ESTATE OF JAMES A. RUSSICK et al v. KOENIG et al
Filing
82
OPINION. Signed by Judge Noel L. Hillman on 4/23/18. (dd, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
ESTATE OF JAMES A. RUSSICK,
GAIL RUSSICK, EXECUTRIX, GAIL
RUSSICK, INDIVIDUALLY,
1:13-cv-07773-NLH-AMD
OPINION
Plaintiffs,
v.
TOM KOENIG and ANNA MARIE
KOENIG, JOINTLY, SEVERALLY
AND IN THE ALTERNATIVE,
Defendants.
APPEARANCES:
RICHARD T FAUNTLEROY
RICHARD T. FAUNTLEROY, P.C.
1525 SOUTH MAIN ST.
PLEASANTVILLE, NJ 08232
On behalf of Plaintiffs
BENJAMIN A. ANDERSEN
POWELL TRACHTMAN, P.C.
475 ALLENDALE ROAD
SUITE 200
KING OF PRUSSIA, PA 19406
On behalf of Defendant Tom Koenig
HILLMAN, District Judge
Presently before the Court is the motion of Defendant Tom
Koenig for summary judgment in his favor on Plaintiffs’ claim
that he is responsible for an unpaid loan.
For the reasons
expressed below, Defendant’s motion will be denied.
BACKGROUND
Defendants Tom Koenig (“Koenig”) and Anna Marie Koenig
(collectively “the Koenigs”), as husband and wife, obtained
$188,000.00 from Anna Marie Koenig’s parents in New Jersey in
order to build a home in Tennessee. 1
Anna Marie Koenig’s father
passed away, and her mother, Gail Russick, as executrix of James
Russick’s estate, filed suit against the Koenigs 2 to recover the
balance of what she considers to be a loan, which was financed
by a home equity loan on the Russick’s New Jersey home. 3
Tom Koenig has moved for summary judgment in his favor,
arguing that not only did he have no involvement in obtaining
the money from the Russicks, discovery has revealed that Mr.
Russick unilaterally gifted his daughter the money without any
expectation of repayment, other than his daughter’s payment of
the monthly interest.
Koenig further contends that when Anna
1
The record indicates that during the course of this litigation,
the Tom and Anna Marie Koenig have separated. It is not clear
whether the parties have instituted formal divorce proceedings.
2
A clerk’s entry of default was entered against Anna Marie
Koenig on June 30, 2016 and she failed to appear at two
depositions. Her deposition was finally taken on January 31,
2017. Plaintiffs have not moved for default judgment against
her.
3
The Court has issued two previous Opinions in this case
concerning Tom Koenig’s contention that personal jurisdiction
over him was lacking. After a short period of discovery limited
to the personal jurisdiction issue, the Court found that the
exercise of personal jurisdiction over him in this Court in this
matter is proper. (See Docket No. 11 and 25.)
2
Marie Koenig stopped paying the interest payments, her parents
never sought to enforce the monthly interest payments, which
evidences the purported loan was actually a gift, and otherwise
constitutes a waiver of any claim to subsequent interest
payments.
In contrast to Tom Koenig’s position, Plaintiffs contend
that disputed issues of material fact preclude summary judgment
on Plaintiffs’ claim that the money was a loan and not a gift,
and that there was no waiver of Plaintiffs’ contractual rights
against the defendants. 4
To support their position, Plaintiffs
point to Anna Marie Koenig’s testimony about her conversations
with her father and her husband about the loan and intentions
that the $188,000 was to be repaid, as well as Gail Russick’s
understanding of the agreement.
Plaintiffs also show the
monthly payments of the loan interest to James Russick as part
of the terms of the loan, and Tom Koenig’s three written
statements acknowledging the loan and his and his wife’s
obligation to repay it.
DISCUSSION
A.
Subject matter jurisdiction
This Court has jurisdiction over this matter pursuant to 28
U.S.C. § 1332 because there is complete diversity of citizenship
4
Plaintiffs have not cross-moved for summary judgment in their
favor on their claims against Tom Koenig.
3
between the parties and the amount in controversy exceeds
$75,000.
Plaintiffs, Gail Russick and her late husband James
Russick, are citizens of New Jersey, see 28 U.S.C. § 1332(c)(2)
(the legal representative of the estate of a decedent is deemed
to be a citizen of the same state as the decedent), and
defendants Anna Marie Koenig and Tom Koenig are citizens of
Tennessee.
B.
