Opinion
No. X08CV04-4003396-S
April 18, 2007
MEMORANDUM OF DECISION ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
In its present posture this case is a dispute among siblings as to the management, probate and disposition of the assets of their deceased parents. The plaintiffs Diana C. Salyer and Brian Carey are suing their brother Raymond J. Carey, III in his individual capacity and in his capacities as executor and trustee of his father Raymond J. Carey II (who died on September 19, 1984) and of his mother Albena V. Carey (who died on February 15, 1994.)
There were originally three defendants. The case has been withdrawn as to all but the plaintiffs' brother the defendant Raymond J. Carey, III.
The operative complaint, the Third Revised Complaint of June 30, 2006, sounds in nine counts: undue influence, fraudulent misappropriation of assets, fraudulent concealment, breach of fiduciary duty, breach of fiduciary duty — self dealing, breach of the Connecticut Uniform Prudent Investor Act (Conn. Gen. Stat. § 45a-541 et seq.), statutory theft, unjust enrichment, and violation of the Connecticut Unfair Trade Practices Act (Conn. Gen. Stat. § 42-100b, et seq.). ("CUTPA"). In addition to his denial of the essential allegations of the causes of action pleaded against him, the defendant has interposed special defenses of res adjudicata and collateral estoppel, laches, and statutes of limitation. Now before the court is the defendant's motion for summary judgment as to all counts.
Factual Background
The following facts are undisputed. Raymond J. Carey II (sometimes hereinafter referred to as the "father") died suddenly at the age of 73 on September 19, 1984 in the crash of an aircraft he was piloting. At the time of his death the father, a domiciliary of St. Croix in the U.S. Virgin Islands, owned real property or real property interests through holding entities in Connecticut, St. Croix, Texas, North Carolina, and Ireland and was actively involved as sole or majority owner in three closely-held businesses including Swan Realty Corporation (a North Carolina corporation) Cruzan Chemicals, Inc. (a Virgin Islands corporation) and Carey Industries, Inc., (a Connecticut corporation.) Carey Industries, headquartered in Danbury, was engaged in the business of importation and further processing of benzenoid chemicals described as "vat dyes" to be sold to the textile and apparel industries and as pyrotechnic dyes to the U.S. military. Cruzan Chemicals manufactured and partially processed the vat dyes in the Virgin Islands for export to Carey Industries in the United States. Swan Realty Corporation was formed to own and hold facilities in North Carolina leased to Carey Industries. The defendant Raymond Carey III was affiliated with his father in the foregoing businesses and was a minority owner of Carey Industries and Swan Realty.
The father had three children surviving him: the two plaintiffs and the defendant, and was also survived by his wife Albena V. Carey, mother of the parties (sometimes hereinafter referred to as the "mother"). The father had signed a will on January 13, 1984 which left his entire estate other than tangible personal property to the trustees of an inter-vivos trust established by agreement of January 13, 1984 (the "father's trust"). The father and Raymond Carey III were the original designated trustees of the father's trust. After the father's death he was replaced by Eugene Kaplan as the "Independent Trustee." The father's trust agreement directs that at the father's death the trust property shall be divided into two trusts, one designated as the. "Marital Share" or "Trust A" and a second trust designated as "Trust B." The trustees are directed to allocate to the Marital Share cash, securities or other property of the trust property equal to the maximum marital deduction for federal estate tax purposes (subject to certain adjustments and credits); all other trust property is to be allocated to Trust B. The net income of trust assets allocated to Trust A is to be paid quarterly to the mother and, in addition, the Independent Trustee is given the power:
The formal title of the Agreement is "Revocable Pour Over Lifetime Trust Agreement."
. . . to pay to or apply for the benefit of Settlor's Spouse [defined as Albena V. Carey, the mother] such sums from the principal of Trust A as in its sole discretion shall be necessary or advisable from time to time for the medical care, maintenance, welfare and education, in reasonable comfort, of Settlor's Spouse, or for any other reason, taking into consideration to the extent the Independent Trustee deems advisable, any other income or resources of Settlor's Spouse known to the Independent Trustee.
The trust agreement allows the mother during her lifetime, if there is no principal remaining in Trust A, to invade the principal of Trust B for her own benefit to the extent annually on a non-cumulative basis of the greater of $5,000 or 5% of the then principal of Trust B. Additionally, the Independent Trustee is given the power under the trust agreement to:
. . . from time to time, pay to or apply for the benefit of any one or more of Settlor's spouse and Settlor's children, until division into shares pursuant to Paragraph (C), such part or all of the net income and principal from Trust B, in such shares and proportions as the Independent Trustee in its sole discretion shall determine, primarily for the care, comfort, maintenance, welfare and education of Settlor's wife and children, taking into consideration to the extent the Independent Trustee deems advisable, any other income or resources of Settlor's children known to the Independent Trustee.
Upon the death of the mother any remaining principal in Trust A is to become part of the trust assets of Trust B and, pursuant to paragraph (C) of the trust agreement, the trust as then constituted is to be divided into three equal separate shares so as to provide one share for each child free of trust.
