U.S. Trust Co. v. Bohart

• Citation: 495 A.2d 1034,197 Conn. 34
• Court: Connecticut Supreme Court
• Decision Date: 30 July 1985
• Parties: UNITED STATES TRUST COMPANY v. James T. BOHART, Sr., et al.

Page 1034

495 A.2d 1034

197 Conn. 34

UNITED STATES TRUST COMPANY v. James T. BOHART, Sr., et al.

Supreme Court of Connecticut.

Argued May 7, 1985.

Decided July 30, 1985.

Leo Nevas, Westport, with whom, on the brief, were Laurence Sarezky, Westport, Jamie K. Gerard, Lisa M. Lopez, and Tom James, for appellants (defendants).

Gary A. MacMillan, Stamford, with whom were John F. Spindler, Stamford, and, on the brief, Cynthia C. George, Stamford, for appellee (plaintiff).

Before PETERS, C.J., and HEALEY, SHEA, DANNEHY and STOUGHTON, JJ. PETERS, Chief Justice.

The principal issue raised by this appeal is whether personal jurisdiction was properly exercised over Texas beneficiaries of a trust created by Connecticut residents. The plaintiff United States Trust Company brought suit for approval of its account as trustee for a terminated inter vivos trust. The defendants, minor beneficiaries of that trust and their guardian, ¹ filed a counterclaim in which they sought immediate disbursement of the trust assets and damages for the plaintiff's alleged breach of its fiduciary duties in managing the trust. The trial court held for the plaintiff on both the complaint and the counterclaim, and the defendants appealed. We find no error.

The facts underlying this appeal are not disputed. In 1943, Richard P. and Elsie Ettinger established a trust for the benefit of Jean Prentice Bohart, their granddaughter. Mr. Ettinger was the founder, president and major shareholder of Prentice-Hall, Inc., a publishing corporation, and Prentice-Hall stock was the principal asset of the trust. Mr. Ettinger served as trustee until 1965, when he resigned and appointed the plaintiff, a New York corporation, as successor trustee. ² Under the terms of the trust, Jean Bohart was an income beneficiary until she reached the age of thirty-five. On that date she would have become entitled to one half of the trust principal, and would have retained her income interest in the remaining assets. Upon her death, the trust assets were to be distributed to her issue. Because Jean Bohart died on June 17, 1974, before she had attained the age of thirty-five, the entire trust principal became payable to the minor defendants, her children. On August 20, 1974, the named defendant, Jean's husband, was appointed guardian of their children's estates.

The plaintiff's complaint was filed on April 21, 1975. The case, however, did not come to trial until November, 1982. Meanwhile, on November 14, 1975, the defendants filed a suit in federal district court in Texas, making the same claims raised in their counterclaim. The Texas court dismissed this suit on December 8, 1976, on the ground that the Connecticut court had properly taken jurisdiction of the dispute between the parties. The defendants' appeal of the dismissal to the United States Court of Appeals for the Fifth Circuit was itself dismissed on March 29, 1977, for failure to file a brief.

On July 19, 1978, three-quarters of the principal and accumulated income of the trust was ordered distributed pursuant to the parties' joint stipulation. On May 27, 1983, the trial court accepted the plaintiff's final account for the period ending June 17, 1974, and, with certain disallowances of expenses, accepted the plaintiff's supplemental account for the period ending August 31, 1982. Accordingly, the trial court rendered judgment for the plaintiff on the defendants' counterclaim. ³

The defendants' claims of error fall into three categories. First, the defendants argue that the trial court lacked personal jurisdiction over them. ⁴ Second, the defendants contend that the trial court erred in striking their counterclaim from the jury docket. Third, the defendants challenge numerous findings and rulings of the trial court relating to the merits of their allegations of breach of fiduciary duty. We are persuaded by none of these claims.

I

The defendants base their jurisdictional claim on the due process requirement that a defendant "not present within the territory of the forum ... have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945); see Standard Tallow Corporation v. Jowdy, 190 Conn. 48, 51-52, 459 A.2d 503 (1983). The defendants argue that because they are domiciliaries and residents of Texas ⁵ and because the trust property has at all relevant times been held and administered in New York by a New York corporation, the trial court lacked personal jurisdiction over them. The plaintiff contends that such jurisdiction obtains because the trust agreement was executed by Connecticut residents, and because the jurisdiction of the trial court was invoked in reliance on the nineteenth paragraph of the agreement, which provides: "This Agreement shall be construed and regulated by the laws of the State of Connecticut and the Trustee shall not be required to account in any Court other than one of the Courts of that State."

