IN THE MATTER IRREVOCABLE FUNDED LIFE INSURANCE TRUST ESTABLISHED BY JOSEPH WEINBERG

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4036-03T24036-03T2

_______________________________________

IN THE MATTER OF THE IRREVOCABLE

FUNDED LIFE INSURANCE TRUST

ESTABLISHED BY JOSEPH WEINBERG

U/A DATED May 11, 1982

_______________________________________

 

Argued October 19, 2005 - Decided July 20, 2006

Before Judges Wecker, Fuentes and Graves.

On appeal from the Superior Court of New

Jersey, Chancery Division, Probate Part,

Somerset County, Docket No. 02-01078.

Allan H. Rogers argued the cause for

appellant Lynn Weinberg.

Thomas N. Torzewski argued the cause for

respondent Norman Warner (Laufer, Knapp,

Torzewski & Dalena (Mr. Torzewski and

Joseph G. Dolan, of counsel and on the

brief).

Perrotta, Fraser & Forrester, attorneys for

respondent Deborah Bort (Donald B. Fraser, Jr.,

on the letter relying on the brief filed on

behalf of respondent Norman Warner).

PER CURIAM

During his lifetime, Joseph Weinberg (Weinberg), who died on March 22, 2001, created two trusts for the benefit of his daughters, Lynn Weinberg (Lynn) and Deborah Bort (Deborah). The Irrevocable Funded Life Insurance Trust, established by Joseph Weinberg, dated May 11, 1982 (the 1982 Trust), is the subject of this appeal. Weinberg created a second trust, the Joseph Weinberg Revocable Trust dated April 28, 1997 (the 1997 Trust).

Weinberg named Lynn and Deborah in his will as the beneficiaries of his Estate. He named Deborah as Executor of his will. Weinberg was a resident of Florida when he died. His Estate was admitted to probate there, and included the assets of the 1997 Trust. Weinberg, who was a stock broker himself, served as Trustee of the 1997 Trust until his death; he named Deborah as his successor Trustee. The 1982 Trust originally named as Trustee an individual who later appointed as his successor Weinberg's colleague, David Schwartz. Schwartz served as Trustee from 1991 to 1998. When Schwartz resigned, he initially appointed Weinberg as his successor Trustee. Apparently realizing that that appointment was contrary to the elements of an Irrevocable Trust, and with Weinberg's concurrence, Schwartz appointed Norman Warner as his successor Trustee as of April 9, 1999. Warner describes himself as Weinberg's "friend and fellow stock broker." At the time of Warner's appointment, a substantial portion of the assets of the 1982 Trust were held in a brokerage account with the firm of Josephthal & Company in Florida.

Shortly after Weinberg's death, disputes arose between Lynn and Deborah over their father's estate, the trusts, and the administration of each. In 2002, the sisters entered into a settlement agreement in Florida covering the Estate and the 1997 Trust. Under the terms of that agreement, Deborah resigned and waived her interests in both the Estate and the 1997 Trust in favor of Lynn. In exchange, Lynn executed a promissory note payable to Deborah in the amount of $50,000, to be paid out of the "net proceeds" of the Estate and the 1997 Trust. Lynn became the sole Executor of the Estate, the sole Trustee of the 1997 Trust, and the sole beneficiary of both. The 1982 Trust remained under Warner's control, as Trustee, for the benefit of Lynn and Deborah.

As of the date of Weinberg's death, an informal accounting indicates that the assets of the Estate were valued at a total of $712,369.29, consisting of two Florida condominium apartments (rental properties valued at $75,000 and $55,000 respectively; a Fort Lee cooperative apartment valued at $90,000; securities valued at approximately $101,600; the 1997 Trust having net equity in a brokerage account valued at $215,447.90 (face value of $416,206.90 in securities, less a margin balance of $200,759); an IRA brokerage account with securities valued at $63,484.00; and two bank accounts totaling $111,838.73. The Fort Lee cooperative apartment had been Lynn's home for more than twenty years, apparently maintained for her at her father's expense.

The Florida agreement between Lynn and Deborah expressly provided that it was not to affect the 1982 Trust. Warner was the sole trustee of the 1982 Trust at Weinberg's death. Initially, both sisters were disenchanted with Warner's management (or alleged lack of management) of that trust and both sought his resignation or discharge. That concert of views did not last long. Lynn brought a complaint in the Probate Part of Superior Court alleging Warner's mismanagement and failure to abide by certain terms of the 1982 Trust. She sought an order surcharging Warner for losses in the trust's value, discharging him as Trustee, and appointing a successor corporate Trustee. Warner promptly filed a separate action seeking approval of his first interim accounting. The two complaints were consolidated, and Deborah filed a single pleading in answer to both, along with a counterclaim seeking the following relief:

