On February 8, 2001, Robert P. Dapkus, also known as Robert Leo Dapkus (Plaintiff), commenced this action by filing a verified complaint against Martin Dapkus, individually and as Trustee of the Leo Realty Trust (Defendant), concerning a three-unit residential building located in South Boston at 64 G Street (Locus). Plaintiffs complaint alleged that Defendant wrongfully converted trust property for his personal use and benefit and included counts for conversion, trespass, breach of fiduciary duty, and accounting. [Note 2] Further, the complaint sought a declaration that Plaintiff is the rightful owner of Locus. Plaintiffs Motion for Lis Pendens was allowed by the court on February 8, 2001. In his answer, filed March 23, 2001, amended on May 1, 2001, Defendant counterclaimed against Plaintiff for declaratory judgment, fraud, resulting trust, breach of the covenant of good faith and fair dealing, quantum meruit, wrongful action, abuse of process, intentional infliction of emotional distress, civil assault and battery, conversion, promise to pay debt, malicious interference with rights, libel, nuisance, slander of title, and reaffirmation of deed-mistake.
Eileen White Dapkus (White-Dapkus) filed a Motion for Summary Judgment on February 28, 2006, along with a memorandum. Plaintiff responded, on April 5, 2006, by filing a Cross-Motion for Summary Judgment. After a hearing, summary judgment was granted in favor of White-Dapkus on the basis of the statute of limitations, and the court dismissed all of Defendants counterclaims, other than the count wherein Defendant (Plaintiff-in-counterclaim) sought a declaration that he owns Locus, because they did not come within the jurisdiction of the court. The court found that the statute of limitations began to run as of the date of the trusts termination, April 13, 1991 because Plaintiff could have discovered the terms of the Leo Realty Trust, which was recorded with the Suffolk Registry of Deeds.
The summary judgment decision was appealed by Plaintiff on May 3, 2007. In a decision by the Appeals Court dated January 22, 2009, the court affirmed in part, reversed in part, and vacated a portion of the judgment of this court, holding that certain claims were not barred by any applicable statute of limitations. See Dapkus v. Dapkus, 07-P-1385, (Memorandum and Order Pursuant to Rule 1:28 Dec. 18, 2008) (Appeals Court Decision). In reversing in part this courts decision, the Appeals Court held that the Plaintiff can rely on the repudiation of trust doctrine, but that the doctrine could be invoked for actions performed (or not performed) only during the period in which a fiduciary relationship existed, that is during the lifetime of the trust, which terminated on April 11, 1991. Further, the court instructed that under the repudiation of trust doctrine, constructive notice of the existence of the Second Trust was insufficient to put Plaintiff on notice of its terms and that the subjective actual knowledge standard applies. Once the trust terminated, however, the discovery rule applies and the appropriate standard is whether the plaintiff knew, or reasonably should have known, that he had been harmed. [Note 3]
Specifically, the court remanded for determination at trial whether: (1) Martin Dapkus was liable for conversion based on conduct that occurred on or before April 11, 1991, or after February 9, 1998; (2) Martin Dapkus was liable to Plaintiff for breaching his fiduciary duty based on conduct that occurred on or before April 11, 1991; (3) Martin Dapkus was liable for failing to account to Robert Dapkus for the Trust proceeds based on conduct that occurred on or before April 11, 1991, or after February 9, 1995; and (4) whether Robert Dapkus should be declared the owner of Locus at the time of Martin Dapkus death on July 10, 2002. [Note 4]
Following the decision of and remand by the Appeals Court, a Memorandum of Lis Pendens was reinstated on April 6, 2009. A two-day trial was held on June 23 and 24, 2011. The following witnesses testified: Eileen White-Dapkus, Robert Dapkus and Maura Burke, and 67 exhibits were admitted into evidence. Plaintiff also filed on the last day of trial a Motion in Limine to take Judicial Notice of Various Admissions of Parties/Opponents in Record, which was taken under advisement. A hearing on Plaintiffs previously filed Motion for Preliminary Injunction and his Supplemental Motion for Preliminary Injunction, filed July 5, 2011, was held on July 13, 2011. [Note 5] The court took the motions under advisement. As the court now decides the issues at trial, the issues raised in the motions for preliminary relief are incorporated in this decision and in the judgment as permanent relief.
Based on all the evidence and reasonable inferences drawn therefrom, this court finds the following material facts:
1. Locus, located at and commonly referred to as 64 G Street, South Boston, consists of a three-family residential structure and a two-car garage on approximately 2,250 square feet of land.
2. On February 27, 1959, Julius Pfeifer and Anna Pfeifer conveyed Locus to Defendant, by deed recorded with the Suffolk Registry of Deeds in Book 7378, at Page 215. [Note 6]
3. Anna Dapkus, formerly known as Anna Pfeifer (Anna), gave birth to Plaintiff on June 14, 1959. [Note 7] On December 28, 1959, Anna executed the Robert Realty Trust (First Trust), which named Anna as the sole trustee and provided that, upon her death, resignation, or disability, the Suffolk County Probate Court (Probate Court) would appoint a successor trustee. [Note 8] Anna and Plaintiff each held a fifty percent (50%) beneficial interest under the First Trust, which provided in relevant part that, [n]o beneficiary hereunder shall have any interest in the real estate conveyed to me as such Trustee, nor any right to call for partition thereof, but his interest herein shall be personal property only.
