Mendes v. Factor

• Decision Date: 17 April 2012
• Docket Number: No. 2010–171–Appeal.,2010–171–Appeal.
• Citation: 41 A.3d 994
• Parties: Ambrose C. MENDES, Jr., et al. v. Alfred FACTOR et al.
• Court: Rhode Island Supreme Court

41 A.3d 994

Ambrose C. MENDES, Jr., et al.

v.Alfred FACTOR et al.

No. 2010–171–Appeal.

Supreme Court of Rhode Island.

April 17, 2012.

Thomas L. Mirza, Esq., for Plaintiff.

Robert M. Brady, Esq., East Providence, for Defendant Alfred Factor.

Joseph F. Penza, Jr., Esq., Warwick, for Defendant Kirshenbaum & Kirshenbaum.Present: SUTTELL, C.J., GOLDBERG, FLAHERTY, ROBINSON, and INDEGLIA, JJ.

OPINION

Chief Justice SUTTELL, for the Court.

The plaintiffs, Ambrose C. Mendes, Jr., Victor Mendes, and Madonna Mendes,¹ appeal from a Superior Court judgment in favor of the defendants, Alfred Factor and Kirshenbaum & Kirshenbaum Attorneys at Law, Inc. (K & K). The judgment was entered after a hearing justice issued an order granting the defendants' motions to dismiss both the plaintiffs' probate appeal and their verified complaint alleging breach of fiduciary duty and negligence. For the reasons set forth in this opinion, we affirm the judgment to the extent that it dismissed Victor and Madonna's probate appeal and the plaintiffs' verified complaint, but we vacate the judgment insofar as it dismissed Ambrose's probate appeal.

IFacts and Procedural History

The following facts have been taken from plaintiffs' verified complaint and from various Superior Court and Probate Court documents in the record. ² The plaintiffs' father, Ambrose C. Mendes, Sr. (Ambrose, Sr. or decedent), executed his “Last Will and Testament” (will) on February 3, 1976. Under the terms of the will, Rufino Mauricio ³ and Alfred Factor were appointed as coexecutors, and in the event of Factor's death or impediment, Isidore Kirshenbaum was named as his replacement coexecutor. The will also placed all of decedent's property in a trust, with the exception of his home. Mauricio was named as trustee, Factor was named as successor trustee, and Kirshenbaum was named as Factor's successor trustee. The will granted the trustee full authority to “manage and control the trust estate.”

The trust was to be held “for the benefit of [decedent's] three children * * *, namely, Ambrose * * *, Madonna and Victor,” and the net income from the trust was to be paid to, and distributed equally between, the three children until the youngest child turned thirty years old. Specifically, the will expressly directed that when the youngest child reached the age of thirty, the “[t]rust shall terminate, and the trust fund hereby created then in the hands of said trustee or his successor, shall be and become the absolute property of [decedent's] said children * * * in equal shares.”

Ambrose, Sr., died on September 30, 1976, and his estate was opened in the Providence Probate Court the same year. Ambrose, Madonna, and Victor “are the sole surviving heirs and children of [decedent].” Upon his death, decedent was the principal of Intersection Realty Inc. (Intersection Realty), which owned twenty-three parcels of real estate.⁴ One such property was located at 70 Camp Street in Providence and housed the business known as the Mendes Funeral Home, Inc. (Mendes Funeral Home).

The plaintiffs alleged in their verified complaint that decedent, prior to his death, had directed Factor and K & K to transfer his ownership of both Intersection Realty and the Mendes Funeral Home to his three children. They further alleged that on September 27, 1976, “documents of ownership” ⁵ and bank documents, which had been prepared by Factor and notarized by Mauricio, were to be submitted to the Office of the Secretary of State “for validation”; however, according to plaintiffs, this task was never accomplished.

The plaintiffs further alleged that, on May 27, 1977, without notifying the Mendes children, Mauricio and Factor conducted a meeting at which they appointed Factor as president, treasurer, and secretary of Intersection Realty. The first accounting filed by these coexecutors on December 4, 1979, listed fifty-five shares of Intersection Realty with a value of $276,148, a “received to date” amount of $570,404.58, payouts in the amount of $293,198.61, and a remaining balance of $277,205.97. This first accounting was approved by the Probate Court on September 8, 1981.

