The Probate Part was not authorized to order the
disbursement of non-probate assets into a testamentary trust
IN THE MATTER OF THE ESTATE
OF WILLIAM STROHMENGER
(DECEASED)
__________________________________
|
SUPERIOR COURT
OF NEW JERSEY
APPELLATE
DIVISION
Before Judges Ashrafi and Leone.
On appeal from Superior Court of New Jersey,
Chancery Division, Ocean County, Docket No.
182037.
Scott K. Seelagy, attorney for appellant
Jean Cotis.
Carton Law Firm, L.L.C., attorneys for
respondent Lee Strohmenger (James D. Carton,
III, on the brief).
PER CURIAM
In
this probate matter, Jean Cotis, the estranged wife of the deceased, William
Strohmenger, appeals from several orders that dismissed her claims to a part of
his estate and that established a constructive trust for the benefit of their
child. We affirm in part and reverse in
part.
I.
Cotis and
Strohmenger were married at the time of his death but had been living
separately for about ten years. They had
one child, a ten-year-old son who lived with Cotis in Sussex County. Strohmenger lived in Ocean County but spent
time with his son every weekend.
On May 25, 2009,
Strohmenger committed suicide in his home.
He was distraught about an unfortunate but not uncommon incident that
had occurred the previous night. Strohmenger's
sister, Diane,[1]
was with him on the morning of May 25. He
told her he believed the incident would cause the loss of his job as president
of a gun manufacturing company, and also prompt Cotis to interfere with his
parenting time with his son.
That
afternoon, while alone in his office at the manufacturing company, Strohmenger
handwrote and signed a will on seven pages of lined paper. The will stated in part:
William
Strohmenger
of sound mind
+ body
My Will
Everything
All to my son
[full name of
son]
. . . — I love
him — Always
Will
Lee my sister
to
be my executor
. . . .
My Last will +
testament. I leave
everything to
my
son.
I want Lee (sister)
to be my
executor.
Here are my
accts.
[Listing of bank, retirement, and mortgage
account information and location or persons with knowledge of other funds.]
.
. . .
Lee Don Marvel
has
my retirement +
Ins.
from
work [phone number]
he knows its all
for
[son's name]
. . . .
Put it all in
a trust Fund
Fund for [son's name]
Use the money for
his education.
Don’t let Jean
get at it.
I hate Jean not
really
William J. Strohmenger
I love you
[son's name]
Mom
Karol
Lee
Di
Jenn
Strohmenger mailed
the original handwritten will to his sister Lee, and also mailed copies to six
other people. He left two more copies on
his desk at work and took a copy with him.
At some point after he returned home, he made several notations on an
envelope addressed "For My Sister Diane Strohmenger." On scattered parts of the envelope, he wrote where
his recent tax return information could be found, that "other
packets" had been sent in the mail, and, with respect to Cotis: "if
Jean needs help financial wise, tell Lee to help her out — take care of [son's
name], make sure they get help with their house Lee," and "[u]se my
money to help Jean with her house but it's not for her business." An arrow was drawn from the word
"house" to a phrase "house bills."
That evening,
Diane went to Strohmenger's house and found him dead in his bedroom from a
self-inflicted gunshot.
The accounts
referenced in the will included several for which Strohmenger had previously
designated beneficiaries in the event of his death, and thus would pass by
their terms and by operation of law outside the will. On two life insurance policies and an IRA
account, Strohmenger had previously designated his son as the beneficiary. On three other accounts, he had previously named
his sister Lee, his mother Margaret, and Cotis as the beneficiaries.
On June 11, 2009,
Lee filed a verified complaint in the Chancery Division, Probate Part, Ocean
County, seeking to admit the holographic will to probate and to appoint her as
executrix of the estate. A few days
later, Cotis filed a caveat opposing probate of the will.[3] Subsequently, the court entered orders
appointing a guardian ad litem for the son and setting a discovery schedule. Document discovery was conducted, and
depositions were taken.
When discovery ended
in January 2010, the court considered Lee's motion for summary judgment. The certifications of Lee and Diane in
support of the motion identified their brother's handwriting and signature on
the will. Lee also alleged that Cotis and
Strohmenger lived separately for a decade, and that their relationship was
"very unpleasant." Cotis filed
opposition to the summary judgment motion.
