Stuart v. Freiberg

• Citation: 69 A.3d 320,142 Conn.App. 684
• Decision Date: 21 May 2013
• Docket Number: No. 33813.,33813.
• Court: Appellate Court of Connecticut
• Parties: William A. STUART et al. v. Richard M. FREIBERG.

142 Conn.App. 684

69 A.3d 320

William A. STUART et al.

v.Richard M. FREIBERG.

No. 33813.

Appellate Court of Connecticut.

Argued Sept. 18, 2012.

Decided May 21, 2013.

Sandra J. Akoury, for the appellants (plaintiffs).

James A. Fulton, Greenwich, for the appellee (defendant).

DiPENTIMA, C.J., and BEACH and BISHOP, Js.

BISHOP, J.

The plaintiffs, William A. Stuart and Jonathan Stuart, appeal from the summary judgment rendered by the trial court in favor of the defendant, Richard M. Freiberg, and from the court's subsequent denial of their motion to reargue. On appeal, the plaintiffs claim that the court improperly granted the defendant's motion for summary judgment ¹ on the plaintiffs' claims sounding in fraud, negligent misrepresentation, accounting malpractice and violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42–110a et seq.² We reverse the summary judgment as to the fraud, negligent misrepresentation and accounting malpractice counts, and affirm the judgment as to the CUTPA count.

As a prelude to the issues presented in this appeal, a historical review of this dispute is appropriate, as the context is relevant to our determination of the issues at hand. The trail of disputes between the parties, including, at times, collateral actors, has been long and tortuous.

The plaintiffs, William A. Stuart and Jonathan Stuart, and Kenneth J. Stuart, Jr. (Stuart, Jr.), are brothers.³ In 1991, their father, Kenneth J. Stuart, Sr. (Stuart, Sr.), and his wife, Katherine Stuart, executed wills and caused the creation of a trust known as “The Kenneth J. Stuart Living Trust” (trust) in which Stuart, Sr., and Stuart, Jr., were named as co-trustees with the further provision that upon Stuart, Sr.'s death, Stuart, Jr., would be the sole trustee and executor of Stuart, Sr.'s estate. See Stuart v. Stuart, Superior Court, judicial district of Stamford–Norwalk, Complex Litigation Docket, Docket No. X08–CV–02–0193031, 2004 WL 1730143 (June 28, 2004) (37 Conn. L. Rptr. 367), aff'd, 112 Conn.App. 160, 962 A.2d 842 (2009), rev'd in part, 297 Conn. 26, 996 A.2d 259 (2010). Stuart, Sr.'s will provided that should he survive his wife, the principal of the trust would be distributed in equal shares to his three sons. Id. At the time of trust creation, Stuart, Sr., owned approximately $2 million in securities and cash, an interest in real estate, valuable antique furniture and valuable art work, including several famous works by Norman Rockwell. Id. Most of these assets were placed in the trust during Stuart, Sr.'s lifetime. Id. Katherine Stuart died on March 21, 1992, and Stuart, Sr., died eleven months later, on February 17, 1993. Id. In the months preceding his death, Stuart, Sr., completed a number of transactions that affected his estate. Id. In November, 1992, Stuart, Sr., and Stuart, Jr., without the knowledge of either William A. Stuart or Jonathan Stuart, formed the Stuart & Sons Limited Partnership (Stuart & Sons) with Stuart, Sr., and Stuart, Jr., as general partners and the Norman Rockwell Museum at Stockbridge, Massachusetts, as a junior partner. Id. Shortly thereafter, nearly all of Stuart, Sr.'s assets, including the art collection, were transferred to Stuart & Sons. Id. Subsequent to Stuart, Sr.'s death, Stuart, Jr., engaged in numerous transactions on behalf of Stuart & Sons, including the purchase of real estate, the transfer of property from Stuart & Sons to himself and to his wife, Deborah Christman Stuart, and the commingling of Stuart & Sons assets with his own. Id.

On December 17, 1993, William A. Stuart and Jonathan Stuart brought a seven count action against Stuart, Jr., as trustee and as a general partner of Stuart & Sons in which they alleged that Stuart, Jr., exercised undue influence over Stuart, Sr., in conjunction with the creation of the trust, the formation and funding of Stuart & Sons and related financial activities, and that Stuart, Sr., lacked the mental capacity to know and understand those transactions. The complaint alleged that Stuart, Jr., breached his fiduciary duties to the trust in numerous ways. In a third revised complaint, dated March 10, 2003, William A. Stuart and Jonathan Stuart added Deborah Christman Stuart as a defendant. Specifically, the complaint alleged that Stuart, Jr., committed statutory theft and a fraudulent transfer of real estate from Stuart & Sons to his wife, Deborah Christman Stuart. It further alleged that Stuart, Jr., Deborah Christman Stuart and their jointly owned business, Christman Stuart Interiors, LLC, were unjustly enriched by misappropriation of certain assets from Stuart & Sons. Finally, the complaint alleged that a number of these alleged activities violated CUTPA.

As relief, William A. Stuart and Jonathan Stuart sought an injunction preventing Stuart, Jr., as general partner of Stuart & Sons, from spending, wasting or encumbering assets of Stuart & Sons and preventing Stuart, Jr., as trustee, from the same in regard to trust assets. They sought, as well, an order imposing a constructive trust on the assets of Stuart & Sons, and they asked the court to set aside conveyances made by Stuart, Jr., to Stuart & Sons. The case came to trial nearly nine years later ⁴ and was decided by memorandum of decision dated June 28, 2004, following a trial of several weeks. ⁵ The court, Adams, J., found largely for the plaintiffs. Id. The court determined that Stuart, Sr., was not competent to engage in the transactions that formed Stuart & Sons and to transfer trust assets to Stuart & Sons and, further, that Stuart, Jr., had exercised undue influence over Stuart, Sr. Id. The court, therefore, declared null and void the creation of Stuart & Sons and ordered that all of its assets be transferred to the estate of Stuart, Sr.⁶ Id. The court also found that Stuart, Jr., had violated his fiduciary duty and the Connecticut Uniform Prudent Investor Act,⁷ and had been guilty of statutory theft as to certain assets. Id. Finally, the court found that Christman Stuart Interiors, LLC, had violated CUTPA but dismissed the CUTPA claims against Stuart, Jr., and Deborah Christman Stuart. Id. The court, accordingly, awarded monetary damages in favor of the estate against Stuart, Jr., in the amount of $2,375,528, including interest.⁸Id. On the unjust enrichment claims, the court ordered Christman Stuart Interiors, LLC, to pay the sum of $60,539, including interest to the estate and, last, the court ordered accounting fees in the amount of $180,000.⁹Id.

The next litigation of note on the parties' journey of conflict was a lawsuit filed by Jonathan Stuart and William A. Stuart against Peter G. Snyder as attorney for Stuart, Jr., and for the various entities created by Stuart, Jr. See Stuart v. Snyder, Superior Court, judicial district of Stamford–Norwalk, Docket No. CV–06–5001106, 2009 WL 6813160 (August 25, 2009). In a multicount complaint dated March 23, 2006, Jonathan Stuart and William A. Stuart alleged that Snyder, in conjunction with the estate, was guilty of fraud, negligent misrepresentation, negligence, breach of fiduciary duty, civil conspiracy, unjust enrichment and fraudulent concealment. Id. In response, Snyder filed a motion for summary judgment on the ground that the statute of limitations had run before the commencement of the action. Id. Agreeing with Snyder, the court, Pavia, J., rendered summary judgment on August 25, 2009, a decision later affirmed by this court. See Stuart v. Snyder, 125 Conn.App. 506, 8 A.3d 1126 (2010), cert. denied, 300 Conn. 921, 14 A.3d 1005 (2011). We now turn to the facts of the present case.

On April 1, 2004, the plaintiffs commenced the present action against the defendant. The complaint contained four counts: fraud, negligent misrepresentation, accounting malpractice and a violation of CUTPA. In the fraud count, the plaintiffs alleged that the defendant knew of Stuart, Jr.'s mishandling of Stuart, Sr.'s estate assets, aided Stuart, Jr., in his mismanagement by creating adjusted journal entries and mischaracterizing Stuart, Jr.'s personal expenses, prepared misleading transaction summaries and compilation reports and provided the plaintiffs with incorrect compilation reports. The plaintiffs further alleged that the defendant knew or should have known that the plaintiffs would rely on his representations, and that they did rely on them to their detriment. In the negligent misrepresentation count, the plaintiffs incorporated the allegations of the fraud claim and alleged further that the defendant failed to exercise reasonable care and competence in his communication of accounting information and concealed certain transactions from the plaintiffs. In the accounting malpractice count, the plaintiffs incorporated the allegations of the fraud and negligent misrepresentation counts and further alleged that the defendant “failed to provide [accounting information] in good faith, objectively, independently, and in a manner in keeping with generally acceptable levels of expertise and professional standards of the industry.” Finally, in the CUTPA count, the plaintiffs alleged that the defendant's conduct as the accountant for Stuart, Sr.'s estate was “immoral, oppressive, unscrupulous and caused substantial injury and an ascertainable loss to the [p]laintiffs....”

The defendant moved to strike the complaint on the ground of legal insufficiency, and the court, J.R. Downey, J., granted the motion. The plaintiffs appealed from that judgment, citing Practice Book § 10–41. ¹⁰ This court agreed with the plaintiffs and reversed the judgment and remanded the case with direction to deny the defendant's motion. See Stuart v. Freiberg, 102 Conn.App. 857, 863, 927 A.2d 343 (2007).

On July 23, 2008, the plaintiffs filed an amended complaint, continuing to allege the same four counts. The amended complaint added specific allegations that the defendant regularly prepared reports on behalf of the estate that he presented as...