De Prins v. Michaeles

• Decision Date: 20 October 2020
• Docket Number: SJC-12865
• Citation: 486 Mass. 41,154 N.E.3d 921
• Parties: Harry DE PRINS v. Michael J. MICHAELES, personal representative, & others.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

486 Mass. 41

154 N.E.3d 921

Harry DE PRINS

v.Michael J. MICHAELES, personal representative,¹ & others.²

SJC-12865

Supreme Judicial Court of Massachusetts, Suffolk..

Argued March 5, 2020

Decided October 20, 2020

Michael J. Rossi for the defendants.

J. Mark Dickison, Boston (Ryan A. Ciporkin also present) for the plaintiff.

Present: Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher, & Kafker, JJ.³

CYPHER, J.

The United States Court of Appeals for the First Circuit has certified a question to this court, pursuant to S.J.C. Rule 1:03, as appearing in 382 Mass. 700 (1981). We are asked whether, on the undisputed facts of this case, the assets of a self-settled discretionary spendthrift⁴ irrevocable trust governed by Massachusetts law are protected from a reach and apply action by the deceased settlor's creditors. We answer the question "no," based on the circumstances presented here. Consistent with the well-established public policy of the Commonwealth, we conclude that where, as here, a settlor creates a self-settled spendthrift irrevocable trust and a judgment-creditor's cause of action accrues prior to the settlor's death, a judgment-creditor of the settlor's estate may reach and apply the trust's assets after the settlor's death. We do not address what the result might be in other circumstances.

Background. We recite the undisputed facts as established by the First Circuit in its opinion accompanying the certified question. See De Prins v. Michaeles, 942 F.3d 521, 523-525 (1st Cir. 2019). In 2000, Donald Belanger and his wife moved from Massachusetts to Arizona. In 2005, a dispute with their neighbors, Armand and Simonne De Prins (the De Prinses), over shared water rights gave rise to litigation. In 2007, the De Prinses prevailed in their lawsuit against Belanger and his wife. In 2008, Belanger and his wife moved to California, where the wife committed suicide on October 4, 2008. Immediately thereafter, Belanger returned to Arizona with his daughter. That same month, Belanger created the Donald A. Belanger Irrevocable Trust Dated October 28, 2008 (trust), which included a spendthrift clause and provided that Belanger could not "alter, amend, revoke, or terminate" the trust. Belanger named himself as the sole beneficiary during his lifetime and his attorney, Michael J. Michaeles (defendant), as the sole trustee. On Belanger's death, his daughter would become the sole beneficiary. Immediately after signing the trust on November 3, 2008, Belanger conveyed substantially all his assets to the defendant as trustee.

Four months later, on March 2, 2009, Belanger shot and killed the De Prinses. On March 3, 2009, Belanger shot and killed himself after being stopped by a police officer in New Mexico. The defendant, as personal representative of Belanger's estate, probated the estate in Arizona.

On June 10, 2010, the De Prinses' son, the plaintiff, Harry De Prins, brought a wrongful death action against the defendant as personal representative of Belanger's estate. That action was removed from Arizona State court to the United States District Court for the District of Arizona.

In November 2014, after learning about the existence of the trust through the wrongful death action, the plaintiff brought a separate action in the United States District Court for the District of Arizona to reach and apply assets of the trust toward any judgment he may receive in the wrongful death action. In July 2015, the plaintiff settled the wrongful death action against Belanger's estate for $750,000. In the action probating Belanger's estate, the plaintiff and the defendant stipulated that (1) the plaintiff's collection of the wrongful death judgment would be against the trust exclusively, through the pending reach and apply action, and (2) the reach and apply action would be transferred to the United States District Court for the District of Massachusetts.

After the action was transferred pursuant to the stipulation, the plaintiff amended the complaint to state a single claim to reach and apply the trust's assets to satisfy the $750,000 wrongful death judgment against Belanger's estate. On cross motions for summary judgment, judgment entered for the plaintiff, with the judge concluding that the plaintiff satisfied the three elements required for a reach and apply action under Massachusetts common law.⁵ The District Court judge further concluded that a settlor may not use a self-settled spendthrift trust to protect his assets from creditors. The defendant appealed. On appeal, the First Circuit held that (1) Massachusetts's statute of limitations for creditors' claims against a decedent's estate or trust did not apply to bar the plaintiff's claim against the trust;⁶ and (2) the defendant was not collaterally estopped from arguing that the plaintiff could not collect against the trust for the wrongful death judgment, despite the stipulation in the probate action that collection of the judgment could be enforced only against the trust's assets. The First Circuit certified to this court the following question:

"On the undisputed facts of this record, does a self-settled spendthrift irrevocable trust that is governed by Massachusetts law and allowed unlimited distributions to the settlor during his lifetime protect assets in the irrevocable trust from a reach and apply action by the settlor's creditors after the settlor's death?"

