Bartlett v. Dumaine, 85-323

• Decision Date: 02 October 1986
• Docket Number: No. 85-323,85-323
• Citation: 523 A.2d 1,128 N.H. 497
• Parties: Charles W. BARTLETT, et al. v. Pierre DUMAINE, et al.
• Court: New Hampshire Supreme Court

Page 1

523 A.2d 1

128 N.H. 497

Charles W. BARTLETT, et al. v. Pierre DUMAINE, et al.

No. 85-323.

Supreme Court of New Hampshire.

Oct. 2, 1986.

Devine, Millimet, Stahl & Branch, Manchester (Joseph A. Millimet on the brief and orally), and Gaston Snow & Ely Bartlett, Boston, Mass. (Alan L. Lefkowitz & a. on brief and orally), for petitioners.

McLane, Graf, Raulerson & Middleton, Manchester (Robert A. Raulerson on brief and orally), Hamblett & Kerrigan, Nashua (Joseph M. Kerrigan on the brief), Richardson, Tyler & Troubh, Portland, Me. (Robert J. Piampiano on the brief and orally), and Lord, Day & Lord, New York City (John W. Castles III on the brief and orally), for respondents.

KING, Chief Justice.

This case involves a dispute between several beneficiaries and the trustees concerning the management of a business "complex." The complex includes "Dumaines," a New Hampshire trust; Dexter Trust, a Massachusetts trust; several smaller "satellite" trusts also formed in Massachusetts; and the Amoskeag Company, a Delaware holding company owned in large part by Dumaines, Dexter, and the satellite trusts.

This litigation was initiated by a petition for declaratory judgment filed by the trustees of Dumaines and the Dexter Trust. The trustees requested a decree stating that they have no duty to furnish accountings of the Dexter Trust to discretionary income beneficiaries of Dumaines. Several Dumaines income beneficiaries, who are respondents in this case, had demanded such an accounting because the Dumaines Trust has a vested remainder interest in the Dexter Trust; that is, when the current income beneficiary of Dexter dies, the corpus of Dexter will pour over into Dumaines. In response to the declaratory judgment proceedings, the trust beneficiaries brought further claims which are discussed below. The Master (Robert I. Eaton, Esq.), who was approved by both sides, sat during a seventeen-day hearing and found that the Dumaines' beneficiaries were not entitled to an accounting of Dexter. He also found no merit to any of the allegations of breach of trust made by the beneficiaries against the Dumaines' trustees. Finally, the master ruled that the respondents were not entitled to attorneys' fees. The Superior Court (Bean, J.) approved the master's report, and the respondents appealed to this court. We affirm that part of the decision involving the allegations of breach of trust by the Dumaines' trustees and regarding the award of attorneys' fees. We reverse and vacate that part of the trial court's decision relating to whether, how, and to whom Dexter's trustees must account. We hold that a Massachusetts court is the proper forum for the consideration of that issue.

The builder of the Dumaine family business complex was Frederic C. Dumaine, Sr. He was responsible for the creation of the trusts involved in this litigation, and his contributions formed the res of each trust. Dumaine, a New England business leader, had seven children, four of whom were living at the time of the master's report.

In 1911, the elder Dumaine started the Amoskeag Company, originally formed as a voluntary association and later incorporated under Delaware law in 1965. Amoskeag Company today owns Fanny Farmer Candy Shops, Inc., Fieldcrest Mills, Inc. and several other companies.

Dumaines Trust was created by Frederic C. Dumaine, Sr., and others in 1920 by a declaration of trust empowering the trustees "to acquire property of various kinds and from various sources and in their associated capacity to carry on business under and in accordance with the provisions" of the declaration of trust. Dumaines is designed to accumulate capital. The trustees must add the first half of the trust's annual net income to the trust corpus. They may "in their sole discretion" pay the other half of the annual net income to such of Frederic C. Dumaine, Sr.'s legitimate children and grandchildren, in such amounts as the trustees decide. By its terms, Dumaines will remain in existence twenty-one years after the death of the settlors and their children living at the time of Dumaines' creation. The settlors, in the trust declaration, recommended to the eventual Dumaines' remainder interests that the distributed assets of Dumaines be put back into a Dumaines-like trust.

In 1926 Frederic C. Dumaine, Sr., created seven separate trusts with beneficial interests for each of his seven children (the so-called satellite trusts). Each of these trusts provides that one half of the annual income shall be added to principal and that the other half may in the sole discretion of the trustees, be paid quarterly in the following year to the particular child beneficiary. Dumaine funded them in unequal amounts and named his son, Frederic C. Dumaine, Jr. ("Buck") one of the two trustees of each of these satellite trusts. Upon the death of the income beneficiary of a satellite trust, the trust corpus pours over into Dumaines.

