DFT LLC v. Danielle Scialpi (2014)

MEMORANDUM OF DECISION

The plaintiff in the above captioned action, DFT Management, LLC, a Connecticut limited liability company engaged in the business of real estate investment, has brought suit against the defendant, Danielle Scialpi, a local real estate broker, alleging that she violated certain regulatory and fiduciary obligations owed to the plaintiff in her dealings with it.   The plaintiff alleges that it suffered substantial monetary losses as a direct result of these violations and asks the court to award it compensatory and punitive damages under two different and distinct theories of recovery.   The plaintiff's first theory of recovery alleges that the defendant was not licensed as a real estate broker during the times she rendered services to the plaintiff, or alternatively, that she was affiliated with an agency that did not exist during the time she rendered services to the plaintiff.   Therefore, according to the plaintiff, the defendant illegally received commissions for the services she rendered, and the commissions must be returned to the plaintiff.

As developed at trial, the second theory of recovery relied on by plaintiff is somewhat more complicated.   The second theory alleges that the defendant used “confidential and privileged information regarding the plaintiff and its related entities and subsidiaries” to defraud the plaintiff of approximately $287,000.00 that the plaintiff had invested in a certain parcel of real property located at 443 North Street, Greenwich.   The plaintiff alleges that the defendant conspired with Dominick Carpenito, a longtime family friend and former employee of the plaintiff,¹ to place a fraudulent (or at least questionable) mechanic's lien on 443 North Street, Greenwich, days before sale of the property and then wrongfully convert the equity that the plaintiff had contributed to 443 North Street to Carpenito.   The plaintiff alleges that at all times the defendant was fully aware that the plaintiff had contributed approximately $287,000 toward the purchase and/or improvement of 443 North Street and retained some degree of control over the property.   Notwithstanding this knowledge, according to the plaintiff, the defendant still took steps as a broker to market and sell the property without notifying any representatives of the plaintiff.   The plaintiff further alleges that when acting as agent for sale of this particular parcel the defendant violated her broker's fiduciary obligation to it by:  (1) brokering the transaction in the first place knowing that the sale would result in a fraudulent payment to Carpenito and taking a commission payment from it;  and (2) facilitating the transaction by issuing a broker's opinion of value letter which fraudulently set forth a below-market value for this property and expedited its sale.   Therefore, according to representatives of the plaintiff, the evidence is clear that the defendant used privileged and confidential information obtained through her prior years of contact and business association with the plaintiff to engage in a conspiracy with Carpenito to defraud the plaintiff of money rightfully belonging to it and in so doing violated her fiduciary obligations to it.

At trial the plaintiff, through its managing member, Sherry DeVito, and Dominick DeVito (whose relationship and authority to act or speak on behalf of the plaintiff was not made clear at trial) testified to the following facts and circumstances:

(a) In 2007 Dominick DeVito, his elderly father and his wife, Sherry DeVito, were parties in some fashion to an “asset protection trust” which owned, operated, and/or managed the family businesses.   One of these affiliated businesses was the plaintiff, DFT Management, LLC (“DFT”).  The plaintiff's business model included creating DFT and other “single-asset” entities which entered into joint venture partnership and/or limited liability company agreements with other real estate investors.   Title to the targeted real estate investment properties in Greenwich and other towns was purchased and held by the other party, while the plaintiff maintained “control” over the properties by virtue of the joint venture agreement.   In three of the investments described by Dominick DeVito in his direct testimony, the plaintiff provided capital for each project and the other party held title to the property.   Two properties purchased, improved and then resold by the plaintiff in this manner during the time relevant to the plaintiff's complaint were properties located at 23 Bedford Road and 51 Byram Avenue.   The owner of each of these properties at the time of resale was Linda Larson, a joint venturer with plaintiff, and the broker for each of the resales was the defendant.

(b) Sometime prior to 2010, the plaintiff entered into a similar joint venture agreement (the terms of which were not provided to the court) with Joseph Prezioso for the purchase and possible development and resale of property located at 443 North Street, Greenwich.

