Opinion
CV176023588S
08-17-2018
Elizabeth RICHARDS v. Laura Donahue ALLEN, Administrator of the Estate of Charles J. Loria
UNPUBLISHED OPINION
OPINION
Hiller, J.T.R.
This action is an appeal by the plaintiff, Elizabeth Richards, from a decree of the Probate Court rendered on May 10, 2017, in the matter of the Estate of Charles J. Loria. In the underlying matter, the Probate Court authorized the sale of the sole asset of an LLC, of which Loria was the sole member. The principal issue in this appeal concerns whether the defendant, Laura Donahue Allen, the administrator of the estate, properly sold this asset to an interested party, Charles Smith, in lieu of the plaintiff. For the reasons to follow, this court finds for the plaintiff, reverses the decree of the Probate Court approving the sale of the real property, and orders the transfer of Loria’s membership interest to the plaintiff.
The plaintiff also named the following parties as defendants: Marie Loria, Grace Loria, and Charles Smith. Although these defendants are interested parties, their actions are not at issue in this appeal.
I
FACTS & PROCEDURAL HISTORY
After trial, at which the court heard the testimony of both the plaintiff and the defendant and received multiple exhibits, the court finds the following:
The decedent, Dr. Charles J. Loria, died intestate on January 8, 2014, leaving five surviving children who are his heirs at law. At the time of his death, the decedent was the 100 percent member/owner of Westbrook Park Apartments, LLC ("Westbrook") whose sole asset is a thirty-seven-unit apartment complex located at 133 West Street in Seymour, the sale of which is the subject of this appeal. The value of Westbrook’s real estate was appraised at the time of the death of Charles Loria at $2,350,000, and again, on April 19, 2015, at $2,440,000. This same real estate is burdened by a mortgage. Westbrook is organized pursuant to an operating agreement dated November 1, 2002, that contains several provisos for the continuance of the LLC, as well as the passing of the decedent’s membership interest. The plaintiff is the decedent’s oldest child, and was appointed administratix of his estate by the Probate Court for the district of Derby following the decedent’s death. Shortly thereafter, on October 21, 2015, the plaintiff resigned from this role after disputes with other beneficiaries and submitted a final accounting that was approved by the Probate Court. The defendant is an attorney practicing in Derby, and was appointed to replace the plaintiff as administrator on December 16, 2015.
On February 12, 2016, the plaintiff sent an e-mail to the defendant containing an offer to purchase the decedent’s 100 percent interest in Westbrook for $2.1 million dollars without conditions, and proposed a March 1, 2016 closing (Offer # 1). The offer proposed the transfer of the property by way of sale of Westbrook as an entity, via an assignment of the decedent’s membership interest, rather than a direct sale of the real estate. According to the plaintiff, this method of conveyance would carry the following benefits: avoidance of a $300,000 prepayment penalty; avoidance of a broker commission in excess of $195,000; a sale without conditions; an expedited transfer as the mortgage lender had already approved the transfer; the assignment of the membership interest would allow a quick closing and resolution; and, lastly, avoidance of any potential loss both as result of possible rise in interest rates or changes in a volatile real estate market.
The defendant responded to this first offer on February 15, 2016, indicating that she was reviewing the proposal and would get back to the plaintiff as soon as possible. Despite this representation, the defendant neither responded to this offer, nor any of the plaintiff’s subsequent offers.
On February 21, 2016, the plaintiff, having not heard further, wrote the defendant and asked if she was able to consider the proposal and suggested that they discuss the offer during the week. The next day, February 22, 2016. the defendant responded that she wanted to see the court’s ruling on the "accounting and fees" before disposing of assets. When the plaintiff pointed out that the ruling had already issued, and asked to discuss Offer # 1 "tomorrow or Wednesday," the defendant stated she was working on "an analysis of the cash needs of the estate," and that "it may not be until the latter part of next week, but I definitely will speak with you as soon as I can." On March 2, 2016, the plaintiff again asked if they could discuss the offer, but the defendant stated that she would not be in a position to discuss the offer until she better understood the assets and liabilities of the Estate.
Over five weeks later, on April 6, 2016, having not received a response, the plaintiff renewed her offer with additional terms (Offer # 2), and proposed a new closing date of May 15. This second offer proposed to compensate the Estate, in part, by offering releases of two creditors thereby relieving the estate of $82,340 and $35,000 in debt, in lieu of cash payments in equal amounts. The plaintiff concluded with a request for a response from the defendant. On April 11, 2016, the defendant acknowledged receipt of Offer # 2, and indicated that she would get back to the plaintiff as soon as she was able to do so. The defendant never did so.
