Vill. Mortg. Co. v. Veneziano

203 Conn.App. 154

247 A.3d 588

VILLAGE MORTGAGE COMPANY

v.James VENEZIANO

AC 40701

Appellate Court of Connecticut.

Argued October 5, 2020

Officially released March 9, 2021

Gregory T. Nolan, with whom, on the brief, was Patsy M. Renzullo, Winsted, for the appellant (defendant).

Richard P. Weinstein, West Hartford, with whom, on the brief, was Sarah Black Lingenheld, Farmington, for the appellee (plaintiff).

Prescott, Suarez and DiPentima, Js.

SUAREZ, J.

The defendant, James Veneziano, was a founding shareholder and former employee, officer, and director of the plaintiff, Village Mortgage Company. The plaintiff brought the civil action underlying this appeal seeking relief related to the defendant's failure to comply with its corporate bylaws, which required the defendant to satisfy state and federal licensing requirements pertaining to its mortgage loan business. During the course of the underlying litigation, the trial court, relying on a stipulation entered into by the parties, ordered the defendant to satisfy the licensing requirements at issue by a certain date or, in accordance with the penalty for his noncompliance set forth in the plaintiff's bylaws, his stock in the plaintiff would be surrendered to the plaintiff. Subsequently, after finding that the defendant had failed to comply with its order, the court rendered judgment ordering the defendant's shares to be surrendered to the plaintiff.

From this judgment, the defendant appeals. The defendant claims that the court erred (1) in its interpretation of the parties’ stipulation, (2) by failing to apply the doctrines of substantial performance, waiver, and estoppel in its analysis of whether he satisfied the court's order, (3) in finding that the plaintiff did not breach the covenant of good faith and fair dealing, and (4) by denying his motion to open the judgment without holding a preliminary hearing related to the motion. The plaintiff argues that this court lacks subject matter jurisdiction over the appeal because the defendant's claims are moot. We agree with the plaintiff's jurisdictional argument. Accordingly, we dismiss the appeal.

The following facts, as found by the court, and procedural history are relevant to our analysis. The plaintiff commenced the underlying action in February, 2016. In its revised complaint dated March 29, 2016, it alleged in count one that it was in the business of originating residential mortgage loans and was regulated by the federal government and the New England states in which it was licensed. The plaintiff alleged that regulations require "those who have [a 10 percent] or more ownership interest in ... mortgage companies to [submit] to background checks, fingerprinting, credit checks, net worth compliance, surety bonds, and mandatory and timely record management and reporting on the [National Mortgage Licensing System, the system of licensure for mortgage companies and individuals seeking licensing by state and federal mortgage licensing authorities] ...." The plaintiff alleged that the defendant owned more than 10 percent of its stock and that his license and records "are inexorably linked to the [plaintiff's] ... records."

The plaintiff alleged that, despite its request, the defendant had failed to comply with the regulatory requirements and his "continued failure to comply with such regulatory requirements has made it impossible for the plaintiff to meet its mandatory regulatory and reporting obligations ... which puts [the] plaintiff at risk of potential administrative action and suspension of the plaintiff's license by respective state regulators." The plaintiff alleged that its bylaws "address the recalcitrance of the defendant and anyone else who may own [10 percent of its shares] but fails and refuses to comply with regulatory requirements," in that it may demand that such shareholder surrender his or her shares. The plaintiff alleged that, despite making such demand, the defendant refused to surrender his shares.

The plaintiff alleged that, pursuant to a prejudgment remedy in a prior action that it brought against the defendant, a state marshal was in possession of the defendant's stock.¹ Nonetheless, the plaintiff alleged that "it is necessary for a court to adjudicate the rights of the plaintiff in regard to said shares and the determination ordering the surrender of same for their fair value."

In count two, the plaintiff, relying on its allegations in count one, alleged that its bylaws were enacted to protect its "federal and state licensing ...." The plaintiff also alleged that the bylaws should be enforced and it sought specific performance related thereto.

