Opinion
LLICV126007694S
12-23-2015
Village Mortgage Company v. James Veneziano
UNPUBLISHED OPINION
AMENDED MEMORANDUM OF DECISION
HON. John D. Moore, J.
The plaintiff, Village Mortgage Company, (the plaintiff or VMC) sued the defendant, James Veneziano, a founding partner, shareholder, and former employee, officer, and director of VMC in a two-count complaint, amended during trial absent objection, seeking injunctive relief and money damages.
Count one alleges various threats made by the defendant against the plaintiff's employees and the plaintiff itself and seeks a temporary and permanent injunction barring the defendant from the plaintiff's building, preventing the defendant from harassing the plaintiff's employees and discussing the business affairs of the plaintiff with third parties, and precluding the defendant from otherwise interfering with the plaintiff's business.
Count two, as amended, alleges that the defendant owed a fiduciary duty to the plaintiff arising from his management, control, direction and/or supervision of the plaintiff's financial affairs, including the oversight of the plaintiff's audited financial statements and his interaction with outside auditors, and that he misappropriated funds from the plaintiff via conversion, statutory theft, and embezzlement. Count two of the amended complaint could be more artfully pleaded. As it stands, amended count two does not specifically allege breach of fiduciary duty. The court, however, reading the pleading liberally, as it must, Downs v. Trias, 306 Conn. 81, 92, 49 A.3d 180 (2012) (" [P]leadings are to be construed broadly and realistically, rather than narrowly and technically . . ." [Internal quotation marks omitted.]), concludes from the context that the plaintiff is alleging a breach of fiduciary duty in relationship to its allegations of conversion, statutory theft, and embezzlement of funds, as well as alleging these specific claims of misappropriation. This conclusion is reinforced by judicial admissions of the defendant's counsel when the motion to amend the complaint was heard by the court during trial. After the court, during a colloquy with the defendant's counsel, had reviewed factual allegations made by the defendant in six amended counterclaims averring that he owed the plaintiff a fiduciary duty, the defendant's counsel stated, in a judicial admission, that " the allegation of the breach of fiduciary duty is what is out there." Transcript, May 19, 2015, 9. The defendant's counsel further judicially admitted, in response to a question from the court, that it had " always been the defendant's understanding that the plaintiff intended to claim breach of fiduciary duty . . ." Id. Finally, the defendant's counsel stated in the first sentence of his post-trial brief that the plaintiff is alleging " breach of fiduciary duty." July 24, 2015 Post-Trial Brief of Defendant, 1. Under count two, the plaintiff seeks damages, treble damages for theft under General Statutes § 52-564, and such other legal and equitable relief as the court deems appropriate.
" The general rule is that admissions, if relevant and material, made by an attorney incidental to the general authority of the attorney to represent his client in connection with and for the purpose of controlling the matter committed to him are admissible against the client." (Internal quotation marks omitted.) Expressway Associates II v. Friendly Ice Cream Corp. of Connecticut, 218 Conn. 474, 478, 590 A.2d 431 (1991). The court must look to the facts surrounding the statement to determine if such admissions are evidentiary admissions or judicial admissions. Brown v. Hartford, 160 Conn.App. 677, 703 (2015) (" Whether a party's statement is a judicial admission or an evidentiary admission is a factual determination to be made by the trial court." [Internal quotation marks omitted.]) See also 32 C.J.S. Evidence § 630 (2015) (" [i]n order to qualify as a binding admission of counsel, a statement during . . . closing arguments, when viewed in context, must be clear and unambiguous"). Looking to the context of the defendant's counsel's admissions, the court finds that they were judicial admissions.
The defendant admits several of the background allegations in count one, which will be set forth in greater detail below. The defendant further acknowledges that, for a certain period of time, he suffered from several disorders and was very unpleasant to deal with, but claims that treatment has remedied these issues. The defendant denies threatening the plaintiff's employees and misappropriating the plaintiff's funds. In regard to the allegations of count two, the defendant denies embezzling or misappropriating any funds. In his amended answer responding to paragraph 20 of count two of the amended complaint, the defendant left the plaintiff to its proof as to the allegations that the defendant managed, controlled, directed, and/or supervised the plaintiff and owed the plaintiff a fiduciary duty, but that response is at odds with the defendant's allegations, his counsel's admissions, and the evidence adduced at trial. The bottom line, as discussed at length infra, is that the defendant owed fiduciary duties to the plaintiff.
The defendant has also filed special defenses and counterclaims. The operative special defenses allege that the funds that the plaintiff alleged that the defendant misappropriated were funds owed to the defendant for salary, bonuses, and invested funds, and that the applicable statute of limitations, General Statutes § 52-577, bars the claims of embezzlement, conversion, and theft. The defendant's counterclaim sounds in ten counts. Counts one, three, five, and seven, under the theories of breach of oral contract, unjust enrichment, breach of fiduciary duty, and the Connecticut Unfair Trade Practices Act (CUTPA), respectively, claim that the defendant has routinely invested money, property and other valuable commodities, including coins into the business and that these investments must be returned to him. Counts two, four, six, eight, and ten, under the theories of breach of oral contract, unjust enrichment, breach of fiduciary duty, CUTPA, and promissory estoppel, respectively, claim that the plaintiff owes the defendant $518,479.59 in back pay as part of a compensation plan offered to him by the plaintiff. Count nine sounds in defamation, alleging that the plaintiff has defamed the defendant by the false and malicious allegations of embezzlement, misappropriation of funds, and theft found in this lawsuit. In his counterclaim, the defendant alleges that the defendant owed the plaintiff fiduciary duties. Specifically, the defendant alleges that the plaintiff " employed the Defendant to occupy a position of trust and confidence and was responsible for the business operations of the company, " Revised special defenses and counterclaim, April 7, 2015 (counterclaim), count five, paragraph 6 & count six, paragraph 7, and that the defendant " had a fiduciary duty to exercise good faith, loyalty, and honesty toward Plaintiff business to act solely for its benefit in all matter connected with his employment." Id., counterclaim, fifth count, paragraph 7, sixth count, paragraph 8. The defendant never sought to amend these allegations before the close of evidence.
The plaintiff responded to the defendant's special defenses and counterclaims in the following fashion. The plaintiff first claimed that the statute of limitations has been tolled in two ways: (1) under the course of continuing conduct doctrine, and (2) because the defendant, a fiduciary, misappropriated the plaintiff's funds and has never made a full accounting of his misappropriations, under the doctrine of fraudulent concealment. The plaintiff then proceeded to deny the essential allegations of the operative amended counterclaim and raise several special defenses thereto. Because the court finds that the defendant has failed to satisfy his burden of proof as regard to all of the counts of the counterclaim except for the ninth count, there is no need for the court to consider the plaintiff's special defenses. In regard to the ninth count, a claim of defamation, the plaintiff raises a special defense of truth and of the absolute privilege accorded to legal pleadings.
This case was tried to the court for twelve days between May 5 and May 28, 2015. The parties filed post-trial briefs simultaneously on July 24, 2015. On August 27, 2015, the court, J.D. Moore, J., granted the plaintiff's motion to file a supplemental brief, which motion had been filed on July 29, 2015. The supplemental brief was filed upon the granting of permission to do so, e.g., on August 27, 2015.
For the reasons stated below, the court rules against the plaintiff and in favor of the defendant in regard to the allegations of the first count, in favor of the plaintiff and against the defendant in regard to the allegations of the second count, and against the defendant and in favor of the plaintiff in regard to each of the counterclaims. The court awards the plaintiff $2,080,185.09 under the proven allegations of the second count.
INTRODUCTION
A. No substantive Defense Presented
As a threshold matter, it is important to note that the defendant has offered virtually no resistance to the allegations of the amended complaint. The defendant devoted only two pages of his fifty-page post-trial brief to attempt to rebut the allegations of the amended complaint. Even then, the defendant's response to the amended complaint is tepid at best. In what is virtually an admission of liability, the defendant begins by arguing that he should be given credit for monies he paid back to the plaintiff. Then, without pointing to any evidence that supports the finding that the defendant actually loaned any money to the plaintiff, the defendant claims that, as the plaintiff's chief financial officer at the time, the defendant knew best when he should have been allowed to reclaim monies owed to him by the company. The defendant also claims that the plaintiff improperly denied him documents that would have proven his investments in the plaintiff, an argument raised often by the defendant throughout this case, but one to which the court has given no credit. Finally, the defendant argues that the plaintiff itself fostered an environment in which both the defendant and the plaintiff's president and chief executive officer (CEO), Ms. Laurel Caliendo, felt that they could withdraw corporate monies that " they had invested." This argument is not persuasive. When the defendant first tried to cross examine Ms. Caliendo as to her withdrawals of funds from the plaintiff, the court pointed out that, " two wrongs don't make a right." Although the court allowed the defendant to introduce evidence of Ms. Caliendo's withdrawals solely on the limited basis that authority is one element of the plaintiff's conversion claim, the court concludes that a defense predicated on the premise that " I cannot be held liable for what I did because others did the same kinds of things" neither defeats the allegations of misappropriation nor provides a defense thereto.
The other forty-eight pages address the defendant's counterclaims, apparently in an attempt to secure a set-off.
During the presentation of his case, the defendant marshalled compelling evidence to demonstrate that he was not the only officer accessing the plaintiff's corporate assets as if they were his or her own. Ms. Caliendo frankly admitted that she and the defendant took advances throughout the life of the plaintiff business. The defendant's exhibit BY sets forth a lengthy list of what the defendant believes to be personal expenditures made by or on behalf of Ms. Caliendo from the plaintiff's resources. During trial, Ms. Caliendo testified concerning these claims, sifting business expenses from personal ones while reviewing the entirety of exhibit BY. Although the defendant misidentified many business expenses as personal, the personal expenses listed in exhibit BY that, pursuant to Ms. Caliendo's testimony, benefitted the Caliendo family totaled more than $450,000 from 2004 through the end of 2014. Of this amount, approximately $350,000 comprised checks made payable to Laurel Caliendo, Mark Caliendo, Alyssa Caliendo (Laurel's daughter), or Clayton Caliendo, wire transfers to Laurel, Mark and Alyssa Caliendo, and ATM withdrawals. Ms. Caliendo also testified that a significant amount of the withdrawals that she took from corporate funds were for personal vacations. The 2009 and 2010 entries alone reflect trips to Florida, Las Vegas, Hawaii, Ireland, and Great Britain. Ms. Caliendo testified that she used VMC funds for shopping, cosmetics and for her daughter's school books. In the two years before the filing of this suit on October 16, 2012, just after Ms. Caliendo testified that the new chief financial officer (CFO), Mr. Girolimon, brought to her " attention a concern over certain withdrawals that had been made from the corporation [by the defendant], " Transcript, May 5, 2015, 33 & 34, $160,522.05 in checks were made payable to the Caliendo family for personal expenditures. Even after this complaint was filed, a complaint that alleges misappropriation on the part of the defendant and seeks, from the defendant, treble damages for statutory theft, more than $27,000 went to the Caliendo family for personal expenses: $9,600 wired to Alyssa Caliendo, $16,359.54 in checks made payable to Laurel, Mark, and Alyssa Caliendo, and goods purchased in the amount of $922.59 in 2013 and $206.99 in 2014. Although these facts do not diminish, in any way, the defendant's liability, as discussed in the body of this memorandum, they demonstrate, starkly, hypocrisy on the part of Ms. Caliendo, who, along with the plaintiff's CFO, was one of the major witnesses for the plaintiff at this trial. Ms. Caliendo testified consistently during trial that she believed that the defendant, as CFO, was keeping track of advances to officers, that she relied on him to do so and that she was aware that she would have to repay the advances someday. The court notes that the defendant retired from the plaintiff's business in early 2010 and that many of Ms. Caliendo's withdrawals of corporate assets for personal use, as set forth above, took place after the defendant retired from the plaintiff business. Ms. Caliendo testified that, even after his retirement, the defendant authorized her to use VMC funds for her personal benefit. This testimony is simply not credible. Even though, as discussed elsewhere, the defendant stayed involved in overseeing the plaintiff's finances after his retirement and until early 2012, the court does not find it credible that, after Mr. Girolimon advised Ms. Caliendo, in mid-to-late-2010, of large scale inappropriate advances by the defendant, Ms. Caliendo still believed that (1) the advances she had taken were appropriate, and (2) that the defendant would insure that all such advances would be paid back. The court is also aware that Ms. Caliendo testified credibly that she eventually acknowledged that she took money inappropriately from the plaintiff, but she had, after an investigation led by Mr. Girolimon, calculated how much she owed the plaintiff, entered into an agreement (approved by the board of directors) to pay the plaintiff back, paid back a substantial amount to the plaintiff, and owed the plaintiff, at the time of trial, approximately $200,000. The agreement was never entered as an exhibit in this case. The court is also aware, however, that Ms. Caliendo, along with her husband, holds about one-third of the shares of the plaintiff and is likely to benefit substantially from a recovery in this case. Moreover, there was no evidence presented as to whether the negotiations between the plaintiff and Ms. Caliendo were at arm's length, whether either side or both were represented by counsel, whether the plaintiff considered that statutory theft, if proven, could yield treble damages or, most importantly, the final terms of the settlement. The plaintiff's board of directors may find it advisable, considering its obligations to the shareholders, to review anew Ms. Caliendo's settlement agreement with the plaintiff, and the negotiations that led to this settlement in light of the facts found in this case.
B. Credibility
This case was tried to the court. " It is well established that [i]n a case tried before a court, the trial judge is the sole arbiter of the credibility of the witnesses and the weight to be given specific testimony." (Internal quotation marks omitted.) Blasco v. Commercial Linens, LLC, 133 Conn.App. 706, 709, 36 A.3d 737 (2012). The role of the trier of fact is to assess the credibility of the witnesses on the basis of its firsthand observation of the witnesses' conduct, demeanor, and attitude. See Cohen v. Roll-A-Cover, LLC, 131 Conn.App. 443, 450, 27 A.3d 1, cert. denied, 303 Conn. 915, 33 A.3d 739 (2011).
In the present case as in many cases, the testimony by the plaintiff and its witnesses, and that of the defendant and his witnesses, was in some respects diametrically opposed and irreconcilable with regard to several critical facts. The court had ample opportunity to observe the conduct, demeanor, and attitude of each witness, to evaluate the testimony, and to relate the testimony of each witness to the exhibits in the case. In considering the evidence, in addition to evaluating the testimony and exhibits, the court also drew reasonable inferences from the facts established in this case. The court took into consideration, as well, direct and circumstantial evidence that was admitted in the course of the trial.
The court evaluated all witnesses who came before it, taking into account not only their spoken testimony, but also their ability to perceive the things about which they testified, their ability to recall relevant facts and events, any interest that they may have had in the outcome, the reasonableness of their testimony, and any contradictions that arose between their testimony and other evidence introduced at trial. The court's findings of fact, including its decision to credit some witnesses and not others, or to credit some portions of testimony, but not parts thereof, are based upon all of the foregoing factors.
Credibility is of vital importance in the present case. Perhaps because the defendant could not marshal documentary or testimonial evidence to support his defenses or counterclaims, the defendant's counsel stated during closing argument that " this case rests on the credibility." Transcript, May 28, 2015, 168. After the court posed questions to the defendant's counsel as to what trial exhibits might support the defendant's counterclaims and special defenses, the defendant's counsel answered, " my client's testimony is paramount to everything." Id., 175. This is unfortunate for the defendant's position, because the defendant's credibility was impeached multiple times throughout the trial and in regard to almost every issue in this case. The court submits the following few examples for illustrative purposes.
As explained in greater detail below, the defendant filed for, and received, from the State of Connecticut, unemployment benefits while he was working for the plaintiff; even though he claimed not to be drawing a paycheck at that time, he was receiving funds dishonestly labeled as advances, auto expenses, and finance expenses. Additionally, the defendant continuously asserted during trial that he loaned money to the plaintiff, an assertion rebutted by the defendant's personal financial statements, none of which evidence loan receivables for the defendant, as well as by plaintiff's annual audited reports, none of which evidence payments owed to the defendant for loans he made to the plaintiff. Further, the record is rife with examples of the defendant trying to categorize the company's financial records in dishonest fashion so as to mislead the directors, shareholders, or outside auditors. Many of these examples were designed to cover up or disguise the defendant's inappropriate withdrawals. Moreover, evidence demonstrates that the defendant, just prior to his divorce, manipulated his salary by having it paid to his then wife, apparently to support a claim for alimony for himself, an award that he eventually received in the judgment of dissolution. Other evidence undermining the defendant's credibility is the May 14, 2014 financial affidavit filed by the defendant in his divorce case. This affidavit was filed at a time when it was useful to the defendant, for post-judgment motion practice, to have as few assets as possible. At that time, the defendant was objecting to a reduction of the alimony owed to him by his ex-wife and was also contesting an award of attorneys fees against him as part of his ex-wife's motion for contempt. In that affidavit, the defendant swore that his interest in the plaintiff was " unknown" and that the total net value of his business interest was " $0." This evaluation significantly contradicts the values that the defendant has placed on his interest in the plaintiff in documents admitted in the present case, which values were well into the six figures. See, e.g., Exhibits 57-62, inclusive, 64, 65 & 67.
The court has taken judicial notice of the documents in the divorce case, Veneziano v. Veneziano, Superior Court, judicial district of Litchfield, Docket No. FA-12-4011700-S.
FINDINGS OF FACT
The court finds the following facts.
The defendant received a bachelor's degree in business from Western New England College and began working for local banks in 1971. He started as a teller. After two years, the defendant progressed to bookkeeper and then, six or seven years later, became vice president of Winsted Savings Bank. After that, the defendant was named president of Winsted Savings Bank and served in that position for about a year and a half. After that, he moved into the mortgage business at Berkshire Financial Services where he worked for about five years. The defendant met Laurel Caliendo in 1987 when she worked for him at Berkshire Financial Services. Ms. Caliendo came to Berkshire Financial Services after two years of college and after having worked for a lawyer for six months. At the time they met, the defendant had worked in banking for sixteen years. Berkshire Financial Services was purchased as a wholly owned subsidiary of Summit National Bank. In those days, the defendant was a Vice President and Ms. Caliendo was a mortgage salesperson and processor. The defendant and Ms. Caliendo then joined New Milford Savings Bank. After that, they worked together at Community Savings Bank in Bristol, Connecticut.
