Opinion
No. CV 06 5005259
January 5, 2009
MEMORANDUM OF DECISION
Procedural Posture
This matter comes before the court on a three-count complaint in which the plaintiff seeks monetary damages for an anticipated breach in the first count, a breach of the contract in the second count and a breach of the implied covenant of good faith and fair dealing in the third count. The defendant sellers have essentially denied all of the material allegations of the complaint and have filed four counter claims seeking recovery of liquidated damages for breach (total failure of performance of its duty to pursue zoning approvals) and monetary damages exclusive of liquidated damages for the breach of a licensing agreement contained within the prime contract of sale in the first counter claim; attorneys fees exclusive of the liquidated damages for legal expenses incurred in the defense of the instant action as well as those incurred for the successful prosecution of the breach of the licensing agreement in the second counterclaim; and monetary damages for slander of title in the third counterclaim.
Originally the plaintiff sought specific performance and other equitable relief in aid thereof in addition to monetary damages but subsequently abandoned its claim for specific performance apparently for strategic reasons having to do with its burden of proof and now only seeks monetary damages.
The fourth counter claim seeks an execution on a $70,000 cash bond substituted for a prejudgment remedy obtained by the defendants. The parties have agreed that should the plaintiff prevail on any of its claims the bond securing the prejudgment remedy shall be released; should the defendants prevail on any of their counterclaims, the defendants shall be permitted to execute on the bond to the extent of their recovery. No argument was anticipated on this counterclaim.
Facts
The plaintiff buyer is a domestic corporation known as "The Land Group, Inc." which is principally owned by two building contractors, George Frank and John Snellman. The defendant sellers consist of five individuals related by blood or marriage who are proceeding, either in their individual capacities and/or in a fiduciary capacity either as legal representatives of the estates of deceased family members or as trustees of a family trust. At all times relevant George Frank (hereinafter referred to as Frank) was spokesman for the corporation. Carl Palmieri (hereinafter referred to as Palmieri) acted on behalf of all the sellers. Mary Gai, was also an individual owner but was authorized only to act in this transaction in her capacity as the recognized real estate agent on this sale. The property in question consists of two parcels of unimproved real estate approximately three acres in size. The parties executed the subject contract on April 8, 2005. Under the expressed terms in the agreement the initial price for both parcels was $1,600,000 with a $50,000 deposit paid at the signing of which $25,000 was delivered directly to the sellers. The remaining $25,000 was to be held in escrow by the seller's attorney which was to be delivered to the sellers at closing unless the buyer notified the sellers within the first 90 days of its intent not to proceed with the project. In that event the remaining $25,000 was to be delivered to the sellers, the contract terminated and the parties would go their separate ways. It was understood by all parties that the buyer's objective was to build between 13 to 16 condominium units on the property. In order to accomplish this objective it was also understood that the zoning regulations applicable to the subject property would have had to be changed. Therefore although a terminal closing date was set for April 21, 2007, the parties agreed to have an initial closing date as early as September 23, 2005. If the buyer's efforts in obtaining the necessary zoning approvals were unsuccessful, then, at the sellers' option, the closing dates could be extended in six months intervals provided the sellers were satisfied that the buyer was proceeding in good faith and was exercising "due diligence" to obtain the necessary approvals. As written the contract therefore permitted successive six-month closing dates until April 2007 so long as the buyer was exercising due diligence. With regard to the price fixed by the contract, that too was flexible in that it was based upon the number of units approved by the zoning authority above or below the number proposed in the contract.
Gai was recognized in the sales contract as the listing and selling broker. Exhibit A provision #7. In that same provision the buyer also agreed to use Gai as the listing broker for the condominium units to be erected and sold by the plaintiff.
As the property existed at the time the agreement was signed the zoning regulations permitted only five condominium units to be built on the subject property.
The contract provided that if the zoning authority either reduced the number of units below 13 or increased them above 16, then the agreed-upon price of $1.6 million would be reduced or increased as the case might be, by $125,000 per unit. See Exhibit A, bottom of page 2 of the contract.
During the first 90 days after the contract was signed the buyers did not furnish the sellers with a written notice of its intent not to terminate the project. In fact, the buyers orally indicated to the sellers, indirectly through Mary Gai, that it was indeed going to proceed with the project. Therefore according to the contract, the second half of the deposit was to be retained by the sellers' attorney in escrow until the closing. However, during this period the buyer filed no applications for the necessary zoning approvals nor furnished copies to the sellers of any documents to be utilized in the application process. Palmieri was dissatisfied with buyers' efforts in this regard but nevertheless agreed to a six-month extension of the closing to March 23, 2006 because he was satisfied that the buyer was acting in good faith to complete the project by reason of the buyer's gratuitous release to the sellers of the remaining $25,000 in escrow when it was not obligated to do so.
