IN THE MATTER OF THE
ESTATE OF EVELYN BERRY.
______________________________
Argued April 5, 2016
– Decided April 15, 2016
Before Judges Hoffman, Leone and Whipple.
On appeal from Superior Court of New Jersey,
Chancery Division, Probate Part, Somerset County, Docket No. 96-00278.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
PER CURIAM
APPROVAL OF THE APPELLATE DIVISION
Defendant Darryl Fusco appeals from an October 8, 2014
final order of the Chancery Division, Probate Part, awarding damages and
counsel fees in favor of plaintiffs Garrett and Brook Berry in the amount of
$554,893.31. We affirm.
I.
We discern the following facts from the record of the six-day
bench trial before Judge Edward M. Coleman.
Evelyn Berry died testate on March 30, 1995. Shortly before her death, she signed a new
twenty-six-page Last Will and Testament (the Will). Evelyn[1] had
four children from two different marriages.
The two older, adult children from her first marriage were defendant and
Tara. The two younger, minor children
from her second marriage were Garrett and Brook. At the time of her death, Garrett was
fourteen and Brook was eleven.
In Article Four of the Will, Evelyn established the
"Berry Family Trust" (the Trust) to provide for the maintenance,
support, and education of her two minor sons:
In making the provision for
distribution under this paragraph it is my intent that the primary purpose of
this trust is to provide for the care and education of my said sons who, at the
time of the preparation of this will, are minors and that only to the extent
that any assets remain in the BERRY FAMILY TRUST after the care and education
of my said sons have been provided for . . . shall the remaining distribution
provisions of the BERRY FAMILY TRUST come into effect. I make
this provision not because of any lack of love or affection for my adult
children, DARRYL G. FUSCO and TARA L. ARNOLD, but because of a desire to treat
all of my children equally and to provide for my currently minor sons the same
type of benefits and advantages previously provided for my adult children by
making provision for the care and education of my said minor sons just as
during my life I assisted in providing for the care and education of my said
adult children.
At the
time the youngest of Evelyn's surviving children reached the age of
twenty-four, or the age of twenty-one and was not enrolled in a college or
trade school, the Will provided for the equal division of the remaining
principal among Evelyn's surviving children.
The Will also appointed defendant as co-trustee of the Trust.
When
Evelyn died, her business — Lyn's Liquors (the liquor store) — represented the
principal asset of her estate. In
addition, Evelyn had a house located in Branchburg (the Branchburg House), as
well as an interest in an estate in Germany estimated at $200,000. To fund the Trust, Article Seven, Section (u)
of the Will allowed defendant to purchase the liquor store "for a purchase
price equal to the greater of 28% of [the liquor store's] gross sales for the
calendar year immediately preceding the year of my death or, if different and
higher, the 1995 calendar year."
The Will further provided for the payment of the purchase price "in
equal amortized monthly payments over a term of eleven (11) years with interest
at the rate of 15.39% compounded annually."[2] The Will also included a substantial
pre-payment penalty "equal to one fifth of the remaining balance due on
the note at the time of prepayment."
Following Evelyn's death, defendant did purchase the
liquor store, as permitted by the Will.
Defendant presented little testimony or documents regarding the
sale. While defendant claimed he made
payments for the liquor store, his records were incomplete. Plaintiffs asserted that not only did
defendant fail to make timely and full payments, he later sold the liquor store
— in 1998 — for approximately $365,000 and failed to pay off the balance owed
for the purchase of the liquor business.
Importantly, Article Seven, Section (u) of the Will also established the
right of the beneficiaries to recover attorney's fees should defendant default
on his obligation to pay the amount owed for the purchase of the liquor store.
According to plaintiffs, defendant mismanaged the Trust
by, among other things, speculating on volatile stocks and trading on margin;
misappropriating funds by borrowing the beneficiaries' money at will without
interest or repayment; and treating the money as his own. This conduct caused the beneficiaries to file
suit to recover their inherited money which defendant "had stolen,
squandered and misappropriated."
