Styslinger v. Brewster, Park, LLC , 321 Conn. 312 ( 2016 )

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WILLIAM C. STYSLINGER III v. BREWSTER
PARK, LLC, ET AL.
(SC 19489)
Rogers, C. J., and Palmer, Zarella, McDonald, Espinosa, Robinson and
Vertefeuille, Js.
Argued December 15, 2015—officially released May 17, 2016
Joel Z. Green, with whom, on the brief, was Linda
Pesce Laske, for the appellant (plaintiff).
Andrew M. McPherson, with whom, on the brief, was
William J. Kupinse, Jr., for the appellees (defendants).
Opinion
VERTEFEUILLE, J. In this appeal, we must determine
whether the assignee of a membership interest in a
Connecticut limited liability company (LLC) has stand-
ing to seek a court order forcing the winding up of the
affairs of an LLC in the absence of the LLC’s dissolution.
We conclude that the assignee does not have standing
to do so.
The named defendant, Brewster Park, LLC (Brewster
Park), is an LLC with a business address in Fairfield
that owns, maintains, and leases residential housing
units in Bridgeport and Trumbull. It has two members:
the defendant Michael Weinshel1 and Joyce Styslinger,
a nonparty to this action who is the former spouse of the
plaintiff, William C. Styslinger III. As part of a marriage
dissolution settlement agreement, Joyce Styslinger
assigned her membership interest in Brewster Park to
the plaintiff. The parties agree that, under General Stat-
utes §§ 34-170 and 34-172, the plaintiff, as assignee, has
the right to receive distributions resulting from Joyce
Styslinger’s membership interest in Brewster Park,
while Joyce Styslinger remains a member of Brewster
Park unless and until the plaintiff is admitted to mem-
bership by Weinshel, the other member of Brewster
Park. See General Statutes §§ 34-172 and 34-179. The
plaintiff has requested membership status, but has not
been granted it by Weinshel. Brewster Park also has
not made any distributions to the plaintiff, despite the
plaintiff’s demand.
The plaintiff filed the present action against Brewster
Park and Weinshel claiming, among other things, that
Weinshel has breached his fiduciary duties to Brewster
Park and the plaintiff by refusing to make distributions
to the plaintiff while taking distributions for himself,
and by refusing to allow the plaintiff to inspect Brewster
Park’s books and records. In his complaint, the plaintiff
sought the following forms of relief: (1) an order dissolv-
ing Brewster Park; (2) the appointment of a receiver
to wind up its affairs and distribute its assets; and (3)
‘‘[s]uch other and further relief as in law or equity
may appertain.’’
The defendants moved to dismiss the complaint on
the ground that the plaintiff, as an assignee, lacked
standing to seek orders to dissolve and wind up the
affairs of Brewster Park because only members could
seek this relief under the Connecticut Limited Liability
Company Act (act), General Statutes § 34-100 et seq.
The plaintiff responded that both the act and principles
of equity gave him standing to pursue the dissolution
and the winding up of affairs, even as an assignee, as
a remedy for Weinshel’s wrongful conduct.
The trial court agreed with the defendants that the
plaintiff did not have standing to seek a dissolution or
a winding up of Brewster Park’s affairs. Because the
plaintiff did not request with specificity any other form
of relief besides a dissolution and a winding up of the
affairs, the court rendered judgment dismissing the
complaint.2 The trial court also denied a motion by the
plaintiff to reconsider its ruling. The plaintiff appealed
from the judgment of dismissal to the Appellate Court
and we transferred the appeal to this court pursuant to
General Statutes § 51-199 (c) and Practice Book § 65-1.
On appeal, the plaintiff no longer argues that he has
standing to seek the dissolution of Brewster Park.
Instead, he claims that the act grants him standing to
seek a winding up of Brewster Park’s affairs and distri-
bution of its assets even in the absence of a dissolution.
We disagree, and affirm the trial court’s judgment.
