Opinion
DOCKET NO. A-5429-10T2
04-02-2013
IN THE MATTER OF THE RESIDUARY TRUST CREATED UNDER THE WILL OF DONALD C. WATSON, Deceased.
Anthony N. Gaeta argued the cause for appellant Ann B. Watson (Levine DeSantis, L.L.C., attorneys; Mr. Gaeta, on the briefs). Remi L. Spencer argued the cause for respondents Donald C. Watson, Jr. and Susan Watson Ruhl (Law Offices of Nathan E. Arnell, P.C., and Spencer & Associates, L.L.C., attorneys; Nathan E. Arnell and Ms. Spencer, of counsel and on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Ashrafi, Hayden and Lisa.
On appeal from Superior Court of New Jersey, Chancery Division, Union County, Docket No. M-2796-07.
Anthony N. Gaeta argued the cause for appellant Ann B. Watson (Levine DeSantis, L.L.C., attorneys; Mr. Gaeta, on the briefs).
Remi L. Spencer argued the cause for respondents Donald C. Watson, Jr. and Susan Watson Ruhl (Law Offices of Nathan E. Arnell, P.C., and Spencer & Associates, L.L.C., attorneys; Nathan E. Arnell and Ms. Spencer, of counsel and on the brief). PER CURIAM
Defendant, Ann B. Watson, trustee of a residuary trust created in the will of her father, Donald C. Watson (testator), who died in November 1998, appeals from several adverse orders regarding her administration of the trust estate. More particularly, the appeal is from (1) the September 24, 2009 order granting summary judgment in favor of defendant's siblings, plaintiffs Donald C. Watson, Jr. and Susan Watson Ruhl, determining that defendant failed to make required distributions under the trust; (2) the September 8, 2010 order denying defendant's motion for reconsideration; and (3) the June 2, 2011 order imposing a stay on defendant's ability to withdraw funds for counsel fees and costs from the trust for the ongoing litigation.
The amount of funds remaining in the trust are less than the amount that defendant was determined to have improperly failed to pay from the trust funds. Plaintiffs sought and obtained orders in the trial court waiving their claims to counsel fees, to surcharge defendant for any deficiency, and to remove her as trustee. Therefore, all issues as to all parties have been finally resolved, rendering the orders appealed from final and ripe for appellate review.
On appeal, defendant argues that the trial court erred in granting summary judgment in favor of plaintiffs and denying her cross-motion for summary judgment and in denying her reconsideration motion, because the court failed to view the motion evidence in the light most favorable to her and failed to properly apply principles of probable intent. In addition to this primary argument, defendant makes these additional arguments: (1) the court erred in failing to apply the doctrines of laches and equitable estoppel; (2) the court erred by failing to find fraudulent inducement by plaintiffs; (3) the court erred by failing to assess counsel fees and costs against plaintiffs based on their fraud, bad faith and unclean hands; (4) the court erred by refusing to allow her to file an amended complaint with counterclaims; (5) the court erred in imposing a stay on her right to pay counsel fees out of the trust funds; and (6) she is entitled to have her counsel fees paid out of the trust funds.
We are unpersuaded by defendant's arguments, and we accordingly affirm the orders under review.
I.
The testator's Last Will and Testament, executed on April 23, 1998, included provisions addressing the disposition of his estate to his wife Priscilla and their children. The will also created a residuary trust for Priscilla's benefit and designated defendant as trustee. After the testator's death in November 1998, Priscilla resided in a lock-down Alzheimer's unit in New Jersey. Defendant was her attorney-in-fact under a power of attorney. Later, Priscilla moved to Tennessee to be near Donald Jr., who then took over power of attorney. Priscilla died in September 2004.
Section 8 of the testator's will provided for the creation and administration of the residuary trust. The dispute revolves around Section 8.04, which states in its entirety:
Although Section 8 designates the trust as a "Residuary Trust," plaintiffs characterize it as a "Credit Shelter Trust." Section 13.07 provides that captions of the various sections of the will are not dispositive regarding their scope or intent. Because of this provision, and because generally the substantive language, not captions, should be controlling, our analysis is not influenced by the manner in which either party characterizes the trust.
