Steele v. Kelley
| Decision Date | 12 May 1999 |
| Docket Number | No. 97-P-1883,97-P-1883 |
| Citation | 46 Mass.App.Ct. 712,710 N.E.2d 973 |
| Court | Appeals Court of Massachusetts |
| Parties | Walter E. STEELE v. Gerald F. KELLEY 1 & others. 2 |
Alvin S. Nathanson, Boston, for Gerald F. Kelley.
Mark T. Collins, for The K's Inc.
Kathleen M. Curry, Boston, for the plaintiff.
Present: BROWN, LAURENCE, & SPINA, JJ.
A. Procedural background. On June 15, 1994, Walter E. Steele commenced the underlying suit, in his capacity as a beneficiary of the Chatham's Corner Trust (CCT), against Gerald F. Kelley, both individually and in his capacity as sole trustee of the CCT. The sole asset of the CCT was a parcel of rentable commercial real estate in downtown Boston (premises), which was registered land. Steele alleged (in an unverified amended complaint) that, as CCT trustee Kelley had, since late 1992, refused to give the other beneficiaries an accounting, despite their demands; had mortgaged trust property to himself for $225,000 without any consideration and had also assigned trust leases and rents to himself as additional security; had leased the property for use as a restaurant and bar to The K's, Inc. (K's), a corporation owned by his daughters, at less than fair market value rental; had attempted to purchase the interests of the other beneficiaries at less than fair value and told them that, unless they all sold out to him, they would not receive an accounting or any distributions; had refused the other beneficiaries' requests to terminate the CCT and distribute its assets to them; and had failed to make timely payment of real estate taxes on the trust property, resulting in tax liabilities and interest penalties. 3
On the basis of such allegations, Steele demanded: an accounting by Kelley (Count I); the voiding of Kelley's mortgage and assignment to himself (Count II); the voiding of the lease to the K's (Count IV); removal of Kelley as trustee (Count VI); a judgment against Kelley for violation of G.L. c. 93A, with attendant treble damages and attorney's fees (Count V); and termination of the CCT and distribution of its assets among the beneficiaries (Count III). In their answers, the defendants Kelley and the K's essentially denied all of Steele's material averments; Kelley asserted a counterclaim against Steele for abuse of process; and the K's asserted a cross claim for indemnification against Kelley in his capacity as trustee of the CCT.
Only two aspects of the parties' extensive pretrial maneuvering require mention. Kelley moved to dismiss the counts to void the mortgage and terminate the CCT on the ground that, under G.L. c. 185, § 1(a 1/2 ), as inserted by St.1986, c. 463, such claims were within the exclusive jurisdiction of the Land Court because they were "[c]omplaints affecting title to registered land." A Superior Court judge denied the motion, reasoning that the court "clearly has jurisdiction over the dispute and power to award some types of relief if liability is established...." Kelley later filed an unopposed motion to report the jurisdictional issue to the Appeals Court pursuant to Mass.R.Civ.P. 64, 365 Mass. 831-832 (1974). Before this motion was decided, Kelley moved to recuse all Superior Court judges from presiding over the suit because Steele was a justice of the Superior Court at the time this action was commenced. 4 Another Superior Court judge allowed the motion for recusal and transferred the case to a justice of the District Court Department. Subsequently, on April 18, 1995, the Chief Justice for Administration and Management, pursuant to his authority under G.L. c. 211B, § 9, 5 issued an order of assignment designating the District Court justice a justice of the Superior Court Department for the purposes of this suit.
Upon assuming his duties, the assigned judge denied, after hearing, Kelley's motion to report the jurisdictional issue to the Appeals Court for the same reason given by the Superior Court judge who had denied Kelley's motion to dismiss. The judge also denied pending cross motions for summary judgment stating that genuine issues of material fact existed. Kelley subsequently moved for reconsideration of the denial of the motion for summary judgment as to the count to terminate the trust, which was denied on the same basis as the motions to dismiss and report to the Appeals Court.
On February 14, 1996, over Kelley's protest that the case sounded in equity and should receive a bench trial on all issues, a jury trial commenced on all of the counts of Steele's complaint as well as on Kelley's counterclaim. 6 After a two-week trial, the judge, again over Kelley's objection and motion for a directed verdict, submitted the entire case to the jury in the form of special questions pursuant to Mass.R.Civ.P. 49(a), 365 Mass. 812-813 (1974).
