Opinion
CV176075341S
08-14-2018
TODD’S HILL INVESTMENT CIRCLE, LLC v. Jane BELL
UNPUBLISHED OPINION
CORRECTED [*] MEMORANDUM OF DECISION IN RE MOTION FOR SUMMARY JUDGMENT (# 108.00)
Markle, J.
I. FACTS
The plaintiff, Todd’s Hill Investment Circle, LLC (hereinafter referred to as "LLC") moves for summary judgment as to Count One of the complaint filed on November 21, 2018, and requests the court to render judgment in its favor to quiet title. The plaintiff claims that there is no genuine issue of material fact that the defendant, Jane Bell, (hereinafter referred to as "Bell") does not have an interest in the real property located at 21-23 Business Park Drive, Branford, (See Schedule "A" attached hereto) equitable or otherwise, which is owned by the plaintiff LLC, rendering Bell’s notice on the land records under General Statutes § 47-33f of the Marketable Record Title Act (MRTA) void. Oral argument was heard at short calendar on March 5, 2018.
Specifically, Count One of the complaint contains the following pertinent allegations. That the LLC owns the property located at 21-23 Business Park Drive and that Daniel Cosgrove, Sr. and his siblings, Susan Barnes and Mark Cosgrove, are the only members of the LLC. Further, Daniel Cosgrove, Sr. executed the Daniel T. Cosgrove, Sr., 2016 Irrevocable Family Trust (trust) on December 7, 2016, as part of the settlement of his divorce from Bell. Cosgrove, Sr. purported to give his 33.33 percent economic interest in the LLC to the trust, of which Bell is the primary beneficiary. On February 7, 2016, Bell filed a notice on the land records pursuant to General Statutes § 47-33f of the Marketable Record Title Act (MRTA), which claimed an interest in the equitable and legal interest held by Daniel Cosgrove, Sr. in the said property. The plaintiff further alleges that the notice clouded title to the property, is illegal, and is false because Bell has no legal or equitable interest in the property. The plaintiff LLC seeks a judgment in its favor to quiet title to said real property.
II. DISCUSSION
"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." (Internal quotation marks omitted.) Bozelko v. Papastavros, 323 Conn. 275, 282, 147 A.3d 1023 (2016).
"The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law ... and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact ... A material fact ... [is] a fact which will make a difference in the result of the case." (Internal quotation marks omitted.) Stuart v. Freiberg, 316 Conn. 809, 821, 116 A.3d 1195 (2015).
The LLC argues that notice under General Statutes § 47-33f of the MRTA requires an interest in land, and that Bell’s interest in the LLC is personal property, not real property. Bell’s interest, therefore, cannot be recorded on the land records pursuant to § 47-33f. Bell counters by arguing that § 47-33f allows a person to record notice of any interest in land on that town’s land records, and that the term interest must be read broadly to include Bell’s interest in the assets, including the real estate, owned by the LLC.
A. Interest in land required under MRTA
General Statutes § 47-33f(a) of the MRTA provides in relevant part: "(a) Any person claiming an interest of any kind in land may preserve and keep effective that interest by recording, during the forty-year period immediately following the effective date of the root of title of the person whose record title would otherwise be marketable, a notice in writing, duly verified by oath, setting forth the nature of the claim ..." (Emphasis added.)
"Under the plain language of the MRTA, a party may use the act to establish marketable record title to any interest in real property ..." (Emphasis added; internal quotation marks omitted.) Jonathan M. Starble, Navigating Connecticut’s Marketable Record Title Act: A Roadmap for the Practitioner, 81 Conn. B.J. 369, 388 (2007). "Any kind of an estate in land comes within the protection of the Act. Its purpose is not only to clear fee simple title but to make any interest in land more readily marketable." (Emphasis added; internal quotation marks omitted.) Id., 388 n.6.
In the present case, given the plain language of the MRTA, the interest, whatever it might be, must be in land to be recorded pursuant to the MRTA. In this case, the defendant fails to provide the court with any authority which stands for the proposition that non-realty interests may be recorded under the MRTA.
Accordingly, the court must next address (1) whether Bell’s interest in the LLC is considered an interest in real property, and (2) whether the LLC has met its burden of establishing that Bell does not have an interest in real property. Both questions will be addressed in the next section.
B. Interest in LLC is not an interest in land
Effective on July 1, 2017, Connecticut’s former Limited Liability Company Act (LLCA), § § 34-100 through 34-242, was repealed and replaced by the Connecticut Uniform Limited Liability Act, § § 34-243 through 34-299. General Statutes § 34-243w, however, provides in relevant part: "The repeal of sections ... 34-167 to 34-173 [concerning the ownership and transfer of LLC property] ... [does] not affect: (1) The operation of the statute or any action taken under it before its repeal ..." the court should apply § § 34-167 to 34-173 as if they had not been repealed, because the LLC interest that Bell received under the trust, executed on December 7, 2016, and the notes and pledge agreements, executed on June 17, 2014, was transferred prior to the repeal. Additionally, it is undisputed that the property was transferred into the LLC prior to the repeal. For purposes of the court’s analysis herein, these are the only two occurrences which are relevant to the issue of whether Bell’s interest is in the LLC is sufficient to record a notice under the MRTA.
General Statutes § 34-167(a) of the former LLCA, which is operative in the present case, provides in relevant part that "[p]roperty transferred to ... a limited liability company is property of the limited liability company and not of the members individually. A member has no interest in specified limited liability company property." See, e.g., Steiner v. Ciapetta, Superior Court, judicial district of Litchfield, Docket No. CV-11-6004944-S (April 21, 2015, Danaher III., J.) (debtor’s ownership interest in limited liability company is property of debtor’s estate, but property of limited liability company is not property of debtor’s estate); Calpitano v. Rotundo, Superior Court, judicial district of New Britain, Docket No. CV-11-6008972-S (August 11, 2011, Swienton, J.) (52 Conn.L.Rptr. 464, 468) (property transferred to LLC is owned by LLC, not member); Gattoni v. Zaccaro, Superior Court, judicial district of New Haven, Docket No. CV-97-0396081-S (March 13, 1997, Hodgson, J.) (member of LLC has no interest in real property of LLC that would entitle him to partition of real property). Moreover, as the LLC points out, a comment to § 102 of the Uniform Limited Liability Act confirms that in other uniform act jurisdictions, LLC members have no interest in the underlying land. See The Uniform Limited Liability Company Act (2006), with prefatory note and comments, Article 8, § 101(13), commentary, p. 359 ("[i]nterests in a limited liability company are personal property and reflect no direct interest in the entity’s assets"). As already discussed, the act is not retroactively applicable to the present case, however, it provides insight into the way that Connecticut courts view interests in LLCs. Accordingly, this court is persuaded that as a matter of law members have no interest in specified limited liability company property.
Moreover, General Statutes § 34-169 provides: "A limited liability company membership interest is personal property." In Wheeler v. Polasek, 21 Conn.App. 32, 34, 571 A.2d 129, 131 (1990), our Appellate Court held that the plaintiff did not have a realty interest in the partnership property and a consequent right to secure that interest with a notice of lis pendens. The court reasoned that "[a]s specified by the Uniform Partnership Act, a partnership interest is personal property; General Statutes § 34-64; and the partnership realty is considered personalty with respect to any individual partner’s rights therein." Although Wheeler addressed partnership interest, this court finds it very persuasive because our Appellate Court has held that partnership interest is like LLC interest. See Peterson v. Connecticut Attorneys Title Ins., Co., 142 Conn.App. 34, 37 n.3, 64 A.3d 122, cert. denied, 309 Conn. 913, 69 A.3d 309 (2013) ("[ownership] interest in a limited liability company ... is similarly treated [to partnership interest)" [internal quotation marks omitted] ). Additionally, this court is persuaded by the reasoning in Wheeler because it relies on the principle that partnership interest is personal property, which is the same principle codified in the language of the LLCA with respect to LLC membership interest. See General Statutes § 34-169. Accordingly, under the LLCA, following the reasoning in Wheeler, LLC membership interest is considered personal property, as opposed to real property, regardless of underlying assets. Moreover, under the LLCA, LLC realty is considered personalty with respect to any individual member’s rights therein.
In this case, the LLC has offered evidence to establish that the property was held in the name of the LLC, and was transferred to the LLC prior to the dissolution of Bell and Cosgrove Sr.’s marriage, which began on August 25, 2011: See Def.’s Exhibit 1, Aff. of Bell, ¶ 4. The deed to the property indicates that the property was conveyed to the LLC on December 16, 1998 by quitclaim deed. See Pl.’s Exhibit 3, Deed to the property. The property is and at all relevant times has been an asset of the LLC. Accordingly, given the law discussed herein, the LLC has met its burden of establishing that there are no genuine issues of material fact that Bell’s interest in the LLC is personal property, and may not be recorded on the land records of the property under the MRTA.
Thus, the defendant now has the burden of establishing a genuine issue of fact as to whether she has an interest in real property, sufficient to allow her to file a notice on the land records pursuant to the MRTA. The defendant identifies only two sources for the interest that she received from Cosgrove, Sr. The first is her status as a beneficiary of a trust holding Cosgrove, Sr.’s economic interest in the LLC. The second is her promissory notes and pledge agreements concerning Cosgrove, Sr.’s membership interest in the LLC.
