Opinion
CV166061820S
06-16-2017
River Bank Construction, LLC v. Renaissance City Development Association, Inc. et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
Sybil V. Richards, Judge.
This a breach of contract case arising from a development agreement among the plaintiff developer (" Riverbank" or, alternatively, " developer" and/or " plaintiff") and the defendants city of New London (the " city" individually and collectively in the singular as the " defendant") and the city's designated agent Renaissance City Development Association, Inc. (" Renaissance" or, alternatively, collectively in the singular as the " defendant") regarding the city's implementation of a $70,000,000 Fort Trumbull Municipal Development Plan in relation to Riverbank's planned construction of a 104-unit residential development that was to be called " The Village On The Thames" and be built out on 4 parcels of land along the Thames River in the Fort Trumbull District of New London (" project"). The plaintiff commenced the present action by filing a writ, summons and complaint on April 25, 2016 that was returnable to the court on May 10, 2016.
The contract is called the " Development Agreement between New London Development Corporation and River Bank Construction, LLC, November 12, 2010." To avoid confusion, it is worth mentioning that New London Development Corporation is currently known as Renaissance, one of the named defendants. It is also worth mentioning that the development agreement referenced in this decision incorporates terms and conditions from what it calls " Related Documents, " which include, but are not limited to, the city's " Request for Qualifications" and has been " . . . subsequently amended three times on November 17, 2011, October 23, 2012 and January 11, 2013" according to the representations made in the parties in their Joint Trial Management Report that they filed with the court in advance of the hearing on the underlying motion for discharge.
The court acknowledges that the first two words in the plaintiff's corporate name are " River Bank, " but the court will, for the sake of simplicity, refer to it as one word: " Riverbank" or, as noted above, " developer" and/or " plaintiff."
According to the parties' Joint Trial Management Report, the four parcels are shown on a survey map as Parcels 2A, 2B, 2C and 3B and consist of 6.56 acres of real property.
It should be noted that the plaintiff filed a revised complaint dated March 2, 2017 following the hearing on the underlying matter before the court. However, it has no impact upon the court's resolution of the issue presented by Renaissance's motion for discharge.
In its complaint, the plaintiff alleges, among other things, that the defendant breached the development agreement by failing to convey title to certain pieces of real property to the plaintiff upon the plaintiff's completion of its obligations under said agreement. In its requests for relief, the plaintiff seeks, inter alia, specific performance. Renaissance counters, in addition to asserting other defenses, that Riverbank failed to meet the condition precedents in the development agreement relating to Riverbank's obligation to secure private financing to construct the project during the " Pre-Development Period" that ended on May 17, 2013, time being of the essence, and was in default when Riverbank advised Renaissance that it would instead use a mix of alternative financing options, which assurances Renaissance found to be inadequate, including financing from the personal assets of one of its members, two days before the May 14, 2013 scheduled closing. In response, on July 11, 2016, Renaissance moved to discharge the lis pendens filed by the plaintiff arguing that there was no probable cause to sustain the validity of the plaintiff's claim on the ground that the development agreement terminated because of Riverbank's default and on the ground that Riverbank's remedies under the applicable default provisions were limited only to the remedies identified therein. On February 28, 2017, the court held a hearing at which the court heard testimony and admitted exhibits into evidence.
The original complaint contains four counts and the revised complaint comprises of seven counts. This is, as mentioned above, of no importance for purposes of this decision.
The parties' Joint Trial Management Report indicates that [Riverbank] was subject to complying with the " . . . terms of a " Pre-Development Period" during which it would obtain all the necessary approvals and permits and such financing that would be required to complete the proposed development project. Upon satisfaction of the conditions precedent specified in Section 3.01 of the Agreement, [Renaissance] would convey the parcels to be developed to [Riverbank] free and clear of DECD's Mortgages." The reference made to the abbreviation " DECD" stands for the state of Connecticut's Department of Economic and Community Development.
Discussion
A plaintiff is permitted to file a lis pendens if the action is intended to affect real property. General Statutes § 52-325(a) provides, in relevant part: " In any action in a court of this state . . . (1) the plaintiff . . . at the time the action is commenced or afterwards . . . if the action is intended to affect real property, may cause to be recorded in the office of the town clerk . . . in which the property is situated a notice of lis pendens . . ." Subsection (b) of said section states that the phrase " intended to affect real property" " . . . means (1) actions whose objects and purpose is to determine the title or rights of the parties in, to, under or over some particular real property; (2) actions whose object and purpose is to establish or enforce previously acquired interests in real property; (3) actions which may affect in any manner the title to or interest in real property, notwithstanding the main purpose of the action may be other than to affect the title of such real property."
