SEVEN OAKS ENTERPRISES, L.P., ET AL.
v.
SHERRY DEVITO ET AL.
Argued
January 29, 2018
Procedural
History
Action
to recover damages for, inter alia, breach of contract, and
for other relief, brought to the Superior Court in the
judicial district of Stamford-Norwalk, where the named
defendant filed a counterclaim; thereafter, the court,
Hon. Taggart D. Adams, judge trial referee, denied
the motion to dismiss filed by the defendant Robert DePaolo;
subsequently, the court, Hon. Taggart D. Adams,
judge trial referee, denied the defendants' motion to
reargue; thereafter, the action was withdrawn as to the
defendant Robert DePaolo; subsequently, the matter was tried
to the jury before Lee, J.; verdict for the
plaintiffs on the complaint and the counterclaim; thereafter,
the court, Lee, J., denied the named
defendant's motions to set aside the verdict and for
judgment notwithstanding the verdict, and rendered judgment
in accordance with the verdict, from which the named
defendant appealed to this court. Reversed in part;
judgment directed.
Ridgely Whitmore Brown, with whom, on the brief, was Benjamin
Gershberg, for the appellant (named defendant).
Ryan
O'Neill, with whom, on the brief, was Mark Sherman, for
the appellees (plaintiffs).
Lavine, Alvord and Beach, Js.
OPINION
BEACH,
J.
The
defendant Sherri DeVito[1] appeals from the judgment of the trial
court rendered, after a jury trial, in favor of the
plaintiffs, Seven Oaks Enterprises, L.P. (SOE), and Seven
Oaks Management Corporation (SOM), on two counts alleging
breach of contract and one count alleging breach of the
implied covenant of good faith and fair dealing. The jury
awarded $1.325 million in damages to the plaintiffs. On
appeal, the defendant claims that the trial court (1) abused
its discretion in denying the defendant's motion to set
aside the verdict and her motion for judgment notwithstanding
the verdict because the plaintiffs did not produce the
original note at trial, there was insufficient evidence that
the note was lost, and the plaintiffs did not have the right
to enforce the note; (2) incorrectly instructed the jury
regarding SOM's right to enforce the note; (3) lacked
subject matter jurisdiction over SOE because it did not have
the legal capacity to commence and continue the action; and
(4) abused its discretion in denying her motion for judgment
notwithstanding the verdict and in refusing to set aside the
verdict because neither plaintiff had a right to enforce the
management contract, the alleged breaches did not cause any
loss to the plaintiffs, and the jury could not determine with
reasonable certainty the amount of damages sustained. We
affirm the judgment as to SOE's claim regarding breach of
the management contract and reverse as to SOE's claim of
breach of contract regarding the note and all of SOM's
claims.
The
following facts, which the jury reasonably could have found
or are undisputed, and procedural history are pertinent to
our decision. This dispute concerns a note and a management
contract arising from the purchase of a limited liability
company by the defendant. Prior to the events in issue,
Murray Chodos had purchased a residential property located at
516 Round Hill Road, Greenwich, in 1999. A limited liability
company, 516, LLC, had been created to own the property, and
SOE was the sole owner of 516, LLC.
SOM was
the general partner of SOE and Chodos was the president and
managing member of SOM. Chodos met the defendant and her
husband in late 2005 or early 2006. Chodos helped the
defendant and her husband obtain life insurance policies and
referred the defendant to an attorney, who could draft trusts
for their children. In October, 2006, Chodos agreed to sell
516, LLC, to the defendant. The defendant purchased 516, LLC,
from SOE for $4 million. Payment consisted of $2.675 million
in cash by wire transfer and the remaining $1.325 million by
a promissory note (note), which listed property located at
516 Round Hill Road as collateral. The purchase agreement was
executed by the defendant individually and by SOE. Chodos
signed the purchase agreement on behalf of SOM, which in turn
acted in its capacity as SOE's general partner. On the
defendant's side, the note was executed by the defendant
both as manager of 516, LLC, and individually.
In
addition, the purchase agreement provided that until the note
was paid, Chodos was to be the comanager of 516, LLC,
pursuant to a management contract, which was attached to and
expressly incorporated into the purchase agreement. The
defendant and Chodos personally executed the management
contract, which included provisions that Chodos was not to be
removed as comanager so long as any debt was owed to SOE,
that Chodos was to be compensated for his services as
comanager, and that he would have all powers available to the
manager under the operating agreement of 516, LLC.
