Opinion
MMXCV125008148.
12-06-2012
Amalia COPPOLECCHIA v. BUILT RIGHT N.E., LLC et al.
UNPUBLISHED OPINION
AURIGEMMA, J.
The plaintiff, Amalia Coppolecchia, commenced this action by filing an Application for Prejudgment Remedy accompanied by an unsigned complaint. That complaint alleged breach of contract for garage and home improvements against the defendant, Built Right N.E., LLC (" Built Right NE") (First Count), breach of contract for kitchen and powder room improvements against the defendant, Built Right NE (Second Count), breach of implied warranty against Built Right NE (Third Count), breach of Home Improvement Act against Built Right NE (Fourth Count), unfair trade practices against Built Right NE and the defendant, Bethaney B. Brenner (Fifth Count), fraud and intentional misrepresentation against Built Right NE and Bethaney B. Brenner (Sixth Count), successor liability against the defendant, Built Right CT, LLC and Bethaney B. Brenner (Seventh Count), piercing the corporate veil under the instrumentality rule against Bethaney B. Brenner (Eighth Count) and piercing the corporate veil under the identity rule against Built Right NE, Built Right CT, LLC and Bethaney B. Brenner (Ninth Count).
The prejudgment remedy hearing commenced on July 25, 2012. After chambers discussions with counsel, at which the parties agreed that neither corporate defendant had any assets, and, therefore, a prejudgment remedy against them would be futile, the court and parties agreed that the hearing would be continued and the issue at the next hearing would be whether or not the defendant, Dr. Bethaney B. Brenner, the sole owner of both corporate defendants, had personal liability to the plaintiff under either the instrumentality rule or the identity rule.
Evidence at Hearing
At the evidentiary hearing on the issue of piercing the corporate veil with respect to Dr. Brenner, the plaintiff presented the testimony of Richard Brown. Mr. Brown had been in the Navy and then had worked for Carefree Energy Solutions and Anderson Windows. He started dating Dr. Brenner, who is a dentist, in June 2010. Although he was convicted of mail fraud and spent time in prison from 2007-2009, he did not advise Dr. Brenner of this fact. When Dr. Brenner started Built Right NE, she hired Brown as an independent contractor to work as her head of sales and project manager.
The plaintiff called Brown for the ostensible purpose of testifying that the accounts of Built Right NE and the private accounts of Dr. Brenner were commingled and that Built Right NE paid for Dr. Brenner's expenses unrelated to the business of Built Right NE. He testified that Built Right NE paid for a truck which he used 95% for the business of Built Right NE and 5% for personal use.
Brown testified about Built Right NE credit card statements. While those statements showed that Built Right NE paid for certain expenses which were best characterized as personal expenses of Dr. Brenner and Mr. Brown, such as restaurant charges and payments to a juice company of which Dr. Brenner was a franchisee, most of the charges on the Built Right NE credit card were associated with Built Right NE business. Mr. Brown confirmed this by testifying that 98% of the charges on the Built Right NE credit card were direct company expenses. He further testified that all of Built Right NE's payments and expenses for 30-40 projects performed by Built Right NE were properly accounted for on a job-by-job basis.
Mr. Brown also testified about a lawn mower that Built Right NE purchased for $3,783.12 on the company account. He testified that the mower was used at Dr. Brenner's office and at an investment property that she used. Dr. Brenner testified that when she purchased the mower, she intended that it be used on several Built Right NE projects, but it was ultimately used at her own personal properties.
Mr. Brown further testified about renovations performed by Built Right NE at Dr. Brenner's rental property at Spielman Highway, Burlington. He opined that the value of the work performed was $55,000 to $70,000. Dr. Brenner testified that Built Right NE provided some of the labor and materials, worth around $24,000, that she paid Built Right NE $10,000 for those labor and materials and that she paid for the remainder of the project directly from her own funds to the subcontractors and vendors who did the work.
Mr. Brown testified that Built Right NE employees were sometimes paid for overtime using gift cards that were purchased on the Built Right NE account.
The plaintiff also called Kate Gresham who testified that she worked for Built Right NE as a sales representative and design consultant from February 2011 to January 2012. She was an independent contractor and received a W-1099 form reflecting amounts she received from Built Right NE. Ms. Gresham needed a substantial amount of dental work when she started to work for Built Right NE. At Ms. Gresham's request, Dr. Brenner performed dental work for Ms. Gresham which was worth about $12,000. Built Right NE deducted $4,400 from Ms. Gresham's pay to cover the cost of the dental services. However, those payments were not given to Dr. Brenner. Essentially, Dr. Brenner's provision of those dental services conferred a benefit on Built Right NE to the extent it did not have to pay Ms. Gresham amounts that it would have otherwise paid to her. Conversely, Dr. Brenner personally suffered a detriment because she received nothing for dental services performed.
Dr. Brenner also testified at trial. During the period of Built Right NE's existence, Dr. Brenner maintained her personal bank account with Farmington Bank. This was separate from Built Right NE's account with Webster Bank. During part of its time in operation, Built Right NE used Dr. Brenner's residence as its office. Built Right NE paid for 7 months of electric bills from Dr. Brenner's residence. Built Right NE also paid a total of $3954 in payments for Dr. Brenner's Lexus and $6,015.80 in payments for the truck used by Mr. Brown. During the period from November 1, 2010 to February 2, 2012, Dr. Brenner loaned Built Right NE a total of $271,800. Built Right NE repaid Dr. Brenner only $40,000, so at the time that Built Right NE dissolved, it still owed Dr. Brenner $231,800.
Built Right NE moved into a separate location on East Street in Plainville in June 2011. However, Built Right NE was losing money, so when it was able to break the lease, it left the East Street location and returned to Dr. Brenner's residence.
Built Right NE had project managers who would sell jobs and supervise hiring subcontractors to perform the jobs. They were Richard Brown, Ernest Messier, Katie Gresham and Stanley Wieczorek. Dr. Brenner was the only person authorized to sign checks on Built Right NE's bank accounts. However, she relied on the foregoing people to allocate bills to different jobs if Built Right NE was using one supplier for various jobs. Those project managers were authorized to enter into contracts without checking with Dr. Brenner.
By December 2011, Built Right NE had lots of jobs it was doing, but it was losing money. Dr. Brenner loaned the company $75,000 on January 17, 2012 so that it could pay subcontractors for work done. She put another $32,000 of her own money into Built Right NE by check dated January 25, 2012 and gave Built Right NE a check for $40,000 in February 2012. Built Right NE was dissolved in April 2012.
After Built Right NE was dissolved Dr. Brenner formed Built Right CT, LLC to do smaller jobs. Richard Brown did not work for Built Right CT, LLC, but Ernest Messier who was a finish carpenter, thought that he could handle smaller jobs as long as someone else took care of the finances for him. Built Right CT, LLC did not obtain any of Built Right NE's assets, because at the time it dissolved, Built Right NE had no assets, only debts. Built Right CT, LLC only did about six jobs until it, too, stopped doing business.
Amalia Coppolecchia testified that Built Right NE had misrepresented its capabilities including the claim that Stanely Wieczorek was an architect. She introduced a letter from Dr. Brenner dated July 15, 2011 which stated in pertinent part: " As the founder and owner of Built Right NE, LLC, I want to thank you for your most recent order with our company. We want to put your mind at ease with the knowledge that you have selected a team of highly trained professionals dedicated to exceeding your expectations." She also testified that an unidentified worker, allegedly employed by Built Right NE, told her that Built Right NE had removed unused roofing and siding materials from the plaintiff's property and used them at Dr. Brenner's investment property in Burlington. She also testified that after Built Right NE ceased doing work on her property, she had to find another contractor to complete the work. She went to a home show where Built Right CT, LLC was using pictures of work that Built Right NE had done at her house and representing them as work that Built Right CT, LLC had done.
