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Powell-Ferri v. Ferri

Supreme Court of Connecticut

August 8, 2017

NANCY POWELL-FERRI
v.
PAUL JOHN FERRI, JR.

          Argued November 12, 2015

          Kenneth J. Bartschi, with whom were Karen L.Dowd and, on the brief, Thomas P. Parrino and Laura R. Shattuck, for the appellant (plaintiff).

          Charles D. Ray, with whom were Sarah E. Murray and, on the brief, Carole Topol Orland, for the appellee (defendant).

          Palmer, Eveleigh, McDonald, Espinosa and Robinson, Js. [*]

         Syllabus

         The plaintiff appealed from the judgment of the trial court dissolving her marriage to the defendant, who was the sole beneficiary of two trusts, and granting certain other relief. Prior to the parties' marriage, the defendant's father settled the first trust, which was used primarily for investment purposes but was also used to fund certain improvements to the marital home and to pay the parties' taxes. After the commencement of the dissolution action, the trustees of that trust decanted a substantial portion of its assets to create a second, spendthrift trust for the defendant's sole benefit. In a related declaratory judgment action, the court determined that the decanting was improper and ordered the return of 75 percent of the assets to the first trust. The trial court in the present case determined that the assets subject to that order were marital property but declined to divide them equally as the plaintiff had requested. In reaching its conclusion, the trial court recognized that any assets remaining in the spendthrift trust following resolution of a pending appeal in the declaratory judgment action were not marital property. The trial court also denied the plaintiff's motion for contempt, in which the plaintiff had claimed that the rule of practice (§ 25-5) governing automatic orders in dissolution proceedings required the defendant to bring a civil action against the trustees to challenge the decanting of assets, and ordered the defendant to pay attorney's fees to the plaintiff in an amount equal to what he paid his own attorneys, but only until he made his first lump sum alimony payment. On appeal, the plaintiff claimed that the trial court incorrectly found that she had not contributed to the value of the first trust, improperly declined to find the defendant in contempt, incorrectly failed to include the value of the spendthrift trust in the marital estate, and improperly structured its award of attorney's fees. Held:

         1. The plaintiff could not prevail on her claim that the trial court incorrectly found that she did not contribute to the value of the first trust: even if this court were to accept the plaintiff's factual assertions as true, in light of the conclusion set forth in Ferri v. Powell-Ferri (326 Conn.) that the trustees' decision to decant was proper and the fact that the decanted assets could not be reached once they were placed into the spendthrift trust, the assets from the first trust could not be considered as part of the dissolution judgment and, thus, it was unnecessary to consider the merits of the plaintiff's arguments concerning her contributions to the value of the first trust.

         2. The trial court did not abuse its discretion in declining to find the defendant in contempt, this court having concluded that the automatic orders required by Practice Book § 25-5 did not impose any affirmative obligation on the defendant to bring a separate action against the trustees for lawfully decanting assets from the first trust; even if there were instances in which a party could be required to take affirmative action to recover marital assets, the trustees in the present did not engage in any illegal activity and had not breached the terms of the first trust, and, because the defendant was unaware of the decanting, he could not have assisted in dissipation of marital assets or otherwise have engaged in the type of intentional waste or selfish impropriety necessary to constitute dissipation.

         3. The trial court did not abuse its discretion in failing to consider the entire value of the spendthrift trust as a marital asset on the ground that the defendant possessed a chose in action for breach of fiduciary duty against the trustees in an equal amount; although a chose in action existing at the time of dissolution can be classified as an intangible property interest subject to distribution in a dissolution proceeding, the defendant in the present case possessed no such interest because the trustees acted lawfully and in his best interest, and the plaintiff failed to demonstrate that the trustees breached their fiduciary duty to the defendant. 4. The trial court's award of attorney's fees did not constitute an abuse of discretion: the structure of the trial court's award of attorney's fees, which was based on the amount the defendant paid to his attorneys and which terminated upon his first lump sum alimony payment, was not an abuse of discretion in the absence of evidence that the defendant had failed to pay his attorneys or would fail to do so in the future; furthermore, the trial court did not abuse its discretion in determining that the payment of some legal costs by the plaintiff would not undermine its financial orders in light of the significant awards of alimony and child support, substantial litigation expenses incurred by the defendant, and the trial court's other financial orders.

         Procedural History

         Action for the dissolution of a marriage, and for other relief, brought to the Superior Court in the judicial district of Hartford, where the case was transferred to the judicial district of Middlesex and tried to the court, Munro, J.; judgment dissolving the marriage and granting certain other relief, from which the plaintiff appealed. Affirmed.

          OPINION

          EVELEIGH, J.

         This appeal arises from an action dissolving the marriage of the plaintiff, Nancy Powell-Ferri, and the defendant, Paul John Ferri, Jr. (Ferri). On appeal, Powell-Ferri challenges numerous financial orders entered by the trial court. Specifically, Powell-Ferri asserts that the trial court incorrectly (1) determined that she did not contribute to a trust created by Ferri's father, Paul John Ferri, Sr., in 1983 (1983 trust), (2) denied her motion for contempt, (3) determined that a trust created in 2011 (2011 trust) was not a marital asset, and (4) structured the award of attorney's fees. We disagree with Powell-Ferri and, accordingly, affirm the judgment of the trial court.

