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Matter of Trust Created by Johnson

April 4, 1997

IN THE MATTER OF THE TRUST CREATED BY J. SEWARD JOHNSON UNDER AN AGREEMENT DATED OCTOBER 30, 1944, FOR THE BENEFIT OF DIANA JOHNSON FIRESTONE.


On appeal from the Superior Court of New Jersey, Chancery Division, Middlesex County.

Approved for Publication April 8, 1997.

Before Judges Landau, Wallace and Kimmelman. The opinion of the court was delivered by Kimmelman, J.A.D.

The opinion of the court was delivered by: Kimmelman

The opinion of the court was delivered by

KIMMELMAN, J.A.D.

The court is called upon to consider whether a party, as a member of the public or as a remote contingent beneficiary of a trust, may have access to private financial and business records of a vested beneficiary which records were provided to the trustees for purposes of facilitating a discretionary distribution of principal and income and which records were placed before the court in connection with an intermediate accounting and were requested to be sealed by the trustee rather than by the vested beneficiary.

I

Eric B. Ryan (Ryan) appeals from an order denying him access to documents which were previously sealed by court order during an earlier phase of the administration of the trust in question. The documents relate to records detailing the personal financial affairs of Diana Johnson Firestone (Diana), and her husband Bertram, and were filed in connection with prior intermediate accounting proceedings involving the 1944 Diana M. Johnson Stokes Trust *fn1 (hereinafter referred to as the "Diana Trust" or the "1944 Diana Trust"). The records were ordered to be sealed as confidential and personal documents.

On October 30, 1944, J. Seward Johnson created six substantially similar trusts, one for each of his six children. Diana was one of the six children. Each trust was principally funded with 15,000 shares of Johnson and Johnson common stock, the current market value of which is substantial. Mary Lea Ryan, sister of Diana and mother of the appellant Eric B. Ryan, was a beneficiary of one of the six similar trusts. She has since deceased. Appellant is a nephew of Diana and a grandson of the grantor, J. Seward Johnson.

The trustees of the Diana Trust were given the right to pay to Diana so much of the net income of the trust as they "in their absolute and uncontrolled discretion . . . deem to be for her best interests." The trustees had the substantially similar right to distribute and pay over to Diana "any or all of the Trust Property[.]" Upon the death of Diana, the trustees were instructed to distribute any remaining Trust Property to her "surviving spouse and issue . . . as she may direct by her Last Will and Testament[;]" failing such testamentary direction by Diana, the remaining Trust Property was to be distributed "to her issue in equal shares per stirpes, or failing such issue, then" in equal shares to the surviving children of the grantor or per stirpes, to the issue of a deceased child of the grantor.

Ryan is an issue of a deceased child of the grantor, J. Seward Johnson, and, thus, is a contingent remainderman of the Diana Trust. The measure of Ryan's contingency must be gauged by the fact that Diana has a living spouse, four children, and three grandchildren born since 1993. Diana certifies that she has executed a Last Will and Testament containing a power of appointment amongst her spouse and issue who survive her. Ryan was born in 1951 and is forty or more years older than any of Diana's present grandchildren. There may be more grandchildren. Ryan bases his interest in the Diana Trust and his claim to view the sealed documents on the possibility that Diana, her husband, her four children, and her three grandchildren will all predecease Ryan and that there will be no further grandchildren born of Diana's children. Should that possibility occur, Ryan would then become a vested remainderman along with any surviving children or other grandchildren of J. Seward Johnson. Diana's actuary certifies that the possibility of this occurring is "zero [.]" Ryan's actuary certifies that the possibility "is small but is not zero." Judge Hamlin described Ryan's contingent remainder interest as "attenuated and remote."

The personal financial data at issue was submitted by Diana to the trustees of the Diana Trust in support of her request for a discretionary distribution of trust funds. The same personal material was also provided to the guardian ad litem for her infant daughter Alison, who, at the time, was under the age of eighteen years. The trustees filed these personal financial records with the court as part of their request for approval of their intermediate accounting. Diana describes the records as including intimate details regarding the financial affairs of her husband and herself, how they have resolved financial matters in the past, and how they propose to resolve financial problems, as well as other matters of a most private, confidential, and sensitive nature. She certifies that the information was provided to the trustees with the explicit understanding that it would not be made public. Judge Bachman, who had jurisdiction over the intermediate accounting proceeding, ordered such records to be sealed in accordance with Diana's request.

Prior to the adoption in 1969 of the virtual representation rule, Rule 4:26-3, Ryan was made a party to the first intermediate accounting proceeding, by virtue of his contingent interest, filed in 1959 by the trustees of the Diana Trust. Neither Ryan nor any other contingent beneficiary of the Diana Trust had been made a party to trust proceedings subsequent to the adoption of Rule 4:26-3. In the 1992 proceedings which resulted in the sealing of the documents in question, in which Ryan was not named as a party, a guardian ad litem was appointed to represent the interests of the minor child of Diana "and to represent the interests herein of any person not in being or not presently ascertainable, which may be affected by these proceedings." Accordingly, there was virtual representation of Ryan's contingent future intervention by the guardian ad litem in the 1992 proceedings.

In 1961, J. Seward Johnson created the "J.S. Johnson 1961 Charitable Trust" (1961 Trust) from which the income was to be paid to charities until January 10, 1997, with the right of the trustees thereafter to distribute so much of the income to four named children *fn2 of J. Seward Johnson and to their issue, one of whom is Ryan, "in such shares as the Trustees in their absolute and uncontrolled discretion may deem to be for his or her best interests." The trustees have a similar power to distribute trust property to the same beneficiaries. Upon the termination of the 1961 Trust, the trustees are ...


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