Youngman v. Schiavone

• Decision Date: 05 May 2015
• Docket Number: No. 36207.,36207.
• Citation: 157 Conn.App. 55,115 A.3d 516
• Court: Connecticut Court of Appeals
• Parties: Carl YOUNGMAN et al. v. Joel SCHIAVONE et al.

157 Conn.App. 55

115 A.3d 516

Carl YOUNGMAN et al.

v.Joel SCHIAVONE et al.

No. 36207.

Appellate Court of Connecticut.

Argued Dec. 8, 2014.

Decided May 5, 2015.

Irving H. Perlmutter, with whom, on the brief, was Andrew M. Ullman, New Haven, for the appellants (plaintiffs).

Stephen P. Wright, with whom, on the brief, was Nicole L. Barber, Hartford, for the appellees (named defendant et al.).

GRUENDEL, LAVINE and MULLINS, Js.

Opinion

MULLINS, J.

In this case, the plaintiffs, Carl Youngman and Leslie Charm, doing business as Restoration Associates (Restoration),¹ initiated this action in their individual capacities rather than in the name of the proper party, Quinnipiac Riverview Properties, LLC (Riverview), a limited liability company in which they and the defendant Joel Schiavone² are members. That mistake was deemed by the trial court to be a mistake that precluded the plaintiffs from substituting the proper party as the plaintiff and, consequently, deprived the court of subject matter jurisdiction. As a result, the court denied the plaintiffs' motion to substitute Riverview as the proper plaintiff and dismissed this action for lack of subject matter jurisdiction on the ground that the plaintiffs lacked standing. On appeal, the plaintiffs claim that the court abused its discretion in denying their motion to substitute and in granting the defendants' motion to dismiss. In light of our Supreme Court's controlling interpretation of the word “mistake” in DiLieto v. County Obstetrics & Gynecology Group, P.C., 297 Conn. 105, 151, 998 A.2d 730 (2010), we affirm the judgment of the trial court.

The following facts and procedural history inform our review. On December 14, 2010, the plaintiffs filed a complaint against Schiavone, Gary Bello and Fair Haven Heights Realty, LLC (Fair Haven). On May 6, 2011, the defendant Fair Haven filed a notice of bankruptcy, and the plaintiffs, in turn, withdrew the complaint as to Fair Haven.

On February 7, 2013, the plaintiffs filed an amended complaint, alleging, in relevant part, the following:³ Youngman and Charm are partners doing business under the trade name of Restoration Associates. “On or about August 30, 2010, and for more than five years prior thereto, the plaintiffs, as copartners doing business as Restoration, were the owners of a 66 2/3 percent ownership in [Riverview], a Connecticut limited liability company formerly known as the Missy 2, LLC (‘Missy 2’) the name of which was changed on December 14, 2006.... Throughout that period ... Schiavone was the owner of the remaining 33 1/3 [percent] ownership interest in Missy 2.... Between April 17, 2002, and August 22, 2005 ... Schiavone represented to the plaintiffs that he owned or controlled the ownership of [five] properites in New Haven ... [to wit] 22 Front Street, 621 Quinnipiac Avenue, 710 Quinnipiac Avenue, 714 Quinnipiac Avenue, and 715 Quinnipiac Avenue....

“Between April 17, 2002, and November 28, 2005 ... Schiavone offered to the plaintiffs a 50 percent ownership interest in Missy 2 for the sum of $250,000.... At the time of the offer, the other 50 percent ownership interest in Missy 2 was [held] by Alyxx Schiavone and Josie Schiavone, the daughters of ... Schiavone.... The plaintiffs accepted the offer⁴ ... and paid to Missy 2 the sums of money required to receive ownership of the 50 percent [interest] ... from Schiavone.... [After] Schiavone had a disagreement with his daughters ... the plaintiffs acquired, for consideration, an additional 16 2/3 percent ownership of Missy 2, [giving] the plaintiffs [an ownership interest of] 66 2/3 percent of Missy 2⁵ ....

“On November 28, 2005, Missy 2 ... purchased the real property located at ... 740 Quinnipiac Avenue ... with funds received from the plaintiffs and Missy 2, with title being taken in the name of Missy 2.... [It was discovered, however, that] Schiavone, instead of taking title to the [other five properties] ... in the name of Missy 2, took title to [those] properties in his own name and, until August 30, 2010, held [those] properties in his own name.” (Footnotes added.) On December 14, 2006, Missy 2 changed its name to Riverview.

