Opinion
CV166059602
02-26-2018
Sprague Operating Resources, LLC v. J&H Hospitality Restaurant, LLC et al.
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Corradino, Thomas J., J.T.R.
MEMORANDUM OF DECISION
Thomas Corradino, J.T.R.
The original title of this case (the significance of which will be discussed later) was Metromedia Energy, Inc. v. J and H Hospitality Restaurant/Beverage, LLC D/B/A J and H Hospitality, J and H Hospitality, LLC D/B/A J and H Hospitality and Babu Moore D/B/A J and H Hospitality . The complaint was filed on January 8, 2016.
The complaint in count one goes on to claim in paragraph 5 that the LLCs and Moore " collectively and/or individually were acting as and/or doing business as J and H Hospitality." Paragraph 6 states that the " plaintiff is a natural gas supplier authorized to supply natural gas in Connecticut." The complaint then says:
7. On or about June 3, 2014, defendant Moore D/B/A J and H Hospitality entered into an agreement ... with the plaintiff for the supply of natural gas services at property owned and/or controlled and/or managed by the defendants.
8. Pursuant to the agreement, plaintiff supplied the requested commodity on a monthly basis and the defendant accepted such commodity.
9. Plaintiff sent monthly invoices to the defendants between July 1, 2014 and June 2015 for services rendered.
10. The defendant breached the agreement between the parties in that he failed to make all required payments for commodities and/or services rendered.
The count, which lies in contract, then sets forth the claim for damages.
Count two lies in Unjust Enrichment. The first six paragraphs of count one are incorporated in the second count and then the following allegations are made:
7. Upon information and belief, the defendants individually and/or collectively own the Holiday Inn Hotel (hereinafter " Hotel" ) with an address of 35 Governor Winthrop Boulevard, New London, CT 06320 and/or operate the Holiday Inn Franchise at such location.
8. Plaintiff supplied natural gas to the Hotel owned and operated by the defendants between July 2014 and June 2015.
9. As a result of the plaintiff supplying said commodity and/or service to the defendants, at the defendants’ request, the defendants received a substantial benefit.
10. The defendants have failed, refused and/or neglected to pay plaintiff for supplying the defendants and/or for the benefit the defendants have received.
11. The defendants have been unjustly enriched by virtue of their failure to pay the sums owed to the plaintiff for the aforementioned commodity and/or service.
1.
The first issue the court must address is whether Sprague has standing to proceed with this suit. The complaint in this matter was filed on January 8, 2016 and Metromedia is listed as the plaintiff in the action for breach of contract and unjust enrichment. The contract to supply natural gas to the defendant was entered into in the spring of 2014 and monthly deliveries were to commence for a period of eighteen months beginning in July 2014. Kevin Abreu testified for the plaintiff. He stated he worked for Metromedia from 2008 to October 1, 2014, the effective date when Sprague had completed the purchase of Metromedia where he is the Senior Account Manager for Sprague. He testified that the Metromedia contract with the defendants was transferred to Sprague and Sprague continued to supply natural gas to the defendants through June 2015 and sent invoices to the defendants for the deliveries. The invoices which identify Sprague as the supplier run from December 2014 through June 2015. The first invoice indicates there was only a partial payment of the December invoice. The defendants stopped paying for the gas supplies after December 2014 and continued not to do so until the contract ended in June 2015. The contract between Metromedia and the defendants to deliver natural gas to the latter for eighteen months and on which Sprague now relies for its contract claim has a Paragraph 13 in the terms and conditions section which permitted Metromedia to assign the contract to any purchaser. But the complaint was filed with Metromedia as the plaintiff and the defendants argue that Sprague did not comply with Section 52-118 of the General Statutes which states that " the assigned and equitable and bonafide owner of any chose in action, not negotiable, may sue thereon in his own name. Such a plaintiff shall allege in his complaint that he is the actual bonafide owner of the chose in action and set forth when and how he acquired title." But as noted the complaint here lists Metromedia as the plaintiff and nowhere does it indicate how and when Sprague acquired the right to bring suit against the defendants for failure to comply with the contract with Metromedia, which Sprague took over and under whose terms continued to make natural gas deliveries. Section 15 of the terms and conditions paragraph of the contract state that it shall be governed and construed by the law of the state of New Jersey. The policy behind Section 52-118 is reflected in Woodmere Associates v. Merk Corp. 720 A.2d 386, 391 (App.Div.Sup. CT, NJ, 1998) which states that " a valid assignment must contain evidence of the intent to transfer one’s rights and the subject matter of the assignment must be described sufficiently to make it capable of being readily identified ..." Connecticut law agrees with this proposition, Schoonmaker v. Lawrence Brothers, 265 Conn. 210, 227 (2003).
Interestingly although the acquisition by Sprague of Metromedia, including its contract rights occurred as of October 1, 2014, Moore testified and his response to the plaintiff’s interrogatories indicate J and H received natural gas supplies from June 14, 2014 through June 2015 and the invoices came from Sprague. But the Sprague invoices submitted at trial only reflect invoices sent from December 14, 2014 on.
The burden of proof to prove the foregoing rests on the purported assignee. In Perrin v. Wheeler, 111 Conn. 661 (1930) the court said in these cases " The burden was upon (the assignee) to prove that he was ‘the genuine, honest owner (of the particular asset or chose in action), and not a feigned one."
It seems apparent that the purpose of the latter rule and the underlying aim of Section 52-118 is to ensure that defendants are protected against false claims of assignment of an action against them arising from a contract or agreement with another party.
But on several scores the defendant’s position is not persuasive. On August 22, 2016 the plaintiff Metromedia filed a pleading entitled " Motion to Substitute Plaintiff." It stated in support thereof " plaintiff hereby moves to substitute Sprague Operating Resources, LLC (" Sprague" ) as the party plaintiff in this matter. As part of an asset purchased, Metromedia Energy, Inc., assigned the subject contract to Sprague. Wherefore, plaintiff respectfully requests the court to substitute Sprague as the party plaintiff in this matter." It was signed by counsel for Metromedia who certified that a copy of the motion was mailed on the same date to counsel for the defendant. On September 7, 2016, an order was issued regarding the motion to substitute indicating it was granted by the court-" granted, absent objection" by Judge Robinson and notice was sent out September 7, 2016.
Given the relief requested the court, in effect, amended the complaint and the motion itself indicated there was an asset transfer, that was the basis for the motion. Since notice of the motion being granted was sent to counsel for both sides, Edison indicates that except for one filing on November 8, 2016, over twenty filings by the defendant identify Sprague as the plaintiff in the action for breach of contract and unjust enrichment. For example the trial management report dated February 26, 2017 and filed by the defendant has a heading of " Sprague Operating Resources, LLC v. J and H Hospitality Restaurant/Beverage, LLC D/B/A et al . as does the post-trial brief dated September 12, 2017.
Mr. Abreu testified that a letter was sent to Metromedia customers that Sprague had acquired Metromedia by purchase and informed customers about the new billing address and a new Sprague logo on future bills. The letter is dated November 10, 2014. Mr. Moore never denied receiving the letter and this is not surprising since he admitted getting invoices from Sprague for deliveries, knew he owed on them, but after December 14, 2014 did not pay for the deliveries.