A. Declaratory Judgment confirming what assets are in fact trust property;

B. A reformation of the trust, dividing same 50/50 between Deborah Bort and Lynn Weinberg, after any appropriate surcharges;

C. Surcharging Lynn Weinberg's share of the trust for all unnecessary expenses which she forced the trust to incur as a result of her litigation, and interference with the management and operation of the trust;

D. Attorneys fees;

E. Costs of suit:

F. Such other relief as the Court may deem equitable and just.

The core issues in dispute between and among the parties in the Probate Part were these: (1) whether Warner as trustee failed to exercise appropriate care and management of the trust assets after March 2001, resulting in a dramatic loss of value for which he is liable; (2) whether Warner failed in his duties, under two discretionary provisions of the 1982 Trust, to carry out Weinberg's alleged intentions that his trustee (a) assist in the settlement of the Estate and (b) provide Lynn with funds to meet her need for maintenance and support; (3) whether two assets that Warner included in his accounting of the 1982 Trust actually were intended by Weinberg to fund the 1997 Trust; (4) whether the Trust should be terminated and its assets distributed among the beneficiaries; and (5) whether the several counsel fee applications should be granted.

The two assets in dispute (see item (3) above) are (a) securities held in a certain brokerage account with B. B. Graham & Co. and (b) 27,500 shares in a publicly traded corporation, Amerityre. The primary significance of this dispute, of course, is that Lynn and Deborah remain equal beneficiaries of the 1982 Trust, whereas under the 2002 Florida settlement agreement, Lynn is the sole beneficiary of the 1997 Trust. Secondarily, Warner's commissions have been calculated on the values of principal and interest in the 1982 Trust.

Not long after the New Jersey complaints were filed, Lynn came to represent herself in this litigation. Extensive motion practice, largely involving discovery disputes between Lynn and Warner, were conducted before three successive judges in the Probate Part. The ongoing pre-trial motion practice included Warner's application for approval of his first and second interim accountings and Lynn's repeated contentions that Warner had not complied with certain discovery orders issued by the second judge.

The second judge appointed a Guardian ad Litem for Deborah's only child, Sharon Bort, to protect the child's interest as a contingent beneficiary of the 1982 Trust. Lynn has no children. The Guardian was specifically assigned to consider whether division of the Trust between Lynn and Deborah would be in Sharon's interest. The third judge, however, facing continued motions, delegated certain additional responsibilities to the Guardian. Specifically, the judge sought and obtained from the Guardian a report on these questions: (a) whether Warner had complied with prior discovery orders issued on Lynn's motions; (b) whether the 27,500 shares of Amerityre stock were properly included in the 1982 Trust as Deborah and Warner claimed, or whether Weinberg actually intended to donate or transfer the shares to the 1997 Trust as Lynn claimed; (c) whether Warner's interim accountings should be approved; and (d) whether termination of the 1982 Trust and division of its assets equally between Lynn and Deborah would adequately protect Sharon's contingent interest. The first two assignments exceeded the scope of the Guardian's appointment. More importantly, those assignments placed the Guardian in conflicting roles. The Guardian owed a fiduciary duty to Sharon, yet her report and advice were requested as an aid to the court on issues on which Sharon had a distinct interest adverse to Lynn's.

After repeated appearances on oral arguments addressing the core issues, as well as on Lynn's numerous motions to obtain additional discovery, and after the Guardian provided the court with affirmative answers to the four questions posed to her, the probate judge issued a final judgment without holding an evidentiary hearing on any of the disputed core issues. The final judgment, as amended, decided these core issues:

1. The assets and securities which were . . . transferred to the B.B. Graham and Co., . . and the twenty-seven thousand five hundred (27,500) shares of stock in Amerityre Corporation (formerly American Tire Corporation), . . . and entitled in the name of the "Weinberg Trust" are and have always been assets of the Joseph Weinberg Trust established u/a dated May 11, 1982 . . . .

. . . .

3. The First Interim Account for the period of March 30, 2001 through July 31, 2002 as supplemented by the Second Interim Account for the period of July 31, 2002 through September 30, 2003 filed by Norman Warner, Trustee, is allowed as stated;

. . . .

12. The Certification/Exceptions and Objections filed by Lynn Weinberg to the First and Second Interim Account of Norman Warner, Trustee, are hereby disallowed, with each Account allowed and approved as filed.

