Opinion
No. UWY CV09 5015738S
July 25, 2011
MEMORANDUM OF DECISION
I PROCEDURAL HISTORY
Plaintiff initiated this action to recover monies due for the sale of manufacturing equipment to the defendant. It filed a three-count complaint (#105) alleging breach of contract, failure to pay monies as promised, and unjust enrichment. In addition to its answer, the defendant raised three special defenses to the claim, alleging payment, no consideration and accord and satisfaction (#116). The defendant also filed counterclaims against the plaintiff. Subsequent to the plaintiff filing an answer to the special defenses and counterclaims (#119), the defendant, with the permission of the court, filed an amended answer, special defenses and a five-count counterclaim (#124). Specifically, the defendant's counterclaims allege fraudulent non-disclosure, negligent misrepresentation, breach of the covenant of good faith and fair dealing under both General Statutes § 42a-1-304 and the common law, and, a violation of the Connecticut Unfair Trade Practices Act § 42-110a et seq. (CUTPA). The plaintiff has filed a responsive pleading thereto (#125).
On January 27, 2010, the plaintiff had received from the court a prejudgment remedy in the amount of $63,364.00. The matter was ultimately tried to the court over three days, January 20-21, 2011 and February 14, 2011. The parties have filed post-trial briefs which the court has reviewed.
II FACTS
This case involves two pieces of manufacturing equipment known as the TAK X150 and TAK XY1000 that were sold by the plaintiff to the defendant in the summer of 2008. The plaintiff claims the defendant has failed to pay the plaintiff in full for the cost of the TAK X150. A review of the pleadings reveals that several allegations relevant to the claims set forth in the complaint and counterclaims have been admitted to by the plaintiff. Specifically, the plaintiff has admitted in its answer to amended special defenses and counterclaims (#125) that Quality Machine Solutions, Inc. (QMS) was the distributor for the plaintiff relative to the sale of the machinery and that the total purchase price for the two machines was $290,476. It was also admitted that the plaintiff met with the defendant in August 2008 to change the purchase orders initially executed in July 2008 but that the changes did not alter the total purchase price for the two machines. After being held by the defendant for a period of time, the TAK XY1000 was ultimately returned to the plaintiff. As to the TAK X150, the plaintiff acknowledges receipt of a $23,586.94 payment toward that machine.
In addition to the above, the court has considered the weight and credibility of the testimony of the witnesses as well as the documentary evidence presented, and finds the following additional facts. The defendant operates a company producing screw machine products and for many years had purchased machinery for its business through Nelson Rouette (Rouette) as president of QMS. In 2008, the defendant sought to purchase some new machinery and contacted Rouette at QMS. The plaintiff sold and marketed its machinery through distributors such as QMS and in fact designated QMS as an exclusive "authorized distributor" and/or "authorized dealer" for New England. Rouette considered himself, through QMS, as a sales agent for plaintiff and negotiated with clients and/or customers on the plaintiff's behalf. During the negotiations, the customer would be made aware that Yuasa-Yi, Inc. was the seller of the product. Although the terms of an agreement might be reached between QMS and the customer, which QMS often helped to draft, payment was to be made directly to the plaintiff. This was true in this case as well. On this topic, the court finds sufficient credible testimony from Rouette and the defendant to find that QMS, through Rouette, was in fact an agent acting on behalf of the plaintiff in the sale of the machinery. This conclusion is bolstered by the testimony of Christopher Burd (Burd), an employee of the plaintiff, who testified that payment for any purchase would be made by the buyer directly to the plaintiff and that the plaintiff would in turn pay a commission to the distributor.
The testimony of Nelson Rouette was put before the court both through deposition testimony and live testimony. The parties had felt the deposition testimony might be sufficient for evidentiary purposes in lieu of live testimony from the witness who would have otherwise had to travel from Florida for that purpose. After reviewing the testimony, the court did not feel it necessary to require the live testimony of the witness, but provided the parties with the opportunity to do so if they so wished. The parties elected to do so and Mr. Rouette testified on February 14, 2011. The reference to an "authorized distributor" and "authorized dealer" comes from the deposition testimony of Mr. Rouette. He also testified in his live testimony that he was an exclusive distributor for the plaintiff in the New England region.
The first attempt to set out the terms of the agreement for the purchase of the two machines resulted in two purchase orders being written on defendant's letterhead. The first dated July 15, 2008 and addressed to Yuasa International Corp. c/o QMS, called for the purchase of the TAK XY1000 for $289,900 along with a bar feeder for $36,990. A credit of $60,000 was to be given against this cost for the trade in of a KIA SKT15LMS machine which was owned by the defendant. This left a net purchase price of $266,890. Plaintiff's Exhibit 1. The second purchase order, dated and addressed identically to the first, called for the purchase of the TAK X150 at a price of $99,950, less a trade in credit of $60,000 for a KIA SKT50LMS machine. This left a net balance of $39,950.
Subsequent to the defendant's execution of the purchase orders, Rouette and the defendant discussed creating a revised purchase order relative the TAK X150 to account for monies still owed between QMS and the defendant relative to prior purchases of machinery from other manufacturers unrelated to this transaction. These included three debts totaling $3,636.94 owed by the defendant to QMS and a $10,000 credit owed by QMS to the defendant. To this end they created a new purchase order, also dated July 15, 2008, with a revised net purchase price of $35,586.94. Plaintiff's Exhibit 3.
Due to a mathematical error on the invoice, the net amount should have read $33,586.94 instead of $35,586.94.
Two weeks later, Rouette and the defendant agreed to further revise that purchase order to reflect an additional $10,000 credit due the defendant from QMS relative to other equipment. This was reflected on a revised purchase order dated July 29, 2008 showing a new "total due Yuasa $23,586.94" for the TAK X150. Plaintiff's Exhibit 4.
In arriving at the pricing of the machinery for any purchase orders, QMS, through Rouette, would be advised by the plaintiff prior to a sale as to what was the lowest price acceptable to the plaintiff for each machine. Rouette then had the authority to negotiate a final price with the buyer. Payment would be made directly to the plaintiff and the plaintiff would then pay a commission to QMS. Rouette credibly testified that if it wished, QMS could negotiate a price down to the point where no commission would be paid, or, QMS could keep a trade-in of equipment or accessories from the purchaser in lieu of a commission.
There was conflicting testimony between Burd and Rouette on the issue of whether the plaintiff approved of any trade-ins relative to this transaction. Burd insisted that the plaintiff did not accept any trade-ins on major equipment sales such as these and therefore would not have accepted these purchase orders. Rouette testified that not only had plaintiff accepted these purchase orders, it had accepted some trade-ins in the past and had knowingly allowed QMS to keep the trade-ins in this case in lieu of a [cash] commission. The court finds that under the totality of the circumstances and evidence presented, the better weight of that evidence shows the plaintiff did accept the trade-ins as part of the transaction. To this end, the court notes that Rouette credibly testified that he discussed with Burd the credits on the purchase orders and that they were approved by the plaintiff through Burd.
Subsequently, in August of 2008, Burd indicated to Rouette that he wanted to speak to the defendant as the head of plaintiff's company indicated he would not accept any trade-ins as part of the transaction. The court finds it noteworthy that by this time the TAK X150 had already been shipped to and received by the defendant. Moreover, following the shipment of the machine, Burd had sent a July 24, 2008 e-mail to Rouette proposing to have the defendant create two new purchase orders to replace the ones previously sent for each machine. In it Burd wrote, "Neslon, let's talk about this, I have to find a solution quickly; and PLEASE make sure that no one from your company tells anyone at Yuasa that you have already shipped the machine to Spargo." Defendant's Exhibit 9. By this point, it appears that the terms that had originally been approved by Burd, were now meeting with resistance from his superior and he therefore was attempting to restructure the agreement to address the plaintiff's internal concerns. In fact, there were a series of e-mails which collectively show an effort on the part of Burd to convince Rouette to alter the terms of the purchase orders, not as a negotiation over the terms, but rather as alterations to the agreements that had already been reached between the defendant and QMS with Burd's approval on behalf of the plaintiff. Id. This conclusion is supported by the credible testimony on this topic by Rouette and Randall Spargo, president of the defendant company. Moreover, entered into evidence was a January 4, 2010 e-mail between Burd and Rouette in which Rouette writes in response to an (undocumented) message confirming the history of the transaction as being one of approval by the plaintiff and a subsequent effort to restructure it due to internal issues within the plaintiff's office. Id.
Defendant's Exhibit 16 is a billing invoice from Light Rigging Company, LLC which references delivery and placement of the TAK X150 at defendant's plant on July 18, 2008.
