CMG Realty of Connecticut, Inc. v. Colonnade One at Old Greenwich Ltd. Partnership

• Decision Date: 31 January 1995
• Docket Number: No. 12300,12300
• Citation: 653 A.2d 207,36 Conn.App. 653
• Court: Connecticut Court of Appeals
• Parties: CMG REALTY OF CONNECTICUT, INC., et al. v. COLONNADE ONE AT OLD GREENWICH LIMITED PARTNERSHIP et al.

Page 207

653 A.2d 207

36 Conn.App. 653

CMG REALTY OF CONNECTICUT, INC., et al. v. COLONNADE ONE AT OLD GREENWICH LIMITED PARTNERSHIP et al.

No. 12300.

Appellate Court of Connecticut.

Argued Sept. 21, 1994.

Decided Jan. 31, 1995.

David M. Wallman, Stamford, for appellant-appellee (named plaintiff).

Paul L. McCullough, Stamford, for appellees-appellants (defendants).

Before DUPONT, C.J., and HEIMAN and SPEAR, JJ.

SPEAR, Judge.

The sole issue on the appeal by the named plaintiff ¹ is whether a clause that required the defendant owners ² to pay the plaintiff broker $50,000 to terminate a brokerage contract was an unenforceable penalty. The issue ³ on the defendants' cross appeal is whether a brokerage contract made "as of" July 1, 1988, satisfies the date requirement of General Statutes § 20-325a(b)(3) ⁴ where the plaintiff broker was not incorporated until August 15, 1988, and did not sign the contract until October, 1988. We affirm the judgment of the trial court.

The plaintiff sought money damages from the defendants for breach ⁵ of a contract that gave the plaintiff the exclusive right to market and sell units in a 178 unit condominium development that the defendants were constructing in Greenwich. The contract provided that the plaintiff would receive a draw of $12,000 a month against a 1 percent commission for each unit sold. The defendants were also responsible for certain of the plaintiff's employee costs and miscellaneous expenses. The defendants counterclaimed in two counts alleging (1) that the plaintiff had breached the contract and (2) that the defendants were entitled to a refund of the plaintiff's draw that exceeded earned commissions.

The case was tried to an attorney trial referee who recommended judgment for the plaintiff as against Colonnade One in the amount of $63,250. The referee also recommended that the plaintiff be awarded attorney's fees incurred to recover the $50,000 termination fee that was included in the recommended judgment. The referee further recommended that judgment be rendered in favor of the plaintiff on both counts of the defendants' counterclaim. ⁶

After a hearing on the objections and exceptions to the referee's report, the trial court found that the $50,000 fee was in fact a penalty, which could not be recovered. The court rendered judgment for the plaintiff against all of the defendants in the amount of $13,250 ⁷ plus interest from April 2, 1990, for money "wrongfully detained." The court denied the plaintiff's claim for attorney's fees and rendered judgment in favor of the plaintiff on the defendants' counterclaim. ⁸

The plaintiff claims in its appeal that it was entitled to the $50,000 termination fee and attorney's fees. ⁹ The defendants claim in their cross appeal that the contract was unenforceable because it did not satisfy the date requirement of § 20-325a(b)(3). ¹⁰

I

We first address the issue raised in the defendants' cross appeal as to the enforceability of the contract. There is no dispute that the subject contract was a real estate brokerage agreement that must comply with all of the provisions of § 20-325a(b) to be enforceable. It is also undisputed that the plaintiff was incorporated on August 15, 1988, that the contract was signed by all of the parties in October, 1988, that the plaintiff was licensed at the time that this action was brought and that the plaintiff was licensed at the time that the services were rendered.

The statutory scheme of § 20-325a requires that a party who sues for a real estate commission must first show that the written contract or authorization under which the claim is made satisfies the facial requirements of the statute as to names, addresses, date, conditions and signatures. Additionally, the party must also show licensing at the two critical times: (1) at the time the action is brought; and (2) at the time the services are rendered.

Section 20-325a(b)(3) of the statute can be satisfied either by a written contract that states the date on which it was entered into by the parties or a written authorization that shows the date on which the services of the broker were authorized by the owner. The defendants claim that neither date requirement of General Statutes § 20-325a(b)(3) was met. We disagree.

A

The trial court found that the broker's services were "authorized" as of July 1, 1988, and, therefore, the contract satisfied the statute. The defendants assert that the plaintiff could not possibly have received authorization from the defendants as of July 1, 1988, because the plaintiff did not come into existence until August 15, 1988. We agree.

