County Superior Court
Plaintiff: Robert K. Taylor, Esq. Jeffrey H. Gladstone, Esq.
Stephen J. Brouillard, Esq. Theresa L. Sousa, Esq.
Filippi (Marion) and Steven Filippi (Steven) (collectively,
Plaintiffs, Counterclaim Defendants, or Marion and Steven)
move for partial summary judgment, requesting judgment as a
matter of law on their Amended Complaint on Count I: Breach
of Contract with respect to the 2007 Purchase and Sale
Agreement (2007 P&S Agreement); Count II: Breach of
Contract with respect to the LLC Operating Agreements; and
Count IV: Declaratory Judgment. The Plaintiffs also seek
partial summary judgment on Blake Filippi (Blake) and Paul
Filippi's (Paul) (collectively, Defendants,
Counterclaimants, or Blake and Paul) counterclaims, which
assert counts for breach of contract and request declaratory
relief. The Counterclaimants have filed a cross motion for
partial summary judgment, maintaining that they are entitled
to judgment as a matter of law on the following
counterclaims: (a) Count II - Breach of Fiduciary Duty
Against Steven; (b) Count VII - Declaratory Relief Against
Marion and Steven; and (c) Count VIII - Breach of Contract -
Estate Planning Agreement Against Marion. Blake and Paul
object to both of Plaintiffs' summary judgment motions,
and Marion and Steven object to Blake and Paul's cross
motion for partial summary judgment. Jurisdiction is pursuant
to Super. R. Civ. P. 56(c) and G.L. 1956 § 9-30-1.
Facts and Travel
1973, Paul A. Filippi (Paul Sr.) and Marion married.
Filippi v. Filippi, 818 A.2d 608, 612 (R.I. 2003).
Paul Sr., known as a successful businessman and
restauranteur, owned substantial real estate and a number of
businesses in the Town of New Shoreham, more commonly known
as Block Island. See id. Together, Paul Sr. and
Marion had three children: Paul, in 1975; Steven, in 1979;
and Blake, in 1980. Id.
1989, Paul Sr. and Marion entered into a Contract to Make and
Maintain Wills and Trusts (1989 Wills Contract). See
Corrected Mem. of Law in Supp. of Defs.' Objs. to
Pls.' Mot. for Partial Summ. J. and Counterclaimants'
Cross Mot. for Summ. J. (hereinafter, Defs.' Mot.), Ex.
1. The 1989 Wills Contract (1) required that Paul Sr. and
Marion execute wills and trusts; (2) barred Paul Sr. and
Marion from "execut[ing] any other trust or estate
planning document which [would] have the effect of defeating
the intent of their estate plans"; and (3) prohibited
Paul Sr. and Marion from "alter[ing] or revok[ing] any
of the provisions of their respective wills or trust without
first procuring the written and acknowledged consent of the
other." Id. Additionally, Paul Sr. executed a
trust agreement in 1989. Defs.' Mot., Ex. 2. The 1989
Wills Contract was amended in 1992 to reflect the 1989 trust
agreement. See id.
Sr. passed away in 1992. At that time, he owned 100% of the
stock in Shoreham, Inc., d/b/a Ballard's Inn and
Restaurant (Shoreham), the entity which owns all of the
physical assets of Ballard's Inn and Restaurant and
operates the business. Filippi, 818 A.2d at 612.
Paul Sr.'s stock in Shoreham became part of his estate
upon his passing, in accordance with his estate plan.
See Defs.' Mot., Ex. 5. Paul Sr.'s estate,
however, was not closed until early 2006, three years after
extensive litigation between the Filippi Family and Paul
Sr.'s three older children from a former marriage.
See Defs.' Mot., Ex. 6; see also
Filippi, 818 A.2d 608; Filippi v. Citizens Trust
Co., 2001 WL 99860 (R.I. Super. Feb. 1, 2001).
Paul Sr.'s estate was closed, the Shoreham shares, among
other things, were deposited into Paul Sr.'s marital
trust (Marital Trust). See Defs.' Mot., Ex. 6.
According to Paul Sr.'s extensive estate plan, the income
emanating from the Shoreham shares in the Marital Trust was
to be used for Marion and for the support of her minor
children, while a residuary trust (Residuary Trust) was to be
established to provide for the Boys. See Defs.'
Mot., Ex. 1 at D1342-1345. As set forth in the 1989 Wills
Contract, the assets in the Marital Trust were to be
transferred to the Residuary Trust for the benefit of Steven,
Blake, and Paul upon Marion's death. Id. at
D1373-84, 1342-45. However, the Filippi Family and Citizens
Bank RI (Citizens Bank)-the corporate trustee of the Marital
Trust-agreed to a distribution of the assets in the Marital
Trust to Marion individually, on the condition that each
member of the Filippi Family execute Citizens Bank's
requested releases. See Defs.' Mot., Ex.
year earlier, on July 9, 2004, Marion transferred her real
property located at 42 Water Street, New Shoreham, Rhode
Island-the land and building utilized by Ballard's Inn-to
a newly-formed LLC, Ballard's Inn Realty, LLC (R.I.).
See Mem. in Supp. of Pls.' Mot. for Partial
Summ. J. on Defs.' Countercls. (hereinafter, Pls.'
Second Mot.). Approximately one year after the aforementioned
agreement with Citizens Bank, in August 2006, Marion
transferred additional real property she owned, located at 74
Water Street, New Shoreham, Rhode Island- the land and the
building constituting the Overlook Hotel-to a newly-formed
entity, Overlook Realty, LLC (R.I.). Id. Both
properties originated from Paul Sr.'s estate and were
transferred to Marion individually at the time of his death.
See Filippi v. Citizens Trust Co., 2001 WL 99860, at
*6, *8 (R.I. Super. Feb. 1, 2001) ("Marion wanted to
have control of the family real estate and not to be subject
to a trust, as it had been under prior plans. Paul [Sr.]
wanted to be assured that it would remain for the children of
his marriage with Marion. . . . [T]he mutual contracts were
devised to satisfy Paul [Sr.] and not Marion. It was Paul
[Sr.] who wanted to be assured that, if he left the family
real estate to Marion, it would remain in the family,
meaning, of course, the younger children. . . . [T]he
contract resolved [Paul Sr.'s] concern about leaving the
real estate to Marion outright."). At the time that
Marion transferred the properties to the two LLCs, Marion was
the sole member of Ballard's Inn Realty, LLC (R.I.) and
Overlook Realty, LLC (R.I.). Id.
on September 28, 2006, the Filippi Family entered into an
agreement entitled "Filippi Family Estate Planning
Agreement" (Family EPA). Defs.' Mot., Ex. 10. The
Family EPA provided:
"WHEREAS, Paul [Sr.] was the late
husband of Marion and the late father of Paul, Steven and
"WHEREAS, Citizens Bank . . ., Executor
under the will of Paul Filippi and Trustee of the [Marital
Trust] . . ., has proposed closing the probate estate of Paul
[Sr.] and terminating the Marital Trust by transferring all
assets remaining in its possession as Executor and Trustee,
including stock in the Rhode Island corporation, Shoreham,
Inc., to Marion, but [Citizens] Bank is unwilling to do so
unless Paul, Steven and Blake release the Bank for such
"WHEREAS, Paul, Steven and Blake are
unwilling to execute releases unless Marion agrees to take
certain actions in connection with her own estate plan; and
"WHEREAS, Marion is willing to take
"NOW, THEREFORE, Marion, Paul, Steven
and Blake, agree as follows:
"(1) Paul, Steven and Blake will forthwith execute the
releases in favor of Citizens Bank that have previously been
provided to them.
"(2) Marion agrees that she will complete revisions to
her current estate plan within nine (9) months of the date of
this Agreement (including wills and trusts and any related
"(3) Marion agrees that in the event she does not
complete the contemplated revisions to her current estate
plan within nine (9) months of the date of this Agreement or
said revisions are not acceptable to any two (2) of Paul,
Steven and Blake, she will transfer seventy-five percent
(75%) of her interest in Shoreham, Inc., in equal shares to
Paul, Steven and Blake." Defs.' Mot., Ex. 10.
Family EPA bore the signature of each member of the Filippi
Family. Id. In addition, the Filippi Family
purportedly entered into what Blake and Paul characterize as
"the Shoreham Agreement, " which, in part,
"This agreement is hereby entered into by Marion . . .,
Paul . . ., Steven . . . and Blake . . . . Wherefore all the
undersigned parties agree to the following:
"1) Each party has an economic interest in Shoreham . .
"2) Each party is entitled to 25% of the profits of
Shoreham . . ., to be determined by a majority of the
aforementioned parties and paid on or by October 1 (Combined
profits from Ballard's and the Overlook Hotel).
"3) Shoreham . . . will pay Marion . . . $200, 000 in
rental for the Ballard's Inn and Overlook properties
"4) The sole managerial responsibilities will rest with
Steven . . . who will receive compensation from Shoreham . .
