Thе Reservoir Estates Realty Trust was a realty trust established to acquire, develop, and sell a residential subdivision in Framingham. Four years after all of the trust’s real estate assets were sold, Rosario L. Lattuca, a cotrustee, and his wife, Grace Lattuca, a beneficiary, filed suit, individually and on behalf of the trust, against Finar Robsham,
1. Facts. We summarize the facts found by the judge. In 1989, Phillip Ottaviani, Jr., successfully bid on a twelve-lot residential subdivision in Framingham at a foreclosure auction. Five lots had partially constructed houses on them, two others had foundations, and the remaining five were vacant. Robsham, a mortgage lender and Philip Jr.’s friend, agreed to lend Philip Jr., $52,500 for the bid deposit. After Philip Jr. unsuccessfully attempted to obtain additional financing from other sources for the balance of the purchase price, Robsham аgreed to be the project lender for eight lots. Robsham recognized that Philip Jr. lacked the experience to manage the project, and because he himself had no interest in undertaking its management, Rob-sham proposed creation of a real estate trust in which Lattuca, who had the necessary experience, would participate in management of the project.
Robsham and Lattuca previously had engaged in business ventures together, and they socialized and traveled together with their wives. Robsham also had a personal and professional relationship with Philip Jr., to whom he had lent money in the past for business purposes. Robsham proposed that Lattuca would act as cotrustee with Philip Jr., while Joyce Robsham, Grace Lattuca, and Philip Jr. would be beneficiaries, sharing the profits of the subdivision project. The Reservoir Estates Realty Tmst was thus declared as a trust on November, 27, 1989.
In August or September, 1991, Robsham went to Garrahan’s office to sign several deeds for the sale of the lots. The deed to lot four was blank when Lattuca signed it. By January, 1992, the landscaping and road work was complete and Robsham had listed lots four and six through twelve for sale with multiple brokers based on prices suggested by the brokers. Lot four received no bids in response to its original listing price of $350,000, or to the reduced listing price of $325,000. Robsham personally purchased lot four for $300,000 that same month, January, 1992, by deed
Four years later, after Lattuca and Robsham had a falling out over an unrelated matter, Lattuca retained counsel tо perform a title search of the properties sold by the trust and repeatedly requested that Robsham and Philip Jr. provide him with copies of the trust’s financial statements. After discovering that Rob-sham had purchased lot four and that the trust had suffered a net loss of $300, the Lattucas filed suit.
2. Chapter 93A claim. The judge concluded that the Lattucas’
Chapter 93A does not apply to internal disputes between parties who associated “in the interests of forming a business venture together.” Szalla v. Locke,
3. Prejudgment interest. The judge awarded damages of $223,264.00 on the claim for breach of fiduciary duty with interest in the sum of $125,224.67. The Lattucas contend that the judge erred in declining to order the calculation of prejudgment interest based on a contrаct, rather than a tort, theory of liability. An assistant clerk calculated prejudgment interest at the rate of interest for tort actions from the date the complaint was filed. The Lattucas filed a motion to amend judgment, arguing that the “interest on damages . . . should run from the date of the breach.” The motion to amend judgement was denied.
4. Attorney’s fees. Lattuca argues that the judge erred by denying his claim against the trust for attorney’s fees because a trustee is entitled to indemnification for expenses incurred during trust administration. See Hanscom v. Malden & Melrose Gas Light Co.,
An award of attorney’s fees is generally based on the interplay of a number of faсtors, and is always a highly discretionary matter left to the judge. See Shear v. Gabovitch,
At trial the judge found that after 1990 Lattuca had relinquished virtually all duties associated with the trust even though he continued to serve as trustee. He further found that in 1991 Lattuca signed blank deeds for the lots included in the real estate trust for which he served as trustee. We infer that the judge denied the request for attorney’s fees because Lattuca contributed to the financial detriment of the trust.
