Welch v. Stonybrook Gardens Cooperative, Inc. ( 2015 )

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JOAN E. WELCH v. STONYBROOK GARDENS
COOPERATIVE, INC.
(AC 35966)
DiPentima, C. J., and Beach and Berger, Js.
Argued February 11—officially released June 30, 2015
(Appeal from Superior Court, judicial district of
Fairfield, Hon. Richard P. Gilardi, judge trial referee.)
Bruce L. Levin, with whom were George F. Martelon,
Jr., and, on the brief, Barbara M. Schellenberg, for the
appellant (defendant).
Catherine L. Creager, with whom, on the brief, was
Kevin A. Coles, for the appellee (plaintiff).
Opinion
BEACH, J. The defendant, Stonybrook Gardens
Cooperative, Inc., appeals from the judgment of the
trial court rendered in favor of the plaintiff, Joan E.
Welch. The defendant claims that the court erred in
finding (1) that the defendant had breached its contract
with the plaintiff, (2) in favor of the plaintiff on the
ground of unconscionability, and (3) that the defendant
breached the implied covenant of good faith and fair
dealing.1 We agree with the defendant on all three claims
and reverse the judgment of the trial court.
The record discloses the following facts as stipulated
to by the parties and as found by the trial court. The
defendant owned and managed a residential coopera-
tive complex in Stratford, comprising 200 two-story
town house style duplex structures and 200 one-story
ranch style duplex structures. All the town houses had
wood siding. In 1965, the plaintiff, who, with her hus-
band, was an original member of the defendant, entered
into an ‘‘Occupancy Agreement’’2 with it. Article 11 of
the agreement provided in relevant part: ‘‘(a) . . . The
Member agrees to repair and maintain his Dwelling
Unit at his own expense as follows: (1) Any repairs
or maintenance necessitated by his own negligence or
misuse; (2) Any redecoration of his own Dwelling Unit;
and (3) Any repairs or maintenance of his range or
refrigerator. (b) . . . The Corporation shall provide
and pay for all necessary repairs, maintenance and
replacements, except as specified in Clause (a) of this
Article. . . .’’ Article 14 provided that members were
to abide by ‘‘the Charter, Regulatory Agreement
between the Corporation and the Federal Housing Com-
missioner, By-Laws, rules and regulations of the Corpo-
ration and any amendments thereto . . . .’’ The
governing body of the defendant was a board of
directors.
Although the 1965 occupancy agreement provided
that it was subject to the rules and regulations of the
defendant as thereafter amended, the defendant had
not adopted any rules and regulations at that time.3
In 1983, the defendant’s board of directors enacted a
regulation that affected article 11 (a) of the 1965 occu-
pancy agreement. Under the new regulation, the defen-
dant was to supply the paint and the members the labor
when the exteriors of the units required painting. The
parties never expressly amended the 1965 occupancy
agreement, nor did they execute a new agreement
between themselves. New forms for occupancy
agreements were adopted by the defendant in 1983,
2000, 2004, and 2008, but were executed only by mem-
bers who joined the defendant after the respective dates
of adoption. The 1965 occupancy agreement was, there-
fore, the operative occupancy agreement between
the parties.
The exterior of the plaintiff’s unit was painted at
times before and after 1983 with labor supplied by her.
In 2007, the defendant replaced sections of the exterior
siding of the plaintiff’s unit and painted the replaced
siding a different color than that used on the rest of
the unit. Since 2007, the plaintiff requested that the
defendant pay for the painting of the exterior of the
unit. On July 9, 2009, the defendant notified the plaintiff
that the exterior of her unit was deteriorating and that
it required painting. The plaintiff’s unit had not been
painted as of the time of trial. The parties, then, have
been at loggerheads: the defendant, relying on its regula-
tions, will not pay for the labor involved in painting the
exterior of the plaintiff’s unit, and the plaintiff, relying
on her interpretation of the 1965 occupancy agreement,
will not herself supply the labor.4
The plaintiff brought this action in the small claims
session of the Superior Court, seeking $5000 in damages
for the cost of painting the exterior of her unit. The
defendant transferred the claim to the regular docket
of the Superior Court, where the plaintiff filed a two
count complaint alleging: (1) that the defendant
breached the 1965 occupancy agreement by refusing to
perform the painting and attempting to impose on the
plaintiff the cost of repair and maintenance of her unit,
when such costs were part of the defendant’s obligation
under the 1965 occupancy agreement; and (2) that in
so doing, the defendant acted with reckless indifference
and breached the implied covenant of good faith and
fair dealing. The defendant filed an answer and two
special defenses, alleging estoppel and waiver.
