John Kelley v. LLC (2011)

MEMORANDUM OF DECISION

Introduction

This case involves a business venture between the parties, John Kelley and Five S Group, LLC, for the development and management of a golf course, “Topstone Golf Course.”   The plaintiff, John (“Joe”) Kelley, claims that he has suffered adverse tax consequences and will not receive the payoff benefit that he contemplated at the end of the agreement.

In his two-count second amended complaint dated June 25, 2010, Kelley seeks money damages and reformation of the written agreement of the parties to include a provision entitling him to a payment from Five S in the amount of $1,500,000 upon reversion of possession of the property on which the golf course was built to Five S, and reformation of the documents to include a provision that the party operating the golf course will not be the primary debtor on the capital financing but rather that Five S will be the primary debtor.   In the second count of the amended complaint, Kelley claims that he is entitled to damages because Five S has been unjustly enriched in that it received the improvements to its real estate in the form of a completed golf course, including a fully finished restaurant on the premises, without compensating him for such improvements.   The defendant, Five S Group, LLC, filed an answer and special defenses.   In its special defenses the defendant claims ratification, laches, negligence, parol evidence rule, equitable estoppel, waiver, and statute of limitations.   The plaintiff filed a reply to the special defenses in which he denied each and every allegation contained in them.

On September 20, 2010, by consent, the court ordered that the trial be bifurcated as to Count Two only, as between liability and damages.   The court ordered that trial would initially proceed as to Count One as to all issues and Count Two as to liability only.

Trial was held on this matter on September 22, 23, and 24, 2010.   The court heard testimony from the plaintiff, John Kelley;  John D'Amico, an attorney who was retained by the parties to draft various documents;  Norman Hill, a heavy equipment operator who worked with Kelley on building the golf course;  Kenneth Smith, a licensed professional engineer and land surveyor who also worked with Kelley on the project;  Jean Shepard, III, one of the members of the defendant LLC;  and Michael Sulzinski, a CPA who does work for Kelley.   The court also received numerous exhibits.

Post-trial briefs were filed on November 5, 2010 and reply briefs were filed on November 15th and 18th.

Findings of Fact

The following facts are alleged in the amended complaint and admitted by the defendant:  The defendant, Five S Group, LLC, is a Connecticut limited liability company whose members have been members of the Shepard family, including Charles B. Shepard and Jean E. Shepard, also know as “Kip.” The Shepards own various contiguous parcels of land in South Windsor and East Windsor, which have been in their family for an extended period of time.   Portions of that land have been used as farmland.   For some time prior to the mid-1990s, the Shepards had been considering various options as to how to develop the property into a productive investment.   In 1995 and 1996, the Shepards and Kelley engaged in detailed discussions and negotiations relating to the potential for the development of the property as a golf course.   Certain agreements were reached by the parties.   In June 1996 the parties signed various agreements.   The agreements designated Five S as the entity to own the property and designated an entity known as South Windsor Golf Course, LLC as the entity to manage the golf course.   The documents as executed did not contain a provision that effectively provided that Kelley would receive a capital payment of one million five hundred thousand dollars at the end of the relationship but the defendant denies any implication that Kelly was intended to receive that pay out.

Based upon a preponderance of the evidence, the court finds the following additional facts:  At the time that Kelley met the Shepards he had developed several golf courses.   In 1994 he met Kip Shepard and went with him to look at the property which consisted of about 200 acres in South Windsor and East Windsor.   Kelley thought it was an excellent site for a golf course.   Shepard liked the idea of a golf course because the land would remain open space but he wanted the land to remain in the Shepard family.   Kelley prepared a proposal outlining several ways of structuring a deal and faxed it to Shepard in December 1994.   He knew that Shepard always wanted the land to remain with the Shepard family.   There was no further activity between Kelley and the Shepards until 1995.   In October 1995 Kelley and Kip Shepard shook hands and agreed to build a golf course.   The Shepards would contribute the land at a cost of $1 per year and Kelley would oversee the construction and operation of the golf course for no fee.   The parties would then split the profits fifty-fifty and, at the termination of the lease, Kelley would get one and one-half million dollars and the Shepards would get the golf course.   Kelley began work on clearing the land so that various people could have access to it to prepare the necessary studies.   He also provided information to an architect so that final drawings could be prepared.

