Opinion
No. X10-UWY-CV-04-4010222S
September 28, 2006
MEMORANDUM OF DECISION
The trial of this matter has resulted in intensively fact-based decision making, involving threshold questions of credibility determinations, as applied to two areas of law that Connecticut courts have not yet addressed: 1) the reasonableness of withholding of consent in the context of an assignment of an economic interest in a partnership, and 2) the expulsion of a partner pursuant to the dissociation provisions of General Statutes § 34-355(5). Unhappily for this partnership, both of these questions, inter alia, are before this court.
When Richard Aiello died on December 17, 2004, all of the partnerships he was in lost their glue. This particular case is the unhappy story of a financially successful business endeavor that became an environment of distrust, rancor and paralysis after the untimely death of Richard Aiello. The case was tried over several days with many (in excess of 150) exhibits and witnesses (some of whom were called to the stand more than once), including Thomas Brennan, David Lehn, Serge Mihaly, Sal DiNardo, Peter DiNardo, Leonard DiNardo, Alexander Aiello, Robert Cooper (attorney for plaintiff), Carey Sowell (maintenance worker for Trumbull Center Enterprises), Richard Ouellette (employed by Nutmeg Adjusters), Beverly Kambras (branch manager, Newtown Savings Bank), John Martocci (Chair and CEO, Newtown Savings Bank), James Rose (owner of The Gull and Bar Restaurant, Brennan Associates tenant), Salvatore Cataldo (owner of RS Deli, Brennan Associates tenant), Jill Puzzio (owner of Sensory Rich Floral and Gift Shop, former Brennan Associates tenant), Tom Welch (attorney for decedent), A. David Mortenson, (former Sikorsky employee, negotiated business deal with Peter DiNardo), Matthew Mihaly (Serge Mihaly's son), Frank Nuzzo (called but did not testify), Marianne Cardelluchio (bookkeeper for Trumbull Park and Brennan Associates), and Joe Braccio (employee of plaintiff, Thomas Brennan). The court had the opportunity to observe the demeanor of each witness who testified and weigh each witness's credibility. The following facts are found based upon the credible evidence.
I. The Parties and Procedural Background
Brennan Associates is a Connecticut partnership created in 1984 for the purpose of investing in and enjoying the fruits of ownership of a retail complex in the center of Trumbull. The founding partners were Richard Aiello, Thomas Brennan, Alexander Aiello and Serge Mihaly. Upon the death of Richard Aiello, an estate was opened and initially an attorney, Thomas Welch, was appointed by the court pursuant to the wishes of the testator. Thereafter he was replaced, pursuant to Welch's motion, by David Lehn, an attorney familiar with tax, estate and commercial law. He subsequently sought to have Salvatore, Peter and Leonard DiNardo made co-administrators of the estate with him. That request was granted by the probate court.
When the plaintiff, Thomas Brennan ("plaintiff" or "Brennan") initiated this action he sued Al Aiello, and Serge Mihaly, along with David Lehn and Salvatore, Peter and Leonard DiNardo in their capacity as co-administrators of the Estate of Richard Aiello, and the Brennan Associates partnership. The plaintiff brought his complaint in three counts (the presently operative complaint being the revised amended complaint dated December 16, 2005), seeking a declaratory judgment as to the rights of the parties under the partnership agreement regarding the disposition of the partnership interest of Richard Aiello; a permanent injunction seeking reasonable access to the partnership books and records, prohibiting any of the DiNardo defendants from acting as management or holding themselves out as management except in their fiduciary capacity for the estate, and requiring the estate of Richard Aiello to sell his interest in the partnership to him, Brennan, and/or to the partnership itself. In a third count that was added in the December 2005 amendment, Brennan also seeks the appointment of a receiver of the partnership.
The defendants (including the defendants Peter and Leonard DiNardo in both their individual capacity and as co-administrators) brought counterclaims against Brennan seeking a declaratory judgment that the estate can transfer to the DiNardos (in their individual capacity) Richard Aiello's full interest in the partnership such that the DiNardos acquire voting and management rights, as well as an economic interest in the partnership; a declaration that Brennan's refusal to consent to the same is unreasonable; that the proposed assignment from the estate to the DiNardos is not an event of disassociation, and, finally, that the partners and/or Brennan Associates do not have a right to purchase the partnership interest of Richard Aiello. The defendants also brought a claim of disassociation against Brennan, which seeks to expel him from the Brennan Associates partnership. The parties briefed and argued the declaratory judgment actions in the context of cross motions for summary judgment, which the court has previously ruled on. Reference to the same will be made in this decision as necessary. The parties then tried to the court the remaining issues.
II. Findings of Fact
A historical perspective on the first twenty years of the partnership is necessary to put the current crisis in perspective.
The interest of the prior owner in selling the commercial property that now comprises Brennan Associates came to the attention of Richard Aiello sometime prior to 1984. For reasons that were not placed before the court, that owner did not want to sell to Aiello. Aiello set up Thomas Brennan as a straw man to win the confidence of the owner; ultimately Brennan entered into an agreement to purchase the property. Aiello and Brennan, along with Mihaly and Al Aiello, entered into a partnership evidenced by a written partnership agreement for the operation of the venture on or about September 5, 1984. Pursuant to that agreement, Brennan and Richard Aiello each had a 32% ownership interest, Al Aiello had 25% and Serge Mihaly had an 11% ownership interest. The agreement that the parties executed on that date was never amended or modified by the parties. With regard to management, the agreement provides that 70% of the eligible votes is necessary for the conduct of the management of the business on any initiative proposed.
