CAPOBIANCO v. DISCHINO (2020)

MEMORANDUM AND ORDER PURSUANT TO RULE 23.0

This appeal arises from two related cases: (1) an action brought in the Suffolk County Probate and Family Court (Suffolk action) by the plaintiffs, Daniel B. Capobianco and Charles L. DiSchino (trustees), as the trustees of the Robert L. and Dorothy M. DiSchino Living Trusts (trusts), seeking a declaration that each of the defendants (as beneficiaries) had violated section 17.03 of the trusts' no contest clauses ⁶ ; and (2) an equity suit relating to the trusts brought solely by Dennis M. DiSchino in the Norfolk County Probate and Family Court (Norfolk action), seeking to, among other things, oust the trustees, appoint himself as the singular trustee, enjoin the trustees from depleting monies from the trusts, and acquire an accounting of the trusts.

On October 11, 2017, the cases were heard together before a judge of the Probate and Family Court in the fiduciary litigation session. In ruling on the cross motions for summary judgment filed in the Suffolk action, the judge declared that only Dennis ⁷ had violated the no contest clause of the trusts, and she awarded a portion of the trustees' requested attorney's fees. Because the parties had agreed that any decision issued on the cross motions for summary judgment in the Suffolk action relating to the no contest clause issue would equally apply to the Norfolk action, the judge dismissed Dennis's equity complaint in the Norfolk action. On appeal, Dennis contends that (1) the trustees lacked standing to bring the Suffolk action; (2) the judge erred in granting summary judgment in the trustees' favor, and in declaring that Dennis had triggered the trusts' no contest clause -- and, consequently, that she erred in dismissing the Norfolk action based on the violation of the no contest clause; and (3) the judge abused her discretion in ordering Dennis to personally reimburse the trusts the amount awarded the trustees in attorney's fees in the Suffolk action.

We agree with Dennis that the trustees lacked standing to bring the Suffolk action and, therefore, we vacate the summary judgment in their favor. In addition, we vacate the consolidated order awarding attorney's fees in the Suffolk action. Although the judge did not have jurisdiction to reach the issue of the no contest clause in that action, as the identical issue was presented in the Norfolk action and the parties agreed that the judge's determination of that issue would apply to both actions, we address the issue ⁸ and conclude that the judge did not err in holding that Dennis's filing of the Norfolk action triggered the no contest clause. Accordingly, we affirm the dismissal of the Norfolk action.

Background. There is no dispute between the parties with regard to any of the material facts relevant to these matters. Upon Robert's and Dorothy's (settlors) deaths in 2009 and 2010, respectively, Capobianco was appointed the initial independent trustee of the trusts established by the settlors in November 2009; each trust contained the no contest clause due to Robert's and Dorothy's concerns about litigation within the family. The settlors' son Charles succeeded their son Daniel as cotrustee, and as manager of certain real properties to which legal title was held by the trusts (LLCs).⁹

In April 2013, Dennis initiated the Norfolk action by filing an equity complaint seeking to (1) oust the trustees, and remove Charles as the manager of the LLCs; (2) appoint Dennis as the sole successor trustee and manager of the LLCs; (3) enjoin the trustees from “withdrawing, transferring, assigning, encumbering, using and otherwise disposing” of monies or assets of the trusts while the action was pending; and (4) obtain an accounting of the trusts and the LLCs.¹⁰ The trustees counterclaimed (in separate answers), both seeking a judgment declaring that Dennis had, by filing the Norfolk action and the original general petition action (petition action), which was later dismissed by agreement,¹¹ violated the no contest clause and, therefore, had forfeited his beneficial interest in the trusts and subtrusts.

On December 9, 2015, in response to Dennis's filing of the Norfolk action, as well as an action filed in the Norfolk County Superior Court by the defendants in the Norfolk action relating to a violation by settlor, Robert DiSchino, of a transfer restriction agreement (TRA action), the trustees filed the Suffolk action ¹² seeking to enforce against the defendants the no contest clause which, if successful, would cause a forfeiture of their beneficial interests in the trusts and related subtrusts.¹³

In January 2018, the defendants in the Suffolk action filed for summary judgment seeking a declaration that they did not violate the no contest clause. In February 2018, the trustees countered with a cross motion for summary judgment. In their respective motions, both the trustees and the defendants sought an award of their attorney's fees. After a joint status conference held on the Suffolk and Norfolk actions, the parties agreed that the initial determination to be made in both cases was whether the defendants had violated the no contest clause. If Dennis was found to not be in violation, the Norfolk action would “remain viable” and be scheduled for hearing.

