Moraska v. Moraska, No. S0279-11 CnC (Crawford, J., Dec. 10, 2012)

[The text of this Vermont trial court opinion is un official. It has been reformatted from the origina l. The accuracy of the text and the accompanying data included in the Vermont trial cou rt opinion database is not guaranteed.] STATE OF VERMONT
SUPERIOR COURT CIVIL DIVISION
Chittenden Unit Docket No.: S0279-11 CnC

Susan L. Moraska
Plaintiff

v.

Albert F. Moraska, Jr.
Defendant

DECISION ON MOTION FOR SUMMARY JUDGMENT

This case is a dispute over an inheritance between plaintiff Susan L. Moraska and her brother, defendant Dr. Albert F. Moraska, Jr. The core of the parties’ dispute is whether Albert agreed to accept 100% of his late father’s IRA acco unt—valued at close to $1 million—in exchange for granting Susan 100% ownership of the p arties’ now-deceased parents’ home in Charlotte, Vermont. 1 Susan claims that Albert did so agree, but has re fused to relinquish his 25% interest in the homestead property to her. She seeks either: (1) an order declaring that Albert has no interest in the homestead property an d that she, as trustee of her mother’s trust, may convey the trust’s entire interest in the prope rty to herself; or (2) an order requiring Albert
to return all funds he received from the IRA accoun t to Albert Moraska, Sr.’s estate. Albert has filed a motion for summary judgment, arguing that “ the contract Susan is attempting to enforce
relates to real estate but was never reduced to wri ting,” and thus Susan’s claim runs afoul of the Statute of Frauds, 12 V.S.A. § 181. Mot. for Summ. J. at 1 (filed Sept. 19, 2012).

BACKGROUND

The following facts are undisputed except where no ted. 2 Susan and Albert are the children of Betsy C. Moraska and Dr. Albert F. Mora ska, Sr., both late of Charlotte, Vermont. In 1999, Betsy and Albert Sr. each executed A-B trusts

, 3 and each conveyed an undivided one-half interest in their Charlotte homestead to their resp ective trusts. Susan and Albert were each named as remaindermen, each to receive one-half of each trust’s principal. Betsy Moraska died in 2006. Since Betsy Moraska’s death, her one-half interest in the homestead has remained held in trust. Entry Order at 1 (filed May 23, 2012).

1 The court refers to the parties by their first nam es to avoid confusion with the name of their late f ather, Dr. Albert F. Moraska, Sr. No disrespect is intended.

2 The parties’ Rule 56 statements are very brief and direct the court to relatively few materials in th e record. Only a few facts, however, are material to the issue raise d by Albert’s motion. For context, the court has a lso included some facts admitted by Albert in his answer to Susa n’s complaint, and some facts that the court and th e parties have all understood to be undisputed.

3 An A-B trust is “[a] trust into which just enough of a decedent’s estate passes, so that the estate c an take advantage of the unified credit against federal estate taxes. ” Black’s Law Dictionary, bypass trust (also terme d A-B trust) (9th ed. 2009) (WL).2

Albert Sr. died in 2010. Susan claims that in Mar ch 2010—prior to Albert Sr.’s death— she and her brother met with their father, who was getting sicker and who, in Susan’s words, “wanted to get things taken care of before he died. ” Susan Moraska Dep. 70:22–25. According to Susan, her father said at that meeting that he w anted Susan to have the house, and he wanted
Albert to have his Schwab IRA account. Id . at 70:7–8. Susan asserts that Albert agreed that it made “a lot more sense[] for Susan to have the prop erty,” id . at 71:24–25, and that he agreed to release his interest in the house in exchange for b eing designated the sole beneficiary of the IRA account. Compl. ¶ 12. Albert denies these allegat ions.

It is undisputed that there is no writing signed b y Albert that evidences any agreement on his part to transfer his interest in the homestead to Susan. Albert does not dispute that he received 100% of the Schwab account. Answer ¶ 13 ( filed Apr. 18, 2011). Nor does he dispute that Albert Sr.’s trust left all its interest (an u ndivided one-half interest) in the homestead to Susan. Mot. for Summ. J. at 2. He maintains, howe ver, that he currently owns a 25% interest in the homestead (half of the one-half interest held i n Betsy Moraska’s trust). See Answer ¶ 17.

ANALYSIS

The applicable portion of Vermont’s Statute of Frau ds provides as follows:

An action at law shall not be brought in the follow ing cases unless the promise, contract or agreement upon which such action is bro ught or some memorandum or note thereof is in writing, signed by the party to be charged therewith or by some person thereunto by him lawfully authorized: .

. .

(5) A contract for the sale of lands, tenements or hereditaments, or of an interest in or concerning them. Authorization to execute suc h a contract on behalf of another shall be in writing . . . .

12 V.S.A. § 181. Thus, “[i]n general, a contract f or the sale of lands is controlled by the Statute of Frauds and must be in writing to be enforceable. ” In re Estate of Gorton , 167 Vt. 357, 361 (1997). Here, despite some suggestion by Albert th at this case might involve a disclaimer of an interest in trust rather than a contract (and that Susan’s claims would fail under that circumstance), Susan does not dispute that the tran saction at issue was, if anything, a conveyance of an interest in land. See Opp’n at 4 (filed Oct. 24, 2012).