The two plaintiffs and the defendant were named as co-executors of the father's estate and served as such until mid-1986 when the plaintiffs Diana Salyer and Brian Carey resigned, leaving the defendant Raymond Carey III as the sole executor. The primary (domiciliary) probate proceeding was opened in St. Croix, U.S. Virgin Islands. An ancillary probate proceeding for Connecticut property was opened in the Waterbury Probate Court, and another ancillary probate proceeding was opened in Ireland. On June 17, 1985 the father's estate filed an "Inventory and Appraisement" in the Territorial Court of the Virgin Islands, Division of St. Croix at Kingshill, signed by all three co-executors, listing St. Croix real property appraised at $262,000 and personal property (all stock) appraised at $1,216,317. On December 18, 1985 a Form 706 United States Estate Tax return was filed with the IRS as signed by the three siblings (both plaintiffs and the defendant) as co-executors. The Estate Tax Return of the estate of Raymond Carey II shows a gross taxable estate of $2,446,165.83 less deductions of $2,106, 880.83 for a net taxable estate of $339,285.00. (The primary deduction shown is $1,864,241.81 for the marital deduction.) Shortly after the father's death in 1984 Carey Industries was put on notice of a $5 million claim by the U.S. Customs Service for unpaid import duties on vat dyes imported into the United States from the Virgin Islands. This claim was ultimately resolved by agreement in August of 1992 for $800,000 including a $600,000 payment by Sentry Insurance which had bonded Carey Industries (as to which the father had personally agreed to indemnify Sentry.)
There is nothing in the summary judgment supporting or opposing papers referencing any probate proceedings in North Carolina or Texas, presumably because the real property in those states was held in partnership or corporate ownership.
The father had also personally guaranteed a $1.9 million extension of credit to Carey Industries by the former Citytrust Bank of Bridgeport. Both Sentry and FDIC as receiver for Citytrust commenced litigation in Connecticut against the father's estate.
No assets were allocated to Trust A or Trust B of the father's trust until December 23, 1992, several months after resolution of the U.S. Customs claim, when the defendant as executor and the defendant and Eugene Kaplan as trustees executed a document entitled "Distribution of Assets to Marital Trust under Agreement of Raymond J. Carey, Jr. dated January 13, 1984 and Allocation by Trustees," by which the following assets valued cumulatively by the executor and trustees at $1,277,424.98 were allocated to Trust A:
The father, Raymond J. Carey II was also known as Raymond J. Carey, Jr.
300 shares of Swan Realty, Inc.; 275 shares of Carey Industries, Inc. plus all the right title and interest of the estate of Raymond J. Carey, Jr. to receive additional shares of stock in Carey Industries, Inc. pursuant to a certain Contribution and Subscription Agreement dated December 3, 1992; a note receivable from Swan Realty, Inc. estimated value of $69,000, and a note receivable from Albena V. Carey — estimated value of $40,000.
On the same date, December 23, 1992 the defendant as executor and trustee and Eugene Kaplan as trustee of Trust A executed a document entitled "In the Matter of the Trust under Agreement of Raymond J. Carey, Jr. Dated January 13, 1984" which: (1) recited the foregoing allocation of assets to Trust A; (2) recited that all other assets of the estate of the father had passed to Trust B; (3) confirmed that the Independent Trustee, acting pursuant to his powers to distribute assets under the terms of the father's trust agreement, had determined that it was advisable to distribute from Trust A to the mother Albena V. Carey the 300 shares of Swan Realty and the 275 shares of Carey Industries Inc. stock plus the right to receive additional shares of Carey Industries Inc. under the December 3, 1992 Contribution and Subscription Agreement, and had in fact assigned those assets to the mother on December 18, 1992; (4) that the mother Albena V. Carey, by her signature on said document, was requesting that the foregoing assets from Trust A which had been assigned to her be distributed to herself and the defendant Raymond J. Carey, III as trustees under a trust agreement the mother had made on March 24, 1988; (the "mother's trust") and (5) directed the defendant as executor of the father's estate to distribute those assets to the trustees of the mother's trust.
The mother's trust had been created on March 24, 1988 when she as settlor and the defendant as sole trustee entered into the "Albena V. Carey Revocable Pour Over Trust Agreement." That trust agreement provides that trust assets would be held during the life of the mother, with income paid to her, subject to distributions of principal to the mother as she may direct. At the mother's death the trust assets are to be divided into three equal parts and distributed as follows: the defendants Raymond J. Carey, III's share is to be distributed to him, but the shares of the plaintiffs Brian D. Carey and Diana C. Salyer are to be held in trust by the defendant during their lifetimes with distributions of income, principal, or both to be made to them or for their benefit from their respective shares ". . . as Trustee may, in its absolute and unlimited discretion, from time to time deem advisable."
Since all three children did in fact survive the mother this summary disregards provisions for the issue of predeceased children.
On December 24, 1992 the mother as settlor and the defendant as Trustee entered into an "Irrevocable Trust Agreement I" for the benefit of Diana C. Salyer and her issue. (The "irrevocable trust") The irrevocable trust provides that trust assets are to be held for the benefit of Diana and her issue with distributions of income and/or principal to be made to or on behalf of Diana or her issue for her or their education and support in the sole and absolute discretion of the defendant as trustee. Diana is allowed to use and enjoy without payment of rent any residential real property or replacement thereof which becomes part of the trust assets. On December 24, 1992 the mother also amended the March 24, 1988 pour over trust agreement to provide that Diana's one-third share at the mother's death should be distributed to the irrevocable trust rather than being held in continued trust under the 1988 pour over trust agreement.
