The Plaintiff, Thomas L. Murphy individually and as trustee of the Corey-Washington-Egremont Nominee Trust ("CWEN Trust") brought this suit by complaint filed in August 1982 seeking in part, a reconveyance of the property located at 4, 6 and 8 Commercial Street, Boston ("Premises") from the Defendant, Gerald F. Kelley ("Kelley") as he is trustee of Chatham's Corner Trust ("CCT") and seeking damages against Kelley individually. The complaint has been amended several times to include the four claimed beneficiaries of the CWEN Trust (James V., John J., Thomas L. and Paul M. Murphy) as plaintiffs as well as Walter E. Steele ("Steele"), Patrick F. Murphy ("Patrick"), John Meskell ("Meskell") and Kathleen Meskell as defendants. Kelley has counterclaimed seeking, among other things, a determination that CCT is the rightful owner of the premises and a determination as to the beneficial interests in that trust. There have been numerous other issues including certain jury claims, raised by amended complaints and by counterclaim of the parties however, pursuant to a stipulation filed April 8, 1988, this matter has been bifurcated leaving Count I of Plaintiffs' consolidated complaint, as amended, and Count III of Defendant Kelley's counterclaim, as amended, to be decided herein, all other claims are left for further hearingand determination, as may be necessary.
This case was tried over a two year period with over sixty days of trial, and over 300 exhibits admitted into evidence, all of which are incorporated herein for the purposes of any possible appeal. On all of the trial days a record of the proceedings was made by a duly appointed Court reporter. The transcript contains approximately 60 volumes.
Subsequent to the completion of testimony Justice John E. Fenton, Jr., who heard this matter, was appointed Chief Administrative Justice of the Trial Court, and found it necessary to recuse himself. Justice Robert V. Cauchon of the Land Court Department was appointed Justice of the Superior Court to hear and to decide this matter. After several conferences, all parties hereto have agreed to proceed on the established record. Briefs and reply and/or Supplemental Briefs have been filed by several of the parties.
In determining the issues herein, I have reviewed the briefs, reply and/or supplemental briefs and memoranda filed by the parties, the pleadings and other pertinent documents of record; I have also reviewed the exhibits and the transcript with particular attention to the testimony of Patrick F. Murphy, Thomas Murphy, Walter Steele, Gerald Kelley, John Maskell, William Bates and those of the Murphy Brothers who testified.
As indicated above, the issues presently before the Court are:
Count I - wherein Plaintiffs seek an order declaring that title to the Premises be reconveyed to the CWEN Trust or in the alternative that the CCT holds the Premises in a constructive trust for CWEN Trust.
Count III of Kelley's Counterclaim seeking an order declaring that the Premises rightfully belong to the CCT and a further determination as to who are beneficiaries of said trust and the extent of such interests.
Such determination will also obviate the need for the receiver of CCT, which receivership was ordered and appointed shortly after the commencement of this suit. The present receiver is Attorney John Ottenberg.
For clarity in the narrative, the following definitions, which I also find as matters of fact, may be helpful at this point.
The Corey-Washington-Egremont Nominee Trust ("CWEN Trust" a/k/a "Murphy Trust") is an alleged nominee trust established under declaration of trust dated April 27, 1976, recorded with Suffolk District Registry of Deeds Book 10026, Page 214. It was originally established to act as a conduit in the sale of certain real estate owned by the Murphy family and located in Brighton. The schedule of beneficiaries is not in evidence. It is the alleged beneficial or constructive owner of the Chatham's Corner Trust or at least a beneficiary thereof. The Declaration of Trust is Exhibit Number 2. The Trust and its relevance hereto is discussed in detail after Finding Number 4 below.
Walter W. Steele ("Steele") was the original trustee of CWEN Trust but resigned sometime in 1982. Steele was a long time friend of Patrick F. Murphy, which friendship continued at least until sometime after the commencement of this suit. He is a claimed beneficiary of the Chatham's Corner Trust.
Patrick F. Murphy, ("Patrick") [Note 1] an attorney, is the older brother of the Murphy Brothers (See below) and is named in the CWEN Trust as one upon whose certificate "[a]ny person dealing with the trust property or the Trustees may always rely" and who appears by his own testimony to have diverted certain assets of the Trust to his own use, which diversion may or may not have been proper, all as set out below. Although he is named as a defendant, he was Plaintiffs' principal witness and has financially supported their cause. He was an original beneficiary of the Chatham's corner Trust.
James V., John J., Paul M. and Thomas L. Murphy are brothers; ("Murphy Brothers") -- said designation includes the representatives of John J. and Paul M. Murphy who passed away after commencement of this suit. They are brothers of Patrick F. Murphy and are the claimed beneficiaries of the CWEN Trust; Thomas is the present trustee.
Chatham's Corner Trust (CCT a/k/a "Kelly Trust") is a trust under declaration of trust dated February 20, 1976, registered withSuffolk District Registry of Deeds as Document No. 343892 (Exhibit Number 15). The Trust holds record title to Premises by Certificate of Title 91299.
