Statute of Limitations and Laches Bar Recovery

Estate of Rosalie Jean Ryan, Superior Court of New Jersey, Docket No. A-2806-19 (App. Div. Dec. 1, 2021)

This Appellate Division case that covers several common topics that practioners encounter in estate litigation including, but not limited to, discovery deadlines, the doctrine of laches, and statute of limitations.

Plaintiffs — the five Kirschling brothers — Patrick, Thomas, William, John and Michael[1]  — were engaged in litigation against their sister, Veronica Kirschling (“Bonnie”),  as to both their mother’s estate and their aunt’s estate.  As to the prior litigation regarding their mother’s estate the parties settled.

This case focused primarily on with the litigation as to the estate of their aunt, decedent Rosalie Jeanne Ryan.  Plaintiffs filed a Verified Complaint in May of 2016 against Bonnie, alleging that she breached her fiduciary duty as an agent under a Power of Attorney (“POA”) for the decedent.  At the time of the decedent’s death, Medicaid had a $232,619.50 lien against her estate for unreimbursed nursing home and medical care expense accrued during the last four years of her life.  Id. at *2.

In 2003, Bonnie moved the decedent, then 83, into the home Bonnie shared with her mother.  Plaintiffs were aware of this move and of the diminishing capacity of the decedent.  Id. at *4.  The decedent had authorized direct deposit of her pension directly into a bank account (referred to as the “835” bank account) in Bonnie’s name only.

When the settlement was reached regarding the prior litigation, plaintiffs were unaware of the 835 account’s existence.  Id.   However, plaintiffs did obtain information from Bonnie during the prior litigation.  For instance, during discovery regarding their mother’s estate, plaintiff’s obtained records and financial information regarding the decedent, and they deposed Bonnie regarding the decedent’s direct deposit authorizations, annuity statements, the POA she signed in favor of Bonnie in 2003, and correspondence with the United States Internal Revenue Service.  Id. at *3.

By the time plaintiffs filed their lawsuit against Bonnie in 2016 — over 13 years after Bonnie moved in with the decedent — regarding their aunt’s estate, the relevant financial institutions had destroyed any records regarding the decedent’s accounts and Bonnie had disregarded many of her records in accordance with common tax advice and lost records due to a flood.

In discovery, plaintiffs attempted to compel Bonnie to produce a detailed financial certification covering her handling of the decedent’s assets from 2003 to 2014.  When they moved for an Order compelling Bonnie to complete the certification, the judge refused because it would be impossible for anyone to provide such detailed information from memory.  Plaintiffs deposed Bonnie over five days in the litigation and were able to obtain from the bank the history of the 835 account.  Plaintiffs flagged twelve unexplained transactions, both deposits and withdrawals.  They claim the unexplained transactions totaled $254,433.70.  The trial court identified $250,849.70 in unexplained transactions; however, after applying the doctrine of laches and the statute of limitations, the trial court concluded it would only consider unexplained transactions dating back to May 13, 2010, which equaled $15,000.  The trial court specified that the funds were not necessarily wrongfully taken, but rather merely unexplained, as Bonnie was unable to recall the reason for the withdrawals.  Thus, the trial court ordered Bonnie to repay the decedent’s estate $15,000.

The trial court also barred plaintiff’s proposed financial expert during the trial, since discovery had concluded.

The plaintiffs appealed, and the Appellate Division affirmed the trial court decision.  First, the Appellate Division discussed the  trial court’s denial of plaintiffs’ motion to compel Bonnie to certify her financial information.  The trial court noted that no one could be expected to recreate 11 years of detailed financial information without any access to records.  Further, plaintiffs had deposed Bonnie, providing another avenue through which to obtain whatever information was available to her.  The Appellate Division found it was not an abuse of discretion to deny plaintiffs’ application, both because the records were unavailable and alternate means to obtain the information were available through interrogatories or deposition.

Similarly, it was not an abuse of discretion for the judge to have barred their financial expert.  The court looked at the civil discovery deadlines for guidance, finding that the plaintiffs’ request to present an expert was raised well over 600 days after discovery had commenced.

The plaintiffs also argued that it was an error to apply the statute of limitations, because the discovery rule tolled the accrual of the plaintiffs’ cause of action.  The Appellate Division reasoned that although the discovery rule is an equitable doctrine  to avoid harsh consequences, “it is not applicable when a reasonable person exercising ordinary diligence knew or should have known of the injury issue.”  Id. at  *12.  In this case, the trial court had found that the family knew of decedent’s cognitive issues and that she was unable to care for herself as early as 2003.  Thus, the judge rationally applied the six-year statute of limitations beginning in 2004 when Bonnie first comingled funds in the 835 account.  The plaintiffs’ claim was long expired by the time they filed their complaint on May 13, 2016.

Next, the court addressed the plaintiffs’ claim that the trial court’s application of the doctrine of laches was in error.  Laches is an equitable affirmative defense barring recovery due to  an unexplainable and inexcusable delay in bringing suit, and that delay prejudices another party.  Id. at *13.  There was no doubt in this matter that the plaintiffs knew of the decedent’s failing state of mind and inability to care for herself.  Had they initiated legal action in 2003, financial records would have been available and Bonnie’s recollection would have been fresh.  Id. at *14.  Furthermore, the trial court had found that the discovery in the prior litigation involving their mother’s estate had alerted at least one of the plaintiffs to some of the issues regarding Bonnie and the decedent’s accounts.  The court stated:  “There is no discernable reason why plaintiffs delayed litigation about decedent’s estate when they were suspicious of Bonnie’s management of decedent’s funds as early as 2011.  Their failure to sue earlier left Bonnie without the records necessary to defend herself essentially without recourse.”  Id. at *15.

Finally, the court noted that the plaintiffs asserted that the unexplained withdrawals totaled $254,433.70, which was less than the Medicaid lien.  The award of $15,000 payable by Bonnie passed through the estate in satisfaction of the Medicaid lien.  Thus, there was no way that the plaintiffs were going to be able to recover any damages given the amount of the lien.  Id. at *17.

[1] For ease of reference, the parties are referred to by their first names.