Opinion
No. CV 02-0818384S
April 7, 2006
MEMORANDUM OF DECISION
I
The plaintiff Location Realty, Inc. has brought this action against Frank Colachino, Colvest, Ltd., Colvest/North Haven, LLC, Anthony C. Fonda and Afar, LLC for the collection of a real estate commission.
The original complaint is dated July 24, 2002 and the revised amended complaint is dated March 24, 2003 and is in five counts. The first count is as to Fonda and Afar, LLC, the second count is as to Colachino, Colvest Group, Ltd. and Colvest/North Haven, LLC. The first two counts claim a commission due based on a listing agreement effective June 1, 2000.
The third and fourth counts are against Colachino, Colvest Group, Ltd. and Colvest/North Haven, LLC. The third count is based on unjust enrichment and the fourth count is based on an acknowledgment to compensate the plaintiff in accordance with the listing agreement.
The fifth count is a claim under the Connecticut Unfair Trade Practices Act (CUTPA), this count has been removed from the case based on a decision on the defendant's motion for summary judgment.
In determining the issues in this case, the court will first refer to a relevant Supreme court case involving the same plaintiff. Then the court will discuss the claim against the Fonda defendants and then the claim against the Colachino defendants.
II Location Realty Inc. v. General Financial Services, Inc., 273 Conn. 766 was decided in 2005 and involves the same plaintiff and the same attorneys that are involved in the instant case. In Location, the plaintiff, a licensed real estate broker, brought an action seeking to recover a real estate commission in obtaining a lessee for defendant's property. The defendant sought summary judgment asserting that the plaintiff was barred by Connecticut General Statutes § 20-325a and § 20-312(b) from collecting a commission because Location was not duly licensed as a real estate broker because its president was actively involved in its brokerage business but was not a licensed broker. The trial court determined that the defendant was entitled to summary judgment on the basis that plaintiff's license was automatically void, which prevented the plaintiff its right to obtain a commission.The Supreme Court reversed the trial court, stating that the trial court failed to consider the language and legislative history of § 20-325n(c) which permits a licensee who is not duly licensed to recover if, in light of all the facts and circumstances of the case, it would be inequitable to deny the right to recover a commission that was otherwise earned.
The Supreme Court has held at page 777
This analysis brings us back to § 20-312(b). Just as the entire sentence of § 20-325a(a) must be read as a whole, § 20-325a(a) must be read together with § 20-312(b). Reading the two provisions together, we conclude that their language strongly suggests that a corporate licensed broker, whose president was actively involved in its brokerage business but was not licensed as a broker, was not duly licensed within the meaning of § 20-325a(a).
This conclusion is supported by the legislative history of chapter 392 of the General Statutes. That history indicates that the primary purpose of the legislation was the protection of the public, and that the legislature considered the requirement that all active members of a corporate or partnership licensee be themselves licensed to be central to that purpose, so as to avoid the possibility that persons not licensed as brokers could nonetheless combine in a partnership or corporation that would be so licensed.
and at page 781
It necessarily follows from this discussion that a corporate broker licensee, whose president was not licensed as a broker, may not be denied its right to recover a commission otherwise earned solely because of that licensing failure. Its right to recover must be gauged, instead, under all of the facts and circumstances of the case and whether it would be inequitable, in light of those facts and circumstances, to deny it the right to recover. One of those facts and circumstances is, of course, that the licensee may not have been duly licensed; but that fact alone is not sufficient to deny recovery. It follows, further, that the trial court's grant of summary judgment in this case was improper.
The decision in Location is relevant to the issues in the instant case.
III
Acting by its president, Michael O'Brien, the plaintiff entered into a listing agreement with Anthony C. Fonda and Afar, LLC (The Fonda defendants) relative to the development and leasing of property in North Haven. The listing agreement is plaintiff's exhibit 1. The term of the agreement is June 1, 2000 through June 30, 2001.
Michael O'Brien had known Fonda since the early 1990s. Fonda is a developer, he had about 30-40 transactions with Michael O'Brien where commissions were paid. Fonda was allowed to maintain a desk in plaintiff's office. When Michael O'Brien was asked if Fonda was like a mentor, he replied that Fonda was like a broker and father all rolled into one.
Michael O'Brien testified that he has been president of the plaintiff since 1995. His real estate career started with Beazley Real Estate in residential for 4-5 years, then with McCutcheon-Burr in commercial for 6-7 years, then with Roncali who were involved with convalescent homes, it was there he became aware of Location Realty, which he purchased in 1995.
