This is a dispute between family members. As a result of the events set forth below, sisters Arlene Stigum, Ellen Johnson and Katherine Christie are currently the record owners of the life estate in their former family home at 462 Hartford Avenue in Bellingham (the life is that of their mother, Mary Curley), and Arlene is the owner of the remainder. [Note 1] The lawsuit was brought by Arlene alleging waste on the part of Ellen and Katherine (the waste being their alleged failure to pay their share of property-related expenses) [Note 2] and, in consequence, seeking conveyance of full title to herself and compensatory damages. See G.L. c. 242, §1 (action by person having the next immediate estate of inheritance to recover the place wasted and the amount of the damage); Thayer v. Shorey, 287 Mass. 76 , 79 (1934). An alternative claim in tort in the nature of waste for both compensatory and treble damages was also included in the complaint. See G.L. c. 242, §§ 2, 4-6. Ellen and Katherine, later joined by Mary, claimed back against Arlene and Arlenes husband Egil for fraud, undue influence and breach of fiduciary duty, seeking to undo the series of conveyances that led to the current state of title.
As previously ruled, this court has no jurisdiction over claims unrelated to the parties respective rights, title, and interest in the Hartford Avenue property. See Memorandum and Order Denying Third-Party Defendant Egil Stigums Motion to Dismiss for Lack of Subject Matter Jurisdiction at 3-4, 6-7 (Apr. 28, 2008). These non-title claims include Arlenes tort-based damages claim for waste against Kathleen and Ellen, and whatever money damages claims Mary may seek to assert against Arlene and/or Egil arising from the creation or operation of the greenhouse business that was located at the Hartford Avenue property for a time, or for Arlenes handling of the sale of an unrelated property in Walpole. Those claims are thus DISMISSED, without prejudice, except to the extent the findings in this case may have preclusive effect in any further proceedings between the parties. All claims against Egil have previously been dismissed on summary judgment. Memorandum and Order on Third-Party Defendant Egil Stigums Motion for Summary Judgment (Oct. 10, 2008). The remainder of the case was tried before me, jury-waived. Based on the testimony and exhibits admitted into evidence at trial and my assessment of the credibility, weight and inferences to be drawn from that evidence, I find and rule as follows.
These are the facts as I find them after trial.
462 Hartford Avenue in Bellingham, the property at issue in this case, is a nine room, two bath, two hundred year-old farmhouse with approximately 14 acres of land. It is presently vacant and in considerable disrepair. [Note 3] It was purchased by the late John Curley in 1959 while he was still single, and conveyed to himself and his bride-to-be, Mary McNiff (now Curley), later that year shortly before their wedding. The two lived in the house throughout their marriage and, after Johns death, Mary continued living there on her own, leaving only recently.
Mary, a divorcee at the time of her marriage to John, had three children by a prior marriage: Katherine, Ellen and Myles. [Note 4] John had no previous children. John and Mary had one child together: Arlene. This was important to them for inheritance purposes. Both John and Marys early wills (July, 1965) left everything to the other and, thereafter, to Arlene and any other children they might have or adopt together. [Note 5] Katherine, Ellen and Myles were intentionally omit[ted]. [Note 6] Outside of inheritance, however, all three daughters were treated alike. Katherine, Ellen and Arlene all lived together with John and Mary in the Hartford Avenue house while they were children and each looked to John as their father.
The Curleys struggled financially throughout their marriage. Neither John nor Mary had a steady job. John was a self-employed house painter and wallpaper hanger, occupations he had to abandon in the mid-1980s due to glaucoma and hernias. He received social security benefits thereafter, although in a relatively small amount. [Note 7] Mary stayed at home with the children and sewed, taught art classes, sold Avon products, baby-sat and occasionally waitressed to help make ends meet. Later the two cleaned condominiums until that too ended due to their physical infirmities. [Note 8]
John controlled all the family finances, but was both a poor manager and an often unwise spender. Buildings he bought and renovated for rental to residential tenants lost money and ended up in foreclosure. He rejected his daughters advice to put an inheritance in safe, high-earning certificates of deposit. Instead, money slipped through his hands and there was never enough to pay the bills incurred. In Katherines words, [things] were terrible growing up, terrible. We lost our electricity; our phone would be shut off; there were times when we would have to boil water to bathe. It was very difficult. [Note 9] The Curleys borrowed money from their daughters, even when the daughters were still teenagers, to pay overdue taxes and make car payments. Visits and calls from bill collectors were a regular occurrence.
Katherine, Ellen and Arlene all left home at the earliest opportunity and established independent lives. Katherine (the oldest) a teenager at the time of her mothers marriage to John became a banker, rising to treasurer and branch manager. Ellen eight at the time of the marriage has had a long and successful career in telecommunications. Arlene became a realtor and subsequently married Egil Stigum, the owner of a prominent financial planning business.
Egil became close to the Curleys [Note 10] and, concerned about their financial problems, referred them to an estate planning attorney with whom he was acquainted, G. Mitchell Eckel III, a graduate of Harvard Law School, the Boston University Law School tax program, and a partner at a Boston law firm. [Note 11] Attorney Eckel met with the Curleys [Note 12] and put together a series of documents wills, trusts, deeds, powers of attorney, health care proxies, etc., each duly executed and notarized as the Curleys free act and deed on December 20, 1991 with three main objectives. The first was to protect the Curleys assets from Medicaid liens in case the Curleys needed nursing home care in the future (both were in poor health at the time, and this seemed likely). Such protection required the Curleys to give up all right to access the principal of those assets. In light of this, the second objective was to assure they could access the income from those assets, and borrow against the principal if need be. The third objective was to preserve as much flexibility as possible in the ultimate disposition of whatever assets remained at the times of their deaths. This was accomplished through the creation of three trusts, with provisions as follows.
