Opinion
No. CV-084036286
October 30, 2008
MEMORANDUM OF DECISION
The plaintiffs, Henry W. Pascarella and Riversedge Partners, commenced this action against the three defendants, R.S. Silver Enterprises, Inc. (R.S. Silver), the Commissioner of Revenue Services (Commissioner) and the Secretary of the State (Secretary) on March 12, 2008. In their complaint, the plaintiffs are seeking a declaratory judgment challenging the validity of the Secretary's decision to reinstate R.S. Silver's status as a corporation, which had been previously dissolved.
On June 23, 2008, the defendants, the Secretary and the Commissioner, filed a motion to dismiss and memorandum of law claiming that the court lacks subject matter jurisdiction. On July 7, 2008, the plaintiffs filed a memorandum of law objecting to the motion to dismiss. Having reviewed the briefs and heard argument on July 21, 2008, this court grants the motion to dismiss.
FACTS
In their complaint, the plaintiffs allege the following facts. The plaintiffs are currently the defendants in a pending action brought by R.S. Silver in 2006. That lawsuit is similar to one that was brought in 2003 by R.S. Silver under the name "R.S. Silver Co., Inc." The 2003 lawsuit was dismissed on September 11, 2006 because the Secretary had dissolved the corporate existence of R.S. Silver Co., Inc. in 1991, rendering it without power to pursue a civil action. At some point following the dismissal, R.S. Silver Co., Inc. applied to the Secretary for reinstatement pursuant to General Statutes § 33-892 and to change its name to its current name, R.S. Silver Enterprises, Inc. On February 9, 2006, the Secretary granted R.S. Silver's application for reinstatement.
R.S. Silver Enterprises, Inc. v. Pascarella, Superior Court, judicial district of Stamford, Docket No. CV 006 5002499.
The plaintiffs claim in their complaint that the reinstatement was fraudulently induced. According to the complaint, the Commissioner, pursuant to General Statutes § 33-892(a)(3)(C), certified to the Secretary that R.S. Silver had fully paid its back taxes, a precondition for reinstatement. They allege, however, that R.S. Silver had not reported a $2.5 million real estate commission on its tax return for the tax year encompassing February 1, 1997 to January 31, 1998 and thus had not paid taxes on that income. As such, the plaintiffs allege that the Commissioner issued her certification based on a fraudulent tax return.
Thereafter, the plaintiffs petitioned the Commissioner for a ruling that the certification was erroneous. The Commissioner refused to issue a ruling, stating that the certification was correct to the best of her knowledge and that she had no jurisdiction to issue a ruling pertaining to the validity of a reinstatement by the Secretary.
Before this court, the plaintiffs seek a declaratory judgment stating that the reinstatement of R.S. Silver "was based on a fraudulently induced statement . . . that its back taxes had been paid . . ." and but for their fraudulent reinstatement, R.S. Silver would not have standing to sue in the pending 2006 action.
The defendants' sole ground for dismissal is that the plaintiffs lack standing to seek a declaratory judgment.
DISCUSSION
"A motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court . . . A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction." (Internal quotation marks omitted.) Beecher v. Mohegan Tribe of Indians of Connecticut, 282 Conn. 130, 134, 918 A.2d 880 (2007).
"When a . . . court decides a jurisdictional question raised by a pretrial motion to dismiss, it must consider the allegations of the complaint in their most favorable light. In this regard, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader." (Internal quotation marks omitted.) Cogswell v. American Transit Ins. Co., 282 Conn. 505, 516, 923 A.2d 638 (2007).
"Pursuant to the rules of practice, a motion to dismiss is the appropriate motion for raising a lack of subject matter jurisdiction." St. George v. Gordon, 264 Conn. 538, 545, 825 A.2d 90 (2003). "[The issue of] a court's subject matter jurisdiction . . . may be raised at any point in judicial proceedings." Stamford Hospital v. Vega, 236 Conn. 646, 656, 674 A.2d 821 (1996). "[Since] [t]he issue of standing implicates subject matter jurisdiction . . . [it] is therefore a basis for granting a motion to dismiss." St. George v. Gordon, supra, 264 Conn. 544.
"[P]laintiffs must have standing in order for a court to have jurisdiction to render a declaratory judgment." (Internal quotation marks omitted.) Steeneck v. University of Bridgeport, 235 Conn. 572, 578, 668 A.2d 688 (1995). "Standing is the legal right to set judicial machinery in motion." (Internal quotation marks omitted.) Cambodian Buddhist Society of Connecticut, Inc. v. Planning Zoning Commission, 285 Conn. 381, 393, 941 A.2d 868 (2008). "When standing is put in issue, the question is whether the person whose standing is challenged is a proper party to request an adjudication of the issue . . ." Id. "A party pursuing declaratory relief must . . . demonstrate, as in ordinary actions, a justiciable right in the controversy sought to be resolved, that is, contract, property or personal rights . . . as such will be affected by the [court's] decision." Russell v. Yale University, 54 Conn.App. 573, 576, 737 A.2d 941 (1999).
"[T]he plaintiff . . . bears the burden of establishing standing." Seymour v. Region One Board of Education, 274 Conn. 92, 104, 874 A.2d 742, cert. denied, 546 U.S. 1016, 126 S.Ct. 659, 163 L.Ed.2d 526 (2005). "Standing is established by showing that the party claiming it is authorized by statute to bring an action, in other words, statutorily aggrieved, or is classically aggrieved." (Internal quotation marks omitted.) Cambodian Buddhist Society of Connecticut, Inc. v. Planning Zoning Commission, supra, 285 Conn. 393.
In their motion to dismiss, the Commissioner and Secretary assert that the plaintiffs cannot demonstrate either statutory or classical aggrievement and thus lack standing. They claim that the plaintiffs lack standing based on statutory aggrievement because "they do not fall within the `zone of interests' that Connecticut's statutory scheme governing corporate dissolution and reinstatement was designed to protect." The Secretary and Commissioner further argue that the plaintiffs lack standing based on classical aggrievement because they lack any "personal [or] legal interest in whether [R.S. Silver] has paid its taxes." Furthermore, according to the Secretary and Commissioner, a party lacks standing to seek a declaratory judgment regarding the action or inaction of a government official "[unless the official] violated some duty owed to [that party]." They argue that neither the Secretary nor the Commissioner owes a duty to the plaintiffs or any third party to properly execute the law allowing reinstatement of a corporation.
In their brief, the plaintiffs do not analyze the issue of standing under either theory of statutory or classical aggrievement. Instead, they argue merely that General Statutes § 4-175 allows them to "seek in the Superior Court a declaratory judgment when an agency decides not to issue a declaratory ruling . . ." Second, they claim that they are injured because they are forced to defend "[a] lawsuit seeking the plaintiffs' property . . ." They assert that but for the fraudulently induced statement by the Commissioner, R.S. Silver would not be a legally recognized entity and thus unable to maintain their suit against the plaintiffs.
I STATUTORY AGGRIEVEMENT
"Statutory aggrievement exists by legislative fiat, not by judicial analysis of the particular facts of the case. In other words, in cases of statutory aggrievement, particular legislation grants standing to those who claim injury to an interest protected by that legislation . . . Furthermore, [i]t is settled that the existence of statutory standing [also] depends on whether the interest sought to be protected by the [plaintiffs] is arguably within the zone of interests to be protected or regulated by the statute . . ." (Citation omitted; internal quotation marks omitted.) Gillon v. Bysiewicz, 105 Conn.App. 654, 660, 939 A.2d 605 (2008). "[W]here a statute or court rule sets prerequisites to suit by a particular plaintiff, a plaintiff not meeting the statutory criteria lacks standing and the court is said to lack jurisdiction over the case." (Internal quotation marks omitted.) Pinchbeck v. Dept. of Public Health, 65 Conn.App. 201, 206, 782 A.2d 242, cert. denied, 258 Conn. 928, 783 A.2d 1029 (2001).
The plaintiffs invoke General Statutes § 4-175 as the basis for its declaratory judgment action. Section 4-175 provides, however, in relevant part: "If a provision of the general statutes, a regulation or a final decision, or its threatened application, interferes with or impairs, or threatens to interfere with or impair, the legal rights or privileges of the plaintiff and if an agency . . . decides not to issue a declaratory ruling . . . the petitioner may seek in the Superior Court a declaratory judgment as to the validity of the regulation in question or the applicability of the provision of the general statutes, the regulation or the final decision in question to specified circumstances." As is apparent from the plain language of the statute, section 4-175 articulates the process for seeking a declaratory judgment but does not provide the basis for a standing analysis based on statutory aggrievement.
In Pinchbeck v. Dept. of Public Health, supra, 65 Conn.App. 201, the court rejected the plaintiff's claim that he had standing pursuant to § 4-175. In that case, the plaintiff was a neighboring landowner to a homeowner who obtained approval to install a subsurface sewage system on his property based on an opinion by the defendant department of public health. Id., 203. In an attempt to invalidate the approval of the department of public health [DPH], the plaintiff brought a declaratory judgment action against the DPH in the Superior Court pursuant to § 4-175 after the defendant had refused to issue such a declaration pursuant to General Statutes § 4-176. Id., 204-05. Affirming the trial court's dismissal based on standing, the Appellate Court reasoned that: "[The plaintiff] did not ask the court to decide whether a regulation is valid or whether a regulation, statute or decision applied to the facts of this case. Rather, she asked that the court overrule the determination [of the department that led to the approval of the homeowner's proposal] . . . [S]uch relief [is] not available under § 4-175." Id., 206-07.
As the Pinchbeck court held, General Statutes § 4-175 does not authorize the plaintiffs to bring an action. Moreover, the Secretary and Commissioner correctly argue that the relevant statutes for purposes of a statutory aggrievement analysis in this case are General Statutes §§ 33-892 and 33-893, relating to the reinstatement of dissolved corporations. As such, the court's decision in Gillon v. Bysiewicz, supra, 105 Conn.App. 654, is directly on point, not only because it addresses whether third parties have standing to challenge the reinstatement decisions of the Secretary with respect to a dissolved corporation, but also because it specifically addressed this with respect to R.S. Silver Enterprises, Inc., whose reinstatement, as in this case, was at issue.
Section 33-892(a) sets forth the procedures that an administratively dissolved corporation must follow to apply for reinstatement. The application must include "an up-to-date statement or statements from the Commissioner of Revenue Services and the administrator of the unemployment compensation law acting in their respective capacities, showing, to the best of their knowledge and belief, as of the date of such respective statements, either that such corporation has paid all its taxes and contributions or that it was not liable for any taxes or contributions, or that it has made adequate provisions, with such surety as shall be satisfactory to said commissioner and said administrator, for the future payment of any of its unpaid taxes and unpaid contributions as of the date of such respective statements provided . . ." General Statutes § 33-892(a)(3)(C). Section 33-893(b) sets forth an appeal procedure for corporations that were refused reinstatement, which states in relevant part: "The corporation may appeal the refusal of the Secretary of the State to file the application for reinstatement to the superior court for the judicial district where the corporation's principal office or, if none in this state, its registered office, is located within thirty days after return of the application."
In Gillon v. Bysiewicz, supra, 105 Conn.App. 654, the plaintiffs were challenging the Secretary's reinstatement of R.S. Silver Enterprises, Inc., which as R.S. Silver Co., Inc., has been administratively dissolved in October 1991. The plaintiffs, two investors in a company called "R.S. Silver Company, LLC," claimed that R.S. Silver, then called "R.S. Silver Co., Inc.," agreed with them to transfer "[a]ll rights in the name `R.S. Silver Co.' and any variation [thereof] . . ." to the limited liability company in which they had invested. (Internal quotation marks omitted.) Id., 658. When the Secretary reinstated R.S. Silver Enterprises, Inc., they argued, she interfered with their rights under the contract. Id., 660. As such, the plaintiffs sought a writ of mandamus to compel the Secretary to reverse the reinstatement. Id., 657.