Standard for Summary Judgment
Summary judgment is appropriate where the Court is
satisfied that the materials in the record, including
depositions, documents, electronically stored information,
affidavits or declarations, stipulations, admissions, or
interrogatory answers, demonstrate that there is no genuine
issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.
Celotex Corp. v.
Catrett, 477 U.S. 317, 330 (1986); Fed. R. Civ. P. 56(a).
An issue is “genuine” if it is supported by evidence such
that a reasonable jury could return a verdict in the nonmoving
party’s favor.
248 (1986).
Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
A fact is “material” if, under the governing
substantive law, a dispute about the fact might affect the
outcome of the suit.
Id.
In considering a motion for summary
judgment, a district court may not make credibility
determinations or engage in any weighing of the evidence;
4
instead, the non-moving party's evidence “is to be believed and
all justifiable inferences are to be drawn in his favor.”
Marino v. Industrial Crating Co., 358 F.3d 241, 247 (3d Cir.
2004)(quoting Anderson, 477 U.S. at 255).
Initially, the moving party has the burden of demonstrating
the absence of a genuine issue of material fact.
v. Catrett, 477 U.S. 317, 323 (1986).
Celotex Corp.
Once the moving party has
met this burden, the nonmoving party must identify, by
affidavits or otherwise, specific facts showing that there is a
genuine issue for trial.
Id.
Thus, to withstand a properly
supported motion for summary judgment, the nonmoving party must
identify specific facts and affirmative evidence that contradict
those offered by the moving party.
57.
Anderson, 477 U.S. at 256-
A party opposing summary judgment must do more than just
rest upon mere allegations, general denials, or vague
statements.
Saldana v. Kmart Corp., 260 F.3d 228, 232 (3d Cir.
2001).
C.
Analysis
With regard to the issue of whether the $188,000 was a loan
or a gift, there are three elements of a valid and irrevocable
gift: (1) actual or constructive delivery; (2) donative intent;
and (3) acceptance.
Bhagat v. Bhagat, 84 A.3d 583, 593 (N.J.
2014) (citations omitted).
The burden of proving an inter vivos
gift is on the party who asserts the claim, and the recipient
5
must show by “clear, cogent and persuasive” evidence that the
donor intended to make a gift.
Id. at 594 (citations omitted).
The exception to this burden is when the transfer is from a
parent to a child.
In that case, a presumption arises that the
transfer is a gift, and the initial burden of proof on the party
claiming a gift is slight.
Id. (citations omitted).
This parent-child gift presumption is rebuttable by
evidence of a contrary intent.
Such evidence must meet the
clear and convincing evidence standard of proof to rebut the
presumption, and it must be “antecedent to, contemporaneous
with, or immediately following the transfer.”
Id. at 597.
“In
addition, a party seeking to rebut the presumption may also
adduce proof of statements by the parties concerning the purpose
and effect of the transfer.”
Id. at 597-98.
With regard to whether Plaintiffs’ right to the interest
payments was waived, a “waiver” is the intentional
relinquishment of a known right – “[i]t is a voluntary act, and
implies an election by the party to dispense with something of
value, or to forego some advantage which he might at his option
have demanded and insisted on.”
West Jersey Title & Guaranty
Co. v. Industrial Trust Co., 141 A.2d 782, 786–87 (N.J. 1958)
(quotations and citations omitted).
“It is requisite to waiver
of a legal right that there be a clear, unequivocal, and
decisive act of the party showing such a purpose or acts
6
amounting to an estoppel on his part,” and a waiver “presupposes
a full knowledge of the right and an intentional surrender.”
Id. (quotations and citations omitted).
Thus, in order to defeat Tom Koenig’s motion for summary
judgment on his contention that the $188,000 was a gift from the
Russicks to Anna Marie Koenig, Plaintiffs must provide evidence
“antecedent to, contemporaneous with, or immediately following
the transfer,” which if believed by a jury, would constitute
clear and convincing evidence that the $188,000 was a loan and
not a gift.
On the flip side, in order to prevail on summary
judgment that Plaintiffs waived their rights to collect
interest, Tom Koenig must provide undisputed evidence of a
clear, unequivocal, and decisive act by Plaintiffs demonstrating
that they intentionally surrendered their right to collect
interest on the $188,000.
Plaintiffs have met their burden on
the first issue, and Tom Koenig has not met his burden on the
second.
Plaintiffs’ evidence reveals:
•
From September 28, 2007 through November 19, 2007,
James Russick sent his daughter four checks in various
amounts totaling $188,000.
