Author:
Mark E. Swirbalus, Esq., Day Pitney LLP
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.
Hoffman v. University of Massachusetts Amherst
In Hoffman v. University of Massachusetts Amherst, Case No. 10-P-1251, 2011 Mass. App. Unpub. LEXIS 731 (June 2, 2011), a decision issued pursuant to Rule 1:28, the Appeals Court affirmed an application for cy pres with respect to a charitable trust.
The trust provides for scholarships to boys of two particular Roman Catholic parishes to study forestry at Paul Smith’s College or the University of Massachusetts Amherst. The trustee’s application for cy pres to expand utilization of the trust was granted, with the consent of the Attorney General, and the Roman Catholic Bishop of Springfield subsequently filed a motion to intervene pursuant to Rule 24 and a motion for relief from the judgment pursuant to Rule 60(b)(6).
The Roman Catholic Bishop’s motion to intervene was denied. The Court explained that it is the exclusive function of the Attorney General to correct abuses in the administration of a public charity by the institution of proper proceedings, and to protect the public interests by proceeding as those interests may require. A party other than the Attorney General would have standing only if that party has an individual interest in the charitable organization distinct from the general public. The Court held that although the Roman Catholic Bishop operates the two parishes in question, the Roman Catholic Bishop is not a legal beneficiary of the trust. The Catholic males from the two parishes in question who would study forestry at either Paul Smith’s College or UMass Amherst are the legal beneficiaries. Therefore, the Roman Catholic Bishop lacked standing to intervene.
Even if the Roman Catholic Bishop were to have standing, it would not be entitled to relief from the judgment, because such relief would not be necessary to accomplish some “substantial justice.” The exact nature of the cy pres relief granted by the trial court is difficult to discern from the summary decision, but it seems to have included an ability to benefit Catholic students from outside of the two parishes in question, if necessary. In any event, the Court held that the trial court did not abuse its discretion in granting this relief.
Finally, the Court held that the Roman Catholic Bishop was not entitled to receive notice of the cy pres proceedings because the applicable statute, G.L. c. 214, § 108, requires that notice in a cy pres action be given only to heirs and other takers in default should the charitable gift fail. The Roman Catholic Bishop is neither.
Kostick v. Fort Hill Community
In Kostick v. Fort Hill Community, Case No. 10-P-1294, 2011 Mass. App. Unpub. LEXIS 697 (May 23, 2011), a decision issued pursuant to Rule 1:28, the Appeals Court addressed, among other questions, when the statute of limitations begins to run on a breach of trust or breach of fiduciary duty claim.
Fort Hill Community is a commune that was established in the 1960s. Fort Hill has engaged in real estate development, and the proceeds from the real estate development are held in a trust that names all Fort Hill members as equal beneficiaries. The declaration of trust provides that the trustees are to pay net income to the beneficiaries as the trustees deem advisable, and that each Fort Hill member is to remain a beneficiary unless the member ceases living with the other Fort Hill members or is deprived of membership by a four-fifths vote of the trustees. A person who ceases to be a member through either of these two mechanisms is not entitled to a share of the trust.
Plaintiff John Kostick was a member of Fort Hill, but he stopped living in Fort Hill in 1993. He alleges that he left the commune involuntarily and without a four-fifths vote of the trustees to expel him.
In 2007 or 2008, other members of Fort Hill received distributions from the trust. In November 2008, Kostick made a demand for his beneficial interest, which was rejected, and so he filed suit in superior court in February 2009. In his complaint, Kostick asserted claims for breach of trust, breach of fiduciary duty, an accounting, and a declaratory judgment.
The trustees moved to dismiss the complaint, and the court allowed their motion. Between the time of the court's decision and entry of judgment, Kostick moved to amend his complaint. The court then entered judgment on the motion to dismiss and denied Kostick's motion to amend. In denying the motion to amend, the court reasoned that Kostick's claims are barred by the applicable statute of limitations, G.L. c. 260 § 2A, because the three-year limitations period began running on Kostick's claims when he was ejected from Fort Hill many years earlier.