In September of 2016. the defendant learned that the mortgage holder, Arbor Commercial Funding, LLC, would impose a "pre-payment penalty" in the amount of $298,541.74 if the note was paid before maturity. According to the defendant’s calculations, the prepayment penalty would reduce an offer of a potential third-party purchaser paying $2,350,000- the amount of a subsequent Charles Smith offer to $2,051,458; $48,000 less than the plaintiff’s Offer # 2. The defendant finally analyzed Offer # 2 in October of 2016, and conceded, at trial, that the plaintiff’s offer would not invoke the prepayment penalty.
On July 7, 2016, Charles Smith, who the defendant previously knew through Smith’s business partner, contacted the defendant and requested that she tell the family of his interest in acquiring the property. The defendant never advised the beneficiaries, including the plaintiff, of Smith’s interest.
On October 28, 2017, Smith submitted a letter of intent to buy the real estate owned by the LLC, rather than the LLC itself. The defendant took over a month to consider this offer. She added an "Item 8" to the "Letter of Intent," and drafted an Addendum which required Probate Court approval. The addendum specifically provided that the defendant would "make application to the [Probate] Court and pursue the same with diligence." Smith countersigned the Addendum acknowledging that the sale was contingent upon approval of the Probate Court, and that if the defendant was "unable to obtain the approval of the [Probate] Court within 45 days" of the signing of a purchase and sale agreement, Smith could terminate the Agreement. The Letter of Intent and Addendum were not fully executed until November 28, 2016, when they were signed by the defendant.
The defendant failed to advise any of the five beneficiaries of Smith’s October 28 offer, and could offer no justification for failing to do so. Her comparison of the six-month-old Offer # 2 against the Smith offer showed that Offer # 2 provided a greater return to the Estate. The defendant did not contact the plaintiff in light Smith’s offer to see if the plaintiff wished to increase her offer. Conversely, during and after this period, the defendant gave Smith prompt and ample information on which to base a bid, while largely avoiding any requests by the plaintiff for similar information.
On December 23, 2016, the defendant and Smith signed a purchase and sale agreement that described the conditions on which the real estate would be transferred. Subsequently, on January 23, 2017, they added a one-page signed addendum. This purchase and sale agreement provided a number of conditions that could terminate the sale of the property. These conditions included: (a) a financing contingency which provided that if Smith did not obtain a written commitment from Arbor within forty-five days from January 23, 2017, stating that Arbor would agree that he could assume the existing mortgage, then either party could terminate the agreement; (b) an inspection and due diligence provision that allowed Smith to inspect the property and permitted him to cancel the agreement within thirty days of signing "in his sole discretion"; (c) a probate court approval provision requiring the Probate Court to approve the sale of the property within forty-five days or either party could terminate.
As of the date of this appeal, neither party has exercised their rights to cancel this agreement.
On January 31, 2017, the defendant submitted the Smith offer to the Probate Court, and mailed copies of the offer to the beneficiaries and their counsel. The defendant had not given the beneficiaries any prior notice of the Smith offer. When the plaintiff received her copy of the Smith offer on February 7, 2017, she had yet to hear from the defendant regarding any of her previous offers, made nearly a year before.
On February 14, 2017, upon learning of the Smith offer, the plaintiff issued a counteroffer (Offer # 3) via email for $2,355,000, which exceeded the gross purchase price of Smith’s offer by $5,000. On February 15, 2017, the plaintiff, having received no response from the defendant regarding Offer # 3, filed an objection to the Smith sale with the Probate Court, along with a copy of her Offer # 3. The plaintiff raised a number of criticisms of the defendant’s handling of the matter, and emphasized the merits of her offer over Smith’s offer. She concluded with a request that the Smith offer be denied.
On that same date, the Probate Court held a hearing on the proposed sale. The court did not act on the application for sale, nor the objection, but was aware of the two competing offers. The plaintiff’s Offer # 3 was part of the court file, appended to her objection. The Probate Court directed the defendant to meet with the two parties and obtain the best offer. She never did so.
One week later, on February 22, 2017, the plaintiff submitted a formal offer (Offer # 4) to the defendant that mirrored the terms in her e-mail containing Offer # 3. The offer was signed by the plaintiff and the co-offeror Ray Richards with a signature line for the defendant to accept the terms. The defendant neither signed the agreement nor responded to this latest offer.
On April 5, 2017, the Probate Court held a second hearing on the offer to sell. As of that date, the plaintiff s Offers # 3 and # 4 remained the highest. The Probate Court did not act on the offers, but again requested that the defendant spend time trying to get the best offer from the two parties. The defendant disregarded the Probate Court’s instruction and never contacted the plaintiff to see if these were her best offers.
On April 20, 2017, the defendant received an offer from Smith to increase the purchase price to $2,400,000 on the same terms contained in the purchase and sale agreement. The defendant signed this offer without disclosing it to the beneficiaries or seeking their consent.
