Opinion
No. CV 02 046 63 01
March 18, 2005
MEMORANDUM OF DECISION
On June 5, 2002, the Plaintiff, In Out, LLC filed a five-count complaint against the defendant Shyam Baweja (Baweja) and MGS, Inc. (MGS) in the New Haven Superior Court. In the first count of the complaint, the plaintiff alleges that on or about February 22, 2002, Baweja and MGS, through their attorney, offered to sell the plaintiffs certain real estate and business owned by them. According to the plaintiff's complaint, the offer to purchase was accepted by the plaintiff, through its attorney. The first count of the complaint also alleges that the "plaintiff tendered a check in the amount of ten thousand dollars in consideration of Plaintiff's acceptance of defendants' offer of purchase." The plaintiff alleges that the defendants breached the agreement in that they refused to sell the property and business.
The second count of the complaint requests specific performance of the agreement to sell the real estate and the business of the defendant.
In the third count of the complaint, the plaintiff alleges that during the negotiations of the sale of the defendant's business, the defendant made false representations "with the intent and purpose of deceiving the plaintiffs and their lessee and to induce the Plaintiffs into assisting the defendants with maximizing their potential in their negotiations with their lessee." The plaintiff's fourth count alleges that the actions described in count three constitute a violation of the Connecticut Unfair Trade Practices Act, General Statutes §§ 42-110a, et seq. in that the actions were "fraudulent, deceptive, oppressive and unscrupulous."
The fifth count of the complaint is directed against "Defendant, Lessee, . . . an individual residing in the town of _________, County of New Haven, State of Connecticut." The plaintiff alleges that the defendant Lessee, who is unidentified in the complaint, "intentionally, willfully and with malice enticed, induced, compelled and solicited the defendants Baweja and MGS to repudiate said contract and to lease said business to the defendant, Lessee."
On August 21, 2002, an appearance was filed by Attorney Botwick on behalf of Baweja and MGS. Attorney Botwick filed his appearance on behalf of all defendants. A separate and distinct answer and special defense, however, was filed on behalf of each of the named defendants.
In his answer, Baweja denies that he is an owner of the property or the business. He also denies that an offer to sell was made. Additionally, he denies that an agreement was ever reached concerning the purchase and sale of the property. In his special defense, Baweja states that even if a contract for sale existed, it would be impossible to perform because he is not the owner of either the real estate or the business. In addition, he states that even if there had been a meeting of the minds, the alleged agreement is barred by the Statute of Frauds.
MGS's answer admits that it is the owner of the real estate as well as of the business. It denies, however, that an agreement was ever reached regarding the sale of either the real estate or the business. By way of special defense, MGS states that even if an agreement to purchase and sell had been reached, it is barred by the Statute of Frauds.
On December 14, 2004, the court held a trial on the complaint.
At the time of the commencement of the trial, the court was advised by counsel of record, that at the suggestion of the Hon. Antonio Robaina, the presiding judge of the civil division in New Haven, the parties had agreed to bifurcate the trial as to liability and damages. In addition, the parties informed the court that they did not intend to present any testimony to the court, but instead were limiting the evidence to the submission of written documentation.
The court was presented with a written stipulation consisting of three paragraphs. The stipulation was signed by each of the attorneys of record. Paragraph one lists the eight documents that the parties agreed were to be marked as exhibits. The court proceeded to mark each of the exhibits.
Paragraph two of the stipulation states that "the parties agree that Attorney Walter Bansley was duly authorized to act on behalf of In Out, LLC, for the purposes of negotiating the purchase of the property referenced by plaintiff's complaint."
Paragraph three states that "the parties agree that Attorney Edward Botwick was duly directed by Shyam Baweja for MGS, Inc., the defendants for the purposes of negotiating for the sale of the property referenced in by plaintiff's complaint."
At the time of submitting the stipulation, the parties also informed the court of their agreement to request permission to file trial briefs on two specific issues; does a contract satisfying the Statute of Fraud exist and secondly, did the defendant's attorney have the authority to bind the defendant to a contract for the sale of its property.
