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Wiederman v. Halpert

Court of Appeals of Connecticut

December 19, 2017


          Argued October 11, 2017

          Kerry M. Wisser, with whom, on the brief, was Sarah Black Lingenheld, for the appellants (named defendant et al.).

          Taryn D. Martin, with whom, on the brief, was Robert A. Ziegler, for the appellee (plaintiff).

          DiPentima, C. J., and Sheldon and Mihalakos, Js.


          SHELDON, J.

         In this action arising from a real estate investment agreement, the defendants Isaac Halpert and Marsha Halpert[1] appeal from the judgment of the trial court denying their motion to open the judgment rendered against them following a hearing in damages held after they had been defaulted for failing to appear at a trial management conference. The trial court held a hearing in damages and awarded the plaintiff, Malkie Wiederman, $600, 892.58 in compensatory and punitive damages, attorney's fees and costs, on her claims of breach of fiduciary duty, fraud, conversion and bad faith. The defendants claim on appeal that (1) the trial court lacked subject matter jurisdiction to hear the plaintiff's claims because the plaintiff did not have standing to assert them; (2) the trial court failed to make a determination as to the legal sufficiency of the plaintiff's claims of breach of fiduciary duty, fraud, conversion and bad faith; (3) there was no causal connection between the defendants' allegedly wrongful conduct and the losses for which the court awarded the plaintiff compensatory damages; (4) the trial court erred in finding Marsha Halpert liable for fraud and conversion absent sufficient allegations of those claims against her; and (5) the court erred in awarding the plaintiff punitive damages in addition to attorney's fees on her claim of fraud. The defendants concede that they failed to raise any of the foregoing claims in their motion to open the judgment, and thus that the law ordinarily precludes this court from considering those claims on appeal. The defendants nevertheless seek review of their claim that court erred in denying their motion to open on the grounds that the plaintiff lacked standing to assert her claims against the defendants and thus that the trial court lacked subject matter jurisdiction, and that the judgment contained plain errors that resulted in manifest injustice. We agree that the plaintiff failed to properly plead a claim for conversion against Marsha Halpert, and thus that the court's judgment finding her liable for conversion must be reversed. We also agree with the defendants' claim that the court committed plain error in awarding the plaintiff punitive damages in addition to attorney's fees on her claim of fraud, and thus we conclude that the award of punitive damages must be vacated.[2]

         The trial court set forth the following factual and procedural history in its February 5, 2016 memorandum of decision. ‘‘The plaintiff . . . filed this action on November 13, 2008 . . . and filed an amended complaint dated June 14, 2011, which is the operative complaint. . . . The amended complaint contains eleven separate counts. The case has been in the court for a number of years and has an extensive history. The court entered a scheduling order for trial of this matter for March 3, 2015, which was continued until March 17, 2015 and thereafter until October 20, 2015. Counsel for the defendants requested the latest continuance to a trial date of January 28, 2016, with the trial management conference scheduled for January 14, 2016. Counsel for the . . . defendants failed to appear on January 14, 2016 for the trial management conference. The court, as well as [the] plaintiff's counsel, attempted to contact [counsel for the defendants, ] Attorney [David] Rosenberg, for the conference. The notice of the conference was sent to all parties after the court granted the defendants' request for a continuance on October 13, 2015. The notice required that the parties submit a joint trial management report and appear at 9:30 a.m. On January 14, 2016, only the plaintiff and the plaintiff's counsel appeared. Counsel [for the plaintiff] represented that [Attorney Rosenberg] did not respond to requests to supplement the proposed joint trial management report provided to him. The court requested that counsel [for the plaintiff] contact Attorney Rosenberg and wait for a reasonable time period for the defendants to appear. [Attorney Rosenberg] did not appear and at 11:07 a.m., the court entered a default for failure to attend the conference. Notice was sent to counsel for the defendants that the court would conduct a hearing [in] damages on the scheduled January 28, 2016 trial date. Counsel for the plaintiff subpoenaed . . . Isaac Halpert, to appear on January 28, 2016. [Isaac] Halpert did not appear for the trial management conference or appear in response to the subpoena on the trial date.

