October 4, 2007
LESLIE KURTZ AND BARRY KURTZ, INDIVIDUALLY AND AS EXECUTORS OF THE ESTATE OF GRACE B. SIEGEL AND AS SUCCESSOR EXECUTORS OF THE ESTATE OF SIDNEY SIEGEL, PLAINTIFFS-APPELLANTS,
EDWIN LEAVITT-GRUBERGER, ESQ., JAMIESON, MOORE, PESKIN & SPICER, DEFENDANTS-RESPONDENTS, AND PEPPER HAMILTON, LLP,*FN1 DEFENDANT.
On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-1135-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 10, 2007
Before Judges Lisa and Lihotz.
In this legal negligence matter, plaintiffs appeal from summary judgment entered July 21, 2006. We affirm.
The facts underlying the plaintiffs' action arose from the drafting of estate planning documents for Sidney and Grace Siegel. The Siegels, who collectively had accumulated approximately one million dollars of assets, employed defendant Edwin Leavitt-Gruberger, Esq., a partner in defendant law firm Jamieson, Moore, Peskin, & Spicer (Jamieson), to prepare their wills. Sidney's will, after making a specific bequest of personalty to Grace, transferred all property to two trusts: Part "A," the marital deduction trust for Grace's sole benefit during her lifetime, if she survived Sidney; and Part "B," the unified credit trust designated for the benefit of Grace and her three sons. Grace and two of her three sons, plaintiffs Barry and Leslie Kurtz, were appointed as trustees. Grace's third son, Elliot Kurtz, had no administrative powers. Also, Sidney's will specifically disinherited his children, and provided that following the death of Sidney and Grace, Leslie was to receive his parents' residence or its financial equivalent.
The trustees were given broad, discretionary powers regarding the disposition of the net income and assets of Part "B." Specifically, section (b)(2) of Article Third allowed the trustees, other than Grace, to pay or apply to or for the benefit of [Grace] and/or her children such sum or sums out of the principal of this trust (including the whole thereof), as the Trustees, in their sole and non-reviewable discretion, shall deem advisable to provide for the maintenance, support, and education of my said wife and/or her children, as well as for any expenses incurred by or for her or them, or any of them, because of any illness, operation, infirmity, emergency, or for such other purpose, irrespective of cause or need, as the Trustees, in their sole and non-reviewable discretion, shall deem to be in the best interest of my said wife and/or her children. In the exercise of such non-reviewable discretion, the Trustees may pay or apply the principal of this trust to or for the benefit of my said wife and/or her children, equally or unequally, or to or for the benefit of any one or more of them to the exclusion of the others.
In making the determination for such discretionary invasion of principal, the Trustees are urged and requested to be generous in exercising their discretion and to consider my intention to adequately provide for my said wife so that she shall, at all times as possible, have ample funds to provide her a standard of living substantially similar to that which she was accustomed immediately prior to my death.
The provisions of Grace's will mirrored Sidney's, and contained the same trust structure, named Sidney and her sons as beneficiaries, and granted broad discretionary powers over the distribution of income and principal to Barry and Leslie as trustees.
Sidney predeceased Grace. Grace, as executrix, distributed $530,000 to Part "B."*fn2 Due to the ongoing estrangement between Elliot and his mother, Grace, Barry, and Leslie consulted with Leavitt-Gruberger for advice regarding a proposal to distribute the corpus of Part "B" to Barry and Leslie. Plaintiffs assert that Sidney desired "an estate plan that would allow Elliot to be treated differently from the other children if he continued to be alienated from the family." With Grace's knowledge and consent, Leavitt-Gruberger assisted Barry and Leslie, as trustees, to accomplish this objective. Grace also employed Leavitt-Gruberger to prepare a new will that limited Elliot's bequest to $25,000, and distributed the remainder of her estate to Barry and Leslie.
