Opinion
No. CV 03 0483531
December 8, 2004
MEMORANDUM OF DECISION
The plaintiff Anthony Limoncelli and the defendant Prague Limoncelli are siblings. Their father Peter Limoncelli, who was born in 1912, died on July 22, 2003. At issue in this lawsuit are the funds from a deposit trust account set up by Peter Limoncelli "in trust for" Anthony Linoncelli. The defendant claims that her father, prior to his death, authorized her to withdraw the funds and made a gift to her of the money. The plaintiff claims that the defendant misused her fiduciary relationship with the decedent to remove the funds without the decedent's knowledge or consent and convert the funds to her own purposes. This court finds for the plaintiff.
Peter Limoncelli and his wife Nancy resided for many years at 199 Hemingway Avenue, East Haven, CT. Before Nancy died in 1985, the ownership of the house was transferred to Prague. Shortly after Nancy's death, Prague moved in to the Hemingway Avenue residence to help take care of her father. Prague used the upper floors for herself and her family and Peter used the lower floor for his own apartment. Anthony lived elsewhere in New Haven County with his own family, although he kept in contact with his father and sister, and visited his father regularly.
After his wife became ill, in addition to cooperating in the transfer of the Hemingway Avenue house to Prague, Peter Limoncelli arranged his financial affairs so that in the event of his death one of his children would receive any remaining funds in the bank accounts he maintained. Peter Limoncelli had established two joint accounts with his daughter Prague, and one savings account in which he named himself as depositor "in trust for" his son Anthony.
Connecticut law provides for the creation of such a deposit trust account under Conn. Gen. Stat. § 36a-296, which provides:
(a)(1) No bank, Connecticut credit union, or federal credit union shall establish any deposit or share account in which deposits or shares are to be held by one natural person in trust for another natural person unless the depositor provides the bank, Connecticut credit union, or federal credit union with the name and a residential address for the beneficiary, upon establishing the deposit or share account or thereafter at the request of the bank, Connecticut credit union, or federal credit union. The depositor may also provide the bank, Connecticut credit union, or federal credit union with a writing signed by the depositor specifying the terms of the trust under which such deposit or share account is to be held. Unless such writing specifies to the contrary, it shall be conclusively presumed that the depositor intends to create a trust of all funds credited to the deposit or share account from time to time upon the following terms: (A) The depositor during the depositor's life may withdraw, or authorize charges against, such funds; (B) if the depositor survives the named beneficiary, the named beneficiary's death shall terminate the trust and title to the deposit or share account shall thereupon vest in the depositor free and clear of the trust; (C) if the named beneficiary survives the depositor, the depositor's death shall terminate the trust and title to the deposit account or share account, subject to any membership restrictions for Connecticut credit unions or federal credit unions, shall thereupon vest in the named beneficiary free and clear of the trust.
This type of account, often called a Totten trust, is a common estate planning tool recognized in Connecticut law and the law of most other jurisdictions. It allows the creator and depositor of such an account to exercise complete and exclusive control of the account while alive. Upon the depositor's death, provided the beneficiary is still living, the title to the funds remaining in the account vests immediately in the beneficiary. See Manulik v. Devitt, 176 Conn. 663, 668, 410 A.2d 469, 471 (1979).
The name comes from the leading New York case that validated such trusts as tentative trusts "capable of transmitting legal interest in the funds on deposit upon the depositor's death." Matter of Totten, 179 N.Y. 112, 71 N.E. 748 (1904); see Salvio v. Salvio, 186 Conn. 311, 315, 411 A.2d 190 (1982).
It is unclear when, exactly, Peter Limoncelli first established the deposit trust account naming Anthony as beneficiary. Records of First Federal Bank reveal that by July 31, 1991, the account was in existence, #3613000877, denominated as "Peter Limoncelli, in trust for Anthony Limoncelli." The evidence demonstrates that the balance in the account at the end of 1992, was $20,744.10. The depositor Peter Limoncelli conservatively invested the funds in a certificate of deposit paying a modest interest rate, until by March of 2003 the balance in the account, now taken over by Webster Bank, was $30,619.45. There is no dispute in this case that the disputed account was properly set up as a deposit trust account under Conn. Gen. Stat. § 36a-296. Rather the plaintiff and defendant dispute whether the depositor, through his attorney-in-fact, withdrew the funds and donated them to the defendant during the depositor's last few months of life, thus terminating the trust.
Peter Limoncelli suffered from serious congestive heart failure during the year preceding his death on July 22, 2003. On September 18, 2002, accompanied to a lawyer's office by his daughter Prague, Peter Limoncelli executed a General Power of Attorney, designating Prague as his attorney-in-fact.
The power of attorney was actually signed by Peter Limoncelli in an automobile in the parking lot of the law office because of his weakened condition.
Beginning on April 21, 2003, and ending on July 12, 2003, just ten days before her father's death in Connecticut Hospice, Prague Limoncelli used the power of attorney to make four large withdrawals totaling over $30,000, the last of which had the effect of closing the account. Prague Limoncelli converted all of this money to her own use. The question is did the decedent authorize Prague Limoncelli to use the power of attorney in this way, and if she had no express permission to so use it, was she otherwise authorized to withdraw the funds for her own purposes. Of some importance in answering these questions is the answer to a third question: who has the burden of proof in such a dispute? Does the plaintiff have the burden of proving that the holder of the power of attorney, a fiduciary under these circumstances, misused her authority, or does the burden shift to the fiduciary to prove that she has not betrayed her position of trust?
Under Connecticut case law, once the plaintiff produces evidence sufficient to establish the existence of a fiduciary relationship and a set of circumstances that suggests an abuse of that position of trust by the fiduciary, the burden of proving fair dealing shifts to the fiduciary and the standard by which the fiduciary must carry that burden is clear and convincing evidence or its equivalent. Konover Development Corporation v. Zeller, 228 Conn. 206, 229 (1993). The use by the fiduciary of the General Power of Attorney requires that the fiduciary satisfy these requirements in the event of a challenge to her authority in a situation such as this. See Brown v. Villano, 49 Conn.App. 365, 368 (1998).
The defendant argues that it is only the principal with whom the agent has the fiduciary relationship who can mount such a challenge. Prague Limoncelli essentially claims that the plaintiff here has no standing to challenge her actions by way of this lawsuit because he had no vested interest in the funds until after the death of the principal, and the principal did not mount such a challenge during his lifetime. Although this precise issue appears to be one of first impression in Connecticut, respected commentators provide authority for the proposition that the beneficiary of such a trust account does have standing after the death of the depositor to sue for wrongful invasions of the account.
First, the treatise Scott on Trusts provides authority for beneficiary standing in this case. Speaking of Totten trust accounts such as the disputed account in this case, the treatise states:
Where a third person wrongfully withdraws money from the account before the death of the depositor and without his consent, the beneficiary can, after the death of the depositor, maintain a suit against him for the money so withdrawn. The beneficiary had a sufficient interest during the life of the depositor to entitle him to recover the money after the death of the depositor where the trust was not revoked by the depositor.
Fratcher, Scott on Trusts 4th Ed. § 58.4, p. 224, citing Silk v. Silk, 162 Misc. 773, 295 N.Y.S. 517 (1937). See also, Gorfinkle v. First Natl. Bank, 19 App.Div.2d 903, 244 N.Y.S.2d 877 (1963); Hammons v. Eisert, 745 S.W.2d 742 (Mo.App. 1991).
Second, to the extent that the actions of the depositor in creating such an account result in the transmission of a legal interest in the funds on deposit to the beneficiary as of the date of the depositor's death, the right of the beneficiary to sue for wrongful invasion of the account by a third party would seem to be supported by the Restatement (Second) Trusts § 58 (1959).
Third, Connecticut has determined that the interest conveyed through the use of such a trust is sufficiently vested in the beneficiary upon the death of the decedent to defeat the policy favoring a surviving spouse's election to take a share of the estate of a deceased spouse. See Dalia v. Lawrence, 226 Conn. 51, 63-64, 75, 627 A.2d 392, 399-400, 405 (1993). This would indicate that the beneficiary has at least an interest of such a magnitude as to permit the maintenance of an action at law or in equity against one who wrongfully invaded the account during the life of the depositor.
Most compelling, however, is the support lent to the proposition by pure common sense. Assume that a forger or a perfidious bank employee embezzled the funds during the depositor's life, but the theft was not discovered until after the depositor's death. To hold that the intended beneficiary of the account could not sue the embezzler would be absurd and unjust.
With this underlying law as a framework, the court now addresses the facts. The defendant Prague Limoncelli had no authority to invade the trust accounts and convert the money to her own use. The court has no difficulty inferring this fact under either standard of proof that could be applicable in this case: the usual standard of the plaintiff's burden by a preponderence of the evidence of a breach of fiduciary duty, or, here, the defendant's burden of, producing clear and satisfactory proof of her adherence to the proper fiduciary standard.
The court finds that the deceased depositor Peter Limoncelli did not instruct the defendant Prague Limoncelli to withdraw funds for her own use. None of the funds were withdrawn for the benefit of the depositor, such as to pay for his debts or expenses, nor were the funds paid to the defendant for any contractual services. Rather, it appears that the defendant felt entitled to a greater share than her brother of the decedent's estate as compensation for all the years of loving care and service that she had rendered to her father. When it appeared her father was about to die, the defendant seemingly allowed this sense of entitlement to overwhelm her duty to act in consonance with the position conferred on her by her father in naming her his attorney-in-fact. Despite the testimony of the defendant, which this court finds not to be credible, the court finds that the decedent did not indicate any intention to give her the money in the account.
The court further finds that in misusing the power of attorney to invade the trust account and convert the decedent's funds to her own use, the defendant breached her fiduciary duty to her principal. This breach had the effect of completely eliminating the account by the time of the depositor's death, leaving nothing for the beneficiary of the account. The defendant acted outside her authority in withdrawing these funds and must restore all the funds that she withdrew.
The court finds for the plaintiff and against the defendant and awards the plaintiff damages as follows:
1. From the defendant, an award of $30,792.22, composed as follows:
a. Withdrawal of April 21, 2003 $10,000 plus $31.48 in penalties
b. Withdrawal of June 4, 2003 $1,975.00 plus $25.00 in penalties
c. Withdrawal of June 19, 2003 $8000 plus $24.46 in penalties
d. Withdrawal of July 12, 2003 $10,666.28
2. Statutory interest at the rate of $8.44 per day (ten percent simple annual interest on the entire corpus of $30,792, commencing July 13, 2003, for a total as of the date of this judgment (539 days) of $4,549.16.
3. The court imposes a constructive trust over the assets of the defendant in the amount of the sums calculated above.
4. Attorney fees, which the court shall determine at a further hearing to be promptly scheduled.
The attention of the parties is directed to Paranteau v. DeVita, 208 Conn. 515 (1988) regarding the running of the time limit for appeal.
5. Costs, pursuant to a properly submitted bill of costs.
Patty Jenkins Pittman, Judge