Opinion
No. NNH-CV-09-5032172-S
December 29, 2009
RULING ON THE MOTION TO DISCHARGE NOTICE OF LIS PENDENS
The notice of lis pendens filed by the plaintiff, Community Baptist Church (hereinafter "CBC"), against the real property located in Branford CT (hereinafter "Property"), owned by the defendant Pine Brook School (hereinafter "PBS"), is, pursuant to Connecticut General Statutes § 52-325a(c), discharged of record as CBC was unable to establish probable cause to sustain the validity of the claims stated in the September 29, 2009 Complaint.
On October 8, 2008 CBC filed the instant matter in this court seeking specific performance of an alleged contract for the Property, injunctive relief, money damages and/or such other relief as in equity may be required. CBC claimed that, by written offer dated August 12, 2009 (hereinafter the "Offer"), with an Addendum To Real Estate Purchase Sales Agreement, (hereinafter the "Addendum"), also dated August 12, 2009, plaintiff agreed to purchase the Property from the PBS, and that on August 21, 2009, in a written memorandum (hereinafter the "Memorandum"), the PBS agreed to sell the Property. The Offer, CBC's Exhibit 1, was signed only by the prospective buyers, the Addendum, CBC's Exhibit 2, was signed only by the prospective buyers and the Memorandum, CBC's Exhibit 3, signed only by the prospective seller, were all CBC's trial exhibits.
PBS offered Exhibits A, the 8-28-09 emails between counsel for CBC and PBS together with a 19-page document entitled REAL ESTATE PURCHASE AND SALE AGREEMENT, between PBS and CBC describing the prospective purchase and sale of the Property; Exhibit B, the 8-28-09 email between counsel for CBC and PBS together with a revised draft of Exhibit A; and Exhibit C, the September 9, 2009 fax cover sheet from CBC's counsel to PBS's counsel, the September 8, 2009 letter describing revisions required by CBC to Exhibit B — described by counsel as "version 3" of the REAL ESTATE PURCHASE AND SALE AGREEMENT.
The parties agree that none of the REAL ESTATE PURCHASE AND SALE AGREEMENTS, PBS's exhibits A, B and C were signed by both parties.
The parties agree that PBS's Exhibit C was signed by the CBC's representatives, but that no $29,000 deposit accompanied that document, nor was the $29,000 deposit ever tendered.
Applicable Legal Standards
Connecticut General Statutes § 52-325b provides in relevant part: "(a) [u]pon the hearing held on the application or a motion set forth in section 52-325a, the plaintiff shall first be required to establish that there is probable cause to sustain the validity of his claim [ . . . ]." "This probable cause hearing is not a trial on the merits, nor is it intended as such. The plaintiff need not establish his claim by a preponderance of the evidence. The court, while not making a final decision on the merits, weighs the testimony given and the documentary proof presented. The trial court's duty is to weigh the probabilities based on the facts and to exercise its broad discretion in determining whether there is probable cause to sustain the lis pendens." Sanstrom v. Strickland, 11 Conn.App. 211, 212 (1987) "Probable cause is a bona fide belief in the existence of facts essential under the law for the action and such as would warrant a man of ordinary caution, prudence and judgment, under the circumstances, in entertaining it." Dufraine v. Commission on Human Rights and Opportunities, 236 Conn. 250, 261 (1996) (internal quotations and citations omitted).
The issue is whether CBC established, by probable cause, a binding agreement between CBC and PBS for the sale and purchase of the subject property. This question hinged on whether the parties reached a meeting of the minds on the essential terms of the prospective transaction. As the subject matter of the purchase and sale was real property, the agreement must comply with Conn. Gen. Stat. § 52-550(a)(4), the Statute of Frauds.
"The rules governing contract formation are well settled. To form a valid and binding contract in Connecticut, there must be a mutual understanding of the terms that are definite and certain between the parties . . . To constitute an offer and acceptance sufficient to create an enforceable contract, each must be found to have been based on an identical understanding by the parties . . . If the minds of the parties have not truly met, no enforceable contract exists." (Citations omitted; internal quotations marks omitted.) Geary v. Wentworth Laboratories, Inc., 60 Conn.App. 622, 627 (2000). "Whether the parties intended legally to bind themselves prior to the execution of a formal contract is to be determined from (1) the language used, (2) the circumstances surrounding the transaction, and (3) the purpose that they sought to accomplish. A consideration of these factors enables a court to determine if [an] informal contract . . . is enforceable or merely an intention to negotiate a contract in the future." Fowler v. Weiss, 15 Conn.App. 690, 693 (1988).
Furthermore, "[a]n agreement must be definite and certain as to its terms and requirements. So long as any essential matters are left open for further consideration, the contract is not complete." (Citations omitted; internal quotations marks omitted.) 60 Conn.App. at 627. "In Connecticut, the essential terms of a contract for the sale of real property include the parties, a description of the subject of the sale, and the terms of payment, including a basis for determining the total purchase price and the amount, if any, of the purchase money mortgage." Bayer v. Showmotion, Inc., 292 Conn. 381, 412-13 (2009).