The Curleys main asset the Hartford Avenue property was deeded to the 462 Hartford Avenue Realty Trust (the Realty Trust). John was appointed the trustee of that trust. However, the Realty Trust could only take actions as directed or agreed by its beneficiaries, which were two other trusts. These were the John Curley Family Trust (50%) and the Mary Curley Family Trust (50%). John appointed Egil as the trustee of his Family Trust; Mary appointed Egil as the trustee of hers; and Egil served in that capacity without compensation. [Note 13] John and Mary had the right to all income generated by their respective Family Trusts, if any, up until the time, if ever, they entered a nursing home. At that time, if the Trusts worked as intended, the Curleys bills would entirely be paid by Medicaid, and their remaining assets would remain in the Trusts beyond the reach of a Medicaid lien.
The Realty Trust could be terminated at any time by its trustee (John) or by notice from the trustee of either of the Family Trusts (Egil). Upon termination, all of the Realty Trusts assets were immediately to be transferred to its beneficiaries, the Family Trusts. In the event a Family Trust was terminated during the donors life something the trustee of that Family Trust could do in his sole discretion if, inter alia, he deemed it no longer economical to administer the trust assets and trust, for reason set forth in any memorandum addressed to the Trustee by the Donor, or for any other reason deemed sufficient by the Trustee all assets remaining in that trust were to be distributed to Arlene (50%), Katherine (25%) and Ellen (25%). John H. Curley Family Trust, § VIII.C. If Johns Family Trust was still in existence at the time of his death, John retained the right to distribute its assets to whomever he designated in his Last Will, so long as they were his issue (i.e. Arlene or her children) and were living at the time. John H. Curley Family Trust, § IV.B.1. Absent such designation, if Mary were still living, those assets were to be divided between a marital trust (benefiting Mary) and a new family trust with income to Mary for her life and the following division between the daughters: 50% to Arlene, 25% to Katherine and 25% to Ellen. Id, §§ IV.B.2 & IV.B.3; §§ V.B.1 & V.B.2. Marys Family Trust had parallel provisions, although her issue, of course, to whom she could distribute all trust assets remaining at her death in whatever manner she chose in her Will, included Katherine and Ellen (and their issue) as well as Arlene (and her issue). Mary G. Curley Family Trust, § IV.B.1. Absent such a designation in Marys Will, the provision in her trust to take effect upon her death was parallel to Johns: a marital trust benefiting John (were he still living), and a new family trust with the same division as Johns: 50% to Arlene, 25% to Katherine and 25% to Ellen. Id, §§ IV.B.2 & IV.B.3; §§ V.B.1 & V.B.2.
In light of later events and the parties claims regarding them, it is important to remember that, unless the trusts were terminated prior to their deaths, both John and Mary retained full control over the ultimate disposition of the remaining assets in their respective Family Trusts so long as distribution was to their issue. The default provision may have been 50% Arlene, 25% Katherine and 25% Ellen, but Mary could have changed those numbers among her children (and the issue of those children) to anything she wanted them to be, and John could simply have left everything to Arlene and her children. No one was guaranteed anything. The trusts main asset the 462 Hartford Avenue property could also go up or down in value. John and Mary never had enough money to maintain the house properly, and the value of the underlying land varied with the market. There were no guaranteed returns.
The 462 Hartford Avenue property produced no income at the time the 1991 estate plan was created. It was a residence. It was never subdivided, no parts of it were ever rented or sold, and attempts to have it rezoned commercial were rejected by the town. Instead, the Curleys contemplated using the property as collateral for loans from their children. As the trust documents provided:
Loans to Donor or Spouse. The Donor has borrowed funds from one or more of this daughters and step-daughters in the past and may do so in the future. [Note 14] The Trustee is directed to recognize such borrowing as debts of the Donors estate as evidenced by his written receipt and to pay such debts no later than at time of termination of the trust, and to pay interest on each such loan at the annual rate of nine (9%) per cent from the date of advance as evidenced by the receipt of the Donor.
John H. Curley Family Trust, §VIII.E.
Loans to Donor or Spouse. The Donor has borrowed funds from one or more of her daughters in the past and may do so in the future. The Trustee is directed to recognize such borrowing as debts of her estate as evidenced by her written receipt and to pay such debts no later than at time of termination of the trust, and to pay interest on each such loan at the annual rate of nine (9%) per cent from the date of advance as evidenced by the receipt of the Donor.
Mary G. Curley Family Trust, §VIII.E.
The Curleys social security and housecleaning earnings were insufficient to pay anything other than day-to-day bills, and sometimes not even that. They thus continued to borrow money from Arlene to pay their periodic larger obligations, primarily property taxes, insurance, and household repairs. These loans totaled nearly $45,000 by November 1994. [Note 15] To pay this back and to provide a way for the trusts to produce income, John arranged to sell the 462 Hartford Avenue property to Arlene (subject to the life interest described below) in return for a cash down payment ($5,000 to each trust), a short-term interest-bearing promissory note ($20,000 to each trust, payable in January 1995), and a 30-year interest-bearing promissory note ($38,063 to each trust) for the balance. These figures were based on a property valuation of $350,000 (the figure was set by John, with Marys assent), the valuation of the remainder interest in accordance with the IRS actuarial tables (36% of the value of whole, or $126,126), and an interest rate of 6.25% (again, set by John with Marys assent). The Curleys indebtedness to Arlene was reflected and acknowledged in a letter signed by John and Mary, and the transaction itself was properly requested and executed in documents prepared by Attorney Eckel, as the Curleys lawyer, dated November 25, 1994. These were: (1) a letter from John and Mary, signed by each, to Egil as trustee of the Family Trusts requesting him to direct the Realty Trust to make the sale; [Note 16] (2) a letter from Egil as trustee of the family trusts to John as trustee of the Realty Trust requesting John (as trustee) to deed the property on the terms set forth in the Curleys letter; [Note 17] (3) the deed itself; (4) a $5,000 check from Arlene to each of the Family Trusts; and (5) Arlenes promissory notes. The net result was: (1) a cash infusion of approximately $50,347 into the Family Trusts (half to each) by January 1995, [Note 18] (2) the use of this $50,347 to pay the Curleys indebtedness to Arlene and other bills they had accrued, [Note 19] (3) the acquisition by each of the Family Trusts of a $38,063 promissory note from Arlene, with interest paid at 6.25% (the interest could then be distributed to John and Mary as income), (4) the retention by the Realty Trust of the exclusive right to use, occupy and possess the benefit of [the 462 Hartford Avenue property] for the beneficiaries of said 462 Hartford Avenue Realty Trust for the period measured by the joint and last survivor lives of John H. Curley and Mary G. Curley of Bellingham, MA, [Note 20] and (5) the transfer of the remainder interest to Arlene. The two $38,063 notes generated $234.37 in monthly interest for each of the two Family Trusts, and those sums were regularly paid to John and Mary as trust income.
