SUSAN SHAPIRO BARASH, COTRUSTEE, ET AL. v. BARBARA LEMBO
(SC 20676)
Supreme Court of Connecticut
Argued February 15-officially released November 7, 2023
Robinson, C. J., and McDonald, D‘Auria, Mullins, Ecker and Alexander, Js.
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Syllabus
The plaintiffs, three siblings who were beneficiaries of an inter vivos trust established by their father, R, and S, who was one of three cotrustees of the trust, sought to recover damages from the defendant, another one of the cotrustees, for the defendant‘s alleged breach of her fiduciary duty. S is the ex-wife of R and the mother of the trust beneficiaries, whereas the defendant was marriеd to R at the time of his death in 2007. In 2006, R executed a will leaving the residue of his estate to the trust. At the time of R‘s death, R owned a 49 percent interest in certain commercial real estate development projects, including properties owned by E Co., M Co., and N Co., which became a part of his estate upon his death. R‘s business partner, F, also held a 49 percent interest in each of the three companies, and, after R‘s death, F served as the sole manager of each of the companies pursuant to their respective operating agreements. L had served as the sole executor of the estate since 2009. In 2016, S was appointed as the third cotrustee of the trust, joining the defendant and L, the other two cotrustees. After S was appointed as a cotrustee, the plaintiffs raised various challenges in the Probate Court to L‘s management of the estate and to certain accountings, and sought to remove L as executor. Those challenges were predicated on allegations that L had breached his duty of loyalty on the grounds that he engaged in self-dealing and had a conflict of interest stemming from his personal and professional relationship with F. The Probate Court, however, rejected the plaintiffs’ claims and issued various decrees denying the petition to remove L as executor and approving in part the challenged accountings. The plaintiffs and L filed separate appeals from the Probate Court‘s decrees, which were consolidated and scheduled for a trial de novo in the Superior Court. Meanwhile, in their complaint against the defendant in the present case, the plaintiffs alleged that she had breached her fiduciаry duty as trustee by failing to protect and collect trust property, to investigate or ask questions about L‘s alleged mismanagement of the estate, and to seek recovery from and hold L accountable for any damages sustained by the trust as a result of his misconduct. The plaintiffs relied on three sets of factual circumstances relating to L‘s administration of the estate and F‘s management of the three companies. Specifically, the plaintiffs referred to a 2011 amendment to the operating agreement of E Co., which provided F with an annual salary for his services as manager retroactive to 2007, a $3 million loan to E Co. from the proceeds of the sale of assets owned by M Co. and N Co., and the sale of real property owned by E Co. The plaintiffs alleged that these transactions were detrimental to the interests of the trust and that L had ongoing conflicts of interest stemming both from his personal relationship with F and the legal representation provided to F by the law firms with which L was associated while administering the estate. The parties filed separate motions for summary judgment. The plaintiffs adduced certain evidence, in support of their summary judgment motion, that L‘s actions had benefited F to the detriment of the trust beneficiaries and relied on the defendant‘s own deposition testimony that she, among other things, had failed to attend any of the Probate Court hearings pertaining to the estate, did not inquire about the assets that the trust should have been receiving from the estate, maintained no records of distributions made to the trust or to the trust beneficiaries, and took no steps to determine whether L had properly performed his duties as executor. The trial court, however, granted the defendant‘s motion for summary judgment and rendered judgment for the defendant, agreeing with her arguments that her duties as a trustee with respect to the residuary assets of R‘s estate had not commenced because those assets had not yet been conveyed to the trust, and that she owed no fiduciary duty to the trust beneficiaries until the estate settled. On the plaintiffs’ appeal from the trial court‘s judgment, held:
- The Probate Court‘s denial of the plaintiffs’ petition to remove L as executor of R‘s estate on the grounds of self-dealing and conflict of interest did not collaterally estop the plaintiffs from litigating in the present case the issue of whether the defendant had breached her fiduciary duty to investigate, object to, or otherwise hold L accountable for his mismanagement of the estate:
Probate Court orders, judgments, and decrees are final judgments for purposes of collateral estoppel and res judicata, the general rule in Connecticut is that a pending appeal does not deprive a Probate Court order, judgment, or decree of finality for purposes of the preclusion doctrines, and, thus, the Superior Court in the present case ordinarily would be required to apply the principles of collateral estoppel and res judicata to the Probate Court‘s decrees, even when there is a pending appeal from those decrees.
In the present case, however, the consolidated appeal from the Probate Court‘s decrees was to take the form of a trial de novo in the Superior Court pursuant to statute (
§ 45a-186 ), and, although this court had not previously considered whether a trial de novo in a pending appeal renders the preclusion doctrines inapplicable, it adopted the rule applied by the federal courts and endorsed by the Restatement (Second) of Judgments, pursuant to which the pendency of an appeal ordinarily does not suspend the preclusive effect of an otherwise final judgment, unless the appeal is to be conducted as a trial de novo.Application of the federal rule in the context of prior litigation resulting in a probate decree that is the subject of a pending de novo appeal struck the appropriate balance because, when an appeal is conducted as a trial de novo, the appellant is entitled to relitigate the issues that were addressed by the Probate Court without regard to the Probate Court‘s factual findings or legal conclusions, and the Superior Court, sitting as a Probate Court, may admit or preclude evidence, make factual findings and credibility determinations, and arrive at an ultimate conclusion without according any preclusive effect to the Probate Court‘s prior findings or rulings.
Accordingly, a probate decree that is the subject of a pending de novo appeal does not contain the necessary attributes of finality to warrant application of the doctrine of collateral estoppel.
Nonetheless, this court emphasized that trial courts possess significant and effective means to manage their dockets to minimize the risk of inconsistent outcomes or other undesirable consequences of potentially duplicative litigation, and it suggested that, on remand, the trial court may wish to consider deferring trial pending the outcome of the trial de novo in the appeal from the decree denying the petition to remove L as executor, which might ultimately have preclusivе effect in the present case.
