Recent Trusts and Estates Decisions
A Summary of Recent Rhode Island Supreme Court Cases Concerning Trust and Estate Law
A number of recent Rhode Island Supreme Court decisions impacted trusts and estates. From Probate Court appeals to joint account designations and attorney's fees, the Rhode Island Supreme Court has clarified the law in some respects and clouded it in others.
In Estate of Brian W. Hart a/k/a Brian William Hart v. Cheryl A. LeBlanc, 853 A.2d 1217 (R.I. 2004), the Rhode Island Supreme Court ruled on whether, in order to perfect its appeal from Probate Court in Richmond to Superior Court under R.I.G.L. §33-23-1, the appealing party is required to submit an entire privately commissioned transcript of the Probate Court proceedings within thirty days of the Probate Court's order. The Court held that if there is any transcript made at the Probate Court level, electronic or written, part of the official record or not, privately commissioned or judge requested, then it must be provided to the Superior Court on appeal. If supplied in part only, the parts provided must allow the Superior Court to pass on each issue raised in the appeal.
Although this case clarifies the need to provide whatever transcript may have been prepared during Probate Court proceedings, it qualifies this position in an unexplained footnote by stating that given the de novo nature of a Probate Court appeal, the potential subjectivity of determining what portions of the Probate Court transcript are relevant to the appeal, and the fact that any failure to include a portion or portions of the transcript that may prove relevant to the appeal should be held against the appealing party when the court decides the issues raised on the appeal, the Superior Court should rarely if ever dismiss a Probate Court appeal solely for the appellant's mere failure to submit one or more arguably relevant portions of the transcript within the period for doing so. As long as the appellant makes a timely good faith effort...then the appeal should not be dismissed.
This qualification by footnote seems to contravene the very essence of the Court's opinion, which specifically requires that the relevant portions of any transcript be made available on appeal within the thirty-day time limit. Stated simply, actual provision of the relevant portions of a transcript is not the same as a good faith effort to provide those relevant portions. This footnote was likely intended to bridge the requirements of §33-23-1 with de novo style review, but it will just as likely cause confusion in the Superior Court.
For example, in Lauren E. Griggs et al. v. Estate of Glen E. Griggs, 845 A.2d 1006 (R.I. 2004), a case quoted in Estate of Brian Hart, the case originated in the Probate Court in Warwick on petition for guardianship of the petitioners' father, Glenn Griggs. The Probate Court denied guardianship, and the Superior Court dismissed the petitioners' appeal because the petition did not include a decision-making assessment tool. The Supreme Court affirmed the Superior Court's decision, but did so on different grounds-on grounds related to R.I.G.L. §33-23-1. The Supreme Court held that because the petitioners did not submit portions of the Probate Court record (specifically, a transcript under R.I.G.L. §33-23-1) deemed relevant to the appeal in Superior Court within the thirty-day statutory deadline or permitted extension, the appeal had not been perfected and was thus not within the jurisdiction of the Superior Court.
On one hand, the differences in Hart and Griggs can be explained, because in the former a transcript was provided, and it was provided in bulk minus just a few pages deemed not necessary to resolving the issues on appeal, whereas in the latter no transcript was provided at all. However, in the latter case, there appeared to be a good faith effort to obtain the Probate Court record, but the Probate Court clerk failed to copy the whole record, including the transcript. Despite the efforts of the party, and despite that the Probate Court was at least partially to blame for the failure to provide a complete record, the Supreme Court stated that an extension on the time to perfect the appeal "should not have been granted."
The Supreme Court did not seek to overrule Hart and Griggs because it relied in part on Griggs. Realizing that the requirements of §33-23-1 are jurisdictional, and that the Superior Court does not have the power to avoid them, it leaves room for clarification to at one and the same time rule that a subjective good faith effort is sufficient to meet the jurisdictional requirements and also rule that there is no room for a Superior Court judge to enlarge the time to meet these requirements despite a good faith effort to meet them.
Also bearing on R.I.G.L. §33-23-1, in In Re Estate of Milton Paroda, 845 A.2d 1012 (R.I. 2004), the Rhode Island Supreme Court stressed the nature of de novo review in cases coming up on appeal from Probate Court. In that case, the appellant properly interlocutorily appealed to Superior Court from a Central Falls Probate Court order because she was aggrieved within the meaning of R.I.G.L. §33-23-1, specifically because an earlier order of that Probate Court diminished the appellant's responsibilities and duties as co-administratrix of the Estate of Milton Paroda.