In other words Mr. Moore knew Sprague was arranging for the deliveries and whether he owed anything for them which he ultimately contests, they occurred within the context of an agreement which he signed with Metromedia and which he must have known was acquired by Sprague.
What happened here is that suit was brought apparently inadvertently, in the name of the wrong party, Metromedia. At the time suit was filed Sprague had acquired the right, by purchase from Metromedia, to enforce any contractual claims if inherited by purchase from Metromedia.
But as the foregoing discussion makes clear at the time suit was filed Mr. Moore knew or should have known Sprague was so acting. What does he claim- that out of nowhere a company named Sprague started supplying natural gas followed by invoices for no apparent reason and based on no apparent claim of any agreement to do so? To ask the question provides the answer. None of this goes to the merits of the Sprague claim but it would be completely unfair, in the court’s opinion, to avoid having to deal with them on the basis of failure to comply with New Jersey or Connecticut law on the prerequisites for a valid assignment or section 52-118 of the general statutes.
The Court’s action on the motion to substitute satisfies the concerns and policies behind that common and statutory law. Mr. Moore knew at least the claims made were not feigned or invented out of whole cloth apart from the merits. Suit should have been brought on behalf of Sprague ab intio but statutes and rules of practice in a situation like this must be interpreted in the Spirit of Salem Park, Inc. v. Town of Salem, 149 Conn. 141, 144 (1961). Where the court said: " Rules of pleading are not made for the purpose of tripping up the unknowing or unwary. They are designed to clarify and fix, the issues and to confine the judicial inquiry necessary to decide the issues within reasonable and relevant limits." That is what the court will try to do now as it tries to address the merits of the case, having concluded Sprague is the proper assignee of Metromedia’s contract rights, Sprague having acquired Metromedia’s claim.
2.
An issue before the court whether there was an enforceable contract between the plaintiff and the defendant which the defendant then breached.
In Cypress Point Condominium Assoc. v. Towers, 226, N.J. 403, 415 (2016) the New Jersey Supreme Court said that " well settled contract law provides that (courts) enforce contracts based on the interests of the parties, the express terms of the contract surrounding circumstances, and the underlying purpose of the contract." In Roach v. BMMotoring, 228 N.J. 163, 175 (2017) the court also said " good faith and fair dealing is imposed on all contracts to the contract. The duty is an ‘implied covenant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruit of the contract."
In Plienes v. Franklin Construction Company, 30 Conn.App. 612, 616-17 (1993) the court said that: " It is axiomatic that to create a contract there must be an unequivocal acceptance of an offer ... The law however, does not require an express acceptance. Acceptance may be shown by acts or conduct indicating assent to an offer or, under appropriate circumstances, acceptance may be implied by the offeree’s silence and inaction ... Moreover, if the offeree’s conduct leads the offeror reasonably to conclude that the offer is being accepted; acceptance has taken place as a matter of law ...," also see 17A Am.Jur.2d " Contracts" at Section 33, pp 62-63.
Parties to a contract must show mutual assent to its terms, as just indicated, and as set forth in Restatement (2d) contracts where at section 19 it says in subsection: " (1) The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or failures to act (2) The conduct of a party is not effective as a manifestation of assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents."
There is an interesting comment at Section 172, p. 184, of the 17A Am.Jur. article in Contracts Citing numerous cases it says:
Typically, a party manifests its assent by signing an agreement, and the fact that a party has signed a contract creates a strong presumption that the party has assented to the terms of the agreement. However, the absence of a party’s signature does not necessarily destroy an otherwise valid contract. Except where a signature is a condition precedent to contact formation, parties may become bound by the terms of a contract, even though they do not sign it, where their assent or a meeting of the minds is otherwise indicated, such as by accepting and acting upon the contract, or by ratifying the contract, or by the acceptance by one of the performance by the other.
Before turning to the specific facts of this case the court will also cite another principle involved in the application of contract law. In Calamari and Perillo on Contracts 6th ed at Section 941, page 342 the authors states: ... " a party who signs an instrument manifests assent" to it and may not later complain about not reading or understanding. A typical case states that ‘one having the capacity to understand a written document or without reading it or having it read to him, signs it is bound by his signature.’ The thought is that no one could rely on a signed document if the other party could avoid the transaction by not reading or understanding the record" ; among the cases cited are Delk v. Govertical, Inc., 303 F.Supp.2d 94, 99 (D.Conn. 2004) applying Connecticut law and Caspi v. Microsoft Network, 732 A.2d 528, 532 (Sup.Ct. New Jersey Appellate Division). An older New York case further explains the reasoning for this rule. Pimpinello v. Swift & Co., 170 N.E. 530, 531 (Ct of App. 1930).
2.
(a)
The court will now try to apply these principles under the facts of this case.
There are two documents central to the claim made in this case, the contract between the parties (Ex. 1) and the switch over form which must be signed so that the entity charged with delivering the gas can commence making deliveries. That is the natural gas supplier needs the switch over form to work with the utility so as to allow the gas to go to the utility in order that the utility can bring the gas to the customer’s location.
The contract submitted into evidence in this case Exhibit 1, provides that Metromedia will meet the defendants’ natural gas requirements to run their business from July 1, 2014 to November 11, 2015. This appears on the first page of the contract opposite the word " Term." Interestingly, in apparent reference to the switch over form’s purpose, right after these dates it says the dates would be subject to satisfactory transportation arrangements being in place by the commencement date- which, as noted, was July 1, 2014. Also see paragraph 2 of contracts terms and conditions on page 3 which says in relevant part:
2. Nominations: Buyer shall authorize its local distribution company (LDC) to provide seller all necessary information regarding buyer’s gas requirements and seller shall nominate and confirm dispatch volumes with the transporting pipeline and buyer’s LDC ...
As Mr. Abru testified the switch over form must be signed so that the local distribution company will know where to send the gas to in order that the contractual obligations of the supplier can be met.
In other words Exhibit 1 and the switch over form are two separate documents with the latter form being ancillary of the " natural gas sale contract" - see heading of Exhibit 1. In other words the contract is a prerequisite for the existence of and need for a switch over form. As made clear in paragraph 15 of the terms and conditions section of the Contract " 15. Entire Agreement & Law: this is the entire contract between the parties and can only be amended in writing. This agreement is governed by and construed in accordance with laws of the State of New Jersey."
The defendant was well aware of the distinction between the contract to supply the natural gas and the switch over form which just allowed the agreement to operate by ensuring delivery; twice at trial he acknowledged that there could be no delivery of the product unless a switch over form was signed. Thus his own testimony was predicated on the acceptance of the fact that a prior agreement to purchase natural gas was the very reason for having to sign a switch over form. Mr. Abreu’s testimony is that in his experience at Metromedia and Sprague no one who signed the contract for purchase of the product ever refused to sign the switch over form.
