Opinion
No. FST CV 98 0168124
April 2, 2005
MEMORANDUM OF DECISION
This case, which was tried by an attorney trial referee, involves a claim that the defendant, Alan Pagano, was unjustly enriched and that the plaintiffs, Robert Vissa and Pagano Seafood, Inc., suffered monetary damages as a result. The individual plaintiff, Vissa, and the defendant had previously formed Pagano Seafood, Inc. to sell seafood at retail and commercially.
The case was referred to Attorney John F. Carberry, an attorney trial referee, pursuant to General Statutes § 52-434(a)(4) and Practice Book § 19-2A. The referee bifurcated the trial into liability and damages. As to liability, the referee submitted a report dated August 10, 2001 in favor of the plaintiff. The defendants objection to the report regarding liability was subsequently withdrawn, so judgment enters in favor of the plaintiff Vissa as to liability.
The attorney trial referee summed up his findings as to liability by stating: "September 1992 was the same month [the defendant] sent the letter to [the plaintiff] stating that he no longer wished to do business with Vissa. Defendant also admits that he did not pay Pagan Seafood, Inc. for the value of the corporation. For this reason, the defendant has been unjustly enriched. He took the value of Pagano Seafood, Inc. and converted it into his new business, Pagano's [Inc.] The unjust enrichment was at the expense of the plaintiff. The plaintiff's good reputation and efforts to supply lobsters and grow the business of Pagano Seafood, Inc., converted unjustly to the defendant's sole proprietorship, is a detriment to the plaintiff."
The attorney trial referee determined that the defendant was liable to the individual plaintiff, Vissa, and did not refer to the corporate plaintiff receiving a monetary award. Hence, references to the plaintiff in this memorandum of decision refer to Vissa and not to the corporation, Pagano Seafood, Inc.
The attorney trial referee subsequently held a hearing limited to the damages sustained by the plaintiff as a result of the unjust enrichment obtained by the defendant. The referee recommended, in a report dated April 1, 2004, an award of $17,501 in favor of the individual plaintiff. This figure was based on the testimony of an expert witness for the defendant who stated that the value of Pagano Seafood, Inc. in September 1992 was $111,000. Since the individual plaintiff claimed an ownership interest in this company of 49%, his share was $54,390, less $36,888 previously paid to him by the defendant in order to reimburse the plaintiff for his capital contribution, including interest through October 1994, leaving a balance due the plaintiff of $17,501. The referee also recommended the award of prejudgment interest as authorized by General Statutes § 37-3a for the detention of money after it becomes payable.
"A right of recovery under the doctrine of unjust enrichment is essentially equitable, its basis being that in a given situation it is contrary to equity and good conscience for one to retain a benefit which has come to him at the expense of another . . . With no other test than what, under a given set of circumstances, is just or unjust, equitable or inequitable, conscionable or unconscionable, it becomes necessary in any case where the benefit of the doctrine is claimed, to examine the circumstances and the conduct of the parties and apply this standard . . . Unjust enrichment is a very broad and flexible equitable doctrine that has as its basis the principle that it is contrary to equity and good conscience for a defendant to retain a benefit that has come to him at the expense of the plaintiff . . . The doctrine's three basic requirements are that (1) the defendant was benefitted, (2) the defendant unjustly failed to pay the plaintiff for the benefits, and (3) the failure of payment was to the plaintiff's detriment . . . All the facts of each case must be examined to determine whether the circumstances render it just or unjust, equitable or inequitable, conscionable or unconscionable, to apply the doctrine." (Citations omitted; internal quotation marks omitted.) Gagne v. Vaccaro, 255 Conn. 390, 408-09, 766 A.2d 416 (2001).
Thereafter, as authorized by Practice Book § 19-14, the plaintiffs filed objections to the referee's report and recommendations. The plaintiffs objected on the basis that they should be entitled to 49% of the profits and the fair market value at the time of trial in 2004 of the new company, Pagano's, Inc., a/k/a Pagano's, a sole proprietorship, which was formed by the defendant sometime in or after 1992 when he terminated his relationship with the individual plaintiff and Pagano's Seafood Inc. In other words, the plaintiffs believe that they are entitled to a "constructive trust" upon the defendant's successful new company, whose assets were valued at $1,800,000 at the time of trial. The plaintiffs' theory is that the unjust enrichment claim was brought derivatively on behalf of Pagano Seafood, Inc., which is still in existence as it has never been legally dissolved.
Practice Book § 19-14 provides: "A party may file objections to the acceptance of a report on the ground that conclusions of fact stated in it were not properly reached on the basis of the subordinate facts found, or that the . . . attorney trial referee erred in rulings on evidence or other rulings or that there are other reasons why the report should not be accepted."
