2007-031, IN RE GUARDIANSHIP OF ROBERT D. DORSON

The respondent, Peerless Insurance Company/Liberty

Puc on the brief, and Mr. Owers orally), for the respondent. Sulloway & Hollis, P.L.L.C., of Concord (James E. Owers and Kelly Ovitt to press. Errors may be reported by E-mail at the following address:

petitioners. Nicholas R. Aeschliman, of Portsmouth, by brief and orally, for the

IN RE GUARDIANSHIP OF ROBERT D. DORSON

editorial errors in order that corrections may be made before the opinion goes No. 2007-031 Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Hillsborough County Probate Court Readers are requested to notify the Reporter, Supreme Court of New ___________________________

THE SUPREME COURT OF NEW HAMPSHIRE

page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00

well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule p. 2 22 as 2

entitled only to interest at the statutory rate.

settlement. RSA 5 p. 2 24:1-b provides: filed their petition, and October 2006, when the court approved the partial

petition to the date of judgment . . . . interest thereon from the date of the writ or the filing of the them and the date they were repaid, Peerless contended that the estate was any party . . . there shall be added . . . to the amount of damages appreciation lost on the misappropriated funds between the date Nelson took verdict is rendered or a finding is made for pecuniary damages to In all other civil proceedings at law or in equity in which a

award interest at the legal rate between December p. 2 2005, when the petitioners Peerless first argues that RSA 524:1-b (2007) required the trial court to

46 p. 2 2 (2004) (quotation omitted). plainly erroneous as a matter of law.” In re Estate of Treloar, 151 N.H. 460, disturb the probate court’s decree unless it is unsupported by the evidence or not be reasonably made.” RSA 567-A:4 (2007). “Consequently, we will not Life Annuity? While the petitioners argued that Peerless should pay the probate are final unless they are so plainly erroneous that such findings could Peerless should pay on the funds Nelson misappropriated from the Hartford Our standard of review is statutory: “The findings of fact of the judge of review: What is the correct amount of interest and/or lost appreciation that $137,206.11. The parties submitted a single question for the probate court’s ($138,894.59). This appeal followed. ($112,906.11) and when the probate court approved the partial settlement value of the annuity units when Nelson unlawfully liquidated them requiring Peerless to pay $25,988.48, which represented the difference in the The probate court ruled in favor of the petitioners, surcharging Nelson and

successor guardians over the estate. appointed the petitioners, Gertrude Edmunds and Nicholas R. Aeschliman, Robert’s Hartford Life Annuity was invested. In January p. 2 2005, the court probate court approved, pursuant to which Peerless paid the estate In October 2006, the parties entered into a partial settlement, which the

income from the amounts improperly withdrawn.” accounts, plus all damages resulting from said withdrawals,” including “lost Nelson “for all amounts he . . . improperly withdr[ew] from guardianship In December p. 2 2005, the petitioners asked the probate court to surcharge

$11 p. 2 2,906.11 that Nelson unlawfully withdrew from one of the funds in which misappropriating $137,206.11 from Robert’s estate. This amount included interest was just as much a debt as the actual funds. p. 3 executor] also misappropriated the interest thereon. Thus, the lost money to earn interest. By misappropriating the $116,820, [the executor] withdrew those funds he also withdrew the ability of the

in [the decedent’s] bank accounts and earning interest. When [the

different situation. Here, the misappropriated funds were already claim. In the context of the instant case, we are presented with a judgment sum represents the initial loss that constitutes the a lawsuit is pending. The dispositive factor is that the pre-

calculating interest from the date of the misappropriation. Id. at 6, 12-13. Id. (citation omitted). Thus, we held that the probate court did not err by compensate the plaintiff for loss of the use of damage money while

was part of the debt or loss to the estate and did

example, interest accrues from the date of the suit in order to the latter construction. In situations involving tort claims, for court, regardless of whether it took the form of interest or lost appreciation, interest added onto a claim, or as part of the debt itself. We favor subject to probate court jurisdiction. misappropriated funds can properly be considered pre-judgment money he took did not constitute a debt to the estate and, thus, was not The question, however, is whether the charge of interest on

converted the funds to his own use. for their repayment. Id. at 12. We disagreed: misappropriated instead of from the date upon which demand was first made court erred when it calculated interest from the date the funds were misappropriated constituted prejudgment interest and, therefore, the probate The executor also asserted that the interest on the funds he

the executor to the estate. Id. at 9. the executor’s unexplained withdrawals from the estate constituted a debt of money is mandatory.” To the contrary, any surcharge imposed by the probate Id. at 7-8. We held, to the contrary, that the statutory rate of interest to the post-writ, prejudgment loss of the use of executor first argued that the probate court lacked jurisdiction because the Peerless contends that “[u]nder RSA 524:1-b and [RSA] 336:1, application of

executor of an estate took $116,820 from the decedent’s bank accounts and Our decision in In re Estate of Ward is instructive. In that case, the

