Commonwealth of Massachusetts
Appeals Court
Suffolk County 2003 Sitting
No. 03-P-0648
_________________________________________
William J. Gass, Jr.,
Individually And As Trustee
Of The Cedric Luguen B.G. Trust
v.
Kathleen Gass,
Individually And As Executrix Of The
Estate Of William J. Gass And As Trustee
Of The Cedric Luguen B.G. Trust
__________________________________________
On Appeal From A Judgment Of The
Superior Court Of Suffolk County
__________________________________________
Brief For The Defendant/Appellant
____________________________________________
Brian M. McMahon, Esq.
B.B.O. # 338100
278 Mystic Avenue
Medford, MA 02155
(781) 395-9000
Dana A. Curhan, Esq.
B.B.O. # 544250
101 Arch Street
Suite 305
Boston, MA 02110
(617) 261-3800
Table of Authorities
A. Cases
B. Other Authorities
Issue Presented
Statement of the Case
Statement of Facts
A. Background
B. Trial Testimony
1. The Plaintiff's Case
2. The Defendant's Case
3. The Plaintiff's Rebuttal
Argument
I. The Trial Court Erred In Recognizing An
Oral Trust That Superceded The Terms Of
The Decedent's Written Trust And Will
II. Conclusion
Addendum
Whether the trial court erred in recognizing and enforcing an express oral trust that resurrected a written trust that had terminated on the decedent's death.
On August 18, 1998, the plaintiff, William J. Gass, Jr., filed a complaint in the Superior Court against the defendant, Kathleen Gass, On September 9, 1998, the defendant filed an answer to the plaintiff's complaint, counterclaims, and demand for a jury trial. The plaintiff moved for amend his complaint and ultimately filed an amended complaint on October 12, 1999. The defendant filed an amended answer, counterclaims and jury demand on March 8, 2000. The defendant filed an answer to the defendant's counterclaim on March 20, 2000. The complaint as amended alleged that the defendant breached her fiduciary duty under a written trust for which she was trustee (Count I); that she breached a contract promising to place proceeds from the sale of taxi cab medallions into the written trust (Count II); that an express oral trust had been created (Count III); and that the defendant, as trustee of that oral trust, had breached her fiduciary duty (Count IV). [R. App. 3, 6-19] .
On March 2, 1999, the defendant filed a motion for summary judgment on all claims. The plaintiff opposed this motion. On June 20, 2000, the Honorable Carol Ball issued a memorandum of decision and order on the defendant's motion for summary judgment. Judge Ball allowed the motion as to Counts I and II, but denied the motion as to Counts III and IV. [R. App. 3-4, 20-26].
Prior to the start of trial, the parties filed various other motions not relevant to the instant appeal. [R. App. 3-4].
A jury-waived trial commenced before the Honorable Maria Lopez on January 22, 2002. At the conclusion of the plaintiff's evidence, both parties moved for a directed verdict. Judge Lopez denied the motions. [R. App. 499-400; Tr. 3, 48-49].
Judge Lopez issued her findings of fact and rulings of law on March 13, 2002. On March 20, 2002, Judge Lopez issued the judgment on the findings. [R. App. 4, 68-76].
The defendant filed a timely notice of appeal on April 16, 2002. [R. App. 4, 77].
The case was entered on the docket of this court on May 9, 2003.
A. Background
In her memorandum of decision and order on the defendant's motion for summary judgment, Judge Ball succinctly summarizes the facts and circumstances from which this litigation arose and correctly frames the issue:
William Gass, Sr. (Gass Sr.) was arrested for trafficking in cocaine on January 8, 1998 for drug trafficking. He faced a lengthy mandatory minimum prison sentence if convicted of the crime. In order to be released on bail, Gass, Sr. pledged certain taxicab medallions held in his name.
At the time of his arrest, Gass, Sr. had a written will executed on August 29, 1991. Under the terms of his will, his wife, the defendant Kathleen Gass, was to inherit his entire estate. Gass, Sr. and Kathleen Gass had a young son, Cedric. Gass, Sr. also had an adult son by an earlier marriage. That son is the plaintiff, William Gass, Jr.
On January 26, 1998, Gass, Sr. created a written trust, the beneficiaries of which were Kathleen Gass, Cedric Gass, and William Gass, Jr. (“Gass, Jr.”); the three held equal beneficial interests in the trust. From the outset a Paine Webber investment account with a value of approximately $330,000 was part of the trust res. The language of the trust document also contemplates (at paragraph six) that the proceeds from the eventual sale of six taxicab medallions owned by Gass, Sr., together with the sale proceeds of seven taxicabs and assorted taxicab parts and tools, would become part of the trust res. It goes without saying that as long as any of the medallions were pledged to secure Gass, Sr.'s release on bail, their ownership could not be transferred without court approval.
