Opinion
No. CV06-5001567
July 25, 2007
MEMORANDUM OF DECISION ON DEFENDANT OLD SAYBROOK ASSOCIATES' MOTION FOR SUMMARY JUDGMENT
The plaintiff, Blue Moon Market, LLC (Blue Moon), operated a market at the Old Saybrook Shopping Center on Elm Street and Boston Post Road in Old Saybrook, Connecticut. The defense in this action are HomeGoods, Inc. (HomeGoods), Old Saybrook Associates, and Matthew Rubin (Rubin) personally and as trustee of Old Saybrook Associates.
Blue Moon entered into a written lease with Rubin to use and occupy a portion of the premises known as 665 Boston Post Road in the Old Saybrook Shopping Center. This lease agreement was modified on January 4, 2005 with a written agreement whereby Blue Moon vacated its space in exchange for free temporary space in a different area of the shopping center, and a new lease for space then occupied by Payless Shoe Source. Rubin requested this modification to allow the defendant HomeGoods, Inc. to lease 665 Boston Post Road. Blue Moon surrendered possession of 665 Boston Post Road and took possession of 105 Elm Street (also known as Wal-Mart walkthrough area) at the Old Saybrook Shopping Center. Pursuant to the modification agreement, Blue Moon was to take possession of the Payless premises on December 31, 2005. Payless Shoe Source's lease did not expire until July 2, 2007 and Blue Moon was never provided possession of the Payless premises.
In the first count of its complaint, Blue Moon alleges that Rubin and Old Saybrook Associates breached Blue Moon's lease of 665 Boston Post Road by removing them from the premises through misrepresentation and unauthorized actions. The second count alleges that Rubin and Old Saybrook Associates breached the modification agreement by failing to provide Blue Moon with possession of the Payless premises. The third count alleges that Rubin and Old Saybrook Associates' actions violated the Connecticut Unfair Trade Practices Act. The fourth count, although entitled "quantum meruit," alleges that Rubin and Old Saybrook Associates were unjustly enriched when they leased 665 Boston Post Road to HomeGoods. The fifth count requests declaratory judgment that Blue Moon's original lease to 665 Boston Post Road has priority over HomeGoods' lease notwithstanding the modification, that HomeGoods should be removed from the premises and that Blue Moon should be reinstated to the premises. The declaratory judgment count also asks for reimbursement of Blue Moon's costs and expenses.
The defendant Old Saybrook Associates, on February 13, 2007, filed a motion to strike all counts against it on the ground that it is a trust beneficiary, and therefore it is not liable for Rubin's actions as trustee. The court denied this motion on March 6, 2007 noting: "The complaint alleges that the defendant Old Saybrook Associates is a joint venture. Complaint, ¶ 3. Taking the facts as alleged it may be sued pursuant to General Statutes § 52-76." This motion for summary judgment was filed on March 22, 2007 on the same grounds as the motion to strike. In support of its motion, Old Saybrook Associates submits an affidavit from Rubin and a portion of the transcript of the deposition of Jeffrey Cotton. Blue Moon filed an opposing memorandum of law and several documents including certified copies of various land records. Old Saybrook Associates on May 11, 2007 submitted a supplemental affidavit from Rubin, a copy of the "Old Saybrook Associates Joint Venture Agreement" dated July 10, 1969, and a copy of an amendment to that agreement dated December 12, 1989. The parties were heard in oral argument on the motion on May 21, 2007 . . ."Practice Book (§ 17-49) provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.
In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party . . . The party seeking summary judgment has the burden of showing the absence of any genuine issue (of) material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law . . . and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact." (Internal quotation marks omitted.) Deming v. Nationwide Mutual Ins. Co., 279 Conn. 745, 756-57 (2006). "[T]he `genuine issue' aspect of summary judgment requires the parties to bring forward before trial evidentiary facts, or substantial evidence outside the pleadings, from which the material facts alleged in the pleadings can warrantably be inferred . . . A material fact has been defined adequately and simply as a fact which will make a difference in the result of the case." (Citation omitted; internal quotation marks omitted.) Buell Industries, Inc. v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556 (2002).
