A non-written agreement for cohabitants to share retirement benefits can be enforceable under a breach of contract claim, but will not support claims to impose a constructive trust, or for unjust enrichment or an accounting. Such was the holding of the Appellate Division, Second Department, in its November 13, 2013 decision in Dee v. Rakower.
In the majority opinion written by Justice Leonard B. Austin, the appellate court relied heavily on the facts as pleaded in the complaint. The parties had lived together in a committed, same-sex relationship for nearly 18 years. Two children were born of this relationship; each party being the biological parent of one child, legally adopted by the other.
After the relationship ended in 2007 (before the passage of New York’s Marriage Equality Act [see, Domestic Relations Law §§ 10-a, 10-b]), Ms. Dee commenced this action seeking to enforce the alleged oral “joint venture/partnership” agreement. Under that agreement, Ms. Dee was to share in assets, including Ms. Rakower’s retirement contributions and earnings, in exchange for Ms. Dee leaving her full-time job to care for the parties’ children.
Before they had children, each party was employed full-time, earning a salary and retirement benefits. The parties pooled their respective salaries to meet their shared expenses. The parties purchased a house as joint tenants with rights of survivorship.
After the parties’ first child was born, the parties agreed, it was alleged, that given the cost of child care, Ms. Dee would eschew her full-time employment and work part-time so that she could be home with the children and perform other non-financial services for the benefit of the family and for the parties’ partnership and/or joint venture while Ms Rakower would continue to work full-time. Ms. Dee alleged that her decision to leave her full-time employment was based upon the parties’ specific agreement that Ms. Dee would be entitled to one half of Ms. Rakower’s retirement contributions and earnings for the period.
Ms. Rakower moved to dismiss Ms. Dee’s complaint. Kings County Supreme Court Justice Yvonne Lewis granted that motion, determining that the facts did not support causes of action for breach of contract, to impose a constructive trust, for unjust enrichment or for an accounting.
Modifying Justice Lewis’s decision, the Second Department reinstated only the breach of contract claim. Within its four corners, the complaint sufficiently alleged the elements of a breach of contract cause of action necessary to survive a motion to dismiss. The allegations adequately set forth the existence of a contract pursuant to which the plaintiff would quit working full-time, thereby ceasing to earn money toward her own retirement plan, and pursue part-time work enabling her to stay home to care for the parties’ children, in exchange for a one-half share in the defendant’s retirement accounts accrued during those years that the plaintiff refrained from working at a job which provided retirement benefits.
The alleged contract was supported by consideration: the forbearance by Ms. Dee of her career, her inability to continue to save toward her retirement during that forbearance, and her maintenance of the household in return for a share in the defendant’s retirement benefits and other assets earned during the period of forbearance.
The fact that the alleged agreement was made by an unmarried couple living together did not render it unenforceable. Justice Austin quoted the 1980 Court of Appeals decision in Morone v Morone, 50 NY2d 481, 429, N.Y.S.2d 591, a case which recognized the existence of a contract claim to enforce an alleged agreement between heterosexual cohabitants:
New York courts have long accepted the concept that an express agreement between unmarried persons living together is as enforceable as though they were not living together, provided only that illicit sexual relations were not part of the consideration of the contract. . . . While cohabitation without marriage does not give rise to the property and financial rights which normally attend the marital relation, neither does cohabitation disable the parties from making an agreement within the normal rules of contract law.
Second Department Justice Marc C. Dillon dissented, finding that even though the complaint alleged that the parties entered into an oral agreement to equally share in the financial and nonfinancial contributions made by each, it nevertheless failed to plead a breach of contract cause of action. It did not specifically allege that the parties agreed that they would divide their combined assets and Ms. Rakower’s accrued pension benefits in the event that their relationship ended, and how they intended to do so.
The Second Department majority, however, held that Ms. Dee’s failure to specifically allege that there was a “meeting of the minds” as to how the assets would be distributed upon the termination of the parties’ relationship did not compel the conclusion that the complaint failed to state a cause of action to recover damages for breach of contract. There was sufficient definiteness to the material terms of the alleged agreement between the parties to establish an enforceable contract. The failure to include the mechanism for the implementation of the parties’ alleged agreement did not negate the allegations in the complaint that they entered into an agreement with regard to the rights to their assets.
Accordingly, the Second Department held that Justice Lewis should have denied that branch of Ms. Rakower’s motion which was to dismiss the nreach of contract cause of action.
The appellate court, however, did uphold Justice Lewis’s dismissal of the causes of action to impose a constructive trust, for unjust enrichment or for an accounting.
The equitable remedy of a constructive trust may be imposed when property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest. The elements of a cause of action to impose a constructive trust are (1) the existence of a confidential or fiduciary ‘relationship, (2) a promise, (3) a transfer in reliance thereon, and ‘(4) unjust enrichment.
However, unlike divorcing married couples who can rely upon the equitable distribution law, the allegation of an equitable right to share in a cohabitant’s pension on an equal basis is insufficient to support a cause of action to impose a constructive trust. Also, the Employee Retirement Income Security Act (ERISA; 29 USC §§ 1001, et seq.) precludes the imposition of a constructive trust on a pension plan.
Similarly, to establish an unjust enrichment cause of action, a plaintiff must allege that (1) the other party was enriched, (2) at that party’s expense, and (3) it is against equity and good conscience to permit the other party to retain what is sought to be recovered. The essential inquiry in any action for unjust enrichment or restitution is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered. Here, however, Ms. Dee failed to allege that Ms. Rakower was enriched at her expense. Thus, a cause of action based on unjust enrichment was not sufficiently pleaded.
The right to an accounting is premised upon the existence of a confidential or fiduciary relationship and a breach of the duty imposed by that relationship respecting property in which the party seeking the accounting has an interest.Here, again, there was no question as to whether the parties shared a confidential relationship as members of a committed family unit. However, the complaint did not allege that the fiduciary relationship necessary to obtain an accounting was created by Ms. Dee entrusting to Ms. Rakower some money or property with respect to which Ms. Rakower was bound to reveal her dealings.
[Although not discussed in the opinion, it may be noted that an express agreement between a cohabiting unmarried couple is not precluded by the Statute of Frauds requirement that agreements to be performed beyond one year be in writing. See, Spertell v. Hendrix, 93 A.D.2d 788, 461 N.Y.S.2d 823 (1st Dept. 1983); but see, Williams v. Lynch, 245 A.D.2d 715, 666 N.Y.S.2d 749 (3rd Dept. 1997), upholding the partnership-based accounting claim, but denying a contract claim.]