Opinion
No. CV 04 0092123S
May 13, 2008
MEMORANDUM OF DECISION
This action for breach of contract, unjust enrichment, fraud, and violations of the Connecticut Unfair Trade Practices Act (CUTPA) is brought by Trlby Innovative, Inc., a product design, development and manufacturing company and its owners, Robert and Stacey Mileti, against Omni Packaging Corp., Hawley Products Innovation, LLC, Intellipack, LLC, and George Bertram. The case was tried to the court. The evidence established the facts as set forth herein.
In 2001, George Bertram, owner of Hawley, who was previously known to the plaintiffs when he was employed by another company, approached the plaintiffs stating that he wanted them to work on a foam packaging machine. He explained that he was working with Omni on the machine and wanted the plaintiff to assist in the design and manufacture. At the request of Bertram, the plaintiffs leased 2,600 square feet of space to Omni Packaging for $1,500 a month. Mike and Roberta Jones, the sole stockholders of Omni, and Todd Hanna, a vice president of Omni, came from Oklahoma to tour the facility in April 2002. The Miletis subsequently received a "thank you" note from Roberta and Mike Jones indicating that they were "looking forward to the relationship change over the next few months."
In May 2002, a meeting took place at the plaintiffs' business address. Present at that meeting were the Miletis, Todd Hanna, and George Bertram. It was then that Todd Hanna discussed with the Miletis their producing 300 foam packaging machines a year for five years. The Miletis estimated the price of each machine at $11,185, including $10,000 in materials and $1,875 in labor. According to Robert Mileti, the price was determined at the meeting. However, an e-mail from Stacey Mileti to George Bertram on May 31, 2002, the day after the meeting, indicates that she is waiting confirmation that the "anticipated volume is 300 machines, delivered at the rate of 25 per month." She also requested current estimates for materials and labor. The plaintiffs estimated the total value of the contract at just under $400,000. Hanna requested the plaintiffs to fund the inventory. Informing the First National Bank of Litchfield about their plans to manufacture the machine, the plaintiffs secured financing at the end of May 2002. During this time, there was no contract in writing. George Bertram and Stacie and/or Robert Mileti corresponded with each other through e-mails, but nothing in writing specifically pointed to any contract between the parties. The Miletis performed work for the defendants at a reduced rate, believing that they had a contract or anticipating that they would have one.
Robert Mileti performed work for Omni at half his usual rate of $250 an hour. Stacie Mileti performed ninety-three and one-half hours of consulting for Omni in connection with the foam packaging machine at the rate of $42.50 an hour. At that time, her hourly rate was $100 an hour. During this time, the fair market value of the space leased to Omni was $2,550 per month. The plaintiffs reduced the rent because, by April 2002, they believed that they would have the contract for the foam packaging machines. The defendants left the building in December 2002.
Bertram testified that the plaintiffs were never part of the project; rather, they were hired as consultants. His job with Omni was to develop the machine which included putting in place vendors to produce the parts. Stacie Mileti was given a purchase order to act as a purchasing person, but there was never an agreement that the Miletis would get a contract to build the foam packaging machine. In Bertram's mind, there was no more than a 50-50 possibility of having the contract go to Trlby. Todd Hanna testified that he was not authorized by Omni to make such a contract on his own.
Breach of Contract
The plaintiffs claim that Omni breached its contract with them. "The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages." (Internal quotation marks omitted.) Sullivan v. Thorndike, 104 Conn.App. 297, 304, 934 A.2d 827 (2007). "The rules governing contract formation are well settled. To form a valid and binding contract in Connecticut, there must be a mutual understanding of the terms that are definite and certain between parties . . . To constitute an offer and acceptance sufficient to create an enforceable contract, each must be found to have been based on an identical understanding by the parties . . . If the minds of the parties have not truly met, no enforceable contract exists . . ." Duplissie v. Devino, 96 Conn.App. 673, 688, 902 A.2d 30 (2006), citing Geary v. Wentworth Laboratories, Inc., 60 Conn.App. 622, 627, 760 A.2d 969 (2000).
The court finds that the plaintiffs have failed to prove that they had a contract with Omni. Although the Miletis testified that they believed they had a contract with Omni, the court finds that there is no evidentiary basis for their belief. There is no written agreement between Omni and Trlby. The plaintiffs' claim of an oral agreement is contradicted by some of the e-mails. Moreover, the plaintiffs' claim that Hanna and Bertram were, as agents of Omni, authorized to enter into a contract lacks an evidentiary foundation. "The doctrine of apparent authority is implicated where a principal represents that another is his servant or agent and thereby causes a third person to rely justifiably on the care or skill of such agent, and thereby incurs vicarious liability for the harm caused to the third person by the person held out as an agent." (Emphasis added.) Davies v. General Tours, Inc., 63 Conn.App. 17, 31, 774 A.2d 1063 (2001); Mullen v. Horton, 46 Conn.App. 759, 771, 700 A.2d 1377 (1997).
