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Channing Real Estate, LLC v. Gates

Supreme Court of Connecticut

July 4, 2017

CHANNING REAL ESTATE, LLC
v.
BRIAN GATES

         SYLLABUS

          Argued November 16, 2016

         The plaintiff limited liability company appealed to this court from the judgment of the Appellate Court, which reversed the judgment of the trial court and ordered a new trial. The defendant was a co-owner and member of F Co., a limited liability company that owned commercial real estate. On six different occasions, the defendant executed a promissory note in exchange for funds that the plaintiff provided to him. Each of the six notes included an identical clause that precluded oral modification of the note. After the defendant failed to make any payments on the notes, the plaintiff brought a breach of contract action. The defendant alleged four special defenses and filed a three count counterclaim. The plaintiff filed a motion in limine to preclude any extrinsic evidence that varied the terms of the notes, including the evidence the defendant sought to introduce to support his claim that the funds that the plaintiff had provided to him were interim payments made in exchange for an interest in commercial real estate owned by F Co. The trial court denied the plaintiff's motion, concluding that the parol evidence rule did not bar the introduction of extrinsic evidence to vary the terms of the notes because the notes were not integrated as a result of the parties' failure to reduce to writing their full agreement, including the proposed real estate transaction. The trial court rendered judgment for the defendant on, inter alia, the complaint and on the third count of the counterclaim alleging a violation of the Connecticut Unfair Trade Practices Act (§ 42-110a et seq.). On appeal to the Appellate Court, the plaintiff claimed, inter alia, that the trial court improperly had admitted parol evidence to vary the terms of the notes. The Appellate Court concluded that the notes were integrated and that their terms were unambiguous, and, therefore, that the parol evidence rule barred the introduction of extrinsic evidence. The court remanded the case for a new trial on the basis of its conclusion that the introduction of parol evidence was an error that permeated the trial court's findings and undermined its entire judgment, and stated that, on remand, the defendant was entitled to allege and prove any exceptions he may have to the parol evidence rule as a special defense or counterclaim, including a violation of CUTPA. On the granting of certification, the plaintiff appealed to this court. Held:

         1. This court concluded that, although the Appellate Court properly deter- mined that the parol evidence rule barred the introduction of extrinsic evidence to vary the terms of the notes, that court improperly remanded the case for a new trial rather than directing judgment for the plaintiff on the issue of liability and ordering a hearing in damages: each note having contained language that barred the introduction of extrinsic evidence under the applicable parol evidence rule, and the defendant having failed to present any valid defenses or counterclaims that served as exceptions to the parol evidence rule, the trial court's findings pertaining to the extrinsic evidence were irrelevant, and the trial court's remaining findings regarding the terms of the notes and the defendant's failure to pay any of the amounts due thereunder were sufficient to establish the defendant's liability as a matter of law, rendering a new trial on remand unnecessary; furthermore, this court declined to address the defendant's unpreserved claim that, notwithstanding the application of the parol evidence rule, certain actions of the plaintiff effected a postcontractual modification of the notes, providing him with a valid and meritorious special defense in equitable estoppel that entitled him to a new trial on remand, the defendant having failed to raise this distinct claim in the trial court.

         2. A new trial on the count of the defendant's counterclaim alleging a violation of CUTPA was unwarranted because it was F Co. rather than the defendant who would have had standing to assert a CUTPA claim against the plaintiff; F Co. was a limited liability company and thus a distinct legal entity from the defendant, the injuries the defendant alleged in the CUTPA count of his counterclaim were those allegedly suffered by F Co., specifically, and not the defendant, and, because a member of a limited liability company, such as the defendant, cannot recover for an injury allegedly suffered by the company itself, the defendant lacked standing to pursue his CUTPA claim.

         Procedural History

         Action to recover on six promissory notes, and for other relief, brought to the Superior Court in the judicial district of Windham, where the defendant filed a counterclaim; thereafter, the court, A. Santos, J., denied the plaintiff's motion to preclude certain evidence; subsequently, the case was tried to the court, A. Santos, J.; judgment for the defendant on the complaint and in part on the counterclaim, from which the plaintiff appealed to the Appellate Court, Sheldon, Keller and Bear, Js., which reversed the trial court's judgment and remanded the case for a new trial, and the plaintiff, on the granting of certification, appealed to this court. Affirmed in part; reversed in part; judgment directed; further proceedings.

          Linda L. Morkan, with whom was Stuart D. Rosen, for the appellant (plaintiff).

          Frank J. Liberty, for the appellee (defendant).

          OPINION

          ESPINOSA, J.

         The plaintiff, Channing Real Estate, LLC, appeals from the judgment of the Appellate Court, which reversed the judgment of the trial court in favor of the defendant, Brian Gates, on both the plaintiff's complaint seeking recovery on six promissory notes (notes) and on the defendant's counterclaim alleging a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. Channing Real Estate, LLC v. Gates, 159 Conn.App. 59, 83, 122 A.3d 677 (2015). The plaintiff, which prevailed in the Appellate Court, challenges only the scope of the court's remand order, claiming that it improperly ordered a new trial rather than restricting the proceedings on remand to a hearing in damages. The plaintiff contends that a new trial is unnecessary because the Appellate Court's proper application of the parol evidence rule resolved the issue of liability on the notes in favor of the plaintiff as a matter of law and because the defendant lacks standing to raise a CUTPA claim.[1] The defendant argues that the Appellate Court correctly concluded that a new trial is necessary to allow him to pursue valid special defenses and counterclaims. We conclude that a new trial is unnecessary, and, accordingly, reverse in part the judgment of the Appellate Court.

         The trial court found the following relevant facts. The plaintiff is a limited liability company organized under New York law, with Douglas Chan as principal. The defendant was a co-owner and member of Front Street Commons, LLC (Front Street Commons), a limited liability company organized under Connecticut law that owned commercial real estate in Putnam.

         On six different occasions between January, 2008, and February, 2009, the defendant executed a promissory note in exchange for funds that the plaintiff provided to him. The total principal amount of the six notes was $281, 272.74. The defendant has made no payments on any of the notes.

         With the exception of the principal amounts and maturity dates, the terms of each of the six notes were identical. In each note, the defendant promised to pay the corresponding principal amount to the defendant with annual interest at the rate of 14 percent. If the notes were not paid by the maturity dates, their terms called for the payment of interest either at 16 percent annually or the highest rate permitted under New York law, whichever was higher. Each note set forth the address to which the defendant was to send his payments and in what form those payments were to be made. The terms of each note also stated that the defendant promised to pay all reasonable collection costs, including attorney's fees. Finally, each note included the following clause precluding oral modification of the contract: ‘‘This [n]ote ...


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