The court found that the 1965 occupancy agreement
was created as a bylaw of the defendant and that the
1965 occupancy agreement was never amended pursu-
ant to the procedure required to amend bylaws. The
court further found that the 1965 occupancy agreement
omitted, although it did reference, rules and regulations
concerning the use of common areas; ‘‘it [was] the opin-
ion of the court that the intent of reference to the rules
and regulations in the initial documents and, in fact in
the first establishment of rules and regulations was
limited to rules and regulations concerning the common
areas used by the entire membership and not the indi-
vidual obligations between the [defendant] and the
unit owners.’’
In finding in favor of the plaintiff on her breach of
contract claim, the court, citing General Statutes §§ 47-
211 and 47-210 (b),5 found that ‘‘the [defendant’s]
attempt to amend the occupa[ncy] agreement by means
of a collateral amendment through the rules and regula-
tions established by a nine member board of directors is
unconscionable and unenforceable.’’ The court further
found that the defendant breached the implied covenant
of good faith and fair dealing. The court denied the
defendant’s special defenses. The court awarded the
plaintiff $5000 in damages for the necessary painting
of the exterior of the unit, as well as costs and attorney’s
fees pursuant to General Statutes § 52-251a,6 and
ordered the defendant to perform all necessary repairs.
This appeal followed.
I
The defendant first claims that the court erred in
concluding that the defendant had breached the 1965
occupancy agreement by relying on a subsequent regu-
lation to alter the terms of the agreement. We agree.
The court’s finding of a breach of contract was based
on its determination that the defendant did not have
the authority ‘‘unilaterally’’ to alter the 1965 occupancy
agreement by adopting the regulation regarding the allo-
cation of painting costs. Our analysis is informed by an
examination of the relevant provisions of the organizing
documents of the defendant and its regulations; the
inquiry involves a question of law that we review de
novo. See Weldy v. Northbrook Condominium Assn.,
Inc., 279 Conn. 728, 736, 904 A.2d 188 (2006).
We begin with the court’s analysis. The court classi-
fied the 1965 occupancy agreement as a bylaw pursuant
to General Statutes § 47-202 (5).7 The court then con-
cluded that the procedure for amending the bylaws had
not been followed and that it was a breach of contract
for the defendant to alter the 1965 occupancy agreement
collaterally by enacting regulations and, then to insist
that the subsequent regulations controlled the prior
agreement, and to refuse to pay for the labor involved
in painting exterior surfaces.
The defendant is a cooperative corporation organized
in 1965 under the auspices of the Federal Housing
Administration. The certificate of incorporation, filed
with the state of Connecticut, declared the defendant
to be a nonstock corporation. The defendant enacted
an initial set of bylaws, which governed its operating
procedures, and entered into a regulatory agreement
with the Federal Housing Administration. The bylaws
defined ‘‘members’’ as the original board of directors
and such subsequent subscribers who gained the
approval of the board; the members were to be offered
occupancy agreements, ‘‘which Occupancy Agreements
shall all be of one class.’’ A standard occupancy
agreement also was promulgated at the inception of the
cooperative venture; this is the agreement referenced in
this opinion as the ‘‘1965 occupancy agreement.’’ The
affairs of the defendant were to be administered by
the board of directors, which in turn was elected by
the members.
The defendant has contested on appeal the trial
court’s characterization of the occupancy agreement as
a ‘‘bylaw.’’ We agree that the agreement does not fit
within standard definitions of bylaws; cf. General Stat-
utes § 47-202 (5); and the original form for occupancy
agreements was referred to, but not included in, the
original set of bylaws.
We do not, however, view the question of whether
the occupancy agreement was a bylaw to be material.
If the appropriate question was whether a regulation,
adopted by the board of directors, effectively could
alter a bylaw, which could be amended only by a two-
thirds vote of the membership, then such characteriza-
tion of the occupancy agreement as a bylaw may well
make a difference. Whether we view the occupancy
agreement as a bylaw or a lease or rental contract,
however, the result is the same, because the subsequent
regulation was not fatally inconsistent with the preex-
isting occupancy agreement, and, indeed, such regula-
tions were specifically contemplated by the occupancy
agreement. Because application of the regulation did
not violate the terms of the 1965 occupancy agreement,
the court erred in concluding that the defendant
breached the contract.8
We are guided by Weldy v. Northbrook Condominium
Assn., Inc., supra, 279 Conn. 728. In Weldy, the plaintiff
condominium owners sought to enjoin the defendant
condominium association and its board of directors
from enforcing a new regulation, adopted by the board
rather than by a two-thirds vote of the membership,
regarding maximum allowable leash length for house-
hold pets, on the ground that the board had exceeded
its authority in adopting the regulation. Id., 731. The
condominium’s declaration provided, as a use restric-
tion, that household pets were to be restrained by leash
or other comparable means. Id., 730–31. The declaration
also provided that the board of directors had the power
to make regulations as were necessary to carry out
the intent of the use restrictions. Id., 731. The bylaws
provided that regulations included in the declaration
could be amended only in the manner provided for
amending the declaration, for which a two-thirds vote
of the unit owners and mortgagees was required. Id. The
trial court granted the defendant’s motion for summary
judgment, reasoning that because the leash length
requirement was a clarification of an existing rule in
the declaration rather than an amendment, the board
had not exceeded its authority in adopting the clarifica-
tion. Id., 732. This court disagreed, viewing the subse-
quent regulation to be an amendment to a provision in
the declaration. Id. Because the subsequent regulation
had not been approved by a two-thirds vote of the
owners and mortgagees, this court held the regulation
to be unenforceable. Weldy v. Northbrook Condomin-
ium Assn., Inc., 89 Conn. App. 581, 589, 874 A.2d 296(2005), rev’d, 279 Conn. 728, 904 A.2d 188 (2006).
Holding that the subsequent regulation was valid and
enforceable, our Supreme Court reversed the judgment
of this court. Weldy v. Northbrook Condominium Assn.,
Inc., supra, 279 Conn. 744. It began its analysis with
a discussion of the Common Interest Ownership Act,
General Statutes § 47-200 et seq., which ‘‘is a compre-
hensive legislative scheme regulating all forms of com-
mon interest ownership,’’ and which was passed in 1983
‘‘to remedy problems arising from unconscionable lease
agreements in condominiums and other residential
common interest communities created prior to 1984.’’
(Internal quotation marks omitted.) Id., 735 and n.3. The
court further noted that ‘‘[a] condominium association
also is empowered, subject to the declaration provi-
sions, to ‘[a]dopt and amend bylaws and rules and regu-
lations’; General Statutes § 47-244 (1); and to ‘[r]egulate
the use . . . of common elements . . . .’ General Stat-
utes § 47-244 (6).’’ Weldy v. Northbrook Condominium
Assn., Inc., supra, 736.
The Supreme Court concluded: ‘‘Because an associa-
tion’s power should be interpreted broadly, the associa-
tion, through its appropriate governing body, is entitled
to exercise all powers of the community except those
reserved to the members. . . . This broad view of the
powers delegated to the . . . board of directors is con-
sistent with the principle inherent in the condominium9
concept . . . that to promote the health, happiness,
and peace of mind of the majority of the unit owners
since they are living in such close proximity and using
facilities in common, each unit owner must give up a
certain degree of freedom of choice which he might
otherwise enjoy in separate, privately owned property.
. . . Accordingly, the standard of review most com-
monly employed in reviewing a board’s authority to
adopt rules or regulations is that, provided . . . a
board-enacted rule does not contravene either an
express provision of the declaration or a right reason-
ably inferable therefrom, it will be found valid, within
the scope of the board’s authority.’’ (Citation omitted;
internal quotation marks omitted.) Id., 738. The court
held that the board was empowered to act because
the leash length limitation implemented, and thus was
consistent with, an expressed intent of the declaration
that household pets be properly restrained and con-
trolled while in common areas. Id., 739. In sum, the
regulation was valid because it reasonably clarified the
intent of the restriction, even though it logically
expanded the restriction.
The court’s conclusion in Weldy that a board enacted
rule that does not contravene the declaration, or a right
reasonably inferable therefrom, is valid and within the
scope of the board’s authority informs the result in the
present case.10 ‘‘A declaration is an instrument recorded
and executed in the same manner as a deed for the
purpose of creating a common interest community.’’
Cantonbury Heights Condominium Assn., Inc. v.
Local Land Development, LLC, 273 Conn. 724, 726 n.1,
873 A.2d 898 (2005); see also General Statutes § 47-220.
‘‘[T]he declaration operates in the nature of a contract,
in that it establishes the parties’ rights and obligations
. . . .’’ Id., 734. The organizing documents previously
referenced serve the function of the declaration in
Weldy. The portion of the 1965 cooperative plan entitled
‘‘Introduction—The Cooperative Housing Corporation’’
provides insight into the cooperative structure. This
section of the 1965 cooperative plan, one of the organiz-
ing documents, states: ‘‘cooperatives have met the
desires of the apartment dweller for home ownership
and better control over his community environment.
. . . Stonybrook Gardens Cooperative, