McKay v. Longman

• Decision Date: 23 July 2019
• Docket Number: SC 20013, (SC 20014)
• Court: Connecticut Supreme Court
• Parties: Robert J. MCKAY v. Stuart L. LONGMAN et al.

332 Conn. 394

211 A.3d 20

Robert J. MCKAY

v.Stuart L. LONGMAN et al.

SC 20013, (SC 20014)

Supreme Court of Connecticut.

Argued November 15, 2018

Officially released July 23, 2019

James R. Fogarty, Old Greenwich, for the appellant in Docket No. SC 20013 and appellee in Docket No. SC 20014 (plaintiff).

Gary S. Klein, Stamford, with whom was Todd R. Michaelis, Waterbury, for the appellees in Docket No. SC 20013 and appellants in Docket No. SC 20014 (named defendant et al.).

David K. Fiveson, pro hac vice, with whom was Gerald L. Garlick, West Hartford, for the appellee in Docket Nos. SC 20013 and SC 20014 (defendant Manufacturers and Traders Trust Company).

Robinson, C.J., and Palmer, D'Auria, Mullins, Kahn and Ecker, Js.^*

KAHN, J.

These consolidated appeals require us to consider three main issues: (1) whether a plaintiff who is neither a party to a mortgage nor an intended beneficiary thereof has standing to challenge the enforceability of that mortgage under the Connecticut Limited Liability Company Act, General Statutes (Rev. to 2017) § 34-130;¹ (2) whether specified transfers between an owner of property and the limited liability companies of which he is either an officer or equity holder constitute fraudulent transfers under the Connecticut Uniform Fraudulent Transfer Act (CUFTA), General Statutes §§ 52-552e (a) (1) and (2) and 52-552f ; and (3) whether this court recognizes the doctrine of reverse piercing of the corporate veil and, if so, whether the trial court properly applied the doctrine to the facts in the present case. The plaintiff, Robert J. McKay, and the defendants Stuart L. Longman and various entities related to him—Sapphire Development, LLC (Sapphire); Lurie Investments, LLC (Lurie); R.I.P.P. Corp. (R.I.P.P.); 2 Great Pasture Road Associates, LLC (Great Pasture); W.W. Land Company, LLC (W.W. Land); Solaire Development, LLC; Solaire Management, LLC; and Solaire Funding, Inc. (collectively, corporate defendants)—filed separate appeals,² following a bench trial, from the trial court's judgment.

The present case arises from the plaintiff's efforts to enforce a foreign judgment. The trial court found the following facts. In July, 1996, after a falling out between the plaintiff and Longman, who were once business partners, the plaintiff obtained a judgment in New York against Longman in the amount of $3,964,046.86 on the basis of the New York trial court's finding that Longman's actions constituted affirmative fraud against the plaintiff and that Longman's conduct was gross, wanton and wilful (New York judgment).³ The plaintiff promptly filed a certified copy of the New York judgment in Connecticut. The plaintiff's efforts over the years to collect on the New York judgment have been unsuccessful, including his attempts to attach Longman's assets, which, over time, were in the form of two Connecticut properties: real property located in Ridgefield, which was the location of Longman's family residence (Ridgefield Property), and real property located in Greenwich (Greenwich Property).

Throughout the relevant time period, Longman transferred ownership of the Ridgefield and Greenwich Properties between himself and his various entities. Included among these land transfers are three contested transactions that "[set] the stage for ... the predominant issues [on appeal]." Those three transactions, the additional details of which we set forth as necessary, occurred on the following dates and between the following parties. First, in October, 2007, Sapphire, a real estate development business owned partly by Longman that held record title to the Ridgefield Property during that time, obtained a loan from the defendant Manufacturers and Traders Trust Company (M & T Bank)⁴ secured by a mortgage against the Ridgefield Property. Second, in November, 2007, after Sapphire obtained the M & T mortgage and transferred title to the Ridgefield Property to Longman, Longman obtained a loan from J.P. Morgan Chase Bank, N.A. (Chase Bank), also secured by a mortgage against the Ridgefield Property (Chase Bank mortgage), and transferred title to that property back to Sapphire. Finally, in February, 2010, Longman individually acquired the Greenwich Property and transferred title of that property to Lurie, another real estate development business owned partly by him, allowing Lurie to sell the property to a bona fide purchaser several weeks later. Each of these contested transactions occurred and was recorded "prior to any filing of a lis pendens or judgment lien by the plaintiff ...."

