Gray v. Gray
Filing
34
///ORDER granting 22 Motion to Strike 7 Third Party Complaint; granting 23 Motion to Dismiss the Crossclaim of Defendant-Third Party; granting 24 Motion to Dismiss the Counterclaim of Defendant Chester L. Gray III i n his Capacity as Co-Trustee of the Barbara J. Gray Trust of 1996. The motions are granted as follows: (1) Third-Party Complaint (doc. 7) is struck, Answer to the Third-Party Complaint and crossclaim (doc. 21) are struck, and (3) counterclaim in the Amended Answer (doc. 20) is dismissed without prejudice. Leave is granted to file an appropriate third-party complaint and/or counterclaims or crossclaims on or before January 31, 2019. So Ordered by Judge Joseph A. DiClerico, Jr.(gla)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Evan W. Gray
v.
Civil No. 18-cv-522-JD
Opinion No. 2019 DNH 013
Chester L. Gray, III
O R D E R
Evan Gray (“Evan”) brought suit against Chester L. Gray,
III (“Skip”), as executor of the estate of Chester L. Gray, Jr.,
as sole trustee of a trust (the “CLG Trust”) created by Chester,
and as co-trustee of a trust (the “BJG Trust”) created Barbara
Gray.1
Evan alleges that Chester, prior to his death, breached
his fiduciary duties while he was trustee of the BJG Trust.
Evan also alleges that Skip has breached his fiduciary duties as
trustee of the CLG Trust.
Skip filed a third-party complaint against the co-trustees
of the BJG Trust, who are himself, Scott Gray (a third brother),
and Evan, seeking indemnification for any liability, attorneys’
fees, and costs arising from Evan’s suit.
Skip also seeks a
declaratory judgment to enforce certain terms of the BJG Trust.
Evan then filed an amended complaint.
In his Amended Answer to
As is explained below, the suit is the result of a dispute
between brothers about their parents’ trusts.
1
the Amended Complaint and his Answer to the Third-Party
Complaint, Skip alleges a counterclaim and a crossclaim, each
with three parts, against Evan, seeking indemnification.
Evan moves to strike and dismiss Skip’s Third-Party
Complaint and moves to dismiss Skip’s counterclaim and
crossclaim.
Skip objects.
Background
This suit involves three brothers, Skip, Scott, and Evan
Gray.
In 1996, the brothers’ parents, Barbara and Chester Gray,
created, respectively, the “BJG Trust” and the “CLG Trust.”
In
2011, they restated the terms of their respective trusts by
executing the trust documents at issue.
Barbara and Chester Gray served as the initial co-trustees
of both the CLG Trust and the BJG Trust, which were revocable
until their respective settlor’s death.
The CLG Trust includes
among its assets valuable real estate located in Grafton and
Springfield, New Hampshire.
1. The Trust Terms
It is the general purpose of the CLG Trust to maintain and
hold the Grafton and Springfield real estate for Barbara and
Chester Gray’s descendants “as long as is reasonably and
prudently possible.”
Doc. 15-1 at 5.
2
To that end, the CLG
Trust provides for the creation of a “Maintenance Fund”
consisting of the real estate and $820,000, adjusted for
inflation, after Chester’s death.2
After all the provisions of
the CLG Trust have been satisfied, the remainder of the CLG
Trust’s assets are to be distributed equally among Skip, Scott,
and Evan.
The BJG Trust has no expressly stated purpose other than to
provide for the disposition of Barbara Gray’s assets after her
death.
In addition, Article 2.4.A of the BJG Trust provides the
following:
If at the time of the death of my husband and myself,
the amount of liquid assets held in the continuing
trust for real estate located in Grafton and
Springfield, New Hampshire as set forth in my
husband’s trust is less than [$820,000 plus calculated
inflation], I direct that my trustee distribute from
my trust an amount of property that will increase the
sums held in said continuing trust of my husband’s to
[$820,000 plus calculated inflation].
Doc. 15-2 at 5.
The BJG Trust documents require that the
remaining trust property be distributed equally among Skip,
Scott, and Evan.
In short, the BJG Trust must make up any
deficit in the CLG Trust’s Maintenance Fund that exists “at the
The CLG Trust names Skip as the primary beneficiary of the
Maintenance Fund. Doc. 15-1 at 4.
2
3
time of the death of”3 Chester and Barbara, and then distribute
the remaining money or assets equally among Skip, Scott, and
Evan.
