Opinion
Nos. CV 05-4007041 S, CV 08-5023624 S
December 13, 2010
MEMORANDUM OF DECISION
Two cases were consolidated for trial Daisy Torres v. Bega Investments, LLC et al., (CV08-5023624) and Daisy Torres v. Bernard Kershner, The Kershner Company, LLC and Gary Kershner, (CV05-4007041). The same set of facts are determinative of the ultimate result in each case.
The operative complaint in CV05-4007041 includes the following claims, (1) Breach of Contract against all defendants Bernard and Gary Kershner and Bernard Kershner Trustee (2) Fraud against Bernard and Gary Kershner (3) conversion against Bernard Kershner, Bernard Kershner Trustee, and Gary Kershner and (4) violation of the Connecticut Unfair Trade Practices Law against all the foregoing defendants and (5) a claim of violation of § 52-564 (the civil theft statute) as to Bernard Kershner, Bernard Kershner Trustee, and Gary Kershner.
The consolidated case (CV08-5023624) by way of the operative complaint contains the following counts (1) breach of contract claim against Bega Investments and Bernard Kershner Trustee and, against these same defendants a conversion claim. The various legal claims are thus made against all the defendants named in each of the consolidated cases.
The court will try to discuss each of the legal claims and their viability first. It will then turn to the issue of damages if the plaintiff were to prevail on any of the legal theories she advances.
(1) Breach of Contract (a)
The court will first make some general observations on contract interpretation that may be relevant to this case. It will then discuss the contract provisions.
Interpretation of contract documents in this case has a bearing on its resolution. Very generally it has been said that: "Contract law is permeated by the notion that the law should take into account the reasonable expectations of contracting parties," Calamari Perillo On Contracts, 5th ed., § 3.12, page 157. Or as said in Ginsberg v. Mascia, 149 Conn. 502, 506 (1962) "a contract must be construed to effectuate the intent of the contracting parties." That intent "is to be determined from the language used, interpreted in the light of the situation of the parties and the circumstances connected with the transaction," Leonard Concrete Pipe Co. v. C.W. Blakeslee Sons, Inc., 178 Conn. 594, 598 (1979). Contract language must be given its "common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract," Marcus v. Marcus, 175 Conn. 138, 141-42 (1978).
The court has also said that: "In construing contracts, we give effect to all the language included therein, as the law of contract interpretation . . . militates against interpreting a contract in a way that renders a provision superfluous," Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 14 (2008).
It is also the general law that where the language in a contract is doubtful that language "should be interpreted most strongly against the drafting party, especially where he or she seeks to use such language to defeat the contract or its operation . . ." 17A Am.Jur. 2d, "Contracts" § 343, pp. 330-31, cf Sturman v. Socha, 191 Conn. 1, 9 (1983). It should also be noted that the court in A. Dubreuil Sons, Inc. v. Lisbon, 215 Conn. 604, 612 (1990) quoted favorably from a Utah case which held that "where there is a printed form of contract, and other words are inserted (in the printed form), in writing or otherwise, it is to be assumed that they take precedence over the printed matter." This comports with Section 203(d) of the Restatement (2d) Contracts which says "(d) separately negotiated or added terms are given greater weight than standardized terms or other terms not separately negotiated."
(b)
With these general principles in mind the court will first give a brief overview of the contract entered into between the parties. It will later discuss the provisions, where necessary, in more detail. The contract was signed by the parties on April 22, 2002 for Bernard Kershner and on April 4, 2004 by Ms. Torres. There are some interesting aspects to it in light of the facts of the case. Paragraph 1 states "Seller agrees to sell and Buyer agrees to buy for the purchase price and upon the terms and conditions stated herein the real property with all buildings and other improvements thereon . . ."
Paragraph 2 describes the "real property to be purchased" giving the street address of 1 Pine Street in West Haven and described the real property as a "1 family house new construction." As of April 2002 the house was not completed. Kershner hired a Mr. Sandella to erect the house. The purchase price is listed at $134,000 in paragraph 4 with an initial deposit of $5,000, a grant of $5,000 from the Community Development Agency with financing of $124,000. Paragraph 6 states this "financing contingency" is in the amount noted of $124,000 with a "commitment date of 4-30-02." This paragraph goes on to say "Buyer agrees to apply for such financing immediately and diligently pursue a written mortgage commitment on or before the commitment date." It then says in subparagraph (f) "If buyer is unable to obtain a written commitment and notifies seller in writing by 5 p.m. on said commitment date, this agreement shall be null and void and deposits shall be immediately returned to buyer. Otherwise the financing contingency shall be deemed satisfied and this agreement shall continue in full force and effect."
At least to the court, this aspect of the contract is somewhat confusing. Is the buyer expected to secure a mortgage commitment before completion? If the house to be erected is not sufficiently completed to effectuate a closing — what sane buyer could be expected to participate in that event? Query whether failure to secure such a commitment under such circumstances could not justify nullifying the agreement by the seller. The same would be true if zoning issues prevented the issuance of a certificate of occupancy, another prerequisite for any closing. These observations will be discussed shortly.
Paragraph 8 refers to the "Inspection Contingency" which requires that inspections be completed and results reported to the seller "on or before 5 p.m. on upon (sic) completion."
Paragraph 10 is also interesting: It is entitled "Occupancy, Possession" and states "Closing Date: 2 weeks upon completion or thereabout. 60 days." The closing date which is equated with the right to "occupancy and possession" is in effect governed by the "completion date."
(c) (i)
The issues presented are whether there was a breach of contract by the defendants; did the plaintiff herself breach her contractual commitments and if so what if any effect would this have on the defendants' duty to perform. What is substantial performance owed by either side in the context of this case?
The court in trying to address these issues will try to set forth the basis of its conclusions with as much detail as possible so that if there is error it can be more easily corrected by appellate courts.