Gerald Kelley ("Kelley"), is an attorney and is the Trustee of CCT. He was a long time friend of Patrick F. Murphy, which friendship ended about 1981.
John Meskell ("Meskell") is a sometimes real estate broker who located the Premises for Murphy and Kelley and obtained certain financing for the acquisition of the Premises. He was one of the original beneficiaries of the Chatham's Corner Trust but alleges to have conveyed his interest therein to his wife, Kathleen Meskell. He makes no claim to CCT herein.
Second State Street Corporation ("SSSC") is a corporation presently controlled by the CWEN Trust and/or Patrick which corporation operates a restaurant/barroom on the Premises d/b/a Chatham's Corner and is holder of a liquor license.
In consideration of the evidence before the Court, and the memoranda of counsel, I find the following facts, in addition to the foregoing, to be pertinent:
1. The CWEN Trust, as stated, was formed to convey certain real estate located in Brighton owned by the Murphy family. Prior to the execution of the Trust, Patrick deeded his interest in the real estate to the Murphy Brothers. There is no evidence of any consideration for such conveyance. Around that time, Patrick appears to have been having financial difficulty.
2. With the apparent consent of all involved, Patrick asked his long time friend Steele, then a Justice of the Dukes County District Court, and now an Associate Justice of this Court to be Trustee. Patrick had previously represented Steele, as his counsel, in certain matters.
3. Steele agreed to serve as Trustee and did in fact execute the trust declaration. There is, however, no credible evidence that he (as required by the declaration) or anyone else, ever executed a Schedule of Beneficiaries.
4. The closing on the Brighton Property took place at the offices of Peabody & Brown on April 27, 1976. At this closing, Steele executed the CWEN Trust; The Murphy Brothers and other members of the family, by two deeds (Exhibits Number 7 and 8) conveyed the Brighton property to the CWEN Trust which deeds were duly registered and on which certificates issued.
At the closing, it was apparent from the actions and conversations of the Murphy Brothers and Patrick that Patrick was in complete control of the Trust and that his brothers relied on his actions and advice.
CWEN or Murphy Trust
Inasmuch as the CWEN Trust and the nature thereof, including the duties and responsibilities of the trustee Steele and of Patrick, are all essential to the Plaintiffs' case, it is perhaps appropriate to interrupt the narrative findings at this point to explore in detail, that instrument.
The CWEN Trust, (sometimes referred to as the Murphy Trust in testimony and in certain documents), is what appears to be a nominee trust, the claimed beneficiaries of which are Thomas, James, Paul, and John Murphy.
I refer to the Murphy Brothers as "claimed beneficiaries" inasmuch as I am unable to determine from the credible evidence, the identity of the actual beneficiaries, if in fact any such beneficiaries exist. As noted, the schedule of beneficial interests as required by the declaration of trust, is not in evidence, or otherwise before the Court, nor, was there any explanation as to such instrument being a "lost document." As to whether or not such schedule was ever executed, the testimony of the trustee, Steele is as follows:
Q: Did you also at sometime execute a schedule of beneficiaries?
A: I don't have any firm memory of that, but I probably did -- is the best I can give you at this point. (TR 2-14)
Later in referring to another document, a trust amendment dated August 6, 1982, about the time of the commencement of this suit, he testified:
A: I think the people set forth on the face of this document (the Murphy Brothers) are the beneficiaries. (TR 2-15).
Further examination on the same point established that Steele had no memory of any conversation, either between himself, the Murphy Brothers or between Patrick and his brothers, which would indicate they were beneficiaries.
From later testimony of Steele, it is clear that his belief as to the identity of the beneficiaries is based entirely on his conversations with Patrick (TR 3-54), a less than an impartial witness whose credibility is discussed in detail below.
The burden of proof lies with the Plaintiff to establish the existence and identities of the beneficiaries through credible evidence. Plaintiffs have not met that burden. It may have been that the Murphy Brothers believed themselves to be beneficiaries, but such belief is not material. What their actual arrangements or understandings were with Patrick, I cannot determine; however, their relationship based on Patrick's testimony is discussed below.
Nature of the Trust
The lack of beneficiaries aside, the CWEN Declaration of Trust is an attempt to establish a so-called nominee trust, a common device in this Commonwealth for holding title to real estate, which "trust" may afford certain tax and other advantages.
The Trust Declaration (Exhibit Number 2) contains certain "boiler plate" language stating, in part:
The original beneficiaries of the trust are listed in the Schedule of Beneficiaries this day executed by the Trustee and filed with the Trust. The interest of the beneficiaries hereunder shall consist solely of the power of direction over the title to property of the trust as hereafter set forth and the right to receive the proceeds from sales or income of said property . . . the Trustee shall have no power to deal in or with the trust estate except as directed by all of the beneficiaries.
Additional language, in paragraph number 5 creates a situation apparently unique to this document by providing that persons dealing with the trust property or trustee,
may always rely without further inquiry on a certificate signed by any person appearing from the records of said Registry of Deeds to be a Trustee hereunder or signed by Attorney Patrick J. Murphy, #1 Court Street . . . as to the authority of the Trustees, . . . to act or as to the existence or non-existence of any fact or facts which constitute conditions precedent to acts by the Trustees or which are in any other manner germane to the affairs of the trust.