Connecticut General Statutes § 52-550 state that "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: . . . (4) upon any agreement for the sale of real property or any interest in or concerning real property." "The statute of frauds requires that the essential terms and not every term of a contract be set forth therein. SS-II, LLC v. Bridge Street Associates, 293 Conn. 287, 294 (2009), citing Scinto v. Clericuzio, 1 Conn.App. 56, 568 (1984). Furthermore, it is well settled that in order to comply with the above-stated Statute of Frauds in Connecticut, "a written memorandum need not consist of a single document (emphasis added), nor is it necessary that it should be drawn up in any particular form." Robert Lawrence Associates, Inc. v. Del Vecchio, 178 Conn. 1, 20 (1979).
The primary purpose of the Statute of Frauds is to "provide reliable evidence of the existence and the terms of [a] contract." Electric Wholesalers, Inc. v. M.J.B. Corp., 99 Conn.App. 294, 302 (2007). In light of that purpose, the requirements of the Statute of Frauds do not necessarily have to be met through use of a single document. "[A] series of related writings which, taken together, describe the essential terms and conditions of the contract" also meets the requirements of the Statute of Frauds. Killion v. Davis, 69 Conn.App. 366, 372 (2002). The essential terms must be able to be determined by the memorandum itself or by a reference within the memorandum to some other writing. Robert Lawrence Associates, Inc. v. Del Vecchio, 178 Conn. 1, 12-13 (1979); Round v. Matyas, 2002 WL 31125590, *10 (Conn.Super. 2002). In contracts for the sale of real property, the essential terms include "the parties, the matter of the sale, and the purchase price". SS-II, LLC v. Bridge Street Associates, 293 Conn. 287, 294 (2009); Lynch v. Davis, CT Page 1789 181 Conn. 434, 438, (1980).
No probable cause exists to sustain the validity of plaintiff's lis pendens because the parties never entered into a binding and enforceable contract for the sale and purchase of real estate.
Specific performance with respect to real estate is not appropriate unless there exists a binding contract which is fair, equitable, certain and mutual, consistent with policy and made on good consideration. The intention of the parties is, of course, controlling. The law neither makes a contract when the parties intend none nor does it regard an arrangement as completed which the parties thereto regarded as incomplete. Whether the parties intended legally to bind themselves prior to the execution of a formal contract is to be determined from (1) the language used, (2) the circumstances surrounding the transaction, and (3) the purpose that they sought to accomplish [ . . . ]. A consideration of these factors enables a court to determine if the informal contract . . . is enforceable or merely an intention to negotiate a contract in the future.
Margulis v. Lenhart, 2000 WL 1784145, *2 (Conn.Super. 2000) (internal citations and quotations omitted) (plaintiff failed to establish probable cause to sustain the validity of his underlying claim for specific performance because the documents submitted by plaintiff did not constitute a binding and enforceable contract for the sale and purchase of real property).
Moreover, the statute of frauds requires contracts for the conveyance of realty to be in writing and signed by the party to be charged. Conn. Gen. Stat. § 52-550(a)(4).
The note or memorandum of sale, required by the statute, must state the contract with such certainty, that its essentials can be known from the memorandum itself, without the aid of parol proof, or by a reference contained therein to some other writing or thing certain; and these essentials must at least consist of the subject of the sale, the terms of it, and the parties to it, so as to furnish evidence of a complete agreement [ . . . ]. The description is sufficiently definite whenever it is reasonably certain from the contract itself or can be made certain through reference to record, contract, map or fact, by resort to extraneous evidence thereof, whether oral or written. The rule generally is that the memorandum must state with reasonable certainty the terms and conditions of all of the promises constituting the contract, whether or not it shows on its face that some are lacking. It suffices to satisfy the statute if the price is stated in any words or figures which clearly indicate, as applied to the subject, what that price is. Furthermore, [w]here the parties to a contract for the sale of realty leave for future arrangement such an essential as the manner in which the purchase price is to be met, the writing is without legal value. The Statute of Frauds stands in the way of recovery. Such specificity as to price has also been held to include terms of payment regarding interest, principal, mortgage and amortization.
Margulis, 2000 WL 1784145 at *2 (internal citations and quotations omitted); H. Pearce Real Estate Co., Inc. v. Kaiser, 176 Conn. 442, 444 (1979) (letter describing purchaser's understanding of "consensus" reached at a prior meeting with the seller, which was replete with indicia of tentativeness, and which concluded with a statement that the parties' preliminary agreement was subject to modification, was insufficient to avoid the operation of the statute of frauds); Lynch v. 7, LLC, 2008 WL 3916303, *4 (Conn.Super. 2008) (probable cause to sustain the validity of lis pendens did not exist because the parties' negotiations were not consummated into a contract for the purchase and sale of certain real property).