- The trial court incorrectly concluded that there was no genuine issue of material fact as to whether the defendant had breached her fiduciary duty to collect and protect trust assets on the ground that she did not owe the trust beneficiaries such a duty with respect to the residuary assets that were not yet part of the trust res, and, accordingly, this court reversed the trial court‘s judgment and remanded the case for further proceedings:
Beginning when the trustee accepts the trusteeship, the trustee owes a fiduciary duty to administer the trust in the interest of the beneficiaries, the duty to administer the trust includes a duty to collect and protect trust property, as well as the associated responsibility of taking reasonable steps to uncover and redress any breach of duty committed by a predecessor fiduciary, and, when trust property is held or controlled by another, the duty to collect and protect trust property may require the trustee to take reasonable steps to enforce claims held by the trust.
Moreover, the trustee of a testamentary trust has a duty to compel the executor of an estate to transfer trust property that the executor has a duty to transfer, or to redress any breach of duty committed by the executor, these principles apply with equal force when a will contains a testamentary disposition for the purpose of adding property to an inter vivos trust, such as in the present case, and, when an inter vivos trust is the beneficiary of a will, the trustee has a duty to pursue reasonable claims on behalf of the trust against the executor.
In the present case, R‘s trust, which was amended and restated on the same day that R executed his will, operated in аssociation with R‘s will, insofar as R‘s will expressly granted to L the authority to retain the estate assets and significant discretion in controlling their operation and management, the trust, as the residuary beneficiary, was entitled to whatever remained of the assets under L‘s control upon the closing of the estate, and the defendant had a duty, as trustee, to take reasonable steps to safeguard and protect the trust‘s interest in those assets.
Furthermore, it was of no consequence that the defendant lacked legal title or any power to take action with respect to the residuary assets that were in L‘s control because, when an executor, such as L, controls the estate assets while the estate remains open, a trustee has a duty to take reasonable steps to protect and collect the trust‘s interests in the residuary assets, after appropriate inquiry and investigation, and to pursue a claim against the executor if required by the standard of care applicable to trustees.
In addition, this court‘s review of the record revealed that genuine issues of material fact existed with respect to the allegations that the defendant had breached her fiduciary duty to protect and collect the residuary assets in R‘s estate.
Specifically, the allegations in the plaintiffs’ motion for summary judgment, and the evidence that the plaintiffs adduced, established that R‘s estate had been in probate for nearly seventeen years, raised disputed questions of fact concerning both L‘s involvement in the loan to E Co. and the amendment to E Co.‘s operating agreement authorizing a retroactive salary for F, and demonstrated that L had significant personal and professional ties to F and that the law firms with which L was associated received substantial income from their representation of entities in which F had an interest.
Likewise, a reasonable fact finder could reach different conclusions about whether L had made prudent business decisions in managing the estate, consistent with his fiduciary duty as executor, or had made decisions that benefitted L and F to the detriment of the estate and the trust.
The plaintiffs also submitted sufficient evidence to establish that material questions of fact remained as to whether the defendant knew or should have known of L‘s alleged breach of trust, including the deposition transcripts of the defendant, in which she admitted that she, among other things, had failed to discuss at any point with her cotrustees what her duties as trustee included, had failed to attend any Probate Court proceedings, had not inquired about what assets the trust should have been receiving from the estate, and had signed the amendment to the operating agreement of E Co. without inquiring about whether the amendment was in the best interest of the trust.
- The trial court‘s judgment in favor of the defendant could not be affirmed on the alternative ground that the plaintiffs’ complaint had failed, as a matter of law, to state a claim for breach of fiduciary duty:
The defendant‘s alternative ground for affirmance was premised on her claim that an allegation of self-dealing is a necessary element of a claim for breach of a trustee‘s fiduciary duty of prudence and that the plaintiffs did not allege or submit evidence to establish that she had engaged in self-dealing, but this court disagreed that a claim for breach of a trustee‘s fiduciary duty must include an allegation that the trustee engaged in sеlf-dealing.
Specifically, this court clarified that, to state a claim of breach of fiduciary duty against a trustee, a plaintiff must allege the existence of a fiduciary relationship, giving rise to a duty, breach of that duty, causation, and damages, and it overruled an Appellate Court case on which the defendant relied, Rendahl v. Peluso (173 Conn. App. 66), to the extent that that case required an allegation of self-dealing as an element of a claim of breach of fiduciary duty against a trustee.
In the present case, the plaintiffs’ complaint sufficiently alleged a claim of breach of fiduciary duty against the defendant, as trustee, insofar as the complaint alleged that the defendant owed the plaintiffs a duty of undivided loyalty and a duty to administer the trust prudently and with due diligence, that the defendant breached those duties by failing to protect and collect trust property, to investigate or ask questions about L‘s alleged misconduct, and to seek to hold L accountable for that misconduct, and that, as a result of the
defendant‘s various alleged breaches of fiduciary duty, the plaintiffs incurred damages.
Procedural History
Action to recover damages for breach of fiduciary duty, and for other relief, brought to the Superior Court in the judicial district of Hartford, where the court, Moukawsher, J., granted the defendant‘s motion for summary judgment, denied the plaintiffs’ motion for summary judgment, and rendered judgment thereon, from which the plaintiffs appealed. Reversed; further proceedings.
Barbara M. Schellenberg, with whom were Owen T. Weaver and, on the brief, David B. Zabel, for the appellants (plaintiffs).
Laura Pascale Zaino, with whom was Joseph V. Meaney, Jr., for the appellee (defendant).
Opinion
ECKER, J. The primary issue in this appeal is whether the trustee of an inter vivos trust that is the residuary beneficiary of the estate of the settlor-decedent has a duty to protect and collect assets that have not yet been transferred to the trust. After providing for the payment of debts and taxes and setting forth a number of specific bequests, the will of the decedent, Richard
Approximately seventeen years later, the estate has not yet settled. In 2018, the trust beneficiaries and their mother, the plaintiff Susan Shapiro Barash, one of three cotrustees of the Richard Ripps Amended and Restated Revocable Trust Dated February 8, 2008, filed this action in the Superior Court, alleging that the defendant and cotrustee, Barbara Lembo, breached her fiduciary duty as trustee by failing to protect and collect trust property, to investigate or ask questions regarding the alleged misconduct of the executor of the estate, Laurence P. Rubinow,3 and to seek recovery from and hold Rubinow accountable for any damages sustained by the trust as a result of the alleged misconduct. The plaintiffs sought damages and the removal of the defendant as cotrustee. The trial court rendered judgment in favor of the defendant, who was the decedent‘s widow, on the basis of its cоnclusion that the defendant, as a trustee, had no duty, prior to the distribution of the residuary assets, to take any action against Rubinow with respect to those assets—including investigating, questioning or monitoring Rubinow‘s administration of the estate, or, as the trial court stated, to “[s]hap[e]” or “gather” the property that has not yet poured over into the trust.