After learning of these and other transactions entered into by either Longman or the entities he purportedly controlled, in October, 2010, the plaintiff filed an eight count complaint against Longman and twenty entities affiliated with him, M & T Bank, and The Savings Bank of Danbury. See footnote 2 of this opinion. The action by the plaintiff included, inter alia,⁵ three main claims that are before us on appeal. First, the plaintiff alleged that various land transfers from Longman to entities he controlled—including his November, 2007 transfer of the Ridgefield Property to Sapphire and his February, 2010 transfer of the Greenwich Property to Lurie—violated §§ 52-552e (a) (1) and (2) and 52-552f of CUFTA, and requested that the trial court impose constructive trusts on the Ridgefield Property and the proceeds from the sale of the Greenwich Property. Second, the plaintiff alleged that the M & T mortgage was unenforceable under § 34-130 and requested that the trial court declare it void in order to render the Ridgefield Property "unencumbered" by that mortgage when the plaintiff enforced the New York judgment against Longman and the corporate defendants. Third, the plaintiff alleged that the corporate defendants constituted alter egos of Longman and requested that the trial court apply reverse veil piercing to the corporate defendants "to the extent necessary to satisfy the [New York] judgment."

After an eight day bench trial, the trial court rendered judgment relevant to the issues on appeal in the following manner. The trial court rendered judgment as to counts one, three, and four in favor of M & T Bank, holding, inter alia, that the plaintiff lacked standing to challenge the M & T mortgage. The trial court rendered judgment as to counts three through eight in favor of the plaintiff as against Longman, Sapphire, Lurie, R.I.P.P., and Great Pasture. As against W.W. Land and Solaire Development, LLC, Solaire Management, LLC, and Solaire Funding, Inc. (Solaire entities), however, the trial court rendered judgment as to counts seven and eight in their favor. These consolidated appeals followed.

In order to place the parties' arguments on appeal in the proper context, we begin by outlining the trial court's decision. First, the trial court rendered judgment in favor of the plaintiff as to counts three and four of his substituted complaint in the form of a declaratory judgment avoiding and setting aside the fraudulent transfer of the Ridgefield Property by Longman to Sapphire. Second, the court imposed a constructive trust on the Ridgefield Property, subjecting it to all postjudgment remedies that may be applicable. Third, the trial court rendered judgment in favor of the plaintiff as to counts five and six of his substituted complaint in the form of a declaratory judgment avoiding and setting aside the fraudulent transfer of the Greenwich Property by Longman to Lurie. Fourth, the trial court imposed a constructive trust on all moneys received from or other items of value acquired through the transfer of the Greenwich Property. Fifth, in addition to this constructive trust, the trial court entered an award of $250,000 in damages in favor of the plaintiff and against Lurie. Sixth, the trial court rendered judgment in favor of the plaintiff as to counts seven and eight of his substituted complaint in the form of a judgment declaring that Sapphire, Lurie, R.I.P.P., and Great Pasture are alter egos of Longman, and, as such, "their separate corporate existence shall be disregarded for purposes of satisfying the debt of ... Longman to the plaintiff," and enjoined those defendants from disposing of any assets prior to the satisfaction of the plaintiff's foreign judgment. Seventh, the trial court rendered judgment in favor of M & T Bank as to all the claims asserted against it, including the plaintiff's claim under counts one, three, and four that a mortgage on the Ridgefield Property between M & T Bank and Sapphire (M & T mortgage) should be declared void. Eighth, the trial court rendered judgment in favor of the Solaire entities and W.W. Land as to all counts asserted against them.⁶

The plaintiff appeals from the trial court's judgment in favor of M & T Bank as to its claim under counts one, three, and four that the M & T mortgage should be declared void. The plaintiff claims that the trial court incorrectly determined that he lacked standing to challenge the enforceability of that mortgage under § 34-130 (b), (c) and (d), because those subsections are silent as to who may bring a claim under them. M & T Bank responds that the trial court properly held that, as neither a party to nor an intended beneficiary of the mortgage between it and Sapphire, the plaintiff lacked standing to challenge it.⁷

Longman and the corporate defendants appeal from the trial court's judgment as to counts three through six whereby that court rendered two declaratory judgments avoiding and setting aside two specified transfers—one between Longman and Sapphire and the other between Longman and Lurie—under §§ 52-552e (a) (1) and (2) and 52-552f of CUFTA, and imposed constructive trusts on the Ridgefield Property and the proceeds from or other items acquired through the sale of the Greenwich Property. Those defendants claim that, with respect to both transfers at issue, Longman did not transfer an "asset," which is required in order to find that a transfer is fraudulent under CUFTA. In...