Under the form of ownership envisioned by the trust, the trustee does not have authority to act without direction by the beneficiaries, i.e. the beneficiaries control the trust property and what is done with it. Penta v. Concord Auto Auction Inc. 24 Mass. App. Ct. 635 , 639 (1981); R.C. Birnbaum and J.F. Manahan, Nominee Trust in Massachusetts Real Estate Practice, 60 Mass. L. Q. 364, 365 (1976). For this reason, the relationship between the trustee and the beneficiaries of such a trust, at least as far as third persons dealing with the trust are concerned, is one of principal/agent rather than that of trustee/beneficiary in the conventional sense. In the matter In Re Medallion Realty Trust, 103 B.R. 8, 12 (D. Mass. 1989) aff'd 120 B.R. 295 (D. Mass. 1990), it was stated:
A person may be both an agent of and trustee for another if he undertakes to act on behalf of the other and subject to his control he is an agent; but if he is vested with the title to property, he holds for his principal, he is also a trustee. In such a case, however, it is the agency relationship that predominates and the principles of agency rather than the principles of trust, are applicable . . . quoting A. Scott and W. Fratcher, The Law of Trusts, §8 at 88, 95 (4th Ed. 1987).
Assuming arguendo that the Murphy Brothers are beneficiaries, as alleged, it is clear from the evidence that Steele never discussed trust affairs, or anything else for that matter, with any of the Murphy Brothers and as further demonstrated below, all of the Trust business was conducted by Patrick or at his direction. The purchase and sale agreement for the Premises together with the mortgage loan application therewith were signed by Patrick, as attorney for the Trust. Patrick exercised complete control over the check books and bank accounts, management of property and even litigation involving the Trust. On occasion one or more of the Brothers received a check on the Trust funds, which he knew had been authorized only by Patrick.
None of the Murphy Brothers has ever sought an accounting from Steele, nor did they ever object to Steele's handling of Trust affairs or his complete reliance on Patrick. Plaintiffs admit, in their response to Defendants' Request for Admissions (Exhibit Number 312) that prior to the filing of the Complaint, Attorney Patrick Murphy was authorized by the beneficiaries ". . . to act in their behalf with respect to certain matters pertaining to the operation and management of trust properties and/or in dealing with the trustees of the Murphy Trust. . ." Plaintiffs deny however that Patrick was ever authorized to transfer title to locus. As to the Premises, the Brothers gave no indication of any interest or expected future interest therein until well after the CCT-CWEN Trust closing, and then claimed only a partial interest as beneficiaries of the CWEN Trust. Defendants do not dispute that the CWEN Trust has some beneficial interest in CCT.
I do not find that either Kelley or Meskell were aware of any interest, actual or claimed, by the Murphy Brothers in the CWEN Trust, until after the commencement of this suit. Rather they were both of the opinion that Patrick was either "owner" or sole beneficiary of the Trust and that all transactions or dealings that they had with the Trust were authorized by Patrick.
As to the CWEN Trust, I find that
A) The actual beneficiaries were never designated nor determined by the execution, by the Trustee or anyone else, of a Schedule of Beneficiaries, as required by the Declaration of Trust.
B) The Plaintiffs have not sustained the burden of proof that they are beneficiaries. For lack of such proof, I must find that said Trust has no beneficiaries of record, although as to certain matters, the Murphy Brothers appear to be constructive beneficiaries.
C) I do not find, however, such lack of beneficiaries fatal to Plaintiffs, Murphy Brothers' claims, inasmuch as Steele believed them to be beneficiaries and Patrick maintained they were beneficiaries. There is no question that everyone dealing with the Trust believed either that (1) Patrick was sole beneficiary, as in the case of Meskell and Kelley or (2) that Patrick was one of the several beneficiaries as in the case of Steele. Were Patrick the sole beneficiary, he obviously had the authority to bind the trust or to direct the trustee to do so. Were the Murphy Brothers beneficiaries, Patrick had the authority to act in their behalf, as evidenced in part by their own admissions and further by their actions or nonactions, which vested apparent authority in Patrick.
In either event Kelley, Meskell and Steele were justified in relying on Patrick's representations and directions in all matters involving the Trust.
Accordingly, I find that whatever the actual relationship between Patrick and the Murphy Brothers, Patrick was by his own testimony both an agent for his brothers as well as a constructive trustee for their interests, and any ownership Patrick or the CWEN Trust may nominally have in the Premises is in fact held by the present "Trustee" of CWEN Trust in a constructive trust for the Murphy Brothers and/or their legal representative. As stated, such relationship is not binding on Kelley or Meskell who were unaware of it or on Steele for reasons herein stated. It is valid between Patrick and his brothers as Patrick is bound by his own testimony herein.