524:1-b. In re Estate of Ward, 129 N.H. 4, 12-13 (1986). interest governed by RSA 524:1-a (2007) (pertaining to actions on debt) or RSA

this equity proceeding, made a finding of pecuniary damages to a party. Peerless asserts that RSA 52 p. 4 4:1-b applies because the probate court, in 4

beneficiary according to the situation involved.” G. G. Bogert & G. T. Bogert, relief for the same kind of wrongdoing; its object is not merely to prevent loss to list of remedies but rather will mold the relief to protect the rights of the at p. 4 441 (2d. ed. rev. 1993). Equity “does not always grant the same kind of trustee.” G. G. Bogert & G. T. Bogert, The Law of Trusts and Trustees § 543(V), and gravity of the breach and the consequences to the beneficiaries and involved. Id. at 48-51. The court may “adapt[ ] its decree[ ] to fit the nature order consequential damages and punitive damages where malice or fraud is not unsustainably exercise its discretion. trustee or third parties.” unsustainable exercise of discretion standard). We hold that the trial court did Id. at 3-4. In addition to direct damages, courts may recompense him for loss, in so far as this can be done without injustice to the provide the beneficiary with whatever remedy is necessary to protect him and primarily responsible for the protection of rights arising under trusts, and will The Law of Trusts and Trustees § 861, at 4 (2d ed. rev. 1995). “Equity is

breach of trust and breach of loyalty, “[t]he court is not confined to a limited Contrary to Peerless’ assertions, when crafting a remedy for a trustee’s beneficiaries for loss caused by the fiduciary’s want of due care.” the performance of the fiduciary’s duty and is imposed to compensate mistaken.

court decision to impose equitable remedy of recission and restitution under Mooney v. Nationwide Mut. Ins. Co., 1 p. 4 49 N.H. 355, 357 (2003) (reviewing trial surcharge under our unsustainable exercise of discretion standard. Cf. that, as Peerless contends, we review the probate court’s imposition of a the date the court approved the partial settlement. We disagree. Purchase Group, 150 N.H. 270, 274 (2003). We assume, without deciding, of the units of the annuity from the date upon which they were liquidated to discretion of the trial court. See LaMontagne Builders v. Bowman Brook Pennsylvania law). Equitable remedies are particularly within the sound of McCool, 131 N.H. 340, 346 (1988) (quotation omitted) (adopting

for failure to exercise common prudence, common skill and common caution in prejudgment interest. Accordingly, Peerless’ reliance upon RSA 52 p. 4 4:1-b is of interest or lost appreciation, was part of this debt, and not an award of Scheidmantel, 868 A.2d 464, 492-93 (Pa. Super. Ct. 2005). It “is the penalty that the probate court decided to impose upon Nelson, whether it took the form exercise the requisite standard of care and the trust suffers thereby.” In re “A surcharge is the equitable penalty imposed when a trustee fails to

discretion by assessing a surcharge that represented the difference in the value Peerless next asserts that the trial court unsustainably exercised its

Hartford Life Annuity were debts that he owed the estate and any surcharge Similarly, here, the funds that Nelson unlawfully withdrew from the promoters not fraudulently retained the property.” p. 5 a position very similar to that which they would have been in had the judge awarded damages to the beneficial interest holders which placed them in 5

market value of the retained and lost property at the time of trial, the trial

estate beneficiaries sought surcharge of the executors and restitution to the the estate of painter Mark Rothko. Estate of Rothko, 372 N.E.2d at 293. The 1977), also awarded appreciation damages. The case concerned paintings in The court in Matter of Estate of Rothko, 372 N.E.2d 291, 298-99 (N.Y.

at 916.

