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Little Mountains Enterprises, Inc. v. David Groom
MEMORANDUM OF DECISION (corrected*)
Nature of the Proceeding
This is a breach of contract matter that has been remanded to the trial court pursuant to an Appellate Court decision (141 Conn.App. 804), for purposes of determination of damages. The background relevant facts and findings, and the resulting issue, were articulated by the Appellate Court:
“On August 13, 2004, the parties entered into a written contract in which the defendants, as owners, agreed to sell undeveloped real property located in Weston (the premises) to the plaintiff for $1.25 million. A rider attached to the contract provided that the defendants “represent and warrant that the [p]remises consists of two building lots each approved for a five bedroom single family dwelling.” In making this representation, the defendants relied on the opinion of Robert P. Turner, the town's zoning enforcement officer, that the division of the premises into two lots did not require subdivision approval. In reliance on the representation that the premises consisted of two building lots, the plaintiff purchased the premises and recorded the deeds conveying title on September 9, 2004.
“By letter dated February 9, 2005, which was five months after the closing, Turner notified the plaintiff that he had received additional information regarding a previous division of the premises that affected the “subdivision status” of the two lots. Turner advised that he would be unable to issue any zoning permits for the premises until the matter was resolved. The plaintiff, without notifying the defendants about the zoning issues raised by Turner, applied to the town's planning and zoning commission (commission) for approval of a two lot subdivision. On June 20, 2006, the commission's approval of the plaintiff's application became final. At that point in time, the defendants still had no knowledge that the premises had not been divided properly and that the plaintiff had made expenditures, which it claimed totaled $262,987.23, in obtaining subdivision approval.
“On September 14, 2007, the plaintiff filed the present action against the defendants ․ [T]he court issued its memorandum of decision on December 6, 2011 [53 Conn. L. Rptr. 66]. In that decision, the court concluded that the defendants had breached the sales contract by failing to convey two building lots, each approved for a five bedroom single-family dwelling, as promised to the plaintiff. Although the defendants' representation regarding the subdivision status of the premises was false, the court determined that the misrepresentation was made innocently, not negligently, in reasonable reliance on Turner's opinion prior to the conveyance of title. The court further concluded that the defendants failed to prove their special defenses by a fair preponderance of the evidence. Neither the plaintiff nor the defendants have challenged those determinations.” 141 Conn.App. 805–07 (footnote omitted).
“Not having evidence of the diminution in value and unwilling to award the $262,987.23 in costs claimed by the plaintiff, the court essentially awarded the damages that would have been recoverable had the plaintiff elected to rescind the contract when it learned of the zoning problems on February 9, 2005. Such an award, under the circumstances of this case, is clearly erroneous.” 141 Conn.App. 811–12 (footnote omitted).
On a record indicating that the plaintiff had never elected to seek rescission of the contract, the court remanded the matter, effectively ordering this court “to apply the proper measure of damages for the defendants' breach of the sales contract” (141 Conn.App. 813).
A hearing on this matter took place on October 3, 2013. At that hearing, the proper scope of the remand was discussed, including the extent to which new evidence could or should be presented. Two additional exhibits were admitted at that hearing, one being an appraisal (Exhibit 28) and the other being an affidavit relating to additional attorneys fees being sought (Exhibit 29); see, docket entry # 143.00. The parties stipulated that the cost to remedy the problem (obtaining approval for two building lots) was less than the difference in value of the property with and without such approval (Exhibit 28), such that the cost to remedy was the proper measure of damages in this case.
Both parties have filed briefs and reply briefs relating to this remand.
Discussion
As discussed in the Appellate Court decision, the proper measure of damages for a breach of contract is the difference between the value of what was promised and the value of what was delivered. When direct valuation is difficult or impossible, the cost of remediation may be indicative of that difference, subject to the caveat that the court must be alert for the potential for economic waste in such an alternate measure of damages. (As noted above, the parties stipulated that the cost to remedy would be the more appropriate measure of damages, as it would be less than the difference in market value.)
The Appellate Court decision noted that the earlier trial court decision seemed to express concern about the issue of economic waste, although not so describing it:
“In the present case, the plaintiff presented no evidence as to the difference in the values of the premises as warranted and as sold. Without that evidence, the court had only the costs of securing the subdivision approval as the plaintiff's claimed measure of damages. The court, however, without actually stating that such costs would constitute economic waste, did comment that the plaintiff did not provide the defendants with an opportunity to cure the defect in ‘a cost effective manner,’ that the plaintiff ‘underwent costly measures' to obtain subdivision approval and that it had accrued ‘large amounts of damages' to remedy the breach.” 141 Conn.App. 811.
