Opinion
No. CV-06-4005624-S
November 9, 2006
MEMORANDUM OF DECISION
This vigorously contested matter which was tried before this Court on October 25, 2006 involved a claim for damages relating to the sale of goods and merchandise.
The Plaintiff, AGFA Photo USA (the "Plaintiff"), filed a one-count complaint against the Defendant, ABC Photolab, LLC (the "Defendant"), in which it alleges that it sold and delivered certain goods and merchandise to the Defendant. The Complaint further alleges that the Defendant failed to pay for such goods and that the sum of $31,730.81 together with interest is still due and owing. Demand for payment was alleged, and that the Defendant failed to make the same.
The Defendant in its Answer denied the sale and delivery but admitted that demand for payment was made. The defendant also admitted it did not make that payment. In addition to the answer, the Defendant also alleged a special Defense in which it claims that it had reached an agreement with the Plaintiff "with regards to the sums due to be paid the plaintiff by the defendant." The plaintiff left the defendant to its proof with regard to the special defense.
At the trial both parties were well represented by counsel, presented witnesses, exhibits and advanced arguments in furtherance of their respective positions.
FACTS
From the evidence, including the reasonable and logical inferences therefrom, and taking into account the court's evaluation of the credibility of the witnesses, the following facts are found. Between April of 2005 and August of 2005, the Plaintiff provided the Defendant with various goods and merchandise. In accordance with such sales, invoices were rendered and forwarded to the Defendant. The invoices along with the Statement of Account in the amount of $31,730.81 were introduced as Exhibits for the Plaintiff. Demand was made upon the Defendant. The Demand was introduced as an exhibit for the Plaintiff.
The defendant's witnesses admitted originally owing the Plaintiff the sum of $31,730.81. The defendant's business suffered reverses to the point that it was unable to pay its creditors in full. The principals of the defendant negotiated with their creditors having in mind only two options available: either file bankruptcy or obtain agreements to pay reduced amounts that they could raise in exchange for full credit on their accounts. All of the defendant's creditors agreed to accept reduced amounts in full payment of their claims. Each of the three principals thereafter obtained mortgages on their individual homes to raise the funds necessary to pay the compromised amounts. As part of this overall restructuring, the defendant, through its officers, entered into an oral agreement on the telephone with the Plaintiff's agents or employees to settle the outstanding sum for the reduced amount of $10,000.00. The plaintiff's agent was authorized to make such an agreement on behalf of the plaintiff The mortgages on their individual homes were obtained in reliance on the oral agreements to accept reduced amounts if full payment of the debts.
The $10,000 was set aside for that payment from the proceeds of their home mortgages. The rest of the defendant's creditors which had agreed to accept reduced amounts were paid their negotiated reduced amounts.
At about the same time as these negotiations were conducted, the plaintiff's business was also suffering setbacks and was winding down operations. Many of the employees with who the defendant's officers had conducted their negotiations were laid off. The defendant asked the plaintiff's employees to inform it where to send the $10,000. The plaintiff did not respond. The next communication from the plaintiff was the institution of this litigation.
THE LAW
The plaintiff has the burden of proof of the claims made in the complaint by a preponderance of the evidence. Northrop v. Allstate Insurance Co., 247 Conn. 242, 253-54, 720 A.2d 879 (1998). The burden of proving the special defense lies with the defendant. Selvaggi v. Miron, 60 Conn.App. 600, 601-02, 760 A.2d 539 (2000).
"The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages." (Internal quotation marks omitted.) Rosato v. Mascardo, 82 Conn.App. 396, 411, A.2d 893 (2004).
Whether a contractual commitment has been undertaken is ultimately a question of the intention of the parties. Intention is an inference of fact. Hydro-Hercules Corporation v. Gay Excavating, Inc., 166 Conn. 647, 653.