4. Under the First Trust, the Trustees powers included the following power of sale:
As such Trustee I shall have full and absolute power to sell the said real estate or any portion thereof at public or private sale, without the necessity of applying to any beneficiary or other person for authority to do so, and upon such terms and conditions as to me may seem proper, either for cash or credit, and to take back purchase money mortgages upon such sale or sales, and to that end may execute, acknowledge and deliver good and sufficient deeds to convey the said real estate free and discharged of all trusts, no purchaser being bound to see to the application of the purchase money.
5. By deed dated December 28, 1959, Defendant conveyed Locus to Anna, as Trustee of the First Trust. [Note 9]
6. Anna died intestate on October 5, 1970, survived by Plaintiff and Defendant. Defendant was appointed by the Probate Court to administer Annas estate on October 29, 1970 (Case No. 465852). The sole reported asset of Annas estate was her beneficial interest in the First Trust.
7. On November 2, 1970, Defendant petitioned the Probate Court to be appointed successor trustee of the First Trust (Case No. 465895). On November 5, 1970, the Probate Court, appointed Frankland W. L. Miles as guardian ad litem (GAL), to represent Plaintiff, who was then eleven years old. The GAL objected to Defendant being appointed successor Trustee on a number of grounds and, on January 21, 1971, the Probate Court instead appointed Raymond J. Dodds, Esquire (Dodds), as successor trustee of the First Trust.
8. In 1971 or 1972, Locus was destroyed by fire. All insurance proceeds were paid over to Dodds, as Trustee of the First Trust.
9. On April 12, 1971, Defendant executed and recorded the Leo Realty Trust (Second Trust), which named Defendant as the sole trustee and Plaintiff as the sole beneficiary. [Note 10] By its terms, the Second Trust was set to terminate in 1991, twenty (20) years after its creation. But for the termination provision and the naming of a successor trustee, the terms of the Second Trust are substantively the same as those of the First Trust. As in the First Trust, the Second Trust provided that, [n]o beneficiary hereunder shall have any interest in the real estate conveyed to me as such Trustee, nor any right to call for partition thereof, but his interest herein shall be personal property only.
10. In accordance with the First Trusts power of sale provision, Dodds, as Trustee of the First Trust, conveyed Locus to Defendant, as Trustee of the Second Trust, on April 12, 1971. The recited consideration was $4,850.00. [Note 11]
11. Upon termination of the Second Trust, it was the Trustees duty to sell and convey the trust property then remaining and to deliver the proceeds to the beneficiary, or, in his discretion, to transfer and convey the trust property to the beneficiary [t]hereunder.
12. According to the Second Trust, [a]t no time shall any beneficiary hereunder have the right to call for an accounting except upon termination of this Trust as herein provided.
13. Robert Dapkus purchased property known as and numbered 98 H Street, South Boston, on July 31, 1980, recorded in Book 9523, at Page 119. South Boston Savings Bank acquired this property via foreclosure deed recorded July 20, 1993 in Book 18373, at Page 329.
14. On June 4, 1987, B. Kimball Celeveland, Trustee, conveyed to Martin Dapkus and Steven Wardynski property known as and numbered 15 Earl Street, South Boston, recorded in Book 13754, at Page 184. Steven Wardynski subsequently conveyed his interest in the property to Robert Dapkus on December 15, 987, recorded in Book 14333, at Page 114. Said property was conveyed from Martin Dapkus and Robert Dapkus to Thomas E. Flynn on July 25, 1989, recorded in Book 15707, at Page 67.
15. Locus was held by the Second Trust for more than nineteen (19) years before it was conveyed by Defendant, as Trustee of the Second Trust, to himself, individually, on December 5, 1990. The recited consideration was $100.00 and other valuable consideration. [Note 12] At no time did Defendant advise Plaintiff of this conveyance, which occurred just before the trust was to terminate by its own terms.
16. On December 31, 1990, Martin Dapkus conveyed to Robert Dapkus property known as and numbered 790-792 East 3rd Street, South Boston, by deed recorded in Book 16655, at Page 205.
17. In accordance with its terms, the Second Trust terminated on April 11, 1991, twenty (20) years after its creation. At the time of its termination, there was no real property held by the Trustee, as Locus had been conveyed. No accounting was done by Defendant to Plaintiff.