The Dexter Trust, whose nominal settlor was William Dexter, was actually created by Frederic C. Dumaine, Sr. in 1932, names Buck as trustee and provides that Buck will be the sole discretionary income beneficiary. The trustee or trustees may, within their discretion, distribute all net income to the beneficiary. If Buck had predeceased his father, the elder Dumaine would have become the income beneficiary. The trust instrument also provides that upon the death of the survivor of Buck and his father, the trust estate shall be added to the Dumaines Trust corpus and administered as a part of it. Frederic C. Dumaine, Sr., died on May 27, 1951, and Buck survived him. Upon Buck's demise, the assets of the Dexter Trust are to be added to Dumaines. Buck's beneficial interest in Dexter is in addition to his interest in his own 1926 satellite trust.

In the event of a vacancy in the office of trustee of the Dexter Trust, Frederic C. Dumaine, Sr., was vested with the exclusive power to appoint the successor trustee or trustees, including himself, and upon his decease, this authority vests in the trustees of Dumaines, who can elect trustees to the Dexter Trust by majority vote. Although Buck, the income beneficiary of Dexter, was named the sole trustee when the trust was created, he resigned on March 6, 1942, as trustee of the Dexter Trust, and the successor trustees were then appointed by Frederic C. Dumaine, Sr.

Frederic C. Dumaine, Sr., along with his son Buck and his other associates, dominated both Dumaines and the Amoskeag Company. The elder Dumaine served as Amoskeag's treasurer until 1939; he was Dumaines' treasurer from 1920 to 1922 and again from 1925 to 1940. His son Buck served as Amoskeag's treasurer from 1939 to 1962; he was Dumaines' treasurer from 1922 to 1925 and from 1948 to the time of the master's report. In all, during the elder Dumaine's life, thirteen persons served both Amoskeag and Dumaines simultaneously. Six persons were paid salaries by Amoskeag while also serving as Dumaines' trustees. It appears that while the elder Dumaine was alive no distributions of income were made to discretionary income beneficiaries from any of the trusts.

After Frederic Dumaine Sr.'s death, Buck replaced his father as the dominant figure in the Dumaine "complex." At the same time, Buck and the other trustees of Dumaines, Dexter, and the satellite trusts have made regular, substantial distributions of income to each of the beneficiaries. Despite these income distributions, all the trusts enjoyed substantial growth in principal from 1951 to 1982.

On a number of occasions since their father's death, several of the elder Dumaine's children have expressed dissatisfaction with the fact that unlike Buck, they have no control over Dumaines or the 1926 satellite trusts, particularly with regard to who serves as trustee and what investments will be made with trust assets. When, in the late 1970s, Frederic C. Dumaine, Sr.'s son Pierre Dumaine ("Spike") sought an accounting of the Dexter Trust, the Dumaines and Dexter trustees commenced this suit.

At the outset, we must consider the duties of the trustees in managing a complex trust. In determining what the duties of the trustees are in this case, "our purpose is to effectuate the settlor's intention in creating the trust. '[I]t is well established in this jurisdiction that our courts have shown a signal regard for the intention of a settlor of a trust....' " Indian Head Nat'l Bank v. Brown, 123 N.H. 87, 91, 455 A.2d 1056, 1058 (1983) (quoting Indian Head Nat. Bank v. Rawls, 105 N.H. 142, 144, 194 A.2d 767, 769 (1963)). We will give effect to the settlor's intent unless that intent is contrary to statute or public policy. See In re Frolich Estate, 112 N.H. 320, 327, 295 A.2d 448, 453 (1972).

In determining the settlor's intent, courts should look to the terms of the trust. In a case such as the present one, where a court is construing an inter-vivos trust evidenced by a written instrument, "the terms of the trust are determined by the provisions of the instrument as interpreted in the light of all the circumstances and ... other [competent] evidence of the intention of the settlor with respect to the trust...." Restatement (Second) of Trusts § 4, comment (d) (1959). "The relationship of the settlor to the beneficiaries and [the] duties toward them are among the facts to be considered by a court trying to place itself in the shoes of the creator of the trust in order to ascertain what [was] intended by the trust instrument." Indian Head Nat. Bank v. Rawls, supra 105 N.H. at 145, 194 A.2d at 769 (citations omitted). Although extrinsic parol evidence is inadmissible to vary or contradict the express terms of a trust, such evidence may be received to determine the settlor's intent where the language used in the trust instrument is ambiguous. Indian Head Nat'l Bank v. Brown, supra, 123 N.H. at 91, 455 A.2d at 1058.

The settlor's intention is a question of fact to be determined by competent evidence, and not by rules of...