It was while he was president of plaintiff that he got to know Fonda and engaged in real estate transactions with him.
As to the transactions here, there came a point where Fonda did not wish to remain with the transaction. Michael O'Brien instituted a luncheon meeting in December of 2000 at the First and Last Tavern with himself, Fonda and Frank Colachino. The outcome of the meeting was that Fonda was allowed to be removed from the transaction and his place was taken by Colachino.
Michael O'Brien testified that through his meetings and negotiations with CVS and Liberty Bank he obtained them as tenants for the North Haven project. Ultimately the leases for CVS and Liberty Bank were executed by Colachino as he had assumed ownership of the property.
It is not seriously contested that Michael O'Brien was the procuring factor in obtaining CVS and Liberty Bank for the project. Michael O'Brien testified that he met with CVS 75-100 times in negotiating the lease. By securing these tenants for the project, the benefits incurred to the Colachino defendants.
As to Colachino taking over the project, the plaintiff refers to exhibit 79, which is a letter from Location Realty to Peter Alter and Tony Fonda. The letter states in part the following:
As the closing for North Haven is tentative for March 6 and it appears you intend to assign the deal to Frank Colachino, Location Realty, Inc. will require written acknowledgment that the lease commissions will be paid as called for in the exclusive listing agreement.
Location never received written acknowledgment from Fonda or Colachino relative to the issue of commissions.
The plaintiff also refers to exhibit 7, which is the lease with Liberty Bank and exhibit 4 which is the lease with CVS. The landlord in both cases is Colachino.
The lease with Liberty Bank indicates in paragraph 31,
31. Broker. Lessor and Lessee each represent and warrant to and with each other that they respectively (a) have not had any dealings, negotiations or consultations with any real estate broker, finder or any other party entitled to a commission in connection with this Lease; (b) have not been induced to enter into this Lease by any real estate broker, finder or other party entitled to a commission; and (c) have not incurred and will not incur any liability for finder's fees, brokerage fees or other commissions payable in connection with this Lease, except Location Realty, Inc., to whom Lessor shall pay a commission in accordance with a separate letter agreement between the Broker and Lessor. Lessor shall indemnify and save Lessee harmless from and against any loss or damage arising from Lessor's breach of its representation and warranty contained in this Section 31, and Lessee shall indemnify and save Lessor harmless from and against any loss or damage arising from Lessee's breach of its representation and warranty contained in this Section 31.
The lease with CVS indicates in paragraphs 23 and 40, 23. Broker: Michael O'Brien Location Realty 921 Saybrook Road Middletown, Connecticut 06457 (See Article 40 of Part II) Broker —
40. Landlord and Tenant each represent and warrant that it has had no dealings or conversations with any real estate broker other than the Broker(s) named in Section 23 of Part I. Landlord and Tenant each agree to defend, indemnify and hold harmless the other against all liabilities arising from any claim of any other real estate brokers, including cost of counsel fees, resulting from their respective acts. Landlord warrants and agrees that it shall be solely responsible for any and all brokerage commissions owing to said Broker(s), as a result of the negotiation and execution of this Lease.
The plaintiff in its Trial Brief contend that the documents and testimony show that in exchange for the transfer to them to develop the subject property, Colachino assumed the obligations of Fonda including the obligation to pay commissions to plaintiff under the listing agreement. Plaintiff argues that there was an assignment of rights and an assumption of liabilities even though no formal document was entered into between Fonda and Colachino. The main thrust of the plaintiff in its trial brief is a claim against Colachino. It is only as to the issue of damages and in its conclusion that plaintiff maintains a claim against Fonda.
Fonda argues that as a condition precedent that Fonda purchase and develop the property. Fonda points out the testimony of Michael O'Brien, who stated he had reached an agreement with Colachino for a reduced commission of $125,000, thus relieving Fonda of any obligation to pay a commission.
Michael O'Brien also testified that because Fonda wanted out of the transaction, Michael O'Brien set up a meeting with himself, Fonda and Colachino. As a result of that meeting Colachino took over the development of the project. Colachino also reimbursed Fonda $120,000 in connection with Fonda's expenses with the project.
It is undisputed that Fonda derived no benefit from the development of the property or from the leases to CVS and Liberty Bank.
