Opinion
LLICV126007694S
01-27-2016
Village Mortgage Company v. James Veneziano
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE THE PLAINTIFF'S MOTION FOR RECONSIDERATION (#231)
HON. JOHN D. MOORE, J.
The plaintiff filed an amended motion for reconsideration (#231), a Practice Book § 11-11 motion, on January 12, 2016. The same day, the court ordered argument on this motion (#231.10). Argument took place on January 13, 2016. Although the plaintiff did not convince the court to change the substance of its holding on the two issues presented, the court, for the reasons set forth below, will file a second amended memorandum of decision.
While aware of a possible duplication of text in this memorandum and in the second amended memorandum of decision, the court will, in order to highlight for the parties the areas in which the court has edited the second amended memorandum of decision, include in this memorandum similar language.
DISCUSSION
The plaintiff asked the court to reconsider its decision in two particulars. The plaintiff requested the court to reconsider its holding that the doctrine of fraudulent concealment did not operate to toll the statute of limitations. The plaintiff also asked the court to reconsider footnote 3. The court will separately review and respond to each of these issues. First, however, the court will set forth the factual scenarios in which a motion for reargument or reconsideration is properly before the court.
REARGUMENT OR RECONSIDERATION
" [R]eargument is proper when intended to demonstrate to the court that there is some . . . principle of law which would have a controlling effect, and which has been overlooked . . ." (Internal quotation marks omitted.) Stein v. Horton, 99 Conn.App. 477, 488, 914 A.2d 606 (2007). Reargument is also appropriate when " there has been a misapprehension of facts." (Internal quotation marks omitted.) Opoku v. Grant, 63 Conn.App. 686, 692, 778 A.2d 981 (2001). " Reargument may be used to address alleged inconsistencies in the trial court's memorandum of decision as well as claims of law that the [movant] claimed were not addressed by the court . . . [A] motion to reargue [however] is not to be used as an opportunity to have a second bite of the apple or to present additional cases or briefs which could have been presented at the time of the original argument." (Internal quotation marks omitted.) Carriage House I-Enfield Ass'n, Inc. v. Johnston, 160 Conn.App. 226, 237, 124 A.3d 952 (2015). " 'Newly discovered evidence may warrant reconsideration of a court's decision. However, [for evidence to be newly discovered, it must be of such a nature that [it] could not have been earlier discovered by the exercise of due diligence.' . . . Durkin Village Plainville, LLC v. Cunningham, 97 Conn.App. 640, 656, 905 A.2d 1256 (2006)." JP Morgan Chase Bank, N.A. v. Eldon, 144 Conn.App. 260, 277, 73 A.3d 757 (court properly declined to consider evidence that was within the plaintiff's possession at the time of the challenged ruling), cert. denied, 310 Conn. 935, 79 A.3d 889 (2013). Further, " [t]he court has inherent jurisdiction to correct at any time any scrivener's or mathematical error made by the court in rendering its Memorandum of Decision without the need for a motion to be filed by any party. This type of clerical error can be corrected by the court at any time beyond four months. Milazzo v. Schwartz, 88 Conn.App. 592, 597, 871 A.2d 1040 (2005); Blake v. Blake, 211 Conn. 485, 495, 560 A.2d 396 (1989); Fannie Mae v. Dicioccio, 51 Conn.App. 343, 345, 721 A.2d 569 (1998)." Klein v. Bratt, Superior Court, judicial district of Stamford-Norwalk, Docket No. CV-05-5000502-S, (February 18, 2011, Tierney, J.T.R.).
FRAUDULENT CONCEALMENT
In its post-trial brief, the plaintiff had argued that the doctrine of fraudulent concealment, as set forth in General Statutes § 52-595, operated to toll the statute of limitations. The court disagreed. The court held in its memorandum of decision that the doctrine of fraudulent concealment did not operate to toll the statute of limitations. The court found that fraudulent concealment must be proven by the enhanced standard of clear, precise, and unequivocal evidence, that the defendant did not conceal his defalcations from the plaintiff and that knowledge to the plaintiff's chief executive officer (CEO) and to its bookkeeper constituted knowledge to the plaintiff.
