275 Conn. 671 | Conn. | 2005
Lead Opinion
Opinion
The plaintiff, Nancy Weinstein, appeals, following our grant of certification,
The record reveals the following facts and procedural history. After nearly seven years of marriage and the birth of one child, the plaintiff filed a complaint seeking to dissolve her marriage due to an irretrievable breakdown. At the time of the dissolution proceedings, the defendant owned a substantial minority interest in a small, privately held software company, Product Technologies, Inc. (Product Technologies).
On May 29, 1998, the defendant filed a motion for reconsideration of the financial orders in the dissolution judgment, claiming that complying with the existing orders would “strip him bare” and force him to sell premarital assets. While that motion was pending, on June 12, 1998, the defendant received a memorandum of understanding from ICL, Inc. (ICL), a company wdth which Product Technologies jointly had developed certain software.
On June 16, 1998, the dissolution court denied the defendant’s motion for reconsideration. In October, 1998, five months after the entry of the judgment of dissolution, the defendant and his partners sold Product Technologies to ICL for $6 million. As a result of the sale, the defendant received approximately $1.45 million for his interest in the company.
With respect to misrepresentation, the plaintiff asserted, inter aha, that the defendant would not have considered the $2.5 mihion offer, which would have yielded the defendant approximately $500,000, to be too low unless Product Technologies and his interest therein were worth far more than the $40,000 that he had represented in his financial affidavit. Finally, the plaintiff contended that there was a substantial likelihood that the outcome of a new trial would be different in light of the withheld and misrepresented information.
The trial court, Parker, J., denied the plaintiffs application for a rule to show cause, finding that the plaintiff had not proffered clear and convincing evidence that
The plaintiff filed a motion for reconsideration reasserting, inter alia, that the evidence reflected that the defendant had committed fraud because: (1) he received the sale offer before a final judgment had been rendered by virtue of the dissolution court’s denial of
The plaintiff thereafter appealed to the Appellate Court, which affirmed the trial court’s decision. Specifically, the Appellate Court concluded that the trial court properly could have credited the defendant’s testimony that the subject of the sale of Product Technologies to ICL was not broached until June 15, 1998. Weinstein v. Weinstein, supra, 79 Conn. App. 641, 644. It did not address the plaintiffs claim regarding the extension of the defendant’s continuing duty to disclose.
The plaintiff claims that she has satisfied her burden of proving that the defendant fraudulently had misrepresented his financial condition during the dissolution proceedings. Specifically, she asserts, inter alia,
I
STANDARD OF REVIEW AND GOVERNING PRECEDENT
Before addressing the merits of the plaintiffs claims, we set forth the standard for our review and the relevant legal principles. The party claiming fraud—in this case, the plaintiff—has the burden of proof. Aksomitas v. Aksomitas, 205 Conn. 93, 100, 529 A.2d 1314 (1987). Whether that burden has been met is a question of fact that will not be overturned unless it is clearly erroneous. Miller v. Guimaraes, 78 Conn. App. 760, 781, 829 A.2d 422 (2003). “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.”
“Our review of a court’s denial of a motion to open [based on fraud] is well settled. 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. ... In an appeal from a denial of a motion to open a judgment, our review is limited to the issue of 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. . . . The manner in which [this] discretion is exercised will not be disturbed so long as the court could reasonably conclude as it did. . . .
“Fraud consists in deception practiced in order to induce another to part with property or surrender some legal right, and which accomplishes the end designed. . . . The elements of a fraud action are: (1) a false representation was made as a statement of fact; (2) the statement was untrue and known to be so by its maker; (3) the statement was made with the intent of inducing reliance thereon; and (4) the other party relied on the statement to his detriment. ... A marital judgment based upon a stipulation may be opened if the stipulation, and thus the judgment, was obtained by fraud. ... A court’s determinations as to the elements of fraud are findings of fact that we will not disturb unless they are clearly erroneous. . . .
“There are three limitations on a court’s ability to grant relief from a dissolution judgment secured by fraud: (1) there must have been no laches or unreasonable delay by the injured party after the fraud was discovered; (2) there must be clear proof of the fraud; and (3) there is a substantial likelihood that the result of the new trial will be different.” (Citations omitted;
To determine whether there was proof of fraud, we consider the evidence through the lens of our well settled policy regarding full and frank disclosure in marital dissolution actions. “Our [rules of practice have] long required that at the time a dissolution of marriage, legal separation or annulment action is claimed for a hearing, the moving party shall file a sworn statement ... of current income, expenses, assets and liabilities, and pertinent records of employment, gross earnings, gross wages and all other income. . . . The opposing party is required to file a similar affidavit at least three days before the date of the hearing ....
“Our cases have uniformly emphasized the need for full and frank disclosure in that affidavit. A court is entitled to rely upon the truth and accuracy of sworn statements required by . . . the [rules of practice], and a misrepresentation of assets and income is a serious and intolerable dereliction on the part of the affiant which goes to the very heart of the judicial proceeding. . . . These sworn statements have great significance in domestic disputes in that they serve to facilitate the process and avoid the necessity of testimony in public by persons still married to each other regarding the circumstances of their formerly private existence. . . .
“Moreover, in Monroe v. Monroe, [177 Conn. 173, 182, 413 A.2d 819, appeal dismissed, 444 U.S. 801, 100 S. Ct. 20, 62 L. Ed. 2d 14 (1979)], we referred to the requirement of full and frank disclosure between attorney and marital client. [L]awyers who represent clients in matrimonial dissolutions have a special responsibility for full
“We have recognized, furthermore, in the context of an action based upon fraud, that the special relationship between fiduciary and beneficiary compels full disclosure by the fiduciary. . . . Although marital parties are not necessarily in the relationship of fiduciary to beneficiary, we believe that no less disclosure is required of such parties when they come to court seeking to terminate their marriage.
“Finally, the principle of full and frank disclosure . . . is essential to our strong policy that the private settlement of the financial affairs of estranged marital partners is a goal that courts should support rather than undermine. . . . That goal requires, in turn, that reasonable settlements have been knowingly agreed upon. . . . Our support of that goal will be effective only if we instill confidence in marital litigants that we require, as a concomitant of the settlement process, such full and frank disclosure from both sides, for then they will be more willing to [forgo] their combat and to settle their dispute privately, secure in the knowledge that they have all the essential information. . . . This principle will, in turn, decrease the need for extensive discovery, and will thereby help to preserve a greater measure of the often sorely tried marital assets for the support of all of the family members.” (Citations omitted; internal quotation marks omitted.) Billington v. Billington, 220 Conn. 212, 219-22, 595 A.2d 1377 (1991).
EVIDENCE OF FRAUD
A
Misrepresentation in the Defendant’s Financial Affidavit
We begin with the plaintiffs claim that the defendant committed fraud in his financial affidavit. In April, 1998, the defendant represented at the dissolution trial that Product Technologies was worth approximately $200,000. In his financial affidavit, the defendant repeatedly valued his interest in the company at $40,000. See footnote 3 of this opinion. Only two months later, on June 15,1998, the defendant received and rejected ICL’s $2.5 million purchase offer in part because he believed it was too low. A $2.5 million sale price for Product Technologies would have netted the defendant $500,000 for his interest alone. On June 17, the defendant authored a letter to ICL stating that their “low valuation of [Product Technologies]” was flawed because it failed to account for the intellectual property asset. At the hearing on the plaintiffs rule to show cause, the defendant was asked to explain what he meant in the June 17 letter:
“[The Plaintiffs Counsel]: [W]hat did you mean by the low valuation? That the $2.5 million was too low, is that what you meant?
“[The Defendant]: Yes.”
The only logical conclusion one could draw from the defendant’s stated belief that the $2.5 million offer was too low is that the defendant knew that Product Technologies and his interest therein were worth far more that he previously had represented in his financial affi
Even if we were to assume, arguendo, that the defendant’s valuation of Product Technologies during the dissolution trial included the worth of the intellectual property asset, his assessment that the $2.5 million offer was too low still equally serves as clear and convincing evidence that the valuation was a misrepresentation. If the defendant’s valuation of $200,000 for the company had been an accurate assessment that included the worth of the intellectual property asset, then he could not have believed that ICL’s $2.5 million valuation of the company was too low because it excluded the value of that asset.
In considering the defendant’s suggestion that ICL was willing to spend an added premium in order to avoid litigation over the intellectual property rights to the jointly developed software and to gain a competitive advantage in the market, one must ask how much of a premium the trial court reasonably could have assumed that ICL would have been willing to pay for something that supposedly was worth only $200,000. Let us assume, for example, that the trial court determined that as much as 50 percent of the $2.5 million offer could have been a premium that ICL was willing to pay simply to avoid the cost and stress of litigation. It defies reason, however, to think that anyone would spend $1.25 million just to avoid litigation over something worth only $200,000. It would be equally implausible to think that anyone would be willing to pay an additional $1.25 million on top of the litigation premium for something worth so little. Similarly, ICL would not be willing to spend any more money to gain a competitive advantage in the market than it believed that it could make in the market once it had the intellectual property asset.