The court infers that this message from Rouette was in response to an inquiry by the plaintiff relative to Rouette's recollection of the history of the transaction and that it was for the purpose of addressing the pending litigation between the plaintiff and the defendant. The text of the message read as follows: "Hi Chris, I got your message, as you can probably remember, we shipped the machine per your "OK" before the approval from Harry. You sent me an email on July 24, 2008 [attached for reference by Rouette] mentioning to make sure no one at QMS tells anyone at Yuasa that the machine had already been delivered per the original agreement. Harry obviously hates me enough already and I would hate to see him come down any harder on you about this deal but the only correspondence I have via e-mail about the delivery is the note from you about making sure we don't tell anyone at Yuasa that the machine shipped and your request to change the P.O. Thanks! I hope all is well . . ."
Ultimately, Burd flew from out of state to attend a meeting on August 28, 2008 at defendant's office in which he sought from the defendant the issuance of new purchase orders to replace the prior purchase orders so that they would not reflect any reference to trade-ins and instead simply recite the purchase price of the machines. By all accounts, Burd referenced the request as one for plaintiff's "internal purposes" only to satisfy plaintiff's accounting department. He stressed that it would not change the amount owed by the defendant and would only reallocate that price between the two machines reflecting their actual value. Relying on the representation that the substance of the transaction was not being modified, the defendant issued two new purchase orders as requested. Both were dated August 28, 2008; one reflecting a balance of $203,526 for the TAK XY1000 and one for $86,950.94 for the TAK X150. Plaintiff's Exhibits 5 and 6, respectively. In turn, the plaintiff issued billing invoices dated August 29, 2008 reflecting those respective amounts. Plaintiff's Exhibits 8, 7. Despite these invoices, the defendant believed that the amounts due, after changing the allocation of the purchase price between the two machines, was $203,526 for the TAK XY1000 and $23,586.94 for the TAK X150 (which was the amount set out on plaintiff's Exhibit 4, the July 29, 2008 revised purchase order). No money or materials were exchanged by the parties in consideration of the execution of the August 28, 2008 purchase orders.
Although the TAK X150 had been delivered on July 18, 2008, the TAK XY1000 was not delivered until late August or early September. Following the delivery of the machines, issues arose relative to their maintenance and operation, particularly as to the TAK XY1000 as it did not operate as intended and never produced any parts for the defendant. After several months and several failed attempts to get it to work properly, the plaintiff and defendant entered into a handwritten agreement on February 11, 2009 to resolve the issues. The agreement dictated that the plaintiff take back the TAK XY1000 at its own cost, certain other property was returned to or left with the defendant to remain as its property, and a bar feeder would be left to remain as the property of Nelson Rouette. Plaintiff's Exhibit 16. After the return of the machine, the plaintiff issued to the defendant a full credit of $203,526 based on the August 28, 2008 invoiced cost of the machine. Plaintiff's Exhibit 10. Regardless of whether the July 15, 2008 or August 28, 2008 invoice is deemed applicable to the TAK XY1000, the court finds that it was the intention of the parties, through the February 11, 2009 agreement, to place each party back into the position it was in prior to the outset of the transaction relative to the TAK XY1000.
An issue also existed as to the TAK X150 which was to have been delivered with a parts catcher but was not delivered until sometime in 2009. Upon resolution of that issue, the defendant sent to the plaintiff payment of $23,586.94 consistent with what it believed to be the total debt due under the July 29, 2008 purchase order for that item (which reflected the trade-ins and credits). Plaintiff's Exhibits 4, 9.
After resolution of the parts catcher delivery and the receipt of the payment, Burd called the defendant in May 2009 asking if he and Harry (the executive head of plaintiff's company) could meet with Randall Spargo to discuss their claim that there was a balance of approximately $63,000 due the plaintiff for the TAK X150 based on the August 28, 2008 invoice. After Randall Spargo spoke to Rouette, the parties all met together at defendant's office a day or two thereafter. At that meeting the defendant refused to pay any additional funds believing it had paid the balance in full called for under the July 29, 2008 purchase order which was $23,586.94. Burd indicated that if the payment issue was not resolved that day, service on the TAK X150 as well as other machines owned by the defendant might not be provided. No resolution was reached at that meeting and the plaintiff ultimately filed suit in late 2009 seeking payment of $63,364 for what it believed was the balance due from the defendant for the transaction.
Additional facts will be presented as necessary.
III THE PLAINTIFF'S COMPLAINT A. Breach of Contract
Plaintiff's complaint seeks the recovery of monies due relative to the sale of the TAK X150. Under the first count, the plaintiff contends that the August 28, 2008 purchase order is the binding agreement between the parties for the purchase of the machine. It alleges that on that date Randall Spargo delivered the purchase order to Burd as the vice president of Yuasa-Yi, Inc., that the order was accepted, the TAK X150 was delivered to the defendant which accepted it and that the defendant paid only $23,586.94 toward the purchase price of $86,950.94 leaving a balance due of $63,364.00.
