D'Agrosa v Coniglio

[*1] D'Agrosa v Coniglio 2006 NY Slip Op 51305(U) [12 Misc 3d 1179(A)] Decided on July 6, 2006 Supreme Court, Nassau County Galasso, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 6, 2006
Supreme Court, Nassau County

Frieda D'Agrosa, Plaintiff,

against

Louis J. Coniglio, Defendant.



002909/06



Attorney(s)

DANZIG FISHMAN & DECEA ESQS.

BY: THOMAS B. DECEA

Attorneys for Plaintiff

One North Broadway, Suite 1202

White Plains NY 10601

(914) 285-1400/Fax (914)285-1401

MYRON A. KANTER ESQ.

Attorney for Defendant

510 Broadhollow Road, Suite 207

Melville NY 11747

(631) 845-7100

Honorable John M. Galasso, J.

Plaintiff's motion pursuant to CPLR §3212 and §3211(b) for an order granting her summary judgment and compelling defendant to reconstitute a trust and to dismiss defendant's affirmative defenses and defendant's cross-motion for summary judgment are determined as follows:

Plaintiff herein seeks a declaratory judgment that certain settlement documents in a disposed Suffolk County matter constitute a trust and, pursuant to that trust, an order directing specific performance by defendant of his obligation to reconstitute and maintain the trust fund for the support and care of the parties' ninety-nine-year-old mother. Defendant cross-moves for summary judgment based upon his counterclaims against plaintiff under theories of misappropriation and conversion and for plaintiff's failure to provide an accounting.

For the purposes of this decision the Court considers first the issue of whether or not a trust was established by the relevant documents.

Plaintiff and defendant, siblings, have been involved over the years in litigation in the

Supreme Court, Suffolk County (Index #

2541/03 and #

27973/04) over issues that are not relevant here involving the dissolution of a commercial partnership. [*2]

The only salient fact to be gleaned from the first litigation is that in order for the parties to provide

for the care of their mother, a paragraph was inserted into a settlement agreement dated July 23, 2004 (Index #

2541/03). The paragraph provided that each would continue to equally contribute to the support and care of their mother for the rest of her life and each was to deposit $100,000.00 into a Bank of New York account by a certain date. Plaintiff would be allowed to issue checks on her signature alone and would be responsible for keeping defendant informed of the account's use on a monthly basis by bank statements and canceled checks (par. 3.(B)).

On May 20, 2005 a stipulation of settlement under the second litigation, Index #

27973/04, was signed by the attorneys and so-ordered by the Court. That settlement contained certain handwritten provisions including one that plaintiff deliver an accounting for the joint account held for the benefit of their mother before the defendant would execute a stipulation of discontinuance.

In a side agreement dated May 24, 2005 which addressed solely their mother's support, the parties acknowledged the delivery of two checks issued for $100,00.00 each for prompt deposit by their respective attorneys in the Bank of New York account. In addition to the monthly bank statements and cancelled checks referred to in the July 2004 stipulation, plaintiff agreed to provide defendant with the names and addresses of the nurses' aides caring for their mother along with information regarding their working hours and hourly pay rates, thus reiterating the handwritten portion of the May 20th document.

The side agreement was signed by both parties and their attorneys. Thereafter, a stipulation of discontinuance with prejudice was filed under Index #

27973/04

On July 6, 2005, six weeks after the deposits, defendant unilaterally withdrew his $100,000.00 contribution and, according to his affidavit, set aside the money in a separate account as a means of safeguarding it solely for his mother's needs.

Plaintiff claims that the account was actually a trust established by these documents for the benefit of their mother and that both plaintiff and defendant, as co-trustees, are fiduciaries. She asserts that the July 23, 2004 settlement support clause reflected the agreement to establish a trust and the May 24, 2005 side agreement was the document funding and executing the trust.

Accordingly, plaintiff maintains defendant violated his fiduciary duty by withdrawing the money in the first instance, whether or not he was dissatisfied with her accounting methods or feels she had [*3]

misappropriated some of the money for her own purposes. Initially, defendant contends that the instant motion is precluded under the theory of res judicata because of two post-judgment decisions of the Supreme Court, Suffolk County. Res judicata only applies to a claim that has been brought to its final conclusion (Schwartzreich v. E.P.C. Carting Co., Inc., 246 AD2d 439).