•
Anna Marie Koenig testified that she considered the
$188,000 to be a loan that was to repaid in full,
along with the interest, even if the precise terms of
7
repayment of the principal were not specifically laid
out at that point.
•
Gail Russick testified that she considered the
$188,000 to be a loan, even though it was arranged
mostly by her husband.
•
Anna Marie Koenig made interest payments to the
Russicks on December 1, 2007, January 1, 2008, January
26, 2008, April 5, 2008, May 5, 2008, June 8, 2008,
July 8, 2008, August 5, 2008, October 17, 2008,
November 2, 2008 and March 2, 2009.
The interest
payments varied each month due to a variable interest
rate.
•
In late 2008, James Russick became ill, was diagnosed
with cancer with a three-month life expectancy, and
died on January 20, 2009.
•
Anna Marie Koenig testified that after the November
2008 interest payment, her husband assumed the
responsibility of making the interest payments and
indicated that his secretary would contact her father
to determine the amount for the subsequent interest
payments.
•
Anna Marie Koenig testified that her husband did not
make any interest payments.
8
•
On December 17, 2007, Tom Koenig drafted, signed, and
had notarized, a letter stating:
Please accept this note verifying that Anna Marie
and Tom Koenig have taken advantage of a
$188,000.00 loan through Mr. and Mrs. James
Russick, that began with draws starting on or
about October, 2007.
(Docket No. 76-10 at 2.)
•
In August 2009, James Russick’s financial advisor,
Jack Carini, sent a letter to Tom Koenig.
In that
letter, Carini states that in the process of assisting
Gail Russick with the estate, he:
discovered a signed affidavit with your signature
stating a loan transaction between you and James
& Gail Russick. This has become a problem for
Gail due to the changes she would like to make in
her life at this time. The home has a loan/lien
against it and it must be removed so the personal
residence can be sold, placed in a trust or
resided in without incumbency.
To make this agreement binding and much clearer
for all parties concerned, there is a Promissory
Note enclosed for you to review and make
effective.
The enclosed agreement must be signed, dated,
notarized and returned with the first installment
payment by September 15th, 2009. If the signed
agreement is not returned by the deadline of
September 15th, 2009, the entire amount of the
note will become due by September 30, 2009. A
formal lien will be placed on all your properties
to protect Gail Russick's interests.
(Docket No. 78-10 at 1.)
•
On September 11, 2009, Tom Koenig responded back with
9
a letter to the financial advisor:
This is in response to your letter to me
concerning a request for a promissory note to
your client, Gail M. Russick. I have checked with
my wife and she indicates she is completely
unaware of any such request. I would hope that
you will be able to consult further with Ms.
Russick to make certain of her intentions in this
matter.
In any event, the unfortunate fact is that my
wife and I are not in a position at this time to
alter the agreements previously made and execute
the note you requested. The monthly payments you
have asked for are simply not in a range that we
could even begin to accommodate. The terms of
repayment agreed to when these funds were
provided were that interest only payments would
be all that was necessary for a number of years
in order to allow for completion of the home and
an extended period after that until we could get
out from under the significant indebtedness we
were incurring to build our home. The home is
still not complete and will require significant
additional funds in order to finish. We are in a
position to, and we will, continue to make the
agreed upon interest only payments.
Please also understand that at no time was any
mortgage or other lien ever discussed. As a
result, you would have no right or ability to
validly place any lien on any property I or my
wife and I own. Any attempt to do so would have
serious repercussions, not the least of which is
it would give the construction lender a basis for
calling its loan, which would have catastrophic
consequences for all concerned.
(Docket No. 78-11 at 1.)
•
On December 9, 2009, Tom Koenig wrote a letter to
Gail Russick, where in response to her suggestion
that he liquidate other investments, Koenig stated
10
that it was not feasible because it was “not the
intent of the original loan to us.”
(Docket No. 78-
13 at 1.)
Tom Koenig argues that the foregoing evidence does not
constitute clear and convincing proof that James Russick’s
$188,000 payment to his daughter was not a gift.
Tom Koenig
contends that while his wife believed her father would assist
them financially by co-signing a loan, Russick unilaterally
secured a mortgage on his home and provided the money to his
daughter which evidences the gratuitous nature of the act.
Tom
Koenig also points to the lack of any formal agreement between
his wife and her father with regard to repayment of the
principal as proof that it was not a loan.
