Opinion
No. CV02-10898
January 5, 2004
MEMORANDUM OF DECISION
I INTRODUCTION
The plaintiffs, Chien Mien Liu and Chi San Liu, (hereinafter "the Lius") originally brought this action for money damages or an order in equity for specific performance of a building lease against the defendants, C. Pierce Enterprises, LLC (hereinafter "Pierce") and Jesse Critelli (hereinafter "Critelli"), relating to property located at the intersection of West and New Streets in Danbury, Connecticut. In the Amended Complaint, the Lius added a Second Count, seeking to annul the lease for fraud. The Amended Complaint alleges that the Lius, tenants of the defendants, entered into a parking lot lease with Pierce, and entered into a building lease for the structure located on the property with Pierce and Critelli. The Amended Complaint further alleges that due to the failure of the defendants to make certain improvements to the building pursuant to the building lease, the Lius were unable to complete the renovations to the building which was to open as an Asian grocery, and were therefore unable to pay rent to the defendants.
In their answer, the defendants deny the essential allegations of the Amended Complaint. They raise special defenses that they were unable to perform under the lease due to the plaintiffs' failure to complete the renovations to a sufficient point and failure to provide appropriate plans and specifications. Additionally, the defendants claim that the Lius breached the leases by their failure to pay rent and taxes as required by the leases.
The defendants filed a Five-Count Counterclaim, claiming non-payment of rent, use and occupancy, breach of the lease agreement, and fraudulent conveyance.
As discussed later in this decision, the fraudulent conveyance claim, although interchangeably referred to in the pleadings as a counterclaim and third-party claim, is in fact a third-party claim against Tommy G. Liu.
II FACTS
On the basis of a fair preponderance of the evidence, the court finds the following essential facts.
The parties as well as their respective attorneys engaged in a five-month period of negotiations prior to the actual signing of the lease agreements in September 1999. The Lius, who intended to convert the building, an old car dealership, into a mini-supermarket and restaurants, provided the initial "footprints" of the leases and were represented by counsel until shortly before the leases were signed. In addition to their attorney, the Lius' college-aged son was involved in the lease negotiations. There were numerous revisions to the leases. As a result of the negotiations, the Lius demanded and received the rent amounts they desired as well as a period of free rent. No evidence was presented by either party with respect to negotiations regarding the length of the leases.
The building was owned by Pierce and Critelli, and that lease was signed by the Lius, Mr. Clay Pierce on behalf of the corporate defendant and Critelli. The parking lot was owned by Pierce, and that lease was signed by the Lius and Mr. Clay Pierce on behalf of the corporate defendant.
The leases were signed at the defendants' attorneys office on September 30, 1999. Neither the defendants' attorney nor the defendants exerted any undue influence on the plaintiffs at any time. The Lius knowingly and voluntarily signed the leases. Pierce presented credible testimony regarding the ability of the Lius to understand, speak and read English during the negotiation period. The court was also persuaded that Mr. Liu could write in English as well. The Lius were experienced, sophisticated, successful restaurateurs, and Pierce had numerous meetings with the Lius at their place of business at the Danbury Fair Mall. Some of the negotiations included the Lius' son, Tommy Liu, who was very intelligent and spoke excellent English, with less of an accent than his parents. In addition, the defendants presented credible evidence through their real estate attorney relating to the ability of the Lius to converse and communicate in English during the lease negotiations.
While the Lius attempted to downplay their business experience, the court finds otherwise, particularly in light of the Lius' past and present interest and experience in several other restaurant businesses. While Mr. Liu originally testified that his wife had no involvement in the Cajun Cafe, a restaurant at the Danbury Fair Mall, he ultimately conceded that she was the manager of that restaurant, which is owned and operated by TGL, Inc., a company owned by Tommy G. Liu and formed in 1995, when Tommy Liu was sixteen. Additionally, Mr. Liu admitted that he was the manager of China Max, also at the Danbury Fair Mall, where Mrs. Liu also works; according to Mrs. Liu, that restaurant was run by TGL, Inc. The Lius owned another restaurant, the Mandarin Wok, for some period of time.
The Lius were paid in cash and primarily used their extensive personal cash savings toward the construction of their new grocery store/restaurants.
The court was not persuaded by the testimony of Mr. Liu that he could not read English and could only speak or write a little English, nor was the court persuaded by the Lius' testimony relating to any difficulties of Mrs. Liu with respect to the English language. While the Lius testified through a Chinese interpreter, the court took notice, and the record reflects, that Mr. Liu, in particular, frequently responded, in English, to questions asked in English, without waiting for the interpretation into Chinese.
