PETER CONFORTI v. RITA FACCONE (2010)

Defendants George Faccone, Michael Faccone, and Joseph Faccone appeal from a trial court order dated August 10, 2009.   Plaintiff Mary Elizabeth Conforti cross-appeals from the order.¹  We affirm, substantially for the reasons set forth in Judge Malone's comprehensive opinion dated June 8, 2009.

I

The facts are discussed at length in Judge Malone's opinion and need not be repeated here in detail.   To summarize, this case arises from a dispute over the estate of Adeline Conforti and over a house she deeded to her two children, Rita Faccone and Peter Conforti prior to her death.²  The parties to this appeal are Peter's surviving spouse, Mary Elizabeth Conforti (Elizabeth), and Rita's husband and children.

In 1994, Adeline deeded her house to her children Rita and Peter, reserving a life estate for herself.   In 2002, about two years prior to her death, Adeline executed a will devising all of her property to a simultaneously created living trust.   The trust provided for the equal distribution of the residuum to Adeline's son and daughter upon her death.   While acting as trustee, Adeline deposited significant amounts of stock and cash into the trust.

In 2004, Adeline resigned her duties as trustee, appointing Rita as the sole trustee.   Shortly after Rita took over as trustee, $133,000 in cash was withdrawn from the trust account.   At the trial, Rita's husband George, who had replaced Rita as trustee after her death in 2008, was unable to account for the money with any legally competent evidence.

After Adeline died in November 2004, Rita failed to distribute the trust assets and did not sell the house she and Peter jointly owned, although Peter repeatedly inquired as to the status of the trust and asked her to list the house for sale.   Instead, Rita and her husband George sought to buy Peter's share of the home at a reduced value for the benefit of their son Michael.   Peter refused their proposal.

Although the house was vacant, and was not part of the trust, Rita and George withdrew substantial amounts from the trust to maintain the property, including over $500 a month to heat it.   George and his sons also billed the trust tens of thousands of dollars for time they allegedly expended to clean and maintain the house.

In 2006, Peter's attorney requested that Rita produce an accounting of the trust, and he filed suit in 2007.   Although suit was filed in 2007, Rita still did not distribute Peter's shares of stock, nor did she immediately list the house for sale.   While the action was pending, Rita distributed stock to Adeline's grandchildren, pursuant to the terms of the trust.   She also made distributions to herself, but she distributed nothing to Peter.

The house was finally sold in 2008, but the funds were placed in escrow instead of being divided between Rita and Peter.   According to George, the funds were escrowed to ensure that there would be money to reimburse George and his sons for their expenses of maintaining the vacant house.   Both Rita and Peter passed away while the case was pending, and the litigation continued in the names of Peter's wife Elizabeth and Rita's husband and sons.

In a written opinion dated June 8, 2009, Judge Malone concluded that despite Peter's requests that she list the house for sale, Rita unreasonably delayed selling the house in an attempt to coerce Peter into selling her his share of the house at a reduced price.   He also found that the alleged maintenance expenses were inflated and unnecessary, and that Rita paid her sons unreasonable amounts for alleged “consultation” services and upkeep.   He ordered defendants to pay plaintiff one-half of the approximately $127,000 in unjustified expenditures.   He further awarded plaintiff one-half of the $133,000 in cash that was in the trust when Rita took over as trustee.   He awarded plaintiff $180,000 for the lost value of stock that Rita should have distributed to Peter.   Finding no justification for Rita's failure to distribute the stock, the judge used, as a valuation date, the date the action was filed.

The judge approved approximately $66,000 which Rita had taken in trustee commissions.   He also approved her payment of Adeline's funeral expenses from the trust and other expenses he found reasonable.   He denied counsel fees to both sides under the American Rule. Citing Sunset Beach Amusement Corp. v. Belk, 33 N.J. 162 (1960), and Rule 4:42-9(2), he found that the parties conducted the litigation solely for their own benefit, and neither party aided in creating, preserving or protecting a fund in court.   He reasoned that “[w]here as here, the claim against the trustee is breach of duty and bad faith by a co-beneficiary legal fees are not appropriate.  In re Estate of Vayda, 184 N.J. 115 (2005).”

II

On this appeal, defendants raise the following points for our consideration:

Point I:  Judge Malone committed error of law in holding that Rita had a duty to sell her mother's house paramount to the duty of Peter, and this Court must remand for a hearing to set the amount of reasonable expenses.

Point II:  The Court must remand because Judge Malone did not explain why he measured damages as he did, and the measure of damages used was an abuse of the Court's discretion.

