Dayco Corp. v. Fred T. Roberts and Co.

• Decision Date: 20 March 1984
• Citation: 472 A.2d 780,192 Conn. 497
• Court: Connecticut Supreme Court
• Parties: DAYCO CORPORATION v. FRED T. ROBERTS AND COMPANY et al.

Page 780

472 A.2d 780

192 Conn. 497

DAYCO CORPORATION v. FRED T. ROBERTS AND COMPANY et al.

Supreme Court of Connecticut.

Argued Nov. 29, 1983.

Decided March 20, 1984.

Edward J. Holahan, Jr., Bridgeport, on the appeal, for appellant (defendant R. Roberts) and, on the cross appeal, for appellee (defendants R. Roberts and M. Roberts).

Howard E. Kantrovitz, New Haven, with whom, on the brief, was Pat Labbadia III, New Haven, on the appeal, for appellee-appellant (plaintiff).

Before SPEZIALE, C.J., and PETERS, HEALEY, PARSKEY and SHEA, JJ.

PARSKEY, Associate Justice.

This dispute arises out of patent license agreements between the plaintiff Dayco Corporation and the defendant Fred T Roberts and Co. (Roberts Co.), a Connecticut general partnership comprised of two partners, the defendant Robert E. Roberts and his mother, the defendant Marion R. Roberts. ¹ The Roberts Co. owned patents on many products, including radiator hoses which it licensed the plaintiff to produce. The licensing agreements provided that the Roberts Co. would defend and indemnify the plaintiff against any action for infringement of third party patent rights arising from the use of Roberts Co.'s patents. The agreements also provided for the arbitration of disputes. The plaintiff was eventually sued by a third party for patent infringement and it incurred substantial costs in connection with that litigation which resulted in a settlement.

After the Roberts Co. defaulted on its agreement to defend and indemnify, the plaintiff instituted arbitration proceedings. The case was scheduled to be heard in arbitration on June 9 and 10, 1975, and the Roberts Co., through its attorney, was so notified by the American Arbitration Association in mid April 1975. On June 2, 1975, the Roberts Co. began assigning its patents and licensing agreements to the defendant Patent Management Services Company, Limited (PMS), a Connecticut limited partnership comprised of Robert Roberts as the sole general partner and Marion Roberts as the sole limited partner.

Robert Roberts appeared at and participated in the arbitration proceedings held on June 9 and 10. In July an arbitration award of $200,000 was entered in favor of the plaintiff against the Roberts Co. Upon the plaintiff's application to the Superior Court to confirm that award, the court confirmed the award against the Roberts Co. only. ² When this judgment was not paid, the plaintiff, on November 8, 1976, instituted this action in seven counts. In the first count, the plaintiff sought a judgment against the Roberts Co. on the prior unpaid and uncollectible judgment. The second count alleged that Robert Roberts and Marion Roberts, as partners of the Roberts Co., are individually liable for its judgment debt. In counts three through seven the plaintiff sought to void the transfers from the Roberts Co. to PMS as having been fraudulently made. Also in count seven the plaintiff sought a judgment against Robert Roberts and Marion Roberts, based upon their individual liability as partners of PMS, for any judgment obtained as a result of the fraudulent transfers.

The court rendered a judgment in the amount of $200,000 plus interest for the plaintiff (against the Roberts Co.) on the first count. ³ On the second count, the court rendered the same judgment against Robert Roberts but, having found that Marion Roberts had not been notified of the arbitration proceeding, rendered judgment for her estate. On counts three through seven, the court found the transfers to have been fraudulent and declared that they are of no effect with respect to the plaintiff.

On November 18, 1981, the plaintiff filed a motion to open the judgment on the ground that the court "inadvertently failed to consider uncontroverted evidence" that Marion Roberts did have notice of the arbitration proceeding. The court granted the motion but denied the relief requested.

Robert Roberts has appealed from the judgment against him on the second count claiming that the court erred in finding him individually liable for a judgment rendered against the partnership. The plaintiff has cross appealed from the judgment for Marion Roberts on the second count, claiming that the court erred in finding she did not have notice, and, in the alternative, from the court's failure, on the seventh count, to find Robert Roberts and Marion Roberts liable for the fraudulent transfers.