‘‘As a preliminary matter, we set forth the standard
of review. 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.
. . . [O]ur review of the trial court’s ultimate legal con-
clusion and resulting [decision to] grant . . . the
motion to dismiss will be de novo. . . .
‘‘The issue of standing implicates subject matter juris-
diction and is therefore a basis for granting a motion
to dismiss. . . . [I]t is the burden of the party who
seeks the exercise of jurisdiction in his favor . . .
clearly to allege facts demonstrating that he is a proper
party to invoke judicial resolution of the dispute. . . .
‘‘Standing is the legal right to set judicial machinery
in motion. One cannot rightfully invoke the jurisdiction
of the court unless he [or she] has, in an individual or
representative capacity, some real interest in the cause
of action, or a legal or equitable right, title or interest
in the subject matter of the controversy. . . . 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 . . . .’’ (Cita-
tions omitted; internal quotation marks omitted.) Wil-
cox v. Webster Ins., Inc., 294 Conn. 206, 213–14, 982
A.2d 1053 (2009).
The question of whether the plaintiff, as assignee of
a membership interest in an LLC, has standing to bring
his claims under the act, presents an issue of statutory
construction, also a question of law over which our
review is plenary. Well established principles guide our
interpretation. ‘‘When construing a statute, [o]ur funda-
mental objective is to ascertain and give effect to the
apparent intent of the legislature. . . . [General Stat-
utes] § 1-2z directs us first to consider the text of the
statute itself and its relationship to other statutes. If,
after examining such text and considering such relation-
ship, the meaning of such text is plain and unambiguous
and does not yield absurd or unworkable results, extra-
textual evidence of the meaning of the statute shall not
be considered. . . . [W]e are [also] guided by the prin-
ciple that the legislature is always presumed to have
created a harmonious and consistent body of law . . . .
[T]his tenet of statutory construction . . . requires us
to read statutes together when they relate to the same
subject matter . . . . Accordingly, [i]n determining the
meaning of a statute . . . we look not only at the provi-
sion at issue, but also to the broader statutory scheme
to ensure the coherency of our construction.’’ (Internal
quotation marks omitted.) Hartford/Windsor Health-
care Properties, LLC v. Hartford, 298 Conn. 191, 197–98,
3 A.3d 56 (2010).
We begin our analysis with the nature of LLCs and
the law that governs them. Our common law does not
recognize LLCs, which were first created by statute in
in Connecticut in 1993. Public Acts 1993, No. 93-267.
An LLC is a distinct type of business entity that allows
its owners to take advantage of the pass-through tax
treatment afforded to partnerships while also providing
them with limited liability protections common to cor-
porations. See, e.g., 51 Am. Jur. 2d 818, Limited Liability
Companies § 1 (2011); see also General Statutes § 34-
133 (setting forth members’ limited liability protec-
tions). The act establishes the right to form an LLC and
all of the rights and duties of the LLC, as well as all
of the rights and duties of members and assignees. It
permits the members to supplement these statutory
provisions by adopting an operating agreement to gov-
ern the LLC’s affairs. See, e.g., General Statutes § 34-140
(c) (permitting members to adopt operating agreement
governing LLC’s affairs, provided agreement is consis-
tent with act). It is undisputed in the present case,
however, that Brewster Park does not have an operating
agreement to supplement the rights and duties estab-
lished in the act.
The provisions of the act relating to winding up an
LLC’s affairs inextricably link the winding up process
to a dissolution, and therefore must be read together
with the statutes governing the dissolution of an LLC.
See, e.g., General Statutes §§ 34-206 through 34-209.
Tellingly, the provisions governing a winding up of the
affairs of an LLC are found within the provisions govern-
ing the dissolution process. The statutory provisions
with regard to both dissolution and winding up of affairs
are found within the portion of the act entitled ‘‘DISSO-
LUTION.’’ General Statutes §§ 34-206 through 34-216.