On July 12, 2018, the judge issued summary judgment in the Suffolk action; she determined that “Dennis, and Dennis alone,” had violated the no contest clause when he filed the Norfolk action (and the petition action), had forfeited his beneficial interests in the trusts and subtrusts, and thus no longer had standing to prosecute the Norfolk action. On the same day, the judge sua sponte dismissed the Norfolk action with prejudice.¹⁴ Dennis's motion to alter or amend the judgment pursuant to Mass. R. Civ. P. 59 (e), 365 Mass. 827 (1974), was denied.¹⁵

After a separate hearing, on November 27, 2018, the judge issued a memorandum and order on the parties' respective motions for attorney's fees. The judge found that the trustees had not breached their fiduciary duty to the beneficiaries of the trusts, and awarded them their attorney's fees, after some reduction. After denying Dennis's motion for fees, the judge ordered Dennis to personally reimburse the trusts $66,540 for attorney's fees incurred and paid on the trustees' behalf in connection with the Suffolk and Norfolk actions; it is unclear from the order what amount of attorney's fees, if any, were attributed exclusively to the Norfolk action. Dennis timely appealed from both the summary judgment, and the order awarding the trustees' attorney's fees.

Discussion. 1. Standing. We first address Dennis's challenge whether the trustees had standing to bring the Suffolk action. We conclude they did not.¹⁶

“The standing requirement exists because ‘[c]ourts are not established to enable parties to litigate matters in which they have no interest affecting their liberty, rights or property,’ but rather only those matters in which they have a ‘definite interest’ such that their ‘rights will be significantly affected by a resolution of the contested point’ ” (citations omitted). Cambridge St. Realty, LLC v. Stewart, 481 Mass. 121, 128-129 (2018), quoting HSBC Bank USA, Nat'l Ass'n v. Matt, 464 Mass. 193, 199, 200 (2013). The trustees lacked standing because, as trustees of the trust, they had no personal interest in the trusts they were administering.¹⁷

In addition, because the trustees claimed no “injury” as a result of Dennis's actions, they lacked standing to pursue their adversarial declaratory judgment claim. School Comm. of Hudson v. Board of Educ., 448 Mass. 565, 579 (2007), quoting Massachusetts Ass'n of Indep. Ins. Agents & Brokers, Inc. v. Commissioner of Ins., 373 Mass. 290, 293 (1977) (“A party has standing when it can allege an injury within the area of concern of the statute or regulatory scheme under which the injurious action has occurred”).

We are not persuaded by the trustees' argument that the filing of this adversarial action was their recourse for maintaining their duties to the “non-litigating” beneficiaries.¹⁸ As is customary, the trustees could have filed a complaint for instructions to seek guidance whether Dennis (or the other defendants) had violated the trusts' respective no contest clause. See, e.g., Savage v. Oliszczak, 77 Mass. App. Ct. 145, 147 (2010). Instead, the trustees initiated, in another court, a separate adversarial action against select beneficiaries to whom the trustees also owed a fiduciary duty. Had the trustees sought instructions from the court questioning a violation of the trusts' no contest clause, not only would their concerns for the nonlitigating beneficiaries have been addressed, but their request would have prompted the judge to consider the interests of each and every beneficiary in light of any violation.

It is well established that, in providing instructions, the judge had “the power to issue a declaratory judgment of [her] interpretation of a trust instrument,” that contained a no contest clause. Young v. Department of Pub. Welfare, 416 Mass. 629, 634 (1993). The trustees' reliance on Young in arguing that it was “entirely appropriate” for them to pursue a separate action for declaratory judgment is misplaced, as the declaration issued in Young stemmed from a complaint for instructions filed by a trustee seeking an interpretation of certain terms of a trust in relation to the distribution of assets interfering with Medicaid benefits. Id. at 629-630. Notably, it appears that each of the Massachusetts cases cited by the trustees in support of their argument likewise is grounded in actions by fiduciaries seeking instructions from the court regarding the terms of a will or trust, or actions brought by a direct beneficiary. See, e.g., Woodward Sch. for Girls, Inc. v. Quincy, 469 Mass. 151, 152-153 (2014); Savage, 77 Mass. App. Ct. at 147; Shear v. Gabovitch, 43 Mass. App. Ct. 650, 652 (1997).

