Opinion
No. HHD-CV-09-5026591 S
November 12, 2010
MEMORANDUM OF DECISION ON MOTION TO DISMISS
I. INTRODUCTION/PROCEDURAL HISTORY
On January 16, 2009, the plaintiff, James Peplau, commenced this lawsuit by service of process on the defendant, William Roberto. The plaintiff's currently operative Second Revised Complaint ("Complaint"), which was filed on September 25, 2009, alleges, inter alia, the following facts. The defendant represented the plaintiff as his attorney in both criminal and civil matters from October 26, 2004, to January 18, 2006. During the course of that representation, the defendant advised the plaintiff to transfer assets into a trust in order to keep those assets from the plaintiff's creditors. On November 2, 2004, the plaintiff created the "Jenna Waldron Blind Irrevokable Trust," ("Waldron Trust"), named the defendant the trustee and his niece, Jenna Waldron, sole beneficiary; and granted to the defendant a power of attorney. The defendant served as trustee from November 2, 2004, through June 28, 2006. On December 8, 2004, the plaintiff transferred $100,000 into the Waldron Trust. After the creation of the Trust, the defendant negligently invested the Trust assets, engaged in a continuous course of misappropriation of the Trust assets, overcharged for legal fees, and transferred funds to defraud the plaintiff's creditors. Count three of the second revised complaint alleges that the defendant breached his fiduciary duty as a trustee of the Waldron Trust.
The plaintiff's Complaint states six counts against the defendant. Counts One, Two, Four, Five and Six, respectively, plead claims for breach of the defendant's fiduciary duty as an attorney; breach of the defendant's fiduciary duty as trustee of the "James Peplau Blind Irrevocable Trust;" statutory theft in alleged violation of General Statutes § 52-564; unjust enrichment; and negligence.
On February 4, 2010, the defendant moved to dismiss count three of the second revised complaint on the ground that the plaintiff lacks standing to assert a claim for breach of fiduciary duty against the defendant as trustee of the Waldron Trust because the plaintiff is not a beneficiary of that Trust. The defendant filed an accompanying memorandum of law in support of the motion to dismiss. On March 22, 2010, the plaintiff filed an objection to the motion to dismiss and filed a memorandum of law in opposition. On July 15, 2010, the defendant filed a reply memorandum. The court heard the matter at short calendar on September 7, 2010.
II. ANALYSIS
A. STANDARD OF REVIEW
"A motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court." (Internal quotation marks omitted.) Bacon Construction Co. v. Dept. of Public Works, 294 Conn. 695, 706, 987 A.2d 348 (2010). "A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction." (Internal quotation marks omitted.) Wilcox v. Webster Ins., Inc., 294 Conn. 206, 213, 982 A.2d 1053 (2009). "Pursuant to the rules of practice, a motion to dismiss is the appropriate motion for raising a lack of subject matter jurisdiction." St. George v. Gordon, 264 Conn. 538, 545, 825 A.2d 90 (2003).
B. STANDING
"Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless [one] has, in an individual or representative capacity, some real interest in the cause of action . . . Standing is established by showing that the party claiming it is authorized by statute to bring suit or is classically aggrieved . . . The fundamental test for determining [classical] aggrievement encompasses a well-settled twofold determination: first, the party claiming aggrievement must successfully demonstrate a specific personal and legal interest in the subject matter of the decision, as distinguished from a general interest, such as is the concern of all the members of the community as a whole. Second, the party claiming aggrievement must successfully establish that the specific personal and legal interest has been specially and injuriously affected by the decision . . . Aggrievement is established if there is a possibility, as distinguished from a certainty, that some legally protected interest . . . has been adversely affected . . . If a party is found to lack standing, the court is without subject matter jurisdiction to determine the cause." (Citation omitted; internal quotation marks omitted.) Gold v. Rowland, 296 Conn. 186, 207-08, 994 A.2d 106 (2010).
C. THE PARTIES' ARGUMENTS
The defendant argues that this Court lacks subject matter jurisdiction over any claims based upon the defendant's alleged conduct as trustee of the Waldron Trust. Specifically, the defendant argues that the plaintiff lacks standing to bring this action because only beneficiaries, co-trustees or successor trustees of the Trust have standing to sue the trustee for breach of the trustee's fiduciary duty. In response, the plaintiff counters that there is no Connecticut case law addressing whether a trust settlor has standing to sue the trustee for breach of fiduciary duty, but that some jurisdictions have allowed such suits to proceed. He further argues that, since the Trust was established for the benefit of his niece, he has an interest in preserving and enforcing the Trust, an interest that sufficiently entitles him to standing. He therefore argues that if he is not granted standing, then he will be without any remedy.
