October 28, 2004
MEMORANDUM OF DECISION
This is an action for breach of a written contract to rent industrial uniforms. The plaintiff seeks liquidated damages and attorneys fees pursuant to the contract. The defendant denies that it breached the contract. It has also pleaded special defenses alleging that it timely provided the plaintiff with notice of non-renewal of the contract, that the plaintiff waived its rights to claim damages, that the liquidated damages provision is unenforceable because the plaintiff did not sustain any damages, and that the liquidated damages provision is an unenforceable penalty.
The court finds the following facts. The plaintiff is in the business of renting uniforms to commercial customers. The defendant is in the scrap metal business. On September 2, 1997 the parties entered into a written contract in which the plaintiff agreed to provide the defendant with commercial garments for its employees and to clean and maintain those garments.
The contract stated: "This service agreement is effective as of the date of execution above and shall remain in effect, from the date of installation, for a period of sixty (60) months (260 revenue weeks). The agreement shall be automatically renewed for the same period of time unless the Company [plaintiff] is notified to the contrary in writing, thirty days in advance of the expiration of the then current term . . . In the event of termination prior to expiration, the Customer agrees to purchase garments issued to them . . . at replacement costs then in effect or to pay 50% of applicable charges for the remainder of the term, whichever is greater." To prevent automatic renewal of the contract, the defendant was obliged to give the plaintiff written notice that it did not desire to renew by August 2, 2002.
In July 2002, the plaintiff's district service manager, Keith Kucky, visited the defendant's president, Anthony Rubino, to discuss the defendant's renewing its contract with the plaintiff. Rubino made it clear to Kucky that the defendant could not afford to renew the contract because of the defendant's adverse financial condition and the cost of plaintiff's services. Kucky offered the defendant a 40% reduction in price. The defendant never accepted the offer. In August and September, Kucky made subsequent visits and telephone calls to Rubino in an effort to convince him to renew the contract, all to no avail. When Kucky would telephone Rubino, Rubino generally would not take the calls.
On October 9, 2002, Kucky telephoned Rubino and again urged him to renew the contract with the plaintiff. Rubino again refused. In fact, the defendant had signed a contract with another company, Cintas Corp., for these services. Kucky was upset and advised Rubino that he had never cancelled the contract with the plaintiff, and that, accordingly, the contract had automatically renewed according to its terms. Rubino then insisted that he had cancelled the contract in writing. He subsequently faxed the plaintiff a document purporting to be a July 25, 2002 letter to the plaintiff, stating:
This will confirm our recent phone conversation where-in; I advised you that we will not be renewing our "Rental Agreement" upon expiration. Very truly yours,
Anthony Rubino Rubino Brothers, Inc.
The plaintiff claims it never received the letter and that it was never timely sent. The defendant argues that it was timely and properly sent and that, presumptively, it was received by the plaintiff. This is the core factual issue in the case.
The case was tried to the court. There were only two principal witnesses, Kucky and Rubino. Rubino claims he cancelled the contract in writing in July 2002. Kucky claims he did not.
Preliminarily, the court makes the following finding. In July 2002, Rubino made it clear to Kucky that he did not intend to renew the defendant's contract with the plaintiff. The plaintiff, nonetheless, continued its efforts to have the defendant sign a contract, rather than bring suit against the defendant for breach of an automatically renewed contract, because the plaintiff wanted a satisfied customer, not a contentious lawsuit.
The defendant relies on the rule that "[p]roof of mailing a letter to a person at the correct address with correct postage creates a presumption that such letter or other item was received by the addressee. Garland v. Gaines, 73 Conn. 662, 664, 49 A. 19 (1901); Pitts v. Hartford Life Annuity Ins. Co., 66 Conn. 376, 384, 34 A. 95 (1895)." Tait's Handbook of Connecticut Evidence (3rd Ed.) § 3.17.6. The presumption is a rebuttable one and not conclusive. Piscitello v. Boscarello, 113 Conn. 128, 132, 154 A. 168 (1931). The defendant further argues that the presumption cannot be rebutted by the plaintiff's bald assertion that it did not receive the letter. The defendant mistakes the nature of the presumption.
