Cleary v. Cleary

• Decision Date: 14 April 1998
• Parties: William J. CLEARY, Jr. v. Robert B. CLEARY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 955

692 N.E.2d 955

427 Mass. 286

William J. CLEARY, Jr. v. Robert B. CLEARY.

Supreme Judicial Court of Massachusetts Middlesex.

Argued March 5, 1998.

Decided April 14, 1998.

Joseph F. Ryan, Boston, for plaintiff.

Harold Hestnes, Boston, for defendant.

Before WILKINS, C.J., and ABRAMS, LYNCH, GREANEY, FRIED, MARSHALL and IRELAND, JJ.

FRIED, Justice.

Two brothers, the plaintiff, William Cleary, and the defendant, Robert Cleary, were the nephews of the late Mary O'Connell. The plaintiff challenges a transaction that occurred shortly prior to Mary's death, in which the defendant, Mary's insurance agent and attorney-in-fact, assisted her in designating himself the beneficiary of two annuity policies worth approximately $446,000. We hold that the defendant bore the burden of proving that in rendering assistance he did not breach his fiduciary duty to Mary, and remand the case to the Superior Court.

I

In 1984, the defendant, a licensed insurance agent, assisted Mary in acquiring four annuity policies--designated S56, S57, S58, and S59--each of which provided the owner with the amount invested plus a guaranteed rate of interest if the policy matured prior to the owner's death or provided a beneficiary with that amount if it matured after the owner's death. ¹ Each policy included the following provision:

"Change of Beneficiary must be in written form satisfactory to the Company and signed by the Owner. The change will be effective as of the date of signing by the Owner, whether or not the Owner or Insured is living at the time of receipt at the Home Office of the Company...."

At the time the policies were issued, Mary provided that the proceeds were to be distributed 65% to the defendant and 35% to the plaintiff. In 1988, Mary changed the designated beneficiary for each of the four policies from the brothers to her estate. At that time, William and Robert would have benefited equally under Mary's will. In 1989, Mary changed her will, adding some specific bequests but leaving the brothers as equal residuary beneficiaries.

Because policies S58 and S59 were due to mature in 1989, the defendant presented Mary in December, 1989, with a form, an "APP-486" used for this purpose, so that she could extend the policies' maturity dates. The record does not show whether the APP-486 form was blank when Mary signed it or whether the defendant filled it in prior to her signature. Apparently it was the defendant's practice to have clients sign blank forms that he would then fill in at his office. In 1990, policies S56 and S57 matured. The defendant did not immediately extend their dates of maturity.

In 1990, the plaintiff and the defendant had a business dispute, as a result of which they were no longer speaking to each other. The defendant claims that, in the summer of 1990, Mary asked him to get her "the forms" so that she could designate him as the sole beneficiary of the four insurance policies. The defendant sent a service request form to New England Mutual Life Insurance Company (New England Mutual Life) to initiate this process, although the agency never received the request and the plaintiff claims that the defendant did not take such action. On December 10, 1990, Mary executed a new will, reducing the number of specific bequests, keeping the plaintiff and the defendant as equal residuary beneficiaries, and naming the defendant as her executor and the plaintiff the alternate executor. She also gave the defendant a durable power of attorney. On December 19, 1990, Mary designated the defendant as the beneficiary of a $5,000 Boston Mutual Life Insurance Company policy. In January, 1991, the defendant, acting under his power of attorney, took control of Mary's checking account.

At the end of January, 1991, New England Mutual Life again notified the defendant that policies S56 and S57 had matured and needed to be acted on. On January 29 or 30, the defendant brought Mary an APP-486 form at her nursing home. He testified that he told her that the form would extend the maturity date on two of the four policies and that the form would designate him as the sole beneficiary, as she had requested some five months prior. He did not tell her which of the four policies he was referring to, and there is conflicting testimony whether the form was blank when Mary signed it. Apparently the defendant had Suzanne Sciarappa assist him with filling out the form at his office. Sciarappa testified that originally she listed policies S58 and S59 on the form, although the defendant had previously extended the maturity dates on those annuities. Policies S58 and S59 were collectively worth approximately $115,000. Sciarappa later wrote over these numbers, changing them to policies S56 and S57--worth approximately $446,000. Mary did not initial these changes.