In his oral opinion, Judge Coleman found that defendant
breached his fiduciary duty by failing to keep adequate records, failing to
make reasonable investments, and making certain investments that were
prohibited by the Will. The judge
further found that defendant breached his fiduciary duties to invest and manage
the assets solely in the interests of the beneficiaries, noting that
"defendant [] admits to borrowing large sums of money from the trust
assets for his own benefit, to invest in his own liquor stores, to pay his own
bills for those liquor stores."
Further, defendant "admits to trading on . . . margin[,] which[]
was prohibited." He "borrowed
money and never repaid it [and used] the trust funds for his own personal
benefits, all showing bad faith on his part with regard to his fiduciary
duties."
The
judge adopted the findings of plaintiffs' financial expert, Joel Molnar, CPA,
MBA, who testified that a reasonable fiduciary would have invested
approximately half in stocks and half in bonds with a conservative five-percent
return.
The judge also found that defendant breached his fiduciary
duties by failing to maintain adequate records and account for trust assets,
and by engaging in self-dealing by investing in trust funds and entities in
which he had an ownership interest.
Nevertheless, the judge found no basis for the award of punitive
damages. The judge also rejected
defendant's argument that Tara should share liability as a co-trustee, finding
that she was not complicit in defendant's wrongful activities.
The judge found credible and adopted the calculation of
plaintiffs' expert regarding the net purchase price of the liquor store, and
various credits that should apply. The
court specifically rejected defendant's claim that the purchase price of the
liquor store required a downward adjustment to reflect a $25,000 judgment, as
defendant presented no evidence that he satisfied the judgment. The court also rejected defendant's argument
that an earlier, alleged settlement with Garrett represented a full and
complete release of any of Garrett's claims, finding "deception" by
defendant regarding "the money that was actually owed to Garrett."
The court further
awarded attorney's fees to plaintiffs based on the provision in the Will
authorizing defendant's purchase of the liquor store, which included a valid
attorney's fee provision that defendant accepted when he purchased the
store. The October 8, 2014 Order of
Judgment awarded plaintiffs $554,893.31, representing $94,621.93 in
compensatory damages to Garrett; $81,664.55 in compensatory damages to Brook;
$240,747.83 in compensatory damages to Garrett and Brook for the liquor store;
and $137,879 for attorney's fees and costs incurred by plaintiffs. This appeal followed.
II.
Initially,
we note that the scope of our review of findings made by a trial court in a
non-jury case is limited. We review the
factual findings made by a trial judge to determine whether they are
"supported by adequate, substantial and credible evidence." Rova Farms Resort, Inc. v. Investors Ins.
Co. of Am., 65 N.J. 474, 484 (1974) (citation omitted). Such
findings made by a judge in a bench trial "should not be disturbed unless
they are so wholly insupportable as to result in a denial of
justice." Id. at
483-84. Factual findings that "are
substantially influenced by [the judge's] opportunity to hear and see the
witnesses and to have the 'feel' of the case" enjoy deference on appeal. State v. Johnson, 42 N.J. 146,
161 (1964).
On
appeal, defendant presents the following arguments for consideration:
POINT ONE
THE TRIAL COURT ERRED IN [] FAILING TO
APPORTION ANY LIABILITY AGAINST THE CO-TRUSTEE.
A. TARA
ARNOLD WAS A CO-TRUSTEE AND OWED A FIDUCIARY
DUTY TO THE BENEFICIARIES.
B. TO
THE EXTENT THAT DARRYL FUSCO WAS HELD
TO HAVE BREACHED HIS FIDUCIARY DUTIES,
HE SHOULD BE ENTITLED TO AN OFFSET
OR A CREDIT RELATING TO TARA ARNOLD'S
LIABILITY.
POINT TWO
THE TRIAL COURT ERRED IN AWARDING
[ATTORNEY'S] FEES.
A. THERE
WAS NOT A SUFFICIENT WRITING TO OBLIGATE
DARRYL FUSCO TO PAY [ATTORNEY'S]
FEES.