The Appeals Court reversed and remanded. On the statute of limitations question, the Court explained that a cause of action for breach of trust or breach of fiduciary duty does not accrue until the trustee repudiates the trust and the beneficiary has actual knowledge of the repudiation. Here, based on the facts alleged in the complaint, which must be deemed to be true, the trustees did not repudiate the trust until they rejected Kostick's demand for his beneficial interest in November 2008, rather than when he alleges that he involuntarily left the commune without a four-fifths vote of the trustees, and thus his claims were not time-barred.
Krawczyk v. Beng
In Krawczyk v. Beng, Case No. 10-P-1443, 2011 Mass. App. Unpub. LEXIS 702 (May 24, 2011), another decision issued pursuant to Rule 1:28, the Appeals Court affirmed the appointment of a receiver to oversee and manage a parcel of property owned in trust. The Court explained that a receiver can be appointed within the discretion of the court to prevent waste or loss and conserve the assets in question for the benefit of all parties with an interest in the assets. Here, the Court held that the appointment of a receiver was appropriate as a "prophylactic measure to protect assets," and clearly within the motion judge's discretion, because of the discord between the parties and the trustee's demonstrated inability to manage and protect the trust property.
A discussion of law and developments in the trusts and estates field.
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Tuesday, June 14, 2011
Tuesday, June 7, 2011
Attention Life Tenants: Thou Shalt Not Waste
Author:
Mark E. Swirbalus, Esq., Day Pitney LLP
In the first half of 2011, the Appeals Court had two occasions to address the obligations of a life tenant. On each occasion, the Appeals Court sent the same clear message: a life tenant’s primary obligation is to preserve the property.
Comeau v. Coache
In January 2011, the Appeals Court issued a summary decision in Comeau v. Coache, Case No. 09-P-1984, 2011 Mass. App. Unpub. LEXIS 101 (Jan. 24, 2011).
Plaintiff Peter Comeau is the trustee of the Comeau Family Trust. He is also the life tenant of a one-story house in Ipswich that is owned by the trust and where he has resided for the last fifty years. Other family members, including the defendants, are the remainder beneficiaries of the trust.
The relevant provision of the trust instrument allows Mr. Comeau to "continue to occupy the dwelling as his principal residence, provided that he pay all real estate taxes, insurance, maintenance and utilities for the premises." Accordingly, Mr. Comeau alone must bear financial responsibility for “maintenance” work on the property.
Over the objections of the remaindermen, Mr. Comeau arranged for various work to be done at the property, primarily consisting of the replacement of the original windows. After having the windows replaced, for which he himself paid out of his own pocket, Mr. Comeau sought an order from the probate court to compel the remaindermen to reimburse him for their proportional share of the window replacement, which he claimed to be a capital improvement that was necessary to preserve the property. The remaindermen responded by seeking to terminate Mr. Comeau’s life estate. They argued that the replacement of the windows constituted maintenance work for which he is solely responsible.
The probate court decided in favor of the remaindermen, finding that the window-replacement work constituted “elective and cosmetic” maintenance, and terminated Mr. Comeau’s right to occupy the property.
The Appeals Court reversed the termination of Mr. Comeau’s right of occupancy, holding that regardless of whether the replacement of the windows was maintenance or a capital improvement, Mr. Comeau had in fact paid for the work. The Court also noted that Mr. Comeau's obligation to pay for maintenance work could be interpreted to be a condition subsequent, and such conditions are not favored in the law: ". . . there is substantial doubt whether the trust document intended that [Mr. Comeau] automatically forfeit his right to occupy the premises if he breached his duty to pay for maintenance."
Perhaps most importantly, the Court pointed out that Mr. Comeau’s pattern of conduct over the years showed a continuing effort to preserve the integrity and value of the property ultimately benefiting the interests of the remaindermen. Therefore, in the absence of any harm to the property, Mr. Comeau’s pursuit of an arguable claim for reimbursement was not a material breach of the letter or purpose of the condition subsequent of the trust and thus did not warrant the severe sanction of dissolution of his life estate.
Matteson v. Walsh
In May 2011, in its decision in Matteson v. Walsh, 79 Mass. App. Ct. 402 (May 2, 2011), the Appeals Court amplified on the theme that a life tenant has an obligation to preserve the integrity and value of the property.
In her will, Dorothy Walsh devised real property in Chatham consisting of a summer cottage and an unattached garage to her son Robert Walsh as the life tenant, and thereafter, upon his death, to his heirs and her other two children, Elizabeth Gay Matteson and Catherine Baisly, as the remaindermen.
