Case Title: Woodward School for Girls, Inc. v. City of Quincy

Citation: 

Docket Number: SJC-11390

State: massachusetts

Court: Massachusetts Supreme Court

Date: 2014-07-23T00:00:00Z

Document:
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SJC-11390 
 
THE WOODWARD SCHOOL FOR GIRLS, INC.  vs.  CITY OF QUINCY, 
trustee,1 & another.2 
 
 
 
Norfolk.     December 2, 2013. - July 23, 2014. 
 
Present:  Spina, Cordy, Botsford, Gants, Duffly, & Lenk, JJ. 
 
 
Trust, Charitable trust, Investments, Trustee's accounts.  
Damages, Breach of fiduciary duty, Interest.  Interest.  
Massachusetts Tort Claims Act.  Governmental Immunity.  
Immunity from Suit.  Municipal Corporations, Trusts, 
Governmental immunity.  Waiver.  Laches. 
 
 
 
 
Civil action commenced in the Supreme Judicial Court for 
the county of Suffolk on July 11, 2007. 
 
 
After transfer to the Norfolk County Division of the 
Probate and Family Court Department, the case was heard by 
Robert W. Langlois, J. 
 
 
The Supreme Judicial Court on its own initiative 
transferred the case from the Appeals Court. 
 
 
 
John S. Leonard (James S. Timmins, City Solicitor, with 
him) for city of Quincy. 
1 Of the Adams Temple and School Fund and the Charles 
Francis Adams Fund. 
 
2 Attorney General, as a nominal party. 
                     
2 
 
 
Sarah G. Kim (Josephine M. Deang Chin & Alison K. Eggers 
with her) for the plaintiff. 
 
 
 
CORDY, J.  This dispute arises from a trust established in 
1822 by former President John Adams and supplemented by a 
bequest of his grandson in 1886.  The city3 of Quincy (Quincy) 
served as trustee of the Adams Temple and School Fund and the 
Charles Francis Adams Fund (collectively, Funds) through two 
boards.4  The Woodward School for Girls, Inc. (Woodward), the 
income beneficiary of the Funds since 1953, filed suit against 
Quincy initially seeking an accounting and thereafter asserting 
that Quincy committed a breach of its fiduciary duties to keep 
adequate records, invest the trust's assets properly, exercise 
reasonable prudence in the sales of real estate, and incur only 
reasonable expenses related to the management of the Funds.  We 
transferred the case here on our own motion following Quincy's 
appeal and Woodward's cross appeal from a Probate and Family 
3 Quincy, originally a town, was incorporated as a city in 
1888.  See St. 1888, c. 347. 
 
4 For the purposes of this opinion, the city of Quincy, 
along with the board of supervisors and the board of managers 
(together, joint boards) of the Funds at issue (the Adams Temple 
and School Fund, or Adams Fund, and the Charles Francis Adams 
Fund, collectively, Funds) are referred to collectively as 
"Quincy," except where differentiation is helpful. 
 
                     
3 
 
Court judge's ruling removing Quincy as trustee and ordering it 
to pay a nearly $3 million judgment.5 
 
On appeal, Quincy asserts that the trial judge erred in 
finding that Quincy committed a breach of its fiduciary duties 
to the Funds by failing to invest in growth equities to protect 
the principal when the Funds have only an income beneficiary to 
provide for, and by not heeding specific investment advice it 
received in 1973.  In addition, Quincy challenges the award of 
damages, alleging that it was based on an improperly introduced 
and unsound portfolio theory hypothesizing unrealized gains; 
that it failed to exclude reasonable costs and expenses Quincy 
would have incurred had Quincy followed that portfolio theory; 
and that it improperly included prejudgment interest dating back 
to the dates of the various breaches.  Finally, Quincy avers 
that Woodward's claims should have been barred by the 
Massachusetts Tort Claims Act, G. L. c. 258, § 4, and its 
accompanying protection of sovereign immunity, and by the 
equitable doctrine of laches. 
 
For the reasons discussed below, we conclude that the 
claims were not barred, and judgment against Quincy for 
committing a breach of its fiduciary duties to the Funds was 
proper, but the award of damages was erroneous in the 
5 The parties have stipulated to the consolidation of the 
appeals. 
                     
4 
 
calculation of unrealized gains on the investment portfolio.  
Specifically, we conclude that the judge erred in two respects:  
first in finding that Quincy's failure to heed specific 
investment advice it had solicited constituted a breach of its 
duty to act as a prudent investor, and second in calculating as 
damages the gains that might have been realized had Quincy 
followed that advice.  Nonetheless, because there was other 
evidence of Quincy's mismanagement of the Funds, the judge did 
not err in finding that Quincy had committed a breach of its 
fiduciary duties with regard to them. 
 
We further conclude that the judge did not err in including 
prejudgment interest or in declining to speculate as to 
potential costs or expenses Quincy may have incurred with proper 
management.  However, because the judge's calculation of damages 
with regard to the unrealized gains on the investment portfolio 
was based on his incorrect assumption that Quincy was required 
to follow specific investment advice, that calculation was in 
error.  Accordingly, we affirm the judgment as to liability, 
reverse with respect to the calculation of damages on the 
unrealized gains, and remand for further proceedings consistent 
with this opinion. 
 
Background.  In 1822, former President John Adams executed 
two deeds of trust, conveying a portion of his real estate 
holdings to a trust, thereafter named the Adams Temple and 
5 
 
School Fund (Adams Fund), and naming Quincy as the trustee.  The 
first deed executed by President Adams (Deed A) was supplemented 
by a bequest of his grandson, Charles Francis Adams, in 1886, to 
support the objectives of the Adams Fund (Charles Francis Adams 
Fund, and, collectively with the Adams Fund, Funds).  Deed A 
contained the basic provisions of the trust and directed the 
trustee to invest earnings from the real estate "in some solid 
public fund, either of the Commonwealth, or of the United 
States"; to build a church; and to apply "all future rents, 
profits, and emoluments, arising from said land" to support a 
school with particular requirements.  The only principal 
beneficiary identified in the deed was the oldest living male 
descendant of President Adams, who was to receive the principal 
only on "gross corruption or mismanagement," or knowing waste, 
on the part of Quincy.  Shortly after the deeds were executed, 
the inhabitants of Quincy voted to accept the gifts therein, and 
Quincy became the trustee. 
 
Two acts of the General Court granted Quincy further 
authority in executing its responsibilities as trustee of the 
Funds.  In 1827, the General Court appointed the treasurer of 
Quincy as the treasurer of the Adams Fund, incorporated the 
board of supervisors, and authorized the board of supervisors 
and the selectmen of Quincy to execute the intentions of 
President Adams and to receive and manage gifts from others for 
6 
 
the purposes articulated in the deeds.  See St. 1827, c. 59 
(1827 Act).  Quincy thereafter established a board of managers 
for the Adams Fund.6  In 1898, the General Court authorized 
Quincy as trustee of the Funds to sell and convey the Funds' 
real property holdings and to "invest[] and re-invest[]" the 
sale proceeds "from time to time . . . in real estate or in such 
securities as trustees are authorized to hold in this 
Commonwealth."  See St. 1898, c. 102 (1898 Act). 
 
In 1953, pursuant to an unpublished order of this court, 
after three prior income beneficiaries, Woodward was designated 
(and remains) the sole income beneficiary of the Funds.7 
6 The board of managers of the Adams Fund was comprised of 
the mayor of Quincy, the president of the city council, the 
treasurer and collector, and two members elected annually by the 
city council.  See § 2.144.020 of the General Ordinances of the 
City of Quincy.  It appears that whereas the board of 
supervisors and the board of managers shared responsibility for 
overseeing the Adams Fund, only the board of supervisors oversaw 
the Charles Francis Adams Fund. 
 
7 The Woodward School for Girls, Inc. (Woodward), was 
established and operated by the Woodward Fund, a trust created 
by the will of Dr. Ebenezer Woodward, a cousin of President John 
Adams, in 1894.  This fund was also managed by Quincy, but its 
board of managers was separate from those of the Funds.  In 
1952, Quincy filed a petition asking that the Funds be used to 
benefit Woodward, which was experiencing financial troubles.  
This court granted the petition and ordered that "the net income 
from the [Funds] . . . be paid to and expended by the City of 
Quincy in its capacity as trustee of the Woodward Fund and 
Property for the conduct, operation, maintenance, management, 
and advancement of the Woodward School for Girls."  The Woodward 
Fund was subsequently liquidated.  In his findings in the 
present dispute, the judge noted that the cy pres decree "did 
not . . . provide a requirement for any annual, quarterly, or 
                     
7 
 
 
1.  Investment advice and state of Funds.  By the time 
Woodward became the beneficiary of the Funds, the real estate 
holdings of the Adams Fund had diminished significantly, 
presumably due to sale.  At the end of 1952, the assets of the 
Adams Fund consisted of $4,474 in cash, $253,723.02 in 
investment assets, and an assessed value of $102,325 in real 
estate.  The value of the Adams Fund's investment assets in 1973 
totaled $321,932.43, an increase that may have been attributable 
to the further sale of real estate.  In April, 1973, the Adams 
Fund investment assets were invested in a portfolio consisting 
of ninety per cent fixed income and ten per cent equity 
securities.  That month, Quincy received investment advice it 
had requested from the South Shore National Bank (bank) with 
regard to managing the Funds' investment portfolio.  The joint 
boards of the Funds unanimously voted to adopt an agreement 
establishing an advisory relationship with the bank and to 
follow certain diversification investment advice it received 
from the bank.  However, Quincy never implemented the 
diversification recommendations, and instead, by 1990, nearly 
one hundred per cent of the Adams Fund's assets were invested in 
fixed income instruments.  In 2008, the value of the investment 
even periodic, income payments from the [Funds] to the Woodward 
School." 
                                                                  
8 
 
assets in the Adams Fund was reportedly still the same:  
$321,932.43. 
 
