BRIEF OF APPELLANT JULIE SHELTON · JULIE SHELTON, AS TRUSTEE OF THE ELIZABETH M. TAMPOSI GST...

THE STATE OF NEW HAMPSHIRE SUPREME COURT

No. 2010-0634

JULIE SHELTON, Trustee of the Elizabeth M. Tamposi GST Exempt Trust and

The Elizabeth M. Tamposi Trust, both created under the Samuel A. Tamposi Sr. 1992 Trust, and the Elizabeth M. Tamposi Trust created under the Samuel A. Tamposi Sr. 1994 Irrevocable

Trust, and ELIZABETH M. TAMPOSI

v.

SAMUEL A. TAMPOSI, JR and STEPHEN A. TAMPOSI, Individually and as Investment Directors of the Elizabeth M. Tamposi GST Exempt Trust and the Elizabeth M. Tamposi Trust, both created under the Samuel A. Tamposi Sr. 1992 Trust, and the Elizabeth M. Tamposi Trust

created under the Samuel A. Tamposi Sr. 1994 Irrevocable Trust, and as Directors of the Tamposi Companies

______________________________________________________________________________

RULE 7 MANDATORY APPEAL FROM RULING OF THE PROBATE COURT AFTER TRIAL

______________________________________________________________________________

BRIEF OF APPELLANT JULIE SHELTON

Respectfully submitted,

JULIE SHELTON, AS TRUSTEE OF THE ELIZABETH M. TAMPOSI GST EXEMPT TRUST AND THE ELIZABETH M. TAMPOSI [NON-EXEMPT] TRUST By her attorneys, Robert S. Frank, Jr. (admitted pro hac vice) Robert M. Buchanan, Jr. (admitted pro hac vice) CHOATE, HALL & STEWART LLP Two International Place Boston, MA 02110 (t) 617-248-5000 John C. La Liberte (NH Bar #: 6859) SHERIN AND LODGEN LLP 101 Federal Street Boston, MA 02110 (t) 617-646-2173 To be argued by: Robert S. Frank, Jr.

Dated: October 14, 2011

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TABLE OF CONTENTS

Page

INTRODUCTION .............................................................................................................................1

QUESTIONS PRESENTED..............................................................................................................2

STATUTES........................................................................................................................................2

STATEMENT OF THE CASE AND OF THE FACTS....................................................................3

A. The Tamposi Family. .................................................................................................3

B. The Trust Instrument..................................................................................................3

C. The Investment Directors Controlled The Flow Of Funds. .......................................4

D. The Prior Litigation And Settlement..........................................................................5

E. Ms. Shelton Was Selected As The New Trustee. ......................................................6

F. Ms. Shelton Filed The Massachusetts Litigation Seeking To Raise Funds. ..............11

G. Ms. Shelton Filed This Action (1) Seeking A Declaration Of Her Authority As Trustee And (2) Alleging Breach Of Duty By The Investment Directors. .................................................................................................12

SUMMARY OF ARGUMENT .........................................................................................................16

ARGUMENT.....................................................................................................................................17

I. The Probate Court’s Actions Against Ms. Shelton Rest On Two Foundational Errors Of Law. .......................................................................................................................18

A. By Rejecting Ms. Shelton’s Petition On The Merits, The Probate Court Failed To Effectuate The Plain Language Of The Trust Instrument. ........................18

B. The Probate Court Erroneously Applied The In Terrorem Clause Of The Trust. ..........................................................................................................................30

II. The Probate Court Abused Its Discretion When It Ruled That Ms. Shelton Is Personally Liable To Pay Attorneys’ Fees.............................................................................38

A. The Probate Court Had No Basis For Its Finding That Ms. Shelton Conducted This Litigation In Bad Faith. ...................................................................39

B. There Is No Precedent For The Probate Court’s Award Of Fees Against Ms. Shelton. ...............................................................................................................45

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III. The Probate Court Erroneously Removed Ms. Shelton From The Position Of Trustee....................................................................................................................................47

A. Only A Rare Case Warrants Removing A Trustee, And There Is No Precedent For The Removal Of Ms. Shelton. ............................................................47

B. The Grounds Cited By The Probate Court Do Not Support Removal.......................48

CONCLUSION..................................................................................................................................50

REQUEST FOR ORAL ARGUMENT .............................................................................................50

ADDENDUM

iii

TABLE OF AUTHORITIES

Page(s)

CASES

Appeal of Lowy, 156 N.H. 57 (2007) ..................................................................................................................18

Ball v. Mills, 376 So.2d 1174 (Fla. App. 1979).............................................................................................23

Bd. of Trs. of the N.H. Judicial Ret. Plan v. Sec’y of State, 161 N.H. 49 (2010) ..................................................................................................................43

Betts v. City Nat’l Bank, 67 Cal. Rptr. 3d 152 (Cal. Ct. App. 2007) ...............................................................................32

Birmingham Trust Nat’l Bank v. Henley, 371 So. 2d 883 (Ala. 1979)......................................................................................................47

Burtman v. Butman, 97 N.H. 254..............................................................................................................................32

C. B. & T. Co. v. Hefner, 651 P.2d 1029 (N.M. Ct. App. 1982) ......................................................................................42

Chicago Title and Trust Co. v Chief Wash Co., 13 N.E.2d 153 (Ill. 1938) .........................................................................................................50

Clipper Affiliates, Inc. v. Checovich, 138 N.H. 271 (1994) ................................................................................................................47

Conte v. Conte, 56 S.W.3d 830 (Tex. App. 2001).............................................................................................33

Di Portanova v. Monroe, 229 S.W.3d 324 (Tex. App. 2006)...........................................................................................31

Flanagan v. Prudhomme, 138 N.H. 561 (1994) ..........................................................................................................39, 44

Griffin v. Sturges, 40 A.2d 758 (Conn. 1944) .......................................................................................................31

In re Baylis, 313 F.3d 9 (1st Cir. 2002)........................................................................................................43

In re Declaration of Trust by Dumaine, 146 N.H. 679 (2001) ................................................................................................................28

iv

In re Estate of Croessant, 393 A.2d 443 (Pa. 1978) ..........................................................................................................47

In re Estate of Donovan, 162 N.H. 1 (Apr. 28, 2011)..........................................................................................18, 25, 28

In re Estate of Geffen, 202 N.Y.S.2d 599 (N.Y. Surr. Ct. 1960) .................................................................................17

In re Estate of Stralem, 695 N.Y.S.2d 274 (Sur. Ct. Nassau Cty. 1999) .......................................................................31

In re Estate of Tyler, 716 N.E.2d 1239 (Ohio Ct. C.P. 1999)....................................................................................49

In re Goodlander and Tamposi, 161 N.H. 490 (Feb. 25, 2011) ..............................................................................................7, 27

Ingalls v. Ingalls, 54 So.2d 296 (Ala. 1950).........................................................................................................18

Kessler v. Gleich, 161 N.H. 104 (2010) ................................................................................................................39

King v. Mosher, 137 N.H. 453 (1993) ................................................................................................................39

Kukene v. Genualdo, 145 N.H. 1 (2000) ....................................................................................................................39

Langer v. Pender, 764 N.W.2d 159 (N.D. 2009) ..................................................................................................32

Law v. Law, 753 A.2d 443 (Del. 2000) ........................................................................................................49

Lesikar v. Moon, 237 S.W.3d 361 (Tex. App. 2007)...........................................................................................32

McLendon v. McLendon, 862 S.W.2d 662 (Tex. App. 1993)...........................................................................................33

Munsey v. Laconia Home for the Aged, 103 N.H. 42 (1960) ..................................................................................................................20

Nash Family Inv. Props. v. Town of Hudson, 139 N.H. 595 (1995) ................................................................................................................44

Orr v. Moses, 94 N.H. 309 (1947) ..................................................................................................................20

v

Petition of Lovejoy, 227 N.E.2d 497 (Mass. 1967) ..................................................................................................48

Redman-Tafoya v. Armijo, 126 P.3d 1200 (N.M. Ct. App. 2005) ......................................................................................32

Richards v. Midkiff, 396 P.2d 49 (Haw. 1964) ...................................................................................................17, 42

Rockwell v. Dow, 85 N.H. 58 (1931) ....................................................................................................................17

Rodriguez v. Gavette, 9 P.3d 1062 (Ariz. 2000)..........................................................................................................32

Sinclair v. Sinclair, 670 S.E.2d 59 (Ga. 2008)...................................................................................................31, 33

Snook v. Sessoms, 350 S.E.2d 237 (Ga. 1986).......................................................................................................32

Stuart v. Cont’l Ill. Nat’l Bank & Trust Co. of Chicago, 369 N.E.2d 1262 (Ill. 1977) .....................................................................................................27

Town of Swanzey v. Liebeler, 140 N.H. 760 (1996) ................................................................................................................39

Tremaine v. Tremaine, 663 A.2d 387 (Conn. 1995) .........................................................................................18, 22, 23

Tunis v. Dole, 97 N.H. 420 (1952) ............................................................................................................18, 25

Woodstock Soapstone Co., Inc. v. Carleton, 133 N.H. 809 (1991) ................................................................................................................39

Zaring v. Zaring, 39 N.E.2d 734 (Ind. 1942) .......................................................................................................45

STATUTES

Cal. Prob. Code § 21311................................................................................................................35

Fla. Stat. § 736.1108 ......................................................................................................................36

RSA 564-B:1-103(24)..............................................................................................................18, 22

RSA 564-B:1-105(b)(3) .................................................................................................................25

RSA 564-B:1-112 ..........................................................................................................................18

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RSA 564-B:4-404 ....................................................................................................................25, 29

RSA 564-B:7-706 ................................................................................................................2, 23, 48

RSA 564-B:7-711 ..........................................................................................................................18

RSA 564-B:8-816 ....................................................................................................................42, 44

RSA 564-B:10-1004 ......................................................................................................................39

RSA 564-B:10-1014 ................................................................................................................32, 35

RSA 564-B:12-1202 ......................................................................................................................22

RSA 564-B:12-1204 ......................................................................................................................22

OTHER AUTHORITIES

4 Austin W. Scott, William F. Fratcher & Mark L. Ascher, Scott and Ascher on Trusts § 24.4.2 (5th ed. 2006) ...................................................................................................................17

Restatement (Second) of Property (Donative Transfers) § 9.1......................................................32

Restatement (Third) of Property (Wills and Other Donative Transfers) § 8.5 ..................31, 32, 35

Restatement (Third) of Trusts § 27(2) ...........................................................................................29



Restatement (Third) of Trusts § 81(1) and cmts. ...........................................................................23

1

INTRODUCTION

This appeal presents a question of first impression with respect to the obligations of co-

fiduciaries to each other, and to trust beneficiaries, under the Uniform Trust Code as adopted in

New Hampshire. Petitioner-Appellant Julie Shelton was the Trustee of two trusts that benefited

Elizabeth M. Tamposi and her issue. The trust instrument gave Ms. Shelton the right and

obligation to make distributions of income and principal from those trusts to meet the needs of

trust beneficiaries if, in her judgment, the standard set forth in the trust instrument was satisfied.

The trust instrument granted the power to invest trust assets to two Investment Directors, the

Respondents-Appellees Samuel A. Tamposi, Jr., and Stephen A. Tamposi.

The Investment Directors asserted that they were empowered to determine when, and in

what amounts, trust income and principal would be made available to the Trustee. The trust

instrument granted no such power to them. Ms. Shelton sued to obtain a determination of the

scope of her authority as Trustee, and alleged that the Investment Directors had breached their

fiduciary duties to the Trust and its beneficiaries.

The Probate Court adopted the Investment Directors’ interpretation of the instrument. It

then ruled that the commencement of this proceeding violated the in terrorem clause of the trust.

Those rulings were errors of law. Based on those errors, the Court removed Ms. Shelton from

her position as Trustee and held Ms. Shelton personally liable to pay the attorneys’ fees of the

Investment Directors and three other parties who voluntarily intervened in this case. For the

reasons set forth below, these decisions should be reversed.

2

QUESTIONS PRESENTED

I. Did the Probate Court err as a matter of law in elevating the role and authority of

the Investment Directors above that of the Trustee in contravention of the express terms of the

relevant trust instrument?1

II. Did the Probate Court err as a matter of law when it ruled that Ms. Shelton and

Elizabeth Tamposi engaged in an attack on the validity of the trust -- conduct that would trigger

the trust’s in terrorem clause -- rather than determining that they sought an interpretation of the

terms of the trust and were challenging the Investment Directors’ conduct as fiduciaries of the

trust -- conduct that would not trigger the in terrorem clause?2

III. Did the Probate Court err as a matter of law when it held Ms. Shelton personally

liable to pay the Respondents’ and voluntary Intervenors’ attorneys’ fees?3

IV. Did the Probate Court misapply RSA 564-B:7-706 when it removed Ms. Shelton as

Trustee of the relevant trusts?4

STATUTES

The pertinent text of the statutes principally involved in this case is set forth in the

Addendum to this Brief at pages designated “Add. 20-25”.

1 This issue was raised in the Amended Complaint, App. 72-73, and during the Hearing at Tr. 26-27 (opening argument) and Tr. 5693, 5178-19 (closing argument).

2 This issue was raised in Petitioners’ Motion For Partial Summary Judgment On Applicability Of In Terrorem

Clause (Case Summary Index No. 126, App. 129); and during the Hearing at Tr. 28-29 (opening argument), Tr. 5564 (motion for directed verdict) and Tr. 5710-13 (closing argument).

3 At the end of the Hearing, all parties requested an award of attorneys’ fees. Tr. 5611, 5661, 5719; see App. 183. When the Petitioners requested an award of attorneys’ fees in their own favor, this necessarily included an assertion that the opponents’ requests for fees should be denied. The Petitioners argued that this litigation “was necessitated by Respondents’ bad faith conduct.” App. 175-76. After the Probate Court issued its August 18, 2010 Order, the Respondents and Intervenors filed their request to set the amounts of fees on September 17, 2010. Case Summary Index No. 423, App. 33. The Petitioners filed their Opposition on September 27, 2010. Case Summary Index No. 431, App. 34. Determination of the amounts remains pending in the Probate Court.

4 This issue was raised at App. 113, Tr. 5564 (motion for directed verdict) and Tr. 5719 (closing argument).

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STATEMENT OF THE CASE AND OF THE FACTS

A. The Tamposi Family.

Samuel A. Tamposi, Sr. was a real estate entrepreneur. He owned directly, or through

various business entities, a number of properties in New Hampshire and Florida. Mr. Tamposi

had six children -- Samuel, Jr., Stephen, Michael, Celina, Nicholas and Elizabeth.

B. The Trust Instrument.

During his lifetime, Samuel Tamposi, Sr. (the “Settlor”) established two trusts -- one

exempt (from generation-skipping transfer tax) and one non-exempt trust. Upon his death in

1995, the assets in those trusts passed into trusts for the benefit of his children (and their issue),

one exempt and one non-exempt trust for each child. At issue in this case are trusts for the

benefit of Elizabeth M. Tamposi (a daughter of the Settlor) and her issue (the “EMT Trusts”).