On June 15, 1993 the mother as settlor and the defendant as sole trustee entered into a "Second Instrument of Amendment" of the 1988 mother's trust which eliminated the one-third share of the plaintiff Brian Carey and increased the share of the defendant Raymond Carey, III from one-third to two-thirds, with precatory language that "Settlor hopes that RAYMOND [the defendant] will in the future assist her son Brian D. Carey in any way that he deems appropriate from time to time, although this outright gift to Raymond is absolute."
The mother died on February 15, 1994 at the age of 83 leaving a last will and testament made on December 24, 1992 as amended by a First Codicil of June 15, 1993, leaving her residence at 143 East Ridge Drive to the irrevocable trust for the benefit of the plaintiff Diana Salyer and the residue of her estate (other than tangible personal property) to the defendant as trustee of the March 24, 1988 pour over trust. The defendant Raymond Carey III is named as the executor of the mother's estate.
On July 1, 1998 the defendant as Ancillary Executor of the father's estate submitted his final accounting to the Probate Court of the District of Waterbury. The account shows ante-mortem claims paid in the amount of $6,573.84; probate fees paid in the amount of $1,492.00; a reserve of $500 for final expenses; and an advance distribution to the father's A Trust (Marital Trust f.b.o. Albena V. Carey) in the amount of $590,000 consisting of 1,236 shares of Carey Industries, Inc. stock. The account was approved by the Probate Court (James J. Lawlor, Judge), following a hearing, on September 1, 1998.
The probate proceedings relating to the father's domiciliary estate in St Croix were not prosecuted to conclusion and were dismissed without prejudice for failure to prosecute by order of the court, Patricia D. Steele, Judge, on April 3, 1997 since there had been no activity on the file since July 1992.
On May 15, 1995 the defendant as the mother's executor filed a Form 706 United States Estate Tax return showing a gross estate valued at $895,192.39 and a net distributable estate of $537,720 with $240,000 (the value of the house at 143 East Ridge Drive) going to himself as trustee of the irrevocable trust for the benefit of Diana Salyer, and $296,720 going to himself as trustee of the mother's pour over trust under agreement of March 24, 1988.
On July 1, 1998 the defendant submitted to the Waterbury Probate Court his final account as executor of the mother's estate. The account shows a total principal of $727,724.64 and $188,359.40 available for distribution to the beneficiaries broken down as $160,000 (the East Ridge Drive house) going to the irrevocable trust for Diana Salyer, and $28,359.40 going to the 1988 pour over trust of March 24, 1988. The final account of the mother's estate was approved by Judge Lawlor, following a hearing, by decree of August 11, 1998.
There is nothing in the record to indicate that the trustee(s) of the father's trust, the mother's trust or the mother's irrevocable trust have ever rendered a periodic accounting pursuant to Conn. Gen. Stat. § 45a-177.
This civil action was commenced on December 16, 2004.
Standards for Summary Judgment
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." Practice Book § 17-49. In deciding a motion for summary judgment a trial court must view the evidence in the light most favorable to the nonmoving party. Hertz Corp. v. Federal Insurance Company, 245 Conn. 374, 381 (1998). "The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under the 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 . . . A material fact . . . [is] a fact that will make a difference in the result of the case . . . Hurley v. Heart Physicians P.C. (Internal quotation marks omitted.), 278 Conn. 305, 314 (2006). A party's conclusory statements in the affidavit and elsewhere may not constitute evidence sufficient to establish the existence of disputed material facts. Gupta v. New Britain General Hospital, 239 Conn. 574, 583 (1996).
"A motion for summary judgment is designed to eliminate the delay and expense of litigating an issue where there is no real issue to be tried." Wilson v. New Haven, 213 Conn. 277, 279 (1989). In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any issues exist. Nolan v. Borkowski, 206 Conn. 495, 500 (1988). The test used by the court is to determine if the moving party would be entitled to a directed verdict if the same set of facts were presented at trial. Connell v. Colwell, 214 Conn. 242, 246-47 (1990).
The plaintiffs claim initially that this motion for summary judgment must be denied because the defendant have in some 57 instances denied in his answer allegations of the complaint. Plaintiffs argue from this that on the face of the pleadings themselves there are genuine issues of material fact in dispute. The law does not support this position. "Unadmitted allegations in the pleadings do not constitute proof of a genuine issue as to any material fact on a motion for summary judgment." New Milford Savings Bank v. Roina, 38 Conn.App. 240, 245 (1995). The existence of a genuine issue of material fact must be demonstrated by counter affidavits and concrete evidence. Pion v. Southern New England Telephone Co., 44 Conn.App. 657, 663 (1997).
