Opinion
FSTCV136017312S
12-09-2015
Kenneth Fadner v. Newton Joseph Friese, IV
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
A. William Mottolese, Judge Trial Referee.
The plaintiff is the former father-in-law and former employer of the defendant who sues to recover for 18 separate loans which he claims to have made to the defendant and his former wife and the plaintiff's daughter (the " promisors") while they were married to one another during the period 1996 to 2008. The plaintiff seeks repayment of only one-half of the loans, assigning legal responsibility for the other half to his daughter, Nicole. At the time of trial the plaintiff claims that the defendant is indebted to him in the amount of $82,911.75 inclusive of accrued interest.
The initial loan at issue originated May 7, 1996 and was evidenced by a promissory note in the amount of $10,000 with interest at the rate of 7.75% per annum, both payable in monthly installments of $211 with a maturity of May 7, 2001. The note was secured by a second mortgage on the residence owned by the defendant and Nicole located in Stamford. The promisors made regular monthly payments until December 1998. Thereafter, payments were made at irregular intervals and in varying amounts until February 2001 when payments ceased. At that time, the loan balance was $993.21. The plaintiff gave the promissors credit for all payments. The mortgage instrument contained the following recital: " This Security Instrument secures to Lender the repayment of the debt evidenced by the Note, with interest, and all renewals, extensions and modifications of the Note." The loan balance of $993.21 was carried until October 3, 2003 when the plaintiff made a $30,000 loan to the promissors to assist them in financing an addition to their house. Thereafter, he made loans in varying amounts until April 22, 2008 when he made the final loan. At or prior to the time the plaintiff made this loan, the plaintiff and the promisors had a conversation in which it was agreed that the interest rate on the loans would be changed to correspond with the rate which the plaintiff was charged on his home mortgage. From that point on the rate varied from 3% to 8.25%. The parties also orally agreed that these loans would be " added to" and secured by the second mortgage. It was further agreed that these loans would be repaid when the promisors sold their home or upon demand by the plaintiff. The total amount loaned was $133,390.28 which with interest to the date of trial, October 14, 2015 is $165,823.50. The plaintiff seeks to recover one-half of that or $82,911.75.
The plaintiff seeks recovery on one of four alternative causes of action: breach of contract, account stated, unjust enrichment, breach of covenant of good faith and fair dealing. As for the breach of contract count, the defendant not only denies the allegations which support these allegations but has asserted numerous special defenses to the first count but has briefed only the statute of limitations, waiver, and accord and satisfaction. The special defenses which are not briefed are deemed to have been abandoned. Connecticut Light and Power Co. v. Department of Public Utility Control, 266 Conn. 108, 120, 830 A.2d 1121 (2003).
" The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages." Chiulli v. Zola, 97 Conn.App. 699, 706, 905 A.2d 1236 (2006). A promissory note is nothing more than a written contract for the payment of money." Appliances, Inc. v. Yost, 181 Conn. 207, 210-11, 435 A.2d 1 (1980).
Because the defense of the statute of limitations is potentially dispositive it will be addressed first. The special defenses rely on G.S. § 52-576 and G.S. § 52-581. A determination of which statute applies depends on the nature of the contract entered into by the parties and the extent of performance of their respective contractual obligations. While the loans began with a $10,000 note in 1996 with a maturity date of May 7, 2001, on or about October 3, 2003 when the plaintiff made the $30,000 loan to assist in financing the couples' house addition, it was also agreed that this sum and any future loans would be " added to the mortgage" and would bear the variable interest rate which the plaintiff's lender charged for his mortgage. Because this loan and any additional loans exceeded the original mortgage debt and carried a different interest rate the court must determine whether this agreement constitutes a modification of the contract embodied in the note and mortgage.
If this were an action on the $10,000 note the statute of limitations would be the same. G.S. § 42a-3-118.