While Richard was alive he performed virtually all of the activity of management of the partnership. He kept the books and records at his office across the street in a plaza known as Trumbull Park, which he owned in a separate partnership with Donny Aiello and Al Aiello. His bookkeeper in that office, Mary Ann Cardilicchio, also kept Brennan Associates' books. Richard negotiated all the leases, met with current and prospective tenants, performed all the maintenance and improvements, and paid all the bills. The other three partners were akin to silent partners. Al Aiello was somewhat more active than the other two, assisting in the maintenance of the Brennan Associates property inasmuch as he also had a desk at the Trumbull Park Office. Ultimately, a third business venture that Richard Aiello was involved in with Serge Mihaly, known as Brinsmade, also had its records and management housed in the Trumbull Park office. All of the Brennan Associates partners were pleased with the manner in which Richard Aiello managed the partnership. It was poignant that throughout the trial each partner and their counsel in turn, praised Richard Aiello's humanity and style as well as his business acumen and took great pains to affirm that position whenever any hint of a comment could have been construed to sound critical of him.
When Richard was alive, he had a custom of starting his day over coffee at Dunkin' Donuts; his partners and business associates knew that they could find him there early each day. He had a practice of maintaining high visibility with his tenants by regularly walking through his shopping plaza greeting them and making himself available for their comments or inquiries. His business practices were steady, he sought 5% rent increases on annual renewals and anniversaries, he gave hardworking, honest and earnest tenants opportunities to build their businesses in hard times by occasional forbearance; he then expected them to recognize his contribution by paying at full rate when their businesses recovered. He did not treat tenants kindly who appeared to be slothful or were delinquent but were apparently able to pay their rent (i.e. driving a high-priced automobile). In leases, he had a practice of writing in one-year notice provisions for option renewals, hopeful that it would slip the mind of the tenant and put him in a better bargaining position with them.
Over time, as his cousins Peter and Leonard DiNardo (his first cousin's Sal DiNardo's sons) were growing up he would spend time with them, teaching them his way of doing business. They each sought out and listened to his advice as they started out, finding their way in the world of real estate development and management.
On December 17, 2004, Richard Aiello died.
Immediately after the death of Aiello, the remaining partners would meet each morning to address the needs of the partnership. They met at Bruegger's Bagels rather than Dunkin' Donuts, out of respect for Richard. There was a spirit of cooperation and communication between and amongst them as they made the day-to-day management decisions that Richard had always made. Peter DiNardo and his father Sal DiNardo often joined in these meetings and the process. Leonard, who was away at school, participated to a much smaller extent.
This air of collegiality continued through and including a meeting at Attorney Welch's on January 6, 2005. Mr. Welch held the meeting with the partners of Brennan Associates and those persons who had an interest in the disposition of Richard Aiello's interest in Brennan Associates pursuant to the contents of his will. Richard Aiello's will bequeaths most of his estate to The Richard Aiello Charitable Foundation. In the will, he directed that his executor sell his business interests, including Brennan Associates, to his nephews Peter DiNardo and Leonard DiNardo (if they were interested in buying) and the proceeds therefrom fund the Foundation. The will also specified the manner in which the purchase was to be funded by the DiNardo brothers. Both Peter and Leonard DiNardo are directors of the Foundation. Those present in Welch's office included, Thomas Brennan, Al Aiello, a partner and cousin of Richard, Don Aiello (Al's brother), Peter and Leonard DiNardo and their father, Sal DiNardo, Serge Mihaly (a partner who is also an attorney) and two of his sons, Mati Mihaly and Father Luke Mihaly. Serge Mihaly had invited his sons because he assumed that on his demise they would inherit his business interests and he wanted them to meet their future partners.
At this initial meeting, Attorney Welch informed all present that it was his desire to transfer the decedent's interests to Peter and Leonard in accordance with Richard's wishes, and, to accomplish it quickly inasmuch as he had no experience in handling ownership of shopping centers, or the like. No one voiced opposition to this plan. The plaintiff had coffee with Sal DiNardo after the will reading and the plaintiff discussed with him whether it was economically feasible for Peter and Leonard DiNardo to purchase the property under the will terms without taking money out of their respective pockets. Sal DiNardo told him that this was a naive and foolish view; that his sons would make their money on management fees. The interesting thing about this conversation is not the topic of the financing, but rather what wasn't said. At no time did the plaintiff object to the admission of Peter and Leonard DiNardo to the partnership; rather, he discussed it as an economic viability issue.
The seeds of discontent, however, had already been sown. Ultimately the partners reached impasse over many partnership issues, including check signing authority, control of and access to the books and records of the partnership, where should those books and records be housed, who should have contact with prospective and current tenants, how decisions should be made as to leasing, improvements to the premises, and the handling of a fire insurance claim. One partner has accused another of fraud, and all the partners but one are seeking the removal of that partner for inability to agreeably work with him, his conduct toward Al Aiello and his failure to disclose the breadth and depth of his criminal conduct leading to a federal felony conviction in 1989. That partner is seeking to purchase for himself or the partnership the interest of Richard Aiello; all the other partners want that interest to be transferred in accordance with Richard's will.
I. Check Signing
The partnership agreement provided that only Richard Aiello and Thomas Brennan could sign checks. Al Aiello signed checks for the partnership from December 17, 2004 until February 17, 2005. During that time, there was a problem with the proper authorizations for Brennan to sign checks, but that was ultimately sorted out. The court finds that whole incident not noteworthy in and of itself.
From that date, Al Aiello, Serge Mihaly and David Lehn sought to have Al Aiello added as an authorized signer. They each, Al Aiello, Serge Mihaly and David Lehn signed authorization for the same. A document was produced at trial which purported to be Tom Brennan's written authorization for the same as well. While Brennan acknowledged that it was his signature on the authorization, he did so with some hesitation, observing that the signature had two "m"s in Thomas" and that he only sign his name with one "m." In any case, no other partner ever received a copy or was aware of this written authorization until they received a copy of it in discovery as a part of this litigation. The original has not been located. From February 17, 2005 to the present time, only the plaintiff has been authorized to sign checks for the partnership. He has feigned ignorance as to why Al Aiello never ended up an authorized signatory. His explanations, however, were not credible. After the plaintiff found himself at odds with his partners in the beginning of February 2005 over the purchase of Richard Aiello's share by Peter and Leonard DiNardo, the court finds he engaged in a steady campaign of obstructing anything that he perceived to be the wishes of the DiNardos. The court concludes from all of the evidence that the plaintiff sought to maintain himself as the sole signatory to exercise individual control over the finances of the business.
