Court Opinion

ID: 2822263
Source: CourtListenerOpinion
Date Created: 2015-07-30 21:13:49.733096+00
Date Added: 2024-06-11T11:31:05.974490
License: Public Domain

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 RICHARD HYLTON v. GARFIELD GUNTER ET AL.
                (AC 33316)
                 Beach, Alvord and Bishop, Js.
       Argued January 13—officially released May 19, 2015

   (Appeal from Superior Court, judicial district of
  Hartford, Hon. Richard M. Rittenband, judge trial
                      referee)
  Houston Putnam Lowry, with whom, on the brief,
was Julie A. Morgan, for the appellant (named
defendant).
  Gerald M. Beaudoin, with whom, on the brief, was
Francisco A. Cardona, for the appellee (plaintiff).
                         Opinion

   PER CURIAM. A formalized business structure can
outlive its usefulness. In this case, the parties, along
with several other individuals, joined to become mem-
bers of a limited liability company, Progressive Elec-
tric & Telecommunications, LLC (company). The
defendant Garfield Gunter1 and the plaintiff, Richard
Hylton, executed an operating agreement, which gov-
erned, among other items, the administration of capital
accounts. Over time, other members left the venture,
and only the defendant was left as a revenue-producing
member. The company was not dissolved nor were the
agreement’s terms amended to reflect changed circum-
stances. This action concerns the effort of the plaintiff
to secure moneys that he claims he is entitled to, by
virtue of his original investment and the terms of the
operating agreement, and the concomitant effort of the
defendant to protect the fruits of his labor.
  This appeal comes to us on remand from the Supreme
Court. In Hylton v. Gunter, 142 Conn. App. 548, 66 A.3d
517 (2013), rev’d, 313 Conn. 472, 97 A.3d 970 (2014),
the defendant appealed from the judgment of the trial
court rendered in favor of the plaintiff. This court dis-
missed the appeal of the defendant for lack of a final
judgment. Id., 554. Our Supreme Court reversed that
decision; see Hylton v. Gunter, 313 Conn. 472, 97 A.3d
970 (2014); and remanded the case to us with direction
to consider the merits of the defendant’s claims on
appeal. Id., 489. Consistent with that mandate, we now
consider whether the trial court erred in finding in favor
of the plaintiff on the eight counts directed against the
defendant.2 We reverse the judgment of the trial court.
  The trial court found the following facts. ‘‘Sometime
prior to September 21, 2006, the plaintiff . . . the
defendant . . . Derrick Fraser, David Morgan and
Wellesley Shaw decided to form [the company] the pur-
pose of which was to provide electrical materials and
service for construction projects. An Operating
Agreement was executed as to the terms and conditions
of the [company] subsequent to September 21, 2006,
but back dated to that date. . . . [The plaintiff, the
defendant] and Derrick Fraser signed the Operating
Agreement, but David Morgan and Wellesley Shaw did
not. Nonetheless each party contributed a 20 percent
interest in the company in the amount of $1500 for a
total of $7500 start-up money. Subsequently, Morgan,
Shaw and Fraser had their interest purchased by the
[company] leaving the two remaining members . . .
the plaintiff and the defendant . . . as equal members
of the [company]. [The defendant] was named manager
of the [company]. All of the parties worked on the jobs
obtained by the [company] and took draws against the
profits. On July 7, 2007, Morgan and Shaw were bought
out by the [company] and on May 2, 2008, Fraser sold
his interest to the [company]. Even though [the plaintiff
and the defendant] were equal members in the [com-
pany], the day-to-day control was in the hands of [the
defendant] who was not only the managing member
but was also a licensed electrician, [the plaintiff] being
only an apprentice. The books and records of the [com-
pany] were technically open to [the plaintiff], but they
were in fact controlled by [the defendant]. [The plain-
tiff] apparently made only one effort to review the
records by obtaining from the bookkeeper of the com-
pany a flash drive. This occurred in the spring of 2008,
and [the plaintiff] stopped working for the [company]
by the end of July, 2008. There is a dispute between
[the plaintiff and the defendant] as to whether [the
defendant] failed to pick up [the plaintiff] with the vehi-
cle that belonged to the [company] and take him to the
jobs. By July, 2008, [the plaintiff] was no longer doing
work in the field and had become suspicious based
upon his review of the records that [the defendant] was
not providing [the plaintiff’s] fair share of the profits
and was also using moneys of the [company] for his
own personal use. By return date of December 8, 2009,
[the plaintiff] brought this action against [the defendant]
and [the company] to recover what he believed were
shares of profits that had been illegally withheld from
him and to recover 50 percent of the moneys from
[the defendant] that were used for [the defendant’s]
personal expenses.’’