B
Nondisclosure as Further Misrepresentation
Although we already have concluded that the evidence proffered by the plaintiff regarding the defendant’s valuation in his financial affidavit was sufficient to establish that the defendant had misrepresented his financial worth intentionally to deceive the plaintiff, we feel compelled to address the plaintiffs nondisclosure claim, as it further illuminates the defendant’s continuing pattern of fraudulent conduct. The plaintiff contends that the defendant’s duty to disclose pertinent financial information extended until the trial court rendered its decision on the defendant’s motion for reconsideration of the dissolution judgment on June 16,1998, and that the defendant, therefore, should have disclosed his knowledge of ICL’s intent to purchase Product Technologies, notice of which he received on June 12, 1998, and ICL’s $2.5 million offer, which was received on June 15, 1998.
At the outset, we note that the trial court predicated its conclusion on the assumption that the defendant’s continuing duty to disclose pertinent financial information expired at the close of the dissolution trial on April 17, 1998, rather than when judgment was rendered. “Whether the [defendant] had a duty to disclose is a question of law and, thus, our review [of the trial court’s conclusion] is plenary.” Miller v. Guimaraes, supra, 78 Conn. App. 776, citing Macomber v. Travelers Property & Casualty Corp., 261 Conn. 620, 635-36, 804 A.2d 180 (2002). We conclude that the trial court’s assumption was incorrect as a matter of law.
Practice Book § 13-15 imposes a continuing duty, during trial, to correct or supplement discovery responses.
In the present case, however, because the defendant filed a motion for reconsideration, the judgment ultimately did not become final until the dissolution court acted on his motion. We have recognized in an analogous context that the filing of a motion for reconsideration should be treated as suspending the finality of judgment when the effect of a ruling on the motion can affect the substantive rights of the parties.
At oral argument before the dissolution court on his motion for reconsideration, the defendant contended that complying with the financial orders under the dissolution judgment would “strip him bare” and force him to sell premarital assets. Three days earlier, however, the defendant had received express notice of ICL’s intent to purchase Product Technologies, and, on the day of the hearing on his motion, the defendant received the $2.5 million purchase offer. Indeed, the defendant must have known that he bore a duty to disclose this information because such a duty is inherent in the nature of the request he made before the court in his motion for reconsideration. “Common sense is not to be left at the courthouse door.” Meehan v. Meehan, 40 Conn. App. 107, 113, 669 A.2d 616, cert. denied, 236
C
Detrimental Reliance
It is undisputed that the plaintiff relied on the valuation in the defendant’s affidavit when she agreed to
Ill
SUBSTANTIAL LIKELIHOOD OF DIFFERENT OUTCOME
Finally, we turn to the issue of whether the plaintiff failed to proffer clear- proof that there is a substantial
In its memorandum of decision, the trial court noted that the key questions involved in this inquiry were whether the plaintiff would have: (1) agreed to the $40,000 valuation of the defendant’s interest in Product Technologies; (2) presented evidence that the value of the defendant’s interest was greater than $40,000; and (3) been able to convince the trial court that the value was significantly greater than $40,000. We agree with the trial court’s summary of the proof needed, but we disagree with its conclusion that the plaintiff failed to meet this burden.
We first note that, had the dissolution court known of the defendant’s misrepresentation in his financial affidavit, it clearly would have viewed the defendant’s credibility, and therefore his testimony, with far greater skepticism. Furthermore, in light of Product Technologies’ drastically higher value than that attested to by the defendant, as evidenced by ICL’s $2.5 million offer, we are left with the definite and firm conviction that the trial court should have concluded that there existed a substantial likelihood that the dissolution court would have made a different distribution of assets in the plaintiffs favor, either in the form of a direct payment or in shares of the defendant’s company. The plaintiff need not prove what remedy the dissolution court would have adopted; just that the outcome likely would have differed.
We farther conclude that, if the sale offer properly had been disclosed, it is substantially likely that the dissolution court would have granted, rather than denied, the defendant’s motion for reconsideration of
In sum, it was undisputed that Product Technologies was developed during the parties’ marriage, that marital assets were invested in the company and that the defendant’s interest in Product Technologies was a marital asset. Thus, had the dissolution court been aware that this asset was worth significantly more than the defendant had represented, it is substantially likely that the court ultimately would have entered a different award with respect to the division of the parties’ assets. See Kinderman v. Kinderman, 19 Conn. App. 534, 538, 562 A.2d 1151 (“[w]e have no trouble concluding that the $132,000 difference in valuation [of the marital residence] in this case is sizeable”), cert. denied, 212 Conn. 817, 565 A.2d 535 (1989); Cuneo v. Cuneo, 12 Conn. App. 702, 710, 533 A.2d 1226 (1989) (holding that increase in value of marital residence from $40,000 to $60,000 was sizable difference). Accordingly, we conclude that, had the trial court reached this issue, it would have been compelled to conclude that the plaintiff proffered clear proof of a substantial likelihood that the outcome of a new trial would yield a different result. See Jackson v. Jackson, supra, 2 Conn. App. 195 (“[considering all of the statutory criteria for distribution of assets and for alimony in a dissolution action; General Statutes § § 46b-81, 46b-82; we conclude that it is highly likely that a new trial, with all of the cards on the table, will produce a different result”).
The judgment of the Appellate Court is reversed and the case is remanded to that court with direction to reverse the judgment of the trial court and to remand the case to that court with direction to grant the motion to open the judgment of dissolution and for further proceedings according to law.
In this opinion BORDEN and NORCOTT, Js., concurred.
We granted the plaintiffs petition for certification to appeal limited to the following issue: “Did the Appellate Court properly affirm the trial court’s denial of the plaintiffs motion to open this marital dissolution judgment on the basis of fraud?” Weinstein v. Weinstein, 266 Conn. 933, 837 A.2d 807 (2003).
Product Technologies manufactured financial software for Smart Card systems. Smart Cards are reusable plastic cards to which the user can add value, similar to credit cards that have a computer chip inside. Product Technologies produced the “turnkey” software that is used in Smart Cards using uniquely designed source codes. Thus, in addition to its profits from the manufacture and sale of the turnkey software, Product Technologies owned an intellectual property asset in the source codes.
The defendant submitted a total of five affidavits to the dissolution court on: February 3,1997; March 3, 1997; September 10, 1997; April 15,1998; and April 17, 1998. A subsequent affidavit was faxed to the plaintiff on August 17, 1998. Each of the affidavits, with the exception of the ones produced on April 15, 1998, and August 17, 1998, valued the defendant’s interest in Product Technologies at $40,000. The April 15, 1998 affidavit valued the defendant’s interest at $14,000, and the August 17, 1998 affidavit listed the value as unknown.
Although Product Technologies and ICL had operated at one time as friendly partners, the relationship soured sometime between 1997 and 1998. Between March and June, 1998, the companies were threatening each other with litigation over the intellectual property rights to the software.
Although the application to open the judgment was filed more than four months from the date of dissolution; see Practice Book § 17-4 (a); a trial court has Inherent power to determine if fraud exists. Kenworthy v. Kenworthy, 180 Conn. 129, 131, 429 A.2d 837 (1980).
The dissent suggests that, because the Appellate Court failed to address the plaintiffs claim regarding the defendant’s continuing duty to disclose, we should presume that it did so because the plaintiff had failed to plead or to preserve the claim in the trial court. We note, however, that because the defendant objected to her raising this claim for this very reason, the Appellate Court likely would have relied on the defendant’s objection as its reason for not reaching the claim. Instead, the Appellate Court’s opinion is silent on the issue. That opinion similarly is silent with respect to the plaintiffs claims stemming from the valuation in the defendant’s affidavit despite the fact that the dissent agrees that the “gravamen” of the plaintiffs claims stemmed from that affidavit. Thus, rather than presume that the Appellate Court’s failure to address the plaintiffs continuing duty to disclose claim necessarily implies that it agreed with the defendant that the plaintiff failed to plead and to preserve the claim, an argument that we reject; see footnote 8 of this opinion; it is more reasonable to conclude that the Appellate Court simply overlooked that claim.
The plaintiff also has raised numerous other claims, including that the defendant: (1) fraudulently failed to disclose a material financial document, a private placement memorandum, that further evidenced the fraud in his financial affidavit; and (2) fraudulently concealed negotiations with ICL regarding the acquisition of Product Technologies that took place during the dissolution trial. Because our resolution of the plaintiffs claims regarding the $2.5 million offer is dispositive, we need not address these claims.
The defendant claims that we should not review the plaintiffs claim that he committed fraud in his financial affidavit by valuing his interest in Product Technologies at $40,000 because the plaintiff has raised that issue for the first time on appeal to this court. The defendant contends that the plaintiffs sole focus in the trial court and in the Appellate Court was on the issue of whether the defendant had committed fraud by failing to disclose the October, 1998 sale. We disagree. The plaintiff raised the issue of fraud in the defendant’s affidavit in her rule to show cause application by referencing the $40,000 value therein and claiming that the defendant had misrepresented the worth of his business. See Beaudoin v. Town Oil Co., 207 Conn. 575, 587-88, 542 A.2d 1124 (1988) (“[t]he modem trend, which is followed in Connecticut, is to construe pleadings broadly and realistically, rather than narrowly and technically” [internal quotation marte omitted]). The plaintiff also raised this claim in her memorandum of law filed in support of her rule to show cause application and asserted the claim at the hearing on her rule to show cause. Moreover, because the defendant failed to object in the lower courts to any of the plaintiffs claims stemming from the $40,000 valuation, he necessarily has waived the right to object to those claims before this court. See DiLieto v. Better Homes Insulation Co., 16 Conn. App. 100, 104-105, 546 A.2d 957 (1988). For all of the foregoing reasons, we reject the defendant’s claim.