The court finds that the Lius were active participants in the lease negotiations and had no difficulties in understanding the terms of the lease agreements or the English language. The court further finds that the Lius knew and understand the essential terms of the lease agreements prior to their signing them.
A significant amount of renovation as well as money was required to convert the building into a supermarket and restaurants. The Lius hired a contractor who was to obtain the necessary permits and manage the construction project. While they had fired the attorney who represented them in the lease negotiations, they retained another attorney for approvals subsequent to the signing of the leases.
Pierce signed either an application or building permit. He spent a significant amount of time in helping the Lius obtain the building permit. The court finds that while Pierce did in fact provide assistance to the Lius following the signing of the lease, this gratuitous assistance did not induce the Lius to sign the leases nor was it part of the lease agreements at issue.
Pierce was frequently present during the construction and on occasion advanced payment to a subcontractor. On one occasion, he did interfere with the construction process when several of the local inspectors informed him that the walls were improperly being built before the floors and that the subcontractors were not properly licensed, although the court finds that said interference did not cause any delay in the project. There was a one-and-a-half-year delay in obtaining the building permit, which was due to the Lius not paying the people they were using for the project. The Lius did not exercise their right under the leases to cancel after six months, despite the fact that no permits had been obtained.
Pierce and Critelli had obligations under the building lease with respect to the installation of the HVAC system, second-floor windows, and fencing. They were unable to install the fencing as the parking lot had not been blacktopped. They were unable to install the HVAC system, as the HVAC plans were incomplete, there was no HVAC permit and, furthermore, the structural steel needed in order to install the HVAC system was not in place. The Lius had provided only the drawings and not the actual plans for the HVAC system. The court heard convincing evidence from a licensed HVAC contractor who had been engaged by the landlords to do the HVAC work at the proper time.
The court was not persuaded by Mr. Liu's testimony that the flooring, ceiling, water pipes, electrical, cabinetry and shelving work were completed, with only the windows and HVAC work to be done, particularly in light of the photographs introduced into evidence which clearly show otherwise. Substantial work remained on the project and the project was not ready for the installation of the fencing or HVAC system by the landlords. Although the landlords could have installed the windows and refused to do so in light of the Lius' failure to pay rent, their failure to install the windows did not in any way impede the Lius' ongoing work on the building which remained behind schedule for reasons entirely unrelated to the windows. The court makes these findings despite its also finding that the Lius did invest significant amounts of money in the project.
The Lius paid $200,000 in cash and $275,000 by personal check to their general contractor for a total of $475,000 to the general contractor. Additionally, $11,750 was paid to a window vendor by TGL, Inc. check. Approximately $40,000 was expended on equipment although the equipment was retrieved when the deal fell through.
The contractor is identified as JK Construction Consultant, Inc. on the proposals, and Universal Group of New York, Inc. on the receipts; they share the same address, fax and telephone numbers.
No rent or taxes was ever paid by the Lius. Pursuant to the terms of the lease agreements, rent payments were to commence on September 23, 2000. The court finds, despite the testimony of Pierce and Critelli to the contrary, that the defendants agreed to forgive the rent obligations under the lease for one additional year, through September 23, 2001. The court finds most compelling the March 6, 2002 letter from the defendants' attorney to the Lius, referring to the defendants' "generous concession" in the one-year postponement of rent, and referring to the base rent of $37,000.02 owed at that time on the building lease. At the agreed-upon lease rate of $6,166.67 per month, that figure would represent six months of overdue rent, commencing on the new commencement date for rent of September 23, 2001 through the date of the letter. The court also finds, based upon credible testimony of the Lius, that the additional one-year forgiveness of rent applied to the lease for the parking lot as well. Thus, the defendants agreed to postpone the rent payments, and the rents were therefore to commence on September 23, 2001. The court finds that the letter written by the defendants' attorney as their agent met the requirements of paragraph 34 of the lease agreement, discussed below. The court finds that the one-year extension of the rent-free period was accepted by both words and conduct of the Lius; to hold otherwise would be unfair and unreasonable and work an injustice on the Lius who acted in reliance on the extension offer, investing more time and money in the construction project.
