T&E Litigation Update

By 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.