Opinion
No. CV 07-5013091-S
August 17, 2010
MEMORANDUM OF DECISION
FACTS AND PROCEDURE:
This is a somewhat unusual case in which the defendants chose not to be present throughout the trial, and presented no witnesses. Defendants' attorney was limited, therefore, to cross examination of the plaintiff. The plaintiff was the only person to testify, and the Court found her honest and credible.
The plaintiff, Katherine Lodovico, met the defendant, Richard Mihalcik a/k/a (hereinafter also "Mihalcik") when both of them were employed by the Beazley Company Real Estate Agency in 2005 as real estate agents. There, they formed a personal, romantic relationship, and in 2006 the plaintiff and defendant Mihalcik left Beazley to go into business in their own real estate agency. In April 2006, they formed Valley Premier Properties, LLC (hereinafter also "Valley Premier") a Connecticut limited liability company which was to offer brokerage services relating to the sale of residential and commercial real estate in the state of Connecticut with emphasis on the Naugatuck Valley. Mihalcik had a real estate brokerage license. There was another original partner who subsequently sold his interest to the plaintiff and Mihalcik. Mihalcik became the owner of fifty one percent (51%) interest in Valley Premier, and the plaintiff held forty nine percent (49%) ownership of Valley Premier. The business began in June 2006. The plaintiff did the bookkeeping, administrative functions and both she and Mihalcik devoted time to the sale of residential and commercial properties. In March 2007 the personal relationship was ended by the plaintiff, but they agreed to continue as business partners in Valley Premier. By June 2007 Mihalcik's emotions were stimulated when he learned that the plaintiff was dating someone else. Mihalcik become hostile toward the plaintiff, harassed her and threatened her. He also stalked her. The threats were numerous but it is unnecessary to repeat them in detail here. See plaintiff's Exhibit 13, and email in which he made threats and was obviously very angry with the plaintiff. This hostile environment promoted by Mihalcik culminated in August 2007 when Mihalcik terminated the plaintiff's status with Re/Max New England, Inc., the overall brokerage firm of which Valley Premier was a franchisee. It was Mihalcik who terminated her employment and activities. Mihalcik was the broker and owner of record of Valley Premier and had contacted Re/Max New England, Inc., to place the plaintiff on "inactive" status. Mihalcik not only did not give plaintiff notice that he was terminating her as an agent, but did not even once communicate to her that he was taking that action. It was clear, according to the plaintiff who was the only witness to testify, in this trial, that the actions of Mihalcik resulted from his anger and resentment toward the termination of their personal romantic relationship. It had nothing to do with her performance because in the June 2007 monthly report to Re/Max New England, Inc., the plaintiff earned commissions in that month of $16,175 resulting in her being the second highest producing agent for Valley Premier. Mihalcik earned commissions of only $11,758. See plaintiff's Exhibit 18.
This is in sharp contrast to defense counsel's disingenuous claim in his brief that the plaintiff left voluntarily.
Not only could the plaintiff no longer conduct herself as an agent of Valley Premier, but she had made a series of loans to Valley Premier in purchasing furniture and equipment, executing the real estate and equipment leases and made contributions for working capital as well as other loans to Valley Premier. She was unable to recoup the money she had loaned to Valley Premier and commissions and other funds due to her. She also testified without contradiction that on August 21, 2007 Mihalcik took the funds in the Valley Premier checking account at Thomaston Savings Bank of $722.46 and deposited that money in another account at Thomaston Savings Bank under CT Premier Properties, LLC (hereinafter also "CT Premier"). When Mihalcik transferred the money by first closing the Valley Premier accounts, plaintiff was still a member of Valley Premier holding a 49% interest. The plaintiff claims that the transfer was made to deprive the plaintiff of access to those funds. Mihalcik never notified the plaintiff of these actions and never moved to dissolve Valley Premier or to have plaintiff removed as a member of Valley Premier. Plaintiff's Exhibit six. CT Premier was formed by Mihalcik on August 31, 2007 with the same business address at 100 Bank Street, Seymour, Connecticut. See plaintiff's Exhibit 15. Also, plaintiff testified that Mihalcik had not only made the transfer of monies but removed all the books and records of Valley Premier and transferred all of the remaining business assets of Valley Premier consisting of commission income, furniture and equipment to CT Premier. The testimony regarding the removal of funds and closing of the accounts was not contested at trial and was admitted by the defendants in their respective answers including an admission that Mihalcik had formed CT Premier for the purpose of brokering and selling residential real estate.
