Opinion
DOCKET NO. A-0286-12T2
05-16-2013
IN THE MATTER OF THE ESTATE OF CHARLES POLK, Deceased.
John M. Johnson argued the cause for appellant Susan Kern (Johnson & Johnson, attorneys; Mr. Johnson and Craig R. Rygiel, on the brief). Valter H. Must argued the cause for respondents William Ward, Michael Ward, Nancy Ward, Beth Alvarez Sarkar, and Mark Alvarez (Carluccio, Leone, Dimon, Doyle & Sacks, L.L.C., attornevs; Mr. Must, of counsel and on the brief; Adam M. Carman, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Axelrad, Sapp-Peterson and Haas.
On appeal from Superior Court of New Jersey, Chancery Division, Ocean County, Docket No. 185410.
John M. Johnson argued the cause for appellant Susan Kern (Johnson & Johnson, attorneys; Mr. Johnson and Craig R. Rygiel, on the brief).
Valter H. Must argued the cause for respondents William Ward, Michael Ward, Nancy Ward, Beth Alvarez Sarkar, and Mark Alvarez (Carluccio, Leone, Dimon, Doyle & Sacks, L.L.C., attornevs; Mr. Must, of counsel and on the brief; Adam M. Carman, on the brief). PER CURIAM
Defendant Susan Kern appeals from an August 8, 2012 order of the Ocean County Probate Part requiring that Exxon Mobil stock held in decedent Charles Polk's Individual Retirement Account (IRA) at the time of his death pass in accordance with the terms of his Last Will and Testament (Will). Defendant contends the stock should have been transferred to her upon decedent's death because she was named as the beneficiary of the IRA. We disagree and affirm.
I.
The following facts were presented at a two-day trial conducted by Judge Frank A. Buczynski on July 10 and 11, 2012. Decedent's wife, Marion Polk, (Marion) received shares of Exxon Mobil stock through her employment with Esso Research and Engineering Company. The stock was maintained in an IRA during her lifetime. When Marion died in 1996, the stock passed to decedent. Decedent and Marion had no children.
For ease of reference, we refer to Ms. Polk as "Marion" in this opinion and we intend no disrespect.
Marion also purchased additional shares of Exxon Mobil stock with after-tax dollars. At the time of the trial, these shares were valued at $162,695. The shares were kept in a separate brokerage account and are not a subject of the current appeal.
On September 29, 1999, decedent put the stock into an IRA maintained by Tucker Anthony Incorporated. The Designation of Beneficiary form he completed designated defendant, who was his niece, as the "Primary Beneficiary" of the IRA. Decedent designated his sister, Gloria Whaley, who is defendant's mother, as the "Contingent Beneficiary."
On November 18, 2005, decedent moved the stock to an IRA maintained by Bear Stearns. The application form for this account also had a "Designation of Beneficiary" provision, which stated "If I die before my entire interest in the IRA has been distributed under Article IV of the Individual Retirement Account Custodial Agreement, it is my intention that the balance of the account shall be distributed to: [defendant]." Whaley was again listed as a contingent beneficiary. The application form also stated:
Pursuant to the stipulation of the parties, the complete agreement was not introduced in evidence at trial. Only the one-page application form was made part of the record.
I may change or revoke this designation without notice to any beneficiary by completing a new form. Any such change or revocation shall be effective on the date Bear Stearns receives such notice. I understand that if no beneficiary designation is in effect at the time of my death, or if the designated beneficiary dies before my death, or if Bear Stearns is unable to readily locate the designated beneficiary, the balance of my account will be paid to my spouse if surviving, or if none, to my children in equal share per stirpes, or if none, to my estate.Bear Stearns was later taken over by J.P. Morgan Securities, which was maintaining the IRA at the time of decedent's death.
In September 2008, decedent decided to have a new will prepared. He asked his neighbor, Robert Koch, to recommend an attorney to him. Koch contacted Shannon Curtis, Esq., who was a social acquaintance. Curtis arranged to meet with decedent at his home on September 22, 2008 to discuss decedent's estate plan. Defendant was present with Curtis and decedent for most of the meeting. Whaley was also in the home at the time, but she did not participate in the meeting.
