Interim Capital, LLC v. Chiangi

Full title: INTERIM CAPITAL, LLC v. JOHN A. CHIANGI ET AL

Court: Connecticut Superior Court Judicial District of New London at New London

Date published: Mar 31, 2010

2010 Ct. Sup. 8099 (Conn. Super. Ct. 2010)

Opinion

No. CV 096000984

March 31, 2010

MEMORANDUM OF DECISION RE MOTION TO STRIKE #113

MARTIN, J.

FACTS

On November 4, 2009, the defendants, Stonington Services, LLC, Jo-Ann Chiangi and John Chiangi, Jr., ¹ filed this motion to strike and memorandum in support. On December 21, 2009, the plaintiff, Interim Capital, LLC, filed an objection and memorandum in opposition.

1 John A. Chiangi is also a named defendant in this action. On July 2, 2009, the court granted the plaintiff's motion to default John A. Chiangi for failure to appear. The three other defendants, Stonington Services, LLC, Jo-Ann Chiangi and John Chiangi, Jr., collectively filed this motion to strike and will be referred to as "the defendants" hereinafter.

The plaintiff alleges the following facts in its complaint. John A. Chiangi (John) and Jo-Ann Chiangi (Jo-Ann)² are husband and wife, and John Chiangi, Jr. (John, Jr.) is their son. On or about January 20, 1997, Brand Fire Protection Services, Inc. (Brand Fire Protection), by its president, John, obtained a loan from Fleet Bank (the loan), which was a revolving line of credit agreement in the amount of $80,000. John executed a personal guarantee to secure the loan.

2 Jo-Ann Chiangi is also referred to as "Joanne Chiangi" and "Jo-Anne Chiangi" in various filings. She is referred to as "Jo-Ann Chiangi" in the summons and the second revised complaint; accordingly, she will be referred to as "Jo-Ann" hereinafter.

On or about October 19, 2001, Brand Fire Protection changed its name to Brand FireSafety Services, Inc. (Brand FireSafety). In December 2004, Stonington Services, LLC (Stonington Services) was formed with John, Jr. as the sole owner. Subsequently, sixty percent of the interest was transferred to Jo-Ann. Jo-Ann and John, Jr. are the current principals, with Jo-Ann acting as the CEO and John, Jr. acting as vice-president.

On or about November 30, 2005, Bank of America, the plaintiff's predecessor in interest, provided John with a written notice that the loan was in default. Days later, John caused the corporation to be dissolved. In or around December 2005, John, Jo-Ann and John, Jr. sold and/or transferred any and all assets, accounts receivable and all items of value from Brand FireSafety to Stonington Services. Jo-Ann and John, Jr. knew that John was indebted to the plaintiff and aided, abetted and conspired with John to accept the conveyance or transfer of assets from Brand FireSafety.

On or about April 7, 2006, Bank of America assigned the loan to the plaintiff. On or about December 19, 2006, the plaintiff obtained a judgment in its favor against Brand FireSafety, formerly known as Brand Fire Protection, and John in the amount of $97,799.52, plus attorneys fees and costs. See Interim Capital, LLC v. Brand FireSafety Services, Inc., Superior Court, judicial district of New London, Docket No. CV 06 5001679. At the time the judgment was obtained, John was the president of Brand FireSafety. Jo-Ann was the CEO and sole owner of the corporation's stock. John, Jr. was the vice-president. The plaintiff has taken steps to secure and satisfy the judgment, but only $772.60 has been collected on the judgment to date.

Brand Fire Protection remains the titleholder of real property known as Campground Road in Stonington, Connecticut. The name "Brand Fire Services" is still utilized by the defendants to conduct and solicit business. Stonington Services is engaged in the same business as Brand FireSafety and operates at the same address that Brand FireSafety operated.

Count one of the second revised complaint alleges a cause of action for fraudulent transfer pursuant to General Statutes § 52-552e(a). Count two alleges a cause of action for common law fraudulent transfer. The defendants move to strike both counts.

DISCUSSION

Practice Book § 10-39(a) provides, in relevant part: "Whenever any party wishes to contest . . . the legal sufficiency of the allegations of any complaint, counterclaim or cross claim . . . to state a claim upon which relief can be granted . . . that party may do so by filing a motion to strike the contested pleading or part thereof." In ruling on a motion to strike, "[t]he role of the trial court [is] to examine the [complaint], construed in favor of the [plaintiff], to determine whether the [plaintiff has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997). "In ruling on a motion to strike, the court is limited to the facts alleged in the complaint." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997).

