Divorce Agreement Determines Estate Litigation Outcome
Allen v. Estate of Allen, No. A-2605-17TI, 2019 WL 150169 (N.J. Super. Ct. App. Div. Jan. 7, 2019).
This unpublished Appellate Division case covers a number of estate litigation topics, including real estate title issues, rights among spouses, and constructive trusts.
The facts of the case are relatively simple. In 1961, Norma Allen (“Norma”) and Donald L. Allen (“Donald”) were married. They had three children. On July 18, 1972, Norma and Donald executed a Divorce Agreement, which among other things, stated:
[Donald] shall, subsequent to the date of the execution of this agreement, and as soon as practical thereafter, aid [Norma] in securing a permanent home for [Norma] and the minor children in a location to be determined by both parties. The gross price of said home shall not exceed $35,000.00 and the down payment which [Donald] shall be required to pay shall not exceed the sum of $6,500.00 and be not less than $6,000.00. [Norma] shall then be responsible for the mortgage payments. [Donald] shall purchase the home in his own name because of his ability to obtain financing and shall thereafter immediately deed said property to [Norma] by Warranty Deed. [Norma] agrees that should at any time she remarry, then and in this event, said home shall be placed for sale by [Norma] and any equity therefrom divided equally between [Donald] and [Norma]. Should [Norma] either sell or transfer said home without the written consent of [Donald], said property should be appraised and a reasonable equity be determined. [Norma] should then pay one half of such equity.
Id. at *1.
On September 6, 1972, the Superior Court of Georgia issued a Final Judgment of Divorce, which incorporated Donald and Norma’s Divorce Agreement. Five days after their divorce was finalized, Donald and Norma were titled property in Little Silver and identified on the Deed to the property as “husband and wife”. The purchase price of the Little Silver property was $36,000, and the down payment was paid by Donald in the amount of $7,200. It was undisputed that Norma lived in the house in Little Silver until her death. She paid the property taxes, homeowners insurance, and general property maintenance. She never remarried.
Donald remarried and after living for a time in Georgia, moved with his second wife to Rumson, New Jersey. Donald’s second wife died and he married Karen. In or around 1998/1999, Donald and Karen relocated to Florida. Donald died on November 22, 2001. He bequeathed his entire estate to Karen and named her the personal representative of his estate. Thereafter, Karen had Donald’s Will admitted to probate in the State of Florida. The Will did not mention the Little Silver property.
On April 15, 2016, Norma filed a Complaint against Donald’s estate and Karen seeking a judgment declaring that she had sole, legal and equitable title to the Little Silver property. She alleged that she and Donald intended that she alone would have title to the property and that Donald held his interest under the Deed in constructive trust for her.
Norma died on March 17, 2017. The trial court thereafter entered an Order substituting Jennifer, (Norma’s daughter) the administratrix of Norma’s estate, as plaintiff in the action. Donald‘s estate filed an answer and counterclaim alleging it was entitled to one-half of the equity of the property.
In November 2017, the parties filed crossclaims for summary judgment and in January of 2018, the trial court heard oral arguments and the decision was placed on the record. The trial court entered an Order granting Norma’s estate’s motion for summary judgment and denied Donald’s estate any relief. In sum, the trial court found that under the circumstances, the appropriate remedy was a constructive trust, with Donald deemed to have held his interest in the property in trust for Norma. The trial court concluded that Norma’s estate had sole legal and equitable title to the property. Donald’s estate appealed.
Donald’s estate argued five issues on appeal which were all rejected by the Appellate Division as follows:
- Donald’s estate argued that the trial court erred by granting summary judgment because discovery was not complete. The Appellate Division disagreed, finding that the sole issue was whether Norma’s estate had legal and equitable title to the property. The facts material to that determination were undisputed. Those facts consisted of Donald and Norma’s Divorce Agreement, the Judgment of Divorce, the Deed to the property, and Norma and Donald’s actions regarding the property. Furthermore, the defendants did not demonstrate how further depositions or document discovery would have changed those material facts. Id. at *3.
- Donald’s estate argued that Donald and Norma held the property as tenants in common, not as tenants by the entirety. Therefore, when Norma died, Donald’s estate retained a one-half interest in the property. Here, the Appellate Division found that it was undisputed that Donald and Norma’s marriage was dissolved on September 6, 1972, five days before they acquired the property. Since Donald and Norma were not married at the time, they did not take the property as tenants by the entirety, rather they took the property as tenants in common. Nevertheless, that conclusion did not preclude the trial court from holding that Norma’s estate held sole legal and equitable title to the property based on the other factors mentioned by the trial court.
- Next, Donald’s estate argued that the trial court erred in imposing a constructive trust. The Appellate Division noted that the imposition of the constructive trust requires a two-part finding: (1) that the property has been obtained through a wrongful act; and (2) the wrongful act unjustly enriched the recipient. A wrongful act is usually, though not limited to, fraud, mistake, undue influence, or breach of a confidential relationship and can include innocent misstatements or even mistakes. Id. at *5. In the instant case, Donald and Norma’s Divorce Agreement required Donald to purchase a permanent home for Norma in his own name. The Agreement further required Donald to immediately transfer the property to Norma. By failing to do so, Donald committed a wrongful act. In addition, Donald’s estate would be unjustly enriched if it was permitted to retain an interest in the property.
- Donald’s estate also argued that Donald and Norma agreed to modify the Divorce Agreement and allow Donald to retain one-half interest in the property. The Court looked at both New Jersey and Georgia law and decided that under either jurisdiction the Divorce Agreement remains in effect because the Court never approved a modification of the Agreement. The Appellate Division also noted that although the record showed that Donald and Norma had deviated from certain provisions of the Agreement, such as the amount of the purchase price, the down payment, and the mortgage loan, the key provision of the Agreement, which required Donald to transfer title to the property to her, remained unaltered.
- Finally, the estate argued that the Deed to the property represents a novation, which supersedes the relevant portions of the Divorce Agreement. The Appellate Division recited the elements of novation, which include: (1) a previously valid contract; (2) an agreement to make a new contract; (3) a valid new contract; and (4) an intent to extinguish the old contract. Id. at *7. The Appellate Division found that in this case there was no evidence that Donald or Norma agreed to replace the Divorce Agreement with an entirely new contract. Thus, the Deed was not a novation.
The Appellate Division affirmed the trial court rulings in full.