Plaintiff also testified that Mihalcik on August 24, 2007 made a written complaint against the plaintiff with the Seymour Connecticut Police Department (plaintiff's Exhibit 12). The plaintiff claims that the allegations were false and baseless and known by Mihalcik to be false and they are the subject of a count for defamation which will be explained hereafter.
Mihalcik did not show up or be present at trial. His attorney was there and stated that Mihalcik "chose not to be here." There was no indication that he was unavailable. In addition, during the pretrial process Mihalcik did not comply with court orders for production and was fined $250 and later $750 for failure to comply by Elgo, J. This deprived the plaintiff of some of the documents she felt she could use in pursuing her claims.
The parties agreed to file briefs on July 14, 2010 with the reply briefs due a week later on July 21, 2010. The briefs were filed.
STANDARD OF REVIEW:
"The plaintiff in a civil case sustains his burden of proof as to any essential element in his cause of action if the evidence, considered fairly and impartially, induces in the mind of the trier, a reasonable belief that it is more probable than otherwise that the facts involved in that element are true." Busker v. United Illuminating Co., 156 Conn. 456, 458 (1968). This is also known as proof by a preponderance of the evidence.
In addition, this Court evaluates the credibility of the witnesses based upon their appearance and demeanor on the witness stand, the consistency or inconsistency of their testimony, their memory or lack thereof of certain events, whether they were candid and forthright or evasive and incomplete, their manner in responding to questions and their interest or lack of interest in the case.
Also, the Court evaluates general credibility on the basis of other testimony in this case as well as documents in evidence as to their consistency or inconsistency with other evidence.
The burden is on the plaintiff to prove his allegations by a preponderance of the evidence, and the defendants have the burden of proving their allegations in their special defenses by a preponderance of the evidence.
CREDIBILITY:
The Court finds that the plaintiff was credible, honest and candid with a good memory for details in her testimony and finds her to have been a credible witness who was and is believable.
In sharp contrast is the defendant Mihalcik who did not show up for trial. In Sturgeon v. Sturgeon, 114 Conn.App. 682, 690-91 (2009) "a party is entitled to comment on weakness of opposing party's case by bringing to jury's attention the failure to call witnesses to support its own factual theories with witnesses." Further, in Rabeck v. Danbury Orthopedic Associates, P.C., 72 Conn.App. 359, 369-70 (2002) it appears that it is necessary to establish that a witness who does not show up at trial is available to testify in accordance with C.G.S. § 52-216c. As stated, it's a clear inference that Mihalcik was available to testify but "chose not to attend" as stated by his attorney. The Court, therefore, based upon the failure of Mihalcik to come to court to defend the claims of the plaintiff, draws an adverse inference as to his potential testimony. The adverse inference is that any such testimony if given by Mihalcik either under direct or cross examination would have been harmful or detrimental to his interest in the case. Additionally, the Court finds a pattern of failure to comply with court orders as to discovery is contrary to Mihalcik's credibility; and finally, Attorney Lee, in his cross examination of the plaintiff, did not in any way diminish her credibility as a witness.,
Attorney Timothy Lee representing the defendants did a credible job, but the plaintiff was a very good witness.
Sturgeon v. Sturgeon supra and C.G.S. § 52-216c permit comments on failure to call a witness in closing argument in a jury case. Certainly if attorneys in a jury case can make this argument, in a court case, the trial judge certainly has a right to make this inference and consider this failure on the part of the defendants.
