In re Tosi

Decision Date22 February 2008
Docket NumberBankruptcy No. 06-13461-JNF.,Adversary No. 07-1002.
Citation383 B.R. 1
PartiesIn re Jerome R. TOSI, Jr., Debtor. Donald R. Lassman, Chapter 7 Trustee, Plaintiff, v. Jerome R. Tosi, Jr., Individually and as Trustee of the 39 LW Realty Trust, and Diane. L. Henault-Tosi, Defendants, and William A. Lowell and Laura L. Tosi, Trustees of the Jerome R. Tosi, Jr. 1988 Trust, Turnover Defendants.
CourtU.S. Bankruptcy Court — District of Massachusetts

David M. Souza, James M. Liston, Bartlett Hackett Feinberg, P.C., Joseph S.U. Bodoff, Ryan Sullivan, Bodoff and Associates, Boston, MA, for Plaintiff.

Brian E. Donovan; Law Offices of Brian E. Donovan, Nancy Maule-McNally, Quincy, MA, for Defendants.

William A. Lowell, Choate Hall & Stewart, LLP, Boston, MA, pro se.

Laura L. Tosi, Washington, DC, pro se.

MEMORANDUM

JOAN N. FEENEY, Bankruptcy Judge.

I. INTRODUCTION

The matters before the Court are Cross-Motions for Partial Summary Judgment with respect to Count I of the Chapter 7 Trustee's Complaint against Jerome R. Tosi, Jr. (the "Debtor"), his spouse, Diane L. Henault-Tosi ("Henault-Tosi"), and the trustees of the Jerome R. Tosi, Jr. 1988 Trust, namely Laura A. Tosi, the Debtor's sister ("Dr. Tosi"), and William A. Lowell, an attorney with the law firm of Choate Hall & Stewart. The Court conducted a hearing on January 23, 2008 and took the matters under advisement. The issues presented include whether the assets of the Jerome R. Tosi, Jr. 1988 Trust (the "1988 Trust") are property of the estate under 11 U.S.C. § 541(a), and whether Henault-Tosi has a vested property interest in the 1988 Trust.

The material facts necessary to decide the issues are not in serious contention, and Count I is ripe for summary judgment. For the reasons set forth below, the Court finds that Henault-Tosi lacks a vested interest in the 1988 Trust and, under Massachusetts law, in particular the case of Ware v. Gulda, 331 Mass. 68, 117 N.E.2d 137 (1954), the Chapter 7 Trustee is entitled to a determination that the assets of the 1988 Trust are assets of the Debtor's bankruptcy estate.

The following constitutes the Court's findings of fact and conclusions of law in accordance with Fed. R. Bankr.P. 7052.

II. FACTS

The Debtor filed a voluntary Chapter 7 petition on October 2, 2006. At the time he filed his petition, he and Henault-Tosi were beneficiaries of the 1988 Trust. The Debtor is denominated the donor of the 1988 Trust which contains a specific spendthrift provision.1 The pertinent provisions of the 1988 Trust are as follows:

I, JEROME R., TOSI, JR., of Weymouth, Massachusetts, as donor, and DAVID E. PLACE, of Milton, Massachusetts, and my stepfather, A. LEWIS ROGERS, of Chatham, Massachusetts, as trustees, hereby agree that upon transfer to the trustees of any property from me or any other source, as hereinafter described in Article 2, that they will administer the same, together with all additions from any source, in trust ...

Article 1. TERM OF TRUST

This trust is irrevocable....

Article 2. PROPERTY TRANSFERRED

I hereby agree to initially fund this trust with and accordingly transfer and assign to the trustees the following assets:

a) The amount representing the sum of money I will receive from my said deceased father's life insurance and profit sharing proceeds;

b) The said Promissory Note payable to the order of JEROME R. TOSI, JR. from my said brothers MARK G. TOSI and CHRISTOPHER TOSI;2

c) Whatever sum of money I deem appropriate to put in this trust, in connection with the share of the proceeds I receive from the sale of said building located on 152-154 Franklin Street, New York, New York.

* * *

Article 4. BENEFICIAL PROVISIONS DURING MY. LIFE

The trustees shall pay to me the net income of the trust, if any, at least quarter-annually....

From and after the "Final Payment Date", said trust property shall remain in trust and I shall have the right to withdraw at one time or from time to time up to fifty percent (50%) of the whole of the principal as I may from time to time request in writing delivered to the trustees during my lifetime; or in the absence of contrary instructions from me, the trustees shall distribute such amounts of the net income and principal as the trustees in their discretion shall determine to be necessary for my health, support and welfare and that of my spouse, if any, and my issue, if any.

