Summary
affirming judgment dismissing action after denying motion to substitute on ground that plaintiffs did not show they filed action in name of wrong person through mistake, as that term is defined in DiLieto
Summary of this case from Fairfield Merrittview Ltd. v. City of NorwalkOpinion
No. 36207.
05-05-2015
Carl YOUNGMAN et al. v. Joel SCHIAVONE et al.
Irving H. Perlmutter, with whom, on the brief, was Andrew M. Ullman, New Haven, for the appellants (plaintiffs). Stephen P. Wright, with whom, on the brief, was Nicole L. Barber, Hartford, for the appellees (named defendant et al.).
Irving H. Perlmutter, with whom, on the brief, was Andrew M. Ullman, New Haven, for the appellants (plaintiffs).
Stephen P. Wright, with whom, on the brief, was Nicole L. Barber, Hartford, for the appellees (named defendant et al.).
GRUENDEL, LAVINE and MULLINS, Js.
Opinion
MULLINS, J.In this case, the plaintiffs, Carl Youngman and Leslie Charm, doing business as Restoration Associates (Restoration), initiated this action in their individual capacities rather than in the name of the proper party, Quinnipiac Riverview Properties, LLC (Riverview), a limited liability company in which they and the defendant Joel Schiavone are members. That mistake was deemed by the trial court to be a mistake that precluded the plaintiffs from substituting the proper party as the plaintiff and, consequently, deprived the court of subject matter jurisdiction. As a result, the court denied the plaintiffs' motion to substitute Riverview as the proper plaintiff and dismissed this action for lack of subject matter jurisdiction on the ground that the plaintiffs lacked standing. On appeal, the plaintiffs claim that the court abused its discretion in denying their motion to substitute and in granting the defendants' motion to dismiss. In light of our Supreme Court's controlling interpretation of the word “mistake” in DiLieto v. County Obstetrics & Gynecology Group, P.C., 297 Conn. 105, 151, 998 A.2d 730 (2010), we affirm the judgment of the trial court.
“[T]he use of a fictitious or assumed business name does not create a separate legal entity ... [and] [t]he designation [doing business as] ... is merely descriptive of the person or corporation who does business under some other name.... [I]t signifies that the individual is the owner and operator of the business whose trade name follows his....” (Internal quotation marks omitted.) Monti v. Wenkert, 287 Conn. 101, 135, 947 A.2d 261 (2008).
Gary Bello and Fair Haven Heights Realty, LLC, were also named as defendants. The action was withdrawn as to Fair Haven Heights Realty, LLC. In this opinion, we refer to Schiavone and Bello collectively as the defendants and individually by name where appropriate.
The following facts and procedural history inform our review. On December 14, 2010, the plaintiffs filed a complaint against Schiavone, Gary Bello and Fair Haven Heights Realty, LLC (Fair Haven). On May 6, 2011, the defendant Fair Haven filed a notice of bankruptcy, and the plaintiffs, in turn, withdrew the complaint as to Fair Haven.
On February 7, 2013, the plaintiffs filed an amended complaint, alleging, in relevant part, the following: Youngman and Charm are partners doing business under the trade name of Restoration Associates. “On or about August 30, 2010, and for more than five years prior thereto, the plaintiffs, as copartners doing business as Restoration, were the owners of a 66 2/3 percent ownership in [Riverview], a Connecticut limited liability company formerly known as the Missy 2, LLC (‘Missy 2’) the name of which was changed on December 14, 2006.... Throughout that period ... Schiavone was the owner of the remaining 33 1/3 [percent] ownership interest in Missy 2.... Between April 17, 2002, and August 22, 2005 ... Schiavone represented to the plaintiffs that he owned or controlled the ownership of [five] properites in New Haven ... [to wit] 22 Front Street, 621 Quinnipiac Avenue, 710 Quinnipiac Avenue, 714 Quinnipiac Avenue, and 715 Quinnipiac Avenue....
We take the facts to be those alleged in the complaint, construed in the light most favorable to the plaintiffs. See Gold v. Rowland, 296 Conn. 186, 200–201, 994 A.2d 106 (2010).
“Between April 17, 2002, and November 28, 2005 ... Schiavone offered to the plaintiffs a 50 percent ownership interest in Missy 2 for the sum of $250,000.... At the time of the offer, the other 50 percent ownership interest in Missy 2 was [held] by Alyxx Schiavone and Josie Schiavone, the daughters of ... Schiavone.... The plaintiffs accepted the offer ... and paid to Missy 2 the sums of money required to receive ownership of the 50 percent [interest] ... from Schiavone.... [After] Schiavone had a disagreement with his daughters ... the plaintiffs acquired, for consideration, an additional 16 2/3 percent ownership of Missy 2, [giving] the plaintiffs [an ownership interest of] 66 2/3 percent of Missy 2 ....
The complaint contains no allegation as to the date this offer was accepted.
The complaint contains no allegation as to the date this additional ownership interest was acquired.
“On November 28, 2005, Missy 2 ... purchased the real property located at ... 740 Quinnipiac Avenue ... with funds received from the plaintiffs and Missy 2, with title being taken in the name of Missy 2.... [It was discovered, however, that] Schiavone, instead of taking title to the [other five properties] ... in the name of Missy 2, took title to [those] properties in his own name and, until August 30, 2010, held [those] properties in his own name.” (Footnotes added.) On December 14, 2006, Missy 2 changed its name to Riverview.
