Patterson v. Patterson

United States Court of Appeals
For the First Circuit

No. 02-1384

JOEL A. PATTERSON,

Plaintiff, Appellant,

v.

RICHARD J. PATTERSON,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW HAMPSHIRE

[Hon. Joseph A. DiClerico, Jr., U.S. District Judge]

Before

Boudin, Chief Judge,

Bownes, Senior Circuit Judge,

and Lynch, Circuit Judge.

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.

October 9, 2002
 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

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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-

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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

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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

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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

(1984)(quoting Allen v. McCurry, 449 U.S. 90, 96 (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.,

525 A.2d 709, 711-12 (N.H. 1987)(citations omitted). Furthermore,

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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, 681 A.2d 90, 94 (N.H. 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.,

777 A.2d 884, 888 (N.H. 2001)(quoting In re Estate of O'Dwyer, 605

A.2d 216, 217 (N.H. 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.

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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, 624 A.2d 555, 558 (N.H.

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 transaction" analyses.

See Brzica v. Trustees of Dartmouth Coll., 791 A.2d 990, 1000 (N.H.

2002) (factual transaction determined by examining whether previous

and current lawsuits "rely upon" the same facts); Goffin v. Tofte,

772 A.2d 896, 898 (N.H. 2001) (factual transaction determined by

examining whether "the facts relevant" to previous claim are the

same as those relevant to current claim); Marston v. United States

Fid. and Guar. Co., 609 A.2d 745, 748 (N.H. 1992) (factual

transaction determined by examining what "the [lower] court had to

determine" in each of the two actions); Aubert v. Aubert, 529 A.2d

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909, 912 (N.H. 1987) (factual transaction determined by examining

"the purpose" of each action).

When the New Hampshire Supreme Court first articulated

its seminal definition of res judicata it found persuasive the

Third Circuit's reasoning that two claims arise from the same

factual transaction when "[n]o material fact is alleged in action

No. 1 that was not alleged in action No. 2." Eastern Marine

Constr. Corp., 525 A.2d at 713 (quoting Williamson v. Columbia Gas

& Elec. Corp., 186 F.2d 464, 470 (3d Cir. 1950)). We find this

rendition of the factual transaction analysis to be particularly

useful, not only because it incorporates the essence of the other

phraseologies, but also because the New Hampshire Supreme Court has

continued to rely on it. See Warren v. Town of E. Kingston, 761

A.2d 465, 469 (N.H. 2000)(two claims do not arise from same factual

transaction because they are not "based on the same allegations of

fact."). Moreover, this analysis comports with that used in the

Restatement (Second) of Judgments § 24 (1982), which the New

Hampshire Supreme Court has repeatedly used to define res

judicata.1 See Appeal of the Univ. Sys. of N.H. Bd. of Trs., 795

A.2d 840, 843 (N.H. 2002); Shepherd v. Town of Westmoreland, 543

1
The commentary to the Restatement explains that the term
"factual transaction" is "not capable of a mathematically precise
definition," but that "the relevance of trial convenience makes it
appropriate to ask how far the witnesses or proofs in the second
action would tend to overlap the witnesses or proofs relevant to
the first." Restatement (Second) of Judgments § 24 cmt. b (1982).

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A.2d 922, 923 (N.H. 1988); Aubert, 529 A.2d at 911; Eastern Marine

Constr. Corp., 525 A.2d at 713. It also is similar to the analysis

used by the New Hampshire Supreme Court prior to its adoption of

its seminal definition of res judicata. See Concrete Constructors,

Inc. v. Manchester Bank, 377 A.2d 612, 614 (N.H. 1977)(determining

whether two causes of action are the same by examining "the

essential elements" of the parties' pleadings and what the parties

are "required to plead and prove.").

Our review of the record indicates that the Lamberts'

guardianship petition did not allege the same material facts as

those alleged in Joel's breach of fiduciary duty claims. The

Lamberts' petition alleged, in relevant part, that they were Joel's

primary caretakers, that Richard was not providing Joel any

financial support, that the Lamberts believed significant assets

remained from Penney's estate, and that it would be in Joel's best

interest to have access to information regarding those assets.

In contrast, Joel's claims in this case allege that

Richard breached a fiduciary duty to both Penney and Joel by

improperly using the power of attorney to change Penney's life

insurance policy. The facts surrounding the power of attorney

itself, its scope of authority, and Richard's knowledge of Penney's

wishes in regards to how it was to be exercised, are material facts

to Joel's claim. These same facts, however, were not material to

the Lamberts' guardianship petition; nor were they alleged.

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Indeed, the power of attorney was not even mentioned in the

Lamberts' guardianship petition.

Joel's claims also involve specific changes to the

insurance policy made by Richard just prior to Penney's death. The

facts regarding Richard's changes to Penney's life insurance policy

were neither alleged by the Lamberts nor material to their

guardianship petition. Joel's claims further allege that Richard's

settlement with the insurance company and his failure to obtain

court approval of the settlement as required by section 464-A:42

evidenced a breach of fiduciary duty. Richard's negotiations and

settlement with the insurance company, and the actions he took, if

any, to comply with section 464-A:42, were not material facts to

the Lamberts' guardianship petition. The petition merely requested

information about assets remaining from Penney's estate that could

be used for Joel's support. There is simply nothing in the

petition, or the record before us, which indicates that the

Lamberts' request for information arose from Richard's settlement

with the insurance company or his failure to comply with the

requirements of section 464-A:42.

