2009 Ct. Sup. 12840
No. X10 UWY CV 07-5005853 SConnecticut Superior Court Judicial District of Waterbury at Waterbury
August 3, 2009
MEMORANDUM OF DECISION
JANE S. SCHOLL.
Introduction
This case involves a dispute between the parties which arises out of an agreement between them regarding the ownership and development of property in North Branford, Connecticut.
In his five-count revised complaint dated September 15, 2008, the Plaintiff, Robert P. Neubig, alleges causes of action in breach of contract, breach of the implied covenant of good faith and fair dealing, Connecticut Unfair Trade Practices Act, unjust enrichment, and trust by operation of law. The Defendant, Luanci Construction, LLC, filed an answer, special defenses and counterclaim. In its special defenses Luanci claims that the Plaintiff breached the implied covenant of good faith and fair dealing and that the Plaintiff’s claims are barred by the doctrine of unclean hands in that he entered into the agreement when he knew or should have known he did not have the financial resources to complete his obligations under the agreement. In its counterclaim, Luanci claims that Neubig has breached his obligations under the agreement.
Trial on this matter was held before the court on February 17th, 18th and 19th. At that time the court heard testimony from the Plaintiff, Robert Weidenmann, a builder; Carol Zebb, the town planner for North Branford; Kurt Weiss, the town engineer for North Branford; Jean Scalise, a loan officer for Fidelity; and James Ciarleglio, the sole member of Luanci Construction, LLC. The court also received numerous exhibits. Post-trial briefs were filed on April 17, 2009 and rebuttal briefs were filed on May 1, 2009. The parties and the court agreed that the issue of liability would be determined by the court first.
Admissions from the Pleadings
The following facts are alleged in the complaint and admitted by the Defendant: 1) “The Agreement provides that the plaintiff would secure, at CT Page 12841 his own expense and on or before December 31, 2006, approval of a fourteen (14) lot subdivision of the Property.” (Paragraph 5, Revised Complaint). 2) “The Agreement further provides that, after subdivision approval, the defendant would: a. keep four (4) `building permit ready’ lots, b. convey the balance of the Property to the plaintiff, and c. have an option to purchase eight (8) additional `building permit ready’ lots for $150,000 each.” (Paragraph 6, Revised Complaint). 3) “Paragraph 3 of the Agreement provides that the subdivision was to be in accordance with `specifications agreeable to both parties.’ See Exhibit 1, ¶ 3.” (Paragraph 7, Revised Complaint). The following fact is alleged by the Defendant in the counterclaim and admitted by the Plaintiff “Pursuant to the Agreement, Luanci Construction contributed $600,000.00 toward the purchase of certain real property known as 118 Parsonage Hill Road, North Branford, Connecticut (the `Property’).” (Paragraph 3, Counterclaim).
Findings of Fact
Based upon a preponderance of the evidence the court finds the following additional facts. Neubig is a site developer with experience installing roads, septic systems, storm drains and connecting homes to municipal sewers. Luanci is a builder who usually purchases lots ready to be built on. Neubig and Luanci entered into an agreement on August 25, 2005 involving the purchase of property known as 118 Parsonage Hill Road, North Branford, Connecticut. The agreement noted that Neubig was under a contract to purchase the property for $1,200,000 but did not have sufficient funds to do so. Pursuant to the agreement, each party would contribute $600,000 towards the purchase price. The agreement provided that: “Neubig shall be responsible for obtaining approval for a fourteen (14) lot residential subdivision on the subject property, in accordance with site plans, subdivision plans, and specifications agreeable to both parties. Neubig shall pay all expenses related to said approvals. Neubig shall have 12 months from the date of purchase of the aforementioned real property to obtain said approvals.” (Exhibit 5.) Sometime after the agreement, it was amended to provide that “Neubig shall have until December 31, 2006 to obtain said approvals.” (Exhibit 6.) Paragraph 4 of the agreement provided that: “In the event that Neubig is unable to obtain said approvals within said time frame, the Neubig shall have thirty (30) days to pay to Luanci $600,000 plus all accrued interest (as hereinafter described) in exchange for the aforementioned real property.” (Exhibit 5.) The agreement further provided that: “Upon approval of said lots, Luanci shall retain title to the first four (4) approved and `building permit’ ready lots in exchange for Luanci’s $600,000 contribution.” (Exhibit 5.) The purpose of the agreement was to insure Luanci’s investment in the project. As the agreement itself states: “Luanci is willing to contribute $600,000.00 towards said purchase price CT Page 12842 provided that his investment is adequately secured.” (Exhibit 5.)
The purchase and sale contract which Neubig had with the sellers was assigned to Luanci on August 26, 2005. The property was previously conveyed to Luanci on August 15, 2005 although the deed was not recorded in the land records until August 26, 2005.