Count One (Undue Influence)
The plaintiffs allege that the mother's health began to deteriorate after the father's death and she became increasingly dependent on the defendant and that the defendant enjoyed a relationship of trust and confidence with the mother during the final years of her life. They further allege that by exploiting his relationship of trust and confidence the defendant exercised sufficient control over the mother to cause her to execute the Second Trust Amendment and to convey the East Ridge Drive Property to the irrevocable trust for the benefit of Diana Salyer, which she would not have done absent the defendant's influence and control. As a result the plaintiffs claim money damages and financial and irreparable harm for which they have no adequate remedy at law. (The Second Trust Amendment was signed by the mother on June 15, 1993 and eliminated the one-third share of the plaintiff Brian Carey as a beneficiary of the mother's 1988 pour over trust; the "conveyance" of the East Ridge Drive property to the Salyer irrevocable trust was accomplished by a specific bequest in the mother's will of December 24, 1992. Both plaintiffs have submitted affidavits of September 26, 2006 in opposition to this motion. Brian Carey's affidavit speaks of his mother's advanced age (82), lack of sophistication, and ill health and hospitalization in December of 1992 when she was visited by the defendant and the estate lawyers who asked Brian to leave the room while his mother signed certain papers; that the mother seemed intimidated; that the mother later was observed to be crying and stated to Brian that "she did not know whether she was doing the right thing." Diana Salyer's affidavit is similar, but covers a broader spectrum of time:
Many times in the last year of my Mother's life I saw Carey, III come into my Mother's home and go into her bedroom with stacks of legal papers for her to sign. He was often accompanied by lawyers from Carmody Torrance. Many times after Carey III and the lawyers from Carmody Torrance left the house, my mother cried and said to me, "I hope I'm doing the right thing. ". . . Carey III influenced my mother to believe that my deceased ex-husband would take anything she would leave to me in order to make her place my inheritance in his hands to control for the rest of my life." Affidavit [of Diana Salyer] in Support of Objection to Motion for Summary Judgment, September 26, 2006, ¶¶ 10, 11.
Diana made almost an identical statement in her December 16, 2004 affidavit in support of prejudgment remedy at ¶ 6 with the added sentence: "She [her mother] told me that Raymond and the lawyers were pressuring her to do things she did not feel comfortable doing."
The moving party, the defendant, has not submitted any affidavit of his own regarding these factual claims. He has submitted a partial transcript of testimony of Atty. David Sfara (one of the Carmody Torrance attorneys who represented the mother in her estate planning) which includes the statement with regard to the documents signed by the mother on December 24, 1992 that "And she re-did her plan in December. She was — this was certainly something that she was very very definite about doing and very clear about what she wanted to do." Memorandum of Law in Support of Defendant's Motion for Summary Judgment, Tab 5. The court finds that there are genuine issues of material fact as to the alleged undue influence.
The defendant also relies on the equitable defense of laches, and the defense of res adjudicata in that the plaintiffs are bound by the final decree of the Waterbury Probate Court approving the final account in the mother's estate from which they did not take a statutory appeal.
This action, returnable to this court on December 16, 2004 was commenced more than 12 years after the mother "conveyed" the East Ridge Drive house to the irrevocable trust by executing her will containing that bequest on December 4, 1992; and approximately 11 1/2 years after her June 15, 1993 execution of the Second Amendment to the 1988 pour over trust disinheriting the plaintiff Brian Carey. There is no issue of fact as to those dates which are taken from the instruments themselves which are part of the record for purposes of this motion. "The defense of laches, if proven, bars a plaintiff from seeking equitable relief in a case in which there has been inexcusable delay that has prejudiced the defendant . . . First, there must have been a delay that was inexcusable, and second, that delay must have prejudiced the defendant." (Citation omitted.) Ferrigno v. Cromwell Development Associates, 93 Conn.App. 799, 804-05, n. 10 (2006). The delay in commencing this litigation is approximately four times the statute of limitations period for commencing a tort action and approximately double the maximum statute of limitations period for commencing an action for breach of contract.
Conn. Gen. Stat. § 52-577 provides that: "No action founded on a tort shall be brought but within three years from the date of the act or omission complained of."
Conn. Gen. Stat. § 52-576 provides that: "No action for an account, or on any simple or implied contract, or on any contract in writing, shall be brought but within six years after the right of action accrues . . ."
Although courts in equitable proceedings often look by analogy to the statute of limitations to determine whether, in the interests of justice, a particular action should be heard, they are by no means obliged to adhere to those limitations . . . Dunham v. Dunham, 204 Conn., 303, 326 (1987).
The plaintiffs have submitted no facts which would excuse such a lengthy delay. On the other hand, the defendant has submitted no facts from which the court can make a finding of prejudice. The claims of undue influence relate to the defendant's relationship and dealings with his mother at the end of her life at a time when he was the trustee of two trusts established by her. He has not claimed that his memory as to the circumstances of his mother disinheriting Brian or bequeathing the house to the irrevocable trust for Diana was impaired or weakened by the delay in bringing suit, nor has he claimed that any medical or other records became unavailable during that interval. On the face of the record before this court for purposes of this motion and construing that record most favorable to the plaintiffs as I must, I cannot find a basis for holding as a matter of summary judgment that this count one is barred by laches.
The defendant has also raised the defense of res judicata based on the August 11, 1998 decree of the Waterbury Probate Court approving the defendant's final accounting as executor of the mother's estate. Our case law is clear that Probate Court decrees are final judgments for the purpose of the doctrines of res judicata and collateral estoppel. Heussner v. Day, Berry Howard, LLP, 94 Conn.App. 569, 576 (2006). The principles of res judicata were set forth by the Appellate Court in Zanoni v. Lynch, 79 Conn.App. 325, 338 (2003):
The principles underlying the doctrine of res judicata, or claim preclusion, are well settled. [A] valid final judgment rendered on the merits by a court of competent jurisdiction is an absolute bar to a subsequent action between the same parties . . . Upon the same claim or demand . . . Furthermore, the doctrine of claim preclusion . . . Bars not only subsequent relitigation of a claim previously asserted, but subsequent relitigation of any claims relating to the same cause of action which were actually made or which might have been made . . . Probate Court decrees . . . are final judgments for the purposes of the doctrine of res judicata. (Emphasis in original.)