ISSUES AND FINDING:
The court will make findings based upon the specific counts of the amended complaint of May 2, 2008 which brought in CT Premier as an additional defendant.
(1) First Count: Breach of Fiduciary Relationship.
It is well settled that "a fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interest of the other." High-Ho Tower, Inc., v. Com-Tronics, Inc., CT Page 16611 255 Conn. 20, 38 (2000). ". . . In the seminal cases in which this Court has recognized the existence of a fiduciary relationship, the fiduciary was either in a dominant position, thereby creating a relationship of dependency, or was under a specific duty to act for the benefit of another." Id. 38.
Also, in High-Ho Tower, Inc., supra at page 41 the Court found that "The law will imply [fiduciary responsibilities] only where one party to a relationship is unable to fully protect its interest [or where one party has a high degree of control over the property or subject matter of another] and the unprotected party has placed its trust and confidence in the other."
Here there is no question that Mihalcik owed a fiduciary duty to the plaintiff. He was in a dominant position holding 51% of Valley Premier and the plaintiff holding a minority interest of 49%. Further, Mihalcik was the broker, and the plaintiff was an agent. He was, therefore, superior to the plaintiff and was under a specific duty to act for the benefit of the plaintiff in protecting her 49% interest. As the broker and the one who held the franchise from Re/Max New England, Inc., Mihalcik controlled Valley Premier, had a high degree of control over Valley Premier since he was the only signatory to the franchise and, therefore, the plaintiff was the unprotected party who had to place her trust and confidence in Mihalcik.
It is clear to this Court that the plaintiff has put forth sufficient credible evidence that Mihalcik was a fiduciary and owed a duty to the plaintiff.
"Proof of a fiduciary relationship imposes a twofold burden on the fiduciary. Once a fiduciary relationship is found to exist, the burden of proving fair dealing shifts to the fiduciary. Furthermore, the standard of proof for establishing fair dealing is not the ordinary fair preponderance of the evidence standard. The fiduciary is required to prove fair dealing by clear and convincing evidence." Oakhill Associates v. D'Amato, Sr. et al., 228 Conn. 723 (1994), Gorelick v. Montanaro, 119 Conn.App. 785 (2010) (Emphasis added.)
Certainly in cross examination, the defendants did not prove fair dealing on the part of Mihalcik, and offering no evidence Mihalcik could not and did not prove fair dealing by clear and convincing evidence. By Mihalcik's stalking of the plaintiff, making threats to her, unlawfully terminating her position with Valley Premier as aforesaid, putting her on inactive status whereas no other agents were put on inactive status, failure to give her notice of her termination, refusing or neglecting to pay back the loans the plaintiff had given to Valley Premier as aforesaid, Mihalcik's removal of $722.46 from the Valley Premier checking account and depositing that money in the new company he had formed, CT Premier, and thereby taking unlawfully her 49% interest in Valley Premier thereby depriving the plaintiff of access to those funds, Mihalcik's removal of the books and records of Valley Premier so that the plaintiff would not have access to same, fraudulently transferring all of the business assets of Valley Premier consisting of commission income and furniture and equipment to CT Premier and making a false complaint against the plaintiff with the Seymour, Connecticut Police Department, it is clear that Mihalcik several times breached his fiduciary duties towards the plaintiff. The Court, therefore finds, based upon all of the evidence that Mihalcik breached his fiduciary duties towards the plaintiff, and she suffered damages as a result.
(2) Second Count: Withdrawn by the Plaintiff. (3) Third Count: Withdrawn by the Plaintiff. (4) Fourth Count: Breach of Contract.