“Until August 30, 2010, despite representing to the plaintiffs that the properties would be transferred and conveyed to Missy 2 or [Riverview], [Schiavone] failed, refused and neglected to transfer the properties to Missy 2 or its successor [Riverview].... From 2002 through 2006, the properties were always reported to the Internal Revenue Service ... as being owned by Missy 2.... At all times from and after 2007, the properties were always reported to the Internal Revenue Service ... as being owned by [Riverview].... The operating agreement of Missy 2 [and, subsequently, Riverview] provided that no properties owned by the limited liability company could be sold or transferred in the absence of approval by a ‘super majority’ of the members of the limited liability company, as defined in the operating agreement, or in breach of the agreement of the plaintiffs and ... Schiavone or in violation of the operating agreement of Missy 2.... The plaintiffs owned 66 2/3 percent of the ownership of [Riverview], and this percentage constituted a ‘super majority’ of the ownership ... as defined in the operating agreement.
“On August 30, 2010 ... Schiavone transferred and conveyed, for no consideration, the properties at 22 Front Street, 621 Quinnipiac Avenue, 710 Quinnipiac Avenue, 714 Quinnipiac Avenue, 715 Quinnipiac Avenue and 740 Quinnipiac Avenue to [Fair Haven] ... [whose members include] Schiavone ... Bello ... and James Byrne, the attorney for ... Schiavone (who has since resigned from membership in [Fair Haven] ).... [Also] on August 30, 2010 ... Bello communicated with all of the tenants of the properties described ... alleging that he was ‘the manager-owner of [Fair Haven], the new owner of the ... apartment,’ making demand upon each of the tenants to send him their monthly rent checks, directing them not to send the rent checks to the building manager employed by [Riverview], thereby disrupting the continued operation of the residential properties.... Schiavone and Bello continue to deny that the plaintiffs and [Riverview] have any interest in the properties.”
On the basis of these facts, as alleged in their amended complaint, the plaintiffs, in their individual capacities, alleged against the defendants causes of action for breach of contract, conspiracy, unjust enrichment, breach of the covenant of good faith and fair dealing, a violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42–110a et seq., and a count entitled “damages for transfer of property without consideration.”
On March 14, 2013, the defendants filed an answer, special defenses, and a two count counterclaim to the plaintiffs' amended complaint. One of their special defenses alleged that the plaintiffs did not have standing on the ground that “[t]he claims they are making belong to Restoration ... which is a general partnership by the plaintiffs' admission, or [Riverview], which is a limited liability company. Either and both entities have their own legal existence.”
The defendants did not set forth this special defense in response to the plaintiffs' earlier complaint.
On May 30, 2013, counsel for the plaintiffs filed a motion to substitute party plaintiff, explaining that the plaintiffs mistakenly had believed that they were the proper parties to institute the present action but that, following the release of Padawer v. Yur, 142 Conn.App. 812, 818, 66 A.3d 931 (trial court improperly denied motion to dismiss because individual plaintiff lacked standing when injury was to limited liability company), cert. denied, 310 Conn. 927, 78 A.3d 145 (2013), they became convinced that Riverview was the proper party to have instituted the case.The next day, the defendants filed a motion to dismiss for lack of subject matter jurisdiction on the ground that the plaintiffs lacked standing to institute this case in their individual capacities. The court heard argument on the motion, wherein Youngman testified that he had instructed counsel to institute this action in the names of the individual plaintiffs because he thought they had suffered injury in their individual capacities. Following the hearing, on October 9, 2013, the court rendered judgment denying the plaintiffs' motion to substitute and granting the defendants' motion to dismiss in two separate orders.
In the first order, the court granted the defendants' motion to dismiss. The court ruled: “The named plaintiffs lacked standing to bring this action as individuals. That right belongs to the [limited liability company] under long-standing Connecticut law. Notwithstanding the fact that the individual plaintiffs might have erroneously believed that they possessed the legal right to pursue this action, the law is clear and settled. They do not. Therefore, this court lacks subject matter jurisdiction and this action must be dismissed. Procedurally, the court addressed the motion to dismiss first and will address the motion to substitute second.” (Emphasis added.)
In the second order, the court denied the plaintiffs' motion to substitute. The court ruled: “Notwithstanding the argument made by the plaintiffs' counsel, the law regarding who has the right to bring this action has been long established and is not new.”
The plaintiffs thereafter filed a motion for articulation of the trial court's orders, and the court issued a memorandum of decision further articulating its rulings. The court explained that, despite the plaintiffs' contention that they only became aware that they should have brought their complaint in the name of their limited liability company, Riverview, after the Appellate Court issued its opinion in Padawer, “the law regarding this matter was not changed by Padawer .... Because the plaintiffs did not have standing to bring this action, this court was deprived of subject matter jurisdiction to hear the claims or any motions, including the motion to substitute, of the plaintiffs. Had the action been validly brought by the plaintiffs, reasonably believing, based on the law, that they had standing, and then the law changed during the pendency of the matter, depriving the plaintiffs of standing, then the court would have entertained the motion to substitute. But, the law regarding the rights of a limited liability company has not changed. For that reason, the motion was denied.” Accordingly, the court ruled that the plaintiffs should have known that the limited liability company was the proper party because it was the long-standing law in Connecticut. This appeal followed.
