Brennan v. Brennan Associates

• Decision Date: 18 August 2009
• Docket Number: No. 17812.,No. 17813.,17812.,17813.
• Citation: 977 A.2d 107,293 Conn. 60
• Court: Connecticut Supreme Court
• Parties: Thomas BRENNAN v. BRENNAN ASSOCIATES et al.

977 A.2d 107

293 Conn. 60

Thomas BRENNAN v. BRENNAN ASSOCIATES et al.

No. 17812.

No. 17813.

Supreme Court of Connecticut.

Argued February 9, 2009.

Decided August 18, 2009.

James Coyne, with whom were Colleen Fries, Stratford, and, on the brief, George

C. Markley, Fairfield, and Shelley R. Sadin, Bridgeport, for the appellant-appellee (plaintiff).

Christopher Rooney, with whom were John Farnsworth, New Haven, A. Reynolds Gordon and Richard Kaczak, for the appellees-appellants (defendant David Lehn et al.).

NORCOTT, KATZ, PALMER, ZARELLA and SILBERT, Js.

KATZ, J.

As aptly described by the trial court, "[t]his particular case is the unhappy story of a financially successful [partnership] that became an environment of distrust, rancor and paralysis after the untimely death of [one of the four partners]." On one side is the plaintiff, Thomas Brennan, one of the partnership's founding members. On the other side are the defendants: the named defendant, the partnership of Brennan Associates (partnership); the two other surviving partners; and the four coadministrators (administrators) of the estate of the deceased partner, Richard Aiello (decedent).¹ The plaintiff appeals from the trial court's judgment granting the counterclaim filed by the defendant partners, Alexander Aiello and Serge Mihaly, seeking the plaintiff's expulsion from the partnership, pursuant to General Statutes § 34-355(5)(C),² and denying the plaintiff's request for a permanent injunction barring the defendants from blocking his full access to the partnership records. All of the defendants except the partnership cross appeal from, inter alia, the trial court's judgment denying their request for that court to conduct a proceeding for the valuation of the plaintiff's partnership interest while the plaintiff's appeal was pending.³ We affirm the trial court's judgment.

The record reveals the following undisputed facts and procedural history. In 1984, the plaintiff, the decedent, Aiello and Mihaly executed an agreement whereby they formed the partnership, principally for the management and operation of a shopping center they owned in Trumbull. The plaintiff and the decedent each held a 32 percent interest in the partnership, Aiello held a 25 percent interest and Mihaly held an 11 percent interest. Because each partner's number of votes was equal to his partnership interest, and a 70 percent vote was necessary for any business initiative proposed, the plaintiff and the decedent each held a sufficient interest to veto any proposed initiative.

Until his death in December, 2004, the decedent essentially ran the partnership. He negotiated all of the leases, performed all of the improvements and paid all of the bills. He kept the partnership books at an office where he also kept records for two other partnerships. The plaintiff, Aiello and Mihaly were essentially silent partners and were fully content with the decedent's management of the partnership.

After the decedent's death, in January, 2005, his attorney, Thomas Welch, held a meeting with the three surviving partners and others who had an interest in the disposition of the decedent's partnership interest pursuant to the decedent's will. The will directed the sale of the decedent's interest in the partnership to his cousins, the defendants Peter DiNardo and Leonard DiNardo. Welch informed those present that he hoped to transfer the decedent's interest as soon as feasible, with no one expressing opposition at that time. Welch later was replaced as administrator, on his own motion, by another attorney, the defendant David Lehn. Lehn later obtained permission to have Peter DiNardo, Leonard DiNardo and their father, the defendant Salvatore DiNardo, added as administrators of the decedent's estate.

Shortly after the reading of the will, the harmony between the surviving partners deteriorated. They reached an impasse over many issues, including check signing authority, control over and access to partnership books, and decisions relating to the management of the shopping center. The plaintiff also came to believe that Aiello and Salvatore DiNardo had committed insurance fraud in relation to claims that had been submitted to the partnership's insurance company. At some point, the plaintiff made an offer to buy the decedent's share of the partnership, which Lehn rejected.

