2480 BELMONT AVENUE CORP. v. THOMAS J. FITZGERALD ET AL.

2009 Ct. Sup. 17279
No. X03-CV06-5009753SConnecticut Superior Court Judicial District of Hartford, Complex Litigation Docket at Hartford
October 27, 2009

[EDITOR’S NOTE: This case is unpublished as indicated by the issuing court.]

MEMORANDUM OF DECISION
MILLER, J.

On April 26, 2006, the plaintiff and the defendants signed three contracts for the sale of real estate and two businesses owned by defendants and located in Stafford, Connecticut. Two of the contracts were for the sale of two real properties on which defendant Fitzgerald operated a food store and a liquor store. The third contract was for the sale of the food and liquor businesses. The parties agreed to a total transaction price of $2,000,000, and also agreed to an adjustment for inventories on hand on the date of closing. The contracts were mutually dependent, so that the parties clearly contemplated that all three of the agreements would close, or nothing would be sold. Plaintiff paid $100,000 into escrow as a deposit for all three contracts.

The contracts included a due diligence period of 60 business days from April 26, 2006 and required a closing within 90 days of that same date. The transaction was contingent upon plaintiff’s ability to obtain a liquor license for the liquor store.

Plaintiff’s interests were represented by Attorney Robert Bring, a member of the New York Bar. On June 30, 2006, Attorney Bring wrote to defendant’s counsel, Attorney Reiner (Exh. 9) to state that the due diligence period was over and that his client was ready to close during the week of July 17, 2006.

By July 12, 2006, problems with the transaction were starting to emerge. Attorney Bring, who had never previously handled a transaction involving a Connecticut liquor license, wrote to Attorney Reiner to advise that there were problems with the Liquor License transfer contingency, which problems included his discovery that “a Liquor License is not alienable (i.e. “transferable).” (Exh. 10.) Mr. Bring further stated that the closing could not take place until approximately August 15. By July 12, plaintiff had hired one Steve Hennessey, who was in the business of expediting liquor license applications, to accelerate the licensing process for this application. At no point during the period CT Page 17280 when the parties were negotiating over this transaction did plaintiff obtain a liquor license for defendant’s package store. Defendants’ conduct with respect to this aspect of the transaction was not always appropriate, but the failure to obtain the license was ultimately plaintiff’s fault.

Attorney Michael Reiner represented the defendants during the negotiations over the transaction. Mr. Reiner is an experienced Connecticut real estate lawyer. He testified credibly about another significant problem with the deal; plaintiff’s inability to demonstrate that it had the necessary financing in place. Plaintiff’s June 26, 2006 mortgage commitment letter (Exh. 31) and bank counsel’s July 13, 2006 list of documents which it needed to review and approve prior to closing (Exh. 61) made it clear that plaintiff was going to need to accomplish some significant tasks in order to get its financing firmly in place. The most significant of these was the requirement that plaintiff get signed leases for the grocery store and the package store.[1] No such leases were ever produced by the plaintiff.

By August 4, 2006, Attorney Reiner had concluded that plaintiff was not going to be able to close on the transaction. He testified that as of that date, he had not seen the mortgage commitment letter or bank counsel’s “needed list.” When Attorney Crisci requested a September 6, 2006 closing date, Attorney Reiner advised his client not to agree to that date, because plaintiff and its counsel presented him with no evidence that it was able to close.

Another problem with the transaction was Mr. Fitzgerald’s reservations about the deal. Once the purchase and sale agreement was signed, defendant claims that the business premises were visited by many business associates of Mr. Jamal, the principal of the plaintiff corporation and by other people who were apparently interested in buying or otherwise acquiring some interest in the operation. Mr. Fitzgerald testified that these visits were frequent, intrusive and disruptive. It was clear from his testimony that Mr. Fitzgerald eventually decided that he did not want the deal to close.[2] Plaintiff claims that this unwillingness to close the transaction constituted bad faith.

Whatever Mr. Fitzgerald thought about the deal, his counsel advised Attorney Bring, on July 28, 2006 (Exh. 15) that the defendants were “ready, willing and able to close pursuant to the terms of the contract, including the date by which a closing must occur.” By this date, the 90-day period set forth in the purchase and sale agreements had expired. There were numerous, additional communications between counsel for the parties, most of which do not need to be addressed in any detail. On CT Page 17281 August 16, Mr. Bring repeated a prior demand for a September 6 closing date but proposed significantly different terms, including a lease-back to Mr. Fitzgerald and the purchase of only one of the properties (Exh. 28). The last communication between the parties was an August 30, 2006 letter from Attorney Louis Crisci, Connecticut counsel retained by the plaintiff, offering to close the transaction on the original terms on or before September 6, so that plaintiff could complete an exchange pursuant to Section 1031 of the Internal Revenue Code. This litigation[3] started soon thereafter.

The court finds that defendant Fitzgerald was ready, willing and able to go through with this transaction, despite his reservations about it. The deal did not close because of the failure of the plaintiff to do some of the important things which had to be done to make the transaction happen. For whatever reason, the plaintiff did not approach the liquor license process properly, and its conduct was the major, if not the only reason why the license was never obtained. It is also clear to the court that plaintiff did not take timely, appropriate action to get its financing in place for the transaction. By the time that Attorney Crisci advised defendants that plaintiff wanted to close the deal — on the originally agreed-to terms — the defendant was entitled to refuse to go forward with the sale. Attorney Reiner and Mr. Fitzgerald were, under the circumstances which the court finds existed at the time, entitled to believe that the deal would never close. None of these circumstances were caused by anything the defendants did or failed to do. The defendants were, by August of 2006, justified in concluding that plaintiff was in default under the terms of the three contracts.

Judgment shall enter in favor of the defendants and against the plaintiff. Because of the finding that plaintiff defaulted on the contracts, the court further finds that defendants are entitled to retain plaintiff’s $100,000 deposit as liquidated damages.

Under the terms of the contracts, the prevailing party in this action is entitled to recover its costs and reasonable attorneys fees. This issue was left open at the request of the parties. The court will set a date for a hearing on this issue if the parties do not report, on or before November 17, 2009, that they have resolved it.

There remains the matter of the declaratory judgment action filed by Mr. Fitzgerald against 2480 Belmont Avenue Corp. The judgment in this case is dispositive of the issues in that matter.

[1] It was clear from the evidence that Mr. Jamal and the other people CT Page 17282 involved in 2480 Belmont Avenue Corp. never intended to run either store and that they intended their only role in the property to be as the landlord.
[2] Mr. Fitzgerald and his counsel seemed to go out of their way to remind the court that Mr. Jamal, his business associates and many of the people who visited the premises are Arab-Americans. The court notes with disapproval that defense witnesses insisted on using an abbreviated version of Mr. Jamal’s honorific nickname(Abu-jihad), calling him “Mr. Jihad” until directed by the court to stop. The national origin of any party or witness is not relevant to this case, and had nothing to do with the outcome.
[3] On September 6, 2006, defendant Fitzgerald brought a declaratory judgment action (CV06-5000795) in the Judicial District of Rockville, which action was thereafter consolidated with this action and transferred along with it to the Complex Litigation Docket.

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