Mukon v. Gollnick ( 2014 )

******************************************************
The ‘‘officially released’’ date that appears near the
beginning of each opinion is the date the opinion will
be published in the Connecticut Law Journal or the
date it was released as a slip opinion. The operative
date for the beginning of all time periods for filing
postopinion motions and petitions for certification is
the ‘‘officially released’’ date appearing in the opinion.
In no event will any such motions be accepted before
the ‘‘officially released’’ date.
All opinions are subject to modification and technical
correction prior to official publication in the Connecti-
cut Reports and Connecticut Appellate Reports. In the
event of discrepancies between the electronic version
of an opinion and the print version appearing in the
Connecticut Law Journal and subsequently in the Con-
necticut Reports or Connecticut Appellate Reports, the
latest print version is to be considered authoritative.
The syllabus and procedural history accompanying
the opinion as it appears on the Commission on Official
Legal Publications Electronic Bulletin Board Service
and in the Connecticut Law Journal and bound volumes
of official reports are copyrighted by the Secretary of
the State, State of Connecticut, and may not be repro-
duced and distributed without the express written per-
mission of the Commission on Official Legal
Publications, Judicial Branch, State of Connecticut.
******************************************************
MARK MUKON v. ROBERT A. GOLLNICK
(AC 35454)
Lavine, Beach and Alvord, Js.
Argued March 3—officially released June 24, 2014
(Appeal from Superior Court, judicial district of New
Haven at Meriden, Oliver, J.)
Barry T. Pontolillo, for the appellant (defendant).
Robert Shluger, for the appellee (plaintiff).
Opinion
PER CURIAM. The defendant, Robert A. Gollnick,
appeals from the judgment of the court, rendered after
a trial to the court, in this accounting malpractice
action. On appeal, the defendant claims that the court
erred in rendering judgment in favor of the plaintiff,
Mark Mukon, and argues that the dissolution of the
plaintiff’s limited liability company did not automati-
cally trigger the taxable event that resulted in the assess-
ment of a use tax liability to the plaintiff.1 We agree
and therefore reverse the judgment of the trial court.
The record reveals the following facts that are not
in dispute. The plaintiff was a managing member of a
limited liability company, Sea Pearl Marine, LLC (com-
pany).2 In February, 2007, the company purchased a
ship’s hull in Maine, and paid sales tax on the hull
to the state of Connecticut. The company commenced
construction of the vessel at issue with this hull, and
used a resale certificate to defer payment of Connecti-
cut sales tax on the additional items purchased to com-
plete the vessel.
At all relevant times, the plaintiff was a client of the
defendant, a certified public accountant. In November,
2009, the plaintiff sought advice from the defendant as
to how to avoid paying the annual $250 limited liability
company filing fee to the state. The defendant advised
the plaintiff that the fee could be avoided by dissolving
the company, and thereafter assisted the plaintiff in
filing the dissolution paperwork with the state.
In April, 2010, the plaintiff reregistered the vessel in
his name with the Department of Motor Vehicles.3 In
May, 2010, the plaintiff received a letter from the Depart-
ment of Revenue Services (department), informing him
that he had ‘‘been selected for an audit regarding [his]
purchase’’ of the vessel and requiring him to provide
the department ‘‘with proof of tax paid or documenta-
tion that supports the exempt status of [his] purchase.’’
The department eventually determined that ‘‘there
[was] no exception to satisfy [the] transaction,’’ and
assessed a use tax liability against the plaintiff. The
plaintiff ultimately was required to pay the state
$11,665.41.4
On July 8, 2011, the plaintiff brought a malpractice
action against the defendant. The plaintiff claimed that
he had ‘‘inquired of the defendant as to . . . [the poten-
tial] tax consequences to either [the company] or to
[himself] upon [the] dissolution of [the company],’’ and
that the defendant had informed him that the only tax
consequences would be capital gains taxes when the
vessel was sold. In light of the taxes that he was
assessed by the department, the plaintiff asserted that
the defendant was negligent in that the tax advice he
provided was ‘‘false, inaccurate and incorrect, and
caused the plaintiff to suffer monetary damages . . . .’’
