Posts Categorized: Litigation Update

T&E Litigation Update – Fortier v. Sullivan; Pierce v. Spalding; Nystedt v. Nigro; Liporto v. Liporto; Staten v. O’Neill; Masciari v. Fenichel; Kraft Power Corporation v. Merrill; Estate of Steven Gavin v. Tewksbury State Hospital; Fowler v. Kulhowvick; Fiumara v. Fiumara

Author:

Mark E. Swirbalus, Esq., Goulston & Storrs, P.C.

The T&E Litigation Update is a recurring column summarizing recent trusts and estates case law. If you have question about this update or about T&E litigation generally, please feel free to e-mail the author by clicking on his name above.

 

Fortier v. Sullivan
In Fortier v. Sullivan, Case No. 12-P-231, 2012 Mass. App. Unpub. LEXIS 1258 (Dec. 11, 2012), a decision issued pursuant to Rule 1:28, a beneficiary of a will sued the testator’s estate planning attorney for professional negligence and breach of contract. The Superior Court dismissed the claims. The Appeals Court affirmed the dismissal of the professional negligence claim, holding that no duty of care runs from a testator’s attorney to the testator’s intended beneficiary. The Appeals Court reversed the dismissal of the breach of contract claim, however, holding that it is not barred by the Statute of Frauds, despite the lack of a written contract between the attorney and the testator. The Court highlighted the attorney’s admission that plaintiff was the intended beneficiary of the services that the attorney contracted to provide to the testator.

 

Pierce v. Spalding


In Pierce v. Spalding, Case No. 11-P-1373, 2012 Mass. App. Unpub. LEXIS 1200 (Nov. 26, 2012), another decision issued pursuant to Rule 1:28, the Appeals Court affirmed the Probate Court’s denial of legal fees and costs in the underlying trust dispute pursuant to G.L. c. 215, § 45. In affirming the denial of fees, the Court quoted the SJC’s decision in Matter of Estate of King, reiterating that “[a] Probate Court judge has broad discretion to award fees and costs under G. L. c. 215, § 45, and such a decision is ‘presumed to be right and ordinarily ought not to be disturbed.’”

Nystedt v. Nigro
In Nystedt v. Nigro, Case No. 12-1245, 2012 U.S. App. LEXIS 23947 (1stCir. Nov. 20, 2012), the First Circuit affirmed the dismissal of claims against a Probate Court-appointed special discovery master in a will contest. The plaintiff prevailed in the will contest, but, because of the litigation’s expense, the value of the estate had been greatly diminished and he was “left holding a nearly empty bag.” The plaintiff’s response was to sue a “phalanx of will-contest participants,” including the special discovery master, who was alleged to have been delinquent in his duties, causing the estate assets to plummet. The claims against the special discovery master were dismissed under the doctrine of quasi-judicial immunity, which provides absolute immunity to those who perform tasks that are inextricably intertwined with the judicial function
Liporto v. Liporto


In Liporto v. Liporto, Case No. 12 MISC 462221, 2012 Mass. LCR LEXIS 118 (Nov. 13, 2012), the Land Court heard a dispute between four brothers, who are the four trustees and beneficiaries of a trust established by their father, regarding whether the trust is to terminate by its terms. The plaintiff brothers argued in a motion for summary judgment that, pursuant to the plain language of the trust, its assets “shall be distributed outright equally to the Grantor’s children” following the Grantor’s death, provided that he is predeceased by the parties’ mother. The defendant brothers argued in a cross-motion for summary judgment that although both parents are deceased, the date of outright distribution is not specified in the trust (there is no“definitive end date”) and thus the trust should continue to provide income to the four brothers during their lifetimes. The Court held for the plaintiff brothers, finding that nothing in the trust provides for its continuation during the brothers’ lifetimes and ordering the distribution of the trust’s real property to them as tenants in common. Based on this order, the Court stated that it could proceed to the second question presented in the case, i.e., the absolute right of the co-tenants to seek partition of the property. On this point, the Court noted the well-established principle, now inapplicable to this case in light of the ordered termination of the trust and distribution of the property to the brothers as co-tenants, that property owned by a trust is not subject to partition.

 

Staten v. O’Neill
InStaten v. O’Neill, Case No. 11-P-23, 2013 Mass. App. Unpub. LEXIS 3 (Jan. 3, 2013), a decision issued pursuant to Rule 1:28, the Appeals Court affirmed the dismissal of claims against a lawyer by his former clients, the successor trustees of a trust he had represented.

The defendant lawyer (“Attorney O’Neill”) drafted the trust and served as the trust’s lawyer until 2005. In 2006, a third party wished to pursue a case against the trustees, and Attorney O’Neill referred the third party to his own personal lawyer and allegedly spent four hours on the telephone with that lawyer as he drafted a complaint, which ultimately resulted in a judgment of approximately $300,000 against the trustees in their individual and fiduciary capacities.

The trustees sued Attorney O’Neill for negligence, fraud, breach of fiduciary duty and conflict of interest. The claims rested on the premise that Attorney O’Neill employed knowledge gained during his representation of the trustees and transmitted that knowledge to the lawyer to whom he referred the case against them, which contributed to the judgment against them. The Court affirmed the dismissal of the claims against Attorney O’Neill, which the Court characterized as speculative because they failed to show plausible causation of the eventual judgment by reason of the referral. Most significantly, the Court explained that “[t]he mere referral of a claim against the trustees by [Attorney O’Neill] to separate counsel would not by itself constitute a breach of fiduciary duty or a betrayal. Equally plausibly, the referral could represent compliance with a duty not to undertake a matter against a present or former client.” The Court also noted, however, that the course of maximum prudence would be for a lawyer to abstain completely from contact with a claim against a present or former client.

Masciari v. Fenichel


In Masciari v. Fenichel, Case No. 12-02757 (Middlesex Sup. Ct. Nov. 30, 2012), the Middlesex Superior Court denied a motion to dismiss a legal malpractice action against an attorney who drafted a will that was the subject of a will contest. The executor of the estate, which incurred a $44,000 payment to settle the will contest, claimed in a nutshell that the attorney had failed to take appropriate steps to ensure that the testator possessed testamentary capacity and was free from undue influence.

The Court explained that “[a]n attorney owes to a client, or a potential client, for whom the drafting of a will is contemplated, a duty to be reasonably alert to indications that the client is incompetent or is subject to undue influence and, where indicated, to make reasonable inquiry and a reasonable determination in that regard[,]” and that “[a]n attorney should not prepare or process the will unless the attorney reasonably believes the testator is competent and free from undue influence.” (Citation omitted.)

Although the Court also explained that an attorney’s duty of care to a testator does not extend to the testator’s heirs and beneficiaries, the Court nevertheless denied the attorney’s motion to dismiss because the claims against him were brought by the executor of the estate, rather than by an individual heir or beneficiary. “Massachusetts courts have allowed an administrator of an estate to file an action for legal malpractice against an attorney who had prepared the will of the deceased.” (Citation omitted.) The relief, however, must be limited to the damages sustained by the estate as a result of the attorney’s alleged malpractice.

 

Kraft Power Corporation v. Merrill and Estate of Steven Gavin v. Tewksbury State Hospital
In two recent decisions, the courts discussed the viability of certain claims against and on behalf of estates.

First, in Kraft Power Corporation v. Merrill, Case No. SJC-11063, 2013 Mass. LEXIS 8 (Jan. 14, 2013), the Supreme Judicial Court addressed whether an estate can be held liable for certain claims against the decedent as a principal of a corporation under the doctrine of corporate disregard, i.e., whether such claims against the decedent survive his death and can be asserted against his estate.

The doctrine of corporate disregard applies as a matter of equity, and the corporate veil can be pierced, in order to disregard a corporation’s existence and impose liability on individual principals for the purpose of defeating some fraud or wrong or remedying some injury.

The decedent was the sole shareholder and officer of Power Wiring. Kraft Power sold equipment to Power Wiring, for which Power Wiring did not pay. Kraft Power obtained a default judgment against Power Wiring for breach of contract in the approximate amount of $260,000, but Power Wiring had no assets to satisfy the judgment. Prior to entry of the default judgment, the decedent died, and Kraft Power subsequently brought claims against the decedent’s estate. Kraft Power alleged that the decedent was personally responsible for Power Wiring’s contractual obligations because he had abused the corporate form by causing Power Wiring, over which he exercised pervasive control, to become insolvent by transferring its assets to another company under his control, and that both companies were operated by the decedent as shams for his personal benefit. Kraft Power asserted claims against the decedent’s estate for breach of contract, fraudulent transfers in violation of the Uniform Fraudulent Transfer Act, G.L. c. 109A, violations of Section 11 of Chapter 93A, unjust enrichment and fraud.

The trial court dismissed the claims. The SJC reversed in large part and affirmed in small part.

The Court explained that claims which survive a defendant’s death pursuant to the survival statute, G.L. c. 228, § 1, include certain enumerated tort claims and common law claims, and that the common law claims that survive include claims based on contract.

With this explanation, the Court held that the breach of contract claim against the decedent’s estate survives, and similarly that the fraudulent transfer claim survives because it is premised on a contractual obligation owed by the decedent’s company. Therefore, neither of these claims should have been dismissed.

With respect to the Chapter 93A claim, which presented a question of first impression, the Court held that the claim itself survives because it is contract-based (some Chapter 93A claims can be tort-based, and some can be mixed in nature), and thus should not have been dismissed, but that the multiple damages available under Chapter 93A, which are intended to be punitive, do not survive. “Like punitive damages in tort actions, multiple damages under G.L. c. 93A can no longer achieve the goals of punishing a defendant or deterring him from future misconduct when the wrongdoer has died[.]”

The Court also reversed the dismissal of the unjust enrichment claim, which is based on the allegation against the executrix of the estate that she is holding assets that properly belong to Kraft Power, and so the doctrine of corporate disregard and the survival statute do not even apply.

The Court affirmed the dismissal of the fraud claim, however, which was based on the allegation that the decedent had fraudulently induced Kraft Power to enter into the contract. This claim was properly dismissed because a claim of fraudulent inducement does not survive under the survival statute or at common law.

Second, in Estate of Steven Gavin v. Tewksbury State Hospital, Case No. 12-P-62, 2013 Mass. App. LEXIS 6 (Jan. 18, 2013), the Appeals Court addressed the dismissal of a claim for wrongful death under the Massachusetts Tort Claim Act, G.L. c. 258, § 4, because the claim had not been presented or filed by the duly appointed executor or administrator of the decedent’s estate.

The decedent died on August 11, 2008, allegedly because of Tewksbury State Hospital’s negligence. The Massachusetts Tort Claim Act (the “Act”) provides that a claim against a governmental entity must be “presented” within two years. Although the executors named in the decedent’s will (his parents) sent a“presentment” letter to the Hospital and to the Attorney General within the two-year window, on July 21, 2010, they had not been appointed as executors at that time. Then, on March 24, 2011, after the six-month waiting period required under the Act had expired, the named executors filed the wrongful death action on behalf of the estate against the Hospital and the Commonwealth of Massachusetts. After being appointed as temporary executors, they then moved to amend the complaint.

The defendants moved to dismiss, arguing that the presentment and the suit were deficient in that they were brought by someone other than a duly appointed executor or administrator of the estate. The trial court granted the motion, and the Appeals Court affirmed. The Court held that because the “claimants” had not been duly appointed at the time of presentment, a condition precedent to suit under the Act was not met, and that their subsequent appointment did not cure this defect. The Court reasoned that the presentment requirement reflects a legislative choice to permit the public employer to investigate any claim in full and to negotiate, arbitrate, compromise or settle any such claim. Accordingly, the claimant must have the power to negotiate, arbitrate, compromise or settle the claim. Because they had not been duly appointed, the named executors (even in their later capacities as the appointed temporary executors) did not have this power.

Justice Agnes dissented, writing that the meaning the majority assigned to the term “claimant” is too technical and contrary to legislative intent.

 

Fowler v. Kulhowvick
In Fowler v. Kulhowvick, Case No. 12-P-277, 2013 Mass. App. Unpub. LEXIS 168 (Feb. 8, 2013), a decision issued pursuant to Rule 1:28, the Appeals Court affirmed the denial of a petition to vacate a decree allowing a will.

Fowler, an interested party, was not given notice of the petition to probate the will, and did not learn about it until after the will had already been allowed. He then filed a petition to vacate the allowance of the will and for leave to file objections. The probate court determined that notice to Fowler was defective and ordered a hearing on whether Fowler could substantiate his claims of lack of capacity and undue influence. In itself, defective service is not enough to vacate a decree allowing a will. “[A] probate judge has discretion to vacate a decree only after ascertaining whether the party seeking revocation can present ‘substantial and meritorious grounds’ against allowance of the will. Here, after finding that notice was defective, the probate judge ordered a hearing to evaluate whether Fowler had substantial and meritorious grounds against allowing the will. This was the proper procedure under our precedents.” (Internal citations omitted.)

After hearing, the probate court denied Fowler’s petition to vacate the allowance of the will, holding that he could not substantiate his claims of lack of capacity and undue influence. The Appeals Court affirmed because it found no error in the probate court’s ruling.

 

Fiumara v. Fiumara


In Fiumara v. Fiumara, Case No. 12-P-133, 2013 Mass. App. Unpub. LEXIS 130 (Feb. 4, 2013), another decision issued pursuant to Rule 1:28, the Appeals Court affirmed a superior court ruling that the trust at issue was a “sham” because the decedent never intended to relinquish control over the properties placed in the trust or to vest meaningful title in the trustee.

“In order for a trust to be valid in the Commonwealth, it must unequivocally show an intention that the legal estate be vested in one person to be held in some manner or for some purpose on behalf of another.” (Internal citation omitted.) Here, the Appeals Court held that the superior court properly relied on the decedent’s conduct after executing the trust in finding that he did not intend to part with control of the property or divest himself of ownership. The decision does not recite all of the evidence, but the Appeals Court noted that the decedent never informed the trustee of her responsibilities or of the identities of the beneficiaries, which was characterized as “robust” evidence that no valid trust was ever intended.

 

 

The Boston Bar Association Trusts & Estates Section Blog provides information as a service to its users and BBA members. Neither the Trusts & Estates Section nor the Boston Bar Association are a law firm and do not represent clients in any way. Although the information on this site is about legal issues and informational services it is not legal advice. Use of this blog does not in any way create a lawyer-client relationship. If you need a lawyer, the Boston Bar Association Lawyer Referral Service can refer you to a qualified attorney. http://www.bostonbarlawyer.org/or call 617-742-0625.

T&E Litigation Update – Sacchetti v. Sacchetti; Porst v. Deutsche Bank National Trust Company; Rockland Trust Company v. Attorney General

Author:
Mark E. Swirbalus, Esq., Goulston & Storrs, P.C.

The T&E Litigation Update is a recurring column summarizing recent trusts and estates case law. If you have question about this update or about T&E litigation generally, please feel free to e-mail the author by clicking on his name above.
Sacchetti v. Sacchetti
In Sacchetti v. Sacchetti, Case No. 10-P-2200, 2012 Mass. App. Unpub. LEXIS 1000 (Sept. 24, 2012), a decision issued pursuant to Rule 1:28, the Appeals Court addressed cross-appeals from a judgment following the eleven-day trial of a dispute between father and son concerning the father’s assets.
Evo Sacchetti and his wife Lynn relied on their son Kenneth Sacchetti for investment advice. According to that advice, Lynn listed Kenneth’s name as a joint tenant on some of her accounts to avoid probate. Following Lynn’s death in 1989, Kenneth claimed ownership of these joint accounts and promised to transfer them to Evo. Kenneth also assumed control of Evo’s finances, who believed he could trust Kenneth in financial matters. When Evo suffered a stroke in 2008, however, Kenneth continued to claim ownership of the joint accounts with Lynn as well as certain accounts he held jointly with Evo, and also claimed a fifty-percent interest in the family home in Milton as a joint tenant with Evo with a right of survivorship. Evo subsequently filed suit in Superior Court against Kenneth for breach of fiduciary duty and other torts arising from Kenneth’s alleged manipulation of Evo’s assets over a twenty-year period.
The Superior Court ruled in Evo’s favor, ordering Kenneth to reconvey title to the Milton home to Evo and to convey certain bank and brokerage accounts to Evo. Both parties appealed from the judgment. Evo appealed from the denial of his motion to make additional findings and to amend the judgment, which failed to require Kenneth to account for $1.1 million in withdrawals he had made from an account that was found to belong to Evo. Kenneth appealed from the denial of his motion for a new trial or to alter or amend the judgment, arguing that the statute of limitations had expired on some of Evo’s claims and that the judge erred in concluding that Kenneth was not the owner of certain funds.
The Appeals Court affirmed in part (denying Kenneth’s request for a new trial or an amended judgment) and reversed in part (granting Evo’s request for additional relief).
Regarding Kenneth’s statute of limitations defense, the Court recited the well-settled principle that a cause of action for breach of trust or fiduciary duty does not accrue until the trustee repudiates the trust and the beneficiary has actual knowledge of that repudiation. The Court then held that the trial judge was not required to believe Kenneth’s naked assertions that Evo “knew” of Kenneth’s breach of fiduciary duty and thus that his claims had accrued and expired long ago. It was a question of credibility, and there was no error in the trial judge’s conclusion that the statute of limitations did not begin to run until 2008, after Evo had suffered a stroke and his family and financial experts began to review his assets and discovered Kenneth’s wrongdoing.
The Court also rejected Kenneth’s argument that the trial judge erred in concluding that Evo was entitled to the proceeds of the sale of “Kenneth’s” Florida condominium because Evo’s name was not on the deed. Kenneth had not included the deed in the record, and thus there was no documentary support for Kenneth’s argument that Evo’s name was not on the deed. Moreover, even if it were true that Evo’s name was not on the deed, the Court explained that the evidence permitted the reasonable inference that it was Lynn’s and/or Evo’s money that was used to purchase the condominium, and that the trial judge could properly deny Kenneth’s contention that his parents intended to make a gift to him.
Regarding Evo’s argument that Kenneth should be liable to account for the $1.1 million he had withdrawn from Evo’s account, the record reflected Kenneth’s concession that he had withdrawn the funds and deposited them into other accounts, including $989,000 into his own account with Weymouth Bank. Although the Court acknowledged that not all of the funds in the Weymouth Bank account derived from Evo’s funds, the Court found this fact to be irrelevant. Kenneth had failed to demonstrate that the withdrawn funds were provided to or used for Evo’s benefit, and so the Court ordered Kenneth to return the funds to Evo. The Court noted that it was not incumbent on Evo to prove that all of the funds in the Weymouth Bank account belonged to him, even though that account is a source from which Kenneth may repay the funds he withdrew..

 

Porst v. Deutsche Bank National Trust Company
In Porst v. Deutsche Bank National Trust Company, No. 11-04137, 2012 Bankr. LEXIS 4680 (Bankr. D. Mass. Oct. 4, 2012), the U.S. Bankruptcy Court for the District of Massachusetts discussed what constitutes valid revocation of a revocable trust and whether the trustee of a revocable trust owes any duties to contingent remainder beneficiaries.
Mother established the revocable trust, naming herself as trustee and reserving to herself a life estate in any real property conveyed to the trust. The trust provided that upon mother’s death, her son would receive a life estate in the family home if it were still held in the trust. The revocation provision provided that mother could revoke or amend the trust by delivering to the trustee a written instrument that she had “signed and acknowledged.” 

Ten years later, mother executed a document purporting to revoke the trust. The document bears the signatures of two witnesses, but was not acknowledged before a notary public. In her capacity as trustee, mother also deeded the family home from the trust to her son for one dollar. The son subsequently obtained a loan secured by the family home, and then filed for bankruptcy protection. The holder of the security interest filed a proof of claim in the bankruptcy proceeding. One of the issues in dispute was whether the security interest was valid, which turned on two questions – whether mother’s revocation of the trust was valid, and if not, whether her conveyance of the family home from the trust to her son was valid.
On the first question, the Court set forth the established principle that “a valid trust, once created, cannot be revoked or altered except by the exercise of a reserved power to do so, which must be exercised in strict conformity to its terms.” Based on this principle, the Court held that mother’s revocation of the trust was not valid because it was not in strict conformity to the trust’s revocation provision, which required the instrument to be signed and acknowledged by her. In reaching this holding, the Court relied on the following rationale from Phelps v. State Street Trust Company, 330 Mass. 511, 512-13 (1953): “We think that the requirement of acknowledgement meant that the settlor must acknowledge the instrument making the alteration before a public officer authorized by law to take acknowledgements of other writings. . . . And we think that the requirement of acknowledgement was not wholly for the benefit of the trustees, and that it could not be waived by them.” 

On the second question, the son argued that even if the trust revocation were invalid, mother could not convey the family home from the trust to him for the inadequate consideration of one dollar, because doing so constituted a breach of her fiduciary duty to the contingent remainder beneficiaries (including himself, ironically). The Court rejected this argument, holding that because mother had the power to revoke the trust, she was free to do whatever she wanted with the family home. The Court reasoned that during the lifetime of a settlor/beneficiary of a revocable trust, a trustee is under no duty to consider the interests of the contingent remainder beneficiaries, because those interests may be divested by the settlor. “To hold otherwise would eviscerate an underlying purpose of the revocable trust and disrupt the expectations of the settlor.”
Accordingly, mother’s conveyance of the family home from the trust to her son was valid, and thus the security interest in the family home that the son subsequently gave to the lender was valid.

 

Rockland Trust Company v. Attorney Genera
In Rockland Trust Company v. Attorney General, Case No. SJC-11257 (Oct. 11, 2012), the Supreme Judicial Court allowed the requested reformation of a trust.
The settlor died in 2006. The trust provides that upon the settlor’s death, the income is to be used to fund one or two scholarships of $10,000 to students at Scituate High School. Any income not distributed as scholarships is to be added to principal. 

The trustee proposed to reform the trust in two ways. First, the trustee sought to include language in the trust evincing the settlor’s general (as opposed to specific) charitable intent, thereby allowing the trust to qualify as a private charitable foundation and thus be exempt from income tax. Otherwise the trust would have to pay income tax at a high marginal rate, thus reducing the income available to distribute as scholarships. Second, the trustee sought to amend the requirement that any income not distributed as one or two scholarships of $10,000 be added to principal, because undistributed income retained by a private foundation is taxed at the rate of 100%. Again, this tax would reduce the amount available for scholarships.
Based on the evidence in the record, which included an affidavit from the drafting attorney and affidavits from two of the settlor’s friends who attested to her charitable donations and volunteer work, the Court found that the trust’s failure to reflect the settlor’s general charitable intent was a scrivener’s error. The Court also found that imposing a tax on the undistributed income retained in the trust would defeat the settlor’s intent to have as much of the trust income as possible used for scholarships.
Accordingly, the Court held that the trust shall be reformed to include the requested language evincing the settlor’s general charitable intent, and to amend the requirement that the scholarships be limited to one or two in the amount of $10,000, with the undistributed income added to principal. The amended language will read as follows: “If the Distributable Funds exceed Ten Thousand Dollars ($10,000), the Distributable Funds shall be divided into a number of scholarships in equal amounts, provided, however, that each scholarship must be at least Ten Thousand Dollars ($10,000).”
The Boston Bar Association Trusts & Estates Section Blog provides information as a service to its users and BBA members. Neither the Trusts & Estates Section nor the Boston Bar Association are a law firm and do not represent clients in any way. Although the information on this site is about legal issues and informational services it is not legal advice. Use of this blog does not in any way create a lawyer-client relationship. If you need a lawyer, the Boston Bar Association Lawyer Referral Service can refer you to a qualified attorney. http://www.bostonbarlawyer.org/ or call 617-742-0625.

T&E Litigation Update – Bedard v. Corliss

Author:

Mark E.Swirbalus, Esq., Goulston & Storrs, P.C.

The T&E Litigation Update is a recurring column summarizing recent trusts and estates case law. If you have question about this update or about T&E litigation generally, please feel free to e-mail the author by clicking on his name above.
Bedard v. Corliss
In Bedard v. Corliss, Case Nos. 11-P-2118 & 11-P-2173, 2012 Mass. App. LEXIS 241 (Aug. 23, 2012), the Appeals Court addressed complications arising in the intestate estate of a wife when it was learned that she and her surviving husband had not been validly married.
Ethan and Carol were married – or so they believed – in Mexico in 1983. Over the next 21 years, they lived together and held themselves out as husband and wife, filing joint tax returns, maintaining joint accounts, etc. Carol died intestate in 2004, and Ethan as her husband was appointed the administrator of her estate with the assent of her three children from a prior marriage. As administrator, Ethan distributed assets in accordance with Carol’s wishes. Specifically, though he had no obligation to do so, he transferred $120,000 to the children from a joint account in which he had a right of survivorship. He also believed that Carol wanted him to have a life estate in their cottage in Maine, which was titled in her name, and that the cottage was to go to the children upon his death.
When one of the children later became dissatisfied with Ethan, the validity of his marriage with Carol was challenged, and through the ensuing investigation it was revealed that their marriage had been invalid because it was not in compliance with Mexican law. With the parties stipulating to the invalidity of the marriage, the children filed a petition to revoke Ethan’s petition to administer Carol’s estate, and Ethan filed an equity action claiming that the children had been unjustly enriched by the assets he had distributed to them.
The Probate Court entered judgment revoking the decree appointing Ethan as administrator of the estate, concluding that because he was not married to Carol at the time of her death, he could not be appointed the administrator pursuant to G.L. c. 193, §§ 1 and 2. The Probate Court also struck Ethan’s name from the list of Carol’s heirs.
In the equity action, the Probate Court concluded that Ethan had distributed the $120,000 from his account (the joint account with Carol with a right of survivorship) to the children on the basis of two mistakes of fact. “The Court finds that Ethan made a mistake of fact when he believed that Carol’s children considered Ethan to be Carol’s husband, and Ethan made another mistake of fact when he believed that the children would follow through with their mother’s wishes.” As a result of these mistakes of fact, the Probate Court held that the children had been unjustly enriched, and ordered the children to return the $120,000 to him.
On appeal, the Appeals Court reversed the Probate Court’s judgment removing Ethan as administrator, holding that the children were estopped from challenging the validity of Ethan and Carol’s marriage because Carol herself would have been estopped from challenging the validity of the marriage, having received the benefits of the marriage. In light of this reversal, the Appeals Court vacated the judgment in the equity action for further proceedings.

 

The Boston Bar Association Trusts & Estates Section Blog provides information as a service to its users and BBA members. Neither the Trusts & Estates Section nor the Boston Bar Association are a law firm and do not represent clients in any way. Although the information on this site is about legal issues and informational services it is not legal advice. Use of this blog does not in any way create a lawyer-client relationship. If you need a lawyer, the Boston Bar Association Lawyer Referral Service can refer you to a qualified attorney. http://www.bostonbarlawyer.org/ or call 617-742-0625.

Litigation Update: Bird Anderson v. BNY Mellon

Bird Anderson v. BNY Mellon, N.A., No. SJC-11122 (Mass. Aug. 28, 2012)
Author:
Heidi A. Seely, Esq. – Pratt, Bator & Popov, LLP
In Bird Anderson v. BNY Mellon, N.A., the Massachusetts Supreme Judicial Court held that the 2009 Amendment to G.L. c. 210, § 8 including adopted children in the definition of “child” under trusts and wills cannot be applied retroactively to instruments executed prior to 1958.
Facts:  In 1941, Anna Child Bird (“Anna”) executed a will and testamentary trust for the benefit of her son and issue (“ACB Trust”).  At the time the will was executed, G.L. c 210, § 8 (“Section 8”) provided that, subject to clear intent to the contrary, adopted children were excluded from the definition of “child” in testamentary instruments.  In 1958, Section 8 was amended to provide that the term “child” would include adopted children in all such instruments executed thereafter (“1958 Amendment”).  In 2009, Section 8 was further amended to provide that the word “child” would include adopted children in all testamentary instruments, regardless of when such instrument was executed (“2009 Amendment”). 
Under the ACB Trust, the income of the trust is distributed to Anna’s issue and, upon termination, all trust principal will be distributed to Anna’s issue by right of representation.  Plaintiff Rachel Bird Anderson (“Rachel”), is Anna’s great-granddaughter.  In 2007, Rachel began receiving a portion of the income of the trust.  Rachel’s two adopted brothers, Marten and Matthew, did not receive income from the ACB Trust. The Trust fell under the pre-1958 rule stating that adopted children were excluded from the definition of “child” and, therefore, they were ineligible as beneficiaries. 
In 1981, Julia Bird (grandmother of Rachel, Marten and Matthew), established a charitable lead trust.  Upon termination, the trust principal was distributed to Marten, Matthew and Julia’s great-grandchildren, specifically including the children of Marten and Matthew.  Rachel was not a beneficiary of this trust. 
On July 19, 2010, the Trustees gave notice that in light of the 2009 Amendment, Rachel’s adopted brothers, Marten and Matthew, were now considered Anna’s “issue” for purposes of the ACB Trust and, therefore, qualified as beneficiaries. 
Analysis:  The Court dismissed arguments regarding the legislative history of the 2009 Amendment and whether Section 8 is an evidentiary rule raising no constitutional concerns when applied retroactively.  The Court focused its analysis on whether retroactive application of the 2009 Amendment to pre-1958 trusts is unreasonable and therefore, unconstitutional. 
The Court first considered the public interest of equalizing the inheritance rights of adopted and biological beneficiaries motivating the 2009 Amendment.  The Court questioned whether that interest was reasonably served by the statute due to the fifty-two year gap between the passage of the 1958 Amendment and the 2009 Amendment.  This gap allowed grantors and testators time to make compensatory plans to equalize their estates between adopted and biological beneficiaries.  The Court inferred that such deliberate equalization prompted Julia Bird to establish the charitable lead trust for the benefit of Marten and Matthew while specifically excluding Rachel.  The Court concluded the 2009 Amendment only weakly served the public interest it sought to protect. 
The Court then evaluated the nature of the rights affected.  As plaintiff, Rachel was required to show she has a substantial, vested interest which was significantly harmed by the retroactive application of the 2009 Amendment.  In determining Rachel’s right as a beneficiary, the Court followed the reasoning of Billings v. Fowler, 361 Mass. 230 (1972) and measured “the likelihood that the person claiming a vested right will eventually come to enjoy that right.”  Where there is a substantial likelihood of enjoyment, the Court considered the right vested even if it could be defeated or diminished by biological events.  Here, the Court found Rachel had a vested interest in the ACB Trust even though it could be diminished by the birth of siblings or destroyed by death.  The Court concluded that the retroactive application of the 2009 Amendment would significantly harm Rachel’s vested interest in the ACB Trust by reducing her share from 50% to 16 2/3% of the income and principal of the trust.
In addition to the vested interests of the beneficiaries of the ACB Trust, the Court explored the rights of all testators, settlors and grantors who had relied on the law in effect at the time they executed testamentary instruments.  The court reasoned it was likely most testators and grantors are advised by council regarding current law when executing such instruments. Retroactively changing any rule of construction affecting property rights would significantly impact the rights of such testators and grantors to rely on the law then in existence when creating their estate plans. 
Finally, the Court balanced the public benefit and the significant harm to Rachel’s vested interest in the ACB Trust and the presumptive reliance interests of Anna and Julia as testators due to the retroactive application of the 2009 Amendment.  The Court acknowledged the goal of ensuring equality between biological and adopted children, but found that the 2009 Amendment caused significant harm to Rachel, Anna and Julia’s substantial rights and was therefore unreasonable. 
The Court made two significant final points.  First, the Court recognized that other states have decided this issue differently, but pointed out that this case is in line with Massachusetts common law. The Court indicated that the other Courts had given insufficient weight to the substantiality of the interests held by current beneficiaries and ignored the “bedrock principal” that a testator is entitled to rely on the state of law at the time of execution of a testamentary instrument.  Second, the Court clarified that given the uncertainty of the law caused by the 2009 Amendment, any Trustees who either made distributions or declined to make distributions to adopted beneficiaries in reliance on the 2009 Amendment had not abused their discretion or acted in a manner inconsistent with their responsibilities as Trustees.  
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