The defendant asserts several arguments in an effort to frame her interest as broadly as possible. Bell argues that as a member of the LLC, Cosgrove, Sr. has an interest in what happens with the assets of Todd’s Hill Investment Circle, including the real estate in question, especially because the operating agreement makes clear that Cosgrove, Sr. is acting as the manager of the LLC. As such he has direct access and decision-making authority regarding the assets of the LLC. Also, Cosgrove, Sr. has rights under Article XII of the operating agreement, entitled Dissolution and Termination, which pertains to the receipt of assets, either the cash proceeds from a sale, or in kind distribution of assets, should the company be wound up and dissolved. Bell additionally argues that as a beneficiary of the trust, which holds the economic interest in the LLC, she holds an equitable interest in the trust property, which gives her a significant interest in what happens with the LLC’s assets, including a potential distribution of real estate, in kind, should the company ever be wound up and dissolved.
To the extent that Bell argues that there is potential for a distribution of the land, this court is not persuaded that this creates a genuine issue of material fact that Bell’s interest is one in land. "The act" does not provide that upon dissolution, the assets of a limited liability company are automatically transferred to the members of the limited liability company. To the contrary, General Statutes § 34-167(a) clearly establishes that [p]roperty transferred to or otherwise acquired by a limited liability company is property of the limited liability company and not of the members individually and that [a] member has no interest in specific limited liability company property. The dissolution of a limited liability company does not negate this provision or otherwise result in an automatic transfer of the limited liability company’s assets to one of the individual members. Instead, the dissolution necessitates a prescribed winding-up process, and a member receives the limited liability company’s property if, and only if, the member or manager winding-up the limited liability company has completed the applicable steps established by § 34-208(b) and the assets are distributed in accordance with § 34-210. Accordingly, there is no legal foundation for the court’s conclusion that the dissolution of [a] company [may be] accompanied by an automatic transfer of [the underlying property] to the [company’s] managing member." (Emphasis in original; internal quotation marks omitted.) Mukon v. Gollnick, 151 Conn.App. 126, 132, 92 A.3d 1052, 1055 (2014); see also Gattoni v. Zaccaro, supra, Superior Court, Docket No. CV-97-0396081-S ("Judicial dissolution of a limited liability company is governed by [General Statutes § 34-207]. Those statutes provide for sale of the property of the entity and distribution of net proceeds to the members proportional to their contributions, not, as the plaintiff claims, partition of the real property owned by the [LLC].") (Emphasis added.)
In support of Bell’s argument that she holds an equitable interest in the trust property, Bell cites Pitcher v. Hamrick, Superior Court, judicial district of New London, Docket No. CV-03-0566770-S (April 12, 2005, Clarance, J.), which discusses equitable interests in the context of splitting title of trust property into an equitable interest held by the beneficiary, and a legal interest held by the trustee. For purposes of this motion for summary judgment, this analysis is misplaced. What is relevant is the nature of the trust property as opposed to the distinction between legal and equitable title between the trustee and the beneficiary. The fact that property goes into a trust does not change its nature. So, while it may be true that Bell, as a beneficiary, has an equitable interest in the trust property, the equitable interest is in the personal property that is within the trust.
Regardless of how Bell characterizes her interest, the court must first consider and identify the nature of Daniel Cosgrove, Sr.’s interest in the trust. As a member of an LLC, even a managing member, Daniel Cosgrove, Sr. holds only an interest in the distributions of the LLC and not to the underlying assets of the LLC. Since Daniel Cosgrove Sr.’s interest is considered an interest in personal property only, he cannot convey to Bell an interest in real property. Thus the defendant’s notice of interest filed on the land records pursuant to General Statutes Sec. 47-33f of the Marketable Record Title Act is inapplicable.
III. CONCLUSION
For the foregoing reasons the court grants the plaintiff’s motion for summary judgment as to Count One of the plaintiff’s original complaint, also applicable to the revised complaint, and enters a judgment in favor of the plaintiff.
SCHEDULE A
(Legal Description of 21-23 Business Park Drive, Branford, CT)
All that certain piece of parcels of land, with all the buildings and improvements thereon, situated in the Town of Branford, County of New Haven and State of Connecticut, and shown as Lot No. 4 "Section 1" on a map entitled "Map Showing a Resubdivision of Todd’s Hill Investment Circle Section 1 Lots 3 & 4, Section 2 Lot 6 and the Subdivision of a Portion of Remaining Land of Todd’s Hill Investment Circle, Business Park Drive, Branford, Connecticut, Scale 1″ = 100′, February 15, 1985, Phillip W. Genovese and Associates, Inc., Civil Engineers and Land Surveyors, Hamden, Conn.," on file in the Branford Town Clerk’s Office, and bounded and described as follows:
NORTHERLY: by Business Park Drive, as shown on said map, 473.88 feet;
EASTERLY: by Lot No. 3A, "Section 1" as shown on said map, 422.67 feet;
SOUTHERLY: by land of the State of Connecticut (I-95), as shown on said map, 482.07 feet;
WESTERLY: by Lot No. 6, "Section 6," as shown on said map, 456.64. [*] A legal description of the property at issue was included as Schedule "A."