Plaintiff's claims
Plaintiff continues to claim, as recited in the Appellate Court's decision, that the damages for breach of contract that it is entitled to receive total $262,987.38. The manner of calculation of that figure is set forth in its brief, and reproduced here:
Rocco V. D'Andrea, Inc. $ 20,241.75
Fees incurred prior to February 9, 2005 (6,400.00 )
$ 13,841.75
Brautigam Land Surveyors, Inc. $ 14,180.00
Fees incurred prior to February 9, 2005 (5,000.00 )
$ 9,180.00
Real estate taxes
September 9, 2004–June 3, 2006 $ 24,887.96
Interest paid on acquisition loan
September 9, 2004–June 3, 2006 $165,570.63
Interest paid on development loan
line of credit—September 9, 2004–June 3, 2006 $ 48,487.04
Filing fees $ 1,020.00
Total $262,987.38
Defendants' position
In their initial brief (# 144.00), at pages 13–14, defendants summarize their position, and in particular, identify certain issues that are and are not in dispute:
Under the facts of this case the defendants are not challenging the following components of damages: (1) engineering fees of Rocco V. D'Andrea, Inc. for 13,841.75; (2) the surveyor fees of Brautigam Land Surveyors, Inc., of $9,180; and (3) the filing fees for the subdivision application of $1,020.
For purposes of this brief the defendants do not contest the mathematical computation of interest on the purchase money mortgage of $165,570.93 and the line of credit for $48,487.04, as shown on Exhibit 20, a copy of which is attached to this brief. However, the defendants dispute whether any of the interest should be allowed as damages in this case ․
The defendants also do not dispute the amount of taxes paid by the plaintiff from September 9, 2004 to June 3, 2006 in the amount of $24,887.96 but claim that none of those costs are a proper component of damages which may be recovered by the plaintiff in this case..
Scope of dispute
Effectively subtracting the claims defendants do not dispute (totaling $24,041.75) from the claims being asserted by plaintiff, the elements of plaintiff's claim for damages that are in dispute are:
Real estate taxes
September 9, 2004–June 3, 2006 $ 24,887.96
Interest paid on acquisition loan
September 9, 2004–June 3, 2006 $165,570.63
Interest paid on development loan
line of credit—September 9, 2004–June 3, 2006 $ 48,487.04
In addition, there is a dispute with respect to plaintiff's request for additional attorneys fees (Exhibit 29). Plaintiff seeks payment for attorneys fees incurred in connection with the (successful) appeal, plus additional funds for the remand proceedings. Defendant does not challenge the numerical calculations, but does challenge the timeliness of the request for attorneys fees relating to the appeal, invoking the time limit set forth in Practice Book § 11–21. Defendants do not challenge the timeliness of the request for legal expenses in connection with the remand, as the time limit set forth in Practice Book § 11–21 has yet to expire for that claim. Defendants do not challenge the reasonableness of the amount of time that has been expended.
Merits of claims
I. Preliminary issue—when did breach occur
Defendant claims that the breach of contract did not occur until the town of Weston Zoning Enforcement Officer advised plaintiff that it could not treat the property it had acquired as having two buildable lots (February 9, 2005), notwithstanding a prior opinion that the property could be treated as containing two buildable lots. Plaintiff claims that the breach occurred on the date of transfer of title to the property, September 9, 2004. The court believes that the earlier date is the proper date of breach.
The contract was breached when, on the date of transfer of title, defendants did not transfer property consisting of two buildable lots, a key (and required) feature of the property which they had contracted to convey. The fact that the parties did not become aware of this deficiency for six months does not alter that fact. The reasonableness of the belief of the parties that there were two building lots (based on prior input from the town), appears to be the very reason that the misrepresentation was deemed to be innocent rather than negligent (or worse). Defendants' position seems to be that treating the September date as controlling is something of a retroactive approach to the situation (since the problem did not arise until February); the court believes that it is more appropriate to think of the problem as being latent and that the closer examination by town officials, leading to the change of position as to whether there were two buildable lots, was simply a conversion of a latent problem into a patent problem. Alternatively, this may be perceived as analogous to a tort claim arising under the “discovery” aspect of General Statutes § 52–584, where the harm is not recognized until sometime after the allegedly wrongful conduct.
Accordingly, to the extent that the date of breach was not previously established, the court finds the date of breach to have been September 9, 2004.1
II. Preliminary issue—effect of Appellate Court decision
In its reply brief (p. 4 of # 146.00), plaintiff argues:
During the time that it took the Plaintiff to cure the Defendants' breach, the Plaintiff incurred interest expenses and expenses for property taxes. The trial court recognized that these expenses were proper components of a damage award. The Appellate Court found error with another aspect of the trial court's decision, but was unpersuaded by the Defendants' assertions that interest and taxes should not be part of the calculation of damages.
The court believes that plaintiff is reading more into the appellate decision than is warranted. Plaintiff may read the decision as indicating that the Appellate Court had not been persuaded that interest and taxes should not be a part of a calculation of damages,2 but the decision also does not state that interest and taxes should be part of the calculation of damages, because the decision did not address the issue of specific components of a proper damages award. (That was the purpose for the remand.) The Appellate Court did not need to address the propriety of inclusion of certain components of the original damages award, because it concluded that the framework for the trial court's determination had been flawed. In rejecting that earlier award, the Appellate Court did not opine as to which if any components of that earlier award should be carried forward in a new determination of damages, using the standards articulated in the decision, and this court therefore does not believe that it is bound in the manner suggested by the passage quoted from plaintiff's brief.
“It is well settled that a lower court is bound to follow the specific direction of an appellate court's mandate on remand.” Northeast Ct. Economic Alliance, Inc. v. ATC Partnership, 272 Conn. 14, 45 (2004) (internal quotation marks, omitted).
