Smith v. Marshview Fitness, LLC

191 Conn.App. 1

212 A.3d 767

Brant SMITH

v.MARSHVIEW FITNESS, LLC, et al.

AC 41219

Appellate Court of Connecticut.

Argued March 11, 2019

Officially released June 25, 2019

Rowena A. Moffett, New Haven, for the appellant (plaintiff).

Kenneth J. McDonnell, Essex, with whom, on the brief, was Michael L. McGlinchey, for the appellee (named defendant).

Prescott, Elgo and Bishop, Js.

PRESCOTT, J.

In this commercial dispute relating to the sale of certain property belonging to two fitness centers, the plaintiff, Brant Smith, appeals from the summary judgment rendered in favor of the defendant Marshview Fitness, LLC.¹ The trial court concluded that the defendant was entitled to summary judgment because the transfer of certain property, in which the plaintiff claims to have had an economic interest, was not fraudulent, as a matter of law, under either the common law or the Uniform Fraudulent Transfer Act (UFTA), General Statutes § 52-552a et seq. In doing so, the trial court also rejected the plaintiff's related claim under the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq.

On appeal, the plaintiff claims, among other things,² that the trial court improperly (1) concluded that the transfer at issue was not fraudulent under the common law or UFTA because the property that was transferred did not constitute "assets," (2) rejected his CUTPA claim on the ground that it was based solely on his allegations of fraudulent transfer, and (3) denied his motion to reargue. We affirm the judgment of the trial court.

The trial court set forth the following factual and procedural history. "The plaintiff was the owner of two fitness centers that had been operated as ‘Shoreline Health and Fitness’ in Clinton and Old Saybrook, Connecticut. On September 15, 2010, the plaintiff and his former partners sold the businesses to Ryan Rothschild. Rothschild bought the businesses through two separate companies, SHF-Clinton, LLC, and SHF-Old Saybrook, LLC (SHF entities). The Rothschild/SHF entities' purchase of the plaintiff's fitness centers was financed by Wells Fargo Bank [Wells Fargo] under a program sponsored by the United States Small Business Administration [SBA]. The principal amount of the Wells Fargo loan at the time of the plaintiff's sale to the SHF entities was $1.2 million. That loan was secured by a security interest in the assets of the SHF entities, which was prior in right to the security interest of the plaintiff.

"As part consideration for the sale to Rothschild, the plaintiff took back a promissory note for $150,000 and another note for $300,000. Rothschild defaulted on the notes, and the plaintiff commenced [an action] against him titled Smith v. Rothschild , [Superior Court, judicial district of Middlesex, Docket No. CV-14-6012641-S] (Rothschild action). In that case, the plaintiff filed a motion for temporary injunction and court-ordered inspection of company records dated October 21, 2014. That motion sought to enjoin Rothschild from selling the interests or assets of the SHF entities and an order permitting the plaintiff to inspect and copy the books and records of the SHF entities. The plaintiff never sought a hearing or otherwise proceeded on the foregoing motion.

"In connection with the motion for temporary injunction, the plaintiff signed an affidavit in which he averred that the $300,000 note referred to above was secured by a security agreement [that] gave the plaintiff ‘a continuing security interest in all of the assets of [the SHF entities].’ ... [The plaintiff] also averred that ‘I maintain that I am entitled to a right of first refusal with respect to any proposed sale of the [SHF entities].’ ...

"While the plaintiff was litigating his claims against Rothschild, he was simultaneously negotiating with Rothschild to purchase the assets of the SHF entities. The plaintiff's offer to purchase the assets of the SHF entities was accepted by Rothschild. However, Wells Fargo did not accept the offer because SBA regulations prohibited repurchase of the assets by the plaintiff, a former owner. At that time, Rothschild and the SHF entities owed Wells Fargo in excess of $800,000 on the SBA loan used to purchase the assets from the plaintiff. Wells Fargo had to agree to release its security interest in the SHF entities' assets before [they] could be sold.