The Trustee shall pay to or for the benefit of my spouse, during my spouse's life, so much of the principal of this trust as may be necessary for my spouse's maintenance, support and health.
[Emphasis added.]
More particularly, the dispute revolves around expenses in the total amount of $187,731.35 that were incurred for Priscilla's maintenance, support and health, which defendant refused to pay out of the trust funds. The parties do not dispute that these expenses were reasonable, with respect to their need, purpose and amount, in order to provide for Priscilla's maintenance, support and health.
Thus, the focus is on the phrase in Section 8.04, "as may be necessary." Defendant took the position that the phrase gave her discretion to determine what was "necessary" for her mother's care taking into consideration resources available to her mother other than the trust. Plaintiffs took the position that the phrase did not confer such discretion and that the "shall pay" language compelled payment of all reasonable expenses that were required for their mother's care, without regard to any other available resources.
In support of their argument, plaintiffs pointed to other provisions in Section 8 in which discretion of the trustee was expressly granted or clearly denied. For example, Section 8.02 authorizes the trustee to distribute to Priscilla so much of the net income of the trust as the trustee in her "sole and absolute discretion, shall deem appropriate." Conversely, Section 8.03 grants no discretion but provides that, upon Priscilla's written request, the trustee "shall pay" Priscilla such amounts of the principal as requested, not to exceed five percent of the principal amount in any year.
Plaintiffs contend that the phrase "shall pay" in Section 8.04 is controlling and renders the trustee's obligation to pay Priscilla's maintenance, support and health expenses mandatory. They contend that if discretion were intended, it would have been stated. They further contend that the "as may be necessary" phrase merely characterized the nature of the payable expenses and gave the trustee flexibility in determining whether particular expenses were reasonable and necessary. However, because there is no dispute in this case as to the reasonableness and necessity of the expenses for which payment was withheld, plaintiffs conclude there can be no dispute that defendant violated her mandatory duty to pay those expenses.
Defendant argues that provisions in Section 11, addressing the powers of the trustee and administration of the trust, support her position. Section 11.08 provides: "In exercising any discretion conferred herein, the Trustee may, but shall not be required to, inquire into or investigate any other assets or resources available to any beneficiary of this Will." Section 11.09 provides: "All decisions made in good faith and with reasonable diligence by the Trustee shall be conclusive and binding on all persons having or acquiring any interest in any trust under this Will."
In her deposition testimony, defendant contended that she performed all required obligations as trustee and that her mother's needs were always met. She believed she had discretionary authority to withhold disbursements for things she deemed redundant or unnecessary, including some medical, pharmaceutical and rehabilitation bills, and for monthly rental or hospital expenses. She also declined to honor requests for
Defendant and Donald Jr. reached an accommodation, by which defendant agreed to pay fifty percent of the bills. After unsuccessful mediation between the two, defendant directed Donald Jr. to refrain from contacting her directly and to deal with her only through her lawyer.
On November 11, 2004, about two months after Priscilla's death, plaintiffs, through counsel, requested that defendant prepare a final accounting of the trust. In April 2005, defendant provided a partial draft, followed by a later draft in December 2005 covering the period through October 31, 2005. Plaintiffs raised questions and requested a formal accounting. When it was not produced, they filed a complaint in November 2007 demanding an accounting. Defendant did not timely respond, and a default judgment was entered, but later vacated.
In April 2008, defendant filed a complaint to approve her final accounting. Plaintiffs filed exceptions. In December 2008, defendant moved for leave to file an amended complaint including counterclaims against plaintiffs for undue influence and fraudulent concealment of assets received by Priscilla through inheritance. On January 22, 2009, the court granted the motion in part, allowing defendant's assertion in Count I to settle the account and Count II for fraudulent concealment, but not allowing the proposed Count III for undue influence.
The parties thereafter filed cross-motions for summary judgment. Each side contended that the terms of the will were clear and required construction in the manner they respectively urged.
Included in the motion record was the deposition testimony of Gilbert Levine, the attorney who the testator had engaged to prepare his will. Levine has been an attorney since 1986. He specializes in trust, estate, and tax law. The testator came to him in 1998 for the preparation of wills for himself and Priscilla.
