Village Mortgage Co. v. Veneziano, LLICV126007694S

CourtSuperior Court of Connecticut
Writing for the CourtHONORABLE JOHN D. MOORE, J.
Docket NumberLLICV126007694S
PartiesVillage Mortgage Company v. James Veneziano
Decision Date25 January 2016

Village Mortgage Company
v.

James Veneziano

No. LLICV126007694S

Superior Court of Connecticut, Judicial District of Litchfield, Litchfield

January 25, 2016


UNPUBLISHED OPINION

Filed January 27, 2016

SECOND AMENDED MEMORANDUM OF DECISION [1]

HONORABLE JOHN D. MOORE, J.

The plaintiff, Village Mortgage Company, (the plaintiff or VMC) sued the defendant, James Veneziano, a founding partner, shareholder, and former employee, officer, and director of VMC in a two-count complaint, amended during trial absent objection, seeking injunctive relief and money damages.

Count one alleges various threats made by the defendant against the plaintiff's employees and the plaintiff itself and seeks a temporary and permanent injunction barring the defendant from the plaintiff's building, preventing the defendant from harassing the plaintiff's employees and discussing the business affairs of the plaintiff with third parties, and precluding the defendant from otherwise interfering with the plaintiff's business.

Count two, as amended, alleges that the defendant owed a fiduciary duty to the plaintiff arising from his management, control, direction and/or supervision of the plaintiff's financial affairs, including the oversight of the plaintiff's audited financial statements and his interaction with outside auditors, and that he misappropriated funds from the plaintiff via conversion, statutory theft, and embezzlement. Count two of the amended complaint could be more artfully pleaded. As it stands, amended count two does not specifically allege breach of fiduciary duty. The court, however, reading the pleading liberally, as it must, Downs v. Trias, 306 Conn. 81, 92, 49 A.3d 180 (2012) (" [P]leadings are to be construed broadly and realistically, rather than narrowly and technically . . ." [internal quotation marks omitted]), concludes from the context that the plaintiff is alleging a breach of fiduciary duty in relationship to its allegations of conversion, statutory theft, and embezzlement of funds, as well as alleging these specific claims of misappropriation. This conclusion is reinforced by judicial admissions of the defendant's counsel when the motion to amend the complaint was heard by the court during trial. After the court, during a colloquy with the defendant's counsel, had reviewed factual allegations made by the defendant in six amended counterclaims averring that he owed the plaintiff a fiduciary duty, the defendant's counsel stated, in a judicial admission, [2] that " the allegation of the breach of fiduciary duty is what is out there." Transcript, May 19, 2015, 9. The defendant's counsel further judicially admitted, in response to a question from the court, that it had " always been the defendant's understanding that the plaintiff intended to claim breach of fiduciary duty . . ." Id. Finally, the defendant's counsel stated in the first sentence of his post-trial brief that the plaintiff is alleging " breach of fiduciary duty." July 24, 2015 Post-Trial Brief of Defendant, 1. Under count two, the plaintiff seeks damages, treble damages for theft under General Statutes § 52-564, and such other legal and equitable relief as the court deems appropriate.

The defendant admits several of the background allegations in count one, which will be set forth in greater detail below. The defendant further acknowledges that, for a certain period of time, he suffered from several disorders and was very unpleasant to deal with, but claims that treatment has remedied these issues. The defendant denies threatening the plaintiff's employees and misappropriating the plaintiff's funds. In regard to the allegations of count two, the defendant denies embezzling or misappropriating any funds. In his amended answer responding to paragraph 20 of count two of the amended complaint, the defendant left the plaintiff to its proof as to the allegations that the defendant managed, controlled, directed, and/or supervised the plaintiff and owed the plaintiff a fiduciary duty, but that response is at odds with the defendant's allegations, his counsel's admissions, and the evidence adduced at trial. The bottom line, as discussed at length infra, is that the defendant owed fiduciary duties to the plaintiff.

