Unclean Hands Bars Credits for Breaches of Fiduciary Duties as Attorney In-Fact and Executor
In re Joan McFadden, Docket No. A-0236-23, 2025 WL 65016 (N.J. Super. App. Div. Jan. 10, 2025)
Joan McFadden died leaving three sons: Joseph, Vincent, and John. After their mother’s death, Joseph and Vincent brought an action against their brother, John. They alleged he breached his fiduciary duties as both attorney-in-fact and executor of their mother’s estate. Specifically, the two brothers asserted that John improperly converted estate assets, which diminished the other brothers’ inheritance. They asserted John exerted undue influence over their mother, causing her to transfer significant assets, including her Moorestown residence, into his name. They also alleged John used estate funds for personal expenses, including a large sum on his American Express account.
The trial court ruled against John, finding his actions were not only self-serving but also constituted a severe abuse of trust. The court ordered John to reconvey the Moorestown property to the estate, pay back misappropriated funds amounting to $422,576. The court also awarded Joseph and Vincent reasonable legal fees and costs, to be paid by John personally.
John appealed. He sought a credit against the judgment due to the sale of the Moorestown property and the subsequent discharge of its mortgage. He argued that without this credit, the estate would benefit from a “double recovery” since the property was sold and the mortgage was paid off from the proceeds.
Ultimately, the Appellate Division upheld the lower court’s decision. Key findings included the following:
- Unclean Hands Doctrine: The court emphasized that John did not contest the finding that he has unclean hands and quoted the legal maxim: “he who seeks equity must do equity.” Id. at pp. 8-9 (citing Thompson v. City of Atl. City, 190 N.J. 359, 384 (2007) (internal citations and quotations omitted).
- Rule 4:50-1(e): John sought relief from the judgment under Rule 4:50-1(e), which provides such relief where “the judgment or order has been satisfied, released or discharged, or a prior judgment or order upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment or order should have prospective application.” The appellate court denied the requested relief, finding no abuse of discretion by the trial judge in denying the credit – for the full amount of the mortgage portion of the judgment, $282,086 – given John’s unclean hands. The court referred to John’s history of misconduct, including his failure to file necessary estate and inheritance tax returns, and his failure to comply with trial court orders.
- Substantive Due Process: John claimed that denying him the credit violated his constitutional rights to due process under Fourteenth Amendment to the U.S. Constitution and Article I, Paragraph 1, of the New Jersey Constitution. The appellate court, however, denied these claims, finding that the trial court’s denial of a judgment credit “to a litigant in court with unclean hands” did not “shock the conscience” or “offend notions of fairness.” Id. at p. 12.