The EMT Trusts are governed by the trust instrument that Samuel Tamposi, Sr. created

during his lifetime. The relevant documents are the Samuel A. Tamposi, Sr. Trust dated

February 24, 1992 (Add. 1), and its Third Amendment, dated April 8, 1994 (Add. 14). See Order

at 2; App. 342-67 (Ex. 1.1).5

The trusts, as amended, created two types of fiduciaries. There was to be a Trustee. The

Trust defines the Trustee’s authority:

[T]he Trustee from time to time may pay to or for the benefit of the child [Elizabeth Tamposi] and the child’s issue . . . such amounts from the net income and principal of the trust . . . as the Trustee considers necessary for their education and maintenance in health and reasonable comfort.

5 Copies of the two instruments are provided in the Addendum to this Brief at pages “Add. 1” and “Add. 14”. The August 18, 2010 Order of the Probate Court (“Order”), which is the subject of this appeal, is included at the end of the Addendum, and is referenced by its original page numbers 1-54. The trial exhibits were submitted to the Probate Court in 13 volumes and were denoted as Ex. 1.1 through Ex. 13.7. See Order at 9 n. 13. Selected exhibits are included in the Appendix to this Brief as “App. 342”, etc. References to the trial transcript are identified herein as “Tr. __”, and the full transcript of the trial is included in Volumes 4-12 of the Appendix.

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1992 Trust Instrument, Arts. Fifth(a) and Sixth(a), Add. 3-4. Ms. Shelton was the trustee of the

EMT Trusts.6

There were to be two Investment Directors. The Investment Directors were given the

power to manage trust investments, and were authorized, but not obligated, to invest “any part or

all of the Trust property in real estate interests.” 1994 Amendment, Arts. Tenth-A and Tenth-B,

Add. 14-17. The trusts did not grant to the Investment Directors any power to determine the

needs of the trust beneficiaries or to decide whether, when, in what amount, or from what source

-- interest or principal -- trust assets were to be distributed to trust beneficiaries. Appellees

Samuel Tamposi, Jr. and Stephen Tamposi were the Investment Directors of the EMT Trusts.

C. The Investment Directors Controlled The Flow Of Funds.

The Investment Directors caused the trusts for each of the Settlor’s six children to be

invested, almost exclusively, in one-sixth (or smaller)7 minority interests in real estate businesses

or properties, that were also managed by Stephen and Samuel Tamposi, Jr. Order at 9, 21; Tr.

1682 (GAL); App. 1724 (Ex. 11.6). See also Tr. 5559-63 (Stipulation); App. 799 (Ex. 2.121);

App. 1381 (Ex. 3.1); App. 1540 (Ex. 4.1); and see, e.g., Tr. 2026-28, 2576 (Shelton) and App.

747 (Ex. 2.100). These minority interests were highly illiquid. Tr. 2072, 2075, 2624 (Shelton);

Tr. 661-63 (Denby); Tr. 4314-15 (Wexler); Tr. 4583 (Samuel Tamposi, Jr.). When cash was

generated by the various real estate holdings -- regardless of its nature as income or principal --

the Investment Directors (in some cases, along with other managers of the relevant business) first

decided whether that cash should be reinvested or otherwise retained in the business. App. 1722

6 Distributions from the Non-Exempt Trust are governed by Article Sixth of the 1992 Trust Instrument (Add. 4), which does not require the Trustee to consider other income and resources available to the beneficiary. It would be better to make distributions from the Non-Exempt Trust, which is taxable, so as to maintain the assets in the Exempt Trust, which would not be subject to tax on the death of Elizabeth Tamposi. Tr. 2526 (Shelton).

7 In some cases the six pairs of Tamposi family trusts, taken collectively, own only a portion of the relevant business or property. App. 407 (Ex. 1.6).

5

(Ex. 11.2); App. 1723 (Ex. 11.3); Tr. 5243 (Samuel Tamposi, Jr.); Tr. 5322 (Stephen Tamposi).

When the holdings generated what the Investment Directors deemed “surplus or excess cash

flow,” they paid it into a common fund. Tr. 4572-73 (Samuel Tamposi, Jr.). And, when cash in

the common fund exceeded a “reserve” amount, they paid this cash over to the accounts of the

twelve trusts. Tr. 2028, 2230 (Shelton); Tr. 3074 (Knight); Tr. 5243 (Samuel Tamposi, Jr.);

App. 1007 (Ex. 2.132); App. 1235 (Ex. 2.218). Only then did any cash or other assets become

available to the Trustee for potential distribution to trust beneficiaries. As the first trustee of all

of the trusts testified, “they ran the show as far as . . . the checkbook is concerned.” Tr. 2174

(Tully). “[T]hey decide what to give to me,” Ms. Shelton concurred. Tr. 2617.

The Investment Directors provided only limited information to the Trustee. She was not

given any information about the operation of the entities in which her trusts owned interests.

Tr. 2071 (Shelton). Ms. Shelton testified: “When anything happens, I’m not involved. They

don’t ask me anything.” Tr. 2070. The court-appointed Guardian Ad Litem (for the unborn

beneficiaries of the EMT Trusts) reported to the Court that “the Investment Directors have done

what the Investment Directors wanted to do . . . without sharing much information about their

intentions until after they had acted.” App. 1646 (Ex. 9.16).

D. The Prior Litigation And Settlement.

From 1995 to 2007, all six pairs of trusts had the same Trustee; first David Tully (an

accountant and friend of the Settlor), and later Gerald Prunier (an attorney who was a family

friend and not a professional Trustee). Order at 2.

In September 2001, Elizabeth Tamposi and her brother Nicholas filed an action alleging

improper accounting and breach of fiduciary duty by the Investment Directors. After a lengthy

period of mediation, the dispute was settled in October 2006. App. 381 (Ex. 1.3). The trusts

were amended as part of the settlement. Among other things, Elizabeth and Nicholas were given

6

the right to appoint the Trustee of the trusts that benefited them and their issue. Id. Mr. Prunier

remained the Trustee of the trusts for the benefit of Samuel, Jr., Stephen, Celina, and Michael.

During the five-year period of this dispute, Trustee Prunier paid the legal fees of the

Investment Directors, but did not pay fees incurred by Elizabeth or Nicholas Tamposi. See

Tr. 183 (Elizabeth Tamposi). The 2006 Settlement Agreement addressed the legal fees that had

been incurred. On one side, it provided that the attorneys’ fees of the Investment Directors

would be reallocated so that each of the six trust pairs would be charged equally for them. App.

381 (Ex. 1.3 at ¶ 4D). On the other side, it expressly recognized that Elizabeth Tamposi could

seek reimbursement of her legal fees (a total of more than $925,000) from the “subtrust for [her]

own benefit.” App. 385 (Ex. 1.3 at ¶ 4A). Elizabeth Tamposi was led to believe that the

Investment Directors would make funds available to her new Trustee if that Trustee approved

that reimbursement. Tr. 182-86, 362-63 (Elizabeth Tamposi); 2153-54 (Shelton).

As Samuel Tamposi, Jr. viewed the situation, after the settlement agreement Nicholas had

“come back into the family fold,” but Elizabeth was still “estranged.” Tr. 4526.

E. Ms. Shelton Was Selected As The New Trustee.

Elizabeth Tamposi’s litigation counsel, Richard Couser, was to be the successor Trustee

of the EMT Trusts, but he became ill and was unable to serve. Tr. 1960 (Shelton); Order at 11.

Elizabeth Tamposi then sought advice from Ms. Shelton, who was a friend. Tr. 1960

(Shelton). Ms. Shelton is an attorney, but not an expert in trust law. She referred Ms. Tamposi

to Stephanie Denby, an experienced trust lawyer. Tr. 1960 (Shelton); Tr. 402 (Denby).

Ms. Tamposi and Ms. Denby initially attempted to find an institutional Trustee that would agree

to serve as the Trustee of the EMT Trusts. Tr. 404-08 (Denby); Order at 12. When their efforts

failed, Ms. Denby asked Ms. Shelton to serve as Trustee. Tr. 1972 (Shelton). Ms. Shelton

expressed reluctance because service as a trustee is not her area of professional experience, but

7

ultimately accepted the position because Ms. Denby said that “she could guide me through it . . .

she could help me do it in a way that would be appropriate.” Tr. 1973 (Shelton). Throughout

her time as Trustee, Ms. Shelton sought and obtained legal advice from Ms. Denby as to her

responsibilities as Trustee. The consultation included extensive advice with respect to the

conduct and events that are at issue in this case. Tr. 2239-41, 2340 (Shelton); Tr. 400 (Denby).

1. Ms. Shelton Faced Financial Needs In Excess Of The Funds In The

EMT Trust Accounts.

In August 2007, Ms. Shelton accepted appointment as the Trustee of the EMT Trusts.

Shortly thereafter, she concluded that Elizabeth Tamposi had unusual cash needs resulting from a

confluence of pre-existing circumstances. “[W]hen I became trustee, I was presented with a

financial crisis, and so I was trying to deal with it.” Tr. 2531 (Shelton). See also Tr. 413-14

(Denby); Tr. 1784 (Guardian Ad Litem).

(a) Elizabeth Tamposi had incurred legal fees of more than $925,000 during the five years of the prior litigation. The Investment Directors were aware that she would be seeking reimbursement from the new Trustee and were informed of the amount of those fees. App. 532 (Ex. 2.32).

(b) Mr. Prunier, the previous Trustee, had approved the purchase of a home for Elizabeth Tamposi and her children in Gilford on Lake Winnipesaukee. Tr. 1581-82 (Prunier); Tr. 1679 (GAL). Ms. Tamposi had contractual commitments for renovation work. She was behind on payments. Non-payment risked invocation of a penalty clause. Tr. 2024-25, 2066-67 (Shelton); Tr. 225-27 (Elizabeth Tamposi); App. 785 (Ex. 2.114). It was, in any event, unwise to leave the home half-finished.

(c) In June 2007, Elizabeth Tamposi’s husband, Theodore Goodlander, had initiated a divorce proceeding. As this Court is aware, Mr. Goodlander was seeking an interest in the EMT Trusts or the distributions from those trusts. See In re Goodlander and Tamposi, 161 N.H. 490 (Feb. 25, 2011); and see Order at 10. Elizabeth Tamposi’s divorce attorney was threatening to withdraw because his bills were unpaid. Tr. 2005 (Shelton); App. 791 (Ex. 2.117).

(d) Margaret Goodlander (a daughter of Elizabeth Tamposi and a beneficiary of the EMT Trusts) was a student at Yale. Her tuition payment was

8

overdue. Tr. 1996-97 (Shelton). Yale was threatening to expel her if her tuition was not paid. Tr. 2390 (Shelton); App. 696 (Ex. 2.88).8

(e) Bills for health insurance and homeowners insurance were overdue. Ms. Shelton was concerned that further delay in paying these bills would jeopardize coverage. App. 990 (Ex. 2.125).

(f) Elizabeth Tamposi owed $93,757 to Ms. Denby, the trust counsel. App. 785 (Ex. 2.114). Ms. Denby’s fees had not been paid since May 2007. Tr. 2245, 2530 (Shelton).

2. Ms. Shelton Had No Ability To Raise Cash.

The 2006 settlement removed certain real estate assets from the authority of the

Investment Directors. They remained within the EMT Trusts and thus were within the nominal

control of the Trustee. App. 381 (Ex. 1.3). However, those assets were all one-sixth (or smaller)

interests in real estate business entities. Tr. 505, 662 (Denby); Tr. 2525, 2624 (Shelton). The

business entities were, in turn, managed by Samuel, Jr. and Stephen Tamposi. The EMT Trusts’

minority interests in these businesses were entirely illiquid and, thus, unavailable to meet the

cash needs of the EMT Trusts beneficiaries. Tr. 2070, 2523, 2618-20 (Shelton).

3. The Investment Directors Refused To Provide Cash And Demanded

A Release.

Ms. Denby, and, later, Ms. Shelton, had made extensive efforts to prepare for the

transition to the new Trustee of the EMT Trusts. On June 7, 2007, Ms. Denby met in

Manchester with counsel (Mr. Barradale and Ms. Newkirk) for Gerald Prunier, who would be

resigning as Trustee of the EMT Trusts. Tr. 418-19. By letter dated June 15, 2007, Mr.

8 Margaret Goodlander testified that her grandmother (Barbara Tamposi) had been willing to pay the tuition bill, until Samuel Tamposi, Jr. told Barbara Tamposi not to pay it. Tr. 880-81. In the course of these events, Margaret Goodlander spoke to Samuel, Jr. He said that he would release funds to pay the tuition, but only if Margaret could persuade Elizabeth Tamposi to sign a release with respect to the Investment Directors’ conduct as fiduciaries. Tr. 882-83 (Margaret Goodlander). In that conversation, Samuel, Jr. said to Margaret that giving money to Margaret’s family was like “giving money to terrorists.” Tr. 891 (Margaret Goodlander). At trial, Samuel, Jr. explained that in that specific portion of this conversation he was not speaking in his role as a fiduciary. Tr. 5135.

9

Barradale informed Ms. Denby that his client would “require” a release with respect to his

conduct from the effective date of the 2006 settlement to the date of the transfer of assets to a

successor Trustee, and that he anticipated that the Investment Directors “will also require a

release.” App. 549 (Ex. 2.38).

At a family meeting, held August 7, 2007, Elizabeth Tamposi arranged for her brothers,

the Investment Directors, to meet in person with Ms. Denby and Ms. Shelton. App. 601

(Ex. 2.53). Ms. Shelton then tried to schedule such a meeting, with only limited success. See

App. 617 (Ex. 2.61 (August 29)); App. 632 (Ex. 2.68 (September 6)); App. 638 (Ex. 2.72

(September 7)).

Ms. Denby advised Ms. Shelton that, based on review of their financial reports, one of

the Tamposi business entities had $16 million cash on hand. Tr. 1982 (Shelton). On September

7, 2007, Ms. Shelton sent a letter to the Investment Directors, seeking cash from this “backlog.”

Because the tone and content of the letter have since been criticized (Order at 14-15, 35, 46), it is

quoted below in full text. Ms. Shelton’s letter said:

Dear Samuel and Stephen:

As you know, the Trusts provide for the trustee to pay to the beneficiaries such amounts from the income and principal as the trustee considers necessary for the beneficiary’s maintenance in health and reasonable comfort. I have determined due to insufficient cash flow over the past few years as well as some extraordinary expenses, Betty needs an additional distribution in the amount of $2 million to pay off these accumulated debts. This request is consistent with the spirit of the settlement agreement as she would clearly need additional distributions to pay her legal fees in connection with the family litigation.

As you are probably aware, because of her financial distress, Betty has been forced to seek loans from family members, including your mother, Barbara Tamposi. Barbara declined to assist Betty based on your representations to her that there was a “huge backlog of funds” Betty could access from the trusts.

