Argued
April 15, 2019
Procedural
History
Action
to recover damages for, inter alia, breach of contract, and
for other relief, brought to the Superior Court in the
judicial district of Hartford, where the action was withdrawn
as to the defendant One Morningside Drive Partners, Limited
Partnership; thereafter, the court, Robaina,
J., granted the plaintiff's amended motion to
cite in POKO Management Corp. as a party defendant;
subsequently, the matter was tried to the court,
Elgo, J.; judgment in part for the
plaintiff, from which the defendants appealed to this court;
thereafter, the court, Elgo, J., issued a
rectification of its decision; subsequently, Pamela Olson, as
executrix of the estate of Kenneth M. Olson, was substituted
as a defendant. Affirmed.
Thomas
E. Katon, with whom, on the brief, was Adam D. Miller, for
the appellants (defendants).
Kirk
D. Tavtigian, Jr., with whom was George M. Purtill, for the
appellee (plaintiff).
DiPentima, C. J., and Keller and Olear, Js.
OPINION
DiPENTIMA, C. J.
The
defendants[1] POKO Partners, LLC, POKO Reservoir
Yaremich Developers, LLC, POKO Cape Loom Managers, LLC, One
Morningside Group, LLC, One Morningside Managers, LLC, One
Morningside Owners, LLC, Capehart Ventures, LLC, POKO
Management Corp., Richard K. Olson, and Pamela Olson, as
executrix of the estate of Kenneth M. Olson, [2] appeal from the
judgment of the trial court rendered in part in favor of the
plaintiff, Crosskey Architects, LLC. On appeal, the
defendants claim that the court (1) improperly pierced the
corporate veil, (2) improperly found that the plaintiff was
entitled to damages on the theory of quantum meruit and (3)
abused its discretion in awarding statutory prejudgment
interest pursuant to General Statutes §
37-3a[3] on the theory of quantum meruit. We affirm
the judgment of the trial court.
The
following facts, as found by the trial court, and procedural
history are relevant. The plaintiff is an architectural firm
owned by William Crosskey, a licensed architect. From 2006 to
2015, Crosskey had a business relationship with Kenneth Olson
and his brother, Richard Olson. The Olsons oversaw between
forty to sixty business entities established for the purpose
of commercial and residential real estate development. The
Olsons managed their business entities by having the
businesses owned by one limited liability company while being
managed and controlled by another. At the top of this
structure are POKO Partners, LLC, in which Kenneth Olson has
a 50 percent ownership interest, Richard Olson has a 40
percent ownership interest and Pamela Olson, Kenneth
Olson's wife, has a 10 percent interest; and POKO
Management Corp., in which Kenneth Olson has a 60 percent
ownership interest and Richard Olson has a 40 percent
ownership interest. Either Kenneth Olson or the Olsons
together own a majority interest in nearly all of the
defendant entities. The defendant entities owned by the
Olsons operate out of one office in Port Chester, New York.
All of the personnel working out of this office are paid by
either POKO Partners, LLC, or POKO Management Corp. The
Olsons' salaries are paid exclusively from POKO
Management Corp.
In the
thirteen count operative complaint, the plaintiff sought
damages for the unpaid work it had performed on four projects
of the Olsons: the POKO office project, the Reservoir
project, the Morningside Drive project and the Capehart
project. The plaintiff alleged breach of contract, quantum
meruit and unjust enrichment regarding each of the four
projects, and sought to pierce the corporate veil.
The
court described the plaintiff's work on the four projects
as follows. Kenneth Olson began communications with Crosskey
in 2008, regarding the POKO office project, which involved
renovating the office in Port Chester. Employees of the
plaintiff exchanged e-mails with Richard Olson and an
employee of POKO Partners, LLC, regarding the work requested.
The work requested was done and accepted at the hourly rates
that the plaintiff had charged since the beginning of the
plaintiff's business relationship with the Olsons. After
completing the work, Crosskey sent Kenneth Olson and POKO
Partners, LLC, invoices totaling $4690.24 as of October 15,
2008, but the plaintiff was not paid. Richard Olson explained
that the plaintiff was not paid because he and his brother
assumed that the plaintiff would write off the costs.
The
Reservoir project involved new construction, mixed-use
housing and commercial space development in the city of
Bridgeport. In September, 2006, Kenneth Olson solicited the
plaintiff's architectural services. Although the project
never went forward, the plaintiff performed work on the
project and submitted invoices. The plaintiff was never paid.
The
Morningside Drive project involved a group of small office
buildings owned by Kenneth Olson on One Morningside Drive in
Westport. The plaintiff provided architectural services in
connection with this project. POKO Management Corp. was the
property manager for One Morningside Drive, which was being
developed in order to sell to Newman's Own Real Estate,
LLC. Following the sale, POKO Management Corp. continued to
use the plaintiff's services for ongoing projects at One
Morningside Drive. There was an ongoing agreement in which
the plaintiff was solicited to provide architectural services
and the defendants would pay the plaintiff's hourly
rates. Crosskey sent unpaid invoices in the amount of $10,
480.10 to POKO Partners, LLC, and POKO Management Corp. One
Morningside Managers, LLC, was the managing entity of One
Morningside Group, LLC, in which Richard Olson and Kenneth
Olson each had a 37.5 percent interest, respectively, and the
remaining 25 percent was owned by employees of the defendant
entities. One Morningside Managers, LLC, was dissolved in
2014, after the buildings were sold to Newman's Own Real
Estate, LLC, for $5.8 million. At that time, One Morningside
Group, LLC, of which Kenneth Olson was an investor, netted
$1, 669, 702.51. In reliance on an agreement that he would be
paid, Crosskey continued to accept work from Kenneth Olson,
but he was not paid.
The
Capehart project concerned the development of an old mill
building in Norwich into apartment buildings. Kenneth Olson
signed a contract in which he was identified as the managing
member under the auspices of Capehart Ventures,
LLC.[4]
The Capehart project never came to fruition, and the court
noted that Kenneth Olson's deposition testimony revealed
that ‘‘close to a million and a half
dollars'' was lost on the project. (Internal
quotation marks omitted.) POKO Partners, LLC, the project
manager on this project, received $450, 000 in project
management fees. The plaintiff's outstanding bill for the
project totaled $31, 383.93, with late charges totaling $63,
775.71. The court noted that Kenneth Olson
‘‘rationalized his refusal to pay the plaintiff
for architectural services rendered for the Reservoir and
Capehart projects by claiming that the plaintiff was
‘on spec.' In other words, the plaintiff was
effectively working without compensation for [its] services
unless and until the projects were ultimately approved for
funding. There is, however, nocredible evidence that the
plaintiff or Crosskey agreed to this arrangement.''
The
court found in favor of the plaintiff on the first count of
the complaint alleging breach of contract as to the POKO
office project as against POKO Partners, LLC, and POKO
Management Corp. in the amount of $4690.24 plus interest; on
the fifth count of the complaint addressing the Reservoir
project and seeking quantum meruit as to POKO Partners, LLC,
POKO Management Corp. and POKO Reservoir Yaremich Developers,
LLC, in the amount of $23, 907.70 plus interest; on the
seventh count of the complaint, alleging breach of contract
as to the Morningside Drive project as against POKO Partners,
LLC, POKO Management Corp., One Morningside Group, LLC, and
One Morningside Managers, LLC, in the amount of $10, 480.09
plus interest; and on the tenth count of the complaint
alleging breach of contract as to the Capehart project as
against POKO Partners, LLC, Capehart Ventures, LLC, and POKO
Cape Loom Managers, LLC, [5] in the amount of $31, 383.93 plus
interest. The court also found that the plaintiff prevailed
on the thirteenth count of the complaint and pierced the
corporate veil, holding the Olsons personally liable for
damages awarded on each count found in favor of the
plaintiff. The court dismissed all other counts of the
complaint as moot. The court awarded prejudgment interest
pursuant to § 37-3a on all the damages. This appeal
followed. Additional facts will be set forth as necessary.
I
The
defendants claim that the court improperly pierced the
corporate veil and held the Olsons personally liable under
the identity rule.[6] They argue that the court (1) misapplied
the identity rule and (2) failed to properly consider whether
the defendant entities served a legitimate business purpose.
We are not persuaded.
We note
the following relevant law. ‘‘Whether the
circumstances of a particular case justify the piercing of
the corporate veil presents a question of fact. . . .
Accordingly, we defer to the trial court's decision to
pierce the corporate veil, as well as any subsidiary factual
findings, unless they are clearly erroneous. . . . A
court's determination is clearly erroneous only in cases
in which the record contains no evidence to support it, or in
cases in which there is evidence, but the reviewing court is
left with the definite and firm conviction that a mistake has
been made. . . .
‘‘Generally,
a corporation is a distinct legal entity and the stockholders
are not personally liable for the acts and obligations of the
corporation . . . . Courts will, however, 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.'' (Citations omitted; internal
quotation marks omitted.) Commissioner of Environmental
Protection v. State Five Industrial Park, Inc.,
304 Conn. 128, 138-39, 37 A.3d 724 (2012).
We
address the defendants' arguments in turn.
A
The
defendants argue that the court misapplied the identity rule.
They contend that the court improperly found that the
identity test was satisfied based solely on its finding that
the Olsons controlled the defendant entities. They argue that
control is not relevant to the identity test and concerns,
instead, the first prong of the instrumentality test. We are
not persuaded.
‘‘It
is well established that [t]he . . . determination of the
proper legal standard in any given case is a question of law
subject to our plenary review.'' (Internal quotation
marks omitted.) Mirjavadi v. Vakilzadeh,
310 Conn. 176, 183, 74 A.3d 1278 (2013).
‘‘When
determining whether piercing the corporate veil is proper,
our Supreme Court has endorsed two tests: the instrumentality
test and the identity test.''[7] (Internal quotation marks
omitted.) KLM Industries, Inc. v.Tylutki,
75 Conn.App. 27, 32, 815 A.2d 688, cert. denied, 263 Conn.
916, 821 A.2d 770 (2003). The instrumentality rule has three
prongs, the first of which requires ‘‘[c]ontrol,
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 . . .
.''[8] (Internal quotation marks omitted.)
Naples v.Keystone Building & Development
Corp., 295 Conn. 214, 232, 990 A.2d 326 (2010). To
pierce the corporate veil under the identity rule, the
plaintiff must show that ‘‘there was such a unity
of interest and ownership that the independence of the
corporations had in effect ceased or had never begun, an
adherence to the fiction of separate identity would serve
only to defeat justice and equity by permitting the economic
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