In analyzing the conflicting factual evidence the court has relied heavily on the testimony of Jeffrey Kershner. He runs a mortgage company and attempted to secure a mortgage for the plaintiff. For one thing he could explain the financial commitments Ms. Torres had to obtain in order to comply with her obligations to obtain a mortgage so that any closing could go forward. He testified Ms. Torres was referred to him by his father Gary Kershner. He is the grandson of Bernard Kershner but also stated he became friendly with Ms. Torres during the time he was trying to assist her. Much of his testimony was favorable to Ms. Torres as was the contents of a letter he wrote to an attorney who had been representing her in this matter. On the other hand important parts of his testimony do not necessarily favor her position. He struck the court as the only witness who presented a balanced view of what went on here, not colored by the natural tendency of other witnesses to perceive things from their own perspective and governed by their own interests.
The court will now have to review the facts of the case to determine the rights of the parties and more exactly their accrual, given contract terms.
The contract specifically stated as part of the financial contingency that a commitment date had to be complied with by Torres by April 30, 2002. That term refers to the existence of a mortgage secured by a bank. Clearly, no such commitment could be obtained at a time when the house was not completed and obviously no appraisal and inspection could take place, see § 225 of Restatement (2d) Contracts describing the effects of the non-occurrence of a condition. Even according to the most favorable testimony for the defendants the house was not substantially completed (whatever that means since no evidence was offered) until October 2002. Furthermore there were zoning problems which were not resolved until June 2003. A certificate of occupancy could not be issued until this was cleared up and a final inspection of the house could only be done after the certificate was issued according to Jeffrey Kershner. He also testified that you "don't get the mortgage until the final inspection is done." Under these circumstances failure of Torres to get a mortgage commitment at least before July 2003 makes any claimed frustration at her failure to do so ring a little hollow.
Thus any expressed frustration by the Kershners as a reason to avoid their contractual obligations because of Torres' failure to secure a mortgage commitment from 2002 through the point when the house was physically completed will not past muster. Perhaps more to the point arguably there was a waiver by the Kershners of any such contractual right. Despite failure by Torres to secure a commitment even when the house was nearly completed, the Kershners continued to act as if the contract to sell to Torres was still in force at least as late as September 8, 2003. In late July Jeffrey Kershner was called with a demand that a closing occur within only several days; this would require that Torres have a mortgage commitment on the date of the prospective closing. Nothing occurred immediately as a result of that conversation. However, on August 25, 2003 Torres was sent another letter by the Kershners informing her that the closing would take place September 8, 2003. This was done "pursuant to the sales agreement" and she was told "time was of the essence." The August 25th letter is a waiver of any rights they might have had to excuse breaches on their part. The letter represents conduct on their part indicating a viable contract was in place; waiver of contract rights is possible and is a "species of the principle of estoppel, C.R. Klewin Northeast, LLC v. Bridgeport, 282 Conn. 54, 87 (2007).
The "time is of the essence" comment in the Kershners' letter is also of some interest given the facts of the case. Both Jeffrey Kershner and Ms. Torres testified that the house was expected to be completed within 60 days of the signing of the contract. The Kershners do not seem to contest this — see also cryptic comment in paragraph 10 of the contract which says as to the closing date "2 weeks upon completion or thereabouts. 60 days."
How can it be said that given these circumstances, Torres' failure to secure a mortgage commitment prior to July 2003 was a material breach; what possible benefit could the Kershners claim to be deprived of? The could would come to completion without the certificate of occupancy and final inspection which is the only way Torres could have gotten a mortgage commitment, see § 241(a) of Restatement (2d) Contracts. Neither could they have finalized a sale to anyone else.
Also the testimony of Jeffrey Kershner, which is uncontradicted, indicates that Torres during this time and indeed up to September 8th was "mortgageable" and that to maintain that status Torres had to recurringly supply him with information every 30 or 60 days. Securing of this status made procurement of an actual mortgage commitment a certainty as long as nothing in the person's financial status had changed. There was thus no evidence of a prospective failure of Torres to keep her mortgageable status up to date; this might have established she would have been unable to secure a mortgage commitment.
(ii)
At this point things become difficult for the court if there was no breach before that date. Was there a breach by Torres on September 8, 2003? By that date the zoning issues had been cleared up and an inspection of the house could have taken place any time after August 25, 2003. Did the defendants have any ongoing duties with regard to their contractual obligations despite her actions or failures to act on that date or thereafter. The court will present both sides of the evidence of each party — Torres and the defendant Kershners.
This is where the testimony of Jeffrey Kershner becomes particularly important. If the court understands his testimony correctly, up until August 2003 Torres was always mortgageable. That being the case she would have been able to obtain a mortgage commitment. On August 13, 2003, however, he sent Ms. Torres a letter indicating her "loan approval has expired;" that would mean she could not obtain at that point a mortgage commitment. Whatever he might have surmised as to her "mortgageable" status he was dealing with banks and for her to reinstate her loan approval he asked her to send him certain documents saying "Please call ASAP to schedule an appointment to bring by these documents and extend your loan approval." He offered to help her if she had difficulty obtaining the documents he listed. A notation by him on the letter states he sent it four times, two to her work, two by certified mail to her home. Jeffrey Kershner then said "I don't think Mrs. Torres wanted to go through." He goes on to say:
I requested paperwork from her. I don't have any of requested paperwork from her. I don't have any of the paperwork from her. I don't have any — she didn't update certain things. I don't think she wanted the house at that point. She was just really fed up with the whole house because I tried to contact her. That's why I had to certify mail her something to show that, you know, I'm trying to get, you know, this letter's is on the 13th, If she was supposed to close by the 8th, I could have closed probably by the 8th if she brought in this information to me. That's why I was — I said I've got to cover my bases on this 'cause it's such a mess. So I certified letter; I called her work; I called her. I don't have any of the new information from her.
