Opinion
No. CV 08 5016754 S
October 26, 2010
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT
This matter arises out of claimed breach of contract, specifically, a buyout agreement between the parties. Under the terms of the buyout agreement the plaintiff sold his 50% interest in their jointly held limited liability company to the defendant. The corporation owned commercial real estate located at 2 Corporate Drive, Trumbull, Connecticut. The buyout agreement contemplates an additional contingent purchase price under certain circumstances. The plaintiff claims that those circumstances came to pass and that he is therefore entitled to an additional $1,000,000.00 under the buyout agreement. The defendant denies any such contractual obligation.
The plaintiff seeks summary judgment, claiming that the buyout agreement is clear, unequivocal and unambiguous and that under its express terms, given the undisputed facts, he prevails as a matter of law. The defendant asserts that summary judgment is not appropriate as the contract language is ambiguous, thereby raising a question of fact as to the intention of the parties.
For the reasons set forth below, the motion for summary judgment is GRANTED.
Undisputed Facts
The parties agree to the underlying facts and indeed have signed a stipulation which includes the chronology of events set forth below. The parties further agree as to the content of the buyout agreement at issue.
Prior to April 13, 2007, the plaintiff Anthony H. Salce, Sr., and the defendant, Walter Wolczek, were business partners, each owning a 50% interest in a limited liability company named "Anwalt, LLC." Anwalt, LLC owned property at 2 Corporate Drive, Trumbull, Connecticut. In April 2007, the plaintiff agreed to sell his 50% interest in Anwalt to the defendant for a purchase price of $1,750,000.00. The buyout agreement (the Agreement) contained a contingency clause which provides, in its entirety as follows:
(b) Contingent Addition to Purchase Price.
If within one year of the closing hereunder any ownership interest in the Premises or any entity that owns the Premises is transferred to a "non-Wolczek Person" based on a whole property value of more than $3,500,000, the Buyer shall pay Seller an additional purchase price equal to one half the excess at the same time as the transfer. The "excess" is the amount by which the whole property value for the transfer exceeds $3,500,000. The "Whole value" for any sale is the 100% value on which any percentage interest being transferred is based. For example, a one quarter interest transferred for $1,000,000 would equate to a whole property value of $4,000,000. A "Non-Wolczek Person" is someone other than Walter Wolczek or his immediate family member of lineal descendant.
The "Premises" refers to the property at 2 Corporate Drive, Trumbull, Connecticut. The Agreement was executed on April 13, 2007 and the buyout "closed" on May 31, 2007. The one-year contingency period therefore began on May 31, 2007 and would have expired as of May 31, 2008. Thereafter, the Premises were transferred to "Corporate Drive Office Center LLC," an entity whose membership is comprised of family members of the defendant. There has been no claim that this transfer was to a "Non-Wolczek Person" or that it triggered the contingency clause in any fashion.
On March 19, 2008, Corporate Drive Office Center LLC, through the defendant as a Member thereof, entered into a contract for the sale of the Premises to Brian Vaughn or an entity designated by him, with a stated purchase price of $5,500,000. Brian Vaughn then created the entity "Corporate Drive, LLC" to take title to the Premises under the contract. The closing of the real estate transaction for the Premises occurred on July 1, 2008.
Standard of Review
A party seeking summary judgment has the burden of demonstrating the absence of any genuine issue of material facts which, under applicable principles of law, entitle him to judgment as a matter of law. PB § 17-44; Appleton v. Board of Education, 254 Conn. 205 (2000). Conversely, the party opposing such a motion must provide an evidentiary foundation to show the existence of a genuine issue of material fact. Id. This evidentiary foundation must be demonstrated with counter-affidavits and concrete evidence. Pion v. Southern New England Telephone, 44 Conn.App. 657, 663 (1997). A party's conclusory statements may not be sufficient to establish the existence of a disputed material fact, even if in affidavit form. Gupta v. New Britain General Hospital, 239 Conn. 574, 583 (1996).
