On certification to the Superior Court, Appellate Division.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
In this appeal, the Court considers the circumstances in which it is appropriate to award punitive damages against a party in a Probate Part proceeding who has engaged in undue influence in the creation of a will or testamentary trust, or in securing an inter vivos transfer of property in lieu thereof.
Madeleine Stockdale, the testatrix, owned a large home on Monroe Avenue in Spring Lake. Following her husband's death and despite her considerable wealth, she lived frugally and her house eventually fell into disrepair. She talked of selling her home to someone who would restore the home to its former grandeur and agree not to subdivide it. Stockdale was distant from others and distrustful, believing that they were only interested in her for her money. She had no children and no family except for two nephews, George and Peter Lawrence, with whom she had little contact. Stockdale was reclusive, associating with only a few people whom she considered to be her "acquaintances." The Pattersons and the DiFeos were among Stockdale's acquaintances and, in general, they looked after her. Stockdale was impressed with the good work of the volunteers of the Spring Lake First Aid Squad (SLFAS). She intended to leave her entire estate to charity out of respect for the selfless acts of kindness and because it would keep her assets away from the control of the government and limit estate taxes.
In September 1997, Stockdale listed her home for sale for the price of $1.4 million. A neighbor, Ronald Sollitto, was interested in the Stockdale home. He introduced himself directly to Stockdale and shortly thereafter, he and his wife began to help Stockdale around her home and to bring her food, continuing to express how much they liked her home.
In March 1998, Stockdale executed the first of the two wills ("1998 Will") that were eventually offered for probate and that are at the center of this appeal. At that time, Stockdale was in her late 80's or early 90's, was living alone in the Monroe Avenue house, and was in declining health. The 1998 Will was prepared by William Soons, the attorney who handled Stockdale's legal affairs. The 1998 Will named Soons and Peter Kuzmick co-executors of her estate. Stockdale directed that her home be sold on her death and that the proceeds be included in her residuary estate. The 1998 Will also included a substantial number of specific bequests and named SLFAS as the residuary beneficiary.
On the same day that the 1998 Will was executed, Stockdale entered into a new listing agreement for the sale of her home at a price of $1.65 million. In March 1999, Sollitto made an offer on the home that Stockdale rejected; nonetheless, the two continued to discuss Sollitto's purchase of the home. Sollitto claims he promised that he would not subdivide the property; would restore the home to its original grandeur; and would allow Stockdale to remain in the home until she was ready to leave. Although none of these promises was reduced to writing, Stockdale was induced to sign a proposed contract to sell the property to Sollitto for $1.3 million. That contract was prepared by Thomas Foley, an attorney retained by Sollitto. The contract made no mention of the various promises Sollitto had made to Stockdale and included a variety of terms that were unfavorable to her. Stockdale retained Soons to review the contract and to represent her in the sale of her home. Soons contacted Foley in respect of his concerns about the unfavorable terms in the contact. Rather than continuing the negotiations with Soons, Foley prepared an addendum to the contract and gave it to Sollitto, who brought it directly to Stockdale for her signature. Soons was led to believe that the deal was off, even though the parties continued to move forward with the agreement.
In December 1999, Stockdale fell and broke her hip, causing a further deterioration in her already declining health. She was eventually transferred to a rehabilitation facility where Sollitto visited and continued to discuss the pending house sale. Sollitto sent Michael A. Casale, a very close personal friend, to advise Stockdale on the sale. On December 21, 1999, Casale visited Stockdale at the rehab facility but did not reveal his very close personal relationship with Sollitto. According to Casale, Stockdale told him that she wanted to sell her home to Sollitto because he would not demolish it. Casale stated that she asked about a power of attorney and declared her desire to change her 1998 Will. Casale met with Stockdale again on December 27, 1999 where, according to Casale, Stockdale agreed to accept $50,000 from Sollitto at closing, with the remainder of the purchase price to be paid through a note and purchase money mortgage at 5% interest, which was two to three points below the current market rate. Casale testified that Stockdale had crossed out the clause in the 1998 Will leaving her residual estate to the SLFAS because she no longer wanted to leave them her money. On or about December 29, 1999, Casale met with Stockdale for a third time at which time Casale claims Stockdale decided to make Sollitto her residual beneficiary and replace her existing co-executors with Casale as the sole executor of the estate. In addition, she agreed to put a provision in her new will to forgive any mortgage debt that might be owed. Casale and Sollitto spoke regularly after Casale's meetings with Stockdale.
Because of Stockdale's imminent throat surgery, Casale executed the new will and closing documents on January 3, 2000 without the assistance or presence of Sollitto's attorney. The employees of the rehab facility who witnessed the signing of the new will ("2000 Will") were unable to testify whether Stockdale had the requisite testamentary capacity, although the facility's director did testify that Stockdale likely did not have the requisite capacity based on her ingestion of pain medication and her increased signs of confusion. On that day, Stockdale also signed a deed ("2000 Deed") transferring to Sollitto title to her house.
Once discharged from the rehab facility, Sollitto eventually moved Stockdale to an apartment that he rented in her name, secluded from her acquaintances. He and his family had moved into the Stockdale's home. In early February, Sollitto wrote a check to pay for utility charges on the Monroe Avenue home using his Power of Attorney to access Stockdale's funds. The record also shows that Sollitto removed Stockdale's antique furniture and pictures from her home. At the time of her death in April 2000, the Monroe Avenue home was worth significantly more than the purchase price. Moreover, Stockdale's estate taxes under the 2000 Will were considerably more than what would have been owed under the 1998 Will.
On March 1, 2000, Casale offered the 2000 Will for probate; on April 28, 2000, Soons, unaware of the existence of the 2000 Will, offered the 1998 Will for probate. Shortly thereafter, SLFAS, the residuary beneficiary under the 1998 Will, lodged a caveat against the 2000 Will. Casale filed a complaint in the Probate Part, seeking to dismiss the caveat and admit the 2000 Will to probate. SLFAS answered the complaint and filed a third-party complaint against Sollitto and Casale, claiming that the 2000 Will was procured by undue influence and fraud, and that the inter vivos transfer of the title to Stockdale's home by deed was similarly flawed. SLFAS sought both compensatory and punitive damages, together with attorneys' fees. Stockdale's previously disinherited nephews were allowed to intervene in the matter to protect any potential interests in the estate.
Following extensive discovery and a lengthy trial, the probate judge found that Sollitto and Casale were not credible and that Stockdale's 2000 Will was unenforceable as a product of undue influence. The probate judge also found that the 2000 Deed and the 1999 real estate contract ("1999 Contract of Sale") transferring Stockdale's property to Sollitto were invalid as a product of undue influence and "sharp dealing." The judge set aside the 2000 Deed, voided the 1999 Contract for Sale, sustained the caveat, rejected the 2000 Will, and directed that the 1998 Will be admitted to probate. Relying on this Court's decision in In re Niles, the judge awarded SLFAS attorneys' fees as a form of punitive damages, finding that undue influence is a form of intentional tort that provides the basis for awarding punitive damages. Sollitto and Casale were required to pay attorneys' fees to SLFAS in the amount of $1,174,264.87.
The Appellate Division affirmed all but the award of attorneys' fees, remanding for consideration of punitive damages, noting that the trial court was mistaken in its view that an award of attorneys' fees under Niles is or may be a substitute for punitive damages.
The Supreme Court granted certification.
HELD: Actions arising from disputed wills and related documents designed to dispose of estate assets and which rest on allegations of undue influence are most often resolved through the equitable remedies available in the Probate Part. Although a finding that a party in an estate has engaged in undue influence may also, consistent with common-law notions of making an injured party whole and deterring particularly egregious behavior, support an award of punitive damages, the circumstances in which a punitive damage award is permitted is limited. Because the Appellate Division based its analysis on the assumption that punitive damage remedy is broadly available, its judgment is affirmed with modifications.