Ms. Caliendo and the defendant founded Village Mortgage in 1996. Originally, Village Mortgage was a 50/50 partnership between the two of them. The beginnings were humble. The original office was in Ms. Caliendo's house. Ms. Caliendo and the defendant contributed office equipment to the partnership when it formed. From its inception, Village Mortgage's business was the brokering of residential first mortgages, which the company would place and then sell in the secondary market. For more than the first two years of its operation, the defendant was not actively involved in Village Mortgage, as he was then still employed at Community Savings Bank in Bristol. The defendant left the employ of the bank in mid-1998, and, at that time, became actively involved in Village Mortgage. Village Mortgage Company (VMC) was incorporated on July 1, 1998. Defendant's Exhibit B. During the third and fourth quarters of 1998, the defendant solicited investors and sold stock to them. Although shares of stock were distributed to all other investors strictly on the basis of the amounts they paid in, 1835 shares were distributed to the defendant and his wife and 1834 shares of stock were distributed to Ms. Caliendo and her husband on a different basis, in large part based upon the amount of time, energy, and risk that each invested in, and the nature of the banking and mortgage experience that they brought to, the start-up corporation. The defendant began actively working in the VMC office at the beginning of 1999. Ms. Caliendo was initially the secretary of VMC, but around 2000, she became president. The defendant, who held a bachelor's degree in business science and who had 16 more years of experience in banking than did Ms. Caliendo was, from the start, the vice president and treasurer, the two positions he held until he retired from VMC in January 2010. The split of responsibility between Ms. Caliendo and the defendant remained consistent until his retirement. Ms. Caliendo, who did not have an educational background in financial services, having completed only two years of college, handled operations, including the processing, closing, funding, delivery and servicing of the loans, and the selling of the loans on the secondary market. The defendant, who had a financial services background, both through education and work experience, directed, supervised, and controlled all the financial aspects of VMC from its inception, Transcript, May 6, 2015 a.m., 79; Transcript, May 6, 2015 p.m., 46, until his retirement in early 2010 and asserted some influence over financial matters until his discharge from the board in 2012. The defendant was the vice president and treasurer of VMC and was a director until his removal from the board of directors in 2012. See, Transcript, May 5, 2105, 27; Transcript, May 22, 2015 p.m., 50. The defendant had the ultimate responsibility for accounting entries and how transactions were characterized in VMC's records. Transcript May 8, 2015, 65-66. He was also responsible for working with auditors and reviewing the audited financial statements. Id., 66. The plaintiff's board trusted the defendant to handle the financial affairs of the corporation. Transcript, May 19, 2015, 33. Ms. Caliendo also trusted the defendant to run the financial aspects of the business. Transcript, May 22, 2015, 54.
The court will cite to the transcripts throughout the findings of fact, using the trial date and time of day, where applicable. For the sake of brevity, where the court references facts in its analysis of the parties' legal claims, the court will refrain from citing to the transcripts and the reader is instructed to refer back to the findings of fact to pinpoint the source of a fact in the transcripts.
The defendant himself has admitted in his testimony, Transcript, May 14, 2015, 32, that he was a fiduciary of and had a duty to the corporation of undivided loyalty and utmost good faith. The defendant has also alleged in his Counterclaim that the plaintiff employed him " to occupy a position of trust and confidence" and that he was responsible for, among other things, maintaining VMC's accounting records. See, e.g., Counterclaim, Count 5, ¶ 6. The defendant further alleged that as vice president and in light of such duties, he had a " fiduciary duty to exercise good faith, loyalty and honesty toward Plaintiff business to act solely for its benefit in all matter connected with his employment and to be candid with it by fully disclosing information which would be useful to it in the protection and promotion of its interest." See, e.g., id., ¶ 7. Because the defendant never amended these allegations, they constitute judicial admissions. Borrelli v. Zoning Board of Appeals, 106 Conn.App. 266, 271, 941 A.2d 966 (2008) (" [f]actual allegations contained in the pleadings upon which the cause is tried are considered judicial admissions and hence irrefutable as long as they remain in the case." [Internal quotation marks omitted.]). Based upon these admissions and the facts found above, the court finds that the defendant owed fiduciary duties to the plaintiff.
In the early days of VMC, neither Ms. Caliendo nor the defendant took much, if any, of a salary. Although the defendant claimed to have invested $391,000 of capital into the corporation, as well as $50,000 of capital into the partnership, he failed to prove these investments at trial. The only credible proof of money invested by the defendant was a passbook issued to Village Mortgage which reflected a $70,000 deposit by the defendant on August 4, 1998. Exhibit 127. Ms. Caliendo testified that she invested largely goodwill, namely her services and labor, to help get the company off the ground.
VMC received Federal Home Loan Mortgage Corporation (Freddie Mac) approval in 2000 and Federal National Mortgage Association (Fannie Mae) approval in April 2002. Through the efforts of the defendant, VMC received a $2.5 million warehouse loan or line of credit from China Trust with which to start its business. Having a significant warehouse loan or line of credit is vital to the success of the plaintiff's business model; as a general rule, the plaintiff enters into, with a customer, a loan agreement or note secured by a mortgage and then, using the warehouse loan or line of credit money, fronts the money borrowed to help pay for the customer's purchase. The amount fronted is paid back into the account when the plaintiff sells a note and mortgage in the secondary market. VMC currently buys, sells, and services loans. VMC has done quite well, swelling to thirty employees by 2010 and to slightly less than 125 employees at the present time. VMC is licensed and has offices in each of the six New England states, with seventeen total offices. VMC's two lines of credit now total $44 million and it was involved, in 2014 alone, in loans totaling $350 to $375 million.
VMC currently employs the defendant's ex-wife, Donna Veneziano, as well as his son, Joseph Veneziano, his daughter-in-law Patty Veneziano, and his daughter, Kristin Espinet.
[7]Although Ms. Kerr testified that the defendant would reimburse the company money taken for coin purchases and sales, she neither quantified such amounts nor produced documentary evidence of such reimbursements. In reviewing her testimony and her demeanor, the court finds that Ms. Kerr was biased in favor of the defendant and against the plaintiff. Ms. Kerr testified that the plaintiff terminated her in a manner that she felt was unfair. Further, Ms. Kerr referred to the defendant as " Jimmy" and spoke affectionately of the defendant while testifying. In sum, the court finds that Ms. Kerr's testimony that the defendant repaid such withdrawals was overly vague and not credible. After her divorce, Donna Veneziano's name was restored to Donna McGuire. For purposes of this memorandum, however, the court will refer to her by her married name because doing so diminishes confusion.
Problems began to emerge with the defendant in 2009. On or around that time, the defendant began to develop both physical and mental health issues, including difficulty seeing, hearing, and concentrating, as well as sleep deprivation, depression, and impulse control issues. From 2009 through 2011, the defendant engaged in the following volatile behavior. The defendant would take photographs of employees without their consent and, in doing so, violate their personal space. The defendant once engaged in a public outburst of profanities as he first attempted to assemble, and then violently took apart, a desk in the middle of the office. The defendant screamed at an outside vendor installing lights that the defendant claimed he had not approved. Later that day, after Ms. Caliendo asked the defendant to leave the business premises, he shoved her up against the back of her office door, placed his hand over her mouth, and kept her there with such force that others had to push their way in after they heard her kick the door seeking help. Plaintiff's Exhibit 18.
Around that time, the defendant also began to make suggestive and inappropriate remarks to employees and to browbeat them. When the defendant was in the office, he was generally disruptive. Finally, in late 2010 and in early 2011, employees became aware that the defendant was undergoing a heated breakup of his marriage to Donna Veneziano, a breakup that would eventually lead to divorce. On March 9, 2011, the defendant threatened to kill himself and his wife. Plaintiff's Exhibit 3. When he was asked to tone down his behavior, the defendant threatened to take his name off of the warehouse loan guaranty, a move that would have destroyed VMC's business. The defendant was noted to have been drinking a lot in the fall of 2011.
These health and interpersonal issues exacerbated a major weakness on the part of the defendant: he lacked the computer and technological skills to support his work in a modern financial services company. Things got so bad that on November 15, 2011, the corporation's board of directors voted to bar the defendant from the business premises and to forbid him from having contact with employees in the office or at their homes. Plaintiff's Exhibit 39.
The defendant officially retired in early 2010, but stayed involved with the company. The court finds that the defendant both asserted his own authority and was allowed, by the CEO, Ms. Caliendo, and the new CFO, Mr. Girolimon, at times, to assert authority over many aspects of the plaintiff's financial affairs even after his retirement until his removal from the board in April 2012.
The plaintiff appointed Mr. Girolimon to serve as CFO after the defendant's retirement. Mr. Girolimon had worked, off and on, for the plaintiff since he was in high school and while he was in college. Beginning in 2009 and continuing until he was named CFO, Mr. Girolimon had reported to the defendant in the plaintiff's accounting and financial department. After the defendant retired, in mid-to-late-2010, Mr. Girolimon performed a detailed investigation of withdrawals made by the defendant from corporate funds. Although the plaintiff tried to persuade the court that Mr. Girolimon's investigation was the first that the plaintiff knew of the defendant's misappropriations, the court does not find that conclusion credible. Ms. Caliendo testified that she was aware of withdrawals or advances taken by or given to both herself and to the defendant for years. She further testified that she believed that the defendant was keeping track of such transactions and that she and the defendant would one day have to reimburse the plaintiff for these withdrawals or advances. As time marched on, however, without reimbursement, the only logical inference that one could draw is that the defendant's withdrawals were not going to be repaid. This conclusion is reinforced by the testimony of Linda Kerr, a bookkeeper at VMC, working in the defendant's department, from 2003 to 2005. Ms. Kerr testified that, during this time, the defendant would publicly, in front of several people, ask Ms. Kerr to give him company funds to engage in the purchase and sale of coins at large coin shows.
Mr. Girolimon's investigation yielded plaintiff's exhibit 27, a breakdown of all amounts of corporate funds misappropriated by the defendant and not repaid. Mr. Girolimon explained credibly, both in exhibit 27 and in his verbal testimony, how he discovered the manner in which the defendant defalcated sums from the plaintiff, and the amounts of those sums. Exhibit 27 was broken into sections utilizing account numbers from the plaintiff's QuickBooks system.
The plaintiff began to employ the QuickBooks system for its accounting in 2004.
The defendant used category 1120, Advances to Officers, to list amounts purportedly paid to officers, including the defendant, for which amounts the defendant was supposed to reimburse the plaintiff. Through his investigation, Mr. Girolimon revealed that very few such reimbursements were made. Listed as separate accounts, but actually subsets of this main account, were categories J-1120, Advances to Jim Veneziano, which recorded advances only to the defendant and FT-1120, Advances to Frank Thomas. Mr. Thomas is the defendant's cousin. Although the defendant tried to explain that this category comprised entirely legitimate business expenses, the court is not persuaded. The format utilized by the plaintiff concerning the house in which Mr. Thomas lived is not its usual business model: brokering a mortgage and then selling it on the secondary market. In this instance, the defendant decided he wanted to fund a house for his cousin. After the defendant and Ms. Caliendo built the home, the defendant used corporate funds to pay for the mortgage and other related expenses, including taxes, for Mr. Thomas. The defendant also used this account as a pass-through for rents that Mr. Thomas paid in partial reimbursement for the amounts laid out. In the final analysis, more money was expended by the plaintiff than received in rent from Mr. Thomas.
Category 2150 allegedly listed Advances From Officers, including from the defendant. This category purported to list reimbursements by the plaintiff to such officers for fictitious loans. A separate category, but a subset of this one, was 2150-D, Advances From Officers--Donna Payable. This category listed amounts repaid to Donna Veneziano for fictitious loans; money from this category either benefitted the defendant directly (some of the checks were actually cashed by him, see plaintiff's exhibit 33 and accompanying testimony) or indirectly (the defendant either used some money when he still cohabited with Donna Veneziano or used the money to enhance his wife's income prior to his divorce for alimony purposes). Donna Veneziano testified credibly that, although some of the entries in both account 2150 and almost all of the entries in account 2150-D list advances to Donna Veneziano, it was the defendant, and not Donna Veneziano, who received the use of benefit of these monies. Category 2150 served multiple illicit purposes. Because 2150 purported to list reimbursements by the plaintiff to officers for loans that officers had made, these reimbursements constituted debits for tax purposes, reduced the plaintiff's tax liability and were paid, on a tax free basis, e.g., as reimbursements, to officers.
Category 6004--Auto Expense--did not capture the monies paid to the defendant for expenses arising from his one approved company car, but for all other car expenses of the defendant and his family members who were employees of the company.
Category 6010--Commission Expense--reflected amounts paid to the defendant and his ex-wife for commissions to which they were not entitled.
Category 6015--Finance Charge Expense--comprised monies paid to the defendant for his personal credit card, home equity line of credit, and similar bills.
The court finds that Mr. Girolimon, having come into the firm at a very young age, was likely in awe of and may have been manipulated by the defendant in the early stages of his career at VMC, but that, when he testified about exhibit 27 and how it was created, Mr. Girolimon impressed the court as being competent, credible, and conscientious. For example, Mr. Girolimon included credits, when he found them, reflecting occasions when the defendant repaid the plaintiff (e.g., deposit in the amount of $31,000 listed on the third page of exhibit 27 for the date of October 31, 2007). Over a ten-year period from 2004 through 2014, Mr. Girolimon concluded that the defendant had misappropriated $1,244,661.02. The amount of money misappropriated in the period beginning three years before the filing of this lawsuit is $693,395.03.
The plaintiff called an expert forensic accountant, Richard Finkel of Blum Shapiro, to review Mr. Girolimon's conclusions in exhibit 27. Relying on the data disclosed in exhibit 27, Mr. Finkel created plaintiff's exhibit 1, which scrutinized Mr. Girolimon's conclusions and assessed the damage from the defendant's defalcations at $1,273,121. The court finds that Mr. Finkel's testimony was credible and that his calculations were scientifically based and objectively verifiable. The court, however, finds that Mr. Girolimon's total more accurately reflects credits due the defendant and benefits attributed to the defendant. Therefore, the court uses exhibit 27, as opposed to exhibit 1, to analyze the scope of the defendant's defalcations.
In connection with the forensic analysis, Blum Shapiro was provided with an electronic copy of VMC's QuickBooks records as well as bank statements, cancelled checks, deposit slips, invoices, and other back up totaling in excess of 68, 000 documents. Exhibit 1; Transcript, May 8, 2015, 4. All of the documents on which Blum Shapiro relied in performing its forensic analysis were produced to the defendant. Blum Shapiro used Mr. Girolimon's report as a starting point but independently verified the amounts therein and excluded anything that could not be verified. Id., 8. Both exhibit 1 and exhibit 27 used January 2004 as their starting point because VMC's accounting records prior to that point were handwritten and not in QuickBooks. Transcript, May 6, 2015 p.m., 65; Transcript, May 8, 2015, 6. Additionally, the plaintiff introduced pre-2004 audited financial statements that provided a baseline for the analysis beginning in 2004. Transcript, May 8, 2015, 35; Exhibits 104-10, inclusive. Such financial statements did not show any amounts due from VMC to the defendant. Transcript, May 8, 2015, 35-36. Exhibit 1 essentially confirmed the findings of exhibit 27, but, as mentioned above, the court found exhibit 27 to be more reliable as being more inclusive of credits due the defendant and in its characterization of amounts taken for the benefit of the defendant.
The transactions reflected on exhibit 27 were for personal, not corporate matters, and were not authorized by the VMC board of directors. See, Transcript, May 22, 2015 p.m., 57. The defendant told Ms. Caliendo that it was okay for them to take funds from VMC as advances for personal uses and that he was keeping track of the advances. Transcript, May 6, 2015 a.m., 92. Ms. Caliendo relied upon the defendant to record and to keep track of all advances. Transcript, May 6, 2015 p.m., 29. The defendant made the decision to take advances for personal matters from VMC by himself. Transcript, May 19, 2015, 139. For example, the defendant would come into the office, write himself checks from VMC accounts as advances, and say he was going to the casino. Transcript, May 5, 2015, 99; see also Transcript, May 22, 2015 a.m., 85. The defendant would also instruct Mr. Girolimon to issue VMC checks payable to Donna Veneziano, would endorse the checks in front of Mr. Girolimon, and represent that he was going to the casino. Transcript, May 6, 2015 p.m., 77, 79. The defendant also obtained corporate funds by booking payments to himself as " commissions" even though he was not entitled to commissions. Id., 69. VMC requested that the defendant repay his advances, but he refused. Id., 40.
[10]Although Ms. Caliendo testified that she did not authorize this payment, exhibit 45 seems to indicate that she may have done so. On the second page of that document, Ms. Caliendo wrote, in response to the defendant's claim for back salary, that " Back salary was calculated and given to JV towards condo per his request. Trouble is that salary is gross/ s/b [should be] net." Even if Ms. Caliendo may have authorized the payment of $109,000, however, the board of directors did not. The court finds that the CEO lacked the authority to give permission for such a significant personal expense to be paid from corporate funds. Ms. Caliendo has acknowledged that she also improperly took advances for personal items, which advances were authorized by the defendant. Transcript, May 6, 2015 a.m., 61. She is, according to her testimony and as mentioned in footnote 3, making periodic payments to VMC to repay it for such advances according to a written schedule agreed to by the board of directors and has made substantial payments. Transcript, May 6, 2015 p.m., 40; Transcript, May 19, 2015, 37; Transcript, May 27, 2015, 59.
Even were the court to accept the defendant's argument that the withdrawals of Ms. Caliendo reflected an atmosphere in which the defendant and Ms. Caliendo could withdraw corporate funds at their individual discretion, without any prior authority, the court would still find, and, in fact, does find credible Ms. Caliendo's testimony that the approval of such withdrawals under such circumstances emanated from the defendant as the financial head of the plaintiff, and not from the board of directors or from Ms. Caliendo.
Two transactions in which the defendant caused substantial amounts to be disbursed from VMC to him prove the defendant's improper conduct and self-dealing. First, in December 2011, the defendant indicated to VMC that he would be purchasing a condo for Donna Veneziano, during the pendency of their dissolution, and would provide the funds to VMC, with VMC to wire the funds at closing. Transcript, May 5, 2015, 113-15; Transcript, May 12, 2015 a.m., 84. The purchase price for the condo was $144,968.93. The defendant transferred $109,000 from his retirement account with Oppenheimer prior to the closing to help pay for the condominium. After the closing had occurred, the defendant provided an additional $25,000 from Collateral Finance Corporation (CFC), an entity that provided the defendant with loans secured by his coin collection, and a check for $10,000 hand delivered by Elyse Paige, for a total of $144,000 towards the purchase price. Transcript, May 5, 2015 115-66; Transcript, May 12, 2015 a.m., 50, 80. The defendant, however, subsequently instructed Mr. Girolimon to send $109,000 of VMC funds to Oppenheimer for the defendant's benefit. The defendant never repaid the plaintiff for the funds. Transcript, May 14, 2015 76-77; Transcript, May 6, 2015 a.m., 23. The return of the $109,000 to Oppenheimer was not authorized by VMC. Transcript, May 5, 2015, 116-17; Transcript, May 6, 2015 p.m., 6. Thus, VMC effectively paid the majority of the purchase price of Donna Veneziano's condo even though there is absolutely no legitimate basis for the corporation to be paying for such condo. Transcript, May 12, 2015 a.m., 88. The defendant did not identify any valid basis for VMC's effective purchase of Donna Veneziano's condo.