On appeal, the plaintiffs claim that the court abused its discretion in denying their motion to substitute Riverview as the party plaintiff and that it improperly granted the defendants' motion to dismiss. A careful review of the court's order, granting the defendants' motion to dismiss, and its articulation leads us to two conclusions. First, we conclude that the court incorrectly determined that it should rule on the motion to dismiss before considering the plaintiffs' motion to substitute. Second, on the basis of language contained in our Supreme Court's decision in DiLieto v. County Obstetrics & Gynecology Group, P.C., supra, 297 Conn. at 151, 998 A.2d 730, we conclude that the court did not abuse its discretion in denying the plaintiffs' motion to substitute after determining that the plaintiffs had failed to establish that the law had changed such that they would not have known that the limited liability company was the proper party at the time they commenced this action.Finally, we conclude, on the basis of the court's denial of the motion to substitute and the plaintiffs' admission that they were the wrong party to institute this action, that the court properly found they lacked standing in this case. Accordingly, the court was without subject matter jurisdiction, and the motion to dismiss properly was granted.
“A determination regarding a trial court's subject matter jurisdiction is a question of law.... When the trial court draws conclusions of law, appellate review is plenary, and the reviewing court must decide whether the trial court's conclusions are legally and logically correct.... We further recognize that [t]he decision whether to grant a motion for the addition or substitution of a party to legal proceedings rests in the sound discretion of the trial court.... In reviewing the trial court's exercise of that discretion, every reasonable presumption should be indulged in favor of its correctness ... and only if its action discloses a clear abuse of discretion is our interference warranted.” (Citation omitted; internal quotation marks omitted.) Rana v. Terdjanian, 136 Conn.App. 99, 107–108, 46 A.3d 175, cert. denied, 305 Conn. 926, 47 A.3d 886 (2012).
“[When] a motion to dismiss is filed on the ground that the plaintiff lacks standing, and the plaintiff quickly follows by filing a motion to substitute the correct party, the motion to substitute may be heard while the motion to dismiss is pending, notwithstanding the general rule that the subject matter jurisdictional issues raised by a motion to dismiss must be dealt with prior to other motions.” J. Kaye & W. Effron, 2 Connecticut Practice Series: Civil Practice Forms (4th Ed.2004) § 106.5, p. 213; see also Rana v. Terdjanian, supra, 136 Conn.App. at 111, 46 A.3d 175.
In the present case, the trial court determined that, procedurally, it was considering the motion to dismiss for lack of standing before considering the motion to substitute. We conclude, however, that the trial court was not required to address the motion to dismiss before addressing the motion to substitute. Indeed, as we explained in Rana: “[I]t is well within the authority of a court to permit a substitution of plaintiffs in lieu of dismissing an action provided that the court determines that the conditions set forth in [General Statutes] § 52–109 have been met. We also agree with the reasoning of a number of trial court decisions that ... ‘if § 52–109 is to have the ameliorative purpose for which it was intended, then even assuming that the specter of subject matter jurisdiction rears its head, the statute is meant to give the trial courts jurisdiction for the limited purpose of determining if the action should be saved from dismissal by the substitution of plaintiffs.’ ... Wilson v. Zemba, 49 Conn.Supp. 542, 553, 896 A.2d 862 (2004), citing DiLieto v. County Obstetrics & Gynecology Group, P.C., Superior Court, judicial district of Waterbury, Complex Litigation Docket, Docket No. X02–CV–97–0150435–S, 2000 WL 157538 (January 31, 2000) (26 Conn. L. Rptr. 345 ), rev'd on other grounds, 265 Conn. 79, 828 A.2d 31 (2003). As the trial court in DiLieto aptly stated in its decision: ‘The legislature's provision of this statutory remedy would be completely undermined by any rule requiring the immediate dismissal for lack of subject-matter jurisdiction of any action commenced in the name of the wrong person as plaintiff. The statute, as an exercise of the legislature's constitutional authority to determine [our court's] jurisdiction; [Conn. Const., art. V, § 1 ]; must be seen as an extension of that jurisdiction for the limited purpose of deciding a proper motion to substitute.’ DiLieto v. County Obstetrics & Gynecology Group, P.C., supra, 26 Conn. L. Rptr. at 348.” Rana v. Terdjanian, supra, 136 Conn.App. at 111–12, 46 A.3d 175. Despite the court's procedural statement, however, it did consider the plaintiffs' motion to substitute after granting the motion to dismiss.
The trial court did not explain how it could grant the motion to dismiss and then consider and deny the motion to substitute, after having already dismissed the action. Nevertheless, it is clear that the court ruled on both motions.
Thus, we next determine whether the court properly denied the plaintiffs' motion to substitute Riverview as the proper plaintiff in this action. On the basis of DiLieto v. County Obstetrics & Gynecology Group, P.C., supra, 297 Conn. at 151, 998 A.2d 730, we conclude that the court did not abuse its discretion in denying the motion in this case, the court having concluded that counsel should have known the law when he commenced this action on behalf of the plaintiffs.
“The decision whether to grant a motion for the addition or substitution of a party to legal proceedings rests in the sound discretion of the trial court.... In reviewing the trial court's exercise of that discretion, every reasonable presumption should be indulged in favor of its correctness ... and only if its action discloses a clear abuse of discretion is our interference warranted.” (Citations omitted.) Poly–Pak Corp. of America v. Barrett, 1 Conn.App. 99, 102, 468 A.2d 1260 (1983).
