Vill. Mortg. Co. v. Garbus

• Decision Date: 22 December 2020
• Docket Number: AC 42667
• Citation: 244 A.3d 952,201 Conn.App. 845
• Court: Connecticut Court of Appeals
• Parties: VILLAGE MORTGAGE COMPANY v. Ronald GARBUS et al.

201 Conn.App. 845

244 A.3d 952

VILLAGE MORTGAGE COMPANY

v.Ronald GARBUS et al.

AC 42667

Appellate Court of Connecticut.

Argued September 14, 2020

Officially released December 22, 2020

Gregory T. Nolan, with whom, on the brief, was Patsy M. Renzullo, Winsted, for the appellants (defendants).

Richard P. Weinstein, West Hartford, with whom, on the brief, was Sarah Black Lingenheld, Farmington, for the appellee (plaintiff).

Bright, C. J., and Lavine and Cradle, Js.^*

LAVINE, J.

In this declaratory judgment action, the defendants, Ronald Garbus and Georganne Garbus, appeal from the judgment of the trial court, declaring that the defendants are not lawful stockholders of the plaintiff, Village Mortgage Company. The defendants claim that the court improperly concluded that the plaintiff's cause of action is akin to an equitable claim for injunctive relief subject to the doctrine of laches, rather than a legal claim for tortious financial misconduct subject to the statute of limitations, specifically General Statutes § 52-577. We affirm the judgment of the trial court.

The following facts are relevant to our resolution of the defendants’ appellate claim. The plaintiff commenced the present action on March 17, 2016. On September 27, 2016, the plaintiff filed an amended complaint (complaint), alleging in relevant part that it is a corporation existing under the laws of this state since at least 1998. In 1998, the defendants were original stockholders of the plaintiff, having received 300 shares of stock, Certificate No. 2, for an investment of $30,000. That same year, the defendants returned Certificate No. 2 and were reimbursed $30,000, apparently as a result of issues involving the defendants’ third-party creditors. The plaintiff alleged that the defendants’ return of Certificate No. 2 and the plaintiff's reimbursement to them of the invested sum amounted to a rescission of the defendants’ acquisition of stock in the plaintiff. The plaintiff further alleged that in June, 2011, Certificate No. 2 apparently was returned to the defendants in exchange for $30,000, without proper corporate authority. Moreover, the stock was transferred to the defendants for substantially less than the fair value of the stock in June, 2011.

In addition, the plaintiff alleged that the circumstances involving the defendants and the stock recently had come to light as a result of the plaintiff's litigation against the cofounder of the corporation,¹ who surreptitiously was involved in the 1998 stock rescission and the 2011 return of stock to the defendants. On February 2, 2016, the plaintiff demanded a detailed explanation from the defendants with respect to the rescission and return of stock, but the defendants neglected and failed to respond to the demand. The plaintiff alleged that to the extent that the defendants’ stock was improperly reissued or returned to the defendants in June, 2011, without proper corporate authorization and for less than the fair value of the stock, it contested whether the defendants are lawfully stockholders with rights to own, to possess, and to vote the shares of stock. Finally, the plaintiff alleged that a bona fide dispute exists with regard to the defendants’ ownership of the shares for which there is no adequate remedy at law and which requires a judicial determination as to whether the defendants are lawfully shareholders of the plaintiff. The plaintiff claimed no damages.

In their answer to the complaint, the defendants admitted that the plaintiff is a corporation having been in existence since at least 1998. They denied the remaining allegations of the complaint and alleged three special defenses, essentially that the plaintiff's cause of action is barred by (1) the statute of limitations² or (2) laches,³ and that (3) James Veneziano, the plaintiff's cofounder, acted with apparent authority.⁴

The plaintiff denied each of the defendants’ special defenses and pleaded the following by way of avoidance. "Upon information and belief, the defendants conspired with ... Veneziano to avoid disclosure of the defendants’ purported stock interest in [the plaintiff] in order to conceal same from creditors and particularly the [Federal Deposit Insurance Company] and/or conceal same from the bankruptcy court in connection with a certain bankruptcy petition filed by one or more of the defendants. As a result of the aforesaid, the defendants are legally and equitably estopped from asserting the defenses raised in the instant action, especially in that ... Veneziano concealed the facts in regard to the circumstances surrounding the transfers of the stock and any such action taken by ... Veneziano was without corporate authority, apparent or otherwise, constituted [an] ultra vires act and an act which would have been in violation of civil if not criminal law. In order to invoke equitable considerations such as laches, the defendants themselves [have] unclean hands and are precluded from relying upon said doctrine."

The case was tried to the court. Counsel for the parties presented evidence concerning ownership of the shares of stock at issue on October 17, 2018,⁵ and thereafter submitted briefs on December 3, 2018. The court issued its memorandum of decision on January 29, 2019. In its decision, the court first reviewed the allegations of the complaint, the defendants’ special defenses, and the plaintiff's reply to the special defenses and by way of avoidance.

The court noted that, in a case tried to the court, the judge is "the trier of fact, is the sole arbiter of the credibility of witnesses and the weight to be given to their testimony." (Internal quotation marks omitted.) Taylor v. Commissioner of Correction , 324 Conn. 631, 637, 153 A.3d 1264 (2017). It thereafter reviewed the law regarding an action for declaratory judgment.

General Statutes § 52-29 (a) provides: "The Superior Court in any action or proceeding may declare rights and other legal relations on request for such a declaration, whether or not further relief is or could be claimed. The declaration shall have the force of a final judgment." See also Practice Book § 17-55.⁶

"The purpose of a declaratory judgment action, as authorized by ... § 52-29 and Practice Book § [17-55], is to secure an adjudication of rights [when] there is a substantial question in dispute or a substantial uncertainty of legal relations between the parties. ... Subdivisions (1) and (2) of Practice Book § 17-55 respectively require that the plaintiff in a declaratory judgment action have an interest, legal or equitable, by reason of danger of loss or of uncertainty as to the party's rights or other jural relations and that there be an actual bona fide and substantial question or issue in dispute or substantial uncertainty of legal relations which requires settlement between the parties ...." (Citation omitted; internal quotation marks omitted.) New London County Mutual Ins. Co. v. Nantes , 303 Conn. 737, 747, 36 A.3d 224 (2012) ; see id., at 740, 36 A.3d 224 (declaratory judgment action to determine whether claimed injuries were covered by subject insurance policy).

Our Supreme Court has observed that "our declaratory judgment statute provides a valuable tool by which litigants may resolve uncertainty of legal obligation." (Internal quotation marks omitted.) Id., at 747–48, 36 A.3d 224. The court also has recognized that "our declaratory judgment statute is unusually liberal. An action for declaratory judgment ... is a statutory action as broad as it well could be made." (Internal quotation marks omitted.) Id., at 748, 36 A.3d 224. The statute "is broader in scope than ... the statutes in most, if not all, other jurisdictions ... and [w]e have consistently construed our statute and the rules under it in a liberal spirit, in the belief that they serve a sound social purpose. ... [Although] the declaratory judgment procedure may not be utilized merely to secure advice on the law ... it may be employed in a justiciable controversy where the interests are adverse, where there is an actual bona fide and substantial question or issue in dispute or substantial uncertainty of legal relations which requires settlement, and where all persons having an interest in the subject matter of the complaint are parties to the action or have reasonable notice thereof." Id.

In the present case, the trial court found that the issue to be decided was whether the defendants are shareholders of the plaintiff, and that the issue presents a justiciable controversy where the interests are adverse, where there is an actual bona fide and substantial question or issue in dispute, and is properly the subject of a claim for declaratory relief. Furthermore, all parties having an interest in the subject matter of the action are parties.

The court made the following findings of fact on the basis of the evidence it credited. The court credited the testimony of Veneziano's former wife, Donna McGuire, that the defendants are friends of Veneziano and that, for many years, she personally had possession of the original Certificate No. 2 on which the defendants’ names appear. Certificate No. 2 for 300 shares is dated May 1, 1998, and was placed into evidence. Although Certificate No. 2 is dated May 1, 1998, it was not issued until 2000. Veneziano gave McGuire Certificate No. 2 in the early 2000s and asked her to put it in her safe deposit box. McGuire held the certificate for quite a few years. The court found that Veneziano used McGuire's safe deposit box to hide the certificate there.

McGuire eventually gave Certificate No. 2 to Veneziano or to Justin Giroliman, an employee of the plaintiff. Giroliman later became the plaintiff's chief financial officer and senior vice president. Giroliman credibly testified that he possessed the certificate from 2010 to 2011, and that, at Veneziano's direction, kept it in his desk at the plaintiff's offices.

In addition to the evidence demonstrating that the defendants either relinquished or...