In her certification, she stated that the couple "supported"
each other "as husband and wife in every other facet" of life despite
their separation, and that Strohmenger provided a substantial amount of money
for her expenses every month during the entire period of their marriage. She claimed that "[i]t is clear from all
the writings found in his home and from the nature of our relationship for the
past 10-years, he did not intend to disinherit me."
The court granted
summary judgment to Lee and directed Cotis to withdraw her caveat. She did so on January 19, 2010. By order dated January 28, 2010, the court admitted
the will to probate, appointed Lee executrix, required her to post a bond, and allowed
attorney's fees to be paid out of the estate to the attorney for Lee and to the
guardian ad litem.
Less than a month after
withdrawing her caveat, Cotis filed a verified complaint on February 16, 2010,
alleging that the will should be construed to provide her an inheritance equal
to that for the son. She also sought the
appointment of her father as trustee for the son's share of the inheritance. In her complaint, Cotis made factual allegations
essentially identical to her earlier certification in opposition to summary
judgment. She also explained that the withdrawal
of the caveat and the filing of the new, so-called construction complaint were done
upon the advice of counsel regarding how to proceed in the dispute. The court issued an order to show cause to
address the new complaint.
Lee filed
opposition, contending that the prior proceedings collaterally estopped Cotis
from making the claim in the new pleading.
After hearing argument, the court issued an order on April 16, 2010,
dismissing Cotis's complaint and denying restraints on the estate. The court agreed with Lee that collateral
estoppel applied, and it also cited res judicata and the entire controversy
doctrine as grounds for dismissal. Cotis
appeals from an order dated April 30, 2010, which denied her motion for
reconsideration of the court's April 16, 2010 order.
About a year
later, on May 12, 2011, Lee filed a complaint and obtained an order to show
cause seeking approval of a first intermediate accounting for the estate and the
court's authorization for the estate to pay interim attorney's fees, other
fees, and estate taxes. She also sought her
appointment as trustee with respect to both the residuary estate and the non-probate
assets that designated the son as beneficiary.
Before Lee's order
to show cause was heard, Cotis applied to the Sussex County Surrogate and was
named guardian of the person and property of the child. Counsel for Cotis stated before the Ocean
County Probate Part that the life insurance carrier had informed him that
appointment of a guardian was necessary for payment of the insurance proceeds
to a minor in accordance with the terms of those policies. In argument before the Probate Part, the
insurance carrier agreed with Cotis's position that the insurance proceeds
should be disbursed to her as guardian for the minor beneficiary.
The guardian ad
litem sought a different disposition of the non-probate assets. He expressed concern that a large amount of
insurance money would be "dump[ed]" on the son when he turned eighteen,
rather than placed in an educational trust as Strohmenger had desired. The guardian ad litem suggested that the
parties agree to a trust arrangement, with Cotis being co-trustee with a
corporate trustee responsible for the day-to-day management of the trust.
The Probate Part did
not accept either proposal at that time.
Instead, on July 5, 2011, it ordered that the insurance and IRA funds be
deposited into the Ocean County Surrogate's intermingled minors account pending
further argument on the question of how the funds should be distributed. The court indicated that the order was
"interim relief only." The
court recognized that "ordinarily such assets would be considered
. . . non-probate assets and as
such would be transferred as per direction given outside the estate, outside
the will holographic or otherwise."
However, the court viewed "the testator's intent" to be
relevant in the circumstances of this case, since it seemed clear that
Strohmenger wanted the funds to be used for his son's education.
The court approved
the interim accounting for the estate, no objections having been raised. With the deposit of the insurance proceeds
into the Ocean County Surrogate's account, the court dismissed the insurance
carrier from the litigation. Subsequently,
the court approved a significant disbursement from the Surrogate's fund to
reimburse Cotis for certain major expenses she had incurred for the son's
benefit since Strohmenger's death.
Cotis now appeals
from the July 5, 2011 interim order, arguing that the Probate Part had no
authority to direct disposition of non-probate assets contrary to the terms of
the insurance policies and IRA account and contrary to their beneficiary
designations.[4]
On March 14, 2012,
Lee filed another complaint, this time seeking approval of a final accounting of
the estate and the appointment of Ocean First Bank as the trustee of both the
residuary estate and the non-probate assets being held for the son in the Ocean
County Surrogate's account. Attached to
the complaint was a proposed "Irrevocable Health and Educational Trust
Agreement" that directed Ocean First Bank to manage the funds "to
provide for the payment of medical and dental bills, day camps, and high
school, post high school education . . . tuition, books, and any other
necessary payment directly related to education."
