MARY ANN SCHULTZ v. KATHLEEN GLASSER

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                               APPROVAL OF THE APPELLATE DIVISION
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                                                         SUPERIOR COURT OF NEW JERSEY
                                                         APPELLATE DIVISION
                                                         DOCKET NO. A-5239-18T3

MARY ANN SCHULTZ, by her
attorney-in-fact, DONNA
SCHULTZ, ESTATE OF ROBERT
SCHULTZ, SR., by its administrator,
DONNA SCHULTZ, and DONNA
SCHULTZ individually,

          Plaintiffs/Respondents-
          Cross-Appellants,

v.

KATHLEEN GLASSER, EXECUTOR
OF THE ESTATE OF ROBERT R.
SCHULTZ, JR. and KATHLEEN
GLASSER, individually,

          Defendants-
          Third-Party Plaintiffs/
          Appellants-Cross-Respondents,

v.

THE SCHULTZ FAMILY LIVING
TRUST,

     Third-Party Defendant.
_________________________________
            Argued January 6, 2021 – Decided January 27, 2021

            Before Judges Yannotti, Mawla, and Natali.

            On appeal from the Superior Court of New Jersey,
            Chancery Division, Monmouth County, Docket No. C-
            000075-18.

            Michael Confusione argued the cause for
            appellants/cross-respondents (Hegge & Confusione,
            LLC, attorneys; Michael Confusione, of counsel and on
            the briefs).

            Ellen M. McDowell argued the cause for
            respondents/cross-appellants (McDowell Law, PC,
            attorneys; Ellen M. McDowell and Rachel B. Brekke,
            on the briefs).

PER CURIAM

      Defendants Kathleen Glasser (Kathleen)1 individually and as executor of

the Estate of Robert Schultz, Jr. (Bobby) appeal, and plaintiffs Mary Ann

Schultz (Mary Ann) by her attorney-in-fact, the Estate of Robert Schultz, Sr.

(Robert) by its administrator, and Donna Schultz (Donna), cross-appeal from a

June 21, 2019 judgment entered following a trial. We affirm.




1
  We utilize the parties' first names to reflect how they are referred to in the
appellate record and because some of them share a common surname. We intend
no disrespect.
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      Robert and Mary Ann were married and had two children: Bobby and

Donna. In 1996, Robert and Mary Ann, as the grantors and initial trustees,

created the Schultz Family Living Trust.

      The Trust listed the "immediate family group" as the "grantors' children,"

Bobby and Donna. The Trust also listed the beneficiaries as Robert, during his

lifetime; Mary Ann, during her lifetime; Bobby, "upon the death of the surviving

grantor"; and Donna, "upon the death of the surviving grantor." Therefore,

Bobby and Donna became the beneficiaries of the Trust only if Robert and Mary

Ann were deceased. Robert died in 2014, leaving Mary Ann as the surviving

grantor.

      The Trust owned properties in South Carolina, Maryland, and Manalapan.

The Trust contained a schedule for "Specific Gifts for Distribution," indicating

Bobby would receive "the real property located in New Jersey." The Trust also

contained an "Alternate Beneficiary Distribution" provision stating: "If the

deceased final beneficiary has no surviving children, then his or her share shall

be distributed immediately to the surviving named final beneficiary."

      In 1998, the Trust purchased the Manalapan property for $300,002.

Bobby lived on the property from 1998 until his death in January 2018. He paid

the property taxes on the home. Bobby was unmarried and had no children.


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      On December 20, 2017, weeks before his death, Bobby signed a quitclaim

deed for the Manalapan property, which stated he was the "trustee of the Schultz

Family Living Trust."      The deed purported to transfer ownership of the

Manalapan property from the Trust to Bobby and Donna's cousin Kathleen as

joint tenants with the right of survivorship. Bobby also listed Kathleen as the

sole beneficiary of his will.

      With regard to the South Carolina property, Kathleen testified she

prepared a quitclaim deed for the property at the behest of Mary Ann in March

2017. She testified Mary Ann wished to transfer the property out of the Trust

and to Bobby because he "was going there a lot and he was looking to move

there." Mary Ann signed the quitclaim deed on March 10, 2017, transferring

the South Carolina property out of the Trust and to Bobby personally.