During the argument of this motion, the plaintiff contended that the court had misapplied the law to the facts found in the case. The plaintiff argued that the defendant had concealed the " level and extent" of his withdrawals and that the plaintiff did not know, until its chief financial officer's (CFO) extensive investigation, the " nature and extent" of the defendant's concealment. Hearing, January 13, 2016. In both its brief and in argument, drawing upon several examples found by the court of the defendant deliberately hiding his illicit withdrawals, the plaintiff argued that the defendant had fraudulently concealed his wrongdoing, which was not discovered until the CFO's 2014 investigation, and that such fraudulent concealment should have operated to toll the statute of limitations until such time. The plaintiff further argued that the plaintiff's president and CEO was not aware of the status or extent of the loans that had been taken by the defendant and that any limited knowledge that the plaintiff's president and CEO had of the defendant's defalcations could not be imputed to the plaintiff to the extent that the court found that its president and CEO was also improperly receiving funds from the company under the adverse interest exception. Reider v. Arthur Andersen, LLP, 47 Conn.Supp. 202, 208-19, 784 A.2d 464 (2001). Although the court will amend its memorandum of decision to reflect some of the points made by the plaintiff, the court does not agree that the statute of limitations has been tolled by the defendant's fraudulent concealment.
Section 52-595 provides that " [i]f any person, liable to an action by another, fraudulently conceals from him the existence of the cause of such action, such cause of action shall be deemed to accrue against such person so liable therefore at the time when the person entitled to sue thereon first discovers its existence." In deciding whether § 52-595 applies to toll the statute of limitations, the court must first decide whether the defendant fraudulently hid the existence of the cause of such action, and not, as the plaintiff argues, the nature and extent of such a cause of action, from the plaintiff. In so deciding, the court must find that the defendant (1) had actual awareness of the facts necessary to establish the plaintiff's cause of action, (2) intentionally concealed these facts from the plaintiff, and (3) concealed these facts for the purpose of causing the plaintiff to delay in its filing of a complaint on such an action. Iacurci v. Sax, 313 Conn. 786, 799-800, 99 A.3d 1145 (2014). In most cases, the party asserting the fraudulent concealment must prove these elements by " clear, precise and unequivocal evidence" as opposed to a preponderance of the evidence. Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, 281 Conn. 84, 105, 912 A.2d 1019 (2007). The plaintiff argues, however, that in cases involving a fiduciary, the burden shifts to the defendant to disprove that he fraudulently concealed the existence of a cause of action. The plaintiff may have a point, although our Supreme Court has stated that such a burden shift " would be matter of first impression for this court." Iacurci v. Sax, supra, 793 n.9.
The court acknowledges that it found, as facts, numerous examples of the defendant trying to camouflage, conceal, and even cover up inappropriate withdrawals of company funds. The plaintiff cited many of these examples in its brief. Under any burden of proof, however, and even if the burden of proof were to be shifted to the defendant to disprove fraudulent concealment, the court finds that the defendant openly and notoriously took company money, and therefore, could not have fraudulently concealed his wrongdoing.
Although the defendant may have hidden the mechanisms of some improper transactions, he otherwise transparently treated company funds as his own. In this regard, the defendant's attitude toward company funds throughout his tenure with the plaintiff is summed up succinctly in his trial testimony: " When I need some of my monies, I would withdraw." Transcript, May 14, 2015, 34:5-6. This attitude, to put it mildly, is not the attitude of a person trying to fraudulently conceal his intentions. A person evincing such an attitude is not a person trying to bury a secret.
Even assuming, arguendo, that the plaintiff is correct in arguing that the knowledge of the plaintiff's president and CEO of the defendant's wrongdoing could not be imputed to the plaintiff because of the adverse inference exception, the company, in the persons of two bookkeepers, had knowledge of the defendant's misuse of company funds long before the CFO's 2014 investigation.