Neubig applied for subdivision approval three times. The first application was withdrawn and the second application was denied. On October 19, 2006, the North Branford Planning and Zoning Commission approved the third application subject to certain standard and special conditions. Subsequent to such approval, a Mylar map showing the plans as finally approved was required to be filed with the town. Neubig described that as the “birth certificate” of the subdivision. The approval required that the Mylar map be recorded within 90 days of the expiration of the appeal period and that “[f]ailure to record within 90 days will null and void this subdivision approval.” (Exhibit 7.) On January 4, 2007 the town granted the Plaintiff’s request of a ninety-day extension to April 17, 2007 to file the Mylar map. On March 29, 2007, the town granted a second ninety-day extension to July 16, 2007. On July 3, 2007, Carol Zebb clarified that the last extension expired on August 4, 2007. The town also required that a performance bond be posted to ensure that the developer completed the project. The bond was to be submitted prior to the filing of the Mylar map. The bond required by the town was in the amount of $417,000.
Neubig did not file the Mylar map or the bond because he could not afford the cost of the bond. Neubig planned to take a mortgage against the subject property to finance the bond but Luanci would not convey the property to him so he could do so. Therefore Neubig sought to terminate the agreement. Neubig admitted at trial that the filing of the Mylar map and the bond was within his responsibilities under the agreement. The town would not issue a building permit to start construction on the lots until after the map and bond were filed. Because of Neubig’s failure to file the Mylar map and the bond the subdivision approval has lapsed.
Right to Terminate the Contract
Neubig claims that he was entitled to take advantage of the provisions of Paragraph 4 of the agreement and Luanci refused to comply. Neubig claims that by failing to do so Luanci violated the agreement, breached the implied covenant of good faith and fair dealing, and violated the Connecticut Unfair Trade Practices Act. In considering these claims, the court notes that: “There is a strong public policy in Connecticut favoring freedom of contract: It is established well beyond the need for CT Page 12843 citation that parties are free to contract for whatever terms on which they may agree. This freedom includes the right to contract for the assumption of known or unknown hazards and risks that may arise as a consequence of the execution of the contract. Accordingly, in private disputes, a court must enforce the contract as drafted by the parties and may not relieve a contracting party from anticipated or actual difficulties undertaken pursuant to the contract, unless the contract is voidable on grounds such as mistake, fraud or unconscionability . . . If a contract violates public policy, this would be a ground to not enforce the contract . . . A contract . . . however, does not violate public policy just because the contract was made unwisely . . . [C]ourts do not unmake bargains unwisely made. Absent other infirmities, bargains moved on calculated considerations, and whether provident or improvident, are entitled nevertheless to sanctions of the law . . . Although parties might prefer to have the court decide the plain effect of their contract contrary to the agreement, it is not within its power to make a new and different agreement; contracts voluntarily and fairly made should be held valid and enforced in the courts.” (Internal citations, quotation marks and footnote omitted.) Schwartz v. Family Dental Group, P.C., 106 Conn.App. 765, 772-3, cert. denied, 288 Conn. 911 (2008).
“Connecticut law provides that [a] contract must be construed to effectuate the intent of the parties, which is determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction . . . [T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words and . . . the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract . . . Although ordinarily the question of contract interpretation, being a question of the parties’ intent, is a question of fact . . . [w]here there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law.” (Internal quotation marks and citations omitted.) Garcia v. City of Hartford, 292 Conn. 334, 341
(2009).
Paragraph 4 of the agreement provides that: “In the event that Neubig is unable to obtain said approvals within said time frame, the Neubig shall have thirty (30) days to pay to Luanci $600,000 plus all accrued interest (as hereinafter described) in exchange for the aforementioned real property.” (Exhibit 5.) However, both Neubig and Luanci agree that Neubig did obtain “said approvals.” “Said approvals” are the “approval for a fourteen (14) lot residential subdivision on the subject property, in accordance with site plans, subdivision plans, and specifications agreeable to both parties” referenced in paragraph 3 of the agreement. CT Page 12844 (Exhibit 5.)
Neubig claims that he was entitled to terminate the contract and take title to the property in exchange for return of Luanci’s initial investment plus interest if the plans and specifications of the approved subdivision were not agreeable to both parties. Neubig now argues that the approval obtained was not in accordance with specifications agreeable to Luanci, even though Luanci does not object to the specifications on which the subdivision approval was based. Neubig also argues that the subdivision, as approved, was not agreeable to him, yet he never sought to modify any of the conditions set by the Town, nor did he claim that the subdivision as approved was not in accordance with the plans and specifications he submitted for approval. In fact, in Neubig’s attorney’s letter of December 27, 2006 he states that Neubig has no alternative but to exercise his rights under paragraph 4, not based on Neubig’s dissatisfaction with the approval, but on his claim that “because your client (Luanci) continues to assert he cannot purchase additional lots notwithstanding Zoning Commission actions on October 2006, it follows that he believes necessary approvals have not been received.” (Exhibit 10.) In response to the December 27th letter, Luanci’s attorney stated that “our position is that Paragraph 4 of the agreement is no longer pertinent. Your client has obtained all necessary approvals for the subdivision, however the lots are not yet building permit ready.” (Exhibit 11.)