18. On April 8, 1993, Defendant created the 64 G Street Realty Nominee Trust under which he was the sole beneficiary. [Note 13] By deed recorded the next day, Defendant conveyed Locus to Alexander J. Chaplik as Trustee of the 64 G Street Realty Nominee Trust. [Note 14] Following mesne conveyances between Defendant individually and as the Trustee of the Nominee Trust, and some financing transactions, Defendant, individually became the sole owner of Locus by deed dated July 18, 1994. [Note 15]
19. Over the years the Locus has been encumbered by the following mortgages, none of which are discharged on the record:
a. Mortgage recorded December 14, 1990, recorded in Book 16631, at Page 319, granted by Martin Dapkus to Taupa Lithuanian Federal Credit Union in principal amount of $100,000.00;
b. Mortgage recorded April 8, 1991, recorded in Book 16781, at Page 296, granted by Martin Dapkus to Taupa Lithuanian Federal Credit Union in principal amount of $50,000.00;
c. Mortgage recorded February 3, 1993, recorded in Book 18030, at Page 222, granted by Martin Dapkus to Taupa Lithuanian Federal Credit Union in principal amount of $175,000.00;
d. Mortgage recorded February 26, 1998, recorded in Book 22185, at Page 318, granted by Martin Dapkus to Taupa Lithuanian Federal Credit Union in principal amount of $30,000.000.
20. Two other mortgages at one time encumbered Locus: (1) a mortgage from Martin Dapkus, as Trustee of Leo Realty Trust to Farragut Co-operative Bank in the amount of $28,000.00, dated July 22, 1975, recorded in Book 8802, at Page 24, and (2) a mortgage from Martin Dapkus, as Trustee of Leo Realty Trust, to Jordan A. Rosen in the amount of $5,000.00, dated July 22, 1975, recorded in Book 8802, at Page 27. Both mortgages were discharged with discharges recorded in Book 19670, at Page 235 and Book 9295, at Page 120, respectively.
21. Plaintiff lived in the Locus from the time he was born until 1994 and returned to live in the Locus from 1998 until January, 2001.
22. On November 20, 2000, Martin Dapkus married Eileen White-Dapkus.
23. Prior to September 2000, Plaintiff was not aware of the Second Trust nor its terms, nor aware of any trusts in which Plaintiff was a named beneficiary. [Note 16]
24. A fiduciary relationship existed between Martin Dapkus, as Trustee of the Second Trust, and Robert Dapkus, as sole beneficiary of the Second Trust, during the Second Trusts existence - that is from the Second Trusts creation on April 12, 1971 to its termination on April 11, 1991. The Agreement and Declaration of Trust for the Second Trust clearly states that Martin Dapkus, as Trustee of the Leo Realty Trust, takes title to the Locus and will hold said Locus as well as other real estate hereafter conveyed to me as Trustee under this instrument . . . See Exhibit 8.
25. Martin Dapkus died testate on July 10, 2002. Eileen White-Dapkus became executrix of the will in Middlesex County Probate and Family Court (Case No. 02-P-4167-EP). The will was allowed by the probate court and devised all of Martin Dapkus real estate to Eileen White-Dapkus.
26. On January 17, 2009, Eileen Dapkus conveyed Locus to Brian R. Burke, Trustee of 64 G Street Realty Trust. [Note 17] Said deed is recorded in Book 44896, at Page 186.
27. Brian R. Burke resigned as Trustee and Maura L. Burke was appointed as successor trustee on February 25, 2009. Said Appointment and Resignation of Trustee is recorded in Book 44896, at Page 188.
28. Eileen White-Dapkus conveyed the Locus to herself as Trustee of the Voytooseck Realty Trust [Note 18] on September 12, 2007, recorded in Book 43621, at Page 213.
29. A confirmatory deed from Eileen White-Dapkus, as Trustee of the Voytooseck Realty Trust, conveyed to Maura L. Burke, as Trustee of 64 G Street Realty Trust, the Locus. Said confirmatory deed is dated October 2, 2009 and recorded in Book 45579, at Page 268.
30. Maura L. Burke, as Trustee of 64 G Street Realty Trust, granted a mortgage on February 1, 2009 encumbering the Locus to Douglas C. Kaake in the principal amount of $105,000.00. Said mortgage is recorded in Book 44896, at Page 191. An amendment to said mortgage was recorded in Book 45579, at Page 270, for an additional amount of $16,000.00.
31. Maura L. Burke is not a bona fide purchaser for value of Locus because when she took title to the property, as Trustee of 64 G Street Realty Trust, she did so with full knowledge of the pendency of this action, and acknowledged to the court that she would be bound by the courts resolution of the case against White-Dapkus.
32. The City of Boston issued an Instrument of Taking regarding the Locus on December 15, 2009 for nonpayment of taxes. The taking is recorded in Book 46039, at Page 127.
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The inquiry into deciding Plaintiffs claims begins with the determination of when Plaintiff became aware of the Second Trust, as instructed by the Appeals Court Decision. This court has found that Plaintiff did not know of the Second Trust prior to September, 2000, because it does not credit the testimony of White-Dapkus regarding an alleged conversation that took place between Martin Dapkus and Robert Dapkus in 1989 regarding a transfer of the Locus out of the Second Trust. Dapkus v. Dapkus, 07-P-1385 *2 (Memorandum and Order Pursuant to Rule 1:28 Dec. 18, 2008). In its decision, the Appeals Court instructed that certain of the claims brought by Plaintiff might be ripe for trial on remand and not barred by the statute of limitations, and the trial before this court proceeded to determine when Plaintiff knew of the Second Trust in accordance with the determination of the Appeals Court. Consistent with the remand order of the Appeals Court, this court will address Plaintiffs claims of conversion, breach of fiduciary duty, and accounting.