At oral argument
on April 23, 2012, Lee's counsel conceded that the will did not control
non-probate assets but argued that the court should consider the son's best
interests and exercise its "equitable powers" to maintain the life
insurance and IRA proceeds in trust in accordance with Strohmenger's
instructions in his will.
Cotis did not
object to the residuary estate being placed into a trust as proposed, but she objected
to including the insurance proceeds and other non-probate assets in the trust. Cotis argued that the non-probate assets for the
son should not be treated differently from other non-probate assets that had
already been distributed by their own terms and through operation of law to Lee,
Margaret Strohmenger, and Cotis herself.
Cotis contended in the alternative that, if a constructive trust were to
be created based on Strohmenger's expression of an intent that all his assets
be used for the son's benefit, then the non-probate distributions to the three adults,
including herself, should be included in that trust.
The court was
persuaded that the son's interests required that the assets left for his
benefit be held for him in a single trust.
After noting the disadvantage of leaving the son's funds in the
intermingled minor's account for several years until he reached the age of
majority, at a low interest rate, and also noting the duplicate administrative
and legal expenses of having two separate accounts for the boy's benefit, the
court concluded that combining the non-probate funds with the residuary estate
in a single educational trust would be most consistent with the testator's
intent and best for the boy. The court
rejected Cotis's alternative argument that the other three non-probate
distributions should be disgorged and included in the trust on the ground that
no objection had been raised at the time of those distributions. The court entered orders on June 4 and July
3, 2012, that established the trust and named Ocean First Bank as the trustee. The court also awarded counsel fees and costs
to the guardian ad litem and the attorney for the estate. Cotis appeals from those orders.
II.
We
reject Cotis's argument that the Probate Part erred in its April 16 and 30,
2010 orders that dismissed her complaint for construction of the will to
provide an inheritance to her.
We conduct plenary
review of an order on summary judgment, granting no deference to the trial
court's legal conclusions or application of the law to the facts. W.J.A. v. D.A., 210 N.J. 229,
237-38 (2012). We inquire anew into
"whether the competent evidential materials presented, when viewed in the
light most favorable to the non-moving party, are sufficient to permit a
rational factfinder to resolve the alleged disputed issue in favor" of
that party. Brill v. Guardian Life
Ins. Co. of Am., 142 N.J. 520, 540 (1995); see R.
4:46-2(c). Where, as in this case, the summary
judgment decision was based on application of legal principles, "[a] trial
court's interpretation of the law and the legal consequences that flow from
established facts are not entitled to any special deference." Manalapan Realty, L.P. v. Twp. Comm. of
Manalapan, 140 N.J. 366, 378 (1995).
The probate judge referenced
res judicata, collateral estoppel, and the entire controversy doctrine as the
bases for dismissing Cotis's February 2010 construction complaint. The court noted that some of Cotis's claims
were among those adjudicated in January 2010 when the court rejected her caveat
and admitted the will to probate. Other
theories presented by the new complaint may not have been addressed previously,
but they could and should have been concurrently raised in the earlier
proceedings and thus were barred by the entire controversy doctrine. We agree with the Probate Part's conclusions
of law on those issues.
Initially, we note
that the construction complaint relied upon the notations on the envelope found
in Strohmenger's home as indicating his intent.
Cotis did not claim the envelope was a codicil to the will. She contended the notations were relevant
extrinsic evidence of Strohmenger's intent when he executed his will earlier
that day. Further, she alleged that their
life as husband and wife, and Strohmenger's consistent financial support of her
and their son, was additional evidence of his probable intent.
The
doctrine of probable intent is embodied in N.J.S.A. 3B:3-33.1(a):
The intention of a testator as expressed in his will
controls the legal effect of his dispositions, and the rules of construction
expressed in N.J.S. 3B:3-34 through N.J.S. 3B:3-48 shall apply unless
the probable intention of the testator, as evidenced by the will and relevant
circumstances, is contrary.