The undersigned does not have access to the complete court records maintained in Suffolk County. However, it appears from a decision of the Supreme Court (Berler, J.) dated July 22, 2005 under Index #

27973/04 that the Court denied plaintiff a preliminary injunction against defendant because she did not sustain her burden of proof. The relief plaintiff sought in her application was based upon breach of contract and the issue of a trust was never raised.

By further decision dated August 16, 2005 on a motion to reargue, the Court found that the issues raised in plaintiff's application did not involve the settlement at hand which was discontinued with prejudice under Index #

27973/04, but rather a new or separate contractual arrangement. Thus, it is clear that the Court was not asserting any supervisory power over the enforcement of the side agreement which plaintiff now avers to have executed the trust.

Accordingly, the Court determines that the denial of the preliminary injunction was not an adjudication on the merits of the underlying action and therefore res judicata does not apply (Rater v. Fountains Clove Road-Apartments, 118 AD2d 843).

In addition, collateral estoppel does not lie because of any comments regarding the evidence contained in the Court's opinion. Those were with reference to questions of fact raised by defendant in his opposition to the preliminary injunction and did not reflect conclusions as a matter of law. Further, since plaintiff did not pursue the matter under a new action in Suffolk and defendant does not object to venue here, she is not estopped from maintaining the instant action.

To test plaintiff's trust theory the document to be reviewed first is the side agreement dated May 24, 2005 which funded the account and, according to plaintiff, established the actual trust (Estates Proceedings & Trusts Law § 7-1.18). There is no dispute that the agreement is not acknowledged in the manner required for the recording of a conveyance instrument (Estates Proceedings & Trusts Law § 7-17; Real Property Law §291, et. seq.). It is simply signed by the parties and their attorneys.

The Court of Appeals was faced with a similar situation where a post-nuptial agreement did not contain the formality of an acknowledgment as required under the Domestic Relations Law (Matisoff v. Dobi, 90 NY2d 127). There the Court held that the recent admissions by the parties that their signatures were genuine failed to validate the unacknowledged agreement even though it was drafted by an attorney. It reversed the lower Court which concluded that since the terms of the agreement were not alleged to be based on fraud, duress or misunderstanding, failure to comply with the statutory requirement of acknowledgment did not bar its enforcement.

In comparison, Estate Proceedings & Trust Law § 5-1.1 (f)), which concerns a waiver of the right to election, contains the identical more restrictive acknowledgment language as the Domestic Relations Law under discussion in the Matisoff case. Yet, it has been held that in the absence of a valid acknowledgment, proof of a valid execution can be established from some other person who subscribed his name contemporaneously with the parties (In Re Estate of Saperstein, 254 AD2d 89). In Saperstein , that witness was an attorney.

Unlike the more restrictive language of Domestic Relations Law and §5-1.1(f) of the Estate Proceedings & Trust Law, §7-1.17 provides for an alternative method of execution of a trust: it may be executed in the presence of two witnesses. The statute does not require the witnesses' signatures to be in accordance with proof by a subscribing witness as described under Real Property Law §304. Nor does the proof of the instrument require any other type of authentication, such as clerk's certification (General Construction Law §11; In Re Tavis, 184 AD2d 505).

Accordingly, the Court finds the funding document validly executed pursuant to Estate Proceedings & Trusts Law §7-1.18.

It is not enough for the Court to determine that the funding instrument was properly executed. The issue of whether that document taken together with the settlement agreement, paragraph 3.(B) under the Index #

2541/03, which the Court construes as one instrument, is the expression of the parties' intent to establish a trust.

The Court notes that it is not essential to use the words trust or trustee in order to create a valid trust pursuant to relevant statutes (In Re Mannara, 5 Misc 3d 556; Morse v. Morse, 85 NY 53). It is sufficient if the language used fulfills the purpose of the statute (Donovan v. Van De Mark, 78 NY 244). It is also beyond cavil that stipulations of settlement are subject to the principles of contract interpretation and must be enforced according to their terms without reference to extrinsic evidence

(Carney v. Carozza, 16 AD3d 867). Intent is to be gathered from the whole instrument and is a question of law (Morris v. Ward, 36 NY 587). Only when the language is ambiguous can one look to the surrounding circumstances and situation of the parties (Rome v. Vescio, 58 AD2d 990).

