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13-P-906 Appeals Court
13-P-686
13-P-1385
CURT F. PFANNENSTIEHL vs. DIANE L. PFANNENSTIEHL
(and two consolidated cases1).
Nos. 13-P-906, 13-P-686, & 13-P-1385.
Norfolk. February 11, 2014. - August 27, 2015.
Present: Kafker, C.J., Cypher, Kantrowitz, Berry, & Fecteau,
JJ.2
Divorce and Separation, Division of property, Findings,
Attorney's fees. Trust, Spendthrift provision. Contempt.
Practice, Civil, Findings by judge, Contempt, Stay of
proceedings.
Complaint for divorce filed in the Norfolk Division of the
Probate and Family Court Department on September 22, 2010.
1
Both involving the same parties.
2
These consolidated cases were initially heard by a panel
comprised of Justices Kantrowitz, Berry, and Fecteau. After
circulation of the opinion to the other justices of the Appeals
Court, the panel was expanded to include Chief Justice Kafker
and Justice Cypher. See Sciaba Constr. Corp. v. Boston, 35
Mass. App. Ct. 181, 181 n.2 (1993). Justice Kantrowitz
participated in the deliberation on this case while an Associate
Justice of this court, prior to his retirement.
2
The case was heard by Angela M. Ordoñez, J.; a complaint
for contempt, filed on January 24, 2013, was also heard by her;
and a motion to stay enforcement of the judgment pending appeal
was considered by her.
A motion to stay the proceedings pending appeal was
considered in this court by Vuono, J.
Robert J. O'Regan for the husband.
Jillian B. Hirsch for the wife.
BERRY, J. The main issue presented -- in what is the lead
of three appeals3 related to these divorce proceedings --
concerns the decision of a judge of the Probate and Family Court
(probate judge or judge) to include in the marital estate, for
purposes of the G. L. c. 208, § 34, division, the husband's
interest in a multi-million dollar trust established by the
husband's father (the 2004 trust4). The principal of the 2004
trust was, in the main, associated with funding from the
family's operation of corporations that own and operate for-
profit colleges, including Bay State College in Massachusetts
and Harrison College in Indiana.5 The husband claims as error
3
The three consolidated appeals are from the amended
judgment of divorce, the judgment of contempt, and the single
justice's order denying the motion for a stay.
4
The legal title of the 2004 trust is the "Frederick G.
Pfannenstiehl 2004 Trust."
5
These two colleges are owned by Bay State Educational
Corporation and Educational Management Corporation, corporations
controlled by the husband's family. Bay State Education
Corporation does business as Bay State College in Massachusetts.
Educational Management Corporation does business as Harrison
3
the assignment of $1,333,047 of the trust value to the wife and
the requirement that the husband pay $48,699.77 monthly for
twenty-four months to effectuate the division of assets set
forth in the amended judgment.6
As to this issue, the husband, citing a spendthrift
provision in the subject trust, argues that the 2004 trust value
and income therefrom were isolated, were not within the marital
College which is a postsecondary higher education institution
with thirteen to fourteen campuses in Indiana and surrounding
States and which, at the time of trial, had an enrollment of
approximately 6,000 students. See note 13, infra.
6
Other issues presented in the three consolidated appeals
include the husband's arguments that he was denied his right to
trial before an impartial magistrate; that many of the judge's
findings of fact are plainly wrong; that the judge's award of
attorney's fees to the wife was an abuse of discretion; that the
judgment finding him in contempt was in error; and that an order
denying his motion for a stay should be set aside.
In a cross appeal the wife argues that the award of
attorney's fees was insufficient; that the judge erred by not
considering future distributions from the 2004 trust as income
in calculating support; and that the judge should have included
the husband's hypothetical claim for breach of fiduciary duty in
the marital estate.
We address these other issues, after first turning to the
principal issue involving the 2004 trust. In summary, as to
these various other issues, we determine with respect to the
major claims that (1) the wife's attorney's fees were warranted;
(2) the contempt finding against the husband is not sustainable;
and (3) the stay which ordered no further payments to the wife
pending appeal shall be vacated. The husband's claim that his
case was not decided by an impartial magistrate lacks any merit.
4
estate, and, therefore, should have been excluded from
consideration under G. L. c. 208, § 34.7
This spendthrift isolation theory, as detailed infra, is
advanced notwithstanding that the 2004 trust had made
distributions to the husband -- including an outright $300,000
in 2008 followed by 2009-2010 monthly payments of several
thousand dollars -- all of which were distributed from the 2004
trust to the husband, his twin brother, and a sister. Only as
to the husband did these substantial monthly payments end, and
they did so precisely on the eve of the husband's divorce
filing. In contrast to the finale for the husband, the 2004
trust payments continued to the husband's brother and sister.
Specifically, there was a cutoff of the monthly payments to the
7
General Laws c. 208, § 34, as amended by St. 2011, c. 124,
§ 2, states:
"In fixing the nature and value of the property, if any, to
be so assigned, the court, after hearing the witnesses, if
any, of each of the parties, shall consider the length of
the marriage, the conduct of the parties during the
marriage, the age, health, station, occupation, amount and
sources of income, vocational skills, employability,
estate, liabilities and needs of each of the parties, the
opportunity of each for future acquisition of capital
assets and income, and the amount and duration of alimony .
. . In fixing the nature and value of the property to be so
assigned, the court shall also consider the present and
future needs of the dependent children of the marriage . .
. contribution of each of the parties in the acquisition,
preservation or appreciation in value of their respective
estates and the contribution of each of the parties as a
homemaker to the family unit."
5
husband of from $20,000 to $65,000 in August, 2010, one month
before the commencement of divorce proceedings in September,
2010. This cutoff, of course, stands in stark contrast to the
continuing pattern of distributions to the husband's two other
siblings and undermines the husband's theory of exclusion of the
2004 trust.
For the reasons stated herein, we conclude that the record
in the case, including but not limited to trust documentary
exhibits, provides telling evidence that the spendthrift
provision is being invoked as a subterfuge to mask the husband's
income stream and thwart the division of the martial estate in
the divorce. A chart set forth infra shows a spendthrift scheme
that is virtually empty of purpose except as a form of
insulation to inclusion and valuation in the divorce process.
On this issue, we look to settled trust law, which holds that
the mere statement of a spendthrift provision in a trust does
not render distributions from a trust, such as this one, immune
to inclusion in the marital estate for G. L. c. 208, § 34,
calculations.
In addition to our determination that the probate judge
correctly included the 2004 trust in the marital estate, we
further conclude that the judge appropriately divided the
6
marital estate by allocating sixty percent to the wife and forty
percent to the husband.8
1. Divorce appeal. a. Factual background. The following
is taken from the case record of the divorce. The parties were
married in February, 2000, and last lived together in August,
2010. The parties have two children. At the time of trial, the
son was eleven years old, and the daughter was eight years old.
Both children have special needs. The son has been diagnosed
with dyslexia and Attention Deficit Disorder (ADD) and attends a
private school that specializes in teaching students with
dyslexia. The daughter has been diagnosed with Down syndrome
and has had significant medical and developmental issues
throughout her life. The daughter currently is treated by nine
specialists for her medical needs and attends a specialized
school that provides her with physical, occupational, and speech
therapy. She requires "around the clock supervision."
i. The husband. At the time of the 2012 trial, the
husband was forty-two years old. He had attended college for
8
It is more than worthy of note that in this complicated,
intensely litigated case with eight days of trial, this judge
did a masterful job in marshalling the facts and compiling the
record in a memorandum of decision spanning forty-two pages,
including 344 fact findings (which often provide clarity in a
maze of seemingly nontransparent financial arrangements) and
accompanying legal analysis and rationale. That memorandum
decision provides an insightful backdrop to the eight appellate
briefs of 295 pages and the 4,769 pages of record appendices
submitted to this court in the three separate appeals.
7
one and one-half years. He has dyslexia and ADD but is
otherwise in good health. The husband comes from a family of
substantial means. Those substantial family holdings are
principally connected to the family's running of for-profit
colleges. The tuition income from these for-profit educational
businesses was substantial, and, indeed, was a main source of
funding for the 2004 trust.
In addition, the husband was employed as an assistant
bookstore manager for one such university and earned about
$170,000 per year. The judge found that a "normal incumbent" in
this assistant bookstore manager position would earn roughly
$50,000 to $60,000 per year. The judge found that this handsome
and inflated salary flowed from the husband's "familial
relations."9
Between 2008 and 2010, the husband received tax-free
distributions from the 2004 trust as follows: $300,000 received
in one payment in 2008, $340,000 received in six payments in
2009, and $160,000 received at a rate of $20,000 per month for
the first eight months of 2010. Payments from the trust ceased
9
These same familial relations provided the husband the
opportunity to take a four-year leave of absence from his
employment between 2007 and 2011 to pursue carpentry and
building work. During his leave of absence, the husband earned
only modest income from his carpentry work and continued to
receive his full salary as an assistant bookstore manager. The
husband has also earned modest amounts as an on-call firefighter
and a snowplow driver.
8
after August, 2010, the month preceding the husband's filing for
divorce.
In 2010, the husband's gross income, including the trust
distributions of $160,000, amounted to approximately $350,000.
At the time of trial, given the cessation of the trust income,
the husband's gross annual income had diminished to $180,000.
The husband has substantial opportunities to acquire capital
assets and income in the future.
ii. The wife. The wife is forty-eight years old and is
generally in good health. She is a college graduate who served
as an officer in the United States Army Reserves for eighteen
years. The wife left the military in 2004, just two years short
of the twenty years of service that would have entitled her to a
military pension. The decision to retire came after pressure
from the husband and his family following the birth of the
parties' daughter, who, as noted, is medically challenged. The
wife currently works as an ultrasound technician one day each
week and is paid approximately forty-six dollars per hour. At
the time of trial, her gross yearly income from this position
was $22,672.
The wife was the primary homemaker and caretaker of the two
children throughout the entirety of the marriage. She has
devoted extraordinary amounts of time and effort addressing the
children's (and particularly the daughter's) personal, medical,
9
educational, and extracurricular needs and activities. The
judge found that the wife "currently spends most of her time
caring for [the parties' daughter]." The daughter's needs are
ongoing, and she will likely reside with the wife for numerous
years to come. Although the wife has some opportunity to
acquire assets in the future, her opportunity is limited
considerably by her care of the parties' daughter.
b. The family lifestyle as interconnected to the 2004
trust distributions. During the marriage, the family was able
to enjoy an upper middle class lifestyle. This expansive
lifestyle was financially attributable, in large measure, to the
distributions to the husband from the 2004 trust, the
beneficence of the husband's father, and the rather large salary
of $170,000 which the husband received as the assistant
bookstore manager. The probate judge did "not credit [the
husband's] testimony that he lacked knowledge concerning where
he spent the 2004 Trust distributions as well as whether he paid
taxes on said distributions."
c. The amended judgment. The pertinent parts of the
judgment, as amended and dated August 13, 2012, are summarized
as follows.
Including the husband's interest in the 2004 trust, the
judge calculated the total value of the combined marital estate
at $4,305,380. The judge divided assets in the marital estate
10
(including the husband's interest in the 2004 trust) by
allocating sixty percent to the wife and forty percent to the
husband. In the final calculations including that division, and
certain other assets, the wife received total assets valued at
$2,328,688 and the husband received total assets valued at
$1,976,692.