The trial court relied on Arruda Realty, Inc. v. Doyon, 35 Conn.Supp. 617, 401 A.2d 625, cert. denied, 176 Conn. 763, 394 A.2d 201 (1978). In ruling on an appeal from a summary judgment, that court held that a listing agreement that stated, " '[t]his agreement will be effective commencing Sept. 17, 1976' "; id., at 619, 401 A.2d 625; complied with the date requirement of § 20-325a(b) because "authorization could be found to have been given on September 17, 1976." (Emphasis added.) Id., at 620, 401 A.2d 625.

Authorization is official approval or permission. See Webster's Third New International Dictionary. By signing the contract, the defendant owners authorized the plaintiff broker's services from that date forward. Retroactive authorization of those services that were rendered prior to the contract's signing date could have been accomplished only by the defendants' ratification of those acts that constituted the services. "Ratification is defined as the affirmance by a person of a prior act which did not bind him but which was done or professedly done on his account.... Ratification requires acceptance of the results of the act with an intent to ratify, and with full knowledge of all the material circumstances." (Citation omitted; emphasis added; internal quotation marks omitted.) Russell v. Dean Witter Reynolds, Inc., 200 Conn. 172, 185, 510 A.2d 972 (1986). Authorization by ratification could be found for actions that occurred from the date that the contract was signed retroactive to August 15, 1988, when the plaintiff corporation came into existence. The plaintiff did not exist, however, during the period from July 1, 1988, to the time of its incorporation on August 15, 1988. It could not have performed any acts during that period that were capable of ratification by the defendant. Retroactive authorization as of July 1, 1988, was not possible, ¹¹ and, therefore, the trial court's legal conclusion that there was such authorization cannot stand.

B

The defendants also assert that the July 1, 1988 date did not comply with the alternative statutory requirement that a brokerage contract show the date on which it was entered into by the parties because the contract was actually signed on October 15, 1988. The trial court did not rule on this claim because it found authorization for the broker's services as of July 1, 1988. We conclude that the contract date requirement of the statute, rather than the authorization date, was satisfied here. The parties briefed and argued both date alternatives and "[t]his court is authorized to rely upon alternative grounds supported by the record to sustain a judgment." (Internal quotation marks omitted.) Kelley v. Bonney, 221 Conn. 549, 592 606 A.2d 693 (1992); Latimer v. Administrator, 216 Conn. 237, 252, 579 A.2d 497 (1990); In re Jennifer G., 29 Conn.App. 689, 692, 617 A.2d 921 (1992).

We first note that the cases cited by the defendants in support of their claim that the July 1 date does not comply with the contract date provision of the statute furnish little guidance as they all involved omissions that were apparent on the face of each document. New England Land Co. v. DeMarkey, 213 Conn. 612, 569 A.2d 1098 (1990) (failure to identify particular sales price); Hossan v. Hudiakoff, 178 Conn. 381, 423 A.2d 108 (1979) (failure to include broker's address); Boline v. Albert, 23 Conn.App. 688, 583 A.2d 945 (1991) (failure to include special conditions of agreement); Rostenberg-Doern Co. v. Weiner, 17 Conn.App. 294, 552 A.2d 827 (1989) (failure to include rate of broker's commission). These cases shed no light on the issue of whether an execution date that is different from the date on the face of the contract renders the date on the contract invalid pursuant to § 20.325a(b)(3).

We conclude that the July 1, 1988 date satisfies the statute because it is the date on which the parties chose to become contractually bound. This "as of" date is the effective date of the contract for two reasons. First, the parties are free to contract as they wish and, second, a corporation may adopt rights and obligations that predate its existence.

Parties are always free to contract as they see fit as long as the contract does not violate any law or public policy. "It is established well beyond the need for citation that parties are free to contract for whatever terms on which they may agree." Holly Hill Holdings v. Lowman, 226 Conn. 748, 755, 628 A.2d 1298 (1993); see also Collins v. Sears, Roebuck & Co., 164 Conn. 369, 377, 321 A.2d 444 (1973); 17A Am.Jur.2d, Contracts § 174 (1991). We discern no reason here why the parties could not agree on the date when they would become contractually bound, whether that date was before (or after) the date on which they actually signed the contract.

A corporation can acquire rights and subject itself to duties with respect to preincorporation matters. A contract made in the name of an inchoate corporation can be enforced after the corporation is organized on the principle of ratification. Cramer v. Burnham, 107 Conn. 216, 219, 140 A. 477 (1928). We note that such ratification here would not be subject to the infirmity discussed above where we concluded that the doctrine of ratification could not be used to show that the defendants authorized the plaintiff's services as of July 1, 1988. By signing the...