Discussion
At the hearing on the motion for summary judgment, the parties agreed that the dispositive issue with respect to this motion is whether the terms of the "Contingent Addition to Purchase Price" provision of the Agreement is unambiguous, or whether it is, by its terms, ambiguous. If the language is clear and unambiguous, the parties' intent will be determined by looking to that language and the contract will be interpreted as a matter of law. Tallmadge Brothers, Inc., v. Iroquois Gas Transmissions Systems, L.P., 252 Conn. 479, 498 (2000). If this court finds ambiguity in the language, the fact finder must discern the intent of the parties at the time the Agreement was signed. Id. at 495. On this issue there is a factual dispute, which would preclude summary judgment. Practice Book § 17-44.
The plaintiff argues that the language regarding the transfer of "any ownership interest" in the Premises is unambiguous. He argues that given its ordinary and commonly understood meaning, "any" "includes both legal and equitable ownership interest. The plaintiff further argues that under Connecticut law, the execution of a contract for the sale of real estate has the effect, under the doctrine of equitable conversion, of transferring equitable title to the property to the buyer. Thus, he argues, under the plain and unambiguous language of the Agreement, the contingency was triggered when the contract for sale to Mr. Vaughn was executed and the defendant is required to pay half of the excess purchase price to him.
Conversely, the defendant claims that the phrase "any ownership interest" does not include equitable interest and further that the word "transfer," as contained in the Agreement, is ambiguous. He argues that the "transfer" refers not to an equitable conversion upon the execution of a contract, but the closing of the transaction. Since the closing occurred after May 31, 2008, if the contract language is interpreted as he suggests, he has no liability under the contract. He does not seek summary judgment or ask this court to interpret the contract as he suggests. Rather, he argues that the dueling interpretations give rise to a question of fact, as to the parties' intent, making summary judgment inappropriate.
"Although ordinarily the question of contract interpretation, being a question of the parties' intent, is a question of fact . . . [w]here there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law . . . Levine v. Massey, 232 Conn. 272, 277, 654 A.2d 737 (1995); see Mulligan v. Rioux, 229 Conn. 716, 740, 643 A.2d 1226 (1994), on appeal after remand, 38 Conn.App. 546, 662 A.2d 153 (1995); Bank of Boston Connecticut v. Schlesinger, 220 Conn. 152, 158, 595 A.2d 872 (1991)." Tallmadge Brothers, Inc. v. Iroquois Gas Transmission Systems, L.P., supra, 252 Conn. at 495. (Internal quotes omitted.) The interpretation and construction of a written contract present questions of law for the court to decide when the contract is unambiguous and the intent of the parties can be determined from the agreement's face. Id. citing, 11 S. Williston, Contracts (4th Ed. 1999) § 30:6, pp. 77-83.
"Our case law, however, does not set forth a test by which to determine whether contract language is sufficiently definite to warrant its review as a question of law rather than as a question of fact. Id. at 496. "It is noteworthy that, in the majority of the cases considering contract interpretation a matter of law, the disputed agreement was a commercial contract between sophisticated commercial parties with relatively equal bargaining power." Id. While the commercial nature of the contract, the sophistication of the parties, the use of counsel to draft the agreement or the equal bargaining power of the parties are not dispositive factors, they do, when present, "raise a presumption of definitiveness." Id. at 497.
"A contract must be construed to effectuate the intent of the parties, which is determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction . . . [T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words and . . . the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract . . . Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms. A court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity . . . Similarly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms." Id. at 498, quoting, Pesino v. Atlantic Bank of New York, 244 Conn. 85, 91-92 (1998) (citations omitted).
With these principles in mind, the court looks to the Agreement between these parties.
The Agreement is a commercial contract between sophisticated persons created by and with the assistance of counsel. Each party had his own attorney. See, The Agreement, p. 5, ¶ 10. There is no suggestion that the parties, as 50% owners of Anwalt, did not have equal bargaining power. Thus, there is a presumption of "definitiveness" in the language chosen. Tallmadge Brothers, Inc., v. Iroquois Gas Transmission Sys. L.P., supra, 252 Conn. at 497.
Even absent this presumption, the language of the contract is unequivocal.