Mr. Walsh resided at the property, but he stopped paying taxes in or about 2004, resulting in the town's issuance of a notice of tax-taking. Mr. Walsh also stopped paying to maintain the property, causing it to fall into disrepair. Ms. Matteson paid some of the delinquent taxes and hired someone to repair the premises, which were described as being in "considerable distress." Eventually, however, she filed suit against Mr. Walsh for waste.
The superior court found that Mr. Walsh had committed waste through his non-payment of taxes and by allowing the deterioration of the buildings, ordering him to reimburse Ms. Matteson for the taxes and $53,000 in repair costs she had paid. The superior court also divested Mr. Walsh of his life estate and ordered that he, Ms. Matteson and Ms. Baisly were to hold title to the property as tenants in common.
The Appeals Court affirmed in part, rejecting Mr. Walsh's argument that his failure to pay taxes did not result in waste because the property was neither seized nor sold. The Court explained that the only reason why the property was not seized and sold was that Ms. Matteson had stepped in to pay the outstanding debt, and that the threat to the remainder interests was sufficient to constitute prejudice to the inheritance. "Permitting the real estate taxes assessed to the property to remain unpaid to the point that the taxing authority records a tax-taking amounts to waste."
The Court also rejected Mr. Walsh's argument that his failure to maintain the property amounted to permissive waste for which he, as a life tenant, cannot be liable. The Court reasoned that the notion of permissive waste applies to a tenant at will, and that a life tenant is under a higher duty to preserve the estate for the benefit of the remaindermen.
As for the appropriate relief, the Court held that the superior court had erred in granting Mr. Walsh a fee interest in common after having ordered divestment of his life estate. When Mr. Walsh was divested of his life estate, the remainder interests vested, and he did not hold a remainder interest. If he had any heirs, their remainder interests might have vested, but he had none, and although he theoretically could have still produced an heir, the remainder interests are determined as of the date of recovery under the statute of waste, M.G.L. c. 242, § 1.
Conclusion
With these decisions, the Appeals Court fired an unmistakable warning shot: a life tenant is merely a visitor at the property in which he or she resides, and as such the life tenant must take care to preserve (i.e., not waste) the property for the benefit of the remaindermen. Every life tenant would be well-advised to heed this warning.
Mark E. Swirbalus, Esq., Day Pitney LLP
In the first half of 2011, the Appeals Court had two occasions to address the obligations of a life tenant. On each occasion, the Appeals Court sent the same clear message: a life tenant’s primary obligation is to preserve the property.
Comeau v. Coache
In January 2011, the Appeals Court issued a summary decision in Comeau v. Coache, Case No. 09-P-1984, 2011 Mass. App. Unpub. LEXIS 101 (Jan. 24, 2011).
Plaintiff Peter Comeau is the trustee of the Comeau Family Trust. He is also the life tenant of a one-story house in Ipswich that is owned by the trust and where he has resided for the last fifty years. Other family members, including the defendants, are the remainder beneficiaries of the trust.
The relevant provision of the trust instrument allows Mr. Comeau to "continue to occupy the dwelling as his principal residence, provided that he pay all real estate taxes, insurance, maintenance and utilities for the premises." Accordingly, Mr. Comeau alone must bear financial responsibility for “maintenance” work on the property.
Over the objections of the remaindermen, Mr. Comeau arranged for various work to be done at the property, primarily consisting of the replacement of the original windows. After having the windows replaced, for which he himself paid out of his own pocket, Mr. Comeau sought an order from the probate court to compel the remaindermen to reimburse him for their proportional share of the window replacement, which he claimed to be a capital improvement that was necessary to preserve the property. The remaindermen responded by seeking to terminate Mr. Comeau’s life estate. They argued that the replacement of the windows constituted maintenance work for which he is solely responsible.
The probate court decided in favor of the remaindermen, finding that the window-replacement work constituted “elective and cosmetic” maintenance, and terminated Mr. Comeau’s right to occupy the property.