Article 5. DISPOSITION OF TRUST ASSETS AFTER MY DEATH

On my death, the trustees shall hold and distribute the assets of the trust as follows: ...

(B) i) If my death occurs on or after the "Final Payment Date" the trustees shall pay over, transfer and convey the then remaining principal of such trust, together with any undistributed income, to such one or more of my said wife and issue in such manner, interests, and proportions and either in fee or upon such new trusts, conditions or limitations as I may appoint by will, expressly referring to this trust agreement....

ii) On my death, if I have not effectively exercised said power and my said wife survives me, then the trustees shall pay to any one or more of my said wife and my issue living at the time of each payment such amounts or the whole of the net income and principal of such trust as the trustees in their discretion shall determine to be necessary for their health, support or welfare, and may add to principal, at the end of each year, any net income not so paid.

* * *

Article 8. RESTRAINT ON ALIENATION

No interest hereunder in income or principal shall be subject to claims of creditors nor, except to the extent herein expressly authorized, shall the same be alienated by any beneficiary....

(emphasis supplied).3

The Debtor executed the 1988 Trust on March 1, 1988, approximately eight months after his father, Jerome R. Tosi, passed away. Although Jerome R. Tosi's will provided for the distribution of his estate equally among his four children, his death precipitated disputes among, the Debtor and his siblings. The Debtor and Dr. Tosi aligned on one side and employed David Place ("Attorney Place"), an attorney with the now dissolved law firm of Gaston & Snow.4 The Debtor's two brothers, Mark and Christopher Tosi, aligned on the other side and employed the law firm of Goulston & Storrs, which also represented the estate of Jerome R. Tosi. The disputes centered on valuation of the stock of Pastene Corporation, a company which had been in the Tosi family for four generations and which had employed the Debtor until he was terminated by Mark and Christopher immediately following their father's death.

At the time the Debtor executed the 1988 Trust in March of 1998, he was 37 years old and unmarried. He admitted that he was competent and that he had carefully reviewed and understood the trust document before signing it. He admitted that the monies that were placed into the 1988 Trust were monies to which he was legally entitled. He also admitted that he never took legal action to invalidate the 1988 Trust and, indeed, took advantage of the provision of Article 4 to obtain 50% of the principal to acquire his personal residence, a property located at 39 Ladd's Way, Scituate, Massachusetts. Nevertheless, the Debtor represented that he signed the document at the insistence of Attorney Place and his sister, Dr. Tosi. He stated that "if I didn't sign it, I wasn't going to get anything." He added that "there was no other way," to obtain his inheritance because he was unemployed and lacked the resources to employ his own counsel. The Debtor also testified that he was traveling to Argentina around the time in an attempt to start a wine business. The Debtor complained to his sister about the trust vehicle, indicating his preference to invest the monies he was to receive from his inheritance in an account he had in Vermont. According to the Debtor, Dr. Tosi, said "`No can do ... It has to go in the trust." Dr. Tosi, in her deposition testimony, agreed with her brother's deposition testimony, stating "the fact of the matter is my brother had no choice. He was given no other option."

Dr. Tosi explained why a spendthrift trust was prepared for the Debtor. She represented that the Debtor experienced "extensive health issues" from the time he was a small child and that "an overriding concern was to be sure that no matter what his health issue, that there would always be moneys to support him." She also stated that at the time the 1988 Trust was prepared the Debtor "had had one and only one employer [Pastene Corporation] who had underpaid him; and he, therefore, had very limited marketable skills." When asked whose idea it was to establish the 1988 Trust, she stated:

It was, I think an outcome rather than a decision, per se. There was a need to do several things. There was a need to pay my father's extraordinary, at the time, inheritance taxes. There was a need to be sure that there was enough money if the Feds decided enough — not enough had been paid. There was a need to maintain lump sums, and there was need to be sure that my brother had an income as he had been removed from his position at Pastene by my younger brothers.

Jerome R. Tosi designated Dr. Tosi as one of four executors of his estate and she eventually was appointed Temporary Administrator. The other executors were Christopher and Mark Tosi and Alvaro B. Pirani, who succeeded Jerome R. Tosi as president of Pastene Corporation. Dr. Tosi explained that the disputes with respect to the shares in Pastene Corporation, which was her father's most significant asset, were resolved through a Memorandum of Understanding which was amended several times. She stated the following:

At the risk of being inappropriate, what you're seeing is that there was no — very little cash, and so that what you see here is one of many efforts to figure out how one was going pay the taxes and have something left over; and so much of the wording, particularly, in my brother's trust document,...

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