The relevant terms of the trust provide that the trustee has the power to sell the real estate held in trust at either a public or private sale without consent of the beneficiary. See Exhibit 8, Declaration of Trust, ¶ 1. The trustee also has the power to mortgage the trust property and to collect rents, and pay taxes and insurance as required. Id. at ¶ 2, 4. Sole discretion is given to the trustee to distribute rental income, Id. at ¶ 4, and upon termination of the trust, the trustee must either sell and convey the trust property remaining in the trust and deliver the proceeds to the beneficiary, or transfer and convey the trust property to the beneficiary. Id. at ¶ 13.
Pursuant to the Appeals Court Decision, this courts analysis of Plaintiffs conversion claim is limited to those transactions that took place during the trusts existence or post February 9, 1998. See Dapkus v. Dapkus, 07-P-1385 *9 (Memorandum and Order Pursuant to Rule 1:28 Dec. 18, 2008). As such, transactions that took place between April 11, 1991, and February 9, 1998, are not considered.
Conversion is a tort that places the burden on the party asserting such claim to prove defendant is liable. See In the Matter of Brauer, 452 Mass. 56 , 67 (2008). To satisfy a claim of conversion plaintiff must prove defendant exercised dominion over the personal property of another, without right, and thereby deprived the rightful owner of its use and enjoyment. In the Matter of Hilson, 448 Mass. 603 , 611 (2007) (citing Spooner v. Holmes, 102 Mass. 503 , 506 (1869)); see also Abington Natl. Bank v. Ashwood Homes, Inc., 19 Mass. App. Ct. 503 , 507 (1985) ([o]ne who intentionally or wrongfully exercises acts of ownership, control or dominion over personal property to which he has no right of possession at the time is liable for the tort of conversion.). An intent to permanently deprive the rightful owner of his use and enjoyment of the property is not a requirement for conversion. In the Matter of Hilson, 448 Mass. at 611. The intent required is simply the intent to exercise dominion over the plaintiffs property. 37 MASSACHUSETTS PRACTICE SERIES, TORTS § 4.5 (3rd ed. 2012). As for the element of wrongful possession, if defendant has only a limited right to possession, he may not so treat the chattel as to cause injury or damage to the interest of one who owns it. Id. Mere intermeddling is not sufficient to establish conversion; such use must be a serious interference with Plaintiffs possessory rights. Id. Real property cannot be the subject of conversion, see id.; however, money can be wrongfully converted. In the Matter of Hilson, 448 Mass. at 611; see also 37 MASSACHUSETTS PRACTICE SERIES, TORTS § 4.5 (3rd ed. 2012) ([a]ll types of tangible personal property may be converted.).
This court finds that Martin Dapkus, as Trustee of the Second Trust, unlawfully converted trust property. The only res in the trust was Locus the property located at 64 G Street, South Boston. As the tort of conversion does not apply to real property, such claim for conversion can only include personal property. Although not stated clearly in Plaintiffs submissions, this court gleans from the relief sought by Plaintiff that his claim for conversion rests on the Trustee failing to distribute rental income at the termination of the trust. As the trust provides it is within the sole discretion of the Trustee to distribute rental income during the lifetime of the trust, such claim for conversion cannot rest upon such failure to distribute rental income until the trust is terminated, at which time all trust property in the form of money must be transferred to the beneficiary.
As stated above, Plaintiff must prove that Martin Dapkus converted the rental income from Locus by exercising dominion and control over such income, without right, thereby depriving Plaintiff of its use and enjoyment. In the Matter of Hilson, 448 Mass. at 611; see also Abington Natl. Bank, 19 Mass. App. Ct. at 507. It is undisputed that a portion of Locus was rented while the trust was in existence, but exact dates as to the rental periods and amounts received from the tenants were not established at trial. The evidence did establish that a portion of Locus was rented to tenants periodically from the 1970s to approximately 1985, and again beginning in the 1990s. White-Dapkus also rented a portion of Locus from 2002 through 2009.
It is clear from the Second Trusts language that the Trustee had the power to collect rental income from Locus and such income, if not distributed during the lifetime of the trust, was to be distributed to the beneficiary upon the trusts termination, unless accounted for by the Trustee. Therefore, the Trustee did not have the right to exercise control over the rental income unless it was used for the benefit of Locus, such as to provide funds for improvements, renovations, utility bills, etc., and accounted for, either upon request of the beneficiary or upon termination of the trust. Any unaccounted rental income deprives the beneficiary of the trust from its use and enjoyment. White Dapkus, as executrix of Martin Dapkus estate, was not able to account for the rental income that had been collected by Martin Dapkus from Locus. Thus, this court is left with the only inference that Martin Dapkus used such rental income for his own personal use, thereby converting said funds. The amount of any such rental income was not established with certainty.
