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Buyer Loses his Deposit

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house-for-sale-signA buyer loses his deposit when he declines a mortgage contingency clause and then doesn’t obtain financing that he likes, according to a Connecticut Appellate Court opinion to be officially released on February 16, 2016.

In Tsiropoulos v. Radigan, plaintiff entered into a contract to buy defendant’s residential property. He made a $30,000 deposit but not have a mortgage contingency clause. When he didn’t get the financing he wanted, he told defendant he couldn’t close and encouraged her to sell the property to someone else. Three weeks later defendant did just that, for $4,000 more than plaintiff was going to pay. Plaintiff demanded his deposit back. Defendant declined to return it, relying on the liquidated damages provision of the contract. The liquidated damages provision said that seller gets to keep the deposit if buyer is unwilling or unable to perform.

Plaintiff commenced an action for breach of contract and unjust enrichment. Defendant asserted the special defense of wilful termination, among others, and a counterclaim to retain the deposit.

The trial court found that the liquidated damages clause was enforceable and rejected defendant’s breach of contract and unjust enrichment claims. The trial court also found that plaintiff wilfully breached the agreement and ordered that defendant keep the $30,000 deposit. Plaintiff appealed. The Appellate Court affirmed.

Plaintiff’s Main Arguments on Appeal

Plaintiff claimed that the trial court erred in finding (i) the liquidated damages clause enforceable; (ii) plaintiff wilfully terminated the contract; and (iii) defendant was not unjustly enriched.

Appellate Court Concludes Buyer Loses his Deposit

The Appellate Court noted that a liquidated damages clause is not an unenforceable penalty “if three conditions are satisfied: (1) The damage which was to be expected as a result of the breach of the contract was uncertain in amount or difficult to prove; (2) there was an intent on the part of the parties to liquidate damages in advance; and (3) the amount stipulated was reasonable in the sense that it was not greatly disproportionate to the amount of the damage which, as the parties looked forward, seemed to be the presumable loss which would be sustained by the contractee in the event of a breach of the contract.”

The court concluded that the liquidated damages clause met the three conditions. In doing so, it rejected plaintiff’s argument that defendant was not damaged because she promptly sold the property, and for $4,000 more than plaintiff was going to pay.

As to willfulness of the breach, the Appellate Court noted that “[t]he contemporary view is that the court must consider not only the deliberateness of the breach, but also other factors in determining whether to apply the court’s equitable jurisdiction. . . . These factors include, among others, the degree of innocence of the breach, the amount of the detriment to the breaching party and the amount of the benefit conferred upon the nonbreaching party.”

The court rejected plaintiff’s argument that he terminated the contract because he couldn’t obtain financing, which was not wilful on his part. The court concluded that plaintiff’s wilfulness didn’t derive from not obtaining financing. Rather, plaintiff “wilfully waived a financial contingency [i.e., the mortgage contingency clause] that put not only him, but also the defendant, at financial risk.” In other words, plaintiff wilfully assumed the risk that he would lose his deposit if he didn’t get the financing he wanted and that’s exactly what happened.

The Appellate Court didn’t say much about plaintiff’s final argument that defendant was unjustly enriched. It noted that “[i]t was the plaintiff’s burden to ‘demonstrate that the property could, at the time of [his] breach, have been resold at a price sufficiently higher than [the] contract price to obviate any loss of profits and to compensate the seller for any incidental and consequential damages.'” The Appellate Court couldn’t say that the trial court’s conclusion that defendant was not unjustly enriched was clearly erroneous.

Other Things to Note

Defendant claimed her attorney’s fees pursuant to a contract provision and the trial court awarded them. The parties stipulated to the amount of $20,000.

About the Photo

It’s for a property in Georgia — that’s not haunted.

No Absolute Right to Withdraw and Restart an Action

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cameraA plaintiff has no absolute right to withdraw and restart an action. The Connecticut Appellate Court reached this conclusion, and spoke about some other interesting procedural topics, in Palumbo v. Barbadimos, to be officially released on February 16, 2016.

Plaintiff commenced a tort action. Defendant answered and plaintiff replied to the special defenses. After the time to claim a jury expired, plaintiff attempted to withdraw its reply to the special defenses. Defendant objected, arguing that the withdrawal really was an attempt to start a new clock for a jury claim. Plaintiff failed to meet the substance of that argument. The trial court sustained defendant’s objection.

Plaintiff commenced a new action on a nearly identical complaint and withdrew the original action. Plaintiff’s counsel said in an email to defense counsel that “I am going to withdraw the case. [The defendant] has been served with a new writ. I did want a jury and your objection was sustained.” Defendant moved to restore the original action to the docket and attached the email to its memorandum in support. Defendant requested oral argument, which the court granted.

Plaintiff didn’t file a written response. At oral argument, plaintiff took the position that it was her case and she could withdraw it. The trial court gave plaintiff an opportunity to submit a written response. She did but it essentially was limited to an assertion that CGS § 52-80 was dispositive. The statute permits a plaintiff to “withdraw any action … before the commencement of a hearing on the merits thereof.”

The trial court denied the motion to restore. Defendant appealed and moved for an articulation, which the trial court provided. “According to the court, the defendant had failed to establish that he had any vested right in a bench trial. The court relied, at least in part, on the fact that even if a plaintiff fails to claim a case to the jury docket, the trial court nevertheless retains discretionary authority to place the case on the jury docket ‘at any time.’” The trial court relied on CGS § 52-215, which provides that “any … case [properly triable to a jury] may at any time be entered in the docket as a jury case … by order of court.” The trial court also relied on “the broad nature of a plaintiff’s right to withdraw an action pursuant to § 52-80.”