[Defendants] claim that the plaintiff should have rescinded the contract in order to mitigate its damages. This argument fails, however, because the plaintiff, as the non-breaching party, had the choice of rescinding the contract or claiming damages for breach of contract. The plaintiff chose to bring an action for breach of contract. It did not seek the remedy of rescission in its complaint, and, at trial, it expressly acknowledged that it never sought to rescind the contract. The defendants cite no authority, and we are aware of none, that would permit a court to force a nonbreaching party to rescind a contract and to accept restitution damages as its remedy. Accordingly, the trial court failed to apply the proper measure of damages for the defendants' breach of the sales contract.
The judgment is reversed as to the award of damages only and the case is remanded for further proceedings in accordance with this opinion. 141 Conn.App. 813.
This court, then, is charged with the proper calculation of damages, based on the record before it. The court does not read the rescript as mandating that any particular aspect of damages must be included or must not be included; the focus is on ensuring that damages be based on the breach of contract theory espoused by plaintiff.
III. Undisputed damages
The first category of damages being claimed may be characterized as direct cost of remedial action—costs more or less directly involved in obtaining appropriate approval for two buildable lots. The costs incurred for engineering and surveying services, and filing fees, are not being disputed by defendants, and fall into this category. The lack of any dispute as to these claims means that no further attention is needed, except the inclusion of that total ($13,841.75 + $9,180.00 + $1,020.00 = $24,041.75) when all proper elements of damages have been determined.
IV. Mortgage and taxes
Plaintiff claims that it is entitled to recover mortgage and tax expenses incurred prior to June 3, 2006.3 Defendants challenge the existence of such a right, in part because defendants maintain that plaintiff would have had to pay those expenses anyway. They especially contest any claim for such damages prior to February 9, 2005.
In determining the proper amount of damages for breach of contract, the goal is to put plaintiff in a position as close as possible to the position it would have been in, had defendants properly performed their obligations under the contract. Ray Weiner, LLC v. Connery, 146 Conn.App. 1, 7 (2013).
Plaintiff claims entitlement to its reimbursement for what amount to carrying costs for the property until such time as the subdivision issue was resolved, i.e. June 3, 2006. Those carrying costs were purchase money mortgage interest payments plus real estate taxes. Defendants' argument is that the contract was not breached until February 2005 and that plaintiff would have incurred interest and tax expenses regardless of the problem. The court already has rejected the notion that the breach occurred in February 2005, but notwithstanding the rejection of the premise of defendants' argument, at least part of the substance of defendants' argument is meritorious.
The court is not being asked to do a straightforward value-as-promised less value-as-delivered determination of damages resulting from the breach of contract. In such a calculation, it would be essential to know the date of breach, because that would be the date on which the two values would have to be measured. Instead, the court is being asked to do an alternate calculation of damages based on the costs associated with correction of the defective performance of the contract, and while the date of breach is important in this methodology as well, it is not nearly as critical, particularly in the context of this case.
Although the court rejects defendants' premise, defendants are correct that the first six months of carrying costs are not chargeable as costs that in some manner are associated with remediation. Quite simply, the court is unaware of any evidence of a causal relationship between the first six months of mortgage-loan interest and tax expenses, and the breach of contract—unaware of any problem with performance by defendants, there is nothing in the record to suggest that plaintiff incurred those expenses other than in the normal course of its efforts to develop the property, under whatever timetable it had opted to utilize. A developer of real estate may often have periods of time in which carrying costs are being incurred, for a variety of reasons, and the court is unaware of any evidence that notwithstanding the lack of knowledge of a failure to deliver that which had been promised, the six-month initial carrying period was in any way affected (or relevant expenses caused ) by the failure to provide two building lots.4
The additional 16 months of carrying costs, from initial notice of the problem until its cure are properly attributable to the breach. Although not a direct cost of remediation, the delay necessarily and proximately caused increased expenses to be incurred.
At the risk of oversimplification, it might be helpful to synthesize the conclusions of the preceding two paragraphs: development of the property which had commenced in September 2004 was effectively interrupted in February 2005 by the need to take corrective action; when the corrective process concluded in June 2006, development activities continued. Plaintiff is entitled to the carrying costs for the property during that period of interruption.
Defendants contend that plaintiff failed to mitigate damages, and could have taken a more expeditious approach to resolving the problem, but they did not offer any persuasive evidence that some other specific course of action likely would have been productive, and there is no indication that the earlier trial court, in making its findings, found that there had been a failure to mitigate.5
The burden of proof lies on defendants to establish a failure to mitigate damages, Preston v. Keith, 217 Conn. 12 (1991). Defendants generally hypothesized that the corrective action needed should have taken less time, should have cost less money, an appeal should have been pursued, etc., without any specifics as to how much would have been saved had such an alternate strategy been followed (and the relative likelihood of success). Plaintiff has quoted and alluded to testimony on behalf of defendants to the effect that there were no specific alternatives identified, and that defendants likely would have done whatever plaintiff requested, if in fact plaintiff had requested that defendants undertake corrective action (# 145.00 at pp. 10–12).
