Garzarelli Food Specialties, Inc. v. John Brice et al. (2013)

MEMORANDUM OF DECISION re MOTIONS TO REARGUE (# 120.00 and # 121.00)

Nature of the Proceeding

This is a proceeding in which plaintiff is seeking a prejudgment remedy attaching the assets of the defendants in an amount in excess of $1 million, pursuant to General Statutes § 52–278a et seq.   The proposed complaint alleges that approximately nine years ago, a company owned by defendants (Second Generation Foods, Inc.) borrowed money from plaintiff;  a promissory note was executed by defendants on behalf of the corporate borrower, and defendants signed individually as guarantors.   Defendants are married, and currently are parties to a marriage dissolution action pending in this courthouse (Brice v. Brice, FST–FA–12–4023116S).  In addition to the relief sought by plaintiff with respect to both defendants, defendant John Brice seeks a prejudgment remedy against defendant Lorraine Brice with respect to a proposed cross complaint.

According to the proposed complaint, approximately four years ago, defendants stopped making payments on the note.¹  Plaintiff claims that defendants owe outstanding principal, interest, and late fees.   In addition, plaintiff is claiming that pursuant to the agreement, there is an obligation for attorneys fees.

The court heard evidence on June 10, 2013.   The parties were given an opportunity to submit supplemental memoranda, primarily addressing calculation of amounts due;  defendant John Brice filed his memorandum on June 21, 2013 and plaintiff filed a response of memorandum on June 28, 2013.  (No supplemental memorandum was filed on behalf of defendant Lorraine Brice.)

The court issued a memorandum of decision dated July 23, 2013 (# 104.86), addressing both requests for prejudgment remedies.   Plaintiff and defendant Lorraine Brice each filed motions to reargue and/or for reconsideration.   The court heard argument on these motions on August 19, 2013.   A number of significant concerns/issues were identified and discussed.²  For the reasons stated herein, the court will not make any changes in its orders.

Some of the issues raised by plaintiff (as well as defendant Lorraine Brice, as discussed below) seemingly result from conflation of the purpose of a prejudgment remedy with ultimate collectability of a judgment.   Thus, plaintiff states:

If [Mr. Brice] does not have assets to pay more than 1/2 of the note, then how could he ever prove his contribution claim as described in the Court's decision?   To more directly address the concern of the Court—if Mr. Brice does not first suffer the attachment of his assets to a value greater than 1/2 of the current amount of the indebtedness, and if his financial affidavit shows that he does not have enough assets to even allow this to happen, how then is he entitled to a PJR at all?

There is nothing in the prejudgment remedy procedure that directs the court to be concerned about whether a party presently has sufficient assets to pay a judgment, in whole or in part.   Defendant John Brice may or may not have assets meeting the threshold identified by plaintiff, but that does not preclude him from obtaining such assets over the life of this matter.   Further, he may be called upon to satisfy a judgment against him out of his earnings.   Simply taking a snapshot of his assets at this time, and drawing any conclusions about his ultimate liability, seems to be unwarranted (if not unprecedented).   Other than the issue of a possible “race” to attach the assets of defendant Lorraine Brice (discussed further, below), plaintiffs expressed concern about excessive attachment of defendant Lorraine Brice's assets and/or defendant John Brice's entitlement to any form of prejudgment remedy are issues that seem to be beyond the scope of plaintiff's legitimate concern (standing?).

As became evident in these proceedings—sometimes explicitly but always at least implicitly—the prejudgment remedy procedure is not designed for situations such as this.   The need for a prejudgment remedy is inherently contingent upon the outcome of a trial that will occur sometime in the future, but this case involves a second level of contingency, the likelihood that defendant John Brice may ultimately be called upon to pay more than his pro rata share of guarantor responsibility, in turn made more likely due to the relationships among the parties.   In dealing with likelihoods and probabilities, the court has strived to keep separate the issues of security via asset attachment, and ultimate payment.   That distinction is especially important here where there is good reason to believe that it is unlikely that Lorraine Brice would be the primary target of collection efforts, should plaintiff prevail against these defendants.