13. [T]he Trustee is hereby directed to terminate the Weinberg Trust and distribute fifty percent (50%) of the remaining balance of assets in said Trust to Lynn Weinberg, with twenty-five percent (25%) of the Trust assets to be distributed to Deborah Bort, individually, and twenty-five percent (25%) of the Trust assets to be distributed to Deborah Bort under the Uniform Transfers to Minors Act on behalf of her minor daughter, Sharon Bort;

14. Upon distribution of the balance of the assets in the Weinberg Trust, as set forth in Paragraph 13 hereof, Norman Warner is hereby discharged as Trustee of the Joseph Weinberg Trust and released from any and all claims and demands whatsoever, at law or in equity, with respect to his administration of the Joseph Weinberg Trust from April 9, 1999 through the date of final distribution in accordance with this Order.

Warner was allowed income and principal commissions totaling approximately $21,341.48. His attorneys' fees of $118,271.49 were allowed, as were Deborah's attorneys' fees of $19,446.40. Lynn's claimed attorneys' fee was reduced by 20% and allowed to the extent of $7,078.36, because the judge found Lynn's attorney's submission "utilized generous rounding off and lacked any specificity." The Guardian ad Litem's fees of $15,500 also were allowed, all to be paid out of the assets of the 1982 Trust.

On appeal, Lynn presents these arguments:

Point 1

THE TRIAL COURT ERRED IN DISMISSING ALL CLAIMS ASSERTED BY LYNN WEINBERG AND ERRED IN APPROVING THE ACCOUNTING SUBMITTED BY NORMAN WARNER, TRUSTEE, AND IN DISMISSING ALL EXCEPTIONS AND OBJECTIONS BY LYNN WEINBERG, AND RELEASING THE TRUSTEE FROM ANY AND ALL LIABILITY WITHOUT REQUIRING A PLENARY TRIAL, AND DESPITE THE EXISTENCE OF GENUINE ISSUES OF MATERIAL FACT.

Point 2

THE COURT ERRED IN APPROVING ALL APPLICATIONS FOR COMMISSIONS AND ATTORNEY FEES IN FULL DESPITE THEIR BLATANT UNREASONABLENESS, WITH THE EXCEPTION OF ITS AWARD ON BEHALF OF THE ATTORNEY WHO REPRESENTED LYNN WEINBERG, WHICH APPLICATION THE COURT UNFAIRLY AND IMPROPERLY SINGLED OUT FOR REDUCTION.

We have carefully reviewed the record in light of the contentions advanced on appeal. Although Lynn's Point Headings do not clearly identify each of her legal arguments, as required by Rule 2:6-2(a)(5), her brief addressed the core issues we noted above and Warner responded to each. In the interest of justice, we have addressed each issue that the parties argued. We now affirm in part and reverse in part and remand for further proceedings solely on the issue of Warner's attorneys' fees.

I

A fiduciary such as Warner has a duty to exercise the same degree of care in managing the assets he holds for the benefit of another that a reasonable person would exercise in managing his own assets. Cf. F.G. v. MacDonell, 150 N.J. 550, 564 (1997) (citing Restatement (Second) of Trusts 170, 174 (1950)). Lynn's submissions demonstrate Warner's lack of attention to the Trust for a significant period of time, and Warner submitted nothing to demonstrate that he exercised care or judgment over the Trust's assets during that period or any other.

It is the duty of a trustee, imbued by the settlor with discretionary powers, to exercise active judgment and not to remain inert. The standard is set forth in 2 Scott on Trusts, 187.3, pp. 995-996 (1939) as follows:

"Where by the terms of the trust a discretionary power is conferred upon the trustee and the exercise of the power is left to his judgment, the court will interpose if the trustee fails to use his judgment. This is true even though what is done by the trustee or what he fails to do would have been proper if he had used his judgment. Where he does not use his judgment, he has not acted in the state of mind in which it was contemplated by the settlor that he should act."

[Commercial Trust Co. v. Barnard, 27 N.J. 332, 341 (1958)].

The point is not that Warner was negligent in holding rather than selling any particular asset, but that there is no evidence that he exercised any judgment in relation to the assets he was charged with protecting.

On the other hand, a negligence claim requires proof of damage caused by a breach of duty, and Lynn did not provide such evidence. E.g., Siddons v. Cook, 382 N.J. Super. 1, 13 (App. Div. 2005) ("A negligence cause of action requires proof that a defendant owed a duty of care, the defendant breached that duty, and injury was proximately caused by the breach."). It was not enough for her to show that the Trust lost value, without being able to show that proper attention likely would have preserved or increased its value.

We are satisfied that Lynn presented insufficient expert evidence to withstand what in effect became a summary judgment dismissing her damage claim arising from Warner's negligence in the management of Trust assets. Lynn's proffered "expert" reports consisted of the opinion of one writer that "the trust could have benefited from more active management;" another writer's recitation of the Trust holdings, their values as of specific dates, and statements that gains rather than losses could have been realized by sales of certain holdings when their values were higher; and a third writer's observation that Warner made no transactions in a period of thirteen months.