10

Accordingly, I would ask that you please arrange to transfer funds from that “backlog” in the amount of $2 million into Betty’s 1992 subtrust within the next seven days. If you are unable or unwilling to transfer these funds, please provide me with a full explanation of your reasons for not doing so.

App. 639 (Ex. 2.73).9

The Investment Directors, Elizabeth Tamposi’s brothers, did not themselves respond to

this letter or otherwise explain why a distribution would not or could not be made. Instead, their

lawyer responded in a letter dated September 13, 2007. The letter did not address Ms. Shelton’s

request for a transfer of funds. It did not explain why funds -- in any amount -- could not be

provided. Instead, counsel advised Ms. Shelton that the Investment Directors would neither meet

with, nor distribute any funds to, Ms. Shelton (the Trustee) unless and until Ms. Shelton signed

releases on behalf of the EMT Trusts with respect to their conduct between the date of the 2006

Settlement Agreement and the effective date of the release. See App. 644 (Ex. 2.76). He said:

Unless or until the documents are finalized, the appropriate releases signed, and appropriate allocations made, I believe the proposed meeting between you, Sam, and Stephen, and the proposed distribution to Betty Tamposi, are premature.

A week later, counsel reiterated the Investment Directors’ demand for releases. App. 692

(Ex. 2.87). Given the then limited state of her knowledge of the Investment Directors’ conduct,

Ms. Shelton believed (having been advised by Ms. Denby) that it could be a breach of her own

duty to the EMT Trusts to sign such a release. Tr. 765 (Denby); Tr. 2006, 2022, 2580 (Shelton);

App. 1658 (Ex. 9.16, GAL’s Report).

Thus, shortly after she attempted to assume her responsibilities as the new Trustee,

Ms. Shelton was confronted on one side with what she perceived to be pressing cash needs and

9 The amount of this request should be viewed in the context of the Probate Court’s finding that the Investment Directors held assets whose aggregate value was $146,000,000. Order at 9. The EMT Trusts’ one-sixth interest in

11

on another side with co-fiduciaries who refused to meet with her, refused, without explanation,

to transfer any funds, communicated only through their lawyer, and manifested outright hostility

toward Elizabeth Tamposi.10 See p. 8, n. 8, supra.

F. Ms. Shelton Filed The Massachusetts Litigation Seeking To Raise Funds.

Ms. Shelton determined that she needed to take legal action in order to obtain funds to

meet the needs of her beneficiaries. See Tr. 2088. Acting on the advice of counsel (Ms. Denby,

the trust specialist, and Michael Weisman, trial counsel) (Tr. 2241), Ms. Shelton and Elizabeth

Tamposi instituted two legal proceedings.

In Massachusetts, Ms. Shelton and Elizabeth Tamposi commenced an action in which

they sought a narrow remedy. The EMT Trusts owned a one-sixth interest in an entity named

Tamposi LLC. Tamposi LLC, in turn, owned shares of the entity that owns the Boston Red Sox.

Those shares had nothing to do with the family real estate business, and were of no use to

Elizabeth Tamposi. Tr. 5261-62 (Samuel Tamposi, Jr.); App. 500 (Ex. 2.18); App. 327 (Mass.

Court Order). They were, however, a potential source of cash to meet what Ms. Shelton

considered were the needs of her beneficiaries. Tamposi LLC owned an option (a “put”) that, if

exercised, required a Red Sox affiliate to purchase some or all of the shares owned by Tamposi

LLC at a value to be determined by an appraisal. The put could only be exercised during the first

90 days of 2007 or the first 90 days of 2008. App. 455 (Ex. 2.4). One-sixth of the shares owned

by Tamposi LLC -- the shares corresponding to the EMT Trusts’ interest in Tamposi LLC --

could be sold, without selling the shares that were attributable to the other trusts. Tr. 2065-66

those assets was, therefore, more than $24,000,000. Thus, a $2,000,000 distribution would have been about 8% of the value attributable to the EMT Trusts, and less than 1.4% of total assets under the Investment Directors’ control.

10 At the same time, Mr. Barradale and Ms. Newkirk, counsel for the prior Trustee, dragged their feet regarding a transfer to Ms. Shelton of the small sum in his control. Tr. 2067, 2594 (Shelton). Compare App. 544 (Ex. 2.36) (transition meeting held on June 7, 2007) with App. 799 (Ex. 2.121) (letter dated October 16, 2007, listing assets).

12

(Shelton). In December 2006, the Investment Directors represented that they would exercise the

put in the first 90 days of 2007. App. 455 (Ex. 2.4); Order at 18. In fact, they did not. As the

last (i.e., the 2008) opportunity to utilize the put approached, the Investment Directors declined

to make any commitment to exercise the put (even on a confidential basis, and even as to the

shares attributable to the EMT Trusts). App. 502 (Ex. 2.19); App. 334 (Mass. Court Order). The

Massachusetts action was commenced shortly before the put would expire for the last time.

While the case was pending, the Investment Directors did eventually exercise the put. They later

sold Tamposi LLC’s entire interest in the Red Sox outside the put, generating cash for the EMT

Trusts. App. 334-35. As the Massachusetts Court found, Ms. Shelton had reasonable grounds

for bringing and prosecuting the action, which ended in a substantial payment to the EMT Trusts:

Plaintiffs filed this action to generate funds necessary to meet what Shelton believed were the needs of the beneficiaries of the Elizabeth Trusts. Defendants’ refusal to provide funds, whether legitimate or not, compelled Plaintiffs to bring this action.

App. 339 (emphasis added).

G. Ms. Shelton Filed This Action (1) Seeking A Declaration Of Her Authority

As Trustee And (2) Alleging Breach Of Duty By The Investment Directors.

1. The Parties And Claims.

On October 12, 2007, Ms. Shelton, as Trustee, and Elizabeth Tamposi filed this lawsuit

in Probate Court. They named Samuel Tamposi, Jr. and Stephen Tamposi as defendants. They

alleged a breach of fiduciary duty by the Investment Directors and sought “a declaration that it is

the role of Petitioner Trustee Julie Shelton to determine what amounts need to be made available

to the EMT Trusts . . . and that it is the role of the [Investment Directors] . . . to manage the

assets of the EMT Trusts so that the needs are met.” App. 73 (Amended Complaint); see also

App. 52 (Complaint ¶ 55). They requested relief, described in more detail at pp. 32-36, infra,

13

that would prevent future violations of what they alleged was the intent of the Settlor. App. 54

(Complaint); App. 73 (Amended Complaint).

Thereafter, (a) Michael Tamposi and Celina Tamposi (represented by one set of lawyers)

and (b) Gerald Prunier, the Trustee of the trusts for the benefit of Samuel, Jr., Stephen, Michael,

and Celina (represented by other lawyers) intervened on the side of the Investment Directors.

2. The Guardian Ad Litem.

The Probate Court, on its own initiative, appointed an independent Guardian Ad Litem

(“GAL”) to represent the interests of the unborn beneficiaries of the EMT Trusts. She conducted

a thorough investigation and prepared an extensive Report. App. 1646 (Ex. 9.16). In her Report,

the GAL supported the actions taken, and relief requested, by Ms. Shelton because:

• “[I]f Trustee Shelton reasonably believed that her co-fiduciaries were in breach of their duties, then Trustee Shelton would be in breach of her own fiduciary duties if she failed to take action. Further, failure to act in that instance could harm the future interests of the unborns.” App. 1664.

• “. . . a finding that the In Terrorem Clause has been violated would not be in the best interests of the unborns.” App. 1680.

• “This [current] Trust management paradigm does not work, and in its costly unwieldiness, the unborns are harmed.” App. 1685.

The GAL testified at trial and presented closing argument in support of Ms. Shelton’s actions as

Trustee and the relief that she requested. Tr. 1667, 1693, 1783-87, 1830, 1864, 5579-80.

3. The Trial.

The trial lasted 26 days. The Probate Court heard testimony by eight expert witnesses.11

It allowed testimony by three witnesses who purported to recall oral statements made by the

11 Ms. Shelton and Elizabeth Tamposi called as expert witnesses John Langbein, John Macomber and Dennis Stone. The Intervenors and Respondents called Richard Breed, Robert Wells, Charles Rounds, Jeffrey Cooper and Robert Wexler.

14

Settlor at least fourteen years earlier.12

The Court rendered its decision without the benefit of a trial transcript. On January 21,

2010, just before the end of the trial, the judge said that he had “tried to take notes” during the

trial and wanted to decide the case soon, “while I still can remember the case and the demeanor

of . . . the witnesses and all that.” Tr. 5415.

4. The August 18, 2010 Order.

Seven months later, on August 18, 2010, the Probate Court rendered its decision. The

Court did not address the declaratory relief sought by Ms. Shelton. Order at 1, 27-43. It ruled

that the Investment Directors did not breach any fiduciary duty (Order at 27-43), determined that

the filing of this action violated the in terrorem clause of the trust resulting in a forfeiture of

Elizabeth Tamposi’s interest in the EMT Trusts as of October 12, 2007, the date this action was

commenced (Order at 43-49), held Ms. Shelton personally liable to pay attorneys’ fees of the

Respondents and the voluntary Intervenors (Order at 45-49),13 and removed Ms. Shelton from

her position as Trustee (Order at 49-50).

5. Elizabeth Tamposi’s Conduct Regarding This Appeal.

Elizabeth Tamposi’s conduct in this Court has been erratic. She filed a notice of appeal

on September 17, 2010. On January 4, 2011, she filed a motion to withdraw her appeal

contingent upon various matters. On February 28, 2011, Ms. Tamposi filed a motion to reinstate

12 Testimony was given by Alan Reische, who was counsel for the Settlor (Tr. 3456), by Samuel Tamposi, Jr. (Tr. 4545, 5013), and by Celina Tamposi Griffin (Tr. 5427). See pp. 28-29, infra.

13 The amounts of fees have not yet been determined by the Probate Court.

15

her appeal. On June 21, 2011, she again filed a motion to withdraw her appeal. That motion was

granted. The reason for these maneuvers was not disclosed, and is not known to Ms. Shelton.14

6. The December 30 Contingent Ruling (Since Withdrawn).

Thomas Jalkut (the “First Successor Trustee”) replaced Ms. Shelton as Trustee of the

EMT Trusts. On November 29, 2010, he sought permission to make an immediate distribution

to Elizabeth Tamposi’s children of the entire assets of the EMT Non-Exempt Trust. His theory

was that such a distribution might save taxes. However, distribution to the children would have

violated an express trust provision, which required that assets remain in trust for a grandchild of

Samuel Tamposi, Sr. until that grandchild reached age 30. 1992 Trust Instrument, Art.

Fourth(c), Add. 3. None of Ms. Tamposi’s children had attained that age. The Investment

Directors did not oppose the distribution. On December 30, 2010, the Probate Court issued an

Order (App. 284) that permitted the requested distribution subject to certain conditions.

On May 24, 2011, Mr. Jalkut did an about face. Without explanation, he withdrew the

underlying motion, and asked the Probate Court to vacate its December 30 Order. On June 22,

2011, that Order was vacated. See Case Summary Index Nos. 502 and 507 (App. 39).

On June 13, 2011, the First Successor Trustee withdrew as Trustee. He was replaced by

James R. DiGiacomo (the “Second Successor Trustee”).

7. Matters Currently Pending In The Probate Court.

Several post-trial matters remain pending in the Probate Court. See Case Summary Index

Nos. 423, 426, 466 and 509 (App. 33, 36, 39-40). Most recently, on June 22, 2011, the Second

Successor Trustee filed a motion requesting a surcharge award of more than $3 million against

14 The friendship between Ms. Shelton and Elizabeth Tamposi has ended. Elizabeth Tamposi filed suit against Ms. Shelton and others on December 31, 2010, alleging legal malpractice, breach of fiduciary duty and unjust enrichment. Elizabeth M. Tamposi v. Stephanie Denby, et al., (D. Mass.), Case No. 1:10-cv-12283.

16

Ms. Shelton. Case Summary Index No. 509, App. 39. This motion asserts, among other things,

that Ms. Shelton should pay to the EMT Trusts (1) the entire amount of all payments made by

Ms. Shelton to, or on behalf of, Elizabeth Tamposi (regardless of whether they were in the form

of loans to Elizabeth Tamposi), (2) the entire cost of the Probate Court proceeding and the

Massachusetts Action, and (3) all payments from the trusts to defend trust assets and

distributions in the Goodlander/Tamposi divorce proceeding.

Also pending in the Probate Court (among other post-trial matters) is a petition seeking to

establish the amounts of an award of legal fees to the Investment Directors (who request

$2,165,000) and to the voluntary Intervenors (who request $776,000 and $490,000, respectively).

SUMMARY OF ARGUMENT

I. The Probate Court erroneously construed the governing trust instrument.

A. The trust instrument vests in the Trustee discretionary authority to make

distributions from the income and principal of the EMT Trusts, subject to the broad standard set

forth in the Trust. The Investment Directors are excluded from that function. The Investment

Directors have a duty to invest the trust assets in a manner that will render it possible for the

Trustee to make distributions to meet the needs of her beneficiaries. The Probate Court

erroneously permitted the Investment Directors to thwart the Trustee’s decisions. The Probate

Court further erred by relying on evidence that was extrinsic to the trust document, i.e.,

testimony that purported to describe the intentions of the Settlor.

B. The in terrorem clause of the trust does not apply to the Petitioners’

conduct. The Petitioners did not seek to set aside the trust or any of its provisions. Rather, they

sought a determination of the authority of the Trustee, and to remedy a breach by the Investment

Directors of their duties to the EMT Trusts and their beneficiaries -- both steps that are expressly

permitted under the trust instrument and the case law.

17

II. Acting on the foundation of these errors of law, the Probate Court ruled that

Ms. Shelton is liable to pay the attorneys’ fees of both the Respondents and the voluntary

Intervenors. This ruling further rested on the Probate Court’s finding that Ms. Shelton acted in

bad faith in bringing this action. The finding of bad faith cannot be sustained. In its absence,

there is no basis for the award of attorneys’ fees.

III. On the foundation of the same errors of law, the Probate Court removed

Ms. Shelton from her position as Trustee. This order was contrary to the stated wishes of all

trust beneficiaries. There is no precedent for the order of removal, and it cannot be sustained.

ARGUMENT

This case is about the relationship between the powers and duties of the Trustee and the

Investment Directors of the EMT Trusts. It is common ground that (1) both are fiduciaries with

respect to the EMT Trusts and their beneficiaries, and (2) each has a role with respect to those

trusts, from which the other is excluded. The central questions presented relate to the way in

which these co-fiduciaries were to interact with each other, and, more specifically, relate to

whether the Investment Directors were required to perform their functions in a way that would

allow the Trustee to perform her separate functions under the trust instrument.

Well-established principles of trust law (1) permit a trustee to bring an action against her

co-fiduciaries to declare their respective duties under a trust, and (2) require a trustee to redress a

breach of trust by a co-fiduciary. See, e.g., Richards v. Midkiff, 396 P.2d 49, 56 (Haw. 1964);

Rockwell v. Dow, 85 N.H. 58, 68 (1931); 4 Austin W. Scott, William F. Fratcher & Mark L.

