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In re Herr

Decided: October 4, 1956.

IN THE MATTER OF DOUGAL HERR, AN ATTORNEY AND COUNSELOR AT LAW


On order to show cause as amended why respondent should not be disciplined.

For disbarment -- Chief Justice Vanderbilt, and Justices Burling, Jacobs and Brennan. For discharge of rule -- Justices Heher, Oliphant and Wachenfeld. The opinion of the court was delivered by William J. Brennan, Jr., J. Wachenfeld, J. (dissenting). Heher and Oliphant, JJ., join in this dissent.

Brennan

[22 NJ Page 278] Respondent has been called upon to answer specific charges of alleged unethical and improper conduct, principally that in various ways, for his personal profit and gain, he abused and took advantage of the confidence reposed in him by his client, Miss Bertha Breckwoldt. By direction of this court hearings on the charges were had before Judge Grimshaw in the Chancery

Division. Judge Grimshaw filed conclusions finding that some charges were sustained by the evidence and others were not. Briefs were submitted to this court and we have had oral argument and reargument here.

Miss Breckwoldt died on April 11, 1954 at the age of 89. Two brothers, who also never married, predeceased her, one in 1918 and the other in 1930. The brothers and sister resided in Hoboken where the brothers conducted a hardware store business and prospered. When the second brother, William, died in 1930 Miss Breckwoldt, then 65 years of age, inherited a fortune in excess of $450,000. Now alone, she employed as a companion the nurse, Patience Libby, who attended William in his last illness, and the two ladies thereafter lived together in Hoboken until 1950, and from 1950 until Miss Breckwoldt's death, in a small five room bungalow in Dumont, Bergen County, purchased in that year.

Respondent practiced in Hoboken for many years until 1938. From 1934 to 1938 he practiced in partnership with William A. Kaufmann in the firm of Herr & Kaufmann.

Respondent was William Breckwoldt's attorney. After William's death he became Miss Breckwoldt's attorney, first handling the administration of William's will under which Miss Breckwoldt was executrix and then becoming her advisor and confidant in the investment and management of her newly inherited fortune. Miss Breckwoldt had no training or experience adequate for the purpose; the record discloses that the extent of her business experience was occasional waiting on customers in the hardware store.

On October 1, 1937, at the instance of respondent, Miss Breckwoldt executed a "voluntary living trust" naming respondent as sole trustee. The agreement was not drawn in the office of Herr & Kaufmann. Respondent employed for the purpose, at Miss Breckwoldt's expense, Emerson A. Tschupp, a member of the New Jersey bar, formerly an employee of respondent and the firm. Mr. Tschupp did not consult with Miss Breckwoldt as to the terms of the agreement but received his instructions in that regard from the respondent. The instrument was typed by a public stenographer

and was executed at Miss Breckwoldt's home at night in the presence of respondent, Mr. Tschupp, and a secretary formerly employed by Herr & Kaufmann.

The agreement transferred Miss Breckwoldt's fortune to respondent in trust and granted him very broad powers of management. He was authorized to make investments "as he in his absolute discretion shall or may deem proper or suitable * * * without restriction to that class of investments which a trustee is or may hereafter be permitted by law to make to the end that the principal hereof shall be increased to the greatest possible extent consistent, in the judgment of the trustee, with reasonable safety to the principal"; he could "retain by way of investment any property or securities by this indenture transferred to him, or the altered form thereof, without liability for depreciation, nor shall the trustee or his successors be liable for any errors in judgment in the making and retaining of investments"; he was authorized to cause securities to be registered "in his name as Trustee hereunder, in his name individually, or to take and keep the same unregistered," to "determine whether or not money or property coming into his possession shall be treated as principal or income, and to charge and apportion expenses or losses to principal or income, according as he may deem just and equitable;" and generally "to do, take, and perform all such acts and things as may be necessary and proper in furtherance of the execution of the foregoing power, and the preservation and management of said trust property, * * * as he may consider requisite and advantageous to the best interest of the estate."

The trust could be altered or revoked by written instrument or by Miss Breckwoldt's last will and testament, the donor reserving in either case the power to direct the disposition of the trust fund. The net income was payable to Miss Breckwoldt after deduction of commissions of 5% per annum and expenses, including an annual counsel fee of $500 to the respondent. She was also entitled to draw such amounts of principal as she might desire. A commission of 5% of the principal was also provided for respondent, payable

upon termination of the trust or upon the resignation or removal of the respondent as Trustee.

