April 7, 2010
IN THE MATTER OF THE ESTATE OF NORTON D. SMITH, DECEASED.
On appeal from the Superior Court of New Jersey, Chancery Division, Probate Part, Monmouth County, Docket No. P-0380-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 10, 2010
Before Judges Graves and Sabatino.
This appeal arises out of efforts by a judgment creditor, Cindy Lou Drastal ("Drastal"), to collect sums owed to her by a judgment debtor, Dennis Smith ("Dennis"), and to attach sums that may be due to Dennis from the estate of his father, Norton D. Smith ("Norton").
Pursuant to a lease signed in or about February 2007, Dennis resided for several months at a house in Atlantic Highlands owned by Drastal and her husband, Henry F. Wolff, III, Esq. ("Wolff")*fn1. Eventually Dennis left the couple's premises after several disputes arose concerning repairs and other matters. Dennis then moved into Norton's former residence, which also was in Atlantic Highlands. Because Dennis was not employed at the time, he apparently did not pay any rent to Norton's estate or pay utilities.
After Dennis ended his tenancy in her residence, Drastal sued Dennis in the Special Civil Part for back rent and other unpaid sums. As the result of a trial before Judge Lisa Thornton, Drastal obtained an award of $15,066, which eventually, with interest, resulted in a judgment of $16,591.30 being entered against Dennis on April 2, 2008.
Norton died on June 11, 2005. The executor of Norton's estate is Daniel Smith ("Daniel"), one of Dennis's siblings. After Norton died, his will was admitted to probate, and no caveats were filed.
The primary asset of the estate was Norton's residence. Daniel arranged for the sale of the house, which had no mortgage. The house sold on April 4, 2008--coincidentally, two days after the entry of Drastal's judgment against Dennis--for $800,000. After disbursing closing costs from the sale proceeds, Daniel then made partial installment payouts to the beneficiaries under Norton's will.
The parties agree that Dennis was a beneficiary under Norton's will, but they differ as to the exact extent of his share. Drastal contends that Dennis was entitled to a one-eleventh share of the estate. However, the estate's Verified Answer states that Dennis's share was one-fourteenth, which is consistent with the fact that fourteen next-of-kin for Norton are listed in the Surrogate's attached printout.*fn2
Suspecting that Dennis was without assets and was judgment proof, Drastal decided to levy upon the estate, which she did on July 2, 2008, in an effort to collect the past due sums from Dennis. However, Dennis represented, in an unsworn letter to the court dated July 29, 2008, that he never received any distributions from the estate because the estate had loaned him money and other consideration. The alleged consideration included the estate allowing Dennis to live in Norton's house rent-free, with the right of repayment. Consequently, the levy was vacated and this litigation ensued.
The estate, through Daniel as its executor, contends in its Verified Answer that, after deductions at the closing of the house sale, there was a total remainder amount in the Estate of $542,060.48. That translates into $38,718.61 owed to each of the apparent fourteen beneficiaries under the will. The Verified Answer further contends that Dennis did not receive any distributions from the estate because he was obligated to pay back the alleged amount of money that he owed to the estate for, among other things, living at the premises for free.
The Verified Answer asserts that, as of February 2009, the balance in the estate's account was $49,513.24, a sum which was "being held to cover any unanticipated expenses of the [e]state and to pay charges of the Executor." According to the Verified Answer, "[t]he remainder will be distributed evenly among the beneficiaries." Although one-fourteenth of $49,513.24 would be $3,536.66, the Verified Answer stresses that Dennis "is owed nothing from any final distribution."
The Verified Answer of the estate also alleges various contentions that would seem to be personal to Dennis, including allegations that Drastal and Wolff breached promises to Dennis to repair their premises for him, and had leased the premises to Dennis illegally, without a proper certificate of occupancy.
Attached to the Verified Answer is a typewritten schedule, which shows a distribution of $3,500 to Dennis on Check No. 1153 issued on April 9, 2008, with the unexplained entry "Payout to Rachel."*fn3 There was a second distribution of $5,000 on Check No. 1l95 issued on December 11, 2008, which is designated "Partial 2 (Toward Dan Loan)."*fn4 The schedule then lists, without any corresponding check numbers, the following: $10,700 designated as "rent"; $2,515.26 designated as "utilities"; $7,195 designated as "PT Cruiser value"; and $6,089.74 designated as "Partial 3 (Toward Dan Loan)."*fn5 As to the PT Cruiser noted on the schedule, Dennis's July 2008 letter to the court asserts that he received a "car" (an unspecified model) as part of the estate and that he ultimately sold the car to his daughter.
