Opinion
UWYCV106007279S
05-27-2016
Patrick M. Graziano v. PMS, Inc. aka PMS Associates, Inc. et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
Barbara Brazzel-Massaro, J.
I. INTRODUCTION
This case came to be heard in a non-jury trial before this court on October 22, 2015. At the conclusion of the testimony and evidence the parties requested a period of time to submit post-trial briefs. The plaintiff and defendants filed post-trial briefs dated December 10, 2015. Thereafter, the defendants filed a Reply Brief as to factual allegations on January 27, 2016.
The action was filed by complaint dated October 8, 2010 and filed on October 22, 2010. The complaint contains one count which alleged that the defendant defaulted on his payments for a promissory note in the amount of $35,000. The defendants denied the allegations and filed special defenses and a counterclaim dated January 18, 2011. The defendants filed a Revised Special Defense and Counterclaim dated August 9, 2013. The special defenses include a claim of statute of limitations and laches regarding the promissory note. The counterclaim is in two counts. The first count alleges a breach of contract for the involvement with a product called " Sweet Peet." The second counterclaim is a breach of contract for the formation of a business known as " Norway Corp."
The court conducted a hearing on October 22, 2015 and October 28, 2015. The parties submitted post-trial briefs on December 10, 2015 and January 27, 2016.
II. DISCUSSION
" It is well established that in cases tried before courts, trial judges are the sole arbiter of the credibility of witnesses and it is they who determine the weight to be given specific testimony . . . it is the quintessential function of the fact finder to reject or accept certain evidence . . ." (Citations omitted; internal quotation marks omitted.) In re Antonio M., 56 Conn.App. 534, 540, 744 A.2d 915 (2000). The trier of fact must evaluate the credibility of both testimonial and documentary evidence. Coombs v. Phillips, 5 Conn.App. 626, 627, 501 A.2d 395 (1985) (per curiam). " The fact finding function is vested in the trial court with its unique opportunity to view the evidence presented in a totality of the circumstances, i.e., including its observations of the demeanor and conduct of the witnesses and parties." (Internal quotation marks omitted.) Cavoli v. DeSimone, 88 Conn.App. 638, 646, 870 A.2d 1147, cert. denied, 274 Conn. 906, 876 A.2d 1198 (2005).
The trier of fact must observe the demeanor of witnesses and draw inferences as to the motives underlying their testimony and conduct. Christie v. Eager, 129 Conn. 62, 64-65, 26 A.2d 352 (1942). " It is well established that [t]he trier of fact may accept or reject the testimony of any witness . . . The trier can, as well, decide what-all, none, or some of a witness' testimony to accept or reject." (Citation omitted; internal quotation marks omitted.) Wilson v. Hryniewicz, 51 Conn.App. 627, 633, 724 A.2d 531, cert. denied, 248 Conn. 904, 731 A.2d 310 (1999).
In evaluating the credibility of the witnesses, this Court considered their appearance and demeanor on the witness stand, the consistency or inconsistency of their testimony, their memory or lack thereof of certain events, their manner in responding to questions and whether they were candid and forthright or evasive and incomplete, their interest or lack of interest in the case and the consistency or inconsistency of their testimony in relation to other evidence, including exhibits in the case. The testimony and exhibits in this matter have created areas for the court to weigh and decide issues of credibility or reliability as they relate to the exhibits or testimony. This was recognized by the parties during the trial and as argument in their post-trial memorandum.
From the credible testimony and evidence presented, the court finds the following facts to have been proven by a fair preponderance of the evidence.
The plaintiff introduced a promissory note which contains signatures for the defendants. The promissory note does not contain a date of the signing of the promissory note by the defendants. The first page of the note contains a date of November 21, 1997. (Plaintiff Exhibit 1.) The testimony of Attorney Yamin indicated that there is a date on the bottom of the document which is 1/6/98-KMD/H1. This notation indicates that the note was prepared on the date of January 6, 1998. The body of the note indicates that the first payment on the note is February 20, 1998 with 39 monthly payments thereafter. The " Maturity Date" of the note was February 20, 2008. (Exhibit 1, ¶ 2a.) The plaintiff was uncertain as to the date it was signed and testified that he did not have a recollection of the date but recalls it was signed by the defendant. The plaintiff was confused as to the dates and finally agreed with the date simply because it was on the note. This testimony was no more than a guess as to the date by the plaintiff. The defendant does not deny that he signed the promissory note. He states he does not recall a promissory note but does did not testify that he never signed the note. Again, although there was an inference that the defendant did not sign the note and the signature was not his, the defendant never specifically denied that the signature was his. Additionally, Frank Cavallo identified the signature as Lou Cavallo. The defendant, Lou Cavallo, testified that he received $35,000 from Mr. Graziano but stated that he believed it was a part of the investment for a franchise. Lou Cavallo testified that he recalled conversations about owing the plaintiff money and not having the funds to pay Mr. Graziano. He indicated that the plaintiff told him not to worry about it. There was no writing that verified forgiveness of the note. Instead, the plaintiff testified that there were payments or setoffs of the $35,000. The plaintiff presented a spread sheet entitled " Loan Amortization Schedule" for the payments. (Exhibit 2.) This document contains a listing of dates for payments which coincide with the promissory note dated November 21, 1997. This schedule includes a notation on 5/20/05 of $1,100 as " accept payment to loan by supplying goods to Jill T. Graziano/Photo Dog." (Plaintiff's Exhibit 2.) The exhibit also included two cash payments of $700 and $900 which reduced the amount due to $32,300. (Exhibit 2.)
