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Branson v. Louttit

Supreme Court of Rhode Island

June 28, 2019

Wenda Branson
Marion P. Louttit, individually and in her capacities as Trustee of the Augusta P. Hathaway Living Trust and Custodian for Jonathan H. Louttit, II and Caroline Hathaway Louttit, minor children.

          Superior Court Providence County (PC 09-5006) Luis M. Matos, Associate Justice.

          For Plaintiff: Joseph F. Hook, Esq.

          For Defendant: David E. Maglio, Esq.

          Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.


          Francis X. Flaherty, Associate Justice.

         This protracted squabble among siblings reaches us after a decade of litigation. At issue are amendments to an inter vivos trust and gifts of interest in a family limited partnership that was established by Augusta Hathaway during the 1990s in an effort to limit the tax liability to her estate. A trial was held in December 2014, after which a jury found that Ms. Hathaway lacked the testamentary capacity to amend her trust and that the defendant, Marion Louttit, Ms. Hathaway's youngest daughter, had unduly influenced Ms. Hathaway, thereby causing Ms. Hathaway to execute the challenged amendments and gifts.[1] The jury also found that Marion Louttit had breached her fiduciary duty as trustee of the inter vivos trust. Following the jury's verdict, Louttit renewed her motion for judgment as a matter of law and moved for a new trial. After duly considering those motions, the trial justice denied Louttit's motion for new trial and judgment as a matter of law on the claims of testamentary capacity and undue influence. However, the trial justice granted both motions as to the fiduciary duty verdict because, according to the trial justice, the plaintiff, Wenda Branson-Ms. Hathaway's middle daughter-had failed to prove damages. An order entered on February 4, 2016, to that effect, which also denied the plaintiff's motion for attorneys' fees. Judgment entered that same day, and the parties cross-appealed.[2] After carefully reviewing the parties' arguments and thoroughly examining the evidence presented at trial, we affirm the judgment of the Superior Court in all respects, and we vacate the grant of a new trial as to the plaintiff's breach of fiduciary duty claim.


         Facts and Travel

         The essential facts of this case are not in dispute. Augusta Hathaway lived in her home in Barrington for nearly fifty years. She married twice, and had three daughters: Joan Prout-Oscarsson, Wenda Branson, and Marion Louttit. In 1992, following the death of her second husband, Ms. Hathaway created the Augusta P. Hathaway Living Trust Agreement to distribute her assets upon her death. In addition, the trust contained language that required the trustee to apply "so much of the net income and principal of the Trust Estate, even to the extent of exhausting principal, as the Settlor may at any time or times direct in writing or as the Trustee may deem advisable for the Settlor's support, maintenance, health, education, or welfare."

         In 1997, the trust was amended to include an equalization clause, which provided that:

"[T]he Trustee shall take into consideration that it is the Settlor's desire and intention that all of the Settlor's children share equally in her estate. To that end, in distributing the Trust Estate, per stirpes, to the Settlor's issue, the Trustee shall consider all gifts and loans made by the Settlor to her children or other issue during her lifetime. Gifts and loans made to each child and his or her issue shall be added together to arrive at a total family share for each child. To the extent that the total family shares for each child are unequal, the Trustee shall first allocate to each child and to the issue of a deceased child the amount or amounts necessary which, when added to the total family share for each child will equalize the total amounts given to each child's family during the Settlor's lifetime."

         Around the same time, Ms. Hathaway also established the A. P. Hathaway Family Limited Partnership, to which she deeded her Barrington home. The partners to the limited partnership were Ms. Hathaway, who retained the general interest, and limited partners Louttit, who also retained an interest for the benefit of her two children, and Branson, who also retained an interest for the benefit of Kristal Osborn, who was then a minor child.[3] Over the next several years, Ms. Hathaway gifted additional interests in the limited partnership to her children and grandchildren. The last unchallenged gifting document, executed in 1999, indicates that Hathaway retained 44.1 percent, Louttit owned a combined 31.06 percent for herself and her children, and Branson owned a combined 24.84 percent for herself and Kristal Osborn.

         The record reveals that, in the fall of 2000, Louttit and her mother discussed Louttit's wish to move into the Barrington home with her husband, Jonathan, and their family as soon as some planned construction at the home could be completed.[4] However, Louttit and Jonathan had difficulty securing a loan to pay for the construction because the ownership of Ms. Hathaway's home was divided among the other members of the limited partnership.

         In October 2000, Louttit and Jonathan met with Ms. Hathaway's attorney, Andrew Davis, for the purpose of effecting changes to Ms. Hathaway's estate plan. Mr. Davis's legal bills for the date in question indicate that the purpose of the meeting was to conduct a "review of partnership documents and prepare [a] new gifting letter."