The Appellate Court reversed.

Defendant’s Main Argument on Appeal

Defendant argued that the trial court had abused its discretion in denying the motion to restore because it allowed plaintiff to avoid the consequence of failing to timely claim a jury trial and circumvented the court’s order sustaining defendant’s objection to plaintiff’s motion to withdraw its reply to the special defenses.

Appellate Court Concludes there is No Absolute Right to Withdraw and Restart an Action

The Appellate Court began its analysis by noting that it “often has used, without further explication, the phrase ‘absolute and unconditional’ to describe a plaintiff’s right under § 52-80 to withdraw an action before a hearing on the merits has occurred.” This, however, means “only that, prior to a hearing on the merits, the withdrawal of an action does not require the permission of the court.” From other precedent it is “clear that the right of withdrawal may be trumped in certain circumstances by another party’s right to restore the case to the docket.”

When does the right to restore the case to the docket trump the right of withdrawal? The Appellate Court explained, as follows:

It is important that we take this opportunity to clarify that the broad authority granted to a plaintiff pursuant to § 52-80 to unilaterally withdraw an action prior to a hearing on the merits does not automatically extend to the plaintiff the additional right to commence an essentially identical action following that withdrawal if the primary purpose for doing so is to undermine an order of the court rendered in the prior litigation or if the withdrawal and subsequent refiling implicates a substantial right that vested in another party to the litigation and that likely will be jeopardized should the plaintiff proceed with the new action…. In either instance, if seasonably requested by the defendant or other third party, the court should exercise its discretion to restore the original action to the docket.

The court then addressed whether defendant had acquired some right in the original action that he would lose if he had to defend the second action. The court concluded defendant had acquired such a right, as follows:

Having failed to comply with either of the time periods set out in § 52-215 [for claiming a jury], the plaintiff waived her right to unilaterally claim her original action to the jury docket…. At that time, the defendant acquired the right to have the parties’ dispute decided by the trial court. Although that right was subject to divestment by the trial court should it choose to exercise its own discretion to order a jury trial, the decision to do so was outside the control of the plaintiff and was never requested in this case. It is reasonable to infer from the defendant’s choice not to exercise his own right to claim the matter to the jury docket that he perceived some advantage to proceeding with a bench trial and that a divestment of that right by the plaintiff’s actions would prejudice him.

The court described the prejudice defendant would suffer, this way:

The defendant’s interest in having the original action restored to the docket and tried before the court rather than having to proceed with the inevitable jury trial in the second action is a substantial one. If the defendant is forced to defend the second action, he undoubtedly will incur additional expenses in the form of attorney’s fees, costs and other expenses necessary to get the pleadings closed in that action. Moreover, it is undis- puted that because of the right to individual voir dire in this state, significant additional expenditures of time and money would be involved in the selection of a jury.

Other Things to Note

In footnote 9, the Appellate Court noted it “previously has indicated that in the absence of some seasonable objection by the opposing party to exhibits attached to a motion before the trial court for adjudication, the trial court properly may consider the attached exhibits in reaching its decision, even if the exhibits were not formally introduced into evidence by the moving party.” Attaching unauthenticated documents to motion papers is a widespread practice in Connecticut, unlike every other jurisdiction where I’ve ever filed a motion or opposition (off the top of my head that’s New York, New Jersey, California and Texas, not to mention federal courts). I guess it’s no different than trial: If you have a legitimate authenticity beef, it’s worth raising. If not, and you do raise it, all you really do is get the judge mad at you.

In footnote 12, the Appellate Court declined to limit its holding to cases where plaintiff commenced a new action: “It is important to note, however, that even in cases that have been withdrawn outright, with no new action filed, circumstances may arise in which the court may restore an action to the docket, not for the purpose of forcing a plaintiff to litigate a cause of action that was withdrawn as of right, but to protect important interests of parties to the litigation.”

In footnote 13, the court declined to limit its holding to cases where the defendant had a “vested right” that would be lost in the second action: “We do not purport to decide whether other circumstances might arise that would trigger the court’s authority to restore a voluntarily withdrawn action to the docket. For example, even in the absence of a vested right, a party may be significantly prejudiced by the withdrawal or the withdrawal may have an adverse effect on the due administration of justice.”

In footnote 15, the court noted: “General Statutes § 52-212a, which provides that civil judgments may only be opened or set aside within four months of the date they were rendered, is applicable not only to the opening of a case that has proceeded to judgment but also to the restoration of a withdrawn case” (internal quotes omitted).

About the Photo

It’s a camera lens and has nothing to do with the case. I just liked it.

Child’s Uninsured Medical Expenses were not “Unreimbursed”

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eye

The Connecticut Appellate Court concluded that a child’s uninsured medical expenses were not “unreimbursed” for purposes of a child support order where someone other than a parent paid them. In Schull v. Schull, the parties were under court orders to share equally all of their minor children’s unreimbursed medical expenses. Their son had an eye disorder. Plaintiff wanted him to have an experimental surgery that was not covered by her insurance, at a cost of nearly $56,000. Defendant was concerned over the surgery’s experimental nature and cost. Plaintiff said her father would pay for it as a gift to the son.

