Appellate Division Affirms the Award of Fees and Sanctions Against the Lawful Beneficiary of Life Insurance Proceeds
In re Estate of May, Docket No. A-1380-22 (N.J. Super. App. Div. Jan. 28, 2024)
This case examines an award of counsel fees and imposition of sanctions in an action brought by a spouse to be named lawful beneficiary of life insurance policies over the decedent’s mother.
The decedent, Tyrone May, Sr., was married to Teresa, and they had three adult children together. He owned two life insurance policies, naming Theresa as beneficiary: a MONY Incentive Life Legacy variable life policy (“MONY Life Legacy”) with a $250,000.00 face value; and an AXA Equitable Term 20 policy (“AXA Term policy”), with a $350,000.00 death benefit.
In February 2011, Tyrone signed an AXA Equitable change of beneficiary form for both policies naming his mother, Hazel, as beneficiary. He signed in the presence of David S. Pozzi, an insurance adjuster for his family business, May Funeral Homes. Two days later Pozzi faxed the form to AXA, with the subject line only referencing the AXA Term policy.
In February 2019, Teresa filed for divorce, but Tyrone never filed any responsive pleadings, hoping for reconciliation. The divorce complaint was later dismissed upon his death.
Tyrone died intestate in April 2020. At the time of his death, he and Teresa were still legally married. The MONY Life Legacy policy was valued at $545,181.82.
Hazel and Teresa both filed complaints seeking to be appointed as estate administrators in April 2020.
In July 2020, Lento Law submitted a limited power of attorney to Equitable concerning the death claim for both policies, on Hazel’s behalf. Hazel and Lento Law endorsed checks in July 2020 for $350,025.60 and $545,181.82 from Equitable. The funds were deposited into a trust account (the “Wyoming Trust”) allegedly established for Hazel’s and Tyrone’s children’s benefit, with Hazel listed as the account owner and a Wyoming address. The trust account was owned by a Wyoming Corporation TMFT, Inc.
In August 2020, the court granted Hazel’s application and appointed her temporary administrator. She was directed to provide an informal estate accounting within forty-five days.
On September 15, Teresa served written discovery demands on Hazel. One of the demands asked “What insurance policies of any kind did Tyrone May, Sr. have? Please list name of company, contact information and policy number.” Another asked Hazel to produce copies of the policies. Hazel answered on December 4, 2020, stating “Decedent had health insurance at the time of his death” and that she was not in possession of any documents responsive to the request for insurance policy information. Id. at 4-5.
Hazel produced a deficient accounting on October 23, 2020 and another deficient accounting two weeks later.
An EIN number was issued on November 12, 2020, with Hazel as administrator, unbeknownst to Teresa or the court. On November 20, the court removed Hazel as administrator and appointed Maisie Chin Smith as temporary administrator.
Hazel’s responses to the interrogatories initiated “protracted and contentious” discovery hearings from November 2020 to April 2021, and Teresa’s counsel and Ms. Smith were unable to obtain any information regarding Tyrone’s assets, EIN and death benefits. Id. at 6. Three hearings were held in April 2021, where Hazel admitted that she received over $800,000.00 and distributed some of those funds to Tyrone’s children when they “wanted something.” Id. Hazel’s counsel maintained that obtaining an EIN was an “outstanding issue” even though they had already obtained the EIN over six months earlier.
On April 7, 2021, the court ordered that no more funds be distributed from the account, that Pozzi produce the insurance documents to Teresa’s counsel and Ms. Smith, and that Lento Law produce a sworn statement regarding its efforts to obtain an EIN, and bank account statements and copies of the checks drawn from the Wyoming account.
Hazel produced bank statements showing withdrawals, but no copies of the checks. On April 12, a lawyer from Lento Law, submitted a certification that “between February 26 and March 2, 2021, no EIN was taken out for the [estate], no accounts were opened in the name of the estate.” Id. at 7. On April 18, he submitted a second certification stating that an EIN was obtained in Hazel’s name to open the Wyoming Trust account. The court ordered further clarification so the lawyer submitted a certification on April 21 stating that he directed and approved establishing the Wyoming corporate entity “TMFT, Inc.,” an irrevocable asset protection trust set up to protect Hazel’s interest in the life insurance proceeds. He also admitted that the firm obtained an EIN as part of plaintiff’s status as the temporary administrator of the estate.
Even in light of these certifications, Hazel continued to obfuscate assets and insurance policy documents from April 18, 2021 through October 28, 2022. The court sanctioned Hazel for discovery violations prior to June 2021 and ordered her to pay Teresa’s and the court-appointed administrator’s counsel fees.
Hazel moved for summary judgment, seeking an order that the insurance benefits from both policies were non-probate assets and she was the lawful beneficiary. Teresa opposed the motion, arguing that she was the lawful beneficiary of the MONY Life Legacy policy.
The trial court found that Hazel was the lawful beneficiary of the AXA Term Life policy, but decided a plenary hearing was necessary to determine the lawful beneficiary of the MONY Life Legacy Policy, and ordered those funds to remain in the court-appointed administrator’s trust account. This was because a single change of beneficiary form was used for both policies, as was the company’s standard procedure when the same owner was naming the same beneficiaries on multiple policies, but was a point of confusion for the court. Pozzi testified and clarified this point at the hearing, as he witnessed Tyrone executed the change of beneficiary forms.
The court found that Hazel was also the lawful beneficiary of the MONY Life Legacy policy, and ordered $600,000.00 be released to Hazel, but $67,989.86 be retained for the anticipated sanctions and fee awards.
Teresa sought $125,716.00 in attorney fees and costs for services rendered from June 29, 2021 to October 20, 2022, and sanctions against Hazel. The court found that Teresa was only entitled to $44,000.00 because the billing was excessive – for example 86.75 hours billed for the opposition to Hazel’s motion and preparation for the cross-motion for attorney fees and sanctions, even though several motions had already been filed for the case and the information was readily available. The court also imposed $20,000.00 in sanctions against Hazel, finding her actions were intentionally and maliciously deceitful to Teresa and the court.
Hazel appealed the award of attorneys’ fees, arguing that the life insurance proceeds were non-probate assets and it was an abuse of discretion for the court to award attorneys’ fees from them. She also argued the sanctions award was unreasonable and duplicative.
The Appellate Division was not convinced by either argument, finding that, in light of the “torturous procedural history” of the case, attorneys’ fees were warranted. Id. at 16. It also found that the sanctions were reasonable in light of Hazel’s “intentional, willful, and malicious” misconduct. Id. at 18.
On appeal, Teresa argued that the reduction in the fee award was in error. The Appellate Division upheld the trial court’s finding that the application for services was excessive and found no abuse of discretion.
Teresa also argued that the trial court erred in finding Hazel to be the lawful beneficiary of the MONY Life Legacy policy. The Appellate Division found that this conclusion of the trial court was supported by ample credible evidence in the record and was not an abuse of discretion, and further, that Teresa had not made a showing that she was the lawful beneficiary.