LLC v. Brian Gates (2013)

MEMORANDUM OF DECISION

The plaintiff, Channing Real Estate, LLC, seeks repayment of six (6) promissory notes, plus interest, as provided in the notes.   The defendant, Brian Gates, denies owing the plaintiff on the notes and alleges, by way of special defenses and counter claim in three counts, that the funds paid to the defendant were advances on a joint real estate venture.   In his special defenses, the defendant alleges fraud, unjust enrichment, misrepresentation and promissory estoppel.   In his counterclaim, the defendant alleges fraud, negligent misrepresentations and violations of CUTPA.

The court heard the case on July 26, July 27, September 6 and on October 11 of 2012.   The plaintiff called attorney William St. Onge who testified, and the plaintiff testified through, Douglas Chan, a managing member of the plaintiff LLC. The defendant called William Henry Bugden who testified, and the defendant, Brian Gates, testified regarding the case.   The court considered their testimony and all exhibits (full) entered as evidence in this case.   The record closed when the defendant submitted his post-trial brief on February 4, 2013.

MOTION IN LIMINE # 140

The plaintiff filed a motion in limine on July 25, 2012 (Motion # 140) asking the court to preclude any evidence of an alleged condition or purpose to the defendant's payment obligation under the six promissory notes that constitute the basis of the plaintiff's complaint.   At the commencement of trial the plaintiff claimed and argued the motion in limine, alleging that the parol evidence rule bars the court from considering any evidence that vary the terms of the six promissory notes signed by the defendant.   Specifically, the plaintiff argues that the defendant seeks to vary the terms of the notes by offering evidence that the plaintiff told the defendant that the promissory notes were solely to protect the plaintiff if the defendant backed out of the real estate deal and the notes would not be used for any other purpose.

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 conversations, 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.   Parol evidence offered solely to vary or contradict the written terms of an integrated contract is, therefore, legally irrelevant.   When offered for that purpose, it is inadmissible not because it is parol evidence, but because it is irrelevant.   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 omitted;  internal quotation marks omitted.)  Heyman Associates No. 1 v. Ins. Co. of Pennsylvania, 231 Conn. 756, 780–81, 653 A.2d 122 (1995).

The court finds that the contract was not fully integrated and the parties' full true agreement was not reduced to a signed writing.   Therefore, the introduction of extrinsic evidence is not precluded by the parol evidence rule in the present case.   The plaintiff's motion in limine objecting to the introduction of parol evidence is denied.

FINDINGS OF FACTS

The plaintiff, Channing Real Estate, LLC, is a limited liability company organized under the laws of the state of New York, with an office in the state of New York. Chan, a resident of the state of New York, is a member and principal of the plaintiff.   Chan is not a party to this action.

The defendant, Brian Gates, is a resident of the state of Connecticut.   The defendant and the defendant's wife, Ulrika Gates, are members of Front Street Commons, LLC (Front Street Commons), a Connecticut limited liability company, each owning a fifty percent interest in the said LLC. Ulrika Gates is not a party to this action.   In addition, Front Street Commons is not a party to this action.

Front Street Commons is the owner of two parcels of commercial real estate, located in the Town of Putnam, known as 93–95 Front Street and 96 Front Street (the properties).   Front Street Commons acquired 93–95 Front Street through a foreclosure by sale committee deed dated October 15, 2004.  (Ex. 13.)   In addition, Front Street Commons acquired 96 Front Street by quitclaim deed from the defendant and his wife dated May 27, 2005.  (Ex.12.) The property at 93–95 contains commercial space and apartment space which includes a 3–bay garage, a two-story office complex, a two-unit strip mall and a two-story building.   Three apartments on the very top of 93–95 Front Street have been vacant since 2004.   Tenants occupied the properties before September 2007.

The defendant met Chan in Putnam at the properties through a realtor in September 2007.   Immediately, the plaintiff, through Chan, and the defendant began negotiations regarding the properties.   At the time, the plaintiff, through Chan, proposed that the two become partners in a real estate venture that would include optioning and ultimately the purchasing of adjacent land to create a mixed use shopping mall.