Old Saybrook Associates argues that it is entitled to summary judgment as to the claims that Blue Moon asserts against it in that they are all premised on Rubin's conduct as the trustee of a trust of which Old Saybrook Associates is the beneficiary. It contends that as a consequence of this relationship, Old Saybrook Associates cannot be held liable for Rubin's conduct as a matter of law. Blue Moon objects to the motion on the ground that issues of fact remain unresolved as to the nature of the relationship between Rubin and Old Saybrook Associates, and that Old Saybrook Associates has not, therefore, met its burden of establishing that it is entitled to summary judgment as a matter of law. Blue Moon argues that Old Saybrook Associates is not a trust but rather a joint venture, and that its members are jointly liable for the obligations of the joint venture.
"A trust . . . when not qualified by the word `charitable,' `resulting' or `constructive,' is a fiduciary relationship with respect to property, subjecting the person by whom the title to the property is held to equitable duties to deal with the property for the benefit of another person, which arises as a result of a manifestation of an intention to create it." 1 Restatement (Second) of Trusts § 2 (1959). "A trust requires three basic elements: (1) a trust res; (2) a fiduciary relationship between a trustee and a beneficiary requiring the trustee to deal with the trust res for the benefit of the beneficiary; and (3) the manifestation of an intent to create a trust. See 1 Restatement (Second), Trusts § 2 . . . A simple conveyance of property to one upon trust for another, without further specifications or directions' is a simple trust . . . In such case the law regulates the trust, and the (beneficiary) has the right of possession and of disposing of the property, and he may call upon the trustee to execute such conveyances of the legal estate as are necessary." (Citations omitted; internal quotation marks omitted.) Goytizola v. Moore, 27 Conn.App. 22, 25 (1992).
"It is a well established legal principle that (a) trustee is not an agent. An agent represents and acts for his principal, who may be either a natural or artificial person. A trustee may be defined generally as a person in whom some estate, interest, or power in or affecting property is vested for the benefit of another . . . An agent undertakes to act on behalf of his principal and subject to his control . . . a trustee as such is not subject to the control of the beneficiary, except that he is under a duty to deal with the trust property for his benefit in accordance with the terms of the trust and can be compelled . . . to perform this duty." (Citations omitted; internal quotation marks omitted.) Heise v. Rosow, 62 Conn.App. 275, 282, cert. denied, 256 Conn. 918 (2001). "[T]he general view appears to be that trustees are personally liable on the contracts they make during trust administration with third parties unless they expressly exclude such liability. The trustee is not an agent of the beneficiaries, and therefore they cannot be bound under a theory that the trustee acted for them." Bottomley v. Coffin, 121 R.I. 399, 405, 399 A.2d 485 (1979); see also Abraham Zion Corp. v. Lebow, 761 F.2d 93, 103 (2d Cir. 1985) ("a trustee, unless he is also an agent for the trust beneficiary, cannot subject the beneficiary to personal liabilities").
Since the trustee is personally liable on the contracts made for the benefit of the trust, the creditor's legal remedy lies against the trustee personally, not against the beneficiary. Wendell Corp. Trustee v. Thurston, 239 Conn. 109, 123-24 (1996) (Berdon, J., concurring). Where the trust instrument provides, however, for the trustee's reimbursement, a creditor may bring an action in equity naming the trustee in his representative capacity, and recover out of the trust assets. Palmer v. Hartford National Bank Trust Co., 160 Conn. 415, 426-27 (1971).
"Although generally a beneficiary of a trust is not personally liable for the trust's obligations, personal liability may attach if the beneficiary exerts significant control over the administration of the trust, that is, if the beneficiary is a principal of the trust." Bay of Naples Condominium Ass'n. v. Lewis, 582 A.2d 1210, 1212 (Me. 1990). "Where the trustee is given full control in the management of the business of the trust, then the beneficiaries have no personal liability. Where, however, the beneficiaries retain control over the trustee and the management of the business in relation thereto, a different result is warranted . . . The trustee is regarded as the agent of the beneficiaries and they will be liable upon his contracts . . . A power of direction alone, however, will not result in the creation of an agency." (Citations omitted.) Kessler, Merci and Lochner, Inc. v. Pioneer Bank Trust Co., 101 Ill.App.3d 502, 505-06, 428 N.E.2d 608 (1981).
