Emanuel Falaguerra v. Panfilo Guglielmi, Jr. et al. (2013)

MEMORANDUM OF DECISION RE MOTION TO STRIKE # 133

I. INTRODUCTION

The action was filed by writ, summons and complaint with a return date of May 24, 2011.   The defendants are Panfilo Guglielmi, Jr., Zeldis Guglielmi & Company, LLP, Advanced Capitol Advisors, LLC, Lincoln National Life Insurance Company (“Lincoln”), Quantlife Settlements, LLC (Quantlife), Life Insurance Finance Solutions, H.M. Ruby Fund, Himelsein Mandel Fund Management, LLC, Wayne Himelsein (“Himelsein”), National Bank of California (“NBCAL”), Robert Colson (“Colson”), Mark Hathaway, and Maria Guglielmi.   The plaintiff filed a Second Revised Amended Complaint dated February 17, 2012 which is the subject of the motion to strike.   The Second Revised Complaint contains twenty-seven counts.   The defendant Lincoln National Life Insurance Company filed the motion to strike the Twenty–Fourth and Twenty–Fifth Counts of the Second Revised Amended Complaint dated March 5, 2012.   The plaintiff filed a memorandum in opposition to the motion dated March 26, 2012 and the plaintiff filed a reply dated April 5, 2012.

II. FACTUAL BACKGROUND

The plaintiff, Emanuel Falaguerra purchased a life insurance policy from the defendant Lincoln National Life Insurance Policy (Lincoln) about 2008.   This policy has been referred to as a stranger-originated life insurance (“STOLI”) transaction by the plaintiff and defendants.   The plaintiff was involved in a business relationship and in particular an accounting business relationship with the defendant, Panfilo Guglielmi (Guglielmi).   In 2008 Guglielmi discussed the purchase of a life insurance policy for five million dollars with the plaintiff.   The policy would be purchased and would be part of an irrevocable trust entitled the Emanuel Falaguerra Irrevocable Trust.   With the assistance of Guglielmi and others the trust was formed and the plaintiff began to apply for a life insurance policy with Lincoln National Life Insurance Company.   The defendant, Robert Colson, an insurance broker (agent) with Lincoln was involved in assisting the plaintiff to purchase the policy.   The plaintiff was guided by Guglielmi and Colson to finance the premiums for the policy by taking a loan from the National Bank of California (NBCAL).   Guglielmi and Colson assisted the plaintiff in filling out the life insurance policy and submitted it for consideration.   One of the areas of inquiry for the policy and loan was an estimate of the value of the plaintiff's assets.   The defendants Colson and Guglielmi filled out the forms for the policy by including information as to the assets of the plaintiff without verifying the accuracy of the assets.   They also assisted in the application for the bank loan from NBCAL which also required an estimate of assets.   The premium payments for the first two years for the life insurance policy was approximately $420,000.   The plaintiff received a loan from NBCAL for payment of the premium for the first year.   The first loan issued to the trust from NBCAL was for $365,000.   This loan required that the plaintiff also sign a personal guaranty.   The second loan from NBCAL for $55,000 was secured by Falaguerra's Northwestern Mutual Life insurance policy for $55,000.   On September 25, 2008, at about the same time the plaintiff purchased the life insurance policy, he entered into a holder rights agreement or what is also termed a “put contract” with the defendant Quantlife.   This agreement with Quantlife involved their purchase of the Lincoln life insurance policy two years and one day after the Lincoln Policy was issued.   This purchase was orchestrated so that it would provide a return for the premiums paid by the plaintiff as well as a profit to the plaintiff.

The Plaintiff paid the premiums amounting to $420,000 by borrowing the money for the first two years.   The policy was to be sold in accordance with the agreement with Quantlife.   However, after the passage of two years and payment of the premiums, the defendant Quantlife announced it was not purchasing the life insurance policy.   The plaintiff did not have the funds to pay further premiums and thus the policy terminated for non-payment.   The plaintiff did not have a purchaser for the life insurance policy.   He was responsible for the monies borrowed from NBCAL for the first two years of premiums.   The plaintiff has filed this legal action seeking damages and a declaratory judgment.