The defendant denied the plaintiff’s substantive allega-
tion, and claimed as a special defense that the plaintiff
was contributorily negligent. The case was tried on
October 17, 2012, and each party filed a posttrial memo-
randum. In a written decision released on February 15,
2013, the court found that the plaintiff had sufficiently
established professional malpractice and that the defen-
dant had failed to prove his special defense. The court
rendered judgment against the defendant in favor of
the plaintiff in the amount of $12,865.41.5 This appeal
followed.
On appeal, the defendant argues that the court’s deci-
sion ‘‘is fatally flawed in that the court did not correctly
apply the statutes of the state of Connecticut to the
present fact pattern.’’ He asserts that the ‘‘court clearly
sets forth its error’’ in its findings of fact numbers seven-
teen and twenty-one because the dissolution of the com-
pany did not trigger the assessment of the use tax nor
did the winding-up of the company require a transfer
of the vessel to the plaintiff. The plaintiff maintains that
the conclusions of the court are ‘‘legally and logically
correct and find support in the facts set out in the
memorandum of decision.’’ We agree with the
defendant.
The thrust of the plaintiff’s argument before the trial
court was that the dissolution of the company triggered
an automatic transfer of the vessel from the company
to the plaintiff, and that this automatic transfer trig-
gered the tax liability. The court agreed with plaintiff’s
position and, in its finding of fact number seventeen,
found that ‘‘[a]s a result of dissolving [the company],
the plaintiff personally incurred a use tax liability of
$16,621.57, including interest and penalties.’’ Similarly,
in its finding of fact number twenty-one, the trial court
found that the ‘‘dissolution of the [company] and auto-
matic transfer of the marine vessel to the plaintiff as the
[company’s] managing member triggered the taxable
event that resulted in the assessment of the use tax
liability to the plaintiff.’’ (Emphasis added.) On the basis
of its findings of facts, the court found that the plaintiff
established professional malpractice by a fair prepon-
derance of the evidence6 and that ‘‘the defendant failed
to exercise due diligence and prudence in focusing on
potential income tax consequences and not the entire
transaction.’’
We set forth our standard of review and the principles
that guide our analysis. ‘‘[T]he scope of our appellate
review depends upon the proper characterization of the
rulings made by the trial court. To the extent that the
trial court has made findings of fact, our review is lim-
ited to deciding whether such findings were clearly
erroneous. When, however, the trial court draws con-
clusions of law, our review is plenary and we must
decide whether its conclusions are legally and logically
correct and find support in the facts that appear in the
record.’’ (Internal quotation marks omitted.) Shevlin v.
Civil Service Commission, 148 Conn. App. 344, 353–54,
84 A.3d 1207 (2014). Here, the court based its factual
findings on its interpretation of the law governing the
dissolution of limited liability companies, therefore we
exercise plenary review of the court’s conclusions of
law.
The Connecticut Limited Liability Company Act (act),
General Statutes § 34-100 et seq., governs the dissolu-
tion of a limited liability company and requires a wind-
ing-up of its affairs. See, e.g., General Statutes § 34-
206 (‘‘[a] limited liability company is dissolved and its
affairs shall be wound up . . .’’ [emphasis added]).
General Statutes § 34-208 (a) directs that the members
or managers of the limited liability company undertake
the responsibility for the tasks associated with the wind-
ing-up of the business and affairs of the limited liability
company. Section 34-208 (b) sets forth those tasks,
which include, in relevant order: ‘‘(1) [p]rosecute and
defend suits; (2) settle and close the business of the
limited liability company; (3) dispose of and transfer
the property of the limited liability company; (4) dis-
charge the liabilities of the limited liability company;
and (5) distribute to the members any remaining assets
of the limited liability company.’’ The act further pro-
vides in relevant part: ‘‘Upon the winding up of a limited
liability company, the assets shall be distributed as fol-
lows: (1) [p]ayment, or adequate provision for payment,
shall be made to creditors . . . in satisfaction of liabili-
ties of the limited liability company; (2) . . . to mem-
bers or former members in satisfaction of liabilities for
distributions under [General Statutes §§] 34-158 and 34-
159; and (3) . . . to members and former members,
first, for the return of their contributions and second,
respecting their membership interests, in proportions
in which the members share in distributions under [§]
34-158.’’ General Statutes § 34-210.
