Opinion
HHDCV156056962
06-21-2017
Crosskey Architects, LLC v. Poko Partners, LLC et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
Nina F. Elgo, J.
In this action, Crosskey Architects, LLC (" plaintiff") has sued ten defendants, POKO Partners, LLC (" POKO Partners"), POKO Reservoir Yaremich Developers, LLC (" POKO Reservoir"), Poko Cape Loom Managers, LLC (" POKO Cape Loom"), One Morningside Group, LLC (" OMG"), One Morningside Managers, LLC (" OMM"), One Morningside Owners, LLC (" OMO"); Capehart Ventures, LLC (" Capehart"), Kenneth M. Olson (" Ken Olson"), Richard K. Olson (" Rich Olson"); POKO Management Corp., (" POKO Management"), (collectively " POKO defendants") alleging breach of contract, unjust enrichment and quantum meruit for architectural services rendered for four projects from 2006 through 2013. The plaintiffs also seek to pierce the corporate veil, alleging that either or both Ken and Rich Olson (collectively, " Olsons"), individually or together, exclusively controlled all of these entities. In addition to denying liability for damages, the defendants have asserted that recovery is barred by the statute of limitations as to the breach of contract claims with respect to two of the projects and that the Olsons cannot be held personally liable. This court received evidence on October 25, 2016, including a total of 66 exhibits and live testimony by William Crosskey and Richard Olson, as well as deposition testimony by Olson. This court finds the following facts by a preponderance of the evidence.
The plaintiff is an architectural firm owned by William Crosskey (" Crosskey"), a licensed architect as well as president and principal of the firm. The plaintiff specializes in the rehabilitation of historic buildings for commercial and residential use but also provides architectural services for new construction. Over the course of ten years, from 2006 to 2015, Crosskey had a business relationship with Ken Olson, a commercial and residential real estate developer who, with his brother, Rich Olson, oversees between forty and sixty business entities established for that purpose.
The Olsons manage their businesses by having the businesses owned by one LLC and managed and controlled by another LLC. At the top of this corporate structure are two entities, POKO Partners, LLC and POKO Management, LLC. With respect to POKO Partners, Ken Olson has a 50 percent ownership interest, his wife, Pam Olson, has a 10 percent ownership interest and Richard Olson has a 40 percent ownership interest. With respect to POKO Management, Olson has a 60 percent ownership interest and Rich Olson has a 40 percent ownership interest. Both entities operate out of 225 Westchester Avenue, Port Chester, NY. All of the POKO-related entities owned by the Olsons operate out of the 225 Westchester Ave. office headquarters. All of the personnel working out of POKO headquarters are paid by either POKO Partners or POKO Management and all of the operations' books, records and computers are housed at POKO headquarters.
Significant to this court's findings is the ambiguity with which Ken Olson has cloaked his business operations, apparent even in testimony before this court--notably, by deposition, rather than live testimony. For example, POKO Partners, LLC, is a development company which Ken Olson described as operating the " infrastructure for all [ . . . ] development" done by the POKO-related companies. When asked, however, whether POKO Partners, LLC is his " main organization, " Ken Olson responded in the following manner:
A: What does that mean?
Q. I don't know. Okay?
A. Well, neither do I.
Q. Okay. Is that your primary business organization?
A. I don't know what that means.
In stating that POKO Partners " operates the infrastructure for all [ . . . ] development, " Olson denied that POKO Partners oversees the development done by the other POKO-related companies and denied that it was an umbrella organization for the other companies. Instead, Olson portrayed POKO Partners as a " back office" which employs analysts, project managers and other individuals who " do the tasks, associated with any given development so the development can go forward."
By contrast, Olson's brother, Richard, was much more straightforward and forthcoming. He admitted, and this court finds, that POKO Partners, which his brother, Ken Olson controls, is the developer of commercial real estate and affordable housing properties. Richard Olson is the Chief Operating Officer of POKO Management, which provides property management services to third parties but primarily for the affordable housing and commercial properties owned and/or developed by the Olsons and POKO Partners. Both Olson brothers draw their salaries exclusively from POKO Management.
The undisputed evidence demonstrates that Ken Olson has at least either a 50 percent ownership interest in nearly all of the POKO-related companies with whom he is associated or jointly with his brother, Richard Olson, has a majority interest in all of the companies.
POKO Office Project
Ken Olson began having communications with Crosskey in February 2008 to renovate the headquarters of POKO Partners, POKO Management and the POKO-related entities in Port Chester, New York. The plaintiff's employees exchanged emails with Rich Olson, in his apparent capacity as COO of POKO Management, as well as Madelienne Hormann, identified as Planning and Development Manager of POKO Partners. The emails contained references and attachments detailing the work requested by Rich Olson, as well as changes and adjustments to the plans submitted by the plaintiff's associates.
When that work was completed, Crosskey sent to Olson and POKO Partners invoices totaling $4,690.24 as of October 15, 2008. Although the payment was due thirty days after receipt of the invoice, the POKO Office Project bills were never paid. Rich Olson, however, admitted that the plaintiff's bills for the POKO Office Project were never paid because of " an unspoken thought that . . . if our business would continue as it had been that . . . maybe (Crosskey) would throw that into--for us as an accommodation at the time . . ." In other words, the Olsons assumed that the plaintiff would write off the costs. Implied by Rich Olson's use of the term " unspoken" is the fact that Crosskey never shared this sentiment. At the same time, he acknowledged that the plaintiff's architectural services benefited both POKO Partners and POKO Management. There is no credible evidence disputing the plaintiff's evidence that the work requested was done and accepted at the hourly rates which the plaintiff had charged since the outset of the plaintiff's business relationship with Olson. Moreover, in an email dated November 12, 2014, Olson and Crosskey reached an agreement to resolve various billing disputes. Part of that resolution included the Olsons' agreement to sign a personal note with a payment plan in order to satisfy outstanding obligations relative to the POKO Office project in exchange for the plaintiff's agreement to stamp plans relating to a project involving the CHFA and the Town of Stonington. Although Crosskey continued to do work for the Olsons and the POKO entities as a result of that promise, the Olsons never honored that agreement. Effective December 17, 2014, Crosskey began charging late fees at a rate of 10 percent.
