Opinion
FSTCV166029529S
06-05-2017
Henry Pascarella v. Robert Silver
UNPUBLISHED OPINION
MEMORANDUM OF DECISION re MOTION FOR SUMMARY JUDGMENT (#109.00)
Kenneth B. Povodator, J.
Background
This is a preemptive-type declaratory judgment action, having its origins in an agreement between the parties that was reached in the late 1990s. The " Participation Agreement" provided for the defendant to provide up-front funding in exchange for a share of distributions relating to ownership/operation of a commercial property in Greenwich, as detailed (with numerous conditions) in that agreement.
With a somewhat torturous history, litigation in 2006 commenced by the defendant came to a conclusion in 2016, R.S. Silver Enterprises, Inc. v. Pascarella, 163 Conn.App. 1, 134 A.3d 662, cert. denied, 320 Conn. 929, 133 A.3d 460 (2016). In that earlier proceeding, the defendant successfully claimed that the plaintiffs had not made required distributions to the defendant, with the judgment reflecting damages proven through 2008.
The defendant, or perhaps more accurately the principal of the defendant, having continued to make representations to third parties concerning an interest in the subject property, the plaintiffs have commenced this action, seeking declaratory relief to the effect that the defendant has no further rights under the Participation Agreement and the necessary corollary that the defendant has no right to sue or make any further claims under that agreement. The plaintiffs claim that under principles of claim preclusion under the doctrine of res judicata, the defendant has exhausted its right to sue the plaintiffs for claimed breach of the Participation Agreement.
This proceeding initially was commenced against Robert Silver, individually, as well as R.S. Silver Enterprises, Inc.; subsequently, a withdrawal was filed as to the individual defendant. Therefore, although Mr. Silver is the " named defendant" in this proceeding, all further references to the defendant will be intended to be a reference to the defendant entity, R.S. Silver Enterprises, Inc.
The plaintiffs have moved for summary judgment, relying upon a " typical" application of res judicata in the context of a breach of contract, whereby once a party has obtained a judgment with respect to a claimed breach of that contract against a defendant, further claims arising under the contract are barred. In perhaps over-simplified terms, implicit in such a " typical" scenario is that the contract is at an end, with no post-litigation duties remaining. Again, in perhaps over-simplified terms, there are two categories in which this applies: the breach of an indivisible obligation or a claimed termination of a continuing duty to perform.
There are other, less-frequently litigated scenarios (at least in terms of res judicata jurisprudence), involving a continuing or ongoing obligation of performance, where there is a less than total termination of the relationship between the parties. That distinction is at the heart of this case.
Discussion
As identified above, the central issue in the case, and especially for purposes of this motion for summary judgment, is whether the defendant was entitled to only one action against the plaintiffs based on a breach of the Participation Agreement, or whether the 2006 action merely precluded further claims arising from any breach that may have occurred prior to the time of trial. The plaintiffs bear the burden, for purposes of this motion for summary judgment, of establishing both the absence of a material issue of fact and entitlement to judgment as a matter of law based on the undisputed facts.
For context, it is not difficult to posit a situation wherein a single breach does not necessarily terminate the contract or terminate all rights to pursue further breaches. If a retailer enters into a long-term contract with a vendor for periodic delivery of perishable goods, a claim for damages predicated on a single delivery of spoiled/rotten goods does not require termination of the ongoing contractual relationship, nor does it immunize the vendor from claims of future/further deliveries of spoiled/rotten goods. The parties may disagree as to the cause of a specific unusable delivery--for example, the vendor may claim that the purchaser did not protect the goods immediately after delivery--but unless the contract is deemed to be terminated, the vendor continues to have obligations to perform, and a breach of future obligations remains potentially actionable.
The key issue is whether there was a total termination of the Participation Agreement prior to commencement or conclusion of the 2006 litigation, such that the defendant effectively was suing for a total breach of the agreement, or whether the defendant had sued the plaintiffs for an incremental portion of the plaintiffs' promised performance, such that the judgment only pertained to damages sustained to that point. This is the focus of Section III of the defendant's brief, and the court concludes that the plaintiffs are not entitled to judgment as a matter of law, based on the current record (summary judgment submissions).
