Q: … Did you get any tools, airplane parts as a result of the administration of this estate?
A. We were – my brother and I inherited the contents of the shop.
[See Deposition of William C. Werner, attached hereto as Exhibit _____, Page 9, Lines 19-24 thereof.]
The Expectant has received and maintained possession of many items referred to above that did not constitute “tools, farm machinery and airplanes”. The Will makes absolutely no mention that Expectant and his brother are entitled to the airplane parts, engines, parts or books, or otherwise the entire contents of the shop. They are entitled to the airplanes and farm machinery, not the items and machinery that are detached from the airplanes. Those items and machinery are part of the residuary estate as set forth in the Eighth paragraph of the Will bequeathed to the Expectant’s nieces and nephews that includes the Expectant and his brother. [See Exhibit 1 Attached Hereto, Eighth Paragraph Thereof.]
At best, the Expectant implies that there is an ambiguity in the Will. There is no ambiguity regarding the fact that Expectant and his brother are not entitled to the entire contents of the shop. As to whether they are entitled to the before mentioned items and machinery that are detached from the airplanes, that would require the Court to determine the probable intent of the Will. “In attempting to determine the probable intent of the testator, where that doctrine applies, courts must consider the entirety of the will in light of the circumstances surrounding the execution of the will.” In re Estate of Gabrellian, 372 N.J. Super. 432, 441 (App. Div. 2004), cert. denied, 182 N.J. 430 (2005), quoting In re Estate of Branigan, 129 N.J. 324, 332-333 (1992), and Fidelity Union Trust Co. v. Robert, 36 N.J. 561, 564-565 (1962). “[E]xtrinsic evidence may be reviewed … [but not] to vary the terms of the will.” In Re Estate of Gabrellian, supra, 372 N.J. at 441. The Expectant has not provided the court with any extrinsic evidence as to the probable intent of the Will.
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As to the Executor’s position regarding the probable intent of the Will, the court is referred to the Fifth paragraph of the Will which bequeaths the entire contents of the Decedent’s home to the Executor, including books. This shows the Will’s probable intent that Decedent only intended the Expectant and his brother to receive his home and real property along with tools, farm machinery and airplanes, not detached materials. No where in the Will is it stated that they are entitled to the entire contents of the shop.
II. EXECUTOR HAS NOT VIOLATED THE PRUDENT INVESTOR RULE
A. The Executor’s Fiduciary Duty.
Pursuant to N.J.S.A. 3B:20-11.3(d), the executor was required to take the following criteria into consideration in determining whether to sell or maintain the stocks.
(1) General economic conditions;
(2) The possible effect of inflation or deflation;
(3) The expected tax consequences of investment decisions or strategies;
(4) The role that each investment or course of action plays within the overall trust portfolio;
(5) The expected total return from income and the appreciation of capital;
(6) Other resources of the beneficiaries;
(7) The need for liquidity, for regularity of income, and for preservation or appreciation of capital; and
(8) An asset's special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries as, for example, an interest in a closely-held enterprise, tangible and intangible personalty, or real estate.
Id.
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B. Surrounding Circumstances of the Sale of the Stocks and Bonds.
Expectant takes issue in paragraph ¶ 24 of his Statement of Material Facts that the Executor has violated the Prudent Investor Rule by selling common stock of PNC Financial Services Group valued at $64.80 per share, with there being 2,870 shares, for an aggregate value of $185,976.00. “The prudent investor rule expresses a standard of conduct, not outcome. Compliance with the rule is determined in light of the facts and circumstances existing at the time of the fiduciary's decision or action.” N.J.S.A. 3B:20-11.9.
The facts and circumstances underlying the Executor’s decision to sell the share are as follows. The decedent died on March 13, 2001, six months before the World Trade Center bombing on September 11, 2001. As stated above, prior to “9-11” the shares were valued at $64.80 per share. By February 2, 2002, the Executor sold the shares when they continued to diminish in value. He sold them at $56.7537 per share. In fact, by July 2002, the value of the PNC stock had diminished in value to only $36.00 per share. It was not until March 2006 that the stock had again reached its initial value of approximately $64.80 per share.
“Compliance with the [prudent investor] rule is determined in light of the facts and circumstances existing at the time of the fiduciary's decision or action.” N.J.S.A. 3B:20-11.9. See also In re Bayles' Estate, 108 N.J. Super. 446, 454-55 (App. Div. 1970) (“What constitutes a reasonable period of time within which securities should be disposed of, and whether an executor should be held responsible for loss as a result of the failure to sell them … depends upon the circumstances of the particular case.”).
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The Executor had a fiduciary duty to exercise reasonable care in determining when or if to sell the shares. Given the surrounding circumstance of “9-11” where market values steadily continued to plummet, it was not imprudent for him to have sold them at $56.7537 per share. How was the Executor to know that the stocks would have regained their initial value six years later or that this probate action would have still been in litigation at that time. In addition, if the stocks continued to plummet, perhaps even below $36.00 per share, the Expectant would have raised the same imprudent investor argument that he raises herein.
C. The Executor is Not Liable.
Whether or not an Executor is liable to the beneficiaries of a Will is determined by the criteria set forth in N.J.S.A. 3B:20-11.10. This statute provides,
a. A fiduciary may delegate investment and management functions that a prudent fiduciary of comparable skills could properly delegate under the circumstances. The fiduciary shall exercise reasonable care, skill, and caution in:
(1) selecting an agent with special investment skills and expertise and of sound financial standing;
(2) establishing the scope and terms of the delegation consistent with the purpose and terms of the trust instrument; and
(3) periodically reviewing the agent's actions in order to monitor the agent's performance and compliance with the scope and terms of the delegation.
b. In performing a delegated function, the agent shall owe to the trustee and the beneficiaries the same duties as the fiduciary and shall be held to the same standards as the fiduciary.