On December 8, 1995 Kelley called Attorney D'Amico.   He and the Shepards both had previously dealt with his firm.   Kelley explained to D'Amico the proposed deal with the Shepards including that there would be a buyout of $1.5 million at the end of thirty years for Kelley, and that the Shepards would put up the land.   Kelley also explained that there would be a $2 million mortgage on the land but the Shepards would take $250,000 out of the $2 million.   Kelley would manage the course for free and there would be no fees for him to develop the course.   A memo from Attorney D'Amico to the Shepards and Kelley dated December 11, 1995 provided a basic outline of the structure of the transaction.   The memo indicated that:  “The parties will be taxed on future profits used to pay down the bank debt which will be reflected in their capital accounts.   It has been proposed that Kelley's interest be purchased for $1.5 million at the end of the thirty year lease term.   This buyout could be for an interest in the operating LLC and should take into account Kelley's capital account at that time.”   Exhibit 5. On December 15, 1995 Kelley and Kip Shepard met with Attorney D'Amico for more than three hours.   They explained their handshake deal to him and discussed with him putting their deal into legal form.   D'Amico's notes from that meeting indicate that they discussed a reduction in the $1.5 million back end price if projections were not met.   Kelley said he wanted an upside and Shepard said no.   D'Amico suggested an incentive management arrangement but there was no resolution of the issue at that meeting.   Notes from a telephone conference D'Amico had with Kelley and Shepard in January 1996 indicate that there was discussion of “incentive management rather than buyout @ end.”   Exhibit 7. On January 17, 1996 Kelley and Shepard jointly borrowed $150,000 to finance the project.   By memorandum dated January 23, 1996, D'Amico outlined to the Shepards and Kelley three areas of concern which had arisen since his December 11th memo regarding the structuring of their relationship with respect to the golf course.   D'Amico stated:  “Initially, the Shepards and Kelley agreed that Kelley would be entitled to a $1.5 million payment at the end of the thirty year lease term in order to ‘buy out’ his interests.   The Shepards raised the possibility that, if projections were not met, this amount should be reduced.   Joe indicated that if projections were exceeded, the amount should be increased.   I have discussed an incentive management arrangement whereby Kelley would be entitled to additional compensation to the extent projections were exceeded.”   Exhibit 8.

D'Amico created an LLC called South Windsor Golf Course.   Shepard and Kelley, as the organizers, executed the articles of organization for South Windsor Golf Course LLC on February 16, 1996.   During 1996 the parties applied to the various zoning commissions for approval of the plans for the course, which was to be built on land located in two towns.   Construction was started in March of that year.   Kelley worked extensively in securing the appropriate regulatory approvals and supervising the construction of the course.

By memo dated April 8, 1996, D'Amico proposed a term sheet for the operating agreement which provided for an additional payment of $65,000 per year in profits to Kelley for the next thirty years.   Although requested by D'Amico to provide any comments to him, Kelley did not.   On April 24, 1996, D'Amico faxed to Shepard and Kelley a projection of profit sharing which gave Kelly an incentive payment of $1.5 million spread over fifteen years.   D'Amico's last contacts with Shepard and Kelley were in April and May 1996 when he sent them drafts of the operating agreement and the management agreement.   He received no comments from either of them regarding these documents.   By his own admission, Kelley paid very little attention to the details of the deal, he was more concerned with supervising the construction of the golf course.   Copies of the draft documents were also sent to Attorney Crowe who was handling the mortgage transaction as well as the land transactions necessary to create one piece of land on which the golf course would be built.

Shepard indicated to Kelley early on that he did not want to saddle his family with a $1.5 million payout at the end.   Kelley agreed, but indicated he wanted to get that amount out of the project in some way.   As noted above, there were discussions of alternative proposals, including an incentive payment plan as well as an annuity, to get this sum to Kelley but none was agreed upon prior to the closing.   As of April 30, 1996, D'Amico's impression was that the parties had agreed to an incentive payment arrangement and the $1.5 million was dead.   But as of that date the parties hadn't definitively agreed and the documents he prepared did not contain any reference to either an incentive payment or a buyout for Kelley nor any place holder so that such an agreement could be added later.   Kelley never retained separate legal counsel to represent his interests in the matter.

In May of 1996, Shepard believed that the compensation issue had been resolved.   Kelley would give up the end compensation and Shepard would give up his claim to up-front money in the amount of $250,000 which was to come out of the mortgage proceeds.   Shepard noted that he and “Kelley agreed:  1. 50-50 split, 2. No 250,000 Shepards, no buyout Kelley.”   Exhibit C.

On June 11, 1996 the deal was closed.   The bank wanted the documents signed before the closing on the loan.   D'Amico did not participate in the closing.   At the closing of the deal, Kelley indicated that he had not read the documents but didn't ask for time to do so.   Shepard said it was a fifty-fifty deal.   Shepard knew at the closing that the agreement did not have a incentive arrangement or buyout for Kelley.   At that time the parties signed a ground lease for the golf course wherein Five S was the landlord and South Windsor Golf Course LLC was the tenant.   Also executed was a management services agreement between South Windsor Golf Course LLC and Kelley, and an operating agreement between Five S and Kelley regarding South Windsor Golf Course LLC. The operating agreement provided that Five S and Kelley each had a 50% interest in the LLC. The management services agreement provided that Kelley would not receive any additional compensation for his management of the golf course.

Shepard lined up financing to fund the project which totaled three million dollars.   On June 12, 1996, Jean Shepard, John Kelley and Charles Shepard as well as South Windsor Golf Course LLC and Five S Group LLC signed a construction to permanent mortgage note to the Savings Bank of Manchester in the amount of $2.4 million.   The loan was secured by a mortgage on the golf course property.   The course was completed in August 1996.   The clubhouse was then designed and constructed in February 1997.   On June 27, 1997 the course was opened.   The parties increased the amount borrowed to $3 million on July 11, 1997 and executed an allonge to the original note setting forth this amount.

Kelley has managed the golf course since it opened in 1997 and also acts as general manager of the restaurant.   Around 1999 or 2000, while negotiating another deal with the Shepards, Kelley realized that the $1.5 million buy out was not in the documents.   He spoke to Shepard at that time and he indicated that it had been taken out.   Each party has taken approximately $100,000 per year out of Topstone.

Kelley instituted this action in 2008, twelve years after the agreements between him and Five S regarding the development and management of the golf course were signed.

Discussion

I. Reformation

In the First Count of the Second Amended Complaint the plaintiff alleges a cause of action for reformation of the documents executed by the parties.

“A cause of action for reformation of a deed rests on the equitable theory that the instrument sought to be reformed does not conform to the real contract agreed upon and does not express the intention of the parties and that it was executed as the result of mutual mistake, or mistake of one party coupled with actual or constructive fraud, or inequitable conduct on the part of the other ․ Reformation is not granted for the purpose of alleviating a hard or oppressive bargain, but rather to restate the intended terms of an agreement when the writing that memorializes that agreement is at variance with the intent of both parties.”  (Citations and internal quotation marks omitted.)   Blow v. Konetchy, 107 Conn.App. 777, 792 (2008).  “Reformation is appropriate in cases of mutual mistake-that is where, in reducing to writing an agreement made or transaction entered into as intended by the parties thereto, through mistake, common to both parties, the written instrument fails to express the real agreement or transaction ․ [R]eformation is also available in equity when the instrument does not express the true intent of the parties owing to the mistake of one party ․” (Citations and internal quotation marks omitted.)  Derby Savings Bank v. Oliwa, 49 Conn.App. 602, 604 (1998).  “In short, the mistake, being common to both parties, effects a result which neither intended.”  (Citations omitted.)  Lopinto v. Haines, 185 Conn. 527, 532 (1981).