There are four elements of a trust: (1) a designated beneficiary; (2) a designated trustee; (3) sufficiently identified property to enable title to pass to the trustee; and (4) the actual delivery of the property to the trustee with the intention of passing legal title to the trustee (In Re Mannara, supra ).

The intent of the donor to create a trust relationship is what controls; however, the "test is objective rather than subjective, a question of manifestation of intent rather than actual intent" (In Re Mannara, supra , at 558).

The two documents at bar contain the fundamental attributes of a trust instrument. There is a beneficiary, two trustees, one of whom has a duty to manage the account, a sufficiently identifiable property ($200,000.00) and the delivery of the funds to the account which is to be held jointly. In addition, it also contains terms of limitation, i.e., for the rest of their mother's life (see Donovan v. Van De Mark, supra ; Cook v. Platt, 98 NY 35).

Thus, the Court reaches the objective conclusion that a trust was established.

Defendant vehemently denies that his intention was to establish a trust and argues that the documents manifest a contract only and that plaintiff was acting as an agent merely as a matter of convenience and not as a fund manger. He professes that his withdrawal of $100,000.00, his original contribution, was an anticipatory breach because of use of the account by plaintiff for her own benefit by issuing several checks in 2005 totaling $4,606.00. He also submits additional evidence that after he withdrew the money on July 7, 2005, plaintiff attempted to withdraw what she believed to be the entire amount remaining in the account, $197,817.22, which sum included defendant's contribution.

Further, defendant counterclaims that plaintiff failed to provide a proper accounting on a continuing basis.

The undersigned concludes, however, that plaintiff and defendant did not intend to execute a simple contract whereby either could remove their contribution at any time, (e.g., In Re Seeberg's Estate, 46 NYS2d 412).

Plaintiff and defendant had a litigious history and evidentially could not agree on many issues, including the support of their mother. Plaintiff, who actually saw to her mother's care since defendant lived out-of-state, necessarily wanted to be assured that sufficient monies were available. Toward that end she, as did defendant, gave up her right to her own money to use as she pleased to place it in an account to be used for this limited purpose.

To conclude that there was an understanding that at any time either plaintiff or defendant could take back their individual contributions would be tantamount to the parties agreeing to adhere to the status quo method of paying their mother's expenses, which undisputedly was not working for them. This interpretation is without "common-sense" (Gilbert v. Gilbert, 39 NY2d 663, 669).

The Court also keeps in mind in the search for the probable intentions of the grantors that an express provision was included that plaintiff's signature alone would be sufficient to access the funds. Ordinarily, this provision would not have been necessary if the joint account previously established was continued in the manner pre-dating the settlements. Furthermore, although it is still in the middle of the 2005 tax year, it is difficult for the undersigned to believe that the parties, who appear to possess some financial sophistication, as well as their attorneys, never considered the certain beneficial tax consequences of a trust.

As to defendant's declaration that the account was held as tenants in common, section 675 of the Banking Law states that joint accounts are prima facie proof of joint tenancy. However, although defendant has presented proof to rebut the presumption of survivorship by the settlement remainder language changing the vested right of survivorship from the joint tenant to the individual parties' actual heirs, the Court nevertheless concludes that the designation of survivorship other than that presumed by law does not impact the trust itself, only its remainder. Both parties to the account being alive makes this distinction, at best, academic.

Accordingly, plaintiff's motion for this Court to determine that a trust had been established is granted.

With respects to the remainder of her application, as well as defendant's cross-motion, summary judgment is denied. The issues of unclean hands, misappropriation, violation of the trust account and accounting deficiencies, etc., are all issues of fact and are not appropriate for equitable relief and/or summary judgment at this juncture.

Plaintiff is directed to request a Preliminary Conference in order for discovery to commence in an expeditious manner.

Dated: July 6, 2006 ....................................................................J.S.C.