Opinion
No. CV 07-5003925 S
July 31, 2008
MEMORANDUM OF DECISION
I. NATURE OF THE CASE
This case arises out of a one-count complaint filed on July 12, 2007, by the plaintiff, The City Fish Market, Inc. (hereinafter referred to as, City Fish) against the following named defendants: "David Tolly, a.k.a. David H. Tolly, a.k.a. David Tully, d/b/a Avon Old Farms Inn, and Angie Tolly, a.k.a. Angelita K. Tolly, a.k.a. Angie Tully, d/b/a Avon Old Farms Inn."
The plaintiff alleges that it is engaged in the sale of commercial fish products, and that from September 2, 2006, to February 10, 2007, the defendants purchased seafood items from City Fish and "agreed to pay the reasonable value for said items." The plaintiff claims and the parties have so stipulated that the amount presently due to the plaintiff for said items is $15,238.30. Plaintiff seeks interest and costs, including attorneys fees, which plaintiff claims the defendants "agreed to pay" in the event of a default in payment for the sale of the fish.
The defendants, in their special defense filed on August 13, 2007, admit that Angelita Tolly and/or her fellow employees ordered the fish products at issue, but that she and others did so on behalf of Avon Old Farms Inn, Inc., a duly registered Connecticut corporation in good standing. The defendants assert that the debt in question is a corporate obligation of Avon Old Farms Inn, Inc. and that neither of the defendants are personally liable, as neither ever agreed to be personally liable for the purchase of the fish from the plaintiff. The defendants added a counterclaim to their pleading, alleging that the plaintiff's actions violated the Connecticut Unfair Trade Practices Act, commonly known as CUTPA, however, the same was withdrawn at the trial.
Notably, on May 30, 2007, Judge Trial Referee Murray conducted a hearing on the plaintiff's application for a pre-judgment remedy. The plaintiff sought to attach the real estate owned by the
defendants. The transcript of that hearing was admitted as a full exhibit at the trial as Plaintiff's Exhibit #4. Judge Murray subsequently granted the plaintiff's application, finding the requisite probable cause. See Memorandum of Decision filed July 3, 2007.
In August 2007, the defendants impleaded Shawn Daigle. In their third-party complaint, the defendants allege that in April 2007, Daigle purchased all of the stock of Avon Old Farms Inn, Inc. from Angelita Tolly and agreed at that time to hold harmless each of the defendants from any debts then due from the corporation, including the outstanding balance owed by the corporation to City Fish. The defendants further alleged that Daigle has refused to honor his agreement, which has resulted in the underlying lawsuit by City Fish and the attachment of their real estate, as a result of which they claim that they lost a sale to a prospective buyer.
The parties to the third-party complaint have stipulated to certain facts and have agreed to a briefing schedule. Although the decision on the third-party complaint is somewhat dependent on the facts involved in this court's decision on the underlying complaint, a decision on the former is not part of this memorandum and will await further proceedings and further findings by this court.
The trial was held on May 21, 2008, during which the court heard from two witnesses, John Anagnos, who is the president of City Fish and Angelita Tolly, the former sole shareholder of Avon Old Farms Inn, Inc. Davina Ulisse, who is the credit manager of the plaintiff, chose to ignore a duly served subpoena. David Tolly, a defendant and former chief executive officer of Avon Old Farms Inn, Inc., was unavailable for the trial. However, the parties agreed that the court should read the testimony of each given at the pre-judgment hearing as contained in Plaintiff's #4. In addition to that exhibit, the court received an Account Profile And Sales Agreement ( Plaintiff's Exhibit #1); thirty-four invoices ( Plaintiff's Exhibit #2) and a Statement Of Account ( Plaintiff's Exhibit #3). The parties stipulated that the fish products valued at $15,238.30 were delivered to the business address of Avon Old Farms Inn, Inc. and that said amount remains unpaid. The plaintiff filed its post-trial brief on June 10, 2008, and the defendants filed their responsive brief on June 28, 2008. The plaintiff filed a reply brief on July 15, 2008. The court, after reading all of the pleadings; reviewing all of the exhibits; considering the testimony of the witnesses at trial and that at the pre-judgment remedy hearing; assessing the credibility of each of the witnesses and considering the arguments of counsel and the briefs filed by each parties, makes the following findings.
