Court Opinion

ID: 618159
Source: CourtListenerOpinion
Date Created: 2011-12-01 20:50:58+00
Date Added: 2024-06-11T17:50:43.450605
License: Public Domain

NOT PRECEDENTIAL

           UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
                                  ______

                                         No. 10-4417
                                           ______

                                  BARBARA HOUSTON,
                                                 Appellant

                                              v.

   JOHN R. HOUSTON, III; WEST AND FEINBERG P.C.; WHITNEY HOUSTON
                                _______

        Appeal from the United States District Court for the District of New Jersey
                                (No. 2:08-cv-5530 (PGS))
                      District Judge: Honorable Peter G. Sheridan
                                        _______

                        Submitted under Third Circuit LAR 34.1(a)
                                   November 18, 2011
                                        _______

                   Before: FUENTES and CHAGARES, Circuit Judges
                                and POGUE,* Judge

                            (Opinion Filed: December 1, 2011 )
                                          _______

                                          OPINION
                                          _______

       *
        Hon. Donald C. Pogue, Chief Judge, United States Court of International Trade, sitting
by designation.
       POGUE, Judge,

       Appellant Barbara Houston appeals the District Court’s grant of summary

judgment in a suit arising out of a family dispute over an alleged contract for payment of

proceeds of a life insurance policy to satisfy a mortgage debt on Appellant’s New Jersey

residence (“residence”). The two questions at issue are whether the Statute of Frauds

applies to the alleged contract, and if so, whether there is sufficient evidence to support

the inference that the parties had an oral agreement. For the reasons discussed below, we

affirm the District Court’s decision.

                                       I. BACKGROUND

       Because we write primarily for the benefit of the parties, we recount only the

critical facts. Appellant is the step-mother of Appellee, Whitney Houston, and the widow

of John R. Houston Jr. (“John Houston”), who is the Appellee’s late father. The

mortgage debt was created when, in 1990, Appellee loaned John Houston the funds to

purchase the residence. The mortgage note was for a principal amount of $723,800.00.

James P. Cinque, formerly an attorney for the Appellee, prepared the mortgage. John

Houston was to make installment payments on the mortgage, and the mortgage contract

provided for default payments and penalties. By the time of his death in February 2003,

John Houston was in default on these payments.

       Appellee (in the form of Nippy, Inc.1) also purchased an insurance policy, in the

       1
           Appellee was the sole shareholder in Nippy, Inc.

                                                 2
amount of $1,000,000, on her father’s life. Various documents relating to the insurance

policy were drafted, but none of them were ever signed during the many years between

the purchase of the policy and John Houston’s death. At his death, John Houston

bequeathed all of his assets to Appellant, and Appellee received the insurance proceeds.

Appellee did not, however, apply the insurance proceeds to the mortgage.2 In addition,

when John Houston’s estate was probated Appellee did not object, in probate, to the

transfer of the residence to the Appellant. The mortgage debt at the time of John

Houston’s death was approximately $1.15 million, and at the time of Appellant’s filing

this action it had increased to $1.4 million.

       Appellant filed a complaint in state court on May 9, 2008, alleging that Appellee

illegally kept insurance proceeds from a policy she created for her father and that she

failed to honor an agreement with her father to apply those proceeds to the mortgage debt

on the residence that Appellant received from John Houston’s estate. Appellee removed

the action to federal court on November 11, 2008. The District Court granted summary

judgment in Appellee’s favor on October 20, 2010.

                   II. JURISDICTION & STANDARD OF REVIEW

       We have appellate jurisdiction over the matter under 28 U.S.C. § 1291 and review

de novo whether the District Court’s grant of summary judgment was appropriate. Kopec

       2
          After John Houston’s death, the $1,000,000 life insurance policy was “inexplicably”
credited against the mortgage debt. At deposition, the accountant recalled that those were
Appellee’s instructions, but he never recalled hearing of an agreement. The court infers, from the
fact that there is a dispute in this case, that Appellee ultimately received this money.