On January 28, 1998, two days after the trust was created and with the criminal case pending, Gass, Sr. killed himself. He left a suicide note which indicates his expectation that the taxicabs and medallions would be sold and that the proceeds would pass through the trust. By its terms, however, the trust terminated with Gass, Sr.'s death. The Paine Webber account funds were distributed to the three trust beneficiaries. At issue in this litigation is whether the proceeds from the sale of the taxicab medallions, taxicabs, parts and tools should be distributed in accordance with the terms of the trust or the terms of the will. Gass, Jr. takes the position that the taxicab property (“the taxicabs”) should be distributed as trust property; Kathleen Gass argues that it is part of Gass, Sr.'s estate.
[R. App. 20-21].
B. Trial Testimony
1. The Plaintiff's Case
When his father went to prison for drug trafficking in the mid 1980s, William Gass, Jr. took a part-time job to help with the household bills. [R. App. 117-118, 120, 260-261; Tr. 1, 40-41, 43; Tr. 2, 69-70]. Gass, Sr. stayed in contact with his family while in prison. He promised that upon his release, he would go into business with Gass, Jr. and that he would not engage in drug trafficking or associate with criminals. [R. App. 119, 124; Tr. 1, 42, 47]. Shortly after his release from prison in 1986, he reconnected with his former criminal associates, resumed his drug activities and left his family. [R. App. 122-123, 263-264; Tr. 1, 44-45; Tr. 2, 72-73]. Thereafter, Gass, Jr. did not have a close relationship with his father. [R. App. 125, 264; Tr. 1, 48; Tr. 2, 73].
In 1994, the relationship between William Gass Sr. and William Gass, Jr. began to improve. They both helped Gass, Jr.'s brother John through some personal problems. [R. App. 126-130, 264-267; Tr. 1, 49-53; Tr. 2, 73-76]. Between 1994 and 1998, Gass, Jr. did some work on his father's home. His father repeatedly asked him to work at his cab company. He refused, however, believing that his father was still involved in criminal activity. [R. App. 127; Tr. 1, 50].
On January 8 or 9, 1998 Gass, Sr. informed Gass, Jr. that he had again been arrested for drug trafficking. [R. App. 130; Tr. 1, 53]. Gass, Jr. and his brothers went to their father's house. He informed them that he planned to set up a trust to deal with his financial affairs. One-third of the corpus was to go to Gass, Jr., and he was to be a co-trustee with Kathleen Gass. [R. App. 131-132, 137; Tr. 1, 54-55, 60]. According to Gass, Jr., his father instructed him to sell the cab business, including the medallions, and place the proceeds in trust. [R. App. 132, 137, 146-148, 161-162, 165, 284-285; Tr. 1, 55, 60, 69-71, 84-85, 88; Tr. 2, 93-94]. He also directed him to place in the trust the funds from an investment account and all of his bank accounts, the proceeds from the collection of outstanding loans to two people, and the proceeds from the sale of all of his land except the house. [R. App. 132-133; Tr. 1, 55-56]. To accomplish this end Gass, Jr. and Kathy were provided with documents containing descriptions of the vehicles and their medallion numbers. [R. App. 151-154, 286; Tr. 1, 74-77; Tr. 2, 95]. Gass, Sr. gave his three sons a set of keys to the cabs. [R. App. 148; Tr. 1, 71].
Attorney Heather Lynham drafted three trusts on behalf of William Gass, Sr. after his arrest in January of 1998. Those trusts were intended to help Gass put his business plans in order. The first draft was not signed. The second was signed on January 19. It listed her boss, Attorney William Spallina, as a co-trustee. The third trust, signed on January 26, replaced Spallina with William Gass, Jr. It also made him a one-third beneficiary and gave him the ability to borrow $100,000 from the trust corpus. [R. App. 234-255; Tr. 2, 43-64].
Gass, Jr. initially did not wish to be a trustee of the trust. After his father agreed to his demand that he be permitted to borrow $100,000 from the trust corpus, he agreed to be a co-trustee. The parties further agreed that Kathy would do the bookkeeping for the trust and that Gass, Jr. would help look after Cedric. The parties signed the trust documents on January 26, 1998. [R. App. 254-256, 259, 269-270, 274, 283; Tr. 1, 63-65, 68, 78-79, 83, 92]. Gass, Jr. was also given a durable power of attorney to enable him to sell trust assets. His father reiterated that he was getting one-third of the assets and not to “screw it up.” [R. App. 270-273; Tr. 1, 79-82].