Subsequent to that, Lehn and Peter and Leonard DiNardo sought Brennan's agreement for them to become signatories as the co-administrators of Richard Aiello's estate, presenting to Brennan that under the partnership agreement the personal representative of the estate had the authority to exercise all of his rights under the agreement during the administration of the estate, until the estate transferred the partnership interest. Brennan resisted that effort. The bank with which the partnership did business was Newtown Savings Bank. The bank refused to add any of these persons as signatories unless a resolution authorizing the same was signed by all the partners. All partners, once again as stated above, except Brennan gave their authorization. Brennan refused to do so. The result was from Richard Aiello's death to the present day, only Brennan can sign checks.
2. The Books and Records of the Partnership
Against this backdrop, it is ironic that one of Brennan's claims is that he has been deprived access to the books and records of Brennan Associates. Mary Ann Cardilicchio had been the bookkeeper for all of Richard Aiello's business interests for over 20 years. She operated a single office for all of those interests and maintained the files for all of them in cabinets controlled and maintained by her. No partner of Brennan Associates was permitted access to the cabinets themselves to peruse the contents. Instead, it was her practice to pull out whatever file that was applicable to information sought by a partner, let him review the file, and then she would provide copies of any document(s) the partner wanted. This practice was satisfactory to all of the partners, including Tom Brennan when Richard Aiello was alive After his death, the plaintiff asserted that it was unsatisfactory for two reasons: 1) he wanted to be able to go through the files to see what was there; then he would know what interested him once he found it through this `fishing' process, and 2) he felt he was not treated the same as Peter and Leonard DiNardo and Al Aiello, asserting that since they worked in the office where the files are housed, undoubtedly they had personal access to the files.
The plaintiff did not prove this latter assertion. While Al Aiello does have an office there, neither Peter nor Leonard DiNardo does. Occasionally Peter would use the telephone in Richard Aiello's office, but he did not take it over as his. He has not unilaterally accessed the books and records of the partnership. Instead, the office is maintained by Ms. Cardilicchio in a sense as a shrine to Richard Aiello: not one item in the office has been moved since his death; it has been maintained by her just as it was the day he died. Further, the plaintiff adduced no proof that either Peter DiNardo, Leonard DiNardo, or Al Aiello had personal access to the files.
As to the plaintiff's desire to have unlimited access to look through the files, based upon the evidence, the court concludes that no such right was reposed in any partner historically; to provide for the same would have been a change in the practice and custom of the partnership's manner of operation. Therefore, it required either unanimous consensus or an affirmative vote of the partnership. No such vote was ever taken. The court finds no basis in the record for one partner, the plaintiff or any other, to distrust the even handedness of the bookkeeper in dealing with each of them. The plaintiff sought as a response to his dilemma to remove the work from her control. This was not ever approved of by the partnership. Pendente lite, this court ordered Brennan Associates' records isolated from the other partnerships' records in the event the court saw that such access should be ordered in favor of the plaintiff. He has not, however, proved a legal right to this remedy.
3. Tenants, Leases and Improvements
Following the death of Richard Aiello, the initial period of conciliation unraveled as the partners and Aiello's relatives met with current tenants, advertised for future tenants and attempted to make decisions about improvements to the premises.
The conduct of Peter DiNardo and Leonard DiNardo at issue is how they referred to themselves when they each introduced themselves to tenants.
Peter DiNardo is a real estate developer with a law degree. He and his brother Leonard are partners with their father. Leonard is currently enrolled in an MBA program at New York University and works at the business when he is not attending to his studies. His business expertise real estate development includes much commercial and residential unit management. Leonard is primarily working on a proposal to redevelop the old Remington Arms building in Bridgeport for residential purposes.
There is a website for their business, Peter DiNardo Enterprises, which permits a web surfer to access photos of property managed by that business. It also includes the Brennan Associates property of those that can be accessed (at least as of March 18, 2005). The same is the case of Trumbull Park and Brinsmade properties. As to the inclusion of the two latter properties, Leonard DiNardo says they are included because he expects that he and his brother will acquire Richard's interest. The irresistible inference is that this is the case for the Brennan Associates property as well. He listed these properties and showed a couple of them to prospective tenants during the period of conciliation shortly after Richard's death. There is no evidence that he continued in this conduct after the court's decision on the summary judgment motions.
Leonard DiNardo has visited every tenant at the Brennan Associates property and introduced himself as the co-Administrator of the Estate of Richard Aiello. He told all of them to continue to mail their checks as they had in the past to Trumbull Park where the office is located. His reason to visit is so that a face could be put with his name since Richard's death. The court finds that the plaintiff has failed to prove that Leonard DiNardo has engaged in any behavior that is harmful to the partnership.
One of the tenants at the premises, the owner of a floral shop, had fallen behind in her rent. Sal DiNardo came in on Valentine's Day to press her for payment of her rent while there were customers at the premises. The plaintiff, however, when he spoke of the matter did not complain regarding that-instead, he complained that Sal DiNardo offered the tenant the right to bring the rent current after she sold her business. When plaintiff asked him after the conversation why he did that, Sal DiNardo told him the plaintiff he was not very smart, that this was "not about the rent" but instead about a shopping center that he had inherited. What can be surmised from this exchange of words is that the plaintiff does not like Sal DiNardo's business or interpersonal relationship style. It is important to note that neither Peter nor Leonard DiNardo were present for the conversations. Whatever was troubling for the plaintiff about this is not behavior that can be imputed to either of them.