Reading the winding up and dissolution statutes
together, the act creates a clear progression from disso-
lution to winding up the affairs, demonstrating that a
winding up is not an independent event, but is an inte-
gral part of the dissolution process. Once an event of
dissolution occurs, the LLC winds up its affairs, distrib-
utes its assets, and then terminates its business opera-
tions. See, e.g., Mukon v. Gollnick, 151 Conn. App. 126,
131–32, 92 A.3d 1052 (2014).
The act provides only a single mechanism for trig-
gering a winding up of an LLC’s affairs: an event of
dissolution. Section 34-206 provides in relevant part
that ‘‘[a] limited liability company is dissolved and its
affairs shall be wound up upon the happening’’ of one
of three events: (1) any event of dissolution specified
in the LLC’s articles of organization or operating
agreement; (2) a vote to dissolve by the majority of the
LLC’s members; or (3) the entry of a decree of judicial
dissolution under General Statutes § 34-207. (Emphasis
added.) Under § 34-207, only a member or someone on
the member’s behalf may apply for a decree of dissolu-
tion, and a decree may enter only if the court determines
that ‘‘it is not reasonably practicable to carry on the
business in conformity with the articles of organization
or operating agreement.’’3 General Statutes § 34-207.
There are no other mechanisms in the act for triggering
a winding up of the affairs.
Moreover, the provisions of the act governing the
winding up process presuppose that the LLC has already
dissolved prior to winding up its affairs. For instance,
General Statutes § 34-208 (a) (1) explains who may
carry out the winding up process and vests this power
in ‘‘the members or mangers who have authority . . .
to manage the limited liability company prior to disso-
lution . . . .’’ (Emphasis added.) General Statutes § 34-
209 (a) sets out the powers of members and managers
to bind the LLC after dissolution, providing in relevant
part that, ‘‘after dissolution of the limited liability com-
pany, each of the members having authority to wind
up the limited liability company’s business and
affairs can bind the limited liability company . . . (1)
[b]y any act appropriate for winding up the limited
liability company’s business and affairs or completing
transactions unfinished at dissolution . . . .’’
(Emphasis added.) In addition, General Statutes § 34-
210, the sole provision among the dissolution sections
of the act that governs the final distribution of the
LLC’s assets, provides in relevant part that, ‘‘[u]pon the
winding up of a limited liability company, the assets
shall be distributed as follows . . . .’’ (Emphasis
added.)
In the present case, none of the events of dissolution
specified in § 34-206 has occurred and the plaintiff
therefore cannot trigger a winding up of Brewster Park’s
affairs. First, the plaintiff has not alleged that Brewster
Park’s articles of organization have triggered a dissolu-
tion and it has no operating agreement. Second, the
plaintiff has not alleged that its members voted to dis-
solve. Third, because the plaintiff is not a member of
Brewster Park, he cannot pursue a judicial dissolution
under § 34-207. Unless and until the plaintiff is admitted
to membership, Joyce Styslinger continues to hold the
sole power to exercise the rights accompanying her
membership interest; see General Statutes §§ 34-170 (a)
(4) and 34-172 (d); and she has not sought a judicial
dissolution of Brewster Park in this action. Because
no event of dissolution has occurred, and the plaintiff
cannot force a judicial dissolution under § 34-207 as an
assignee, we conclude that the act does not grant the
plaintiff standing to seek a winding up of Brewster
Park’s affairs.
The plaintiff argues that his right to force a winding
up of Brewster Park’s affairs is found in § 34-208 (a).
We disagree. That subsection pertains only to who may
carry out the winding up process once it has been trig-
gered by dissolution; it does not provide authority for
an assignee to trigger a winding up in the first place.