Ascher, Scott and Ascher on Trusts § 24.4.2 (5th ed. 2006). A trustee’s decision to bring suit is

subject to judicial review solely for abuse of discretion. Richards, 396 P.2d at 62; In re Estate of

Geffen, 202 N.Y.S.2d 599, 601-03 (N.Y. Surr. Ct. 1960). The Probate Court erroneously

punished Ms. Shelton for exercising her discretion to seek judicial relief.

18

I. THE PROBATE COURT’S ACTIONS AGAINST MS. SHELTON REST ON TWO

FOUNDATIONAL ERRORS OF LAW.

A. By Rejecting Ms. Shelton’s Petition On The Merits, The Probate Court

Failed To Effectuate The Plain Language Of The Trust Instrument.

When a court construes a trust, “the intention of a settlor is paramount.” Appeal of

Lowy, 156 N.H. 57, 61 (2007). The intent of the settlor is determined by reference to “the

express terms of the trust itself. . . . [A]ny construction of trust language that would defeat the

clear and expressed intention of a settlor” should be rejected. Id. (internal quotations omitted).

New Hampshire law applies the familiar “canon of construction that all words of a will

are to be given effect if possible.” Tunis v. Dole, 97 N.H. 420, 424 (1952); see In re Estate of

Donovan, 162 N.H. 1 (Apr. 28, 2011). This canon applies equally to trusts. RSA 564-B:1-112.

“[I]t is a primary rule of construction that the settlor’s intent and purpose must be gathered from

the whole instrument, conflicting clauses being reconciled if possible.” Ingalls v. Ingalls, 54

So.2d 296, 301 (Ala. 1950). See also Tremaine v. Tremaine, 663 A.2d 387, 395-96 (Conn.

1995) (“all of the provisions of the trust instrument must be construed together”).

In this case, the terms of the governing trust instrument are very clear. The Trustee of the

EMT Trusts is to determine the needs of the beneficiaries of those trusts. She determines the

amount to be paid to or for individual beneficiaries, and the source (principal or interest) of the

payments. The trust assets are, in theory, held by the Trustee, but the Investment Directors are to

decide how these assets are invested. The Trustee is an excluded fiduciary with respect to

investment decisions. RSA 564-B:1-103(24); 564-B:7-711. The Investment Directors are

excluded fiduciaries with respect to decisions as to the needs of the trust beneficiaries, the sums

to be distributed to them, and the question whether individual distributions are to be made

entirely from principal, entirely from income, or partially from both sources.

19

In actual practice, the Investment Directors controlled the assets of the EMT Trusts. The

one-sixth (or smaller) minority interests held by the EMT Trusts in various entities and

properties were illiquid, and the real estate assets themselves were also illiquid. See p. 4, supra.

None could effectively be accessed to meet the needs of the beneficiaries of the EMT Trusts.

The Investment Directors chose not to invest or retain any portion of the assets of the EMT

Trusts in cash, marketable securities, or any other form that would allow the Trustee to distribute

principal (or reinvested income) to the beneficiaries of the EMT Trusts. The Investment

Directors thus rendered nugatory the Trustee’s power to access the principal (and much of the

income) of the Trusts in order to meet the needs of her beneficiaries. The Trustee could only

distribute the funds that the Investment Directors chose to provide to the Trustee. And, the

Investment Directors refused even to meet with Ms. Shelton unless she executed the release that

they demanded for themselves.

Against that background, Ms. Shelton requested that the Probate Court:

Enter a declaration that it is the role of Petitioner Trustee Julie Shelton to determine what amounts need to be made available to the EMT Trust so that the Trustee can fulfill her fiduciary obligations to make the appropriate distributions to the beneficiaries of the EMT Trusts to provide for their education and maintenance in health and reasonable comfort and that it is the role of the Respondents Investment Director Samuel A. Tamposi, Jr. and Stephen A. Tamposi to manage the assets of the EMT Trust so that the needs are met . . .

App. 73 (Amended Complaint). Ms. Shelton’s legal position correctly applied the plain

language of the Samuel A. Tamposi, Sr. Trust.

1. The Trust Instrument Unambiguously Vests In The Trustee The Sole

Authority To Make Distributions.

The Trustee has the sole power under the trust instrument to decide the timing and

amount of payments to a beneficiary from the trust assets. She decides whether the payment is to

20

be made from income or principal. She “may pay to or for the benefit” of any living beneficiary

“such amounts . . . as the Trustee considers necessary for their education and maintenance in

health and reasonable comfort.” See pp. 3-4, supra; 1992 Trust Instrument, Arts. Fifth(a) and

Sixth(a), Add. 3-4. “Reasonable comfort” is to be evaluated in the context of “the beneficiary’s

accustomed way of life,” which should be “not merely ‘comfortable’ in a physical sense, but

fitting to her station.” Orr v. Moses, 94 N.H. 309, 312 (1947). The Trustee has broad discretion

when making those decisions. See Munsey v. Laconia Home for the Aged, 103 N.H. 42, 45-46

(1960) (“[t]he trustee should give a broad interpretation to his discretionary powers in order that

the pleasure, comfort and support of the life beneficiary will be assured”). “A discretionary

power conferred upon the trustee to determine the benefits of a trust beneficiary is subject to

judicial control only to prevent misinterpretation or abuse of the discretion of the trustee.”

Restatement (Third) of Trusts § 50(1) (2003). As Professor John Langbein15 testified:

Under these provisions of Articles 5 and 6, the Trustee is the sole decisionmaker with regard to the questions of whether, when, and in what amounts to make distribution among the designated beneficiaries during the lifetime of Elizabeth M. Tamposi.

App. 1701 (Ex. 10.25, Expert Report).

Samuel Tamposi, Sr., the Settlor, established six separate pairs of trusts, one for each of

his children and their respective issue. Each child was to be treated equally at the outset. One-

sixth of the assets existing at the Settlor’s death were to be placed in each of the six pairs of

trusts. Distributions from those trusts was another matter. The trusts were intended to last for a

period of decades. The Settlor recognized that, over time, the needs of individual beneficiaries,

and the circumstances in which they found themselves, would vary. The employment and

15 Professor Langbein is Sterling Professor of Law and Legal History at Yale Law School. Tr. 1099. He was a member of the drafting committee that prepared the Uniform Trust Code. Tr. 1104. He is an advisor and reporter for the pertinent Restatements. Tr. 1105; App. 1699-1700 (Ex. 10.25).

21

marital situations of beneficiaries would differ, as would their access to other sources of income,

and their short run needs for revenues -- to build a house, or to defend trust assets in litigation,

for example. At any given point in time, a child, grandchild, or a beneficiary that had not been

born at the time of the Settlor’s death, might need access to trust assets for a purpose that the

Settlor did not, and could not possibly, anticipate. There was no requirement, and no intention,

that distributions to the beneficiaries from each of the six pairs of trusts be equal. Mr. Prunier

confirmed on cross-examination that, as trustee, his job is to “meet [the] needs” of the

beneficiaries, which “may be different for different beneficiaries at different times.” Tr. 1499.16

Further, the Settlor selected a trustee who was not one of his children. He decided that

one sibling should not be evaluating the needs of, or determining how much money was to be

provided to, another sibling. See Tr. 4549 (Samuel Tamposi, Jr.) (the Settlor “wanted to have

somebody that was [an] [in]dependent party as trustee rather than having family members put in

that position”). Apart from considerations relating to internal family dynamics, the Investment

Directors’ circumstances were foreseeably different from those of their siblings. They would be

employed, and paid, by the family businesses. By consequence, they would have a substantial

source of income that would not be available to their siblings, and their need to access trust

assets could well differ from that of their siblings. In addition, their natural instinct would be to

maximize the assets of the businesses, rather than to distribute those assets (thus diminishing

their own management responsibility). For all of these reasons, it was important that

decisionmaking as to distributions, including the decision to access principal in appropriate

16 Moreover, distributions from a given trust pair would not affect the assets available to beneficiaries of other trusts. If the assets of a given pair of trusts were exhausted, the beneficiaries of those trusts could no longer receive distributions, but the beneficiaries of the other trusts would be unaffected.

22

circumstances, was to be made by the Trustee and was not to be within the control of the

Investment Directors.

2. The Investment Directors Have A Duty To Manage The Investments

So That It Is Possible For The Trustee To Effect Distributions.

The Trustee of each trust was to invest trust assets as directed by the Investment

Directors. 1994 Amendment, Art. Tenth-B, Add. 15-17. Disproportionate investments in real

estate were permitted, but not required. Id., Art. Tenth-A, Add. 14. The Trust should have been

interpreted to require that the Investment Directors retain sufficient liquidity in the EMT Trusts

to allow the Trustee to perform the function assigned to her by the trust instrument -- i.e., to

distribute cash to meet the needs of her beneficiaries.

The Investment Directors are “excluded fiduciaries” with respect to distribution

decisions. See RSA 564-B:1-103(24), 564-B:12-1204. They have no authority to second-guess,

to veto, to render impossible, or to hinder, a Trustee’s exercise of the discretion granted to that

Trustee by the Settlor. RSA 564-B:12-1202 (“A trust advisor . . . is a fiduciary with respect to

each power granted to such trust advisor.” “A trust advisor . . . is an excluded fiduciary with

respect to each power granted . . . to any one or more trustees.”).17 The Probate Court correctly

noted at page 37 of its Order that: “As ‘excluded fiduciaries’ the investment directors have no

right to determine the amount or timing of distributions to the beneficiaries and no duty [and,

Appellant would add, no right] to review the trustee’s distribution decisions.” See RSA 564-

B:12-1204.18

17 The Investment Directors themselves and Trustee Prunier emphasized this precise point in 2000 when they filed a Petition for Declaratory Judgment. They said: “Under the terms of the Trust, the Trustee is granted extremely broad powers and exclusive discretionary authority with respect to the amount and timing of distributions from the Trust to and among the Beneficiaries; and the Investment Directors exercise no power, authority or discretion whatsoever in connection with such matters.” App. 305 (emphasis added).

18 The Supreme Court of Connecticut reconciled similar complementary roles in Tremaine v. Tremaine, 663 A.2d 387 (Conn. 1995), where the court construed a trust instrument in the context of a divorce proceeding. The trustee

23

Co-fiduciaries of a trust have a duty to cooperate with each other. See Restatement

(Third) of Trusts § 81(1) and cmts. a and c. “[C]o-trustees owe to each other, as well as to the

beneficiaries . . ., the duty and obligation to so conduct themselves as to foster a spirit of mutual

trust, confidence, and cooperation to the extent possible.” Ball v. Mills, 376 So.2d 1174, 1182

(Fla. App. 1979). A trustee may be removed if “lack of cooperation among cotrustees

substantially impairs the administration of the trust.” RSA 564-B:7-706(b)(2). In this case, the

trust instrument established two types of fiduciaries -- Trustee and Investment Director -- whose

roles were intended to be complementary. Each fiduciary had a duty to act in a way that would

allow the other meaningfully to carry out his or her appointed role. As Professor Langbein

explained, “[t]he duty of the Investment Directors is to invest in a manner consistent with the

Trustee’s fiduciary decisions regarding the beneficiaries’ needs.” App. 1702 (Ex. 10.25).

The Respondents and the Intervenors acknowledged, at trial, that the Investment

Directors have a duty to cooperate with the Trustee. Tr. 4740 (Samuel Tamposi, Jr.). On cross-

examination Stephen Tamposi agreed that it is “the trustee’s job to determine the needs of the

trust beneficiaries,” and that it is the “investment director’s job to try to accommodate those

needs within reason.” Tr. 5356. Mr. Prunier, who is still the Trustee of four of the pairs of

trusts, explained how those two sets of duties are easily reconciled:

Q. If your beneficiaries have a need for cash, and there is not cash available in the trusts . . . you would approach the investment directors and ask them to make cash available so that you could meet those needs, isn’t that accurate?

was given authority under the trust instrument to pay to the beneficiary “so much of the trust principal as shall, in the sole discretion of the trustee, be necessary or advisable for the ‘comfortable care, maintenance and support’” of the beneficiary. Id. at 396. An investment advisor was given authority “to direct the ‘disposal’ of the trust property.” Id. The question presented was whether the investment advisor had power “to direct the distribution of trust property.” Id. The court ruled that he did not. The plain language of the trust instrument, it ruled, reserved that power to the trustee. Id. The court further explained: “This interpretation of the trust instrument is consistent with the intent of the settlor as expressed throughout the trust instrument . . .” Id.

24

A. That’s the way I would approach it. . . Q. And your expectation is that the investment directors would

make reasonable efforts to create liquidity so that you could meet the needs of your beneficiaries?

A. I would expect that.

Tr. 1496-97 (emphasis added).

The actual conduct of the Investment Directors departed from their duty of cooperation.

They asserted the right to refuse to fund distributions that Ms. Shelton, as Trustee, determined

should be made. They declined to invest any of the assets of the EMT Trusts in a form that

would allow the Trustee to access principal to meet the needs of her beneficiaries. They

demanded information about the beneficiaries’ actual needs before they would even consider

providing funds in response to the request of the Trustee. Tr. 2234-25 (Shelton); App. 178 (Ex.

2.198). They asserted the right to determine when income would be distributed to the accounts

available to the Trustee. As Samuel Tamposi, Jr. testified, the Trustee could not “access any of

that money to pay bills,” even where the family business had cash, “until we transferred it over”

to accounts that were controlled by the Trustee. Tr. 5211 (Samuel Tamposi, Jr.).

The expert testimony proferred by the Investment Directors defended this position.

Charles Rounds of Suffolk University Law School offered the view that “the constituent trusts

get only that which the investment directors hand out.” Tr. 4232. Jeffrey Cooper of Quinnipiac

School of Law opined that “the trustee may make requests of the investment directors for

distribution of funds, but the investment directors have the reciprocal right to refuse.” Order at

29. Where, one might ask, is that right to refuse the Trustee access to income or principal to be

found in the trust instrument? Where does the trust instrument allocate to the Investment

Directors the right to determine the timing of distributions, or the amount to be distributed, to

their siblings, nieces, and nephews?

25

The terms of the trust instrument are just the opposite. The plain words of Articles Fifth

and Sixth vest in the Trustee the sole decisionmaking power with regard to distributions. See

pp. 3-4, supra; Add. 3-4. The Investment Directors must exercise their powers under the trust in

a way that allows the Trustee’s powers to be exercised. Professor Langbein testified:

[The Investment Directors] are on notice from day one after the settlement period of what their own conduct has brought about, which is a trust that is loaded with interests that don’t match well with foreseeable needs of this particular trust for liquidity for distribution for its beneficiaries.

Tr. 1155. Therefore, he explained in his Expert Report:

[T]he Investment Directors’ insistence on concentrating virtually the entire portfolio in illiquid assets was a breach of their duty to manage the portfolio in a fashion appropriate to the distribution needs of the trust.