Despite acknowledging that he represented to VMC that he was paying for the condo, the defendant now claims that he is not obligated to VMC for the $109,000 because the condo is in Donna Veneziano's name and the defendant is not on the title. Transcript, May 21, 2105 a.m., 58; Transcript, May 14, 2015, 84. The court disagrees. The court finds that the defendant bought this condominium for his then-wife for the defendant's personal benefit for reasons arising from his divorce proceeding from her. The defendant has further claimed not only that he is not obligated to the plaintiff for the $109,000, but that VMC owes him the $25,000 he put into VMC towards the purchase of the condo. Transcript, May 20, 2015, 24. The court disagrees because the source of the $25,000 was a personal loan to the defendant from CFC on which the defendant had caused VMC to make the payments. See, Transcript, May 22, 2015 a.m., 73, 90. Thus, the defendant now claims VMC owes him monies that were used to purchase a condo for his ex-wife and which were the proceeds of a personal loan for which VMC made the payments. The court again disagrees, as there can be no question that the defendant is obligated to reimburse VMC the $109,000 that VMC expended to buy Donna Veneziano a condo and that VMC is not required to return the $25,000 to the defendant. The defendant has not provided any valid justification for such transactions. The defendant's claims regarding the transaction are indicative of his disregard for the interests of VMC and its shareholders.
The defendant's withdrawal of $154,000 from VMC in January 2012 (the month after the closing on Donna Veneziano's condo) provided additional evidence of the defendant's dishonest conduct and self-dealing. On January 20, 2012, the defendant withdrew $14,000 from a VMC Fannie Mae escrow account through a withdrawal slip he signed. Exhibit 23; Transcript, May 5, 2015, 142. The defendant did not provide any credible reason that the defendant would have been entitled to the funds of Fannie Mae's customers held in such an escrow account. The withdrawal was not authorized. Transcript, May 22, 2015 a.m., 86. On January 25, 2012, the defendant made withdrawals in the amounts of $9,900 and $130,100 (for a total of $140,000), also using withdrawal slips he signed. Exhibit 23. The defendant claimed the $140,000 was back salary owed to him. Transcript, May 28, 2015, 27. As discussed more fully herein in connection with the defendant's counterclaims, however, there is no justification for the claim of back salary or any basis for the amount claimed. Ms. Caliendo never authorized the defendant to take $140,000 from VMC as back salary nor had anyone else with authority done so. Transcript, May 28, 2015, 63. The withdrawals were not authorized. Transcript, May 5, 2015, 59-62.
In fact, immediately before the defendant made these withdrawals, on January 24, 2012, there had been a meeting of the VMC board of directors at which they voted to remove the defendant from signatory authority on VMC's accounts. Id., 72-73. Once the withdrawals were discovered, VMC's outside accountants refused to release VMC's audited financial statements until the defendant's transgressions were corrected. Id., 64; Transcript, May 14, 2015, 41. The defendant, therefore, provided a personal check to repay VMC, but because the amount in the numeric portion of the check (" $154,000") did not match the written portion (" one hundred fifty-four"), VMC's bank would not accept the check. Transcript, May 5, 2015, 65. The defendant never provided a replacement check. Transcript, May 14, 2015, 41. The defendant is obligated to VMC for his unauthorized withdrawal of $154,000 and the fact that the defendant made such a large withdrawal when faced with the prospect of losing his access to VMC's bank accounts illustrates the defendant's underhanded dealings.
When questioned at trial about the impropriety of his use of corporate funds for personal matters, the defendant attempted to defend his actions by claiming that the funds did not belong to the plaintiff. Rather, the defendant viewed the advances as taking, not corporate funds, but his own funds that he had lent to VMC. Id., 33-34. In fact, with regard to his taking of VMC funds, the defendant stated, " When I need some of my monies, I would withdraw." Id., 34. Despite the fact that the funds were maintained in VMC's accounts and were commingled and fungible with regard to all of VMC's funds in such accounts, and were, therefore, the plaintiff's funds, the defendant viewed the funds in VMC's accounts as his own. Transcript, May 19, 2015, 139. Such an attitude and explanation shows a complete disregard for corporate formalities, the rights and interests of VMC and its shareholders, and the defendant's fiduciary duties. The defendant did not attempt to claim that the advances were for proper corporate purposes. The defendant acted at his own sole discretion with regard to VMC's finances, without approval from the board of directors, which approval the defendant contended he did not need because the Venezianos and the Caliendos had a majority of stock and control of the plaintiff. Exhibit 7 (notes by the defendant instructing accounting entries and write-offs and stating that board of director's approval was not required). The purported advances and loans to the defendant or Ms. Caliendo should have been approved by the board of directors with the defendant and Ms. Caliendo abstaining from voting due to their interest in such transactions. The defendant's view that he could authorize and cause advances to himself whenever he wanted without proper approval epitomizes both his misconduct in this case and the mindset he evinced when supervising the financial affairs of the plaintiff.
The defendant's lack of good faith and fair dealing was also illustrated by his manipulation of VMC's accounting records. It was the defendant's policy in the early years of VMC to borrow from a bank at the end of the year and then pay the money back at the beginning of the next year. Transcript, May 5, 2015, 136-38. The defendant would also have journal entries made at end of the year and then reverse them at the start of the next year so that year-end books did not accurately reflect VMC's financial affairs. Transcript, May 28, 2015, 141. Such journal entries were made upon the defendant's instruction in order to manipulate the financial statements between years. Transcript, May 8, 2015, 86.
Substantial amounts of advances to the defendant and Ms. Caliendo were also written off with no taxes paid on the benefit of the write-offs. Transcript, May 6, 2015 a.m., 92.
Mr. Girolimon explained in his testimony how the defendant would cause amounts in QuickBooks to be reclassified from income accounts to advances from officers so that VMC's tax liability was artificially reduced (through the reduction in income) and so that it would appear that the officers had made payments towards loans owed by them or had otherwise provided money to VMC. Transcript, May 6, 2015 p.m., 66-68; Transcript, May 28, 2015, 101-04; Exhibits 30, 31 (examples of such journal entries). Such practices also allowed officers to receive income (through the reduction in amounts owed to corporation) outside of payroll and associated withholding. Transcript, May 6, 2015 p.m., 66-68. The journal entries used to make such reclassifications were made on the defendant's instruction. Transcript, May 8, 2015, 92-93; Transcript, May 28, 2015, 131. The defendant told Mr. Girolimon that certain income accounts were best for these adjusting entries because their large size made covering up the advances to officers being written off easier to hide. Transcript, May 28, 2015, 102. Aside from reducing taxable income, the defendant also wanted VMC's profit to be as small as possible so the board of directors would not know how well the company was doing. Id., 132-33; Exhibit 5 (email from the defendant stating he did not want the board of directors to know how well VMC was doing). The defendant also told Mr. Girolimon in an email that he did not even want Ms. Caliendo to know how well the corporation was doing. Exhibit 2. The defendant, who has worked in banking and finance since 1971, caused these manipulations and concealment of VMC's true financial status even though he understood that the accounting records of a banking institution must be accurate. Transcript, May 13, 2015 p.m., 49-50. The defendant's manipulations of the corporate records were particularly problematic considering that VMC was and remains subject to audit and review by every state in which it is licensed as well as by the federal government. Such manipulation of VMC's accounting records evidence the defendant's misconduct and lack of fair dealing.
When the defendant was questioned about his accounting manipulations by VMC employees, he was dismissive and threatening. For example, when Mr. Girolimon questioned the propriety of entries, the defendant did not provide an explanation and said not to worry about it. Transcript, May 6, 2015 p.m., 64, 77, 79. Further, the defendant told Mr. Girolimon just to do what he was told. Id., 84. Moreover, the defendant went so far as to threaten Mr. Girolimon by implying that he would be fired if he did not abide by the defendant's direction as to the improper accounting entries. Id., 64.
Alesia Warner, who was the bookkeeper for VMC from 2007 to 2009 before Mr. Girolimon took over the position, provided similar testimony about the defendant's response to being questioned about the propriety of his conduct. When she questioned the defendant concerning journal entries, he would say that she should do what she was told and that he was the boss. Transcript, May 28, 2015, 148. The defendant also threatened to fire Ms. Warner if she did not follow his directions as to how the transactions should be entered. Id., 149. The court credits Ms. Warner's testimony that she never signed any financial statements because she was uncomfortable with what was being done through the improper journal entries. Id., 148. The defendant never contradicted the testimony of Mr. Girolimon and Ms. Warner that the defendant had threatened them with termination of their employment when they questioned the propriety of the defendant's conduct.
The defendant's manipulation of VMC's books and his threats to employees if they questioned the propriety of such entries are indicative of his bad faith in dealing with the corporation's funds and attempts to hide the monies he was taking out of the corporation. The defendant even characterized his own activities with regard to VMC's books and records as fraud. Specifically, Joseph Veneziano testified that when he suggested to his father that his father go through the court to get access to VMC's books and records, the defendant responded by telling his son that there was " fraud all over those goddamn books." Transcript, May 22, 2015 a.m., 9, 12. The defendant did not contradict this testimony.
The court finds that the defendant did not provide any credible evidence to contradict the conclusions in Mr. Girolimon's report or the Blum Shapiro report. While the defendant attempted to argue that he was entitled to certain credits that did not appear in the reports, he did not provide any documentary evidence to support his claims. See, Transcript, May 13, 2015 p.m., 32, 37; Transcript, May 28, 2015, 9-11, 13; Exhibit CH. The court credits Mr. Girolimon's testimony that the credits claimed by the defendant were actually journal entries improperly reclassifying or writing off amounts, as described above. Transcript, May 28, 2015, 89-90. Of particular note to the court, after the defendant identified at trial the credits to which he claimed he was entitled, Mr. Girolimon did an additional review of VMC's books and records and did not find any indication of monies actually received by VMC that would be a credit to the defendant that were not already reflected on exhibits 1 and 27, and Mr. Girolimon did not find any basis for changing the amounts claimed due to VMC from the defendant. Transcript, May 28, 2015, 99; Exhibits 128, 129.
Despite the fact that he had been engaged continuously since 1971 in the heavily regulated banking and financial services industries, the defendant manipulated the financial affairs of the plaintiff in numerous dishonest ways. In addition to the improprieties listed in exhibit 27 and those discussed above, there was an overwhelming amount of additional evidence adduced at trial as to other irregularities, both in substance and in reporting, brought about by the defendant and concerning the plaintiff's business and financial affairs. Many of the reporting irregularities served to cover up the defendant's wrongdoing. This evidence includes the following.
The defendant, like the proverbial fox in the henhouse, controlled all entries as to advances to and from officers.
The defendant advised the company to write off $4,000 a month paid to Donna Veneziano. Plaintiff's Exhibit 7.
The defendant advised Ms Caliendo that she did not need board approval to use the plaintiff's funds to purchase a condominium for Donna Veneziano just prior to the divorce because between the Venezianos and the Caliendos, they owned 66 percent of the company's stock. Id.
The defendant instructed the plaintiff to pay Donna Veneziano his president's salary and bonuses even though she was only trained for administrative work. This instruction began just prior to the divorce action being filed and continued during the pendency of the divorce at a time when the defendant's salary and earning capacity would be relevant to an award of alimony, an award that the defendant received in the dissolution judgment. Despite these instructions, the defendant would, during the pendency of his marriage to Donna Veneziano, enjoy the benefits of these funds himself.
The defendant authorized the use of a VMC line of credit to buy real property for VCH Holdings, LLC, an entity in which he and Ms. Caliendo were members.
The defendant endorsed checks made payable to his wife, plaintiff's exhibit 33, and used the funds for his own benefit.
In the fall of 2011, the defendant would use the plaintiff's funds to gamble at the casino frequently.
From June 2008 through January 2009, the defendant applied for and received unemployment benefits from the State of Connecticut. During this time, the defendant was employed by the plaintiff, was not drawing a paycheck, but was, as mentioned above, receiving corporate funds illicitly as advances to officers, automotive expenses, and finance charges. See, Plaintiff's Exhibit 27.
When a shareholder, Mr. Garbus, paid back $25,000 to VMC for a loan he had taken against his stock, the defendant advised the company to categorize this sum on its financial reports dishonestly as a pay-down of an advance that the defendant had made. Plaintiff's Exhibit 6.
The defendant instructed Mr. Girolimon to hide increased profit margins from the board of directors. Plaintiff's Exhibit 5. Many other exhibits evidence examples of the defendant trying to hide or smudge the truth contained in the plaintiff's financial statements or to manipulate the plaintiff's books so as to cover up his thefts. See, e.g., Plaintiff's Exhibits 2, 4, 6, 7, 8, 9, 10, 29-32, inclusive, 38, 50 & 51. The court finds that the defendant treated the corporate assets of the plaintiff as if they were his own. Having taken little or no salary early on, and having grown the plaintiff business, the court finds that the defendant felt entitled to loot the corporate treasury whenever he wanted to and that he did so.
DISCUSSION OF THE LAW: THE PLAINTIFF'S CLAIMS
Count One: Injunction
General Statutes § 52-471 provides: " (a) Any judge of any court of equitable jurisdiction may, on motion, grant and enforce a writ of injunction, according to the course of proceedings in equity, in any action for equitable relief when the relief is properly demandable, returnable to any court, when the court is not in session. Upon granting of the writ, the writ shall be of force until the sitting of the court and its further order thereon unless sooner lawfully dissolved. (b) No injunction may be issued unless the facts stated in the application therefore are verified by the oath of the plaintiff or of some competent witness."
" A party seeking injunctive relief has the burden of alleging and proving irreparable harm and lack of an adequate remedy at law . . . 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 substantial probability that but for the issuance of the injunction, the party seeking it will suffer irreparable harm." (Citations omitted; internal quotation marks omitted.) AvalonBay Communities, Inc. v. Orange, 256 Conn. 557, 566, 775 A.2d 284 (2001). " In deciding, the trial court must consider the equities, including the gravity and wilfulness of the violation, as well as the potential harm. Gelinas v. West Hartford, 225 Conn. 575, 595-96, 626 A.2d 259 (1993); Berin v. Olson, 183 Conn. 337, 343, 439 A.2d 357 (1981)." Dept. of Transportation v. Pacitti, 43 Conn.App. 52, 57, 682 A.2d 136, cert. denied, 239 Conn. 937, 684 A.2d 707 (1996).
" Although the defendant's wrongful conduct is a factor that the court must consider when balancing the equities of a proposed injunction, it is not necessarily a dispositive one. See 4 Restatement (Second) [Torts § § 936 & 941 comment (b) (1979)]." Franc v. Bethel Holding Co., 73 Conn.App. 114, 145, 807 A.2d 519, cert. granted in part on other grounds, 262 Conn. 923, 812 A.2d 864 (2002).
In the present case, the court finds that the plaintiff has not satisfied its burden of proof in regard to its claims for injunctive relief. The majority of the plaintiff's evidence concerning the allegations of count one arise from incidents that took place from 2009 through 2011 and that ceased during or prior to 2012, plaintiff's exhibits 11-22, inclusive and related testimony, and is therefore, stale. Although there was some evidence of at least one confrontation that took place recently between the defendant and his son, Joseph Veneziano that might be considered harassing to some degree, this interaction does not support an award of the kind of injunctive relief requested in count one. As stated above, " [t]he extraordinary nature of injunctive relief requires that the harm complained of is occurring or will occur if the injunction is not granted." (Citations omitted; internal quotation marks omitted.) AvalonBay Communities, Inc. v. Orange, supra, 256 Conn. at 566. In the present case, especially in light of the testimony that the defendant has received medical treatment for the conditions that plagued him from 2009 through 2012, the plaintiff has not sustained its burden to prove that the harm complained of " is occurring or will occur if the injunction is not granted." Therefore, the court finds against the plaintiff and in favor of the defendant in regard to the allegations of Count One.
Count Two: Breach of Fiduciary Duty Resulting from Conversion, Theft, and/or Embezzlement
As mentioned above, the court construes count two as alleging a breach of fiduciary duty by means of conversion, statutory theft, and embezzlement of the plaintiff's funds. The court shall first review applicable law for each of these causes of action and will then examine the facts found in light of the elements of the claimed wrongs.
Breach of Fiduciary Duty
" Our law on the obligations of a fiduciary is well settled. [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 interests of the other . . . The superior position of the fiduciary or dominant party affords him great opportunity for abuse of the confidence reposed in him. Konover Development Corp. v. Zeller, 228 Conn. 206, 219, 635 A.2d 798 (1994)." (Internal quotation marks omitted.) Cadle Co. v. D'Addario, 268 Conn. 441, 455, 844 A.2d 836 (2004).
" 'An officer and director occupies a fiduciary relationship to the corporation and its stockholders.' Katz Corp. v. T.H. Canty & Co., Inc., 168 Conn. 201, 207, 362 A.2d 975 (1975). 'He occupies a position of the highest trust and therefore he is bound to use the utmost good faith and fair dealing in all his relationships with the corporation.' Id. " Pacelli Bros. Transportation, Inc. v. Pacelli, 189 Conn. 401, 407, 456 A.2d 325 (1983). " [A] director [must] act in good faith. See General Statutes § 33-756." (Footnote omitted.) Thames Recycling, Inc. v. Gallo, 50 Conn.App. 767, 781-82, 720 A.2d 242 (1998) (action against director and shareholder of closely held corporation on behalf of corporation and also other stockholders of the corporation); see also Cox v. Reyes-D'Arcy, Superior Court, judicial district of New London, Docket No. CV-10-6005687-S (August 13, 2014, Moukawsher, J.) (58 Conn. L. Rptr. 781) (in addition to directors and officers, majority shareholders in closely held corporations also owe a fiduciary duty to minority shareholders in their capacity as shareholders, but not in any other capacity, such as that of an employee).
" Once a [fiduciary] relationship is found to exist, the burden of proving fair dealing properly shifts to the fiduciary . . . the standard is clear and convincing evidence." (Citation omitted; internal quotation marks omitted.) Cadle Co. v. D'Addario, 268 Conn. 441, 455-56, 844 A.2d 836 (2004).
" 'Although not always expressly stated, the basis upon which the aforementioned burden shifting and enhanced burden of proof rests is, essentially, that undue influence will not be presumed; Connell v. Colwell, 214 Conn. 242, 252, 571 A.2d 116 (1990) (fraud is not presumed and burden of establishing fraud rests on party who alleges it); and the presumption of fraud does not arise from the relationship itself. We note, however, that [this] rule is somewhat relaxed in cases where a fiduciary relationship exists between the parties to the transaction or contract, and where one has a dominant and controlling force or influence over the other. In such cases, if the superior party obtains a possible benefit, equity raises a presumption against the validity of the transaction or contract, and casts upon such party the burden of proving fairness, honesty, and integrity in the transaction or contract . . . 37 Am.Jur.2d 601-02, Fraud and Deceit § 441 (1968); see also United Founders Life Ins. Co. v. Carey, 347 S.W.2d 295, 307 (Tex. App. 1961) (when fiduciary relationship is shown and involved transaction is attacked for fraud and party accused has obtained advantage, presumption of unfairness arises which such party must dispel by showing transactions fairly made), rev'd on other grounds, 363 S.W.2d 236 (Tex. 1962). Therefore, it is only when the confidential relationship is shown together with suspicious circumstances, or where there is a transaction, contract, or transfer between persons in a confidential or fiduciary relationship, and where the dominant party is the beneficiary of the transaction, contract, or transfer, that the burden shifts to the fiduciary to prove fair dealing. 25 Am.Jur.2d 551, Duress and Undue Influence § 38 (1996). A fiduciary seeking to profit by a transaction with the one who confided in him has the burden of showing that he has not taken advantage of his influence or knowledge and that the arrangement is fair and conscientious. Id., 552; see also Nichols v. McCarthy, [53 Conn. 299, 307-08, 23 A. 93 (1885)].' . . . Murphy v. Wakelee, [247 Conn. 396, 405-06, 721 A.2d 1181(1998)]. Generally, therefore, when a breach of fiduciary duty is alleged, and the allegations concern fraud, self-dealing or a conflict of interest, the burden of proof shifts to the fiduciary to prove fair dealing by clear and convincing evidence. Id., 400." (Emphasis in original.) Cadle Co. v. D'Addario, supra, 268 Conn. 456-57.