The assets of the Charles Francis Adams Fund, which are far 
smaller than those of the Adams Fund, have diminished somewhat 
over time.  As of 1953, the Fund had a value of $23,428, 
consisting of $1,453 in cash and $21,975 in securities 
(primarily in corporate bonds).  It has since declined to 
$19,982 as of 2005, when it consisted of $2,530 in cash and 
$17,452 in investments.8 
 
Despite the lack of growth in the Funds, between 1953 and 
2008, the Funds generated over $700,000 in income; this income 
was either paid to Woodward directly or used to pay the Funds' 
expenses. 
 
2.  Request for accounting and present litigation.  The 
present dispute began in 2005, when Woodward had, for two 
consecutive years, received a smaller distribution from the 
Funds than it had anticipated.  In light of these discrepancies, 
the chair of the Woodward board of trustees requested an 
accounting of the Funds from Quincy.  As of nearly one and one-
half years later, the school had received some information from 
8 As of 1962, the Charles Francis Adams Fund had a value of 
$24,323.  The Fund hovered in this range until 1977, when it 
dropped to $19,542.  As of 1984, the Fund contained $21,975. 
 
                     
9 
 
Quincy but not a full accounting, which it again requested.9  In 
July, 2007, after still receiving no response, Woodward filed a 
complaint and petition for an accounting with a single justice 
of this court against Quincy as trustee of the Funds.  Woodward 
asserted that "as beneficiary of the Funds, [it] is entitled to 
know, the real and financial assets currently in the Funds, 
information about the Funds' management, and historically what 
has happened to the Funds' assets and income."  The single 
justice transferred the case to the Norfolk County Division of 
the Probate and Family Court Department. 
 
A judge in that court appointed a special master to gather 
relevant documents regarding the Funds' assets, prepare an 
accounting for the Funds for the period of 1953 to 2008, 
inclusive, and issue a report assessing the propriety of the 
Funds' transactions.  See G. L. c. 206, § 2; Rule 20 of the 
Rules of the Probate and Family Court, Massachusetts Rules of 
Court, at 1051 (Thomson Reuters 2014).  Overall, the special 
master concluded that Quincy had committed a breach of its 
fiduciary duties in several respects, primarily because it had 
"not maintained adequate books and records to substantiate its 
9 Quincy had never previously provided an accounting of its 
stewardship of the Funds to Woodward. 
 
                     
10 
 
stewardship as Trustee," and it had sold the Funds' real 
property at less than fair market value.10,11 
10 This accounting and report was supplemented by that of a 
certified public accountant, who was retained to assist the 
special master.  Incorporating the accountant's findings, the 
special master made numerous findings, the most relevant of 
which are summarized here.  First, he determined that the return 
generated by the Funds' investments was "comparable to the 
market return of similar investments."  Second, he concluded 
that $85,090 in income from the Adams Fund that was not 
distributed to Woodward "was maintained in the Fund and 
reinvested in market rate instruments," and that $18,864 in 
income from the Charles Francis Adams Fund was wrongly withheld 
from Woodward.  Third, he concluded that real property sales 
conducted between 1953 and 1972 were below fair market value, 
and that the only remaining parcel of real property held by the 
Funds was leased at less than fair market rent.  Fourth, he 
determined that Quincy's expenses were significant and required 
justification.  Finally, the special master concluded that 
Quincy committed a breach of its duty of care to Woodward and 
"may have violated its duty to prudently invest trust assets" 
with regard to the land sales between 1955 and 1972;  committed 
a breach of "its duty of loyalty to Woodward when it engaged in 
business dealings which caused trust property to be sold for 
below fair market value"; committed a breach of its duty to 
furnish information to beneficiaries "by not informing Woodward 
of the 1972 petition concerning the lease" of real property 
owned by the Funds, which was not a prudent investment, and by 
not providing an actual accounting when Woodward requested one 
until ordered to do so by the court; and committed a breach of 
its duty to keep accurate records and provide reports.  In a 
supplemental report filed after receipt of additional 
documentation, the special master concluded that Quincy "did not 
adhere to the investment mandates" articulated in Deed A and 
"varied the investment portfolio between equities and bonds" 
when the deed seemed to limit investments to bonds only.  The 
special master also noted that the fifty-five year accounting 
period at issue exceeded the recommended record retention period 
and therefore questioned the timeliness of Woodward's challenge 
to Quincy's actions as trustee. 
 
11 The trial judge subsequently gave "presumptive weight" to 
the special master's findings and conclusions.  See 
Mass. R. Civ. P. 53 (h) (1), as amended, 386 Mass. 1237 (1982). 
                     
11 
 
 
Following the report of the special master, the dispute 
proceeded to a thirteen-day bench trial.  In February, 2011, an 
amended judgment and amended findings entered, with 220 findings 
of fact. 
 
The judge concluded that Quincy failed to keep accurate 
records of its financial stewardship of the Funds, to obtain 
appraisals for real property and to sell parcels at fair market 
value or greater,12 to act on professional investment advice it 
received, and to comport with its duty of loyalty to the Funds.  
The judge characterized Quincy's management of the Adams Fund 
specifically as "inattentive, imprudent and neglectful," but not 
so neglectful as to "rise to the level of gross corruption or 
gross mismanagement," such that the remainder beneficiary would 
take the trust property. 
 
With regard to Quincy's investment strategy for the Adams 
Fund, the judge made several findings relevant to Quincy's 
appeal.13  First, he concluded that Quincy did not commit a 
 
12 With regard to Quincy's real estate sales on behalf of 
the Adams Fund, the judge concluded that Quincy failed to fulfil 
its duty to sell realty for the best possible price, or at least 
for fair market value, and instead prioritized its own municipal 
needs. 
 
13 With regard to the investment strategy for the Charles 
Francis Adams Fund, the judge concluded that even though the 
Fund's corpus had declined by nearly fifteen per cent between 
1953 and 2005, it appeared that Quincy had made "a modest effort 
to pay income of this relatively basic trust over to the 
                                                                  
12 
 
breach of its fiduciary duty to the Funds by employing 
inappropriate investment strategies during the years of 1953 to 
1973.14  Second, with regard to the 1973 investment advice Quincy 
received from the bank, the judge found that Quincy received and 
unanimously voted to adopt a single portfolio diversification 
plan, consisting of sixty per cent in equity securities, thirty-
five per cent in fixed income, and five per cent in savings (60-
35-5 plan).  He concluded that Quincy failed to follow this 
directive, and that it "ignored the terms of its own April 11, 
1973, vote, and the competent, professional . . . advice 
contained therein, to the considerable detriment of the [Adams 
Fund]."  Therefore, Quincy acted imprudently and in violation of 
its fiduciary duties. 
 
Third, the judge found that it was imprudent for Quincy to 
permit the Adams Fund to consist almost entirely of fixed income 
and cash assets by 1990.  The judge rejected Quincy's assertion 
that it maintained the Fund's assets in government securities in 
order to comport with the explicit directive of the trust 
instrument; rather, the judge concluded that the Fund had acted 
in derogation of the 1892 legislation directing Quincy to invest 
Woodward School."  The judge therefore declined to speculate as 
to any loss in income received by Woodward from this Fund. 
 
14 Nonetheless, the judge expressed "serious reservations 
and concerns" regarding the investment approach employed during 
this period. 
                                                                  
13 
 
real estate sales proceeds "in real estate or in . . . 
securities," by instead investing "the fungible portion of the 
trust corpus in corporate bonds as well as in 
equities/securities."15 
 
In light of these findings, the judge awarded Woodward a 
total judgment of $2,994,868, including prejudgment interest of 
$1,610,826 and approximately $1.1 million for "[u]nrealized 
[g]ains in portfolio," and removed Quincy as trustee of the 
Funds.16 
15 This finding departed from the special master's finding 
on this issue. 
 