The record reflects the following facts relevant to this appeal. Almost one year before his death, in February, 2006, the decedent executed his will, which left the residue of his estate to the amended and restated revocable trust benefiting his three children as trust beneficiaries. The will and the trust were executed on the same day. During his lifetime, the decedent served as the sole trustee. After his death, Rubinow, the defendant, and Edwin Silverstone began serving as successor cotrustees. The decedent‘s will named Rubinow and Silverstone as coexecutors. Silverstone resigned as coexecutor and cotrustee in 2009, and Barash was appointed as the third cotrustee in 2016. Since 2009, Rubinow has served as the sole executor of the estate. It is undisputed that the trust beneficiaries have received $976,600 in distributions from the trust.
Upon the decedent‘s death, the initial total gross value of the estate was $12,897,768. Included in that estate was his 49 percent interest in the commercial assets. The decedent‘s business partner, John Finguerra, retained a 49 percent interest in each of the commercial assets and, following the decedent‘s death, served as the sole manager of each of those entities pursuant to their respective operating agreements.4
In their complaint, the plaintiffs relied on three sets of factual circumstances relating to Finguerra‘s management of the commercial assets and Rubinow‘s administration of the estate to support their allegation that the defendant had breached her fiduciary duty to investigate, to ask questions, to seek recovery of damages from Rubinow, or otherwise to hold him accountable for his management of the estate. First, in 2011, Evergreen Walk‘s operating agreement was amended to provide Finguerra with an annual salary of $175,000 for his services as manager, retroactive to January, 2007—contrary and detrimental, the plaintiffs claim, to the interests of the trust. The plaintiffs allege that the defendant signed the amendment upon the request of Rubinow and Finguerra without first reviewing the operating agreements of the commercial assets or otherwise making an independent determination whether it would be in the best interest of the trust to do so. Second, the plaintiffs complain about a loan of $3 million to Evergreen Walk from the proceeds of the sale of assets owned by M/S Town Line Associates and Northern Hills. The plaintiffs contend that Rubinow instead was obligated to convey those proceeds to the trust. Lastly, the plaintiffs support their claims of wrongdoing by reference to the 2014 sale of а real estate parcel owned by Evergreen Walk. The plaintiffs allege that, despite Rubinow‘s initial representations that the estate would receive more than $2 million as a result of the sale, which would then be distributed to the trust, the estate received only $490,000 following the sale.
The parties filed separate motions for summary judgment. In support of their motion, the plaintiffs produced evidence of Rubinow‘s accountings, demonstrating that, although the trust beneficiaries have received a total of $976,600 in distributions, Rubinow and his present and former law firms have received more than $1.8 million in fees. Additionally, to establish that Rubinow took actions that benefitted Finguerra, to the detriment of the trust beneficiaries, the plaintiffs adduced evidence that Rubinow had assisted in facilitating the approval of a 2011 amendment of Evergreen Walk‘s operating agreement, which authorized the payment of a salary to Finguerra for his services as manager of Evergreen Walk, retroactive to January, 2007, allegedly depriving the trust of additional funds. The plaintiffs argued that the retroactive amendment violated § 5.5 of the original 2006 operating agreement of Evergreen Walk, which provided in relevant part: “No [m]anager shall receive any compensation for his services as a [m]anager of thе [c]ompany.” They also claimed wrongdoing in connection with the $3 million loan to Evergreen Walk from the proceeds of the sales of the properties owned by Northern Hills and M/S Town Line Associates. They produced communications in support of their claim that Rubinow advised Finguerra to make the loan so that Evergreen Walk could repay bank loans that had been personally guaranteed by Finguerra, thereby serving Finguerra‘s financial interests rather than directing the sale proceeds to the estate for distribution to the trust.
The plaintiffs also submitted the deposition testimony of the defendant in support of their allegations that she had breached her fiduciary duty, relying on the defendant‘s admissions that she, among other things, failed to attend any of the Probate Court hearings pertaining to the estate, never inquired regarding the assets that the trust should have been receiving from the estate, kept no records of distributions made to the trust or to the trust beneficiaries, never made any inquiries regarding Northern Hills or M/S Town Line Associates, signed the amendment to the Evergreen Walk operating agreement authorizing compensation for Finguerra, did not discuss the amendment with the trust beneficiaries, and never took steps to determine whether Rubinow had properly performed his duties as executor of the estate.
In arguing for summary judgment in her favor, the defendant primarily relied on the fact that none of the three commercial assets in the decedent‘s estate had been conveyed to the trust. Because the three commercial assets are not part of the trust res, the defendant argued, and because the trust is currently unfunded, her duties as a trustee will not arise until the estate settles and its residue is cоnveyed to the trust.5
I
We first consider the preclusive effect, if any, of the May 10, 2018 decree of the Probate Court denying the plaintiffs’ petition to remove Rubinow as executor of the estate on the basis of allegations of self-dealing and conflict of interest. Following oral argument, this court sua sponte directed the parties to submit supplemental briefs addressing the following question: “Does the decree of the Probate Court dated May 10, 2018, which denied the petition filed by . . . [the plaintiffs] to remove . . . Rubinow as executor of the estate, collaterally estop the plaintiffs in this action from litigating whether the defendant . . . [had] breached her fiduciary obligations to ‘investigate, object to, or seek to prevent [Rubinow‘s] conflicts of interest and misconduct’ in administering the estate? See [
The following additional facts are relevant to our resolution of this issue. Following her appointment as the third cotrustee in 2016, Barash raised various challenges in the Probate Court to Rubinow‘s management of the estate, petitioning to remove him as executor and challenging both the fourth interim and final accountings. All three challenges were predicated on the plaintiffs’ claim that Rubinow, in his capacity as executor, had breached his fiduciary duty of undivided loyalty to the estate. The plaintiffs relied on many of the same allegations that they raise in the present action, alleging that Rubinow had conflicts of interest stemming from his personal and professional relationship with Finguerra. The plaintiffs argued that those alleged conflicts of interest led Rubinow to act in the interest of Finguerra, Rubinow‘s law firms, and Rubinow himself, to the detriment of the trust.
The Probate Court rejected the plaintiffs’ claims that Rubinow had breached his duty of loyalty to the estate and, by extension, the trust, which at that time was the only remaining beneficiary of the estate. The court found no conflict of interest requiring Rubinow‘s removal and no evidence that the estate or trust had been harmed by Rubinow‘s administration of the estate. To the contrary, the court found that “the estate ha[d] clearly benefited from [Rubinow‘s] experience, expertise,
The plaintiffs appealed from the decrees of the Probate Court denying the petition to remove Rubinow as executor and approving in part the fourth interim accounting and final accounting, and Rubinow appealed from the partial denial of attorney‘s fees incurred in connection with the final accounting. See footnote 1 of this opinion. All four consolidated appeals from the Probate Court are scheduled for a trial de novo. The question is whether, pending appeal of the decree denying the petition to remove Rubinow as executor, the Probate Court‘s rejection of the allegations against Rubinow for breach of fiduciary duty as executor operates in the present case to preclude the plaintiffs from relitigating essentially the same issues in derivative form, i.e., against the defendant rather than Rubinow directly.
There is no doubt that “Probate Court decrees are final judgments for purposes of collateral estoppel and res judicata.” Solon v. Slater, 345 Conn. 794, 809, 287 A.3d 574 (2023); see, e.g., Gaynor v. Payne, 261 Conn. 585, 596, 804 A.2d 170 (2002) (res judicata); Heussner v. Day, Berry & Howard, LLP, 94 Conn. App. 569, 576, 893 A.2d 486 (collateral estoppel), cert. denied, 278 Conn. 912, 899 A.2d 38 (2006). Because a prior judgment in another case maintains its preclusive effect even pending appeal of that judgment,7 the Superior Court in the present case ordinarily would be required to
apply the principles of collateral estoppel to the Probate Court‘s decrees and orders rejecting the claims of wrongdoing by Rubinow, notwithstanding the pending appeals from those orders. Prior decisions of both this court and the Appellate Court consistently have held that a pеnding appeal does not deprive a Probate Court order, judgment, or decree of finality for purposes of res judicata and collateral estoppel. To the contrary, we have observed that “the mere taking of an appeal from a probate decree does not in and of itself vacate or suspend the decree. . . . [T]he probate decree appealed from continues ‘in full force’ until the appellate tribunal otherwise determines. . . . But once the appellate tribunal, i.e., the Superior Court, otherwise determines and either modifies or sets aside the decree of the Probate Court, the probate decree is superseded.” (Citations omitted.) Kerin v. Stangle, 209 Conn. 260, 265, 550 A.2d 1069 (1988); see also Kochuk v. Labaha, 126 Conn. 324, 329, 10 A.2d 755 (1940); Silverstein v. Laschever, 113 Conn. App. 404, 414, 970 A.2d 123 (2009).
This is the general rule. But a complication arises in a case, like this one, in which the underlying proceedings resulting in the probate order, judgment, or decree were not held on the record, because the appeal in such a case takes the form of a trial de novo in the Superior Court.8 See, e.g., Kerin v. Stangle, supra, 209 Conn. 264 (“[t]he function of the Superior Court in appeals from a Probate Court is to take jurisdiction of the order or decree appealed from and to try that issue de novo“). This court has not previously considered whether the requirement of a trial de novo in a pending appeal from an order, judgment, or decree of the Probate Court renders inapplicable the doctrines of res judicata and collateral estoppel.9
The rule applied in federal courts is that an appeal that is conducted as a trial de novo suspends the preclusive effect of the underlying judgment. See, e.g., In re Parmalat Securities Litigation, 493 F. Supp. 2d 723, 737 (S.D.N.Y. 2007) (“Courts long have held that the pendency of an appeal ordinarily does not suspend the preclusive effect of an otherwise final judgment. But there is an exception for situatiоns in which the appeal actually involves a trial de novo.” (Footnote omitted.)),
otherwise final remains so despite the taking of an appeal unless what is called an appeal actually consists of a trial de novo“).
The limitation of the preclusion doctrines to final judgments is grounded in the “[commonsense] point that such conclusive [carry over] effect should not be accorded a judgment [that] is considered merely tentative in the very action in which it was rendered.” Id., comment (a), p. 132. The finality requirement, like a number of other doctrinal limitations in this area, is intended to ensure that the preclusive effect of prior litigation is no broader than necessary to serve the fundamental purposes underlying res judicata and collateral estoppel—preventing or minimizing repetitive litigation, inconsistent judgments, and vexatious litigation. See, e.g., Cumberland Farms, Inc. v. Groton, 262 Conn. 45, 58-60, 808 A.2d 1107 (2002). This line drawing exercise ultimately involves a judgment call based on a multitude of considerations that will determine, in the final analysis, whether the demands of efficiency, fairness and public policy weigh for or against issue or claim preclusion under the circumstances. See id., 58-59 (observing that “the [common-law] doctrine of collateral estoppel is neither statutorily nor constitutionally mandated” but, “rather, is a judicially created rule of reason“). As Judge Henry J. Friendly observed, “‘[f]inality’ in the context herе relevant may mean little more than that the litigation of a particular issue has reached such a stage that a court sees no really good reason for permitting it to be litigated again.” Lummus Co. v. Commonwealth Oil Refining Co., 297 F.2d 80, 89 (2d Cir. 1961), cert. denied sub nom. Dawson v. Lummus Co., 368 U.S. 986 (1962).
The question we must resolve is where to draw the line for purposes of effectuating these doctrinal objectives in the context of prior litigation resulting in a probate decree that is the subject of a pending de novo appeal. We think that the rule articulated in the federal cases and commended in the commentary to the Restatement (Second) of Judgments—giving preclusive effect to judgments during the pendency of an appeal unless the appeal requires a trial de novo—strikes the appropriate balance.
