New York Law Review

Tag: confidential relationship

  • Greiff v. Greiff, 92 N.Y.2d 341 (1998): Burden of Proof in Challenging Prenuptial Agreements

    Greiff v. Greiff, 92 N.Y.2d 341 (1998)

    When a confidential relationship exists between parties entering into a prenuptial agreement, the burden of persuasion shifts to the proponent of the agreement to prove it was free from fraud, deception, or undue influence.

    Summary

    This case addresses the evidentiary burden in challenges to prenuptial agreements, especially where a relationship of trust exists between the parties. Helen and Herman Greiff, ages 65 and 77, respectively, entered into prenuptial agreements before their marriage. Herman died three months later, excluding Helen from his will, which favored his children from a prior marriage. Helen sought her elective share of the estate, challenged by Herman’s children based on the prenuptial agreement. The Surrogate’s Court invalidated the agreement, finding Herman had exerted undue influence. The Appellate Division reversed, stating Helen failed to prove fraud. The Court of Appeals reversed again, holding that the burden of proof can shift to the proponent of the prenuptial agreement if the challenging party demonstrates a relationship of trust and confidence where unfair advantage was probable.

    Facts

    Helen and Herman Greiff married in 1988 when they were 65 and 77 years old. They executed reciprocal prenuptial agreements, each waiving their right to elect against the other’s estate. Herman’s will left his entire estate to his children, excluding Helen. Herman died three months after the marriage. The Surrogate Court found that Herman was in a position of great influence over Helen, selected and paid for her attorney, and engaged in unfair dealings.

    Procedural History

    Helen Greiff petitioned for her statutory elective share of Herman Greiff’s estate. Herman’s children opposed, citing the prenuptial agreements. The Surrogate’s Court invalidated the prenuptial agreements. The Appellate Division reversed, finding Helen failed to prove fraud or overreaching. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether the special relationship between betrothed parties executing a prenuptial agreement warrants shifting the burden of persuasion regarding its legality and enforceability to the proponent of the agreement, specifically, whether Helen demonstrated that her premarital relationship with Herman manifested “probable” undue and unfair advantage.

    Holding

    Yes, because when the relationship between parties to a prenuptial agreement demonstrates a probable undue and unfair advantage by one party, the burden shifts to the proponent of the agreement to prove freedom from fraud, deception, or undue influence.

    Court’s Reasoning

    The Court of Appeals acknowledged the general rule that a party challenging a contract bears the burden of proving fraud. However, it recognized an exception where parties have a relationship of trust and confidence. In such cases, the burden shifts to the party in whom trust is reposed to disprove fraud or overreaching. The court clarified that this burden shift is not automatic but depends on the specific facts of the relationship between the parties. The court explicitly distanced itself from the outdated premise in Graham v Graham, which assumed men naturally had disproportionate influence over women. Instead, the court adopted a “fairer, realistic appreciation of cultural and economic realities.” The court noted that in Matter of Phillips, the court indicated some extra leverage could arise from the “circumstances in which the agreement was proposed.” The Court emphasized that, based on the Surrogate Court’s findings regarding Herman’s influence and conduct, the Appellate Division should have considered whether the relationship warranted shifting the burden of proof to Herman’s children to demonstrate the prenuptial agreements were free from fraud or undue influence. The Court remitted the case to the Appellate Division for further consideration of this issue and other issues not previously addressed. The Court stated, “Whenever * * * the relations between the contracting parties appear to be of such a character as to render it certain that * * * either on the one side from superior knowledge of the matter derived from a fiduciary relation, or from an overmastering influence, or on the other from weakness, dependence, or trust justifiably reposed, unfair advantage in a transaction is rendered probable, * * * it is incumbent upon the stronger party to show affirmatively that no deception was practiced, no undue influence was used, and that all was fair, open, voluntary and well understood.”

  • McGrath v. Hilding, 41 N.Y.2d 625 (1977): Unjust Enrichment Requires Examination of Plaintiff’s Conduct

    McGrath v. Hilding, 41 N.Y.2d 625 (1977)

    A court of equity, when determining unjust enrichment in a confidential relationship, must consider the plaintiff’s conduct affecting the transaction from which the alleged unjust enrichment arose.

    Summary

    Doreen McGrath sought equitable relief based on a constructive trust against her former husband, Hilding, alleging he unjustly retained the value of improvements she funded on his property based on his oral premarital promise to grant her a tenancy by the entirety. The trial court awarded McGrath the amount she contributed, finding unjust enrichment. The Appellate Division affirmed. The Court of Appeals reversed, holding that a court of equity must examine the plaintiff’s conduct to determine whether the enrichment was truly unjust, considering the human setting of the transaction. The court found the trial court improperly excluded evidence of McGrath’s conduct during the marriage that was relevant to the issue of unjust enrichment.

    Facts

    Hilding, a widower, met Doreen McGrath, who was separated from her husband. They became engaged, and McGrath contributed money to construct an extension to Hilding’s house, including two bedrooms for her children. This was done in reliance on Hilding’s oral promise to put her name on the deed. McGrath received $8,900 from the sale of her prior home. The addition cost $7,900, half paid by McGrath. The couple married, and McGrath moved in with her children. The marriage quickly deteriorated, and McGrath briefly returned to her former husband before divorcing Hilding in the Dominican Republic. Hilding never conveyed an interest in the property to McGrath.

    Procedural History

    McGrath sued Hilding, seeking equitable relief based on a constructive trust. The Supreme Court found Hilding had been unjustly enriched and awarded McGrath $3,950. The Appellate Division affirmed. Hilding appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether a court of equity, when called upon to remedy enrichment allegedly gained unjustly from abuse of a confidential relationship, may grant relief without regard to or examination of the conduct of the plaintiff affecting the transaction from which the alleged unjust enrichment arose.

    Holding

    1. No, because a court of equity must consider the plaintiff’s conduct to determine whether the enrichment was truly unjust in the context of the human setting of the transaction.

    Court’s Reasoning

    The Court of Appeals reasoned that while the Statute of Frauds generally prevents enforcement of oral agreements to convey land, a constructive trust can be imposed when an unfulfilled promise induces a transfer in the context of a confidential relationship, resulting in unjust enrichment. The court emphasized that enrichment alone is insufficient; it must be unjust under the circumstances and between the parties. “Critical is that under the circumstances and as between the two parties to the transaction the enrichment be unjust.” The court noted the trial court improperly excluded evidence of McGrath’s conduct, such as a contract to purchase a house with her former husband while still married to Hilding, which was relevant to whether Hilding’s enrichment was unjust. The court stated, “In excluding proof of plaintiff’s possibly grievous fault in the reciprocal relation between husband and wife, the trial court lapsed.” The court analogized to contract law, where a promisee cannot recover for a broken promise unless they have performed their obligations. Similarly, a plaintiff seeking a constructive trust must show they have not breached the trust and fidelity upon which the trust is to be based. The court concluded that a “simplistic analysis based on the superficial application of equitable principles was employed” and that a new trial was necessary to explore all relevant facts.