“The burden of persuasion in an ordinary civil action is sustained if evidence induces in the mind of the trier a reasonable belief that it is more probable than otherwise that the fact in issue is true ․ In certain extraordinary circumstances a higher degree of belief has been required ․ The evolution of the equitable doctrine of reformation providing, as it does, relief where none was provided at law against an instrument secured by fraud and mistake has properly been said to require evidence of a very high order to overcome ․ the heavy presumption that a deliberately prepared and executed written instrument manifested the true intention of the parties ․ We have stated the standard of proof for reformation in different ways but all with the same substantive thrust:  evidence should be clear, substantial and convincing ․ The phrase ‘clear, substantial and convincing evidence’ fairly characterizes that degree of belief that lies between the belief that is required to find the truth or existence of the issuable fact in an ordinary civil action and the belief that is required to find guilt in a criminal prosecution ․ In cases such as this which require such a showing of proof, the burden of persuasion is sustained if the evidence induces in the mind of the trier a reasonable belief that the facts asserted are highly probably true, that the probability that they are true or exist is substantially greater than the probability that they are false or do not exist ․ This is the quality of the evidence required in cases of this type.   Where fraud is absent, it must be established that both parties agreed to something different from what is expressed in writing, and the proof on this point should be clear so as to leave no room for doubt ․ Even where there is no actual fraud, but merely such knowledge as makes it ‘inequitable’ for one party to retain his advantage, the court will deal as summarily with that inequitable position of the party, as in the other case with his fraud.”   (Footnotes, citations and internal quotation marks omitted.)  Lopinto v. Haines, 185 Conn. 527, 533-5 (1981).  “Although we have characterized this standard of proof as a middle tier standard ․ and as an intermediate standard ․ between the ordinary civil standard of a preponderance of the evidence, or more probably than not, and the criminal standard of proof beyond a reasonable doubt, this characterization does not mean that the clear and convincing standard is necessarily to be understood as lying equidistant between the two.   Its emphasis on the high probability and the substantial greatness of the probability of the truth of the facts asserted indicates that it is a very demanding standard and should be understood as such ․ We have stated that the clear and convincing evidence standard should operate as a weighty caution upon the minds of all judges, and it forbids relief whenever the evidence is loose, equivocal or contradictory.”  (Emphasis in the original;  citations and internal quotation marks omitted.)  In Re Giovanni C., 120 Conn.App. 277, 279-80 (2010).

“The burden of proof on the issue of reformation is upon the party seeking it.”  (Citations omitted.)  Lopinto v. Haines, 185 Conn. 527, 535 (1981).

Kelley seeks reformation of the written agreements of the parties because he claims that they do not reflect the actual agreement between them.   Specifically, Kelley claims that the documents should be reformed to include a provision entitling him to a payment from Five S in the amount of $1,500,000 upon reversion of possession of the property on which the golf course was built to Five S, and reformation of the documents to include a provision that the party operating the golf course will not be the primary debtor on the capital financing but rather that Five S will be the primary debtor.   As to the latter provision, there is no evidence to support a finding that there was any such agreement between the parties and that, through mistake, it was not included in the documents.   The plaintiff seeks such a reformation to avoid the adverse tax consequences of his being credited, as income, with fifty per cent of the monies used to pay debt service on the project.   Yet as early as December 1995, Attorney D'Amico had advised him that the LLC, which would be composed of Kelley and the Shepards as equal members, would be taxed on the future profits used to pay down the debt.   In addition, such a provision was not agreed to by the parties because, as Kelley admits in his brief, it was never discussed with him in putting the deal together.   Plaintiff's Post-Trial Brief, p. 16.   Apparently Kelley never raised this issue during the negotiations despite the fact that this concept is unique to golf courses and Kelley experienced this same tax issue with his other courses.

Kelley also argues that the insertion of the provision regarding the party responsible for the mortgage debt is necessary to ensure the actual agreement of the parties that he receive 50% of the golf course net income.   This argument is unavailing because both he and Five S are charged with the same so-called “phantom income,” therefore each is receiving equal shares of the golf course's income.

As to the claim that the documents should be reformed to include a provision that Kelley be paid $1,500,000 upon reversion of possession of the property on which the golf course was built to Five S, the evidence was loose, equivocal and contradictory, and therefore insufficient to support a reformation of the documents by this court.   Although the evidence established that there were discussions between Kelley and Shepard regarding an additional payment of moneys to Kelley, there was never any firm agreement as to how much would be paid, the terms of the payment, or when the payment would be made.   Kelley admitted that he knew that Shepard did not want to burden his family with a large lump sum future payment.   Yet Kelley also admitted that he never agreed to an incentive management fee arrangement as an alternative method of compensating him.   The evidence revealed that at most the payment of any lump sum or incentive payments to Kelley was left unresolved at the time the documents were signed, not that those terms had been resolved but not included in the documents by mistake.   Shepard, in fact, testified that he would not have signed the documents if the $1.5 million buyout was part of them.

Therefore, the plaintiff has not met the burden of proving his claim for reformation under the standard of proof required.

II. Unjust Enrichment

In the alternative to a reformation of the documents, the plaintiff claims, in the Second Count of his Second Amended Complaint, that the defendant has been unjustly enriched by his development and operation of the golf course and he should be compensated accordingly.