   The plaintiff brought an eight count complaint that
alleged, as against the defendant, negligence, breach of
contract, unjust enrichment, statutory theft, conver-
sion, breach of fiduciary duty, breach of implied duty
of good faith and fair dealing, and fraud. The case was
tried to the court.
   The court found that the defendant and the com-
pany’s accountant manipulated the company’s books
and tax returns in order to show a zero balance in
the partnership’s capital account. The court found that
there had been a series of transactions between the
company and the defendant, including loans to the
defendant, a loan to the defendant’s church and ques-
tionable payments to the defendant, all of which
resulted in the enrichment of the defendant at the
expense of the plaintiff. The transgressions were aggra-
vated by an accounting practice that rendered the plain-
tiff’s capital account penniless. The court determined
that the plaintiff was entitled to $114,216 in compensa-
tory damages plus 50 percent of amounts paid by the
church on its loan. The court tripled the damages
because of the statutory theft count, and also awarded
attorney’s fees. The court did not differentiate damages
according to any of the eight counts, but rather found
the defendant liable in the same amount on each count,
except that damages on the statutory theft count were
tripled. Following a hearing on attorney’s fees, the court
awarded the plaintiff $23,400 in punitive damages. This
appeal followed.3
  The defendant filed a motion for articulation, which
the court granted. Thereafter, the defendant filed a
motion for review of the articulation with this court,
which this court granted.4 The court issued a second
articulation on May 22, 2012.
   ‘‘[W]e must determine whether the facts set out in
the memorandum of decision are supported by the evi-
dence or whether, in light of the evidence and the plead-
ings in the whole record, those facts are clearly
erroneous. . . . We also must determine whether
those facts correctly found are, as a matter of law,
sufficient to support the judgment. . . . [W]e give great
deference to the findings of the trial court because of
its function to weigh and interpret the evidence before
it and to pass upon the credibility of witnesses . . . .
We do not examine the record to determine whether
the trier of fact could have reached a conclusion other
than the one reached . . . . Rather, on review by this
court every reasonable presumption is made in favor
of the trial court’s ruling.’’ (Citation omitted; internal
quotation marks omitted.) Masse v. Perez, 139 Conn.
App. 794, 797–98, 58 A.3d 273 (2012), cert. denied, 308
Conn. 905, 61 A.3d 1098 (2013).
   The defendant claims that the court erred when it
determined that the plaintiff was entitled to distribu-
tions and that several fundamental misconceptions per-
meated the award. We agree.
   We have carefully examined the record, including the
transcript of proceedings and the exhibits. The court
appears to have assumed that any irregularities in the
financial affairs of the company, as orchestrated by
the defendant, properly and automatically resulted in
damage awards to the plaintiff. The operating
agreement, in articles VII and VIII, however, did not
require the disbursement or distribution of funds from
the capital account at any time. Further, the court seems
to have made no distinction between the company and
the defendant, and we are unable to discern the precise
evidentiary bases in support of the findings of liability
on each count. As one example, the court found the
defendant liable as to both the breach of contract count
and the unjust enrichment count; ordinarily, recovery
on the two counts is mutually exclusive. See, e.g., Rus-
sell v. Russell, 91 Conn. App. 619, 882 A.2d 98, cert.
denied, 276 Conn. 924, 925, 888 A.2d 92 (2005) (‘‘unjust
enrichment and breach of contract are mutually exclu-
sive theories of recovery’’); see also Gagne v. Vaccaro,
255 Conn. 390, 401, 766 A.2d 416 (2001) (‘‘lack of a
remedy under the contract is a precondition for recov-
ery based upon unjust enrichment’’ [internal quotation
marks omitted]).
   We are left with the misapplication of the law as to
all counts; in the circumstances, we find it pointless to
examine the elements of each count and the court’s
conclusions. We therefore reverse as to all counts,5 and
remand the case for a new trial on all but one of the
counts. As to the count alleging fraud, we are confident
that there was no evidence offered on the element of
reliance,6 and we therefore direct judgment for the
defendant as to that count.