To the extent this favored Arlene over the other two daughters, the favoritism was intentional. [Note 21] As John and Mary noted in their November 25, 1994 letter to Egil referenced above, the sale of the remainder interest to Arlene will at least let any future appreciation in the value of this property accrue to Arlene. Arlene was Johns only child, and the only child of John and Marys marriage. Katherine and Ellen had established independent and successful lives by that date, and Arlene had been the one most capable and willing to lend John and Mary money when they needed it. The $350,000 value placed on the property was close enough to its fair market value at that time to make the sale proper and reasonable, particularly given the reservation of the life estate. [Note 22] The figure was set by John, assented to by Mary, and not the result of undue influence or breach of fiduciary duty by Arlene or Egil. Were it not for the continuing loans from Arlene, the Curleys would have lost the property to tax foreclosure or their creditors. With these loans, the Curleys were able to maintain a decent life and stay in the house for the remainder of Johns life and beyond. Mary, Katherine and Ellen contend that the funds received by the Curleys from Arlene were not loans but, instead, either consideration for the disproportionate 50-25-25 split of the daughters beneficial interests in the Family Trusts or gifts. I do not find this credible. First, it ignores the Curleys preference of Arlene with respect to inheritance matters. Second, the papers signed by the Curleys acknowledged them as loans. Third, the sums involved were large ultimately reaching hundreds of thousands of dollars. It is not simply not believable that Arlene, or anyone else, would have made an open-ended agreement to keep advancing funds, with no limit in time or amount, on nothing more than the prospect of receiving an additional 25% of the Curleys remaining assets at an uncertain time in the future. As noted above, there was no guarantee that the Trusts would have anything remaining in them at the time of their termination, [Note 23] and both John and Mary could have redirected their assets elsewhere in their wills. Fifty percent of nothing is nothing. Fourth, Arlenes statement to Mary when Mary was ill that Mary should send her bills to Arlene for payment cannot credibly be seen as an open-ended promise to pay them, whenever sent and in whatever amount, without future reimbursement. [Note 24] It was a one-time conversation, with no promise that these would be gifts. The bills being paid were reviewed monthly with Mary and John, and they signed notes for their repayment. Fairly seen, Arlenes comment was nothing more than a daughter seeking to help her mother through difficult, emotional events, with repayment to be made at a future, hopefully less stressful time.
Another transaction was pending at approximately the same time as the sale of 462 Hartford Avenues remainder interest to Arlene, this one involving 252 Moose Hill Road in Walpole. Mary and her brother Louis Verrochi had inherited the Walpole property from their father and become its tenants in common. Mary deeded her interest to the Realty Trust on February 9, 1995, and the property was sold in its entirety to Ciba Corning Diagnostics Corporation on February 21, 1996 for $150,000. Arlene acted as the sellers broker, earning a $15,000 commission. After that and the other sale-related expenses were paid, the net proceeds were divided equally between the Realty Trust and Louis, each receiving over $60,000. The Realty Trusts share was deposited in the two Family Trusts, half to each. Because trust principal could not be distributed to the Curleys, only income, the $60,000 was lent to Arlene, who signed promissory notes ($30,000 each to the two trusts) and paid monthly interest at a 6.25% annual rate, all of which went to the Curleys. Arlene secured the loans by granting the trusts mortgages on her Boston condominium. The Curleys owed Arlene approximately the same amount of money at that time, but Arlene deferred collecting on it, choosing instead for the moment to borrow the $60,000 so that John and Mary would have income from the interest she paid.
The Curleys became too ill to continue their housecleaning jobs, and their social security payments and interest distributions from the Family Trusts were not enough to cover their expenses. They thus continued to borrow from Arlene, and to confirm at their monthly meetings with Egil that these were loans, intended for full repayment. These borrowings continued to include such things as property tax, insurance, repairs, medical costs, automobile expenses and, increasingly, day to day pocket money (deposited by Arlene into the Curleys checking account), groceries and other living expenses. John also borrowed some hundreds of dollars to buy guidebooks on investments in stock options, although there was no evidence that he ever made such investments, certainly not successfully. Added to this was the value of a Chevrolet Suburban (which John wanted to use in connection with agricultural activities at the 462 Hartford Avenue property) and money for a new business venture called Curleys Covent Garden. Egils warnings that this level of spending was unsustainable went unheeded and the loans were allocated half each to the two Family Trusts as John and Mary requested.
