Opinion
No. CV 08-5004625-S
November 10, 2010
MEMORANDUM OF DECISION
In this matter the plaintiff, Krista Karch, filed a one-count complaint against the defendant, Jonathan Lounsbury, dated May 28, 2008 and returnable to court on July 1, 2008. The plaintiff seeks to be reimbursed for sums she loaned to the defendant in connection with the start up of a new business, Vertical Probe Industries, LLC (VPI). On November 12, 2008, the defendant filed an answer and four special defenses alleging that the plaintiff's claims are barred in whole or in part by (i) the defendant having paid to the plaintiff all sums due and owing; (ii) the doctrine of accord and satisfaction; (iii) the applicable statute of limitations, including, without limitation, General Statutes § 52-581; and (iv) the statute of frauds, General Statutes § 52-550. The defendant also filed two counterclaims. The plaintiff filed a motion to dismiss the second counterclaim which motion was granted by order of the court, Burgdorff, J. on February 18, 2010 thereby leaving only the first counterclaim wherein the defendant claims the plaintiff failed, refused or neglected to offset the value of payments and/or work the defendant made or performed for her benefit.
The matter was tried to the court on October 7, 2010. The court ordered post-trial briefs from the parties which were to be filed within thirty days from the date of the trial. The plaintiff filed her brief on October 26, 2010.
The defendant's brief was not timely filed — it was not filed as of the date and time of the filing of this memorandum.
The court heard testimony from the plaintiff and the defendant. The plaintiff introduced twelve full exhibits and the defendant introduced fifteen full exhibits. Based on the credible evidence presented, the court makes the following findings by a fair preponderance of the evidence.
I.
Findings of Facts
The basis of the plaintiff's claim is an oral agreement between the parties pursuant to which she alleges she loaned the defendant $31,667.65 in connection with his development of Vertical Probe Industries, LLC (VPI). A summary of the money she alleges she so advanced to the defendant is attached to the complaint as Exhibit A. Pursuant to the itemization set forth on Exhibit A, the date of the first advance of money she made to the defendant was on July 15, 2003 and the last was September 12, 2005. The plaintiff testified she is not seeking to recoup the amounts that she loaned or advanced to the defendant in connection with his personal expenses, but only to be repaid for money she claims to have loaned to him to start up his business, VPI. Prior to the commencement of trial, the plaintiff amended her statement of money she claims to have advanced to the defendant for the start up of VPI by eliminating the amount she advanced to pay "taxes." The plaintiff introduced into evidence, in support of the claims, Exhibit 1; Exhibit 1 is the same as Exhibit A referenced above except there is a line added thereto indicating that the amount of "Taxes" is excluded from her demand. After reducing the amount advanced by eliminating the demand for taxes, the plaintiff is seeking to be repaid for sums she loaned to the defendant in the amount of $27,408.71.
There is no dispute that the loans claimed to have been made by the plaintiff are not evidenced by any written agreement. The plaintiff claims that there was an oral agreement or understanding that she would be repaid by the defendant for such loans and that the defendant, in many e-mails, acknowledged his indebtedness to her.
The plaintiff's exhibits include several e-mails from the defendant wherein he repeatedly promised to repay his debt to her. She failed, however, to produce, in her responses to the defendant's discovery requests and at trial, the entire e-mail chain between the parties. She elected to produce only e-mails she deemed relevant. The parties stipulated that the e-mails produced are not full and complete and do not accurately reflect the entirety of the communication between the parties with respect to the claims made by the plaintiff and the defendant's responses thereto.
The matter is complicated by the parties being involved in a dating relationship during the time that the plaintiff advanced money to and for the benefit of the defendant. It is clear that the parties intertwined their business and personal lives and finances. It is also clear that the plaintiff did pay some of the defendant's personal expenses and that she further contributed money to the defendant and/or for VPI to assist in development of the company.
The defendant, like the plaintiff, contributed to the couple's personal and household expenses by providing in-kind services and contributing some funds, albeit not to the same extent as the plaintiff. From time to time, the defendant also worked without compensation for the plaintiff in one or more of her businesses.