In the instant case, there is no written agreement for the sale of the Property signed by both plaintiff and the PBS. The documents plaintiff purports to rely upon are insufficient to satisfy the requirements of the statute of frauds set forth in Connecticut General Statutes § 52-550(a)(4) because it is clear that there was never a meeting of the minds as to the essential terms of the agreement. See Sanstrom v. Strickland, 11 Conn.App. 211 (1987); H. Pearce Real Estate Co., Inc. v. Kaiser, 176 Conn. 442 (1979); Margulis v. Lenhart, 2000 WL 1784145 (Conn.Super. 2000); Lynch v. 7, LLC, 2008 WL 3916303 (Conn.Super. 2008).
CBC's Exhibit 1, required in paragraph 4(b), CBC to deposit $29,000 with the Listing Broker, see Exhibit 1 paragraph 5 "Deposits," "upon Seller's (PBS's) acceptance" of the CBC offer. CBC never deposited $29,000 with the Listing Broker in spite of its current claims that PBS's 8-21-09 Memorandum was an acceptance of the CBC offer to purchase. This conduct is inconsistent with CBC's claim that PBS had "accepted" CBC's offer to purchase.
CBC's Exhibit 3, the 8-21-09 Memorandum from PBS to CBC, creates the confusion in this case. Paragraph 1 of the Memorandum expresses an acceptance of the CBC offer to purchase, but paragraph 2 of the Memorandum conditions that acceptance and describes the reason for the conditional acceptance and proposes a "contract" drawn by the parties' respective counsel.
These contradictory paragraphs, acceptance of the offer in paragraph 1, and a counterproposal in paragraph 2, provide some evidence that the parties had not yet reached a meeting of the minds necessary for a binding contract.
As described in paragraph 2, PBS proposed the need for "a more conventional Purchase and Sales contract be drawn up by Pine Brook's legal representation and legal representation of your choosing. This contract would of course reflect the amount and conditions agreed to in our documentation to date (including your addendum) and be mutually acceptable for execution." This response to CBC's offer to purchase reflects the need for further negotiation and preparation of a "contract." PBS's need to further negotiate and prepare a `contract' was explained in that same memorandum: "People's Bank is subsidizing this sale by forgiving a portion of the mortgage debt owed by the Pine Brook School. This amount, in our current estimation, exceeds 10% of the outstanding mortgage balance." Therefore, the seller advised the buyer that this transaction was a "short sale," that is a sale where the full amount of the outstanding mortgage was not being paid, but the mortgage was being released from the land records thereby allowing the purchaser to acquire marketable title. Mr. Timothy Zacharias, pastor of the CBC, testified that he did not know what would happen if the parties could not reach an agreement that was "mutually acceptable for execution." Pastor Zacharias felt that PBS' need for negotiation with People's Bank was a problem only between People's Bank and PBS, not recognizing that without People's Bank's acquiescence and forgiveness of a portion of the mortgage that encumbered the title to the "property" that CBC could not obtain a title to the property free of the existing mortgage and, without such a release of the then-existing mortgage, further financing, as proposed by CBC in its offer to purchase, would have been impossible.
In short, PBS and CBC needed People's Bank to release the mortgage on the property and PBS' memorandum noted that People's Bank required a "more conventional Purchase and Sales Agreement" drawn by counsel. That more conventional agreement would be the parties "contract." The parties failed to finalize such an agreement.
Additionally, CBC's efforts to revise PBS's 8-28-09 REAL ESTATE PURCHASE AND SALE AGREEMENT, evidenced by PBS's Exhibits B (inserting a financing contingency clause) and Exhibit C (CBC's counsel proposed multiple modifications of Ex. B) are inconsistent with a claim that the parties had reached a meeting of the minds on the essential elements of the contract in CBC's trial exhibits A, B and C.
As noted above, "Whether the parties intended legally to bind themselves prior to the execution of a formal contract is to be determined from (1) the language used, (2) the circumstances surrounding the transaction, and (3) the purpose that they sought to accomplish. A consideration of these factors enables a court to determine if [an] informal contract . . . is enforceable or merely an intention to negotiate a contract in the future." Fowler v. Weiss, 15 Conn.App. 690, 693 (1988).
CBC has failed to establish probable cause that the parties did have an identical understanding of the prospective agreement and intended to legally bind itself prior to the execution of a formal contract. Each party conditioned it's prospective contractual obligations upon fulfillment of conditions or terms outside of their control and the control of the other party to the agreement: PBS conditioned it's acceptance upon the execution of a "more conventional purchase and sales contract to be drawn up by (counsel) and that "this contract would . . . be mutually acceptable for execution," CBC's Exhibit 3, explaining the need for PBS's bank to agree to a `short sale' and CBC required the closing date to be rescheduled as CBC needed approvals from the Branford Planning and Zoning Commission that could not be obtained within the time limits initially proposed, see Attorney Sittnick's September 8, 2009 letter. CBC failed to establish that the minds of the parties had truly met, hence there was a failure to establish a binding agreement between the parties.
Wherefore, the lis pendens is ordered: DISCHARGED.