In order to prevail on the filing of the lis pendens, the plaintiff must prove that the action will affect title to or an interest in real property and that there is probable cause to sustain said lis pendens. Donenfeld v. Friedman, 79 Conn.App. 64, 67-68, 829 A.2d 107 (2003).
In the case of Levinson v. Lawrence, our Appellate Court provided an outline of the statutory framework, legal processes and procedures and the evidentiary burden that apply when a property owner challenges the filing of a lis pendens similar to the circumstances presented here. " When a property owner challenges the existence of probable cause for the validity of the lis pendens claim, resolution of this application for discharge is governed by General Statutes § § 52-325a, 52-325b and 52-325c. Section 52-325a prescribes the required content of an application for discharge grounded on an alleged lack of probable cause. Section 52-325b describes the requisite hearing to be held on a § 52-325a application, if probable cause is contested, and assigns the burden of proof on this issue to the lis pendens claimant. Subsection (b) of § 52-325b empowers the trial court, having resolved the probable cause issue, either to deny the application for discharge or to order the notice of lis pendens discharged. To complete the scenario, § 52-325c(a) then provides that [a]ny order entered as provided in subsection (b) of section 52-325b shall be deemed a final judgment for purpose of appeal.' Other subsections of § 52-325c: require an appeal to be taken within seven days; provide for a hearing upon an application for a stay, supported by a surety bond, once a timely appeal has been taken; and authorize recordation of an order discharging a notice of lis pendens." Levinson v. Lawrence, 162 Conn.App. 548, 133 A.3d 468 (2016).
" When, however, a property owner files a motion for discharge alleging an invalid notice of lis pendens, resolution of this motion is governed entirely by General Statutes § 52-325d. Section 52-325d provides relief if the recorded notice of lis pendens: '(1) . . . is not intended to affect real property, or (2) . . . does not contain information required by subsection (a) of section 52-325 or section 46b-80 . . . or (3) . . . was not [served] in accordance with statutory requirements, or (4) . . . for any other reason . . . never became effective or has become of no effect . . .' Upon a judicial finding that the notice of lis pendens 'never became effective or has become of no effect, ' the court is empowered to issue its order 'declaring that such notice of lis pendens is invalid and discharged.' General Statutes § 52-325d." (Footnotes omitted.) Dunham v. Dunham, 217 Conn. 24, 35-39, 584 A.2d 445 (1991). Id.
Once the notice lis pendens has been recorded as described in the preceding subsection, a hearing must be held if an applicant applies for a discharge of said notice. " Whenever a notice of lis pendens is recorded against any real property pursuant to subsection (a) of 52-325, the property owner, if the action has not then been returned to court, may make application . . . to the superior court . . . that a hearing . . . be held to determine whether such notice of lis pendens should be discharged." § 52-325a(a).
Probable Cause for the Lis Pendens
In the parties' Joint Trial Management Report, the parties have composed the precise query that they agree is presented to the court for resolution: " . . . [t]he sole issue is the validity of the plaintiff's lis pendens." And the court agrees with the parties after researching the applicable law. Thus, as more fully developed by the court, the court acknowledges that the issue that is the focus of the court's inquiry, following the mandated hearing that was conducted under the parameters of General Statutes § 52-325b, is whether the plaintiff has satisfied its burden of demonstrating that there was probable cause to file the notice of lis pendens in connection with the parcels of land that are the subject of the instant action. On this topic, the long standing principles of law that apply are clear as expressed by the Appellate Court in Corsino v. Telesca, 32 Conn.App. 627, 630 A.2d 154 (1993).
" Our rules regarding the standard of proof for establishing probable cause are well settled. It is important to remember that the plaintiff does not have to establish that he will prevail, only that there is probable cause to sustain the validity of the claim. Village Linc Corporation v. Children's Store, Inc., 31 Conn.App. 652, 657, 626 A.2d 813 (1993); citing Dow & Condon, Inc. v. Anderson, 203 Conn. 475, 479, 525 A.2d 935 (1987). " The legal idea of probable cause is a bona fide belief in the existence of the facts essential under the law for the action and as such would warrant a man of ordinary caution, prudence and judgment, under the circumstances, in entertaining it. Wall v. Toomey, 52 Conn. 35, 36 (1884). Probable cause is a flexible common sense standard. It does not demand that a belief be correct or more likely true than false. Texas v. Brown, 460 U.S. 730, 103 S.Ct. 1535, 75 L.Ed.2d 502 (1983)." (Internal quotation marks omitted.) Village Linc Corporation v. Children's Store, Inc., supra, 31 Conn.App. at 657-58, 626 A.2d 813, citing Three S. Development Co. v. Santore, 193 Conn. 174, 175, 474 A.2d 795 (1984), and Goodwin v. Pratt, 10 Conn.App. 618, 623, 524 A.2d 1168 (1987). Thus, we must determine whether the trial court's determination that probable cause exists to sustain the plaintiff's claim was clearly erroneous. Village Linc Corporation v. Children's Store, Inc., supra, 31 Conn.App. at 658, 626 A.2d 813."