The letter of Attorney Yamin incorporates the date of the front of the note of November 21, 1997 as the date for beginning of interest to accrue. (Exhibit C.)
It would be logical that if the defendant believes that someone signed his name and the signature was not his, he would be adamant about the fact that it is not his signature. He did not do this and in fact his testimony about the signature was rather uncommitted.
The documents regarding the franchise indicate that it was well after the dates noted in this promissory note.
As to the claims concerning Norway Corporation and the business venture of Sweet Peet, the defendant did not provide any written agreement as to Norway Corp. The testimony of the defendant and others involved in the discussions for various aspects of the business provided only a very general discussion with no specific terms or conditions that were agreed upon by the plaintiff. The defendant's recollection was that the plaintiff orally agreed to help with some funding. The plaintiff confirmed that he agreed to help with funding of Norway Corp. contingent upon the defendant starting the business. However, there was never an investment in the business by the plaintiff because of the uncertainty and therefore they did not enter into any agreements. The only agreement which was the promissory note for $35,000 did not refer to the Norway Corp. Additionally, the testimony of Attorney Yamin regarding the request to prepare the note confirmed that there was no consideration for Norway Corp. as to this financing. The defendant does not have any records for the Norway Corp. business venture except for a couple of tax returns which he did not introduce into evidence at trial. The damages claimed are based upon subjective calculations without supporting documentation.
The Sweet Peet business did have an agreement for distribution of the product. (Exhibit B.) On August 18, 2008, the parties entered into a ten-year agreement as company and distributor to sell and buy. The agreement was not for a joint venture or franchise. The agreement provided that " both are independent contractors acting for their own accounts, and neither is authorized to make any commitment or representation, express or implied on the other's behalf."
III. LEGAL DISCUSSION
A. PROMISSORY NOTE
The plaintiff argues that there is a contractual obligation to pay the promissory note. The plaintiff contends that the special defense of statute of limitations does not apply. The defendant first appears to argue that he did not sign the note and knows nothing about it. There was some inference by the defendant that the note was invalid and the signatures were not his. However as noted above, the defendant never specifically denied entering into a promissory note with the plaintiff and in fact testified that the plaintiff told him not to worry about it when he had financial difficulties which prevented him from making payments to the plaintiff. The defendant's testimony regarding this conversation as well as the exchange of product for payment noted in the Loan Amortization Schedule are inconsistent with the argument that he did not enter into the agreement. The defendant's argument that the money was for Norway Corp. is also not consistent with the testimony and the total lack of credible and specific testimony and evidence about Norway Corp. The plaintiff's argument that there is a valid promissory note was supported not only by the testimony of the parties but also by the testimony of Attorney Yamin. In addition to the note, Attorney Yamin sent a cover letter to the defendant stating, " Pat Graziano asked me to send a Promissory Note to you in the amount of $35,000.00, with interest accruing at a rate of 7 % per year (the interest has been accruing since November 21, 1997 and the first payment is due February 20, 1998). The term of the Note is ten years. The Note provides that you will pay Mr. Graziano interest only over the ten-year period and, at the end of that period, the entire balance will be due and payable . . ." (Defendant's Exhibit C). This letter dated January 6, 1998 coincides with the date on the first page of the promissory note. It also explains the date of November 21, 1997 for purposes of the confusion of both parties as to when the document was signed. Neither of the parties could remember the signing on November 21, 1997 and just assumed it was this date. The defendant received the sum of $35,000 referred to in the promissory note. The court finds that the defendant executed and delivered the promissory note for the principal sum of $35,000. The court finds from the testimony of Attorney Yamin that the November 21, 1997 date was not the date the note was signed but that the note was signed in accordance with the letter from Attorney Yamin to the defendant at some time thereafter. It is clear that the parties entered into a promissory note under the terms set forth in Exhibit 1. This testimony with the statements by the defendant recognize the validity of the note. Add to this testimony the plaintiff's statements and the notations about a set off in exchange for products to the plaintiff's daughter as well as notations for two monetary payments, the court finds that the parties entered into a promissory note which contemplated monthly installments and repayment at the end of the term for the note. Additionally, the Loan Amortization Schedule indicates that the first payment was February 20, 1998, the month after the letter from Attorney Yamin and after the dates on the bottom of the promissory note which support the testimony that it was an agreement for the loan of $35,000 to the defendant. (Plaintiff Exhibit 2.) The cumulative testimony and exhibits support the plaintiff's claim that the defendant entered into a valid promissory note.