Curtis testified decedent told her that he had over 21,000 shares of Exxon Mobil stock and that it was worth over $1.6 million. Decedent stated his wife Marion always wanted the bulk of the stock to go to her side of the family when he died and he wanted to honor her wishes. Decedent wanted to leave his home to defendant. However, decedent was concerned defendant would not be able to maintain the home and would need financial assistance to pay real estate taxes and maintenance costs on the large residence. Therefore, defendant told Curtis he would like to give defendant a portion of the stock. He also stated he wanted to give a portion of the stock to defendant's daughter, Lisa Carr.
Curtis kept "copious notes" of everything decedent said. Curtis testified decedent told her the stock "was held in a brokerage account." He did not get "any more specific[]" than that. Decedent never stated the stock was kept in an IRA or that he had any other type of IRA. Therefore, Curtis did not ask him about an IRA. Defendant was also unaware of the existence of the IRA and she testified decedent never told her she had been listed as the primary beneficiary on the IRA application form decedent completed in 2005.
Using what she believed was a "rough estimate" of $1 million as the value of the Exxon Mobil stock, Curtis reviewed different scenarios with decedent as to what percentage of stock, if left to defendant, would enable her to have the financial means to afford to maintain his residence after he died. After the meeting, Curtis returned to her office and prepared a draft will for decedent's review. After decedent was satisfied that his requested changes were made, he executed the Will on October 13, 2008.
Paragraph Six of the Will provides that defendant would receive decedent's residence, along with its contents. Paragraph Seven of the Will states:
I give, devise and bequest any and all shares of ExxonMobil[] stock (or the resulting shares of any corporate merger and/or takeover of ExxonMobil[] which I may own at the time of my death to the following individuals in the specified amounts:
(A) Seventeen percent (17%) to my niece, [DEFENDANT]. Should she predecease me, her shares shall pass to my grandniece, LISA CARR;
(B) Seventeen percent (17%) to my grandniece, LISA CARR. Should she predecease me, her shares shall pass to her issue to share and share alike;
(C) Seventeen percent (17%) to my deceased wife's grandniece, BETH ALVAREZ [SHAKAR]. Should she predecease me, her shares shall pass to my deceased wife's grandnephew, MARK ALVAREZ;[(Emphasis in original).]
(D) Seventeen percent (17%) to my deceased wife's grandnephew, MARK ALVAREZ. Should he predecease me, his shares shall pass to my deceased wife's grandniece, BETH ALVAREZ[;]
(E) Seventeen percent (17%) to my deceased wife's niece, NANCY WARD. Should she predecease me, her shares shall pass to her issue to share and share alike;
(F) Seven and one-half percent (7.5%) to my deceased wife's nephew, MICHAEL WARD. Should he predecease me, his shares shall pass to his issue to share and share alike; and
(G) Seven and one-half percent (7.5%) to my deceased wife's nephew, WILLIAM WARD. Should he predecease me, his shares shall pass to his issue to share and share alike.
Decedent died on February 24, 2010. As of January 30, 2010, the Exxon Mobil stock was valued at $1,003,145. Shortly thereafter, it was discovered that decedent had kept the stock in the J.P. Morgan IRA and that the application form for the IRA had listed defendant as the beneficiary.
On February 1, 2011, plaintiffs Beth Alvarez Sarkar, Mark Alvarez, Nancy Ward, Michael Ward, and William Ward filed a complaint in the Probate Part seeking to have the stock transferred in accordance with the terms of the 2008 Will rather than through the 2005 beneficiary designation on the IRA application form. Defendant filed an answer. J.P. Morgan was not a party to the litigation.