II. Breach of Fiduciary Duty
Consistent with the Appeals Court Decision, Plaintiffs claim of breach of fiduciary duty can only be based on actions that arose during the lifetime of the trust that is prior to the trusts termination on April 11, 1991. See Dapkus v. Dapkus, 07-P-1385 *9 (Memorandum and Order Pursuant to Rule 1:28 Dec. 18, 2008). All transactions that occurred after the trusts termination are not relevant to this courts determination of whether Martin Dapkus, as Trustee, breached his fiduciary duty to Plaintiff Robert Dapkus, the sole beneficiary.
Breach of a fiduciary duty is a cause of action in tort under G. L. c. 260, § 2A, the determination of which is a matter of law for the court. Merola v. Exergen Corp., 423 Mass. 461 , 464 (1996). The burden of proof in actions for self-dealing lies with the plaintiff to show that such acts were in violation of the trustees fiduciary duty. [A]cts of a trustee challenged as improper self-dealing will be struck down by the courts only upon clear proof that the trustees are abusing their authority and acting in perversion of the trust. Steele v. Kelley, 46 Mass. App. Ct. 712 , 735 (1999) (quoting Dumaine v. Dumaine, 301 Mass. 214 , 221 (1938). For accounting, the burden of proof is on the trustee to show that a transaction with himself was advantageous for the person for whom he was acting. Adelson v. Aldeson, 60 Mass. App. Ct. 753 , 766 (2004) (citations omitted); see also Markus v. Markus, 331 Mass. 394 , 399 (1954) ([w]here a trust is established the burden is upon a trustee to show that he acted with reasonable skill and judgment and to account for all the trust property which came into his possession.). The party challenging such transaction, however, bears the burden of proof if no fiduciary relationship exists. Markus, 331 Mass. at 767.
The rights and duties imposed on a trustee depend on the trust itself, including the trust instrument and its stated purpose. See 22 MASSACHUSETTS PRACTICE, PROBATE LAW AND PRACTICE § 39.2 (2d ed. 2011). Although a trustee may be given broad powers in the trust instruments, such powers must be conducted in a manner consistent with fiduciary standards and in regard to fiduciary principles. Ventura v. Ventura, 407 Mass. 724 , 728 (1990). Such reasonable regard means that established rules will be applied. Old Colony Trust Co. v. Silliman, 352 Mass. 6 , 10 (1967).
As a fiduciary the trustee owes a duty of loyalty and utmost good faith in all matters pertaining to the trust. 23 MASSACHUSETTS PRACTICE, ESTATE PLANNING § 13.25 (2d ed. 2011). Accordingly, a trustee cannot enter into any transactions with the trust either as buyer or seller [i.e. self-dealing and conflict of interest] unless the trust instrument authorizes him to do so or he receives . . . consent of all the beneficiaries; Id.; however, the trustee must still act fairly and in good faith. 3 SCOTT & ASCHER ON TRUSTS § 17.2.11 (5th ed. 2007). Furthermore, trust property cannot be commingled with the trustees own property or other funds. Markus, 331 Mass. at 398-99; see also 23 MASSACHUSETTS PRACTICE, ESTATE PLANNING § 13.29 (2d ed. 2011).
The trustee also has a duty to account for trust property throughout the lifetime of the trust and an accounting can be requested by the beneficiary. Simmons v. Barns, 263 Mass. 472 , 475 (1928). If the trustee is unable to account he must stand the loss. Markus, 331 Mass. at 399. As executrix of the estate of Martin Dapkus, it is the duty of White Dapkus to produce an accounting of the trust and all property and monies held in trust. Id. at 398. If it is determined an amount is due against the trustees estate the executrix is not to be held personally liable, except for the costs. See id. at 399.
Plaintiff, to the extent he relies on any conduct by Martin Dapkus post April 11, 1991, must prove a fiduciary relationship existed between his father and himself after the trusts termination. See Dapkus v. Dapkus, 07-P-1385 *3 (Memorandum and Order Pursuant to Rule 1:28 Dec. 18, 2008). As a threshold matter, this court finds that a fiduciary relationship existed between Martin Dapkus, as Trustee of the Second Trust, and Robert Dapkus, as beneficiary of the trust during the lifetime of the Second Trust.
As there was a fiduciary relationship between Martin Dapkus and Robert Dapkus, the question becomes whether Martin Dapkus breached his fiduciary duty by engaging in self-dealing during the lifetime of the trust and by failing to provide an accounting upon the trusts termination. If no such breach is found, this court will only then examine whether a fiduciary relationship existed after the termination of the trust between Martin Dapkus and Robert Dapkus.
