Before Judges Wallace, Newman and Fall.
The opinion of the court was delivered by: Wallace, Jr., J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: November 12, 1998
On appeal from the Superior Court of New Jersey, Chancery Division, Middlesex County.
This appeal concerns competing claims to the estate of decedent Josephine Czoch (Josephine) and related life insurance proceeds and pension benefits. Norman Czoch, executor of Josephine's estate, filed a complaint against his sister and niece alleging that all monies and assets given to them by Josephine were assets of the estate. Defendants, Joan Freeman and her daughter Joanne, disputed plaintiff's assertion and claimed the assets had been gifted to them. In the bifurcated liability trial, the trial Judge held in favor of plaintiff finding insufficient evidence to establish the various assets had been gifted to defendants. In the damages trial, a different trial Judge awarded damages to plaintiff in the amount of $161,186.67, which included insurance proceeds and pension benefits previously paid to Joanne as beneficiary. Defendants appeal, contending the trial Judge in the liability trial erred in failing to find the monies given to defendants were gifts and the trial Judge in the damages trial erred in finding the insurance proceeds and pension benefits should be included in Josephine's estate and in determining the amount of the damage award. Plaintiff cross-appeals, challenging the trial Judge's failure to include prejudgment interest and the failure to include all of Josephine's Social Security payments in the calculation of total revenues. We reverse the inclusion of the insurance proceeds and pension benefits in the estate and remand for additional findings concerning the amount of Social Security benefits to be included in the estate and recalculation of the total revenue. In all other respects, we affirm.
Josephine died testate on February 8, 1993. In her will dated March 31, 1992, she bequeathed her estate equally to her children Anthony Czoch, John Czoch, Norman Czoch, and Joan Freeman. She named Norman as executor. The sons discovered their mother's estate was very small. They believed that Joan held money that belonged to Josephine's estate. On March 20, 1995, Norman, as executor of Josephine's estate filed a complaint against his sister Joan and his niece Joanne. The complaint alleged that money given by Josephine over the years to Joan and Joanne was not intended to be gifts, but rather Joan held the funds in trust for her mother. Joan and Joanne answered, claiming that the monies given to them by Josephine were gifts.
Norman recalled that in 1986, Anthony and he asked Josephine for a $60,000 loan to purchase several cottages in South Seaside Park. Josephine replied that she would consider it. Later she agreed to lend the money, stating that Joan had the money and would have a check ready. Norman then arranged with Joan to obtain the money. As part of this transaction, Norman and his partners executed a note and mortgage to Joan and her husband. Norman stated that when he paid the loan back to Josephine, she inquired why Joan's husband's name was on the note because it was Josephine's money.
Norman stated that he made similar arrangements for a $25,000 loan from his mother, although a note and mortgage was not executed. He received a $25,000 check signed by Joan. Norman stated that Josephine had her own checking account and paid her bills from this account. He began preparing Josephine's income tax returns about eight years before her death. He never included any interest income on the tax returns because there was none.
Anthony lived with his mother up until her death in 1993. He substantiated Norman's account of the $60,000 loan from Josephine in 1986. He recalled that his mother told him to see Joan for the money because "she has my money." Later, Josephine told him to go to attorney John Stockel's office to get the money. Anthony stated that Stockel was handling the papers for the purchase of the property so the check for the loan automatically went to Stockel. Anthony signed the note and mortgage which listed Joan Freeman and Charles Freeman, her husband, as the mortgagors. When he returned home and showed his mother a copy of the documents, she said "this is my money, this is not Joan Freeman or Charles Freeman's money; their name should not be on this loan, it's my money." Anthony explained that on another occasion Joan agreed to loan them $25,000 for remodeling the cottage. He said that nothing was ever said about repaying the money.
John testified that he also had occasion to borrow money from his mother. In 1970 he borrowed $2,200 to buy a new car and in 1977 he borrowed $1,200 for insurance. Later, John borrowed $6,500 from Josephine to buy a piece of property, and in 1990 he borrowed an additional $25,000 for business purposes. When he borrowed the $25,000, Josephine told him to go to Joan for the money. He then called Joan and in a couple of days she gave him the money.
John explained that he also discussed the insurance policy and pension benefits with his mother. He stated that Josephine asked him what she should do with it and he replied leave it in Joan's name, she "will do the right thing." On other occasions, John suggested that Josephine leave all of her money to her grandchildren.
Attorney John Stockel, who had represented the family for a number of years, drafted Josephine's will. He testified that he did not recall asking her about her assets, but that her will left everything equally to her four children. He had no knowledge about the insurance policy and pension benefits until after Josephine's death.
Defendant Joan Freeman is Josephine's only daughter. Joan testified that beginning in 1973, Josephine, who was employed at a retirement facility, gave her payroll checks to Joan and instructed her to cash the check and bring back the money, or deposit the money in Josephine's account, or to keep the money for herself. Joan opened a joint account with Josephine. When her mother found out about the joint account, Josephine instructed her to remove Josephine's name from the account and to place the money in Joan's children's name.
Joanne Freeman is Joan's daughter and Josephine's granddaughter. Joanne testified that between 1980 and 1983, when she was between the ages of fourteen and sixteen, her grandmother would give her a check with instructions to cash it, place it in her checking account, or to keep it. If the check was given to her for her own use, Joanne would spend it on herself. She stated that once her grandmother gave her the checks, her grandmother never inquired about the checks or the money again.
The trial Judge found that defendants failed to prove that Josephine made gifts of her income to them over the years. The Judge reasoned that the amount of money allegedly given as gifts was substantial and the giving of such a large amount of money solely to her daughter Joan was inconsistent with the general intent of Josephine to distribute her estate evenly among her children. Further, he found no evidence that Josephine was unusually close to Joan or dependent upon her or that Josephine was upset with her sons. The Judge found that Josephine continued to control the money held by Joan, as evidenced by Josephine's instructions to her sons to see Joan about the loans they sought, while stating that Joan "is holding my money." The Judge was also impressed by Joan's testimony that she had opened a joint account for the funds and later changed it to eliminate Josephine's name at Josephine's request. The Judge found this demonstrated Joan knew the money remained ...