In an exchange of e-mails on June 28 and 29, 2012, the parties stipulated that
this trial is about whether despite the apparent designation, [plaintiffs] can prove by clear and convincing evidence that [decedent] intended to dispose of all of his stock by way of his [Will]. If so, the stock in the IRA (pre-tax stock) goes by way of the will; if not [defendant] gets to keep all of that stock and only the remaining stock goes by way of the [W]ill.Thus, as expressly stipulated by the parties, the sole issue to be decided at trial was whether decedent intended to distribute the stock through his Will rather than through the beneficiary designation set forth in the IRA application form. The parties also agreed, as set forth in defendant's pre-trial brief, that IRAs "are governed by the Uniform [Transfer on Death] Security Registration Act" (the Act), N.J.S.A. 3B:30-1 to -12.
Both parties acknowledge this stipulation in their appellate briefs. Defendant states "[t]he disputed issue at trial was solely whether it was [d]ecedent's intent to bequeath all of the Exxon Mobil stock, including his IRA, through his [Will]." Plaintiffs state the issues at trial "were winnowed down to whether [they] could prove by clear and convincing evidence that [decedent] intended to dispose of all his Exxon Mobil stock by way of his [Will] despite the contrary beneficiary designation related to the IRA." The parties also confirmed this stipulation at oral argument before us.
At trial, Curtis testified that decedent's intent was that the stock should be distributed in accordance with the terms of the Will. She stated:
[Decedent] could not have been more clear. That was his absolute testamentary intent. He believed without question that all of his stock would flow through the Estate.
. . . .
We discussed it several times. [Decedent] was very reminiscent [sic] of his wife Marion. He said he wanted to honor her request that her stock benefit her side of the family. He wanted to make this change with respect to [defendant] and her daughter getting some of the stock, which he estimated to be at 17 and a half percent, about $170,000 because he just wanted to make sure she would have enough to maintain the carrying costs and taxes on his real property that he was leaving to her. That was it.
Koch was named executor in the Will. Koch testified decedent would frequently talk about who was going to get his house and who was going to get his stock. Koch stated decedent consistently told him defendant would inherit the house and the stock would be split between his nieces and nephews from Marion's side of the family. Decedent never told Koch he had kept the stocks in an IRA or that defendant was named as the beneficiary.
Sarkar testified it was understood from "casual conversation" she had with decedent that he wanted the stock to go to Marion's side of the family. She stated she was "very much" surprised to hear about the beneficiary designation in the IRA and that "it completely contradicted everything that our family had ever talked about with [decedent]."
Whaley testified decedent had been supporting her by sending her $500 each month. She never discussed decedent's finances or the stock with him. Decedent never told her he had named defendant as the primary beneficiary of his IRA or that she was named as the contingent beneficiary. Whaley testified her brother was honest and honorable and, if he had made a promise to Marion, he would keep that promise.
Linda Monner, decedent's accountant, testified she was aware decedent had opened an IRA, but he never told her who he named as the primary beneficiary of the IRA in which the stock was placed. She did not know anything about decedent's estate plan or the Will.
Defendant testified she was at the meeting between Curtis and decedent when the terms of the Will were discussed. She confirmed that decedent stated he wanted the stock distributed in the manner set forth in the Will. She knew nothing about the IRA or the beneficiary designation until after decedent died. She stated she reacted with "[s]hock" upon discovering she was named as the IRA beneficiary.
Defendant submitted the transcript of the deposition testimony of Lucille O'Rourke, a home health care provider who took care of decedent. O'Rourke started working for decedent in April 2008, and she was present in the home on the day Curtis met with decedent to discuss the Will. Sometime thereafter, O'Rourke testified she had a conversation with decedent and he told her he had an IRA. He also told her defendant was the beneficiary of the IRA and that "everything goes to [defendant]."
O'Rourke was too ill to testify in person at the trial.
In an oral opinion, Judge Buczynski concluded the stock should be distributed in accordance with the terms of decedent's Will rather than pursuant to the beneficiary designation set forth on the IRA application form. In answer to the question posed by the parties' stipulation as the sole issue before him, the judge found plaintiffs had established by clear and convincing evidence that decedent "wanted all his stock with [J.P.] Morgan to pass in accordance with his Will regardless of whether it was in his IRA or his brokerage account."