" For a valid modification to exist, there must be mutual assent to the meaning and conditions of the modification and the parties 'must assent to the same thing in the same sense.' (Internal quotation marks omitted.) Lar-Rob Bus Corp. v. Fairfield, 170 Conn. 397, 402, 365 A.2d 1086 (1976); see First Hartford Realty Corp. v. Ellis, 181 Conn. 25, 33, 434 A.2d 314 (1980). Modification of a contract may be inferred from the attendant circumstances and conduct of the parties. See Rowe v. Cormier, 189 Conn. 371, 372-73, 456 A.2d 277 (1983)." Malone v. Santora, 135 Conn. 286, 292, 64 A.2d 51 (1949).
" Whether the parties to a contract intended to modify the contract is a question of fact. Three S. Development Co. v. Santore, 193 Conn. 174, 177-78, 474 A.2d 795 (1984)." (Alternate citations omitted). Herbert S. Newman and Partners v. CFC Construction LTD, Partnership, 236 Conn. 750, 761-62, 674 A.2d 1313 (1996). Conduct which is inconsistent with the written terms of a contract to which the other party assents may be deemed to have created a new contract arising by implication." Malone v. Santora, 135 Conn. 286, 292, 64 A.2d 51 (1949). The essential element of a novation is the extinguishment of the original contract by the substitution of a new one. Flagg Energy Development Corp. v. General Motors Corp. 244 Conn. 126, 145, 709 A.2d 1075 (1998).
The defendant disputes that these were the terms of the agreement of October 3, 2003 which would govern the financial relationship. Because the court rejects the defendant's disavowal of their agreement for the reasons that follow, the court finds that on that date, the plaintiff and the promisors entered into an oral contract which constituted a modification of the agreement embodied in the note and mortgage.
" Parties may alter any term of an existing contract by entering into a subsequent contract . . . The contract as modified becomes a new contract between the . . . The meaning to be given subsequent agreements . . . depends on the intention of the parties." Alarmax Distributors, Inc. v. New Canaan Alarm Co., 141 Conn.App. 319, 320, 61 A.3d 1142 (2013).
After the final loan on April 22, 2008 the plaintiff rendered no statement to the promisors until July 17, 2009 when the plaintiff sent them a letter (Ex. 27) requesting that they sign a written agreement that the loan total be repaid when their home is sold or " the equity value thereof is otherwise realized in cash, " reminding them of their previous oral agreement that " the loan is callable by me at will." Nicole signed the letter but the defendant did not. There was no further communication with the defendant until November 28, 2012 when the plaintiff caused his attorney to make demand for payment in full (Ex. 31). By letter of December 12, 2012 the defendant denied that there were any grounds " to justify commencing legal action" against him for the unpaid loans (Ex. C).
The defendant's reliance on § 52-576 depends entirely upon the promissory note which contains a maturity date of May 7, 2001. The defendant argues that the statute of limitations on the note expired on May 7, 2007 and therefore at least the first $10,000 is time barred. This position is directly contradictory to the defendant's claim that this note was paid in full. Whether that is so or not is irrelevant because the note was modified by an oral agreement entered into by the parties on October 3, 2013 and any balance that may have been due at that time was rolled over into the oral novation.
The defendant next argues that all sums that may have been due the plaintiff prior to February 16, 2007, which is six years before the commencement of this action, are likewise time barred. Similarly, in contending for the application of § 52-581, the three-year statute of limitations, the defendant incorrectly triggers the statute by the date on which the last loan was made, namely April 22, 2008. Nevertheless, because the defendant never performed his contractual obligation to repay his share of the loan balances, the oral contract remained executory, thus triggering the application of G.S. § 52-581. John H. Kolb & Sons, Inc. v. G& L Excavating, Inc., 76 Conn.App. 599, 609-10, 821 A.2d 774 (2003). It is not the law of this state that the statute of limitations begins to run on a demand loan when the last sum of money was advanced on the loan. The statute is triggered in a breach of contract action when the injury has been inflicted. Lenares v. Miano, 74 Conn.App. 324, 331, 811 A.2d 738 (2002). Here, the breach occurred and the injury inflicted on the plaintiff when his demand for payment was rejected by the defendant on December 12, 2012. Id. The plaintiff did not make a demand for payment until November 28, 2012 when the plaintiff's attorney sent the defendant a letter (Ex. 14) demanding payment in full by December 15, 2012. So, it does not matter whether the six-year or the three-year Statute of Limitations applies because the action was commenced on February 16, 2013, well within the three-year statute. Therefore, the action is timely.