Following Grace's death, Elliot reviewed both his mother's and step-father's will. Elliot filed a caveat against the probate of Grace's will, alleging undue influence. Additionally, Elliot filed an exception to the approval of the trustees' final accounting, following the administration of Sidney's estate. Elliot challenged the distribution of the assets of Sidney's estate to Barry and Leslie.*fn3 A Jamieson partner, other than Leavitt-Gruberger, defended the estates of Grace and Sidney against Elliot's claims and appeared on behalf of the co-trustees. Both sides filed motions for summary judgment. Contrary to the arguments presented, the reviewing judge*fn4 determined that the issues presented posed a factual dispute as to Sidney's intention in drafting the provisions of Part "B"; additional discovery and a plenary hearing were ordered. To avoid the additional expense of the contested proceeding, plaintiffs settled Elliot's claims against both estates for $130,000.
Thereafter, plaintiffs filed the instant legal malpractice action, contending that Leavitt-Gruberger negligently drafted the will. Plaintiffs asserted that when taken as a whole, the provisions of Part "B" failed to unambiguously satisfy Sidney's intention because it contained confusing and competing instructions to the trustees. Plaintiffs argue that the trust presented "inconsistencies that created the impression that Grace was a major beneficiary." This ambiguity prevented the court from dismissing Elliot's action, and necessitated a plenary hearing to decide whether "it was inappropriate to deplete the trust of all assets while Grace was still alive." Further, because "trustees owe a fiduciary duty to all beneficiaries," Leavitt-Gruberger placed plaintiffs in an unsupportable position as trustees, by advising them to distribute trust assets to themselves, as beneficiaries, to the exclusion of Elliot. Such draftsmanship was "irresponsible and caused plaintiffs to incur enormous legal fees defending Elliot's law suit."
Defendants' motion for summary judgment was returnable on July 21, 2006. Plaintiffs argued Leavitt-Gruberger did not clearly draft the testamentary provisions to unambiguously present Sidney's desire to allow Elliot to share in his estate only if he ended his estrangement with his mother. Plaintiffs urged that the proper estate planning vehicle to accomplish Sidney's purpose was a limited power of appointment. At the very least, plaintiffs argued that the documents should have specifically thwarted any self-dealing claims if the trustees exercised the granted powers and depleted the assets. Additionally, plaintiffs stated that the power to deplete principal contained in section (b)(2) of Article Third was limited by an ascertainable standard*fn5 so that principal distributions were to satisfy only needs similar to maintenance, support, education, and health. Leavitt-Gruberger's advice to the contrary was incorrect.
After concluding plaintiffs failed to prove by clear and convincing evidence that the trust provisions as written did not properly reflect Sidney's intent, the motion judge determined the benefits designated for Grace were "alternative provisions" to those allowing Barry and Leslie to distribute the principal in their non-reviewable discretion. The motion judge concluded that the trust clause was "broad" and that "it permits the trust to be exhausted . . . including the whole thereof. . . . [I]t's my conclusion that there is nothing ambiguous about this, it's not a question of ambiguity."
On appeal, plaintiffs challenge the trial court's conclusions, asserting that: (1) the trust was improperly drafted by Leavitt-Gruberger because it contained irresolvable, ambiguous, and conflicting provisions, which on the one hand, instructed the trustees to use the income and principal of Part "B" for the benefit of Grace during her lifetime, yet, on the other hand, granted the trustees the power to deplete the trust for their sole benefit; (2) the motion judge should have allowed the use of extrinsic evidence to establish the testator's probable intent to reconcile the ambiguities to show the testator desired the trustees to terminate the trust during Grace's lifetime, if they chose to do so; and (3) the applicable burden of proof to establish to resolve ambiguity in donative instruments is the preponderance of the evidence standard.