In the analysis of the principles of res judicata to the plaintiffs' claims of undue influence in the first count, it is necessary to look separately at the claims of the two plaintiffs.
Diana Salyer is claiming that the bequest of the East Ridge Drive home to the mother's irrevocable trust for Diana as made in the mother's will of December 24, 1992 was the product of the defendant's undue influence upon the mother. That bequest was clearly set forth in the final account of the defendant as executor of the estate of Albena Carey as approved by the Waterbury Probate Court. See, Schedule B-7 of the account, "Property on Hand and Proposed Distribution to Beneficiaries" at Tab 4 attached to the Motion for Summary Judgment. The validity of that bequest and the distribution of the home to the trust were therefore issues submitted to the probate court which Diana Salyer could have litigated in that forum:
Courts of probate in their respective districts shall have the power to . . . determine title or rights of possession and use in and to any real, tangible or intangible property that constitutes, or may constitute, all or part of . . . any decedent's estate . . . Conn. Gen Stat. § 45a-98(a)(3).
(a) Courts of probate shall have jurisdiction of the interim and final accounts of . . . executors . . . (f) upon the allowance of any such account, the court shall determine the rights of . . . the parties interested in the account . . . (g) In any action under this section, the Probate Court shall have, in addition to powers pursuant to this section, all the powers available to a judge of the Superior Court at law and in equity pertaining to matters under this section.
Conn. Gen. Stat. § 45a-175 Diana Salyer was clearly a "party interested in the account." Accompanying the account was a General Waiver (Form PRC-19) signed by her and acknowledged before a notary public on July 13, 1998 in which she certified that she had examined the application and waived notice of hearing and had no objection to the granting and approval thereof. After the account was approved by decree of August 11, 1998 she did not exercise her right to a statutory appeal to the Superior Court with the appeal period (or at any time). Her claim of undue influence as pleaded in the first count of this action is therefore barred by the doctrine of res judicata.
The first count claims of Brian Carey, on the other hand, are not barred by the doctrine of res judicata. He complains that the June 15, 1993 Second Trust Amendment to the mother's 1988 pour over trust which took away his one-third beneficiary interest in that trust was the product of the defendant's undue influence. Although Schedule B-7 of the final account of the mother's estate does designate the defendant as trustee of the mother pour over trust, as amended, as a beneficiary of the estate, there is nothing therein defining or dealing with beneficial interests in that trust, nor could issues of beneficial interests of that trust be litigated in the context of the hearing on the executor's final account. The probate court would have jurisdiction to hear and decide those issues in connection with the hearing on an account of the trustee under the trust documents, but — so far as the record discloses — no such trustee account, periodic or final, has ever been filed in any Connecticut probate court.
As to the first count, then, the motion for summary judgment is granted against the plaintiff Diana Salyer on the ground of res judicata, and otherwise denied.
Second Count — Fraudulent Misappropriation of Assets
In the second count the plaintiffs allege that the defendant as the trustee of the father's trust and/or as executor of the father's estate has fraudulently misappropriated assets to his own use and control. The assets at issue include the assets (stock and promissory notes) transferred on December 23, 1992 from the father's Trust A to the mother and then by her to the mother's trust, mortgage proceeds from the North Carolina property, sale proceeds from the Galveston, Texas property, corporate assets of Swan Realty, three St. Croix lots, two industrial buildings in Danbury, the mother's stock in Carey Industries, The Cruzan Chemicals stock, two industrial lots in St Croix, manufacturing equipment and machinery, the lakeside dwelling in Ireland, Carey Industries and Cruzan Chemicals profit sharing/pension plans, and a Merrill Lynch IRA account. In his moving papers, the defendant has addressed some of these claims with plausible explanations of valid actions or defenses (e.g. that the actions complained of were done not by himself but rather by the independent trustee of the father's trust, or that the transfers in question were related to his overall plan to liquidate assets to pay estate creditors and claimants, or that the claims are barred by Connecticut statute of limitations applicable to fraud claims, Conn. Gen. Stat. § 52-577 (quoted at footnote 6).
The other special defense, res judicata, would not bar the claims in this count. Most of the assets alleged were not Connecticut assets and would not have been involved with the final account of the defendant as executor of the father's Connecticut ancillary estate; and were not scheduled as assets of the mother's estate. The August 1992 decrees of the Waterbury probate court would therfore have no preclusive effect on these claims.
There are material issues of fact as to the statute of limitations defense which must be resolved at trial. There is no doubt that this action was commenced later than the three-year period of § 52-577 from the acts or omissions complained of, but the plaintiffs have asserted in their opposition papers that the statute of limitations is tolled under the doctrine of fraudulent concealment as codified at Conn. Gen. Stat. § 52-595, which provides:
The plaintiffs have pleaded fraudulent concealment as a substantive count of the complaint (count three). They have not pleaded fraudulent concealment as a matter in avoidance of a special defense per Practice Book § 10-57. Nonetheless, they may set up fraudulent concealment in opposition to the special defense of statute of limitations for purposes of opposing this motion for summary judgment. Since motions for summary judgment can now be made under Practice Book § 17-44 as amended "at any time" without the necessity of closing the pleadings, the issues in deciding motions for summary judgment need not necessarily be framed by the pleadings. See Girard v. Weiss, 43 Conn.App. 397, 416, cert. denied 239 Conn. 946 (1996) (a party does not have to plead a time limitation as a special defense prior to moving for summary judgment.)