During the first six-month extension period Frank continued to deal exclusively with Gai who encouraged him to proceed to obtain a zoning approval under its provisions authorizing affordable housing. In this regard, Frank began tracking the zoning application of a nearby project known as the "Turkey Hill project" in which another developer was seeking an affordable housing approval from the Westport zoning authority. That application was ultimately denied but Frank was so convinced of the need for affordable housing and because it was the best and highest use of the defendants' property that he eventually decided to use the same zoning vehicle to obtain the necessary regulatory changes. The buyer also commissioned an updated survey and some architectural drawings and undertook other minor activities in preparation for seeking the necessary zoning approvals. But as in the initial 90-day "due diligence" period, the buyers never filed or attempted to file any application with the zoning authority during this six-month extension period. At a face to face meeting between Frank the buyer's attorney, Palmieri and Gai, in a trailer on the defendants' property, in early February 2006, Palmieri indicated his dissatisfaction with the progress the buyers were making and indicated he was having a cash flow problem due to caring for his ill brother and wanted to get the deal closed as soon as possible. Frank attempted to assuage Palmieri's concerns by offering to advance the sellers $625,000 in cash against the purchase price and continue to attempt to get approval for the proposed number of units presumably during a second six-month extension. Palmieri rejected this offer out of hand and the meeting ended. Shortly thereafter Frank formally notified the sellers by letter dated Feb. 6, 2006, that he was considering affordable housing along with other development strategies as a means of obtaining the necessary approvals. This letter was followed on March 13, 2006 with a letter formally notifying sellers of the buyer's definitive election to proceed with the affordable housing strategy. After consulting with his attorney, Palmieri directed his attorney to terminate the contract because he did not believe the plaintiff could obtain the necessary zoning approvals within the time remaining on the current six-month extension. By letter dated March 15, 2006, the sellers' attorney notified the buyer's attorney that the contract was terminated immediately and that the sellers would be seeking other potential buyers. This letter was dated eight days before the six-month extension period expired. And, on April 20, 2006, sellers gave buyers written notice that their license to store equipment on the subject premises was revoked and requested that it remove their personal property immediately.
This price was presumably arrived at by calculating the per unit price of five units at $125,000 each which exactly equals the number of units that could have been built as a matter of right without any zoning.
At trial the director of the Westport planning and zoning authority opined without contradiction that under the best circumstances it would take between 45 and 60 days for an affordable housing application to obtain zoning approval.
On March 20, 2006, five days after the notice of termination and unbeknownst to the sellers, the plaintiffs filed a copy of the unwitnessed and unacknowledged contract on the Westport land records. In the meantime the sellers were actively shopping the property to other potential buyers at a sale price of $1.3 million with no mortgage or zoning contingencies. The sellers first learned of the recorded contract inadvertently on or about August of 2007 when the third potential buyer showed Palmieri a copy of a title search revealing the existence of the recorded contract. Shortly thereafter Palmieri, Gai and sellers' attorney orally requested Frank to remove the contract from the land records on several occasions. The buyer consistently refused. The contract remains on the land records as of this date. Two of the three potentially serious buyers testified at trial that the recorded contract was one of the reasons it declined to go to contract with the sellers. The present law suit was filed by the plaintiff on October 30, 2007.
The seller identified three potentially serious buyers for the subject property. The first buyer declined to purchase the property for reasons not relevant to the defendants' claim and was therefore not considered by the court as evidence of slander of title.
Discussion The First Count
The plaintiff claims that the defendant sellers were guilty of an anticipatory breach because they repudiated the contract some eight days before the first extension of the performance period expired. The court respectfully disagrees.
The first extension period as distinguished from the initial "due diligence" period was the 6-month period from September 23, 2005 to March 23, 2006. See 4th full paragraph appearing on page 2 of provision #2 of the agreement.
An anticipatory breach has been defined by our courts as occurring ". . . when the breaching party repudiates his duty before the time for performance has arrived . . ." Cottman Transmission Systems, Inc. v. Hocap Corp., 71 Conn.App. 632, 639 (2002).
Based on this definition, the breaching party would be the defendant sellers, the alleged breach would be the termination of the agreement eight days prior to the end of the first six-month extension period. Whether such a breach occurred here depends on the intention of the parties as evidenced by the unequivocal language of the agreement. Tallmadge Brothers, Inc. v. Iroquois Gas Transmission System, 252 Conn. 479, 498 (2000) and the circumstances surrounding the actions of the parties. Pullman, Comely, Bradley Reeves v. Tuck-it-Away, Bridgeport, Inc., 28 Conn.App. 460, 465 (1992).
The relevant provisions of the consideration section of agreement on this point is as follows:
The Buyer shall . . . pursue approvals and obtain permits for the construction of a minimum of (13) condominium units at the Real Property. The Buyers shall pursue the approvals and permits with due diligence." (emphasis added) See 2nd full paragraph on page 2 of the agreement.
and the fourth full paragraph on page 2 of the agreement provided:
If the due diligence effort does not prove successful within the 90 day period, the closing may be extended by six month increments by the Seller, upon satisfactory showing of all good faith efforts on the part of the buyer in pursuance to this agreement.
This "due diligence" period preceded the first 6-month extension. See the third full paragraph on page 2 of the agreement.
and, in the fifth full paragraph on page two provided in relevant part:
Buyer shall provide copies of all submissions and any other documentation utilized to obtain the approvals to the Sellers and shall assign all the approvals obtained to the Sellers. (Emphasis added.)
