In re Estate of Porto

IN THE MATTER OF THE ESTATE OF SUSAN J. PORTO, Deceased.

DOCKET NO. A-0636-17T1

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION

Argued November 28, 2018

May 10, 2019

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

Before Judges Fuentes, Accurso and Vernoia.

On appeal from Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. P-000069-16.

John K. Walsh, Jr., argued the cause for appellant/cross-respondent Cathy Timpone (Walsh & Walsh, attorneys; John K. Walsh, Jr., of counsel and on the briefs).

Christopher K. Leyden, II, argued the cause for respondent/cross-appellant Ronald Porto (Leyden Law, LLC, attorneys; Christopher K. Leyden, II, of counsel and on the briefs).

PER CURIAM

In this probate matter, plaintiff Cathy Timpone appeals from an April 28, 2017 Chancery Division order approving the first and final accounting she filed as executrix of the estate of her mother, Susan Porto (decedent), with the exception of $121,891.28 in savings bonds that the court determined should be included in the corpus of the estate. Defendant Ronald Porto, plaintiff's brother and decedent's son, cross-appeals from the order, claiming the court erred by finding that four joint bank and brokerage accounts totaling $93,649.99 held by plaintiff and decedent were not part of the corpus of the estate. Plaintiff and defendant also appeal from the court's August 25, 2017 order allocating attorney's fees and costs and rejecting defendant's request that the court surcharge plaintiff's commissions. We affirm the April 28, 2017 order. We also affirm the August 25, 2017 order, with the exception of the court's denial of defendant's request for attorney's fees and costs in the action he filed, which we vacate and remand for further proceedings.

I.

Decedent passed away on March 16, 2012, two-and-a-half years after the death of her husband, Carl Porto, in August 2009. Decedent was survived by plaintiff, defendant and six grandchildren. Decedent's Last Will and Testament (Will), dated November 5, 1997, which was amended and republished by codicil on November 4, 2010, appointed plaintiff executrix of the estate and devised theresiduary estate into thirds: one-third to each of her children, and the remaining third to be divided evenly between her grandchildren.

In September 2014, defendant filed a verified complaint seeking a formal accounting of the estate and plaintiff's removal as executrix. In an October 29, 2015 order, the court dismissed the complaint with prejudice, directed that plaintiff file an account and preserved defendant's claims to surcharge plaintiff's commissions and for attorney's fees and costs pending the outcome of any challenge to the accounting.

Four months later, plaintiff filed a verified complaint to settle the First and Final Account (first account), which covered the period from the date of decedent's death through December 31, 2015. Defendant filed exceptions to the first account, and made three claims pertinent to this appeal. First, he asserted that on or about February 19, 2010, two years prior to decedent's death and while she suffered from debilitating physical conditions and dementia, decedent transferred $121,891.28 in savings bonds that she inherited from her sister, Florence Wilson, to plaintiff. Defendant asserted plaintiff acted as decedent's attorney-in-fact when the transfer occurred, challenged its propriety and requested that it be set aside.

Second, defendant claimed decedent converted four bank and brokerage accounts totaling $93,649.99 into joint accounts with plaintiff while decedent suffered "from infirm capacity" and was subject to plaintiff's undue influence. Defendant requested the transfers be set aside and the accounts be included in the corpus of decedent's estate.

Last, defendant asserted the commissions and fees sought by plaintiff were "excessive, especially in view of the improper acts taken in the administration of [the] estate." Defendant requested that the court disallow the first account, award damages, remove plaintiff as executrix, surcharge plaintiff's commissions, disallow plaintiff's requests for an award of attorney's fees and costs, and award defendant attorney's fees and costs.

The court conducted a four-day bench trial on the issues raised by defendant's exceptions and made detailed findings concerning decedent's transfer of the bonds and conversion of the bank and brokerage accounts into joint accounts with plaintiff.

