419 Mass. 685 | Mass. | 1995
This dispute between two brothers, Gerald Roberts, the plaintiff, and Jason S. Roberts, the defendant, concerns the ownership of two contiguous parcels of commercial real estate located in Reading. The case was tried before a Land Court judge. The judge found for the defendant, and entered judgment to that effect. The plaintiff appealed. We allowed his application for direct appellate review. We affirm.
The two brothers are the children of Harry and Rose Rosenblatt. In 1968, the family purchased the property at issue and opened a Midas franchise on it. Title to the property was • taken in a trust, known as the Harro Trust. The declaration of trust, which was duly recorded in the registry of deeds, was executed by Gerald, as sole trustee.
Approximately one and one half years after the creation of the trust, the family sold the Midas franchise. Since then, the property has been leased to outsiders. In July, 1973, a first amendment to the Harro Trust was executed before a notary and recorded. Jason was appointed cotrustee and a paragraph was added providing that, “[u]pan the death of both beneficiaries hereunder the Trustees shall transfer and convey the specific assets constituting the Trust estate ... to the Trustees as tenants in common.”
Due to Gerald’s failure to repay debts, his inattention to the affairs of the trust and Harry’s suspicions that Gerald was using the trust to finance an extravagant life style, Harry and Rose decided that Gerald was not to share in the trust’s assets. On March 30, 1976, they executed before a notary and recorded a second amendment to the Harro Trust. The amendment removed Gerald as trustee and left Jason as sole trustee. The paragraph added by the first amendment was replaced with a provision that, “[ujpon the death of both beneficiaries hereunder, the Trustee shall have full power and authority to deal with the Trust Property in his own right and the Trust shall be deemed to have terminated.”
The Harro Trust was a nominee trust: “an entity created for the purpose of holding legal title to property with the trustees having only perfunctory duties.” Morrison v. Lennett 415 Mass. 857, 860 (1993), quoting Johnston v. Holiday Inns, Inc., 595 F.2d 890, 893 (1st Cir. 1979). “Unlike ... a [traditional trust] the trustees of a nominee trust have no power, as such, to act in respect of the trust property, but may only act at the direction of . . . the beneficiaries.” Morrison, supra.
Nominee trusts have characteristics of both agency and trust; the trustee is an “agent-trustee” who holds title to property “for the benefit of and subject to the control of another.” Restatement (Second) of Agency, supra at § 14B, at 62.
“Gifts over” are not typical of nominee trusts; nominee trusts do not normally provide for disposition of the res to anyone other than the beneficiaries.
When they executed the first amendment, Harry and Rose intended a present transfer of a future interest, albeit subject to recall, to Gerald and Jason. In executing the second amendment, they recalled that gift and transferred a future interest to Jason only.
“[A] trust is ‘not testamentary and invalid for failure to comply with the requirements of the Statute of Wills merely because the settlor-trustee reserves a beneficial life interest [,] power to revoke and modify the trust . . . [and] controls the administration of the trust.’ ” Sullivan v. Burkin, 390 Mass. 864, 869 (1984), quoting Restatement (Second) of Trusts § 57 comment h (1959).
In National Shawmut Bank v. Joy, supra, we said that an inter vivas trust with a gift over of the trust estate on the settlor’s death was a valid nontestamentary transfer even though the settlor retained a beneficial life estate, a general power of appointment, the power to withdraw principal from the trust and the power to “alter, amend or revoke” the trust.
In Sullivan v. Burkin, supra, we held that a trust with remainder interests given to others on the settlor’s death was not testamentary in character where the settlor was sole trustee and retained a broad power to modify or revoke the trust, the right to receive income, and the right to invade principal during his life. Id. at 867-868.
Because the gift over in the Harro Trust is not materially different from the gifts over in Sullivan and Joy, it should be treated similarly. We therefore hold that the gift over was a valid inter vivas transfer.
Judgment affirmed.