Pursuant to § 52–109, “[w]hen any action has been commenced in the name of the wrong person as plaintiff, the court may, if satisfied that it was so commenced through mistake, and that it is necessary for the determination of the real matter in dispute so to do, allow any other person to be substituted or added as plaintiff.” In DiLieto, our Supreme Court explained that, “[u]nder § 52–109, substitution is permitted only when the trial court determines that the action was commenced in the name of the wrong plaintiff ‘through mistake,’ which properly has been interpreted to mean ‘an honest con viction, entertained in good faith and not resulting from the plaintiff's own negligence that she is the proper person to commence the [action ].’ [Wilson v. Zemba, supra, 49 Conn.Supp. at 549 ].” (Emphasis added.) DiLieto v. County Obstetrics & Gynecology Group, P.C., supra, 297 Conn. at 151–52, 998 A.2d 730.
Although the Supreme Court cited Wilson for this interpretation of mistake; see DiLieto v. County Obstetrics & Gynecology Group, P.C., supra, 297 Conn. at 151–52, 998 A.2d 730 ; this interpretation originally was set forth by the trial court in DiLieto in 2000 and was disavowed by the court in Wilson in 2004. See Wilson v. Zemba, supra, 49 Conn.Supp. at 549–50, 896 A.2d 862 (concluding that trial court's definition of mistake in DiLieto was “too limiting” and “too difficult to apply,” and holding that legislature meant nothing more than “the lawyer named the wrong plaintiff”); DiLieto v. County Obstetrics & Gynecology Group, P.C., supra, 26 Conn. L. Rptr. at 351 (defining mistake as “an honest conviction, entertained in good faith and not resulting from the plaintiff's own negligence that she is the proper person to commence the lawsuit”).
In seeking to ascertain the meaning of the term “mistake” as used in the statute, the trial judge in DiLieto noted that there was no legislative history and then proceeded to analyze what the word was taken to mean in the common law and analogous statutory provisions. DiLieto v. County Obstetrics & Gynecology Group, P.C., supra, 26 Conn. L. Rptr. at 350–51. Reviewing the history of the decision in DiLieto, it is clear that, at the time of that trial court's decision in 2000—when the definition of mistake as “an honest conviction, entertained in good faith and not resulting from the plaintiff's own negligence that she is the proper person to commence the action” first was set forth—General Statutes § 1–2z had not yet been enacted by our legislature. See Public Acts 2003, No. 03–154, § 1 (enacting § 1–2z ). When the Supreme Court issued its decision in DiLieto in 2010, however, and adopted the same definition that the trial court had set forth, § 1–2z was well established. See, e.g., Board of Selectmen v. Freedom of Information Commission, 294 Conn. 438, 449, 984 A.2d 748 (2010). Nevertheless, our Supreme Court did not conduct an analysis of the plain language of § 52–109 before stating that this interpretation was the proper interpretation of that term.
The dictionary definition of mistake, however, is more expansive and, thus, seems more congruent with the remedial purpose of § 52–109. “If a statute or regulation does not sufficiently define a term, it is appropriate to look to the common understanding of the term as expressed in a dictionary.” (Internal quotation marks omitted.) Marchesi v. Board of Selectmen, 309 Conn. 608, 616, 72 A.3d 394 (2013). Black's Law Dictionary (9th Ed.2009) defines mistake, in relevant part, as: “An error, misconception, or misunderstanding; an erroneous belief.” Merriam–Webster's Collegiate Dictionary (10th Ed.1993) defines mistake as: “1: [A] misunderstanding of the meaning or implication of something. 2: [A] wrong action or statement proceeding from faulty judgment, inadequate knowledge, or inattention....” The American Heritage Dictionary (2nd College Ed.1985) defines mistake, in relevant part, as: “1. An error or fault. 2. A misconception or misunderstanding....”
None of these definitions defines “mistake” as an absence of negligence. Rather, there is a clear commonality to each of these definitions, which includes error, misunderstanding, and misconception. Although these more expansive dictionary definitions appear to be more in line with the remedial purpose of the statute, it is not the interpretation that the court in DiLieto instructed is the proper interpretation of the term mistake as used in § 52–109. Because we are “an intermediate appellate court ... we are not at liberty to overrule, reevaluate or reexamine controlling precedent of our Supreme Court.” Pite v. Pite, 135 Conn.App. 819, 826, 43 A.3d 229, cert. denied, 306 Conn. 901, 52 A.3d 728 (2012).
Here, it is undisputed that the plaintiffs commenced they now admit that the proper party plaintiff is Riverview. Aside from merely stating that they believed they were the proper parties to have commenced this action, the plaintiffs did not explain to the court why Riverview was not named as a plaintiff despite all of the allegations in the complaint concerning the harm allegedly caused to Riverview. Instead, they simply argued before the trial court that our 2013 decision in Padawer v. Yur, supra, 142 Conn.App. at 812, 66 A.3d 931 made counsel aware that this case should have been commenced by Riverview and not by the plaintiffs in their individual capacities. Thus, the mistake in this case was, as the court determined, the result of the plaintiffs' and of counsel's belief that the law up until 2013 had permitted them to commence this action in their individual capacities.
