17-1881-cv Jaffer v. Hirji

In the United States Court of Appeals For the Second Circuit AUGUST TERM, 2017

SUBMITTED: JANUARY 24, 2018 DECIDED: APRIL 4, 2018

17‐1881‐cv

LATIFA JAFFER, AHMED M. HIRJI, SHEHZAD HIRJI, AND HUSSEIN JAFFER,

Plaintiffs‐Counter‐Defendants‐ Appellants,

v.

NAUSHAD M. HIRJI AND SABIRA HIRJI,

Defendants‐Counter‐Claimants‐ Appellees. ________

Appeal from the United States District Court for the Southern District of New York. No. 14-CV-2127 – Kenneth M. Karas, District Judge. ________

Before: Leval, Calabresi, Cabranes, Circuit Judges. ________

1 Plaintiffs‐Counter‐Defendants‐Appellants, Latifa Jaffer, Ahmed M. Hirji, Shehzad Hirji, and Hussein Jaffer appeal from the May 18, 2017 judgment of the United States District Court for the Southern District of New York (Karas, J.) granting summary judgment in favor of Defendants‐Counter‐Claimants‐ Appellees. We vacate and remand that judgment.

Judge Cabranes dissents in a separate opinion.

Costantino Fragale, Esq., Maker, Fragale & Di Costanzo, LLP, Rye, NY, for Plaintiffs‐Counter‐Defendants‐ Appellants

Andrew D. Brodnick, Esq., Rye Brook, NY, for Defendants‐Counter‐ Claimants‐Appellees CALABRESI, Circuit Judge:

Plaintiffs‐Counter‐Defendants‐Appellants Latifa Jaffer, Ahmed M. Hirji, Shehzad

Hirji, and Hussein Jaffer (jointly, “Plaintiffs”) appeal from the October 27, 2015 order

and May 18, 2017 judgment of the District Court in favor of Defendants‐Counter‐

Claimants‐Appellees Naushad M. Hirji and Sabira Hirji (jointly, “Defendants”).

Plaintiffs argue that the District Court erred by granting judgment on the pleadings

against their adverse possession claim and by granting summary judgment in favor of

Defendants on Plaintiffs’ constructive trust claim. Upon review, we agree with the

District Court with respect to the adverse possession claim and affirm that ruling. With

regard to the constructive trust claim, we disagree with the District Court and vacate

and remand that ruling. We assume the parties’ familiarity with the underlying facts,

the procedural history of the case, and the issues on appeal. 2 BACKGROUND

This case involves an intra‐family dispute over who owns a residential house in

Hartsdale, New York (“the Property”). In 1982, the now‐deceased Mohamed Hirji

(“Mohamed”) purchased the Property, and put the title in the names of two of his sons:

Plaintiff Ahmed Hirji (“Ahmed”) and non‐party Mustafa Hirji. According to the

attorney who represented Mohamed at the purchase, Mohamed intended the Property

to be “a place that the family could reside in.” App. at 58.

In 1989, Plaintiff Ahmed and Mustafa transferred the title to their father

Mohamed and their brother, Defendant Naushad Hirji (“Naushad”), as joint tenants

with the right of survivorship. Mohamed and Defendant Naushad paid no

consideration. Mohamed died in 1998, and his interest in the Property devolved to

Defendant Naushad. In 2001, Defendant Naushad deeded the Property to himself and

his wife, Defendant Sabira Hirji. Defendants currently possess title to the Property, but

live in Tanzania. Defendant Naushad testified that he never spoke to the attorney who

prepared the deeds in 1989 and 2001. During this whole period, Defendant Naushad

visited the Property only once and never hired anyone to inspect it.

Plaintiffs Ahmed, Shehzad Hirji (son of Ahmed), Latifa Jaffer (daughter of

Mohamed, sister of Ahmed), and Hussein Jaffer (husband of Latifa) now reside at the

Property, where they all (except Shehzad) have lived since 1984. Between 1984 and

3 2013, Plaintiffs maintained and made capital improvements on the Property, paid all

subject property taxes, and never remitted rent payments to Defendants.

In January 2014, Defendants issued a Notice of Termination to Plaintiffs

requiring them to vacate the Property on or before February 28, 2014. Three days before

they were required to vacate, Plaintiffs commenced the instant litigation. In their

amended complaint, Plaintiffs claimed that (1) Defendant Naushad holds the legal title

to the Property in constructive trust for the benefit of the Plaintiffs, and (2) Plaintiffs

acquired title to the Property by adverse possession.

The District Court granted judgment on the pleadings against the adverse

possession claim under Federal Rule of Civil Procedure 12(c). The District Court

subsequently granted summary judgment to Defendants on the remaining constructive

trust claim. This appeal followed.

DISCUSSION

We review de novo the award of summary judgment, “constru[ing] the evidence

in the light most favorable to the [nonmoving party]” and “drawing all reasonable

inferences and resolving all ambiguities in [its] favor.” Darnell v. Pineiro,

(2d Cir. 2017) (internal quotation marks omitted). Summary judgment is appropriate

only where “there is no genuine dispute as to any material fact and the movant is

entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “The moving party bears

the initial burden of showing that there is no genuine dispute as to a material fact.”

4 CILP Assocs., L.P. v. PriceWaterhouse Coopers LLP,

(2d Cir. 2013)

(internal quotation marks and alteration omitted). But where “the burden of proof at

trial would fall on the nonmoving party,” the moving party can shift the initial burden

by “point[ing] to a lack of evidence to go to the trier of fact on an essential element of

the nonmovant’s claim.” Simsbury‐Avon Pres. Soc’y, LLC v. Metacon Gun Club, Inc.,

(2d Cir. 2009).

We also review de novo the grant of a motion for judgment on the pleadings,

“accept[ing] all factual allegations in the complaint as true and draw[ing] all reasonable

inferences in plaintiffs’ favor.” Hayden v. Paterson,

(2d Cir. 2010)

(internal quotation marks and alteration omitted). “To survive a Rule 12(c) motion, the

complaint must contain sufficient factual matter to ‘state a claim to relief that is

plausible on its face.’” Graziano v. Pataki,

(2d Cir. 2012) (quoting Bell

Atl. Corp. v. Twombly,

(2007)).

On both substantive claims we apply New York law. See Travelers Ins. Co. v. 633

Third Assocs.,

(2d Cir. 1994).

Constructive Trust Claim. The District Court improperly granted summary

judgment to Defendants on the constructive trust claim.

“A constructive trust is an equitable remedy and its purpose is to prevent unjust

enrichment.” Henning v. Henning,

(N.Y. App. Div. 2013). Under

New York law, “a constructive trust is only imposed upon a finding of ‘(1) a

5 confidential or fiduciary relation, (2) a promise, express or implied, (3) a transfer made

in reliance on that promise, and (4) unjust enrichment.’” Consumers Union of U.S., Inc. v.

State,

, 78 n.14 (N.Y. 2005) (quoting Bankers Sec. Life Ins. Soc’y v. Shakerdge,

(N.Y. 1980)). The parties do not debate that the facts satisfy the first

prong of the test. Instead, the case turns primarily on the second factor, on which, given

the alleged facts, the third and fourth prong depend.

“Even without an express promise, however, courts of equity have imposed a

constructive trust upon property transferred in reliance upon a confidential

relationship.” Sharp v. Kosmalski,

(N.Y. 1976). In Sharp, and also in

Sinclair v. Purdy,

(N.Y. 1923), the New York Court of Appeals found that a

constructive trust existed in favor of a party who transferred property to another in

reliance upon a confidential relationship. In both cases, it did so in the absence of any

express promise.

In the first case, Sharp, the Court of Appeals found a constructive trust to exist for

a farmer who transferred his farm and home to a woman he hoped to marry. It did so

because “it is inconceivable that plaintiff would convey all of his interest in property

which was not only his abode but the very means of his livelihood without at least tacit

consent upon the part of the defendant that she would permit him to continue to live on

and operate the farm.”

.

