Opinion
No. CV 03-0193878 S
January 18, 2006
MEMORANDUM OF DECISION
This action arises out of losses sustained by the plaintiff bank in connection with a loan made to a small corporation. The defendant, also a bank, formerly held securities owned by its customer who was a guarantor of the loan. The plaintiff claims to have had a security interest in the guarantor's securities which was wrongfully ignored by the defendant when it delivered the securities to the guarantor. Liability is based on a number of theories, each discussed below.
The plaintiff is the successor by merger to Lafayette American Bank and Trust Company ("Lafayette"). In early 1998 Lafayette was the holder of certain commercial loans made to Joshua Lockhart, Inc. ("JLI"). JLI was owned by Timm Lockhart ("Lockhart") and William G. Gaspero a/k/a Joshua Gaspero ("Gaspero"). Lafayette's loans to JLI consisted of a line of credit and a term loan with an aggregate outstanding balance of approximately $309,000. JLI needed additional financing and requested Lafayet to lend it an additional $150,000. Lafayette agreed to make the loan provided that Gaspero personally guaranteed JLI's entire debt and that he collaterize his guaranty with a pledge of securities then being held in a securities account he maintained with defendant. Gaspero agreed to Lafayette's conditions. Lafayette and JLI agreed to structure the loans so that all existing debt would be consolidated into a new term loan in the amount of $309,000 and a new $150,000 line of credit would be established. James W. Woods, Lafayette's Vice President for Commercial Loans and Business Development, was in charge of making and closing the loan to JLI.
In connection with the pledge of his securities as collateral for his guaranty, Gaspero introduced Woods to Stephen Bates, ("Bates") the Senior Vice President of the office of defendant, PNC Bank New England, where Gaspero maintained his securities account. In the spring of 1998 Gaspero's account contained investment securities worth approximately $1.1 million. Those securities were subject to a pledge to defendant executed by Gaspero on December 22, 1997 to secure a $250,000 debt owed to defendant. The then current balance of this indebtedness was reflected on the monthly statements for the securities account issued by the defendant to Gaspero.
After being introduced, Woods and Bates discussed the proposed pledge of Gaspero's securities to collateralize his guarantee of the JLI debt. Bates informed Woods the defendant would require that any such arrangement be documented using defendant's form of agreement. Thereafter, a copy of a form entitled "Notification and Control Agreement (Trust, Custody or Brokerage Accounts)" was faxed by Bates to Woods. Woods subsequently marked up the form to reflect Lafayette's corporate name and address and faxed it back to Bates.
Bates then produced a draft Notification and Control Agreement which was sent to Woods. In the unsigned draft, Gaspero was described as the "Pledgor," Lafayette was described as the "Secured Party" and the defendant was described as the "Custodian." The "Collateral" was described as "certain investment property . . . held in Account No. 23-23-003-5000675." The account number was that of Gaspero's security which had been inserted in the draft by Bates. The draft Notification and Control Agreement stated that the Secured Party's security interest in the Collateral was described in a "Pledge Agreement" which was to be attached. The draft had blanks for the date of the execution of the agreement, the date of the Pledge Agreement and the description of the "Custodian Agreement" under which the defendant held Gaspero's securities. The agreement contained signature lines for the "Pledgor," the "Secured Party" and the "Custodian." Paragraph 5 of the agreement required the defendant to send Lafayette copies of all notices and statements rendered pursuant to the Custodian Agreement.
On March 27, 1998, Lockhart signed promissory notes on behalf of JLI. On the same date, Gaspero signed the draft of the Notification and Control Agreement prepared by Bates as "Pledgor," a document entitled "Guaranty Agreement" and a document entitled "Security Agreement — Custodian Account." Thereafter, Woods executed the Notification and Control Agreement on behalf of Lafayette as "Secured Party." The date March 27, 1998 was filled in as the date of the Notification and Control Agreement and the date of the Pledge Agreement. However, no document entitled "Pledge Agreement" was signed and no agreement of any description was attached to the Notification and Control Agreement. On March 27, 1998 Lafayette did not advance any new funds to JLI, but consolidated the existing term loan and line of credit into the new term loan.