A. Breach of Duty of Loyalty by Self-Dealing
Self-dealing occurs when the trustee obtains a personal benefit from a transaction. See 23 MASSACHUSETTS PRACTICE, ESTATE PLANNING § 13.25 (2d ed. 2011); see also Jerlyn Yacht Sales, Inc. v. Roman Yacht Brokerage, 950 F.2d 60, 67 (1st Cir. 1991) ([t]hat an agent breaches his fiduciary duty to his principal by earning a secret profit or commission is a rule well established in Massachusetts . . .). Unless authorized by the trust documents, the most manifest form of self-dealing occurs when the trustee sells trust property to himself or herself as an individual. See Steele v. Kelley, 46 Mass. App. Ct. 712 , 734 (1999).
Plaintiff alleges that Defendant Martin Dapkus breached his fiduciary duty as Trustee of the Second Trust when he conveyed Locus on December 5, 1990, by deed from himself as Trustee to himself individually for the amount of $100.00. [Note 19] Such conveyance is a textbook example of self-dealing and this court agrees with Plaintiff that such transfer was a breach of Martin Dapkus fiduciary duty. Although the trust gave the Trustee power to sell the real estate in the trust either at a public or private sale without consent of the beneficiary, see Exhibit 8, Declaration of Trust, ¶ 1, such language cannot be read to authorize the Trustee to convey trust property to himself as an individual for a nominal sum. And despite such broad powers granted to the Trustee to sell all or a portion of the Locus, he must still act fairly and in good faith in regard to such transaction and account for the proceeds which rightfully belong to the beneficiary. It is clear that Martin Dapkus did neither of those things when he obtained Locus from himself as Trustee for a nominal sum a mere $100.00 for a two family home in South Boston in 1990. Therefore, this court finds that Martin Dapkus, as Trustee of the Second Trust, breached his fiduciary duty by engaging in self-dealing as a result of the 1990 conveyance to himself individually. [Note 20]
Generally, as part of the trustees fiduciary duty, a trustee is required to provide an accounting to beneficiaries upon request and upon termination of the trust, unless otherwise stated in the trust documents. The Second Trust provides for an accounting only upon the termination of the trust. See Exhibit 8, Declaration of Trust, ¶ 4. It is undisputed that after the trust terminated, on April 11, 1991, Martin Dapkus, as Trustee, did not provide an accounting to Robert Dapkus, as beneficiary. This is corroborated by the fact that Plaintiff did not learn of the Second Trusts existence until approximately 2001, ten years after the termination of the Second Trust. Therefore, Martin Dapkus breached his fiduciary duty by failing to provide an accounting of the Trusts property upon termination of the Second Trust.
C. Commingling of Funds
A trustee also has the responsibility of keeping trust property separate from his or her own property or other funds. Markus, 331 Mass. at 398-99; see also 23 MASSACHUSETTS PRACTICE, ESTATE PLANNING § 13.29 (2d ed. 2011). Failure to do so results in commingling of funds and a breach of fiduciary duty. This court finds that Defendants failure to account for the trust property, particularly the rental income, casts doubt as to Defendant Martin Dapkus lawful use of the funds as trustee for the benefit of the trust property. Martin Dapkus failure to make an accounting of the trust property to Plaintiff makes it extremely difficult for Plaintiff to prove his claim regarding comingling of funds. At all times Defendant Martin Dapkus and later White-Dapkus were in possession of all relevant documentation. Although White-Dapkus submitted into evidence checkbook statements regarding rental income received from January 2008 through January 2009, see Exhibit 65, these check amounts do not account for the period of time prior to April 11, 1991, while the Second Trust was in existence, nor does it prove one way or the other whether Martin Dapkus deposited rental income into a separate account or into his personal bank accounts. As such, and given the nature of Defendant Martin Dapkus previous actions, including his self-dealing and failure to provide an accounting upon the Second Trusts Termination, this court draws the permissible inference that Martin Dapkus, as Trustee of the Second Trust, more probably than not commingled the rental income with his own personal funds.
As this court finds that Defendant, Martin Dapkus, Trustee committed conversion, breached his fiduciary obligations by engaging in self-dealing, commingling trust funds, and failing to provide an accounting upon the Second Trusts termination, and Defendant, White-Dapkus, as executrix of Martin Dapkus estate, has failed to provide an accounting of the Second Trust at the request of Plaintiff in conjunction with this lawsuit, Plaintiff is entitled to damages. The remedies for each claim will be discussed below.
A. Breach of Fiduciary Duty by Self-Dealing and Commingling of Funds
The remedy for breach of fiduciary duty is either conveyance of Locus from Maura L. Burke, the current owner, to Plaintiff, or the payment to Plaintiff of the fair market value of Locus as of 1991, when the trust terminated. It is within the courts discretion as to which remedy it adopts. This court awards Plaintiff the property, free and clear of any and all encumbrances.
The act of conversion relates to the rental income obtained from Locus and the mortgages encumbering the Locus. The remedy for conversion is normally a return of the property, in this case money, acquired by the wrongdoer. However, separate from this courts finding that Martin Dapkus, Trustee, committed conversion is whether Plaintiff is entitled to such rental income and mortgage proceeds. Such determination depends on this courts interpretation of the language of the Second Trust.
