D2E Holdings, LLC v. Corp. for Urban Home Ownership of New Haven

Decision Date31 May 2022
Docket NumberAC 44218, (AC 44656)
Citation212 Conn.App. 694,277 A.3d 261
Parties D2E HOLDINGS, LLC v. CORPORATION FOR URBAN HOME OWNERSHIP OF NEW HAVEN
CourtConnecticut Court of Appeals

Danielle J. B. Edwards, for the appellant in Docket Nos. 44218 and 44656 (plaintiff).

Peter V. Lathouris, Stamford, with whom, on the brief, was Victor Andreou, for the appellant in Docket No. 44218 (third-party defendant Dragon Bridge Management, LLC).

Scott E. Jackson, for the appellee in Docket Nos. 44218 and 44656 (defendant).

Alvord, Suarez and Bishop, Js.

BISHOP, J.

These consolidated appeals arise from a dispute among the plaintiff, D2E Holdings, LLC (D2E Holdings), the defendant, third-party plaintiff, and third-party counterclaim defendant, Corporation for Urban Home Ownership of New Haven (CUHO), and the third-party defendant and third-party counterclaim plaintiff, Dragon Bridge Management, LLC (Dragon Bridge).1 In Docket No. AC 44218, D2E Holdings and Dragon Bridge appeal from the judgment of the trial court, rendered after a trial to the court, in favor of CUHO. In Docket No. AC 44656, D2E Holdings appeals from the judgment of the trial court denying its motion to open the judgment in favor of CUHO.2 The parties advance three claims in their appeals. In AC 44218, D2E Holdings claims that the court improperly rendered judgment in favor of CUHO on D2E Holdings’ breach of the implied covenant of good faith and fair dealing claim; in the same docket, Dragon Bridge claims that the court improperly rendered judgment in favor of CUHO on Dragon Bridge's breach of contract counterclaim. In AC 44656, D2E Holdings claims that the court incorrectly determined that it failed to make a threshold showing of fraud in order to warrant limited discovery and an evidentiary hearing on its motion to open. We affirm the judgments of the court.

The following factual findings of the court and procedural history are relevant to the issues raised in this appeal. The present dispute stems from two separate but related contracts: a property management agreement between CUHO and Dragon Bridge, and a real estate contract between CUHO and D2E Holdings.

On March 7, 2017, CUHO and Dragon Bridge attempted to enter into an exclusive property management agreement. In the management agreement, Dragon Bridge, designated in the agreement as the "MANAGER," agreed to be CUHO's "exclusive managing agent to rent, lease, operate, maintain, manage, and supervise and coordinate the rental, leasing, operation, and maintenance" of specified properties owned by CUHO in exchange for a payment of $7000 per month. The management agreement also contained a liquidated damages provision in which CUHO agreed to pay Dragon Bridge twelve months of management fees in the event that CUHO prematurely terminated the management agreement. Dragon Bridge, however, did not exist as a corporate entity on the date that the management agreement was executed, March 7, 2017, because it was not incorporated until March 14, 2017. Eduardo Perez was "employ[ed] ... as a manager" of Dragon Bridge. Perez signed the management agreement, despite the fact that Perez was not individually named as a party to the management agreement.3 Nevertheless, between April, 2017, and October, 2017, Dragon Bridge provided services to CUHO pursuant to the management agreement, and CUHO paid Dragon Bridge for a majority of its services. In October, 2017, or November, 2017, CUHO asked Dragon Bridge not to return to its property.

On October 3, 2017, D2E Holdings and CUHO entered into a real estate contract, through which D2E Holdings agreed to purchase from CUHO seventy-three residential units in New Haven in exchange for $2,900,000. The real estate contract contained a financial contingency provision in § 3.3 (a) that required D2E Holdings to obtain "a commitment from a recognized lending institution to provide purchase money mortgage financing" on or before October 31, 2017. Section 3.1 of the real estate contract mandated that CUHO provide to D2E Holdings sixteen types of statements, including those regarding income and expenses, "[t]o the extent such documents are existing and available ...." Sections 2.2 (a) and 6.1 of the real estate contract required D2E Holdings to provide CUHO with an initial deposit of $100,000, which could be retained by CUHO if D2E Holdings defaulted on any of its obligations.

