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Vardi v. URI Bar-Zemer

Superior Court of Rhode Island, Providence

January 28, 2019


          Providence County Superior Court

          For Plaintiff: Bernard A. Jacvony, Esq.; Rebecca M. Murphy, Esq.

          For Defendant: Neal J. McNamara, Esq.; Steven N. Richard, Esq.; William H. Wynne, Esq.


          SILVERSTEIN, J.

         This matter is before the Court for decision following a nonjury trial brought by Plaintiffs Amitai Vardi, Hagit Vardi, Shira Vardi, Orit Vardi, Tragash, Hava Shaul, Izhar Shaul, Nadav Shaul, Opher Shaul, Yael Shaul, Rachel Riklis, Vered Ben Ari, Michal Riklis Hazan, Nili Riklis Dayan and Tamar Gispan (collectively, Plaintiffs)- beneficiaries of the subject Trust-against Defendant Uri Bar-Zemer (Defendant or Bar-Zemer), the Trustee.[1] The dispute focuses on whether Defendant breached his fiduciary duties in the administration of the Trust during his time as Trustee. This Court exercises jurisdiction pursuant to G.L. 1956 §§ 8-2-14 and 9-30-1.

         I Facts and Travel

         Ernest Weil (Weil) created the Declaration of Trust by Ernest Weil (the Trust) on April 16, 1985. Weil nominated himself as Trustee, his long-time companion Birgitta Aker (Birgitta) as beneficiary[2] and successor Trustee upon his death, and Defendant, his nephew, also a beneficiary, as second successor Trustee upon Birgitta's death. Weil named Plaintiffs-other nieces and nephews-and Birgitta's issue as beneficiaries of the Trust upon Birgitta's death. Upon creation of the Trust, Weil transferred assets to the Trust including $104, 000 worth of liquid assets and a twenty-five percent interest in Hilltowne Properties, a California general partnership (the Partnership) formed in 1963, which owns a fifty-eight unit apartment complex in Freemont, California.

         Weil died in May of 1986. Upon his death, Birgitta accepted her role as successor Trustee and began to administer the Trust. Birgitta's son, Eric Aker (Eric), periodically assisted Birgitta with her administration of the Trust. He performed a number of tasks in assisting Birgitta, such as reviewing financial statements from the brokerage accounts and the Trust's real estate partnership holding; assisting with the preparation of taxes; and, later, writing checks from the Trust account to Birgitta.

         In April of 2012, Plaintiff Hagit Vardi (Hagit), in an email to Defendant, requested a loan from the Trust for the purpose of paying for her daughter's educational expenses. Defendant assisted in contacting Birgitta on Hagit's behalf through Eric. Hagit's request for a loan was denied. Defendant explained via email that he "had a quite long conversation with Eric [regarding] an early distribution . . . After hemming and haughing [sic] a bit he came up with a negative answer saying that no one else enjoyed such early distribution and that it would be inappropriate to start now. Pls.' Ex. 5. Hagit interpreted this correspondence as an indication that Eric was acting as Trustee in place of Birgitta and expressed her concern to Defendant in her response to his email. Pls.' Ex. 6.

         Shortly after Birgitta's death in December 2012, Defendant accepted his nomination as Trustee and traveled to California to meet with Eric, as well as the Trust's portfolio and property managers. Following his trip to California, Defendant placed a phone call to Hagit in which he informed her that he was now serving as Trustee and provided her with a general description of the Trust's assets. He further indicated that he was concerned about immediately selling the Trust's real estate interests due to tax concerns and inquired as to Hagit's opinion on adding Weil's niece as a beneficiary. Following their phone conversation, Hagit obtained an informal opinion from an attorney regarding adding a beneficiary and the dissolution of the Trust. Hagit later sent the opinion she received from the attorney to Defendant and discussed her conversation with Defendant and other beneficiaries. Pls.' Ex. 7. Defendant responded to Hagit's message indicating that he understood that the process of adding a beneficiary was an "ethical" decision, as opposed to legal consideration, to be decided among all beneficiaries. Pls.' Ex. 8. Moreover, he reiterated his concerns about the ramifications of an immediate sale of the real estate interest. Id. Defendant and Hagit exchanged a series of email messages in which each party expressed their frustrations. Pls.' Exs. 9-13. Ultimately, Defendant indicated that he was seeking the advice of an attorney in order to navigate his responsibility as Trustee. Pls.' Ex. 12. Hagit indicated that she approved of Defendant's decision to employ counsel. Pls.' Ex. 13.