The defendant also contends, and the dissent concludes, that we should not address the plaintiffs claim regarding the extension of the continuing duty to disclose because the plaintiff did not plead this claim with specificity in her rule to show cause application and failed to preserve this claim at trial. These contentions are without merit. With respect to the pleadings, the plaintiff framed her rule to show cause application broadly enough to encompass this claim by asserting that the defendant improperly had failed to disclose an offer to purchase his business that he received during the “prolonged pendency” of the marriage dissolution proceedings. We will not penalize the plaintiff for not pleading, to the letter, claims that could not have been flushed out fully at the pleadings stage because they are based in part on information, such as the defendant’s receipt and rejection of the $2.5 million offer on June 15,1998, that, because of the defendant’s conduct, she could not possibly have uncovered prior to discovery. Indeed, it is understandable that the plaintiffs pleadings focused primarily on the ultimate acquisition of Product Technologies for $6 million because that was all she knew about when she filed her rule to show cause application. Still, the plaintiff framed her rule to show cause broadly enough to encompass
With respect to the preservation of her claim, at trial the plaintiff elicited evidence from the defendant in support of this claim and reasserted that claim in her closing argument, in her brief, and again in her motion for reconsideration of the trial court’s decision. Specifically, in the facts section of her brief to the trial court, the plaintiff provided a time line of events. Three of those events included: the defendant’s receipt of the $2.5 million offer on June 15, 1998; the defendant’s argument that same day before the trial court on his motion for reconsideration of the dissolution judgment, claiming that the property settlement in the judgment would “strip him bare”; and the defendant’s rejection two days later of the $2.5 million offer because it was too low. In the argument section of her brief, the plaintiff again referenced these three events and underscored the defendant’s failure to disclose the $2.5 million offer. The plaintiff then stated with respect to these, as well as other actions by the defendant: “All of the foregoing representations by [the defendant] regarding his assets were known by [him] to be untrue. Moreover, these false representations were made in order to induce [the plaintiff] and the court to rely and act upon them, and both [the plaintiff] and the court did rely and act upon them.” (Emphasis added.) Finally, the defendant hardly can contend that he was ambushed by the plaintiffs claim because in his closing argument in the trial court he acknowledged its presence in her brief and defended against that claim, raising the same arguments that he raises in his brief to this court. In addition to the excerpts in the transcript cited by the dissent, at closing, the defendant’s counsel stated: “We filed a motion for reconsideration. If [the defendant] had thought ICL was going to come along and offer him a lot of money or any money, he would not have a filed a motion for reconsideration. It would have been ridiculous. And the fact that that motion was denied again strongly pushes that the date that we need to look at back to the time of the trial . . . .” When these remarks are read in concert with the remarks quoted by the dissent, it becomes clear that the defendant’s counsel had recognized the nature of the plaintiffs claim and simply was arguing that the duty to disclose should not extend beyond the date of the trial.
In concluding that the plaintiff failed to plead and preserve this claim, the dissent assigns considerable weight to the fact that the trial court asked the plaintiff at the hearing if she would agree that, in order to prevail, she
The dissent points to the defendant’s statement at trial, in response to a question unrelated to his rejection of the $2.5 million offer, that he doubted tire sincerity of the offer and believed it could be a ploy on ICL’s part to gain access to Product Technologies’ intellectual property secrets through due diligence review as evidence of another reason that the defendant could have rejected the offer. We find it difficult to conclude that the trial court reasonably could have credited this testimony. Two weeks after rejecting ICL’s $2.5 million offer, ostensibly in part because of their concern about ICL’s intent to use the due diligence review to obtain intellectual property secrets with no binding obligation to purchase the company, the defendant and William Mangino, Jr., the founder and a co-owner of Product Technologies, signed a nonbinding memorandum of understanding with ICL that subjected Product Technologies to the same due diligence review. In other words, the same risk existed, and the only substantive difference between the $2.5 million offer that the defendant rejected and the $6 million offer that the defendant accepted two weeks later was the higher price. Moreover, even if we were to assume, arguendo, that the trial court properly could have credited the defendant’s statement regarding the sincerity of the offer as an alternate explanation for his rejecting it, it could not conclude that this was the sole reason for reject ing it as it is undisputed that the defendant testified that he believed that $2.5 million was too low a price if it included the intellectual property asset. In other words, the presence of evidence in the record that could suggest that this is not the sole reason that the defendant rejected the offer is irrelevant to our conclusion regarding the correlation between the defendant’s admission that he thought the offer was too low and his valuation of the company during the dissolution Irial. To be clear, our conclusion that the defendant knew that Product Technologies was worth more than he represented in his financial affidavit is not predicated simply on the fact that the defendant ultimately rejected the offer, as suggested by the dissent, but rather, it is founded on the defendant’s admission that he did so because he believed the offer was too low.
We accept, therefore, the defendant’s uncontradicted testimony that Product Technologies had a minimal book value, but we reconcile that 1 estimony with the other evidence, namely, the defendant’s rejection of ICL’s $2.5 million offer, by concluding that the book value logically could not have included the company’s intellectual property asset. The dissent, however, concludes that the book value was the actual value of all of Product Technologies’ assets without reconciling that conclusion with the defendant’s rejection of the $2.5 million offer as too low.
The dissent suggests that because Pia was an expert in valuing businesses, he should have either independently assessed the worth of the intellectual property asset or asked more questions concerning its worth. The defendant, however, was best equipped to value that asset because he created it and knew its worth better than anyone else involved in the marriage dissolution proceedings. Additionally, Pia’s valuation necessarily was limited by the information disclosed by the defendant. The defendant’s duty to disclose fully and frankly required more than merely alluding to the fact that Product Technologies owned source codes; similarly, that duty was not met by his providing to Pia reams of documents in which information was buried that might have alerted Pia as to the asset’s worth. See Jackson v. Jackson, 2 Conn. App. 179, 191, 478 A.2d 1026 (concluding that trial court’s finding that plaintiff had not committed fraud in failing to disclose stock split to defendant because defendant easily could have ascertained number and value of plaintiffs shares from information in footnote in plaintiffs affidavit was clearly erroneous because it was not “a reasonable conclusion from the evidence unless the attorney examining the affidavit [had] been alerted to what he should look for”), cert. denied, 194 Conn. 805, 482 A.2d 710 (1984).
In order to comply with the requirement of full and frank disclosure, the defendant should have disclosed the fact that the company owned this asset and offered an accurate assessment of the asset’s worth. See id., 190-91. To the extent that the defendant believed that Pia should discount the worth of the intellectual property asset because of the dispute with ICL over the rights to it, it was incumbent upon the defendant to explain that to Pia, rather than exclude altogether the worth of the asset from his valuation and his disclosures to the plaintiff. The dissent essentially makes a due diligence argument, namely, that the plaintiff and her expert did not dig deep enough to uncover the true worth of something the defendant had a duty to fully and frankly disclose. In Bittington, however, we removed the due diligence inquiry from the fraud analysis in marital actions because “the requirement of diligence in discovering fraud is inconsistent with the requirement of full disclosure because it imposes on the innocent irqured party the duty to discover that which the wrongdoer already is legally obligated to disclose.” Billington v. Billington, supra, 220 Conn. 220.
There is no question that the defendant believed that Product Technologies owned a valuable intellectual property asset, namely, the source codes for their Smart Card technology. See footnote 2 of this opinion. Indeed, the potential marketability of this asset formed the basis of a venture capital effort launched prior to the sale by the defendant and Mangino as a part of their plan to grow the company rapidly. Not surprisingly, the only document that evidenced the asset’s potential, namely, the private placement memorandum on which the dissent relies, was withheld from the plaintiff during discovery. Although the dissent affords considerable weight to the defendant’s stock sale to Mangino in January, 1997, this sale occurred eleven months before issuance of the first placement memorandum, a document clearly evidencing the defendant’s belief that Product Technologies owned a valuable intellectual property asset and his strategy for developing that asset’s potential, a strategy that may not have existed eleven months earlier. We further note that, although the dissent questions the inferences the majority has drawn from the defendant’s conduct only one month after the judgment of dissolution, it nevertheless finds it reasonable to draw an inference from the defendant’s conduct eighteen months prior to the dissolution.
Although the dissent suggests that Pia’s valuation of Product Technologies and the defendant’s interest therein also could serve as an independent appraisal of the company, the dissent fails to recognize that Pia’s valuation could not have been accurate in the absence of information essential to reaching a proper valuation, namely, the worth of the intellectual property asset. See footnote 12 of this opinion. The dissent’s contention that this assertion is unsupported by the record is without merit. At the hearing on the motion to open, Pia testified that he had asked the defendant “very specifically” how he intended to go about growing Product Technologies. According to Pia, the defendant’s sole response was that the company was trying to obtain bank financing. Pia expressly stated that “[n]othing else was described at that point in time.” As previously noted; see footnote 12 of this opinion; under the holding in Jackson v. Jackson, supra, 2 Conn. App. 191, the fact that something might have been buried in the mass of documents that the defendant provided to Pia is insufficient to meet the defendant’s disclosure obligations. The defendant had a duty to indicate clearly the value of the intellectual property asset. Kather than comply with this duty, the defendant failed to mention the asset and its potential for the company when Pia asked about his plans to grow the company and similarly failed to disclose the only document that evidenced the asset’s potential and the defendant’s efforts to grow the company by marketing the worth of this asset. See footnote 13 of this opinion.