      On May 3, 2018, plaintiffs filed a complaint claiming Bobby breached his

fiduciary duty to the beneficiaries of the Trust and sought judgment against

Kathleen, declaring the transfer of the Manalapan property to her null and void.

Plaintiffs argued the Manalapan property belonged to the Trust, not to Bobby's

estate, and Bobby had no legal or equitable rights to the property.




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      Defendants asserted a claim for equitable relief, seeking the imposition of

a resulting or constructive trust because Bobby paid $163,000 of the $300,002,

or 54.33 percent, of the purchase price of the Manalapan property.

      Judge Katie A. Gummer tried the matter over the course of five days,

during which Donna and Kathleen testified. The judge found neither witness

credible. She stated "part of Donna's testimony was based on pure and utter

speculation . . . as to what was discussed between her brother and their parents.

Speculation about transactions of which she had no part." The judge found:

            Kathleen was even less credible than Donna. Her
            pleadings alone demonstrated her lack of credibility.

                  She testified that Bobby would never harm his
            mother, yet in her answer she admitted that he had
            executed a deed to convey title of the New Jersey
            property to himself and to Kathleen, a transfer that
            could only serve to hurt his mother.

                  She denied in her answer . . . the allegation that
            Bobby had taken possession of two vehicles owned by
            Robert. But in her testimony acknowledged that he had
            taken those vehicles.

                  Her testimony about what payments Bobby made
            with respect to the . . . Manalapan property[] was really
            [ninety-nine] percent speculation.

                  ....

                  One thing in particular that demonstrated to the
            [c]ourt her utter lack of credibility was testimony

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            regarding Bobby's relationship with his mother, . . .
            especially during the time period when his mother was
            living with Bobby.

                  Kathleen testified . . . with no qualification, that
            Bobby would never . . . take money from her, would
            never use her ATM card.

                  But it's clear reviewing the records provided to
            the [c]ourt that in fact Bobby was using his mother's
            ATM card.

      The judge stated: "This case is notable in that the three people who would

have . . . the most knowledge as to what happened, didn't testify. Obviously[,]

Robert and Bobby could not testify because they're deceased. Mary Ann did not

testify and in fact no one deposed her." As a result, the judge found "[n]o one

actually involved in [the Manalapan property] transaction [was] called to testify.

So the [c]ourt largely was left with analyzing the case based on the documents

presented and through those documents the behavior of the parties who actually

were involved in the transactions at issue."

      Regarding the Manalapan property, defendants adduced in evidence the

December 2017 deed signed by Bobby in which he referred to himself as trustee

of the Trust. The judge noted "according to defendants [the deed] forms the

legal basis to remove the Manalapan property from the Trust and . . . gift it to

Bobby and Kathleen." The judge stated:


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                  The defendants' case with respect to the
            Manalapan property is premised on their argument that
            Bobby was the settl[o]r because . . . he had effectively
            purchased the property. And that as the settl[o]r, he had
            the right to amend the Trust which according to
            defendants he did so by executing this purported
            quit[]claim deed. . . .

                   The [c]ourt cannot conclude that Bobby was a
            settl[o]r of the Trust. The reason for the payments that
            defendants assert form the basis of their argument that
            he was a settl[o]r, were based on pure speculation as to
            the purpose of those purported payments . . . .

                  ....

                 The reasons for the exchange of funds between
            Bobby and his parents are unknown to this [c]ourt.

      The judge concluded Bobby never identified himself as the settlor and had

no authority to execute the deed as either a settlor or trustee because the Trust

designated Robert and Mary Ann as the sole trustees during their life and Mary

Ann was living when the property transaction took place. The judge concluded

Bobby violated his fiduciary duty to the beneficiaries of the Trust, voided the

deed transferring the Manalapan property, and found defendants had neither a

legal nor equitable interest in the Manalapan property.

      At trial, plaintiffs contended Bobby and Kathleen conspired to exert undue

influence on Mary Ann to transfer the Manalapan property out of the Trust. As

a result, they sought attorney's fees. Judge Gummer denied these claims because

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Kathleen had no fiduciary duty to the Trust's beneficiaries and because there

was not "enough evidence . . . to conclude that Kathleen knew that the . . .

quit[]claim deed was premised on a lie."

                                          I.

      Our review of a trial court's findings in a non-jury case is limited.