The son had the surgery when he was 17. Plaintiff’s father paid for it in full. Plaintiff never asked defendant to pay anything.

After the son graduated from high school and turned 18, defendant moved to terminate child support. Plaintiff did not contest termination and did not claim any arrearage.

Nearly a year later, plaintiff filed a motion for contempt, claiming that defendant filed to comply with the court’s orders that he pay 50% of the son’s unreimbursed medical expenses. She claimed that the money from her father was a loan to her, not a gift to the son. The trial court found her testimony “dubious” and noted that plaintiff did not present any evidence of a loan or that she was paying it back. The court gave her two months to submit that evidence. If she met that condition, defendant would be obliged to pay $25 per month towards his putative $28,000 obligation.

I’m going to pause the factual recitation here. Think of it like an aside in a play. At $25 a month, it would take defendant more than 91 years to pay his share. Clearly, the judge was telling plaintiff to let it go. She didn’t.

Instead of submitting the evidence the judge requested, plaintiff filed a motion to reargue, which the court denied. She later filed a motion to open on the basis of fraud. She alleged that defendant had misrepresented his assets in his financial affidavit and could pay more than $25 per month. She still didn’t submit the evidence the court requested. By the time the court considered the motion to open, the evidence deadline had passed.  Instead of denying it outright on that basis, the trial court found no probable cause to believe there was a fraud and denied the motion.

Plaintiff appealed. The Appellate Court affirmed.

Plaintiff’s Main Argument on Appeal

Plaintiff argued that the support orders unconditionally obligated defendant to pay 50% of the son’s unreimbursed medical expenses. Therefore, the trial court improperly conditioned defendant’s payment obligation on proof that plaintiff’s father had loaned plaintiff the money to pay for the surgery and she was paying it back.

Appellate Court Concludes Child’s Uninsured Medical Expenses were not “Unreimbursed”

The Appellate Court noted that the support orders did not define “unreimbursed medical expenses.” But the child support guideline regulations consider unreimbursed medical expenses to be those “not covered by insurance or reimbursed in any other manner” (my emphasis). Since plaintiff failed to prove that she was obliged to repay her father, the surgery expenses were not unreimbursed even though they weren’t reimbursed by insurance. They were reimbursed in another manner — namely by plaintiff’s father’s gift to the son.

The court concluded that defendant didn’t have any obligation to reimburse plaintiff. “To hold otherwise would give [plaintiff] a windfall; she would have no obligation to pay her 50 percent share of the medical expenses, and, at the same time, the defendant would be responsible to give to her his 50 percent share.”

Appellate Court Concludes Plaintiff’s Other Arguments were Moot

Plaintiff also argued that $25 a month was too small a payment and the trial court should have granted her motion to open the judgment on the basis of fraud.

The Appellate Court concluded these arguments were moot because plaintiff missed the deadline for submitting the “proof of loan” evidence (and in fact never submitted any). In other words, the size of the monthly payment and defendant’s ability to pay more were moot because plaintiff’s failure to submit the evidence meant defendant didn’t have to pay anything.

Other Things to Note

The Appellate Court observed that the trial court’s conditional order of payments, including plaintiff’s evidence deadline, was an order related to child support. Under Practice Book § 61-11(c), plaintiff’s motion to open did not automatically stay the conditional order, which means it did not stay  plaintiff’s evidence deadline. So, while plaintiff’s motion to open did extend her time to appeal the order, it did not extend her time to comply with the order.

In footnote 2 of the opinion, the court noted that defendant did not file an appeal brief but his attorney asked to be heard at oral argument. The Appellate Court rejected the request because Practice Book § 70-4 says you can’t argue if you didn’t file a brief or join in someone else’s.

In footnote 12, the court cautioned that not every gift would be considered a reimbursement by other means. For example, “if the plaintiff had established that her father simply had given her a gift of $50,000, untethered to her son’s medical expenses, and that the plaintiff then chose to use those funds to pay the medical expenses, then that gift would not be considered a reimbursement of medical expenses.”

About the Photo

The son had an eye condition called aniridia, which is an absence of the iris. The American Association for Pediatric Ophthalmology and Strabismus describes it in detail here.

Nonsuit for Untimely Sanction Payment Reversed

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MarsNonsuit for untimely sanction payment reversed in a Connecticut Appellate Court decision to be officially released on February 9, 2016.

In Herrick v. The Monkey Farm Cafe, LLC, plaintiff sought recovery for injuries he sustained in a fight outside defendants’ bar. Defendants filed a request to revise the complaint. The trial court overruled plaintiff’s objection and ordered plaintiff to revise its complaint. “During the ensuing year, the plaintiff filed seven revised complaints and/or motions to amend the revised complaints. Following the plaintiff’s first four attempts to revise, the defendants filed a motion for nonsuit … claim[ing] that the plaintiff had failed to comply with the court’s … order to revise his complaint.”

At the hearing on the motion for nonsuit, defendants’ counsel asked the trial court for a $2,700 sanction against plaintiff representing defendants’ attorney’s fees in dealing with plaintiff’s ever-changing complaint. The trial court awarded $500 in attorney’s fees but did not set a payment deadline. Plaintiff’s counsel said it would be paid by the end of the week.

