ANN BROWNING ET AL.
v.
VAN BRUNT, DUBIAGO & CO., LLC, ET AL.
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 ...