III. DISCUSSION

A. GENERAL STANDARD

“The purpose of a motion to strike is to contest ․ the legal sufficiency of the allegations of any complaint ․ to state a claim upon which relief can be granted.”  (Internal quotation marks omitted.)  Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).  “It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted.”  (Internal quotation marks omitted.)  Coe v. Board of Education, 301 Conn. 112, 116–17, 19 A.3d 640 (2011).  “[P]leadings must be construed broadly and realistically, rather than narrowly and technically.”  (Internal quotation marks omitted.)   Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 253, 990 A.2d 206 (2010).  “If any facts provable under the express and implied allegations in the plaintiff's complaint support a cause of action ․ the complaint is not vulnerable to a motion to strike.”  Bouchard v. People's Bank, 219 Conn. 465, 471, 594 A.2d 1 (1991).

Count twenty-four alleges that the defendants are liable pursuant to a claim of unfair insurance practices based CUTPA claims.   This count is addressed specifically to the defendant Lincoln National Life. Count twenty-five is also a claim against Lincoln National Life but seeks a declaratory judgment.   The defendant Lincoln National Life argues that the court should strike these counts because the Revised Complaint (Count Twenty-four) lacks sufficient supporting factual allegations of an underlying violation of Conn. Gen.Stat. § 38a–815(1), (2), or (8) to state of claim.   The defendant alleges that as to Count Twenty-five the plaintiff has failed to comply with procedural requirements for filing of a declaratory judgment claim.

B. COUNT TWENTY–FOUR CUIPA

The defendant, Lincoln National Life Insurance (“Lincoln”) contends that Count Twenty–Four does not contain allegations applicable directly to Lincoln but are claims of vicarious liability for the actions of Colson and thus not a basis for a violation of CUIPA by this defendant.   The defendant contends that the allegations are merely a recitation of the statutory language and thus do not satisfy the pleading requirements for a CUIPA claim.   It further argues that the complaint has placed Lincoln in the position of victim and perpetrator which prevents Colson's violative conduct from being imputed to Lincoln.   In support of this argument, the defendant relies upon Lewis v. Michigan Millers Mut. Ins. Co., 154 Conn. 660, 664, 228 A.2d 803 (1967) which states that the insurance broker is the agent of the person procuring the insurance and not the agent of Lincoln.¹

The plaintiff contends that the defendant has failed to address all of the allegations within the Revised Complaint in arguing that Count Twenty–Four has sufficiently pled a claim for a violation of C.G.S. § 38a–816(1).   In particular, the plaintiff refers to the factual background set forth in the First Count of the complaint that was incorporated into the present count.   Conn. Gen.Stat. § 38a–816(1) defines unfair practices as:  “(1) Misrepresentations and false advertising of insurance policies.   Making, issuing or circulating, or causing to be made, issued or circulated, any estimate, illustration, circular or statement, sales presentation, omission or comparison which:  (A) Misrepresents the benefits, advantages, conditions or terms of any insurance policy;  (B) misrepresents the dividends or share of the surplus to be received on any insurance policy;  (C) makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy;  (D) is misleading or is a misrepresentation as to the financial condition of any person, or as to the legal reserve system upon which any life insurer operates ․” Conn. Gen.Stat. § 38a–816(2) provides as to false information that it is:  “․ Making publishing, disseminating, circulating or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated or placed before the public, in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio or television station, or in any other way, an advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business, which is untrue, deceptive or misleading.”

The defendant in its' motion to strike takes some liberties in reciting the allegations in the complaint.   The court has viewed each allegation included in the complaint as a basis to determine if the complaint satisfies the pleading requirements.   The plaintiff has provided a number of factual allegations in support of his claim pursuant to CUIPA.   Contrary to the claims of the defendant, the allegations in the Revised Complaint provide sufficient facts.   In particular, paragraph 6 of the First Count designates that the defendant Colson was not only an insurance broker but that he was “soliciting and selling insurance products.”   Paragraph 25 refers to Colson as an insurance agent authorized to act for and on behalf of Lincoln.   The product at issue here was the Lincoln National STOLI policy which was presented and sold to the plaintiff.  C.G.S. § 38a–816(1) and (2) do not require allegations of a business practice but the complaint does need factual allegations other than a recitation of the statute.   Unlike the case of Finocchino v. Atlantic Mut. Ins. Co., 47 Conn. L. Rptr. 624, (Conn.Super. Apr. 22, 2009) relied upon by the defendant, this complaint consists of allegations beyond the simple inclusion of the statutory language.   The allegations in Paragraph 13 outline the action taken by all of the defendants to sell the “plaintiff a life insurance policy for which he was ill-suited and could not afford ․” Thereafter in paragraphs 20 and 25 of the First Count the plaintiff sets forth a litany of acts and allegations in support of the CUIPA claim.   Paragraph 20 describes a course of conduct to create the irrevocable trust, borrow money and eventually place the policy into a security which would be sold.   This paragraph includes all of the defendants.   Paragraph 25 specifically speaks to the actions of Colson as the insurance agent of Lincoln in procuring and then selling the policy to the plaintiff as an agent of Lincoln.   The plaintiff alleges that the defendants as a group, each with different organizations and skill sets put together the plan which engaged the plaintiff.   The allegations may not be as factually specific as the defendants would like but the complaint when viewed in a manner most favorable to the plaintiff offers sufficient facts to deny the motion to strike for legal insufficiency.

Therefore, the plaintiff has pled sufficient facts to allege a cause of action and the motion to strike Count Twenty–Four is denied.

C. COUNT TWENTY–FIVE DECLARATORY JUDGMENT

The Twenty–Fifth count is a cause of action for declaratory judgment.   The defendant sets forth a number of arguments to strike this count including procedural defects, that the claim is moot and the facts do not support a cognizable non-declaratory claim.   The plaintiff filed an Amendment dated April 30, 2012 to the complaint to comply with Practice Bk. § 17–56b and address the claim of a procedural defect.   The motion was granted absent objection from the defendants.   Thus the filing of the amendment cured the alleged procedural defects.

“The purpose of a declaratory judgment action, as authorized by General Statutes 52–29 and Practice Book § 17–55 is to secure an adjudication of rights where there is a substantial question in dispute or a substantial uncertainty of legal relations between the parties ․ [D]eclaratory relief is a mere procedural device by which various types of substantive claims may be vindicated ․ Implicit in these principles is the notion that a declaratory judgment action must rest on some cause of action that would be cognizable in a non-declaratory suit.   To hold otherwise would convert our declaratory judgment statute and rules into a convenient route for procuring an advisory opinion on moot or abstract questions and would mean that the declaratory judgment statute and rules created substantive rights that did not otherwise exist.”  (Citations omitted;  internal quotations marks omitted.)  Bysiewicz v. Dinardo, 298 Conn. 748, 756–57, 6 A.3d 726 (2010).  Practice Book § 17–54 provides:  “The judicial authority will, in cases not herein excepted, render declaratory judgments as to the existence or nonexistence (1) of any right, power, privilege or immunity;  or (2) any fact upon which the existence or nonexistence of such right, power, privilege or immunity does or may depend, whether such right, power, privilege or immunity now exists or will arise in the future.”   The Practice Book further states that a declaratory action may be maintained if all of the following conditions have been met:  “(1) The party seeking the declaratory judgment has an interest, legal or equitable, by reason of danger of loss or of uncertainty as to the party's rights or other jural relations;  (2) There is an actual bona fide and substantial question or issue in dispute or substantial uncertainty of legal relations which requires settlement between the parties, and (3) In the event that there is another form of proceeding that can provide the party seeking the declaratory judgment immediate redress, the court is of the opinion that such party should be allowed to proceed with the claim for declaratory judgment despite the existence of such alternate procedure.”  Conn. Practice Book § 17–55.

In the present action, the defendant argues that the declaratory action is not justiciable.   The defendant contends that the claim is moot because the policy lapsed for non-payment of the premiums.   The plaintiff requests in the complaint that the court declare the life insurance contract “void and that the plaintiff should be returned to the status quo ante ․” In this regard what the plaintiff is seeking is not a renewal of the policy but a return of the premiums he paid for the policy based upon alleged fraud of the defendants.   The plaintiff contends that the underlying contract is fraudulent and as such he is entitled to, among other remedies, a rescission of the contract or restitution to the plaintiff and a declaratory judgment.

