Gray v. Gray
Filing
71
///ORDER granting in part 62 Motion for Summary Judgment. Evan is directed to show cause on or before December 19, 2019, why the court should not, in the interest of justice, treat that portion of his Sixth Defense asserting undue influence as a counterclaim. Response due on or before December 30, 2019. Reply due on or before January 6, 2020, if necessary. The court stays ruling on the merits of the motion for summary judgment as to Count II of the CLG Estate Counterclaims until briefing and ruling on this issue is completed. 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 207
Chester L. Gray, III
O R D E R
As discussed in the court’s prior orders, this case
involves disputes among Chester and Barbara Gray’s three
children, Skip, Scott, and Evan Gray.1
Evan brought suit against
Skip as executor of the CLG Estate, as sole trustee of the CLG
Trust, and as co-trustee of the BJG Trust.
In his Amended
Complaint, Evan alleges that Chester, prior to his death,
breached his fiduciary duties while he was trustee of the BJG
Trust (Counts 1 and 2).
Evan brings Counts 1 and 2 in his
capacity as a trustee of the BJG Trust and in his individual
capacity.
Evan sues Skip in Skip’s capacity as executor of the
CLG Estate.2
As in its previous orders, the court will refer to the
principals in this case by their first names for clarity and
succinctness. The court also uses the abbreviations for
Barbara’s trust (“BJG Trust”), Chester’s trust (“CLG Trust”),
and Chester’s estate (“CLG Estate”) consistent with its previous
orders. E.g., docs. 54, 55.
1
Evan also alleges that Skip breached his fiduciary duties
as trustee of the CLG Trust (Count 3), and he seeks removal of
Skip as co-trustee of the BJG Trust based on alleged conflicts
of interest (Count 4). Counts 3 and 4 of the Amended Complaint
2
Skip filed counterclaims,3 the “CLG Estate Counterclaims,”
which were brought in his capacities as executor of the CLG
Estate and trustee of the CLG Trust.
Doc. 36.
The CLG Estate
Counterclaims are for indemnification (Count I) and for a
declaratory judgment regarding the BJG Trust’s “pour over”
provision, Article 2.4.A (Count II).
Skip moves for summary judgment in his favor on Counts 1
and 2 of Evan’s Amended Complaint to the extent Evan brought
Counts 1 and 2 in his individual capacity.
Additionally, Skip
moves for summary judgment in his favor as to Count II of the
CLG Estate Counterclaims, arguing that he is entitled to relief
on the merits of that claim and that Evan cannot prevail on his
affirmative defense of equitable estoppel, which he pled as the
Fifth Defense to Count II.
Evan opposes partial summary judgment.
Scott, who in his
capacity as a co-trustee of the BJG Trust is a counterclaim
defendant as to the CLG Estate Counterclaims, did not file an
opposition to Skip’s motion for summary judgment.4
are not at issue with regard to Skip’s motion for partial
summary judgment.
Skip also filed counterclaims seeking attorneys’ fees,
costs, and other expenses in his capacity as trustee of the BJG
Trust (the “BJG Trust Counterclaims”). Doc. 37. Those
counterclaims are not at issue in this order.
3
Scott is not a plaintiff as to Counts 1 and 2 of Evan’s
Amended Complaint.
4
2
Standard of Review
Summary judgment is appropriate when the moving party
“shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a); Faiella v. Fed. Nat’l Mortg. Assoc., 928
F.3d 141, 145 (1st Cir. 2019).
“A genuine issue of material
fact only exists if a reasonable factfinder . . . could resolve
the dispute in that party’s favor.”
Town of Westport v.
Monsanto Co., 877 F.3d 58, 64-65 (1st Cir. 2017) (internal
quotation marks and citation omitted).
Background
A. BJG Trust & CLG Trust
In 1996, Chester and Barbara Gray each created a trust.
Doc. 65-4 (creating the 1996 CLG Trust); Doc. 65-4 (creating the
1996 BJG Trust).
The two trusts reserved the right of the
grantors (Chester and Barbara) to revoke or modify the trusts.
