Henry v. Sheffield

• Decision Date: 10 September 2010
• Docket Number: C.A. No. 09–332 S.
• Citation: 749 F.Supp.2d 3
• Parties: Nathan HENRY, et al., Plaintiffs,v.Richard B. SHEFFIELD, et al., Defendants.
• Court: U.S. District Court — District of Rhode Island

749 F.Supp.2d 3

Nathan HENRY, et al., Plaintiffs,

v.Richard B. SHEFFIELD, et al., Defendants.

C.A. No. 09–332 S.

United States District Court, D. Rhode Island.

Sept. 10, 2010.

Charles D. Blackman, Lederberg & Blackman LLP, Providence, RI, for Plaintiffs.Joseph F. Penza, Jr., Olenn & Penza, Warwick, RI, Peter Brent Regan, Sayer Regan & Thayer LLP, Newport, RI, for Defendants.

ORDER

WILLIAM E. SMITH, District Judge.

The Report and Recommendation of United States Magistrate Judge David L. Martin filed on August 13, 2010 (document # 22), in the above-captioned matter is hereby accepted pursuant to Title 28 United States Code § 636(b)(1). No objection having been filed, the Report and Recommendation is accepted in full and Defendant Margaret Kemp Henry's Motion to Dismiss (document # 17) is hereby DENIED.

REPORT AND RECOMMENDATION

DAVID L. MARTIN, United States Magistrate Judge.

This is an action for equitable restitution and to recover money damages arising out of the alleged wrongful defeat of Plaintiffs' inheritance under their grandfather's Last Will and Testament. See Amended Complaint (Docket (“Dkt.”) # 12) at 1. Before the Court is the Motion to Dismiss (Dkt. # 17) (“Motion to Dismiss” or “Motion”) filed by Defendant Margaret Kemp Henry (“Defendant” or “Peggy” ¹) based on (1) lack of personal jurisdiction and (2) failure to state a claim against her for breach of fiduciary duty.

This matter has been referred to me for preliminary review, findings, and recommended disposition pursuant to 28 U.S.C. § 636(b)(1)(B). A hearing was held on March 18, 2010. After listening to oral argument, reviewing the memoranda submitted, and performing independent research, I recommend that the Motion to Dismiss be denied.

Facts and Travel

Plaintiffs Nathan Henry (“Nathan”) and Corinna Laszlo–Henry (“Corinna”) (collectively “Plaintiffs”) are the grandchildren of Eugene B. Henry (“Captain Henry”). See Amended Complaint ¶¶ 11, 13. They are the children of one of Captain Henry's two sons, David Vaughan Henry (“David”), from his previous marriages. See id. ¶¶ 12–13. Peggy is David's widow from his third marriage. Id. ¶ 14.

Defendant Richard B. Sheffield (“Sheffield”) was Captain Henry's lawyer. Id. ¶ 15. Sheffield drafted and witnessed the execution of the Last Will and Testament of Captain Henry dated August 21, 1992 (the “Will”), and a Codicil thereto dated December 2, 1994 (the “Codicil”). Id. ¶ 15; see also id., Exhibit (“Ex.”) A (Will), Ex. B (Codicil). The Will created two testamentary trusts for the Captain's sons, David and Douglas Davies Henry (“Douglas”). See id. ¶ 16. The Codicil amended and restated the dispositive terms of the trusts. Id. The David Vaughan Henry Trust (the “DVH Trust”) was amended and restated in pertinent part to read as follows:

The trustee shall pay the net income to my son, David Vaughan Henry, at least quarterly and so much of the principal, whether the whole or in lesser amount as my trustee in his sole discretion determines. In exercising this discretionary power, my trustee may but need not consider any other resource of my son and shall give primary consideration to the needs of my son.

Upon my son's death, or five years from the date of my decease, whichever shall occur first, my trustee shall distribute all property then belonging to the principal of the trust to such of his descendants as shall then be living, in equal shares, per stirpes.

Id.; see also id., Ex. B. The Douglas Davies Henry Trust (the “DDH Trust”) was amended and restated in pertinent part to read as follows:

The Trustee shall pay the net income to my son, Douglas Davi[e]s Henry, at least quarterly and so much of the principal, whether the whole or in lesser amount as my trustee in his sole discretion determines. In exercising this discretionary power, my trustee may but need not consider any other resource of my son and shall give primary consideration to the needs of my son.

Upon my son's death or five years from the date of my decease, whichever shall occur first, my trustee shall distribute all property then belonging to the principal of the trust to my son, if living; or, if not living, to my daughter in law, MARY ELLEN HENRY, if living, and not separated nor divorced; or, if not living, or separated or divorced, to my said son's descendants as shall then be living, in equal shares, per stirpes.

....

Amended Complaint ¶ 16; see also id., Ex. B. The DDH Trust is not at issue in this proceeding. See Amended Complaint ¶ 16.