At the hearing on the plaintiff’s rule to show cause, the defendant testified that there were certain events that occurred between April and June of 1998 that, in his opinion, significantly increased the value of Product Technologies. These events included a contract signed by one of their clients with “the largest credit card issuer in the world” that put Product Technologies’ Smart Cards under that company’s name with a Mastercard logo on them, and a 50 percent increase in the number of employees. Although the defendant initially claimed that he believed that these events only made Product Technologies' appear to be a successful company, when pressed further by the plaintiff, he later stated that he thought that these events
We note that the Connecticut Chapter of the American Academy of Matrimonial Lawyers filed an amicus brief in support of the plaintiff’s appeal and took the position that the Appellate Court and the trial court improperly failed to focus on whether the defendant’s $40,000 valuation was reasonable in light of ICL’s offer and ultimate purchase of Product Technologies indicating a significantly greater value.
The trial court found that “[t]he evidence is clear that ICL had not proposed, or even broached, an acquisition until June 15,1998.” That finding was clearly erroneous in light of the memorandum of understanding from ICL. The defendant contends that the trial court was entitled to believe the testimony of Mangino that the offer on June 15, 1998, came “[o]ut of the blue” and had not been contemplated by Product Technologies until that
Practice Book § 13-15 provides: “If, subsequent to compliance with any request or order for discovery and prior to or during trial, a party discovers additional or new material or information previously requested and ordered subject to discovery or inspection or discovers that the prior compliance was totally or partially incorrect or, though correct when made, is no longer true and the circumstances are such that a failure to amend the compliance is in substance a knowing concealment, that party shall promptly notify the other party, or the other party’s attorney, and file and serve in accordance with Sections 10-12 through 10-17 a supplemental or corrected compliance.”
In one of her interrogatories to the defendant, the plaintiff asked: “Has [Product Technologies] been approached, or any contacts made by any
Although the dissent concedes that the proper date to value the parties’ assets is the date of the dissolution, in this case May 12, 1998, it fails to address the defendant’s testimony that he believed that the value of Product Technologies began increasing significantly prior to this date due to certain key events that he similarly failed to disclose to the plaintiff or to the dissolution court. See footnote 15 of this opinion.
In Killingly v. Connecticut Siting Council, 220 Conn. 516, 525-27, 600 A.2d 752 (1991), we addressed the question of whether the filing of a motion for reconsideration of an agency’s decision rendered the original judgment nonfinal until the decision on the motion for reconsideration was issued. In doing so, we expressed our approval of the rule followed by the federal courts, under which the agency retains jurisdiction, and thus a decision is not final, while the motion for reconsideration is pending. Id., 526. We declined to adopt a bright line rule, however, that would preclude the trial court from retaining jurisdiction over an administrative appeal that was filed within the original appeal period, but before the motion for reconsidera
The dissent’s basis for criticizing our reliance on Killingly is unavailing. Although we stated in that case that a motion for reconsideration suspends the finality of the judgment when the ruling of the motion would “have redetermined the rights of the parties”; id., 521; the dissent contends that, because our holding was based on the importance of final judgments in the agency context, it is inapplicable in the marital dissolution setting. We fail to see the distinction. The importance of obtaining a final judgment when the lower ruling body is an agency applies with equal force when the lower ruling body is a trial court. “[T]he relevant considerations in determining finality are whether the process of . . . decisionmaking has reached a stage where [appellate] review will not disrupt the orderly process of abdication and whether rights or obligations have been determined or legal consequences will flow from the [earlier] action.” Id.
This rale neither suggests nor allows for the finality of judgments to be extended indefinitely as the dissent suggests. A party only has twenty days from the date of judgment in which to file a motion for reconsideration.
The defendant contends that it would be unreasonable to require disclosure of an offer received only one day before the court rendered its decision. We disagree, particularly in light of the fact that the defendant knew three days prior to the June 15, 1998 meeting of ICL’s intention to purchase ProductTechnologies. To acceptthe defendant’s contention would be wholly inconsistent with the considerations we outlined in Bittington. Pull and frank disclosure means precisely that—full and frank disclosure.
The dissent’s suggestion that the plaintiff did not rely on the defendant’s affidavit is contradicted by the record. Pia clearly stated that he had agreed to settle on a value of $40,000 in part because it was the value the defendant had placed on his interest in his affidavit. Moreover, Pia’s valuation is not the issue in this case. Rather, the issue is whether the defendant failed to comply with his duty to fully, frankly, and truthfully disclose the worth of his interest in his affidavit.
Indeed, because General Statutes § 51-183b allows a court to file its decision within 120 days of the date of the close of evidence, the appropriate question in a case like the present one is whether the trial court should be able to assume that it will be notified of any significant change in financial circumstances as soon as it occurs.
In fact, both the trial court and the defendant recognized that, in filing his motion for reconsideration, the defendant necessarily invited the court to reexamine his financial situation. In his closing argument, the defendant’s counsel stated: “We filed a motion for reconsideration. If [the defendant]
As one family law treatise explains: “The trend [in valuing marital assets] appears to be moving away from mandating a specific date for valuation and toward a flexible approach where the court has discretion to assign the date of valuation .... Even in jurisdictions that require or prefer that valuation be assigned as of a particular date, circumstances may require flexibility. If an asset at issue is one that is highly susceptible to fluctuations in value, authority should be located and arguments prepared to support utilization by the court of a valuation date most beneficial to the client.” 2 A. Rutkin, Family Law and Practice (2005) § 13.04 [1] [b], p. 13-67. The valuation of a closely held business can be very difficult and numerous
At the outset, we note that, according to Pia, it was he, and not the defendant, who had suggested the “tail” provision. Pia testified that the only reason he brought it up was because he had asked the defendant if he would be willing to consider it if the parties entered into a settlement agreement. We further note that the obvious answer to the dissent’s query of why the defendant would have considered offering the plaintiff a “tail” if he knew that Product Technologies was worth millions is that he clearly had colored that offer by representing to the plaintiff that Product Technologies had virtually no future and no sale or investment prospects. Pia testified that he did not think the defendant’s offer was an attractive one based on the circumstances that the defendant had disclosed to him at that time. Pia also testified that he had been given no reason to believe that there was going to be a sale of Product Technologies any time in the near future. These are precisely the kind of representations that the defendant had a continuing duty to correct during the pendency of the dissolution proceedings, and, if the defendant had complied with that duty, then there is a substantial likelihood that the plaintiff would have reconsidered whether to accept the tail provision.
Finally, the dissent harkens that, as a result of this opinion, there will be mass confusion among the family bench and bar and far more dissatisfied marital litigants. We disagree. The result of this case essentially is no different than any other reversal of judgment in a dissolution action requiring a new trial, affording the trial court enormous discretion, as to valuation and division of the marital assets and other attendant financial orders. Furthermore, the result in this case places responsibility where it belongs, on the party who wrongfully withheld information, not on the matrimonial bar otherwise likely to face malpractice complaints that would result from the dissent’s allocation of blame. See Grayson v. Wofsey, Rosen, Kweskin & Kuriansky, 231 Conn. 168, 174-77, 646 A.2d 195 (1994) (upholding liability of wife’s trial counsel following Appellate Court’s judgment afiirming decision by trial court denying her motion to open dissolution judgment based on husband’s fraudulent affidavit).
Dissenting Opinion
joins, dissenting. The majority today reverses the judgment of the Appellate Court and concludes that the plaintiff, Nancy Weinstein, has proved by clear and convincing evidence that the defendant, Luke A. Weinstein, had
I begin this dissent in part I with an expanded rendition of the facts in order to place the majority opinion in its proper light and to set the backdrop for my analysis. In part II, I turn my attention to the majority’s holding that the defendant committed fraud in his affidavit. I first conclude that the plaintiff has not proved by clear and convincing evidence that the defendant did not include what he perceived to be the worth of the software in his $40,000 estimate. I then review the trial court’s finding that the defendant’s characterization of the $2.5 million offer as too low had no correlation to his knowledge of the company’s worth during the dissolution proceedings. Unlike the majority, I conclude that the court’s finding is amply supported by the evidence. I explain that the majority, in rejecting this specific finding and the trial court’s overall finding that the defendant did not fraudulently misrepresent the worth of his interest, departs from the deferential standard
In part III, I review the majority’s reasoning with respect to the plaintiffs second claim, namely, that the defendant’s nondisclosure of the $2.5 million offer constituted fraud in its own right. I begin in part III A with a review of the majority’s conclusion that the defendant was obligated to inform the plaintiff of that offer because his duty to disclose continued until June 16, 1998, the date on which the dissolution court denied the defendant’s motion for reconsideration of its financial orders. I reject the majority’s new continuing disclosure rule because, in my opinion, it finds no support in the law and it directly contravenes the provisions of Practice Book § 13-15. Because the rules of practice expressly provide that a party’s duty to disclose continues only through the conclusion of the trial; see Practice Book § 13-15; and the majority does not have the authority to modify that rule, I would hold that the defendant had no duty to disclose the offer. I note in part III B, however, that, even if the majority’s new continuing disclosure rule could somehow be deemed valid, the defendant’s failure to conform to it cannot support a finding of fraud because he could not possibly have known of its existence in light of the fact that it was first announced today. Finally, in part III C, I briefly review the defendant’s alternative grounds for affirming the judgment of the Appellate Court because, in my view, they illustrate just how grossly unfair the majority opinion is to the defendant, the trial court and the Appel
I
The Facts
I begin my restatement of the facts with some background information about Product Technologies. Prior to its acquisition by ICL on October 1, 1998, Product Technologies was a small entrepreneurial business
Because Product Technologies was severely under-capitalized, the shareholders decided “to try and grow the company as rapidly as possible, and either succeed quickly or die quickly.” In order to pursue that strategy, the defendant and Mangino determined that they needed at least $5 million in new capital “to survive . . . .” In May, 1997, the company prepared its first private placement memorandum in an attempt to raise that capital from private investors.