As the trial court correctly noted in its articulation, however, Padawer did not change the established law. See General Statutes § 34–134 (“[a] member or manager of a limited liability company is not a proper party to a proceeding by or against a limited liability company solely by reason of being a member or manager of the limited liability company, except where the object of the proceeding is to enforce a member's or manager's right against or liability to the limited liability company or as otherwise provided in an operating agreement”). The dictates of § 34–134 have been the law at least since the statute's inception in 1993. Public Acts 1993, No. 93–267, § 20. Padawer simply restated this settled principle of law.
The plaintiffs do not contend that the law had changed, and they acknowledge that, at the time they commenced this action in 2010, the law commanded that the action be initiated in the name of Riverview, the limited liability company in which the plaintiffs are members. They did not argue otherwise before the trial court. In other words, the plaintiffs could not, and perhaps more specifically, did not, demonstrate to the trial court that their belief that they were the proper parties was a reasonable one, held in good faith, and not the result of their own negligence in failing to name the proper party. Consequently, under the circumstances in this case, we cannot conclude that the court abused its discretion in denying the plaintiffs' motion to substitute.
We are mindful, however, that the same sort of mistake at issue here, namely, a mistake of law, has been considered a good faith, nonnegligent mistake by our courts in other cases. For instance, in DiLieto, the plaintiff erroneously believed her bankruptcy proceeding had ended so that the debtor, not the trustee, could sue in malpractice. DiLieto v. County Obstetrics & Gynecology Group, P.C., supra, 297 Conn. at 147, 998 A.2d 730. The trial court found this to be a nonnegligent mistake, based on the facts presented regarding the plaintiff's reasons for believing that she was the proper party, notwithstanding the well established law that actions brought on behalf of a bankruptcy estate must be brought in the name of the trustee as the real party in interest. See id.; see also Manning v. Feltman, 149 Conn.App. 224, 233–34, 91 A.3d 466 (2014).
Additionally, in Rana v. Terdjanian, supra, 136 Conn.App. at 112–13, 46 A.3d 175 this court found that the trial court had not abused its discretion in granting a motion to substitute after concluding that the mistake in commencing the action in the name of the wrong plaintiff was not the result of negligence. In that case, the self-represented plaintiff initiated his action in small claims court in his individual capacity. Id., at 112, 46 A.3d 175. He was suing on behalf of a limited liability company, in which his wife was the sole member, to recover a debt owed by the defendant to the limited liability company. Id., at 103–104, 46 A.3d 175. The plaintiff was not a member of the limited liability company, but his name appeared on the credit card and bank statements of the limited liability company. Id., at 105, 46 A.3d 175. Just four months after the action was commenced, the defendant removed the case to the Superior Court, and the plaintiff retained counsel. Id., at 103–104, 46 A.3d 175. Counsel filed an amended complaint, but did not correct the fact that the wrong plaintiff had commenced the action, and the defendant then filed a special defense alleging that Rana had no standing. Id., at 104, 105 n. 6, 46 A.3d 175. The issue of standing, however, was not raised again until the court, during trial, sua sponte, inquired whether the plaintiff had standing to pursue the case. Id., at 104–105, 46 A.3d 175. The plaintiff responded to the court's inquiry by filing a motion to substitute the limited liability company as the proper plaintiff. Id., at 105, 46 A.3d 175. After hearing argument on the motion, the court concluded that, at the time he commenced this action, the self-represented party had an honest conviction, entertained in good faith and not resulting from his own negligence that he was the proper party because (1) he was not aware of General Statutes §§ 34–134, 34–186 and 34–187 ; and (2) the evidence of his extensive role in operating the business owned by the limited liability company led to his belief that he was the proper party to commence the action. Id., at 112, 46 A.3d 175. We concluded that the trial court properly allowed the substitution. Id., at 112–13, 46 A.3d 175.
In both DiLieto and Rana, the trial court determined, based on the facts presented to it, that the original plaintiffs in those cases were not negligent in commencing their actions in their individual names, the court having been satisfied that there was a reasonable basis for the plaintiffs' belief that they were the proper parties.
In the present case, the plaintiffs contended that a recent case from the Appellate Court made counsel realize that Riverview was the proper party, rather than the individual plaintiffs. Although the dissent presents a well written opinion, the plaintiffs in this case presented nothing more than an argument that the law had changed when in fact it had not. On the basis of such an argument, what was the trial court to do? After hearing testimony and considering the argument of counsel, the trial court here concluded that the law had not changed and that, therefore, the plaintiffs, who were represented by counsel at the time this action was commenced, should have known that Riverview was the proper party. The plaintiffs offered very little in the way of explanation, both before the trial court and on appeal, as to why they were unaware of the established law and as to why the case was not commenced in the name of Riverview. Thus, here, we are unable to conclude that the court abused its discretion in denying the motion to substitute based on what was presented to it.
Finally, having concluded that the court did not abuse its discretion in denying the plaintiffs' motion to substitute, we also conclude that the court properly determined that the plaintiffs lacked standing in this case. Indeed, given that the court denied the plaintiffs' motion to substitute and the plaintiffs admitted that they were the wrong parties to have commenced this action, the court properly found that they did not have standing to proceed with this matter in their individual capacities. Accordingly, the court was without subject matter jurisdiction, and the action properly was dismissed.