Doc. 65-5 at 22; Doc. 65-4 at 22.
Between 2010 and 2011, Attorney Nicholas Harvey served as
Chester’s and Barbara’s estate planning counsel.
Chester, who
was a retired lawyer, paid particular attention to the details
of the estate plans.
Ultimately, Attorney Harvey prepared two
trust documents, which Barbara and Chester executed in 2011: the
“First Amendment and Complete Restatement of the Chester L.
3
Gray, Jr. Trust of 1996” and the “First Amendment and Complete
Restatement of the Barbara J. Gray Trust of 1996,” which have
been referred to throughout this litigation as the CLG Trust and
the BJG Trust, respectively.
Barbara and Chester served as the initial co-trustees of
both the CLG Trust and the BJG Trust, which were revocable until
their respective settlor’s death, at which point they became
irrevocable under their provisions.
Among the assets included
in the CLG Trust is real estate located in Grafton and
Springfield, New Hampshire.
The CLG Trust exists, in part, to hold and maintain the
Grafton and Springfield real estate for Barbara and Chester’s
descendants “for as long as is reasonably and prudently
possible.”
Doc. 62-3 at 4.
To that end, the CLG Trust provides
that, after Chester’s death, the real estate will be held in a
Continuing Trust, which shall exist until certain conditions
outlined in Article 2.2.A(2)-(4) of the CLG Trust are met.
In addition, after Chester’s death, the CLG Trust provides
for the creation of a “maintenance fund” for the real estate,
which is to be funded with assets valued at $820,000 adjusted
for inflation.
After all of the CLG Trust provisions have been
satisfied, the remainder of the CLG Trust’s assets are to be
distributed equally among Barbara and Chester’s three sons,
Skip, Scott, and Evan.
4
The BJG Trust provides for the management of Barbara’s
assets before and after her death.
2013.
Barbara died on April 9,
Following Barbara’s death, Chester became sole trustee of
both trusts.
Chester remained as trustee of both the BJG Trust
and the CLG Trust until his death on April 26, 2017.
The BJG Trust includes provisions that became effective
after the death of both Barbara and Chester.
One of the
principal provisions of the BJG Trust is Article 2.4.A which
provides:
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 adjusted for
inflation],5 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 adjusted for inflation].
Doc. 62-4 at 4.
The “remainder of the trust property” is to be
distributed equally among Skip, Scott, and Evan.
Id.
After Chester’s death, Skip, Scott, and Evan became cotrustees of the BJG Trust, and Skip became sole trustee of the
CLG Trust.
Skip petitioned the probate division of the New
Hampshire Circuit Court to open a probate administration and
The BJG Trust directs the inflation adjustment to be
calculated “in accordance with the percentage changes in the
Consumer Price Index – All Urban Consumers (Northeast Region)
from January 1, 2011 until January of the year of my death
. . . .” Doc. 62-4 at 4.
5
5
appoint him to administer the CLG Estate.
The New Hampshire
court granted Skip’s petition for estate administration and
appointed him Executor on June 14, 2017.
B. Pre-Litigation Correspondence
Skip originally retained Attorney Catherine Richmond of
Stebbins Bradley, PA, to represent him as fiduciary of the CLG
Trust and CLG Estate, before retaining current counsel Attorney
Ralph Holmes.
After Chester’s death in late April 2017, Skip’s
counsel engaged in correspondence with Evan which continued
throughout 2017 and 2018 and culminated in this litigation begun
by Evan.
On December 12, 2017, Evan sent to Skip, by registered
mail, a letter entitled “Notice of Claims and Demand for
Payment.”
Doc. 62-8 at 1.
In the letter, Evan listed Skip
twice, once as executor of the CLG Estate and once as trustee of
the CLG Trust.