The defendant argues next that if the court finds it is a valid promissory note then the court must find that the plaintiff failed to file this action on the note within the applicable statute of limitations. The plaintiff argues that the statutory period is six years from the due date of the note. The defendant argues that the statutory period is not six years and that even if the period is six years the time period began when the defendant first defaulted on the obligation to pay the monthly installments in February 1998. The defendant actually did not pay the first installment on February 20, 1998 and the plaintiff contends that the statute of limitations began on February 20, 1998 when the first payment was not made.
The first issue is a determination of what is the applicable statute of limitations and secondly when does the statute of limitations begin to run in accordance with the facts of this case.
Both of these issues were addressed in the case of Fleet National Bank v. Cynthia Lahm, 86 Conn.App. 403, 861 A.2d 545 (2004). The court first found that the applicable statute of limitations for a note payable at a definite time such as in the instant action is Conn. Gen Stat. § 42a-3-118(a) or (b). The statute provides a six-year period of time to bring the action. The Lahm court has established the applicable statute of limitations as six years for a note with an obligation to pay at a specified time such as the promissory note in this case. Therefore, the six-year statute set forth in C.G.S. § 42a-3-118(a) applies to this action.
The second issue is determining the date or event which triggered the statute of limitations. The defendant contends that statute of limitations began on February 20, 2008 when the first payment was missed. Thus the defendant argues that the time between first payment and the initiation of the legal action filed on October 22, 2010 was beyond the time permitted in the statute. The plaintiff argues that the statute of limitations did not begin to run until the date for the last installment payment, that is, the Maturity Date, which is set forth in Exhibit 1. The Maturity Date of this Promissory Note was November 20, 2010.
The promissory note in Lahm contained a provision that if there was a missed payment the entire indebtedness with accrued interest would be due thereon at the option of the holder of the note . (Emphasis added.) The Lahm defendant failed to make an installment payment and all payments thereafter.
The plaintiff contends that the statute of limitations did not accrue until the Maturity Date of the promissory note because the plaintiff chose not to accelerate the payments after the defendant missed monthly installments. The court in Lahm was clear that the mere failure to make a payment does not automatically begin the running of the statute of limitations. The Court found that if the note is payable at the option of the plaintiff, that is, the payments could be accelerated when the installment payment is not made at the option of the maker of the note then the statute of limitations begins to run upon the choice to make a demand for the balance due or if no demand at the Maturity Date. The court in Lahm distinguished a demand note from an installment note with options and found that because there was an option to accelerate the payments it does not make the note immediately payable at the time of a default. The facts in Lahm are similar to this action and thus a guide as to the application of the statute of limitations. In accordance with Lahm when there is an acceleration clause of total unpaid debt that is optional on the part of the holder of a note and the holder has given no indication to the debtor that the entire balance is presently due, the cause of action does not accrue until that balance is due pursuant to the particular note or the holder has notified the debtor of an earlier date. In support of his position that the statute of limitations begins on February 20, 2008, Lahm directly addresses two arguments of the defendant, that is, the applicable statute of limitations for the note and the application of an acceleration clause. The court states that, " The fact that a cause of action may have accrued with respect to an installment in default does not necessarily mean that a cause of action has also accrued against future installments that are not even due." Citing Cadle Co. v. Prodoti, 45 Conn.Supp. 325, 327, 716 A.2d 965 (1998). The court further states that when an acceleration of the total unpaid debt is optional on the part of a holder of a note, and the holder has given no indication to the debtor that the entire balance is presently due, the cause of action does not accrue until that balance is due pursuant to the particular note or the holder has notified the debtor of an earlier date. Id. at 327-30. The plaintiff, Mr. Graziano, did not accelerate the payment as a result of the defendant's failure to make the monthly payments. The plaintiff testified and introduced an exhibit about payments in the form of a credit for goods given to the plaintiff's daughter and two additional payments of $700 and $900 on June 20, 2006 and May 20, 2007 (Exhibit H2). The maturity date of the payments was November 20, 2010. Until this date, the defendant was given every opportunity to make payments as is evidenced by the two cash payments as well as the credit for goods that was permitted by the defendant. Thus, the action on the promissory note did not accrue until the last date for payment of November 20, 2010. The six-year statute began to run on this date and thus the plaintiff filed this action within the applicable statute of limitations.