Levine testified that, following the usual office protocol, he sent out a fact sheet to the clients in advance of his first meeting with them to list information pertaining to assets, insurance policies, heirs, and the like. He then met with them personally. At this meeting, it was customary for him to discuss their wishes and goals and to take notes accordingly. Sometimes there would be a second meeting to discuss these issues further. He then turned over the notes to another partner in the firm, who would review them and, in turn, assign the actual drafting to an associate.
The associate would then draft the wills and deliver them to the partner who had assigned them. That partner would review them and, if satisfied they were correct, would pass them on to Levine, who would then schedule another meeting with the clients to review the wills with them. The wills would have been sent to the clients in advance of this meeting for their review, so they could be prepared to ask appropriate questions.
Levine's deposition was taken on May 19, 2009. During that time he said he typically met with about ten to fifteen clients per week in connection with drafting and reviewing wills, trusts, and similar documents. He estimated that the volume was about the same at the time of the testator's and Priscilla's wills eleven years earlier. Levine said he has prepared thousands of wills, generally following the same procedure as in this case. His office policy is to retain wills indefinitely because, after a client for whom a will has been prepared dies, his office is often involved in the administration. Of course, the file would include all of his notes, which might prove useful in connection with administration.
About five months prior to Levine's deposition, counsel for plaintiffs had demanded production of Levine's entire file, including his notes. They were never produced. At his deposition, Levine revealed for the first time that the original file, including the notes, could not be located. The only items contained in a newly created file in the office were copies of the wills in their final form. Levine estimated that he had last seen the original file about five years earlier, when the dispute arose regarding payment of Priscilla's expenses.
Therefore, Levine was testifying from memory. He vaguely remembered meeting with the testator and Priscilla at their home. He said the testator's objective was to preserve the principal of the trust so a portion of the testator's estate would pass without taxes to the ultimate heirs. In addition, he contented the trust would benefit Priscilla when needed. He expressed the view that Section 8.04 is not restrictive and gave defendant broad authority to distribute money, if she deemed it necessary, and broad authority to withhold money, if she deemed it prudent. Levine maintained that the trust reflected the testator's wishes because Levine believed that he reviewed the various sections of the will with the testator and Priscilla, just like he did with every will and every client.
When pressed as to why some trust provisions expressly gave the trustee discretion, but Section 8.04 did not, yet should be interpreted as conferring such discretion, Levine explained that the practice in his office is to utilize language in each clause from a will or trust that has been interpreted in a legal decision. By using such precise language, the result has already been adjudicated, and there could thus be no dispute as to the correct interpretation. In this regard, he said:
I don't change provisions. When provisions are parts of case law, I don't change them. I don't try and elaborate on them because it can only get me in trouble. It can only preclude my clients from achieving their objectives. I take language from other documents that have been interpreted to mean certain things.When questioned further about why, if he believed Section 8.04 conferred broad or unbridled discretion, he did not draft it to expressly say so (as he had done with other provisions in the same document), he said:
Well, again, I've explained this to you; that we steal language from other documents which have interpretation. So if you wanted me to put in here: "My client says: Can we say 'may' in their sole and complete discretion", I would say: "Let me see what I could find." It wasn't something that [the testator] asked me to do, so I left it the way it was.
Levine acknowledged that each document he prepares for a particular client is unique to that client, and that cutting and pasting piecemeal provisions in their precise language from other documents might lead to a different interpretation of a particular provision within the context of the document he is creating. He testified: "[W]e try to prevent that from happening. I mean to say that it may -- anything may happen, but I, again, or my job is to try to prevent that from happening." When asked if that is why he sometimes modifies borrowed provisions (as he had earlier testified) to meet the needs of a particular client, he said: "We use different provisions from different documents. We try not to modify provisions."
In his deposition, Levine did not identify any particular court decision upon which he based the language in Section 8.04. On appeal, he identifies such a case, which we will discuss in a later section of this opinion.
II.
In ruling on the cross-motions for summary judgment, the trial court concluded that Section 8.04 was clear and unambiguous and directed that payments "shall" be paid for Priscilla's maintenance, support and health. The court distinguished the language in Section 8.04 from other sections in the will which expressly conferred discretion on the trustee. The judge rejected the suggestion that Section 11.08 provided any basis for "granting" discretion. That section pertains to circumstances in which the trustee is "exercising any discretion conferred herein," in which circumstances the trustee is authorized to consider other assets and resources available to Priscilla.
