Opinion
No. FST CV 07 4012975 S
January 27, 2010
MEMORANDUM OF DECISION
This interpleader action involves a contract interpretation dispute and the disposition of the $100,000 down payment made in a real estate transaction. The issue is which period controls the effect of the buyer's October 17, 2007 termination notice: 30 days from the execution of the contract or 30 days from the later receipt of certain income tax returns.
The court finds the following facts and legal conclusions.
In a contract bearing a handwritten initialed date of September 4, 1997 the seller, The Chandlery at Essex, Inc. (The Chandlery), agreed to sell its marine business at 9 Novelty Lane, Essex, Connecticut to the purchaser, Rick Ayotte (Ayotte). Ex. 9, Ex. 31, Ex. 32. The transaction included the real property, all buildings and improvements thereon, the marina business, machinery, customer lists, books, records, all permits, licenses and trademarks, equipment, docks, piers, moorings, slip and mooring contracts, related personal property, a barge and two boats. The legal description of the real property at 9 Novelty Lane contained a reference to a 1979 map entitled "Land of the Essex Paint Marine Co." The parties were rightly concerned with environmental and contamination issues. This was a complex transaction that involved the conveyance of title to real property, sale of an on-going business and sale of personal property. Ex. 33, Ex. 34. The transaction included issues of waterfront use, zoning, contamination, septic concerns, and leases. The sales price was $3,800,000. Ayotte paid $100,000 as a down payment pursuant to the contract, which $100,000 was held in escrow by the seller's attorney, the plaintiff, Alan R. Spirer of Westport, Connecticut. Attorney Spirer prepared the contract on behalf of his client, The Chandlery. Ayotte was represented by Attorney Terrance D. Lomme of Essex, Connecticut. Changes to the contract were negotiated and the resulting contract was signed. The transaction did not close. In November 2007 both defendants demanded the return of the $100,000 deposit from Attorney Spirer, who in turn commenced this interpleader action on November 20, 2007. Ex. 18, Ex. 19, Ex. 20, Ex. 21. Both real estate attorneys, Alan R. Spirer and Terrance D. Lomme, testified at trial.
An interlocutory judgment of interpleader was entered on June 10, 2008 (#101.00). Both defendants filed answers to the plaintiff's interpleader complaint and filed claims against each other for the return of the $100,000. The issues were joined, the pleadings were closed and the matter was tried to the court, the Objection to Trial Before Attorney Trial Referee dated October 28, 2008 (#118.00) having been sustained.
This case involves the interpretation of certain provisions of the real estate contract.
The intent of the parties as expressed in a contract is determined from the language used interpreted in light of the situation of the parties and the circumstances connected with the transaction . . . The intent of the parties is to be ascertained by a fair and reasonable construction of the written words and . . . the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract . . . Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms. A court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity . . . Similarly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms . . . Moreover, the mere fact that the parties advance different interpretations of the language in question does not necessitate a conclusion that the language is ambiguous.
Genua v. Logan, 118 Conn.App. 270, 274 (2009).
Contract language is unambiguous when it has a definite and precise meaning . . . concerning which there is no reasonable basis for a difference of opinion . . . The proper inquiry focuses on whether the agreement on its face is reasonably susceptible of more than one interpretation.
Massey v. Brandford, 118 Conn.App. 491, 496 (2009).
Similarly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the term.
Isham v. Isham, 292 Conn. 170, 181-82 (2009).
The law of contract interpretation militates against interpreting a contract in a way that renders a provision superfluous.
Wesley v. Schaller Subaru, Inc., 277 Conn. 526, 546 (2006).
The general rule, which is embodied in the Connecticut interpleader statute, is that a party who is confronted with conflicting claims from various alleged creditors to a fund in his possession and who does not claim any interest in the fund . . . may in good faith interplead the various claimants deposit the funds in court if ordered to do so and then be paid his taxable costs and a reasonable attorneys fee from the fund . . .
Franklin Construction Co. v. FM Concrete Construction Co., 35 Conn.Sup. 79, 81, (1978).
A complaint in an interpleader action should allege only such facts as show that there are adverse claims to the fund or property and need not, in fact, should not, allege the basis upon which any claimant relies to justify his claim; the latter allegations are to be made in the statement of claim following the interlocutory judgment of interpleader.
John Hancock Mutual Life Ins. Co. v. Advance Realty Co. et al., 9 Conn.Sup. 367, 368 (1941).