In the letter, Evan explained his claims:
PLEASE TAKE NOTICE, pursuant to New Hampshire RSA
Section 556:2, that Evan W. Gray, as Trustee of the
Barbara J. Gray Trust of 1996, asserts the following
claim(s) against Chester L. Gray, III, Executor of the
Estate of Chester L. Gray, Jr., and Chester L. Gray
III, Trustee of the Chester L. Gray, Jr., Trust of
1996:
Claim(s) for breaches of fiduciary duties by decedent
Chester L. Gray, Jr., as former sole trustee of the
Barbara J. Gray Trust of 1996 from April 9, 2014,
through April 26, 2017 (the “Period”), by: (i)
managing the investments of the Trust for his sole
benefit as income beneficiary of the Trust during the
6
Period, to the detriment of the Trust and the
remainder beneficiaries of the Trust, including
without limitation by concentrating the investments of
the trust solely in municipal bonds and utility stocks
bearing high levels of current income but little or no
capital growth, such that the capital value of the
Trust was $100,000 (One Hundred Thousand Dollars) less
at the end of the Period than at the beginning of the
Period, whereas the Standard & Poor 500 equity index
increased 50% during the Period; (ii) distributing
capital of the Trust to himself in violation of
Paragraphs 2.3.A.(2) and (4) of the Trust instrument;
and (iii) using capital removed improperly from the
Trust to purchase real property in the center of the
town of Grafton, New Hampshire, and donating such real
property to the town of Grafton, New Hampshire, for
the decedent's own charitable benefit, to the
detriment of the Trust and the remainder beneficiaries
of the Trust.
PLEASE TAKE FURTHER NOTICE, pursuant to New Hampshire
RSA Section 556:2,that based on the foregoing
breaches, Evan W. Gray, as Trustee of the Barbara J.
Gray Trust of 1996, DEMANDS that the Estate of Chester
L. Gray, Jr., and the Chester L. Gray, Jr., Trust of
1996 pay to the Barbara J. Trust of 1996 damages in an
amount to be determined but not less than $850,000
(Eight Hundred and Fifty Thousand Dollars).
PLEASE TAKE FURTHER NOTICE that, pursuant to New
Hampshire RSA Section 564-B:5-505(b)(1), because,
according to Chester L. Gray, III, Executor, as stated
in his Petition for Estate Administration, the Estate
of Chester L. Gray, Jr., equals only $19,000 (Nineteen
Thousand Dollars), and is inadequate to satisfy the
claim(s) notified hereby, the property of the Chester
L. Gray Jr. Trust of 1996 is subject to such claims.
PLEASE TAKE FURTHER NOTICE that, pursuant to New
Hampshire RSA Section 554:19.I and the first paragraph
of Article 2.2 of the First Amendment and Complete
Restatement of the Chester L. Gray, Jr., Trust of
1996, the claim(s) notified hereby are “debts of the
deceased” and “obligations” that must be paid before
any “Continuing Trust” may be established under
Article 2.2.A of the First Amendment and Complete
Restatement of the Chester L. Gray, Jr., Trust of
1996.
7
Doc. 62-8 at 1-2.
Evan signed the letter as Evan Gray, Trustee,
identifying the trust of which he was trustee as the “Barbara J.
Gray Trust of 1996.”
Id. at 2.
On January 5, 2018, Attorney Holmes, on Skip’s behalf, sent
a letter to all the trustees of the BJG Trust, enclosing Evan’s
December 12 letter.
In the January 5 letter, Attorney Holmes
articulated Skip’s understanding of the claims given Evan’s
statements in the December 2017 letter, noted that Evan demanded
that the CLG Estate and CLG Trust pay the BJG Trust a sum not
less than $850,000, and stated that the CLG Estate would defend
the claim and seek recovery of costs, which it was likely to
receive “[i]nsofar as the Claim is successfully defended.”
62-9 at 1-2.
Doc.
Attorney Holmes also stated that Evan would need
to prove bad faith in order to establish liability.
Id. at 2.
On February 9, 2018, Evan replied to the January 5 letter
from Attorney Holmes, stating that Attorney Holmes had been
“deliberately misleading” in his use of “defined terms.”