Two months later, defendants filed another motion for nonsuit, because they had not received the payment. Plaintiff explained that his attorney had mailed a $500 check but defendants’ counsel apparently had not received it. “The objection also stated that the plaintiff’s counsel had paid the sanction that day, rectifying the initial mailing error, by ordering a money order for the $500 and mailing it overnight, via Federal Express, to the defendants’ counsel. The plaintiff attached the receipt for a $500 money order paid to the firm of the defendants’ counsel to his written objection.”

The trial court overruled the objection and nonsuited plaintiff. “Although counsel had already paid the sanction prior to the judgment of nonsuit, the court noted that ‘[i]f the plaintiff can produce something which proves that the $500 ordered by the court was paid (or attempted to be paid) promptly, the court will reconsider [its] ruling.'” Plaintiff moved for reconsideration. He submitted his attorney’s affidavit, which explained that the attorney obtained a bank check and mailed it eight days after the court’s original order. The affidavit included supporting documentation from plaintiff’s attorney’s bank showing that the bank wrote the check but it never was deposited.

“Notwithstanding this information, the court denied the motion for reconsideration.”

Plaintiff appealed. The Appellate Court reversed.

Arguments on Appeal

“On appeal, the plaintiff claim[ed] that the trial court abused its discretion by rendering a judgment of nonsuit against him for the failure of his counsel to pay the underlying sanction. Specifically, the plaintiff argue[d] that his counsel made a good faith effort to comply with the court’s order and that the judgment of nonsuit was a disproportionate response to his counsel’s failure, promptly, to effectuate the payment of $500 to the defendants’ counsel.”

Appellate Court’s Conclusion

The Appellate Court concluded “that the judgment of nonsuit disproportionately punished the plaintiff for his counsel’s untimeliness in complying with its sanction order.” The Appellate Court noted that the trial court “did not find the failures of the plaintiff’s counsel to be wilful or contemptuous. Nor did the court find that counsel’s failures showed a deliberate and repeated disregard for the court’s authority. Such findings often will support such a harsh response from the court as a judgment by nonsuit…. Additionally, we are not insensitive to the apparent harshness of any decision by a court that may be perceived as punishing the client for the transgressions of his or her attorney.”

“[T]he failure of the plaintiff’s counsel to pay the sanction timely, an indiscretion uniquely counsel’s and unrelated to the merits of the case, resulted in the plaintiff’s disenfranchisement from
court, a punishment that was disproportionate to counsel’s failure of timely compliance.”

Impact

Do your best to avoid sanctions. If you can’t, pay on time. It’s not worth the trouble.

About the Photo

Sometimes I can’t understand how some things happen in court. On those occasions, I say, “I must be from Mars.”

Standing is Slippery Subject Matter

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standing is slippery subject matterStanding is slippery subject matter, as made clear in the Connecticut Appellate Court’s decision in R.S. Silver Enterprises, Inc. v. Pascarella, to be officially released on February 9, 2016.

The essence of this dispute was that plaintiff, a real estate brokerage, invested $1,250,000 in defendant’s real estate project in exchange for a share of the project’s profits. Plaintiff later transferred its brokerage assets to a new company and ceased operating. Apparently, plaintiff’s principal later realized that defendant never paid plaintiff any share of profits. Plaintiff sought and obtained reinstatement as a corporation from the Secretary of State. It then sued defendant for breach of contract, breach of fiduciary duty and an accounting.

Defendant asserted twenty-two special defenses, including two that called plaintiff’s standing into question. The twenty-first special defense challenged plaintiff’s standing with a claim that plaintiff had assigned its rights under the contract it claimed defendant breached when it transferred its brokerage assets to the new company. The sixth special defense challenged standing on the ground that the Secretary of State should not have reinstated plaintiff as a corporation.

On plaintiff’s motion to strike, the trial court struck the twenty-first and sixth special defenses, and eighteen others. The case was tried to the court, who ultimately (more on that later) found for plaintiff on the breach of contract claim and awarded damages.

Defendant appealed. The Appellate Court remanded to the trial court for determination of the twenty-first special defense, presumably because it implicated standing. The Appellate Court retained jurisdiction over defendant’s other claims pending the trial court’s decision. The trial court conducted an evidentiary hearing and determined that plaintiff had not assigned its interest in the contract it had with defendant.

Because the trial court rejected the twenty-first special defense, the case returned to the Appellate Court for review of that determination as well as defendant’s other claims on appeal.

The Appellate Court affirmed.

Arguments on Appeal

Defendant maintained that plaintiff lacked standing because it had assigned its contract interest to the new company and “lacked the legal capacity to bring this action because it should have been
barred from reinstatement as a Connecticut corporation before this action was commenced.”

Defendant also argued that the trial court should not have struck its second and fourth special defenses which alleged that public policy precluded plaintiff from pursuing this matter because plaintiff (i) obtained reinstatement through a fraud on the Commissioner of Revenue Services; and (ii) engaged in bankruptcy fraud when it entered into the contract at issue and thus had unclean hands.

Defendant also argued that the trial court’s judgment was ‘‘ineffective because it was issued 966 days after the completion of trial in violation of . . . General Statutes § 51-183b [which requires a court to issue a decision on a matter heard by it within 120 days from the date of the end of the proceeding].’’

Appellate Court’s Conclusions

The Appellate Court agreed with trial court that the contract pursuant to which plaintiff transferred assets to the new company unambiguously transferred only brokerage assets. Plaintiff’s interest under the contract with defendant was not a brokerage asset and was not listed in the schedule of assets transferred. So, plaintiff still owned the contract interest.

