Opinion
X07HHDCV166075231S
04-03-2018
Joseph Stefan RODOWICZ, Jr. v. Deborah Y. BERNARD
UNPUBLISHED OPINION
OPINION
Moukawsher, J.
This is at least the fourth decision in a family feud over a trust set up to care for the Rodowicz family matriarch, Alma Rodowicz. Feeding the feud is rent coming from a nursing home. This rent is the only trust income. It is used to care for Alma Rodowicz. One family faction controls the nursing home and the other- following a coup d’etat- captured control of the trust. Now those affiliated with the nursing home want the court to remove the successful coup plotters.
The coup worked like this: Alma Roclowicz named two trustees in her trust document: her son Joseph Rodowicz, Sr. and her daughter Deborah Bernard. The trust instrument said that if either of them needed to be replaced they first had to be replaced by Alma’s son Carter Rodowicz, but in the event that Carter Rodowicz was already serving as a trustee then Joseph Rodowicz, Sr. had to be replaced by Alma’s grandson Curtis Rodowicz.
Curtis Rodowicz is an owner of the nursing home and Joseph Rodowicz, Sr. and his son Joseph Rodowicz, Jr. have supported his work personally and financially. Deborah Bernard and her brother Carter Rodowicz never liked the idea of the trust and resented Curtis and the others controlling the nursing home. The evidence showed that Deborah Bernard in particular wanted to dismantle the trust and reorganize Alma’s affairs more to her liking. But in Carter and Deborah’s way lay both Rodowicz, Sr. and Curtis Rodowicz.
Seizing on the relatively gentle disposition of Rodowicz, Sr., Deborah and Carter Rodowicz convinced him to agree to amending the trust to add Carter as a third trustee- in the spirit of family harmony. Since he knowingly- if foolishly- agreed, this court earlier held the amendment was legal. It was, in any case, Rodowicz, Sr.’s undoing. With a majority of 2 to 1, Deborah and Carter promptly unseated Joseph Rodowicz, Sr. and disqualified Curtis Rodowicz as a successor trustee- the former substantially for moving trust money before they could seize it and the latter for alleged breaches of trust that they claimed happened, puzzlingly enough, before he even became a trustee.
At issue is whether these two trustees and their anointed third- Carter’s wife Nadine- should now be removed for their own fiduciary breaches. At their feet, Rodowicz, Sr. and his son Rodowicz, Jr.- a successor beneficiary of the trust- laid several charges of breach of fiduciary duty.
The basic and most credible charge is that the energy and resources of the trust are now being used to carry on the feud instead of focusing on preserving its assets and protecting its primary beneficiary. Carter Rodowicz and Deborah Bernard certainly took power for themselves and then excluded their rivals. These two said they did it because their rivals Rodowicz, Sr. and Curtis Rodowicz were unfit. But at best, Rodowicz, Sr. was guilty of the same thing they were trying to do- seeking to control trust assets to keep a rival faction from controlling them. And the absurd claim that Curtis Rodowicz violated a trust duty before he had one does nothing more than fully expose this already thinly veiled machination for what it was: a power grab by a rival faction.
The two parties traded allegations of wrongdoing. But most importantly, the current fiduciaries really say very little about what’s best for Alma Rodowicz. They only echo and re-echo the claim that their rivals are bad for Alma so they may keep going about the business of frustrating them at every turn.
This focus is hardly consistent with Judge Benjamin N. Cardozo’s resounding lines on the sanctity of the trust duty in Meinhard v. Salmon : " [a] trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior."
249 N.Y. 458, 464 (1928).
Repeated instances show Carter Rodowicz and Deborah Bernard falling well below " the punctilio of an honor." Carter and Deborah first purported to oust Rodowicz, Sr. in 2012 by a simple vote of the two of them- an action they apparently realized was illegal under the trust terms. Four years later, to shore things up, Deborah Bernard sought with Carter’s support to effectively become Alma Rodowicz.
