Opinion
No. CV02 039 55 56 S
October 23, 2009
MEMORANDUM OF DECISION
PROCEDURAL POSTURE:
The instant dispute arises out of the attempt of an unsecured creditor (hereinafter referred to as "Cadle") to object to a certain interim accounting filed by the executors of the Estate of Francis D. D'Addario (hereinafter referred to as the "Estate") on or about December 13, 2001 and the Estate's objections to motions for discovery filed by Cadle relating to financial matters contained in that accounting. The Trumbull Probate Court issued a written decision on these disputes dated March 21, 2002 to which each party took an appeal from said decision to this court. Subsequent to the filing of the separate appeals in the Fairfield JD (Estate, CV 02-392497 S and Cadle, CV 02-0393356 S) on June 14, 2007 these appeals were ordered consolidated for purposes of a trial de novo. On September 24, 2009 a hearing was held on these appeals. It was agreed at the outset that no evidence was to be presented as only the legal arguments of the respective parties were necessary for the court's determination of the dispute.
On June 1, 2007 Cadle filed a motion for discovery in the consolidated appeal which was denied without comment by Arnold, J. on December 15, 2008. Cadle's motion to reargue was likewise denied on January 26, 2009. The propriety of Arnold, J.'s action is not the subject of the instant appeal and consequently this court does not address that matter in its decision on the appeals.
DISCUSSION
On March 21, 2002 the Trumbull Probate Court issued a memorandum of decision which held that, (1) Cadle, as a valid creditor of the estate, had standing to object to the December 2001 accounting irrespective of whether the estate was solvent; (2) that Cadle also had standing to conduct discovery into the financial matters contained in that interim account; and, that (3) such discovery was limited only to those limitations imposed by the rules of practice and the Connecticut General Statutes in civil matters.
It is undisputed that Cadle was at the time of this dispute a valid unsecured creditor of the Estate and as such had standing to participate in these probate proceedings. See, Probate Court's Memorandum of Decision dated March 23, 1998.
See, Probate Court's Memorandum of Decision, dated March 21, 2002.
The Estate objected to each of these rulings as expressed in its Reasons for Appeal. On the other hand, Cadle seeks in its appeal to sustain all of the issues ruled upon by the Probate court in its March 21st Memorandum of Decision.
See, Estate's pleading #102 entitled "Reasons for Appeal" and dated July 1, 2002.
On appeal, Cadle took exception to the Probate Court's reference to the principle of res judicata and its effect on interim accounts not appealed from in a timely fashion. It argued that Judge Chiota's statement of the law was incomplete in that it failed to mention all the exceptions to the general rule. It is noteworthy however, that Cadle's appeal relates only to the December 13, 2001 interim accounting to which it filed an objection to its acceptance and a motion to conduct discovery with regard to it. See, paragraphs 5 and 6 of its Reasons for Appeal dated 3/28/07. No other accountings were objected to. Moreover, on appeal the parties themselves agreed that the issue of the application of the principle of res judicata to any unspecified accounting remained an open question in this case. This court therefore declines to address the effect of res judicata as it may relate to any unspecified interim account in this appeal inasmuch as it concludes that it is not the subject of this appeal.
The Estate first argues that Cadle lacks standing to even contest an interim accounting because it does not involve a justiciable issue inasmuch as all available evidence points to the fact that the Estate's assets, after payment of all secured debt, far exceed the amount necessary to satisfy Cadle's unsecured claim. Consequently, there would be no practical benefit to Cadle even if its objection were sustained; that this is just a hypothetical question that the court is not required to entertain citing Ramos v. Vernon, 254 Conn. 799, 808-09 (2000). The Estate argues that in order for an unsecured creditor to have standing at this stage of the probate proceedings it must first present some colorable evidence that its unsecured claim is likely to be in jeopardy in order to rebut the presumption that all estates are solvent, citing Tweedy v. Bennett, 31 Conn. 276, 278 (1863), and Reilly v. Healey, 122 Conn. 64, 76 (1936). This court disagrees with the Estate's rationale.