The proposal made by the plaintiff, through Chan on October 1, 2007, was that the plaintiff would buy a fifty percent interest in Front Street Commons (Exs.B, C.) The new entity was to be Front Street Associates LLC with the defendant being paid $373,640 for his equity in Front Street Commons.   Everything was to be split, profit and losses equally.  (Exs.B, C.) During his testimony, Chan admitted that the reason for buying an interest in Front Street was to surround it with other properties.   In 2009, there were no options on other properties.

During their discussions and negotiations, the parties were represented by counsel.   Attorney William St. Onge, represented the plaintiff in Connecticut.   The defendant and Front Street Commons were represented by attorney Nicholas Scola.   In addition, the plaintiff was assisted by attorneys in New York, including attorney Louis Soloway.

The attorneys spoke regarding the plaintiff having an ownership interest in the real estate owned by Front Street Commons.   The discussions included the formation of a new limited liability company that would own the properties and the plaintiff, the defendant and Front Street Commons would participate as members.   Chan sent attorney St. Onge an outline of the subject matter of the negotiations.

A reduction of the equity to be paid to the defendant from $373,600 to $250,000 occurred after the environmental surveys showed environmental cleanup cost associated with the property.   The parties had an agreement in principle as of December 14, 2007 on a purchase option by the plaintiff for $250,000 to purchase “one half of the subject premises” and that the transaction would close by January 7, 2008.  (Exs.K, M.)

The proposals were reduced to writing.   Several versions of the proposed operating agreements were exchanged amongst the parties.   The parties neither signed any of the proposed operating agreements nor the option agreements.

The defendant asked for advances of money from the plaintiff.   The plaintiff advanced funds on six separate occasions.   On each occasion, prior to the disbursement of funds, the plaintiff had the defendant sign a promissory note.   The defendant alleges that these payments were made by the plaintiff toward the purchase price of Front Street Commons.

The plaintiff and the defendant followed the same routine with each note.   The plaintiff transmitted a promissory note from its office in New York to the defendant in Connecticut.   The defendant signed the note in Connecticut which was delivered to the plaintiff in New York. Thereafter, the plaintiff wired the funds from an account in New York to the defendant's Front Street Commons account at Putnam Bank in Connecticut.

The promissory notes varied in amounts.   The first promissory note, dated January 8, 2008 was for $38,939.50.  (Ex. 2.) The second promissory note, dated February 6, 2008 was for $28,000.  (Ex. 3.) The third promissory note, dated March 12, 2008 was for $50,000.  (Ex. 4.) The fourth promissory note, dated January 7, 2009, was for $17,333.24.  (Ex. 5.) The fifth promissory note, dated February 13, 2009, was for $30,000.  (Ex. 6.) The sixth promissory note, dated February 17, 2009, was for $117,000.  (Ex. 7.) The total principal on the notes was for $281,272.74.

There were many discussions and written proposals for the joint ownership of the properties, but no contract had been executed regarding the intended joint ownership of Front Street Commons and no operation agreement or option agreement had been signed by the parties.   Despite the lack of formal agreements, the plaintiff signed a letter that the $250,000 received by the defendant was for the purchase of a one-half interest in Front Street Commons.   After the defendant requested the letter, the plaintiff had his attorney prepare draft operating agreements.  (Ex. GGG–8.)

The plaintiff's writings contradict his testimony that the advances were loans to the defendant.   Instead, the writings indicate that the effective date of the parties' partnership was January 1, 2008.  (Ex. GGG–8.) The document has tax consequences and also shows a break out for one-half of losses, one-half of the property taxes and one-half of the fit up for tenant space and the balance as contributions to the partnership.   The response by the plaintiff, through the January 7, 2009 promissory note in the principal sum of $17,333.24, establishes that these funds were intended to pay half of the losses in the partnership.   In its default letter to the defendant, the plaintiff characterizes the payments to the defendant;  $250,000 as a loan and $39,107.62 as operating expenses (Ex. 8).   The court so finds.

