Appellate Division Looks to Extrinsic Evidence for Settlor’s Intent and Reverses Trial Court

In the Matter of the Estate of Violet Nelson, Deceased, 2018 WL 1513450, A-4004-15T1 (N.J. Super. Ct. App. Div. March 28, 2018). Approved for publication.

The decision determined that the courts may look beyond the apparently plain language of a trust to determine the settlor’s probable intent.

Violet Nelson left trust property to her “grandchildren.” On its face, therefore, the trust apparently benefited all six children of Violet’s three children – sons Jacob (known as “Jack”) and Robert, and daughter Jacoba.

Jack was the trustee. He sought a declaratory judgment that Jacoba’s two sons were not included among Violet’s “grandchildren”; he argued that Violet did not consider Jacoba’s sons to be her “grandchildren” because Jacoba married outside their Orthodox Jewish faith.  Jack contended that, after Jacoba’s marriage in 1970, Violet mourned Jacoba as if she were dead and cut off contact with her.

Indeed, the attorney who drafted the trust understood that Violet did not count Jacoba’s children among her grandchildren, nor even acknowledge their existence. The drafting attorney used the word “grandchildren” to include only Jack’s and Robert’s children.  The attorney advised that he reviewed the trust with Violet, explained that only Jack’s and Robert’s children would benefit.  He further stated that Violet understood.

Jack acknowledges that after years of silence between Violet and Jacoba, the two attempted reconciliation in 1986. But he contends relations were cut off again after Violet learned that Jacoba’s children had been baptized.  Jack points to an unprobated will Violet signed in 1988.  It identified Jacoba as her daughter, but omitted Jacoba’s sons among the listed grandchildren, and expressly left nothing to Jacoba or her “surviving issue.” A 2001 codicil also referred only to her “four grandchildren.”

One of Jacoba’s sons, Jared Lina, opposed Jack’s declaratory judgment action. He contended the trust was clear on its face.   He also presented extrinsic evidence to show that Violet intended to include all of her grandchildren in the trust, without exception.

After discovery, Jared and Jack filed cross-motions for summary judgment. The trial judge determined that Jared and his brother were trust beneficiaries, in reliance mainly on the plain meaning of “grandchildren.” The judge concluded that In re Estate of Gabrellian, 372 N.J. Super. 432, 443 (App Div. 2004), barred the court from considering extrinsic evidence.

The Appellate Division explained at the outset that a “court’s primary goal in interpreting a trust agreement is to fulfill the settlor’s intent.” Id. at *7.  “The court may even read a trust or will ‘contrary to its primary signification’ if necessary ‘to prevent the intention of the testator from being defeated by a mistaken use of language.’ Id. (citations omitted).

The Appellate Division clarified that the focus is on probable intent, as codified at N.J.S.A. 3B:3-33.1:

The Court “continue[s] to adhere to the view of the doctrine of probable intent expressed in Fidelity Union.” Payne, 186 N.J. at 335.  The doctrine does not permit a court to “conjure up an interpretation or derive a missing testamentary provision out of whole cloth.” Engle v. Siegel, 74 N.J. 287, 291 (1977) (quoting In re Estate of Burke, 48 N.J. 50, 64 (1966)).  However, a court “may, on the basis of the entire will, competent extrinsic evidence and common human impulses strive reasonably to ascertain and carry out what the testator probably intended . . . .” Ibid. (quoting Burke, 48 N.J. at 64).

Id. at *8.

The court further explained that fulfilling a settlor’s or testator’s probable intent takes two forms: interpretation; and reformation.  The former entails discerning the meaning of language already in the instrument.  Reformation “involves remaking or modifying an instrument, to correct mistakes, to fulfill an unexpressed intention, or to address circumstances that were unforeseen.” Id. at *9.

The appeals court further explained the distinction in the burdens of proof:  “The preponderance-of-the-evidence standard of proof applies to interpretation; however, the more rigorous clear-and-convincing standard of proof applies to reformation.” Id. at *10.  “The higher standard of proof for reformation is warranted to prevent reliance on ‘contrived evidence.’” Id. at *11 (citations omitted).

The Appellate Division explained that, as to interpretation, “our courts have long disapproved the so-called ‘plain meaning rule,’ which bars a court from looking beyond the face of a writing to consider extrinsic evidence in ascertaining intent.” Id. Indeed, “these principles of interpretation apply with greater force in interpreting trusts and wills.” Id. at *12.

The appeals court continued:

Against the backdrop of this substantial authority, we cannot endorse the general statement in Gabrellian, 372 N.J. Super. at 443, upon which the trial court relied (and for which we intend no criticism), that “[t]he doctrine of probable intent is not applicable where the documents are clear on their face and there is no failure of any bequest or provision.”  As noted, a court may resort to extrinsic evidence to unveil ambiguity that does not appear on the document’s face.

Nor is our Court’s long-held resistance to the “plain meaning rule” limited to cases where there is a failure of a bequest….

We should not tolerate interpreting a trust to provide benefits the settlor did not intend.

Id. at *14 (citations omitted).

The Appellate Division thus reversed the grant of summary judgment against Jack and remanded the matter:

We are satisfied that, extending to Jack all favorable inferences, extrinsic evidence demonstrated that “grandchildren,” as the term was used in this trust, was ambiguous.  While “grandchildren” generally means “the children of children,” Jack presented evidence that Violet used the term in a different sense, personal to her….

Jack has presented sufficient extrinsic evidence to support a conclusion that “grandchildren” meant not all children of Violet’s children, but the children of her sons, who continued to practice her religion, and not the sons of her daughter who inter-married. Having established ambiguity, Jack is obliged to demonstrate by a preponderance of the evidence that his proposed meaning is the one that fulfils Violet’s intent.  He may do so by marshaling extrinsic evidence.  Of course, Jared may counter that with evidence of his own.

Even if the court as fact-finder is not persuaded that “grandchildren” excluded Jacoba’s children, Jack should be allowed to establish that the scrivener made a mistake in using the word, and in drafting the trust without identifying the four grandchildren Violet intended to benefit. That would require reformation of the trust.  Jack would bear the burden of demonstrating that general intent by clear and convincing evidence.

Id. at *16-17.