The court concludes that the credible testimony demonstrates that Fonda could only be responsible for the commissions if he purchased or developed the property, this he did not do. In addition, plaintiff's agreement to accept $125,000 from Colachino showed that plaintiff now looked to Colachino for the commission, thus relieving Fonda of any obligation to pay a commission.
Also and significantly is the fact of the relationship between Michael O'Brien and Fonda. Michael O'Brien was sympathetic to Fonda's desire to be relieved of the project and its obligations. Thus, Michael O'Brien found Colachino who ultimately agreed to pursue the project. While not officially a novation, by his conduct Michael O'Brien agreed to relieve Fonda of his obligation under the listing agreement and look to Colachino.
The court finds that plaintiff has not established by a preponderance of the evidence that it is entitled to recover from the Fonda defendants.
IV
As to the Colachino defendants, the plaintiff has three legal theories as the basis for its claim for commissions.
The first is that Colachino is assignee of the rights and obligations of Fonda pursuant to the listing agreement, second unjust enrichment and third estoppel.
In considering the plaintiff's theories, the court first finds that the listing agreement (exhibit 1) has met the statutory requirements and is a valid listing agreement.
A. Assignment Claims by Plaintiff
Before the execution of the leases with CVS and Liberty Bank, the Colachino defendants took over the development opportunities relative to the North Haven property. Said leases were executed by Colachino as lessor as he had assumed development of the project.
The plaintiff argues that at the time the leases were executed, Colachino was aware of the listing agreement (exhibit 1). Also the leases in question contained provisions that acknowledge Location Realty as the broker entitled to a commission for procuring said tenants.
Colachino contends that his group were not parties to the listing agreement, as to this the plaintiff claims that the Colachino defendants are the assignees of the Fonda defendants as to the listing agreement or otherwise assumed the obligations thereunder. The listing lists as owners Anthony C. Fonda and/or Afar, LLC or assigns. It is undisputed that Colachino took over the project and that Colachino was the lessor of the leases with CVS and Liberty Bank. Colachino does not dispute that the listing agreement complied with the statutory requirements and is valid as to Fonda.
The plaintiff takes the position that Colachino is responsible for the commission because the listing agreement is made applicable to the assigns of Fonda, Fonda transferred his development opportunity to Colachino and Colachino assumed the obligation of Fonda, and that the leases that were executed contained provisions that acknowledge plaintiff as the broker.
Colachino points out that plaintiff has not proven an assignment, that Colachino is not named in the listing agreement and that if the listing agreement is to be modified it must be in writing per clause 12 of the listing agreement, which states:
12. GENERAL PROVISIONS. This Agreement shall be binding upon the parties, and their heirs, successors, assigns and personal representatives; shall be interpreted under and governed by the laws of the State of Connecticut; and may be modified, waived or discharged only by an agreement in writing signed by both parties.
In its Trial Brief, the plaintiff claims that there was an assignment of rights and an assumption of liabilities in regard to the subject property, even though there was no formal document of assignment entered into by Fonda and Colachino.
Colachino claims that they are not liable to the plaintiff because they were not parties to the listing agreement and that recovery is barred by Connecticut General Statutes § 20-325a, said statute requires that in order for a real estate broker to obtain a commission, the listing agreement must satisfy the following requirements:
(1) be in writing, (2) contain the names and addresses of the real estate broker performing the services and the name of the person or persons for whom the acts were done or services rendered, (3) show the date on which the contract was entered into or such authorization given, (4) contain the conditions of such contract or authorization, (5) be signed by the real estate broker or the real estate broker's authorized agent.
The plaintiff takes the position that the requirements of § 20-325a have been met under the circumstances of this case. The plaintiff has provided no authority for this assertion.
Colachino argues that § 20-325a(b)1 mandates the existence of a written listing agreement and it is uncontested that there was no written listing agreement or written assignment between Location and Colachino.
The court finds that Colachino did not enter into a written listing agreement with plaintiff. Also that there was no written modification of the listing agreement in accordance with clause 12 of the agreement. There is no written documentation to show an assignment of the listing agreement between Fonda and Colachino. Also there was no written contract where all the parties agreed to a substitution of Colachino in place of Fonda.
The court concludes that plaintiff has failed to prove that there was an assignment of the listing agreement to Colachino.
Therefore, plaintiff cannot prevail on its claim that Colachino is responsible for commissions to plaintiff based on a theory of an assignment of the listing agreement.