As to the December 17, 2007, September 11, 2009, and
December 9, 2009 letters Tom Koenig drafted acknowledging the
$188,000 as a loan to be repaid, Tom Koenig contends that the
only reason he executed those documents is because his wife
represented to him that it was a loan – not that he
independently understood the money was a loan. 5
5
Tom Koenig
In his reply brief in an effort to explain his deposition
testimony and the three letters, Tom Koenig provides an
affidavit stating that he only thought he was obligated to repay
the $188,000 because he was mistaken about his liabilities for
his spouse’s debts, in the event that the $188,000 is considered
a loan and not a gift. (Docket No. 79-3 at 4.) Koenig’s
testimony as to his beliefs is for a jury to assess.
Additionally, as the Court noted previously, Plaintiffs are
11
further argues that those documents cannot be considered in
determining the intent of James Russick because they are not
“antecedent to, contemporaneous with, or immediately following”
the transfer of money, with the December 17, 2007 letter
occurring two months after the first check and twenty-eight days
after the final check, and the other two letters occurring two
years after the transfer.
Tom Koenig finally argues that the Russicks’ failure to
collect on the interest payments for ten months - from November
2008 until September 2009 – evidences first James Russick’s, and
later Gail Russick’s, knowing relinquishment of any interest
going forward.
The Court does not find Tom Koenig’s position on either
point to be availing.
First, Koenig argues that the Court must
disregard his three letters since they are not “antecedent to,
contemporaneous with, or immediately following” the transfer, by
way of 28 days after the final disbursement, two months after
suing the Koenigs jointly and severally, and whether Koenig will
ultimately be responsible for the loan if judgment is entered in
Plaintiffs’ favor against him will be determined in a family
court proceeding. (Docket No. 24 at 6 n.4 (citing Alford v.
Alford, 120 S.W.3d 810, 813 (Tenn. 2003) (holding that “marital
debts” are all debts incurred by either or both spouses during
the course of the marriage up to the date of the final divorce
hearing, and guidelines in the equitable distribution of marital
debt insure the fairest possible allocation of debt, and protect
the spouse who did not incur the debt from bearing
responsibility for debts that are the result of personal
excesses of the other spouse).)
12
the first disbursement, and two years after the initial and
final disbursements.
Koenig, however, constrains the concept of
“immediately following” without any support in the law as to
what time frame “immediately following” means.
Koenig’s
December 17, 2007 letter states that the $188,000 from the
Russicks was a loan, with draws starting in about October 2007,
just two months before.
Koenig’s December 17, 2007 letter also
occurred after the first interest payment was made on the loan,
and before eight future interest payments were made.
Koenig has
not pointed to any cases where a writing confirming the nature
of the conveyance of money a month or two after that conveyance
is not considered “immediately following.”
Similarly, although Tom Koenig’s September 2009 and
December 2009 letters are two years later, those letters merely
affirm what his December 2007 letter acknowledged, along with
subsequent events that also confirm that nature of the original
transfer.
Again, Koenig has not provided any citation that
would deem these letters to be outside of the permissible realm
of consideration.
Indeed, in Bhagat, the trial court considered
documents related to the transfer of shares from parent to child
that were provided over the course of several years from the
original conveyance, and only rejected a sworn certification
made more than 20 years after the time of the purported gift.
Bhagat, 84 A.3d at 589.
Moreover, the Bhagat court noted that
13
“the subsequent conduct of the parties may be given in evidence
to corroborate the inference drawn from prior and
contemporaneous circumstances.”
Id. (citing Bertolino v.
Damario, 107 N.J. Eq. 201, 202, 152 A. 330 (E. & A. 1930)
(explaining that gift presumption may be rebutted by later
admissions of parties)); Weisberg v. Koprowski, 111 A.2d 481
(N.J. 1955) (not precluding evidence of conduct subsequent to
the son's purchase of the house in which his mother lived to
rebut the presumption of a gift)).
Thus, Plaintiffs’ proffer of
Koenig’s letters as his admission to the nature of the $188,000
is permissible, and if accepted as true by a jury, serves as
evidence to rebut the presumption that the money was a gift from
father to daughter.
Even if Tom Koenig’s letters were not considered,
Plaintiffs have provided sufficient proof, if believed by a
jury, to meet their clear and convincing burden of proof to
rebut the presumption that the money transfer was a parent-tochild gift.
The matter is complicated by the absence of the
primary actor, James Russick, as well as the adversarial nature
of a mother’s claims against her daughter and her estranged
husband, but Gail Russick and Anna Marie Koenig testified that
the money was a loan, and Tom Koenig testified that his wife
represented to him that it was a loan.