He testified he had been trying to get the requested items from the point in time at the end of July when his father contacted him about wanting a closing and the date he sent the August 13th letter. He had called Ms. Torres about this and told her to contact her attorney to request an extension the first time at the end of July when his father had called saying he wanted to schedule a closing. No attorney contacted him and according to the letter sent to the attorney originally representing Torres in this matter he did not hear from Torres again until she told him someone else had bought the property. In his trial testimony Kershner said he thought the builder Sandella told her the property to others by the time he was talking to her about sending in the updated documents in August 2003. But Torres herself denies Sandella told her this and she said as of September 8, 2003 she did not know a sale was in the works with other buyers. She only saw it in the paper but that would have been sometime around October 2003 when the closing with the new buyer had taken place.
The factor that makes this case a difficult one is that the defendants themselves acted or failed to act in various ways which could be said to have violated their contractual obligations and arguably could not meet the contractual expectations of the plaintiff in dealing with them under the contract.
In DeMattia v. Mauro, 86 Conn.App. 1, 7 (2004) the court said that: "When the parties to a real estate contract want to fix a specific date for performance, we generally have required them to express specifically in the contract that time is of the essence; otherwise performance within a reasonable time will satisfy the contract." Quoting from an earlier case, the court went on to say "Ordinarily, what constitutes a reasonable length of time is largely a question of fact to be determined in the light of the particular circumstances of each case . . ." Here the house contracted for was to be built within two months of the signing of the contract. Because of delays in construction and placement of the house on the lot, all attributable to the builder the Kershners hired, the house was not ready for occupancy until June or July of 2003, some fourteen or fifteen months after the contract was signed. Torres could have backed out of her contractual relationship, she chose not to, however.
There is no reason to conclude the Kershners were not aware Torres was mortgageable. Jeffrey Kershner told Gary Kershner before he wrote the August 13th letter to Torres that she was mortgageable. In late July when Jeffrey Kershner was pressed about a closing he told his father that he needed several days to get an appraisal done, a prerequisite to a final mortgage commitment. So it must be assumed that these people, who had been in the real estate business for decades by their very demands for a closing and Jeffrey Kershners' response, all assumed Torres was mortgageable and could easily obtain a mortgage commitment.
The August 25, 2003 letter informing Torres of the prospective closing on September 8, 2003 is obviously critical to this case. Torres said she called Jeffrey Kershner to set up another time for the closing; he testified he did not hear from her after he sent the August 13th information request letter. She did not call Gary Kershner because she said he never returned her calls. The court believes Jeffrey on this issue but credits Torres' testimony and not Gary Kershners' that he never got calls from her. Why would she not try to reach him — she moved herself and her children next to the home she hoped to move in and stayed there for months? Why would she be shy or reluctant to call Gary Kershner? The woman was forced to rely on her contacting Jeffrey Kershner who worked in the same building as his father Gary.
The court also believes that as per the instructions of the August 25th letter informing her of the September 8th closing that she did try to call the seller's lawyer concerning the closing and apparently more time to prepare for it. She said at trial she was told the lawyer was on vacation — not an unusual occurrence for that month. If he was not and got no call from Torres, he could have easily been produced at trial but he was not. What to make of all this sometimes conflicting testimony? The court believes that by the summer of 2003 Torres was completely frustrated in her desire to acquire this house. It agrees with Jeffrey Kershner that that was why she did not respond to the August 13, 2003 letter he sent to her asking for information which would allow the mortgage commitment to be procured. The court further concludes Torres did not receive the letter just a few days before September 8, 2003 as she stated but on August 28, 2003 which is the post office stamp date for delivery. Why would the post office place the wrong date? There is vague reference in Torres' testimony that Jeffrey had all the documents he needed to move to mortgage commitment. But the individuals such as a former lawyer who might have had them were not served with a subpoena to produce documents they had or otherwise questioned as to what the documents might have been, if they were lost. The court credits Jeffrey Kershner's testimony on this issue.
But it further concludes that it is likely she still had an interest in acquiring the house. The August 25, 2003 letter would have alerted her that despite all the delays the house in fact was ready to be delivered to her, by way of a closing. She did make at least some efforts to put that date off so the final mortgage commitment could be secured despite her recent failure to cooperate with Jeffrey Kershner — why would she try to call the seller's lawyer? After that she apparently gave up her efforts at acquiring the property. She never contacted Jeffrey Kershner or had a lawyer do so to find out about a new closing date or the status of the property. The Kershners never contacted her. The complicated picture becomes more complicated when the question is asked why they did not contact her. Not hearing from her could they have assumed she lost interest in the property?
The court finds that the defendants could have easily contacted Torres by phone, mail or even personal visit. They knew where she worked and lived and they must have known Jeffrey Kershner was in touch with her — he worked in the same building. But these observations cut the other way. Torres knew where the defendants' business was located. They did not return her calls but she could have sent them a certified letter regarding her desire to obtain a new closing date and expressing her continuing interest in buying the house. She could have done the same with Jeffrey Kershner after September 8, 2003. She could have had a lawyer do any of the above and she apparently had one at this time.
Finally other factors must be discussed which may be relevant to the legal principles the court must apply to the claims being made. On the very day a letter was sent to Torres, August 25, 2003, in which she was informed a closing would take place and time was of the essence a fax was sent by Gary Kershner to his lawyer. Attached was a copy of the August 25th letter sent to Torres. Gary Kershner asked the lawyer to let him know if Torres or a lawyer representing her calls him pursuant to the letter giving the lawyer's name and phone number. The fax then says: "Please set up closing. My father wants to cancel her out." At this point Gary Kershner, from talking to his son, knew Torres was mortgageable but the son needed ten days notice prior to the closing to "turn it around" — i.e. get an appraisal and a mortgage commitment. The letter to Torres was sent by certified mail August 25th and time stamped August 28, 2003, twelve days before the prospective closing date of September 8, 2003.
But the complications do not end there. On August 25, 2003 — the very day the letter was sent to Torres indicating the time is of the essence closing date — a settlement statement was signed by Gary Kershner for Bega Investments and two prospective buyers. They had secured financing for a sales price $40,000 greater than the price Torres was to pay under her agreement.
The court can assume with some degree of assurance that these prospective buyers did not walk into the Bega Investment offices the morning of August 25th prepared to sign the settlement agreement. When negotiations between these people and Bega Investment took place, however, was not pursued at trial — particular when the sales price of $177,692.18 was put on the table. An actual contract to sell was signed between these parties on, interestingly enough, on September 8, 2003; the date the closing with Daisy Torres was to take place. Interestingly enough in paragraph 6 of this contract under the heading "other conditions" it says "$5,000 sellers concession toward closing. Subject to previous contracts becoming null/void" — obviously referring to contract with Torres. The closing date was set at October 15, 2003 "on or before." Gary Kershner testified that if Torres appeared mortgage commitment in hand before that, the property would have been sold to her.
The question becomes given all these complicated factors what is the applicable law on whether either of these parties breached the contract between them. The first question the court will address is whether Ms. Torres herself can be found responsible for a breach of contract on September 8, 2003. Certainly the sellers here had a right to expect that the buyer would appear at any closing prepared to consummate the contract of sale between them. This would have required a mortgage commitment. By not appearing at the September 8th closing was a material breach of her contractual obligations committed by Torres?
The contract between the parties sets no specific date for this performance requirement by Torres. Paragraph 10 rather cryptically, as noted says "Closing Date: 2 weeks upon completion. Thereabout. 60 days." As previously discussed, a closing could not take place until zoning problems, here not created by the buyer, were cleared up so that a certificate of occupancy could be issued. That was not accomplished by the seller until sometime in June 2003. The fact that the house was physically completed even several months before that, in itself, cannot have triggered an obligation by Torres to appear at a closing. Any other reading of the contract does not make sense and would nullify its existence ab initio. The sellers themselves did not press for a closing until the end of July 2003. Even with that Jeffrey Kershner told them given any date the sellers dictated he would need ten days to arrange for an inspection of the property, a prerequisite for any mortgage commitment. Or perhaps to put it less verbosely paragraph 10 assumes both sides would be ready to come to the closing ready to consummate the sale — the Kershners having enabled a certificate of occupancy to be issued, Torres, with her mortgage on hand.
What of the September 8th date as the bench mark to determine violation of contractual duties by Torres? Even where an agreement explicitly sets forth a time for performance "a party's tender of performance within a reasonable time thereafter will be considered substantial performance unless the parties intended that the time for performance to be of the essence." Mihalyak v. Mihalyak, 11 Conn.App. 610, 616 (1987). But as said in Miller v. Bourgoin, 28 Conn.App. 491, 498 (1992): "Because delays are typical in transactions involving real property or building contracts, time is ordinarily not of the essence in those contracts." And it has been held that where a contract does not make time of the essence, a seller's attempt to convert the contract into a time is of the essence contract can be considered ineffectual if the notice is too abrupt under the circumstances, cf ADC Orange v. Coyote Acres, 7 N.Y.3d 484 (Ct. of App. N.Y., 2000).
Thus the mere fact that Torres did not appear at a September 8th closing ready to perform her part of the contract, standing alone and under the facts of this case was not a material breach. But the question still remains as to whether other considerations lead to the conclusion that there was a material breach. Our appellate courts have adopted the test set out in Section 241 of the Restatement (2d) Contracts. The relevant parts of that section read as follows:
241. Circumstances Significant In Determining Whether a Failure is Material.
In determining whether a failure to render or offer performance is material, the following circumstances are material;
(a) The extent to which the injured party will be deprived of the benefit which he reasonably expected.
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(d) The likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances . . .
Cases citing and relying on an analysis under § 241 are Bernstein v. Nemeyer, 213 Conn. 665, 772 (1990); 669 Atlantic Street Associates v. Atlantic-Rockland Standard Associates, 43 Conn.App. 113, 126 (1996).
The decision as to whether Ms. Torres breached her agreement, in the court's opinion, is an important consideration because it is intrinsically tied to the question as to whether the defendants breached their obligations to Torres by not consummating a sale to her and in fact selling the house to other people; see Section 237 of the Restatement which is cited in Borrelli v. H H Constructing, Inc., 100 Conn.App. 680, 693 (2007). Section 237 states that ". . . it is a condition of each parties remaining duties to render performances to be exchanged under an exchange of promises that there be no uncured material failure by the other party to render any such performance due at an earlier time."
As to Section 241, it could certainly be said that the defendant sellers in this case would have been deprived of the benefit of their bargain with Torres if Torres did not appear at the September 8th closing or any reasonable date thereafter with a firm mortgage commitment and otherwise ready to close. Subsection (d) of § 241 can be said to present the problem for their position, however. Jeffrey Kershner made it clear to them that Torres was mortgageable so these experienced real estate businessmen knew or should have known that she could procure a mortgage commitment as long as Jeffrey Kershner was given the ten days he needed to secure an appraisal and inspection of the property. The defendants had no problem pursuing completion of a contractual arrangement with new buyers that put off a closing until the middle of October. The court concludes, as Jeffrey Kershner testifies, that the defendants wanted to cancel her out (Gary Kershner's own words) because of the more lucrative offer from new buyers. No attempt was made by them to contact Torres after September 8th. They had her home and street address and no testimony indicated they tried to speak with Jeffrey, their son and grandson who worked in the same building, to try to set up another closing date.