On May 3, 2017, unaware of the latest Smith offer, the plaintiff made a new offer that reiterated her previous purchase price of $2,355,000 (Offer # 5), included a bank check for $100,000, as well as a letter explaining the benefits of her offer. These advantages included: (1) an overall higher dollar amount than the previous Smith offer the plaintiff was aware of; (2) an effective deposit of $250,000; (3) a conveyance to the plaintiff would relieve the estate of liabilities, including the Arbor Mortgage, along with the legal obligation and cost of winding up Westbrook; (4) the plaintiff’s offer was for a higher amount than the Smith Offer due to the avoidance of the pre-payment penalty, conveyance taxes, and costs for winding up Westbrook; (5) the contract provided for payment in five days; (6) there was no due diligence, inspection, or financing contingency; and (7) the transfer in ownership of Westbrook was a significantly simpler process than to purchase its sole asset, which involved closing costs and other considerations. This offer was never responded to.
The defendant did not advise the plaintiff about the amended Smith offer until the early morning of May 8, 2017, two days before the final probate hearing. Despite her previous representations and the directions of the Probate Court, the defendant never responded to, nor discussed, with the plaintiff any of her multiple prior offers. The defendant did not provide a copy of the Smith offer to any of the beneficiaries, but did bring the offer with her to the May 10, 2017 hearing.
On May 8, 2017, after the plaintiff was informed that hers was no longer the higher offer, she indicated that she would again outbid Smith. Subsequently, on May 9, 2017, the day before the hearing, the plaintiff followed through with another higher offer of $2,405,000 (Offer # 6). Because her previous requests and correspondence had seemingly been ignored, the plaintiff filed this offer with the Probate Court the same day. Thus, Smith’s offer of $2,400,000, and the plaintiff’s offers of $2,405,000 and $2,355,000 were all before the Probate Court.
The Probate Court confirmed the sale to Smith on May 10, 2017, from which the plaintiff appealed. The plaintiff filed her complaint with this court on June 9, 2017. The defendant filed her answer on January 10, 2018. The parties filed pre-trial briefs on March 19, 2018. A trial before the court was held on March 22, 2018. Subsequently, the parties filed proposed statements of fact on April 2, 2018. The plaintiff and defendant filed post-trial briefs on April 2, 2018, and March 27, 2018, respectively. Subsequently, on June 22, 2018, upon the request of the court, the parties briefed issues regarding the procedural propriety of the sale in light of the property at issue being solely owned by Westbrook, a separate legal entity from the decedent’s estate, and whether Westbrook’s operating agreement affected these matters.
II
DISCUSSION
"[A]n appeal from a probate order or decree to the Superior Court is not a civil cause of action. It has no more of the ordinary attributes of a civil action than the original proceedings in the court of probate ... [A]ppeals from probate are not civil actions because it has always been held that the Superior Court, while hearing appeals from probate, sits as a court of probate and not as a constitutional court of general or common-law jurisdiction. It tries the questions presented to it de novo, but in so doing it is ... exercising a special and limited jurisdiction conferred on it by the statute authorizing appeals from probate." (Internal quotation marks omitted.) In re Probate Appeal of Cadle Co., 152 Conn.App. 427, 439-40, 100 A.3d 30 (2014).
The court notes that there is no dispute that the plaintiff is an aggrieved person able to bring suit. "Any person aggrieved by any order, denial or decree of a probate Court in any matter may ... appeal therefrom to the Superior Court." General Statutes § 45a-186(a). The Supreme Court has held that "[w]hile one who bids upon the property of an estate offered for sale has no interest in the property itself, he does have an interest in the proceedings employed by the court to approve the sale. It may be that a party appealing from an order of a probate court often has an interest in the estate itself, as a distributee or a creditor." Merrimac Associates, Inc. v. Disesa, 180 Conn. 511, 517-18, 429 A.2d 967 (1980). The plaintiff is an heir of the Estate, and, therefore, has an "interest in the proceedings employed by the court." Moreover, as noted by the plaintiff, she also has an interest in seeing that the property of the Estate be administered promptly, equitably, and properly.
"In a probate appeal, the Superior Court cannot consider events that occurred after the Probate Court hearing ... The appeal brings to the Superior Court only the order appealed from. The order remains intact until modified by a judgment of the Superior Court after a hearing de novo on the issues presented for review by the reasons of appeal ... The Superior Court may not consider or adjudicate issues beyond the scope of those proper for determination by the order or decree attacked ... Inasmuch as the motion for the appeal is made in the Court of Probate and forms a part of the proceedings in that court, no amendment to it may be made in the Superior Court. The Superior Court, therefore, cannot enlarge the scope of the appeal." (Citations omitted; emphasis in original; internal quotation marks omitted.) Id., 439.