" In the cases concerning self-dealing in corporate transactions, we have stated that, if a director of a corporation enters into a transaction with the corporation that will inure to his or her individual benefit, the director bears the burden of proving that the transaction is 'fair, in good faith and for adequate consideration . . .' Rosenfield v. Metals Selling Corp., 229 Conn. 771, 795-96, 643 A.2d 1253 (1994); Osborne v. Locke Steel Chain Co., 153 Conn. 527, 534, 218 A.2d 526 (1966) ('director of a corporation has the burden of showing that any personal dealing with the corporation is fair, in good faith and for adequate consideration'); Klopot v. Northrup, 131 Conn. 14, 20-21, 37 A.2d 700 (1944) ('[w]here a director of a corporation enters into a transaction with it which will inure to his individual profit, we have held that he has the burden of proving that the transaction is entirely fair, made in good faith, for an adequate consideration and upon a full understanding'); Massoth v. Central Bus Corp., 104 Conn. 683, 689, 134 A. 236 (1926) (where director of corporation 'deals with it as an individual, not himself participating in the transaction on behalf of the corporation, the burden rests upon him to show the transaction was entirely fair, made in good faith, for an adequate consideration, and upon a full understanding'); Sisk v. Jordan Co., [94 Conn. 384, 391, 109 A. 181 (1920) (where '[i]n his dealing with the corporation, both in his loans of money and credit, and in his purchases, the individual interest of [the plaintiff] and his fiduciary interest as director met . . . the burden was upon him to show that each of the transactions was fair and equitable'); see also 1 A.L.I., Principles of Corporate Governance: Analysis and Recommendations (1994) § 4.01(c), comment (d), pp. 176-77 (business judgment rule is safe harbor except where matters of conflict exist; where director is interested, business judgment rule is inapplicable and burden shifts to director to prove transaction fair and reasonable to corporation)." Murphy v. Wakelee, supra, 247 Conn. 402-03.
The shifting burden and heightened standard of proof apply only to a claim of breach of fiduciary duty and does not alter the burden or standard of proof for other claims against a fiduciary. See Stuart v. Stuart, 297 Conn. 26, 996 A.2d 259 (2010) (burden on plaintiffs to prove statutory theft by preponderance of the evidence when there was also a claim of breach of fiduciary duty against the defendant); see also Chernick v. Johnston, 100 Conn.App. 276, 280, 917 A.2d 1042, cert. denied, 282 Conn. 919, 925 A.2d 1101 (2007) (burden on plaintiff to prove statutory theft at trial on six-count complaint alleging conversion, breach of fiduciary duty, and statutory theft).
Conversion
" 'The tort of [c]onversion occurs when one, without authorization, assumes and exercises ownership over property belonging to another, to the exclusion of the owner's rights.' . . . Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20, 43, 761 A.2d 1268 (2000). Thus, '[c]onversion is some unauthorized act which deprives another of his property permanently or for an indefinite time; some unauthorized assumption and exercise of the powers of the owner to his harm. The essence of the wrong is that the property rights of the plaintiff have been dealt with in a manner adverse to him, inconsistent with his right of dominion and to his harm . . . The term owner is one of general application and includes one having an interest other than the full legal and beneficial title . . . The word owner is one of flexible meaning, and it varies from an absolute proprietary interest to a mere possessory right . . . It is not a technical term and, thus, is not confined to a person who has the absolute right in a chattel, but also applies to a person who has possession and control thereof.' . . . Label Systems Corp. v. Aghamohammadi, 270 Conn. 291, 329, 852 A.2d 703 (2004)." Deming v. Nationwide Mutual Ins. Co., 279 Conn. 745, 770-71, 905 A.2d 623 (2006).
" In order to succeed on a claim for conversion a plaintiff must prove: (1) 'legal ownership or the immediate superior right of possession to the [property]'; (2) 'that the defendant exercised unauthorized dominion over the [property] to the exclusion of the plaintiff's rights.' Devitt v. Manulik, 176 Conn. 657, 662, 410 A.2d 465 (1979)." Wilcox v. Schmidt, Superior Court, judicial district of Windham, Docket No. CV-05-4001851-S (June 3, 2010, Swords, J.).
" Under our case law, '[m]oney can clearly be subject to conversion. See Devitt v. Manulik, 176 Conn. 657, 662-63, 410 A.2d 465 (1979) (recovery of money wrongfully taken from joint survivorship bank account); Dunham v. Cox, 81 Conn. 268, 270-71, 70 A. 1033 (1908) (recovery of a sum of money entrusted to the defendant for payment to a third person); Shelby Mutual Ins. Co. v. Della Ghelfa, 3 Conn.App. 432, 445, 489 A.2d 398 (1985), aff'd, 200 Conn. 630, 513 A.2d 52 (1986) (recovery by insurer from insured's attorney pursuant to General Statutes [Rev. to 1979] § 38-325[b]) . . .' . . . Omar v. Mezvinsky, 13 Conn.App. 533, 536, 537 A.2d 1039, cert. denied, 208 Conn. 803, 545 A.2d 1101 (1988)." (Citation omitted.) Deming v. Nationwide Mutual Ins. Co., supra, 279 Conn. 771. " 'An action for conversion of funds may not be maintained to satisfy a mere obligation to pay money . . . It must be shown that the money claimed, or its equivalent, at all times belonged to the plaintiff and that the defendant converted it to his own use . . . [ Macomber v. Travelers Property & Casualty Corp., 261 Conn. 620, 650, 804 A.2d 180 (2002)] quoting National Fire Union Ins. Co. of Pittsburgh, PA. v. Wilkins-Lowe & Co., 29 F.3d 337, 340 (7th Cir. 1994) . . . Consistent with this rule, in our case law sustaining a cause of action wherein money was the subject of a conversion or theft, the plaintiffs in those cases at one time had possession of, or legal title to, the money. See e.g., Devitt v. Manulik . . . 176 Conn. [657], 662-63, [410 A.2d 465 (1979)]; Dunham v. Cox . . . 81 Conn. [268, 270-71, [70 A. 1033 (1908)].' . . . Deming v. Nationwide Mutual Ins. Co., [ supra, 279 Conn. 772]." Wilcox v. Schmidt, supra, Superior Court, Docket No. CV-05-4001851-S .
Statutory Theft
" Any person who steals any property of another, or knowingly receives and conceals stolen property, shall pay the owner treble his damages." General Statutes § 52-564.
" We consistently have held that '[s]tatutory theft under § 52-564 is synonymous with larceny under General Statutes § 53a-119.' . . . Blackwell v. Mahmood, 120 Conn.App. 690, 700, 992 A.2d 1219 (2010); see also Lauder v. Peck, 11 Conn.App. 161, 165, 526 A.2d 539 (1987) ('[t]he word " steals" as used in . . . § 52-564 is synonymous with the definition of larceny under . . . § 53a-119'). 'A person commits larceny within the meaning of . . . § 53a-119 when, with intent to deprive another of property or to appropriate the same to himself or a third person, he wrongfully takes, obtains or withholds such property from an owner. An owner is defined, for purposes of § 53a-119, as any person who has a right to possession superior to that of a taker, obtainer or withholder. General Statutes § 53a-118(a)(5).' . . . Blackwell v. Mahmood, supra, 700." Rana v. Terdjanian, 136 Conn.App. 99, 113-14, 46 A.3d 175, cert. denied, 305 Conn. 926, 47 A.3d 886 (2012).
Statutory theft and conversion are not the same causes of action. " 'Conversion can be distinguished from statutory theft as established by § 53a-119 in two ways. First, statutory theft requires an intent to deprive another of his property; second, conversion requires the owner to be harmed by a defendant's conduct. Therefore, statutory theft requires a plaintiff to prove the additional element of intent over and above what he or she must demonstrate to prove converson.' . . . De Jesus Suarez-Negrete v. Trotta, 47 Conn.App. 517, 521, 705 A.2d 215 (1998)." Rana v. Terdjanian, supra, 136 Conn.App. 114.
Embezzlement
Embezzlement and statutory theft are related, as both have their roots in larceny. Embezzlement, in fact, is a subset of larceny.
" General Statutes § 53a-119 provides in relevant part: 'A person commits larceny when, with intent to deprive another of property or to appropriate the same to himself or a third person, he wrongfully takes, obtains or withholds such property from an owner. Larceny includes . . . (1) Embezzlement. A person commits embezzlement when he wrongfully appropriates to himself or another property of another in his care or custody.' As aptly stated by our Supreme Court, '[t]he crime of embezzlement is consummated where . . . the defendant, by virtue of his agency or other confidential relationship, has been entrusted with the property of another and wrongfully converts it to his own use.' State v. Lizzi, 199 Conn. 462, 467, 508 A.2d 16 (1986)." Sullivan v. Thorndike, 104 Conn.App. 297, 306-07, 934 A.2d 827 (2007), cert. denied, 285 Conn. 907, 942 A.2d 415 (2008).
Analysis
The plaintiff has alleged that the defendant breached his fiduciary duty to it through the misappropriation of the plaintiff's funds. The plaintiff has further alleged that the defendant committed conversion, statutory theft and embezzlement of the plaintiff's funds. The plaintiff is seeking treble damages under its claim of statutory theft.
As explained below, the evidence produced at trial incontrovertibly established that the defendant owed a fiduciary duty to VMC and that he breached it by engaging in self-dealing by taking VMC's funds for his own personal use at his sole discretion without any regard to VMC or its shareholders. As such, the burden shifted to the defendant to establish fair dealing by clear and convincing evidence, which burden he failed to meet. The plaintiff also proved, by a preponderance of the evidence that the defendant committed conversion, statutory theft and embezzlement of the plaintiff's corporate funds. Under § 52-564, the plaintiff is entitled to treble damages.
A. The Defendant Owed a Fiduciary Duty to VMC and thus was Required to Establish Fair Dealing by Clear and Convincing Evidence
The evidence presented at trial and the admissions of the defendant establish that the defendant owed fiduciary duties to the plaintiff and that he breached those duties.
The defendant was the vice president and treasurer of VMC, a closely held corporation, and was a director until his removal from the board of directors in 2012. The defendant, therefore, owed a fiduciary duty to VMC during this entire time period. See, Katz Corp. v. T.H. Canty & Co., Inc., supra, 168 Conn. 207. The defendant also owed a fiduciary duty to VMC due to the trust and confidence placed in him by Ms. Caliendo, Mr. Girolimon, and others, his control over VMC's finances, and the opportunity that such control gave for self-dealing. It is important to remember that Ms. Caliendo completed only two years of college. When their business relationship began, the defendant, armed with a business degree and sixteen years of experience in the banking and financial services industry, was Ms. Caliendo's superior and supervisor. When the defendant and Ms. Caliendo moved first to New Milford Savings Bank and then to Community Savings Bank, Ms. Caliendo continued to report to the defendant, who occupied a superior managerial position at both banks. While they worked together at the plaintiff, the defendant handled all financial matters while Ms. Caliendo attended to the office. Until his retirement in early 2010, the defendant was in a superior position to everyone else at VMC in regard to financial matters, based upon his experience and expertise. The defendant directed, supervised, and controlled all the financial aspects of VMC from its inception until his retirement in early 2010 and asserted his influence over financial matters until his discharge from the board in 2012. The defendant was primarily responsible for the books and records of VMC and was the employee at the plaintiff business responsible for interacting with the accountants. The defendant had the ultimate responsibility for accounting entries and how transactions were characterized in VMC's records. He was also responsible for working with auditors and reviewing the audited financial statements. The plaintiff's board of directors trusted the defendant to handle the financial affairs of the corporation. Ms. Caliendo also trusted the defendant to run the financial aspects of the business.
For all of the reasons set forth in the preceding paragraph, the defendant owed a fiduciary duty to the corporation until at least April 2012, when he was terminated by the board of directors. Because VMC was a closely-held corporation, the defendant, as an officer and director owed fiduciary duties to the corporation, as well as to its shareholders. Thames Recycling, Inc. v. Gallo, supra, 50 Conn.App. 781-82; Cox v. Reyes-D'Arcy, supra, 58 Conn. L. Rptr. 781. Notwithstanding the fact that the defendant purportedly retired in 2010, he continued to have significant contact with VMC personnel and continued to assert or to attempt to assert a substantial amount of control over VMC's finances through the end of January 2012.
B. The Plaintiff Established that the Defendant Breached his Fiduciary Duties to the Plaintiff by Stealing, Embezzling, and Converted its Funds to his Own Use and that the Defendant did not Produce any Evidence that would Establish Fair Dealing in such Transactions
In the present case, the evidence of the defendant's wrongful exercise of dominion over the assets of the plaintiff is overwhelming. As mentioned above, exhibit 27 illustrated both how the defendant absconded with assets of the plaintiff that did not belong to him and establishes the amount of his theft. Mr. Girolimon determined that the defendant had misappropriated $1,244,661.02 from VMC from 2004 through 2014 and $693,395.03 since a period that began three years before the date the present case was filed. Exhibit 27. Mr. Finkel of the accounting firm of Blum Shapiro independently confirmed Mr. Girolimon's findings. Exhibit 1. While exhibit 1 essentially confirmed the findings of exhibit 27, as mentioned above, the court found exhibit 27 to be more reliable as being more inclusive of credits due the defendant and in its characterization of amounts taken for the benefit of the defendant.
The transactions reflected on exhibit 27 were for personal, not corporate matters, and were not authorized by the VMC board of directors. The defendant told Ms. Caliendo it was okay for them to take funds from VMC as advances for personal uses and that he was keeping track of the advances. Ms. Caliendo relied upon the defendant to record and to keep track of all advances. The defendant made the decision to take advances for personal matters from VMC by himself, including issuing checks to himself for funds used to gamble. The defendant would also instruct Mr. Girolimon to issue VMC checks payable to Donna Veneziano and endorse the checks in front of Mr. Girolimon and represent that he was going to the casino. The defendant also obtained corporate funds by booking payments to himself as " commissions" even though he was not entitled to commissions. VMC requested that Veneziano repay his advances but he refused.
Two transactions in which the defendant caused substantial amounts to be disbursed from VMC to him especially prove the defendant's improper conduct and self-dealing. The first such transaction was the use of VMC funds to purchase a condo for Donna Veneziano, the details of which are discussed at length in the findings of fact. Despite acknowledging that he represented to VMC that he was paying for the condo, the defendant now claims that he is not obligated to VMC for the $109,000 because the condo is in Donna Veneziano's name and the defendant is not on the title. The defendant has not proven that the transactions related to the purchase of Donna Veneziano's condo had any legitimate business purpose. Rather, the evidence supports the conclusion that these transactions were for the defendant's personal benefit and, in fact, harmed the plaintiff by requiring the plaintiff to expend funds that it had no obligation to expend and derived no benefit from.
The defendant's withdrawal of $154,000 from VMC in January 2012 (the month after the closing on Donna Veneziano's condo) similarly evidences the defendant's dishonest conduct and self-dealing. Specifically, on January 20, 2012, the defendant withdrew $14,000 from a VMC Fannie Mae escrow account through a withdrawal slip signed by the defendant. Exhibit 23. On January 25, 2012, the defendant made withdrawals in the amounts of $9,900 and $130,100 (for a total of $140,000), also using withdrawal slips signed by the defendant. Exhibit 23. The defendant claimed the $140,000 was back salary owed to him. As discussed more fully herein in connection with the defendant's counterclaims, however, there is no justification for the claim of back salary or any basis for the amount claimed. Neither Ms. Caliendo nor the board of directors authorized the defendant to take $140,000 from VMC as back salary. Lending support to the conclusion that the defendant's withdrawals were not authorized is the fact that on January 24, 2012, there had been a meeting of the VMC board of directors at which they voted to remove the defendant from signatory authority on VMC's accounts. Once the withdrawals were discovered, VMC's outside accountants refused to release VMC's audited financial statements until the defendant's repaid the withdrawn funds. While the defendant provided a personal check to repay VMC, the amount in the numeric portion of the check (" $154,000") did not match the written portion (" one hundred fifty-four"), and VMC's bank would not accept the check. The defendant never provided a replacement check.
When questioned at trial about the impropriety of his use of corporate funds for personal matters, the defendant attempted to defend his actions by claiming that the funds did not belong to the corporation. Despite the fact that the funds were maintained in VMC's accounts and were commingled and fungible with regard to all of VMC's funds in such accounts, the defendant viewed the funds in VMC's accounts as his personal funds. The court finds that such an attitude and explanation shows a complete disregard for corporate formalities, the rights and interests of VMC and its shareholders, and the defendant's fiduciary duties.
The defendant's lack of good faith and fair dealing is also illustrated by his manipulation of VMC's accounting records. As discussed in greater detail in the findings of fact, it was the defendant's policy in the early years of VMC to borrow from a bank at the end of the year and then pay the money back at the beginning of the next year. In so doing, he would also have journal entries made at end of the year and then reverse them at the start of the next year so that year-end books did not accurately reflect VMC's financial affairs. Substantial amounts of advances to the defendant and Ms. Caliendo were also written off with no taxes paid on the benefit of the write-offs. Mr. Girolimon also explained how the defendant would cause amounts in QuickBooks to be reclassified from income accounts to advances from officers so that VMC's tax liability was artificially reduced (through the reduction in income) and it also appeared that the officers had made payments towards loans owed by them or had otherwise provided money to VMC. Such practices also allowed officers to receive income (through the reduction in amounts owed to corporation) outside of payroll and associated withholding. The journal entries used to make such reclassifications were made on the defendant's instruction. The defendant's manipulations of the financial records were particularly problematic considering that VMC is subject to audit and review by every state in which it is licensed as well as by the federal government. The court finds that the defendant's knowledge of the impropriety of his manipulations of the corporate books is evidenced by the fact that on numerous occasions, as discussed in detail in the findings of fact, when faced with questions from employees concerning his accounting practices, the defendant threatened employees with termination.
The court notes that, because the defendant owed a fiduciary duty to the plaintiff, it was the defendant's burden to establish by clear and convincing evidence that he engaged in fair dealing. The defendant failed to meet his burden. The defendant failed to submit any documentary evidence that proved that the funds that were used for his personal benefit were properly authorized by the plaintiff or that the funds represented legitimate obligations on the part of the plaintiff towards the defendant. While the defendant argued at trial that he was entitled to certain credits that were not reflected in either Mr. Girolimon's report or the Blum Shapiro report, the court does not find his testimony credible. Further, the defendant did not prove that he loaned money to the corporation, or that there was any basis on which he could simply access corporate funds at his whim to repay investments.