         Facing the trials and increasing infirmities of age, Ms. Hathaway moved into an assisted living facility in November 2000. Sadly, just a few weeks later, she attempted suicide and was admitted to Butler Hospital for care. When asked why she had tried to take her own life, she responded, "to relieve my family of the burden of taking care of me" and that "[t]his is the easiest way to give my house to them." Ms. Hathaway was discharged from inpatient care on December 1, 2000. In a discharge report, her treating physician diagnosed Ms. Hathaway as having bipolar disorder, type II depressed, and "Alzheimer's dementia, mild." Her physician reported that Ms. Hathaway "requires a higher level of care secondary to obvious cognitive deficits" and that "[s]he demonstrates impairments in the areas of safety, medication management, and money management." Importantly, the physician at Butler Hospital also reported that "[s]he demonstrates significant difficulty in determining negative consequences of her actions and poor coping skills as well" and that "she had difficulty weighing the risks, benefits, and alternatives to suicide for handing her property over to her family."

         It is also noteworthy that, in the months following her discharge from Butler Hospital, Ms. Hathaway made several changes to her estate plan, all of which were geared toward shifting the major portion of her estate to the Louttit family and away from Branson and Osborn. Ms. Hathaway signed two documents (the partnership gifts) transferring her remaining interest in the limited partnership, including the general partnership share, to Louttit and her family. She also made several amendments to her trust. The first, signed on December 19, 2000, appointed Louttit as trustee. Another amendment, signed on February 28, 2001, made Branson and Osborn's beneficiary interest in the trust conditional on the transfer of their interest in the limited partnership to Louttit. The relevant language of that amendment provided:

"Notwithstanding anything herein to the contrary, it is the Settlor's specific intent that all of the interests in THE AUGUSTA P. HATHAWAY FAMILY LIMITED PARTNERSHIP be owned by MARION P. LOUTTIT and her family, in spite of the fact that such ownership might result in an ultimate unequal distribution of the Settlor's estate. To that end, the Settlor hereby provides that any and all benefits or trust distributions provided for WENDA P. BRANSON and/or KRISTAL A. FAHEY pursuant to this trust are contingent upon the said WENDA P. BRANSON and KRISTAL A. FAHEY transferring, without consideration, all of their respective interests in THE AUGUSTA P. HATHAWAY FAMILY LIMITED PARTNERSHIP to MARION P. LOUTTIT or if she is not then living, to her living issue per stirpes. Said transfer to be accomplished within ninety (90) days of the Settlor's death, provided however, that MARION P. LOUTTIT may, at her sole discretion elect to purchase within said ninety (90) day period said interests in THE AUGUSTA P. HATHAWAY FAMILY LIMITED PARTNERSHIP from WENDA P. BRANSON and KRISTAL A. FAHEY at such price and upon such terms and conditions as MARION P. LOUTTIT shall deem appropriate."

         Around the time of those amendments, Jonathan sent a letter to Branson, in which he asked that she and Osborn surrender their shares in the limited partnership. In that correspondence, Jonathan represented that making the transfers would have the result of "saving the estate almost $200, 000 in estimated estate taxes." He clarified, however, that "it is still your mother's intention that you, Marion and Joan will eventually share equally in her estate at the time of her death. That will include the value of the house." Jonathan later testified at trial that, in fact, there would not have been any savings in estate taxes because the house already had been conveyed to the limited partnership in 1997. In any event, Branson and Osborn did not comply with Jonathan's request and did not surrender their shares in the limited partnership.

         Soon after she received the letter from Jonathan, Branson received another letter, this one purportedly from Ms. Hathaway. The relevant portions of that letter said:

"As you know, my arthritis has now made it impossible for me to write letters to people. Because of this, I've asked one of the secretary's [sic] at [the assisted living facility] to type this for me.
"* * *
"What I would like you to do is to please call Andrew Davis, my attorney and make arrangements to transfer your shares in the partnership back to me. Since you now have a copy of my will you know that I intend to leave you, Marion and Joan equal shares in my estate when I'm gone. However, if we can not resolve the problems with the partnership I may have to rethink my estate planning."

         Although the letter was purported to have been written by Ms. Hathaway, Jonathan later testified that, in fact, he had drafted the letter after meeting with Ms. Hathaway at the assisted living facility and that she had not dictated the letter to him. He claimed, however, that he later reviewed the contents of the letter with Ms. Hathaway.

