Opinion
No. X03 CV03 4022302
April 19, 2006
MEMORANDUM OF DECISION DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT
This lawsuit arises out of a fraudulent scheme by Steven Cooperman, the defendant's ex-husband (Cooperman), whereby he collected insurance proceeds from the plaintiffs for two paintings, Nude Before A Mirror by Pablo Picasso and The Custom Officer's Cabin at Pourville by Claude Monet, which were insured for a total amount of $12.5 million dollars. The Second Revised Complaint alleges eight counts against the defendant Nancy Cooperman (the defendant) as follows: Count One (fraudulent conveyance), Count Two (violation of the Uniform Fraudulent Transfer Act), Count Three (statutory theft), Count Four (unjust enrichment), Count Five (accounting), Count Six (constructive trust), Count Seven (civil conspiracy) and Count Eight (conversion). The defendant moved for summary judgment in two motions. The first sought summary judgment on all counts on the grounds of collateral estoppel while the second motion asserted that Counts Three, Four, Five, Seven and Eight are all barred by the three-year statute of limitation for torts, General Statutes § 52-577. The plaintiffs are those certain Underwriters at Lloyd's, London, AXA Art Insurance Corporation, formerly known as AXA Nordstern Art Insurance Corporation and successor to Nordstern Insurance Company of America, and National Union Fire Insurance Company of Pittsburgh, Pennsylvania (collectively referred to herein as "Underwriters"). The court issued a summary order denying summary judgment on November 21, 2005. This memorandum constitutes an articulation of the reasoning underlying that ruling.
For purposes of this opinion Nancy Cooperman will be referred to as the defendant, and her ex-husband, Steven Cooperman, will be referred to as Cooperman.
I
The following facts are uncontested and construed in the light most favorable to the plaintiffs as the nonmoving party. From August 15, 1991 through August 15, 1992, the plaintiffs or their predecessor companies provided insurance to Cooperman under a Fine Arts Insurance Policy for the two paintings in question. In or about July 1992, Cooperman acted on a plan to commit insurance fraud involving the policy. (Second Revised Amended Complaint ("Complaint"), ¶¶ 7-9.) At that time, the defendant and Cooperman were married and resided at 254 Barrington Avenue in Los Angeles, California. (Complaint ¶ 9.) Cooperman arranged and conspired with others for the paintings to be removed from the defendant's home under circumstances intended by Cooperman to suggest that they had been stolen. (Complaint, ¶ 10.) Cooperman reported the paintings as stolen and made a claim against the insurance policy for $12.5 million. (Complaint, ¶ 10.) In August 1992, Cooperman and the defendant jointly purchased a home at 245 Bramley Hedge Circle, Fairfield, Connecticut, where they then moved their marital residence. (Complaint, ¶ 13.) In November 1992, Cooperman brought suit against the insurance carriers in the United States District Court for the Central District of California, which was settled in September 1993, for the total sum of $17,500,000. (Complaint, ¶ 14.) Cooperman transferred a portion of the settlement proceeds to the defendant who thereafter deposited $2.25 million into an account in her name with the investment firm of Gruber McBain Capital Management. (Complaint, ¶ 17-18.)
In July 1999, Cooperman was convicted of eighteen counts of insurance fraud and related crimes in the United States District Court for the Central District of California arising out of the theft of the artwork. (Complaint, ¶ 20.) Following extensive post-trial proceedings, in July 2001, Cooperman was sentenced to 37 months incarceration and ordered to pay $3.5 million restitution.
In July 2000, Underwriters commenced a lawsuit in the California Superior Court seeking recovery of the $17,500,000 plus additional consequential damages due to Cooperman's fraud. (Complaint, ¶¶ 22-24.) In February 2002, a judgment was entered in favor of the plaintiffs for damages approximating $22 million. (Complaint, ¶ 26.)
On September 20, 2001, pursuant to an asset transfer agreement that preceded a dissolution of their marriage on November 18, 2004, Cooperman transferred to the defendant by deed, his interest in 245 Brambley Hedge Circle, Fairfield, Connecticut, as well as his interest in the contents therein consisting of all his personal property including but not limited to artwork, antiques, an autograph collection, automobiles, jewelry, furniture and all his investments. (Complaint, ¶¶ 27-28.) See Cooperman v. Cooperman, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. 396744 (November 18, 2004, Owens, J.).
In September 2003, the plaintiffs filed this action against the defendant seeking to recover the insurance proceeds and property acquired from those proceeds that is now in her possession or control.