II. RELEVANT TESTIMONY AND EXHIBITS A. John Anagnos-President, City Fish
Anagnos testified that he has been employed by the plaintiff for fifty-one years and has owned the company for the past twelve years. The company delivers frozen and fresh seafood throughout
Connecticut, Massachusetts and Rhode Island. As of August 2005, the plaintiff had been doing business with Avon Old Farms Inn, Inc., a corporation organized and existing under the laws of the State of Connecticut, for the past fifteen to twenty years.
In August 2005, he became aware that there were new owners (the defendants) and testified that his procedure was to obtain an account profile, which is Plaintiff's Exhibit #1. He caused the profile to be faxed to Jo-Ann, who for the past several years had been the bookkeeper at Avon Old Farms Inn, requesting that she obtain the signature of the new owners. The document contained language that personally guaranteed payment for all deliveries of the fish products. He stated that he never received any response, despite numerous attempts by his employees to obtain the signatures of David and Angelita Tolly.
Despite his lack of success with regard to his attempts to obtain the personal guarantees, the outstanding balance accumulated by Mr. Simmons, the previous principal or sole shareholder of Avon Old Farms Inn, Inc., was paid by said corporation while under the control of the Tollys. Despite the fact that no personal guarantee had been received by it, City Fish continued to make the deliveries to Avon Old Farms Inn. The invoices, however, for the ensuing eighteen months were made out as follows:
AVON OLD FARMS INN DAVID ANGIE TULLY PO BOX 535 AVON, CT 06001
To the left of this heading and slightly above were two boxes. The top box contained "DELIVER TO", while the one below it contained "SOLD TO." See Plaintiff's Exhibit #2.
Printed on each of the 34 invoices received in evidence were the so-called "sales terms" which included the payment of interest at 1 1/2 percent a month for delinquent accounts and attorney fees. Plaintiff claims interest in the amount of $3,428.55. As noted earlier herein, the parties have stipulated that there is indeed a balance due from Avon Old Farms Inn, inc. to the plaintiff of $15,238.30, however, the crux of the dispute is whether or not David and Angelita Tolly are personally responsible for the corporate debt. The plaintiff admitted
that he had no personal conversation with the Tollys, however, despite the lack of a written or oral personal guarantee the business relationship and the deliveries of the fish continued from August 5, 2005 through September 6, 2006, at which time Avon Old Farms Inn, Inc. ceased paying the disputed invoices. Anagnos confirmed that Avon Old Farms, Inc., at any given time during the long-standing relationship between the two companies, carried an account balance of $12,000-$15,000 with City Fish.
B. Angelita Tolly-former sole shareholder of Avon Old Farms Inn, Inc.
She testified that in June 2005, she purchased all of the stock of Avon Old Farms Inn, Inc. and subsequently paid the outstanding balance that was due from the corporation while under the control of the previous owner. She admits that there is no dispute as to the amount of the debt claimed by City Fish nor that the fish products listed on the invoices were delivered to Avon Old Farms Inn. Despite the fact she paid all of the invoices received while she was in control of the corporation, she confirmed that she never signed any personal guarantee and told "her people" to inform City Fish of her refusal to sign the account profile. She admitted that she never communicated to City Fish any objection as to the manner in which the invoices were billed, but added that she did not know that it was a personal bill to her and her husband, that is, until City Fish commenced this lawsuit.
In April 2007, she agreed to sell all of her stock in the corporation to Shawn Daigle and confirmed that she was the sole owner of all of the stock of the corporation from June 2005 to April 2007. She confirmed that the balance due to City Fish from Avon Old Farms Inn, Inc. as of the date of the sale of stock to Mr. Daigle was, in fact, $15,238.30, however, she insisted that Daigle "picked up the debt" and, therefore, he should be responsible as he presently owns all of the corporate stock. When shown several of the invoices by the court that had signatures thereon, she identified three of the signatures as her stepson, the executive chef and the event planner. All three signed the invoices as employees of the corporation.