At the onset, the court notes that it has reviewed the entire record including, but not limited to, the complete court file, full exhibits admitted during the hearing, the motion before the court and the objection filed thereto, observed the demeanor of the witnesses and considered the oral arguments made by counsel. But to resolve the question presented in the instant action, the court must apply the legal principles as stated herein above beginning with an in-depth examination of the relevant provisions of the development agreement. Although the parties are at odds as to whether the plaintiff met its obligations and performed its responsibilities in the timeframe specified in the development agreement, the court finds that there is no dispute between the parties with respect to their respective legal theories about the applicable terms and conditions of the development agreement that are controlling over the current issue before the court. Those provisions are as follows:
The court is well aware that arguments made by counsel are not evidentiary and, as a result, did not ascribe any weight to or treat said arguments as evidence.
8.06 Remedies in Event of Default Not Cured
(a) If the Developer is the defaulting party, then NLDC and, where applicable, DECD shall collectively have the following exclusive remedies:
(i) The right to retain and use, free from any claims by the Developer, the Deposit paid in accordance with the provisions of Section 5.06(a), to reimburse NLDC for costs and expenses incurred in the issuance and implementation of the Project and to permit NLDC to seek a new developer for the Project;
(ii) The right to draw upon letters of credit and/or payment and performance bonds in accordance with their terms, if any;
(iii) The right to reimbursement of all costs and reasonable attorneys fees incurred in connection with the enforcement of this Agreement and the exercise of NLDC's rights and remedies in the event of a default by Developer hereunder;
(iv) The right to terminate this Agreement after the expiration of applicable cure or grace periods, such termination to be effective upon delivery of notice of the same pursuant to the notice provisions set forth herein at Section 9.04.
(b) If NLDC is the defaulting party, then the Developer shall have, subject to the rights granted DECD hereunder including, without limitation, the right of DECD to cure such default as herein provided, the following exclusive remedies;
(i) The right to terminate this Agreement, in which event NLDC shall return to Developer the Deposit minus those sums which Section 5.06(a) of this Agreement entitled the NLDC to have withdrawn as of the date of such notice of termination is received and this Agreement shall be of no further force and effect except as to matters which expressly survive termination of this agreement;
(ii) The right to specific performance with respect to the conveyance of title to a Project Parcel for which all conditions precedent to the transfer of title have been satisfied (or, but for NLDC's default, would have been satisfied), provided Developer is not in default hereunder;
(iii) The right to specific performance with respect to the delivery of a Certificate of Completion concerning the Project, or a Project Parcel for which all conditions have been fulfilled (or, but for NLDC's default, would have been fulfilled), provided Developer is not in default hereunder;
(iv) The right to specific performance with respect solely to release or elimination of a land title encumbrance voluntarily created by NLDC after completion of the title review by the Developer in violation of Section 3.02; and
(v) The right to reimbursement of all costs and reasonable attorneys fee incurred in connection with the enforcement of this Agreement and the exercise of Developer's rights and remedies in the event of a default by NLDC hereunder.
(c) The remedies provided in this Article VIII are exclusive with respect to this Agreement, but are in addition to any remedies available elsewhere in the Related Agreements. Exercise of one remedy shall not be deemed to preclude exercise of other remedies for the same default, and all remedies available to a party may be exercised cumulatively.
Again, for the sake of clarity, the New London Development Corporation, which goes by the acronym " NLDC" in the development agreement is now known as the defendant " Renaissance" in this lawsuit.
However, to determine whether the plaintiff satisfied its legal burden by the conclusion of the hearing, the court must now turn to the relevant and credible evidence presented at the hearing on Renaissance's motion for discharge of the lis pendens.
