Benjamin v. Corasaniti

• Decision Date: 06 December 2021
• Docket Number: SC 20491
• Citation: 341 Conn. 463,267 A.3d 108
• Parties: Helen Z. BENJAMIN et al. v. Ralph P. CORASANITI, Trustee, et al.
• Court: Connecticut Supreme Court

341 Conn. 463

267 A.3d 108

Helen Z. BENJAMIN et al.

v.Ralph P. CORASANITI, Trustee, et al.

SC 20491

Supreme Court of Connecticut.

Argued April 1, 2021

Officially released December 6, 2021^*

Steven M. Frederick, Stamford, with whom were David G. Keyko, pro hac vice, and, on the brief, Christopher Fennell, pro hac vice, and Gessi Giarratana, for the appellants(plaintiffs).

Helen Harris, Stamford, with whom, on the brief, were John W. Cerreta, Hartford, Thomas D. Goldberg and Michael Schoeneberger, Stamford, for the appellees(named defendant et al.).

Charles W. Pieterse, with whom were Wyatt R. Jansen, Greenwich, and Lynn K. Neuner, for the appellees(defendantWilliam T. Ziegler et al.).

Frederic S. Ury, with whom, on the brief, was Deborah M. Garskof, Fairfield, for the appellees(defendantKarl H. Ziegler et al.).

Gary W. Hawes, assistant attorney general, with whom, on the brief, were William Tong, attorney general, Clare E. Kindall, solicitor general, and Karen Gano, assistant attorney general, for the appellee(defendantattorney general).

Robinson, C. J., and McDonald, D'Auria, Kahn, Ecker and Keller, Js.

ECKER, J.

In July, 2015, Peter M. Ziegler(Peter), a scion of a wealthy Connecticut family, suffered a tragic accident that rendered him a quadriplegic.Approximately one year later, Peter executed a trust instrument to create a charitable trust, Peter's Yellow Submarine Trust, for the purpose of providing financial assistance to other quadriplegics and their caregivers.The trust was not funded during Peter's lifetime, but Peter, who had nongeneral testamentary powers of appointment under various Ziegler family trusts, exercised his powers of appointment in his will to direct the proceeds of the sale of stock in a Ziegler family corporation, Hay Island Holding Corporation(HIHC), to Peter's Yellow Submarine Trust.Peter's sister, Helen Z. Benjamin(Helen), subsequently challenged the validity of Peter's exercise of his nongeneral testamentary powers of appointment, alleging that a trust that remains unfunded during a testator's lifetime does not exist as a matter of law and, therefore, is an impermissible appointee.The Probate Court disagreed, and the trial court affirmed, concluding that Peter's Yellow Submarine Trust was a permissible appointee even though it was not funded prior to Peter's death.On appeal, we must determine whether an unfunded charitable trust is a permissible appointee of the exercise of a nongeneral testamentary power of appointment.We answer that question in the affirmative and, accordingly, affirm the judgment of the trial court.

The record reflects the following stipulated or otherwise undisputed facts.In 2002, Peter's father, William Ziegler III, created The William Ziegler III Family Irrevocable Trust (2002 Trust), which established separate trusts for the benefit of Peter and each of his five siblings: Melissa J. Ziegler, William T. Ziegler, Karl H. Ziegler, Cynthia Z. Brighton, and Helen.The 2002 Trust holds shares of HIHC, which is wholly owned by the Ziegler family and their trusts.Pursuant to § 3.4 of the 2002 Trust, Peter was granted a nongeneral testamentary power of appointment over the HIHC shares held in trust for his use and benefit.Section 3.4 (A) of the 2002 Trust provides in relevant part that, upon Peter's death, his 2002 Trust "shall terminate" and that, "by specific reference in his ... will, [Peter] may appoint the remaining trust property in such amounts, either outright or in further trust ... to or for the benefit of any one or more persons or charitable organizations ... provided, however, that such limited power of appointment shall not be exercisable in favor of [Peter], his ... creditors, his ... estate, or the creditors of his ... estate ...."(Emphasis in original.)If Peter failed validly to exercise his nongeneral testamentary power of appointment, his trust property would be distributed equally to his descendants or, alternatively, to the 2002 Trusts of his surviving siblings.The 2002 Trust is governed by Illinois law.

In 2005, William Ziegler III created a second trust, The William Ziegler III Revocable Trust, which, among other things, created a Trust C (2005 Trust C) holding HIHC shares for the use and benefit of each of the six Ziegler siblings.Under § 3.12 of the 2005 Trust C, Peter was granted a nongeneral testamentary power of appointment substantially similar to that contained in the 2002 Trust, which could not be exercised in favor of Peter, his creditors, his estate, or the creditors of his estate.¹Also similar to the 2002 Trust, Peter's failure to validly exercise his nongeneral testamentary power of appointment would result in the distribution of his trust property equally to his descendants or, alternatively, to the trusts of his surviving siblings.The 2005 Trust C is governed by Connecticut law.