Neubig argues that “with the December 31 deadline approaching, because the parties could not agree to proceed in light of having to install the road earlier than anticipated, [he] had to terminate the Contract.” (Plaintiff’s Trial Brief, p. 9.) Neubig’s position misconstrues the language of the agreement. First, the December 31st deadline applied only to the “approvals,” that is, the approval for the fourteen lot residential subdivision. Second, the provision for cancellation of the agreement applied only if he was unable to obtain such approvals, not building permit ready lots. The language of the agreement here is clear. The provisions of paragraph 4 only become operative “[i]n the event that Neubig is unable to obtain said approvals.” (Exhibit 5.) Since Neubig obtained the approvals called for in the agreement, he cannot avail himself of the provisions of Paragraph 4. Consequently, Luanci did not breach the agreement by failing to comply with Neubig’s demand for a closing pursuant to paragraph 4.
Breach of Contract
In its counterclaim Luanci claims that Neubig has breached his obligations under the agreement. “The elements of a breach of contract CT Page 12845 action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages.” (Internal quotation marks and citation omitted.) Rosato v. Mascardo, 82 Conn.App. 396, 411 (2004).
There is no dispute that an agreement was formed by the parties. Pursuant to the agreement, the only obligation that had matured that Luanci was required to perform was to contribute $600,000 towards the purchase price of the property. He had done so. The agreement further provided that: “Upon approval of said lots, Luanci shall retain title to the first four (4) approved and `building permit’ ready lots in exchange for Luanci’s $600,000 contribution. Luanci shall convey to Neubig or an entity he shall form for the purpose of holding title to the remaining property.” (Exhibit 5.) “In ascertaining the contractual rights and obligations of the parties, we seek to effectuate their intent, which is derived from the language employed in the contract, taking into consideration the circumstances of the parties and the transaction . . . We accord the language employed in the contract a rational construction based on its common, natural and ordinary meaning and usage as applied to the subject matter of the contract . . . Where the language is unambiguous, we must give the contract effect according to its terms . . .” (Citations omitted.) Cantonbury Heights Condominium Association, Inc. v. Local Land Development, LLC, 273 Conn. 724, 734-5 (2005). The language of the agreement is clear that once Neubig had four approved and building permit ready lots the property would be conveyed to him by Luanci except for those four lots.
Luanci claims that Neubig never obtained building permit ready lots. Neubig admits that he did not do so. Neubig agrees that, at a minimum, in order to obtain a building permit for the lots he was required to file the Mylar map and the bond, which he could have done but did not.
Neubig argues that the town’s requirement that the road be installed in the subdivision prior to the issuance of any building permits was the singular cause for the breakdown of the parties’ business relationship. Neubig claims that the cost of building the road was $250,000 which he did not have. Yet he admitted at trial that no one from the town had said that he needed the road built before he could get a building permit. He claimed that this issue was raised by Luanci. Although the town engineer stated that the town regulations require that a road with a binder coarse would need to be built before a certificate of occupancy could be issued for a home built in the subdivision, he indicated that it was not required before a building permit to build the home would be issued. However the alleged confusion regarding this issue arose from the CT Page 12846 proposed construction sequence submitted by Neubig himself in the subdivision application. It provided that “pave road” be done before “develop individual lots.” (Exhibit 9). Therefore town officials testified that, based on this sequence, as part of the approved subdivision plans and specifications, the road was to be built before a building permit would be issued. This construction sequence was the same in this regard as had been submitted in a previous application. In fact, in his revised complaint, Neubig alleges that “issuance of a building permit was conditioned upon installation of the initial stages of the subdivision road, pursuant to a construction sequence negotiated by the plaintiff and added to the subdivision plans prior to receipt of the conditional approval.” (Paragraph 11, Revised Complaint.) Therefore, pursuant to the plans submitted by Neubig himself, and approved by the town, if the road needed to be constructed before development of the lots, it was because of Neubig’s own actions.
Even though Neubig disputes the town’s and Luanci’s position that the approved plans required that a road be built before a building permit would be issued, he agreed that he had not complied with the minimum requirements to obtain a building permit, that is, the filing of the map and the bond. Thus Neubig did not obtain “building permit ready lots” such that, pursuant to paragraph 5 of the agreement, the property would be conveyed to Neubig minus the four building permit ready lots to be retained by Luanci in exchange for its $600,000 contribution.