The Appeals Court reversed the termination of Mr. Comeau’s right of occupancy, holding that regardless of whether the replacement of the windows was maintenance or a capital improvement, Mr. Comeau had in fact paid for the work. The Court also noted that Mr. Comeau's obligation to pay for maintenance work could be interpreted to be a condition subsequent, and such conditions are not favored in the law: ". . . there is substantial doubt whether the trust document intended that [Mr. Comeau] automatically forfeit his right to occupy the premises if he breached his duty to pay for maintenance."
Perhaps most importantly, the Court pointed out that Mr. Comeau’s pattern of conduct over the years showed a continuing effort to preserve the integrity and value of the property ultimately benefiting the interests of the remaindermen. Therefore, in the absence of any harm to the property, Mr. Comeau’s pursuit of an arguable claim for reimbursement was not a material breach of the letter or purpose of the condition subsequent of the trust and thus did not warrant the severe sanction of dissolution of his life estate.
Matteson v. Walsh
In May 2011, in its decision in Matteson v. Walsh, 79 Mass. App. Ct. 402 (May 2, 2011), the Appeals Court amplified on the theme that a life tenant has an obligation to preserve the integrity and value of the property.
In her will, Dorothy Walsh devised real property in Chatham consisting of a summer cottage and an unattached garage to her son Robert Walsh as the life tenant, and thereafter, upon his death, to his heirs and her other two children, Elizabeth Gay Matteson and Catherine Baisly, as the remaindermen.
Mr. Walsh resided at the property, but he stopped paying taxes in or about 2004, resulting in the town's issuance of a notice of tax-taking. Mr. Walsh also stopped paying to maintain the property, causing it to fall into disrepair. Ms. Matteson paid some of the delinquent taxes and hired someone to repair the premises, which were described as being in "considerable distress." Eventually, however, she filed suit against Mr. Walsh for waste.
The superior court found that Mr. Walsh had committed waste through his non-payment of taxes and by allowing the deterioration of the buildings, ordering him to reimburse Ms. Matteson for the taxes and $53,000 in repair costs she had paid. The superior court also divested Mr. Walsh of his life estate and ordered that he, Ms. Matteson and Ms. Baisly were to hold title to the property as tenants in common.
The Appeals Court affirmed in part, rejecting Mr. Walsh's argument that his failure to pay taxes did not result in waste because the property was neither seized nor sold. The Court explained that the only reason why the property was not seized and sold was that Ms. Matteson had stepped in to pay the outstanding debt, and that the threat to the remainder interests was sufficient to constitute prejudice to the inheritance. "Permitting the real estate taxes assessed to the property to remain unpaid to the point that the taxing authority records a tax-taking amounts to waste."
The Court also rejected Mr. Walsh's argument that his failure to maintain the property amounted to permissive waste for which he, as a life tenant, cannot be liable. The Court reasoned that the notion of permissive waste applies to a tenant at will, and that a life tenant is under a higher duty to preserve the estate for the benefit of the remaindermen.
As for the appropriate relief, the Court held that the superior court had erred in granting Mr. Walsh a fee interest in common after having ordered divestment of his life estate. When Mr. Walsh was divested of his life estate, the remainder interests vested, and he did not hold a remainder interest. If he had any heirs, their remainder interests might have vested, but he had none, and although he theoretically could have still produced an heir, the remainder interests are determined as of the date of recovery under the statute of waste, M.G.L. c. 242, § 1.
Conclusion
With these decisions, the Appeals Court fired an unmistakable warning shot: a life tenant is merely a visitor at the property in which he or she resides, and as such the life tenant must take care to preserve (i.e., not waste) the property for the benefit of the remaindermen. Every life tenant would be well-advised to heed this warning.
Monday, June 6, 2011
Massachusetts Probate Courts Release Revised and New Guardianship/Conservatorship Forms
When Article 5 of the MUPC became effective in July 2009, the Massachusetts Probate and Family Courts released a number of forms pertaining to Guardianship and Conservatorship. Since then, the Courts have collected and reviewed comments on the forms, and on May 30, 2011 released a series of revised and new forms.
The revised and new Guardianship and Conservatorship forms are available here. The Probate and Family Courts’ May 30, 2011 press release announcing the forms is available here. Practitioners should note that the Courts will continue to accept the earlier version of the forms until June 30, 2011.
The revised and new Guardianship and Conservatorship forms are available here. The Probate and Family Courts’ May 30, 2011 press release announcing the forms is available here. Practitioners should note that the Courts will continue to accept the earlier version of the forms until June 30, 2011.