The court granted the request to file trial briefs and asked that the briefs be filed no later than January 27, 2005. Reply briefs were to be filed no later than February 3, 2005. The court received trial briefs from both of the counsel of record, however, only the plaintiff submitted a reply brief.
Alter reviewing the evidence and reading the briefs, the court finds as follows:
I. FACTS
On February 18, 2002, Attorney Walter C. Bansley, plaintiff's attorney, wrote a letter to Attorney Edward J. Botwick, defendant's attorney. The subject matter of the letter was identified by Attorney Bansley as "Re: Offer of Purchase ICO, In Out, LLC [Buyer] MGS, Inc. [Seller (Shyam Baweja)]-540, AKA 640 Foxon Road, East Haven, CT 06513, d/b/a Krauser's.
Plaintiff's Exhibit 1.
Attorney Bansley started his letter by stating that he "writes as the legal representative for In Out, LLC [In Out] and with respect to our meeting of February 15, 2002 at which your client made an offer of sale for One Million Three Hundred Thousand [$1,300,000] Dollars." Attorney Bansley continued by expressing his client's "understanding that the offer included the real property located at the above address(es) and the business that is currently operating under the name of Krauser's."
Attorney Bansley informed Attorney Botwick that his clients were extending an offer to purchase the property and business for One Million One Hundred Seventy-Five Thousand ($1,175,000.00) Dollars. The offer was made contingent to certain conditions which were listed in the letter and included items such as financing, inspections, commercial appraisal, transfer of lottery and money order licenses, Certificate of Good Standing from the Secretary of State, A Hold Harmless Agreement with respect to any and all claims that may arise prior to the closing date and an agreement for the reasonable value of the inventory existing at the time of the closing.
Attorney Bansley also informed Attorney Botwick that he required copies of the income tax returns for the years 1998-2000, copies of the "appraisals that the seller possesses with respect to the financing that it secured in calendar years 1996, 1999 and 2001. The letter went on to say, "Needless to say, copies of the requested documents will be required in order to secure financing for the purchase."
Attorney Bansley closed the letter by asking Mr. Botwick to prepare a sales agreement if the offer to purchase was acceptable to Mr. Botwick's client.
On February 21, Attorney Botwick responded to Attorney Bansley's letter. The letter informed Mr. Bansley that the defendant could not sell the property to the plaintiff for the price that the plaintiff was willing to pay. However, Attorney Botwick wrote, "He would be willing to sell for the sum of $1,400,000.00 which would make him whole as to his expectations after payment of the pre-payment penalty."
Plaintiff's Exhibit 2.
Plaintiff's Exhibit 2.
The next day, February 22, 2002, Attorney Bansley faxed a message to Attorney Botwick indicating that he discussed the change in purchase price with "the principals involved and they continue to be interested in pursuing the purchase. Of course, with the change in the numbers we must confer with our lender . . . Please fax copies of the requested tax returns so we can review them as ASAP with our lender."
Plaintiff's Exhibit 3.
On February 23, 2002, Attorney Bansley faxed Attorney Botwick a letter stating that "the principals of In Out, LLC have accepted your client's offer of One Million Four Hundred Thousand [$1,400,000.00] Dollars for the sale of the above identified property and business. As requested previously, please fax copies of the requested tax returns so we can review them among ourselves and with the lender."
Plaintiff's Exhibit 4.
On February 27, 2004, Attorney Bansley wrote a letter to Attorney Botwick and enclosed his trustee check in the amount of Ten Thousand ($10,000.00) Dollars. Attorney Bansley requested that the check be deposited in Attorney Botwick's "trustee account as earnest money" for the purchase of the real estate and the business. Attorney Bansley asked Attorney Botwick to please advise him if "your client requires additional earnest money . . . and we can discuss that issue in detail."
Plaintiff's Exhibit 5.
Plaintiff's Exhibit 8.