Salvatore Cataldo, a Brennan Associates tenant who owns and operates R and S Deli, also was visited by Salvatore DiNardo after the death of Richard Aiello. On both occasions he was with Al Aiello. On the first occasion he was told in a loud tone by Mr. DiNardo to pay his rent on time or he would be out. On the second occasion in a similar tone he was told to clean the dock. Both times, Mr. DiNardo's words were punctuated with foul language. On neither occasion did Al Aiello express concern to Sal DiNardo as to the way he spoke. These events occurred within about two weeks of Richard's death. Cataldo has never dealt with Sal DiNardo since. He has had no interaction with Peter or Leonard DiNardo. Cataldo did not think the second occasion was any big deal. He was embarrassed by the first visit because it was in front of customers. Shortly after these incidents, the plaintiff came around and told him that he would be collecting the rents from now on. From there he fell behind in his rent again and he only came current after legal action was pursued by the partnership for payment.
While Sal DiNardo's manner was gruff and embarrassed the tenant, Al Aiello who was with him apparently expressed no concern. Tom Brennan cultivated this witness to complain against Sal DiNardo, and in exchange Brennan forbore on the rent, so that he was allowed to fall between $7,000 and $12,000 behind in his rental payments. Under those circumstances, and understanding that Sal DiNardo has not continued to visit the tenants, the court concludes that no harm was done to the partnership by Sal DiNardo's behavior here.
On another occasion after the meeting in Welch's office, when the plaintiff was walking by one of the Brennan Associates buildings, the plaintiff observed that he wanted to remove some vinyl siding to spruce the place up. Sal DiNardo told him not to do anything, because his boys were going to buy in. The plaintiff recalls him swearing and screaming at the top of his lungs about this. DiNardo relates the conversation as something that did not rise to that level of animosity or rancor. It is fair to say that Brennan and DiNardo have different sensibilities and there is hostility between them which makes each of their respective prisms of the nature of the incident suspect. The court draws no conclusions from either of their testimony as to how civil or ugly the interchange was.
There remains a dispute in the partnership as to the terms under which the Newtown Savings Bank lease for its Trumbull branch will be renewed. The plaintiff, Al Aiello and Serge Mihaly met in early 2005 and authorized the plaintiff to negotiate a 7% increase with the Bank. Thereafter the Bank counter-offered at 3% and they then again met and authorized the plaintiff to negotiate a 5% increase. In the fall of 2005 the Bank agreed to a 5% increase. However, there is still no lease because at partnership meetings the Administrators, specifically Salvatore, Leonard and Peter DiNardo have said that 5% is too low. Al Aiello and Serge Mihaly feel, with the plaintiff, that the 5% should be honored since they offered it. This issue remains unresolved. While it must ultimately be resolved, none of the conduct of the parties is opprobrious. It is a situation where some feel their verbal commitment should be honored and the other partner representatives, knowing a verbal commitment is not legally binding, feel that a more advantageous lease renewal rate should be negotiated. This difference in philosophy and approach to the running of the business could be stifling if it extended to many tenants. Instead it is just one tenant issue and therefore should not be determinative of the outcome of the partnership's future.
Prior to Richard Aiello's death the partnership had liability insurance coverage with a limit of $10 million. In 1995, over the plaintiff's objection the partnership entered into a contract for $25 million combined coverage for Brennan Associates, Brinsmade and Trumbull Business Center. The premium charged to Brennan Associates was based on a pro rata square foot calculation, just as maintenance fees had been allocated for many years. Brennan objected that it was not worth the increase in coverage to pay the additional premium. Perhaps he was most irritated that he was not consulted in advance of the decision on this, but found out about it when he was presented the check to sign for premium coverage. He also was concerned that he was contracting for liability of two partnerships he had no interest in, though there appears no basis in law or fact for that position.
4. Insurance Loss and Fraud Claim
An insurance loss occurred at the partnership premises on February 12, 2005 when water damage occurred in those part of the premises leased by a business known as "Concepts." All of the individuals involved in this litigation showed up at the property on February 13, which was a Sunday morning and immediately after the damage occurred. The plaintiff along with the other partners examined the property and saw water damage to the roof, walls and carpets; there was standing water on the floor. The electrical system had shorted out from the water damage. Immediate arrangements were made to retain Nutmeg Adjusters to handle the claim and deal with Ohio Casualty which issued the applicable insurance policy for coverage. Al Aiello made the arrangements by contacting Richard Ouellette. Ouellette spoke with Al Aiello and Tom Brennan on the day of the loss and both of them said that he needed to authorize whatever it took for the tenant to be able to open his business the next day. Ouellette told Al Aiello's people that were employed by Trumbull Center to keep track of their hours, including overtime, but to get the work done. He also contacted Nuzzo Electric and United Cleaning to get the work done that day. They worked at the site on February 13th and 14th. The effort was successful in that the work was about 90% complete by Monday and Concepts was able to open for business. Up until that point in time, this water loss was an example of the ability of the business' partners to function agreeably when faced with a crisis, just as they did immediately after Richard Aiello's death.
Again, however, cooperation unraveled and was replaced by mistrust. On or about February 26, 2005 Nutmeg Adjusters opened a bank account to flow the funds from Ohio Casualty through to Brennan Associates. The plaintiff was the only signatory on that bank account pursuant to the partnership agreement's language discussed above, and there being no other partner consented to by all, at that time. Trumbull Center, United Cleaning and Nuzzo Electric all submitted bills to Al Aiello for their work at the premises. Al Aiello gathered them and sent them to Ouellette at Nutmeg. He prepared a Proof of Claim and sent it on to the insurance company representative. Then the money was sent from the insurance company to the account that Brennan maintained for purposes of paying the vendors for the work to repair the damage.
The Nuzzo Electric's invoice that Al Aiello submitted to Nutmeg was for $2597.65. That was invoice number 4066. There was also a second invoice number 4066 from Nuzzo in the amount of $1,580.05. A subsequent invoice, number 4079 for $134.45, was also submitted for repair work done on February 23, 2005. Nuzzo was paid $1,714.50. Brennan takes the position that the invoices were falsely inflated and then submitted and this constitutes a fraud on the insurance company. It is his position that Sal DiNardo and Al Aiello participated in such wrongful conduct. The evidence does not support this claim.