An undated letter from Mark Pollack of BH Capital, LLC, which was provided to Warner's and Deborah's attorneys with Lynn's letter dated August 28, 2003, concluded that the Trust account "went unmanaged for about fifteen months" and that "the account would have benefited from more active management during that period." Pollack nonetheless noted that "hindsight is 20/20." A letter opinion dated August 26, 2003, from Jerry DeNigris of the Riverside Financial Group, summarized his review of the Trust's Josephthal & Co. account statements and noted losses in the value of the Trust's holdings between April 2001 and May 2002. But DeNigris offered no opinion as to Warner's performance or his responsibility for those losses. Finally, an unsigned, August 17, 2003 "To Whom it May Concern" letter from Schwartz, Warner's predecessor as trustee of the 1982 Trust, also noted that there were no trades in the account between April 2001 and May 2002 and that "repositioning the account into safer mutual funds didn't begin until mid 2002." Schwartz also offered no opinion respecting Warner's performance or his responsibility for the Trust's reduced value.

Those letters imply that Warner neglected his duty of care as Trustee. They do not, however, satisfy the requirement that an expert whose opinion is relied upon to establish a recoverable loss, proximately caused by a fiduciary's negligence, must address the causal relationship and demonstrate how any breach of the applicable standard of care caused the losses claimed. Cf. Creauga v. Jardal, 185 N.J. 345, 360 (2005) (medical expert's differential diagnosis was not a net opinion). Lynn was not entitled to a plenary hearing on her negligence claim against Warner because she did not serve any such expert report. Thus she did not establish a prima facie case on that claim.

The judge concluded that the losses incurred by the Trust were largely due to poor overall stock performance that affected everyone in the stock market after the terrorist attacks on September 11, 2001. A defendant fiduciary cannot be held negligent for such losses. See Cox v. Camden Safe Deposit & Trust Co., 124 N.J. Eq. 490, 502 (Ch. 1938) (trustee was not responsible for losses due to financial conditions caused by the Depression). The judge also noted that many of the stocks in the portfolio had been chosen by the decedent himself, that he apparently favored speculative investments, and that Deborah did not object to Warner's accounting. Deborah's concurrence in Warner's accounting and in his defense of Lynn's claim for a surcharge provided sufficient support for the judge's conclusion that Lynn cannot prove damages for fiduciary negligence. We therefore affirm the denial of Lynn's claims for surcharge against Warner.

Warner also contends that he "was willing to resign; however, he would not do so without receiving a formal release from the beneficiaries." While Warner blames the ensuing litigation and its costs on Lynn's refusal to provide him with a full release, we see no justification in that argument. In light of the uncontroverted evidence of Warner's inattention to his fiduciary duties during the period between Weinberg's death and the filing of Lynn's complaint, but a lack of evidence to warrant a surcharge against Warner for causing the Trust's losses, we conclude that Warner clearly did not earn the principal or income commissions awarded to him. See In re Probate of Alleged Will of Landsman, 319 N.J. Super. 252, 275 (App. Div.), certif. denied, 161 N.J. 335 (1999) and 162 N.J. 127 (1999):

"Commissions are allowed as compensation for the faithful discharge of duty." Fluck v. Lake, 54 N.J. Eq. 638, 644 (Prerog. Ct. 1896). The court in In re Jula's Estate, 3 N.J. Misc. 976, 979-80 (Orphans Ct. 1925), made the concept more explicit when it said, "It is also well settled that commissions are a compensation for the faithful discharge of duties, and that, when an administrator violates that duty, he will not be entitled to commissions."

[Ibid.]

The record does not support the allowance of those commissions, which we reverse.

II

Lynn contends that Warner violated his several duties to her and to the Estate under the terms of the 1982 Trust. Warner contends that after her father's death, Lynn "began to harass" him and "made constant requests for distributions from the Trust to pay her personal bills and to pay the debts and administration expenses of the estate."

A

Lynn contends that Warner was obligated to provide her with sufficient financial assistance to enable her to maintain and support herself. She relies on the language of paragraph 5(c) of the 1982 Trust, which states:

[T]he Trustee shall from time to time, in his sole discretion, pay to or apply for the benefit of the Settlor's children so much of the principal as may be necessary for the comfortable support, maintenance, medical care, and education (including college and post-graduate education) of said children. The Trustee need not make equal payments of such principal for such purposes to the Settlor's children. However, in making such payments, the Trustee shall consider the particular needs and circumstances of each child, including age, marital status, parental obligations, other means of support and maintenance, other property or income, if any, and the similar needs and circumstances of the Settlor's other children.

[Emphasis added.]