Defendant Lorraine Brice has raised a series of interrelated issues.   The starting point is the nature of any claim that defendant John Brice may have against her.   She claims that, pursuant to Lestorti v. DeLeo, 298 Conn. 466, 474–75 (2010), defendant John Brice does not have a claim against her unless and until he pays more than his pro rata share of their liability as co-guarantors.   That, in turn, leads to a number of sub-issues.

Perhaps foremost among the claims identified by defendant Lorraine Brice in this regard is whether defendant John Brice's claim is premature insofar as he has not paid anything to plaintiff, much less more than his pro rata share (one-half of the ultimate liability).   During argument, the court alluded to the fact that there are numerous contingent-type liabilities that are asserted at the outset of litigation, even though the merits of the contingent claim are dependent upon the outcome of another phase of the proceeding.   An example given by the court was the increasingly-common practice of plaintiffs, in motor vehicle accident cases, to assert underinsured motorist claims simultaneously with the claim against the alleged tortfeasor, anticipating that policy limits will be exhausted long before they actually are exhausted.   Claims for contribution and indemnification also can be asserted at the outset of a proceeding (or early in the case, by way of impleader), long before ultimate liability is determined for the party seeking indemnification or contribution.   On the other hand, the court recognized that in some contexts, the almost-universal practice is to require the initial proceeding to be concluded before even asserting (and not just pursuing) a contingent claim, specifically identifying claims of vexatious litigation as coming within this second category.³  No authority or persuasive argument was given as to why this type of claim should be in the second category rather than the first.

Almost as a corollary, defendant Lorraine Brice also contends that the cross claim asserted by defendant John Brice fails to allege, specifically, that he has paid more than his pro rata share of the guarantee, a condition precedent to any liability on the part of defendant Lorraine Brice to “reimburse” him for that excess.

It is correct that defendant John Brice has not specifically addressed these issues in the sense of providing authority to the court.   He did argue that it was his belief that the liability of defendant Lorraine Brice to him, under his cross claim, starts at the first dollar he might pay to plaintiff, rather than maturing only after he has paid more than half of the total liability to plaintiff.   The court's role at this juncture does not include ruling on this issue, but to the extent that the determinations required of the court in connection with a prejudgment remedy include probabilities of outcome, Lestorti does seem to undermine defendant John Brice's claim in this regard—but only as to the threshold for Loraine Brice's liability.

This last point provides a segue to a more basic issue.   At this juncture, the claims being asserted by defendant Lorraine Brice in the current motion to reargue appear to be, themselves, premature.   Substantively, and subject to contrary authorities that might be cited by defendant John Brice, her arguments seem to have merit.   The court however is not dealing with “final” pleadings or even truly operative pleadings.   Procedurally, the complaint and cross claim that have been filed are, pursuant to statute, “proposed” and preliminary pleadings,⁴ yet defendant Lorraine Brice is, in effect, urging the court to undertake a rigorous analysis of the pleadings as if the court were considering a motion to strike.   To put it differently, she effectively is claiming that because a motion to strike might properly be granted in the future, based on the current proposed (and as yet unamended) pleadings, the court should deny a prejudgment remedy without regard to whether some or all defects could be remedied by amendment.

At the bottom of page 3 of her motion, defendant Lorraine Brice posits a hypothetical leading to a bizarre result.   Aside from the fact that the hypothetical conflicts with the legal principle argued vigorously on the proceeding page, the court's decision cannot be controlled by the fact that a party can imagine a hypothetical situation that might lead to a bizarre result.⁵  The court is unaware of anyone suggesting a possible outcome such as described in that paragraph.   The two “scenarios” that seem to be in play are John Brice's position that liability as between co-guarantors is on a strictly 50–50 basis, and Lorraine Brice's position that her possible (contingent) liability to John Brice only would come into play after he has paid more than half of the liability of the co-guarantors to the plaintiff.⁶  No one has suggested that he can shift part of his liability to her, even if she has paid her fair share (or more), and a hypothetical based on that scenario does not carry any weight.

