Schwalm v. Schwalm ( 2023 )

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22-P-783 Appeals Court
GREGORY K. SCHWALM & others1 vs. KAREN SCHWALM, trustee.2
No. 22-P-783.
Middlesex. May 10, 2023. – July 7, 2023.
Present: Meade, Blake, & Brennan, JJ.
Trust, Trustee's accounts, Trustee's discretion, Beneficiary.
Uniform Trust Code. Declaratory Relief.
Complaint filed in the Middlesex Division of the Probate
and Family Court Department on October 8, 2020.
A motion to dismiss was heard by Christine D. Anthony, J.
Joshua Looney (Mark Swirbalus also present) for the
plaintiffs.
Patricia Keane Martin for the defendant.
BLAKE, J. In this case we are asked to determine whether a
trustee has a common-law duty to account to remainder
beneficiaries who are not yet qualified beneficiaries under
1 Paul W. Schwalm and Peter J. Schwalm.
2 Of the William J. Schwalm Retirement Plan Trust.
2
G. L. c. 203E, § 103. See Matter of the Colecchia Family
Irrevocable Trust, 100 Mass. App. Ct. 504 (2021) (Colecchia).
We conclude that the common-law duty to account is limited to
the trustee's obligation to maintain books and records, and does
not require the trustee to provide that information to
nonqualified beneficiaries. Accordingly, we affirm the judgment
of dismissal.
Background. On September 13, 2018, William J. Schwalm
created the William J. Schwalm Retirement Plan Trust (trust),
naming his wife, Karen Schwalm, as trustee. William3 died on
December 29, 2019, at which time Karen became the beneficiary of
the trust during her lifetime. The plaintiffs are William's
adult children from a prior marriage, Gregory, Paul, and Peter
Schwalm (children). The children are the remainder
beneficiaries of the trust, and they are entitled to any
remaining trust property upon Karen's death.4 As relevant here,
the trust provides that it shall be administered "with
efficiency, . . . and with freedom from judicial intervention."
The trust contains a so-called privacy provision that states the
3 As the parties share a surname, we use first names to
avoid confusion.
4 Pursuant to Article Six, section 6.0.1, of the trust,
Gregory and Paul will each receive 47.5 percent of the remaining
trust property, and Peter will receive five percent of the
remaining trust property after Karen's death.
3
trustee has "sole and absolute discretion, to provide any
information to a Permissible Distributee or Qualified
Beneficiary" and "may exclude any information that [she]
determines is not directly applicable to the beneficiary
receiving the information."
Following William's death, the children requested that
Karen provide them with certain documents, including statements
of accounts and life insurance policies that funded the trust,
changes to the beneficiaries of those accounts, an inventory and
accounting of the trust, and a copy of the prenuptial agreement
between William and Karen.5 Karen did not provide the documents.
The children filed an "Equity Complaint for Declar[at]ory
Judgment" in the Probate and Family Court seeking a declaration
that Karen is required to produce the requested information and
an injunction requiring Karen to deliver to the children a
"complete inventory of and accounting for all assets" in
William's name or held for his benefit at the time of his death.
Karen filed a motion to dismiss under Mass. R. Civ. P. 12 (b)
(6), 365 Mass. 754 (1974), with a supporting memorandum, which
the children opposed. After a nonevidentiary hearing, the
judge, in a margin notation, allowed the motion to dismiss,
5 At oral argument the children conceded that they are not
entitled to a copy of the prenuptial agreement under the common-
law duty to account.
4
stating, "The Trust is clear and unambiguous regarding the
Trustee's discretion to provide information to the
Beneficiaries." A judgment of dismissal without prejudice
entered. This appeal followed.
Discussion. 1. Declaratory relief. The children argue on
appeal that the probate judge erred by implicitly concluding
that they were not entitled to a declaratory judgment. Karen
contends that the children failed to set forth an actual
controversy sufficient to create jurisdiction under the
declaratory judgment act. See G. L. c. 231A, § 1. Where, as
here, the subject of a motion to dismiss is a claim for
declaratory relief, we employ a two-step process. See Buffalo-
Water 1, LLC v. Fidelity Real Estate Co., LLC, 481 Mass. 13, 18
(2018). First, we determine whether a claim for declaratory
relief is "properly brought." Id. A claim is properly brought
when the plaintiff demonstrates "that an actual controversy
exists, . . . that the plaintiff has legal standing to sue,
. . . and that all necessary parties have been joined." Id. If
a claim is "properly brought," we next determine "whether the
facts alleged by the plaintiff in the complaint, if true, state
a claim for declaratory relief that can survive a defendant's
motion to dismiss." Id. Cf. Caputo v. Moulton, 102 Mass. App.
Ct. 251, 258 (2023). Assuming without deciding that the
complaint set forth an actual controversy, we turn to the
5
question whether Karen had an obligation to provide the children
with information concerning the trust, and if she did, what
information the children are entitled to receive.
2. Duty to account.6 The Massachusetts Uniform Trust Code
(MUTC) became effective July 8, 2012. See St. 2012, c. 140,
§ 56. Because the MUTC was effective six years before the trust
was established, we assume William was aware of the relevant
aspects of the MUTC as it related to the trustee's obligations
to the trust beneficiaries. See Boston Safe Deposit & Trust Co.
v. Wilbur, 431 Mass. 429, 435 (2000), quoting Johnson v.
Johnson, 215 Mass. 276, 285 (1913) ("The testator . . . may be
fairly assumed to rely upon the law of this Commonwealth for the
rules to be applied in the interpretation of his testamentary
words").
