SULLIVAN V. BURKIN

390 Mass. 364, 460 N.E. 2d 571 (1934)


Procedure:In class action, plaintiffs, victims of embezzlement, sought an order setting aside express trust created by embezzler a certified public accountant, and members of his family as donors. Following reporting of the case without decision by the Superior Court, Bristol County, the Appeals Court, remanded for entry of judgment, and victims' application for further appellate review was allowed.

Facts: Sullivan executed a will and created an intervivos trust of all of his real property. He specifically failed to make a provision to the appellant, his wife Mary Sullivan, or his grandson, Mark Sullivan in the trust or the will. The appellant sought a determination that the trust property be included as a part of his estate.

Issue:Should the assets of an inter vivos trust be considered in determining the portion of the estate against which the surviving spouse may elect a share?

Holding: The Supreme Judicial Court, Hennessey, C.J., held that although assets held by embezzler on certain date were not traceable proceeds, by promising assets to the victims, he restored constructive trust and subjected assets thereto as of that date. Case Remanded.

Rule: A trust with a remainder interest is not an invalid testamentary disposition just because the settlor during his lifetime, retained broad power to modify or revoke the trust, receive income, and invade the principal. The fact that the settlor is also the trustee does not invalidate the trust

Analysis: Legal effect of instrument, which was executed by certified public accountant who had embezzled funds from investors and which on its face was a conveyance of assets to the trustees for the benefit of the investors was to convey the accountant's family's assets in trust for victims of embezzlement and a victim was entitled to reformation of instrument, insofar as it purported to give assets to general creditors of the accountant, due to mistake of parties in executing instrument.A certified public accountant's conversion of would-be investors' funds was an embezzlement and relationship between accountant and investors was that of agent and principal, not debtor and creditor; consequently, accountant became constructive trustee of money and its traceable proceeds