(c) The plaintiff contributed capital to the joint venture which was used for the purchase and/or improvement of the 443 North Street parcel.   The plaintiff offered no evidence as to precisely when the capital contribution was made or whether it was made toward the purchase price or later improvements to the property, or both.

(d) Title to the property was first taken in the name of Prezioso and his girlfriend, Kelly Gibbons, and then transferred to a limited liability company owned and/or controlled by the plaintiff (it was not made clear at trial whether Prezioso and Gibbons were also members of this limited liability company).   Prezioso then fell behind in the mortgage payments for 443 North Street, and the lender commenced a foreclosure action against it.   In order to permit a modification of the loan, the property was transferred back to Prezioso and Gibbons individually.

(e) In 2007 Dominick DeVito pled guilty to bank and insurance fraud charges and in 2009 began serving a 51–month sentence in federal prison.   He testified that despite his absence from the state he stayed in very close contact with his wife, Sherry DeVito, and others regarding operation of DFT and its related businesses and maintained complete control over it.

(f) For some time prior to 2009 or 2010, the plaintiff and its members were also affiliated with LVE, LLC, also known as Lake View Estates, LLC (“LVE”), described as the “construction arm” of the DeVito family businesses.   LVE placed mechanic's liens on the 23 Bedford Road and 51 Byram Avenue properties to secure amounts claimed to be owed to it by the owners of those parcels.   Each of these claims of a mechanic's lien certificates was executed on behalf of LVE by Carpenito as President.

(g) LVE employed Carpenito in an executive capacity at all times relevant hereto until the date of his resignation from the company sometime in 2010.

(h) At some point in 2010 Prezioso and Gibbons listed 443 North Street for sale with the defendant.   To facilitate the sale, at some point the defendant issued a broker's opinion letter of value, stating that the property was worth approximately $500,000.

(i) The property was sold in 2010 in a “short sale” arranged by the defendant to Anna Maria Oppedisano for $510,000.00.   Although not entirely clear from the evidence presented, i.e., plaintiff's Ex. 2, all net proceeds of sale, after customary adjustments and payments for conveyance taxes and brokerage commissions, were paid to the foreclosing mortgagee.   Plaintiff's Exhibits 2, 3 and 4 make it perfectly clear that the buyer, Oppedisano, took title to the property subject at closing to a $285,000.00 mechanic's lien to LVE. Oppedisano had negotiated a payoff figure for release of the LVE lien prior to the closing on January 17, 2012 and she brought the additional $287,000.00 needed to secure release of this certificate of mechanic's lien to the closing.  (Plaintiff's Ex. 3.) This amount was then paid as a disbursement in the ordinary course by the seller's counsel, Ivey, Barnum & O'Mara, LLC. The defendant received a commission of $30,500.00 for her services in this transaction.

(j) The certificate of mechanic's lien on the North Street property in the amount of $287,000.00 paid at or shortly after this closing was in the name of LVE and signed by Carpenito, as President.   Dominick DeVito testified on behalf of the plaintiff that this certificate which was filed just days before the closing was invalid, never should have been paid, and essentially resulted in DET's capital contribution being paid wrongfully to Carpineto.

(k) Shortly thereafter, the new owner of the property, Oppedisano, listed the 443 North Street, Greenwich property for resale with the defendant and her new agency at a price of $1,200,000.00.   When this resale was completed sometime later, at a price of approximately $850,000.00 with the defendant and her new agency still acting as listing broker, the defendant was paid another commission, although the amount was never specified at trial.

(l) At some time after the first and second sales of the 443 North Street property had taken place, Dominick and Sherry Devito learned about them and discovered the payment to Carpenito in the name of LVE. Dominick DeVito testified again that Carpenito was never entitled to this payment, and that his efforts to find Carpenito and recover the $287,000.00 payment from him on behalf of DFT have been completely unsuccessful.²

The defendant briefly testified at trial and limited her direct testimony to her role as broker and agent for the owners of 443 North Street, which at the time of the first resale were Prezioso and Gibbons, and Oppedisano at the time of the second.   The defendant's argument in response to all of the allegations made on behalf of the plaintiff is that she and her company represented only the owners of the property at the time of each sale, and owed fiduciary obligations with respect to 443 North Street at the time of each sale only to them.

