(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).
Argued January 17, 1995 -- Decided May 24, 1995
GARIBALDI, J., writing for a unanimous Court.
The issue on this appeal is what property is included as "corpus distributed" in the calculation of a
guardian's termination commission pursuant to N.J.S.A. 3B:18-28.
In August 1991, the trial court issued an order declaring that Herbert Reutlinger (the Ward) was a
mental incompetent due to unsoundness of mind, and was incapable of managing his own affairs. At the
same time, the trial court appointed the Public Guardian for Elderly Adults of New Jersey (the Guardian) as
guardian of the Ward's person and property. The Guardian continued in that capacity until the Ward's death
in January 1992. The Ward left a will devising his estate to a beneficiary.
At the time the Guardian was appointed, the Ward had assets totalling approximately $164,000,
including real estate that consisted of a house valued at approximately $110,000. The Guardian took
possession of the real property, but did not sell it during the guardianship period.
In December 1992, the Guardian filed an action for settlement of her First and Final Accounting of
the guardianship. The Guardian had expended $17,000 for the Ward's care, leaving a balance of $147,000.
The Guardian sought approval of certain statutory commissions, including a termination commission in the
amount of $2,941. That commission was calculated by multiplying the total amount of assets remaining in
the Ward's estate at the time of his death by the applicable two-percent rate provided by statute.
The trial court approved the statutory commissions sought by the Guardian, except the termination
commission. The court reduced the termination commission from $2,941 to $1,091. The court reached the
lower figure by subtracting the value of the real property from the value of the estate when the Guardian was
appointed and then by applying the two-percent rate to the balance. Accordingly, the court held that the
corpus distributed -- the amount on which the termination commission is calculated -- was the value of the
estate when the Guardian had been appointed, less the real estate remaining in the estate when the Ward
had died.
In February 1993, the Guardian filed a motion for reconsideration, asserting that the correct
termination commission was $3,289, two percent of the estate at the time of her appointment as Guardian,
including real estate, or a total of $164,000. The trial court denied that motion, reasoning that the Ward had
retained title to the real estate until he had died, that the Guardian never had title to the property, and that
the Guardian thus never had "distributed" it. According to the court, even at the Ward's death, the property
passed to the beneficiary by will and had never been handled by the Guardian. Thus, the trial court found
that the real estate was not "corpus distributed" for purposes of calculating the termination commission.
On appeal, the Appellate Division affirmed the trial court's denial of the motion for reconsideration,
reasoning that the unsold real property does not constitute "corpus distributed" under N.J.S.A. 3B:18-28.
The Supreme Court granted certification.
HELD: Under N.J.S.A. 3B:18-28 and N.J.S.A. 3B:12-38, and in accordance with sound public policy,
termination commissions are calculated on the basis of a corpus that includes real estate and other
property left unsold at the termination of the guardianship. Therefore, the Guardian in this case
shall receive a termination commission of two percent of the estate at the time of appointment,
including the value of the house left unsold at the time of Herbert Reutlinger's death.
1. According to the plain language of N.J.S.A. 3B:18-28, the termination commission is payable when the
guardianship terminates or when part of the corpus is distributed. There is no requirement that the assets
actually be sold or otherwise "handled" by the fiduciary. For the assets that the guardian distributes during
the guardianship, the guardian may elect to take a termination commission at the time of that distribution or
at the termination of the guardianship. Thus, to distribute means either to distribute assets during the
guardianship or to transfer the corpus when the guardianship is terminated. (pp. 4-6)
2. The legislative history of N.J.S.A. 3B:18-28 and related statutes demonstrates that "corpus distributed"
includes the entire corpus (all assets) remaining in the estate when the guardianship terminates for any
reason. (pp. 6-8)
3. The plain language of N.J.S.A. 3B:12-38 and its legislative history also support the conclusion that even
unsold real property must be considered corpus on which termination commissions are calculated. N.J.S.A.