Additionally, the
payment of interest over at least a year before the Koenigs’
14
financial situation deteriorated even further and they lacked
the means to continue the interest payments strongly infers that
the $188,000 was not a gratuitous donation.
If a jury weighs
Tom Koenig’s arguments - concerning how James Russick
unilaterally secured the mortgage without first telling his
daughter, the lack of principal repayment terms, and how he had
nothing to do with the request for money in the first place –
against Plaintiffs’ evidence, and the jury believes Plaintiffs,
then Plaintiffs will have met the clear and convincing standard
to rebut the gift presumption.
denied on this issue.
Thus, summary judgment must be
Cf. Bhagat, 84 A.3d 583 at 599 (reversing
the lower courts’ entry of summary judgment, finding that
several statements by the defendant raised genuine issues of
fact about whether the 1989–90 stock transfers were an
unqualified gift from father to son or a mere matter of
convenience to further a family business, including the
inconsistent statements in the prior intra-family litigation,
and an assessment of the defendant’s credibility beyond that
accomplished by simply examining affidavits, letters, notes, and
other documents).
Second, Tom Koenig’s argument that Plaintiffs waived their
right to the interest payments is also unavailing.
On this
issue, Koenig has the burden of proof to show, by clear and
convincing evidence, that no material disputed facts exist as to
15
his claim that Plaintiffs intentionally surrendered their right
to collect interest on the $188,000.
Koenig argues that after a
year of the monthly interest payments, the payments stopped, and
at this time James Russick was aware of the marital discord
between the Koenigs.
Koenig contends that according to his
wife, her father did not know what to do about the lack of
interest payments because he did not wish to upset the delicate
state of the Koenig household, so he did nothing.
Koenig argues
that his father-in-law’s lack of effort to collect the interest
at that point unequivocally evidences his intentional
relinquishment of his right to collect interest.
The Court does
not agree.
The evidence shows that Anna Marie Koenig made ten interest
payments to her father, but those payments stopped when he
became ill and died, all within a matter of a few months.
This
was also the time when James Russick became aware of the
Koenigs’ marital troubles.
The Court cannot find as a matter of
law that those three months Russick did not pursue efforts to
collect interest was a waiver of that right, especially
considering he was suffering from an aggressive terminal illness
during that time.
Under Koenig’s argument, Russick’s death
would be considered the ultimate waiver of his rights, which is
not the law.
Moreover, during that ten-month span - from
November 2008 until September 2009 - that Koenig argues
16
demonstrates waiver, Anna Marie Koenig made an interest payment
in March 2009, which a jury could view as defeating Koenig’s
argument that the Russicks had intentionally given up on their
rights to the interest payments.
Thus, summary judgment on Tom
Koenig’s contention that Plaintiffs waived their rights to
collect the interest payments on the $188,000 must be denied.
See, e.g., Indymac Venture, LLC v. Klimkiewicz, 2016 WL 4006012,
at *5 n.7 (N.J. Super. Ct. App. Div. 2016) (citing West Jersey
Title & Guaranty Co. v. Industrial Trust Co., 141 A.2d 782, 786–
87 (N.J. 1958)) (rejecting defendants’ contention that the
plaintiff implicitly waived defendants’ default by allowing them
to draw down $19,500 to pay outstanding unpaid interest because
nothing in the plaintiff’s emails constituted a “clear,
unequivocal and decisive act” to waive plaintiff’s rights to
defendants’ default).
CONCLUSION
This Court noted in December 2015 that it was hopeful the
parties could “move forward to efficiently resolve this contract
dispute that has unfortunately pitted mother against daughter
and son-in-law, and husband against wife.”
6.)
(Docket No. 24 at
Over two years have passed since then, and despite this
Court’s hope that the parties could privately resolve their
17
familial dispute, it appears that a jury must now do so. 6
An appropriate Order will be entered.
Date: April 23, 2018
At Camden, New Jersey
s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
6
In September 2017, Tom Koenig’s attorney moved to be relieved
as Koenig’s counsel because of Koenig’s failure to pay his legal
bills. The magistrate judge denied that motion without
prejudice, finding that it was premature, in part because
Koenig’s motion for summary judgment was fully briefed and no
action was required by counsel until the resolution of that
motion. (Docket No. 80 at 5.) The magistrate judge permitted
counsel to refile his motion after this Court issued its
decision on Koenig’s motion, and directed that “any such motion
shall include a certification by counsel addressing specifically
RPC 1.16(b)(5) and (6).” (Id.)
18
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