The defendant testified that he had never before used an APP-486 form to change the beneficiary on an annuity. Normally a change of beneficiary form would be used, such as the form used when Mary designated her estate as the beneficiary of the four policies. The defendant asserts, however, that Sciarappa telephoned New England Mutual Life prior to executing the APP-486 form and asked whether such a form could be used to change the beneficiary on an annuity. According to Sciarappa, New England Mutual Life indicated that an APP-486 form could be used for that purpose. The plaintiff contests this evidence, claiming that Sciarappa did not call New England Mutual Life until after the APP-486 form was already submitted. He also notes that New England Mutual Life requires that any overwrites on a change of beneficiary form be initialed by the owner.

On February 14, 1991, New England Mutual Life issued endorsements stating that policies S56 and S57 had been extended. The endorsements did not mention a change of beneficiary. Mary died on March 11, 1991. On March 28, 1991, the defendant brought New England Mutual Life a service request form, dated October 29, 1990, that he claimed had been in his files since that time. He then attempted to collect on all four of the policies. On review, New England Mutual Life determined that it would pay the defendant on policies S56 and S57--because of the APP-486 form--but not on policies S58 and S59.

On December 23, 1992, after the plaintiff received an accounting of the estate that showed that the estate had paid significant Federal income taxes but did not show assets justifying such tax payments, he discovered that $446,000 had been paid to the defendant on policies S56 and S57 and that the defendant had used estate proceeds to pay the taxes on those policies. On May 12, 1993, after unsuccessfully seeking answers from the defendant regarding these matters, the plaintiff sent a G.L. c. 93A demand letter requesting that the defendant rectify problems surrounding the administration of the estate. In response, the defendant agreed to reimburse the estate for the money used to pay the taxes on the two policies.

In August, 1993, the plaintiff commenced this action, alleging fraud, breach of fiduciary duty, breach of contract, recovery for money had and received, and violations of G.L. c. 93A, § 9. The case was tried in June, 1995. The trial judge retained all counts except the fraud count, which he submitted to the jury. The central issue at trial was whether Mary intended to designate the defendant as the sole beneficiary of policies S56 and S57 when she signed the APP-486 form. On that point, the defendant introduced testimony from Mary's lawyer and Mary's friend, Virginia Scott, that Mary was upset with William prior to her death because he did not visit her at her nursing home and did little for her. Scott testified that Mary had said she "would very much like to leave [the plaintiff] out of [her] will."

The judge submitted the following special question to the jury on the issue of fraud:

"Did Mary J. O'Connell sign an APP-486 Form on or about January 30, 1991 with the intent that Robert Cleary be the sole beneficiary of her annuities [S56] and [S57]?"

The jury returned an affirmative response, which disposed of the fraud claim. The judge then considered the other causes of action. The judge rejected the contract action, which alleged that the defendant was in breach of the annuity contracts entered into between New England Mutual Life and Mary, because he found that the annuity policies only required that a change in beneficiary be in written form satisfactory to the issuer, and the APP-486 form signed by Mary was deemed acceptable by New England Mutual Life. He likewise found no breach of G.L. c. 93A nor grounds for a claim for money had and received. Finally, the judge "rule[d] that Robert fulfilled his fiduciary duty to Mary and that there [was] no basis for concluding there was impropriety on Robert's part." The Appeals Court, in a brief memorandum issued pursuant to its rule 1:28, adopted the conclusions of the judge and stated that "there is no basis for disturbing the judgment." 43 Mass.App.Ct. 1112, 684 N.E.2d 1212 (1997). We granted the plaintiff's application for further appellate review.

II

The plaintiff's central argument is that the judge erred in the treatment of the claim that the defendant breached a fiduciary duty to Mary. In general, a party challenging a will or other document on the ground that it was procured through fraud or undue influence bears the burden of proving the allegation by a preponderance of the evidence. See, e.g., Tarricone v. Cummings, 340 Mass. 758, 762, 166 N.E.2d 737 (1960); Mirick v. Phelps, 297 Mass. 250, 252, 8 N.E.2d 749 (1937); Hogan v. Whittemore, 278 Mass. 573, 578, 180 N.E. 526 (1932). The burden shifts, however, when a fiduciary benefits from a transaction with his principal. ² In the context of attorney-client relations, we have stated that an attorney "who bargains with his client in a matter of advantage to himself must show, if the transaction afterwards is called in question, that...