Curleys Covent Garden, whose origins date to 1993, was two things: a cosmetics and gift shop, and a greenhouse that grew and sold flowers and seedlings. It was the joint idea of the Curleys and the Stigums something the Curleys could do from home to make money now that they were no longer physically able to clean houses, and a way for Mary and Arlene to work together (Arlene held the license for the cosmetics operation). Arlene fronted the money, which the Curleys agreed to repay. This went towards the construction of the greenhouse and the purchase of equipment and inventory, including a tractor and roto-tiller. Arlene and Egil initially took the losses on their personal tax returns because Arlene had advanced the money and the Curleys had insufficient income to benefit, tax-wise, from those losses. On the recommendation of Egils accountant, the tax returns were later amended to reflect the losses as the Curleys. Arlene initially worked at the business and Egil helped out on weekends, but they eventually drifted away when they believed Mary was failing to account for all the revenues the business received. [Note 25] John and Mary continued to work at the business thereafter, but shut it down completely after a time.
At approximately the time the business was shuttered, John, Mary and Arlene talked about the Curleys continuing cash needs. The Curleys thought they needed around $700 per month in addition to the social security payments they received, and Arlene arranged to deposit this in a checking account she established for them. These deposits continued for several years, in amounts that sometimes varied. John withdrew much of it in cash, and the Curleys continued to look to Arlene for help with their larger bills (property tax, insurance, etc.). It was agreed that both the deposits and the bill payments would be loans, and all ultimately were reflected in signed promissory notes.
Mary, Katherine and Ellen challenge the circumstances surrounding the notes, but a close examination shows nothing overreaching or suspect. The amount of Arlenes loans eventually overwhelmed the assets in the Family Trusts, [Note 26] and Egil was uncomfortable continuing the trusts because of their insolvency. Attorney Eckel drew up formal promissory notes to reflect the Curleys indebtedness to Arlene, all of which were reviewed with and signed by John and Mary. John and Mary also executed letters, drafted by Attorney Eckel, requesting Egil (as trustee) to terminate the Family Trusts. At Attorney Eckels suggestion, lines were included in the termination letters for the assents of Arlene, Kathleen and Ellen so that each of the potential beneficiaries would be informed. John and Mary signed the letters requesting Egil to terminate the trusts on November 11, 1997. Arlene signed them as well. Egil took the letters to Katherine and Ellen for their signatures, but both refused. The reasons they gave were similar. Neither had been involved when the trusts were established, they had not been involved in the day-to-day administration of trust affairs, and they were thus reluctant to become involved and sign something only at the end. Their signatures were not necessary for termination, so it went ahead without them. John and Marys debts to Arlene exceeded the amount of Arlenes promissory notes to them and the amount of cash left in the trusts. With no assets apparently remaining, each of the trusts was terminated and, at that point, Katherine, Ellen and Arlene became life tenants of the 462 Hartford Avenue property. Nonetheless, with everyones consent, John and Mary continued to live there. Arlene also continued her $700/month deposits in the Curleys checking account, even though there was now nothing to secure their repayment.
John died on April 5, 2001. Arlene continued making deposits in the Curley account, now solely for Mary, although these gradually were reduced to a $500/$350 level. The two fell out in 2003 when Mary, without first telling Arlene, gave the greenhouse to a contractor for nothing. All contact between them ceased at that point, and Arlene stopped depositing money for Mary. She continued, however, to pay all property-related bills (taxes, insurance and basic maintenance) until this courts August 9, 2007 interim order requiring them to be shared by Katherine and Ellen. Mary vacated the house in 2004, leaving it uninhabited. It remains vacant today.
This lawsuit was filed on March 31, 2005. To address the claims raised by Mary, Katherine and Ellen, Arlene and Egil hired an accountant to review the various loans and expenditures that had occurred. As a result of that review, an adjustment was made. In response to Mary, Katherine and Ellens objections to Arlenes taking Curleys Covent Gardens losses on her personal tax returns, the tax benefit Arlene received was credited towards the Curleys indebtedness to her. This resulted in a surplus in each Family Trust account in the amount of $4,736 at the time the trusts were terminated (1997). This was not material, however. The credit for Arlenes tax benefit was unnecessary. It did not reflect any loss to the Curleys (they themselves would not have benefited from the losses since they lacked sufficient income to offset against it) and was more than offset by Arlenes subsequent deposits in the Curleys bank account and her payment of property-related bills. Any issue that could be raised regarding the interest that accrued on the Curleys obligations to Arlene (9%) as compared to the interest she paid them on her notes to them (6.25%) is also more than mooted by these subsequent sums. It is also more than clear that, absent Arlenes support, the Curleys would have lost the property to tax foreclosure and other creditor claims. Nothing would have remained for anyone.
Further facts are set forth in the discussion section below.
I begin with Mary, Katherine and Ellens claims against Arlene challenging the current state of the record title to the 462 Hartford Avenue property. That title, as previously noted, is an estate in Arlene, Ellen and Katherine for Marys lifetime, with Arlene owning the remainder interest. Mary, Katherine and Ellen contend that the deed that began that process the 1991 deed from John and Mary to the Realty Trust should be rescinded and all subsequent deeds rescinded as well, [Note 27] returning title to John and Mary individually and now, after Johns death, to Mary alone. [Note 28]
Rescission is a remedy, not a substantive cause of action, and can only be granted if the party seeking it proves all the elements of a cause of action that supports such a remedy fraud, mistake, accident, illegality, undue influence, or breach of fiduciary duty. See Beaton v. Land Court, 367 Mass. 385 , 392 (1975); Brodie v. Evirs, 313 Mass. 741 , 744 (1943); Markell v. Sidney B. Pfeifer Foundation, Inc., 9 Mass. App. Ct. 412 , 442 (1980). Constructive trust, a potential alternative remedy, [Note 29] requires a showing of unjust enrichment of one party at the expense of the other where the legal title to the property was obtained by fraud or in violation of a fiduciary relation. See Barry v. Covich, 332 Mass. 338 , 342 (1955); Demoulas v Demoulas, 428 Mass. 555 , 580-581 (1998).