16 The $2,994,868 total judgment was calculated as follows:  
$255,566 in miscellaneous damages due to financial 
mismanagement, including recoupment of funds not received by the 
Adams Fund as a result of sales of real estate below fair market 
value, unrealized income from the sale of a particular parcel, 
the value of "missing" funds from the South Shore National Bank 
(bank) account where the trust assets were held and from 
unreported stock gains, and recoupment of an unexplained account 
deficiency; $1,135,494 for the unrealized gain in the investment 
portfolio; and a total of $1,610,826 in prejudgment interest on 
these items ($475,426 on the miscellaneous damages combined, and 
$1,135,400 on the unrealized gains); less a credit for 
disallowed expenses of $7,018.  Quincy's argument on appeal 
focuses primarily on the unrealized gains and the prejudgment 
interest portions of the award of damages.  It appears to 
concede that if the Massachusetts Tort Claims Act, G. L. c. 258, 
§§ 1 et seq., does not bar the award, Quincy would remain 
responsible for $119,271 of the $255,566 miscellaneous damages 
(the amount attributable to unrealized income from the sale of a 
particular parcel and the unexplained account deficiency), plus 
certain prejudgment interest on that amount.  Quincy asserts 
that the remainder of the $255,566 (attributable to below-market 
real estate sales and missing accounts and gains) is barred by 
laches. 
                     
14 
 
 
Discussion.  We will not disturb the findings of the trial 
judge or the special master unless they are clearly erroneous.  
Mass. R. Civ. P. 52 (a), as amended, 423 Mass. 1402 (1996).  See 
Chase v. Pevear, 383 Mass. 350, 359-360 (1981); Matter of Jones, 
379 Mass. 826, 839 (1980).  "A finding [of fact] is clearly 
erroneous . . . [if], although there is evidence to support it, 
the reviewing court on the entire evidence is left with the 
definite and firm conviction that a mistake has been committed" 
(quotations and citations omitted).  Demoulas v. Demoulas Super 
Mkts., Inc., 424 Mass. 501, 509 (1997). 
 
1.  Breach of fiduciary duties.  The primary issue in this 
case is whether the judge erred in concluding that Quincy 
committed a breach of its fiduciary duties by failing to invest 
in growth securities and by failing to heed investment advice it 
procured from an investment adviser.  Because trustees' conduct 
with regard to investment strategy and decision-making is 
governed by the prudent investor standard, we begin by 
articulating what that standard requires. 
 
a.  Prudent investor standard.  A trustee's obligations 
with regard to investing and managing a trust's assets are 
dictated by our common law and by the Massachusetts Prudent 
Investor Act, G. L. c. 203C, §§ 1 et seq.  See Kimball v. 
15 
 
Whitney, 233 Mass. 321, 331 (1919); Harvard College v. Amory, 9 
Pick. 446, 461 (1830).17 
 
A trustee has a duty to invest the trust's assets "solely 
in the interest of the beneficiaries."  G. L. c. 203C, § 6.  In 
performing this duty, a trustee must "exercise reasonable care, 
skill, and caution" in "invest[ing] and manag[ing] trust assets 
as a prudent investor would, considering the purposes, terms, 
and other circumstances of the trust."  Id. at § 3 (a).  Among 
those considerations are "the possible effect of inflation or 
deflation"; "the expected total return from income and the 
appreciation of capital"; "other resources of the 
beneficiaries"; and "needs for liquidity, regularity of income, 
and preservation or appreciation of capital."  Id. at 
§ 3 (c) (2), (5)-(7).  See O'Brien v. Dwight, 363 Mass. 256, 
17 Because the Massachusetts Prudent Investor Act, G. L. 
c. 203C, §§ 1 et seq. (Act), applies only "to decisions or 
actions of a trustee occurring on or after" the 1998 effective 
date of the Act, we apply the standards of both the common law 
and the Act and note distinctions where relevant.  See St. 1998, 
c. 398, § 3, inserting G. L. c. 203C.  In many respects, the Act 
mirrors the common-law doctrine that has existed since the mid-
1800s.  See Harvard College v. Amory, 9 Pick. 446, 461 (1830).  
See also Chase v. Pevear, 383 Mass. 350, 363 (1981).  However, 
the Act introduced two significant changes:  permissive 
delegation of duties, and the modern portfolio theory, which 
recognizes inflation as a factor to be considered in portfolio 
management decision-making and therefore shifts the assessment 
of a trustee's actions to the over-all construction of the 
portfolio.  See Taylor, Massachusetts' Influence in Shaping the 
Prudent Investor Rule for Trusts, 78 Mass. L. Rev. 51, 51-52 & 
n.5 (1993).  Compare Chase, supra at 364 (assessing each 
investment individually, but with some consideration of "the 
fund as a whole" [citation omitted]). 
                     
16 
 
294-295 (1973).  We assess investment decisions in the context 
of the over-all investment strategy of the trust.18  G. L. 
c. 203C, § 3 (b).  See Restatement (Third) of Trusts § 90 
(2007). 
 
A trustee exercising "reasonable care, skill and caution," 
G. L. c. 203C, § 3 (a), undoubtedly will approach investment 
decisions with some conservatism.  This, however, must be 
balanced with a degree of risk in order to obtain income for the 
trust and protect the principal against inflation.  See 
Restatement (Third) of Trusts, supra at § 90 comment e; 
Restatement (Second) of Trusts § 227 comment e (1959).  
Diversification of investments is therefore considered a central 
component of prudent investment because it both moderates and 
reduces risks.  See G. L. c. 203C, § 4; Chase, 383 Mass. at 363.  
Accordingly, trustees are discouraged from investing "a 
disproportionately large part of the trust estate in a 
particular security or type of security."  Restatement (Second) 
of Trusts, supra at § 228 comment a.  Nonetheless, the standard 
recognizes that in some circumstances, it may not be prudent to 
diversify an investment portfolio, particularly where "the 
objectives of both prudent risk management and impartiality can 
be satisfied" without diversification.  Restatement (Third) of 
18 For actions occurring prior to 1998, we evaluate each 
investment individually, but also consider investments in the 
context of the trust as a whole.  See Chase, 383 Mass. at 364. 
                     
17 
 
Trusts, supra at § 90 comment g.  See G. L. c. 203C, § 4; 
Restatement (Second) of Trusts, supra. 
 
b.  Investment advice.  We turn now to Quincy's first claim 
of error.  Quincy contends that the judge erred in concluding 
that Quincy was required to follow specific investment advice it 
requested and received in 1973.  In addition, it asserts that 
the judge misconstrued the investment advice at issue as 
providing only one recommendation, when the advice actually 
consisted of several alternatives, one of which Quincy claims to 
have followed.  We agree that the judge improperly considered 
strict compliance with investment advice to be required of a 
prudent investor.  We do not, however, consider the judge's 
interpretation of the advice provided to be clearly erroneous. 
 
The investment advice in dispute was provided by the bank 
in a letter dated March 29, 1973, and reviewed by the joint 
boards of the Funds at a meeting on April 11.19  The letter was 
interpreted by the trial judge as providing a single 
diversification recommendation of sixty per cent equity 
securities, thirty-five per cent fixed income, and five per cent 
savings (60-35-5 plan).20  This represented a drastic change from 
19 Quincy had requested this advice after receiving guidance 
from its legal counsel that it was permissible to seek 
professional advice regarding investments, but that Quincy would 
retain responsibility for making investment decisions. 
 
                     
18 
 
the Adams Fund's portfolio at the time of ninety per cent fixed 
income and ten per cent equity securities.  On receiving the 
investment advice, the joint boards unanimously voted to enter 
into an advisory relationship with the bank,21 and to "mak[e] 
investments and changes of investments in said Funds 
substantially within the outline as presented" by the bank in 
its letter.22  However, Quincy did not make changes to its 
20 The letter lends itself to several interpretations.  It 
ambiguously refers to three proposals, giving some credence to 
Quincy's suggestion that the letter did not provide only one 
directive.  We agree with Quincy that one of the proposals 
included in the letter was for "a modest upgrading of the 
balance of the bond portfolio into higher rate bonds," which 
Quincy purports to have followed.  However, we are not persuaded 
that the recommendations contained in the letter were meant to 
be alternatives rather than complements to each other.  Our own 
review of the letter suggests that the primary emphasis with 
regard to the Adams Fund was the adoption of a diversification 
plan consisting of sixty per cent in equity securities, thirty-
five per cent in fixed income, and five per cent in savings (60-
35-5 plan).  Accordingly, the judge's understanding of the 
letter as providing this recommendation is plausible and not 
clearly erroneous. 
 
21 The agreement authorized the bank "to review periodically 
and to advise or recommend to [Quincy] the retention, sale or 
exchange of the securities and other property in the [Funds] and 
to advise or recommend the purchase of stocks, bonds and other 
securities."  The agreement indicated that Quincy would 
ultimately be responsible for making decisions regarding "the 
acquisition or disposition of securities and other property." 
 
22 The trial judge found that the boards adopted the 
specific 60-35-5 diversification proposal discussed above.  
However, the meeting minutes do not reflect such a precise vote.  
Accordingly, we conclude that the boards did not adopt any 
specific reading of the investment advice provided in the letter 
but rather resolved to follow more generally the advice 
provided. 
                                                                  
19 
 
portfolio consistent with the advice it received, and instead 
increased the percentage of investments in fixed income assets 
so that, by 1990, nearly one hundred per cent of the assets of 
the Adams Fund were in fixed income investments.23 
 
Under both the common law and the Prudent Investor Act, a 
trustee is permitted to consult with and receive advice from 
accountants and financial advisers.  See G. L. c. 203C, 
§ 10 (a); Milbank v. J.C. Littlefield, Inc., 310 Mass. 55, 62 
(1941) ("A trustee may avail himself of the services of 
others"); Restatement (Third) of Trusts, supra at § 77 comment b 
& § 80 comment b.  Cf. Rothwell v. Rothwell, 283 Mass. 563, 571 
(1933) (trust disbursements paying agents and attorneys who 
assisted in trust management were appropriate); Hanscom v. 
Malden & Melrose Gas Light Co., 234 Mass. 374, 381 (1920) 
(same). 
 