Plaintiff contends that there was a meeting of the minds as to the August 28, 2008 agreement thereby binding the parties to it and that the July purchase orders were either not accepted by the plaintiff, or, were rescinded by the parties. Generally, "[t]he 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.) Chiulli v. Zola, 97 Conn.App. 699, 706-07, 905 A.2d 1236 (2006).
In this instance the August 28, 2008 purchase order did not form an independent agreement as a prior July purchase order had been entered into. While it is true that parties are free to alter or amend the terms of an agreement, in this instance there was no consideration granted to the defendant for doing so. Harley v. Indian Spring Land Company, 123 Conn.App. 800, 822, 3 A.3d 992 (2010) In fact, plaintiff's own stated reason for having a new purchase order issued changing the price without reference to any credits was for its own "internal purposes" of satisfying its accounting department — not to make any substantive change to the transaction. Burd himself specifically told the defendant that the overall net price of the transaction, for the two machines, would not change. Hence, the issue becomes not only the enforceability of the July purchase orders, but also whether QMS acted as an agent for the plaintiff in arriving at those agreements.
Addressing the latter issue first, the elements of an agency relationship were set forth by our Supreme Court in National Publishing Co., v. Hartford Fire Ins. Co., 287 Conn. 664, 677-78, 949 A.2d 1203 (2008) as follows: "In Beckenstein v. Potter Carrier, Inc., [ 191 Conn. 120, 133], 464 A.2d 6 (1983), we set forth the elements required to show the existence of an agency relationship: (1) a manifestation by the principal that the agent will act for him; (2) acceptance by the agent of the undertaking; and (3) an understanding between the parties that the principal will be in control of the undertaking . . . We also emphasized in Beckenstein that [t]he existence of an agency relationship is a question of fact . . . Some of the factors listed by the Second Restatement of Agency in assessing whether such a relationship exists include: whether the alleged principal has the right to direct and control the work of the agent; whether the agent is engaged in a distinct occupation; whether the principal or the agent supplies the instrumentalities, tools, and the place of work; and the method of paying the agent . . . In addition, [a]n essential ingredient of agency is that the agent is doing something at the behest and for the benefit of the principal . . . Finally, the labels used by the parties in referring to their relationship are not determinative; rather, a court must look to the operative terms of their agreement or understanding." (Citation omitted; internal quotation marks omitted.)
The court finds there is ample evidence to establish that QMS did act as an agent for the plaintiff under the standards set forth above. The plaintiff sold and marketed its' machinery through QMS and had designated it as its exclusive "authorized distributor" and/or "authorized dealer" for the entire New England region. Burd specifically testified that sales of large machines such as those at issue here were done only through the distributors and not by the plaintiff directly. Thus, the sales were done by QMS at the behest and for the benefit of the plaintiff. Typically, the buyer would contact the distributor, the distributor would contact the plaintiff for a bottom line price quotation and then the distributor would negotiate a price with the buyer. In this way, the principal had control of the undertaking, but gave broad authority to the agent to craft the terms of any agreement. Both Burd and Rouette made clear that QMS would receive a commission upon the sale of machine. In some instances the commission was by cash payment, in other instances, by the distributor's retention of a trade in from the buyer which the distributor would then attempt to resell at a profit. Regardless, the compensation paid to an agent by a principal upon the sale of one the principal's products or services is a hallmark of a typical relationship between an agent and principal. Moreover, Randall Spargo noted that in the defendant's negotiation of the transaction, he dealt with QMS and had no direct contact with the plaintiff until after being approached by Burd to request new purchase orders. Despite this, QMS made clear to the defendant, and the defendant understood, that the machinery purchase was in fact from the plaintiff, that it would be approved by the plaintiff and that the purchase order would be addressed to the plaintiff in care of QMS.
In addition, the creation of the July 15, 2008 purchase order for the TAK X150 (plaintiff's Exhibit 2) and the July 15, 2008 and July 29, 2008 revised purchase orders (plaintiff's Exhibits 3 and 4) were done by QMS as plaintiff's agent. The evidence compels the conclusion that QMS had the authority to enter into the terms set forth and that the purchase order was within the parameters of the authority granted to the agent by the principal. While the e-mails establish that QMS and the plaintiff continued to discuss numbers relative to the sale after the execution of the initial July 15, 2008 purchase order, the discussion essentially centered around how QMS and the plaintiff would divide up any profit from the sale taking into account what commission QMS could potentially earn on the sale. The total price to be paid by the defendant for the machines was not the real issue as that had been negotiated and agreed upon. That initial and revised July 15, 2008 purchase orders were modified by the July 29, 2008 purchase order which took into account additional credits negotiated between QMS and the defendant as consideration for the execution of a new purchase order. Such change, though affecting transactions between QMS and the defendant that were unrelated to any prior purchase from the plaintiff, was nonetheless within the parameters of the authority granted to the agent by the principal.
