Patterson v. Patterson

• Decision Date: 09 October 2002
• Docket Number: No. 02-1384.,02-1384.
• Parties: Joel A. PATTERSON, Plaintiff, Appellant, v. Richard J. PATTERSON, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 1156

306 F.3d 1156

Joel A. PATTERSON, Plaintiff, Appellant, v. Richard J. PATTERSON, Defendant, Appellee.

No. 02-1384.

United States Court of Appeals, First Circuit.

Heard September 4, 2002.

Decided October 9, 2002.

Joseph S. Hoppock, with whom Goodnow, Arwe, Ayer, Prigge, Hoppock and Kane, P.C. was on brief for appellant.

Pamela N. Morales, with whom Steven E. Grill and Devine, Millimet & Branch, P.A. were on brief for appellee.

Before BOUDIN, Chief Judge, BOWNES, Senior Circuit Judge, and LYNCH, Circuit Judge.

BOWNES, Senior Circuit Judge.

Plaintiff-appellant, Joel Patterson ("Joel"), brought common law and statutory claims against his adoptive father, defendant-appellee, Richard Patterson ("Richard"), for breach of fiduciary duty. Joel based his claims on Richard's alleged misappropriation of insurance proceeds following the death of Joel's mother, Penney Patterson ("Penney"). The district court granted the defendant's motion for summary judgment on the grounds that the doctrine of res judicata precludes the plaintiff's claims. We reverse.

I. BACKGROUND

A. Facts

In reviewing a district court's grant of summary judgment, "we must view the entire record in the light most hospitable to the party opposing summary judgment, indulging all reasonable inferences in that party's favor." Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir.1990). We recite the facts accordingly.

In 1982 Penney gave birth to her son, Joel. In 1988, Penney married Richard, who, during that same year, adopted Joel as his son. Penney subsequently purchased a life insurance policy with a death benefit of $150,000 and named Richard as the primary beneficiary, and Joel as the secondary beneficiary. Penney and Richard also established a family trust and designated themselves as trustees and principal beneficiaries, and Joel as a residual beneficiary. In 1991, Samuel Patterson ("Samuel") was born to Penney and Richard. After Samuel's birth, Penney changed the beneficiary of the life insurance policy so that $100,000 would be paid to Joel individually, and $50,000 to the family trust. This was the last time that Penney herself changed the beneficiaries of the insurance policy.

Shortly after she made these changes, Penney was diagnosed with a malignant brain tumor. Within days of the diagnosis, Penney executed a durable power of attorney that granted Richard the power to change the beneficiary of her life insurance policy. Richard exercised this power on two separate occasions during 1993. The first was on June 11th when he named Penney and himself, in their capacity as trustees for the family trust, as the beneficiaries of the life insurance policy. The second was on July 21st at 6:45 p.m. when Richard substituted himself, in his individual capacity, as the sole beneficiary. Penney died at 7:05 p.m. on that same day.

Following his wife's death, Richard sought payment under the life insurance policy, but the insurance company refused to transfer the funds because of its concerns about Richard's changes to the policy. The insurance company and Richard eventually settled the dispute and agreed to divide the insurance proceeds into two parts. Richard received approximately one-third of the policy benefits in his individual capacity. The remaining two-thirds were placed into a new trust, the Patterson Children 1994 Trust, of which Richard was the trustee and Joel and Samuel were the beneficiaries.

During the last nine months of Penney's life, Joel went to live with his maternal grandparents, Robert and Mary Jane Lambert. He continued to live with the Lamberts on a permanent basis thereafter. In 1995, the Lamberts brought a petition in New Hampshire probate court for guardianship of Joel. In their petition, the Lamberts claimed to be his sole and primary caretakers. They further alleged that Richard was not paying any support for Joel, and was retaining social security benefits paid to Joel as a result of his mother's death. The Lamberts also claimed that there were significant assets remaining from Penney's estate, and that it would be in Joel's best interest to obtain information regarding these assets.

The probate court ordered the appointment of a guardian ad litem who was "empowered to investigate not only the traditional matters which would be raised in the guardianship concerning the best interests of the child, but also ... to investigate the financial circumstances, particularly involving the proceeds of life insurance of Joel A. Patterson's late mother, Penney." The probate court ultimately granted guardianship to the Lamberts, and ordered the establishment of a new trust that contained Joel's share of the Patterson Children 1994 Trust. The funds in this new trust amounted to roughly one-third of the insurance policy benefits — about $50,000 less than Joel would have received had Richard not made any changes to Penney's life insurance policy.