3B:18-28 provides that real property owned by a ward at the time of appointment comes into the hands of
the guardian. According to the legislative history underlying that statute, undisposed real property that is
received by the guardian should be included in the base for computing termination commissions. (pp. 8-11)
4. In seeking to exclude real estate left unsold, the courts below might have been attempting to protect
elderly wards. However, such an exclusion would hurt, not help elderly wards. It is often harder to maintain
real estate than to sell it. In addition, any double commission on the sale of the property (commissions to
the guardian and to the real estate broker) is not prohibited by the Legislature. (pp. 11-14)
Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the trial court
for proceedings consistent with this opinion.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN, STEIN and
COLEMAN join in JUSTICE GARIBALDI'S opinion.
SUPREME COURT OF NEW JERSEY
A-
64 September Term 1994
In the Matter of
HERBERT REUTLINGER,
An Incompetent,
Now Deceased
Argued January 17, 1995 -- Decided May 24, 1995
On certification to the Superior Court,
Appellate Division.
Ruth Charbonneau, General Counsel, argued the
cause for appellant Public Guardian for
Elderly Adults of New Jersey (Patricia Kotyk-Zalisko, Public Guardian, attorney; Lawrence
M. Rosa, on the brief).
Steele R. Chadwell argued the cause for
amicus curiae New Jersey State Bar
Association (William B. McGuire, President,
attorney; Michael K. Furey, on the brief).
The opinion of the Court was delivered by
GARIBALDI, J.
This appeal concerns what property is included as "corpus
distributed" in the calculation of a guardian's termination
commission pursuant to N.J.S.A. 3B:18-28. Both plaintiff, the
Public Guardian for Elderly Adults of New Jersey (the Guardian),
and amicus, New Jersey State Bar Association (NJSBA), claim that
real property remaining in the estate at the time of termination
is included in the corpus distributed. The trial court and the
Appellate Division reached the opposite conclusion.
When the Guardian was appointed, the Ward had assets totalling approximately $164,000, including real property that consisted of a house with a presumptive value of $110,000. The order of appointment authorized the Guardian to sell the Ward's real property if it was found in his best interest; however, before executing a deed, the Guardian would have to have the proposed sale confirmed by the court. The Guardian took possession of the real property, but did not sell it during the guardianship period.
In December 1992, the Guardian filed an action for settlement of her First and Final Accounting of the guardianship. No opposition was filed. During the guardianship, the Guardian
expended $17,000 for the Ward's care, leaving a balance of
$147,000. The Guardian sought approval of the following
statutory commissions: N.J.S.A. 3B:18-24 (income) commissions in
the sum of $53; N.J.S.A. 3B:18-25 (annual corpus) commissions in
the sum of $274; and N.J.S.A. 3B:18-28 (termination) commissions
in the sum of $2,941. The termination commission was calculated
by multiplying the total amount of assets remaining in the Ward's
estate at the time of his death by the applicable two-percent
rate provided by N.J.S.A. 3B:18-28.
The trial court approved the statutory commissions requested
by the Guardian with the exception of the termination commission.
The court reduced that commission from $2,941 to $l,091. The
court arrived at the lower figure by subtracting the value of the
real property, $109,950, from the value of the estate when the
Guardian was appointed, $164,485, and then by applying the two
percent rate to the balance of $54,535. Accordingly, the court
held that the corpus distributed -- the amount on which the
N.J.S.A. 3B:18-28 termination commission is calculated -- was the
value of the estate when the Guardian had been appointed, less
the real estate remaining in the estate when the Ward had died.
In February 1993, the Guardian filed a motion for
reconsideration, asserting that the correct termination
commission was $3,289, two percent of the estate at the time of
her appointment as Guardian, including real estate, or $164,000.
After a hearing, the trial court denied the motion for
reconsideration. The court asserted that the Ward had retained
title to the real estate until he had died, that the Guardian
never had had title to it, and that the Guardian thus never had
"distributed" it. Even on the Ward's death, the trial court
reasoned, the real estate had passed to the beneficiary by will,
and had never been handled by the Guardian. Hence, the trial
court concluded, the real estate was not "corpus distributed" for
purposes of calculating the N.J.S.A. 3B:18-28 commission.
The Appellate Division, in a per curiam opinion, affirmed
the trial court's denial of the motion for reconsideration.
The Appellate Division, however, added to the trial court's
analysis the observation that in other statutes the corpus on
which commissions are calculated is not limited by the word
"distributed." For example, N.J.S.A. 3B:18-25 provides that
annual commissions are calculated on the basis of the
unrestricted term "corpus." Pursuant to N.J.S.A. 3B:18-24,
income commissions are calculated on the basis of "income that
comes into [the guardian's] hands." That court reasoned,
therefore, that unsold real estate did not constitute "corpus
distributed" under N.J.S.A. 3B:18-28.