On January 27 and 28, Gass, Jr. met with his father, who again stated that he should shut the corporation as soon as possible, sell the cabs and medallions, collect certain loans, sell his land, close his accounts, and put all the proceeds in a Dean Witter account pursuant to the terms of the trust. [R. App. 274-284; Tr. 1, 83-93]. On January 28, Gass, Jr. met with his father and Kathy to discuss the possibility of Gass, Sr. cooperating with the government. The following day, he received word that his father had killed himself. The police found a number of letters which appeared to be suicide notes. The instructions in the letter addressed to him were not inconsistent with the oral instructions his father had given him. [R. App. 286-296; Tr. 1, 95-105].
Initially, Kathy fulfilled her obligations by distributing proceeds from the Dean Witter account that had been placed in the trust at the time of its creation. Gass, Jr. received $130,000 as his share of the proceeds. Gass, Jr. made some phone calls to Charles Johnson, one of the loan recipients, in an effort to collect on the loan. He told her to call Kathy or him. [R. App. 297-302; Tr. 1, 106-111].
In April of 1998, Gass, Jr. signed an affidavit stating that his father had been emotionally confused and unstable, that he was in the midst of a breakdown during this time period, that he was constantly changing his mind about how to preserve his assets, and that he lacked the capacity to make the January 1998 will. He believed that the will, which did not leave him anything, was contrary to the promises his father had made to him. [R. App. 198-203; Tr. 2, 7-12].
Kathleen Gass testified that the time between her husband's arrest and his death was particularly stressful. They discussed his options, which were going to prison or cooperating with law enforcement authorities. If the latter course of action were chosen, they would likely have to enter the witness protection program and leave Massachusetts. [R. App. 311-314, 316-317; Tr. 2, 120-123, 125-126].
She was aware that her husband was meeting with William Jr. during the weeks leading up to his death. She was present for some of the meetings. [R. App. 306-308, 310; Tr. 2, 115-117, 119]. She also knew that her husband had set up a trust and that she would be named as a beneficiary, although she did not discuss the exact terms of the trust with him when she signed the documents. [R. App. 318-319; Tr. 2, 127-128]. She acknowledged that her husband wanted his son William Gass, Jr. to be co-trustee, that he was to be a one-third beneficiary in the trust, and that he was to receive a $100,000 loan against the trust. Her husband was not happy with this latter arrangement. [R. App. 322-323; Tr. 2, 131-133].
She did not believe that her husband wished to have the cab business, medallions and vehicles, sold and the proceeds placed in trust. [R. App. 324, 331; Tr. 2, 134, 141]. In the weeks prior to his death, he had been showing her how to run the business, and she believed that he expected her to keep running the business. [R. App. 334-335, 366, 417-419; Tr. 2, 144-145; Tr. 3, 15, 66-68]. The cabs continued to operate, even after the medallions were pledged to the government as bail, and she did not believe she could sell the medallions while they were pledged. [R. App. 357; Tr. 3, 6-8].
The language of the trust document specifically provided that the trust would “terminate upon written notice of the settler, or upon the death of the settler William J. Gass [Sr.].” [R. App. 222; Tr. 2, 31]. Her husband had signed a will on January 19, 1998, which gave his assets to her and named her as executrix. [R. App. 372; Tr. 3, 21].
After her husband's death, Kathy's attorney engaged the government to have the liens on the cabs released. [R. App. 368; Tr. 3, 17]. Soon thereafter, in August of 1998 Kathy sold the medallions and most of the vehicles. [R. App. 368-369; Tr. 3, 17-18]. William Jr. then filed a restraining order to stop her from selling the vehicles. [R. App. 369; Tr. 3, 18].
2. The Defendant's Case
William Gass, Jr., acknowledged that, like the 1998 will, a will executed by his father in 1991 did not name him as a beneficiary. [R. App. 401-407; Tr. 3, 50-56].
Kathleen Gass described conversations with her husband prior to his death regarding the day-to-day operations of the cabs. She understood that the purpose of these discussions was for her to learn the business quickly. He suggested that someone named Paul Ladd could help her run the business if and when he went to prison. [R. App. 417-419; Tr. 3, 66-68]. After her husband's funeral on February 2, she noticed that the three newest cabs were missing. She learned that John Gass and William Gass, Jr. had taken them. She filed a complaint with the Boston Police Department. When the cabs were returned, the meters were gone. She never recovered the $1,000 deposits on each of these meters. [R. App. 425-429; Tr. 3, 74-78].
