2011 Ct. Sup. 20631
No. FST CV 11 5013593 SConnecticut Superior Court Judicial District of Stamford-Norwalk at Stamford
September 28, 2011
RULING ON APPLICATION FOR PREJUDGMENT REMEDY (100.31)
TAGGART D. ADAMS, Judge Trial Referee.
I. Introduction
In the proposed complaint filed in connection with their application for a prejudgment remedy, the plaintiffs Carrozini and Martinez allege they purchased ninety percent (90%) of an electrical contracting business from the defendant Toledo in August 2008 for $25,000.00. Plaintiffs allege Toledo breached the contract, tortiously interfered with business expectancies, was unjustly enriched and violated the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq. (CUTPA). A hearing on the prejudgment remedy (PJR) application was commenced on June 21, 2011, continued on August 10 and completed on August 16. Subsequently, counsel have filed post-hearing memoranda.
II. Factual Background
According to the often disjointed testimony of Mr. Martinez the parties agreed to the sale transaction in the form of signed corporate minutes of a special shareholders meeting of Electromech, Inc., (Electromech) Toldeo’s electrical contracting business, dated August 7, 2008. Exhibit 1. Martinez had worked for Toledo for over five years as an apprentice, Carrozini had previously worked for Electromech, according to Toledo, and had been fired in 2001 for tardiness. Neither of the plaintiffs holds or has ever held a Connecticut electrician’s license. Martinez testified that the plaintiffs were to pay Toledo $25,000.00 in two years (August 2010) in return for each of them receiving 45% of the stock of Electromech. Toledo was to retain 10%.
The minutes, Exhibit 1, indicate that Toledo sold nine hundred of his 1,000 shares in equal amounts to the two plaintiffs and Electromech gave a note to Toledo promising to pay him $25,000.00 without interest in August 2, 1010. Toledo resigned as president of Electromech and was succeeded by Carrozini. Martinez was elected corporate secretary-treasurer. The minutes indicate that Toledo was elected as a CT Page 20632 “special vice president” and stated . . . in such capacity his duties and obligations to Electromech Co., Inc. are limited to his continuing his current efforts to obtain and secure all governmental licenses and permits necessary for Electromech Co., Inc. to continue as an electrical contractor operating in Connecticut . . .”
Martinez testified that Toledo did not provide him or Carrozini with access to existing Electromech clients. He testified that Toledo continued to keep a separate Electromech bank account at People’s United Bank which received payments from customers. He also testified that he and Carrozini did not set up a new account for Electromech until January 2009 (later on, he said it was March 2009). Martinez also testified that he and Carrozini worked on a project known as the “Guilante” project for six months without receiving a share of the revenue from that project, and testified further that Toledo fired him and Carrozini in September 2009. Martinez testified that Toledo has kept all the Eleetromech clients and receipts from these clients have not been paid to Electromech.
The problem with Martinez’ testimony is that it was conclusory in nature, bereft of details which should have been known, incomplete and often self-contradictory. In addition, it was contradicted by the testimony of Toledo on critical issues, testimony the court found more credible.
A sampling of examples will suffice. On the subject of the separate back accounts, Martinez conceded on cross-examination that Toledo was the individual guarantor for bills owed by Electromech to electrical supply venders. Martinez and Carrozini attempted to become guarantors, but were not accepted apparently because Carrozini had some unpaid debts. Even after August 2008 Toledo was the only individual with enough money to pay for necessary supplies. The plaintiffs would buy supplies and Toledo would have to pay for them out of the People’s United Bank account. In the absence of any other account opened by the plaintiffs for Electromech, for several months Toledo testified he had no alternative but to put receipts from customers in the People’s United account and pay expenses incurred by the plaintiffs from it. In August 2008 the plaintiffs began charging supplies to the Electromech account guaranteed by Toledo at Electrical Wholesalers, Inc. See Exhibits C-F. These charges, many of them identified only with the name of Marcelo (apparently the plaintiff Carrozini) amounted to between $3,000.00 and $13,000.00, per month.