Indeed, consulting investment advisers may be part of 
acting prudently and exercising care.  See Restatement (Third) 
of Trusts, supra at § 77 comment b.  "After obtaining advice or 
consultation, the trustee can properly take the information or 
suggestions into account but then (unlike delegation) must 
exercise independent, prudent, and impartial fiduciary judgment 
23 Although Quincy avers that it followed some of the advice 
in the letter by upgrading the Adams Fund's bond portfolio to 
higher rate bonds, as noted above we are not persuaded that this 
was more than a secondary component of the bank's broader 
diversification recommendation. 
                     
20 
 
on the matters involved."  Id. at § 80 comment b.  See Attorney 
Gen. v. Olson, 346 Mass. 190, 197 (1963) (trustee may employ 
bank as investment agent, as long as trustee gives independent 
consideration to agent's recommendation).  In contrast, were we 
to require a trustee to follow investment advice it receives, we 
would in effect mandate delegation of a trustee's fiduciary 
duties.24  We decline to require a trustee to abdicate this 
fundamental function of a trustee to make investment decisions 
merely because the trustee seeks advice on acting prudently.  
See Boston v. Curley, 279 Mass. 549, 562 (1931).  However 
prudent the advice may be, a trustee is not required to follow 
it.  To the extent the judge considered the failure to follow 
specific advice a per se breach of Quincy's fiduciary duty of 
prudent investment, this was in error. 
 
Whether a trustee requested and followed specific 
investment advice is but one factor in the determination of 
whether the trustee acted prudently.  Receipt of sound 
investment advice and dismissal or wilful ignorance of it, where 
the advice was at the time prudent and consistent with the trust 
24 The common law and the Prudent Investor Act take 
different approaches to delegation of a trustee's 
responsibilities. Compare G. L. c. 203C, § 10 (a) (permitting 
trustee to "delegate investment and management functions if it 
is prudent to do so"), with Milbank v. J.C. Littlefield, Inc., 
310 Mass. 55, 62 (1941) (trustee may not "delegate his authority 
as trustee"), and Boston v. Curley, 276 Mass. 549, 562 (1931).  
Merely receiving, considering, and adopting investment advice, 
however, does not constitute delegation under either standard. 
                     
21 
 
beneficiary's needs and goals, may be indicative of a lack of 
prudent investing.  But such action or inaction in and of itself 
does not rise to the level of imprudent investing.  The judge's 
reliance on the 1973 investment advice as a default prudent 
investment strategy resulted in inadequate consideration of the 
range of investment strategies that would have been prudent for 
the Adams Fund.25 
 
c.  Concern for principal of income-only fund.  Quincy also 
challenges the trial judge's finding that it committed a breach 
of its fiduciary duty by not investing in growth securities.  It 
asserts that as the trustee of a fund with only an income 
beneficiary, it had a "duty to maximize income, even at the risk 
of sacrificing growth," and therefore it was not obligated to 
invest in growth equities that would protect the principal from 
inflation.  It claims that it acted prudently in structuring the 
Adams Fund's investment portfolio as it did because the Fund 
produced income for Woodward, and the investments comported with 
the trust instrument's direction to invest the majority of the 
Fund's assets in government-backed bonds. 
 
The judge's findings regarding the Adams Fund's investment 
portfolio demonstrate that the Fund has been primarily invested 
 
25 We reserve our discussion of the impact of Quincy's 
failure to follow the bank's investment advice for a more 
holistic analysis of whether it acted prudently.  See part 1.d, 
infra. 
                     
22 
 
in fixed income assets since Woodward became the income 
beneficiary.  As a result, the value of the Fund has remained 
largely unchanged since 1973.  Despite this lack of principal 
growth, between 1973 and 2008, the Funds generated over $700,000 
in income, benefiting from a 7.54 per cent rate of annual 
return, which was either paid to Woodward directly or used to 
pay the Funds' expenses.  Nonetheless, the judge found that it 
was imprudent for Quincy "to permit, by 1990, the [Adams Fund] 
to consist of essentially 100% fixed income/cash assets," and 
that this imprudence significantly harmed the Adams Fund. 
 
Where, as here, the current beneficiary of a trust is an 
income-only beneficiary, courts in at least three other 
jurisdictions with similar prudent investor standards have 
concluded that a trustee owes a duty to that beneficiary to 
prioritize income over growth, and that investing in fixed 
income assets over equities is not a breach of fiduciary duty 
where such investments produce income for the beneficiary but 
may fail to maintain the principal against inflation.  See 
Tovrea v. Nolan, 178 Ariz. 485, 490 (Ct. App. 1993); SunTrust 
Bank v. Merritt, 272 Ga. App. 485, 488-489 (2005); In re Trust 
Created by Martin, 266 Neb. 353, 359-360 (2003).  See also Shirk 
v. Walker, 298 Mass. 251, 257-258 (1937).  This comports with 
the obligation under G. L. c. 203C, § 6, to invest for the 
benefit of the beneficiaries. 
23 
 
 
Although trustees in such cases are required to balance the 
interests of successive beneficiaries, one of whom is to receive 
the income during his or her lifetime and the other of whom is 
to take the principal on the income beneficiary's death, these 
courts have consistently concluded that a trustee does not 
commit a breach of a fiduciary duty "by investing the trust in 
such manner as to maximize the income payable to [the income 
beneficiary] rather than expand the corpus of the trust."  
SunTrust Bank, 272 Ga. App. at 489.  See Tovrea, 178 Ariz. at 
490 ("trustees' duty was [primarily] to invest in such a manner 
as to produce an income for [income beneficiary] and, 
secondarily, [to] preserve the principal"). 
 
In theory, the case for maximizing income over growth is 
even stronger here, because the income beneficiary is an 
institution and the remainder beneficiary takes only upon "gross 
corruption or mismanagement . . . notorious negligence, or any 
waste knowingly permitted," thereby justifying complete 
attention to the interests of Woodward.  See G. L. c. 203C, § 6.  
However, the Adams Fund's status as a charitable trust and 
Woodward's institutional status makes this case distinctly 
different from those involving trusts with a lifetime 
beneficiary. 
 
A charitable trust such as this one is designed to support 
an income beneficiary in perpetuity.  See Jackson v. Phillips, 
24 
 
14 Allen 539, 550 (1867) (charitable trusts exempt from rule 
against perpetuities).  As a result, the trustee must 
necessarily consider both the generation of income and the 
growth and maintenance of the principal in order to provide 
income funds to the beneficiary indefinitely.  See Restatement 
(Third) of Trusts, supra at § 90 comment e ("In balancing the 
return objectives between flow of income and growth of 
principal," trustee must consider trust's "purposes and 
distribution requirements").  In effect, Woodward is equivalent 
to both the lifetime income beneficiary and all subsequent 
beneficiaries. 
 
As such, acting prudently in managing a charitable trust 
that benefits an institutional income beneficiary requires 
considering the specific needs of the beneficiary in the short 
and long term and balancing prioritization of income with 
protection and preservation of the principal.  At a minimum, a 
trustee must consider how best to guard the principal against 
inflation, if not how to grow the principal while simultaneously 
generating income to support the beneficiary.  Where the income 
beneficiary will continue to exist in perpetuity, the mandate of 
G. L. c. 203C, § 3 (a), to act with "caution" necessarily 
entails considering "the possible effect of inflation or 
deflation," id. at § 3 (c) (2), and the "preservation or 
appreciation of capital," id. at § 3 (c) (7).  A trustee must 
25 
 
accordingly "invest with a view both to safety" -- "seeking to 
avoid or reduce loss of the trust estate's purchasing power as a 
result of inflation" -- and "to securing a reasonable return."  
Restatement (Third) of Trusts, supra at § 90 comment e. 
 