The defendant has also filed special defenses and counterclaims. The operative special defenses allege that the funds that the plaintiff alleged that the defendant misappropriated were funds owed to the defendant for salary, bonuses, and invested funds, and that the applicable statute of limitations, General Statutes § 52-577, bars the claims of embezzlement, conversion, and theft. The defendant's counterclaim sounds in ten counts. Counts one, three, five, and seven, under the theories of breach of oral contract, unjust enrichment, breach of fiduciary duty, and the Connecticut Unfair Trade Practices Act (CUTPA), respectively, claim that the defendant has routinely invested money, property and other valuable commodities, including coins into the business and that these investments must be returned to him. Counts two, four, six, eight, and ten, under the theories of breach of oral contract, unjust enrichment, breach of fiduciary duty, CUTPA, and promissory estoppel, respectively, claim that the plaintiff owes the defendant $518, 479.59 in back pay as part of a compensation plan offered to him by the plaintiff. Count nine sounds in defamation, alleging that the plaintiff has defamed the defendant by the false and malicious allegations of embezzlement, misappropriation of funds, and theft found in this lawsuit. In his counterclaim, the defendant alleges that the defendant owed the plaintiff fiduciary duties. Specifically, the defendant alleges that the plaintiff " employed the Defendant to occupy a position of trust and confidence and was responsible for the business operations of the company, " Revised special defenses and counterclaim, April 7, 2015 (counterclaim), count five, paragraph 6 & count six, paragraph 7, and that the defendant " had a fiduciary duty to exercise good faith, loyalty, and honesty toward Plaintiff business to act solely for its benefit in all matter connected with his employment." Id., counterclaim, fifth count, paragraph 7, sixth count, paragraph 8. The defendant never sought to amend these allegations before the close of evidence.

The plaintiff responded to the defendant's special defenses and counterclaims in the following fashion. The plaintiff first claimed that the statute of limitations has been tolled in two ways: (1) under the course of continuing conduct doctrine, and (2) because the defendant, a fiduciary, misappropriated the plaintiff's funds and has never made a full accounting of his misappropriations, under the doctrine of fraudulent concealment. The plaintiff then proceeded to deny the essential allegations of the operative amended counterclaim and raise several special defenses thereto. Because the court finds that the defendant has failed to satisfy his burden of proof as regard to all of the counts of the counterclaim except for the ninth count, there is no need for the court to consider the plaintiff's special defenses. In regard to the ninth count, a claim of defamation, the plaintiff raises a special defense of truth and of the absolute privilege accorded to legal pleadings.

This case was tried to the court for twelve days between May 5 and May 28, 2015. The parties filed post-trial briefs simultaneously on July 24, 2015. On August 27, 2015, the court, J.D. Moore, J., granted the plaintiff's motion to file a supplemental brief, which motion had been filed on July 29, 2015. The supplemental brief was filed upon the granting of permission to do so, e.g., on August 27, 2015.

For the reasons stated below, the court rules against the plaintiff and in favor of the defendant in regard to the allegations of the first count, in favor of the plaintiff and against the defendant in regard to the allegations of the second count, and against the defendant and in favor of the plaintiff in regard to each of the counterclaims. The court awards the plaintiff $2, 080, 185.09 under the proven allegations of the second count.

INTRODUCTION

A. No Substantive Defense Presented

As a threshold matter, it is important to note that the defendant has offered virtually no resistance to the allegations of the amended complaint. The defendant devoted only two pages of his fifty page post-trial brief to attempt to rebut the allegations of the amended complaint.[3] Even then, the defendant's response to the amended complaint is tepid at best. In what is virtually an admission of liability, the defendant begins by arguing that he should be given credit for monies he paid back to the plaintiff. Then, without pointing to any evidence that supports the finding that the defendant actually loaned any money to the plaintiff, the defendant claims that, as the plaintiff's chief financial officer at the time, the defendant knew best when he should have been allowed to reclaim monies owed to him by the company. The defendant also claims that the plaintiff improperly denied him documents that would have proven his investments in the plaintiff, an argument raised often by the defendant throughout this case, but one to which the court has given no credit. Finally, the defendant argues that the plaintiff itself fostered an environment in which both the defendant and the plaintiff's president and chief executive officer (CEO), Ms. Laurel Caliendo, felt that they could withdraw corporate monies that " they had invested." This argument is not persuasive. When the defendant first tried to cross examine Ms. Caliendo as to her withdrawals of funds from the plaintiff, the court pointed out that, " two wrongs don't make a right." Although the court allowed the defendant to introduce evidence of Ms. Caliendo's withdrawals solely on the limited basis that authority is one element of the plaintiff's conversion...

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