LLC v. Paul Rocheleau (2011)

MEMORANDUM OF DECISION RE DEFENDANT'S MOTION TO DISMISS

BACKGROUND:

In 2006, Travis Mortgage, LLC executed two promissory notes payable to Farmington Savings Bank. Vincent DiPentima and defendant Paul Rocheleau each personally guaranteed the notes.   The notes went into default.   DiPentima formed a single member limited liability company [LLC], entitled Travis Asset Holdings, LLC [hereinafter, TAH], the plaintiff in this action.   TAH purchased the notes from Farmington Savings Bank.

In Count I of this action, TAH, as a holder in due course, now seeks to collect the amount due on the notes and guarantee from Rocheleau.   The principal amount owed on the notes as of November 1, 2009 is $531,216.55.

On December 14, 2010, TAH requested leave to amend the complaint (123.00) to add a second count.   The court (Pittman, J.) overruled the defendant's objection (126.00) on January 3, 2011.   Count II is in the nature of a defensive claim.   It alleges that defendant Rocheleau accuses TAH of acting on behalf of DiPentima and, therefore, the sole remedy available to TAH is “an action for contribution.” 123.00, amended complaint, ¶ 19.   What the plaintiff asserts is that, if the defendant prevails in its defense to Count I that TAH was acting on behalf of its sole member, DiPentima, TAH should stand in the shoes of DiPentima and be allowed to pursue contribution from Rocheleau as a co-guarantor.

Rocheleau has filed a motion to dismiss Count II for lack of standing.   TAH does not allege that it is the coguarantor of the notes.   At oral argument, counsel for TAH affirmatively conceded that it is not the coguarantor of the notes but argues that TAH has a colorable claim for damages and, as a matter of equity, the court may treat it as a proper party to seek recovery for contribution.

LEGAL STANDARD OF REVIEW:

“A motion to dismiss ․ properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court ․ A motion to dismiss tests, inter alia, whether on the face of the record, the court is without jurisdiction.”  (Internal quotation marks omitted.)  Cox v. Aiken, 278 Conn. 204, 210–11, 897 A.2d 71 (2006).

The standard governing a trial court's review of a motion to dismiss is well established.  “In ruling upon whether a complaint survives a motion to dismiss, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader.”  (Internal quotation marks omitted.)   Brennan v. Fairfield, 58 Conn.App. 191, 195, 753 A.2d 396 (2000).

“Jurisdiction of the subject-matter is the power [of the court] to hear and determine cases of the general class to which the proceedings in question belong.”  (Citations omitted;  internal quotation marks omitted.)  Doe v. Roe, 246 Conn. 652, 661, 717 A.2d 706 (1998).  “A claim that [the] court lacks subject matter jurisdiction [may be raised] at any time.”  (Internal quotation marks omitted.)  Dowling v. Slotnik, 244 Conn. 781, 787, 712 A.2d 396 (1998).  “Once the question of lack of jurisdiction of a court is raised, [it] must be disposed of no matter in what form it is presented ․ and the court must fully resolve it before proceeding further with the case.”  (Citations omitted;  internal quotation marks omitted.)  Figueroa v. C & S Ball Bearing, 237 Conn. 1, 4, 675 A.2d 845 (1996).  “The plaintiff bears the burden of proving subject matter jurisdiction, whenever and however raised.”  Fink v. Golenbock, 238 Conn. 183, 199 n.13, 680 A.2d 1243 (1996).

When a trial court decides a jurisdictional question raised by a pretrial motion to dismiss on the basis of the complaint alone, it must consider the allegations of the complaint in their most favorable light.   In this regard, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader.  Conboy v. State, 292 Conn. 642, 651–52, 974 A.2d 669 (2009).

Standing to bring an action implicates the court's subject matter jurisdiction.   The plaintiff ultimately bears the burden of establishing standing.  Seymour v. Region One Bd. of Ed., 274 Conn. 92, 104, 874 A.2d 742, cert. denied, 546 U.S. 1016, 126 S.Ct. 659, 163 L.Ed.2d 526 (2005).

ANALYSIS:

The sole issue to be decided is whether a limited liability company has standing to bring a claim of contribution against a coguarantor of its single member.

Standing is the legal right to set judicial machinery in motion.   One cannot rightfully invoke the jurisdiction of the court unless one has, in an individual or representative capacity, some real interest in the cause of action.   Standing is established by showing that the party claiming it is authorized by statute to bring suit or is classically aggrieved.   The fundamental test for determining [classical] aggrievement encompasses a well-settled twofold determination:  first, the party claiming aggrievement must successfully demonstrate a specific personal and legal interest in the subject matter of the decision, as distinguished from a general interest, such as the concern of all the members of the community as a whole.   Second, the party claiming aggrievement must successfully establish that the specific personal and legal interest has been specially and injuriously affected by the decision.   Aggrievement is established if there is a possibility, as distinguished from a certainty ․ that some legally protected interest has been adversely affected.  (Internal quotation marks omitted.)

Gold v. Rowland, 296 Conn. 186, 207, 994 A.2d 106 (2010).   See also, Bysiewicz v. Dinardo, 298 Conn. 748 (2010).

Under Connecticut law, the right of contribution between coguarantors is based on the theory of implied contract.   When two or more persons guarantee the debt of another, they simultaneously enter into an implied promise on the part of each to contribute his share if necessary to meet the common obligation.   This right is an existing obligation running from the inception of the relationship.   Nevertheless, its enforcement does not accrue until the actual payment of the common debt.