But the problem is that this observation cuts both ways. Torres said she called the seller's lawyer before September 8th but he was on vacation. Why did she not call on September 8th or otherwise appear on that date at the location of the closing. More importantly why did she not contact Jeffrey Kershner to find out what was going on before September 8th or afterward. Why is there not any evidence that she in fact sent in the materials requested in the August 13, 2003 letter from Kershner, someone who definitely supported her position from his first contact with her to the date of this trial. Gary Kershner never responded to her calls but she had the defendants' address and could have sent them regular or certified mail announcing her intention to pursue her contract rights and just as importantly her contract obligations.
Where does that leave us? The court concludes that all parties basically abandoned contractual rights they might have had leading to the consummation of the sales agreement. One cannot help but being sympathetic to Ms. Torres. Here she was told the house she contracted for would be completed in 60 days. It was not substantially completed at least until the end of 2002 and even then the deal could not be consummated, through no fault of her own, but because of the zoning issues created by the placement of the house — a problem created by the defendants' agent who constructed the house. Torres dutifully kept in close touch with Jeffrey Kershner regarding the mortgage requirements for months. She could only find out about the progress of construction and about delays through him, because the defendants did not keep in touch with her. But from her actions and failures to act, although she would have still loved to move into what for her was a dream house, she withdrew from efforts to consummate the contract except for one call to the seller's lawyer that was not pursued.
The defendants, on the other hand, wanted to "cancel her out," weeks before their chosen September 8th closing date which they now apparently claim is the date of her breach. It would not result in any loss to them — a new deal would give them thousands more. The defendants had been told Torres was mortgageable, Jeffrey Kershner did not recall whether he told the defendants about the August 13th letter requesting more information which would have turned her mortgageable status into a mortgage commitment. But Jeffrey Kershner was told, according to him, by Gary, his father to say if anyone asked, say Torres was not mortgageable — this was presumably after the October 2003 sale to others. This indicates they certainly knew the significance of being mortgageable and preapproved for a mortgage in the process of getting a commitment. Oddly enough no evidence was introduced as to what steps were taken to prepare for any closing on September 8, 2003. No time for the closing was indicated in the letter informing Torres it would take place on September 8, 2003. On the very day of the scheduled closing they signed a settlement agreement with the new prospective buyers. It does contain language that says this agreement was "subject to previous contracts becoming null and void" — what does "becoming" signify? If the claim is that Torres breached the agreement on September 8, 2003 it was already a nullity. After September 8th came and went the defendants did not contact Torres or Jeffrey Kershner to inquire as to what was going on. This was consistent with the fax to their lawyer that said Bernard Kershner wanted to cancel her out. As discussed they knew how to contact her despite testimony from Bernard Kershner at his deposition that she had "disappeared." All of this does not indicate that the defendants breached the entire contract or better put its main object — to sell Torres the house. They took no affirmative steps to mislead her or prevent performance on her part.
But like Ms. Torres the defendants, in effect, abandoned the contractual relationship. Their actions after the "My father wants to cancel her out" can best be understood in that way. At the deposition of Bernard Kershner the following occurred:
Q. Okay. What did you mean to say you were going to "cancel" her?
A. Well, if she didn't come through with a mortgage and ready to close, then we're going to cancel her and find somebody else. That's what I meant.
Q. And what did "cancel" mean? She wasn't going to get the property?
A. She wasn't going to get the property and we'd give her her deposit back.
It is a close case but the formal statement of the doctrine the court believes applies to this confusing set of facts is set forth in Young v. Young, 78 Conn.App. 394, 402 (2003). There the court said:
This court and our Supreme Court have addressed the issue of mutual abandonment of an agreement. "Mutual assent to abandon a contract, like mutual assent to form one, may be inferred from the attendant circumstances and conduct of the parties . . . Our Supreme Court's conclusion . . . that parties are free to terminate an agreement by mutual assent has been followed in later cases. [T]he well-established rule [is] that rescission or abandonment of contracts, like entry into a contractual relation, depends upon the intent of the parties and that the relevant intent is to be inferred from the attendant circumstances and conduct of the parties." (Citations omitted; internal quotation marks omitted.) Smith Smith Building Corp. v. DeLuca, 36 Conn.App. 839, 842-43, 654 A.2d 368 (1995); see also Herman S. Newman Partners, P.C. v. CFC Construction Ltd. Partnership, 236 Conn. 750, 762, 674 A.2d 1313 (1996).
The court does not believe that a breach of contract claim as made against the sellers has been established but also has concluded that under the circumstances of the case this is not based on the position that Ms. Torres breached the contract. That does not end the discussion under the breach of contract claim viewed as a contract to sell the house at 1 Pine Street to Ms. Torres, however.
There is the matter of the $5000 deposit and where a contract has been "abandoned" that does not preclude a court from deciding whether certain rights and obligations have accrued under the contract that must be enforced. A $5,000 deposit was put up by Torres at the time of contract formation. Paragraph 14 states in relevant part: "If buyer fails to comply with any terms of this agreement by the time set forth for compliance and seller is not in default, seller shall be entitled to all initial and additional deposit funds provided for in Section 4 whether or not buyer has paid the same, as liquidated damages and both parties shall be relieved of further liability under this Agreement."
This contract was drawn up by the seller and the written language was added by the seller. The relevant paragraphs to interpret paragraph 14, to the court at least, are paragraph 4 which determines the amount of the deposit, paragraph 6 which discusses the "financial contingency" and the buyer's obligation to secure a financing. It states a commitment date (for the mortgage was to be 4-30-02). It then says deposit will be returned to buyer if buyer by 5 p.m. on Commitment date notifies seller she cannot obtain a mortgage. Where else does the agreement set forth the buyer's obligation? Paragraph 10 states the closing date will be "2 weeks upon completion or thereabout. 60 days" (a handwritten addition to printed contract language). The court would respectfully suggest that this language is indecipherable and does not give the sellers the right to retain the $5,000 deposit as liquidated damages. Is the commitment date in paragraph 6 somehow moved up to September 8, 2003? Torres said she called the seller's lawyer and could not reach him — the only thing she could say is she had no commitment but that does not belie the fact that she was still mortgageable. Is paragraph 10 to be interpreted to define the ambit of Torres's compliance or lack thereof with the terms of the agreement? What does the written language mean in terms of triggering any obligation on the buyer's part?
