Wellington Systems, Inc. v. Redding Group, Inc.

• Decision Date: 23 June 1998
• Docket Number: No. 16334,16334
• Citation: 714 A.2d 21,49 Conn.App. 152
• Court: Connecticut Court of Appeals
• Parties: WELLINGTON SYSTEMS, INC., et al. v. REDDING GROUP, INC., et al.

Page 21

714 A.2d 21

49 Conn.App. 152

WELLINGTON SYSTEMS, INC., et al. v. REDDING GROUP, INC., et al.

No. 16334.

Appellate Court of Connecticut.

Argued Nov. 6, 1997.

Decided June 23, 1998.

Christopher T. Coburn, with whom, on the brief, were Robert S. Bello, Lawrence M. Lapine and Thomas M. Cassone, Stamford, for appellants-appellees (plaintiffs).

David S. Maclay, Southport, for appellees-appellants (defendants).

Before EDWARD Y. O'CONNELL, C.J., and LAVERY and SPEAR, JJ.

LAVERY, Judge.

This appeal involves the dissolution of a partnership. The plaintiffs ¹ appeal from the judgment rendered, after a trial to the court, awarding the defendants ² $72,213. The plaintiffs claim that the trial court improperly (1) granted summary judgment, (2) found that Wellington Systems, Inc. (WSI), was not entitled to share in either the postdissolution revenues of contracts negotiated prior to dissolution or the revenues from contracts in existence at the date of dissolution until the expiration of those contracts, and (3) allocated partnership expenses. The defendants filed a cross appeal claiming that the trial court was incorrect in failing to find that (1) the plaintiffs breached their fiduciary duty to the defendants, (2) the plaintiffs' conduct caused the demise of the defendant Redding Group, Inc. (RGI), and resulted in $1.5 million in damages to the defendants, (3) the plaintiffs Stahl and Goodman, were also jointly and severally liable for the judgment, and (4) prejudgment interest was also due.

The record discloses the following facts and procedural history. The defendant corporation, RGI, developed and marketed computer software. The individual defendants, Fazio and Theys, were the principal stockholders of RGI. The plaintiff corporation, WSI, was a computer consulting firm owned by the individual plaintiffs, Stahl and Goodman. In 1981, RGI decided to market one of its software products to the business market. This product, GrafTalk, allowed users to design charts and graphs. The defendants contacted the plaintiff Stahl for assistance in negotiations with a potential customer. Thereafter, Stahl introduced the defendants to Goodman, his coowner in WSI. In a letter from the defendants to the plaintiffs dated November 11, 1981, the parties agreed on the percentage due the plaintiffs based on gross receipts from sales generated by the plaintiffs. At some point in 1982, RGI and WSI agreed that WSI would act as a sales representative and marketing consultant to assist RGI in selling its products in return for a share of the receipts. The two corporations, RGI and WSI, formed a partnership known as Redding Group Services (RGS).

On March 26, 1984, WSI, the individual plaintiffs, RGI, and the individual defendants signed a letter of intent to merge RGS into RGI and to make the individual plaintiffs shareholders and officers of RGI. No such formal agreement was ever signed. Several months after the letter of intent was signed, the parties had a falling out and the defendants terminated their business relationship with the plaintiffs and dissolved the RGS partnership.

The plaintiffs commenced this suit in 1984, and their amended complaint of March 13, 1985, contained six counts. The first count was against RGI, alleging that it had breached an agreement to restructure the RGS partnership agreement into one corporation and to give Stahl and Goodman ownership interests in RGI. The second count was against RGI, Theys, and Fazio, alleging that the defendants had made certain representations that Stahl and Goodman would become shareholders in RGI, and that the defendants knew such representations to be false. The third count was against RGI, alleging that RGI had interfered with the plaintiffs' customers and caused monetary damages to the plaintiffs. In the fourth count, the plaintiffs alleged that Theys and Fazio had interfered with the plaintiffs' contractual rights with RGI. In the fifth count, the plaintiffs alleged that RGI, Theys, and Fazio had engaged in a conversion of funds belonging to the plaintiffs. In the sixth count, the plaintiffs sought an accounting and the appointment of a receiver for the RGS partnership.