From September 2007 through 2009, when discussions and negotiations ceased, the plaintiff sought information regarding Front Street including financial information about Front Street and the real estate in question.   The defendant provided the information sought by the plaintiff.   The income and expenses from the properties were considered by the plaintiff and the defendant was fully informed about other issues.   In February 2009, the plaintiff wanted to close the deal during the first week in March.  (Ex. 57.)

One of the issues that arose during the course of the parties' discussions and negotiations were the existing mortgages with Putnam Bank, which encumbered the Front Street properties and whether the due on transfer clause in the mortgages would be triggered by a completed transaction between the parties.   Considering the testimony by the defendant and the bank's dealings with him, the defendant had a good business relationship with Putnam Bank.

The parties were aware of issues concerning the mortgages and concerning environmental regulations.   Attorney St. Onge communicated with attorney Scola about these issues.   Attorney St. Onge testified that the environmental and existing mortgages were obstacles to the parties signing formal contracts regarding Front Street.   Attorney Soloway, the plaintiff's attorney in New York, advised the plaintiff that the environmental issues with the property and the mortgages on the property had to be resolved before the closing could take place.   The plaintiff and the defendant discussed these issues in August 2009, and again in September 2009.

The evidence demonstrates that the defendant had disclosed all information to the plaintiff about 93 Front Street.   The property, known as 93 Front Street, was a former dry cleaning business.  (Ex. JJJ.) The defendant, as required by Putnam Bank, had cleaned up the site because as a dry cleaning establishment, it was subject to the Transfer Act. These documents were delivered to attorney St. Onge on October 30, 2007.   Therefore, it was always known prior to any advances of money by the plaintiff to the defendant that this issue existed.   The environmental issue that was raised and considered by the attorneys was resolved in January 2008 where the parties agreed to equally share the costs of any cleanup and reports.  (Ex. P, G429.) Then, the parties agreed to share the costs equally and take the property subject to the mortgages.  (Ex. P, G426–7.)

In February 2009, the defendant asked plaintiff for an advance or loan of $117,000 so defendant could complete his purchase of 116 Cove Road, Stonington, Connecticut with his wife.   On February 18, 2009, the defendant sent an e-mail to Sharon Chan, where the defendant wrote:  “I don't know if [Chan] told you but I need a letter signed by yourself or [Chan] for my closing on myself and Ulrikas new house.   It's a simple letter they want to see where all the monies come from and channing real estate bought out half my equity.   I will email it to you tomorrow.”  (Ex. 56.)   The defendant stated to Sharon Chan that his bank made it a “stip that his monies down on the property come from the parties' deal.”

Chan was aware, as early as November 2, 2007, that the defendant was going to use his equity interest payments to buy a new home.  (Ex. G.) “You can then close on your Ocean front property.”   He stated his desire for the plaintiff to purchase a fifty percent share of Front Street.  “I am going away from Nov. 7 till 20.   Once I return I would like to sign our deal, pay you for the fifty percent then.”

The plaintiff demanded payment on the six promissory notes on December 15, 2009.   The defendant has not paid any sums on the notes.   The plaintiff, as holder of the six notes, and seeks payment of the principal, interest and attorneys fees pursuant to the terms of the six promissory notes.   The plaintiff claims unpaid principal amount due pursuant to the terms of the six promissory notes is the sum of $281,272.74.  (Exs.2–7.)   The plaintiff claims prejudgment interest pursuant to the notes in the total amount of $173,093.71.  (Exs.2–7.)  (Interest per Ex. 2:  $28,234.75;  Interest per Ex. 3:  $19,889.59;  Interest per Ex. 4:  $35,556.52;  Interest per Ex. 5:  $9,760.16;  Interest per Ex. 6:  $16,495.89:  Interest per Ex. 7:  $64,116.40.)

The plaintiff hired an attorney to collect on the notes.   The plaintiff seeks attorneys fees and related litigation expenses in the amount to $56,411.47.   (Ex. 11.)   The defendant acknowledged receiving the funds for the plaintiff, evidenced by the promissory notes, and asserts that the payments were advances toward the purchase of a fifty percent interest in Front Street Commons.   The draft operating agreements appear to corroborate the defendant's contention that the funds provided by the plaintiff to the defendant were intended as payments toward a fifty percent interest in Front Street Commons.¹

DISCUSSION

The defendant has proven by clear and unequivocal evidence through the e-mails and other evidence that the funds advanced by the plaintiff were in payment for an interest in a partnership and were not loans to be repaid.   The plaintiff did not prove that the defendant was unwilling to perform on the promise to sell one-half interest in Front Street Commons.

On January 3, 2008, Chan was in agreement that the deal should close as soon as possible.   Afterward, many operating agreements were prepared by attorney Solway's office in New York. The last document, the option agreement, contemplates that the full price of $250,000 would be paid at the time the option was executed.   In the option agreement, a return of funds paid would only occur if the Front Street Commons property were destroyed or if the defendant defaulted on his promises.   The closing, as contemplated, did not occur by February 8, 2008.   Chan requested the documents that had been sent to attorney St. Onge and Chan expressed his frustration with the delay of the closing.   On May 12, 2008, Chan wrote to the defendant that the lawyers were all in agreement, but then he asked for financial data.  (Ex. V.) The defendant had provided the financial information.  (Ex. X.) A new closing was scheduled for August 2008.   Everyone was in agreement except with respect to the value for the fifty percent interest which had been agreed to before.²  (Ex. P.)

Despite the delays in closing, the parties had worked together as partners through August 2008 and until December 2008.  (Exs.CC, DD.) The parties experienced a loss for the 2008 fiscal year and they shared the loss of the partnership equally, the plaintiff paying its one-half share of $17,333.24.   (Ex. 50.)

The defendant's testimony is corroborated by a contemplated mortgage to secure the monies advanced by the plaintiff if the defendant did not complete the transaction.   The defendant testified and the court credits his testimony that he was and is ready willing and able to deliver specific performance to the plaintiff.

The plaintiff has stated that the defendant requested defendant's exhibit NN in writing to the bank as if that absolves the plaintiff from admitting that these were payments and not loans.   But that is not what the documents show.   Rather they are consistent with the plaintiff's version that the transfers of funds were interim payments toward the purchase of Front Street Commons.   (Exs.KK, II.) The plaintiff's attorneys listed the payments made as contributions rather than loans and back-dated the effectiveness of their agreement to January 2008.  (Ex. GGG–8.) The defendant clearly acknowledges full payment of the option price by the plaintiff.  (Ex. RR.)

The record is filled with other evidence that the money advances by the plaintiff went toward the actual partnership that existed between the plaintiff and the defendant.  “I gave you several interim payments, pls make sure they are included on the sales side.”  (Ex. KK.) Here, Chan admits that the payments were not intended to be loans.  “[W]ill be responsible for one half of the bills and operating expenses” (Ex. NN.) Chan believed that the plaintiff was legal owner of fifty percent of Front Street Commons.   Further, he admitted that he had never asked to be a member and that the defendant has never refused to make him a member.  (Trial testimony, hearing date, July 26, 2013.   Transcript, 100–02;  112–7;  122–3.)

The plaintiff has proven by clear and unequivocal evidence through the e-mails and other evidence, including the plaintiff's counsel, that the funds advanced by the plaintiff were in payment for an interest in Front Street Commons.   The plaintiff did not prove that the defendant was unwilling to perform on the promise to sell one-half interest in Front Street Commons.   Accordingly, the plaintiff's fails and recovery on the notes is denied.

SPECIAL DEFENSES AND COUNTER CLAIM

Fraud

In his special defenses and count one of the counter claim, the defendant alleges fraud on the part of the plaintiff.   The elements of a claim of fraudulent misrepresentation are well established.  “The essential elements of an action in common law fraud ․ are that:  (1) a false representation was made as a statement of fact;  (2) it was untrue and known to be untrue by the party making it;  (3) it was made to induce the other party to act upon it;  and (4) the other party did so act upon that false representation to his injury.”  Sturm v. Harb Development, LLC, 298 Conn. 124, 142, 2 A.3d 859 (2010).  “All of these ingredients must be found to exist;  and the absence of any one of them is fatal to a recovery ․ Additionally, [t]he party asserting such a cause of action must prove the existence of the first three of [the] elements by a standard higher than the usual fair preponderance of the evidence, which higher standard we have described as clear and satisfactory or clear, precise and unequivocal.”  (Citations omitted;  internal quotation marks omitted.)  Harold Cohn & Co. v. Harco International, LLC, supra, 72 Conn.App. 43, 51, 804 A.2d 218 (2002).

In the present case, the plaintiff alleges it loaned money to the defendant as proven by the five promissory notes.   However, Chan testified and the court finds that the defendant signed the promissory notes as security for the plaintiff if the defendant decided not to sell a fifty percent share in Front Street Commons.   The plaintiff's e-mails, written and sent by Chan and other persons working for the plaintiff, demonstrate by clear and unequivocal evidence that the money advances were not loans, but instead advances toward the purchase of a fifty percent stake in Front Street Commons.   Relying on these statements, the defendant acted and used the money advanced for the expenses and losses of Front Street Commons and for his personal needs.   Acting on the assertions and requests of Chan, the defendant evicted some of his tenants anticipating the closing on their agreement.   However, the defendant has failed to provide any evidence suggesting that the plaintiff never had any intention going through with the agreement to purchase a fifty percent stake Front Street Commons.   Therefore, the defendant has failed to produce evidence showing that the statements made by the plaintiff were untrue and known to be untrue.   Accordingly, the defendant's special defense fails.

Unjust Enrichment

The defendant's second special defense alleges unjust enrichment.  “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 benefited, (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.”  Vertex, Inc. v. Waterbury, 278 Conn. 557, 573, 898 A.2d 178 (2006).

In the present case, the doctrine of unjust enrichment is simply not applicable.   The evidence shows that the defendant received advances from the plaintiff towards the purchase of a fifty percent stake in Front Street Commons.   Further, the plaintiff paid its share of the losses and expenses of the partnership in accordance with the agreement.   The defendant has not made any payments on the alleged promissory notes and the plaintiff has not retained any other benefit outside of the parties agreement.   Therefore, the plaintiff has not been unjustly enriched.   Accordingly, the defendant's second special defense fails.

Misrepresentations

The third special defense alleges that the plaintiff made innocent and negligent misrepresentations.  “The court has long recognized liability for innocent [or negligent] misrepresentation.”  (Internal quotation marks omitted.)  Matyas v. Minck, 37 Conn.App. 321, 333, 655 A.2d 1155 (1995).   “Traditionally, an action for negligent misrepresentation requires the plaintiff to establish (1) that the defendant made a misrepresentation of fact (2) that the defendant knew or should have known was false, and (3) that the plaintiff reasonably relied on the misrepresentation, and (4) suffered pecuniary harm as a result.”  Nazami v. Patrons Mutual Ins. Co., 280 Conn. 619, 626, 910 A.2d 209 (2006).  “[E]ven an innocent misrepresentation of fact may be actionable if the declarant has the means of knowing, ought to know, or has the duty of knowing the truth.”  (Internal quotation marks omitted.)   West Middle Turnpike Realty v. Hammersla, Superior Court, judicial district of Tolland, Docket No. CV 04 0083598 (January 27, 2005, Scholl, J.) (quoting Richard v. A. Waldman & Sons, Inc., 155 Conn. 343, 346, 232 A.2d 307 (1967)).

“The governing principles are set forth in similar terms in § 552 of the Restatement Second of Torts 1979:  One who, in the course of his business, profession or employment ․ supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.”  (Citations omitted;  internal quotation marks omitted.)   D'Ulisse–Cupo v. Board of Directors of Notre Dame High School, 202 Conn. 206, 217–18, 520 A.2d 217 (1987);  see also Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 575–76, 657 A.2d 212 (1995).

In the present case, the evidence shows the that plaintiff, through Chan, represented that the plaintiff wanted to purchase a fifty percent interest in the partnership, that the plaintiff wanted to become a member of Front Street Commons and that the plaintiff required the defendant to sign promissory notes to protect the plaintiff in case the defendant reneged on the agreement to purchase fifty percent of the partnership.   After relying on the plaintiff's representations, the defendant did not pursue tenants for available space or enter into long term leases.   The defendant relied on these misrepresentations and incurred damages.   Unlike the standard for fraudulent misrepresentation, the threshold for innocent or negligent misrepresentation is much lower.   It does not require the party to prove that other party knew the representation was false at the time it was made, but instead, requires the party to only show that the party knew or should have known that the statement or representation was false.   Based on this standard, and having reviewed the facts of the case in detail, the defendant has established the plaintiff negligently and innocently misrepresented the purpose of the promissory notes.   Accordingly, the defendant's third special defense and counterclaim for misrepresentation is sustained.

Estoppel

The defense of promissory estoppel is an equitable remedy.  “The standards governing the application of equitable estoppel are well established.   There 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 ․” Levine v. Sterling, 300 Conn. 521, 534–35, 16 A.3d 664 (2011).

In the present case, the evidence demonstrates that the money advances made by the plaintiff to the defendant were advances toward the purchase of a fifty percent interest in Front Street Commons by the plaintiff from the defendant, as well as business expenses associated with Front Street Commons.   The defendant acted on these statements and the plaintiff's actions and used the money advanced for the expenses and losses of Front Street Commons and for his personal needs.   Further, acting on the assertions and request of the plaintiff, the defendant evicted some of his tenants anticipating the closing on their partnership agreement.   Reviewing the facts in detail it is clear that the parties were acting as partners in a partnership.   The defendant relied on the statements asserted by the plaintiff and signed the promissory notes as a result.   Therefore, the plaintiff is now estopped from claiming that the promissory notes were not advancements toward the purchase of a fifty percent interest in the partnership.   Accordingly, the defendant's fourth special defense is sustained.

CUTPA

In count three of his counterclaim, the defendant alleges that the plaintiff has violated the Connecticut Unfair Trade Practices Act (CUTPA) by engaging in an unfair and deceptive act in misrepresenting the purposes of the promissory note.   Therefore, as a result of this act, the defendant suffered an ascertainable loss.

“[General Statutes § 142–110b(a) provides that [n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.   It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair:  (1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise in other words, it is within at least the penumbra of some common law, statutory or other established concept of unfairness;  (2) whether it is immoral, unethical, oppressive, or unscrupulous;  (3) whether it causes substantial injury to consumers, [competitors or other businesspersons] ․ All three criteria do not need to be satisfied to support a finding of unfairness.”  (Internal quotation marks omitted.)  Harris v. Bradley Memorial Hospital & Health Center, Inc., 296 Conn. 315, 350, 994 A.2d 153 (2010).

“Thus a violation of CUTPA may be established by showing either an actual deceptive practice ․ or a practice amounting to a violation of public policy.”  (Internal quotation marks omitted.)  Glazer v. Dress Barn, Inc., 274 Conn. 33, 82–83, 873 A.2d 929 (2005).  “In order to enforce this prohibition, CUTPA provides a private cause of action to [a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a [prohibited] method, act or practice ․” (Internal quotation marks omitted.)  Stevenson Lumber Co.Suffield, Inc. v. Chase Associates, Inc., 284 Conn. 205, 213–14, 932 A.2d 401 (2007) (quoting General Statutes § 42–110g(a)).

