Opinion
No. CV 00-0101810 S
January 6, 2005
MEMORANDUM OF DECISION
I. BACKGROUND
This case has been brought in Four Counts; First Count for breach of contract, Second Count under CUTPA, Third Count for fraudulent misrepresentation and the Fourth Count for unjust enrichment. The two defendants are Ameritage Construction Corp. and Thaddeus Bysiewicz.
The defendants have denied some of the allegations of the complaint and have raised nine Special Defenses, all of which the plaintiffs have denied.
II. FINDINGS OF FACT
After reviewing the oral testimony and the exhibits, and having evaluated the credibility of the witnesses, the court finds the following facts.
On March 10, 1999, the defendant, Thaddeus Bysiewicz, and the plaintiffs signed a six-page document furnished by the defendant entitled "CONTRACT TO BUY REAL ESTATE, CONTRACT TO CONSTRUCT A HOME." The first paragraph of this contract lists the plaintiffs as BUYER and the defendant Ameritage Construction Corp. as the only Seller. However, on page 6 of the contract, on the signature line above the words SELLER/BUILDER (We), is the signature of Thaddeus Bysiewicz, with no reference to Ameritage Construction Corp. The contract required the builder to work continuously to finish the house by June 30, 1999. The original contract was amended by two addenda. In the first amendment, because the house was not completed by June 30, 1999, the defendant agreed to pay a penalty of $100.00 per day for each day the house was not completed and title given after August 30, 1999. This addendum was prepared by the plaintiff, Robert Rydell, and originally provided for a daily penalty of $150.00. The defendant Bysiewicz would not agree to the $150.00, so he changed the amount to $100.00 per day, which the Rydells agreed to. He also changed the deadline day from August 15, 1999, to August 30, 1999. There was no mention in this addendum of Ameritage Corp. and the addendum was initialed by the Rydells and Mr. Bysiewicz, and signed approximately April 1, 1999.
When it become clear that the house would not be completed and title given by August 30, 1999, the Rydells and Mr. Bysiewicz agreed on a second addendum, dated August 2, 1999, which extended the effective date on the original penalty clause from August 30, 1999 to September 30, 1999. It also provided that "in exchange for this extension, seller agrees to add hardwood floors to the dining area and entire foyer area from front door to kitchen area, dining area to parlor area at no additional charge to buyer." The value of adding the hardwood floors was about $3,000.00. It further provided that the "extension is also inclusive of seller's request for 7 additional days in which to complete "Bump Out" of foyer requested by buyer. Additional charge of $3,000.00 for "Bump Out" will be addressed via change order prior to closing." Therefore the Seller gave the Buyer floors worth about $3,000.00 in exchange for twenty-three extra days (30 days minus the 7 extra days for the bump-out work). "Seller also agrees that penalty of $100.00/day will resume for each day house is not complete and title given to buyer beyond September 30, 1999." Just as in the first addendum, this agreement was initialed by the Rydells and Mr. Bysiewicz. The words used to refer to the original contract were "Addendum To Contract Re: Russell Ridge, Lot 22: Robert Rydell and Judy Morgan Rydell (Addendum 1) and "Addendum #2 Re: Russell Ridge, Lot 22: Robert Rydell and Judy Morgan Rydell."
Both addenda were prepared by the plaintiff, Robert Rydell.
From the time these parties began dealing with each other right up to closing, more than a year later, it was understood by all that the Seller of the property was Ameritage Corp. and not Mr. Bysiewicz individually. The Buyers were aware that he was acting in a representative capacity for Ameritage Corp., and that their contract, along with its addenda, was with the Corporation as Seller.
At the time the original contract was signed, up to the time of closing, fifty-five weeks later, the plaintiffs lived in a six hundred square foot cottage with almost all their possessions in storage. They had a mortgage commitment, but because of the delay beyond June 1999, they had to obtain a different kind of mortgage which cost them about $4,000.00.
At the time the contract was signed, the plaintiffs eliminated the standard wood burning fireplace, for which they received credit, and informed the defendants that they were going to substitute a gas fireplace, and add an additional fireplace in the master bedroom upstairs, and arrange for gas appliances. The defendants were aware that this would require gas lines. The plaintiffs were to hire their own contractor to do this work.
The defendants did very little work on the property from March to August 1999.