In the
next sentence, Evan stated that “[t]he Claims are asserted on
behalf of the BJG Trust, not me individually.”
Doc. 62-10 at 1.
He added that “the trustees of the BJG Trust have a duty to
pursue such Claims,” and that, if the CLG Estate or CLG Trust
was “foolish enough” to contest the Claims, “they likely will
have statutory responsibility to reimburse the BJG Trust for its
8
attorney fees and other costs after the BJG Trust prevails on
the Claims . . . .”
Id. at 1-2.
On February 12, 2018, Evan sent another letter to Skip,
this time writing “in my capacity as a qualified beneficiary of
the” CLG Trust.
Doc. 62-11 at 1.
In the February 12 letter,
Evan stated that he had sent the December 12 letter in “my
capacity as a trustee of the Barbara J. Gray Trust of 1996.”
Id.
Evan then urges Skip “promptly to negotiate with the BJG
Trust to resolve the Claims without the expense of litigation
. . . .”
Id. at 2.
Evan filed this lawsuit on June 13, 2018.
Discussion
Skip moves for summary judgment as to Counts 1 and 2 of
Evan’s Amended Complaint to the extent Counts 1 and 2 were
brought outside Evan’s capacity as trustee of the BJG Trust.
Skip contends that Evan failed to provide the notice and demand
required under RSA 556:1.
Evan responds, contending that he
provided sufficient notice under RSA 556:1 and that Skip waived
the notice requirement in any event.
Skip also moves for summary judgment as to Count II of the
CLG Estate Counterclaims, contending that the plain meaning of
Article 2.4.A of the BJG Trust and Article 2.2 of the CLG Trust
requires a determination of the pour over amount only after all
9
obligations against the CLG Trust have been paid or provided
for.
In his summary judgment motion, Skip also contends that
Evan cannot succeed on his affirmative defense of equitable
estoppel.
Evan responds, arguing that the BJG Trust language does not
reference the CLG Trust’s payment of claims against it and that
the pour over amount, if any, would be set at the time of the
surviving spouse’s (i.e., Chester’s) death.
Evan also responds
that there are genuine disputes of material fact as to his
defenses of equitable estoppel and unclean hands, which prevent
the entry of summary judgment in Skip’s favor.
Skip did not
file a reply.
A. Jurisdiction
Any time “a colorable question exists,” the court is
obliged to inquire into its own jurisdiction.
Watchtower Bible
and Tract Soc. of New York v. Colombani, 712 F.3d 6, 10 (1st
Cir. 2013).
The claims in this case touch on matters relating
to the probate of the CLG Estate, which the court understands
remains open in the New Hampshire Probate Court.
“The probate exception is a judge-made doctrine stemming
from the original conferral of federal equity jurisdiction in
the Judiciary Act of 1789.”
18, 24 (1st Cir. 2010).
Jimenez v. Rodiguez-Pagan, 597 F.3d
The probate exception “reserves to
10
state probate courts the probate or annulment of a will and the
administration of a decedent’s estate; it also precludes federal
courts from endeavoring to dispose of property that is in the
custody of a state probate court.
But it does not bar federal
courts from adjudicating matters outside those confines and
otherwise within federal jurisdiction.”
Marshall v. Marshall,
547 U.S. 293, 311-12 (2006) (citations omitted).
“Where the
exercise of federal jurisdiction will result in a judgment that
does not dispose of property in the custody of a state probate
court, even though the judgment may be intertwined with and
binding on those state proceedings, the federal courts retain
their jurisdiction.”
Jimenez, 597 F.3d at 24 (quoting Lefkowitz
v. Bank of N.Y., 528 F.3d 102, 106 (2d Cir. 2007)) (alteration
omitted).