For example, while defendants suggest that there should have been an appeal to the zoning board of appeals from the ZEO decision that the property could not be used for two building lots as conveyed, there would have been both a time and monetary expense incurred in doing so, without any identified assurance of success. If that alternate course of approach proved unsuccessful, additional months (?) of delay might have resulted. Again, the court is unaware of sufficient evidence allowing or requiring the court to conclude that such an alternate course of action would have been likely to be successful and likely to have saved time and money in the process. As noted in footnote 5, the prior court's decision simply reflected that the defendants “may” have been able to solve the problem in a more cost effective manner without actually making a finding consistent with defendants' burden on the issue.6
Defendants further claim that they should not be required to pay for plaintiff's decision to finance the purchase of the property rather than paying cash for the property. It hardly can be said to be unforeseeable that a purchaser of property might choose to finance the purchase through a mortgage loan. However indirect or not-reasonably-foreseeable the issue of borrowing money to pay bills, as discussed in the next section, the actual expense of financing the purchase is a reasonably foreseeable cost.7 To frame the issue in traditional breach-of-contract terminology, the carrying costs during remediation, including the expense of mortgage-based financing, would appear to be foreseeable consequential damages arising from the breach. Sovereign Bank v. Licata, 116 Conn.App. 483, 506 (2009); L.F. Pace & Sons, Inc. v. Travelers Indemnity Co., 9 Conn.App. 30, 39–40 (1986).
Connecticut courts have recognized and allowed consequential damages in a number of different contexts, including many instances where costs or expenses arising from delay have been allowed. West Haven Sound Development Corp. v. West Haven, 201 Conn. 305, 320 (1986) (lost profits allowed as consequential damages if not speculative or remote); Levesque v. D & M Builders, Inc., 170 Conn. 177 (1976) (living expenses allowed as damages, while house that had been improperly located on lot was being moved to proper location); Cruz v. Visual Perceptions, LLC, 136 Conn.App. 330 (2012) (medical bills allowed as consequential damages, where plaintiff's employment terminated and bills claimed to have been incurred due to loss of medical insurance); Milford v. Coppola Construction Co., 93 Conn.App. 704 (2006) (claim for equipment that was idle due to delays, allowed, and could be characterized as direct rather than consequential damages); Sullivan v. Brown, 2008 Ct.Sup. 5113, J.D. New London, No. CV–06–5001464 (Mar. 31, 2008) (expenses associated with delayed completion of home, allowed as consequential damages to extent proven, including cost of obtaining extension of mortgage commitment). Payment of mortgage loan interest and real estate taxes, required to be paid while remedial action was taking place, is a foreseeable consequence of a breach of the contract between the parties; as set forth in footnote 7, that this property was being purchased through use of a mortgage loan was foreseeable if not a matter of actual knowledge.
Plaintiff is claiming damages based on real estate taxes from September 9, 2004 through June 3, 2006 in the amount of $24,887.96, and interest paid on the acquisition loan from September 9, 2004 through June 3, 2006, in the amount of $165,570.63. According to Exhibit 20, the interest paid from September 9, 2004 through February 2005 was $33,624.41, and according to Exhibit 18, there was a real estate tax payment on January 27, 2005 in the amount of $9,320.78; defendants claim that both such amounts should be excluded. Although the court has rejected defendants' rationale for asking the court to exclude those amounts, the court agrees that the amounts attributable to the period from September 9, 2004 through February 9, 2005, subject to some modification, should be excluded.
As noted earlier, defendants explicitly have acknowledged the accuracy of plaintiff's calculations while disputing plaintiff's entitlement to certain aspects of damages. Plaintiff, on the other hand, has neither explicitly acknowledged nor explicitly challenged the calculation of the claimed adjustments set forth in the preceding paragraph. Despite defendants' concession, there is an apparent disparity in how the numbers are being used, requiring a brief digression.
In large measure, the parties have relied on “payments made” evidence in determining their respective positions; see, Exhibits 18, 20–22. With respect to taxes, however, plaintiff has attempted to calculate a per diem rate which, in turn, was refined based on a change in assessment that occurred during the relevant timeframe. Thus, although Exhibit 18 shows the checks that were used to pay taxes in January 2005, August 2005, January 2006, and July 2006, the amount of taxes actually being claimed is not simply the sum of those checks. (The damages calculation on Exhibit 22 does reflect the sum of those checks, but the amount actually being claimed is a lesser amount with the difference attributable to the use of the per diem calculations.) Defendants, in arguing that the taxes through February 2005 should be disallowed, ask the court to reduce the amount claimed by the full amount of the check paid in January 2005 ($9320.78)—see, # 144.00 at page 11.
With respect to taxes, the per diem approach to the calculation of damages (or adjustments to the damages claimed), clearly is more accurate and therefore will be utilized. To the extent that the parties essentially have agreed (if tacitly) to use a “payments made” approach for other expenses, the court will rely on that approach as well—the court will decide the case on the basis on which it was tried and on which evidence was presented.
Having concluded that mortgage loan interest and real estate taxes generally are properly chargeable, but not for the period September 9, 2004 through February 9, 2005, the proper calculation of these elements of damages can be undertaken.
Plaintiff's claim for mortgage interest expenses in the amount of $165,570.63 needs to be reduced by the amount of $33,624.41 (the sum of the checks paid in the six-month period, which also is the sum identified by defendants), resulting in a mortgage loan interest component of damages in the amount of $131,946.22.