B. Unjust Enrichment
In the third count of the plaintiff's revised amended complaint, the plaintiff alleges that the Colachino defendants have been unjustly enriched to the extent that they have gained the benefit of the leases that were procured by Michael O'Brien.
Unjust enrichment is a principle of law that applies whenever justice requires a remedy to be given for services rendered under a contract, and no remedy is available by an action on the contract. Unjust enrichment is a doctrine based on the premise that it is contrary to equity and fairness for a defendant to retain benefit at the expense of a person providing the benefit.
In the case of Gagne v. Vaccano, 255 Conn. 390, the plaintiff attorney sought damages from the defendant, a successor attorney for his failure to pay the plaintiff a portion of a fee recovered in a settlement. The defendant defended on the basis that the plaintiff failed to obtain a written contingency fee agreement in accordance with Connecticut General Statutes § 52-215c. The Supreme Court held plaintiff's failure to comply with § 52-251c did not preclude him from recovering from the defendant, under the doctrine of quantum meruit or unjust enrichment.
The court stated at page 401:
We turn next to the doctrines of quantum meruit and unjust enrichment. See footnote 10 of this opinion. Quantum meruit is a theory of contract recovery that does not depend upon the existence of a contract, either express or implied in fact. Fischer Co. v. Morrison, 137 Conn. 399, 403, 78 A.2d 242 (1951). Rather, quantum meruit arises out of the need to avoid unjust enrichment to a party, even in the absence of an actual agreement. Fischer v. Kennedy, 106 Conn. 484, 492, 138 A. 503 (1927); see also Sidney v. DeVries, 215 Conn. 350, 351-52 n. 1, 575 A.2d 228 (1990) (quantum meruit and unjust enrichment are common-law principles of restitution; both are noncontractual means of recovery without valid contract). Quantum meruit literally means "as much as he has deserved "Black's Law Dictionary (7th Ed. 1999). Centered on the prevention of injustice, quantum meruit strikes the appropriate balance by evaluating the equities and guaranteeing that the party who has rendered services receives a reasonable sum for those services. Unjust enrichment applies whenever "justice requires compensation to be given for property or services rendered under a contract, and no remedy is available by an action on the contract . . ." 12 S. Williston, Contracts (3d Ed. 1970) § 1479, p. 272. Indeed, lack of a remedy under the contract is a precondition for recovery based upon unjust enrichment. Not unlike quantum meruit, it is a doctrine based on the postulate that it is contrary to equity and fairness for a defendant to retain a benefit at the expense of the plaintiff. See National CSS, Inc. v. Stamford, 195 Conn. 587, 597, 489 A.2d 1034 (1985).
The court pointed out that the doctrine has three basic requirements (1) the defendant was benefitted; (2) the defendant unjustly failed to pay the plaintiff for the benefit; and (3) the failure of payment was to the plaintiff's detriment, citing Bolmer v. Kocet, 9 Conn.App. 595.
Where the benefit of the doctrine unjust enrichment is asserted, it is necessary to examine the circumstances and the conduct of the parties.
In the instant case the Colachino defendants took over the development opportunity from Fonda after the leases with CVS and Liberty Bank had been negotiated by plaintiff. Colachino then executed the final leases with CVS and Liberty Bank, which leases acknowledged plaintiff as the real estate broker. Moreover Colachino's correspondence with People's Bank to obtain financing references brokerage commission of $215,000 (exhibit 115). Exhibit 115 is a Budget Review dated March 25, 2001 for People's Bank concerning Colachino's development of the North Haven property, said document included brokerage commission and was used by Colachino in the financing process with People's Bank and assisted in Colachino obtaining financing.
The court finds that based on the credible evidence, the plaintiff has sustained its burden of proof that the defendant was benefitted by the conduct and efforts of the plaintiff in procuring CVS and Liberty Bank as tenants during the term of the listing agreement, and that the defendant unjustly failed to pay the plaintiff for the benefit he accepted and the failure of payment was to the plaintiff's detriment.
Plaintiff has established that Colachino had received a benefit, that he knowingly accepted, at the expense of plaintiff under circumstances that would make it unjust for Colachino to retain the benefit. The court finds that it would be inequitable to deny the plaintiff the right to recover commissions that it otherwise earned.
Therefore, the plaintiff is entitled to recover from the defendant based on the principle of unjust enrichment.
