Passero v. Fitzsimmons, 92 Mass. App. Ct. 76

Background

Settlor created a trust (1999); one quarter held in a discretionary trust for Elaine Passero and her children Paul and Alicia; upon Elaine's death remaining balance to Paul and Alicia.
After settlor died (2001), trustees (Madeline Lia and Paula Fitzsimmons) administered the trust, paid storage fees for Elaine’s personal property for ~15 years, and used trust assets for trustee and attorney fees and litigation expenses.
Elaine received little communication and only early accounting statements; defendants provided annual accounts to other beneficiaries but not to Elaine for many years; defendants refused to disclose the storage facility’s location when requested.
Elaine’s trust share declined materially (from ~$542k to ~$463k by 2013, then to ~$250k by 2016) although she had received no distributions; she filed suit in Probate and Family Court (Aug. 2013).
The Probate judge found breach of trust (imprudent depletion of assets), disallowed certain trustee fees, removed the trustees, ordered repayment of storage and unaccounted sums, appointed Paul and Alicia as successor trustees, and ordered $4,000/month distributions to Elaine.
On appeal the court affirmed breach, fee disallowance, removal, and repayment orders but vacated the appointment of Paul and Alicia and the command for fixed monthly distributions, and remanded for appointment of a disinterested successor trustee with discretionary distribution authority per the trust.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether paying 15 years of storage fees from Elaine’s share was a breach of trust	Passero: trustees imprudently depleted trust, breached fiduciary duties by paying storage without authorization and failing to account	Trustees: had broad discretionary power; payments were within discretion; exculpatory clause shields them	Court: breach of trust; trustee discretion limited by fiduciary standards; payments were imprudent and showed reckless indifference, so exculpatory clause unenforceable
Whether exculpatory clause shields trustees from liability	Passero: clause unenforceable where breach committed in bad faith or with reckless indifference	Trustees: clause absolves liability unless wilful default/gross negligence proven	Court: clause unenforceable here because judge found reckless indifference/wilful default; trustees liable
Whether trustees should be removed	Passero: removal warranted due to persistent failure, hostility, lack of impartiality, and depletion of assets	Trustees: removal unwarranted given discretion and some fees allowed	Court: removal affirmed — persistent failure, hostility, and imprudent administration justified removal
Whether judge properly appointed beneficiaries (Paul & Alicia) as successor trustees and ordered fixed monthly distributions	Passero: appointment and distribution order appropriate to protect her interests	Trustees: appointment/distribution order acceptable	Court: vacated — Paul and Alicia are interested beneficiaries disqualified from exercising certain powers; judge lacked authority to compel fixed distributions and modified trust terms; remand for disinterested trustee with discretionary authority per trust
Whether judge was biased and whether fee disallowance was improper	Passero: judge acted properly and credited her evidence	Trustees: judge biased; improperly disallowed some fees and prevented rebuttal witnesses	Court: no bias; fee adjustments supported by record; failure to call witnesses at trial waived

Key Cases Cited

Woodward Sch. for Girls, Inc. v. Quincy, 469 Mass. 151 (review for clear error in finding trustee breached fiduciary duty)
Old Colony Trust Co. v. Sillman, 352 Mass. 6 (trustee discretion must be exercised according to fiduciary principles)
Fine v. Cohen, 35 Mass. App. Ct. 610 (broad discretionary powers limited by fiduciary duties)
New England Trust Co. v. Paine, 317 Mass. 542 (wilful default includes reckless indifference to beneficiary interests)
Liteky v. United States, 510 U.S. 540 (judicial rulings alone ordinarily do not establish bias)
Demoulas v. Demoulas Super Markets, 424 Mass. 501 (factfinder credibility determinations reviewed for clear error)
Shear v. Gabovitch, 43 Mass. App. Ct. 650 (removal appropriate when hostile feelings impair administration)
Matter of the Trusts Under the Will of Crabtree, 449 Mass. 128 (standard of review for trustee removal)
E.C.O. v. Compton, 464 Mass. 558 (credibility assessments fall to the judge)
Castricone v. Mical, 74 Mass. App. Ct. 591 (appellate deference to trial judge on witness credibility)