For example, Linda Kerr, a bookkeeper of the plaintiff from 2003 to 2005, testified that the defendant would publicly, in front of other employees, ask her to give him checks to buy and sell coins at large coin shows. The plaintiff's business did not include the purchase and sale of coins.
Another bookkeeper was well aware of the actions of the defendant long before 2014. Alesia Warner, the plaintiff's bookkeeper from August 2007 through January 2009, took issue with the defendant concerning bookkeeping entries that he wanted her to make, including advances to officers. She testified that she felt so concerned about these entries that she would never sign any financials for the plaintiff because she " wasn't comfortable with what was being done." Transcript, May 28, 2015, 148:23.
The plaintiff's motion has impelled the court to find additional facts which are reflected in the most recent amended memorandum of decision of even date with this decision. The court had previously found that the defendant " lacked the computer and technological skills to support his work in a modern financial services company." Amended memorandum of decision, December 31, 2015, 15. The court further finds that, after the plaintiff began to use QuickBooks to track its financial information in 2004, the defendant relied upon others in the plaintiff's financial department to input the defendant's handwritten ledger sheets and financial notes into the QuickBooks system. Therefore, when one reviews exhibit 27, one realizes that financial employees of the plaintiff input various inappropriate withdrawals of the defendant's dating from 2004 through October 16, 2009, the date on which the court held and still holds that the statute of limitations cut off the plaintiff's claims. For example, contained within exhibit 27's categories 1120 Advances to Officers and J-1120, Advances to James Veneziano, are numerous entries within this time period input by the plaintiff's financial employees of charges that pertain to personal credit cards of the defendant and his various coin purchases. Additionally, category 6004 of exhibit 27 reflects entries input by the plaintiff's financial employees during this time period of the defendant's withdrawals for personal, as opposed to company-approved automobile expenses. Further, category 6010 of exhibit 27 reflects commissions paid to the defendant during this period notwithstanding the fact that the defendant, in his position, was not entitled to collect any commissions. Finally, category 6010, Financial Charges, of exhibit 27 sets forth payments made, during this time period, on behalf of the defendant for personal, as opposed to company, credit cards, and for non-approved automobile expenses.
In reviewing the nature and extent of these entries, the inescapable conclusion is that, while financial employees of the company were placing these entries onto QuickBooks, they knew that the defendant was taking unauthorized withdrawals from the company, treating, as he put it, the company's funds as " my monies." Transcript, May 14, 2015, 34:6.
While the " nature and extent of an agent's authority is a question of fact for the trier, " E. Udolf, Inc. v. Aetna Casualty & Surety Co., 214 Conn. 741, 749, 573 A.2d 1211 (1990), " notice to, or knowledge of, an agent acting within the scope of his authority and in reference to a matter over which his authority extends, is notice to, or knowledge of, the principal . . . [and] a principal is affected by the knowledge of an agent concerning a matter as to which . . . it is his duty to give the principal information." (Citations omitted; internal quotation marks omitted.) Id., 746. Moreover, when " an agent acting within the scope of his authority obtains knowledge of a fact relevant to the transaction in which he is engaged, ordinarily that knowledge is imputed to his principal." Reardon v. Mutual Life Ins. Co. of New York, 138 Conn. 510, 516, 86 A.2d 570 (1952). Our Supreme Court has upheld a trial court finding that a bookkeeper who was responsible for " running the bookkeeping operation . . . had a responsibility to report to [the principal] any misappropriations that occurred in that department." E. Udolf, Inc. v. Aetna Casualty & Surety Co., supra, 749.
Our Supreme Court has held that public activity such as that described in these preceding paragraphs has sufficed to defeat a claim of fraudulent concealment. When the " defendants replaced a defective pipe in full view of one of the plaintiffs, and left the defective part on the plaintiffs' property . . . the 'intensely public nature' of these repairs 'cannot reasonably be construed as evidentiary of an intent to conceal the problems with the [septic system] and thus to delay the plaintiffs' discovery of their cause of action." Bartone v. Robert L. Day Co., 232 Conn. 527, 536, 656 A.2d 221 (1995); see also Bound Brook Ass'n v. Norwalk, 198 Conn. 660, 669, 504 A.2d 1047 (repiling of a home's foundation was " intensely public" and defeated a claim of fraudulent concealment), cert. denied, 479 U.S. 819, 107 S.Ct. 81, 93 L.Ed.2d 36 (1986).