         ‘‘The court . . . proceeded on the hearing [in] damages on January 28, 2016. . . . Neither [Attorney Rosenberg] nor the subpoenaed defendant [Isaac Halpert] appeared for the hearing [in] damages. The court heard testimony from [the plaintiff] and received exhibits in support of her claim for damages.'' (Footnote omitted.)

         After noting that, ‘‘[u]pon default, the plaintiff ordinarily becomes entitled to recover damages, '' the court reasoned: ‘‘The defendant failed to appear for the trial management conference on January 14, 2016, or at the trial which was scheduled as a hearing [in] damages as a result of the default entered on January 14, 2016. The court entered a default as to all parties but for purposes of this decision, the court is addressing only the two individuals, Isaac Halpert and Marsha Halpert. At the hearing, the plaintiff . . . proceeded as to count one, count four, count five, count six, and count ten [alleging, respectively] breach of fiduciary duty . . . fraud . . . conversion . . . bad faith and . . . [violation of the Connecticut Unfair Practices Act (CUTPA), General Statutes § 42-110a et seq.].[3]

         ‘‘The plaintiff offered testimony and exhibits at the hearing. She testified that she met Isaac Halpert and he presented himself as an experienced real estate developer. He took her to several properties in Waterbury which he had redeveloped and thereafter she invested in the several properties with him. This action arises out of the agreement between the plaintiff and the defendants, which created several limited liability companies [LLCs] for a number of development properties and the actions of the defendants which are clearly set forth in the complaint and further supported with the exhibits that were admitted during the hearing before this court. The plaintiff introduced 51 separate exhibits during her testimony.

         ‘‘The plaintiff became a 50 [percent] member in the following limited liability companies: (1) 58 North Walnut, LLC; (2) 94 Cherry Street, LLC; (3) 100 Burton Street, LLC; (4) 44 Linden Street, LLC; (5) 49 Webb Street, LLC; (6) 15 Cossett Street, LLC; and (7) 31 Webb Street, LLC. Each of the [LLCs] purchased property in the city of Waterbury for development. In addition to these properties, the plaintiff was also involved in the purchase of property at 35 Adams Street in the city of Waterbury. This property was resold to the city of Waterbury and the sale proceeds of $65, 262.19 were to be divided with 50 [percent] to the plaintiff for her investment. As to the remaining properties for each of the LLCs the plaintiff invested sums of money and she was to receive 50 [percent] of the investment and profits. The defendants, Isaac Halpert, Marsha Halpert, and Judah Liberman each had a percentage interest in the properties which consumed the remaining 50 [percent]. The defendant Isaac Halpert agreed to conduct the day-to-day management of the properties.

         ‘‘At the hearing, the plaintiff provided the court with a number of exhibits, including e-mails that questioned expenses, payments, payouts, location of checks, funds, and actions of Isaac Halpert which follow the allegations in the complaint regarding his commingling of the accounts, misappropriation of funds, withholding of funds, failing to account for or deposit funds collected, converting the funds to his and his wife's own personal use, and the securing of funds by use of fraudulent documents.

         ‘‘The exhibits provide abundant support for damages as to counts one, four, five and six of the complaint. The plaintiff has made a [CUTPA] claim in count ten for damages pursuant to [General Statutes] § 42-110b. The exhibits and testimony of the plaintiff do not indicate that she has satisfied the requirements pursuant to [General Statutes] § 42-110g (c) and thus the court does not award a judgment for the plaintiff on this count only. As to the remaining counts, the court awards judgment and damages after review of the exhibits admitted in support of the plaintiff's testimony. In particular, the plaintiff has supported her testimony with an exhibit prepared by her that identifies the funds taken by [Isaac] Halpert and the investment summary for purposes of the claims of breach of fiduciary duty, fraud, conversion and bad faith. As to the claim for compensatory damages for these counts, the evidence supports an award of compensatory damages in the amount $271, 250 and $95, 797.79 for the funds proven by the [plaintiff] as alleged in the conversion count. The court awards punitive damages as claimed in [the] complaint in the amount of $175, 000. The court awards attorney fees in the amount of $57, 337.50 on the counts for fraud and conversion, and costs in the amount of $1, 507.29. . . .