In support of these remedies, Mary, Katherine and Ellen allege fraud, undue influence, and breach of fiduciary duty by Arlene [Note 30] claims which turn on two factual assertions: (1) that Arlene improperly induced John and Mary into creating the trust arrangements detailed above, transferring the 462 Hartford Avenue property to those trusts, and subsequently selling her the remainder interest in the property at an allegedly unfair price, and (2) that she wrongfully procured loan agreements and supporting documents from John and Mary when the debts they reflected should more properly be seen as funds she owed them either (a) as consideration for her contingent 50% beneficial interest in the Family Trusts, or (b) in fulfillment of an alleged oral promise to Mary to pay all of John and Marys bills. In the background is an implicit third assertion: that, absent Arlenes allegedly wrongful acts, Mary would still have ownership and equity in the 462 Hartford Avenue property. The evidence on each of these contentions shows otherwise.
Arlene Did Not Defraud John and Mary in Connection With Any of the Challenged Transactions
Fraud requires the showing of a misrepresentation of a material fact, made to induce action, and reasonable reliance on the false statement to the detriment of the person relying. Commerce Bank & Trust Co. v. Hayeck, 46 Mass. App. Ct. 687 , 692 (1999) (internal citation omitted). Here, there was no showing of any misrepresentation by Arlene in connection with any of the challenged transactions, nor any reasonable reliance on anything Arlene said or did. The original conveyance of the property from John and Mary to the Realty Trust was done for estate planning purposes, on advice of independent counsel. The later conveyance of the remainder interest to Arlene, reserving the life estate in the Family Trust beneficiaries, was likewise done for legitimate reasons to generate income that could be distributed to John and Mary and the challenging parties (Ellen, Katherine and Mary) did not show that the consideration paid for the conveyance was unfair. As the evidence showed, the price was chosen by John, not Arlene or Egil. There was no showing that a higher price could have been obtained, particularly since the Curleys were retaining a life interest and the remainder owner would have had to rely on them to maintain the property a risky proposition given their always-shaky finances. I do not find credible any assertion that either conveyance was done in reliance on any statement or reasonable assumption that Arlene would provide John and Mary a continuing flow of funds in consideration for these conveyances. Indeed, all the credible evidence is to the contrary, including (1) the lack of any such commitment in any of the written documents, (2) the specific provision in the trust documents that the Curleys could borrow from their daughters using the property as collateral (a recognition that loans were intended to be sought), (3) Johns repeated statements that the funds he and Mary were receiving from Arlene were loans, not gifts or payments, (4) the Curleys monthly meetings with Egil to go over the amount of their borrowings, and (5) the fact that they signed letters and promissory notes reflecting Arlenes funds and other contributions as loans. Moreover, it made no sense at all for Arlene to enter into such an arrangement, which (if true) would have involved (1) an open-ended commitment to support John and Mary for the entirety of their joint lifetimes, with (2) no limit on the amount, (3) no assurance that there would still be equity in the property at the end, and (4) no assurance that John and/or Mary would have not have changed the ultimate disposition of the property in their wills.
John and Mary may have regretted their financial situation that led to the need for such borrowing, and some of the things they did may seem foolish in retrospect (e.g., Curleys Covent Gardens), [Note 31] but they knew what they were doing. From their standpoint, it was a very favorable arrangement. They retained a life interest in the property and continued to live there. Arlene never attempted to take the property until after Mary abandoned it. The Curleys transactions with Arlene mooted their need to borrow from a bank, which they likely could not have done anyway. [Note 32] And, to the extent the transactions may have benefited Arlene, such was their intention. Arlene was the only child of the couple, and the only one with the financial resources and willingness to help them when they needed help. [Note 33]
In support of her contention that Arlenes funds and other contributions (the cars, etc.) were either gifts or consideration for the 50-25-25 beneficial interest in the trust, Mary points to a single statement by Arlene, made in a brief telephone call when John was sick and Mary needed to devote all her attention to caring for him, that Mary should send her bills to Arlene and Arlene would see that they were paid, and claims she relied on this. As noted above, I do not find this credible, and certainly not something upon which Mary reasonably could have relied in the way she now claims. Arlene never said, and Mary never claimed she said, that the bills she was paying or the funds she advanced would be gifts or consideration of any kind. Indeed, all were reflected on the loan accounts, and all were made without affecting Marys continued ability to live on the property.
Arlene Did Not Unduly Influence John and Mary in Connection With Any of These Transactions
Undue influence is unfair persuasion of a party who is under the domination of the person exercising the persuasion or who, by virtue of the relation between them, is justified in assuming that that person will not act in a manner inconsistent with his welfare. Bruno v. Bruno, 384 Mass. 31 , 34, n.3 (1981) (citing Restatement (Second) of Contracts §319). The first is substantially equivalent to the emphasis in [Massachusetts] cases on the domination of the will or the destruction of free agency; the second has a counterpart in our cases treating improper influence in the context of a confidential relationship. Id. Relying on this second aspect, Mary, Ellen and Katherine claim that Arlene unduly influenced John and Mary into entering into the estate plan, the conveyance of the remainder interest in the property, and signing the various loan documents. I disagree, for two reasons. First, Arlene was not in a confidential relationship with John and Mary within the scope of the doctrine. Second, there was neither improper influence nor a result inconsistent with their welfare.
Arlene was clearly the favored daughter during the time of these transactions; certainly of her father John. Arlene, Egil, John and Mary vacationed together, dined together regularly, and both Arlene and Egil were frequently at the 462 Hartford Avenue property helping out with repairs and other chores. John and Mary respected Arlene and Egils business judgment. But this does not equate to a confidential relationship within the meaning of the law. [M]ere respect for the judgment of another or trust in his character is not enough to constitute a confidential relationship. Bruno, 384 Mass. at 33. A confidential relationship does not arise merely by reason of family ties. Collins v. Huculak, 57 Mass. App. 387, 394 (2003). It requires evidence indicating that one person is in fact dependent on anothers judgment in business affairs or property matters. Id. at 395 (emphasis added). Here, the primary decision-maker was John, and the evidence showed that he did what he wanted, irrespective of others advice. Egil and Arlene pleaded with him to spend less, but he continued regardless. Katherine and Ellen tried to persuade him to put his money in safe, high-yielding certificates of deposit, but he pursued risky renovation projects instead, all of which failed. Mary may have been dominated by John and deferred to his wishes, but Arlene is not responsible for this.