The judgment is affirmed.
In this opinion LAVINE, J., concurred.
GRUENDEL, J., dissenting.
In affirming the judgment of the trial court, the majority concludes that the court did not abuse its discretion when it denied the motion to substitute filed by the plaintiffs, Carl Youngman and Leslie Charm. I disagree, and write separately because I believe that the court abused its discretion in two respects. First, the court improperly ruled on the motion to dismiss filed by the defendants Joel Schiavone and Gary Bello before ruling on the plaintiffs' motion to substitute. Second, although the court went on to consider the motion to substitute, in doing so, it misapplied the substantive requirements of General Statutes § 52–109. I, therefore, respectfully dissent from the majority opinion and would reverse the judgment of the court for further proceedings according to law.
The plaintiffs named Joel Schiavone, Gary Bello, and Fair Haven Heights Realty, LLC, as defendants. The action was withdrawn as to Fair Haven Heights Realty, LLC. In this opinion, I refer to Schiavone and Bello collectively as the defendants and individually by name where appropriate.
I
I first address the court's determination that it could not consider the plaintiffs' motion to substitute because the plaintiffs lacked standing. As our court has previously held that § 52–109 extends jurisdiction to the extent necessary to rule on a motion to substitute, I would conclude that the court's ruling was incorrect and, thus, an abuse of discretion.
The following procedural history is relevant to the present appeal. On May 31, 2013, one day after the plaintiffs filed a motion to substitute, the defendants filed a motion to dismiss for lack of subject matter jurisdiction on the basis that the individual plaintiffs did not have standing because the harms alleged in the complaint were suffered by Quinnipiac Riverview Properties, LLC (Riverview). Nearly five months later, the court granted the defendants' motion to dismiss after concluding that the plaintiffs lacked standing in their individual capacities. The court then denied the plaintiffs' motion to substitute. On April 14, 2014, the court issued a memorandum of decision regarding its denial of the plaintiffs' motion to substitute, stating that “[b]ecause the plaintiffs did not have standing to bring this action, the court was deprived of subject matter jurisdiction to hear the claims or any motions, including the motion to substitute, of the plaintiffs.” (Emphasis added.) It is this conclusion that I believe requires reversal.
This court previously has interpreted § 52–109 as authorizing a limited extension of jurisdiction for the purpose of considering a motion to substitute, even when the named plaintiff otherwise lacks standing. Rana v. Terdjanian, 136 Conn.App. 99, 109, 46 A.3d 175, cert. denied, 305 Conn. 926, 47 A.3d 886 (2012). The rationale behind this conclusion is that for “§ 52–109... to have the ameliorative purpose for which it was intended ... the statute is meant to give the trial courts jurisdiction for the limited purpose of determining if the action should be saved from dismissal by the substitution of plaintiffs.” (Internal quotation marks omitted.) Id., at 111, 46 A.3d 175. “The legislature's provision of this statutory remedy would be completely undermined by any rule requiring the immediate dismissal for lack of subject-matter jurisdiction of any action commenced in the name of the wrong person as plaintiff. The statute, as an exercise of the legislature's constitutional authority to determine [our court's] jurisdiction; [Conn. Const., art. V, § 1 ]; must be seen as an extension of that jurisdiction for the limited purpose of deciding a proper motion to substitute.” (Internal quotation marks omitted.) Id., at 111–12, 46 A.3d 175 quoting DiLieto v. County Obstetrics & Gynecology Group, P.C., Superior Court, judicial district of Waterbury, Complex Litigation Docket, Docket No. X02–CV–970150435S, 2000 WL 157538 (January 31, 2000) (26 Conn. L. Rptr. 345 ), rev'd on other grounds, 265 Conn. 79, 828 A.2d 31 (2003).
In the present case, the court determined that, because the plaintiffs lacked standing, it was precluded from entertaining any of their motions, including the motion to substitute. This reasoning is in direct opposition to our case law, which has concluded that § 52–109 extends the court's subject matter jurisdiction to the extent necessary to consider the plaintiffs' motion to substitute. As the majority notes, the court first was required to determine whether the statutory criteria for substitution had been met. If the motion was granted, then the standing issue would be remedied and the case could proceed with Riverview stepping into the shoes of the plaintiffs. F.P., Inc. v. Collegium & Wethersfield, Ltd. Partnership, 33 Conn.App. 826, 830–31, 639 A.2d 527, cert. denied, 229 Conn. 917, 642 A.2d 1211 (1994). If the motion was denied, the court then properly could grant a dismissal on the basis that the plaintiffs lacked subject matter jurisdiction. By failing first to consider the motion to substitute, the court misapplied the law and thus, abused its discretion. Hayward v. Hayward, 53 Conn.App. 1, 8, 752 A.2d 1087 (1999) (“[o]ur review of a trial court's exercise of the legal discretion vested in it is ... whether [it] correctly applied the law and could reasonably have reached the conclusion that it did” [emphasis added; internal quotation marks omitted] ).
The majority concludes that the court did not abuse its discretion because it later went on to consider the plaintiffs' motion. After a careful review of the record, I am not convinced that the trial court properly considered the plaintiffs' motion in light of its prior ruling, granting the defendants' motion to dismiss.
