Opinion
C. A. PC-2021-00953
02-28-2022
MALCOLM CHACE IV, et al., Plaintiffs, v. ARNOLD B. CHACE JR., et al., Defendants.
For Plaintiffs: Michael S. Marino, Esq.; Richard G. Fallago, Esq. For Defendants: Matthew T. Oliverio, Esq.; Hannah Sfameni, Esq.
For Plaintiffs: Michael S. Marino, Esq.; Richard G. Fallago, Esq.
For Defendants: Matthew T. Oliverio, Esq.; Hannah Sfameni, Esq.
DECISION
STERN, J.
Before this Court is Defendants'-Arnold B. Chace Jr. and William Saltonstall, both individually and as Trustees of the M2K Trust-Motion for Partial Summary Judgment pursuant to Rule 56 of the Superior Court Rules of Civil Procedure. Plaintiffs-Barbara Chace, John Chace, Malcolm Chace IV, Malcolm Chace V, Ryan Chace, Elizabeth Chace Sundell, Annabel Gould, Jonathan Gould, Matthew Pelton, Michael Pelton, Ruby Sundell, and Brooke Ulehla (collectively, Plaintiffs)-filed a timely objection. Jurisdiction is pursuant to Rule 56 of the Rhode Island Superior Court Rules of Civil Procedure.
I Facts and Travel
Plaintiffs originally filed this action for breach of duty of loyalty/conflicted transactions, breach of trust/failure to account/furnish information, breach of duty of impartiality with beneficiaries, breach of duty to invest prudently, and for removal of trustees on February 5, 2021. (Pls.' Compl. ¶¶ 31-80.) Plaintiffs filed the Complaint against Defendants Arnold B. Chace, Jr. (ABC Jr.) and William Saltonstall (Saltonstall) (collectively, Defendants), both in their individual capacity and as trustees of the "M2K Trust." Id. ¶¶ 15-16. Specifically, Plaintiffs brought this action seeking a trust accounting from 2011 to the present, removal of both Defendants as trustees for breach of trust and breach of fiduciary duty, and the appointment of successor trustees. Id. at 1. Plaintiffs allege that Defendants invested trust assets in entities owning real property in Providence in which ABC Jr. owns the remaining interest. Id. ¶¶ 38-47. Additionally, Plaintiffs argue that, as beneficiaries of the M2K Trust, they have not received any distributions of income or principal. Id. ¶ 29. Plaintiffs also contend that the M2K Trust at issue in this case is governed by the laws of the State of Florida. Id. ¶ 2.
The M2K Trust originated through a trust agreement created by Malcolm G. Chace in 1937. (Defs.' Mem. Supp. of Partial Summ. J. 2.) After the trust agreement's initial inception, the trust was amended several times and eventually incorporated into the wills of several individuals through powers of appointment. Id. 2-3. Over the course of the history of the wealth at issue, the trust was eventually divided into multiple funds while additionally being modified by further powers of appointment in the Chace family's wills. Id. The M2K Trust is a testamentary trust that was created by the relevant Testator's will drafted in 2007. Id. 4.
In response to Plaintiffs' Complaint, Defendants filed an Answer on April 8, 2021, denying all liability and raising several affirmative defenses. (Defs.' Answer 1-10.) Importantly, Defendants asserted that the M2K Trust is governed by Rhode Island law, that none of the Plaintiffs have ever requested a distribution from the M2K Trust, and that this lawsuit serves as a pretext for Malcolm Chace IV to enrich himself and retaliate for his late father's rejection to name him as a trustee. Id. at 1-3.
On July 19, 2021, Defendants filed a Motion to Amend the Answer to add three additional affirmative defenses. (Defs.' Mot. to Amend.) Specifically, Defendants asserted that: (1) Plaintiffs were required to join the primary beneficiary as a necessary party; (2) Plaintiffs and this Court must consider the best interest and desires of the primary beneficiary and the overall intent of the Testator; and (3) Defendants at all times relied upon the guidance of the Testator's estate planning attorneys in administering the provisions of the M2K Trust. Id. at 1-2. This Court granted Defendants' Motion to Amend on July 27, 2021. (Order Granting Defendants' Motion for Leave to Amend (July 27, 2021) (Stern, J.).)
