Opinion
No. CV 106004459 S
August 20, 2010
MEMORANDUM OF DECISION APPLICATION FOR PREJUDGMENT REMEDY #102
FACTUAL BACKGROUND
The plaintiffs, David and Virginia Sterling, commenced an action in eighteen counts against 49 A Shore Road, LLC, ("Shore Road") Hasim Avdiu and Opala Avdiu on April 6, 2010 by way of a writ, summons, complaint and application for a prejudgment remedy alleging that the defendants have improperly refused to return a deposit for the purchase of a new home at 49 A Shore Road, Greenwich, Connecticut. The complaint alleges causes of action in rescission, breach of contract, deceptive trade practices, unfair trade practice, fraudulent misrepresentation, negligent misrepresentation, innocent misrepresentation and statutory theft. The plaintiffs filed an application for a prejudgment remedy which was returned to the court on April 8, 2010, requesting relief in the amount of $380,000.00. Notice of the return of service for the application for prejudgment remedy was made to the court on June 11, 2010.
The parties appeared before the court on June 28, 2010, July 19, 2010, and July 26, 2010. During these times the defendants indicated that they were seeking counsel to represent them and asked that the matter be continued on each date because counsel had not been retained. On July 26, 2010 the court allowed a final continuance to August 9, 2010 for an appearance by counsel that defendant Hasim Avdiu indicated had just been consulted. On August 9, 2010, the defendants returned to court for a hearing and once again did not have legal representation. Each of the individual defendants had filed an appearance to represent themselves. The defendant, Hasim Avidu, submitted an appearance for the Shore Road. The court informed Hasim Avdiu that "Shore Road" needed legal representation but he chose not to engage the services of an attorney. The court did not recognize his appearance for Shore Road.
The court began a hearing on the prejudgment application on August 9, 2010. The hearing with testimony and evidence was continued to August 16, 2010. The hearing was conducted for two days with testimony from Mr. Sterling, Mr. Avidu, Mrs. Avidu, Mrs. Wells, and Mrs. Sterling. The parties submitted a number of exhibits. After the hearing, the court makes the following findings.
DISCUSSION
"The purpose of a prejudgment remedy of attachment is security for the satisfaction of the plaintiff's judgment, should he obtain one . . . It is primarily designed to forestall any dissipation of assets by the defendant and to bring [those assets] into the custody of the law to be held as security for the satisfaction of such judgment as the plaintiff may recover . . . The adjudication made by the court on [an] application for a prejudgment remedy is not part of the proceedings ultimately to decide the validity and merits of the plaintiff's cause of action. It is independent of and collateral thereto." (Internal quotation marks omitted.) Marlin Broadcasting, LLC v. Law Office of Kent Avery, LLC, 101 Conn.App. 638, 646-47, 922 A.2d 1131 (2007).
"[P]rejudgment remedy proceedings are not involved with the adjudication of the merits of the action brought by the plaintiff or with the progress or result of that adjudication. They are only concerned with whether and to what extent the plaintiff is entitled to have property of the defendant held in the custody of the law, pending the adjudication of the merits of that action. This limited evidentiary proceeding contrasts sharply with, for example, the detailed and substantive arguments and conclusions that must be addressed in a motion to strike." (Citation omitted; internal quotation marks omitted). Marlin Broadcasting, LLC v. Law Office of Kent Avery, LLC, supra, 101 Conn.App. 646.
" `Prejudgment remedy' means any remedy or combination of remedies that enables a person by way of attachment, foreign attachment, garnishment or replevin to deprive the defendant in a civil action of, or affect the use, possession or enjoyment by such defendant of his property prior to final judgment but shall not include a temporary restraining order." General Statutes § 52-278a(d). Prejudgment remedies are statutory devices designed to bring the defendant's assets into custody as security for the satisfaction of the judgment the plaintiff may recover. Pursuant to § 52-278d(a), the prejudgment remedy hearing is limited to a determination of: "(1) whether or not there is probable cause that a judgment in the amount of the prejudgment remedy sought, taking into account any defenses, counterclaims or set-offs, will be rendered in the matter in favor of the plaintiff."
The role of the court in considering an award of a prejudgment remedy is well established. "A prejudgment remedy is available upon a finding by the court that there is probable cause that a judgment in the amount of the prejudgment remedy sought, or in an amount greater than the amount of the prejudgment remedy sought, taking into account any defenses, counterclaims, set-offs will be rendered in the matter in favor of the plaintiff . . ." Kendall v. Amster, 108 Conn.App. 319, 948 A.2d 1041 (2008).
