Atelier Constantin Popescu, LLC v. JC Corp.

134 Conn.App. 731

49 A.3d 1003

ATELIER CONSTANTIN POPESCU, LLC

v.JC CORPORATION et al.

No. 31951.

Appellate Court of Connecticut.

Argued Nov. 17, 2011.

Decided April 17, 2012.

John F. Carberry, with whom, on the brief, was David T. Martin, Stamford, for the appellants (defendants).

Eric D. Grayson, Greenwich, for the appellee (plaintiff).

BEAR, ESPINOSA and DUPONT, Js.

ESPINOSA, J.

The defendants, JC Corporation, Tea House on the Riverside, Inc. (Tea House), Julie Chen and Hsiao–Wen Chen, appeal from the judgment of the trial court finding them liable for damages incurred by the plaintiff, Atelier Constantin Popescu, LLC, as a result of a fire that destroyed the building that JC Corporation had agreed to lease to the plaintiff. The defendants claim that the court improperly found that (1) JC Corporation's independent contractor acted with gross negligence in causing the fire that destroyed the building; (2) the gross negligence of the independent contractor could be imputed to the defendants; (3) the defendants acted recklessly; (4) the corporate veils of JC Corporation and Tea House could be pierced; and (5) the plaintiff was entitled to prejudgment interest under General Statutes § 37–3a.¹ We affirm the judgment of the trial court.

The following facts as found by the trial court are relevant to our consideration of this appeal. The plaintiff is a Connecticut corporation in the business of renting, selling and repairing classical stringed instruments, as well as providing music lessons. The corporation has two members, Constantin Popescu and Rodica Brune, who formed the corporation in 1997. In 2006, the plaintiff needed a new space for its business, as its existing lease was set to expire. In a discussion with the plaintiff's real estate broker, Brune expressed interest in a building located at 1076 East Putnam Avenue in Riverside that she had seen with a sign that read, “Tea House on the Riverside—Coming Soon.” Brune had driven past this building many times over the past two years, and the tea house had never opened. The real estate broker arranged a meeting between Brune, Popescu and the owners of 1076 East Putnam Avenue.

Sometime in May, 2006, Popescu and Brune met with Hsiao–Wen Chen, Hsiao–Wen Chen's husband and Julie Chen, their daughter, to discuss a potential lease agreement. At this meeting, the Chens explained that they had been trying, without success, for approximately three years to obtain the permits necessary to open a tea house at 1076 East Putnam Avenue. Having grown frustrated with the process, the Chens stated that, instead, they would be willing to lease the premises to the plaintiff. Brune believed that 1076 East Putnam Avenue was an ideal location because the Chens had made a number of improvements, including the creation of a new bar that could be used for a counter, new shelving that could serve as storage and new bathrooms and other facilities that increased the value of the property.

Shortly after the meeting, the Chens notified the plaintiff that they were willing to lease the entire building for a monthly rent of approximately $13,000. The Chens also requested $150,000 in “key money,” which the real estate agent explained was a payment to reimburse the Chens for the improvements made to the building. Although Brune thought that this key money payment was too high, she believed that the improvements were beneficial and would allow the plaintiff to move into the building without further renovation.

On May 25, 2006, the plaintiff submitted its first offer. The offer listed “JC Corporation,” the owner of record of 1076 East Putnam Avenue, as the landlord, and proposed, among other terms, a key money payment of $100,000 payable to the landlord upon signing of the lease. On May 29, 2006, Julie Chen, who was the vice president and secretary of JC Corporation and the sole individual in charge of JC Corporation's daily operations, wrote, in response to this offer: “Key Money: $150,000. Over the weekend, we spoke with the Tea House principals and considering their substantial investment (more than $300,000) they put into renovating the space, they need significantly more than $100,000 to relinquish the space.” The letter ended by stating: “If the terms and conditions presented herein are acceptable, we would be happy to proceed with preparing the lease.” On June 1, 2006, the plaintiff sent Julie Chen a letter confirming the agreed to terms and conditions for the lease. The proposed agreement set the key money payment at $110,000.