Accordingly, the court finds that July 29, 2008 purchase order is the binding agreement that existed between the parties. Further, the court finds that the August 28, 2008 purchase order created at the request of the plaintiff solely for its own internal purposes is not a binding agreement as there was no consideration for its execution.
The plaintiff argues in its post-trial brief that there was consideration for the August 28, 2008 agreement as the TAK XY1000 had not been delivered as of that date and the defendant was concerned that it would not be delivered if in fact he didn't execute a new purchase order that day as requested by plaintiff. However, plaintiff's complaint seeks recovery only for the TAK X150 which had already been delivered to the defendant on or about July 18, 2008. Hence, there would have been no concern on the defendant's part about that machine's delivery to act as consideration for the execution of a new purchase order for it.
Because the court finds the July 29, 2008 purchase order binding, the court must now analyze that agreement to determine the amount due thereunder, if any. That purchase order set a price of $99,950 for the TAK X150 with a credit of $60,000 for the trade in from the defendant of a KIA SKT50LMS leaving a balance of $39,950. Against that amount, various credits and set offs were set forth to account for other past transactions that had occurred between QMS and the defendant. Collectively, QMS allowed credits of $20,000 but set off against those credits debts of $3,636.94 owed by the defendant to QMS. Applied against the balance of $39,950, this left a net balance due of $23,586.94.
Following the meeting in August 2008 between the parties and Rouette, the August 28, 2008 purchase order created at the request of the plaintiff showed a purchase price of $86,950.94 and the defendant was billed the next day for that amount. Plaintiff's Exhibits 6 and 7. Even using this figure, the court notes that the KIA SKT50LMS machine traded in by the defendant toward this purchase was valued at $60,000 and there is no evidence that this machine was ever returned to the defendant from QMS as plaintiff's agent or independently of that relationship. Moreover, Randall Spargo had agreed to that valuation for the machine. Owners of property are able to give an opinion as to the value of the property they own. Misisco v. La Maita, 150 Conn. 680, 684, 192 A.2d 891 (1963). By testifying as to the value of the machine relative to the terms of the purchase order, the court accepts the defendant's valuation for purposes of establishing the credit. While the plaintiff contends that the value of the traded-in machine was overvalued, it failed to provide any specific evidence contradicting the owner's claimed value of the machine. Rouette credibly testified that the machine was never returned to the defendant and in fact was sold (at a loss) by QSM.
In light of the above, the court finds that the defendant's payment of $23,586.94 constituted payment in full and left a zero balance due from the defendant. Any issues which the plaintiff may have relative to credits that QMS allotted relative to the purchase of the machine must be addressed between QMS and the plaintiff if it believes it was outside of the authority granted to QMS to do so.
B. Promise
Incorporating many of the same allegations of the first count, the court finds that as to the second count, the plaintiff has failed to prove its claim by a fair preponderance of the evidence.
C. Unjust enrichment
In its third count the plaintiff has alleged unjust enrichment. As noted above, the court has found that the July 29, 2008 purchase order was a binding agreement between the parties. The elements for a claim of unjust enrichment are well established. "Plaintiffs seeking recovery for unjust enrichment must prove (1) that the defendants were benefited, (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." (Internal quotation marks omitted.) Jo-Ann Stores, Inc. v. Property Operating Co., LLC, 91 Conn.App. 179, 194, 880 A.2d 945 (2005). "Unjust enrichment is a very broad and flexible equitable doctrine that has as its basis the principle that it is contrary to equity and good conscience for a defendant to retain a benefit that has come to him at the expense of the plaintiff." Gagne v. Vaccaro, 255 Conn. 390, 409, 766 A.2d 416 (2001). In reviewing a claim under this theory, it is noted that "[t]he lack of a remedy under a contract is a precondition to recovery based on unjust enrichment or quantum meruit." United Coastal Industries, Inc. v. Clearheart Construction Co., 71 Conn.App. 506, 513, 802 A.2d 901 (2002).