"[A] hearing in probable cause is not intended to be a full scale trial on the merits of the [moving party's] claim. The [moving party] does not have to establish that he will prevail, only that there is probable cause to sustain the validity of the claim . . . The court's role in such a hearing is to determine probable success by weighing probabilities . . . the legal idea of probable cause is a bona fide belief in the existence of the facts essential under the law for the action and such as would warrant a man of ordinary caution, prudence and judgment under the circumstances, in entertaining it . . . Probable Cause is a flexible common sense standard. It does not demand that a belief be correct or more likely true than false." Spilke v. Spilke, 116 Conn.App. 590, 593 n. 6, 976 A.2d 69 (2009). "Proof of probable cause as a condition of obtaining a prejudgment remedy is not as demanding as proof by a fair preponderance of the evidence." (Internal quotation marks omitted.) Kosiorek v. Smigelski, 112 Conn.App. 315, 319, 962 A.2d 880, cert. denied, 291 Conn. 903, 967 A.2d 113 (2009); see 36 DeForest Avenue, LLC v. Creadore, 99 Conn.App. 690, 698, 915 A.2d 916, cert. denied, 282 Conn. 905, 920 A.2d 311 (2007) (stating that the burden of proof at a probable cause hearing is a low one). "At a probable cause hearing on a prejudgment remedy, a trial court may properly consider all evidence presented, including testimony of witnesses, documentary evidence, and affidavits." Fleet Bank of Connecticut v. Dowling, 28 Conn.App. 221, 610 A.2d 707, cert. granted on other grounds, 223 Conn. 921, 614 A.2d 821 (1992).
With this standard in mind, and for the purposes of this application, the court finds that the plaintiffs have satisfied their burden in relation to the application for a prejudgment remedy. In determining that the plaintiffs have satisfied the criteria for the issuance of a prejudgment remedy in this matter the court relies upon the testimony and evidence submitted by the parties.
The defendants testified that Opala Avdiu was the owner of the property at 49 A Shore Road. The defendants are married and are both actively involved in operating and conducting the business of 49 A Shore Road, LLC. Opala Avdiu is a managing member and Hasim Avdiu is a member and the agent for service. (Pl. Exh. 12) Hasim Avdiu was also the general contractor for the property at 49 A Shore Road, Greenwich. Although Hasim Avdiu was responsible for all building aspects including the obtaining of the building permits and certificate of occupancy, Opal Avdiu indicated her extensive involvement in the property which is the subject of this action. She was the owner of the property and became obligated for an open end mortgage to receive funds to build the house. The defendants are involved in other new construction projects and have experience in this field. They decided to build the house at 49 A Shore Road as an investment property. A permit for a new building was obtained by Hasim Avdiu on January 4, 2008 from the Greenwich Building Department. (Pl. Exh. 6.) The defendant included within the permit the FAR calculation that was a total of 4,107 s.f. This application did not include square footage for the basement or the attic/third floor area. On August 1, 2008, the defendant submitted an amendment to "finish basement for rec room, finish attic for storage only . . ." (Pl. Exh. 6.) The defendants did not amend the FAR to include the additional square footage. The defendant, Hasim Avdiu, testified that he was aware that the zoning regulations would restrict the FAR and not allow a ceiling over seven feet in the area which was beyond the allowable FAR for this zone. The building plans that were submitted to the building department show a ceiling of six feet eleven inches total for the space on the third floor that was eventually described as a playroom/media room. (Pl. Exh. 2.) Despite the plans submitted to the building department, the third floor was constructed with ceiling heights of eight feet three inches. At some time after the house was ready to market, the defendant engaged a real estate agent who marketed the house with a brochure describing the features and space of the house. The brochure was approved by the individual defendants. It was this brochure and description that brought the plaintiffs, who were searching for their first home, to look at the property. The plaintiffs began a search for a new home in January 2010 in the Greenwich area. They saw the home at 49 A Shore Road and decided to pursue the purchase. The property had what they wanted. In particular, the third floor playroom offered the space they were seeking for their new family. They engaged in negotiations with the seller and on January 25, 2010 they signed a Sales Agreement for the purchase of the property for $2,800,000. (Pl. Exh. 3.) Before the defendant would sign the sales agreement, he required a deposit. The plaintiffs gave a deposit of $280,000 upon their signing of the sales agreement. The defendant Hasim Avdiu signed the agreement on February 1, 2010 as member of 49 A Shore Road, LLC. The sales agreement set the closing date for the purchase as March 9, 2010. The plaintiffs testified that they needed a short closing date because they were expecting their first child and wanted to be settled before the baby arrived. Thereafter, on February 5, 2010, the plaintiffs were tending to matters to prepare to purchase the house when they were informed that the seller had been cited for a zoning violation because the playroom added square footage and ceiling heights to the third floor of the house which violated the zoning regulations. The notice of violation was dated February 3, 2010 and was based upon an inspection on January 29, 2010. (Pl. Exh. 4.) The specific violation addressed the addition of height to both the main attic area and dormers which, according to the zoning regulations, added additional gross floor area that exceeded the permitted building area. The notice required that the defendants eliminate this work and floor area. As a result of the violation, the defendants would be unable to obtain a certificate of occupancy until the violation was corrected.