In this case, a prudent investor would have realized at 
some point, long before 2008, that a fund value that is 
unchanged for decades after 1953 has not kept up with inflation, 
and, given the potential perpetuity of the income beneficiary's 
needs, would have taken or attempted to take steps to protect 
the principal in order to preserve future income opportunities.  
If Quincy recognized that the Adams Fund was vulnerable to 
inflation, likely attributable to its lack of diversification, 
it had a duty to determine which of its assets could be invested 
in a manner that would guard against this vulnerability.  At a 
minimum, Quincy could have invested the proceeds from the sale 
of real estate in investments that would potentially protect the 
principal.  See St. 1898, c. 102.  Instead, Quincy chose to keep 
the Adams Fund's investment assets exclusively in bonds, which 
produced a higher rate of return than a more diversified 
portfolio but resulted in stagnation of the trust principal.26  
26 Quincy asserts that the terms of the trust instrument, 
Deed A, required it to invest most of the principal, with the 
exception of real property sales proceeds, in State and Federal 
bonds.  Under the Prudent Investor Act, a trustee may be 
relieved from the obligations set forth in the Act where the 
trust instrument requires the trustee to act otherwise and "the 
                     
26 
 
Where, in most instances, an increase in principal will lead to 
an increase in income, this decision not to diversify was 
imprudent in light of the Adams Fund's need to support Woodward 
in perpetuity and not merely during a human lifetime.  Even 
without the benefit of hindsight, see G. L. c. 203C, § 9, it is 
clear that Quincy did not take any steps to protect the Adams 
Fund's principal against inflation.  We therefore conclude that 
Quincy's failure to protect the principal against inflation 
alone was sufficient to constitute a breach of its fiduciary 
duty. 
trustee acted in reasonable reliance on the provisions of the 
trust."  G. L. c. 203C, § 2 (b).  See Restatement (Second) of 
Trusts § 228 comment f (1959) ("By the terms of the trust the 
requirement of diversification may be dispensed with").  
However, we are not persuaded that Quincy's complete reliance on 
this particularly restrictive trust provision was reasonable.  
Quincy failed to keep adequate records reflecting which assets 
could be invested only in bonds and which assets could be more 
broadly invested and used to diversify the portfolio and secure 
the principal against inflation.  Instead, Quincy invested 
nearly all of its assets in bonds, which undoubtedly exceeded 
the allocation that was required by the trust. 
 
 
Further, if the express terms of the trust proved too 
restrictive to achieve the trust's goals, Quincy could have 
appealed to the court to revise the trust's terms to better 
serve its original purpose.  See Trustees of Dartmouth College 
v. Quincy, 357 Mass. 521, 531 (1970) ("courts of equity" have 
general power "in the administration of charitable trusts to 
permit deviations short of cy pres applications"); Briggs v. 
Merchants Nat'l Bank of Boston, 323 Mass. 261, 274-275 (1948) 
(applying cy pres doctrine because "[equity] will presume that 
the donor would attach so much more importance to the object of 
the gift than to the mechanism by which he intended to 
accomplish it that he would prefer to alter the mechanism to the 
extent necessary to save the object"). 
 
                                                                  
27 
 
 
d.  Quincy's over-all performance.  As the above 
discussions illustrate, Quincy engaged in several shortcomings 
in its management of the Adams Fund's investment portfolio that 
indicate that it failed to perform as a prudent investor would 
under the circumstances.  See G. L. c. 203C, § 3 (a).  Although 
Quincy sought and received ongoing investment advice from the 
bank in 1973 and thereafter,27 it does not appear that it ever 
heeded the most significant, and seemingly prudent, advice the 
bank provided, construed in even the most general terms:  to 
diversify the Adams Fund's portfolio in such a way that would 
decrease slightly the annual rate of return but would realize 
some appreciation for the principal.  This factor, while not 
dispositive, is illustrative of Quincy's general lack of 
consideration of diversification, long considered a prudent 
investment strategy, see G. L. c. 203C, § 4; Chase, 383 Mass. at 
363, and its disregard for both the 1898 legislative directive 
and the long-term needs of the income beneficiary. 
 
We are not persuaded that Quincy was prohibited from 
following this advice or from otherwise diversifying the Adams 
Fund's portfolio by the restrictions in the trust instrument.  
See note 26, supra.  Rather, as Quincy's legal counsel observed 
27 The board meeting minutes reflect that an investment 
representative from the bank attended the board meetings and 
provided reports to Quincy in the decades following the 1973 
advice. 
                     
28 
 
and as the 1898 Act required, Quincy was in fact directed to 
invest the real estate sale proceeds "in real estate or in such 
securities as trustees are authorized to hold in this 
Commonwealth."  St. 1898, c. 102, § 2.  The limitation 
articulated in Deed A of investing in government-issued bonds 
did not apply to these proceeds.  Thus, contrary to Quincy's 
assertion that it was following the restrictions on the 
investment of the Adams Fund, its nearly complete investment in 
bonds suggests that Quincy actually contravened the applicable 
investment restrictions. 
 
Finally, and most significantly, Quincy failed to invest 
with the long-term needs and best interests of the income 
beneficiary in mind, creating a portfolio that consistently 
provided income but that left the principal vulnerable to 
inflation and, as a result, depreciation.  See Harvard College, 
9 Pick. at 458.  Accordingly, based on these considerations, the 
judge's ruling that Quincy committed a breach of its fiduciary 
duty of prudent investment was not clearly erroneous. 
 
2.  Award of damages.  We turn next to Quincy's allegations 
of error in the theory and calculation of the award of damages. 
 
a.  Theory of damages.  Quincy contends that the judge 
improperly devised a new liability theory, that of Quincy's 
failure to achieve any capital appreciation for the Adams Fund, 
that had not previously been an issue in the case.  Quincy avers 
29 
 
that by "injecting" this issue into the case, enabling Woodward 
to assert the issue by permitting its expert witness to testify 
based on the theory, and making a finding based on this 
testimony, the judge engaged in an inappropriate fact-finding 
method and denied Quincy an adequate opportunity to prepare to 
defend against the theory.  We agree with Woodward that the 
issue of lack of capital appreciation was present from the 
beginning of the litigation, and further note that even if it 
were not, a judge has the authority to raise an issue in the 
case as long as adequate notice is afforded to the parties. 
 
We begin with a brief description of what transpired.  On 
the second day of trial, in the presence of counsel, the judge 
indicated his disbelief that the Adams Fund's principal would 
not have grown significantly over the course of nearly sixty 
years.28  He then proceeded to ask counsel a number of rhetorical 
but relevant questions about why the value of the Adams Fund had 
not appreciated, speculating that perhaps various stock 
28 Specifically, the judge stated, "It is inconceivable to 
me that the value of the portfolio has not doubled, tripled, 
quadrupled over [sixty] years."  He observed that there had been 
no growth in the Adams Fund's portfolio but that "[t]he 
investments seemed reasonable" and "didn't seem inappropriate."  
In encouraging the parties to seek a settlement, the judge noted 
that he had "no idea what the end result of this case [was] 
going to be" and that it was "unusual that a trust fund, whereby 
there would be no invasion of the principal, doesn't grow over 
[sixty] years of an incredible period of time of growth in the 
country. . . . It is inconceivable that there would not be an 
increase." 
                     
30 
 
investments had been made that did, at least temporarily, lead 
to some appreciation, the value of which was then lost through 
unsuccessful investments, but that such transactions were simply 
not reflected in the Fund's records.  Quincy asserts that these 
statements "injected" the issue of capital appreciation into the 
case. 
 
Thereafter, Woodward identified Scott Winslow as an expert 
witness who would testify that the Adams Fund's investment 
portfolio, being primarily invested in bonds, was such that it 
resulted in significant underperformance.  Quincy moved to 
exclude Winslow's testimony, asserting that it "would introduce 
a new issue in the middle of trial."  In opposition, Woodward 
contended that Winslow's testimony would "respond to the Court's 
questions regarding why it was that despite a period of 
extraordinary growth in the economy, the principal of [the 
Funds] did not increase in value."  Woodward further asserted 
that capital appreciation had been an issue from the beginning.  
The judge denied the motion but ultimately limited Winslow's 
testimony on this issue to whether the investments were 
consistent with the advice Quincy had received from the bank, 
and prohibited Winslow from testifying about a theoretical 
proposal that Quincy could have followed. 
 
Winslow testified that, had Quincy employed the 60-35-5 
diversification plan recommended by the bank in 1973, the Adams 
31 
 
Fund would have grown in value significantly.  Because Quincy 
did not do so, the Fund's value remained unchanged from 1973 to 
2008.  The judge credited this testimony and used it to 
calculate the damages owed to Woodward. 
 
Although the specific calculations employed by Winslow and 
adopted by the judge were inappropriate for the award of 
damages, as we discuss infra, there was no error in the process 
by which this liability theory was introduced.  The question of 
capital appreciation was indeed mentioned in Woodward's 
complaint, in the order appointing a special master, and in 
Woodward's pretrial memorandum.  Given this early introduction 
of the issue, we are not persuaded that Quincy was denied a 
meaningful opportunity to prepare to defend against this 
assertion.  Contrast Harrington-McGill v. Old Mother Hubbard Dog 
Food Co., 22 Mass. App. Ct. 966, 968 (1986).  
 
Even if the issue were not raised in the complaint and 
other documents, the judge may introduce a recovery theory or 
unpleaded issue at trial if there is "implied consent" of the 
parties, reflected by evidence "that the parties knew the 
evidence bearing on the unpleaded issue was in fact aimed at 
that issue and not some other issue the case involved."  Jensen 
v. Daniels, 57 Mass. App. Ct. 811, 816 (2003).  See 
Mass. R. Civ. P. 15 (b), 365 Mass. 761 (1974); Harrington-
McGill, 22 Mass. App. Ct. at 968.  As the above discussion 
32 
 
regarding Quincy's breach of fiduciary duty evinces, the 
question whether a trust's principal has experienced any capital 
appreciation is part of the inquiry into whether a trustee has 
engaged in prudent investments.  Accordingly, Quincy cannot 
claim that, where a breach of fiduciary duty was alleged for 
improper investment strategies, it was unaware that principal 
appreciation might be an issue or even unaware of the facts that 
might be used in support of an argument that there was no 
appreciation. 
 
