26 Conn. App. 749 | Conn. App. Ct. | 1992
The plaintiff in this contract action appeals from the trial court’s judgment in favor of the defendants Keith S. Mahler and Jane Z. Mahler.
The following uncontroverted facts are relevant to this appeal. The plaintiff brought this action to recover
In March, 1989, Edgecliffe transferred the lot to Jane Z. Mahler. Later, when Progress, through Keith S. Mahler, declined to make payment for the plaintiff’s services, this action was commenced. In its complaint, the plaintiff alleged breach of contract as to Progress and Edgecliffe, fraudulent conveyance as to Edgecliffe and Jane Z. Mahler, unjust enrichment as to Jane Z. Mahler, and intentional interference with contractual rights as to Keith S. Mahler. The complaint’s fifth count alleged that Edgecliffe’s transfer of the property to Jane Z. Mahler lacked adequate consideration and was made with the intent to defraud the plaintiff of its indebtedness. The defendants admitted this allegation in their answer, denying only that consideration was inadequate.
The trial court rendered judgment against Progress and Edgecliffe each in the amount of $9427.41 for breach of contract, and against Edgecliffe in the amount of $4125 as punitive damages. Judgment was rendered in favor of the Mahlers as to the counts against them. This appeal followed.
The plaintiff claims that Edgecliffe is the agent of Progress, that Keith S. Mahler intentionally refused to permit Progress and Edgecliffe to pay the plaintiff, and that Jane Z. Mahler is liable to the plaintiff on a theory of unjust enrichment and fraudulent conveyance.
When the factual basis of a trial court’s decision is challenged, it is this court’s function to “determine whether the facts set out in the memorandum of decision are supported by the evidence or whether, in light of the evidence and the pleadings in the whole record, those facts are clearly erroneous.” Pandolphe’s Auto Parts, Inc. v. Manchester, 181 Conn. 217, 221-22, 435 A.2d 24 (1980); State v. Milton, 26 Conn. App. 698, 705, 603 A.2d 750 (1992). We do not, however, retry the facts. Nor’easter Group, Inc. v. Colossale Concrete, Inc., 207 Conn. 468, 473, 542 A.2d 692 (1988); Plikus v. Plikus, 26 Conn. App. 174, 177, 599 A.2d 392 (1991).
In its memorandum of decision, the trial court stated that it did not find any evidence that Keith S. Mahler controlled Edgecliffe and Progress, or that he was responsible for the plaintiff’s being denied the sum it was due from Progress. The court also found no evidence that Jane Z. Mahler either knew or was aware that the transfer of property to her was for the purpose of defrauding the plaintiff. Our review of the record, however, discloses that the trial court improperly failed to find the following salient and uncontroverted facts. Keith S. Mahler controlled both Progress and Edgecliffe. To enable Jane Z. Mahler to obtain the funds to purchase the lot, Keith S. Mahler made a fraudulent affidavit in March, 1989, in which he stated that no improvements had been made to the property, when in fact he and his wife had paid Progress $258,548 for such improvements. Jane Z. Mahler gave a $352,000
The plaintiff next claims that the trial court improperly failed to find that the admission of intent to defraud, as contained in the defendants’ answer to paragraph eleven of the fifth count in the plaintiff’s complaint, is binding upon all the defendants, including Jane Z. Mahler.
An admission in a defendant’s answer to an allegation in a complaint is binding as a judicial admission. Franchi v. Farmholme, Inc., 191 Conn. 201, 214, 464 A.2d 35 (1983); Lutkus v. Kelly, 170 Conn. 252, 257, 365 A.2d 816 (1976); Bridgeport v. Stratford, 142 Conn. 634, 646, 116 A.2d 508 (1955). A party is bound by a judicial admission unless the court, in the exercise of its discretion, permits the admission to be withdrawn,
The plaintiff claims that the admission in the defendants’ answer to paragraph eleven is binding on Jane Z. Mahler and thus establishes that she intended to defraud the plaintiff of its indebtedness. In response, the defendants assert that paragraph eleven does not allege that Jane Z. Mahler took part in the fraud. They also contend she was not involved in the fraud because the trial court found that she had paid adequate consideration as part of the transaction.