App. 1705 (Ex. 10.25). It is an overarching principle of law that trusts exist for the benefit of

their beneficiaries. RSA 564-B:1-105(b)(3); 564-B:4-404. The EMT Trusts, of which the

Investment Directors were co-fiduciaries, existed for the benefit of the beneficiaries of the EMT

Trusts.

3. The Probate Court’s Order Allowed The Investment Directors To

Thwart The Determinations Of The Trustee.

The Probate Court disagreed with the proposition that the Investment Directors were

obligated to perform their functions in a way that would allow the Trustee to perform hers. The

Court held that, as between Article Tenth-B, establishing the powers of the Investment Directors,

and Arts. Fifth(a) and Sixth(a), establishing the powers of the Trustee, Article Tenth-B

“controls” because, the Court said, it was the “later drafted” provision. Order at 31. That was an

error of law. As noted above (see p. 18), the provisions of a trust are to be interpreted

harmoniously. In re Estate of Donovan, 162 N.H. at 4; Tunis, 97 N.H. at 424. No one provision

should be interpreted in a way that would vitiate another provision. This principle of general

26

applicability was also the Settlor’s clearly-expressed intent in this case. The trust amendment

that created the position of Investment Director stated explicitly that “[i]n all other respects, the

Grantor hereby confirms the [pre-existing] provisions” of the Trust -- including the provision

that gave the Trustee the power to decide whether, when, how much, and from what source

(principal or income) to make distributions. 1994 Amendment, Add. 18 at ¶4.19

At Pages 30-31 of its Order, the Probate Court wrote (emphasis added):

The petitioners attempt to buttress their position by placing focus on the EMT Trusts’ provisions empowering the trustee to distribute principal regardless of the existence or amount of income available. That the trust instrument grants the trustee authority to distribute principal and income is not a compelling argument for enabling the trustee to issue mandates to or superintend the investment directors. The investment directors make distributions to the trustees that include income from investment assets as well as proceeds from their sale. When cash is distributed to the sub-trusts, it may be retained or distributed to the beneficiaries, in the discretion of the trustee.

In fact, the trust instrument does not empower the Investment Directors to make decisions on

whether to make “distributions to the trustees.” Rather, all of the trust assets are owned by the

Trustees. The role of the Investment Directors is only to direct them in making suitable

investments. 1994 Amendment, Art. Tenth-B, Add. 15-17. Ms. Shelton as Trustee did not assert

a right to “superintend” the Investment Directors. She asserted the right that is expressly stated

in the trust instrument -- i.e., to determine when trust assets were to be distributed to trust

beneficiaries to meet their needs. By allowing the Investment Directors to make or withhold

“distributions to the trustees,” the Probate Court allowed the Investment Directors to determine

19 The Probate Court said that “the Petitioners strive to . . . eliminate the role of the Investment Directors as described in the SAT Sr. Trust.” Order at 46. That was simply incorrect. They sought a determination that would allow both fiduciaries to perform the roles allocated to them by the trust instrument. Also erroneous is the Probate Court’s holding that the illiquidity of the EMT Trusts’ assets was sanctioned by the power granted to the Investment Directors to “hold trust assets in real estate interests.” Order at 46. The Investment Directors surely had that power, but the power should have been exercised in a way that recognized, and allowed for the implementation of, other powers granted by the trust instrument.

27

when and what amount of cash would be available to the Trustee and then to constrain, in their

discretion, the Trustee’s exercise of the express power granted to her alone by the trust

instrument. This was a plain misreading of the trust instrument.20

The Probate Court made a further error. It said:

[The Investment Directors] have no duty to make assets available at the request or demand of the trustee above and beyond what would be necessary to provide for the beneficiaries’ education and maintenance in health and reasonable comfort.

Order at 31. This reasoning confuses the parties’ respective responsibilities. It is not for the

Investment Directors to decide what distributions are necessary to provide for the education,

health and reasonable comfort of the beneficiaries. That was the role of the Trustee. And, it was

not the burden of the Trustee to prove that the needs of her beneficiaries exceeded actual

distributions to her by the Investment Directors. She was to determine those needs. Absent

proof of an abuse of discretion -- and there was none in this case -- her determination was final.21

20 This Court quoted the same passage of the Probate Court’s Order (as quoted on p. 26 above) when this Court issued its decision In re Goodlander and Tamposi, 161 N.H. 490 (Feb. 25, 2011). This Court underlined for emphasis the Probate Court’s statement that cash from the trust accounts “may be retained or distributed to the beneficiaries, in the discretion of the trustee.” Id. at 496-97. That proposition is affirmed by all parties in this action. It is sufficient to support this Court’s holding in Goodlander, which ruled that Elizabeth Tamposi did not have a vested property right in the assets of the trust. See id. at 498-501. In addition, however, this Court stated in Goodlander that “the practice of the investment directors has been to distribute . . . funds to the sub-trust once the balance of the ‘common account’” reaches a certain level. Id. at 496. This Court added that “[a] beneficiary is thus twice removed from access to the trust assets -- first, by the investment directors’ discretion in making distributions to the sub-trusts, and again by the trustee’s discretion to distribute any sub-trust funds to the beneficiaries.” Id. This Court accurately described the actual practice of the Investment Directors. However, the added reference to the “discretion” of the Investment Directors was not necessary to the Court’s holding in the Goodlander case, and it is not supported by the record in this case.

21 Moreover, the persons who might be affected by, and who would have had standing to complain about, an improvident distribution by Ms. Shelton were the beneficiaries of the EMT Trusts, not the Investment Directors. Even if the assets of the EMT Trusts were completely depleted, the Investment Directors’ cognizable interests would be unaffected. In fact, the beneficiaries of the EMT Trusts -- the persons who would be affected by her distributions -- all supported and defended Ms. Shelton’s conduct. Elizabeth Tamposi was a co-petitioner. Her children testified that they supported Ms. Shelton’s actions. See p. 48, infra; Tr. 1078 (Christina Goodlander); Tr. 897, 908, 911 (Margaret Goodlander). The court-appointed Guardian Ad Litem testified that the distributions that had been made from the EMT Trusts were within the range of the Trust’s ascertainable standard. Tr. 1783-87. The expense of litigation, in particular, was within Ms. Shelton’s discretion. Where “resort to the courts [is] necessary to resolve [an] impasse” between fiduciaries, it is proper to spend trust assets seeking a judicial resolution. Stuart v. Cont’l Ill. Nat’l Bank & Trust Co. of Chicago, 369 N.E.2d 1262, 1279 (Ill. 1977).

28

4. The Probate Court Erroneously Relied On Testimony Purporting To

Describe The Intent Of The Settlor.

The Probate Court relied heavily on trial testimony of witnesses who said that they

recalled oral statements made by Samuel Tamposi, Sr. a decade and one-half earlier regarding

Mr. Tamposi’s intent. The Order recounted this testimony,22 and then relied on it.23 The Probate

Court’s reliance on, and the conclusions that it drew from, extrinsic evidence were further, and

very clear, error. As a matter of law, the Settlor’s intention, as stated in the express terms of the

trust instrument, is controlling:

The determination of the ultimate fact of the intent of the settlor rests with this court. To determine the settlor’s intent, we first look to the language of the trust. In searching for the proper interpretation of words used in a written instrument, we require that the words and phrases be given their common meaning. We examine the instrument as a whole, and look to extrinsic evidence of the settlor’s intent only if the language used in the trust instrument is ambiguous. [Emphasis added.]

In re Estate of Donovan, 162 N.H. at 10 (internal quotations omitted) (citing In re Declaration of

Trust by Dumaine, 146 N.H. 679, 681 (2001)).

In this case, all parties asserted, and the Probate Court found, that the language of the

trust is not ambiguous. Order at 30. Therefore, there was no occasion to hear, and no legal basis

22 See Order at 26: “The respondents argue that decoupling is contrary to Sam, Sr.’s intent as settlor. They complain that Betty has been trying to force a buy-out or severance of her interests from the rest of the family trusts for many years. They presented testimony by Attorney Alan Reische, Sam, Sr.’s trust and estate planning attorney, who stated that he had personally met with Betty and spoken with her on the phone in 1994 concerning her father’s determination that family members be treated equally and that the family businesses continue after his death. Exhibit 11.97. Sally [Celina Tamposi] testified that there were two meetings -- one in 1994 and one in 1995 -- at which Sam, Sr. specifically informed all his children about his trusts and his intention that Sam, Jr. and Steve be in charge of the Tamposi Companies. Sally expressly recalled that Sam, Sr. told the six siblings that this was a gift and they could take it or walk away. He informed the family that he had provisions in the trust to enforce this. Sally further testified that Betty was adamant in her objection to Sam, Jr. and Steve having charge of the family businesses.”

23 See Order at 47: “It was clearly the intent of Sam, Sr. in devising his trust strategy, that the Tamposi family business would continue; that the trust assets would be managed and invested together; that his children would be treated equally; and that family bonds would be cemented as a result. In this litigation, the petitioners aspire to defeat these purposes by disengaging the interests of Betty and her issue from the train, taking it down an independent track where they will be free to choose their own destination and route for getting there.”

29

for relying upon, testimony from witnesses based upon their memory of undocumented oral

statements made sixteen years prior to the trial of this case.

Based upon that testimony, the Probate Court found repeatedly that the Settlor intended

that his real estate empire remain intact. Order at 45, 47. The trust instrument contains no such

statement. It allocates investment responsibility to the Investment Directors, but says nothing

about maintaining the family business. Nevertheless, the court below elevated the Settlor’s

alleged desire to maintain the family business -- an objective that is not stated in the trust

instrument -- over the power that is expressly allocated to the Trustee, to make distributions to

meet the needs of individual beneficiaries. In any event, as a matter of law, the maintenance of

the family business could not be the overriding purpose of a trust. “A trust and its terms must be

for the benefit of its beneficiaries.” RSA 564-B:4-404. Accord Restatement (Third) of Trusts

§ 27(2); see also App. 1699 at 1702-03 (Ex. 10.25, Report of Prof. Langbein).

Also based on oral testimony of recalled conversations, the Probate Court found that the

Settlor’s intent was that “his children be treated equally” (Order at 45); but although the trust

instrument does contemplate an equal initial distribution of assets to the individual trusts, it also

contemplates the probability of differing -- i.e., non-equal -- distributions from those trusts

thereafter. See pp. 20-22, supra. And, again based on oral testimony, the Court ruled that the

Settlor intended trust assets to be “available for multiple generations of his issue” when in fact

the trust instrument gives to his children unrestricted powers of appointment over all assets in the

larger non-exempt trusts by will. 1992 Trust Instrument, Article Sixth, Add. 4.

In sum, Ms. Shelton’s position on the merits was correct. The Probate Court erred in

rejecting her construction of the trust and her related prayer for relief.

30

B. The Probate Court Erroneously Applied The In Terrorem Clause Of The

Trust.

Part III(B) of the Probate Court’s Order (pp. 43-49) is addressed to the in terrorem clause

contained in Article Fourteenth of the trust instrument. In the course of addressing this

provision, the Probate Court declared that because Ms. Shelton and Elizabeth Tamposi

prosecuted this case, Elizabeth Tamposi forfeited her interest in the EMT Trusts and Ms. Shelton

and Elizabeth Tamposi must pay the attorneys’ fees of the Respondents. See Order at 49.

Immediately thereafter, the Probate Court ruled that Ms. Shelton was to be removed from her

position as Trustee. See Order at 49-51. The Probate Court’s analysis of the in terrorem clause,

which is foundational to its actions against Ms. Shelton, was erroneous as a matter of law.

Article Fourteenth of the trust states:

If any person shall at any time commence or join in the prosecution of any proceedings in any court or tribunal . . . to have . . . this trust . . . set aside or declared invalid or to contest any part . . . of the provisions included in . . . this trust . . . then and in that event such person shall thereupon forfeit any and all right, title and interest in . . . this trust, and this trust shall be distributed in the same manner as would have occurred had such person died prior to the date of execution of this trust. Nothing contained in this Article, however, shall preclude any beneficiary from enforcing, by litigation or otherwise, . . . the trustee’s duties under this . . . trust.

1992 Trust Instrument, Add. 12 (emphasis added).

On their face, neither the initial Complaint nor the Amended Complaint requested that the

trust (or any provision of the trust) be “set aside or declared invalid,” or “contest[ed]” the trust or

any of its provisions. Ms. Shelton, in her capacity as Trustee, sought a determination of the

rights and responsibilities of the co-fiduciaries of the EMT Trusts. See pp. 12-13, supra; App.

73 (Amended Complaint); App. 54 (Complaint). She asserted that the Investment Directors had

breached their fiduciary duties by performing their investment role in a way that prevented her

31

from performing her role as Trustee. Such a suit should not have triggered the in terrorem

clause.

1. There Is No Authority For The Probate Court’s Ruling.

The claims made by Ms. Shelton as Trustee did not, and inherently could not, seek to “set

aside” the EMT Trusts. Ms. Shelton’s office derived from the trust instrument. She sought a

ruling that would allow her to perform the duties prescribed by the trust instrument. The Probate

Court did not cite any precedent for enforcing an in terrorem clause where a beneficiary joined a

trustee in seeking to force co-fiduciaries to acknowledge the trustee’s authority. To the contrary,

courts have ruled that lawsuits of this nature do not violate an in terrorem clause.

In terrorem clauses must be “construed narrowly, consistent with their terms.”

Restatement (Third) of Property (Wills and Other Donative Transfers) § 8.5 cmt. d (2003). “A

suit to construe, reform, or modify the language of a donative document is not a contest of the

document and hence is not a violation of a no-contest clause. . .” Id.; see also Sinclair v.

Sinclair, 670 S.E.2d 59, 62 (Ga. 2008) (“[t]he search for the true meaning of a will is not an

attack upon it”); In re Estate of Stralem, 695 N.Y.S.2d 274 (Sur. Ct. Nassau Cty. 1999) (action to

construe a trust did not trigger the in terrorem clause); Griffin v. Sturges, 40 A.2d 758, 760

(Conn. 1944) (“an assertion by any beneficiary of the construction which he believes to be the

correct one is not a contest . . . because he is merely seeking to give effect to the real intent of the

testator”); Di Portanova v. Monroe, 229 S.W.3d 324 (Tex. App. 2006) (in terrorem clause did

not apply where guardian of a beneficiary sued for a declaration that the trustees were authorized

to make a gift). The request for a determination of the relative powers of the Trustee and the

Investment Directors did not violate the in terrorem clause. It was, instead, an expressly

permitted effort to “enforc[e]” the Investment Directors’ “duties under” the trust instrument. See

Add. 12.