C. Equitable Estoppel
In invoking the position that Colachino should be estopped to deny liability, plaintiff cites the case of Rapin v. Nettleton, 50 Conn.App. 640. In Rapin, the defendant's husband, with her oral authorization, signed her name to an extension of a listing agreement. In a suit for a real estate commission, the defendant claimed that the provision of Connecticut General Statutes § 20-325a that requires the owner's signature. The court on appeal, held for the plaintiff on the doctrine of equitable estoppel. The court said at page 649:
Equitable estoppel is the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed . . . as against another person, who has in good faith relied upon such conduct and has been led thereby to change his position for the worse. Brock v. Cavanaugh, 1 Conn.App. 138, 141-42, 468 A.2d 1242 (1984).
In Rapin, the plaintiff was unaware that the defendant's husband signed her name to the extension. And the plaintiff relied thereon to his detriment. The court allowed equitable estoppel to apply because the plaintiff relied to his detriment on the conduct of the defendant concerning the extension of the listing agreement.
In the present case there is no conduct by Colachino as to the listing agreement, therefore, the doctrine of equitable estoppel does not apply here.
The plaintiff has failed to prove by a preponderance of the evidence that it should prevail on the theory of equitable estoppel.
V
Colachino maintains that the plaintiff should not collect real estate commissions because it did not have a valid duly issued real estate license. Also that plaintiff is not entitled to collect on its commission claims, as the equities do not balance in its favor.
This brings into consideration the case of Location Realty, Inc. v. General Financial Services, Inc., supra, where the Supreme Court held that notwithstanding that Location did not possess a valid license, it would not be barred from recovering the commission if it were found that it would be inequitable to deny the recovery.
In its determination, this court must balance the equities between the parties. Colachino claims that Michael O'Brien had actual knowledge of the statutory requirements for corporate licensure and that he wilfully violated the statutory requirements. Colachino points to Michael O'Brien's conduct relative to the statutory standards for corporate broker's license and describes Michael O'Brien as going to elaborate lengths to circumvent them. The court finds that the evidence presented does not support this assertion. The court concludes that the credible evidence does not establish that Michael O'Brien acted wilfully as to the relevant statutory requirements. Moreover, Michael O'Brien's conduct as to statutory requirement had no bearing on the transaction between the parties. Colachino has not sustained his burden of proof on this issue.
Other than pointing out Michael O'Brien's conduct as to the statutory standards, Colachino did not present any evidence that Michael O'Brien acted improperly or unprofessionally as to the transaction in question.
Under the facts and circumstances of this case and in accordance with the holding in Location Realty, the court must balance the equities between the parties. In so doing the court has carefully examined the evidence and finds that in balancing the equities, they balance in favor of the plaintiff. By procuring CVS and Liberty Bank as tenants, the plaintiff provided a valuable benefit to Colachino, which Colachino knowingly accepted. Colachino benefitted by plaintiff's efforts in obtaining said tenants.
Colachino has not shown by a preponderance of the evidence that Michael O'Brien wilfully set out to circumvent the indicated statutory requirements. Also the court has found that no credible evidence has been established that Michael O'Brien acted improperly or unprofessionally in this instant transaction. Accordingly, it is concluded that it would be inequitable to deny recovery against the Colachino defendants.
VI
Having found that plaintiff has established a cause of action by a preponderance of the evidence against Colachino in unjust enrichment and that in balancing the equities, that it would be inequitable to deny plaintiff the recovery of real estate commission against Colachino, it now becomes necessary to determine the issue of damages.
The plaintiff argues that pursuant to the listing agreement, damages for commissions are $100,000 for the CVS lease and $45,712.50 for the Liberty Bank lease. Said amounts were set forth in the plaintiff's billing as shown in exhibit 102 dated December 18, 2001. However, further evidence showed that Michael O'Brien and Colachino had discussed that the amount of the commissions would be $125,000, $100,000 for the CVS lease and $25,000 for the Liberty Bank lease. One reason Michael O'Brien agreed to this was the hope of continued business with Colachino.
Unjust enrichment damages are measured by the benefit to the defendant. The contract price and subsequent agreement as to commissions are evidence of the benefit to Colachino. The court finds that since Michael O'Brien agreed to a reduction in commission for the indicated leases in the amount of $125,000, the benefit to Colachino was in the amount of $125,000.
Therefore, the court finds that plaintiff is entitled to damages only against the Colachino defendants in the amount of $125,000.