11.28.2017

NJ Appellate Division Finds Removal Of Executor Unwarranted

In the Matter of the Estate of Dolores M. Pierce, Deceased, 2017 N.J. Super. Unpub. LEXIS 2381, No. A-4691-15T4 (N.J. Super. Ct. App. Div. Sept. 22, 2017).

This case arose from the Monmouth County Probate Part.

Dolores Pierce (“Decedent”) died testate in December 2014. Her son Michael, was named as executor in his mother’s Will.  Michael’s sister, Marilyn, who was a South Carolina resident, initially objected to her brother’s appointment, without success.  Michael received letters testamentary in May 2015.

Decedent’s assets included three parcels of real estate: a 122-acre farm on which Michael had worked for over 40 years (“the Farm”); a single-family dwelling that had an underground storage tank (“the Pine Tree property”); and a parcel where Michael lived and maintained his business (“the Ramshorn property”).  The Will instructed that Decedent’s real estate was to “be sold as soon as practicable.”

In November 2015, Marilyn filed her first verified complaint seeking Michael’s removal. She cited a variety of reasons to support her claim that her brother had not fulfilled his statutory obligations:  failure to pay any New Jersey Estate Tax, exposing the estate to interest and penalties; failure to sell Decedent’s real property; failure to properly inventory, appraise, or distribute Decedent’s personal property; and refusal to allow Marilyn access to Decedent’s real and personal property.

Michael submitted a 13-page certification with 11 exhibits in opposition to the complaint. He claimed that estate taxes had not been paid because the estate had no cash assets.  He had obtained appraisals, but had not yet provided an inventory.  The certification also highlighted Michael’s efforts in managing the properties, knowing that they were assets which needed to be sold.  During the appraisal process, an underground storage tank was discovered on the Pine Hill property, but Michael was still able to locate a buyer willing to purchase that property for $250,000.  In addition, Michael stated that he wished to buy the Ramshorn property, which was in foreclosure by the time Michael was appointed executor.  Further, Michael also loaned the estate over $20,000 to pay real estate taxes, and nearly $50,000 in all, during the months that he had served as executor.  Lastly, Michael supplied a letter from a realtor declining to list the Farm because it included significant wetlands.

In January 2016, Michael represented to the court that the contract to sell the Pine Tree property for $250,000 had been signed, and that he would obtain an appraisal for the Ramshorn property as he wished to purchase it.

In her decision dismissing Marilyn’s first complaint, the judge stated that Michael knew the real properties had to be sold, but had “been sitting around for a year.” The judge also stated that she didn’t “buy that argument” that Michael needed more time to get appraisals.  The court ordered Michael to promptly sell the real property, even though she denied Marilyn’s request to remove Michael.  The judge observed that under the statute for removal, it was “difficult” to demonstrate clear and definite proof of fraud, gross carelessness, or indifference.  She found that Michael had acted in good faith, but was “hanging on by a thread.”

The judge directed Michael to provide Marilyn with the sales agreement for the Pine Tree property. The order also provided that if the sale did not close by March 1, 2016, Michael would have to sign a multiple listing agreement within 10 days and notify Marilyn of all sales activity and offers to purchase the property every 30 days after entering into the multiple listing agreement.  In addition, Michael was required to sign a multiple listing agreement for the Farm within 10 days at a price not less than its appraised value.  Michael was also ordered to obtain an appraisal of the Farm property within 20 days, and to allow his sister to access the interior and exterior of all of Decedent’s real estate, except Michael’s home, within 10 days.  The judge dismissed the count in the complaint seeking to void Decedent’s transfer of a fourth parcel of real estate to Michael and his wife during Decedent’s lifetime.

By letter dated February 26, 2016, Michael’s attorney on behalf of the buyer asked Marilyn’s attorney for a one-week extension of the March 1, 2016, closing date for the Pine Tree property. He attached a copy of the buyer’s email request to this letter.  The underground storage tank needed to be removed prior to closing, and the extension would ensure the removal would be completed before title was transferred.  Marilyn’s attorney refused to consent, and the closing took place on March 2, 2016.

On that same day, Marilyn filed a motion for reconsideration of the order dismissing her first complaint to remove Michael. She again sought Michael’s removal and submitted a certification from her attorney regarding the delay of the Pine Tree property closing date.  The attorney certified that “[a]s of this date there has been no communication from [Michael] as to the status of the sale” of the Pine Tree property.

In opposition, Michael filed a letter brief explaining that the Pine Tree closing had occurred on March 2, and otherwise outlining his efforts to comply with the order. Marilyn had never contacted her brother to arrange a time to inspect the real estate.  Michael also included an itemization of Decedent’s personal property, copies of which had been previously sent to Marilyn’s attorney.

Michael also provided a copy of an agreement listing the Farm for sale at $2.8 million. Michael produced documentation explaining that the asking price had been suggested by the realtor, despite an earlier appraisal assessing the property at only $830,000.

At the March hearing on Marilyn’s application for reconsideration, Marilyn contended that the January 2016 hearing was necessitated by Michael’s failure to act to settle the estate. She further argued that the $2.8 million listing was essentially “a decision not to sell the property” since it was significantly higher than the appraised value.

At the outset of the hearing, the judge said that she was “very, very disconcerted” by the repeated filing of Marilyn’s application, but she was not sure if Michael had violated his statutory obligations. The court also noted “tremendous animosity” between the parties, but animosity alone is “not really a reason to remove an executor.”

