Helman v. Mendelson

• Decision Date: 10 April 2001
• Docket Number: No. 512,512
• Citation: 138 Md. App. 29,769 A.2d 1025
• Parties: Herby HELMAN v. Ira MENDELSON et al.
• Court: Court of Special Appeals of Maryland

769 A.2d 1025

138 Md. App. 29

Herby HELMAN v. Ira MENDELSON et al.

No. 512, Sept. Term, 2000.

Court of Special Appeals of Maryland.

April 10, 2001.

Albert Brault, Rockville (David J. Cynamon, Maureen B. Beahn, Gerard M. Babendreier and Shaw Pittman, on the brief), Washington, DC, for appellant.

Brian L. Schwalb (Burton A. Schwalb and Schwalb, Donnefeld & Schwalb, PC, on the brief), Washington, DC, for appellees.

Argued before KENNEY, ROBERT L. KARWACKI, (Ret'd, specially assigned) and CHARLES E. MOYLAN, Jr. (Ret'd, specially assigned), JJ. KENNEY, Judge.

This case arises out of a grant of summary judgment by the Circuit Court for Montgomery County in favor of appellees, Ira Mendelson ("Ira"), Herlene Nagler ("Herlene"), and David Luftig ("David"), to two suits, consolidated below, filed by appellant, Herby Helman. Appellant presents three questions on appeal, which we have renumbered:

1. Whether the trial court abused its discretion when it excluded the report of Mr. Helman's expert, Charles Lundelius, which exclusion resulted in the grant of summary judgment in favor of Appellees on Mr. Helman's claim that the trustees of the Alfred G. Mendelson Trust breached their fiduciary duty by improperly investing the assets of the Alfred G. Mendelson Trust.

2. Whether the trial court incorrectly held that there was no genuine issue of material fact and that Appellees were entitled to judgment as a matter of law on Mr. Helman's claim that the loans made by the trustees of the Alfred G. Mendelson Trust to themselves and Mendelson family members and friends constitute a breach of fiduciary duty.

3. Whether the trial court abused its discretion when it denied Mr. Helman's motion to alter or amend the Order that granted summary judgment in favor of Appellees.

Answering all questions in the negative, we will affirm.

Factual Background

Alfred G. Mendelson ("Alfred"), appellant's grandfather, died in 1972. Alfred created a testamentary trust, the Alfred G. Mendelson Trust ("AGM Trust"), pursuant to which his wife, Ida Mendleson ("Ida"), was the income beneficiary, and his two children, Murry Mendelson ("Murry") and Sandra Helman ("Sandra"), were the remainder beneficiaries. Murry had two children, Ira and Herlene. Sandra had two children, Gloria Helman ("Gloria") and appellant.

If Murry or Sandra predeceased Ida, their children (or their grandchildren, if the children were deceased) would take the remainder, except that if Sandra predeceased Ida, appellant's per stirpes share was to be placed into a trust identified as the Herby Helman Trust ("HH Trust").¹ Murry and Ida were also the designated trustees of the AGM Trust.

In 1981, Sandra and Gloria sold all of their ownership interests in the closely held family business, Murry's Steaks, Inc.("Murry's Steak"), back to the company. They also agreed to sell their interests in the AGM Trust to Murry's Steaks at some future time. Pursuant to the agreement with Gloria, her contingent remainder interest was worth $665,000, and she agreed to sell her interest if her mother predeceased her. Sandra died in January 1985, and, later that year, the purchase of Gloria's 25% interest in the AGM Trust was completed. The alternate purchasers were the three remaining contingent remainder beneficiaries, Ira, Herlene, and appellant. Each were required to pay $221,667 for one-third of Gloria's 25% interest in the trust. To take advantage of this opportunity, and, as Ida wished, each of them were loaned the $221,667 from the AGM Trust to effectuate the purchase. Each signed a promissory note to the Trust, but Ida paid appellant's interest on the note as a gift.²

As a result, after Sandra's death, Ira and Herlene each owned a 25% contingent remainder beneficiary interest in the AGM Trust through their father in addition to an 81/3% remainder interest in the AGM Trust from their purchase of one-third of Gloria's share. On Ida's death, appellant would own outright 81/3% of Gloria's remainder interest in the AGM Trust; his original 25% remainder interest would be placed into the HH Trust.

During her life, Ida was very generous, giving large sums of money to her grandchildren and great-grandchildren as gifts. These gifts were drawn on an account entitled "Ida Mendelson Trust C," a revocable inter vivos trust set up to receive the income from the AGM Trust. Appellant was aware that the gifts came from this account, and he had asked Murry about it. Murry advised that "Ida Mendelson Trust C" was the name of the account but apparently provided no detailed explanation regarding its origin or its funding.