We granted certification,
137 N.J. 312 (1994), and now
reverse.
corpus on which the commission is calculated must exclude real
estate that the guardian has not sold, transferred, or otherwise
handled. That analysis is faulty for a number of reasons.
First, it is inconsistent with the plain language of N.J.S.A.
3B:18-28 and N.J.S.A. 3B:12-38, and their legislative history.
N.J.S.A. 3B:18-28, entitled "Corpus commissions on
termination of trust, guardianship or upon distribution of
assets," provides that
upon termination of the trust or
guardianship, or upon distribution of assets
from the trust or guardianship, the fiduciary
may take a commission on corpus distributed,
including accumulated income which has been
invested by the fiduciary. . . . The amount
of the commissions to be taken are as
follows:
a. If the distribution of corpus occurs
within 5 years of the date when the corpus is
received by the fiduciary, . . . . an amount
equal to 2" of the value of the corpus
distributed . . . .
The statute then outlines the rates of commissions, which depend
on how long the trust or guardianship has been administered.
Each section begins, "If the distribution of corpus occurs
within" a stated number of years, either five years, between five
and ten years, or more than ten years after "the corpus came into
the hands of the fiduciary," then a certain rate of commission
applies. Ibid.
According to the plain language of the statute, the corpus
commission is payable when the guardianship terminates or when
part of the corpus is distributed. There is no requirement that
the assets actually be sold or otherwise "handled" by the
fiduciary. The commission is triggered by either termination of
the guardianship or distribution of assets prior to termination.
For assets that the guardian distributes during the guardianship,
the guardian may elect to take the N.J.S.A. 3B:18-28 commission
at the time of that distribution or at the termination of the
guardianship: the guardian may take the commission "upon
termination of . . . guardianship, or upon distribution." Ibid.
(emphasis added). Thus, to distribute means either to distribute
assets during the guardianship or to transfer the corpus when the
guardianship is terminated by reason of the Ward's attaining
majority, regaining competency, or, as here, dying. The other
two commission statutes that the Appellate Division cited do not
contain such an option.
The meaning of the term "corpus distributed" is further
clarified by the legislative history of N.J.S.A. 3B:18-28 and
related statutes. In the 1970's, the Legislature began a major
revision of the State's probate law, adopting several provisions
of the Uniform Probate Code. After revising Title 3A several
times in the 1970's, the Legislature undertook the final revision
in 1981. In 1981, the Legislature repealed Title 3A, but
reenacted its substance in Title 3B. L. 1981, c. 405.
The language "corpus distributed" first appeared in section
3A:10-2.1, which was enacted as part of the 1979 reform package.
L. 1979, c. 501, § 2. That statute was the source section for
current N.J.S.A. 3B:18-28, and the language of the two statutes
is substantially similar. Because "corpus distributed" first
appeared in a section that was part of the 1979 revisions, the
use of the word "distribute" in other sections enacted in 1979
sheds light on the meaning of "corpus distributed." Those other
sections concern the powers and duties of guardians of minors and
mental incompetents.
Those sections demonstrate that "corpus distributed"
includes the entire corpus remaining when the guardianship
terminates for any reason. For example, when a minor reaches the
age of eighteen, "his guardian, after meeting all prior claims
and expenses of administration, shall pay over and distribute all
funds and properties to the former ward as soon as possible."
N.J.S.A. 3B:12-54 (emphasis added) (L. 1979, c. 482, § 17,
originally codified as 3A:6-16.22). If an incompetent ward
returns to competency, "the guardian, after allowance of his
final account, shall pay over and distribute all funds of the
former ward." N.J.S.A. 3B:12-63 (emphasis added) (L. 1979, c.
482, § 28, originally codified as 3A:6-16.26). If an incompetent
ward dies during the period of guardianship, the guardian is
required to deliver the will, if there is one, to the court "and
retain the estate for delivery to a duly appointed personal
representative of the decedent or other persons entitled
thereto." N.J.S.A. 3B:12-60 (emphasis added) (L. 1979, c. 482, §
29, originally codified as 3A:6-16.27). The guardian may
petition the court for an appointment as personal representative
"so that he may proceed to administer and distribute the
decedent's estate without additional or further appointment."
