2008 Ct. Sup. 69
No. CVN-0607-2069Connecticut Superior Court New Britain Judicial District Housing Session
January 22, 2008
MEMORANDUM OF DECISION
This action arises out of a commercial lease between the plaintiff, 40 Hart Street, LLC (40 Hart Street), and the defendants, New Britain Urological Group, P.C. (New Britain Urological Group) to which Paul Ceplenski, M.D., is a guarantor. Barbara Ceplenski, wife of Paul Ceplenski, was added as an additional defendant shortly after suit was commenced on July 28, 2006. The amended complaint is set forth in three counts. The first count seeks unpaid rent and other charges against New Britain Urological Group pursuant to a lease agreement. The second count is directed against Paul Ceplenski as guarantor of the debts and liabilities of New Britain Urological Group pursuant to the lease. The third count alleges fraudulent conveyance arising from Paul Ceplenski’s transfer to Barbara Ceplenski of his one-half interest in the residential property located at 29 Brookwood Drive, Southington, Connecticut. The first count against New Britain Urological Group has been stayed in accordance with the automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362, following the filing of its bankruptcy petition in the United States Bankruptcy Court for the District of Connecticut subsequent to suit. Therefore, the only counts subject of the trial were counts two and three.
A trial to the court was held on June 22, 2007. Based on the testimony and full exhibits presented therein, the court finds the following material facts: New Britain Urological Group entered into a lease with the plaintiff, 40 Hart Street, for rental of office space located at 40 Hart Street, New Britain, Connecticut. Paul Ceplenski, M.D., signed the lease as the president of New Britain Urological Group. Paul Ceplenski also signed a guaranty of the lease in which he guaranteed “the prompt payment” of all charges that became due under the lease including “all payments of rent, additional rent, and all other charges, expenses and costs of every kind and nature, which are or may be due now or in the future under the terms of the Lease. . . .” (Plaintiff’s Exhibit 3.) The lease went into effect on January 1, 2005. Under Article II of the lease, New Britain Urological Group was responsible for the basic rent CT Page 70 of the premises in the amount of $8,875.00 per month, a five percent (5%) late charge on the basic rent, if payment was not made by the fifth day after which it was due, and additional rent, as specified in Article XXVII of the lease. In accordance with this provision, New Britain Urological Group was responsible for additional rent due “at Landlord’s option . . . either in a lump sum within sixty (60) days after the Landlord notifies Tenant of the amount thereof, or . . . prorated and paid monthly together with the basic rent hereinbefore reserved over the succeeding twelve months, or, if there are less than twelve months remaining in the term of this Lease, over the remainder of said term. The Tenant shall pay interest at the rate of one (1%) percent per month on the unpaid balance of any said additional rent not paid within said sixty (60) day period.” (Plaintiff’s Exhibit 2.)
40 Hart Street, LLC, succeeded Brooke Management Venture, LLC (Brook Management), as landlord to New Britain Urological Group. Brooke Management assigned 40 Hart Street the sum of $87,230.15 for unpaid “Additional Rent.” “The eighty seven thousand dollar debt was rolled into the new lease. . . . [New Britain Urological Group’s] rent was adjusted upwards to pay for that over a period of time.” (Testimony of Paul J. Ceplenski, M.D., transcript, p. 28.) Paul Ceplenski was involved in a medical malpractice lawsuit which was concluded in February 2005. Shortly thereafter, in March 2005, he transferred his one-half interest in his house to his wife, Barbara Ceplenski.
I General Statutes § 47-19
In defense of the second count, Paul Ceplenski claims that the guaranty agreement against him is unenforceable in that the lease itself it was not properly witnessed, acknowledged or recorded in accordance with the provisions of General Statutes § 47-19. “The purpose of § 47-19 is to give public notice of deeds and leases so that creditors and bona fide purchasers may not be deceived and cheated Farmers Mechanics Savings Bank v. First Federal Savings Loan Assn., 167 Conn. 294, 302, 355 A.2d 260 (1974), citing Barnum v Landon, 25 Conn. 137, 149, 150 [(1856)].” Hoyts Cinemas Corp. v Stonington, Superior Court, judicial district of New Britain, Docket No. CV 95 0535298 (October 15, 1998, Aronson, J.) (23 Conn. L. Rptr. 249). “The effect of the statute is not to render an unrecorded lease void but voidable by such persons as are protected under the statute.”Farmers Mechanics Savings Bank v. First Federal Savings Loan Assn., supra, 167 Conn. 301. “General Statutes § 47-19 is designed to protect bona fide purchasers without actual notice from being bound by CT Page 71 unrecorded leases. . . . A bona fide purchaser is one who buys property of another without notice that some third party has a right to or interest in such property, and pays a full and fair price for the same . . . before he has notice of a claim or interest of such other in the property. . . . The purchaser has such notice if he knows facts which are sufficient to put a prudent man on inquiry which, if prosecuted with reasonable diligence, would certainly lead to discovery of a conflicting claim.” (Citations omitted; internal quotation marks omitted.)Drazen Properties Limited Partnership v. E.F. Mahon, Inc., 19 Conn. App. 471, 477, 562 A,2d 1142 (1989).