Trial was held in the above captioned matter on February 4, 2014, at which time both parties appeared and were heard.

Having heard the evidence presented by the plaintiff and the defendants, the court makes the following findings:

(1) At all relevant times, the plaintiff, DFT, was a limited liability company engaged in the business of purchasing, developing, improving and renovating real estate in the Town of Greenwich, Connecticut, for purposes of resale or rental.   The plaintiff's business during years prior to 2009 included entering into joint venture agreements with individuals who purchased certain parcels of real estate in their names, while DFT provided capital to develop or improve the properties for resale at a profit.   In some instances the plaintiff took title to the property in its name, and in other instances title would be held by the other partner or joint venturer.

(2) The defendant, Danielle Scialpi, was licensed as a real estate salesperson in accordance with General Statutes § 20–312, subsection (a) from December 4, 2007 through May 31, 2010, and as a real estate broker from May 6, 2010 through March 21, 2014.  (Defendant's Exhibits D and F.) The defendant was affiliated with Engel & Volkers Greenwich, LLC which was formed by Articles of Organization filed May 11, 2007, with the Connecticut Secretary of State.   (Defendant's Exhibit A.) Engel & Volkers Greenwich, LLC changed its name to EV Greenwich, LLC by Articles of Amendment dated April 28, 2009 filed with the Connecticut Secretary of State on April 29, 2009.  (Defendant's Exhibit B.) At some time thereafter EV Greenwich, LLC filed a Chapter 11 bankruptcy petition and Articles of Dissolution.   The court cannot determine from the evidence presented at trial whether the defendant was affiliated with EV Greenwich, LLC after it was dissolved, but that determination is not relevant to the court's judgment.

(3) At some point prior to commencement of the plaintiff's action (the exact dates are not clear from the evidence presented) the defendant acted as real estate salesperson and/or broker for at least three properties in which the plaintiff claims it had an interest, either as an investor or as controlling member or partner of a joint venture.   Sherry DeVito, managing member of the plaintiff, testified that the defendant acted as broker, agent or salesperson for the sale of real estate located at 23 Bedford Road, for 51 Byram Road and for a rental of 27 Vineyard Lane, all of which are in Greenwich, Connecticut.   Both Dominick DeVito and Sherry DeVito testified on behalf of the plaintiff that they had no complaints at the time about the defendant's service as a real estate agent for these three properties.   The court finds that the plaintiff was not the legal owner of either 23 Bedford Road or 51 Byram Road, and that the only interest that the plaintiff may have had in said real estate was as a member or partner of a joint venture with the legal titleholder of the respective parcels.

(4) The plaintiff alleges in the First Count of its three-count complaint that the defendant violated a fiduciary duty to it by failing to comply with licensing and other regulatory requirements applicable to all Connecticut real estate salespersons and real estate brokers as set forth in Chapter 392 of the General Statutes.   The plaintiff alleges that the brokerage firm with which the defendant was affiliated when she accepted listings for 23 Bedford Road and 51 Byram Road were illegal because Engel & Volker Greenwich, LLC was not a validly-existing corporation.   Therefore, according to the plaintiff, the defendant must disgorge all commission income received while either she or the company with which she was affiliated was not in compliance with Chapter 392 of the General Statutes.   The court finds that the defendant was validly licensed at all times relevant to the allegations in the plaintiff's complaint, and further finds that she was affiliated with a corporation validly-existing as a Connecticut limited liability company again at all times relevant to the allegations in the plaintiff's complaint.   The court finds that the company changed its name at some point, but remained in existence.   The plaintiff presented no evidence that Engel & Volker Greenwich, LLC or EV Greenwich, LLC was not itself properly licensed during the times alleged in the plaintiff's complaint.   Therefore, the court finds that the plaintiff has not proven by a preponderance of the evidence that the defendant was in violation of any of the provisions of Chapter 392 of the General Statutes.   The most that the court can ascertain from the evidence brought forth at trial is that the defendant may have mistakenly used the old name on the listing agreement instead of the new name, which the court finds to be an immaterial technical violation, if any.   The court also notes that Dominick DeVito, after having been shown defendant's Exhibits A through F at trial conceded that the defendant was “properly credentialed.”   The court therefore finds no basis in law or equity to require the defendant to return any commissions from the sale of 23 Bedford Road or 51 Byram Avenue properties, or from the rental of 27 Vineyard Road.

