Gardner v. Gardner

1

Betty Gardner and Ruth Sheldon, Plaintiffs, v. Roy M. Gardner, Jr. and Molly Pangbum Defendants

No. CARSC-CV-2020-060

Superior Court of Maine, Aroostook

October 1, 2022

JUDGMENT

This matter came before the court for bench trial on January 18 and 19, 2022. Plaintiffs were present and represented by William Devoe, Esq. and Kady Huff, Esq. Defendants were present and represented by William Smith, Esq. The court received the testimony of all of the parties and Roy E Gardner. After the close of the evidence, both sides were permitted additional time to submit written closing arguments. Plaintiffs provided their submission on February 8, 2022. Defendants provided their submission on February 22 2022. Plaintiffs submitted a reply to Defendants' submission on February 25, 2022. After due consideration to the evidence presented, the Court finds and orders as follows:

At the heart of the dispute between these parties is the family sporting camp land and business. The parties are all siblings and the children of Roy Gardner, Sr., and the late Maude Gardner^[1]. Their parents owned and operated successful sporting camps in the Town of Allagash. As the parties' parents were getting older, they began transferring interests in their real estate to the parties. Although the testimony failed to present a complete history of the chain of title for each of the parcels at issue, the evidence made clear that the parties transferred property interests back and forth between one another from time to time, depending on the particular life circumstances of the title holder. For instances, the property interest would be transferred out of the name of one of the parties if that party was experiencing a divorce. The evidence made clear that the intent of Roy and Maude, as well as the parties, was that the family property would be held for the benefit of all four children equally.

Beginning in 2011, Betty, Ruth and Molly began serving significant roles in the operation of the sporting camp business due to Maude's declining health. They functioned on somewhat of a rotating scheduled where they would come to the property for extend periods of time to help manage the business and care for its clientele. This continued through the passing of Maude on March 5, 2015.

In 2015, the parties engaged in formal discussions about the formation of a trust to hold and manage the family real estate moving forward. The Gardner Family Trust instrument represents the ultimate agreement reached by three of the siblings regarding the management of the property (hereinafter "the Trust"). See, Plaintiffs' Ex. 5. The Trust was established and the interest in the real estate as described in the trial exhibits was conveyed to the Trust. See, Plaintiffs' Ex. 6. Although some of the property involved in the sporting camp business is described in the instruments conveying real estate interests to the Trust that is at issue in this case, the Trust holds no title interest in or to the "lodge property" that was utilized in the operation of the sporting camps. The parties agree that any interest in the lodge property is "beyond the reach of the court in relation to the trust termination issues." Plaintiffs' Closing Argument at FN 4.

When assets were transferred to the Trust, Roy and Molly could convey no greater estate than they held, being a remainder interest in the real estate. See, Defendants' Ex. 1, 2, and 3. The life estate in the real estate remained with Roy, Sr. after the passing of Maude. "The relation of a life tenant to the remainderman is usually termed that of a trustee or quasi trustee. Hardy v. Mayhew (Cal.), 158 Cal. 95,110 P. 113; Smith v. Cross, 125 Tenn. 159,140 S.W. 1060. He differs, however, from the trustee of a pure trust in that he may use the property for his exclusive benefit and take all of the income and profits. Cook v. Collier (Tenn.), 62 S.W. 658; Gibson v. Brown (Ind.), 62 Ind.App. 460, 110 N.E. 716." Nelson v. Meade, 129 Me. 61, 65, 149 A. 626, 628-629. From the inception of the Trust through the date of the trial, the Trust had no present possessory interest in any of the property that is in dispute or any right to income or profits, as it was all subject to a life estate in Roy Gardner, Sr.

It is clear from the language of the trust instrument that Betty Gardner is not included as a beneficiary, grantor, or trustee. See, Plaintiffs' Ex. 5. This is due to the desire, of at least Roy and Molly, to not have Betty involved in any management activities. However, Court finds by clear and convincing evidence that Ruth was to hold and manage an additional ¼ interest on behalf of and for the benefit of Betty, with the result being that each of the four children ultimately have an equal interest in the trust property.

In addition to assisting with the sporting camp business, Betty took on the primary role of also caring for Roy Gardner, Sr. She used the income from the business to provide care for Roy Gardner, Sr., and pay her living expenses as well. This arrangement continued with the consent and approval of Roy, Molly, and Ruth through 2019.