The Reservoir Project
The second project that is the subject of this lawsuit was known as the Reservoir Project. That project involved a new construction, mixed-use housing and commercial space development in Bridgeport, CT. Olson initially solicited the plaintiff's architectural services on September 26, 2006, in response to a request for proposal (RFP) issued by the City of Bridgeport. Crosskey did an initial sketch, which Olson used for submission to the RFP. POKO Partners was subsequently selected in December 2006, after which Crosskey drafted a fee proposal for architectural and engineering services for the remainder of the project. On August 30, 2007, Olson incorporated POKO Reservoir Yaremich, Developers, LLC (" Reservoir Yaremich LLC") for which he maintained a 60 percent ownership interest and Rich Olson had a 40 percent ownership interest. The Reservoir Yaremich, LLC was a single purpose entity established specifically for the development of the Reservoir Project. On December 19, 2007, Crosskey sent to Olson and POKO Partners a written and signed proposal outlining his services, which was described in five phases with a corresponding breakdown in fees. The proposal also included the standard American Institute of Architects (AIA) contract outlining the obligation to pay attorneys fees, court costs and interests if fees are not paid within 30 calendar days of the invoice date. Although Olson never signed the proposal, he made revisions to it which were incorporated in the revised contract dated February 2, 2008. Having received Olson's authorization to perform the work, the plaintiff's associates subsequently had numerous email exchanges throughout 2008 between themselves and associates of POKO Partners, including Hormann, who was the Planning and Development Manager of POKO Partners and Simon Gerson, identified as a Project Manager at POKO Partners. The email exchanges specifically referenced work that was requested and/or done by the plaintiff and for which POKO Partner associates sought access for their review, comment and input. Because the project itself never went forward, however, Crosskey provided only schematic design services pursuant to Phase 1 of his proposal, and only 50 percent of what was originally projected. Accordingly, Crosskey submitted invoices dated November 30, 2008 totaling $22,750.00. Notably, the invoice also referenced that late charges may be assessed for unpaid balances after thirty days. The plaintiff was never paid for that work.
In the November 12, 2014 email exchange between Olson and Crosskey, Olson made clear that he continued to dispute the plaintiff's claim that he and his brother, who is copied on the email, owe Crosskey any money for the Reservoir Project as well the Capehart project. At the same time, Olson suggested that he and his brother " would remain open-minded" about the issue in response to Crosskey's request that they continue to " dialogue" about the dispute. One month later, on December 31, 2014, POKO Reservoir Yaremich Developers, LLC was dissolved.
One Morningside Drive Project
The next project involved a group of small office buildings on One Morningside Drive in Westport, CT which were also owned by Ken Olson. Work on that project began in 2006 and included a number of on-call services which the plaintiff provided for the One Morningside Drive properties for prospective tenants, and included work on common areas as well.
POKO Management functioned as the property manager for One Morningside Drive which was being developed in order to sell to the Newman's Own Real Estate, LLC (" Newman's Own"). After Newman's Own purchased the property, POKO Management continued as property manager and continued to utilize the plaintiff's services for ongoing projects at One Morningside Drive. The defendants' records clearly reflect an ongoing agreement between the plaintiff and the defendants in which the plaintiff was solicited to provide architectural services as needed and, upon receipt the plaintiff's invoices, the defendants would pay the plaintiff at its hourly rates. Notably, the plaintiff's associates worked with a number of individuals ostensibly associated with POKO Partners, LLC based on their signature line in the numerous email exchanges between the plaintiff's associates and POKO employees in 2012 and 2013. For example, relative to this project, the plaintiff's associates worked with Kanan Ajmera, Project Manager for POKO Partners, Steven Wissak, Director of Development of POKO Partners, LLC, Joseph Gagliardotto, Construction Project Manager, POKO Partners, LLC; Tanner D. Johnson, POKO Partners. Of all the individuals associated with POKO, Rich Olson is the only one noted on the email exchanges with an email signature line associating himself with POKO Management.
The email addresses for all POKO associates, however, seem consistently to end with " @pokomgt.com."
For services relating to the One Morningside Drive project, Crosskey had outstanding unpaid invoices in the amount of $10,480.10 which he sent to POKO Partners and POKO Management. Significant to this court is evidence that until 2013, the defendants duly compensated Crosskey Architects for the on-call service provided to the One Morningside Drive project and at the hourly rates established by the plaintiff. Rich Olson also admitted that as of 2013, the open invoice report kept by One Morningside Group, LLC confirmed that the plaintiff was owed $13,735.15 for architectural services provided for the One Morningside Drive properties. Rich Olson believed that the Crosskey invoices were never paid due to a mistake made by someone at POKO Management.
The entities associated with One Morningside Drive include One Morningside Group (OMG) which is comprised of the investors for the project including the Olson Boys, LLC (including Ken, Richard and a third Olson brother, Gary) with a 11.43 percent interest; two other entities with a 28.57 percent interest, an individual investor with a 11.43 percent interest and One Morningside Managers, LLC (OMM) which held a 20 percent interest.