In so ruling, the judge found that an IRA is governed by the Act, which permits the owner of securities to arrange for a non-probate transfer of the asset to a named beneficiary at the time of the his or her death. N.J.S.A. 3B:30-8. However, the Act also makes clear that
[t]he designation of a [time of death] beneficiary on a registration in beneficiary form has no effect on ownership until the owner's death. A registration of a security in beneficiary form may be cancelled or changed at any time by the sole owner or all then surviving owners, without the consent of the beneficiary.Therefore, the judge determined the critical issue to be whether decedent's "primary intent" was to distribute the stocks in accordance with his Will or with the IRA designation.
[N.J.S.A. 3B:30-7.]
The judge ruled decedent's intent was set forth clearly in his Will. Defendant was not to receive all of the stock. Rather, the stock was to be divided between defendant, Carr, and plaintiffs. The judge also found Curtis's testimony to be "clear, credible and adamant" that decedent wanted to distribute the stock to the individuals, and in the percentages, set forth in the Will.
The other witnesses confirmed it was decedent's consistent intent to have plaintiffs receive most of the stock. Defendant was present during decedent's meeting with Curtis and did not dispute her account of what decedent said or that Curtis drafted the will in accordance with decedent's wishes. She was not aware of the IRA and neither was Koch or Whaley. Under these circumstances, Judge Buczynski found:
Carving out a million dollars in stock to one niece is so inconsistent with his discussions with all of his friends or relatives as well as his lawyer that it would be something this [c]ourt would have expected he would have expressed during his conference for preparing his Will. This [having the stock pass by way of the IRA beneficiary designation] was not what he intended to do when explaining his plan to his lawyer.
In so ruling, the judge discounted O'Rourke's testimony that decedent told her defendant "was going to get it all[.]" The judge found that O'Rourke's testimony was
contrary to everything the decedent told his lawyer and the [e]xecutor. He never confided in his closest living relative by blood, his sister, that he was giving the majority of his assets to [defendant]. He never told [defendant] that since she - - because she was shocked to find out she was the beneficiary of the IRA. He never expressed any of this to his wife's side of the family. And most significantly, when his own lawyer was inquiring in detail as to what he wanted to do with his assets, he never told her. If this was his true scheme, it was never told or suggested to his lawyer. In fact, [defendant], who would have been the beneficiary of all these assets, was present for the discussion with counsel and if ever a time presented itself to let her know that she was going to
receive the bulk of his [e]state, that would have been the time.
Accordingly, the judge stated he was "convinced with a clear conviction that [decedent] specifically explained to his lawyer that he wanted all his stock with [J.P.] Morgan to pass in accordance with his Will regardless of whether it was in his IRA or his brokerage account." The judge reiterated that the "[m]ost reliable and most relevant" considerations in his decision were "the circumstances surrounding [decedent's] consultation with his lawyer and his subsequent execution of his Will."
The August 8, 2012 Order for Judgment directed J.P. Morgan Securities "to execute the transfer of the Exxon Mobil immediately to the Estate of Charles Polk[.]" Defendant was also ordered "to immediately sign any and all documents necessary to effectuate the aforementioned transfer of stock[.]" This appeal followed.
II.
On appeal, defendant argues the judge erred in finding decedent intended to distribute his stock through his Will rather than through the designation set forth in his earlier IRA application form. "Final determinations made by the trial court sitting in a non-jury case are subject to a limited and well-established scope of review[.]" Seidman v. Clifton Sav. Bank, 205 N.J. 150, 169 (2011). "'[W]e do not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice[.]'" In re Trust Created by Agreement Dated December 20, 1961, 194 N.J. 276, 284 (2008) (quoting Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974)). The court's findings of fact are "binding on appeal when supported by adequate, substantial, credible evidence." Cesare v. Cesare, 154 N.J. 394, 411-12 (1998).
By comparison, we review the trial judge's determinations on legal issues de novo. A trial judge's "interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty v. Twp. Comm., 140 N.J. 366, 378 (1995). Applying these well-established standards of review here, we discern no basis to set aside the final judgment.
