Rudow v. Fogel

• Decision Date: 17 September 1981
• Citation: 426 N.E.2d 155,12 Mass.App.Ct. 430
• Parties: William RUDOW 1 v. Albert FOGEL.
• Court: Appeals Court of Massachusetts

Page 155

426 N.E.2d 155

12 Mass.App.Ct. 430

William RUDOW ¹ v. Albert FOGEL.

Appeals Court of Massachusetts, Essex.

Argued May 20, 1981.

Decided Sept. 17, 1981.

James T. Ronan, Salem (Mary P. Harrington, Salem, with him), for plaintiff.

Bertram Glovsky, Salem (Jane Kilduff, Salem, with him), for defendant.

Before ARMSTRONG, ROSE and DREBEN, JJ.

DREBEN, Justice.

This dispute is the sequel to Rudow v. Fogel, 376 Mass. 587, 382 N.E.2d 1046 (1978), and involves a parcel of real estate located in Rockport, Massachusetts, which has been the subject of litigation since the death of the plaintiff's mother in 1963. ² The principal issue in this appeal is what law should Massachusetts apply in determining whether the defendant, the plaintiff's uncle, holds the property in constructive trust for the plaintiff. The trial judge found that the property was transferred to the defendant in New York on an oral trust at a time when the plaintiff, his mother, and the defendant were all domiciled in New York. We hold that, in the circumstances of this case, Massachusetts should look to New York law.

We state the relevant facts found by the trial judge. Marvin and Florence Rudow, the parents of the plaintiff William Rudow, purchased the Rockport property in 1958, taking title as tenants by the entirety. They operated a jewelry store in Rockport during the summer but lived in New York City during the rest of the year, where Florence taught school. In 1961, William's parents separated, Florence brought divorce proceedings in New York, and Marvin moved to Rockport. The plaintiff and Florence lived in New York with Florence's mother and with the defendant Albert Fogel, who was Florence's brother.

Great animosity developed between Marvin and Florence. Nevertheless, in 1962, while Florence was hospitalized for cancer Marvin conveyed his interest in the Rockport property to Florence. The judge found this was done "out of a sense of remorse over the failure of the marriage and also because he felt sorry for his wife." The conveyance was a gift to Florence without any promise on her part of any kind.

In May, 1962, Florence made a will which, after several small gifts, left the residue of her property in trust for the plaintiff to be distributed to him at age twenty-five. ³ Thereafter, on July 27, 1962, "anxious to keep the property away from her husband, then and in the future", Florence conveyed the Rockport property to the defendant in New York. The transfer was without consideration. The judge found, and his finding is not clearly erroneous, that at the time of transfer the defendant orally agreed that he would hold the property for the benefit of the plaintiff and "would turn it over to the plaintiff when (he) reached maturity." The judge also found that there was no fraud on the part of the defendant.

It appears that there is a difference between Massachusetts local law ⁴ and New York law as to when a confidential (fiduciary) relationship may be found between close family members so as to impose a constructive trust. While recognizing that "respectable authority", including the State of New York, ⁵ imposes a constructive trust on the principle "that a confidential relationship arises where the conveyance is made between members of a family", Ranicar v. Goodwin, 326 Mass. 710, 713, 96 N.E.2d 853 (1951), the Supreme Judicial Court has ruled, as a matter of Massachusetts local law, that "a confidential relationship does not arise merely because the conveyance was made between members of the family, even if the transferee promised to hold the land in trust." Meskell v. Meskell, 355 Mass. 148, 152, 243 N.E.2d 804 (1969). The court explicitly rejected Restatement (Second) of Trusts § 44, Comment c (1959). ⁶ Ibid. This holding was reaffirmed in Kelly v. Kelly, 358 Mass. 154, 156-157, 260 N.E.2d 659 (1970). See also Markell v. Sidney B. Pfeifer Foundation, Inc., --- Mass.App. ---, --- - ---, ^a 402 N.E.2d 76 (1980). Compare Samia v. Central Oil Co. of Worcester, 339 Mass. 101, 112, 158 N.E.2d 469 (1959), where additional factors resulted in a fiduciary relationship.

New York law permits a confidential relationship to be found "in the bond of kinship", and "unjust enrichment under cover of the relation of confidence ... puts the court in motion." Sinclair v. Purdy, 235 N.Y. 245, 253, 139 N.E. 255 (1923). See also Farano v. Stephanelli, 7 A.D.2d 420, 424, 183 N.Y.S.2d 707 (1959); Janke v. Janke, 47 A.D.2d 445, 448-449, 366 N.Y.S.2d 910 (1975), affirmed 39 N.Y.2d 780 (1976). See also 1 Scott, Trusts §§ 44.2, 45.2 (3d ed 1967) and cases cited, and 4 Palmer, Law of Restitution § 19.3(b) (1978), which criticizes the Massachusetts rule.

The trial judge, applying Massachusetts local law, ruled that there was no constructive trust. Although he refused specific performance, he held that the plaintiff was not without remedy, and entered judgment for the plaintiff in the amount of the fair value of the property less expenses incurred by the defendant. The award to the plaintiff in the amount of the value of the property, less reasonable expenses, is in accord with Massachusetts law. See Cromwell v. Norton, 193 Mass. 291, 292-293, 79 N.E. 433 (1906); Kemp v. Kemp, 248 Mass. 354, 357-358, 142 N.E. 779 (1924); Collins v. Hillis, 7 Mass.App. 883, 386 N.E.2d 1287 (1979) (action by beneficiary of promise).

In determining that there was no constructive trust, the judge followed the traditional conflicts rule which looks to the law of the situs for determining all material questions involving legal or beneficial interests in land. See, e. g., Herman v. Edington, 331 Mass. 310, 314, 118 N.E.2d 865 (1954) (whether sufficient declaration of an express trust); Hill v. Peterson, 323 Mass. 384, 386, 82 N.E.2d 11 (1948) (resulting trust). ⁷ See also 5 Scott, Trusts § 652, p. 4123 (3d ed. 1967).

The Supreme Judicial Court has, however, in a series of cases, rejected the notion that a single test is appropriate for determining which law governs all questions relating to a transaction. The court can be said to have adopted a "more functional approach." See Choate, Hall & Stewart v. SCA Servs., Inc., 378 Mass. 535, ---, ^b 392 N.E.2d 1045 (1979). See also Restatement (Second) of Conflict of Laws § 6(2) (1971). ⁸

Thus, although the traditional torts conflicts rule provides for reference to the law of the place where the tort occurred, in Pevoski v. Pevoski, 371 Mass. 358, 360, 358 N.E.2d 416 (1976), the court recognized that "another jurisdiction may sometimes be more concerned and more involved with certain issues than the State in which the conduct occurred." In that case, which involved a three-car collision in New York State, the Pevoski automobile was registered in Massachusetts (as apparently were the other two) and all three vehicles were driven by Massachusetts residents. The plaintiff, a passenger in the car driven by her husband, brought an action against him for damages, and he defended on the ground of interspousal tort immunity. The court held that Massachusetts law governed that question. After pointing out that "the economic and social impact of this litigation will fall on Massachusetts domiciliaries and a Massachusetts insurer," the court concluded, "New York has an undoubted interest in enforcing its traffic laws and in making its highways safe for travel but it has no legitimate interest in regulating the interspousal relationships of Massachusetts domiciliaries who chance to be injured within its borders." Ibid.

Although the court in Choate, Hall & Stewart v. SCA Servs., Inc., had no occasion to look to foreign law, id. at ---, ^c 392 N.E.2d 1045, it rejected reference to the law of the place of making of a contract as determinative of all issues involved in the transaction. Id. at ---, ^d 392 N.E.2d 1045. The court noted, "(T)here is nothing unusual about the laws of different States applying respectively to various phases of a single transaction or incident." Id. at ---, ^e 392 N.E.2d 1045.

While the court has not recently ruled on choice-of-law questions concerning trusts involving land, it has rejected the law of the situs as the only criterion for resolving all questions pertaining to an inter vivos trust. This is true even if the trust expressly directs that the trust shall be governed by and construed in accordance with internal Massachusetts law. In First Natl. Bank v. Shawmut Bank, 378 Mass. 137, --- - ---, ^f 389 N.E.2d 1002 (1979), a Connecticut settlor created a revocable inter vivos trust in Massachusetts and directed her trustees to pay from the trust all estate and inheritance taxes imposed by reason of her death. Her will, executed while she was a resident of Connecticut but probated in Florida, her domicile at the time of her death, provided that such taxes were to be paid from the residue of her estate. In sending the matter back for more findings, the court found a significant choice of law question despite earlier Massachusetts cases ⁹ which appeared to have rejected a reference to any law, other than Massachusetts local law, to determine tax apportionment questions for Massachusetts trusts. The court found it unnecessary to decide "at this time whether the suggestion of the Isaacson and Warfield opinions on choice of law would be accepted today." Id. at ---, ^g 389 N.E.2d 1002. While recognizing that the law of the situs would often be given recognition in construing the trust instrument and rights and obligations under it, particularly when the trust expressly so directs, the court pointed out, "In particular circumstances, there may be reason to look to the law of that jurisdiction with which the testator-settlor had the greatest contact at significant times (such as her domicile at the time of execution of the trust and will), or perhaps one would look to the law of that jurisdiction which the testator-settlor had reason to believe would be applicable." Id. at ---, ^h 389 N.E.2d 1002.

We think these...