Title: In the Matter of the Estate of Theodore M. Payne, Deceased

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). Payne met Don Burton in 1997 when both were suffering from AIDS. In May 1997, they began living together in Payne s residence in Morristown. At the time, Payne was a Managing Director of Finance at Metropolitan Life, and Burton was disabled. Payne had jointly purchased a vacation home in Harpswell, Maine with Frederick Rick Wohlfarth, which provided for a right of survivorship. Payne and Wohlfarth had lived together as partners but, at the time they purchased the vacation home, their partnership had ended. The men remained friends and agreed that the first to die would satisfy the balance of the mortgages on the property and that each would provide for that provision in his respective will. Payne and Wohlfarth exchanged drafts of their wills to ensure each contained similar language concerning the payment of mortgage debts on the Maine property. In his March 13, 1998 will, Payne bequeathed to Wohlfarth his half interest in the Maine property and a sum equal to the amount necessary to pay off the mortgage debts on the Maine property reduced by the proceeds of any life insurance policy on Payne s life payable to Wohlfarth. Payne also bequeathed the personal property located in Morristown to Wohlfarth and divided the residue among other beneficiaries. There was no provision for Burton in this will. In July 1998, Payne sold the Morristown residence and bought a home in Harding Township, New Jersey. Burton lived in the home with Payne. According to Burton, while traveling with Payne to Maine in the summer of 1999 or 2000, they discussed the care of Payne s two dogs upon Payne s death. Burton told Payne that he was concerned about being able to provide a home for himself and the dogs should Payne die. Burton claims that Payne told him not to worry because he would leave the house to Burton and that Payne s life insurance proceeds would pay off the mortgage on the New Jersey home. Burton also claimed that a similar conversation took place on another trip to Maine during the summer of 2000. At that time, Payne allegedly again said that Burton would inherit the New Jersey property debt-free. At some point, Payne contacted his attorney, Jack Wolff, to change his 1998 will. On August 15, 2000, Wolff sent Payne a revised draft. The primary change in the will provided a gift to Burton of Payne s personal property located in the New Jersey home. In November 2000, Payne reviewed the draft, outlined several changes and mailed the will back to Wolff. The will neither specified a bequest of the New Jersey home to Burton nor that it be inherited debt-free. Wolff made the changes and sent another draft to Payne on November 21, 2000. Payne s deteriorating health forced him to leave his job in September 2001. Burton assisted Payne with his hygiene needs, the preparation of meals, transportation to and from medical appointments, and the care of Payne s dogs. Payne still had not signed the revised will and on October 1, 2001, Payne wrote to Wolff commenting that the will only gave the contents of the New Jersey home to Burton, even though he intended to give the house and contents to Burton. Payne also inquired about issues concerning language in the will relating to the Maine property. Wolff made certain changes and forwarded a revised draft to Payne on October 15, 2001. Again, there was no reference to a bequest of the New Jersey home to Burton. Burton discussed with Payne his concerns about this proposed draft and they both agreed that Burton should be referred in the will as partner rather than friend. In addition, Burton wondered why the will expressly provided for payment of mortgage debts for the Maine property but did not contain similar language for the New Jersey property. Payne responded that the specific language was required for the Maine property because it was jointly owned but that the clause in his will directing payment of all his just debts provided for the debt on the New Jersey property. Payne wrote Wolff on November 11, 2001, instructing him to refer to Burton as partner, to prepare a Power of Attorney and Medical Directive in favor of Burton, and to provide guidance on the financial and tax aspects of planning his estate. Crucial language in this letter refers to: liquidating the debt encumbering his real estate so that it passes to his beneficiaries free and clear; not wanting the properties sold to satisfy the debt; and desiring that his life insurance, worth slightly over $1million, be used to pay off the mortgage balances. Payne suggested that they discuss these issues when he comes to sign the will and other documents. After receiving this letter, the only change Wolff made was to designate Burton as partner. On March 4, 2002, Wolff sent Payne the revised will, power of attorney, and living will. Payne was hospitalized on March 13, 2002, the day before he was sign the documents in Wolff s office. Wolff came to the hospital the following day and, after determining that Payne was lucid and wanted to execute the will and related documents, had Payne sign these papers. The next day, Payne lapsed into a coma and remained in that condition until his death on April 21, 2002. Daulton Lewis was named executor of the will and, ultimately, Payne s estate satisfied the mortgage on the Maine property but refused to pay the debt on the New Jersey property. Burton sued the estate, alleging that at the time of Payne s death, he had been living with Payne as his partner for about four years, that Payne had told him that he would inherit the New Jersey property debt-free, and that the November 11, 2001 letter to Wolff expressed that intent. Answers were filed by Lewis and various other beneficiaries. At the bench trial, Burton testified about the relationship and Payne s expressed intention to bequeath the New Jersey property to Burton debt-free. Wolff testified that Payne had not instructed him to do the same thing regarding mortgage debts for the New Jersey property that he did for the Maine property. Wolff also stated that he did not interpret the November 11th letter to mean that Payne wanted the mortgage debts on the New Jersey property satisfied out of his estate. Lewis and Wohlfarth also testified. The trial court found that the November 11th letter evidenced Payne s desire to find a way to protect Burton from the mortgage payments but nonetheless concluded that Payne failed to meet the burden of establishing Payne s intention of giving him the property debt-free. The court reasoned that Payne was looking in other directions to protect Burton and never expressed an intention that the other beneficiaries bear the expense of having the estate satisfy the mortgage. The court rejected the all my just debts clause as evidence of Payne s intention to cover the mortgage debts on the real estate, especially in light of the detailed language regarding the Maine property. The Appellate Division affirmed, finding that the trial court properly applied the doctrine of probable intent in that Payne was unable to carry out his desire to provide Burton with a debt-free property because of the priority attached to the Maine property and the lack of sufficient residual assets remaining in the estate to accomplish the other bequests. The Supreme Court granted certification. HELD: The application of the doctrine of probable intent demonstrates that Theodore Payne intended to bequeath his New Jersey property to his partner debt-free. 1. In interpreting a will, the goal is to ascertain the probable intent of the testator. Primary emphasis should be on the testator s dominant plan and purpose as they appear from the entirety of the will in consideration of the surrounding facts and circumstances. The court should ascribe to the testator those impulses that are common to human nature and construe the will to effectuate those impulses. Courts are to effectuate the testator s probable intent to accomplish what he or she would have done had he or she envisioned the present inquiry. Extrinsic evidence should be admitted to aid in ascertaining probable intent. (Pp. 11-14) 2. The most important evidence of Payne s probable intent is set forth in the November 11, 2001 letter to his lawyer. The fifth and sixth paragraphs of the letter clearly evidence Payne s probable intent and are consistent with an intention that the all my just debts clause was a direction for the estate to pay the mortgage debts on the New Jersey property. There is a clear and unambiguous expression of Payne s intent that his beneficiaries, Burton and Wohlfarth, receive their respective real estate debt-free and that neither beneficiary should be required to sell the property to pay off the mortgages. Payne s use of the plural beneficiaries and properties evidences that he was referring to both Wohlfarth and Burton and to both the Maine and New Jersey properties. (Pp. 14-17) 3. The Court s reasoning also supports the conclusion that Payne s probable intent was to pay off the mortgage debts on the Maine property first and then pay off the debt on the New Jersey property. (P. 18) Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the trial court for further proceedings consistent with this opinion. JUSTICE RIVERA-SOTO, dissenting, is of the view that it is the November 11, 2001 letter that is ambiguous not the will, which clearly demonstrates that the mortgages on the Maine home were to be satisfied from the estate, while no such provision was made in respect of the New Jersey residence. Justice Rivera-Soto would be guided by deference to the trial court s findings properly given them by the Appellate Division. CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ZAZZALI, and ALBIN join in JUSTICE WALLACE s opinion. JUSTICE RIVERA-SOTO filed a separate dissenting opinion. SUPREME COURT OF NEW JERSEY A- 12 September Term 2005 IN THE MATTER OF THE ESTATE OF THEODORE M. PAYNE, DECEASED. Argued January 4, 2006 Decided April 20, 2006 On certification to the Superior Court, Appellate Division. Dennis T. Smith argued the cause for appellant, Donald P. Burton (Pashman Stein, attorneys; Michael S. Stein, of counsel; Mr. Smith and Mr. Stein, on the briefs). John P. Beyel argued the cause for respondent Daulton J. Lewis, Executor of the Estate of Theodore M. Payne, Deceased (McElroy, Deutsch, Mulvaney & Carpenter, attorneys). Neal M. Frank argued the cause for respondent Frederick P. Wohlfarth. JUSTICE WALLACE, JR. delivered the opinion of the Court. In this will contest, decedent had executed a will with a specific provision for his estate to pay to the joint tenant of a property he owned in Maine an amount equivalent to the mortgage debts on that property. Other than the payment of all my just debts clause, the will did not have a provision for the estate to pay the mortgage debts on decedent s home in New Jersey. Decedent bequeathed his New Jersey property to his partner, who lived with him in that residence. The trial court concluded that decedent s partner and not the estate was responsible for payment of the mortgage debts on the New Jersey property. The Appellate Division affirmed. We conclude that application of the doctrine of probable intent demonstrates that decedent intended to bequeath the New Jersey property to his partner debt-free. We reverse. At present, the major source of cash to the estate would come from life insurance proceeds of about $1 million and I have viewed this cash as available to be directed to pay off the mortgage balances which may exist at the time. However, this might not be true if estate taxes are assessed on the gross value of the real estate, which is currently worth between $1.7 million and $2.2 million, and there is a big tax liability to satisfy ahead of addressing the mortgages. There is another $300,000-$400,000 (assuming the stock market is bottoming out) of investments which would be available to the estate to pay taxes and debt. It has been suggested that I structure the life insurance proceeds to be paid into a trust outside of the estate where the trust would be directed to use the proceeds to repay the real estate debt. I am not inclined to create another level of complexity such as this unless it is necessary. Maybe we can sort through some of these issues when I come in to sign the will and other documents. [(emphasis added).] After receiving that letter, the sole change Wolff made in the will was to designate Burton as partner. On March 4, 2002, Wolff wrote to Payne enclosing the revised will, power of attorney, and living will. Wolff arranged to have Payne execute the documents in his office on March 14, 2002. Unfortunately, Payne was hospitalized on March 13, 2002. The following day Burton telephoned Wolff, informed him of Payne s hospitalization, and requested that Wolff deliver the original documents to the hospital for Payne to execute. Wolff went to the hospital and spoke to Payne in the Intensive Care Unit. After asking Payne several questions, Wolff was satisfied that Payne was lucid and wanted to execute the will and related documents. Payne then signed the will, power of attorney and living will. The next day Payne lapsed into a coma and remained in that condition until his death on April 21, 2002. Daulton Lewis was named executor of the will. Lewis informed Burton that he was responsible for paying the outstanding debt on the New Jersey property. Burton replied that Payne wanted any mortgages on the house satisfied from his estate and intended that the property would pass to him debt-free. At the time of Payne s death, the approximate value of his real estate was $900,000 for the New Jersey property and $375,000 for his one-half interest in the Maine property. The New Jersey property was encumbered by a mortgage in the amount of $347,190 and a line of credit of $92,458, and the Maine property was encumbered by a mortgage of $302,450 and a second mortgage of $106,092. The estate ultimately received life insurance proceeds totaling $1,053,425. Payne s estate satisfied the obligations on the Maine property but refused to pay the debt on the New Jersey property because it was bequeathed to a named beneficiary. Burton filed a complaint against the estate. He alleged that at the time of Payne s death, he had been living with Payne as his partner for approximately four years, that Payne informed him that he would inherit the New Jersey property debt-free, and that the November 11, 2001, letter from Payne to Wolff expressed that intent. Answers were filed by the executor and various other beneficiaries. At the bench trial, Burton testified that his relationship with Payne was like a marriage in every way. He outlined three conversations he had with Payne in which Payne expressed his desire to give Burton the New Jersey property debt-free. Wolff, who had drafted the will, testified that Payne instructed him to provide for the estate to pay the balance of the mortgages on the Maine property but had not instructed him to do the same for the mortgage debts on the New Jersey property. Wolff acknowledged that he had neither discussed with Payne the difference in treatment of the two properties nor estate tax issues. When he received the November 11, 2001, letter, Wolff did not interpret the letter to mean that Payne wanted the mortgage debts on the New Jersey property satisfied out of his estate. It was Wolff s belief that except for changing the description of Burton from friend to partner, the will was satisfactory to Payne. On cross-examination, Wolff explained that despite the reference in the November 11, 2001, letter that Payne wanted the mortgage debts encumbering the real estate paid off so it passes to my beneficiaries free and clear, he believed Payne was only referring to the Maine property. Wolff admitted that following the November 11, 2001, letter, he never met with Payne to sort through some of the issues raised in the letter and never discussed with Payne whether his use of the word properties was a mistake. Lewis, the executor of the estate, testified that he was a long-time friend of Payne, and that Payne was the godfather to his daughter. He said that his daughter was one of numerous beneficiaries under the residuary clause of Payne s will. It was not until after Payne s death that he became aware that Payne had named him executor. Lewis, who was a lawyer, said that Wohlfarth was one of his clients. Lewis recalled a conversation with Payne and Wohlfarth wherein they discussed a testamentary plan in which the first to die would pay off the mortgage debts on the Maine property. Wohlfarth testified that he had both a personal and a business relationship with Payne. Even after their close personal relationship ended, he said they continued to maintain a business relationship. In 1997, the two of them purchased the Maine property jointly, each contributing to the purchase price and being obligated on the mortgage. Wohlfarth stated that Lewis was his attorney and had drafted his will. Following a discussion with Lewis, it was Wohlfarth s understanding that at some point the money in the estate would be disbursed to pay off the various mortgages. He had agreed with Payne that the first to die would pay off the mortgage debts on the Maine property either through the estate or with life insurance proceeds. He and Payne had exchanged wills and both had a similar clause about paying off the mortgage debts on the Maine property. The trial court found that the November 11, 2001, letter was evidence of Payne s desire to find a way that Burton would be protected from the mortgage payments. However, the court concluded that Payne was looking in other directions for that help and never expressed an intent that other beneficiaries be saddled with the expense of having the estate satisfy the mortgage. The court rejected the all my just debts clause of the will as evidencing Payne s intention to cover the mortgage debts on the real estate because he had a detailed disposition with respect to the [Maine] property owned by decedent and Wohlfarth. The court reasoned that it would not be necessary to specifically provide for the debt on the Maine property if the all my debts clause could just have easily covered the same item with respect to the Maine property. Additionally, the court held that Payne s alleged intention to have the all my just debts clause apply to the mortgage debts for both properties was inconsistent with Wolff s testimony that Payne was detail oriented in their dealings. The court concluded that Burton failed to meet the burden of establishing that Payne intended to give him the New Jersey property debt-free. The Appellate Division affirmed in an unpublished opinion. The panel found that the trial court properly applied the doctrine of probable intent by attempting to accomplish what the testator would have done if confronted with the issues. The panel concluded that the trial court essentially found that although Payne would have liked to provide Burton with the property debt-free, he was unable to do so in light of the priority he attached to the Maine property and the lack of sufficient residual assets remaining in the estate to accomplish his other bequests. We granted Burton s petition for certification. 185 N.J. 35 (2005). JUSTICE RIVERA-SOTO, dissenting. In this case, the testator held ownership interests in two homes in different states. More importantly, the nature of testator s ownership in those two properties was different: he owned his vacation home in Maine in joint ownership with another, which joint ownership had a right of survivorship, while he alone owned his primary New Jersey home. The testator s will reflected this dichotomy: although it specifically provided that, as part of his estate, the mortgages on the Maine home were to be satisfied out of his estate, there was no parallel provision made for any mortgages that may have encumbered his New Jersey home. In the face of clearly dissimilar treatment by the testator of his two separate real property holdings, the majority holds that both the trial court and the Appellate Division erred in determining this testator s probable intent and that, instead, the application of the doctrine of probable intent demonstrates that decedent intended to bequeath the New Jersey property to his partner debt-free. Ante, ___ N.J. ___ (2006) (slip op. at 2). I cannot agree. The only credible proofs tendered that the testator s will did not represent fairly the testator s intent consisted of extrinsic evidence in the form of a letter from the testator to his counsel that preceded the testator s execution of the will by several months. See footnote 1 Unlike the majority s expansive application of extrinsic evidence in order to divine the testator s probable intent, caution mandates that we hew closely to the limits we have placed on the use of extrinsic evidence as a barometer of a testator s probable intent. As we made clear in Wilson v. Flowers, 58 N.J. 250, 263 (1971): [I]n deciding whether there is an ambiguity, a court should always admit extrinsic evidence including direct statements of intent since experience teaches that language is so poor an instrument for communication or expression that ordinarily all such evidence must be examined before a court can be satisfied of whether an ambiguity exists. We do not, of course, mean to imply that such evidence can be used to vary the terms of the will, but rather that it should be admitted first to show if there is an ambiguity and second, if one exists, to shed light on the testator s actual intent. [(citation omitted.)] Held side-by-side, there is no ambiguity in the explicit terms of the will generated by that letter. The testator simply does not state in that letter what the majority holds here, that it was the testator s intent that his New Jersey home pass unencumbered to his devisee. On the contrary, it is the letter that is ambiguous while the will itself is patently clear: the mortgages on the Maine vacation home were to be satisfied from the estate, while no such provision was made in respect of the New Jersey home. See footnote 2 In these circumstances, I would be guided by the deference for the trial court s findings properly accorded to them by the Appellate Division. Therefore, I would affirm for substantially the reasons thoughtfully expressed by both the trial court and the panel here. I respectfully dissent. SUPREME COURT OF NEW JERSEY NO. A-12 SEPTEMBER TERM 2005 ON CERTIFICATION TO Appellate Division, Superior Court IN THE MATTER OF THE ESTATE OF THEODORE M. PAYNE, DECEASED. DECIDED April 20, 2006 Chief Justice Poritz PRESIDING OPINION BY Justice Wallace DISSENTING OPINION BY Justice Rivera-Soto