Opinion
No. CV 07 5003417
April 18, 2008
MEMORANDUM OF DECISION RE WHETHER PURCHASE CONTRACT VIOLATES THE STATUTE OF FRAUDS
Factual Background
The plaintiff, SS-II, LLC, has brought a one-count complaint against the defendant, Bridge Street Associates seeking specific performance of an option to purchase contained in the parties' lease agreement.
In response to the suit, defendant Bridge Street Associates (hereafter Bridge Street) has filed a motion for summary judgment premised on the grounds that there is not a genuine issue of material fact and that the option to purchase violates the statute of frauds. A memorandum in support of the motion was attached thereto. In support of its' motion for summary judgment, defendant Bridge Street attached the following: a signed and sworn affidavit of Jonathan Sibley and James F. Sibley.
Both are the general partners of Bridge Street Associates, the defendant company.
The plaintiff has a memorandum in opposition to the motion for summary judgment. In support of its' memorandum, the plaintiff attached the following: (1) a signed and sworn affidavit of Lisa Wadge, which has attached exhibits; and (2) a signed and sworn affidavit of Gregg Cook.
Lisa Wadge is an environmental engineer.
Gregg Cook is a member of the plaintiff, SS-II, LLC.
Summary Judgment Standard
"Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Johnson v. Atkinson, 283 Conn. 243, 253, 926 A.2d 656 (2007).
Bridge Street argues that the motion for summary judgment should be granted on the ground that the underlying option to purchase the real property violates the provisions of the Connecticut Statute of Frauds, § 52-550. The plaintiff, on the other hand, argues that the defendant is estopped from asserting the statute of frauds and that the exception of part performance applies.
General Statutes § 52-550 provides in relevant part that "(a) No civil action may be maintained in the following cases unless the agreement, or a memorandum of the agreement, is made in writing and signed by the party, or the agent of the party, to be charged . . . (4) upon any agreement for the sale of real property or any interest in or concerning real property."
Knowledge of the past dealings of the parties is helpful in understanding the context of this case. The parties entered into a commercial lease contract on March 6, 2003. The agreement contained in the lease was extended by the parties on December 23, 2004, which extended the termination date of the lease to March 31, 2013. Included in the lease was an option to purchase. On September 27, 2007, the plaintiff sent the defendant a notice to exercise the option. Included in that letter and notice of exercise of option is the following language: "[d]o you intend to make use of the ELURS as permitted in the lease? If so how many? The use of ELURs will affect the value of the property and require us to negotiate the final purchase price pursuant to paragraph 13A of the lease."
Specifically, with regards to payment, the contract entered into by the parties states the following: "13. Option To Purchase — Lessor grants an option to purchase the property to Lessee, said option to be effective only during the original term of this lease, and PROVIDED THAT Lessee may not exercise such option until the beginning of the 36th month of this Lease, unless otherwise consented to by Lessor, upon the following terms and conditions: A. Purchase Price. The purchase price shall be ONE MILLION TWO HUNDRED THOUSAND DOLLARS ($1,200,00.00) for the premises less $20,000 for each year of the Lease term (or partial year on a pro-rated basis) which has expired, adjusted however, so as to increase the Option Price by an amount equal to 0.3% of $1,200,00.00 per month commencing on the thirty-seventh (37th) month of the Lease term, and pro-rated for each partial month, and further adjusted to take into account environmental conditions existing at the leased premises, which adjustment shall be mutually determined by Lessor and Lessee. The entire purchase price shall be due at the time of closing scheduled in accordance with the terms herein, as adjusted in accordance with the custom of the Middlesex County Bar Association. The purchase price shall be paid by way of cash, certified check or bank check at closing." The issue in this case revolves around the language which indicates that adjustments to the price will be based on environmental factors that will be mutually determined by the parties, however, when that adjustment is to take place and how much of an adjustment is not stated in the contract.
Based on the parties' briefs, the property to be purchased has substantial environmental contamination and has been under the supervision and review of the Connecticut Department of Environmental Protection. After receiving notice of the plaintiff's intent to exercise the option to purchase, on October 3, 2007, the defendant, by counsel, advised the plaintiff that the defendant would not be closing on the property due to the language in the option contract, which indicates, that the purchase price is to be determined at a later date based on environmental factors. According to the plaintiff, the parties, since late March 2007, had commenced a "collaborative environmental investigation" of the premises in order to determine the environmental issues better, in contemplation of the plaintiff purchasing the property.