Our reasons for adopting this approach are straightforward. It is well settled in Connecticut that the mere taking of an appeal generally is not sufficient to deprive a judgment of finality for purposes of the preclusion doctrines. “The fact that the judgment was appealed from makes no difference, because a party cannot litigate in a second action matters already concluded in a prior one. If the judgment appealed from is sustained, there is an end to the matter. If error is found and a new trial ordered, the party has his opportunity to retry the issues in the first action.” Salem Park, Inc. v. Salem, supra, 149 Conn. 144. In contrast to
a typical appeal,
for [a] new trial or to set aside a judgment, or of an appeal from a judgment, is relevant in deciding whether the question of preclusion should be presently decided in the second action. It may be appropriate to postpone decision of that question until the proceedings addressed to the judgment are concluded.“); see also
Consistent with the foregoing principles, we adopt the federal rule and conclude that the requirement of a trial de novo in the pending, consolidated appeals strips the Probate Court‘s May 10, 2018 decree of preclusive effect. A decree that carries no force on appeal should not be accorded outcome determinative, preclusive effect in different litigation while that appeal is pending.
II
The gravamen of the plaintiffs’ claim in the present case is that the defendant breached a fiduciary duty owed to the trust beneficiaries tо protect and collect assets that are not yet part of the trust res but that are to be distributed to the trust from the decedent‘s residuary estate when the estate settles. The trial court determined that, until the estate is settled, no such duty exists with respect to residuary assets that have not been distributed out of the estate.
The existence of a fiduciary duty presents a question of law subject to de novo review. See Iacurci v. Sax, 313 Conn. 786, 795-97, 99 A.3d 1145 (2014) (rejecting plaintiff‘s claim that existence of fiduciary duty presented question of fact).
It is a fundamental principle of trust law that a trustee is a fiduciary obligated to act in the best interest of the trust beneficiaries. See, e.g.,
A trustee owes a fiduciary duty to administer the trust in the interest of the beneficiaries, and that duty commences when the trustee accepts the trusteeship. See, e.g., Phillips v. Moeller, 148 Conn. 361, 372, 170 A.2d 897 (1961) (acknowledging “the [trustee‘s] duty . . . to administer the trust solely in the interest of the beneficiaries“); see also 3 Restatement (Third), supra, § 76, comment (a), p. 68 (“[o]nce having accepted the office . . . a trustee has a duty to administer the trust as long as he or she continues to serve as trustee“). The trustee‘s administration of the trust must comport with her duties of loyalty and prudence. See
As part of the duty to administer the trust, the trustee has a duty to “[collect] and [protect] trust property . . . .” 3 Restatement (Third), supra, § 76 (2) (b), p. 68; see, e.g., Tatoian v. Tyler, 194 Conn. App. 1, 37, 220 A.3d 802 (2019) (“One of the fundamental common-law duties of a trustee is to preserve and maintain trust assets. A trustee has the right and duty to safeguard, preserve, or protect the trust assets and the safety of the principal.” (Internal quotation marks omitted.)), cert. denied, 334 Conn. 919, 222 A.3d 513 (2020); see also, e.g., Terry v. Conlan, 131 Cal. App. 4th 1445, 1461, 33 Cal. Rptr. 3d 603 (2005) (trustee‘s duties include collecting and protecting trust property).
When trust property is held or controlled by another, the duty to collect and to protect trust property may require a trustee to take “reasonable steps to enforce
The duty to collect or protect property in the hands of the executor of an estate appears to arise most commonly in the context of testamentary trusts. Although this court has not had the opportunity to address the issue, a trustee of a testamentary trust has a duty to compel the executors of an estate to transfer trust property that they have a “duty to transfer, or to redress any breach of duty committed by them.” (Internal quotation marks omitted.) In re Estate of Erlien, 190 Wis. 2d 400, 416, 527 N.W.2d 389 (1994); see 1 Restatement (Second), Trusts § 177, comment (a), p. 383 (1959) (“[t]he trustee is under a duty to the beneficiary to take reasonable steps to enforce any claim [that] he holds as trustee against predecessor trustees . . . or in the case of a testamentary trust against the executors of the estate, to compel them to transfer to him as trustee property [that] they are under a duty to transfer, or to redress any breach of duty committed by them” (citation omitted; emphasis added)); see also, e.g., Bullis v. DuPage Trust Co., 72 Ill. App. 3d 927, 933, 391 N.E.2d 227 (1979) (trustee was under duty “to take reasonable steps” to enforce claims against executor, even when trustee and executor roles were filled by same trust company); American Fidelity Co. v. Barnard, 104 N.H. 146, 152–53, 181 A.2d 628 (1962) (“The trustee is under a duty to take such steps as are reasonable to secure control of the trust property and to keep control of it. Thus in the case of a testamentary trust [in which] one person is named as executor and another as trustee, it is the duty of the trustee to obtain possession of the trust property from the executor, and if he does not within a reasonable time take such steps as are reasоnable to obtain possession of the property and the executor thereafter makes away with the property, the trustee is liable to the beneficiaries for the loss.” (Internal quotation marks omitted.)).
The obligation of the testamentary trustee to take reasonable steps to obtain property improperly detained by an executor is merely a specific application of the more general principle that a trustee has a duty to protect the rights and interests of the beneficiaries of the trust. See, e.g., In re Herrmann, 127 App. Div. 2d 999, 1000, 512 N.Y.S.2d 942 (1987); see also 3 A. Scott et al., Scott and Ascher on Trusts (5th Ed. 2007) § 17.9, p. 1222 (“a trustee who fails to take reasonable steps to enforce a claim against the executor or a previous trustee, to compel them to turn over property, or to redress a breach of trust, is ordinarily liable for any resulting loss” (emphasis added)).
This principle applies with equal force when a will contains a testamentary
The point is illustrated by Pepper v. Zions First National Bank, N.A., 801 P.2d 144 (Utah 1990), in which the beneficiaries of an inter vivos trust that was the sole beneficiary of the estate claimed that the defendant bank, which served as both executor of the estate and trustee of the trust, had breached its fiduciary duty as executor by misrepresenting the value of the estate in quarterly reports. Id., 145–49. The beneficiaries argued that the bank, in its capacity as trustee, had a fiduciary duty to object to the closing of the estate and to enforce a claim against itself in its capacity as executor for any damages sustained as a result of the executor‘s alleged mismanagement of the estate. Id., 147, 151–52. In reversing the trial court‘s granting of summary judgment in favor of the bank, the Utah Supreme Court recognized: “The law is settled that a ‘trustee owes a duty to the beneficiary on taking over property from the executor to examine the property tendered and see whether it is that which he ought to receive.’ [G. Bogert & G. Bogert, The Law of Trusts and Trustees (2d Ed. Rev. 1980) § 583, pp. 358-59]. . . . A trustee has a duty to enforce claims against an executor as a prior fiduciary upon the transfer of the assets of the estate to the trustee. [Comment (a) to § 177 of the] Restatement (Second) of Trusts . . . [provides]: ‘The trustee is under a duty to the beneficiary to take reasonable steps to enforce any claim [that] he holds as a trustee against predecessor trustees . . . or in the case of a testamentary trust against the executors of the estate, to compel them to transfer to him as trustee property [that] they are under a duty to transfer, or to redress any breach of duty committed by them.‘” (Citation omitted.) Pepper v. Zions First National Bank, N.A., supra, 151; see also In re Kemske, 305 N.W.2d 755, 762 (Minn. 1981) (noting with approval inter vivos trustee‘s concession that, “generally trustees do have a duty to the beneficiaries of the trust to pursue any actions [that] the trust rightly has against a prior trustee or executor for breach of his fiduciary duties” (internal quotation marks omitted)).
