IN THE MATTER ESTATE OF EDGAR REEVE, DECEASED

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1290-04T51290-04T5

IN THE MATTER OF THE ESTATE

OF EDGAR REEVE, DECEASED.

 

Submitted: October 12, 2005 - Decided:

Before Judges Stern and Fall.

On appeal from the Superior Court of New Jersey, Chancery Division, Probate Part, Union County, Docket Number M-8535.

John L. Pritchard, attorney for appellant William W. Lanigan.

David B. Foltz, attorney for respondent Westfield Historical Society.

PER CURIAM

This appeal arises from an action in the Probate Part by a residuary beneficiary seeking removal of an executor appointed under a will. Edgar Reeve died testate on December 28, 2001. Decedent's will appointed appellant William W. Lanigan, an attorney, as executor of his estate. On January 8, 2002, the Union County Surrogate issued letters testamentary to Lanigan.

Unrelated to his duties as executor of the Estate of Edgar Reeve, on June 24, 2002, Lanigan was indicted by the Somerset County Grand Jury on an allegation that, between 1986 and 2002, he committed second-degree theft by retaining property belonging to the Betham Trust and its beneficiaries, having a value of approximately $860,000, contrary to N.J.S.A. 2C:20-9, and second-degree misapplication of entrusted funds, contrary to N.J.S.A. 2C:21-15.

On August 26, 2004, plaintiff Westfield Historical Society, a three-percent (3%) beneficiary of the residue of the Estate of Edgar Reeve, filed a complaint in the Probate Part seeking an order removing Lanigan as executor, on the basis that the criminal charges against Lanigan "involve the commission of a serious breach of trust." On August 31, 2004, the trial court issued an order directing that Lanigan show cause on September 23, 2004, why he should not be removed as executor. On or about September 13, 2004, Lanigan filed an answer to the complaint, stating that "the alleged breach of trust did not occur[,]" and contending that "all of such beneficiaries other than the residuary beneficiaries have received their inheritance and have delivered releases and refunding bonds."

The issue posited by the order to show cause was argued in the Probate Part on September 23, 2004. At the hearing, counsel for Westfield Historical Society stated that he had not yet received it, but the indictment

relates to another client [of Lanigan], where a trust established for the benefit, a spousal trust, had been misused by Mr. Lanigan, and while it is merely an indictment it is an instrumentality of the State of New Jersey that has found sufficient facts to indicate a crime evidencing moral turpitude, violation of fiduciary duty, ongoing, continuous pattern of behavior, which I think certainly raises a question.

[Emphasis added.]

The trial judge expressed familiarity with Lanigan in connection with Lanigan's involvement in a prior action involving the competency of decedent to marry decedent's housekeeper or nurse. The judge then stated:

Okay, I'm inclined to remove him immediately because of what he is accused of doing because I assume there's some funds left and the residuary beneficiaries haven't been paid yet even though the will was admitted to probate in January 2002.

After considering the arguments of Lanigan's counsel that "[t]here's not even an allegation in the papers that the underlying facts [in the indictment] are true[,]" and "[i]t's the mere fact that he is indicted which is the sole reason which is put forward here for his removal[,]" the judge stated:

The criminal allegations are too serious to leave him as the executor of this estate.

I'm going to remove him because I really don't trust that Mr. Lanigan has been acting in the best interest of Mr. Reeve. And there were also allegations regarding what he had done, regarding the brother's estate that I have read about.

* * * *

I'm not making findings like a criminal court that he's guilty beyond a reasonable doubt. I'm not trying him on those criminal complaints but it's too close for comfort to what he's doing here as the executor of this will and there was just too much money involved in this and I see that [Lanigan] and his wife are made residuary beneficiaries too for the foundation.

On September 29, 2004, the court issued a judgment removing Lanigan as executor and revoking the letters of administration that had been issued to him. An order entered on October 21, 2004, denied Lanigan's application for a stay of the judgment pending appeal. On appeal, Lanigan advances the following arguments:

POINT ONE

AN INDICTMENT CONSTITUTES A MERE ALLEGATION, AND HAS NO EVIDENTIAL VALUE.