II
I next turn to the court's application of § 52–109. Notwithstanding the court's prior determination that it lacked subject matter jurisdiction, the court in fact did proceed to consider the motion to substitute. In denying the motion, the court concluded that a pure mistake of established law could not form the basis of the plaintiffs' requested substitution. I disagree and conclude that, under the statute and our relevant case law, the court did not properly apply the correct legal standard in denying the motion to substitute.
Section 52–109 requires the court to conduct a two part inquiry. First, the court must determine whether the case was commenced by the wrong party through mistake. The term “mistake” in our case law has been defined as “an honest conviction, entertained in good faith and not resulting from the plaintiff's own negligence that she is the proper person to commence the [action].” (Internal quotation marks omitted.) DiLieto v. County Obstetrics & Gynecology Group, P.C., 297 Conn. 105, 151, 998 A.2d 730 (2010). Second, the court must inquire as to whether the proposed substitution is necessary for the determination of the real matter in dispute. Id., at 150, 998 A.2d 730.
I concur with the majority that the definition of mistake is overly restrictive given the term's more expansive dictionary definition. See footnote 8 of the majority opinion. Considering the lack of legislative history, it is difficult to see how, consistent with the mandate of General Statutes § 1–2z, the proper definition of mistake is “an honest conviction, entertained in good faith and not resulting from the plaintiff's own negligence that she is the proper person to commence the [action].” (Internal quotation marks omitted.) DiLieto v. County Obstetrics & Gynecology Group, P.C., supra, 297 Conn. at 151, 998 A.2d 730 ; cf. Black's Law Dictionary (9th Ed.2009) (mistake defined as “[a]n error, misconception, or misunderstanding”).
Other courts also have struggled with this definition of mistake. In Wilson v. Zemba, 49 Conn.Supp. 542, 549–50, 896 A.2d 862 (2004), the court stated that “it is ... difficult to imagine a situation in which negligence has not led to use of the wrong party as the original plaintiff.... When the legislature used the word ‘mistake,’ a common sense appraisal of what they meant is merely to describe the context in which the statute was to apply—the lawyer named the wrong plaintiff.”
Section 52–109 motions tend to arise in one of three narrow situations. The first is where the manager or shareholder of an organization brings the action individually where the proper plaintiff is the entity itself. See Rana v. Terdjanian, supra, 136 Conn.App. at 112, 46 A.3d 175 (individual plaintiff commenced action against defendant for fraud, theft, and conversion related to plaintiff limited liability company); Lupinacci v. Stamford, 48 Conn.Supp. 1, 2, 823 A.2d 456 (2002) (individual plaintiffs commenced action against town regarding certain real property owned by limited partnership). Another situation is where the party who brings a claim is a parent and the harm alleged is to the minor child. See Wilson v. Zemba, supra, 49 Conn.Supp. at 554, 896 A.2d 862 (father named plaintiff when alleged harm was to minor child). The last situation is where the named plaintiff is the party who entered into the contract or agreement, but at the time the action is initiated is no longer the party in interest. See NewAlliance Bank v. Schaeppi, 139 Conn.App. 94, 95–96, 54 A.3d 1058 (2012) (company that was party to contract subsequently merged to form new entity, which became successor in interest), cert. denied, 307 Conn. 948, 60 A.3d 737 (2013) ; Zipp v. Florian, judicial district of New Britain, Docket No. CV–3101980, 2006 WL 3719373 (November 13, 2006) (plaintiff entered into lease agreement with defendant but later transferred ownership of property to limited liability company); DiLieto v. County Obstetrics & Gynecology Group, supra, 26 Conn. L. Rptr. at 351, 356 (plaintiff filed for bankruptcy and bankruptcy trustee substituted as plaintiff).
In each of these situations, reasonable efforts to understand the law would have led the parties involved to file the action under the proper plaintiff. Thus, it is unclear how courts are to distinguish between negligent and nonnegligent mistakes. Further complicating the matter is that, I suspect, in most cases, plaintiffs are relying on the advice of counsel, meaning the mistake is likely more often that of the lawyer's, rather than that of the plaintiff's. Subjecting a party to dismissal on the basis that they reasonably relied on the erroneous advice of counsel runs counter to the statute's remedial purpose.
In denying the plaintiffs' motion to substitute, the court noted that it was established law that the entity, Riverview, was the proper plaintiff to bring this action. Although it is true that “[a] member may not sue in an individual capacity to recover for an injury the basis of which is a wrong to the limited liability company”; Wasko v. Farley, 108 Conn.App. 156, 170, 947 A.2d 978, cert. denied, 289 Conn. 922, 958 A.2d 155 (2008) ; a member may sue directly when the claim alleged is separate and distinct from that of other members. See Guarnieri v. Guarnieri, 104 Conn.App. 810, 823–24, 936 A.2d 254 (2007) (concluding shareholder of corporation had requisite standing to bring action on counts where no shareholder was similarly situated).