As to the Guilante project, Toledo specifically denied that he fired the plaintiffs. When the project, which was supposed to be completed in CT Page 20633 September 2009, fell behind schedule and Electromech (Martinez and Carrozini) failed to supply enough workers on one particular day despite being warned by Toledo in advance, Guilante fired Electromech, and Toledo was put into the position of finding other workers to complete the job which took another three months.
Martinez also either completely misunderstood, or materially misstated facts about Electromech receipts and finances. He testified that the net income of Electromech in 2009 was $224,389.00 and that he was owed 45% of this amount or around $100,000.00. In fact, the profit and loss statement for that year prepared by an independent accountant, Exhibit 5, showed net income to be $58,703.00, and the figure of $224,389.00 was actually the amount of the cost of goods sold.[1] The profit and loss statement for 2009 showed Carrozini and Martinez being paid in excess of $49,000.00 and $50,000.00 respectively. No payments were made to Toledo.
Martinez also said he was never paid for work he performed on an electrical contracting job for Cablevision. Nevertheless, there was evidence of a more than $15,000.00 payment made by Cablevision to Electromech which Toledo testified was deposited in the People’s United Bank account and reflected on the independent accountant’s profit and loss report. Exhibits 8 and 4.
Aside from the quality and persuasiveness of the evidence, a major issue during the hearing was the status of the plaintiffs and defendant as licensed electricians. Shortly after the August 2008 sale agreement Toledo, as per the agreement, obtained permits for a number of electrical contracting jobs for Electromech. Toledo testified that Carrozini did or supervised the work on the projects, and between August 2008 and March 2009 each project failed inspection. Shortly thereafter Carrozini admitted to Toledo he did not have any appropriate license to do electrical work in Connecticut.[2] Neither plaintiff rebutted this testimony in any fashion. Toledo knew Martinez was an apprentice and did not have an electrician’s license, but testified he did not know of Carrozini’s unlicensed status until Carrozini’s admission. Toledo testified that when he agreed to the sale of his shares in Electromech he believed Carrozini had a journeyperson’s license and that Martinez, as an apprentice, could work under his supervision. See Id., § 20-332-1
(definition of an apprentice). Instead, neither one of the new owners of 90% of Electromech could legally do electrical work on his own; as a legal matter both had to work under a licensed supervisor. General Statutes § 20-334(a). Martinez testified that the plaintiffs have a licensed electrician working with them, but he could not remember his name
CT Page 20634 Based on the record as it now exists, both the plaintiffs and the defendants made a serious error in judgment to enter the August 2008 agreement. The plaintiffs had no money and were legally unable to perform their trade except under supervision. Under the circumstances they could not reasonably expect to have Toledo present at all jobs on a daily basis to supervise them and receive only 10% of the net earnings. The defendant should never have assumed that Carrozini was licensed and should have taken out more protection for his investment.
General Statutes authorizes court to issue a PJR when there is probable cause that a judgment in the amount of the prejudgment remedy sought . . . taking into account any defenses, counterclaims or set-offs, will be rendered in the matter in favor of the plaintiff. General Statutes §52-278d(a). “Probable cause” is regularly defined as “bona fide belief in the existence of facts essential under the law for the action as would warrant a man of ordinary caution, prudence and judgment under the circumstances, in entertaining it.” Dufraine v. CHRO, 236 Conn. 250, 261
(1996). Probable cause does not demand that the belief be that the plaintiff will eventually meet the preponderance of the evidence standard. See Malave v. Ortiz, 114 Conn.App. 414, 426 (2009). The plaintiffs carry the burden of proof. In this case as the record stands, the court finds that the plaintiffs have not established probable cause. They have not carried out their bargain to Electromech to pay Toledo the $25,000.00 for his share of Electromech. Indeed, by not having any electrical license it appears they expected Toledo to continue to work as in the past, but with only ten percent of the shares, even though under the agreement Toledo’s responsibilities were limited to procuring licenses and permits. It may be that on a more fully developed and detailed record that the plaintiffs can prevail on one or more of their claims. But the evidence presented to date does not justify the granting of a PJR.
CT Page 20635