Counsel Fees and Costs: Exception to the American Rule
In the Matter of the Estate of Adrian J. Folcher 2016 N.J. LEXIS 330 (N.J., Apr. 26, 2016)
Adrian Folcher (“Folcher”) had three children with his first wife, who died in July 2002. In December 2002, Folcher married Bernice Folcher (“Bernice”).
In 2003, Folcher and Bernice signed a postnuptial agreement, which provided that any real estate they owned jointly would pass to the surviving spouse upon death. Folcher also executed his first will in 2003, after execution of the postnuptial agreement. Folcher executed another will in 2006.
Folcher was also concerned about a home in Cherry Hill. Bernice had owned the Cherry Hill home before the marriage, but during the marriage, Folcher had invested a significant amount of money into the property. Folcher wanted his children to have an interest in the home after Folcher’s death. The parties executed a new deed changing ownership of the Cherry Hill property from a joint tenancy to a tenancy in common.
Folcher became gravely ill in September 2007. Suffering from metastasized kidney cancer, Folcher was temporarily hospitalized. He was discharged to return home on September 22, 2007, knowing that further treatment, other than hospice care, was of no use. He was prescribed a combination of potent pain medications, was wheelchair-confined, needed oxygen support, and generally relied on Bernice for his basic daily care.
On September 28, Folcher purportedly executed two codicils. The first stated, “I affirm my last will and testament dated January 19, 2006, to be my wishes. I want my wife Bernice [Tambascia-] Folcher to have all personal property and all items in our home.” The second codicil was a copy of copy of the first codicil with the above whited-out and replaced by the following handwritten statement: “I want my spouse Bernice Tambascia[-Folcher], to have all personal accts./property [and] all items in our home.” Bernice testified that she prepared second codicil after Folcher rejected the first as not properly expressing his wishes.
Folcher also signed a deed, created by Bernice, changing ownership of the Cherry Hill property back to a joint tenancy.
The codicils and deed were allegedly notarized in a bank parking lot.
Folcher died in October 2007. Bernice, who was not named as executor of Folcher’s estate, brought the 2003 will and one codicil to the estate’s attorney. She did not produce the 2006 will or the second codicil until a year later. The estate’s attorney suspected fraud and litigation regarding the wills and deeds ensued.
At trial, the estate was able to establish a confidential relationship between Folcher and Bernice, and a host of suspicious circumstances regarding the subject documents. Regarding a confidential relationship, the court reasoned that Folcher was clearly reliant on Bernice because of his illness. The list of suspicious circumstances was extensive to the point of establishing fraud: (i) the September, 2007, deed was prepared by Bernice and not by Folcher’s attorney; (ii) the certification on the deed was copied from the old deed; (iii) the signatures on the deed were not in the right place; (iv) there were multiple signature and notary pages; (v) Bernice had the notary come out to the car where Folcher was sitting to notarize the deed; (vi) Bernice initially produced only one of the codicils; and (vii) although the codicils purported to have the signatures of witnesses and an acknowledgment by a notary, the notary denied executing the acknowledgement and the witnesses denied signing or witnessing the codicils.
After a 13-day bench trial, the court found that Bernice had failed to rebut the presumption of undue influence with clear and convincing evidence. The September 2007 deed and the two codicils were declared void, based upon the court’s finding that they were products of Bernice’s undue influence over Folcher.
The trial court also assessed attorney’s fees against Bernice. Bernice appealed.
The Appellate Division affirmed the trial court ruling, including the award of fees against Bernice. The appellate court also affirmed the finding that the estate’s attorney’s fees were not excessive, despite the fact that they exceeded the amount in dispute, because the litigation had been driven by Bernice’s fraud.
Bernice appealed to the New Jersey Supreme Court. The focus was whether to expand the narrow exception to the American Rule created in In re Niles Trust, 176 N.J. 282 (2003), allowing attorneys’ fees to be assessed against an executor or a trustee who “commits the pernicious tort of undue influence,” to a person who does not owe a fiduciary responsibility to an estate or its beneficiaries.
The Supreme Court declined to expand the exception to a person who does not owe a fiduciary responsibility to an estate and its beneficiaries; because the confidential relationship created in Bernice an obligation only to her husband, and not the estate, a fee award was not the proper vehicle to do equity. Bernice’s confidential relationship with Folcher did not encumber her with any special duty toward the estate’s beneficiaries. Indeed, Bernice was a beneficiary herself.
Accordingly, the Supreme Court held, a fee award in this undue influence context would be based exclusively on the egregiousness of the undue influence. That would be an unwarranted expansion of Niles, which created only a narrow exception to the American Rule.
The Court remanded the case to the trial court to vacate the attorney fee award and to reconsider the relief available, to fashion an equitable remedy.
In a dissent, several Justices expressed that they would uphold the probate court’s equitable order requiring Bernice to reimburse the reasonable attorney’s fees expended by the estate in protecting the Folcher children’s inheritance from her fraud.