Under the terms of the Guaranty Agreement, Gaspero guaranteed any and all indebtedness of JLI to Lafayette up to an aggregate maximum of $459,000. The Guaranty Agreement states "This guarantee is secured by assets more fully described in a Security Agreement — Custodian Account of even date herewith."
The Security Agreement — Custodian Account which is signed by Gaspero and addressed to Lafayette states, in relevant part: "To induce you to lend money or give credit to me or to the Borrower, I assign and pledge to you my account No.#23-23-0035000675 established by PNC Bank New England pursuant to a letter of instruction, dated 3-27-98 (the `Custodian Account'), containing cash and the securities described below (the `Securities') and including all distributions on the cash and Securities such as interest, stock splits, stock dividends, and the like, and all future deposits of securities and cash in the Custodian Account. Securities: SEE ATTACHED EXHIBIT." There was no exhibit attached to the Security Agreement — Custodian Account.
On April 6, 1998 Woods faxed the Notification and Control Agreement to Bates. On April 23, 1998, Woods mailed two copies of that agreement to Bates with the request that they be signed on behalf of the defendant and that the blank referring to the custodian agreement be completed. Neither of the two copies of the Notification and Control Agreement had any documents attached to them. The Notification and Control Agreement was never signed by the defendant as "Custodian."
On May 16, 1998, in response to Bates' request, Woods faxed Bates copies of the Guaranty Agreement and Security Agreement — Custodian Account which had been signed by Gaspero. In late June 1998, Woods phoned Bates to inquire as to when he might expect the executed Notification and Control Agreement. This call was prompted by Lafayette's loan department which, in Woods' words, was "harassing" him regarding the absence of a signed Notification and Control Agreement. When Woods received no response from Bates, he asked Timm Lockhart to follow up with Bates. Eventually Woods sent a letter dated July 9, 1998 to Bates reminding him of a prior conversation in which Bates had stated that the agreement had been sent to the defendant's Boston office for execution. In that letter Woods stated: "I would appreciate it if you check on its status for me as the bank's loan to Mr. Gaspero's company cannot be closed without the agreement. I would appreciate you giving this matter your immediate attention and if there is a problem, please get back to me as soon as possible." In his trial testimony Bates claimed that the reference to "closing" did not refer to closing the loan but rather to "putting the loan file to rest."
On July 14, 1998, Bates sent Woods a fax apologizing for the fact that the Notification and Control Agreement had "fallen off the radar." In the same fax Bates informed Woods of "one issue." That issue was — "We need to specify the amount of collateral that will be pledged for your loan as the investment account also secures loans we have with (Gaspero). Your Security Agreement should specify the total amount of securities pledged to cover your loan." In response to this fax Woods apparently left a message for Bates advising him that collateral to be pledged to secure Lafayette should be $400,000 and asking that this be added to the Security Agreement and sent back to him. Woods did not hear further from either Bates or any other representative of the defendant. Woods did not inform his loan department of the communication from Bates regarding the defendant's interest in the collateral, and there was no further follow up or "harassment" from the loan department. In mid-July 1998, Lafayette advanced new funds to JLI by permitting it to draw on the newly established $150,000 line of credit. Eventually the entire line of credit was advanced to JLI. The defendant was never notified that additional funds had been advanced by the plaintiff to JLI.
Woods testified that he believed that as a result of the preparation of the Notification and Control Agreement by the defendant, its execution by Gaspero, and its subsequent transmission to the defendant, Lafayette had a first priority lien on Gaspero's entire account. On the other hand, Bates testified that after mid-July of 1998, he heard no more from Woods or any representative of Lafayette. Bates assumed that Lafayette's loan to JLI had not closed or that Lafayette had been provided with other guarantees and/or collateral sufficient to satisfy it. In his trial testimony Woods did not explain why he failed to notify his loan department when he learned that the defendant had a security interest in Gaspero's account nor did he explain why he failed to follow up with the defendant after mid-July 1998 in an effort to obtain executed documents perfecting Lafayette's security interest in Gaspero's account.