Discussion of the Law and Ruling
" Courts will ... disregard the fiction of a separate legal entity to pierce the shield of immunity afforded by the corporate structure in a situation in which the corporate entity has been so controlled and dominated that justice requires liability to be imposed on the real actor." (Internal quotation marks omitted.) Angelo Tomasso, Inc. v. Armor Construction & Paving, Inc., 187 Conn. 544, 552, 447 A.2d 406 (1982). A court may pierce the corporate veil and impose individual liability only in the most exceptional circumstances, for example, where the corporation is a mere shell, serving no legitimate purpose, and use primarily as an intermediary to perpetuate fraud or promote injustice. United Electrical Contractors v. Progress Builders, Inc., 26 Conn.App. 749, 755, 603 A.2d 1190 (1992).
The corporate shield should not be lightly disregarded to hold a stockholder liable, even when there is only one stockholder. Falcone v. Night Watchman, Inc., 11 Conn.App. 218, 222, 526 A.2d 550 (1987). " To do so would be to act in opposition to the public policy of this state as expressed in legislation concerning the formulation and regulation of corporations." Saphir v. Neustadt, 177 Conn. 191, 212, 413 A.2d 843 (1979).
The extraordinary circumstances which will justify disregarding the corporate entity have often been referred to as the " instrumentality" rule and the " identity" rule.
Under the instrumentality rule, in any case but that of express agency, proof of three elements is required: " ‘ (1) Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; (2) that such control must have been used by the defendant to commit fraud or wrong, to perpetrate the violation of a statutory or other positive legal duty, or a dishonest or unjust act in contravention of plaintiff's legal rights; and (3) that the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of." Saphir v. Neustadt, supra, at 10; Falcone v. Night Watchman, Inc., supra, 220 at n. 2.
Under the ‘ identity’ rule, as stated in Zaist v. Olson, 154 Conn. 563, 576, 227 A.2d 562 (1967), the corporate veil may be pierced when the plaintiff shows " ‘ such a unity of interest and ownership that the independence of the corporation had in effect ceased or had never begun, [and that] an adherence to the fiction of separate identity would serve only to defeat justice and equity by permitting the economic entity to escape liability arising out of an operation conducted by one corporation for the benefit of the whole enterprise." ..." ’ (Citations omitted.) Falcone v. Night Watchman, Inc., supra, at 221. A key factor in determining whether the corporate shield should be disregarded is the degree of control or influence exercised over the corporation by the individual sought to be held liable. Falcone v. Night Watchman, Inc., supra. The identity rule " primarily applies to prevent injustice in the situation where two corporate entities are, in reality, controlled as one enterprise because of the existence of common owners, officers, directors or shareholders and because of the lack of observance of corporate formalities between the two entities." Angelo Tomasso, Inc. v. Armor Construction & Paving, Inc., supra, at 560.United Electrical Contractors v. Progress Builders, Inc., supra, at 755-57.
Under the law set forth above, piercing the corporate veil under the instrumentality rule requires proof of all three elements: complete domination to the point of eliminating the corporation's separate identity; fraud or dishonesty by the individual from whom recovery is sought; and proximate cause of the injury at issue due to the complete domination and the fraud or dishonesty.
In this case the plaintiff has failed to prove that Dr. Brenner is liable under the instrumentality rule. Dr. Brenner did not completely control or dominate the conduct of Built Right NE. Her employees or independent contractors sold jobs and even suggested allocations of bills to jobs. Moreover, the plaintiff's alleged damages resulted from defective workmanship by Built Right NE. The plaintiff was not induced to do business with Built Right NE under the mistaken belief that she was dealing with Dr. Brenner.