The Court finds that Mihalcik breached the terms of the operating agreement (plaintiff's Exhibit six) in which they agreed to set up and operate a real estate brokerage company known as Valley Premier Properties, LLC, with Mihalcik owning 51% thereof and the plaintiff owning 49% thereof. Further, there were oral agreements between the plaintiff and Mihalcik that plaintiff would be reimbursed for monies she loaned to Valley Premier. Plaintiff testified, and the Court believes her, that the purchases included the acquisition of furniture and equipment for the business, supplies and other pertinent items, that she had become obligated for the commercial lease of the premises and the telephone system and photocopier. Plaintiff became a guarantor to Wells Fargo Financial Leasing for the telephone system and photocopier. Mihalcik refused to lend his personal name as guarantor on these leases. She also guaranteed as co-owner of the business a credit card under the name of Valley Premier, but Mihalcik refused to sign any personal guarantee as was required of her.
By placing her on inactive status and terminating her position at Valley Premier, and, in effect, taking away her 49% of the business, continuing to owe her money that she had expended or guaranteed, closing the Valley Premier accounts and taking with him all monies of Valley Premier and commissions and fraudulently turning these assets including furniture and equipment over to a new company which he organized known as CT Premier were all elements of his breach of contract both written and oral. Accordingly, the Court finds that the plaintiff has sustained her burden of proof for breach of contract in the fourth count by a preponderance of the evidence.
(5) Fifth Count: Breach of the Covenant of Good Faith and Fair Dealing.
"Every contract carries an implied Covenant of Good Faith and Fair Dealing requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement." Warner v. Konover, 210 Conn. 150, 154-56 (1989) and Habetz v. Condon, 224 Conn. 231, 238 (1992). "The law does not permit the exercise of a right to repudiate a contract when the exercise of such a right and bad faith would work an injustice." Habetz v. Condon, supra, Id. 238.
For all of the reasons stated in regard to Count Four, the actions by Mihalcik in breaching the contract between the parties were of a deliberate nature and done in bad faith; namely, putting the plaintiff on inactive status, in effect terminating her from the partnership of which she owned 49% refusing and/or neglecting to repay the monies that she loaned to the company they set up, namely Valley Premier, the taking of the money from Valley Premier and transferring it to CT Premier as stated in Count four and for all the reasons stated therein Mihalcik's actions or inactions when action was required were done in bad faith and clearly amounted to a breach of the covenant of good faith and fair dealings which the plaintiff had a right to believe that the covenant would not be broken. The Court finds Mihalcik liable under Count Five.
(6) Sixth Count: Tortious Interference with Business Relationships and Expectancies.
Plaintiff has sustained her burden of proving that she had business expectancies. First, she expected to continue working as a 49% owner of Valley Premier and obtain commissions as a result of sales that she made of real estate. Secondly, she expected that the money she had loaned to Valley Premier for equipment, furniture, becoming liable on the real estate lease and other loans based upon Mihalcik's promise that she would be repaid were also expectancies that she expected to make in reimbursement from Valley Premier.
It is obvious that Mihalcik knew of the business expectancy. They went into this venture with the expectation that both of them would be making money from the sale of real estate and since Mihalcik promised the plaintiff that she would be reimbursed for her expenditures, he obviously knew she expected that. As for the third element it is clear that defendant Mihalcik tortiously interfered with her business expectancies. First and foremost is that the deliberate action taken by Mihalcik to have the plaintiff terminated as an agent of Valley Premier by placing her on inactive status as an agent of Re/Max New England, Inc., thereby depriving her of any future earnings by commission or otherwise. Secondly, Mihalcik removed all remaining funds of Valley Premier, closed the accounts and transferred same to CT Premier and thereby opening up a new real estate known as CT Premier Property's LLC and transferring all remaining furniture and equipment of Valley Premier to CT Premier. In effect he not only interfered with her business expectancy of receiving commissions and profits from her 49% ownership of Valley Premier but by refusing/neglecting to repay her the monies she had loaned to Valley Premier he interfered with that business expectancy and in effect closed her out of the real estate agent business. Finally, the plaintiff has sustained her burden of proving an actual loss as a result of Mihalcik's tortious interference. She obviously lost any future commissions. She lost the money that was loaned to Valley Premier and not repaid and she lost her 49% of the business, the assets of which were transferred to another company controlled and owned by Mihalcik. The Court concludes that Mihalcik is liable for tortious interference of a business relationship and the damages the plaintiff suffered will be set out hereafter in more detail.