Both trusts contained various contingencies for succession
of trustees depending on the order in which Barbara and Chester
died and whether any of their children predeceased them.
happened, Barbara Gray died in 2013.
As it
Upon his wife’s death,
Chester Gray became sole trustee of both trusts.
Although the
BJG Trust became irrevocable, Chester retained a lifetime
interest in it.
Specifically, as to the BJG Trust, Chester was permitted to
receive any income from the trust paid “in convenient
installments.”
Doc. 15-2 at 4.
He was also permitted to
receive “from the principal of the trust from time to time such
amounts as are in [the] trustee’s discretion necessary for his
support and maintenance in his accustomed manner of living and
for his health care,” after taking into account any other
“resources available to him,” including the income from the
trust.
Id.
The “power to use principal for [Chester’s] benefit
The parties appear to dispute the meaning of this phrase.
The court’s description of this language in this order does not
create any findings as to the phrase’s construction or
interpretation.
3
4
shall not be exercised without the consent of an independent
trustee or one of [Barbara’s] children.”
Id.
Chester remained as trustee of both the BJG Trust and CLG
Trust until his death in 2017.
Upon their father’s death, Skip,
Scott, and Evan became co-trustees of the BJG Trust; Skip became
sole trustee of the CLG Trust, which became irrevocable upon the
death of Chester.
Skip was also named executor of Chester’s
estate (the “CLG Estate”).
2.
Evan’s Complaint
In June 2018, Evan filed this lawsuit, and he filed an
amended complaint on September 26, 2018.
In Count 1, Evan
states that the claim is brought “by Plaintiff as trustee and
beneficiary of the BJG Trust.”
Doc. 9 at 14.
Evan alleges
that, during Chester’s four-year tenure as sole trustee of the
BJG Trust, he improperly invested in high-yield, low-growth
assets.
In Count 2, Evan, also “as trustee and beneficiary of
the BJG Trust,” alleges that Chester violated the BJG Trust’s
terms by removing principal from the BJG Trust and giving it to
the CLG Trust without receiving the consent of an independent
trustee or one of the beneficiaries, as the trust requires.
at 15.
Id.
Evan alleges that Chester then used these assets to
purchase real estate in Grafton, New Hampshire, which he later
5
donated to the town.
In Counts 1 and 2, Evan appears to name
Skip as a defendant in two capacities: as executor of the CLG
Estate and as trustee of the CLG Trust.
In Count 3, Evan, as “qualified beneficiary and distributee
of the CLG Trust,” alleges that Skip breached his fiduciary
duties as trustee of the CLG Trust, by failing to deliver
reports on the condition of the trust and by failing to properly
invest and manage the trust property.
Id. at 16.
In Count 4,
Evan, as “trustee and beneficiary of the BJG Trust,” asks that
Skip be removed as co-trustee of the BJG Trust due to breaches
of his duty of loyalty to the BJG Trust, fundamental conflicts
of interest with his duties as sole trustee of the CLG Trust,
and his failure to cooperate with Evan and Scott, his cotrustees of the BJG Trust.
Id. at 18.
3. Skip’s Third-Party Complaint, Counterclaim, and
Crossclaim
On September 18, 2018, before Evan filed the Amended
Complaint that added Counts 3 and 4 along with language
clarifying that the lawsuit was brought by Evan in his capacity
as a trustee of the BJG Trust, Skip filed a third-party
complaint naming himself, Scott, and Evan in their capacities as
trustees of the BJG Trust as third-party defendants.
In Count
1, Skip requests indemnification for the CLG Estate and the CLG
6
Trust from the BJG Trust, alleging that Article 4.3 of the BJG
Trust, which exonerates a trustee from liability where he acts
in good faith, allows for “indemnification from the BJG Trust
for any damages that may be awarded to [Evan], as well as any
defense costs that have been and will be incurred, in connection
with this litigation.”
Doc. 7 at 6.
In Count 2, Skip requests
a declaratory judgment to enforce Article 2.4.A of the BJG
Trust, which, Skip contends, requires a pour over of funds to
the extent the CLG Trust’s assets are insufficient to fund the
Maintenance Fund to be created by the CLG Trust.
On October 31, 2018, Skip filed an amended answer to the
Amended Complaint, alleging a counterclaim with three parts
against Evan.
In the counterclaim, Skip appears to request
indemnification from Evan personally and from the BJG Trust
corpus for “any and all expenses, fees, damages, or other items”
resulting from the litigation.
