Sargent v. Sargent

• Decision Date: 31 July 2009
• Docket Number: C.A. PC08-1429
• Parties: FRANCIS B. SARGENT, JR. and COASTLINE TRUST COMPANY, as CO-TRUSTEES OF THE DIANE M. SARGENT REVOCABLE TRUST - 1998 v. PAMELA M. SARGENT
• Court: Rhode Island Superior Court

FRANCIS B. SARGENT, JR. and COASTLINE TRUST COMPANY, as CO-TRUSTEES OF THE DIANE M. SARGENT REVOCABLE TRUST - 1998 v. PAMELA M. SARGENT

C.A. No. PC08-1429

Superior Court of Rhode Island

July 31, 2009

DECISION

GIBNEY, J.

Before this Court for decision is a suit by Plaintiffs Francis B Sargent, Jr. and Coastline Trust Company ("Plaintiffs"), as Co-Trustees of The Diane M Sargent Revocable Trust-1998 (the "Trust") against Defendant Pamela M. Sargent ("Pamela" or "Defendant"). The Plaintiffs seek $861, 177 in damages for various breaches of trust allegedly committed during the Defendant's approximately eight-year tenure as trustee of the above-named Trust. Jurisdiction is pursuant to G.L. 1956 § 8-2-13.

I Factual Summary and Travel

On or about April 6, 1998, Diane M. Sargent ("Diane" or "Decedent"), late of Providence, Rhode Island established The Diane M. Sargent Revocable Trust – 1998. The Trust named Diane as trustee and Diane's daughter, Pamela, as successor trustee. Diane died on November 26, 1999, and was survived by four adult children Kennett Sargent ("Kennett"), Jeffrey Sargent ("Jeffrey"), Lisa Sargent ("Lisa"), and Pamela. Upon Diane's passing, Pamela assumed her role as successor trustee and as executrix of the estate.

Diane's will directed the distribution of her tangible personal property to her children in substantially equal shares. (Def.'s Ex. 254.) The balance of Diane's property passed directly to the Trust by means of a "pourover provision" contained in the will. Id. The Trust, in turn, provided that after Diane's death, it was to be divided into equal shares for her children. (Pls.' Ex. 1, at Article III(A).) Specifically, the Trust provided that Pamela's one-quarter share may be distributed outright and free of the Trust. Id. In contrast to Pamela's share, the Trust provided that Jeffrey's and Lisa's one-quarter shares continue in trust, with income and principal available to them and their children, if any, for their maintenance, support, and education, and that Kennett's one-quarter share was to be administered as a "special needs trust" for his benefit.^1[] Id. In addition, the Trust states that "Rhode Island law shall govern the validity, construction, effect and administration of each of the trusts hereof." (Article IV, § v.)

At the date of her death in 1999, Diane's estate had a gross value of slightly over 2.5 million dollars. (Pls.' Ex. 60, Form 706, part 4.) The principal asset consisted of a brokerage account with A.G. Edwards & Sons, Inc. ("A.G. Edwards"), valued at approximately 2 million dollars. Id. at schedule G, item 4. Eighteen and one-half percent of the A.G. Edwards account was invested in a mutual fund, 1.4% was invested in tax-exempt bonds, and the balance was invested in the stock of 33 companies, including 1600 shares of Qualcomm Corporation stock, constituting 30.4% of the overall investment portfolio. (Pls.' Ex. 2.) In addition, the Trust contained a mutual fund account at Commonwealth Financial Network ("Commonwealth"), valued at approximately $23, 486, and real estate located at 11 Barnes St. in Providence, Rhode Island, valued at $420, 000. (Pls.' Ex. 60 at schedule G) The Trust was funded with all of the major assets prior to Diane's death. Id.

The value of the Qualcomm stock declined during Pamela's administration of the estate and was liquidated to pay federal and state estate taxes on July 25, 2000. (Pls.' Ex. 41.) The Qualcomm stock was sold for $377, 091, which was $238, 409 less than its value eight months earlier when Diane died. Id. The loss in value of the Qualcomm stock gives rise to one of Plaintiffs' central claims and will be discussed in detail infra.

In the months following Diane's death, Pamela carried out the necessary steps of administering her mother's estate, from arranging for her funeral, to filing and handling an audit of the estate tax returns. The record contains scores of exhibits evidencing the work performed in her capacity as executrix. The Plaintiffs do not challenge how Pamela administered her mother's estate; rather, their claims arise out of the administration of the Trust.