On March 19, 1999, Lafayette merged with and became a part of the plaintiff. No notices or copies of statements regarding Gaspero's securities account were ever sent to Lafayette or to the plaintiff by the defendant pursuant to paragraph five of the Notification and Control Agreement. Apparently, neither Lafayette nor the plaintiff made any inquires to either Gaspero or the defendant regarding the absence of such statements.
In May 1999 Bates resigned his position with the defendant and accepted a similar position with Mellon Bank. At the same time Gaspero transferred his investment account, then having a value in excess of $1.4 million, to Mellon. Gaspero's indebtedness to the defendant, then having an outstanding balance of $179,000 was repaid coincident with the transfer. The plaintiff was not notified of the transfer, nor was any action taken by the defendant to protect any claim that the plaintiff might have against the transferred assets.
By March 2000, JLI was in financial difficulties. Plaintiff agreed to a modification of the term note to provide for interest only. Despite this accommodation, JLI was unable to pay even the interest and both the term loan and the line of credit went into default in the fall of 2000. Plaintiff's efforts to collect from JLI were unavailing. On July 25, 2001 Woods sent a letter addressed to Bates personally at defendant's Greenwich office demanding the collateral. On the date of that letter it had been over two years since Bates had resigned his position with the defendant and Gaspero had ceased to be a customer of the defendant's. This probably explains why Woods's letter went unanswered.
After receiving no response from either Bates or the defendant, the plaintiff assigned the loan to its loan resolution department. In early 2002 the plaintiff brought an action against Gaspero to enforce his guaranty. Apparently, as the result of the loss of his employment and a pending dissolution of his marriage, Gaspero's net worth had declined significantly and the plaintiff was able to recover only a portion of its loss from Gaspero. The plaintiff then brought this action seeking to recover the balance of its losses from the defendant. At the time of the trial the balance owed to the plaintiff under the term loan and the line of credit totaled approximately $302,000.00.
PLAINTIFF'S LEGAL CLAIMS
The plaintiff's complaint sets forth seven separate grounds for recovery. The first count claims breach of a written agreement. The second count alleges breach of a verbal agreement. The third count alleges breach of a fiduciary duty. The fourth count alleges misrepresentation. The fifth count alleges negligent misrepresentation and omission. The sixth count alleges promissory estoppel. The seventh count alleges unjust enrichment and quantum meruit. The complaint does not identify any statutes underlying plaintiff's claims. The defendants answer denied the essential allegations of each of the counts of the plaintiff's complaint.
THE DEFENDANTS SPECIAL DEFENSES
The defendant has asserted a number of special defenses to plaintiff's claims. First, the defendant asserts that the second, third, fourth and fifth counts are barred by the applicable statute of limitations. Second, the defendant alleges that the defendant is entitled to a set-off for all moneys which the plaintiff recovered from Gaspero. Because the court has determined that the plaintiff cannot recover under any of the claims asserted in its complaint, the merits of the defendant's special defenses need not be considered by the court.
PLAINTIFF'S CLAIMS UNDER THE UNIFORM COMMERCIAL CODE
The plaintiff devoted a substantial portion of its post-trial brief to an analysis of the parties' rights and obligations under the Uniform Commercial Code. In its reply brief the defendant complains of the plaintiff's failure to comply with Practice Book § 10-3(a). It is true that not only did the plaintiff fail to plead that its claims were grounded on the provisions of the Uniform Commercial Code, the plaintiff's reliance on those statutory provisions did not arise during the trial and received on passing mention in the parties' oral arguments after the close of evidence.
"When a claim made in a complaint . . . is grounded on a statute, the statute shall be identified by its number."