Based on this language it is clear that the parties agreed that it was the buyer's duty to pursue zoning approvals and permits to construct at least 13 condominium units on the subject property and to exercise due diligence in doing so. The duty to pursue the zoning approvals was a promise and the duty to do so with "due diligence" was both a promise and a condition of obtaining any addition extension of the closing date.
This analysis is obvious from the fact the entire purpose of the agreement from the buyer's standpoint was to build as many condominium units as the property would legally support. The sellers' objective, on the other hand, was to dispose of the property for the highest monetary return the property would bring irrespective of the type of housing to be built. These objectives are consistent with the language in the agreement. Frank was in the business of building multi-unit housing mostly for speculation purposes for many years and was generally familiar with the zoning regulations in the area of the proposed construction. By virtue of this experience, he knew or should have known that a change in the zoning regulations would be a condition precedent to erecting the number of units proposed in the subject contract. Likewise, Carl Palmieri was also generally familiar with the zoning regulations pertaining to his property from his experience as a long-time real estate broker involved with numerous sales of real estate in the area. Consequently, it is reasonable to believe that both parties to the agreement understood that a change in the zoning regulations would be necessary. Therefore the pursuit of a change in the zoning regulations was clearly an essential part of the bargain which duty was logically assigned to the buyer. Furthermore, this assignment is necessarily implied from the buyers' expressed duty to assign any changes in the zoning regulations obtained to the sellers. Finally, the use of the word shall to modify the verb pursue as considered in the context of the agreement was indicative of parties' intent to make the acquisition of zoning approvals a mandatory obligation. A. Dubreuil Sons., Inc. v. Lisbon, 215 Conn. 604, 610-11 (1990) on the part of the buyer.
Frank admitted as much when he testified at trial that he believed that the affordable housing option offered the highest and best zoning use for the property.
The agreement was silent with regard to the type of housing to be built on the property and placed no limitation on the construction in this regard.
Frank testified that he had been in the construction business for a long period of time before this transaction and that his business was both building for speculation and for contract with speculation occupying the majority of his experience.
At all times relevant to this case Palmieri was retired from the real estate business.
With regard to the due diligence requirement, although the earliest date for closing was established at September 23, 2005, both parties recognized the need for the closing date to be flexible due to the uncertainties associated with obtaining the necessary zoning approvals. Thus the closing dates were segmented into six-month extension periods. That is, a closing was to take place at the end of any six-month segment if all of the necessary approvals had been obtained. The effect of the "due diligence" condition was to induce the buyer to move promptly to obtain the necessary approvals while giving the seller the right to terminate the agreement at the end of any six-month extension if the buyer failed to do so. But regardless of the buyer's due diligence the transaction had to close, if at all, no later than April 21, 2007. The court is mindful that in construing the exercise of due diligence as a condition as well as a promise gives effect to the intent of the parties to prevent the undertaking from languishing for two years without meaningful progress and without tying up the property in contract while not imposing a strict forfeiture on the buyers ability to perform. That is, giving the buyer the right to claim substantial compliance with the condition rather than strict forfeiture upon condition broken.
See provision #4 "Closing" on page 3 of the agreement.
Id.
The plaintiff did not claim that the preparations it made constituted substantial compliance with the conditions, rather it claimed that the so called preparations fully satisfied the conditions. This contention finds no support in the evidence.
The buyer argues that it did exercise due diligence by inter alia, obtaining an updated survey, commissioning architectural drawings and tracking another affordable housing application then before the zoning authority and other ancillary activities in preparation for filing a formal application to change the zoning regulations. This argument is without merit as what was bargained for was results, not preparations, approvals, not application tracking or surveys.
If the buyer truly believed that obtaining an updated survey or commissioning architectural drawings constituted documents utilized to obtain approvals, then it was obligated under the terms of the agreement to furnish copies of same to the sellers. However, plaintiff offered no evidence that it provided any such preparatory documents to the sellers at any time relevant to this dispute.
As a fall back position, plaintiff claims that the term "due diligence" was not defined in the agreement and therefore it was ambiguous and could be reasonably interpreted to include the aforementioned preparatory activities. This argument is equally without merit. Ambiguity implies that a term or phrase is susceptible to more than one interpretation. State v. Marsh McLennan Companies, 286 Conn. 454, 464-65 (2008). A claim of ambiguity does not arise because one of the parties claims it is ambiguous. It emanates from the language in the agreement itself. The court will not torture the plain meaning of words to construe an ambiguity. Tallmadge Brothers, Inc. v. Iroquois Gas Transmission Systems, supra at 498 [check cite]. The phrase due diligence has long been held to be a term of art when used in contracts. "Due diligence means doing everything reasonable, not everything possible." Kubeck v. Foremost Foods, 190 Conn. 667, 672 (1983). Furthermore, both parties were represented throughout by competent attorneys who drew and reviewed the agreement and presumably advised their respective clients as to its impact on the intended transaction before they executed it. Consequently, both parties had relatively equal bargaining power and understood the meaning of this subsequently controversial phrase in its traditional legal sense. The conclusion is inescapable that the phrase "due diligence" as written in this agreement was not capable of more than one interpretation and it was not ambiguous. The plaintiff failed to take any reasonable steps to pursue the necessary zoning approvals. The court therefore concludes the defendants were justified in refusing to extend the closing for another six months based on the plaintiff's lack of due diligence.