The presumption becomes operative not by any evidence of mailing a letter to a person at the correct address and with correct postage but by "proof." See Garland v. Gaines, supra, 73 Conn. 664 (noting finding made by court that document was mailed); Pitts v. Hartford Life Accident Ins. Co., supra, 66 Conn. 381, 384 (same). "Fairly stated, evidence legally is the means by which alleged matters of fact are properly submitted to the trier of fact for the purpose of proving a fact in issue. On the other hand, 'proof is the result or the effect of such 'evidence.'" Cologne v. Westfarms Associates, 197 Conn. 141, 153-54, 496 A.2d 476 (1985). Based largely on the court's assessments of the witnesses, the court finds that the document faxed to the plaintiff on October 2 had not previously been mailed. Since there was never any mailing, there is no presumption of receipt.
The defendant does not contest, either by oral argument or by brief, that notice in writing was required for the defendant to prevent the contract from being automatically renewed. It is a settled rule of contract law that "[i]t is always competent for parties to contract as to how notice shall be given, unless their contract is in conflict with law or public policy." Stratton v. Abington Mutual Fire Ins. Co., 9 Conn.App. 557, 562, 520 A.2d 617, cert. denied, 203 Conn. 807, 525 A.2d 522 (1987), quoting Westmoreland v. General Accident F. L. Assurance Corporation, 144 Conn. 265, 270, 129 A.2d 623 (1957). "It is axiomatic that a party is entitled to rely upon its written contract as the final integration of its rights and duties." Zullo v. Smith, 179 Conn. 596, 601, 427 A.2d 409 (1980). Contracts that provide for automatic renewal in the absence of written notice are generally given effect. See 17A Am.Jur.2d, Contracts § 507 (2004).
At trial, counsel for the defendant stated; "According to the terms of the contract your Honor, if the letter was received any time after August 2nd, of 2002, then the contract would go into renewal. And it would be true, Rubino Brothers would be obligated for an additional five-year term if the letter were received any time after August 2nd of 2002." In its trial brief, the defendant states: "As the Court properly noted, the only relevant issue is whether the notice of non-renewal was properly mailed, and if so, judgment should enter for the defendant."
The defendant has failed to brief its special defenses of invalidity of the liquidated damages clause of the contract or waiver. At trial, the defendant briefly mentioned only its defense that the liquidated damages provision of the contract was an unenforceable penalty. This, however, would seem to satisfy the requirements of Practice Book § 5-2.
The defendant seeks a finding that it did not transact new business with the plaintiff after the expiration of the initial term of the contract. The court finds that the plaintiff did not prove that the defendant transacted such business.
The defendant's claim of waiver is gleaned from its motion for summary judgment, filed in December 3, 2003. The claim of waiver is based on the plaintiff's having retrieved its uniforms from the defendant on October 16, 2003 and appears to be related to the liquidated damages clause of the contract. That clause provides: "In the event of termination prior to expiration, Customer agrees to purchase garments issued to them . . . at replacement costs then in effect or to pay 50% of applicable charges for the remained of the term, whichever is greater." The defendant argued that since the plaintiff retrieved the garments, the defendant could not purchase them.
"Waiver is the intentional relinquishment of a known right . . . A waiver occurs, therefore, only if there is both knowledge of the existence of the right and intent to relinquish it . . . [Waiver] involves the idea of assent and assent is an act of understanding . . . Intention to relinquish [must] appear, but acts and conduct inconsistent with intention [to assert a right] are sufficient . . . Wavier does not have to be express, but may consist of acts or conduct from which waiver may be implied . . . In other words, waiver may be inferred from the circumstances if it is reasonable to do so." (Citations omitted; internal quotation marks omitted.) Schreck v. Stamford, 72 Conn.App. 497, 500, 805 A.2d 776 (2002).
The court finds that the defendant has failed to prove its defense of waiver. At best the conduct of the plaintiff in retrieving the uniforms it had provided the defendant was equivocal. The defendant was aware that the plaintiff had signed a contract with another company to provide such garments. The plaintiff, therefore, could reasonably have believed that the defendant did not want to purchase its uniforms. This is buttressed by the defendant's handing over the garments to the plaintiff, apparently voluntarily and without controversy.
At trial, the following exchange occurred between the court and Attorney Rubino, counsel for the defendant:
THE COURT: And damages would be what?
MR. RUBINO: According to the contract 50 percent of the remaining term. We dispute the conscienabiliy (phonetic) of that and that's what the contract says or the cost of the uniforms, whichever is greater, Since — so therefore, if a customer were to cancel a contract in the early portion of the five-year term, I would assume that the damages would be 50 percent of the remaining contract since that would be greater and most likely than the cost of the uniforms . . .
Practice Book § 5-2 provides: "Any party intending to raise any question of law which may be the subject of an appeal must either state the question distinctly to the judicial authority in a written trial brief under Section 5-1 or state the question distinctly to the judicial authority on the record before such party's closing argument and within sufficient time to give the opposing counsel an opportunity to discuss the question. If the party fails to do this, the judicial authority will be under no obligation to decide the question."
Practice Book § 5-1 provides: "The parties may, as of right, or shall, if the judicial authority so orders, file, at such time as the judicial authority shall determine, written trial briefs discussing the issues in the case and the factual or legal basis upon which they ought to be resolved."
The contract between the parties contained the following clause: "In the event of termination prior to expiration, Customer agrees to purchase garments issued to them (including special garments in inventory, if applicable) at replacement costs then in effect of to pay 50% of applicable charges for the remainder of the term, whichever is greater."
"A contractual provision for a penalty is one the prime purpose of which is to prevent a breach of the contract by holder over the head of a contracting party the threat of punishment for a breach . . . A provision for liquidated damages, on the other hand, is one the real purpose of which is to fix fair compensation to the injured party for a breach of the contract." (Citation omitted.) Berger v. Shanahan, 142 Conn. 726, 731, 118 A.2d 311 (1955). "It is . . . well settled that a contract provision which imposes a penalty for breach of contract is invalid, but a provision which allows liquidated damages for breach of contract is enforceable if certain conditions are satisfied. Norwalk Door Closer Co. v. Eagle Lock Screw Co., 153 Conn. 681, 686, 220 A.2d 263 (1966). The requisite three conditions are that: (1) the damage which was to be expected as a result of a breach of contract was uncertain in amount or difficult to prove; (2) there was an intent on the part of the parties to liquidate damages in advance; and (3) the amount stipulated was reasonable. Berger v. Shanahan, 142 Conn. 726, 732, 118 A.2d 311 (1955)." Hanson Development Co. v. East Great Plains, 195 Conn. 60, 64-65, 485 A.2d 1296 (1985).
Where a party injured by a breach of contract seeks to enforce a liquidated damages clause, "the burden of persuasion about the enforceability of the clause naturally rests with its proponent." CT Page 15814 Vines v. Orchard Hills, Inc., 181 Conn. 501, 511, 435 A.2d 1022 (1980); see Hertz Commercial Leasing Corporation v. Dynatron, Inc., 37 Conn.Sup. 7, 17, 427 A.2d 314 (1980); Automated Waste Disposal, Inc. v. Kuhnt, Superior Court, Judicial District of Danbury, No. 320729 (July 15, 1997) (Mihalakos, J.); Brown v. Rangoon, Superior Court, judicial District of Hartford-New Britain, No. CV91-0702650 (January 5, 1994) (N. 0'Neill, J.). Burden of persuasion is synonymous with burden of proof Potter v. Chicago Pneumatic Tool Co., 241 Conn. 199, 235 n. 26, 694 A.2d 1319 (1997); Christian Activities Council v. Town Council, 249 Conn. 566, 580, 735 A.2d 231 (1999).