We agree with Judge Buczynski that the beneficiary designation did not grant defendant a vested interest in the stock. Indeed, the terms of the IRA application form specifically state otherwise and provide that the beneficiary can be changed or revoked "without notice to any beneficiary[.]" This language is inconsistent with the conferral of a vested right upon defendant. This conclusion is also supported by the Act, which makes clear the designation of a beneficiary "has no effect on ownership until the owner's death" and that the beneficiary "may be cancelled or changed at any time" by the IRA owner "without the consent of the beneficiary." N.J.S.A. 3B:30-7. Thus, we do not believe that a designated beneficiary has a vested interest in the IRA prior to the decedent's death and, therefore, a decedent may change or void the designation at any time.
As noted above, at trial, the parties agreed the IRA was an asset covered by the Act. On appeal, however, defendant now argues otherwise. As explained above, we agree with the trial judge that decedent's IRA fell within the provisions of the Act. Moreover, because plaintiff failed to raise this argument at trial, we decline to consider it here. Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973).
Turning to the stipulated issue presented to the judge for resolution, we conclude there was clearly adequate, substantial, credible evidence in the record to support Judge Buczynski's determination that decedent intended to distribute the stock in the manner set forth in the Will, rather than giving it all to defendant. There was a written, subsequently executed Will that specifically contradicted the earlier IRA application form by unequivocally providing the stock was to be distributed to defendant, Carr and plaintiffs. Decedent continually expressed his intent to divide the stock among a number of heirs during his meeting with Curtis. Defendant participated in that meeting and provided no testimony concerning a contrary intent on decedent's part. Decedent and Curtis estimated the value of the stock being discussed by them at over $1 million. This supports the judge's finding that they were discussing the stock at issue here and not the separate pre-tax stock held in a separate account, that had a value of only $162,695.
In addition, decedent told Koch, the future executor of his estate, and Sarkar that he intended the heirs to share the stock. He never told defendant or Whaley that they had been designated as beneficiaries on the IRA or that he intended to leave defendant all of the stock. Thus, the evidence amply supports the judge's conclusion that defendant intended that all of the stock be distributed in the manner set forth in his Will.
Defendant argues that O'Rourke's testimony contradicted that of the other witnesses and demonstrated decedent really intended that defendant receive all of the stock. However, Judge Buczynski carefully explained why he discounted O'Rourke's inconsistent testimony. We defer to the judge's findings, including his credibility findings, because they are fully supported by sufficient credible evidence in the record. Rova Farms, supra, 65 N.J. at 484.
Although the parties stipulated prior to trial that the only issue that needed to be decided by the judge was decedent's probable intent in executing his Will, defendant now contends the judge erred as a matter of law in resolving this case by ascertaining decedent's intent. Instead, she argues the judge should have applied the doctrine of substantial compliance and, because decedent did not comply with the method set forth in the IRA for changing the beneficiary designation, i.e., he did not complete a new designation form, the stock should have passed to her under the earlier IRA designation rather than pursuant to his Will.
This contention was not raised at trial and, therefore, we need not, and do not, consider it here. Nieder, supra, 62 N.J. at 234. The parties stipulated that this case would be decided under the doctrine of probable intent. Because this stipulation limited the issue to whether decedent intended to distribute the stock pursuant to his Will, the parties did not even introduce the complete IRA forms into evidence. No witness from J.P. Morgan was produced to testify concerning the circumstances of decedent's preparation of the IRA form. There is also no evidence in the record that J.P. Morgan was insistent that its change-of-beneficiary requirements be met in this case before it distributed the stock. Therefore, the issue was not properly preserved for appellate review.
The custodian of an IRA account can waive compliance with any requirement it imposes as to how a beneficiary may be changed. In re Estate of Trigoboff, 669 N.Y.S.2d 185, 187 (NY Sur. Ct. 1998); Leblanc v. Wells Fargo Advisors, L.L.C., 981 N.E.2d 839, 846-47 (Ohio 2012).
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In sum, there is ample credible evidence in the record to support Judge Buczynski's findings. Therefore, we conclude the judge appropriately found that decedent intended that his Will control the disposition of his Exxon Mobil stock.
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION