Posts Tagged: trust

T&E Litigation Update – The FPE Foundation v. Solomon; Berkowitz v. Berkowitz

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

While the Red Sox were marching toward victory, the following decisions were reported enforcing an arbitration clause in a trust and addressing statute of frauds and statute of limitations questions in a case involving alleged breaches of an oral trust.

The FPE Foundation v. Solomon

In The FPE Foundation v. Solomon, Civil Action No. 12-11342-GAO, 2013 U.S. Dist. LEXIS 134120 (D. Mass. Sept. 19, 2013), the charitable remainder beneficiary of a QTIP trust brought suit against the trustees and the estate planning attorney for alleged mismanagement of the trust, asserting tort and contract claims in the U.S. District Court.  The Court dismissed the claims and compelled arbitration of the dispute pursuant to the arbitration clause in the trust instrument.  In doing so, the Court assumed the enforceability of the clause and focused its discussion on whether the defendants had waived their right of enforcement.

Berkowitz v. Berkowitz

In Berkowitz v. Berkowitz, Civil Action No. 11-10483-DJC, 2013 U.S. Dist. LEXIS 134791 (D. Mass. Sept. 20, 2013), Samuel Berkowitz sued his daughter Bonnie Berkowitz for breach of fiduciary duty, claiming that she was holding certain real property and securities for his benefit pursuant to an oral trust, and that she repudiated the oral trust in 2008.  Bonnie moved for summary judgment, arguing in part that Samuel’s claim is barred by the statute of frauds and the statute of limitations.  Her motion was denied.

The U.S District Court acknowledged that the statute of frauds applies to contracts for the conveyance of land, and that no trust concerning land, except a trust that may arise or result by implication of law, shall be created or declared unless by a written instrument.  The Court held, however, that one such trust that arises by implication of law (and thus does not require a written instrument) is a resulting trust, and that a genuine issue of fact exists as to whether a resulting trust was created when Samuel transferred the real property to Bonnie.

Similarly, the statute of frauds does not apply to the securities that were allegedly held pursuant to the oral trust, because it was not a contract to make or revoke a will or codicil.  Even if the oral trust were made in contemplation of Samuel’s death, and thus arguably fell within the statute of frauds, the statute of frauds would not apply to a constructive trust, and Samuel brought forth sufficient evidence to raise a genuine issue of fact as to the existence of a constructive trust.

Finally, the Court held that Samuel’s claim was not barred as a matter of law by the statute of limitations.  A claim for breach of fiduciary duty does not accrue until the trustee repudiates the trust and the beneficiary has actual knowledge of the repudiation.  Here, although there is evidence that Samuel knew he had been “swindled” as early as 2002, there was no evidence that Bonnie specifically repudiated the trust until 2008, when Samuel requested an accounting.  For the same reason the Court rejected Bonnie’s argument under the doctrine of laches.

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