POINT TWO

THE REMOVAL OF A FIDUCIARY MAY OCCUR ONLY FOR GOOD CAUSE, ON PROOFS ESTABLISHED BY CLEAR AND CONVINCING EVIDENCE.

POINT THREE

THE COURT SHOULD BE PARTICULARLY RELUCTANT TO REMOVE AN EXECUTOR CHOSEN BY THE TESTATOR.

POINT FOUR

THE FACT THAT AN EXECUTOR HAS BEEN INDICTED ON AN UNRELATED CRIMINAL CHARGE IS NOT A SUFFICIENT REASON FOR THE REMOVAL OF THE EXECUTOR.

N.J.S.A. 3B:14-21 establishes the grounds for removal of a fiduciary by a court, as follows:

The court may remove a fiduciary from office when:

a. After due notice of an order or judgment of the court so directing, he neglects or refuses, within the time fixed by the court, to file an inventory, render an account or give security or additional security;

b. After due notice of any other order or judgment of the court made under its proper authority, he neglects or refuses to perform or obey the order or judgment within the time fixed by the court; or

c. He has embezzled, wasted or misapplied any part of the estate committed to his custody, or has abused the trust and confidence reposed in him; or

d. He has removed from the state or does not reside therein and neglects or refuses to proceed with the administration of the estate and perform the duties and trust devolving upon him; or

e. He is of unsound mind or mentally incapacitated for the transaction of business; or

f. One of two or more fiduciaries has neglected or refused to perform his duties or to join with the other fiduciary or fiduciaries in the administration of the estate committed to their care whereby the proper administration and settlement of the estate is or may be hindered or prevented.

Removal is an extraordinary remedy and the application to remove a trustee is only granted sparingly. Braman v. Central Hanover Bank & Trust Co., 138 N.J. Eq. 165, 196-97 (Ch. 1946). Our courts are generally reluctant to remove a fiduciary designated by the decedent in his will. As long as the executor acts in "good faith, with ordinary discretion and within scope of his powers, his acts cannot be successfully assailed." Connelly v. Weisfeld, 142 N.J. Eq. 406, 411 (E. & A. 1948). See also Rothenberg v. Franklin Washington Trust Co., 127 N.J. Eq. 406 (Ch. 1940).

The power of a court to remove a fiduciary may be exercised whenever such a "state of mutual ill feeling, growing out of the trustee's behavior, exists between the trustee and the beneficiary, that his continuance in office would be detrimental to the execution of the trust." Braman, supra, 138 N.J. Eq. at 166. However, the executor's conduct must be such that it became, or threatened to become, inconsistent with his obligations to the estate. Semler v. CoreStates Bank, 301 N.J. Super. 164, 175 (App. Div.), certif. denied, 151 N.J. 467 (1997) (citing In re Koretzky, 8 N.J. 506 (1951) and Wolosoff v. C.S.I. Liquidating Trust, 205 N.J. Super. 349, 362 (App. Div. 1985)). At the same time, courts will be especially cautious where the court, as here, is asked to pass judgment upon an executor appointed by the testator under a will. Connelly, supra, 142 N.J. Eq. at 411.

Not every violation of duty is a ground of removal. For example, the mere fact that "a beneficiary disagrees with a fiduciary's proper exercise of discretionary powers, or is resentful of the fiduciary's authority, or is antagonized by his personality, is not sufficient to cause his removal." In re Koretzky, supra, 8 N.J. at 530-531. However, when clear and definite proof of gross carelessness, indifference or acts done in bad faith by the fiduciary have been evidenced, or that have diminished or endangered the trust without bad faith, it is the duty of the court to remove him. Braman, supra, 138 N.J. Eq. at 166. See also Connelly, supra, 142 N.J. Eq. at 410 (1948).

It is generally accepted that a court can remove an executor for acts done in breach of trust, see Clark v. Judge, 84 N.J. Super. 35, 62 (Ch. Div. 1964), but the applicant seeking removal must produce competent evidence demonstrating misconduct, or that continued retention of the executor would endanger the trust or the welfare of the beneficiary. In re Estate of Hazeltine, 119 N.J. Eq. 308, 316-317 (Prerog. Ct.), aff'd 121 N.J. Eq. 49 (E. & A. 1936).