(7) Seventh Count: Defamation.
On August 24, 2007 Mihalcik went to the Seymour, Connecticut Police Department and filed a complaint, plaintiff's Exhibit 12. He made a written statement in which he claimed among other things, that in April 2006 he opened a real estate company of which he is the sole owner. In September 2006 he opened a second company with a partner, Katherine Lodovico. Mihalcik states that he is a 51% owner of the second company and Lodovico is 49% owner. In the police report it is clear that Mihalcik stated that Lodovico has no legal authority to open an account under Re/Max, that she legally has no part of that company, and that further she has no right to use Valley Premier money to pay for a cell phone that her daughter uses. These statements made to the Seymour police were false and were known by Mihalcik to be false when he made them. During the trial it became clear from the plaintiff's testimony that Mihalcik knew in May 2006 that the plaintiff was ordering a cell phone under the Valley Premier name for Mihalcik and the plaintiff. Plaintiff testified that she had a preexisting Cingular cell phone account that included a phone for herself and her daughter which she then transferred over to the Valley Premier account and that Mihalcik was fully aware that her daughter was also on the account. Further, Mihalcik told the Seymour police that the plaintiff had no right to open a credit card account with Citibank and had no right to use his personal information all of which was false and known by Mihalcik to be false when he made those statements to the police.
In the case of Cwleinsky v. Mobil Chemical Co., 267 Conn. 210, 217 (2004) the Court set forth the following criteria to establish a case of defamation: "(1) The defendant published a defamatory statement." This Court finds that the statements made to the Seymour police were false and Mihalcik knew them to be false. "(2) The defamatory statement identifies the plaintiff to a third person." The statement clearly identified the plaintiff in this case to the Seymour police officers: "The defamatory statement was published to a third person." The statement was published to Seymour police officers and "(4) The plaintiff's reputation suffered injury as a result of the statement." All of these elements have been proven by a preponderance of the evidence by the plaintiff. "Libel per se is a defamatory statement in writing the meaning of which is apparent per se which is apparent on the face of the statement and is actionable without proof of actual damages . . . when the defamatory words are actionable per se, the law conclusively presumes the existence of injury to the plaintiff's reputation . . . The individual plaintiff is entitled to recover, as general damages, for the injury to his or her reputation and for the humiliation and mental suffering which the libel caused him or her." Lega Siciliano Social Club, Inc. v. St. Germaine, 77 Conn.App. 846, 851-52 (2003). Also in St. Germaine, supra at 853 the Court held that "two of general cases of libel which are generally recognized, are actionable per se are (1) libel charged in crimes and (2) libel which injure a man or a woman in his/her profession and calling . . . to fall within the category of libels that are actionable per se because they charge crime, the libel must be one which charges a crime which involves moral turpitude or to which an infamous penalty is attached."
In the case at bar Mihalcik filed two reports falsely accusing the plaintiff of theft and fraud. These are crimes of moral turpitude and the reports are defamation per se.
(8) Eighth Count: Connecticut Unfair Trade Practices Act (also known as "CUTPA").
In the leading case of Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 591, 592 (April 1995), the Court set forth the elements for a violation of CUTPA.
Section 42-110b(a) provides: `No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.' In determining whether certain acts constitute a violation of this act, `we have adopted the criteria set out in the cigarette rule by the federal trade commission . . . (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise-whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers [(competitors or other businessmen)]. Conaway v. Prestia, [ 191 Conn. 484, 492-93, 464 A.2d 847 (1983)], quoting FTC v. Sperry Hutchinson Co., 405 U.S. 233, 244-45 n. 5, 92 S.Ct. 898, 31 L.Ed.2d 170 (1972). McLaughlin Ford, Inc. v. Ford Motor Co., 192 Conn. 558, 567-68, 473 A.2d 1185 (1984); see Statement of Basis and Purpose of Trade Regulation Rule 408, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. 8324, 8355 (1964). Atlantic Richfield Co. v. Cannan Oil Co., 202 Conn. 234, 239, 520 A.2d 1008 (1987); Daddona v. Liberty Mobile Home Sales, Inc., 209 Conn. 243, 254, 550 A.2d 1061 (1988).