Lorraine Brice then goes on to suggest two alternatives, one of which the court already has deemed unacceptable (attachments directed to each defendant on a 50–50 basis) because it has been rejected by the plaintiff.   The other alternative that has been suggested is to limit the possible attachment of the property of Lorraine Brice to the approximate $1.4 million being claimed.   That is unworkable because, yet again, there is a conflation between ultimate liability and security via a prejudgment remedy.   Plaintiff could attach $1.4 million of property of Lorraine Brice yet still, post-judgment, proceed against John Brice to the extent of whatever reachable assets (and income) he might have.   Alternatively, if plaintiff were to attach $700,000 of the property of each (as a matter of choice), again, there is nothing that would prevent plaintiff from seeking to execute against additional assets (or income) of John Brice.⁷  Neither suggested “solution” is really a solution.   In either scenario, it is the likelihood that John Brice would be the primary target for collection, post-judgment, that justifies his claim for some security against “excessive” guarantor liability, however measured.

The previously-identified issue of a “race” to attach the assets of defendant Lorraine Brice raises a significant concern.   In a sense it is a structural problem insofar as the statutory scheme for prejudgment remedies allows the situation to arise (if rarely) but without providing a statutory solution or guidance.   The statutes do not explicitly address the issue, yet it certainly would seem to frustrate the purpose of the statutes to have a party with secondary and contingent claims having superior security for potential liability than the plaintiff with the primary claims.   This comes back to the question raised in the earlier memoranda of decision as to whether the court has authority to try to apply equitable principles or whether the mantra more appropriately is “Keep It Simple.”   Yet again, the court must recognize that an attachment of Lorraine Brice's property does not prevent plaintiff from seeking to satisfy any judgment out of the assets of John Brice, even beyond the presumed 50% threshold for contribution.

The court has considered other options.   In order to address/prevent the hypothetical scenario whereby plaintiff attaches $1.4 million of assets of Lorraine Brice and defendant John Brice attaches a further $700,000, the court considered the possibility of ordering that any assets attached by defendant John Brice be subordinated to claims by plaintiff, thereby minimizing if not avoiding the theoretical possibility of excessive attachments.   Aside from questions as to whether the court has the power/authority to order such subordination in connection with a prejudgment remedy,⁸ yet again there is the problem that regardless of what is attached, plaintiff still has the prerogative of seeking to execute, post-judgment, on assets of John Brice as well as any income he may have at that time.

Similarly, the court considered whether its ability to order a bond—directed either to a claimant, or directed to a “defendant” in lieu of allowing property to be attached—might address some of the concerns raised by the parties.   While there is statutory authority for ordering bonds, none of the parties has requested a bond, and to the extent that a bond potentially imposes additional costs (of unknown magnitude to the court), the court does not believe it appropriate to take the initiative in that regard.⁹

The court recognizes that the concerns raised by the parties range from highly speculative/hypothetical to very real, but there is no proposed solution that does not have its own problems.   The issue of whether an attachment in favor of John Brice is premature must await a determination of whether the claim by John Brice, itself, is premature in the sense that it cannot even be asserted until after the proverbial dust has settled with respect to the claim of plaintiff, including efforts to collect on any resulting judgment.

The court is mindful that this is a multifaceted dispute and that in connection with the dissolution action, the respective rights and responsibilities of the defendants, inter se, are likely to be addressed.   Should defendant John Brice's cross claim be stricken as premature, then defendant Lorraine Brice would be able to rely on that determination to seek to have the prejudgment remedy in favor of John Brice dissolved.   For now, however, the court sees no basis for making any substantive changes to its previous orders.

In sum, then, while the court recognizes that there are many good questions and issues that have been identified, the limited scope of this proceeding makes it all the more difficult to try to deal with what may well be characterized as structural problems.   Rather than trying to deal with creative solutions of questionable efficacy (and legality), the court will address the “race” issue alone by the perhaps simplistic approach of staggering the dates on which orders are issued.