32

Even if Ms. Shelton’s interpretation of the trust instrument (see pp. 19-25, supra) does

not ultimately prevail in this Court, it cannot be dismissed as an unreasonable interpretation of

the instrument. For this further reason, there is no basis for applying the in terrorem clause in

this case. See Restatement (Third) of Property (Wills and Other Donative Transfers) § 8.5 (an

in terrorem clause does not apply where “probable cause existed for instituting the proceeding”);

see also Redman-Tafoya v. Armijo, 126 P.3d 1200 (N.M. Ct. App. 2005) (endorsing this

Restatement position); Rodriguez v. Gavette, 9 P.3d 1062 (Ariz. 2000) (quoting a similar

provision of the Second Restatement and applying an Arizona statute to the same effect).24

Similarly, a claim of breach of fiduciary duty does not trigger an in terrorem clause. See

Langer v. Pender, 764 N.W.2d 159, 168-69 (N.D. 2009); Lesikar v. Moon, 237 S.W.3d 361, 370

(Tex. App. 2007) (“[t]he right to challenge a fiduciary’s actions is inherent in the

fiduciary/beneficiary relationship”); Betts v. City Nat’l Bank, 67 Cal. Rptr. 3d 152 (Cal. Ct. App.

2007) (petition alleging that trustee breached fiduciary duty did not trigger trust’s in terrorem

clause); Snook v. Sessoms, 350 S.E.2d 237, 238 (Ga. 1986) (“[a] beneficiary assuredly is

empowered to enforce the provisions of a trust, no matter the terms of any in terrorem clause”).

For the same reason, the Complaint and Amended Complaint were permitted to include a

prayer requesting that the Court remove Stephen and Samuel Tamposi, Jr. as Investment

Directors. App. 54 (Complaint); App. 74 (Amended Complaint). Such a prayer was well within

24 New Hampshire did not enact a statute authorizing an in terrorem clause in a trust until Section 10-1014 was added to RSA 564-B in 2011. See p. 35, infra. This Court’s decision in 1952 in Burtman v. Butman, 97 N.H. 254 addressed an in terrorem clause in the context of a will contest, where an heir sought to increase his inheritance by setting aside a provision of the will that directed money to charity. Burtman does not apply to a trust. Moreover, Burtman does not supersede the Restatement provision cited above. Burtman relied heavily on the First edition of the Restatement. The Third Restatement, which is currently in place, expressly provides that an in terrorem clause should not be enforced where “probable cause existed for instituting the proceeding.” Restatement (Third) of Property (Wills and Other Donative Transfers) § 8.5. This probable cause exception was added by the Second Restatement, which came into effect in 1983. The First Restatement, which was in place at the time of the Burtman decision, did not contain a probable cause exception. See Restatement (Second) of Property (Donative Transfers) § 9.1, Reporter’s note 1 (1983).

33

the scope of remedies permitted in an action for breach of fiduciary duty. McLendon v.

McLendon, 862 S.W.2d 662, 678-79 (Tex. App. 1993) (in terrorem clause did not “prohibit a

beneficiary from instituting legal action against a co-executor for breach of fiduciary duties” and

seeking removal of co-executor); Conte v. Conte, 56 S.W.3d 830, 833 (Tex. App. 2001) (in

terrorem clause did not address “[a]n action to remove a trustee”); Sinclair, 670 S.E.2d at 62.25

Indeed, the Investment Directors are precluded from asserting otherwise. They sought an order

removing Ms. Shelton as Trustee of the EMT Trusts. Order at 1, 49; Case Summary Index No.

12 (App. 3); Tr. 5661. They are poorly situated to argue that Ms. Shelton’s request for the

removal of a fiduciary triggered the in terrorem clause.

Ms. Shelton and Elizabeth Tamposi also sought to separate the assets of the EMT Trusts

so that those assets could be managed (a) separately from those of the trusts that benefited the

other Tamposi siblings and (b) in a way that would meet the particular needs of the beneficiaries

of the EMT Trusts. Ms. Shelton’s Amended Complaint sought an order for:

restructuring of the assets owned by the EMT Trusts . . . so that the assets of the EMT Trusts can be decoupled from the assets of the other subtrusts . . . and from the control of the Respondents, and . . . shall continue to be administered pursuant to the terms of the 1992 Trust Instrument. [Emphasis added.]

App. 73-74 (Amended Complaint). This request did not challenge a provision in the trust

instrument. It expressly provided that the EMT Trusts would continue to be administered under

the terms of the trust instrument. It was designed to implement the Settlor’s manifested intention

that the needs of the beneficiaries be considered on an individual basis. Nothing in the trust

25 In addition, the initial Complaint asked the Court to “[o]rder the liquidation of the Tamposi Companies so that the assets can effectively be managed for the benefit of Elizabeth and her children as intended by her father when he created the EMT Trusts.” App. 54 (Complaint). This request was not a request that the EMT Trusts be “set aside or declared invalid,” and it could not provide a basis for invoking the in terrorem clause. In any event, the Petitioners amended their Complaint, and the Amended Complaint did not include that request, or a similar request, for relief.

34

instrument states that each pair of trusts must own a one-sixth undivided interest in every asset

controlled by the Investment Directors.26

The Probate Court erroneously ruled that “[t]he remedies sought by the petitioners,

including . . . the ‘decoupling’ . . . are yet other manifestation [sic] of their wish to challenge

provisions of the SAT, Sr. Trust.” Order at 47. It relied on testimony by the Respondents, who

maintained that a separation of assets would require them to harm the Trusts for the benefit of

the other five siblings.27 This assertion was entirely pretextual. During the life of the Settlor, a

single trust held title to the various properties and LLC interests. After the Settlor died, six pairs

of trusts were created, but as Trustee Prunier’s lawyer testified, and as the Probate Court found

(Order at 4), title to all assets remained in the name of the single trust that existed during the

Settlor’s lifetime. Tr. 4471, 4473 (Barradale). Samuel Tamposi, Jr. explained that this was done

“for ease of administration” and to avoid expense. Tr. 5277-79. As the Court found, each of the

six pairs of trusts merely held equitable title to one-sixth of this group of assets.

The Investment Directors (or the Court) could have identified properties that had one-

sixth of the total trust value and allocated those properties to the EMT Trusts. Then, as

fiduciaries of the EMT Trusts, they could have managed the assets of the EMT Trusts in the

26 The 1992 Trust permits (but does not require) the Trustee (not the Investment Directors) to “combine any of the investments or property of said trusts in a common fund.” 1992 Trust Instrument, Art. Tenth, Add. 9. A comparable power was not granted to the Investment Directors in the trust amendment that enumerates their powers. 1994 Amendment, Art. Tenth-B, Add. 15-17.

27 Samuel Tamposi, Jr. testified: “I don’t believe a decoupling is – it’s not appropriate. And what it does is it actually fractures the family’s interest in the collective whole. It’s deleterious to the other five trusts.” Tr. 5142. Asked whether the Investment Directors could sell something to provide money as requested by Ms. Shelton to pay Elizabeth Tamposi’s bills, Samuel Tamposi, Jr. testified: “there’s nothing on this sheet [listing trust holdings] where we could sell an asset of my sister and raise $2 million, that she has 100 percent interest in. It would impact everything else.” Tr. 4625.

35

interests of the beneficiaries of the EMT Trusts.28 Far from challenging a provision of the trust

instrument, this relief if granted would have eliminated the conflict of interest under which the

Investment Directors operated. If it were correct, as the Investment Directors asserted, that the

interests of the beneficiaries of the six trust pairs were adverse to one another -- some wanted

minority interests only, and others needed assets that could be accessed if needed -- the way to

eliminate that conflict was to separate the assets of relevant trusts so that each group of assets

could be managed by the Investment Directors in the interests of the beneficiaries of the trust that

held those assets. Moreover, separation could not have harmed the trusts for the benefit of

family members other than the Elizabeth Tamposi family. If the beneficiaries of the five other

trust pairs benefitted from holding minority interests in a group of assets, they would get the

same benefit from owning a one-fifth share of each asset held in trust as they obtained from

owning a one-sixth share of each such asset.

Finally, there is no precedent in this Court for applying an in terrorem clause to a trust at

all. The statutory authority for recognizing a “no-contest” clause in a trust was created by RSA

564-B:10-1014, enacted on July 13, 2011.29 This statute does not apply to then-pending

proceedings, like this case. See RSA 564-B:10-1014(e) (“This section shall apply to all judicial

proceedings concerning the enforcement or interpretation of a no-contest provision commenced

on or after its effective date.”) (emphasis added). States have made differing choices as to

whether an in terrorem clause in a trust may be enforced. For example, California enacted a

statute providing that such a clause may be enforced. Cal. Prob. Code § 21311. By contrast,

28 Alternatively, the Investment Directors could have sold one property or borrowed money using a property as collateral, distributed the resulting cash to the EMT Trusts, and then reduced the EMT Trusts’ deemed holdings of the other properties accordingly.

29 The statute and the Restatement refer to such a clause as a “no-contest clause.” See Restatement (Third) of Property (Wills and Other Donative Transfers) § 8.5. The Probate Court used the term “in terrorem clause.” This Brief uses the same term as the Probate Court in order to avoid confusion.

36

Florida law provides that such a clause may not be enforced. Fla. Stat. § 736.1108. The New

Hampshire legislature had not permitted the enforcement of in terrorem clauses at the time that

the pleadings in this case were filed.

2. The Probate Court’s Ruling Was Inconsistent With Previous Rulings.

On October 3, 2000, Judge Cloutier addressed earlier litigation involving these parties

and trusts. In January 2000, the Investment Directors and Mr. Prunier had filed a petition for

declaratory judgment, which sought a ruling that the Trustee (who was then Mr. Prunier) was

required to act in accordance with the written directions of the Investment Directors to carry out

a reorganization. App. 296; Order at 7. In March 2000, Elizabeth Tamposi and Nicholas

Tamposi responded by filing their own separate Petition for Declaratory Relief, which sought a

declaration that they could participate in the January 2000 lawsuit -- and could seek “[t]he

removal and replacement of the . . . Investment Directors” -- without triggering the in terrorem

clause. App. 319. Ruling on this request, Judge Cloutier held:

The Court grants the Motion for Declaratory Judgment and rules that the in terrorem clause does not take effect if the plaintiffs [i.e., Elizabeth and Nicholas Tamposi] do not challenge or attempt to challenge the validity of the trust or the authenticity of the documents or signatures. [Emphasis added.]

App. 324. This interpretation of the same in terrorem clause that is at issue here established the

parameters within which the parties were operating. The Petitioners below did not challenge

“the validity of the trust or the authenticity of the documents or signatures.” And, their request

that the Investment Directors be removed or replaced did not trigger the in terrorem clause as

this in terrorem clause had already been interpreted by the Probate Court.30

30 The Order below correctly noted that “[i]n the prior litigation, Betty sought removal of her brothers as investment directors, request for relief she presently repeats.” Order at 45. However, the Order failed to note that in 2000 this request for relief was expressly held not to trigger the in terrorem clause.

37

In 2006, members of the Tamposi family reached a settlement of another dispute. See

pp. 5-6, supra. One of the terms of the settlement provided that the Investment Directors would

no longer act as Investment Directors with respect to the majority of the assets in the EMT (and

Nicholas Tamposi) Trusts. (The Trustee still could not raise cash from those assets. See p. 8,

supra.) Although this transaction “set aside” the provisions of the trust instrument as to the

relevant assets, this transaction was supported by the Investment Directors and approved by the

Probate Court (Judge Cloutier). App. 392 (Ex. 1.5); see Order at 9. It was not deemed a

violation of the in terrorem clause.

On August 19, 2009, during the pretrial proceedings in this case, the Probate Court

(Judge Cassavechia) addressed a motion filed by Ms. Shelton and Elizabeth Tamposi that sought

discovery of the files of Alan Reische, the lawyer responsible for drafting Samuel Tamposi, Sr.’s

trust instruments. They requested that discovery in order to develop evidence regarding Mr.

Tamposi’s intentions. The Court denied that motion on the ground that Ms. Shelton and

Tamposi were not seeking to have the EMT Trusts declared invalid. It said:

Petitioners are not seeking to contest Samuel A. Tamposi, Sr.’s will or the Samuel A. Tamposi, Sr. Trusts. Petitioners’ claims in the amended complaint concern whether the Investment Directors . . . have breached their fiduciary duties.

App. 216-17. Having denied otherwise relevant discovery that might have assisted the

Petitioners at trial -- on the ground that the relief requested by the Petitioners was not an attempt

to contest the trust instruments -- the Court ruled, after trial, that the same request for relief was

an attempt to contest the trust instruments. The two rulings are irreconcilable.

Finally, the Probate Court’s August 18 Order is wholly inconsistent with the Probate

Court’s contingent December 30 Order. In December 2010, Ms. Shelton’s successor as Trustee

sought to make a “premature outright distribution” to Elizabeth Tamposi’s children of every

38

single asset in the EMT Non-Exempt Trust (which is much the larger of the two trusts). App.

285. The trust instrument expressly states that property must remain in trust for the benefit of

issue of children of Samuel Tamposi, Sr. until the relevant beneficiary reaches age 30. 1992

Trust Instrument, Art. Seventh, Add. 5. None of Elizabeth Tamposi’s children had attained the

age of 30. Tr. 1957. The Successor Trustee did not assert that the proposed complete

distribution of trust assets was intended to provide for the education, healthcare, or comfort of

the beneficiaries and did not deny that the proposed transaction was prohibited by an express

provision of the trust. Instead, he argued the outright termination of the EMT Non-Exempt Trust

might avoid a tax liability.31 Far from deeming this a request to “set aside” the entire trust

instrument, the Probate Court conditionally approved it. See App. 290-92; see p. 15, supra.

Inexplicably, a much less extreme remedy, when requested by Ms. Shelton and Elizabeth

Tamposi, was declared by the same judge, interpreting the same instrument, to be a violation of

the same in terrorem clause.

In sum, the Probate Court’s application of the in terrorem clause is contrary to well-

settled principles of law and to other rulings by the same Court. It cannot be sustained.

II. THE PROBATE COURT ABUSED ITS DISCRETION WHEN IT RULED THAT

MS. SHELTON IS PERSONALLY LIABLE TO PAY ATTORNEYS’ FEES.

In the course of addressing the in terrorem clause, the Probate Court stated that “in

bringing and prosecuting this litigation the petitioners have acted in bad faith.” Order at 45. It

ordered Ms. Shelton to pay attorneys’ fees of the Respondents and the voluntary Intervenors.

31 In filing his motion the Successor Trustee noted that the generation-skipping transfer tax was then zero percent for calendar year 2010, but might rise to 35% for calendar year 2011. App. 198-200. He sought permission to distribute all of the assets of the Non-Exempt Trust, effective in the year 2010, so that any tax on the distribution would be at a rate of zero percent.

39

Order at 49. That ruling was further error. There was no basis for the Probate Court’s finding of

bad faith. In its absence, the Probate Court’s Order cannot be sustained.

A. The Probate Court Had No Basis For Its Finding That Ms. Shelton

Conducted This Litigation In Bad Faith.

