BENISTAR EMPLOYER SERVICES TRUST COMPANY ET AL.
v.
JAMES J. BENINCASA ET AL.
Argued
December 10, 2018
Procedural
History
Application
to vacate an arbitration award, brought to the Superior Court
in the judicial district of Hartford, where the defendants
filed a motion to confirm the award; thereafter, the matter
was tried to the court, Noble, J.; judgment
denying the application to vacate and granting the motion to
confirm, from which the plaintiffs appealed to this court.
Affirmed.
Daniel
J. Krisch, with whom were Logan A. Car-ducci and, on the
brief, Daniel P. Scapellati, for the appellants (plaintiffs).
Mark
J. Kallenbach, pro hac vice, with whom was Jerome Patger, for
the appellees (defendants).
Lavine, Alvord and Prescott, Js.
OPINION
LAVINE, J.
The
plaintiffs, Benistar Employer Services Trust Company (BESTCO)
and Benistar Admin Services, Inc. (BASI), appeal from the
judgment of the trial court denying their application to
vacate and granting a motion to confirm an arbitration award
in favor of the defendants, James J. Benincasa and Jody L.
Benincasa. On appeal, the plaintiffs claim that the court
improperly denied the application to vacate the arbitration
award because the award was (1) not timely issued, (2)
predicated on a manifest disregard of the law, (3) not
mutual, final and definite, and (4) in violation of public
policy. We disagree and affirm the judgment of the trial
court.
The
following undisputed facts, as found by the trial court, and
procedural history are relevant to this appeal.
‘‘The dispute which brought the parties to
arbitration involved the purchase of two $16 million
individual whole life insurance policies on the lives of the
[defendants], who were the president and vice president,
respectively, and sole owners of [Mortgages Unlimited, Inc.
(MUI)], an S corporation. The policies were purchased by the
Benistar 419 Plan and Trust (plan), a multiple employer
welfare benefit plan. The funding for the purchase of the
policies came from MUI's participation in, and
contributions to, the plan. BESTCO was the plan sponsor, and
BASI was the administrator of the plan. The Plan was designed
to comply with Internal Revenue Code, 26 U.S.C. § 419A
(f) (6). In its conception, the plan was to provide tax
deductions to participating employers, such as MUI, for
contributions paid by them to the plan's trust fund. The
contributions, in turn, funded the premiums for preretirement
life insurance policies for key employees under the plan. The
Plan issued a certificate of coverage to the employer, MUI,
listing the participants as the [defendants], each of whom
was to receive $16 million in death benefits. In this case,
MUI contributed [$700, 000] annually to fund the policies
between 2001 and 2004, totaling $2.8 million. The
contributions to the plans were, in fact, claimed as tax
deductions by MUI.
‘‘In
2004, MUI transferred the benefits and life insurance
policies from the plan to the Grist Mill Trust Welfare
Benefit Plan out of concern that the plan would no longer
support tax free contributions to the life insurance
policies. Benistar 419 Plan Services, Inc., was the Grist
Mill [Trust Welfare Benefit] Plan's sponsor and
administrator. The [defendants], as participants, and MUI, as
employer, shortly thereafter, terminated their participation
in the Grist Mill Trust [Welfare Benefit Plan], and the
[defendants] took possession of the policies in their own
names. The [defendants] were charged $33, 546.90 for the
surrender of the policies.
‘‘The
Commissioner of Internal Revenue (commissioner) challenged
the validity of the tax deductions and ultimately issued the
[defendants] a notice of deficiency on their personal income
taxes on the basis that the contributions to the plan were
payments on their personal behalf and were not ordinary and
necessary business expenses of their employer, MUI, under 26
U.S.C. § 162 (a). The commissioner also asserted that
the distribution of the two life insurance policies resulted
in taxable income to the [defendants], which they failed to
report. In addition, the commissioner imposed underpayment
penalties pursuant to 26 U.S.C. § 6662A. . . .
‘‘The
[defendants] filed a claim for arbitration against the
[plaintiffs][1] on November 29, 2007, asserting, among
other theories of liability, breach of contract for their
failure to provide a tax exempt vehicle to purchase the life
insurance policies. The arbitration was sought in accordance
with identical provisions found in the plan Administration
Agreement and the Grist Mill Trust Welfare Benefit Plan
Administration Fee Agreement, which provided in relevant
part: ‘Any dispute or controversy arising under or in
connection with this Agreement or with respect to the
Employer's participation in the Plan shall be settled by
Arbitration, conducted by a single arbitrator in New York
City in accordance with the rules of the American Arbitration
Association [(AAA)] then in effect. . . .' The
[defendants] submitted, inter alia, breach of contract and
fiduciary duty claims to arbitration.
‘‘Evidence
in the arbitration was taken on March 5 and 6, 2013, [before
Arbitrator Jeffrey G. Stein]. The arbitrator's award
dated May 15, 2013, was transmitted to AAA on May 17, 2013.
The award recited a prearbitration request by the
[plaintiffs] to add a cross claim in the context of the
pending arbitration submittal, which Stein had denied on the
basis that the AAA rules required them to file a separate
arbitration and then consolidate the cases. Stein declared in
the award that ‘[o]n or about April 18, 2013 . . . the
record was closed.' Substantively, Stein made the
specific finding that the [plaintiffs] ‘breached their
promises and obligations to [the defendants] in numerous
ways.' Pertinently, this included a breach of the
[plaintiffs'] ‘contractual fiduciary duties [by]
failing to provide a compliant 26 U.S.C.§ 419A (f) (6)
plan and, most specifically, by not determining the maximum
amount of contributions that could be contributed. . . . [The
plaintiffs] . . . failed to provide a tax free transfer of
the policy out of the plan to the [defendants].' Stein
awarded the [defendants] the following damages: (1) taxes,
including 26 U.S.C. § 6662A taxes, as of the date of the
award attributable to ‘the transfer of the [life
insurance] polic[ies] as part of the exit strategy from the
failed Plan'; (2) ‘the $33, 546.90 transfer
fee' for the surrender of the policies; (3) the
attorney's fees for ‘the legal defense of the
[Internal Revenue Service (IRS)] assessment' . . . and
(4) any state taxes assessed for the transfer of the
policies. Because the amount of the federal and state taxes
and penalties had not yet been determined, and no findings as
to such were made by Stein, he retained jurisdiction to
interpret and resolve any disputes concerning the award. The
parties moved for clarification of the award. In the
clarification, Stein explained that the [defendants] had
‘not [yet] settled with the IRS and, therefore, there
[could be] no set amount of taxes and penalties that could be
awarded.' Stein observed that his award detailed
‘each component of the ultimate settlement [the
defendants] [would] reach with the IRS and which party is
responsible for that component. [Stein] believe[d] that [the
award was] specific and clear enough.' ''
(Footnotes added and omitted.) Additional facts will be set
forth as needed.
Before
reaching the plaintiffs' claims on appeal, we underscore
that the policy behind arbitration compels a deferential
standard of review of arbitration awards. ‘‘[T]he
law in this state takes a strongly affirmative view of
consensual arbitration. . . . Arbitration is a favored method
to prevent litigation, promote tranquility and expedite the
equitable settlement of disputes. . . . As a consequence of
our approval of arbitral proceedings, our courts generally
have deferred to the award that the arbitrator found to be
appropriate. . . . The scope of review for arbitration awards
is exceedingly narrow. . . . Additionally, every reasonable
inference is to be made in favor of the arbitral award and of
the arbitrator's decisions. . . .
‘‘Despite
the wide berth given to arbitrators and their powers of
dispute resolution, courts recognize three grounds for
vacating arbitration awards. . . . As a routine matter,
courts review de novo the question of whether any of those
exceptions apply to a given award. . . . The first ground for
vacating an award is when the arbitrator has ruled on the
constitutionality of a statute. . . . The second acknowledged
ground is when the award violates clear public policy. . . .
Those grounds for vacatur are denominated as common-law
grounds and are deemed to be independent sources of the power
of judicial review. . . . The third recognized ground for
vacating an arbitration award is that the award contravenes
one or more of the statutory proscriptions of . . . [General
Statutes] § 52-418. . . .
‘‘Where
the submission does not otherwise state, the arbitrators are
empowered to decide factual and legal questions and an award
cannot be vacated on the [ground] that . . . the
interpretation of the agreement by the arbitrators was
erroneous. Courts will not review the evidence nor, where the
submission is unrestricted, [2]will they review the
arbitrators' decision of the legal questions involved. .
. . In other words, [u]nder an unrestricted submission, the
arbitrators' decision is considered final and binding;
thus the courts will not review the evidence considered by
the arbitrators nor will they review the award for errors of
law or fact. . . . Furthermore, in applying this general rule
of deference to an arbitrator's award, [e]very reasonable
presumption and intendment will be made in favor of the
[arbitral] award and of the arbitrators' acts and
proceedings.'' (Citations omitted; footnote altered;
internal quotation marks omitted.) Board of Education
v. Local R1-126, National Assn. of Government
Employees, 108 Conn.App. 35, 39-41, 947 A.2d 371 (2008).
I
The
plaintiffs claim that the trial court improperly denied their
application to vacate the arbitration award because the award
was not timely issued. Specifically, the plaintiffs argue
that the award was not made within thirty days from the close
of the hearing and, thus, pursuant to General Statutes §
52-416 (a), the arbitration award has ‘‘no legal
effect.'' We disagree.
The
standard of review for statutory interpretation is well
settled. ‘‘When construing a statute, [o]ur
fundamental objective is to ascertain and give effect to the
apparent intent of the legislature. . . . In other words, we
seek to determine, in a reasoned manner, the meaning of the
statutory language as applied to the facts of [the] case,
including the question of whether the language actually does
apply. . . .
‘‘Moreover,
[t]his court will not reverse the factual findings of the
trial court unless they are clearly erroneous. . . . A
finding of fact is clearly erroneous when there is no
evidence in the record to support it . . . or when although
there is evidence to support it, the reviewing court on the
entire evidence is left with the definite and firm conviction
that a mistake has been committed. . . . In making this
determination, every reasonable presumption must be given in
favor of the trial court's ruling.'' (Citation
omitted; internal quotation marks ...