In rejecting the plaintiff's statutory aggrievement claim, the court observed that "the dissolution and reinstatement provisions of the act do not provide enforcement rights to third parties. If the legislature had intended to grant such a broad right, it easily could have done so expressly." (Internal quotation marks omitted.) Id., 661. In addition, the court found that the plaintiffs failed to demonstrate that they were within the "zone of interests" those statutes were crafted to protect. Id., 662. As the court held, "the relevant question would not be simply whether the official or agency violated the law, but rather whether the official or agency violated any duty to the plaintiff." (Internal quotation marks omitted.) Id. Since Gillon has made clear that General Statutes §§ 33-892 and 33-893 provide no enforcement rights to third parties and since the plaintiffs have failed to demonstrate that their interests fall within the zone of interests encompassed by its provisions, this court finds that the plaintiffs have failed to show that they have standing based on statutory aggrievement.
II CLASSICAL AGGRIEVEMENT
Relying also on Gillon v. Bysiewicz, supra, 105 Conn.App. 659, this court finds that the plaintiffs have also failed to show that they have standing based on classical aggrievement. "Classical aggrievement requires a two part showing. First, a party must demonstrate a specific, personal and legal interest in the subject matter of the [controversy], as opposed to a general interest that all members of the community share . . . Second, the party must also show that the [alleged conduct] has specially and injuriously affected that specific personal or legal interest." (Internal quotation marks omitted.) Id.
"[I]f the injuries claimed by the plaintiff are remote, indirect or derivative with respect to the defendant's conduct, the plaintiff is not the proper party to assert them and lacks standing to do so." (Internal quotation marks omitted.) Cambodian Buddhist Society of Connecticut, Inc. v. Planning Zoning Commission, supra, 285 Conn. 395. The harm must be a direct result of the defendant's conduct, or it is not actionable. See id.
Applying this standard, the Gillon court held that the plaintiffs lacked standing to pursue the action because there was no direct nexus between the reinstatement and any harm to the plaintiffs' contractual rights. Gillon v. Bysiewicz, supra, 105 Conn.App. 660. The rationale for the decision was that "any breach of the alleged agreement was not proximately caused by the [S]ecretary's reinstatement of [R.S. Silver]. Because any harm was necessarily occasioned by the alleged breach of a contractual provision allegedly entered into between the plaintiffs and [R.S. Silver], any harm to the plaintiffs resulting from the [S]ecretary's reinstatement of [R.S. Silver], was indirect and, therefore, cannot provide an adequate basis for finding aggrievement." Id.
Similarly, the Commissioner's certification and the Secretary's reinstatement of R.S. Silver have only an indirect impact on the plaintiffs in that the reinstatement enables R.S. Silver to maintain a lawsuit against the plaintiffs. Moreover, the plaintiffs' claim that Gillon does not apply to the present case is unpersuasive. The plaintiffs first argue that Gillon was an action for a writ of mandamus, and the present action is one for declaratory relief. "As a general matter, [however] a plaintiff's standing to sue is dependent not on the nature of the remedy that the plaintiff seeks but on the existence of an actionable injury." Connecticut State Medical Society v. Oxford Health Plans (CT), Inc., 272 Conn. 469, 481 n. 8, 863 A.2d 645 (2005). Standing depends on whether the plaintiff has a sufficient interest in the matter being litigated and whether the defendant's challenged actions are directly related to that interest. See Cambodian Buddhist Society of Connecticut, Inc. v. Planning Zoning Commission, supra, 285 Conn. 394. Therefore, whether the plaintiffs are seeking a writ of mandamus or a declaratory judgment is irrelevant.
The plaintiffs also argue that because this case involves alleged fraudulent conduct by the defendant and Gillon did not, the issue of alleged fraud, by itself, confers standing upon them. In support of this theory, the plaintiffs rely on Thompson v. Orcutt, 257 Conn. 301, 777 A.2d 670 (2001), asserting that because "a criminal fraud on government implicates public policy . . ." the plaintiffs must have standing or else the "court would be condoning the fraud." Given that the Thompson case did not address the issue of standing, this court rejects this claim.
Based on all of the above and given the precedent of Gillon v. Bysiewicz, supra, 105 Conn.App. 660, this court find that the plaintiffs have failed to prove classical aggrievement.
CONCLUSION
Given the plaintiffs' failure to show that they have standing in this case, the motion to dismiss filed by the defendants Secretary of State and Commissioner of Revenue services is granted.