It is well settled law that it is only necessary to prove one of the three elements of the cigarette rule in order to prove a violation of CUTPA.
1. Under CUTPA there must be participation in the conduct of trade or commerce before relief can be sought under CUTPA. The conduct in which the defendant would have to be involved includes the advertising, or the offering of sale, rent or lease or the distribution of any service and any property, tangible or intangible, real, personal or mixed and any other article, commodity or thing of value in Connecticut. The Court finds that the conduct of a real estate brokerage firm or company is clearly in the conduct of trade or commerce.
2. This Court finds that the plaintiff has sustained her burden of proving a violation of CUTPA by clear and convincing evidence in that the defendants violated CUTPA by Breach of Fiduciary Duty as set forth in Count One, Breach of the Covenant of Good Faith and Fair Dealing found in Count Five, Tortious Interference with a Business Relationship or Expectancy as found in Count Six and Defamation as found in Count Seven. It meets the following criteria of the cigarette rule:
(a) ". . . it is within at least the penumbra of some common law, statutory, or other established concept of unfairness. (Emphasis added.) It was certainly unfair of the defendants to act as they did as specified above, in particular the defendant Mihalcik."
(b) By the violations of Counts One, Five, Six and Seven, the Court finds that the actions or inactions of the defendants, in particular Mihalcik, were immoral, unethical, oppressive and unscrupulous.
(c) ". . . whether it causes substantial injury to consumers [competitors or other businessmen]." These actions and inactions as described of the defendants certainly hurt the reputation of the plaintiff and she suffered substantial financial injury by not having the loans she made to the business repaid, by not having all of her commissions paid to her and the other financial damages set forth herein and hereafter."
These injuries are substantial, they are not clearly outweighed by any counter-veiling benefits to consumers or competition that the practice produces and it is not an injury the plaintiff could reasonably have avoided.
The Court, therefore, finds that the defendants violated CUTPA for the reasons stated above and have suffered ascertainable loss which will be set forth hereafter.
The plaintiff is entitled to attorneys fees and punitive damages under CUTPA.
9. Ninth Count: Fraudulent Transfer.
As for fraudulent conveyance, the Court finds by clear and convincing evidence as follows:
1. Mihalcik had control of Valley Premier and its assets being a 51% stockholder and the agent of record with Re/Max New England, Inc. He exercised complete control of Valley Premier.
2. With that complete control he set up another LLC known as CT Premier at the same address as Valley Premier and transferred without consideration from CT Premier all the assets, including cash, equipment, liabilities, etc.; to CT Premier of which he was the sole owner. This was clearly done for the purpose of removing the assets of Valley Premier from the claims of the plaintiff by, in effect, terminating the LLC in which the plaintiff had a 49% interest and transferring it away from her 49% interest and any other assets of which she had a part by her 49% interest and transferring it to CT Premier which effectively extinguished her 49% interest in Valley Premier. The transfer was done by Mihalcik from a company of which he had control and majority ownership to another company of which he had control and majority ownership and all of this was done without consideration (at least no consideration was brought forth as evidence by the defendants in the trial).
Accordingly, this Court finds that the transfer of the assets of Valley Premier to CT Premier was a fraudulent conveyance committed by the defendant Mihalcik, Valley Premier and CT Premier.
The fraudulent conveyance proximately caused the unjust loss or injury complained of by the plaintiff in that she no longer was able to access or obtain the assets of Valley Premier of which she was a 49% owner and could not obtain reimbursement of the loans she made to Valley Premier.
Valley Premier is liable to the plaintiff under this fraudulent conveyance and the assets transferred are hereby revoked from CT Premier which is equally liable to the plaintiff under the fraudulent conveyance, and the plaintiff is entitled to seek damages against CT Premier.
