Conveyance of Trusts Assets Must Abide by the Clear and Unambiguous Terms of the Trust Instrument

Gabriele v. Williams, KNLCV096001373S, 2011 WL 2480535 (Conn. Super. Ct. May 26, 2011)

In a case before the Superior Court of Connecticut in relation to the conveyance of trusts, a daughter, in her capacity as the conservator of her mother’s estate, petitioned the court to determine the rights of the family members to undeveloped land and to quiet title to the contested property.  In her answer to the complaint, the mother requested that the court declare her trust terminated and declare her the sole title owner of the contested real estate.  The court quieted title to the property in the trust and declared the attempted revocation of the trust to be null and void.

In 1992, at the age of 68, the mother established a nominee trust to assist with estate planning for approximately 170 acres of undeveloped land that she owned.  On the same date that the trust was established, the mother conveyed her interest in the property to the trust, excepting a two acre lot with her residence. Keeping the land in the family and undeveloped as long as possible was a priority for the mother and, together with estate tax planning, were motivating reasons for establishing the trust.  She named herself as the trustee and a beneficiary of the trust, and named her daughter and her daughter’s two sons as additional beneficiaries. All three additional beneficiaries agreed with her philosophy of keeping the land intact and undeveloped.  The trust contained two provisions that limited the trustee’s powers to deal with the trust property except as directed by all beneficiaries.  It also required that any amendments be signed by all the beneficiaries.  An agreement was later provided to clarify the administrative provisions of the trust, stating that if the beneficiaries differed in opinion as to the directions that should be given to the trustee, a majority vote by beneficial interest would control.  From 1992 to 1998, the mother made a series of gifts of percentages of interest in the trust to her daughter and to her daughter’s two sons.  According to the percentage in the final schedule of beneficial interests dated 1998, the mother owned approximately 49-percent, the daughter owned approximately 21-percent, and the two grandsons each owned approximately 15-percent.  The trust, the property conveyance and the later agreement were all recorded in the town land records in a timely fashion.

At the age of 80, the mother began to have medical and cognitive difficulties.  She was diagnosed with breast cancer.  During a brief hospital stay in April, a neurologist also diagnosed her with mild dementia.  Her primary doctor re-examined the mother and diagnosed her with “senile dementia with depression, Alzheimer type.”  Because of the mother’s ill health and the conflict her care was causing between family members, the town probate judge petitioned for an involuntary conservatorship of the mother.  The daughter later requested that the petition for conservatorship be withdrawn because the hearings were causing her mother obvious distress.  The acting judge withdrew the petition without making a finding of the mother’s capacity.

While the conservatorship hearings were in process, a family member who was not a beneficiary of the 1992 trust arranged for a new attorney to get involved with the mother’s affairs.  The new attorney prepared a deed for the mother to sign as trustee purporting to convey all trust assets from the trust to herself individually.  The attorney prepared a revocation of trust for the mother’s signature.  The family attorney who wrote the trust and who represented the mother for many years was not consulted in any of the transactions.  None of the beneficiaries of the 1992 trust were consulted or involved in the decision making process to convey the sole trust asset to the mother individually nor did they consent to the conveyance.  When the family attorney learned of the deed and the attempted revocation, he prepared an affidavit and had it recorded in the town land records.

The mother was formally declared incompetent through temporary conservatorship.  A permanent involuntary conservatorship of the person and estate followed, and was still in effect at the time of the instant case.