Shortly thereafter, Defendants moved for Partial Summary Judgment on August 17, 2021, seeking a determination from this Court that Rhode Island law controls in this case. See (Defs.' Mot. for Partial Summ. J. 1) That same day, Defendants filed a Motion for Judgment on the Pleadings alleging that the Plaintiffs failed to join an indispensable party. (Defs.' Mot. for J. on the Pleadings.) In response to Defendants' Motion, Plaintiffs filed the Amended Verified Complaint to include Elizabeth Zopfi Chace, the primary beneficiary of the M2K Trust, as a defendant. (Pls.' Am. Verified Compl.) Consequently, Defendants withdrew the Motion for Judgment on the Pleadings. (Withdrawal of Mot. for J. on the Pleadings.) On November 2, 2021, Plaintiffs filed an Objection to Defendants' Motion for Partial Summary Judgment. (Pls.' Mem. in Opp'n to Partial Summ. J.) This Court heard oral argument on Defendants' Motion for Partial Summary Judgment on November 16, 2021. See Docket (PC-2021-00953). This Court's decision follows.
II Standard of Review
Summary judgment is an extreme remedy and should be granted "only when 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as [a] matter of law.'" Plunkett v. State, 869 A.2d 1185, 1187 (R.I. 2005) (quoting Wright v. Zielinski, 824 A.2d 494, 497 (R.I. 2003)). Partial summary judgment is proper where there is no genuine issue of material fact as to one or more causes of action. Banks v. Bowen's Landing Corp., 522 A.2d 1222, 1225 (R.I. 1987). Only when a '"review of the admissible evidence viewed in the light most favorable to the nonmoving party reveals no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law, will this Court . . . grant . . . summary judgment.'" National Refrigeration, Inc. v. Standen Contracting Company, Inc., 942 A.2d 968, 971 (R.I. 2008) (quoting Carlson v. Town of Smithfield, 723 A.2d 1129, 1131 (R.I. 1999)). The moving party "bears the initial burden of establishing the absence of a genuine issue of fact." McGovern v. Bank of America, N.A., 91 A.3d 853, 858 (R.I. 2014) (citation omitted). The party opposing a motion for summary judgment '"carries the burden of proving by competent evidence the existence of a disputed material issue of fact and cannot rest on allegations or denials in the pleadings or on conclusions or legal opinions.'" National Refrigeration, Inc. 942 A.2d at 971 (quoting Accent Store Design, Inc. v. Marathon House, Inc., 674 A.2d 1223, 1225 (R.I. 1996)).
When faced with issues concerning conflict of laws, the Rhode Island Supreme Court has held that when no genuine issues of material fact exist, the court is left with a legal determination as to which state's law applies. See Oyola v. Burgos, 864 A.2d 624, 627 (R.I. 2005) (explaining that because no material issues of fact existed, the only question was whether the motion justice erred in his ruling on the conflict of laws issue).
III Analysis
To succeed on the Motion for Partial Summary Judgment requesting that this Court apply Rhode Island law, Defendants must demonstrate that Rhode Island law applies under our State's approach to conflict of laws. In addition to determining whether Defendants have sufficiently demonstrated the application of Rhode Island law, this Court will also seek to clarify Rhode Island's approach to analyzing conflicts of laws. For the purposes of this Decision, this Court will first seek to clarify Rhode Island's conflict of laws approach. The Court will then address both the parties' arguments regarding the application of Rhode Island law in this case and their application to the instant matter.
A Rhode Island's Conflict of Laws Approach
As an initial matter, this Court seeks to clarify Rhode Island's approach to conflict of laws issues before reaching the parties arguments. With respect to questions related to conflicts of laws, Rhode Island has adopted the "Second Restatement Approach." See Commerce Park Realty, LLC v. HR2-A Corp., 253 A.3d 1258, 1270 (R.I. 2021) (applying the Second Restatement of Conflict of Laws); Sheer Asset Management Partners v. Lauro Thin Films, Inc., 731 A.2d 708, 710 (R.I. 1999) (same). For example, in Harodite Industries, Inc. v. Warren Electric. Corp., 24 A.3d 514, 534 (R.I. 2011), the Court applied the most significant relationship test enunciated in the Restatement (Second). Id.