(5) The court finds insufficient evidence upon which to find that the defendant has violated any fiduciary obligations to the plaintiff in her service as a broker for the 443 North Street, Greenwich, property.   The court agrees as a matter of law with the defendant's argument that any duties which she owed to her principal as a real estate agent were owed to the owners of the property at the time the listing was signed.   Dominick DeVito conceded in his direct examination that he “lost control” over sale of the property once the property was placed in Prezioso's and Gibbons' names, despite the existence of a separate joint venture agreement regarding the property.   The plaintiff presented no evidence showing that the defendant played any role in the separate joint venture agreement.   Although the defendant testified that there were communications between her and Carpenito regarding the 443 North Street closing before it occurred, there is simply no evidence of a conspiracy to defraud the plaintiff other than Dominick DeVito's and Sherry DeVito's assertions.   The court agrees with counsel for the defendant's closing argument that the plaintiff failed to introduce at trial any evidence as to precisely what “privileged and confidential information regarding plaintiff and related entities and subsidiaries” the defendant used against the plaintiff.   Dominick DeVito's argument that a secret collaboration between Carpenito and the defendant was “the only way this could have happened” does not prove fraudulent acts by the defendant.   Under Connecticut law, the plaintiff has the burden of proving all elements of fraud by “clear, precise and unequivocal evidence”;  Garrigus v. Viarengo, 112 Conn.App. 655, 665, 963 A.2d 1065 (2009);  and the plaintiff has not done so in this case.

(6) The court agrees with the plaintiff's statement that real estate brokers and salespersons owe certain fiduciary obligations to the owners of the real estate who have entrusted the brokers with arranging sales of their properties, citing Licari v. Blackwelder, 14 Conn.App. 46, 54, 539 A.2d 609, cert. denied, 208 Conn. 803, 545 A.2d 1100 (1988).   In Licari, however, in contrast to the present case, there was no question as to the identity of the owners of the property, and consequently no question as to whom the fiduciary obligations ran.  Id., 47.   But in the present case there is no evidence that the defendant acted other than as a real estate broker or salesperson for Prezioso and Gibbons in the first instance, and Oppedisano in the second instance.   The court declines to extend a real estate broker's fiduciary obligations to persons who claim an indirect interest in the property, known or unknown to the broker, as the plaintiff would have the court do in the present case.   The plaintiff cites no authority that might compel the court to do so.   “An agent is a fiduciary with respect to matters within the scope of his agency.”  Chart Oak Lending Group, LLC v. August, 127 Conn.App. 428, 441, 14 A.3d 449, cert. denied, 302 Conn. 901, 23 A.3d 1241 (2011);  Restatement (Second) 1 Agency § 13.   The nature and extent of the agency relationship is a question of fact, and in the present case, insufficient evidence was presented at trial to establish that the defendant's agency relationship as real estate broker to the owners of 443 North Street included the plaintiff as co-principal.

The court notes where one party alleges breach of fiduciary duty on the part of one who enjoys a confidential relationship, the burden of proof shifts to the fiduciary to prove fair dealing by clear and convincing evidence.  Cadle Co. v. D'Addario, 268 Conn. 441, 445, 844 A.2d 836 (2004).   But in the present case, the court finds that the plaintiff has failed to make a prima facie showing of a fiduciary relationship between defendant and DFT with respect to the listing and sale of 443 North Street.