“Until August 30, 2010, despite representing to the plaintiffs that the properties would be transferred and conveyed to Missy 2 or [Riverview], [Schiavone] failed, refused and neglected to transfer the properties to Missy 2 or its successor [Riverview].... From 2002 through 2006, the properties were always reported to the Internal Revenue Service ... as being owned by Missy 2.... At all times from and after 2007, the properties were always reported to the Internal Revenue Service ... as being owned by [Riverview].... The operating agreement of Missy 2 [and, subsequently, Riverview] provided that no properties owned by the limited liability company could be sold or transferred in the absence of approval by a ‘super majority’ of the members of the limited liability company, as defined in the operating agreement, or in breach of the agreement of the plaintiffs and ... Schiavone or in violation of the operating agreement of Missy 2.... The plaintiffs owned 66 2/3 percent of the ownership of [Riverview], and this percentage constituted a ‘super majority’ of the ownership ... as defined in the operating agreement.

“On August 30, 2010 ... Schiavone transferred and conveyed, for no consideration, the properties at 22 Front Street, 621 Quinnipiac Avenue, 710 Quinnipiac Avenue, 714 Quinnipiac Avenue, 715 Quinnipiac Avenue and 740 Quinnipiac Avenue to [Fair Haven] ... [whose members include] Schiavone ... Bello ... and James Byrne, the attorney for ... Schiavone (who has since resigned from membership in [Fair Haven] ).... [Also] on August 30, 2010 ... Bello communicated with all of the tenants of the properties described ... alleging that he was ‘the manager-owner of [Fair Haven], the new owner of the ... apartment,’ making demand upon each of the tenants to send him their monthly rent checks, directing them not to send the rent checks to the building manager employed by [Riverview], thereby disrupting the continued operation of the residential properties.... Schiavone and Bello continue to deny that the plaintiffs and [Riverview] have any interest in the properties.”

On the basis of these facts, as alleged in their amended complaint, the plaintiffs, in their individual capacities, alleged against the defendants causes of action for breach of contract, conspiracy, unjust enrichment, breach of the covenant of good faith and fair dealing, a violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42–110a et seq., and a count entitled “damages for transfer of property without consideration.”

On March 14, 2013, the defendants filed an answer, special defenses, and a two count counterclaim to the plaintiffs' amended complaint. One of their special defenses alleged that the plaintiffs did not have standing on the ground that “[t]he claims they are making belong to Restoration ... which is a general partnership by the plaintiffs' admission, or [Riverview], which is a limited liability company. Either and both entities have their own legal existence.”⁶

On May 30, 2013, counsel for the plaintiffs filed a motion to substitute party plaintiff, explaining that the plaintiffs mistakenly had believed that they were the proper parties to institute the present action but that, following the release of Padawer v. Yur, 142 Conn.App. 812, 818, 66 A.3d 931 (trial court improperly denied motion to dismiss because individual plaintiff lacked standing when injury was to limited liability company), cert. denied, 310 Conn. 927, 78 A.3d 145 (2013), they became convinced that Riverview was the proper party to have instituted the case.

The next day, the defendants filed a motion to dismiss for lack of subject matter jurisdiction on the ground that the plaintiffs lacked standing to institute this case in their individual capacities. The court heard argument on the motion, wherein Youngman testified that he had instructed counsel to institute this action in the names of the individual plaintiffs because he thought they had suffered injury in their individual capacities. Following the hearing, on October 9, 2013, the court rendered judgment denying the plaintiffs' motion to substitute and granting the defendants' motion to dismiss in two separate orders.

In the first order, the court granted the defendants' motion to dismiss. The court ruled: “The named plaintiffs lacked standing to bring this action as individuals. That right belongs to the [limited liability company] under long-standing Connecticut law. Notwithstanding the fact that the individual plaintiffs might have erroneously believed that they possessed the legal right to pursue this action, the law is clear and settled. They do not. Therefore, this court lacks subject matter jurisdiction and this action must be dismissed. Procedurally, the court addressed the motion to dismiss first and will address the motion to substitute second.” (Emphasis added.)

In the second order, the court denied the plaintiffs' motion to substitute. The court ruled: “Notwithstanding the argument made by the plaintiffs' counsel, the law regarding who has the right to bring this action has been long established and is not new.”

The plaintiffs thereafter filed a motion for articulation of the trial court's orders, and the court issued a memorandum of decision further articulating its rulings. The court explained that, despite the plaintiffs' contention that they only became aware that they should have brought their complaint in the name of their limited liability company, Riverview, after the Appellate Court issued its opinion in Padawer, “the law regarding this matter was not changed by Padawer .... Because the plaintiffs did not have standing to bring this action, this court was deprived of subject matter jurisdiction to hear the claims or any motions, including the motion to substitute, of the plaintiffs. Had the action been validly...