C. The Pre-Judgment Remedy Hearing
As noted, the hearing before Judge Murray on May 30, 2007, resulted in a finding probable cause for the plaintiff's claim and the authorization of an attachment of the defendants' real estate in the amount of the debt. The court, having read the entire transcript, will address the portions thereof which this court deems relevant and material to the CT issues in this case.
1. Reference to the case of City Fish v. Varipapa, 76 CA 905 (2003).
This was a per curiam affirmation of an opinion written by Judge Berger on the very issue presented in this case. This case is also attached to and referred to in the defendants' brief. Apart from the fact that the case appears to be dispositive of the issue at the crux of this case and involves the same plaintiff, the significance of the case, in this court's view, is the fact that its existence and the lower and appellate court decisions thereon were clearly known to Mr. Anagnos when, in response to a specific discovery order issued by Judge Pittman, he stated that he knew of "no invoices or documents which are billed to a corporate account and also contains the corporate owner's name." In light of the quoted case, those statements, contained in a sworn affidavit, seriously calls into question the affiant's credibility.
2. The Testimony of Davina Ulisse
As noted, she is the credit manager employed by the plaintiff, who has held that position for seventeen years. She confirmed that arrangements were made with the Tollys after the transfer of the stock ownership of Avon Old Farms Inn, Inc. took place that the bill that was outstanding under the previous ownership was paid by the successor "owners." She confirmed that she was the one who sent the account profile to Avon Old Farms under the control of the Tollys and that it was the business practice to do so for a "new account." The account profile was faxed to Jo-Ann, as she was in charge of the office at Avon Old Farms. Ulisse confirmed that despite repeated requests, the account profile was never signed or filled out by the Tollys. She confirmed that no one from Avon Old Farms ever communicated any objection to the manner in which the invoices were sent. Notably, on cross examination, she either failed to appreciate or refused to accept the principles, clearly established under Connecticut law, of limited liability and separate corporate existence. She states on page 29 of the transcript, in response to a question as to whether she ever checked with the Secretary of State to determine whether Avon Old Farms Inn was incorporated, "No I don't do that. I don't care about corporations. We deal with people, not corporations." When informed by counsel that the independent corporate existence was the very issue in this case, her response was: "It's not my issue. We sold to Angie and David Tolly." On page 34, she responds: "correct" to counsel's question: "And you have no personal guarantee, or any written agreement from the Tollys to either be invoiced or pay for the bills." Correct? It is clear that the credit manager for City Fish
has no concept of or appreciation for the legal status of a corporate entity in this state, not to mention mandatory civil process.
3. Defendant, David Tolly-Former CEO, Avon Old Farms, Inn, Inc.
Tolly confirmed that as part of the stock transfer in which his wife purchased the restaurant from the previous owners, the liabilities of the corporation were to be continued forward and paid off by the corporation. When asked by plaintiff's attorney, whether he and his wife paid the amount due to City Fish, his response was: "No, City Fish was paid off by Avon Old Farms Inn, Inc." During his wife's ownership of 100% of the stock of the corporation, he was the corporation's chief executive officer and chief financial officer. On page 56 of the prejudgment transcript, he succinctly communicates he and his wife's position on this lawsuit: When he was asked by plaintiff's counsel, whether or not he ever objected to his name being inserted on the City Fish invoices, his response was: "I didn't need to object. I didn't sign any of those invoices, nor did I sign a contract with City Fish to be personally involved, or responsible for it." When asked to explain further, he stated: "The documents — the invoices purport to be a contract. And, in order for a contract to be completed, my wife or myself are the only two people in the organization who would've had to sign it in order to make it a contract. We didn't sign any of those invoices and we didn't sign any — any agreement at the beginning when we acquired the company, and so it was moot."
