For the fourth time in just the past 13 years, the New Jersey Supreme Court addressed whether a person found to have exerted undue influence in a probate matter should be held responsible for the payment of other parties’ attorney’s fees. Fee shifting in probate cases is a notable exception to the general rule – referred to as the American Rule – that each party pays his or her own legal fees in a lawsuit. In the latest case, In re Estate of Folcher, No. A-3-14 (074590) 2016 N.J. LEXIS 330 (N.J. April 26, 2016), the Court drew a bright-line rule against fee-shifting where the perpetrator was neither a fiduciary nor a stranger to the decedent’s estate, in an apparent attempt to confirm its prior assurance that its rulings would not “open the floodgates.”
Adrian Folcher married Bernice Tambascia-Folcher in 2002, a second marriage for each of them. Each had children from the prior marriage. Folcher signed a will in November 2003 naming his daughter as his executor and signed another will in January 2006 that provided for gifts of his personal property to both his children and Bernice. In March 2007, Folcher had his attorney prepare a new deed to the marital home pursuant to which he and Bernice took title to the home as tenants-in-common. As a result, at Folcher’s death his one-half share of the home would pass in accordance with his will. Shortly after the new deed was signed, Folcher’s health rapidly deteriorated.
In mid-September 2007, suffering from metastasized kidney cancer, Folcher was temporarily hospitalized. He was discharged on September 22, 2007, knowing that further treatment, other than hospice care, was of no use, and was prescribed a combination of potent pain medication. He was confined to a wheelchair, needed oxygen support, and generally relied on Bernice for his basic daily care.
On September 28, Folcher purportedly executed two codicils to his January 2006 will. The first gave all personal property and items in the home to Bernice, and the second gave all personal property, accounts and items in the home to Bernice. On September 29, Bernice and her daughter drove Folcher to a local bank, where according to Bernice a bank notary came out to the car and notarized a new deed to the home signed by Folcher in the car. The new deed changed title to joint tenants with rights of survivorship, meaning that Folcher’s one-half share of the home would pass directly to Bernice outside of the will at his death. Folcher died on October 2, 2007. About 45 minutes after his death, Bernice went to the Camden County Clerk’s Office to record the new deed.
The trial court found that the codicils and the new deed were the product of undue influence exerted by Bernice and that she engaged in fraud and forgery. The court ordered Bernice to pay close to $400,000 in attorney’s fees incurred by the estate, citing the Supreme Court decisions in In re Estate of Niles, 176 N.J. 282 (2003) and In re Estate of Stockdale, 196 N.J. 275 (2008) as authority for the ruling.
After the Appellate Division affirmed, the Supreme Court, in a 5 – 1 vote, reversed the lower court’s decision ordering Bernice to pay the estate’s legal fees. The Court stated that its decision in Niles focused on the fiduciary relationship that the trustee or executor owed to the beneficiaries, but Bernice, not being a fiduciary, owed no duty to the beneficiaries and did not fall within the Niles decision. It further found that its decision in Stockdale was based on the perpetrator of the fraud being a stranger to the natural object of the decedent’s bounty, or an outsider. Being Folcher’s wife, Bernice was not a stranger to Folcher’s estate, and the circumstances therefore fell outside the Stockdale decision. As a result, Bernice could not be held responsible for the estate’s legal fees.
The Court acknowledged that Bernice and her aged and vulnerable husband were in a confidential relationship – a relationship under the law in which confidence is naturally inspired. However, the Court maintained that a confidential relationship was critically different than a fiduciary relationship, as the confidential relationship between Folcher and Bernice did not encumber Bernice with any special duty toward the beneficiaries of the Estate. The Court therefore declined to expand the fee shifting ruling in Niles. Instead, the Court sent the case back to the trial court to fashion “a truly equitable remedy” by reconsidering relief in the form of punitive damages against Bernice based on the undue influence and fraud.
The dissenting opinion saw no meaningful difference between Niles and the case before the Court. Noting a laundry list of exceptions to New Jersey’s rule against fee-shifting, discerning no meaningful difference between the egregious behavior of the wrongdoers in Nilesand Folcher, and finding that an award of attorney’s fees would represent consequential damages suffered by Folcher’s rightful heirs, the dissent stated that awarding fees would serve the public policy of deterring the wrongful conduct.
Perhaps the majority of the Court was concerned about “opening the floodgates,” a subject it addressed in Niles. In many if not most undue influence cases decided in our courts, the party charging another with undue influence alleges that a confidential relationship existed between the perpetrator and the decedent. A confidential relationship is shown where trust is reposed by reason of weakness or dependence, and where one side has exerted over-mastering influence over the other or one side is weak or dependent. Such a showing is beneficial to the claimant, as when combined with suspicious circumstances, it shifts the burden to disprove undue influence to the party charged with the fraud. It is relatively easy to show a confidential relationship, as most undue influence cases involve an elderly, weak and dependent individual who makes changes in estate planning documents toward the end of life. If a confidential relationship, rather than the more formal fiduciary relationship held by an executor or trustee, formed the basis for the shifting of responsibility for fees, fee shifting claims could become the norm in undue influence cases, something the Court undoubtedly took pains to prevent.