On February 13, 2002, the Lius quitclaimed their primary residence to their only child, Tommy Liu, approximately eleven days past his twenty-third birthday. At that point, all work on the project had just stopped. The court was not persuaded by Mr. Liu's testimony that the conveyance was a Chinese custom, particularly in light of the timing of the transaction.
The defendants never revoked permission for the building permit. They served a Notice to Quit on the Lius, and commenced a summary process action in May 2002.
III RELEVANT LEASE PROVISIONS
Paragraph one of both lease agreements provides for a lease term of five years, commencing on the date the lease was signed by both the lessor and the lessee. It further provides that the lessee has an option to renew the lease for two successive five-year periods. Paragraph 35 of both lease agreements sets forth in greater detail the lessee's option to renew the leases for the two successive five-year periods.
However, at paragraph 34, both leases provide for a security deposit in the ninth year of the leases. Additionally, the Schedule Bs, which are incorporated into the leases, shows a ten-year rent schedule.
Pierce and Critelli believed the leases were for an initial period of ten years. Their attorney, experienced in real estate, drafted the leases, and testified that the leases were five-year leases, with five-year renewal periods. The Lius themselves offered no credible testimony with respect to their understanding as to the length of the leases. In light of its findings as set forth below, the court need not and does not reach the issue of the length of the leases.
As mentioned above, the "footprints" of the first draft of the leases were provided by the Lius.
Paragraph 6 of the leases provide as follows:
The LESSEE further acknowledges and agrees he has not relied on any representation, promise, agreement or statement of the LESSOR or any representative, employee, or agent of the LESSOR in . . . deciding to enter into this LEASE.
Paragraph 7(c) provides that the lessee's obligations under the lease, including the obligation to pay rent, continue irrespective of any construction delays or problems, disputes between the lessor and lessee, and the like.
Paragraph 7(d) places responsibility on the lessee to secure building and other permits, approvals, and certificates.
Finally, paragraph 33 of the leases provides as follows:
This lease states the entire Agreement between the parties. No statement, promise or agreement by the LESSOR or LESSEE which conflicts with the terms of this Agreement may in any [way] modify, vary, alter, enlarge or invalidate any provisions of this LEASE. Any changes to this LEASE must be in writing and signed by the LESSOR and LESSEE.
IV DISCUSSION OF LAW
"In construing a written lease, which constitutes a written contract, there are three elementary principles: (1) The intention of the parties is controlling and must be gathered from the language of the lease in the light of the circumstances surrounding the parties at the execution of the instrument; (2) the language must be given its ordinary meaning unless a technical or special meaning is clearly intended; (3) the lease must be construed as a whole and in such a manner as to give effect to every provision, if reasonably possible." (Internal quotation marks omitted.) Peter-Michael, Inc. v. Sea Shell Associates, 244 Conn. 269, 275, 709 A.2d 558 (1998).
"[I]ntention is to be determined from the language used, the circumstances, the motives of the parties and the purposes which they sought to accomplish . . . A determination of contractual intent ordinarily presents a question of fact for the ultimate fact finder, although where the language is clear and unambiguous, it becomes a question of law for the court." (Citations omitted; internal quotation marks omitted.) Peter-Michael, Inc. v. Sea Shell Associates, 244 Conn. 269, 276, 709 A.2d 558 (1998).
"Contract language is unambiguous when it has a definite and precise meaning . . . concerning which there is no reasonable basis for a difference of opinion . . . A court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity, and words do not become ambiguous simply because lawyers or laymen contend for different meanings." (Citations omitted; internal quotation marks omitted.) Gould v. Mellick Sexton, 263 Conn. 140, 151, 819 A.2d 216 (2003).
"In contrast, a contract is ambiguous if the intent of the parties is not clear and certain from the language of the contract itself." BD Associates, Inc. v. Russell, 73 Conn. App. 66, 71, 807 A.2d 1001 (2002). "[A]ny ambiguity in a contract must emanate from the language used in the contract . . ." (Internal quotation marks omitted.) Poole v. Waterbury, 266 Conn. 68, 88, 831 A.2d 211 (2003). "If the language of the contract is susceptible to more than one reasonable interpretation, the contract is ambiguous." (Internal quotation marks omitted.) Poole v. Waterbury, 266 Conn. 68, 88, 831 A.2d 211 (2003). "Where a contract term is ambiguous extrinsic evidence is admissible to assist the court in resolving the question of the parties' intent." (Internal quotation marks omitted.) Anchor Electrical Contractors v. Waterbury, Superior Court, judicial district of Hartford, Docket No. CV 98 582103 (October 25, 2001, Peck, J.).