The plaintiff has also failed to prove that Dr. Brenner has liability under the identity rule. She has not proved that there was such a unity of interest between Dr. Brenner and Built Right NE that the independence of the corporation had in effect ceased or had never begun. Built Right NE had its own bank account which was separate from that of Dr. Brenner. Built Right NE paid a few bills that should have been paid by Dr. Brenner personally. But the plaintiff's witness, Mr. Brown admitted that 98% of the amounts included in the Built Right NE credit card statements were for legitimate corporate expenses.
Generally a successful attempt to pierce the corporate veil under the identity rule involves conduct by an individual that benefits him or herself at the expense of the corporation. For example, in Toshiba America Medical Systems, Inc. v. Mobile Medical Systems, Inc., 53 Conn.App. 484, 730 A.2d 1219 cert. denied, 249 Conn. 930, 733 A.2d 851 (1999), the court affirmed the piercing of the corporate veil where the defendant used corporate funds to pay his personal income tax, and transferred over a million dollars from one of his corporations to another to avoid paying the plaintiff. In this case, Built Right NE was benefitted by Dr. Brenner's frequent loans, and Dr. Brenner was burdened by making those loans, which she was, apparently, under no legal obligation to do. The loans were clearly documented and banking records were introduced that show that money went out of Dr. Brenner's account and into the account of Built Right NE.
Based on the foregoing, the plaintiff cannot pierce the corporate veil of Built Right NE under the identity rule.
In her brief, the plaintiff argues for the first time, that even if she cannot recover from Dr. Brenner personally by piercing the corporate veil, she can still recover from her under the theory that where an agent of a corporation commits a tort, he is liable to third persons injured thereby. Scribner v. O'Brien, Inc., 169 Conn. 389, 404, 363 A.2d 160 (1975). See also, Cohen v. Roll-A-Cover, LLC, 131 Conn.App. 443, 27 A.3d 1 (2011); Ventres v. Goodspeed Airport, 275 Conn. 105, 881 A.2d 937 (2005). The plaintiff did not previously request that the court consider this avenue of personal liability at the hearing nor did she indicate at the hearing that she intended to present any evidence on that issue.
In Cohen, supra, the president of the defendant corporation made numerous fraudulent misrepresentations to the plaintiff to induce him to contract with the defendant corporation and in Ventres, supra, the defendant corporation's president had personally instructed another person to take illegal actions. There was no evidence of tortious conduct by Dr. Brenner presented at the October hearing. The letter dated July 15, 2011 from Dr. Brenner as owner of Built Right NE did represent that Built Right NE had " a team of highly trained professionals dedicated to exceeding your expectations."
In order to prove a fraudulent misrepresentation, the plaintiff must prove that the defendant made a false representation as a statement of fact, that the statement was untrue and known to be untrue by the defendant or that the defendant made the statement with reckless disregard for the truth of the matter, that the defendant made the statement to induce the plaintiff to act on it and that the plaintiff did act on the statement to her injury. The plaintiff must prove the first three elements by clear and convincing evidence and the fourth element by a preponderance of the evidence. Updike, Kelly & Spellacy, P.C. v. Beckett, 269 Conn. 613, 643 (2004); Barbara Weisman, Trustee v. Kaspar, 233 Conn. 531, 539-40 (1995); Kilduff v. Adams, Inc., 219 Conn. 314, 326-30 (1991). Since this letter was sent after the plaintiff had already contracted with Built Right NE, it could not have induced action by the plaintiff and, therefore, could not have been a fraudulent misrepresentation.
As the stated purpose of the hearing presently under consideration was to determine whether the plaintiff could pierce the corporate veil and, thereby, hold Dr. Brenner personally liable, this court will not further opine as to whether Dr. Brenner might have personally committed a tort with respect to the plaintiff. However, this court has determined as set forward above, that the plaintiff has not submitted sufficient evidence which would permit her to disregard the corporate status of Built Right NE under either the instrumentality or the identity rule in order to recover from Bethaney Brenner personally.