This letter closed with Attorney Bansley's request that a "proposed formal contract" be forwarded to him at Mr. Botwick's earliest convenience.
On March 4, 2004, Attorney Bansley communicated with Attorney Botwick by fax. In this letter, Mr. Bansley stated that trusted and hoped "that by now your office has received my trustee's check in the amount of $10,000.00 as earnest money for the above described agreement . . . I trust this amount will be sufficient until such time as you have the opportunity to finalize the full contract."
Plaintiff's Exhibit 6.
On March 4, 2004, Attorney Botwick wrote a letter to Mr. Bansley. The letter was also faxed to Mr. Bansley's office. In the letter, Attorney Botwick states that "I have been informed by my client that he has decided not to sell the subject property. I am sorry for the effort and time you invested in this matter . . . Enclosed with the mailed copy of this letter is return of your trustee check in the sum of $10,000.00."
Plaintiff's Exhibit 7.
It is from this exchange of letters between attorneys that the plaintiff alleges that an enforceable contract exists.
II. No Valid Contract Exists
The parties to this action agree that their agreement, embodied in a series of letters and faxes between their respective attorneys, must comply with the Statute of Frauds in order for the Court to find the existence of a valid and enforceable contract. "Whether a contract exists is a question of fact for the court to determine." Levesque Builders, Inc. v. Hoerle, 49 Conn.App. 751, 754, 717 A.2d 252 (1998) (Internal quotation marks omitted.) citing Harris Calorific Sales Co. v. Manifold Systems, Page 755 Inc., 18 Conn.App. 559, 563, 559 A.2d 241 (1989). "The construction of a contract is usually a question of fact because the interpretation of its language is a search for the intent of the parties, making contractual intent a classic question of fact. Lavigne v. Lavigne, supra, 3 Conn.App. 427-28. In Ballard v. Asset Recovery Management Co., 39 Conn.App. 805, 809, 667 A.2d 1298 (1995), the Appellate Court stated that "In the absence of definitive contract language, however, the determination of what the parties intended to encompass in their contractual commitments is a question of the intention of the parties, and an inference of fact. (Internal quotation marks omitted.) Finley v. Aetna Life Casualty Co., 202 Conn. 190, 199, 520 A.2d 208 (1987); see also Bryan v. Reynolds, 143 Conn. 456, 460, 123 A.2d 192 (1956).
While it is clear to the court that the plaintiff was very interested in purchasing the real estate he described in his correspondence as 540, AKA 640 Foxon Road, East Haven, CT 06513, d/b/a Krauser's; it is also clear that the plaintiff knew that he did not have an agreement to purchase this real estate.
This is evident in the written correspondence between the parties, but it is most compelling in the repeated requests made by plaintiff's counsel that a "proposed formal contract" be provided to him as soon as possible. The plaintiff made the request in his original February 18, 2002 offer to purchase as well as in his subsequent letter of February 27, 2002. The language that the plaintiff's lawyer uses in each of these letters is clear and unambiguous, "prepare a sales agreement and forward it to this office as soon as possible."
The plaintiff argues in his brief that "While it is true that Plaintiff requested copies of tax returns and a proposed formal contract on February 27, 2002, this in no way invalidates the offer and acceptance of the initial written contact (by facsimile) between the parties. Indeed, the act of written acceptance and a tendered deposit of $10,000 on February 22, 2002, clearly implied that a contract already existed."
Plaintiff's Trial Brief of January 27, 2005, page five.
In the case of Fowler v. Weiss, 15 Conn.App. 690, 692-93, 546 A.2d 321 (1988), our appellate court addressed an issue similar to the one facing the court in this case, namely does an enforceable contract exist between the parties. Although the writing in question in the Fowler case was a binder and not an exchange of letters as we have here, the Appellate Court's discussion provides direction to the Court in this case.