Further, though Brennan denies he saw the Proof of Loss claims when he signed the Statement of Loss for the claims, the court finds that he did see them. In coming to this conclusion, the court credits the testimony of Ouellette over Brennan. Brennan was provided opportunities to prove his claim regarding this whole matter both in the partnership environment and in court and he did not do so. Instead, he created an atmosphere of tension by inferring fraud and wrongdoing by a partner. Notwithstanding his assertion that there was wrong doing in the invoices and having no evidence of the same, Brennan transferred the balance of the insurance money of $36,917 to the regular Brennan Associates account instead of returning it as Serge Mihaly has suggested. Mihaly had told him if he thought there was wrongdoing to go ahead and give him the evidence, and return the money. Brennan did neither. Instead, he besmirched Al Aiello's reputation without cause.
5. Successor(s) In Interest to Richard Aiello
The plaintiff does not want Peter or Leonard DiNardo as partners in Brennan Associates. He has flatly refused. He recalls telling Richard Aiello that he could never be a partner with a DiNardo when he was with him at the opening of a store at the property; Aiello had told the plaintiff he was teaching the DiNardos the real estate business. His reason is that he does not like their father, Sal DiNardo, and therefore he has determined that he will never be a partner with a DiNardo. His stated reason for his animosity toward Sal DiNardo is a rejection of the latter's style of doing business. An incident that occurred at the Trumbull branch of Newtown Savings Bank is illustrative of the issue. Sal DiNardo, David Lehn and Peter DiNardo went into the bank manager's small office to demand that the bank make the estate administrators signatory on the Brennan Associates bank account once they were appointed by the probate court. Sal DiNardo was verbally menacing to the bank manager, upsetting her. He told her that the signatory status had to be accomplished within 24 hours or they would remove all their money from the bank. He used foul language. Undoubtedly the same message that he delivered could have been delivered in a more genteel manner. On a couple of other occasions (discussed hereinabove) Sal DiNardo confronted a couple of Brennan Associates tenants about past due rent in front of the tenant's customers. It was embarrassing for the tenants. Of course, neither of these acts was done by Peter or Leonard DiNardo. Their respective relationships with their father appear close; they are business partners with him. He is very proud and supportive of his children. On the other hand, both Peter and Leonard DiNardo are adults who have developed their own respective expertise in the field of real estate and have developed their own philosophies on management and acquisition of tenants, negotiations of leases and maintenance of properties.
From some depositors this might be an insignificant threat. The Aiello deposits in the branch were about $8 million, about 30% of the branch deposits.
The plaintiff has failed to prove that Peter DiNardo and/or Leonard DiNardo are captive to the will of their father Sal DiNardo and unable to exercise independent judgment from them. Further, the plaintiff has failed to prove that these defendants have acted in any manner in contravention of the court's rulings on the cross-declaratory judgment actions.
In May 2005, after finding that he could not unilaterally convey the estate interest to Peter and Leonard DiNardo, Lehn requested approval for the same in writing from the partners. Mihaly, Al Aiello (and obviously the estate) consented. The plaintiff did not. Subsequent to that date, the court in its ruling on the summary judgment motions held that the partnership agreement required unanimous consent for the same. The court also found that the Estate could, under the partnership agreement, assign its economic interest in the partnership with the approval of the other partners, which such approval could not be unreasonably withheld.
The Estate through this litigation, pursuant to the other findings of the court, has sought a ruling that Brennan has unreasonably withheld his consent to the Estate's assignment of its economic interest in the partnership to the DiNardo brothers. Similarly, the plaintiff has asserted that the conduct of Peter and Leonard DiNardo has given him reason to withhold his consent.
6. Brennan's Felony Conviction
In 1989, the plaintiff was convicted of a federal felony. At the time of his conviction, he told his partners that the reason for the conviction was that he had failed to report income in the year it was received and had, instead, pushed it out to the next year. In his answers to discovery in related litigation (specifically, the matter involving the dissolution of the entity known as ABD, LLC) he gave the same explanation for the conviction, which was in two counts for two tax years, and added that he relied on the advice of his accountant when he engaged in this behavior.
In 1989, the plaintiff, as discussed above, did not have control over the checkbook or other financial documents of the partnership. He and the other partners relied on Richard Aiello to mange the partnership affairs.
The plaintiff, however, was convicted for conduct that involved moral turpitude. He kept a double set of books and wrongfully failed to disclose income in excess of a million dollars; this conduct was conducted over two reporting years and was continuing into a third year until interrupted by his arrest. The extent of his deceptive, dishonest and illegal behavior was not known by his partners until the present and related litigation between them ensued. It is this extensive criminal wrongdoing involving business affairs (as well as Brennan seeking the appointment of a receiver and his treatment of Al Aiello) that has led Serge Mihaly to decide that he could not trust Brennan as his partner and to seek to have Brennan dissociated from the partnership. In court on the instant matter, the plaintiff did not acknowledge the full extent of his wrongdoing even though his guilty plea transcripts show his admissions of the above-described criminal conduct at that time. While the criminal conduct was over 20 years ago, Brennan presently continues to be unable to recognize the depth of and significance of his wrongdoing. Therefore, the remoteness in time, which might normally be significant, is not here. It is unfair to ask partners to trust Brennan with their finances and decisions when his past significant culpable conduct regarding money in business matters is soft-pedaled and rationalized to the present day.
Testimony was adduced, also about a letter in which Brennan wrote his sentencing judge, Judge Daly (United States District Court, District of Connecticut) from prison seeking a commutation of his sentence. In the letter he tells the judge that he has lost his real estate license. In fact, Brennan has never lost his real estate license. He denies ever reading the letter to Daly, J. — intimating that he just signed it after his brother prepared it. While this is not a significant issue, the court agrees with the defendants that it is indicative of Brennan's overall unreliable veracity. The content of the letter is heartfelt, including narratives of the losses his family suffered in his downfall. It is cynical of Brennan to believe that this court would find that he did not even read a letter intended to seek mercy from a court sent from prison where he had nothing but time on his hands, including time to read the letter.
