Saff v. Saff , 61 A.D.2d 452 ( 1978 )

OPINION OF THE COURT

Simons, J.

Appellant has obtained a divorce from respondent because he abandoned her. She appeals from so much of the judgment as denied her alimony and failed to impose a constructive trust on one half of all respondent’s separately owned property (with one minor exception). She asserts that our prior decision in Janke v Janke (47 AD2d 445, affd 39 NY2d 786) supports her claim for this relief.

In Janke a majority of this court affirmed a trial court decision that imposed a constructive trust in favor of a wife upon a one-half interest in her husband’s restaurant business. The Court of Appeals affirmed, noting that the case presented largely factual issues. In view of our affirmance of the trial court’s findings that the husband had made a promise to his wife which induced her to transfer funds to him, that she had managed the business relying upon this conduct, and that the husband had thereby been unjustly enriched, there was little else the Court of Appeals could do (see CPLR 5501, subd [b]) for the rules of constructive trust are well established and require proof of no more than that (see McGrath v Hilding, 41 NY2d 625; Sharp v Kosmalski, 40 NY2d 119).

Contrary to the suggestion of appellant’s counsel at the trial of this action and renewed here, the decision in the Janke case did not presage acceptance of an evolving concept of judicially imposed community property and we know of no appellate court decision which has. Certainly the Court of Appeals affirmance of Janke cannot be read to favor such a rule. On the contrary, the important point of Janke is that given a confidential relationship and the same factual findings as the majority made there, a constructive trust would have been imposed in any event, whether the parties were married or not.

In this case we do not find evidence to support imposition of a constructive trust and, therefore, we affirm the judgment.

Appellant and her husband were married in 1936. At the time appellant worked as a maid and respondent was unemployed. Over the next few years both worked at various jobs and gradually they accumulated a small reserve of funds which they held in their joint names. In 1946, after a few false starts, respondent went into partnership with Wallace Dahl and the two men founded Jamestown Fabricated Steel as equal partners. Each man invested $2,000 but Dahl was short of cash and respondent loaned him $1,000 (later repaid) to purchase his half interest. The money for these payments came from the Saifs’ joint funds. In 1950 the company was incorporated and the capital stock was divided between respondent and Dahl. The company has prospered over the years and it is now estimated to have a net worth exceeding $500,000. In 1975 it grossed $590,000. Appellant has never had any legal interest in the business or in the corporate stock.

A minority of the court would grant appellant relief by imposing a constructive trust on one half of her husband’s stock in Jamestown Fabricated Steel, Inc., upon one half of whatever business profits respondent received from the corporation by way of profit sharing, and upon one half of the annual installments paid to respondent by the corporation to acquire real property formerly owned by him. In the alternative the minority believe her entitled to alimony in some unspecified amount.

Before the court may declare that respondent holds his separately owned property as a trustee for appellant’s benefit, appellant must prove that there was (1) a promise by him— express or implied, (2) which caused her to transfer property to him relying on the promise, (3) that a confidential relationship existed between the parties and (4) that respondent has been unjustly enriched at her expense by his conduct (Mc-Grath v Hilding, 41 NY2d 625, supra; Sharp v Kosmalski, 40 NY2d 119, supra; Janke v Janke, 47 AD2d 445, affd 39 NY2d 786, supra). In deciding these matters on appeal, we are obliged to view the record in a light most favorable to sustain the trial court’s judgment and give due deference to its findings on credibility (Van Roo v Van Roo, 268 App Div 170, 172, affd 294 NY 731; McCall v Town of Middlebury, 52 AD2d 736).

Marriage is a confidential relationship, of course, and there was a transfer of funds and labor by appellant to respondent. The remedy of constructive trust, however, requires that more be shown. There must be proof that the transfer was made in reliance on a promise that the property transferred would be held for the benefit of appellant, and that respondent was enriched unjustly by retaining the fruits of the transfer.

We find no express promise by respondent. Appellant testified that from 1946 to 1960, apparently after the purchase of the business, respondent told her on various occasions, "Baby girl, what is mine is yours; you’re my wife. It’s always all half yours, you’re my wife.” Such representations undoubtedly reflected the emotions of a happier time but they most assuredly did not constitute a promise by respondent that he held one half of his corporate stock as trustee for appellant (see Vassel v Vassel, 40 AD2d 713, affd 33 NY2d 533). The statements meant precisely what most people would interpret them to mean—not that appellant had a proprietary interest in every personal belonging of respondent, be it clothing or corporate stock, but rather that the parties would share their successes equally in raising their family and enjoying their life together.