         Hagit also indicated that she would like to receive a detailed and official accounting of the Trust assets. Id. Defendant replied that he would be disseminating information that week regarding the real estate interest as it becomes available and regarding the liquid assets. Id. He further stated that he would be traveling to Israel to meet with other beneficiaries. Id.

         On February 4, 2013, Defendant sent an email to several-but not all-beneficiaries informing them that the Trust was under legal and financial review and that he would forward information as it became available. Def.'s Ex. A. On February 6, 2013, Defendant sent another email to several-but not all-beneficiaries detailing approximate valuations of the liquid assets and the real estate interest held by the Trust. Pls.' Ex. 14. Defendant stated in this message that "Eric, [Birgitta's] son . . . handled the trust in her latter years . . . ." Id. On February 12, 2013, Defendant communicated via email to Hagit that counsel was in the process of drafting a consent form for the liquidation of the Trust's liquid assets. Pls.' Ex. 15.

         On February 18, 2013, Hagit's husband, Uri Vardi, asked for a timeline in which Hagit would receive (1) the consent form and (2) a check for Hagit's share of the Trust. Pls.' Ex. 16. He also requested advance copies of any documentation that Defendant would be bringing with him to the meeting in Israel with the other beneficiaries. Id. Defendant responded the following day indicating that he expected the letters of release to be delivered shortly and that no distributions could be completed until all twenty-one releases had been signed and returned. Pls.' Ex. 17. He further stated that he did not have any documentation, other than bookkeeping records, but he was working with a CPA to analyze the tax implications of selling the Trust's real estate interest. Pls.' Ex. 17.

         In March of 2013, Defendant traveled to Israel in order to meet with three beneficiaries at the home of Plaintiff Nili Riklis Dayan (Nili) in Beit Nir, Israel. Defendant provided the beneficiaries with a copy of an advertisement of the California apartment complex and described the real estate interest, the Trust portfolio, and his plans for liquidating and distributing the portfolio. Nili took notes of the meeting and later sent them to Defendant to translate them from Hebrew to English for distribution to all beneficiaries. The notes purport to detail the expected relationship between the Trustee and beneficiaries as well as the objectives of the parties and indicate, inter alia, that the real estate interest should be sold within a year, but grants leeway in order to maximize its value. Pls.' Ex. 18. The notes further indicate that Defendant would be paid twenty-five percent of the yearly rental income from the real estate interest as a Trustee fee. Id.

         Defendant sent another email to some of the beneficiaries on April 30, 2013, detailing the dissolution plan relating to the liquid assets held by the Trust. Pls.' Ex. 21. The plan notes that each beneficiary would receive a distribution while the Trust would retain a portion of the funds for tax-related purposes; if residual funds remained following any tax-related payments, a second distribution would then occur. Id. Defendant further detailed his fee for serving as Trustee, as previously outlined in the notes stemming from the meeting in Israel. Id.

         From March to May of 2013, Hagit and Defendant remained in contact via email. Def.'s Exs. B-E. In their exchanges they discussed the distribution of checks from the Trust account, including the signing and return of the release documents. Id. Defendant also communicated with other beneficiaries during this time period and forwarded a copy of the release for each of the beneficiaries to sign and return. Def.'s Ex. C. The parties communicated with some regularity throughout 2013. Def.'s Exs. F, G, L-O, and Q.

         In June of 2013, Nili sent an email to Hagit asking her to translate the notes from the March meeting in Israel. Def.'s Ex. H. Nili expressed an interest in pressing Defendant to sign the document and capping his administration fee to $12, 500 for a maximum of two years and adding language requiring the delivery of regular, official reports. Id.

         In July of 2013, Defendant sent the real estate "owner report for 2012" to Nili. Def.'s Ex. L. In response, Nili requested the Trust's accountant report for 2012. Id. On January 13, 2014, Nili sent another email to Defendant requesting official financial statements for the Trust signed by an accountant. She further indicated that, as previously discussed by the parties, she was serving as a point-person for beneficiaries in Israel and has received several requests for this information. Pls.' Ex. 22. In his response, Defendant expressed frustration regarding the expanding pool of beneficiaries that had been designated as point-persons and what he described as movement toward "trust by committee" and a team of coordinators. Pls.' Ex. 23. On January 16, 2014, Nili again requested from Defendant official financial statements of the Trust for 2011 ...

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