The placement memorandum characterized the market for Smart Card products in 1997 as one involving “an increasing number of market entrants who have developed or are developing a wide variety of products.” Despite the uncertainty in that market, the memo
The memorandum further revealed that Product Technologies’ chief competitors were “subsidiaries of multinational companies and independent firms with established [S]mart [C]ard businesses who have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources . . . .” These competitors included, among others, American Express, International Business Machines or IBM, MasterCard International, Schlumberger Limited and Visa International. With respect to Product Technologies’ finances, the memorandum disclosed that, in 1996, the company reported net income of $266,544. As of December 31, 1996, the company’s working capital was $195,773, and stockholder’s equity totaled $252,319.
In January, 1997, the defendant sold slightly less than one half of his shares to Mangino. In return, the defendant received $5000 and a $ 1000 increase in his monthly salary. Fourteen months later, in March, 1998, Product Technologies issued a revised placement memorandum that incorporated the company’s financial results for 1997. During that year, working capital declined from a positive balance of $195,773 to a deficit of $58,152, while net income was only $18,673 for the entire year. As of December 31, 1997, stockholders’ equity totaled
Product Technologies’ future was rendered even more tenuous in the spring of 1998, when ICL, which had partnered with Product Technologies to develop certain components of the SmartCity software, claimed that it owned the intellectual property rights to that software. On March 25,1998, ICL terminated the parties’ software licensing agreement and announced that it was “coming” to the United States
During the dissolution proceedings, Kenneth J. Pia, Jr., the plaintiffs financial expert, independently appraised the value of Product Technologies and the defendant’s 19.4 percent interest therein. At the hearing
On May 12, 1998, the court, Higgins, J., dissolved the marriage of the plaintiff and the defendant and issued financial orders in connection with the dissolution. The court ordered the defendant to pay to the plaintiff a property settlement of $100,000, alimony in the amount of $1000 per month and child support in the amount stipulated to by the parties. The judgment also provided that the defendant would retain his interest in Product Technologies and the plaintiff would retain her interest in a real estate partnership that was formed by her family.
On May 26, 1998, the defendant filed a motion for reconsideration in which he alleged that the aforementioned financial orders were inconsistent with the court’s intentions, as expressed during the dissolution proceedings, namely, that the court was going to allow
On June 12, 1998, while the motion for reconsideration was pending, Product Technologies received an unsigned memorandum of understanding from ICL. Although ICL expressed its intent to purchase all of the outstanding stock of Product Technologies, the memorandum contained no purchase price or other financial terms. The memorandum did, however, include the following clause: “Statements of intent or understandings in this [memorandum] shall not be deemed to constitute any offer, acceptance or legally binding agreement and do not create any rights or obligations for or on the part of any party to this [memorandum].” (Emphasis added.) The memorandum further provided that ICL would have an opportunity to perfoim a due diligence review of the business and financial condition of Product Technologies prior to its agreement to purchase the company. The defendant and his business partners did not respond to the memorandum.
On June 15, 1998, the dissolution court heard oral arguments from the parties without the presence of the defendant, regarding his motion for reconsideration of the court’s financial orders. On that same day, Mangino and the defendant attended a meeting with representatives from ICL at which those representatives made an
On the next day, June 16, 1998, two events occurred. First, the dissolution court denied the defendant’s motion for reconsideration. Second, Mangino and the defendant received a letter from Alan P. Wain, ICL’s vice president and general counsel, in which Wain maintained that the intellectual property rights to the SmartCity software were “held and shared equally by the parties.” Although Wain expressed ICL’s hope that an acquisition would still occur, he also articulated ICL’s expectations and intentions if it did not. In particu
On June 17, 1998, the defendant wrote a letter to Wain on behalf of Product Technologies. In that letter, the defendant stated that Wain’s position that ICL owned equal rights to the SmartCity software was flawed. That was so, the defendant wrote, because Product Technologies solely had developed many enhancements to SmartCity that fell outside of the purview of the parties’ agreement. The defendant further wrote that Product Technologies “would vigorously protect its rights under [the agreement] and would seek to recover damages [that Product Technologies] incurs as a result of any claim against it. ” Finally, the defendant closed the letter with the following passage: “[Product Technologies] management clearly understood at the meetings on [June 15, 1998] that your position on [the intellectual property rights] is a major factor in the low valuation of [Product Technologies], If this position is seriously flawed, then so is the valuation.”
Thereafter, additional discussions between Product Technologies and ICL ensued and, on July 1, 1998, the parties signed a nonbinding memorandum of understanding setting forth ICL’s intent to acquire Product Technologies for $6 million, subject to a favorable due diligence review. On October 1,1998, the parties signed an acquisition agreement and the sale was consummated. ICL’s decision to acquire the company was precipitated by its desire to develop a Smart Card business, its view that the SmartCity software would fit optimally with its overall Smart Card strategy and its eagerness to resolve the dispute over the ownership of the intellec
II
Fraud in the Defendant’s Financial Affidavit
The majority’s conclusion that the defendant committed fraud in his financial affidavit rests on two alternate grounds. First, according to the majority, the $40,000 estimate that the defendant assigned to his business interest did not include the worth of the software that Product Technologies owned and, therefore, it was a “blatant and deliberate misrepresentation.” Second, the majority posits that, even if the defendant did include the worth of the software in his $40,000 estimate, the statement that he made in his June 17, 1998 letter to Wain, namely, that the $2.5 million offer was too low, is equally convincing proof that he knew his shares in Product Technologies were worth far more than $40,000 on April 17, 1998. In so holding, the majority rejects the trial court’s determination that the plaintiff did not prove by clear and convincing evidence that the defendant fraudulently had misrepresented the worth of his interest, and concludes that it is left with the “definite and firm conviction” that the trial court made a mistake. (Internal quotation marks omitted.)
Before I analyze the majority’s reasoning as itpertains to the plaintiffs first claim, I set forth the highly deferential standard that long has guided our review of a trial court’s factual findings. It is well settled that “[w]e will overturn ... a finding of fact only if it is clearly erroneous in light of the evidence in the whole record.” (Emphasis added; internal quotation marks omitted.) In re Eden F., 250 Conn. 674, 705, 741 A.2d 873 (1999). A court’s factual finding “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 convic
My analysis will reveal that the maj ority violates virtually every one of the foregoing principles. First, the majority affords no weight to the trial court’s findings and makes no presumption in their favor. Second, the majority does not review the evidence of the record as a whole but, rather, confines its review to selected pieces of evidence and draws inferences therefrom that are undermined by other evidence in the record. Finally, the majority essentially adopts the plaintiffs speculative inferences and substitutes them for the contrary and well supported findings of the trial court.
A
Exclusion of the Worth of the Software from the $40,000 Estimate
The plaintiff first contends, and the maj ority agrees, that she has proved by clear and convincing evidence that the defendant did not include the worth of the software in the $40,000 estimate contained in his affidavit. The majority concludes that this misrepresentation
The majority’s determination that the defendant’s affidavit did not include the worth of the software rests entirely on the defendant’s testimony that his $40,000 estimate was based on the “book value” of Product Technologies. It is from this isolated statement that the majority concludes that the financial affidavit contained a “blatant and deliberate misrepresentation.” I note, however, that the defendant did not explain what he thought “book value” meant but simply stated that $40,000 was a “guesstimate” of what he would receive “if [Product Technologies] got distributed and broken up at the time.” The plaintiffs counsel did not ask the defendant to explain the term “book value,” nor did she ask him to articulate the specific assets and liabilities that formed the basis of his estimate. Most importantly, the plaintiffs counsel did not ask the defendant whether his estimate included what he perceived to be the worth of the SmartCity software on April 17, 1998. Thus, the plaintiffs claim and the majority’s determination are premised exclusively on the unproven assumption that the defendant defined “book value” in a manner consistent with the exclusion of intangible assets such as intellectual property rights. That assumption is flawed.
The placement memorandum that Product Technologies issued in March, 1998, shows that the actual book value of the entire company was only $25,031, which
The majority’s determination also is undermined by the valuation performed by Pia, the plaintiffs expert. Pia explained that he performed a comprehensive analysis of the value of Product Technologies and arrived at a value for the defendant’s shares that was comparable to the $40,000 estimate that the defendant had reported. Surely Pia, who has evaluated or appraised more than 300 companies in a broad range of industries, would have included the worth of the software in his
Finally, I note that the defendant, and presumably Pia, reasonably could have concluded that the software did not have substantial value in April, 1998, even though Product Technologies had expended more than $1 million in development costs. At the hearing on the plaintiffs motion to open, the defendant testified that:
When the evidence is viewed as a whole, it is clear that the plaintiff has not proved by clear and convincing evidence that the defendant did not include the worth of the software in his affidavit. Moreover, the plaintiffs claim should be rejected for another reason, namely, because the plaintiff offered no evidence that the purported omission was made with the intent to deceive. The majority nevertheless seems to believe that the plaintiff does not need to do so. Implicit in the majority’s analysis is the notion that Billing ton allows us to infer fraud automatically whenever a party to a dissolution proceeding makes a misrepresentation or omission. Because that assumption pervades the majority opinion, I pause for a moment to discuss Billinglon.