3. The Plaintiff's Rebuttal
John Gass testified that when he and his brother returned the meters from the cabs they took, they did not receive a refund of the deposits. [R. App. 439-441; Tr. 3, 88-90].
I. The Trial Court Erred In Recognizing An Oral Trust That Superceded The Terms Of The Decedent's Written Trust And Will
As noted above, William Gass, Sr. executed a will on January 19 and a written trust on January 26. The trust specifically provided that it terminated upon his death. Following the terms of these documents, which were drafted by an attorney and executed days before the death of Gass, Sr., only the assets in the trust at the time of his death would be distributed in accordance with the terms of the trust. The balance of the assets would be distributed under the terms of the will. However, the trial judge found that various oral statements made by Gass, Sr. in the days and hours prior to his death created an express oral trust that effectively extended the written trust beyond its stated terms. Assuming an oral trust can effectively modify the terms of a written trust, the intent of the settlor to do so must be clear and unambiguous. Here, the intent of Gass, Sr. was at best ambiguous. The judge erred in recognizing an oral trust, and the assets should have been distributed in accordance with the will and the written trust signed by the parties.
Where there is some ambiguity as to the terms of a trust, the “trust instrument may be reformed to conform with the settlor's intent.” In The Matter of Substitute Indenture of Trust, 439 Mass. 1009 (2003) (trust amended to give beneficiary favorable tax results intended by the settlor); Fleet Nat. Bank v. Marquis, 437 Mass. 1010, 1011 (2002) (same); Walker v. Walker, 433 Mass. 581, 587 (2001) (same). In such circumstances, the court must try “[t]o ascertain the settlor's intent, [by looking] to the trust instrument as a whole and the circumstances known to the settlor on execution.” DiCarlo v. Mazzarella, 430 Mass. 248, 250 (1999), quoting Pond v. Pond, 424 Mass. 894, 897 (1997). See also Loring v. Stewart, 349 Mass. 365, 369 (1965) (“intent of the settlor is to be determined from the words used in the part of the instrument to be interpreted along with the entire instrument considered in the light of all the attendant factors and material circumstances of the settlor existing at the time of execution”). The intent of the written trust, “so gleaned must be given effect unless some positive rule of law forbids.” Loring v. Stewart, 349 Mass. at 369. See Chase v. Switzer, 331 Mass. 301, 305 (1954) (no error in refusing to admit in evidence letters from decedent to son, letters from trustees to son promising to place certain property in trust not included in trust, and evidence of relations between donor and son, all of approximately the time of the insertion of the reserved power to amend into the original trust, to contradict terms of original trust). Compare Bourgeois v. Hurley, 8 Mass. App. Ct. 213, 215 (1979) (document dated, signed, initialed on each page, and appended to trust found to show intention of settlor as to property to be placed in the trust). Contrast Cooney v. Montana, 347 Mass. 29, 34-38 (1964) (terms of oral trust decided and upheld by court where no written trust in existence).
In this case, there is no ambiguity in the written instrument creating the trust. It specifically provided that the trust would terminate on the death of the settlor. That provision was clearly stated and would have been readily apparent when executed by the parties. The plaintiff offered no evidence that the attorney who drafted this provision included it by mistake, that Gass, Sr. did not intend it to be part of the trust instrument. In the absence of any mistake or ambiguity, the judge had no basis to reform the existing trust instrument to modify this particular provision. See Chase v. Switzer, 331 Mass. at 305 (evidence addressing challenged provision of trust properly excluded where that provision was unambiguous).
Of course, a settlor may create a new and separate trust through oral statements. “An express trust in personal property may be created and proved by parol.” Rugo v. Rugo, 325 Mass. 612, 617 (1950). See also Cooney v. Montana, 347 Mass. at 34; Russell v. Meyers, 316 Mass. 669, 672 (1944).