At trial the defendant admitted to signing the contract but prior history presents a more complicated picture. Paragraph 7 of the complaint reads as follows " On or about June 3, 2014, Defendant Moore D/B/A J and H Hospitality entered into an agreement ... with the plaintiff for the supply of natural gas services at the property owned and/or controlled and/or managed by the defendants." The defendant’s answer was simple and direct- " Denied."
In several conversations with Ms. Beaver after January 2015, when Moore stopped paying for the gas he was receiving, among other things he claimed he did not sign the contract and at one point said he wanted out of the contract. But this was coupled with Moore’s complaint that the pricing had gone up- pricing in a pre-agreed-upon contract one would assume.
At trial to explain away any apparent inconsistencies in his defense against a contract action Moore at one point said that he only signed 1/2 a contract, he signed what Metromedia labeled as a " contract" but he did not sign the switch over form. His signature on that form was forged. He maintained he never took the position that he did not sign what the court said was " the actual contract," Exhibit 1. He took the same position as regards response to interrogatories filed by the plaintiff saying no contract was signed by him. At trial he said, contrary to Ms. Beaver’s testimony, he called Metromedia to try to cancel the contract in September or October of 2014. At a deposition he said he did not contact Metro-media directly in 2014. When confronted with this directly at trial- " you’re now saying you called Metromedia in 2014 the answer then became " I think so" (all this in the context of questioning of whether he called Metromedia to cancel the contract for natural gas deliveries). Later at trial he could not remember calling Metromedia before or after he stopped paying for the natural gas that was delivered to him. More to the point how could he say he cancelled a contract which he said at trial never existed in the first place?
A person named Roberto Rodriguez also testified. He said he did not work for Metromedia. He and his company, JR Energy puts agreements to purchase natural gas and electricity together after assessing the needs of customers like Moore and tries to secure a contract with suppliers. He testified he has around 500 customers and deals with about 40 electrical suppliers and 7 natural gas suppliers- of which Metromedia was one of the seven at the time in question. Rodriguez gets paid out of the payments made by the customer once delivery of the product starts- it’s built into the price that he presents to the customer. He sees himself as the agent of customers like Moore which the defendant disputed saying he was the agent for Metromedia. But for the issue at hand how important is that? Rodriguez went on to testify that once he secures the customer’s signature on the contract and the switch over form he, Rodriguez, sends these documents to the supplier, here Metromedia. He could not remember Moore in the process of actually signing either document- not surprising since he testified about events three and a half years earlier and he deals with hundreds of customers. True, he only gets paid if a contract is completed and a switch over form is signed so hypothetically he had a motive for forging Moore’s signature on the switch over form just as Metromedia agent would have. But he could easily have testified that he remembers seeing Moore sign each document but said only this was the course of conduct he adopts in all these cases, and he always did business with Moore in that way having had other broker arrangements with Moore. After securing the signatures he would forward the documents to Metromedia. As said in Maynard v. Seva, 158 Conn.App. 509 (2015), quoting from an earlier case; " Testimony as to the habit or practice of doing a certain thing in a certain way is evidence of what actually occurred under similar circumstances or conditions ... Evidence of a regular practice permits an inference that the practice was followed on a given occasion." Id., page 518, also see Caselowitz v. Roosevelt Mills, Inc., 138 Conn. 121-26 (1951) and Connecticut Code of Evidence, Section 4-6.
In any event who could have forged Mr. Moore’s signature on the switch over form and why? Moore certainly does not suspect Rodriguez- both testified they still have ongoing business relationships with each other. Why would Rodriguez endanger that relationship to secure the operation of one contract? Why would Metromedia have one of its agents forge a person like Moore’s signature? Why would they suspect any need to do so since as Abreu testified if you sign the contract as Moore admits why on earth would you not sign the switch over form?- to ask these questions provides the answer. Moore did sign the switch over form.
As said in Tait’s Handbook of Connecticut Evidence 5th ed, Tait and Prescott at Section 9.6.3, page 693. " Authorship of handwriting can also be proved by a comparison of the disputed writing with a specimen of known origin ...? ... Comparisons may be made by the trier of fact, be it judge or jury with or without the aid of expert testimony see Tyler v. Todd, 36 Conn. 218, 222, 223 (1869). Mr. Moore admitted signing Exhibit 1, the contract, and denied signing the switch over form, Exhibit A. The signatures are very similar; although the contract signature is obscure to the right the broad linear sweep from the end of the signature is unique as is what appears to an " H" but is probably a " B" at the beginning of the signature.
But even if the foregoing discussion does not, standing alone, establish that the defendant accepted the contract or the entire contract according to a position that the switch over form was part of the contract agreement and he did not sign it, other factors indicate he in fact did sign it or that a contractual arrangement was in effect whether or not the defendant signed the switch over form.
He accepted the natural gas delivery for his business each month for six months beginning July 2014 and he paid each month for the delivery. He never contacted Metromedia advancing a claim that he never signed the contract or what is now claimed is a necessary document for the establishment of the contract, i.e., the switch over form. For the next six months Moore accepted delivery each month the only difference from the preceding six months is that he did not pay the invoices for each month’s delivery. Ms. Beaver, the Sprague representative testified that she had conversations with Mr. Moore in 2015. In her conversations Beaver said he did not so much as say he wanted out of the contract which interestingly would establish a contractual relationship but he complained about the increased price he had to pay for deliveries which also establishes an agreement by the plaintiff to make deliveries followed by invoices for the same.
Mr. Abreu had testified that in effect for almost all the months Moore was billed the price for natural gas was less than his contracted price.
Mr. Rodriguez testified and he said Mr. Abreu called him in the winter of 2015 and asked him to speak to Mr. Moore about the failure to pay invoices. Rodriguez said he contacted Moore who said Mr. Moore said " he was upset that the ... that the contract was not going his way. That the market turned in the other direction." (He had a fixed price contract, prices went lower.) But the next time Rodriguez talked to Moore he had a new theory to explain non-payment for ongoing deliveries- he mentioned that he did not sign the contract. Rodriguez elaborated on at another point in his testimony that Moore told him that, " he wasn’t going to pay. That he thought the price for natural gas was a lot less than the ... the contracted price. He wasn’t going to pay" - making more explicit what Moore was saying about his dissatisfaction with a contract he in fact recognized he had with Metromedia and now assigned to Sprague.
Rodriguez kept talking to Mr. Abreu regarding the nonpayment problem. He said Abreu indicated to him that " Mr. Moore told him, that you know, he didn’t sign the contract and he was adamant about it." All of the foregoing obviously implicate Mr. Moore’s credibility as to whether he signed the switch over form and Moore’s understanding of whether he had a contractual relationship with the plaintiff. Whether he signed the form or not.
In any even basically the defendant argues " If the switch over form is not an actual part of the contract what is it? When something remains to be done or must occur before judicial enforcement of a particular promise is possible such act or event is a condition precedent to the formation of a value contract, Hartford Federal Savings & Loan Assoc. v. Green, 36 Conn.Supp. 506 ... A ‘condition precedent’ is a fact other than the passage of time, which must exist before a duty of immediate performance of a promise can arise. Bergman v. Parker, 216 A.2d *D.C.App. 1966)." Calamari and Perillo on Contracts 6th ed, Perillo put the principle rather concisely and includes a factor not mentioned by the defendant. At Section 11.5, page 362 it says: " A condition precedent is an act or event, other than a lapse of time, that must exist before a duty to perform a promise arises. If the condition does not occur and is not excused the promised performance need not be rendered (emphasis by court); Internatio Rotteraun v. RiverBrand Rice Mils, 259 F.2d 137, 139, 140 (eA2, 1958; Rose v. Harding, 391 P.2d 526, 530, 531 (Wise, 1964). Signing of the switch over form is something Moore had to do to receive natural gas supplies to run his business and which he had agreed to receive and pay for by signing a contract. But if he did not sign the switch over form, even if someone forged his signature allowing the plaintiff to ship the gas and thereby expect to be paid, only puts into effect something he had bargained for and agreed to by signing the contract.
Even if one were to construe the prerequisite of signing the switch over form by Moore something of a benefit to him- perhaps allowing a second chance for Moore to consider whether he wanted the contract to be performed on both sides, the point is he received the gas supplies for six months and paid for them and continued to receive the suppliers for another six months without paying for them. The switch over form was for Moore’s benefit, it allowed gas to be shipped to him which he had bargained for as evidenced by the contract he signed- he waived the condition precedent to performance of the contract by his receipt of the gas suppliers. See Goldenberg v. Corporate Am., Inc., 189 Conn. 504, 510 (1983) where the court said " Waiver is the intentional relinquishment of a known right. Although waiver need not be expressed but may be implied from acts and conduct."
(b)
Several other arguments were raised by the defendant raising issues which would make the contract void or limit its applicability.
(i)
The defendant argues that " the plaintiff chose only to sue the defendant Moore" - " clearly the plaintiff has consciously chosen to direct its litigation claims in Count One (the contract) only against Babu Moore precluding itself from obtaining a judgment against J and H Hospitality, LLC should the court decide that the parties to the contract were in fact Metromedia Energy, Inc. and J and H Hospitality, LLC." This argument is difficult to understand at least for the court. Paragraph 5 states " 5. At all relevant times, the three defendants J and H Beverage, LLC, J and H, LLC and Moore collectively and/or individually were acting as and/or doing business as J and H Hospitality." Paragraph 7 states " 7. On or about June 3, 2014 defendant Moore D/B/A J and H Hospitality entered into an agreement (herein after the Agreement) with the plaintiff for the supply of natural gas services owned and/or controlled and/or managed by the defendants." Paragraph 9 states " 9. Plaintiff sent monthly invoices to the defendants between July 2014 and June 2015 for services rendered." Paragraph 10 does say " the defendant breached the agreement between the parties in that he failed to make all required payments for commodities provided and/or services rendered." But even paragraph 10 uses the term " agreement between the parties " (emphasis by the court).
Paragraph 11 states " 11. The defendants currently owe $52,44.07 exclusive of interest and costs and, despite demand," paragraph 12 says the defendants, despite demand, have failed to pay the amount due and owing under the agreement. The plural defendants is used. The last three paragraphs are confusing in that the singular " defendant" is used stating liability for payment of the monies owing and paragraph 15 speaks of defendant’s breach. But the " despite demand" on all defendants in paragraph 12 and a cursory reading of the other paragraphs previously discussed indicate the LLC was an object of this contract claim. It is interesting to note that in another section of the defense brief the defendant says Babu Moore is also not personally liable because he obviously only signed the contract in a representative capacity. Of course " LLC" was also left out of the heading of the contract heading which listed the customer as only " J and H Hospitality." The net result is that no party is liable for receiving six months of unpaid for natural gas supplies on a breach of contract theory.
(ii)
The defendant argues that if Rodriguez was an agent of the defendant the contract is void or voidable since he was compensated for his services by Metromedia. The case of Cannell v. Smith, 21A 793 (Pa., 1891) is cited where the court said " The defendant was a real estate broker and attempted to serve two masters. There is high authority for saying this cannot be done ... The plaintiff paid him a commission of $5,000 for effecting a sale of certain real estate ignorant of the fact that he was also the broker or agent of the purchaser. When she discovered that he was acting in this dual character she brought this suit in the court below to recover back the money so paid and succeeded. We have no doubt of the right to recover money paid under such circumstances. It is against public policy and sound morality for a man to act as broker for both parties unless that fact is fully communicated to them."
Mr. Moore testified that Roberto Rodriguez was not his agent but was the agent of Metromedia. Yankee Gas was his supplier and he sought to switch to Metromedia as his supplier in 2012 but this never went forward. In 2014, according to Moore, Mr. Rodriguez came back again after the 2012 failed transfer- he " came on his own" and did not suggest any other supplier than Metromedia. He then signed the contract (Exhibit 1) to have Metromedia supply gas. Moore gathers from all this that Rodriguez did not represent him- " he’s representing the companies." Moore never paid him anything, Rodriguez was paid by putting his commission into the price charged J. and H in the invoices from Sprague. All of this argues for an " odor" in the whole 2014 deal.
On cross there is the suggestion that the " odor" should be dispelled. On cross examination counsel used the disposition testimony given by Moore to question the latter’s characterization of Moore as simply the agent of Metromedia. On pages 42 and 43 of the May 18, 2017 transcript the following appeared on Moore’s cross examination:
Q. Do you see where it says: " Question: okay do- do you ever negotiate the price directly with the company, or do you rely on the energy broker?
A. " If I ... If I agree with the energy brokers, then I don’t step on his toes, I’ll let him deal with it.
Q. Okay. Can you think of an occasion where you entered into a utility contract where you didn’t use this energy broker? (Emphasis by court.)
A. I don’t remember.
On the following page this appears on cross examination.
Q. Okay. And on the next page, page 37, the question was: " As far as you can recall everything has gone through Roberto?
A. Yeah. I mean Roberto knows like for long time. He sees the big account. So he brings everything where- he get it.
The testimony of Roberto Rodriguez seems to be in agreement with Moore’s foregoing responses at his deposition which suggests he was the agent of Moore, his customer, or at least acted as a dual agent. The court’s discussion of Rodriguez’s status will be somewhat repetitive since it was relevant to another aspect of this case previously discussed. Mr. Rodriguez has his own business, J.R. Energy Solutions. He brokers natural gas and electricity between several suppliers and customers- " we put the deals together, basically." He agreed with counsel’s characterization in a question asked of him on direct to the effect that he goes to a customer to assess their needs and then goes into the market place on the customer’s behalf and tries to secure a natural gas or electricity contract.
He testified that he brokers natural gas for Metromedia on behalf of Connecticut customers. He saw himself as an agent for the customers working for them and their interests. As for the implication of Moore’s testimony that Rodriguez showed up one day in 2014, did not mention any other supplier but Metromedia, Rodriguez’s testimony establishes he was aware of the energy needs of Moore’s several businesses. He testified he brokered his first electricity deal with Moore in 2011, he was involved in the 2012 gas deal where he secured an offer from Metromedia and presented it to Moore, but the contract could not be ratified. In the last six or seven years before this May 2017 trial Mr. Rodriguez testified he entered into six or seven contracts with Moore and J and H Hospitality with them as the customers. He later testified that he was involved in negotiating the contract now before the court. When asked why he placed J and H with Metromedia in 2014, he answered " well, Metromedia was the most competitive that I could find at the time and Mr. Moore agreed." He felt a fixed price contract such as the one here " would be the best because the market was very volatile and that time and prices were on the rise." He would procure the contract from Metromedia and then bring it to the customer, here Mr. Moore, to sign. Rodriguez said he reviewed the contract with Moore and he said " that sounds good to me."
Restatement (2d) Agency at Section 1 defines agency in the following way
(1) Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control and consent by the other party to so act.
The foregoing discussion supports the position that Rodriguez was acting as an agent of Moore and his company in securing this contract. Mr. Abreu is Sprague’s Senior Energy Portfolio Manager. He testified that from his perspective brokers such as Rodriguez represent customers and brokers are " looking to place customers with us." So we’ll do bids and things like that to get them prices. He agreed that the job of brokers is to shop around different third-party suppliers and Sprague is just one of them. The court asked if he agreed that a company like Sprague does not have a duty to advise customers and explain options- " buy from you, buy from a monthly supplier- Mr. Abreu then interjected " Don’t buy at all" that is how he conceived how his industry operates. This testimony is reinforced by the following testimony of Rodriguez. As noted after six months J and H stopped paying invoices on gas supplies they received. Rodriguez said: " If I recall correctly Mr. Abreu reached out to me. I’m thinking six months, seven months after the onset of that contract saying: " Look Mr. Moore is not paying. Do you think you could go in and talk to him? Do you think maybe you could help us, you know this thing current?"
This reads as an appeal to a broker to appeal to his customer because of the recognized special relationship he has with the customer.
It is true that for his services J and H did not pay Rodriguez a commission, he was paid through a commission included in the price to the customer. But this does not accomplish a complete turnaround making Rodriguez only the agent of Metromedia- an important thing to note is Rodriguez’s testimony that he would only get paid his commission if J and H paid its monthly invoices- an effective way for Metromedia to pressure the broker to put pressure on his customer to pay his gas delivery bills.
Given all the testimony involved at the most Rodriguez acted as a dual agent. Section 392 of the Restatement (2d) Agency says:
§ 392. Acting for Adverse Party with Principal’s Consent An agent who, to the knowledge of two principals, acts for both of them in a transaction between them, has a duty to act with fairness to each and to disclose to each all facts which he knows or should know would reasonable affect the judgment of each in permitting such dual agency, except as to a principal who has manifested that he knows such facts or does not care to know them.
It could be said that here Rodriguez was acting for two principals who knew he was doing so. In any event the rule of the Cannell v. Smith case, supra, is not operative.
(iii)
The defendant also claims that mutual misunderstandings and lack of full knowledge of Eversource’s twelve-month rule by both buyer and seller resulted in no meeting of the minds between the contracting parties and thus no contract.
Under Connecticut law once a switch over is made for example, in this case Metromedia agreeing to supply natural gas to Mr. Moore’s business, there can be no switch back to another supplier for twelve months.
The defendant argues that nowhere in the contract is there mention of the twelve-month rule. Mr. Rodriguez did not tell Moore about the rule. Before the 2014 contract was signed there is no indication that someone at Metromedia told him about the twelve-month rule. In fact there was a " mutual misunderstanding" of the twelve-month rule " by both buyer and seller resulting in" no meeting of the minds and therefore no contract" according to the defendant.
The twelve-month rule apparently adopted by the state provides that a contract cannot be terminated before the expiration of a twelve-month period after contract formation between a supplier and a customer. The mutual mistake rule is set forth in Restatement of Contracts 2d at Section 152. Therein it states:
152 When Mistake of Both Parties Makes a Contract Voidable
(1) Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party ...
The defendant cites the cases of Dencer v. ERB, 60 A.2d 282 (NJ, 1948); Lanpley v. Davis, 530 A.2d, 1254 (NJ, 1987), Interstate Indus. Uniform Rental Service, Inc. v. Couri Pontiac, 355 A.2d 913 (1976) which accept this principle. The Dencer case however states that " there can be no rescission awarded by reason of the mistake of one party only, where the other party was not guilty of any deception, concealment, undue influence, or bad faith, and did not cause, induce, or encourage the mistake and will not derive any unconscionable advantage from the contract, 60 A.2d at page 286." The Interstate Industrial case makes several observations pertinent to this case (1) " the mistake must be mutual, that is, the minds of the parties must fall prey to the same misconception, with respect to the bargain, 355 A.2d at p. 918, (2) ‘Only if the mutual mistake relates to a material fact of the essence of the bargain can the injured party avoid the contract, id. (3) ...’ the mutual mistake must so vitally affect the facts upon the basis of which the bargain was struck that the written contract does not express the intent of the parties. The parties must have, in effect, agreed to something other than that established by the writing." Id. The Lampley case relies on the law as set forth in the Restatement 530 A.2d at pages 1259, 1260.
The mutual mistake doctrine is generally accepted but courts have noted that qualifications to it. In Bolduc v. Beal Bank, 167 F.3d 667 CeA4, 1991 the court says at page 674 that " the doctrine permits contract avoidance only if avoidance is just and reasonable" and " avoidance based on mutual mistake must not unfairly prejudice the rights of an innocent party." In Grun v. Preumo Apex Corp., 163 F.3d 411 (eA7, 1998) at page 421 says: " A mutual mistake results when both parties share a common assumption about a vital existing fact upon which they based their bargain and that assumption is false ... (and) because of the mistake, a quite different exchange of values occurs from the " exchange of values the parties contemplated ... However ‘a self-serving statement, ‘that a party did not understand the contract to mean what it says (or appears to say) will not suffice.’ " Or. as simply put in Herring v. Herring 762 S.E.2d 190 (N.C.App. 2013) " A mutual mistake of fact is a mistake common to both parties and by reason of it each has done what neither intended," at page 192. Also see generally 17A Am.Jur.2d at Section 198, pp 206, 207 where at page 207-08 the following interesting observation is made " if partial performance has occurred on one side, the mutual mistake doctrine does not mechanically cancel all remaining obligations on the other side and thereby allow the nonperforming party simply to retain the benefit conferred by the partial performance. On the contrary, the doctrine permits the court to grant relief only on such terms as justice requires."
The court does not accept this argument of the defendant for a variety of reasons. First very fundamentally the word " mutual" is defined in Black’s Law Dictionary as " The same on both sides of a transaction or relationship whether it be a matter of affection, assistance, or advantage; reciprocal. Ballentine’s Law Dictionary defines " Mutual" as " 1. Generally directed by each toward the other or others; reciprocal 2. (Of a condition credit, covenant, promise etc.) reciprocally given, received, or exchanged 3 (of a right etc.) belonging to two parties; common."