OMM, which was the managing entity of OMG, was also owned by Ken Olson; Olson had a 37.5 percent interest, Rich Olson also had a 37.5 percent owner while the remaining 25 percent was owned by POKO employees. OMM was eventually dissolved on December 31, 2014, after the buildings were sold to Newman's Own Realty company for $5,800,000. At the same time, OMG, of which Olson was an investor by virtue of his interest in Olson Boys, LLC and his investor status via OMM, netted $1,669,702.51.
Yet another entity, One Morningside Owners, LLC, was merged with OMG on December 21, 2011. Ken Olson testified, but was not sure, that OMO sold the property to Newman's Own Realty.
On November 12, 2014, Ken Olson agreed with respect to the POKO Office Project and One Morningside Drive, that the Olsons would personally sign a note and provide the plaintiff with a payment plan to satisfy their " outstanding obligations" as to those projects in exchange for ensuring that certain plans were filed with the CHFA and the Town of Stonington. In reliance upon this agreement that he would get paid for these projects, Crosskey continued to accept work from Olson, but did not get paid.
Capehart Project
The final project which is the subject of this lawsuit is the Capehart Project. The Capehart project was a development of an old mill building in Norwich, CT which involved the renovation and new construction of the property into apartment buildings. The project, which was commenced in 2006, eventually resulted in a contract signed by Ken Olson, identified as " managing member" under the auspices of Capehart Ventures, LLC, on April 3, 2009. The contract outlined the details of the agreement including the fee structure as well as a separate signature page for the AIA contract addressing attorneys fees and interest if payments are in default. Olson's testimony with respect to this agreement, however, is that he signed it, not as the managing member of Capehart Ventures, LLC, but as the " managing member of the managing member."
Like the Reservoir project, the Capehart project never came to fruition. Although Ken Olson claimed not to remember how much money he made from the Newman's Own purchase of the One Morningside Drive properties, for which OMG netted $1,669,702.51 following a $5,800,000 sale, he readily recalled that they lost " close to a million and a half dollars" on the Capehart Ventures project. The project manager for Capehart Ventures was POKO Partners which received $450,000.00 in project management fees in the year ending 2014. In addition, POKO Cape Loom Managers, LLC is an entity in which Ken Olson is a 60 percent owner and Rich Olson is 40 percent owner. The plaintiff was never fully paid for this project with outstanding bills totaling $31,383.93 with late charges totaling $63,775.71.
Olson rationalized his refusal to pay the plaintiff for architectural services rendered for the Reservoir and Capehart projects by claiming that the plaintiff was " on spec." In other words, the plaintiff was effectively working without compensation for his services unless and until the projects were ultimately approved for funding. There is, however, no credible evidence that the plaintiff or Crosskey agreed to this arrangement.
Breach of Contract
The plaintiff has asserted breach of contract relative to the POKO Office Project in Count One as to the defendants POKO Partners, POKO Management, and Ken Olson and Richard Olson. It has alleged Breach of Contract in Count Four relative to the Reservoir Project as to POKO Partners, Ken Olson and Richard Olson and POKO Reservoir Yaremich Developers, LLC. In Count Seven, the plaintiff has alleged Breach of Contract relative to the Morningside Drive Project as to POKO Partners, POKO Management, Ken Olson and Richard Olson, One Morningside Group, LLC and One Morningside Managers, LLC. In Count Ten, the plaintiff has alleged breach of contract relative to the Capehart project as to POKO Partners, Ken Olson and Richard Olson, Capehart Ventures, LLC and POKO Cape Loom Managers, LLC.
" 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.) Bross v. Hillside Acres, Inc., 92 Conn.App. 773, 780, 887 A.2d 420 (2006); see also Chiulli v. Zola, 97 Conn.App. 699, 706-07, 905 A.2d 1236 (2006) (same). The elements of a breach of contract claim must be proven by the preponderance of the evidence. See Waicunas v. Macari, 151 Conn. 134, 137, 193 A.2d 709 (1963); see also Colliers, Dow & Condon, Inc. v. Schwartz, 77 Conn.App. 462, 471, 823 A.2d 438 (2003); Daley v. Wesleyan University, 63 Conn.App. 119, 131-32, 772 A.2d 725, cert. denied, 256 Conn. 930, 776 A.2d 1145 (2001).
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 . . . [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 quotation marks omitted.) L& R Realty v. Connecticut National Bank, 53 Conn.App. 524, 534-35, 732 A.2d 181, cert. denied, 250 Conn. 901, 734 A.2d 984 (1999). A contract requires clear and definite terms. See Suffield Development Associates Ltd. Partnership v. Society for Savings, 243 Conn. 832, 843, 708 A.2d 1361 (1998). A court may, however, enforce an agreement " if the missing terms can be ascertained, either from the express terms or by fair implication." (Internal quotation marks omitted.) Geary v. Wentworth Laboratories, Inc., 60 Conn.App. 622, 627-28, 760 A.2d 969 (2000).