A AS TO COUNT ONE OF THE AMENDED COMPLAINT SEEKING SPECIFIC PERFORMANCE UNDER THE BUILDING LEASE CT Page 719
In this matter, the building lease has been terminated by a notice to quit and judgment in the summary process action and, as such, there can be no specific performance of the lease agreement. The court would note that even had the lease not been terminated, the court would not order specific performance, for the reason that it was impossible for Pierce and Critelli to perform their obligations under the lease due to the status of the construction work. Bringing the construction project to a point where Pierce and Critelli could perform was a condition precedent under the lease agreement, the nonoccurrence of which excused the nonperformance by Pierce and Critelli. See, e.g., Zivic v. Zivic, 26 Conn. App. 5, 9, 596 A.2d 475 (1991) ("A condition precedent is a fact or event that must exist or take place before there is a right to performance . . . The nonoccurrence of such a condition pends the obligor's duty to perform on the ground that it is not due as long as the condition has not occurred" (citations omitted)). The court therefore finds in favor of the defendants as to the First Count of the Amended Complaint.
B AS TO COUNT TWO OF THE AMENDED COMPLAINT WHICH SEEKS TO ANNUL THE LEASE FOR FRAUD
The Lius claim in the Second Count that Pierce and Critelli, acting through Pierce, took advantage of their alleged inability to read English and procured their signatures on a lease which they could not and did not read and which the Lius allegedly signed in reliance on various assurances of the defendants. Although the complaint is unclear, the court proceeds with the understanding that the Lius seek annulment of both the building lease and the parking lot lease.
"A party may not assert as a defense to an action on a contract that it did not understand what it was signing." John M. Glover Agency v. RDB Building LLC, 60 Conn. App. 640, 645, 760 A.2d 980 (2000).
"[A] party [is not] allowed, in the absence of accident, fraud, mistake or unfair dealing, to escape his contractual obligations by saying . . . that he did not read what was expressly incorporated as specific provisions of the contract into which he entered." (Internal quotation marks omitted.) E.F. Construction Co. v. Rissil Construction, 181 Conn. 317, 321, 435 A.2d 343 (1980).
"Fraud vitiates all contracts, written or otherwise; no rule of law, including the parol evidence rule, deprives a trial court of the power to allow oral testimony to prove fraud." Harold Cohn Company v. Harco International, 72 Conn. App. 43, 49, 804 A.2d 218 (2002).
"[Fraud in the factum is] [s]uch misrepresentation as has induced the party to sign the instrument with neither knowledge nor reasonable opportunity to obtain knowledge of its character or its essential terms." (Internal quotation marks omitted.) Heating Acceptance Corporation v. Patterson, 152 Conn. 467, 474, 208 A.2d 341 (1965).
"Fraud in the inducement [is] [f]raud connected with [the] underlying transaction and not with the nature of the contract or document signed. Misrepresentation as to the terms, quality or other aspects of a contractual relation, venture or other transaction that leads a person to agree to enter into the transaction with a false impression or understanding of the risks, duties or obligations she has undertaken." Black's Law Dictionary (6th Ed. 1990).
"Fraud in the inducement of a contract ordinarily renders the contract merely voidable at the option of the defrauded party, who also has the choice of affirming the contract and suing for damages." (Internal quotation marks omitted.) Harold Cohn Company v. Harco International, 72 Conn. App. 43, 50, 804 A.2d 218 (2002).
The Amended Complaint does not identify whether the claim of fraud is based on fraud in the inducement or fraud in the factum. The Amended Complaint alleges that the defendants defrauded the Lius by procuring their signatures on a document they did not and could not read and the court reads the allegations to state a claim of fraud in the factum. Nonetheless, the court has considered both claims and finds that there are no facts to support either a claim of fraud in the inducement or fraud in the factum.
The plaintiffs have not proven a claim for fraud in the inducement. The Lius fully understood the true risks, duties and obligations they undertook and were not induced to enter into the lease agreements by any such misrepresentations. Neither are there facts to support a claim for fraud in the factum. The Lius knew of the essential terms of their lease agreements and had ample opportunity to obtain such knowledge without any misrepresentation to induce their signing of the leases. As such, the court finds in favor of the defendants as to the Second Count of the Amended Complaint.