The court found no need to look at the probable intent of the testator because the critical language was unambiguous. The court therefore stated that evidence or deposition testimony about the testator's estate planning was not relevant.
The court therefore granted plaintiffs' summary judgment motion and denied defendant's cross-motion for summary judgment. The court ordered defendant to reimburse the trust $187,731.35 and to pay counsel fees and costs incurred by plaintiffs, to be charged to defendant's share of the trust. The court denied plaintiffs' requests that defendant be surcharged for excessive legal fees paid by the trust and that she be removed as trustee and surcharged for commissions paid to her.
In the aftermath of this September 24, 2009 decision, a representative of the Union County Surrogate's Office returned to defendant's attorney the amended complaint he had submitted, stating it remained "unfiled due to the court granting the motion for Summary Judgment in favor of Plaintiffs last week."
Defendant moved for reconsideration, contending that the court failed to consider the testator's probable intent based upon the extrinsic evidence in the motion record. Plaintiffs also moved for reconsideration of the court's denial to surcharge and remove defendant as trustee. The court denied both motions. Defendant filed an appeal, but it was dismissed as interlocutory.
The parties returned to the trial court. Plaintiffs moved to waive counsel fees so that the previous orders would become final. They also sought a stay to prevent defendant from withdrawing funds from the estate to pay counsel fees and costs for her ongoing litigation. The court granted both motions. Defendant then filed a new appeal, which is now before us.
III.
We first address the primary issue in this appeal, whether summary judgment in favor of plaintiffs (and denial of defendant's reconsideration motion) was properly granted. Defendant contends these orders were erroneously entered because the court did not attempt to discern the testator's probable intent and failed to employ the correct legal standard governing the use of extrinsic evidence when interpreting testamentary documents.
In deciding a summary judgment motion pursuant to Rule 4:46-2, a trial court must consider whether the evidence presented, in the form of pleadings, depositions, answers to interrogatories, admissions, and affidavits, when viewed in the light most favorable to the non-moving party, shows that there is "no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). However, "[i]f there exists a single, unavoidable resolution of the alleged disputed issue of fact, that issue should be considered insufficient to constitute a 'genuine' issue of material fact for purposes of Rule 4:46-2." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 2512, 91 L.Ed. 2d 202, 214 (1986)). Our review is de novo and follows the same standards. Prudential Prop. & Cas. Ins. Co. v. Boylan, 3 07 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998).
Defendant contends that the trial court's failure to consider the scrivener's deposition testimony because the language was unambiguous fails to comport with the law in New Jersey. She relies on Wilson v. Flowers, 58 N.J. 250, 260 (1971), for the proposition that, in determining whether an ambiguity exists in a testamentary document, a court should always admit extrinsic evidence, including direct statements of intent. For purposes of our analysis, we deem Levine the scrivener of the testator's will. He dealt directly with the testator and, although his recollection was sparse, he apparently went section by section through the will with the testator. We agree with defendant that Levine's testimony should be considered as to the threshold question of whether an ambiguity exists. As part of our de novo review, we do so.
The concept of presumed probable intent must be applied sparingly and only where necessary to give effect to the intent of the will or trust without varying the terms of the document. In re Estate of Munger, 63 N.J. 514, 521 (1973). The doctrine of probable intent "cannot be used to write a will that the testator did not write." In re Estate of Gabrellian, 372 N.J. Super. 432, 441 (App. Div. 2004) (citing In re Estate of Cook, 44 N.J. 1, 12 (1965), certif. denied, 182 N.J. 430 (2005); accord In re Estate of Burke, 48 N.J. 50, 64 (1966) (holding that, even when a decedent has executed a will, "a court may not . . . conjure up an interpretation or derive a missing testamentary provision out of the whole cloth"); Cook, supra, 44 N.J. at 12 (Hall, J., dissenting) (recognizing that "[a] wider outlook and reliance on probable intention should never be permitted . . . to work out a will which a testator did not make.").
