Summary
concluding that the trustee defendant had a continuing duty to the plaintiff to keep him informed about the details of the trust
Summary of this case from Pike Co. v. South Central Conn. Regional Water AuthOpinion
No. CV 06-5007633-S
January 4, 2011
MEMORANDUM OF DECISION
In this unfortunate action the plaintiff, Richard Masse, Jr., has asserted claims against the defendant, Susan Perez, who is his mother, regarding a trust fund established by his grandmother for his benefit. The trust corpus was in the form of bank accounts in the defendant's name as trustee. The defendant has admitted that, prior to 1995, her mother, Velma Krestan, set up three bank accounts in trust for the plaintiff. The defendant was trustee of the accounts and the plaintiff was the sole beneficiary of the trust funds. The defendant has also admitted that, on May 29, 1995, the trust bank accounts had a total value of $79,884.21. No formal trust instruments were submitted.
Breach of Fiduciary Duty
In count one, the plaintiff alleges a breach of fiduciary duty. "One of the most fundamental duties of the trustee is that he must display throughout the administration of the trust complete loyalty to the interests of the cestui que trust. He must exclude all selfish interest and also all consideration of . . . third persons." (Internal quotation marks omitted.) Phillips v. Moeller, 148 Conn. 361, 369, 170 A.2d 897 (1961). "A trustee must always be loyal to his trust." Conway v. Emeny, 139 Conn. 612, 621, 96 A.2d 221 (1953); Hall v. Schoenwetter, 239 Conn. 553, 559, 686 A.2d 980 (1996).
"A trustee is under a duty to keep clear and accurate accounts, and in his reports he should show what he has received and expended, and in general such data as will keep beneficiaries informed concerning the management of the trust. 2 Perry, Trusts (7th Ed.) § 821; 2 Scott, Trusts (2d Ed.) § 172." Phillips v. Moeller, 148 Conn. 361, 371 (1961). "Proof of a fiduciary relationship . . . imposes a twofold burden upon the fiduciary. Once a [fiduciary] relationship is found to exist, the burden of proving fair dealing properly shifts to the fiduciary . . . Furthermore, the standard of proof for establishing fair dealing is not the ordinary standard of fair preponderance of the evidence, but requires proof either by clear and convincing evidence, clear and satisfactory evidence or clear, convincing and unequivocal evidence." (Citations omitted; internal quotation marks omitted.) Dunham v. Dunham, 204 Conn. 303, 322-23, 528 A.2d 1123 (1987), overruled on other grounds, Santopietro v. New Haven, 239 Conn. 207, 682 A.2d 106 (1996).
The defendant did not present satisfactory records to show how she disbursed the funds of the trust. She testified that she could not provide these records because they were lost as a result of a flood. She also testified that the records were in her marital home which she left during a divorce. When she attempted to obtain the records from her former husband, they could not be found. The defendant testified that she attempted to obtain records from the bank, but was unable to do so. She offered no further evidence, such as letters or testimony from bank employees, regarding the lack of availability of records from the bank.
The court finds that the defendant did not inform the plaintiff beneficiary of the balances in the trust from 1995 until 2003, when she told the plaintiff there was no more money in the trust. The defendant's failure to present even the most basic records of her expenses, and her failure to inform the plaintiff of the details of the trust substantially affects her credibility and hinders her ability to show fair dealing by clear and convincing proof.
The defendant submitted a copy of transaction sheets for two People's bank accounts dated July 16, 2001. She testified that the funds contained in account #6373-09 were a part of the original funds held in trust. On July 16, 2001, the balance in that account was $46,522.54. Neither party presented documentary evidence to show how the difference between the original amount of the trust funds, which was $79,884.21, and the July 16, 2001 account balance, a difference of $33,361.67, was spent. The testimony of the parties established that in the period from 1995 to 2001, the plaintiff attended college and his mother paid his educational and housing expenses from the trust fund. During this time, the defendant also purchased a car for the plaintiff using trust funds. The plaintiff does not dispute that at least $33,361.67 was used for his benefit. Based upon this evidence, the court concludes that the defendant has, by clear and convincing evidence, established that $33,361.67 of the trust fund was used for the plaintiff's benefit.
The defendant testified that $46,522.54, the amount remaining in the account on June 16, 2001, was transferred at the direction of the plaintiff, or spent on his behalf. Specifically, she testified that $20,000 was given to each of her two children, the plaintiff's half-brother and half-sister, and the remaining amount was spent on behalf of the plaintiff and/or his children. The defendant testified that the plaintiff directed the transfers to his half-siblings so that he could qualify for, and maintain, his state assistance. The court does not find this testimony credible.
The defendant's lack of credibility was demonstrated by the fact that she did not produce any bank accounts in the name of her children which showed the purported two $20,000 deposits. Furthermore, the plaintiff testified that his half-brother and half-sister never acknowledged any such transfers. Finally, it is difficult to accept this scenario in view of the fact that the court has found that the defendant did not keep the plaintiff informed as to the details of the trust, including the amounts in the bank accounts.
