On appeal from Superior Court of New Jersey, Chancery Division, Monmouth County.
Michels, O'Brien and Skillman. The opinion of the court was delivered by Skillman, J.A.D.
Plaintiff and defendant were both beneficiaries under the will of their late mother, Sylvia Bronstein. Shortly before her death, Mrs. Bronstein transferred all her remaining assets into joint accounts with defendant. This lawsuit was brought to set aside those transfers on the grounds of undue influence. The trial court dismissed the action at the close of plaintiff's case. We reverse.
At the time of the events in question Mrs. Bronstein was in her late eighties. She had been living by herself in Florida since her husband's death in 1979. She was in good health and in full command of her faculties. However, she relied upon defendant in connection with her financial affairs. She gave her stock certificates, which were her main source of income, to defendant, who kept them in his safe deposit box. Defendant also made recommendations to his mother concerning the sale of her assets and reinvestment of the proceeds, which she routinely followed.
In late May of 1985 Mrs. Bronstein became seriously ill and on the advice of her physician moved to New Jersey to live with defendant. At first her condition was diagnosed as anemia and it was anticipated that she would stay with defendant only temporarily. However, after her arrival in New Jersey she was diagnosed as having lung cancer. Thereafter, her health deteriorated rapidly and she died on November 7, 1985.
Mrs. Bronstein had slightly more than $200,000 in assets which she held jointly with defendant at the time of her death. She placed $15,000 in certificates of deposit in a joint account with defendant in December 1980. Defendant testified that the purpose of this transfer was "[b]ecause partially it was a convenience for me to help my mother manage that money and partially because she wanted me to have it, if something happened to her." This money was subsequently reinvested in a Ginnie Mae account. Mrs. Bronstein also had a joint checking account with defendant and held in joint name an investment in
American Insured Mortgage Trust units. The total of Mrs. Bronstein's assets held in joint name prior to the time she moved into defendant's house was approximately $25,000. However, another approximately $190,000 was transferred into joint names in June and September 1985, while Mrs. Bronstein was living with defendant in a terminally ill condition.*fn1
The principles which govern a case such as this were described as follows in In re Dodge, 50 N.J. 192 (1967):
[T]he common law has always imposed a heavy burden of proof in most instances of claimed inter vivos gifts, even where the donor is not shown to have been mentally incompetent at the time of the transaction. The principle has been expressed frequently that "in all transactions between persons occupying relations, whether legal, natural, or conventional in their origin, in which confidence is naturally inspired, is presumed, or, in fact, reasonably exists, the burden of proof is thrown upon the person in whom the confidence is reposed and who has acquired an advantage, to show affirmatively not only that no deception was practiced therein, no undue influence used, and that all was fair, open and voluntary, but that it was well understood." In re Fulper's Estate, 99 N.J. Eq. 293, 302 (Prerog.Ct. 1926).
In the application of this rule it is not necessary that the donee occupy such a dominant position toward the donor as to create an inference that the donor was unable to assert his will in opposition to that of the donee. As Chief Justice Gummere observed in Slack v. Rees, 66 N.J. Eq. 447, 449 (E. & A. 1904), the doctrine has a much broader sweep. "Its purpose is not so much to afford protection to the donor against the consequences of undue influence exercised over him by the donee, as it is to afford him protection against the consequences of voluntary action on his part induced by the existence of the relationship between them, the effect of which upon his own interests he may only partially understand or appreciate." In our judgment, whenever it appears that the relations between the parties to an inter vivos gift are of such character that in reasonable probability they do not deal with each other on terms of equality because one has given friendship and justifiably reposes confidence in the other, that on the donee's side superior knowledge exists as to the nature of the transaction proposed by him, as well as the detriment to be suffered by the donor if he engages in it
and the donee fails to see to it that the donor thoroughly understands its nature and consequences, equity should regard it as voidable at the instance of the donor or his representatives. In such a situation the donee must show by explicit and convincing evidence that the donor intended to make a present gift and unmistakably intended to relinquish permanently the ownership of the subject of the give. . . . And where death or incompetency of the donor has intervened between the alleged gift and the making of the claim, which generally facilitates the making of false ...