Accordingly, while the court has granted the parties' motions for reargument and reconsideration to the extent of entertaining the arguments presented in those pleadings, the court is denying any formal relief.

POVODATOR, J.

FOOTNOTES

FN1. Other than in paragraph 4 of the proposed complaint, plaintiff does not appear to differentiate between the corporate borrower (which is not a party to this action) and the individual defendants who were the officers of the corporate borrower as well as guarantors of the note.   See, e.g., ¶ 8 of the proposed complaint (“According to the terms of the Note, the defendants were obligated to make monthly payments to the plaintiff as described therein”).   Plaintiff makes no allegations suggestive of a “piercing the corporate veil” approach to the case..  FN1. Other than in paragraph 4 of the proposed complaint, plaintiff does not appear to differentiate between the corporate borrower (which is not a party to this action) and the individual defendants who were the officers of the corporate borrower as well as guarantors of the note.   See, e.g., ¶ 8 of the proposed complaint (“According to the terms of the Note, the defendants were obligated to make monthly payments to the plaintiff as described therein”).   Plaintiff makes no allegations suggestive of a “piercing the corporate veil” approach to the case.

FN2. Perhaps not so significant:  Both parties expressed their exception to the court's observation that counsel for these parties appear to share office space (based on court records).   Although plaintiff professes that it is simply that they each have an office in the same building, plaintiff's own motion reflects that both offices are located in the same suite in that building—plaintiff's signature block on page 3 and the certification of service to opposing counsel on page 4 both refer to Suite 206.   It seemed/seems reasonable to infer that offices within a suite share at least some common facilities/areas—presumably the reason to have multiple offices in a single suite..  FN2. Perhaps not so significant:  Both parties expressed their exception to the court's observation that counsel for these parties appear to share office space (based on court records).   Although plaintiff professes that it is simply that they each have an office in the same building, plaintiff's own motion reflects that both offices are located in the same suite in that building—plaintiff's signature block on page 3 and the certification of service to opposing counsel on page 4 both refer to Suite 206.   It seemed/seems reasonable to infer that offices within a suite share at least some common facilities/areas—presumably the reason to have multiple offices in a single suite.

FN3. See, e.g. Colgan v. Stamford Zoning Board of Appeals, 1999 Ct.Sup. 11030 (J.D. Stamford/Norwalk at Stamford, CV99 0170844;  August 16, 1999)..  FN3. See, e.g. Colgan v. Stamford Zoning Board of Appeals, 1999 Ct.Sup. 11030 (J.D. Stamford/Norwalk at Stamford, CV99 0170844;  August 16, 1999).

FN4. General Statutes § 52–278c provides that “any person desiring to secure a prejudgment remedy shall attach his proposed unsigned writ, summons and complaint to the following documents ․” (emphasis added)..  FN4. General Statutes § 52–278c provides that “any person desiring to secure a prejudgment remedy shall attach his proposed unsigned writ, summons and complaint to the following documents ․” (emphasis added).

FN5. The hypothetical also conflates the purpose of the prejudgment remedy with the ultimate outcome, when under any theory, there are potential outcomes for which the cross complaint, given its contingent nature, might not even come into play.   The most obvious, if trivial, example of such a scenario would be if the ultimate result were that the loan had been forgiven such that there is no guarantor liability.   And, of course, if defendant Lorraine Brice truly thought that her hypothetical were even a remotely-possible outcome, the simple solution would be for her to file a crossclaim of her own..  FN5. The hypothetical also conflates the purpose of the prejudgment remedy with the ultimate outcome, when under any theory, there are potential outcomes for which the cross complaint, given its contingent nature, might not even come into play.   The most obvious, if trivial, example of such a scenario would be if the ultimate result were that the loan had been forgiven such that there is no guarantor liability.   And, of course, if defendant Lorraine Brice truly thought that her hypothetical were even a remotely-possible outcome, the simple solution would be for her to file a crossclaim of her own.

