August 25, 2011
IN THE MATTER OF THE ESTATE OF JOHN OLIVA, JR., DECEASED.
On appeal from the Superior Court of New Jersey, Chancery Division, Probate Part, Atlantic County, Docket No. 97566.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted January 3, 2011
Before Judges A. A. Rodriguez and Grall.
Kellie A. McHugh, the executrix and sole beneficiary of the Estate of John Oliva, Jr. (Decedent) appeals from the February 8, 2005 Probate Part order directing her to pay $17,000 counsel fees to decedent's parents John Oliva, Sr. and Carolyn Oliva (Parents). We reverse.
On September 22, 2002, decedent named McHugh as the sole beneficiary in a holographic will and the primary beneficiary on his life insurance policy and pension. Decedent took his own life nine days later on October 1, 2002. Probate was granted and McHugh was named executrix of decedent's estate. The Parents commenced an action contesting decedent's will, contending that McHugh "exerted undue influence upon their son, and that he did not have proper testamentary capacity . . . when he authored a holographic will and changed his beneficiary designation form to" replace Parents with McHugh.
The judge dismissed the Parents' claim of decedent's lack of testamentary capacity. McHugh and the Parents subsequently reached a settlement on the Parents' undue influence claim. The Parents moved to recover $61,949.47 in counsel fees. The judge granted the Parents counsel fees of $17,500. McHugh moved for reconsideration and the judge reduced the Parents' award of counsel fees to $17,000. McHugh appeals, arguing that "decedent's parents are not entitled to counsel fees from life insurance proceeds or a pension" and that because the judge did not find that she wielded "undue influence or other wrongdoing, no fees can be awarded."
McHugh argues that Parents are not entitled to counsel fees because there is no fund and that any award should not be payable by her personally or from the life insurance or pension proceeds she received as beneficiary. We agree.
Rule 4:42-9(a)(2) "permits an allowance from a 'fund' when it would be unfair to saddle the full cost upon a litigant who is in court to advance more than her own interests." In re Estate of Sugarman, 191 N.J. Super. 385, 386 (Law Div. 1983) (citing Sunset Beach Amusement Corp. v. Belk, 33 N.J. 162, 168 (1960)). "Thus, the rule permits payment of a fee to a litigant who creates, increases or protects a fund from which a class of claimants will benefit." Ibid.
In probate actions, the award of counsel fees is within the discretion of the courts. In re Alleged Will of Macool, 416 N.J. Super. 298, 312 (App. Div. 2010). Rule 4:42-9(a)(3) provides that:
In a probate action, if probate is refused, the court may make an allowance to be paid out of the estate of the decedent. If probate is granted, and it shall appear that the contestant had reasonable cause for contesting the validity of the will or codicil, the court may make an allowance to the proponent and the contestant, to be paid out of the estate. . . .
"To satisfy the rule's 'reasonable cause' requirement, those petitioning for an award of counsel fees must provide the court with 'a factual background reasonably justifying the inquiry as to the testamentary sufficiency of the instrument by the legal process.'" Macool, supra, 416 N.J. Super. at 313 (quoting In re Caruso, 18 N.J. 26, 35 (1955)). Nevertheless, "[e]xcept in a weak or meretricious case, courts will normally allow counsel fees to both proponent and contestant in a will dispute." In re Reisdorf, 80 N.J. 319, 326 (1979).
Here, the Parents contested decedent's will based on an allegation of lack of testamentary capacity and undue influence. The judge dismissed the Parents' lack of capacity cause of action, but allowed the contest to proceed based on the alleged undue influence. McHugh and the Parents reached a settlement on the undue influence allegation without a judicial determination.
However, non-probate assets such as life insurance and pension proceeds pass by operation of contract and property law outside of the decedent's estate. See Fitzgerald v. Linnus, 336 N.J. Super. 458, 473 (App. Div. 2001). The designation of a life insurance beneficiary is considered a non-probate transfer. See Hadfield v. Prudential Ins. Co., 408 N.J. Super. 48, 51 (App. Div. 2009).
Here, McHugh is the named beneficiary of decedent's life insurance policy and pension. The Parents cite no authority stating that such assets, where an individual beneficiary is named, are a part of the probate estate available to satisfy an award of counsel fees. Moreover, an award of counsel fees against an executrix personally, is warranted where there is a "gross abuse of the trust and confidence." In re Peppler's Will, 134 N.J. Eq. 160, 161 (E. & A. 1943). There is no such showing of gross abuse present here.
The award of counsel fees against McHugh is vacated. The Estate is not a party to this appeal. Therefore, any award fees against it is unaffected by this decision.
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