Nevertheless, the judge ultimately found that Michael had “neglected and refused to perform or obey [the order of] judgment within the times fixed by the Court.” The judge also considered Michael’s listing of the Farm for three times the original appraised value to establish that Michael did not “really want to sell it.”

While acknowledging that the closing was not delayed “much,” the judge opined that Michael should have been aware of the underground tank problem. The judge also considered Michael’s relocation of the personal property to a new facility to demonstrate a lack of “cooperating.”

In short, the judge granted Marilyn’s second request to remove her brother as executor, and appointed an attorney as substitute Administrator CTA. The judge also ordered Michael to submit a formal accounting in 60 days.

Michael subsequently filed his own motion for reconsideration, along with a certification detailing his efforts to list the Farm and the reason he had disagreed with the $830,000 appraisal price. He noted that he had 36 years of consulting experience as a licensed professional engineer, licensed architect, and licensed professional planner.  Michael further certified that he had been making payments from his personal funds toward the loan against the property, preventing a foreclosure.  Further, he had the personal property moved into a storage facility because his wife did not want Marilyn to come to her place of business in order to examine it.

During the reconsideration hearing, Michael argued that it was improper to remove an executor without a plenary hearing. The court denied the motion for reconsideration.  The judge found that she had entered an order that the Pine Tree property “was to be sold by a certain date, and it really wasn’t sold by that date.”  She found fault with Michael’s decision to move the personal property to Clifton, knowing that his sister lived in South Carolina.  The court also noted that Michael listed the Farm property for three times the appraised value.  The judge affirmed her earlier decision and refused to stay the order pending appeal.

On appeal, the Appellate Division reversed, finding that the statutory standard for removal had not been met, and reinstated Michael as executor.

Citing Manalapan Realty, L.P. v. Township Comm’n of Manalapan, 140 N.J. 366, 378 (1995), the Appellate Division noted that appellate courts owe no deference to a trial court’s interpretation of the law.  As to mixed questions of law and fact, the Appellate Division gives deference to factual findings of the trial court, but reviews de novo the trial court’s application of legal rules to such factual findings. Patel v. Karnavati Am., LLC, 437 N.J. Super. 415, 423 (App. Div. 2014).

Ordinarily, an appellate court will not disturb factual findings “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 interest of justice.” Rova Farms Resort, Inc. v Investors Ins. Co., 65 N.J. 474, 484 (1974) (citing Fagliarone v. Township of N. Bergen, 78 N.J. Super. 154, 155 (App. Div. 1961)).  Where the judge’s fact-finding results from a review of allegations untested by cross-examination, an appellate court’s review will not be deferential. NJ Div. of Youth & Family Serv’s v. G.M., 198 N.J. 382, 396 (2009).

The Appellate Division also recognized a long-standing practice by appellate courts in reviewing chancery decrees “to make an independent investigation of the facts.” In re Estate of Mosery, 349 N.J. Super. 515, 522 (App. Div. 2002), certif. denied, 174, N.J. 191 (2002).

The Appellate Division addressed the statute governing removal for cause (N.J.S.A. § 3B:14-21) and its application in this case. In her first application to remove Michael as executor, nearly all of the evidence related to the Pine Tree property, which was sold by the time of Michael’s removal.  The only new information provided by Marilyn as a possible basis for removal in her second application was the sentence from her attorney’s certification that she had “no communication” from Michael as to the status of the sale of the Pine Tree property.  However, a week earlier, Michael’s attorney had asked Marilyn’s attorney for a one-week extension for the closing at the buyer’s request.  Counsel refused that request the same day that she filed her second application for removal.

In addition, the judge’s order had not required Michael to sell the Pine Tree property by March 1. Even if it had imposed that obligation, the delay was initiated by the buyer and was inconsequential.

Further, Marilyn did not dispute the fact that she never attempted to arrange a time to view any property, real or personal, regardless of location. Therefore, Michael’s removal on that basis was unwarranted as well.

Finally, the Appellate Division found that it was not at all clear that Michael’s decision to list the Farm at three times the appraised value – at the realtor’s suggestion – was a violation of the judge’s order. He listed the property as the order required, even if at a different price than the appraisal.

The Appellate Division held that the judge “misapprehended” Michael’s conduct, which did not appear to violate the judge’s order. In view of the significant disputes of fact, the trial judge should have resolved those factual disputes before removing the executor.

The Appellate Division cautioned that courts should be “reluctant to remove an executor as trustee without clear and definite proof of fraud, gross carelessness or indifference.” In re Estate of Hazeltine, 119 N.J. Eq. 308, 314 (Prerog. Ct.), aff’d, 121 N.J. Eq. 49 (E. & A. 1936).  Removal is appropriate where an executor shows bad faith or jeopardizes the value of the estate’s assets. Bramen v. Central Hanover Bank & Trust Co., 138 N.J. Eq. 165, 197 (Ch. 1946).  Here, Michael did not engage in any misconduct that reached the extremes prohibited in the removal statute.  Further, Michael did not fail to comply with the judge’s orders or otherwise fail to comply with the statutory duties set forth in N.J.S.A. § 3B:14-21.

In the end, Michael’s removal was unwarranted, and the lower court’s decision was reversed.