The defendant did not show, by clear and convincing evidence that he was acting in good faith and fair dealing as a fiduciary toward the plaintiff.
In conclusion, the plaintiff presented ample evidence of the existence of a fiduciary duty to shift the burden of proof to the defendant. The defendant failed to meet his burden, having provided no credible evidence to support a conclusion that his use of corporate funds and manipulation of the corporate books was in good faith and constituted fair dealing. Moreover, even though the defendant had the burden of proof, the plaintiff nonetheless provided sufficient evidence that would have established a breach of fiduciary duty through its statutory theft and conversion claims even if it had the burden of proof.
C. The Plaintiff Established by a Preponderance of the Evidence that the Defendant Committed Conversion, Statutory Theft, and Embezzlement
The elements of conversion are that a person, without authorization, assumes and exercises ownership over property belonging to another, to the exclusion of the other's rights. Deming v. Nationwide Mutual Ins. Co., supra, 279 Conn. 770. Conversion requires the owner to be harmed. Rana v. Terdjanian, supra, 136 Conn.App. 114. The court finds that the plaintiff has proven that the defendant did not act with authority even though the CEO may have engaged in similar withdrawals. The court finds that it would not be appropriate under the law of corporations for each of the CEO and CFO to permit each other to steal other people's money, namely the funds of the corporation. See generally Lettieri v. American Savings Bank, 182 Conn. 1, 7-8, 437 A.2d 822 (1980). Moreover, as mentioned above, the court finds credible the CEO's testimony that she did not give the defendant permission to take these sums and that it was the defendant, as the CFO, who purported to give such approval to do so. The facts cited in the previous section demonstrate convincingly, beyond a preponderance of the evidence, that the defendant was not authorized to abscond with the funds of the corporation, but that he did so throughout his employment at the plaintiff and even after his retirement.
The court can only decide the issues before it. The only defendant in this case is Veneziano. Ms. Caliendo is not a defendant in this case. As mentioned in footnote 3, however, the court has concerns about the actions of Ms. Caliendo, as well as those of the defendant, as set forth in this opinion.
Statutory theft takes place when one, with the intent to deprive another of property, wrongfully takes, obtains, or withholds such property from an owner. Rana v. Terdjanian, supra, 136 Conn.App. 113-14. The facts set forth in the previous section establish, well beyond a preponderance of the evidence, that the defendant, for ten years, at least, looted the corporate treasury to a significant extent for his own benefit. Such substantial misappropriations over such a long period of time demonstrate the requisite intent and the requisite wrongful taking of property from its rightful owners, the shareholders, by a preponderance of the evidence.
Similarly, embezzlement occurs when a person, by virtue of his agency or other confidential relationship, has been entrusted with the property of another and wrongfully converts it to his own use. The fiduciary duty section sets forth clearly the facts that establish, by a preponderance of the evidence, that the defendant was in a special and confidential relationship with the plaintiff, that he, as CFO and financial head of the plaintiff, was entrusted with the corporate funds and that he wrongfully converted a substantial amount of the corporate funds to his own use.
Therefore, the court finds that the plaintiff has sustained its burden of proving that the defendant committed conversion, statutory theft and embezzlement by a preponderance of the evidence. As mentioned above, § 52-564 states that a person who violates its provisions " shall pay the owner treble his damages." General Statutes § 52-564.
DISCUSSION OF THE LAW: SPECIAL DEFENSES
The defendant, however, has filed special defenses to the plaintiff's claim. The court must examine these special defenses to see whether they serve to defeat the plaintiff's claims.
" 'The fundamental purpose of a special defense, like other pleadings, is to apprise the court and opposing counsel of the issues to be tried, so that basic issues are not concealed until the trial is underway.' Bennett v. Automobile Ins. Co. of Hartford, 230 Conn. 795, 802, 646 A.2d 806 (1994). 'Under our practice, when a defendant pleads a special defense, the burden of proof on the allegations contained therein is on the defendant.' DuBose v. Carabetta, 161 Conn. 254, 262, 287 A.2d 357 (1971). 'Whoever asks the court to grant judgment regarding any legal right or liability has the burden of proving the existence of the facts essential to his or her claim or defense.' C. Tait & E. Prescott, Tait's Handbook of Connecticut Evidence (4th Ed. 2008) § 3.3.1, p. 114." Crown Linen Service, Inc. v. Mastroianni, Superior Court, judicial district of Hartford, Docket No. CV-07-5009448-S (February 25, 2009, Bentivegna, J.).
The defendant's first special defense is factually based, namely, that the defendant could not have misappropriated the plaintiff's funds because these were funds owed to the defendant for salary, bonuses, and invested funds. For the reasons set forth in the counterclaim section, the defendant did not sustain his burden of proof to show, either for this special defense or for his counterclaim, that the plaintiff owed the defendant money for salary, bonuses, and invested funds. Therefore, the court finds against the defendant on this special defense.
The defendant's next three special defenses claim that the allegations of embezzlement, conversion, and statutory theft are all barred by the applicable statute of limitations, General Statutes § 52-577.
Statute of Limitations
General Statutes § 52-577 provides: " No action founded upon a tort shall be brought but within three years from the date of the act or omission complained of."
" [T]he statute of limitations for claims of conversion and statutory theft is the three year period applicable to torts, set forth in General Statutes § 52-577 . . . 'In construing our general tort statute of limitations . . . we have concluded that the history of that legislative choice of language precludes any construction thereof delaying the start of the limitation period until the cause of action has accrued or the injury has occurred.' . . . Fichera v. Mine Hill Corp., 207 Conn. 204, 212, 541 A.2d 472 (1988). 'The date of the act or omission complained of is the date when the . . . conduct of the defendant occurs . . ." Vilcinskas v. Sears, Roebuck & Co., 144 Conn. 170, 173, 127 A.2d 814 (1956); see also Valentine v. LaBow, 95 Conn.App. 436, 445 n.8, 897 A.2d 624 ('§ 52-577 is an occurrence statute and . . . its limitation period does not begin when the plaintiff first discovers an injury' [internal quotation marks omitted]), cert. denied, 280 Conn. 933, 909 A.2d 963 (2006)." Certain Underwriters at Lloyd's, London v. Cooperman, 289 Conn. 383, 408, 957 A.2d 836 (2008).
When conversion is wrongful from the start, as in this case, proof of the wrongful taking establishes the conversion; thus there is no need for a demand and a refusal for return of the property to establish the tort. Epstein v. Automatic Enterprises, 6 Conn.App. 484, 488, 506 A.2d 158 (1986). The statute of limitations for this type of conversion begins to run on the date the property was wrongfully taken. See Sterniak v. Mullins, Superior Court, judicial district of New Britain, Docket No. CV-02-0516931-S (Sept. 18, 2003, Cohn, J.) (citing Heffernan v. Marine Midland Bank, N.A., 283 A.D.2d 337, 727 N.Y.S.2d 60, 62 (N.Y.A.D. 2001)). In the present case, the conversion was wrongful from the start; there was no legitimate basis on which the defendant could have believed that he was entitled to the money he took. The statute of limitations, therefore, begins to run on the date of each wrongful taking. As is the case with all " occurrence" type statute of limitations, " '[i]gnorance of his rights on the part of the person against whom the statute has begun to run, will not suspend its operation.' . . . [ Piteo v. Gottier, 112 Conn.App. 441, 445-46, 963 A.2d 83 (2009)]." Carson v. Allianz Life Ins. Co. of North America, Superior Court, judicial district of Hartford, Docket No. CV-12-6030681-S (September 17, 2015, Peck, J.).
As mentioned above, the plaintiff claims the operation of § 52-577 has been tolled by means of the defendant's continuing course of conduct and by the defendant's fraudulent concealment of his activities. The court shall discuss these seriatim.
Tolling of the Statute of Limitations--Continuing Course of Conduct
" Section 52-577 applies to . . . actions alleging fraud . . . It is a statute of repose in that it sets a fixed limit after which the tortfeasor will not be held liable and in some cases will serve to bar an action before it accrues . . . Nonetheless, [w]hen the wrong sued upon consists of a continuing course of conduct, the statute does not begin to run until that course of conduct is completed . . ." (Internal quotation marks omitted.) Haas v. Haas, 137 Conn.App. 424, 433, 48 A.3d 713 (2012).
" [I]n order [t]o support a finding of a continuing course of conduct that may toll the statute of limitations there must be evidence of the breach of a duty that remained in existence after commission of the original wrong related thereto. That duty must not have terminated prior to commencement of the period allowed for bringing an action for such a wrong . . . Where [our Supreme Court has] upheld a finding that a duty continued to exist after the cessation of the act or omission relied upon, there has been evidence of either a special relationship between the parties giving rise to such a continuing duty or some later wrongful conduct of a defendant related to the prior act . . . The continuing course of conduct doctrine is conspicuously fact-bound . . . In sum, a precondition for the operation of the continuing course of conduct doctrine is that the defendant must have committed an initial wrong upon the plaintiff . . . Second, there must be evidence of the breach of a duty that remained in existence after commission of the original wrong related thereto . . . [T]hat continuing wrongful conduct may include acts of omission as well as affirmative acts of misconduct . . ." (Internal quotation marks omitted.) Id.
" 'Where [our Supreme Court has] upheld a finding that a duty continued to exist after the cessation of the act or omission relied upon, there has been evidence of either a special relationship between the parties giving rise to such a continuing duty or some later wrongful conduct of a defendant related to the prior act . . . The continuing course of conduct doctrine is conspicuously fact-bound.' . . . Giulietti v. Giulietti, 65 Conn.App. 813, 833-34, 784 A.2d 905, cert. denied, 258 Conn. 946, 947, 788 A.2d 95, 96 (2001)." Jarvis v. Lieder, 117 Conn.App. 129, 148, 978 A.2d 106 (2009). " 'Thus, there must be a determination that a duty existed and then a subsequent determination of whether that duty is continuing.' Watts v. Chittenden, 115 Conn.App. 404, 412, 972 A.2d 770, cert. granted on other grounds, 293 Conn. 932, 981 A.2d 1077 (2009)." Stuart v. Snyder, 125 Conn.App. 506, 511, 8 A.3d 1126 (2010), cert. denied, 300 Conn. 921, 14 A.3d 1005 (2011).
" The continuing course of conduct doctrine reflects the policy that, during an ongoing relationship, lawsuits are premature because specific tortious acts or omissions may be difficult to identify and may yet be remedied . . . [T]he doctrine is generally applicable under circumstances where [i]t may be impossible to pinpoint the exact date of a particular negligent act or omission that caused injury or where the negligence consists of a series of acts or omissions and it is appropriate to allow the course of [action] to terminate before allowing the repose section of the statute of limitations to run . . ." (Internal quotation marks omitted.) Giulietti v. Giulietti, supra, 65 Conn.App. 834 (continuing course of conduct existed when defendant, an attorney and also an officer and director of his family's private corporation, as legal counsel for his father, one of the plaintiffs, committed wrongful acts related to conveyance of certain real property more than three years prior to the commencement of the lawsuit, but continued to serve as his father's legal counsel after the wrongful conduct, which the court characterized as a fiduciary relationship).
" The application of the continuing course of conduct doctrine necessitates an examination of the cases in which the statute of limitations was tolled on the basis of that doctrine. In Blanchette v. Barrett, [229 Conn. 256, 640 A.2d 74 (1994)], the statute of limitations was tolled because of evidence that the defendant physician had failed to satisfy his duty of monitoring the plaintiff's questionable breast condition. The court considered this to be later wrongful conduct that related to the defendant's diagnosis of the plaintiff. In Cross v. Huttenlocher, 185 Conn. 390, 440 A.2d 952 (1981), the statute of limitations was tolled because of the negligent failure of a physician to warn a patient of the harmful side effects of a drug that the physician had prescribed and that the patient had continued to ingest over a period of time. In Giglio v. Connecticut Light & Power Co., 180 Conn. 230, 429 A.2d 486 (1980), the statute of limitations was tolled because the installer of a pilot light gave repeated instructions as to its use in response to multiple complaints by the plaintiff. In Handler v. Remington Arms Co., [144 Conn. 316, 130 A.2d 793 (1957)], the statute of limitations was tolled by the defendant manufacturer's continuing failure to warn of the potential danger associated with an inherently dangerous cartridge of ammunition. In each of these cases, the plaintiff's injury was perpetuated, enhanced and even caused by the breach of a duty on the part of the defendant." Sanborn v. Greenwald, 39 Conn.App. 289, 297, 664 A.2d 803, cert. denied, 235 Conn. 925, 666 A.2d 1186 (1995) (holding that there was no continuing course of conduct where the attorney's representation of the plaintiff had ended and his subsequent statements to the plaintiff did not create or perpetuate any duty).
" [A] plaintiff [claiming misappropriation of funds by a fiduciary] could argue that the continuing course of conduct doctrine tolls the statute of limitations while the defendant acts in a fiduciary capacity to the plaintiff. See Caldrello v. Gordon, Superior Court, judicial district of New London at New London, Docket No. 533626 (January 9, 1998, Hurley, J.T.R.) (the court applied the continuous course of conduct doctrine to toll the statute of limitations for misappropriation while the defendant acted in a fiduciary capacity toward the plaintiff). However, '[c]ases applying the continuing course of conduct doctrine have all involved the conduct of the defendant prior to the discovery of injury.' Rivera v. Fairbank Mgmt. Props., 45 Conn.Supp. 154, 158, 703 A.2d 808 (1997). To allow the continuing course of conduct doctrine to toll the statute of limitations after discovery 'would, in effect, allow the plaintiff to acquiesce in the defendant's conduct for as long as convenient to the plaintiff, contrary to one of the purposes of statutes of limitations, which is to prevent the unexpected enforcement of stale claims concerning which the persons interested have been thrown off their guard by want of prosecution.' . . . Id., 160." Vissa v. Pagano, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV-98-0168124-S (September 29, 1999, Karazin, J.).
As mentioned above, " the doctrine [of a continuing course of conduct tolling the statute of limitations] is generally applicable under circumstances where [i]t may be impossible to pinpoint the exact date of a particular negligent act or omission that caused injury or where the negligence consists of a series of acts or omissions and it is appropriate to allow the course of [action] to terminate before allowing the repose section of the statute of limitations to run . . ." (Internal quotation marks omitted.) Giulietti v. Giulietti, supra, 65 Conn.App. 834.
Under the facts of the present case, the defendant committed scores of individual wrongful takings. Not only was it not impossible, but it was actually quite simple to pinpoint the exact date of each intentional theft. Because of the way that the plaintiff's financial information was stored on QuickBooks, Mr. Girolimon's investigation was able, with a push of the button, to discover the exact date of each such defalcation. Moreover, given the fact that the defendant was stealing the money that belonged to his fellow shareholders and investors, it was not appropriate to let the course of action terminate before allowing the repose section of the statute of limitations to run. Therefore, the continuing course of conduct doctrine does not operate to toll the statute of limitations in this case.
Tolling of the Statute of Limitations--Fraudulent Concealment
General Statutes § 52-595 provides: " If any person, liable to an action by another, fraudulently conceals from him the existence of the cause of such action, such cause of action shall be deemed to accrue against such person so liable therefore at the time when the person entitled to sue thereon first discovers its existence."
" Fraudulent concealment must be proved by the more exacting standard of clear, precise, and unequivocal evidence. Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, 281 Conn. 84, 105, 912 A.2d 1019 (2007)." Macellaio v. Newington Police Dep't, 145 Conn.App. 426, 433, 75 A.3d 78 (2013).
" [T]o toll a statute of limitations by way of our fraudulent concealment statute, a plaintiff must present evidence that a defendant: (1) had actual awareness, rather than imputed knowledge, of the facts necessary to establish the [plaintiff's] cause of action; (2) intentionally concealed these facts from the [plaintiff]; and (3) concealed the facts for the purpose of obtaining delay on the [plaintiff's] part in filing a complaint on their cause of action.' . . . Iacurci v. Sax, 313 Conn. 786, 799-800, 99 A.3d 1145 (2014)." Bozelko v. Webster Bank, N.A., 159 Conn.App. 821, 827, 123 A.3d 1250 (2015). Our Supreme Court has assumed for purposes of certain cases, without deciding whether or not to adopt the federal rule, that " a fiduciary's nondisclosure could satisfy the second element of fraudulent concealment for the purpose of § 52-595." Iacurci v. Sax, supra, 792 n.8.
In the present case, the plaintiff argues that the defendant has never made a full accounting of his withdrawals and that the defendant has, therefore, fraudulently concealed his wrongdoing. The convincing evidence in this case, however, clearly establishes that the defendant did not conceal what he was doing from the plaintiff. Pursuant to Ms. Kerr's testimony cited above, the defendant would publicly request corporate funds with which to buy and sell coins. More importantly, Ms. Caliendo was aware, right from the inception of VMC, that the defendant was taking advances from corporate funds. Although the defendant told Ms. Caliendo that he was keeping track of these advances and that they would be paid back, the court finds that the overwhelming majority of these advances were never paid back. Ms. Caliendo, the president and CEO of the plaintiff knew or must have known far earlier than Mr. Girolimon's 2010 investigation that these monies had been illicitly taken. Knowledge to the CEO is deemed to be knowledge to the corporation. See Cramer v. Kolodney & Meyers, Inc., 129 Conn. 468, 471, 29 A.2d 579 (1942). Under these circumstances, the court finds that it would not be fair to allow the statute of limitations to be tolled.
Therefore, the statute of limitations bars recovery of damage for individual acts of defalcation that occurred more than three years before the commencement of this action, namely all damages arising before October 16, 2009.
As a result, the court awards the plaintiff the damages it incurred beginning from a date three years before the filing of this lawsuit: $693,395.03. Pursuant to the operation of General Statutes § 52-564, the court trebles that amount for a total award of $2,080,185.09.
COUNTERCLAIMS
The court's task is not concluded, however, because the defendant has alleged counterclaims in an effort to achieve a set-off of the amount awarded to the plaintiff.
The defendant has asserted counterclaims seeking recovering of back pay and reimbursement of " investments" sounding in breach of oral contract, unjust enrichment, breach of fiduciary duty, CUTPA, and promissory estoppel. The defendant failed to provide any credible evidence to support such claims, including lack of any credible evidence as to the specific amounts claimed due to him. The defendant's testimony about the amounts he claimed were due to him was vague and changed mercurially throughout the trial. " Damages are recoverable only to the extent that the evidence affords a sufficient basis for estimating their amount in money with reasonable certainty." (Internal quotation marks omitted.) American Diamond Exchange, Inc. v. Alpert, 302 Conn. 494, 510, 28 A.3d 976 (2011). Because the defendant has not met his burden of proof, as explained in greater detail below, the plaintiff is entitled to judgment on his counterclaims.
The court shall first examine the factual underpinnings of the defendant's counterclaims and makes the following additional findings of fact.