RSA 564-B:10-1004 provides that “[i]n a judicial proceeding involving the

administration of a trust,” the court may award attorneys’ fees “as justice and equity may

require.” See Order at 41. “Justice and equity” do not “require” holding Ms. Shelton personally

liable to pay attorneys’ fees.

“An award of attorney’s fees is the exception rather than the rule.” Flanagan v.

Prudhomme, 138 N.H. 561, 576 (1994). Accord Kessler v. Gleich, 161 N.H. 104, 113-14 (2010)

(reversing award of fees where a limited partnership agreement did not clearly state a right to

recover fees in an action between partners).

When, as here, a court is exercising permissive authority to award fees against a party,

the court must first find that the party acted in bad faith. Woodstock Soapstone Co., Inc. v.

Carleton, 133 N.H. 809, 818 (1991). “Bad faith” exists only where a party’s position is “without

reasonable basis in the facts or claim of law.” Id.; Town of Swanzey v. Liebeler, 140 N.H. 760,

764 (1996) (an award of fees is justified where a litigant’s “position is patently unreasonable”).

In Kukene v. Genualdo, 145 N.H. 1, 3 (2000) this Court explained:

A party pursues a claim in bad faith if the claim is frivolous. A frivolous claim lacks “any reasonable basis in the facts provable by evidence, or any reasonable claim in the law as it is, or as it might arguably be held to be.”

Id. (quoting King v. Mosher, 137 N.H. 453, 457 (1993)). “A plaintiff’s motive in bringing an

action does not determine whether an action is frivolous.” Id. at 6. Rather, “[t]he question is

whether litigation was ‘unnecessary’ because the claim was meritless.” Id. Pre-litigation

conduct is similarly irrelevant. See Flanagan, 138 N.H. at 576 (“[a]lthough the appellants’

40

conduct toward their neighbors may have been vexatious and egregious, we look only to their

conduct in the litigation and find nothing to support the conclusion that their defense was

frivolous”).

The Order neither references this standard, nor acknowledges any of these cases. The

Court below did not find, and could not properly have found, that the Petitioners’ contentions

were “frivolous.” Instead, it repeatedly, and incorrectly, focused on what it deemed to be the

Petitioners’ motives for bringing the action. For example, it found that “[t]he actions of the

petitioners in bringing this matter to court were motivated by a desire to force a buy-out of

Betty’s share of the trust and non-trust assets” (Order at 46); and that “the petitioners aspire to

. . . disengag[e] the interests of Betty and her issue from the train, taking it down an independent

track . . .” (Order at 47). Because the Court below failed to apply the correct legal standard, its

award of attorneys’ fees should be reversed.

1. Ms. Shelton’s Legal Claims, Which Were Supported By A Leading

Trust Law Authority And By The GAL, Had Substantial Merit.

Ms. Shelton’s claims were far from being “meritless” or “frivolous.” In addition to the

arguments set forth above, there were contemporaneous, independent indicia of the

reasonableness of her position.

Yale Law School Professor John Langbein is one of the leading authorities on fiduciary

law in the United States. He stated: “In my judgment, Trustee Shelton was not only authorized

to bring these actions, she was obliged to do so as a matter of her fiduciary duty to the Trusts’

beneficiaries.” App. 1708 (Ex. 10.25, Expert Report). See p. 25, supra.

The highly regarded and experienced Guardian Ad Litem testified at trial that:

I still cannot envision how this trust can be used if the assets are so intertwined that the trustee does not have the ability to disburse portions of principal as she determined are necessary.

41

Tr. 1771.

The Massachusetts Court, addressing the concurrent Red Sox litigation, held that:

Plaintiffs filed this action to generate funds necessary to meet what Shelton believed were the needs of the beneficiaries of the Elizabeth Trusts. Defendants’ refusal to provide funds, whether legitimate or not, compelled Plaintiffs to bring this action.

App. 339 (Massachusetts Superior Court Order).

2. Ms. Shelton Brought Suit After Obtaining The Advice Of Expert

Counsel.

When Ms. Shelton accepted her appointment as Trustee, she faced urgent bills for a home

renovation project that had been approved by prior trustee Prunier, a recently instituted divorce

proceeding, college tuition, insurance, and the fees of trust counsel. See pp. 7-8, supra.

Ms. Shelton also addressed legal fees of more than $925,000 incurred in the prior litigation. The

parties to the prior litigation -- the Respondents and Intervenors here -- agreed that these legal

fees could properly be requested. Ms. Shelton determined that they should be reimbursed, but

the Investment Directors declined to distribute assets that would allow that reimbursement.32

Ms. Shelton testified that she instituted this case because she believed that she needed

cash to meet the financial needs of the beneficiaries of the EMT Trusts. Tr. 2088, 2280, 2619.

The Investment Directors refused even to meet with her, much less transfer any assets to her,

until they were first given releases with respect to their conduct subsequent to the execution of

the parties’ 2006 Settlement Agreement. Tr. 1992, 2269, 2274, 2573, 2580 (Shelton). In these

circumstances, a decision to commence litigation was well within Ms. Shelton’s discretion as

Trustee. See pp. 17-18, supra.

32 The Probate Court observed that: “Had Trustee Shelton concentrated on taking possession of the assets, she would have had sufficient funds to pay [trust beneficiary] Maggie [Tamposi]’s tuition.” Order at 46. This assertion misses the point. The total amount of liquid assets transferred to Ms. Shelton from her predecessor ($215,265) was far less than her beneficiaries’ preexisting needs. See App. 984 (Ex. 2.123).

42

However, Ms. Shelton did not act on her own. She was not an expert in trust law. She

did what a diligent trustee should do. She consulted an experienced trust attorney, Stephanie

Denby. The court below expressly found that Ms. Shelton relied on advice provided by Ms.

Denby as to how to proceed in her role as Trustee. Order at 12. See Tr. 2239-41 (Shelton); Tr.

400-01 (Denby). Trust counsel (Ms. Denby) and litigation counsel (Michael Weisman) actually

drafted the Complaint and Amended Complaint in this case, and thus, framed the prayers for

relief in those pleadings that were later alleged to violate the in terrorem clause. Tr. 2364-65

(Shelton); Tr. 660, 681 (Denby). RSA 564-B:8-816(a)(27) states that a trustee may “employ

persons, including attorneys . . . to advise or assist the trustee in the performance of the trustee’s

administrative duties and to act without independent investigation upon their recommendations.”

“To seek and follow the advice of competent counsel is certainly indicatory of prudence in the

exercise of discretion” where a trustee decides whether to initiate and how to prosecute litigation.

Richards, 396 P.2d at 54-55 (citations omitted); accord C. B. & T. Co. v. Hefner, 651 P.2d 1029

(N.M. Ct. App. 1982).

In sum, (a) the objective merits of the positions taken by Ms. Shelton, as Trustee, (b) the

fact that her positions were supported by a nationally-recognized expert in trust law and the

neutral, court-appointed Guardian Ad Litem, and (c) the further fact that she acted on the advice

of experienced trust counsel, individually and together compel the conclusion that it was an error

to require Ms. Shelton to pay the Respondents’ and voluntary Intervenors’ legal fees.

3. The Probate Court’s Criticisms Of Ms. Shelton Were Unfounded.

The Probate Court’s criticisms of Ms. Shelton’s conduct do not provide a basis for

finding that she acted in bad faith in bringing this action.

The Probate Court criticized Ms. Shelton’s September 7, 2011, letter in which she

requested that the Investment Directors provide $2,000,000 to her or explain why it was not

43

feasible in the then circumstances to free up that amount. Order at 14-15, 36, 46. The letter was

courteous, professional in tone and consistent with (indeed, well within) Ms. Shelton’s powers as

Trustee. It is quoted in full at pp. 9-10, supra.

The Probate Court found that “[t]he respondents’ requests for a release [prior to meeting

with Ms. Shelton or considering her request for funds] . . . were precipitated by Shelton’s

demand for trust assets without so much as waiting for [a] meeting. . . ” Order at 36.33 This

finding was both incorrect as a matter of law and unsupportable as a matter of fact. As a matter

of law, a fiduciary must subordinate his or her personal interest to that of the trust and the

beneficiaries the fiduciary serves. Bd. of Trs. of the N.H. Judicial Ret. Plan v. Sec’y of State,

161 N.H. 49, 57 (2010); In re Baylis, 313 F.3d 9, 20-21 (1st Cir. 2002). It follows that the

Investment Directors could not properly demand a release from the trust as a condition of

performing their duties as fiduciaries of the trust. Tr. 1120 (Professor Langbein); Tr. 5579

(GAL). As a matter of fact, in June 2007, before Ms. Shelton was even selected as Trustee and

long before she requested access to any of trust assets, the prior Trustee’s counsel, Mr.

Barradale, wrote to Ms. Denby stating that the Investment Directors would “require” releases.

App. 549 at 550 (Ex. 2.38); see pp. 8-9, supra. The Investment Directors’ plan in June 2007 to

“require” a release could not have been caused by a letter that was written in September 2007.

The Probate Court found that Ms. Shelton deliberately sent her September 7, 2007, letter

requesting $2,000,000 at a time when she was aware the Investment Directors would not be able

to respond in a timely fashion. Order at 14-15. This finding is remarkable. Ms. Shelton

addressed her letter to both Samuel Tamposi, Jr. and Stephen Tamposi. Samuel, Jr. was going

on vacation; Stephen was not. The fact that one would be on vacation did not suggest that

33 On page 36, the Probate Court criticized Ms. Shelton for moving too quickly in seeking the transfer of assets; while on page 46, the Probate Court criticized Ms. Shelton for moving too slowly in seeking the transfer of assets.

44

neither would receive or could respond to the letter; nor could it plausibly suggest that Stephen

Tamposi (who would not be on vacation) was unable to communicate with Samuel Tamposi, Jr.

(who was in Scotland) -- or that Ms. Shelton would have believed that such communication

would not occur. In fact, there was communication. Attorney Robert Stein, representing both

Investment Directors, responded to Ms. Shelton’s September 7 letter on September 13, less than

one week later. App. 644 (Ex. 2.76). Thus, the Probate Court’s finding that the timing of the

letter somehow reflects an improper motive is unsupportable. In any event, as noted above,

prelitigation conduct is legally irrelevant to the question whether Ms. Shelton had a good faith

basis for pursuing this action. See Flanagan, 138 N.H. at 576.

The Probate Court further noted that Ms. Shelton could have filed a petition for

instructions instead of filing the Complaint. Order at 48. In selecting the form of her pleading,

Ms. Shelton properly relied on the advice of her specialist trust counsel, Ms. Denby, who drafted

the Complaint along with trial counsel. Tr. 660 (Denby); Tr. 2364-65 (Shelton). That choice

was outside of Ms. Shelton’s experience and squarely within the scope of Ms. Denby’s expertise.

It is precisely the type of subject matter as to which Ms. Shelton, as a prudent trustee, could

properly rely on Ms. Denby’s expert advice. See RSA 564-B:8-816(a)(27). In addition, a

litigant’s “strategic decisions,” are not, by themselves, a sufficient basis to award attorneys’ fees.

Nash Family Inv. Props. v. Town of Hudson, 139 N.H. 595, 605 (1995).

The Probate Court criticized Ms. Shelton for “collud[ing]” with Elizabeth Tamposi.

Order at 50. It is, of course, entirely legitimate for a trustee to consult with a beneficiary in order

to determine the beneficiary’s needs and to discuss available options. See Restatement (Third)

of Trusts § 79(1); see also id. cmt. d (“a trustee will often find it desirable, and sometimes

important or even necessary to consult with beneficiaries”). Moreover, the question ultimately is

45

whether there was a reasonable basis for the positions that Ms. Shelton took in this litigation, not

whether she did or did not join with Elizabeth Tamposi in bringing this lawsuit.

The Probate Court disbelieved Elizabeth Tamposi’s testimony, Order at 27, criticized her

conduct and found that she had made false statements (id. at 24, 27, 45). However, there was no

evidence and no contention, even by the Investment Directors, that Ms. Shelton was aware of the

facts to which the Court referred at any time prior to the trial of this case. To the contrary, the

Court inferred that Elizabeth Tamposi concealed from Ms. Shelton facts relating to past

distributions from the EMT Trusts. Id. at 26. The Court’s criticisms of Elizabeth Tamposi,

whatever their merit, do not provide grounds for an award of fees against Ms. Shelton.

The Probate Court criticized Elizabeth Tamposi for buying and renovating an expensive

house,34 Order at 9-10, 35, but that criticism is not relevant to Ms. Shelton. The previous

Trustee, Intervenor Prunier, who now criticizes Ms. Shelton, approved the initial $1.4 million

loan “for Betty’s Gilford project.” Tr. 1619 (Prunier). Work on the house was well advanced by

the time Ms. Shelton became the Trustee. Similarly, the costs of prior litigation were incurred

before Ms. Shelton assumed the role of Trustee. See pp. 6-7, supra.

B. There Is No Precedent For The Probate Court’s Award Of Fees Against

Ms. Shelton.

Counsel for Ms. Shelton are not aware of any appellate precedent in any jurisdiction for

awarding attorneys’ fees against a trustee who brought suit against a co-fiduciary seeking to

vindicate her authority as trustee. Rather, courts in similar cases have considered the question

whether a trustee bringing the case may herself recover attorneys’ fees from the trust estate. See,

e.g., Zaring v. Zaring, 39 N.E.2d 734 (Ind. 1942).

34 The Investment Directors have invested all of the assets of the Trust in real estate. Ironically, they are complaining that loans from the EMT Trusts were used to invest in real estate, the family home.

46

There is also no precedent for holding a trustee personally liable to pay attorneys’ fees in

a situation where (a) she sued only in her capacity as Trustee, (b) the principal trust beneficiary

joined as a petitioner in the suit, (c) all of the other living beneficiaries supported the prosecution

of the suit and the requests for relief made by a trustee,35 and (d) a disinterested, court-appointed

GAL for all unborn beneficiaries of the trust also supported the Trustee’s request for relief. Tr.

1667, 1693, 1783-87, 1830, 1864, 5579-80.

Ms. Shelton brought this action in an effort to serve the beneficiaries of the EMT Trusts.

The case could not possibly have resulted in personal benefit to Ms. Shelton. The trust

beneficiaries knowingly took the risk of a defeat in order to seek the benefits of a victory. The

Probate Court’s ruling unfairly shifts the burden of that risk to Ms. Shelton, by holding her

personally liable for the attorneys’ fees of the Respondents and voluntary Intervenors.

The Probate Court’s ruling is particularly punitive because it awards fees to the parties

who intervened in this case. Ms. Shelton did not sue the Intervenors. They joined in this case

voluntarily. Moreover, they had no interest that could not be (and was not) adequately protected

by Samuel Tamposi, Jr. and Stephen Tamposi. Samuel, Jr. and Stephen were sued individually

and in their capacity as Investment Directors. Intervenors Michael and Celina Tamposi (who

now request fees of two separate law firms totaling $490,000) had the same interest, and

35 Elizabeth Tamposi’s oldest child, Christina Goodlander, testified that Ms. Shelton as Trustee was “involved in

this litigation so that she can be enabled to fulfill her fiduciary duty” “to make sure that the needs of her beneficiaries are being met.” Tr. 1077. She testified that she supported “the position that Julie Shelton has taken in this litigation” “wholeheartedly.” Tr. 1078.