In Harodite, the Court described Rhode Island's approach as the "interest weighing" approach to choice of law questions. Id. However, after stating that Rhode Island followed the interest-weighing approach, the Court proceeded to apply the most significant relationship test which is the analysis used under the Second Restatement approach. Id.
Commerce Park further clarifies the Court's approach to conflict of laws issues and affirms the notion that Rhode Island follows the Second Restatement approach. Commerce Park Realty, LLC, 253 A.3d at 1270 ("This principle is reflected in the Restatement (Second) Conflict of Laws § 187(2)(a) (1971), which has been adopted by Rhode Island and echoes the well-settled choice-of-law principle that this Court enunciated in Owens.") (emphasis added). Although Rhode Island has not had the occasion to adopt the specific section of the Restatement at issue in this matter, it is apparent that the Rhode Island Supreme Court has previously approved the use and application of the Restatement (Second) by the Superior Court. Because Rhode Island clearly follows the Second Restatement approach with respect to conflict of laws issues, the Court will look to the Restatement (Second) for clarity on the issue presented in the instant matter.
B The Parties' Arguments
In support of their Motion for Partial Summary Judgment requesting that this Court apply Rhode Island law, Defendants argue that Rhode Island law applies to the instant matter regardless of how this Court categorizes the conflict of laws issue. (Defs.' Mem. Supp. of Partial Summ. J. 22.) In support of this contention, Defendants argue that Rhode Island law applies to the instant matter regardless of whether this Court categorizes the Plaintiffs' action under either a tort, contract, or trust administration analysis. Id. at 17.
Defendants argue that Rhode Island law applies if this action is categorized under a contracts analysis. Id. Specifically, they point out that this Court may wish to follow a federal court's interpretation of Matarese v. Calise, 111 R.I. 551, 561, 305 A.2d 112, 115-18 (1973). In Alifax Holding SpA v. Alcor Scientific Inc., 357 F.Supp.3d 147, 156 (D.R.I. 2019), a District Court applying state law interpreted the Matarese decision as holding that "if a fiduciary duty arises from an express agreement's terms, contract-based rules govern any choice-of-law question." Id. Using the contracts conflict of laws approach, Defendants argue that this Court would apply the lex loci contractus principle and apply Rhode Island law because this contract was "made with a view to performance" in Rhode Island. (Defs.' Mem. at 17.) This is because the M2K Trust is administered in Rhode Island. Id. Because this Court is able to reach the same outcome using either the torts or a trust-specific analysis, the Court will not consider the potential applicability of this approach.
First, Defendants argue that Rhode Island law applies if this action is categorized under a torts analysis. Id. at 15. Defendants assert that while the place of the alleged injury is hard to determine because the majority of the M2K Trust is comprised of marketable securities, the place where the conduct causing the injury is located is exclusively Rhode Island. Id. at 16. Additionally, Defendants note that the residence of the parties varies, but Rhode Island is the most common domicile of the parties. Id. Lastly, Defendants assert that the place where the relationship of the parties is centered, Point Gammon, which is the entity that houses all of the M2K Trust documents, is located in Rhode Island. Id. Additionally, both the location where the alleged torts were committed, and the real estate holdings that Plaintiffs claim are indicative of self-dealing transactions, are located in Rhode Island. Id.
Finally, Defendants argue that Rhode Island law applies if this Court chooses to categorize this action under a trust-specific analysis and apply the rule from Restatement (Second) Conflicts of Law § 271. Id. at 19-22. Defendants contend that Section 271 of the Restatement is applicable to the instant matter and directs this Court to apply the law of the state of administration. Id. Defendants argue that the M2K Trust is clearly administered in Rhode Island. Id.
In response to Defendants' argument regarding Rhode Island's choice of law approach, Plaintiffs argue that Defendants have cited no cases applying Rhode Island's choice of law approach "in the context of conflict of state's laws with respect to a trust instrument" and that this Court should therefore refuse to apply Rhode Island's conflict of laws analysis. (Pls.' Obj. at 8-9.) Instead, Plaintiffs assert that this Court must look at the "law of the domicile of the Donee or that of the Donor" when there is a conflict. Id. In support of this contention, Plaintiffs' cite to a 1986 Superior Court decision, Rhode Island Hospital Trust National Bank v. de Beru, No. NC 84-0189, 1986 WL 714230, at *4 (R.I. Super. Dec. 8, 1986), which allegedly applied this rule. Id. at 9.