Further, in raising the theory, the judge afforded numerous 
opportunities for Quincy to respond.  Quincy was permitted to 
depose Winslow prior to cross-examination and to retain an 
expert and prepare a response to Winslow's testimony, which it 
did.  In addition, the judge limited Winslow's testimony on this 
issue.  Thus, Quincy suffered no prejudice in the way the 
liability theory was introduced, see Cormier v. Grant, 14 Mass. 
App. Ct. 965, 965 (1982), and there was no issue of "fundamental 
fairness" in the inclusion of the theory at trial.  See Jensen, 
57 Mass. App. Ct. at 816. 
 
b.  Calculation of damages.  Quincy also alleges that the 
judge erred in calculating the award of damages award in three 
respects: first, by basing the award for unrealized gains on 
what the value of the Adams Fund would have been had Quincy 
followed the specific investment advice the judge found that 
33 
 
Quincy received in 1973; second, in deciding not to subtract 
from the unrealized gains the costs and expenses Quincy 
theoretically would have incurred had it followed the 
diversification plan; and third, in awarding prejudgment 
interest dating back to the date of each breach.29  We agree that 
the formula used to calculate unrealized gains was 
inappropriate, but reject Quincy's other claims. 
 
i.  Basis for unrealized gains.  Quincy first asserts that 
the judge's finding that Quincy should have adopted a specific 
portfolio diversification plan recommended by the bank in 1973, 
and the judge's employment of this plan by way of Winslow's 
testimony to calculate the unrealized gains, was clearly 
erroneous.  We agree. 
 
In awarding damages, the judge concluded that the Adams 
Fund was "entitled to a return on monies it would have 
29 Quincy also asserts that the judge's findings were 
inadequate to support the award.  While we agree with Quincy 
that the judge is required to make subsidiary findings of fact 
in support of an award, see Mass. R. Civ. P. 52 (a), as amended, 
423 Mass. 1402 (1996), we are not persuaded that the judge did 
not adequately do so here.  See Willis v. Selectmen of Easton, 
405 Mass. 159, 161-162 (1989) (judge need only "articulate the 
essential grounds for a decision" and demonstrate that he or she 
"has dealt fully and properly with all the issues").  Further, 
to the extent Quincy challenges the judge's crediting of the 
testimony of Scott Winslow generally, and his discrediting of 
the testimony of Quincy's expert witness, we note that the judge 
is entitled to credit any properly admitted expert testimony he 
or she deems credible, and that the judge here explicitly found 
that Winslow's opinion was credible.  See Delano Growers' Coop. 
Winery v. Supreme Wine Co., 393 Mass. 666, 682 (1985). 
                     
34 
 
reasonably realized but for the imprudent actions of the 
Trustee."  Because the judge determined that it was imprudent 
for Quincy to ignore the bank's investment advice, and 
interpreted this advice as providing a 60-35-5 diversification 
plan, the judge calculated the return the Adams Fund would have 
realized based on this recommended portfolio and the five per 
cent rate of return the bank anticipated that such a portfolio 
would receive.  Using this information, Winslow had testified 
that, had Quincy employed this diversification plan, given the 
growth in the equity market between 1973 and 2008, the Adams 
Fund would have grown from its 1973 value of $321,932.43 to a 
value of $1,457,426 in 2008.30  The judge therefore determined 
that the Fund suffered a loss in value of $1,135,494, or an 
average annual loss of income of $31,542, from Quincy's failure 
to act prudently and to employ the bank's portfolio 
recommendation.  Accordingly, he included this amount, plus 
prejudgment interest, in the total award. 
 
To the extent the damages here were based on the judge's 
finding that Quincy ignored the specific investment advice it 
received in 1973, the finding and calculation were in error.31  
30 Quincy takes issue with the bond indexes employed by 
Winslow in calculating these numbers.  Because we conclude that 
the formula used to calculate the unrealized gains was 
inappropriate, we decline to assess whether the indexes Winslow 
used were appropriate here. 
 
                     
35 
 
As discussed above, a trustee is not required to follow 
investment advice strictly but rather must invest prudently.  
See G. L. c. 203C, §§ 1 et seq.  Therefore, an award of damages 
cannot be based solely on what the trust's investment portfolio 
performance would have been had the trustee complied with 
certain, specific advice.  Such reliance on a potential 
investment portfolio necessarily and improperly employs the 
benefit of hindsight.  See id. at § 9.  Unfortunately, this is 
precisely the formula the trial judge employed here. 
 
The award must be based on more than just the unheeded 
investment advice a trustee received, and should instead 
consider the totality of the circumstances as they would have 
informed prudent investment decisions over the relevant time 
period.  See Quinton v. Galvin, 64 Mass. App. Ct. 792, 800 
(2005) (judge must reach "approximate estimate of the 
plaintiffs' damages" in considering variety of factors).  Cf. 
Bernier v. Bernier, 449 Mass. 774, 785 (2007) (valuation of 
business for purposes of divorce proceeding must not be 
31 We disagree with Woodward's assertion that it was proper 
for the judge to rely on Winslow's testimony in calculating the 
award where Quincy did not present any contrary methodology or 
challenge Winslow's calculations.  Were the methodology employed 
by the judge sound, and simply not the approach most favorable 
to Quincy, we would uphold the judge's calculation.  However, we 
cannot permit a judge's ruling to stand where it is clearly 
erroneous, as we conclude it is here.  See Mass. R. Civ. P. 
52 (a), as amended, 423 Mass. 1402 (1996).  See also Young Men's 
Christian Ass'n of Quincy v. Sandwich Water Dist., 16 Mass. App. 
Ct. 666, 672-673 (1983). 
                                                                  
36 
 
"materially at odds with the totality of the circumstances").  
Factors to consider in this case include the state of the 
relevant bond and equities markets when various investment 
decisions were made, not just at one point in time decades ago; 
the terms and limitations of the trust instrument; the specific 
needs of the income beneficiary in the short and long term; and 
any risk calculations that may have influenced the trustee's 
decisions, including subsequent advice from the bank, the Funds' 
financial advisor.  Cf. Black v. Parker Mfg. Co., 329 Mass. 105, 
112, 116-117 (1952) (assessment of value of unique services 
involves consideration of variety of tangible and intangible 
factors).  As another factor, the judge may "take into account 
his general knowledge of economic conditions during the period 
of [the trustee's] transgressions."  Quinton, supra.  These 
factors can appropriately guide the judge's determination of 
"what asset mix a prudent fiduciary would have maintained" for 
the Adams Fund during the lengthy time frame at issue.  See 
Meyer v. Berkshire Life Ins. Co., 250 F. Supp. 2d 544, 573 (D. 
Md. 2003). 
 
Because the judge here considered merely one possible 
investment approach and did not account for these other factors, 
we reverse the award for unrealized gains in the portfolio and 
remand for further proceedings on this measure.  On remand, an 
assessment of what a prudent investor would have done requires 
37 
 
expert testimony on the minimum level of growth equities that 
would have been prudent for an income-only fund, with 
consideration of the potential shifts over the lengthy period at 
issue.  A prudent investor may well have followed the 60-35-5 
plan, or could have chosen a portfolio with a lower allocation 
to growth equities.  At a minimum, the record must be thoroughly 
developed and findings made regarding the range of prudent 
strategies, so that the award, particularly with regard to 
unrealized gains, is calculated with a fuller understanding of 
the minimum growth equities allocation in mind.32 
 
ii.  Accounting for costs and expenses.  Quincy also 
asserts that the judge erred in failing to subtract from the 
damages related to the return on investment the costs and 
expenses the Adams Fund would have incurred in realizing those 
investment gains.  See G. L. c. 203C, § 8 (trustee may incur 
"costs that are appropriate and reasonable in relation to the 
assets, the purpose of the trust, and the skills of the 
trustee").33 
32 Recalculating the unrealized gains on the portfolio also 
requires careful consideration of the extent of likely stock 
appreciation and the appropriate rate of return corresponding 
with the portfolio or portfolios on which the award is based. 
 