The permit for the foundation was signed on July 28, 1999, and for the house on October 1, 1999. All the ledge blasting on Buyers' lot was done prior to March 10, 1999; the Seller needed only to remove the loose rock. In August, the plaintiffs requested that when the foundation was poured there would be a "bump-out" to accommodate an agreed-upon change. The "bump-out" was extra foundation work for an addition. The date for completion on the second addendum was extended to September 30, 1999, which included and allowed for an extra seven days required because of the "bump-out."
In early October, the parties met because the defendants noticed that the plaintiffs' fireplace contractor had put a 30% elbow bend in the furnace flue. The plaintiffs had not told the defendants about that, nor had they discussed with them ducting, supply lines and venting. The plaintiffs' fireplace contractor used flexible plastic tubing for the gas lines and had to poke holes through the sills to run the lines and had to put the vent through the exterior.
Because of the installation of flex tubing and the 30% bend in the flue done by plaintiffs' fireplace contractor, which the defendant believed to be unsafe, and because of discussions concerning the plaintiffs waiving their rights to the new home warranty as to those items being done by the plaintiffs, some delay in completion of the house was justified. However, these issues did not prevent the defendant from doing other work on the house, which, if he had done, would have resulted in an earlier closing.
The closing finally took place on March 31, 2000, at which time the closing statement, plaintiff's Exhibit 5, showed as credits to seller, $209,500.00 (the original selling price on the contract), $354.45 for oil, and $5,461.50 for extras, which was the exact amount of the extras shown on Change Orders 1 and 2 (defendant's Exhibits C and D) which were attached to the Closing Statement. The only credits to buyers on the closing statement were the $20,000.00 deposit and cash to balance of $195,315.95.
The defendants in paragraph 10 of their Amended Answer admit that Ameritage refused to honor the penalty provision of the second addendum and that there would have been no closing unless full payment of the amount due and owing Seller was made (with no deduction for damages). The Buyers went ahead with the closing because they had been waiting for over a year to get into their new home, and had planned accordingly. They were informed prior to closing that there would be no closing unless they paid the full price, so they did not bringing up the issue of the $100.00 a day deduction, fully intending to pursue that claim after they owned the house.
DISCUSSION FIRST COUNT
The plaintiffs claim that both defendants breached a Contract To Buy Real Estate (and) Contract To Construct A Home, and additionally two amendments called addenda to the original contract. The defendants admit the existence of the original contract and the two amendments, but deny that the defendant, Thaddeus Bysiewicz, was a party to the original contract or the two addenda.
The second addendum provided that the "Builder agrees to pay a penalty of $100/day for each day house is not complete and title given to buyer beyond August 30, 1999."
The plaintiffs, in their Post-Trial Memorandum, Par. 68, assert that their damages total $18,300.00, at the rate of $100.00 per day for 183 days.
The plaintiffs seek $18,300.00 as liquidated damages in the first sentence of the Legal Argument part of their Memorandum.
The court concludes that the builder breached the contract by not completing the house and delivering title by September 30, 1999. The plaintiffs have established by a fair preponderance of the evidence that the builder did not work continuously to finish the house by September 30, 2000, as required by Par. 8 of the original contract as amended by the addenda. Some, but not all of the delay from September 30, 1999, to March 31, 2000, was the result of the buyers' changes which were not communicated seasonably to the seller.
With respect to damages, the plaintiffs argue that Par. 8 of the original contract as amended by the two addenda constitutes the parties' intent to provide for liquidated damages. The defendants argue that the liquidated damages clauses are unenforceable.
[A] provision which allows liquidated damages for breach of contract is enforceable if certain conditions are satisfied . . . The requisite three conditions are that: (1) the damage which was to be expected as a result of a breach of contract was uncertain in amount or difficult to prove; (2) there was an intent on the part of the parties to liquidate damages in advance; and (3) the amount stipulated was reasonable. (Internal quotation marks omitted.) CMG Realty of Connecticut, Inc. v. Colonnade One Ltd. Partnership, 36 Conn.App. 653, 667, 653 A.2d 207 (1995).
Mattegat v. Klopfenstein, 56 Conn.App. 97, 102 (1998).
Most of the litigation concerning liquidated damages clauses arises in the context of an affirmative action by the party injured by breach to enforce the clause in order to recover the amount therein stipulated. In such cases, the burden of persuasion about the enforceability of the clause naturally rests with its proponent.
Vines v. Orchard Hills, Inc., 181 Conn. 501, 511 (1980).