The judge found that the total value of the 2004 trust was
$24,920,217.37. The judge calculated the husband's one-eleventh
interest10 in the trust at $2,265,474.31. The wife was allocated
a portion of the 2004 trust worth $1,133,047.79. The husband
retained a portion of the 2004 trust valued at $1,132,426.52.
To effectuate the asset transfers to the wife, the judge
ordered the husband to make twenty-four monthly payments to the
wife in the amount of $48,699.77.11
In other provisions of the amended judgment, the wife was
designated the primary custodial parent of the children, subject
to the husband's parenting schedule. The husband was ordered to
pay child support in the amount of $1,100 per week, an amount to
which the parties stipulated. Neither party was awarded
alimony.
10
The husband's interest was formulated on the basis of the
current number of beneficiaries.
11
These $48,699.77 payments were the subject of the wife's
contempt action against the husband, see part 2, and were stayed
during a part of the pendency of this appeal, see part 3.
11
The judge also ordered the parties to maintain life
insurance policies for the benefit of the children and, based on
the judge's findings concerning the husband's obstructionist
conduct at trial, ordered the husband to contribute $175,000
towards the wife's attorney's fees. As we have indicated, both
the husband and the wife have appealed.
d. The 2004 trust. i. General principles. At the
outset, we set forth the general principles that bear upon the
authority of the probate judge to determine whether to include
an asset or an interest in the marital estate. In D.L. v. G.L.,
61 Mass. App. Ct. 488, 492-493 (2004), we stated:
"General Laws c. 208, § 34, defines the scope of a trial
judge's discretion to assign interests in the marital
estate to the wife or husband, based on a number of
specified factors. . . . Separate from the division of
assets within the estate is the question whether certain
assets properly are considered a part of the estate. In
making the determination of what to include in the estate,
the judge is not bound by traditional concepts of title or
property. 'Instead, we have held a number of intangible
interests (even those not within the complete possession or
control of their holders) to be part of a spouse's estate
for purposes of § 34.' Baccanti v. Morton, 434 Mass. 787,
794 (2001), quoting from Lauricella v. Lauricella, 409
Mass. 211, 214 (1991). 'When the future acquisition of
assets is fairly certain, and current valuation possible,
the assets may be considered for assignment under § 34.'
Williams v. Massa, 431 Mass. 619, 628 (2000)."
D.L. v. G.L., supra, quoting from S.L. v. R.L., 55 Mass. App.
Ct. 880, 882-883 (2002).12
12
Whether a party's interest in trust property is part of
the marital estate for purposes of § 34 has been said to present
12
In this case, we determine that the judge acted properly in
including the husband's interest in the 2004 trust in the
marital estate, which we further describe below, and
appropriately valued and divided the trust assets.
ii. Trust background. We outline the only parts of the
2004 trust material to these appeals. The 2004 trust is an
irrevocable spendthrift trust that was established by the
husband's father. The 2004 trust holds shares of stock in the
husband's family-controlled private corporations, which
corporations, in turn, own and operate for-profit colleges.13
Among additional assets and liabilities in the 2004 trust, there
are promissory notes owed to the husband's father, and life
insurance policies.14
a question of law. See Lauricella v. Lauricella, 409 Mass. at
213 & n.2; D.L. v. G.L., supra at 493-494. The instant case
also presents intensive and supported fact finding on the part
of the probate judge concerning the distributions from the trust
leading up to the time of the divorce and thereafter.
13
The 2004 trust shares are comprised of thirty-six percent
of the outstanding shares (i.e., currently 3,600 shares) of
Educational Management Corporation and fifteen percent of the
outstanding shares (i.e., 1,569 shares) of Bay State Education
Corporation. The 2004 trust holds three life insurance policies
on the life of the husband's father (which are intended to pay
any estate tax in the event of his death) and a cash account.
14
Thus, as of the date of trial, the husband's father had
been paid close to $7 million on a promissory note from the
trust. At the time of trial, approximately $5,378,701 in
principal and interest were still owed to the husband's father
pursuant to the promissory note and a later amended promissory
note. The trust is also obligated to pay the premiums on the
13
There are two trustees of the 2004 trust. The husband's
twin brother is one trustee. This brother is also vice-
president and secretary of Educational Management Corporation
and president and treasurer of Bay State College, which is owned
by Bay State Education Corporation and holds stock in that
particular for-profit college (see note 5, supra). The brother
and the father serve as officers and directors of the
corporations. Thus, in these corporate roles, the brother and
father decide and control what dividends are to be paid to the
trust, impacting the funding to the 2004 trust, and, in turn,
the 2004 trust principal and income available for distributions.
The second trustee was ostensibly an outside trustee, but
this trustee was also inextricably interconnected with, and
aligned with, the husband's family. This trustee is a lawyer,
and he and his law firm have represented the husband's father
and his businesses since 1972. His law firm also represents the
trustees of the 2004 trust. At trial, this trustee's testimony
manifested not only hands-off administration, but also little,
if any, scrutiny of the 2004 trust distributions; indeed, this
three life insurance policies held by the trust (annual payments
amount to $435,000 per year). Although not obligated to do so,
the trust makes payments to the husband's father for taxes owed
on income in addition to the principal and interest owed on the
amended promissory note.
14
trustee appeared unaware of the level of, or timing of, the
distributions.