The court's calculation 8 of real estate taxes is that there were 141 days between February 9, 2005 and June 30, 2005. At a per diem of $51.12, taxes paid/payable between February 9, 2005 and June 30, 2005 total $7,207.92. That should be added to the taxes calculated as paid/payable for the period from July 1, 2005 through June 3, 2006 ($11,187.80) for a total of $18,395.72.
V. Line of Credit payments
The final category of expense claim by plaintiff is the cost of money borrowed in order to pay expenses, including the expenses incurred in the previous category (or categories). These are costs not directly related to the need for remedial action nor directly resulting from the need for remedial action, but that do have a claimed nexus with the need for remedial action. These costs may be characterized as secondary if not tertiary in nature.
This third category highlights the distinction in approach taken by the parties. Plaintiff seeks reimbursement for all costs it incurred which have at least a plausible connection to the need for remedial action. Defendants, on the other hand, take a far more restrictive approach, acknowledging responsibility for only those expenses having the most direct possible connection to the need for remedial action. The court believes that both positions are too extreme.
Adopting a different perspective, plaintiff effectively is asserting a variation on a claim relating to the time value of money. If plaintiff is entitled to recover the cost of borrowing money to pay for otherwise-chargeable expenses, then a party who does not borrow the money should be entitled to compensation for the outlay of that money (an opportunity-cost type of analysis)—effectively, interest on the outlay.
Plaintiff has cited no authority for the proposition that such secondary/tertiary indirect expenses may be characterized as breach of contract damages. More narrowly, plaintiff has not cited any authority for the proposition that the cost of money associated with remedial action in a breach of contract context is a proper element of damages. Indeed, viewed from the alternate perspective in the preceding paragraph, i.e. someone paying cash, the issue simply is one of entitlement to interest on money paid or payable, rather than entitlement to damages.
The decision to borrow money to pay expenses as opposed to “paying cash” is volitional or strategic. As noted earlier, the court recognizes that the purchase of property itself often is done through financing, and therefore had little difficulty in inclusion of mortgage loan interest as an element of damages. However, the damages faced by a breaching party should not depend upon the decision of a plaintiff concerning the further extent to which a transaction is leveraged by debt, or more cynically, by the expectation of a plaintiff that interest on borrowed money may be recoverable whereas a direct outlay for expenses might not be compensated by interest.9 To avoid any uncertainty, it must be emphasized that the court is drawing a distinction between a purchase money mortgage which is commonplace and reasonably foreseeable as a carrying charge, as opposed to interest being used to pay expenses that may be reimbursed as damages (or otherwise were incurred without regard to the breach), which is not readily foreseeable.
Viewed from a causation perspective, the court believes that the relationship is too remote for inclusion as an element of damages. If the court were to conclude that interest paid to obtain funds to make payments for other expenses is properly chargeable, then other similarly secondary or tertiary factors might also need to be considered. For example, if the interest on a loan used to pay taxes is to be charged to defendants, should there be an offset for the presumed deductibility of taxes and/or interest? At some point, the tenuous nature of these claimed expenses needs to be recognized.10
Absent authority to the contrary, the court does not consider interest on money borrowed to pay other expenses to be a proper element of damages, whether characterized as direct, incidental or consequential. If there is any entitlement to interest qua interest, that is or would be a separate determination, independent of whether money used to pay expenses was borrowed or not (or as in footnote 9, whether any money has yet been expended).
VI. Request for attorneys fees
Defendants claim that the request for attorney fees relating to appellate procedures was untimely, citing Practice Book § 11–21 for that proposition. Defendants rely, in large measure, on Traystman, Coric & Keramidas, P.C. v. Daigle, 282 Conn. 418 (2007). The court has reviewed that decision carefully, as well as other cases cited by the parties (and other authorities), and concludes that the rule being invoked applies to statutory claims for attorneys fees, and not, as here, contractual rights.
Second, and more fundamentally, Practice Book § 11–21 provides a specific post judgment procedure for seeking statutory attorneys fees. See Practice Book, 1999, § 11–21, commentary (rule' is aimed principally at statutory attorneys fees') and therefore is controlling ․ 282 Conn. 430 (emphasis added).
The interpretation of the Practice Book rule as being applicable only to statutory claims is reinforced (confirmed?) by a recent decision of the Appellate Court. In Centrix Management Co., LLC v. Valencia, 145 Conn.App. 682 (2013), the court had occasion to address concerns raised by amicus curiae, relating to the availability of attorneys fees in summary process proceedings. In explaining why it was appropriate to have prevailing-tenant claims for attorneys fees addressed in a summary process matter, in turn in reliance on General Statutes § 42–150bb (in situations where the lease specifically provided for the landlord to recover attorneys fees if the landlord prevailed), the court invoked the decision in Traystman, specifically stating that “[i]n that case, our Supreme Court held that claims for attorneys fees under § 42–150bb must be brought by a motion under Practice Book § 11–21.” 145 Conn.App. 692. The court distinguished the non-statutory claim of a prevailing landlord in a similar situation (where the lease was the authority for the availability of attorneys fees). In a footnote, quoting from a trial court decision, the Appellate Court adopted language highlighting the distinction: “Postjudgment claims for attorneys fees by prevailing landlords can only be brought pursuant to a specific lease provision in a separate postjudgment civil action because they are not statutorily derived.” 11 Thus, the Appellate Court endorsed a dichotomy dependent upon the identity of the party seeking attorneys fees—a landlord's claim would be purely contractual and therefore would need to be claimed in a separate proceeding, whereas a tenant invoking a statutory right to mutuality of claims for attorneys fees would be governed by Practice Book § 11–21.12
Defendants cite two trial court decisions on page 14 of their reply memorandum concerning the need for a timely motion in contract-based matters—although not specifically identified as an issue in the case, in one of those cases (Citicorp Vendor Finance, Inc. v. Premier Support Services, Inc., No. J.D. of New Haven at Meriden, CV04 0286362–S (April 26, 2006) (2006 Ct.Sup. 7672)), the factual recitation seems to indicate that the motion had not been timely but nonetheless the motion was granted (summary judgment granted on November 4; motion for attorneys fees filed on December 9); in the other cited case, the court denied an untimely motion. Both cases predate Traystman and Centrix Management, such that even if they stood for the proposition(s) claimed, the court would look to more recent appellate authorities for guidance. The court also finds defendants' attempt to extrapolate from the decision in Landry v. Spitz, 102 Conn.App. 34 (2007) unpersuasive.