FN6. Similar to plaintiff, defendant Lorraine Brice, in the middle of page 3, treats John Brice's current financial situation (as disclosed in the financial affidavit he filed in connection with the pending marriage dissolution action) as somehow determinative of his need for security for his cross claim.   As believed was mentioned during argument, the court's recollection is that the financial affidavits were submitted to demonstrate that both defendants acknowledged the continuing existence of the debt to plaintiff to counter the suggestion that the debt had been forgiven years ago.   Conversely, if plaintiff and/or defendant Lorraine Brice believe that John Brice's ultimate ability to pay plaintiff is less than half of the gross amount of approximately $1.4 million, the reluctance to agree to approximately $700,000 attachments against each defendant serves no apparent purpose.   To approach it from a different perspective, as long as plaintiff insists that it is entitled to an attachment of more than $700,000 against John Brice, John Brice is entitled to security against that excess via an attachment of property of Lorraine Brice, particularly given the likelihood that he, not she, would be the primary target of collection efforts..  FN6. Similar to plaintiff, defendant Lorraine Brice, in the middle of page 3, treats John Brice's current financial situation (as disclosed in the financial affidavit he filed in connection with the pending marriage dissolution action) as somehow determinative of his need for security for his cross claim.   As believed was mentioned during argument, the court's recollection is that the financial affidavits were submitted to demonstrate that both defendants acknowledged the continuing existence of the debt to plaintiff to counter the suggestion that the debt had been forgiven years ago.   Conversely, if plaintiff and/or defendant Lorraine Brice believe that John Brice's ultimate ability to pay plaintiff is less than half of the gross amount of approximately $1.4 million, the reluctance to agree to approximately $700,000 attachments against each defendant serves no apparent purpose.   To approach it from a different perspective, as long as plaintiff insists that it is entitled to an attachment of more than $700,000 against John Brice, John Brice is entitled to security against that excess via an attachment of property of Lorraine Brice, particularly given the likelihood that he, not she, would be the primary target of collection efforts.

FN7. Relatively early during argument, the court raised the possibility, as identified in its memorandum of decision, of whether the court should “collapse” the two applications for prejudgment remedies into a single “net” order, with half of plaintiff's claim to be protected by an attachment of defendant John Brice's property, and half of plaintiff's claim to be protected by attachment of defendant Lorraine Brice's property.   Upon further consideration, this proposed solution still would have been vulnerable to the problem outlined in the text above.   In any event, however, Plaintiff expressed an objection, and to the extent that the court perceived plaintiff's right to adequate security as paramount, the court did not (and will not) pursue the matter further..  FN7. Relatively early during argument, the court raised the possibility, as identified in its memorandum of decision, of whether the court should “collapse” the two applications for prejudgment remedies into a single “net” order, with half of plaintiff's claim to be protected by an attachment of defendant John Brice's property, and half of plaintiff's claim to be protected by attachment of defendant Lorraine Brice's property.   Upon further consideration, this proposed solution still would have been vulnerable to the problem outlined in the text above.   In any event, however, Plaintiff expressed an objection, and to the extent that the court perceived plaintiff's right to adequate security as paramount, the court did not (and will not) pursue the matter further.

FN8. In addition to the ever-present concern about exceeding the scope of relief being sought by the parties and the related concern about lack of notice to the parties, the court examined § 52–278k which authorizes the court to modify the prejudgment remedy being requested.   The court's brief research failed to disclose any authority suggesting that the statute was intended to be applied in this manner..  FN8. In addition to the ever-present concern about exceeding the scope of relief being sought by the parties and the related concern about lack of notice to the parties, the court examined § 52–278k which authorizes the court to modify the prejudgment remedy being requested.   The court's brief research failed to disclose any authority suggesting that the statute was intended to be applied in this manner.

FN9. It is not clear whether a bond approach could address all of the problems that have been identified;  if any of the parties believes that a bond approach would be preferable, that party can file a suitable motion (§ 52–278d(d))..  FN9. It is not clear whether a bond approach could address all of the problems that have been identified;  if any of the parties believes that a bond approach would be preferable, that party can file a suitable motion (§ 52–278d(d)).

Povodator, Kenneth B., J.