Michael D. Kroha et al. v. Kelli Mooney et al. (2013)

MEMORANDUM OF DECISION

This cause of action arises out of a contract between the plaintiffs, Michael D. Kroha and Remedy Ideas, LLC and the defendants Kelli Mooney and Kerri Ricardo.   The plaintiffs claim that the defendants breached the contract by failing to pay a balance due of $60,000.

The plaintiffs filed a two-count complaint, claiming breach of contract in the first count and unjust enrichment in the second count.   In addition to an answer the defendants filed several special defenses, which, in effect, simply denied the allegations of the complaint.

Based on the credible evidence submitted during the trial and the post-trial briefs of the respective parties the court has made the following factual and legal conclusions.

The defendants, Kelli Mooney and Kerri Ricardo, were employees and minority stockholders of a company called Alpha Medica, Inc., which employed approximately 50 people.   The holders of 50% of the stock in the company had indicated they were going to move to have the company dissolved.   The defendants, who were employed by Alpha opposed discontinuing a company employing 50 people.   They owned 46% of the outstanding stock and an additional 4% was owned by the plaintiff, Kroha.   The plaintiff had been terminated as an employee of the company, but did remain the owner of the 4% stock.

A meeting had been scheduled on the Friday of Memorial Day in 2009.   The defendants contacted the plaintiff with a proposal allowing them to use, by proxy, his 4% of stock.   At approximately the time of the meeting, the defendant prepared an agreement which the plaintiff reviewed, and was signed by both.   The agreement was as follows:

CONSULTING AGREEMENT

This will serve as a consulting agreement between Michael Kroha/Remedy Ideas and Kelli Mooney and Kerri Ricardo as individuals.   This agreement confirms that Michael Kroha [Fn 11] agrees to provide Kelli Mooney and Kerri Ricardo, an irrevocable voting proxy, simultaneously herewith, for all of his Alpha Medica Inc ․ (AMI) shares (total owned shares), for a period of 12 months, or as long as payments continue.   In no event, will the voting proxy be used to diminish Michael Kroha's stock ownership interest in AMI. In exchange, Kerri Ricardo and Kelli Mooney agree to pay Remedy Ideas, the sum of $15,000 per month for six months, beginning May 21, 2009 and will continue the agreement for an additional six months, as long as they remain employed by Alpha Medica, Inc. These payments totaling $90,000 will be personally guaranteed by Kelli Mooney and Kerri Ricardo.

Payments will be made on or before the dates listed below:

June 21, 2009

July 21, 2009

August 21, 2009

September 21, 2009

October 21, 2009

The defendants signed the agreement on May 27, 2009 and the plaintiff signed the agreement, individually, on May 28, 2009.   The defendants made monthly payments totaling $90,000 for the initial six months and an additional $30,000 for the next two months.   Thereafter, they ceased payments.

As is not unusual when unrepresented parties draft their own agreement, an opinion as to the intent of the agreement is in the mind of the respective beholders.

The plaintiffs claim that the intent of the contract was that Kroha was to be paid on a monthly basis for 12 months.   The contract provided that the defendants agreed to pay $1,500 per month for six months, beginning 20 May 21, 2009 and that they agreed to continue those payments for an additional six months, as long as they remain employed by Alpha Medica.   The defendants stop payments after eight months, which they claim was within their rights according to the contract.

The defendant, Kerri Ricardo, testified that the intent of the contract they composed only provided for guaranteed monthly payments of six months and, in effect, an option to pay additional individual monthly payments for six months, as long as payments continued, which were discontinued after eight months, ending the contract.

“It is a fundamental principal of contract law that the existence and terms of a contract are to be determined from the intent of the parties ․ The parties' intentions manifested by their acts and words are essential to the court's determination of whether a contract was entered into and what its terms were.”  (Internal quotation marks omitted.)  Auto Glass Express, Inc. v. Hanover Ins. Co., 293 Conn. 218, 225, 975 A.2d 1266 (2009.)  “The intent of the parties as expressed in [writing] is determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction ․”

As was correctly noted by Judge Rush in his Memorandum of Decision on an Application for Prejudgment Remedy, dated November 3, 2011:

A difficulty exists with respect to the proper interpretation of the “Consulting Agreement.”   Is the agreement, one in which the individual defendants agreed to pay $15,000 payment for six months, with an option to continue it for an additional six months?   Is the requirements of the payment guarantee of $90,000 applicable for six months only, or only to the second six months.   The plaintiff presented evidence that the defendants were in the employee of Alpha, at least until the duration of the 12 month period beginning in May 2009.   Interpretation of the “Consulting Agreement” dependence on additional evidence as to the intention and circumstances of the parties at the time the agreement was executed by the defendants, on May 27th 2009, and by the plaintiff on May 28th 2009.   The court cannot find as a matter of law that the language of the consulting agreement requires an interpretation asserted by either the plaintiffs or the defendants.   Accordingly, the court finds there is a “bona fide belief in the existence of the facts essential of the law for the action.”

The court agrees that the language of the contract was ambiguous.

The general principles governing the construction of a contract are well established.  “If a contract is unambiguous within its four corners, intent of the parties is a question of law requiring plenary review ․ When the language of a contract is ambiguous, the determination of the parties' intent is a question of fact, and the trial court's interpretation is subject to reversal on appeal only if it is clearly erroneous.”  (Internal quotation marks omitted.)  Sagalyn v. Pederson, 140 Conn.App. 792, 795, 60 A.3d 367 (2013).

Based on the contract itself, exhibits of the respective parties and the more credible testimony of Kelli Costello, it is the decision of this court that the contract did intend to provide guaranteed payments of six months, or $90,000, and that the defendants had the option of renewing the request for a proxy on a monthly basis for the next six months or until they terminated payments, which occurred after an additional two months.   The court further finds that the plaintiff suffered no damages.

The contract specifically provided that payment for the first six months was to be made on specific dates.   There was no reference to any specific dates following the first six months.

The plaintiff testified that after signing the agreement, he was e-mailed a copy of a proxy vote by the defendants, which he never produced.   He indicated that he found the verbiage very finite and that he had signed it, he was relinquishing for all eternity, his shares.   To the contrary, the consulting agreement specifically provided “In no event, will the proxy used to diminish Michael Kroha's, stock ownership interest in AMI.” He testified that he talked to Kelli Costello and she indicated they did not need a separate proxy agreement but that the consulting agreement would be sufficient.   The court finds that testimony to be not credible.   The consulting agreement was not a proxy, but a contract agreeing to provide a voting proxy, under certain conditions.   Aside from not being in compliance of the requirements for a voting proxy, it also does not seem credible that the defendants would volunteer to publicize the contract at a stockholders meeting indicating they were paying at least $90,000 for a proxy vote rather than submit an actual signed proxy.

Contrary to the initial testimony of the plaintiff, the defendants admitted into evidence an e-mail sent by the plaintiff to the defendants which contained a proposed form of a voting proxy.   It provided that the plaintiff as a voting member of Alpha Medic, Inc., was designating Kelli Mooney or Kerri Ricardo as his representative in that they could cast all the votes and express all approvals or disapprovals that said member may be entitled to cast or express at a special meeting of the shareholders of Alpha Medica, Inc. to be held on or before June 21, 2009 through July 20, 2009.   It concluded, “this proxy will be irrevocable during the time specified and in no event shall this proxy be valid for longer than the days which it is given.”

Although the plaintiff was paid $15,000 on June 21, 2009, the proxy was not required as the plaintiff attended the meeting himself.   Contrary to the terms of the contract, the plaintiff never provided a signed irrevocable voting proxy for 12 months, or six months, or even one month.   Although the plaintiff was paid eight months at $15,000 per month, at no time was it necessary for the plaintiffs to utilize the plaintiff's proxy.

The court found it significant that, in the e-mail, the plaintiff agreed to “provide a signed copy for each month, as applicable.”

Finally, as was indicated, the court found the testimony of the defendant, Kelli Costello to be the more credible as to the intention of the terms and conditions of the “Consulting Agreement.”

It is the conclusion of the court that the plaintiffs failed to establish the necessary burden of proof with respect to the complaint.

As to the second count “unjust enrichment” the parties did, in fact, have a contract.   In addition, the plaintiffs never actually received any consideration nor did the plaintiffs incur any damages, but did receive $120,000.

Accordingly, judgment is entered for the defendants, Kelli Mooney and Kerri Ricardo, as to the complaint.

GILARDI, J.T.R.

Gilardi, Richard P., J.T.R.