The court, then, is satisfied that appellate authority has rejected defendants' position (at least with respect to contractual claims for attorneys fees).
As previously noted, defendants do not contest the hourly rate or the reasonableness of hours claimed but rather only the availability of this claim, to the extent it was not timely under Practice Book § 11–21. Accordingly, the court awards an additional $26,455.00 in attorney fees (appellate plus post-remand trial court legal fees, as set forth in Exhibit 29), supplementing the attorneys fees previously ordered by judge Karazin (see docket entry # 129.00) in the amount of $22,522.50, for a total of $48,977.50.
Conclusion
Plaintiff has established that it is entitled to recover the costs directly related to remedying the breach of contract, which costs have not been contested by defendants. Plaintiff is entitled to “carrying costs” consisting of real estate taxes and mortgage loan interest from February 9, 2005 through June 3, 2006, the period during which efforts were being made to correct the deficiency in the property as conveyed. Plaintiff is not entitled to interest paid on its development loan, nor on the carrying costs arising prior to February 9, 2005. Plaintiff is entitled to attorneys fees for the initial trial as already awarded, attorneys fees for the appeal, and attorneys fees for proceedings on remand. The actual amounts are summarized below.
Summary of awarded amounts
Breach of contract damages
Agreed/conceded damages: $ 24,041.75
Mortgage loan expenses (2/9/05—6/3/06) $131,946.22
Real estate taxes (2/9/05—6/3/06) $ 18,395.72
TOTAL DAMAGES $174,383.69
Attorneys fees (contractual obligation) $ 48,977.50
$223,361.19
Judgment will enter in favor of plaintiff in accordance with the foregoing.
POVODATOR, J.
*Dates on page 17 corrected.
FOOTNOTES
FN1. The earlier trial court decision used February 9, 2005 as the date for determination of damages based on it being the date that the parties learned of the problem; see, p. 13 of memorandum of decision (# 126.00): “Knowledge of the fact that there were not two lots was obtained by the plaintiff on February 9, 2005, thus the reason for the computation of damages as of that date.” That is not a determination of the date of breach, but rather a recognition of the pivotal nature of the later date with respect to determination of damages. As discussed below, this court agrees that the February date is a key date for measuring damages.. FN1. The earlier trial court decision used February 9, 2005 as the date for determination of damages based on it being the date that the parties learned of the problem; see, p. 13 of memorandum of decision (# 126.00): “Knowledge of the fact that there were not two lots was obtained by the plaintiff on February 9, 2005, thus the reason for the computation of damages as of that date.” That is not a determination of the date of breach, but rather a recognition of the pivotal nature of the later date with respect to determination of damages. As discussed below, this court agrees that the February date is a key date for measuring damages.
FN2. Plaintiff does not identify any specific page of the decision supporting this statement.. FN2. Plaintiff does not identify any specific page of the decision supporting this statement.
FN3. The court notes that there is a potential “discrepancy” as to the terminal date for calculation of damages. At times, the record reflects a June 20, 2006 date as the date of subdivision approval. At other times, June 3, 2006 is the date identified as the terminal date for calculation of damages. See, e.g., first paragraph on page 2 of Judge Karazin's memorandum of decision, reciting both dates (# 126.00). As plaintiff's own claims are predicated on a June 3 terminal date, the court will use that date for all purposes relating to calculation of damages.. FN3. The court notes that there is a potential “discrepancy” as to the terminal date for calculation of damages. At times, the record reflects a June 20, 2006 date as the date of subdivision approval. At other times, June 3, 2006 is the date identified as the terminal date for calculation of damages. See, e.g., first paragraph on page 2 of Judge Karazin's memorandum of decision, reciting both dates (# 126.00). As plaintiff's own claims are predicated on a June 3 terminal date, the court will use that date for all purposes relating to calculation of damages.
FN4. This is confirmed by the fact that plaintiff is not claiming that engineering and survey work done prior to February 9, 2005 was wasted—that work inferentially was the preliminary work needed to get the project underway, and there is no apparent claim that the work had to be duplicated later.. FN4. This is confirmed by the fact that plaintiff is not claiming that engineering and survey work done prior to February 9, 2005 was wasted—that work inferentially was the preliminary work needed to get the project underway, and there is no apparent claim that the work had to be duplicated later.
