Haynes v. First Nat'l State Bk. of NJ
87 N.J. 163, 432 A.2d 890, 23 A.L.R. 4th 347 (1981)
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Rule of Law:
When a presumption of undue influence arises because an attorney who drafts a will has a professional conflict of interest from concurrently representing the testator and the principal beneficiary, the presumption must be rebutted by clear and convincing evidence. Additionally, an in terrorem (no-contest) clause in a will or trust is unenforceable if a challenger has probable cause to contest the instrument.
Facts:
- Isabel Dutrow, an elderly widow, initially had an estate plan that treated the families of her two daughters, Betty Haynes and Dorcas Cotsworth, equally.
- After Betty Haynes died, the 84-year-old Dutrow, suffering from multiple ailments, moved from Pennsylvania to New Jersey to live with her surviving daughter, Dorcas Cotsworth.
- While living with the Cotsworths, Dutrow executed a series of new wills and trusts that drastically altered her long-standing estate plan, significantly favoring Dorcas Cotsworth and her children over the children of Betty Haynes.
- Dorcas Cotsworth and her husband, John, became actively involved in Dutrow's estate planning, pressuring Dutrow and communicating their desired changes to the family's long-time attorney, Richard Stevens.
- The Cotsworths then introduced their own family attorney, Grant Buttermore, into Dutrow's estate planning.
- Buttermore, who had a long-standing attorney-client relationship with the Cotsworth family, ultimately took over from Stevens as the sole attorney drafting Dutrow's will and trusts.
- Under Buttermore's guidance, Dutrow executed new instruments that left the bulk of her estate to Dorcas Cotsworth, nearly disinheriting the Haynes grandchildren.
- Buttermore also drafted a codicil and trust amendment for Dutrow that added in terrorem clauses, which would cause any beneficiary who challenged the will to forfeit their inheritance.
Procedural Posture:
- Plaintiffs, the Haynes grandchildren, filed an action in the New Jersey trial court seeking to set aside the probate of Isabel Dutrow's will and two related trusts.
- The trial court found that a presumption of undue influence existed but held that the defendants (proponents of the will) had successfully rebutted it. The court also ruled the in terrorem clause was unenforceable.
- The defendants appealed the ruling on the in terrorem clause, and the plaintiffs cross-appealed the ruling on undue influence to the Appellate Division.
- The Appellate Division affirmed the trial court's decision on undue influence but reversed on the in terrorem clause, holding that it was enforceable.
- The plaintiffs (appellants) petitioned for certification to the Supreme Court of New Jersey, which was granted.
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Issue:
When an attorney who drafts a will has a conflict of interest by also representing the principal beneficiary, must the will's proponents overcome the resulting presumption of undue influence with clear and convincing evidence?
Opinions:
Majority - Handler, J.
Yes, when an attorney who drafts a will also represents the principal beneficiary, creating a conflict of interest, the will's proponents must overcome the resulting presumption of undue influence with clear and convincing evidence. A presumption of undue influence arises from a combination of a confidential relationship between the testator and beneficiary, and the presence of suspicious circumstances. Here, the confidential relationship between the dependent mother, Dutrow, and her daughter-caregiver, Cotsworth, combined with the drastic change in the estate plan, triggered this presumption. The court found that the involvement of an attorney with a conflict of interest is a particularly suspicious circumstance that strengthens the presumption. Attorney Buttermore's dual representation of both the testatrix (Dutrow) and the principal beneficiary (Cotsworth) violated ethical rules (DR 5-105) and was fraught with the potential for undue influence. Because of this heightened risk, the standard burden of proof (preponderance of the evidence) is insufficient; the proponent of the will must rebut the presumption with clear and convincing evidence. The court also held that in terrorem clauses are unenforceable where there is probable cause for a will contest, adopting the policy of a new statute (N.J.S.A. 3A:2A-32) as the state's common law, even though the statute was not yet effective.
Dissenting - Clifford, J.
This opinion concurs with the majority on the undue influence issue but dissents regarding the in terrorem clause. The dissent argues that the court should apply the public policy that was in effect at the time of the testator's death, not the policy of a statute enacted a year later. Under the prior controlling case law, Alper v. Alper, an in terrorem clause was enforceable when the challenge was based on undue influence. The testator's clear intent was to include this clause, and that intent was consistent with the law at the time. The court should not retroactively apply a new public policy, especially when the legislature mistakenly believed the new statute was codifying existing law rather than changing it.
Analysis:
This decision significantly impacts estate planning and litigation in New Jersey by clarifying the consequences of an attorney's conflict of interest. It establishes that dual representation of a testator and a primary beneficiary heightens the presumption of undue influence and raises the evidentiary standard for rebutting it to "clear and convincing." This holding places a heavy burden on attorneys to avoid such conflicts and provides will contestants with a powerful tool when such a conflict exists. Furthermore, by judicially adopting the modern public policy against enforcing in terrorem clauses where probable cause for a challenge exists, the court removed a significant deterrent for good-faith litigation, making it safer for beneficiaries to challenge suspicious testamentary instruments.