"[The defendant] was the landlord for the SHF-Clinton fitness center. The members of [the defendant] are Todd Pozefsky and John Giannotti. After the plaintiff's failed attempt to purchase the assets of the SHF entities, Pozefsky and Giannotti negotiated with Rothschild for the purpose of purchasing the assets of the SHF entities so that Rothschild would voluntarily vacate the [defendant's] premises.

"[The defendant] reached an agreement with Rothschild to purchase the assets of the SHF entities. The agreement was approved by Wells Fargo, which agreed to accept $100,000 to release its security interest in the SHF entities' assets, even though its loan exceeded $800,000. Wells Fargo approved the sale by Rothschild contingent on the plaintiff receiving no more than $63,500 in exchange for the release of his subordinate security interest in the assets of the SHF entities. At his deposition, the plaintiff admitted that he was aware of the [defendant's] purchase, and that he was represented by counsel in the preparation of a payoff letter accepting $59,806.13 in exchange for a release ‘terminating [his Uniform Commercial Code] lien on the assets of the [SHF entities].’ ...

"On February 26, 2016, Wells Fargo released its lien on the SHF entities' assets in exchange for $100,000, and the plaintiff released his subordinate lien on those assets in exchange for $59,806.13.³ On February 29, 2016, [the defendant] then sold the assets to a new tenant in the building for $159,806.13, the exact amount it had paid for the assets.

"After the sale of the SHF entities' assets, Rothschild stopped defending the Rothschild action and allowed a default judgment to enter against himself and the SHF entities. Rothschild then appealed the default judgment and filed bankruptcy proceedings. Although the plaintiff released his lien in order to permit the sale of the SHF entities' assets to occur, he now claims that [the] sale constituted a fraudulent transfer as to him." (Citations omitted; footnote added.)

The plaintiff brought this action by way of a four count complaint dated August 10, 2016, alleging violations of UFTA under General Statutes §§ 52-552e and 52-552f in the first two counts, respectively, a common-law fraudulent transfer in the third count, and a violation of CUTPA in the fourth count. The plaintiff alleged that the defendant and the SHF entities conspired to "strip the SHF entities of assets sufficient to satisfy their indebtedness to [him]" by fraudulently transferring the assets of the SHF entities to the defendant for a price that was not reasonably equivalent to their value.

On August 1, 2017, the defendant moved for summary judgment, arguing that it was entitled to judgment as a matter of law on all counts of the plaintiff's complaint. The plaintiff objected to the defendant's motion, asserting that the defendant had "failed to meet its burden of showing that there was no genuine issue as to any material fact." By way of a written memorandum of decision filed on November 16, 2017, the court granted the defendant's motion for summary judgment. The court concluded that the defendant was entitled to judgment as a matter of law on the plaintiff's fraudulent transfer claims for three reasons: (1) the plaintiff consented to and voluntarily participated in the transaction that he now claims was fraudulent; (2) the defendant retained no proceeds from the transaction; and (3) the property that was transferred did not constitute "assets" of the SHF entities because it was encumbered by a valid lien. The court further concluded that the defendant was entitled to judgment as a matter of law on the plaintiff's CUTPA claim because that claim was based on the invalid claims of fraudulent transfer. The court denied the plaintiff's subsequent motion to reargue, and this appeal followed.

We begin by setting forth the relevant standard of review that governs our review. "The standard of review of a trial court's decision granting summary judgment is well established. Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.... The courts are in entire agreement that the moving party ... has the burden of showing the absence of any genuine issue as to all the material facts .... When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue.... Once the moving party has met its burden, however, the [nonmoving] party must present evidence that demonstrates the existence of some disputed factual issue.... Our review of the trial court's decision to grant the defendant's motion for summary judgment is plenary.... On appeal, we must determine whether the legal conclusions reached by the trial court are legally and logically correct and whether they find support in the facts set out in the memorandum of decision of the trial court." (Citations omitted; internal quotation marks omitted.) Lucenti v. Laviero , 327 Conn. 764, 772–73, 176 A.3d 1 (2018). With these principles in mind, we turn to the plaintiff's claims on appeal.

I

The plaintiff first challenges the trial court's summary judgment on his claims of fraudulent transfer. Specifically, the plaintiff argues...