Mention should also be made of an earlier draft of the trust agreement. That draft included a provision not found in the final draft, empowering the respondent to name his successor in the event respondent resigned, became disqualified, was incapacitated, or died before termination of the trust; and that draft was accompanied by the draft of a will which named respondent as residuary legatee, subject however to the requirement "that he first apply so much of this gift, in such manner as to him shall seem most suitable and proper, so far as he is then able, to the uses and purposes as directed by me and with which he is already familiar, which for reasons by me deemed good and sufficient are not here expressed being the subject of previous agreement between us and confirmed and ratified by him at the time of the execution hereof; he to retain the balance, if any there be, after the employment and payment of the fund or portion thereof as herein directed, for his own proper use, benefit and enjoyment, in recognition of his long and conscientious service as advisor and counselor to my deceased brothers, William and Herman Breckwoldt and to myself."

Only unexecuted copies of these drafts were in evidence. Respondent's law partner at the time, Kaufmann, testified that he saw the originals fully executed on respondent's desk, but if the originals were in fact executed it is clear that they were not considered or treated as operative. Miss Breckwoldt did execute a will at a later date, April 29, 1940. That will was drafted by respondent. He had quit the practice of law two years earlier to devote his time to the office of Advisory Master in the former Court of Chancery, hearing matrimonial matters. The will was drafted in his chambers in Elizabeth.

The will named respondent as sole executor and trustee and granted him broad powers of administration comparable to those contained in the trust agreement. After providing a legacy of $15,000 for Patience Libby, and legacies aggregating $9,000 to three friends, the will bequeathed the residuary estate to the respondent with power in his "absolute

discretion" to pay out income or principal "as my trustee shall see fit to distribute" "to any one or more" of five named charitable organizations "without any obligation to account for the reasons which may actuate him to make such payment or payments"; "to appoint by his last will and testament or by suitable deed, the disposition of the corpus of my estate among the said charities or some or one of them, such choice to be made in his absolute discretion as aforesaid." He was also empowered to appoint a successor trustee, any successor to have all the powers and duties granted to him. Provision was made for compensation of $1,000 per year from the income or 5% of the gross income, whichever was the lesser, and for a commission of 5% of all assets distributed by him; there was a like provision for compensation to any successor he might name.

It will be noted that no provision was made either in the trust agreement or in the last will and testament for heirs at law or next of kin. Miss Breckwoldt was not on close or friendly terms with her few relatives who lived at distant places. In 1943, 11 years before her death, next of kin retained Arthur Gould, a New York attorney, to investigate into Miss Breckwoldt's affairs. Gould was a law school classmate of Kaufmann's and sought information from Kaufmann. Kaufmann supplied information to Gould, which if true, cast grave doubt upon Miss Breckwoldt's mental capacity when the trust was created and reflected adversely upon respondent's conduct in having Miss Breckwoldt execute the instrument.

Gould made no use of the information until after Miss Breckwoldt's death, when he retained New Jersey counsel to contest the probate of her will on grounds of lack of testamentary capacity and undue influence. The proceeding pended before Judge Grimshaw in the Chancery Division. The contest was not pressed after a settlement was made and the sum of $110,000 paid out of the estate to and on behalf of the heirs at law and next of kin. Before settlement was reached, Kaufmann's deposition was taken at the instance of counsel representing respondent. That deposition

was directed to this court by Judge Grimshaw, and after reviewing it we directed Judge Grimshaw to conduct an inquiry into its subject matter and generally into respondent's conduct in his relations with Miss Breckwoldt and in his management of the trust. Voluminous testimony was taken and many exhibits were received in evidence. Two reports were filed by Judge Grimshaw. These reports resulted in the preferment of the charges now under consideration. By consent, the record made at the inquiry was made the record upon the hearings of the charges, supplemented with other testimony.

I.