The existence of a trust does not depend upon the terminology used, and failure to employ the word “trust” is in no sense determinative of whether one has been created. Id. at 616. See also Gordon v. Gordon, 332 Mass. 193, 195 (1955). Nevertheless, “the words employed must unequivocally show an intention” that an enforceable trust be created, and the terms of the oral trust must be unmistakable from the language used. Cooney v. Montana, 347 Mass. at 35. See Wheeler v. Kennard, 344 Mass. 466, 469 (1962); Temple v. Russell, 251 Mass. 231, 235-236 (1925). See generally Estate of Leggett v. United States, 418 F.2d 1257 (3rd Cir. 1969) (a trust by parol evidence must be sufficiently clear, precise and indubitable); United States v. Kaplan, 277 F.2d 405, 409 (5th Cir. 1960) (a trust by parol evidence must be clear, strong, and unequivocal); Fricke v. Weber, 145 F.2d 737 (6th Cir. 1944) (oral evidence must be clear, certain and conclusive); Eychaner v. Gross, 202 Ill.2d 228, 260, 779 N.E.2d 1115, 1135, 269 Ill.Dec. 80, 100 (2002) (one seeking to establish an express trust by parol evidence bears the burden of proving the trust by clear and convincing evidence; the acts or words relied upon must be so unequivocal and unmistakable as to lead to only one conclusion); Nichols v. Wray, 325 Ark. 326, 333, 925 S.W.2d 785, 789 (1996) (to impose a constructive trust, there must be full, clear, and convincing evidence leaving no doubt with respect to the necessary facts); Estate of Wardell v. Dailey, 674 S.W.2d 293, 295 (Tenn.App.1983) (the burden of proof required to establish a resulting trust is always on the plaintiff, and the proof must be clear and convincing to establish such a trust by parol evidence); Carson v. White, 456 S.W.2d 212, 215 (Tex.Civ.App. 1970) (clear, satisfactory, and convincing evidence is required to prove a trust by parol evidence); Greathouse v. Jones, 167 Colo. 406, 408, 447 P.2d 985, 986 (1968) (a trust by parol the evidence must be clear, precise and indubitable); Sechler v. Sechler, 403 Pa. 1, 7, 169 A.2d 78, 81 (1961) (a trust by parol the evidence must be clear, precise and indubitable); Russell v. Bruer, 64 Ohio St. 1, 5, 59 N.E. 740, 741 (1901) (a trust by parol evidence must be beyond reasonable doubt as to the existence of the trust, and must be clear, certain and conclusive as to its terms and conditions). See also Restatement (Second) of Trusts, § 23 (1953).
The strictness of this rule, requiring unequivocal proof of the settlor's intent, is necessary to protect a decedent's estate from having a “mere moral obligation” transformed into an oral trust. See Id.
In this case, Gass, Sr. expressed, through numerous conversations and in notes found after his death, his desire to have the cabs and medallions sold and the proceeds placed in trust. It is not clear, however, that he was contemplating his death during any of these conversations, as opposed to his imprisonment or entry into the witness protection program. Indeed, just hours before his death, he discussed his options with his family. While he had mentioned the possibility of his suicide, he did so “jokingly”. [R. App. 197; Tr. 2, 6]. Further, while the notes found after his death were characterized as suicide notes, some of the writings were made a number of days prior to the death of Gass, Sr., and it is not clear that these writings were made in contemplation of his death. The oral statements and some of the statements in the notes were consistent with comments made in contemplation of his own death, but they were equally consistent with the comments of someone who simply had not made up his mind about his plans or about what he wanted to do with these assets. Indeed, in his April 1998 affidavit, Gass, Jr. characterized his father as emotionally confused and unstable, in the midst of a breakdown, and constantly changing his mind about what to do with his assets. In the absence of a clear, unequivocal and unmistakable expression of intent that the existing trust survive his death or that a new trust be created following his death, the record simply does not support the judge's findings.
Finally, the terms of the new trust were by no means clear. For example, he did not specifically repudiate or revoke the provision in the written instrument terminating the trust on his death. While one could infer that he may have intended the trust to continue after his death, nothing in his statements indicated when and how the new trust was to terminate.
While Judge Ball may have been correct in concluding that oral statements could in some circumstances create an oral trust, the evidence brought out at trial simply failed to support the creation of an oral trust in the present circumstances. The assets that had not been placed in trust at the time of his death should have been distributed according to the will, and the defendant cannot be held to have breached any duty as a trustee of the purported oral trust. Judgment should be entered for the defendant.
II. Conclusion
Based on the authorities cited and the reasons aforesaid, the defendant requests that the judgment be reversed and that judgment enter in her favor as to both of counts.
Respectfully submitted,
Kathleen Gass, Individually and as Executrix of the Estate of William J. Gass and As Trustee of the Cedric Luguen B. G. Trust
By her attorneys,
Brian M. McMahon, Esq.
B.B.O. # 338100
278 Mystic Avenue
Medford, MA 02155
(781) 395-9000
Dana A. Curhan, Esq.
B.B.O. # 544250
101 Arch Street
Suite 305
Boston, MA 02110
(617) 261-3800
|