If any person, liable to an action by another, fraudulently conceals from him the existence of the cause of action, such cause of action shall be deemed to accrue against such person so liable therefor at the time when the person entitled to sue first discovers its existence.
Plaintiffs maintain that they first learned of certain key elements of this cause of action in the fall of 2004 (just several months before this action was commenced) when they retained an attorney, Fred L. Baker, Esq., to investigate and review their parents' estates. For instance, Brian Carey claims in his affidavit of September 26, 2006 in opposition to this motion that:
11. I was never informed of the terms of the father's trust by Carey III or Carmody Torrance, and Carey III concealed from me that I was a beneficiary of my Father's Trust.
The significance of this statement is that the plaintiffs were each one-third beneficiaries of the father's trust, entitled to outright distribution of trust principal at the death of the mother. Under the mother's trust, their distributions at her death were subject to further trust provisions under the trusteeship of the defendant, and, in the case of Brian Carey, by virtue of the second amendment to the mother's trust, he was not a beneficiary at all. Hence the plaintiffs claim they were damaged by the allegedly improper transfers of trust assets out of the father's trust and ultimately into the mother's trust during the life of the mother.
12. I was never kept fully informed of any matters affecting my father's estate. I was never informed that Cruzan Chemicals had merged with Cruzan Connecticut or that the Galveston property had been sold or that Triangle Street and White Street [Danbury properties] had been "contributed" to Carey Industries or that Carey Industries and Swan Realty had been transferred out of the Father's Estate or that my father's domiciliary estate in St. Croix had never been closed or that the U.S, customs lawsuit had been settled in 1992.
Similar statements are made in the affidavit of Diana Salyer.
The defendant claims that the plaintiffs were aware of all aspects of their father's estate because they had served with him from late 1984 until mid-1986 as co-executors of the estate, because during that interval they signed the father's Federal Estate Tax Return as co-executors, because they were kept informed of developments by correspondence from Carmody Torrance as attorneys for the estate, and because of certain general admissions of knowledge gleaned from the affidavits they submitted to this court in December 2004 in support of their application for prejudgment remedy in this case. The court has reviewed all of that evidence as submitted by the defendant. Construing it most favorably to the plaintiffs as the law requires, the court is satisfied that there are genuine issues of material fact as to fraudulent concealment. The plaintiffs served briefly as co-executors of the estate but they had not been actively involved in the business and affairs of the father as had the defendant and they both lived at great distance from Connecticut. Brian did write a few letters on behalf of the estate at the very beginning, but they concerned discreet minor matters that did not require comprehensive knowledge of the estate assets or the terms of the father's various trusts. Other than that there is nothing to show, any significant involvement of the plaintiffs in their brief tenure as fiduciaries. Although they both admit signing the signature page of the father's Federal Estate Tax Return as sent to them by Atty. David Sfara, they each state in their affidavits (Brian ¶ 14; Diana ¶ 13) that they did not review the return but simply signed and returned the front page as instructed by Atty. Sfara. Although Atty. Sfara says by affidavit of August 25, 2006 (Tab 17 to the Motion for summary Judgment) that it was his firm's "standard practice" to provide a copy of a decedent's will and trust to all executors named in the will and to review the documents in person with the executors if possible, he is unable to say definitively that such "standard practice" was followed with respect to the plaintiffs, nor has he submitted any cover letters or other verification that they were provided with copies of those key documents. The statute of limitations defense and the plaintiff's fraudulent concealment avoidance of that defense must be resolved at trial.
As previously mentioned the defendant has provided certain plausible valid explanations as to some of the transactions alleged in the second count as fraudulent misappropriations, but there are many other allegations of this second count that he simply has not addressed at all. For instance the moving and reply papers are silent as to the claim that he used Swan Realty assets to purchase a condominium in North Carolina for his own personal use, or that proceeds from the sale of the Galveston mansion were deposited into his daughter's account at Merrill Lynch, or that hundreds of thousands of dollars of manufacturing equipment and machinery owned by the father have not been accounted for, or that he misappropriated Brian Carey's one-third interest in the house in Ireland by using a purported power of attorney that Brian had never signed, or that funds from the Carey Industries and Cruzan Chemicals profit sharing/pension plans which went into an IRA account for the mother are unaccounted for to the extent of $400,000. The defendant is entitled to summary judgment on this count only if he can show lack of a genuine issue of material fact and that he is entitled to judgment as a matter of law. A defendant who successfully defends against some — but not all — of the allegations of a cause of action does not become entitled to judgment. This is so because a plaintiff who alleges multiple transgressions in a single count is not obliged to prove them all. The plaintiff is entitled to judgment on that count so long as at least one specification of the cause of action is proved. Judgment in that event enters for the plaintiff against the defendant as to the allegations the plaintiff has proved or the defendant was unable to defend against. For that reason it has been held that "Connecticut does not have a procedure for rendering judgment for a defendant on part of a count unless it disposes of all the issues in a count." (Internal quotation marks and citations omitted.) Electrical Contractors, Inc. v. City of Hartford, Docket Number CV04-0831259S, Superior Court, Judicial District of Hartford at Hartford (Jane S. Scholl, J., March 17, 2006; 2006 Ct.Sup. 5199, 40 Conn. L. Rptr. 878. For all the foregoing reasons, the motion for summary judgment is denied as to the second count of the complaint.