Next, defendant based its “lack of legal capacity” argument on its claim that plaintiff obtained corporate reinstatement from the Secretary of State through a fraud on the Commissioner of Revenue Services. The court noted that defendant already had brought a separate action on this fraud issue against the Commissioner of Revenue Services, the Secretary of State and plaintiff. The trial court in that separate action dismissed it, finding that defendant did not have standing to challenge plaintiff’s reinstatement because defendant was not aggrieved by plaintiff’s reinstatement. Aggrievement is an element of standing. The Appellate Court affirmed and the Supreme Court denied certification. Since defendant did not have standing to raise the issue in a separate action, it did not have standing to raise it as a defense in this action.

The court rejected defendant’s first public policy argument for the same reason: defendant lacked standing to challenge plaintiff’s reinstatement. The court also rejected defendant’s bankruptcy fraud-unclean hands public policy argument. Fleshing it out a bit more, defendant’s  claim was that plaintiff was in bankruptcy when it invested with defendant and had promised the investment funds to its creditors as part of the bankruptcy. The court first noted that the special defense said nothing about unclean hands. Even if defendant’s allegations could be read as asserting that defense, the unclean hands must have some relation to the activities at issue in the instant case. The possibility that the investment funds should have gone to plaintiff’s creditors does not change the fact that the investment funds actually went to defendant. If plaintiff’s hands were unclean, they were unclean as to its bankruptcy creditors, not as to defendant.

The Appellate Court agreed with the trial court’s conclusion as to defendant’s “timeliness of decision” argument.  As its decision deadline approached after the trail and post-trial briefing, the trial court had asked for an extension of its time to decide. All parties consented and no party placed any limitation on its consent. The trial court found for plaintiff on the breach of contract claim but only as to liability. It reserved decision on the accounting claim because it was unclear whether plaintiff, having prevailed on the breach of contract claim, still wanted an accounting. It also reserved decision on the amount of damages for the breach of contract claim because the amount could be affected by an accounting if there was going to be one. The court asked the parties to submit additional briefing on those issues, which they did. Defendant later initiated motion practice essentially claiming that its consent was to a “reasonable” extension and the court had taken too long. The trial court denied the motions on the ground that defendant’s unconditional consent to the court’s requested extension was a waiver of any time limit on the court’s decision. The trial court ultimately issued a final judgment denying the accounting claim and awarding damages on the breach of contract claim.

Impact

This decision tells me that standing is slippery subject matter. First on my list of things that confuse me is that it is well-settled that standing is an aspect of subject matter jurisdiction, which cannot be waived. The law also is clear that plaintiff has the burden of proof on standing. For these reasons, a defendant does not have to raise lack of standing as a special defense. Though I didn’t mention it above, the court ascribed the burden of proof on the standing issue to defendant. It seems to me that plaintiff should have had that burden. It probably would not have changed the outcome but I like to have clarity.

Next, the reinstatement question is really one of capacity to sue. It seems to me that if plaintiff obtained its capacity to sue (i.e., corporate reinstatement) through fraud, it never really obtained capacity to sue. If a plaintiff who lacks capacity to sue also lacks standing, the court’s focus should have been on whether plaintiff lacked capacity to bring the instant action, not on whether defendant lacked standing to raise the issue as a plaintiff in a separate action. In other words, defendant’s aggrievement, or lack of it, is irrelevant to whether plaintiff lacks standing.

Lastly, if you don’t want the court to have as much time as it wants to decide something, you have to limit your consent to an extension of time.

No Change in Child Custody

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pexels-photo-2There would be no change in child custody where the facts did not show a material change in circumstances. In Clougherty v. Clougherty, the Connecticut Appellate Court declined to modify the trial court’s custody order because certain of the claimed changes in circumstances were not changes at all, others were not material changes, and still others were not material changes that impacted the best interests of the child.

Mother was born and raised in Texas. Father was from Massachusetts. The couple moved to Connecticut because father got a job here. Throughout the marriage, mother traveled back and forth to Texas to continue working in her family’s business located there. The marriage disintegrated and mother filed for divorce.

The trial court found that mother’s life was in Texas and she never really had acclimated to Connecticut. The court concluded that it was in the child’s best interest for his primary residence to be in Texas with his mother, surrounded by her extended family. It granted joint legal custody and shared physical custody with the child’s primary residence in Texas and a secondary residence in Connecticut with father.

After his appeal of the original physical custody order failed, father moved to modify it claiming a material change in mother’s circumstances. In particular, he claimed that mother lost her job in the family business when it went bankrupt; was no longer living with her brother who had been identified as a positive influence on the child; had encountered financial difficulties including losing her home in foreclosure; and had been inattentive to the child’s educational needs, which had changed since the original order.

The trial court denied father’s motion to modify. It observed that the original custody order was not based in particular on mother’s job, her family’s business, her family or her financial prospects in Texas. Rather, it was based on the court’s finding that mother derived her identity from Texas. It was in the child’s best interest to have his primary residence in Texas because it was in his mother’s best interest to be in Texas. There had been no material change in that dynamic so there would be no change in child custody.

Father appealed. Mother cross-appealed. She had asked the trial court to award her additional attorney’s fees for defending against father’s motion to modify. The trial court denied her request.

The Appellate Court affirmed.

