Ramsdell v. Union Trust Co.

• Decision Date: 13 January 1987
• Citation: 202 Conn. 57,519 A.2d 1185
• Court: Connecticut Supreme Court
• Parties: Ruth RAMSDELL et al. v. UNION TRUST COMPANY, Executor (ESTATE OF Edna M. SWAYZE).

Page 1185

519 A.2d 1185

202 Conn. 57

Ruth RAMSDELL et al. v. UNION TRUST COMPANY, Executor (ESTATE OF Edna M. SWAYZE).

Supreme Court of Connecticut.

Argued Nov. 13, 1986.

Decided Jan. 13, 1987.

David M. Reilly, New Haven, for appellants-appellees (plaintiffs).

Robert W. Allen, New Haven, for appellee-appellant (defendant).

Before PETERS, C.J., and SHEA, DANNEHY, CALLAHAN and BRENNEMAN, JJ.

PETERS, Chief Justice.

The dispositive issue on this appeal is whether a conflict of interest warranted the removal of the defendant, the Union Trust Company, from its position as executor of the plaintiffs' decedent's estate. The plaintiffs are beneficiaries under the will of the decedent, Edna M. Swayze. In 1977, the year of Swayze's death, the plaintiffs petitioned the Probate Court to remove the defendant as executor of Swayze's estate and to deny approval of the defendant's inventory of the estate. The court denied the petitions, and the plaintiffs appealed. In 1982, the plaintiffs instituted a third appeal from a subsequent Probate Court order approving the defendant's final account as executor. All of the plaintiffs' appeals alleged misfeasance by the defendant in its dual capacity as executor of the Swayze estate and as trustee of an inter vivos trust created by Swayze some six years before her death. The appeals were consolidated for trial. The trial court, S. Freedman, J., rendered judgment for the defendant on the first two appeals, which related to the removal of the defendant as executor and the adequacy of the estate inventory. On the third appeal, however, it rendered judgment for the plaintiffs, and refused to accept the defendant's final account. The plaintiffs appealed to this court from all three judgments, and the defendants cross appealed from the judgment on the third appeal. We find error in the plaintiffs' appeal of the trial court judgments.

The facts of this case are undisputed. On February 1, 1971, Edna M. Swayze, as grantor, established a revocable inter vivos trust (the trust) with a corpus of approximately $365,000. The trust named the defendant and R. Schuyler Goodwin as trustees. ¹ The trust directed the trustees to make periodic payments of income "to or for the benefit of" the grantor during her life, and gave the grantor the option to direct the payment of additional sums from interest or principal to herself or another party of her election. ² The trust also provided: "In the event of accident or illness, or in the event the Grantor is not easily available, the Trustees are authorized in their discretion to make payments from income or principal from time to time for the benefit of the Grantor including payments for her living expenses and care."

On July 23, 1971, the New Haven Probate Court adjudged Swayze incompetent. That court appointed Herbert W. Newton conservator of her estate. Newton obtained a $10,000 bond and, pursuant to General Statutes § 45-75, filed an inventory of the Swayze estate with the Probate Court. The inventory listed personal property in the amount of $28,527.57, but did not list the trust as an asset.

From 1971 through 1976, the defendant, as trustee, paid income and principal to Newton, as conservator, upon Newton's oral requests for funds to an officer of the defendant. The trustees never sought permission from the Probate Court to make payments from the trust to Newton, nor did they inform the Probate Court of those payments. Newton provided no regular receipts for expenses purportedly incurred on Swayze's behalf, and did not account to the trustees for his use of the money received from the trust. The record does not indicate that the trustees ever investigated Newton's use of the trust funds. During Newton's tenure as conservator, the trustees paid him approximately $360,000 from the trust. The New Haven Probate Court removed Newton as conservator, effective January 17, 1977, because of his failure to provide the court with an acceptable accounting of his expenditures.

Swayze died on February 8, 1977. Pursuant to the terms of her will, the defendant was appointed executor of Swayze's estate on February 24, 1977. On August 3, 1977, the plaintiff Ruth N. Ramsdell filed an application with the Guilford Probate Court to remove the defendant as executor, alleging as grounds for removal, inter alia, a conflict of interest between the defendant's role as executor under the will and as trustee of the inter vivos trust. Following a hearing, the Probate Court denied the application on September 8, 1977.