The defendant further contends that the declaratory judgment does not rest on any cause of action which would be cognizable in a non-declaratory suit and thus based upon this argument there is no justiciable claim.

The defendant's first argument contends that as a result of voiding the contract for non payment of premiums, the claims are moot.   The plaintiff does not address this argument in any meaningful manner except to refer to the claim of fraud by the defendants.   The plaintiff contends that there is an issue of fraud in the inducement to enter into the contract and thus it is justiciable.  “Fraud in the inducement of a contract ordinarily renders the contract merely voidable at the option of the defrauded party, who also has the choice of affirming the contract and suing for damages ․” Sangivanni & Sons v. F.M. Floryan & Co., 158 Conn. 467, 472, 262 A.2d 159 (1969).   However, the facts alleged in the complaint clearly indicate that there is no existing contract.   The plaintiff relies upon Leisure Resort Technology, Inc. v. Trading Cove Associates, 277 Conn. 21, 889 A.2d 785 (2006) for his position that the plaintiff as an alleged defrauded party has the option of seeking rescission or enforcement of the contract.   The facts in Leisure Resort are not similar and unlike the facts in this action there was a pending contract to rescind or enforce.   The defendant's argument that the contract no longer exists and therefore the plaintiff's cause of action for declaratory judgment is moot is well taken.   It is well established that “before a claimed controversy is entitled to a resolution on the merits it must be justiciable.”  State v. Nardini, 187 Conn. 109, 111, 445 A.2d 304 (1982).   The Nardini court held that the following four elements must exist for a claim to be justiciable:  “(1) that there be an actual controversy between or among the parties ․ (2) that the interests of the parties be adverse ․ (3) that the matter in controversy be capable of being adjudicated by judicial power ․ and (4) that the determination of the controversy will result in practical relief to the complainant.”  Id. at 111–12 (internal citations omitted).   The claims in Count Twenty–Five of the Second Revised Complaint allege that the life insurance policy was induced by fraud and that the defendant Lincoln Life engaged in negligence as to the training, oversight, and investigation of individual defendants who were engaged in the selling and marketing of the policies.   These claims as alleged by the plaintiff are specifically related to the actions of the defendants Guglielmi, Colson, and Hathaway in marketing the policy and thereafter in their conduct in improperly including false background information.   The parties agree that the policy is no longer in effect and that the relief requested is in the form of rescission of a contract that no longer exists.   The allegations of the plaintiff are particular to him and the alleged acts of the defendants related to the methods which they employed to sell and enter into a life insurance policy with this plaintiff.   Neither the allegations in Count Twenty–Five nor the specific alleged conduct involve a pending claim that relates to an existing contract.   “It is a well settled general rule that the existence of an actual controversy is an essential question to ․ jurisdiction, it is not the province of ․ courts to decide moot questions, disconnected from the granting of actual relief or from the determination of which no practical relief can follow ․ An actual controversy must exist not only at the time the [case is brought] but also throughout the pendency of the [case] ․ When during the pendency of [a case], events have occurred that preclude [the] ․ court from granting any practical relief through its disposition on the merits, a case has become moot ․ The determination of whether a claim has become moot is fact sensitive ․” (Citations omitted;  internal quotation marks omitted).   Ayala v. Smith, 236 Conn. 89, 93–94, 671 A.2d 345 (1996).   The allegations clearly indicate that the plaintiff is not presently a party to the contract and is not requesting that the court enforce the policy to enable him to continue his obligation under the agreement but instead is seeking the rescission.   Because there is no pending contract or substantial legal question for this court to decide, there is no practical relief which the court can render to the plaintiff in the form of a declaratory judgment.   Therefore, the motion to strike is granted on this basis and the court need not address the defendant's remaining argument.

IV. CONCLUSION

The motion to strike is denied as to Count Twenty–Four and granted as to Count Twenty–Five.

THE COURT

Brazzel–Massaro, J.

FOOTNOTES

FN1. Note that Colson is referred to as the insurance agent also in this action in Count One, Paragraph 25..  FN1. Note that Colson is referred to as the insurance agent also in this action in Count One, Paragraph 25.

Brazzel–Massaro, Barbara, J.