However, Practice Book 10-3(a) is directory and not mandatory. Steele v. Stonington, 225 Conn. 217 n. 7, 622 A.2d 551 (1993); Fleet National Bank v. Lahm, 86 Conn.App. 403, 405 n. 3, 861 A.2d 545 (2004) cert. denied, 273 Conn. 904 (2005); Gilbert v. Beaver Dam Ass'n. Of Stratford, Inc., 85 Conn.App. 663, 671, CT Page 1637 858 A.2d 860 (2004); Spears v. Garcia, 66 Conn.App. 669, 676, 785 A.2d 1181 (2001), aff'd, 263 Conn. 22, 818 A.2d 37 (2003); Krevis v. Bridgeport, 80 Conn.App. 432, 435, 835 A.2d 123 (2003), cert. denied, 267 Conn. 914, 841 A.2d 219 (2004).
In addition, the defendant was well aware of the potential application of the UCC having argued, in its initial brief, that the plaintiff's action was not maintainable under the UCC and that the application of the UCC barred all common law claims. Accordingly, the court will consider the plaintiff's UCC claims.
The plaintiff claims that under the UCC when securities are held in a brokerage account they are a "Security entitlement" under General Statutes § 42a-8-102(a)(17); that the owner of the securities is an "Entitlement holder" under § 42a-8-102(a)(8) and that the broker or agent holding such securities (the role of the defendant in the relevant transactions) is "Securities intermediary" under § 42a-8-102(a)(14). The plaintiff also claims that under § 42a-8-507 a valid "entitlement order" from an entitlement holder to a securities intermediary which must be complied with by the "securities intermediary." The court agrees with these basic assertions which simply describe the legal relationships underlying any investment account in which securities are held in "street name."
The plaintiff claims that the Notification and Control Agreement signed by Gaspero on March 27, 1998 and mailed to the defendant by plaintiff on April 23, 1998 constitutes an "entitlement order" and that the defendant's failure to comply with that order renders it liable to the plaintiff. The court does not agree with this claim. General Statutes § 42a-8-102(a)(9) defines an "Entitlement order" as "a notification communicated to a securities intermediary directing transfer or redemption of a financial asset to which the securities holder has a security entitlement." The plaintiff does not cite any judicial authority for its assertion that the Notification and Control Agreement was binding on the defendant upon receipt and did not require the defendant's signature. Instead the defendant relies entirely on its interpretation of the meaning of the UCC. In its reading of the UCC the plaintiff ignores the official comments to § 8-507 of the UCC. In relevant part the comments state:
One important application of this principle is that if an entitlement holder grants a security interest in its security entitlements to a third-party lender, the intermediary owes no duties to the secured party, unless the intermediary has entered into a "control" agreement in which it agrees to act on entitlement orders originated by the secured party. See section 8-106. Even though the security agreement or some other document may give the security party authority to act as agent for the debtor, that would not make the secured party an "appropriate person to whom the security intermediary owes duties."
The official commentary to the Uniform Commercial Code is a part of the circumstances surrounding the enactment of the Code, and, as such, is relevant to the legislature's intent. WD Acquisition v. First Union National Bank, 262 Conn. 704, 817 A.2d 91 (2003); Flagg Energy Development Corp. v. General Motors Corp., 244 Conn. 126, 136-39, 709 A.2d 1075 (1998).
Under the provisions of § 42a-8-106(d), as applied to the present situation, the plaintiff would be considered a "purchaser", the defendant would be considered a "securities intermediary", and Gaspero's securities account with defendant would be considered a "securities entitlement." § 42a-8-106(d) provides: "A purchaser has `control' of a security entitlement if: (1) The purchaser becomes the entitlement holder; (2) The securities intermediary has agreed that it will comply with entitlement orders originated by the purchaser without further consent by the entitlement holder; or (3) Another person has control of the security entitlement on behalf of the purchaser or, having previously acquired control of the security entitlement, acknowledges that it has control on behalf of the purchaser."
See § 42a-1-201 (33) — "`Purchaser' means one who takes by purchase." and § 42a-1-201(32) "`Purchase' includes taking by sale, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift or any other voluntary transaction creating an interest in the property."