When asked by his attorney to give his opinion as to who owes the money to City Fish, his response was: "Avon Old Farms, Inc., the corporation."
III. CLAIMS OF THE PARTIES A. The Plaintiff's Claim
The plaintiff makes reference to the format employed by it in its invoices, pointing out that the fish was delivered to Avon Old Farms Inn, but was sold to the defendants as individuals. Relying on the manner of billing selected by it, City Fish correctly points out that over the eighteen-month period during which the parties to this suit did business, the defendants never voiced or otherwise communicated to City Fish any objection to the way in which the invoices were filled out. This lack of objection, while accepting the invoices, without correction, and
the fish products that were delivered to the inn, plaintiff argues, is indicative of the acceptance by the Tollys of
individual liability.
In support of its position that the Tollys are individually liable, the plaintiff cites the case of Connecticut Limousine Service, Inc. v. Nancy Powers et al., 7 Conn.App. 398 (1986), which stands for the legal principle that an agent who contracts for goods or services in his/her own name, without disclosing his/her representative or corporate capacity, is personally liable to pay for the goods or services provided. The case further holds that in order to avoid personal liability, the agent or corporate representative is obligated to fully disclose the representative capacity in which she/he is acting and to specifically identify the principal or corporate entity involved. In this case, the plaintiff argues, the Tollys had a duty to inform City Fish that it was selling and delivering to a corporation and that neither of the defendants would accept personal liability for the fish products delivered to Avon Old Farms Inn by the plaintiff. The plaintiff asserts that the Tollys' failure to disclose the existence of the corporate entity, despite the fact that the two corporations did business for decades, or their failure to return the fish establishes their individual and personal liability under Connecticut law. As the plaintiff puts it in its brief:
[W]here there was nondisclosure to the plaintiff that there was a corporation and where there was no objection during the time period in question, August 2005 through February 2007, to the way the billing was done, the defendants should not be relieved of personal liability.
B. The Defendants' Position
The defendants point out that Avon Old Farms Inn, Inc. was and currently is a Connecticut corporation that has maintained its corporate existence in good standing before Angelita Tolly purchased all of the corporate stock, during the time that she was the sole owner of that stock and after she sold all of her shares to Daigle. Despite the fact that Anagnos never received the personal guarantee of the Tollys that he solicited, he unilaterally decided to insert the name of each defendant on the City Fish invoices and did so, as he testified to, without any conversation with either of the defendants. The defendants also refer to the fact that neither of them signed any of the City Fish invoices and assert that neither of them authorized any of the corporate employees
who did sign the invoices to bind the defendants personally to the corporate debt.
The Defendants cite Section 33-673 of the Connecticut General Statutes which provides, in subparagraph (b), that:
Unless otherwise provided in the certificate of incorporation, a shareholder of a corporation is not personally liable for the acts or debts of the corporation except that he may become personally liable by reason of his own acts or conduct.
The defendants, therefore, argue that even a shareholder who owns the entire stock of a corporation cannot be held personally liable for any of the corporate debts, citing Old Farms Associates v. Commissioner of Revenue Services, 279 Conn. 465 (2006). For a shareholder to be held liable for a debt of the corporation, he/she must have signed a personal guarantee or rewritten contract. Landry v. Spitz, 102 Conn.App. 34 (2007). Thus, the defendants argue, based on statutory and case law in Connecticut, that unless the plaintiff can produce a written contract or guarantee, signed by Angelita or David Tolly, the individual defendants cannot be held liable for those fish deliveries to Avon Old Farms Inn that remain unpaid.
The defendants correctly assert that there was no evidence adduced at trial that either of the defendants, in writing or orally, made any agreement with City Fish to be personally liable for the fish sold and delivered to Avon Old Farms Inn. They never signed the account profile and neither had any direct contact with Anagnos relative to any issue. The defendants argue that given the fact that the plaintiff's complaint implicates a cause of action based solely on a claim that the defendants "agreed" to pay for the fish deliveries, absent any proof of such agreement, the plaintiff cannot prove that which it has alleged in the sole count of its compliant. The complaint, the defendants assert, is not based on a theory estoppel, unjust enrichment, quasi contract or implied contract; it is solely based on the alleged breach of an express contract, the existence of which the plaintiff cannot and did not establish at the trial.
