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Clayman v. McLaughlin

Superior Court of Massachusetts, Suffolk

August 14, 2017

Deborah A. Clayman, Individually and as Trustee, and Richard E. Mastrocola, Trustee [1]
John T. McLaughlin et al

          Filed August 15, 2017


          Edward P. Leibensperger, Justice

         The widow of a real estate entrepreneur sues several individuals and entities following the death of her husband. The Second Amended Complaint (" SAC") alleges breach of fiduciary duty, aiding and abetting tortious acts, tortious interference with a contractual relationship and conversion. To briefly summarize the SAC, the widow alleges at least three wrongful acts or series of acts. First, she claims that the individual selected by her husband to be his executor (personal representative) and trustee of his revocable trust, upon the husband's death, breached fiduciary duties to her as a beneficiary and co-trustee. Second, she alleges that the brother/business partner of her husband schemed with the executor to diminish what she was to receive under her husband's estate planning documents. Third, she alleges that defendants are, to this day, refusing to pay to her trust amounts owed after the sale of a property and are, thus, converting those proceeds. Defendants move to dismiss arguing that the SAC fails to state a claim upon which relief can be granted. To address the arguments, the stage must be set from the facts as alleged in the SAC, including the documents attached or referenced in the SAC.


         Deborah A. Clayman married Richard I. Clayman in 2005.[2] In connection with their marriage, Deborah and Richard entered into a Prenuptial Agreement dated October 13, 2005. Subsequently, Richard executed a Will and a Revocable Trust on January 25, 2006. Richard's Will names defendant, John T. McLaughlin, as his executor (personal representative). Under the Revocable Trust, McLaughlin is named as trustee. These instruments, read together, detail Richard's intent with respect to what Deborah should receive after Richard's death.[3]

         McLaughlin was a trusted friend of Richard's. He is a lawyer and a partner in the defendant law firm, Berluti McLaughlin & Kutchin, LLP.

         A. Estate Plan Instruments

         The relevant terms of the Prenuptial Agreement are the following. Richard's interests in nine real estate investments are defined as " Separate Property." Richard's interest in the real estate project known as Revere Beach at Oak Island is defined as " Marital Property." One of the properties listed as Separate Property is Richard's residence at 615 Revere Beach Boulevard, Revere. With respect to that property, Richard expressly agrees that upon his death Deborah shall be entitled to receive the Revere residence outright and free of encumbrances.

         The Prenuptial Agreement also contains the following provision for the division of Richard's property after Richard's death:

Deborah shall be entitled to receive the annual income from property of an amount equal to Two Million Dollars ($2, 000, 000), provided that such property shall be held in a Qualified Terminable Interest Property Trust, as defined in § 2056(b)(7) of the Internal Revenue Code of 1986, as amended, for the sole benefit of Deborah. The choice of the specific property to be held in trust for Deborah shall be made in the sole discretion of the Executor of Richard's estate and Trustees of such Trusts. Deborah shall be entitled to be a co-Trustee of such Trust, but shall have no authority to make distributions of principal. Deborah shall be entitled to receive income from such Trust at least as often as quarterly.

         Prenuptial Agreement, Article III, A, 3(c)(ii). Finally, the Prenuptial Agreement provides that if either party breached any provision of the agreement, " the breaching party or his or her estate shall indemnify the other party and make the other party whole as if no such breach had taken place with respect to this Agreement." Id. at III, C.

         Richard's Will makes explicit reference to the Prenuptial Agreement. The Will provides that all of Richard's interest in the Revere residence go to Deborah, free of any mortgages. All of Richard's Separate Property, other than the Revere home, is bequeathed to Richard's Revocable Trust. McLaughlin is appointed as Richard's Executor. The Executor is given broad power and discretion. Specifically, with respect to Richard's interest in the real estate listed as Separate Property, the Will provides that the Executor shall not be held liable for any action or omission, except for willful default or bad faith, in retaining, selling or otherwise dealing with such interest.

         Richard executed the Revocable Trust on the same day as his Will. The Revocable Trust provides that upon Richard's death, McLaughlin shall serve as trustee. The Revocable Trust is the vehicle used to pour the assets of that trust into two subtrusts--Deborah's Trust and the Family Trust. With respect to the subtrust called Deborah's Trust, the Revocable Trust provides that " if property is held on the terms of Deborah's Trust under paragraph 5, Deborah may serve as a co-trustee of Deborah's Trust." Revocable Trust, § 9.1.

         With respect to Deborah's Trust the Revocable Trust provides as follows:

My trustee shall set aside the sum of Two Million Dollars ($2, 000, 000) and deal with that sum under paragraph 5 as a separate trust known as " Deborah's Trust." This provision is intended to establish the Qualified Terminable Interest Property Trust described in Article III, Paragraph A(3)(c)(ii) of the Prenuptial Agreement and Deborah's Trust is intended to satisfy the requirements thereof.

         Revocable Trust, § 4.1(b). The remaining property that flowed into the Revocable Trust from the Will is, pursuant to the terms of the Revocable Trust, put into a subtrust called the Family Trust. The beneficiary of the Family Trust is Kate Clayman, Richard's daughter by a previous marriage.

         Under § § 5.1 and 5.2 of the Revocable Trust describing Deborah's Trust, Deborah is to receive the income produced by the principal in Deborah's Trust for her lifetime. Upon Deborah's death, after payment of estate taxes, the trustee is instructed to pay the principal into the Family Trust. The trustee is given discretion to pay Deborah, during her lifetime, all or part of the principal of Deborah's Trust.

         The Revocable Trust contains the following provision with respect to the trustee's discretion:

Whenever my trustee " may" pay income or principal to a beneficiary or group of beneficiaries, my trustee shall have the absolute discretion to make the payments at any time to one or more of those beneficiaries, in any amounts and proportions and for any purposes, except as specifically provided otherwise, as my trustee considers advisable.

         Revocable Trust, § 8.1.

         Deborah was given the power to remove any trustee of Deborah's Trust upon 30 days notice. Under the terms of the Revocable Trust, each appointment, removal, resignation, acceptance or notice regarding the trustees shall be in writing and shall be given to all of the trustees.

         Section 9.6 of the Revocable Trust recognizes that the subtrust may include assets that are shares of stock or other ownership interests in closely held businesses. These interests are defined as " Closely-Held Interests." Section 9.7 describes the liability of a trustee for dealing with Closely-Held Interests. Section 9.7(a) states that " [n]o trustee shall be liable for any action or omission, except for willful default or bad faith, in retaining, selling or otherwise dealing with an interest in the " Closely-Held Interests." Section 9.10(b) of the Revocable Trust states that " [a]ny account of the trustee of any trust under this agreement shall be conclusive, except for fraud or ...

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