consideration:2

I. THE TRIAL COURT FAILED TO UNDERSTAND AND DISTINGUISH THE PROPERTY RIGHTS OF A LIFE ESTATE TENANT FROM THAT OF A REMAINDERMAN WITH A FUTURE INTEREST.

II. SINCE THE DEED AND THE MAINTENANCE AGREEMENT WERE UNAMBIGUOUS ON THEIR FACE, THE TRIAL COURT [LACKED THE] POWER TO MODIFY THE SAME.

 

III. THE TRIAL COURT FAILED TO ENFORCE THE PROPER BURDEN OF PROOF AGAINST THE DEFENDANT.

 

a. AT THE TIME THE DEED AND MAINTENANCE AGREEMENT WERE SIGNED IN OCT. 2005.

 

b. AFTER THE DEED AND MAINTENANCE AGREEMENT WERE SIGNED: THERE WAS NO SUBSEQUENT MODIFICATION OR RELEASE.

 

i) RENTS NOT DEMANDED FOR THREE YEARS (2007-2010) WAS NOT EVIDENCE OF INTENTION OF A RELEASE OR WAIVER.

 

ii) STAYING LONGER THAN ORIGINALLY ANTICIPATED AT THE HOME OF DEFENDANT'S PARENTS WAS NOT CLEAR AND CONVINCING EVIDENCE OF SUBSEQUENT RELEASE OF RIGHTS.

 

iii) THERE WAS AND IS NO LEGALLY ENFORCEABLE "PLAN" TO JUSTIFY A MODIFICATION OF THE DEED.

 

IV. DEFENDANT MUZYKA VIOLATED HIS FIDUCIARY DUTY TO THE PLAINTIFF, MRS. DOLAN.

In her reply brief, appellant includes the following argument:

THE APPELLATE DIVISION HAS THE RIGHT TO PLENARY REVIEW IN THIS CASE BECAUSE NJ REAL PROPERTY LAW AND NJ STATUTES AS APPLICABLE TO THIS REAL ESTATE CASE, AND SUCH PLENARY REVIEW AS A MATTER OF LAW WOULD RESULT IN A REVERSAL OF THE LOWER COURT DECISION IN PLAINTIFF/APPELLANTS' FAVOR.

 

 

 

 

II.

Our review of a trial court's factual findings is limited. Estate of Ostlund v. Ostlund, 391 N.J. Super. 390, 400 (App. Div. 2007). We are not permitted to "weigh the evidence, assess the credibility of witnesses, or make conclusions about the evidence[,]" Mountain Hill, LLC v. Township of Middletown, 399 N.J. Super. 486, 498 (App. Div. 2008), and may not disturb the trial court's factual findings "unless they are so wholly insupportable as to result in a denial of justice[.]" Rova Farms Resort, Inc. v. Investors Insurance Co., 65 N.J. 474, 483-84 (1974). However, "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).

Plaintiff challenges the trial court's finding that the "basic law of life estates does not apply to this matter because a specific Agreement was put in place which alters the concept that the life tenant be responsible for all costs associated with the premises." Plaintiff argues that this holding impermissibly converted defendant's future interest as a remainderman to a present interest by transferring rights to possession of the property and collection of certain rents.

In the October 13, 2005 quitclaim deed, plaintiff transferred her ownership in the property to defendant for the sum of one dollar and retained "a life estate interest in the subject property." The contemporaneous maintenance agreement obligates defendant to assume all financial responsibilities regarding the property.

Our role in interpreting the terms of a contract is to "discern and implement the common intention of the parties." Pacifico v. Pacifico, 190 N.J. 258, 266 (2007) (citing Tessmar v. Grosner, 23 N.J. 193, 201 (1957)). We must consider what is written in the context of the circumstances at the time of drafting and to apply a rational meaning in keeping with the "expressed general purpose." Atl. N. Airlines, Inc. v. Schwimmer, 12 N.J. 293, 302 (1953).

Standing alone, the phrase "the Grantor retains a life estate interest in the subject property[,]" as found in the deed, would indicate that plaintiff intended to retain the exclusive right of possession of the property with all the rights and obligations normally associated with the creation of a life estate, including the right to receive income derived from the property. See B.D. v. Div. of Med. Assistance & Health Servs., 397 N.J. Super. 384, 391 (App. Div. 2007) (noting that while the phrase "for the life of" typically symbolizes a grantor's intent to create a life estate, "other aspects of the lease tend to suggest an intent to convey some different interest."); see also Restatement (Second) of Property 119 (1936) ("The owner of a possessory estate for life, during the continuance of such estate has the privilege of taking and receiving all issues and profits derived from the land."). However, plaintiff and defendant executed the deed and maintenance agreement contemporaneously and both instruments must be read together. It is therefore clear that the parties intended that plaintiff would enjoy possession while defendant was responsible for all of the property's costs.