The defendants ask this court not to permit the plaintiff to argue in its brief a legal theory that was not advanced in its compliant. They cite Russell v. Russell, 91 Conn.App. 619 (2005) for the principle which we as judges consistently charge juries, i.e., that a plaintiff is limited in his/its recovery to what is pled in the compliant. The defendants, therefore, argue that the court should not consider the
"theory" advanced by the plaintiff in its brief, a theory that the mere sending of the invoices in the name of the individual defendants,
coupled with their failure to correct the invoices or to return the fish creates in each of them a personal liability.
The defendants argue that the Connecticut Limousine case, supra, is not applicable to the factual scenario in this case, as, in this case, unlike the "agent" in that case, neither of the defendants communicated directly with City Fish. Neither agreed to be personally liable, neither agreed to the insertion of his or her name on the invoices and neither signed any of the invoices. In Connecticut Limousine, the defendant Powers carried out all of the business herself and the court found no evidence of a separate corporate existence, in this case, Angelita Tolly had no contact with Anagnos or any employee of City Fish; she testified that payment was always made by corporate check from the corporate accounts and that the corporation was at all times in good standing and operated publicly as Avon Old Farms Inn, Inc. In summary, the defendants argue that there simply is no legal theory or precedent, including that established in the Connecticut Limousine case, that places the burden on a corporate shareholder to correct an invoice that he/she never agreed to personally pay.
The defendants refer to the case of City Fish Market, Inc v. Varipapa, referred to earlier herein, wherein Judge Berger rejected the precise argument made by the plaintiff in this case. That case involved the unilateral insertion by City Fish of the shareholder's name on the invoice for fish delivered to a corporate entity. Justice Burger, in ruling that the individual defendant was not personally liable, stated:
The fact that the plaintiff made the invoices out to "Leon's Rest ED/Leon Joseph Varipapa" does not make the named defendant personally liable for the corporate debts. (Emphasis by Judge Berger.)
Notably, in that case, decided when Ulisse was the credit manager of the plaintiff, the fact-finder found that Varripapa neither ordered the seafood or agreed to personally pay for it. The manager of City Fish decided to unilaterally insert Varripapa's name on the invoice!
Finally, as to any claim that the signature of the executive chef, the event planner or the employee-stepson, somehow imposed personal liability on either of the defendants, the defendants assert that simply because those individuals were authorized by their corporate employer to accept deliveries, that does not establish or imply any authority granted to them by either defendant to bind them personally to the debt. As the
defendants correctly assert, the chef's acceptance of a delivery or deliveries of seafood should not be deemed the legal equivalent of the Tollys' signature on a personal guarantee or contract. The
defendants also correctly point out that no agency theory was pled by the plaintiff in its compliant.
IV. DISCUSSION
The court agrees with the defendants that the plaintiff's one-count complaint is grounded in one legal theory — the breach of an agreement by the defendants. As noted earlier herein, City Fish alleges, in paragraph 42 of its complaint:
The defendants, on or about September 7, 2006, through and including February 10, 2007, purchased seafood items from the plaintiff and agreed to pay the reasonable value for said seafood items. (Emphasis added.)
There has been no evidence presented by the plaintiff at the trial either that the Tollys individually purchased seafood items or that they agreed to pay for any of such items delivered by the plaintiff to the Avon Old Farms Inn from September 2, 2006 to February 10, 2007. On the contrary, there is no question that the Tollys declined, by ignoring it, City Fish's request to complete the account profile (Plaintiff's #1) and by so doing, refused to agree to be personally liable by personally guaranteeing the payment for the products delivered by City Fish to said inn during that period of time. There is no evidence that either of the Tollys had any conversation with Anagnos or Ulisse, let alone orally agreeing to assume personal liability. The court agrees with the defendants that the plaintiff did not prove what it alleged in its complaint.