"[I]f acts provable in the complaint would support a cause of action, the motion to strike must be denied . . . Moreover . . . [w]hat is necessarily implied [in an allegation] need not be expressly alleged . . . It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted . . . Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Violano v. Fernandez, 280 Conn. 310, 318, 907 A.2d 1188 (2006). When considering a motion to strike, a trial court is generally limited to the grounds alleged in the motion. "Although grounds other than those specified should not be considered by the trial court in passing upon a motion to strike . . . where the trial court sustains a motion to strike on erroneous grounds, if another ground is appropriate, the granting of the motion will be upheld by this court . . . Of course, the alternative ground must have been alleged in the motion to strike in some form." (Internal quotation marks omitted.) Gazo v. Stamford, 255 Conn. 245, 259, 765 A.2d 505 (2001).

"A party alleging a fraudulent transfer or conveyance under the common law bears the burden of proving either: (1) that the conveyance was made without substantial consideration and rendered the transferor unable to meet his obligations or (2) that the conveyance was made with a fraudulent intent in which the grantee participated . . . These are also elements of an action brought pursuant to General Statutes §§ 52-552e(a) . . . Indeed, although the statute provides a broader range of remedies than the common law . . . the Uniform Fraudulent Transfer Act is largely an adoption and clarification of the standards of the common law of [fraudulent conveyances]. . ." (Citations omitted; internal quotation marks omitted.) Certain Underwriters at Lloyd's, London v. Cooperman, 289 Conn. 383, 394-95, 957 A.2d 836 (2008).

The defendants move to strike count one of the complaint on the ground that it "is legally insufficient because the [p]laintiff fail[s] to allege that (i) it was a creditor of the [d]efendants at the time of the alleged fraudulent transfers, and (ii) the [d]efendants were transferees of the transferred assets . . ." Motion to Strike, p. 1. The defendants move to strike the second count on the same grounds. Additionally, the defendants move to strike the second count on the ground that the plaintiff fails to allege "specific acts of fraud." Id., p. 2.

I

The defendants' first ground is that the plaintiff fails to allege that it was a creditor of the defendants at the time of the allegedly fraudulent transfer. Specifically, the defendants cite the plaintiff's allegations that the alleged transfers occurred in December 2005, and that Bank of America's assignment of the loan to the plaintiff took place in April 2006. The defendants assert that these allegations are legally insufficient because a cause of action for fraudulent transfer requires that the plaintiff was a creditor of the defendants at the time the alleged transfer occurred. In response, the plaintiff argues that it alleges that it was the assignee of Bank of America, and thus assumes Bank of America's status as creditor of the loan.

Section 52-552e(a), which addresses fraudulent transfers as to current creditors, provides: "A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, if the creditor's claim arose before the transfer was made or the obligation was incurred and if the debtor made the transfer or incurred the obligation: (1) With actual intent to hinder, delay or defraud any creditor of the debtor; or (2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor (A) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction, or (B) intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due." General Statutes § 52-552b provides definitions of terms for the Uniform Fraudulent Transfer Act. Section 52-552b provides, in relevant part: "As used in sections 52-552a to 52-552l, inclusive . . . `[c]laim' means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured . . . `Creditor' means a person who has a claim."

In the present case, the plaintiff alleges that Brand Fire Protection obtained a loan in the amount of $80,000 that was subsequently assigned to the plaintiff. The plaintiff alleges that, as the assignee of the loan and holder of the note evidencing the loan, it obtained a judgment in its favor against Brand FireSafety, formerly known as Brand Fire Protection. The plaintiff alleges that it is owed a debt on account of the judgment entered. Thus, the plaintiff sufficiently alleges that it is a creditor for the purposes of § 52-552e. The plaintiff incorporates the same arguments into the second count of the complaint, which alleges a cause of action based on common law fraudulent transfer. The same analysis applies; Certain Underwriters at Lloyd's, London v. Cooperman, supra, 289 Conn. 395; the plaintiff sufficiently alleges that it is a creditor for common law cause of action as well.