II
"Practice Book § 17-49 provides in relevant part that 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. It is well established that, [i]n seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle[s] him to a judgment as a matter of law. The courts hold the movant to a strict standard. To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact . . . As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent . . . When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue. Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § [17-45)." (Internal quotation marks omitted.) Socha v. Boudreau, 277 Conn. 579, 585-86, 893 A.2d 422 (2006).
III COLLATERAL ESTOPPEL
The defendant contends that summary judgment should be granted as to entire complaint because the alleged fraudulent conveyance that provides the basis for all eight counts of the complaint was fully and fairly litigated and decided in the marriage dissolution proceedings between the defendant and Cooperman, which were concluded in November 2004. Thus, the plaintiffs are collaterally estopped from making the present claim.
"The fundamental principles underlying the doctrine of collateral estoppel are well established. The common-law doctrine of collateral estoppel, or issue preclusion, embodies a judicial policy in favor of judicial economy, the stability of former judgments and finality . . . Collateral estoppel means simply that when an issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties in any future lawsuit . . . Issue preclusion arises when an issue is actually litigated and determined by a valid and final judgment, and that determination is essential to the judgment . . . Thus, the issue must have been fully and fairly litigated in the first action . . . Collateral estoppel express[es] no more than the fundamental principle that once a matter has been fully and fairly litigated, and finally decided, it comes to rest . . .
"An issue is actually litigated if it is properly raised in the pleadings or otherwise, submitted for a determination, and in fact determined . . . An issue is necessarily determined if, in the absence of a determination of the issue, the judgment could not have been validly rendered . . . If an issue has been determined, but the judgment is not dependent upon the determination of the issue, the parties may relitigate the issue in a subsequent action." (Emphasis in original; internal quotation marks omitted.) Heussner v. Day, Berry Howard, LLP, 94 Conn.App. 569, 573 (2006).
The defendant argues that summary judgment should be granted because the plaintiffs are collaterally estopped from obtaining a judgment on the issue of the fraudulent conveyance of Cooperman's real and personal property to the defendant because the issue was fully litigated and necessarily adjudicated in their dissolution proceedings which terminated in a decision of the court (Owens, J.) on November 18, 2004. (Defendant's 3/23/05 Memorandum in Support of Motion for Partial Summary Judgment, pp. 8-9.) The standard for proving a claim in fraudulent conveyance is: "A party who seeks to set aside a conveyance as fraudulent bears the burden of proving that the conveyance was made without substantial consideration and that, as a result, the transferor was unable to meet his obligations (constructive fraud) or that the conveyance was made with fraudulent intent in which the transferee participated (actual fraud)." Tessitore v. Tessitore, 31 Conn.App. 40, 42, 623 A.2d 496 (1993).
The defendant claims the plaintiffs' complaint rests solely on the premise that the defendant paid Cooperman insufficient value for the real and personal property and investments that he transferred to her on or about September 20, 2001, and that Judge Owens' determination that the transaction constituted an "equivalent exchange," defeats the plaintiffs' claims as a matter of law. The defendant further argues that the defendant entered to transfer agreement with the intent to make a bona fide purchase of assets from Cooperman which was concluded in the context of the dissolution of their marriage.
The defendant submitted Judge Owens' decision as an exhibit in support of the motions for summary judgment and requested that the court take judicial notice of the entire record of that case. Nancy Cooperman v. Steven G. Cooperman, judicial district of Fairfield at Bridgeport, Docket No., FA 02-0396744. The defendant purchased Cooperman's "personal property and stock and investment accounts, interests in partnerships, rights under insurance policies, for the purchase price of $475,000." (Defendant's 3/23/05 Memorandum in Support of Motion for Partial Summary Judgment, p. 3.)
On the question of the validity of the defendant's and Cooperman asset transfer agreement, Judge Owens found as follows:
The testimony elicited at trial supports the claim of valid contracts. Each party had independent counsel during the negotiation of the agreements, documents memorializing the agreements were drafted and executed, and both parties are intelligent and well educated. The parties testified that they agreed that plaintiff would provide cash in exchange for assets of equal value. The uncontroverted testimony of Attorney Gioella at trial and the deposition testimony that the court has read was that defendant's interest in real and personal property was exchanged for plaintiff's funds. Attorney Gioella who represented the defendant in many aspects of the criminal proceedings and counseled him extensively in the transfer of assets characterized the transfers as a "like/kind exchange." (Emphasis added.) Cooperman v. Cooperman, supra, Superior Court, Docket No. 396744.