The defendant maintains in both his brief and his testimony that no such modification took place. He begins by making reference to exhibits 4, 5 and 35 which used the terminology " nicoleloan" or " Loans-Nicole" thereby ascribing responsibility for these loans to Nicole alone. Such a claim is contrary to the evidence. The record is replete with admissions by the defendant that the loans were made jointly to Nicole and him for the sole purpose of enabling them to meet family financial needs. While it is true that the plaintiff communicated primarily with Nicole concerning these loans, it was entirely logical for him to do so not only because of their father-daughter relationship but also because she handled the finances in the household. In his brief, the plaintiff has accurately summarized the evidence that gives overwhelming support to the fact that not only did the defendant participate in the oral modification agreement but that he approved of and confirmed many of the loans as they were made pursuant to that agreement. The court adopts the factual scenario presented by the plaintiff as reflective of the evidence and makes them findings of the court.
See e.g. Ex. 11 where in paragraph 3 the plaintiff committed himself to make loans to both " as required for the necessary expenses of the household."
Typically Nicole would make the request of her father, explaining why the couple needed the money; plaintiff would agree to and make the transfer to the couple's joint checking account; then he would send an email to Nicole and the defendant confirming that the transfer had been made and that he would " add it to their loan balance." On many occasions the defendant thanked the plaintiff in a reply email. E.g . Ex. 13 (" Thank you very much for the transfer Ken"); Ex. 14 (" Yes, many thanks with all the help"); Ex. 24 (thanks so much Ken"). The majority of time the transfers were made directly into the couple's joint checking account. In a few instances, bills were paid directly by the plaintiff. While the defendant testified that he did not know what was meant by " loan balance" on the various emails, he never asked his wife what the words meant and had " no idea what the emails were for." There are no less than 17 exhibits sent by the defendant which reference the loans. See Ex. 4, 5, 9, 10, 11, 13, 14, 16, 17, 18, 19, 20, 22, 23, 24, 25, 26. Indeed, as noted, in many of these email exchanges the defendant affirmatively thanks the plaintiff for the loan. E.g. Ex. 13, 14, 24. There are also six exhibits in which the plaintiff expressly acknowledges the loans and his debt to the plaintiff. See Ex. 9 (P35 ¶ 4); Ex. 10 (¶ b); Ex. 11 (agt. Preamble and ¶ 3, 4b); Ex. 22 (¶ ¶ 1 and 2); Ex. 23 (¶ ¶ 1 and 2); Ex. 26 (¶ ¶ 1 and 2). For example, Ex. 23 is an email exchange between the plaintiff and the defendant. In paragraph one the plaintiff states that he will pay off the $25,000 Master Card balance and " add it to the loan I've made to you and Nicole, making the balance approximately $120,000." The defendant responds, " OK." In paragraph 2 the plaintiff states " We'll split the joint $120,000 loan in two $60,000 pieces, one owed to me by you (the " loan") and one by Nicole." The defendant responds " OK." Ex. 23.
The following is a catalogue of the defendant's responses to his attorney's questions on direct examination with respect to the emails:
Exhibit
Number
Response
16
Did not know what was meant by " loan balance"
17
Did not know what was meant by " loan balance"
18
Did not know what was meant by " loan balance"
19
" I had no idea what it was for"
20
" I had no idea what it was for"
21
" This does not refer to loans but to overall discussions
about divorce"
22
" This was part of the divorce settlement. I did not question
the reference to loans."
24.
" I raised no question about the Mastercard loan of $25,000
or the other loan mentioned."