The defendant also contends that the special defense of laches applies to the instant claim. The plaintiff counters that the claim of laches is inapplicable to the present action which is an action at law and not equity, thus precluding the application of the equitable defense of laches. The case of A.Sangivani and/Sons v. F.M. Floryan and Co., 158 Conn. 467, 262 A.2d 159 (1969), cited by the defendant supports the proposition that a defense of laches applies only to an equitable action and not an action at law. In the instant action the plaintiff makes a single claim for payment pursuant to a promissory note. He requests money damages as his relief and makes no equitable claims for relief. Thus it is clear that the complaint is strictly a legal claim. It was filed within two and one-half years after the accrual date for this cause of action. Therefore, the claim of laches is not applicable.
The defendants contend that there is no cause of action against Lou Cavallo as an individual because the plaintiff has failed to include a claim of guaranty as a separate count within the complaint. The defendant alleges that the operative complaint contains only one count and that this is a claim as to the promissory note which if at all can stand only as to the defendant PMS. While, the defendant is correct that the cause of action is in one count as to both defendants, the court will not allow a belated attack on the pleadings to be the basis for a finding as to the guaranty. The defendant chose to answer the complaint and file special defenses and a counterclaim as to the allegations without following the order of pleadings. The Connecticut Practice Book Section 10-6 sets forth an order of pleading which allows the defendant to file in this order, a motion to dismiss, followed by a request to revise and thereafter a motion to strike the complaint, in that order before filing an answer or special defenses. In particular, § 10-35 of the Practice Book states that a party may request a " separation of causes of action which may be united in one complaint when they are improperly combined in one count . . ." The Practice Book, Sec. 10-7, provides that " In all cases, when the judicial authority does not otherwise order, the filing of any pleading provided for by the preceding section will waive the right to file any pleading which might have been filed in due order and which precedes it in the order of pleading provided in that section." In this action the defendant did not address the issue of the separation of the claims against the parties as to the agreement and the guaranty prior to the trial. The plaintiff has filed a one-count complaint referring to the agreement which contains a signature from the company PMS and a guaranty by the individual defendant, Lou Cavallo. Although the defendant appears to argue that the one count apples only to the PMS INC., defendant, the one count does not clearly distinguish the obligation of the individual guarantor and PMS INC. The defendant has waived his right to argue that procedurally the guarantor is not a party to the action because of the pleadings are not separated into two counts.
The promissory note entered into by the parties clearly contains a provision for the responsibility of a guarantor. " A guarantee, similar to a suretyship, is a contract, in which a party . . . contracts to fulfill an obligation upon the default of the principal obligor." (Internal quotation marks omitted.) One Country, LLC v. Johnson, 137 Conn.App. 810, 816, 49 A.3d 1030 (2012). In interpreting a contract it " must be construed to effectuate the intent of the parties, which is determined from the language used, interpreted in the light of the situation of the parties and the circumstances connected with the transaction." (Internal quotation marks omitted.) Murtha v. Hartford, 303 Conn. 1, 7, 35 A.3d 177 (2011). Paragraph 5 of the Promissory Note states: " As evidenced by his signature below, this Note is personally guaranteed by Lou Cavallo presently of 170 Norway Street, Oakville, Connecticut." The Promissory Note does include the guarantor in additional sections that involve the notice and interpretation of the Note. There have been rulings that also viewed the responsibility as a guarantor based upon the signing of the note with additional caveats such as signing as president or treasurer in which the court distinguished the responsibility to one who signs under his or her responsibility. Duart v. Gugliuzza, Superior Court, judicial district of New London, Docket No. CV 12-5014462, (October 14, 2014, Hendel, J.T.R.). However, Lou Cavallo signed for PMS, Inc. as well as under the separate line as an individual guarantor. The note could not be clearer and the intent could not be clearer, therefore both PMS, Inc. and Lou Cavallo are responsible for payment. This intent to bid is argued by the plaintiff as an absolute guaranty by the individual defendant. Plaintiff correctly argues that there were no limitations in the obligation of the defendant to be liable for the payment of the promissory note. As noted above, there was no distinction which permitted nonpayment by Lou Cavallo.