Paroda died intestate and was survived by four heirs, one of whom was his niece, the appellant. The other heirs wanted Paroda's brother-in-law to be appointed the sole administrator of the Estate. The Probate Court initially appointed the appellant and the brother-in-law to share the administrative duties related to the Estate. Some time thereafter, the Probate Court diminished the appellant's duties when the brother-in-law and the other heirs petitioned the Probate Court to remove appellant as an administrator, accusing her of waste and incompetence. The Superior Court affirmed the Probate Court's order, but it did so when the parties appeared before it only for the purpose of scheduling.
The Supreme Court reversed the Superior Court and remanded the case for a de novo hearing pursuant to R.I.G.L. § 33-23-1(d) to determine the appellant's competence to share in the administration of the Estate due to the limited review given to the matter by the Superior Court hearing justice below. Again, appeals from Probate Courts are not to be reviewed as assigned errors but rather retried de novo.
Clear as this may seem, the Supreme Court really only held that a de novo review is only available when "a Probate Court order or decree adversely affects in a substantial manner some personal or property right of the one seeking review," as this is the definition given to the word "aggrieved" in Lind v. McSoley, 419 A.2d 247, 250 (R.I. 1980) (emphasis added). If de novo review depends on the substantiality of the adverse affect, then it would seem that the Superior Court would have some measure of discretion over this analysis. The Supreme Court, however, did not address that issue in the Paroda opinion, and did not afford the Superior Court any room to consider the substantiality of the adversity suffered by the appellant, but rather moved right to the issue of piecemeal review, which is, again, only permitted when there has been a substantial adverse affect on a personal or property right. The Court could have given some attention to an analysis of substantiality in this case, as that seems to be the hidden fulcrum on which the decision turns. Surely, interlocutory ("piecemeal") review is available, however, just as surely its practical availability turns on more than its mere statutory availability.
Leaving the realm of appellate jurisdiction and entering the realm of substantive transactions, in Mary Gaspar (aka Gasper) et al. v. Maria F. Cordeiro, 843 A.2d 479 (R.I. 2004), the Rhode Island Supreme Court ruled on a troubling issue that faces nearly all trust and estate practitioners, that of the varying affects of certain joint account designations.
In this case, Joseph Cordeiro and his sister-in-law, the defendant, opened two joint bank accounts. Following Joseph's death, the plaintiffs and defendant filed cross motions for summary judgment on the issue of whether the accounts carried a right of survivorship. The Superior Court ruled that the accounts did not carry a right of survivorship, and it granted a summary judgment in favor of the plaintiffs. The defendant appealed that ruling, proffering an unsigned Personal Deposit Account Agreement which contained language that could have been interpreted to impose survivorship rights on the account. The Supreme Court held that because the signed signature cards and customer agreements did not contain survivorship language the defendant did not have a right of survivorship in the accounts. Accordingly, the Court affirmed the Superior Court's ruling.
Again, this summary reads clearly, but the real point is what effect the kind of absence of designation at issue in this case has on the presumptive intent of the depositor. It is not so much the inclusion or the absence of a designation that matters as it is the intent of the depositor. The absence of a survivorship designation is not conclusive proof of the absence of survivorship rights, it is conclusive proof that there was no intent to transfer any right of ownership to a survivor. Conversely, the inclusion of survivorship language does not presumptively provide for survivorship rights, it merely provides a rebuttable presumption of an intent to grant survivorship rights.
That being said, though designations are the primary proof of intent, it must be remembered that it is the intent that matters. Thus, the Supreme Court's opinion ends just where it should have begun, as the intent of a depositor cannot be ascertained without some factual analysis. Practitioners will do well to remember that there are several ways to evidence the intent to grant an ownership interest, and designations are but one. The Court makes short shrift of the intent factor and too heavily relies on the existence or absence of a survivorship designation to satisfy the factual necessity of proving intent.
In re Estate of Anna Cantore, No. 2001-568-A, January 22, 2003, the Rhode Island Supreme Court held that the trial justice did not abuse his discretion in awarding attorney's fees under R.I.G.L. §33-18-19 because the amount awarded was adjusted to reflect the wrongdoing of the parties who sought to collect those fees.
R.I.G.L. §33-18-19 vests Probate Courts with jurisdiction to have counsel fees for services rendered to the benefit of the estates of decedents or incompetents paid out of such estates. However, R.I.G.L. §33-18-19 also provides that if a legally interested person fails to successfully prosecute a suit, that person shall not be entitled to costs but shall be liable to the adverse party for costs, unless the proceedings are found to have been necessary to the protection of the estate.
In this case, the bulk of the attorney's fees at issue were run up by a party defending against a claim of mismanagement of funds, which claim was ultimately successful. The adjustment of requested fees that saved the Superior Court ruling from an abuse of discretion reversal was from $19,277.00 to $16,277.00 a difference of $3,000.00. The Court stated that the $3,000.00 difference proportionately represented the difference in fees between what the mismanagement defense represented and what defense for the benefit of the estate represented.