D) While Steele was a nominal trustee, the property standing in his name, and as such was probably not one to whom the language authorizing reliance on Patrick was applicable, were such language standing alone. I find that under the circumstances (i.e. the actions of the parties as set forth herein), Steele was a trustee/agent whose actual principal appears to have been Patrick and on whose representations he could rely. Even though Steele believed the Brothers were beneficiaries, by their own admissions and by their actions, if in fact they were beneficiaries, they authorized Patrick to act as their agent, and thereby waived any requirement of individual approval by themselves.
Having found the aforesaid, I find Plaintiffs' arguments as to the duties and responsibilities of Steele to be misplaced notwithstanding the lack of beneficiaries of record. Were this a conventional "Donor" Trust, with the trustee in control of the property and of course with beneficiaries such arguments would probably apply, but I find no such application to relationships created by the CWEN Trust, and particularly so in view of the pertinent circumstances.
5. Sometime in 1977, Patrick and Kelley decided to explore the possibilities of opening a bar and restaurant for investment purposes. In that regard, they approached John Meskell, a friend and sometime client of Patrick, who had experience in the foodliquor business and asked if he could find them a bar or a location for such business. Meskell was aware that the Premises, at that time owned by Joseph Mazzine d/b/a Joe's Smoke Shop was for sale. Kelley, Patrick and Meskell had a series of discussions on the suitability of the Premises and the possibility of converting it to a bar or restaurant. The original oral agreement was for Patrick and Kelley to become equal owners of the Premises; Patrick was to obtain funds through a mortgage loan; Kelley was to put up at least $25,000 -- such monies to be repaid from future profits. Patrick made a memo projecting figures for the project, which memo he gave to Kelley (Exhibit Number 142).
6. After further discussions, Kelley, Patrick and Meskell agreed that the Premises would be owned by the three of them and that a corporation would be formed to operate a restaurant on the Premises. The corporation would be similarly owned. It was agreed that Paul Murphy, one of the Murphy Brothers, would manage the restaurant and members of the Kelley family would be employed there. During at least one meeting, Paul Murphy was present and was informed by Patrick that "Kelley and I are buying the building and we're going in with John Meskell." There was no mention, as between Patrick, Kelley or Meskell of the CWEN Trust being in any way involved.
7. Meskell on behalf of Kelley and Patrick negotiated with Mazzine for the purchase of the Premises. On December 30, 1977, a purchase and sale agreement was signed for the Premises, the name of the buyer being, Patrick F. Murphy (Exhibit Number 82). Kelley provided the initial deposit of two thousand dollars. The agreement was subject to the buyer obtaining a liquor license for the Premises. Patrick, as buyer, signed an additional agreement with Mazzine relating to a certain existing tenancy of the Premises (Exhibit Number 88). Other than an interest in the Premises, Meskell received nothing for his efforts in acquiring the Premises nor in the obtaining financing, all as further set out below.
8. Subsequent to December 1977, Patrick informed Kelley and Meskell that he would obtain a loan from a family trust to help with the purchase of the Premises and the necessary renovations thereto. The foregoing notwithstanding, it was soon apparent to Patrick, Kelley and Murphy that none of them had sufficient credit to secure a bank loan for the full amount of funds necessary to purchase and renovate the building. After an unsuccessful attempt at financing through the South Boston Savings Bank by Patrick, Meskell obtained the necessary financing from the Central cooperative Bank through a friend, Attorney Edward Coonihan, now deceased. That institution, however sought additional guarantees and, accordingly, Patrick and Kelley, with the assent of Meskell, asked Steele if he would pledge his credit in return for a share in the Premises. In connection with the proposed loan, Meskell prepared an appraisal addressed to the "Commonwealth Trust" a proposed entity which would eventually own the Premises. Steele, who, prior to being asked to lend his credit, was aware that Kelley and Patrick were intending to buy the Premises, agreed to guarantee the entire mortgage note, however the lender, before closing, agreed to limit such guarantee to the "first $50,000." The president of the lender believed Steele's note "lent prestige" to the bank. It was suggested by Patrick and agreed by Kelley and Meskell, that in return for his personal guarantee which appeared most desirable if not essential from the lender's point of view, Steele would obtain an equal ownership with the three of them in the Premises. It is not clear whether or not that arrangement originated with Steele or with Patrick. In any event, Steele had no interest in participating in the restaurant business. Patrick, Kelley and Meskell agreed with Steele that the ownership would be 25% to each (or their nominees). There was no mention at that time of the CWEN Trust having any share in the building or restaurant.
9. On January 28, 1978, Patrick made the necessary filing of the documents which he had prepared, incorporating the Second State Street Corporation ("SSSC"). The purpose of the SSSC is to own and operate a restaurant on the Premises. Patrick, Kelley and Meskell had equal interests in the Corporation, such interests being held by nominees who were also the corporate officers: Thomas Finneran, Kelley's son-in-law, President; Lee Murphy, Patrick's daughter, Treasurer; Kathleen Meskell, Meskell's wife, Clerk (Nominees).