It is apparent that Weinberg vested his Trustee with exceedingly broad discretion to determine "the needs and circumstances" of each daughter. Thus it is unlikely that the court would intervene in any reasoned exercise of discretion by Warner in response to a request for distribution by either Lynn or Deborah. But the very broad discretion accorded to the Trustee by paragraph 5(c) is not without any guidelines.

First, the Trustee was to distribute "so much of the principal as may be necessary for the comfortable support, maintenance, medical care, and education (including college and post-graduate education) of said children." (Emphasis added). There is no dispute that during his lifetime, Weinberg provided Lynn for many years with significant support and maintenance in the form of possession of his Fort Lee cooperative apartment; thus there was historical support for continuing some financial assistance to Lynn. Second, the paragraph expressly contemplated that "[t]he Trustee need not make equal payments of such principal for such purposes to the Settlor's children." Thus it was not entirely unreasonable for Lynn to request some assistance from the Trust if her circumstances warranted it. Finally, the paragraph required "the Trustee [to] consider the particular needs and circumstances of each child, including age, marital status, parental obligations, other means of support and maintenance, other property or income, if any, and the similar needs and circumstances of the Settlor's other child[]." (Emphasis added).

The Probate judge found that Lynn failed to establish that any extra distribution was "necessary for her support." We agree that no such evidence appears in the record. But we also see no evidence in the record that Warner gave any attention to Lynn's requests for distributions, or that he looked into her financial circumstances, or compared her circumstances with Deborah's before rejecting her requests. Even the broadest discretion requires reasoned consideration by the trustee.

Lynn has explicitly set forth her rationale for seeking distributions of principal over and above the periodic distributions to both sisters as provided by paragraph 5(a) and (b) of the trust: five percent of principal to each daughter, every two years, upon request. According to Lynn, she had lived in the Fort Lee cooperative apartment for twenty-two years, paid for and maintained by her father for her benefit, and he had intended to transfer title to the apartment to Lynn, but did not "get around to it" before he died. Deborah has not disputed Lynn's representation that their father provided Deborah with $50,000 to assist her in purchasing her house years earlier.

In this case, denying Lynn's request for additional distributions of principal may have been entirely reasonable, but the failure to fully consider and respond was not. As noted above, Lynn's requests for personal financial assistance from the Trust, via discretionary distributions of principal, has some basis in the trust document itself. To the extent that Warner failed to consider the very factors the Trust specified, Warner can be said to have failed in his duties as Trustee. We are satisfied that no provable damages are apparent, but that this failure provides further support for denying Warner's claimed commissions and for reconsidering his claim for attorneys' fees.

B

Lynn also claims she was entitled to distributions from the 1982 Trust to pay for claims against the Estate (representing debts incurred by her late father) in order to protect the Estate's assets against creditors. She also contends that the Estate was obligated to pay the administrative expenses of the Estate, and therefore should reimburse her for the expenses she advanced on behalf of the Estate.

In her final analysis, the Probate judge concluded that Lynn's numerous demands upon Warner for financial assistance to the Estate failed to recognize the distinction between the Estate and each of the Trusts. We agree in part. As the judge concluded, there is no basis for Lynn's requests that the Trust pay Estate expenses, which demonstrate Lynn's failure to distinguish between two entities: the Estate and the 1982 Trust. By virtue of the Florida settlement agreement between Lynn and Deborah, Lynn became the sole beneficiary of the Estate, as well as its sole Executor. Thus if Lynn was forced, as she claimed, to advance certain Estate expenses out of her own personal funds (in light of the illiquid condition of most of the Estate assets), she would be able to reimburse herself after selling the Estate's assets. The net result would be the same as if the Trust had lent the Estate funds with which to pay its expenses. Such a loan would have to be repaid out of the proceeds of the sale of Estate assets, that is, the Florida condominiums.

The 1982 Trust terms evidence Weinberg's intention that the Trustee assist the Estate's executor to maintain the Estate's liquidity and protect its assets. But there is no evidence that the settlor intended Trust assets to be transferred outright to the Estate. Thus Lynn's requests for the Trust to pay the Estate's debts or administrative expenses were entirely without basis.

C

Finally, Lynn contends that the Trustee violated his duty to assist in maintaining the Estate's liquidity. She argues that the Trust "specifically requires Warner to either advance a loan to the Estate or purchase Estate property." Lynn relies on the following language of paragraph 4:

The Trustee is hereby authorized, in his absolute discretion, without regard to whether he may also be serving as a personal representative of the Settlor's estate, to purchase on behalf of the trust estate any property, real, personal, or mixed, tangible or intangible, and wherever situated, belonging to the estate of the Settlor or to make loans or advancements, secured or unsecured, to the personal representative of the estate of the Settlor in order to provide funds with which to pay claims, taxes, administration expenses, or other indebtedness of such estate. Any such purchases, loans, and advancements shall be made upon such terms and conditions as the Trustee in his discretion deems appropriate, but for a fair market value and on a reasonable basis consistent with the ordinary course of business judgment.