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 com-
pany. 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 prop-
erty 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 the company was
accompanied by ‘‘an automatic transfer of [the vessel]
to the plaintiff as the [company’s] managing member.’’
Likewise, there is no basis for the court’s conclusions
that ‘‘as a result of dissolving [the company], the plaintiff
personally incurred a use tax liability’’ or that the disso-
lution ‘‘triggered the taxable event that resulted in the
assessment of the use tax liability.’’ Sections 34-208 (b)
and 34-210 expressly establish that the members or
managers of a limited liability company are responsible
for discharging the limited liability company’s outstand-
ing liabilities during the prescribed winding-up process.
Accordingly, it is clear that it is not the dissolution, but
rather the failure to conform to the requirements of
the statutes, that can trigger a taxable event to the
managing members.
Here, the plaintiff does not dispute that there was an
outstanding sales tax liability on the vessel, and he
testified before the court that he understood the tax
deferral implications of using a resale certificate while
constructing the vessel. Nevertheless, the record is
clear that the plaintiff, as a managing member of the
company, failed to discharge, pay, or make adequate
provisions for payment in satisfaction of the outstand-
ing tax liabilities of the company, as required by the
winding-up process in the statutes, before reregistering
the vessel in his own name. We therefore conclude
that the court misconstrued the relevant limited liability
company dissolution statutes, and that its subordinate
findings of fact are rendered clearly erroneous.
The plaintiff continues to assert in this court that the
defendant’s tax advice was negligent because the tax
at issue ‘‘became due and payable when the marine
vessel was automatically transferred to the plaintiff
upon the dissolution of the subject [company].’’
(Emphasis added.) He presented his cause of action
against the defendant based upon this theory, and the
trial court decided the matter using the law and facts
that the plaintiff put before it. The plaintiff has provided
no alternative grounds upon which to affirm the court’s
judgment, nor has he explicitly directed us to any aspect
of his claim that remains unresolved. As we have estab-
lished, there is no legal foundation for the dissolution
theories propounded by the plaintiff; therefore, his mal-
practice cause of action, which was exclusively predi-
cated upon these theories, must fail.
The judgment is reversed and the case is remanded
with direction to render judgment in favor of the
defendant.
1
The defendant also claims that the court erred in rendering judgment
for the plaintiff’s recovery of use tax payments from the defendant because
the plaintiff’s ‘‘cause of action sought the recovery of sales tax payments.’’
Because we reverse judgment on the basis of the defendant’s first claim,
we need not reach this issue.
2
The plaintiff’s wife, Melody Mukon, also was listed on the company’s
tax return as a managing member of the company. She is not a party to
this action.
3
The vessel previously was registered in the name of the company. Sales
tax was not collected at the time of reregistration because the plaintiff
claimed an exemption.
4
The plaintiff originally was assessed an individual use tax at 6 percent
of the vessel’s value, plus interest and penalty, for a total of $16,621.57.
The plaintiff negotiated a settlement with the department in the amount
of $11,665.41
5
The plaintiff sought money damages including the $11,665.41 he paid to
the state, $650 for the cost of additional accounting services, and $600 for
attorney’s fees to negotiate the tax, interest, and penalty ultimately assessed
by the department. The amount awarded by the court is the sum of all of
the damages claimed.
6
‘‘There are four essential elements to a malpractice action. . . . (1) the
defendant must have a duty to conform to a particular standard of conduct
for the plaintiff’s protection; (2) the defendant must have failed to measure
up to that standard; (3) the plaintiff must suffer actual injury; and (4) the
defendant’s conduct must be the cause of the plaintiff’s injury.’’ (Emphasis
omitted; internal quotation marks omitted.) Stuart v. Freiberg, 142 Conn.
App. 684, 703, 69 A.3d 320, cert. granted, 310 Conn. 921, 77 A.3d 142 (2013).