Under our law and the facts of the present case, the court finds that knowledge of the bookkeepers and other financial employees of the defendant's defalcations is imputed to the plaintiff corporation. Although the court believes that this finding was implicit in the previous iteration of its memorandum of decision, the court will, prompted by this motion, make this finding explicit in the second amended memorandum of decision, of even date with this decision.
Therefore, the court declines the plaintiff's invitation to change its conclusion that the defendant's alleged fraudulent concealment of his wrongdoing tolled the applicable statute of limitations.
The parties should note that in the second amended memorandum of decision, the relevant footnote is footnote 4. For consistency with the plaintiff's arguments, in this order the court will continue to refer to it as footnote 3.
In its post-trial brief, the plaintiff also asks the court to modify or redact footnote 3 of the amended memorandum of decision. The plaintiff, in its initial motion for reconsideration (#230) stated that the footnote had harmed or prejudiced the plaintiff corporation in a conclusory manner, but failed to supply any support for this position. Instead, the plaintiff focused on the purported harm to the plaintiff's president and CEO, Laurel Caliendo. Harm to Ms. Caliendo personally is not relevant to this motion because Ms. Caliendo is not personally a party to the present case and the plaintiff's counsel, as he said several times during trial and as he acknowledged at this hearing, only represented the plaintiff corporation and not Ms. Caliendo. After the court pointed this out in order #230.01, the plaintiff attempted to articulate ways in which the footnote harmed the plaintiff corporation. The plaintiff's attempts in this regard are largely confined to footnote 1 of its amended motion. This footnote recites the facts that the plaintiff is licensed by state and federal governments, has numerous employees throughout New England, is a " substantial customer" of Fannie Mae and Freddie Mac and is a borrower from numerous financial institutions. During argument, the plaintiff attempted to buttress this argument by stating that Ms. Caliendo is the " face" of the plaintiff and has personal signing authority for tens of millions of dollars of loans. The plaintiff also, both in its papers and at argument, attempted to introduce, for the first time, detailed evidence of the negotiations between Ms. Caliendo and the plaintiff that resulted in a settlement of potential claims by the plaintiff over advances to Ms. Caliendo and argued that it did not do so at trial because it did not consider the evidence relevant.
First of all, it would not be appropriate for the court to consider any of the new evidence proffered by the plaintiff. As mentioned above, a " motion to reargue is not to be used as an opportunity to have a second bite of the apple or to present additional cases or briefs which could have been presented at the time of the original argument." (Internal quotation marks omitted). Carriage House I-Enfield Ass'n, Inc. v. Johnston, supra, 160 Conn.App. 237. During trial, the plaintiff was well aware of the fact that the court decided to allow the defendant to cross examine Ms. Caliendo as to her advances and to allow the defendant to submit his own evidence in this regard because the court deemed such evidence to be relevant to the issue of conversion. Amended memorandum of decision, December 31, 2015, 6. The plaintiff made a strategic decision to counter such evidence in a general way via Ms. Caliendo's testimony that she had negotiated a resolution of this issue with the company, had paid some money back and still owed some $200,000 to the plaintiff. The plaintiff chose not to submit any additional evidence as to this negotiation. Having decided not to do so at trial, the plaintiff cannot do so now in a motion for reconsideration.
The plaintiff also argued at the hearing of the present motion that Ms. Caliendo had, prior to this negotiation, begun to pay back sums advanced to her. The court's review of the transcript does not support this argument and the court will not allow the plaintiff a second bite of the apple in regard to this claim either.