On
April 4, 2008, the defendant, unknown to Chodos or to the
plaintiffs, unilaterally executed an amendment to the
operating agreementof516, LLC. The amendment removed Chodos
as comanager, provided Chodos with no voting rights, and
provided no compensation to Chodos. On May 1, 2008, the
defendant executed another amendment to the operating
agreement. This amendment recognized a mortgage of $365, 000
in favor of Allied International Fund, Inc. (Allied), and
placed the Allied security interest above SOE's note in
priority.
The
defendant did not pay any of the $1.325 million owed on the
note or anything to Chodos for compensation under the
management contract. In April, 2010, the plaintiffs initiated
this action against the defendant. On December 31, 2011, SOE
executed a ‘‘Bill of Sale and
Assignment'' (assignment), which assigned to SOM
‘‘any and all claims, rights and title to any and
all defaulted loans and damages relating to the sale of 516,
LLC.'' The plaintiffs alleged four counts: (1) breach
of contract for the defendant's breach of the management
contract; (2) breach of the implied covenant of good faith
and fair dealing for the defendant's bad faith breaches
of the management contract; (3) breach of contract regarding
the defendant's failure to make payments on the note; and
(4) reckless and wanton misconduct by the defendant. The
defendant raised several special defenses and counterclaims.
There are no claims on appeal regarding the special defenses
and counterclaims.
The
trial commenced on January 23, 2015. The plaintiffs withdrew
their claim of reckless and wanton misconduct before the jury
was charged. On February 6, 2015, the jury returned a verdict
in favor of the plaintiffs on all three remaining counts, as
well as the defendant's special defenses and
counterclaims. It awarded the plaintiffs $1.325 million in
damages. The verdict did not attribute damages to any
specific count or counts.[2] At the same time, the jury provided
answers to a set of written jury interrogatories. On February
23, 2015, the defendant filed a motion for judgment
notwithstanding the verdict and a motion to set aside the
verdict, which motions the court denied on August 21, 2015.
This appeal followed. Additional facts will be set forth as
necessary.
On
appeal, the defendant claims that the trial court abused its
discretion in denying her motion to set aside the verdict and
her motion for judgment notwithstanding the verdict because
the plaintiffs did not produce the original note at trial,
there was insufficient evidence that the note was lost, and
the plaintiffs did not have the right to enforce the note;
that the court incorrectly instructed the jury regarding
SOM's right to enforce the note; that the court lacked
subject matter jurisdiction over SOE because SOE did not have
the legal capacity to commence and continue the action; and
that the court abused its discretion in denying her motion
for judgment notwithstanding the verdict and in refusing to
set aside the verdict because neither plaintiff had a right
to enforce the management contract, the alleged breaches did
not cause any loss to the plaintiffs, and the jury could not
have determined with reasonable certainty the amount of
damages required. We consider the claims in a different order
for the purpose of clarity, and, in light of our conclusions,
it is not necessary to address several of them.
We
begin with our standard of review. ‘‘The proper
appellate standard of review when considering the action of a
trial court in granting or denying a motion to set aside a
verdict is the abuse of discretion standard. . . . In
determining whether there has been an abuse of discretion,
every reasonable presumption should be given in favor of the
correctness of the court's ruling. . . . Reversal is
required only [when] an abuse of discretion is manifest or
[when] injustice appears to have been done. . . . [T]he role
of the trial court on a motion to set aside the jury's
verdict is not to sit as [an added] juror . . . but, rather,
to decide whether, viewing the evidence in the light most
favorable to the prevailing party, the jury could reasonably
have reached the verdict that it did. . . . In reviewing the
action of the trial court in denying [or granting a motion] .
. . to set aside the verdict, our primary concern is to
determine whether the court abused its discretion . . .
.'' (Internal quotation marks omitted.) Rendahl
v. Peluso, 173 Conn.App. 66, 94-95, 162 A.3d 1 (2017).
‘‘The
standards for appellate review of a directed verdict are well
settled. Directed verdicts are not favored. . . . A trial
court should direct a verdict only when a jury could not
reasonably and legally have reached any other conclusion. . .
. In reviewing the trial court's decision [to deny the
defendant's motion for a directed verdict] we must
consider the evidence in the light most favorable to the
plaintiff. . . . Although it is the jury's right to draw
logical deductions and make reasonable inferences from the
facts proven . . . it may not resort to mere conjecture and
speculation. . . . A directed verdict is justified if . . .
the evidence is so weak that it would be proper for the court
to set aside a verdict rendered for the other party. . . .
