A battle between siblings over their mother’s estate shows that you can hold someone to their promise if you rely in good faith on that person’s word to your disadvantage, a state appeals court in Manhattan has ruled.
The ruling reinstates a lawsuit by Peter Castellotti to force his sister Lisa to give him half of John’s Pizza in Midtown and other assets she inherited from their mother Madeline.
After Madeline’s death in 2005, Peter and Lisa orally agreed that Peter would pay the taxes on Madeline’s estate with his share of the proceeds from a life insurance policy held by Madeline. In exchange, Lisa promised to give Peter half the inheritance after his divorce from his then-wife Rea and half the income and proceeds generated from the estate before the divorce was final.
After she became ill, Madeline disinherited Peter to prevent Rea from obtaining any of her assets, which besides the pizzeria included a 51% stake in a real estate partnership, a house on Staten Island and funds held in various bank accounts.
Lisa allegedly also agreed to obtain a $5 million life insurance policy that named Peter as beneficiary and to maintain that policy until she transferred the assets to Peter.
After Lisa let the insurance policy lapse in May 2012, Peter sued for breach of contract, charging her with failing to transfer half of Madeline’s assets to him after his divorce became final in November 2008. Lisa countered that Peter’s claim was barred by New York’s statute of frauds, which requires that an agreement to name a beneficiary of a life insurance policy be in writing.
The trial court sided with Lisa and dismissed the case after ruling that because part of the contract was invalidated by the statute of frauds, the entire contract was void. The appeals court disagreed. Associate Justice Rosalyn Richter, writing for the panel, explained:
Here, the allegations of the complaint show an unambiguous promise by Lisa to provide Peter with half of the income generated by the assets during the pendency of Peter’s divorce, to transfer half of the assets upon the finality of the divorce, and to name Peter as sole beneficiary of a life insurance policy of at least $5 million. The complaint’s allegations also show that Peter detrimentally relied on those promises by paying a substantial amount in taxes for Madeline’s estate, and suffered resulting monetary damages.
According to Richter, the trial court properly rejected an assertion by Peter that his paying the taxes on the estate meant that the statute of frauds did not apply.
Still, fairness compelled the court to reinstate the court case. “The theory of unjust enrichment is not precluded by the statute of frauds because it is not an attempt to enforce the oral contract but instead seeks to recover the amount by which Lisa was enriched by Peter’s expense,” Richter explained.