The original permit indicates that Hasim Avdiu was the owner of the property on page one and on page two he does not include a notarized authorization from the owner but signs as authorized builder. (Pl. Exh. 6.) The testimony and documents indicate that the owner of the property is Opala Avdiu. The real estate brochure also lists her as the owner of the property.
There was testimony from Ms. Wells who marketed the house. She prepared the brochure which was Pl. Exh. 1 for prospective buyers. She testified that there were prior real estate brokers who had marketed the house for 6,000 square feet but she changed it to "over 7,300 of elegant living space" noted in the brochure as well as including the third floor use as a playroom/media room. In fact, the brochure for the property includes a reference no less than four times that there is a media room which is this illegal third floor space. Additionally the brochure boasts of "high ceilings." Mrs. Wells testified that the practice of the realtors in the Greenwich area permits them to embellish the square footage but she was unable to give a specific regulation that supported this policy. What she did confirm is the more square footage, the higher the price and the greater the commission.
On February 5, the plaintiffs and the defendant Hasim Avdiu discussed the violation and the impact on the house. The suggestion to correct the violation by the defendant involved lowering the ceiling to slightly under seven feet. There was conflicting testimony as to whether this suggestion involved lowering and then after inspection once again raising the ceiling height. However, this option was not acceptable to the plaintiffs because they intended to utilize the third floor as a playroom and the reduced height would make it uncomfortable because Virginia Sterling's father was well over six feet and would not comfortably move in a room with six foot eleven inches as the ceiling height.
A few days thereafter, the plaintiffs informed the defendants that they were terminating the agreement because there was a violation of the zoning regulations that substantially changed the property. At about the same time the plaintiffs also learned that contrary to the representations of the defendants there were three legal actions involving the property, that is, a foreclosure action filed by Webster Bank (Pl. Exh. 7), a Lis Pendens filed by Webster Bank (P1. Exh. 8), and a Mechanics Lien filed by Chestnut Stair Co., LLC (Pl. Exh. 9). Once the Sterlings informed the defendants of their intentions there was very little communication. The defendants refused to return the deposit of the plaintiffs which is the basis for this legal action and application for a prejudgment remedy.
The defendants testified that they did not intentionally breach the sales agreement and were aware of the obligations to deliver a certificate of occupancy to the buyers by the closing. Although the defendant, Hasim Avdiu, testified that he did not believe he would have a problem with the certificate of occupancy, the violation would leave the Sterlings with property that was not in compliance with the regulations and if changes of a temporary nature were done it would make them complicit in violating the regulations.
The defendants also argued that the contract provides a time to cure. Even if this were so it is clear from the testimony of the plaintiffs that they were terminating the contract and the defendants have not cured the zoning violation up to the day of this hearing.