Arguments on Appeal

Father argued that there had been the following material changes: (i) mother had economic misfortunes; (ii) child’s academic needs changed when he entered school; and (iii) child is struggling in school because of mother’s inattentiveness.

On her cross-appeal, mother argued that in denying her request for additional attorney’s fees, the trial court improperly concluded that such an award would be inequitable in light of the father’s child support and visitation expenses. There was no statutory authorization to deny a request for attorney’s fees based on these expenses.

Appellate Court’s Conclusions

Father failed to demonstrate how mother’s financial problems were a material change that affected the child’s best interests. Original trial court was aware that the family business was in jeopardy and ordered child’s primary residence to be in Texas. The evidence on the motion to modify showed that mother started her own business after the family business was liquidated in bankruptcy and, despite her setbacks, she was meeting the child’s physical needs and he was doing well in school.

As for the child’s changing academic needs, the original trial court understood that the child eventually would attend school and, by setting Texas as his primary residence, effectively ordered that he go to school there. The trial court adjusted father’s visitation schedule to account for the fact that the child now was in school.

The Appellate Court found that, contrary to father’s argument, the child was not struggling in school, but in fact doing well. Mother had some parenting shortcomings but so did father. The original trial court found that mother was a marginally better parent. To the extent that father had since improved on his parenting skills, such an improvement did not constitute a change in circumstances.

Turning to the cross-appeal, the Appellate Court noted that it is well-established that a trial court ruling on an attorney’s fee request in a family matter may consider factors other than those enumerated in the statutes. Mother did not address why the trial court could not have considered these expenses.

Impact

It’s hard to prevail on a motion to modify a child custody order based on a material change in circumstances if the record shows that the child’s needs are being met and he is doing well.

About the Photo

I think it’s self-explanatory.

Buyer’s Broker Earned Its Commission

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double dealingA buyer’s broker earned its commission where it substantially complied with the statute prescribing the requisites of an enforceable broker contract and it would have been inequitable to deny the commission. The Connecticut Appellate Court upheld the trial court’s award of the commission in NRT New England, LLC v. Jones, to be officially released on February 9, 2016.

Defendant entered into an exclusive agency agreement with plaintiff. The agreement provided that plaintiff earned a 2.5% commission if defendant purchased a home within a certain geographic area during the term of the agreement regardless of whose efforts resulted in the purchase. Plaintiff agreed to seek its compensation from the seller “whenever feasible.” Upon plaintiff’s inquiry, defendant denied that he had any arrangement with any other broker.

During the term of the agreement, defendant notified plaintiff that he had purchased a home within the agreement’s geographic area — through a different broker with whom he also had an exclusive agency agreement. Plaintiff placed a broker’s lien on the property for a dollar amount that represented a 2.5% commission on the purchase price. Plaintiff commenced an action to foreclose the broker’s lien and for breach of contract.

The trial court found for plaintiff on its breach of contract claim concluding that plaintiff’s agreement with defendant substantially complied with CGS § 20-325a and that it would have been inequitable to deny plaintiff the commission. The trial court also rejected defendant’s contention that plaintiff should be denied a recovery for failing to seek compensation from the seller’s broker because it would not have been feasible for plaintiff to do so.

Defendant appealed. The Appellate Court affirmed.

Arguments on Appeal

Defendant argued that (i) the agreement did not comply with § 20-325a and it would not be inequitable to deny plaintiff a recovery; (ii) it was feasible for plaintiff to have sought compensation from seller’s broker.

Defendant also argued that the trial court improperly awarded plaintiff (i) a 2.5% commission when the seller’s listing provided only a 2% commission; (ii) a commission on the full purchase price when defendant acquired only a 50% interest in the property (his fiancee got the other 50%).

Appellate Court’s Conclusions

Section 20-325a(b) sets forth seven requirements for an enforceable broker’s contract. The first requirement is that the contract be in writing. The sixth requirement is that the contract contain a specified notice of the broker’s statutory lien rights. The statute recites the specified notice in all caps but the statute does not explicitly require the provision to be capitalized in the contract. Plaintiff’s contract contained the notice but it wasn’t capitalized. Plaintiff’s notice also misidentified the subsection of the statute relating to broker’s lien rights. Defendant argued that, because of these two deficiencies, plaintiff did not substantially comply with § 20-325a(b) and therefore did not have an enforceable contract.

The Appellate Court noted that the statute itself provides a safe harbor. More specifically, section 20-325a(d) allows a broker to recover a commission if the agreement is in writing, substantially complies with the other six requirements and “it would be inequitable to deny [a] recovery ….” The agreement substantially complied with the statute notwithstanding the failure to capitalize the broker’s lien notice because the legislature did not require capitalization for this notice as it had for other notices. Moreover, finding the notice non-compliant because of the subsection misidentification amounted to denying a recovery due to a scrivener’s — a result the court deemed too harsh.

As to the equitable considerations, the court noted that plaintiff’s agent had performed hundreds of hours of services for defendant and defendant had lied in failing to disclose his other broker. Under those circumstances, it would be inequitable to deny plaintiff a commission. The court rejected defendant’s contention that the equities favored him because plaintiff had nothing to do with the property he purchased. The court observed that defendant agreed to pay plaintiff a 2.5% commission regardless of whose efforts led to the purchase. “However unjust this result [awarding plaintiff a commission] may seem to the defendant in hindsight, we cannot say it is inequitable because it is precisely what he agreed to.”