Besides to the court at least it does not make sense to hold that the sellers under the facts of this case are entitled to retain the deposit as liquidated damages. That term is defined in Berger v. Shannon, 142 Conn. 726, 731-32 (1955), and there it says: "A provision for liquidated damages . . . is one the real purpose of which is to fix fair compensation to the injured party for breach of contract." In light of the great delays in making the house ready for a closing which caused the plaintiff's expectations under the contract to be frustrated with no attendant cost to the defendants precipitated by Torres and because the net result of Torres's contract being terminated resulted in a profit of some $40,000 over the sale price to her it does not seem rational to hold that the sellers here would be entitled to liquidated damages.
In any event none of the contract provisions give the sellers a right to retain the $5,000 deposit and that amount should be returned to the buyer with interest.
In effect the court holds that the defendants broke that aspect of the contractual relationship defining the circumstances under which the deposit money could be retained by the defendant sellers. Or perhaps better put, the contract provisions, reasonably interpreted gave them no right to retain the deposit.
As a necessary result of the foregoing analysis the court denies the defendant's counterclaim.
Conversion
"Conversion is an unauthorized assumption and exercise of the right of ownership over goods belonging to another, to the exclusion of the owner's rights," Discover Leasing, Inc. v. Murphy, 33 Conn.App. 303, 309 (1993); Suarez-Negrete v. Trotta, 47 Conn.App. 517, 521 (1998). Money can be the subject of a conversion, Omar v. Mezvinsky, 13 Conn.App. 533, 536 (1988); Devitt v. Manulik, 176 Conn. 657, 662-63 (1979). Conversion requires that the owner be harmed by a defendant's conduct, id. At page 660. In Connecticut Law of Torts, 3ed, Wright, Fitzgerald, Anberman, at § 27, page 42 it notes that where the defendant's possession of the res in question is rightful in the first instance and becomes wrongful by reason of wrongful detention "then demand and refusal are necessary prerequisites for bringing (an) action of conversion," citing Molski v. Bendza, 116 Conn. 710 and Moore v. Waterbury Tool Co., 124 Conn. 201.
Here the original retention of the deposit was rightful and dictated by the terms of the contract. In light of the discussion in the previous section the court concludes the detention became wrongful. There was no evidence of a specific demand for return of the deposit, however, filing of the suit by the plaintiff is the equivalent thereof. The plaintiff under conversion theory is entitled to return of the deposit but interest should only run on this theory from the filing of the suit.
Theft Statute: Section 52-564
The plaintiff claims a violation of the so-called civil theft statute because of the retention of the deposit money. That statute states: "Any person who steals any property of another, or knowingly receives and conceals stolen property, shall pay the owner treble his damages."
In Sullivan v. Delisa, 101 Conn.App. 605, 619-20 (2007) the court said that: "The elements that the plaintiffs must prove to obtain treble damages under the civil theft statute, are the same elements required to prove larceny . . . The elements of civil theft are also largely the same as the elements to prove the tort of conversion, but theft 'requires a plaintiff to prove the additional element of intent over and above what he or she must demonstrate to prove conversion. In Mystic Color Lab, Inc. v. Auctions Worldwide, LLC, 284 Conn. 408 (2007) at page 418, footnote 14 the court said: "This court has held that statutory theft under § 52-564 'is synonymous with the crime of larceny' as defined in § 53a-119 . . . A person commits larceny within the meaning of § 53a-119 'when with intent to deprive another of property or to appropriate the same to himself or a third person, he wrongfully takes, obtains or withholds such property from an owner." An 'owner' is defined for purposes of § 53a-119 as 'any person who has a right of possession superior to that of a taker, obtainer, or withholder.' General Statutes § 53a-118(5)."
In the recent case of Stuart v. Stuart, 297 Conn. 26, 44 (2010) the court overruled an Appellate Court case and held the proper standard of proof is not clear and convincing evidence but the preponderance of the evidence standard.
What is the intent that is required under the statute and for larceny in general? In Whitaker v. Taylor, 99 Conn. 719, 732 (2007) the court discussed the civil theft statute and indicated that one accused must act "with the requisite intent to permanently deprive the plaintiff of her property." The court has examined the larceny statute, § 53a-119 and cases under it. First it should be noted our statute is broad in language in that it covers not only direct stealing but withholding of property implying one can be guilty of larceny even if the property in question was acquired legally but was then letter wrongly withheld with intent to deprive the rightful owner of his or her property.
Cases dealing with direct theft ab initio are interesting in one respect relative to the issues presented in this case and their observation would seem to apply in a withholding situation. Thus in State v. Varszegi, 33 Conn.App. 368 (1993) the court referred to and quoted from Am.Jur. (1970) and hornbooks to the effect that: "Since the taking must be with felonious intent . . . taking under a bona fide claim of right, however unfounded, is not larceny . . . Although ignorance of the law is, as a rule, no excuse, it is an excuse if it negatives the existence of a specific intent." Quoting again from Am.Jur. the court said: "A defendant who acts under the subjective belief that he or she has a lawful claim on property lacks the required felonious intent to steal. Such a defendant need not show his mistaken claim of right was reasonable, since an unreasonable belief that he had a right to take another's property will suffice so long as he can establish his claim was made in good faith." Or to state it in another more succinct way the court earlier said: "Because larceny is a specific intent crime, the state must show the defendant acted with the subjective desire or knowledge that his actions constituted stealing," id. pp. 372-73. See also Substantive Criminal Law 2d. ed., La Fave Vol. 3, § 19.5 subsection (a), pp. 88-89, also see 50 Am.Jur. 2d, "Larceny," § 42, page 52. There is no credible reason, at least in the court's opinion, why these observations should not apply in a case of what one might call larceny by withholding. The question becomes as to the bearing of foregoing observations on this case.