Captain Henry died on June 21, 1995, in Newport, Rhode Island. Id. ¶ 17. On or about July 6, 1995, Douglas, as executor of Captain Henry's estate, see id. ¶ 20–21; id., Ex. A, filed a petition in the Probate Court for the Town of Portsmouth, Rhode Island (the “Probate Court”), to admit the Will and Codicil to probate. See Amended Complaint ¶ 20; see also id., Ex. C (Probate Court petition). Sheffield entered his appearance on behalf of Douglas. See Amended Complaint ¶ 21.

Sheffield also filed an affidavit dated July 6, 1995 (the “Sheffield Aff.”), which purports to describe an error he made in the preparation of the Codicil. Id. ¶¶ 22–23; see also id., Ex. D (Sheffield Aff.). Sheffield stated that “Eugene B. Henry instructed me to make the provision with respect to trust income for David Vaughan Henry the same as provided for Dou[g]las Davies Henry,” Amended Complaint ¶ 23 (quoting id., Ex. D ¶ 5); that “[i]n the typing of said Codicil, certain words were inadvertently omitted from the second paragraph of the David Vaughan Henry Trust ...,” id. (quoting id., Ex. D ¶ 7)(alteration in original); and that “Eugene Henry intended that his sons, David and Douglas, with respect to the net income from their respective trusts, were to be treated equally,” id. (quoting id., Ex. D ¶ 8). According to the Sheffield Aff., in order “to accurately reflect the intention of Eugene B. Henry,” id., the DVH trust should provide as follows:

The trustee shall pay the net income to my son, David Vaughan Henry, at least quarterly and so much of the principal, whether the whole or in lesser amount as my trustee in his sole discretion determines. In exercising this discretionary power, my trustee may but need not consider any other resource of my son and shall give primary consideration to the needs of my son.

Upon my son's death or five years from the date of my decease, whichever shall occur first, my trustee shall distribute all property then belonging to the principal of the trust to my son, if living; or, if not living, to my said son's descendants as shall then be living, in equal shares, per stirpes.

Id.; see also id., Ex. D ¶ 9. By decree dated July 11, 1995 (the “1995 Decree”), the Probate Court admitted the Will, as amended by the Codicil, and appointed Douglas as the Executor of the Captain Henry's estate. Id. ¶ 27; see also id., Ex. E (1995 Decree). Relying on the Sheffield Aff., the Probate Court also found that “by error” certain words were omitted from the second paragraph of the DVH Trust as set forth in the Codicil and that “to correctly reflect the intention” of Captain Henry the Codicil had to be changed. Amended Complaint ¶ 27 (quoting id., Ex. E). The portion of the Will and Codicil including the DVH Trust were altered to read:

Upon my son's death or five years from the date of my decease, whichever shall first occur, my trustee shall distribute all property then belonging to the principal of the trust to my son, if living; or, if not living, to such of his descendants as shall be living, in equal shares, per stirpes.

Id., Ex. E ¶ 2; see also id. ¶ 3. Neither Nathan nor Corinna received notice of the Probate Court proceeding. Amended Complaint ¶¶ 25, 29. No guardian ad litem was appointed for Nathan, who was a minor at the time of the Probate Court's action in 1995. Id. ¶¶ 25, 29.

The 1995 Decree changed the contingencies in the dispositive terms of the DVH Trust. Id. ¶ 28. Specifically, the 1995 Decree altered Nathan's and Corinna's remainder interest from being contingent upon their survival for five years after Captain Henry's death to being contingent upon David's death within five years after Captain Henry's death. Id. Because David survived his father by more than five years, the 1995 Decree operated to eliminate Nathan's and Corinna's remainder interest under the DVH Trust. Id. But for the 1995 Decree, the remainder of the DVH Trust would have been administered for the benefit of Nathan and Corinna and later distributed to Corinna and in continuing trust for the benefit of Nathan.² See id.

Captain Henry's estate was administered, and the DVH Trust administered and distributed, based on the 1995 Decree. Amended Complaint ¶ 29. Douglas paid the debts of Captain Henry's estate and distributed the residue in part to the Testamentary Trustee of the DVH Trust. Id. ¶ 30. In or about June of 2000, the Testamentary Trustee distributed the remainder of the DVH Trust outright and free of trust to David as the 1995 Decree provided rather than to Nathan and Corinna as the 1992 Will and 1994 Codicil expressly provided. See id. The remainder of the DVH Trust was approximately $160,000 at the time of the distribution to David in June 2000. Id. ¶ 32.

By the time of the final distribution of the DVH Trust in 2000, David had developed early onset Alzheimer's Disease. Id. ¶ 33. Knowing that he was or would become disabled and possibly require nursing home care, David and Peggy undertook an estate planning process whereby David transferred assets out of his name to Peggy. David and Peggy did so for the purpose of qualifying David for public benefits. Id. Among the assets that David transferred to Peggy were monies that David had received from the DVH Trust. Id. Some transfers were made by Peggy to herself acting as David's attorney in fact under a purported durable power of attorney dated in or about April of 2004. Id.

After attaining the age of majority, Nathan on November 20, 2008, moved that the...