Opinion
No. CV 01 0508486-S
September 21, 2004
FINDING OF FACTS AND CONCLUSIONS OF LAW
On April 16, 1997, Keith Rechenberg, the plaintiff, was injured while on the premises of the Starstruck Restaurant and Lounge (Lounge) located at 317 Farmington Avenue, Plainville, Connecticut. The Lounge was owned by High Performance, Inc. (HP). Rechenberg brought a personal injury action against HP on September 5, 1997. Thereafter, he resolved his claim against HP by entering into a stipulated judgment March 27, 2000. This judgment provided, in part, that HP was to pay Rechenberg $10,000.00 within six months.
On April 30, 2001, Rechenberg filed a two-count complaint against Angus G. Nicholson and Karaoke, Inc. (Karaoke). The first count, which is framed against Nicholson personally, claims that he breached his fiduciary duty to Rechenberg as a creditor of HP. The second count against Karaoke alleges that Karaoke, through Nicholson's actions, fraudulently distributed assets from HP to Karaoke and as a result Rechenberg was damaged. The trial was held on June 3, 2004. Nicholson was the only witness and Rechenberg was not present.
Angus Nicholson incorporated HP on April 1, 1988. He and Bonnie Nicholson, his wife, were the only shareholders of the corporation and held the positions of president and secretary, respectively. In 1990, HP established the Starstruck Restaurant and Lounge, which maintained a place of businerr at 317 Farmington Avenue, Plainville. Thereafter, in May 2000, Nicholson contemplated dissolving HP and sold its tangible assets to Michael Hoffman. This transaction realized $21,200 for HP.
During this court side trial, Nicholson testified that he closed Starstruck Restaurant and Lounge in October 2000, and sent a notice of dissolution to all of the creditors of HP, but he could not find a copy of it. HP filed a certificate of dissolution on November 30, 2000.
Nicholson incorporated Karaoke, Inc., on May 22, 2000. He and his wife also held the positions of president and secretary in the new corporation. In August 2000, Karaoke opened the Starstruck Karaoke Restaurant, which maintained a place of business at 290 Farmington Avenue, Plainville. Karaoke was dissolved in April 2002.
HP and Karaoke were both in existence and operating similar businesses during August, September, and part of October 2000. No liquor, furniture, kitchen equipment or any other tangible assets of HP were conveyed to Karaoke. The trade name "Starstruck" is registered to Angus Nicholson not to HP or Karaoke.
In the first count of the complaint, Rechenberg alleges that Nicholson breached his fiduciary duty to Rechenberg by causing HP to distribute its assets to Karaoke. These assets included tangible assets as well as goodwill and the trade name "Starstruck." In order for Rechenberg to prevail on a count for breach of a fiduciary duty, he must first prove that a fiduciary relationship existed. Rechenberg claims that Nicholson was a director of HP and as such owed a fiduciary duty to all of HP's creditors, including Rechenberg. Nicholson admitted that he was an officer and director of HP and therefore, he had a fiduciary duty to all of the creditors of HP including Rechenberg. See Baldwin v. Wolff, 82 Conn. 559, 562, 74 A. 947 (1909).
The plaintiff argues, in his post-trial brief dated June 17, 2004, on pages 7-8, "In conclusion on this aspect of the case, it is clear that Angus Nicholson breached his fiduciary duty to the creditors of High Performance, including but not limited to the plaintiff, by selectively determining which creditors would be paid and which would not be paid and by not paying the plaintiff." However, the plaintiff never asked for leave to amend his complaint. Therefore, the court is limited to the claims in the complaint.
In his answer dated June 6, 2002, Nicholson admitted that he was an officer, director, president and shareholder of HP and Karaoke.
Rechenberg had to prove that Nicholson caused HP to distribute its assets to Karaoke. The assets claimed to have been distributed consisted of tangible assets, goodwill and the trade name "Starstruck." The credible evidence clearly established that Nicholson, as president of HP, caused HP to sell its tangible assets to Michael Hoffman. Connecticut General Statutes § 33-831(a) provides "[a] corporation may sell . . . all . . . of its property, with or without the goodwill, otherwise than in the usual and regular course of business, on the terms and conditions and for the consideration determined by the corporation's board of directors." Accordingly, there was no distribution of tangible assets from HP to Karaoke as alleged in the complaint.
The remaining two assets claimed to have been distributed from HP to Karaoke were the trade name "Starstruck" and goodwill. A trade name is defined in Connecticut General Statute § 35-11a(4) as a "term [that] includes words and names lawfully adopted and used by any person engaged in any business . . . to identify such business." "Good will is the advantage or benefit which is acquired by an establishment beyond the mere value of the property employed therein in consequence of the general public patronage and encouragement which it receives from constant or habitual customers . . ." (Citations omitted.) Steinmetz v. Steinmetz, 7 Conn.Sup. 402, 404 (1939). The Connecticut Supreme Court has stated that "a `trade name' today designates a term or symbol that denotes a business or company and its goodwill . . ." (Citations omitted.) Mohegan Tribe, Indians, CT v. Mohegan Tribe Nation, 255 Conn. 358, 364 n. 13, 769 A.2d 34 (2001). Therefore, the trade name "Starstruck" consists of not only the "Starstruck" name, but the goodwill attributed to it. The court will consider these two assets together.
In Mohegan, the Court is analyzing a violation of the Lanham Act, 15 U.S.C. § 1127. Although the present case was not brought under the Lanham Act, the court finds this analysis informative because the definition of "trade-name" under the Lanham Act (trade-name means any name used by a person to identify his business) is virtually identical to that of Connecticut General Statute § 35-11a(4).
Nicholson's testimony, which the court finds credible, revealed that the trade name "Starstruck" was owned by him personally. Consequently, the name "Starstruck" and the goodwill attributed to it were never assets of HP. Since it was impossible for HP to distribute assets that it did not own, HIP could not have distributed these two assets to Karaoke. Therefore, there was no distribution from HP to Karaoke of the trade name "Starstruck" or the good will attributed to it.
The court concludes that Rechenberg has failed to prove that any assets were distributed from HP to Karaoke and thus he failed in his proof of count one.
Concerning count two, Rechenberg claims that Karaoke, through the actions of Nicholson, distributed tangible assets, goodwill and the trade name "Starstruck" from HP to Karaoke and that the distribution constituted a fraudulent transfer as to him. The court has concluded that not only was there no transfer of assets from HP to Karaoke as alleged in count one, but also there was no transfer of assets as alleged in count two. Keith Rechenberg has also failed in his proof on the second count.
A judgment may enter for the defendant Angus G. Nicholson on count one and for Karaoke, Inc. on count two.
So ordered.
William P. Murray
A judge of the Superior Court