For one thing it is undisputed that the original receipt of the money here by the defendants and their deposit of the funds in an escrow account was an act devoid of larcenous intent, obviously legal, and contemplated by the contract. Neither is this a case where the money was surreptitiously taken out of such an account and spent for the defendants' own personal or business use. The money remains in an escrow account awaiting an order of the court with a claim of interest. On the other hand our larceny statute talks of depriving an owner of property and contemplates one way of doing so is by wrongfully "withholding it," see § 53a-119. And Section 53-118(a)(3) defines "deprive" to mean "(A) to withhold it or cause it to be withheld from (another) permanently or for so extended period or under such circumstances that the major portion of its economic value or benefit is lost to him."
Giving the plaintiff every favorable inference the larcenous withholding would have commenced sometime in the summer of 2003 — that is when a contract was signed with new buyers. That of course is seven years ago but much of that time was consumed in litigation which began in January 2005. Here the question comes down to whether the court can conclude that in retaining the deposit that the defendants acted with larcenous intent or to put it in a perhaps less inflammatory way — can be said they have had a good faith belief that they had a right to retain the deposit permanently. The court for the reasons stated concluded they had no right to retain the deposit. It should have been returned to Ms. Torres at least upon the closing date with the new purchasers.
It has been the defendants' position during the litigation that Ms. Torres breached her contractual obligations and that that coupled with the contract language gave them a right to retain the deposit and perhaps even make a claim for attorneys fees. But there are inconsistencies in their actions which belie a good faith claim.
In his deposition testimony Bernard Kershner testified that when Gary Kershner sent the August 25, 2003 fax to their attorney saying he, Bernard Kershner, wanted to cancel out Torres he meant she was not going to get the property and "we'd give her deposit back." He explicitly said she was entitled to get it back. He also said he told his son Gary that if she called "give her the $5,000." The most damaging testimony, to the defendants' position, came from Jeffrey Kershner. He said his father, Gary Kershner called him and said if anyone calls you tell them Torres was not mortgageable. That is something Jeffrey Kershner and the defendants knew was not true. The court believes the position adopted by the defendants not to return the deposit was not based on a good faith belief they had a right to it but in order to prepare for their litigation posture just as the language in the settlement agreement with the new purchasers to the effect the agreement depended on the Torres contract being declared null and void was intended to do — protect them from any claim by those purchasers if Torres did press for a closing with a mortgage commitment and to put the best face on rebutting claims Torres might make.
The court will order under the statute double the amount of the deposit be paid to Torres not triple since it has already ordered a $5,000 judgment as to the deposit on the breach of contract count. The court does wish to make clear that if its decision on the breach of contract count is deemed incorrect, under the civil theft statute it would have awarded triple the amount of the deposit as damages.
Fraud
The plaintiff also makes a claim in Fraud. Whitaker v. Taylor, 99 Conn.App. 719, 729-30 (2007) sets forth the prerequisites for proving such a claim. The court said that: "Fraud involves 'deception practiced in order to induce another to act to her detriment, and which causes that detrimental action . . . The four essential elements of fraud are (1) that a false representation of fact was made; (2) that the party making the representation knew it to be false; (3) that the representation was made to induce action by the other party and (4) that the other party did so act to her detriment." The substantive elements of this tort must be proved by "clear and satisfactory evidence" but damages may be proved by a preponderance of the evidence, Kilduff v. Adams, Inc., 219 Conn. 314, 330 (1991).
As stated in Connecticut Law of Torts "a false representation is the first basic ingredient in recovering damages for fraud." § 136, page 392. In the plaintiffs' trial brief their argument is structured around the introductory assertion that: "It is the claim of the plaintiff that the defendants committed fraud on her when they accepted her deposit and then did not follow through with the agreement."
But this would turn every breach of contract claim into an action in common-law fraud. What is central to this tort is misrepresentation. From the facts of this case it cannot be established that ab initio the defendants fraudulently induced Torres to enter into this contract, never intending to comply with it — why, to get her $5,000 and then to move on to a better more lucrative deal? But what rational prospective buyer prior to completion of the house and the resolution of zoning problems in the summer of 2003 would have paid anything for the house let alone more than Torres paid?
In any event why did the defendants refer Torres to Jeffrey Kershner to have her achieve compliance with the financial contingency — i.e. get a mortgage commitment — if they had no intention to go through with their contractual commitments from the date of contract formation.
The argument the plaintiff really pursues focuses on the post-July 2003 events and specifically what the defendant's intentions were surrounding the "purported" September 8th closing date.
The plaintiff relies in part in a portion of Bernard Kershner's deposition testimony that in effect said to the question "You had no intention of closing on September 8th with her, did you? — 'A. Probably.'" The court suggests the quote is taken out of context and on the next page despite Kershner's gilding the lilly (to coin a phrase) saying Torres "disappeared," he did say he had a contract with Torres and would have honored it if she appeared at the closing on that date and was ready to close with a mortgage commitment. What else could he have done if Torres so appeared on September 8 or a reasonable time thereafter?