During argument, the court asked the plaintiff's counsel the threshold legal question of why the plaintiff's request that the court modify footnote 3 was properly before the court by means of a motion for reconsideration. Specifically, the court asked the plaintiff's counsel whether the plaintiff's request to modify or eliminate footnote 3 was to correct a manifest error of law, to present newly discovered evidence, to submit new law, to correct a miscalculation, or to fix a misapplication of law. The plaintiff's counsel's response was frank and telling. The plaintiff's counsel agreed that footnote 3 was not " within the panoply of a typical motion for reconsideration." The court construes this remark to be a skilled advocate's way to avoid saying that this request was not properly before the court by means of a motion for reconsideration, but to continue to ask the court to amend or remove the footnote.
The closest that the plaintiff came to claiming that the court misapplied the facts or the law is when it claims that the court overstated and misunderstood the testimony in regard to Ms. Caliendo and officer's loans because the corporation did not submit fulsome evidence of these transactions. The court, however, spent an entire afternoon during the trial listening to Ms. Caliendo testifying as to what advances made to her were personal or business expenses and, as mentioned above, the plaintiff chose not to submit a more detailed explanation of its negotiations and settlement with her.
Based upon the admitted evidence, the court finds that the plaintiff has not presented and the court cannot find any persuasive legal basis on which to amend or remove footnote 3.
Further, the court notes that the plaintiff freely concedes that footnote 3 is dicta and not, in any respect, the holding of the case. The court agrees. " Dictum includes those discussions that are merely passing commentary . . . those that go beyond the facts at issue . . . and those that are unnecessary to the holding in the case." (Internal quotation marks omitted.) DiNardo Seaside Tower, Ltd. v. Sikorsky Aircraft Corp., 153 Conn.App. 10, 26 n.4, 100 A.3d 413, cert. denied, 314 Conn. 947, 103 A.3d 976 (2014). " [M]ere dicta . . . has no precedential value." Mierzejewski v. Brownell, 152 Conn.App. 69, 83, 97 A.3d 61 (2014). Therefore, any purported damage resulting from footnote 3 is limited by its status as dicta.
Moreover, the plaintiff did not submit any evidence or argument as to reporting obligations that the plaintiff may have to forward the memorandum of decision to any of the regulatory agencies with which it deals.
Finally, the court finds that numerous judicial admissions made by the plaintiff during trial support the court's observations in footnote 3. These include the following.
The plaintiff's counsel made the following statements during argument over the defendant's attempt to cross examine Ms. Caliendo about personal advances.
" [T]hey [the defendant and Ms. Caliendo] sought to use corporate funds for personal expenses [and] that money has to be repaid to the corporation as far as the corporation is concerned. The party in this case is the corporation, not Mrs. Caliendo and not James Veneziano." Transcript, May 6, 2015, 45:14-19.
" I will concede . . . that there were funds taken by both parties, that is Mr. Veneziano and Mrs. Caliendo, that were treated as officer loans or advances." Id., 45:25-46:1.
Footnote 3 sets forth trial admissions by Ms. Caliendo concerning her advances.
Even more damning to this motion, however, are the following statements made during closing argument by the plaintiff.
" Mrs. Caliendo has acknowledged her wrongdoing by her self-serving transactions." Transcript, May 28, 2015, 159:2-3.
" It's enough that they [the defendant and Ms. Caliendo] used the corporation's line of credit" to purchase real estate for their company, VC Holdings. Id., 159:25-26.
" Mr. Veneziano and Laurel Caliendo not only could have been held liable by Fannie Mae, both civilly and criminally, but the corporation could have sued them" for a $226,000 shortfall to Fannie Mae. Id., 158:20-22.
The plaintiff itself has, therefore, used terms to describe the actions of its CEO and president that are quite similar to the language used in footnote 3.
As mentioned during argument on the present motion, the court could have written footnote 3 with even stronger language. Footnote 3 is supported by the evidence adduced at trial. The court kept detailed notes as to the advances that Ms. Caliendo categorized as " personal" as opposed to " business, " and spent substantial time reviewing these notes and adding up the advances. The plaintiff never argued that the court's calculations were incorrect. For these and the reasons set forth above, the court will not redact footnote 3 and only modifies it slightly for the sake of equity.
So ordered.