Town of Stratford v. Edmund Winterbottom (2013)

MEMORANDUM OF DECISION

The plaintiff the town of Stratford brings a three-count action against the defendant, Edmund Winterbottom, a former employee.   In the complaint, the plaintiff alleges three claims for money had and received, unjust enrichment and conversion.   All of these claims arise out of its payment to Winterbottom of $9,744.56 and his retention of that money.   In turn, Winterbottom counterclaims for bad faith litigation and for reimbursement of salary and termination benefits because he was paid less than his original salary for his last six months of work.   The case was tried before this court on March 5, 2013.

I

FACTS

On August 1, 2012, the parties stipulated to the following facts.   From May 12, 2008, through December 11, 2009, the defendant was employed as Human Resources Director of the plaintiff.   He was hired by then-mayor James Miron through an at-will agreement which entitled him to certain benefits, including a contract salary of $90,884 per year and a 37.5–hour work week.

In the spring of 2009, the defendant made a financial contribution to Miron's mayoral reelection campaign.   In the plaintiff's budget for July 1, 2009 through June 30, 2010,¹ the Town Council denied Miron's proposed raise for the defendant, and instead reduced his salary from $90,844 per year to $85,884 per year.   The reduction in the defendant's salary caused his nominal hourly rate to change from $46.61 per hour to $44.04 per hour.

After Miron lost his reelection campaign for Mayor, the defendant decided to accept Miron's offer of termination.   Upon the defendant's termination, he was paid for accrued benefits in a “cash-out” included in his last paycheck.   Miron personally approved a “Termination Notice” listing the categories and hours to be used in determining the cash-out to be paid to the defendant as well as others.   Prior to this notice, the defendant had made no formal or written claim for the cash-out.   The value of the cash-out was calculated using a nominal hourly rate and was subject to withholding and other deductions.   The cash-out was calculated based on the $44.04 per hour hourly rate.

Mayor John A. Harkins assumed the office of mayor of the plaintiff on December 14, 2009.   In January 2010, the plaintiff sent the defendant a W–2 form, which included the cash-out income for social security purposes along with appropriately itemized deductions.   The defendant, however, later received written notice that the plaintiff claimed a debt of $9,744.56.

The parties provided evidence as to additional facts of import to this decision at trial.   The court shall make evidentiary findings as they are necessary to the determination of the parties' claims.

The plaintiff argues that Miron improperly computed some of the defendant's benefits and improperly included others in the cash-out.   Specifically, it argues he improperly included excess hours for perfect attendance days, vacation days, professional development days, and sick days in the cash-out even though perfect attendance payments were no longer used.   The plaintiff also claims that the defendant had only twenty-five vacation days rather than the thirty he was paid for, the mayor did not conduct the evaluations necessary to justify awarding professional development days and the defendant received 2.5 more sick days than he was entitled to.   The total value of these errors amounted to $9,744.56, and the plaintiff seeks full reimbursement.   The defendant counterclaims for lost wages due to the salary reduction (approximately $3,392.40) and for the higher value which the cash-out would have had if his salary had stayed at its previous value (approximately $848.10).   In addition, the defendant claims he is entitled to attorneys fees for bad faith litigation because the plaintiff refused to mediate or discuss settlement, and initially announced the suit in the newspaper rather than contacting the defendant prior thereto.