To use understatement: the record shows the 2004 trust was
not administrated impartially by the two trustees. To the
contrary, the judge expressly found that as the divorce began,
"the proverbial family wagons circled the family money." We
have described some record facts that support the judge's
graphic image and findings, but there are far more. Among other
facts, the judge cited the cessation before the divorce of
distributions to the husband and continuing pattern of monthly
distributions to the husband's brother and sister; the judge
also considered the unusual testimony of the supposedly
independent cotrustee concerning the ongoing payments to the
brother and sister. This trustee said that the reason why the
distributions to the husband were discontinued was out of a
concern that the intent of the donor (the husband's father) to
keep funds within the family might be violated if distributions
continued. This statement was not indicative of independence.
iii. Chart showing cutoff of 2004 trust distributions to
the husband. In calculating the 2004 trust distributions, the
judge added the numbers as follows: between April, 2008, and
August, 2010, the husband received $800,000 from the trust and,
since April, 2008, the husband's brother received $1,133,207 and
his sister received $1,180,000.
15
The following chart reveals how the spigot from the 2004
trust of substantial monthly income distribution was
deliberately and abruptly shut off for the husband alone as the
divorce proceedings were in the immediate offing. (Again, to be
noted is that this chart does not include the $300,000 outright
distribution in 2008.)
Date Trust Funding Trust Funding Brother HUSBAND Sister
from College from Distributions Distributions Distributions
Income Investment from Trust from Trust from Trust
Account
Jul-07 1,584,000 95,000
Aug-07
Sep-07 30,000
Oct-07 130,000
Nov-07
Dec-07
Jan-08 90,000
Feb-08
Mar-08
Apr-08 90,000
May-08
Jun-08 (1,332,000)
Jul-08 1,332,000 95,700
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09 95,000
Feb-09
Mar-09
Apr-09 100,000
May-09 225,000 (65,000) (65,000) (65,000)
Jun-09 280,000 (85,000) (85,000) (85,000)
Jul-09 265,000 (60,000) (60,000) (60,000)
Aug-09 90,000 (30,000) (30,000) (30,000)
Sep-09 150,000 (50,000) (50,000) (50,000)
Oct-09 140,000
Nov-09 135,000 (50,000) (50,000)
Dec-09 135,000
Jan-10 135,000 (20,000) (20,000)
Feb-10 135,000 (20,000) (40,000) (20,000)
Mar-10 135,000 (20,000) (20,000) (20,000)
Apr-10 877,500 (20,000) (20,000)
May-10 135,000 (20,000) (20,000)
Jun-10 135,000 (13,207) (20,000) (20,000)
Jul-10 225,000 (20,000) (20,000) (20,000)
Aug-10 225,000 (20,000) (20,000) (20,000)
Sep-10 225,000 (20,000) (20,000)
Oct-10 225,000 (20,000) (20,000)
Nov-10 225,000 (20,000) (20,000)
Dec-10 225,000 (20,000) (20,000)
Jan-11 253,127 (20,000) (20,000)
Feb-11 253,127 (20,000) (20,000)
Mar-11 253,127 (20,000) (20,000)
Apr-11 253,127 (20,000) (20,000)
16
May-11 (20,000) (20,000)
Jun-11 (20,000) (20,000)
Jul-11 253,127 (20,000) (20,000)
Aug-11 253,127 (20,000) (20,000)
Sep-11 253,127 (20,000) (20,000)
Oct-11 107,207 (20,000) (20,000)
Nov-11 107,207 (20,000) (20,000)
Dec-11 107,207 (20,000) (20,000)
Jan-12 154,735 (20,000) (20,000)
Feb-12 154,735 (20,000) (20,000)
Mar-12 154,735 (20,000) (20,000)
It is clear that this cutoff of the distributions from the
2004 trust only to the husband and just on the eve of divorce
was a deliberate manipulation to erase a major component of the
husband's annual income and to silence his interest in the trust
-- for a convenient time while the divorce was ongoing.
Significantly, the judge found it likely that the husband would
receive distributions from the 2004 trust after the divorce was
over. The judge found as follows. "The Court finds that the
suspension of trust distributions occurred because [the husband]
filed for divorce and the Trustees deemed it risky to give [the
husband] money that might be shared with [the wife], a non-
beneficiary." The husband now seeks to cover this manipulation
by invoking the spendthrift provision.15
iv. The spendthrift provision. This pattern of
distribution -- substantial distributions before the divorce,
then zero as the divorce loomed -- belies the husband's
invocation of a spendthrift provision to exclude the 2004 trust
15
Notwithstanding the significant assets and distributions,
there were no annual accountings by the trustees of the 2004
trust.
17
from his marital estate. The spendthrift provision provides as
follows:
"Neither the principal nor income of any trust created
hereunder shall be subject to alienation, pledge,
assignment or other anticipation by the person for whom the
same is intended, nor to attachment, execution, garnishment
or other seizure under any legal, equitable or other
process."
It is well established by law that a trust, even one with a
spendthrift provision, may be included in a marital estate for
purposes of division under § 34. "Common sense and basic
concepts of fairness support the notion that ownership of a
valuable asset demonstrates ability to pay without further
inquiry as to whether payment can be enforced directly against
the asset. . . . The law does not require that an obligor be
allowed to enjoy an asset --such as a valuable home or the
beneficial interest in a spendthrift trust -- while he neglects
to provide for those persons whom he is legally required to
support." Krokyn v. Krokyn, 378 Mass. 206, 213-214 (1979).
Accord Lauricella v. Lauricella, 409 Mass. at 216. "[W]e have
held a number of intangible interests (even those not within the
complete possession or control of their holders) to be part of a
spouse's estate for purposes of § 34." Id. at 214. Thus, in
Lauricella it was held that a trust with a spendthrift clause
was includable under § 34. See Davidson v. Davidson, 19 Mass.
App. Ct. 364, 371 (1985) (remainder interest subject to valid
18
spendthrift clause included in estate for property division
under § 34).
v. The ascertainable distribution standard in the 2004
trust. We also consider, as did the probate judge, whether in
this case the trust is subject to an ascertainable standard
which supports the inclusion of this asset in the marital
estate. The income stream was not too remote or speculative,
nor purely discretionary.