During the life of the AGM Trust, the corpus grew from approximately $420,000, the value of the stock in Murry's Steaks at the time of Alfred's death, to approximately $22 million. In the interim, Murry's Steaks had been sold to Rymer, Inc. for $57 million. This resulted in a large influx of cash into the AGM Trust after taxes were paid on the sale. Murry's Steaks was bought back in 1989 through a bank loan in addition to loans from Murry and Ida; the AGM Trust did not pay any of the costs of repurchase. The company is now known as Murry's, Inc.

In 1989, Ida, who no longer wished to be a co-trustee of the AGM Trust, resigned and Ira took over in her place.³ After Ida died on May 28, 1996, Murry and Ira then began serving as trustees of the now funded HH Trust.

Appellant contested Ida's will, which was probated in the Circuit Court for Palm Beach County, Florida, where she lived at the time of her death. Murry was the designated personal representative of Ida's estate. Appellant alleged that Ida lacked testamentary capacity and accused Murry of exerting undue influence on her in an effort to reduce the amount she left appellant in her will. Appellant apparently believed that he was entitled to one-fourth of Ida's $10 million estate. Appellant settled that litigation on the eve of trial for a "relatively small amount".

During the course of the will contest, appellant began complaining about the handling of the AGM Trust. He insisted that the corpus did not grow as much as he thought it should have and that the assets were allocated in a manner to provide the maximum benefit to the income beneficiary to the detriment of the remainder beneficiaries because the trustees invested primarily in fixed income securities such as bonds and notes rather than investing in the stock market. Appellant also argued that the trustees made improper loans to family members and engaged in other behavior appellant viewed as "self-dealing."

Murry died in 1998, and David replaced him as trustee for the HH Trust. Ira and Herlene were named as the co-personal representatives of Murry's estate. Between the time of Murry's death and the filing of the present litigation, appellant was making demands for increasing amounts of money from the HH Trust. Although Ira and David granted some of these requests, they explained in letters to appellant that they also had a duty to the remainder beneficiaries of that trust, namely, appellant's children.

On January 13, 1999, appellant filed two suits in the Circuit Court for Montgomery County. The first suit was filed against Ira as co-trustee of the AGM Trust and co-personal representative of Murry's estate, Herlene as co-personal representative of Murry's estate, and David as trustee of the HH Trust. The suit claimed breach of fiduciary duty, requested an accounting, requested removal of both Ira and David as trustees of the HH Trust and the AGM Trust, and requested removal of both Ira and David as trustees of the HH Trust. The second suit requested that the circuit court assume jurisdiction over the HH Trust. In it, he claimed Ira breached his fiduciary duty with respect to the HH Trust by breaching various duties to the AGM Trust,⁴ requested removal of both Ira and David as trustees of the HH Trust, and requested an accounting. The two cases were consolidated by order of the court on April 29, 1999.

During the course of discovery, appellant requested several modifications of the discovery schedule, apparently revolving around the retention of an expert witness. In addition, appellant was not forthcoming with the information he intended to use to prove the allegations made in his complaints, apparently relying on his expert to provide him with whatever evidence he would need to prevail. Discovery in the case closed on November 24, 1999; appellant's December 9, 1999 request for a further extension was denied. Appellant did not provide appellees with his expert's report until January 26, 2000.

Appellees filed a motion for summary judgment on December 9, 1999. They argued that appellant had failed to "determine and disclose" the facts he intended to rely upon to support his claims, that the expert finally designated by appellant lacked the qualifications needed to be an expert in this case, and that appellant's claims were barred by both the doctrine of laches and the doctrine of equitable estoppel.

On January 14, 2000, appellant filed an amended complaint, dismissing David from the first complaint concerning management of the AGM Trust. That same day, appellant filed an amended petition in the case concerning the HH Trust that requested relief only with respect to Ira.

The court held a hearing on the motion for summary judgment on January 28, 2000. At that hearing, the court declined to accept the late-filed expert's report and granted appellees' motion for summary judgment. A written order, entered on February 1, 2000, effectively disposed of both of the original complaints.

Appellant filed a motion to amend or alter judgment on February 11, 2000. That motion was denied on March 28, 2000. This appeal followed and involves the claims of both original complaints.

Discussion

I. The Expert's Report

In his brief, appellant argues that the circuit court abused its discretion by excluding his expert's report. In order to fully discuss this issue, it would be useful to...