The Court finds two separate Restatements to be particularly helpful. Section 243 of the Restatement (Second) of Contracts distinguishes between situations in which there is a total breach of a contract and situations in which there is only an incremental breach. Subsection (3) is directly on point:
(3) Where at the time of the breach the only remaining duties of performance are those of the party in breach and are for the payment of money in installments not related to one another, his breach by non-performance as to less than the whole, whether or not accompanied or followed by a repudiation, does not give rise to a claim for damages for total breach.
Restatement (Second) of Contracts § 243 (1981).
This is to be distinguished from a situation in which the non-breaching party elects to treat the breach as a complete repudiation and seek damages for a complete breach of the contract.
The official commentary provides further explanation:
c. Duties on one side . The rule stated in Subsection (3) applies only where all the remaining duties at the time of the breach are those of the party in breach. It therefore applies where the parties have exchanged promise for performance (§ 72), and where the parties have exchanged promise for promise (§ 74) and the injured party has fully performed. It is well established that if those duties of the party in breach at the time of the breach are simply to pay money in installments, not related to one another in some way, as by the requirement of the occurrence of a condition with respect to more than one of them, then a breach as to any number less than the whole of such installments gives rise to a claim merely for damages for partial breach. Whether there is a relationship between installments or other acts depends on the extent to which, in the circumstances, a breach as to less than the whole of such installments or acts can substantially affect the injured party's expectation under the contract.
Restatement (Second) of Contracts § 243 (1981).
The plaintiffs' contention that the defendant effectively would be splitting a cause of action is addressed in the Restatement (Second) of Judgments. Section 24 identifies the general rule prohibiting splitting of causes of action. The discussion recognizes a distinction between singular events/transactions and a series of relatively independent obligations, as well as identifying the proper treatment of an action based on some but not all then-existing breaches of a contract.
When a number of items are overdue on a running account between two persons, and the creditor, bringing an action on the account, fails to include one among several past due items, judgment for or against the creditor precludes a further action by him to recover the omitted item. This conforms to ordinary commercial understanding and convenience. On the other hand, when there is an undertaking, for which the whole consideration has been previously given, to make a series of payments of money--perhaps represented by a series of promissory notes, whether or not negotiable--the obligation to make each payment is considered separate from the others and judgment can be obtained on any one or a number of them without affecting the right to maintain an action on the others. The same applies to the obligations represented by coupons attached to bonds or other evidences of indebtedness which are similarly considered separate.
Restatement (Second) of Judgments § 24 (1982).
Section 24 includes references to § 26, which provides in part:
(1) When any of the following circumstances exists, the general rule of § 24 does not apply to extinguish the claim, and part or all of the claim subsists as a possible basis for a second action by the plaintiff against the defendant:
. . .
(e) For reasons of substantive policy in a case involving a continuing or recurrent wrong, the plaintiff is given an option to sue once for the total harm, both past and prospective, or to sue from time to time for the damages incurred to the date of suit, and chooses the latter course;
Restatement (Second) of Judgments § 26 (1982).
This is further explained in the commentary:
g. Contracts--plaintiff's option in case of material breach . A judgment in an action for breach of contract does not normally preclude the plaintiff from thereafter maintaining an action for breaches of the same contract that consist of failure to render performance due after commencement of the first action. Compare § 24, Comment d . But if the initial breach is accompanied or followed by a " repudiation" (see Restatement, Second, Contracts § 250), and the plaintiff thereafter commences an action for damages, he is obliged in order to avoid " splitting, " to claim all his damages with respect to the contract, prospective as well as past, and judgment in the action precludes any further action by the plaintiff for damages arising from the contract.
In the event of a " material" breach (see Restatement, Second, Contracts § 241) that is not accompanied or followed by a repudiation, the plaintiff is entitled to treat the contract as at an end and to recover damages for performances not yet due as well as those already due on the theory that there has been a total breach of contract. If the plaintiff does this, a judgment extinguishing the claim under the rules of merger or bar precludes another action by him for further recovery on the contract. On the other hand, although the breach is material, the plaintiff may elect to treat it as being merely a partial breach. If he so elects, he is entitled to maintain an action for damages sustained from breaches up to the time of the institution of the action, and the judgment does not preclude a further action by him for a breach occurring after that date.