The general rule concerning the application of probable intent was set forth in Wilson, supra, 58 N.J. at 260, in which the Court explained that extrinsic evidence that "furnishes information regarding the circumstances surrounding the testator" may be offered to "aid in ascertaining [the testator's] probable intent," and "[w]here the probable intent is thus made manifest . . . the court may not refuse to effectuate that intent by indulging in a merely literal reading of the instrument." Accord In re Estate of Payne, 186 N.J. 324, 335 (2006); In re Estate of Flood, 417 N.J. Super. 378, 381 (App. Div. 2010), certif. denied, 206 N.J. 64 (2011).
However, the Court in Wilson, supra, 58 N.J. at 263, restricted the breadth of extrinsic evidence:
We do not, of course, mean to imply that such [extrinsic] evidence can be used to vary the terms of the will, but rather that it should be admitted first to show if there is an ambiguity and second, if one exists, to shed light on the testator's actual intent.
Defendant relies on Levine's statements that he crafted Section 8.04 to effectuate the intent of the testator, he derived the language of the section from case law in which other courts had interpreted the language as discretionary in nature, and that testator read the language and believed it was discretionary. She argues that her interpretation is in complete accord with the testator's probable intent. The testator and Priscilla are deceased, the law firm file for the will is missing, and Levine's memory is minimal. Nevertheless, under Wilson, this information is relevant for a proper interpretation of Section 8.04.
Defendant further contends that the trial court was not limited to, nor bound by, only the language of Section 8.04. To support this premise, she relies on In re Estate of Tateo, 338 N.J. Super. 121, 126-27 (App. Div.), certif. denied, 168 N.J. 295 (2001), in which we stated that the seminal decision in New Jersey defining the doctrine of probable intent is Fidelity Union Trust Co. v. Robert, 36 N.J. 561 (1962), in which the Court expanded the
rule that required determination of the testator's intent essentially from the four corners of the will itself, and made clear that the judicial inquiry must focus on the subjective intent of the testator as evidenced not merely by the text of the will but, primarily, by the testator's "dominant plan and purpose as they appear from the entirety of his will when read and considered in the light of the surrounding circumstances," ascribing to the testator, "[s]o far as the situation fairly permits 'those impulses which are common to human nature . . . .'"We continued in Tateo, quoting Fidelity Union Trust Co. and explaining that
[338 N.J. Super. at 127 (alterations in original) (quoting Fidelity Union Trust Co. v. Robert, 36 N.J. 561, 565 (1962)).]
courts should "strain towards effectuating the probable intent of the testator . . .", and, since it is a particular testatrix's intent in a particular will construction case that is in issue, generally applicable canons of construction as well as precedents involving the construction of other wills have no controlling force. Thus the essential endeavor the court must undertake "is to put itself in the testator's position insofar as possible in the effort to
accomplish what he would have done had he 'envisioned the present inquiry.'" Consequently, a clearly ascertained probable intent can be effectuated by the court even if it means the deletion from, substitution of or insertion in the verbiage used in the will.
[Ibid. (alterations in original) (internal citations omitted).]
Defendant asserts that the trial court's holding flies in the face of the clear imperative provided by Wilson, supra, 58 N.J. at 263, requiring consideration of testimony concerning probable intent before and in service of determining whether an ambiguity exists. Thus, defendant maintains that the court erred by applying the incorrect standard of looking first to the four corners of the document to see if an ambiguity existed and, failing to find one, excluding any consideration of extrinsic evidence.
Our consideration of Levine's testimony in conjunction with the language in the testator's will leads us to the same conclusion as reached by the trial court, namely that Section 8.04 is not ambiguous and mandates payment of the disputed expenses. We reject defendant's argument that, applying the Brill standard and thus giving all favorable inferences to Levine's testimony, genuine issues of material fact exist regarding the testator's intent as expressed to Levine and Levine's crafting of Section 8.04 to satisfy the dual goals of providing for Priscilla's care and minimizing tax liability. This argument is unpersuasive because, contrary to Levine's testimony, the case law upon which he purportedly relied does not support the conclusion that Section 8.04 is interpreted to give discretion to defendant. Therefore, even giving all favorable inferences to defendant and concluding that Levine and his law firm sought to create a provision granting discretion, the case law leads to a contrary conclusion, as we will now discuss.