As to the ascertainable standard for distribution, the 2004
trust provides in art. first, par. A, a common distribution
standard tied to such life matters as support, welfare and
maintenance.
"Until the division of the Trust into separate shares
pursuant to paragraph B below, the Trustee shall pay to, or
apply for the benefit of, a class composed of any one or
more of the Donor's then living issue such amounts of
income and principal as the Trustee, in its sole
discretion, may deem advisable from time to time, whether
in equal or unequal shares, to provide for the comfortable
support, health, maintenance, welfare and education of each
or all members of such class . . . . In the exercise of
such discretion, the Trustee may take into account funds
available from other sources for such needs of each
beneficiary . . . . At the end of each taxable year, any
net income which is not disposed of by the terms of this
paragraph shall be added to the principal of the trust
estate." (Emphasis added.)
Thus, the husband had a present enforceable right to
distributions from the 2004 trust. That factor, among others,
was appropriately assessed by the probate judge in weighing the
value and manner of the total asset division to the wife.
19
Significantly, the judge found it likely that the husband would
receive distributions from the 2004 trust after the divorce was
over.
In these respects, the 2004 trust differs from wholly
discretionary trusts, with no distribution standards regarding
support, health, maintenance, welfare, or education. Thus, we
are not persuaded by the husband's citation to D.L. v. G.L., 61
Mass. App. Ct. 488, because the trust at issue in that case
involved payments that were wholly discretionary, and,
consequently, the trust was not includable in the marital
estate. (In D.L., supra, neither income nor principal had ever
been distributed from the subject trust to the husband, a marked
contrast to this case where there were serial monthly
distributions to the husband.)
Reduced to essentials, it is clear that the 2004 trust has
an ascertainable standard pursuant to which the trustees, as
fiduciaries, were obligated to, and actually did, distribute the
trust assets to the beneficiaries, including the husband, for
such things as comfortable support, health, maintenance,
welfare, and education. Illustrative of ascertainable standards
which govern trust distributions, see, e.g., Marsman v. Nasca,
30 Mass. App. Ct. 789, 795 (1991), quoting from Woodbury v.
Bunker, 359 Mass. 239, 243 (1971) (language directing trustees
to pay beneficiary such amounts as they "shall deem advisable
20
for his comfortable support and maintenance" has been
interpreted to set an ascertainable standard, namely to maintain
life beneficiary "in accordance with the standard of living
which was normal for him before he became a beneficiary of the
trust"). See also Dana v. Gring, 374 Mass. 109, 117 (1977);
Dwight v. Dwight, 52 Mass. App. Ct. 739, 744 n.5 (2001) ("the
trustee would be under a duty to provide income from the trust
to the husband should the trustee determine, upon inquiry, that
the husband needed it").
Given these ascertainable standards, the husband's interest
in the trust is vested in possession, with a presently
enforceable right to the trust distributions to support his
lifestyle during his lifetime including for maintenance,
welfare, and education (and including educational funds needed
for the special needs of the two children). Indeed, the pattern
of distributions up to the time of the divorce filing (with the
husband regularly receiving distributions until the eve of the
divorce filing) reflects distributions from the 2004 trust that
fall within these ascertainable standards.
Finally, it cannot be gainsaid that the substantial income
distributions for support, maintenance, and welfare from the
2004 trust were woven into the fabric of the marriage. The 2004
trust distributions were integral to the family unit, and the
family depended upon these trust distributions monies to meet
21
their routine expenses and to maintain their standard of living.
It was mostly the large cash distributions from the 2004 trust
which allowed the husband and wife to live an upper middle class
lifestyle, own an expensive home, supplement the expenses for
their special needs children's services, and live well beyond
the husband's inflated bookstore income of $170,000. The judge
found the husband had expenses of $3,557 per week and wife had
expenses of $2,910. Their combined annual expenses are
$336,284. As the judge found, such high-level expenses could
only have been met with augmentation from the 2004 trust
distributions. Notably, the trust distributions were all tax-
free, so the disposable income was significant. In short, the
family lifestyle and expenses, as a matter of financial
mathematics, could not have been met on the husband's after-tax
net income without the 2004 trust income stream as woven into
the marriage fabric.
Furthermore, upon termination of the distributions from the
2004 trust, the husband will receive a share equal to his
siblings. The husband therefore has a vested beneficial
interest subject to inclusion in the marital estate. Even a
"remainder interest under [a] testamentary trust . . .
constituted a sufficient property interest to make it a part of
[the] estate for consideration in connection with a property
22
division under § 34." Davidson v. Davidson, 19 Mass. App. Ct.
at 372.16
vi. The 2004 trust valuation and division. Having decided
that the 2004 trust was includable in the marital estate, the
judge had discretion to divide that asset. "Once the judge
included these assets as part of the marital estate, [he] had
broad discretion to determine how to divide the entire estate
equitably . . . ." Williams v. Massa, 431 Mass. at 625-626.
Moreover, the fact that the value of a vested, but not yet
distributed, interest may not be susceptible of precise
calculation "does not alter its character as a divisible asset."
Lauricella v. Lauricella, 409 Mass at 217. See Davidson v.
Davidson, 19 Mass. App. Ct. at 373 n.12.
Our divorce law takes an expansive view of what may
comprise the marital estate of a party, including a beneficial
interest in a trust. In this case, the distributions to the
husband from the 2004 trust from 2008 to 2010 (prior to the
divorce) support including the 2004 trust in the estate of the
recipient subject to division under G. L. c. 208, § 34. See
Earle v. Earle, 13 Mass. App. Ct. 1062, 1063 (1982); Davidson v.
16
We reject the husband's argument that simply because the
pool of beneficiaries remains open to future offspring, the 2004
trust is not subject to valuation and division as an asset of
the marital estate.
