Undue Influence - Different Analysis Depending On Type Of Claim

Two 1999 Appellate Division decisions pointed out the different analysis used in establishing undue influence claims in situations involving an inter vivos gift versus the execution of a will.¹ The Appellate Division in In re Will of Landsman decided a will contest in which the testator’s niece claimed that the executor exerted undue influence over the testator in the making of his will.² In re Estate of Penna, the Appellate Division dealt with an undue influence claim in the context of a joint account and an inter vivos gift that the decedent’s daughter contended was created as a result of her sister’s undue influence over their mother.³

In a situation involving a will, the presumption is that "the testator was of sound mind and competent when he executed the will."⁴ The burden of proving undue influence lies upon the contestant.⁵ There are two elements necessary to create the presumption of undue influence.⁶ First, a confidential relationship must exist between the testator and the beneficiary.⁷ Second, there must be the presence of suspicious circumstances which, in combination with such a confidential relationship, will shift the burden of proof to the proponent of the will.⁸ These circumstances need be no more than "slight" to shift this burden.⁹

Once this burden shifts, the proponent generally must overcome that presumption by a preponderance of the evidence.¹⁰ This burden can be met by presenting countervailing evidence sufficient to dispel the presumption of constraint of will and volition.¹¹

Not all influence is "undue." It is not sufficient to claim "persuasion or suggestions for the possession of influence and the opportunity to exert it."¹² To constitute "undue influence," it must be of such a nature so as to "destroy the testator’s free agency and to constrain him to what he would not otherwise have done in the disposition of his worldly assets."¹³ The coercion exercised upon the testator may be moral, physical or mental, or all three.¹⁴

A confidential relationship exists "where trust is reposed by reason of the testator’s weakness or dependence or where the parties occupied relations in which reliance is naturally inspired or in fact exists, as the relation between client and attorney."¹⁵ It exists "when the parties do not deal on equal terms, but on the one side there is an overmastering influence, or, on the other, weakness, dependence or trust, justifiably reposed."¹⁶ A "confidential relationship" does not exist when the parties deal on terms of equality.¹⁷

If a confidential relationship is established, the "slight" circumstances needed to shift the burden of proof may include:

1. the initiation of proceedings for the preparation of the instrument;
2. participation in such preparation;
3. presence at the execution of the will;
4. efforts to exclude the natural objects of testator’s bounty from his society;
5. concealing the making of the will; and
6. taking possession of the will.¹⁸

The court will not set aside a will merely because it is unequal or unjust.¹⁹ A testator "is not required to divide his or her estate evenly among his or her children and may even exclude a child or family member completely."²⁰ In considering whether the natural objects of the testator’s bounty were excluded from his will, the court may consider whether the testator contributed to his children during his lifetime by inter vivos gifts.²¹ Moreover, a testator is not locked into beneficiaries named in prior wills and is free to leave his estate to anyone he pleases, as long as it is accomplished without coercion or undue influence.²²

In In re Will of Landsman, the proponent conceded the existence of a confidential relationship and suspicious circumstances sufficient to shift the burden of proof to him.²³ The issue on appeal was whether the correct burden of persuasion was the preponderance of the evidence or the clear and convincing evidence standard.²⁴

The executor, Marvin Greenwald ("Greenwald"), was an accountant who prepared the income tax returns of the testator, Elliot Landsman ("Landsman").²⁵ Landsman’s will was prepared by Stephen Cocci ("Cocci") who had a referral relationship with Greenwald and also utilized Greenwald as his accountant.²⁶ Because Cocci believed that Landsman was blind, he had Landsman’s wife sign the will on his behalf.²⁷ The witnesses to the will were Cocci and Nicholas Pirro, who was a part-time employee of Greenwald.²⁸ The notary was also supplied by Greenwald.²⁹

The will named Greenwald as executor and made a bequest to Marvin and Janet Greenwald.³⁰ The will also made a bequest to Landsman’s niece, her two children, Landsman’s sister and various Jewish charities.³¹ Landsman’s niece filed this suit to challenge the will on the basis of Greenwald’s undue influence over Landsman.³²

Greenwald argued that the trial court incorrectly applied the higher burden of proof, the clear and convincing standard.³³ The trial court relied on the Supreme Court decision of Haynes v. First National State Bank of New Jersey in which this higher burden of proof was imposed based upon a conflict of interest existing as to the attorney who prepared the will due to the attorney also representing the testatrix’s daughter.³⁴

The Appellate Division agreed with the trial court’s utilization of the clear and convincing standard under the circumstances of this case.³⁵ The court found that Cocci and Greenwald had a mutually beneficial referral relationship.³⁶ The court noted that "[s]uch relationships are of the kind that ordinarily engender a sense of loyalty, irrespective of the absence of a true attorney-client relationship."³⁷ Although Cocci financially benefitted from his relationship with Greenwald, he failed to disclose it to Landsman.³⁸ Thus, the court found that Cocci had a conflict of interest due to his relationship with Greenwald and, in light of the circumstances under which the will was executed, the higher burden of proof had to be imposed on Greenwald.³⁹

Accordingly, the Appellate Division affirmed the judgment to the extent that it held that Greenwald unduly influenced Landsman for his benefit.⁴⁰ The court, however, reversed the trial court’s decision to invalidate the entire will.⁴¹ Under New Jersey law, "[w]here the undue influence affects only a portion of the will, the affected portion can be severed and the remainder of the will can be enforced." ⁴² The Appellate Division found that removing the Greenwalds as beneficiaries and Marvin Greenwald as the executor was all that was required to cure the effect of Greenwald’s undue influence over Landsman.⁴³

The presumption of undue influence in inter vivos transfers is different than a claim of undue influence in connection with the execution of a will. As to an inter vivos transfer, "a presumption of undue influence arises when the contestant proves that the donee dominated the will of the donor, ... or when a confidential relationship exists between the donor and donee."⁴⁴ No additional circumstances must be shown to give rise to the presumption of undue influence.⁴⁵ The belief is that "a living donor is not likely to give to another something that he or she can still enjoy."⁴⁶

When the presumption of undue influence arises in this context, "the donee has the burden of showing by clear and convincing evidence not only that >no deception was practiced therein, no undue influence used, and that all was fair, open and voluntary, but that it was well understood’."⁴⁷ When a person is dependent upon another and makes an "improvident gift," stripping the donor of virtually all of his assets, a presumption arises that the person did not understand the consequences of his act, unless he has had the benefit of competent and disinterested counsel.⁴⁸

In In re Estate of Penna, the Appellate Division decided a claim of undue influence in the context of an entitlement to a joint mother-daughter bank account.⁴⁹ Under the Multiple-Party Deposit Account Act, a rebuttable presumption of survivorship is established.⁵⁰ The issues on appeal concerned whether the trial court utilized the proper standard for an undue influence claim to an inter vivos gift and what proofs had to be presented. ⁵¹

The plaintiff, Maria Stuart ("Stuart"), and the defendant, Erika Muellner ("Muellner"), were two of three surviving children of the decedent, Petronella Penna ("Penna").⁵² Under the terms of the decedent’s will, all of her property was to be divided equally among her three children except for bequests of $1000 each to her grandchildren.⁵³ At issue in this case were 3 CDs worth over $100,000 which had been transferred to POD and then joint accounts, jointly owned by Penna and Muellner.⁵⁴

The trial court correctly found that a confidential relationship existed between mother and daughter Muellner.⁵⁵ Muellner had control over Penna’s banking and helped her with other matters.⁵⁶ She split her time living between her two daughters.⁵⁷ Based upon the mother/daughter relationship and the trust she placed in Muellner, the trial judge concluded that a confidential relationship existed between the two.⁵⁸

However, the Appellate Division held that the trial court incorrectly followed the undue influence analysis applied to cases involving wills.⁵⁹ The trial judge searched for evidence of "suspicious circumstances" surrounding the transfer of the CDs and found none.⁶⁰ The Appellate Division pointed out that if the trial court had applied the proper standard, "he would have shifted to defendant the burden of proving that she exerted no undue influence on her mother when creating the joint accounts and that her mother understood the legal effect of those joint accounts."⁶¹

The Appellate Division ruled that in analyzing a claim to a joint account, the court must first look "at whether the joint accounts were validly created by determining whether undue influence was exerted by the surviving account holder."⁶² Then, "[e]ven if no undue influence is found, a trial judge should still be free to look at all the direct and circumstantial evidence available to determine whether the depositor intended to create survivorship rights."⁶³

Under this analysis, the Appellate Division found that the trial judge improperly looked for proof that the defendant committed "some horrible act."⁶⁴ There was evidence that the joint accounts were created to permit the defendant to take care of the mother’s banking affairs, rebutting the presumption of survivorship.⁶⁵ Moreover, the mother’s evenhanded treatment of her three children ran counter to the assumption that Penna would leave well over $100,000 to one child with minimal assets to be divided among the three children.⁶⁶

Because of the confidential relationship between Penna and Muellner, the Appellate Division found that Muellner must show that the joint account was created free of undue influence and intended as an inter vivos gift.⁶⁷ The court held that if Muellner carried her burden of proof, the plaintiff may still challenge entitlement to the joint account by attempting to rebut the presumption of survivorship.⁶⁸ Since the trial judge utilized the wrong analysis in determining whether the presumption of survivorship was rebutted and there was evidence rebutting this presumption, the Appellate Division reversed and remanded for a new trial.⁶⁹

Thus, in claims of undue influence, the analysis to be used in evaluating the claim will depend upon whether the claim concerns the execution of a will or an inter vivos gift. If the latter, it is easier to shift the presumption of undue influence to the donee since no "suspicious circumstances" must be shown. However, once the burden shifts, in the context of a will, the presumption typically must be overcome by the preponderance of the evidence unless the situation merits the imposition of the higher burden of proof. In the context of an inter vivos transfer, the more difficult clear and convincing standard will apply.

1. In re Estate of Penna, 322 N.J. Super. 417 (App. Div. 1999)(inter vivos gift); In re Will of Landsman, 319 N.J. Super. 252 (App. Div.) certif. den., 162 N.J. 127 (1999) (will).
2. Landsman, supra, 319 N.J. Super. at 255-56. This case actually involved the claim of undue influence as to two wills but, at the time of the appeal, the executor was not contesting the undue influence in the making of the second will.
3. Penna, supra, 322 N.J. Super. at 419.
4. Gellert v. Livingston, 5 N.J. 65, 71 (1950).
5. Id.
6. Haynes v. First National State Bank of New Jersey, 87 N.J. 163, 176 (1981).
7. Id.
8. Id.
9. Id.
10. Id. at 178.
11. In re Blake’s Will, 21 N.J. 50, 58-59 (1956).
12. Gellert, supra, 5 N.J. at 73.
13. Id.; see also Blake, supra, 2 N.J. at 56 and In re Estate of Churik, 165 N.J. Super. 1, 4 (App. Div. 1978) aff’d, 78 N.J. 563 (1979).
14. Gellert, supra, 5 N.J. at 73.
15. In re Hopper, 9 N.J. 280, 282 (1952).
16. Stroming v. Stroming, 12 N.J. Super. 217, 224 (App. Div.), certif. den., 8 N.J. 319 (1951).
17. Id.
18. Id.
19. Kuruc v. Kuruc, 23 N.J. Super. 584, 591 (Ch. Div. 1952); see also Gellert, supra, 5 N.J. at 72.
20. Blake, supra, 21 N.J. at 57.
21. In re Will of Liebl, 260 N.J. Super. 519, 529 (App. Div. 1992), certif. den., 133 N.J. 432 (1993).
22. Churik, supra, 165 N.J. Super. at 6.
23. Landsman, supra, 319 N.J. Super. at 264.
24. Id.
25. Id. at 258.
26. Id.
27. Id.at 259.
28. Id.
29. Id.
30. Id. at 256.
31. Id.
32. Id. at 257. The suit was actually filed by the niece’s guardian after the niece was adjudged incompetent.
33. Id. at 264.
34. Id. at 264-65; Haynes, supra, 87 N.J. at 167.
35. Landsman, supra, 319 N.J. Super. at 266.
36. Id. at 265.
37. Id.
38. Id.
39. Id. at 266.
40. Id.
41. Id. at 269.
42. Id. at 267.
43. Id. at 269.
44. Pascale v. Pascale, 113 N.J. 20, 30 (1988).
45. Id. at 31.
46. Id.
47. Id. at 31, citing to In re Dodge, 50 N.J. 192, 227, quoting In re Fulper’s Estate, 99 N.J. Eq. 293, 302 (Prerog. Ct. 1926).
48. Seylaz v. Bennett, 5 N.J. 168, 173 ( 1950); see also Pascale, supra at 31.
49. In re Estate of Penna, 322 N.J. Super. 417, 422 (App. Div. 1999).
50. N.J.S.A. 17:16I-5(a); see also Penna, supra, 322 N.J. Super. at 419.
51. Penna, supra at 422.
52. Id. at 419.
53. Id. at 419-20.
54. Id. at 421.
55. Id. at 424.
56. Id.
57. Id.
58. Id.
59. Id.
60. Id.
61. Id.
62. Id. at 427.
63. Id.
64. Id. at 428.
65. Id.
66. Id.
67. Id. at 419.
68. Id.
69. Id. at 419, 429.