The plaintiffs argue that the defendant's attempt to invoke the collateral estoppel doctrine fails because: 1) the plaintiffs were neither a party nor in privity with a party to the divorce action; 2) the issues and facts which the defendant contends cannot be litigated in this action are not identical to the issues or facts decided by Judge Owens; 3) the issues and facts before this court were not actually litigated before Judge Owens and were not necessarily determined by his findings; 4) there are substantial issues of material fact relating to the defendant's knowledge of her ex-husband's schemes; and, 5) the defendant acknowledges that the funds in her possession or control and the profits derived therefrom are funds that Cooperman stole from the plaintiffs. (Plaintffs' Memorandum in Opposition, pp. 10-11.)
The defendant's claim of collateral estoppel is not sustainable for several reasons. Collateral estoppel applies only to subsequent litigation between "the same parties or those in privity with them." Efthimiou v. Smith, 268 Conn. 499, 506, 846 A.2d 222 (2004); see also Rosenfield v. Rogin, Nassau, Caplan, Lassman Hirtle, LLC, 69 Conn.App. 151, 155, 795 A.2d 572 (2002). Although counsel for the defendant conceded at oral argument that the concept of privity was "critical," the defendant's argument as to this issue was tenuous at best. (Hearing Transcript, 6/21/05, pp. 34-36.) The interests of the plaintiffs and Cooperman have been adverse since 1992 and there is no reasonable basis to believe that he adequately represented the interests of the plaintiffs in challenging the validity of the September 2001 asset transfer agreement with his wife in the contest of their divorce proceedings. In addition, the issues in the instant case concern the defendant's intent to deprive the plaintiffs of property rightfully theirs and whether the defendant "aided, abetted and conspired" with her ex-husband to evade creditors and accept fraudulently obtained funds. These issues were not before Judge Owens, and therefore, were not actually litigated. (See Complaint ¶ 32.) Although Cooperman claimed collusion with his wife in an effort to undermine the asset transfer agreement, Judge Owen did not address the interests of the insurers and was not required to. Nor was the resolution of the issue of the defendant's legal entitlement to the property necessary to the determination of the dissolution action. See Mazziotti v. Allstate Ins. Co., 240 Conn. 799, 812, 695 A.2d 1010 (1997). In the context of the divorce proceedings, Judge Owens' consideration was limited to the cause for the breakdown of the marriage, an assessment of fault and the equitable distribution of the marital assets between the parties before him. The parties did not litigate the defendant's entitlement to those assets vis-a-vis the rights of the plaintiffs herein. A decision was not rendered on whether Nancy Cooperman intended to defraud the insurance companies by taking possession of Steven Cooperman's fraudulently obtained assets or on whether she was entitled to keep monies invested on her behalf and the profits derived therefrom which were the proceeds of insurance fraud. Notably, despite the defendants' persistent argument suggesting otherwise, Judge Owens never made a finding that the exchange of consideration between Cooperman and the defendant was equivalent. Rather, he found that " the parties testified that they agreed that plaintiff [the defendant herein] would provide cash in exchange for assets of equal value." (Emphasis added.) Cooperman v. Cooperman, supra, Superior Court, Docket No. 396744. Finally, there are genuine issues of material fact that preclude summary judgment as to the defendant's knowledge and participation in the fraud perpetrated by her husband. There are unresolved issues as to whether she had knowledge of the theft in 1993 and unresolved issues as to whether she participated in a scheme with her husband following his conviction to protect family assets and prevent the return of the fraudulently obtained insurance proceeds to the plaintiffs. The evidence that the defendant offered in support of her motion does nothing to put these key issues to rest. For all the foregoing reasons, summary judgment on the issue of collateral estoppel is denied.
The evidence offered in support of the defendant's motion for summary judgment as to the issue of collateral estoppel is paltry at best. Most notable is the defendant's affidavit, which does no more than authenticate the "Agreement for the Sale of Assets dated September 19, 2001 between Steven G. Cooperman and Nancy Cooperman," and the real estate contract between them of the same date for the sale of the real property at 245 Brambly Hedge Circle, Fairfield. By the time of these transfers, Cooperman had not only been convicted and sentenced in connection with his crimes, he had also admitted his guilt to the defendant. (Plaintiffs' 6/6/05 Memorandum, p. 20.)