The defendant in many of his e-mails to the plaintiff acknowledged being indebted to the plaintiff. He testified that he twice gave her $1,000 in reduction of his obligation to her. In December 2005, after obtaining funds from his father, the defendant gave her $10,000 in the hope that it would satisfy his debt to her. Although the defendant claims he doesn't believe there was any loan that he is obligated to repay, the credible evidence is that the plaintiff did loan him money for personal and business expenses, she also provided funds to and for VPI, the defendant acknowledged the same and that he agreed, as evidenced by several e-mails, to repay what was owed by him and he made repayments to her from time to time when he had funds available to do so. He did not, however, guarantee the indebtedness of VPI and the plaintiff, in her complaint, did not allege that he did so.
The parties stipulated that VPI was formed on December 23, 2002. VPI remained in existence during all relevant times. VPI, as a limited liability company, is a separate legal entity and is not a party to the suit.
II. DISCUSSION A. Existence of an oral contract.
The defendant is alleging that there is no agreement or meeting of the minds between the parties. The plaintiff advanced money to the defendant and the defendant acknowledges receipt of funds from the plaintiff. The parties dispute the amount of the funds that were used for business purposes and the amount that were personal expenditures. The court finds that some funds were advanced for business purposes and the court does not find credible the defendant's claim that such funds were provided to him as gifts. The defendant, in Exhibit 2, e-mails the plaintiff stating, unequivocably, "You will get your money as soon as possible." In Exhibit 4, the defendant states ". . . as soon as my second come (sic) in I will mail you a check." Further, the defendant testified that he did believe he owed her some repayment for helping him start his business and the court credits that testimony.
The court finds that the plaintiff advanced funds with the reasonable expectation that they would be repaid, the defendant agreed to do so when he was able to do so and from time to time he did make repayments when he had funds available to do so.
To be enforceable, an agreement "must be definite and certain as to its terms and requirements." (Internal quotation marks omitted.) Presidential Capital Corp. v. Reale, 231 Conn. 500, 506-07 (1994), Dunham v. Dunham, 204 Conn. 303, 313, Page 507 (1987). Parties may reach a binding agreement even if some of the terms are indefinite. See, Meaney v. Connecticut Hospital Assn., Inc., 250 Conn. 500, 521 (1999). An agreement to repay when funds are available is sufficiently definite to constitute an enforceable agreement of the defendant to pay within a reasonable time. See, Griffin v. Smith, 101 Conn. 219, 224 (1924) (plaintiff's promise to pay when he "could spare the money" construed as unconditional promise to pay within reasonable time). See also, Mucha v. Brown, Superior Court, judicial district of Tolland, Docket No. CV 91 48796 (July 10, 1997, Hammer, J.T.R.) ( 20 Conn. L. Rptr. 2) (an agreement to pay when able is an unconditional promise which is to be performed within reasonable time).
The court finds the parties intended to enter into an agreement whereby the plaintiff would loan money to the defendant to help with his development of VPI and the defendant agreed to repay her from time to time when able to do so. The court finds an enforceable oral agreement between the parties.
B. Statute of Limitations.
The plaintiff's complaint was returnable to the court on July 1, 2008. Exhibit 1 evidences the sums the plaintiff claimed she advanced to the defendant for business expenses. The earliest advance was July 15, 2003 and the last on September 12, 2005.
The defendant argues that the plaintiff's claims are barred by the applicable statute of limitations, General Statutes § 52-581.
Sec. 52-581. Action on oral contract to be brought within three years.
(a) No action founded upon any express contract or agreement which is not reduced to writing, or of which some note or memorandum is not made in writing and signed by the party to be charged therewith or his agent, shall be brought but within three years after the right of action accrues.
(b) This section shall not apply to causes of action governed by article 2 of title 42a.
General Statutes § 52-581 has been held to apply only to executory oral contracts. See, John H. Kolb Sons, Inc. v. GL Excavating, Inc., 76 Conn.App. 599, 610, cert. denied, 264 Conn. 919 (2003). A contract is executory when "neither party has fully performed its contractual obligations and is executed when one party has fully performed its contractual obligations." Id. When a contract is executed the applicable statute of limitations is the six-year statute of limitations set forth in General Statutes § 52-576.