The defendant alleges that the plaintiff's actions here violated all three prongs of the cigarette rule.   First, the defendant claims that the plaintiff engaged in an unfair and deceptive act by misrepresenting the purposes of the promissory notes, stating the funds from the promissory notes were payments rather than loans and admitting the same to the defendant.   Second, the defendant argues that the plaintiff's admission that the payments were for an interest in Front Street Commons but still seeking payment on the promissory notes is immoral, unethical, oppressive and unscrupulous.   Third, the defendant asserts as a result, he suffered a substantial injury.   The court agrees.

The plaintiff's argument that the defendant was a sophisticated businessman and could have reasonably avoided the damages claimed is unpersuasive.   The parties had an agreement to enter into a partnership.   That agreement required the plaintiff to pay the defendant $250,000 for a fifty percent stake in the partnership.   Allowing the plaintiff to claim those payments were not advancements, but instead loans outside of any agreement would transfer all the risk of the transaction to the defendant and leave the plaintiff risk free.   Further, any issues relating to the mortgage on the properties or the environmental issues were presented to the plaintiff well before the scheduled closing.   The writings and actions of the parties show that the advancement of funds was for the plaintiff's stake in Front Street Commons.   The defendant has always been able and willing to make the plaintiff or his business entity a member.   The plaintiff cannot now claim the money was a loan because he does not want to continue with the transaction.

In the present case, the plaintiff's conduct was substantial, that it did not outweigh countervailing benefits to the defendant and the defendant could not have reasonably avoided the injury.   The plaintiff's act of misrepresenting the purposes of the promissory notes violates all three prongs of the cigarette rule.   The act violates public policy, is unscrupulous, and caused the defendant substantial injury.   Accordingly, count three of the defendant's counterclaim is sustained.

CONCLUSION

For the reasons fully set out above, judgment is entered for the defendant on the plaintiff's complaint.   The defendant's special defenses of misrepresentation and promissory estoppel are sustained and his special defenses of fraud and unjust enrichment are denied.   Judgment is entered for the plaintiff as to count one and for the defendant as to count two and three of the defendant's counterclaim.

Damages

The defendant seeks damages for lost rents.  (Ex. HHH.) The evidence shows that in 2007, before the start of the parties' partnership, Front Street Commons collected $72,709 in rents.   In 2008, the rent roll was reduced slightly to $71,081.   In 2009, the rents received were greatly reduced to $54,964.   In 2010, rents received were up to 79,594.   Currently, the rents received by Front Street Commons were $114,636.   The only significant year where there was a substantial loss of rents was in 2009.   However, the rents significantly increased in 2011.   It is unclear from the evidence whether the significant decrease in 2009 was caused by the plaintiff's request to leave some of the building space vacant.   The expenses of ownership by Front Street Commons varied from 2007 before the joint venture at $96,973 to $84,065 in 2010 after the plaintiff was no longer actively involved in the partnership.   The court notes that the plaintiff contributed $39,107.62 as operating expenses.   (Ex. 8.) Therefore, the court not convinced that the defendant suffered substantial damages resulting from the plaintiff's misrepresentatations.

The plaintiff has stopped contributing to the parties' partnership.   The injury to the defendant is that Front Street Commons no longer receives financial assistance, as necessary, from the plaintiff.   The injury to the defendant is substantial.   Because the court has found that the plaintiff violated the Connecticut Unfair Trade Practices Act (CUTPA) which provides for an award of reasonable attorneys fees, the defendant is granted $28,000.  (Ex. HHH.)

THE COURT

ANGEL L. dos SANTOS, Sr. Judge

FOOTNOTES

FN1. Additional facts will be discussed, as necessary..  FN1. Additional facts will be discussed, as necessary.

FN2. The evidence establishes that the reduction of the purchase price from $373,640 to $250,000 took into account the environmental concerns with the property..  FN2. The evidence establishes that the reduction of the purchase price from $373,640 to $250,000 took into account the environmental concerns with the property.

dos Santos, Angelo L., S.J.