Doc. 20 at 21.
The same day, Skip, in his capacity as a trustee of the BJG
Trust, answered the Third-Party Complaint that he had filed
against himself.4
In the Answer, Skip generally denied the BJG
Skip filed the Third-Party Complaint in his capacity as
executor of the CLG Estate and his capacity as trustee of the
CLG Trust and seeks indemnification from the BJG Trust. Skip is
also a defendant in the Third-Party Complaint in his capacity as
a trustee of the BJG Trust.
4
7
Trust’s responsibility for indemnification of the CLG Estate and
CLG Trust.
Skip states that Evan’s Amended Complaint indicates
that he brought claims as a trustee of the BJG Trust.
Skip
asserts that Evan was not authorized to bring claims on behalf
of the BJG Trust.
For that reason, Skip alleges, any
indemnification to the CLG Estate or the CLG Trust should come
from Evan personally or from his share of the BJG Trust.
In
addition, Skip brings a crossclaim against Evan “in his
individual capacity and as co-trustee” for losses resulting from
his suit.
Discussion
Evan moves to strike/dismiss the Third-Party Complaint and
to dismiss the counterclaim and crossclaim.
Skip objects.
A. Standard of Review
In considering a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6), the court accepts all well-pleaded
facts as true and makes all reasonable inferences in the
pleading party’s favor.
See Ocasio-Hernández v. Fortuño-Burset,
640 F.3d 1, 11-13 (1st Cir. 2011).
The court, however,
disregards conclusory allegations.
Manning v. Boston Med. Ctr.
Corp., 725 F.3d 34, 43 (1st Cir. 2013).
8
Under Federal Rule of Civil Procedure 14(a)(4), “[a]ny
party may move to strike the third-party claim, to sever it, or
to try it separately.”
Fed. R. Civ. P. 14(a)(4).
The court
should strike a third-party complaint only “if it is obviously
unmeritorious and can only delay or prejudice the disposition of
plaintiff’s claim.”
Fed. R. Civ. P. 14(a), Advisory Committee
Notes (1963 Amendments).
The court “should allow [third-party
practice] on any colorable claim of derivative liability that
will not unduly delay or otherwise prejudice the ongoing
proceedings.”
Lehman v. Revolution Portfolio L.L.C., 166 F.3d
389, 393 (1st Cir. 1999).
B. Motion to Strike/Dismiss the Third-Party Complaint
Evan argues that the court must strike/dismiss the ThirdParty Complaint because it is procedurally improper.
He
contends that Skip cannot bring a third-party complaint against
him because, as the plaintiff, he is a party in the case.
also asserts that Skip cannot sue himself.
Evan
Evan further
contends that the Third-Party Complaint fails to state a claim
upon which relief can be granted and fails to state appropriate
derivative liability claims.
9
1. Procedural Issues
“A defending party may, as third-party plaintiff, serve a
summons and complaint on a nonparty who is or may be liable to
it for all or part of the claim against it.”
14.
Fed. R. Civ. P.
A person who possesses two or more distinct legal
capacities is a distinct “party” in each capacity.
Cohen v.
Baker, 845 F. Supp. 289, 291 (E.D. Pa. 1994) (“A party to a
lawsuit in one distinct capacity is not considered to be a party
with regard to other distinct legal capacities. . . .
Although
[the third-party defendants] were already parties in their
capacities as plan beneficiaries, they were not parties in their
capacities as ERISA plan fiduciaries.”); see also Goldstein v.
Galvin, 719 F.3d 16, 23 (1st Cir. 2013) (observing that persons
sued in their official capacity are merely proxies for the
entities they represent and holding that “a person sued in his
official capacity is a different party, in contemplation of law,
than the same person sued in his individual capacity”).
A
trustee has two distinct legal capacities: his personal capacity
and his fiduciary capacity, which may also be called his
capacity as a trustee.
RSA § 564-B:10-1010(c) (stating that
certain claims “may be asserted in a judicial proceeding against
the trustee in the trustee’s fiduciary capacity, whether or not
the trustee is personally liable for the claim”); State of N.H.
10
Wetlands Bd. v. Marshall, 127 N.H. 240, 250 (1985) (sustaining
judgment against assets of trust where pleading named the
trustee “individually and in her capacity as the sole trustee
. . .”).
Skip correctly contends that when he filed the Third-Party
Complaint, Evan was not a party in his capacity as a trustee of
the BJG Trust.