The interlocutory judgment of interpleader determines the propriety of the interpleader procedure. 45 Am.Jur.2d 179, Interpleader § 38 (Sup. 1996). Until the interlocutory judgment of interpleader has been rendered, there can be no trial on the merits of the interpleader proceeding . . . In an interpleader proceeding, therefore, "there are, in effect, two separate and distinct suits, the first suit determining whether there shall be a decree of interpleader, and the second . . . determining who shall get the fund or thing in dispute. 45 Am.Jur.2d 459, Interpleader § 35 (1969).
Yankee Millwork Sash Door Co. v. Bienkowski, 43 Conn.App. 471, 473-74 (1996).
The purpose of an interpleader action is to bring all adverse claimants together in a single action for an adjudication of all matters in controversy related to a particular fund to which the adverse claimants seek entitlement. Collard Roe, P.C. v. Klein, 72 Conn.App. 683, 685, fn.1 (2002).
The court has applied the preponderance of evidence standard in the determination of which of these two parties are entitled to the $100,000 down payment. The statute is silent on the burden of proof, which of the claimants has the burden of proof and which claimant must present their evidence first. Gen. Stat. § 52-484. So too our rules of procedure for interpleader offers no answers to these questions. P.B. §§ 22-42, 22-43. No Connecticut case has discussed this issue. Kaczynski v. Kaczynski, 294 Conn. 121, 130-31 (2009). This court required Ayotte to proceed first because the interpleader complaint named him as the first defendant. The court considered each of the two claimants to be on an equal footing. The court applied no presumptions. Each defendant had the burden of proving their claim by a preponderance of the evidence. This court had entered an interlocutory judgment of interpleader on June 10, 2008. The plaintiff testified as to his escrow duties and the fact that he still held the $100,000. He also testified as to his claim of attorney fees and costs. As to the stakeholder issues, the plaintiff, Alan R. Spirer, had the burden of proof by a preponderance of the evidence.
Attorney Spirer prepared the original draft of the contract. Ex. 3. Section 4 of the draft contract was entitled "The Study Period." Section 4 contained two separate paragraphs. Those original two paragraphs are as follows:
Section 4 The Study Period. The Buyer shall have a period of thirty (30) days following the execution of this Agreement (the "Study Period") to physically inspect the Premises, review economic data relating to the Premises, conduct appraisals, perform environmental assessments and otherwise conduct due diligence. Upon the signing of this Agreement, Seller shall provide the Buyer with all environmental assessments and studies, surveys, maps and other information in Seller's possession relating to the Premises.
During the Study Period, the Buyer may terminate this Agreement, at any time and for any reason, in the sole discretion of the Buyer. If Buyer so notifies Seller or Seller's attorney in writing, at or before 5:00 p.m. on the thirtieth (30th) day following the execution of this Agreement, then this Agreement shall be null and void and the buyer shall be entitled to the immediate return by the Seller of all sums paid by the Buyer on account of this Agreement. If Seller or Seller's attorney does not receive such written notice at or before 5:00 p.m. on said date, this Agreement shall remain in force and effect pursuant to the terms hereof.
According to this draft Section 4 there was one period of time that the buyer had to terminate the contract, "at or before 5:00 pm on the thirtieth (30th) day following the execution of this Agreement." There is a dispute between the parties as to the date of "the execution of this Agreement." The Chandlery claims that the date of execution is September 4, 2007. The $100,000 downpayment was sent on September 7, 2007 by Ayotte to The Chandlery. Ex. 10. Ayotte did not offer a definitive date of execution but it appears the latest date of execution that Ayotte could claim is September 11, 2007 when seller's counsel faxed a fully executed contract to buyer's counsel. Ex. 8, Ex. 9. The parties do not dispute that regardless of the calendar date of "the execution of this Agreement," October 17, 2007 was beyond the "thirtieth (30th) day following the execution of this Agreement."
On October 17, 2007 Attorney Lomme on behalf of Ayotte wrote a letter to Attorney Spirer, which included the following sentence: "If your clients are not willing to extend these dates then please consider this notice of termination of the Contract of Sale and return the deposit to me immediately." Exhibit 13. Ayotte claims that this letter is the notice of termination. The Chandlery does not dispute the October 17, 2007 date or the fact that Ayotte claims that he first terminated the Agreement by Exhibit 13. A town wide zone change occurred on October 15, 2007 that could have affected the ability of Ayotte to increase the height of the existing buildings, Ex. 26, Ex. 27. The contract contained no zoning contingency. Ayotte was aware of this proposed zone change prior to his signing the contract.