The language at issue here is the phrase "if any ownership interest in the Premises . . . is transferred." The event described therein, the "transfer" of "any ownership interest" triggers the defendant's obligation to pay additional funds to the plaintiff. The plaintiff argues that by its plain and unambiguous language "any ownership interest" includes equitable ownership interest. This court agrees. As indicated, in determining the import of the contract language, the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract. Id. at 499, quoting, 24 Leggett Street Ltd. Partnership v. Beacon Industries, Inc., 239 Conn. 284, 295 (1996). "The plain, common or normal meaning of language will be given to the words of a contract unless the circumstances show that in a particular case a special meaning should be attached to them." Tallmadge Brothers, Inc. v. Iroquois Gas Transmission Systems, L.P., 252 supra, 252 Conn. at 499, citing, 11 S. Williston, Contracts (4th Ed. 1999) § 32.3.
"Any" is defined alternatively as: "unmeasured or unlimited in amount, number, or extent;" or "one or some indiscriminately of whatever kind;" or "every — used to indicate one selected without restriction." Merriam-Webster, Collegiate Dictionary, (10th Ed. 1998). The Agreement contains no limitation, restriction or even reference to a particular type, or as argued by the defendant, a particular quantity of ownership interest.
In attempting to import ambiguity into the Agreement, the defendant relies upon that portion of the Agreement which provides an exemplar for calculating "whole value." He argues that the inclusion of this language demonstrates that the term "any" was simply used as an acknowledgment that the defendant might transfer only a portion of the ownership interest but that if he did that, the provision might still be triggered, depending on the "whole value" as calculated under the agreement. While it is certainly accurate that the phrase "any" would include a mere percentage of the ownership interest, there is no language to suggest that it was referencing only this limited situation. Had the parties intended such a limitation, they could have included such a provision in the Agreement. See, Bank of Boston Connecticut v. Schlesinger, CT Page 20249 220 Conn. 152 (1991). Further, whether the proposed sale was for less than 100% or not, does not import ambiguity as to whether the term "ownership interest" includes equitable ownership interest.
Thus, "any ownership interest" includes an equitable ownership interest. The next question then is whether there was a transfer of equitable ownership interest in the Premises when the contract for sale of the Premises with Brian Vaughn was signed by both Mr. Vaughn and the defendant. Under Connecticut law, as of March 19, 2008, Mr. Vaughn had an equitable ownership interest in the Premises by reason of the doctrine of equitable conversion.
Under the doctrine of equitable conversion, when an executory contract for the sale of real property is entered into, the purchaser is regarded as the owner, subject to the seller's lien for the unpaid purchase price, and the seller holds the legal title in trust for the purchaser. The seller's interest thereafter in equity is in the unpaid purchase price, and is treated as personalty; while the purchaser's interest is in the land and is treated as realty. Francis T. Zappone Co. v. Mark, 197 Conn. 264, 268 (1985).
It is the doctrine of equitable conversion which allows for equitable causes of action for specific performance to be brought by a buyer, when the seller has defaulted on the contract. That is, a buyer has an equitable ownership interest if he is entitled to specific performance under the contract. 14 R. Powell, Real Property (2000) § 1.03, pp. 81-84. "Because parties to a real estate contract are able to obtain a decree ordering specific performance of their contract, they can under the doctrine of equitable conversion qualify as equitable owners of the title to the property . . . even before they bring an action for specific performance of the contract." Zappone, 197 Conn. at 267. Indeed, the contract for the sale of the Premises to Brian Vaughn implicitly acknowledges the transfer of equitable title. Section 13(a) of the contract identifies remedies in the event of a default by the seller and specifically recognizes the buyer's option to "any other legal or equitable right or remedy of Purchaser against Seller including, but not limited to, specific performance."
Nor do the parties dispute that the contract with Mr. Vaughn was an executory contract for the sale of the Premises, which would, under Connecticut law trigger the doctrine of equitable conversion. The dispute is whether the doctrine should be "read into" or applied to this Agreement.