Given these definitions there was no " mutual" mistake shared by the plaintiff and defendant concerning the operation and effect of the application of the so-called twelve-month rule. Mr. Abreu who worked for Metromedia then Sprague was the Senior Energy Portfolio Manager at the time the contract was entered into between these two parties. During his testimony he described the twelve-month rule and how it operated in general and in particular as regards this case. Mr. Moore himself testified he first became aware of the rule from Ms. Beaver only in the first weeks of 2015 when he was receiving gas supplies and not paying for them and expressed a desire to get out of the contract. Ms. Beaver was the Accounts Receivable Manager for Sprague from 2014 when it acquired Metromedia and had worked for Metromedia since 2000. Both witnesses explicitly referenced the rule and Abreu went into some detail as to how the rule’s operation would affect a supplier like Metromedia or Sprague and how it affects a customer signing a supply contract of more than twelve months.
Mr. Rodriguez who brokered the Metromedia contract with Moore which is the subject of this litigation testified he was aware of the twelve-month rule but does not explain it to customers unless they ask him to do so. The defendant claims Rodriguez was the agent of Metromedia but even if this is not plausible, standing alone, he is probably best defined as a dual agent for Moore and Metromedia; his knowledge of the rule can be imputed to the latter.
In any event for the court at least Moore’s adamant position at trial that no one ever informed him of the twelve-month rule is difficult to accept. He said at trial no one had informed him of the rule until Ms. Beaver did in one of the conversations she had with him in early 2015. Prior to signing the Metromedia documents (read contract) he was not aware of the rule. In 2012 Mr. Moore attempted to have contractual relations for the supply of natural gas to his businesses. Metromedia did not accede to the contract in the last analysis because it would violate the twelve-month rule due to Moore’s supply relationship with another supplier.
Defense counsel brought out on redirect that English was not Mr. Moore’s first language and that he was born in India. But Mr. Moore is a sophisticated businessman who owns two hotels and a gas station. It is difficult to comprehend that when the natural gas supply deal with Metromedia in 2012 could not go forward due to Metromedia’s decision not to sign the contract because it would violate the twelve-month rule, Moore did not inquire or come to know about why Metromedia was taking this position.
Leaving aside the foregoing there is another problem, at least in the court’s opinion with the defendant’s position on the twelve-month rule. He signed a contract for eighteen months duration which is obviously, as plaintiff’s counsel noted at trial, longer than the twelve-month period which under the rule would be the point at which the contract could be terminated. There was not an iota of evidence offered on the defendant’s part that if he had known about the rule when he signed the contract he would not have signed the contract for an eighteen-month period. There was no evidence concerning price fluctuations or the frequency of fluctuations or the length of any fluctuations up or down in this natural gas supply market. In fact he paid for the initial six months. Mr. Rodriguez testified that the reason he placed J and H Hospitality with Metromedia in the spring of 2014 was that " Metromedia was the most competitive" he could find at that time and he said " Mr. Moore agreed." The advantage of the type of agreement locks in a price for a fixed period of time- here eighteen months. There would always be a risk that prices could fluctuate up or down but the reason a buyer would agree to a contract of over one year, as here, is that the buyer, Moore, made the determination that, all things considered given the presently offered low price a contract of the length he signed was worth the risk.
Having paid for the gas the first six months, receiving gas for the next six months without paying in the context of a situation where the supplier had to hedge or reserve gas supplies to service an eighteen-month contract, Moore and his company cannot rely on a lack of mutual misunderstanding which for the foregoing reasons is inapplicable. He got what he bargained for until his breach.
(iv)
The defendant in the last issue raised concerning contract formation makes a very general argument. In issue (9) the following is claimed:
(9) Was the contract incomprehensible to the point that the defendants could not reasonably understand and anticipate that any Natural Gas not consumed would be sold by Seller and Buyer would not only suffer any loss but also pay taxes above and beyond what was chargeable by Eversource, and actually pay same twice, for the gas on the schedule, and then on the resale of unconsumed gas; nor were the defendants informed that the delivery cost of the gas was to be separately billed, (by Eversource) thus causing, by these unilateral mistakes, no meeting of the minds.
In his thorough post-trial brief the defendant as to issue (9) makes only two points- the " contract" would not have alerted Mr. Moore or anyone else as to their exposure to various charges and actions which the plaintiff claims were undertaken by right. And also it is argued " Eversource ... rates might float every month (but) you pay only for the gas you use."
As to the first argument that there could be no meeting of the minds because of charges that could not be anticipated. What charges could they be? As to taxes included in various invoices sent to Mr. Moore how could he as a purchaser of the gas supply not realize taxes would have to be paid by a consumer of the natural gas? To ask the question provides the answer. In exhibit 8 invoices from Sprague for the first six months of the contract include charges for Connecticut taxes and these invoices were all paid. The post December 2014 invoices all include a claim for taxes.
Mr. Abreu testified Metromedia and later Sprague " we’re the physical commodity. We’re the natural gas." Eversource is not controlled by his company, Yankee Gas and Eversource delivered the product- the contract in the Terms and Conditions Section identify the latter companies as the buyer’s " local distribution company." They would send their bills for delivering the product secured by Metromedia. Common sense would seem to indicate this would be performed. Did Moore and his company not pay any delivery charges the first six months?- if so how were they able to receive the gas? The course of conduct defines the ambit of the contract and the necessary manner in which it was to be carried out, given that agreement.
The final assertion that Eversource rates might float every month but at least you pay only for the gas you use assumes a conclusion that is not relevant to the issue at hand. The whole point of these long-term fixed rate contracts is that the price is locked in and you know what you have to pay ahead of time. At the time the Metromedia contract was signed in the spring of 2014 the rate that could be secured on a fixed rate long-term basis was " competitive." Given the risk presented by markets that fluctuate hindsight might lead the consumer to conclude a mistake was made by a fixed rate contract agreement. That hardly provides an excuse for breach of a fixed rate contract and especially for not paying for a delivered product.
Damages
(1)
The defendant argues that the decision by the plaintiff to liquidate gas allegedly purchased for the defendants resulted in a failure to mitigate damages. The contract is " silent" as to the right to liquidate or how it should be done. Mitigation, it is claimed, was not even considered or attempted. It could have been sold to other Sprague customers whose gas needs were underestimated. Instead of liquidating all at once it would have been sold month to month. Apparently the gas was sold for less than one-third of the contract price- this shows the contract price of $1.03 per therm was " a rip off from the start." The defendant argues that this was " again an attempt to victimize the defendant with actions that were not spelled out in the contract."
The court will attempt to discuss the law as to a wronged party’s duty to mitigate damages. The Restatement (2d) Contracts sets forth the basic law at Section 350; " Avoidability as a Limitation on Damages" where in subsection (1) it states ..." damages are not recoverable for loss that the injured party could have avoided without undue risk, burden, or humiliation."
