The Supreme Court of New Jersey has historically been willing to adopt the views of the American Law Institute, as stated in its various Restatements of the Law, including, in particular, the Restatement (Second) of Trusts. E.g., McKelvey v. Pierce, 173 N.J. 26, 57 (2002); In re Estate of Munger, 63 N.J. 514, 522 (1973). Yesterday, however, in Tannen v. Tannen, 208 N.J. 409 (2011), the Court might be seen to have signaled that it would not adopt the newer Restatement (Third) of Trusts, or at least that part of it that was at issue in Tannen.
Tannen was a divorce action. The defendant wife had a family trust. The trial judge directed that the trust and others be named as parties to the case. Ultimately, the trial judge imputed income from the trust to the wife, which affected alimony. On appeal to the Appellate Division, that court, speaking through Judge Messano, determined that it was error to have imputed to the wife any income from the trust. Tannen v. Tannen, 416 N.J. Super. 248 (App. Div. 2010). The panel found that result to be required by existing law, which incorporated provisions of the Restatement (Second) of Trusts.
Judge Messano noted, however, that the more recent Restatement (Third) of Trusts had changed the law espoused by the Restatement (Second) and would have called for the opposite result. But his opinion expressed the long-held view that it is not for the Appellate Division to change New Jersey law. “As a court of intermediate appellate jurisdiction, we do not presume to adopt the Restatement (Third) of Trusts as the law of this state and apply its provisions to the facts of this case. Given the significance of its principles in the context of N.J.S.A. 2A:34-23(b)(11) [the divorce statute at issue], such determination would be more appropriately made by our Supreme Court.” Instead, the panel applied existing law.
The Supreme Court’s decision yesterday affirmed the Appellate Division’s ruling based on Judge Messano’s opinion. Does that mean that the Supreme Court has refused to adopt the Restatement (Third) of Trusts? That seems unlikely, given the Court’s lengthy track record of adopting Restatement teachings.
The Court may have rejected the specific aspect of the Restatement (‘Third) that was at issue in Tannen, through the Court’s affirmance on Judge Messano’s opinion below. But even that might be doubtful. Without a full opinion that states the Court’s unwillingness to adopt that provision of the newer Restatment and the rationale for such a conclusion, it is less than clear that this, rather than some other reason, underlies the outcome in the Supreme Court. In another case, parties should feel free to argue the provisions of the Restatement (Third) of Trusts, and to contend that the Supreme Court’s action in Tannen does not constitute a rejection of that Restatement or any part of it.