B. TO
THE EXTENT THAT [ATTORNEY'S] FEES ARE ALLOWED, THE AMOUNT AWARDED WAS EXCESSIVE AND REPRESENTS AN ABUSE OF DISCRETION.
POINT THREE
THE TRIAL COURT ERRED IN FAILING TO
CREDIT DARRYL FUSCO A $25000 CREDIT FOR PAYMENT OF THE SECOND MORTGAGE.
POINT FOUR
THE TRIAL [COURT] ERRED IN ITS FINDING
THAT DARRYL FUSCO ACTED IN BAD FAITH.
After carefully reviewing the trial record, we reject
defendant's arguments and affirm substantially for the reasons expressed by
Judge Coleman in his oral opinion of September 2, 2014. The record contains adequate, substantial and
credible evidence supporting the judge's findings and conclusions. We add the following comments.
Defendant's
claim that the court erred in not assessing any damages against Tara clearly
lacks merit. While plaintiffs could have
asserted a claim against Tara, see Branch v. White, 99 N.J.
Super. 295, 306 (App. Div.), certif. denied, 51 N.J. 464
(1968), they declined to do so. The
court found credible Tara's testimony that she did not control, invest, or
borrow any trust funds or assets as defendant did. Instead, the court found that it was
defendant who improperly borrowed from the Trust, traded on the margin, lost
thousands in speculative option trading, and misappropriated funds. Tara testified that she only opened the
Schwab accounts under defendant's direction, and closed Brook's account because
money had been disappearing from it.
Judge Coleman found defendant solely responsible for plaintiffs' damages
based on defendant's deception and misconduct, and properly rejected
defendant's request to hold Tara liable for not stopping him. We defer to Judge Coleman's findings. See Cesare v. Cesare, 154 N.J.
394, 412 (1998).
Defendant's claim that the court erred in awarding
attorney's fees, or alternatively, that the amount was excessive, also clearly
lacks merit. The scope of appellate
review of a counsel fee award is narrow and "fee determinations by trial
courts will be disturbed only on the rarest occasions, and then only because of
a clear abuse of discretion." Rendine
v. Pantzer, 141 N.J. 292, 317 (1995). New Jersey has adopted the "American
Rule" which prohibits recovery of counsel fees by the prevailing party
against the losing party. Litton
Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372, 404 (2009). Despite the constraints of the American rule
and New Jersey's public policy against fee-shifting, an allowance of counsel
fees may be made even if not authorized by rule or statute where the parties
themselves have so agreed in advance by contract. Satellite Gateway Com. v. Musi Dining Car
Co., 110 N.J. 280, 285-86 (1988); see also In re Unanue,
311 N.J. Super. 589, 597-98 (App. Div.) (enforcing testamentary trust
provision calling for payment of attorney's fees by the party losing litigation
out of disputes over the trust), certif. denied, 157 N.J. 541
(1998), cert. denied, 526 U.S. 1051, 119 S. Ct. 1357, 143 L.
Ed. 2d 518 (1999).
In the context of wills, "[i]f the devise be upon
terms which are capable of being enforced in equity, and the gift be accepted,
equity will compel compliance with the conditions annexed to it." Bird v. Hawkins, 58 N.J. Eq.
229, 243 (Ch. 1899). We discern no basis
for defendant's argument that the court abused its discretion in awarding the
attorney's fees based on the terms of the Will.
The court reasoned that by accepting the terms of the Will concerning
the purchase of the liquor store, defendant agreed to accept the provision
making him liable for attorney's fees in the event he defaulted. We further note that the court limited the
award of attorney's fees to those fees incurred in connection with defendant's
default on the payments owed for purchase of the liquor store. Our review of the record convinces us that
the trial court reasonably exercised its discretion in the amount of attorney's
fees awarded here.
Defendant's
remaining appellate arguments lack sufficient merit to warrant discussion in a
written opinion. R.
2:11-3(e)(1)(E).
Affirmed.
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