The primary issue in Billinglon was “whether a party to a marital dissolution judgment must establish, in order subsequently to open the judgment based upon a claim of fraud, that she was diligent during the original action in attempting to discover this fraud.” Billinglon v. Billington, supra, 220 Conn. 214. In answering that
As Billington makes clear, one of these remaining limitations is that “[t]here must be clear proof of the perjury or fraud,” (Emphasis added; internal quotation marks omitted.) Id., 218. Thus, unlike the majority, I do not read Billington to stand for the proposition that fraud should be inferred automatically, thereby relieving a plaintiff of his or her burden of proof, whenever a party makes a misrepresentation or omission concerning financial assets.
B
Assessment of $2.5 Million Offer as “Too Low”
I now consider the majority’s second ground on which it concludes that the defendant committed fraud in his affidavit, namely, that, even if the defendant did include the value of the software in his $40,000 estimate, his assessment of ICL’s $2.5 million offer as too low also constitutes clear and convincing proof of fraud. The majority posits that, “[i]f the defendant’s valuation
The defendant’s so-called assessment of the $2.5 million offer traces its origin to his June 17, 1998 letter to Wain. As I noted previously, the defendant wrote that letter on behalf of Product Technologies in response to Wain’s threat of litigation on the previous day. In that letter, the defendant asserted that ICL did not possess equal ownership of the software rights, as Wain contended, because Product Technologies had made many enhancements to the software that fell outside of the purview of the parties’ agreement. He also asserted that Product Technologies would vigorously protect its rights under the agreement and would seek to recover damages if ICL asserted a legal claim. Finally, the defendant wrote: “[Product Technologies] Management clearly understood at the meetings on [June 15, 1998] that your position on [intellectual property rights] is a major factor in the low valuation of [Product Technologies]. If this position is seriously flawed, then so is the valuation.” It is this latter passage that forms the basis of the majority’s determination that the defendant committed fraud.
At the hearing on the motion to open, the defendant explained what he meant by his final statements to Wain. He testified that ICL was willing to pay $2.5 mil
When I view the defendant’s letter to Wain in conjunction with his testimony, I do not believe that it provides any insight into the defendant’s state of mind during the dissolution proceedings. Indeed, I read the final passage in that letter simply to be an aggressive negotiating tactic that was made in the heat of a contentious dispute with ICL. I also find the defendant’s letter, when read in conjunction with Wain’s letter, to be highly probative of the defendant’s representation that he and Mangino believed that ICL was intent on gaining access to the software codes so that ICL could emerge as a competitor. I certainly would not consider it to be a thoughtful and deliberative “assessment” of the worth of Product Technologies in light of the context in which it was made. Thus, I would afford a presumption in favor of the trial court’s finding and hold that the trial court correctly found no correlation between the defendant’s assessment of the $2.5 million offer on June 17, 1998, and his knowledge of the company’s value during the dissolution proceedings.
I note, moreover, that the majority fails to consider other evidence in the record that undermines its conclusion and supports the trial court’s overall finding that the plaintiff has not proved by clear and convincing
Second, the defendant told Pia, during their interview, that he would be willing to agree to a “tail,” meaning that the plaintiff could retain an ownership interest in a certain percentage of the defendant’s shares of Product Technologies for up to two years. Although the “tail” would have allowed the plaintiff to share in any gain that the company might have realized if it prospered or was acquired by another company, it also would have required her to assume the risk that she would receive nothing from this asset if Product Technologies was unsuccessful. Pia explained that he did not consider the “tail” option to be particularly attractive at that time. Although the majority acknowledges, in part III of its opinion, that the defendant agreed to offer the plaintiff a “tail,” it focuses on the grounds on which she supposedly declined that offer, which, in my view, simply do not matter. What does matter is the fact that the defendant actually agreed to make the
Third, in January, 1997, the defendant sold slightly less than one half of his shares to Mangino in exchange for a reduced work schedule so that he could spend more time with his daughter. The price was $5000, plus a $1000 increase in his monthly salary.
The majority also contends that “the huge disparity between the value that the defendant placed on Product Technologies in April, 1998, and the value that ICL placed on the company just two months later compels the conclusion [that] the defendant knew the company and his interest therein were worth more during the dissolution trial.” (Emphasis in original.) I disagree. Even if ICL initially valued Product Technologies at $2.5 million on June 15, 1998, and subsequently raised its price to $6 million, that does not compel the conclusion that the company was worth that much during the dissolution proceedings. More importantly, however, even if I assumed that the company was worth millions of dollars during the dissolution proceedings, the plaintiff has not offered any credible evidence that the defendant had any reason to know it, nor does the majority cite any in its opinion. Rather, the majority simply imputes ICL’s perceived worth of Product Technologies
If I were to rely on a third party’s appraisal to ascertain whether the defendant could reasonably have thought his interest in Product Technologies was worth only $40,000 during the dissolution proceedings, I would look to Pia’s valuation, which the majority completely ignores.
Pia also collected documents from the defendant and others that substantially filled a trunk and nine notebook binders. He relied on these data along with information that he had obtained from his interview with the defendant in utilizing three different valuation methods. Pia’s analysis revealed that the defendant’s shares in Product Technologies were worth between $35,000 and $68,000 at the time of the dissolution proceedings, and he fixed his appraisal at $40,000. In my view, if Pia believed that the company was worth only $40,000 in April, 1998, then so, too, could the defendant. I also find it significant that Pia did not testify at the hearing on the motion to open whether, in retrospect, he would have performed his appraisal differently in light of his newfound knowledge of the $2.5 million offer and the subsequent $6 million sale. Nor did the plaintiffs counsel ask him that question. That omission is telling in its own right.
In sum, the plaintiff’s claim, as well as the majority’s analysis of it, is based entirely on hindsight and gross speculation. The plaintiff has not offered any credible evidence, much less clear and convincing evidence, that the defendant knew or even should have known that his interest in Product Technologies was worth more than $40,000 in April, 1998. I therefore would sustain the trial court’s conclusion that the plaintiff had not met her burden of proving that the defendant had fraud
Ill
Nondisclosure of the $2.5 Million Offer as Fraud
I now turn to the majority’s second ground for reversal, namely, that the defendant’s failure to disclose the $2.5 million offer constituted fraud in its own right. In reaching that conclusion, the majority reasons that: (1) the defendant’s duty to disclose information affecting his finances continued until June 16, 1998, the date on which the dissolution court denied his motion for reconsideration; (2) the defendant therefore should have disclosed the $2.5 million offer that Product Technologies had received from ICL on June 15, 1998; and (3) his failure to make that disclosure automatically constituted fraud.
A
Duty to Disclose
I first consider the majority’s new continuing disclosure rule, which rests on three interrelated propositions. First, the duty to disclose necessarily must continue until the date of dissolution because, in Sunbury v. Sunbury, 216 Conn. 673, 676, 583 A.2d 636 (1990), we held that the date of dissolution is the proper time to value the marital assets. Second, our decision in Billington essentially mandates that we further extend the duty to disclose until the judgment is final. See Billington v. Billington, supra, 220 Conn. 217-18, 222. Third, the rule of Killingly v. Connecticut Siting Council, 220 Conn. 516, 526, 600 A.2d 752 (1991), extends that duty even further because, in Killingly, we determined that a motion for reconsideration suspends the finality of a judgment until the court acts on that motion. The majority applies these three principles to the facts of the present case and holds that the
First, Sunbury had absolutely nothing to do with a party’s duty to disclose changes to his or her financial status during a marital dissolution proceeding. Rather, the issue in Sunbury was whether the marital estate should be valued as of the date of dissolution or the date of the subsequent hearing that was conducted following our remand of the case to the trial court. See Sunbury v. Sunbury, supra, 216 Conn. 674-75. In concluding that it was the date of dissolution, we relied on General Statutes § 46b-81 (a)
Nor did we address in Billington the date on which a party’s duty to disclose terminates. As I explained previously, we considered whether a party in a marital dissolution action must prove that he or she was diligent in uncovering the other party’s fraud during the dissolution proceedings “in order subsequently to open the judgment based upon a claim of fraud . . . .” Billington v. Billington, supra, 220 Conn. 214. In answering that question in the negative, we recognized the need for full and frank disclosure in marital actions; id., 219-22; but did not state that the duty to disclose continued until the judgment was final. I note, however, that, even if Billington could be read to stand for that proposition, the judgment in this case was final on May 12, 1998, the date on which the court entered the divorce decree and issued its financial orders. At that point, there is no question that the parties’ marriage was dis
The defendant’s filing of a motion for reconsideration did not affect the finality of the dissolution judgment, and, contrary to the majority’s assertion, Killingly v. Connecticut Siting Council, supra, 220 Conn. 516, does not alter that conclusion. In Killingly, we explained that the filing of a motion for a rehearing before an administrative agency may preclude a party from appealing that decision to the Superior Court while the motion for a rehearing is pending. Id., 523-24, 526. Even if I were to assume that the defendant’s filing of a motion for reconsideration in this case also delayed his ability to file an appeal, I nonetheless would conclude that such a delay has no bearing on the issue in this case.
