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Antonelli v. Antonelli

A-6799-97T2 and A-6895-97T2 and A-1085-98T2 (N.J. Super. App. Div. 2000) (Unpublished)

DEEDS; FRAUDULENT CONVEYANCES; EQUITY—A court refused to require one party to reconvey a property to another when the original conveyance was admitted by the claimant to have been made in the first place to defraud creditors.

A contractor and owner of certain real property experienced both business and personal difficulties resulting in his filing both a Chapter 11 proceeding and a personal bankruptcy. According to him, in an effort to protect his interests in two pieces of real estate, he and his daughter entered into an agreement whereby a property would be deeded to his daughter and after completion of the bankruptcy, the property would be deeded back to him. To implement this plan, he borrowed money to pay off the existing debts on the property. When, according to him, his daughter refused to return the property to him, he commenced an action against her for the return of the property. Other actions were commenced for repayment of the borrowed monies. The lower court dismissed all actions, prompting these appeals. The daughter offered a different version of the story. She claimed that she had borrowed money directly from one of the lenders and that the monies that her father had borrowed from the same individual was not the same money that she had borrowed. Consequently, she claimed that she owned the property and did not owe any money to her father based on the money that he had originally borrowed for the property. As for the loan that she claimed to have made on her own, she insisted that she repaid it by virtue of some alleged work done at one of the properties and that she was to “[r]epay it when I can.” The Appellate Division was puzzled. “What is most striking about this transaction (as well as the other transactions comprising the other issues on appeal) is the lack of any substance or certainty as to who—[father or daughter]—actually borrowed money and for what purpose, who made the alleged repayment and who was ultimately responsible for the obligation, if any.” After reviewing the record, the Appellate Division agreed with the lower court that none of the parties seeking repayment had met their burden of establishing the bona fides of the transaction. With respect to dismissal of the claim by the father for recovery of the property from his daughter, the lower court determined that the father “was barred from recovery on the grounds of judicial estoppel, the statute of frauds and, finally, ‘this court is not going to aid someone who acted with bad faith and does not have clean hands.’” The Appellate Division agreed. In the bankruptcy proceedings, the father stated that he owned no property. When he applied for letters testamentary after the death of his wife, he stated the same. The Court was not impressed by his explanation that his answer was accurate because the bankruptcy proceeding involved his corporation rather than him personally. To the Court, it was clear that he intended to mislead the inquirer as to any alleged rights he had in the property that he had deeded to his daughter. Further, the father certified that he transferred title of the properties to his daughter “so that I could testify that I did not have an interest in these properties.” Assumedly, he did so “[b]ecause the property was about to go to sheriff sale and I could arrange for its repurchase.” Under these facts, the Court refused to allow the father to enforce an alleged oral agreement with his daughter requiring her to reconvey the property because to do so would violate the statute of frauds. Further, his testimony in the bankruptcy case gave rise to his claim being blocked by the doctrine of judicial estoppel. Lastly, to the extent the father was asserting that a constructive trust should have been imposed on the property, he was seeking to invoke an equitable remedy. In such cases, however, “one seeking equitable relief must do so with ‘clean hands.’” Therefore, the Court refused to allow him to derive benefit from the scheme he had constructed. While realizing that the lower court’s dismissal of the cause of action left the parties where they were, the Appellate Division felt that decision achieved the appropriate result. “Any other determination, including enforcement of the fraudulent scheme, results in [the father] being benefitted notwithstanding his complicity in the entire fraudulent transaction.”


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