Turning to feasibility of seeking compensation from the seller’s broker, the court agreed with plaintiff that it would have been futile because plaintiff had nothing to do with defendant’s purchase of the property. Since “[t]he law does not require an act which would be a mere futility”, plaintiff had no obligation to ask the seller’s broker to pay plaintiff a commission.

The Appellate Court declined to consider defendant’s other two arguments regarding calculation of the commission because defendant inadequately briefed them. They were conclusory without any legal citation.

Impact

The broker’s lien notice does not have to be capitalized even though it’s capitalized in the statute, at least where the substantial compliance safe harbor is in play. Capitalization may be an open question where the safe harbor provision is not in play.

About the Photo

I searched photos for “double dealing” because that’s how I viewed defendant’s two brokerage contracts. I don’t know how the photo depicts double dealing but I liked it, so I used it.

Affordable Housing Trumps Local Law

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city-road-people-streetAffordable housing trumps local law, according to the Connecticut Appellate Court’s decision in Brenmor Properties, LLC v. Planning and Zoning Commission, to be officially released on February 2, 2016.

The main issue in this relatively long opinion surrounded an interior road in a proposed affordable housing development. The commission maintained that the interior road did not comply with the town’s road ordinance, which specified things like minimum width and maximum grade. Since the town’s road ordinance was enacted to protect the public health and safety, any deviation from it is per se unacceptable and requires denial of the application.

The developer countered that the interior road did not present any safety risk, notwithstanding its noncompliance with the road ordinance. The developer’s traffic expert submitted a report and testified to that effect.

The commission denied the application. The developer appealed to the Superior Court, who reversed and remanded to the commission with an instruction to grant the application “as is.”

The commission appealed to the Appellate Court, who affirmed the trial court.

Arguments on Appeal

The commission’s principal argument essentially was that it didn’t really have to consider anything beyond the road’s noncompliance with the road ordinance because the road ordinance represented what was necessary for public health and safety.

The commission also argued that the proposed development did not comply with the fire code based on the fire marshal’s report. I’m not going to address this claim because it doesn’t warrant any discussion. The court noted that the argument was not well-made because everyone conceded that the fire marshal’s report was based on an earlier version of the application, not the final, revised application.

The commission’s final argument was that Superior Court did not have the authority to remand with an instruction to grant the application “as is.”

The developer offered an alternative ground for affirmance, namely that the commission failed to state its reasons for denying the application.

Appellate Court’s Conclusions

The Appellate Court agreed that the road ordinance protects public health and safety. The court disagreed that the affordable housing statutes allowed the commission to end the inquiry there. Rather, the court concluded:

“In an affordable housing appeal pursuant to § 8-30g, the commission bears the burden of demonstrating that its denial was necessary to protect a substantial public interest that clearly outweighs the need for affordable housing. When a municipal legislative enactment is involved, the commission—as well as a reviewing court—must look to the rationale behind that enactment to determine whether that standard is satisfied.”

The evidence showed that the road ordinance’s restrictions were not necessary to protect a substantial public interest. The developer’s traffic engineer explained that the proposed interior road could safely accomplish all of the things that a road needed to accomplish. In contrast, there was no evidence, other than speculation, from anyone that the proposed interior road posed any risk for anyone.

As to the commission’s argument that the Superior Court could not direct the commission to accept the application “as is”, the Appellate Court concluded that “[t]he court’s authority under § 8-30g (g) includes ‘the power’ to order a commission to grant an affordable housing application on remand.” The trial court did not abuse its discretion with its remand order.

The Appellate Court rejected the developer’s alternate ground for affirmance, as follows: “Admittedly, the motion to deny the plaintiff’s modified application was not a model of precision. It nonetheless set forth various grounds for denial in plain fashion…. As a result, we conclude that the record contains a clear basis on which to review the commission’s decision.”

Impact

The notion that noncompliance with a town ordinance is not a per se ground to deny an affordable housing application appears to me to be an extension of existing law. The Appellate Court explained that one of the reasons we have the affordable housing statutes is to prevent commissions from pre-textual denials based on noncomformance with planning and zoning regulations. For that reason, it is established law that a commission cannot deny an affordable housing application based on mere nonconformance with planning and zoning regulations. The Appellate Court seems to have extended that reasoning to all town regulations and ordinances.

About the Photo

A road like the one in the photo probably would have supported denial of the application.

Foreclosing Plaintiff Had Standing

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commercial buildingA foreclosing plaintiff had standing to foreclose because it was the holder of the note and defendant failed to rebut the resulting presumption of ownership. Also, defendant failed to preserve an appellate challenge to the existence of an agency relationship between the loan servicer and plaintiff because defendant didn’t object or otherwise raise the issue during the servicer’s testimony.

The Connecticut Appellate Court made these determinations in AS Peleus, LLC v. Success, Inc., which will be officially released on February 2, 2016.

Standing is one of my pet issues. What the court didn’t say about standing in this case is more interesting to me than what it did say. I will explain that in the “Impact” section. For now, I note that plaintiff apparently plead that it was the owner and holder of the note. Defendant left plaintiff to its burden of proof on that allegation. At trial, plaintiff introduced the original note which “contained” six allonges ending with a special endorsement to plaintiff. Plaintiff also introduced testimony from a representative of plaintiff’s loan servicer.

Defendant did not offer any evidence at the trial. Nor did defendant object to the competence of the servicer representative to testify about the existence of an agency relationship between itself as agent and plaintiff as principal. Defendant instead made a tactical decision to raise that issue in its post-trial brief.