Section 34-208 (a) (1) provides in relevant part that, by
default, the winding up may be carried out ‘‘by the
members or managers who have authority . . . to man-
age the limited liability company prior to dissolution
. . . .’’ Alternatively, ‘‘if one or more of the members
or managers of the limited liability company have
engaged in wrongful conduct, or upon other cause
shown,’’ the statute permits any member or an assignee
to apply to the Superior Court to ask the court to carry
out the winding up process in place of the members
and managers. General Statutes § 34-208 (a) (2). Thus,
under § 34-208 (a), if an LLC has dissolved, but the
members or managers had engaged in wrongful conduct
or for other cause shown, an assignee can apply to the
Superior Court to have the court perform the winding up
process instead of the members or managers. Nothing in
§ 34-208, however, permits an assignee to apply to the
Superior Court to force the commencement of a wind-
ing up process absent a dissolution under § 34-206.
Apart from having no support from the text of the
act, the plaintiff’s interpretation of § 34-208 allowing an
assignee to force a winding up of affairs without a
dissolution of the LLC would undermine the statutory
scheme for LLCs, thus leading to absurd results. Under
the act, an assignee is a passive recipient of the eco-
nomic benefit of a membership interest and is barred
by the act from participating in the management of the
LLC’s business or exercising any right of membership
unless and until the assignee is admitted as a member.
General Statutes § 34-170 (a) (2) through (4). The act
expressly provides that ‘‘an assignment of a limited
liability company membership interest does not dis-
solve the limited liability company or entitle the
assignee to participate in the management and affairs
of the limited liability company or to become or exercise
any rights of a member . . . .’’ General Statutes § 34-
170 (a) (3). Instead, the rights and duties of membership
remain vested in the assignor until the assignee is admit-
ted to membership. General Statutes §§ 34-170 (a) (4)
and 34-172 (d). Recognizing that assignees have no role
to play in managing the LLC’s affairs, the act shields
them from any liabilities that a member might have;
General Statutes § 34-170 (a) (5); including, for exam-
ple, for capital contributions. See General Statutes § 34-
151 (describing member liability for capital contribu-
tions to LLC). Instead, the assignor member continues
to hold the obligations of membership, including for
capital contributions, and continues to owe a duty of
good faith to the LLC. See, e.g., General Statutes §§ 34-
140, 34-141 and 34-151.
The plaintiff’s interpretation of the act is directly
contrary to these limitations on the rights of an assignee,
and would exalt rights of assignees to a level on par
with those of members in the face of the act’s clear
intention to the contrary. Only members may vote to
dissolve an LLC and wind up its affairs. General Statutes
§ 34-206 (2). Only a member or someone on his behalf
may apply to a court for a judicial dissolution forcing
a winding up of an LLC. General Statutes § 34-207. If
an assignee could obtain a judgment effecting a winding
up of the LLC’s affairs without a dissolution, the
assignee would hold the power to force a termination
of the LLC’s business operations, giving the assignee
undue leverage over the members. In the present case,
Joyce Styslinger, rather than the plaintiff, retains the
sole right under the act to exercise her membership
rights and to protect her membership interests.
There is only one provision of the act that places the
rights of assignees on par with the members, and the
power to exercise this right is available to assignees
only after the LLC has dissolved. As we have previously
explained, § 34-208 permits assignees, after a dissolu-
tion, to ask the Superior Court to conduct the winding
up process in the stead of its members and managers,
‘‘if one or more of the members or managers of the
limited liability company have engaged in wrongful con-
duct, or upon other cause shown.’’ General Statutes
§ 34-208 (a) (2). Providing assignees this power after a
dissolution and during a winding up process is wholly
consistent with the limited role that the act grants to
assignees. The assignee’s interest in receiving distribu-
tions from the LLC becomes primary after an LLC dis-
solves. After dissolution, the purpose of the LLC is no
longer to maintain its business operations, but to wind
up its affairs so that the LLC’s assets may be liquidated
and distributed to its members or their assignees. Gen-
eral Statutes §§ 34-206 through 34-211. Thus, only after
a dissolution does the act permit an assignee to petition
the court to protect his or her then primary interest in
receiving a share of the LLC’s assets. General Statutes
§ 34-208 (a) (b) (5).