For that reason, a claim against Evan as a
trustee would be a third-party claim under Rule 14.
Skip
acknowledges that the Amended Complaint changed the parties by
adding Evan in his capacity as a trustee of the BJG Trust.
He
asks the court to construe the Third-Party Complaint as a
counterclaim if necessary to conform to the Federal Rules of
Civil Procedure or to allow him to file amended pleadings.
To avoid any further confusion about the parties and claims
in this case and because the Amended Complaint was filed after
the Third-Party Complaint, it is appropriate to allow Skip to
file amended pleadings to address the changed circumstances.5
Skip denies that Evan was authorized to bring this suit as
a trustee of the BJG Trust in his pleadings, but he has not
moved to dismiss Evan from the suit in that capacity. See Fed.
R. Civ. P. 9(a) (noting that a party need not plead the capacity
in which he sues and that denial of capacity must be made
through negative pleading); see, e.g., Doermer v. Oxford Fin.
Group, Ltd., 884 F.3d 643, 648-49 (7th Cir. 2018) (holding that
an individual lacks capacity to sue in his capacity as a trustee
where he does not have the requisite authorization of his cotrustees). Therefore, Evan is a party to the suit in both his
personal and trustee capacities.
5
11
2. Substantive Issues
Evan also moves to dismiss the Third-Party Complaint on the
ground that it fails to state an actionable claim.
Because the
Third-Party Complaint is struck, it is not necessary to address
the substantive issues that Evan raises.
C. Motion to Dismiss Counterclaim and Crossclaim
Evan moves to dismiss Skip’s counterclaim and crossclaim,
included in the Amended Answer to the Amended Complaint and
Answer to the Third-Party Complaint.
In support, Evan contends
that the claims lack sufficient facts to show a plausible claim
for relief and the cited laws do not support the claims.
also contends that the claims are unripe.
Evan
Skip objects to the
motions, arguing that he alleged sufficient grounds to avoid
dismissal.
Because the Third-Party Complaint will be struck, the
Answer to it is moot and the crossclaim will be dismissed,
without prejudice, as moot.
With respect to the counterclaim, the court agrees with
Evan that it appears to be incomplete.
The counterclaim is
alleged as follows:
1. Under RSA 564-B:7-709, a trustee is entitled to
reimbursement out of the trust property, with
12
interest, for expenses properly incurred in the
administration of the trust. Further, under RSA 564B: 10-1004 and/or 564-B:10-1002, the court may award
costs and expenses, including reasonable attorney's
fees, to any party to be paid by another party or from
the trust that is the subject of the controversy.
2. Notice is hereby given that Defendant shall ask
the Court to order that Plaintiff Evan Gray reimburse
him for his costs, expenses, and attorney's fees, that
the same be reimbursed to him out of the corpus and
charged to Plaintiff or, in the alternative, or that
the same be reimbursed to him out of the corpus and
charged to Plaintiff.
3.
Notice is hereby given that Defendant shall ask
the court to order that Plaintiff Evan Gray indemnify
and reimburse him and/or the BJG Trust for any and all
expenses, fees, damages, or other items (“Losses”)
from him in both his fiduciary and individual
capacities, that he or the BJG Trust suffer relating
to or as a result of this action. See RSA 564-B:101004.
Doc. 20 at 21.
As written, the counterclaim simply provides
notice of a claim or claims that Skip may pursue in the future.
He does not ask for relief to be granted.
The counterclaim is
dismissed without prejudice to allow Skip to file a claim in
proper form.
Conclusion
For the foregoing reasons, Evan’s motions to strike and
dismiss (documents nos. 22, 23, and 24) are granted as follows:
(1)
Skip’s Third-Party Complaint (doc. 7) is struck,
13
(2)
Skip’s Answer to the Third-Party Complaint and
crossclaim (doc. 21) are struck.
(3)
Skip’s counterclaim in his Amended Answer (doc. 20) is
dismissed without prejudice.
Skip is granted leave to file an appropriate third-party
complaint and/or counterclaims or crossclaims on or before
January 31, 2019.
SO ORDERED.
__________________________
Joseph A. DiClerico, Jr.
United States District Judge
January 15, 2019
cc:
Adam M. Hamel, Esq.
Ralph F. Holmes, Esq.
Roy S. McCandless, Esq.
Neil B. Nicholson, Esq.
Andrea Jo Schweitzer, Esq.
14
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?