In accordance with these provisions in the real estate contract, D2E Holdings provided CUHO's attorney with $100,000 as an initial deposit. D2E Holdings also requested that CUHO provide it with certain documents so that it could obtain financing from Liberty Bank. CUHO supplied D2E Holdings with all of the documents that were required pursuant to the real estate contract, but did not provide all of the documents requested by D2E Holdings because those documents "did not yet exist" and could not be created by the closing date. Consequently, D2E Holdings never submitted a full mortgage loan application, never obtained mortgage financing, and the November 30, 2017 closing date expired without a closing.

The parties thereafter engaged in the underlying litigation stemming from the management agreement and the real estate contract. D2E Holdings instituted an action by way of a complaint against CUHO, alleging that CUHO breached the covenant of good faith and fair dealing implied in the real estate contract by failing to provide D2E Holdings with the necessary documents for it to secure mortgage financing and by retaining D2E Holdings’ initial deposit without actual intent to transfer title to the subject units. In that action, D2E Holdings sought specific performance of conveyance of title and "[a]ctual damages ...." After being impleaded by way of a third-party complaint filed by CUHO, Dragon Bridge filed a counterclaim against CUHO, alleging that CUHO breached the management agreement and was unjustly enriched when it failed to pay Dragon Bridge all of the fees for its services. In its counterclaim, Dragon Bridge claimed that it suffered damages in the amount of $96,200, on the basis of the liquidated damages provision in the management agreement.

On March 3 and 5, 2020, all of the parties’ claims were tried to the court, and the court issued a memorandum of decision on August 6, 2020. Through its memorandum of decision, the court found in favor of CUHO as to D2E Holdings’ breach of the implied covenant of good faith and fair dealing claim because it concluded that CUHO had no obligation to provide D2E Holdings with financial documents that did not exist at the time the real estate contract was executed. The court also found in favor of CUHO as to Dragon Bridge's breach of contract claim on the ground that the management agreement was a "nullity" because Dragon Bridge was a nonexistent entity on the date that the management agreement was executed. The court, nevertheless, rendered judgment in the amount of $7000 against CUHO on Dragon Bridge's unjust enrichment claim for the services provided by Dragon Bridge for one month, which represented the unpaid services that Dragon Bridge provided. D2E Holdings and Dragon Bridge then filed this appeal.

During the pendency of this appeal, D2E Holdings, on March 11, 2021, filed a motion to open seeking to vacate the trial court's judgment in favor of CUHO. In support of its motion, D2E Holdings contended that CUHO engaged in fraud by concealing in discovery that it had sold the subject rental units to another entity for a higher price. On April 6, 2021, the court issued a memorandum of decision denying D2E Holdings’ motion to open. The court concluded that CUHO's "allegedly impure motives and the existence or nonexistence of any side deals are legally irrelevant" because the court specifically found in its memorandum of decision that CUHO had complied with the real estate contract. D2E Holdings filed a separate appeal from the trial court's denial of its motion to open, and this court consolidated both appeals. Additional facts will be set forth as necessary.

I

D2E Holdings claims on appeal that the court improperly rendered judgment for CUHO on D2E Holdings’ breach of the implied covenant of good faith and fair dealing claim. Specifically, D2E Holdings argues that the court incorrectly determined that CUHO did not act in bad faith by failing to create and provide to D2E Holdings the documents necessary for D2E Holdings to obtain mortgage financing, and by accepting D2E Holdings’ initial deposit without the intent to transfer title to the subject units. We are not persuaded.

We begin with the applicable standard of review and relevant legal principles that govern the resolution of this claim. Although D2E Holdings frames its claim as challenging the legal standard used by the court, the whole of its argument reveals that its claim challenges the court's application of the standard to the evidence presented at trial. See, e.g., State v. Acker , 160 Conn. App. 734, 741–42, 125 A.3d 1057 (2015) (reframing claim on appeal on basis of content of appellant's brief, despite title of claim, stated standard of review, and characterization of claim used by appellant), cert. denied, 320 Conn. 915, 131 A.3d 750 (2016). We apply plenary review to this claim because the issue of whether undisputed facts meet a particular legal standard is a question of law.4 Burns v. Adler , 325 Conn. 14, 33, 155 A.3d 1223 (2017). Likewise, to the extent we are required to interpret the real estate contract, the language of which is plain and unambiguous, our review also is plenary. See Gallagher v. Fairfield , 339 Conn. 801, 807, 262 A.3d 742 (2021).

"[I]t is axiomatic that the ... duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship. ... In other words, every contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement. ... The covenant of...

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