It is important to remember that this case involves the valuation of a marital asset, specifically, the defendant’s 19.4 percent interest in Product Technologies. In Sun-bury, we made it clear that marital assets should be valued as of the dissolution date. Sunbury v. Sunbury, supra, 216 Conn. 676. Integral to the Sunbury rule is the notion that the valuation will take into account events that bear on the value of assets up until the dissolution date but will exclude those that occur thereafter. See id. In other words, because Sunbury fixes the valuation date of marital property as the date of dissolution, events that occur thereafter are irrelevant with respect to a motion for reconsideration. Indeed, if the rule were otherwise, there never would be an end to litigation between estranged marital partners. I note, furthermore, that a motion for reconsideration does not present a dissatisfied litigant with the opportunity to try to force a revaluation and reallocation of the marital assets simply because subsequent events reveal that an asset has a higher value than that which it was assigned on the dissolution date. Rather, a motion for reconsideration is merely a request that the court reconsider its
I also note that the majority’s new continuing disclosure rule violates Practice Book § 13-15, which provides in relevant part: “If, subsequent to compliance with any request or order for discovery and prior to or during trial, a party discovers additional or new material or information previously requested and ordered subject to discovery or inspection or discovers that the prior compliance was totally or partially incorrect or, though correct when made, is no longer true and the circumstances are such that a failure to amend the compliance is in substance a knowing concealment, that party shall promptly notify the other party, or the other party’s attorney, and file and serve ... a supplemental or corrected compliance.” (Emphasis added.) Thus, under the express provisions of Practice Book § 13-15, a party’s continuing duty to disclose information that affects the financial information reported in his or her affidavit terminates at the conclusion of the trial. I assume, without deciding, that the term “trial” could be construed to extend to the date on which the court renders its judgment, which, in the present case, was May 12,1998. Such a reading would be compatible with Sunbury because the parties’ duty to disclose would terminate on the same date that the assets are valued.
Unlike the majority, I would reject the new continuing disclosure rule advocated by the plaintiff because it violates our precedent and the rules of practice. I simply would hold that Practice Book § 13-15 governs the defendant’s duty to disclose in this case. Because that provision makes clear that such a duty terminates at the conclusion of the dissolution trial, and because Product Technologies received ICL’s $2.5 million offer after the trial had concluded, the defendant had no duty to disclose it.
B
The Majority’s Finding of Fraud
Even if the majority’s new continuing disclosure rule can somehow be deemed valid, the defendant’s failure to conform to it cannot possibly support a finding of fraud. In order for the defendant to have committed fraud by virtue of his failure to disclose the $2.5 million offer, he must have known that he had a duty to disclose it. I certainly did not know before today that the defendant had such a duty and, therefore, I cannot imagine how the defendant, a nonlawyer, possibly could have possessed that knowledge. Even if the defendant was clairvoyant, that does not relieve the plaintiff of her burden of proving that his failure to disclose ICL’s offer
The majority nonetheless ignores this evidentiary void and determines that the defendant committed fraud because he “must have known that he bore a duty to disclose this information because such a duty is inherent in the nature of the request [that] he made before the court in his motion for reconsideration.” (Emphasis in original.) That is so, the majority informs us, because the defendant’s situation “is akin to the defendant going before the court and asking it to reduce his child support obligations because he was unemployed and could barely support himself, while concealing the fact that he had a lucrative job offer . . . .” This argument misses the mark because the majority fails to recognize that there is a fundamental distinction between a motion for modification of child support or alimony and a motion for reconsideration, namely, that a party’s changed financial circumstances are relevant to the former but not the latter. That is because a motion for reconsideration is merely a request that the court reconsider its original ruling on the basis of the evidence that was before it when that ruling was made. See Opoku v. Grant, supra, 63 Conn. App. 692-93. It does not involve the presentation of new evidence. See id. Thus, contrary to the majority’s assertion, Product Technologies’ receipt and rejection of the $2.5 million offer on June 15,1998, was not “directly pertinent and material” to the defendant’s motion for reconsideration as it per
The majority nevertheless asserts that the plaintiff indeed was harmed because, if the defendant had “timely disclosed the $2.5 million offer . . . the plaintiff would have been well within the four month period during which the plaintiff would have been permitted to file a motion to open the judgment, subject only to review as to whether the court acted unreasonably or in clear abuse of its discretion.” In other words, the plaintiff would not have been “saddled” with proving fraud. In response to that argument, I note the following. First, the majority assumes that the plaintiffs motion to open would have been granted automatically if it had been filed within the four month window. I disagree with that assumption. A motion to open, like a motion for reconsideration, is not an opportunity for a dissatisfied litigant to get a second bite at the apple by seeking a revaluation and reallocation of the assets due to post-dissolution events. Because the $2.5 million offer was a postdissolution event, I believe that the plaintiff would have needed to prove that the defendant intentionally had misrepresented the value of his interest in Product
C
Defendant’s Alternative Grounds for Affirmance
Finally, I note that the defendant urges us to affirm the judgment of the Appellate Court on two alternative grounds, namely, that the plaintiff failed: (1) to preserve her claim pertaining to the defendant’s continuing duty to disclose the $2.5 million offer; and (2) to raise that claim in her motion to open. The majority rejects both grounds, concluding that they lack merit. I disagree and, therefore, briefly discuss them because, in my
In the plaintiffs motion to open, she essentially claimed that the defendant knew that the $40,000 value reported in his affidavit was false because Product Technologies and ICL were engaged in sales negotiations or discussions during the dissolutionproceedings and he failed to disclose that information to the plaintiff, thereby inducing her to rely on the value that he had reported in his affidavit.
The plaintiff focused principally on the actual sale of Product Technologies as evidence of fraud at the hearing on her motion to open. The plaintiffs counsel also elicited testimony from the defendant concerning
During closing argument at the hearing on the motion to open, the court asked the plaintiffs counsel whether she thought that the defendant’s duty to disclose extended beyond the conclusion of the evidentiary portion of the dissolution trial on April 17, 1998. She responded that, in her view, the defendant’s duty to disclose extended to June 16, 1998, the date on which the court denied the defendant’s motion for reconsideration. During closing argument, counsel for the defendant briefly commented that she was unaware of any legal authority that would support the assertion of the plaintiffs counsel that the defendant’s duty to disclose extended beyond April 17, 1998.
The trial court denied the plaintiffs motion to open and issued a thirty-nine page decision in support of its findings and conclusions. The court found that, “as of the time of [the dissolution] trial, April 16 and 17, 1998, there was no sale pending, no offer to purchase had been made, and ... no negotiations or discussions regarding [the] sale of the business had taken place.” The plaintiff therefore could not prevail on her fraud claim asserted in her motion to open. The court also found that Product Technologies’ rejection of the $2.5 million offer as too low did not support an inference that the defendant knew that the company was worth that amount or more during the dissolution proceedings. The court did not address the belated assertion of the plaintiffs counsel that the defendant’s duty to disclose extended beyond the conclusion of the dissolution trial.
The plaintiff appealed from the trial court’s denial of her motion to open to the Appellate Court, which affirmed the trial court’s ruling in all respects. Weinstein v. Weinstein, 79 Conn. App. 638, 649, 830 A.2d 1134 (2003). Like the trial court, the Appellate Court did not consider the plaintiffs continuing duty to disclose the claim even though the plaintiff fully briefed it on appeal to the Appellate Court. When the plaintiff asserted that claim on appeal to this court, the defendant responded with two alternative grounds for affirmance. First he argued that the plaintiff did not preserve that claim at trial. Second, he argued that the plaintiffs counsel conceded that she did not plead it. Although I believe that both alternative grounds have merit, I focus my attention on the first ground advanced by the defendant.
“We have stated repeatedly that we ordinarily will not review an issue that has not been properly raised
In the present case, the plaintiff did not brief her claim to the trial court. Although she alleged that the defendant rejected the $2.5 million offer as too low, she did not present any legal argument in support of her claim that the defendant had a continuing duty to disclose that offer. Nor did she distinctly raise that claim at any time during the proceedings on the motion to open. Rather, as I noted previously, she merely alluded to that claim during closing argument, in response to questions by the court. It is clear that this brief reference by the plaintiffs counsel to the claim that the plaintiff now seeks to advance on appeal does not satisfy the requirement that a claim be distinctly raised at trial before closing argument. Practice Book § 5-2; see Swerdloff v. AEG Design/Build, Inc., 209 Conn. 185, 188, 550 A.2d 306 (1988) (“a claim ‘briefly suggested’ is not ‘distinctly raised’ ”). Indeed, the fact that the trial court did not address this claim in its
The majority disagrees and contends that the defendant was not “ambushed” by the plaintiffs continuing duty to disclose claim because counsel for the defendant “defended against that claim in his closing argument, raising the same arguments against it that [the defendant] raises in his brief to this court.” Footnote 9 of the majority opinion. That is wrong for two reasons. First, the plaintiffs counsel’s brief reference to this claim in her closing argument followed the evidentiary portion of the trial. The defendant therefore did not have an opportunity to present factual evidence in defense of that claim because he had no notice of it. Second, the majority’s assertion cannot be squared with
Finally, I find the majority opinion to be confusing because of the absence of any direction to the trial court on remand. The majority rejects the trial court and Appellate Court decisions on separate grounds, each of which appears to establish a different date for valuing the marital assets. The first ground is that the defendant committed fraud in his affidavit. Presumably, the date of revaluation on remand under this theory is May 12,1998, the date of dissolution. The second ground of fraud, however, is predicated on the defendant’s failure to disclose the $2.5 million offer pursuant to the majority’s new continuing disclosure rule. Under this theory, the assets must be revalued as of June 16, 1998, the date on which the dissolution court denied the defendant’s motion for reconsideration and on which the defendant’s duty to disclose finally terminated. Otherwise, there would be no purpose for the majority’s new rule. The question then becomes: What is the trial court to do?