II

MONEY HAD AND RECEIVED

The plaintiff's first claim is for money had and received.²  In order to prevail on this count, the plaintiff must demonstrate that the payment was made “by mistake where the payor is free from any moral or legal obligation to make the payment and the payee in good conscience has no right to retain it ․ The real ground for recovery is the equitable right of the plaintiff to the money.”  Bridgeport Hydraulic Co. v. Bridgeport, 103 Conn. 249, 261–62, 130 A. 164 (1925);  see also Stratford v. Castater, 136 Conn.App. 522, 528–29, 46 A.3d 945, cert. denied, 307 Conn. 903, 53 A.3d 218 (2012);  Stratford v. Castater, Superior Court, judicial district of New Haven, Docket No. CV 10 6011629 (March 15, 2011, Lager, J.);   aff'd, 136 Conn.App. 522, 46 A.3d 945, cert. denied, 307 Conn. 903, 53 A.3d 218 (2012);  Koch v. Stop & Shop Company, Inc., Superior Court, judicial district of New London, Docket No. CV 02 0561277 (February 11, 2003, Hurley, J.T.R.).  “Originally an action for the recovery of debt, favored because more convenient and flexible than the common law action of debt, [money had and received] has been gradually expanded as a medium for recovery upon every form of quasi-contractual obligation in which the duty to pay money is imposed by law, independently of contract, express or implied in fact.”  Norwich v. Lebanon, 200 Conn. 697, 708, 513 A.2d 77 (1986).   In Stratford v. Castater, supra, Docket No. CV 10 6011629, the court considered these same issues relating to another former employee of the plaintiff, Eric Castater, who was terminated at the same time as the defendant.   The Castater court found that Miron's powers as mayor were sufficiently broad to allow him to make the payments in question, and that in addition, the defendant accepted the money in good faith.  Stratford v. Castater, supra, Docket No. CV 10 6011629.   Likewise, this court must first determine whether the cash-out payments were made by mistake by determining whether the mayor had the power to alter the cash-out amount under the town charter, and then decide whether equity warrants the court invalidating this transfer of funds.

“It has been well established that a city's charter is the fountainhead of municipal powers ․ The charter serves as an enabling act, both creating power and prescribing the form in which it must be exercised ․ Agents of a city, including [its commissions], have no source of authority beyond the charter ․ In construing a city charter, the rules of statutory construction generally apply ․” Fennell v. Hartford, 238 Conn. 809, 813, 681 A.2d 934 (1996).

The town council has a variety of budgetary and employment powers.   The Stratford town charter contains the following provisions regarding the power of the town council.   Section 2.2.1 gives the town council “the power to make, alter and repeal resolutions and ordinances (a) relative to the regulation of the various departments ․ [and] (e) relative to the appropriation of town funds ․” Section 2.2.5 provides that the “Council shall fix the salaries of the Mayor and of all Council or Mayoral appointees ․ The council shall further have the power to approve or disapprove wage and salary schedules recommended by the Mayor for administrative department employees.”   In his testimony in Stratford v. Castater, offered as an exhibit in the present case, Miron stated that the mayor proposes the salary but the town council sets the salary schedule when it accepts the budget.

The Stratford town charter contains other provisions which grant the mayor broad authority.   Section 1.2 grants the mayor the power to administer and supervise “all departments, agencies and offices of the Town,” and specifically to “act as the bargaining agent and personnel director for the Town, with the exception of the Board of Education, in all labor and employment matters, including authority to retain the services of labor consultants and attorneys to assist in such matters.”   The mayor also has the power to select, appoint and hire department heads, and to adopt and update “written policy for ․ hiring all Town employees for positions in accordance with approved job descriptions.”   The charter provides in § 2.2.14 that “[t]he power to appoint persons to employment, granted to the Mayor by this Charter, shall be exercised solely and exclusively by him or her.”   Finally, § 5.6.6, Payments, states that “[p]ayments by the Town shall be made as certified by the head of the appropriate department or other division of the town government as approved by the director of finance.   Payments shall be authorized by the director of finance and the Mayor.”   The mayor is required by § 6.2.1 to submit the annual budget to the Council, but he is not explicitly required to seek authorization for specific salary terms.

In addition, the defendant's employment agreement states in its appendix that the mayor has the discretion to modify, change or alter the benefit descriptions.   In his testimony, Miron stated that a modification of an employment agreement was “a de facto modification of those terms that I as the Mayor had the authority to—to do.”   Ex. 1, p. 16 ln. 8–9.   He also acknowledged that the town council approves salaries, but stated that they do not oversee benefits when an employee separates from the town.   Ex. 1, p. 17 ln. 12–18.   Miron stated that he believes § 1.2 gives him the power to modify compensation agreements.   Ex. 1, p. 42–44.   Finally, Miron noted that there are no ordinances or Town Council resolutions governing the cash-out process.   Ex. 1, p. 52.

The court concludes that Miron did not exceed his authority, and therefore the payments were not made by mistake.