The foregoing standard of review also governs the trial
court's denial of the defendant's motion for judgment
notwithstanding the verdict because that motion is not a new
motion, but [is] the renewal of [the previous] motion for a
directed verdict.'' (Citation omitted; internal
quotation marks omitted.) Bagley v. Adel Wiggins
Group, 327 Conn. 89, 102, 171 A.3d 432 (2017).
I
We
first consider various issues regarding the third count of
the operative complaint, which alleged nonpayment of the
note. The jury indicated in its answers to interrogatories
that it had found that SOE and the defendant originally had
been the parties to the note, that SOE possessed the note
when it was lost, that the note nonetheless had effectively
been assigned to SOM, and that the defendant failed to make
payments on the note. A note, of course, is a form of
contract, and principles of contract construction are used to
interpret its language. Federal National Mortgage Assn.
v. Bridgeport Portfolio, LLC, 150 Conn.App. 610, 620, 92
A.3d 966, cert. denied, 312 Conn. 926, 95 A.3d 523 (2014).
‘‘The standard of review for contract
interpretation is well established. Although ordinarily the
question of contract interpretation, being a question of the
parties' intent, is a question of fact . . . [when] there
is definitive contract language, the determination of what
the parties intended by their . . . commitments is a question
of law [over which our review is plenary].''
(Internal quotation marks omitted.) Meeker v. Mahon,
167 Conn.App. 627, 632, 143 A.3d 1193 (2016).
‘‘In ascertaining the contractual rights and
obligations of the parties, we seek to effectuate their
intent, which is derived from the language employed in the
contract, taking into consideration the circumstances of the
parties and the transaction. . . . We accord the language
employed in the contract a rational construction based on its
common, natural and ordinary meaning and usage as applied to
the subject matter of the contract.'' (Internal
quotation marks omitted.) Welch v. Stonybrook Gardens
Cooperative, Inc., 158 Conn.App. 185, 197, 118 A.3d 675,
cert. denied, 318 Conn. 905, 122 A.3d 634 (2015).
‘‘Furthermore, [i]n giving meaning to the
language of a contract, we presume that the parties did not
intend to create an absurd result.'' (Internal
quotation marks omitted.) South End Plaza Assn., Inc. v.
Cote, 52 Conn.App. 374, 378, 727 A.2d 231 (1999).
A
Prior
to the transfer of the note, which occurred after this action
was initiated, SOE was clearly entitled to enforce the note,
as the parties to the purchase agreement, which referenced
the note, were the defendant and SOE, [3] and the parties
to the note were, as lender, SOE, and, as borrowers, 516,
LLC, the defendant, and a guarantor.[4] Prior to the transfer of the
note, then, SOE[5] was the only plaintiff able to enforce the
note. The plaintiffs do not claim to the contrary.
Approximately
one year after the action was commenced, SOE transferred the
note to SOM. The next question is whether SOE, SOM, or both
entities retained the power to enforce the note. The
assignment provided in pertinent part that SOE
‘‘does hereby grant, convey, sell, assign, and
transfer over to [SOM] all [SOE's] right, title, and
interest in and to . . . any and all claims, rights and title
to any and all defaulted loans and damages relating to the
sale of 516, LLC.'' The note was referenced in the
purchase agreement, and the note itself referenced 516, LLC.
Where no interest in the assigned property is retained or the
assignment is otherwise qualified, the assignment
extinguishes all of the assignor's rights in the assigned
matter. Bozelko v. Milici, 139 Conn.App. 536, 539,
57 A.3d 762 (2012), cert. denied, 308 Conn. 914, 61 A.3d 1101
(2013). The first paragraph of the note specified that the
defendant ‘‘acknowledges that [SOE] may transfer
this [n]ote . . . .'' The assignment clearly stated
that SOE was assigning its ‘‘claims, rights and
title to any and all defaulted loans and damages relating to
the sale of 516, LLC.'' SOE's assignment of the
note to SOM extinguished all rights SOE had to enforce the
note. Therefore, from December 31, 2011, onward, SOE lacked
the ability to enforce the note.[6]
B
The
jury reported in its answers to interrogatories that SOE
transferred the note to SOM, and apparently concluded that
SOM was entitled to enforce the note. The trial court
determined, in its memorandum of decision dated August 21,
2015, on the defendant's motion for judgment
notwithstanding the verdict, that ‘‘[t]here was
sufficient evidence for the jury to have found that, in
accord with General Statutes § 42a-3-309, SOE was in
possession of the note when it was lost, its whereabouts are
unknown, and the entity is entitled to enforce the note. The
jury further found that SOE transferred the right to enforce
the note to SOM. Again, the jury could have reasonably and
legally reached the conclusion that the ...