Kaufmann entered respondent's employ in 1930 after his admission to the bar, and the firm of Herr & Kaufmann was formed in 1934. Kaufmann's contacts with Miss Breckwoldt, according to his testimony covered the years from 1930 or 1931 to 1938. He said she was a frequent visitor at the office and that he often had occasion to interview her in connection with the execution of various papers. He said that in 1935 he began to suspect "that she had slipped pretty badly mentally." "Her memory became extremely bad," "she would come into the office several times to keep one appointment. She seemed to have lost concept of time. She did not seem to understand what was said, what she was doing." "If I would explain a document to her the only response I would get was one of blank stare, to me a look of lack of understanding." "As time went on, I would say into 1936 and 1937, she wore a continual insipid smile, the same expression such as you would find on a happy child of eight, nine or ten years."

Kaufmann further testified, although respondent categorically denies it, that he made known his concern to respondent as early as 1936 and "several times" thereafter, although not "in so many words," suggested her incompetency and argued "that there should be a guardianship proceeding or a guardian appointed for Miss Breckwoldt." Kaufmann

said that respondent rejected the idea and preferred to have "a trust as a means of solving that problem" and that finally, in April of 1938, when Kaufmann persisted respondent "made it very definite that he did not want me to bother him anymore about it. He brushed aside definitely, brusquely I would say, the idea of a guardian."

Before that 1938 discussion and after the execution of the trust agreement of October 1937, of which respondent had informed him, Kaufmann says he conceived the idea of having Miss Breckwoldt execute some nonsensical documents as evidence of her incapacity in order to persuade respondent to "abandon this trust business and have a guardianship." Respondent at that time had in his employ a lawyer, Bernard J. Kenny, not connected with the firm, who was writing the text of a work on marriage, divorce and separation subsequently published in respondent's name. Kaufmann enlisted the aid of Kenny to write the nonsensical documents and Kenny drafted four such documents which it is conceded bear Miss Breckwoldt's signature. They are dated respectively October 1, 1937 (the date of the trust agreement); December 22, 1937, December 24, 1937 and April 29, 1938. The nature of the documents is sufficiently shown by reproducing the one dated October 1, 1937.

"This is to let the world know that I am fully acquainted with all that goes on. Before proving that, I should not omit to state that I am whacky. In fact, so much so that when I am called screwy, I am being insulted. I'm as weak minded and as simple as any human being can be. I don't know one day from another, what I own or owe, who my relatives are, or any of the ordinary things that a normal person would know. Be that as it may, I persist in proving that I know all. There is an election taking place in New York City. Dewey is running for Mayor and LaGuardia for the D.A.'s job -- I may have that confused, maybe it is LaGuardia for the D.A.'s job and Dewey for Mayor. I bet they'll lose or win. I hope they win and lose. No -- I change my mind -- I hope they lose and win. Are you convinced that I'm all right in the head? Why not -- Anyhow I can read and write and to prove it here is my J.H. with all the trimmings."

Kaufmann testified that on each occasion that one of the nonsensical papers was signed, he alone interviewed Miss

Breckwoldt, first gave her the paper to read, and then himself read it aloud to her before she signed it.

But Kaufmann did not show any of the papers (called by the parties "the crazy quilts") to respondent nor tell him about them. He said he did not do so because when he talked with respondent in April 1938 "I had these with me and I wanted to tell Mr. Herr that it was obvious that this woman couldn't execute validly anything, but he would not speak to me. He was very angry with me and told me to mind my own business and to have no concern about the matter; that it was his own personal business." Respondent first learned of the "crazy quilts" when Kaufmann's deposition was taken.

II.

Much of respondent's brief consists of a vigorous attack upon Kaufmann's credibility and upon his conduct in connection with the preparation and alleged execution of the "crazy quilts," and the methods employed by him to obtain surreptitiously other papers offered in evidence. Kaufmann's motives are impugned and the charge is levelled that he deliberately and maliciously concocted a plot unfairly to assail respondent's character, holding his fire until after Miss Breckwoldt's death.

But we cannot dismiss the charges of respondent's alleged abuse of his client's confidence merely by rejecting Kaufmann's testimony and refusing to draw the inference of Miss Breckwoldt's complete mental incapacity suggested by that testimony and by the "crazy quilts." There existed an unusually close relationship of attorney and client between respondent and Miss Brackwoldt and she trusted him implicitly. Respondent admits as much on his brief in saying that "unquestioned is the fact that Miss Breckwoldt had profound confidence in Mr. Herr, whom she had known for many years." It is this unquestioning confidence and trust, without regard to Miss Breckwoldt's age or capacity, which heightened the obligation of the respondent for punctilious

adherence to the high standards which measure an attorney's ...


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