Despite the Court's finding that the mismanagement claim was at times for varying amounts, the claim was ultimately successful for a fairly large sum of money that was found to have gone missing. That only $3,000.00 of the requested attorney's fees award was allocated to the personal responsibility of the party defending against that claim seems disproportionate to the $16,277.00 allocated to the estate's responsibility for defending against that claim in light of the fact that the claim was successful. Why the estate should have borne more than five times the amount of fees for defending against a fiduciary's breach than the fiduciary bore herself goes unexplained in the opinion and leaves room to question the Court's analysis. At the very least, one has to consider with caution what affect this case may have on future litigation on the breach of a fiduciary duty that could end in an unfavorable determination for a fiduciary.
An opinion bearing on testamentary capacity or the lack thereof has also recently come down from the Rhode Island Supreme Court, Bajakian v. Erinakes, 880 A.2d 843 (R.I. 2005). This case was on review from Kent County Superior Court, having originally come from the East Greenwich Probate Court. The opinion partially focused on Rhode Island Superior Court Rule of Civil Procedure 59, and specifically whether the trial justice erred in his ruling on a motion for a new trial made pursuant to Rule 59 in light of the evidence presented in the case. The trial justice in Bajakian did not grant a new trial, and the Rhode Island Supreme Court affirmed.
The principle of law that the decision rested on was essentially that set of factors relevant to the testamentary capacity analysis as set forth in Rynn v. Rynn, 55 R.I. 310 (1935). In Rhode Island, it is well settled that the proponent of the will in a will contest bears the burden of proof of testamentary capacity by a fair preponderance of the evidence. The factors to be considered in that proffer were boiled down in Bajakian by strictly reducing the analysis to the language of Rynn.
"Eccentricities, peculiarities and oddities in either speech or behavior, or fixed notions and opinions upon family or financial matters will not render a person incapable of making a will, provided such person has sufficient mind and memory to understand the nature of the business he is engaged in when making his will, has a recollection of the property he wishes to dispose of thereby, knows and recalls the natural objects of his bounty, their deserts with reference to their conduct and treatment of him, their necessities and the manner in which he wishes to distribute his property among them." Rynn, 55 R.I. at 321.
Standing alone, this is a sound paradigm for the testamentary capacity analysis. But Bajakian was not so simple. The trial justice gave an erroneous jury instruction that raised the standard for testamentary capacity from "sufficient mind and memory" to "full knowledge." As to the specific import of this error in this case, it was significant because the jury found a lack of testamentary capacity under the instruction of the higher standard. However, despite admitting that the instruction was "overly exigent," the Supreme Court did not specifically review the erroneous jury instruction because it was not objected to by any party below. The Court relied on Zawatsky v. Cohen, 463 A.2d 210 (R.I. 1983), for allowing the erroneous jury instruction to become the law of the case below upon the absence of an objection. The Court, then, in this case effectively reinstated in definite terms the standard for testamentary capacity and at the same time impliedly gave to interested parties the ability to stipulate to another, perhaps higher or lower standard through jury instructions.
In Barrett v. Barrett et al., 894 A.2d 891 (R.I. 2006), the Rhode Island Supreme Court faced head-on a statutory construction issue bearing on trusts and estates. The Court there revisited its decision in Pezza v. Pezza, 690 A.2d 345 (R.I.. 1997). One cannot fully analyze the Barrett opinion without the background of Pezza.
In Pezza, the issue was whether a certain transfer of real estate was fraudulent or illusory. The husband transferred property to an inter vivos trust, which was made irrevocable before his death, for the benefit of his children by a former marriage. The husband's second wife contended that the transfer was a fraudulent attempt to deprive her of her spousal life estate granted pursuant to R.I.G.L. §35-25-2, which at the time did not contain the now present sub-section (b). The Court went on to consider adopting either the fraudulent or illusory transfer test. After adopting the illusory transfer test as the only measure applicable to determining whether transfers of property that serve to defeat a surviving spouse's statutory share are invalid, the Court found that the transfer was not illusory. The issue of intent was of primary importance in that analysis, though it was not the intent to defraud that was made relevant, but rather the intent to transfer, which if not met would reveal something merely tantamount to fraud. The issue of intent to transfer, though expressly dealt with in Pezza was not directly dealt with in Barrett.