On appeal, the Rhode Island Supreme Court affirmed the Superior Court's decision in de Beru regarding the Court's application of full faith and credit and res judicata. See Rhode Island Hospital Trust National Bank v. De Beru, 553 A.2d 544 (R.I. 1989). Id. Plaintiffs also cite to Cotting v. De Sartiges, 17 R.I. 668, 24 A. 530, 531 (1892); Rhode Island Hospital Trust Co. v. Dunnell, 34 R.I. 394, 83 A. 858, 861 (1912); and Adams v. D'Hauteville, 72 R.I. 325, 328, 51 A.2d 92, 94 (1947), which ostensibly demonstrates Rhode Island's adoption of this rule. (Pls.' Obj. 9-10.)
Regarding Defendants' argument that this Court should apply the Restatement (Second) Conflict of Laws, Plaintiffs argue that this Court should refuse to do so because Defendants have not located a case applying this provision of the Restatement (Second). Id. at 12. Plaintiffs further argue that if this Court were to apply the rule in Section 271, this Court would also have to find that the Testator intended to have the M2K Trust administered in Rhode Island. Id. at 12-13. Finally, outside of alleging that this Court should not follow Rhode Island's conflict of laws approach in general, Plaintiffs fail to address the substantive arguments in opposition to this Court categorizing the instant matter under a torts or contracts analysis. See generally Pls.' Obj.
In their Reply, Defendants contend that Plaintiffs have confused the application of choice of law/conflict of laws rules for issues related to the administration of a trust with the rules related to exercise of testamentary power. (Defs.' Reply 1.) Additionally, Defendants note that the Restatement (Second) permits courts to apply the laws of different states related to trust cases depending on the issue before the court. Id. at 2. "The local law of one state may be applied to an issue of validity and the local law of another state applied to an issue of administration or to an issue of construction." Restatement (Second) Conflict of Laws Ch. 10, Topic 1. Further, Defendants also note that all of the cases cited by Plaintiffs in their Objection concern the exercise of testamentary power, as opposed to the administration of a trust created through that power. Id. at 3.
Regarding the location where the M2K Trust is administered, there is no genuine dispute of material fact before the Court. Both parties agree that the Testator died in the state of Florida, and that he was a domiciliary of Florida prior to his death. See Pls.' Obj. 17; see generally Defs.' Mem. Supp. of Partial Summ. J. Further, the parties agree that both Defendants, as trustees, conduct business in the State of Rhode Island and that at least one Defendant is domiciled in Rhode Island. (Pls.' Am. Compl. ¶¶ 15-16; Defs.' Reply 8.) Additionally, it is undisputed that the property owned by the M2K Trust, at issue in the instant matter, is located in Rhode Island. (Pls.' Am. Compl. ¶ 42.) Finally, Plaintiffs attempted to argue that Defendants have failed to administer the M2K Trust in any state while simultaneously conceding that the M2K Trust is administered in Rhode Island. See Pls.' Obj. 14 ("Here, Defendant Trustees' Memorandum relies heavily on administration of M2K and Fund One out of Point Gammon Corp., a Rhode Island corporation, to establish Rhode Island's law as controlling administration.") (emphasis added). Based on the foregoing, this Court finds that the material facts regarding the administration of the M2K Trust in Rhode Island are undisputed, and consequently, the sole remaining issue before the Court is the proper application of the relevant law.
Plaintiffs' Objection to Defendants' Motion for Partial Summary Judgment attempts to argue that both ABC Jr. and Saltonstall are residents of the State of Massachusetts. (Pls.' Obj. 14) However, Plaintiffs' Amended Complaint and Defendants' Amended Answer agree that ABC Jr. is a Rhode Island resident. (Pls.' Am. Comp. ¶ 15); (Defs.' Am. Answer ¶ 15.) Additionally, Plaintiffs do not contest the fact that, regardless of his domicile, ABC Jr. conducts his business in the State of Rhode Island. See generally (Pls.' Obj.)
