Court of Appeals May-June Session: Arguments of Interest for May 31, 2017

The Court of Appeals’ May-June Session continues on May 31st with three cases on the argument docket (the Court’s case summaries can be found here). The Court will address the following issues: (1) whether a decedent entered a binding and irrevocable agreement with his grandsons to care for and maintain his rental property in exchange to title to the property free and clear of the mortgage; (2) whether the trial court determined on the record that a 15-year-old criminal defendant was not eligible for a youthful offender adjudication; and (3) whether the trial court is required to give its reasons on the record when it determines that a criminal defendant is not entitled to a youthful offender adjudication.

No. 78     Matter of Estate of Hennel

When a grandfather no longer wanted to maintain his 4-unit rental property, his grandsons stepped up to do it for him.  The grandfather signed a deed to the property over to them, reserving a life estate, and promised that for taking over the management of the property, they wouldn’t have to worry about paying the mortgage after he died. So, the grandfather, at the same time, executed a new will that required the mortgage for the property to be paid off with the assets of his estate.  The grandsons followed through on their end of the bargain, managing and renting the property and paying the mortgage out of the rental proceeds.

In 2008, however, the grandfather revoked the prior will and executed a new will that did not require the mortgage to he paid off from the proceeds of his estate.  The grandfather then passed away in 2010, and his executor sought to admit the 2008 will to probate.  The grandsons objected, arguing that they had a binding deal with the grandfather and that they held up their end of bargain.  

Surrogate’s Court agreed, and granted the grandsons summary judgment and ordered the grandfather’s estate to pay off the mortgage.  The Appellate Division, Third Department affirmed, but with two Justices dissenting.  Although the Court noted that wills are generally revocable at any time, it held that the testimony of family attorney who drafted the first will and the grandsons’ conduct in reliance on their agreement with the grandfather established a binding, irrevocable commitment for the estate to pay off the mortgage.  The Court declined to apply the Statute of Frauds, which would have otherwise barred enforcement of the grandsons’ unwritten agreement with the grandfather because it concerned an testamentory provision, because it would have lead to an unconscionable result in this case.

The dissenting Justices agreed with the majority in large part, including that the Statute of Frauds applied, but departed on unconscionability. The dissenters said, the grandsons sustained a few losses, but they were also well compensated for maintaining and renting out the property.  The few minor losses, the dissent would have held, did not rise to the level of unconscionabilty so as to avoid the Statute of Frauds bar.

On appeal, the executor of the estate argues that the grandfather validly revoked the will that had promised to pay off the mortgage, and that promissory estoppel cannot bar application of the Statute of Frauds because the grandsons did not reasonably rely on the promises that the grandfather made and the result here is not unconscionable.

The Third Department’s order can be found here.