Therefore, the court finds that the defendants, PMS, Inc. and Lou Cavallo, have defaulted on the Promissory Note with a maturity date of February 20, 2008. The court enters judgment as to the complaint in the amount of $32,000 for the principal, $42,109.32 for interest and $7,500 attorney fees for a total amount of $81,609.32.
B. COUNTERCLAIMS
Count One Breach of Contract Sweet Peet
The defendants allege that the plaintiff failed to satisfy the terms of their agreement for supply of the product known as " Sweet Peet." The defendant testified that he had entered into an agreement with the plaintiff to sell a product as well as to establish a distribution of the product. (Exhibit B.) The agreement that was introduced as controlling was signed by the owner representative for Sweet Peet of Florida, Mr. Pat Graziano and the owner/company member/manager of Sweet Peet Distributors, LLC, Mr. Luigi Cavallo. In particular, the defendant contends that there was approximately $11,000 of product distributed. However, the plaintiff requested specific documentation of the claim for damages prior to the commencement of trial which the defendant failed to disclose. It was not until after the start of trial that the defendant came forward with some documents that he claimed were documents related to the damages. The plaintiff objected to late disclosure and the court sustained the objection. Therefore, there is no valid documentation of any " Sweet Peet" damages. The defendant did produce an Agreement which provides that the defendant had a right to terminate at any time and that the Distributor (Lou Cavallo) had the right to distribute Sweet Peet in any state. He paid consideration of one dollar for the right. The distribution agreement does not provide any guarantee of a product or that there will be a profit in the distribution of the product. The defendant testifies that he anticipated sales that would allow profit of $48,000 per year but he failed to provide supporting documentation that this was more than a guess. The defendant had no experience or background which would provide definitive evidence that supports this claim. Without such the claim is nothing more than speculation. Therefore, the defendant has failed to satisfy his burden of proof on this counterclaim.
Count Two Breach of Contract Norway Corp.
In the Second Count of the Counterclaim, the defendant alleges that the plaintiff breached his Contract to provide start-up funds for a new company called Norway Corp. " The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages." (Internal quotation marks omitted.) Keller v. Beckenstein, 117 Conn.App. 550, 558, 979 A.2d 1055, cert. denied, 294 Conn. 913, 983 A.2d 274 (2009). The defendant alleges that the plaintiff Graziano breached his contractual obligation to the defendant by failing and refusing to provide " Norway Corp." with the required amounts of working capital it needed beyond Defendant's contribution to operate." (Counterclaim, Count Two ¶ 2(e).) It is unclear based upon the testimony as to what specific contract is the subject of this claim. There is no written agreement which sets forth terms for a contractual obligation. In order to satisfy the burden of proof the defendant must first present evidence that in fact there was a meeting of the minds or a formation of the specific terms of a contract. The defendant presented some testimony about meetings where there was a reference to the formation and finances of Norway Corp., but no one was aware of a specific agreement to provide specific funds to the defendant. Additionally, there was no definite time period for which the funds were needed. It appears that any discussion about Norway Corp. was devoid of terms or conditions and was more speculative than certain.
The defendant has claimed that the plaintiff breached his contractual obligation to the defendant by failing and refusing to provide " Norway Corp." with the capital it needed to operate and as a result of this failure, the company was forced to terminate its operations. The plaintiff has denied that he entered into any agreement with the defendant for this purpose. The plaintiff did not provide any written documents supporting the claim of a contractual obligation as contended in the counterclaim. Additionally, the witnesses for the defendant who were involved in the operation could not affirmatively support the claim of the defendant. In particular, if such agreement was reached in the manner claimed by the defendant in his testimony, there are no supporting documents that would indicate any meeting of the minds by the parties to a contractual agreement. The defendant has not provided any credible testimony or evidence to support the claim for damages regarding the Norway Corp. The plaintiff has failed to satisfy his burden of proof as to Count Two and judgment should enter for the plaintiff as to Count Two of the Counterclaim.
CONCLUSION
The court finds in favor of the plaintiff on his complaint and enters judgment in the amount of $81,609.32. The court finds that the defendant has failed to satisfy his burden of proof as to Count One and Count Two of the Counterclaims. Judgment is entered for the plaintiff, Pat Graziano, on both Count One and Count Two of the Counterclaims.