Opinion
No. CV 04-0104074S
October 18, 2005
MEMORANDUM OF DECISION
After trial the court finds the following facts. In August 2003, the plaintiff, Philip Tyson, contacted Jack Stang, the yacht sales manager for the defendant, Louis Marine Ltd., regarding the purchase of a 57' Rival Navigator motor yacht. Louis Marine Ltd. had purchased the yacht sometime in the Spring of 2003. Tyson told Stang that he would require financing in order to purchase the yacht.
There are two plaintiffs, Philip Tyson and AGI Group, Inc. and two defendants, Louis Marine Ltd. and Louis Bassett. There was no evidence as to any right to recovery by AGI Group, Inc., nor any liability of Louis Bassett. Counsel referred only to the plaintiff, Philip Tyson, and the defendant, Louis Marine Ltd., throughout their memoranda. The court has similarly referred to the plaintiff and the defendant in the singular in this decision.
In August 2003, Louis Marine Ltd. was located in Westbrook, Connecticut and Norwalk, Connecticut. Philip Tyson and his company, Agri Group, Inc., were located in Sarasota, Florida.
After the first telephone conversation in which Tyson expressed his interest in the yacht, Joe Grosso, sales manager for the Norwalk location of Louis Marine Ltd., referred Tyson to a finance company from whom to obtain financing for the yacht and faxed Tyson some forms pertaining to his financing application.
Tyson made arrangements to come to Connecticut to see the yacht. In a fax to Joe Grosso dated August 6, 2003, Tyson stated: "I have completed the forms you sent. I will bring the tax info for 2001 and 2002 with me on Friday."
Thereafter Tyson and his wife traveled to Connecticut to see the yacht. Tyson brought his tax returns to give to Grosso. Tyson and his wife stayed on the yacht for several nights. Before he returned to Sarasota, Tyson and Grosso signed a document entitled "Bill of Sale." which was the contract for the purchase and sale of the CT Page 13351-bw yacht. The Bill of Sale provided that the total selling price was $798,000, the trade-in allowance for Tyson's existing boat was $175,000 and the deposit was $100,000. It further provided that the Tyson's existing boat, identified as a 2001 Cruisers 3672 Twin Engine 380H, was to be inspected and approved and that a punch list of items was to be added to the yacht by Louis Marine Ltd.
At the time he signed the Bill of Sale, Tyson gave Grosso a check for $100,000. Tyson believed that that deposit would be returned if he was unable to obtain the financing with which to purchase the yacht. However, the Bill of Sale did not provide that Tyson's obligation to purchase was subject to financing. On the back of the Bill of Sale there were various preprinted clauses including the following:
3. PAYMENT AND DELIVERY. Buyer understands that Seller may not have in stock the boat, motor, and/or accessories herein being purchased, and that therefore, Seller will order same from the manufacturer. In such event, Buyer acknowledges and agrees that the delivery date specified on the reverse side hereof is subject to any delays, from whatever cause, occurring in the manufacturer's delivery of the boat, motor, and/or accessories to Seller . . . If the boat, motor, and/or accessories have not been received by Seller by the specified delivery date. Seller agrees to notify Buyer when such boat, motor, and/or accessories are ultimately received by it, and buyer agrees to pay the balance of the purchase price within ten (10) days of receiving such notice . . .
4. LIQUIDATED DAMAGES. Buyer understands and agrees that if full payment of the purchase price is not made by Buyer within ten (10) days after Buyer's receipt of notice pursuant to paragraph (3) above, Seller shall have the option, without further notice to Buyer, to cancel this Agreement; in the event of such cancellation, Buyer further agrees that he shall thereupon become indebted to Seller in a sum equal to the sum initially received by Seller as the deposit (as shown on the reverse side hereof) and that Seller may retain said deposit sum as and for liquidated CT Page 13351-bx damages. Buyer understands and agrees that the sum fixed hereby as liquidated damages is a reasonable sum considering the substantial damages that Seller will sustain in such event, and said sum is hereby fixed, determined and agreed upon as liquidated damages because of the difficulty in ascertaining the exact amount of damages that may be sustained by Seller.
7. ATTORNEYS FEES. Should either party to this Agreement institute litigation to interpret or enforce any of the terms hereof, the prevailing party shall be entitled to recover his costs and reasonable attorneys fees incurred therein from the losing party.