The defendant testified that $6,522.54, the amount remaining after the transfers, was spent on behalf of the plaintiff and his children. She presented a check register which shows checks written for the benefit of the plaintiff's children in support of this claim. The defendant acknowledged that the check register was for her personal banking account, which, she testified, was funded with money from the trust account. She did not present any bank statements to support this claim. The court does not find the defendant's claims regarding the disbursement of the $6,522.54 to be credible.
The defendant has not satisfied her burden of demonstrating fair dealing with regard to her disbursement of trust funds in the amount of $46,522.54 by clear and convincing proof. The plaintiff is entitled to damages in the amount of $46,522.54 for the defendant's breach of her fiduciary duty.
Conversion
In count three, the plaintiff alleges that the defendant converted trust funds to her own use. The tort of "[c]onversion occurs when one, without authorization, assumes and exercises ownership over property belonging to another, to the exclusion of the owner's rights." (Internal quotation marks omitted.) Wellington Systems, Inc. v. Redding Group, Inc., 49 Conn.App. 152, 169, 714 A.2d 21, cert. denied, 247 Conn. 905, 720 A.2d 516 (1998); Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20, 43, 761 A.2d 1268 (2000). The court concludes that the plaintiff has sustained his burden of proof as to conversion and he is entitled to damages in the amount of $46,522.54 on this count.
Statutory Theft
In count two, the plaintiff alleges that the defendant's action constituted statutory theft pursuant to General Statutes § 52-564 and he seeks treble damages. Section 52-564 provides that "[a]ny person who steals any property of another, or knowingly receives and conceals stolen property, shall pay the owner treble his damages." "Statutory theft under § 52-564 is synonymous with larceny under General Statutes § 53a-119 . . . Pursuant to § 53a-119, [a] person commits larceny when, with intent to deprive another of property or to appropriate the same to himself or a third person, he wrongfully takes, obtains or [withholds] such property from an owner . . . Conversion can be distinguished from statutory theft as established by § 53a-119 in two ways. First, statutory theft requires an intent to deprive another of his property; second, conversion requires the owner to be harmed by a defendant's conduct. Therefore, statutory theft requires a plaintiff to prove the additional element of intent over and above what he or she must demonstrate to prove conversion." (Internal quotation marks omitted.) Deming v. Nationwide Mutual Ins. Co., 279 Conn. 745, 771, 905 A.2d 623 (2006); Whitiker v. Taylor, 99 Conn.App. 719, 732, 916 A.2d 834 (2007).
Our Supreme Court recently annunciated the standard of proof for statutory theft and stated: "[W]e are loath to extend the application of the clear and convincing standard of proof further, to claims brought pursuant to § 52-564. In the absence of a statutory mandate, the proper standard of proof, therefore, is the preponderance of the evidence standard." Stuart v. Stuart 297 Conn. 26, 42-44, 996 A.2d 259 (2010).
As noted earlier, on June 16, 2001, the defendant withdrew $46,522.54 from the plaintiff's trust bank account. This action establishes intent. The defendant was not able to satisfactorily explain how she used this money. She did not use it for the plaintiff's benefit. The money is no longer in a trust account and the plaintiff has been harmed. The court finds that the plaintiff has proven that the defendant committed statutory theft by a preponderance of the evidence. The court finds damages of $46,522.54 for theft and will award treble damages pursuant to General Statutes § 52-564.
Unjust Enrichment
In count six, the plaintiff alleges unjust enrichment by the defendant. "Plaintiffs seeking recovery for unjust enrichment must prove (1) that the defendants were benefitted, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the [plaintiff's] detriment." (Internal quotation marks omitted.) New Hartford v. Connecticut Resources Recovery Authority, 291 Conn. 433, 451-52, 970 A.2d 592, appeal dismissed, 291 Conn. 502, 970 A.2d 578 (2009). "Unjust enrichment is a very broad and flexible equitable doctrine that has as its basis the principle that it is contrary to equity and good conscience for a defendant to retain a benefit that has come to him at the expense of the plaintiff." Gagne v. Vaccaro, 255 Conn. 390, 409, 766 A.2d 416 (2001). The court finds that the plaintiff has proven that the defendant was unjustly enriched by her actions in the amount of $46,522.54.
Remaining Counts
In count four the plaintiff alleges fraudulent concealment; in count five he alleges fraudulent misrepresentation; in count seven he alleges negligent misrepresentation. The court concludes that these allegations are, in actuality, intertwined with the plaintiff's allegations regarding the defendant's utilization of the trust funds. The plaintiff has failed to establish specific damages as to these counts.