"The requisite elements of a valid and enforceable trust are: (1) a trustee, who holds the trust property and is subject to duties to deal with it for the benefit of one or more others; (2) one or more beneficiaries, to whom and for whose benefit the trustee owes the duties with respect to the trust property; and (3) trust property, which is held by the trustee for the beneficiaries." (Internal quotation marks omitted.) Palozie v. Palozie, 283 Conn. 538, 545, 927 A.2d 903 (2007). "Only the beneficiaries of the trust, the cotrustees of a trust or a successor trustee have standing to sue for breach of trust by a trustee. No one other than a beneficiary or one suing on his behalf can maintain a suit against the trustee to enforce the trust." (Internal quotation marks omitted.) Weiss v. Weiss, Superior Court, judicial district of Windham, Docket No. CV 02 0065932 (January 9, 2002, Kocay, J.); see also 1 Restatement (Second), Trusts § 200, p. 439 (1959) ("No one except a beneficiary or one suing on his behalf can maintain a suit against the trustee to enforce the trust or to enjoin or obtain redress for a breach of trust"). A trustee's duty is to the beneficiary or beneficiaries of the trust. New Haven Savings Bank v. LaPlace, 66 Conn.App. 1, 9, 783 A.2d 1174, cert. denied, 268 Conn. 942, 786 A.2d 426 (2001). Accordingly, "[n]either the settlor nor his heirs or personal representatives, as such, can maintain a suit against the trustee to enforce a trust or to enjoin or obtain redress for a breach of trust." 1 Restatement (Second), supra, § 200, comment (b).
No Connecticut case law specifically addresses the issue of whether a settlor has standing to sue a trustee, but the majority of states follow the rule that a trust settlor does not have standing to sue a trustee for breach of fiduciary duty unless the settlor retained an interest in the trust property. See, e.g., Sanders v. Citizens National Bank, 585 So.2d 1064, 1065 (Fla.App. 1991); Child v. Hayward, 16 Utah 2d 351, 351, 400 P.2d 758 (1965); Webelovsky v. Manufacturers Trust Co., 12 App.Div.2d 793, 793, 209 N.Y.S.2d 564 (1961); Ex Parte Ingalls, 266 Ala. 45, 48, 93 So.2d 753 (1957). For example, in Sanders v. Citizens National Bank, supra, 1065, a settlor transferred several life insurance policies into a trust, named the defendant bank as trustee, and retained no interest in the policies. The bank allowed several of the life insurance policies to expire, and that expiration led to higher premiums. The settlor sued the bank for breach of fiduciary duty, but the trial court ruled that the settlor did not have standing to bring the claim. The District Court of Appeals affirmed, ruling: "It is well recognized that the settlor of an irrevocable trust who has retained no beneficial interest in the trust res has no right of action against the trustee for either breach of trust or breach of contract." Id.
Similarly, in Child v. Hayward, supra, 16 Utah 351, the Utah Supreme Court ruled that a trust settlor would not have standing to sue for breach of fiduciary duty. In that case, the plaintiff purchased land from the defendant and asked the defendant to give the land to the plaintiff's son. The son, without the plaintiff's knowledge, contracted to sell the land back to the defendant. The plaintiff sued the defendant for breach of contract, but the trial court granted the defendant's motion to dismiss on the ground that the plaintiff retained no interest in the property and thus had no standing. On appeal, the plaintiff argued that the defendant was a trustee and therefore owed fiduciary duties to the plaintiff. The Utah Supreme Court disagreed, ruling that, "[u]nder such a theory, [the plaintiff] would be the creator of the trust. Since he had divested himself completely of any interest whatsoever in the trust res, and had not reserved any right or power of revocation therein, any such trust would be irrevocable insofar as he is concerned and he would therefore be without any standing to sue for an alleged breach of trust." Id., 354.
Relevant treatises agree: "After a settlor has completed the creation of the trust, the settlor is not . . . in any legal relationship with the beneficiaries or the trustee, and has no rights, liabilities, or powers with regard to the trust administration." G. Bogert A. Hess, 1 Trusts and Trustees (3d Ed. 2007) § 42, p. 445; W. Fratcher, 3 Scott on Trusts (4th Ed. 1987) § 200.1, p. 211 ("the settlor has retained no interest in the trust property, the duties of the trustee are owing not to him but to the beneficiaries of the trust").
