Brand v. Brand

• Decision Date: 27 January 1987
• Docket Number: No. 488,D,488
• Citation: 811 F.2d 74
• Parties: Robert BRAND, Plaintiff-Appellee, v. Herbert BRAND, Defendant-Appellant. ocket 86-7571.
• Court: U.S. Court of Appeals — Second Circuit

Page 74

811 F.2d 74

Robert BRAND, Plaintiff-Appellee, v. Herbert BRAND, Defendant-Appellant.

No. 488, Docket 86-7571.

United States Court of Appeals Second Circuit.

Argued Dec. 10, 1986.

Decided Jan. 27, 1987.

Guy L. Heinemann, New York City, for plaintiff-appellee.

Herbert Brand, Yaphank, N.Y., defendant-appellant pro se.

Before KAUFMAN, TIMBERS and MAHONEY, Circuit Judges.

TIMBERS, Circuit Judge:

Appellant Herbert Brand ("appellant" or "Herbert") appeals pro se from a judgment entered June 16, 1986 in the Eastern District of New York, Charles P. Sifton, District Judge, imposing a constructive trust for the equal benefit of Herbert and Robert Brand, the two sons of Anton Brand, on certain assets held by appellant and directing an accounting by appellant with respect to his handling of those assets.

The judgment appealed from was entered on the court's findings of fact and conclusion of law. The court held that appellant had promised his father to preserve during the father's lifetime certain assets which, on his death, would constitute his estate; that the father, in reliance on the promise, had transferred to appellant title to, or the interest in, almost all of his assets; and that appellant's breach of the promise resulted in his unjust enrichment.

The sole issue on appeal is whether the court erred in imposing the constructive trust.

We hold that the court's findings of fact are not clearly erroneous. We further hold that its conclusion of law comports in every respect with the New York law on constructive trusts applicable to this diversity action. We therefore hold that the court correctly imposed the constructive trust.

We affirm.

I.

We summarize only those facts believed necessary to an understanding of the issue raised on appeal.

Appellee Robert Brand ("appellee"), plaintiff below, and appellant, defendant below, are brothers. They are the only children of the late Anton Brand ("Anton") and the late Maria Brand ("Maria"). Both brothers are in their early forties. Appellee is a citizen of Connecticut. He resides with his wife and two children in Newtown. He is employed as a salesman by a chemical company. Appellant is a citizen of New York. He resides on Long Island. He has been a part-time substitute school teacher and, during the summers, a lifeguard.

On February 23, 1950, Anton executed a will leaving his entire estate to his wife Maria, or, in the event that she predeceased him, to his children in equal shares, per stirpes. That will never was revoked or modified. Maria died in 1979. After Maria's death and throughout the period giving rise to the instant action, appellant lived with Anton in a house in Yaphank, New York.

Sometime during 1979, Anton was stricken with Parkinson's disease. Beginning in early 1983, Anton transferred to appellant interests in certain bank and securities accounts ("the accounts") as follows:

                Account                       Date of Transfer   Nature of Transfer
                Brokerage account at          February 4, 1983   From Anton to Anton and
                Janney Montgomery Scott                          appellant as joint tenants
                Securities account at         February 15, 1983  From Anton to Anton and
                Federated High Income                            appellant with rights of
                Securities                                       survivorship
                Union Savings money           March 24, 1983     From Anton to Anton and
                market account                                   appellant with rights of
                                                                 survivorship
                Barclay's Bank checking       August 4, 1983 to  From Anton to Anton and
                account                       September 2, 1983  appellant with rights of
                                                                 survivorship.
                Putnam High Yield             1983               From Anton to Anton and
                Securities Trust                                 appellant as joint tenants.
                Limited partnership interest  1984               From Anton to Anton and
                in Damson Energy                                 appellant jointly.
                Company
                

On November 16, 1984, appellant filled out a preprinted form deed conveying title to the Yaphank house and property ("the Yaphank property") from Anton to appellant. Anton executed and delivered the deed to appellant on the same day.