When Tyson and his wife returned to Sarasota, Joe Grosso called to advise them that their application for financing had been turned down. Grosso suggested that Tyson call the prospective lender directly. Tyson did call the lender and attempted to obtain financing for the yacht from several other lenders without success.
Tyson first requested that Louis Marine Ltd. return his deposit in mid August. While the Bill of Sale did not contain a provision that the purchase was subject to a financing, Joe Grosso was clearly aware that Tyson would be unable to purchase the yacht without financing. Rather than return his deposit, Grosso encouraged Tyson to seek further financing. Tyson ultimately applied for a loan with Key Bank, the bank which had financed his existing boat. However, by letter dated September 7, 2003, Key Bank also refused to make Tyson the loan for the yacht. After Key Bank refused him the loan, Tyson again requested that the defendant return his deposit. Grosso told Tyson that he would have to go to the Fort Lauderdale boat show to discuss the matter with Louis Bassett, the owner of Louis Marine Ltd.
Tyson did meet Bassett at the Fort Lauderdale boat show and Bassett told Tyson that when he returned to his office, he would "take care of it." Tyson understood that to mean that Bassett would return his deposit when he returned to his office. However, the deposit was not returned.
Joe Grosso, of Louis Marine Ltd., was aware by mid August 2003, that Tyson would be unable to purchase the yacht. By early September it was clear to Louis Marine Ltd. that Tyson had exhausted all potential loan sources. Louis Marine Ltd. brought the yacht to various shows in September. Although Louis Bassett testified that he didn't attempt to CT Page 13351-by sell the yacht at those shows, because he considered that it was a "sold boat," the court does not find that testimony to be credible. Moreover, Louis Marine Ltd. never installed or fixed the "punch list" items which were part of the contract for purchase of the yacht because it knew that the yacht was not sold to Tyson without financing.
At trial the defendant claimed damages for interest charges, and storage charges from August 2003 to the present time. Louis Marine Ltd. purchased the yacht in the spring of 2003. It attempted to sell the yacht thereafter. Tyson's attempted purchase of the yacht had the effect of keeping the yacht off the market for no more than one month. By September 2003, Louis Marine Ltd. was aware that Tyson could not purchase the yacht. It returned the yacht to the market as evidenced by the display of the yacht at various boat shows. Louis Marine Ltd. suffered damages in the amount of $4000, its interest carrying charges for the yacht for a one month period.
In the First Count of the Complaint the plaintiff alleges that he is entitled to a return of his deposit. In his brief the plaintiff argues that the liquidated damages clause is unenforceable because it imposes a penalty.
Arguably, Tyson's deposit never became liquidated damages. Under paragraph 4 of the Bill of Sale, Louis Marine Ltd. was only entitled to retain the deposit as liquidated damages in the event that Tyson failed to pay the entire purchase price of the yacht "within ten (10) days after Buyer's receipt of notice pursuant to paragraph (3) above." There was no evidence that Louis Marine Ltd. ever notified Tyson that the yacht was ready to be delivered.
A contractual provision for a penalty is one the prime purpose of which is to prevent a breach of the contract by holding over the head of a contracting party the threat of punishment for a breach . . . A provision for liquidated damages, on the other hand, is one the real purpose of which is to fix fair compensation to the injured party for a breach of the contract. In determining whether any particular provision is for liquidated damages or for a penalty, the courts are not controlled by the fact that the phrase `liquidated damages' or the word `penalty' is used. Rather, that which is determinative of the question is the intention of the parties to the contract. Accordingly, such a provision is ordinarily to be construed as one for liquidated damages if three conditions are satisfied: (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 CT Page 13351-cz to be the presumable loss which would be sustained by the contractee in the event of a breach of the contract."
(Citation omitted.) Berger v. Shanahan, 142 Conn. 726, 731-32, 118 A.2d 311 (1955).
In this case the liquidated damages clause must be construed as a penalty because the deposit is so greatly disproportionate to the damages suffered by the defendant. The defendant did not purchase the yacht specially for Tyson, as contemplated under paragraph 3 of the Bill of Sale set forth above. It already owned the yacht when Tyson came along. It was aware within less than a month that Tyson would not be able to purchase the yacht because he could not obtain financing. It did not make any of the upgrades or changes to the yacht which it agreed to do in the Bill of Sale. Therefore, the most that the defendant suffered in damages were the financing charges in the amount of $4,000 it incurred for the period of one month when the yacht was "off the market" pending the sale to Tyson. The amount of damages is vastly disproportionate to the amount of the deposit, $100,000.