The Court in Pezza stated that the illusory transfer test required an owner to completely divest himself or herself of all ownership and that the transfer must have been made with the proper donative intent. Interestingly, the Court stated that, as §32-25-2 was written at the time, the statutory right depended on title being held in fee simple by the deceased spouse. When put up against the illusory transfer test, which at the time required full divestiture of all incidents of ownership, this interpretation of §32-25-2 left a gap. Partial transfers would be deemed illusory outright, even if made with proper donative intent, and even though property would then validly not be held in fee simple, §32-25-2 would still govern and grant a spousal interest in the whole of the property.
In Barrett, the Court faced this issue head-on, only this time the Rhode Island General Assembly interposed itself between Pezza and Barrett in 1999 by amending §32-25-2 to include a sub-section (b). R.I.G.L. §32-25-2(b) was enacted following the Pezza opinion. Sub-section (b) states that any real estate conveyed and recorded by a decedent prior to death shall not be subject to the spousal share granted in sub-section (a). The issue, then, in Barrett was whether this sub-section (b) was enacted to legislatively overrule the Pezza Court's adoption of the illusory transfer test, such that any transfer would suffice to invalidate the spousal share, no matter how illusory or partial, and without regard to the intent of the transferor.
The Court in Barrett found that sub-section (b) was indeed enacted to overrule Pezza. The Court held that the illusory transfer test no longer applies, and that any conveyance would invalidate the spousal life estate. However, in Barrett there were interesting distinctions from the facts of Pezza that the majority gave little attention to. The husband in Barrett transferred the property to a revocable trust reserving for himself a life estate with the full power to sell, mortgage, convey or otherwise encumber the life estate and remainder. The Court disposed of this distinction succinctly by stating its irrelevance in light of the fact that these retained powers were never exercised by the grantor. The Court did not address whether the retention of rights maintained a fee simple interest in the grantor, nor did the Court address the intent of the grantor in light of these reservations. Had the Court done so, it might have identified a statutory conflict between sub-sections (a) and (b).
Because the Court gave short shrift to whether the transfer at issue in Barrett was actually a conveyance at all, the practical gap exposed above was closed solid where there was plenty of opportunity to widen it. The Court did well to close the gap by reading sub-section (b) harmoniously with sub-section (a), in that sub-section (a) requires the property to be held in fee simple if a life estate is to vest in the surviving spouse and the Court's interpretation of sub-section (b) invalidated the spousal share upon any conveyance, whole or partial. This amounts to a ruling in the realm of §32-25-2 that makes the effect of any conveyance a derogation of the fee simple, even if partial or without the proper donative intent. Though the Court specifically addressed the meaning of "conveyance," it did so minimally by stating that the "General Assembly did not delimit the type of conveyance necessary to avoid a spousal life estate or even require a complete divestiture of all beneficial interest in the real estate."
Justice Robinson, in dissent, made much of the factual distinction at play in Barrett by stating that "one has not actually ‘conveyed' if the grantor specifically retains the right to convey to some other person or entity-even though it turns out that the grantor opts not to exercise that retained right to convey in his or her lifetime." Thus, Justice Robinson did not specifically take issue with the crux of the holding, which closed the gap and permitted any conveyance to sufficiently invalidate the surviving spouse's statutory life estate. Rather, he questioned whether there was a conveyance at all. Accordingly, Justice Robinson would theoretically agree with the Court's interpretation of the interplay between sub-sections (a) and (b) of §32-25-2, but he would have held differently on the facts. As discussed above, to have better effectuated its argument, perhaps the dissent should have focused on an analysis of the fee interest and proper donative intent.
The Rhode Island Supreme Court (Justice Robinson included) unfortunately overlooked the analysis of donative intent as it was given in Pezza. The Court, with its overruling of the illusory transfer test, leaves lower courts assuming that a donative intent is not necessary to effectuate the kind of conveyance that will invalidate the spousal share granted under §32-25-2(a). This is troubling because any transfer or conveyance of real estate requires delivery of the deed, which of itself is largely a question of grantor intent. Again, whereas Justice Robinson was on the right track in his dissent, he failed to question whether the intent to deliver title to real estate is no longer part and parcel with the meaning of "convey" under §32-23-2(b). One would think that the Court did not intend to abolish the required common law intent to deliver from the elements of conveyances that do not implicate §32-23-2. But without a clear indication, the lower courts will be left wondering how far reaching the Court's implied removal of donative intent is in the realm of real estate conveyancing.
While the Rhode Island Supreme Court has clarified several statutory and common law principles governing trusts and estates, in so doing, it has opened the door to future inquiries by the lower courts. The problem for practitioners is that these several decisions of the Rhode Island Supreme Court do not allow for the creation of a concise and comprehensive approach to the matters treated therein, which leaves final resolution to the Rhode Island General Assembly.