In a letter from appellant to appellee dated December 5, 1984, appellant discussed in detail Anton's illness and, in the event of his death, how his assets should be treated and how appellant and appellee should share his estate. Appellant suggested that the accounts be left intact and stated that "the interest [should be] shared equally" and that "[a]fter taxes your share should come to over $400. a month. That would be every month for the rest of your life." Appellant suggested also that the Yaphank property "could be sold but I think that would be a mistake. Aside from making you pay high taxes ... it would give a goodly portion of the value of the house to the Government. I think this value should be kept by both of us." Appellant suggested that certain rooms in the house be rented, and stated that "[w]e could split [the] profit and I could also mail you the money every month." The letter further stated:

"I haven't taken this up with Pop but I think he would agree with my ideas of how the estate should be divided. Pop and I have already taken measures to avoid either lawyers or the Govt. from getting anything from his death. And, as I see it, if we use this plan we will continue to avoid such potential leeches. And leeches are exactly what they are. Once a lawyer is involved his intentions will be to create greed and discontent. And, if the Government gets involved with any major sale transactions they too become a leech, more of a bandit actually." (emphasis added).

Anton died on July 6, 1985. At that time, the aggregate value of the accounts was approximately $125,000; the value of the Yaphank property was between $100,000 and $125,000. From July to September 1985, both appellee and his attorney attempted through letters to reach a settlement with appellant regarding distribution of the assets. Appellant did not answer these letters.

Appellee commenced the instant diversity action on November 18, 1985. Appellee alleged that, despite the transfer of the assets consisting of the accounts referred to above, Anton before his death had maintained control over, and beneficial ownership of, the accounts. He had continued to reside in the Yaphank house and to pay for its upkeep. Appellee alleged that Anton had transferred the assets solely for the purpose of convenience and had intended appellant to distribute them equally to appellant and appellee on Anton's death. Appellee sought the imposition of a constructive trust on the accounts and the Yaphank property, an accounting by appellant as to his handling of those assets, and money damages.

After a one day bench trial on March 4, 1986, the court announced its findings of fact and conclusion of law from the bench. The court directed that judgment be entered imposing a constructive trust on the accounts, the Yaphank property, and an automobile in appellant's possession to which, evidence at trial showed, Anton had title prior to his death. The court also directed appellant to render an accounting with respect to his handling of those assets following Anton's death, and directed both appellant and appellee to proceed to probate in the appropriate New York Surrogate's Court.

On June 16, 1986, judgment was entered on the court's findings of fact and conclusion of law. This appeal followed.

II.

With these facts and prior proceedings in mind, we turn directly to the propriety of the court's imposition of a constructive trust.

It is common ground that New York substantive law applies in this diversity action. " 'A constructive trust is the formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee.' " Simonds v. Simonds, 45 N.Y.2d 238, 241, 380 N.E.2d 189, 193, 408 N.Y.S.2d 359, 363 (1978) (quoting Beatty v. Guggenheim Exploration Co., 225 N.Y. 380, 386, 122 N.E. 378, 380 (1919) (Cardozo, J.)).

To be entitled to a constructive trust under New York law, a party must establish four elements: (1) a confidential or fiduciary relationship; (2) a promise, express or implied; (3) a transfer made in reliance on that promise; and (4) unjust enrichment. Bankers Security Life Insurance Society v. Shakerdge, 49 N.Y.2d 939, 939, 406 N.E.2d 440, 440, 428 N.Y.S.2d 623, 624 (1980); Sharp v. Kosmalski, 40 N.Y.2d 119, 121, 351 N.E.2d 721, 723, 386 N.Y.S.2d 72, 75 (1976).

The district court held that appellee had established each of these four elements and hence that, under New York law, equity required the imposition of a constructive trust. To the extent that this holding rested on the court's findings of fact, it may not be set aside unless those findings were clearly erroneous. Fed.R.Civ.P. 52(a). The Supreme Court recently defined the nature of appellate review under the clearly erroneous standard. Anderson v. City of Bessemer City, 470 U.S. 564, 573-76 (1985). Anderson strikes us as having particular application to the scope of our review on the instant appeal:

"Although the meaning of the phrase 'clearly erroneous' is not immediately apparent, certain general principles governing the exercise of the appellate court's power to overturn findings of a district court may be derived from our cases. The foremost of these principles ... is that '[a] finding is "clearly erroneous" when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.' United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948). This standard plainly does not entitle a reviewing court to reverse...