Normally, life tenants bear the responsibility of all costs associated with the property. See Restatement (Second) of Property 129 ("[T]he owner of an estate for life who has either the privilege to receive issues and profits, or the privilege to receive rent and income, has duties to . . . keep paid all current taxes, . . . [and] pay any expense incidental to the management of the land[.]"). Here, defendant assumed the obligations for all expenses relating to the property.

As the agreement was silent as to rent entitlement, Judge Harz undertook a determination of the intent of the parties based on "the reasonable expectation and intentions of the parties, and . . . equitable principles . . . ." Judge Harz had the opportunity to observe the witnesses and determined that defendant's testimony that he would not have entered into the agreement and undertaken responsibility for all expenses of the property had he not been entitled to rental income, was credible. Judge Harz also determined that plaintiff's testimony regarding the Muzykas' alleged mistreatment of her was not credible. Thus, there is no explanation for plaintiff's failure to voice her concerns regarding the rental income when defendant and other tenants began residing in the home in 2007. As Judge Harz noted in her opinion, plaintiff's home is a two-story home and plaintiff could have inhabited only one of the units. In addition, both defendant and the drafting attorney testified that at the time the deed and agreement were executed it was discussed and anticipated that defendant would reside in the home and the issue of rent was never discussed.

We find that the court's decision to award defendant the income he anticipated from the second-floor unit was an appropriate attempt to "discern and implement the common intention of the parties." Sachau v. Sachau, 206 N.J. 1, 5 (2011) (citations omitted).

Plaintiff also argues that the deed and the maintenance agreement are unambiguous, therefore, the court lacked the power to modify their terms. While the language may be unambiguous, the parties do not address who is entitled to collect rents. "When the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court." Restatement (Second) of Contracts 204 (1981). This section is "to be applied in cases in which the parties failed to agree regarding an issue, generally because they did not anticipate that it would arise or merely overlooked it." Pacifico, supra, 190 N.J. at 266.

In the absence of such an agreed-upon provision, Judge Harz was required to determine who was entitled to the rental income. Judge Harz considered the relationship of the parties and the circumstances at the time the deed and agreement were executed and determined that the purpose of the agreements would best be served if defendant received the rental proceeds he anticipated.

As we stated in Joseph Hilton & Assocs., Inc. v. Evans, 201 N.J. Super. 156, 171 (App. Div.), certif. denied, 101 N.J. 326 (1985), "the conduct of the parties after execution of the contract is entitled to great weight in determining its meaning." Plaintiff was aware that defendant and other tenants were living in the home beginning in 2007 and she never expressed a concern or interest regarding the rental income; nor did she object to defendant residing there.

Plaintiff next argues that the court improperly placed the burden on her to prove that she was entitled to the rental income. Referring to the court's action as a "modification" of the agreements, plaintiff argues that defendant should have been required to prove by clear and convincing evidence that a modification was warranted, citing the Statute of Frauds, N.J.S.A. 25:1-13, for support. However, the deed and agreement were not modified, as plaintiff suggests. Rather, Judge Harz discerned the parties' intent at the time of the execution of the deed and agreement "by probing their positions at an evidentiary hearing." See Pacifico, supra, 190 N.J. at 267.

We are satisfied that the remainder of plaintiff's arguments are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We add only the following comments.

Plaintiff argues that defendant, as her attorney-in-fact, owed a fiduciary duty to her which he violated by comingling the rental income with his personal funds. The provision of the power of attorney that gives defendant the power to collect rents does not require him to keep those funds in trust for plaintiff. Further, plaintiff executed the power of attorney on August 9, 2005, prior to the execution of the deed and agreement, and thus prior to defendant's assumption of all of the financial obligations of the property.

Affirmed.

1 Mr. Muzyka, Sr. passed away in 2009.

2 Appellant raised an additional issue in her reply brief which is not properly before us. A.D. v. Morris Cnty. Bd. of Soc. Servs., 353 N.J. Super. 26, 30-31 (App. Div. 2002).