If Anagnos and Ulisse were concerned over the tacit refusal of the Tollys to complete the account profile, the solution was a simple one-cease the delivery of the product until the form was completed and personal liability was confirmed! The manner in which City Fish chose to address its concern was, in this court's view, inappropriate and legally ineffective in achieving the desired result.
In this regard, the court will refer to Judge Robinson's decision in City Fish Market v. Rapolla (CV99-0496060), 1999 Ct.Sup. 10942 from this judicial district. In that case, decided two and one-half years before a Judge Berger's decision in Varripapa, supra, City Fish was denied an attempt to attach real estate owned by the ex wife and employee of the principal owner/manager of The Captains Galley restaurant in Orange. City Fish had, as it did in this case, inserted the wife's name on the invoices, without her permission and without any agreement by her that that she would assume personal liability for the debts of the restaurant. Judge Robinson found that her failure to seek a correction of the invoices was insufficient to establish the personal liability of the wife for the debt owed to City Fish by the restaurant, a limited liability corporation. In light of these two previous decisions, and in light of the position taken by this court, it is strongly suggested that
City Fish, Anagnos and Ulisse immediately cease this questionable and ill-conceived business practice.
The plaintiff chose not to include in its complaint other alternative legal theories such as promissory estoppel or implied (in law or in fact) contract. No agency theory was alleged in said complaint; there was no count alleging unjust enrichment, which is the same cause of action as
quasi-contract. The plaintiff simply alleged, as its sole legal theory, the breach of an express agreement. There was no agreement entered into between City Fish and the Tollys, wherein the latter agreed to be personally responsible for the products delivered to Avon Old
Farms Inn.
Our appellate court has stated:
The allegations of a complaint limit the issues to be decided on the trial of a case and are calculated to prevent surprise to opposing parties . . . It is fundamental in our law that the right of a plaintiff to recover is limited to the allegations of his complaint.
Provenzano v. Provenzano, 88 Conn.App. 217, 225 (2005).
In Russell, supra, the court further stated:
Although we have reviewed all of the testimony and the evidence submitted at trial, we rely primarily on the pleadings and judgment in the contract action to assist us in resolving the defendants' claim . . . It is axiomatic that the parties are bound by their pleadings and it is equally clear that [t]he court is not permitted to decide issues outside of those raised in the pleadings . . . A judgment in the absence of written pleadings defining the issues would not merely be erroneous, it would be void. (Citations and internal quotation marks omitted.)
Russell v. Russell, 91 Conn.App. 619, 632-34 (2005).
Again, in a recent case, our appellate court instructed:
The interpretation of pleadings is an issue of law. As such, our renew of the court's decisions in that regard is plenary . . . The allegations of a complaint limit the issues to be decided on the trial of a case and are calculated to prevent surprise to opposing parties . . . It is fundamental in our law that the right of a plaintiff to recover is limited to the allegations of his complaint. The purpose of a complaint . . . is to limit the issues at trial, and . . . pleadings are calculated to prevent surprise . . . It is fundamental to our law that the right of a [party] to recover is limited to the allegations in his [pleading] . . . Facts found but not averred cannot be made the basis for a recovery. (Internal citations and quotation marks omitted.)
Stamford Landing Condominium Association, Inc. v. Lerman, 109 Conn.App. 261, 271 (2008).
V. CONCLUSION AND ORDER
Based on the foregoing, this court finds that the plaintiff has failed to prove that the defendants agreed to be personally liable to City Fish for deliveries of seafood products to Avon Old Farms Inn from September 2, 2006 to February 10, 2007, as a result of which Avon Old Farms Inn, Inc. remains indebted to City Fish in the amount of 15,238.30. City Fish should collect its debt from that corporation.
Accordingly, on the underlying complaint, judgment may enter in favor of the defendants Angelita Tolly and David Tolly, as against the plaintiff, The City Fish Market, Inc.