Third Count — Fraudulent Concealment
The allegations of the third count incorporate and mirror the claims of wrongful appropriation of the second count.
Res judicata would not bar this count based on the record presented because some of the claims alleged go to assets other than Connecticut assets which were not before the Waterbury Probate Court. There are also claims of beneficial interests in the father's trust and the mother's trust which were not before that court because no accounting of the trustee of those trusts has ever been filed. Nor would the special defense of statute of limitations for fraud claims (Conn. Gen Stat. § 52-577 — three years from the act or omission complained of), on the record presented, bar these claims because as indicated above under the discussion of count two, there are issues of material fact as to whether or not the statute of limitations has been tolled under Conn. Gen Stat. § 52-595 by fraudulent concealment of the cause of action. Those same genuine issues of material fact would also prevent the defendant from being entitled to judgment as a matter of law on the plaintiffs' substantive claims of the third count — also grounded on a theory of fraud by concealment. The motion for summary judgment is therefore denied as to the third count.
Fourth Count — Breach of Fiduciary Duty Fifth Count — Breach of Fiduciary Duty — Self Dealing
The allegations of these counts mirror and incorporate all the allegations of the second and third counts. The plaintiffs claim that the defendant's actions, as alleged therein amounted to violations of his fiduciary duties as trustee of the father's trust and executor of the father's estate. The defense of res judicata does nor bar these claims. Almost every transgression alleged in these counts concerns assets and transactions which were not part of the Connecticut ancilliary estate which was the only thing relating to the father which was before the Waterbury probate court. Nor would the defense of statute of limitations on the record presented bar these claims because of the previously discussed issues of material fact relating to possible tolling of the statute of limitations under Conn. Gen. Stat. § 52-595. Finally, the defendant has not met his initial burden of showing lack of a material issue of fact — indeed has not even addressed at all certain of the allegations of the fourth and fifth counts.fn9 He is therefore not entitled to summary judgment on either count because of the rule against partial summary judgment within a single count as annunciated in Electrical Contractors, Inc. v. City of Hartford, supra, and cases cited therein.
Sixth Count — Breach of Duty-Prudent Investor Act
The sixth count alleges that the defendant "as Trustee after September 19, 1984 (Father's date of death) are governed by the Connecticut Uniform Prudent Investor Act, Conn. Gen. Stat. §§ 45a-541, et seq." The reference to the father's date of death which was ten years earlier than the mother's date of death can only mean that this count is directed to the defendant solely in his capacity as trustee of the father's trust. The Connecticut Uniform Prudent Investor Act (the "Act") states that a trustee shall invest and manage trust assets as a prudent investor would and shall exercise reasonable care, skill and caution. § 45a-541b(a). A trustee is required to consider certain generalized circumstances in investing and managing trust assets, such as the effects of inflation and deflation; tax consequences; the role of each investment within the overall trust portfolio; expected return from income and appreciation; related trusts and other income and resources of beneficiaries; needs for liquidity, regularity of income, and preservation or appreciation of capital; an asset's special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries; the size of the portfolio; and the nature and estimated duration of the trust. § 45a-541b(c). The Act also has specific requirements for diversification, initial duties, loyalty, impartiality, and appropriate and reasonable costs. §§ 45a-541c through 45a-541g. The Act expresses a standard of conduct, not outcome, and compliance is determined in light of the facts and circumstances existing at the time of a trustee's decision or action. § 45a-541h. The Act specifically provides for private causes of action based on violations of the Act: ". . . A trustee who invests and manages trust assets owes a duty to the beneficiaries of the trust to comply with the prudent investor rule as set forth in sections 45a-541 to 45a-541l, inclusive." § 45a-541a.
The plaintiffs allege in very general terms that the defendant violated the act by mismanagement, inadequate diversification, breach of the duties of loyalty and impartiality, and incurring inapprropriate and unreasonable costs. The defendant in his memorandum of law in support of this motion claims that "all of the assets requiring investor decisions were devised to the mother" (thereby implying lack of standing by the plaintiffs) and that all the other assets in the estate consisted of stock in closed corporations and the operating assets relative thereto which were not available for investment. The defendant also points out that the estate assets were subject to some $7 million in claims which, he states, were known to the plaintiffs. The plaintiffs in their opposing papers have not specifically addressed this sixth count, but they have in response to other portions of the motion for summary judgment stated that there were other assets, including real estate assets in several different states, and in Ireland, which were either fraudulently misappropriated or unaccounted for, and that they were unaware of the full extent of the estate liabilities until 2004.
The Act is not limited to investment decisions. The standard of care applies both to management and investment of trust assets by a trustee. § 45a-541b. Stuart v. Stuart, Docket No. X08 CV02-0193031S, Superior Court, Judicial District of Stamford-Norwalk at Stamford, (Adams, J., June 28, 2004) [ 37 Conn. L. Rptr. 367] 2004 Ct.Sup. 10367, 37 CLT 367. There is large overlap between the claims made in this count and the claims of fraudulent misappropriation, fraudulent concealment and breach of fiduciary duties as alleged in earlier counts. Those same issues of fact earlier identified with respect to those counts would largely apply to the sixth count as well, including issues as to tolling the statute of limitations under Conn. Gen Stat. § 52-595. There is an additional category of factual issues applicable to this count in that the Act first took effect in Connecticut on October 1, 1997, some 13 years after the father's death. "As applied to trusts existing on October 1, 1997 sections . . . 45a-541 to 45a-541l, inclusive, govern only decisions or actions occurring after that date." § 45a-541. There are then issues of fact as to the chronological operative effect of the Act on the alleged misconduct set out in complaint and the claimed valid and appropriate actions taken by the defendant. All those factual issues will have to be resolved at trial.