The trustees did not have standing to bring the Suffolk action, and the judge therefore lacked subject matter jurisdiction over it. See Cambridge St. Realty, LLC, 481 Mass. at 128-129. See also, e.g., Revere v. Massachusetts Gaming Comm'n, 476 Mass. 591, 607 (2017), quoting Ginther v. Commissioner of Ins., 427 Mass. 319, 322 (1998) (“[w]e treat standing as an issue of subject matter jurisdiction”); Kenner v. Zoning Bd. of Appeals of Chatham, 459 Mass. 115, 125 (2011); Planning Bd. of Marshfield v. Zoning Bd. of Appeals of Pembroke, 427 Mass. 699, 703 (1998). For this reason, we vacate the judgment entered in the Suffolk action in favor of the trustees.

2. No contest clause. Dennis argues that because the judge erred in concluding that he violated the no contest clause, it was error to dismiss the Norfolk action.¹⁹ We review a motion to dismiss de novo. See Galiastro v. Mortgage Elec. Registration Sys., Inc., 467 Mass. 160, 164 (2014). The determination that Dennis's complaint to remove the trustees and to appoint him as the sole trustee violated the no contest clause “is a legal conclusion that we review de novo.” Savage, 77 Mass. App. Ct. at 147, quoting Ritter v. Massachusetts Cas. Ins. Co., 439 Mass. 214, 215 (2003). “[B]ecause equity does not favor forfeitures, [no contest] clauses have been construed narrowly.” Savage, supra at 149, quoting Bogert, The Law of Trusts and Trustees § 181 (rev. 2d ed. 2007).

Dennis sought, in his complaint, to remove Capobianco and Charles as cotrustees, and Charles as the manager of the LLCs. He also sought to appoint himself as the sole trustee in both these capacities. Dennis alleged, among other things, that Capobianco had violated the trustee succession provision of the trusts by appointing Charles after Daniel had resigned, and that Charles had violated the provision of the trusts requiring him to provide an adequate annual accounting. No question, Dennis had the right under section 14.13 of the trusts to request or insist on an adequate accounting. Briggs v. Crowley, 352 Mass. 194, 200 (1967) (“trust instrument purporting to relieve the trustees of the duty imposed by law to account are invalid as against public policy” if language of instrument deprives court of jurisdiction and petitioner of standing to bring proceeding). However, when he sought to place himself in these capacities, he challenged the terms of the trust in violation of the no contest clause.²⁰ Cf. Mazzola v. Myers, 363 Mass. 625, 639 (1973) (“in seeking an interpretation of the will, the plaintiff has not attacked or challenged the will or any part of it”). Had Dennis been successful in his request to oust and then personally replace the cotrustees, the succession of trustees would not have been carried out in accordance with the trusts' terms. Therefore, Dennis's act of bringing the Norfolk action was a “real opposition” to the trusts' terms, see Maguire v. Bliss, 304 Mass. 12, 14 (1939), triggering the trusts' no contest clause.

In the memorandum and order on the cross motions for summary judgment, the judge, in reading the no contest clause, determined that “the language contained therein [wa]s intended to foreclose both challenges to the [trusts] themselves and challenges to any of the provisions of the [trusts], including amendments.” The judge further found, as relevant here, that the complaint filed by Dennis in the Norfolk action “pointed directly at the provisions of the [trusts] that govern the trustees, the appointment of successor and co-trustees, and the authority of trustees to act as managers of the LLCs.” We agree. “Dennis'[s] [requested] appointment as sole trustee of the [trusts] and manager of the LLCs would effectively void the [s]ettlors' decision on who they wanted to manage the [trusts] and the LLCs,” thus directly challenging sections 3.03 and 3.04 of the trusts governing the appointment of trustees, successor trustees, and cotrustees. The judge's findings were supported by the record.

Based on the foregoing, we discern no error in the judge's determination that Dennis did indeed violate the no contest clause, terminating his beneficial interests therein. Accordingly, we conclude the judge did not abuse her discretion when she dismissed, for lack of standing, Dennis's complaint filed in the Norfolk action. See L.L. v. Commonwealth, 470 Mass. 169, 185 n.27 (2014).

3. Attorney's fees award. Based on our determination that the trustees lacked standing in the Suffolk action, the order requiring Dennis to personally reimburse the trusts $66,540 in attorney's fees in connection with that action cannot stand. To charge Dennis with the cost of litigation for an action brought improperly would be unjust and inequitable. See Estate of King, 455 Mass. 796, 805 (2010). Although G. L. c. 215, § 45, is an exception to the “American rule” that the parties are responsible their own fees, “the fact that it is an exception does not mean that § 45 contemplates an award of costs or attorney's fees as a matter of course.” Id. at 803.

Conclusion. As to the Suffolk action, we vacate the judgment in favor of the trustees, and the matter is remanded to the Probate and Family Court for the entry of a judgment dismissing the trustees' complaint against all defendants. As to the Norfolk action, the judgment dismissing Dennis's complaint is affirmed. As to both actions, the order dated November 27, 2018, acting on the parties' respective motions for attorney's fees is vacated.²¹

So ordered.

