Filippi v. Filippi

• Decision Date: 14 December 2017
• Docket Number: C.A. No. WC/KB-2016-0627
• Parties: MARION FILIPPI and STEVEN FILIPPI, Plaintiffs, v. BLAKE FILIPPI and PAUL FILIPPI, Individually and as Trustees of the Marion C. Filippi Trust - 2007, Defendants.
• Court: Rhode Island Superior Court

MARION FILIPPI and STEVEN FILIPPI, Plaintiffs, v. BLAKE FILIPPI and PAUL FILIPPI, Individually andas Trustees of the Marion C. Filippi Trust - 2007, Defendants.

C.A. No. WC/KB-2016-0627

STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS WASHINGTON, SC. SUPERIOR COURT

December 14, 2017

DECISION

STERN, J.

Marion Filippi (Marion) and Steven Filippi (Steven) (collectively, Plaintiffs, Counterclaim Defendants, or Marion and Steven) move for partial summary judgment, requesting judgment as a matter of law on their Amended Complaint on Count I: Breach of Contract with respect to the 2007 Purchase and Sale Agreement (2007 P&S Agreement); Count II: Breach of Contract with respect to the LLC Operating Agreements; and Count IV: Declaratory Judgment. The Plaintiffs also seek partial summary judgment on Blake Filippi (Blake) and Paul Filippi's (Paul) (collectively, Defendants, Counterclaimants, or Blake and Paul) counterclaims, which assert counts for breach of contract and request declaratory relief. The Counterclaimants have filed a cross motion for partial summary judgment, maintaining that they are entitled to judgment as a matter of law on the following counterclaims: (a) Count II - Breach of Fiduciary Duty Against Steven; (b) Count VII - Declaratory Relief Against Marion and Steven; and (c) Count VIII - Breach of Contract - Estate Planning Agreement Against Marion.¹

Blake and Paul object to both of Plaintiffs' summary judgment motions, and Marion and Steven object to Blake and Paul's cross motion for partial summary judgment. Jurisdiction is pursuant to Super. R. Civ. P. 56(c) and G.L. 1956 § 9-30-1.

IFacts and Travel

In 1973, Paul A. Filippi (Paul Sr.) and Marion married. Filippi v. Filippi, 818 A.2d 608, 612 (R.I. 2003). Paul Sr., known as a successful businessman and restauranteur, owned substantial real estate and a number of businesses in the Town of New Shoreham, more commonly known as Block Island. See id. Together, Paul Sr. and Marion had three children: Paul, in 1975; Steven, in 1979; and Blake, in 1980. Id.

In 1989, Paul Sr. and Marion entered into a Contract to Make and Maintain Wills and Trusts (1989 Wills Contract). See Corrected Mem. of Law in Supp. of Defs.' Objs. to Pls.' Mot. for Partial Summ. J. and Counterclaimants' Cross Mot. for Summ. J. (hereinafter, Defs.' Mot.), Ex. 1. The 1989 Wills Contract (1) required that Paul Sr. and Marion execute wills and trusts; (2) barred Paul Sr. and Marion from "execut[ing] any other trust or estate planning document which [would] have the effect of defeating the intent of their estate plans"; and (3) prohibited Paul Sr. and Marion from "alter[ing] or revok[ing] any of the provisions of their respective wills or trust without first procuring the written and acknowledged consent of the other." Id. Additionally, Paul Sr. executed a trust agreement in 1989. Defs.' Mot., Ex. 2. The 1989 Wills Contract was amended in 1992 to reflect the 1989 trust agreement. See id.

Paul Sr. passed away in 1992. At that time, he owned 100% of the stock in Shoreham, Inc., d/b/a Ballard's Inn and Restaurant (Shoreham), the entity which owns all of the physical assets of Ballard's Inn and Restaurant and operates the business. Filippi, 818 A.2d at 612. PaulSr.'s stock in Shoreham became part of his estate upon his passing, in accordance with his estate plan. See Defs.' Mot., Ex. 5. Paul Sr.'s estate, however, was not closed until early 2006, three years after extensive litigation between the Filippi Family and Paul Sr.'s three older children from a former marriage. See Defs.' Mot., Ex. 6; see also Filippi, 818 A.2d 608; Filippi v. Citizens Trust Co., 2001 WL 99860 (R.I. Super. Feb. 1, 2001).

When Paul Sr.'s estate was closed, the Shoreham shares, among other things, were deposited into Paul Sr.'s marital trust (Marital Trust). See Defs.' Mot., Ex. 6. According to Paul Sr.'s extensive estate plan, the income emanating from the Shoreham shares in the Marital Trust was to be used for Marion and for the support of her minor children, while a residuary trust (Residuary Trust) was to be established to provide for the Boys. See Defs.' Mot., Ex. 1 at D1342-1345. As set forth in the 1989 Wills Contract, the assets in the Marital Trust were to be transferred to the Residuary Trust for the benefit of Steven, Blake, and Paul upon Marion's death. Id. at D1373-84, 1342-45. However, the Filippi Family and Citizens Bank RI (Citizens Bank)—the corporate trustee of the Marital Trust—agreed to a distribution of the assets in the Marital Trust to Marion individually, on the condition that each member of the Filippi Family execute Citizens Bank's requested releases. See Defs.' Mot., Ex. 9.²