C Restatement (Second) § 271's Applicability to the Instant Matter
With respect to the present dispute as to whether the laws of the State of Florida, as Plaintiffs contend, or whether the laws of the State of Rhode Island, as Defendants contend, govern the matter currently before the Court, both parties agree that Rhode Island case law is silent with respect to which state's laws apply to lawsuits arising out of the administration of a trust. (Defs.' Mem. Supp. of Partial Summ. J. 9; Pls.' Mem. in Opp'n to Partial Summ. J. 7.) Specifically, the parties assert, and this Court agrees, that there is no existing Rhode Island case law adopting or interpreting the Restatement (Second) Conflict of Laws § 271 (1971). Section 271 states the following:
The administration of a trust of interests in movables created by will is governed as to matters which can be controlled by the terms of the trust (a) by the local law of the state designated by the testator to govern the administration of the trust, or (b) if there is no such designation, by the local law of the state of the testator's domicil at death, unless the trust is to be administered in some other state, in which case the local law of the latter state will govern. Restatement (Second) Conflict of Laws § 271 (1971) (Dec. 2021 Update).
Based on the Rhode Island Supreme Court's adoption of the Second Restatement approach to conflict of laws issues, this Court finds, as a matter of first impression, that Section 271 of the Restatement (Second) Conflict of Laws applies to the instant matter. See Commerce Park Realty, LLC, 253 A.3d at 1270; Sheer Asset Management Partners, 731 A.2d at 710. Specifically at issue in this matter is the application of Section 271(b) which requires this Court to apply "the local law of the testator's domicil at death, unless the trust is to be administered in some other state, in which case the local law of the latter state will govern." Restatement (Second) Conflict of Laws § 271(b) (1971) (emphasis added).
Defendants argue that the plain language of Section 271 directs this Court to apply Rhode Island law. This is because this trust is clearly administered in Rhode Island. (Defs.' Mem. Supp. of Partial Summ. J. 9-19.) This is evidenced by the fact that at least one of the Defendant trustees, ABC Jr., is a Rhode Island resident; Rhode Island law firms, accounting firms, and other entities were employed to assist in trust administration; the Chace family entity, Point Gammon, is based in Rhode Island; and trust documents obtained through discovery in this matter list Rhode Island as the address for the M2K Trust. Id.; See Pls.' Mem. in Opp'n to Partial Summ. J. 17. Therefore, Defendants contend that this Court should apply Rhode Island law in this matter.
Plaintiffs' first argue that because there is no Rhode Island case law applying Section 271, the Section therefore does not apply. (Pls.' Mem. in Opp'n to Partial Summ. J. 12.) Regardless, Plaintiffs argue that for Section 271 to apply, the Court must also consider the intent of the Testator and Plaintiffs argue that there is not enough evidence to demonstrate the Testator's intent to have Rhode Island law apply. Id. at 12-16.
The above evidence cited by Defendants clearly demonstrates that Rhode Island was the place of administration for this trust. Additionally, the administration provision of the M2K Trust at issue, and described below, grants the trustees the broadest possible authority to administer the trust as the trustees see fit. See Defs.' Ex. D, at 10. This administration provision invalidates Plaintiffs' argument regarding the Testator's intent. (Pls.' Obj. 12.) The plain language of the Restatement (Second) does not direct this Court to consider the Testator's intent and even if the language did, the Testator gave the trustees the maximum amount of authority to administer the trust in accordance with the trustees' preferences. See Restatement (Second) Conflict of Laws § 271(b) (1971); Defs.' Ex. D, at 10.
As described above, in support of the argument that this Court should apply Rhode Island law, Defendants cite several reasons that the trust, created by will, at issue in this matter is administered under Rhode Island law. (Defs.' Mem. Supp. of Partial Summ. J. 9-19.) Based on the plain language of Section 271, Defendants argue that the M2K Trust is clearly administered in Rhode Island necessitating an application of Rhode Island law. See id. Further, Defendants note that Plaintiffs in this matter chose to file this lawsuit in the State of Rhode Island, further indicating an assumption that Rhode Island law applies based on the choice of forum. Id. at 11-12.