N.J.S.A. 3B:20-11.10(a) and (b).
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The rule in regard to retention of investments by trustees is that they act in good faith, with ordinary care, caution and discretion and within the scope of their powers, and they will not be held liable for mere mistakes, if such there were, resulting from mere errors of judgment and not proceeding from any fraud, gross carelessness or indifference to duty on their part.” Ditmars v. Camden Trust Co., 10 N.J. 471, 488-89 (1952), citing In re Koretzky’s Estate, 8 N.J. 506, 524 (1952). “Mere errors of conscientious judgment do not of themselves establish a failure of duty.” In re Cook's Will, 35 Backes 123, 128 (N.J. Prerog. 1945).
In fact, the Executor could have been held liable if he did not sell the PNC stock and it further depreciated in value.
[A]n executor is not ordinarily held responsible for the mere depreciation of assets, nor for a loss due to a decline in the market merely because he does not make an immediate sale even though the nature of the security mandates that a sale eventually be made. As a corollary to this proposition, however, he may be held liable for loss if he retains stock or other securities beyond a reasonable time for sale.
In re Bayles' Estate,
108 N.J. Super. 446, 454 (App. Div. 1970).
D. In Kind Distribution was not Required.
The Eighth Paragraph of the Will, the residuary clause, bequeathes the Decedent’s “funds, bank accounts, stocks and bonds” to his nephews and nieces that include the Expectant, the Expectant’s brother and the Executor. The Second Paragraph of the Will provides the Executor the complete power to distribute “all of [his] property and estate” in kind or to dispose of it as he deemed proper. The Second paragraph of the Will provides
I hereby give to anyone who serves as Executor … under this, my Last Will and Testament, the fullest power and authority in all matters and questions, and to do all acts which I might or could do if living, including, without limitation, complete power and authority to sell (as public or private sale, for cash or credit, with or without security), mortgage, lease and dispose of and distribute in kind, all my property and estate, real personal and/or mixed, at such times upon such terms and conditions as he or she may deem advisable.
[Emphasis Supplied.]
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The Second Paragraph clearly provided the Executor the “fullest power and authority” and the “complete power and authority to sell” the stocks and bonds in question, especially where there were surrounding circumstances that their value was depreciating and could have continued to do so.
III. EXECUTOR HAS APPROPRIATELY PROVIDED ADVANCED NOTICE OF HIS FINANCIAL PLANNING AND ACTIONS TO ALL BENEFICIARIES NOTWITHSTANDING THAT THE WILL PROVIDES THAT HE WAS NOT RESPONSIBLE TO DO SO
Pursuant to N.J.S.A. 3B:20-11.10, a fiduciary is required to provide reasonable advance written notice whenever the fiduciary intends to delegate investment and management functions.
The Expectant alleges in Paragraph ¶ 14 of his Statement of Material Facts that, “Accountant Joseph Kosmo kept Expectant William C. Werner, and upon information and belief, the other heirs in the dark as to the Estate administration.” As set forth hereinabove, none of the eight heirs, save for the Expectant, referred to in the Eighth Paragraph of the decedent’s Will, have filed objections. The expectant has not explained how or why he believes that they feel that they have been left “in the dark” and it constitutes inadmissible heresay.
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“It is well established in New Jersey law that hearsay alone is insufficient to defeat a motion for summary judgment.” Cortland Associates, LP v. Cortland Neighborhood Condominium Ass'n, 2005 WL 2334364, *5 (App. Div. 2005), citing Judas v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 76 (1954). See also Baldyga v. Oldman, 261 N.J. Super. 259, 264 (App. Div. 1963), and Raymond v. Cregar, 72 N.J. Super. 73, 99 (App. Div. 1962) (Our assessment of the foregoing proofs, viewed most favorably for the plaintiff (excising from our consideration all hearsay testimony contained in the material submitted to the trial court)…).
As to the Expectant being left in the dark, he has provided no examples of this in his moving papers other than conclusory statements. The Executor has adequately put all beneficiaries on notice of his financial planning for the estate in accord with N.J.S.A. 3B:20-11.10(f). This statute provides,
A fiduciary shall provide reasonable advance written notice on each occasion upon which the fiduciary intends to delegate investment and management functions pursuant to this section, including the identity of the agent, to the beneficiary or beneficiaries eligible to receive income from the trust on the date of the intended delegation. Upon providing such notice, the fiduciary shall be authorized to delegate investment and management functions pursuant to this section.
Id.
Seven of the eight residuary beneficiaries who are set forth in paragraph ¶8 of the Decedent’s Will, his nieces and nephews, have filed no objections to the Executor’s plans or actions or Accounting. [See Executor’s Statement of Facts, Paragraph ¶9, thereof.] The Expectant has not provided an example of not having been put on notice that the Executor intended to sell the PNC stock. A failure to timely object constitutes a waiver to raises objections at a later time.
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CONCLUSION
For the foregoing reasons, the court should deny the Expectant’s Motion for Summary Judgment and grant the Executor’s Motion for Summary Judgment.
Respectfully Submitted,
LAW OFFICE OF xxxxx & xxxx, P.C.
________________________________
Robert XXXXXX, Esq.
Attorney for Executor
Dated:
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