ADDITIONAL FINDINGS OF FACT PERTAINING TO COUNTERCLAIMS
Claims for Back Salary
The defendant has claimed that he is entitled to back salary because there was an agreement to defer his salary and he was to receive the same salary as Ms. Caliendo, but he actually received less. There is absolutely no evidence to support the defendant's claim that there was any agreement regarding deferring his salary. Moreover, during some of the time for which he alleges he is owed back salary, the defendant was receiving unemployment compensation, was only working part time, or was retired. He has no justification for his claim that he is due additional salary for such periods. The defendant also ignores the fact that he instructed the plaintiff to pay Donna Veneziano any salary due to him. In short, the defendant failed at trial to establish any credible basis for the back salary claimed.
Despite bringing a counterclaim sounding in breach of contract based on an alleged oral agreement, the defendant could not provide any evidence of any such agreement. To the extent that the defendant's claims rely on any board of directors activity, he could not even state when or if board meetings occurred. Transcript, May 13, 2015 p.m., 53. Four members of the board of directors testified that there was not any agreement with the defendant regarding his salary. Transcript, May 19, 2015, 24, Transcript, May 21, 2015 p.m., 17; Transcript, May 22, 2015 a.m., 3; Transcript, May 28, 2015, 63. The defendant did not call any other board members to testify in an effort to rebut this testimony. Ms. Caliendo further testified that there were not even discussions between the defendant and her or the board of directors regarding the defendant deferring his salary. Transcript, May 6, 2015 a.m., 29. Mr. Girolimon also testified that he never had any indication or heard any mention of the defendant's salary being deferred. Transcript, May 12, 2015 a.m., 65.
The defendant failed to present any other credible evidence that he was entitled to any other back salary. The defendant is seeking back pay for periods during which he was receiving unemployment benefits, working only part-time, or retired. The defendant received unemployment benefits from the state of Connecticut from June 2, 2008, to January 13, 2009. Transcript, May 28, 2015, 55-56. The defendant had not been terminated by VMC and he continued to actively work for VMC during the time in which he received unemployment benefits. Transcript, May 21, 2015 p.m., 35; Transcript, May 12, 2015 a.m., 91. The defendant claims to have stopped receiving a salary from VMC while he was receiving unemployment benefits, but he nevertheless continued to receive funds from VMC during this time. The defendant characterized the payments as taking back monies he had lent to VMC rather than salary. Transcript, May 13, 2015 p.m., 55. Donna Veneziano also received wages from VMC during this time period despite the fact that she was not working at VMC at that time. Exhibit 99; Transcript, May 13, 2015 p.m., 55; Transcript, May 22, 2015 a.m., 24.
In 2009, the defendant transitioned to a part-time working status with VMC. Transcript, May 13, 2015 p.m., 60. He retired in early 2010, although after his retirement he continued to have almost daily contact with the office and continued to manage and oversee VMC's finances. Transcript, May 6, 2015 p.m., 12, 42, 46, 49. The defendant stopped going into the office in September 2011, and was terminated by VMC in April 2012. Transcript, May 12, 2015 p.m., 51; Transcript, May 6, 2015 a.m., 62. Despite the fact that the defendant has not worked full time since 2009, and ceased working entirely in 2012, he is still seeking equivalent compensation to Ms. Caliendo through 2014. Transcript, May 13, 2015 p.m., 60-61. In fact, in 2012, the defendant requested that he be put back on the payroll at the same amount as Ms. Caliendo despite the fact that he had retired in 2010 and in November 2011, had been precluded by the board of directors from going to VMC's offices. Exhibit 51. In claiming that he is owed back pay, the defendant asks the court to discount the fact that he had all salary that he would otherwise have received transferred to Donna Veneziano. While they were married, Donna Veneziano used the defendant's salary that was paid to her to pay the defendant's bills and their joint household costs. Since their divorce, the defendant has received a sizable portion of the salary that he had instructed the plaintiff to pay to Donna Veneziano in the form of court-ordered alimony. Transcript, May 22, 2105 a.m., 20-23, 32, 33-34. Donna Veneziano started working for VMC in 2010 after the defendant had retired. The defendant directed that his salary and any bonuses were to be paid to her. Transcript, May 13, 2015 p.m., 6; Transcript, May 5, 2015, 130; Exhibit 41 (email from the defendant reiterating that Donna Veneziano was to receive his salary). The stated purpose of the salary transfer was so that Donna Veneziano could build up her social security earnings. Transcript, May 12, 2015 p.m., 47. Donna Veneziano continued to receive the defendant's full salary even after the defendant's retirement and termination. The defendant even asked in 2012 that the salary go back to him instead of being issued to Donna Veneziano, despite the fact that he had been terminated. Transcript, May 13, 2015 p.m., 6. There was no credible evidence presented at trial of an agreement between the defendant and either Ms. Caliendo or the board of directors that would entitle the defendant to receive a salary after he stopped being an employee of VMC. Transcript, May 6, 2015 p.m., 13. The defendant was still being paid a salary (given to Donna Veneziano at his request) even after he retired at his sole discretion and without discussion or approval from anyone else at VMC. Transcript, May 6, 2015 p.m., 43, 44, 47.
[13]There was, additionally, some inchoate testimony from Ms. Caliendo that she and the defendant had agreed, at the inception of the company, to be paid equally. It is unclear, however, whether this agreement applied only to the partnership, of which both Ms. Caliendo and the defendant were equal partners, or to the plaintiff corporation. It is also unclear as to when this purported agreement was reached. At bottom, however, for the other reasons set forth in this section, the defendant has failed to sustain his burden of proving that the plaintiff authorized, agreed to, or promised any award to the defendant of back pay. In 2004, the defendant also directed that part of his salary be paid to his son. Transcript, May 6, 2015 p.m., 9-10. Donna Veneziano also received salary from VMC in 2008 and 2009, although in a lesser amount than in 2010 and forward. Exhibit 99. Donna Veneziano was still working at her prior position with the Winchester Housing Authority in 2008 and 2009 and did not begin working for VMC until 2010. Transcript, May 22, 2015 a.m., 24. No basis was identified at trial for Donna Veneziano to have received salary from VMC in 2008 and 2009. The court notes that this was the same time period during which the defendant was receiving unemployment benefits.
At trial, the defendant claimed that he was owed back salary in the amount of $140,000 for the years 2006 to 2009. As with many of the defendant's claims, the exact amount of this claim varied over the course of the trial. In particular, the defendant seems to have abandoned his allegation in his counterclaims that the amount owed to him for back salary was $518,479.59. Even limiting the amount claimed to $140,000, the defendant was unable to provide any credible evidence to support such claim.
The defendant claimed to be owed $140,000 in back salary based upon differences between what he made in 2006 to 2009 and what Ms. Caliendo earned during the same period, notwithstanding the facts that he was not employed on a full-time basis in those years and had collected unemployment during that time. Transcript, May 28, 2015, 3. The defendant's calculations appear to be based upon a chart comparing officer's wages created by VMC. Exhibit 99. The defendant's calculation of $140,000, however, ignores salary paid to Donna Veneziano in 2008 and 2009. Id. No evidence was presented that provided a credible explanation for why Donna Veneziano would have received any funds from VMC in those years as she did not start working for VMC until 2010. Transcript, May 21, 2015 p.m., 52. Ms. Caliendo testified that she never had an understanding of how the $140,000 figure was calculated by the defendant. Transcript, May 28, 2015, 64. Other than a simple comparison of the amounts listed on Exhibit 99, the defendant did not provide any justification as to why he was entitled to $140,000 in back salary despite the fact that there was no agreement as to deferred salary and he was not working full time. The defendant's claims for back salary are also contradicted by the fact that, as acknowledged by the defendant, VMC's audited financial statements did not reflect any salary due to officers. Transcript, May 28, 2015, 7-8; Exhibits 80-86.
In sum, the court finds no credible evidence supporting a claim for back pay.
Claims for Advances or Loans
In his counterclaims, the defendant also alleges that he is entitled to repayment of " investments" made in VMC. It is unclear if these claims relate to loans/advances or only to contributed capital. The defendant did not provide any evidence that VMC owed him for any loan or advance. Ms. Caliendo testified credibly that she had no knowledge of any loan from the defendant carried on the books of VMC to be repaid. Transcript, May 6, 2015 p.m., 39. The defendant acknowledged that VMC's audited financial statements did not show any monies owed to the defendant for loans. Transcript, May 13, 2015 p.m., 83-87; Exhibits 78, 80-86. The audited financial statements did not show any monies owed to the defendant despite the fact that they were based upon information provided by the defendant and the defendant was aware from his banking background that related party transactions, including loans to and from officers, should be reflected on audited financial statements. Transcript, May 13, 2015 p.m., 84. VMC's financial statements, including its liabilities, were relied upon by VMC, its shareholders, and its board of directors, as well as third parties, including lenders, Fannie Mae, Freddie Mac, and government regulators. Such parties relied upon the fact that the financial statements did not show any liabilities to related parties.
The defendant's personal financial statements also failed to identify any funds purportedly due to him from VMC. Thus, despite the defendant now claiming substantial funds due from VMC, the defendant never claimed monies owed from VMC on his own financial statements. Transcript, May 19, 2015, 135. For example, the defendant failed to include any monies allegedly owed to him by VMC on the financial statements provided to the court in his divorce. Id., 116-17. The court finds that the defendant's claim that he did not include the funds due to him on his financial statements so that he would take the whole loss if the company failed is not credible. Transcript, May 20, 2015, 117, 122. Significantly, the defendant never communicated such arrangement to Ms. Caliendo. Transcript, May 22, 2015 a.m., 69. Such purported rationale also does not explain why the defendant did not claim the amounts due to him when VMC was profitable and would not justify the defendant's acceptance of what he now claims were inaccurate audited financial statements.
Even if the court were to find that the defendant had provided credible evidence that he was entitled to payment for loans to the plaintiff, which it does not, the defendant has not provided any credible evidence that would sufficiently identify the amount due and, thus, cannot succeed on this claim. The defendant never provided anything resembling complete accounting to VMC of the amounts he claimed he provided to VMC and for which he was entitled reimbursement. Transcript, May 5, 2015, 126. In fact, the defendant was unable to provide the court with the exact dates or sources of any amounts he claimed he provided to VMC. Transcript, May 20, 2015, 40.
The defendant claimed at trial that the plaintiff owed him funds for coins he claimed to have given to the plaintiff. The court notes that the defendant's testimony regarding the coins changed throughout the trial, was overly vague, and was not supported by any documentary evidence. The defendant claimed that the coins were sold at various times and that some of the proceeds of the coins were given to VMC and some were used personally by the defendant. Transcript, May 13, 2015 a.m., 56. The defendant could not recall every transaction that he claims resulted in funds going to VMC and failed to provide any specific information about dates and amounts. Id., 60. When he did try to provide specific dollar amounts, the defendant kept changing his testimony. For example, he originally testified that the amounts were $110,000 in 2005 and $42,000 in each of 2007 and 2009. Then he said he did not recall the amount in 2007 and that not all of the money was given to VMC. Id., 61-63. The defendant later testified that the amount in 2005 was $73,000 rather than $110,000. Transcript, May 14, 2015, 18. At another point in his testimony the defendant stated that the funds that were given to VMC were subsequently withdrawn from VMC for his benefit and he was no longer claiming that he was entitled to them. Id., 17-20. Due to the fact that the defendant continually contradicted himself and provided vague and incomplete answers, unsupported by any documentary evidence, the court does not credit the defendant's testimony concerning the coins.
[15]Although there were credits claimed by the defendant that were confirmed by Mr. Girolimon (see Exhibit 128), including one for $73,156 on August 11, 2005, that the defendant claimed were for proceeds from the sale of coins, (1) the defendant did not prove that these were credits for loans advanced, and (2) all of the credits set forth in Exhibit 128 were accounted for before the end of calendar year 2008, more than nine months before October 16, 2009, the first date on which that the court awards damages to the plaintiff in this case. The defendant did not request, much less provide to the court, verification from his coin dealer of the value of the coins and the timing of sales. Transcript, May 13, 2015 p.m., 74-75. The court also notes that the amounts claimed by the defendant in the present case exceed the value of the coin collection that was reflected on his financial statements. Transcript, May 14, 2015, 24, Exhibit 112.
To the extent that the defendant is claiming any funds are due to him in connection with VMC's acquisition of Mortgage/Fax, such claims are also not supported by the evidence. Mortgage/Fax was a Massachusetts business acquired by VMC in 2007 for a total purchase price of $150,000. Exhibits J, K. The purchase price was paid with $50,000 of VMC's funds and $100,000 from a line of credit taken out by the defendant from CFC secured by his coins. Transcript, May 12, 2015 a.m., 49-50. VMC paid CFC in full for the $100,000 line of credit. Exhibit O (CFC statement showing zero balance); Transcript, May 20, 2015, 23. Thus, there is no evidence that there are additional monies due to the defendant in connection with this transaction. To the contrary, Mr. Girolimon credibly testified that the defendant actually owes VMC money as he directed VMC to make additional payments to CFC even after the $100,000 line of credit had been paid in full. Transcript, May 12, 2015 a.m., 50.
In sum, the court finds no credible evidence supporting a claim for monies owed to the defendant for advances or loans.
Claims for Capital Contributions
The defendant has characterized certain transactions as paid in capital rather than a loan or advance. His testimony as to the amounts claimed as capital investments was not credible, was not supported by any documentary evidence, and was inconsistent and vague. The defendant made various claims of monies he alleged to have provided to VMC at its inception. Such claims include a purported $50,000 in cash put into the initial bank account for VMC and a purported initial capital contribution of $391,000. Veneziano May 12, 2105 p.m., 39. The defendant claimed the $50,000 came from various banks but could not identify which banks or how much money came from each one. Transcript, May 13, 2015 p.m., 92. He did not produce any bank records or other evidence of the claimed $50,000 deposit and did not testify that he attempt to obtain any records that could have substantiated such claims. Id., 97; Transcript, May 14, 2015, 85. The alleged $50,000 was not reflected on VMC's initial tax return. Transcript, May 13, 2015 p.m., 94; Exhibit A (tax return). The defendant's lack of credibility as to these claims is underscored by the fact that the defendant testified that on such tax return, it was intentionally misrepresented that the defendant did not have any ownership interest in VMC in order to avoid a conflict of interest while he was still employed by Community Bank. Transcript, May 12, 2015 p.m., 13. The defendant made the same misrepresentation in a deposition in 1999 that was taken in relation to a lawsuit involving the defendant and Community Bank. Transcript, May 21, 2015 a.m., 28. In short, the defendant did not provide any credible evidence that would show that he actually provided the claimed $50,000 to VMC.
The defendant's claims with regard to the purported $391,000 capital contribution are similarly not credible. The defendant claimed that the money came from the sale of assets, his savings, and a lawsuit settlement. Transcript, May 12, 2105 p.m., 38. The defendant, however, was unable to identify the specific bank at which such funds were held or the amounts contributed from each source. Transcript, May 20, 2015, 127-28; Transcript, May 21, 2015 a.m., 7, 11. The defendant was unable to even say when such purported contribution was made, first testifying that the amount was made up of different deposits made at different times up until 2000, Transcript, May 14, 2015, 7-8, and then later testifying that all of the alleged $391,000 was invested by 1998. Transcript, May 19, 2015, 44. The defendant did not provide any cancelled checks, wire confirmations, or other evidence to support this alleged contribution. Transcript, May 19, 2015, 96-97; Transcript, May 28, 2015, 40, 50. In fact, Veneziano never provided any credible evidence that supported a claim for $391,000, as such amount was not consistent with the number of shares obtained by the defendant at the time of incorporation and did not appear on any financial statement.
The defendant attempted at various points in the trial to claim that he owns more than the 917.5 shares reflected in VMC's records, comprised of one-half of his original 1, 835 shares, which were divided in his divorce. The number of shares has already been addressed by our courts in a separate action. The court does not find a credible factual basis for the defendant to base a claim that he holds additional shares.
Ms. Caliendo and Mr. Girolimon reviewed VMC's books and records, including banking records for the original accounts into which investors' money was deposited, and Ms. Caliendo testified that they were unable to find any evidence that the defendant provided the amounts claimed by the defendant at VMC's startup. Transcript, May 6, 2015 a.m., 80; Transcript, May 22, 2015 a.m., 49; Transcript, May 27, 2015, 30. The only credible evidence of any initial contribution was an old passbook found by Ms. Caliendo that indicated a possible contribution from the defendant of $70,000 on August 4, 1998. Transcript, May 27, 2015, 24; Exhibit 127. The court finds that the defendant made this investment into the plaintiff, but further finds that there was no agreement that this amount was to be returned, or was in the nature of a loan. Moreover, money invested as a capital contribution is returned upon the sale of one's stock. See Spooner v. Phillips, 62 Conn. 62, 24 A. 524 (1892).
Claims Arising from Real Estate Acquisitions
At trial, the defendant also made various claims regarding real estate acquisition or refinances that he attempted to link to claims that VMC owed him for monies he had provided to VMC. Rather than proving any of the defendant's claims, however, the evidence regarding these real estate deals illustrates the defendant's lack of credibility as well as his self-dealing and breach of his fiduciary duties. The defendant's testimony regarding these transactions is also illustrative of his propensity to change his story during the trial and his inability to substantiate any of his claims.
VC Holdings, LLC (VC Holdings) was a separate entity owned by the defendant and Ms. Caliendo for real estate acquisition. Transcript, May 13, 2015 a.m., 27. The assets of VC Holdings were eventually transferred to VMC as paid in capital and VC Holdings was dissolved. Transcript, May 5, 2015, 132, 185, 187. Mr. Girolimon testified that the assets were categorized as paid in capital (rather than a loan or advance) at the defendant's direction. Transcript, May 12, 2015 a.m., 44, 79. The defendant testified that it was necessary that they be categorized as capital so that the amounts could be used to meet increased Fannie Mae or Freddie Mac capital requirements. Transcript, May 19, 2015, 104. The defendant acknowledged that these assets were categorized as paid in capital. Transcript, May 13, 2105 p.m., 88.
The VC Holdings transactions also provide evidence of the defendant's self-dealing and failure to recognize any corporate formalities. Ms. Caliendo testified that, the defendant, with complete disregard to the differences between VMC and VC Holdings, caused VMC to " reimburse" him for expenditures related to VC Holdings properties. Transcript, May 27, 2015, 124. The defendant has claimed in the present case that VMC owes him for $40,000 he allegedly paid as out of pocket expenses to complete the Pondside Condominiums that were owned by VC Holdings. Transcript, May 13, 2015 p.m., 75. As with his other claims, the defendant did not provide any evidence substantiating that he actually paid out these funds. Moreover, the defendant did not provide credible evidence to support a basis upon which VMC would be responsible for VC Holdings' expenditures.
The defendant also improperly used a VMC line of credit to purchase properties for VC Holdings and caused VMC to make payments for properties owned by him and Ms. Caliendo individually. For example, Ms. Caliendo testified that although the Oxbow Condominiums were owned by the defendant and Ms. Caliendo, and not VMC, VMC paid the bills for the property and the defendant thought that it was appropriate for VMC to pay such bills. Transcript, May 6, 2015 a.m., 88-90. Ms. Caliendo eventually quitclaimed her one-half interest to VMC and the property was the subject of a partition action.