The well-established legal maxim that one must be just before being generous compels us to conclude that it does not. See Foster v. Hurley, 444 Mass. 157, 172, 826 N.E.2d 719 (2005) (Greaney, J., dissenting in part); Hill v. Treasurer & Receiver Gen., 229 Mass. 474, 477, 118 N.E. 891 (1918) ; Chase v. Redding, 13 Gray 418, 420, 79 Mass. 418 (1859).

Discussion. The answer to the certified question depends, in part, on whether the common law or the Massachusetts Uniform Trust Code (MUTC), G. L. c. 203E, §§ 101 et seq., controls. When interpreting a statute, we are bound by the Legislature's intent. Rotondi v. Contributory Retirement Appeal Bd., 463 Mass. 644, 648, 977 N.E.2d 1042 (2012). Where a statute's plain meaning is unambiguous, the statutory text may be dispositive as to legislative intent. Id. Where the language of the statutory provision is ambiguous, however, we must look for legislative intent in the statute as a whole, and in "extrinsic sources, including the legislative history and other statutes" (citation omitted). Ciani v. MacGrath, 481 Mass. 174, 178, 114 N.E.3d 52 (2019). See Rotondi, supra. "[W]e do not construe a statute ‘as effecting a material change in or a repeal of the common law unless the intent to do so is clearly expressed.’ " Suffolk Constr. Co. v. Division of Capital Asset Mgt., 449 Mass. 444, 454, 870 N.E.2d 33 (2007), quoting Riley v. Davison Constr. Co., 381 Mass. 432, 438, 409 N.E.2d 1279 (1980).

Although we determine that the common law applies to the present facts, an overview of the MUTC is warranted. General Laws c. 203E, § 505, addresses when a creditor can reach a trust's assets to satisfy a claim against the trust's settlor and applies regardless of whether a trust contains a spendthrift provision. Section 505 (a ) (1) provides that a creditor can reach the assets of a revocable trust during the settlor's lifetime. Section 505 (a ) (3) provides that a creditor can reach the assets of a revocable trust after the settlor's death.

Section 505 (a ) (2) addresses a creditor's ability to reach the assets of an irrevocable trust. It does not specify whether it applies only during a settlor's lifetime or whether it applies after a settlor's death. G. L. c. 203E, § 505 (a ) (2). It provides that, where a settlor has created an irrevocable trust, including one that contains a spendthrift provision, a creditor "may reach the maximum amount that can be distributed to or for the settlor's benefit." Id. Where a settlor may reach the assets of an irrevocable trust, the settlor's creditors may also reach those assets. Therefore, as the defendants concede, if Belanger were still alive today, the plaintiff could reach the entirety of the trust's assets because the defendant trustee could, under the express terms of the trust, distribute all such assets to Belanger or for Belanger's benefit.

Because it is unclear from the statutory language whether § 505 (a ) (2) addresses a creditor's ability to reach the assets of an irrevocable trust after the settlor's death, we look to the other sections of the statute as well as the legislative history. See Ciani, 481 Mass. at 178, 114 N.E.3d 52 ; Rotondi, 463 Mass. at 648, 977 N.E.2d 1042. When Massachusetts was considering adopting the Uniform Trust Code, an ad hoc committee was created to review and revise it for adoption. Report of the Ad Hoc Massachusetts Uniform Trust Code Committee 1-2 (rev. Jul. 18, 2012) (Report). The committee's comment to G. L. c. 203E, § 505, however, does not shed any additional light as to whether § 505 (a ) (2) was intended to allow a creditor to reach an irrevocable trust's assets after the settlor's death or only during the settlor's lifetime.⁷

Looking to the other provisions in the statute, G. L. c. 203E, § 106, provides that the MUTC is to be supplemented by the "common law of trusts and principles of equity." The committee's comment to this section further clarifies that "the [MUTC] is not intended to replace the common law of trusts in Massachusetts except where the [MUTC] modifies it." Report, supra at 7. It is clear, then, that the common law continues to apply where the MUTC does not address the situation at issue, and that the court may apply "principles of equity" to such cases. See G. L. c. 203E, § 106. In accordance with principles of equity, two sections of the MUTC specify that a trust may not be created that is contrary to public policy. See G. L. c. 203E, §§ 105 (b ) (3), 404.⁸

The trust at issue here is an irrevocable, self-settled, spendthrift trust. A trust is self-settled where "the settlor is also the person who...