Defendant contends that Levine discussed the trust provisions with the testator in their face-to-face meetings and that Levine's impression was that the testator understood these provisions and affirmed that the will as written was an accurate memorialization of his intent to ensure that his bounty would be used to care for Priscilla while also preserving as much of the principal as possible so that it would pass tax free to their three children.
Defendant asserts that had the testator desired that the trustee invade the principal of the trust for all of the beneficiary's maintenance, support and health payments, it would have been simple enough to draft the provision to remove the words "as may be necessary" so it would read, "Trustee shall pay to or for the benefit of my spouse, during my spouse's life, the principal of this trust for my spouse's maintenance, support and health." However, it would have been equally easy to draft a provision that clearly stated that the trustee had discretion to make the decision. Indeed, other provisions in the will contained express provisions granting discretion.
As we have stated, the record does not reveal what case law Levine relied on; in his deposition, he merely stated that he was familiar with case law in which the provision had been upheld as discretionary. In the statement of facts in her appellate brief, defendant relies on Marine Trust Co. of Western New York v. United States, 247 F. Supp. 278, 279-80 (W.D.N.Y. 1965), claiming that language in that case was similar to language here and provided the trustee with unfettered discretion whether to invade the principal of the trust. However, the language in that case differs significantly from the language of Section 8.04. The provision in that case was as follows:
In addition to Marine Trust Co., defendant also cites in her statement of facts Estate of Elmer v. Commissioner of Internal Revenue, 6 T.C. 944, 948-49 (T.C. 1946), to support "Levine's drafting," but the court in that case merely stated that "the trustee . . . has the discretionary power to pay or apply so much of the principal as may be necessary 'to properly provide for her support and maintenance,'" without including the exact language of the clause at issue.
--------
"(a) * * * my trustee is directed to pay the net income of said trust together with so
much of the principal as may be necessary to maintain my said daughter, Katherine B. Statler, in the same standard of living which she shall have enjoyed at the time of my death, said principal and income to be payable in monthly, quarter, annual or other suitable installments to said daughter.
"(b) If by reason of sickness, accident, misfortune or any other circumstances either of my said daughters shall be or become in need of funds in the opinion of my trustee for her health, support, maintenance, comfort, welfare or for any other reason, to pay over and distribute to her from the principal of the trust funds set up for said daughter such part or parts thereof as at any time or from time to time my trustee, in its sole discretion shall deem necessary.
"(c) A written request from any child of mine for such payments or distributions from the trust fund set up for such child, shall be good and sufficient authority for my trustee to make such payments or distributions, but my said trustee shall not be forced to comply with any such request, and the judgment of my trustee shall be final and conclusive as to whether any payments shall or shall not be made, and no payment or distribution can be enforced or enjoined by legal action."
[Ibid. (emphasis added).]
Here, there is no language in Section 8.04 addressing discretion by the trustee or the judgment of the trustee. See also Estate of Morgens v. Comm'r of Internal Revenue, 133 T.C. 402, 404-05 (T.C. 2009), aff'd, 2012 U.S. App. LEXIS 9059 (9th Cir. May 3, 2012); Salter v. Lerner, 99 Cal. Rptr. 3d 1, 2 n.2 (Cal. App. 2009); In re Living Trust of Johnson v. Johnson, 190 S.W.3d 469, 472 (Mo. Ct. App. 2006); Luke v. Stevenson, 696 N.W.2d 553, 560 (S.D. 2005).