The court finds that regardless of the date of the execution of the agreement, the October 17, 2007 letter from Attorney Lomme to Attorney Spirer is more than 30 days following the execution of the Agreement. Exhibit 13.
One of the changes made by Attorney Lomme to the original draft contract prior to its execution was in Section 4. Ex. 6. He made the following changes to Section 4, which were agreed to by The Chandlery. In the first subparagraph of Section 4 "The Study Period," Attorney Lomme removed the language in the first sentence "execution of this Agreement" and substituted therefore the phrase "the receipt by Buyer of the below items." He created the typographical error of two consecutive "the the" in the first sentence of Section 4. The typographical error was not corrected by either of the parties after the change by Attorney Lomme. There were no changes to any other portions of Section 4. The contract was signed with the above stated change in Section 4. Ex.7, Ex.9.
The original draft of the agreement required one date for cancellation and the same date for the end of the Study Period, which was "a period of thirty (30) day following the execution of this Agreement." The buyer had the right to terminate the contract for any reason whatsoever within 30 days from the date of execution. In the original draft the thirty days following the execution was co-terminus with the Study Period established in the first paragraph.
At trial the party's interpretation of the changes made to Section 4 differed. After the change made by Attorney Lomme, Ayotte argued that there were two separate periods. The first period was the original right of the buyer to terminate for any reason within the 30th day "following the execution of this agreement." The second period was as a result of the change granting the buyer the right to cancel the agreement during the Study Period. The Study Period would not be co-terminus with the 30 days following the execution of the agreement. The Study Period was measured by a different event: 30 days following the "receipt by buyer of the below items." Attorney Lomme testified that his change created two periods of time for cancellation. "The intent of the Parties was to give Mr. Ayotte a period of time in which he could conduct due diligence, and during that period of time he could terminate the Agreement at his discretion." Defendant Rick Ayotte's Post-Trial Brief dated December 11, 2009 (#137.00) pg. 25.
The Chandlery argued at trial that the two paragraphs of Section 4, after the Attorney Lomme change, are interpreted as follows: the "Buyer had thirty days following receipt of the last document to conduct due diligence: to come upon the land, to take measurements, to inspect, to conduct tests, etc. But he was constrained, if he wished to cancel the agreement, to notify Seller within thirty days of contract execution. There is no ambiguity if the contract is so interpreted by the court." Post-Trial Brief of the Defendant the Chandlery at Essex, Inc., dated December 11, 2009 (#135.00) pg. 6; (#136.00) pg. 6.
After the contract was signed Ayotte requested that The Chandlery provide him with certain documents so he could perform his due diligence. Ex. 10. Some documents and records had previously been requested. Ex. 1, Ex. 5. Some documents and records had previously been provided. Ex. 2, Ex. 15. On September 14, 2007 Ayotte requested The Chandlery to provide "Certified copies of the 2004, 2005 and 2006 tax returns." Ex. 11. These corporate income tax returns were produced to Ayotte by The Chandlery without any objection on September 25, 2007. Ex. 16. Exhibit 11 is not a part of the contract. It is a request by Ayotte that The Chandlery provide its due diligence material pursuit to its contract obligations. On September 25, 2007 Attorney Lomme received the S Corporation income tax returns for The Chandlery at Essex, Inc., for the years 2003, 2004 and 2005. Ex. 23. Ayotte testified that this was the last of the due diligence documents received. Ayotte argues that according to Section 4, September 25, 2007 was the commencement date of the Study Period.
The court finds that Section 4 as drafted by Attorney Spirer and as changed by Attorney Lomme did not create any ambiguity. The Study Period was created by Attorney Spirer's drafting of the contract and the Study Period was essential for this complex real estate transaction to go forward. The Study Period was the due diligence period and permitted the buyer to inspect the premises, to review economic data related to the premises, to conduct appraisals, perform environmental assessments, check out zoning issues, plan for future development, and otherwise conduct due diligence. The Chandlery had an obligation to provide all information necessary for due diligence including "all environmental assessments and studies, surveys, maps and other information in Seller's possession relating to the Premises."
The court finds that the income tax returns for The Chandlery for years 2003, 2004 and 2005 were to be provided to the buyer by the seller in accordance with the contract. Those items were provided to Ayotte on September 25, 2007.