Seidman v. Clifton Savs. Bank, S.L.A.,  205 N.J. 150, 169 (2011). "[W]e do not

disturb the factual findings and legal conclusions of the trial [court] unless we

are convinced that they are so manifestly unsupported by or inconsistent with

the competent, relevant and reasonably credible evidence as to offend the

interests of justice[.]" Ibid. (last alteration in original) (quoting In re Tr. Created

By Agreement Dated Dec. 20, 1961,  194 N.J. 276, 284 (2008)).

      "Deference is especially appropriate when the evidence is largely

testimonial and involves questions of credibility. Because a trial court hears the

case, sees and observes the witnesses, and hears them testify, it has a better

perspective than a reviewing court in evaluating the veracity of witnesses." Ibid.

(quoting Cesare v. Cesare,  154 N.J. 394, 411-12 (1998)). Deference is also

appropriate because "[i]n fashioning relief, [a] Chancery [court] has broad

discretionary power to adapt equitable remedies to the particular circumstances




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of a given case." Marioni v. Roxy Garments Delivery Co., Inc.,  417 N.J. Super.
 269, 275 (App. Div. 2010).

      On appeal, defendants argue: (1) the judge misapplied New Jersey law by

denying Bobby's estate any relief with regard to the Manalapan property; (2) the

deed should be amended to provide Bobby's estate with a 54.33 percent share of

the property; (3) Bobby was a settlor of the Trust and had the power to revoke

Robert's contributions to the Trust; (4) the judge erred by refusing to impose a

constructive trust declaring Bobby's estate a 54.33 percent owner of the

property; and (5) the judge erred by refusing to require Robert's estate to

reimburse Bobby's estate for $163,000 he allegedly paid for the purchase of the

property and $79,403 he allegedly paid for capital improvements.

      Plaintiffs' cross appeal contends the judge erred by not allowing them to

amend the complaint to assert a claim of undue influence regarding the South

Carolina property. Plaintiffs claim the judge erred by failing to award Robert's

estate litigation costs and attorney's fees as tort damages for the undue influence.

      We affirm for the reasons expressed in Judge Gummer's thorough and

well-reasoned oral opinion. We add the following comments.




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                                         9
                             A. Defendants' Appeal

      "It is well-settled that a court's primary function is to enforce the testator's

expressed intent with respect to a testamentary trust." In re Est. of Bonardi,  376 N.J. Super. 508, 515 (App. Div. 2005).           The court's "duty is to 'uphold

testamentary dispositions of property, made through the medium of trusts,

instead of searching for reasons for avoiding them, or dealing with them with

any degree of disfavor.'" Ibid. (quoting Fid. Union Tr. Co. v. Margetts,  7 N.J.
 556, 565 (1951)).

      "[T]he goal always is the ascertainment of the testator's intent and it is not

to be thwarted by unduly stressing 'the literal meaning' of his [or her] words."

In re Tr. of Nelson,  454 N.J. Super. 151, 158 (App. Div. 2018) (first alteration

in original) (quoting Fid. Union Tr. Co. v. Robert,  36 N.J. 561, 565 (1962)).

Examining the probable intent of a trust is a two-step process, first involving the

interpretation of the existing trust, and then, when warranted by evidence,

reformation.   Nelson,  454 N.J. Super. at 159-60 ("[R]eformation involves

remaking or modifying an instrument, to correct mistakes, to fulfill an

unexpressed intention, or to address circumstances that were unforeseen.").

"The preponderance-of-the-evidence standard of proof applies to interpretation;




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however, the more rigorous clear-and-convincing standard of proof applies to

reformation." Id. at 160.

      Here, there was no difficulty surmising testator's intent because the Trust

was clearly worded, and Bobby was never designated as a trustee.              The

unambiguous language of the Trust expressly stated Bobby would receive the

Manalapan property only if he survived Robert and Mary Ann. Further, the

Trust contemplated a scenario where Bobby predeceased a surviving grantor.

Indeed, the Trust included an "Alternate Beneficiary Distribution" provision,

which stated: "In the event that . . . [Bobby or Donna] predeceases the surviving

Grantor" and the deceased final beneficiary has no surviving children, "then his

or her share shall be distributed immediately to the surviving named final

beneficiary." Therefore, as here, where Bobby predeceased Mary Ann and had

no surviving children, his share would have to be distributed to Donna, not

Bobby's estate.