See also, Connecticut Light Power v. Lighthouse Landings, Inc., 279 Conn. 90, 109 (2006).
See FN 16.
Finally, the plaintiff argues that even if the defendants failed to perform their duty with due diligence, they must nevertheless prevail on the first count because the defendants were thereby guilty of an anticipatory breach. The court disagrees.
II
As the court previously observed, the plaintiff buyer had a duty to diligently pursue the necessary zoning approvals within the time limited by the six-month extension, to wit: on or before March 23, 2006. The plaintiff neither pursued these approvals nor submitted any documentation of same or other documents it utilized to obtain the approvals in question within the time limited which it was obliged to do under the terms of the contract. The only action on the part of the plaintiff was to notify the sellers by its attorney's letter of March 13, 2006 of its election to proceed under that part of the zoning regulations permitting affordable housing on the site. This was immaterial since the sellers had no interest in the type of zoning approvals the buyer was to pursue or the strategy used to obtain them. However, based on his general knowledge of the zoning regulations in the area of their property and after discussion with his attorney, Carl Palmieri concluded that it was not possible for the plaintiff to obtain the approvals specified in the March 13th letter within the nine-or ten-day window remaining on the six-month extension. He therefore directed his attorney to send the plaintiff's attorney a letter immediately terminating the agreement. It is undisputed that the March 15th letter served to terminate the agreement. CT Page 830 His conclusions with regard to the feasibility of obtaining the approvals for the type of housing the plaintiff proposed in its March 13th letter turned out to be correct. Mr. Bradley, the Director of the Westport Planning and Zoning Authority, called by the plaintiff, testified at trial that of all the zoning options available for the site in question, the affordable housing option was one that could most quickly be approved. It was also his opinion that under the best case scenario the application process for affordable housing would take between 45 and 60 days to obtain zoning approval. Of course, this time line would be expanded in the event of any complications or unexpected delays in the process.
See Exhibit H, plaintiff's attorney's letter dated March 13, 2006.
See Exhibit I, sellers' attorney's letter dated March 15, 2006. At trial both parties conceded that the March 15th letter effectively terminated the agreement.
Our courts have held that in order to prevail on an anticipatory breach claim, the injured party must prove that he would have had the ability to complete the transaction had there been no premature repudiation. Round v. Matyas, Superior Court, judicial district of Litchfield, docket # 82825 (August 19, 2002, Trombley, J.). Indeed it has been held by our Supreme Court that only the party himself not in default has the right to claim that the other party's manifestation of an intention not to perform constitutes a breach of the contract. Gilman v. Pederson, 182 Conn. 582, 584 (1981). However, the plaintiff's recovery of damages based on an anticipatory breach need not establish that the buyer was in fact ready, willing and able to perform on the date for performance, it need only show that it would have been able to perform had there been no repudiation. McKenna v. Woods, 21 Conn.App. 528, 534 (1990). The Restatement (Second) of Contracts is in accord with this principle:
[a] party's duty to pay damages for total breach by repudiation is discharged if it appears after the breach that there would have been a total failure by the injured party to perform his return promise. Sec. 254(1).
Inasmuch as the facts in this case unequivocally demonstrate that the plaintiff could not have performed, i.e., obtained all of the necessary zoning approvals within the time limited, the defendant's repudiation under the circumstances of this case was legitimate. In other words, the defendants not only had the right to refuse to extend the closing date but also had the right to terminate the contract. Accordingly, plaintiff cannot prevail on an anticipated breach theory as alleged in the first count of the complaint.
The Second Count
The plaintiff next claims in the second count of his complaint that he did perform in that he was prepared to tender the purchase price on the terminal closing date or within a reasonable time thereafter and therefore the defendants breached the contract by failing or refusing to deliver title on that date. This claim is untenable in that the facts simply do not support this position. More importantly, plaintiff's reliance on this theory is inconsistent with the court's conclusion on the first count that the contract was legitimately terminated by the defendants on or about March 15, 2006.
It should be noted that the contract contained no "time is of the essence" clause. Therefore performance was not required precisely on March 23rd. Plaintiff would not have been in breach if it had tendered performance, within a reasonable time thereafter. Jaramillo v. Case, 100 Conn.App. 815, 823; cert. den. 283 Conn. 902, 926 (2007).
Plaintiff's attorney's letter of April 20, 2007 indicated that the buyer was prepared to tender the payment of $600,000 in full payment for the purchase of the property. The letter contained a copy of a bank check payable to the defendant's attorney as trustee for the defendants in the amount of $550,000. The letter explained that this price was arrived at by valuing the five units which could have been erected as a matter of right without zoning approval at $125,000 each and crediting the buyer with the $50,000 deposit already released to the defendants.
Exhibit BB, plaintiff's attorney's letter dated April 20, 2006.
The buyer's calculation of the tendered price appears to be miscalculated. By the court's math 5 times $125,000 equals $625,000. However, the court discounts this error as it would not affect the court's rationale for its conclusion.