There was no documentary evidence regarding the actual amount of rental payments received by Martin Dapkus, Trustee, during the period of time in which the Second Trust was in existence. The testimony established only that various portions of Locus were rented approximately from 1971 through 1991. In the 1970s, Martin Dapkus rented the second and third floor apartments to tenants. Trial Tr. vol. I, 71. Beginning in the 1980s, the second floor apartment was rented between 1980 and 1982, and the first floor apartment was rented between 1980 and 1985. Trial Tr. vol. I, 14, 15, 50, 79, 87. There were no further rentals between 1985 and Second Trusts termination in 1991. Therefore, from 1971 through 1982 two apartments in Locus were rented with one apartment rented for an additional period of three years.
There is also no evidence as to the amount of rental income received prior to April 1991. Plaintiff argues that rental income should be based on an average of $20,000.00 per year times the number of years. See Plaintiffs Supplemental Motion for Preliminary Injunction and Post-Trial Brief. This court disagrees with Plaintiffs analysis and reasoning in reaching the $20,000.00 annual figure and does not adopt it. The terms of the Second Trust give the Trustee broad power. In regard to rental income, the Trustee has full power to collect rents . . . distributing the net income ratably to the beneficiaries at such time and in such amounts as the Trustee deems advisable. See Exhibit 8, ¶ 4. However, upon termination of the trust, the trust states that it is the Trustees duty to either sell and convey the trust property then remaining and to deliver the proceeds to the beneficiary or in the alternative transfer and convey the trust property to the beneficiary. See Exhibit 8, ¶ 13 (emphasis added). Because this court is declaring that Locus be conveyed to Plaintiff, only the second part of the above sentence is applicable, namely, the part pertaining to the transfer and conveyance of the trust property.
This court declines to award any amount for rental income because the amount of such an award would be speculative and because the trust provide broad discretion to the Trustee who was required to pay net income ratably to the beneficiaries at such time and in such amounts as the Trustee deems advisable. There was insufficient evidence at trial upon which this court could conclude that the failure of the Trustee to pay rental income to Robert during the lifetime of the Second Trust was inadvisable. The evidence did not establish how Martin Dapkus used any of the rental income and what portion, if any, was used toward maintenance and upkeep of Locus, rather than for his own purposes.
Additionally, this court declines to award Plaintiff damages in the amount of the proceeds of the mortgages that encumbered the Locus following the conveyance of the property from Martin Dapkus, as Trustee, to himself individually. Only three mortgages fall within the statute of limitations period, as defined by the Appeals Court Decision. Those mortgages are: (1) a mortgage recorded December 14, 1990, recorded in Book 16631, at Page 319, granted by Martin Dapkus to Taupa Lithuanian Federal Credit Union in the principal amount of $100,000.00; (2) a mortgage recorded April 8, 1991, recorded in Book 16781, at Page 296, granted by Martin Dapkus to Taupa Lithuanian Federal Credit Union in the principal amount of $50,000.00; and (3) a mortgage recorded February 26, 1998, recorded in Book 22185, at Page 318, granted by Martin Dapkus to Taupa Lithuanian Federal Credit Union in the principal amount of $30,000.000.
The Second Trusts language gives the Trustee broad power to mortgage the trust property, see Exhibit 8, ¶ 2, and, as stated above, this court reads the Second Trusts language as providing the beneficiary with a property free and clear of any and all encumbrances upon the termination of the trust. Given the trustees broad powers regarding mortgaging the property during the lifetime of the Trust, Martin Dapkus was within his rights to mortgage the property. There was a lack of evidence detailing how Martin Dapkus used the proceeds from the mortgages, but this court determines that Plaintiff is entitled to an unencumbered property free and clear of any and all mortgages, as opposed to the proceeds of those mortgage loans. [Note 21]
This court finds that it is the responsibility of White-Dapkus, as executrix of the late Martin Dapkus estate, to pay off the balances that remain, if any, on the three mortgages listed above if necessary to secure discharges of those mortgages and any expenses associated with the recordation of the discharges at the Suffolk Registry of Deeds. In regard to any mortgages placed on the property during the period of time in which Maura Burke owned the property, it is her responsibility to pay off the balances of those mortgages in full and record the discharges with the Suffolk Registry of Deeds. [Note 22] The responsibility for the payment of any and all amounts due the City of Boston for outstanding real estate taxes are the joint and several responsibility of White-Dapkus and Maura Burke, as current owner.
The Second Trust states that upon the termination of the trust, and at the beneficiarys request, the trustee is to provide an accounting. [Note 23] It is undisputed that Plaintiff, upon learning of his interest in this trust and in connection with this lawsuit, sought an accounting and that Defendants, Martin Dapkus as Trustee, and White-Dapkus, as executrix of Martin Dapkus estate, failed to provide such accounting. The testimony established that no records were kept regarding Locus, including rental income, or expenses associated with maintenance and improvements made to Locus. It was clear from her testimony at trial that White-Dapkus would be unable to provide such an accounting even if ordered by this court. This court recognizes the constraints imposed on White-Dapkus to conduct an accounting more than twenty years after the Second Trusts termination; therefore, this court ORDERS an accounting to be performed limited to ascertaining the balances that remain on any existing mortgages encumbering the property and the amount necessary to pay off any existing utility bills, including but not limited to water, sewer electric, and fuel and the outstanding real estate taxes. White-Dapkus accounting must be completed and delivered to Plaintiffs counsel (copy to the court) not later than January 4, 2013.
