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May 8, 1997

ERIC WEISS, Plaintiff, against STEPHEN WEISS, Defendant.

The opinion of the court was delivered by: DOLINGER




 In 1991, plaintiff Eric Weiss commenced this lawsuit against his adoptive father, Stephen Weiss, and others. *fn1" Plaintiff challenged his father's handling of assets that the father had placed in trust or in various Uniform Gift to Minors Act ("UGMA") accounts for the benefit of Eric. Following a trial at which the jury returned verdicts in favor of Stephen Weiss on all of plaintiff's claims, the court granted judgment as a matter of law for plaintiff with respect to liability on one claim and scheduled a non-jury trial on damages. Weiss v. Weiss, 1996 U.S. Dist. LEXIS 2471, 1996 WL 91641, at *21-23 (S.D.N.Y. March 4, 1996). *fn2"

 We have conducted the damages trial and now direct that judgment be entered for plaintiff on his claim for early termination of a so-called Clifford Trust, in the amount of $ 12,047.61 in principal and $ 1,362.63 in pre-judgment interest. In all other respects, the complaint will be dismissed.

 A. The Nature of the Surviving Claim

 Among the many complaints voiced by plaintiff concerning his father was a claim based on the alleged early closure of a Clifford Trust that Stephen Weiss had established in 1978 for Eric's benefit. According to plaintiff, the trust instrument required Stephen Weiss, as trustee, to keep the trust open for 121 months, and further provided that any assets placed in the trust after its initial creation were to be treated as a separate trust for purposes of measuring when the trust could be closed. Plaintiff further alleged that when his father closed the trust in July 1988, it contained assets, in the form of shares of stock, that had been added to the trust in 1979 and 1986.

 The evidence at trial bore out these contentions. Moreover, the evidence demonstrated beyond meaningful dispute that Stephen Weiss had profited by some undetermined amount as a result of his failure to retain these assets in the trust. Accordingly, the court determined that, despite the jury's verdict to the contrary, plaintiff had established the basis for a claim for breach of fiduciary duty against his father in this one respect. Id. at *22 & n.27.

 The theoretical basis for the claim is set out at some length in the court's post-trial opinion. Briefly stated, the trust instrument unambiguously required that the trust be kept open for a specified period for after-acquired assets, and defendant violated that explicit provision. That violation constituted a breach of trust even though the record amply demonstrates that defendant acted without intent to commit the violation. (See RESTATEMENT (SECOND) OF TRUSTS § 201, cmts. a & c, illus. 2-3 (1959)). See also Dill v. Boston Safe Deposit & Trust Co., 343 Mass. 97, 100-01, 175 N.E.2d 911, 913 (1961).

 The trust instrument did contain a so-called exculpatory provision, which stated that: "Trustee shall be relieved from all responsibility or liability for any loss to the trust properties which may occur because of errors of judgment and shall be liable only for failure to act in good faith." (Pl.'s Ex. 28A, P 10). Despite the language excluding trustee liability for good-faith acts, the courts recognize certain exceptions to this protective shield erected around the trustee. Most pertinently, as noted in our prior opinion, this language "does not protect a trustee who commits a breach of trust 'in bad faith or intentionally or with reckless indifference to the interest of the beneficiary,' nor does it relieve a trustee 'of liability for any profit which the trustee has derived from a breach of trust.'" Weiss at *22 (quoting Restatement § 222(2)). See also New England Trust Co. v. Triggs, 334 Mass. 324, 340-41, 135 N.E.2d 541, 550-51 (1956).

 Since there is no question that defendant's early termination of a portion of the trust yielded some "profit" to him, we concluded in our prior opinion that the jury had erred in finding that plaintiff had not demonstrated that Stephen Weiss had profited. This formed the basis for entry of judgment for plaintiff as to liability on this claim, and led to the subsequent, brief bench trial on damages.

 From the wording of the cited Restatement provision, we are directed to assess the extent of the profit realized by defendant as a consequence of his breach of the trust. It is to this matter that we now turn.

 B. Damages

 1. The 1979 Assets

 The Clifford Trust provided that the income from the trust was to be used for the benefit of Eric Weiss. The corpus was to remain in the trust for the requisite period, and, upon termination of the trust, was to revert back to the grantor, Stephen Weiss. Since Eric was entitled only to the benefit of the income, the early termination profited defendant in one evident way -- the stock dividends paid, after termination, on the shares that had been in the trust apparently went to Stephen Weiss and not for the benefit of Eric.

 With the exception of shares held in Datascope Corporation, which are the subject of a separate analysis, it appears that when Stephen Weiss terminated the trust in September 1988, he assumed title to shares of thirteen corporations that represented assets that he had added to the trust between September 1978 and December 1979. During the period from September 1988 until January 1990 -- the latest date at which the 121-month period for these assets expired -- Stephen Weiss received dividends on both these shares and shares that had been delivered to the trust pursuant to dividend reinvestment plans that he maintained as part of his investment strategy.

 In calculating the defendant's recoverable profits on these shares, we exclude from consideration any dividends paid on shares that had been received by the trust in lieu of cash dividends. In doing so, we reject plaintiff's argument that we should count those dividends as "profits" because the dividend reinvestment shares, although income, were not used for plaintiff's benefit or as reimbursement to Stephen Weiss for payments on behalf of his son. The short answer to this contention is that the jury found that all income earned by the trust -- including therefore these dividend reinvestment shares -- was utilized by defendant either for his son or as reimbursement for payments made for his son's benefit. *fn3" Given this limitation, we calculate defendant's profits flowing from the early termination of the trust -- exclusive of the Datascope stock -- as follows: Company Dividends AllTel $ 364.50 Ameritech $ 47.25 AT&T $ 42.60 Bell Atlantic $ 42.84 Boston Edison $ 546.00 Centerior Energy $ 400.00 Central & Southwest $ 512.00 Houston Industries $ 888.00 Lomas & Nettleton $ 444.00 NYNEX $ 42.42 Oklahoma Gas & Electric $ 171.00 Sierra Pacific $ 225.00 United Telecommunications $ 432.00 TOTAL $ 4,157.61


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