J.M. Lynne Co., Inc. v. Geraghty, 12958

Decision Date14 July 1987
Docket NumberNo. 12958,12958
Citation204 Conn. 361,528 A.2d 786
CourtConnecticut Supreme Court
PartiesJ.M. LYNNE COMPANY, INC. v. Phillips R. GERAGHTY, et al.

Daniel W. Moger, Jr., Greenwich, for appellant (named defendant).

William F. Askinazi, Bridgeport, with whom, on the brief, was Carolyn Longstreth, Southbury, for appellee (plaintiff).

Before HEALEY, SHEA, SANTANIELLO, CALLAHAN and DONALD T. DORSEY, JJ.

ARTHUR H. HEALEY, Associate Justice.

The plaintiff, J.M. Lynne Company, Inc., instituted this action against the defendants, Phillips R. Geraghty Constructor, Inc. (Geraghty Constructor or the corporation), and its president, Phillips R. Geraghty, for breach of a contract involving the purchase of wall covering. The trial court found both defendants jointly and severally liable in the amount of $26,457.66 plus interest of $7782.25. Only the named defendant, Phillips R. Geraghty (defendant) has appealed from this judgment. He claims that the court erred in: (1) concluding that he was personally liable under New York law on a debt arising out of the continuance of corporate business after the corporation had been dissolved but before the dissolution was annulled; (2) its ruling in that the effect of the court's decision was to enforce a foreign penalty; and (3) rendering judgment against him when it had also rendered judgment against Geraghty Constructor without election by the plaintiff between allegedly inconsistent claims. We find no error.

The following facts were found by the trial court. The plaintiff and Geraghty Constructor are both New York corporations, but the latter corporation maintains an office in the town of Stamford. In the fall of 1982, Geraghty Constructor entered into a contract with a convent and an architect for the renovation of a convent in Bronx, New York. Geraghty Constructor, the general contractor on the project, subsequently contracted with the plaintiff for the purchase of wall covering to be used on the project. The plaintiff extended credit to the corporation for the purchase after investigating the corporation's credit record. The wall covering was delivered to Geraghty Constructor in February, 1983, at the contract price of $26,457.66. Evidence at trial revealed that the defendant did not object to the delivery or to invoices sent by the plaintiff regarding the purchase, but the only payment received by the plaintiff was a $10,000 check from Geraghty Constructor in April, 1983, which was returned for insufficient funds. The record reveals that at some point in the spring of 1983, conflict arose between the convent, the architect and Geraghty Constructor, and the convent refused to make certain payments to the latter party. Litigation pertaining to this dispute is currently pending in New York.

In February, 1984, the plaintiff instituted this action to recover the cost of the wall covering. The parties agreed that New York law controls their dispute. Prior to trial, it was discovered that Geraghty Constructor had been dissolved in either 1979 or 1980 for failure to pay the annual New York state franchise tax since 1976. Under New York law, this dissolution is accomplished by the secretary of state publishing a proclamation which declares that a corporation is dissolved and that its charter is forfeited. N.Y.Tax Law § 203-a (McKinney). 1 Shortly before trial, the defendant obtained a certificate from the New York tax department indicating that all past due franchise taxes plus interest had been paid. The effect of this certificate under New York law was that the dissolution was annulled and the corporate status of Geraghty Constructor was restored. N.Y.Tax Law § 203-a(7).

The named defendant, who resides in the town of Fairfield, is the president and sole shareholder of Geraghty Constructor, and he testified at trial that he was in "100 percent control" of the corporation. He could not recall any meeting of the board of directors or the identity of any directors with the possible exception of the attorney who had incorporated the corporation. In addition, he was unable to identify any other officers of the corporation except for his son, whom he had recently named secretary-treasurer. The defendant was unable to locate any corporate books or any other documents regarding the corporation, save a checkbook register indicating that the defendant had paid school tuitions from the corporate checkbook. At the time of trial, the trial court found that the corporation had no assets other than an account receivable for the balance of approximately $57,000 due on the renovation project, and a claim of about $300,000 "for extras."

The defendant testified at trial that the corporation was willing to pay for the purchase of the wall covering but that it lacked the funds to do so. On the basis of this and other testimony, the trial court was plainly justified in rendering judgment against Geraghty Constructor for the contract price plus interest. The plaintiff also claimed that the defendant was personally liable for the debt on the theory that the corporation was his "alter ego," or under the theory that, because the corporation had been dissolved at the time of the contract with the plaintiff, the defendant was personally liable for all contracts made in the corporation's name, even though the dissolution was subsequently annulled.

The court declined to hold the defendant personally liable under the alter ego claim because it found no evidence that the defendant had defrauded or had made misrepresentations to any party or that he had circumvented the corporate form of conducting business. The court did impose personal liability for the debt, however, on the theory that the defendant continued to conduct corporate business after the corporation had been dissolved but before its reinstatement. In reaching this conclusion, the court relied on Poritzky v. Wachtel, 176 Misc. 633, 27 N.Y.S.2d 316 (1941), the only New York decision directly on point. The trial court also noted that although there is a diversity of opinion among courts on this issue, the majority rule is that officers may be held personally responsible for contracts made when a dissolved corporation continues to conduct business, regardless of subsequent statutory reinstatement. See, e.g., Moore v. Occupational Safety & Health Review Commission, 591 F.2d 991, 995-96 (4th Cir.1979); Adam v. Mt. Pleasant Bank & Trust Co., 355 N.W.2d 868, 873 (Iowa 1984); Kessler Distributing Co. v. Neill, 317 N.W.2d 519, 522 (Iowa App.1982); 16A W. Fletcher, Cyclopedia Corporations (Perm.Ed.1979 Rev. & 1986 Cum.Sup.) §§ 7997, 7998. Such a construction accords with the rule at common law. See, e.g., Moore v. Occupational Safety & Health Review Commission, supra, 994-95.