23
Davidson, 19 Mass. App. Ct. at 374 n.13; Comins v. Comins, 33
Mass. App. Ct. at 30.
For these reasons, we conclude that the ascertainable
standard embedded in the 2004 trust, the enforceability of that
standard for distributions to the husband, and the vested nature
of the husband's interest in the 2004 trust warranted the judge
in including the 2004 trust in the marital estate.17
e. Attorney's fees. The award of attorney's fees to the
wife's counsel in the amount of $175,000 was based, in large
part, on the husband's failure to obtain information concerning,
and to list a value for (other than as "uncertain"), his
beneficial interest in the 2004 trust. On this record,
including, but not limited to, the attorney's fees unnecessarily
incurred by the wife in "scorched earth litigation" and
discovery violations,18 we conclude the fees awarded are
reasonable and shall be affirmed.
17
The value the judge assigned to the husband's interest in
the 2004 trust was justified on the record.
18
We note two limited examples, from an array of such
tactics. In the husband's trial testimony (on a point not
credited by the probate judge), the husband testified that he
did not know what he did with $800,000 in distributions he
received. Likewise, in discovery, in an act reflecting his
nonproduction of trust information, the husband in one of his
financial statements referred to a beneficial interest in a
trust set up by his father, but listed that trust as having no
value.
24
2. The contempt case. On January 24, 2013, the wife filed
a complaint for contempt, alleging that the husband had failed
to comply with the amended judgment of divorce because he had
not made a required monthly payment in the amount of $48,699.77.
The husband stated that he had no independent ability to
make the monthly payments and, therefore, could not be adjudged
in contempt. In his answer, and later through the
representations of his counsel at the contempt hearing and in
his own affidavit, the husband stated that while he had been
making monthly payments to the wife in the required amount as a
result of loans he had been receiving from his father, in
January, 2013, his father had indicated that he would no longer
be lending monies to the husband for this purpose.19
After his father decided to stop lending money to him, the
husband requested, by letter, that the two trustees of the 2004
trust make distributions to him on a monthly basis so that he
could comply with the judgment. Not surprisingly given the
distribution cutoff, which was tied to the divorce, the trustees
declined the husband's request for distributions.
After hearing, the husband was adjudicated guilty of
contempt for failing to pay to the wife each month the sum of
19
The wife acknowledges in her brief that the husband made
five monthly payments to her from August 15, 2012, to December
15, 2012.
25
$48,699.77 for the period between January 15, 2013, and April
15, 2013. Arrearages (including the interest thereon) were
fixed at $200,634.05, and the husband was ordered to pay
attorney's fees to the wife's counsel in the amount of $5,250.
The husband was ordered to jail for a period of sixty days
unless released earlier by the payment of the amounts due. In
her findings, the judge stated that the husband had violated a
clear and unequivocal order and that he had sufficient assets to
pay what he currently owed.
On this convoluted record, we are not persuaded that the
contempt judgment can stand under the standard of Birchall,
petitioner, 454 Mass. 837, 853 (2009). Here the husband did, or
at least ostensibly tried to do, what he was supposed to do
(write the letter to the trustees requesting distributions from
the 2004 trust). Although one might be disposed to question the
genuineness of all these machinations given the bias of the two
trustees and the husband's father, the outcome of the matter is
that it was not proved by clear and convincing evidence that the
husband wilfully and intentionally violated a clear and
unequivocal order. Accordingly, the judgment of contempt is set
aside. See Dominick v. Dominick, 18 Mass. App. Ct. 85, 94
(1984); Flaherty v. Flaherty, 40 Mass. App. Ct. 289, 289 (1996).
3. The motions to stay. Following the entry of the
amended judgment of divorce, the husband filed a motion for stay
26
pending appeal, which was denied by the probate judge on March
7, 2013. Thereafter, the husband filed a motion for stay in
this court pursuant to Mass.R.A.P. 6(a), as appearing in 454
Mass. 1601 (2009), which was denied by a single justice, without
comment, on April 12, 2013. The husband has appealed from the
order of the single justice. We see no merit in this appeal.
Indeed, we note that on February 11, 2014, a panel of this court
stayed so much of the amended judgment as required the husband
to pay to the wife the monthly sum of $48,699.77 for twenty-four
months to effectuate the judgment.
As to the stay during this appeal, that stay shall be
vacated upon entry of the rescript by this court.20
Conclusion. In the divorce appeal, docket no. 13-P-906,
the amended judgment is affirmed. In the contempt action,
20
Contrary to the wife's assertion, we decline to hold that
the judge improperly failed to include the husband's
hypothetical breach of fiduciary duty claim (which she values at
$380,000) as a marital asset under G. L. c. 208, § 34. Where,
as here, there is no pending lawsuit against the trustees,
contrast Hanify v. Hanify, 403 Mass. 184, 188 [1988]), and the
record is devoid of indication that the husband intends to file
such an action, we think the hypothetical breach of fiduciary
duty claim is too speculative to be included in the marital
estate.
We also reject the wife's argument that future trust
distributions to the husband should have been included in the
determination concerning alimony. The judge correctly decided
that "[s]ince Husband's share of the 2004 trust is being
divided, the court will not use any future stream of income from
distributions in assessing alimony."
27
docket no. 13-P-1385, the judgment of contempt is vacated. The
wife's request for appellate attorney's fees and costs is
denied. In the appeal from the order of the single justice
denying the stay pending appeal, docket no. 13-P-686, the appeal
is dismissed.
So ordered.
FECTEAU, J. (dissenting, with whom Kantrowitz, J., joins).