                                                3
v. Tate, 361 F.3d 772, 775 (3d Cir. 2004). Construing the facts in the light most

favorable to the Appellant, we consider whether there is a genuine dispute regarding any

material fact. Id.; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 255 (1986).

                                         III. ANALYSIS

                                      A. Statute of Frauds

       Under the Statute of Frauds (“SOF”),3 “a transfer of real estate” must be in writing.

N.J. STAT. ANN. § 25: 1-13 (West 2011); see also id. at § 1-10.4 There is, however, an

       3

              a. A transaction intended to transfer an interest in real estate shall not be
              effective to transfer ownership of the interest unless:

              (1) a description of the real estate sufficient to identify it, the nature of the
              interest, the fact of the transfer and the identity of the transferor and the
              transferee are established in a writing signed by or on behalf of the
              transferor; or

              (2) the transferor has placed the transferee in possession of the real estate
              as a result of the transaction and the transferee has paid all or part of the
              consideration for the transfer or has reasonably relied on the effectiveness
              of the transfer to the transferee's detriment.

              b. A transaction which does not satisfy the requirements of this section
              shall not be enforceable except as an agreement to transfer an interest in
              real estate under section 4 of this act.

              c. This section shall not apply to leases.

              d. This section shall not apply to the creation of easements by prescription
              or implication.

       N.J. STAT. ANN. § 25:1-11 (internal citations omitted).
       4

              “Interest in real estate” means any right, title or estate in real estate, and
              shall include a lease of real estate, a lien on real estate, a profit, an
              easement, an interest in a trust in real estate and a share in a cooperative

                                                  4
exception to the “in writing” requirement if the terms of an oral agreement can be proven

by “clear and convincing evidence.” Id. at § 1-13(b).5

       Appellant argues that the SOF does not apply here because John Houston and

Appellee’s agents had an oral agreement to use the insurance proceeds to reduce the

balance of the mortgage on the residence rather than to transfer an interest in the real

estate itself. To the Appellant, under the SOF, only a discharge of the mortgage is

required to be in writing. In other words, Appellant contends that the transfer of funds at

issue is not covered by the SOF. Appellant calls this transaction a “reduction” of the

balance on a mortgage, which does not “extinguish” the lien on the property and is thus

not a transfer of real estate under the SOF.

       As the District Court correctly concluded, however, the SOF applies to a transfer

              apartment.

              “Transfer of an interest in real estate” means the sale, gift, creation or
              extinguishment of an interest in real estate.

       N.J. STAT. ANN. § 25: 1-10.

       5

               [W]hen an agreement has not been reduced to writing, a “high standard
              of proof” must be met to establish that intent. Specifically, “the existence
              of an [oral] agreement between the parties as well as its essential terms
              must be proved by clear and convincing evidence.” The Commission
              stated that, “[t]he circumstances surrounding a transaction, the nature of
              the transaction, the relationship between the parties, [and] their
              contemporaneous statements and prior dealings, if any, all are relevant to
              a determination of whether the parties made an agreement by which they
              intend to be bound.” Morton v. 4 Orchard Land Trust, 849 A.2d 164, 168
              (N.J. 2004) (internal citations omitted).

                                                 5
of real estate; including, but not limited to, an extinguishment.6 An extinguishment of a

lien is a lien’s discharge by legal operation. Black’s Law Dictionary 664 (9th ed. 2009).

As the District Court noted, the alleged agreement to pay off the mortgage with the

insurance proceeds is akin to an extinguishment of Appellee’s mortgage, and thus is

subject to the SOF. Absent evidence or language suggesting otherwise, the alleged

agreement to use the insurance proceeds to pay off the mortgage would have extinguished

Appellee’s mortgage.7

       The parties agree that while there is evidence of drafts of agreements, emails and

other documents which were produced during discovery, there is no evidence of a signed

agreement between John Houston and Appellee stipulating that the life insurance

proceeds be used to reduce the mortgage. Therefore, because the SOF requires that,

unless there is “clear and convincing evidence” of an oral agreement, an instrument must

be signed and in writing in order to create a binding promise or agreement, it follows that

we must determine whether there is evidence sufficient to create an issue of material fact

of the existence of an oral agreement.