N.J.S.A. 3B:12-61 (emphasis added) (L. 1979, c. 482, § 29,
originally codified as 3A:6-16.27).
The use of the term "corpus distributed" in those statutes
obviously refers to the final disposition of all assets remaining
in the estate at the termination of the guardianship, regardless
of the reason for termination. Although the Appellate Division
focused on the use of the term "corpus" rather than the term
"corpus distributed" to justify its use of different calculations
for the annual and termination commissions, the legislative
history supports our conclusion that no difference was intended
and that the same amount of corpus should be used for both
calculations. See In re Riker Trust,
192 N.J. Super. 225, 230-31
(Law Div. 1983) (comparing calculation of annual and termination
commissions before and after effect of new section N.J.S.A.
3A:10-2.1).
Likewise, an examination of the plain language of N.J.S.A. 3B:12-38 and its legislative history also supports the conclusion that even unsold real property must be considered corpus on which termination commissions are calculated.
N.J.S.A. 3B:12-38 provides, "The appointment of a guardian of the estate of a minor or mental incompetent vests in him title
as trustee to all property of his ward, presently held or
thereafter acquired." The statute, therefore, on its face
provides that real property owned by a ward at the time of
appointment comes into the hands of the guardian. The first
enactment of such a provision was N.J.S.A. 3A:6-16.13 -- the
source section for N.J.S.A. 3B:12-38 -- which was also part of
the 1979 reform package. L. 1979, c. 482, § 4.
An examination of the legislative history of N.J.S.A. 3B:18-28 supports the conclusion that undisposed real property that is
received by the guardian should be included in the base for
computing termination commissions. The statutory scheme evolved
through various amendments. Prior to 1942, termination
commissions based on the corpus at the time of the guardian's
appointment did not include the ward's undisposed real estate.
In 1942, the Legislature added a provision specifically providing
that "the reasonable value [of the real estate] may be considered
as corpus receipts, or corpus which comes into [the guardian's]
hands, for the purpose of fixing the corpus commissions." L.
l942, c. 258 § l. That statute was originally codified as part
of the former Title 3, and was then codified as N.J.S.A. 3A:10-3
when Title 3A replaced Title 3. L. 1951, c. 345.
In New Jersey's final probate reform package, signed by
Governor Brendan Byrne on January 5, 1982, certain sections of
former Title 3A that were determined to be obsolete were not
included in the new Title 3B. Among those sections that did not
survive was 3A:10-3, which had specified that real estate not
sold by the trustee was includible in the corpus for purposes of
calculating termination commissions. The explanation for
"repealing" this provision is contained in the legislative
history:
Since its enactment, Title 3A of the New
Jersey Statutes has undergone many changes by
way of amendments and supplements thereto. .
. . As a result of these changes, sections
of the existing law have become obsolete or
superseded and by reason thereof have not
been enacted as parts of the proposed new
Title 3B.
. . . .
12. N.J.S. 3A:10-3 provides that a fiduciary
shall be entitled to corpus commissions on
real estate coming into his possession. P.L.
1977, c. 412, s. 54 (C. 3A:2A-54) provides
that a personal representative has a right to
and shall take possession or control of a
decedent's property, and P.L. 1977, c. 412,
s. 5 (C. 3A:2A-55) provides that until
termination of his appointment a personal
representative has the same power over title
to property of the estate that an absolute
owner would have. P.L. 1979, c. 482, s. 4
(C. 3A:6-16.3) provides that the appointment
of a guardian of a minor or mental
incompetent vests in the guardian title as
trustee to all of his ward's property. Title
to real property forming a part of a trust
estate vests in the trustee by operation of
law. By virtue of the foregoing, N.J.S.
3A:10-3 has been superseded, and its
retention is no longer necessary.
[L. 1981, c. 405 (Sponsor Statement
to Assembly No. 3580).]
This commentary indicates that the Legislature found that the provision allowing for commission on unsold real estate was
no longer necessary because title to all of the ward's property
vested in the guardian or fiduciary at the time of appointment
under N.J.S.A. 3A:6-16.3 (currently codified as 3B:12-38).