C AS TO THE FIRST COUNT OF THE COUNTERCLAIM SEEKING NON-PAYMENT OF RENT (BUILDING LEASE)
In the First Count of their Counterclaim, Pierce and Critelli claim that the Lius breached the lease agreement by failing to pay rent on the building lease.
"[T]he key elements of a breach of contract action considered by the court are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages." Bouchard v. Sundberg, 80 Conn. App. 180, 189, 834 A.2d 744 (2003).
"[W]hether there was a breach of contract is ordinarily a question of fact." Benedetto v. Wanat, 79 Conn.App 139, 152, 822 A.2d 438 (2003).
"Contract law has always distinguished between material and immaterial breaches. If a breach is immaterial, the existing rights of the parties do not change. The contract remains enforceable although the breach may occasion liability for damages, if any can be proved . . . a material breach, on the other hand, does affect the substantive rights of the parties. A substantive or material breach is one which touches the fundamental purpose of the contract and defeats the object of the parties in making the contract . . . The standard of materiality [of contractual breach] must be applied in the light of the facts of each case in such a way as to further the purpose of securing for each party his expectation of an exchange of performance . . . A material as opposed to incidental breach bf contract is one that is so important that it vitiates or destroys the entire purpose for entering into the contract." (Citations omitted; internal quotation marks omitted.) Fishman v. Smartserv Online, Inc., Superior Court, complex litigation docket at Stamford, Docket No. X05 CV 0172810 S (February 11, 2003, Rogers, J.).
"In Bernstein v. Nemeyer, . . . our Supreme Court approved the multifactor standards for materiality contained in § 241 of the Restatement (Second) of Contracts. In determining whether a failure to render or to offer performance is material, the following circumstances are significant: (a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; [and] (e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing." (Internal quotation marks omitted.) Strouth v. Pools by Murphy Sons, 79 Conn. App. 55, 60, 828 A.2d 620 (2003).
"A breach of a covenant to pay rent does not automatically result in the termination of the lease . . . The failure to pay rent gives the landlord a right to terminate the lease and in order to terminate a lease a landlord must perform some definite unequivocal act which clearly demonstrates his intent to terminate the lease . . . Service of a statutory notice to quit is such an unequivocal act." (Citations omitted; internal quotation marks omitted.) Pelensky v. Alejos, Superior Court, judicial district of Fairfield Housing Session at Bridgeport, Docket No. SPBR 9604 31878 (July 17, 1996, Tierney, J.).
The court finds that the Lius breached the building lease agreement by their failure to pay rent and that the failure to pay rent was a material breach. The defendants/plaintiffs on the Counterclaim, Pierce and Critelli are therefore entitled to damages for the unpaid rent, from the date the obligation to pay rent commenced on September 22, 2001, to the date the Notice to Quit was served on May 23, 2002, in the total amount of $55,500.03, representing nine unpaid months at the agreed-upon rent rate of $6,166.67 per month.
In addition, the defendants/plaintiffs on the Counterclaim seek attorneys fees, and their counsel filed an affidavit in that regard. The court finds that the claim is proper pursuant to paragraph 21 of both the building lease and parking lot lease, and awards attorneys fees in the amount of $8,000, representing thirty-two hours at $250 per hour.
D AS TO THE SECOND COUNT OF THE COUNTER CLAIM SEEKING USE AND OCCUPANCY
"General Statutes § 47a-26b provides in relevant part that the court . . . shall order payments for use and occupancy in an amount equal to the last agreed-upon rent or, in the absence of a prior agreed-upon rent, in an amount equal to the fair rental value of the premises during the pendency of such action accruing from the date of such order . . . In determining the amount of the use and occupancy payment, therefore, the court looked to the amounts previously agreed on by the parties. Whether and in what terms parties have undertaken a contractual commitment are questions of fact, the determination of which by the trial court may be overturned on appeal only if the trial court's determinations are clearly erroneous." (Internal quotation marks omitted.) East Hartford Housing Authority v. Morales, 67 Conn. App. 139, 141, 786 A.2d 1134 (2001).
The defendants/plaintiffs on the Counterclaim are entitled to use and occupancy in the amount of $38,438.91, calculated at the prior agreed-upon rent of $6,166.67, for six and a quarter (6-1/4) months from May 23, 2002 through December 1, 2002, the last date the Lius were entitled to possession.