         In its memorandum of decision, the trial court set forth the following relevant facts and procedural history. The trial court dissolved the parties' marriage in August, 2014, and entered financial orders. At the time of dissolution, the parties had been married for nineteen years and had three daughters, all of whom were minors. Powell-Ferri was a homemaker throughout the marriage, taking care of all three children and the family household. For most of the marriage, the parties lived in a home they owned in Farmington. Ferri briefly worked for his father's venture capital firm, Matrix Partners, but for the majority of the marriage, his income was derived from numerous Valvoline franchises (franchises).

         Ferri is the sole beneficiary of the 1983 trust. The 1983 trust is central to the underlying dissolution action, and the parties' use of the trust during the marriage strongly informed the trial court's financial orders. The parties did not rely on the trust for their daily living expenses. Ferri primarily used the 1983 trust for investment purposes. There were a few instances during the marriage when the 1983 trust was not used for purely investment purposes; for example, the trust provided $300, 000toward home improvements and regularly paid the parties' taxes. The parties, in turn, regularly contributed their tax refund checks to the trust. Ferri also used funds from the trust during the marriage to purchase ownership interests in the franchises. In March, 2011, while the underlying dissolution action was pending, the trustees of the 1983 trust (trustees) created a second trust whose sole beneficiary was Ferri (2011 trust). The trustees then decanted a substantial portion of the assets in the 1983 trust to the 2011 trust.

         Throughout the divorce, the parties disputed the valuation of the 1983 trust. The trustees valued the trust at approximately $69 million, Powell-Ferri valued it at approximately $98 million, and Ferri at approximately $80.5 million. The majority of the trust value derived from three assets: securities, hedge and investment funds, and various limited liability companies related to the franchises. The parties did not dispute the value of the securities, as these were publicly traded. The parties also did not contest the values of the limited liability companies, which obtained ownership of the franchises using, in part, funds from the 1983 trust. Specifically, the trial court found that the 1983 trust contributed between $5 million and $8 million toward the acquisition of the franchises. The parties agreed that the franchise related entities were worth approximately $14.5 million. The parties did, however, dispute the value of the hedge and investment fund assets. The court engaged in a detailed and thorough analysis to determine the value of these assets. In a related declaratory judgment action, the trial court found that the trustees were not authorized to decant, and ordered the trustees to return 75 percent of the assets to the 1983 trust, [1] which the trial court in the present case had determined was marital property.

         Although the trial court determined 75 percent of the assets transferred from the 1983 trust to be marital property, it did not divide those assets equally as Pow-ell-Ferri had requested. The trial court found that Pow-ell-Ferri had requested too great a share of those assets because the 1983 trust represented a sum of money that the parties knew they had in reserve so that they would ‘‘always be free from want or need in the lifestyle they had established.'' The trial court recognized that the 1983 trust was ‘‘an asset that [Ferri] brought to the marriage, that it is the initial product of the labor of his father, not him, and that it should be left sufficiently intact so that it may be used for investment . . . purposesas[Ferri] had envisioned it.'' The court also recognized that whatever assets remained in the 2011 trust following an appeal in the declaratory judgment action; see footnote 1 of this opinion; were not marital assets because Ferri had no present or future entitlement to those funds.

         On the basis of that separate action and the uncertainty as to the validity of the decanting, the trial court fashioned two alternative financial orders. The first order contemplated a return of assets to the 1983 trust. The second order assumed that the trustees' decision to decant was upheld on appeal and that the assets of the 2011 trust were left undisturbed. Under the first order, Ferri was required to pay Powell-Ferri $12 million in lump sum alimony over the course of several years. The trial court found that, under this scenario, it was ‘‘equitable to order a sufficient lump sum alimony [so] that [Powell-Ferri] will have no need for dependency on [Ferri] in the future.'' Conversely, under the second order, Ferri was required to pay, inter alia, $25, 000 per month in alimony.

         As we explained more fully in the appeal pertaining to the declaratory judgment action; Ferri v. Powell-Ferri, 326 Conn., A.3d (2017); the issue of whether the trustees had the authority to decant the assets of the 1983 trust into the 2011 trust, presented a novel issue of Massachusetts law. Therefore, we certified the following three questions to the Massachusetts Supreme Judicial Court: (1) ‘‘Under Massachusetts law, did the terms of [the 1983 trust] empower [the] trustees to distribute substantially all of its assets . . . to [the 2011 trust]?'' (2) ‘‘If the answer to [the first question] is ‘no, ' should either [75 percent] or [100 percent] of the assets of the 2011 [t]rust be returned to the 1983 [t]rust to restore the status quo prior to the decanting?'' (3) ‘‘Under Massachusetts law, should a court, in interpreting whether [Ferri's father] intended to permit decanting to another trust, consider an affidavit [from him], offered to establish what he intended when he created the 1983 [t]rust?'' The Massachusetts Supreme Judicial Court answered the first and third questions in the affirmative. Ferri v. Powell-Ferri, 476 Mass. 651, 663-64, 72 N.E.3d 541 (2017). In Ferri v. Powell-Ferri, supra, 326 Conn., we adopt the Massachusetts Supreme Judicial ...


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