IN THE MATTER OF THE ESTATE OF EDWARD A. CANTOR Deceased

 
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The status of this decision is

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(NOTE: The status of this decision is unpublished.)
 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4233-03T54233-03T5

IN THE MATTER OF THE ESTATE OF

EDWARD A. CANTOR,

Deceased.

________________________________________________________________

 

Argued December 6, 2005 - Decided

Before Judges Coburn, Lisa and S.L. Reisner.

On appeal from the Superior Court of New Jersey,

Chancery Division, Probate Part, Morris County,

MRS-P-0547-02.

Alan B. Lebensfeld argued the cause for appellant

Michael Cantor (Lebensfeld Borker & Sussman, attorneys; Mr. Lebensfeld and Phyllis Barker, on

the brief).

John A. Ridley argued the cause for respondent

Jane B. Cantor (Drinker Biddle & Reath, attorneys;

Mr. Ridley and Michael G. Langan, on the brief).

Mary A. Powers argued the cause for respondent

Charles B. Jacobs (Dillon, Bitar & Luther, attorneys;

Ms. Powers, of counsel and on the brief).

Richard D. Catenacci argued the cause for respondent

Cheryl Trabocco (Mr. Catenacci, of counsel and on

the brief).

PER CURIAM

We granted Michael Cantor leave to appeal and a stay of an order removing him as executor of the estate of his father, Edward A. Cantor, deceased. The will provided for about $10 million in specific bequests with the balance of about $80 million going to Michael, who was a designated co-executor. When the order was entered, virtually all the specific bequests had been paid except for creation of a trust, worth about $1 million, for Michael's daughter. Also at that time, although one of the parties had written a letter to the trial judge asking for Michael's removal, the only pending formal request was a motion for re-consideration of an order refusing to add a co-executor. A judge should be particularly reluctant to remove a fiduciary chosen by the decedent, Connelly v. Weisfeld, 142 N.J. Eq. 406, 411 (E. & A. 1948), and the foremost concern when such an act is contemplated should be whether the executor's continued service would be detrimental to the estate. Wolosoff v. CSI Liquidating Trust, 205 N.J. Super. 349, 360 (App. Div. 1985). Although we may reverse such an order only for manifest abuse of discretion, ibid., we are satisfied that occurred here because Michael is the primary beneficiary under the will, virtually all the specific bequests had been honored, and the trial judge's findings provide insufficient support for the conclusion that Michael's continued service would be detrimental to the estate.

I

By way of introduction to our statement of facts, which of necessity will include a description of many of the procedural aspects of the case, we note that despite the existence of factual issues bearing on the question of whether Michael should be removed as executor, the judge ordered Michael's removal without a testimonial hearing. Since no party requested a testimonial hearing, and since the judge ultimately did not rely on facts in dispute, we will limit our description of the events to the undisputed facts.

Edward Cantor died on February 19, 2002, and on March 1, 2002, his will was admitted to probate and Letters Testamentary were issued to the executors he had named, his accountant, Charles B. Jacobs, and his son Michael. The parties agree that Edward's estate is worth between $90 and $100 million, consisting mainly of multi-tenanted industrial properties. Michael is an experienced businessman who was involved in some of his father's businesses and has been actively operating the estate's businesses since his father's death. He is the sole residuary legatee and is the estate's primary beneficiary. The specific gifts total less than $10 million, with most of the money going in trust to Edward's wife, Jane, who is the step-mother of Michael and his sister, Cheryl S. Trabocco. There is a trust for Michael's daughter, Brittany, of about $1 million and twelve charitable gifts totaling $925,000. Edward expressly disinherited his daughter Cheryl and her adopted daughter Pilar.

The will is complex and description of all its provisions is unnecessary. However, the following points should be noted. The will directs the executors to pay Jane $500,000 within fifteen days after their appointment. They were also to pay her $227,500 so that she, in her discretion, could make the payments to twenty individual beneficiaries. If she chose not to, then the gifts were to be made from the residuary estate, and Jane was entitled to retain the $227,500. The executors' first step was to fund, with $6 million, the Cantor Marital Trust for Jane's benefit. Funding was to be completed "as promptly as possible" after Jane waived her rights under the pre-nuptial agreement and was to "be completed to the maximum extent possible within ninety (90) days after the effective date of such waiver." Jane is to receive only the income from that trust for life, with the principal going to Michael if he survives her. Unreasonable delay in funding the trust "shall constitute grounds for the removal of the involved co-Executor

. . . ." All taxes were to be paid out of the residuary estate.

During one of the early proceedings, Michael indicated informally that he had a claim against the estate for approximately $45 million based on misconduct of his father during their business dealings. That claim has not yet been formally presented to the estate. Although Michael still maintains this claim, and has recently certified that with interest it exceeds $80 million, during oral argument of this appeal he stipulated that he would not assert it against any of the specific bequests. In other words, Michael's only reason for asserting this claim would be to avoid estate taxes and sharing the residue of the estate with Cheryl.

II

In June 2002, Cheryl sued for herself and her daughter, seeking to set aside the residuary clause of the will on the ground that Michael used undue influence to cause their disinheritance. She demanded that Michael be removed as executor and asked for one-half of the residuary estate. In September 2002, Cheryl sent interrogatories and a request for production of documents to the executors.

In May 2002, Jane executed the waiver required to fund the marital trust, and in August 2002, Jane sued the co-executors, alleging numerous failures on their part, including failure to fund the marital trust and failure to pay the $500,000 cash bequest. Jacobs and Michael filed answers, and Michael filed a counterclaim against Jane, alleging that she had misappropriated estate assets and interfered with the estate's administration, and a cross-claim against Jacobs, alleging accounting malpractice and a willful failure to cooperate in the estate administration. There were additional proceedings in 2002, which need not be detailed, but which came about because of a number of disagreements among the parties.

In January 2003, Jacobs and Jane filed a motion asking the court to remove Michael as executor, and on February 7, 2003, Judge Stanton deferred decision on that issue, while observing that if the estate's objectives were not satisfied, it was his "general intention . . . to remove both executors and put somebody in who will start getting these things done." At that time, Judge Stanton ordered that the executors pay the $500,000 to Jane and fund the marital trust by March 14, 2003. Michael moved for reconsideration, and after hearing argument on March 14, 2003, Judge Stanton signed an order on March 19, 2003, which among other things, denied the motion to remove the executors but directed that they pay the $500,000 to Jane by March 21, 2003, and that they fund the $6 million marital trust "as soon as practicable, and by no later than April 25, 2003 . . . ." Michael paid the $500,000 on March 14, 2003. During the March 14 hearing, Judge Stanton explained why he would not remove Michael:

I'm not going to remove Michael Cantor. I think there's been movement, and I'm hopeful of that. And, of course, I don't want to remove him . . . because . . . the residuary of this estate is his, so he's got the biggest stake in the whole thing, and he should be involved in it, and I gather he's a person of some skill and sophistication in the kind of business dealings that will be useful in getting this -- the assets in this estate organized, so of course, we want to keep him in there, but we want to keep him in there, but we also want[] to get this stuff accomplished for Mrs. Cantor, as the decedent wanted, so I'm trying to get everybody their primary objectives.

Judge Stanton retired, and in April, Michael filed a motion seeking to defer funding of the marital trust. In May 2003, Cheryl filed a motion to compel discovery from Michael. In June 2003, another judge granted a motion disqualifying Michael's attorney and other relief which need not be detailed. In September 2003, Jane filed a motion to remove Michael as executor because, among other things, he had still failed to fund the marital trust. Jacobs joined the motion to remove Michael. Michael finally funded the marital trust in October 2003, which was almost six months after he had been ordered to perform that act.

On November 4, 2003, the judge entered an order "that discovery in this matter is compelled" without setting any date for completion of any aspect of the discovery. On November 21, 2003, that judge heard the outstanding motions. He granted interest on the $500,000 and the marital trust, which Michael had opposed despite the will's provision that all payments to Jane should include interest from the date of Edward's death; denied Jane's motion to remove Michael as executor; and enforced an agreement between Michael and Jacobs calling for Jacobs' resignation as executor. During the hearing, while the judge was deciding one of the issues, Michael apparently made some comments that were not recorded and walked out of the courtroom. Although the judge said that he did not like Michael's "attitude" as indicated by that conduct, he refused to remove Michael as executor for the following reasons:

So I think the settlement made all the sense in the world and I'm going to, in effect, enforce it by saying Michael is not going to be removed, and he will be the sole executor, as the settlement agreement contemplated.

This -- it just doesn't make any sense to me when -- I think [Michael's counsel] has put his finger on the real nub of this thing. If Jane Cantor gets the six million dollars and she has the five million dollars, she gets the interest, and she gets funded a sum that will protect her in terms of the future claims that she has, in the sense that there will be money segregated for her, for those items, I think the major part of this case is over. And there isn't that much to fight about, and there isn't any sense, as far as I could see, to bring in another executor, an independent executor, whatever that may mean, to deal with issues that don't really require an awful lot of work.

I don't think that an independent executor, or a neutral, whatever you want to call it, is going to have any effect whatsoever on those issues. . . . Those issues are not complex issues. They can be resolved and they should . . . be resolved among the parties. . . .

So I see no reason to -- except I recognize that Mr. Cantor -- Michael Cantor has been difficult and he was difficult here in the courtroom. Although I also recognize that I felt that [Cheryl's counsel] stirred him up a little bit with some of the language he used about Mr. Cantor, but Mr. Cantor demonstrated to me that he has no real caring about court orders and that kind of thing. He doesn't have any respect for the court system. And I recognize that, but I also recognize that he is the one who has to administer this estate. It doesn't make any sense to have somebody else come in and do it.

In late December, Jane filed a motion for reconsideration, seeking among other things, appointment of a co-executor in addition to Michael. While that motion was pending, Michael sent checks to Jane's counsel which bore the inscription "Extortion money per court order marked filed 12/29/03." Jane's counsel sent copies of the checks to the judge with a letter claiming that the checks showed that Michael was unfit to remain as executor.

On January 23, 2004, the judge considered Jane's motion and entertained extensive argument on the question of whether Michael should be removed or an additional executor should be added to administer the estate. The judge reserved decision.

On February 20, 2004, the judge delivered an oral opinion explaining why, despite Jane's limited formal request for addition of a co-executor, he had decided to entirely remove Michael as executor, and appoint an attorney instead. His first point was that Michael's conduct in walking out of the courtroom while he was deciding a legal point showed "an attitude that Mr. Cantor has towards the Court and towards legal processes that I think is significant in this case." He further explained that the situation reflected badly on Michael's ability to work as an executor of the estate and deal with court orders and court decisions. Secondly, the judge said that by the time of the last hearing there had been "no response to the order with respect to the discovery on the Cheryl [Trabocco] case." Then he discussed the "Per the extortion by the court order of" inscription on the checks. But he acknowledged that "it may very well be that it's not a reflection on the Court . . . that Mr. Cantor didn't mean it to be a reflection on the Court." Nonetheless, he said it "reflects [Michael's] unwillingness to voluntarily comply with both the will and any court order." And finally he reached what appears to be his main reason, Michael's informal claim against the estate for $45 million, about which he said the following:

And the thing that I didn't really grasp at that time [referring to the last hearing], which I think is an important consideration, is that . . . Michael . . . claims that he is a creditor of the decedent in the amount of forty-five million dollars. That means that he is both a creditor and . . . the executor of the estate, and I think that creates a problem here, . . . a significant problem.

. . . .

And it certainly creates a problem with the IRS because we're setting aside amounts for Jane Cantor, and if Mr. Cantor's wrong about the debt to the IRS, then that money would be available for the IRS to take, and that's where they would go first, I would think, is after that money. So the money set aside for Jane Cantor would certainly be subject to the IRS lien, and the first place the IRS would go to get their money.

So, for all those reasons, I believe that Mr. Cantor should be replaced.

Before the removal order was signed, Michael supplied the trial judge with a certification from the estate's certified public accountant, which included the following statements:

6. During the past 14 months, I have worked closely with Mr. Cantor in regard to the Estate's numerous and complex financial and tax matters. . . .

7. . . . Cantor . . . greatly has improved the operations of the Estate in order to maximize its value . . ., [while] demonstrat[ing] a rather amazing capability to handle what is an extraordinarily complex estate, comprised largely of multi-tenanted commercial, rent-producing properties which are entangled in a web of partnerships and other entities, in which, in some cases, the Estate holds a minority interest with Mr. Cantor individually and/or others having a majority interest which existed well prior to the death of his father. In fact, Mr. Cantor's knowledge of accounting matters and his tax acumen, as a layman, is quite remarkable.

8. Mr. Cantor has been extremely cooperative in my efforts, providing me at all times with the necessary information which I require to prepare the tax returns to be filed on behalf of the Estate. Indeed, in my experience, his efforts on behalf of the Estate have been quite remarkable and extremely successful. Based upon our review of the Estate's books and records, the Estate's taxable income for the 12-month period ended January 31, 2004, will be in excess of $21 million, after the appropriate deduction of all expenses and depreciation.

9. I am in the final stages of preparation of the Estate's federal estate tax return.

Although we do not rely on this certification, we are concerned that the removal of Michael as executor without a formal request for that relief probably prevented the judge from having it before reaching his decision, and that he may not have considered it before signing the order. At the least, this certification suggests that the earlier decisions refusing to remove Michael were quite sound.

III

The Legislature has provided the following grounds for removal of fiduciaries, which of course includes executors:

The court may remove a fiduciary from office when:

a. After due notice of an order or judgment of the court so directing, he neglects or refuses, within the time fixed by the court, to file an inventory, render an account or give security or additional security;

b. After due notice of any other order or judgment of the court made under its proper authority, he neglects or refuses to perform or obey the order or judgment within the time fixed by the court; or

c. He has embezzled, wasted or misapplied any part of the estate committed to his custody, or has abused the trust and confidence reposed in him; or

d. He has removed from the state or does not reside therein and neglects or refuses to proceed with the administration of the estate and perform the duties and trusts devolving upon him; or

e. He is of unsound mind or mentally incapacitated for the transaction of business; or

f. One of two or more fiduciaries has neglected or refused to perform his duties or to join with the other fiduciary or fiduciaries in the administration of the estate committed to their care whereby the proper administration and settlement of the estate is or may be hindered or prevented.

[N.J.S.A. 3B:14-21.]

In addition, "a court may invoke its equity powers to remove [an executor]." In re Duke, 305 N.J. Super. 408, 438 (Ch. Div. 1995) (citing In re Koretzky, 8 N.J. 506, 530 (1951)). The critical question is, as we noted at the beginning of this opinion, "whether the circumstances are such that the continuance . . . in office would be detrimental to the [estate] and require the court to grant relief." Wolosoff, supra, 205 N.J. Super. at 360. Thus, mere friction between an executor and beneficiaries is not a ground for removal unless the relationship is likely to "interfere materially with the administration" of the estate. Ibid. Estate litigation is often acrimonious, but the removal of an executor appointed by the decedent is generally to be avoided. Connelly, supra, 142 N.J. Eq. at 411. In this regard, it is worth repeating the following statement endorsed by the Court of Errors and Appeals in Connelly: "No man is infallible; the wisest make mistakes; but the law holds no man responsible for the consequences of his mistakes which are the result of the imperfection of human judgment, and do not proceed from fraud, gross carelessness or indifference to duty." Ibid. (citation omitted).

Michael's delay in funding the marital trust and paying the $500,000 certainly violated court orders, but no one suggests that every violation of a court order requires removal. His judgment was unsound but more reflective of reluctance rather than gross indifference to duty. Moreover, both of those requirements had been satisfied long before Michael was removed. Although Jane argues that they provide a basis for removal, the judge did not rely on them, and we see no basis for doing so now.

Nor did Michael's delay in answering Cheryl's interrogatories provide a sound basis for his removal. Although Cheryl served her interrogatories in September 2002, she did not move to compel discovery until May 2003, and that motion was not decided until entry of an order in November 2003, which merely recited "that discovery in this matter is compelled," without setting a date by which any discovery should be turned over. The judge relied, in part, on Michael's failure to provide discovery by January 23, 2004, but the order contained no such specific requirement. While it might be said that Michael neglected his duty in this regard, it was not a gross neglect and could have been corrected with an order less extreme than complete removal as executor.

Although it may have been impolite for Michael to leave the courtroom while the judge was deciding a point of law, that act surely did not support the inference that Michael would not comply with future court orders. Michael's angry extortion inscriptions on the checks were inappropriate, but the judge concluded that "it may very well be that it's not a reflection on the Court . . . that Mr. Cantor didn't mean it to be a reflection on the Court." Since the checks were sent to Jane pursuant to a court order, there is no basis for the judge's conclusion that the inscriptions "reflect[ed] . . . [Michael's] unwillingness to voluntarily comply with both the will and any court order."

It appears that the judge's main reason for ordering Michael's removal as executor was Michael's informal $45 million claim against the estate. Certainly, a conflict of interest between an executor and beneficiaries of the estate can be a basis for removal. In re Koretzky, supra, 8 N.J. at 528; In re Kolbeck, 27 N.J. Super. 135, 137 (App. Div. 1953). But when the judge decided on removal, virtually all of the specific bequests had been honored and Michael was the sole residuary legatee. The only specific problem identified by the judge was that if Michael wrongly asserted his claim, and filed an estate tax return on that basis, the Internal Revenue Service might deny it and look to the specific bequests to satisfy its tax assessment. But removing Michael does nothing to avoid that problem since it may arise no matter who serves as the estate's executor if Michael formally files and pursues the claim. Moreover, considering the size of the residuary estate, the concern that it would not be able to pay any taxes imposed by the IRS is quite speculative, to say the least. In light of what appears to be Michael's successful management of the estate's business interests, the complexity of those interests, and the passage of time since Edward's death, it seems apparent that Cheryl's claim will not be adversely affected by Michael's continued efforts to improve the estate's finances.

Although there were times during the administration of this estate when Michael's removal as executor might have been justified, such was not the case in February 2004, when he was removed. Therefore, we reverse the order of removal. But Michael would be well-advised to assist the trial court in all respects to bring this estate to closure as soon as possible, including the filing of the estate tax returns. Our opinion, we emphasize, does not foreclose Michael's removal in the future if he substantially fails in any duty to the estate or to the court.

 
Reversed.

Her daughter has withdrawn her claim.

(continued)

(continued)

16

A-4233-03T5

December 23, 2005