      Furthermore,  N.J.S.A. 3B:31-3 defines a settlor as

            a person, including a testator, who creates, or
            contributes property to, a trust. If more than one person
            creates or contributes property to a trust, each person is
            a settlor of the portion of the trust property attributable
            to that person's contribution except to the extent
            another person has the power to revoke or withdraw
            that portion.


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Additionally, a constructive trust should "be impressed in any case where to fail

to do so will result in an unjust enrichment." D'Ippolito v. Castoro,  51 N.J. 584,

588 (1968). "Generally all that is required to impose a constructive trust is a

finding that there was some wrongful act, usually, though not limited to, fraud,

mistake, [or] undue influence . . . which has resulted in a transfer of property."

Id. at 589.

      We have no reason to second guess Judge Gummer's detailed fact and

credibility findings that defendants failed to meet their burden of proof to

establish Bobby was a settlor. As the judge noted, the proofs presented allegedly

showing Bobby purchased the Manalapan property were not persuasive. Nor is

there any evidence to convince us the judge erred by not imposing a constructive

trust or reimbursing Bobby's estate for the funds he allegedly spent for the

benefit of the Trust. The preponderance of the evidence showed the quitclaim

deed improperly removed the property from the Trust and to let the transaction

stand would unjustly enrich defendants. Also, defendants did not meet their

burden to prove an entitlement to reimbursement of the funds allegedly spent.

                          B. Plaintiffs' Cross-Appeal

      The power to permit a party to amend its pleadings is left to the sound

discretion of the trial judge. R. 4:9-1. The "exercise of discretion requires a


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two-step process: whether the non-moving party will be prejudiced, and whether

granting the amendment would nonetheless be futile." Notte v. Merchs. Mut.

Ins. Co.,  185 N.J. 490, 501 (2006). "[T]he factual situation in each case must

guide the court's discretion, particularly where the motion is to add new claims

or new parties late in the litigation." Bonczek v. Carter-Wallace, Inc.,  304 N.J.

Super. 593, 602 (App. Div. 1997). We review such determinations for an abuse

of discretion. Fisher v. Yates,  270 N.J. Super. 458, 467 (App. Div. 1994).

      "[U]ndue influence is a mental, moral, or physical exertion of a kind and

quality that destroys the free will of the testator by preventing that person from

following the dictates of his or her own mind as it relates to the disposition of

assets . . . ." In re Est. of Folcher,  224 N.J. 496, 512 (2016) (alteration in

original) (quoting In re Est. of Stockdale,  196 N.J. 275, 302-03 (2008)).

"[W]hen there is a confidential relationship coupled with suspicious

circumstances, undue influence is presumed and the burden of proof shifts to the

will proponent to overcome the presumption." Folcher,  224 N.J. at 512 (quoting

Stockdale,  196 N.J. at 303).

      Judge Gummer found plaintiffs pled neither a confidential relationship nor

a lack of capacity on Mary Ann's part to support an undue influence claim. She

stated:


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                     Even applying the liberal standard that the [c]ourt
              must, searching the complaint in depth and with
              liberality, the [c]ourt does not see the fundament of a
              cause of action based on undue influence.

                     . . . [T]hat in and of itself is enough to keep it out
              of the case. It is grossly unfair to a defendant to raise
              at the last minute an undue influence claim not present
              in the complaint. It prevented . . . defendants from
              being able to bear any burden that shifted to them based
              on the existence of a confidential relationship.

We are unconvinced the judge abused her discretion.

      Finally, we review a trial judge's determination whether to assess

attorney's fees for an abuse of discretion. Mears v. Addonizio,  336 N.J. Super.
 474, 479-80 (App. Div. 2001). Plaintiffs cite In re Estate of Lash,  169 N.J. 20,

27 (2001) and argue the judge should have awarded attorney's fees as tort

damages for defendants' breach of fiduciary duty. Lash is inapposite because

there, our Supreme Court held attorney's fees are compensable in tort where the

breach of fiduciary duty arises from an attorney-client relationship, which did

not exist here. Id. at 34; see also Innes v. Marzano-Lesnevich,  224 N.J. 584,

596 (2016).

      Affirmed.




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