The defendant's original inventory of the Swayze estate listed as an estate asset a claim of undetermined amount against Newton, the former conservator. After the plaintiffs objected to the probate court's acceptance of the inventory, arguing that the defendant had failed to include a claim against the trustees of the inter vivos trust, the defendant amended its inventory to list "a possible secondary claim" against the trustees. The Guilford Probate Court accepted the amended inventory on August 10, 1977. The plaintiffs appealed the Probate Court's refusal to remove the executor and its acceptance of the amended inventory, and also appealed the court's subsequent order approving the defendant's final account as executor.

While the plaintiffs' appeals were pending, the defendant, as executor, sued Newton in Superior Court seeking, inter alia, an accounting of his expenditures as conservator. On December 4, 1980, the trial court in that action, Pastore, J., rendered judgment against Newton for a total of $69,792.40, an amount which included interest accruing from the date of Newton's removal as conservator to the date of judgment. The executor collected all but $2593.40.

On February 1, 1985, following a trial on the plaintiffs' consolidated appeals from probate, the trial court, S. Freedman, J., rendered judgment dismissing the plaintiffs' appeals from the Probate Court's acceptance of the inventory and refusal to remove the defendant as executor, but sustaining the appeal from the acceptance of the defendant's final account. In its memorandum of decision, the court determined that, because it was hearing the matter de novo as a Probate Court, it lacked jurisdiction to consider claims for damages and equitable relief raised in the plaintiffs' appeals. It held, accordingly, that those claims should be brought in a court of general jurisdiction. The court, however, undertook a limited inquiry into the plaintiffs' claims that the defendant was liable for negligence in the administration of the inter vivos trust. The court undertook this inquiry for the sole purpose of determining whether reasonable grounds existed for the plaintiffs to sue the defendant in a court of general jurisdiction. After examining the terms of the trust instrument, the court concluded that such reasonable grounds did exist, and accordingly refused to accept the defendant's final account pending resolution of the plaintiffs' claims against the defendant in a court of general jurisdiction. The court also determined that the defendant's status as trustee placed it in a position of "potential conflict" with its duties as executor. The court refused, however, to remove the defendant as executor, reasoning that the parties ultimately might reconcile their differences and that "the weight of authority" favored permitting the executor to remain in office.

On appeal to this court, the plaintiffs claim that the trial court erred in: (1) failing to remove the defendant as executor; (2) approving the defendant's inventory of the Swayze estate, despite the defendant's failure to include in the inventory an appraisal of the claim against the trustees of the inter vivos trust; and (3) failing to surcharge the defendant as executor for litigation expenses incurred by the estate, which expenses allegedly resulted from the defendant's negligence and misfeasance in connection with its duties as trustee. We agree with the plaintiffs' first claim of error, and will address their additional claims in that light. ³

The defendant, as cross appellant, claims that the trial court erred in refusing to accept the final account of the defendant as executor, pending resolution of the plaintiffs' claims against the defendant in a court of general jurisdiction. We disagree.

I

We turn first to the resolution of the plaintiffs' dispositive claim of error, that the trial court erred in refusing to order the removal of the defendant as executor, despite explicitly recognizing the possibility of a conflict of interest between the defendant's role as executor under the will and as trustee of the inter vivos trust. The defendant does not dispute that both the Probate Court and the trial court on appeal have jurisdiction to order the removal of an executor. General Statutes § 45-263(a); 2 W. Locke & P. Kohn, Connecticut Probate Practice (1951) § 341; see Prince v. Sheffield, 158 Conn. 286, 295, 259 A.2d 621 (1969). Rather, the defendant argues that removal is not warranted in this case because, despite its dual and potentially conflicting roles as executor and trustee, its conduct as executor was marked by the diligence and prudence required of a fiduciary. In particular, the defendant argues that it acted prudently in failing to pursue a claim against itself and the other trustee, since such an action would have been costly and probably fruitless. While the posture of this case does not require us to resolve definitively the matter of the defendant's potential liability to the estate, we are not persuaded that the defendant's dual roles as executor and trustee did not impair the performance of its fiduciary responsibilities as executor.

General Statutes § 45-263(a) provides that the Probate Court, upon its own motion or upon the application of an interested party or a surety upon the fiduciary's bond, may remove a fiduciary who "becomes incapable of executing his trust, neglects to perform the duties of...