The defendant's first claim on appeal challenges the court's legal conclusion that under New York law he is personally liable for the debt. Specifically, he argues that the court should not have relied on Poritzky as representing the state of the law in New York on the question presented. Our standard for reviewing the legal conclusions of a trial court is well established. "On appeal, it is the function of this court to determine whether the decision of the trial court is clearly erroneous.... [W]here the legal conclusions of the court are challenged, we must determine whether they are legally and logically correct and whether they find support in the facts set out in the memorandum of decision...." Pandolphe's Auto Parts, Inc. v. Manchester, 181 Conn. 217, 221, 435 A.2d 24 (1980).

The parties do not dispute that New York law controls this case. Under New York law, when a dissolved corporation files the certificate stating that all back franchise taxes have been paid, it has "the effect of annulling all of the proceedings theretofore taken for the dissolution of such corporation under the provisions of this section and [the corporation] shall thereupon have such corporate powers, rights, duties and obligations as it had on the date of the publication of the proclamation, with the same force and effect as if such proclamation had not been made or published...." N.Y.Tax Law § 203-a(7). The defendant initially argues that under the final clause of the quoted provision, once the certificate was filed, it was as if the dissolution had never happened. He contends, therefore, that the reinstatement of the corporation retroactively validated his prior acts performed on behalf of the corporation, thereby relieving him of personal liability. We disagree.

Once it is determined that the governing law is the law of a sister state, not only must we apply the pertinent statute of that state, "but also its construction by the highest tribunal" of that state. Gibson v Fullin, 172 Conn. 407, 411-12, 374 A.2d 1061 (1977); see also Breen v. Aetna Casualty & Surety Co., 153 Conn. 633, 639, 220 A.2d 254 (1966). As the trial court noted, there is no decision from the New York Court of Appeals which resolves the precise question presented here. When a decision from the highest state court is lacking, we must anticipate how that court would rule on the question presented. See Hendrix v. Hendrix, 160 Conn. 98, 107-108, 273 A.2d 890 (1970). In the making of this determination, decisions of lower courts, including trial courts, are entitled to " 'proper regard' in ascertaining the applicable state law." Bartolotta v. Liberty Mutual Ins. Co., 411 F.2d 115, 118 (2d Cir.1969); see also Wilmington Trust Co. v. Clark, 289 Md. 313, 320 n. 4, 424 A.2d 744 (1981); Van Wagenberg v. Van Wagenberg, 241 Md. 154, 171, 215 A.2d 812, cert. denied, 385 U.S. 833, 87 S.Ct. 73, 17 L.Ed.2d 68 (1966); Avery v. Bender, 119 Vt. 313, 330, 126 A.2d 99 (1956). It is interesting to note that the Second Circuit Court of Appeals in Bartolotta v. Liberty Mutual Ins. Co., supra, had occasion to consider a question of Connecticut law. Noting that we had not decided the question, the ...

To continue reading

Request your trial
25 cases
  • Holmes v. Holmes
    • United States
    • Connecticut Court of Appeals
    • 3 Agosto 1993
    ...normal circumstances we will not remand a case to correct a deficiency the appellant should have remedied." ' J.M. Lynne Co. v. Geraghty, 204 Conn. 361, 376-77, 528 A.2d 786 (1987)...." (Citation omitted.) Augeri v. Planning & Zoning Commission, 24 Conn.App. 172, 178, 586 A.2d 635, cert. de......
  • Gonzalez v. University System of New Hampshire, No. 451217 (CT 1/28/2005)
    • United States
    • Connecticut Supreme Court
    • 28 Enero 2005
    ...the highest state court is lacking, we must anticipate how that court would rule on the question presented." J.M. Lynne Co. v. Geraghty, 204 Conn. 361, 368, 528 A.2d 786 (1987). The plaintiff relies on cases such as Lash v. Cheshire County Savings Bank, Inc., 124 N.H. 435, 438, 474 A.2d 980......
  • State v. Marquez
    • United States
    • Connecticut Supreme Court
    • 14 Abril 2009
    ...not empowered to bind police departments, much less their sister tribunals, by virtue of their rulings. See J.M. Lynne Co. v. Geraghty, 204 Conn. 361, 369, 528 A.2d 786 (1987); McDonald v. Rowe, 43 Conn.App. 39, 43, 682 A.2d 542 (1996); see also State v. Anderson, 255 Conn. 425, 438, 773 A.......
  • Evans v. General Motors Corp.
    • United States
    • Connecticut Supreme Court
    • 28 Marzo 2006
    ...254). This argument has no merit. A lower court decision is not binding precedent on this court. See, e.g., J.M. Lynne Co. v. Geraghty, 204 Conn. 361, 369, 528 A.2d 786 (1987). More significantly, because the court in Jones compared CUTSA to the preamendment version of CUTPA; see Pepe & Haz......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT