Salvio v. Salvio

• Decision Date: 23 February 1982
• Court: Connecticut Supreme Court
• Parties: Fred E. SALVIO v. Sophie K. SALVIO.

Page 190

441 A.2d 190

186 Conn. 311

Fred E. SALVIO v. Sophie K. SALVIO.

Supreme Court of Connecticut.

Argued Dec. 9, 1981.

Decided Feb. 23, 1982.

Harry L. Nair, Hartford, for appellant (defendant).

C. Michael Budlong, Hartford, with whom was Pasquale J. Cannata, Enfield, for appellee (plaintiff).

Before PETERS, HEALEY, PARSKEY, ARMENTANO and WRIGHT, JJ.

PETERS, Associate Justice.

The principal issue in this case is whether savings accounts held by one or both parents in trust for their children may be included by the trial court in its division of marital property accompanying the parents' divorce. The trial court divided six savings accounts issued in the name of the defendant wife, Sophie K. Salvio, in trust for Gerald and Deborah Salvio, children of the parties, equally between the defendant and the plaintiff husband, Fred E. Salvio, co-trustee of one account. The defendant appeals that decision and certain other orders arising out of the marital dissolution.

Fred and Sophie Salvio were married in 1959 and had two children, Gerald, born in 1960, and Deborah, born in 1962. In 1978 the plaintiff, Fred Salvio, brought an action for divorce. The defendant counterclaimed, seeking dissolution of the marriage, custody of Deborah, at that time still a minor, and various financial benefits. At a protracted series of hearings the parties testified to the existence of twelve savings accounts, eight at the Berlin Savings Bank and four at the American Savings Bank of Newington. The latter accounts, two issued to the defendant as trustee for Gerald and two as trustee for Deborah, contained at the time of trial approximately $50,000. They were not included by the trial court in its decision and are not at issue in this appeal. Of the eight accounts at the Berlin Savings Bank, two were conceded to be irrevocable trusts and hence unavailable to either party; those accounts contained approximately $200. The six remaining Berlin Savings Bank accounts, containing approximately $25,000, are the focus of this appeal. Three accounts were in trust for Gerald and three for Deborah; Sophie Salvio was named trustee in five, Sophie or Fred Salvio in one.

At trial both parties agreed that these accounts were established by the defendant as a fund for the children's college education. ¹ Although the defendant retained possession of the bank books and the plaintiff made only one deposit, the plaintiff knew of the existence of these accounts and of their purpose. The defendant testified to withdrawing funds from the accounts on one occasion to purchase a car and later replacing the amount withdrawn. ² All other withdrawals were for the purpose of opening new accounts in trust for the children. The sources of the funds deposited included the earnings of both parties, the defendant's inheritance, and gifts to the children.

In its memorandum of decision the trial court ordered that the funds in the six accounts at the Berlin Savings Bank be divided equally between the parties. The court further ordered that $3000 of the plaintiff's share be held in escrow until resolution of certain disputed claims under a previous court order. After awarding custody of the minor child to the defendant, ordering the plaintiff to pay $175 per week in alimony, denying child support, and dividing other assets of the marriage, the court denied counsel fees to both parties.

On appeal to this court, the defendant's principal claim of error is the inclusion by the trial court of the six Berlin Savings Bank accounts in its division of marital property. The defendant also claims error in the court's order placing $3000 of the plaintiff's share in escrow; in the court's failure to act on the defendant's motion for contempt against the plaintiff; in the amount of the court's award of alimony and its denial of child support; in the allocation of the parties' assets; and in the denial of counsel fees.

I

The defendant claims that the disputed accounts at the Berlin Savings Bank were beyond the trial court's jurisdiction to allocate because they were irrevocable trusts owned by the beneficiaries, Gerald and Deborah. Since the beneficiaries, the true owners of the property, were not made parties to the dissolution action, she argues, the trial court could not order the disposition of a trust corpus based merely on the parties' status as trustees. The first issue before us, then, is the determination of the rights of trustees and beneficiaries in savings bank trust accounts. Such a determination is a prerequisite to adjudication of the Superior Court's jurisdiction to allocate such property in a marital dissolution action.

Because the issue before us is one of first impression in this state, it is important to put the savings account trust, now statutory, into its historical context. A savings account trust arises when a bank depositor establishes an account in trust for a named beneficiary while reserving to himself, as trustee, the right to withdraw the funds in that account at any time. Upon the trustee's death, ownership of the funds remaining on deposit passes automatically to the beneficiary. Originally such trusts were viewed as enforceable only if they could be found to be irrevocable. Minor v. Rogers, 40 Conn. 512, 521 (1873); McCaffrey v. North Adams Savings Bank, 244 Mass. 396, 398, 138 N.E. 393 (1923). Revocable trusts were often held ineffective as testamentary dispositions violative of the Statute of Wills. Day Trust Co. v. Malden Savings Bank, 328 Mass. 576, 579, 105 N.E.2d 363 (1952); Hogarth-Swann v. Steele, 294 Mass. 396, 398, 2 N.E.2d 446 (1936). New York courts, however, early in this century validated such trusts, often called Totten trusts after the leading case, as tentative trusts capable of transmitting a legal interest in the funds on deposit at the depositor's death. In re Totten, 179 N.Y. 112, 125-26, 71 N.E. 748 (1904). This is the view endorsed by the Restatement (Second), Trusts § 58 (1959) and by I Scott, Trusts (3d Ed. 1967) § 58.

Each of these analyses of savings bank trust accounts proved in some sense unsatisfactory. As this court recognized in Driscoll v. Norwich Savings Society, 139 Conn. 346, 350, 93 A.2d 925 (1952), savings accounts that purport to transfer ownership of deposits are so hybrid in concept that they call out for a sui generis treatment by statute.

The earliest Connecticut statute to address this need provided procedures for the creation of savings account trusts and absolved banks from any liability for payment of funds on deposit at the depositor's death to the named beneficiary. General Statutes § 5829 (1949 Rev.). ³ After this court declared such payments to be in violation of the Statute of Wills; Fasano v. Meliso, 146 Conn. 496, 500, 152 A.2d 512 (1959); the legislature responded with a more elaborate statute validating these death transfers. ⁴ The court's concern in Fasano that "there was no evidence whatsoever of any intention that title to (the accounts) or any interest in them should leave the decedent prior to his death" was remedied by the legislature's conclusive presumption of the depositor's intent that "if the named beneficiary survives the depositor, the depositor's death shall terminate the trust and the moneys to the credit of the trust shall vest in the named beneficiary free and clear of the trust." Public Acts 1961, No. 306, § 1(c). ⁵ This statutory presumption was clearly added to eliminate any need for the evidence of intent found lacking in Fasano. It survives verbatim in the present version of the statute, General Statutes § 36-110, ⁶ which also specifies as a condition of the presumption that the depositor may freely withdraw the funds on deposit during his lifetime. General Statutes § 36-110(1)(a)(1).

The defendant claims that a trust established under the provisions of § 36-110 not only creates a valid statutory trust, even though it fails to satisfy the Statute of Wills, but also creates a valid present interest in the beneficiary, unless a contrary intention is indicated at the time the account is established. In support of this view the defendant invokes the 1965 revision of § 36-110, which deleted the statement that "(t)he trust shall be revocable at will by the depositor during his life" and substituted the statement that "(t)he depositor during his life may withdraw, or authorize charges against, the moneys to the credit of the trust." She argues that the deletion of the term "revocable" can only mean that the legislature intended savings account trusts to become irrevocable, with the depositor authorized by statute to withdraw funds solely to effectuate the purposes of the trust. We do not agree.

An examination of the legislative history for § 36-110 reveals that the 1965 revision was intended to clarify the tax status of savings account trusts but to leave unaltered the substance of the statute. At hearings on the proposed revision, Representative Floyd A. Laird of Sharon described the modified bill as "an act clarifying the presumptions relating to savings deposits in trust to avoid unintended succession tax consequences" occasioned by the term "revocable," which signaled automatic liability to the state succession tax. See 11 H.R.Proc., Pt. 3, 1965 Sess., p. 1313. He later asserted that "this language which is changed, merely says the same thing but in a different way ...." 11 H.R.Proc., supra, 1314-15; see 11 S.Proc., Pt. 3, 1965 Sess., p. 1169; Joint Standing Committee Hearings-Banks 1965, pp. 116-19, 133-34. There is no basis for the defendant's contention that after 1965 savings account trusts became irrevocable and that consequently the beneficiaries' interest vested irrevocably when the trusts were created.

Under the present statute it is perfectly clear, as we stated in Manulik v. Devitt, 176 Conn. 663, 668, 410 A.2d 469 (1979), that savings account trusts cannot be treated as irrevocable, because they allow the depositor an unlimited power...