Browning v. Brunt

          Argued March 28

         Procedural History

         Action to recover damages for, inter alia, breach of contract, and for other relief, brought to the Superior Court in the judicial district of Stamford-Norwalk, where the court, Heller, J., granted the motion to dismiss filed by the defendant Thomas Olander et al. and rendered judgment thereon, from which the plaintiffs appealed. Affirmed.

          Kenneth A. Votre, for the appellants (plaintiffs).

          Daniel J. Krisch, with whom, on the brief, were Jeffrey F. Gostyla and Cory D. Olson, pro hac vice, for the appellees (defendant Thomas Olander et al.).

          Palmer, McDonald, Robinson, D'Auria, Mullins, Kahn and Vertefeuille, Js. ^[*]

          OPINION

          KAHN, J.

         The sole question presented in this appeal is whether the trust beneficiaries are the proper parties to bring an action against third parties on behalf of the trust. The plaintiffs-Ann Browning, Richard Browning, Lance Browning, Karen Guinta, and Jill Milligan-are beneficiaries of a trust, and appeal^[1] from the judgment of the trial court dismissing their breach of contract claim against the defendants Dougherty & Company, LLC (Dougherty), the financial advisor for the trust, and Thomas Olander, an employee of Dougherty.^[2]Although the parties agree that the general rule is that beneficiaries of a trust lack standing to bring an action against a third party for liability to the trust, they disagree that the general rule applies under the facts of the present case. See 4 Restatement (Third), Trusts, § 107, p. 102 (2012).^[3] Specifically, the plaintiffs claim that they fit within an exception that allows beneficiaries to bring an action against third parties if the trustee improperly refuses or neglects to do so.^[4] The defendants respond that the plaintiffs do not fit within the exception to the general rule because they failed to demand that the current trustee bring an action and they did not allege in their complaint that the current trustee improperly neglected to sue the defendants. The defendants further argue that, because standing implicates subject matter jurisdiction, they properly raised the issue by way of a motion to dismiss. We conclude that the trial court properly determined that it lacked subject matter jurisdiction over the claim and, therefore, that the trial court properly granted the motion to dismiss. Accordingly, we affirm the judgment of the trial court.^[5]

         The allegations of the complaint, together with undisputed facts as evidenced in the record, establish the following factual and procedural background relevant to our resolution of this appeal. See, e.g., Cuozzo v. Orange, 315 Conn. 606, 615, 109 A.3d 903 (2015) (in reviewing trial court decision on motion to dismiss, reviewing court may consider facts as established by ‘‘ ‘the complaint supplemented by undisputed facts evidenced in the record' ''). On June 23, 1993, Byram D. Browning (Byram) established a revocable, inter vivos trust for the benefit of his children, the five plaintiffs and their sister Victoria Peters. The trust corpus consisted of thirteen separate investment bonds and securities.

         When Byram died in May, 2006, the trust corpus was valued at $836, 000, and Peters became the successor trustee.^[6] A secrecy clause in the trust prevented Peters from disclosing the percentage of the assets left to each of her siblings for five years, and from distributing any funds from the trust to the plaintiffs and herself until five years after Byram's death. Between 2006 and 2010, Peters drained hundreds of thousands of dollars from the trust for her personal use. In 2008, unable to obtain any information from Peters about the state of the trust, at least one of the plaintiffs filed a petition requesting that the Probate Court for the district of Darien-New Canaan order Peters to produce an accounting and disclose the terms of the trust.

         By June, 2010, when Peters had yet to provide any information regarding the trust, the Probate Court ordered her to produce an accounting, which revealed that the trust funds had become inseparably commingled with Peters' personal accounts and that the trust suffered from improper recordkeeping. Consequently, the Probate Court determined that Peters breached various fiduciary duties owed to the plaintiffs and ordered her to pay $182, 553.48 in accounting and legal fees. The Probate Court accepted Peters' resignation as trustee^[7]and appointed Van Brunt, DuBiago & Co., LLC (Van Brunt), an accounting firm, as the successor trustee.^[8]The plaintiffs contend that at the time Van Brunt assumed its role as successor trustee, less than $70, 000 remained in the trust, and, consequently, Nicholas DuBi-ago, the managing partner of Van Brunt, informed the parties that ‘‘it would be too costly [given the funds remaining in the trust] to reconstruct a complete and comprehensive accounting . . . .'' See footnote 2 of this opinion.

         The plaintiffs thereafter brought the present action, claiming breach of contract by the defendants. The complaint may be read to suggest that the defendants' contractual duty arose from the fact that, pursuant to the deed of trust signed by Byram, the assets of the trust were held in an investment account under the defendants' full possession and control. One provision in the deed of trust precluded the trustee from liquidating the assets of the trust and required all income, after taxes and expenses, to be reinvested. The plaintiffs claimed that the defendants breached the contractual duties that were allegedly created by the deed of trust by allowing Peters ‘‘to withdraw exorbitant amounts of money'' from the trust. They did not allege that Van Brunt improperly refused to bring an action on behalf of the trust or that they had requested that it do so. Nor did the complaint allege that Van Brunt improperly neglected to bring an action on behalf of the trust. Rather, the plaintiffs' breach of contract claim against the defendants focused primarily on the defendants' failure to prevent Peters from violating her obligations under the deed of trust, and its only reference to Van Brunt was that its managing partner, DuBiago, had ‘‘determined that distributions from'' the trust were ‘‘wrongfully withdrawn'' by Peters.

         The defendants moved to dismiss count three of the complaint for lack of subject matter jurisdiction. They argued that the plaintiffs lacked standing to bring their claim under Connecticut law, which provides that the trustee is the appropriate party to bring an action against third parties for liability to the trust. The plaintiffs filed a memorandum in opposition to the defendants' motion to dismiss, contending that their claim fell within the exception that allows beneficiaries to bring an action against a third party after the trustee improperly refuses or neglects to bring the action on behalf of the trust. In their reply, the defendants responded that the plaintiffs failed to qualify for the exception because they never alleged that their current trustee, Van Brunt, improperly refused or neglected to pursue a claim against the defendants.

         Following argument at short calendar on the defendants' motion, the trial court dismissed the plaintiffs' breach of contract claim against the defendants, holding that, as beneficiaries, the plaintiffs lacked standing to maintain a breach of contract action against third parties for liability to the trust. The trial court reasoned that the plaintiffs ‘‘have not alleged that they first asked [Van Brunt] . . . to bring an action, and [Van Brunt] refused. They have offered no evidence to suggest that [Van Brunt] was somehow implicated in the alleged wrongdoing of . . . Peters . . . or otherwise acted imprudently so as ...