“Unjust enrichment applies wherever justice requires compensation to be given for property or services rendered under a contract, and no remedy is available by an action on the contract ․ 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 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, consistent with the principles of equity, a broad and flexible remedy ․ Plaintiffs seeking recovery for unjust enrichment must prove (1) that the defendants were benefitted, (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 ․ Furthermore, the determinations of whether a particular failure to pay was unjust and whether the defendant was benefitted are essentially factual findings for the trial court that are subject only to a limited scope of review on appeal.”  (Citations and internal quotation marks omitted.)  Hartford Whalers Hockey v. Uniroyal Goodrich Tire, 231 Conn. 276, 282-3 (1994).

“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.”   (Citation and internal quotation marks omitted.)  New Hartford v. Connecticut Resources Recovery Authority, 291 Conn. 433, 451 (2009).

In addition, “when an express contract does not fully address a subject, a court of equity may impose a remedy to further the ends of justice.”   (Citations and internal quotation marks omitted.)  New Hartford v. Connecticut Resources Recovery Authority, 291 Conn. 433, 455 (2009).

The plaintiff claims that he has not been fully compensated for his development and management of the golf course and therefore the defendant has been unjustly enriched in that it has received improvements to its real estate in the form of a completed golf course including a fully finished restaurant without having compensated the plaintiff for such improvements.   First, this business venture involved contributions by both sides.   Five S contributed the land consisting of approximately 162 acres.   Five S executed a thirty-year lease of the land to South Windsor Golf Course LLC at a price of $1 per year.   It subjected the land to a multi-million dollar mortgage lien.   Not only Five S and South Windsor Golf Course LLC, but also Jean Shepard and Charles Shepard, as well as Kelley, personally signed the mortgage note.   Second, in Kelley's first communication with D'Amico he admitted that he would receive no additional fees for his development of the course.   Lastly, the plaintiff claims that at the end of the lease, Five S will gain control of the course and will therefore be unjustly enriched by his construction and development services.   The court questions how it can determine that, in sixteen years, the situation will be as described by the plaintiff and that, in fact, the land will be in such a state that Five S will benefit as the plaintiff claims.   For example, the course may no longer be successful and it could be subject to foreclosure.   This possibility highlights the risk Five S has taken in this arrangement and underscores the plaintiff's claim that Five S has been unjustly enriched.   In addition, the plaintiff has received an equal share of the profits based on his contribution of his time and talents to the project.   Although he is personally liable on the mortgage note, it does not appear that he has directly submitted any of his personal assets to the same risk of loss as have the members of Five S. Balancing the positions of both sides does not reveal that there has been a benefit that this court can characterize as unjust to Five S at the expense of the plaintiff.

Therefore the court concludes that the plaintiff cannot prevail on his claim of unjust enrichment since the plaintiff has not established that the failure of the defendant to make any additional payments to him is unjust or unfairly benefitted the defendant.

III. Special Defenses

The defendant has raised a number of special defenses to the plaintiff's claims.   A discussion of those defenses indicates as well why the plaintiff cannot prevail in this matter.

A. Ratification

The defendant claims that even if the Operating Agreement, the Ground Lease, and the Management Agreement are not binding on Kelley as he claims, by his actions over the years as a fifty per cent member of South Windsor Golf Course LLC, the operating entity of the course, he has ratified and acquiesced in those agreements.

“[R]atification of a voidable contract is ordinarily a matter of intent ․ [H]owever, intent may be inferred from silence as well as from affirmative acts ․ The case law in other jurisdictions demonstrates that the dispositive question is not why the plaintiff chose not to disaffirm a contract that is voidable for duress, but whether, once the duress had ceased, he had the opportunity to do so.   These cases hold, in accordance with the Restatement, that ratification results, as a matter of law, if the party who executed the contract under duress accepts the benefits flowing from it or remains silent or acquiesces in the contract for any considerable length of time after opportunity is afforded to annul or avoid it.  Gallon v. Lloyd-Thomas Co., 264 F.2d 821, 826 (8th Cir.1959) (ten months too long);  Abbadessa v. Moore Business Forms, Inc., 987 F.2d 18, 23 (1st Cir.1993) (five months too long);  DiMartino v. Hartford, 636 F.Sup. 1241, 1252 (D.Conn.1986) (two months too long);  Schmalz v. Hardy Salt Co., 739 S.W.2d 765, 767-68 (Mo.App.1987) (three months too long);  Powell v. Oman Construction Co., 25 App.Div.2d 566, 566, 267 N.Y.S.2d 862 (1966) (eleven months too long);  McGee v. Stone, 522 A.2d 211, 214-15 (R.I.1987) (eighteen months too long);  see also 1 E. Farnsworth, Contracts (1990) § 4.19, p. 443.”  (Citation omitted.)  Young v. Data Switch Corporation, 231 Conn. 95, 102-4 (1994) (seventeen months too long).