Further, the plaintiff submitted the affidavit of Gregg Cook, a member of the plaintiff, SS-II. Specifically, Cook states that "I told him [John Sibley] that we [the plaintiff] wanted to purchase the property pursuant to the option in . . . the lease, but had an incomplete understanding of the environmental issues as they then existed." (Plaintiff's brief, Exhibit B.) Further, the affidavit states that "[i]t was also clear that this process [environmental collaboration between the parties] would put us both in a better position to make adjustments in the purchase price calculation, as contemplated in the Option to Purchase." (Plaintiff's brief, Exhibit B.) By the plaintiff's own admission, the purchase price was not set by the parties and as the contract states, is to be determined by the parties at a later date. However, the evidence submitted does indicate that both parties were attempting to come up with a purchase price for the property prior to the filing of this action.
Although the parties were attempting to negotiate a purchase price, the defendant Bridge Street correctly argues that the option to purchase contract fails to set a definite price term, and therefore, violates the statute of frauds. Regarding the statute of frauds, the Appellate Court has held that "[o]ption contracts for the purchase of land must . . . satisfy the statute." Battalino v. Van Patten, 100 Conn.App. 155, 164, 917 A.2d 595 cert. denied, 282 Conn. 924, 925 A.2d 1102 (2007); see also Montanaro Bros. Builders, Inc. v. Snow, 190 Conn. 481, 485, 460 A.2d 1297 (1983). "The statute of frauds requires that the essential terms and not every term of a contract be set forth therein . . . The essential provisions of a contract are the purchase price, the parties, and the subject matter for sale . . . In order to be in compliance with the statute of frauds, therefore, an agreement must state the contract with such certainty that its essentials can be known from the memorandum itself without the aid of parol proof . . ." (Citations omitted; internal quotation marks omitted.) Donenfeld v. Friedman, CT Page 6019 79 Conn.App. 64, 829 A.2d 107 (2003).
"A memorandum is insufficient if it fails to specify the terms of payment of any part of the purchase price." (Internal quotation marks omitted.) Lynch v. Davis, 181 Conn. 434, 439, 435 A.2d 977 (1980). The purchase price is an integral part of the statute of frauds and without it, a contract fails to meet the statute of frauds. Since the purchase price is to be adjusted and determined at a later date, the court finds that this contract violates the statute of frauds.
See Suffield Development Associates Limited Partnership v. Society for Savings, 243 Conn. 832, 843, 708 A.2d 1361 (1998); and Garre v. Geryk, 145 Conn. 669, 673-74, 145 A.2d 829 (1958).
The plaintiff does argue, in opposition to summary judgment, that the exception of partial performance applies. "[A]cts on the part of the promisee may be sufficient to take a contract out of the statute [of frauds] if they are such as clearly refer to some contract in relation to the matter in dispute . . . [T]he acts of part performance generally must be such as are done by the party seeking to enforce the contract, in pursuance of the contract, and with the design of carrying the same into execution, and must also be done with the assent, express or implied, or knowledge of the other party, and be such acts as alter the relations of the parties . . . The acts also must be of such a character that they can be naturally and reasonably accounted for in no other way than by the existence of some contract in relation to the subject matter in dispute." (Internal quotation marks omitted.) Electrical Wholesalers, Inc. v. M.J.B. Corp., 99 Conn.App. 294, 306, 912 A.2d 1117 (2007); see also Breen v. Phelps, 186 Conn. 86, 94, 439 A.2d 1066 (1982).
"[T]he elements required for part performance are: (1) statements, acts or omissions that lead a party to act to his detriment in reliance on the contract; (2) knowledge or assent to the party's actions in reliance on the contract; and (3) acts that unmistakably point to the contract . . . Under this test, two separate but related criteria are met that warrant precluding a party from asserting the statute of frauds . . . First, part performance satisfies the evidentiary function of the statute of frauds by providing proof of the contract itself . . . Second, the inducement of reliance on the oral agreement implicates the equitable principle underlying estoppel because repudiation of the contract by the other party would amount to the perpetration of a fraud." (Citations omitted; internal quotation marks omitted.) Glazer v. Dress Barn, Inc., 274 Conn. 33, 62-63, 873 A.2d 929 (2005).
"It is generally held that partial or even full payment of the purchase price for the sale of land under an oral contract does not take the case out of the statute of frauds . . . The reason usually given for this rule is that the purchaser normally may have restitution of the consideration paid so that his predicament does not warrant the application of an equitable doctrine designed to prevent the statute of frauds itself from becoming an engine of fraud." (Citations omitted; internal quotation marks omitted.) Breen v. Phelps, 186 Conn. 86, 94-95, 439 A.2d 1066 (1982).
Conclusion
Inasmuch as the court finds that the contract is violative of the Statute of Frauds, and further finds that partial performance, if any, is incapable legally of rescuing it from this infirmity, the motion for summary judgment of defendant Bridge Street must be and hereby is granted.