The refusal to return the deposit must be viewed from the perspective of a liquidated damage action in which the contract such as the one at issue contains a clause for the payment of damages in the event of non performance. "[T]he law is well established in this jurisdiction, as well as elsewhere, that a term in a contract calling for the imposition of a penalty for the breach of the contract is contrary to public policy and invalid, but a contractual provision fixing the amount of damages to be paid in the event of a breach is enforceable if it satisfies certain conditions . . . A contractual provision for a penalty is one the prime purpose of which is to prevent a breach of the contract by holding over the head of a contracting party the threat of punishment for a breach . . . A provision for liquidated damages, on the other hand, is one the real purpose of which is to fix fair compensation to the injured party for a breach of the contract. In determining whether any particular provision is for liquidated damages or for a penalty, the courts are not controlled by the fact that the phrase `liquidated damages' or the word `penalty' is used. Rather, that which is determinative of the question is the intention of the parties to the contract." American Car Rental, Inc. v. Commissioner of Consumer Protection, 273 Conn. 296, 306, 869 A.2d 1198 (2005). Liquidated damages are appropriate and construed as such if three conditions are satisfied: (1) damage which was to be expected as a result of a breach of contract was uncertain in an amount or difficult to prove; (2) there was an intent on the part of the parties to liquidate damages in advance; and (3) the amount stipulated was reasonable in the sense that it was not greatly disproportionate to the amount of the damages which as the parties looked forward seemed to be a presumable loss which would be sustained by the contract in the event of a breach of contract. Bellemare v. Wachovia Mortgage Corporation, 284 Conn. 193, 203, 931 A.2d 916 (2007), American Car Rental, Inc. v. Commissioner of Consumer Protection, supra, 306-07, Dougan v. Dougan, 114 Conn.App. 379 (2009). Although the defendants argue that they should not be responsible to return the deposit they have offered no evidence as to the reasonableness of such amount to be retained within four days of the defendant signing the agreement. The defendant, Opala Avdiu, testified in fact that there were other interested buyers for the property but she never provided information that would assist in this analysis. Lastly, the defendants offered exhibits regarding the appraised values of the house (Defendants' Exhs. D, E, and F) which demonstrate appraised values ranging from three million to four million one hundred thousand dollars that would not support a liquidated damages award.
Based upon this testimony and evidence, the court finds that there is a bona fide belief in the existence of the facts essential under the law for this action as would warrant a man of ordinary caution, prudence and judgment under the circumstances in entertaining it to believe there is probable cause to believe that a judgment will be rendered in favor of the plaintiff.
In determining the amount of the prejudgment remedy the court considers the validity of the plaintiff's claim as well as the amount that is being sought. The applicant is required to prove that there is probable cause that a judgment may enter in favor of the plaintiff in an amount at least equal to or greater than the amount of the prejudgment remedy. Dufraine v. Commission on Human Rights and Opportunities, 236 Conn. 250, 261, 673 A.2d 101 (1996). "[T]he plaintiff bears the burden of presenting evidence which affords a reasonable bases for measuring [his] loss." (Citations omitted; internal quotation marks omitted.) Rafferty v. Noto Bros. Construction, LLC, 68 Conn.App. 685, 693, 795 A.2d 1274, 1279 (2002). "[I]n an application for a prejudgment remedy, the amount of damages need not be determined with mathematical precision . . . A fair and reasonable estimate of the likely potential damages is sufficient to support the entry of a prejudgment attachment." (Internal quotation marks omitted.) Morris v. Cee Dee, LLC, 90 Conn.App. 403, 419, 877 A.2d 899 (2005).
The plaintiffs have requested that the court award a prejudgment remedy that will return the $280,000 deposit in addition to attorney fees in the amount of $100,000. The deposit amount is clear and they have established to the court's satisfaction that there is a probability of judgment in their favor in that amount. However, the plaintiffs have requested that the court include within the amount for a prejudgment remedy $100,000 for attorney fees. The only testimony in this regard was from Mr. Sterling that he believes the attorney fees are $100,000 for this action. The plaintiffs have not presented any evidence that would establish fees of this nature for the present action. At the present time they are speculative, if anything, and appear beyond any reasonable amount that should be charged for this type of action. The court is of the opinion that attorney fees of $40,000 which would include time for the presentation of this motion and permit substantial time to be devoted to this action to arrive at a decision are more likely to be a reasonable sum.
CONCLUSION
Therefore, based upon the evidence and testimony addressed at the hearing as noted above, the plaintiffs have established to the court's satisfaction the probability of a judgment in their favor in an amount equal to or greater than $320,000.00 The court orders an attachment for the sum of $320,000.00 of sufficient property and assets of the defendants Hasim Avdiu, Opal Avdiu and 49 A Shore Road LLC, to secure such sum including but not limited to all real estate, bank accounts, investment accounts, mutual funds, and money market accounts.