The defendant has filed a counterclaim in which it seeks damages from the plaintiff. As stated above, the court finds that those damages are $4,000. When that amount is offset against the plaintiff's claim for the return of his deposit, the amount of $96,000 is due from the defendant to the plaintiff.
The court awards interest pursuant to Connecticut General Statutes § 37-3a from August 8, 2003 in the amount of $20,800. The plaintiff also seeks attorneys fees under paragraph 7 of the Bill of Sale which provides:
Should either party to this Agreement institute litigation to interpret or enforce any of the terms hereof, the prevailing party shall be entitled to recover his costs and reasonable attorneys fees incurred therein from the losing party.
The plaintiff, as the prevailing party, is entitled to his attorneys fees in the amount of $22,084.23, which the court finds to be reasonable. The total judgment in favor of the plaintiff is $138,884.23.
The plaintiff claims fraud in the Second Count. "The essential elements of an action in common law fraud . . . are that: (1) a false representation was made as a statement of fact; (2) it was untrue and CT Page 13351-ca 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 that false representation to his injury" (Emphasis added; internal quotation marks omitted.) Suffield Development Associates Ltd Partnership v. National Loan Investors, L.P., 260 Conn. 766, 777, 802 A.2d 44 (2002), quoting Barbara Weisman, Trustee v. Kaspar, 233 Conn. 531, 539, 661 A.2d 530 (1995); see also Citino v. Redevelopment Agency, 51 Conn.App. 262, 275, 721 A.2d 1197 (1998).
In order to prevail on a claim for fraudulent misrepresentation, a party's reliance on the alleged misrepresentation must have been reasonable. Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 580, 657 A.2d 212 (1995). The Bill of Sale signed by Tyson did not make the purchase of the yacht contingent upon Tyson's obtaining financing. Therefore, while Louis Marine Ltd. knew that Tyson's ability to purchase was contingent upon his obtaining financing and may have implicitly represented that knowledge to Tyson, it was not reasonable for Tyson to rely on any such representation because that contingency was not contained in the contract for purchase. Moreover, "[t]he general rule is that where a person of mature years and who can read and write, signs or accepts a formal written contract affecting his pecuniary interests, it is his duty to read it and notice of its contents will be imputed to him if he negligently fails to do so." Ursini v. Goldman, 118 Conn. 554, 562, 173 A. 789 (1934). For the foregoing reasons, the plaintiff cannot prevail on his the Second Count and judgment may enter on the Second Count in favor of the defendant.
In the Third Count the plaintiff alleges that the defendant violated the Connecticut Unfair Trade Practices Act. Connecticut General Statutes § 42-110a et seq., "CUTPA."
General Statutes § 42-110b(a) provides: No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. In determining whether certain acts constitute a violation of this act, we have adopted the criteria set out in the cigarette rule by the federal trade commission . . . (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, CT Page 13351-cb oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers [competitors or other business persons].
(Internal quotation marks omitted.) Williams Ford, Inc. v. Hartford Courant Co, 232 Conn. 559, 591, 657 A.2d 212 (1995).
All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three . . . Thus a violation of CUTPA may be established by showing either an actual deceptive practice . . . or a practice amounting to a violation of public policy.
(Citations omitted; internal quotation marks omitted.) Cheshire Mortgage Service, Ins. v. Montes, 223 Conn. 80, 106, 612 A.2d 1130 (1992).
The defendant was aware that Tyson could not purchase the yacht without obtaining financing. Yet, it provided him with a purchase contract, the so-called Bill of Sale, which did not contain a financing contingency. Tyson, the CEO of a company, was clearly able to read the contract and discern its lack of a financing contingency clause. There was no evidence that anyone advised Tyson that notwithstanding the language of the contract, Louis Marine Ltd. would construe it to contain a financing contingency clause. The defendant engaged in sharp business practice, but the court does not find that its conduct constituted a violation of CUTPA. Therefore, judgment may enter in favor of the defendant on the Third Count of the Complaint.
As set forth above, after entering judgment in the amount of $4,000 favor of the defendant on the Counterclaim and setting that off against the amount due to the plaintiff on the First Count of the Complaint, judgment is hereby entered in favor of the plaintiff, Philip Tyson, in the amount of $138,884.23 against the defendant, Louis Marine Ltd.