Wolfel v. Wolfel
| Decision Date | 18 April 2023 |
| Docket Number | AC 44316 |
| Parties | KENNETH G. WOLFEL, JR., ET AL. v. LAWRENCE C. WOLFEL |
| Court | Connecticut Court of Appeals |
Argued January 31, 2023
Procedural History
Appeal from the decree of the Probate Court for the district of Newington holding that the plaintiffs breached their fiduciary duties as trustees of a trust and ordering them to reimburse the defendant for his share of certain trust assets, brought to the Superior Court in the judicial district of New Britain and tried to the court, Hon. Joseph M. Shortall, judge trial referee; judgment reversing in part the Probate Court's decree, from which the plaintiffs appealed to this court thereafter, Richard J. Margenot, the successor administrator of the Estate of Lawrence C. Wolfel, was substituted as the defendant. Affirmed.
Michael P. Kaelin, for the appellants (plaintiffs).
Terence J. Gallagher, with whom, on the brief, was Patrick L. Poeschl for the appellee (substitute defendant).
Prescott, Cradle and Suarez, Js.
This action stems from a dispute between three brothers, Kenneth G. Wolfel, Jr. (Kenneth), Rodney J. Wolfel (Rodney), and Lawrence C. Wolfel (Lawrence),[1] regarding their respective shares in assets set aside in the Wolfel Family Trust (trust), which was created by their mother, Vera Wolfel. The plaintiffs, Kenneth and Rodney, appeal from the judgment of the Superior Court affirming in part and reversing in part the decree of the Probate Court holding that they, as cotrustees of the trust, violated their fiduciary duties and ordering them to reimburse Lawrence, the defendant, for his equal share of the trust assets. On appeal, the plaintiffs claim that the Superior Court (1) exceeded its authority by addressing issues that they did not raise in their appeal from the decree of the Probate Court, and (2) erroneously found that Kenneth failed to prove that he had paid $552,271 into the trust to reimburse it for distributions made to him for his personal benefit. We disagree and, accordingly, affirm the judgment of the Superior Court.
The following facts, as set forth by the Superior Court in its memorandum of decision, and procedural history are relevant to our resolution of this appeal. In December, 2000, Vera Wolfel established the trust for the equal benefit of her three sons, Kenneth, Rodney and Lawrence. All three sons were beneficiaries of the trust, and Kenneth and Rodney were the named trustees of the trust.[2]
Pursuant to the terms of the trust, the plaintiffs, as trustees, were authorized to "pay or apply all or any part of the net income and principal" to or for the benefit of Vera Wolfel's descendants "for any such eligible beneficiary's maintenance in health and reasonable comfort, complete education (including preparatory, college, postgraduate and professional training), or support in any such eligible beneficiary's accustomed manner of living . . . ." Although the plaintiffs were afforded extensive "[management [p]owers," the trust conferred the authority to make discretionary distributions to an independent trustee, which was defined in the trust as a trustee who is "not a current eligible income beneficiary of [the] trust" or a descendant of Vera Wolfel. Although the plaintiffs were empowered to appoint an independent trustee, they never did.
The trust was to continue until the death of Vera Wolfel, at which time it was to terminate, and the plaintiffs were to divide any assets in the trust into "separate shares, per stirpes, with respect to [her] then living descendants . . . ." When Vera Wolfel died on December 24, 2011, her "then living descendants" were her three sons. The plaintiffs were to hold their respective shares and the defendant's share in three separate trusts, and apply the net income and principal for the benefit of the beneficiary of each trust for his "maintenance in health and reasonable comfort, complete education (including preparatory, college, postgraduate and professional training), or support in any such eligible beneficiary's accustomed manner of living . . . ." These separate trusts were never created and the plaintiffs continued to administer the single trust as they had before Vera Wolfel's death.
On March 31, 2014, the Probate Court granted a petition for an accounting of the trust filed by the defendant, and ordered the plaintiffs to file an accounting of their activities as trustees of the trust, from December 19, 2000, to September, 2014. On December 31, 2014, the plaintiffs filed a revised accounting.[3] On November 2, 2015, following a hearing on the plaintiffs' accounting, the Probate Court issued a decree, finding, inter alia, that the accounting filed by the plaintiffs was substantially deficient and that they had violated their fiduciary duties as trustees "as they used the trust assets to fund their own personal business endeavors and interests . . . ." The Probate Court found that the plaintiffs had submitted no evidence supporting their claims that Kenneth had reimbursed the trust in the amount of $552,271 or that Rodney had reimbursed the trust in the amount of $789,795.95, for the distributions made to them in violation of the terms of the trust because they were not approved and made by an independent trustee. The Probate Court determined that each beneficiary was entitled to $1,153,783.22, as his equal share of the trust assets, but that Lawrence had received only $647,766.55.[4] Accordingly, the Probate Court concluded that Lawrence had been underpaid $506,016.67 of his equal share of the trust assets and ordered the plaintiffs to pay Lawrence the $137,136.13 balance of the trust funds and an additional amount of $368,880.54.
On December 2, 2015, the plaintiffs filed an appeal of the decree of the Probate Court with the Superior Court, alleging that, by way of reimbursement to the trust, Kenneth returned at least $552,271 to the trust and Rodney returned at least $789,795 to the trust; they did not make any unauthorized or improper payments from the trust; they were entitled to fees for the duties they performed as trustees; the defendant was not entitled to a payment in the amount of $506,016.67 from the trust; the defendant was not entitled to any payments from their personal assets; and that the Probate Court did not have the legal authority or jurisdiction to order them to make any payments from their personal assets.
On September 17, 2020, following a trial de novo, the Superior Court issued a memorandum of decision in which it found, inter alia, that the plaintiffs breached their fiduciary duties by violating the trust's explicit direction to divide the assets into three separate trusts following the death of Vera Wolfel, thereby allowing them to "continue having access to the entire corpus in existence at that time for the purpose of financing their own personal and business interests"; failing to appoint an independent trustee; and engaging in "self-dealing transactions, including undocumented and unsecured loans' to support their personal and commercial interests, without participation by an independent trustee and without regard to their effect on the financial health of the trust or [the defendant's] interest as a beneficiary." The Superior Court concluded that the plaintiffs "treated the trust as a deep well into which they could dip their bucket of financial wants whenever it suited them." The court found that Rodney made payments into the trust accounts sufficient to cure most of the self-dealing distributions made from the trust for his personal benefit but that Kenneth failed to make payments to the trust sufficient to cure more than a small portion of the self-dealing distributions made to him from the trust. The Superior Court concluded that the three beneficiaries had shared unequally in the trust assets and entered orders to equalize their shares. The Superior Court also ordered that the trust be terminated. This appeal followed.
The plaintiffs first claim that the Superior Court exceeded its authority by addressing issues that they did not raise in their appeal from the decree of the Probate Court. Specifically, the plaintiffs argue that, instead of "limiting its decision to whether the Probate Court correctly decided [that the] plaintiffs failed to prove that Kenneth deposited $552,271 into the trust and that Rodney deposited $789,795.95 into the trust, and correctly ordered the plaintiffs to pay [the defendant] $137,136.13 from the assets of the trust and $368,880.54 from the plaintiffs' personal assets, the Superior Court performed its own calculations of how much [the plaintiffs] deposited into the trust, and then decided to 'equalize' the payments from the trust and to 'terminate' the trust when no party requested this relief in the pleadings in the Superior Court." According to the plaintiffs, "[t]his clearly exceeded the Superior Court's statutory authority as a matter of law."[5] We disagree.
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