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Circuit Court for Baltimore City Case #94095054 CE 178578

IN THE COURT OF APPEALS OF MARYLAND No. 22 September Term, 1996 ____________________________________

REGINA H. KANN v.

DONALD R. KANN et al.

____________________________________ Bell, C.J. Eldridge Rodowsky Chasanow Karwacki Raker Murphy, Robert C. (retired, specially assigned), JJ. ____________________________________ Opinion by Rodowsky, J. ____________________________________ Filed: March 11, 1997

We hold today that allegations of breach of fiduciary duty, in and of themselves, do not give rise to an omnibus or generic cause of action at law that is assertable against all fiduciaries, including trustees of express trusts. Accordingly, here, where the

beneficiary of an express trust sues the trustee, the claim is exclusively equitable and not triable of right before a jury. The litigation arises out of the following facts. In August

1974 Frances O. Kann (Frances) died, testate, leaving a portion of her estate to her then husband, Louis M. Kann, Jr. (Louis), and creating a trust of the residue. Under that trust (the Frances

Trust) Louis received the income for his life, and the remainder was divided, free of trust, evenly between the children of Frances and Louis. They had two children, Donald R. Kann (Donald), who is FrancesUs will

one of the respondents, and Lois K. Fekete (Lois). designated Louis as sole trustee.

In 1976 Louis remarried, but that marriage lasted only one year. In 1979 Louis married the petitioner, Regina H. Kann The marriage of Louis and Regina lasted fourteen years,

(Regina).

until LouisUs death, testate, on December 18, 1992. LouisUs will created a trust (the Louis Trust), the income from which is to be paid to Regina for life. That trust also contains

a broad, discretionary power of invasion of corpus for the purpose of maintaining ReginaUs accustomed standard of living. Upon ReginaUs

death the remainder of the Louis Trust, in general, is to be

-2divided one-half to Lois and one-half equally to DonaldUs two children, Aaron and Burton. Donald was named personal

representative of LouisUs probate estate and sole trustee of the Louis Trust. Several days after LouisUs death, Donald engaged counsel. are the attorney respondents, Venable, Baetjer and They

Howard

(Venable), and Alexander I. Lewis, the head of VenableUs estates and trusts practice group. In late 1992 or early 1993 Donald found in LouisUs records evidence that Louis may have misappropriated funds from the Frances Trust.1 Venable advised Donald to continue his review to determine

if there was a pattern or whether the apparent diversion was an isolated incident. wife, Joanna B. Over the succeeding ten months Donald and his Kann, discovered further indications of

misappropriations from the Frances Trust.

For example, Louis had

sold stock owned by the Frances Trust and applied over $35,000 of the proceeds toward the purchase of the condominium in which Regina continued to reside. On March 31, 1993, Donald applied to the Circuit Court for Baltimore City for appointment as successor to Louis as trustee of the Frances Trust, and Donald was so appointed.

Donald had discovered an August 1992 deposit of $10,412.71 into Louis and ReginaUs joint checking account. The deposit was considerably more than the typical deposits into the account, and the funds came from the sale of a U.S. Treasury Bond that was an asset of the Frances Trust.

1

-3By November 1993 Donald concluded that Louis had

misappropriated over $118,000 from the Frances Trust.

Donald

further estimated that the loss from the lack of investment income on the $118,000 increased the total loss suffered by the Frances Trust to approximately $195,300. He reported these findings to the

attorney respondents who advised Donald to transfer assets of LouisUs estate valued at $195,300 into an account in the name of the Frances Trust, pending a final resolution of the matter (the segregated assets). In December 1993 Donald filed a "supplemental" inventory in the OrphansU Court of Baltimore City, reporting that certain assets originally inventoried were held by Louis only as trustee of the Frances Trust and were not part of LouisUs individual probate estate. The orphansU court, in January 1994, approved the inventory

modification and the accompanying First and Final Administration Account. Regina was not advised of this orphansU court proceeding.2

After the assets in question were segregated from the Louis Trust, Donald sent Regina a memorandum, with attached exhibits, detailing LouisUs apparent misappropriations of principal from the Frances Trust. In April 1994, Donald, in his capacities as personal

representative of LouisUs estate, trustee of the Louis Trust, and As an heir and a beneficiary of the Louis Trust, but not a legatee, Regina was no longer an "interested person" in the probate estate of Louis. See Maryland Code (1974, 1991 Repl. Vol.),

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