Carten v. Carten

• Decision Date: 05 May 1966
• Court: Connecticut Supreme Court
• Parties: George T. CARTEN et al. v. Daniel C. CARTEN et al.

Page 711

219 A.2d 711

153 Conn. 603

George T. CARTEN et al. v. Daniel C. CARTEN et al.

Supreme Court of Connecticut.

May 5, 1966.

William Reeves, Bridgeport, with whom was Robert J. Cooney, Bridgeport, for appellants-appellees (defendants).

Vincent M. Simko, Bridgeport, for appellees-appellants (plaintiffs).

Before KING, C.J., and MURPHY, ALCORN, SHANNON and HOUSE, JJ.

HOUSE, Associate Justice.

This is an action in equity for discovery. A rather lengthy recital of facts is necessary to an understanding of the issues involved, and it may be noted at the outset that the court's finding is not subject to correction in any respect material to the determination of this appeal. In 1947, Daniel C. Carten, hereinafter referred to as the testator, died and by his will established a testamentary trust for the benefit of his wife and children. The corpus of the trust consisted of 996 shares of stock in the D. J. Carten Sand and Gravel Company, hereinafter referred to as the corporation, which were all of the shares of the corporation owned by the testator at the time of his death. The testator appointed his son Daniel C. Carten and his daughter Ethel C. Armstrong as trustees, and they have served as such since March 27, 1947. As a matter of convenience they will be referred to by their first names only. The testator's widow was the life tenant of the trust, which provided that she was to be paid during her life all of the net income or so much thereof as totaled $4800 per annum, whichever should be less, subject to such additional payments of income and principal as might be necessary for her reasonable support and care. Any remaining net income of the trust was to be paid semiannually to the testator's seven children on the basis of 40 percent to Daniel, 15 percent to Ethel and 9 percent to each of the other five children. Upon the death of the life tenant, which took place on June 28, 1962, the corpus of the trust was to be distributed to the seven children in that same proportion. Owing to stock dividends and a stock split, at the time of the death of the life tenant, the corpus of the trust consisted of 3984 shares of the outstanding 4000 shares of stock of the corporation. Daniel and Ethel, in addition to the 3984 shares which they held in their capacity as trustees, each individually owned four shares. The plaintiffs are two of the testator's children and accordingly neneficiaries under the trust, but neither individually owns any shares of stock in the corporation. During the life of the widow, the trustees filed with the .probate Court three periodic accounts, and each was accepted and allowed, and no appeal was taken. The last of these three accounts covered the period from May 1, 1954, to April 30, 1957. After the death of the life tenant, the trustees filed their final account for the period from May 1, 1957, to August 17, 1962, and on September 26, 1962, the Stratford Probate Court accepted and allowed the account. The two plaintiffs in the present action objected to the acceptance of this final account and appealed to the Superior Court from its acceptance and allowance. That appeal, hereinafter referred to as the original action, is still pending, but further proceedings on it have been stayed pending final determination of the present case.

The corporation is a going concern with two ready-mix concrete plants and a sand and gravel plant. Its sand and gravel bank becomes depleted as material is removed from it, and the corporation has, for the last ten years, been seeking to acquire a new bank to replace its source of supply. The corporation has purchased marketable securities in the sum of $71,685.73 so that it will have a fund available for the purchase of a new sand and gravel bank, which is necessary for future business operations. Daniel is president of the corporation, and Ethel is the secretary and treasurer. Both of them were directors and officers of the corporation prior to the death of the testator, and, during the period of the trust, they, together with the widow-life tenant and another son of the testator, comprised the corporation's board of directors.

In the original action, the two plaintiffs appealed from the decree accepting the trustees' final account. As made more specific, their reasons of appeal include allegations that the accounting is incomplete because it does not show what receipts and expenditures of the trust corpus were allocated to principal and what to income, that it does not disclose whether or not all the net income of the trust was accounted for or paid to the beneficiaries, and that, on information and belief, the trustees failed to pay the income of the trust from November, 1947. In addition, the reasons of appeal contain allegations that the account does not show how the net income of the trust was computed, that the trustees failed to manage the corporation for the best interests of the beneficiaries, and that they have failed to disclose the records of the management of the corporation.