B. Procedural History

In April, 2001, Joel filed a complaint against Richard in New Hampshire Superior Court. Joel alleged that Richard's use of the power of attorney just prior to his mother's death constituted a breach of common law fiduciary duties to Penney, and a breach of common law and statutory fiduciary duties to Joel, as a third party beneficiary. Joel specifically claimed that Richard's breach was evidenced by his changes to the life insurance policy, his negotiated settlement with the insurance company, and his failure to obtain court approval of the settlement as required by section 464-A:42 of the New Hampshire Revised Statutes. These actions allegedly amounted to fraud, misappropriation and conversion. Joel claimed standing pursuant to section 506:7 of the New Hampshire Revised Statutes, which permits children of principals to file claims in the superior or probate court to determine the legality of actions taken under powers of attorney.

Richard properly removed the case to federal district court on the basis of diversity jurisdiction, and then moved for summary judgment on the grounds that he did not breach a fiduciary duty to Penney, that he owed no fiduciary duty to Joel, that section 464-A:42 was not applicable, that Joel waived his right to challenge Richard's exercise of the power of attorney, and that the Lamberts' guardianship proceeding precluded Joel's claims under the doctrine of res judicata. The district court granted Richard's motion for summary judgment, relying on res judicata to reach its decision.

II. DISCUSSION

We review grants of summary judgment de novo. Pure Distribs., Inc. v. Baker, 285 F.3d 150, 154 (1st Cir.2002). In cases involving preclusion, federal statutory law requires federal courts "to give preclusive effect to state-court judgments whenever the courts of the State from which the judgments emerged would do so." Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 81, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984)(quoting Allen v. McCurry, 449 U.S. 90, 96, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980)). Here, Richard contends that the New Hampshire probate court guardianship proceedings bar Joel's current claims. Therefore, "[w]e look to state law to determine the preclusive effect of a prior state court judgment." In re Spigel, 260 F.3d 27, 33 (1st Cir.2001).

Under New Hampshire law, res judicata means "that a final judgment by a court of competent jurisdiction is conclusive upon the parties in a subsequent litigation involving the same cause of action." Eastern Marine Constr. Corp. v. First S. Leasing, Ltd., 129 N.H. 270, 525 A.2d 709, 711-12 (N.H.1987) (citations omitted). Furthermore, res judicata "bars the relitigation of any issue that ... might have been raised in respect to the subject matter of the prior litigation." Grossman v. Murray, 141 N.H. 265, 681 A.2d 90, 94 (1996) (quoting Dennis v. R.I. Hosp. Trust Nat'l Bank, 744 F.2d 893, 899 (1st Cir. 1984) (emphasis in original)). The parties do not challenge on appeal the finality of the probate court's judgment. Their arguments instead focus on whether the probate court had jurisdiction to hear Joel's breach of fiduciary duty claims, whether the Lamberts' guardianship petition is the same cause of action as Joel's breach of fiduciary duty claims, and whether Joel was a party to the guardianship proceedings.

A. Jurisdiction

Joel argues that the district court erred in ruling that the probate court could have exercised proper subject matter jurisdiction over his breach of fiduciary claims during the guardianship proceedings. In New Hampshire, "[t]he probate court is not a court of general jurisdiction. Its powers are limited to those conferred upon it by statute." In re Cigna Healthcare, Inc., 146 N.H. 683, 777 A.2d 884, 888 (2001)(quoting In re Estate of O'Dwyer, 135 N.H. 323, 605 A.2d 216, 217 (1992)). By statute, the superior court and probate court have concurrent subject matter jurisdiction over powers of attorney. See N.H.Rev.Stat. Ann. § 547:3(II)(b) (Supp. 2002). This jurisdiction includes the power "to determine the legality of acts, proposed acts, or omissions of the agent." N.H.Rev.Stat. Ann. § 506:7(III)(b) (Supp. 2002). Joel's claims arise from Richard's use of the power of attorney. Therefore, the district court properly found that the probate court could have exercised subject matter jurisdiction over Joel's claims.

B. Same Causes of Action

New Hampshire law considers two causes of action to be the same for purposes of res judicata when they arise from the same factual transaction. ERG, Inc. v. Barnes, 137 N.H. 186, 624 A.2d 555, 558 (1993) ("[t]he term `cause of action' embraces all theories on which relief could be claimed arising out of the same factual transaction."); Eastern Marine Constr. Corp., 525 A.2d at 712-13. Although simplistic on its face, the term "factual transaction" is not always easy to define with precision. We note in this regard, that the New Hampshire Supreme Court has used slightly different phraseology when conducting its "factual...