Ms. Caliendo also testified that the Falls Village property on Route 123 or 126 was also owned by the defendant and Ms. Caliendo individually but they acquired it using VMC's line of credit. I d., 82, 83. Ms. Caliendo further testified that the defendant sanctioned the use of VMC's line of credit to purchase the property. Id., 82-83. No evidence was presented to support a legitimate basis for VMC's funds to be used to purchase a property in which VMC had no interest. Such payments, which would have been caused and approved by the defendant, are clear examples of self-dealing.
The settlement statement for the sale of the property shows the Falls Village property as being owned by VC Holdings rather than the defendant and Ms. Caliendo individually. Exhibit 115. Throughout the trial there was confusion as to which properties had been owned by VC Holdings and which were owned by the defendant and Ms. Caliendo individually. In either case, the evidence supports a conclusion that the property was not held by VMC.
A portion of the Falls Village property was eventually sold, with the proceeds going to VMC to be used to cover a shortfall of approximately $250,000 owed to Fannie Mae. Id., 84. The defendant initially claimed that he had personally provided funds to make up part of the shortfall, but such testimony was contradicted by documentary evidence. Specifically, the defendant originally testified that the proceeds from the sale of the property were $150,000 and the balance of the shortfall was made up of $73,000 in proceeds from an alleged sale of coins by him. Transcript, May 12, 2015 p.m., 59-60. No documentary evidence of the purported $73,000 from the sale of coins was provided. The defendant, however, later testified that the proceeds from the sale of the property were approximately $250,000. Transcript, May 20, 2015, 46-47. The settlement statement reflects proceeds of $251,080.38, which was paid by check to VC Holdings at the time of the closing, and the check was then endorsed as payable to VMC. Exhibits 115, 116; Transcript, May 22, 2015 a.m., 63. The court credits Ms. Caliendo's testimony that the proceeds from the sale were sufficient, without any additional funds, to cover the shortfall to Fannie Mae. Transcript, May 22, 2015 a.m., 66. Thus, the defendant's claims regarding providing funds to VMC to cover the shortfall are not credible.
There was also quite a bit of testimony during the trial regarding refinances of the defendant's home (113 Chapel Road) and whether any funds from such refinances were provided to VMC. The defendant's story and the amounts claimed with regard to these purported investments changed throughout the trial. Thus, again, the defendant's testimony was contradictory, vague, unsupported by any documentary evidence, and, therefore, not credible. The defendant claimed that he originally took out a line of credit on the home in 1997 and withdrew $125,000 from the line of credit in 2000. He initially testified that these funds were deposited into VMC. Transcript, May 13, 2015 a.m., 41-42. He later testified, however, that such funds went to the construction of a home on South Road owned by Mr. Thomas. Transcript, May 14, 2015, 15; Transcript, May 20, 2015 15; Transcript, May 21, 2015 a.m., 34. The defendant's testimony regarding the South Road property was particularly confusing and contradictory. In addition to testifying that the $125,000 from the line of credit both went to VMC and to Mr. Thomas, the defendant also claimed that he personally lent $225,000 to Mr. Thomas, but he later testified that these funds were given to VMC for Mr. Thomas. Transcript, May 20, 2015, 9; Transcript, May 28, 2015, 34. The defendant also claimed that VMC provided $73,000 to Mr. Thomas. Transcript, May 20, 2015, 11. The defendant did not provide any evidence that would substantiate any of these claims or explain why VMC would have provided funds to the defendant's cousin for construction of his home. The defendant claimed that any loans from VMC were paid off when the property was refinanced in 2005, but an underwriting statement showed $226,000 being paid to the defendant and nothing being paid to VMC. Transcript, May 27, 2015, 12-13; Transcript, May 28, 2015, 64; Exhibit 124. Mr. Girolimon testified that he did not find any evidence of any proceeds from this original line of credit against 113 Chapel being provided to VMC. Transcript, May 12, 2015 a.m., 53.
[19]This exhibit is consistent with, if not identical to, Defendant's Exhibit Z. [20]Although the continued applicability of the cigarette rule has been questioned in light of the fact that the Federal Trade Commission no longer uses this test, our Supreme Court has declined to abandon the cigarette rule in favor of the Federal Trade Commission's substantial unjustified injury test. Artie's Auto Body, Inc. v. Hartford Fire Ins. Co., supra, 317 Conn. 622 n. 13; see also Glazer v. Dress Barn, Inc., 274 Conn. 33, 82 n.34, 873 A.2d 929 (2005). [21]Section 42-110g(f) provides " An action under this section may not be brought more than three years after the occurrence of a violation of this chapter." It is unclear if this is the same alleged $73,000 from a purported sale of coins that the defendant claimed he gave to VMC, Transcript, May 14, 2015, 18, or the alleged $73,000 that the defendant claimed to have given to VMC to cover the Fannie Mae shortfall. Transcript, May 12, 2015, 59-60. In any case, while the defendant introduced into evidence VMC's bank statement showing a deposit of $73,156.00 in August 2005, exhibit H (see also exhibit 128), he failed to prove, to the court's satisfaction, the source of such deposit.
The defendant next claimed that VMC received funds from a second refinance on his Chapel Road property in 2006. Again, the defendant's claims regarding this transaction changed throughout his testimony and were contradicted by the documentary evidence. The defendant originally testified that $225,000 of the proceeds of the 2006 refinance of Chapel Road were deposited into VMC. Transcript, May 13, 2015 a.m., 48-50. He later testified that the refinance was a " no cash" transaction but still tried to claim that there was nonetheless some benefit to VMC from the payoff. Transcript, May 13, 2015 p.m., 70-71. The defendant's testimony was completely contradicted by the settlement statement, which did not show any monies going to VMC. Exhibit 32. There is no basis to conclude that VMC owes Veneziano anything with regard to this transaction. Moreover, Ms. Caliendo testified credibly that, despite the fact that VMC did not receive any of the proceeds from the refinance of the defendant's Chapel Road home, VMC made the payments on the loan. Transcript, May 5, 2015, 131. Ms. Caliendo testified credibly that she was not aware that VMC was paying the mortgage on the defendant's home until after the defendant was removed from the company. Transcript, May 28, 2015, 72. The payments were stopped in either 2011 or 2012. Transcript, May 13, 2015 a.m., 42. The defendant did not present any credible evidence that would provide a valid basis for VMC to be paying his mortgage. The defendant's self-dealing and bad faith is further shown by the fact that despite VMC paying the mortgage on his behalf, the defendant was personally taking the tax deduction for the mortgage interest. Transcript, May 19, 2015, 132.
The Parties' Financial Statements
The defendant's claims for monies purportedly owed to him by VMC are further undercut by the financial statements of both the defendant and VMC that were entered into evidence. Almost none of the statements support any of the defendant's claims and, in fact, most contradict them. The defendant's financial statements also evidence that it was highly unlikely that he had the funds to make the investments that he claims to have made in VMC. The court, for ease of the parties, has incorporated portions of the plaintiff's summary of the parties' financial statements into this decision. This summary was originally part of the plaintiff's post-trial brief and it accurately reflects the exhibits that were admitted at trial and are cited in the summary.
The Defendant's Personal Financial Statements
Date
Exhibit
Relevant Information
February 1997
92
Reflects $29,000 in cash, $75,000 in coins, and
$35,000 from an estate settlement.
November 1998
112
Showing a net investment into VMC of $140,000, cash
of $110,000 and coins in amount of $150,000.
October 1999
117
Claiming VMC value to be $270,000 and coins of
$150,000.
November 2002
122
Claiming the value in cost of defendant's interest in
VMC to be $391,000 and reflecting coins valued at
$300,000.
March 2003
55
Reflecting no obligations due to the defendant from
VMC; attached resume sets forth the defendant's
extensive banking background.
January 2004
118
Reflects a value for VMC of $600,000 (Schedule A),
but a non-marketable securities reference of
$300,000.
March 2004
57
Reflects a value for VMC of $480,000, coins of
$350,000, and no claims of monies owed from VMC to
the defendant; Schedule C states Defendant's original
investment in VMC was $300,000.
2005
120
Reflects a value for VMC of $600,000 and acknowledges
that the defendant's mortgage was paid for by VMC.
October 2006
58
Reflects $825,000 value for VMC (Schedule A) and
$500,000 for coins.
August 2007
59
Reflects $650,000 for the value of VMC and states
that the defendant has a one-third ownership
interest; shows value of $400,000 for coins.
October/
61/60
Both reflecting $650,000 for the value of VMC,
$400,000
December 2008
for the coins.
December 2008
62
Reflects $650,000 for the value of VMC and states
that the defendant has a one-third ownership
interest; shows value of $400,000 for coins.
December 2009
64
Reflects $1.2 million value of interest in VMC.
Claims $100,000 due to him from VMC in connection
with the Mortgage/Fax acquisition. Again acknowledges
that VMC was paying the defendant's mortgage.
December 2010
65
Reflects a value for VMC of $1,683,000 and $500,000
in coins. Again, reflective that VMC was paying his
mortgage.
October 2011
67
Reflects a value of $1,700,000 for VMC and $500,000
in coins; again acknowledging that VMC was paying his
mortgage.
October 2013/
96/119
Both statements were filed in the Superior Court of
October 2014
Litchfield in connection with the defendant's
divorce; neither reflects any money being owed to the
defendant from VMC.
Overall, the defendant's financial statements evidence that he never reported that VMC owed him any money, whether categorized as back pay, loans, advances, or otherwise. The increase in the valuation of VMC over time also discounts the defendant's testimony that he did not claim any amounts due from the corporation so that he would absorb all losses if the corporation failed. Transcript, May 20, 2015, 117, 122. Such a rationale, to the extent that it ever made any sense, makes even less sense when the defendant's own financial statements show VMC being profitable and growing. The financial statements do not support the defendant's claims as to the amounts that he alleges he originally invested in VMC. Such amounts are not reflected on the statements and the statements cast down on whether the defendant even had the assets to invest such monies with VMC at that time. As noted above, the only capital contribution that the court finds the defendant made in the plaintiff was the $70,000 reflected in the 1998 passbook. Exhibit 127. Therefore, the court finds as not credible any statements referred to in the chart set forth above concerning other investments made by the defendant into the plaintiff corporation.
VMC's Audited Financial Statements
Date
Exhibit
Relevant information
1998
104
Reflecting capital stock of $5,460 and paid in capital of
$540,540. No amount is reflected as being owed to the defendant
and there is no statement of related party transactions.
1999
105
Reflects capital stock of $5,660, paid in capital of
$560,340.00, and contributed capital of $11,967.
2000
106
Reflects capital stock of $6,300, paid in capital of $623,700,
and contributed capital of $11,967. Again, as the previous
statements, there is no reference to related party transactions.
2001
107
Reflects the same amounts as the 2000 statement; again, no
reference to related party transactions.
2002
108
Reflects capital stock of $7,150, paid in capital of $707,850,
and contributed capital of $11,967; again, no reference to
related party transactions.
2003
109
Reflects the same amounts as the 2002 statement.
2004
110
Reflects capital stock of $6,850, paid in capital of
$678,150, and contributed capital of $16,150. Although this
statement references an increase in advances to officers, it
is unclear what this is based upon. Again, there is no
footnote in regard to the related party transactions.
2005
78
Reflects capital stock of $7,150, $707,850 for paid in capital,
and $16,012 for contributed capital. There is a related party
transaction on page 7, footnote 5, reflecting advances to and
from officers and related parties.
2006
80
Reflects capital stock of $7,050, paid in capital of
$697,950, and contributed capital of $16,012. Advances to
officers are reflected as $0.
2007
81
Reflects capital stock of $7,050, paid in capital of
$697,950, and contributed capital of $16,012. Officers'
advances were reflected at $54,655.
2008
82
Reflects capital stock of $7,050, paid in capital of
$697,950, and contributed capital of $483,476. The officers'
advances were $0.
2009
83
Advances to officers disappeared from this financial
statement, together with the related party note.
2010
84
Capital stock reflected as $621,900, paid in capital now
reduced to $98,100. Again, the related party transactions
reference is omitted.
2011
85
Reflects capital stock of $651,900, paid in capital of
$611,100, and contributed capital of $483,476; no reference
to officers' loans.
2012
86
Reflects capital stock of $651,900, paid in capital of
$576,241, and a note due from related parties of
$237,061.
The court notes that in all of VMC's audited financial statements, any investments by the defendant and Ms. Caliendo are reflected as capital. There is nothing to reflect loans owed to the defendant. There is nothing to reflect that money was owed for past salary.
LEGAL ANALYSIS OF COUNTERCLAIMS
As mentioned above, the defendant has filed counterclaims alleging that the plaintiff breached an oral contract with him, was unjustly enriched, breached a fiduciary duty owed to him, and violated CUTPA concerning issues arising from both back pay allegedly owed to the defendant and repayment of investments made by defendant. The defendant has further counterclaimed by averring that the plaintiff is liable under the doctrine of promissory estoppel in regard to the back pay issue and committed defamation by means of the allegations of the complaint against the defendant in the present case. The court will deal with each of these theories seriatim.
Breach of an Express Oral Contract
The law governing contracts is well-settled in Connecticut. A contract is an agreement enforceable at law. " In order to form a binding and enforceable contract, there must be an offer and an acceptance based on a mutual understanding by the parties [as to the essential terms of the contract]." Steinberg v. Reding, 24 Conn.App. 212, 214, 587 A.2d 170 (1991). An offer is a clear, unambiguous expression of the terms under which someone is willing to enter into a contract. A. Corbin, Contracts (Rev. Ed. 1996) § 1.11. The acceptance of the offer must be explicit, full and unconditional. J. Calamari & J. Perillo, Contracts (4th ed. 1998) § 2.2. In order to form a binding contract, there must be a mutual assent or a meeting of the minds at the time the contract was formed. In order for there to be a meeting of the minds, the parties must agree that they have entered into a contract and must have a similar understanding of the essential terms. Bridgeport Pipe Engineering Co., Inc. v. DeMatteo Construction Co., 159 Conn. 242, 249, 268 A.2d 391 (1970); Hoffman v. Fidelity & Casualty Co. of New York, 125 Conn. 440, 443-44, 6 A.2d 357 (1939). " To be enforceable, an agreement 'must be definite and certain as to its [essential] terms and requirements.'" Presidential Capital Corp. v. Reale, 231 Conn. 500, 506-07, 652 A.2d 489 (1994); Dunham v. Dunham, 204 Conn. 303, 313, 528 A.2d 1123 (1987), limited on other grounds by Jaser v. Jaser, 37 Conn.App. 194, 655 A.2d 790 (1995). If the agreement is shown by the direct words of the parties, whether spoken or written, the contract is an express one. Janusauskas v. Fichman, 264 Conn. 796, 804-05, 826 A.2d 1066 (2003); Skelly v. Bristol Sav. Bank, 63 Conn. 83, 87, 26 A. 474 (1893); Hale v. Fred Benevenuti, Inc., 38 Conn.Supp. 634, 638-39, 458 A.2d 694 (1983).
" 'The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages.' . . . Chiulli v. Zola, 97 Conn.App. 699, 706-07, 905 A.2d 1236 (2006)." Sullivan v. Thorndike, supra, 104 Conn.App. 303.
The first and second counts of the defendant's counterclaims allege breach of an oral contract. As discussed more fully herein, the defendant has failed to prove that there was any agreement between the defendant and the plaintiff through either Ms. Caliendo or the plaintiff's board of directors as to back pay or return of investments and, therefore, these claims must fail. Specifically, the defendant did not sustain his burden of proving, by credible evidence, that there was an offer and an acceptance based on a mutual understanding by the parties as to the essential terms of an oral contract to provide the defendant back pay or to repay investments. Investments are investments and are not loans. Ordinarily, investments are repaid when the shareholder sells his stock. See Spooner v. Phillips, supra, 62 Conn. 62.
Therefore, the court finds against the defendant on his counterclaim of breach of an oral contract.
Unjust Enrichment
As our Supreme Court has pointed out, " [c]ourts and commentators have used disparate nomenclature to describe the restitutionary claim that is [unjust enrichment]." Meaney v. Connecticut Hospital Ass'n, Inc., 250 Conn. 500, 510-11, 735 A.2d 813 (1999). Sometimes denominated as an " implied in law [contractual] claim or [a] quasi-contract claim, " Vertex, Inc. v. Waterbury, 278 Conn. 557, 574, 898 A.2d 178 (2006), " it is more descriptive to call it what it is, a claim in restitution whose basis is the alleged unjust enrichment of one person at the expense of another . . . However denominated, a claim for unjust enrichment has broad dimensions." (Citation omitted; footnote omitted.) Meaney v. Connecticut Hospital Ass'n, Inc., supra, 511.
Unjust enrichment is a common law principle of restitution; it is a noncontractual means of recovery without a valid contract, Sidney v. DeVries, 215 Conn. 350, 351-52 n.1, 575 A.2d 228 (1990), one that has been applied in circumstances where no contract exists. Meaney v. Connecticut Hospital Ass'n, Inc., supra, 250 Conn. 508-12. Meaney applied the doctrine of unjust enrichment to a case where the plaintiff sought incentive compensation where there was no express contractual provision, no implied in fact contractual provision, and, in fact, no promissory obligation at all governing incentive pay. Id., 510-12. " Unjust enrichment applies whenever 'justice requires compensation to be given for property or services rendered under a contract, and no remedy is available by an action on the contract . . .' 12 S. Williston, Contracts (3d Ed. 1970) § 1479, p. 272 . . . [Unjust enrichment] is a doctrine based on the postulate that it is contrary to equity and fairness for a defendant to retain a benefit at the expense of the plaintiff. See National CSS, Inc., v. Stamford, 195 Conn. 587, 597, 489 A.2d 1034 (1985)." Gagne v. Vaccaro, 255 Conn. 390, 401, 766 A.2d 416 (2001), on appeal after remand, 80 Conn.App. 436, 835 A.2d 491 (2003), cert. denied, 268 Conn. 920, 846 A.2d 881 (2004).
" [E]quitable remedies [such as unjust enrichment] are not bound by formula but are molded to the needs of justice . . . Our Supreme Court has described unjust enrichment as a very broad and flexible equitable doctrine . . . [E]quitable determinations . . . depend on the balancing of many factors . . ." (Citations omitted; internal quotation marks omitted.) Jay v. A& A Ventures, LLC, 118 Conn.App. 506, 516-17, 984 A.2d 784 (2009). In fact, " [i]n an equitable proceeding, the trial court may examine all relevant factors to ensure that complete justice is done." (Internal quotation marks omitted.) Webster Bank v. Zak, 71 Conn.App. 550, 556-57, 802 A.2d 916, cert. denied, 261 Conn. 938, 808 A.2d 1135 (2002).
" With no other test than what, under a given set of circumstances, is just or unjust, equitable or inequitable, conscionable or unconscionable, it becomes necessary in any case where the benefit of the doctrine is claimed, to examine the circumstances and the conduct of the parties and apply this standard . . . Plaintiffs seeking recovery for unjust enrichment must prove (1) that the defendants were benefited, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the plaintiffs' detriment." (Internal quotation marks omitted.) New Hartford v. Connecticut Resources Recovery Authority, 291 Conn. 433, 451-52, 970 A.2d 592 (2009).