In Dunleavey v. Paris Ceramics, 97 Conn.App. 579, 582-83 (2006) the court quoting from earlier decisions said that " ‘We have often said in the contracts and tort contexts that the party receiving a damage award has a duty to make reasonable efforts to mitigate damages ... What constitutes a reasonable effort under the circumstances of a particular case is a question of fact for the trier ... Furthermore, we have concluded that the breaching party bears the burden of proving that the non-breaching party has failed to mitigate damages ...’ The defendant, thus, bears the burden of proving that the plaintiff failed to make reasonable efforts to mitigate the amount of damages." In court the Webster Bank v. GFI Groton, LLC, 157 Conn.App. 409, 426 (2015) quoted from sub-section g, page 132 of Section 350 of the Restatement to the effect " (it is not reasonable to expect the (non-breaching party) to take steps to avoid loss if those steps may cause other serious loss." The court also quotes from 22 Am.Jur.2d " Damages" effect that " a party to a contract who is not in breach need not make substantial expenditures to avoid damages from a breach because compelling an innocent party to spend money might entail risks beyond those assumed in the contract. In other words as stated in subsection (2) of Section 350 of the Restatement defining the ambit of mitigation or avoidability of losses doctrine set forth in subsection (1) it states " (2) the injured party is not precluded from recovery by the rule stated in subsection (1) to the extent that he has made reasonable but unsuccessful efforts to avoid loss."
Perhaps more to the point the court in Preston v. Keith, 217 Conn. 12, 22 (1991) said: " To establish a mitigation of damages claim the defendant must show " that the injured party failed to take reasonable action to lesser the damages; that the damages were in fact enhanced by such failure; and that the damages which could have been avoided can be measured with reasonable certainty."
The first point the defendant makes is that the contract is " silent" about the right to liquidate or how it should be done. It is difficult to understand how that observation supports the defendant’s position which ties this in with an argument about a failure to mitigate damages. Whether or not the contract specifically ties in the liquidation concept to the duty to mitigate a plaintiff like Sprague would have a duty to mitigate. In Sean Wood, LLC v. Hegarty Group, 422 N.J.Sup. 500, 519 (2011, App.Div.) The court said New Jersey courts recognized that: " parties injured by a breach of contract have a common-law obligation to take reasonable steps to mitigate their damages." In other words the doctrine assumes a valid contractual relationship that has been breached by the wrongful conduct of a defendant who is sued for the breach. It provides only that given these facts and whether or not the contract mentions liquidation responsibilities or not, a court has an independent duty to take into consideration whether the wronged party has taken reasonable steps to avoid the consequences of the loss that would otherwise result from the breach- the purpose of the doctrine is to " discourage even persons ‘against whom wrongs have been committed from possibly suffering economic loss which could be avoided by reasonable efforts." Indus. Leasing Corp. v. Thomason, 532 P.2d 916, 919 (Idaho, 1974).
The defendant makes broad claims that mitigation was not even considered or attempted by the liquidation process taken. As noted it is argued that the gas could have been sold to other customers and there was no reason to sell it all at once, it could have been sold month to month. But the testimony in this case indicates that the gas supply market is very volatile with prices capable of rising or falling from month to month. That is why contracts are signed with companies like Metromedia which guarantee a fixed price as here for up to 18 months. Why should a company in Sprague’s position forego the opportunity to sell all at once when in this type of market there is no guarantee what prices will be on a month to month basis. Is not all of this reflected in what happened here? For six months Moore paid the invoices but then stopped. Did the price of gas go down substantially? Is the claim being made that if the gas was not sold all at once but from month to month more money could have been made from the sale of the gas- how much, based on what? There is no indication or proof offered that when the gas was sold all at once a company in Sprague’s position knew or should have known gas prices would continue to be low. If anything all of this shows Sprague did attempt to mitigate damages but the defendant’s complaint is that this was not done in a productive way. But no proof was offered in what way it would have been preferable and how much monthly gas prices could go up or down in this volatile market. How can the court possibly determine the amount damages were increased by the " all at once" sale- which was the defendant’s burden to establish?
Or. to put it another way why was it not reasonable to sell the gas all at once and how can the court question the reasonableness of Sprague’s decision to do so (let alone try to guess at the loss thereby that would be attributed to the defendants). Was Sprague required to play games with the market on some hope holding on to the gas would result in a higher return from its sale? It had every reason to liquidate the gas at a price which it felt was the best price considering all the circumstances apart from the fact that the defendant would receive a credit for the gas sold depending on that price.
In any event the court does not believe any damages should be reduced on a failure to mitigate theory.
An interesting observation is made in Calamari & Perillo on Contracts, Joseph Perillo at § 14.16, page 509, there it says that: " if the relation between the parties is such that the wronged party was legally free to enter into similar contracts with others, that subsequent to the breach the wronged party could have or actually has made similar contracts, in no way reduces the entitlement to damages. Thus, for example, if the lessee of automobiles from a car rental breaches the lease, damages will not be reduced by the fact that the lessor leases, or could have leased, the automobiles to another. The lessor was free to obtain as many customers as it was willing and able to secure, provided that as a practical matter it could secure additional automobiles for such customers.
The plaintiff was entitled to its specific bargain with the defendant and need not put off securing some return for its efforts to secure the gas supply for the sake of a customer who had not paid for six months of deliveries and even denied having contractual obligations when talking to its customer representative Ms. Beaver. In any event the court rejects the position by the defendant that any damages awarded to the plaintiff should be reduced because of a failure to mitigate damages.
(2)
Another issue the defendant raises as to damages is the failure of the plaintiff to enter into evidence its cost of obtaining natural gas, its " margin," the commission it was paying Mr. Rodriguez and the actual cost at which it liquidated all resulted in a failure to prove damages.
The first three factors are not relevant to the damage issue- i.e., the cost to Metromedia to obtain the gas, its margin, the commission that was paid to Mr. Rodriguez. This was a fixed price contract, all costs were included in the 1.03 per therein figure. The defendant did not pay Rodriguez anything for his services so he must have assumed that the commission paid Rodriguez was included in Metromedia’s arriving at the 1.03 figure to present to Moore and which Moore accepted. Rodriguez testified if Moore did not pay he would not get his commission obviously the Rodriguez figure was part of the commission.
Furthermore, the fact that this was a fixed rate contract that covered eighteen months and the price was presented to the buyer who was free to accept or reject the contract at the price offered makes " margin" and the seller’s cost of purchase and even Rodriguez’s commission irrelevant. Metromedia was free to go into the market place and sell the gas to any buyer- Moore’s breach deprived Metromedia of the benefits of the bargain it struck to receive 1.03 per therm. Its offered price was based in part on factoring in its costs and that price could be offered to any customer- when Moore breached the contract what Metromedia lost was the offered price of the natural gas, costs had already been fixed into that price.
In its brief the defendant also expands on the theme that the plaintiff has not proven its damages and that the damage claim which is based on " mere speculation." Ms. Beaver gave detailed testimony as to invoices which were unpaid and included invoices from December 2014 through June 2015. The last page of the invoice exhibit, exhibits 2, indicates the amount due was $46,866.99. Exhibit 5 represents a summary of Exhibit 2 invoices and it comes up with a figure of $44,547.60 and appears to set forth the cost to cover or liquidate natural gas the defendant contracted for but did not pay. Exhibit 5 also lists a " Finance" charge of $10,549.23. When the last two figures are added together one comes up with damage figure of $55,096.83. Ms. Beaver testified to this amount and described the $10,549.23 figure as a late fee charge or the cost of carrying the debt. Based on the foregoing the court does not accept the defendant’s argument as to damages.