6 In the second case, Sinclair, the Court of Appeals did the same for a state court

clerk who transferred his interest in a property to his sister allegedly because he

thought that limiting his assets would discourage criminal defendants from asking him

to post bail for them.

. The Court of Appeals found the trust because

“[h]ere was a man transferring to his sister the only property he had in the world . . . in

reliance upon her honor” and because “[e]ven if we were to accept her statement that

there was no distinct promise to hold it for his benefit, the exaction of such a promise, in

view of the relation, might well have seemed to be superfluous.”

.

Here, although, as the District Court found, no express promise was made, a

genuine dispute of material fact may exist as to whether Ahmed transferred the

Property to Naushad “in reliance upon a confidential relationship,” Sharp,

, as that term is defined by Sharp and Sinclair. Ahmed testified that he conceived of

the Property as a family home that all could occupy indefinitely and that transferring

the deed from one family member to another would not change this. As he explained,

“To me, it was like ‐‐ we don’t believe in deeds. So, to me, it was like a family house . . . .

Like, I never used to care, oh, it’s under whose name. We didn’t care. We didn’t care

about that. I know it’s a family house.” App. at 77. A number of undisputed facts may

support Ahmed’s characterization of his and his family’s views of the Property’s

ownership: Plaintiffs lived rent‐free for almost thirty years, made capital improvements

to the Property, paid taxes on the Property, received Naushad as a visitor only once

7 during this period, and changed the names on the Property’s deed multiple times

without Naushad discussing these changes with the real estate lawyer who prepared

the deeds. To the extent that Defendants question the existence of this practice and

expectation, there may be a genuine dispute of material fact as to whether an implied

promise was made and as to whether Defendants’ refusal to honor this promise

unjustly enriched them.

The District Court did not consider Sinclair. It cited Sharp and acknowledged the

legal significance of implied promises: “New York courts have long held that while a

promise is essential [to the creation of a constructive trust], it need not be expressly

made, for active co‐operation or silent acquiescence may have the same effect as an

express promise.” Jaffer v. Hirji, No. 14‐CV‐2127 (KMK),

, at *11

(S.D.N.Y. Mar. 28, 2017) (internal quotation marks omitted). It did not, however,

compare the relationship and the transaction in Sharp to the relationship and transaction

alleged here. Instead, it rested its conclusion on what Naushad believed, a factor not

discussed by Sharp. As a result, we cannot say that the District Court correctly

determined whether Ahmed transferred the Property to Naushad “in reliance upon a

confidential relationship,” Sharp,

, as that term is defined by Sharp and

Sinclair. We, therefore, remand to the District Court for it to make such a determination.

Defendants’ major counterargument gives us little pause. In their brief, they

contend that “Appellants predicate their claim on the allegation that the Home was

8 intended for the benefit of [Mohammed Hirji’s] children and therefore the promise to

honor that objective . . . could be implied.” Appellees’ Br. at 13. They then explain that

New York courts find constructive trusts to rectify fraud, not simply to enforce

intentions.

It is correct that New York law requires something beyond “intentions” if a

constructive trust is to be imposed. See Binenfeld v. Binenfeld,

(N.Y.

App. Div. 1989) (observing that “[a]lthough the facts may reveal a case of unrealized

expectations, we may not, without more, fashion a constructive trust” and adding that

constructive trusts are “fraud‐rectifying remed[ies]”). But Defendants mischaracterize

Plaintiffs’ case in this appeal. Plaintiffs’ claim to a constructive trust turns on

considerably more than Mohammed Hirji’s intentions. It rests on the claims that Ahmed

possessed an interest in the Property and deeded it to Naushad because he assumed,

based on his relationship to Naushad, that Naushad would allow him and his family to

live there indefinitely. Portraying Plaintiffs’ case as depending entirely on Mohammed

Hirji’s intentions misses the case’s key facts. Defendants’ argument is, therefore,

unavailing.1

1 If, on remand, the District Court finds that Ahmed transferred the Property to Naushad “in reliance upon a confidential relationship,” Sharp,

, as that term is defined by Sharp and Sinclair, and hence that this case involves more than merely unrealized expectations, but concludes that the transfer lacked any element that might require a “fraud‐rectifying remedy,” Judge Calabresi believes that certification to the New York Court of Appeals may, at that stage, be appropriate to resolve the tension 9 Defendants make arguments based on the New York Dead Man’s Statute and

judicial estoppel. The District Court rejected these arguments and so do we for the

reasons given by that court.