It must be remembered that Jeffrey Kershner testified that he first got a call from the defendants at the end of July to set up a closing in a week's time. He told the defendants he needed 10 days to "turn it around," that is get a mortgage commitment. They in fact did not move for a closing immediately but sent a letter by certified mail on August 25, 2003 setting a closing date of September 8th — a month after their original demand to Jeffrey Kershner. In the meantime he sent an August 13, 2003 letter asking for material from Ms. Torres so he could get the mortgage commitment and his testimony, which the court credits for reasons previously stated, is that he never heard from her. She received the letter August 28th, twelve days before September 8th — within the ten-day turnaround period referred to by Jeffrey Kershner. Under these circumstances how can it be said any "misrepresentation" by the defendants induced action or lack of action on her part and that such action or lack of action caused detriment to her? Even if she appeared, mortgage commitment in hand, after September 8th, the Kershners seem to have recognized they would have to follow through with their contractual obligations — why else did they put into the September 8, 2003 contract with the new prospective buyers that it was subject to the Torres contract. Even ascribing the worst motives to make themselves look good in any future litigation it still accurately reflected a recognition of their legal obligations.
The September 8th letter did have "time is of the essence" language but what would a layperson like Torres have interpreted this to mean? Besides the letter did give her their lawyer's phone number — why do that if you intended to set up a closing date you knew she could not comply with?
For the foregoing reasons and those set forth in the breach of contract discussion, insofar as they are factually relevant to the fraud argument, the court concludes that the plaintiff has not established this common-law tort.
CUTPA
The plaintiff also makes a claim under the Connecticut Unfair Trade Practices Act (CUTPA). As the plaintiff notes Section 42-110(b)(a) of that act provides that no person shall engage in unfair methods of competition or unfair or deceptive acts or practices in the conduct of any trade or commerce. The Kershners and their companies were engaged in the real estate business so their actions or failures to act would be subject to CUTPA regulation. That act provides a cause of action to any person, such as Ms. Torres who suffers any ascertainable loss of money or property as a result of a prohibited act, § 42-110g(a).
It has been held that because of its remedial purposes CUTPA must be liberally construed in favor of those the legislation was intended to benefit, Willow Springs Condominium Assn., Inc. v. Seventh BR Development Corp., 245 Conn. 1, 42 (1998). As this case noted for example the standard under CUTPA is lower than for fraud and requires no showing of an intent to deceive. Id. p. 44.
The plaintiff's position is concisely stated. The defendants contracted with Torres to build her a home. After many delays they realized they could make a larger profit — $43,000 more — by selling the property to someone else. As a result as Gary Kershner told their lawyer they decided to cancel her out, sell the property to the Griffin family and pocket the extra money. To the plaintiff this is a clear cut case of a deceptive practice under the act.
The court completely agrees that the defendants can be assumed to have been delighted to find a buyer willing to offer more money for this property and were quite willing to cancel Torres out. After inordinate delay in performance on their part the demand for a quick closing can be construed as a device to get Torres out of the picture as a buyer hoping that she would not be able to perform and does not represent an attempt to fairly fulfill their contractual obligations to Torres. The admonition to Jeffrey Kershner to tell anyone who asks that Torres was not "mortgageable" can be construed as an attempt to provide an ironclad defense of any criticism of their actions.
The court would have had no difficulty in finding a CUTPA violation on a non-fulfillment of contractual obligations if Torres was able to perform her obligations on September 8th or any reasonable time thereafter. Her failure to do so was, however, not as a result of any misrepresentation on their part nor even a communication to her that if she did not appear at the September 8th closing the contract would be cancelled. Even if that analysis is incorrect the point is that on August 13, 2003 Jeffrey Kershner sent a certified letter to her preceded by three other letters requesting material that would have converted her "mortgageable status" into a mortgage commitment and armed with this she could have gone to the September 8th closing. She did not respond or contact Jeffrey Kershner. Twenty-six days lay between August 13th and September 8th and Jeffrey Kershner said he only needed 10 days to turn things around — i.e. get the appraisal done and finalize the mortgage commitment. Given these facts the court cannot find a CUTPA violation based solely on the fact that the Kershners did not try to contact her after September 8th.
But the CUTPA analysis is not concluded in the court's opinion. The obligations imposed by that act in a situation like this are not determined solely by asking the question of whether the defendants complied with their obligations to sell the property to Torres or took actions or made misrepresentations that prevented the contract from going into effect. All aspects of their behavior must be scrutinized. In deciding whether CUTPA should apply in a particular case the federal Supreme Court in FTC v. Sperry Hutchinson Co., 405 U.S. 233 formulated the "cigarette rule" which our Supreme Court has followed many times, see for example Associated Investment Co., Ltd. Partnership v. Williams Assn. IV, 230 Conn. 148, 155, fn.11 (1994).
The "cigarette rule" uses the following criteria to determine whether a practice is unfair:
(1) Whether a practice, without previously having been considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness (2) whether it is immoral, unethical, oppressive, or unscrupulous (3) whether it causes substantial injury to consumers or competitors or other businessmen.
All three criteria need not be established under the case law. A practice can be unfair because of the degree to which it meets one of the criteria, and a violation can be shown by a deceptive practice or a violation of public policy, see Cheshire Mortgage Services, Inc. v. Montes, 223 Conn. 80, 100 (1992).
The court would refer to its analysis concluding there was a civil theft under § 52-564 because of the retention of the deposit of $5,000. That certainly violated an important public policy and meets the criteria of the cigarette rule. The deprivation of having use of that money also meets the "ascertainable loss" requirement of CUTPA.
Under the CUTPA count the court as it did in other counts orders the return of the deposit. Damages should be allowed in terms of attorneys fees and costs as requested by the plaintiff. The court wishes further argument on the amount of attorneys fees and whether its award should be limited by the fact that there was a contingency fee agreement between Ms. Torres and her attorney. Query would that serve the ameliorative and prophylactic purposes of the act where litigants are encouraged to act as private attorneys general in enforcing CUTPA, Thames River Recycling v. Gallo, 50 Conn.App. 767, 794-95 (1998)?
The court concludes punitive damages are not appropriate since it already ordered treble damages under the civil theft statute, § 52-564.