The present action for discovery was brought by the same two children of the testator who took the appeal in the original action. The defendants are the two trustees, also sued in their individual capacities and as officers and directors of the corporation, the corporation and the corporation's accountant. In the present action, the plaintiffs allege the existence of the trust, that they are beneficiaries, that Daniel and Ethel are trustess under the will as well as officers and directors of the corporation, that the plaintiffs' appeal from the allowance of the trust account is pending, that the plaintiffs have suffered a substantial shrinkage of their interest in the trust, and that the plaintiffs believe the trustees have failed to perform the duties of their trust. It is also alleged on information and belief that a discovery and examination of the corporation's books and records will disclose material evidence in support of their claim and reasons for appeal and that the books and records are of such a character 'as might be expected to supply facts as to whether or not the trustees properly performed their trust.' By way of relief, the plaintiffs claim a decree ordering the defendants to produce for examination and copying 'any and all financial statements of the D. J. Carten Sand and Gravel Corporation, books and accounts, check books, cancelled checks, financial records and journals, records of sales, income, expenses, purchases, salaries, sale of assets and any and all documents of the company which may pertain to the defendants' operation of the company.'

In short, in the sweeping style of the classical 'fishing expedition,' the plaintiffs have sought an unrestricted examination of all the records of the corporation in an attempt to search out evidence of a possible breach of the fiduciary duties of the defendant trustees. The attempte is non predicated upon any allegation or claim of fraud, embezzlement, misappropriation, bad faith or violation of any legal direction in the testator's well. In neither action have the plaintiffs made any claim of mismanagement of the corporation by the other defendants. Nor do we find here a situation where the trustees themselves created the corporation as a means either of accomplishing the purposes of the trust or of insulating their conduct from examination. The assertion of the plaintiffs that '(t)he defendants have hidden their management of the trust res behind a corporate shield' has no foundation in fact. The corporation was in existence before the trust was created, and the shares of stock in the corporation were placed in trust by the testator. It was these shares of corporate stock and not the corporation itself nor the corporate assets which comprised the trust res.

The trial court granted the relief requested to the limited extent of directing that the plaintiffs be permitted to examine the corporation's annual balance sheets, annual profit and loss statements and the general ledger, covering only the period since the date of the last preceding trust account, which had been accepted and allowed by the Probate Court and from which no appeal was taken. The parties filed cross appeals to this court, each filing numerous assignments of error. It is the basic position of the defendants that the plaintiffs were not entitled to any discovery whatsoever. It is the contention of the plaintiffs that they were entitled to a much broader discovery, both in time and scope, than the court allowed.

Before discussing the merits of the appeal, we must first consider a claim by the defendants that the Superior Court did not have jurisdiction over the subject matter of this equitable bill for discovery because the complaint contains no allegation of fact or demand showing that the 'matter in demand' is in excess of $5000. They rely on General Statutes § 52-6, which, when this action was brought, provided that the Court of Common Pleas should have exclusive jurisdiction of all civil actions for equitable relief only, wherein the matter in demand did not exceed $5000.

It does not appear that any question of jurisdiction was raised during the trial, or, more properly, before trial, by a motion to erase if the claim was that the want of jurisdiction appeared on the face of the record; Felletter v. Thompson, 133 Conn. 277, 279, 50 A.2d 81; or by plea in abatement if facts which do not appear in the record were relied upon. Practice Book § 92; Village Creek Homeowners Assn., Inc. v. Public Utilities Commission, 148 Conn. 336, 340, 170 A.2d 732; see Park Construction Co. v. Knapp, 150 Conn. 588, 591, 192 A.2d 635. Lack of jurisdiction, however, may be raised at any time and not necessarily through the formality of a motion to erase, for the question, once raised, must be disposed of no matter in what form it is presented. Watson v. Howard, 138 Conn. 464, 467, 86 A.2d 67. 'If the trial court lacks jurisdiction the supreme court...