The defendant's disclaimers lack credibility and are unacceptable.
Because the plaintiff has proved the allegations of the first count and need not prove any of the alternate theories of recovery, only the special defenses which were expressly made to that count may be considered. Other than the defense of the statute of limitations the only special defenses which merit discussion are the second and seventh special defenses of waiver and accord and satisfaction.
" Waiver is the intentional relinquishment of a known right . . . Waiver need not be express, but may consist of acts or conduct from which a waiver may be implied . . . In other words, waiver may be inferred from the circumstances if it is reasonable to do so." (Internal quotation marks omitted.) Kalinowski v. Kropelnicki, 92 Conn.App. 344, 352-53, 885 A.2d 194 (2005). " The party asserting waiver, however, must present evidence such that the court can infer waiver from the circumstances." (Alternate citations omitted.) Carpender v. Sigel, 142 Conn.App. 379, 388, 67 A.3d 1011 (2013).
The defendant has produced no evidence that the plaintiff intended to relinquish any right to repayment of the loans. In fact, contrary evidence was abundant. The plaintiff proved that there was agreement that the loans would be repaid upon the sale of the marital home or upon demand. The plaintiff never waivered from this position.
As for the defense of payment and accord and satisfaction, the evidence showed that all but a small balance of the original $10,000 loan had been repaid, and the loans continued to revolve only insofar as the plaintiff made additional advances after the note matured but not insofar as those advances were repaid in whole or in part.
" When there is a good faith dispute about the existence of a debt or about the amount that is owed, the common law authorizes the debtor and the creditor to negotiate a contract of accord to settle the outstanding claim. County Fire Door Corp. v. C.F. Wooding Co., 202 Conn. 277, 281, 520 A.2d 1028 (1987). 'An accord is a contract between creditor and debtor for the settlement of a claim by some performance other than that which is due. Satisfaction takes place when the accord is executed.' W.H. McCune, Inc. v. Revzon, 151 Conn. 107, 109, 193 A.2d 601 (1963). Without a mutual assent, or a 'meeting of the minds, ' there cannot be valid accord. Crucible Steel Co. v. Premier Mfg. Co., 94 Conn. 652, 656, 110 A. 52 (1920)." (Alternate citations omitted.) Herbert S. Newman & Partners v. CFC Construction, Ltd., Partnership, 236 Conn. 750, 764, 674 A.2d 1313 (1996).
Not only is there no evidence to support the elements of the doctrine of accord and satisfaction but the evidence was unmistakable that there never was a dispute at any time over the amounts loaned or the interest charged but rather unqualified assent on every occasion that called for assent. The plaintiff has proved that the defendant is responsible for the repayment of $82,911.75 together with interest to date in accordance with the variable rate set forth in Ex. 34.
The plaintiff requests that the court award prejudgment interest at the statutory rate of 10% as authorized by § 37-3a for monies wrongfully withheld. " Whether interest is a proper element of damages is primarily an equitable determination and is a matter which lies within the discretion of the trial court. State v. Stengel, 192 Conn. 484, 487, 472 A.2d 350 (1984); Perl v. Case, 3 Conn.App. 111, 116, 485 A.2d 1331 (1985). Where, on the other hand, the parties have expressly contracted for the payment of interest, the court does not have this latitude. Where the payment of interest is contractually agreed upon, interest is recoverable." (Alternate citations omitted.) Guaranty Bank & Trust, Co. v. Dowling, 4 Conn.App. 376, 385-86, 494 A.2d 1216 (1985). The plaintiff does not specify whether this rate should be applied to the debt in lieu of the variable contract rate or in addition to the contract rate. In any event, the court believes that it would be inequitable to award both since the variable interest rate was freely contracted for. Moreover, because the court has found the defendant liable under the breach of contract count based on a novation, the interest rate must be determined by the terms of the parties' agreement. These rates are set forth in Ex. 34. See Alarmax Distributors, Inc. v. New Canaan Alarm Co., 141 Conn.App. 319, 334-37, supra. So Ordered.