Court Finds No Abuse Of Discretion In Denying Fee Award Because Beneficiary Has The Right To Examine Executor’s Use Of Estate Funds

In re Estate of Biber, A-3970-17T3 (N.J. Super. Ct. App. Div. June 11, 2019).

The Appellate Division analyzed issues surrounding the actions of a guardian of an incapacitated adult.

Anna Biber had two children: Peter Biber and Sheldon Biber.  Joshua Biber – Anna’s grandson – was the only son of Sheldon.  Peter and Joshua were the litigants.

Anna owned a home in Morristown, New Jersey where she lived with Sheldon until she moved into a nursing home. In 1994, when Anna’s health began to decline, Peter was appointed her guardian.

In 1998, Anna’s healthcare expenses increased and Peter and Sheldon agreed that Sheldon would take title to Anna’s house for Medicaid planning purposes. Sheldon signed a deed obtaining title to the house on April 3, 1998.  That same day, Peter executed a mortgage on the house seeking repayment of personal funds he had expended for Anna’s healthcare costs and other expenses related to the house.  The mortgage was between Anna (Peter signed as her guardian) and Peter in his personal capacity.  The mortgage secured a loan of $30,000 due upon the sale of the house or Sheldon’s death, whichever occurred first.  In the event Peter made any repairs or incurred any other expenses related to the house, the mortgage provided that the cost be added to the principle due under the mortgage.

Anna died in 2000. Sheldon continued living in the house following Anna’s death, and during that time Peter paid all expenses related to the house, including utilities and property taxes.

Sheldon passed away, and in February 2009, Peter was appointed as administrator of Sheldon’s estate. The only asset of Sheldon’s estate was the house, and Peter was the only creditor of the estate.  As administrator, Peter spent $45,000 to repair the house and sold it for $295,000.

Joshua was the only heir of Sheldon’s estate. Peter advised Joshua that Peter planned to take $165,000 from the proceeds of the sale of the house to repay himself for the expenses related to maintenance of the house.  Peter offered to provide Joshua with an informal accounting of his expenses.

However, in March 2012, Joshua filed a complaint to compel an accounting of Sheldon’s estate. The matter remained opened for four years and in May 2016, Peter filed a summary judgment motion seeking to dismiss Joshua’s complaint.  Joshua filed a cross-motion for partial summary judgment seeking to void the mortgage.

In December 2016, the trial court dismissed Joshua’s complaint, finding that while the mortgage was facially suspect (partially due to R. 4:94-1, which requires court approval of real estate transactions involving an incapacitated person), Joshua lacked standing to contest the mortgage.  However, the trial court did grant Joshua’s request for an updated formal accounting.

Peter filed a formal accounting and Joshua filed objections, incorporating his earlier objections to Peter’s informal accounting and renewing his challenge to the validity of the mortgage.

In March 2018, the trial court dismissed Joshua’s objections to Peter’s formal accounting, finding that Peter provided sufficient evidence to support his expenses. Furthermore, the trial court rejected Joshua’s attempt to re-litigate the validity of the mortgage and the expenses that Peter incurred related to the home, since that had been adjudicated in the December Order.

On appeal, Joshua argued the following: (1) that he had standing to contest the mortgage; (2) that Peter’s formal accounting failed for lack of evidentiary support; and (3) that Peter should not have been allowed to charge legal fees related to the validity of the mortgage to the Sheldon’s estate. Peter appealed the trial court’s decision to decline to address his application for attorney’s fees and sanctions against Joshua.

First, the Appellate Division found that the trial court had properly concluded that Joshua lacked standing to void the mortgage as a matter of law because he had no interest in Anna’s estate pursuant to N.J.S.A. 3B:14-36.  The statute allows only persons with an interest in the estate to void self-dealing encumbrances by a fiduciary.  The only person with an interest in Anna’s estate was Sheldon, and he never sought to void the transfer.  In fact, Sheldon benefitted for 10 years by living in the house without contributing to any of its expenses.  Finally, the transfer of the home was to Sheldon, and not to Peter, his spouse, agent, or his attorney; there was no conflict of interest under the statute.  

Next, the Appellate Division looked at the issue regarding the approval of estate expenses claimed by Peter totaling $165,000. The Appellate Division found that Peter provided sufficient evidence of his expenses, which related to the house.  Joshua offered no evidence to the contrary.  He never sought to depose Peter, nor served any subpoenas seeking information to contradict Peter’s expenses.  Joshua simply contended without any foundation, that the claimed expenses were not incurred by Peter.  As to the payment of Peter’s legal fees out of Sheldon’s estate, the Appellate Division held that the trial court properly approved Peter’s legal fees and costs in defending against Joshua’s challenge to the mortgage.

Finally, the appeals court found that the trial court did not abuse its discretion by declining to address Peter’s request for counsel fees and costs pursuant to N.J.S.A. 2A:15-59.1 and Rule 1:4-8.  Joshua’s objections to Peter’s accounting claims did not lack rational basis in law or fact according to the Appellate Division, nor did the objections evince an intent to harass, delay or injure.  Joshua as an heir and beneficiary of Sheldon’s estate had a right to examine Peter’s use of estate funds to pay expenses.

For those reasons, the Appellate Division affirmed the trial court’s findings.