In this instance, the court finds the purchase order does not have any provision for remedies upon default by either party and therefore, unjust enrichment is a viable cause of action for a claim of damages by the plaintiff. As noted above, the credits and trade in on the July 29, 2008 purchase were freely negotiated between the defendant and QMS through the authority granted to QMS by the plaintiff, as agent for the plaintiff. The machine traded in was never returned to the defendant and it paid the balance due under that purchase order. In short, the defendant performed its part of the bargain. Therefore, the plaintiff has failed to establish by a preponderance of the evidence any unjust enrichment to the defendant.
In light of the court's conclusions as to the three counts of plaintiff's complaint, the court need not specifically address the defendant's special defenses.
IV DEFENDANT'S COUNTERCLAIMS A. Fraudulent Misrepresentation and Non-Disclosure
In the first count of its counterclaim, the defendant alleges that the plaintiff intentionally failed to disclose to the defendant that the TAK X150 was a used machine, rather than new, thereby inducing it to purchase the machine at an amount in excess of its true value. "[T]he essential elements of an action in fraud . . . are: (1) that a false representation was made as a statement of fact; (2) that it was untrue and known to be untrue by the party making it; (3) that it was made to induce the other party to act on it; and (4) that the latter did so act on it to his [or her] injury." Kilduff v. Adams, Inc., 219 Conn. 314, 329, 593 A.2d 478 (1991); Miller v. Appleby, 183 Conn. 51, 54-55, 438 A.2d 811 (1981). The standard of proof for any claim of fraudulent misrepresentation is that of clear and convincing evidence. Kavarco v. T.J.E, Inc., 2 Conn.App. 294, 296, 478 A.2d 257 (1984). Where the claim of fraud is based on nondisclosure of material information, it must be noted that a mere nondisclosure does not normally amount to fraud. There must be "a failure to disclose known facts and, in addition thereto, a request or an occasion or circumstance which imposes a duty to speak . . . Such a duty is imposed on a party insofar as he voluntarily makes disclosure. A party who assumes to speak must make full and fair disclosure as to the matters about which he assumes to speak." (Citations omitted; internal quotation marks omitted.) Duksa v. Middletown, 173 Conn. 124, 127, 376 A.2d 1099 (1977); see also Egan v. Hudson Nut Products, Inc., 142 Conn. 344, 347, 114 A.2d 213 (1955).
A review of the testimony and exhibits leads the court to the conclusion that the defendant has not met the higher standard of proof in this regard. There was credible testimony from Rouette that the machine had been a demonstration model at a trade show in Massachusetts at which it had been "powered up" but he could not recall having run the machine to create any parts. After the trade show the machine was moved to QMS's office in Enfield, Connecticut where on one occasion it was used to demonstrate "something" for Colt Manufacturing. This information, coupled with other facts presented, is insufficient to be considered clear and convincing evidence of defendant's claim that the plaintiff (intentionally) sold it a used machine.
B. Negligent Misrepresentation and Non-Disclosure
In the second count of its counterclaim, the defendant makes the same allegations as the first count except that it states its cause of action as one for negligent misrepresentation for the plaintiff failing to disclose the machine as being used.
"Traditionally, an action for negligent misrepresentation requires the plaintiff to establish (1) that the defendant made a misrepresentation of fact (2) that the defendant knew or should have known was false, and (3) that the plaintiff reasonably relied on the misrepresentation, and (4) suffered pecuniary harm as a result." Nazami v. Patrons Mutual Ins. Co., 280 Conn. 619, 626, 910 A.2d 209 (2006). "Whether evidence supports a claim of . . . negligent misrepresentation is a question of fact." (Citation omitted; internal quotation marks omitted.) Johnnycake Mountain Associates v. Ochs, 104 Conn.App. 194, 201-02, 932 A.2d 472 (2007), cert. denied, 286 Conn. 906, 944 A.2d 978 (2008). Centimark Corp. v. Vill. Manor Associates Ltd. P'ship, 113 Conn.App. 509, 518, 967 A.2d 550, 558-59 (2009).
Unlike a claim of fraudulent misrepresentation, the standard of proof for a negligent misrepresentation claim is that of a preponderance of the evidence. Rego v. Connecticut Ins. Placement Facility, 22 Conn.App. 428, 430, 577 A.2d 1105 (1990), rev'd on other grounds, 219 Conn. 339, 593 A.2d 491 (1991).
Based on the facts found by the court, the defendant has failed to establish by a preponderance of the evidence that the plaintiff made a misrepresentation by negligently withholding information from the defendant in order to induce it to purchase the machine.