The court will also consider whether the defendant is equitably entitled to retain the cashout.   The defendant was the human resources director, but claimed that he was not involved in the calculation of his own cash-out.   Trial Transcript, March 5, 2013, p. 9–11.   Miron describes meeting with the chief administrative officer, the defendant, and the finance director in order to decide how to cash-out those who were being terminated.   Exhibit 1, p. 56.   The defendant's W2, provided by the town after the end of Miron's term, included the cash-out as part of his wages.   Trial Transcript, March 5, 2013, p. 25.   The defendant further claimed that he paid taxes on the cash-out.  Id.

Based on the testimony, the court determines that the defendant did in good conscience retain the cash-out benefits that he received from the town.   Judgment shall enter in favor of the defendant on the first count, for money had and received.

III

UNJUST ENRICHMENT

The plaintiff next makes a claim for recompense under a theory of unjust enrichment.   In order to prevail on this claim, the ultimate question is:  “Did [the defendant], to the detriment of someone else, obtain something of value to which [the defendant] was not entitled?”  Franks v. Lockwood, 146 Conn. 273, 278, 150 A.2d 515 (1959);  Stratford v. Castater, supra, Docket No. CV 10 6011629.  “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.”  Vertex, Inc. v. Waterbury, 278 Conn. 557, 573, 898 A.2d 178 (2006).   The Castater court found that the plaintiff failed to prove that the defendant was not entitled to the payment, or that the payment was detrimental to it.  Stratford v. Castater, supra, Docket No. CV 10 6011629.   Finally, the court found that because the defendant had paid taxes on the money, “it would be inequitable to apply the doctrine of unjust enrichment against him to order restitution in the town's favor.”  Id. Like Castater, the plaintiff in the present case paid taxes on the cash-out benefit.   In addition, as noted above, the plaintiff failed to prove that the defendant was unjustly enriched.   This court finds that it would be inequitable to apply the doctrine to the defendant.

IV

CONVERSION

The plaintiff's final claim is for conversion.   The plaintiff included a conversion count in the complaint, but did not address it in its pretrial brief.   Based on the facts the plaintiff makes no case for conversion.  “The tort of [c]onversion occurs when one, without authorization, assumes and exercises ownership over property belonging to another, to the exclusion of the owner's rights ․ Thus, [c]onversion is some unauthorized act which deprives another of his property permanently or for an indefinite time;  some unauthorized assumption and exercise of the powers of the owner to his ․ The word owner is one of flexible meaning, and it varies from an absolute proprietary interest to a mere possessory right.”  Deming v. Nationwide Mutual Ins. Co., 279 Conn. 745, 770–71, 905 A.2d 623 (2006).

The Castater court found that the plaintiff had failed to frame a prima-facie case under the third claim, for conversion, because it failed to offer evidence establishing that the defendant's conduct was unauthorized, and that the defendant's conduct injured the plaintiff.  Stratford v. Castater, supra, Docket No. CV 10 6011629.   Therefore, the court dismissed the count.   Id. In addition, the court concluded that the defendant was authorized to receive the payments, therefore the conversion claim simply failed on the merits.  Id. Likewise this court finds that the defendant believed that he was receiving an appropriate cash-out benefit and that he was authorized to received the payment, and judgment shall enter for the defendant on the third count as well.

V

COUNTERCLAIM:  UNPAID WAGES

The defendant has made a counterclaim against the plaintiff for lowering his salary in violation of his contract.   He also claims under General Statutes § 7–421 and § 7–421b that his salary was lowered in retribution for his donation to Miron's mayoral campaign.   The plaintiff responds that the city's charter permits the city council to set salaries and to approve salary schedules proposed by the Mayor.   The defendant's contract was signed by the mayor.   The counterclaim is therefore the inverse of the plaintiff's claims, that the city council was not authorized to unilaterally change the plaintiff's employment contract.   This issue is unique to this defendant;  the board did not lower the salary of Castater in Castater or of Devron Wilson in the companion case of Stratford v. Wilson, Superior Court, judicial district of Fairfield, Docket No. CV 10 6010163.

In responding, the plaintiff relies on Fennel v. Hartford:  “[C]ourts have consistently refused to give effect to government-fostered expectations that, had they arisen in the private sector, might well have formed the basis for a contract or an estoppel ․ We believe that implied contract claims in the public sector, based upon pension or employee manuals, would only invite endless litigation over both real and imagined claims of misinformation by disgruntled citizens [and employees], imposing an unpredictable drain on the public fisc.”  (Internal quotation marks omitted.)  Fennell v. Hartford, 238 Conn. 809, 816, 681 A.2d 934 (1996).   The plaintiff also cites Biello v. Watertown, 109 Conn.App. 572, 583, 953 A.2d 656 (2008), where the appellate court applied Fenton to state that a city council had the power to refuse to follow the water and sewer authority's recommendation that the plaintiff should receive a salary increase, instead maintaining the same salary.   Here, the defendant alleges that he had a valid contract providing only for salary increases, which the city council breached by lowering his salary.

The alleged contract is set forth in a letter from Miron to the defendant dated July 11, 2008, which was submitted by the plaintiff as Exhibit 2. The letter is signed by Miron and the defendant.   It states:

“This letter sets forth the mutually agreed upon terms and conditions of your employment as the Human Resources Director and constitutes the agreement between you and the Town of Stratford (“Town”) regarding such employment.   This agreement shall remain in effect unless mutually modified and/or terminated except as to provisions that survive termination.

* * *

“2. Your salary shall be $90,884 per annum effective July 1, 2008.   Thereafter, the Mayor shall review and evaluate your performance annually within two (2) months from the beginning of the fiscal year of the Town. Based upon the annual performance evaluation, and at the Mayor's sole discretion and recommendation, the base salary may be increased on July 1 of each fiscal year, subject to the approval of the Town Council, which by Charter fixes the salaries of all mayoral appointees.

* * *

“10. You acknowledge and agree that your employment is “at will” and that nothing contained in this Agreement shall be construed to require any cause for your removal or termination or to give you right to due process in the event of your suspension, removal or termination.

* * *

“12. Agreement contains the entire understanding and agreement between the parties and supercedes any prior employment letter.   This Agreement may not be modified or waived except in writing and signed by you and the Mayor of the Town. This Agreement may not be assigned or otherwise transferred in whole or in part.”

The charter provisions noted in Section II regarding the respective powers of the mayor and the city council apply here as well.   Both the mayor and the city council have broad power regarding employment matters.   At trial, the defendant asserted that the council did not have the power to lower his salary because he had a contract.   Trial transcript p. 19, ln. 6–10.   According to the terms of the charter, the city council did not have the power to lower the defendant's salary as part of the annual budget process.

The defendant also argues that the salary reduction violated his political rights according to General Statutes § 7–421 and § 7–421b.  Section 7–421(b) states:  “A person employed in said classified [municipal] service retains the right to vote as he chooses and to express his opinions on political subjects and candidates and shall be free to participate actively in political management and campaigns.   Such activity may include ․ soliciting votes in support of or in opposition to a candidate and making contributions of time and money to political parties, committees or other agencies engaged in political action ․” Section 7–421b states:  “Notwithstanding any general statute, special act or local law, ordinance or charter to the contrary, any municipality which has not adopted a merit system shall not impose restrictions on the political rights of its employees other than those provided in section 7–421.”   The defendant claims that the plaintiff violated this statute by lowering his salary after he contributed to Miron's campaign while raising the salary of employees who had not contributed.   He testified to this effect at trial, stating that the salaries of department heads who contributed to Miron's campaign were cut while other employees received a raise.   Trial transcript p. 15 ln. 13–24.   The plaintiff claims that the defendant has not demonstrated that the board reduced his salary because of his donation, and claims that § 7–421 and § 7–421b relate to municipal employees seeking elective office, not to municipal employees donating money, citing Meyers v. Westport, 41 Conn.Sup. 295 (October 30, 1989, Flynn, J.):  “The intent of this legislation ․ clearly intends to allow classified and now ․ unclassified municipal employees to run for office.”