The parties entered into a stipulation that was reflected in an order issued by the court, Dubay , J ., on March 28, 2016. The order provided: "By stipulation, [the defendant's] stock is deemed to be surrendered to the [plaintiff] corporation pursuant to the bylaw provision requiring compliance with state and federal licensing authorities and shall be turned over by the marshal to the corporation unless the defendant fully and completely satisfies all federal and state regulatory licensing requirements for shareholders of [10 percent] or more stock in the plaintiff corporation on or before April 11, 2016."

On March 31, 2016, the defendant filed a notice of compliance with Judge Dubay's March 28, 2016 order. The following day, the plaintiff objected to the notice of compliance on the grounds that neither the plaintiff nor the applicable regulatory authorities had reviewed the filings purportedly made by the defendant or deemed them to be satisfactory. Ultimately, the matter was scheduled for a trial before the court, Scholl , J ., on February 3, 2017. Prior to the trial, the defendant filed an offer of proof in which he requested to elicit testimony from one or more of the plaintiff's attorneys with respect to the meaning of the parties’ stipulation. The plaintiff objected to the defendant's request and offer of proof. The court denied the defendant's request, noting that its order was clear and unambiguous, and that its focus at the trial would be on whether the defendant had complied with the order. Following the trial, the parties submitted briefs to the court.

After the date of the trial, but before the court issued its decision, the defendant filed a motion to open the evidence, which the court denied on May 8, 2017. In a subsequent articulation of its denial of this motion, the court explained: "The evidence proffered in the motion was not relevant to the issue before the court. The sole issue before the court was whether the defendant had complied with the court order entered pursuant to the parties’ stipulation."

In its June 6, 2017 memorandum of decision, the court stated in relevant part: "The plaintiff is a mortgage lender licensed by state regulators. It does business in a number of states. [Haley Rice, the plaintiff's chief compliance officer and general counsel] oversees licensing requirements for the plaintiff. On March 31, 2016, Rice received the defendant's alleged compliance. It was not sufficient to submit to the regulators because [the defendant's] financial statement was filled out in pencil and the representations and warranties section on the last page, in which the signatory represents that the information provided is true, correct, and complete was crossed out. A notarized document submitted was [incorrectly] dated [March 30, 1948]. Although the plaintiff did receive new financials from the defendant, other deficiencies in his package persisted. A copy of the notarized document was resubmitted which was an altered form of the original document. Rice never received a complete set of forms from [the defendant] sufficient to submit to the appropriate regulatory authorities. [The defendant] did not request a background check as the regulatory form required. Nor did he fully explain the ‘yes’ answer on the forms, as required, in particular, and explanation of ‘yes’ to the question: ‘Q. Have you ever voluntarily resigned, been discharged, or permitted to resign after allegations were made that accused you of ... fraud, dishonesty, theft, or the wrongful taking of property?’ To another ‘yes’ question the defendant provided inaccurate information. No package of forms acceptable to be submitted to the regulators was received from [the defendant] by the plaintiff on or before April 11, 2016.

"The defendant claims that the plaintiff breached the stipulation by not submitting the defendant's package of materials to regulators. Yet the court agrees that the plaintiff had no obligation to submit to the regulators materials that were in pencil, appeared to have been altered, or were inaccurate or incomplete.

"The defendant also claims that the parties’ stipulation was not a fully integrated agreement, but included the requirements set forth [in an exhibit submitted to the court]. ... Here, the court's order, based on the parties’ stipulation, is complete in itself as to its terms. In any event, even if the court was to consider the instructions in [the exhibit] as part of the stipulation on which the order was based, the defendant did not comply with those instructions. For example, [the exhibit] required that the defendant request a background check, which he did not.

"Lastly, the defendant has not substantially complied with the stipulation and order as he claims. ... Here, based on the facts found by the court, the defendant did not comply with the terms of the stipulation and his breach was not immaterial.

"Therefore, the court finds that the defendant ... did not comply with the court's March 28, 2016 order and judgment shall enter in favor of the plaintiff ... that the defendant's stock is deemed surrendered to the [plaintiff] pursuant to the bylaw provision requiring compliance with state and federal licensing authorities and shall be turned over by the marshal to the [plaintiff]." (Citations omitted.) Thereafter, the defendant filed a...