It is settled law that a contract provision which imposes a penalty for a breach of the contract is contrary to public policy and is invalid, but a contractual provision which fixes liquidated damages for a breach of the contract is enforceable if it satisfies certain conditions. Berger v. Shanahan, 142 Conn. 726, 731, 118 A.2d 311, and cases cited. The conditions which will justify an agreement for liquidated damages are: "(1) The damage which was to be expected as a result of a breach of the contract was uncertain in amount or difficult to prove: (2) there was an intent on the part of the parties to liquidate damages in advance; and (3) the amount stipulated was reasonable in the sense that it was not greatly disproportionate to the amount of the damage which, as the parties looked forward, seemed to be the presumable loss which would be sustained by the contractee in the event of a breach of the contract." Id. 732.
Norwalk Door Closer Co. v. Eagle Lock Screw Co., 153 Conn. 681, 687 (1966).
In Miller v. Macfarlane, 97 Conn. 299, 302, 116 A.335, we quoted with approval from The Colombia, 197 Fed. 661, 664, that "no provision in a contract for the payment of a fixed sum as damages, whether stipulated for as a penalty or as liquidated damages, will be enforced in a case where the court sees that no damage has been sustained." See also King Motors, Inc. v. Delfino, supra, 498. This principle finds approval in comment (e) of the Restatement, I Contracts § 339, where it is stated that "[i]f the parties honestly but mistakenly suppose that a breach will cause harm that will be incapable or very difficult of accurate estimation, when in fact the breach causes no harm at all or none that is incapable of accurate estimation without difficulty, their advance agreement fixing the amount to be paid as damages for the breach . . . is not enforceable." See also Priebe Sons, Inc. v. United States, 332 U.S. 407, 412, 68 S.Ct. 123, 92 L.Ed. 32. This is not to say that any burden is placed on a plaintiff to prove actual damage in order to recover under a valid contract for liquidated damages. The proposition is only that equitable principles will be invoked to deny recovery when the facts make it apparent that no damage has been suffered. CT Page 435
Norwalk, supra, 688-89. In the instant case, however, the facts do not make it apparent that no damage has been suffered.
Whether any particular provision is for liquidated damages or for a penalty, the courts are not controlled by the fact of the phrase "liquidated damages" or the word "penalty" is used.
Berger v. Shanahan, 142 Conn. 726, 732 (1955).
Looking at the three conditions justifying enforceability of a liquidated damages clause, the court concludes:
1. The damage which was to be expected as a result of a breach of the contract was uncertain in amount or difficult to prove. There was uncertainty in this case; the plaintiffs were renting a tiny cottage, virtually all their possessions were in storage, they had a mortgage commitment at a certain rate for a certain time, and they were faced with notifying a landlord of when they were going to leave.
2. There was intent by the parties to liquidate damages in advance.
The requisite intent was present here; the parties negotiated the daily amount, with the plaintiffs wanting $150.00 a day, and the defendants successfully insisting on a 1/3 reduction to $100.00 a day. Mr. Bysiewicz made these changes himself and he, having built houses for thirty years, was experienced in these matters. He knew full well the purpose of, and the ramifications of this clause, and agreed to it in two separate addenda. The builder also made it clear that he understood and assented to the clause when, in addendum two, he agreed to complete the bump-out of the foyer in exchange for being given 7 additional days before the $100.00 a day provision would take effect, and agreed to give the plaintiffs $3,000.00 worth of hardwood floors in exchange for the extra days.
That it was the intention of the parties to liquidate the damages arising from a possible breach is apparent from the wording of the contract itself. The defendant argues that the court had no basis for an inference that this was the intention of the parties, because it does not appear that there was any discussion by them, before the contract was executed, of the provision under consideration. It is a sufficient answer to this contention that the unattacked finding of the court is that the whole contract, including the clause in question, was read aloud in the presence of both parties and each provision was discussed. They both knew the language of the clause and they therefore are conclusively presumed, in the absence of some evidence of mistake, to have intended the result which the language of the clause expressly provided for.
Berger v. Shanahan, supra, 732, 733.
Such is the case at hand.
3. The amount stipulated was reasonable.
The defendants shouldn't be heard to say now that $100.00 a day was unreasonable. First of all, they changed the amount downward from $150.00, and agreed to it in each addendum, which were signed months apart. Secondly, in addendum 2, they paid the plaintiffs the $100.00 a day damages by agreeing to install hardwood floors, worth about $3,000.00, at no additional charge, in exchange for getting an extra twenty-three days (30 days less 7 days for the bump-out) to complete the house before the $100.00 per day started. They must have regarded it as reasonable if they were willing to pay $3,000.00 for twenty-three days, which comes out to $130.00 a day.