In 2019, for reasons that are not entirely clear, the parties' relationship deteriorated to the point that it became clear that Roy and Molly could not work with Betty and Ruth. They began discussing untangling the real estate interests and Trust. Suffice it to say that the parties could not reach a mutually acceptable exit plan for their interests or the care of Roy Gardner, Sr., and his property interests.

In March of 2020, the parties, including Betty, met to discuss the Trust and the family issues. Molly and Roy, over Ruth's objection, appointed themselves as Trustee Managers. After the meeting, ostensibly pursuant to their authority as Trustee Managers, Roy and Molly took steps to close down the sporting camp business and oust Betty from any role in the business. This suit was commenced in late spring of 2020. After this matter had been pending for some time, Betty's personal property was moved to and stored in some of the sporting camp buildings.

COMPLAINT I - DECLARATORY JUDGMENT

In Count 1 of Plaintiffs' Complaint, Plaintiffs are seeking a declaratory judgment regarding the beneficial ownership of Betty Gardner in the Trust assets, the meaning of provisions of the Trust, and the right of the LLC to use the Trust real estate. The Court will address each in turn.

A. INTEREST OF BETTY

As noted above, Betty Gardner has no stated beneficial interest in the Trust assets pursuant to the terms of the Trust. The court does find that Ruth agreed to hold and manage Betty's interest in the Trust property.

"A constructive trust may be imposed to do equity and to prevent unjust enrichment when title to property is acquired by fraud, duress, or undue influence, or is acquired or retained in violation of a fiduciary duty." Baizley v. Baizley, 1999 ME 115, ¶ 6, 734 A.2d 1117,1118 (quotation marks and alteration omitted). Thus, a constructive trust may be imposed when "a person holding title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it." Id. "A constructive trust is an equitable remedy imposed by the court regardless of the parties' intentions in order to prevent unjust enrichment." Corey v. Corey, 2002 ME 132, ¶ 10, 803 A.2d 1014, 1017. In the context of a constructive trust, a fiduciary relationship exists when one party "has rights and duties that he is bound to exercise for the benefit of [another]." Wood v. White, 123 Me. 139, 143, 122 A. 177, 179 (1923) (quotation marks omitted)." Cassidy v. Cassidy, 2009 ME 105, ¶8, 982 A.2d 326,329.

The court finds by clear and convincing evidence that a constructive trust was created by the fiduciary relationship formed between Ruth and Betty as it related to the Trust property. Ruth was allocated a 50% beneficial interest in the Trust property. It would be unjust to permit Ruth to retain the 25% interest that was intended for Betty.

B. MEANING OF TRUST PROVISION

Plaintiffs contend that the provisions of the Trust set forth in paragraph 1.4 regarding Managing Trustee are ambiguous. In a declaratory judgment action pursuant to 14 M.R.S. §§5951-5963, "the allocation of the burden of proof .. . must be determined by reference to the substantive gravamen of the complaint. The party who asserts the affirmative of the controlling issues in the case, whether or not he is the nominal plaintiff in the action, bears the risk of non-persuasion." Hodgdon v. Campbell, 411 A.2d 667, 670-71 (Me. 1980). The controlling issues in this matter are whether the Defendants have violated the terms of the Trust by appointing themselves as Managing Trustees under a one-Trustee/one-vote reading of the Trust as opposed to a reading of the Trust that the Trustee's vote is weighted in accordance with that Trustee's beneficial interest in the Trust. Plaintiff asserts the affirmative of those controlling issues. Therefore, the burden of proof rests with the Plaintiff.

The court does not find the Trust in this regard to be ambiguous. The Trust is clear that by majority vote of the Trustees may appoint one or more of the Trustees to the managing Trustee. Plaintiffs' Ex. 5 at ¶1.4. The language referring to "one or more" Trustees clearly reflects a one-Trustee, one-vote dynamic. Therefore, the Court finds that the Defendants' action in appointing themselves as Trustee Managers did not violate the terms of the Trust.

C. LLC'S USE OF THE TRUST PROPERTY COMPLAINT II - INJUNCTION

Pursuant to 14 M.R.S. §5963, "[w]hen declaratory relief is sought, all persons shall be made parties who have or claim any interest which would be affected by the declaration and no declaration shall...