misappropriation.” Bogert & Bogert, beneficiary’s suit or judgment thereon rather than its value at the time of representing the appreciated value of the property at the time of the property at the time of trial.” As the court explained, “By applying the fair entitled to damages equaling the fair market value of the retained and lost from loss by tax sale, the court ruled that “[t]he beneficial interest holders are the trustee of a land trust had negligently failed to protect the trust property Graham, P.A., et al., 503 So. 2d 913, 913, 916 (Fla. Dist. Ct. App. 1987), where For instance, in Flagship Bank v. Reinman, Harrell, Silberhorn, Moule & the funds. That remedy is one of many that a beneficiary may pursue. Prudent Investor Rule § 208 (1992). Restatement (Second) of Trusts, supra § 208; Restatement (Third) of Trusts

theory of conversion, the court may award him ‘appreciation damages’, Where, as in this case, “the beneficiary should seek damages on the been if no breach of fiduciary duty had been committed.” trustee breaches duty of loyalty). Trusts, supra § 206 (remedies available under section 205 also apply where Restatement (Second) of Trusts, supra § 205; see Restatement (Second) of disgorge any profit that the trustee made through the breach of trust. estate in the same position it would have been had Nelson not misappropriated the trust estate resulting from the breach of trust” or requiring the trustee to include holding the trustee liable for “any loss or depreciation in the value of

designed to restore the trust to the same position it would have been had no Jacobs, 370 S.E.2d 860, 865 (N.C. Ct. App.) (“damages for breach of trust are 770 N.E.2d 961, 977 (Mass. 2002) (quotation omitted); see Matter of Wills of

the beneficiary of the trust is entitled to be put in the position he would have Restatement (Second) of Trusts § 205 (1959). “When a breach of trust occurs,

In this case, the court imposed a surcharge that was designed to put the

future. Id. at 441-42. purposes of relief may be to deter other trustees from acting similarly in the the trust estate or wrongful gain by the trustee.” Id. Rather, one of the case.

Estate’s loss of use of funds.” We decline to address this argument because prejudgment rate established under RSA 33 p. 6 6:1 appropriately measures the of return that a prudent investor would have realized, “the statutory

remedy than that which it imposed here. We need not speculate in this case, the circumstances of this case. taken depreciated in value, the probate court would have imposed a different depreciated in value. Presumably, had the fund from which the money was

imposed by the probate court, we uphold it. any authority, that because the petitioners introduced no evidence of the rate petitioners’ expert. As there is evidence in the record to support the surcharge Finally, Peerless contends, for the first time on appeal and without citing however, that the probate court based its decision upon the testimony of the

reasonably could have concluded that such a surcharge was equitable under the date that the probate court approved the partial settlement. The trial court would have been inequitable had the fund from which Nelson took the units units of the Hartford Life Annuity from the date they were misappropriated to Peerless also contends that the surcharge imposed by the probate court

support the surcharge it imposed. The record submitted on appeal reveals, Peerless next asserts that the evidence before the probate court failed to

the trustee followed the investment plan. court explained, placed the beneficiary in the position he would have been had realized had the trustee adhered to the investment plan. Such a remedy, the the trustee that constituted the gain that the trust’s principal would have unsustainable exercise of discretion by awarding the difference in value of the monetary investments. For example, in In this case, we hold that the trial court did not engage in an

fulfill its duty of care”). value of principal assets of a trust that was lost because of a trustee’s failure to “for the purpose of providing the beneficiaries with the unrealized gain to the at 38 p. 6 6; see In re Scheidmantel, 868 A.2d at 493 (court may grant a surcharge

37 p. 6 6, 386 (Pa. Super. Ct. 2002), the court approved imposing a surcharge upon

Courts have also awarded appreciation damages in cases involving

The purpose of such a surcharge was to “make the estate whole.” Id. to their value at the time of the decree, i. e., appreciation damages.” Id. at 298. returned to the estate, the court ruled that “the estate [was] therefore entitled estate of certain paintings. See id. at 293. Because the paintings could not be p. 7 7

BRODERICK, C.J., and DUGGAN, GALWAY and HICKS, JJ., concurred.

appeal reveals that Peerless failed to raise this argument to the probate court. v. Red Oak Prop. Mgmt., 151 N.H. 248, 250 (2004). The record submitted on Peerless has failed to demonstrate that it preserved it for our review. See Bean