On the appeal, Robert Roberts claims that since he was not named as a defendant in the arbitration proceeding he cannot be held personally liable for the judgment which resulted from that proceeding. He contends that such liability is not authorized by General Statutes § 34-53 and is a violation of due process. We disagree.

General Statutes § 34-53 ⁴ which is part of the Uniform Partnership Act adopted in Connecticut in 1961, provides in relevant part: "All partners are liable ... (b) jointly for all other debts and obligations of the partnership...." The defendant concedes that the arbitration award constitutes a partnership debt but contends that since the award was against the partnership, which has no assets, the plaintiff is forever barred from looking to the individual partners for satisfaction of that debt. In effect, the defendant's argument renders § 34-53 a nullity.

The defendant points to General Statutes §§ 52-112, 52-364 and 52-57b (now 52-57[d] to support this proposition that the partners have no liability for the partnership debt because they should have been individually named in the arbitration proceeding. Section 52-112 ⁵ allows suit in the partnership name but prohibits the attachment of the private property of a partner not named in the process. Section 52-364 ⁶ prohibits execution upon the private property of a partner now named in the complaint, while § 52-57(d) ⁷ provides for the manner of service of process upon a partnership. The defendant submits that these statutes evince a policy and procedure which requires that, in order to hold the partners personally liable for a partnership debt reduced to judgment they must be named and personally served as defendants in the beginning of the litigation. The defendant's reliance on these statutes is misplaced.

Sections 52-112 and 52-57(d) pertain to "actions." "In a general sense the word 'action' means the lawful demand of one's right in a court of justice; and in this sense it may be said to include any proceeding in such a court for the purpose of obtaining such redress as the law provides." Waterbury Blank Book Mfg. Co. v. Hurlburt, 73 Conn. 715, 717, 49 A. 198 (1901). In Skidmore, Owings, & Merrill v. Connecticut General Life Ins. Co., 25 Conn.Sup. 76, 197 A.2d 83 (1963), the court discussed whether an arbitration proceeding was an action for the purposes of the Statute of Limitations, General Statutes § 52-584. In a thoughtful and thorough analysis the court opined that arbitration proceedings do not occur in court, indeed that their very purpose is " 'to avoid the formalities, the delay, the expense and vexation of ordinary litigation.' In re Curtis-Castle Arbitration, 64 Conn. 501, 511, 30 A. 769 (1894)." Id. 25 Conn.Sup. 84, 197 A.2d 83. It further noted that these proceedings are not governed by our rules of procedure. Id., 85, 197 A.2d 83; In re Curtis-Castle Arbitration, supra. It looked to other jurisdictions which have held that arbitration proceedings were not actions. Temple v. Riverland Co., 228 S.W. 605, (Tex.Civ.App.1921); Son Shipping Co. v. DeFosse & Tanghe, 199 F.2d 687 (2d Cir.1952). Finally, the court concluded that an arbitration proceeding is not an action within the meaning of that word as used in the Statute of Limitations. Id., 25 Conn.Supp. 83, 197 A.2d 83.

Similarly, we conclude that an arbitration proceeding is not an action for the purposes of §§ 52-112 and 52-57(d). The proceeding at issue was a contractual matter in which the parties agreed that "[a]ny controversy or claim arising out of or relating to [the agreement between the plaintiff and the Roberts Co.] ... shall be settled by arbitration in accordance with the Rules of the American Arbitration Association...." These rules are less formal than the rules governing proceedings in court. See Commercial Arbitration Rules, American Arbitration Association (1975); 5 Am.Jur.2d, Arbitration and Award § 110. The arbitration was presided over by a member of the American Arbitration Association and not by a judge. Hence §§ 52-112 and 52-57(d) did not govern that proceeding.

Section 52-364 is also inapposite because the plaintiff is not attempting nor has it attempted to levy upon the property of the partners. After the arbitration award was confirmed against the partnership, the plaintiff did attempt to levy on partnership property but found none. It then instituted this suit against the partners.

What these statutes reveal is axiomatic: in an action against a partnership, in which only the partnership is named as a defendant and the result is a judgment against the partnership, a plaintiff cannot attach the individual property of the partners or levy upon their individual property. This does not prevent a plaintiff, when it finds the partnership without assets and its judgment debt...