[Emphasis added.]

The judge concluded that Lynn was largely responsible for the fact that the 1982 Trust did not purchase certain Estate property or provide a loan to the Estate to protect that property, as authorized by the Trust document (and as specifically allowed in an order issued by the prior judge).

We see conflicting certifications submitted by Lynn and by Warner as to who is responsible for failing to move any such transaction forward. But we are informed that the two Florida properties in issue have now been sold to third parties, making the purchase aspect of the dispute moot. We are also informed, however, that the proceeds of those sales are being held in escrow pending resolution of certain debts of the Estate, which prevents the Florida probate from final disposition. The record is inadequate to allow us to determine whether the consummation of a purchase by the Trust or a loan to the Estate would have benefited Lynn without undue prejudice to Deborah. We do not view any further attempt to pursue that question as a reasonable exercise or dedication of Trust assets.

It is apparent that when the 1982 Trust was created, and thereafter upon Weinberg's creation of the 1997 Trust and execution of his will, Weinberg intended Lynn and Deborah to be co-beneficiaries of all of the assets he had acquired. Weinberg's provision for the Trustee of the 1982 Trust to lend money to his Estate or purchase property from the Estate unquestionably was intended to allow flexibility that would equally protect both daughters. He could not have contemplated that his daughters' interests in such transactions would conflict.

As the judge concluded, terminating the 1982 trust and distributing the beneficiaries' shares of the Trust's assets, which we address below, will allow Lynn to apply her share of the 1982 Trust as she sees fit. She will be in a position to direct her entire inheritance without further dealings with the Trustee or with Deborah. We perceive no grounds for our intervention respecting Trust paragraph 4.

III

Several of the core issues are so interrelated that we address them together.

A

In what Lynn admits was the probate judge's "good faith" attempt to conclude the litigation expeditiously, the judge nonetheless erred when she assigned to the Guardian the role of adviser to the court, and then relied upon her reports on issues where Sharon's interest was adverse to Lynn's. The Guardian's role was to protect Sharon's interest in the 1982 Trust, including the Trust's ownership of the Amerityre stock. That role clearly conflicted with Lynn's interest, and the conflict should have precluded the Guardian from acting as a disinterested special master, which is essentially the role the judge gave her.

B

The B.B. Graham & Co. account, unlike the Amerityre shares, was expressly acknowledged in the Florida settlement agreement as an asset of the 1982 Trust. The probate judge concluded that Lynn "was estopped from revisiting the Graham issue." We agree. Lynn's argument in that regard has insufficient merit to warrant further discussion. See R. 2:11-3(e)(1)(E).

C

With regard to the 27,500 Amerityre shares, Lynn claims that this asset belongs in the 1 997 Trust and not the 1982 Trust. There is inconclusive evidence in the record from which the parties would have the court draw conflicting inferences about Weinberg's intention regarding ownership of the 27,500 shares represented by certificate number 2308, which was issued on September 1, 2000. Lynn submitted to the probate judge, as support for her claim, a letter dated October 24, 2002, signed by Weinberg's Florida attorney, John C. Thompson. In that letter, Thompson noted that the decedent intended to control the Amerityre stock himself, because "he had experienced problems getting with the trustee of another trust or trusts to timely handle his instructions and execute documents . . . ." Thompson wrote that he had a series of telephone conversations with the decedent, who had been in the process of consolidating several certificates representing Amerityre shares. Those shares, Thompson wrote, were issued "[in the name of the] Weinberg Trust with no further designation." Thompson noted that he found no evidence that the Amerityre stock was issued in the name of the 1982 Trust, and that the decedent intended to control those assets at his sole discretion. Lynn also produced a $22.00 check to Interwest Transfer Company, dated July 28, 2000 and signed by Warner, with the word's "transfer of AmeriTire" written in the memo section of the check.

The Guardian was assigned by the court (improperly in our review) to advise the court as to which trust held title to the shares. Sharon is a contingent beneficiary under the 1982 Trust, and has a twenty-five percent interest in the 1982 Trust. Thus her Guardian, upon whose report the judge relied, had an obvious conflict of interest on the issue. The Guardian inexplicably reported to the court that irrespective of Thompson's letter, there was "no written evidence of what the settlor intended with those stock certificates other than the fact that they were initially issued in the '81 [sic] Trust . . . ." In her report, the Guardian opined that the Amerityre stock was titled as if it was part of the 1982 Trust, and that taxes "presumably" were paid on this stock as part of the 1982 trust.