In March, 2005, the plaintiff commenced the present action against the defendants. In his revised amended complaint, the plaintiff sought a declaratory judgment that the disposition of the decedent's partnership interest constituted an event of dissociation⁴ that: (1) triggered the right of the surviving partners to purchase the decedent's full partnership interest; (2) in the absence of unanimous consent of the surviving partners, precluded the decedent's estate from transferring the decedent's full partnership interest to Peter DiNardo and Leonard DiNardo; and (3) would render any purported assignment of the decedent's interest to Peter DiNardo and Leonard DiNardo effective as to only the economic interest and not any management or voting rights. The plaintiff also sought a permanent injunction to, inter alia, prohibit the defendants from blocking his access to the partnership's records.⁵ Finally, the plaintiff sought to have himself appointed as a receiver to supervise the partnership during the pendency of the trial on this matter because of alleged misconduct by Aiello and the DiNardos.⁶

The administrators, Aiello and Mihaly thereafter each filed counterclaims against the plaintiff. The administrators sought a declaratory judgment that the decedent's death was not an event of dissociation, that the decedent's estate holds the decedent's full partnership rights, including management and voting rights, and that the plaintiff's withholding of consent for the estate to assign the decedent's full partnership interest to Peter DiNardo and Leonard DiNardo is unreasonable. Aiello and Mihaly sought a judicial determination expelling the plaintiff from the partnership pursuant to § 34-355(5). They claimed that the plaintiff's conduct constituted grounds for dissociation under each of the three subparagraphs of that statute. See footnote 2 of this opinion.

The plaintiff and the administrators subsequently filed cross motions for partial summary judgment as to the issues concerning the decedent's partnership interest. The trial court's resolution of the motions turned on the extent to which the partnership agreement addressed the issues raised and to what extent resort was necessary to the Connecticut Uniform Partnership Act (partnership act), General Statutes §§ 34-300 through 34-399, to fill any gaps in the agreement. The court rejected the plaintiff's contention that the decedent's death was an event of dissociation that triggered the right of the surviving partners to buy the decedent's interest, if the partnership was not dissolved. The court concluded that the partnership agreement specifically provided that, upon a partner's death, the partner's estate or representative "shall succeed to such partner's interest" and cloaks such representative with "all [of] the powers of such [p]artner." In light of those expressly conferred powers, the court also rejected the plaintiff's contention that the administrators did not succeed to all of the powers held by the decedent at his death, including authority to enter into agreements encumbering the partnership's assets and to conduct banking. The court agreed with the plaintiff, however, that "only [the decedent's] share of distributions, along with the other incidents to a partnership interest enumerated by General Statutes § 34-348,⁷ may be transferred to [Peter DiNardo and Leonard DiNardo]. [The decedent's] management and voting rights may not be transferred under this statutory scheme." The court therefore concluded, "[a]bsent the unanimous agreement of the partners ... the [administrators] may transfer only [the decedent's] right to distributions from the partnership, subject to the reasonable consent requirements set forth in ... the agreement."⁸ The court noted that the reasonableness of the plaintiff's refusal to consent to the assignment, the scope and duration of the administrators' power and the plaintiff's claims that the administrators had acted improperly were issues to be determined at trial. Therefore, the trial court granted in part and denied in part the parties' cross motions in accordance with the foregoing conclusions.

Thereafter, a trial to the court ensued, which, as the court noted in its memorandum of decision, required it to address threshold questions of credibility of the key witnesses' testimony, as well as two issues of first impression under Connecticut law: (1) the reasonableness of the withholding of consent in the context of an assignment of an economic interest in a partnership; and (2) the expulsion of a partner pursuant to § 34-355(5). With respect to the first issue, the trial court granted the administrators' request for a declaratory judgment that the plaintiff unreasonably had withheld his consent to the assignment of the decedent's interest from his estate to Peter DiNardo and Leonard DiNardo. The court concluded that the plaintiff's refusal had stemmed principally from his dislike of Salvatore DiNardo, who had engaged in some confrontations with the partnership's tenants and business associates since his appointment as administrator, and the plaintiff's concern as to the influence Salvatore DiNardo would have over his sons' conduct. The court found that the plaintiff's refusal to consent to the assignment was arbitrary, however, because the two sons had developed their own expertise and philosophy about business management. Therefore, it held that the decedent's estate could transfer the decedent's economic partnership interest to Peter DiNardo and Leonard DiNardo.

With respect to the second issue, the court granted the application of Aiello...