These legal principles apply to the trust at issue in the present case. The trust originally was created as an inter vivos trust and was amended and restated on the same day that the decedent‘s will was executed. The two instrumеnts operate hand in glove. The trust is an integrated part of an overall estate plan that provides that assets in the residue of the estate will be added to the principal of the trust. Article IV (A) of the decedent‘s will expressly grants to Rubinow the power to retain the estate assets and significant discretion in controlling their operation and management. As the residuary beneficiary, upon the closing of the estate, the trust will be entitled to whatever remains of the assets currently under Rubinow‘s control. As trustee, the defendant is duty bound to take reasonable steps to safeguard and protect the trust‘s interest in those assets.
The defendant argues that the trial court properly relied on Warner v. Merchants Bank & Trust Co., supra, 2 Conn. App. 729, to conclude that she owed no fiduciary duty to the trust
The defendant also contends that she lacked any power—and, therefore, any duty—to take action with respect to the residuary assets because they were in Rubinow‘s control and had not been conveyed by him to the trust. This argument misses the point. Although the defendant‘s lack of legal title to the residuary assets obviously rendered her powerless to collect any income from those assets or to distribute that income to the trust beneficiaries, these circumstances do not relieve the trustee of her duty to take reasonable steps to protect and collect the trust‘s interests in the residuary assets, after appropriate inquiry and investigation, and then to pursue a claim or other relief against the executor if required by the standard of care applicable to her position as trustee.15 The fact that an executor controls the estate assets while the estate remains open is the very circumstance that triggers a trustee‘s duty to take reasonable steps to ensure that the executor exercises that control in a manner consistent with the interests of the trust and its beneficiaries. A trustee has powers coterminous with her duties in this respect.
Notes
As we previously explained, a trustee‘s fiduciary duty to administer the trust includes a duty of care, or prudence, which requires her to exercise reasonable care, skill, and caution in administering the trust. See Phillips v. Moeller, supra, 148 Conn. 369 (“[i]t is the duty of a trustee to exercise due diligence in view of the circumstances surrounding the administration of the trust . . . and [the trustee] must do what ordinary prudence requires in the circumstances” (citation omitted)); 3
Restatement (Third), supra, § 77 (1) and (2), p. 81 (“[t]he trustee has a duty to administer the trust as a prudent person would,” which “requires the exercise of reasonable care, skill, and caution“); see also
Because the trial court incorrectly concluded that the defendant had no duty to protect and collect potential trust assets, such as the undistributed residuary assets at issue in this case, the court did not consider whether the plaintiffs adduced sufficient evidence to survive summary judgment on the issue of the defendant‘s alleged breach of her fiduciary duty. Our review of the record reveals that genuine issues of material fact exist with respect to the allegations of the defendant‘s breach of fiduciary duty in the present case.17
The plaintiffs submitted sufficient evidence to demonstrate that issues of material fact remain as to whether the defendant had breached her duty to protect and collect the residuary assets in the decedent‘s estate. The factual assertions in the plaintiffs’ motion for summary judgment, as supported by the attached exhibits, establish that the estate has been in probate for nearly seventeen years and raise disputed questions of fact concerning Rubinow‘s involvement in the $3 million loan from Northern Hills and M/S Town Line Associates to Evergreen Walk and in the amendment to Evergreen
Walk‘s operating agreement authorizing a salary, retroactively, for Finguerra. The plaintiffs’ exhibits also demonstrate that Rubinow had significant personal and professional ties to Finguerra and that Rubinow‘s law firms received substantial income—allegedly more than $6.2 million—from their representation of entities in which Finguerra has an interest. As the trial court in the present case observed, “a reasonable fact finder could go either way” on the pivotal question of whether Rubinow made prudent business decisions in managing the estate, consistent with his fiduciary duty as executor, or made decisions that benefitted Finguerra and himself, to the detriment of the estate and the trust.
The plaintiffs also have submitted sufficient evidence to establish that material questions of fact remain as to whether the defendant knew or should have known of the alleged breach by Rubinow. See 1 Restatement (Second), Trusts, supra, § 223 (2), p. 519 (“[a] trustee is liablе to the beneficiary for breach of trust, if [it] (a) knows or should know of a situation constituting a breach of trust committed by [its] predecessor and [it] improperly permits it to continue; or (b) neglects to take proper steps to compel the predecessor to deliver the trust property to [the trustee]; or (c) neglects to take proper steps to redress a breach of trust committed by the predecessor“); see also In re Estate of Hunter, 194 Misc. 2d 364, 368–69, 753 N.Y.S.2d 675 (Sur. 2002) (applying § 223 of Restatement (Second) of Trusts when predecessor fiduciary was executor), aff‘d, 6 App. Div. 3d 117, 775 N.Y.S.2d 42 (2004), aff‘d, 4 N.Y.3d 260, 827 N.E.2d 269 (2005). In support of their motion for summary judgment, the plaintiffs produced evidence, primarily from the deposition transcripts of the defendant, that she had failed to discuss at any point with her cotrustees what her duties as trustee included, failed to attend any Probate Court proceedings, made no inquiries regarding what assets the trust should be receiving from the estate, received a copy of a letter in 2008 informing her that the trust beneficiaries would not be receiving any further distributions until the resolution of a suit brought by a third party but failed to make any inquiries regarding the notice of no future distributions, made no inquiries regarding Northern Hills or M/S Town Line Associates, despite having received a payment of her 1 percent interest in the commercial assets as a result of the sales of those two assets, never reviewed the operating agreements of Northern Hills or M/S Town Line Associates, and signed the amendment to the operating agreement of Evergreen Walk without inquiring about whether the amendment was in the best interests of the trust.