First of all, this dispute over the right of discovery was mischaracterized by the Probate Court as a dispute over the issues of standing and ripeness. This court takes the position that the issue of standing was put to rest prior to this dispute. The Probate Court ruled in its memorandum of decision dated March 23, 1998 that Cadle, as a valid creditor of the Estate, had standing to participate in the ongoing probate proceedings affecting the D'Addario estate. Consequently, in the absence of a reversal of that decision by the Probate Court sua sponte, or on appeal, that decision is the law of this case. The record in this appeal is devoid of any evidence of any reversal of the court's ruling on that issue. Therefore, once the creditor has standing to participate in the probate proceeding with regard to matters relevant to its claim, which would necessarily include the right to contest matters related to his claim contained in any interim accounting, it cannot be divested of its standing by later contesting other matters relevant to that claim. Fort Trumbull Conservancy, LLC v. New London, Superior Court, judicial district of Hartford, Docket No. CV 05 4031891 (March 18, 2008, Rittenband, J.T.R.).(holding that because the issue of standing had previously been ruled upon interlocutorily, that issue could be treated as the law of the case as there were no new or overriding circumstances).
The Probate judge preliminary to his decision on the merits requested the parties to submit briefs on five issues which it framed in terms of standing and ripeness of those issues and then addressed each of those issues in his memorandum of decision dated March 21, 2002.
Furthermore, the Estate's reliance on Sadloski v. Town of Manchester, 228, Conn. 79, 83 (1993), is misplaced to the extent that it claims that this dispute implicates the concepts of justiciablility and ripeness. That court observed that the concept of standing involves ". . . the legal right to set judicial machinery in motion." (Internal quotation marks omitted.) supra, 84. In this case the judicial machinery was set in motion when the probate court found that Cadle had standing to be heard in these proceedings with respect to its legitimate concerns, See, Benedetto v. Appeal from Probate, Superior Court, Judicial District of Fairfield, Docket No. CV91-0281690 (August 22, 1994, Vertefeuille, J.) [12 Conn. L. Rptr. 354]. Accordingly, this court concludes that the proper characterization of this dispute on appeal is the propriety of the Probate Court's action in granting Cadle the right to be heard on its legitimate concerns with regard to the interim accounting. See Zuch v. The Connecticut Bank Trust Co., 5 Conn.App. 457, 462-63 (1985). This court will therefore proceed to resolve this dispute on the latter basis.
In its March 21st memorandum of decision the Probate Court confirms its earlier ruling in its 1998 memorandum that Cadle had standing in this case by virtue of being a valid creditor of the estate and that the creditor's status as unsecured or the fact that the assets of the estate were likely sufficient to pay the creditor had no bearing on its right to challenge the interim accounting. At the end of its memorandum Judge Chiota observed that by virtue of the evolution of the trust and probate laws, interim accounting orders which are not challenged and timely appealed become conclusive and therefore not subject to collateral attack. Based on this general statement of the law with which this court agrees, the practical effect of a valid creditor of the estate having no ability to challenge any interim accounting that later turned out to be erroneous or insufficient, precludes him from contesting the final accounting and thereby prejudices his interests as creditor. Moreover, it may be impossible for a creditor for, example, to determine a simple error such as a fiduciary's mistake in consistently placing a comma in the wrong location in the valuation of an asset which in turn might change to total valuation of the estate to the creditor's prejudice. Consequently, the proper time to raise any defects in any interim account is at the hearing on its approval. The Estate disagrees and argues the creditor's remedy is to bring an action directly against the fiduciary for a violation of his fiduciary duty in the Superior Court. However, that is not this case. There is no claim here concerning the wrongdoing of the fiduciary. If, what has occurred is an innocent mistake by the fiduciary, the creditor may indeed never learn of it and is therefore without any remedy according to the Estate's logic. Consequently, without the right to question an interim account, the creditor