33 Although the judge did not exclude any costs or expenses 
from the calculation of the unrealized return on investments, he 
did exclude from the total award expenses that he found to be 
allowable, including reasonable compensation for Quincy's 
services, despite the fact that Quincy never submitted a bill 
                     
38 
 
 
The plaintiff bears the burden "to introduce evidence 
proving its damages to a reasonable certainty."  See Brewster 
Wallcovering Co. v. Blue Mountain Wallcoverings, Inc., 68 Mass. 
App. Ct. 582, 609 (2007).  The theory or explanation for the 
damages requested need not be the soundest one; it need only 
"provide[] a sufficiently (if minimally) rational basis" for the 
award.  Id. at 611.  Cf. Bernier, 449 Mass. at 785.  Woodward 
met this burden by presenting Winslow's testimony.  There is no 
obligation on the part of the judge to decrease potential 
damages sua sponte because of costs or expenses not admitted in 
evidence.  In the absence of contrary testimony from Quincy 
regarding what its costs were or would have been had it 
implemented the investment strategy on which the award was 
based, the judge did not err in crediting the reasonable opinion 
proffered by Woodward's expert as to what costs and expenses a 
trustee using a hypothetical portfolio would have incurred.  Cf. 
Bernier, supra. 
 
iii.  Award of prejudgment interest.  Finally, Quincy 
challenges the judge's award of interest on each measure of 
damages from the last date on which the damage was sustained, 
for this compensation.  In fact, the judge found that Quincy 
would be due a credit against other funds owed to the Adams Fund 
of $7,018, given $157,025 in allowed expenses offset by $150,007 
in disallowed expenses.  This credit was factored into the total 
award. 
                                                                  
39 
 
consistent with the judge's findings on these issues.34  Quincy 
avers that the judge erred in including this prejudgment 
interest because, in tort actions, such interest can be awarded 
only from the date of the filing of the complaint, and not from 
the date of the breach itself, pursuant to G. L. c. 231, § 6B.35  
We conclude that G. L. c. 231, § 6B, does not apply here, and 
affirm the awards of prejudgment interest.36 
 
General Laws c. 231, § 6B, provides for the addition of 
interest to the amount of damages awarded in an action involving 
damage to property and other such tort actions, at a rate of 
twelve per cent per year from the date of commencement of the 
action.  The statute is intended "to compensate a damaged party 
34 For example, the judge found that 1962 was the year of 
the Adams Fund's last sale of real estate below fair market 
value, and thus he included interest from the end of 1962 on the 
monies not received as a result of these below-market real 
estate sales.  In addition, the judge found that the sale of a 
property referred to as "Vigoda" should have occurred in 1972 
but did not occur at all, and therefore he awarded interest from 
January 1, 1972.  The judge employed two different rates of 
return in calculating the prejudgment interest:  five per cent 
for the unrealized gain in the investment portfolio, and 7.54 
per cent for all other measures. 
 
35 Quincy also avers that prejudgment interest is barred in 
claims against municipalities under the Massachusetts Tort 
Claims Act.  See G. L. c. 258, § 2.  Because, as discussed 
infra, we conclude that Quincy waived its sovereign immunity on 
these claims and therefore that the Tort Claims Act does not 
govern here, we decline to address this claim. 
 
36 However, the rate of return the judge employed for the 
unrealized gain in the investment portfolio may require 
reconsideration on remand, consistent with our discussion above 
regarding the flaws in this particular analysis. 
                     
40 
 
for the loss of use or the unlawful detention of money."  McEvoy 
Travel Bur., Inc. v. Norton Co., 408 Mass. 704, 717 (1990), 
quoting Conway v. Electro Switch Corp., 402 Mass. 385, 390 
(1988).  The primary goal of this statutory interest award is 
not to make the aggrieved party whole, but rather "to compensate 
for the delay in the plaintiff's obtaining his money."  See 
Bernier v. Boston Edison Co., 380 Mass. 372, 388 (1980).  To 
achieve this goal, § 6B affords a standard return that the 
aggrieved party "would have had but for the other party's 
wrongdoing," regardless of what the theory of liability or 
underlying damages calculation is.  See McEvoy, supra. 
 
In contrast, "[w]hen a breach of trust occurs, the 
beneficiary of the trust is 'entitled to be put in the position 
he would have been in if no breach of fiduciary duty had been 
committed.'"  Berish v. Bornstein, 437 Mass. 252, 270 (2002), 
quoting Fine v. Cohen, 35 Mass. App. Ct. 610, 616 (1993).  
Making the beneficiary whole, particularly where the breach 
stems from imprudent investment decisions having an impact on 
the growth of the trust's assets, may require awarding interest 
beginning from the time of the breach, such that the trust's 
assets resemble what they would have but for the breach.  In 
such circumstances, the award of prejudgment interest is part 
and parcel of the award of damages itself, and is not 
compensation for the delay of litigation in the same sense as 
41 
 
interest awarded under G. L. c. 231, § 6B.  Accordingly, it was 
not erroneous for the judge here to find that the Adams Fund was 
entitled to a return on monies that it would have reasonably 
realized but for Quincy's imprudent actions, and to award 
prejudgment interest stemming from the last date of breach in 
order to make the Adams Fund whole.37 
 
3.  Claimed bars to recovery.  We discuss briefly Quincy's 
remaining assertion that Woodward's claims should have been 
barred on the grounds of sovereign immunity; the Massachusetts 
Tort Claims Act, G. L. c. 258, §§ 1 et seq.; and laches.  We 
conclude that Woodward's claims were not so barred, and recovery 
against Quincy was proper. 
 
a.  Sovereign immunity and applicability of Tort Claims 
Act.  Quincy first argues that because Woodward ultimately 
brought a breach of fiduciary duty claim, which sounds in tort, 
Woodward was obligated to follow the requirements of the Tort 
Claims Act or else Quincy, as a municipality, would be 
effectively protected against the claim by sovereign immunity.  
Further, Quincy avers that Woodward failed to satisfy the Tort 
37 There may be circumstances in which it is proper to apply 
G. L. c. 231, § 6B, to tort actions arising from the breach of a 
fiduciary duty of a trustee.  See, e.g., Lattuca v. Robsham, 442 
Mass. 205, 210 (2004).  Where, however, the judge determines 
that an award of prejudgment interest is necessary to make the 
beneficiary whole, the additional award of interest under § 6B 
would be excessive and improper, as such an award is not 
punitive in nature.  See McEvoy Travel Bur., Inc. v. Norton Co., 
408 Mass. 704, 717 (1990). 
                     
42 
 
Claims Act's presentment requirement specifically, and therefore 
its claim should have been barred.  See G. L. c. 258, § 4.  
Woodward, in contrast, asserts that its claim sounds in contract 
rather than tort, because Quincy's obligations to manage the 
Funds arose through a contractual relationship with President 
Adams, and therefore the Tort Claims Act does not place any 
conditions on its claim.  Alternatively, if its claim does sound 
in tort rather than contract, Woodward contends that Quincy's 
sovereign immunity is impliedly waived, due to Quincy's 
acceptance of the role of trustee and subsequent acts by the 
Legislature affirming this role, such that Woodward's claim 
properly survived. 
 
In determining whether a claim arises in tort or contract, 
we look to "the essential nature of the plaintiff's claim."  
Hendrickson v. Sears, 365 Mass. 83, 85 (1974).  When Quincy 
accepted the responsibility to manage President Adams's property 
in trust, Quincy and President Adams entered into a contract, 
see Dunphy v. Commonwealth, 368 Mass. 376, 383 (1975), of which 
Woodward is an intended third-party beneficiary and therefore is 
entitled to enforce the contract's terms.  See Miller v. Mooney, 
431 Mass. 57, 61-62 (2000); Anderson v. Fox Hill Village 
Homeowners Corp., 424 Mass. 365, 366-367 (1997), and cases 
cited.  However, although Woodward initiated this action seeking 
an accounting, a purely contractual claim, the case evolved into 
43 
 
an action for breach of fiduciary duty, a claim that sounds in 
tort, see Doe v. Harbor Schs., Inc., 446 Mass. 245, 254 (2006); 
Lattuca v. Robsham, 442 Mass. 205, 210, 213 (2004), and arises 
by operation of law rather than by contractual obligation.  See, 
e.g., G. L. c. 203C, §§ 1 et seq.  See also LeBlanc v. Logan 
Hilton Joint Venture, 463 Mass. 316, 328 (2012) ("Where a 
contractual relationship creates a duty of care to third 
parties, the duty rests in tort, not contract").  Accordingly, 
the present case is a tort action.  To the extent Woodward asks 
us to frame its claim as a contractual one, we decline to do so.  
See Anthony's Pier Four, Inc. v. Crandall Dry Dock Eng'rs, Inc., 
396 Mass. 818, 823 (1986). 
 
As Woodward's claim sounds in tort, Quincy asserts that the 
Tort Claims Act imposes numerous conditions that Woodward failed 
to fulfil.38  See G. L. c. 258, §§ 1 et seq.; Morrissey v. New 
England Deaconess Ass'n -- Abundant Life Communities, Inc., 458 
Mass. 580, 587 (2010).  The purpose of the conditions imposed by 
the Tort Claims Act is to limit tort claims against 
municipalities in order to maintain effective government.  See 
id.; Vasys v. Metropolitan Dist. Comm'n, 387 Mass. 51, 57 
38 Among these is the requirement that the plaintiff present 
its claim to the executive officer of the municipality within 
two years of when the cause of action arises.  See G. L. c. 258, 
§ 4; Richardson v. Dailey, 424 Mass. 258, 261-262 (1997).  The 
parties do not dispute that Woodward did not comply with this 
presentment requirement.  In addition, the Tort Claims Act 
places a $100,000 limit on damages.  G. L. c. 258, § 2. 
                     