Restatement (Second) of Judgments § 26 (1982).
As set forth in a case cited by the defendant, Connecticut has adopted at least some of these principles:
Pursuant to a comment to the Restatement section articulating the transactional test for res judicata, which Connecticut cases employ, [m]aterial operative facts occurring after the decision of an action with respect to the same subject matter may in themselves, or taken in conjunction with the antecedent facts, comprise a transaction which may be made the basis of a second action not precluded by the first . . .(Internal quotation marks and citation, omitted; emphasis as in cited case.) Landmark Investment Group, LLC v. Chung Family Realty Partnership, LLC, 137 Conn.App. 359, 368, 48 A.3d 705, 711 (2012).
The defendant further cites Hartford-Connecticut Trust Co. v. Cambell, 95 Conn. 399, 111 A. 864, 867 (1920), for the proposition that it is a factual issue, relating to the intent of the parties, as to whether a contract was intended to be severable into components; whether that principle rigorously applies here, the concept is the same--the intent of the defendant with respect to whether the plaintiff's breach, as determined in the 2006 action, was to be treated as a total repudiation or instead a breach of to-date obligations, with future events to determine whether there would be future breaches necessitating future litigation, is a matter of intent to be determined as a factual matter (unless otherwise conclusively established as a matter of law).
The court has attempted to review the trial court decisions in the 2006 litigation, as well as the parties' citations to those trial court proceedings, and could find nothing that conclusively established this plaintiff's position.
The court, of course, for purposes of summary judgment does not have to conclude that the defendant is correct on the merits of its contentions--the court cannot make that determination in the context of the plaintiffs' motion for summary judgment. All that the court is required to determine is whether the plaintiffs have established, as a matter of law, that they are correct, and the existence of a material issue of fact--and contrary principles of law--suffice for establishing the failure to prove that the plaintiffs are entitled to judgment.
Although the foregoing is dispositive, the court feels compelled to note its rejection of the defendant's contention that the speculative nature of future damages, at the time of the earlier trial, inherently could preclude application of res judicata. It might have a bearing on the existence of an adequate opportunity to litigate an issue in the sense of prematurity of a ripened cause of action, as a basis for defeating possible application of res judicata, but identifying damages as speculative at a given point in time, alone, is insufficient. Juries routinely are told that a plaintiff must remove claims of damages from the realm of speculation and prove damages in terms of probability--the inability to prove damages (beyond speculation) does not entitle a plaintiff to a second trial if additional evidence becomes available. Indeed, the defendant cites numerous cases indicating that a court cannot award damages based on speculation, but none of the cases state that that confers a right for the plaintiff to come back for a second try (if the state of available proof improves), particularly if other damage claims had been subject to proof and awarded.
The speculative nature of future damages may well inform the decision as to the defendant's intentions in commencing the 2006 litigation (from the defendant's perspective) or it might support a claimed about-face in the defendant's strategy in the earlier litigation (from the plaintiff's perspective), but ordinarily, an inability to remove a claim of damages from the realm of speculation, without a context of a claimed future accrual of a cause of action, means nothing more than that the plaintiff cannot recover for such claimed damages.
The plaintiff has identified indicia of an intent on the part of the defendant to seek damages into the future, relative to the date of trial.
Conclusion
The plaintiff's articulation of principles surrounding application of res judicata is generally correct--at least as seemingly reflected by most reported decisions. " Most" is not all, and independent/sequential conduct--whether tortious or constituting breaches of contract--can give rise to independent/sequential causes of action.
The court must recognize that an overly-rigid application of res judicata might run afoul of the cautionary statement made by the Appellate Court in Cadle Co. v. Gabel, 69 Conn.App. 279, 298, 794 A.2d 1029 (2002): " To conclude that its claim is now barred by res judicata would be to require omniscience in litigation." At the time of the earlier trial, the defendant could not know whether there would be further distributions arising from the profitability of the subject property and whether the plaintiffs would honor the obligation to provide a portion of the distributions in accordance with the Participation Agreement.
Based on the current record, the court must deny the motion for summary judgment.