The defendant believed that it was worth $100.00 a day to him to have additional time to complete the house. In effect, he made a business decision that if he needed extra time to fulfill his contractual obligation to finish the house, it made business sense for him to pay $100.00 per day for any additional time he might need.
SECOND COUNT — CUTPA
The plaintiffs allege that the defendant has failed to honor the contract in violation of public policy, and that this constitutes immoral, unethical, oppressive conduct which has caused substantial injury to a consumer, thereby violating Conn. Gen. Stat. § 42-110a, et seq.
The plaintiffs have tried and briefed this case without reference to CUTPA, and further, the plaintiffs have failed to sustain their burden of proving the necessary elements for recovery under CUTPA.
THIRD COUNT — FRAUDULENT MISREPRESENTATION
The plaintiffs allege that as a result of the fraudulent representation of the defendants, the plaintiffs were fraudulently induced to enter into an agreement and addendums, and that if they had known the representations were false and that the defendants had no intention of upholding their end of the bargain, they would not have executed or delivered the contract or its addendums.
The essential elements of a cause of action in fraud are: "(1) a false representation was made as a statement of fact; (2) it was untrue and known to be untrue by the party making it; (3) it was made to induce the other party to act upon it; and (4) the other party did so act upon the false representation to his injury." (Internal quotation marks omitted.) Parker v. Shaker Real Estate, Inc., supra, 196 Conn. 587. "All of these ingredients must be found to exist; and the absence of any one of them is fatal to a recovery." Bradley v. Oviatt, 86 Conn. 63, 67, 84 A. 321 (1912); see also Kilduff v. Adams, Inc., 219 Conn. 314, 329-30, 593 A.2d 478 (1991). Additionally, "[t]he party asserting such a cause of action must prove the existence of the first three of [the] elements by a standard higher than the usual fair preponderance of the evidence, which higher standard we have described as `clear and satisfactory' or `clear, precise and unequivocal.' Barbara Weisman, Trustee v. Kaspar, supra, 233 Conn. 540.
Citino v. Redevelopment Agency, 51 Conn.App. 262, 275-76 (1998).
The court concludes that the plaintiffs have failed to prove the essential elements of this claim, nor have they briefed the issue. Therefore, the court considers it to be abandoned. See Gallagher v, Gallagher, 29 Conn.App. 482, 484 (1992).
FOURTH COUNT — UNJUST ENRICHMENT CT Page 438
The plaintiffs allege that the defendants, by failing to pay them the promised sums, have been unjustly enriched.
Although the plaintiffs did not specifically label this count as being in the alternative to the first and second counts, it is clear that it is meant to provide an alternative basis for recovery in the event of a failure of proof under those counts. Unjust enrichment applies when justice requires compensation "`to be given for property or services rendered under a contract, and no remedy is available by an action on the contract.' 5 Williston, Contracts (Rev. Ed.) § 1479." Cecio Bros., Inc. v. Greenwich, 156 Conn. 561, 564, 244 A.2d 404 (1968); Montanaro Bros. Builders, Inc. v. Snow, 4 Conn.App. 46, 53, 492 A.2d 223 (1985).
Bolmer v. Kocet, 6 Conn.App. 595, 612 (1986).
Since, in this case, a remedy is available by an action on the contract, unjust enrichment does not apply. In addition, the plaintiffs have not briefed this issue.
SPECIAL DEFENSES
At the conclusion of the trial, the court told counsel for the defendants that if he intended to pursue any of his many special defenses, he should submit a memorandum concerning them. Counsel responded that he was going to raise the special defense as far as penalty clauses; and that he would do just a short memorandum of law with regard to penalty clauses. Therefore, the court will consider only the special defense raised in paragraph 3 of the defendants' By Way of Special Defenses', specifically the issue of penalty clauses.
Inasmuch as the court has already discussed this issue under the First Count, it will not discuss it under Special Defense Three.
CONCLUSION
The court finds the issues under the First Count for the plaintiffs against the defendant, Armitage Corp. only; judgment is entered for the plaintiffs in the amount of $9,000.00 against the defendant, Ameritage Corp. and in favor of the defendant, Thaddeus Bysiewicz. The court finds for the defendants in Counts Two, Three and Four.
RICHARD A. WALSH JUDGE TRIAL REFEREE CT Page 439