In the annotation that updates 2 A.L.R.2d 1383, the author addresses cases that deal with the question whether it is proper for a trustee to consider a beneficiary's other means under trust provisions authorizing invasion of the principal for the beneficiary's support, maintenance, health, or education. Jonathan M. Purver, Annotation, Propriety of Considering Beneficiary's Other Means Under Trust Provision Authorizing Invasion of Principal for Beneficiary's Support, 41 A.L.R.3d 255, 257 & n.4 (1972). A review of the many cases discussed in the annotation reveals that most involve trusts that specifically give trustees authorization within their discretion or their sole discretion as they deem necessary for such elements as the support, maintenance, or health of the beneficiary. See, e.g., Sibson v. First Nat'l Bank & Trust Co., 64 N.J. Super. 225, 227 (App. Div. 1960) (trust to be established with trustee, "in its sole discretion," paying as much of the principal as determined necessary for wife's support, health, and maintenance); In re Mitchell's Will, 217 N.Y.S.2d 690, 692 (N.Y. Sur. Ct. 1961) ("[T]rustees are authorized to pay from the principal of the trust such portion thereof as in their discretion they shall deem necessary for the support, maintenance and comfort of my daughter, or because of an accident to, the illness of, or other emergency affecting my daughter.").
Contrary to defendant's argument, the case upon which Levine purportedly relied (as well as other case law) supports the conclusion that Section 8.04 does not grant discretion to the trustee, but that it unambiguously mandates payment of the disputed expenses. The scrivener could have drafted a provision clearly giving defendant the discretion to make payments or withhold them for Priscilla's maintenance, support and health. When read in the context of the overall document, which included other provisions expressly authorizing discretion, the absence of such authorization in Section 8.04 stands out in clear contrast.
Further, we agree with the trial court that Section 11.08 does not serve to confer discretion in the administration of the trust. That section is only triggered in reference to a trust provision in which the exercise of discretion has been conferred. In such circumstances, the trustee is authorized to consider other assets or resources of the beneficiary. However, Section 11.08 cannot serve as a source of discretion in and of itself. Likewise, the safe harbor provision of Section 11.09 cannot serve as a source of discretion that is not otherwise granted in the trust document. That section cannot alter the substantive provisions of the trust. It merely protects the trustee as long as her actions in administering those substantive provisions are made in good faith and with reasonable diligence.
Defendant further maintains that the trial court failed to consider that a trustee is provided discretion in administering a trust even when it is not explicitly provided in a trust provision. She argues that the court's conclusion that the trustee lacked discretion does not comport with the law of New Jersey. However, to support that claim, defendant does not rely on any New Jersey case law. Instead, she relies on Metropolitan Life Insurance Co. v. Potter, 992 F. Supp. 717 (D.N.J. 1998), and Luby v. Teamsters Health, Welfare & Pension Trust Funds, 944 F.2d 1176, 1181 (3d Cir. 1991). Our review of those cases reveals no support for defendant's argument.
In Metropolitan Life Insurance, the defendant sought insurance benefits under a life insurance plan underwritten by the plaintiff. The court stated:
Where, as here, a claimant challenges a benefit determination made by the plan administrator, the appropriate standard of the Court's review turns on the language of the plan itself. In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed. 2d 80, (1989), the Supreme Court held that "a denial of benefits . . .
is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." If the plan provides the administrator with discretionary authority to determine a participant's eligibility for benefits, the arbitrary and capricious standard applies. Id. at 111; see also Hullett v. Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107, 114 (3d Cir. 1994); Abnathya v. Hoffman-LaRoche, Inc., 2 F.3d 40, 45 (3d Cir. 1993). The trust instrument need not expressly grant discretionary authority; rather, such discretion may be implied from the terms of the plan. See Hullett, 38 F.3d at 114; Heasley v. Belden & Blake Corp., 2 F.3d 1249, 1256 (3d Cir. 1993); Luby v. Teamsters Health Welfare & Pension Trust Funds, 944 F.2d 1176, 1181 (3d Cir. 1991) (holding no "magic words" such as discretion need be used to accord discretion).
[992 F.Supp. at 722-23.]
In Luby, the court reviewed a determination by an administrator as to death benefits. The court stated:
Discretionary powers may be implied by a plan's terms even if not granted expressly. See De Nobel v. Vitro Corp., 885 F.2d 1180, 1187 (4th Cir. 1989) (no "magic words," such as "discretion is granted . . . ," need be expressly stated in order for the plan to accord the administrator discretion to interpret plan terms and to hear and decide disputes between persons alleging themselves to be beneficiaries, so long as the plan on its face clearly grants such discretion). Nonetheless, we are not persuaded that the Plan impliedly grants the Administrator authority to make beneficiary determinations.The court concluded:
[944 F.2d at 1180.]