Seventh Count-Statutory Theft
By incorporating all the allegations of the first six counts, the plaintiffs allege that the defendant's actions constitute statutory theft pursuant to Conn. Gen. Stat. § 52-564 in that he wrongfully assumed and continues to assume unauthorized control of the assets of his parents' estates and trusts to the exclusion of the plaintiffs and has refused to surrender and deliver the appropriate portion of their trusts and estates to the plaintiffs. § 52-564 provides: "Any person who steals any property of another, or knowingly receives and conceals stolen property shall pay the owner treble his damages." Statutory theft under this section is synonymous with larceny under the criminal code, Conn. Gen. Stat. § 53a-119. Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20, 43-44 (2000). § 53a-119 defines larceny as follows:
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. Larceny includes, but is not limited to: . . . (2) Obtaining property by false pretenses. A person obtains property by false pretenses when, by any false taken, pretense, or device, he obtains from another any property, with intent to defraud him or any other person. (Emphasis added.)
With reference to the italicized language it is clear that the allegations of this seventh count are co-extensive with the allegations of the second count for fraudulent misappropriation, which are incorporated into the seventh count. Therefore, the reason given above for denial of the motion for summary judgment on the second count applies equally to this seventh count.
Eighth Count — Unjust Enrichment
The eighth count incorporates all the allegations of the earlier counts and alleges generally that as a result of those alleged activities the defendant and his companies have been unjustly enriched by the wrongful misappropriation and by the unconscionable retention of the parents' trusts and estates for the benefit of the defendant and to the detriment of the plaintiffs. No additional facts are alleged in the eighth count.
Unjust enrichment in the context of this case would be an equitable quasi-contractual claim for restitution for benefits provided by the plaintiff. "The right of recovery for unjust enrichments is equitable, its basis being that in a given situation it is contrary to equity and good conscience for the defendant to retain a benefit that has come to him at the expense of a plaintiff." (Internal quotation marks omitted. Citation omitted.) National CSS, Inc. v. Stamford, 195 Conn. 587, 597 (1985). "To find unjust enrichment you must find that the plaintiff has provided [goods/services], that the defendant has benefitted from those [goods/services], that the defendant unjustly did not pay for that benefit and that the defendant's failure to pay hurt the plaintiff." Connecticut Judicial Branch, Civil Jury Instructions, No 3-40, Unjust Enrichment. In this case it is clear beyond any genuine issue of fact that the plaintiffs have not provided any goods or services or anything else of value to the defendant. Summary judgment for the defendant is therefore appropriate on this eighth count for unjust enrichment.
Ninth Count — CUTPA
Without alleging any additional facts, the plaintiffs claim in the ninth count that the defendant's conduct as alleged in the first eight counts constitutes unfair or deceptive trade practices within the meaning of the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. §§ 42-110b, et seq. in that his actions and/or services were immoral, unethical, oppressive, unscrupulous, and caused substantial injury and ascertainable losses to the plaintiffs including but not limited to attorneys fees. The motion for summary judgment is granted on the CUTPA count for two reasons.
The CUTPA statute § 42-110b prohibits unfair methods of competition and unfair or deceptive trade practices ". . . in the conduct of any trade or commerce." In McCann Real Equities v. David McDermott, CT Page 6122 93 Conn.App. 486 (2006) the Appellate Court held that the prohibition only applies to activities undertaken by a person or entity in the conduct of its primary trade or commerce. The evidence submitted by the defendant and not disputed by the plaintiffs is that at all relevant times the defendant's primary trade or commerce was conducting business in the processing and sale of vat dyes through closely held corporations, primarily Carey Industries. All of the allegations directed against the defendant as incorporated into this ninth count were performed in his capacities as trustee or executor of his deceased parents' estates, which was clearly not his primary trade or commerce. The CUTPA count fails on that basis.
The second reason is that the CUTPA statute contains a limitation of actions provision at § 42-110g(f): "An action under this section may not be brought more than three years after the occurrence of a violation of this chapter." This action was commenced in December 2004. All the activities alleged to be unfair or deceptive trade practices by undisputed evidence occurred before December 2001 — in most cases many years prior to 2001. The statute of limitations defense therefore bars this count unless the statute has been tolled under Conn. Gen. Stat. § 52-595 by the fraudulent concealment theory relied upon by the plaintiffs. But Connecticut law is clear that "[a] CUTPA Claim is not tolled by fraudulent concealment for purposes of the statute of limitations." Wright, Fitzgerald Ankerman, Connecticut Law of Torts § 194 citing Finchera v. Mine Hill Corporation, 207 Conn. 204 (1988) where the court said: "We are convinced that its application [application of the doctrine of tolling by fraudulent concealment] here would defeat the legislative intention expressed in 42-110g(f) to bar actions for CUTPA violations after the lapse of more than three years from their occurrence." 207 Conn. at 216.
The motion for summary judgment is granted on the ninth count.
Order
The motion for summary judgment is granted against the plaintiff Diana Salyer only on the first count. The motion for summary judgment is granted against both plaintiffs on the eighth count and the ninth count. In all other respects the motion for summary judgment is denied. Judgment shall enter accordingly.
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