"The function of the Superior Court in appeals from a Probate Court is to take jurisdiction of the order or decree appealed from and to try that issue de novo ... Thereafter, upon consideration of all evidence presented on the appeal which would have been admissible in the [P]robate [C]ourt, the [S]uperior [C]ourt should exercise the same power of judgment which the [P]robate [C]ourt possessed and decide the appeal as an original proposition unfettered by, and ignoring, the result reached in the [P]robate [C]ourt ... An appeal from probate does not vacate the decree appealed from nor does it lift the entire cause from the probate court into the superior court. On the contrary, it leaves the entire matter as it was in the probate court, there to be continued with and completed according to law, presenting in the meanwhile to the superior court for redetermination, after a retrial of the facts, the special and limited issues embraced within the particular decree appealed from ... [I]n probate appeals, a Superior Court may admit any evidence that was received by the Probate Court or could have been received by it ... The converse of this rule is that the Superior Court may not receive evidence that the Probate Court could not have received because it came into existence subsequent to the Probate Court hearing ." (Citations omitted; emphasis in original; internal quotation marks omitted.) Id., 439-40.
In this appeal, this court must resolve two major issues: (1) whether the sale of the real estate was procedurally proper, insofar as it is owned by Westbrook, a separate legal entity with its own rules and procedures, rather than the decedent, proper; and (2) which of the offers was in the best interest of the Estate. The court will address each of these issues in turn.
A
Procedural Propriety of the Sale
After trial, the court, sua sponte, raised several issues regarding the procedural propriety of the sale including: whether Westbrook’s real estate was in the decedent’s estate; the administrator’s authority vis-a-vis Westbrook; and, whether Wesbrook’s operating agreement impacted the proposed sale of the real estate, its sole asset. Both parties briefed these issues thoroughly.
The court’s inquiry as to these issues stemmed from concerns that the real property was not part of the estate, and, in light of this, whether Westbrook’s operating agreement presented any restrictions on the transfer of the real property. One of the issues the court requested the parties brief was what LLC statutory scheme applied to determine these issues. The statutory schemes at issue are Chapters 613 and 613a, the latter repealed the former effective July 1, 2017. The plaintiff contends that the differences between the schemes are not material, and the defendant essentially concurs. The court is less sanguine on this issue, but finds the savings clause of the new act dispositive of this question. General Statutes § 34-243w provides that the repeal of Chapter 613 by Chapter 613a shall not affect: "(1) The operation of the statute or any action taken under it before its repeal; (2) any ratification, right, remedy, privilege, obligation or liability acquired, accrued or incurred under the statute before its repeal; (3) any violation of the statute, or any penalty, forfeiture or punishment incurred. because of the violation, before its repeal; or (4) any proceeding, reorganization or dissolution commenced under the statute before its repeal, and the proceeding, reorganization or dissolution may be completed in accordance with the statute as if it had not been repealed." Therefore, because the Probate Court proceeding was conducted under the previous statutory scheme and Westbrook’s operating agreement specifically references the same, the court concludes that Chapter 613 applies to this appeal.
It is the plaintiff’s position that the transfer of the Westbrook property was procedurally improper because the real property is owned by Westbrook, not the decedent, and, thus, the only asset pertaining to Westbrook that is in the decedent’s estate is his membership interest. The plaintiff also argues that the defendant could only act, with regard to the LLC, as provided by Westbrook’s operating agreement, which provided that Westbrook was intended to survive the death of its sole member. The plaintiff contends that the sale of the real estate to Smith improperly terminated Westbrook, but that the transfer of the decedent’s membership interest would be proper under the operating agreement.
Conversely, the defendant contends that the sale was proper because, as administrator, she stood in the shoes of the decedent-member with the right to control and administer real estate owned by Westbrook. As to the operating agreement, the defendant asserts that it does not materially impact her actions, because, as acting sole member, she can both dissolve the company and amend the operating agreement as necessary. Thus, the defendant contends, the decree and her actions are procedurally acceptable.
This court begins with a review of the applicable legal principles. An Estate is defined as "the sum total of the property formerly owned by the decedent which, after his death, remains subject to administration and distribution." (Internal quotation marks omitted.) Clayman v. Prochaska, 2 Conn.App. 430, 437, 479 A.2d 1214 (1984). Real property owned by an LLC, however, is "property of the limited liability company and not of the members individually. A member has no interest in specific limited liability company property." General Statutes § 34-167(a). Instead, all that a member retains is their membership interest which is "a member’s share of the profits and losses of the limited liability company and a member’s right to receive distributions of the limited liability company’s assets, unless otherwise provided in the operating agreement." General Statutes § 34-101(13). This membership interest "is personal property." General Statutes § 34-169. Ordinarily, then, real property owned by an LLC would not be part of a member’s estate.