Moreover, the absence of a signature to a contract does not defeat its enforceability. It is well established that " [p]arties are bound to the terms of a contract even though it is not signed if their assent is otherwise indicated." (Internal quotation marks omitted.) Original Grasso Construction Co. v. Shepherd, 70 Conn.App. 404, 411, 799 A.2d 1083, cert. denied, 261 Conn. 932, 806 A.2d 1065 (2002). " One enjoying rights is estopped from repudiating dependent obligations which he has assumed; parties cannot accept benefits under a contract fairly made and at the same time question its validity." (Internal quotation marks omitted.) Green v. Connecticut Disposal Service, Inc., 62 Conn.App. 83, 95, 771 A.2d 137, cert. denied, 256 Conn. 912, 772 A.2d 1124 (2001); see also Schwarzschild v. Martin, 191 Conn. 316, 321-22, 464 A.2d 774 (1983) (" [i]n the absence of a statute requiring a signature . . . parties may become bound by the terms of a contract, even though they do not sign it, where their assent is otherwise indicated, such as by the acceptance of benefits under the contract" [(internal quotation marks omitted)]. Ullman, Perlmutter & Sklaver v. Byers, 96 Conn.App. 501, 505-06, 900 A.2d 602, 605-06 (2006).
" Whether and on what terms a contractual commitment has been undertaken are ultimately questions of fact for the trier of facts." (Internal quotation marks omitted.) Presidential Capital Corp. v. Reale, 231 Conn. 500, 507, 652 A.2d 489 (1994). " A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined." Id., see also Rahmati v. Mehri, 188 Conn. 583, 587, 452 A.2d 638 (1982).
1. POKO Office Project
With respect to the POKO Office project, this court finds, by a preponderance of the evidence that a valid and enforceable contract existed. The credible evidence indicates that Olson and associates working for POKO Partners and POKO Management requested architectural services from the plaintiff. Having not disputed the hourly rates charged for those services which had also been in effect for previous work done by Crosskey for the POKO-related entities, the court also finds that the defendants assented to the terms of compensation for the plaintiff's services. The court finds that as a result of the defendants' failure to pay for the plaintiff's work on that project, the plaintiff incurred money damages in the amount of $4,690.24.
The defendants, however, have asserted that the plaintiff's claim is barred by the statute and that Ken and Rich Olson may not be sued personally. For the following reasons, this court finds that the action is not barred by operation of the applicable statute of limitations, General Statutes § 52-576.
2. Statute of Limitations
General Statutes § 52-576 provides in relevant part: " No action for an account, or on any simple or implied contract, or on any contract in writing, shall be brought but within six years after the right of action accrues." " The true test for determining the appropriate date when a statute of limitations begins to run is to establish the time when the plaintiff first successfully could have maintained an action. That is, an action cannot be maintained until a right of action is complete and hence, the statute of limitations cannot run before that time." Sean O'Kane A.I.A. Architect, P.C. v. Puljic, 148 Conn.App. 728, 733-34, 87 A.3d 1124 (2014). Given that the POKO Office project was one distinct project, the statute of limitations would have begun to run on November 15, 2008, one month after the final invoice and therefore, the action would have been barred if filed after November 15, 2014. This action was commenced January 26, 2015.
The plaintiff, however, argues that the statute was tolled on November 12, 2014 based on the defendant's promise, and the plaintiff's reliance, on Olson's agreement to give the plaintiff a personal note agreeing to establish a payment plan to satisfy the outstanding debts as to this project in exchange for Crosskey's work on other projects. This court agrees with the plaintiff.
" The Statute of Limitations creates a defense to an action. It does not erase the debt. Hence, the defense can be lost by an unequivocal acknowledgment of the debt, such as a new promise, an unqualified recognition of the debt, or a payment on account . . . John H. Kolb & Sons, Inc. v. G& L Excavating, Inc., 76 Conn.App. 599, 611, 821 A.2d 774, 781 (2003). " A general acknowledgment of an indebtedness may be sufficient to remove the bar of the statute. The governing principle is this: The determination of whether a sufficient acknowledgment has been made depends upon proof that the defendant has by an express or implied recognition of the debt voluntarily renounced the protection of the statute . . . But an implication of a promise to pay cannot arise if it appears that although the debt was directly acknowledged, this acknowledgment was accompanied by expressions which showed that the defendant did not intend to pay it, and did not intend to deprive himself of the right to rely on the Statute of Limitations . . . [A] general acknowledgment may be inferred from acquiescence as well as from silence, as where the existence of the debt has been asserted in the debtor's presence and he did not contradict the assertion." Id. Because this court finds that the promise made by the defendant on November 12, 2014, tolled the statute of limitations, the plaintiff's action is not barred.
3. One Morningside Drive
With respect to the One Morningside Drive Project, the court finds that the plaintiff has met its burden with respect to its breach of contract claim as to defendants, POKO Partners and POKO Management, to the extent that the evidence demonstrates that on behalf of POKO Partners, LLC, Olson and associates of POKO Partners, LLC, as well as Rich Olson of POKO Management, solicited architectural services from the plaintiff relative to this project and they failed to compensate the plaintiff in the amount of $10,480.10. The defendants deny that Olson acknowledged this debt on November 12, 2014 and assert that Crosskey never accepted the terms of the agreement embodied in that email. The court disagrees. The evidence demonstrates that Olson not only acknowledged the debt but induced Crosskey to finish unrelated POKO projects by promising personally to satisfy these debts.
While the owner of the project was OMG and the evidence indicates that checks paid to Crosskey for architectural services were issued from the account of OMG, the entity contracting with the plaintiff was POKO Partners and POKO Management. Rich Olson not only agreed that these debts remain unpaid and owing, but that he believed that the failure to pay Crosskey was due to a mistake made by someone at POKO Management.
This court concludes that having failed to pay those invoices for services rendered, POKO Partners, LLC and POKO Management are liable to the plaintiff for breach of contract in the amount of $10,480.10.