In order to render judgment in a quiet title action, Connecticut courts are permitted to determine the construction of instruments that are the sources of contested title. Conn. Gen. Stat. § 47-31(f). The instant case required the court to examine four documents: the 1992 trust instrument, the 1998 final schedule of beneficial interests, the 2004 deed conveying the trust asset to the mother individually, and the 2004 revocation of trust.  The construction of a trust instrument presents a question of law to be determined in the light of facts.  According to Connecticut case law, a court’s role is to determine the meaning of what the grantor stated in the trust instrument and to not speculate upon what the grantor meant to state in the instrument. Connecticut Bank & Trust Co. v. Lyman, 148 Conn. 273, 278-79, 170 A.2d 130 (1961).  Expressed intent must control the court’s interpretation of the instrument.  In determining the intent of the grantor, the words used in the trust instrument are to be interpreted in their ordinary sense and all the provisions must be construed together. Tremaine v. Tremaine, 235 Conn. 45, 61, 663 A.2d 387 (1995).  Therefore, the plain language of the trust instrument itself, rather than extrinsic evidence of actual intent, is determinative of the grantors’ intent. Heffernan v. Freedman, 177 Conn. 476, 481, 418 A.2d 895 (1979).

The 1992 trust instrument contained clear and unambiguous language that the trustee had no power to deal in or deal with the estate except as directed by all beneficiaries.  At the time of the attempted conveyance of the contested property from the trust back to the mother individually, the trust had four beneficiaries.  Three beneficiaries neither knew of nor agreed to the conveyance.  Therefore, the court found that the attempted conveyance in 2004 was a violation of the trust document, and declared the conveyance to be void for that reason.  Furthermore, any attempted transfer of the trust estate back to the grantor by deed or revocation without compliance with the clear and unequivocal terms of the trust constitutes a breach of the grantor’s fiduciary duty to the beneficiaries.  The mother, in her capacity as trustee, was a fiduciary within the definition of Connecticut law, Conn. Gen. Stat. § 45a-199, and could not personally benefit from the trust.  Therefore, the court declared the both conveyance and revocation were void due to the mother’s breach of fiduciary duty resulting from her violation of the terms of the trust agreement and her intention for personal benefit.

The court additionally determined that the mother lacked the necessary capacity to execute the 2004 documents due to her mental condition.  The mental capacity to make a deed is defined as whether, at the time of executing the deed, the person possessed understanding sufficient to comprehend the nature, extent and consequences of the deed.  Both the doctor who attended to the mother during a brief hospital stay and the mother’s primary doctor had diagnosed her with mild dementia in relatively close proximity to the attempted transactions.  Additionally, the mother was not able to remember and understand the trust she created in 1992 and the gifts she had granted subsequent to its creation.  These two factors taken together supported the court’s determination that the 2004 attempted conveyance of the contested property from the trust and the attempted revocation of the trust was null and void.

Even if the conveyance and revocation were otherwise effective, the court declared these transactions to be null and void because the family member involved in bringing them about did so through the exercise of undue influence. A deed procured by undue influence is voidable regardless of whether the undue influence was exerted by the grantee or another individual. Fritz v. Mazurek, 156 Conn. 555 (1968). Connecticut case law sets out four elements necessary for a finding of undue influence:  (1) a person who is subject to influence, (2) an opportunity to exert undue influence, (3) a disposition to exert undue influence, and (4) a result indicating undue influence. Dinan v. Marchand, 279 Conn. 558, 560, fn.1 (2006).  As evidence of these elements, the court cited the affidavit of the town probate judge who initiated the involuntary conservatorship proceedings to protect the mother from the family member.  The affidavit described the family member’s intention to change the mother’s trust and will to benefit him, as well as the steps that he took to keep the mother isolated and locked in the house.  The family member selected a new attorney, failed to contact the family’s regular attorney and attended all the conferences the new attorney held with his mother.  The changes that would result from the conveyance and revocation would solely benefit the family member involved.  Based on this evidence, taken together with other facts of the case, the court found the elements of undue influence satisfied and the two instruments to be null and void on this basis.

Because the trial court declared the 2004 property conveyance and revocation of trust to be null and void on several bases, the court determined that title to the contested property remained vested in the 1992 trust. Furthermore, the court clarified that the beneficiaries of the trust and the proportions of their interests are as described in the schedule of beneficial interests signed by the mother in 1998.

Should you have any questions relating to trusts, real estate and other personal asset protection issues, please do not hesitate to contact managing partner Attorney Joseph Maya, at JMaya@Mayalaw.com or at 203-221-3100.