A state appeals court on Thursday upheld the return of $140,000 to the estate of a testator who, weeks after executing a will, opened a bank account that designated his lawyer as his beneficiary.
The money was intended for the heirs, and the estate was entitled to rescission without proving any fault by the lawyer, the Appellate Division said in Stephenson v. Spiegle, A-4193-11.
That equitable remedy is more common in insurance and government contract matters, but the court saw “no reason for refusing to apply these principles in favor of beneficiaries of an elderly individual who tried but failed to establish a valid trust.”
On Dec. 19, 2006, Jack Murray, a New Jersey resident who had moved to Florida, executed his will, leaving his estate to family members directly or to trusts benefiting them.
The will was prepared by William Spiegle III, of Fleming & Spiegle in Ocean City, who had represented Murray over the years.
About six weeks after the execution, Murray opened a money market account at Union State Bank in Naples, Fla. There was no evidence explaining his decision, but family members later speculated he was trying to take advantage of a promotional interest rate.
Murray, it was discovered later, wanted to designate a trust as the account’s “pay-on-death” beneficiary, but did not have the trust documents with him. He instead listed “William Spiegle Atty” as the beneficiary. That designation never changed.
When Murray died at age 80, exactly one year after executing his will, the account had $143,151, about one-third of his estate’s total value.
Dan Stephenson, Murray’s son-in-law and executor of the estate, discovered the account and inquired with the bank, which said it needed to contact Spiegle. The next time Stephenson heard of the account was in a May 12, 2010, letter from Spiegle asserting that he was the account’s sole beneficiary.
Spiegle, who had been unaware of the account until contacted by the bank and had been incommunicado with Murray since executing the will, said the timing of the account opening indicated an intent to “take it outside the estate itself.”
“I have looked at this situation from various points of view seeking to fathom the intent of this account,” Spiegle wrote. “I come back to the only conclusion that I can draw, which is — for whatever reason — he wanted me to have this money.”
Stephenson sued in the Chancery Division, claiming Murray was incompetent or made a mistake.
At trial, Atlantic/Cape May County General Equity Judge William Todd III found that Murray’s creation of an account benefiting Spiegle was a mistake and any other explanation “just doesn’t make sense.”
Todd found no evidence that Murray’s bond with Spiegle went beyond an attorney-client relationship or that there was a sudden rift in the family. It is “virtually inconceivable” that Murray intended to benefit Spiegle, Todd said, adding that Murray must have gone to the bank intending to establish a trust or to fund a trust that would be created through the will.
Todd rejected numerous theories that might allow the estate to recover the money — such as reformation, constructive trust, conversion and undue influence — because the mistake was unilateral and no fault of Spiegle’s.
Instead, Todd ordered rescission as the only available remedy, citing Villanueva v. Amic Mut. Ins. Co., 374 N.J. Super. 283 (App. Div. 2005), the “closest case … dealing with these types of issues,” he said. There, the court allowed an insurance company to back out of the deal because its policy limits were higher than it thought.
Spiegle appealed. In a published ruling on Thursday, Appellate Division Judges Clarkson Fisher Jr., Carmen Alvarez and Jerome St. John affirmed.
To be entitled to rescission, Stephenson didn’t need to show inequitable conduct by Spiegle, Fisher wrote for the court.
Fisher, citing the four factors from Villanueva, said Stephenson only needed to and did show that Murray’s mistake was “of such consequence” that enforcement would be unconscionable, was “material to the undertaking” and “occurred regardless of his exercise of due care under the circumstances, and that rescission would not cause serious prejudice to Spiegle.
The court said in a footnote that a “party’s loss of a windfall is not the type of prejudice envisioned by these principles.”
Because Todd “properly recognized that a consideration of these four factors weighed in favor of the relief sought, we conclude that rescission was appropriately awarded,” Fisher wrote.
Todd could have used other equitable remedies: impose a trust when the one Murray evidently attempted to form failed — to which the funds would revert — or use the “doctrine of probable intention,” Fisher added.
Norman Briggs, Stephenson’s trial and appellate counsel, says Spiegle “had no business ever trying to hold onto the money.” Why he was listed as beneficiary “should be pretty obvious.”
Briggs, who heads a Philadelphia firm, says the decision is significant because it “gives a legal roadmap to correct that mistake or that error” and allows proof of intent by circumstantial evidence, he adds.
Spiegle did not return a call. Neither did Mount Laurel solo Daury Lamarche, who assisted with his appeal.