Notwithstanding, the defendant argues that the law of equitable conversion should not be read into the contract. He argues first that the word "transfer," as used in the Agreement, means the "closing" of any sale of the Premises and that at the very least this identifies an ambiguity as to whether the parties intended a transfer pursuant to the doctrine of equitable conversion to be a "transfer" under the Agreement. He argues that to apply the doctrine of equitable conversion which creates a "transfer" at a time prior to the closing, is inconsistent with the language of the Agreement. He points to that portion of the agreement which requires the excess payment to be made at the time of the transfer. He argues that to require the payment in advance of the closing is absurd, as the funds would not be available to the defendant until the closing and indeed, the sale may never go through as contemplated.
The term "transfer" is not defined in the Agreement. It has been defined however as "a conveyance of right, title or interest in real or personal property from one person to another." Merriam-Webster, Collegiate Dictionary, (10th Ed. 1998). In the first instance, the defendant asks this court to import ambiguity by giving the word "transfer" a more restrictive meaning than its common, natural and ordinary meaning. Clearly, a conveyance of equitable interest is included within the definition of "transfer." In view of the unambiguous inclusion of equitable "ownership interest" in the contingency clause, had the parties intended the monies to be due at the closing, or at any other time independent of the transfer of equitable title, they could have so indicated. See, Bank of Boston Connecticut v. Schlesinger, supra, 220 Conn. at 158. Indeed, for purposes of commencing the one-year contingency time period, the parties specifically identified the "closing" of the Agreement as the start date. They could have easily indicated that the "excess" was due "at closing."
It is noteworthy that the contract with Mr. Vaughn includes a contingency for additional payments which uses virtually identical language as that at issue here. In the event that Mr. Vaughn transfers "any ownership interest" in the premises within two years of his purchase, the defendant would be entitled to all of the proceeds in excess of $5,500,000. However, the provision requiring payment at the time of the transfer which appears in the Agreement, is not present in Mr. Vaughn's contract.
In this vein, the court is reminded of the closing admonition in the Tallmadge Brothers decision: "Courts do not unmake bargains unwisely made. Absent other infirmities, bargains moved on calculated considerations, and whether provident or improvident, are entitled nevertheless to sanctions of the law . . . Although parties might prefer to have the court decide the plain effect of their contract contrary to the agreement, it is not within its power to make a new and different agreement; contracts voluntarily and fairly made should be held valid and enforced in the courts. Robert Lawrence Associates, Inc. v. Del Vecchio, 178 Conn. 1, 21-22, 420 A.2d 1142 (1979)." Tallmadge Brothers, supra, 252 Conn. at 506.
The defendant also argues that the doctrine of equitable conversion should not be read into this contract because the other cases which have applied or invoked the doctrine have all arisen out of the real estate transaction at issue. While this is generally true, the context in which the doctrine has been applied are, in some instances, quite similar to that presented here. For example, in Francis T. Zappone Co. v. Mark, 197 Conn. 264 (1985), a real estate broker brought suit to collect a commission on the sale of property. Applying the doctrine of equitable conversion, the court found that the commission was earned because the listing provided for commission "upon the transfer" of the property in question. Id. at 268. A similar situation was presented in the matter of Lyman, Tyler, Inc. v. Lodrini, Judicial District of New London, Dkt. No. 04-545124 (February 20, 2004) (Purtill, J.). Like the situation presented here, both of these cases involve the question of whether the doctrine of equitable conversion triggered an obligation under a contract independent of the sale of the property, for the reason that the property had been "transferred" pursuant to that doctrine.
As was the case in Tallmadge Brothers, this court concludes "that the parties meant what they said and said what they meant, in language sufficiently definitive" such that the court can discern the parties' intent from the language used. The "transfer" of "ownership interest" in the Premises occurred when the contract with Mr. Vaughn was fully executed.
While the defendant offers, as evidence of his interpretation of the language in the Agreement, testimony on the issue of the parties' understanding and intent, the ambiguity must emanate from the language of the Agreement itself, "and not from one party's subjective perception of the terms." Pesino v. Atlantic Bank of New York, supra, 244 Conn. at 92. As indicated above, the arguments based upon the language of the agreement are not persuasive.
The motion for partial summary judgment is granted.
SO ORDERED.