DeSantis v. Piccadilly Land Corp.

• Decision Date: 26 February 1985
• Docket Number: No. 2653,2653
• Citation: 3 Conn.App. 310,487 A.2d 1110
• Parties: Ricardo C. DeSANTIS et al. v. PICCADILLY LAND CORPORATION et al.
• Court: Connecticut Court of Appeals

Page 1110

487 A.2d 1110

3 Conn.App. 310

Ricardo C. DeSANTIS et al. v. PICCADILLY LAND CORPORATION et al.

No. 2653.

Appellate Court of Connecticut.

Argued Dec. 12, 1984.

Decided Feb. 26, 1985.

Edward J. Markosky, Jr., Danbury, for appellant (defendant Julian spiro).

Gordon A. Evans, New Haven, with whom, on the brief, was Richard H. Lamere, New Haven, for appellees (plaintiffs).

Before DUPONT, C.P.J., and BORDEN and DALY, JJ.

DALY, Judge.

The plaintiffs, Ricardo C. and Sandra DeSantis, instituted an action against the defendant Piccadilly Land Corporation (hereinafter Piccadilly), and two individual defendants, Julian Spiro and Abram Spiro, claiming breach of contract, fraudulent misrepresentation and wrongful disbursement of funds. From a judgment rendered against Piccadilly and against the defendant Julian Spiro (hereinafter Spiro), ¹ Spiro has appealed. ²

The trial court found the following facts: The defendant Julian A. Spiro was the president, treasurer, director and majority shareholder of Piccadilly. Prior to December 2, 1974, Spiro represented that Piccadilly was actively engaged in the construction of homes and that its financial status was sound. Relying on these representations, which proved to be false, the plaintiffs entered into a written agreement with Piccadilly on December 2, 1974, which provided that Piccadilly would build a home for the plaintiffs according to certain plans and specifications. The home was to be ready by mid-April, 1975. Pursuant to the agreement, the plaintiffs made an $8000 downpayment. After performing some site work and putting in the footings, Piccadilly ceased work on the home.

The court further found the following facts: Spiro made statements concerning Piccadilly's finances which he knew were untrue. Additionally, Piccadilly was not busy with the construction of homes as represented and was in financial straits at the time the agreement was signed. The agreement provided for the return of the $8000 if a satisfactory mortgage was not obtained by February 1, 1975. Spiro indicated that he had mortgage money available and would provide the necessary money to the plaintiffs as well as to any purchaser of the plaintiffs' residence.

Spiro maintained to the plaintiffs as late as May, 1975, that he was in good financial shape. At no time was it indicated that there were mortgages and liens against the property, even though the plaintiffs inquired about financial conditions. Most of Piccadilly's records were never produced. Spiro and Piccadilly were not solvent at the time of the signing of the agreement, despite Spiro's assertions to the contrary.

On May 13, 1983, the trial court rendered judgment for the plaintiffs against Spiro individually and against Piccadilly in the amount of $8000. It also awarded punitive damages to the plaintiffs, which were to be determined at a future hearing.

The court noted in its memorandum of decision that, although a claim for piercing the corporate veil was not made, the evidence offered at trial would support such a claim and it therefore permitted the plaintiffs to file an additional count to their complaint, alleging Spiro to be the dominator and alter ego of the corporation. The trial court found in favor of the plaintiffs against Spiro on this count in a supplemental memorandum of decision dated July 12, 1983. Spiro was ordered to pay interest on the $8000 awarded to the plaintiffs in the sum of $4396.44 as of May 13, 1983, plus punitive damages of $4132.15, office costs of $322.07 and court costs.

Spiro claims that the court erred in the following respects: (1) in concluding that Spiro was liable on the basis of fraud; (2) in concluding that Spiro was the alter ego of Piccadilly; (3) in granting punitive damages; (4) in permitting the plaintiffs to amend their amended and substituted complaint many months after trial and after the memorandum of decision had been filed; and (5) in permitting the plaintiffs to introduce evidence of damages, costs and the expenses of litigation many months after the trial and subsequent to the filing of the memorandum of decision.

The proper standard for establishing fraud, employed by the trial court in this case, is by "clear and satisfactory evidence." We have held that such an enhanced civil standard means that the facts asserted are highly probably true, or that the probability of their truth is substantially greater than the probability of their falsity. Clark v. Drska, 1 Conn.App. 481, 487, 473 A.2d 325 (1984).

In determining liability on the basis of fraud, the court had to assess the credibility of the witnesses appearing before it. "Since the trier of fact is the ultimate judge of the credibility of witnesses, we may not pass upon the credibility of the witnesses." State v. DeForge, 194 Conn. 392, 398, 480 A.2d 547 (1984).

The trial court specifically found that Spiro was not a credible witness. There was clear and satisfactory evidence for the trial court to have concluded that Spiro continually misrepresented that he was financially solvent, that the corporation was solvent when it only had as assets a $10,000 checking account, that the corporation was building homes when others were not, that he failed to disclose numerous preexisting encumbrances and liens, and that he failed to produce vital corporate records.

We turn now to the claim that the court erred in concluding that Piccadilly and Spiro were alter egos. "Generally, a corporation is a distinct legal entity and the stockholders are not personally liable for the acts and obligations of the corporation.... Courts will, however, disregard the fiction of a separate legal entity to pierce the shield of immunity afforded by the corporate structure in a situation in which the corporate entity has been so controlled and dominated that justice requires liability to be imposed on the real actor.... We have affirmed judgments disregarding the corporate entity and imposing individual stockholder liability when a corporation is a mere instrumentality or agent of another corporation or individual owning all or most of its stock." (Citations omitted.) Saphir v. Neustadt, 177 Conn. 191, 209, 413 A.2d 843 (1979).

The record before us reasonably supports the court's findings that Piccadilly was a corporation in name only and that it was operated as the instrumentality or alter ego of Spiro, subject to his sole control. As such, Piccadilly's activity was not indicative of corporate activity, but was symptomatic of the business operations of an individual. Spiro was the president, treasurer, director and majority shareholder of Piccadilly. He ran the business, fully controlled it, and alone made all its decisions.

In view of those facts, the court could reasonably conclude that Spiro completely dominated the corporation to the point where Piccadilly had no separate existence. Moreover, the court could conclude...