On March 1, 1996, the jury returned their answers to the questions as follows: (1) Kelley, as trustee, did not "properly and adequately account" to Steele for the CCT's income, but such failure caused no damage to the CCT; (2) there was "fair consideration for the granting of the $225,000 mortgage by ... Kelley [as] trustee ... to [himself] individually, in that there was fair value or benefit given by [him] individually and fair value or benefit received by the [CCT]" only as to Kelley's trustee's fees in the amount of $52,500 and not as to his claimed fees as attorney for the CCT, or the fees he personally paid the CCT's law firm, or the monies he personally advanced to the CCT for trust purposes; (3) the purposes of the CCT had "been frustrated so as to warrant its termination and the distribution of its assets to the beneficiaries"; (4) Kelley as trustee had "acted in bad faith or with personal and wilful misfeasance or fraud" in entering the lease with the K's so as to justify voiding the lease, and the K's "had actual knowledge that ... Kelley acted improperly in entering into the lease," but the jury could not determine what was the proper amount of rent which the K's should have been charged and proposed letting the matter of proper rent be determined by "the average of two independent professional appraisals"; (5) Kelley as trustee had committed "an [unidentified] unfair or deceptive practice toward" Steele while engaged in trade or commerce with Steele, which had caused Steele loss and damages in the amount of his attorneys' fees incurred in prosecuting the suit; this amount should be doubled because the act was "willful or knowing"; (6) the evidence "justifie[d] the removal of Kelley as trustee"; and (7) Steele did not commit an abuse of process by bringing the suit against Kelley.
Before the verdicts were accepted, Kelley requested that the judge harmonize the jury's answers to Count I with their answers regarding the mortgage count (arguing that if his accountings had caused no damage to the trust, neither could the challenged consideration for the mortgage, which the accountings presented to the jury had reflected). The judge effectively denied the request, declaring that no inconsistencies existed. Subsequently, the K's filed a motion for entry of judgment as to Count IV, contending that the evidence did not support the jury's finding that it had actual knowledge of any impropriety on Kelley's part, which was denied.
On April 18, 1996, the judge entered a final order of judgment in Steele's favor which (1) directed Kelley to provide an accurate and complete accounting of the CCT within thirty days; (2) declared null and void the mortgage and assignment executed by Kelley and ordered Kelley to repay the CCT all monies he had paid to himself in excess of $52,500; (3) ordered that the CCT be terminated; (4) declared null and void the lease from Kelley, as trustee, to the K's and ordered the K's to pay market rent, to be determined by and paid to a receiver; (5) removed Kelley as trustee of the CCT; (6) awarded Steele attorney's fees and costs 7 under G.L. c. 93A, § 11, but disallowed the jury's doubling of this amount; and (7) dismissed Kelley's counterclaim for abuse of process. On the same day, the judge also issued an order appointing a receiver for the purpose of terminating the CCT and distributing its assets to the beneficiaries.
Kelley subsequently moved to alter or amend the judgment, for judgment notwithstanding the verdict as to each count (having previously moved for a directed verdict), for a new trial, and to substitute the successor trustee named under the trust instrument as a party defendant. The K's also filed its own motion to alter or amend the judgment and for a new trial. On May 9, 1996, all the defendants' motions were denied. The defendants filed timely notices of appeal.
Kelley argues that the judgment is defective, that his directed verdict and posttrial motions attacking it were erroneously denied, and that he is entitled to reversal and a new trial for the following reasons: (1) the judge lacked subject matter jurisdiction to void the mortgage and terminate the trust because such actions affected title to registered land and were within the exclusive jurisdiction of the Land Court; (2) the judge abused his discretion in submitting to the jury, rather than trying himself, the issues in this case which, aside from the c. 93A count (as to which Steele was not entitled to a jury trial), were entirely cognizable under the principles of equity jurisdiction; (3) the judge erred in allowing the jury to consider the issue of termination of a trust in the absence of evidence supporting frustration of purpose or impossibility and on incorrect instructions; (4) the judge erred in allowing the jury to void the mortgage upon incorrect instructions; (5) the judge erred in voiding the lease in the face of insufficient evidence of breach of trust by the trustee and of the jury's conflicting responses to the special questions; (6) the court erred in submitting the c. 93A count to the jury, since the matter was not subject to c. 93A; (7) ...
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