DeGiacomo v. City of Quincy

476 Mass. 38

63 N.E.3d 365

James R. DeGIACOMO, trustee,¹

v.CITY OF QUINCY & others.²

SJC–11940.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Sept. 7, 2016.

Decided Nov. 15, 2016.

James R. DeGiacomo (Susan J. Baronoff with him), Boston, for the plaintiff.

James S. Timmins, City Solicitor, for city of Quincy.

Barry S. Pollack, Boston (Phillip Rakhunov with him) for Quincy Historical Society.

Present: GANTS, C.J., BOTSFORD, LENK, HINES, GAZIANO, LOWY, & BUDD, JJ.

GANTS, C.J.

In 1971, the city of Quincy (Quincy), as trustee of the Adams Temple and School Fund (Adams Fund), filed a “bill of complaint” in equity asking a single justice of the Supreme Judicial Court to enter a decree authorizing it to execute a proposed fifty-year lease of the building and parking lot of the Adams Academy that it had negotiated with the Quincy Historical Society (Society). The Attorney General was a defendant in that action, but the Woodward School for Girls, Inc. (Woodward School or School), which was the sole income beneficiary of the Adams Fund, was not. In 1972, the single justice decreed that Quincy was authorized to execute the proposed lease. The successor trustee of the Adams Fund now seeks rescission of that lease, as well as money damages and restitution, claiming that Quincy violated its fiduciary duty of loyalty by executing the lease approved by the single justice.

The issue presented on appeal is whether the successor trustee of the Adams Fund is precluded by res judicata from obtaining that relief. The successor trustee contends that he should not be precluded because neither he nor the Woodward School was a party to the equity proceeding in 1972, and the School could not reasonably have intervened because it was not given notice of the proposed lease or the filing of the complaint. Quincy and the Society contend that preclusion is appropriate because, where the Adams Fund is a public charitable trust, the only necessary party to the equity proceeding was the Attorney General, who was in privity with the School based on a statutory responsibility under G.L. c. 12, § 8, to “prevent breaches of trust” in the administration of public charities. We conclude that the successor trustee is precluded by res judicata from prevailing on his challenge to the execution of the lease.

Background. The Adams Fund arose from the 1822 deed of trust of former President John Adams, who deeded a portion of his estate to the benefit of Quincy and its residents. The history of the Fund is described in Woodward Sch. for Girls, Inc. v. Quincy, 469 Mass. 151, 154–155, 13 N.E.3d 579 (2014) ( Woodward School ), so we will recount here only those facts relevant to the disposition of this appeal.

In 1953, this court decreed in an unpublished order that the net income from the Adams Fund shall be paid “for the conduct, operation, maintenance, management, and advancement” of the Woodward School. The Woodward School remains the sole income beneficiary of the Fund.

In 2007, the Woodward School filed a complaint and petition for an accounting with a single justice of this court, and the single justice transferred the case to the Norfolk County Division of the Probate and Family Court Department. After the issuance of a report by a special master and a bench trial, the judge in February, 2011, entered findings of fact and an “amended judgment and rationale,” in which he concluded that Quincy had failed as trustee to manage the Adams Fund in a competent and prudent manner, and thus committed a breach of its “primary duty” to maximize the income of the trust. Among other relief, the judge removed Quincy as trustee and appointed the plaintiff as successor trustee.³ The judge specifically found that Quincy had committed a breach of its “duty of loyalty to the Woodward School” when it petitioned the single justice for approval of a fifty-year lease of the Adams Academy to the Society for “nominal rent.” The judge, however, did not order that any action be taken regarding the lease, apart from enjoining Quincy from negotiating any modification or extension of the lease before the successor trustee had assumed stewardship of the Adams Fund. We affirmed the amended judgment as to liability but remanded the case to the Probate and Family Court for recalculation of the damages. Id. at 180, 13 N.E.3d 579.

In February, 2014, the successor trustee filed a complaint against Quincy and the Society in the county court, invoking this court's equity authority under G.L. c. 214, § 1. The complaint alleged that Quincy violated its fiduciary duty to the Woodward School by failing to notify the School of its intention to lease the Adams Academy and by leasing the property at a rental price below market, and sought rescission of the lease and money damages. The complaint also alleged that the Society knowingly participated in Quincy's breach of fiduciary duty and, therefore, was liable for restitution in the amount of its unjust enrichment.