10. Tenth Count: Successor Liability of CT Premier.
The evidence that has been found that proved there was a fraudulent transfer of all the assets, money, commissions, equipment etc. from Valley Premier to CT Premier, is sufficient to prove by clear and convincing evidence that CT Premier is the successor to Valley Premier. Nothing had really changed with either LLC other than that all the income, profits and assets were moved to CT Premier. The assets of Valley Premier were intentionally placed beyond the reach of the plaintiff including her 49% interest in Valley Premier. This was the continuation of the enterprise of Valley Premier to CT Premier, the latter conducting the same business with essentially the same employees doing the same jobs and producing the same products.
Further, CT Premier has succeeded to the liability of defendant Valley Premier because it is a continuation of the selling LLC, Valley Premier. The plaintiff has demonstrated what is in effect a single LLC after the transfer of assets. The Court finds that CT Premier is burdened with successor liability for the debts of Valley Premier because of the transfer of all of the latter's assets. CT Premier is equally liable to the plaintiff as Valley Premier.
As part of this count and the Fraudulence Conveyance count, this Court finds that Mihalcik is personally liable for 49% of the assets of both Valley Premier and CT Premier because Mihalcik was the alter ego of both LLCs, and the Court by clear, precise and convincing evidence finds that the LLC veil of both LLCs is hereby pierced because Mihalcik was and is the alter ego of both LLCs. He controlled and does control both LLCs to the extent that the LLCs take no action or inaction under their own authority but do so only under the complete authority of Mihalcik. The LLCs have not a mind of their own, therefore, he is liable under the Fraudulent Transfer Count and the Successor Liability Count as well as the LLCs.
In United Electrical Contractors, Inc. v. Progress Builders, Inc., 26 Conn.App. 749, 755, 756 (1992), the Court stated that "the corporate veil will be pierced when the `the corporate entity has been so controlled and dominated that justice requires liability to be imposed on the real actor.'" The Court stated that the corporate veil may be pierced under the "instrumentality rule" upon proof of three elements:
(1) Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attack so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own;
(2) That such control must have been used by the defendants to commit fraud or wrong, to perpetrate the violation of a statutory or other positive legal duty, or a dishonest or unjust act in contravention of plaintiff's legal rights:
(3) That the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of. (Citations omitted.)
The Court finds that based upon the totality of the evidence all three elements have been proven by clear, precise, convincing and unequivocal evidence. This piercing of the veil applies to an LLC as well as a corporation. In this particular case, therefore, the individual defendant, Mihalcik, was the alter ego and the veil has been pierced, and he is, therefore, liable on all of the counts of the complaint.
DEFENDANTS' CLAIMS:
Defendants cite in their brief that the plaintiff is not entitled to a return of her capital contribution of $250 because of the clause or phrase that says "No Recourse Against Member" and the brief goes on to say "It specifically states that `the member shall look solely to the assets of the company for the return of their investment . . . they shall have no recourse against any other member.' "However, as this decision has shown the defendant Mihalcik took all the assets of Valley Premier and transferred it to his new company. Since there were no assets of the company for the return of the investment except what was taken from Valley Premier and transferred to CT Premier the plaintiff still has the right to recover that amount from Mihalcik who fraudulently conveyed the assets of Valley Premier to the new company.
Defendants also criticized the plaintiff's contention that she should be paid back the loans that she made which were not a capital contribution to Valley Premier but loans. Defendants claim that the plaintiff has a claim against Valley Premier but not Mihalcik. However, the defendants' brief overlooks the fact that it was the defendant Mihalcik who in effect fired the plaintiff, took all the assets and transferred them to another company of which he was the principal, and Mihalcik is personally liable on all counts for the additional reason that this Court, in this memorandum has found that he was the alter ego of both of the LLCs, and this Court has pierced the LLC veil on both LLCs making him personally liable.