As discussed more fully herein, the defendant has failed to establish any entitlement to salary that was withheld from him or to any monies that he provided to VMC for which he was not previously reimbursed. Thus, there has been no unjust enrichment.
As a threshold matter, " '[o]ne who seeks equity must also do equity and expect that equity will be done for all.' LaCroix v. LaCroix, 189 Conn. 685, 689, 457 A.2d 1076 (1983), citing 1 Pomeroy, Equity Jurisprudence 419, § 385 et seq. (1881)." Falkenstein v. Falkenstein, 84 Conn.App. 495, 504, 854 A.2d 749, cert. denied, 271 Conn. 928, 859 A.2d 581 (2004). The defendant in the present case has done the opposite of equity. He has stolen other people's money. While it is true that the defendant took precious little of a salary in many years when he was working for the plaintiff, that does not allow him to take whatever money he needs, at any time, for any purpose, as the defendant did in this case. Under the proven facts of this case, the defendant has not sustained his burden to prove that the plaintiff unjustly did not pay the defendant for the benefit it received from him either in regard to alleged back pay or return of investments. Pursuant to the defendant's instructions, the plaintiff paid either the defendant or Donna Veneziano, as well as his son and daughter, just what the defendant told the plaintiff to pay those employees. For these reasons, the court finds against the defendant on his claim of unjust enrichment and concludes that the plaintiff was not unjustly enriched for either the defendant's claimed back pay or by failing to return the defendant's alleged investments.
Breach of Fiduciary Duty
The law governing a breach of fiduciary duty has been laid out at length in the court's analysis of the plaintiff's claims. Of particular importance in analyzing the defendant's counterclaim is the principle that: " [i]t is axiomatic that a party cannot breach a fiduciary duty to another party unless a fiduciary relationship exists between them. '[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 interests of the other.' . . . Hi-Ho Tower, Inc. v. Com-Tronics, Inc., [ supra, 255 Conn. 38]." (Emphasis in original.) Biller Associates v. Peterken, 269 Conn. 716, 723, 849 A.2d 847 (2004).
In the present case, there is no basis upon which to find that VMC owed a fiduciary duty to the defendant. In fact, the defendant's allegations in support of this claim set forth the fiduciary duty he owed to VMC and its shareholders but do not set forth any basis for determining that VMC owed a fiduciary duty to him . Moreover, even if such a duty existed, the defendant has failed to establish any breach of such duty because, as fully set forth herein, he did not establish that any monies to which he was entitled were not paid to him by VMC. The plaintiff asserted the same special defenses to the defendant's breach of fiduciary duty claims as to his prior claims and the defendant's claims for breach of fiduciary duty are barred by such defenses. In the present case, the defendant, rather than the plaintiff or any of its other officers, was in a superior position as to the plaintiff's finances. The plaintiff placed its trust and confidence in the defendant and not vice versa. Therefore, the court finds against the defendant as to his counterclaims for breach of fiduciary duty as to alleged back pay and return of investments.
CUTPA
General Statutes § 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."
" 'CUTPA is, on its face, a remedial statute that broadly prohibits unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce . . . To give effect to its provisions, [General Statutes] § 42-110g(a) of [CUTPA] establishes a private cause of action, available to [a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act, or practice prohibited by [General Statutes § ]42-110b . . .' . . . Marinos v. Poirot, 308 Conn. 706, 712-13, 66 A.3d 860 (2013)." Artie's Auto Body, Inc. v. Hartford Fire Ins. Co., 317 Conn. 602, 623, 119 A.3d 1139 (2015). " CUTPA imposes no requirement of a consumer relationship. In McLaughlin Ford, Inc. v. Ford Motor Co., 192 Conn. 558, 473 A.2d 1185 (1984), [our Supreme Court] concluded that 'CUTPA is not limited to conduct involving consumer injury' and that 'a competitor or other business person can maintain a CUTPA cause of action without showing consumer injury.' Id., 566, 567; see Della Construction, Inc. v. Lane Construction, Inc., 42 Conn.Supp. 202, 612 A.2d 147 (1991)." Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 496, 656 A.2d 1009 (1995). " Because CUTPA is a self-avowed 'remedial' measure, General Statutes § 42-110b(d), it is construed liberally in an effort to effectuate public policy goals. See Hinchliffe v. American Motors Corp., [184 Conn. 607, 617, 440 A.2d 810 (1981)], see also Kintner, A Primer on the Law of Deceptive Practices, pp. 30-31 (1971); Ormstedt & Langer, 'The Connecticut Unfair Trade Practices Act, ' 52 Conn. B.J. 116 (1978)." Sportsmen's Boating Corp. v. Hensley, 192 Conn. 747, 756, 474 A.2d 780 (1984), superseded in part by statute as stated in Fichera v. Mine Hill Corp., 207 Conn. 204, 541 A.2d 472 (1988).
Our courts have turned to the Federal Trade Commission to determine if commercial acts or practices are unfair under CUTPA. " '[I]n determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the [F]ederal [T]rade [C]ommission for determining when a practice is unfair: (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- 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 business persons] . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three.' . . . Harris v. Bradley Memorial Hospital & Health Center, Inc., 296 Conn. 315, 350-51, 994 A.2d 153 (2010)." A rtie's Auto Body, Inc. v. Hartford Fire Ins. Co., supra, 317 Conn. 609 n.9.
Other Supreme Court and Appellate Court cases have put a finer point on the requirement of proving unfair acts or practices in the conduct of trade or commerce.
In Ulbrich v. Groth, 310 Conn. 375, 78 A.3d 76 (2013), our Supreme Court gave a gloss on the first prong of the cigarette rule, a violation offending public policy. Ulbrich held that the jury could have reasonably found that the mortgagee's failure to ensure that a buyer at a foreclosure sale was warned that certain personal property was leased, and therefore would not be conveyed as part of the sale, " was not merely negligent or incompetent, but involved a conscious departure from known, standard business norms and was therefore unscrupulous, within at least the penumbra of some . . . statutory, or other established concept of unfairness . . . and resulted in an ascertainable loss to the plaintiffs." (Citation omitted; footnote omitted; internal quotation marks omitted.) Id., 436-47.
Our appellate courts have also commented on the second tine of the cigarette rule, proof of immoral, unethical, oppressive, or unscrupulous behavior. " A trade practice that is undertaken to maximize the defendant's profit at the expense of the plaintiff's rights comes under the second prong of the cigarette rule. See Johnson Electric Co. v. Salce Contracting Associates, Inc., 72 Conn.App. 342, 357, 805 A.2d 735 (defendant general contractor held liable for CUTPA violation under second prong of cigarette rule after listing plaintiff subcontractor as successful bidder but failing to honor contract), cert. denied, 262 Conn. 922, 812 A.2d 864 (2002)." Votto v. American Car Rental, Inc., 273 Conn. 478, 485, 871 A.2d 981 (2005) (unfair trade practice for rental car company to charge customer's credit card for damages to rental vehicle when customer did not authorize company to charge his credit card for damages and the amount charged exceeded the estimated cost to repair damages prepared by company).
Our courts have also provided guidance as to when a commercial act or practice is deceptive under CUTPA." ' [A] party need not prove an intent to deceive to prevail under CUTPA.' . . . Normand Josef Enterprises, Inc. v. Connecticut National Bank, 230 Conn. 486, 522-23, 646 A.2d 1289 (1994)." Willow Springs Condominium Ass'n, Inc. v. Seventh BRT Development Corp., 245 Conn. 1, 43, 717 A.2d 77 (1998). Although " [a] violation of CUTPA may be shown by proof of deceptive conduct . . . [i]t is not necessary to prove that the defendant intended to deceive. Web Press Services Corp. v. New London Motors, Inc., 203 Conn. 342, 363, 525 A.2d 57 (1987). An act or practice is deceptive if three requirements are met. 'First, there must be a representation, omission, or other practice likely to mislead consumers. Second, the consumers must interpret the message reasonably under the circumstances. Third, the misleading representation, omission, or practice must be material--that is, likely to affect consumer decisions or conduct.' . . . Caldor, Inc. v. Heslin, 215 Conn. 590, 597, 577 A.2d 1009 (1990), cert. denied, 498 U.S. 1088, 111 S.Ct. 966, 112 L.Ed.2d 1053 (1991), citing Figgie International, Inc., 107 F.T.C. 313, 374 (1986)." Freeman v. A Better Way Wholesale Autos, Inc., Superior Court, judicial district of Hartford, Docket No. CV-13-6045900-S (April 1, 2015, Huddleston, J.) (failure of auto dealer to disclose financing terms before requiring a nonrefundable deposit was a deceptive practice that violated all three prongs of cigarette rule). Under the cases cited above, " a violation of CUTPA may be established by showing either an actual deceptive practice . . . or a practice amounting to a violation of public policy." (Internal quotation marks omitted.) Glazer v. Dress Barn, Inc., supra, 274 Conn. 82-83.
In sum, to be legally sufficient, a CUTPA complaint brought by a consumer or a person who is not a competitor of the defendant must plead (1) either (a) an unfair act or practice in the conduct of trade or commerce, an element that may be satisfied by alleging (i) a violation of public policy as established under statutes, common law or otherwise, within, at least, some penumbra of unfairness as set forth in a statute, under common law or otherwise; (ii) an immoral, unethical, oppressive, or unscrupulous act or practice; or (iii) an act or practice that causes substantial injury to consumers; or (b) a deceptive act or practice, meaning a material representation, omission, or other practice likely to mislead consumers, which such communication a consumer must have interpreted reasonably under the circumstances, and (2) that such unfair or deceptive act or practice caused an ascertainable loss of money or property. The plaintiff's complaint fails to set forth these necessary allegations.
Of particular relevance in the present case, CUTPA does not apply to purely intracorporate conduct. See Metcoff v. Lebovics, 123 Conn.App. 512, 519, 2 A.3d 942 (2010) (" It is well settled that purely intracorporate conflicts do no constitute CUTPA violations"); see also McCrae Associates, LLC v. Universal Capital Management, Inc., 746 F.Supp.2d 389, 398 (D.Conn. 2010) (collecting cases). Thus, CUTPA is not even applicable to the present case.
Even if CUTPA were to apply to the present case, the defendant has failed to establish any amounts due to him from VMC the withholding of which could establish a CUTPA violation. Thus, the defendant is not entitled to judgment on these claims. In addition to the special defenses asserted as to the defendant's other claims, the plaintiff also asserts that the defendant's CUTPA claims are barred by the three-year statute of limitations for CUTPA, General Statutes § 42-110g(f). Thus, the defendant is barred from any recovery under CUTPA for acts occurring prior to September 23, 2010.
Under the facts of the present case, the defendant has not sustained his burden of proving ascertainable loss, or of proving a violation of public policy, an immoral, unethical, oppressive, or unscrupulous act or practice, an act or practice that causes substantial injury to consumers or others or a deceptive act or practice, likely to mislead the defendant. Therefore, the court finds against the defendant as to his counterclaim under CUTPA for both his claims for back pay and return of investments.
Defamation
" 'A defamatory statement is defined as a communication that tends to harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him . . . To establish a prima facie case of defamation, the plaintiff must demonstrate that: (1) the defendant published a defamatory statement; (2) the defamatory statement identified the plaintiff to a third person; (3) the defamatory statement was published to a third person; and (4) the plaintiff's reputation suffered injury as a result of the statement.' . . . Cweklinsky v. Mobil Chemical Co., 267 Conn. 210, 217, 837 A.2d 759 (2004). 'For a claim of defamation to be actionable, the statement must be false and truth is an affirmative defense.' Rafalko v. University of New Haven, 129 Conn.App. 44, 53, 19 A.3d 215 (2011)." Nodoushani v. Southern Connecticut State University, 152 Conn.App. 84, 95-96 n.6, 95 A.3d 1248 (2014).
" 'It is well settled that communications uttered or published in the course of judicial proceedings are absolutely privileged [as] long as they are in some way pertinent to the subject of the controversy.' . . . Hopkins v. O'Connor, 282 Conn. 821, 830-31, 925 A.2d 1030 (2007). The effect of an absolute privilege is that damages cannot be recovered for the publication of the privileged statement even if the statement is false and malicious. E.g., Craig v. Stafford Construction, Inc., [271 Conn. 78, 84, 856 A.2d 372 (2004)]." Gallo v. Barile, 284 Conn. 459, 465-66, 935 A.2d 103 (2007).
" In Connecticut, parties to or witnesses before judicial or quasi-judicial proceedings are entitled to absolute immunity for the content of statements made therein. [ Petyan v. Ellis, 200 Conn. 243, 510 A.2d 1337 (1986)]." Field v. Kearns, 43 Conn.App. 265, 271, 682 A.2d 148, cert. denied, 239 Conn. 942, 684 A.2d 711 (1996), overruled on other grounds by Rioux v. Barry, 283 Conn. 338, 927 A.2d 304 (2007) (overruling the grant of absolute privilege in a vexation litigation claim, while still granting absolute immunity in defamation claims).
" 'In making [the] determination [of whether a particular statement is made in the course of a judicial proceeding], the court must decide as a matter of law whether the allegedly [false and malicious] statements are sufficiently relevant to the issues involved in a proposed or ongoing judicial proceeding, so as to qualify for the privilege. The test for relevancy is generous, and " judicial proceeding" has been defined liberally to encompass much more than civil litigation or criminal trials.' Hopkins v. O'Connor, supra, ." Gallo v. Barile, supra, 284 Conn. 467. " The judicial proceedings privilege is available only when the defamatory matter has some reference to the subject matter of the proposed or pending litigation; although it need not be strictly relevant to an issue involved in it." (Internal quotation marks omitted.) Dlugokecki v. Viera, 98 Conn.App. 252, 256-57, 907 A.2d 1269 (statements related to the credibility of a party or reliability of information provided by the party are privileged because the statements " could be pertinent to the subject of the controversy." [Footnote omitted; internal quotation marks omitted.] Id., 259), cert. denied, 280 Conn. 951, 912 A.2d 483 (2006).
The ninth count, sounding in defamation, does not appear to have been pursued by the defendant as he did not introduce any evidence to establish defamatory statements or damages at trial. The court finds against the defendant on his defamation count because the allegations of the plaintiff at issue were (1) found to be true by this court and (2) were made as pleadings in a lawsuit and are, therefore, privileged under the cases cited above.
Promissory Estoppel
" 'Under the law of contract, a promise is generally not enforceable unless it is supported by consideration . . . This court has recognized, however, the development of liability in contract for action induced by reliance upon a promise, despite the absence of common-law consideration normally required to bind a promisor . . . Section 90 of the Restatement [(Second) of Contracts] states that under the doctrine of promissory estoppel [a] promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. [1 Restatement (Second), Contracts § 90, p. 242 (1981).] A fundamental element of promissory estoppel, therefore, is the existence of a clear and definite promise which a promisor could reasonably have expected to induce reliance. Thus, a promisor is not liable to a promisee who has relied on a promise if, judged by an objective standard, he had no reason to expect any reliance at all.' . . . D'Ulisse-Cupo v. Board of Directors of Notre Dame High School, 202 Conn. 206, 213, 520 A.2d 217 (1987).
" Although the promise must be clear and definite, it need not be the equivalent of an offer to enter into a contract because '[t]he prerequisite for . . . application [of the doctrine of promissory estoppel] is a promise and not a bargain and not an offer.' . . . 3 A. Corbin, Contracts (Rev.Ed. 1996) § 8.9, p. 29; cf. Suffield Development Associates Ltd. Partnership v. Society for Savings, 243 Conn. 832, 845-46, 708 A.2d 1361 (1998) (concluding that contract did not exist because agreement was not sufficiently definite and remanding case for new trial to permit consideration by fact finder of promissory estoppel claim predicated on same facts). This, of course, is consistent with the principle that, although '[a]n offer is nearly always a promise'; 1 E. Farnsworth, Contracts (2d Ed.1998) § 3.3, p. 188; all promises are not offers. See 1 Restatement (Second), supra, at § 24, comment (b), p. 72 ('[w]hether or not a proposal is a promise, it is not an offer unless it specifies a promise or performance by the offeree as the price or consideration to be given by him').
" Additionally, the promise must reflect a present intent to commit as distinguished from a mere statement of intent to contract in the future. See D'Ulisse-Cupo v. Board of Directors of Notre Dame High School, supra, 202 Conn. at 214-15, 520 A.2d 217. '[A] mere expression of intention, hope, desire, or opinion, which shows no real commitment, cannot be expected to induce reliance'; 3 A. Corbin, Contracts, supra, at § 8.9, pp. 29-30; and, therefore, is not sufficiently promissory. The requirements of clarity and definiteness are the determinative factors in deciding whether the statements are indeed expressions of commitment as opposed to expressions of intention, hope, desire or opinion. See D'Ulisse-Cupo v. Board of Directors of Notre Dame High School, supra, at 214-15, 520 A.2d 217. Finally, whether a representation rises to the level of a promise is generally a question of fact, to be determined in light of the circumstances under which the representation was made. Torosyan v. Boehringer Ingelheim Pharmaceuticals, Inc., 234 Conn. 1, 17, n.6, 662 A.2d 89 (1995)." (Emphasis omitted.) Stewart v. Cendant Mobility Services Corp., 267 Conn. 96, 104-06, 837 A.2d 736 (2003).
[U]nder the doctrine of promissory estoppel, [a] promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. A fundamental element of promissory estoppel, therefore, is the existence of a clear and definite promise which a promisor could reasonably have expected to induce reliance. Thus, a promisor is not liable to a promisee who has relied on a promise if, judged by an objective standard, he had no reason to expect any reliance at all.' . . . Torringford Farms Ass'n, Inc. v. Torrington, 75 Conn.App. 570, 575, 816 A.2d 736, cert. denied, 263 Conn. 924, 823 A.2d 1217 (2003); see also Sturm v. Harb Development, LLC, 298 Conn. 124, 142, 143-44, 2 A.3d 859 (2010) (detrimental reliance element of fraud and negligent misrepresentation)." Valencis v. Nyberg, 160 Conn.App. 777, 789-90, 125 A.3d 1026 (2015).
The defendant's claim of promissory estoppel must also fail because, as shown above, the defendant has not provided any credible evidence of any statements in the nature of a clear and definite promise made by a representative of the plaintiff that the defendant was entitled to back pay or return of his investments. The court does not need to reach the plaintiff's special defenses to the defendant's claim of promissory estoppel because the defendant has not met his burden of proof for this claim. The court finds against the defendant on his counts of promissory estoppel because the defendant did not sustain his burden of proving a clear and definite promise made by the plaintiff or its agents pertaining to either back pay or return of investments.
CONCLUSION
The court rules against the plaintiff and in favor of the defendant in regard to the allegations of the first count, in favor of the plaintiff and against the defendant in regard to the allegations of the second count, and against the defendant and in favor of the plaintiff in regard to each of the defendant's counterclaims. The court awards the plaintiff $2,080,185.09 under the proven allegations of the second count.
So ordered.