C. Statutory Breach of Covenant of Good Faith and Fair Dealing
In its third count, the defendant alleges that the plaintiff's request of August 28, 2008 to create a new purchase order for the TAK X150 for plaintiff's internal purposes only and then subsequently bringing suit against the defendant based on that new purchase order constitutes a breach of the covenant of good faith and fair dealing set forth in General Statutes § 42a-1-304. That statute reads as follows: "Every contract or duty within this title imposes an obligation of good faith in its performance and enforcement."
Shortly before trial, on January 4, 2011, the court (Trombley, J.) allowed the defendant, over the objection of the plaintiff to file amended counterclaims but in so doing ordered the defendant to delete any monetary reference to lost profits and productivity in paragraph 17 of count 3 and paragraph 25 of count 5. It appears the defendant failed to substantively comply with that order and therefore the court has not considered any of the allegations that may go to the substance of such claims.
The elements of a claim such as that set forth by the defendant have been set out in our case law. "There are three elements to establishing a breach of [a covenant of good faith] which a party must plead: first, that the plaintiff and the defendant were parties to a contract under which the plaintiff reasonably expected to receive certain benefits; second, that the defendant engaged in conduct that injured the plaintiff's right to receive some or all of those benefits; and third, that when committing the acts by which it injured the plaintiff's right to receive benefits it reasonably expected to receive under the contract, the defendant was acting in bad faith." Haven Health Center of Litchfield Hills, LLC v. Parente, Superior Court, judicial district of Litchfield, Docket No. CV 03 0091743 (January 18, 2006, Bozzuto, J.); see also De La Concha of Hartford, Inc. v. Aetna Life Ins., Co., 269 Conn. 424, 433, 849 A.2d 382 (2004).
Based on the facts and reasoning set for in Section IVD below, the court finds that the defendant has failed to establish its claim by a preponderance of the evidence as to this count.
D. Common-Law Breach of Covenant of Good Faith and Fair Dealing
In the fourth count of its counterclaim, the defendant alleges that the plaintiff's request of August 28, 2008 to create a new purchase order for the TAK X150 for its internal purposes only and then subsequently bringing suit against the defendant based on that new purchase order constitutes a breach of the covenant of good faith and fair dealing as found at common law.
"[I]t is axiomatic that the . . . duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship . . . In other words, every contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement." Renaissance Management Co. v. Connecticut Housing Finance Authority, 281 Conn. 227, 240, 915 A.2d 290 (2007). "Essentially, it is a rule of construction designed to fulfill the reasonable expectations of the contracting parties as they presumably intended. The principle, therefore, cannot be applied to achieve a result contrary to the clearly expressed terms of a contract, unless, possibly, those terms are contrary to public policy." (Internal quotation marks omitted.) LaSalle National Bank v. Freshfield Meadows, LLC, 69 Conn.App. 824, 834, 798 A.2d 445 (2002).
"To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith." (Internal quotation marks omitted.) Renaissance Management Co. v. Connecticut Housing Finance Authority, supra, 281 Conn. 240. Bad faith involves "actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive." (Internal quotation marks omitted.) New England Custom Concrete, LLC v. Carbone, 102 Conn.App. 652, 661, 927 A.2d 333 (2007). "Bad faith means more than mere negligence; it involves a dishonest purpose." (Internal quotation marks omitted.) Collins v. Anthem Health Plans, Inc., 275 Conn. 309, 334, 880 A.2d 106 (2005); see also Sullivan v. Allstate Ins. Co., Superior Court, judicial district of Hartford, Docket No. CV 05 4008548 (March 28, 2006, Tanzer, J.) (bad faith "contemplates a state of mind affirmatively operating with furtive design or ill will"). "[B]ad faith may be overt or may consist of inaction, and it may include evasion of the spirit of the bargain." (Citations omitted internal quotation marks omitted.) Landry v. Spitz, 102 Conn.App. 34, 43, 925 A.2d 334 (2007).
In this instance, the court cannot say there is sufficient evidence to conclude that the plaintiff's actions were done dishonestly, with ill will or a sinister motive. For example, in its meeting with the defendant, the plaintiff openly described the creation of the August 28, 2008 purchase orders as being for its own internal purposes and that they did not change the total amount due between the parties for the purchase of the two machines. The fact that it later brought suit based on the August 28, 2008 purchase order for the TAK X150 was based on its belief that it was still owed money for the sale of that machine in the amount claimed. The real issue from the plaintiff's standpoint at the time of the filing of the claim and at trial was as to whether the credits negotiated by QMS had been properly applied.