The defendants filed an answer generally denying the material allegations of the complaint, and a revised special defense, set-off and counterclaim. In their special defense and counterclaim, the defendants alleged that the plaintiffs had breached their partnership agreement, their fiduciary duties to the defendants, the implied covenant of good faith and fair dealings, and had engaged in a conversion and a "secret plan" to deprive Theys and Fazio of their ownership of RGI. The defendants further claimed that, as a result of the plaintiffs' activities, RGI was forced out of business, and the defendants were deprived of their investment in RGI and incurred legal fees in connection with said activities.

In 1989, the defendants moved for summary judgment as to the first five counts of the six count complaint. Summary judgment was granted as to the first five counts. The court based its decision to grant summary judgment on the handwritten "letter of intent" dated March 26, 1984, summarizing the future merger of RGS into RGI, which, by its own terms, stated that it was contingent on the execution of a formal agreement. ³ Because the court found that no formal agreement had ever been entered into, it concluded that the first five counts of the complaint could not survive the defendants' motion for summary judgment.

The only causes of action that were tried were the sixth count of the amended complaint seeking an accounting of the dissolution of the partnership RGS, and the defendants' counterclaim. The trial was held between October, 1992, and March, 1993. The initial memorandum of decision, dated June 21, 1995, included the court's decision on the accounting, found for the plaintiffs on the defendants' counterclaim and ordered that the $46,000 remaining balance of RGS, held in escrow, be released to the defendants. Subsequent supplemental memoranda of decision were issued on January 2 and August 23, 1996, culminating in the August 23, 1996 judgment, in favor of RGI against its former partner WSI in the amount of $72,213.

I

The plaintiffs' first claim on appeal is that the trial court improperly granted the defendants' motion for summary judgment as to the first five counts of the plaintiffs' amended complaint. Because each count raises a separate legal claim, we will discuss each individually. We first set forth our standard of review when faced with a challenge to a trial court's decision to grant a motion for summary judgment.

"The standards governing our review of a trial court's decision to grant a motion for summary judgment are well established. Practice Book § 384 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.... Miller v. United Technologies Corp., 233 Conn. 732, 744-45, 660 A.2d 810 (1995). In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.... Id., at 745, 660 A.2d 810. The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law; D.H.R. Construction Co. v. Donnelly, 180 Conn. 430, 434, 429 A.2d 908 (1980); and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact. Practice Book § 381.... Suarez v. Dickmont Plastics Corp., 229 Conn. 99, 105, 639 A.2d 507 (1994)." (Internal quotation marks omitted.) Doty v. Mucci, 238 Conn. 800, 805-806, 679 A.2d 945 (1996); Thompson & Peck, Inc. v. Division Drywall, Inc., 241 Conn. 370, 374-75, 696 A.2d 326 (1997).

"Although the party seeking summary judgment has the burden of showing the nonexistence of any material fact ... a party opposing summary judgment must substantiate its adverse claim by showing that there is a genuine issue of material fact together with the evidence disclosing the existence of such an issue.... It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue. Mere assertions of fact ... are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court [in support of a motion for summary judgment]." (Citations omitted; internal quotation marks omitted.) Barrett v. Danbury Hospital, 232 Conn. 242, 255, 654 A.2d 748 (1995).

A

The plaintiffs argue that the court improperly granted summary judgment as to the first count ⁴ of the complaint because (1) the court relied exclusively on the conditional language of the letter of intent and failed to take into consideration whether subsequent conduct by the defendants served to make the agreement binding, (2) the letter of intent was not a condition precedent, (3) an issue of material fact exists as to whether such condition precedent was waived or excused, and (4) an issue of material fact exists as to whether the circumstances surrounding the transaction and the defendants' actions, subsequent to the letter of intent, estop them from denying that the contractual relationship exists.

In support of its motion for summary judgment, the defendants submitted an affidavit signed by Theys, along with four exhibits. The exhibits were a letter of November 11, 1981, addressed to Stahl and signed by Fazio as vice president of RGI, confirming an oral agreement between WSI and RGI regarding payment for WSI's future services; a letter dated October 11, 1982, signed by both Fazio and Stahl, concerning the handling of RGI products by RGS; the March 26, 1984 letter of...