See § 42a-8-102(14)(ii) — "`Securities intermediary' means: . . . A person, including a bank or broker, that in the ordinary course of its business maintain securities accounts for others and is acting in that capacity."
See § 42a-8-102(17) — "`Securities entitlement' means the rights and property interest of an entitlement holder with respect to a financial asset specified in part 5."
The plaintiff has not alleged or shown that it had become an "entitlement holder" under § 42a-8-106(d)(1). Despite the plaintiff's claims, the evidence does not establish that the defendant agreed to comply with "entitlement orders originated by the [plaintiff]" under § 42a-8-106(d)(2). Nor do the facts of this case fall within the provisions of § 42a-8-106(d) (3). Consequently the court concludes that plaintiff did not have "control" over all or any portion of Gaspero's security account with the defendant.
Since the plaintiff did not have "control," it cannot have a security interest in the claimed collateral under § 42a-9-106 and § 42a-9-203(b)(3)(D). It follows that plaintiff cannot recover on any claims founded on the application of the Uniform Commercial Code.
Since the plaintiff's complaint also implicates common law claims, the court will consider each of these claims in turn.
WRITTEN AGREEMENT
In its post-trial brief, the plaintiff acknowledges that the defendant never signed an agreement to protect the plaintiff's interest in Gaspero's securities which were to serve as collateral for his obligations under his guarantee. However, plaintiff claims that Gaspero's signature on the Notification and Control Agreement constituted an instruction from Gaspero which the defendant was obligated to honor under the terms of the December 27, 1995 Custody Agreement establishing Gaspero's securities account with the defendant. In relevant part the Custody Agreement provides:
FOURTH: Where the Clients instruction is required, the Bank will be required to act only upon instruction received in writing. However, the Bank may, in its discretion, accept oral or other forms of instruction which it believes to be genuine and Client will provide subsequent written confirmation of such instruction. The Bank may conclusively rely and act upon any oral or other form or instruction which it believes to be genuine notwithstanding Client's failure to provide a subsequent written confirmation.
The plaintiff reasons that under the above provisions the defendant had an obligation to honor the terms of the Notification and Control Agreement despite the fact that it had never signed it or agreed to be bound by its terms. The plaintiff reasons that providing the defendant with an agreement signed by Gaspero was sufficient to obligate defendant to protect the plaintiff's claims to the collateral. As noted above, this claim cannot be sustained under the provisions of the UCC.
The plaintiff fails to provide the court with any case law supporting its theory of recovery under the common law. It is obvious from their context that the quoted provisions of the Custody Agreement between defendant and Gaspero were intended to protect the defendant in its relationship with its customer. There is no indication that these provisions were intended to create obligations for the benefit of any third parties.
The court finds that there was no written agreement between the plaintiff and the defendant and further finds that there was no written agreement between the defendant and Gaspero for the benefit of the plaintiff. The court finds the issues on the plaintiff's first count for the defendant.
VERBAL AGREEMENT
In its brief, the plaintiff claims that it had a verbal agreement with the defendant to secure its interest in the collateral. The court finds that the evidence does not support this claim. The evidence shows that the parties always intended that any agreements between them would be in writing and be signed by duly authorized parties. The evidence shows that the defendant was willing to grant the plaintiff a security interest in Gaspero's collateral only upon execution of documentation acceptable to it. The evidence further shows that there was no meeting of the minds as to the identity of the collateral, the nature of Gaspero's obligations to be secured by the pledge and no agreement on the part of the defendant to be bound in the absence of complete documentation which had been signed on its behalf. Accordingly, the court finds the issues on the plaintiff's second count for the defendant.
BREACH OF FIDUCIARY DUTY
In its brief, the plaintiff claims that the terms of the Notification and Control Agreement created a fiduciary relationship between the plaintiff and the defendant which the defendant breached by releasing the collateral to Gaspero in 1999. This claim ignored the fact that the Notification and Control Agreement was never signed by the defendant and that no verbal contract between the parties existed. As the court has determined that there never was an agreement between the parties, either written or verbal, the mere application of a "fiduciary" label to the relationship which would have existed had there been such an agreement adds nothing to the plaintiff's claims. The court finds the issues on the third count for the defendant.