Special Defenses
The defendant has raised the special defense of unclean hands. "The doctrine of unclean hands expresses the principle that where a plaintiff seeks equitable relief, he must show that his conduct has been fair, equitable and honest as to the particular controversy in issue . . . Unless the plaintiff's conduct is of such a character as to be condemned and pronounced wrongful by honest and fair-minded people, the doctrine of unclean hands does not apply." (Citation omitted.) Bauer v. Waste Management of Connecticut, Inc., 239 Conn. 515, 525, 686 A.2d 481 (1996). "In addition, the conduct alleged to be unclean must have been done directly against the interests of the party seeking to invoke the doctrine, rather than the interests of a third party. Orsi v. Orsi, [ 125 Conn. 66, 69-70, 3 A.2d 306 (1938)] (`[t]he wrong must be done to the defendant himself and must be in regard to the matter in litigation' ([I]nternal quotation marks omitted])." Thompson v. Orcutt, 257 Conn. 301, 311, 777 A.2d 670 (2001).
This defense is based on a redetermination eligibility document that the plaintiff signed on September 12, 2001, in order to continue receiving state assistance. In the document, the plaintiff was asked to indicate if he had any trust funds and he indicated "no." This action by the plaintiff does give rise to a defense of unclean hands. First, the court notes that only the unjust enrichment count sounds in equity. Second, because the defendant failed to keep the plaintiff informed as to the details of the trust, it is possible that the plaintiff's response on the document was motivated by ignorance and not deception. Finally, the alleged wrong was not done to the defendant, but to the interests of a third person, the state of Connecticut.
The defendant has filed a special defense to each count alleging that the actions are barred by the three-year statute of limitations contained in General Statutes § 52-577. This action was commenced on November 21, 2006. The court finds that the statute of limitations was tolled by the continuing course of conduct doctrine.
"The issue . . . of whether a party engaged in a continuing course of conduct that tolled the running of the statute of limitations is a mixed question of law and fact . . . We defer to the trial court's findings of fact unless they are clearly erroneous . . . [I]n order [t]o support a finding of a continuous course of conduct that may toll the statute of limitations there must be evidence of the breach of a duty that remained in existence after commission of the original wrong related thereto. That duty must not have terminated prior to the commencement of the period allowed for bringing an action for such a wrong . . . Where [our Supreme Court has] upheld a finding that a duty continued to exist after the cessation of the act or omission relied upon, there has been evidence of either a special relationship between the parties giving rise to such a continuing duty or some later wrongful conduct of a defendant related to the prior act . . . The continuing course of conduct doctrine is conspicuously fact-bound." (Citations omitted; internal quotation marks omitted.) CT Page 2330 Giulietti v. Giulietti, 65 Conn.App. 813, 833-34, 784 A.2d 905, cert. denied, 258 Conn. 946, 788 A.2d 95, 258 Conn. 947, 788 A.2d 97 (2001); Jarvis v. Lieder, 117 Conn.App. 129, 148, 978 A.2d 106 (2009).
Here, there is a special relationship in the form of a fiduciary relationship because the defendant is a trustee of the plaintiff's trust. As noted earlier, as part of the defendant's fiduciary duty she was required to keep the plaintiff informed as to the details of the trust, which she did not do. The plaintiff testified that he did not learn about the defendant's actions concerning the June 16, 2001 withdrawal from the trust account until after this litigation had commenced. The defendant had a continuing duty to inform the plaintiff of the details of this transaction and she did not begin to fulfill this duty until after this action was commenced. This failure to inform the defendant was also wrongful conduct, which was sufficient to toll the applicability of § 52-577.
Summary
The plaintiff has established that he has sustained damages in the amount of $46,522.54 as a result of the defendant's breach of fiduciary duty, conversion, theft and unjust enrichment in connection with her utilization of the plaintiff's trust funds. The amount of damages is the same for each count; it is not, however, appropriate to make a multiple award of damages. The court concludes that under the facts of this case the plaintiff is entitled to interest damages pursuant to General Statutes § 37-3a and determines that five (5) percent per year should be allowed from June 16, 2001. The court has considered that the interest damages will be trebled. The court awards damages for interest in the amount of $22,221.91, (five (5) percent on $46,522.54 from June 16, 2001 through January 4, 2011) for total damages of $68,744.45. The damages are trebled pursuant to § 52-564 and result in a final damage award of $206,233.35. Judgment may enter in favor of the plaintiff in the amount of $206,233.35.
Following are the calculations used to reach the total damage award.
$46,522.54 x .05 = $2,326.13 interest per year or $6.37 interest per day.
CT Page 2331
9 years (June 16, 2001 through June 16, 2010) x $2,326.13 = $20,935.17.
202 days (June 17, 2010 through January 4, 2011) x 6.37 = $1,286.74.
interest: $20,935.17 + $1,286.74 = $22,221.91.
damages: $46,522.54 + $22,221.91 = $68,744.45