Villanueva v. Villanueva

Javier Villanueva v. Rafael Villanueva

No. FSTCV186037228S

Superior Court of Connecticut, Judicial District of Stamford-Norwalk, Stamford

October 30, 2019

UNPUBLISHED OPINION

Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Krumeich, Edward T., J.

MEMORANDUM OF DECISION

KRUMEICH, J.

This case involves a dispute between two brothers, Javier Villanueva ("Javier") and Rafael Villanueva ("Rafael"), concerning a business operated under the name Villanueva Landscaping.

In 2005 Javier started a small landscaping company known as Villanueva Landscaping that mowed lawns and did some patching and sealing pavement driveways. Rafael started working for his brother in 2007; Rafael worked for him initially as an employee, but as the business grew the brothers became de facto equal partners, sharing the profits, and the management of the business. No written partnership agreement was ever entered into by the brothers. The brothers split their duties as over time one crew did landscaping and the other did masonry and tree work. Javier worked on increasing the customer base and supervised a masonry/tree crew in the field; Rafael took over as bookkeeper and was responsible for paperwork, but also supervised the landscaping crew. The business grew from approximately 12 to 15 customers during the first years to approximately 50 customers in 2009, when they purchased a customer list from another landscaper, to approximately 85 customers in 2014. The number of workers grew from Javier in 2005 to the original crew of two, Rafael and Javier, in 2007 to seven workers divided into two crews of four and three by 2014.

Although initially Javier received customer payments, Rafael took over the back-office work, including all billing and banking. The business deposited revenues into two bank accounts at Webster Bank and Bank of America, controlled by Rafael. Javier did not have a tax I.D. number so the business accounts were opened by Rafael and he was in charge of deposits and withdrawals. Funds were withdrawn from the accounts by both brothers as needed to pay their personal expenses rather than drawing a salary.^[1] On May 24, 2011 Rafael formed Villanueva Landscaping, LLC with himself as sole member. The reason Javier was not made a member was that he lacked a tax I.D. number, but the business of the LLC was the continuation of Villanueva Landscaping and the brothers remained partners.

Sometime in 2014 Javier found himself locked out of the landscaping business as Rafael, without warning, took all the customers, crew, tools, vehicles and equipment used in the landscaping side of the business together with all the cash in the accounts.^[2] Rafael left behind the masonry/tree equipment and vehicles. In 2014 landscaping fees represented 90% of the business income. The portion left to Javier, the masonry and tree work, represented 10% of revenues. Although Rafael referred to the business being "divided" in early 2014, the credible evidence is that there was no discussion or agreement about splitting the business but rather Rafael imposed the division on Javier when he took over the landscaping portion of the business as his own, along with the funds in the accounts.

The Defendant Breached the Implied Partnership Agreement.

In Connecticut Light and Power Co. v. Proctor, 324 Conn. 245, 259-60 (2016), the Supreme Court discussed the proof required for a contract implied-in-fact:

With respect to implied in fact contracts, we have recognized that "[w]hether [a] contract is styled express or implied involves no difference in legal effect, but lies merely in the mode of manifesting assent." ... "A true implied [in fact] contract can only exist [however] where there is no express one. It is one which is inferred from the conduct of the parties though not expressed in words." ... ("[t]he intention of the parties manifested by their words and acts is essential to determine whether a contract was entered into and what its terms were"...).

"A contract implied in fact, like an express contract, depends on actual agreement." ... However, "[i]t is not fatal to a finding of an implied contract that there were no express manifestations of mutual assent if the parties, by their conduct, recognized the existence of contractual obligations." ... Thus, "conduct of one party, from which the other may reasonably draw the inference of a promise, is effective in law as a promise." ... "As long as the conduct of [the] party is volitional and that party knows or reasonably ought to know that the other party might reasonably infer from the conduct an assent to contract, such conduct will amount to a manifestation of assent."

324 Conn. at 259-60 (citations omitted).

A partnership may be based upon an implied agreement to act as partners, that is, to share profits and losses and management. See generally, Boland v. Catalano, 202 Conn. 333, 340-41 (1987). The law on formation of a general partnership was summed up by Judge Squatrito in Lenoble v. Best Temps, Inc., 352 F.Supp.2d 237, 249 (D.Conn. 2005) (Squatrito, J.).

Connecticut’s legislature has adopted and codified the Uniform Partnership Act, which provides, in pertinent part, that "the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership." Conn. Gen.Stat. § 34-314(a) (2003). "In determining whether a partnership is formed, ... [a] person who receives a share of the profits of a business is presumed to be a partner in the business ..." Id., § 34-314(c)(3). Also, "a mutual agency relationship is[, generally,] an essential element of a partnership."

In Bartomeli v. Bartomeli, 65 Conn.App. 408, 414-15 (2001), the Appellate Court upheld a finding below that two brothers were de facto partners in a business carried out in corporate form and one brother had breached the partnership contract by failing to give his brother an interest in the corporation: "[o]n the basis of the court’s findings that both Thomas and Raymond worked for the company, both contributed personal assets in the form of equipment to the company, both guaranteed notes for the purchase of company equipment, Raymond introduced Thomas as his partner and denied Thomas his interest in the company, we conclude that the court properly found that Raymond and Thomas were de facto partners, and that Raymond had breached the contract of partnership."

Here, there is strong evidence the parties were de facto partners.^[3] Although they divided their responsibilities between front office and back-office, and by areas of the business, landscaping and paving, they acted as mutual agents and jointly managed the business and shared its profits. The LLC was formed to facilitate the businesses’ finances, banking and reporting but, as between themselves, the brothers remained general partners. Their joint purchase of real estate using corporate funds epitomized the informal understanding between the brothers. The informal nature of distributions and draws, and the absence of contrary credible proof, suggests they were equal partners. The totality of evidence satisfied the test for formation of a partnership set by statute, C.G.S. § § 34-301^[4] and 34-314,^[5] and affirmed by case law. See Gibson v. Scap, 960 F.Supp.2d 373, 381-82 (D.Conn. 2013) (Hall, J.).^[6]

The Action is Not Barred by the Statute of Limitations

The statute of limitations for breach of an implied contract is six years pursuant to C.G.S. § 52-576(a). This action was timely commenced less than four years after defendant took partnership property to start his own landscaping business.^[7]

Damages for Breach of Partnership Agreement

Partners are held to be fiduciaries as to each other and trustees of partnership property. See Konover Development Corp. v. Zeller, 228 Conn. 206, 218-19 (1994). Under C.G.S. § 34-339(b) a partner may maintain an action against another partner.

In Jacobs v. Thomas, 26 Conn.App. 305, 314 (1991), the Appellate Court discussed damages recoverable for breach of an oral partnership agreement: " ‘[t]he general rule in breach of contract cases is that the award of damages is designed to place the injured party, so far as can be done by money, in the same position as that which he would have been in had the contract been performed.’ ... Damages for breach of contract are to be determined at the time of the occurrence of the...