Edinburg v. Cavers

• Decision Date: 02 July 1986
• Parties: Dorothy B. EDINBURG v. David F. CAVERS, Jr., trustee, & others 1 (and a companion case). 2
• Court: Appeals Court of Massachusetts

Page 1171

492 N.E.2d 1171

22 Mass.App.Ct. 212

Dorothy B. EDINBURG v. David F. CAVERS, Jr., trustee, & others ¹ (and a companion case). ²

Appeals Court of Massachusetts Suffolk.

Argued Feb. 13, 1986.

Decided May 19, 1986.

Further Appellate Review Denied July 2, 1986.

Geoffrey D. Wyler, Boston, for plaintiff.

George S. Abrams (Peter J. Sonnabend, Boston, with him), for Jo-Ann Edinburg Pinkowitz & others.

Michael J. Liston, Boston, for David F. Cavers, Jr.

Before GREANEY, C.J., and BROWN and SMITH, JJ.

GREANEY, Chief Justice.

In these appeals by Dorothy B. Edinburg from a judgment in the Superior Court, we are concerned with the control of the Edinburg family business, Chandler & Farquhar Company, Inc. (company). ³ The first case (no. 84-690) was commenced by Dorothy on April 16, 1981, about three months after she had started divorce proceedings against her husband, Joseph M. Edinburg. By her amended complaint, Dorothy sought to remove Joseph (who died on February 16, 1983) and Mr. David F. Cavers, Jr., a lawyer, as trustees of the Dorothy B. Edinburg Trust (DBE trust). This trust, which is irrevocable, had been established to operate the company. Dorothy alleged that Joseph and Mr. Cavers had violated their fiduciary duties and had committed numerous other acts of misconduct in handling the business of both the company and the DBE trust. The amended complaint also sought damages and included a claim under G.L. c. 93A. Dorothy's three children, remainder beneficiaries of the DBE trust, were named as defendants in the action. They counterclaimed, seeking Dorothy's removal as a trustee and cancellation of her power to appoint successor trustees.

The second case (no. 84-691) was commenced on April 16, 1982. By her complaint, Dorothy sought transfer to the DBE trust of 800 shares of the company's common stock then held by Joseph. Dorothy asserted that the shares should have been included originally in the assets of the trust because Joseph had agreed to transfer them in 1958 as part of an estate plan created by Dorothy's father to avoid taxes.

The cases were consolidated with the other pending Edinburg actions and were tried for eleven days before the probate judge of the Middlesex Division who was hearing all the Edinburg litigation. On September 9, 1983, the judge made "Findings of Fact and Conclusions of Law" pertaining to both cases and entered judgments against Dorothy. The judge ordered Dorothy removed as a trustee, struck the provisions of the trust granting her the power to appoint successor trustees, retained Mr. Cavers as a trustee, and appointed two attorneys as trustees to fill the vacancies left by Joseph's death and Dorothy's removal. He also concluded that Dorothy had not sustained her burden of proof that the 800 shares of the company's common stock held in Joseph's name actually belonged to the trust. Finally, the judge decided that Dorothy was not entitled to damages.

For background, we summarize facts found by the judge. The DBE trust was created by a deed of trust dated July 2, 1958. Creation of the trust was part of an effort begun in 1957 by Dorothy's late father to respond to an Internal Revenue Service investigation of his business and to transfer ownership of the company without incurring potential gift or estate taxes. To effect his plan, Dorothy's father had the company purchased by Joseph, who received 2,000 shares of the company's outstanding common voting stock. Joseph, as settlor of the trust, then transferred 1,200 of these shares (representing sixty percent of the common stock) into the newly-created DBE trust. Dorothy was the life beneficiary of the trust, and the children of Joseph and Dorothy the remainder beneficiaries. Original trustees were Joseph, Dorothy, and Mr. Henry L. Mason, Jr., an attorney. The trust instrument gave Dorothy the power to appoint successor trustees. Through ownership of the stock, its sole asset, the DBE trust has the controlling interest in the company. Joseph retained ownership of the remaining 800 shares (forty percent) of the company's common stock until February 5, 1981. On that date, he transferred the 800 shares to himself and Mr. Cavers as trustees under a revocable trust, the terms of which provided for the payment of the trust income to Joseph for his lifetime, and at his death the remainder to his children.

After serving from 1958 until 1972 as a trustee of the DBE trust, and as corporate counsel, director, and clerk of the company, Mr. Mason resigned. On December 30, 1972, Dorothy appointed Mr. Cavers, then a partner in a Boston law firm, as a trustee of the DBE trust to fill the vacancy left by Mr. Mason. Mr. Cavers also became clerk of the corporation and served as its corporate counsel; however, he never became a director of the corporation.