It is difficult to understand the discrepancy between the $46,866.99 figure and the invoice amount of $44,547.60. When the customer used less than the contracted amount it was sold back into the market and he would be responsible for the contracted amount. This would apply to amounts " hedged" by Metromedia for the last six months of the contract and he would receive a credit on what the gas could be sold for- if for more than the contracted price the credit would reduce the amount owing after termination.
If the finance charge of $10,549.23 is viewed as a late fee almost the entire amount if not all of it can be attributed to the carrying cost of the debt for the unpaid invoices from December 2014 to June 30, 2015 when gas was delivered but not paid for.
(3)
The last issue the court will discuss is the question as to whether Mr. Moore should be held personally liable for any damages imposed in this case. Section 34-133(a) of the General Statutes provides that " (a) except as provided in subsection (b) of this section, a person who is a member or manager of a limited liability company is not liable, solely by reason of being a member or manager under a judgment, decree, or order of a court, or in any other manner, for a debt, obligation or liability of the limited liability company, whether arising in contract, tort or otherwise or for the acts or omissions of any other member manager, agent or employee of the limited liability company." Subsection (b) exceptions have no bearing on this case.
The complaint which is dated December 15, 2015 but filed in January 2016 at paragraph 5 states that " 5 at all relevant times the three defendants, J and H Beverage, LLC and J and H, LLC and Moore collectively and/or individually were acting as and/or doing business as J and H Hospitality." Mr. Moore testified that he and two partners were members of the LLC. The plaintiff’s argument against Moore’s right to be free of personal liability in this case is that " he did not follow the corporate formalities in signing the contract." The contract, Exhibit 1, lists Metromedia as the " seller" and the " buyer" is listed as " J and H Hospitality" at the bottom of the contract it states " Buyer" and again " J and H Hospitality" is listed and then it says " By" and Mr. Moore signs opposite this designation. In the box below Babu Moore appears but opposite " title" below Moore’s name is a word that is indecipherable. The invoices sent by Sprague to J and H Hospitality at the top list the account as that of J and H Hospitality. Two checks sent to Metromedia for payment of supplies in November 2014 and January 2015 refer to the account of J and H Hospitality- in none of the foregoing is LLC attached to the business J and H Hospitality. Mr. Moore would have received the invoices and presumably copies of checks that were cashed. He certainly was aware of the LLC designation. He signed the 2012 switch over form for the contract with Metromedia on that date which did not materialize and the customer was designated as J and H Hospitality, LLC. A bill he received from Yankee Gas with a due date of July 30, 2014 is sent to J and H Hospitality, LLC.
Given the foregoing the court, however, does not believe Moore should be subject to personal liability. At Section 20, pp. 852-53 of the article on " Limited Liability Companies" in 51 Am.Jur.2d it says that: " under both the revised Uniform Limited Liability Company Act and the Uniform Limited Liability Company Act, the failure of a limited liability company to observe the usual company formalities or requirements relating to the exercise of its company powers or management of its business is not ground for imposing personal liability on the members or managers of the company." Subsection (b) of Section 304 of the just mentioned Uniform Acts on Volume 6C of Uniform Laws annotated read as follows:
(b) The failure of a limited liability formalities relating to the exercise of its powers or management of its activities and affairs is not a ground for imposing personal liability on a member or manager for a debt obligation, or other liability of the company.
The comment to this section states subsection (b) refers to the doctrine of " piercing the veil." It goes on to say that: " in the corporate realm ‘disregard of corporate formalities’ is a key factor in the piercing analysis. In the realm of LLCs, that factor is inappropriate, because informality of organization and operation is both common and desired." The formalities at issue in subsection (b) however, " are the process formalities of governance- both those few created by the act and however few or many might be created by the operating agreement."
In other words there are " formalities" and then there are " formalities" of a more serious sort. This is somewhat confusingly reflected in the article on Limited-Liability Companies in 51 Am.Jur.2d at § 20, pages 852-53. The article first says that under the uniform laws " the failure of a limited liability company to observe the usual company formalities or requirements relating to the exercise of its company powers or management of its business is not a ground for imposing personal liability." The article then concedes it is possible to pierce the veil of such a company and lists four factors taken into consideration in deciding whether to do so- one of which is " (3) failure to observe company formalities," citing Gasstop, LLC v. Seatwo, 225 P.3d 1072 (Wyo., 2010). This court would suggest breaching the veil of protection only occurs when the " formality" breached indicates the company claiming LLC status in fact did not so conduct its internal affairs as an LLC or the LLC status was a charade aimed at or resulting in harm to entities dealing with it.
It is true that what is involved in this case is not formalities involving operations of the business such as formal monthly meetings where all the members work in the LLC and consult each other regularly but have forgotten about the monthly meeting requirement- that subsection (b) says is irrelevant to a piercing claim. Here the issue is proper notice of LLC status and claims of such status to any person or business about to engage in business with the business.
But the same rules of fairness and commonsense should apply in addressing the just mentioned issue as is applied in the piercing the veil question as set forth in Section 304(b) of the Uniform Acts. First it is clear that it is the policy of the state to permit businesses to run in an LLC status one of whose chief features is the immunity from liability given to LLC members for claims against and debts of the LLC. Secondly there is no evidence in this case to indicate this LLC was not properly acting as such or was merely an alter ego of another business or a member, Utzlier v. Braca, 115 Conn.App. 261 (2009). It would be violative of state policy and unfair to an LLC member to be deprived of LLC protection for reasons that have nothing to do with the fair application of the state policy or do not deprive entities dealing with companies of their ascertainment of and right to ascertain the LLC status of a company they were dealing with.
Here it seems obvious that the plaintiff knew that it was supplying an LLC. Mr. Abreu testified that in 2012 he received the switch over form from J and H Hospitality for the earlier proposed contract that did not go forward. As noted, that form had at its top " J and H Hospitality, LLC." Was it reasonable for Metromedia to expect the LLC status was no longer operative for J and H Hospitality? Metromedia prepared the contract (Exhibit 1) which just said J and H Hospitality without the LLC designation. Was it not incumbent for them to check on whether the LLC status was still operative when it prepared the contract? Moore’s signing of the contract without correcting the J and H designation and adding LLC to it can only be viewed as a careless act by a lay person. That there was no misunderstanding of the LLC status of J and H Hospitality is evidenced by the heading of the plaintiff’s own complaint prepared in December of 2015. There is nothing to indicate Metromedia would not have entered into the 2014 contract if the entity it was contracting with was an LLC.
If the main attraction or a major attraction of the contract for Metromedia was the fact that Moore would sign a contract that permit Metromedia to make a claim against Moore personally why did it not explicitly list Babu Moore as the " buyer" along with J and H Hospitality? Why would Moore sign a contract knowingly whose wording would set him up for a judgment of personal liability against him when he did not have to secure the contract? For the foregoing reasons the court does not believe personal liability should attach to Mr. Moore.
Against J&H Hospitality, LLC, the court enters a judgment of $55,096.83 along with any interest accruing since the date of trial, costs, and attorneys fees per the contract which will be determined at a later hearing.