In the face of fierce opposition from Rodowicz, Jr., Deborah Bernard applied to become conservator of Alma’s person and estate. The probate judge granted her request but explicitly told Bernard on the record not to deal with the trust: the court said that she was only appointed to oversee non-trust issues and assets. But Bernard, withholding this information from her own lawyer, relied on the judge’s mistakenly-broad probate decree and promptly declared that she had used Alma’s power under the trust instrument to oust Rodowicz, Sr. as trustee. Bernard’s appointment was subsequently overturned by this court because the Probate Court’s limiting words didn’t match its unlimited decree.
With the trust in their hands, Carter Rodowicz and Deborah Bernard appointed Carter’s wife Nadine as the third trustee. They then began running up debts from the trust to themselves, specifically and most substantially to Carter Rodowicz who began billing the trust for his work as a trustee, his travel, etc. He claimed that he didn’t take all the money he billed, but these thousands of dollars in uncollected sums against the backdrop of all the evidence were really attempts to build up the trust’s obligations so that, if any one would get the money represented by the bills, it would be Carter, not his rivals.
More important than these debt-building maneuvers, the new trustees also promptly went to war with the goose that laid the trust’s golden eggs: the nursing home (Colonial Health & Rehabilitation Center of Plainfield). This was the entity that paid the rent to a trustee-controlled limited partnership (Village Manor Associates, LP) that paid it to the trust set up for Alma. They did so not for any legitimate reason associated with Alma or the trust’s interests in general. At best, they claimed that Joseph Rodowicz, Sr. had been manipulating the trust in favor of the nursing home, so they apparently thought this would justify them in manipulating the trust against the nursing home. Whatever it was, this had nothing to do with Alma. It was done because the nursing home was controlled by Curtis Rodowicz with the support of Rodowicz, Sr. and Rodowicz, Jr.
Carter Rodowicz and Bernard’s biggest assault on the nursing home was to block its attempt to exercise a written and unambiguous option to buy the nursing home property for $5.5 million. This was, of course, a substantial sum. It would have provided liquid assets to the trust and thus resources independent of the nursing home’s success that could be used to support Alma and successor beneficiaries. The trustees, acting indirectly through the real estate company, threw obstacles in the path of the sale, falsely claiming the seller had no money to cover closing costs when the accounts they had access to clearly show they did and falsely claiming that aspects of this litigation dispute made it impossible to proceed- even though the nursing home offered to escrow any disputed amounts. This left the real estate company that was the gateway to the trust (control over which was also disputed) losing an arbitration hearing to the nursing home that was subsequently upheld by Judge Cole-Chu of this court. The arbitrator ordered the company to pay nearly $8,000 in fees, which diminished the realty company and thereby diminished the trust that was its sole reason for existing.
Colonial Health & Rehabilitation Center of Plainfield, LLC v. Village Manor Associates, LP, Superior Court, judicial district of Windham, Docket No. CV 17 6011990 (February 2, 2018, Cole-Chu, J.).
Because the nursing home rights were clear and its exercise of those rights would have yielded a substantial sum to the trust, injuring this relationship and dishonoring the obligations to the nursing home were directly in conflict with the trust’s interests and were simply part of a personal feud. And lest there be any doubt, the depths and character of this feud are amply documented by emails and conversations between the parties where they trade allegations about family betrayal, personal hurts, and grudges from the past. None of this evidence shows the trustees engaged in the dispassionate protection of their beneficiary their positions warranted.
In particular, there was no support for the trustees’ claims that dishonoring the option could somehow lead to greater gains for the trust. The evidence shows that the trust assets were strained and being reduced by the trustees’ stratagems and spoils. It shows that over the years the nursing home industry has been highly volatile and that this nursing home in particular was bankrupted under the management of another family member not part of this litigation. There was every reason to steady the boat, but Carter Rodowicz and Deborah Bernard governed themselves instead by their desire to throw rival family members overboard.
Indeed, the battle with the nursing home only got worse. Another row erupted over certain reserve accounts holding hundreds of thousands of dollars and controlled by Carter Rodowicz and Deborah Bernard. Ultimately, the nursing home was forced to file its own lawsuit, paying the rent into court and making it more difficult to use for Alma.