The doctrine is no
more than "a rule of construction or interpretation, and therefore
presupposes an existing testamentary disposition" to interpret. In re Estate of Flood, 417 N.J.
Super. 378, 382 (App. Div. 2010), certif. denied, 206 N.J. 64
(2011). The doctrine is "applied
sparingly and only where necessary to give effect to the intent of the will or
trust without varying the terms of the document." Estate of Gabrellian, 372 N.J.
Super. 432, 441 (App. Div. 2004), certif. denied, 182 N.J.
430 (2005). By way of example, a
decedent's intent to minimize the tax consequences of testamentary dispositions
might be used to read "technical provisions essential to achieve tax
savings" into an existing gift, In re Estate of Branigan, 129 N.J.
324, 335 (1992), "but only to the extent that those revisions [do] not
alter the dispository provisions of the will," Estate of Gabrellian,
supra, 372 N.J. Super. at 442.
"The doctrine of probable intent is not applicable where the
documents are clear on their face and there is no failure of any bequest or
provision." Id. at 443.
These
principles are fatal to Cotis's claim that the will should be construed to include
her as a beneficiary. She has never
pointed to a single sentence, phrase, or word in the will that could be
interpreted to give any part of Strohmenger's estate to her. The will could hardly have been clearer:
- "Everything
all to my son [name]."
- "I
leave everything to my son."
- "Don
Marvel . . . knows its all for [name of son]."
- "Put it all in a
trust fund for [name of son]. Use
the money for his education."
- "Don't
let Jean get at it."
Because the will
was clear that all of Strohmenger's estate was to go to his son in trust and
none to Cotis, and because this directive could be carried out as written, the
doctrine of probable intent had no role in this case. The court was required to and did effectuate Strohmenger's
intent by ordering the residuary estate to be placed in an educational
trust. That order, and the judgment
dismissing the will construction action, were correct on the merits.
Furthermore,
as the Probate Part correctly concluded, Cotis's contentions had been presented
and considered in the prior proceeding adjudicating her caveat to probate of
the will. In those proceedings, the
court had determined that the seven handwritten pages mailed to several
different persons and otherwise found were Strohmenger's will, and that the notations
on the separate envelope were not part of the will. Thus, Cotis's claim that it was Strohmenger's
testamentary intent to assist her financially with her "house bills"
had been previously adjudicated and could not be raised again in a separate
action among the same parties. Those
claims were barred by res judicata and collateral estoppel. See Estate of Gabrellian, supra,
372 N.J. Super. at 446; see also Brookshire Equities, LLC v.
Montaquiza, 346 N.J. Super. 310, 318 (App. Div.), certif. denied,
172 N.J. 179 (2002) (elements of res judicata are (1) final judgment by
court with jurisdiction, (2) identity of issues, (3) identity of parties, and
(4) identity of cause of action).
Other
grounds for construing the will in Cotis's favor were barred by the entire
controversy doctrine. See R.
4:30A. The doctrine requires that a
litigant present "all aspects of a controversy in one legal
proceeding," or else be precluded from raising the omitted claims in a
later lawsuit. Hobart Bros. Co. v.
Nat'l Union Fire Ins. Co., 354 N.J. Super. 229, 240 (App. Div.)
(quoting Malaker Corp. Stockholders Protective Comm. v. First Jersey Nat'l
Bank, 163 N.J. Super. 463, 496 (App. Div. 1978), certif. denied,
79 N.J. 488 (1979)) (internal quotation marks omitted), certif. denied,
175 N.J. 170 (2002). The doctrine
furthers the judicial "preference that related claims and matters arising
among related parties be adjudicated together rather than in separate,
successive, fragmented, or piecemeal litigation." Kent Motor Cars, Inc. v. Reynolds &
Reynolds, Co., 207 N.J. 428, 443 (2011).
"In
determining whether successive claims constitute one controversy for purposes
of the doctrine, the central consideration is whether the claims . . . arise
from related facts or the same transaction or series of
transactions." Ditrolio v.
Antiles, 142 N.J. 253, 267 (1995).
The preclusive effect therefore extends "not only to matters
actually litigated, but to all aspects of a controversy that might have
been thus litigated and determined."
Vision Mortg. Corp. v. Patricia J. Chiapperini, Inc., 307 N.J.