Since Paul Ceplenski is neither a bona fide purchaser nor a creditor who can invoke the protection of § 47-19, his argument is misplaced. Furthermore, § 47-19, is a notice statute. Since Paul Ceplenski signed the lease as president on behalf of New Britain Urological Group, he clearly knew about it. In addition, in a separate writing for which there was distinct consideration, Paul Ceplenski signed a guaranty of payments due under the lease. (See Plaintiff’s Exhibit 3; testimony of Paul Ceplenski, transcript, pp. 26-29.) Therefore, under all the circumstances, he is not entitled to the protection of § 47-19. Since Paul Ceplenski does not challenge the validity of the guaranty, he is clearly liable pursuant to the terms of the guaranty which constitutes a clear contractual obligation in addition to the terms of the lease. Accordingly, the court finds that the plaintiff has established by a preponderance of the evidence that the guaranty executed by Paul Ceplenski is valid and enforceable against him by the plaintiff.
II Fraudulent Conveyance
As to the third count, the plaintiff claims that in March 2005, Paul Ceplenski transferred his one-half interest in his residence at 29 Brookwood Drive, Southington, Connecticut, to his wife for essentially no consideration in an effort to fraudulently avoid his debt to 40 Hart Street pursuant to the guaranty. In support of this count, the plaintiff argues that “the transfer of his house . . . was made after he had personally guaranteed the lease debts of his company to the Plaintiff. Therefore, the Defendant Paul Ceplenski knew of his liability to the Plaintiff when he transferred the property to his wife, Defendant Barbara Ceplensky.” (Emphasis original.) (Plaintiff’s Amended Memorandum of Law in Reply to Defendants’ Post-Trial Memorandum and Proposed Findings of Fact and Law (Plaintiff’s Amended Memorandum, p. 14.)
“The question of whether a fraudulent conveyance took place is solely CT Page 72 a question of fact to be determined by the trier. . . . Whether the plaintiff [is] entitled to set aside the conveyances, however, involves a mixed question of law and fact. . . .” (Internal quotation marks omitted.) National Loan Investors, L.P. v. World Properties, 79 Conn. App. 725, 731, 830 A.2d 1178 (2003), cert. denied, 267 Conn. 910, 840 A.2d 1173 (2004). “[T]he elements of fraudulent conveyance, including whether the defendants acted with fraudulent intent, must be proven by a heightened standard of proof, that of `clear, precise and unequivocal evidence.'” Litchfield Asset Management Corp. v. Howell, 70 Conn. App. 133, 141, 799 A.2d A.2d 298, cert. denied, 261 Conn. 911, 806 A.2d 49
(2002). “The Uniform Fraudulent Act, General Statutes § 52-552a to 52-552l `is largely an adoption and clarification of the common law [of fraudulent conveyances].'” Id., 145 n. 7; see Robinson v. Coughlin, 266 Conn. 1, 9, 830 A.2d 1114 (2003).
General Statute § 52-552e (a) sets forth the test to determine whether a transfer is fraudulent: “A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, if the creditor’s claim arose before the transfer was made or the obligation was incurred and if the debtor made the transfer or incurred the obligation: (1) With actual intent to hinder, delay or defraud any creditor of the debtor; or (2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor (A) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction, or (B) intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due.” General Statutes § 52-552e. General Statutes § 52-552b (3) and 52-552b (12) provide: ?`claim’ means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured. . . . `Transfer’ means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease and creation of a lien or other encumbrance.” General Statutes § 52-552b (3) and (12).