         Concerned because she was being asked to give up her shares in the limited partnership, Branson set up a meeting with Ms. Hathaway, Prout-Oscarsson, and Osborn over dinner for the purpose of discussing the potentially uneven distribution of Ms. Hathaway's estate. Branson surreptitiously recorded much of the conversation because, she later testified, she was worried that Ms. Hathaway would not be able to remember the conversation and Branson wanted to be able to play the recording to her mother to remind her of what she had said.[5] Branson and Prout-Oscarsson asked their mother to explain why Louttit was to receive the lion's share of the limited partnership interest. In her response to that inquiry, Ms. Hathaway said, "It was always meant that you and Joan would get the money and Marion there would take the house" and that she "wanted everybody to get an equal share." When Branson asked how the daughters would get an equal share if Louttit owned the entire house, the following exchange ensued:

"BRANSON: [D]id Joan and I get equal amounts of money that equal, is the same as what Marion gets in the house?
"HATHAWAY: I don't know.
"BRANSON: Well, how can it be equal if it's not?
"HATHAWAY: Well, she's got an attorney.
"HATHAWAY: Yeah, all right. Andrew Davis?
"BRANSON: Yeah, but that's - - you're supposed to be, that's your attorney, not Marion's.
"HATHAWAY: Oh, well, I don't have an attorney, I don't need one."

         Ms. Hathaway made the final amendment to her living trust several months later, on August 3, 2001. That amendment made Louttit the trustee and dispensed with any pretense of distributing the trust assets equally upon Ms. Hathaway's death. Instead, the amendment provided that Branson, Osborn, and Prout-Oscarsson would each receive $2, 000 from the trust, while the remaining balance of the trust assets would be distributed to Louttit or her living issue. The amendment also added a no-contest clause, which provided that "[i]f any beneficiary hereunder or heir at law shall contest the validity of this Trust Amendment * * * then all benefits provided for such beneficiary or heir at law shall lapse as if such beneficiary had predeceased the Settlor."

         There can be no doubt that Louttit and Jonathan were intricately involved with the changes to Ms. Hathaway's estate plan during this period. Louttit scheduled her mother's appointments with her attorney and drove Ms. Hathaway to meet with Mr. Davis to discuss drafting the partnership gifts and trust amendments. Louttit and Jonathan were present for all those meetings and they also were present when Ms. Hathaway executed the partnership gifts and amendments to the trust, with the sole exception of the August 3, 2001 trust amendment, which she signed at the assisted living facility rather than at her attorney's office. Jonathan was also in routine contact with Mr. Davis, and Jonathan sent emails to him on more than one occasion to discuss the limited partnership and the trust amendments.

         In 2003, Ms. Hathaway inherited $10, 000 after the passing of one of her friends. Louttit, who had held Ms. Hathaway's financial power of attorney since 1997, sent an email to Mr. Davis seeking advice on how to proceed with the inheritance check her mother had received. Louttit wrote of her mother, "She doesn't want my two sisters to know about this money. She told Jon and I she wants to put the money in our children's accounts for their education. * * * I don't want it to look like I just deposited this money into our children's accounts." Later, Louttit, on behalf of her mother, deposited the inheritance funds into college savings accounts for her two children.

         Ms. Hathaway passed away in November 2008. Branson brought this suit in August 2009 seeking to void the 2000 and 2001 partnership gifts and the February 28 and August 3, 2001 trust amendments. Branson also alleged that Louttit had breached her fiduciary duty as trustee by diverting funds from the trust. A jury trial was held in December 2014.

         At trial, Branson presented the testimony of John Stoukides, M.D., an expert qualified in geriatric medicine and palliative care. Doctor Stoukides, who had practiced in the field of geriatric and palliative care for over twenty-five years, testified that he had reviewed Ms. Hathaway's medical records from various dates between 1997 and 2004. Doctor Stoukides was asked at trial: "Were you asked to evaluate Augusta Hathaway's capacity to make gifts to her daughter?" He responded: "I was asked to basically look at her cognitive ability as was documented in her medical records and render an opinion whether or not I felt she had the requisite capacity to make complex financial decisions, so I think that's a yes to your answer."

         Doctor Stoukides reported that Ms. Hathaway had been suffering from memory problems since at least 1997, when she visited a neurologist who, after a follow-up appointment in early 1998, diagnosed Ms. Hathaway with early Alzheimer's disease. Doctor Stoukides also reviewed the report of an occupational therapist who had evaluated Ms. Hathaway during her stay at Butler Hospital in late 2000. According to Dr. Stoukides, the occupational therapist had given Ms. Hathaway a series of coins to count, but, he testified, "she couldn't even comprehend the value of the coins and give her a value of, you know, what a quarter, a dime, a nickel, and a penny are worth." He reported that it was the opinion of the ...

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