Opinion
CV156025586S
12-12-2017
Gia WALKA v. HIGH POINT INVESTMENT AND DEVELOPMENT CO., INC.
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
Knox, J.
The defendants, High Point Investment & Development, Co., Inc. (High Point), Southeastern Investment Corp. (Southeastern), and Auto Showcase, Inc. (Auto Showcase) move to dismiss the plaintiff’s complaint, pursuant to Practice Book § 10-30, on the ground that the court lacks subject matter jurisdiction because the plaintiff lacks standing to bring her claims against these corporate entities because the claims are not personal, but are derivative in nature. The plaintiff, Gia Walka, argues that she has standing under General Statutes § 33-896, which governs judicial dissolutions of corporations, and that she has standing to bring her other claims, because the harms are personal to the plaintiff.
The plaintiff also sued Victor Walka and Miriam Walka. Both have appeared but did not join the other defendants in this motion to dismiss. For purposes of this memorandum, only High Point, Southeastern, and Auto Showcase will be referred to as the defendants.
Practice Book § 10-30(a) provides in relevant part: " A motion to dismiss shall be used to assert ... lack of jurisdiction over the subject matter ..."
FACTS
The plaintiff filed a summons and four-count amended complaint against the defendants on April 28, 2016, which alleges the following facts. The defendants are closely-held family corporations that operate mobile home parks in Norwich, Connecticut. The plaintiff, her brother, Victor Walka (Victor), and her mother, Miriam Walka (Miriam), each own an interest in the corporations. In each of these corporations, the plaintiff owns a minority of shares. The plaintiff was also an officer in various capacities of each of the corporations and worked for High Point and Southeastern. In the summer of 2012, Victor told the plaintiff to leave those corporations and never return. Subsequently, on April 3, 2015, Victor and Miriam voted to terminate the plaintiff’s employment at High Point and Southeastern and refused to pay her salary. They have refused to buy out her interests in the corporations.
The plaintiff filed her initial complaint on December 4, 2015, and the defendants did not challenge the amending of the complaint as Miriam filed an answer to the amended complaint on June 23, 2016 and the remaining defendants, except Victor, filed their answers on June 29, 2016.
The shares are divided as follows: The plaintiff owns 28 percent of the shares of High Point, 28 percent of the shares of Southeastern, and 50 percent of the shares of Auto Showcase; Victor owns 28 percent of the shares of High Point, 28 percent of the shares of Southeastern, and 50 percent of the shares of Auto Showcase; and Miriam owns 44 percent of the shares of High Point and 44 percent of the shares of Southeastern.
The plaintiff sued Victor, Miriam, and the defendants for four counts: (1) judicial dissolution of the corporations pursuant to § 33-896 and appointment of a receiver pursuant to General Statutes § 33-898; (2) breach of fiduciary duty as to Victor and Miriam; (3) bad faith as to High Point and Southeastern; and (4) breach of an employment agreement as to all defendants.
General Statutes § 33-898(a) provides in relevant part: " [A] court in a judicial proceeding brought to dissolve a corporation may appoint one or more receivers to wind up and liquidate, or one or more custodians to manage, the business and affairs of the corporation. The court shall hold a hearing, after notifying all parties to the proceeding and any interested persons designated by the court, before appointing a receiver or custodian. The court appointing a receiver or custodian has jurisdiction over the corporation and all of its property wherever located."
DISCUSSION
" A motion to dismiss tests ... whether, on the face of the record, the court is without jurisdiction ..." (Internal quotation marks omitted.) Fairfax Properties, Inc. v. Lyons, 72 Conn.App. 426, 432, 806 A.2d 535 (2002). " [A] motion to dismiss is not designed to test the legal sufficiency of a complaint in terms of whether it states a cause of action." Pratt v. Old Saybrook, 225 Conn. 177, 185, 621 A.2d 1322 (1993). " In ruling upon whether a complaint survives a motion to dismiss, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader." (Internal quotation marks omitted.) Fairfax Properties, Inc. v. Lyons, supra, 72 Conn.App. 432. Subject matter jurisdiction " may not be waived by any party, and also may be raised by a party, or by the court sua sponte, at any stage of the proceedings ..." (Internal quotation marks omitted.) Keller v. Beckenstein, 305 Conn. 523, 531-32, 46 A.3d 102 (2012). " [I]n determining whether a court has subject matter jurisdiction, every presumption favoring jurisdiction should be indulged." (Internal quotation marks omitted.) Connor v. Statewide Grievance Committee, 260 Conn. 435, 443, 797 A.2d 1081 (2002). " [T]he plaintiff bears the burden of proving subject matter jurisdiction, whenever and however raised." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. New London, 265 Conn. 423, 430 n.12, 829 A.2d 801 (2003).
The defendants argue that, pursuant to Scarfo v. Snow, 168 Conn.App. 482, 499, 146 A.3d 1006 (2016), the plaintiff lacks standing to bring her claims against these corporate entities because the claims are not personal, but are derivative in nature. The plaintiff argues she has standing under § 33-896 and that she has standing to bring her other claims, because the harms are personal to the plaintiff.
" Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless [one] has, in an individual or representative capacity, some real interest in the cause of action ..." (Internal quotation marks omitted.) Tomlinson v. Board of Education, 226 Conn. 704, 717, 629 A.2d 333 (1993). " Standing focuses on whether the party initiating the action is the proper party to request adjudication of the issues." Stamford Hospital v. Vega, 236 Conn. 646, 657, 674 A.2d 821 (1996). " Standing is established by showing that the party claiming it is authorized by statute to bring suit or is classically aggrieved." (Internal quotation marks omitted.) Wilcox v. Webster Ins., Inc., 294 Conn. 206, 214, 982 A.2d 1053 (2009).
Section § 33-896(a) provides in relevant part: " The superior court for the judicial district where the corporation’s principal office or, if none in this state, its registered office, is located may dissolve a corporation: (1) In a proceeding by a shareholder if it is established that ... (B) the directors or those in control of the corporation have acted, are acting or will act in a manner that is illegal, oppressive or fraudulent ... or (D) the corporate assets are being misapplied or wasted ..." " Section 33-896 is silent as to the type of action that may be brought to pursue a judicial dissolution." Schumann v. Schumann, United States District Court, Docket No. 3:11CV888 (WWE) (D.Conn. June 5, 2012). " It is [the court’s] duty to interpret statutes as they are written ... Courts cannot, by construction, read into statutes provisions which are not clearly stated." (Internal quotation marks omitted.) Fiona C. v. Kevin L., 166 Conn.App. 844, 850, 143 A.3d 604 (2016).
Accordingly, interpreting the statute as written, there is nothing in the statute regarding what type of action a plaintiff must bring to seek judicial dissolution. This court cannot read into the statute a requirement for the plaintiff to allege a derivative cause of action. Further, § 33-896 only requires that the proceeding be brought " by a shareholder." The plaintiff sufficiently alleges in her complaint that she is a shareholder in the defendant corporations. Count one alleges that Victor and Miriam are now in control of each of the defendant companies and " have acted or are acting in a manner that is illegal, oppressive, or fraudulent" including the use of corporate assets for personal expenses. A fair reading of the complaint demonstrates that the plaintiff has set forth specific allegations under the statute in count one.
Nevertheless, the defendants, relying on Scarfo v. Snow, supra, 168 Conn.App. 499, argue that the court lacks subject matter jurisdiction in the absence of a shareholder derivative action. That reliance is misplaced. First, Scarfo was not an action under General Statute 33-896 for corporate dissolution, bad faith or breach of an employment contract. Rather, Scarfo involved one member of a company suing the other member of the company based on breaches of their operating agreement. Id., 504. On appeal, the Appellate Court, sua sponte, raised the issue of standing. Id., 495. The Appellate Court held that the plaintiff had no standing in his individual capacity to bring a cause of action based on the operating agreement, which was specifically signed by the parties as agents for the company. Id., 504. As a result, the plaintiff, in his individual capacity lacked standing to bring a cause of action. Id. Scarfo does not preclude a shareholder from bringing an action for dissolution under § 33-896 or from requesting appointment of a receivership under § 33-898.
Similarly, defendant’s reference to Budney v. Budney Industries, Inc., Superior Court, judicial district of Hartford, Complex Litigation Docket, Docket Nos. X07-CV-13-6058255-S, X07-CV-136058256-S (November 8, 2016, Sheridan, J.) does not support the proposition that a cause of action under § § 33-896 or 33-898 must be brought in a shareholder derivative action. Budney involved two closely-held family businesses in which a brother and sister were equal owners, and the directors and managers of the companies. Id. After trial, the court entered judgment in favor of the defendant sister as the plaintiff brother failed to prove his shareholder derivative lawsuit against the company and his sister. Id. The defendant sister, individually, had also filed a counterclaim against the plaintiff, alleging a breach of fiduciary duty in bringing the cause of action for the purpose of a personal windfall and for misappropriating equipment from the business. Id. The court, however, concluded it lacked subject matter jurisdiction to hear the counterclaim because the defendant did not sustain any injury that was distinct and separate from the injuries of the corporation. Id. The court concluded that the counterclaim sought to remedy harm to the corporation, who was the real party in interest. Id. Budney did not involve the situation presented in this case, where a shareholder has brought an action for dissolution under § 33-896 and requested appointment of a receivership under § 33-898.
With regard to count two, the plaintiff, in its complaint, only brings a cause of action against Victor and Miriam. Thus, it is immaterial whether the court has jurisdiction over the count for the corporate defendants.
As for the remaining counts, the defendants argue the plaintiff’s employment claims are legally insufficient. Because challenging claims for legal sufficiency are not dealt with in a motion to dismiss; see Pratt v. Old Saybrook, supra, 225 Conn. 185; and because the defendants did not adequately brief why the court lacks subject matter jurisdiction over these counts; see Connecticut Light & Power Co. v. Dept . of Public Utility Control, 266 Conn. 108, 120, 830 A.2d 1121 (2003); the court does not consider the defendants’ arguments.
CONCLUSION
Therefore, the defendant’s motion to dismiss for lack of subject matter jurisdiction due to the plaintiff’s lack of standing is denied.