Also known as: personal fault · personal liability
Written by attorneys — see sources below.
Liability imposed on a trustee or personal representative for torts committed during administration or for obligations arising from ownership or control of trust or estate property only when the fiduciary's own conduct or knowledge satisfies the fault standard.
Preston Pratt conveyed mortgaged land to Prism Analytics. The mortgagee later executed an express written release of Pratt from the underlying note. Because the release discharged Pratt without any finding of personal fault on his part, the mortgagee could not pursue him for a deficiency after foreclosure.
Pierre Poulin formed an undercapitalized shell corporation that ignored corporate formalities and held no assets. When the corporation defaulted on obligations, creditors proved Poulin used the entity merely to avoid personal liability. The court disregarded the corporate form and held Poulin personally liable because his conduct met the alter-ego and injustice prongs.
Parker Phillips served as trustee of a trust that owned contaminated land. After the trust sold the property, the buyer incurred cleanup costs under environmental law. Because Phillips had taken no personal action causing the contamination and had followed all trust procedures, the court held he was not personally at fault and therefore not personally liable.
Portia Price acted as personal representative of an estate that owned rental property. A tenant was injured when a handrail collapsed. The court found the collapse resulted from ordinary wear that Price had no reason to know about and had not personally created. Because Price was not personally at fault, she incurred no individual liability for the tenant's claim.
The executor paid the federal estate tax that included the value of the trust principal and filed suit for a refund in the district court. All facts were stipulated for the district court proceeding. The district court ruled for the government. The executor appealed to the United States Court of Appeals for the First Circuit. The decedent had been a donor to three inter vivos trusts previously established by his wife. He served as a trustee of the trusts until the date of his death. The initial life beneficiary was the decedent's adult son. Eighty percent of the trust income was normally payable to the son, with the balance added to principal. Subsequent beneficiaries were the son's widow and his issue. The trust instruments contained powers in Article 4 and Article 7. Article 4 permitted the trustees in their absolute discretion to increase the percentage of income payable to the son when needed in case of sickness or desirable in view of changed circumstances. The trustees could also cease paying income to the son and add it all to principal during such period as they decided the stoppage was for his best interests. Article 7 gave the trustees broad administrative powers, including discretion to acquire investments not normally held by trustees and authority to determine what was to be charged or credited to income or principal. It further empowered the trustees generally to do all things in relation to the trust fund which the donor could do if living and the trust had not been executed. The government claimed that the powers in the two articles required inclusion of the trust corpus in the decedent's estate. The executor disputed this position after paying the tax and seeking recovery. The district court had ruled against the executor on the stipulated facts, leading directly to the appeal.
View caseA trustee is personally liable for such torts only if the trustee is personally at fault. The trust estate itself remains reachable by the tort victim even when the trustee escapes personal liability.
No. A limited partner remains shielded from personal liability for partnership obligations even when participating in management or failing to observe formalities, unless other law imposes liability based on the partner's specific conduct.
Creditors must satisfy a two-prong test: the corporation was the alter ego of the shareholder, and respecting the corporate form would sanction fraud or promote injustice. Undercapitalization combined with disregard of formalities can support that finding.
Yes. An express release from the mortgagee discharges the transferor from personal liability on the secured obligation regardless of any suretyship defenses that might otherwise apply.
…NYLJ April 29, 1974). The application to punish Marlboroughs for contempt is granted. There is no proof that respondent Reis personally took any action nor aided and abetted Marlborough or Lloyd with regard to the transactions in violation of the orders of this court and accordingly the motion to punish him for contempt is…