   With respect to the count of fraud, the court found
that the defendant’s bookkeeping scheme to arrive at
a zero balance in the capital account constituted fraud.
A thorough review of the trial transcripts and the evi-
dence submitted convinces us that no evidence was
presented that the plaintiff did anything in reliance on
the defendant’s representations regarding the account-
ing. Furthermore, there was no other evidence of reli-
ance as to any of the defendant’s other allegedly
improper actions; the plaintiff testified at trial, for exam-
ple, that he learned only at trial that the defendant had
taken a loan from the company. Because there is no
evidence of the reliance element of fraud, the court’s
finding cannot stand.
  The judgment is reversed with respect to the finding
of fraud and the case is remanded to the trial court
with direction to render judgment for the defendant on
that count. The judgment is reversed as to the remaining
seven counts and the case is remanded for a new trial
on those counts.
      In this opinion the other judges concurred.
  1
     Progressive Electric & Telecommunications, LLC, was also a defendant,
and was defaulted for failure to appear and for failure to appear at trial.
This opinion does not affect any damages awarded as to the company. We
refer to Gunter only as the defendant.
   2
     The defendant claims that the court erred in making certain evidentiary
rulings. We do not address these claims because they will not necessarily
arise in a new trial.
   3
     In Hylton v. Gunter, supra, 142 Conn. App. 548, the defendant appealed
from the judgment of the trial court awarding compensatory damages and
finding that the plaintiff was entitled to punitive damages in the form of
attorney’s fees. This court dismissed the appeal of the defendant, for lack
of a final judgment pursuant to § 52-263, because at the time the appeal
was filed, the trial court had not yet determined the amount of the award
of punitive damages. Our Supreme Court reversed, concluding that an
appealable final judgment existed even though the amount of common-law
punitive damages, limited to attorney’s fees, had not been determined. Hyl-
ton v. Gunter, supra, 313 Conn. 478. The court remanded the case to us
with direction to consider the merits of the defendant’s claims on appeal.
Id., 489.
   4
     This court ordered the trial court ‘‘to articulate: (1) why the plaintiff
was entitled to one-half of the outstanding loan balance; (2) the portion of
the operating agreement requiring the plaintiff to be notified of or approve
the loan; (3) what portion of the operating agreement was violated and how;
(4) how the operating agreement entitled the plaintiff to a forced distribution
of the proceeds in his capital account when section 8.6 specifically provides
that there is no such right; and (5) the factual and legal bases for finding
the defendant liable for (i) negligence, (ii) breach of contract, (iii) conversion
and (iv) unjust enrichment.’’
   5
     We note that, inter alia, to prove: negligence, the plaintiff must prove a
duty; Ruiz v. Victory Properties, LLC, 315 Conn. 320, 328, 107 A.3d 381
(2015); breach of contract, the plaintiff must prove a violation of the terms
of the contract; Pelletier v. Galske, 105 Conn. App. 77, 81, 936 A.2d 689
(2007), cert. denied, 285 Conn. 921, 943 A.2d 1100 (2008); statutory theft and
conversion, the plaintiff must prove he is the owner; Deming v. Nationwide
Mutual Ins. Co., 279 Conn. 745, 770–71, 905 A.2d 623 (2006); breach of a
fiduciary duty, the plaintiff must prove the existence of a fiduciary relation-
ship; 2 National Place, LLC v. Reiner, 152 Conn. App. 544, 551, 99 A.3d
1171 (2014); and breach of the implied covenant of good faith and fair
dealing, the plaintiff must prove he has the right to receive benefits. De La
Concha of Hartford, Inc. v. Aetna Life Ins. Co., 269 Conn. 424, 432–33, 849
A.2d 382 (2004).
   6
     ‘‘The four essential elements of fraud are . . . that a false representation
of fact was made . . . that the party making the representation knew it to
be false . . . that the representation was made to induce action by the
other party; and . . . that the other party did so act to her detriment.’’
(Internal quotation marks omitted.) Chase Manhattan Mortgage Corp. v.
Machado, 83 Conn. App. 183, 188, 850 A.2d 260 (2004).