III. Legal Issues
The legal issues before the court against the framework of these facts are as follows:
1. The plaintiff's claims:
a. Count One: Declaratory Judgment The plaintiff's count seeking a declaratory judgment was disposed of by this court on cross motions for summary judgment in a prior opinion. The same is thus true for portions of the defendants' actions for the same as referenced below. b. Count Two: Temporary and Permanent Injunction. The plaintiff seeks a permanent injunction alleging that "the DiNardos" have interfered in partnership affairs, that the plaintiff has no adequate remedy at all and should be granted a permanent injunction (a) prohibiting defendants from taking any action to block Brennan's reasonable access to the books and record of Brennan Associates, (2) prohibiting defendants from representing that the DiNardos are managing partners of Brennan Associates, (3) prohibiting the DiNardos from participating in the management or conduct of the Brennan Associates business except in the management or conduct of the Brennan Associates business except as is appropriate in the capacities as the Co-Administrators of the Estate of Richard Aiello, and (4) requiring the holder of the interest in Brennan Associates owned by Richard Aiello at his death to sell such interest to Brennan and/or Brennan Associates, at a price to be determined.In order to be entitled to an injunction the plaintiff must prove that he has no adequate remedy at law and that he will suffer irreparable harm if the injunction is not granted.
A party seeking injunctive relief has the burden of alleging and proving irreparable harm and lack of an adequate remedy at law . . . A prayer for injunctive relief is addressed to the sound discretion of the court . . . The extraordinary nature of injunctive relief requires that the harm complained of is occurring or will occur if the injunction is not granted. Although an absolute certainty is not required, it must appear that there is a substantial probability that but for the issuance of the injunction, the party seeking it will suffer irreparable harm. [I]n exercising its discretion, the court, in a proper case, may consider and balance the injury complained of with that which will result from interference by injunction.
(Citations omitted; internal quotation marks omitted.) Town of Wallingford v. Werbiski, 274 Conn. 483, 493-94, 877 A.2d 749 (2005).
The court finds that neither Peter nor Leonard DiNardo have interfered in the operation of the business of Brennan Associates. Their limited personal participation without partnership approval did not continue after the court's summary judgment decision. Their continued participation as co-Administrators in decision-making is not in violation of the partner agreement or the common law. Accordingly, the court finds that the plaintiff will suffer no harm, irreparable or otherwise, if an injunction is not ordered in his favor against Peter and/or Leonard DiNardo from involving themselves personally (as distinguished from as co-Administrators) in partnership affairs. Therefore, the court need not reach consideration of whether the plaintiff has proven the other elements necessary for an injunction. On this count, judgment enters for the defendants.
c. Count Three: Appointment of a Receiver
The plaintiff has also brought a count seeking the appointment of receiver of the business operations of the partnership. At trial this count was not pursued. Evidence was adduced that it was the plaintiff's pleading seeking the temporary appointment of himself as receiver pendent lite which soured Mihaly on doing business further with Brennan. That motion however was never heard or decided in the court. Accordingly, there is nothing on this count before the court and the court will deem it abandoned by the plaintiff.
2. The defendants' claims are as follows.
a. Application pursuant to Gen. Stat. sec. 34-355(5) for a judicial determination expelling Brennan from the Brennan Associates partnership (Brought by the defendants David M. Lehn, Salvatore DiNardo, Peter DiNardo, and Leonard DiNardo in their capacities as co-administrators of the Estate of Richard Aiello, and Al Aiello and Serge Mihaly)
The defendant co-administrators, along with Al Aiello and Mihaly, seek the dissociation of the plaintiff pursuant to General Statutes § 34-355(5), which is captioned "Events causing partner's dissociation" and provides in pertinent part:
A partner is dissociated from a partnership upon the occurrence of any of the following events: . . . (5) On application by the partnership or another partner, the partner's expulsion by judicial determination because: (A) The partner engaged in wrongful conduct that adversely and materially affected the partnership business; (B) the partner wilfully or persistently committed a material breach of the partnership agreement or of a duty owed to the partnership or the other partners under section 34-338; or (C) the partner engaged in conduct relating to the partnership business which makes it not reasonably practicable to carry on the business in partnership with the partner . . .
The defendants claim that it has satisfied the criteria for judicial expulsion that is contained in all three subsections of 34-355(5). The plaintiff has filed an unclean hands defense to the disassociation claim.
Connecticut's partnership statutes were dramatically changed upon the adoption of the Revised Uniform Partnership Act in 1997. These changes brought about the concept of dissociation, which previously did not formally exist in our law. Therefore, the paucity of case law (both in Connecticut and other jurisdictions) discussing and applying the dissociation provisions of the UPA is not surprising. As both parties have noted, however, the statutory dissociation language in General Statutes § 34-355 is very similar to the dissolution provisions embodied in General Statutes § 34-372. The Comment to § 601 of the U.L.A. Uniform Partnership Act (which is the source of General Statutes § 34-355) confirms that the dissociation provisions were based upon the preexisting grounds for dissolution under the UPA. See 6 U.L.A. Partnership Act § 601, cmt. 6. Therefore, decisional law addressing the analogous UPA dissolution provisions is probative in analyzing the defendants' dissociation claim.
The court finds, pursuant to part (C) of General Statutes § 34-355(5), that the plaintiff's moral turpitude and criminal fraud, and failure to be honest in court as to the extent of his criminal wrongdoing constitutes conduct relating to the partnership business that makes it not reasonably practicable to carry on the business with the plaintiff. These partners cannot trust Brennan with the finances of their business. When Richard Aiello was alive it made no difference. Now, they are vulnerable to him, particularly in light of Brennan's veto power under the partnership agreement. Further, the court finds his challenge to the integrity of Al Aiello conduct harmful to the healthy continuance of the partnership. His baseless claims of fraud remain; as Mihaly said, he has rung the bell and it cannot be un-rung. Brennan himself when he sought to make himself receiver pendente lite showed naked ambition to control the partnership, contrary to the terms of the agreement.