The defendants in questioning whether there was a breach of fiduciary duty state that the courts have stated that "a fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interest of the other . . . The Supreme Court has traditionally confined the traditional principles of fiduciary duty to cases involving `fraud, self dealing or conflict of interest.'" Murphy v. Wakelee, 247 Conn. 396, 400 (1998). This Court finds that Mihalcik did commit fraud, self dealing and had a conflict of interest based upon all the factors contained in this memorandum.
DAMAGES:
Based upon the totality of the evidence, and, at trial, defendants' counsel was not able to attack successfully the damages set forth and introduced by plaintiff as Exhibit 52 to which reference is hereby made. The plaintiff testified credibly before this Court to all of these damages at trial. They consist of the following:
CT Page 16621
Summary of Losses Katherine Lodovico
Plaintiff's 4,600.00 Personal Loans from Kathy Lodovico $16,300.00 (Ex. 24) Made to Valley Premier Properties Payments made by Kathy Lodovico to $10,276.22 (Ex. 33) Wells Fargo Financial Leasing Payments made by Kathy Lodovico to Citibank $3,606.40 (Ex. 36) For Valley Premier Properties Credit Card Furniture and Supplies Paid by Kathy Lodovico $14,578.33 (Ex. 39) (Personal Credit Card) Computers Paid by Personal Account of $2,437.97 (Ex. 41) Kathy Lodovico Miscellaneous Business Expenses Paid $375.00 (Ex. 43) by Kathy Lodovico Payments made by Kathy Lodovico to $11,910.91 (Ex. 46) Trust Realty Corporation for Property at 100 Bank Street, Seymour, CT Commission Income Due to Kathy Lodovico $ (Ex. 48) Total Losses $64,084.83Accordingly, the Court enters compensatory judgment damages for the plaintiff in the amount of $64,084.83 against all defendants.
In addition, plaintiff seeks damages of $32,042.41 for defamation per se under the Seventh Count which sum represents one-half of her actual damages, and the Court so orders judgment in that amount as well against Mihalcik only.
The Court finds that under C.G.S. § 37-3a the monies due the plaintiff were wrongfully withheld by the defendants. The Court awards statutory interest of 10% under said statute on the $64,084.83 commencing on August 21, 2007 which was the date the assets, bank accounts of Valley Premier were closed down and transferred to CT Premier to August 21, 2010 which is three years which totals prejudgment interest of $19,225.45. Unless the defendants pay this amount immediately, which is doubtful, the prejudgment interest and postjudgment interest which is the same 10% will certainly go to at least August 21, 2010.
The Court will award $50,000 in punitive damages under the CUTPA Count. The plaintiff seeks $128,169.66 in punitive damages, but in view of all the circumstances, the Court feels that a proper amount would be $50,000.
The Court also awards attorneys fees under the CUTPA count as well as attorneys fees under Breach of Fiduciary Duty and the Intentional Tort of Failure to Deal in Good Faith, Defamation against Mihalcik only and Tortious Interference with a contract, business expectancies, business relationship and fraudulent conveyance, all of which are intentional, in the total amount as requested of $33,262.50.
Costs in the amount of $1,433.36 are also awarded to plaintiff against all defendants.
CONCLUSION:
The following damages sustained by the plaintiff are awarded against the defendant Mihalcik in the following amounts:1,433.36
1. Loans $64,084.83 2. Defamation $32,042.41 3. Prejudgment Interest $19,225.45 4. Punitive Damages $50,000.00 5. Attorneys Fees $33,262.50 6. Costs $ Total $200,048.55From the totality of the evidence, the Court enters judgment against the defendant Mihalcik for $200,048.55. The same amounts are awarded against both Valley Premier, LLC and CT Premier, LLC, the latter being liable as the successor LLC for these damages with the exception of the damages for defamation resulting in an award against both Valley Premier, LLC and CT Premier, LLC of a $168,006.14.
If either side wishes to have a hearing on the amount of punitive damages and attorneys fees, please contact caseflow for a hearing to be held under the provisions of the Connecticut Practice Book.