As ordered post trial, Maura Burke must maintain replacement casualty and premises liability insurance on Locus until delivery of Locus to Plaintiff. Maura Burke must vacate Locus and deliver it to Plaintiff free and clear of tenants and any personal property, and free of the Kaake mortgage on or before February 15, 2013.
No attorneys fees are awarded.
[Note 1] On January 31, 2006, this court allowed Plaintiffs motion to substitute Defendants executrix, Eileen White-Dapkus, for Defendant, who died on July 10, 2002.
[Note 2] Plaintiffs complaint is set forth in six counts. However, in substance, there are only four causes of action.
[Note 3] Under the discovery rule, the statute of limitations can only be tolled in three circumstances: where a misrepresentation concerns a fact that was inherently unknowable to the injured party, where a wrongdoer breached some duty of disclosure, or where a wrongdoer concealed the existence of a cause of action through some affirmative act done with the intent to deceive. Patsos v. First Albany Corp., 433 Mass. 323 , 328 (2001) (citing Protective Life Ins. Co. v. Sullivan, 425 Mass. 615 , 631-32 (1997)).
[Note 4] The decision of the Appeals Court affirmed this courts dismissal of claims based on trespass, its dissolution of the Memorandum of Lis Pendens, and its dismissal of Defendants remaining counterclaims for lack of jurisdiction. This court reinstated the lis pendens on April 6, 2009, inasmuch as Plaintiff was alleging a constructive trust would arise if this court found that the Trustee had breached his fiduciary duty.
[Note 5] A memorandum in support of both motions was filed July 11, 2011.
[Note 6] Hereinafter, all recording references are to the Suffolk Registry of Deeds.
[Note 7] Defendant is the biological father of Plaintiff, who was born during Annas marriage to Julius Pfeifer. Shortly after Plaintiffs birth, Anna divorced Julius Pfeifer and married Defendant. Thereafter, Defendant legally adopted Plaintiff.
[Note 8] Recorded in Book 7450, at Page 30.
[Note 9] Recorded in Book 7450, at Page 33.
[Note 10] Recorded in Book 8435, at Page 625.
[Note 11] Recorded in Book 8435, at Page 629.
[Note 12] Recorded in Book 16631, at Page 317. Between 1990 and 1998, Defendant obtained a number of loans secured by mortgages on Locus, and he did not apprise Plaintiff of any of the loans for which he used Locus as collateral.
[Note 13] Recorded in Book 18147, at Page 306.
[Note 14] Recorded in Book 18147, at Page 305.
[Note 15] On July 18, 1994, Peter T. Kline, successor Trustee of the 64 G Street Realty Nominee Trust deeded Locus back to Martin Dapkus, individually, all as evidenced by a deed recorded in Book 19202, at Page 166.
[Note 16] This court credits the testimony of Plaintiff regarding when he learned of the Second Trust and specifically finds that his testimony more credible than that of White-Dapkus. White-Dapkus testified that a conversation between Martin Dapkus and Plaintiff occurred in 1989 concerning the transfer of property at 790-792 East Third Street, South Boston from Martin Dapkus to Plaintiff to avoid Plaintiffs wife receiving 64 G Street in forthcoming divorce proceedings. Plaintiff testified that no such conversation occurred. Further, Plaintiff testified Martin Dapkus and he always spoke to each other in Lithuanian, which White-Dapkus could not understand, and Martin did not know about the divorce proceedings until he was served with the papers in 1992. This court finds the testimony of White-Dapkus as not credible and adopts the Plaintiffs position as to when he learned of the Second Trust. This finding is consistent with arguments made in Plaintiffs Motion In Limine to take Judicial Notice of Various Admissions of Party Opponent [White-Dapkus] filed June 24, 2011.
[Note 17] The Declaration of Trust for 64 G Street Realty Trust is recorded in Book 44896, at Page 181.
[Note 18] The Declaration of Trust for the Voytooseck Realty Trust is dated August 29, 2007.
[Note 19] This deed is recorded in Book 16631, at Page 317.
[Note 20] This court does not credit testimony at trial to the point that Martin and Robert had specifically agreed to swap properties and that Martin somehow made up for the transfer to himself for nominal consideration by transferring other properties to Robert.
[Note 21] The issue of payment of the mortgages will be discussed below.
[Note 22] As of the time of trial, there was an outstanding mortgage to Mr. Douglas Kaake who, like Ms. Burke, agreed to be bound by the judgment of this court.
[Note 23] Paragraph 4 states that [a]t no time shall any beneficiary hereunder have the right to call for an accounting except upon termination of this Trust.