Having examined the claims and counterclaims as relevant to
Skip’s motion for partial summary judgment, the court is
satisfied that the probate exception does not apply to those
claims and counterclaims.6
Evan’s claims do not fall within the
probate exception to the extent the relief sought is a creditor
claim against the CLG Estate, rather than exercise of any
jurisdiction over the assets of the CLG Estate while they remain
Depending on the circumstances, if Evan prevails on his
claims, the court may lack jurisdiction to order certain relief
against the CLG Estate while it remains in probate. See
Jimenez, 597 F.3d at 24.
6
11
under the probate court’s jurisdiction.
Likewise, while the
declaratory judgment requested in Count II of the CLG Estate
Counterclaims may, in part, bind the state probate court to a
particular interpretation of the trusts’ terms, such a judgment
is not outside this court’s jurisdiction.
See Jimenez, 597 F.3d
at 24; Turton v. Turton, 644 F.2d 344, 347 (5th Cir. 1981)
(observing that the probate exception does not prohibit a
federal court from issuing, for example, “a declaratory judgment
that a probated will entitles [a devisee] to twenty percent of
the net estate”).
The court turns next to the merits of the
arguments on summary judgment.
B. Notice of Claim (Counts 1 and 2 of Evan’s Amended
Complaint)
Skip argues that, under RSA 556:1 and RSA 556:3, Evan
failed to provide sufficient notice of a claim against the CLG
Estate in any capacity outside his capacity as trustee of the
BJG Trust.
Skip contends that, while Evan provided notice of
the claim in his capacity as a trustee of the BJG Trust, he
expressly disclaimed any claim in his personal capacity.
Evan
argues that Skip waived the demand requirements of RSA 556:1 and
RSA 556:3 and that he provided notice of his claims that meets
the requirements of RSA 556:1 and RSA 556:3.
In New Hampshire, no action shall be sustained against an
estate administrator unless a demand has been exhibited to the
12
administrator and payment has been demanded within six months
after the original grant of the administration.
556:3.7
RSA 556:1,
“A notice sent to the administrator or his agent by
registered mail, setting forth the nature and amount of the
claim and a demand for payment, shall be deemed a sufficient
exhibition and demand.”
1.
RSA 556:2.
Notice of Claims
Evan asserts that he sent a notice by registered mail that
complied with the requirements of RSA 556:1 and 556:3 on
December 12, 2017, within six months after Skip was granted
administration of the CLG Estate on June 20, 2017.8
Evan states
that he sent the letter in his “representative capacity as a
trustee of the BJG Trust,” for the benefit of the remainder
beneficiaries of the BJG Trust, therefore including Evan in his
individual capacity.
Evan also asserts that the letter was
sufficient to satisfy the notice requirement as to his
individual capacity because Skip was made aware of the claims
“No action shall be sustained against an administrator if
begun within six months after the original grant of
administration, nor unless the demand has been exhibited to the
administrator and payment has been demanded.” RSA 556:1. “No
such action shall be sustained unless the demand was exhibited
to the administrator within six months after the original grant
of administration, exclusive of the time such administration may
have been suspended.” RSA 556:3.
7
8
Doc. 62-6; Doc. 62-7.
13
through it, which, he contends, is the purpose of the notice
statute.
Evan’s December 12 letter states that he is asserting a
claim “as Trustee of the Barbara J. Gray Trust of 1996.”
62-8 at 1.
Trust.
Doc.
Evan signs the document as “Trustee” of the BJG
Id. at 2.
Therefore, Evan notified Skip about the
claims in Counts 1 and 2 of his Amended Complaint made in his
capacity as trustee of the BJG Trust, but he failed to timely
notify Skip of any claim made in Counts 1 and 2 outside that
capacity.
Evan argues that, despite the language of his letter, the
purpose of RSA 556:1 was achieved because Skip was placed on
notice about the existence of the claims against the trust.
While it is true that the letter Evan sent to Skip gave Skip
notice about one particular type of claim against the CLG Estate
– one brought by a trustee of the BJG Trust – Skip was not
properly notified about the nature of Evan’s later-asserted
claim brought in a different capacity.
The effect of Evan’s letter giving notice to Skip as to
claims only on behalf of the BJG Trust is underscored by their
subsequent communications.