We note that it is not necessary to demonstrate misconduct where the removal is based on hostility between the beneficiary and executor. In such circumstances, removal is justified where there is a "demonstration that the relationship will interfere materially with the administration of the trust or is likely to do so." Wolosoff, supra, 205 N.J. Super. at 360-61. See also In re Koretzky, supra, 8 N.J. at 530; McAllister v. McAllister, 120 N.J. Eq. 407 (Ch. 1936), aff'd 121 N.J. Eq. 265 (E. & A. 1937).

Applying these principles, we are unable to conduct a meaningful review of the removal of Lanigan from his position as executor by the Probate Part because the record on appeal is inadequate. Although Lanigan was removed based on a grand jury indictment on charges of second-degree theft and misapplication of entrusted property both charges involving a serious breach of trust the record does not include evidence that Lanigan breached any duty as executor of Mr. Reeve's estate, or that his conduct was such as to support his removal as the executor of Mr. Reeve's will. Other than pointing to the indictment, the Historical Society has not challenged Lanigan's honesty or performance with respect to this estate, and the indictment remains pending, untried in Somerset County.

Although the Historical Society notes that Lanigan had not provided an accounting, failure to provide an accounting is not cause for removal, unless such accounting has been requested by the court. Heath v. Maddock, 81 N.J. Eq. 469, 473 (Prerog. Ct.), aff'd, 82 N.J. Eq. 366 (E. & A. 1913); accord Pfefferle v. Herr, 75 N.J. Eq 219, 226 (Prerog. Ct. 1909), aff'd 77 N.J. Eq. 271 (E. & A. 1910). Moreover, Lanigan's removal was not based on his failure to provide accounting, but on the existence of the indictment.

The indictment, standing alone, does not constitute a breach of a fiduciary duty by Lanigan as executor of this estate. An indictment is not equivalent to a conviction and therefore "evidence sufficient to remove a fiduciary" because an indictment has no probative or evidential value; it is just an accusation that raises no presumption of guilt. See Application of Fortenbach, 119 N.J. Super. 124, 129 (Law Div. 1972); see also State v. Green, 313 N.J. Super. 385, 391 (1998).

We also note that in circumstances, as here, where the court is apprehensive as to what may occur in the future, it may generally not remove the fiduciary, but may require a bond of him. See Pfefferle, supra, 75 N.J. Eq. at 226 (where the court required the executor to give a bond conditioned to the faithful performance under the will of the testator); Starr v. Wiley, 89 N.J. Eq. 79, 90-91 (Ch. 1918).

Simply put, the record on appeal does not include evidence establishing that Lanigan's conduct was such as to have breached a fiduciary duty owed to the beneficiaries of Mr. Reeve's estate, or that his actions threatened the execution of the estate. As we have noted, we cannot speculate nor determine whether further proceedings in the Probate Court, including a plenary hearing or receipt of additional evidence, would establish grounds for removal of Lanigan pursuant to the criteria set forth in N.J.S.A. 3B:14-21. Certainly the existence of the indictment as noted by counsel for the Historical Society at the September 23, 2004 hearing warranted further inquiry by the court on those issues. The September 29, 2004 judgment removing Lanigan as executor is reversed, and the matter is remanded for a plenary hearing to determine whether Lanigan has fulfilled his obligations as an executor or there is cause for his removal.

Reversed and remanded. We do not retain jurisdiction.

 

A copy of the will is not included in the record on appeal. However, the complaint recites specific bequests totaling approximately $335,850, with fifty-percent (50%) of the residuary estate given to "Joy Lanigan [his surviving wife], Edgar Reeve Foundation," ten-percent (10%) thereof to "William Lanigan, Esq., Reeve Foundation," and the remainder of the residuary estate divided among various charitable organizations, including respondent herein.

Although a copy of the transcript of the pertinent Somerset Grand Jury proceedings is included in the record on appeal, a copy of the indictment is not. It also appears that the grand jury transcript was not part of the record presented to the Probate Part.

We note that the briefs indicate that subsequent to his removal, Lanigan submitted an accounting to the Probate Part, and that exceptions thereto have been filed. Certainly, if that has not already been completed, the court should conduct a hearing with respect to that accounting, which may or may not make the issue of removal moot.

(continued)

(continued)

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A-1290-04T5

October 31, 2005