5. Statute of limitations. In their cross appeal, the defendants argue that the claim for breach of fiduciary duty is barred by
The defendants point to the following facts in support of their assertion that Lattuca had “knowledge” of the sale of lot four in 1992 and “knowledge” of Philip Jr.’s failure to repay the trust in 1989. In August or September, 1991, Lattuca went to Garrahan’s office to sign several documents that he was told were deeds for the sale of the lots, including the deed to lot four, which did not yet have a buyer. Lattuca made no effort to investigate the sale of lot four until he prepared to file this action in 1996. He admitted that he “chose not to” conduct an inquiry at an earlier time. The defendants contend that Lattuca must be charged with his failure to investigate the sale of lot four earlier, and he must be charged with the requisite knowledge of the facts that triggered the running of the statute of limitations in 1992 when Robsham bought the lot.
Regarding Philip Jr.’s failure to reimburse the trust, Lattuca testified at trial that in 1989 he had been informed by Robsham that Philip Jr.’s check for $11,044 in payment of the debt had been returned for insufficient funds and that he “spoke to”
Breach of fiduciary duty is a cause of action in tort that is governed by G. L. c. 260, § 2A, which provides for a three-year period of limitation. We have said that when an action is brought against a trustee, the “cause of action does not аccrue until the trustee repudiates the trust and the beneficiary has actual knowledge of that repudiation.” Demoulas v. Demoulas Super Mkts., Inc.,
We consistently have hеld that a cause of action for breach of fiduciary duty does not arise until the beneficiary is aware that repudiation has occurred. See Demoulas v. Demoulas Super Mkts., Inc., supra at 518-519. The judge found that Philip Jr.’s repudiation of trust occurred when he “failed to repay” the trust for his personal closing costs and that “[njone of the plaintiffs had actual knowledge of any of the defendants’ transactions with the [tjrust until 1996.” We focus on what the plaintiff beneficiary actually knew, not what the trustee actually or constructively knew. Grace Lattuca was not aware that Philip Jr. had failed to repay his $11,044 debt until Lattuca viewed the “statement of the results of operations of the trust’s activities”
Even if it could be said that Lattuca made formal “demand” in the contract sense, repudiation does not occur if the trustee “instead of flatly rejecting a demand or request. . . gives some apparently good or plausible reason for his noncompliance, or promises future compliance . . . [which] may well be regarded as being more nearly a recognition of the trust than a repudiatian thereof.” Annot.,
With regard to the claim against Robsham, the record indicates that Grace Lattuca did not have actual knowledge that Robsham purchased lot four until shе learned of the results of
6. Expert testimony. The defendants argue that the judge erroneously credited expert testimony offered by the Latineas to the effect that Robsham purchased lot four from the trust at a price lower than market value. The defendants allege that the expert’s admission that she did not use a “comparable sales” approach, see Correia v. New Bedford Redevelopment Auth.,
The witness began her valuation by considering the price at which lot four was sold in 1994 in an arm’s-length transaction and adjusted that price by three per cent to account for the inflation that occurred in Framingham between January, 1992, and the fall of 1994 and thereby determined the value of the lot to have been $406,800 in January, 1992. She made no other adjustments after determining that there were no improvements made since 1992 that would have affected the sale price in 1994. She also examined public records to rule out any other explanation for the difference between the price Robsham paid for lot four and the price at which he sold it. Evidence of the market value based оn the price accepted by a third party in an arm’s-length transaction is a reliable method of valuation. See Delta Materials Corp. v. Bagdon,
The expert supplemented the evidence of the subsequent sale of lot four by considering two other sales of lots within the subdivision, sales which also occurred in 1992. Lot seven sold for $391,000 a few months aftеr Robsham purchased lot four. The judge noted that lot seven is smaller than lot four and that the house on lot seven is twenty per cent smaller than that on lot four. The second comparable sale was that of lot eleven
Here, the expert relied on market data in establishing the fair market value of lot four according to a method that considered a subsequent sale and then reasonably adjusted for factors that could have contributed to a price increase. See Burchell v. Commonwealth,
7. Existence of a trust. There is no merit to the defendants’ claim that Robsham cannot be held liable for breach of fiduciary duty because the beneficiaries granted him unfettered authority over the trust, rendering the trust invalid. The judge found that the requisite intent, property, and identifiаble beneficiaries existed in 1989 to create the Reservoir Estates Realty Trust, and there was no evidence of trust termination. The judge discredited the testimony suggesting that the trust served as a straw for
8. Payment to trustee. The defendants challenge the judge’s finding that a $10,000 payment made from the trust to Philip Sr. in 1992 was improper. At trial, the defendants attributed the payment of $10,000 to Philip Sr. to snowplow and lawn watering services rendered. There was, however, no documentation or invoice for this transaction and Lattuca, a cotrustee, never authorized the payment. The judge did not err in concluding that the payment constituted unjust enrichment because it was transferred absent trustee approval and proper accounting.