Hearing on the Motion for Discharge of Lis Pendens
At the hearing, each party called a witness to the stand. Riverbank's sole witness was Robert Stillman, a managing member of Riverbank who has had a 50% interest in Riverbank since 2005. He testified that his father is also a principal at Riverbank. Stillman has been a general contractor since 1984. He testified that he had three years, under the development agreement, to complete the construction project after Renaissance transferred the parcels to Riverbank. He disputed Renaissance's claim that it provided Riverbank with the appropriate default notices in the manner described in the development agreement. In addition, Stillman contended that the development agreement gave Riverbank the right to file a lis pendens in the event of a default on the part of Renaissance. He further testified that Riverbank received a letter of completion from Renaissance indicating that all the pre-conditions Riverbank had to satisfy were completed. Additionally, Stillman testified that Riverbank approached six to seven banks to finance the project and that it received one commitment from M& T Bank. Stillman further testified that self-financing is permitted under the terms of the development agreement and posited that the defendant lacks the right to unilaterally determine that Riverbank's decision to self-finance phase one of the project was unsatisfactory because the criterion for rejecting financing was based on a reasonableness standard under the development agreement. Stillman also attested that he executed a personal guaranty for the benefit of Red Coat Realty, a company in which he is a partner with father, for the purpose of financing phase one of the project. He also admitted that the state informed him that the developer's responsibility to construct the project could not be self-financed but never asked for proof of self-financing documentation. Lastly, Stillman insisted that he was ready to consummate the transaction among the parties as scheduled and had subcontractors in place.
After the plaintiff rested, Renaissance called a witness, Michael Joplin, who testified that he has been a general contractor for 30 years and was the former president of Renaissance from 2002 through 2014. Joplin testified that correspondence indicating that Riverbank met all of the required pre-conditions was based upon commitments from private financing sources, not self-financing by Riverbank, and that there were no such proposals mentioned prior to the May 10, 2013 Pre-Development Period date in relation to the project. Joplin further attested that on May 13, 2013, he received a telephone call from Stillman who informed him that he was not going to use private financing but would use funds from personal sources. Additionally, Joplin testified that Stillman was reluctant to provide DECD with details and documents relating to any letter of credit or escrowed funds Stillman supposedly relied on to finance the construction project during a meeting of the parties on May 15, 2013 and that DECD would not proceed with the closing without proof of such private commitments because it did not want to " chase" contractors who fail to perform as agreed. Joplin further attested that Stillman later presented a counter-proposal that listed only assets but omitted any reference to liabilities. Joplin also disagreed with Stillman's posture that DECD lacked any authority to find self-financing acceptable because Joplin claimed that DECD had final decision making authority over any form of permissible self-financing and the development agreement gave DECD the right to demand proof of alternative sources of funds or supporting documentation.
Despite the various other legal arguments raised by the parties in their pleadings, the court is mindful of the ultimate issue to be resolved; that is, whether there is probable cause to sustain the validity of Riverbank's lis pendens claim. In the final analysis, by applying the applicable statutes and caselaw cited herein to the credible and relevant facts found by the court, the court concludes that Riverbank presented a sufficient level of evidence regarding its bona fide belief, consistent with that of a man with ordinary caution, prudence and judgment, in the existence of the essential facts to demonstrate that there is some reasonable degree of merit to its claims that the litigation it commenced is intended to affect the four parcels of real property that are the subject of the instant action and/or title to the same and that said litigation involves real property that was intended to be conveyed to it for the construction of multiple residential units. In sum, the court finds that there was a written development agreement between the parties that relates to the construction of over 100 residential units in the downtown area of the city of New London, that the development agreement spelled out the respective responsibilities of the parties to finance, transfer title to and construct said units on one or more of four parcels of real property under specific terms and conditions contained therein and that the subject parcels were neither conveyed to or developed by Riverbank in light of the parties' dispute. In reviewing the evidence presented by each party, the credibility of the witnesses, the supporting documents and full exhibits as well as the entire record, the court finds that the plaintiff met its burden of proof.
Because the question of whether Riverbank satisfied all of the conditions precedents to which it was obligated or the issue of whether Renaissance breached the development agreement by rejecting the alternative, self-financing options and funding sources proposed by Riverbank and/or by failing to convey title to said parcels are not matters that are properly before the court for disposition, the court's decision is limited solely to the issue presented by the parties.
For the foregoing reasons, the court denies the motion for discharge of lis pendens and all relief requested therein by the movant with the court holding that Riverbank's successfully demonstrated that the action filed against the defendant is intended to affect real property and that the lis pendens filed by Riverbank was supported by probable cause based on the court's review of the relevant and credible evidence in the record.