Affirmed in part; vacated in part and remanded

FOOTNOTES

6.   Section 17.03 of each trust provides: “If any person attempts to contest or oppose the validity of this agreement, or any of its provisions (including any amendment to this agreement), or commences, continues or prosecutes any legal proceedings to set this agreement aside, whether directly or indirectly, then that person will forfeit his or her share, cease to have any right or interest in the trust property, and will, for purposes of this agreement, be deemed to have predeceased [the settlors].”

7.   Because some of the parties share the same last name, we refer to each by their first name for ease of reference.

8.   In any event, Dennis specifically requested that we undertake to address the no contest issue, which is “likely to recur in litigation amongst the parties or in other cases,” even if we found no jurisdiction in the Suffolk action.

9.   Capobianco and Charles were also trustees to ten subtrusts which they established (under the terms of the trusts) for the benefit of all the trusts' beneficiaries, including the defendants in this case.

10.   Although the other defendants in the Suffolk action supported Dennis in pursuit of the Norfolk action (and the petition action), Dennis remained the only plaintiff in the Norfolk action.

11.   Previously, in August 2012, Dennis had filed the petition action in the Norfolk County Probate and Family Court, asserting nearly identical claims and sought essentially the same relief as in the Norfolk action. The parties referred to the Norfolk action and the petition action collectively as “the probate matters.” The petition action was later dismissed without objection after the judge determined that the Norfolk action and the petition action dealt with identical issues. Dennis did not appeal from that dismissal. The petition action is relevant to this appeal only to the extent that attorney's fees may have been awarded for work performed in that matter.

12.   The trustees later amended their complaint to reflect the trustees' capacity as trustees of the subtrusts.

13.   The trustees claimed that Dennis violated the no contest clause when he filed the Norfolk action (and the petition action), and that the other defendants violated the clause due to their alignment with Dennis in those matters, and when they all joined in filing the TRA action.

14.   In November 2017, the judge amended the decrees of dismissal in the Suffolk and Norfolk actions to indicate that the issue of requested attorney's fees by the parties' had remained open.

15.   Although Dennis appealed in the Suffolk action the denial of his motion to alter or amend the judgment, and his motion to dismiss under G. L. c. 231, § 59H, he did not address those issues in his brief and, therefore, the issues are waived. See Barkan v. Zoning Bd. of Appeals of Truro, 95 Mass. App. Ct. 378, 389 (2019).

16.   The trustees concede that although Dennis raises the standing issue for the first time on appeal, we are not precluded from considering it. See Pugsley v. Police Dep't of Boston, 472 Mass. 367, 371 (2015).

17.   As previously noted, Charles is a party to this action only in his capacity as cotrustee of the trusts and subtrusts, not as a beneficiary thereto.

18.   There was no evidence presented that the defendants (excluding Dennis), or any of the trusts' other beneficiaries, were prevented in any way from becoming parties to the Norfolk action. In fact, after the joint status conference, the judge instructed the parties to add the other defendants named in the Suffolk action as parties to the Norfolk action -- either as plaintiffs or nominal defendants.

19.   It is undisputed that the parties agreed that “the initial determination to be made in these cases” was whether the defendants had violated the trusts' no contest clause. Even though the judge specifically addressed the no contest claim in the Suffolk action, where it had been briefed in cross motions for summary judgment, she was at the same time addressing it in the Norfolk action. Accordingly, we review the issue of Dennis's violation of the trusts' no contest clause as a contested issue in the Norfolk action.

20.   On the death of both of the settlors, the trusts instructed that Capobianco would be appointed as the initial independent trustee under the provisions of section 3.01 of the trustee succession provisions. Section 3.07 required that “there shall at all times be a minimum of two [t]rustees serving” for each trust created, “one of which must be an independent trustee”; only a “specifically authorized” trustee or an independent trustee could serve alone. As the independent trustee, Capobianco was permitted by section 3.04 to appoint Charles as successor cotrustee on Daniel's resignation, and the inability of the designated successor cotrustee to serve in that capacity. In addition, sections 3.03 and 3.04 allowed Dennis (as a beneficiary) to be appointed as a cotrustee of his own subtrust, “to serve along with the then serving [t]rustee”; as section 3.03 required, during any time that Dennis was serving as a cotrustee of his subtrust, “there must be at least one other [i]ndependent [t]rustee serving” with him.

21.   We deny the parties' respective requests for appellate attorney's fees requested in these companion cases.