An administrator of a member’s estate, however, is not without authority as to the property of an LLC or the assignment of a member’s interest. General Statutes § 34-173(a) provides that " if a member who is an individual dies ... the member’s ... administrator ... may exercise all of the member’s rights for the purpose of settling the member’s estate or administering the member’s property, including any power the member had under the articles of organization or an operating agreement to give an assignment of the right to become a member ..." Furthermore, "if a limited liability company has only one member and an event of dissociation occurs ... the legal representative or other successor in interest may, at the election of such legal representative or other successor in interest, become a member." General Statutes § 34-173(b). Under this statutory scheme, a member, and seemingly, by extension, an administrator, can transfer property held in the name of an LLC. See General Statutes § 34-168. Moreover, a member can assign his membership interest; General Statutes § 34-170; and, if an LLC has only one member, the assignor can give the assignee the right to become a member. General Statutes § 34-172(a)(3)
These rights, however, are subject to limitation and modification by an LLC’s operating agreement. Indeed, the LLC act, Chapter 613, only "provides a set of default rules governing [LLCs] which organizers and members can elect to modify at their discretion through the company’s operating agreement." (Footnote omitted.) 418 Meadow Street Associates, LLC v. Clean Air Partners, LLC, 304 Conn. 820, 834, 43 A.3d 607 (2012). "[The statutory scheme controls and provides for the default method of operation unless the organizers or members of the limited liability company contract, through the operating agreement, for another method of operation. Indeed this is one of the foundational principles of the law governing limited liability companies." (Footnote omitted.) Id., 837. See General Statutes § 34-242(a) ("It is the policy of sections 34-100 to 34-242, inclusive, to give maximum effect to the principle of freedom of contract and to enforcement of limited liability company agreements"). Thus, members may elect whether, and to what extent, they are controlled by the LLC Act. Id. See Voll v. Dunn, Superior Court, judicial district of Waterbury, Complex Litigation Docket, Docket No. X10-CV-126018520-S (November 10, 2014, Dooley, J.) (LLC act only applies to extent not pre-empted by operating agreement).
In light of these principles, Westbrook’s operating agreement warrants consideration and review. Operating agreements are construed in accordance with the guiding maxims of contract interpretation. See Ocsai v. Exit 88 Hotel, LLC, 127 Conn.App. 731, 17 A.3d 83 (2011); Radding v. Freedom Choice Mortgage, LLC, 76 Conn.App. 366, 820 A.2d 317 (2003). "When construing a contract, we seek to determine the intent of the parties from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction ... [T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words and ... the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract ... When only one interpretation of a contract is possible, the court need not look outside the four corners of the contract ... The contract must be viewed in its entirety, with each provision read in light of the other provisions ... and every provision must be given effect if it is possible to do so." (Internal quotation marks omitted.) McTiernan v. McTiernan, 164 Conn.App. 805, 821-22, 138 A.3d 935 (2016).
The plaintiff and defendant through joint motion moved for the operating agreement to be introduced into the record on June 14, 2018, which was granted by the court on June 29, 2018. The court notes that "[i]t is firmly established that in probate appeals, a Superior Court may admit any evidence that was received by the probate court or could have been received by it." Bishop v. Bordonaro, 20 Conn.App. 58, 64, 563 A.2d 1049 (1989). Thus, this document, which indisputably existed prior to the probate appeal, can properly be considered.
Upon review, Westbrook’s operating agreement provides several notable provisos as to the LLC’s termination, distribution, and liquidation, as well as a mechanism for the succession of a member’s interest upon their death.
The operating agreement, dated November 15, 2002, indicates that Westbrook was formed under the Connecticut Liability Company Act by the filing of the articles of organization with the Secretary of State on November 12, 2002, and its stated business is to "acquire, own and dispose of real estate." Section 1.3(a). Notably, the agreement expands the nature of a membership interest, beyond a mere financial interest, to include ownership. See Article II ("interest" defined as "the entire ownership interest of such Member in the Company ..."). The existence of the LLC was intended to be continuous, as the operating agreement provides "[t]he company shall not be dissolved by the incapacity of any Member or the Transfer by any Member of its Interest." Article IX, Section 9.3 Nevertheless, dissolution of Westbrook is permissible under the operating agreement. Pursuant to Section 9.5, dissolution is only to occur by affirmative vote by each member; or if a court decrees dissolution pursuant to General Statutes § 34-207. Upon dissolution of Westbrook, the members or a liquidating agent shall wind up its affairs and liquidate its assets. Section 9.5(b). This liquidator is empowered to effectuate the liquidation and termination of the LLC. Section 9.5(c). Westbrook’s assets are then to be distributed in the following order: to pay costs and expenses in liquidation and termination; to creditors of the Company in order of priority provided by law; to Members for loans, if any, to the company; and lastly to Members in proportion to their respective Capital Account Balances. Section 9.6. Section 9.8 provides that "[t]he Company shall terminate when all property owned by the Company shall have been disposed of and the assets shall have been distributed as provided in Section 9.6. The Liquidator shall then execute and cause to be filed Articles of Dissolution of the Company."