There are three problems with this position. First and foremost, since the contract had already been terminated as of March 15 there was no contract in existence at the time of the so called tender. Secondly, plaintiffs alleged tender occurred more than a year after the expiration of the six-month extension. Under no stretch of the imagination could the alleged tender be considered in the context of this agreement to have been made within a reasonable time of March 15, 2006. Thirdly, assuming plaintiff had prevailed on its first count and there was a contract in existence, what was purportedly tendered was not the agreed cash price. The cash consideration for the purchase of this site was $1,600,000 not $600,000 or $625,000. The plaintiffs' reliance on the provision of the contract dealing with the possible reduction of the purchase price is misplaced. That provision in relevant part reads as follows:
The sale price is based on density of between (13) and (16) condominium units. In the event that less than (13) condominium units are approved for the site, then the sale price shall be reduced by the sum of $125,000 per unit less than (13). For example, if only (12) condominium units are approved, then the sales price shall be reduced to the sum of $1,475,000,000. (Emphasis added).
Clearly, the parties intended this section of the contract to modify the price but only in the event the zoning authority reduced the density the buyer proposed. It was the buyer's duty to apply for approval of at least 13 units. Since the plaintiff never made any application to the zoning authority, three was nothing for the zoning authority to act on let alone approve. In other words, the discounted price was only applicable if the zoning authority allowed a density lower than that proposed in the agreement. To construe this provision in accord with the plaintiff's argument would result in a windfall to the buyer and clearly not in accord with the intent of parties at contract. If zoning approvals were not required to be pursued, the buyer could purchase the property at any time for a song. It is settled law that a court will not construe a contract's language in a manner that "would lead to a patently absurd and inequitable result." State v. Philip Morris, Inc., 279 Conn. 785, 805 (2006). The result urged by the plaintiff would be both absurd and inequitable. For all of the foregoing reasons the plaintiff cannot prevail on the second count.
The Third Count
The third count alleges a claim of breach of the implied covenant of good faith and fair dealing. It is well settled that a duty of good faith and fair dealing is implied into every contractual relationship. It requires that neither party do anything to injure the other's right to receive the benefits of the contract. Landry v. Spitz, 102 Conn.App. 34, 36 (2007). Bad faith may include one party's interpretation of the contract in a manner that evades the spirit of the agreement and is unfaithful to its purpose. Id. at 48. It has also been held that this implied covenant is:
"Essentially . . . a rule of construction designed to fulfill the reasonable expectations of the contracting parties as they presumably intended. The principle therefore, cannot be applied to achieve a result contrary to the clearly expressed terms of a contract . . ." Southbridge Associates v. Garofalo, 53 Conn.App. 11, 16 (1990).
The plaintiff claims that the sellers breached this duty by encouraging the buyer to seek an affordable housing zoning approval and then when the plaintiffs announced their intent to do so, Palmieri announced that he would not permit such housing on the site.
This claim lacks any creditable support in the evidence. This argument also ignores the fact that the plaintiff had over nine months from the date the contract was executed to obtain whatever zoning approvals they desired to achieve its objectives. During this period they failed to pursue any zoning approvals whatsoever.
Plaintiff claims that initially, both before and after the contract was signed, Frank dealt exclusively with Mary Gai who encouraged Frank to pursue approvals for affordable housing, one of the several types of housing options available in the zoning regulations. Early on Frank conducted his own investigation of the various zoning options available to the buyer consistent with its intention to build multiple housing condominium units on the property. Although he was influenced by Gai's constant encouragement to pursue affordable housing on the site, it was Frank's decision to pursue the affordable housing vehicle despite the fact that a similar application had been recently denied by the zoning authority because he concluded that there was a need for such housing and it was the best and highest use for the site in question. Furthermore, Gai's primary interest in this transaction was in the recovery of her real estate sales commission as she was not only recognized in the agreement as both the listing and selling agent but plaintiff also agreed in the same provision to allow her to be the selling agent for any units plaintiff built. Therefore, if this project went to fruition, she stood to make a substantial commission on these sales. Furthermore in the subject agreement the plaintiff agreed to use her services as the exclusive listing agent for the sale of the condominium units as they were built and sold off by The Land Group, Inc. It is clear from the evidence that although Gai was one of the owners of the property she was only authorized to speak to Frank in her capacity as a real estate agent. Palmieri was the person in charge of selling the property on behalf of all of the owners. Frank knew or in the exercise of due care, should have known this. There is no claim by the plaintiffs that Mary Gai represented the family in this matter nor any allegation or proof of her apparent agency to do so. Since she was not acting in any representative capacity, her urging could not be attributable to the sellers. Moreover, her acts of encouragement could not be reasonably construed to be contrary to the spirit of the agreement. Landry v. Spitz, supra, 48. Nor were her acts of encouragement in any way antagonistic to the objectives of the agreement. Southbridge, supra, 16. To the contrary, they were completely consistent with the spirit of the agreement.
See paragraph 7. Brokers of the subject agreement.