The plaintiff claims that he did not intend to ratify the agreements set forth in the documents.   But the plaintiff waited for more than twelve years from when he signed the documents to bring this action.   From that time until now he has reaped the benefits of the agreements.   His ratification can clearly be implied from his actions.

B. Laches

In its Second Special Defense, the defendant claims that Kelley has inexcusably delayed in bringing this action to the prejudice of the defendant.

“Laches consists of two elements.   First, there must have been a delay that was inexcusable, and, second, that delay must have prejudiced the defendant ․ The mere lapse of time does not constitute laches ․ unless it results in prejudice to the defendant ․ as where, for example, the defendant is led to change his position with respect to the matter in question.”  (Citations and internal quotation marks omitted.)  Bozzi v. Bozzi, 177 Conn. 232, 239 (1979).  “Moreover, the mere lapse of time does not constitute laches unless it results in prejudice to the defendant such that the defendant is led to change his position with respect to the matter in question.”  (Citation omitted.)   Brock v. Cavanaugh, 1 Conn.App. 138, 140 (1984).

The plaintiff claims that the delay in bringing this action is excusable because of his ongoing professional relationship with the defendant and any delay did not prejudice the defendant.   The defendant argues that it is prejudiced because it would never have agreed to the deal the plaintiff claims existed between them in the first place.   The court agrees that the delay here was inexcusable and prejudiced the defendant.   The plaintiff had many years, once he discovered that the documents did not conform to what he thought the agreement was, to bring this action, yet he waited in order to continue to do business with the defendant and benefit from their working relationship.   The defendant would clearly be prejudiced if, at this point, almost fifteen years after the documents were signed, and after they have committed their assets to the project, the documents are interpreted to include a provision Shepard indicated he would not have agreed to when he signed them.

Therefore the court finds that the plaintiff's action is barred by laches.

C. Negligence

In its Third Special Defense, the defendant claims that Kelley failed, neglected or refused to read the Operating Agreement, the Ground Lease, and the Management Agreement and/or various loan agreements and accordingly his negligence bars him from the relief he seeks in this action.

“In Essex v. Day, 52 Conn. 483, 1 A. 620 (1885), this court held that the unquestionable negligence of certain town officials in not reading the text of bonds before they were issued did not operate to bar the town from obtaining a reformation of those bonds in order to correct an error therein, where the defendant bondholder had received one of the bonds knowing of the mistake and had then sought to use the error to his advantage.   Of the town officials' failure to read the text of the bonds and its impact on the equitable claim for reformation of the bonds, Justice Loomis wrote:  ‘There is here unquestionably a reprehensible carelessness;  a lack of intelligent attention to the matter that must be regarded as not only unreasonable but culpable.   We have no disposition to defend, or even to excuse, such conduct ․ This negligence is not of that extremist kind which the courts sometimes characterize as the equivalent of fraud.   It was not recklessness;  it was mere want of care ․ It is to be classed only with those incautious and unbusiness-like acts which are constantly presenting themselves and would not have been noticed but for some mischief that they have wrought.   Thus a man carelessly signs a note for a thousand dollars which he supposed to be for a hundred dollars.   Through a mistake of the scrivener it is thus written, when he had directed that it be written a hundred, and he signs it without reading it.   This is certainly gross carelessness;  but should it debar him from all remedy against a party who receives the note knowing of the mistake?   Would not a court of equity enjoin the holder who took it with full knowledge against its collection?   Would it be good in his hands, in any court admitting of equitable defences, for more than a hundred dollars?   We think therefore that the negligence of the plaintiffs in the execution and issuing of the bonds, was not of such a character as to preclude all equitable relief against the present defendant.’  Id., 492-93.”  (Citation omitted.)  Voll v. Lafayette Bank & Trust CO., 223 Conn. 419, 428-9 (1992).   Thus negligence does not bar a claim for the equitable relief of reformation based upon unilateral mistake or upon mutual mistake when the other party has not been prejudiced.   Zahner v. Schiano, Superior Court, Judicial District of Stamford-Norwalk at Stamford, Docket No. CV94 0137212 (Lewis, J., June 15, 1995).