In 2011, all of the Ziegler siblings, with the exception of Helen, transferred their shares in HIHC to separate trusts.Pursuant to Peter's 2011 Irrevocable Trust (2011 Trust), which was established by his wife, Marie Longner Ziegler, Peter was granted a nongeneral testamentary power of appointment that, like the other two trusts, could not be exercised in favor of Peter, his creditors, his estate, or the creditors of his estate.²Similarly, if Peter died without validly exercising his nongeneral testamentary power of appointment, the trust property would be distributed equally to his descendants or, alternatively, to the 2002 Trusts of his surviving siblings.The 2011 Trust, like the 2002 Trust, is governed by Illinois law.

In December, 2012, the shareholders in HIHC, including Peter, his siblings, and the trustees of their respective trusts, entered into an Amended and Restated Shareholder's Agreement of Hay Island Holding Corporation(shareholder's agreement).The shareholder's agreement provides that, if a Ziegler sibling exercises his or her nongeneral testamentary power of appointment with respect to the HIHC shares in the 2002 Trust, the 2005 Trust C, or the 2011 Trust, "the shares as to which the testamentary power of appointment was exercised shall be sold in equal shares to the surviving Ziegler [s]iblings' [family][t]rusts."The sale must "take place within nine ... months of the date of death of the deceased Ziegler [s]ibling," and the shares shall be valued "as of the date of death of the Ziegler [s]ibling ...."

As we previously mentioned, Peter suffered a tragic accident in 2015 that rendered him a quadriplegic.

Approximately one year later, on August 5, 2016, Peter signed a trust instrument establishing Peter's Yellow Submarine Trust and designating himself and two of his siblings as trustees.The express purpose of Peter's Yellow Submarine Trust "is to make distributions, loans, or grants exclusively for [c]haritable [p]urposes ... with special emphasis on distributions, loans, or grants related to (1) providing housing assistance to quadriplegics, (2) providing assistance with the development and distribution of assistive devices and tools for quadriplegics, (3) providing assistance and education to caregivers of quadriplegics, and (4) providing funding for research related to paralysis and returning motor and nerve function to quadriplegics."The Peter's Yellow Submarine Trust instrument provides that the res of the trust is the "property listed in Schedule A attached hereto," but there is no evidence that a Schedule A ever was attached or that the trust was funded prior to Peter's death.

In October, 2016, Peter executed a will, which references his "testamentary powers of appointment over the [HIHC][s]hares held" in the 2002 Trust, the 2005 Trust C, and the 2011 Trust, and which states that "I hereby exercise such powers and direct that all of the [s]hares be sold in accordance with the [s]hareholder's [a]greement and the net proceeds of such sale shall be distributed to ... Peter's Yellow Submarine Trust, to be added to principal and applied for such organization's charitable purposes."Approximately one year later, Peter died without descendants, and his will was admitted to probate.Peter is survived by all five Ziegler siblings.

In May, 2018, Peter's sister Helen received a copy of the Peter's Yellow Submarine Trust instrument and learned that it was not funded prior to Peter's death.After voicing concerns about the validity of Peter's exercise of his nongeneral testamentary powers of appointment and the pending nine month deadline for the sale of Peter's shares of HIHC stock under the terms of the shareholder's agreement, Helen entered into a memorandum of understanding with the trustees of the respective Ziegler family trusts, which provided that they would "file a petition in Connecticut Probate Court seeking a determination as to the validity of Peter's exercise of the [p]owers of [a]ppointment," and, "if a final [nonappealable]court determination has not been issued prior to November 20, 2018, validating the exercise of any [p]ower of [a]ppointment," the sale of Peter's stock will be rescinded and the respective trusts will be returned to their "status prior to June 5, 2018, so as to avoid incurring any income tax liability ...."

In order to meet the nine month deadline set forth in the shareholder's agreement, Peter's HIHC stock in the 2002 Trust, the 2005 Trust C, and the 2011 Trust was sold on June 5, 2018, yielding "approximately $184 million in proceeds of cash and promissory notes, of which $7,513,353 was attributable to the shares held by the 2002 Trust, $150,678,000 to the shares held by the 2005 Trust [C], and $25,909,767 to the shares held by the 2011 Trust."³

On June 26, 2018, pursuant to the memorandum of understanding, the named defendant, Ralph P. Corasaniti, who is the cotrustee of the Ziegler family trusts, filed a petition for construction of trusts and confirmation of exercise of powers of appointment in the Probate Court, seeking a judicial construction of Peter's 2002 Trust, 2005 Trust...