4. Reservoir and Capehart Projects
For both the Reservoir Project and the Capehart Project, the plaintiff drafted detailed contracts outlining its proposal for its architectural services. The court finds that the terms with respect to the nature and scope of services, as well as the structure of compensation, are sufficiently definite and certain for this court to find an enforceable contract with respect to both projects. With respect to the Capehart Project, the court finds that by signing the contract, Olson accepted the terms therein on behalf of Capehart Ventures, LLC, thus resulting in an enforceable contract as to Capehart Ventures, LLC. As to the Reservoir Project, the court concludes that while it cannot find an enforceable written contract, the plaintiff has met its burden in demonstrating that an enforceable quasi-contract existed. For the reasons outlined below, the court finds that the plaintiff is entitled to damages emanating from the breach of contract as to Capehart project and based on equitable claims of relief as to the Reservoir Project.
Notably, the defendants do not argue that the plaintiff did not perform the services nor do they deny that they solicited Crosskey's services. Instead, as to both projects, the defendants argue that Crosskey is not owed anything for work done on the Reservoir and Capehart projects because Crosskey's services were retained " on spec."
a. Breach of contract as to Reservoir Project
With respect to the Reservoir Project, the court cannot find an enforceable written contract because Olson's failure to sign the contract has rendered the evidence sufficiently ambiguous as to who and/or which entity is personally liable on the contract. Because evidence demonstrates that Olson was adamant that Crosskey was " on spec, " Olson's failure to sign the written contract makes it difficult for this court to find that there was a meeting of the minds with respect to the contracting party relative to that project. Therefore, this court cannot find that the plaintiff has met its burden with respect to a breach of contract as written regarding the Reservoir Project. This court, however, can find that relief based in equity is viable.
b. Quantum Meruit/Unjust Enrichment
As a preliminary matter, it is worth noting the facts that give rise to relief based in equity. In this case, it is clear that Olson specifically solicited the plaintiff to provide architectural services, and that Olson and the POKO entities related to the Reservoir project, specifically, POKO Partners, POKO Management and POKO Reservoir, benefitted from those services by utilizing them in their attempt to secure the development rights for the project. Moreover, this court can find that the defendants unjustly did not pay the plaintiff.
Ken Olson, whose testimony was offered solely via deposition transcript, suggests that their failure to pay Crosskey was justified with respect to the Reservoir Project and the Capehart Project because the plaintiff was " on spec." In other words, the defendants claim that the plaintiff was retained to perform the work with no guarantee that it would get paid. The defendants ask that this court to draw that conclusion because Crosskey was aware that he was providing architectural services for projects which might not ultimately go forward and for which funding might not be approved. Related to this untenable claim is the corporate structure which Ken Olson and POKO Partners devised for these projects. Having established limited liability companies, Olson and POKO Partners do not dispute that they procured architectural services from Crosskey at the outset of these projects, but claim that upon the establishment of a " single purpose entity" like POKO Reservoir Yaremich Developers, LLC and Capehart Ventures, LLC, the entities, as opposed to POKO Partners, under whose auspices this court finds solicited Crosskey's services, would begin assuming liability for bills associated with the project. This arrangement was effective, according to Olson, even though as Crosskey testified, the plaintiff's services were typically 75 percent complete by the time the single purpose entity was formed.
The credible evidence, however, simply does not support the conclusion that the plaintiff agreed to provide architectural services " on spec." First, Crosskey flatly and credibly denies this point, making clear that he " doesn't work for free." Second, the contracts drafted, reviewed and by their conduct, accepted by Ken Olson and POKO Partners, make very clear that Crosskey had no intention to work without compensation or upon contingency. Moreover, and even before a formal contract was drafted, Ken Olson acknowledged as early as March 31, 2008 in an email to various consultants on the Capehart project, including Crosskey, that he understood that he was now " spending money" to secure the services of various consultants. Specifically, Ken Olson asked these consultants to be " prepared and smart" in order to help him present a viable proposal to the state Department of Environmental officials relative to wetlands and environmental issues at the Capehart Project development. As the email makes clear, Ken Olson was fully aware that he had an obligation to pay for services he and his entities used.
Moreover, a contingency fee type arrangement can be a high risk proposition for a vendor providing services. For it to find that the plaintiff entered into such an arrangement, this court requires evidence of an explicit agreement to agree to those terms. Instead, a careful review of their brief makes clear that the defendants essentially ask this court to infer that Crosskey agreed to this fee structure based on the defendants' position that " [a]ny architect working on a project before the single purpose entity is formed is in effect working on spec for the entity that is to be created." Although embedded in a footnote, this claim is an extraordinary proposition based on neither law nor fact and as such, this court rejects it.
The defendants also argue that as to the Reservoir Project and the Capehart project, POKO Partners and their single purpose entities never secured the development rights for their respective projects. The fact, however, that the POKO entities were willing and able to assume the risk of investing time and resources to pursue the development rights for the projects, with no guarantee that those rights and the funding would ultimately follow, does not mean, in the absence of credible evidence, that Crosskey Associates also agreed to assume the same risk.
Despite the lack of an express written contract, the plaintiff claims that this court can find sufficient evidence supporting its claim for damages under the doctrines of unjust enrichment and/or quantum meruit as to the Reservoir Project. The court does find, however, that as the Reservoir project, the plaintiff has met its burden in proving that it is entitled to damages based on the doctrine of quantum meruit.