There were five owners of the property all related by blood or marriage. Four of the five were owners in the capacity as fiduciaries — executors of decedent family members estates or as a trustee of a family trust. Gai is the only plaintiff who is an owner in an individual capacity. The record is silent as to what each owner's precise financial interest in the two parcels was.
Plaintiff further argues that the defendants, namely Palmieri was averse to affordable housing being built on the property. This argument is disingenuous.
In support of his argument the plaintiff points to Palmieri's testimony in an affidavit he gave in connection with a motion for summary judgment in which in one paragraph thereof he said that he refused to extend the closing because he opposed the erection of affordable housing. Palmieri testified that the statement referred to was taken out of context and pointed to an earlier paragraph in the same affidavit which clarified the meaning of the paragraph in question to the effect that his intent in opposing affordable housing was because the plaintiff was unable to get approvals therefor within the existing extension period. The affidavit itself was never introduced into evidence by either party. Based on the weight of the credible evidence on this point, it is clear that the type of housing to be erected on the sellers' property was immaterial to Palmieri, and that his decision not to grant another extension and to terminate the contract was motivated by his conclusion that the plaintiff had not acted with due diligence and thereby failed to obtain the necessary approvals within the time limited.
For the forgoing reasons the plaintiff has failed to offer sufficient evidence to support a bad faith or unfair dealings claim. Accordingly plaintiff cannot prevail on this count.
In Summary
For all of the foregoing reasons expressed herein judgment should and is hereby granted in favor of THE DEFENDANTS on all counts of the plaintiff's complaint.
Defendants' Counterclaims First Counterclaim
In the first counterclaim the defendant sellers allege a breach of the contract by reason of the plaintiff's total failure of performance on March 15, 2006, i.e., the failure to obtain any of the necessary zoning approvals. As the court earlier observed, since this contract did not contain a "time is of the essence" clause, the buyers would have had a reasonable time after March 15th to tender payment. In fact, the plaintiff has claimed that its letter of April 20, 2007, was a proper tender. The court disagrees for the reasons set forth in its discussion of plaintiff's second count.
Note that the letter is dated April 20, 2007, a day before the terminal closing date but more than a year after then end of the first six-month extension period. Apparently the plaintiff predicated this theory on the premise that it prevailed on its claim of anticipatory breach and thus was relieved of any further duties of performance. Obviously, its premise was fatally flawed.
Furthermore, since the March 15th letter legitimately terminated the agreement, plaintiffs only recourse was to tender payment of the purchase price on March 15th or within a reasonable time thereafter. See Jaramillo v. Case, 100 Conn.App. 815, 823; cert. den. 283 Conn. 902, 926 (2007). The plaintiff argues that it made such a tender in its April 20, 2007 letter more than a year after performance or breach was due. As the court earlier explained the focal point for performance was March 15, 2006.
In addition to damages for the breach of the subject contract, the defendants also seek damages in the same counterclaim arising out of the breach of a licensing agreement contained in provision #32 of prime (subject) contract.
That provision gave the plaintiff a license to store its equipment and materials on the premises. By letter of April 20, 2006 the defendant sellers revoked the aforesaid license and demanded removal of plaintiffs' personal property from the site. The plaintiff refused to remove its equipment and materials from the premises requiring the defendants to institute summary process proceedings in the Housing court, resulting in a judgment against the plaintiffs. It is un-controverted that plaintiffs' personal property remained on the premises from April 20, 2006 until May of 2007. As a consequence thereof defendants seek to recover the resulting damages for loss of rents and profits. In support of this claim the defendants argue that the licensing agreement was a separate agreement not contemplated by the parties to be part of the sale and they are therefore entitled to such damages over and above any damages accruing from liquidated damages. The court disagrees.
The terms of the license relevant to this claim are as follows: "32. License to Store Equipment. During the term of this contract and any extension thereof, the buyer may store equipment and materials at the premises . . . at no cost . . ."
See Exhibit L.
It is clear from the language in the contract and the conduct of the parties that the licensing agreement was intended to be an integral part of the purchase and sale of the subject property. First, if it were intended to be a separate undertaking, the parties would have either expressed that intent in the language of the prime contract document or as customary in legal circles executed a separate "side" agreement in another document simultaneously with the sale agreement. They did neither. Secondly, the defendants rely on a provision contained in section 28 of the prime agreement, to recover their legal expenses associated with the illegal occupation of the premises. This position is inconsistent with their claim that provision #32 represents a self-contained agreement independent of the agreement in the prime contract. Thirdly, if this was intended as an agreement separate and apart from the prime agreement, then it would have been unenforceable for lack of consideration since by its terms there was no charge for the license. Yet, in the same breath, defendants rely on another provision in the prime contract to recover legal fees. Furthermore, if the license were not an integrated part of the sales agreement, as the defendants urge, the defendants would be unable to recover attorneys fees in any case since they were not provided for in the so called separate licensing agreement. In other words the defendants can't have it both ways.
Inasmuch as the plaintiff has breached the contract as aforesaid, the defendants are entitled to all damages arising out of the breach of the prime agreement as liquidated damages. That is, defendants' recovery under their first counterclaim is limited to the amount specified in the liquidated damage provision #13.