In my view, the husband's interest in the 2004 income
distribution trust (the 2004 trust) is too remote and
speculative, too dependent on trustee discretion, and too
elusive of valuation to have been included in the marital estate
for purposes of division. Therefore, I respectfully dissent
from that part of the majority opinion affirming the portion of
the amended judgment which includes the husband's interest in
the 2004 trust in the marital estate for purposes of division
pursuant to G. L. c. 208, § 34.
I recognize, as the majority points out, that the existence
of a spendthrift clause within a trust instrument, such as the
trust instrument at issue here, does not necessarily preclude
the trust from being included in the marital estate. See
Lauricella v. Lauricella, 409 Mass. 211, 216 (1991). Moreover,
it is also accurate for the majority to state that the
uncertainty of value of a party's interest in an asset alone is
not necessarily sufficient to preclude consideration of the
interest as subject to division. See id. at 217. Last, I agree
that the trust at issue here contains an ascertainable standard
-- namely, the "comfortable support, health, maintenance,
welfare, and education" of each member of the class. However,
each of the aforementioned propositions cannot be viewed in
isolation but, rather, must be read together and in the context
2
of the entire trust instrument. As discussed further infra, the
trust instrument as a whole, including but not specifically
limited to the spendthrift clause, the uncertain value of the
interest, and the discretionary nature of the instrument,
renders the husband's interest in the trust too speculative and
remote for inclusion in the divisible estate. See D.L. v. G.L.,
61 Mass. App. Ct. 488, 496-497 (2004).
At the outset, the wife's reliance upon Comins v. Comins,
33 Mass. App. Ct. 28 (1992), is misplaced, as it does not govern
the present case in material respects. In Comins, the wife was
the beneficiary of a fund "held as a separate trust," for her
sole benefit, that had been settled and funded by her father,
the terms of which provided that "the trustee should 'in its
discretion pay to [the wife] so much or all of the income and
principal of [the trust] as in its discretion it deems advisable
to provide for the comfort, welfare, support, travel and
happiness of [the wife].'" Id. at 30 & n.4 (emphasis in
original). The wife was also granted the power to appoint
recipients of the trust corpus upon her death. Ibid. In
addition, the trust had a fixed fair market value. Id. at 30.
It was in this context that we concluded that the judge properly
included in the marital estate the wife's interest in the trust,
stating, inter alia, that "[a]s in Lauricella [v. Lauricella,
409 Mass. at 216,] the wife has a 'present, enforceable,
3
equitable right to use the trust property for [her] benefit.'"1
Id. at 31. Compare Randolph v. Roberts, 346 Mass. 578, 579
(1964) (where Supreme Judicial Court, in discussing trust
established for support of named beneficiary, stated: "[t]he
trust confided exclusively to the discretion of the trustees the
decision whether any principal should be used for the support of
the defendant [beneficiary]. She has no absolute right to the
use of any part of the principal, and could herself compel
principal payments only by showing that the trustees had abused
their discretion by acting arbitrarily, capriciously, or in bad
faith"); Pemberton v. Pemberton, 9 Mass. App. Ct. 9, 20-21
(1980) (where, in case in which trust appears to have contained
ascertainable standard, we stated, "if even apart from the
spendthrift clause a trustee is given the discretionary power to
distribute income or principal to described beneficiaries, 'any
right of any beneficiary to receive anything is subject to the
condition precedent of the trustee having first exercised his
discretion" [quotation and citation omitted]).
Unlike the trust in Comins, there are a number of
considerations regarding the trust in the present case that
1
The sole asset of the trust in Lauricella was a two-family
house, and the Supreme Judicial Court stated that the husband in
that case had exercised his right to use the property during the
marriage by residing in one of the dwelling units in the house.
Lauricella v. Lauricella, 409 Mass. at 212, 216.
4
militate against inclusion of the husband's interest in the
trust, for purposes of a division of property in the marital
estate. First, the trust at issue has an open class and
multiple beneficiaries, in different generations, to whom the
trustees owe fiduciary duties.2 This is in obvious contrast to
the trust in Comins, which had as its sole beneficiary the wife,
and the trust in Lauricella, of which the husband was one of two
beneficiaries. Given that the trust at issue here has an open
class, both the near-term and long-term interests of the
beneficiaries are implicated. See D.L. v. G.L., 61 Mass. App.
Ct. at 497 (citing as one factor generational nature of trust in
concluding that husband's interest in trust was too remote and
speculative).
Second, the "ascertainable standard" in the present case
cannot be read in isolation. It must be considered in the
context of the terms of discretion in which it is found and of
the entire trust instrument. While the trust instrument evinces
an intent on the part of the husband's father to benefit the
2
There are currently eleven beneficiaries of the 2004 trust
-- the husband and his two siblings, and their eight children.
The judge noted that neither the husband nor his siblings have
grandchildren "at this time." Only the husband and his two
siblings have received any distributions from the 2004 trust to
date. The trust also provides that, until the death of the
donor, the independent trustee is authorized, "in its sole and
absolute discretion, to add one or more spouses of the Donor's
issue as a permissible beneficiary of the income and principal
of any trust established hereunder."
5
husband (and the other beneficiaries) for specified purposes, it
grants to the trustees discretion as to the amounts and timing
of distributions and allows the trustees to take into account
(among other factors) funds available from other sources. The
trustees have made distributions in some years and not in
others. In short, the husband's interest in the 2004 trust
stands on different footing from a party's interest in cases
where interests are more clearly fixed and certain. Compare
Lauricella v. Lauricella, 409 Mass. at 216-217 (husband's
interest in trust rightfully included in marital estate where
husband was one of two beneficiaries, and trust was completely
funded by sole asset, which was house in which husband had
regularly resided previously and from sale of which husband
could profit); Comins v. Comins, 33 Mass. App. Ct. at 30-31
(wife's interest in trust properly included in marital estate
where wife was sole beneficiary of separate trust which had
fixed fair market value).
Significantly, valuation of the husband's interest is too
speculative to stand and further demonstrates why the interest
should not have been included in the estate. There are serious
problems in this case with respect to the judge's determination
that the husband has a one-eleventh interest in the 2004 trust
which underscore the difficulty of establishing the husband's
interest and undermine the judge's valuation of that interest.
6
Simply put, the judge's determination of the husband's one-
eleventh interest, and the valuation that flows therefrom,
should not stand. Not only does the trust instrument make clear
that the class of beneficiaries is open (and the number of
beneficiaries may well increase), but the trust also allows for
distributions to be made in equal or unequal shares, and upon
consideration, in the trustees' discretion, of funds available
from other sources for the needs of each beneficiary.3
Furthermore, determination of the husband's interest in the
principal amount at that time at one-eleventh places him, and
the wife, by virtue of this ruling, in an unfair advantage, not
only vis-à-vis possible additional beneficiaries, but also in
the event of a deterioration in the trust corpus (which appears
not unlikely given the scrutiny of "for-profit" educational
institutions by the Federal government).4 In the circumstances
3
Indeed, the judge acknowledged in her order denying the
motion for stay pending appeal that the exact amount of the
husband's interest in the trust may be uncertain.
4
There are two additional problems relating to valuation of
the stocks at issue. First, the nature of the corporations --
for-profit colleges -- is such that shareholders of the
corporations, such as the trust, are obligated to contribute
money to the corporations yearly when the corporations are
attempting to comply with Federal rules and regulations.
Therefore, the trust corpus can fluctuate greatly depending on
the financial needs of the corporations in relation to
compliance with Federal law. Second, the two corporations in
which the trust owns stock are close family corporations and,
thus, it appears that the stocks are not publicly traded.
Common sense dictates that this fact renders the stock even more
7
of this case, the fractional share methodology employed by the
judge has produced an arbitrary result. See Adams v. Adams, 459
Mass. 361, 386 (2011); Ray-Tek Servs., Inc. v. Parker, 64 Mass.
App. Ct. 165, 175 (2005) ("Valuation of assets . . . should be
based on evidence that shows it by a fair degree of certainty
and accuracy" [citation omitted]).5
The majority makes note of what it considers machinations
on the part of the trustees to discontinue trust payments to the
husband on the eve of the divorce filing in an effort to paint
the husband's interest as remote and speculative where it never
had been previously. However, the primary focus of the instant
inquiry should be the terms of the trust instrument itself, not
how those terms may be or have been manipulated. In other
difficult to value and presumably more difficult to sell (if the
trustees decided, in their discretion, to sell the stocks), and
valuation necessarily depends on third-party appraisals only.
It should also be noted that the trust's thirty-six percent
share in one corporation is a nonvoting share, and the
professional trustee testified that there would not be a buyer
for nonvoting shares such as these.
5
The wife, in her proposed rationale, took the position
that a disposition of the husband's interest in the 2004 trust
should not be made on an "if and when received" basis. Relying,
in part, on Krintzman v. Honig, 73 Mass. App. Ct. 1124 (2009) (a
case decided pursuant to Appeals Court rule 1:28), she asserted
that such an approach is inappropriate (and essentially
constitutes an illusory division) when it could enable the
trustees to make distributions in a manner that would prevent
her from obtaining the value of the marital asset to which she
is entitled.
8
words, consideration of such manipulation must be secondary to
the terms of the trust instrument itself.6
In addition to the aforementioned issues, inclusion of the
husband's interest in the trust will create practical problems.
Namely, the judge's decision to include the husband's beneficial
interest in the trust as a divisible asset of the marital estate
means that administrative hardships -- in the form of future
litigation -- are not only possible but very likely. See
Williams v. Massa, 431 Mass. 619, 628 (2000) (court, in
discussing husband's unspecified "contingent remainder
interests," stated: "[n]either the present assignment of a
percentage of a contingent interest's value, nor a future award
6
It is worth noting that a trust for the parties' son was
established by the husband's father when the son was born. The
son's private school tuition is currently paid by the trust
which, as of March, 2012, had a market value of approximately
$158,000. The husband's father and his husband's father's wife
pay money into the trust and the husband is the trustee. The
judge found that the husband's father had indicated at trial
that if the husband could not pay for something in connection
with the son's education, he and his wife would ensure that the
son is taken care of through the age of twenty-three, or through
an undergraduate program.
Similarly, the husband's father established a trust for the
parties' daughter in her name. The husband's father and his
wife deposit money into the trust and the husband is the
trustee. As of March, 2012, the trust had a market value of
approximately $157,000. The judge found that the husband had
indicated that should the funds in the daughter's trust become
insufficient to meet her needs, he would cover any expense. The
husband's father also testified that that he and his wife would
ensure that the needs of the parties' daughter were taken care
of.
9
on an 'if and when' basis, avoids administrative hardships
inherent in the valuation of expectant interests or in the
requirement of continued court supervision"). Here, not only
are there administrative hardships inherent in the valuation of
the husband's interest, but continued court supervision looms
large, as the judge's decision appears to envision future
actions by the husband and the trustees (which could conceivably
result in ancillary litigation). Also, it should be noted that,
unlike alimony, property divisions are not subject to
modification. See Hanify v. Hanify, 403 Mass. 184, 193 (1988)
(Liacos, J., concurring in part and dissenting in part). This
is important given that the class is open and subject to growth,
thereby making the valuation even more dubious.
On all of the circumstances, the husband's interest in the
trust should not have been included in the marital estate.
Rather, this interest should have been weighed under the G. L.
c. 208, § 34, criterion of "opportunity of each [spouse] for
future acquisition of capital assets and income." For this
reason, I dissent.