Taking all of the evidence into account and the credibility of the witnesses, the court does not believe the trustees’ explanations that they were merely trying to protect Alma from the deprivations of their rival faction. While there is evidence that Rodowicz, Sr. was an ally of the nursing home owners, working together with the trust’s sole source of income isn’t necessarily bad. There is no evidence that he improperly gave the nursing home any money or otherwise disadvantaged the trust. He was simply more cooperative in helping the nursing home help itself with HUD. More importantly, going to war with the nursing home can hardly be deemed in the trust’s interest. It only cost it money when the trustees’ obstructions were proved in the arbitration to be wrong.
It should be noted that a lot of what Carter Rodowicz and Deborah Bernard did was through the entities affiliated with the LPs and LLCs that were set up to own and manage assets, especially Village Manor Associates. Despite any niceties about their technical status as separate organizations, it is undisputed that they were set up merely to create a framework satisfactory to serving the needs of the trust and qualifying its money-source, the nursing home, for HUD financing. This explains the overlapping leadership and the overlapping dispute about leadership. There is no doubt, for instance, that Village Manor Associates- the realty owner- exists only to hold the real estate, collect the rent and pass it on to the trust. Therefore, if it matters, Carter Rodowicz and Deborah Bernard may claim to have occasionally acted in a legal capacity at various points for the limited partnership not the trust directly, but plainly they were acting through this instrumentality in their capacity as trustees and for no independent purpose. The limited partnership simply had no independent purpose.
So was what they did bad enough to remove them? If we take seriously what Judge Cardozo said about trust duties this court cannot conclude these trustees have fulfilled them. And if this were a testamentary trust, General Statutes § 45a-242 would allow their removal for grounds including discord among co-trustees, unfitness or persistent ineffectiveness. The trust itself also allows removal for serious breach of trust or reckless behavior. And in 1987 our Supreme Court in Ramsdell v. Union Trust Co. held that persisting conflicts of interest merit the removal of a trustee.
Whatever is to be done, our High Court in 1979 in Jackson v. Conland said that removing a trustee is committed to the sound discretion of the trial court. This gives the court plenty of latitude, but it is not to say that this discretion is infinite. The court is well aware of the cautionary note struck by Ramsdell and similar cases that the decision mustn’t be taken lightly.
But here the reign of these trustees has been insidious from the start. It was conceived in sibling rivalry, consummated by the sin of deception, and followed by a train of betrayals of their beneficiary for the principal purpose of running down their familial rivals. That the trustees, particularly Bernard, were hostile to the very purpose of the trust while spending trust money on themselves and their feud, means that if they were left unfettered, the trust would likely end. This is particularly so since they have so far frustrated the large infusion of cash that would come from the exercise of the nursing home option and become available to aid the ailing Alma. There is clear and convincing evidence that these trustees pose a threat to the continued existence of the trust, that they favored self-interests that conflicted with those of the trust, and that have recklessly and wrongly attacked the very relationship on which the trust income depended.
They also blatantly ignored the trust terms to serve their own ends- probably by removing Joseph Rodowicz, Sr. as a trustee- but certainly by ignoring the trust mandate to fill his vacancy with Curtis Rodowicz. Disqualifying Curtis Rodowicz as a trustee had everything to do with who he was and nothing to do with what he had done. He hadn’t even become a trustee when they declared him to be in breach of his trust obligations.
Because they have repeatedly breached their fiduciary duties and would doubtless continue to do so, Deborah Bernard and Carter Rodowicz are removed as trustees under the Alma Rodowicz Irrevocable Trust Dated October 24, 2012. Because appointing Nadine Rodowicz to fill the trustee vacancy left by Joseph Rodowicz, Sr. violated the trust terms, that appointment is void and she is declared not to hold and never to have held the office of trustee under this trust.
The court will hear proposals for successor trustees on April 27, 2018 at 9:30 a.m. It notes that Joseph Rodowicz, Sr. has agreed not to seek reinstatement as a trustee and that the plaintiffs in both cases have agreed to the principle that a neutral trustee be appointed.
Until the hearing, Deborah Bernard and Carter Rodowicz are to act under the court’s supervision as temporary trustees to carry out the minimal ordinary business of the trust until successors- temporary or otherwise- may be named at the hearing. They are enjoined from moving or expending any sum in excess of $2,500 without permission of the court.