As we recently explained in Lombard Bros., Inc. v. General Asset Management Co., 190 Conn. 245, 250, 460 A.2d 481 (1983), analysis of a due process challenge to personal jurisdiction is a two-step process. First, we must inquire into the foundation, under state law, of the trial court's assertion of jurisdiction over the defendants. Only if personal jurisdiction has attached under state law do we reach the constitutional question of whether due process is offended thereby. The plaintiff ordinarily bears the burden of establishing an adequate factual basis for personal jurisdiction over a defendant. Standard Tallow Corporation v. Jowdy, supra, 190 Conn. 53-54, 459 A.2d 503. Unlike subject matter jurisdiction, however, personal jurisdiction may be created through consent or waiver. See Insurance Corporation of Ireland v. Compagnie des Bauxites, 456 U.S. 694, 703-704, 102 S.Ct. 2099, 2104-2105, 72 L.Ed.2d 492 (1982); Lake Garda Co. v. Lake Garda Improvement Assn., 156 Conn. 61, 65, 238 A.2d 393 (1968); Reed v. Reincke, 155 Conn. 591, 598-99, 236 A.2d 909 (1967).

A

Our inquiry into the state law basis for jurisdiction over the defendants is guided by the unusual nature of this action. The plaintiff did not seek to establish an affirmative claim against the defendants. Instead, it requested judicial approval of its account as trustee as a preliminary step in the distribution of the trust assets to the defendants. The trial court's exercise of jurisdiction was thus limited to deciding the propriety of the plaintiff's proposed accounting and the defendants' challenge thereto.

The record before us reveals an adequate basis for such a limited assertion of jurisdiction. The Superior Court is vested with the equitable power to approve an inter vivos trust accounting. Preston v. Preston, 102 Conn. 96, 121, 128, A. 292 (1925); Second National Bank of New Haven v. Harris Trust & Savings Bank, 29 Conn.Sup. 275, 288, 283 A.2d 226 (1971). The settlors were residents of Connecticut at the time the trust was created. ⁶ The trust agreement specifically provided that the trust was to be administered pursuant to Connecticut law and that an accounting action would be litigated in Connecticut. The defendants, through their interest in the trust, thus had a significant relation to Connecticut for the purposes of this lawsuit. Cf. 1 Restatement (Second) Conflict of Laws (1971) § 39; 1 Restatement (Second) Judgments (1982) § 5.

In addition, while the defendants have consistently questioned the constitutionality of Connecticut jurisdiction, they have never directly challenged the trial court's state law authority to render judgment. In their brief, the defendants claimed that they had not been properly served with process, but their claim assumed that there was a valid statutory basis for the assertion of jurisdiction. ⁷ The defendants' actions regarding the suit they initiated in Texas further support the conclusion that they waived the issue of the state law basis for jurisdiction. In that suit, the defendants made the same allegations contained in their counterclaim. The Texas court dismissed the action because it found that the Connecticut Superior Court had properly taken jurisdiction over the parties and their dispute. Although the plaintiff did not raise the defense of collateral estoppel below; see Practice Book § 164; ⁸ the defendants' failure to pursue their appeal from the judgment of the Texas court militates against any effort to relitigate the question here. See Baldwin v. Iowa State Travelling Men's Assn., 283 U.S. 522, 51 S.Ct. 517, 75 L.Ed. 1244 (1931); cf. Morabito v. Wachsman, 191 Conn. 92, 96-97, 463 A.2d 593 (1983); Hendrix v. Hendrix, 160 Conn. 98, 104-105, 273 A.2d 890 (1970). The trial court did not err in asserting jurisdiction over the defendants.

B

We now turn to the question of whether this exercise of jurisdiction met with the constitutional requirements of the due process clause. The twin touchstones of due process analysis under the minimum contacts doctrine are foreseeability and fairness. "[T]he foreseeability that is critical to due process analysis ... is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen Corporation v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980). This basic tenet of foreseeability has given rise to the specific corollary that "parties to a contract may agree in advance to submit to the jurisdiction of a given court...." National Rental v. Szukhent, 375 U.S. 311, 315-16, 84 S.Ct. 411, 414, 11 L.Ed.2d 354 (1964). Absent a showing of fraud or overreaching, such forum clauses will be enforced by the courts. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10-12, 92 S.Ct. 1907, 1913-1914, 32 L.Ed.2d 513 (1972). At the same time, jurisdiction...