One year earlier, on July 9, 2004, Marion transferred her real property located at 42 Water Street, New Shoreham, Rhode Island—the land and building utilized by Ballard's Inn—to a newly-formed LLC, Ballard's Inn Realty, LLC (R.I.). See Mem. in Supp. of Pls.' Mot. for Partial Summ. J. on Defs.' Countercls. (hereinafter, Pls.' Second Mot.). Approximately one year after the aforementioned agreement with Citizens Bank, in August 2006, Marion transferredadditional real property she owned, located at 74 Water Street, New Shoreham, Rhode Island—the land and the building constituting the Overlook Hotel—to a newly-formed entity, Overlook Realty, LLC (R.I.). Id. Both properties originated from Paul Sr.'s estate and were transferred to Marion individually at the time of his death. See Filippi v. Citizens Trust Co., 2001 WL 99860, at *6, *8 (R.I. Super. Feb. 1, 2001) ("Marion wanted to have control of the family real estate and not to be subject to a trust, as it had been under prior plans. Paul [Sr.] wanted to be assured that it would remain for the children of his marriage with Marion. . . . [T]he mutual contracts were devised to satisfy Paul [Sr.] and not Marion. It was Paul [Sr.] who wanted to be assured that, if he left the family real estate to Marion, it would remain in the family, meaning, of course, the younger children. . . . [T]he contract resolved [Paul Sr.'s] concern about leaving the real estate to Marion outright."). At the time that Marion transferred the properties to the two LLCs, Marion was the sole member of Ballard's Inn Realty, LLC (R.I.) and Overlook Realty, LLC (R.I.). Id.

Afterwards, on September 28, 2006, the Filippi Family entered into an agreement entitled "Filippi Family Estate Planning Agreement" (Family EPA). Defs.' Mot., Ex. 10. The Family EPA provided:

"WHEREAS, Paul [Sr.] was the late husband of Marion and the late father of Paul, Steven and Blake; and

"WHEREAS, Citizens Bank . . ., Executor under the will of Paul Filippi and Trustee of the [Marital Trust] . . ., has proposed closing the probate estate of Paul [Sr.] and terminating the Marital Trust by transferring all assets remaining in its possession as Executor and Trustee, including stock in the Rhode Island corporation, Shoreham, Inc., to Marion, but [Citizens] Bank is unwilling to do so unless Paul, Steven and Blake release the Bank for such action; and

"WHEREAS, Paul, Steven and Blake are unwilling to execute releases unless Marion agrees to take certain actions in connection with her own estate plan; and"WHEREAS, Marion is willing to take such actions,

"NOW, THEREFORE, Marion, Paul, Steven and Blake, agree as follows:

"(1) Paul, Steven and Blake will forthwith execute the releases in favor of Citizens Bank that have previously been provided to them.

"(2) Marion agrees that she will complete revisions to her current estate plan within nine (9) months of the date of this Agreement (including wills and trusts and any related instruments).

"(3) Marion agrees that in the event she does not complete the contemplated revisions to her current estate plan within nine (9) months of the date of this Agreement or said revisions are not acceptable to any two (2) of Paul, Steven and Blake, she will transfer seventy-five percent (75%) of her interest in Shoreham, Inc., in equal shares to Paul, Steven and Blake." Defs.' Mot., Ex. 10.

The Family EPA bore the signature of each member of the Filippi Family. Id. In addition, the Filippi Family purportedly entered into what Blake and Paul characterize as "the Shoreham Agreement," which, in part,³ provided:

"This agreement is hereby entered into by Marion . . ., Paul . . ., Steven . . . and Blake . . . . Wherefore all the undersigned parties agree to the following:

"1) Each party has an economic interest in Shoreham . . .

"2) Each party is entitled to 25% of the profits of Shoreham . . ., to be determined by a majority of the aforementioned parties and paid on or by October 1 (Combined profits from Ballard's and the Overlook Hotel).

"3) Shoreham . . . will pay Marion . . . $200,000 in rental for the Ballard's Inn and Overlook properties"4) The sole managerial responsibilities will rest with Steven . . . who will receive compensation from Shoreham . . . under the following terms

"Base Salary: $100,000.00

"Incentive: If revenues of both Ballard's and the Overlook reach $2.75 Million [Steven] will be paid $150,000.00 total, including base salary[.] If revenues reach $3 Million, [Steven] will be paid $200,000.00 total including base salary[.]

"Steven . . . will be responsible for all aspects of the operations of Ballard's, including but not limited to, bank accounts, receivables, cash deposits and all personnel decisions. In turn, [Steven] will provide all information on all aspects of the operations including financials, of Ballard's to any of the aforementioned parties to this agreement[.]" Defs.' Mot., Ex. 11.⁴

In accordance with the Family EPA, Steven, Blake, and Paul executed the releases mentioned therein. See Defs.' Mot., Ex. 12.⁵ Marion also retained Attorney William Kirchick (Attorney Kirchick) to quarterback her estate planning. See Defs.' Mot., Ex. 4 (hereinafter, Marion Dep.) at 53:5-12; Pls.' Second Mot., Ex. I. Blake, a third-year law student at the time, participated in Marion's estate planning with Attorney Kirchick...