Susan argues instead that, despite the operation of the Statute, the alleged oral agreement is enforceable. Her argument is based on the doctr ine of “part performance,” under which an oral contract to convey real estate may be valid in spite of the Statute of Frauds. Jasmin v.
Alberico , 135 Vt. 287, 289 (1977). “A court may specifical ly enforce an oral contract to convey land, despite the Statute of Frauds, where the plai ntiff is equitably entitled to the real estate.”

Gorton , 167 Vt. at 361. “Enforcement is justified on the ground that repudiation by one party after the other has fully performed amounts to a vi rtual fraud.” Id . (citing Restatement (Second) of Contracts § 129 cmt. a). And of course, since t he purpose of the Statute of Frauds is to prevent frauds, that purpose would be frustrated if its application promoted fraud. See id

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Specifically, the “part performance” doctrine is de scribed as follows:

A contract for the transfer of an interest in land may be specifically enforced notwithstanding failure to comply with the Statute of Frauds if it is established that the party seeking enforcement, in reasonable r eliance on the contract and on the continuing assent of the party against whom enf orcement is sought, has so changed his position that injustice can be avoided only by specific enforcement.

Restatement (Second) of Contracts § 129. Thus, to come within the “part performance” exception, the plaintiff must show: “(1) there was an oral agreement (2) upon which [she] reasonably relied (3) by changing [her] position so that [she] cannot be returned to [her] former position, and (4) the other party to the agreement knew of such reliance.” Gorton , 167 Vt. at
362.

The court concludes that there are triable issues of fact on each of these elements. Taking Susan’s assertions as true, there was an oral agree ment between Albert and his father, with Susan as an intended third-party beneficiary: Albert agre ed to release his 25% interest in the house to Susan, and Albert Sr. agreed to designate his son a s the sole beneficiary of the IRA account. 4 In any case, the basis of Albert’s argument for presen t purposes is not that there was no agreement,
but that Susan “cannot establish an irretrievable c hange in position based on the alleged agreement she seeks to enforce.” Mot. at 5. 5

Susan asserts that she does not need to show that she changed her position. She contends that the agreement was between Albert and Albert Sr ., and that it was Albert Sr. who changed position by making Albert the sole beneficiary on t he IRA account—irretrievably so because the elder Albert died shortly after making that change. Opp’n at 3–4. The court agrees. Albert Sr.’s alleged decision to make the change to the IRA acco unt’s beneficiary would qualify as a substantial and irretrievable change in his positio n on reliance of his son’s alleged agreement to
release his interest in the house. 6 It would be the sort of parol family settlement o r arrangement that has been routinely enforced in equity. See An notation, Doctrine of Part Performance in Suits for Specific Performance of Parol Contract to Convey Real Property , 101 A.L.R. 923 (1936). This case is thus quite different from Jasmin v. Alberico , where the change in position consisted only of repairs and improvements that wer e indistinguishable from those acts that a

4 Giving Susan the benefit of all reasonable doubts and inferences, the court presumes that, prior to A lbert Sr.’s action to change the beneficiary of the IRA account , Susan was to receive at least a portion of it. I n that sense, the alleged agreement also operated to the detriment of Susan, although in a way that, according to Susan’ s allegations, the parties agreed was fair given that she would al so benefit from becoming the 100% owner of the hous e.

5 Elements (2) and (3) appear to be the locus of mos t disputes concerning the operation of the part per formance
doctrine. Gorton , 167 Vt. at 362 (“The main issue in dispute, as in most cases of this nature, is whether appellants have alleged a substantial and irretrievable change in position in reliance on the agreement.”).

6 Albert concedes that the Statute of Frauds cannot be used to promote a fraud, but he argues there Sus an has not
shown that it would be fraudulent or unfair if reli ef is denied in this case. He maintains that Susan ’s argument is just
that she is entitled to relief because it is what h er father intended. Susan does indeed claim that h er father intended her to own 100% of the house, but she also claims t hat Albert agreed to release his 25% interest in it

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tenant responsible for the maintenance of leased pr emises would have taken. 135 Vt. 287, 290 (1977).

The part performance rule articulated above states that it is the party seeking enforcement of the oral promise who must have changed position in reliance. The c ourt concludes, however, that the purpose of the part performance rule—to av oid fraud—would be frustrated if intended third-party beneficiaries of agreements could not a rgue that their contractual benefactors changed position in reliance on the oral contract. See Goresen v. Gallagher , 468 N.Y.S.2d 940, 941–43 (N.Y. App. Div. 1983) (wife was intended third-part y beneficiary of oral contract between her estranged husband and a real estate broker who purc hased the marital home at a foreclosure sale, and part performance of the oral contract took it o ut of the statute of frauds). In other words, “the real question . . . is not so much whose acts will suffice under the doctrine of part performance, as who will be prejudiced or injured b ecause of the acts if the contract is not performed.” Annotation, Doctrine of Part Performance in Suits for Specific Performance of Parol Contract to Convey Real Property , 101 A.L.R. 923 (1936). Here, Susan is plainly th e person who will be injured if the alleged contract is proved but not performed.

In addition to the above reasons, the court notes t hat its equitable power based on the promisee’s reliance is to be cautiously exercised “ in light of all the circumstances.” Restatement (Second) of Contracts § 129 cmt. a. The scant reco rd as it has been developed so far is insufficient for the court to say with confidence t hat it can make a decision now about whether or not to exercise its equitable power to enforce the alleged oral contract.

ORDER

Defendant’s motion for summary judgment is denied.

Dated at Burlington this ____ day of December 2012.

__________________ Geoffrey W. Crawford Superior Court Judge