Adverse Possession Claim. We also conclude that the District Court properly

granted Defendants’ motion for judgment on the pleadings with respect to Plaintiffs’

adverse possession claim.

To establish a claim of adverse possession, one must show that the occupation of

a property is “(1) hostile and under claim of right; (2) actual; (3) open and notorious; (4)

exclusive; and (5) continuous for the required period” of 10 years. Walling v. Przybylo,

(N.Y. 2006). While New York courts typically presume hostility

where the other elements are satisfied, this presumption does not apply where “there is

a close and cooperative relationship between the record owner and the person claiming

title through adverse possession . . . .” Estate of Becker v. Murtagh,

(N.Y. 2012). In such circumstances, the “party asserting the adverse possession claim

must come forward with affirmative facts to establish that the use of the property was

under a claim of right and adverse to the interests of the true owners.”

(internal

quotation marks and alterations omitted).

between the language of the New York Court of Appeals in Sharp and Sinclair and that of the Appellate Division in Binenfeld.

10 Plaintiffs pled that Ahmed conveyed title to his brother, Defendant Naushad, in

1989. In such circumstances, “permission can be implied from the beginning, [and]

adverse possession will not arise until there is a distinct assertion of a right hostile to

the owner.” Congregation Yetev Lev D’Satmar, Inc. v. 26 Adar N.B. Corp.,

(N.Y. App. Div. 1993). The amended complaint does not contain any affirmative

facts that Plaintiffs did anything that constituted “a distinct assertion of a right hostile

to” Defendants. Accordingly, the District Court appropriately granted Defendants’

motion on the adverse possession claim.

Sanctions. Finally, Defendants ask this Court to impose sanctions against

Plaintiffs because this appeal was made “solely for the purpose of ‘needlessly

increas[ing] the cost of litigation.’” Appellees’ Br. at 15 n.3 (quoting Fed. R. Civ. P.

11(b)(1)). We decline to do so. Plaintiffs prevail in their appeal of the constructive trust

claim; their arguments are anything but frivolous.

CONCLUSION

For the foregoing reasons, we AFFIRM the October 27, 2015 order of the District

Court and VACATE AND REMAND the May 18, 2017 judgment of the District Court.

11 17‐1881‐cv Jaffer v. Hirji

JOSÉ A. CABRANES, Circuit Judge, dissenting:

The New York Court of Appeals may one day decide to transform the constructive trust doctrine into an intent‐enforcing remedy. But because it has not yet done so, I respectfully dissent.

According to the New York Court of Appeals, “the constructive trust doctrine serves as a ‘fraud‐rectifying’ remedy rather than an ‘intent‐enforcing’ one.” Bankers Sec. Life Ins. Soc’y v. Shakerdge,

(N.Y. 1980); see also Superintendent of Ins. v. Ochs (In re First Cent. Fin. Corp.),

(2d Cir. 2004) (“New York law is clear that a constructive trust is an equitable remedy intended to be ‘fraud‐rectifying’ rather than ‘intent‐enforcing.’”); Binenfeld v. Binenfeld,

(N.Y. App. Div. 1989) (“Courts have uniformly held that a constructive trust is a fraud‐rectifying remedy rather than an intent‐enforcing one.” (internal quotation marks omitted)). Neither appellants nor the majority, however, identify any fact that creates a genuine dispute about whether appellees committed fraud. At most, appellants and the majority establish that there is a genuine dispute about appellant Ahmed’s subjective expectations when he conveyed title to appellee Naushad. Expectations are not enough to impose a constructive trust under New York law. See Binenfeld,

. (“Although the facts may reveal a case of unrealized expectations, we may not, without more, fashion a constructive trust.” (internal quotation marks omitted)).