Since the grant of summary judgment calls for a review of the "trial court's interpretation of the law and the legal consequences that flow from established facts," the trial court's decision is "not entitled to any special deference," and is subject to de novo review. Manalapan Realty, L.P. v. Twp. Comm., 140 N.J. 366, 378 (1995). In making that assessment, we apply the same standard as the trial court, reviewing the record to determine if there are genuine issues of material fact. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). We must determine "whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational fact-finder to resolve the alleged disputed issue in favor of the non-moving party." Ibid. However, if there is no such genuine issue of fact, we then must determine if the trial court properly applied the law. Prudential Prop. Ins. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). We will affirm only if the record indicates the moving party is entitled to judgment as a matter of law. R. 4:46-2(c); Brill, supra, 142 N.J. at 540. With these standards in mind, we address plaintiffs' contentions.
Distilling plaintiffs' arguments, we must first decide whether the competent evidence in the record sufficiently permitted the motion judge's conclusion that the trust as drafted presented no irresolvable ambiguity. The remaining issues raised on appeal are reached only in the event that an ambiguity is found in the instrument. Whether a term is clear or ambiguous is a question of law. Schor v. FMS Financial Corp., 357 N.J. Super. 185, 191 (App. Div. 2002); Nester v. O'Donnell, 301 N.J. Super. 198, 210 (App. Div. 1997). Although we agree that some trust provisions were inartfully drafted (one example is section (b)(1) of Article Third, which includes both a mandatory directive to the trustees to annually distribute the trust's net income to the beneficiaries, yet also suggests income might be accumulated and added to principal), and that other provisions could have been more definitive, we are unable to accept the arguments advanced by plaintiffs that the will provisions were ambiguous for a number of reasons.
First, we do not agree that the need for a plenary hearing regarding Elliot's claims unassailably proved the existence of ambiguity and poor draftsmanship. The rationale supporting the denial of the request to dismiss Elliot's actions was expressed and is not the subject of our review. Suffice it to say that no conclusion on the merits of either party's position was made.
Second, we find that a reading of the trust provisions reflect the testator's intent to allow the trustees maximum flexibility to consume principal without limitation. The trustees were afforded "sole and non-reviewable discretion" to act as they "shall deem to be in the best interest of [Sidney's] wife and/or her children," to make principal distributions "equally or unequally, or to any one or more of them to the exclusion of the others" for "maintenance, support, . . . education," health "or such other purpose, irrespective of cause or need." To read the phrase "or other purpose" as being limited by its preceding language would render the words "irrespective of cause or need" that immediately follow meaningless. We reject such an unnatural reading and conclude that the power to consume, as intended by the testator, was not a narrow or limited one.
Finally, in our review of the testamentary trust provisions of Sidney's will, we "ascertain and give effect to the 'probable intention of the testator,'" Fidelity Union Trust Co. v. Robert, 36 N.J. 561, 564 (1962), keeping in mind that "the controlling consideration is the effect of the words as actually written." In re Armour's Estate, 11 N.J. 257, 271 (1953). In doing so, we find no conflict posed by the directions to the trustees to permit distributions to Grace, which included the sharing in the trust's net income and the power to annually request the greater of $5,000 or five-per-cent of the principal. These provisions do not prevent the trustees from exercising the additional power to make principal distributions authorized by section (b)(2). The mere fact that under the testamentary trust terms the trustees had discretion to pay income to Grace or to make principal distributions to her, if requested, is no obstacle to the termination of the trust by its depletion. The trustees' determination to exercise the granted power to do the latter would not do violence to Sidney's intent. See Mesce v. Gradone, 1 N.J. 159 (1948) (beneficiaries of trust may not require acceleration and termination if such action would be contrary to the intention of settlor). Grace had independent assets and substantial income. She sought no distributions from Part "B." The lack of conflict between Grace's interests and the trustees' powers is supported by Grace's prior knowledge of and consent to the trustees' exercise of discretion to distribute the trust principal to themselves.
We conclude that any imperfections in defendants' drafting of Sidney's will did not thwart Sidney's expressed desire to allow Barry and Leslie to distribute the whole of the unified credit trust to themselves. Accordingly, no ambiguity is presented and summary judgment was properly granted.