In light of the animosity that Brennan harbors toward his partners, his distrust of them (which distrust is mutual) and his suspicion that Al Aiello committed a fraud, it is not reasonably practicable for him to carry on business with them. The court finds that Al Aiello and Serge Mihaly gave Brennan the benefit of every consideration in his lease dealings and his check writing. He has rewarded them with nothing but suspicion and acrimony. Moreover, the partnership has reached an impasse regarding important business issues because of Brennan's veto power. The court finds that the defendants have proven that it is deleterious to the partnership for Brennan to remain as their partner under this section.
The court finds that Brennan's failure to be fully open and honest about his past criminal conduct results in an irreconcilable distrust of him by his partners and an inability to consider him to be trustworthy as an active participating partner in the advent of the partnership after Richard Aiello's death.
In sum, it is clear that Brennan can no longer do business with his colleagues, and vice-versa. The court finds that Brennan's conduct as detailed hereinabove, is a major cause for the present dissension and acrimony among the partners. While the court appreciates Brennan's frustration over some of Salvatore DiNardo's actions, that frustration cannot suffice to explain or justify Brennan's reprehensible conduct in dealing with Al Aiello and Serge Mihaly. The appropriate remedy under these circumstances is the dissociation of Brennan pursuant to General Statutes § 34-355(5)(C). See Warnick v. Warnick, 76 P.3d 316, 322 (Wyo. 2003) (Affirming trial court's finding of dissociation of partner where discussion over possible sale of partner's interest lead to heated dispute and physical altercations with other partner); Nupetco Associates v. Jenkins, 669 P.2d 877, 883 (Utah 1983) (Affirming trial court's dissolution of partnership where trial court found that partners could not agree on "method, timing and means" of managing partnership affairs and partners could no longer work together amid atmosphere of dissension, although neither party proved a breach of the partnership agreement); Covalt v. High, 675 P.2d 877 (N.M.Ct.App. 1983) (Dissolution appropriate where partners reached an impasse over whether to increase rent on partnership property, although breach of fiduciary duty not proven). See generally Am.Jur.2d Partnerships, § 571.
In light of the foregoing, the court need not reach the issues of whether dissociation is warranted pursuant to General Statutes § 34-355(5)(A) or (B).
The court does note that the defendants conceded in their post-trial memorandum that Brennan's lack of candor in discussing his criminal conviction caused no material harm to the partnership prior to the death of Richard Aiello.
The plaintiff claims, and has pleaded as a special defense, that the defendants lack clean hands and therefore the claims for dissociation should fail. Those claims, however, have no merit. The conduct of the defendants have never been wrongful or in violation of the terms of the partnership agreement. That the parties had a disagreement over the terms of the agreement that required a court ruling does not, in itself, constitute a breach of the agreement. That the DiNardo brothers thought they would be managing the property because of their cousin's will and their reliance on their attorney's interpretation of the agreement does not make their conduct wrongful. Once the court ruled, there has been no claim by the plaintiff of any wrongful conduct by any of the defendants. The partners' disagreement on how to proceed with the bank lease is a sign of healthy discussion, not wrongful behavior. There is nothing in the record to show wrongful behavior by any partner to the agreement who is a defendant. The plaintiff's special defense must fail.
The court grants judgment to the defendants on their claim for dissociation of plaintiff.
b. Reformation of the contract (Brought by the defendants David M. Lehn, Salvatore DiNardo, Peter DiNardo, and Leonard DiNardo, in their capacities as co-administrators of the Estate of Richard Aiello, and Al Aiello and Serge Mihaly)
At the time of trial, count two seeking, by way of relief, a reformation of the contract was granted on the record by consent of all of the parties. The judgment of reformation corrects the scrivener's error in paragraph 15, "Transferability," of the Brennan Associates' Partnership Agreement corrects the last sentence of that paragraph to state as follows: "Such assignment shall not be made without such written consent of the Partners but no partner shall unreasonably withhold consent."
Judgment therefore enters on count two as stated herein, without costs to any party.
c. Declaratory Judgment (Brought by the defendants David M. Lehn, Salvatore DiNardo, Peter DiNardo, and Leonard DiNardo in their capacities as co-administrators of the Estate of Richard Aiello, and Peter DiNardo and Leonard DiNardo individually)
The defendant co-administrators, along with Peter and Leonard DiNardo in their individual capacities, have filed a Counterclaim for a declaratory judgment, a portion of which (concerning the nature of the interest in Brennan Associates that may be transferred to the DiNardos by the Estate of Richard Aiello) was disposed of on summary judgment. The remaining claim seeks a declaration that Brennan's refusal to consent to the assignment of the Estate's economic interest in Brennan Associates to the DiNardos is unreasonable.
The defendants have asserted that the plaintiff has unreasonably withheld his consent to the assignment of the estate's interest pursuant to the provision of the agreement between the parties subject to the judgment of reformation, namely, paragraph 15, which is entitled "Transferability" and provides that the assignment of an economic interest in the partnership is subject to the approval of the partners as follows: "Such assignment shall not be made without such written consent of the Partners but no partner shall unreasonably withhold consent." (Emphasis added.)