Point III:  The judgment contradicts Judge Malone's opinion with respect to the money withdrawn from the trust and given to Adeline.

Plaintiff presents these points in her cross-appeal ³ :

POINT IV:  THE COURT ERRED IN AWARDING COMMISSIONS TO THE TRUSTEE.

POINT V:  THE COURT ERRED IN NOT AWARDING COUNSEL FEES TO THE PLAINTIFF.

Plaintiff did not challenge the trustee's commissions in the trial court, and we will not address the issue for the first time on this appeal.   See Nieder v. Royal Indem.   Ins. Co., 62 N.J. 229, 234 (1973).   With respect to all of the remaining appellate arguments presented to us, we conclude that Judge Malone's decision is supported by substantial credible evidence and is consistent with applicable law.   R. 2:11-3(e)(1)(A).   The parties' respective appellate contentions are without sufficient merit to warrant discussion in a written opinion.   R. 2:11-3(e)(1)(E).   We add the following comments.

We find no merit in defendants' claim that Peter delayed in asking Rita and George to sell the house and give him his share of the trust stock.   Peter's wife Elizabeth, who was present during the conversations, testified that Peter began asking George and Rita to put the house up for sale and distribute the stock in 2004, shortly after Adeline's death.   According to Elizabeth, Rita and George refused to sell the house because they wanted Rita's son Michael to have it, and they delayed distributing the stock as leverage to pressure Peter into either giving up his interest in the house or selling it cheaply.   The judge credited Elizabeth's testimony, and we find no basis in this record to disturb his determination.   See Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974).

We likewise find no error in the judge's decision with respect to the amount of approximately $133,000 withdrawn from Adeline's account while Adeline was alive, but shortly after Rita became trustee.⁴  In his opinion, the judge correctly observed that Rita would not be surcharged for funds withdrawn for Adeline's benefit.   However, it was defendants' burden to prove that Rita, as the fiduciary, actually gave the money to Adeline or used it for Adeline's benefit.   Defendant produce no canceled checks or other legally competent evidence that Rita gave Adeline the money or used it for her benefit.   George Faccone's testimony on this point was hearsay, because he had no personal knowledge as to what Rita did with the money.   In fact, he admitted that he had “no proof” that the money was paid to Adeline.   An unsworn, undated statement apparently prepared by Rita was likewise hearsay.

Moreover, in addition to being the trustee, under the terms of Adeline's will, Rita was the executrix of her estate.   Adeline's will provided that all estate assets were to be paid into the trust.   Therefore, even if Rita had given Adeline $133,000 shortly before Adeline's death, once Adeline died, Rita should have placed that money back in the trust;  there was no evidence that Adeline spent the money.   It was Rita's burden, and hence the defense's burden, to account for the $133,000 as a trust asset and as an estate asset.   The complete failure to do so justified the trial court's decision to surcharge Rita for one-half of that sum.

Finally, in light of Rita's palpable bad faith in refusing to distribute the shares of stock to her brother, even in the face of litigation, we find no abuse of discretion in the judge's decision to value the stock as of the date the complaint was filed.   See In re Estate of Bayles, 108 N.J.Super. 446, 459 (App.Div.1970) (absent fiduciary's bad faith, court need not select highest valuation date);  Torres v. Schripps, Inc., 342 N.J.Super. 419, 437 (App.Div.2001) (in shareholder dissolution suit, shares are normally valued at the date complaint was filed).

Affirmed.

FOOTNOTES

FN1. Wachovia Securities, L.L.C. was named as a defendant in its capacity as the custodian of a disputed trust account, and is not a party to this appeal..  FN1. Wachovia Securities, L.L.C. was named as a defendant in its capacity as the custodian of a disputed trust account, and is not a party to this appeal.

FN2. For the sake of clarity, and intending no disrespect, we will refer to the parties by their first names..  FN2. For the sake of clarity, and intending no disrespect, we will refer to the parties by their first names.

FN3. The first three points of plaintiff's brief address defendants' appeal..  FN3. The first three points of plaintiff's brief address defendants' appeal.

FN4. The Wachovia trust account records show that about $133,000 was withdrawn from the account, and $10,000 was deposited into the account a couple of months later.   However, there is no proof that the $10,000 represented a portion of the money withdrawn earlier..  FN4. The Wachovia trust account records show that about $133,000 was withdrawn from the account, and $10,000 was deposited into the account a couple of months later.   However, there is no proof that the $10,000 represented a portion of the money withdrawn earlier.

PER CURIAM