The trial court found that plaintiff was the owner and holder of the note and had established the other elements of its foreclosure claim.

The Appellate Court affirmed.

Arguments on Appeal

Defendant argued that the trial court erred in determining that plaintiff was the owner and holder of the note. I can’t give you any specifics of why defendant thought the trial court erred in this regard because the Appellate Court didn’t give any specifics in the opinion. If I had to guess, I would say it had something to do with the allonges because the Appellate Court said the note “contained” the allonges, rather than the allonges were attached to the note. It also dropped a footnote defining “allonge” and explaining that an allonge is considered part of the note. Without digressing too much, an allonge isn’t an allonge unless it’s physically attached to the note, which means that an allonge isn’t part of the note unless it’s attached to the note. In short, I don’t think the court used “containing” accidentally.

Defendant also argued that the trial court erred in accepting the servicer representative’s testimony absent proof that he was plaintiff’s agent.

Appellate Court’s Conclusions

The court concluded that the note and allonges established plaintiff’s holder status, which gave rise to the rebuttable presumption of ownership. Defendant, who didn’t offer any evidence at trial, failed to rebut the presumption. Thus, the trial court properly determined that the foreclosing plaintiff had standing as the owner and holder of the note.

As to defendant’s agency argument, the court concluded that defendant had not preserved it for appeal because defendant did not object to any of the servicer representative’s testimony, including his testimony that he was authorized to speak for plaintiff. Defendant’s decision to raise the issue for the first time in its post-trial brief was inconsistent with the preservation requirement. It also effectively ambushed plaintiff, who was deprived of the opportunity to supply curative evidence.

Impact

Defendant left plaintiff to its proof on the owner and holder issue. “Leaving plaintiff to its proof” of an allegation is like a denial, with one big difference: Defendant does not get to controvert the allegation as it would with an outright denial. So, all plaintiff has to do is offer some evidence to support the allegation, which establishes it as fact, prima facie. Since defendant can’t controvert it, the weakness of plaintiff’s evidence is irrelevant. That would make you think that a defendant who leaves a plaintiff to its proof of the owner/holder allegation forgoes the right to rebut the presumption. The court didn’t say that defendant lost the right to rebut the presumption. It said that plaintiff didn’t attempt to rebut the presumption.

On the other hand, standing is an aspect of subject matter jurisdiction, which can’t be created by waiver or consent. This might mean that borrower can’t lose the right to attempt to rebut the presumption.

The case leaves these issues open. I think the better course of action for a borrower is to deny the owner/holder allegation. That way, there can be no question of forfeiting the right to attempt to rebut the ownership presumption.

About the Photo

I used this picture in my first post, which was about another foreclosure case. It might become my go to pic for this category of cases.

Default Judgment Not Void

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UK telephone boothA default judgment was not void despite procedural irregularities in obtaining it. Nor was the judgment inconsistent with the relief requested in the complaint.

Before you jump to any conclusions about that first sentence, yes, a default judgment and a judgment based on a default are different things and yes, I’m really talking about a judgment based on a default. Google, however, apparently will rank me higher if I say “default judgment not void” when I mean “judgment based on a default not void.” So there you have it. Now back to the case.

Plaintiff in Dawson v. Britagna filed a breach of contract complaint seeking money damages and “other and further relief as the court finds just and equitable.” Defendant timely appeared. I summarize the ensuing “convoluted procedural history” this way: plaintiff attempted to obtain a judgment based on a default with three different motions all of which were procedurally incorrect for one reason or another.

Plaintiff got his act together and obtained a default for failure to plead. The trial court conducted a hearing in damages and entered a judgment against defendant for $70,000.

Two years later, defendant moved to open the judgment on the ground that “it is void as a matter of law.” The trial court denied the motion because it was untimely, having been filed outside the four month limitation, and the judgment was not void in any event. The Appellate Court affirmed.

Arguments on Appeal

Defendant’s first argument was that the judgment was void because plaintiff failed to follow the proper procedures in obtaining his default. Her second argument was that the judgment was void because it was inconsistent with the relief requested in the complaint.

Appellate Court’s Conclusions

As to defendant’s first argument, the court effectively concluded that none of the procedural irregularities surrounding the default prejudiced defendant because she had appeared in the action, received notices of the hearings and court orders, but did not nothing in response. Additionally, the irregularities were not a factor in the default judgment that the trial court ultimately rendered.

The court’s conclusion in respect of defendant’s second argument requires a few more facts. Plaintiff and defendant had some sort of business arrangement where plaintiff would supply funds for defendant to operate a cellular telephone store (Sprint). The deal seems to have contemplated that defendant would return plaintiff’s funds and give him a share of the profits. Plaintiff sued because defendant didn’t tender him any money.

Defendant expressed her second argument as follows: “There is most definitely no claim made in the complaint for return of mon[eys] loaned or invested in the business enterprise.’’ The Appellate Court concluded that, although plaintiff didn’t necessarily use the best words in the complaint to articulate his claim, they sufficiently expressed his intent. That, coupled with the fact that defendant’s default was an admission of the allegations, meant the judgment was consistent with the relief requested in the complaint.

Impact

I think the court left the door open to the notion that procedural irregularities might render a judgment void if the irregularities prejudiced a party.

About the Photo

Who doesn’t like UK telephone booths?