As noted above, however, the court finds that the failure of the documents to include a buyout or incentive provision was not the result of mistake, either unilateral or mutual, and therefore reformation of the documents is not appropriate.   In any event, it has been established that the defendant has been prejudiced such that the plaintiff's unquestionable negligence, in not reading the documents at any time before he signed them and in not even reading them or having someone else read them until three or four years afterwards, bars his claim for reformation.

D. Parol Evidence Rule

In the Fourth Special Defense, the defendant claims that the documents were intended by Kelley and Five S to be complete and final expressions of the agreements between them and accordingly Kelley's claims are barred by the parol evidence rule.

“The parol evidence rule is premised upon the idea that when the parties have deliberately put their engagements into writing, in such terms as import a legal obligation, without any uncertainty as to the object or extent of such engagement, it is conclusively presumed, that the whole engagement of the parties, and the extent and manner of their understanding, was reduced to writing.   After this, to permit oral testimony, or prior or contemporaneous conversation, or circumstances, or usages [etc.], in order to learn what was intended, or to contradict what is written, would be dangerous and unjust in the extreme ․ The parol evidence rule does not of itself, therefore, forbid the presentation of parol evidence, that is, evidence outside the four corners of the contract concerning matters governed by an integrated contract, but forbids only the use of such evidence to vary or contradict the terms of such a contract.”  (Citation and internal quotation marks omitted.)  Ravenswood Construction v. Merritt, 105 Conn.App. 7, 14-5 (2007).  “By implication, such evidence may still be admissible if relevant (1) to explain an ambiguity appearing in the instrument;  (2) to prove a collateral oral agreement which does not vary the terms of the writing;  (3) to add a missing term in a writing which indicates on its face that it does not set forth the complete agreement;  or (4) to show mistake or fraud ․ These recognized exceptions are, of course, only examples of situations where the evidence (1) does not vary or contradict the contract's terms, or (2) may be considered because the contract has been shown not to be integrated;  or (3) tends to show that the contract should be defeated or altered on the equitable ground that relief can be had against any deed or contract in writing founded in mistake or fraud.”  (Citations and internal quotation marks omitted.)  Alstom Power, Inc. v. Balcke-Durr, Inc., 269 Conn. 599, 609-10 (2004).

Although the parol evidence rule does not prohibit the use of evidence outside the confines of a written contract to supply terms omitted by mistake, such is not the case here.   But the parol evidence rule does prohibit the use of prior or contemporaneous conversations and negotiations to contradict what is written.   It therefore cannot be used, as the plaintiff claims, to resurrect the oral handshake deal which preceded the written agreements of the parties in contradiction of those documents.

E. Equitable Estoppel

In the Fifth Special Defense the defendant claims that the plaintiff's claims are barred by the doctrine of equitable estoppel because, based on Kelley's promise to provide services for thirty years for no compensation other than the benefits accruing to him by virtue of being a member of South Windsor Golf, Five S was induced to enter into the Ground Lease and mortgage, and that Five S would be unfairly prejudiced and damaged if Kelley were permitted to disregard his agreements and obtain compensation for his services on a basis different from those set forth in the agreements.

“The doctrine of equitable estoppel is well established.  [W]here one, by his words or actions, intentionally causes another to believe in the existence of a certain state of things, and thereby induces him to act on that belief, so as injuriously to affect his previous position, he is [precluded] from averring a different state of things as existing at the time ․ Equitable estoppel is a doctrine that operates in many contexts to bar a party from asserting a right that it otherwise would have but for its own conduct ․ In its general application, we have recognized that [t]here are two essential elements to an estoppel-the party must do or say something that is intended or calculated to induce another to believe in the existence of certain facts and to act upon that belief, and the other party, influenced thereby, must actually change his position or do some act to his injury which he otherwise would not have done ․ [T]here must generally be some intended deception in the conduct or declarations of the party to be estopped, or such gross negligence on his part as amounts to constructive fraud, by which another has been misled to his injury ․ In the absence of prejudice, estoppel does not exist.”  (Citations and internal quotation marks omitted.)  Coss v. Steward, 126 Conn.App. 30, 41-42 (2011).

The evidence here establishes that the defendant subjected its property to the burden of a long-term lease and mortgage based on the promise Kelley made in the documents that he would contribute his services in exchange for compensation in the form of the profit sharing arrangement set forth in the documents.   Kelley has accepted the benefits of that arrangement over a protracted period of time.   Therefore Kelley is estopped from asserting his claims.

F. Waiver

In the Sixth Special Defense the defendant claims that Kelley's claims are barred by the doctrine of waiver because he accepted compensation for his services in accordance with the agreements for more than thirteen years and therefore waived any right he may have had to obtain compensation on any basis different than that set forth in the documents.

“Waiver is the intentional relinquishment or abandonment of a known right or privilege ․ [V]arious statutory and contract rights may be waived ․ Waiver is based upon a species of the principle of estoppel and where applicable it will be enforced as the estoppel would be enforced ․ Estoppel has its roots in equity and stems from the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed ․ Waiver does not have to be express, but may consist of acts or conduct from which waiver may be implied ․ In other words, waiver may be inferred from the circumstances if it is reasonable to do so.”  (Citations and internal quotation marks omitted.)  C.R. Klewin Northeast v. Bridgeport, 282 Conn. 54, 87 (2007).

Here the plaintiff's waiver of his claims can be implied by his unreasonable delay in pursuing his claims while at the same time, over a period of more than twelve years, reaping the benefits of the agreements.

G. Statute of Limitations

Lastly, in its Seventh Special Defense the defendant alleges that Kelley's claims are barred by the applicable statute of limitations.

“Equity ordinarily will refuse a remedy when the statute applying to similar actions at law has run ․ But just as it may give a remedy after the statute has run, so it may dismiss an action for laches within the statute's period.”   (Citations omitted.)  Lesser v. Lesser, 134 Conn. 418, 423 (1948).

In an action for reformation of a contract the courts have applied the statute of limitations applicable to actions on contract.  “If the court applies § 52-576 to this claim, it is time bared.   Reformation is an equitable remedy and the court must therefore decide whether or not, under the circumstances, the applicable statute of limitation should be applied so as bar the cause of action.”   Colodonato v. Hanson, Superior Court Judicial District of Hartford at Hartford, Docket No. CV 04-4004755S (Miller, J., Aug. 11, 2006).  General Statutes § 52-576(a) provides that:  “No action for an account, or on any simple or implied contract, or on any contract in writing, shall be brought but within six years after the right of action accrues ․” This same statute has been applied to actions for unjust enrichment.  “There is no Connecticut appellate authority that squarely addresses the applicable statute of limitations for unjust enrichment.   Because unjust enrichment is a form of contract action, often called ‘quasi-contract,’ the court concludes that the most applicable statute in this case is the six-year contract statute.”   (Citation omitted.)   Gianetti v. Individual Practice, Superior Court, Judicial District of Waterbury, Complex Litigation Docket at Waterbury, Docket No. CV 02 4001685 (Schuman, J., July 21, 2005).

The plaintiff claims that it would be inequitable to apply the statute of limitations to bar his claims because there has been no prejudice to the defendant and Shepard actively sought to conceal Kelley's cause of action.   There is no evidence to support such a claim and the court has already found that the delay has prejudiced the defendant.   The plaintiff also claims that it took him several years to even learn of his cause of action, he did not have legal counsel, and he did not want to disrupt his business relationship with the Shepards.   The court concludes that all these excuses are the result of the plaintiff's own inattention to this matter and his desire to continue to take advantage of his business relationship with the Shepards.   He did not read the drafts of the documents sent to him, he did not read them when he signed them, and he did not even read them after he signed them.   The delay in his attempts to enforce his claims is the result of his own failure, throughout the process of negotiating and constructing the deal in this matter, to take appropriate actions to protect his own interests.   By failing to do so in a timely manner he has forfeited his right to do so now.

Conclusion

The court cannot change the written agreements between the parties simply because they are not what the plaintiff claimed he agreed to when he failed to pay such attention to them to ensure that they did.   In any event “[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.”  Neubig v. Luanci Construction, 124 Conn.App. 425, 432 (2010).

For all the reasons set forth above, judgment shall enter for the defendant on both counts of the complaint.

Jane S. Scholl

Scholl, Jane S., J.