We do not find persuasive the district court's reasoning

that negotiations between the Lamberts' attorney and Richard's

attorney regarding settlement of potential future lawsuits by Joel

means that the two causes of action are the same. Although these

negotiations took place while the guardianship proceedings were

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ongoing, we do not find them significant in this case. Where the

complaint and pleadings in the second action are not based on the

same underlying factual transaction as the earlier action, we would

not find there to be a res judicata effect simply because one party

attempted also to settle independent claims as part of a

comprehensive global settlement.

We also reject Richard's argument that the two causes of

action are the same because the probate court specifically

empowered the guardian ad litem to "investigate the financial

circumstances" of Penney's life insurance policy. The probate

court's order arose from the Lamberts' request for information

regarding assets from Penney's estate. As we have already

explained, the request for information did not arise from the same

factual transaction as Joel's breach of fiduciary duty claims.

Of course, New Hampshire case law also supports, as the

district court noted, the modern view that the claim preclusion

branch of res judicata encompasses "all theories on which relief

could be claimed on the basis of the factual transaction in

question," Eastern Marine Const. Corp., 52 A.2d at 712, even

though the later asserted theory was not actually articulated in

the earlier case. This approach functions as a kind of compulsory

joinder of related claims growing out of the same factual

predicate. Thus, if the original lawsuit accused a fiduciary of

breach of duty in appropriating trust assets, a later suit cannot

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allege simple conversion based upon the same events. We agree with

the district court that the principle is correct under New

Hampshire law; but we differ because we think that it does not

quite reach the present case.

Rather, as we have already explained, certain of the

facts that underpinned the guardianship proceeding would have been

relevant in pursuing a fiduciary duty claim; but the bulk of the

facts needed for the latter were not part of the guardianship case

as actually presented to the probate court. Admittedly, these are

matters of characterization and degree. But the fiduciary duty

claim seems to us to require facts sufficiently different than

those offered for a change in guardianship as to make us believe

that a New Hampshire court would not regard them merely as two

different theories that could be asserted "on the basis of the

factual transaction in question."2 Id.

We conclude that under New Hampshire law, the Lamberts'

guardianship petition and Joel's breach of fiduciary duty claims

did not allege the same material facts, and therefore did not arise

from the same factual transaction. Our conclusion is buttressed by

the New Hampshire Supreme Court's reasoning in Aubert v. Aubert,

529 A.2d 909 (N.H. 1987). In that case, a husband brought an

2
We do not read Grossman, 681 A.2d at 93-94, cited by the
district court, as meaning that any common fact automatically makes
two claims the same for res judicata purposes.

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action for divorce against his wife on the basis of extreme

cruelty. Id. at 911. He alleged that his wife shot him in the

head with a revolver, causing permanent facial injuries. Id. The

husband was granted a divorce and subsequently filed a separate

civil action against his wife alleging negligence and intentional

tortious conduct stemming from the same shooting incident. Id.

The New Hampshire Supreme Court reasoned that the divorce

proceeding and the tort claims were not the same causes of action

for purposes of res judicata:

we think it clear that a civil action in tort
is fundamentally different from a divorce
proceeding, and that the respective issues
involved are entirely distinct. . . . The
purpose of a divorce action is to dissolve the
marital relationship and effect the legal
separation of man and wife, while a tort
action is brought to recover compensation for
injuries suffered as a result of a civil
wrong.

Id. at 911-12.

The court also rejected the argument that the divorce was

the same cause of action as the tort claims because alimony can be

awarded in divorce cases. The court stated that alimony "does not

partake of the nature of either damages or a penalty for

misconduct. . . . [It] is an allowance for support and maintenance,

having no other purpose and provide[s] for no other object." Id.

at 912 (alterations in original) (citations omitted). The same

logic applies to a comparison of Joel's tort claims and the

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Lamberts' guardianship petition. The purpose of guardianship

proceedings is not to recover compensation for civil wrongs, but

rather, "to secure for a minor an environment of stability and

security by providing for the appointment of a guardian of the

person when such appointment is in the best interests of the minor;

and to provide for the appointment of a guardian of the estate for

the proper management of the property and financial affairs of the

minor." N.H. Rev. Stat. Ann. § 463:1 (Supp. 2002).

Having ruled that Joel's claims are not the same causes

of action as the Lamberts' guardianship petition, we need not, and

do not, reach the issue of whether Joel was a party to the

guardianship proceeding for purposes of res judicata.

III. CONCLUSION

Joel's breach of fiduciary duty claims are not precluded

by res judicata. Richard urges us to affirm the district court's

order of summary judgment on a variety of grounds other than res

judicata. We decline to do so; we leave the extent and nature of

further proceedings in the hands of the district court. The

district court's order granting the motion for summary judgment is

VACATED and the case is REMANDED for further proceedings not

inconsistent with this opinion. Costs on appeal awarded to Joel

Patterson.

So Ordered.

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