The decisive question before us is whether the binder of sale was a binding contract or merely an informal writing documenting an intention to create a binding contract. In concluding that the binder of sale was not an enforceable contract, we examined the plain meaning of the contract in conjunction with the intent of the parties. As our Supreme Court has stated, "[t]he court will not torture words to import ambiguity where ordinary meaning leaves no room for ambiguity. Downs v. National Casualty Co., 146 Conn. 490, 494, 152 A.2d 316 [1959]. The circumstances surrounding the making of the contract, the purposes which the parties sought to accomplish and their motives cannot prove an intent contrary to the plain meaning of the language used. Connecticut Co. v. Division, 425, 147 Conn. 608, 616-17, 164 A.2d 413 [1960]; see 3 Corbin, Contracts 542; 4 Williston, Contracts (3d Ed.) 609." Zullo v. Smith, 179 Conn. 596, 601, 427 A.2d 409 (1980).
Whether the parties intended legally to bind themselves prior to the execution of a formal contract is to be determined from (1) the language used, (2) the circumstances surrounding the transaction, and (3) the purpose that they sought to accomplish. Klein v. Chatfield, 166 Conn. 76, 80, 347 A.2d 58 (1974). A consideration of these factors enables a court to determine if the informal contract, in this case the binder, is enforceable or merely an intention to negotiate a contract in the future. See Johnson v. Star Iron Steel Co., 9 Wash.App. 202, 206, 511 P.2d 1370 (1973).
Applying the guidelines established in our case law to the facts in this case, it is clear that no contract for the sale of real estate exists.
(1) The language used.
An examination of the correspondence between the parties reveals that, by their own language, the parties did not expect to be bound until a contract of sale was drawn. The plaintiff's letters repeatedly asked for formal contracts.
The plaintiff argues that since all of the essential terms of a contract were included in the exchange of letters between the attorneys, an enforceable contract exists. He points to the fact that he clearly articulated the purchase price he was willing to pay the defendant for the real estate and that the defendant accepted the offer. He does not, however, address in his brief that he also carefully detailed all of the conditions that the offer to purchase was contingent upon.
There were at least ten contingencies identified in the letter of February 18, 2002, chief among them was the need to secure financing for the transaction. This paragraph of the plaintiff's letter closes with the sentence, "Needless to say, copies of the requested documents will be required in order to secure financing for the purchase."
In addition, the plaintiff repeatedly requested financial information in the form of income tax returns. "It was essential to the creation of a contract that a formal written agreement should be executed. This formal written agreement was a condition precedent to the completion of a contract, and until such formal written agreement was executed the parties were still in the stage of negotiations for a contract and either party could withdraw from the negotiations." Atlantic Terra Cotta Co. v. Chesapeake Terra Cotta Co., 96 Conn. 88, 101, 113 A.2d 156 (1921).
Although the correspondence between the parties clearly stated what the plaintiff was willing to pay, as well as what the defendant was willing to accept there is absolutely no mention or discussion of how this sales price was going to be paid. While the plaintiff informs the defendant that the offer to purchase is contingent upon financing, he does not inform the defendant of any of the terms imposed upon him by his lender.
(2) The circumstances surrounding the transaction.
The circumstances surrounding negotiations between the attorneys also indicate that the parties did not intend their correspondence to be legally enforceable. The plaintiff himself expected a formal contact to be drafted as soon as possible. "As our Supreme Court has recognized, considering the importance of the transaction to the parties, the memorandum appears no more than a statement of some of the essential features of a proposed contract and not a complete statement of all the essential terms." Fowler v. Weiss, supra, citing Westbrook v. Times-Star Co., 122 Conn. 473, 481, 191 A. 91 (1937).
As Attorney Botwick states in his well-reasoned trial brief "The circumstances here plainly demonstrate that Attorney Botwick's February 21 letter was merely part of the parties' preliminary negotiations, and was neither intended by Attorney Botwick, nor understood by Attorney Bansley, as creating a contractual offer subject to immediate acceptance.