From 1958, when the DBE trust was formed, until the summer of 1980, management of the company and of the trust was uneventful and proceeded without dispute. As president and treasurer, Joseph ran the company through the period from December, 1976, until his death in 1983.

Despite assertions to the contrary, from 1958 to 1980 Dorothy never demonstrated any interest in the affairs of either the company or the trust, regardless of her position as trustee. She never questioned Mr. Mason or his successor, Mr. Cavers, with respect to any company-related matters, nor did she express any complaint about the management of the company or the administration of the trust. Throughout this time, the company was operated, as the judge found, with the "corporate informality" often seen in closely held family corporations. Corporate records showed annual meetings of shareholders. However, during the period, Dorothy neither received notice of a shareholders' meeting nor attended any of those meetings. (Because she was never a director, Dorothy did not attend directors' meetings.) Similarly, no formal meetings of the trustees of the DBE trust were held. As a trustee, Dorothy, in effect, left management of the DBE trust to the other trustees: her husband and either Mr. Mason or Mr. Cavers.

In 1966, the company created and authorized the issuance of 3,800 shares of preferred stock in addition to the 2,000 shares of common voting stock. The Hope Edinburg Trust, of which Dorothy was settlor and her daughter Hope Edinburg beneficiary, received 442 shares of the preferred stock. The balance (3,358 shares) was held in the testamentary trust established by Dorothy's father, Harry B. Braude. Dorothy and her mother were trustees and life beneficiaries of the Harry B. Braude testamentary trust. The company's articles of organization mandated the payment of a yearly dividend on the preferred stock of at least $7.00 a share. The articles further provided that if this dividend should be in default for a period in excess of one year following the close of the corporation's prior fiscal year, the preferred shareholders would acquire voting rights.

On August 22, 1980, Dorothy for the first time communicated by telephone with Mr. Cavers with respect to the operation of the company. Dorothy complained to him about the company's failure to pay preferred dividends for fiscal year 1979 and about not receiving dividends on the common stock. She made general allegations of misfeasance and corporate waste by Joseph, including a claim that he had forged her name to a document indirectly affecting the DBE trust. She also advised Mr. Cavers that she had engaged counsel to represent her. At that time, she voiced no complaint whatsoever about any action or inaction on part of Mr. Cavers, either as clerk of the corporation or as trustee of the DBE trust. Earlier in the summer, she had requested that Mr. Cavers act as a trustee of one of the children's trusts.

Other than a second short telephone conversation in September, 1980, after the preferred share dividend for fiscal 1979 had been paid, Mr. Cavers had no direct contact with Dorothy. Nor did she make any complaint about his conduct until the filing of her petition to remove him as a trustee of the DBE trust in April, 1981.

At the time Dorothy made her August 22, 1980, telephone call to Mr. Cavers, she had decided to divorce Joseph and had engaged counsel to prosecute that intention and to examine the administration of the DBE trust. Mr. Cavers did not understand that the situation between the two Edinburgs had become adversary until the August 22nd telephone conversation. Prior to the summer of 1980, there had been no indication of marital discord between the two, even to persons who worked closely with Joseph.

In December, 1980, Mr. Cavers introduced Joseph to Mr. Lawrence T. Perera, a partner in a different Boston law firm. Thereafter, Mr. Perera represented Joseph in the divorce and in the other proceedings Dorothy had commenced against him.

1. Recusal. Dorothy argues that the judge should have recused himself from hearing these cases (and the other cases as well) because he exhibited bias toward her at all stages of the proceedings. Her recusal argument is based upon certain comments made by the judge, as well as upon piecemeal criticism of the judge's findings of fact that are adverse to Dorothy's position in the litigation. In her view, the comments and the findings demonstrate that the judge was prejudiced.

The claim is without substance. The rules governing the recusal of a judge are not intended to provide litigants with a means of obtaining a judge of their choice. See Blizard v. Fielding, 454 F.Supp. 318, 321 (D.Mass.1978), affd. sub nom. Blizard v. Frechette, 601 F.2d 1217 (1st Cir.1979). Discharge of a judge from a case after hearings have begun is unusual and ought not to be done in the absence of compelling reasons. See Dittemore v. Dickey, 249 Mass. 95, 99, 144 N.E. 57 (1924). Indeed, a judge may very well have an obligation "to resist a challenge to his impartiality which is tenuous, baseless or frivolous." Police Commr. of Boston v. Municipal...