Super. 48, 52 (App. Div. 1998) (quoting Mori v. Hartz Mountain Dev.
Corp., 193 N.J. Super. 47, 53 (App. Div. 1983)), aff'd, 156 N.J.
580 (1999). At the same time, the entire
controversy doctrine "does not apply to bar component claims that are
unknown, unarisen, or unaccrued at the time of the original action." Mystic Isle Dev. Corp. v. Perskie &
Nehmad, 142 N.J. 310, 323 (1995).
Also, equitable principles may ease its application, and courts should
not enforce the doctrine where doing so would deprive a litigant of "a
fair and reasonable opportunity to litigate [a] claim." Hobart Bros., supra, 354 N.J.
Super. at 241.
Cotis argues that
her action for construction of the will did not accrue until the will was
admitted to probate. She cites Higgins
v. Thurber, 413 N.J. Super. 1 (App. Div. 2010), aff'd, 205 N.J.
227 (2011), as supporting her contention that the entire controversy doctrine does
not apply to a probate matter. Higgins
dealt with a more complex probate action in which subsequent legal malpractice
claims were brought against attorneys who had represented the estate. Id. at 9. We discussed the nature of probate
proceedings and the limited applicability of the entire controversy doctrine to
successive pleadings and independent lawsuits in the Probate Part. Id. at 12-13. We held that a
subsequent claim against the attorneys was not barred by the doctrine. Id. at 14.
By
contrast, in Estate of Gabrellian, supra, we held the doctrine was
appropriately applied to dismiss successive actions among the same parties in
admitting a writing to probate and later seeking to determine the testator's
probable intent. 372 N.J. Super.
at 437-38, 444-45. We also held that the
same result could be reached on grounds of res judicata. Id. at 447.
The
facts and circumstances of this case are more like Estate of Gabrellian
than Higgins. Cotis challenged
the will by her June 2009 caveat. She
had the opportunity to conduct discovery and to claim, as an alternative to
rejection of the will, that it should be construed in her favor based on the
notations on the separate envelope and the parties' relation-ship. But the will was crystal clear as to
Strohmenger's intent. Once Cotis's
caveat was rejected and the seven-page will was admitted to probate, there was
no further claim to be separately adjudicated regarding construction of the
will.
The
Probate Part correctly dismissed Cotis's complaint, both because it was procedurally
barred, and because Cotis's construction complaint had no merit.
III.
We
agree with Cotis, however, that the Probate Part was not authorized to order the
disbursement of non-probate assets into a testamentary trust, even though the
trust was created in accordance with Strohmenger's wishes and a single trust
made good sense in the circumstances of this case.
The Probate Part
recognized that non-probate assets pass outside the decedent's estate to the
named beneficiary. Because the son is a
minor, the ordinary procedure would be the appointment of a guardian who would
manage the funds until the boy turns eighteen.
Jurisdiction to appoint a guardian of a minor's estate lies concurrently
in the Superior Court and in the Surrogate's court in the county in which the
minor resides. N.J.S.A. 3B:12-12;
N.J.S.A. 3B:12-21.
The guardian is
vested with title to the minor's property as trustee, N.J.S.A. 3B:12-38,
and the court may confer on the guardian the power to manage the property,
subject always to the supervisory authority of the court, N.J.S.A.
3B:12-49. This authority would usually
terminate once the minor reached eighteen years of age, and the funds would be
turned over to the minor, N.J.S.A. 3B:12-55, although in certain
circumstances the court may approve investments that "impound" the
funds beyond that period, see In re Guardianship of A.D.L., 208 N.J.
Super. 618, 626-27 (App. Div. 1986) (court could authorize investment in
annuity that would make payments past minor's eighteenth birthday). In this case, the Probate Part followed a
different path, creating a constructive trust for the non-probate assets.
A constructive
trust has been described as "the formula through which the conscience of
equity finds expression." Carr
v. Carr, 120 N.J. 336, 351 (1990) (quoting Beatty v. Guggenheim
Exploration Co., 122 N.E. 378, 380 (N.Y. 1919)). A constructive trust may be imposed when
"the holder of legal title may not in good conscience retain the
beneficial interest." Stewart v.