                                     B. Oral Agreement

       Clear and convincing evidence is somewhere between a preponderance of the

       6
           See supra note 4.
       7
         The District Court also correctly suggests that even if the SOF did not apply, then
Appellant would still have to prove by a preponderance of the evidence that there was a breach of
the contract or past performance on the contract. However, as discussed below, none of the
“agents” providing information for the record recall any such agreement.

                                               6
evidence and “beyond a reasonable doubt.” e.g., Aiello v. Knoll Golf Club, 165 A.2d 531,

534 (N.J. Super. Ct. App. Div. 1960). We agree with the District Court that the evidence

in the record here would not permit a reasonable mind to conclude (or be convinced) that

the existence of an oral argument was clear. The test is whether there was sufficient

evidence of a “meeting of the minds” to form an agreement. Morton, 849 A.2d at 165.

       Appellant argues that the record, including drafts and letters regarding the

mortgage, supports her claim that the insurance proceeds were intended to pay off the

balance of the mortgage upon John Houston’s death. Appellant submits numerous

documents and correspondence between various of Appellee’s employees regarding the

alleged contract. According to Appellant, those letters and emails show that Appellee

bought the insurance in order to pay for the mortgage debt, and that the parties and their

agents intended to agree to a binding contract to that end.

       On the other hand, Appellee contends that no such agreement exists and that she

never even discussed the issue with her father. She notes that a 1999 re-certification of

the insurance policy involved no modifications or contingencies, and preserved her status

as the sole beneficiary. Additionally, Appellee notes that the documents in the record

confirm that a writing was required to change the policy, and that none of the drafts were

ever signed. Notably, at the time of deposition, neither Appellee nor any of her agents

                                             7
could recollect an agreement.8

       The parties both focus on a 1991 letter from James Cinque to Appellee’s former

accountant, Robert Ryder. The letter indicated Appellee’s agreement to apply the

insurance proceeds to the mortgage balance due, but the letter was not signed. Both

Cinque and Ryder testified to a lack of knowledge about that agreement. Similarly,

throughout the record, there was discussion regarding the policy, the mortgage, and the

potential application of the insurance proceeds to the mortgage, but there is no actual

signature by either party and no tangible proof of the parties’ intent.

       Thus, while drafts of an agreement exist, there was also a period of many years

during which the parties had ample opportunity to sign the agreement, but did not do so.

While the father-daughter relationship might suggest a casual relationship regarding

finances, it can also suggest that if there had been an intent to complete the agreement, it

would have been by a writing, as proposed by the attorneys and other agents. See Morton,

849 A.2d at 168 (noting that the “relationship between the parties” is relevant to

determining “whether the parties made an agreement by which they intend to be bound.”).

Nonetheless, anticipation of a written agreement does not preclude a finding of an oral

agreement if the parties’ intent to be bound is clear. McBarron v. Kipling Woods L.L.C.,

838 A.2d 490, 491 (N.J. Super. Ct. App. Div. 2004).

       8
         The District Court also mentioned that the “Korf letter” indicated that John Houston
knew that an agreement was necessary, but he still never signed any agreement during a period of
over a decade.

                                               8
       Therefore, the court must decide whether there is sufficient evidence of the parties’

intent to be bound by an oral agreement. Morton, 849 A.2d at 170-71. Both past dealings

and the relationship of the parties can dictate such an intent to agree. Morton, 849 A.2d

at 168-69. Appellee denies any such intent, while Appellant suggests that the intent to

agree should be inferred because it would be the norm for family members to conduct

business in a less formal manner than if they were unrelated. It remains the case,

however, that there is no tangible evidence that Appellee intended to finalize an

agreement with her father, much less that she came to an oral agreement with him to do

so.

                                   IV. CONCLUSION

       Accordingly, we will affirm the judgment of the District Court.

                                             9