Also, there is insufficient evidence to conclude that the plaintiff had exercised bad faith in selling the TAK X150 as a new machine when it had been previously shown at a trade show. The testimony made clear that the machine had been "powered up" at the trade show and that it had also been used to demonstrate "something" at the office of QMS. There was nothing to indicate that anyone other than the plaintiff had had title to the machine or that it had ever actually been used by QMS or any other party to produce parts. While the parties may differ on their interpretation of what constitutes a "used" versus a "new" machine, the court finds that in this regard, and under the facts of this case, there was no bad faith exhibited by the plaintiff in the sale of the machine.
E. Violation of the Connecticut Unfair Trade Practices Act.
In the fifth count of its counterclaim, the defendant alleges that the plaintiff violated CUTPA in one or more of the following ways: (1) failing to disclose the true used state of the TAK X150 machine (2) requesting the defendant on August 28, 2008 to create new purchase order for the TAK X150 for plaintiff's internal purposes only and then subsequently bringing suit against the defendant based on that new purchase order (3) failing to credit defendant for the traded in machinery and equipment (4) failing to return to defendant the traded in machinery and equipment, and (5) failing to credit defendant the monies due it from plaintiff's agent QSM.
Our courts have allowed recovery under CUTPA only when the party seeking to recover damages meets the following two requirements: "First, he must establish that the conduct at issue constitutes an unfair or deceptive trade practice . . . Second, he must present evidence providing the court with a basis for a reasonable estimate of the damages suffered." (Citations omitted.) A. Secondino Sons, Inc. v. LoRicco, 215 Conn. 336, 343, 576 A.2d 464 (1990).
More specifically, "CUTPA provides that [n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce . . . In order to enforce this prohibition, CUTPA provides a private cause of action to [a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a [prohibited] method, act or practice . . . Thus, in order to prevail in a CUTPA action, a plaintiff must establish both that the defendant has engaged in a prohibited act and that, as a result of this act, the plaintiff suffered injury." (Citations omitted; emphasis in original; internal quotation marks omitted.) Stevenson Lumber Co.-Suffield v. Chase Associates, Inc., 284 Conn. 205, 213-14, 932 A.2d 401 (2007). "The language `as a result of' requires a showing that the prohibited act was the proximate cause of a harm to the plaintiff." Abrahams v. Young Rubicam, Inc., 240 Conn. 300, 306, 692 A.2d 709 (1997).
The court has already addressed above the first and second allegations of the fifth count finding that the plaintiff's actions were not in the nature of bad faith. As to the third, fourth and fifth allegations, the July 29, 2008 purchase order which the court has found enforceable, did credit the defendant for the traded in machinery and equipment as well as monies due it from plaintiff's agent QSM. As to failing to return to the defendant the traded-in machinery and equipment, there was no obligation to do so relative to the TAK X150 as defendant was given full credit. Such a return, if done, would have resulted in an unjust enrichment to the defendant.
As noted earlier, the trade in given by the defendant for the TAK XY1000 was returned to the defendant. Other parts traded in or owed by one party to the other were dealt with in the February 11, 2009 agreement between the parties which included claims by Rouette for QMS.
The court finds that the actions of the plaintiff in this case do not constitute unfair or deceptive trade practices. Its actions were born more out of regret and frustration for actions taken by it or its agent relative to the bargain struck on the sale of the machines. While some of plaintiff's conduct in its meetings with the defendant may not have made it a paragon of virtue, there is insufficient evidence to establish it as bad faith as a matter of law or conduct that would be considered immoral, unethical, oppressive or unscrupulous. Also, in reviewing the pleadings, the court notes that the defendant has not alleged that the plaintiff engaged in the degree of misconduct that would justify the assessment of punitive damages which it has claimed in its prayer for relief. "[P]unitive damages may be awarded only for outrageous conduct, that is, for acts done with a bad motive or with a reckless indifference to the interests of others." (Internal quotation marks omitted.) Lydall, Inc. v. Ruschmeyer, 282 Conn. 209, 245, 919 A.2d 421 (2007). Here the defendant has failed to establish by a preponderance of evidence its claims relative to the fifth count.
V CONCLUSION
Judgment may enter in favor of the defendant as to counts one, two and three of the plaintiff's complaint. Judgment may enter in favor of the plaintiff as to counts, one, two, three, four and five of the defendant's amended counterclaim.
In light of the above, the prejudgment remedy previously granted is ordered dissolved.
So ordered.