In light of the evidence submitted by the plaintiffs in connection with the motions for summary judgment, we conclude that questions of material fact remain regarding whether the defеndant had breached her duty to investigate, to make inquiries, to object to Rubinow‘s
management of the estate, or to enforce claims against Rubinow on behalf of the trust.
III
As an alternative ground for affirming the trial court‘s judgment, the defendant argues that the plaintiffs’ claim of breach of fiduciary must fail as a matter of law because an allegation of self-dealing is a necessary element of any such claim, and the plaintiffs neither alleged nor submitted evidence to establish that the defendant had engaged in self-dealing. We do not agree that a claim for breach of a trustee‘s fiduciary duty is limited to instances in which the trustee engaged in self-dealing, and we therefore reject the defendant‘s invitation to affirm the judgment on this alternative ground.
Our review of the legal sufficiency of the plaintiffs’ complaint presents a question of law. See, e.g., Sturm v. Harb Development, LLC, 298 Conn. 124, 130, 2 A.3d 859 (2010). “[T]he failure to include a necessary allegation in a complaint precludes a recovery by the plaintiff under that complaint . . . .” (Internal quotation marks omitted.) Id., 130. Although an attack on the legal sufficiency of a claim is normally made via a motion to strike, the use of a motion for summary judgment for this purpose “is appropriate when the complaint fails to set forth a cause of action and the defendant can establish that the defect could not be cured by repleading.” Larobina v. McDonald, 274 Conn. 394, 401, 876 A.2d 522 (2005).
“[A] plaintiff alleging a breach of fiduciary duty must show that any damages sustained were proximately caused by the fiduciary‘s breach of his or her fiduciary duty.” Bozelko v. Papastavros, 323 Conn. 275, 283 n.10, 147 A.3d 1023 (2016). A breach of fiduciary duty is a broad concept encompassing a variety of different duties. Whether a fiduciary duty exists in any particular case, and the nature of that duty, is context dependent and “fact drivеn . . . .” Iacurci v. Sax, supra, 313 Conn. 796; see id. (“in many cases, the existence of a fiduciary duty may turn on the unique facts presented in the record“) We are presently considering the elements of a claim as it applies to the duties of a trustee.
The fundamental underlying precept is that a “trustee stands in a fiduciary relationship with respect to the beneficiaries as to all matters within the scope of the trust relationship, that is, all matters involving the administration of the trust and its property.” 3 Restatement (Third), supra, § 78, comment (a), p. 94. We have reviewed the manifold aspects of a trustee‘s fiduciary duties in part II of this opinion. Our decisions have recognized that trustees owe trust beneficiaries a fiduciary duty of loyalty,18 a fiduciary duty of care, or prudence,19 and a fiduciary duty of impartiality.20 The present case involves the trustee‘s duty of prudence.
The defendant contends that an allegation that a trustee has breached her duty of prudence, without
more, does not state a legally sufficient claim for breach of fiduciary duty under Connecticut law. Relying on language in Rendahl v. Peluso, 173 Conn. App. 66, 162 A.3d 1 (2017), the defendant argues that a plaintiff must plead and prove, as an essential element of the tort, that the fiduciary engaged in self-dealing. Her argument focuses on a statement in Rendahl identifying the following four elements of a claim of breach of fiduciary duty: “[1] [t]hat a fiduciary relationship existed [that] gave rise to . . . a duty of loyalty . . . an obligation . . . to act in the best [interest] of the plaintiff, and . . . an obligation . . . to act in good faith in any matter relating to the plaintiff; [2] [t]hat the defendant advanced his or her own interests to the detriment of the plaintiff;21 [3] [t]hat the plaintiff sustained damages; [and] [4] [t]hat the damages were proximately caused by the fiduciary‘s breach of his or her fiduciary duty.” (Emphasis altered; footnote added; internal quotation marks omitted.) Id., 100, quoting T. Merritt, 16 Connecticut Practice Series: Elements of an Actiоn (2016-17 Ed.) § 8:1, p. 686.22
Regardless of whether Rendahl correctly identified the elements of a claim for breach of fiduciary duty in other contexts, such a requirement cannot be reconciled with the law of trusts.23 As we discussed, the fiduciary duties of loyalty, prudence, and impartiality imposed on trustees extend well beyond a prohibition on self-dealing and are inconsistent with a judicially imposed limitation that would allow a claim of breach of fiduciary duty only in cases implicating self-dealing or the duty of loyalty. The duty of prudence, for example, imposes fiduciary duties pertaining to “matters relating to the administration of the trust . . . .” 3 Restatement (Third), supra, § 77, comment (a), p. 82; see Phillips v. Moeller, supra, 148 Conn. 369 (duty “to exercise due diligence” in administering trust); see also Gadaire v. Orchin, 197 F. Supp. 3d 5, 6-7, 11 (D.D.C. 2016) (when trustee failed to make premium payments on life insurance policy owned by trust, court concluded that, because beneficiaries’ claim implicated duty of prudence, question was whether trustee‘s efforts were reasonable, and explained that “[i]t is inherent in the trust relationship . . . that the trustee must make at least some effort to remain apprised of the status of the trust‘s assets and to protect those assets“). The duty of prudence requires a trustee to exercise “reasonable care, skill, and caution.” 3 Restatement (Third), supra, § 77 (2), p. 81; see, e.g., In re Lavery‘s Will, 79 N.Y.S.2d 27, 31-32 (Sur. 1948) (trustee‘s use of trust funds to pay tenant‘s repair costs implicated duty of prudence, and question was whether beneficiaries could show that trustee‘s actions were “without sufficient reason“), aff‘d, 275 App. Div. 674, 87 N.Y.S.2d 221 (1949). The breach of this duty, or any other fiduciary duty imposed on the trustee, is actionable unless precluded by law or by legally valid prohibition.