Synesort, Inc. v. Indata Services, 14 Conn.App. 481, 541 A.2d 543, cert. denied, 209 Conn. 804, 548 A.2d 443 (1988), which held to the contrary was based on New York law. Id., 484, 485.
The court finds that the plaintiff did not sustain its burden with respect to the first and third conditions to establish the validity of the clause. Indeed, it did not endeavor to do so. Nor was the amount of actual damages sustained by the plaintiff proved. Accordingly, the plaintiff is entitled only to nominal damages. Lar-Rob Bus Corporation v. Fairfield, 170 Conn. 397, 409, 365 A.2d 1086 (1976). "Nominal damages . . . are such as are to be awarded in a case where there has been a breach of a contract and no actual damages whatever have been or can be shown." (Internal quotation marks omitted.) Beattie v. New York, N.H. H.R. Co., 84 Conn. 555, 559, 80 A. 709 (1911). "The law implies damage from the invasion of a legal right and recovery of nominal damages, at least, must be had." Mirando v. Mirando, 104 Conn. 318, 321, 132 A. 910 (1926).
The plaintiff also seeks attorneys fees pursuant to the contract, which provides: "All costs, including reasonable attorneys fees, incurred by the Company in enforcing its rights hereunder will be paid by the customer." The plaintiff's attorney has submitted an affidavit representing that attorneys fees of $4,393.88 have been incurred by the plaintiff in connection with this litigation. At trial, the plaintiff's attorney advised the court that the plaintiff was pressing its claim for attorneys fees and that he would submit an affidavit of his fees in support of that claim within one week. The court informed both counsel at that time that " if the plaintiff prevails — I don't know if that's going to happen — of course the defendant would have the opportunity for a hearing if — on all of that attorneys fees if the defendant wished." (Emphasis added.)
Attorneys fees have been held to be recoverable in statutory actions where they are authorized, even where only nominal damages have been awarded. See, e.g., Fabri v. United Technologies, International, Inc., 193 F.Sup.2d 480 (D.Conn. 2002) (action under Connecticut Unfair Trade Practices Act), cited with approval, Schoonmaker v. Lawrence Brunoli, Inc., 265 Conn. 210, 271 n. 77, 828 A.2d 64 (2003). In Coyne International v. Ct. L. Buick Nissan, Superior Court, judicial district of Waterbury, No. CV93-0117891 (June 3, 1998), Judge Pellegrino authorized attorneys fees where only nominal damages had been awarded.
The defendant has, to date, not requested a hearing on the amount of plaintiff's attorneys fees. Specifically, no such issue was raised in the defendant's "Post-trial memorandum of Law" or its "Reply to Plaintiff's Post-Trial Memorandum of Law," both of which appear to have been filed well after the filing of the plaintiff's brief and affidavit. Ordinarily, the defendant might be deemed to have waived any objection to the amount of attorneys fees claim by the plaintiff. Smith v. Snyder, 267 Conn. 456, 481, 839 A.2d 589 (2004); Arcano v. Board of Education, 81 Conn.App. 761, 770-71, 841 A.2d 742 (2004). In view of the wording of the court's remarks on this subject, quoted supra, the defendant may well have believed that not until the court ruled in the plaintiff's favor was the defendant obliged to request a hearing on the subject of the amount of plaintiff's attorneys fees.
The court orders that counsel confer with each other on the issue of costs and attorneys fees. If after such consultation, the defendant desires a hearing on the issue of plaintiff's claim for attorneys fees, its attorney shall so advise the court within two weeks by letter to the undersigned, now assigned to the Judicial District of New Haven, 235 Church St., New Haven, Ct 06510. The court will then schedule a hearing in Superior Court, Judicial District of New Haven.
Judgment may enter for the plaintiff in the amount of $1.00, nominal damages.
BY THE COURT
Bruce L. Levin Judge of the Superior Court