E AS TO THE THIRD COUNT OF THE COUNTERCLAIM ALLEGING BREACH OF LEASE
In the Third Count of the Counterclaim, Pierce and Critelli allege that although they attempted to mitigate their losses from the breach by seeking new tenants, they sustained damage by not receiving anticipated rental payments, property taxes and improvements to the property. Additionally, they claim damages to restore the building and property to a condition where they can be leased.
"The general rule in breach of contract cases is that the award of damages is designed to place the injured party, so far as can be done by money, in the same position as that which he would have been in had the contract been performed." (Internal quotation marks omitted.) Gianetti v. Norwalk Hospital, 266 Conn. 544, 565 n. 11, 833 A.2d 891 (2003). In the present matter, the burden of proof is on the landlord to prove the damage claim. Gargano v. Heyman, 203 Conn. 616, 620 (1987) (burden of proving damages is on the party claiming them).
Although there was some minimal evidence presented relating to the defendants' efforts to minimize their losses by seeking new tenants, the court finds that the defendants/plaintiffs on the Counterclaim did not make reasonable efforts to minimize their damages. Danpar Associates v. Somesville Mills Sales Room, 182 Conn. 444, 446, 438 A.2d 708 (1980). "It is well established that in an action for damages for breach of a lease, the injured party is under a duty to mitigate his or her damages . . . The duty to mitigate requires a landlord to make reasonable efforts to minimize damages . . . which includes taking steps to relet the premises. What constitutes reasonable efforts is a question of fact for the trier." (Citations omitted; internal quotations marks omitted.) Rokalor v. Connecticut Eating Enterprises, 18 Conn. App. 384, 390, 558 A.2d 265 (1989).
In the present matter, there was insufficient credible evidence relating, for example, to costs of advertising the premises for rent subsequent to the Lius vacating the premises nor was there any evidence relating to the strength (or weakness) of the rental market at that time. The court was not persuaded by a fair preponderance of the evidence that the premises were in a condition such that another tenant could not be found had reasonable efforts been made to secure another tenant.
The court finds that the defendants did not make reasonable efforts to minimize their damages and therefore refuses to award the defendants/plaintiffs on the Counterclaim anticipated rental payments, property taxes, or improvements to the property.
There was credible and convincing evidence presented relating to the condition of the premises following the Lius' departure, and the necessary costs to repair the premises in light of damages caused by the Lius. The dollar value of damage may be shown by paid bills or reasonable and probable estimates. DiNapoli v. Doudera, 28 Conn. App. 108, 111 (1992). The court therefore awards damages in the amount of $28,400.00 relating to necessary structural steel work; $69,191.50 for clean up of debris and demolition needed to prepare for the installation of new floors on the first floor; and $29,282.50 relating to work needed to remove the tile and sub-flooring on the two upper levels; and therefore finds in favor of the defendants/plaintiffs on the Counterclaim as to the Third Count of the Counterclaim, in the total amount of $126,874.
The court declines to award damages for real estate taxes; although a proper claim as "additional rent" under both lease agreements, the defendants/plaintiffs on the Counterclaim did not prove such claim by a fair preponderance of the evidence.
F AS TO THE FOURTH COUNT OF THE COUNTERCLAIM ALLEGING FRAUDULENT CONVEYANCE AS TO TOMMY G. LIU
The Fourth Count alleges that the Lius fraudulently conveyed certain property to Tommy G. Liu, the defendant transferee, at a time the Lius were indebted under the lease to Pierce and Critelli. The pleadings refer to the fraudulent conveyance claim interchangeably as a third-party claim as well as a counterclaim; technically, it appears that the claim against Tommy Liu is a third-party claim.
"The question of whether a fraudulent conveyance took place is solely a question of fact to be determined by the trier." (Internal quotation marks omitted.) National Loan Investors v. World Properties, 79 Conn. App. 725, 731, 730 A.2d 1184 (2003).
"[T]he elements of fraudulent conveyance, including whether the defendants acted with fraudulent intent, must be proven by a heightened standard of proof, that of clear, precise and unequivocal evidence." (Internal quotation marks omitted.) Litchfield Asset Management Corp. v. Howell, 70 Conn. App. 133, 141, 799 A.2d 298 (2002).
General Statutes § 52-552e(a) sets forth the test to determine whether a transfer is fraudulent: "A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, if the creditor's claim arose before the transfer was made or the obligation was incurred and if the debtor made the transfer or incurred the obligation: (1) With actual intent to hinder, delay or defraud any creditor of the debtor; or (2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor (A) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction, or (B) intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due."
