Coco v. Coco

• Decision Date: 11 February 1985
• Citation: 107 A.D.2d 21,485 N.Y.S.2d 286
• Parties: Catherine COCO, Appellant-Respondent, v. Keith J. COCO, et al., Respondents-Appellants.
• Court: New York Supreme Court — Appellate Division

Page 286

485 N.Y.S.2d 286

107 A.D.2d 21

Catherine COCO, Appellant-Respondent, v. Keith J. COCO, et al., Respondents-Appellants.

Supreme Court, Appellate Division Second Department.

Feb. 11, 1985.

Phillips & Weiner, Lindenhurst (Robert L. Weiner and James F. Quinn, Lindenhurst, of counsel), for appellant-respondent.

Gordon J. Lang, New York City (Bruce Provda, New York City, on brief), for respondents-appellants.

Before TITONE, J.P., and BRACKEN, NIEHOFF and RUBIN, JJ.

NIEHOFF, Justice.

On this appeal we are called upon to decide whether Special Term erred in dismissing the plaintiff's cause of action to void a conveyance of real property and impose a constructive trust on defendants' interest in the property. For the reasons set forth below, we conclude that plaintiff's application to impose a constructive trust on the defendants' interest in the subject property should be granted and the matter should be remitted to Special Term in order to permit that court to fashion a judgment which will, as nearly as possible, return the parties to their respective pre-July, 1982, positions.

The plaintiff Catherine Coco is the mother of the defendant Keith J. Coco and mother-in-law of the defendant Veronica Coco. Prior to July 6, 1982, Catherine Coco was the sole owner of a nine-room house located at 38 Phipps Lane, Plainview, New York, having lived there for many years with her son Kevin. On July 6, 1982, plaintiff executed a deed to that house, which was recorded on July 9, 1982, whereby she conveyed the premises to herself and the defendants. The facts surrounding the conveyance and the events which transpired after the transfer of the property are as follows:

Before the execution of the deed involved in the suit, the defendants and their children were renting a house in Bethpage, New York. As part of their lease agreement the defendants had an option to buy the house. However, because of an earlier foreclosure action against them, the defendants were unable to obtain the necessary mortgage financing. Consequently, they could not exercise the option to purchase the Bethpage residence.

Sometime in March or April, 1982, the plaintiff, Kevin Coco, and the defendants had a meeting in order to discuss the possibility of their sharing a household. Unfortunately, and understandably, the details of the family members' agreement were arrived at orally and were never reduced to writing. Essentially, it was agreed that the defendants' family would move into plaintiff's house. In order to accommodate the new inhabitants it was agreed that the Plainview house would be refinanced and that the proceeds of the refinancing would be utilized to build a completely furnished extension dormer on the second floor of the house. The plan called for the defendants and their children to move into the existing first floor unit while the plaintiff would move into the newly constructed upstairs apartment and Kevin Coco would reside in a separate downstairs room. They also discussed and agreed upon the manner in which the servicing of the mortgage and carrying charges on the house were to be divided.

Pursuant to the parties' oral agreement, plaintiff deeded a one-half interest in the house to the defendants and the refinancing, in the form of a $55,000 loan, secured by a mortgage, was obtained from the Dime Savings Bank. The defendants paid no money to the plaintiff in return for that interest in the property.

In August, 1982, the defendant Keith J. Coco was injured while working as a New York City Police Officer. He received full pay until December, 1982, retired from the Police Department in February, 1983, under full disability, and received his first disability payment in March, 1983. In the meantime, in September, 1982, the defendants' family had moved into the house. Soon thereafter, the mortgage fell into arrears because of defendants' failure to make mortgage payments.

Eventually, the bank threatened foreclosure, and in June, 1983, plaintiff initiated this lawsuit, inter alia, for reconveyance of the one-half interest in the premises. Thus, what appears to have been a loving attempt to settle a family housing problem has now turned into a deep rift involving an avalanche of charges and counter-charges.

Sometime in August 1983, Keith, Veronica and their children moved out of the Plainview house. Before the refinancing and reconstruction of the house, it was encumbered with a 4% mortgage having a principal balance of approximately $2,500 and a monthly payment of $329. Now, the monthly mortgage payment is approximately $1,100.

The complaint in this action contains two causes of action and prays for a judgment (1) adjudging the July 6, 1982, deed to be null and void and discharging and canceling said deed of record, (2) directing the defendants to reconvey their interest in the premises to plaintiff, and (3) awarding plaintiff $5,000 based on the defendants' failure to make required mortgage payments and for their use and occupancy of the premises.

The answer of the defendants sets forth the affirmative defense of the Statute of Frauds and contains four counterclaims seeking monetary damages as well as a partition and sale of the premises.

After a nonjury trial, Special Term rendered its decision reciting the operative facts, and noting that the defendants admitted "to becoming delinquent on the mortgage". It then properly conformed the plaintiff's pleadings to the proof so as to enable the plaintiff to seek the imposition of a constructive trust, and correctly held that "constructive trust, by its very nature, does not require a writing, and thus the statute of frauds is inapplicable". Special Term also dismissed plaintiff's claim, in effect, to impose a constructive trust on the property as well as defendants' counterclaims for monetary relief. However, the court directed a partition and sale of the premises and it appointed a referee to oversee the sale. While plaintiff was denied any affirmative monetary relief against the defendants, she was awarded credits against the defendants' portion of the proceeds of the sale representing (1) "defendants' breach of contract in failing to pay sixty (60%) percent of the mortgage and taxes, if paid by plaintiff or the mortgagee, from October 27, 1983 to the date of the sale", (2) defendants' retention of a security deposit tendered by prospective tenants of the first floor apartment and (3) defendants' conversion of an insurance check.

Both sides appeal.

As stated above, we conclude that plaintiff's application to impose a constructive trust on defendants' interest in the real property located at 38 Phipps Lane, Plainview, New York should have been granted.

A constructive trust has been defined as "the formula through which the conscience of equity finds expression" (Beatty v. Guggenheim Exploration Co., 225 N.Y. 380, 386, 122 N.E. 378), and as the remedy to "be erected whenever necessary to satisfy the demands of justice" (Latham v. Father Divine, 299 N.Y. 22, 27, 85 N.E.2d 168). The essential purpose of a constructive trust is to prevent unjust enrichment (Sharp v. Kosmalski, 40 N.Y.2d 119, 386 N.Y.S.2d 72, 351 N.E.2d 721). Where property has been acquired in such circumstances that the holder of legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee (Beatty v. Guggenheim Exploration Co., supra, 225 N.Y. p. 386, 122 N.E. 378). Equity cries out for that result herein.

Generally, four factors are considered in ascertaining whether a constructive trust should be imposed upon a property interest: (1) the existence of a fiduciary or confidential relationship, (2) a promise, express or implied, (3) a transfer in reliance on the promise, and (4) unjust enrichment (see Bankers Security Life Ins. Soc. v. Shakerdge, 49 N.Y.2d 939, 428 N.Y.S.2d 623, 406 N.E.2d 440; Simonds v. Simonds, 45 N.Y.2d 233, 241-242, 408 N.Y.S.2d 359, 380 N.E.2d 189; Sharp v. Kosmalski, 40 N.Y.2d 119, 386 N.Y.S.2d 72, 351 N.E.2d 721, supra; Reiner v. Reiner, 100 A.D.2d...