REASONABLE RELIANCE CT Page 1641
In its brief, the plaintiff addresses the issue of reasonable reliance. Reasonable reliance forms no part of the plaintiff's claims founded on express contract, but is relevant to several of plaintiff's other theories of recovery, including misrepresentation and promissory estoppel. The plaintiff claims that once the Notification and Control Agreement had been signed by Gaspero and sent to the defendant it was reasonable for the plaintiff to extend credit to Joshua Lockhart, Inc. The court disagrees.In order for reliance to form a basis of recovery their must be "a clear and definite promise which the promisor could reasonably have expected to induce reliance. Thus, a promisor is not liable to a promisee who has relied on a promise if, judged on an objective standard, he had no reason to expect such reliance at all." D'Uisse-Cupo v. Board of Directors of Notre Dame High School, 202 Conn. 206, 123, 520 A.2d 217 (1987).
As originally executed and sent to the defendant the Notification and Control Agreement incorporated by reference both a pledge agreement and a custodian agreement. The Notification and Control Agreement recited that the pledge agreement was attached to it. However, there was no evidence that a copy of a pledge agreement was ever attached to any copy of the Notification and Control Agreement, much less one that was provided to the defendant. Indeed there was no evidence that a document entitled "pledge agreement" was signed by any of the parties to the loan. It appears that the document serving as a pledge agreement was entitled "Security Agreement — Custodian Account." However, that document was not attached to the Notification and Control Agreement, nor was the language of the Notification and Control Agreement modified to reflect the designation of that document as the one under which Gaspero purportedly granted a security interest in the collateral to the plaintiff.
Similarly, the Notification and Control Agreement has a blank in which it was intended that the parties identify the custodian agreement. That blank was never completed on any copy of the Notification and Control Agreement. The plaintiff's evidence did not include any communications from the defendant agreeing to the terms of the Notification and Control Agreement or promising that it would be signed. Neither the security agreement nor Gaspero's guarantee was provided to the defendant until they were faxed to the defendant more than six weeks after the March 27, 1998 "closing."
At the March 27, 1998 "closing" the plaintiff did not advance any new funds to JLI in reliance on Gaspero's guarantee and the security of the collateral. New funds were not advanced until nearly four months after the closing. By that time the plaintiff knew the following: 1) the Notification and Control Agreement had not been signed by the defendant; 2) the collateral was subject to a prior pledge to the defendant to secure an indebtedness owed to the defendant by Gaspero; 3) the assets to be included in the collateral had not been agreed upon or specifically identified; and 4) the plaintiff's own loan department viewed the absence of a signed Notification and Control Agreement as a problem.
The plaintiff offered no evidence to show any practices or customs in the banking or investment industry supporting its claim that its alleged reliance would have been reasonable. On the contrary, it is clear that the plaintiff's loan department was aware that the plaintiff's interest in the collateral was not established absent a Notification and Control Agreement signed by the defendant. Before Woods allowed the plaintiff to advance any new funds to JLI he was aware both that the Notification and Control Agreement had not been executed and that the defendant had an interest in the collateral. There is no credible explanation as to why Woods failed to put a hold on the advancement of funds until the plaintiff's interest in the collateral was perfected. This failure cannot be attributed to any acts or omissions of the defendant.
The court finds under these circumstances that any reliance the plaintiff may have placed on the defendant's acts or omissions was patently unreasonable.
MISREPRESENTATION
The plaintiff claims that the defendant negligently made false representations to the plaintiff with the intent that the plaintiff rely upon such representations and that the plaintiff reasonably relied upon such representations to its detriment. The plaintiff lists a number of allegedly false representations. They include first the claim that the defendant made a misrepresentation by omission by failing to notify the plaintiff that the defendant claimed an interest in the collateral. Second the claim that the plaintiff represented that it would act as custodian. Finally, the plaintiff claims that the defendant represented to the plaintiff that its guarantee was secured.