Sec. 52-576. Actions for account or on simple or implied contracts. (a) No action for an account, or on any simple or implied contract, or on any contract in writing, shall be brought but within six years after the right of action accrues, except as provided in subsection (b) of this section.
(b) Any person legally incapable of bringing any such action at the accruing of the right of action may sue at any time within three years after becoming legally capable of bringing the action.
(c) The provisions of this section shall not apply to actions upon judgments of any court of the United States or of any court of any state within the United States, or to any cause of action governed by article 2 of title 42a.
The plaintiff in this matter gave money to the defendant pursuant to an oral agreement. The plaintiff performed her part of the agreement thereby establishing an executed contract. Accordingly, the plaintiff's claims are not barred by the applicable statute of limitations, General Statutes § 52-576.
C. Statute of Frauds.
The defendant further claims the plaintiff's claims are barred by the statute of frauds, General Statutes § 52-550. There is no dispute that the agreement between the parties was not in writing. However, there was evidence that the plaintiff fully performed her obligations under the agreement by advancing funds to the defendant. Full performance by one party to a contract takes it out of the statute of frauds. See, Stanley v. M.H. Rhodes, Inc., 140 Conn. 689, 695 (1954), citing Strang v. Witkowski, 138 Conn. 94, 99 (1951). Further, the defendant partially performed his obligations by making partial payment to the plaintiff. "Full or part performance of an agreement gives rise to equitable considerations removing the oral agreement from the operation of the [s]tatute of [f]rauds . . ." (Citations omitted.) Dore v. Devine, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket No. CV 000176933 (October 6, 2000), D'Andrea, J. ( 28 Conn. L. Rptr. 313). Keiser v. Hanrahan, Superior Court, judicial district of Fairfield/Bridgeport, Docket No. CV04-0410421-S (August 25, 2004), Dewey J.
Sec. 52-550. Statute of frauds; written agreement or memorandum. (a) No civil action may be maintained in the following cases unless the agreement, or a memorandum of the agreement, is made in writing and signed by the party, or the agent of the party, to be charged: (1) Upon any agreement to charge any executor or administrator, upon a special promise to answer damages out of his own property; (2) against any person upon any special promise to answer for the debt, default or miscarriage of another; (3) upon any agreement made upon consideration of marriage; (4) upon any agreement for the sale of real property or any interest in or concerning real property; (5) upon any agreement that is not to be performed within one year from the making thereof; or (6) upon any agreement for a loan in an amount which exceeds fifty thousand dollars.
(b) This section shall not apply to parol agreements for hiring or leasing real property, or any interest therein, for one year or less, in pursuance of which the leased premises have been or are actually occupied by the lessee, or any person claiming under him, during any part of the term.
Based on the facts of this case and applicable case law, the plaintiff's claim is not barred by the statute of frauds.
D. Accord and Satisfaction. CT Page 21868
In Schoonmaker v. Brunoli, 265 Conn. 210, 277 (2003), the Supreme Court held that "[t]he hornbook Connecticut law governing the doctrine of accord and satisfaction, as recently set forth by this court in BB Bail Bonds Agency of Connecticut, Inc. v. Bailey, 256 Conn. 209, 212-13, 770 A.2d 960 (2001), provides an appropriate background for resolving the defendants' claim that the trial court abused its discretion in denying their motion to set aside the verdict. '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 . . . An accord is a contract under which an obligee promises to accept a stated performance in satisfaction of the obligor's existing duty . . . Upon acceptance of the offer of accord, the creditor's receipt of the promised payment discharges the underlying debt and bars any further claim relating thereto, if the contract is supported by consideration . . . Although the case law presents the more usual use of accord and satisfaction as a defense by the debtor against the creditor, it is evident that accord and satisfaction equally applies to both parties. Accord and satisfaction is a method of discharging a claim whereby the parties agree to give and accept something other than that which is due in settlement of the claim and to perform the agreement.' (Citations omitted; emphasis added; internal quotation marks omitted.) Id. Indeed, a validly executed accord and satisfaction precludes a party from 'pursuing any action involving the original, underlying claim.' Id., 213. The defendant bears the burden of proving accord and satisfaction when it is pleaded as a special defense. Prishwalko v. Bob Thomas Ford, Inc., 33 Conn.App. 575, 589, 636 A.2d 1383 (1994)."