IV STATUTE OF LIMITATIONS
The defendant also moves for summary judgment as to Counts Three (statutory theft) and Eight (conversion) on the ground that this lawsuit was filed beyond the three-year statute of limitations for torts set forth in General Statutes § 52-577. The defendant further argues that Counts Four (unjust enrichment), Five (accounting) and Seven (civil conspiracy) "rise and fall with the statutory theft and conversion counts." (Defendants' 7/1/05 Memorandum of Law in Support of Motion for Partial Summary Judgment, p. 10). General Statutes § 52-577 provides: "[n]o action founded upon a tort shall be brought but within three years from the date of the act or omission complained of."
A Statutory Theft
"Statutory theft under § 52-564 is synonymous with larceny under General Statutes § 53a-119 . . . Pursuant to § 53a-119, [a] person commits larceny when, with intent to deprive another of property or to appropriate the same to himself or a third person, he wrongfully takes, obtains or withholds such property from an owner. By comparison, [c]onversion is an unauthorized assumption and exercise of the right of ownership over goods belonging to another, to the exclusion of the owner's rights. In addition, conversion requires that the owner be harmed as a result of the unauthorized act . . . Conversion may arise subsequent to an initial rightful possession . . . Conversion can be distinguished from statutory theft as established by § 53a-119 in two ways. First, statutory theft requires an intent to deprive another of his property; second, conversion requires the owner to be harmed by a defendant's conduct. Therefore, statutory theft requires a plaintiff to prove the additional element of intent over and above what he or she must demonstrate to prove conversion." (Citations omitted; internal quotation marks omitted.) Suarez-Negrete v. Trotta, 47 Conn.App. 517, 520-21, 705 A.2d 215 (1998).
Under § 53a-119, a person who receives stolen property may be guilty of larceny. In pertinent part, § 53a-119 provides that larceny is committed by receiving stolen property if a person, "receives, retains, or disposes of stolen property knowing that it has probably been stolen or believing that it has been stolen, unless the property is received, retained or disposed of with purpose to restore it to the owner." § 53a-119(8). The defendant would be guilty of larceny or legally responsible for statutory theft, at a point in time in which she knew or believed that the property she received from Cooperman was stolen. General Statutes § 53a-188(a)(1) defines property as " any money, personal property, real property, thing in action, evidence of debt or contract, or article of value of any kind." (Emphasis added.)
In accordance with the provisions of § 53a-119(8), the requisite elements of a claim of statutory theft, under the circumstances alleged by the plaintiff herein, are: 1) intent to deprive another of property; 2) receipt, retention or disposition of stolen property; and 3) knowledge that the property has probably been stolen or belief that it has probably been stolen. Since a necessary element of statutory theft is knowledge or belief by the defendant that she was in possession of stolen property, the statute of limitations cannot begin to run until the defendant knew or had the requisite knowledge or belief.
The defendant claims that the theft in question allegedly occurred in September 1993 when Cooperman entered into the settlement agreement with the plaintiffs for $17.5 million. Alternatively, the defendant argues that the very latest that the plaintiffs knew or had reason to know of Cooperman's fraud was at the time of his conviction in July 1999. In either case, the defendant contends that the complaint in this action was filed beyond the three-year statute of limitations dictated by § 52-577.
The defendant contends that the moment in time which the plaintiff had knowledge that she possessed stolen property was no later than July 1999, when Cooperman was convicted in federal court. (Hearing Transcript, 7/18/05, p. 6.) The defendant further points out that the larceny statute does not require definitive knowledge on the part of the alleged perpetrator, but only a belief that the property was "probably" stolen. § 53a-119(8); see also State v. Nunes, 58 Conn.App. 296, 301, 752 A.2d 93, cert. denied, 254 Conn. 944, 762 A.2d 903 (2000). Therefore, the defendant asserts that the defendant had the requisite knowledge that she was in possession of the stolen property in July 1999, and that the present lawsuit is barred by the statute of limitations.
The plaintiffs argue that there is a genuine dispute as to when the defendant had knowledge that she was in possession of stolen property. They claim that although Cooperman was initially convicted in July of 1999, post-trial proceedings and motions for judgment of acquittal and a new trial were pending until July 2001, when Cooperman was sentenced. The plaintiffs also argue that the defendant herself has offered no evidence as to when she knew that the property (either the settlement proceeds paid by the plaintiffs in 1993, from which she received $2.25 million, or the property she received pursuant to the September 19, 2001, asset transfer agreement), was stolen. The plaintiffs further claim it was not until 2001 when the depositions of both Cooperman and the defendant were taken in connection with their lawsuit against Steven Cooperman in California Superior Court, that they learned that the defendant had received portions of the stolen property in 1993 and 2001. (Hearing Transcript, 7/18/06, Pp. 25-26.) Finally, the plaintiff argues that the defendant testified in connection with the dissolution proceedings that Cooperman denied his involvement in the theft of the artwork until he reached a sentencing agreement with the prosecutors in July 2001.