As relevant here, the MUTC provides that a trustee has a
duty to account to qualified beneficiaries. See G. L. c. 203E,
§ 813 (c). We first must determine whether the children are
qualified beneficiaries under the trust. "'[T]he date the
beneficiary's qualification is determined' . . . under the terms
6 The children complain that the judge dismissed the case
with a margin endorsement and without a rationale for her
decision, including an analysis of the applicability of
Colecchia, 100 Mass. App. Ct. at 522-523. While this would have
been helpful to the parties, particularly where the decision was
dispositive of the case, our review is de novo and therefore the
lack of a rationale is not an issue.
6
of [a] trust instrument, [is the date] on which an event occurs
to trigger a beneficiary's entitlement under the trust."
Colecchia, 100 Mass. App. Ct. at 506, quoting G. L. c. 203E,
§ 103. This principle was reaffirmed in Sacks v. Dissinger, 488
Mass. 780, 788-789 (2021), in which the court held that only
qualified beneficiaries are entitled to information about a
trust. Here, we conclude, and the parties agree, that the
children are not qualified beneficiaries, and they will not be
so qualified until Karen's death.
This does not end our analysis, however, as the children
contend, under Colecchia, that Karen has a common-law duty to
account and therefore they are entitled to the requested
documents. In so arguing, they point to our decision in
Colecchia wherein we reversed the dismissal of the plaintiff's
claims for a breach of the common-law duty to account for
"damages from the trustees' failure to deal properly with the
proceeds from the sale of the property." Colecchia, 100 Mass.
App. Ct. at 523. However, the property at issue in Colecchia
was sold after the settlors died, and therefore after the
plaintiff became a qualified beneficiary. See id. at 510.
Also relying on Colecchia, the children point to our
recital of the long-standing principle that a trustee has a duty
"to keep clear and accurate accounts with respect to the
administration of [a] trust[]." Colecchia, 100 Mass. App. Ct.
7
at 522-523, quoting Akin v. Warner, 318 Mass. 669, 674 (1945).
We do not disagree with the children that the common-law duty to
account arises "from the inception of the trust." Colecchia,
supra at 522. But that principle requires a trustee only to
maintain the books and records of the trust, nothing more. See
Akin, supra. Generally speaking, the books and records should
reflect what the trust has received and expended and, if there
are beneficiaries in succession, should demonstrate what
expenditures are allocated to income and what are allocated to
principal. See 3 A.W. Scott & M.L. Ascher, Scott and Asher on
Trusts § 17.4, 1314-1315 (6th ed. 2021). The trustee's duty to
provide those records to the beneficiaries is a separate
obligation. It does not extend to nonqualified beneficiaries,
and Colecchia does not hold otherwise. See G. L. c. 203E, § 813
(c). Had the Legislature intended to include a duty to account
to nonqualified beneficiaries, it could have done so. Instead,
the MUTC limited the right to receive information to qualified
beneficiaries. See Guardianship of B.V.G., 474 Mass. 315, 323
(2016), citing Globe Newspaper Co., petitioner, 461 Mass. 113,
117 (2011) ("Legislature presumably is aware of statutory and
common law that governs matter which it is enacting").
The children's interpretation would require us to expand
the common-law duty to account despite the limiting language of
8
the MUTC.7 Much as "[w]e do not read into [a] statute a
provision which the Legislature did not see fit to put there,
nor add words that the Legislature had an option to, but chose
not to include," Commissioner of Correction v. Superior Court
Dep't of the Trial Court for the County of Worcester, 446 Mass.
123, 126 (2006), we also decline, particularly given the
Legislature's relatively recent and thorough treatment of the
issue in the MUTC, to achieve the same result by simply adopting
that provision as a matter of common law. We also note that
unlike Massachusetts, many States that have adopted their own
version of the Uniform Trust Code have specifically included
nonqualified beneficiaries as among the parties that a trustee
has a duty to inform and report to. See, e.g., Mich. Comp. Laws
§ 700.7814(3); N.M. Stat. Ann. § 46A-8-813(C); Va. Code Ann.
§ 64.2-775(C).
Our holding is also consistent with William's stated goals.
In section 9.14 of the trust, William clearly and distinctly
advised his beneficiaries of the importance of privacy and
carefully laid out the duties of the trustee to "inform,
account, and report." See Ferri v. Powell-Ferri, 476 Mass. 651,
654 (2017) (trust instrument construed to give effect to donor's
7 Section 813 (c) of the MUTC provides that "[a] trustee
shall send an account . . . to other qualified beneficiaries who
request it, at least annually and at the termination of the
trust." G. L. c. 203E, § 813 (c).
9
intention). Although divided into a marital trust and a family
trust, the primary purpose of the family trust was "to provide
for the well-being of [Karen] and the preservation of principal
[was] not as important as the accomplishment of [that]
objective." See Gershaw v. Gershfield, 52 Mass. App. Ct. 81, 87
(2001) (where primary purpose of trust instrument was to provide
lifetime support for settlor's child, with discretionary
disbursement to settlor's grandchildren, grandchildren were not
entitled to equal shares despite trust having insufficient
resources to fulfill settlor's intent). See also Sacks, 488
Mass. at 788 ("revocable trusts have become such popular will
substitutes precisely because they typically remain out of
probate, providing greater administrative ease and privacy").
In prioritizing his privacy, William provided Karen with limited
obligations toward the children as remainder beneficiaries, to
avoid just the situation at issue here.8
Judgment affirmed.
8 Each party's request for attorney's fees and costs is
denied.