1. In a probate matter, the burden of proving undue influence ordinarily is on the will contestant. However, when there is a confidential relationship coupled with suspicious circumstances, undue influence is presumed and the burden of proof shifts to the will proponent to overcome the presumption. If there is a conflict of interest on the part of an attorney coupled with confidential relationships between testator and the beneficiary as well as the attorney, the presumption must be rebutted by clear and convincing evidence rather than a preponderance of the evidence. An attorney-client relationship is inherently a confidential relationship and because suspicious circumstances need only be slight, the existence of that relationship often results in both the shifting of the burden and the imposition of a clear and convincing standard of proof. (Pp. 30-34)
2. In probate matters, a tort-based claim can only arise if someone has acted so as to deplete or reduce the estate of its assets. In probate proceeding, there is generally neither compensatory damage-type award nor, by extension, the underpinnings needed for imposition of a punitive award. (Pp. 33-37)
3. In Niles, the Court emphasized New Jersey's strong public policy against shifting counsel fees from one party to another. A narrow exception exists for circumstances in which the executor or trustee commits the tort of undue influence that would enable the estate to be made whole by an assessment of all reasonable counsel fees against the fiduciary that were incurred by the estate. There is also the possibility of a punitive damage award arising from the "pernicious tort of undue influence." However, the availability of that remedy is limited to those situations in which ordinary remedies for breach of fiduciary duty will not lie or will be inadequate. The remedy is limited to situations were one who is essentially a stranger to the testator gains access to her through undue influence and then carries out a scheme to place himself into a position to seize control of that testator's assets through inter vivos transfer or by bequest. Any punitive damage award arising in the Probate Part must be in compliance with the Punitive Damages Act. This remedy will be infrequent, limited to circumstances in which the actor is not entitled to take from the estate by inheritance or through commissions, and thus an accounting and a surcharge remedy will be inadequate to restore the estate to its proper balance. (Pp. 37-45)
4. Sollitto and Casale were strangers to Stockdale, thus the surcharge remedy would be insufficient. There are distinctions between this matter and Niles. Because the claim in this case was brought by a putative beneficiary rather than by the substitute executor, no counsel fee could be awarded. The record includes ample facts and circumstances that would support a compensatory award and, potentially, a punitive one as well. Only the apparent confusion about the parameters of the available remedies prevented the Probate Part and the Appellate Division from engaging in the appropriate analysis of the record. It may well be that a punitive award is appropriate. It is left to the sound discretion of the Probate Part to consider the record in light of the Court's further guidance. (Pp. 45-51)
Judgment of the Appellate Division is AFFIRMED as MODIFIED and the matter is remanded to the Chancery Division, Probate Part, for further proceedings consistent with this opinion.
CHIEF JUSTICE RABNER and JUSTICES LONG, LaVECCHIA, WALLACE and RIVERASOTO join in JUSTICE HOENS' opinion. JUSTICE ALBIN did not participate.
The opinion of the court was delivered by: Justice Hoens
In this matter, we consider questions relating to the circumstances in which it is appropriate to award punitive damages against a party in a Probate Part proceeding who has engaged in undue influence in the creation of a will or a testamentary trust, or in securing an inter vivos transfer of property in lieu thereof. We do so in order to explain more fully the earlier decisions of the Court referring to this potentially additional remedy in the unique context of Probate Part proceedings.
We conclude that, actions arising from disputed wills and related documents designed to dispose of estate assets and which rest on allegations of undue influence are most often resolved through the equitable remedies available in the Probate Part. We further conclude that, although a finding that a party has engaged in undue influence may also, consistent with our common law notions of making an injured party whole and deterring particularly egregious behavior, support an award of punitive damages, the circumstances in which a punitive award is permitted are limited. Because the Appellate Division, in determining that punitive damages would be appropriate in this matter, based its analysis on an assumption that this remedy is broadly available in the Probate Part, however, we affirm that judgment with modifications.
The facts and circumstances that bring this matter to our attention are complex and they unfolded over a period of several years leading up to the death of Madeleine Stockdale, the testatrix; we derive them from the extensive record compiled during the lengthy proceedings in the Probate Part.
Stockdale was, by all accounts, a highly intelligent and sophisticated businesswoman and investor for much of her adult life. Her late husband had been a successful bank officer, and the couple resided in a large home in Spring Lake, which was located near the beach on Monroe Avenue. Following her husband's death in 1965, she worked for many years selling real estate in Spring Lake. Stockdale continued to reside in the home that she had shared with her late husband and which she loved dearly. In spite of her considerable wealth, she lived frugally, often wearing threadbare garments and keeping her home "barely heated" in the winter. As the years went by, her once-grand home began to fall into disrepair and she periodically talked about selling it. However, she told others that she would only be willing to sell the home to someone who would restore it to its former grandeur and who would agree not to subdivide it.