FN5. In the earlier decision, the trial court discussed mitigation-type issues at pp. 7–8, but then concluded (at page 11) that defendants had failed to prove any of their special defenses, including the third special defense which refers, inter alia, to plaintiff's conduct increasing the amount of damages incurred. The court does not deem a statement that “the defendants may have been able to fix the problem in a more cost effective manner” (p. 7; emphasis added) as a finding of a failure to mitigate—it identifies a possibility.To the extent that adoption of the rescission-based calculation of damages was or may have been a consequence of a perceived failure to mitigate, that was rejected by the Appellate Court.. FN5. In the earlier decision, the trial court discussed mitigation-type issues at pp. 7–8, but then concluded (at page 11) that defendants had failed to prove any of their special defenses, including the third special defense which refers, inter alia, to plaintiff's conduct increasing the amount of damages incurred. The court does not deem a statement that “the defendants may have been able to fix the problem in a more cost effective manner” (p. 7; emphasis added) as a finding of a failure to mitigate—it identifies a possibility.To the extent that adoption of the rescission-based calculation of damages was or may have been a consequence of a perceived failure to mitigate, that was rejected by the Appellate Court.
FN6. Note that even if there were a probability of success associated with an administrative appeal, and a probability of saving time and money as a result, such a course of action still might not have been the most prudent one, if the expected payoff (in a game theory or probabilistic sense) was negative. For example, assume a hypothetical analogous situation in which an administrative appeal would have involved $15,000 of cash cost (e.g. attorneys fees), with a potential savings of $45,000 based on halving the time to correct a subdivision problem (hypothetical full delay cost of $90,000), and further assuming a 50.1% probability of success, then the costs associated with the risk of losing would seem to be approximately the same $15,000 of cash cost plus an additional $45,000 in additional delay costs. In this scenario, the approximately 50% chance of saving a net of $30,000 is greatly outweighed by the approximately 50% chance of the strategy costing $60,000 if unsuccessful (because the delay cost associated with the subdivision application route would start to be incurred after the unsuccessful conclusion of the administrative appeal). Obviously, percentages and cash numbers can vary widely, but the point is that a probability of a strategy resulting in a savings needs to be balanced against the costs associated with the strategy proving unsuccessful.. FN6. Note that even if there were a probability of success associated with an administrative appeal, and a probability of saving time and money as a result, such a course of action still might not have been the most prudent one, if the expected payoff (in a game theory or probabilistic sense) was negative. For example, assume a hypothetical analogous situation in which an administrative appeal would have involved $15,000 of cash cost (e.g. attorneys fees), with a potential savings of $45,000 based on halving the time to correct a subdivision problem (hypothetical full delay cost of $90,000), and further assuming a 50.1% probability of success, then the costs associated with the risk of losing would seem to be approximately the same $15,000 of cash cost plus an additional $45,000 in additional delay costs. In this scenario, the approximately 50% chance of saving a net of $30,000 is greatly outweighed by the approximately 50% chance of the strategy costing $60,000 if unsuccessful (because the delay cost associated with the subdivision application route would start to be incurred after the unsuccessful conclusion of the administrative appeal). Obviously, percentages and cash numbers can vary widely, but the point is that a probability of a strategy resulting in a savings needs to be balanced against the costs associated with the strategy proving unsuccessful.
FN7. The court notes that Exhibit 1, the initial contract between the parties, contained a mortgage contingency provision (§ 17 at page 7). The subsequent agreement between the parties, Exhibit 2, deleted that contingency. Mortgage financing of the acquisition was “part of the conversation.”. FN7. The court notes that Exhibit 1, the initial contract between the parties, contained a mortgage contingency provision (§ 17 at page 7). The subsequent agreement between the parties, Exhibit 2, deleted that contingency. Mortgage financing of the acquisition was “part of the conversation.”
FN8. In attempting to determine the correct amount of taxes, the court noted that plaintiff appears to have made an error which was undetected by the parties. In calculating the number of days between September 9, 2004 and June 30, 2005, plaintiff stated that there were 268 days in that interval (and “268” was not just a typographical error in preparing the brief—268 days times the calculated per diem of $51.12 yields the $13,700.16 being claimed as taxes attributable to that period of time.) There are more than 9 months between September 9, 2004 and June 30, 2005, and the court believes the correct number of days in the interval to be 294.. FN8. In attempting to determine the correct amount of taxes, the court noted that plaintiff appears to have made an error which was undetected by the parties. In calculating the number of days between September 9, 2004 and June 30, 2005, plaintiff stated that there were 268 days in that interval (and “268” was not just a typographical error in preparing the brief—268 days times the calculated per diem of $51.12 yields the $13,700.16 being claimed as taxes attributable to that period of time.) There are more than 9 months between September 9, 2004 and June 30, 2005, and the court believes the correct number of days in the interval to be 294.
FN9. There is a third option—the cost of remediation may be susceptible of proof, but corrective action may not have been undertaken, such that there has not been any outlay of money as of the time of trial.. FN9. There is a third option—the cost of remediation may be susceptible of proof, but corrective action may not have been undertaken, such that there has not been any outlay of money as of the time of trial.