Neither of the defendants’ arguments, however, has merit. First, paragraph eleven expressly names Jane Z. Mahler as a participant in the conveyance. Second, the defendants’ counsel conceded at oral argument, and the record clearly shows, that the trial court did not allow modification or withdrawal of the admission. Because it is settled law that an admission in an answer is binding on a defendant; Franchi v. Farmholme, Inc., supra; Lutkus v. Kelly, supra; Bridgeport v. Stratford, supra; we conclude that the trial court improperly failed to find that the admission of intent to defraud by Edgecliffe is binding on all the defendants, including Jane Z. Mahler, who therefore knew of the fraud and acquiesced in it.
Because all the defendants are bound by their admission of intent to defraud the plaintiff, the trial court also should have pierced the corporate veils of Progress and Edgecliffe to determine if Keith S. Mahler should bear any personal liability for his actions as a corporate officer. In its memorandum of decision, however, the trial court reasoned that piercing the corporate veil was improper because it did not find any evidence that Keith S. Mahler intended to defraud the plaintiff.
A court may pierce the corporate veil “ ‘ “only under exceptional circumstances, for example, where the corporation is a mere shell, serving no legitimate purpose, and used primarily as an intermediary to perpetuate fraud or promote injustice.” ’ ” SFA Folio Collections, Inc. v. Bannon, 217 Conn. 220, 230, 585 A.2d 666, cert. denied, U.S. , 111 S. Ct. 2839, 115 L. Ed. 2d 1008 (1991), quoting Angelo Tomasso, Inc. v. Armor Construction & Paving, Inc., supra, 557. The corporate veil will be pierced when “the corporate entity has been so controlled and dominated that justice requires liability to be imposed on the real actor.” Saphir v. Neustadt, 177 Conn. 191, 209, 413 A.2d 843 (1979); Falcone v. Night Watchman, Inc., supra.
Under Connecticut law, the corporate veil may be pierced under either the “instrumentality” or “identity” rules. Under the instrumentality rule, in any case but that of express agency, proof of three elements is
Under the “identity” rule, as stated in Zaist v. Olson, 154 Conn. 563, 576, 227 A.2d 562 (1967), the corporate veil may be pierced when the plaintiff shows “ ‘ “such a unity of interest and ownership that the independence of the corporation had in effect ceased or had never begun, [and that] an adherence to the fiction of separate identity would serve only to defeat justice and equity by permitting the economic entity to escape liability arising out of an operation conducted by one corporation for the benefit of the whole enterprise.” . . .’ ” (Citations omitted.) Falcone v. Night Watchman, Inc., supra, 221. A key factor in determining whether the corporate shield should be disregarded is the degree of control or influence exercised over the corporation by the individual sought to be held liable. Falcone v. Night Watchman, Inc., supra. The identity rule “primarily applies to prevent injustice in the situation where two corporate entities are, in reality, controlled as one enterprise because of the existence of common owners, officers, directors or shareholders and because of the lack of observance of corporate formalities between the two entities.” Angelo Tomasso, Inc. v. Armor Construction & Paving, Inc., supra, 560.
On the basis of our review of the record, we conclude that the trial court failed to make certain findings of fact that should have been made, and that it should have found the admission of intent to defraud in the defendants’ answer binding on all the defendants. The trial court also should have pierced the corporate veils of Progress and Edgecliffe. Because of the sparse record, however, which includes the parties’ briefs, we decline to reach the claims involving tortious interference and fraudulent conveyance. These claims are to be resolved at a hearing to be conducted by the trial court upon remand.
The judgment against Progress and Edgecliffe each in the amount of $9427.41 and against Edgecliffe in the amount of $4125 is affirmed. The judgment is reversed only with respect to Keith S. Mahler and Jane Z. Mahler and the case is remanded for further
In this opinion the other judges concurred.
Also named as defendants in the trial court were Progress Builders, Inc., and Edgecliffe Lawn Development Corporation. The judgment against these defendants is not at issue in this appeal.
Paragraph eleven in the fifth count of the complaint states: “On March 10, 1989, Edgecliffe Lawn Development Corp. transferred to the Defendant, Jane Z. Mahler, the real property described in Exhibit A, attached hereto, without adequate consideration and with the intent to prevent it from being taken by legal process and with the intent of thereby defrauding the Plaintiff and preventing it from securing payment of its indebtedness.”
The defendants’ answer to this allegation states: “As to paragraph 11 the Defendants admit all of the paragraph except ‘without adequate consideration’ which is hereby denied.”