On June 20, 2006, JC Corporation sent the first draft of the lease to the plaintiff. JC Corporation also sent a draft of an agreement, referred to by the parties during the course of this litigation as the “key money agreement,” that named Tea House as the owner of the improvements made to the building and the recipient of the key money payment. The plaintiff was “completely surprised” by both the key money agreement and the interjection into the transaction of the third party, Tea House, which previously had not appeared in any of the draft agreements. When Brune asked Julie Chen to explain what Tea House was and why there was a need for a separate key money agreement, Julie Chen responded that it was a “technicality” and that it was “none of her business.”

On September 19, 2006, the parties executed a lease for the premises at 1076 East Putnam Avenue, with the term set to begin on October 1, 2006. The plaintiff made the first two of three $11,500 installment payments of the security deposit on September 19, 2006, and October 3, 2006. The parties executed the key money agreement on September 19, 2006, and the plaintiff delivered a check to Hsiao–Wen Chen for $110,000, made payable to Tea House.

On October 6, 2006, afire at 1076 East Putnam Avenue essentially destroyed the building. On December 12, 2006, pursuant to language in the lease giving the plaintiff the option of terminating the lease if JC Corporation did not substantially restore the premises within 120 days of a fire or other loss, the plaintiff sent JC Corporation a valid notice of termination of the lease.² Despite this notice, on December 27, 2006, the defendants sent the plaintiff a letter stating that they were not returning the key money payment and that JC Corporation was making a deduction of $3175 from the security deposit, allegedly for one-half of the costs associated with landscaping work completed on the property in connection with the lease. On January 5, 2007, Hsiao–Wen Chen wrote out a check from the Tea House bank account in the amount of $110,000, made payable to herself, and wrote on it, “return of capital.” Hsiao–Wen Chen admitted that this represented the key money payment.

The plaintiff filed its initial complaint on June 4, 2007. The plaintiff later revised and amended its complaint several times. The plaintiff filed the operative complaint in this case, its fifth amended revised complaint, on July 14, 2009. Its eleven counts were as follows: (1) breach of lease, (2) negligence, (3) recklessness, (4) wilful and wanton misconduct, (5) unjust enrichment, (6) equitable forfeiture, (7) piercing the corporate veil as to JC Corporation, (8) piercing the corporate veil as to Tea House, (9) failure to return the plaintiff's security deposit in violation of General Statutes § 47a–21, (10) violations of the Connecticut Unfair Trade Practices Act, General Statutes § 42–110a et seq., and (11) restitution.

On December 14, 2009, following a trial to the court, the court filed a memorandum of decision. The court found in favor of the plaintiff on five of the eleven counts in the complaint: breach of lease, negligence, recklessness and piercing the corporate veil as to both JC Corporation and Tea House. ³ The court rendered judgment in favor of the plaintiff in the amount of $204,406.79, representing the key money, security deposit, litigation costs and $50,000 in attorney's fees.⁴

The defendants appealed to this court on February 4, 2010. On February 16, 2010, the defendants filed a motion for articulation, which the trial court denied on June 2, 2010. The defendants filed a motion for review, and this court granted review and granted the relief requested, directing the trial court to articulate the factual and legal bases of several of its findings. The trial court issued its articulation on November 29, 2010. Additional facts will be set forth as necessary.

IGROSS NEGLIGENCE

The court found, and the parties do not dispute, that clause 29 is the dispositive lease provision that details when JC Corporation may be held liable for consequential damages under the lease. Clause 29 provides in relevant part: “Notwithstandinganything in the Lease herein to the contrary, [JC Corporation] shall in no event be charged with or liable for any consequential damages suffered by [the plaintiff] as a result of [JC Corporation's] failure to perform any of its obligations under this Lease, provided however, that if, due to [JC Corporation's] gross negligence or willful misconduct, [the plaintiff] is prevented from taking initial possession of the premises under this Lease, then this limitation shall not preclude [the plaintiff] from seeking recovery of any sums paid by [the plaintiff], with [JC Corporation's] knowledge, to acquire the right to enter into this lease; following [the plaintiff's] taking possession of the premises, such sums shall not be recoverable against [JC Corporation].”

There is no dispute that the plaintiff was prevented from taking initial possession of the premises. Furthermore, the court found that JC Corporation did not engage in wilful misconduct, and the plaintiff does not challenge this determination on appeal. Therefore, the resolution of this appeal hinges on the question of whether the plaintiff was prevented from taking initial possession of the premises due to gross negligence on the part of JC Corporation.

The court determined that JC Corporation's independent...