The case law in Connecticut on what constitutes the unreasonable withholding of consent is concentrated in two primary areas: landlord-tenant law, and custodial decision-making in family dissolution cases. The former is more relevant to the matter at hand, and is a more developed area of law. The Restatement (Second) of Property has established a standard for determining when a landlord may reasonably withhold his consent to a tenant's transfer of his tenancy interest. The Restatement notes that such lease provisions are in derogation of the common law which would have allowed consent to arbitrarily be withheld. The reporters of the Restatement provided the following canvas of the status of the law in this area:
The "reasonableness" concept in the context of establishing what are reasonable bases for the landlord withholding consent to a transfer can be appraised from cases in which the lease agreement has stipulated that such consent shall not be withheld unreasonably. See 54 A.L.R.3d 689 (1973) and 1 M. Friedman, Friedman on Leases § 7.304c (1974) for extensive annotations of decisions in which courts have dealt with this problem. A general statement of what constitutes unreasonableness in this area was given in Mitchell's, Inc. v. Nelms, 454 S.W.2d 809, 814 (Tex.Civ.App. 1970), that being: "without fair, solid and substantial cause or reason." As to what constitutes reasonableness, most courts look to the standard of the reasonably prudent man, and leave no room for considerations of personal taste and convenience. Broad Branford Place Corp. v. J.J. Hockenjos Co., 132 N.J.L. 229, 39 A.2d 80 (1944). The court in American Book Co. v. Yeshiva University Development Foundation, Inc., 59 Misc.2d 31, 297 N.Y.S.2d 156 (Sup.Ct. 1969), provided greater specificity in delineating objective criteria constituting grounds for reasonable refusal, namely: (a) financial responsibility, (b) the "identity" or "business character" of the transferee, i.e., his suitability for the particular building, (c) the legality of the proposed use, and (d) the nature of the occupancy, i.e., office, factory, clinic, etc. The adherence to objectivity in this area is further illustrated by Theunissin v. Huyler's, Inc., 25 F.2d 530, 61 A.L.R. 706 (D.C. Cir. 1928), in which it was held that a provision prohibiting transfer for "objectionable purpose" refers only to purposes deemed objectionable in the legal sense, and not merely personally objectionable to the landlord (landlord's objection to assignment where assignee's business would compete with that of other tenant's held unreasonable). See also American Book Co. v. Yeshiva University Development Foundation, Inc., supra, ("doctrinal anathema" no ground for objecting to assignment of office space to planned parenthood group; this is Illustration 6); Roundup Tavern, Inc. v. Pardini, 68 Wash.2d 513, 413 P.2d 820 (1966) (landlord's personal objection to assignment for use as tavern, where lease placed no restriction on use, held unreasonable). It has been held that the landlord is not unreasonable in withholding consent when no guidelines as to the nature of the occupancy or suitability of the contemplated business activities are provided. Kroger Co. v. Rossford Industrial Corp., 25 Ohio Misc. 43, 51 Ohio.Op.2d 382, 261 N.E.2d 355 (Ct.Comm.Pleas 1969). There is authority indicating that the transfer must be consented to unless the prospective transferee is found unacceptable using the same standards applied in the acceptance of the original tenant. Shaker Building Co. v. Federal Lime Stone Co., supra.
Courts have acknowledged the reasonableness of a landlord wishing an evaluation of the transferee's financial stability. Riggs v. Murdock, 10 Ariz.App. 248, 458 P.2d 115 (1969). But if the original tenant offers to act as the guarantor of the transferee, a refusal on this basis has been deemed unreasonable. See Adams, Harkness Hill, Inc. v. North East Realty Corp., 361 Mass. 552, 281 N.E.2d 262, 54 A.L.R.3d 673 (1972).
Restatement (Second) Property, Landlord and Tenant, § 15.2, comment 6.
It is against this standard of construction that the court examines the reasonableness of the plaintiff's refusal to consent to the assignment to Peter and Leonard DiNardo. The basic reason that he has proffered is that he does not like their style of business and the influence that he is sure their father, Sal DiNardo would have over their business judgments. The financial stability of Peter and Leonard DiNardo respectively is strong. Each has experience and formal education which lends to their understanding of the work of Brennan Associates. There is no doubt as to the legality of the proposed assignment. The issue then as characterized by the law above is the character of these two individuals. No evidence was introduced to suggest that either Peter DiNardo or Leonard DiNardo lack a good reputation or business character in their community. The plaintiff points to Peter DiNardo's presence at the incident between his father and the bank manager as proof that the younger DiNardo will be adversely affected in Brennan Associates by his father. While his father exercised poor judgment in his dealings that day, there is nothing in that incident to suggest that the son will act similarly in his dealings, or, alternately, that such conduct by the father (if it were to occur again in the future) would some how coerce the younger DiNardos to act poorly. That both of them were of one mind that the bank should have accepted the estate representatives as signers provides no insight as to the instant question before the court. Similarly, that they have taken a united position on the question of the bank's rental terms, or believed that nonpaying tenants should be dealt with in a certain way are business judgments that all fall within the realm of the reasonable, even if it is not the way Tom Brennan asserts he would do business.
Finally, the assignment at issue is one which transfers income, not decision-making or management powers. Therefore the latter questions are of no moment to the issue at hand. The plaintiff has provided nothing other than an arbitrary withholding of his consent to the assignment by the Estate pursuant to paragraph 15. Therefore, the court finds it unreasonable and not in good faith. Warner v. Konover, 210 Conn. 150, 155, 550 A.2d 1138 (1989). Good faith in business dealings has been read in as an essential condition for all contracts. Collins et al. v. Anthem Health Plans, Inc., 275 Conn. 309, 333, 880 A.2d 106 (2005). The same doctrine of good faith in dealings applies here. The plaintiff cannot block the economic assignment just because he does not like the DiNardo brother's father. The Estate of Richard Aiello, as well as the other partners, have a right to require an objection be based in rational acts and facts; they are missing here. The court, finding the plaintiff unreasonably withheld his consent, orders that that the Estate of Richard Aiello may transfer, pursuant to paragraph 15 of the Brennan Associates partnership agreement, all of its economic interest to Peter DiNardo and Leonard DiNardo. Therefore, judgment enters on this matter for the defendants.
In its memorandum of decision on the motion for summary judgment in this matter, the court also raised questions about whether a period of time of reasonableness may be imputed by the court for the time that the administrators could act on behalf of the estate during the period of estate administration. The court also raised the question as to whether the fact that the estate had so many administrators would result in unwieldiness for the partnership in the conduct of partnership affairs during the period of estate administration. The court has, after hearing all the evidence, determined that it was improvident of it to raise these issues outside of the pleadings and therefore declines to make findings or orders regarding the same.