After receiving the letter, Skip,
through Attorney Holmes, wrote a response to the trustees of the
BJG Trust dated January 5, 2018, reciting his understanding that
the claims involved the trustees of the BJG Trust, not any claim
14
by a beneficiary.
Doc. 62-9 at 1 (“I write to you in your roles
as the Trustees of The Barbara J. Gray Trust of 1996 . . . .”).
Skip also notes his understanding that Evan’s potential claim
demanded that a sum be paid to the BJG Trust.
Skip’s January 5
letter does not suggest that Skip understood that Evan could
potentially bring a claim in which he recovered personally.
Indeed, Evan reinforced Skip’s understanding of the claims
in Evan’s own reply to Skip’s January 5 letter, where, after
criticizing Attorney Holmes for being “deliberately misleading”
in the January 5 letter, Evan stated that “[t]he Claims are
asserted on behalf of the BJG Trust, not me individually.”
62-10 at 1-2.
Doc.
Evan argues that this statement was “a single,
isolated sentence” in a letter irrelevant to the demand
requirement, because the notice had already been provided
through the December 12 letter.
Evan’s statement that the
claims would not be brought by him individually, however,
undercuts his argument that RSA 556:1 was satisfied because Skip
was provided general knowledge about the nature of the claims
through the December 12 letter.
In sum, Evan’s December 12 letter provided notice of a
specific claim in which Evan carefully and uniformly identified
each party in a particular capacity or capacities.
Skip cannot
be faulted for relying on Evan’s description of his own claims,
and Evan cannot send a letter, for the purpose of providing
15
notice of claims under RSA 556:1, in which he says one thing but
means another and then expect that its recipient will divine
that contrary, unstated meaning.
Therefore, Evan did not
provide sufficient notice under RSA 556:1 that the claims made
in Counts 1 and 2 of his Amended Complaint were being made in
his individual capacity as well as in his capacity as trustee of
the BJG Trust.
2.
Waiver of Demand Requirements
Next, Evan contends that the statutory demand requirement
is waived if the estate administrator denies liability when the
claim is presented or by a refusal to pay at that or any other
time.
Evan asserts that Skip waived the demand requirement
through his January 5, 2018, response to the December 12 notice
letter.
Evan relies on Dewey v. Noyes, in which the New Hampshire
Supreme Court held that an estate administrator can waive a
statutory demand requirement if he denies “all liability when
the claim is presented” or provides an “absolute refusal to pay
it at that or any other time.”
76 N.H. 493, 493 (1912).9
In
Dewey, the Supreme Court observed that the plaintiff had called
the defendant and explained the claim, but the defendant
The language of the statutory demand requirement in Dewey
is similar to the language in RSA 556:1.
9
16
responded that “she would not pay the plaintiff for any claim or
matter whatsoever, and that it would do no good to put a
statement of it in writing for her.”
Id. (emphasis added).
The New Hampshire Supreme Court has subsequently elaborated
on this rule, stating that “[a]n executor has a right to be
informed of the creditor’s claim . . . but he may lose this
right by denying liability in advance of the presentation of the
creditor’s claim.”
Frost v. Frost, 100 N.H. 326, 328 (1956).
By contrast, “the failure to exhibit the claim was not excused
because there ‘was neither denial nor recognition of liability,
and neither promise nor refusal to settle.’”
Id. (quoting
Watson v. Carvelle, 82 N.H. 453, 457 (1926)).
In his January 5, 2018, letter, Skip did not deny all
liability in his response to Evan’s notice, and he did not
foreclose the possibility of settlement.
It is true that, in
the letter, Skip asserts that the CLG Estate will seek to
recover costs, but he notes that he may only recover those costs
“[i]nsofar as the Claim is successfully defended.”
2.
Doc. 62-9 at
Skip merely asserted that he would seek costs if Evan moved
forward with the claim and that he would likely receive costs if
he prevailed in defense.
He did not deny all liability for any
claim, nor did he make any absolute statement refusing to
settle.