. under the following terms
"Base Salary: $100, 000.00
"Incentive: If revenues of both Ballard's and the
Overlook reach $2.75 Million [Steven] will be paid $150,
000.00 total, including base salary[.] If revenues reach $3
Million, [Steven] will be paid $200, 000.00 total including
"Steven . . . will be responsible for all aspects of the
operations of Ballard's, including but not limited to,
bank accounts, receivables, cash deposits and all personnel
decisions. In turn, [Steven] will provide all information on
all aspects of the operations including financials, of
Ballard's to any of the aforementioned parties to this
agreement[.]" Defs.' Mot., Ex. 11.
accordance with the Family EPA, Steven, Blake, and Paul
executed the releases mentioned therein. See
Defs.' Mot., Ex. 12. Marion also retained Attorney William
Kirchick (Attorney Kirchick) to quarterback her estate
planning. See Defs.' Mot., Ex. 4 (hereinafter,
Marion Dep.) at 53:5-12; Pls.' Second Mot., Ex. I. Blake,
a third-year law student at the time, participated in
Marion's estate planning with Attorney Kirchick at
Marion's request. See Marion Dep. at 52:16-62:1;
Pls.' Second Mot., Ex. J (email from Marion to Attorney
Kirchick) ("Just to re-iterate [sic], please copy to
Blake what you send to me. At this point it isn't
necessary to send to Paul and Steven as we are in the working
document stage and Blake is the one with the legal
in December 2007, Marion executed an irrevocable trust
agreement, entitled "The Marion C. Filippi Irrevocable
Trust - 2007" (2007 Trust), as well as other estate
planning documents prepared by Attorney Kirchick.
See Defs.' Mot., Ex. 18; Defs.' Ans. ¶
6. Attorney Kirchick crafted the 2007 Trust to be an
intentionally defective grantor trust. See
Defs.' Mot., Ex. 15 at 2. In pertinent part, Article
Third of the 2007 Trust provides that all property that is
held in the 2007 Trust is to be divided into three separate
sub-trusts: (1) the Share Trust f/b/o Paul C. Filippi (Paul
Share Trust); (2) the Share Trust f/b/o Steven C. Filippi
(Steven Share Trust); and (3) the Share Trust f/b/o Blake A.
Filippi (Blake Share Trust) (collectively, Share Trusts).
See Defs.' Mot., Ex. 18. Marion was listed as
the grantor of the 2007 Trust, and Steven, Blake, and Paul
named as trustees of the 2007 Trust and as co-trustees of
each of the Share Trusts. See Defs.' Mot., Exs.
22-23. Article Seventh of the 2007 Trust permits the Share
Trusts to make discretionary decisions upon approval of the
majority of trustees-i.e., two of the three Boys.
Defs.' Mot., Ex. 18. Among other things, however, Article
Tenth of the 2007 Trust limits the authority of trustees to
make distributions of "principal" to an
"interested person." Id.
Kirchick's estate planning procedure also required the
creation of Overlook Realty, LLC (Overlook LLC) and
Ballard's Inn Realty, LLC (Ballard's LLC)
(collectively, the LLCs) under the state laws of Delaware.
See Defs.' Mot., Ex. 15 at 2; Defs.' Mot.,
Exs. 19-20. The LLCs were created with a three percent voting
membership interest (Voting Interest) and a ninety-seven
percent non-voting membership interest (Non-Voting Interest).
See Defs.' Mot., Exs. 19-20. On December 21,
2007, the Filippi Family executed the Operating Agreement for
Overlook LLC (Overlook Operating Agreement) and the Operating
Agreement for Ballard's LLC (Ballard's Operating
Agreement) (collectively, Operating Agreements). See
id. The Operating Agreements, among other things,
appointed Marion, Steven, Blake, and Paul as managers of the
LLCs. Defs.' Mot., Ex. 19 at 19-20; Defs.' Mot., Ex.
20 at 19-20.
further accordance with Attorney Kirchick's estate
planning advice, Marion gifted each Share Trust a one percent
Voting Interest and a two-thirds percent Non-Voting Interest
in each of the LLCs. See Defs.' Mot., Exs.
22-23. In addition, Marion sold each Share Trust a fifteen
percent Non-Voting Interest in the LLCs in exchange for the
Share Trusts each paying Marion $587, 700 (2007 Sale).