The plaintiff successor trustee moved for partial summary judgment, claiming that he was entitled under the doctrine of issue preclusion to a declaration that Quincy had committed a breach of its fiduciary duty to the Woodward School with respect to the lease, as had been found by the judge. The defendants, Quincy and the Society, cross-moved for summary judgment, claiming, among other grounds, that they were entitled to judgment under the doctrine of res judicata because of the judgment of the single justice in 1972 authorizing the execution of the lease.

The single justice allowed the defendants' motions, denied the plaintiff's motion, and entered judgment on behalf of the defendants. The single justice concluded that “[t]he 1972 decree settles as a matter of res judicata the issue of whether [Quincy] breached its duty of loyalty in executing the lease with the Society. It did not.” The single justice also concluded that, because the judge made a “mistake of law” in finding that Quincy had committed a breach of its fiduciary duty of loyalty by petitioning this court for approval of the lease, the judge's finding “can have no effect in the nature of collateral estoppel for the current litigation.” The successor trustee appealed from the judgment to the full court, contending that the single justice erred as a matter of law in concluding that the defendants were entitled to judgment under the doctrine of res judicata.⁴ We review the single justice's disposition of a motion for summary judgment de novo. Miller v. Cotter, 448 Mass. 671, 676, 863 N.E.2d 537 (2007).

Discussion. The doctrine of res judicata is based on “[c]onsiderations of fairness and the requirements of efficient judicial administration,” which “dictate that an opposing party in a particular action as well as the court is entitled to be free from attempts to relitigate the same claim.” Wright Mach. Corp. v. Seaman–Andwall Corp., 364 Mass. 683, 688, 307 N.E.2d 826 (1974). See Biggio v. Magee, 272 Mass. 185, 188, 172 N.E. 336 (1930) ( “the doctrine of res judicata is a rule of public policy founded on the established principle that it is in the interest of the parties and for the public welfare that litigation once decided on its merits should end”).

Res judicata is now understood as a “generic term” that describes two specific types of preclusion. Heacock v. Heacock, 402 Mass. 21, 23 n. 2, 520 N.E.2d 151 (1988). “Claim preclusion makes a valid, final judgment conclusive on the parties and their privies, and prevents relitigation of all matters that were or could have been adjudicated in the action.” Kobrin v. Board of Registration in Med., 444 Mass. 837, 843, 832 N.E.2d 628 (2005), quoting O'Neill v. City Manager of Cambridge, 428 Mass. 257, 259, 700 N.E.2d 530 (1998). “[C]laim preclusion requires three elements: ‘(1) the identity or privity of the parties to the present and prior actions, (2) identity of the cause of action, and (3) prior final judgment on the merits.’ ” Kobrin, supra, quoting DaLuz v. Department of Correction, 434 Mass. 40, 45, 746 N.E.2d 501 (2001).

“[I]ssue preclusion ‘prevents relitigation of an issue determined in an earlier action where the same issue arises in a later action, based on a different claim, between the same parties or [parties in privity with the same parties].’ ” Kobrin, 444 Mass. at 843, 832 N.E.2d 628, quoting Heacock, 402 Mass. at 23 n. 2, 520 N.E.2d 151. A party is precluded from relitigating an issue where “(1) there was a final judgment on the merits in the prior adjudication; (2) the party against whom preclusion is asserted was a party (or in privity with a party) to the prior adjudication; and (3) the issue in the prior adjudication was identical to the issue in the current adjudication,” was essential to the earlier judgment, and was actually litigated in the prior action. Kobrin, supra, quoting Tuper v. North Adams Ambulance Serv., Inc., 428 Mass. 132, 134, 697 N.E.2d 983 (1998).

We focus on issue preclusion. Here, the first and third elements are plainly satisfied: there was a final judgment on the merits in the 1972 bill of complaint litigation, and the essential issue in both cases is the same—whether execution of the lease of the Adams Academy to the Society constitutes a breach of Quincy's fiduciary duty of loyalty. The dispute concerns the second element.

The successor trustee essentially makes two arguments why the second element is not satisfied in this case. First, he claims that he was not a party to the 1972 litigation, because he was not appointed until 2011, and that he should not be bound by the adjudication of the earlier litigation because the original trustee, Quincy, committed a breach of its fiduciary duty of loyalty by seeking the decree it obtained. We need not dwell long on this argument. We recognize that a successor trustee may act on behalf of the beneficiaries in bringing a claim of breach of fiduciary duty against the former trustee. See O'Connor v. Redstone, 452 Mass. 537, 552, 896 N.E.2d 595 (2008)....