Moreover, the decisions made by John to enter into the transactions at issue in this case (protecting assets from Medicaid claims; using the property for income and collateral for loans the Curleys could not otherwise obtain), all of which were joined in by Mary, were not foolish ones, and the results were not unfair. Each of those decisions made perfect sense at the time, each was done with the advice and guidance of independent counsel (Attorney Eckel), and each was reflected in a properly signed writing. Far from taking advantage of John and Mary, Arlenes loans (all on fair terms) helped them maintain their lifestyle, aiding them when they most needed it, and with minimal impact on their daily lives. They continued to live at the property, and the loans enabled them to take money out while doing so. Ironically, the one most at risk in all this was Arlene. Since the only asset that might ever repay her was the 462 Hartford Avenue property, she had no choice but to keep advancing money to pay its taxes, insurance and repair costs.
Arlene Did Not Breach Any Fiduciary Duty to John or Mary
To establish a breach of a fiduciary duty, a party must show that a fiduciary relationship existed, that there was a breach of that relationship, and that the breach caused damages. See Hanover Ins. Co. v. Sutton, 46 Mass. App. Ct. 153 , 164 (1999) (elements are duty and breach damage and causation). Like undue influence, a fiduciary relationship does not arise merely by reason of family ties. Markell v. Sidney B. Pfeifer Foundation, Inc., 9 Mass. App. Ct. 412 , 444 (1980). There must be evidence that one person is in fact dependent on anothers judgment in business affairs or property matters. Id. As noted above, the primary decision-maker was John, and John followed his own lead, not Arlenes. That Mary followed John is not Arlenes fault. Moreover, even had there been a fiduciary relationship between Arlene and her parents, I find that it was not breached. Arlene gave them sound advice; hire a lawyer, create an estate plan to protect your assets as much as possible, find a way to get income from the property that will not endanger your ability to continue living there, enter into loan transactions with me on market terms. Arlene cannot be held responsible for her parents spending habits. Lastly, and I say this after long reflection on the evidence, there was no true causal connection between the transactions at issue in this case and the Curleys ultimate financial situation. The reality is that John and Mary would have lost everything if left alone. In Katherines own words, John with money was like a man at a roulette machine. In the absence of Arlenes loans, at some point likely sooner rather than later, the property would have been lost, in its entirety, to tax lien or other creditor foreclosure. [Note 34]
Arlenes Claims of Waste and the Appropriate Remedy to Address Those Claims
Ellen (25%), Katherine (25%) and Arlene (50%) hold a life estate in the property for the life of their mother, Mary. Arlene holds the remainder interest. This action began with a claim for waste by Arlene against Ellen and Katherine, the waste being their refusal to contribute to the propertys maintenance characterized in the case law as permissive waste. See Harrison v. Pepper, 166 Mass. 288 , 289 (1896).
Waste is an unreasonable or improper use, abuse, mismanagement, or omission of duty touching real estate by one rightfully in possession, which results in its substantial injury. Thayer v. Shorey, 287 Mass. 76 , 81 (1934). As previously noted, life tenants have an obligation to treat the premises in such manner that no harm be done to them and that the estate may revert to those having an underlying interest undeteriorated by any willful or negligent act. Delano v. Smith, 206 Mass. 365 , 370 (1910). This includes the obligation to pay real estate taxes as they become due even though the estate was unproductive, Thayer, 287 Mass. at 81, [Note 35] but not an obligation to keep the premises insured, Harrison, 166 Mass. at 289. It also includes the obligation to keep the premises in at least minimal repair so that no substantial injury occurs by reason of neglect. See Thayer, 287 Mass. at 81.
Neither Katherine nor Ellen has done anything affirmative to harm the property. So far as the evidence shows, they have not taken anything from it. But, except by court order, they have not contributed to it in any way, at least since Mary moved away. They defend this on two grounds. First, they say, because the transactions that made them life tenants should be rescinded, they are not actually life tenants. For the reasons set forth above, that argument has no merit. The transactions they challenged are each valid. Second, they point out that they never asked to be life tenants, [Note 36] and thus should not be burdened with the obligations of such tenancy. This is fair, but has a consequence. If they do not want to be life tenants, they must renounce that tenancy.
Accordingly, Katherine and Ellen must choose one of two paths. If they want to remain life tenants, they must reimburse Arlene their unpaid share of the propertys taxes (i.e., 25% each) from and after the time of the filing of this lawsuit, and continue to pay their share of those taxes, as well as their share of all repairs necessary to keep the property in weathertight, undamaged condition, from now until the time their life tenancy ends. If they do not do so, or if they choose to renounce their life tenancy, full fee simple title immediately shall vest in Arlene. If, upon receipt of this judgment, Katherine and Ellen choose to renounce their life tenancy, Arlene must reimburse them for all sums they have paid towards property-related expenses pursuant to this courts interim orders.
For the foregoing reasons, Mary, Katherine and Ellens claims against Arlene for rescission or constructive trust, and all of the underlying claims for fraud, undue influence and breach of fiduciary duty associated therewith, are DISMISSED, WITH PREJUDICE. Arlenes claims against Katherine and Ellen for waste are ALLOWED to the following extent: if Katherine and Ellen promptly renounce their life tenancies, full fee simple title to the property shall vest in Arlene upon Arlenes reimbursement of the sums they have paid towards property-related expenses pursuant to this courts interim orders. If Katherine and Ellen choose to remain life tenants, they must promptly reimburse Arlene their unpaid share of the propertys taxes (i.e., 25% each), , as well as their share of all repairs necessary to keep the property in weathertight, undamaged condition, from now until the time their life tenancy ends. If Arlene wishes the property to be insured, she must pay for such insurance herself.
