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Great Country Bank v. Ogalin

Court of Appeals of Connecticut

October 11, 2016

GREAT COUNTRY BANK ET AL.
v.
JEFFREY OGALIN ET AL.

          Argued April 11 2016

         (Appeal from Superior Court, judicial district of Fairfield, Kamp, J.)

          Roy W. Moss, for the appellant (Drywall Construction Corporation of Connecticut, Inc.).

          Paul N. Gilmore, with whom, on the brief, was Christopher A. Klepps, for the appellee (substitute plaintiff).

          DiPentima, C. J., and Keller and Prescott, Js.

          OPINION

          KELLER, J.

         In this foreclosure action, a third party, Drywall Construction Corporation of Connecticut, Inc. (Drywall), appeals from the judgment of the trial court awarding the plaintiff Cadle Company a turnover order in the amount of $19, 887.27 to aid in the execution of a deficiency judgment rendered against the defendant Frank Ogalin, Jr.[1] Drywall claims that (1) the court erroneously found that, as of the date on which the plaintiff served a property execution on Drywall, it owed the defendant unreimbursed business expenses, and (2) even if the court properly found that it owed the defendant unreimbursed business expenses, it improperly awarded the plaintiff a turnover order because the expenses at issue constituted earnings for personal services, which are not the proper subject of a property execution. We affirm the judgment of the trial court.

         The relevant procedural history may be summarized as follows. In 1994, following a foreclosure by sale, the named plaintiff, Great Country Bank, obtained a deficiency judgment against the defendant. Later, Great Country Bank assigned its interest in the deficiency judgment to the plaintiff. In 2013, the plaintiff conducted postjudgment discovery and concluded that Drywall, a closely held family business, was in possession of debts that were due and owing to the defendant, one of its employees. In December, 2013, pursuant to General Statutes (Rev. to 2013) § 52-356a (a) (1), [2] the plaintiff served on Drywall a personal property execution in an attempt to collect on the unsatisfied judgment. Drywall refused this demand for payment.

         In 2014, the plaintiff sought a turnover order against Drywall. It filed an application for orders in aid of execution pursuant to General Statutes § 52-356b[3] and a claim for a determination of interests in the subject property pursuant to General Statutes § 52-356c.[4] It is not in dispute that Drywall was served with the application and claim. The court summoned Drywall to appear at a hearing on these matters, which took place over the course of three days, September 4, 2014, October 2, 2014, and November 5, 2014.[5] During the hearing, the plaintiff presented documentary evidence and testimony from Christina Ogalin (Ogalin), who is both Dry-wall's president and the defendant's daughter. Following the hearing, both the plaintiff and Drywall submitted posttrial briefs. Essentially, the plaintiff argued that the evidence, which included business records of Drywall, demonstrated that Drywall owed the defendant un reimbursed business expenses that he incurred on Drywall's behalf. Drywall, arguing that the evidence demonstrated that it had reimbursed the defendant for prior expenses and that not all of the expenses in evidence had been incurred by the defendant, contended that it did not owe the defendant any ‘‘significant obligation'' in December, 2013, when the property execution was served on Drywall.

         In relevant part, the court stated the following in its memorandum of decision: ‘‘During the hearing on the plaintiff's application, the only witness was [Ogalin], who testified in her capacity as president of Drywall. Her testimony largely focused on the creation of four manila envelopes that were marked as the plaintiff's exhibits 3, 4, 5, and 6. On the outside of each of these exhibits, Ogalin had written in red ink, in three separate columns, the amount of the expense, the date the expense was incurred, and the vendor to whom the expense was paid. Contained within each envelope [were] the expense receipt[s] . . . itemized on the face of the envelope. It was estimated that among all four envelopes, more than 700 individual expenses were itemized. The court finds that Drywall's accounting and record keeping practices were sloppy at best and performed in a manner that defies even basic accounting standards.

         ‘‘On October 29, 2013, Ogalin was deposed by the plaintiff in postjudgment proceedings. During that deposition, the following colloquy took place:

         ‘‘ ‘Q. And all of these . . . receipts . . . in these four folders that are exhibits 3, 4, 5, and 6 and the front pages, that represents obligations owing from [Drywall] to [the defendant]?

         ‘‘ ‘A. Yes. All this will be owed. If not already paid, some.' . . .

         ‘‘On March 13, 2014, in her continued deposition, Ogalin testified as follows with regard to the creation of the envelopes:

         ‘‘ ‘Q. You testified a couple of minutes ago that you never wrote the first check for expense reimbursement concerning a document, such as an exhibit, which is now exhibit 9, until the front face of the document was complete.

         ‘‘ ‘A. I normally would generate the receipts and have a total on the manila [envelope], and from that total would write out checks when the business had money, and then that total would be wiped out once I hit that total. And then would go to the next manila [envelope] and next manila [envelope] and so on. Everything has been paid and accounted for but, like I said, that would be an amount, and that's how I would do it. . . .'

         ‘‘During the hearing on the plaintiff's application, Ogalin testified contrary to her prior sworn deposition testimony. Most significantly, she claimed [at the hearing] that all the expenses had been reimbursed prior to her creating the manila envelopes, not before. In addition, it was her testimony that the expenses were not incurred by the defendant alone. Rather, they were expenses incurred by her brother [Frank F. Ogalin III], who is also an officer in the corporation, as well as herself and [the defendant]. There was also conflicting testimony as to how those receipts were maintained. At one point, Ogalin testified that receipts were kept in separate bags depending upon who incurred the expense. There was also testimony that all the receipts were comingled, regardless of who incurred the expense. Again, as the court noted previously, the accounting and record keeping methods employed by Ogalin and Drywall were so poor that it is almost impossible to place any credibility in their accuracy.

         ‘‘After [posttrial] litigation [had] commenced, Ogalin attempted to create a spreadsheet in which she allocated each individual expense to either herself, [the defendant], or [Frank Ogalin III]. The court does not find this testimony credible. First, when deposed, Ogalin made clear that she only issued reimbursement after she totaled the expenses on the outside of each envelope and knew the aggregate total of those expenses. Such a process would be the logical method of issuing reimbursement, as one would need to know how much needs to be reimbursed before issuing any payment. To now claim that payments were made to reimburse expenses before the actual value of those expenses was determined is not logical [or] credible. Moreover, to now assert that these expenses were comingled expenses incurred by the defendant, [Frank Ogalin III], and herself also lacks credibility. [Ogalin] previously testified under oath that the receipts contained in these individual envelopes were expense reimbursements owed to the defendant alone. Her testimony, that in 2014 she created a spreadsheet allocating those expenses between three individuals, based on her memory of approximately 700 individual receipts from a multitude of different vendors, also lacks credibility. No individual is capable of recalling who incurred a specific expense out of all of the many individual expenses [at issue], some dating back as many as five years. . . .

         ‘‘[W]hen the court evaluates the credibility of the testimony of Ogalin, scrutinizes all the exhibits, and considers the business practices of Drywall and its accounting methods, the court finds that as of December 3, 2013, the date of the plaintiff's property execution issued to Drywall, Drywall owed the defendant unreimbursed business expenses in the amount of $19, 887.27. The court has reduced the total sum by those expenses not attributable to the business of Drywall.

         ‘‘With regard to the plaintiff's claim of a $4300 loan repayment obligation due the defendant from Drywall, the plaintiff has not met its burden of proof that this was still owed to the defendant as of the date of the property execution. This portion of the turnover order is denied.

         ‘‘For the foregoing reasons, the court grants the plain- tiff's [application for a] turnover order in the amount of ...


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