10. In 1978, SSSC filed an application for a liquor license, (actually a transfer) with the Boston Licensing Board ("the Board"). A hearing thereon was held in February of 1978, at which the Board expressed reservations as to the lack of experience of the applicants ("the Nominees") and of Paul Murphy, the proposed manager. Paul was a real estate broker with no experience in the restaurant business.
11. In answer to the concerns of the Board, Meskell, Patrick and Kelley agreed to send Paul to see and work with one William Bates in Florida. Bates is Kelley's brother-in-law and has owned and/or operated restaurants, and was considered by Kelley and Patrick to be very knowledgeable in that field. He agreed to give Paul a "crash course" in the restaurant business, to be completed in time for the second hearing. In arranging for the "course", Kelley told Bates that Steele, Meskell, Patrick, all of whom Bates appears to have known, and himself were buying a building and were opening a restaurant. As a result of the call, Kelley and Paul went to Florida where Paul received a "course" in restaurant management over a several week period.
12. While in Florida, Paul appeared to be very enthused over the proposed restaurant. On various occasions, he expressed his opinion that Patrick, Kelley, Meskell and Steele, usually referred to by Paul as "three lawyers and a judge", had a deal that "couldn't miss" -- he "didn't see how they could go wrong." Moreover, he often gave his opinion that the three lawyers and the judge had a great deal and would make a lot of money even if they did not operate a restaurant. He not only expressed that opinion to Bates, but to numerous other persons, Bates and he met. Paul expressed his belief to Bates that Patrick and Kelley were putting up cash and that Steele "was kind of borrowing his money and his credit." At no time did Paul indicate he had or was to have an ownership interest in the restaurant or Premises.
13. While in Florida, Paul asked Bates if he could come to Boston to testify at the second license hearing. Bates agreed and upon arriving in Boston, was met by Paul who showed him the Premises and the surrounding Quincy Market area. Paul again remarked that the three lawyers and a judge could not go wrong and, if all else failed, could make money with a parking lot on the Premises. Thereafter, Paul and Bates met at Patrick's office, there Patrick told Bates that Kelley, Patrick, Steele and Maskell had a chance to get "this building" (Premises) but it was contingent on obtaining a liquor license and asked Bates to attend the license hearing the following day. Inasmuch as he had come to Boston for that express purpose, Bates agreed.
14. At the second Board hearing April 19, 1978, the Board again expressed reluctance as to the qualifications of the Nominees. In the course of the hearing, Paul indicated the building was owned, or would be owned, by "family and friends."
15. On March 27, 1978, Patrick gave the seller a sixty-day notice of readiness to pass papers on the Premises. The notice (Exhibit Number 87) was in Patrick's name, not that of the CWEN Trust.
16. About that time, there was a meeting at Kelley's home. In attendance were Kelley and his wife, Patrick, John Meskell and his wife, Thomas Finneran, Lee Murphy, Paul Murphy and Mary Ann Cremins. Patrick stated that the building was owned by Steele, himself, Gerry Kelley and John Meskell and that the restaurant would be owned by Gerry Kelley, Pat Murphy and Jack Meskell. There was no mention of the CWEN Trust having any ownership interest in the building or restaurant.
17. In late May 1978, Kelley, Meskell and Patrick met and agreed that their chances for license appeal might be improved if they owned the Premises, and, that in any event, the purchase appeared to be "a good deal" for them. It was suggested by Patrick in order to expedite the closing to " . . . take title in CWEN Trust now and straighten out later as far as your (Kelley's) interest, Jack's, mine and Walter's (Steele's) . . ." Neither Kelley nor Meskell intended CWEN Trust to have an equity interest in the realty or in the restaurant. As stated above, neither Meskell nor Kelley were aware of the beneficiaries of the Trust. Kelley believed it was "Pat Murphy's trust." Kelley and Meskell believed the title was being taken in the CWEN Trust, as was represented by Patrick as an expedience and that the Premises would eventually be owned either outright or throuqh a Trust or nominees, by themselves, Patrick and Steele in equal shares. There was not, however, any written agreement to that effect, an unfortunate consistency throughout these entire dealings.
18. The closing on the Premises was on May 26, 1978. As agreed title was conveyed to the CWEN Trust. Meskell, Kelley and Patrick attended the closing. The Murphy Brothers do not appear to have been involved. Whereas the deed reflects a purchase price of $100,000, it appears the actual price was $150,000. The Central Co-operative Bank gave a mortgage loan in the amount of $150,000 of which $100,000 was paid over at the closing and $50,000 was held back for renovations, and eventually deposited into a CWEN Trust account. The balance of the purchase price paid to the seller was $4,000 from Kelley and $46,000 from either Patrick or the CWEN Trust. There is insufficient evidence to determine the actual source of the $46,000. As requested by the bank, Steele guaranteed $50,000 of the mortgage note.
19. After the closing, Kelley, his family and Meskell worked on the physical renovation of the Premises. In addition thereto, Kelley hired additional help and advanced some funds for labor and materials. Kelley, Maskell and Patrick were at the Premises on a daily basis.