"It is a fundamental principle of contract law that the existence and terms of a contract are to be determined from the intent of the parties . . . The parties' intentions manifested by their acts and words are essential to the court's determination of whether a contract was entered into and what its terms were . . . Whether the parties intended to be bound without signing a formal written document is an inference of fact for the trial court . . ." (Citations omitted.) Steeltech Building Products, Inc. v. Edward Sutt Associates, Inc., 18 Conn.App. 469, 471-72, 559 A.2d 228 (1989); MD Drilling and Blasting v. MLS Construction, LLC, 93 Conn.App. 451, 454 (2006).
The plaintiff claims, with respect to the special defense, the application of the Statute of Frauds.
General Statutes § 52-550(a), Connecticut's Statute of Frauds provides in relevant part: "(a) No civil action may be maintained in the following cases unless the agreement or a memorandum of the agreement, is made in writing and signed by the party, or the agent of the party, to be charged . . . (2) against any person upon any special promise to answer for the debt, default or miscarriage of another . . ." The Statute of Frauds was principally designed to prevent imposition of liability on the basis of swearing contests about the alleged relationship between the parties. Willow Funding Co., L.P. v. Grencom Associates, 63 Conn.App. 832, 850, 779 A.2d 174 (2001).
Plaintiff claims interest pursuant to CGS sec. 37-3a as a result of the wrongful retention of money. "[T]he allowance of interest as an element of damages is primarily an equitable determination and a matter within the discretion of the trial court . . . While the determination depends in part upon when the money involved is payable . . . the real question in each case is whether the detention of the money is or is not wrongful under the circumstances . . ." Middlesex Mutual Assurance Co. v. Walsh, 218 Conn. 681, 701-02 (1991) (citations omitted; internal quotation marks omitted).
The defendant claims the benefit of the doctrine of common-law composition of creditors and accord and satisfaction under the general claims of its Special Defense.
An agreement by a debtor with all creditors to accept a reduced amount can constitute a common-law composition with creditors. Lamothe Young, Inc., v. Vehs, 140 Conn. 115, 167 A.2d 709 (1961). This would be an accord, which, if performed according to its terms, would become a satisfaction. In re Clarence A. Nachman Co., 6 F.2d 427, 430 (2d Cir.). The agreement to accept a part in satisfaction of the whole, so long as it remains executory, will not operate either as payment, satisfaction or discharge. State Ex Rel. McClure v. Northrop, 93 Conn. 558, 106 A. 504 (1919) citing Blake v. Blake, 110 Mass. 202, 203.
CONCLUSION
In this case, because the defendant does not contest the facts constituting the original debt and, because of the proof offered by the plaintiff by a preponderance of the evidence, the plaintiff would be entitled to a judgment unless the defendant's special defense is successful.
First, the plaintiff claims the application of the Statute of Frauds would preclude the defendant's claims of a contract constituting a common-law composition with creditors. The plaintiff's reliance on that portion of the Statute of Frauds relating to undertaking the obligation of another is misplaced. In this case, by the allegations of the Special Defense, the defendant is attempting to obligate the plaintiff to abide by the terms of its agreement to accept $10,000 in lieu of the $31,730.61. This situation does not involve attempting to enforce a party to respond to the debt of another. Thus, this defense to the Special Defense will not assist the plaintiff. Next, the court finds that the defendant has proved by a preponderance of the evidence that the defendant's agreement with its creditors, under the circumstances found to exist here, did constitute a common-law composition with creditors. However, the law is clear that such an agreement will not avail the debtor unless and until it is carried into effect by the payment of the lesser sum. In this case no payment was made to the plaintiff.
The issue remaining, however, comes from the defendant's claim that the "setting aside" of the funds to pay the lesser amount under the circumstances of this case will be found to be the equivalent of payment. No cases have been cited by the parties nor found by the court to assist in the analysis of this question. It is found that the defendant was ready, willing and able to make the $10,000 payment and that it was the conduct of the plaintiff that frustrated the ability to carry the composition agreement into effect. Under these circumstances this court will not see the plaintiff benefit from its own obstruction of the defendant's ability to carry those terms into effect.
Accordingly, the court enters judgment in favor of the plaintiff in the amount of $10,000 to which it became entitled by virtue of the common-law composition with creditors. Giving consideration to the circumstances found to exist and weighing the equities of the parties the court will not order the payment of interest or costs.