Always distant from others, as the years passed, she grew distrustful, harboring deeply held concerns that other people were only interested in her for, or because of, her money. Stockdale had no children and no family save for two nephews, George and Peter Lawrence, with whom she had little contact, largely because she suspected that they, too, were after her money. She ceased having any meaningful contact with them many years prior to the events in issue. Over time, Stockdale became somewhat reclusive, agreeing to associate only with a few people whom she considered to be her "acquaintances" and limiting when and how they could see her in person or speak with her by telephone. In particular, two families, the Pattersons and the DiFeos, were among Stockdale's acquaintances and, in general, they looked after her. In spite of her distrustful and reclusive lifestyle, members of these families visited with her, made certain that she was properly fed, invited her to their homes for holiday dinners, and attempted to include her as part of their families.
Although she was generally distrustful of others, Stockdale was fascinated by those people who engaged in acts of selflessness and charity. In particular, she was touched by the kindness of the pastor of a local church that she did not attend, but who had regularly donated blood for her husband simply because the two shared a rare blood type. In one of the wills that she executed, she left $100,000 to his church in appreciation for this generosity from a man who was otherwise a complete stranger to her. Similarly, she was impressed by the good works of the Spring Lake First Aid Squad, a completely volunteer organization of people who would drop whatever they were doing and rush to the aid of anyone who called. She came to appreciate their acts of selflessness and kindness when they attended to her after an automobile accident and when they came to assist her late husband during one of his periods of illness, and began including the First Aid Squad in her will in 1965.
Hand in hand with her distrust of others and her concern that others wanted her money, Stockdale had an intense dislike for the government and the taxes it extracted from its citizens. Although she did not give much to charities during her lifetime, she repeatedly told her acquaintances that she planned to leave her estate to charity. She intended to do so partly out of respect for those who engaged in these selfless acts of kindness, but also because it would keep her assets away from the control of the government. Indeed, when she died, she had a document in her purse that included her burial instructions and a typewritten expression of her intention that "most" of her estate would go to "charity."
Stockdale prepared a number of wills during her lifetime, and all of the ones prior to 1998 included substantial charitable donations, precisely for these reasons. From time to time, the identity of the beneficiaries of her largess changed as she became disenchanted with various organizations and substituted others in their places. In some cases, she changed her mind about a particular charity for reasons known only to her, on other occasions, she did so because she concluded that one or another of the charities was devoting an insufficient percentage of its funds to charitable works, as opposed to payment of administrative expenses.
The events that culminated in Stockdale's death and in the dispute about her estate began in 1997, when Ronald Sollitto, a podiatrist, began to live year-round in a house he and his wife, Patricia, owned which was about a block away from Stockdale's. In September 1997, Stockdale listed her home for sale, pricing it at $1.4 million. Although real estate agents showed the property to interested potential buyers, and although Stockdale was shown homes she could purchase nearby when hers was sold, her home did not attract a buyer willing to pay her asking price and Stockdale remained in it.
Sollitto liked Stockdale's house very much and when he saw a real estate agent standing on the sidewalk outside of it, he expressed his interest in purchasing the home. Sollitto then decided to introduce himself to Stockdale directly. Shortly after meeting her, Sollitto and his wife began to help Stockdale around her house and to bring her food, all the while expressing how much they liked her home.
In March 1998, Stockdale executed the first of the two wills ("1998 Will") that were eventually offered for probate and that are at the center of the dispute in this matter. Although her age during the time of the events in issue cannot be precisely identified based on the available records, there is no doubt that by 1998 she was at least in her late 80's or early 90's, that she was living alone in the house on Monroe Avenue, and that she was already in declining health. Since the mid-1980's, Stockdale had been suffering from a variety of health problems and ailments, including headaches and double vision; inflammation of the arteries to the brain; thyroid disease; and bone marrow disease. A CAT scan taken in May 1997 revealed that Stockdale had suffered a "tiny stroke."
The 1998 Will was prepared for Stockdale by William Soons, an attorney from Englewood who had been handling her legal affairs, and who had drafted her previous wills, at no charge to her, since her husband had died in 1965. Mrs. DiFeo, one of the kind and caring neighbors who continued to look after Stockdale, and who Stockdale considered to be among her "acquaintances," drove her to the Soons law office in Teaneck, receiving nothing in return, simply so that Stockdale would be able to execute her new will. The 1998 Will named Soons as the co-executor of the estate, along with Peter Kuzmick, ...