20. On June 7, 1978, Kelley, Meskell and Patrick had an off-Premises meeting to discuss the overall project. Kelley and Maskell were concerned that the license was as yet unresolved. Patrick for the first time took the position that inasmuch as the CWEN Trust had advanced funds for the realty, it should also have an interest in the realty. There was some further discussion after which Patrick drew up, in his own handwriting, a memorandum ("July 7 Memo", Exhibit Number 46). The memo was then signed by Kelley, Maskell and Patrick. This was the first mention of the CWEN Trust having an interest in anything and the first and perhaps only written memorandum setting out ownership, or proposed ownership, interests in the Premises.
21. While neither Kelley nor Meskell was pleased with the proposal, they agreed, at least in part, out of concern that as the Premises stood in the name of CWEN Trust, it might never be transferred to the "final" trust, in which they were to have an interest with Steele and Patrick, or that, at the least, such transfer might be somewhat difficult.
Exhibit Number 46 Reads:
Memo. June 7, 1978
1. If the license is not granted in a year from date the Trust owns the building.
2. If the license goes thru and restaurant is in operation, the building is to be owned as follows:
20% G.F. Kelley or nominee
20% J.F. Meskell or nominee
20% W.E. Steele or nominee
20% CWEN Trust (Murphy Trust) or nominee
20% P.F.Murphy or nominee s/ Gerald F.Kelley s/ John F. Meskell s/ Patrick F. Murphy
While Steele was not present at that meeting he appears to have later acquiesced to a share going to the CWEN Trust.
22. Shortly, after the June 7, 1978 meeting, the Board approved the transfer of the liquor license.
23. On October 6, 1978, Meskell signed a release (Exhibit Number 260) which Plaintiffs characterize as a waiver of his interest in the Premises. The release names as releasees Steele, both individually and as trustee (presumably of CWEN Trust), Kelley, Patrick and the CWEN Trust. The language is that of a release from tort or contractual claim. By October 6, 1978, however, Meskell had (or would have had) a vested interest in the overall enterprise, which interest could only be conveyed by a bill of sale or deed - even a release deed. Exhibit No. 260 is not such an instrument. In any event, the release had no practical effect inasmuch as Meskell had previously transferred whatever interest he had in the project to his wife Kathleen Meskell (Exhibit Numbers 249 and 250) and Patrick was aware of such transfers in January and June of 1978 respectively. The acknowledgment of such transfers by the Murphys is demonstrated by Patrick's (or CWEN Trust's) purchase of Kathleen's interest in the restaurant in 1980. The other parties hereto do not contest such transfer. Meskell makes no claim of interest in locus.
24. On September 8, 1978, Patrick filed two applications for building permits as to the Premises, with the City of Boston. They were siqned "W.E. Steele, Trustee by P.F. Murphy Agent and Attorney." On October 3, 1978, a similarly signed application to amend (Exhibit Number 34) was filed by Patrick. Although Steele had not authorized such signing -- under the terms of the CWEN Trust, Patrick's name probably was sufficient.
25. Sometime in or around November 1978, Patrick called a meeting at his house where he, Paul, Kelley and Meskell met with Richard O'Reagan, a general contractor, to discuss completing the renovations of the Premises. Patrick introduced the other to O'Reagan as his partners and mentioned that Steele was also involved.
26. By late February 1979, Patrick or, someone in his office other than Kelley, had drawn up the Chatham's Corner Trust including the schedule of beneficiaries. There was also drawn a deed conveying the Premises from CWEN Trust to CCT. Kelley was named as trustee, Paul the successor trustee (Exhibit Number 15). The CCT is a "grantor" trust in which the control of the trust property is largely in the trustee. The schedule of beneficiaries probably relying on the "Meskell release" named Kelley and Steele each with a 25% beneficial interest and the "Murphy Trust" (CWEN) with a 50% interest. There is no credible explanation for the "absorption" of Patrick's share by the CWEN Trust other than Patrick's complete control, and perhaps ownership, of that Trust.
27. On February 20, 1979, Kelley and Patrick took the CCT declaration, the schedule of beneficiaries and said deed and drove from Boston to the Wareham District Court, where Steele was sitting. On the way down, Patrick reviewed the documents, which he fully understood.
Arriving at the Court, Kelley and Patrick gave Steele the documents which he reviewed and then at Patrick's request, executed as appropriate. Steele asked Patrick if he was satisfied and received an affirmative reply. At no time did Patrick tell Steele that there was anything improper with the transfer or the interests as listed in the schedule of beneficiaries. As noted, Patrick voluntarily accompanied Kelley to Wareham, reviewed the documents and made no objection thereto either to Steele or Kelley either before or after the signing. After the execution, Patrick brought the deed, the CCT declaration and the schedule of beneficiaries back to his office where they appear to have remained until the March closing (the deed of February 20, 1979, was never recorded). While it is true the Murphy Brothers never consented to that transfer (which I do not find was necessary for its validity) neither did they consent to the Trustee's purchase, or financing, of the Premises in the first place or, for that matter, to any other acts of the trustee.
28. Neither Steele nor Patrick ever told Kelley or Meskell that there were any irregularities in the transfer of the Premises from the CWEN Trust to CCT. As found at Paqe 11 above, the Plaintiffs admit that Patrick had the actual authority to speak and act for the Plaintiffs for all acts except this transfer. I find he also had the apparent, if not actual, authority to act in their behalf in the transactions described in 27 above and 30 below.
29. About that time, it became apparent that the restaurant could not be completed with the $50,000 available. Patrick and Kelley met and agreed a refinancing was necessary; Patrick contacted Meskell to explore further financing possibilities. Paul was present at the meeting and was aware that CCT would hold title to the building, which was apparently no surprise to Paul as that was his often expressed understanding from the start. Meskell again contacted his friend Coonihan at the Central Co-op Bank, and reported back to Kelley and Patrick that the Central Co-op would increase its mortgage loan to $200,000 provided Steele sign another guarantee. On or about March 6, 1979, Kelley as trustee executed a formal application (Exhibit Number 18) for a $200,000 mortgage loan on behalf of CCT. The Central Co-op approved the loan, the approval being addressed to "Chatham's Corner Trust Gerald F. Kelley and Walter E. Steele Trustee." (Exhibit Number 169). Meskell's gratuitous acts would be somewhat unusual if neither he nor his wife retained any interest in the project.
30. On March 7, 1979, the $200,000 mortgage loan was closed, the loan being made to CCT, which was also the grantor of the mortgage. Both Steele and Kelley personally guaranteed $75,000 of the mortgage note. Steele appeared at the closing, signed a new deed prepared by the bank attorney, which deed conveyed the Premises from CWEN Trust to CCT, Steele also signed the guarantee and left prior to the actual closing; Kelly and Patrick drove to the closing together. Patrick was aware that the title to the Premises was being transferred, that the mortgage loan from the CWEN Trust was being paid off with funds from new larger mortgage loan to CCT. Patrick voluntarily attended the closing, reviewed all papers to the extent he felt necessary or desireable, and in fact had also brought with him the unrecorded February 20, 1979 deed and the duplicate certificate of title. The deed and mortgage were registered by Meskell, in the presence of Kelley and Patrick, both of whom accompanied him to the registry. The proceeds were used first to satisfy the CWEN Trust mortgage which was discharged; the balance of the loan was paid to Kelley as trustee of CCT in the amount of $42,246.72. This amount was later used for the renovation to the Premises. At no time during the closing and at no time thereafter until 1982, did Patrick ever complain of or even suggest there were any irregularities in the transaction. There was no suggestion of any ownership in the Premises by CWEN Trust other than its share of the CCT.
31. In late February 1979, Bates's mother died in Boston. He came to Boston to attend her funeral and thereafter met Patrick and Steele at Kelley's home. Patrick told Bates things were going slow and asked if he would stay in Boston for a while and help Paul get things going. Bates agreed and remained until September of that year. During that period, he worked at the Premises on a nearly daily basis with Paul. Paul introduced him to a contractor (O'Reagan) as "Trustee Kelley's brother-in-law." On at least one of several visits to equipment distributors Bates heard Paul tell the distributor "three lawyers and a judge . . . own the building" Bates also met John Murphy who on at least one occasion remarked "the lawyers, the Judge, how can they go wrong with this location." Thomas Murphy told Bates that it was "beautiful the way Pat, Gerry, Walter have it."
32. The restaurant opened for business in April 1979. A longtime lease was executed by and between the SSSC and CCT. Patrick prepared the lease. The rent was equal to the mortgage payment. About that time the wives of Kelley and Patrick opened and operated an art store on the Premises also under a lease prepared by Patrick. In November 1979, Kelley became president of SSSC and the shares therein of Finneran were transferred to Kelley.
33. In March 1979, Kelley obtained a $35,000 loan for SSSC from Liberty Bank and Trust. That loan was guaranteed by Kelley and secured by a second mortgage on the Premises and other security. The proceeds of that loan were used to purchase additional restaurant equipment for the Corporation, a fact well known to Paul.
34. From the restaurant opening until March 1980, Kelley and Patrick had a series of disagreements. On March 8, Patrick called a meeting of the directors of SSSC, at which meeting Kelley was removed as president and replaced by Paul. Kelley's relatives were terminated and thereafter Patrick, through his family, managed and operated the restaurant. In April 1980, Patrick purchased the stock of Kathleen Meskell for $21,000. That stock was later returned to the corporation. The shares were delivered to Patrick; the payment came from Patrick.
35. From March 1980 until his resignation as Trustee of CWEN Trust in June 1982, Steele attempted to act "as a peacemaker" between Kelley and Patrick. There were several meetings between the foregoing and attorney James Fox who appeared as an attorney for CWEN Trust and Steele. During those meetings, Patrick never alleged any impropriety in the transfer of the Premises from CWEN Trust to CCT.
After a review of the Transcript and Exhibits and perhaps as indicated in the foregoing, I have difficulty in finding any significantcredibility in the testimony of Patrick F. Murphy, Plaintiffs' principal witness.