II

The defendants' second ground for their motion is that the plaintiff fails to sufficiently allege that the defendants were "transferees of the transferred assets." Specifically, the defendants argue that "[t]he Uniform Fraudulent Transfer Act . . . imposes liability only on tranferors and transferees of assets or the persons for whose benefit the transfer was made . . . The [p]laintiff alleges only that Brand and Stonington were the alleged transferor and transferee of the Brand Assets." (Citations omitted.) Memorandum of Law in Support of Motion to Strike, p. 5. In response, the plaintiff argues that "the definitions contained in . . . § 52-552b do not even include the term `[t]ransferor' or `[t]ransferee'; the fact that the [p]laintiff alleges that the assets were transferred to the [d]efendants is clearly sufficient." The plaintiff argues that it sufficiently alleges that subsequent to the notice of default by Bank of America, the defendants transferred substantially all of the assets from Brand Fire Services to Stonington Services.

With respect to this ground, the defendants argued at oral argument that the plaintiff's claims are legally insufficient as to Jo-Ann and John, Jr. because the complaint alleges that they received assets as members of an LLC, and therefore they cannot be a debtor within the meaning of § 52-552e. The defendants stated that they did not dispute that the complaint sufficiently alleges that Stonington Services was the transferee of the assets.

The court does not need to address the substance of the defendants' or plaintiff's arguments regarding whether the plaintiff alleges that Jo-Ann and John, Jr. were "transferees or transferors." The complaint must be construed broadly, and a motion to strike must fail if any of the plaintiff's claims are legally sufficient. In the present case, the plaintiff alleges that the assets from Brand FireSafety, formerly known as Brand Fire Protection, were transferred to Stonington Services. The defendants do not dispute that the allegations have been properly pleaded as to Stonington Services. Thus, the allegations in counts one and two are legally sufficient with respect to the allegations against Stonington Services.

A motion to strike is not the appropriate procedural vehicle to address whether the allegations are sufficient with respect to Jo-Ann and John, Jr. "[T]he proper way to cure any confusion [regarding the complaint] is to file a [request] to revise, not a motion to strike the entire complaint . . . If a request to revise had been granted and complied with, the defendants would then have been in a position to move to strike any count of the plaintiff's revised complaint pertaining to their respective liabilities for which the plaintiff was unable to allege the necessary prerequisites." (Citation omitted.) Rowe v. Godou, 209 Conn. 273, 279, 550 A.2d 1073 (1988). Counts one and two are legally sufficient with respect to at least one defendant, Stonington Services. Accordingly, the motion to strike cannot be granted on this ground.

CT Page 8104

III

Finally, the defendants move to strike count two of the second revised complaint on the ground that the plaintiff has failed to allege any specific acts of fraud. Specifically, the defendants argue that count two is legally insufficient to state a claim for common law fraudulent transfer because the plaintiff fails to allege that the transfer of assets were made without substantial consideration. Additionally, the defendants argue that "the [p]laintiff's allegation that the transfers were made with fraudulent intent are conclusory at best." Memorandum of Law in Support of Motion to Strike, p. 7. In response, the plaintiff asserts that it adequately alleges that the assets of Brand Fire Protection and Brand FireSafety were transferred wrongfully to Stonington Services in an attempt to avoid the debt.

A plaintiff alleging fraudulent transfer must allege either that the transfer was made without substantial consideration and rendered the transferor unable to meet his or her obligations, or that the transfer was made with a fraudulent intent in which the grantee of the transfer participated. Certain Underwriters at Lloyd's, London v. Cooperman, supra, 289 Conn. 395. In the present case, the plaintiff does not allege that the transfer was made without consideration. The plaintiff alleges that the defendants knew that John was indebted to the plaintiff and accepted the transfer with this knowledge. The plaintiff also alleges that the transfer deprived John of sufficient means to satisfy the debt.

The defendants recognize in their memorandum of law that the plaintiff alleges that the transfers were made with fraudulent intent. The defendants argue, however, that the allegations regarding the defendants' intent are conclusory. This argument is without merit. "A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). The plaintiff alleges that the defendants were aware of John's debt. The plaintiff also alleges that John, Jo-Ann and John, Jr. transferred all assets from Brand FireSafety to Stonington Services after John received notice that the debt was in default. These specific facts support the plaintiff's allegation that the defendants transferred the assets with fraudulent intent, thus, the allegation is not conclusory.

CONCLUSION

Based on the foregoing, the defendants' motion to strike is denied with respect to both counts.