9. Survival of G. L. c. 93A claim. We need not consider whether a claim under G. L. c. 93A, § 11, survives the death of the defendant becаuse we affirm the judge’s dismissal of that claim.
Judgment affirmed.
Notes
Einar Robsham died after we granted further appellate review but before oral argument. Counsel for Robsham filed a suggestion of death and requested a stay of appellate proceedings, pending the appointment of a personal representative. After we allowed the motion, counsel for Robsham filed a motian to substitute Robsham’s wife, Joyce Robsham, as personal representative. The Lattucas assented to this motion. On April 2, 2004, Joyce Robsham filed a motion for partial dismissal of appeal as moot, arguing that the Lattucas’ G. L. c. 93A, § 11, claim did not survive Robsham’s death.
In their counterclaim, the defendants alleged breach of fiduciary duty by Lattuca but the judge found that the exculpatory clause in the declaration of trust was enforceable, exempting Lattuca from liability arising out of his duties as trustee. The issue is not raised on appeal.
The parties have referred to the trust as a “nominee trust.” A nominee trust, in Massachusetts practice, is a real estate title holding device, with the trustees having only perfunctory duties and acting only at the direction of the beneficiaries. See, e.g., Roberts v. Roberts,
There was testimony that the property had been listed for over one year, but this testimony implicitly wаs rejected by the judge, who found that the sale of lot four to Robsham occurred the same month that it was listed. The defendants did not challenge this finding in their motion to alter or amend the judgment and they do not argue on appeal that the judge’s finding is not supported by the evidence or is plainly wrong.
Philip Sr. had replaced Philip Jr. as cotrustee in May, 1993.
In other jurisdictions, a trustee “is entitled to indemnity for expenses not properly incurred by him if and to the extent to which he has thereby in good faith benefited the trust estate” (emphasis added). 3A A.W. Scott & W.F. Fratcher, Trusts § 245.1, at 338 (4th ed. 1988). Massachusetts appears to follow the minority rule in this area. Id. at § 245.1, at 338-339 n.1. Although the lawsuit benefited the trust, it did so only superficially; it served to rectify the financial detriment caused in part by Lattuca. This is, therefore, not an appropriate case for us to reconsider our rule.
The judge also found that Robsham breached his fiduciary duty by renting the house on lot four for a profit after purchasing it under value, by assigning the interest that Philip Jr. owed to Robsham personally as an еxpense of the trust, and by claiming $15,300 in points on a loan to the trust. The judge found that Philip Sr. also breached his fiduciary duty as trustee by knowingly receiving $10,000 from the trust without documentation and trustee approval. See infra at 216-217. The defendants, however, confine their statute of limitations argument to the Lattucas’ knowledge relative to the purchase of lot four and Philip Jr.’s failure to pay the $11,044 debt that was incurred during closing. Our inquiry likewise is so confined.
The defendants suggest that because one of the plaintiffs, Lattuca, was a named cotrustee, he had a duty to investigate the facts that gave rise to this action at an earlier time. Because the other plaintiff in this case, Grace, was a beneficiary who did not oversee trust activities and was likely unaware of any of the facts that gave rise to the breach, we decline to consider whether Lattuca’s status as cotrustee required him to investigate the claim earlier than he did. The facts of this case do not prompt us to abandon the “actual knowledge of repudiation” rule.
The defendants do not claim that the statute of limitations began to accrue in 1992 when trust affairs wound up and a financial accounting was produced.