(7) The plaintiff's complaint alleges only “fraudulent non-disclosure of information about a January 2012 closing” leading to the plaintiff's losses.   In order to recover on a claim of failing to disclose material facts when there is a duty to do so, a party must prove first that the other party does indeed have a duty to disclose.   Viewed in the most favorable light, the plaintiff's evidence at trial demonstrated only that the defendant was aware that the plaintiff had some investment or other beneficial interest in the 443 North Street property, and that she represented the legal owners of the property when it was sold.   But the court cannot find from the evidence presented that the defendant had a duty to disclose details of the first (or second) 443 North Street sale to representatives of the plaintiff.   The court therefore finds that the plaintiff has not proven the elements of its cause of action for fraudulent non disclosure.

(8) The court is aware that the defendant chose not to specifically refute the allegations of Dominick and Sherry DeVito on behalf of the plaintiff, but disagrees with counsel for the plaintiff's argument that undisputed testimony by either party must be taken as established by the trier of fact.   The court, as the trier of fact, is free to accept or reject any part or the entire testimonial or demonstrative evidence introduced by a witness at trial and to accord whatever weight it wishes to any piece of evidence.  “In a case tried before the court, the trial judge is the sole arbiter of the credibility of the witnesses and the weight to be given specific testimony.”  ACMAT Corp. v. Great New York Mutual Ins. Co., 88 Conn.App. 471, 481, 869 A.2d 1254, cert. denied, 274 Conn. 903, 876 A.2d 11 (2005).   In the present case, the court did not find the testimony of either Dominick DeVito or Sherry DeVito entirely convincing or complete as to precisely how the defendant caused the loss of the $287,000.00 they claim she is responsible for.   The court notes that the truthfulness of Dominick DeVito's testimony was properly impeached by defendant's counsel by his prior felony convictions bearing directly on his personal credibility and past history of telling the truth.

(9) The court finds insufficient evidence that the defendant violated the Connecticut Unfair Trade Practices Act, as alleged in the third count of the plaintiff's complaint.  General Statutes § 42–110b provides:  “No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.”  “In determining whether a practice violates CUTPA, [Connecticut courts] are guided by the criteria set out in the Federal Trade Commission's so-called cigarette rule:  (1)[W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness;  (2) whether it is immoral, unethical, oppressive, or unscrupulous;  (3) whether it causes substantial injury to consumers, [competitors or other business persons].   All three criteria do not need to be satisfied to support a finding of unfairness.   A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three.”  (Citation omitted;  internal quotation marks omitted.)  Blackwell v. Mahmood, 120 Conn.App. 690, 703–04, 992 A.2d 1219 (2010).   Thus, in order to determine whether the defendant's actions support a claim under CUTPA, the court considers each element of the cigarette rule test as they apply to the facts of this case.   This court also recognizes the legislative intent that the Act should be applied in view of its remedial purposes.  General Statutes § 42–110b(d).

Despite the potentially broad reach of the Act, the court is unable to find any actions by the defendant that violated any of the three elements of the cigarette rule test.   The court reiterates that whatever fiduciary duty of loyalty and full disclosure that the defendant owed was owed only to the owner of the property at time of sale and/or listing.   As stated above, the court declines to extend the obligation of a real estate broker owed to a title holder to persons other than the title holder who may have a derivative and/or indirect interest in the property.

(10) The court finds no basis upon which to award punitive damages to the plaintiff as demanded in the Second Count of the plaintiff's complaint.

Judgment shall enter in favor of the defendant, Danielle Scialpi, and against plaintiff, DFT Management, LLC on all counts of the plaintiff's complaint.

So Ordered,

Anthony D. Truglia, Jr. J.

FOOTNOTES

FN1. And/or employee of one of the plaintiff's affiliated companies, Lake View Estate, LLC..  FN1. And/or employee of one of the plaintiff's affiliated companies, Lake View Estate, LLC.

FN2. The court notes that Mr. DeVito's testimony that he has no idea of Carpenito's current location conflicts somewhat with his testimony that Oppedisano is now suing Carpenito in New York state court..  FN2. The court notes that Mr. DeVito's testimony that he has no idea of Carpenito's current location conflicts somewhat with his testimony that Oppedisano is now suing Carpenito in New York state court.

Truglia, Anthony D., J.