See Defs.' Mot., Exs. 24-27. Therefore, each
Share Trust held: (1) a one percent Voting Interest in
Overlook LLC and Ballard's LLC; and (2) a fifteen and
two-thirds percent Non-Voting Interest in Overlook LLC and
Ballard's LLC; Marion owned the remaining fifty percent
of the Non-Voting Interest in the LLCs for tax-related
reasons. See Defs.' Mot., Exs. 17,
29-30; see also supra n.6. It appears from the
record that around the time the 2007 Trust was created,
Marion intended to sell or otherwise transfer the remaining
fifty percent Non-Voting Interest that she held to the Share
Trusts after certain valuations were completed and the
three-year IRS lookback period had expired. See
Defs.' Mot., Exs. 29-30.
connection with the 2007 Sale, the Boys, acting in their
capacity as co-trustees of each Share Trust, executed
promissory notes in the amount of the purchase price to
Marion (2007 Notes). See Defs.' Mot., Ex. 27. In
addition, Marion and the Boys, acting as trustees of the
Share Trusts, also executed the 2007 P&S Agreement to
memorialize the 2007 Sale. See Defs.' Motion,
Ex. 24. Among other things, the 2007 P&S Agreement
provided as follows:
Preconditions to Future Sale or Distribution by the
"(a) Notice. Each of the Purchasers [the Share
Trusts] hereby agrees that, so long as the Seller [Marion] is
living, no Purchaser shall sell, pledge, distribute to its
beneficiaries, or otherwise transfer or encumber all or any
portion of the Interests received by such Purchaser without
first providing at least thirty (30) days advance notice to
"(b) Payment of Note. Each Purchaser further
agrees that such Purchaser shall not sell, pledge, distribute
or otherwise transfer all or any portion of the Interests
received by such Purchaser, or any other interest of such
Purchaser in [Overlook LLC] or [Ballard's LLC], until
such Purchaser has paid such Purchaser's Note in
" as defined by the 2007 P&S Agreement, included
"a 15% Non-Voting Membership Interest in [Ballard's
LLC], and a 15% Non-Voting Membership Interest in [Overlook
in 2008, Steven, Blake, and Paul, in their capacity as
trustees of the Share Trusts, again issued promissory notes
to Marion (2008 Notes) in connection with the 2007 Sale.
See Pls.' Mem. in Supp. of Mot. for Partial
Summ. J. (hereinafter, Pls.' First Mot.), Ex. I. Steven
and Marion characterize the 2008 Notes as "replacement
notes" meant only to operate as a renegotiation of the
2007 Notes in order to reflect more favorable interest rates.
See Pls.' First Mot. at 5-6. The same holds true
for promissory notes executed in 2009 by Steven, Blake, and
Paul on behalf of the Share Trusts (2009 Notes); Steven and
Marion maintain that the 2009 Notes were renegotiations of
the original bargain underlying the 2007 Sale to reflect more
favorable interest rates. See id.; infra
n.8. Blake and Paul contend that the 2008 Notes were meant to
operate as payment in full of the 2007 Notes; a new bargain
resulted in the 2008 Notes. See Defs.' Mot. at
56. Blake and Paul maintain the same position with regard to
the 2009 Notes. See id. at 56-57.
the years 2008 through 2016, the 2007 Trust operated as
follows: payments from the LLCs were distributed evenly to
Marion and the 2007 Trust, and the 2007 Trust would issue
checks to Marion from the 2007 Trust representing payments of
principal and interest. See Defs.' Mot., Exs.
33-35. Steven and Marion contend that these distributions of
principal were to pay off the balance on the promissory notes
owed to Marion; they claim that the LLCs obtained money from
Shoreham, deposited the income into the 2007 Trust, and the
cash flowed to Marion. See Marion Dep. at 110, 124.
and Paul contend that from 2007 to 2013, the three Boys
received payments in the amount of twenty-five percent of
Shoreham's profits, purportedly in accordance with the
Shoreham Agreement. See Marion Dep. at 70:16-71:3.
Meanwhile, Steven and Marion contend that the Boys did not
receive twenty-five percent of Shoreham's profits;
Yolanda Samson, who has been employed by Shoreham since 2002
as its accountant, stated in an affidavit that "[i]n
2008, [the Boys] each received 7.86%; in 2009, 6.48%; in
2010, 17.53%; in 2011, 9.71%; in 2012, 7.70%; and in 2013,
8.33%." Pls.' Obj. to Defs.' Cross-Mot. for
Summ. J., Ex. EE at ¶¶ 2-3.
October 30, 2014, Marion, acting as CEO of Shoreham, and
Steven, acting as manager of Ballard's Inn, executed an
agreement entitled "Operating Agreement Outline
10/17/2014, " which provided in part:
"1. [Marion] is personally guaranteed by [Steven] $300,
000 per year and a 2% cost of living increase in 2016 and
each year after. [Steven's] compensation is a [$599, 000]
base salary with a 2% cost of living increase in 2016 . . . .
"2. Marion will receive 50%, Paul 16%, Blake 16% and
Steve 16% of profits. As per the ownership of [Ballard's
"3. Paul and Blake will receive no less than $75, 000.
"4. Both Marion and Steven must approve in writing the
distributions to Paul and Blake." Defs.' Mot., ...