The Guardian noted that the certificate issued for Weinberg's initial purchase of 2,500 shares of Amerityre, dated May 19, 1998, demonstrated that those shares were issued in the name of David Schwartz, "Trustee for the benefit of the Weinberg Trust." In May 1998 Schwartz was Warner's predecessor as trustee of the 1982 Trust. Weinberg himself was the sole trustee of the 1997 Trust. On January 19, 1999, however, a second certificate, this one for 25,000 shares of Amerityre, was issued in the name of "Joseph Weinberg, TTEE FBO Weinberg Trust." At the time, Weinberg apparently was acting as trustee of both Trusts. The two certificates later were combined, and at Weinberg's request, a new certificate was issued for 27,500 shares in the name of "Weinberg Trust." Based on this information, the Guardian concluded that Weinberg had transferred all of the Amerityre shares to the 1982 Trust. The judge agreed. We cannot find adequate documentary support in the record for the conclusion, without any testimony, that the certificate for 27,500 Amerityre shares more likely was intended by Weinberg to be titled in the 1 982 Trust than in the 1997 Trust. The designations on the several certificates appear to us to be ambiguous.

The Thompson letter referred to above appears to demonstrate a genuine issue of material fact as to the ownership of the Amerityre stock and an alleged amendment to the 1982 Trust. Whether the matter that was before the probate judge is viewed as the conclusion of a summary proceeding under N.J.S.A. 3B:2-4 and Rule 4:67, or an application for summary judgment under Rules 4:83 and 4:46, the existence of a material dispute of fact requires a plenary proceeding to determine the disputed issue. See R. 4:67-5; In Re Estate of Baker, 297 N.J. Super. 203, 207 (App. Div. 1997); Wolosoff v. CSI Liquidating Trust, 205 N.J. Super. 349, 366 (App. Div. 1985). It was that opportunity a plenary hearing that Lynn sought at the final court appearance on January 9, 2004.

Despite the usual rule requiring a plenary hearing, two facts override what otherwise would be a material issue of fact. First, the Amerityre shares are not mentioned in the 2002 Florida settlement agreement between Lynn and Deborah, and when Lynn and Deborah settled their respective claims to the Estate and the 1997 Trust, neither was aware that the asset existed. By affirming the decision that the shares belong to the 1982 Trust, with the result that they will be divided equally between the sisters, Weinberg's intent as the settlor of both trusts will be effectuated.

In other words, although we find procedural error both in soliciting the Guardian's report and in denying a plenary hearing on the ownership of the Amerityre shares, we are convinced that the errors were harmless under the circumstances. If Lynn were to prevail in a hearing to establish that the asset was intended for the 1997 Trust, the Florida settlement would be voidable for mutual mistake, an entirely counterproductive result in light of the settlor's apparent intent. We therefore see no reason to permit further discovery on the stock ownership issue or on the possibility that Weinberg executed an amendment to the 1982 Trust.

IV

Lynn objects to the termination of the Trust because she did not seek termination. She sought continuation of the Trust and appointment of a replacement Trustee and continued to seek financial assistance from the Trust. She claims that the Trust demonstrates the "obvious intent of the settlor" to provide such assistance. Warner claims that the judge's termination of the Trust was proper.

We perceive no error or abuse of discretion in the judge's determination that the 1982 Trust should be terminated and its remaining assets divided equally between Lynn and Deborah, with Deborah's share to be further divided equally between her and her daughter Sharon. We recognize that the Trust agreement provided no termination date and even included a "spendthrift" clause. But under all the circumstances, we are satisfied that the judge had the power to amend or modify the Trust in order to effectuate the apparent primary intent of the Settlor: to protect his assets for the benefit of his children.

The expressed or implied intent of the Settlor is a key factor in any decision respecting a trust. A court of equity has the inherent power to terminate a trust, even where there is no provision in the trust document for its termination; but the court must be cautious in exercising that power, mindful of the settlor's expressed or implied intention for the trust's continuation when the material purpose of the trust appeared to be to protect the beneficiary for her lifetime, without giving her control of the assets. Fidelity Union Trust Co. v. Margetts, 7 N.J. 556, 572-73 (1951); In Re Estate of Bonardi, 376 N.J. Super. 508, 515-18 (App. Div. 2005). Thus even where all parties agree to seek a trust's termination, their agreement is not determinative. See Heritage Bank-North, N.A. v. Hunterdon Med. Ctr., 164 N.J Super. 33, 36 (App. Div. 1978) (spendthrift provision demonstrated Settlor's intention, as expressed to his attorney, which would be frustrated by termination of the trust).