A review of the plaintiffs' complaint demonstrates that some of the claims allege individual harms. In the first count of the operative complaint, the plaintiffs alleged that they, individually, contributed funds for the purpose of purchasing real property. Although the property was intended to be held by Riverview's predecessor, Missy 2, LLC, the plaintiffs alleged that, on the day of the transaction, Schiavone took title to the property. In the fourth count, the plaintiffs alleged a breach of the covenant of good faith and fair dealing as to them as individuals. Each of these claims alleged harms that were separate and distinct from any harm to the limited liability company. Without reaching a determination on these issues, I acknowledge that there exists a reasonable legal basis from which the plaintiffs could have believed they were the proper parties to bring the action. See Kortner v. Martise, 312 Conn. 1, 10, 91 A.3d 412 (2014) (“[s]tanding ... requires no more than a colorable claim of injury” [internal quotation marks omitted] ); see also Yanow v. Teal Industries, Inc., 178 Conn. 262, 281–82, 422 A.2d 311 (1979) (“well settled that if the injury is one to the plaintiff as a stockholder, and to him individually ... where an alleged fraud ... has affected the plaintiff directly, the cause of action is personal and individual”). As a result, reasonable diligence would not have apprised the plaintiffs of their mistake. See DiLieto v. County Obstetrics & Gynecology Group, supra, 26 Conn. L. Rptr. at 350 (non-negligent mistake is one made despite party's exercise of reasonable diligence to know truth). The foregoing analysis serves as an example where a mistaken belief in law can form the basis of a nonnegligent mistake under the statute. The court, therefore, abused its discretion when it incorrectly applied the law by summarily concluding that a mistake of law could not form a basis for substitution.
I also note the practical concern that the court's denial of a motion to substitute most often will result in the dismissal of the case. In a motion to substitute, the plaintiff bears the burden of establishing that he or she is the incorrect party to bring the claim and that a different party should be substituted. By doing so, the party must admit to the court that they lack standing. If the court denies the plaintiff's motion, the logical next step, given the plaintiff's admission, is to grant a motion to dismiss on the ground that the court lacks subject matter jurisdiction. In my view, this further emphasizes the need for the trial court to apply the substitution statute liberally in favor of those it was intended to protect. See Okee Industries, Inc. v. National Grange Mutual Ins. Co., 225 Conn. 367, 373–74, 623 A.2d 483 (1993) (to extent remedial “statute leaves room for construction, we have construed its requirements liberally in order to implement the statute's remedial purpose”).
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Further, the majority's conclusion is incongruent with our precedent in Rana v. Terdjanian, supra, 136 Conn.App. at 99, 46 A.3d 175. In Rana, the original plaintiff, Anees U. Rana, brought an action against the defendant, Harry Terdjanian, after a limited liability company owned by Rana's wife purchased a business from Terdjanian. Id., at 103–104, 46 A.3d 175. During trial, Rana testified under cross-examination that the business purchased from the defendant was actually owned by his wife's limited liability company. Id., at 104, 46 A.3d 175. When the court raised, sua sponte, the issue of whether Rana had standing to bring the action, Rana filed a motion to substitute his wife's company as the plaintiff. Id., at 104–105, 46 A.3d 175. In support of the motion, Rana stated that he had held a good faith belief that he was a part owner of the limited liability company and that he ran all managerial aspects of that business. Id., at 105, 46 A.3d 175. In addition, Rana's counsel stated that, based on representations made to him, he held a good faith belief that Rana was the proper party to bring this action. Id. The trial court concluded that Rana had commenced the action by mistake, in ignorance of statutory authority, and granted the motion to substitute. Id., at 112, 46 A.3d 175. This court, in affirming the trial court, concluded that the substitution remedied the prior standing issue and that it was “legally and logically correct” to grant the plaintiff's motion to substitute. Id., at 112–13, 46 A.3d 175. In the present case, the plaintiffs and their attorney similarly believed that the plaintiffs were the proper parties to bring the action. Moreover, the plaintiffs in the present case actually had an ownership interest in the company and alleged that they, personally, had invested money in the business. In conclusion, I see no relevant distinction in these cases to warrant two different outcomes.
Finally, the trial court's analysis cannot be reconciled with the established principle, enunciated in Federal Deposit Ins. Corp. v. Retirement Management Group, Inc., 31 Conn.App. 80, 84, 623 A.2d 517, cert. denied, 226 Conn. 908, 625 A.2d 1378 (1993), that “[o]ur rules of practice ... permit the substitution of parties as the interests of justice require. ” (Emphasis added.) Furthermore, “[t]hese rules are to be construed as to alter the harsh and inefficient result that attach to the mispleading of parties at common law.” Id.; see also Hagearty v. Ryan, 123 Conn. 372, 375–76, 195 A. 730 (1937). “[I]t is well established that remedial statutes such as § 52–109 must be liberally construed in favor of those whom the legislature intended to benefit.” (Internal quotation marks omitted.) DiLieto v. County Obstetrics & Gynecology Group, P.C., supra, 297 Conn. at 149, 998 A.2d 730. Although the proper standard of review is an abuse of discretion, “the court's discretion should be exercised mindful of the policy preference to bring about a trial on the merits of a dispute whenever possible and to secure for the litigant his day in court .... The design of the rules of practice is both to facilitate business and to advance justice; they will be interpreted liberally in any case where it shall be manifest that a strict adherence to them will work surprise or injustice .... Rules are a means to justice, and not an end in themselves....” (Citation omitted, emphasis added, internal quotation marks omitted.) Millbrook Owners Assn., Inc. v. Hamilton Standard, 257 Conn. 1, 16, 776 A.2d 1115 (2001). I, therefore, disagree with the majority's conclusions that the court's denial of the plaintiffs' motion to substitute and its dismissal of the action was not an abuse of discretion.
For the foregoing reasons, I respectfully dissent.