By his own testimony, Patrick improperly took or converted money from the CWEN Trust, and otherwise improperly used Trust funds to pay his personal expenses. Inasmuch as I have found above, that Patrick was at least a partial, if not total, owner of the Trust, his handling of Trust assets could be proper, or improper in varying degrees. In either event, the Murphy Brothers acquiesced by actual or implied consent to his handling of the Trust funds -- in such instance, of course, the claims against Steele and Kelley must fail as I find they do. Again, by his own testimony, he abused the friendship and trust placed in him by his longtime friend, Steele. Two instances of which are: 1) The memoranda prepared by Patrick for Steele's depositon early in this proceeding whearein Patrick indicates that Steele and Kelley were to have a partial ownership in the Premises which he now claims is untrue and 2) The fact that Patrick drove 60 or more miles to Wareham with Kelley to have Steele sign the deed transferring the Premises from CWEN Trust to CCT which by Patrick's testimony defrauded his brothers, after which he returned to Boston where he retained custody of the deed and trust until the final closing whereby the Premises were conveyed to CCT. Throughout all of this he made no complaint to Steele, Kelley or his brothers. Such actions are completely inconsistent with Plaintiffs' allegations and wholly consistent with Defendant's version of the facts. Neither is his claim that CWEN Trust should have complete ownership of Premises supported by his own brothers' testimony. Such claim of ownership was obviously an after-thought conceived well after the fact.
The inconsistencies I have listed are only a few examples of many which permeate the transcript.
In addition to the foregoing claims, Plaintiffs have also raised the question of "unjust enrichment" and "lack of consideration" on the part of the Defendants.
The circumstances, events, agreements and understandings pertinent to the acquisition of the Premises and the establishment of Chatham's Corner restaurant, were not, unfortunately as is now apparent, based on specific or detailed written agreements. Rather, the present situation appears to have arisen from a series of discussions between long-time friends and acquaintances who decided from longobservation and little experience that a barroom/restaurant could be a profitable venture. The idea appears to have originated with Patrick and Kelley, who then brought in Steele to lend his credit and prestige and Maskell who was instrumental in finding the location and in obtaining necessary financing. In addition to being one of the original entrepreneurs, Kelley furnished funds personally and through the CCT, "know how," through Bates, and plain "sweat equity" from himself and his family members.
This was not a matter where the parties sat down and drafted a detailed agreement specifying the contribution of each and assigning an actual or relative value to such contribution. Rather, it was a rather loose (to say the least) agreement among friends, whom interestingly enough all had a legal education and experience, all of whom agreed to work together on a joint venture, secured for the most part, by a handshake or less. As I have noted the only written "memos" or agreements pertinent to the issues herein appear to be a "projection of figures" (Exhibit Number 142) and the June 7, 1978 memo. Despite the informality of the undertaking, it has perhaps somewhat surprisingly, become what appears to be a financial success. Most unfortunate is the obvious move by one of the principals to obtain complete control of the enterprise by attempting to endow an inartfully drawn and woefully lacking document with the authority to impose duties and to preserve the benefits of a conventional donor/donee trust. Kelley, Maskell, Steele and even Patrick have all made the necessary contribution required of them. There was never any relative value placed on those contributions; they have done what they agreed to do and this should be recognized.
In consideration of the foregoing, I rule as follows:
1. Plaintiffs have failed to prove that they themselves, or anyone else, are the beneficiaries of the Corey-Washington Egrement-Nominee Trust;
2. At all times pertinent hereto, the assets of said Trust were under the control of Patrick Murphy; moreover, if in fact the Murphy Brothers were beneficiaries of said Trust by their actions and words, they gave Patrick apparent if not actual authority to act in their behalf;
3. Walter Steele was justified in relying on the representations and direction of Patrick Murphy in his dealings for and with said Trust;
4. Any assets pertaining to locus held by the Trustee of said Trust or by Patrick Murphy are held in constructive trust for the Murphy Brothers and/or their legal representatives;
5. Gerald Kelley and John Meskell had no knowledge of the alleged claim of beneficial interest of the Murphy Brothers in the CWEN Trust;
6. The representations by Patrick, as set forth in 17 above, as to title to the Premises being taken by CWEN Trust as an accomodation was a material fact, relied upon by Kelley and Meskell, and was made by Patrick, an agent of, if not owner of the CWEN Trust, and if false, constituted fraud on Kelley and Meskell which would entitle them, in any event, to a share in Premises;
7. Title to the Premises is in the Chatham's Corner Trust, Gerald F. Kelley, Trustee;
8. Beneficial ownership of said Trust is:
Walter E. Steele, Gerald F. Kelley and Kathleen Meskell, each 20%; The Murphy Brothers and/or their legal representatives 40%; and
9. Attorney John Ottenberg shall file a final accounting as soon as reasonably possible, upon the approval of which he shall be discharged.
At the close of evidence Defendant Thomas M. Finneran, Individually and as Trustee moved for dismissal of all claims against him. Said Motion is hereby allowed.
[Note 1] I use Mr. Murphy's first name as no indication of disrespect, but simply because of the number of Murphys involved.