A Guardian of the Person has Standing to Sue for Return of Property

Faulk v. Martucci, No. A-2234-19T1, 2021 WL 243833 (N.J. Super. Ct. App. Div. Jan. 26, 2021).

Defendant Anne Martucci (“Anne”) appealed from an order awarding a constructive trust in favor of plaintiff Janette Faulk (“Janette”) as guardian of Harry Faulk (“Harry”), an incapacitated person.  Janette is Harry’s daughter.

Prior to being found an incapacitated person, Harry had a career in construction demolition and later heavy-equipment and machinery scrap sales.  Anne worked as Harry’s secretary and bookkeeper; they were also in a romantic relationship for over 40 years.

Over the course of his career, Harry was involved with or operated various businesses and owned certain lots of land in connection with those companies, in particular, the parcels that are the subject of this case.  Collectively, they were known as the “front lots” and “back lots” of the property called “the Meadows.”

In the 1980s, Harry purchased the front lots, and Harry’s friend and personal attorney represented him in the transaction.  Later, the same attorney created Edgar-Charles Realty Corporation (“Edgar-Charles”) for Harry with Anne as incorporator and co-trustee, along with Harry’s sister, June Ochsner (“June”).

Harry later transferred title of the front lots to Edgar-Charles with the same attorney representing both Harry and Edgar-Charles in the transaction.  Later, when the back lots became available for purchase, the attorney represented both parties in the transaction.  Edgar-Charles conducted no business and served no purpose other than holding legal title to the properties upon which Harry operated his business.

June later resigned her interest in Edgar-Charles, but received nothing in return.  In June 2005, Anne, on behalf of Edgar-Charles, transferred the back lots to Anne Martucci, Inc., by quitclaim deed for nominal consideration.  Anne admitted that Harry did not acknowledge the transfer of title of the front lots in writing.

In 2014, a stroke rendered Harry incapacitated.  The following year, Anne deeded the front and back lots to herself for nominal consideration.

In August 2018, the court appointed Janette as Harry’s guardian.  She learned of the Meadows property transfers to Anne and filed a complaint in her capacity as guardian of the person, seeking to void Anne’s legal title to the property.  Anne filed a motion to dismiss for lack of standing, which Janette opposed.  The trial judge denied the motion, and Anne filed her answer.

After a two-day bench trial, the judge found that Harry retained an equitable interest in the property and that Anne wrongfully transferred the property to herself.  The judge imposed a constructive trust for Harry, and ordered Anne to transfer the property and provide an accounting.

Anne appealed on several points.  The Appellate Division affirmed the trial court’s decision.

The first issue before the appellate panel was whether Janette had standing.  While the appellate court determined that the matter was not properly before it because of filing deficiencies by Anne, it nonetheless concluded that Janette had statutory standing under N.J.S.A. 3B:12-57(f)(10), as Harry’s guardian of the person to seek recovery of property held in constructive trust by Anne.

The court next addressed Anne’s appeal with regard to the constructive trust.  Constructive trusts are appropriate when a person who has acquired possession title to property should not be allowed to retain possession or title because it would be inequitable.  In order to impose a constructive trust, the court must find that the property has been obtained through a “wrongful act which unjustly enriches the recipient.”  Id. at *5.  The burden to establish the right to the remedy must be established by the party demanding the relief by clear and convincing evidence.

In this case, the trial judge rightly determined the transfer was wrongful.  The Appellate Division noted that the trial court did not find Anne or Harry’s attorney to be credible witnesses — they could not satisfactorily explain the reasons for their actions, and their testimony was inconsistent and unsupported by documentary evidence.

The trial judge then found that Anne was unjustly enriched when she impermissibly transferred a sizable asset out of the reach of Harry’s financial guardian and deprived Harry of a significant resource that could be used for his care.

The appellate court also addressed Anne’s laches defense.  It noted that Anne failed to assert the defense diligently, and her one-time mention of the defense in her answer did not preserve the defense through the span of the litigation.  Even so, the court, relying on Mancini v. Twp. of Teaneck, 179 N.J. 425, 433 (2004), analyzed the three factors relevant to the laches defense and found Anne’s argument wanting.  Specifically, the court considered “(1) whether [the] alleged act [was] unreasonably distant in time, (2) whether [the] plaintiff knew or should have known of a valid claim based on that act, and (3) whether the plaintiff’s delay in filing [the] claim has caused undue prejudice to [the] defendant.”  Faulk, No. A-2234-19T1, 2021 WL 243833, at *7 (quoting Mancini, 179 N.J. at 433).  The Appellate Division affirmed the lower court, noting that the actions Janette complained of occurred only four years earlier, and Anne was not prejudiced by the delay.

Finally, the appellate court rejected Anne’s argument that the trial judge should not have allowed Janette’s counsel to cross-examine defendant’s sole attorney witness on disciplinary transgressions.  The court disagreed, noting that N.J.R.E. 607 allows a party to introduce extrinsic evidence relevant to the issue of credibility, and misconduct by an attorney is admissible to impeach an attorney’s credibility.