Legal Blog: Will Bethenny Frankel Get Her Tribeca Pad Back After Judge Rules Trust Used To Purchase Property Is Invalid?

Emotional trust is like paper. Once it is punctured it can’t be perfect again. A trust as a legal instrument under New York law does not tolerate imperfections either.

A judge recently declared that documents used to secure a trust for Bethenny Frankel and Jason Hoppy’s Tribeca apartment is null and void. The purchase of the apartment on Hudson Street, which Jason refuses to leave, closed in 2011 and was supposedly funded by a loan in the amount of $2,300,000.00 and by approximately $2,700,000.00 from an account in Bethenny’s name. “I’m the richest homeless person in Manhattan right now,” Bethenny told broker and “Million Dollar Listing New York” star Fredrik Eklund on a recent episode of the “Real Housewives of New York.”

The New York Times best-selling author claims she took out the loan but the signature on the trust documents may not have been hers. She says she was “duped” into signing the documents and someone may have forged her signature. The Skinnygirl founder avers she never read the trust agreement before signing it, and does not recall ever being shown any part of it except for the signature page.

“[I]t is also undisputed that neither [Bethenny], [Jason], nor the trustee was ever present in the office” of the attorney who allegedly witnessed their signatures on the trust agreement, according to documents obtained by Radar Online. In instances where no trust is created by reason of failure to comply with the formalities necessary for a valid trust, the judge held the transfer of the apartment into the trust was null and void.

Perhaps this is the reason Bethenny has a spring in her step in addition to a new short and sassy hairdo courtesy of the Serge Normant Salon (stylist to the stars).  She may have lost some length on her tresses but she won the “Battle For Tribeca” – maybe. 

The judge found the trust agreement here is a matrimonial agreement, since it was made between spouses and purports to govern property ownership as between them. The home that Skinnygirl built, which features furniture and fabrics from Ikea and Restoration Hardware, was purchased through a trust during the marriage. Under New York law, the trust agreement is subject to strict formality requirements. 

In Matisoff v. Dobi, 90 NY2d 127 (1997), the Court of Appeals held that in accordance with New York law, without the proper acknowledgment, a marital agreement is unenforceable. The courts will not be permitted to enforce agreements that, although signed, do not comply with the strict directives of being acknowledged in a manner required to entitle a deed to be recorded. Agreements must be executed in writing; signed by both settlor and trustee; and acknowledged by a notary public or signed by two disinterested adult witnesses. 

The matrimonial agreement between Bethenny and Jason was unenforceable because its acknowledgment was not taken by a person authorized to acknowledge the execution of a deed in New York (notary) nor did two impartial adults witness their signatures.

I unearthed an important decision in which New York County Supreme Court Justice Ellen Gesmer (the same judge presiding over the Frankel v. Hoppy divorce) discussed New York formalities required in a marital agreement.  In J.R. v. E.M., 2014 NY Slip Op 51094[U], the day after the husband and wife were married in New York City, they sought a “Matrimonial Property Agreement,” much like the one involved in Frankel v. Hoppy. After commencing her divorce action, the wife, like Bethenny, claimed she did not see the Agreement. Since marital agreements encompass weighty personal rights, relinquishment of property, and family interests, the formality of acknowledgment must be followed.

The judge here ruled, “It is undisputed that the signatures of the parties … were not acknowledged in the presence of the person claiming to have acknowledged those signatures. It is also undisputed that the power of attorneys were not even signed in the state where the notary public was credentialed, Pennsylvania.”  Could Bryn’s grandmother be headed to jail for notarial misconduct?

The sweet little lady who took Bethenny bridal dress shopping on “Bethenny Getting Married?” is also a warrior in the “Battle For Tribeca.” Carol Hoppy, Jason’s mom, is the notary listed on the trust in question, but she is not registered in New York, and neither party signed documents in her home state of Pennsylvania, where she is licensed.

According to Radar Online, Carol is a notary in Pennsylvania, and her stamp and signature appear on some of the documents, however the documents state, “that she is a ‘notary public in and for the State of New York,’” which is not true. Bethenny “claims, and [Hoppy] does not deny, that neither party” ever went to Pennsylvania to sign the forms.

A notary public shall act as a trusted third-party record-keeper and impartial witness who does not profit or gain from any document or transaction requiring a notarial act, apart from the fee allowed by statute. The entire judicial system relies on a notary’s faithful and competent discharge of his or her duties with regard to deeds, mortgages, contracts, trusts, etc.  A notary cannot engage in sloppy or nefarious notary practices, otherwise he or she will be subject to potential disciplinary action (fines or jail) and liability (from those impacted by the notary’s reprehensible ways).

Examples of notarial misconduct include: 1) the notary notarized an instrument without the signer being present; 2) the notary failed to establish the identity of the signer by satisfactory evidence; 3) the notary failed to execute proper notarial procedures; and 4) the notary knew the document contained false statements, and the notary notarized the document anyway.  If a notary’s official negligence or misconduct is the cause of a person’s financial losses, such person (Bethenny, in this case) may sue and recover damages from the notary public. 

The judge here remarked, “The deed must be reformed in order to reflect the proper identity of the purchase, since the trust never existed, and cannot therefore have taken title to the apartment.” The judge asked both parties to refile their motions as needed. Bethenny argues that since the trust has been declared null and void, she should be awarded the apartment since said dwelling was purchased with her separate property. That strategy isn’t foolproof: The Tribeca flat is likely subject to equitable distribution because it is marital property acquired during the marriage.

There is yet another wrinkle in the “Battle For Tribeca.” Bethenny claims she executed (signed) the trust agreement believing, based on her communication with her husband, that the trust “was only to maintain privacy given her public recognition.” Bethenny could assert that because Jason “duped” her into executing the trust agreement in order to make the apartment joint property, she should get the $5 million mansion in the sky.

In November 2011, just over one year before Bethenny filed for divorce, Jason was named as the sole successor trustee of the trust, reportedly to ensure Frankel’s privacy, which is de rigueur among rich Manhattanites.

To keep their real-estate transactions as tight-lipped as possible, affluent and famous people form limited-liability companies (LLCs) and trusts to purchase Manhattan property secretly. They bury multimillion-dollar real-estate deals under legal entities that may be nearly untraceable. “Million Dollar Listing New York” star Fredrik Eklund told Wendy Williams about his new book, The Sell: The Secrets of Selling Anything to Anyone while regaling her with tales of how he tries to keep high-profile client real estate deals anonymous, which proved slightly unsuccessful when Wendy showed an image of Fredrik taking triple threat Jennifer Lopez to look at properties.      

Grab your gavel, join the conversation, and let us know what you think about the “Battle For Tribeca.”  We wish everyone a meaningful, relaxing, and safe Memorial Day weekend filled with plenty of reality TV binge-watching. 

 

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