First, while both parties contemplated a formal, written contract, the evidence not only fails to demonstrate agreement on all of its essential terms, but demonstrates instead that there was no discussion, and certainly no agreement, as to any term except price."
Defendant's Trial Brief, page 13.
(3) The purpose that they sought to accomplish.
The facts in this case clearly establish that the lawyers in this case intended to merely discuss the preliminary terms of a sale of the subject property. These preliminary discussions were to be followed by a presentation of the discussion to their respective clients. This is established in Attorney Bansley's response to the counteroffer made by Attorney Botwick. In his letter, he said he discussed the change in price with "the principals involved and they continue to be interested in pursuing the purchase." This statement reasonably conveys the message that someone other than Attorney Bansley would be making the final decision on this purchase.
III. STATUTE OF FRAUDS
The Statute of Frauds, General Statutes § 52-550(a) provides in relevant part "that no civil action may be maintained in the following cases unless the agreement, or a memorandum of the agreement, is made in writing and signed by the party, or the agent of the party, to be charged: . . . (4) upon any agreement for the sale of real properly or any interest in or concerning real property . . ."
"The requirements of a memorandum of sale to satisfy the statute of frauds in this [s]tate are too well established to require extended consideration. It must state the contract between the parties with such certainty that the essentials of the contract can be determined from the memorandum itself without the aid of parol proof either by direct statement or by reference therein to some other writing or thing certain, and these essentials must at least consist of the subject of the sale, the terms of it and the parties to it, so as to furnish evidence of a complete agreement." Santoro v. Mack, 108 Conn. 683, 687-88, 145 A. 273 (1929), Gabriele v. Brino, 85 Conn.App 503, 507, 858 A.2d 273 (2004).
As discussed in Part II(1) of this decision, the offer to purchase was made subject to a number of conditions. First and foremost was the issue of financing. The plaintiff consistently made it known that any changes would have to be discussed with the lender. Therefore, the defendant was aware that the transaction would not be one settled in cash, but one that required a mortgage. The plaintiff however, never informed the defendant of the principal amount of the loan, the time period within which the mortgage commitment must be obtained nor the terms of the mortgage expressed in years.
As the defendant's attorney states in his trial brief citing "Significantly, our Supreme Court has held that an agreement or memorandum which "fails to specify the terms of payment of any part of the purchase price is insufficient to satisfy the Statute of Frauds."
Defendant's Trial Brief of January 26, 2005, page 16.
"To determine whether the statute of frauds is satisfied in the present case, we focus on the mortgage contingency clause. The degree of detail required when an agreement is conditioned on the purchasers obtaining a mortgage was a source of confusion among drafters of real estate sales documents. See Montanaro v. Pandolfini, 148 Conn. 153, 157, 168 A.2d 550 (1961). This uncertainty was removed in 1976 by the enactment of Public Acts 1976, No. 76-69, now General Statutes 49-5b, which provides that a mortgage contingency clause is sufficient to satisfy the statute of frauds if it contains at least the following information: (1) the principal amount of the loan required to fulfill the contingency; (2) the time period within which the mortgage commitment must be obtained; and (3) the term of the mortgage expressed in years." Booth v. Flanagan, 23 Conn.App. 579, 582, 583 A.2d 148 (1990).
General Statutes Sec. 49-5b provides in relevant part that "Any mortgage contingency clause included in a bond for deed or a written agreement for sale of real estate which conditions the purchaser's performance on his obtaining a mortgage from a third party shall satisfy the provisions of section 52-550 if such mortgage contingency clause contains at least the following: (1) The principal amount in dollars of the loan the purchaser must obtain to fulfill such contingency; (2) the limit of the time period within which a commitment for such loan must be obtained, and (3) the term of the mortgage expressed in years.
IV. FINDINGS AND ORDER
It is found that no contract exists for the sale of the subject property, the parties having failed to agree on the essential terms of the contract.
It is further found that no writing sufficient to satisfy the Statute of Frauds, was executed.
Judgment shall enter for the defendant.
Carmen L. Lopez, J.