Second Counterclaim
This counterclaim specifically pertains to the awarding of attorneys fees separate and apart from liquidated damages. The defendants not only seek to recover liquidated damages, but also seek to recover reasonable attorneys fees for the defense of plaintiff's claims as well as fees incurred in the prosecution of the eviction proceeding in which it prevailed. On the other hand, the plaintiff argues that the liquidated damages provision encompasses all damages arising from the breach of the prime agreement including all reasonable attorneys fees. Therefore the defendants' recovery is limited to the amount specified in the liquidated damage provision. The court disagrees.
Since both sides rely on the liquidated damages provision as a measure of their respective recoveries, they have necessarily conceded that the liquidated damage provision contained in the agreement as section 13 is valid. That is, that it does not amount to a penalty for breach. See Bellemare v. Wachovia Mortgage Corp., 284 Conn. 193, 203 (2007). Consequently, the court does not address the validity issue.
These positions implicate two provisions in the agreement the relevant portions thereof are as follows:
13. DEFAULT. If BUYER is in default hereunder, or, on or before the date of closing as set forth herein, indicates that BUYER is unable or unwilling to perform and SELLER stands ready to perform SELLER'S obligations, SELLER'S sole remedy shall be the right to terminate this Agreement by written notice to BUYER or BUYER'S attorney and retain the down payment as reasonable liquidated damages for BUYER'S inability or unwillingness to perform . . . (emphasis added). and:
28. COSTS OF ENFORCEMENT Except as otherwise expressly provided herein, in the event of any litigation brought to enforce any material provision of this agreement, the prevailing party shall be entitled to recover its reasonable attorneys fees and court costs from the other party. (Emphasis added).
At first blush these two provisions appear to be inconsistent with each other. Provision #28 is to apply so long as no other provision expressly provides otherwise. However, provision #13 expressly provides that liquidated damages are the sole remedy available in the event of breach.
The defendants argue that in fact that these two provisions are not contradictory or repugnant to each other but are complementary to each other. This is because the liquidated damages provision pertains exclusively to defaults while provision #28 pertains exclusively to enforcement contingencies. The plaintiff also seems to agree with this view. After a second review of these provisions the court is also convinced that the provisions are not repugnant to each other. This conclusion is further buttressed by the fact that liquidated damages pertain to compensatory damages while attorneys fees are considered under Connecticut law as being in the nature of punitive or exemplary damages and are only awarded if specifically written into the contract or by statute. Jones v. Ippolitti, 52 Conn.App. 199, 209 (1999). Indeed, in cases involving contracts for the sale of real property, at least two Superior Court judges have allowed the sellers to keep the buyer's deposit as liquidated damages and awarded attorneys fees pursuant to a clause in the contract. See, e.g., Mizesko v. Weiss, Superior Court, judicial district of New Haven at Meriden, docket No. CV92 0240331 (February 24, 1994, Dorsey, J.T.R.); Murning v. Blankenbeckler, Superior Court, judicial district of Hartford-New Britain, docket No. CV92 0454960 (April 21, 1993, Jackaway, J.). Moreover, this interpretation of the contract is clearly consistent with the intent of the parties as expressed in the agreement. The court therefor concludes that in the present case reasonable attorneys fees are recoverable to the extent that they are proven in addition to any liquidated damages recoverable under the prime agreement.
Now the plaintiff's question whether all attorneys fees claimed in the enforcement of the licensing agreement are recoverable. In their attempt to enforce the licensing provision, the defendants first brought an unsuccessful law suit on the theory of unlawful entry and detainer. The plaintiff points out that under provision 28 only the prevailing party may recover attorneys fees and costs and since the defendants were the unsuccessful litigant, they should not be entitled to recovery any attorneys fees. The court agrees. Despite the defendants' claim that the unlawful entry and detainer suit was dismissed without prejudice, it still was a loss. Inasmuch as the defendant did not prevail in that suit, the defendant cannot recover any attorneys fees or costs incurred in bringing it.
In summary, the defendants are entitled to recover reasonable attorneys fees and costs incurred in defending the present suit as well as those incurred in the prosecution of the summary process action under the second counterclaim in addition to liquidated damages.
Third Counterclaim
The defendants' third counterclaim sounds in slander of title and is pleaded as a separate and distinct cause of action from its breach of contract claim.
Defendants claim that the act of recording of a copy of the subject contract of sale subsequent to the plaintiff's breach amounted to a slander of their title because they were unable to sell the property to other prospective buyers due to the existence of that recorded document.
Slander of title is an intentional tort. The essential elements of a cause of action for slander of title consists of
Bellemare v. Wachovia Mortgage Corp., supra, 202.
". . . the . . . publication of a false statement derogatory to the plaintiff's title, with malice, causing special damages as a result of diminished value of the plaintiff's property in the eyes of third parties . . . The publication must be false." Gilbert v. Beaver Dam, 85 Conn.App. 663, 672-73 (2004); See also Elm Street Builders, Inc. v. Enterprise (Emphasis added) Condominium Ass'n., 63 Conn.App. 657, 669 (2001).