FN10. If one gets into the details of interest and the time value of money, there are other potential nuances and refinements, including the arguable time-shifting of the financial consequences of a delay while remedial steps are taken. This is perhaps best demonstrated by a hypothetical. Assume a project estimated to take 24 months had begun on January 1, 2010, but on January 2, 2010 a problem such as existed here were discovered, and it took 12 months to correct. As a result, instead of being finished on December 31, 2012, the project would not be concluded until December 31, 2013. Although 2010 would have been a year in which essentially no work on the project had been done while remedial efforts were underway, the actual increment in carrying costs would be incurred in calendar year 2013, the “extra” year it took actually to complete the project. In this very limited sense, defendants' argument that plaintiff would have incurred expenses from February 2005 through June 2006, anyway, might be perceived to be correct—but only if expenses incurred after June 3, 2006 were to be substituted as damages.. FN10. If one gets into the details of interest and the time value of money, there are other potential nuances and refinements, including the arguable time-shifting of the financial consequences of a delay while remedial steps are taken. This is perhaps best demonstrated by a hypothetical. Assume a project estimated to take 24 months had begun on January 1, 2010, but on January 2, 2010 a problem such as existed here were discovered, and it took 12 months to correct. As a result, instead of being finished on December 31, 2012, the project would not be concluded until December 31, 2013. Although 2010 would have been a year in which essentially no work on the project had been done while remedial efforts were underway, the actual increment in carrying costs would be incurred in calendar year 2013, the “extra” year it took actually to complete the project. In this very limited sense, defendants' argument that plaintiff would have incurred expenses from February 2005 through June 2006, anyway, might be perceived to be correct—but only if expenses incurred after June 3, 2006 were to be substituted as damages.
FN11. The court was citing, in footnote 4, the decision of Judge Susan A. Peck in Figueroa v. FAH Redstone Ltd. Partnership, Superior Court, judicial district of New Britain, Housing Session, Docket No. CVN–0702–2096 (November 29, 2007) (44 Conn. L. Rptr. 639).. FN11. The court was citing, in footnote 4, the decision of Judge Susan A. Peck in Figueroa v. FAH Redstone Ltd. Partnership, Superior Court, judicial district of New Britain, Housing Session, Docket No. CVN–0702–2096 (November 29, 2007) (44 Conn. L. Rptr. 639).
FN12. Plaintiff argues that the final sentence of Practice Book § 11–21 is significant: “Nothing in this section shall be deemed to affect an award of attorneys fees assessed as a component of damages.” Plaintiff relies on the Appellate Court's reference to this language in a footnote in TDS Painting & Restoration, Inc. v. Copper Beech Farm, Inc., 73 Conn.App. 492, 517, n.10 (2002). Especially in light of the historical procedural complexity of that case, it is hard to be certain as to the intent or meaning of that reference. On the preceding page (73 Conn.App. 516), there is a reference to the availability of attorneys fees in connection with foreclosure actions, pursuant to § 52–249(a). Earlier in the decision, there is a reference to a contractual right to be compensated for costs of collection including attorneys fees (73 Conn.App. 495). Further, the court was not ruling on the availability of attorneys fees but rather was reversing the trial court for its failure to allow a referee, on remand, to consider the question of attorneys fees.Was the court addressing the issue of whether the rule's time limit is directory or mandatory? Was the court addressing the distinction, addressed in this decision, between statutory and contractual claims for attorneys fees? Or was the court simply recognizing the need for a factual record, particularly since, as in this case, the fees being sought were not limited to appellate fees (“First, TDS Painting sought not only appellate attorneys fees ․ but all postjudgment attorneys fees.”)?Under the circumstances, the court is reluctant to draw any inferences from the language that plaintiff correctly has identified as facially helpful, but which is of uncertain application to any particular scenario.. FN12. Plaintiff argues that the final sentence of Practice Book § 11–21 is significant: “Nothing in this section shall be deemed to affect an award of attorneys fees assessed as a component of damages.” Plaintiff relies on the Appellate Court's reference to this language in a footnote in TDS Painting & Restoration, Inc. v. Copper Beech Farm, Inc., 73 Conn.App. 492, 517, n.10 (2002). Especially in light of the historical procedural complexity of that case, it is hard to be certain as to the intent or meaning of that reference. On the preceding page (73 Conn.App. 516), there is a reference to the availability of attorneys fees in connection with foreclosure actions, pursuant to § 52–249(a). Earlier in the decision, there is a reference to a contractual right to be compensated for costs of collection including attorneys fees (73 Conn.App. 495). Further, the court was not ruling on the availability of attorneys fees but rather was reversing the trial court for its failure to allow a referee, on remand, to consider the question of attorneys fees.Was the court addressing the issue of whether the rule's time limit is directory or mandatory? Was the court addressing the distinction, addressed in this decision, between statutory and contractual claims for attorneys fees? Or was the court simply recognizing the need for a factual record, particularly since, as in this case, the fees being sought were not limited to appellate fees (“First, TDS Painting sought not only appellate attorneys fees ․ but all postjudgment attorneys fees.”)?Under the circumstances, the court is reluctant to draw any inferences from the language that plaintiff correctly has identified as facially helpful, but which is of uncertain application to any particular scenario.
Povodator, Kenneth B., J.
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Docket No: FSTCV075004977S
Decided: January 31, 2014
Court: Superior Court of Connecticut.
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