We therefore conclude that the act does not provide
an assignee such as the plaintiff with standing to seek
the winding up of the affairs of an LLC in the absence
of a dissolution of that LLC.4 Accordingly, the trial court
properly dismissed the plaintiff’s complaint.
The judgment is affirmed.
In this opinion the other justices concurred.
1
References to Brewster Park and Weinshel jointly are to the defendants;
individual references are by name.
2
The plaintiff claims on appeal that he is also entitled to pursue other
forms of relief besides a winding up of Brewster Park’s affairs, including
money damages for Weinshel’s wrongful conduct. In dismissing the com-
plaint, however, the trial court noted that the plaintiff had failed to specifi-
cally request money damages and thus could not sustain such a claim. We
agree with the trial court.
Assuming for the sake of argument that an assignee is entitled to seek
some other relief, including money damages, for wrongful conduct on the
part of the members or managers of an LLC, the plaintiff did not explicitly
ask for any other relief besides a court-ordered dissolution and winding up
of Brewster Park’s affairs in his complaint. Although the plaintiff requested
‘‘[s]uch other and further relief as in law or equity may appertain,’’ the trial
court properly concluded that a more specific request was necessary to put
the defendants on notice that the plaintiff was seeking some other form of
relief besides dissolution and winding up. As the Appellate Court has
explained, a catchall prayer for relief such as ‘‘ ‘such other relief as the
court deems necessary and just’ is too amorphous to be a claim for money
damages.’’ Solomon v. Hall-Brooke Foundation, Inc., 30 Conn. App. 129,
134, 619 A.2d 863 (1993); see also Stern v. Connecticut Medical Examining
Board, 208 Conn. 492, 501, 545 A.2d 1080 (1988) (‘‘In an ordinary civil case,
the general rule is that a prayer for relief must articulate with specificity
the form of relief that is sought. . . . A party who fails to comply with this
rule runs the risk of being denied recovery.’’ [Citations omitted.]).
3
By contrast, our Uniform Partnership Act; General Statutes § 34-300 et
seq.; expressly permits transferees of a partnership interest to ask a court
to dissolve and wind up the affairs of a partnership. See, e.g., General
Statutes §§ 34-348 (b) and 34-372 (6). We find this difference significant and
strongly suggestive of the fact that the legislature did not intend to provide
an assignee of a membership interest in an LLC with the right to wind up
the affairs of the LLC.
4
The plaintiff has also claimed that he is classically aggrieved under
the common law or principles of equity, but we disagree. The act permits
‘‘principles of law and equity [to] supplement’’ the act only to the extent
that they are not ‘‘displaced’’ by the act’s provisions. General Statutes § 34-
242 (b). Thus, even if we assume, for the sake of argument, that the common
law or equitable principles would otherwise grant an assignee standing to
seek a winding up of an LLC’s affairs, we nevertheless conclude that these
principles are displaced by the provisions of the act discussed previously
herein that expressly limit an assignee’s role and prevent an assignee from
forcing the dissolution or winding up of the LLC.
In support of this claim, the plaintiff cites the Delaware Chancery Court
decision in In re Carlisle Etcetera LLC, 114 A.3d 592 (Del. Ch. 2015), but
we find that decision inapposite because Delaware law concerning assign-
ments of membership interests in an LLC differs markedly from that in
Connecticut. Under Delaware law, an assignment leaves both the member
and the assignee without the power to assert the rights of membership at
issue unless and until the assignee is admitted to membership Id., 597–601.
The court in In re Carlisle Etcetera LLC resolved this lacuna by granting
equitable standing to the assignee. Id., 601–607. Connecticut law, by contrast,
does not result in a similar void because the assignor continues to hold the
exclusive power to exercise the rights of membership until the assignee
becomes a member. General Statutes §§ 34-170 (a) (4) and 34-172 (d).