The Fund also argues that because the Declaration of Trust expressly granted Trustees discretionary authority in a number of specified areas, similar discretion is impliedly granted in other unspecified areas of Plan administration. We are not persuaded. Nothing in the Declaration of Trust grants the Trustees or Administrator discretionary authority to decide disputes between beneficiary claimants. We reject the Fund's argument that because the Declaration of Trust expressly grants Trustees discretion in certain, specified areas, "it is nothing less than absurd to suggest that the same settlors which entrusted broad discretion to the Trustees in all other phases of Fund administration . . . would deny this same discretion in resolving a dispute between [benefit claimants]." Fund Brief at 26. Far from "absurd", we believe that the settlor's express grant of discretion in certain areas of Fund administration and silence as to others strongly supports the conclusion that had the settlors intended to grant Trustees discretionary authority to decide among disputed beneficiaries on a case-by-case basis, they knew how to say so and would have expressly done so.
[Id. at 1181 (emphasis added).]
This case is similar to the situation in Luby. Some provisions of the will specifically state that the trustee has discretion in certain decisions. There is no such language in Section 8.04, and nothing in the will states that the trustee has discretion in all her decisions. While defendant claims it is common sense to conclude she had discretion to pay for Priscilla's maintenance, support and health, case law upon which she specifically relies and other relevant case law indicate that the scrivener should have known how to grant discretionary authority and could have clearly done so in Section 8.04.
IV.
We now address defendant's remaining arguments.
Defendant contends that the trial court erred in refusing to bar plaintiffs' claim under the doctrines of equitable estoppel and laches. The court found that plaintiffs made periodic claims over the years objecting to defendant's assertion of discretionary authority to withhold the disputed payments. The court also found no showing of prejudice to defendant based on the passage of time. We review these determinations for abuse of discretion. Mancini v. Twp. of Teaneck, 179 N.J. 425, 436 (2004).
Equitable estoppel requires reliance upon a party's action or inaction coupled with a detrimental change in position based on reasonable reliance. Ridge Chevrolet-Oldsmobile, Inc. v. Scarano, 238 N.J. Super. 149, 154 (App. Div. 1990). Defendant cannot satisfy these criteria because plaintiffs repeatedly objected to her interpretation of Section 8.04. Plaintiffs made written requests for reimbursement and demanded an accounting. Further, there is no indication that defendant relied to her detriment on plaintiffs' objection to her not paying the disputed bills.
Laches is designed to discourage stale claims. Gladden v. Bd. of Trs. of Pub. Emps.' Ret. Sys., 171 N.J. Super. 363, 371 (App. Div. 1979). The party seeking application of the doctrine must show that an inexcusable or unexplained delay caused him or her prejudice. Enfield v. FWL, Inc., 256 N.J. Super. 502, 520 (Ch. Div. 1991), aff'd, o.b., 256 N.J. Super. 466 (App. Div.), certif. denied, 130 N.J. 9 (1992). Our analysis here mirrors that with equitable estoppel. Defendants were guilty of no unexplained or unexcused delay. Indeed, they testified that they refrained from filing suit during Priscilla's lifetime because that was Priscilla's wish. Plaintiffs continually disputed defendant's position. And, defendant has demonstrated no prejudice.
Defendant claims that the trial court erred by failing to bar plaintiffs' claim because they fraudulently induced her to make distributions by concealing Priscilla's assets. This claim revolves primarily around the fact that Priscilla inherited several hundred thousand dollars, of which plaintiffs were aware, but which they failed to disclose to defendant. Defendant contends that, had she known of these assets, she would not have agreed to pay fifty percent of Priscilla's maintenance costs out of the trust. This argument lacks merit because, for the reasons we have discussed, the trust required defendant to make distributions for the full amount of Priscilla's maintenance, support and health out of the trust.
Defendant's remaining claims are that the trial court erred by (1) failing to assess counsel fees and costs against plaintiffs, (2) not allowing defendant to file her amended complaint with counterclaims, (3) imposing a stay that prohibited defendant from paying her counsel fees out of the trust, and (4) denying her the right to have her counsel fees paid out of the trust. These arguments lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION