Appellate Division Endorses Probate Judge’s Novel Use Of Equitable Remedy To Award Rescission Of “Payable-On-Death” Bank Account Designation

In Stephenson, Personal Representative of Estate of Murry v. Spiegle, Docket No. A-4193-11T2 (App.Div., January 31, 2013), the decedent executed a Last Will and Testament leaving his estate to family members or trusts for family members. The will was prepared by his attorney, William E. Spiegle, III, Esq. Less than two months later, the decedent went to a bank, opened a “payable-on-death” (P.O.D.) account, and sought to name a trust as the beneficiary. When a bank representative dissuaded him from doing so because he did not have a copy of the trust with him, the decedent named “William Spiegle Atty” as the beneficiary. The account contained $143,151.26, which was approximately a third of his entire estate.

After the decedent’s death, in a letter to the executor, Mr. Spiegle expressed his surprise at the designation, stating that he had “no idea why this account was established,” that he had not spoken to the decedent since his will was executed, and that he “can only surmise that something happened… for him to take this action.” He stated, “I come back to the only conclusion that I can draw, which is — for whatever reason — he wanted me to have this money.”

The executor filed suit against Mr. Spiegel, alleging that the decedent was either incapacitated, that he had made a mistake, or that the designation was the result of undue influence.

After a bench trial, the probate judge found that most equitable theories would be inapplicable, but that it would be “unconscionable to withhold the remedy of rescission” based on the decedent’s unilateral mistake; accordingly, the judge declared that the estate was entitled to the funds, and ordered the “unique” remedy of rescission.

The Appellate Division affirmed, adding an analysis about the applicable remedies available to the plaintiff. It began by recognizing that the Chancery Division judge had found that the decedent made a mistake in designating the P.O.D. beneficiary, because the relationship between the decedent and Mr. Spiegle was “largely limited to an attorney-client relationship” and it was “highly unlikely” that the decedent suddenly decided to leave a substantial portion of his estate to his lawyer personally, as his lawyer now claimed.

It noted that the chancery judge had examined other theories of recovery, including the remedy of reformation, constructive trust, the doctrine of probable intention and the tort of conversion, but found that these theories required wrongful conduct on the defendant’s part, which was not supported by the record.

In its analysis of the trial court’s actions, the Appellate Division recognized that “’inevitably,… an equitable cause of action ‘often constructs itself.’” (citation omitted). While it agreed that the judge had appropriately ordered rescission based upon unilateral mistake, the appellate court noted that other equitable theories would also support the judge’s decision, including the imposition of a resulting trust, and the application of the doctrine of probable intent to reform the mistaken terms of the account. It concluded that the trial court had “appropriately granted relief through a common sense and equitable application of rescission principles.”

A copy of the January 31, 2013 opinion is attached here – Stephenson v. Spiegle