Judgment shall enter accordingly.
[Note 1] I refer to the parties by their first names for ease of reference.
[Note 2] Life tenants have an obligation to treat the premises in such manner that no harm be done to them and that the estate may revert to those having an underlying interest undeteriorated by any willful or negligent act. Delano v. Smith, 206 Mass. 365 , 370 (1910). This includes the obligation to pay real estate taxes as they become due even though the estate was unproductive, Thayer v. Shorey, 287 Mass. 76 , 81 (1934), but not an obligation to keep the premises insured, Harrison v. Pepper, 166 Mass. 288 , 289 (1896).
[Note 3] Interim orders have been entered in the case regarding its maintenance and the payment of its taxes.
[Note 4] Myles is mentally disabled, a ward of the state, and never lived with John and Mary.
[Note 5] As it turned out, John and Mary neither had nor adopted any other children together. Katherine and Ellen, for example, were never adopted by John.
[Note 6] Last Will and Testament of John Curley at 1 (Jul. 1965); Last Will and Testament of Mary Curley at 1 (Jul. 1965). These wills were later superseded by the estate plan described below, which still favored Arlene.
[Note 7] These benefits never exceeded $525 per month.
[Note 8] Mary had ulcers and, later, was diagnosed with cancer.
[Note 9] Trial transcript, 4-208 4-209. All of the other witnesses, including Mary herself, gave similar testimony. See also Katherines deposition testimony, previously cited in the courts Memorandum and Order on Third-Party Defendant Egil Stigums Motion for Summary Judgment at 7, n. 7 (Oct. 10, 2008):
Q: Finances were a trouble for them [the Curleys]?
Q: What do you know about their financial affairs?
A: I know that my mother [Mary] was even when she was married to my father was a very frugal type of person. And I know that John with money was like a man at a roulette machine, is how he did dealings. I mean, he was absolutely terrible, absolutely terrible with money. Hed borrow money and not pay it back, absolutely terrible.
Q: Who did he borrow money from?
A: Me, for one. My grandmother, Hortense, for another.
A: Yes, Hortense Verrochi. She was from Italy.
Q: John would borrow money from you?
A: When they were ready to repossess the cars he borrowed money from me as a teenager.
* * *
Q: How often did he ask you for money?
A: After a couple of times they didnt ask anymore. I just said, you know, Im just, between private schools and things, Im stretched. I was divorced, self-supporting.
Q: You kind of discussed it a little bit in your other answers. Who handled the finances in John and Marys marriage?
A: John did.
Deposition of Katherine Christie at 18, 22.
[Note 10] During Egils courtship and after his marriage to Arlene, John, Mary, Arlene and Egil often dined out and vacationed together with Egil and Arlene paying the bills. Egil prepared the Curleys tax returns, at no cost to them. The Curleys would stay at Arlene and Egils condominium when they came to Boston. Egil also helped John cut trees, brush, move rocks and do other chores at the Hartford Avenue property on the weekends.
[Note 11] That firm has since dissolved and Attorney Eckel currently practices in Acton at a firm he co-founded.
[Note 12] Egil also attended at least some of these meetings. Attorney Eckel was clear that his clients were the Curleys, not Egil, and very clear that he always met with the Curleys, alone, to discuss any documents they would be signing, often sending them an explanatory letter beforehand. At Johns request, correspondence between Attorney Eckel and the Curleys was sent to Egils address and hand-delivered by Egil to John and Mary. This appears to have been done for the sake of convenience. There was no evidence that any of the correspondence was altered, influenced or concealed in any way. Mary confirmed the genuineness of her signature on all the operative instruments, both those from the time of the original estate plan and those that came later, even the ones she claimed not to remember.
[Note 13] Egil had a BA and MBA from Dartmouth, held CPA and CLU qualifications, owned and operated a successful financial planning business, and had experience serving as trustee for many of his clients.
[Note 14] Ellen lent John money from time to time. Katherine had lent John and Mary thousands of dollars in the past to pay their taxes and other bills, tapping into her own childrens college savings to help them out. See, e.g., n. 9, supra. When Katherine needed repayment, the Curleys turned to Arlene, borrowing from her to pay Katherine. The Curleys then went to Arlene for further loans to pay their past-due property taxes and home insurance, for surveying, repairs, maintenance and a new heater/boiler at the house, for various uninsured medical bills, and reflecting the value of a car Arlene provided Mary when Mary needed one to drive. Arlene also lent the Curleys money to pay Attorney Eckels bills and allowed them to use her credit cards for routine purchases, all on the agreement that she would be reimbursed at a later point. After the trusts were in place, Egil met with the Curleys monthly to go over the trust accounts, the various loans they received from Arlene, and to confirm that these were to be treated as loans.
[Note 15] The borrowings were itemized in a letter from John and Mary (signed by both) to Egil Stigum as trustee of the Family Trusts dated November 28, 1994. The letter requested Egil (as trustee) to repay both those and future loans from whatever trust assets might exist.
As previously noted, a large part of these borrowings were used to pay the Curleys real estate taxes and home insurance bills, which they seemingly never had the funds to pay on their own. The Curleys also received gifts from each of their children groceries purchased by Ellen or Katherine, a vacuum cleaner, vacations with Arlene and Egil, small amounts of cash, and occasional incidental items.
[Note 16] The request was made in this manner because, as previously noted, the Realty Trust (which held title to the 462 Hartford Avenue property) could only act as it was directed to act by its beneficiaries, the Family Trusts. Egil, as trustee of the Family Trusts, took his guidance from John and Mary.
[Note 17] Id.
[Note 18] To be precise, the figure was $50,000 plus the interest accrued on the two $20,000 notes at the time they were paid in January ($173.61 each, for a total of $347.22).
[Note 19] Arlene was paid in full on March 1, 1995.
[Note 20] As previously noted, the beneficiaries of the Realty Trust were the two Family Trusts. The beneficiaries of the two Family Trusts were John and Mary for their lifetimes or until such time as the Family Trusts terminated for any other reason, whichever first occurred, and then Arlene (50%), Katherine (25%) and Ellen (25%). In practical effect, John and Mary could thus continue to live at the property during their lifetimes so long as the Trusts had not earlier been terminated.
[Note 21] Further evidence of this is shown by a deed from John to Arlene dated August 25, 1995. A creditor of Johns, Jerome Tuck, had obtained a Sheriffs deed to the 462 Hartford Avenue property in June 1974. By instrument dated July 31, 1995, Mr. Tuck conveyed whatever interest he held under that deed to John and released the entirety of his claims arising from the Sheriffs sale. John then deeded that interest to Arlene (and Arlene alone) in the August 25, 1995 deed, as well as any other remaining interest he might have had in the property.
[Note 22] The property had been marketed from time to time at prices ranging from $395,000 to $775,000, but never sold. An independent company thought it could be sold for $375,000. The net to the Curleys would have been less, since they would have had to pay the brokers fee and certain other closing costs.
[Note 23] Among other things, the 462 Hartford Avenue property could have been lost to tax foreclosure, or mortgaged and lost to the foreclosing mortgagee. Given the Curleys financial history, these were near-certainties. Note also that, to the extent Arlenes money was used to pay for property tax, insurance and repairs with no contribution from Katherine and Ellen, unless Arlenes money was a loan she would be subsidizing their interests (protecting them from foreclosure and preserving the value of the property) all out-of-proportion to the extra 25% she might ultimately receive. I do not find such an intended subsidy credible.
[Note 24] By videotaped deposition introduced into evidence at trial, Mary testified that, based primarily on this brief statement by Arlene in a telephone conversation, she (Mary) believed all monies received from Arlene were either gifts or as consideration for Arlenes 50% interest in the Family Trusts. I find this to be a hindsight perspective and not reflective of events as they actually transpired. Mary has had a falling-out with Arlene and currently lives with her other daughters on whom she is dependent both financially and for everyday care. The contemporaneous documents signed by Mary tell a different story, and they are consistent with events as they unfolded.
[Note 25] I make no finding whether this was true or not. There was no indication that Arlene ever spoke to Mary about this and, to the extent money was taken without exact accounting, Mary may sincerely have believed she was entitled to do so. It would certainly be consistent with the informality with which the Curleys treated money. Put simply, they were not, and never had been, good money managers.
[Note 26] By this time, the amount of John and Marys continued borrowings from Arlene far exceeded the amount of her promissory notes to them.
[Note 27] As noted above, these are (1) the 1994 deed from the Realty Trust retaining the exclusive right to use, occupy and possess the benefit of [the 462 Hartford Avenue property] for the beneficiaries of said 462 Hartford Avenue Realty Trust for the period measured by the joint and last survivor lives of John H. Curley and Mary G. Curley of Bellingham, MA and conveying the remainder to Arlene, (2) the 1995 deed from John to Arlene, conveying her all his interest in the property, and (3) the 1997 dissolution of the Family Trusts, which resulted in the distribution of the Trusts remaining asset (the exclusive right to use, occupy and possess the benefit of [the property] for the period measured by the joint and last survivor lives of [John and Mary]) to Arlene (50%), Ellen (25%) and Katherine (25%).
[Note 28] In associated claims, Mary, Katherine and Ellen also seek cancellation/rescission of all of the Curleys promissory notes to Arlene, a return to Mary of all sums borrowed by Arlene from the Family Trusts that were not repaid in cash (i.e., that were repaid by offsets from the Curleys notes) and, presumably, a declaration that Mary has no indebtedness to Arlene of any kind.
[Note 29] This alternative theory, as I understand it, is that Ellen, Katherine and Arlene hold their interests in the property in constructive trust for Mary and, upon her death, for themselves in the 50-25-25 split set forth in the Family Trusts.
[Note 30] As noted above, the claims against Egil have previously been dismissed.
[Note 31] Both John and Mary were in poor health, and the running of such a business proved to be beyond their physical capacities.
[Note 32] Their credit history and lack of steady income almost certainly precluded a conventional loan, and there was no evidence that they ever sought a reverse mortgage, much less that one could have been obtained. Moreover, had they done so, the result (from Mary, Katherine and Ellens standpoint) would have been little different. Mary could have continued to live there during her lifetime, and there would have been no interest in the property to pass on to Katherine and Ellen after Marys death.
[Note 33] See n. 9 & n.14.
[Note 34] See G.L. c. 59, §57 and c. 60, §62 (interest on unpaid taxes accrues at 14% from the time taxes are due until the collectors sale or tax taking occurs, and at 16% thereafter); G.L. c. 60, §64 (once right of redemption has been foreclosed, tax title is absolute and neither the taxpayer nor any party claiming through the taxpayer such as mortgagees, lienors or attaching creditors has any claim, then or later, to the property or any part of its value. See also Buk Lhu v. Dignoti, 431 Mass. 292 , 296 (2000)).
[Note 35] This obligation is sometimes limited to the rental value of the property, the theory being that excessive taxation might make the property of no value for use and occupation. See Thayer, 287 Mass. at 81-82. No evidence of the propertys rental value was introduced at trial, so any argument based on such a limitation has been waived.
[Note 36] Their life tenancy was created by John and Mary, without their ever having requested it.