Apparent and ostensible authority is such authority as a principal intentionally, or by want of ordinary care, causes or allows a third person to believe that the agent possesses. This authority to act as agent may be conferred if the principal affirmatively or intentionally, or by lack of ordinary care, causes or allows a third person to act on an apparent agency. It is essential to the application of the above general rule that two important facts be clearly established: (1) that the principal held the agent out to the public as possessing sufficient authority to embrace the particular act in question, or knowingly permitted him to act as having such authority; and (2) that the person dealing with the agent knew of the facts and acting in good faith had reason to believe and did believe that the agent possessed the necessary authority. The apparent power of an agent is to be determined by the acts of the principal and not by the acts of the agent; a principal is responsible for the acts of an agent within his apparent authority only where the principal himself by his acts or conduct has clothed the agent with the appearance of authority, and not where the agent's own conduct has created the apparent authority. The liability of the principal is determined in any particular case, however, not merely by what was the apparent authority of the agent, but by what authority the third person, exercising reasonable care and prudence, was justified in believing that the principal had by his acts under the circumstances conferred upon his agent . . . [A]pparent power of an agent is to be determined not by his own acts but by those of the principal. (Internal citations omitted; internal quotation marks omitted) Fireman's Fund v. Longshore Beach Country Club, 127 Conn. 493, 497, 18 A.2d 347 (1941).
There is no evidence that either Roberta or Mike Jones, the principals of Omni, did anything which would justify a belief on the part of the Miletis that either Hanna or Bertram had the authority to enter into an oral contract for the production of foam packaging machines over a period of five years. Accordingly, the court finds that there was no contract between Omni and Trlby.
Fraud
"The plaintiffs allege violations of the Connecticut Unfair Trade Practices Act by the defendants in that they made material misrepresentations calculated to mislead and induce the plaintiffs into performing work at a discounted fee. "A false representation made as a statement of fact, the statement was untrue and known to be untrue by the party making it, the statement was made to induce the other party to act on it and the other party acted on it to his injury." See Kilduff v. Adams, Inc., 219 Conn. 314, 329, 593 A.2d 478 (1991). "[A] finding of fraudulent misrepresentation requires a higher burden of proof, namely, proof by clear and convincing evidence . . . as opposed to a breach of contract claim, which requires proof by a preponderance of the evidence." (Internal citations omitted.) Foley v. Huntington Company, 42 Conn.App. 712, 746, 682 A.2d 1026 (1996). Although the defendants accepted the reduced rate, it is not clear that either Omni or Bertram induced the plaintiffs to give them a reduced rate based on the evidence presented. The plaintiffs have failed to prove fraud on the part of Omni or Bertram and Hawley.
Unjust Enrichment
"[U]njust enrichment is a legal doctrine to be applied when no remedy is available pursuant to a contract." Moran v. Morneau, 100 Conn.App. 169, 175 (fn 1), 917 A.2d 1003 (2007); also see United Coastal Industries, Inc. v. Clearheart Construction Co., 71 Conn.App. 506, 512, 802 A.2d 901 (2002). "A right of recovery under the doctrine of unjust enrichment is essentially equitable, its basis being that in a given situation it is contrary to equity and good conscience for one to retain a benefit which has come to him at the expense of another . . . Unjust enrichment is, consistent with the principles of equity, a broad and flexible remedy . . . Plaintiff's seeking recovery for unjust enrichment must prove (1) that the defendants were benefitted, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the plaintiffs' detriment." James v. Hennesey, 105 Conn.App. 1, 4, 937 A.2d 66 (2007).
The plaintiffs have sustained their burden of proof that Omni benefitted from the work of the Miletis and from the lease. In fact, it was to the plaintiffs' detriment that they offered the reduced rate for their work and for the lease. They have not, however, sustained their burden of proof that the defendant was unjust in not paying the Miletis' usual rate. Rather, the evidence indicates that the Miletis offered the reduction in their rates and in the lease because they expected to get a certain amount of work from the defendant in addition to their hope that they would receive a contract. Further support for this finding is the fact that the Miletis offered the lease at a reduced rent before the May meeting. The plaintiffs' loss is due to the fact that they made a bad bargain.
Conclusion
For the above stated reasons, the court finds the issues for the defendants.