" Quantum meruit and unjust enrichment are noncontractual means of recovery in restitution. Quantum meruit is a theory of recovery permitting restitution in the context of an otherwise unenforceable contract. In contrast, recovery under a theory of unjust enrichment applies in the absence of a quasi-contractual relationship . . . Because both doctrines are restitutionary, the same equitable considerations apply to cases under either theory." (Citation omitted.) Walpole Woodworkers, Inc. v. Manning, 307 Conn. 582, 587 n.9, 57 A.3d 730 (2012).
" A plaintiff who seeks a recovery 'in quantum meruit' usually asserts that the defendant is obligated to pay a reasonable price for specified services rendered . . . From its 17th-century origins to the present day, the single pleading has been used to state two quite different claims. One alleges what is recognizable today as an implied contract, alias a contract 'implied in fact.' If it is appropriate to conclude that a promise to pay reasonable compensation . . . was part of the parties' agreement--although nowhere expressed in so many words--a recovery called 'quantum meruit' enforces an implied term of an actual contract . . . But quantum meruit has often been used in a different set of cases as well, regarded in modern law as instances of unjust enrichment rather than contract. Because quantum meruit alleged a fictitious promise to pay, it was equally available to recover the value of benefits conferred in cases where the defendant had made no promise, express or implied." 1 Restatement (Third), Restitution and Unjust Enrichment, p. 486 Restitution and Contract § 31, p. 486-87 (2010).
" In modern practice, a claim styled 'quantum meruit' typically seeks compensation for services rendered in the expectation of payment, but in the absence of explicit agreement as to amount. Based on the circumstances of the transaction, it may be appropriate to find an implied promise by the defendant to compensate the plaintiff--usually at the customary wage or " going rate" for the work done. If so, the measure of the plaintiff's contractual expectation is described by the words " quantum meruit" (Or " as much as he is entitled to"), but the defendant's obligation is fully explained as a matter of contract. In such a case it would be erroneous to associate " quantum meuruit with a liability in unjust enrichment, or to view the plaintiff's action as one for restitution rather than contract damages." Id.
An " implied contract can only exist where there is no express one." Collins v. Lewis, 111 Conn. 299, 304, 149 A. 668 (1930). " [Q]uantum meruit [is a form] of the equitable remedy of restitution by which a plaintiff may recover the benefit conferred on a defendant in situations where no express contract has been entered into by the parties." Burns v. Koellmer, 11 Conn.App. 375, 385, 527 A.2d 1210 (1987). " [P]arties who have entered into controlling express contracts are bound by such contracts to the exclusion of inconsistent implied contract obligations." H.B. Toms Tree Surgery, Inc. v. Brant, 187 Conn. 343, 347, 446 A.2d 1 (1982); Polverari v. Peatt, 29 Conn.App. 191, 199, 614 A.2d 484, cert. denied, 224 Conn. 913, 617 A.2d 166 (1992). Rosick v. Equip. Maint. & Serv., Inc., 33 Conn.App. 25, 37, 632 A.2d 1134, 1141 (1993).
Thus, while Olson and Capehart Ventures, LLC are bound by the express contract signed as to the Capehart project, quantum meruit is a viable cause of action in the absence of what this court finds is an unenforceable written contract as to the Reservoir Project. Under the various applications of quantum meruit under the Restatement, and given the equitable character of the doctrine, this court finds that the ambiguity as to which entity entered into a contract is not fatal to the plaintiff's ability to demonstrate that it is entitled to the value of services conferred upon the defendants pursuant to the contract, albeit unsigned.
Moreover, the circumstances in the present case also permit this court to find that the plaintiff has met its burden of establishing that it can recover damages under the doctrine of unjust enrichment as to the Reservoir Project. The elements of unjust enrichment are well established. " Plaintiffs seeking recovery for unjust enrichment must prove (1) that the defendants were benefited, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the plaintiffs' detriment." (Internal quotation marks omitted.) Jo-Ann Stores, Inc. v. Property Operating Co., LLC, 91 Conn.App. 179, 194, 880 A.2d 945 (2005). " Unjust enrichment is a very broad and flexible doctrine that has as its basis the principle that it is contrary to equity and good conscience for a defendant to retain a benefit that has come to him at the expense of the plaintiff." Gagne v. Vaccaro, 255 Conn. 390, 409, 766 A.2d 416 (2001), on appeal after remand, 80 Conn.App. 436, 835 A.2d 491 (2003), cert. denied, 268 Conn. 920, 846 A.2d 881 (2004).
Under either theory of quantum meruit and unjust enrichment, it is clear that Olson specifically solicited the plaintiff to provide architectural services, and that Olson and the POKO entities related to the Reservoir Project, specifically, POKO Partners, POKO Management and POKO Reservoir, utilized those services in its attempt to secure the development rights for the project. This unequivocally evidences that the defendants received a benefit from the architectural services rendered because without the plaintiff's service, the opportunity to secure the rights to develop the project would not have come to fruition. This court can also find that the defendants' prior dealings with the plaintiff substantiates their knowledge that the plaintiff does not work for free or " on spec" and withholding payment based on such an unfound basis is unjust.
In any event, pursuant to the parties' implied-in-fact contract, this court awards damages in the amount of $22,750.00 for the services rendered under the doctrine of quantum meruit. It is clear that the plaintiff engaged in such services with the reasonable expectation that it would be paid and it was not. Furthermore, in light of the parties' prior dealings, the defendant reasonably knew the same to be true. We thus conclude that the plaintiff has satisfied its burden with respect to its quantum meruit claim.