The operating agreement also provides a procedure to be followed in the event of a member’s incapacity, which is defined as "the bankruptcy, insolvency, death, resignation, expulsion, adjudication of incompetence or insanity; dissolution or termination or any other event described in Section 34-180 of the Act, as the case may be, of such Person." Article II. This procedure is found in Article IX, § 9.4 of the operating agreement which provides that "[t]he incapacity of a member shall terminate such Member’s membership in the company. Upon a Member’s incapacity, the Company has the right of first refusal and may purchase the Incapacitated Members’ Interest in the company at a discount of thirty three percent ... of the Member’s Interest at the time of such incapacity, if the company, with the unanimous vote of the Non-Incapacitated Members, so decides. If the individual non-incapacitated Members cannot or will not purchase the Interest of the Incapacitated Member, then the Incapacitated Member’s interest in the company shall pass, with no discount, to such Member’s heirs and/or assigns."
This court finds that, in the present case, the defendant terminated Westbrook while constrained from doing so, and, thus, the sale of Westbrook’s asset was procedurally improper. Instead, Westbrook’s operating agreement required the defendant sell the decedent’s membership interest.
The real property was separate and apart from the estate, as it was owned by Westbrook, a separate legal entity from the decedent. See § 34-167(a) (property owned by LLC is not owned by individual members). While, a member can transfer property under the LLC act; § 34-168; these powers are limited by Westbrook’s operating agreement. See 418 Meadow Street Associates, LLC v. Clean Air Partners, LLC, supra, 304 Conn. 834 (operating agreement can modify LLC Act rules). Specifically, the operating agreement provides that "[t]he Company shall terminate when all property owned by the Company shall have been disposed of and the assets shall have been distributed as provided in Section 9.6" (Emphasis added.) Article IX, Section 9.8. Because the disposal of the company’s assets is a termination under the operating agreement, the attempted transfer of Westbrook’s sole asset needed to comply with the provisions of the operating agreement providing for its dissolution, liquidation, and termination. To properly dispose of the property, the defendant needed to vote to dissolve under § 9.5(a), and then act as or appoint a liquidator, to sell the assets and control the liquidation process. The defendant failed to follow these procedures.
In coming to this conclusion, the court construes the operating agreement so as to give effect to every provision, to the furthest extent possible. See McTiernan v. McTiernan, supra, 164 Conn.App. 822.
Furthermore, the court concludes that based on the terms of the operating agreement that a transfer of the decedent’s membership interest was required. First, the operating agreement provides that Westbrook was meant to be continued. See Article IX, § 9.3 ("[t]he company shall not be dissolved by the incapacity of any Member or the Transfer by any Member of its interest"). As administrator, the defendant should have given this provision a significant degree of deference in exercising "the member’s rights for the purpose of settling the member’s estate." General Statutes § 34-173(a). Second, the operating agreement provides that the plaintiff, and other heirs, have a right of first refusal to the decedent’s membership interest. Specifically, Article IX, § 9.4 provides that "[t]he incapacity of a member shall terminate such Member’s membership in the company . Upon a Member’s Incapacity ... [i]f the individual Non-Incapacitated Members cannot or will not purchase the Interest of the Incapacitated Member, then the Incapacitated Member’s interest in the company shall pass, with no discount, to such Member’s heirs and/or assigns ."(Emphasis added.) This court finds that this provision limits the power of the defendant because the decedent’s membership terminated upon his incapacity, and, as no other members exist to purchase the interest, the defendant was required to ensure that it pass to an heir who wishes to purchase it, i.e., the plaintiff.
In light of the foregoing, the court concludes that the sale of the real estate to Smith was procedurally improper. The court now turns to a review of the merits of the various offers.
B
Merits of the Offers
The plaintiff claims that this court should revoke the sale of the real estate to Smith, and instead order the sale of the decedent’s membership interest to the plaintiff because her offer was objectively better. The plaintiff asserts that her offer was better as it resulted in higher net proceeds to the Estate, removed liabilities as well as potential administrative costs, and closed sooner. As a matter of procedure the plaintiff claims that her offer is properly before this court because it was submitted to the probate court; the probate court had the authority to dispose of the membership interest; and on appeal the Superior Court can convey an estate asset according to the better of two competing offers.
The defendant argues that the plaintiff’s offer was not materially better, and the order of sale should stand. The defendant contends that the only remedy this court offer is to affirm or reverse the decree of the probate court; it cannot mandate the sale of the decedent’s membership interest to the plaintiff as such offer was not formally brought by the administrator as required by statute. Even considering the merits of the offer, the defendant asserts, the plaintiff’s offer was not significantly or materially more attractive.
It has been held that "[b]efore a sale can be ordered, the court must find that it is in the best interests of the parties in interest ... if the sale is to be private, the court must also find that the price and terms of the sale are in the best interests of the estate ... The issues being statutory, the burden is on the proponent, in this case the administrator, to establish in the Probate Court, and in the Superior Court, on appeal, the statutory predicate for the court’s order ... The burden remains the same on appeal whether the proponent is the appellant or the appellee and whether or not the opponent, as appellant, asserts in her reasons of appeal the negative of the statutory issue or issues ... If the proponent seeks a private sale, then he must prove that the price and terms of such sale are in the best interests of the estate, even in the absence of a specific claim to the contrary in the reasons for appeal." (Citations omitted; footnotes omitted; internal quotation marks omitted.) Satti v. Rago, 186 Conn. 360, 365-67, 441 A.2d 615 (1982). "The power of the Probate Court to order the sale of such property is special and statutory and the authority must be strictly followed, otherwise the order of sale will be void." Id., 365.
Additionally, the court notes that the defendant, as administrator, bears an additional burden as a fiduciary. Specifically, an administrator owes fiduciary duties to an estate’s heirs when they decide to sell assets. See, e.g., Satti v. Rago, supra, 186 Conn. 367 (defendant-administrator owed plaintiff "a duty of equity and fair dealing in respect to any transaction of mutual concern"); Geremia v. Geremia, 159 Conn.App. 751, 783, 125 A.3d 539 (2015) ("the administrator or executor, as the designated fiduciary of the estate, is the representative of all beneficiaries" [footnote omitted; internal quotation marks omitted] ); Aksomitas v. Aksomitas, 205 Conn. 93, 99, 529 A.2d 1314 (1987).
In view of these principles, the Probate Court, and the Superior Court on appeal, has the authority to choose the best of two competing offers, and must do so based upon the best interests of the estate. See, e.g., Paradise v. Gambardella, 24 Conn.App. 582, 585, 590 A.2d 978, cert. denied, 219 Conn. 912, 593 A.2d 135 (1991) ("[t]he Probate Court did not abuse its discretion in authorizing a private sale of the property for the amount of the highest sealed bid and in approving that sale upon reasonable terms in the best interests of the estate"); Bishop v. Bordonaro, 20 Conn.App. 58, 60, 563 A.2d 1049 (1989) (sale to highest bidder was in best interest of the estate); Balfour v. Balfour, Superior Court, judicial district of Hartford, Docket No. CV03-0826406-S (January 27, 2004, Beach, J.) (36 Conn.L.Rtpr. 440, 441) (approving sale to different party on basis that "the offer exceeds the fair market value [of the property] by $10,000 and contains no constructing conditions or reductions").
In the present case, the court finds the plaintiff’s Offer # 6 was the best offer as of the May 10, 2017 hearing, and in the best interests of the estate to accept. At trial, the defendant as a witness, even conceded the following advantages of the plaintiff’s offer: (1) the overall price of the plaintiff’s offer was $5,000 higher than the Smith offer; (2) the plaintiff’s offer was accompanied by a bank check for $100,000 and releases for $149,772 of Estate indebtedness, which was more than 10 percent of her purchase price, by contrast the Smith offer put up only $23,500 less than 1 percent earnest money; (3) the plaintiff’s offer had no contingencies that would delay closing; (4) the plaintiff’s offer would close within five days of approval and would provide the estate with over $760,000 which would be available to pay creditors, cover administrative expenses and make distributions; (5) the plaintiff proposed to buy the LLC membership interest and not simply its assets, which would rid the estate of both known and unknown liabilities; (6) the plaintiff’s offer would avoid time, expense, and reduction of assets associated with winding up Westbrook; (7) the plaintiff’s offer would avoid closing costs and repayment of Arbor’s out of pocket expenses, as well as closing costs on the real estate transfer including conveyance taxes totaling $24,000; and, (8) because the estate agreed to allow one of the beneficiaries. Marie Loria, to continue to live at the premises with the Estate assuming the cost of her occupancy, the mere conveyance of Westbrook makes this arrangement more tenable. The court concludes that the plaintiff’s Offer # 6 was the best offer on all terms. Not only was the offer for a higher purchase price; see Paradiso v. Gambardella, supra, 24 Conn.App. 585; it also came contingency free; see Balfour v. Balfour, supra, 36 Conn.L.Rptr. 441. Moreover, as noted in Part IIA of this memorandum of decision, a transfer of the decedent’s membership interest would comply with Westbrook’s operating agreement, and provide the plaintiff with ownership of the LLC. Accordingly, accepting the plaintiff’s offer was in the best interest of the estate, and the defendant, in accepting this offer, should have transferred the decedent’s membership interest to the plaintiff, which would allow her to both own and manage Westbrook.
Furthermore, the plaintiff’s Offer # 6 is best in light of the duties a fiduciary owes to the beneficiaries of the estate. The defendant’s conduct raises several concerns regarding her interaction with the plaintiff, a beneficiary. The plaintiff made multiple offers to the defendant, all of which were ignored without justification. The defendant concealed Smith’s interest in the property from the beneficiaries, and did not inform them of his ultimate offer in a timely manner. The defendant also seemingly ignored the direction of the Probate Court to seek the best offer she could, and provided information to Smith on which he could base a bid, while largely ignoring any similar requests from the plaintiff. These failures, both to disclose an offer, and to seek an increased offer from a clearly interested beneficiary, were deliberate, inexplicable, and contrary to the obligations of a fiduciary administrator to obtain the best possible terms for the Estate when selling an asset. See generally Aksomitas v. Aksomitas, supra, 205 Conn. 99; Geremia v. Geremia, supra, 159 Conn.App. 783. Accordingly, the court concludes that, in prioritizing the Smith offer to the complete exclusion of the plaintiff the defendant failed to fully comply with her duties as a fiduciary. The procedural impropriety of these acts, noted in part II A of this memorandum of decision, further bolster this conclusion. In the court’s view, these failures place the plaintiff’s offer in an even more favorable light.
Nevertheless, the defendant contends that the relief requested from the plaintiff, the sale of the membership interest as opposed to the real property, cannot be afforded to the plaintiff. In so arguing, the defendant asserts that the plaintiff’s offer was not made upon the written application of the administrator, as required by General Statutes § 45a-164(a). Thus, the defendant contends the only relief this court could afford is to void the sale. The court disagrees. The plaintiff’s offer is properly before the court, and this court can afford the plaintiff’s requested relief.
As noted previously, the plaintiff’s offer was filed with the Probate Court before the hearing approving the sale to Smith, and the plaintiff’s appeal specifically requests that "this Court rescind and revoke approval of the Smith Offer and approve and direct the sale by the Administrator of Westbrook, LLC pursuant to the Plaintiff’s Offer and provide such other and further relief as the Court deems just and equitable." No motion to strike the plaintiff’s petition or claim for relief has been filed. The plaintiff requests a transfer of the decedent’s membership interest, which, as noted previously, is personal property. The sale of personal property is not required to be on the application of the administrator, and instead its sale may be ordered "at any time" if the Probate Court finds it to be in the best interest of the estate. See General Statutes 45a-162. Moreover, there is no meaningful difference between the sale of real property; General Statutes 45a-164(a); and the sale of personal property; General Statutes 45a-162; for purposes of appeal. See Price v. Sheffield, 158 Conn. 286, 292-93, 259 A.2d 621 (1969). Accordingly, the court concludes that the plaintiff’s offer is properly before it, and that the conveyance of the decedent’s membership interest is in the best interest of the estate.
Moreover, to the extent it is required, the court exercises its equitable powers in granting the plaintiff’s requested relief. "The situation ... in which the Probate Court may exercise equitable jurisdiction must be one which arises within the framework of a matter already before it, and wherein the application of equity is but a necessary step in the direction of the final determination of the entire matter." Palmer v. Hartford National Bank & Trust Co., 160 Conn. 415, 429, 279 A.2d 726 (1971). The court finds that remanding the matter merely voiding the sale, as posited by the defendant, is an untenable solution, particularly in light of the fiduciary issues raised by the court. Accordingly, the court exercises its equitable powers to void the sale to Smith, and direct the sale of the decedent’s interest to the plaintiff.
III
CONCLUSION
In light of the foregoing, the court sustains the plaintiff’s appeal and orders the following:
1. The plaintiff’s offer is found to be in the best interest of the estate, in light of both the procedural issues concerning its status as an asset owned by Westbrook, as well as the substantive merits of the offer, as compared to Smith’s offer.
2. The decree of sale of the Probate Court approving the Smith offer is rescinded and revoked.
3. The court approves, and directs the administrator to accept the plaintiff’s offer and awards ownership of the membership interest of Westbrook to the plaintiff on the terms stated in Offer # 6.
SO ORDERED.