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Matter of Estate of Polevski

Decided: October 13, 1982.

IN THE MATTER OF THE ESTATE OF DORA POLEVSKI, DECEASED


On appeal from Superior Court, Law Division, Essex County.

Fritz, Joelson and Petrella. The opinion of the court was delivered by Petrella, J.A.D.

Petrella

[186 NJSuper Page 247] Indemnity Insurance Company of North America (hereafter Indemnity) appeals from a judgment enforcing a supplementary

$50,000 surety bond which was issued in connection with a trust under the 1961 will of Dora Polevski. Indemnity claims that the alleged concealment of material facts by the beneficiary under the trust was a fraud entitling it to discharge on the second bond that was issued, and alternatively that it should not be liable on the bond because it was not enforceable pursuant to R. 1:13-3. The trial judge in two oral opinions held Indemnity liable on the $50,000 bond. We affirm.

The original trustee named in the will died in 1976 and the trustee's son, Richard Feldman, was substituted as trustee. One of the beneficiaries under the trust, Pnina Bar-Yehuda Strauch (Strauch), sister of the settlor-testatrix, instituted an action against Feldman on March 7, 1980 to compel an accounting. See R. 4:86-3 and 4:67. Feldman was ordered to account. Indemnity was not named as a defendant or party in interest in that action. Unlike an action to settle an account instituted by a fiduciary (R. 4:87-1), the rule does not specifically require naming in the complaint all the persons interested in the account, which would include the bonding company. See R. 4:86-3 and compare with R. 4:86-3 and R. 4:87-1(a). See, also, 7 N.J. Practice (Clapp, Wills and Administration) (3d ed. 1962), § 1449 at 156, § 1459 at 173-174. However, the better practice and perhaps the more prudent practice would be that all parties in interest, including any surety, receive notice of the action.*fn1

In the action to compel an accounting various orders were issued requiring Feldman to furnish a list of the trust assets. He did not comply with any of these orders and ultimately on July 23, 1980 he was ordered to either obtain a certified public accountant's statement of his net worth or obtain bonding for at least $150,000. The trust assets had apparently increased.

Feldman was already covered by a $100,000 bond issued by Indemnity.*fn2 That bond is not in issue.

I

On August 6, 1980 Indemnity issued a second bond for $50,000 based on a telephone call from Feldman's attorney, and an application form dated August 4 which was signed by Feldman. Feldman indicated therein that he had total assets of $1,100,000. A question on the form inquiring of any pending litigation had been left blank. In addition, the application indicated that the trust funds were invested in $44,000 in loan participations and $135,000 in a lease. Notwithstanding the incomplete application and what might be questionable investment items (the loan participations and lease) appearing on the face of the affidavit, Indemnity made no further inquiry and Feldman's attorney did not advise of the impending law suit.

The bond was signed by Feldman as principal and Indemnity as surety. Although the $50,000 bond contained Indemnity's standard form provisions and stated that Indemnity submitted itself to the jurisdiction of the court, and that its liability could "be enforced on motion without the necessity of an independent action," the bond did not contain an express statement waiving the right to a jury trial (if indeed any such right existed), as required by R. 1:13-3(b). The surrogate's office refused to accept the new bond in the belief that it did not conform to the rule. The bond was then returned on August 13, 1980 by Feldman's attorney to Indemnity with the request that it be amended to comply with the court rules.*fn3

In the meantime Strauch made additional applications to the court to have Feldman removed because ...


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