Friday, June 3, 2011
The New Pet Trust Law and the Proposed Massachusetts Uniform Trust Code
Author:
Liza M. Connelly, Esq., Rackemann, Sawyer & Brewster
In January 2011, Governor Deval Patrick signed H. 1467 into law, making Massachusetts the 44th state to adopt a pet trust law. On April 7, 2011, the pet trust law came into effect. The law will be listed as M.G.L. c. 203, § 3C.
The proposed Massachusetts Uniform Trust Code (“MUTC”) also contains pet trust provisions in § 408. The most frequently asked question I heard once the pet trust bill was passed into law was: “How will this new law work with the proposed MUTC?” The answer is that the pet trust statute will be inserted into § 408 of the proposed MUTC and will completely replace the existing § 408.
In March of 2011, I met with Eric Hayes and Ray Young, two members of the MUTC Ad Hoc Committee, to discuss how the pet trust law would work with the proposed MUTC if it is passed. The MUTC Ad Hoc Committee suggested that the existing terms of § 408 of the proposed MUTC be lifted out and replaced with the pet trust law. If the proposed MUTC is adopted, the pet trust statute in M.G.L. c. 208, § 3C will be removed with a reference to the MUTC § 408 so that the only pet trust provision will be contained in the MUTC.
The proposed MUTC’s replacement of § 408 with the pet trust statute will ensure that there are no gaps, conflicts or overlaps between the proposed MUTC and existing pet trust statute.
The members of the MUTC Ad Hoc Committee also requested one change to the statute. The pet trust statute as passed into law specifically exempts pet trusts created under it from the Rule Against Perpetuities (“RAP”). The MUTC Ad Hoc Committee has requested that the RAP be added back in, with the compromised language stating that the lives in being shall be measured on the animal or animals alive at the time of the settlor’s death or when the pet trust becomes irrevocable. The drafters and proponents of the pet trust law have agreed to this change, and it will be incorporated into the proposed MUTC.
If the proposed MUTC is adopted, the existing pet trust statute will replace the text currently found in MUTC § 408 and will contain RAP provisions. For the present time, the pet trust statute remains as drafted and passed into law.
Liza M. Connelly, Esq., Rackemann, Sawyer & Brewster
In January 2011, Governor Deval Patrick signed H. 1467 into law, making Massachusetts the 44th state to adopt a pet trust law. On April 7, 2011, the pet trust law came into effect. The law will be listed as M.G.L. c. 203, § 3C.
The proposed Massachusetts Uniform Trust Code (“MUTC”) also contains pet trust provisions in § 408. The most frequently asked question I heard once the pet trust bill was passed into law was: “How will this new law work with the proposed MUTC?” The answer is that the pet trust statute will be inserted into § 408 of the proposed MUTC and will completely replace the existing § 408.
In March of 2011, I met with Eric Hayes and Ray Young, two members of the MUTC Ad Hoc Committee, to discuss how the pet trust law would work with the proposed MUTC if it is passed. The MUTC Ad Hoc Committee suggested that the existing terms of § 408 of the proposed MUTC be lifted out and replaced with the pet trust law. If the proposed MUTC is adopted, the pet trust statute in M.G.L. c. 208, § 3C will be removed with a reference to the MUTC § 408 so that the only pet trust provision will be contained in the MUTC.
The proposed MUTC’s replacement of § 408 with the pet trust statute will ensure that there are no gaps, conflicts or overlaps between the proposed MUTC and existing pet trust statute.
The members of the MUTC Ad Hoc Committee also requested one change to the statute. The pet trust statute as passed into law specifically exempts pet trusts created under it from the Rule Against Perpetuities (“RAP”). The MUTC Ad Hoc Committee has requested that the RAP be added back in, with the compromised language stating that the lives in being shall be measured on the animal or animals alive at the time of the settlor’s death or when the pet trust becomes irrevocable. The drafters and proponents of the pet trust law have agreed to this change, and it will be incorporated into the proposed MUTC.
If the proposed MUTC is adopted, the existing pet trust statute will replace the text currently found in MUTC § 408 and will contain RAP provisions. For the present time, the pet trust statute remains as drafted and passed into law.
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