Therefore, Skip did not waive the notice requirement of
RSA 556:1, and he is entitled to summary judgment in his favor
17
as to Counts 1 and 2 of the Amended Complaint to the extent
Counts 1 and 2 are brought by Evan outside his capacity as
trustee of the BJG Trust.10
C. BJG Trust “Pour Over” Provision (Count II of CLG Estate
Counterclaims)
Next, Skip contends that he is entitled to summary judgment
as to Count II of the CLG Estate Counterclaims, in which he
requests a declaratory judgment that “in the event that the
Plaintiff’s action results in an underfunding of the Maintenance
Fund, the Counterclaim/Crossclaim Defendants, as Co-Trustees of
the BJG Trust, shall be required to make up for the deficiency
created.”
Doc. 36 ¶ 35.
In support, Skip contends that Article
2.4.A of the BJG Trust and Article 2.2 of the CLG Trust require
a pour over in those circumstances.
Evan opposes summary
judgment on the grounds that the unambiguous language of the
trust does not require such a distribution, that his “Fifth
Defense” of equitable estoppel prevents Skip from enforcing this
Embedded in his opposition to Skip’s motion for partial
summary judgment, Evan requests an opportunity to amend his
complaint “to assert a petition for relief pursuant to RSA
556:28, including additional facts that otherwise are
unnecessary for purposes of the present motion” if his arguments
as to notice under RSA 556:1 are to fail. Doc. 65-1 at 18 n.2.
Evan improperly presents his motion to file an amended complaint
within his opposition memoranda, which is not allowed in the
District of New Hampshire. LR 7.1(a)(1) (“Objections to pending
motions and affirmative motions for relief shall not be combined
in one filing.”).
10
18
provision of the BJG Trust, and that his “Sixth Defense” of
unclean hands prevents Skip from enforcing this provision of the
BJG Trust.
At this time, the court addresses only one matter with
respect to Skip’s motion for summary judgment as to Count II of
the CLG Estate Counterclaims.
Specifically, as to the “Sixth
Defense,” which Evan entitled “unclean hands,” Evan contends
that Chester’s undue influence on Barbara renders the BJG Trust,
or portions thereof, void.
He states:
One set of facts barring Defendant’s counterclaim on
the basis of unclean hands involves the undue
influence by which [Chester] alone directed the terms
of the 2011 BJG Trust Instrument, at a time when
[Barbara] had long been in a debilitated state
cognitively and physically, and was completely
dependent upon [Chester] for her material existence.
Doc. 65-1 at 23.11
To the extent Evan argues that Skip should
not be granted equitable relief because of Chester’s unclean
hands in using undue influence with regard to the establishment
of the BJG Trust in 2011, the unclean hands doctrine does not
appear to be applicable to Skip in this case.
“It is old hat that a court called upon to do equity should
always consider whether the petitioning party has acted in bad
In his “Sixth Defense,” stated in his Answer to the CLG
Estate Counterclaims, Evan wrote, inter alia, the following:
“The Counterclaims also are barred by the unclean hands of
[Chester] based on additional actions by [Chester], including
without limitation [Chester’s] procurement by undue influence of
benefits under the BJG Trust.” Doc. 56 at 10-11.
11
19
faith or with unclean hands.”
Texaco Puerto Rico, Inc. v. Dep't
of Consumer Affairs, 60 F.3d 867, 880 (1st Cir. 1995).
“The
doctrine of unclean hands only applies when the claimant's
misconduct is directly related to the merits of the controversy
between the parties, that is, when the tawdry acts ‘in some
measure affect the equitable relations between the parties in
respect of something brought before the court for
adjudication.’”
Id. (quoting Keystone Driller Co. v. General
Excavator Co., 290 U.S. 240, 245 (1933)).
Here, Chester’s
alleged actions do not prevent Skip, as a successor trustee of
the CLG Trust, from seeking a declaratory judgment setting out
the legal rights of the CLG Trust concerning the meaning of the
terms of the BJG Trust and the CLG Trust about which there is a
substantial controversy.