Practice Book § 19-17(a) involves the function of this court in reviewing reports of attorney trial referees and provides: "The court shall render such judgment as the law requires upon the facts in the report. If the court finds that the attorney trial referee has materially erred in its rulings or that there are other sufficient reasons why the report should not be accepted, the court shall reject the report and refer the matter to the same or another . . . attorney trial referee . . . for a new trial or revoke the reference and leave the case to be disposed of in court." Dills v. Enfield, 210 Conn. 705, 713, 557 A.2d 517 (1989). Romano v. Derby, 42 Conn.App. 624, 626, 681 A.2d 387 (1996).
In terms of an attorney trial referee's recommendation as to damages, it is well established that the calculation of damages is a matter for the trier of fact. Cheryl Terry Enters v. City of Hartford, 270 Conn. 619, 639, 854 A.2d 1066 (2004). Moreover, it is "axiomatic that [a] reviewing authority may not substitute its findings for those of the trier of the facts. This principle applies no matter whether the reviewing authority Court . . . the Appellate Court . . . or the Superior Court reviewing the findings of . . . attorney trial referees. See Practice Book § [19-17] . . . [Our Supreme Court] has articulated that attorney trial referees and fact finders share the same function . . . whose determination of the facts is reviewable in accordance with well-established procedures prior to the rendition of judgment by the court . . . The factual findings of a [referee] on any issue are reversible only if they are clearly erroneous . . . [A reviewing court] cannot retry the facts or pass upon the credibility of the witnesses . . . A finding of fact is clearly erroneous when there is no evidence in the record to support it . . . or when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed" (Citation omitted; internal quotation marks omitted.) Meadows v. Higgins, 249 Conn. 155, 162, 733 A.2d 172 (1999).
"[T]he measure of damages in an unjust enrichment case ordinarily is not the loss to the plaintiff but the benefit to the defendant." Hartford Whalers Hockey v. Uniroyal Goodrich Tire, 231 Conn. 276, 285, 649 A.2d 518 (1994). This analysis was described as a "highly fact-intensive inquiry." Gagne v. Vaccaro, supra, 255 Conn. 401.
An unjust enrichment claim has also been variously described as an implied-in-law claim, a quasi contract claim, and a claim in restitution "whose basis is the alleged unjust enrichment of one person at the expense of another." Meaney v. Connecticut Hospital Ass'n, Inc., 250 Conn. 500, 511, 735 A.2d 813 (1999). The appropriate measure of recovery in quasi contract is the value of the property at the time of the conversion or transfer. 1 G. Palmer, The Law of Restitution (1978) § 2.2, p. 56 and 2.12, p. 157. Accordingly, the proper measure of the benefit conferred on the defendant under a claim of unjust enrichment in this case is the actual value of the plaintiff's interest in Pagano Seafood, Inc. in 1992, when defendant abandoned that corporation and went off on his own.
The attorney trial referee in assessing damages used this formula and further indicated that under the plaintiffs' theory they would be entitled to approximately $880,000 based on the value in 2002 of the defendant's current operating company, Pagano's, Inc. The referee rejected this claim and summed up his recommendation to the contrary in these words: "It would not be equitable to award any part of that increased value [of the defendant's new entity, Pagano's, Inc.] to Plaintiff, when Plaintiff has neither contributed to the enterprise's success since 1992, nor borne the risk of loss in such a business." This reasoning is similar to that in Hartford Whalers Hockey v. Uniroyal Goodrich Tire, supra, 231 Conn. 286 wherein the court found that estimating the present value of an existing entity such as the defendant's corporation "would be extraordinarily difficult, if not impossible, to put into practice, because the defendants' revenues would necessarily depend on many factors other than a particular local advertising program. Those factors include the state of the local and national economy, the fortunes of the industry, and the degree of competition, to state but a few."
The attorney trial referee, as noted previously, recommended damages for the plaintiff in the amount of $17,501, the difference between the defendant's payment to the plaintiff of $36,888 and the value as of September 30, 1992 of Pagano's Seafood, Inc. Thus, the damage award recommended by the referee is based on the plaintiff's share of the value of Pagano's Seafood, Inc. at the time the defendant ended his relationship with the plaintiff and began working with a new entity. This analysis is sound and logical and is accepted.
The referee also recommended prejudgment interest in favor of the plaintiff from October 1, 1992, to the date of this judgment, at an interest rate based on the "Blended Annual Applicable Federal Rates," from 1992 to 2004. The average interest rate over those thirteen years is 7.6% which will be applied to the judgment of $17,501.
Based on the applicable standard of review for attorney trial referee's reports, his recommendations as to the amount of damages due the plaintiff are accepted. No material error in the referee's report has been found, and there is no other sufficient reason for rendering the report unacceptable. Practice Book § 19-17(a). As recommended by the attorney trial referee, judgment hereby enters in favor of the plaintiff Vissa to recover from the defendant $17,501, plus interest at 7.6% from October 1, 1992 to the date of this judgment, which amounts to $16,626, for a total judgment in favor of the plaintiff of $34,127. Costs are to be taxed in favor of the plaintiff by the chief clerk of this court in accordance with General Statutes § 52-257 and Practice Book § 18-5.
So Ordered.
William B. Lewis, Judge