This Court finds Defendants' arguments in support of the M2K Trust being administered in Rhode Island, necessitating the application of Rhode Island law, meritorious. Based on the multiple factors cited by Defendants indicating that the M2K Trust is administered in Rhode Island, Section 271 of the Restatement (Second) dictates that Rhode Island law should apply to the instant matter. Restatement (Second) Conflict of Laws § 271(b). While it is true, as Plaintiffs contend, that the Testator who created the will containing the M2K Trust died in the State of Florida, Section 271 clearly states that Rhode Island law should govern the trust if the trust is being administered in the State of Rhode Island. See Pls.' Mem. in Opp'n to Partial Summ. J. 9; Restatement (Second) Conflict of Laws § 271(b) (1971). Therefore, this Court finds that Rhode Island law governs this matter.
In an attempt to argue that Florida law applies to the instant matter, Plaintiffs contend that because the will including the M2K Trust directs that Florida law apply to certain distributions to the Testator's issue, it cannot manifest an intent to have Rhode Island law apply to matters related to trust administration. (Pls.' Mem. in Opp'n to Partial Summ. J. 15.) However, based on the will creating the M2K Trust itself, it clearly provides the trustees with the ability to administer the M2K Trust under the laws of the State of Rhode Island. See generally Defs.' Ex. D. With respect to the will's management provisions, the will states that:
"The trustee, in addition to and not in limitation of all common law and statutory authority, shall have the broadest discretionary powers of investment, reinvestment and management over the trust established under this my will . . . ." See Defs.' Ex. D, at 10.
Based on the broad powers granted to the trustees under the will at issue, the trustees clearly received the maximum possible authority in the ability to administer the M2K Trust. Id. Because the facts and circumstances surrounding the administration of the M2K Trust clearly demonstrate that Rhode Island law should govern aspects related to trust administration pursuant to Section 271 of the Restatement, it is irrelevant for the purposes of the present action that a different provision of the will at issue calls for the application of Florida law to certain distributions. See Restatement (Second) Conflict of Laws Ch. 10, Topic 1. ("The local law of one state may be applied to an issue of validity and the local law of another state applied to an issue of administration or to an issue of construction.")
D
Rhode Island Law Still Warrants the Application of Rhode Island Law under a Torts Analysis
Separately, Rhode Island's conflict of laws doctrine would require the application of Rhode Island law if this Court were to categorize this action as a tort for conflict of laws purposes. Although, as Defendants assert, the place of the alleged injury is hard to determine because the majority of the M2K Trust is marketable securities, the place where the conduct causing the injury is exclusively located in Rhode Island. (Defs.' Mem. Supp. of Partial Summ. J. 16.) Additionally, Defendants note that the residence of the parties varies, but Rhode Island is the most common domicile of the parties. Id.; Pls.' Am. Compl. 1-3. Further, the place where the relationship of the parties is centered, Point Gammon, the entity which houses the M2K Trust documents, is located in Rhode Island. (Defs.' Mem. Supp. of Partial Summ. J. 16.) The location where the alleged torts were committed is also in Rhode Island and the real estate holdings that Plaintiffs claim are indicative of self-dealing transactions are similarly located in Rhode Island. Id.; Pls.' Am. Compl. 6-11. Therefore, because (1) the place where the conduct causing the injury occurred is clearly located in Rhode Island; (2) Rhode Island serves as the most common domicile of the parties; and (3) the place where the relationship of the parties is centered is Rhode Island, this Court finds that Rhode Island law still applies under a torts analysis. See Harodite Industries, Inc., 24 A.3d at 534.
To the extent that this Court is additionally required to analyze policy considerations for conflict of laws purposes, this Court finds that (1) an application of Rhode Island law to trusts administered in Rhode Island would enhance the predictability of results; (2) an application of Rhode Island law in the instant matter would both enhance and prevent confusion with respect to the maintenance of interstate and international order; (3) an application of Rhode Island law would greatly simplify the judicial task; and (5) Rhode Island's more flexible and common law approach to trust related issues constitutes a better rule of law. See Harodite, 24 A.3d at 534. (Highlighting policy considerations for conflict of laws analyses.)
IV Conclusion
Based on the foregoing, Defendants' Motion for Partial Summary Judgment is granted. Counsel shall submit the appropriate order for entry.