That inquiry is not insignificant because the trial court’s choice of a valuation date could vary the disposition of this case greatly. That is so because the value of a business at any point in time depends on then-existing market conditions. On May 12,1998, there was only one possible buyer for Product Technologies,
Despite that fact, the majoiity does not even acknowledge that the two theories underlying its opinion give rise to different valuation dates. Rather, the majority simply offers us two insights. First, it states that “[t]he trend [in valuing marital assets] appears to be moving away from mandating a specific date for valuation and toward a flexible approach [under which] the court has discretion to assign the date of valuation . . . .” (Internal quotation marks omitted.) Footnote 26 of the majority opinion, quoting 2 A. Rutkin, Family Law and Practice (2005) § 13.04 [1], p. 13-67.1 refer the majority to General Statutes § 46b-81 (a); see footnote 17 of this opinion; and our interpretation of that statute in Sunbury v. Sunbury, supra, 216 Conn. 676, both of which make crystal clear that marital assets should be valued as of the dissolution date. If this state is to move to a “flexible approach” pursuant to which courts can select the valuation date, that is a decision for the legislature, not this court. Second, the majority suggests that I am overreacting because trial courts wrestle with these types of issues all the time. See footnote 28 of the majority opinion. In response, I simply note that, in my view, it is unacceptable for this court to issue an
In closing, I note that the majority is able to reach its decision today only by systematically disregarding the amply supported facts found by the trial court, the strictures of our rules of practice, our well settled law regarding proof of fraud and our long-standing rule that we do not allow plaintiffs to advance claims on appeal that have not been fairly raised or preserved at trial. The majority’s actions, in my view, are unwarranted even under the guise of “doing justice,” which is the only motivation that I can charitably attribute to the majority opinion. The unfortunate irony is that it fails to accomplish even that goal.
For all of the foregoing reasons, I dissent.
The defendant testified at the dissolution trial that Product Technologies had ten full-time employees and one part-time employee.
See footnote 2 of the majority opinion for a description of “Smart Cards” and the particular software that Product Technologies developed in connection therewith.
As of December 31, 1997, the company had outstanding liabilities of $484,232, while assets totaled only S490,960.
The placement, memorandum stated that ICL “is a $4.5 billion majority owned subsidiary of Fujitsu Limited of Japan . . . [and] is a major player in the European financial services marketplace.”
Throughout this opinion, I refer to ICL’s $2.5 million preliminary sales price as an “offer.” I note, however, that the June 12, 1998 memorandum of understanding makes clear that the establishment of a preliminary sales price does not “constitute any offer, acceptance or legally binding agreement and [does] not create any rights or obligations for or on the part of any party . . . .” (Emphasis added.) Thus, the $2.5 million offer is not an “offer,” as that term is commonly used.
The record does not indicate the time of day that the June 15, 1998 meeting occurred. Nor does it indicate whether the defendant knew that his attorney would be arguing his motion for reconsideration on that day.
This number is obtained by dividing the $40,000 estimate reported on the defendant’s affidavit by the 19.4 percent interest that the defendant owned in the company, and rounding the quotient to $200,000.
The placement memorandum defined book value per share as “the total amount of assets less total liabilities, divided by the number of Share[s] of Common Stock outstanding . . . .”
Indeed, the majority admits as much when it states: “We recognize the testimony that the book value of Product Technologies was extremely low . . . .” Footnote 11 of the majority opinion. In that same footnote, the majority also contends that I do not explain how the defendant could have thought that ICL’s $2.5 million offer was too low unless the defendant believed that the value of the software could yield a higher price. I do address that issue in the text of this opinion.
The majority states: “The dissent suggests that because Pia was an expert in valuing businesses, he should have either independently assessed the worth of the intellectual property asset or asked more questions concerning its worth.” Footnote 12 of the majority opinion. The majority then notes that my purported view is inconsistent with Billington v. Billington, supra, 220 Conn. 222, in which we abandoned the due diligence requirement. Either the majority misunderstands my argument or it is overreaching. I merely assert that Pia’s appraisal provides a reliable benchmark precisely because he likely was diligent in including the worth of the software. In other words, because Pia is an experienced appraiser, he likely considered the worth of the software when he performed his appraisal and arrived at a value that was comparable to the defendant’s estimate.
The majority also states that “Pia’s valuation necessarily was limited by the information disclosed by the defendant.” Footnote 12 of the majority opinion; see also footnote 14 of the majority opinion. Once again, the majority’s assertion is unsupported by the record. At the hearing on the motion to open, Pia did not testily that he was denied any information concerning the intellectual property rights. Indeed, the only document that Pia thought he should have received but did not was the private placement memorandum. It is noteworthy that Pia did not testify, and was not asked, whether his valuation would have differed if he had been given the placement memorandum. Despite this fact, the majority posits that the placement memorandum was “the only document that evidenced the . . . potential” marketability of the source codes from the SmartCity software. Footnote 13 of the majority opinion. The majority’s assertion is incorrect. One need only look to the exhibits in this case to find a comprehensive sales brochure that describes the asset’s potential. It is called, “SmartCity fashioning the industry . . . .” (Emphasis in original.)
See footnote 7 of this opinion.
Since the defendant valued his shares in the company at $40,000, the plaintiff presumably could have obtained a 20 to 30 percent interest for $8000 to $12,000.
This observation prompted the majority to write: “The obvious answer to the dissent’s query of why the defendant would consider offering the plaintiff a ‘tail’ ... is that he clearly colored that offer by representing to the plaintiff that Product Technologies had virtually no future and no sale or investment prospects.” Footnote 27 of the majority opinion. There is absolutely no evidence in the record that the defendant misrepresented Product Technologies’ uncertain future to either the plaintiff or Pia. Moreover, the trial court specifically found that there were no sales negotiations underway during the dissolution proceedings, and, therefore, the defendant did not know that an offer would be made two months later. Even the plaintiff does not challenge that finding on appeal. Thus, the majority’s reasons for failing to consider the defendant’s willingness to offer a “tail” as evidence tending to disprove scienter are unfounded.
The majority essentially writes that this stock sale is not credible evidence of the defendant’s knowledge of the worth of the company at the close of the dissolution proceedings because the defendant’s strategy for developing the asset’s potential may not have existed when the sale occurred in January, 1997. See footnote 13 of the majority opinion. First, there is no evidence in the record to support the majority’s assertion. Second, the majority fails to realize that the significance of the stock sale lies in the
The majority concludes that Pia’s appraisal is not reliable because he did not have accurate information on which to base his estimate of the worth of the intellectual property asset. See footnote 14 of the majority opinion. As I explained in footnote 10 of this opinion, the majority’s conclusion contradicts the record.
As I previously noted, ICL was threatening to pursue legal action against and compete with Product Technologies in the United States at this time.
General Statutes § 46b-81 (a) provides in relevant part: “At the time of entering a decree annulling or dissolving a marriage . . . the Superior Court may assign to either the husband or wile all or any part of the estate of the other. . . (Emphasis added.)
The gravamen of the plaintiffs fraud claim appears in the following paragraphs in her motion to open: “5. At the time of trial, [the] defendant submitted a financial affidavit, placing a value on his interest in [Product Technologies at $40,000], . . .
“7. Based on [the] defendant’s representations, the parties agreed on a value of [$40,000] as the defendant’s interest in his business. . . .
“9. Several months after the trial, and after the decision, [the] defendant’s business was sold for [$6 million]. . . .
“11. In spite of diligent efforts on the part of the plaintiff to discover the true value of the defendant’s interest in his business, the defendant did not disclose to the plaintiff that any negotiations or discussions regarding [the] sale of [Product Technologies] were transpiring during the pendency of the divorce, and so the defendant misrepresented the value of his business.” (Emphasis added.)
In support of its conclusion that the plaintiff raised this claim at trial, the majority cites another part of the defendant’s counsel’s closing argument in which she stated that the defendant would not have filed a motion for reconsideration if he “had thought ICL was going to come along and offer him a lot of money or any money .... And the fact that that motion was denied again strongly pushes that the date that we need to look at back to the time of trial . . . .” (Internal quotation marks omitted.) Footnote 9 of the majority opinion. The majority, however, fails to refer to the next sentence of the defendant’s counsel’s argument, as it appears in the transcript. Specifically, she states: “So they—in order to prevail, they need to clearly show that, before April, they had an offer.” This sentence makes clear that the closing remarks cited by the majority do not pertain to the plaintiffs continuing duty to disclose claim. Instead, they were made in defense of the claim that the plaintiff actually pleaded in her motion to open, namely, that the defendant knew that sales negotiations were underway during the dissolu
The events described in footnote 15 of the majority opinion are perfectly consistent with this observation.
The majority, in footnote 28 of its opinion, fails to explain with cases, statutes and rules of practice what valuation date the trial court must use on remand.