Q. And what do you understand the issue to be in this litigation? A. . . . the issue is that the investment directors are not making funds available to the

trustee of the EMT Trusts to -- basically, to meet the needs of the beneficiaries. Q. [A]re you supportive of the position that Julie Shelton has taken in this litigation? A. Yes. Wholeheartedly so.

Id. Under questioning by counsel for the Investment Directors, Margaret Goodlander, the second oldest child, testified that she supported the positions taken by the Petitioners and was “reassured to know, that we were still pursuing these . . . important questions about fiduciary duty” in this case. Tr. 985.

47

throughout trial asserted the same positions, as Samuel, Jr. and Stephen, sued in their individual

capacities. Intervenor Gerald Prunier, who was represented by his own separate set of lawyers

(and who now request fees totaling an additional $776,000), had no interest, and took no

position, that was different from that of his beneficiaries, Samuel, Jr., Stephen, Michael, and

Celina. The Intervenors were “neither forced to litigate nor subject to litigation.” Clipper

Affiliates, Inc. v. Checovich, 138 N.H. 271, 278 (1994) (reversing an award of fees where a

witness intervened voluntarily in order to assure the presence of his counsel). They chose to

intervene. They should bear their own fees.

III. THE PROBATE COURT ERRONEOUSLY REMOVED MS. SHELTON FROM

THE POSITION OF TRUSTEE.

The Investment Directors sought the removal of Julie Shelton as Trustee. Order at 1, 49;

Case Summary Index No. 12 (App. 3). The Court below held, correctly, that they did not have

standing to request her removal. Order at 50. The living beneficiaries of the EMT Trusts

testified that “they did not wish for Julie Shelton to be removed as trustee.” Id. The GAL for

unborn beneficiaries observed that Ms. Shelton appropriately represented the interests of those

beneficiaries “to the extent that she’s been able” to do so in the face of hostility from the

Investment Directors. Tr. 1830. The Probate Court nevertheless removed Ms. Shelton as

Trustee. Order at 49-50, 53. The record does not support this action.

A. Only A Rare Case Warrants Removing A Trustee, And There Is No

Precedent For The Removal Of Ms. Shelton.

Removal is an extreme remedy. In re Estate of Croessant, 393 A.2d 443, 446 (Pa. 1978)

(“Removal of a trustee is . . . a drastic action, and proof of the need for this remedy must be

clear”); Birmingham Trust Nat’l Bank v. Henley, 371 So. 2d 883, 897 (Ala. 1979) (“The removal

of a trustee is a drastic action which should only be taken when the estate is actually endangered

and intervention is necessary to save trust property.”).

48

The Probate Court did not cite any precedent for removing a trustee over the objection of

all trust beneficiaries. To counsel’s knowledge, there is no such precedent. To the contrary,

when considering whether a trustee should be appointed -- an analogous context -- the

Massachusetts Supreme Judicial Court has held that “[w]hen . . . the beneficiaries unite on a

qualified trustee . . . we hold it to be arbitrary and capricious action and an abuse of discretion”

for the court to appoint someone else. Petition of Lovejoy, 227 N.E.2d 497, 500 (Mass. 1967).

B. The Grounds Cited By The Probate Court Do Not Support Removal.

The Probate Court relied on RSA 564-B:7-706(b). See Order at 50. It states:

[T]he court may remove a trustee if:

(1) the trustee has committed a serious breach of trust; [or]

. . .

(3) because of unfitness, unwillingness, persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the interests of the beneficiaries . . .

The statutory grounds for removal are not present on this record, and the grounds stated by the

Probate Court do not support removing Ms. Shelton as Trustee. See Order at 49-51.

1. Ms. Shelton Has Not Committed “A Serious Breach Of Trust.”

Ms. Shelton did not commit any breach of trust. The Probate Court found, incorrectly,

that “bringing this litigation was to benefit one trust beneficiary, i.e., Betty, and afforded little or

no value to the other beneficiaries. . .” Order at 51. This finding ignored both (1) the testimony

of the other living beneficiaries who supported Ms. Shelton’s conduct in this case and (2) the

testimony and argument of the GAL that Ms. Shelton has “appropriately represented the interests

of” the unborn beneficiaries (Tr. 1830) and that “it’s in the interest of the unborn that this court

rule on the proper functioning of the trust instrument” (Tr. 2989). If Ms. Shelton’s legal position

49

had prevailed, it would have served all of the beneficiaries of the EMT Trusts by obtaining for

their Trustee the practical ability to make distributions.

2. There Are No Grounds To Find “Unfitness, Unwillingness, Or

Persistent Failure Of The Trustee.”

Ms. Shelton could not properly be removed for “unfitness” or “unwillingness,” and there

were no grounds for concluding that “removal of the trustee best serves the interests of the

beneficiaries.”

Ms. Shelton was not “unfit” because she is not an expert in trust law or practice. Order at

12, 50. That is why she retained Ms. Denby, who is an expert. It is well settled that a trustee is

not required to have prior experience as a trustee. See, e.g., In re Estate of Tyler, 716 N.E.2d

1239, 1240 (Ohio Ct. C.P. 1999) (“The appointment of a fiduciary is not necessarily a question

of expertise. Most testators appoint a loved one, a relative, or a trusted friend as a fiduciary. The

testator assumes the fiduciary will hire the experts necessary, such as attorneys and

accountants.”); Law v. Law, 753 A.2d 443, 447 (Del. 2000). It cannot be asserted that Samuel

A. Tamposi, Sr., the Settlor, expected that a professional trustee would be appointed. He

appointed David E. Tully, a friend who had no training as a trustee. Tr. 2164. See also the

GAL’s Report, App. 1663.

The beneficiaries of the EMT Trusts and the GAL were fully able to evaluate the

“interests of the beneficiaries.” They supported Ms. Shelton.

The only remaining possible basis for removal were the Probate Court’s rulings that

(1) the Petitioners’ Complaint had no merit whatsoever, and (2) the filing of a Complaint

violated the Trust’s in terrorem clause. As demonstrated above, those foundational rulings were

in error. And, even if Ms. Shelton does not ultimately prevail in this case, there is no precedent

for removing a trustee against the wishes of the trust beneficiaries merely because the trustee

ADDENDUM

A. 1992 Trust Instrument (Add. 001 – Add. 013).

B. 1994 Amendment (Add. 014 – Add. 019).

C. New Hampshire Statutes (Add. 020 – Add. 025).

D. Copy Of The Decision Being Appealed (August 18, 2010 Order).36

36 This Brief cites to the original page numbers, 1 through 54, of the August 18, 2010 Order.

RSA 564-B:1-103(24) (2011)

564-B:1-103 Definitions.

In this chapter:

. . .

(24) "Excluded fiduciary" means any trustee, trust advisor, or

trust protector to the extent that, under the terms of the trust, an agreement of the qualified beneficiaries, or court order, (i)

the trustee, trust advisor, or trust protector is excluded from exercising a power, or is relieved of a duty, and (ii) the power or

duty is granted or reserved to another person.

RSA 564-B:1-112 (2011)

564-B:1-112 Rules Of Construction.

The rules of construction that apply in this state to the

interpretation of and disposition of property by will also apply as appropriate to the interpretation of the terms of a trust and the

disposition of the trust property.

RSA 564-B:4-404 (2011)

564-B:4-404 Trust Purposes.

A trust may be created only to the extent its purposes are lawful, not contrary to public policy, and possible to achieve. A

trust and its terms must be for the benefit of its beneficiaries.

RSA 564-B:7-706 (2011)

564-B:7-706 Removal Of Trustee.

(a) The settlor, a cotrustee, or a beneficiary may request the

court to remove a trustee, or a trustee may be removed by the court on its own initiative.

Add. 020

(b) In addition to the power to remove a trustee pursuant to

RSA 564:9, the court may remove a trustee if:

(1) the trustee has committed a serious breach of trust;

(2) lack of cooperation among cotrustees substantially impairs the administration of the trust;

(3) because of unfitness, unwillingness, persistent failure of the trustee to administer the trust effectively, the court

determines that removal of the trustee best serves the interests of the beneficiaries; or

(4) there has been a substantial change of circumstances or removal is requested by all of the qualified beneficiaries,

the court finds that removal of the trustee best serves the interests of all of the beneficiaries and is not inconsistent

with a material purpose of the trust, and a suitable cotrustee or successor trustee is available.

(c) Pending a final decision on a request to remove a trustee, or

in lieu of or in addition to removing a trustee, the court may order such appropriate relief under RSA 564-B:10-1001(b) as

may be necessary to protect the trust property or the interests of the beneficiaries.

RSA 564-B:7-711 (2011)

564-B:7-711 Directed Trusts.

If the terms of the trust, an agreement of the qualified beneficiaries, or a court order requires a trustee, trust advisor,

or trust protector to follow the direction of a trust advisor or trust protector and the trustee, trust advisor, or trust protector

acts in accordance with such direction, then the trustee, trust advisor, or trust protector shall be treated as an excluded

fiduciary.

RSA 564-B:8-816(a)(27) (2011)

564-B:8-816 Specific Powers Of Trustee.

Add. 021

(a) Without limiting the authority conferred by RSA 564-B:8-815, a trustee may:

. . .

(27) employ persons, including attorneys, auditors,

investment advisors, or agents, even if they are associated with the trustee, to advise or assist the trustee in the

performance of the trustee's administrative duties and to act without independent investigation upon their

recommendations;

RSA 564-B:10-1004 (2011)

564-B:10-1004 Attorney's Fees And Costs.

In a judicial proceeding involving the administration of a trust,

the court, as justice and equity may require, may award costs and expenses, including reasonable attorney's fees, to any party,

to be paid by another party or from the trust that is the subject

of the controversy.

RSA 564-B:10-1014 (2011)

564-B:10-1014 Enforcement of No-Contest Provision.

(a) For the purposes of this section, a “no-contest provision” of a trust instrument means a provision that, if given effect, would

reduce or eliminate the interest of any beneficiary of such trust who, directly or indirectly, initiates or otherwise pursues:

(1) Any action to contest the validity of the trust or the

terms of the trust;

(2) Any action to set aside or vary the terms of the trust;

(3) Any action to challenge the acts of the trustee or other

fiduciary of the trust in the performance of the trustee's or

Add. 022

other fiduciary's duties as described in the terms of the

trust; or

(4) Any other act or proceedings to frustrate or defeat the settlor's intent as expressed in the terms of the trust.

(b) A no-contest provision shall be enforceable according to the express terms of the no-contest provision without regard to the

presence or absence of probable cause for, or the beneficiary's good or bad faith in, taking the action that would justify the

complete or partial forfeiture of the beneficiary's interest in the trust under the terms of the no-contest provision. A no-contest

provision shall be unenforceable to the extent that the trust is invalid because of fraud, duress, undue influence, lack of

testamentary capacity, or any other reason. In the case of an

action solely to challenge the acts of the trustee or other fiduciary of the trust, a no-contest provision shall be

unenforceable to the extent that the trustee or other fiduciary has committed a breach of fiduciary duties or breach of trust.

(c) Subsection (b) shall not apply to:

(1) Any action brought by the trustee or any other

fiduciary serving under the terms of the trust, unless the trustee or other fiduciary is a beneficiary against whom the

no-contest provision is otherwise enforceable;

(2) Any agreement among the beneficiaries and any other

interested persons in settlement of a dispute or resolution of any other matter relating to the trust, including without

limitation any nonjudicial settlement agreement;

(3) Any action to determine whether a proposed or pending motion, petition, or other proceeding constitutes a

contest within the meaning of a no-contest provision;

(4) Any action brought by a beneficiary or on behalf of any such beneficiary for a construction or interpretation of the

terms of the trust; or

Add. 023

(5) Any action brought by the attorney general for a

construction or interpretation of a charitable trust or a trust containing a charitable interest if a provision exists in

a trust purporting to penalize a charity or charitable interest for contesting the trust if probable cause exists for

instituting proceedings.

(d) It is the intent of this section to enforce the settlor's intent as

reflected in a no-contest provision to the greatest extent possible. The provisions of this section shall be construed and

applied in a manner consistent with such intent.

(e) This section shall apply to all judicial proceedings concerning the enforcement or interpretation of a no-contest provision

commenced on or after its effective date.

RSA 564-B:12-1202 (2011)

564-B:12-1202 Trust Advisors and Trust Protectors as Fiduciaries.

(a) A trust advisor or trust protector, other than a beneficiary, is a fiduciary with respect to each power granted to such trust

advisor or trust protector. In exercising any power or refraining from exercising any power, a trust advisor or trust protector

shall act in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries.

(b) A trust advisor or trust protector is an excluded fiduciary with respect to each power granted or reserved exclusively to any

one or more other trustees, trust advisors, or trust protectors.

RSA 564-B:12-1204 (2011)

564-B:12-1204 No Duty to Review Actions of Trustee, Trust Advisor,

or Trust Protector.

(a) Whenever, pursuant to the terms of a trust, an agreement of

the qualified beneficiaries, or a court order, an excluded fiduciary is to follow the direction of a trustee, trust advisor, or trust

Add. 024

protector with respect to investment decisions, distribution

decisions, or other decisions of the non-excluded fiduciary, then, except to the extent that the terms of the trust, the agreement

of the qualified beneficiaries, or the court order provide otherwise, the excluded fiduciary shall have no duty to:

(1) monitor the conduct of the trustee, trust advisor, or trust protector;

(2) provide advice to the trustee, trust advisor, or trust protector or consult with the trustee, trust advisor, or trust

protector; or

(3) communicate with or warn or apprise any beneficiary

or third party concerning instances in which the excluded fiduciary would or might have exercised the excluded

fiduciary's own discretion in a manner different from the manner directed by the trustee, trust advisor, or trust

protector.

(b) Absent clear and convincing evidence to the contrary, the actions of the excluded fiduciary pertaining to matters within the

scope of the trustee, trust advisor, or trust protector's authority (such as confirming that the trustee, trust advisor, or trust

protector's directions have been carried out and recording and reporting actions taken at the trustee, trust advisor, or trust

protector's direction or other information pursuant to RSA 564-B:8-813), shall be presumed to be administrative actions taken

by the excluded fiduciary solely to allow the excluded fiduciary to perform those duties assigned to the excluded fiduciary under

the terms of the trust, the agreement of the qualified beneficiaries, or the court order, and such administrative actions

shall not be deemed to constitute an undertaking by the excluded fiduciary to monitor the trustee, trust advisor, or trust

protector or otherwise participate in actions within the scope of

the trustee, trust advisor, or trust protector's authority.

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BRIEF OF APPELLANT JULIE SHELTON · JULIE SHELTON, AS TRUSTEE OF THE ELIZABETH M. TAMPOSI GST...

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