In this regard see also, Bellemare v. Wachovia Mortgage Corp. supra; Elm Street Builders, Inc. v. Enterprise Park Condominium Ass'n., Inc., 63 Conn.App. 657, 669 (2001).
First and foremost the publication must be false. It is undisputed that the document recorded on the land records was an exact copy of the original contract of sale. The defendants have offered no evidence nor does the record reveal that any data contained in that document is false. Failing to prove this first element would therefore result in the plaintiff prevailing on the third counterclaim by reason of the defendants' failure of proof of an essential element of the cause of action, as a matter of law. Bellemare v. Wachovia Mortgage Corp., 284 Conn. 192, 202 (2007); Elm Street Builders, Inc., v. Enterprise Park Condominium Ass'n., Inc., supra; Gilbert v. Beaver Dam, supra. Since this failure is dispositive of their claim, it is unnecessary for the court to discuss the remaining elements. Accordingly, judgment is entered in favor of the plaintiff on the defendants' third counterclaim.
See Exhibit A (the contract in question) and compare it with Exhibit JJ (copy of the recorded contract).
Fourth Counterclaim
Inasmuch as the defendants have prevailed on their first two counterclaims and should those judgments thereon become final, they would be entitled to a forfeiture and execution on the cash bond referred to in this counterclaim. Accordingly, judgment is entered in favor of the defendants on the fourth counterclaim.
Damages CT Page 839
Early in this case the court bifurcated the proceedings into two parts: liability and damages. Following the hearing on liability the parties returned to offer evidence on damages. As the court has already determined that the breach of the contract by the plaintiff entitled the defendants to liquidated damages of $50,000. It also determined that the defendants could not prevail on its claim of slander of title and were therefore not entitled to any damages under their third counterclaim. Therefore the only question remaining is the amount of attorneys fees and costs to be recovered by prevailing party in the present action and separate litigation associated with the enforcement of the licensing provision.
Both attorneys testified to their respective experience, length of practice, nature of their specialties in the practice of law, the hourly rates that they typically charged clients for their services and the time and effort they spent in representing their clients both pre-trial and at trial. After a full hearing on these matters the court is satisfied that the respective credentials of the attorneys, the nature of their respective expenditure of time and effort by the attorneys justify the rates charged and the efforts made in prosecution and defending this law suit. Accordingly damages are assessed as follows:
Not included in these charges were the time and effort spent in this one-day hearing on damages. The parties are hereby invited to submit a supplementary claim for same to the court. They may also request oral argument on same or waive any argument upon written stipulation to waive same upon which the court will decide the matter on the papers.
i These credits account for the fact that the defendant offered evidence of gross amounts without reductions for unearned fees associated with their unsuccessful litigation efforts to enforce this agreement as well as their unsuccessful prosecution of their third counterclaim. Inasmuch as plaintiff made no claim of set-off nor was there any motion by the plaintiff to conform the pleadings to the proof, no award is made to the plaintiff for its successful defense of the entry detainer action or the Third counterclaim in this action.
ii As the court previously noted this case was bifurcated into two parts: liability and damages. On 12/23/08 the parties presented evidence on all their claimed damages with exception of the last day or trial. That day's hearing by the court's calculation took four hours to complete. Inasmuch as the defendants have prevailed in the present suit, they are entitled to recover reasonable attorneys fees incurred in this hearing. The court has taken the liberty of calculating the amount of defendants' attorneys fees for the last day of trial using the same principles it did for assessing the reasonableness for other attorneys fees in this case. However, the court is herewith reserving to both counsel the opportunity to be heard to make a separate presentation with regard to the reasonableness of attorneys fees on the last day of trial provided that such a request is filed within 3 business days of the publication of this memorandum of decision. Otherwise, the court will assume that the parties agree with the court's assessment and the judgment in this case shall become final for purposes of appeal.
Damages
The total amount of damages awarded to the defendant in this case is $178,217.65 and is broken down as follows:
Credits Third Counterclaim: 1,400.00 GRAND TOTAL JUDGMENT AWARD OF DAMAGES
First Counterclaim: All aspects of the present case exclusive of attorneys fees and costs: Gross Total 1st Counterclaim As Liquidated damages $ 50,000.00 Second Counterclaim: Attorneys fees and costs for enforcement of subject contract: Pretrial from 10/30/06 to 10/24/08 230 hrs @ $350/hr $80,500.00 Trial from 10/24/08 to 12/22/08 122 hrs @ $350/hr 42,700.00 Sub-Total $123,200.00 Summary Process litigation 78.57 hrs @ $350/hr 27,499.50 Costs: 618.15 Sub-Total 28,117.65 Gross Total 2nd Counterclaim $151,317.65 Less for unsuccessful:i Procution of unlawful entry detainer action: 30 hrs @ $350/hr 10,500.00 Defense of Third Counterclaim: 40 hrs @ $350/hr 14,000.00 Total Credits (24,500.00) 00.00 Sub-Total Net Damages Awarded $176,817.65 Add Supplementary Award of Attorneys fees:ii Last day of hearing in damages: Defendants' attorneys fees 4 hrs @ $350/hr $178,217.65The prevailing party shall file with the clerk of this court a judgment file not inconsistent with this decision.