         ‘‘Based upon the above, judgment is entered in favor of the plaintiff in the amount of $367, 047.79 compensatory damages and punitive damages in the amount of $175, 000 as to counts four and five. The court awards attorney fees in the amount of $57, 337.50 and costs of $1, 507.29.'' (Footnotes added and omitted.)

         Thereafter, on May 10, 2016, the defendants filed a motion to open the judgment, to which the plaintiff filed an objection. The court held a hearing on the defendants' motion to open the judgment and the plaintiff's objection thereto, after which the court issued a written order, in which it denied the defendants' motion as follows: ‘‘The plaintiff has objected and the court noted specifically that in addition to the attempts by the plaintiff to contact [Attorney Rosenberg] when he failed to appear for a trial management conference and thereafter for the trial date which was requested by him, the defendant[s] had received notices by the court, the defendant Isaac Halpert had been served in hand with a subpoena to testify on January 28, 2016, when the matter was scheduled for a hearing and failed to come, and months have passed before the defendant[s] [sought] to open although notices were sent to [Attorney Rosenberg's] old office address as well as his old and new e-mail addresses and he failed to respond. Counsel for the plaintiff as well as this court made many attempts to keep the defendant[s] aware of the status of the action but the defendant[s] remained unresponsive.''

         This appeal followed. The defendants now raise several claims of error as to the court's judgment, as set forth herein, none of which were raised in their motion to open the judgment. ‘‘The denial of a motion to open is an appealable final judgment. . . . Although a motion to open can be filed within four months of a judgment . . . the filing of such a motion does not extend the appeal period for challenging the merits of the underlying judgment unless filed within the [twenty day period provided by Practice Book § 63-1]. . . . When a motion to open is filed more than twenty days after the judgment, the appeal from the denial of that motion can test only whether the trial court abused its discretion in failing to open the judgment and not the propriety of the merits of the underlying judgment. . . . This is so because otherwise the same issues that could have been resolved if timely raised would nevertheless be resolved, which would, in effect, extend the time to appeal. . . .

         ‘‘The principles that govern motions to open or set aside a civil judgment are well established. Within four months of the date of the original judgment, Practice Book [§ 17-4] vests discretion in the trial court to determine whether there is a good and compelling reason for its modification or vacation. . . .

         ‘‘Because opening a judgment is a matter of discretion, the trial court [is] not required to open the judgment to consider a claim not previously raised. The exercise of equitable authority is vested in the discretion of the trial court and is subject only to limited review on appeal. . . . We do not undertake a plenary review of the merits of a decision of the trial court to grant or to deny a motion to open a judgment. The only issue on appeal is whether the trial court has acted unreasonably and in clear abuse of its discretion. . . . In determining whether the trial court abused its discretion, this court must make every reasonable presumption in favor of its action.'' (Emphasis omitted; internal quotation marks omitted.) Sabrina C. v. Fortin, 176 Conn.App. 730, 746-47, 170 A.3d 100 (2017).

         In light of the foregoing principles, the defendants acknowledge that ‘‘[t]he merits of the underlying judgment are ordinarily not reviewable when a party appeals only the denial of a motion to open judgment.'' The defendants do not argue that the trial court abused its discretion in denying their motion to open the judgment. The defendants argue, rather, that the judgment should be opened because their claims of error either implicate the trial court's subject matter ...

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