The term transfer is defined by General Statutes § 52-552b(12) to mean "every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease and creation of a lien or other encumbrance." An asset is, among other things, "property of a debtor, but the term does not include: (A) Property to the extent it is encumbered by a valid lien . . ." General Statutes § 52-552b(2). Property is "anything that may be the subject of ownership." General Statutes § 52-552b(10).
"[A] creditor plaintiff in a fraudulent conveyance action may seek as remedies both damages and a setting aside of the wrongful conveyance . . . Nonetheless, [c]ommon law principles do not authorize a general creditor to pursue the transferee in a fraudulent conveyance action for anything other than the specific property transferred or the proceeds thereof . . . As such, a damages award against a fraudulent transferee generally is appropriate only where the transferee subsequently disposes of the transferred property and retains the proceeds of that disposition. In such a situation, the amount of the damages award against the transferee is limited to the proceeds it retained from the disposition of the transferred property, regardless of the total debt owed the plaintiff by the original transferor . . . Accordingly, under Connecticut law . . . a successful claim of fraudulent conveyance could not result in a judgment of liability against the transferee, joint and several or otherwise, on the underlying debt obligations owed by the transferor [beyond the value of the property wrongfully transferred or the proceeds thereof]." (Citations omitted; internal quotation marks omitted.) Litchfield Asset Management Corp. v. Howell, 70 Conn. App. 133, 144, 799 A.2d 298 (2002).
"[A]lthough the rule is that as between the parties to an executed fraudulent conveyance, the transferee will not be compelled to return the property to the transferor, the transferee may voluntarily restore or reconvey the property to the transferor. In fact, it has been said that while a fraudulent grantee is under no legal obligation to reconvey, he is under a moral obligation to do so. Therefore, all acts done by him in execution of this duty should be favorably considered in equity, since the moral obligation is a valuable and sufficient consideration for a reconveyance." (Internal quotation marks omitted.) Robinson v. Coughlin, 266 Conn. 1, 9-10, 830 A.2d 1114 (2003).
This court finds by clear, precise and unequivocal evidence, that the Lius acted with fraudulent intent when they quitclaimed to Tommy Liu for nominal consideration of one ($1) dollar their primary residence, at a time when their son was approximately twenty-three years and eleven days old. The court finds that the transfer was made at the time the Lius owed a significant obligation to Pierce and Critelli under the leases, and that the transfer was made with actual intent to defraud Pierce and Critelli. The court therefore finds in favor of the defendants/plaintiffs on the Counterclaim and orders that the conveyance be set aside and be declared null and void as to the plaintiffs on the Counterclaim.
C AS TO THE FIFTH COUNT OF THE COUNTERCLAIM ALLEGING NON-PAYMENT OF RENT (PARKING LOT LEASE)
In the Fifth Count of the Counterclaim, Pierce alleges that the Lius breached the lease agreement on the parking lot by failing to pay rent. The court finds that the Lius materially breached the parking lot lease by their failure to pay the monthly rentals of $1,500. Pierce is therefore entitled to damages for the unpaid rent, from the date the obligation to pay rent commenced on September 22, 2001 through December 1, 2002, the last date the Lius were in possession, for total damages of $22,875, representing fifteen and a quarter (15-1/4) months rent at $1,500 per month.
V CONCLUSION
Judgment may enter in favor of the defendants, Pierce and Critelli, as to both counts of the Amended Complaint.
Judgment may enter in favor of the defendants, Pierce and Critelli/plaintiffs on the Counterclaim as to count One, in the amount of $55,500.03 in damages for unpaid rent and $8,000 for attorneys fees, for a total of $63,500.03.
Judgment may enter in favor of the defendants, Pierce and Critelli/plaintiffs on the Counterclaim as to Count Two for damages for use and occupancy, in the amount of $38,438.91.
Judgment may enter in favor of the defendants, Pierce and Critelli/plaintiffs on the Counterclaim as to Count Three for damages in the total amount of $126,874.
Judgment may enter in favor of Pierce and Critelli with respect to the Fourth Count of the "Counterclaim"/Third-Party Claim, and the court orders that the conveyance to the third-party defendant, Tommy Liu, be set aside and be declared null and void as to Pierce and Critelli.
Judgment may enter in favor of the defendant Pierce/plaintiff on the Counterclaim as to the Fifth Count, for damages in the amount of $22,875 for unpaid rent.
BARBARA N. BELLIS, JUDGE.