See the Plaintiffs' Responses to Defendant Nancy Cooperman's First Set of Interrogatories and Request for Production wherein the plaintiffs refer to Nancy Cooperman's deposition of October 15, 2001 and Steven G. Cooperman's deposition of September 6, 2001, given in connection with Those Certain Underwriters At Lloyd's, London, Severally Subscribing Cover Note Number P161 et al. v. Steven G. Cooperman, filed in the Superior Court of the State of California for the County of Los Angeles, Central District under Case No., BC233160, as the source of their knowledge of the defendant's receipt of the stolen property. (See Interrogatory Responses #19-21 appended to the Defendant's 3/23/05 Memorandum in Support of Motion for Partial Summary Judgment (Plaintiffs' Interrogatory Responses).)
The court finds that the operative date for statute of limitations purposes on which the defendant knew or probably should have known that she was in receipt of stolen property was September 19, 2001, the date of the asset transfer agreement and approximately three months after her husband was sentenced for his crimes. Whatever amount of property she may have received between 1993 and 2001 is an open question but, at the very least, in accordance with the "Agreement of for Sale of Assets" attached as Exhibit 1 to her affidavit submitted in support of her motions for summary judgment, she certainly received substantial property on that date which she probably should have known was likely to have been stolen, or purchased with stolen funds, or profits derived thereby. Further, it is a question of fact as to whether some or all of the property encompassed by that agreement is property stolen from the plaintiffs. The defendant has presented no evidence to the court which could lead to any other conclusion. Therefore, the court finds that the claim of statutory theft is not time barred.
B Conversion
The defendant also moved for summary judgment on Count Eight conversion. Statutory theft and conversion can be distinguished in that the element of intent does not have to be proven for conversion. Suarez-Negrete v. Trotta, supra, 47 Conn.App. 521. In order to prevail on a claim of conversion, the plaintiffs must prove that they have been injured by the defendant's possession of the property. Id. A person innocently in possession of stolen properly does not commit actionable conversion until a demand is made for the return of the stolen property and that demand is refused. Coleman v. Francis, 102 Conn. 612, 615, 129 A.2d 718 (1925). In Coleman, the court held that "[t]here are two general classes into which conversions are grouped: (1) those where the possession is originally wrongful, and 2) those where it is rightful . . . The second class comprises those where the possession, originally rightful, becomes wrongful by a wrongful detention." Id. Also, ". . . an innocent purchaser of personal property from a wrongdoer shall first be informed of the defect in his title, and have an opportunity to deliver the property to the true owner, before he shall be made liable as a tortfeasor for wrongful conversion." (Internal quotation marks omitted.) Atlas Assurance Co., Ltd. v. Gibbs, 121 Conn. 188, 194, 183 A.2d 690 (1936).
Viewing the allegations of conversion in the light most favorable to the nonmoving party, the court accepts the claim of the plaintiffs that they have alleged the second type conversion in their complaint. Count Eight incorporates paragraphs 1 through 33 of Count One and recites in paragraph 35 that although they have demanded the return of the "proceeds, Ms. Cooperman has refused to return the Insurance Proceeds . . . and have converted the same for her own use and purpose." In accordance with Part IVB, supra, based on the asset transfer agreement executed on September 19, 2001, offered by the defendant in support of her motion for summary judgment and the Plaintiffs' Interrogatory Responses #19-21, the plaintiffs had no knowledge of the property in the defendant's possession until they took her deposition on October 15, 2001. The court assumes that the demand made for return of the property by the plaintiffs came sometime thereafter. Finally, the plaintiffs are entitled to rely on the defendant's claim that she was unaware of her husband's crime, and thus unaware that she was in possession of stolen property, until 2001. In any event, for all the foregoing reasons, the court finds that the claim for conversion set forth in Count Eight is well within the three-year statute of limitation set forth in § 52-577. As previously stated, it is a question of fact as to whether some or all of the property encompassed by that agreement constitutes property stolen from the plaintiffs.
C Unjust Enrichment, Accounting, Civil Conspiracy
Since the defendant has herself argued that Counts Four, Five and Seven rise or fall with Counts Four and Eight, in light of the court's ruling as to those counts, summary judgment was denied as to these counts as well.
CONCLUSION
Accordingly, for all the foregoing reasons, the defendant's motions for summary judgment have been denied.