Failing an express promise, appellant contends there was an implied promise. Unquestionably an implied promise may be sufficient if the evidence otherwise supports a finding that respondent holds property as trustee for another (Sharp v Kosmalski, 40 NY2d 119, 122; Sinclair v Purdy, 235 NY 245, 254; Janke v Janke, supra; Farano v Stepheanelli, 7 AD2d 420). Such promises may be inferred from the factual circumstances and setting of the parties and they frequently are when the conduct of the injured party is otherwise inexplicable (see e.g., Sharp v Kosmalski, supra). The fact of the marriage is an important consideration indicating a confidential relationship between the parties, but standing alone it does not provide the basis for an implied promise which will support a constructive trust (Moftiz v Moftiz, 50 AD2d 901). Furthermore before a court implies a promise between husband and wife for purposes of a constructive trust, it must be careful to separate those promises going to the marriage relationship and those going to a business relationship. The two may not be mixed together in some sort of salmagundi, as the minority has done, to find an implied promise that the wife will share in the ownership of a specific business because of such unrelated acts as her employment as a maid or drill press operator, her care of the children or her handling of the family finances. The remedy of constructive trust may not be applied randomly to adjust general equities between spouses or as a punitive measure to divvy up a husband’s separately owned property because of his past indiscretion.

In this case the marriage relationship cuts against a finding of implied promise to hold one half of respondent’s interest in the corporation for the benefit of appellant. Appellant’s participation in the buisness is easily explainable as a normal incident of marriage which was manifestly given as such and for the generous salary she received and without any expectation on her part of any future ownership of the business.

Thus, appellant testified that she worked as a bookkeeper for the company, without pay, from 1946 until 1950. In the beginning the work was minimal for the simple reason that the company had little business. Appellant estimated that during those years the books for a whole month could be done in one day and respondent helped her with the tax returns. The work required more time by 1950, when the business was incorporated but appellant has never worked more than 20 to 24 hours per week and she testified that she frequently took the bookkeeping home and completed it there rather than work at the plant. Also, in 1950 the corporation hired an accountant and additional other women employees to do the office work, although appellant continued to do some of the bookkeeping. She has received a salary from the company since 1950. At the time of the divorce her salary from Jamestown Steel was $12,500 per year for this part-time work. During the marriage appellant also worked part time for a doctor for about two years and she did part-time office work for another two years at Jamestown Plastics, another company then owned by her husband.

If any rebuttal is needed to appellant’s claim of implied promise, the proof establishes that respondent consistently refused to give his wife any of the company stock or permit her to be an officer or director of any of his corporations and his wishes were well known to her from the beginning. Appellant has never played a management role in respondent’s companies, even in the broadest sense. Her work was always part time and entirely clerical and she shared in neither the liability, ownership, nor management of the business.

Thus, while there was a transfer of jointly owned funds to acquire the business, the transfer was not induced by the marriage relationship and was not referable to any express or implied promise of ownership. The funds, or at least appellant’s share of them, represented a gift, or at best, a loan by appellant, not an investment made as part of her participation in a joint venture (see Lindt v Henshel, 25 NY2d 357, 362-363; Larsen v Larsen, 54 AD2d 1073).

Further than that, there was no unjust enrichment of respondent. Appellant has been more than adequately compensated for her efforts and in ways fully to be expected in a marriage. Respondent, by his efforts at developing and operating the business, has kept the couple happily circumstanced for 30 years. All of his earnings from the company were deposited in the couple’s joint accounts and were used to support appellant. Generous purchases of property and investments were made from these funds for her and respondent’s income has been sufficient to enable her to travel and to enjoy the satisfying social and athletic life which she described in her testimony as the routine of "the most beautiful marriage in the world.” Appellant will continue to enjoy the support available through respondent’s efforts, by the separately owned property accumulated for her or, if her needs require it, by respondent’s income for as long as he is able to do so. There is no need for a division of respondent’s capital. The protection afforded appellant by the Domestic Relations Law will provide the support function in the manner the Legislature has approved.

We should point out that appellant is not penniless. She came to this marriage with few material assets but she has lived a financially secure life for over 30 years since then. The trial court granted her exclusive, tax-free use of the marital residence and the extensive furnishings in it. She has joint ownership in $100,000 in stocks, several thousand dollars of various stocks in her own name, $15,200 in savings and ownership of a sizeable insurance policy on her husband’s life. In addition to this, she receives $12,500 a year income from her part-time employment at Jamestown Steel and she has dividend income of $3,600 per year. Neither the trial court nor the majority of this court find alimony justified on these facts.

This case is a vivid illustration of the dangers of creating a judicial version of a community property law. In these days of sophisticated taxes and governmental regulation, a businessman or businesswoman ought to be able to determine whether his or her spouse is a partner in business, a partner in marriage, or both, without obtaining a judicial decree, after the fact, based upon nebulous and subjective concepts of what is equitable. The result sought by appellant here would foist an unwanted business partner on respondent and the innocent Mr. Dahl (who is still a half owner of the corporation’s stock), a business partner who may be motivated by considerations unrelated to the best interests of Jamestown Steel, those who own it and those who are employed by it. It is one thing to make an equitable adjustment of real and personal property of divorced spouses. It is quite another thing for a court of equity to trifle with corporate enterprises involving the vital interests of innocent third parties.

The judgment should be affirmed.