Section 4 second paragraph states: "During the `Study Period,' the Buyer may terminate this Agreement, at any time and for any reason, in the sole discretion of the Buyer." The Study Period ran for thirty days and commenced on "the receipt by buyer of the below items." The income tax returns for 2003, 2004 and 2005 were included in "the below items" and "review economic data relating to the Premises" and were delivered to Ayotte on September 25, 2007. Ayotte terminated the contract within the Study Period. The October 17, 2007 termination occurred within the Study Period that ran for thirty days from September 25, 2007. Ayotte timely terminated the contract.
The plaintiff was the stakeholder of the $100,000 throughout the transaction and is still holding the funds on deposit in an interest bearing account. The plaintiff has sustained his burden of proof as to these facts.
This court has decided the issue presented based on contract interpretation rules. The court need not reach the claims that The Chandlery failed to disclose certain due diligence material. The fact that the contract contained no time is of essence clause, the claim that The Chandlery did not suffer more than $100,000 damages, the legal effect, if any, of the liquidated damage clause, whether or not Ayotte terminated the contract within a reasonable period of time, whether or not the escrow agent signed the contract, and whether or not the soil remediation date in Section 20 was properly changed.
The interpleader statute, Gen. Stat. § 52-484, provides that the stakeholder as a party is entitled to attorney fees "payable out of such fund or property." Attorney Alan R. Spirer was the stakeholder. The contract designated Attorney Spirer as the person who should hold the down payment in Section 2(c). Although he represented The Chandlery in the real estate transaction, as soon as the dispute arose he withdrew his representation of The Chandlery. The Chandlery was then represented by independent counsel throughout this litigation. The court finds that Attorney Spirer as the stakeholder is an attorney. He has sustained his burden of proof that he is entitled to receive attorneys fees. He has requested such relief in his complaint. He testified, was cross-examined and offered documents in support of his claim for attorneys fees. He produced time records. Ex. 25. Attorney Spirer claims attorney fees in the amount of $8,872.50 and costs in the amount of $449.43. He requests that both sums be paid from the $100,000 currently held by him in escrow. Ex. 25.
The court finds that his hourly rate of $325 is reasonable and that he kept contemporary time records based upon a 1/10 of an hour. He first billed for stakeholder attorney fees on November 15, 2007 and continued his stakeholder billing through and including the first day of trial. Attorney Spirer testified on the first day of trial. Although he was present in court throughout the remainder of the trial, he is not making any claim for attorneys fees after the first trial day since he was summoned as a witness in the case.
The court considered his testimony and reviewed the time records. The court has eliminated the following: 2.0 hours from the June 25, 2009 trial time, (This is listed in Ex. 25 as "Services re: preparation for trial and trial 7.00"), 1.5 hours from the November 7, 2008 pretrial, .2 of an hour for the review Requests for Admissions on May 27, 2009 and .6 of an hour for Review Amended Complaint on June 8, 2009. That totals 4.3 hours, times the $325 per hour, is a total reduction of $1,397.50 in the attorneys fees claim. The claim for attorneys fees is $8,872.50 plus $449.43 costs less the $1,397.50 disallowed. The court awards attorneys fees and costs to the plaintiff, Alan R. Spirer, under Gen. Stat. § 52-484 in the amount of $7,929.43. This $7,929.43 is to be paid from the $100,000 and the accrued interest that is currently being held on deposit by Attorney Spirer as trustee/escrow agent.
The court finds that the successful defendant is Rick Ayotte since the termination of the contract by Ayotte on October 17, 2007 was within the Study Period set forth in Section 4. The court finds that after the October 17, 2007 termination Ayotte had no further obligation to perform the contract. Section 4 states: "the buyer shall be entitled to the immediate return by the Seller of all sums paid by the Buyer on account of this Agreement." Ayotte is due the $100,000 plus accrued interest less the $7,929.43 for Attorney Spirer's attorney fees and costs.
Attorney Spirer placed the $100,000 on deposit in an interest bearing account with the Bank of America. Ex. 24. As of May 31, 2009 the account balance had grown to $102,758.45. Further interest has accrued. Attorney Alan R. Spirer is directed to withdraw said $100,000 and all accrued interest from the Bank of America account in a manner so as not to forfeit any interest and from that sum draw two checks: The first to Alan R. Spirer, Esq. in the amount of $7,929.43 and the second to the attorney of record for Rick Ayotte for the remaining amount.
This Memorandum of Decision is a final appealable judgment effective January 27, 2010.