The amendment provided that: “Gerald Roberts, now of Needham, Massachusetts, shall not be appointed trustee of this Trust. In the event that the current Trustee, Jason S. Roberts, should die, resign, or be unable to serve for any reason, the beneficiaries may agree upon a successor Trustee, other than the said Gerald Roberts. In the event that the beneficiaries are unable to agree, or both of them are unable by reason of death or disability to participate in the selection of a successor Trustee; the Middle-sex Probate and Family Court shall be requested to appoint a successor Trustee. It is specifically requested, however, that the said Gerald Roberts shall not be appointed to this position or any other fiduciary position under this Trust. In the event that one of the beneficiaries is unable by reason of death or disability to participate in the appointment of a successor Trustee to Jason Roberts, then the other beneficiary may appoint such a successor. Said successor may not, however, be Gerald Roberts.”
The typical features of a nominee trust are: “(1) the names of the beneficiaries are filed with the trustees rather than being publicly disclosed; (2) a trustee may serve simultaneously as a beneficiary; (3) the trustees lack power to deal with the trust property except as directed by the beneficiaries; (4) a third party may rely on the disposition of trust property pursuant to any instrument signed by the trustees, without having to inquire as to whether the terms of the trust have been complied with; and (5) the beneficiaries may terminate the trust at any time, thereby receiving legal title to the trust property as tenants in common in proportion to their beneficial interests. . . . The third listed feature is the key to the nominee na
We note that in the present case, while the beneficiaries had a great deal of control, their power was not unlimited: they could not, by virtue of the third amendment, appoint Gerald as trustee; they could not dispute a third party’s rights under any transaction entered into by the trustees, purportedly on behalf of the trust; they gave the trustees the power to administer the cash of the trust estate; they could not revoke or modify the trust except by formal written instrument; and they could not revoke the trust by a will, see Leahy v. Old Colony Trust Co., 326 Mass. 49, 53 (1950), quoting Restatement of Trusts § 330 comment j (1939) (“If the settlor reserves a power to revoke the trust by a transaction inter vivas, as, for example, by notice to the trustee, he cannot revoke the trust by his will”).
Generally, the beneficiaries receive title as tenants in common upon termination of a nominee trust. In re Grand Jury Subpoena, supra at 48. Johnston v. Holiday Inns, Inc., 595 F.2d 890, 893 (1st Cir. 1979).
The plaintiff argues that the beneficiaries could not have intended to transfer an interest in the trust estate because, if a successor trustee were appointed by the court under the terms of the third amendment, the interest would go to a stranger. A successor trustee would be appointed only on Jason’s resignation, death or inability to serve as trustee. Absent Harry, Rose, and Jason all dying simultaneously, the beneficiaries would have had ample opportunity to avoid this contingency by agreeing on a successor trustee or by amending or revoking the trust.
The fact that the gift over achieves the same ends as a testamentary transfer is immaterial. See National Shawmut Bank v. Joy, 315 Mass. 457, 471 (1944) (“If an owner of property can find a means of disposing of it inter vivas that will render a will unnecessary for the accomplishment of his practical purposes, he has a right to employ it. The fact that the motive of a transfer is to obtain the practical advantages of a will without making one is immaterial”).
We note that, in the Harro Trust, the beneficiaries, who had control over the trust, were not the actual settlors. They did not execute the trust instrument. The res was purchased by means of two mortgages and an advance from Roberts Enterprises, Inc., a corporation funded by Harry, but owned by Gerald and Jason. The parties believed and it is not disputed that the property belonged to Harry and Rose. The beneficiaries were the settlors for all intents and purposes. See Sullivan v. Burkin, 390 Mass. 864, 868 (1984) (“For the purposes of determining whether a trust is testamentary . . . the origin of the assets, totally at the disposal of the settlor once received, should make no difference”).
We also note our opinion in Greeley v. Flynn, 310 Mass. 23 (1941). In that case “the settlor was herself the trustee and had every power of control, including the right to withdraw principal for her own use. Yet the gift over at her death was held valid and not testamentary.” Joy, supra at 476-477. That case differs from the present one in that it dealt with a savings bank trust. Greeley, supra at 25.
The plaintiff tries to distinguish this case by arguing that the power of control of a trustee is a limited power which can only be exercised in accordance with the terms of the trust. This distinction fails because where, as in Sullivan, such power is combined with a beneficial life estate, the right to all income and principal, and the power to modify or revoke the trust at will, it is, essentially, an unrestricted power.
The defendant requests reasonable attorney’s fees without setting forth any grounds therefor. We deny the request.