Harris Structural Steel Co., 198 N.J. Super. 255, 268 (App. Div.
1984) (quoting Stretch v. Watson, 5 N.J. 268, 279 (1959)). Ultimately, a constructive trust is a tool to
avoid the unjust enrichment that would likely occur in its absence.
Lee argues that
this is an extraordinary case, in which the court was "empowered to
achieve substantial justice," Seavey v. Long, 303 N.J. Super.
153, 156 (App. Div. 1997), by imposing a constructive trust on the non-probate funds
so that they would pass to the son according to Strohmenger's intent. In Seavey, however, we reversed the
Chancery Division's invocation of its equitable powers to create a constructive
trust and to split a widow's pension between the needy first wife of the
decedent and the less needy second wife, who was entitled to the pension
benefits by statute. Id. at 157,
161. We stated "that in ordinary
circumstances equity follows the law and will not divest rights that have been
legally acquired," id. at 156, although "extraordinary
circumstances or countervailing equities [may] call for relief," ibid.
(quoting Monmouth Lumber Co. v. Indemnity Ins. Co. of N. Am., 21 N.J.
439, 451 (1956) (internal quotation marks omitted)).
In
Vasconi v. Guardian Life Ins. Co., 124 N.J. 338 (1991), and in Bauer
v. Crummy, 56 N.J. 400 (1970), the Supreme Court authorized the
potential disposition of non-probate assets in accordance with the decedent's
testamentary wishes. But in those cases,
the record clearly established that the assets would have passed to an
expressly unintended beneficiary unless the equitable powers of the court were
employed to carry out the testator's wishes.
Here, in contrast, the insurance proceeds and the IRA funds will be
distributed for the benefit of the son, the intended beneficiary, although through
their own contractual provisions and the operation of law.
The Probate Part had
good intentions in creating a single, sensible trust, but it did not have the
power to do so. There is nothing in the
record that indicates the boy will be deprived of the benefit of the insurance
and IRA funds if his mother, acting as his guardian, receives the funds and is
able to make use of them for his benefit.
Although Strohmenger stated explicitly that he did not want Cotis to
have access to his assets for her own benefit, he recognized that a financial
benefit to his son would include her to some extent. By his notations on the envelope that were
made after the execution of the holographic will, Strohmenger indicated his
desire that Cotis and their son be aided financially, in particular to pay
their "house bills."
In writing his
holographic will without advice of counsel, perhaps he erred in believing that
the life insurance proceeds and IRA funds would pass under the estate into a
trust for his son, but his error does not alter the Probate Part's limited authority
to order the distribution of probate assets.
Without having conducted a hearing and made findings based on the
evidence relevant to improper disposition of the funds or unjust enrichment in
the absence of a constructive trust, the Probate Part overstepped its authority
in ordering that the insurance proceeds and the IRA funds be placed in a
testamentary trust.
Since
we have reached that conclusion, Cotis's remaining argument — that the court
also erred in awarding attorney's fees for services performed regarding
non-probate assets — will have to be reconsidered by the Probate Part. We note Lee's argument that Cotis did not
object to the amount of attorney's fees awarded when application was made to
the Probate Part. She contends that
failure to object constitutes waiver of the contention on appeal. We leave it to the Probate Part on remand to
determine whether an objection to the attorney's fees awarded was preserved,
whether the fees were properly awarded for services related to the estate or otherwise
for the benefit of the son, and whether any adjustment should be made in the
amounts awarded.
We
affirm the Probate Part's orders in part and reverse them in part, and we remand
to the Probate Part for further proceedings in conformity with our decision. We do not retain jurisdiction.
|
[1]
Meaning no disrespect, and for convenience of reference, we will use first
names for two of the decedent's sisters discussed in the briefs, Diane Strohmenger
and Lee Strohmenger.
[2]
We use script to indicate a signature without attempting to duplicate
Strohmenger's actual signature.
[3]
A surviving spouse is typically entitled to an elective share of one-third of
the estate if the decedent did not provide as much for the spouse in his or her
will, but not if the couple were "living separate and apart in different
habitations" or had "ceased to cohabit as man and wife," as in
this case. N.J.S.A. 3B:8-1.
[4]
As we will discuss, it appears that subsequent orders have mooted the provision
of the July 5, 2011 order from which Cotis appeals.
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