The plaintiffs, in the verified complaint, contended that defendants sold the land and building on which the Mendes Funeral Home sat, but did not sell the actual business in conjunction with the sale of the real estate. The plaintiffs further alleged that between February 3, 1976, and May 1987, defendants sold many of Intersection Realty's properties below their fair market value, failed to maintain insurance on the properties in their care, failed to take “reasonable and prudent steps to maintain and preserve the properties,” and failed to pay taxes on many of the properties, allowing them to be sold at tax sales. Although the will called for the coexecutors to create a trust, then to terminate the trust and distribute its assets equally among the three Mendes children when the youngest Mendes child attained the age of thirty, plaintiffs averred that the coexecutors failed to ever create such a trust. The plaintiffs also alleged that Factor, who was employed by and associated with K & K, “continued to act in some legal capacity, either as fiduciary of Ambrose [Sr.'s] estate, officer of Intersection Realty [or] attorney for the [Mendes children] after April 2, 1981.” Additionally, plaintiffs purported that Factor continued to sell Intersection Realty properties after this date and that K & K received commissions from these sales.

The Providence Probate Court docket sheet shows no entries regarding the estate from June 2, 1987, until September 8, 2008, at which time the docket sheet reflects that Factor filed an amended second accounting ⁶ and also a third and final accounting. On September 18, 2008, the three beneficiaries of the Mendes estate objected to the entry of these accountings, and they subsequently sought a hearing in the Probate Court on the accountings' validity. As a result of this action, a consent order pursuant to G.L.1956 § 33–23–1(f) ⁷ was entered by the Probate Court on March 3, 2009.

In the consent order, the parties conceded that the issues that were presented to the Probate Court could not be resolved there, stipulated to an appeal to the Superior Court, agreed to numerous facts, declared the issues that would “form the basis of the appeal,” and acquiesced that neither party would be precluded “from raising additional claims or defenses” on appeal. The issues, as stated in the consent order, were as follows:

“a) Whether the fiduciary breached his duties to the beneficiaries of the estate;

“b) Whether the second and third accountings were properly allowed by the [P]robate [C]ourt;

“c) Whether the executors had the authority to sell any assets of Intersection Realty Inc.;

“d) If the executors did have the authority to sell the assets of Intersection Realty Inc., what monies, if any have not been accounted for in the Estate of Ambrose Mendes.”

Also on March 3, 2009, a claim of appeal was filed in the Probate Court, which stated:

“The undersigned, a party in interest, is aggrieved by an order or decree entered on: March 3, 2009[.] * * * [P]ursuant to [§ 33–23–1(3)(f) ] the parties presented, and the [c]ourt entered a [c]onsent [o]rder stipulating to certain facts and the necessity of an appeal. [A]nd in consequence thereof and as a result claim an appeal from said order or decree to the Superior Court for said County and request a certified copy of said claim and the record of the proceedings appealed from.”

The only plaintiff to sign the claim of appeal was Ambrose.

On March 31, 2009, the three Mendes children filed a verified complaint in the Superior Court alleging breach of fiduciary duty and negligence. Specifically, the breach-of-fiduciary-duty claim alleged that defendants “breached said duty by failing to transfer [decedent's] interests in Intersection Realty” to plaintiffs “at any time prior to or after [their father's] death.” The complaint further contended that defendants failed to collect rents from the real estate properties, to account for rents that had been collected, to pay taxes that became due, or to “otherwise manage the said real estate property.” The complaint also alleged that defendants failed “to sell the properties properly or in a commercially reasonable manner, or for their fair value,” “to pay the operating expenses of the assets,” which allowed those properties “to become tax delinquent” and be subject to tax sales, and “to properly account for and/or disburse to the [p]laintiffs for any and all money received.” The negligence claims listed in the verified complaint alleged that defendants breached a duty of care owed to plaintiffs by allowing the previously mentioned acts to occur.

The defendants subsequently filed separate motions to dismiss the probate appeal, both contending that plaintiffs had failed to perfect their appeal for two reasons: first, because Victor and Madonna had not filed an appeal in accordance with § 33–23–1(a)(1),⁸ and second, because Ambrose had failed to comply with the provisions of § 33–23–1(a)(2) in filing his appeal.⁹ Additionally, defendants moved to dismiss the verified complaint under Rule 12(b)(6) of the Superior Court Rules of Civil Procedure on the grounds that the statute of limitations had expired.

A hearing on defendants' motions to dismiss was held on January 5, 2010, and on January 15, 2010, the hearing justice granted the motions and dismissed both the probate appeal and the verified complaint. An order reflecting the hearing justice's bench decision and a judgment in favor of defendants were entered on January 20, 2010. The plaintiffs subsequently filed an appeal to this Court on February 5, 2010.¹⁰

IIStandard of Review

Rule 81(a)(1) of the Superior Court Rules of Civil Procedure states that the said rules “do not apply during the process and pleading stages to * * * [p]robate appeals.” Nevertheless, this Court previously has indicated...