Dennis acknowledged his liability to Drastal on the judgment, but claimed in his letter to the court that he and his wife have "no assets and no income at this time."
Consequently, Drastal brought an Order to Show Cause against the estate in the Probate Part of the Chancery Division, seeking, among other things, to restrain Daniel from making any further distributions from the estate until Drastal's judgment was paid in full.
In a short bench ruling, the trial judge dismissed Drastal's claims against the estate. The judge ruled that Drastal could more properly pursue her remedies as a creditor directly against Dennis, through, for example, a potential supplementary proceeding to discover Dennis's assets under Rule 6:7-2.
The trial judge found that Drastal's action had been improperly brought against the estate in the Probate Part. The judge noted that the "executor's duty is to satisfy the levy if any funds are available to do so." In essence, the judge accepted at face value the estate's assertion in the Verified Answer that Dennis is owed nothing. Consequently, the order to show cause was denied and Drastal's complaint against the estate was dismissed.
Drastal now appeals. She argues that the trial court's abrupt ruling in the estate's favor must be set aside. At a minimum, Drastal contends, the trial court should have permitted her to take discovery from the estate and from Dennis, so as to get to the bottom of the various financial and personal relationships involved.
In her brief, Drastal relies upon In re Sycle, 16 N.J. Misc. 23, 24-25 (Orph. Ct. 1937). The court held in Sycle that the law authorizes a judgment creditor of the distributee of an estate to levy in certain situations upon the distributee's share. Ibid. Sycle is still good law. See In re Gardner, 215 N.J. Super. 578, 587 (App. Div. 1987). Drastal also invokes N.J.S.A. 2A:17-50--which is the general statute pertaining to levies and attachments--and argues that she has a statutory right to attach assets potentially owned by Dennis that are payable from the estate.
Drastal contends that the deductions from Dennis's share of the estate, as shown on the estate's schedule, lack supporting documentation and could be inflated or fraudulent. At oral argument before the trial judge, Drastal's attorney highlighted the fact that there was no written lease between Norton and Dennis, and argued that the alleged credits shown on the schedule attached to the Verified Answer are "basically a bare bones homemade accounting without any backup."
Because we have been asked to review, in essence, a summary disposition by the trial court without an evidentiary hearing, we apply on appeal the familiar standards that generally pertain to orders granting summary judgment. Generally, the court must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); see also R. 4:46-2(c). On appeal, we apply that same standard to the record, de novo. Liberty Surplus Ins. Corp., Inc. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007).
Here, the record manifestly raises genuine issues of material fact, including whether (1) Dennis did or did not owe money to the estate, (2) whether the estate is indebted to Dennis, and (3) whether the estate was improperly dissipated in derogation of the rights of creditors. The two checks issued to or for Dennis--for $3,500 and $5,000 respectively--and listed on the schedule are not explained. Moreover, the estate never states anywhere exactly how much Dennis owed to it. Also troubling is the lack of documentation for the transactions and debts in question.
Given the numerous and pivotal questions of fact that are presented by the record, we agree with Drastal that summary judgment was prematurely entered by the trial court. The order must be vacated, and the case remanded to allow discovery against the estate, as well as Daniel, Dennis, and one or more of the other beneficiaries. The discovery may explore, among other relevant topics, the bona fides of the items charged to Dennis's share of the estate, and whether any fraud or collusion occurred here between Dennis and Daniel, or between Dennis and his other siblings. If, on remand, some of the expenses charged to Dennis turn out to be illegitimate or inflated, or if fraud or collusion is otherwise demonstrated, Drastal may have recourse to attach and levy upon assets that are remaining in the estate. In re Sycle, supra, 16 N.J. Misc. at 24.
Although we appreciate the trial court's understandable reluctance to entangle an already-probated estate in a creditor's lawsuit, the numerous question marks presented by this record warrant closer examination.
Vacated and remanded. Jurisdiction is not retained.