“In the area of fraudulent conveyances . . . the party seeking to set aside a conveyance as fraudulent bears the burden of proving either: (1) that the conveyance was made without substantial consideration and rendered the transferor unable to meet his obligations; or (2) that the conveyance was made with a fraudulent intent in which the grantee participated. . . . The party seeking to set aside the conveyance need not satisfy both alternatives.” (Citation omitted; internal quotation CT Page 73 marks omitted.) Wendell Corp. Trustee v. Thurston, 239 Conn. 109, 115-16, 680 A.2d 1314 (1996); see also Sekas v. Enginunity PLM, LLC, Superior Court, judicial district of Ansonia-Milford at Derby, Docket No. CV 75002249 (June 6, 2007, Esposito, J.).
In support of his claim of fraudulent conveyance, the plaintiff asserts that the conveyance in question “was made without substantial consideration and rendered the transferor [Paul Ceplenski] unable to meet his obligations.” (Plaintiff’s Amended Memorandum, p. 15.) However, the plaintiff has failed to prove by clear and convincing evidence that Paul Ceplenski’s transfer of his half interest in his house to his wife left him in a position in which his remaining assets were unreasonably small in relation to the business or transaction or that he intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became duc, as required by § 52-552e (a)(2)(A) and (B). In fact, the plaintiff presented no evidence of Paul Ceplenski’s financial position, including no evidence whatsoever that the transfer of the house rendered him unable to meet his debt obligations to the plaintiff or anyone else.
The only issue left to be determined by the court is the amount of damages to which plaintiff is entitled pursuant to the guaranty. Related to this issue is a post-trial motion by the plaintiff to have the court reconsider its ruling limiting the application of Plaintiff’s Exhibit 7, a full exhibit. Plaintiff’s Exhibit 7 is a computer printout of a statement of charges and payments created and maintained by James Brower, owner of 40 Hart Street, LLC, in connection with the latter’s lease with New Britain Urological Group. The court admitted this document into evidence, originally stating, in pertinent part, as follows: “unless something happens later on in the evidence . . . the only purpose of the exhibit is . . . to show that the defendant was on notice that certain amounts were being claimed by the plaintiff, that bills went out on certain dates that are reflected in that exhibit . . . the document will not be relevant, is not relevant as to damages.” (Transcript, p. 111.) The court later explained that, as presented, what was missing is “knowledge of the witness of the basic element that afford reliability and trustworthiness to this computer generated data.” (Transcript p. 117.) In so doing, as noted at page 133 of the transcript, the court allowed for the possibility that additional evidence might persuade the court to revisit this ruling and consider the exhibit for the purpose of damages. As it was, the document was CT Page 74 admitted as a full exhibit and the court invited the defendants to file, in addition to its post-trial brief, a written motion to strike the exhibit before a decision was rendered in the case which the defendants have declined to do.
After a review of Plaintiff’s Exhibit 7, as well as all the exhibits in the case and the testimony of the witnesses, the court is satisfied as to the reliability of Plaintiff’s Exhibit 7 on the issue of damages. Due to the lack of clarity in the ruling concerning Plaintiff’s Exhibit 7 during the trial, and in the interest of fairness and justice, the court hereby orders that a further hearing be held at which time the plaintiff will further articulate its claim for damages based on the evidence in the record. At the hearing, the defendants will be allowed an opportunity to challenge the amount of the damages set forth by the plaintiff in Exhibit 7 and the testimony of James Brower.
IV CONCLUSION AND ORDER
For all the foregoing reasons, the court hereby orders judgment in favor of the defendants Paul Ceplenski, M.D. and Barbera Ceplenski, as to count three. As to count two, the court further orders that no later than February 25, 2008, the plaintiff is to file in the New Britain Superior Court, Housing Session, a written breakdown of damages as to count two based on and limited to the testimony and evidence in the court record, including and in particular, Plaintiff’s Exhibit 7.
If no submission is made by that date, unless this date is otherwise extended by the court, judgment will be ordered as to count two in favor of the defendant Paul Ceplenski. Assuming the submission is made as ordered herein; a hearing will be held in Courtroom 5, New London Superior Court, 70 Huntington Street, New London, on Friday, March 28, 2008 at 10 a.m. The court further orders that James Brower be present for examination by counsel.
MR. SWEENEY: He’s using it now to establish a debt, you’ve indicated it was admissible for purposes of notice to the defendant.
THE COURT: With the information that I then had, and I think I indicated when I ruled on it that unless there’s some other evidence that would . . . persuade me otherwise, that it wouldn’t be considered for purposes of damages. (Emphasis added.) CT Page 76
(Transcript, p. 133.)
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