See Order on Motion to Dismiss CLG
Estate Counterclaims, doc. 54 at 9 (“A substantial controversy
exists about the interpretation of the terms of the BJG Trust
and the CLG Trust.”).
Furthermore, an affirmative defense of unclean hands does
not appear to be appropriate in addressing the alleged undue
influence of Chester because New Hampshire law provides a
statutory cause of action to contest the validity of a trust or
portions of a trust on the ground of undue influence.
20
RSA 556-
B:4-406(a), (b).12
Therefore, as part of his “Sixth Defense” to
the CLG Estate Counterclaims, Evan appears to assert a claim of
undue influence under RSA 556-B:4-406.
In addition, in response
to Skip’s motion for summary judgment, Evan cites the standards
applicable when a petitioner seeks a declaration that a trust is
void because of undue influence.
Doc. 65-1 at 23 (citing Estate
of Cass, 143 N.H. 57 (1998), Archer v. Dow, 126 N.H. 24 (1995),
and In re Stedman 1989 Trust 2013 Restatement, 2016 WL 7451406
(N.H. Nov. 10, 2016)).
12
RSA 564-B:4-406 states the following in relevant part:
(a) A trust is void to the extent that it was not
validly created in accordance with this chapter or its
creation was induced by fraud, duress, or undue
influence.
(b) A person may commence a judicial proceeding to
contest the validity of a trust within the earlier of:
(1) in the case of a trust that was revocable at the
settlor's death, 3 years after the settlor's death;
(2) in the case of an irrevocable trust, including a
formerly revocable trust that has become irrevocable,
3 years after the trustee sent to the beneficiary a
notice described in RSA 564-B:8-813(c)(3); or
(3) in the case of an irrevocable trust, including a
trust that was revocable at the settlor's death or a
formerly revocable trust that has become irrevocable,
180 days after the trustee sent the person a copy of
the trust instrument and a notice informing the person
of the trust's existence, the trustee's name, address,
and telephone number, and the time allowed for
commencing a proceeding to contest the validity of a
trust.
21
While Evan pled this claim as a defense, “[i]f a party
mistakenly designates a defense as a counterclaim, or a
counterclaim as a defense, the court must, if justice requires,
treat the pleading as though it were correctly designated, and
may impose terms for doing so.”
(emphasis added).
Fed. R. Civ. P. 8(c)(2)
Under Rule 8(c)(2), it appears that the court
must treat as a counterclaim that part of Evan’s Sixth Defense
which asserts that Chester exercised undue influence over
Barbara with respect to the BJG Trust.
Therefore, the court must decide the legal issue of how to
address Evan’s apparent undue influence claim, which was pled as
an affirmative defense, before the court can resolve Skip’s
motion for summary judgment on Count II of the CLG Estate
Counterclaims.
The parties, however, will be given the
opportunity to brief this procedural issue before the court
rules on it.
Conclusion
For the foregoing reasons, Skip’s motion for partial
summary judgment (doc. no. 62) is granted in part.
Summary
judgment is granted in favor of Skip to the extent Evan’s claims
in Counts 1 and 2 of his Amended Complaint are brought outside
his capacity as a trustee of the BJG Trust.
22
Evan is directed to show cause on or before December 19,
2019, why the court should not, in the interest of justice,
treat that portion of his Sixth Defense discussed above
asserting undue influence as a counterclaim.
Skip is directed
to file a response on or before December 30, 2019, and Evan may
reply to Skip’s response on or before January 6, 2020, if
necessary.
To the extent that there is an issue concerning any
statute of limitations applicable to the undue influence claim
the parties shall address it.
The court stays ruling on the
merits of Skip’s motion for summary judgment as to Count II of
the CLG Estate Counterclaims until briefing and ruling on this
issue is completed.
SO ORDERED.
__________________________
Joseph A. DiClerico, Jr.
United States District Judge
December 9, 2019
cc:
Counsel of Record
23
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