The court finds that none of these claims provides a basis for recovery by the plaintiff. The evidence does not show that the defendant was ever under a duty to disclose to the plaintiff either the value of the collateral or the existence of any claims against it. Neither party produced any evidence of any financial statements furnished to the plaintiff by Gaspero. However, defendant could have reasonably inferred that the plaintiff had learned of the existence of the collateral from Gaspero and that plaintiff would have reviewed a financial statement from Gaspero before agreeing to make a loan to Joshua Lockhart, Inc. based on Gaspero's net worth. In addition there was no evidence that the plaintiff ever made any inquiries of the defendant regarding the collateral and any claims that might exist against it. Finally, it is clear that the defendant informed the plaintiff of its interest in the collateral prior to the extension of additional credit to Joshua Lockhart, Inc.
The plaintiff's next claim that the defendant misrepresented that it was prepared to act as custodian of the collateral securing Gaspero's guarantee. The evidence shows that Bates informed Woods that the defendant could and would hold collateral for the plaintiff's benefit pursuant to a written Notification and Control Agreement. However, the Notification and Control Agreement was never completed by completing the identification of the collateral or the obligation being secured. In addition there was no evidence presented to show that defendant stated willingness to act under the Notification and Control Agreement once proper documentation was completed was a misrepresentation.
With respect to the plaintiff's final claim, there is no evidence supporting the allegation that the defendant ever represented to plaintiff that its interest in the collateral was secure.
In addition all claims based on alleged misrepresentations must fail since, as noted above, the evidence does not show that any reliance which the plaintiff claims to have placed upon the alleged misrepresentations or omissions of the defendant would have been reasonable under the circumstances. The court therefore finds the issues on the fourth and fifth counts for the defendant.
PROMISSORY ESTOPPEL CT Page 1644
In its posttrial brief the plaintiff claims that it is entitled to recover damages from the defendant under the principle of promissory estoppel as alleged in its sixth count. The fundamental elements of promissory estoppel are a clear and definite promise which the promisor expects the promisee to rely on in taking action or forbearing from action and the subsequent action or forbearance by the promisee. § 90 Restatement Second (Contracts) 1981. In many respects the plaintiff's promissory estoppel claim duplicates or at least overlaps the claims for misrepresentation set forth in the plaintiff's fourth and fifth counts. The promissory estoppel claim must fail for the same reasons.The evidence does not show that the defendant made any promise to plaintiff which could be reasonably relied on. The evidence does not show that the plaintiff ever informed the defendant that it intended to extend credit to Joshua Lockhart, Inc. in reliance upon any promise of the defendant. Even if there were such reliance, as noted above, the evidence shows that such reliance would have been unreasonable. Accordingly the court finds the issues on the sixth count for the defendant.
UNJUST ENRICHMENT — QUANTUM MERUIT
The plaintiff's seventh count claims that the defendant has been unjustly enriched at the expense of the plaintiff. The plaintiff's theory in support of this claim, is that the 1995 pledge of Gaspero's stock to the defendant was ineffective, and that it therefore unjustly enriched itself by accepting payment from Gaspero when he transferred his brokerage accounts to another firm in 1999. However, this theory depends on the validity of the plaintiff's claim to have had a valid security interest in the collateral. The court has already found that no such security interest was created. Accordingly, the payment of Gaspero's debt to the defendant could not have unjustly enriched the defendant at the plaintiff's expense.
In addition, the record is also clear that even in 1999, Gaspero's account had sufficient value to secure not only his indebtedness to the defendant (whether secured or unsecured), but also his obligations to the plaintiff under his guaranty. Under these circumstances, it is clear that it was the failure of the plaintiff to acquire an interest in the collateral, rather than the payment made to Gaspero by the defendant, that caused the plaintiff to suffer the loss. The court finds the issues on the seventh count for the defendant.
Judgment may enter for the defendant on all counts of the complaint.