Here, Lynn opposes the termination of the 1982 Trust, with the frank assertion of her hope or expectation that the Trustee (or the court) will adopt her contention that she needs a greater share of the principal than Deborah. She stresses the inference to be drawn from paragraph 5(c) that it was their father's intention to allow unequal distributions based on his daughters' respective needs. We are convinced however that to continue the Trust's existence for that purpose would not have been Weinberg's choice had he foreseen the present circumstances, that is, the total rupture of the sisters' relationship and the waste of trust assets that has resulted from litigating the disputes between them as well as with the Trustee.

We recognize that the 1982 Trust in many respects falls within the principles enumerated in Bonardi to hold termination impermissible. See Bonardi, supra, 376 N.J. Super. at 515-16. The 1982 Trust had no termination date, it included a spendthrift provision, and it can readily be inferred that the Settlor intended the Trustee (or a successor) to administer the Trust assets for the benefit of his daughters' throughout their lives. But overriding circumstances here tip the scales in favor of termination. The adversity between the settlor's daughters, the Trustee's disappointing performance, and the excessive expenditure of trust assets on continuing litigation, justify the conclusion that disengaging Lynn and Deborah from the trust and giving each control of half the remaining assets will better serve the supervening intent of their father to preserve his assets for both daughters.

We are certain, as was the probate judge, that it was not Weinberg's intention that the assets of the Trust should be dissipated in litigation between his daughters or between either of them and his Trustee. We are satisfied that the judge appropriately inferred that Weinberg intended to provide the maximum benefit to his daughters and not to third parties who might profit from ongoing litigation. We therefore affirm the judgment terminating the 1982 Trust.

We do not see an order staying the judgment from which Lynn appealed. To the extent that distribution of the assets of the 1982 Trust has been effectuated, we rely on the probate judge to order any adjustment that may be required after the remand. If any portion of the Trust's assets has not yet been distributed, further distribution should await the conclusion of the remand. The same applies to the payment of the Trustee's attorneys' fees, which must be reconsidered on remand.

V

We cannot entirely understand the trial court allowing Warner's continued role as Trustee after both beneficiaries sought his discharge in their initial pleadings, and after he admitted he sought to be relieved. We disapprove of Warner's admitted refusal to step down in favor of a corporate successor trustee unless and until he was provided with a full release by all beneficiaries. His fee application shall be reconsidered in light of our determination that his performance as Trustee was deficient and that he took an unreasonable position early in this litigation. While Lynn's stance on certain issues also was not reasonable, she was not wholly responsible for this protracted litigation and its costs. We will not intervene in the judge's reduction of Lynn's counsel fee application because it was based upon limitations in her attorney's submission rather than upon her role in the proceedings.

Affirmed in part, reversed in part, and remanded for entry of an order vacating the approval of the Trustee's commissions and for further proceedings respecting the counsel fee award to the Trustee, consistent with this opinion. We do not retain jurisdiction.

 

The total value of the 1 982 Trust as of March 31, 2002 was $947,911.01. According to the probate judge's written opinion in this case:

The [1982 Trust] includes few, if any, blue chip stocks. This portfolio was selected by the Settlor. On July 31, 2002 the market value was $634,210.66, exclusive of disbursements and distributions of approximately $75,000. On September 30, 2003, the value of the corpus was $579,799.99 and the value of income was $2,469.02 after disbursements and distributions of $77,652.06.

One specific expense Lynn offered was that she, representing the Estate, bore the expense of defending an arbitration proceeding brought by a former client of Weinberg's, alleging professional negligence in the recommendation of "unsuitable investments." The claim was eventually dismissed, but Lynn's application to the arbitrator for fees and costs was denied.

We note the terms of the $50,000 promissory note Lynn signed to Deborah as part of the Florida settlement. That note is due only out of the net proceeds of the Estate.

We find no fault with the request that the Guardian report on the negligence claim against the Trustee or on the Trustee's interim accounting. On those issues, there was no apparent conflict between Lynn's interest and Sharon's.

The Guardian's December 10, 2003 report erroneously referred to certificate 2308 as having been issued on two different dates, January 19, 1999 and September 1, 2000. The record demonstrates that certificate 2308 represents the consolidation of certificate 1682, issued on May 19, 1998 for 2,500 shares to "David Schwartz, TTEE FBO WEINBERG TRUST," and certificate 1811, issued on January 19, 1999 for 25,000 shares to "JOSEPH WEINBERG, TTEE FBO THE WEINBERG TRUST."

Weinberg himself briefly acted as trustee of the 1982 Trust, in the months between Schwartz's resignation in December 1998 and Warner's appointment in April 1999.

An "irrevocable trust" has been defined as "[a] trust that cannot be terminated by the settlor once it is created." Black's Law Dictionary 1516 (7th ed. 1999). "Irrevocable" has been defined as "[u]nalterable." Id. at 835. An irrevocable trust, by definition, is not subject to amendment.

(continued)

(continued)

33

A-4036-03T2

July 20, 2006