As Neubig concedes in his brief, “building permit ready lots could have issued upon the filing of the performance bond and mylar map, notwithstanding Staff’s interpretation of the Building Sequence — that they could have issued had the defendant complied with the Contract and conveyed the property.” (Plaintiff’s Trial Brief, p. 7.) Neubig claims that he needed title to the property in order to pledge it as collateral for a loan to finance the bond. Luanci refused to convey the property to him because it feared the loss of security for its investment. Yet the filing of the map and the bond were Neubig’s responsibility as part of securing approval for the subdivision and pursuant to the agreement he was to “pay all expenses related to said approvals.” (Exhibit 5.) But the contract did not require Luanci to convey the property to Neubig prior to Neubig’s obtaining building permit ready lots. Therefore Luanci had no obligation, under the agreement, to convey the property to Neubig so that it could be used as collateral for a loan to finance the bond.
The agreement provided that, upon approval of the lots, Luanci would retain title to the first four approved and “building permit” ready lots and the remaining property would be conveyed to Neubig. The parties never reached this point because Neubig did not advance the project to the CT Page 12847 stage where the lots were “building permit” ready, even though he could have done so. The subdivision approval was obtained, yet Neubig failed to perfect that approval by filing the Mylar map and the bond. Once that was done, the approval allowed him five years to complete construction/site improvement on the project. Therefore if some road work was necessary before a building permit would issue, then there was time to do so. There is nothing in the agreement which excuses Neubig’s performance because of cost issues nor is there a time limit on the provisions of building permit ready lots to Luanci. There is also no time constraints imposed by the town in obtaining a building permit. Other than a professed lack of resources, there is no reason for Neubig’s failure to comply with the agreement.
Luanci also claims that Neubig breached the agreement by failing to pay interest on the $600,000 advanced at closing, as called for in the agreement. Pursuant to paragraph 8 of the agreement Neubig agreed to pay Luanci $3,000 per month commencing on September 26, 2005. Neubig made only four of those payments. However Luanci subsequently agreed, when Neubig claimed he was unable to pay the interest, that those payments would come out of future closings on the lots. But since the subdivision approval has lapsed the ability to sell individual lots has also lapsed and there will be no closings out of which the accrued interest can be paid.
Lastly, Luanci claims Neubig breached the agreement by failing to pay engineering expenses as well as taxes due on the property. Pursuant to paragraph 3 of the agreement, “Neubig shall pay all expenses related to said approvals.” (Exhibit 5.) The agreement is silent as to who is responsible for payment of the taxes on the property. Juliano Associates placed a mechanic’s lien on the property for surveying services it performed as part of the subdivision application process. It claimed that it was due $43,125.14. Neubig admitted that he never paid Juliano in full.
Therefore the facts establish that Neubig breached the agreement by failing to provide the “building permit ready” lots, pay interest on Luanci’s investment, and pay the engineering expenses.
Unjust Enrichment
Neubig claims that if he cannot prevail on his breach of contract claim he should recover under a theory of unjust enrichment. “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 CT Page 12848 him at the expense of another . . . With no other test than what, under a given set of circumstances, is just or unjust, equitable or inequitable, conscionable or unconscionable, it becomes necessary in any case where the benefit of the doctrine is claimed, to examine the circumstances and the conduct of the parties and apply this standard . . . 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.” (Internal quotation marks and citations omitted.)Gagne v. Vaccaro, 255 Conn. 390, 408-9 (2001).
Neubig claims that the agreement contemplates that if he was unable to repay Luanci its initial investment Luanci shall have no obligation to repay Neubig any portion of the purchase price contributed by Neubig. Neubig argues that this limitation anticipates that his time and labor and the money contributed by him in pursuing subdivision approval would be reimbursed to him. Such an argument is clearly contrary to the terms of the agreement. The agreement provides that Neubig shall pay all expenses related to said approvals. It also provides that Luanci would have no obligation to repay any portion of the purchase price of the property contributed by Neubig if he failed to repay Luanci its investment pursuant to paragraph 4.
The court finds that Neubig cannot prevail on a claim of unjust enrichment. The failure of this project was his alone. Despite investing significant time and money to obtain the subdivision approval, he failed to perfect the approval by filing the Mylar map or the bond. Although Neubig claimed he needed the property as security for a loan to finance the bond, the agreement does not contemplate such an arrangement. In addition, Neubig’s work has not increased the value of the property or provided a benefit to Luanci, the property remains as it was at the time of the initial agreement since the subdivision approval has lapsed.
Conclusion
Judgment shall enter for the Defendant on the First, Second, Third and Fourth Counts of the Complaint. The court finds liability in favor of the Defendant and against the Plaintiff on the counterclaim. The parties shall contact the court’s officer to schedule a hearing on the Fifth Count of the Complaint and the remedy to be ordered on the counterclaim.
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