The Bonds

The court determined that the savings bonds, which had been the property of Florence Wilson, passed to decedent in November 2008 following Wilson's death and pursuant to Wilson's Will. The court rejected as uncorroborated,contrived and implausible plaintiff's testimony that Wilson gave her the bonds in 2006, and that plaintiff accepted them at that time but chose to leave them in Wilson's home until Wilson passed away. The court noted that Wilson did not bequeath the bonds to plaintiff and the bonds were listed on Wilson's estate tax returns as assets of her estate. Moreover, the court explained that subsequent to the execution of her Will, Wilson conferred with her attorney about amending the Will to include a bequest of the bonds to plaintiff, but never did so.

The court found the bonds were neither gifted to plaintiff nor inherited by plaintiff from Wilson. Instead, the court determined decedent inherited the bonds from Wilson because decedent was the sole beneficiary of Wilson's residuary estate, which included the bonds.

The court next considered whether decedent effectively made an inter vivos gift of the bonds to plaintiff. The court explained decedent "met with . . . counsel and created written evidence of her intent to gift the bonds to [plaintiff]," but that:

[T]his gifting was undertaken at a time when [decedent] was [eighty-eight] years of age, very soon after the devastating loss of her husband Carl, at a time [decedent] was in diminished physical and mental health, and while she was in a deeply trusting, confidential and dependent relationship with the putative donee—her daughter [plaintiff], in whose home she was residing.

The court further found that "memorialization of [decedent's] supposed intent to gift the bonds was done by [plaintiff's] counsel," decedent was "uncounseled" and the purported gifting was "implemented through the assistance and guidance of [plaintiff's] son . . . a financial advisor to both his mother [plaintiff] and his grandmother [decedent]."

The court found plaintiff had a confidential relationship with decedent beyond that which was "characteristic or typical of parents and adult children who are close." The court noted that decedent resided in plaintiff's home from September 2009 until her death on March 16, 2012, and during that time did not drive, was dependent on plaintiff for her shelter, nourishment, transportation to and from medical care and the attendance of her home health care aides. Decedent further relied on plaintiff for assistance with her finances and having her medications organized. Moreover, prior to decedent taking residence in plaintiff's home, decedent granted plaintiff a "plenary, durable authority over her finances and medical affairs." The court concluded that plaintiff and decedent's relationship was "one of complete trust, and intimate dependence and reliance by an aged, ailing parent, upon the ultimate recipient of the purported gift of $121,891.28 in bonds."

The court concluded that although there was no evidence plaintiff engaged in trickery or improper conduct to obtain the transfer of the bonds, she did not present clear and convincing evidence that decedent was not unduly influenced by plaintiff and, therefore, failed to sustain her burden of demonstrating that the process by which the transfer was made "was either fair or voluntary, or well understood." The court noted that plaintiff was counseled concerning the transfer of the bonds, but decedent "was entirely unrepresented and uncounseled in the transaction." Decedent only spoke to plaintiff's attorneys and the transfer was accomplished by plaintiff's son, who served as both plaintiff's and decedent's financial advisor. The court relied on the lack of any independent legal or financial advice to decedent regarding the transfer to support its conclusion that plaintiff failed to establish the transfer was free, open, voluntary and well understood by decedent.

The court further explained the evidence established "[s]everal of the classic hallmarks of undue influence." They included the age and failing health of decedent, her "markedly diminished capacity," her inability to drive, cook for herself or organize her medications, and her multiple hospitalizations and stays in rehabilitation facilities in the years following her husband's death in 2009. The court noted that decedent resided with plaintiff and the attorney who draftedthe codicil to decedent's Will, which removed defendant as the co-executor and made plaintiff the sole executrix of the estate, was not the attorney who drafted the Will. This new attorney was recommended by plaintiff's son. The durable power of attorney granting plaintiff authority over decedent's medical and financial affairs was drafted by plaintiff's son and witnessed by plaintiff's fiancé.

The court explained that these facts weighed against a finding that decedent's alleged gift of the bonds was free of undue influence, in a manner that was open, voluntary and well understood, and concluded plaintiff failed to sustain her burden. The court determined the bonds were not effectively gifted by decedent to plaintiff and therefore were part of decedent's estate upon her death.

The Bank and Brokerage Accounts

The court made separate findings concerning...