Soon after Diane's death, problems developed between Pamela and her two brothers, Kennett and Jeffrey, relative to her role as trustee. The Court will make detailed findings of fact as to Pamela's interactions with each brother in the sections that follow. In general, however, the brothers grew upset with the allegedly secretive manner in which Pamela was administering the Trust. Kennett and Jeffrey claimed that despite repeated requests, Pamela refused to reveal any information at all about the Trust— including the value of their respective shares—and refused to provide an accounting. Furthermore, the brothers claimed that Pamela refused to make certain disbursements that they felt were appropriate. In Kennett's case, no disbursements at all were made, despite his special needs, in the first four and one-half years of Pamela's administration of the Trust.

On or about July 8, 2004, Kennett and Jeffrey filed a lawsuit against Pamela in Providence County Superior Court, entitled Kennett F. Sargent and Jeffrey P. Sargent v. Pamela M. Sargent, C.A. No. PC04-3674, in which they sought, inter alia, an order requiring Pamela to provide a full accounting of Trust assets and an order removing her as trustee. (Pls.' Ex. 17.) On September 28, 2004, a consent order was entered requiring that Pamela provide a full and complete accounting of her stewardship of the Trust within 30 days of the order's entry. (Pls.' Ex. 18.) While Pamela provided a one-page summary of asset and distribution information to her attorney on September 28, 2004 (Def.'s Ex. 213), she did not provide a full accounting within the required thirty days. Instead, a draft accounting was not produced until October 14, 2005, (Def.'s Ex. 227), and a more formal "preliminary accounting" ("1999-2004 Accounting") was not completed until August 3, 2006 (Pl. Ex. 41). A final accounting of the entire period of Pamela's administration of the Trust was completed on June 13, 2008. (Def.'s Ex. 235.)

The preliminary accounting, which summarized Trust transactions from Diane's date of death in 1999 through December 31, 2004, revealed that Pamela had made the following disbursements: of the approximately 1.6 million dollars remaining in the Trust after payment of expenses and estate taxes, Pamela disbursed $386, 577 to herself, including payment of trustee fees in the amount of $43, 628. Lisa received $402, 500 from the Trust as a credit towards the purchase of the 11 Barnes St. property, and as compensation for providing care to Diane in her final days. Jeffrey received $132, 500, and Kennett received nothing.

On May 8, 2007, Kennett and Jeffrey renewed their petition to remove Pamela as trustee. On July 30, 2007, the Court appointed Laura M. Krohn, Esq., as guardian ad litem for Kennett in order to give recommendations as to whether Pamela had acted in his best interests pursuant to the terms of the Trust. (Pls.' Ex. 47.) On September 11, 2007, the guardian ad litem filed her report and concluded that Pamela had "act[ed] arbitrarily in denying distributions to Kennett for his health, maintenance, and support." Id. She further concluded that Pamela had "breached her fiduciary duty to Kennett by not acting in his best interest, and by failing to carry out the intent of Diane M. Sargent." Id.

On September 14, 2007, Pamela resigned as trustee, and Coastline Trust Company ("Coastline") and Francis Sargent ("Francis"), father of the four siblings, were appointed successor co-trustees of the Trust. (Pls.' Ex. 49.) On January 31, 2008, the successor co-trustees filed a petition for instructions with the Court, requesting guidance regarding the remaining Trust funds. (Pls.' Ex. 51.) The successor co-trustees recommended, and the Court approved, that the Trust assets be divided in the following manner:

Based on the 1999-2004 Accounting, the Successor Co-Trustees recommend the following immediate division of Irrevocable Trust funds into shares of $335, 960.01 for each beneficiary (which is the amount that Pamela reported that she had received in the 1999-2004 Accounting):

(a) Lisa . . . [who has] already received allotments totaling $402, 500.00, should not be allotted an additional share at this time;

(b) Pamela, who has already received allotments totaling $335, 960.01, should not be allotted an additional share at this time.

(c) Jeffrey . . . [who has already] received allotments totaling $132, 500.00, should be allotted an immediate additional share in the amount of $203, 460.01 bringing his aggregate allotment to $335, 960.01, and

(d) Kennett . . . [who has already] received allotments totaling $24, 000.00, ^2[] should be allotted an immediate additional share in the amount of $311, 960.01 bringing his aggregate allotment to $335, 960.01. (Pls.' Ex. 51.)

In addition, the Court entered an order granting the brothers' motion to compel Pamela to finalize the 1999-2004 Accounting and complete an accounting from the period January 1, 2005 through September 14, 2007, the date of her resignation as trustee. (Pls.' Ex. 52.)

On or about March 10, 2008, the successor co-trustees brought suit against Pamela. In their verified complaint, they make the following nine claims: (1) breach of duty to administer the Trust in strict accordance with its terms, (2) breach of duty to deal impartially with beneficiaries, (3) breach of duty of loyalty, (4) breach of duty to exercise reasonable care and skill, (5) breach of duty to properly delegate investment decisions, (6) breach of duty to render accounts and to furnish information, (7) breach of duty to preserve trust property and keep it productive, (8) malice, and alternatively (9) gross...