may forever lose his right to protect his legitimate interests as a creditor and is thereby deprived of procedural due process. Dutch Point Credit Union, Inc. v. Caron Auto Works, Inc., 36 Conn.App. 123, 130 (1994) (finding lienholder's interest in property entitled to due process protection). It is a fundamentally unfair process to preclude one who has already established his standing as a creditor of the estate to deny him the right to protect his creditor interests in that estate. Deer Run Shores Property Owner's Ass'n., Inc. v. Deer Run Shores Property Owner's Assn., Inc., Judicial District of Danbury, Docket No. CV 07 4007704 (August 26, 2009 Shaban, J.) (finding that "standing exists to attempt to vindicate arguably protected interests . . .") In other words, Cadle's standing as a valid creditor, and the right of inquiry into the interim account, is secured by the consequences of the conclusiveness of the approval of the account. It is not a casual, abstract or academic claim, but a real and valid controversy arising out of the debtor estate's duty to its creditor which in turn represents a personal stake in the outcome of the creditor's claim. See, Ramos v. Vernon, 254 Conn. 808; see also Cadle Co. v. D'Addario, 268 Conn. 441, 461 (2004) (finding that an executor owes a fiduciary duty to creditors of the estate).
See, p. 3 of Probate Court's March 21st Memorandum of Decision.
Therefore, this court concludes that Cadle, as a valid creditor of the Estate, does properly have a right to contest an interim accounting by virtue of its previously accorded standing. Accordingly, the Probate Court's ruling on this issue is hereby AFFIRMED.
For the same reasons already articulated above, this court agrees with the Probate Court's ruling that Cadle has a right to conduct discovery into the financial matters contained in the interim accounting in question. After all, discovery is merely a tool to assist litigants in seeking out admissible evidence or information that would likely lead to admissible evidence, relevant to a litigant's prosecution or defense of an action, including probate proceedings. See Practice Book 13-2; General Statutes sections 52-148a(a), 52-148e(b)(d). The use of this tool is an adjunct and a necessary appendage to the right to contest or challenge the accounting document. West Hartford v. Taubman, Superior Court, complex litigation docket at Waterbury, Docket No. X02 CV 07 5007876 (May 21, 2009, Eveleigh, J.) Without this tool, as this court has already observed, a creditor might never learn if an interim account is defective. Accordingly, the Probate Court's ruling that Cadle may conduct discovery into the financial matters contained in the interim account in question is hereby AFFIRMED.
Court found that discovery is permissible if the information sought is not privileged, appears reasonably calculated to lead to the discovery of admissible evidence, the information would be of assistance in the prosecution or defense of the action and it can be provided by the disclosing party or person with substantially greater facility than it could otherwise be obtained by the party seeking disclosure.
However, this court disagrees with the Probate Court's conclusion that discovery in probate proceedings is limited to the same extent limited in ordinary civil actions. In coming to this conclusion the Probate Court failed to recognize the seminal case of Carten v. Carten, 153, Conn. 603 (1966), in which our Supreme Court held that jurisdiction of the Probate Court in matters of accounting does not extend to the adjudication and review of complex management and business operations of estate assets and the business judgments of its fiduciaries. Id. 615. A fortiori, to the extent that the objective of the discovery sought in this case pertained directly or indirectly to the complex financial matters of management and business operations of estate assets or the business judgments of the executors, such discovery and/or production should have been denied on jurisdictional grounds. Carten, supra 615-16. However, since this court has no information regarding the subject matter of the disclosures sought, it must remand this aspect of the case to the Trumbull Probate Court for its determination of which disclosures, if any, it will allow consistent with this opinion.
Accordingly, the Estate's appeal is hereby AFFIRMED with regard to the nature of limitations that may be imposed upon the probate court by virtue of its limited jurisdiction and this portion of the case is REMANDED to the Trumbull Probate Court to determine which requests, if any, for disclosure and production, it will allow consistent with this decision.