Here, the defendant did not provide sufficient evidence to prove that the plaintiff, as the creditor, accepted the defendant's offer of accord in that the plaintiff did not agree to accept something other than that which was due to her in settlement of the claim that she is owed in excess of $27,000. On May 13, 2006, the plaintiff reiterated that she was willing to front VPI in excess of $25,000 and that she has receipts to verify the same. (Exhibit 8.) The defendant did not make an offer of accord thereafter accepted by the plaintiff. Accordingly, the plaintiff's claims, in this instance, are not barred by the doctrine of accord and satisfaction.
E. Proof of Amount Loaned to the Defendant for Business Expenses CT Page 21869
Based on the credible evidence, the plaintiff has proven by a preponderance of the evidence that she and the defendant had an oral agreement pursuant to which she would advance money to him and to VPI to assist in the development of VPI and that such advances would be repaid through the defendant making regular payments in reduction thereof as and to the extent funds were available to him to do so.
It is incumbent on the plaintiff to prove by a preponderance of the evidence the amount of any damages to be awarded. Proof of damages "should be established with reasonable certainty and not speculatively and problematically." Leisure Resort Technology, Inc. v. Trading Cove Associates, 277 Conn. 21, 35 (2006), quoting Johnson v. Flammia, 169 Conn. 491, 500 (1975).
The plaintiff, as set forth above, is not seeking to recoup funds advanced for personal expenses, but rather funds advanced for business purposes. The plaintiff's statement of expenses, Exhibit 1, seeks repayment for the following categories: car insurance; truck payments; credit card debt; travel and sales conferences; cash/miscellaneous; building rent and tooling and machinery materials. The plaintiff agreed that the amount she was seeking for taxes was not a business expense.
As the plaintiff did not initiate suit against VPI, as separate legal entity, the court, in ruling on a motion in limine filed by the defendant, precluded the plaintiff from introducing evidence of debts owed by VPI. As a result of such ruling, the plaintiff acknowledged the amount she advanced for tool and machinery materials was advanced to VPI and was therefore a debt of VPI and not of the defendant. Accordingly, the amount of $9,762.35 advanced for tool and machinery is to be deducted from the $27,408.71 shown on Exhibit 1 — leaving a balance of $17,646.36.
The court further finds the plaintiff did not prove by a preponderance of the evidence that all of the other sums she is seeking are business expenses. As to the building rent, the defendant testified, credibly that Bob Springs, the payee of the building rents paid by the plaintiff in the aggregate amount of $3,500, was the landlord for VPI. Although there was no written lease introduced to support the tenancy of VPI, the defendant testified that the premises were leased to and occupied by VPI for the construction of its machinery and VPI executed a release in favor of the landlord. Accordingly, the payments made by the plaintiff to Bob Springs were made on behalf of VPI and not the defendant.
The court finds additional indebtedness on Exhibit 1 is not the debt of the defendant, but the debt of VPI. The plaintiff also testified that the payment of $41.88 as shown in the "cash/miscellaneous" section of Exhibit 1 was paid to CT Water at the request of Bob Spring, the landlord for VPI. Accordingly, all of such payments made by the plaintiff were made on behalf of VPI and not advanced to the defendant.
As for the credit card payments, the plaintiff put on no evidence that the charges were for business use, in fact, there was no evidence at all of the basis for the charges. Similarly, there was no evidence of the use of the cash or seed money advanced for business purposes and the plaintiff testified that at her deposition she acknowledged that such funds may have been used to pay for personal expenses. The plaintiff has not met her burden to prove such expenses were business expenses she advanced to the defendant.