The only parties to this implied contract are the coguarantors.   The creditor is not a party.   Indeed, the creditor has nothing to do with the right of the coguarantors for contribution among themselves, and has no right to do any act tending to impair it.   Accordingly, the discharge of one coguarantor's direct liability to the creditor will not relieve him or her from his or her liability to contribute to the other coguarantors whether the discharge results from contract or from operation of law.   In addition, the fact that a creditor sues only some of several coguarantors, or recovers judgment against fewer than all of them, does not excuse those not sued or not included in the judgment from paying their part of the joint debt.   Accordingly, as a rule, one or more of the coguarantors against whom the judgment is recovered may, upon paying the creditor, compel contribution from all other coguarantors.

A coguarantor, however, is not entitled to contribution for any amount paid to the creditor toward the common debt.   Rather, under Connecticut law, a guarantor's right of contribution from a coguarantor arises only when the guarantor has paid in excess of his share of the whole outstanding obligation, and the amount of contribution he is entitled to collect is limited to the amount he has paid in excess of his share of the whole outstanding obligation.   The reason for this limitation is that, in Connecticut, a guarantor, as between himself and his co-guarantors, is a principal for the portion of the debt which he ought to pay and is a surety or secondary obligor for the remainder.   Thus, when a coguarantor has made a payment to the creditor in an amount that is less than his share of the whole outstanding obligation, he has no right to contribution from the other coguarantors.

(Internal citations, quotations, ellipses and brackets omitted.)  Lestorti v. DeLeo, 298 Conn. 466, 473–75, 4 A.3d 269 (2010).

Although he is the sole member, DiPentima is not the alter ego of TAH. An LLC is its own legal entity.  General Statutes § 34–101(21).   Where a defendant has contracted with a particular legal entity, the contract cannot be enforced by a different entity.  Christ–Janer v. A.F. Conte & Co., 8 Conn.App. 83, 90, 511 A.2d 1017 (1986).

While the court has seen attempts by a corporate insider to have the corporation made liable for his own personal debts, e.g., Litchfield Asset Management Corp. v. Howell, 70 Conn.App. 133, 149, 799 A.2d 298, cert. denied, 261 Conn. 911, 806 A.2d 49 (2002), this situation is different.   TAH here seeks to have the court ignore the legal distinction between itself and its single member so as to allow the LLC to enforce the rights of its member to the LLC's benefit.

“[I]t is important that the corporate entity be regarded as distinct from individual shareholders especially in light of the fact that there must be a rational method for processing claims in the judicial system and the corporation must have the ability to control and direct its own affairs including its litigation.   If the corporation can bring a claim advancing discrete theories of liability but shareholder can also bring such claims, who controls the litigation?”   Peterson v. Parillo, Superior Court, judicial district of New Haven at New Haven, Docket No. CV03–0477220 S (Dec. 8, 2005, Corradino, J.).

As coguarantor, DiPentima has the right to collect contribution from Rocheleau of any amount DiPentima has paid in excess of his share of the whole obligation.  Lestorti v. DeLeo, supra, 298 Conn. at 473–75.   TAH has no standing to exercise that right on DiPentima's behalf.   TAH is not the co-guarantor, DiPentima is.   TAH cannot stand in the shoes of DiPentima to exercise his personal right as co-guarantor to collect contribution from Rocheleau.

TAH argues that it has a colorable claim because it alleges a direct economic injury, citing as authority, Maloney v. Pac, 183 Conn. 313, 439 A.2d 349 (1981).   In Maloney, the plaintiff sought declaratory and injunctive relief from the legislative veto of action taken by the state traffic commission.   She was directly impacted by the action of the STC and claimed traffic was a nuisance.   The court held, “As long as there is some direct injury for which the plaintiff seeks redress, the injury that is alleged need not be great.”   [Emphasis added.]  Id. at 321.   A close reading of the pleadings reveals that TAH has alleged no such direct impact in Count II of its complaint as it relates to the implied contract of coguarantors between DiPentima and Rocheleau.  Maloney is not applicable here.   The direct impact, if any, is the right to collect on the notes alleged in Count I.

TAH also argues that the court, in equity, should treat TAH and DiPentima as one legal entity.   If TAH itself made that assertion, the court, in deciding the motion to dismiss, would have to accept it.  Charter Oak Lending Group, LLC v. August, 127 Conn.App. 428, 434 (2011).   However, TAH itself makes no such assertion in its complaint.   Rather, in ¶ 19 of Count II, TAH alleges Rocheleau maintains [in his special defense to Count I], that TAH acted on behalf of DiPentima as a coguarantor in purchasing the assignment of notes and that the sole remedy is an action for contribution.   That the defendant makes assertions in a special defense to one cause of action does not provide authority for the court, in equity, to allow the plaintiff to use the defendant's allegation against it in a second cause of action when the plaintiff is not also making the same allegation.

By its own allegations in Count II, TAH is the creditor, not the coguarantor.   Under an implied contract theory, a creditor cannot unilaterally impair the right of contribution between coguarantors because the creditor is not a party to the contract.  Lestorti, supra, 298 Conn. at 481.   By the same token, the creditor here cannot assert the rights of its sole member who happens to be a coguarantor.   The creditor is a legal entity distinct from its sole member.

Again, TAH doesn't allege that it is the alter ego of DiPentima.   Rather, it claims that Rocheleau alleges that TAH is the alter ego of DiPentima.   This is a critical distinction.   In the absence of a claim by TAH that TAH is the alter ego of DiPentima, TAH does not have standing to assert the claim of DiPentima against the coguarantor, Rocheleau.   Absent standing, the court lacks subject matter jurisdiction over the claim.

Seymour v. Region One Bd. of Ed., supra, 274 Conn. at 104.

CONCLUSION:

The defendant's motion to dismiss Count II is granted.

Robert E. Young, Judge

Young, Robert E., J.