5. Corporate Veil Piercing
The plaintiff also seeks to pierce the corporate veil as to both Ken Olson and Richard Olson arguing that the evidence establishes that: 1) the individual defendants pay themselves or related companies before legitimate creditors; 2) ask vendors to supply services to companies that have no reasonable capitalization; 3) control entities with layers of protection by stacking ownership of LLCs; 4) cannot remember what companies they own or manage or control; 5) close companies and distribute assets to owners including themselves and insiders without notice to legitimate creditors; 6) hire vendors through one company while ultimately forming another single purpose entity and then 7) dissolve or abandon that company when it is not viable or convenient for them to proceed with a project. The court agrees with the plaintiff and finds that the evidence supports each of the above claims.
" A corporation is a separate legal entity, separate and apart from its stockholders . . . It is an elementary principle of corporate law that a corporation and its stockholders are separate entities and that . . . corporate property is vested in the corporation and not in the owner of the corporate stock." (Citations omitted; emphasis in original; internal quotation marks omitted.) State v. Radzvilowicz, 47 Conn.App. 1, 18-19, 703 A.2d 767, cert. denied, 243 Conn. 955, 704 A.2d 806 (1997). That principle also is applicable to limited liability companies and their members. General Statutes § 34-133. The assets of a corporation or limited liability company, therefore, typically are not available to creditors seeking to recover amounts owed by a stockholder or member of that corporation or limited liability company. Nonetheless, " [c]ourts will . . . disregard the fiction of a separate legal entity to pierce the shield of immunity afforded by the corporate structure in a situation in which the corporate entity has been so controlled and dominated that justice requires liability to be imposed . . ." Litchfield Asset Mgmt. Corp. v. Howell, 70 Conn.App. 133, 147, 799 A.2d 298, cert. denied, 261 Conn. 911, 806 A.2d 49 (2002)
" The instrumentality rule requires, in any case but an express agency, proof of three elements: (1) Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; (2) that such control must have been used by the defendant to commit fraud or wrong, to perpetrate the violation of a statutory or other positive legal duty, or a dishonest or unjust act in contravention of plaintiff's legal rights; and (3) that the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of." Litchfield Asset Mgmt. Corp. v. Howell, supra, 70 Conn.App. 152.
" [I]n assessing whether an entity is dominated or controlled, courts have looked for the presence of a number of factors. Those include: " (1) the absence of corporate formalities; (2) inadequate capitalization; (3) whether funds are put in and taken out of the corporation for personal rather than corporate purposes; (4) overlapping ownership, officers, directors, personnel; (5) common office space, address, phones; (6) the amount of business discretion by the allegedly dominated corporation; (7) whether the corporations dealt with each other at arm's length; (8) whether the corporations are treated as independent profit centers; (9) payment or guarantee of debts of the dominated corporation; and (10) whether the corporation in question had property that was used by other of the corporations as if it were its own to perpetrate a wrong." Id., 152-53.
" The identity rule has been stated as follows: If a plaintiff can show that there was such a unity of interest and ownership that the independence of the corporations had in effect ceased or had never begun, an adherence to the fiction of separate identity would serve only to defeat justice and equity by permitting the economic entity to escape liability arising out of an operation conducted by one corporation for the benefit of the whole enterprise." (Internal quotation marks omitted.) Davenport v. Quinn, supra, 53 Conn.App. at 300-01, 730 A.2d 1184, quoting Angelo Tomasso, Inc. v. Armor Construction & Paving, Inc., supra, 187 Conn. at 554, 447 A.2d 406. " The identity rule primarily applies to prevent injustice in the situation where two corporate entities are, in reality, controlled as one enterprise because of the existence of common owners, officers, directors or shareholders and because of the lack of observance of corporate formalities between the two entities." Angelo Tomasso, Inc. v. Armor Construction & Paving, Inc., supra, at 560, 447 A.2d 406. " There must be such domination of finances, policies and practices that the controlled corporation has, so to speak, no separate mind, will or existence of its own and is but a business conduit for its principal." Litchfield Asset Mgmt. Corp. v. Howell, supra, 70 Conn.App. 156.
The court finds that the plaintiff has met its burden in establishing that pursuant to the identity rule, the corporate veil should be pierced as to Ken and Richard Olson. Central to this court's conclusions are the following findings.
First, Olson intentionally misled Crosskey into agreeing to provide architectural services, relying on their prior, informal history and pattern of payment following the provision of services at an hourly rate. This court concludes that after the fact, Olson recast that arrangement to Crosskey and to this court into what this court finds is a one-sided " on spec" compensation scheme that existed only in the mind of Ken Olson.
The establishment of " single purpose entities" while not nefarious in and of themselves, in this case was used to absorb liabilities which the entity, specifically, Reservoir Yaremich, LLC and Capehart Ventures, LLC did not originally enter into. As noted below and a little over one month after Crosskey reasserted his claim for outstanding debts to which Ken, in part, acknowledged and agreed to satisfy, nearly all of the relevant entities were dissolved.
Thus with the Reservoir Project, Ken approached Crosskey in 2006 about providing architectural services; POKO Reservoir Yaremich, LLC was incorporated in August 30, 2007 and then dissolved on December 31, 2014.
Capehart Ventures was incorporated April 10, 2007 but Ken began working with Crosskey as early as September 2006. Although the contract was signed by Capehart Ventures, LLC on April 3, 2009, Ken, was the signatory and signed in his capacity as " managing member of the managing member, i.e. POKO Cape Loom Managers, LLC and/or POKO Partners, LLC, who eventually received $450,000 in project management fees without first compensating Crosskey for the $31,383.93. The fact that Capehart Ventures, LLC was virtually entirely third-party investor owned is irrelevant given that the controlling entity was POKO Cape Loom Managers and POKO Partners. Both Capehart Ventures, LLC and POKO Cape Loom Managers, LLC also dissolved effective December 31, 2014.