The court finds that the plaintiff is entitled to compensation for lost wages and to payment of the difference between the cash-out he was paid and the cash-out he would have been paid at his old rate of pay.   Under General Statutes § 31–72 if an employer fails to pay an employee's wages, the employee is entitled to twice the lost wages plus attorneys fees.

VI

ATTORNEYS FEES:  BAD FAITH LITIGATION

The defendant also claims attorneys fees, alleging bad faith litigation.   According to the “American rule” followed by Connecticut, “attorneys fees and ordinary expenses and burdens of litigation are not allowed to the successful party absent a contractual or statutory exception.”  ACMAT Corp. v. Greater New York Mutual Insurance Co., 282 Conn. 576, 582, 923 A.2d 697 (2007).   There is, however, “a bad faith exception to the American rule, which permits a court to award attorneys fees to the prevailing party on the basis of bad faith conduct of the other party or the other party's attorney.”  Broadnax v. New Haven, 270 Conn. 133, 178, 851 A.2d 1113 (2004).  “To determine whether the bad faith exception applies, the court must assess whether there has been substantive bad faith as exhibited by, for example, a party's use of oppressive tactics or its wilful violations of court orders;  [t]he appropriate focus for the court ․ is the conduct of the party in instigating or maintaining the litigation ․ As applied to a party, rather than to his attorney, a claim is colorable, for purposes of the bad faith exception to the American rule, if a reasonable person, given his or her firsthand knowledge of the underlying matter, could have concluded that the facts supporting the claim might have been established.”  (Citations omitted;  internal quotation marks omitted.)   Maris v. McGrath, 269 Conn. 834, 847, 850 A.2d 133 (2004) (Awarding attorneys fees where trial court found that “the plaintiff had testified untruthfully, and it specifically found that the plaintiff's claims were ‘wholly without merit,’ ‘totally false,’ that ‘his testimony was not truthful,’ and that ‘this was not a matter of two good faith litigants ․’ Second, the matters about which the plaintiff repeatedly had testified untruthfully and in bad faith were matters particularly within his firsthand knowledge, namely, conversations between him and the defendant, and financial arrangements and transactions between them.”  Id., 848.)

The Castater court denied the defendant's request for attorneys fees, finding that both sides made good faith arguments and that the town was not required to engage in alternative dispute resolution.  Stratford v. Castater, Superior Court, judicial district of New Haven, Docket No. CV 10 6011629 (April 6, 2011).   In the present case, the defendant represented that his attorney tried to resolve the dispute but the plaintiff was unwilling to compromise.   Furthermore, the defendant claims that the matter could have been brought in the small claims docket, but that the plaintiff instead brought it on the regular civil docket in order to increase the defendant's cost of litigating it.   Finally, the defendant claims that the defamatory manner in which the town brought the charges, i.e. publicly announcing that the defendant had misappropriated money before contacting the defendant, justifies the award of attorneys fees.   The court finds that these facts do justify the imposition of attorneys fees.

The Court has carefully calculated the defendant's claims for attorney fees and it is ordered that plaintiff pay the defendant Six thousand Eight hundred Dollars in attorney fees.

VI

CONCLUSION

Based on the foregoing, judgment shall enter for the defendant and against the plaintiff for the plaintiff's claims, for the defendant and against the plaintiff for the defendant's counterclaim, and for the defendant and against the plaintiff for the defendant's attorneys fees claims.

OWENS, J.T.R.

FOOTNOTES

FN1. The stipulation reads June 30, 2020, however the town follows an annual budgetary process, therefore this should likely be June 30, 2010..  FN1. The stipulation reads June 30, 2020, however the town follows an annual budgetary process, therefore this should likely be June 30, 2010.

FN2. “[A]n action for ‘money had and received,’ ․ is the equivalent of the more modern action for unjust enrichment.”  Gold v. Rowland, 296 Conn. 186, 202 n.15, 994 A.2d 106 (2010).   The court will consider the plaintiff's claims under both theories..  FN2. “[A]n action for ‘money had and received,’ ․ is the equivalent of the more modern action for unjust enrichment.”  Gold v. Rowland, 296 Conn. 186, 202 n.15, 994 A.2d 106 (2010).   The court will consider the plaintiff's claims under both theories.

Owens, Howard T., J.T.R.