Therefore, the guardian would have to "distribute" the real
property, along with the rest of the corpus, on termination.
Real property was thus by definition included in the "corpus
distributed" that is the statutory basis of termination
commissions. That definition, in turn, rendered redundant the
statute that explicitly included real property left unsold, which
clarified why that statute was not reenacted in the final, 1981
probate reform. It was not "repealed"; rather, it was "not
enacted" because it was "unnecessary."
Therefore, the correct basis for calculating termination
commissions is the value of the estate at the time of the
guardian's appointment. That is what the Guardian asked for on
reconsideration.
commissions," and they occur in relation to property other than
real estate.
Moreover, the exclusion of unsold real estate from the
calculation of N.J.S.A. 3B:18-28 termination commissions would
hurt elderly wards, not help them. The courts err in suggesting
an alternative. We find questionable the implication that
guardians do little with unsold real estate, and that the
guardians therefore have no right to a termination/distribution
commission on unsold real estate. Real estate is in fact harder
to maintain than other property, such as liquid assets. Amicus
NJSBA aptly describes the particular difficulty of caring for the
real property of an elderly incompetent:
While the fiduciary of any estate commonly
addresses significant management concerns
with respect to real property, even in the
best of circumstances, the guardian for the
estate of an elderly person also must
commonly address additional problems caused
by old age, ill health or diminished
capacity. The home often will have become
unusually encumbered prior to death as liens
for unpaid hospital bills and taxes incurred
during the last illness need to be addressed.
The decedent's inability to care for the
property during a final illness often will
mean that safety hazards and other property
conditions must be addressed. In fact, in
sharp contrast to the Appellate Division's
assumption that real estate only becomes a
significant administrative concern if the
property is sold, the effort and skill needed
to maintain such property is often far
greater than that expended to sell it.
See also Pomeroy v. Mills, 37 N.J. Eq. 578, 582 (E. & A. 1883) (warning against corpus-commission structure that would force
executors either "to do what would be for the disadvantage of
those whose interests were entrusted to them, to convert into
cash what could easily be divided and might better be preserved
in specie, or else abandon all right to compensation").
Thus, the courts below gave insufficient weight to two
realities: first, it is often harder to maintain real estate than
other property; second, it is often much harder to maintain real
estate than to sell it. For example, a guardian who sells a
house would get an N.J.S.A. 3B:18-28 termination commission on
any proceeds from the sale of the house left in the estate at the
time of death. A guardian who maintained the house would get no
N.J.S.A. 3B:18-28 commission on the value of the house at
termination of the guardianship. Thus, the guardian who does
more work gets less commission, and vice versa.
Although we in no way imply that guardians would take
actions not in the best interest of their wards, as the Guardian
pointed out, the opinions below might create incentives for a
guardian to sell an elderly incompetent's house and place the
ward in a nursing home. Although that might in many instances be
bad for the ward, it would be easier and more remunerative for
the guardian. Such a commission structure is unfair to
guardians, and potentially bad for wards. As amicus NJSBA puts
it, "making the guardian's compensation turn on what is done with
the property is a false consideration that improperly injects
profit considerations into a determination that should depend on
the risk and effort that is being undertaken."
Under N.J.S.A. 3B:18-28 and N.J.S.A. 3B:12-38, and in accordance with sound public policy, we hold that termination commissions are calculated on the basis of a corpus that includes real estate and other property left unsold at the termination of the guardianship. Accordingly, the Guardian shall receive a termination commission of two percent of the estate at the time of appointment, including the value of the house left unsold at the time of the Ward's death.
The judgment of the Appellate Division is reversed, and the case is remanded to the trial court for proceedings in accordance with this opinion.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN, STEIN and COLEMAN join in JUSTICE GARIBALDI'S opinion.
NO. A-64 SEPTEMBER TERM 1994
ON APPEAL FROM ON CERTIFICATION TO Appellate Division, Superior Court
IN THE MATTER OF
HERBERT REUTLINGER,
An Incompetent,
Now Deceased.
DECIDED May 24, 1995
Chief Justice Wilentz PRESIDING
OPINION BY Justice Garibaldi
CONCURRING OPINION BY
DISSENTING OPINION BY