Although our holding is limited to claims of breach of fiduciary duty against trustees, we find further support for our conclusion in the law of other stаtes governing breach of fiduciary duties generally. The substantial majority of jurisdictions do not limit the cause of action to claims based on self-dealing or breach of the duty of loyalty. To the contrary, a cause of action for breach of fiduciary duty in a majority of jurisdictions requires the following elements: (1) the existence of a fiduciary relationship, giving rise to a duty, (2) breach of that duty, (3) causation, and (4) damages. See, e.g., Mendoza v. Continental Sales Co., 140 Cal. App. 4th 1395, 1405, 45 Cal. Rptr. 3d 525 (2006) (“[t]he elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) its breach, and (3) damage proximately caused by that breach“); Aller v. Law Office of Carole C. Schriefer, P.C., 140 P.3d 23, 26 (Colo. App. 2005) (“To prove a claim for breach of fiduciary duty, it is the plaintiff‘s burden to demonstrate, inter alia, that he or she has incurred damages and that the defendant‘s breach of fiduciary duty was a cause of the damages sustained. . . . The element of causation is satisfied when the plaintiff proves that the defendant‘s conduct was a substantial contributing cause of the injury.” (Citation omitted.)), cert. denied, Colorado Supreme Court, Docket No. 05SC653, 2006 WL 1530184 (June 5, 2006); Kahn v. Britt, 330 Ga. App. 377, 382, 765 S.E.2d 446 (2014) (“[e]stablishing a claim for breach of fiduciary duty requires proof of three elements: (1) the existence of a fiduciary duty; (2) breach of that duty; and (3) damage proximately caused by the breach“); Lawlor v. North American Corp. of Illinois, 983 N.E.2d 414, 433 (Ill. 2012) (“[t]o state a claim for breach of fiduciary duty, it must be alleged and ultimately proved: (1) that a fiduciary duty exists; (2) that the fiduciary duty was breached; and (3) that such breach proximately caused the injury of which the party complains“); Dann v. Patten, Docket No. 07-P-1031, 2008 WL 4899193, *1 (Mass. App. November 17, 2008) (decision without published opinion, 73 Mass. App. 1105, 896 N.E.2d 656) (“[the] essential elements of [a] breach of fiduciary duty claim are existence of fiduciary duty, breach, damage, and causation“); Lundy v. Masson, 260 S.W.3d 482, 501 (Tex. App. 2008) (“[the] elements of a breach of fiduciary duty claim are: (1) a fiduciary relationship between the plaintiff and [the] defendant, (2) a breach by the defendant of his fiduciary duty to the plaintiff, and (3) an injury to the plaintiff or benefit to the defendant as a result of the defendant‘s breach“), review denied, Texas Supreme Court, Docket No. 08-0674 (October 24, 2008); see also Kim v. Dongbu Tour & Travel, Inc., Docket No. 2:12-cv-1136 (WHW), 2012 WL 12903168, *2 (D.N.J. October 9, 2012) (citing McKelvey v. Pierce, 173 N.J. 26, 56–58, 800 A.2d 840 (2002), in concluding that, “[u]nder New Jersey law, the elements of a breach of fiduciary claim are: (1) the existence of
a fiduciary relationship between the parties; (2) the breach of the duty imposed by that relationship; and (3) damages or harm to the plaintiff caused by said breach“). But see Wells v. Hurlburt Road Co., LLC, 145 App. Div. 3d 1486, 1487, 43 N.Y.S.3d 637 (2016) (elements of breach of fiduciary duty claim include “the existence of a fiduciary relationship, misconduct by [the] defendant, and damages directly caused by that misconduct“).
We hold that, in order to allege a claim against a trustee for breach of fiduciary duty, a plaintiff must allege (1) the existence of a fiduciary relationship, giving rise to a duty, (2) breach of that duty, (3) causation, and (4) damages. Under this standard, the plaintiffs’ complaint sufficiently alleges a claim of breach of fiduciary duty against the defendant. The complaint alleges that the defendant owed the plaintiffs a duty of undivided loyalty and a duty to administer the trust prudently and with due diligence. The complaint further alleges that the defendant breached those duties by failing to protect and collect trust property, to investigate or ask questions about the executor‘s alleged misconduct, and to seek to hold the executor accountable for that misconduct. The complaint also claims that, as a result of the defendant‘s various alleged breaches of her fiduciary duty, the plaintiffs have suffered damages. These allegations state a legally sufficient claim for breach of a trustee‘s fiduciary duties under Connecticut law.
IV
CONCLUSION
For the foregoing reasons, we conclude that the May 10, 2018 probate decree is not entitled to preclusive effect, that genuine issues of material fact remain as to whether the defendant breached her fiduciary duty to collect and protect trust assets, and that self-dealing is not an essential element of the tort of breach of fiduciary duty. Because the trial court granted the defendant‘s motion for summary judgment on the basis of its conclusion that the defendant did not have a fiduciary duty with respect to the residuary assets, it has not yet considered her remaining claims in support of her motion for summary judgment. See footnote 5 of this opinion. Accordingly, we reverse the judgment of the trial court and remand the case to that court for consideration of the defendant‘s remaining claims in support of her motion for summary judgment, namely, that the defendant reasonably relied on the expertise and judgment of Rubinow and Finguerra, that her actions as alleged by the plaintiffs were not sufficiently egregious to constitute a breach of fiduciary duty under the terms of the trust, applicable statutes and case law, that some or all of the plaintiffs’ claims were barred by the statute of limitations, and any other grounds that the trial court determines have been properly pre-
sented.
The judgment is reversed and the case is remanded for further proceedings in accordance with this opinion.
In this opinion the other justices concurred.
We do not agree with the defendant that the trust limits the defendant‘s liability to actions that constitute fraud or abuse of discretion or that were undertaken in bad faith. The trust provides in relevant part: “All individual (noninstitutional) [t]rustees shall be deemed to have: (a) acted within the scope of the authority granted herein; (b) exercised reasonable care, diligence and prudence; and (c) acted in good faith and impartially as to all persons interested in any trust created herein, unless the contrary shall be proven by clear and convincing affirmative evidence.” (Emphasis added.) This language, the validity or applicability of which is not disputed by the plaintiffs, requires the plaintiffs to rebut, by clear and convincing evidence, the presumption that the defendant acted reasonably, diligently, and in good faith. It imposes a heightened burden of proof on the plaintiffs. It does not, however, foreclose the plaintiffs from bringing a cause of action predicated on a breach of the defendant‘s fiduciary duty of prudence.