44 
 
(1982).  See also Whitney v. Worcester, 373 Mass. 208, 217 
(1977).  Hence, G. L. c. 258, § 10, explicitly excludes certain 
types of claims that the Legislature clearly decided must give 
way to sovereign immunity. 
 
Because the Tort Claims Act is in effect a mechanism for 
both limiting and preserving sovereign immunity from certain 
tort claims,39 see Morrissey, 458 Mass. at 587, and cases cited, 
its restrictions do not apply where a municipality has waived 
sovereign immunity, and thereby implicitly waived the 
protections afforded by the Tort Claims Act.  Sovereign immunity 
may be waived expressly by statute or implicitly, where 
"governmental liability is necessary to effectuate the 
legislative purpose."  Todino v. Wellfleet, 448 Mass. 234, 238 
(2007).  See Woodbridge v. Worcester State Hosp., 384 Mass. 38, 
42 (1981), and cases cited.  We conclude that Quincy's sovereign 
immunity is impliedly waived here. 
 
First, when Quincy agreed to serve as trustee, it assumed 
the fiduciary duties of that role, including the consequences 
for not fulfilling these duties.  The policy purposes of 
39 Indeed, the Tort Claims Act replaced any prior common-law 
sovereign immunity doctrine with regard to tort claims and was 
designed to provide "a comprehensive and uniform regime of tort 
liability for public employers."  Morrissey v. New England 
Deaconess Ass'n -- Abundant Life Communities, Inc., 458 Mass. 
580, 588 (2010), quoting Lafayette Place Assocs. v. Boston 
Redev. Auth., 427 Mass. 509, 534 (1998), cert. denied, 525 U.S. 
1177 (1999). 
                     
45 
 
sovereign immunity are not served where, as here, a municipality 
takes on a responsibility beyond its inherent or core government 
functions and therefore serves in a capacity that could just as 
easily be accomplished by a nongovernmental entity.  See 
Morrissey, 458 Mass. at 587.  See also Minton Constr. Corp. v. 
Commonwealth, 397 Mass. 879, 880 (1986) (where municipality has 
assumed certain obligations through contract, it has waived 
sovereign immunity against actions brought to enforce such 
obligations).  In essence, by choosing to accept the obligations 
of trusteeship, Quincy waived any sovereign immunity from claims 
arising from its duties as a trustee. 
 
A trustee, regardless of whether it is a municipality, a 
corporation, or a private individual, is accountable to courts 
for its conduct in fulfilling, or committing a breach of, the 
fiduciary duties it owes.40  See Fox of Boylston St. Ltd. 
Partnership v. Mayor of Boston, 418 Mass. 816, 818 (1994).  
Unlike the statute at issue in Woodbridge, 384 Mass. at 42, 44-
45, where we determined that sovereign immunity was not waived, 
the Prudent Investor Act creates "a formal system of actionable 
guaranties," id. at 42, and expects the same level of conduct 
from any trustee.  See G. L. c. 203C, §§ 1 et seq.  "[A] natural 
and ordinary reading" of the Prudent Investor Act indicates that 
40 Indeed, Quincy has sought court direction regarding the 
administration of the Funds previously, and therefore has 
subjected itself to court supervision on these matters. 
                     
46 
 
where a municipality accepts the obligations of serving as a 
trustee, it will be held to the same standards and subject to 
the same penalties as any other trustee.  See DeRoche v. 
Massachusetts Comm'n Against Discrimination, 447 Mass. 1, 14 
(2006). 
 
Several legislative acts specific to the Funds further 
signal that Quincy is liable for any breach of the trustee 
responsibilities it has assumed.  The 1827 Act appointed the 
treasurer of Quincy as treasurer of the Adams Fund and 
authorized a board of supervisors and the selectmen of Quincy to 
execute President Adams's intentions.  See St. 1827, c. 59.  It 
further required the treasurer to "render an account of his 
doings, and exhibit a fair and regular statement of the property 
in his hands."  St. 1827, c. 59, § 9.  The 1898 Act authorized 
Quincy, as trustee, to sell and convey the Adams Fund's real 
property holdings, and in effect confirmed Quincy's legal 
responsibility to administer the Fund and invest its assets.  
See St. 1898, c. 102.  In neither of these acts did the 
Legislature indicate that Quincy would be held to standards 
different from those applicable to other trustees. 
 
To effectuate the purposes of these acts, we must consider 
sovereign immunity to be impliedly waived.  The Legislature 
could not have intended to enable a municipality to serve as a 
trustee, by way of the Prudent Investor Act and the 1827 and 
47 
 
1898 Acts, and simultaneously relieve it of the fiduciary duties 
inherent in the role of a trustee.  Reading Quincy's obligations 
otherwise would frustrate the general intent of the Prudent 
Investor Act that trustees further the interests of trust 
beneficiaries, by eliminating any recourse for mismanagement, 
and would be illogical in light of the specific acts of the 
Legislature empowering Quincy to take on such fiduciary 
responsibilities on behalf of the Funds.  Accordingly, the Tort 
Claims Act cannot be read to limit tort liability where a 
municipality has agreed to serve as a trustee.41 
 
b.  Laches.  Quincy also argues that the equitable doctrine 
of laches bars Woodward's claim.  We agree with Woodward, the 
trial judge, and the special master that the claim is not barred 
on this ground. 
 
Quincy avers that Woodward unduly delayed in bringing this 
action, and that this delay prejudiced Quincy because several of 
its key witnesses had died since the alleged breaches occurred.  
Quincy's primary contention on appeal is that the judge 
improperly required actual knowledge by Woodward of Quincy's 
41 Because we conclude that Quincy waived the provisions of 
the Tort Claims Act, including its exceptions, we decline to 
address Quincy's claim that the Probate and Family Court lacked 
subject matter jurisdiction for the claim under G. L. c. 258, 
§ 3. 
 
For the same reason, we need not decide whether Quincy's 
assertion that it is immune from suit on this claim under G. L. 
c. 258, § 10 (b), is a valid one. 
                     
48 
 
mismanagement of the Funds in order to satisfy the laches 
standard; instead, Quincy asserts that an opportunity to 
ascertain such facts is all that is required for a laches 
defense. 
 
At trial, Quincy identified two occasions on which it 
asserted that Woodward had constructive knowledge of Quincy's 
failings as a trustee.  First, Quincy suggested that Woodward 
knew of Quincy's inadequacies as early as the 1960s, when the 
headmistress of Woodward communicated to Quincy's primary 
record-keeper that she was disappointed that Quincy had sold at 
least one parcel owned by the Funds for less than fair market 
value.  Second, Quincy alleged that as a result of litigation in 
the late 1980s between Woodward and Quincy regarding Quincy's 
mismanagement of the Woodward Fund, a separate trust, Woodward 
knew or should have known that Quincy was engaging in similar 
mismanagement of the Funds at issue here.  Quincy contends on 
appeal that this constructive notice should have been adequate 
to satisfy the laches standard. 
 
Both the special master and the trial judge rejected 
Quincy's laches claim because it had not established that 
Woodward had actual knowledge of Quincy's breach prior to its 
seeking of an accounting in 2005.42  There is no flaw in the 
42 The trial judge specifically rejected Quincy's assertion 
that Woodward should have known of Quincy's mismanagement as a 
                     
49 
 
legal analysis employed by the trial judge.  To establish a 
laches defense, the asserting party must establish both actual 
knowledge, see Lattuca, 442 Mass. at 213-214; Demoulas, 424 
Mass. at 518-519; and prejudice.  See Stuck v. Schumm, 290 Mass. 
159, 166 (1935); Stewart v. Finkelstone, 206 Mass. 28, 36 
(1910).  "Constructive knowledge is insufficient," Lattuca, 
supra at 213, as is "[m]ere suspicion or mere knowledge that the 
fiduciary has acted improperly."  Doe, 446 Mass. at 255.  This 
requirement of actual knowledge "protects the beneficiary's 
legitimate expectation that the fiduciary will act with the 
utmost probity in all matters concerning the relationship."  Id.  
Contrary to Quincy's implication, a plaintiff is not required to 
conduct "an independent investigation" to determine if a breach 
of fiduciary duty has occurred.  Demoulas, supra at 520. 
 
We agree with the special master's characterization that 
although "[c]ommon sense would dictate that if Woodward knew 
[Quincy] was mismanaging the Woodward Fund . . . , [then Quincy 
was] engaging in the same practices with regards to the Adams 
Fund [,] . . . common sense and constructive notice are not the 
standards here."  As the special master and trial judge properly 
concluded, the laches standard simply was not satisfied. 
result of the Woodward Fund litigation and emphasized that the 
Funds were not parties to that litigation and therefore were not 
officially on notice of it. 
                                                                  
50 
 
 
Conclusion.  The further amended judgment of the Probate 
and Family Court, and the amended judgment incorporated therein, 
is affirmed as to liability.  We affirm the judge's award of 
damages in part, but remand the case to the Probate and Family 
Court for recalculation of the damages related to the unrealized 
investment gains, including prejudgment interest thereon, and 
for further proceedings consistent with this opinion. 
 
 
 
 
 
 
 
So ordered.