The plaintiff is also claiming the amounts she expended for truck payments and auto insurance were for business expenses. She testified that the payments were made with respect to the vehicle which was the defendant's personal vehicle and that she paid for the same so he could work. (Emphasis added.) The plaintiff acknowledged that the payments were for the defendant's personal vehicle. There was no evidence that the use of a motor vehicle was necessary for the conduct of the defendant's business or that the expenses incurred were ordinary and necessary business expenses. There was no evidence of the percentage of time the vehicle was used for personal use compared to for business purposes. It is axiomatic that using a motor vehicle to commute to work does not convert the vehicle into a business expense for the commuter. Further, the defendant contested the plaintiff's claim that she made the payments for the April 8, 2005 and July 8, 2005 insurance payments and for the April 12, 2005 and August 12, 2005 truck payments because the plaintiff did not produce evidence that she paid the same. It is of no matter. The court finds the plaintiff did not prove, by a fair preponderance of the evidence, that the truck payments and premium payments for motor vehicle insurance were business expenses.
Pursuant to the Internal Revenue Code, a taxpayer may not deduct from his-federal taxes personal, living, or family expenses. See, Commissioner v. Flowers, 326 U.S. 465, 474 (1946) ("The exigencies of business rather than the personal conveniences and necessities of the traveler must be the motivating factors"); Walliser v. Commissioner, 72 T.C. 433, 437 (1979) (to show that an expense was not personal, the taxpayer must prove that the expense was incurred primarily to benefit his business and the continuation of his employment and that there was a proximate relationship between the claimed expense and his business). See, 26 C.F.R. § 1.162-1 Business expenses which provides in relevant part "(a) In general. Business expenses deductible from gross income include the ordinary and necessary expenditures directly connected with or pertaining to the taxpayer's trade or business § 1.162-1(a), Income Tax Regs. (the expenditure must be "directly connected with or pertaining to the taxpayer's trade or business").
That leaves unaddressed from Exhibit 1 only the expenses for the travel/sales conference. The plaintiff did not produce any documents to verify that she paid $158.89 for the car rental and, accordingly, did not sufficiently prove that such funds were actually paid by her. As to the airline ticket, the plaintiff testified that she was only seeking one-half of the total she paid for the tickets and was not seeking to be repaid for her own ticket. The court finds that payment of the airline ticket for the defendant to attend a sales conference is a business expense she advanced for the defendant and the amount of $221.70 is due and payable by the defendant. The defendant introduced Exhibit J to evidence that he paid for the room and that such expense should be offset against the airline tickets cost. The court does not agree. The defendant had to pay for a room regardless of the plaintiff accompanying him on the trip.
The court finds that the plaintiff proved, by a preponderance of the evidence, that prior to September 2005, she advanced the total amount of $221.70 to the defendant (and not to VPI) for the development of his business. The plaintiff's evidence is support of the remainder of the funds she was seeking was problematic and not proven by a fair preponderance of the evidence.
F. Payment in Full.
The defendant claims that the plaintiff's claims are barred because he has paid the plaintiff all sums due and owing. The defendant produced evidence (Exhibit D) of payment of $10,000 on or about December 8, 2005 and he also testified that he twice gave her $1,000 in cash. The court credits the testimony of the defendant that he intended by such payments to reduce any amount he owned to the plaintiff for such business expenses and for any other indebtedness he may feel that he owes her for personal expenses she paid for him. The plaintiff, however, has brought suit only to collect the amounts she has advanced to him for business purposes. The plaintiff has established, by a fair preponderance of the evidence, that she advanced the sum of $221.70 to the defendant as a business expense. The amount paid by the defendant exceeds the amount the plaintiff has established as due and owing to her for business expenses and, accordingly, the plaintiff's claims are barred because he has paid her all of the sums due and owing.
G. Offset.
The defendant, in his counter-claim, alleges the plaintiff failed to offset amounts he paid for and on behalf of the plaintiff. He introduced evidence of payment of such expenses, including testimony of sending over a cleaning service to clean the plaintiff's home, payment of fuel oil delivered to the plaintiff's home (Exhibit L) and payment of Nextel phone bills (Exhibits M and N). As set forth above, he also produced evidence of having repaid the plaintiff more than $12,000 toward any debt that he owed her.
The plaintiff is not seeking to be repaid for amounts she advanced to or for the benefit of the defendant as personal or household expenses. As set forth above, the defendant has proven, by a fair preponderance of the evidence, that he paid to the plaintiff all of the sums he owed her as business expenses. The court need not reach this counter-claim of the defendant.
III. CONCLUSION
Accordingly, for the foregoing reasons, judgment shall enter in favor of the defendant.
It is so ordered.