In Fuessenich v. DiNardo, 195 Conn. 144 (1985), our Supreme Court upheld a trial court determination that a "trustee" was in fact an agent for his partners who were thus liable for a contractual debt. In this case, Pat DiNardo, as trustee for Pat DiNardo Associates entered into a contract for construction of roads in the Avalon Farm subdivision. Id., 157-58. The trial court found that DiNardo acted as trustee for himself and two others who comprised Pat DiNardo Associates. Id., 158. The trustee testified that Pat DiNardo Associates also operated as Avalon Farms, A Partnership. Id., 158-59. The trial court held that DiNardo acted as an agent for himself and the other two partners when forming a partnership; accordingly, the other partners were liable for the contractual debt. Id., 160. The Supreme Court noted: "Whether a relationship of trust or agency is created depends upon the intention of the parties . . . The circumstance that the representative is called a `trustee' has not prevented courts from finding that he was in fact an agent." (Citation omitted; internal quotation marks omitted.) Id., 159-60.
Connecticut General Statutes § 52-106 provides: "An executor, administrator, or trustee of an express trust may sue or be sued without joining the persons represented by him and beneficially interested in the action." Connecticut General Statutes § 52-76 provides: "Any number of persons associated together as a voluntary association, not having corporate powers, but known by a distinguishing name, may sue and be sued and plead and be impleaded by such name . . ." In one case, Booker v. Cappozziello, Superior Court, judicial district of Fairfield at Bridgeport. Docket No. CV 05 4010211 (July 21, 2006, Gilardi, J.) (41 Conn. L. Rptr. 693), the court held that a common-law business trust did not qualify as an unincorporated voluntary association for the purpose of being sued pursuant to § 52-76. However, it would appear that if the shareholders of a business trust associate to manage the business, the trust is a voluntary association and may be sued pursuant to § 52-76. See Richardson v. Clarke, 372 Mass. 859, 861-62, 364 N.E.2d 804 (1977), and Bouchard v. First People's Trust, 253 Mass. 351, 148 N.E. 895 (1925).
Blue Moon argues that Old Saybrook Associates is a joint venture and that joint venturers, like general partners, are jointly liable for the debts and obligations of the joint venture. A joint venture is similar to a partnership and the laws governing partnerships generally also apply to joint ventures. Doe v. Yale University, 252 Conn. 641, 673-74 (2000). Generally partners are jointly liable for the debts and obligations of the other partners; Bentz v. Halsey, 54 Conn.App. 609, 618 (1999). Joint venturers are similarly liable for the debts related to the joint venture. "A joint venture is a partnership formed for a limited purpose, and the acts of one joint venturer are binding upon other joint venturers if those acts pertain to matters within the scope of the joint venture and the joint venturer had authority to act . . . Therefore, just as with partners in a partnership, joint venturers are jointly liable for the obligations of the venture." Bebo Construction Co. v. Mattox O'Brien, P.C., 998 P.2d 475, 477 (Colo.App., 2000).
Whether Old Saybrook Associates is an ordinary trust, a business trust, or a joint venture, the liability of its members depends on whether they or the trustee controlled the business. If the beneficiaries maintained true control over the business affairs, then Rubin acted as their agent and bound them when he entered into the lease with Blue Moon. Further, whether it be a business trust or a joint venture, if its members were associated to control the business, Old Saybrook Associates may be sued in its own name pursuant to § 52-76.
Old Saybrook Associates' joint venture agreement states that the trustees, not the joint venturers, acquired legal title to the subject property by quitclaim deed executed with the agreement. The agreement also states that "it is not the intention of any of the Joint Venturers to form a partnership . . ."
However, the participants are referred to as joint venturers, not as beneficiaries. The joint venturers agree to contribute additional capital if it is required for further development and management (paragraph 3). In paragraph 4, the joint venturers agree to share all profits and losses of the joint venture. In paragraph 7, the joint venturers, by a 75 percent agreement, may remove a trustee without cause and either dissolve the trust or appoint another trustee. In paragraph 8, the joint venturers, by unanimous agreement, may terminate the agreement. In paragraph 16, all matters pertaining to the conduct, management, or operation of the affairs, activity, or business of the Joint Venture and all matters pertaining to the assets and property of the Joint Venture are placed under the control of the joint venturers by a 75 percent agreement, not under the management of the trustees. These factors tend to show that the joint venturers are in control of the enterprise.
A genuine issue of material fact remains as to whether the joint venturers maintained control over the business, with Rubin acting as their agent. Such control would render the joint venturers liable for the business' obligations, and permit Old Saybrook Associates to be sued pursuant to § 52-76 as a voluntary association. Old Saybrook Associates has not met its burden of showing that it is entitled to summary judgment as a matter of law. The motion for summary judgment is denied.