Notwithstanding the weight of such authority, the plaintiff urges this Court to follow the lead of "other jurisdictions, although in the minority, [which assertedly] have held that the settlor of a trust possesses an interest in the trust sufficient to confer standing." In support of this argument, the plaintiff cites two cases from other jurisdictions. In the first, Abbott v. Gregory, 39 Mich. 68, 71 (1878), the issue was whether the plaintiff transferred property to a defendant outright or in trust for the benefit of the plaintiff's daughter. There, the plaintiff, Thomas Abbott, was a business partner with the defendant, Augustus Gregory. Abbott transferred title to some real property to Gregory, who then transferred the property to a third party, Francis Fifield, to secure a loan made to the partnership. Gregory claimed that Abbott transferred the property to him to use as security. Abbott, however, claimed that he transferred the property to Gregory with the understanding that Gregory would then reconvey the property to Abbott's daughter. The Michigan Supreme Court ruled that the transfer from Abbot to Gregory was in fact made for the purpose of reconveying the property to Abbott's daughter. The court therefore ordered that Fifield convey the property to Abbott's daughter, subject to Fifield's lien.
Contrary to the plaintiff's assertion, however, the Michigan Supreme Court in Abbott did not treat the case before it as one involving a suit by the settlor of a trust against the trustee for breach of fiduciary duty. Rather, the Court there ruled that, "The bill in this case may be treated, on behalf of [Abbott's daughter, the trust beneficiary], as one to redeem the property from the claim of Fifield . . ." Id., 78. While Gregory's use of the property to secure a loan may have been a breach of Gregory's fiduciary duty as a trustee, the Michigan Supreme Court did not rule that Abbott had a cause of action against Gregory for damages on that theory. Rather, it merely ruled that Abbott was entitled to sue to ensure that the property was conveyed to his daughter subject to Fifield's lien.
The plaintiff also relies on the holding in Molitor v. Molitor, 184 Conn. 530, 533, 440 A.2d 215 (1981). Like the Michigan Supreme Court in Abbott, the Connecticut Supreme Court in Molitor did not rule that a trust settlor has standing to sue a trustee for breach of fiduciary duty. Rather, the Molitor Court ruled that a trust settlor in the case before it had standing to defend the creation of the trust.
In the second case cited by the plaintiff, Carr v. Carr, 185 Iowa 1205, 1209, 171 N.W. 785 (1919), an Iowa district court entered an order divorcing a husband and wife in accordance with stipulated terms. Among those terms was a requirement that the husband transfer some property to a trustee who would hold the property for the wife's benefit for five years, then transfer the property to the wife outright. After five years, the husband moved that his original transfer to the trustee be set aside and that he be required to transfer only a life estate to the wife. The Iowa Supreme Court outlined the grounds for modification of a decree, ruled that the husband's request did not fall within any of the grounds, and ordered that the trustee transfer the property to the wife as originally anticipated. The Carr Court did not, as argued by the plaintiff, rule that a settlor had standing to sue for breach of fiduciary duty. Rather, it merely noted in dictum that "[i]t is not denied by counsel for appellee that the donor of a trust has such interest therein as to entitle him to maintain a suit in equity to compel the carrying out of the terms thereof." (Emphasis added). Id. That sentence, part of which the plaintiff quotes in his memorandum, was not a ruling of law, but rather merely the Court noting a lack of any argument in opposition.
Neither plaintiff, in Abbott or Carr, was suing the trustee for breach of fiduciary duty. Neither case, therefore, stands for the proposition that a trust settlor has standing to sue the trustee for breach of fiduciary duty.
Here, the plaintiff is not a beneficiary of the Waldron Trust, and he did not retain any interest in the trust property after transferring it to the trust. The sole beneficiary of the Waldron Trust is his niece. Therefore, the trustee of the Waldron Trust owes a fiduciary duty only to her. That duty may only be enforced by her as the beneficiary. The plaintiff, as settlor, does not have standing to sue the defendant in his capacity as trustee for breach of his fiduciary duty of the Waldron trust because no fiduciary duty is owed to the plaintiff.
The plaintiff's final argument is that he "has an interest in preserving and enforcing the trust that entitles him to standing." As discussed previously, the plaintiff, as the settlor of the trust, does not have any interest in the trust property. The plaintiff therefore fails to satisfy the first prong of the test of classical aggrievement because he does not have a legal interest in the subject matter of the litigation. The plaintiff neither alleges in his Complaint nor argues in his memorandum in opposition to the current Motion to Dismiss that Waldron is incapable of enforcing her own rights as a beneficiary or that he is suing on her behalf. After transferring the property into the Waldron Trust, the plaintiff had no further interest in the trust property and therefore does not have standing.
III. CONCLUSION
For the foregoing reasons, the Court hereby concludes that Count Three of the plaintiff's Complaint must be dismissed for lack of subject matter jurisdiction on the ground that the plaintiff, as the settlor of the Waldron Trust, lacks standing to present any claim against the defendant in his capacity as trustee of that Trust.
IT IS SO ORDERED this 12th day of November 2010.