As previously found, POKO Partners, LLC, as well as POKO Reservoir Yaremich, LLC, POKO Cape Loom Managers and POKO Management, LLC are or were all owned by Ken and Rich Olson, respectively, in a 60-40 percent distribution of interest. Similarly, OMM, the managing entity of OMG, revealed a 75 percent interest owned by Ken and Rich with the remaining 25 percent owned by employees of POKO Partners. One Morningside Managers, LLC also dissolved December 31, 2014. In applying the identity rule to these facts, it is clear that these controlling entities are in fact, controlled by Ken and Rich Olson to the detriment, in this case, of the plaintiff's rightful clam to compensation for his services.
The court also finds relevant its observations that the testimony of Ken and Rich Olson was intentionally vague and ambiguous about matters relating to their companies' activities and their role within them. Ken Olson's testimony, in particular, notably offered via deposition transcript, smacks of elusive, game-playing semantics; the court can reasonably infer that Olson's live testimony would have been even more troubling and suggests that the lack of clarity in his business's overall corporate structure and operations was a virtue. For example, in describing POKO Partners, Olson refused to answer straightforward questions and claimed that he did not know what counsel meant by " main organization" or " primary business organization." Instead, Olson described POKO Partners as the entity which " operates the infrastructure for all . . . development" operating as a " back office" which employs analysts, project managers and other individuals who " do the tasks associated with any given development so the development can go forward." Even more relevant to this court's findings is his response to the question of who Crosskey was working for when he was solicited for the POKO Office project. Ken's answer: " I don't think there was a specific 'you're working for POKO Partners, you're working for POKO Management, you're working for JAO.' I don't know. Questions: Okay. You don't know? Answer: I think it was undefined."
Other examples include his answer to the question: " do all of the defendants do business in Connecticut?" Answer: " I don't know who all the defendants are."
Ken also denied that POKO Partners does any development work, denied that it oversees the development done by other POKO-related entities and denied that it was an umbrella organization. Even in describing how the Reservoir project was initiated, Ken stated " POKO was chosen--I use that word very loosely--to be the developer of a project on the corner of Reservoir and Yaremich . . . and we asked Bill if he would participate in the RFP . . . And Bill did some preliminary work." Ken's clear intention, in using the word " chosen" " very loosely" is to insulate the main POKO entities, and himself, from liability. Ken also admitted to being unsure as to who was responsible for bills on the Reservoir project.
Yet POKO Partners is clearly the main locus of power even if it apparently " loses a lot of money" and does not provide distributions to the Olsons. Meanwhile, POKO Management, which receives " reimbursements" " through every company that does business with POKO" for expense, pays salaries to Ken and Rich. POKO headquarters, where all of the businesses and all 40-60 entities are located, houses all of the office supplies and equipment, including computers, which are then shared among the various entities. Moreover, Ken Olson signs all of his email as emanating from POKO Partners, even if the email purports to be handled for one of his entities. Thus, the court finds that POKO Partners, together with POKO Management, is more than a " back office" operation but truly the locus of power for the overall organization through which Ken and Rich Olson have maintained virtually unchecked power and control.
While POKO Partners and POKO Management are the entities through which Ken and Rich Olson conduct their business dealings, it is Ken and Rich Olson who are the actors involved in the projects for which Crosskey is owed monies. As such, this court concludes that the plaintiff has met its burden in establishing that the corporate veil should be pierced and thus finds that Ken and Rich Olson are also personally liable for the damages awarded as to each count found in favor of the plaintiff.
6. Attorneys Fees and Interest
While this court finds that there is no valid basis for awarding attorneys fees and interest based on contract, including relative to the contracts pertaining to the Reservoir and Capehart projects because both remained unsigned, this court awards interest for each award of damages found, effective thirty days from the date of the final invoice, when the debts were in default. The court awards interest pursuant to General Statutes § 37-3a(a) and Killion v. Davis, 69 Conn.App. 366, 375, 793 A.2d 1237, cert. denied, 260 Conn. 931, 799 A.2d 295 (2002) (" prejudgment interest is awarded in the discretion of the trial court to compensate the prevailing party for a delay in obtaining money that rightfully belongs to him . . . from and after the date on which the court, in its discretion, determines that the money was due and payable").
7. Conclusion
The Court finds in favor of the plaintiff with respect to the following counts:
1. First Count of breach of contract as to the POKO Office project as against POKO Partners, POKO Management, and Ken and Richard Olson in the amount of $4,690.24 with 10% interest effective December 14, 2014;
2. Fifth Count of Quantum Meruit as to POKO Partners, POKO Management and POKO Reservoir, LLC, and Ken and Rich Olson in the amount of $22,750.00 with 10% interest effective December 14, 2014;
3. Seventh Count of breach of contract as to the Morningside Drive Project as against POKO Partners, POKO Management, One Morningside Group, LLC, One Morningside Managers, LLC, and Ken and Rich Olson in the amount of $10,480.09 with interest effective December 14, 2014.
4. Tenth Count of Breach of contract as to the Capehart Project as against POKO Partners, Capehart Ventures, LLC, POKO Cape Loom Managers, LLC, and Ken and Rich Olson in the amount of $31,383.93 with interest, effective December 17, 2014.
All other counts, with the exception of the thirteenth count piercing the corporate veil, are dismissed as moot.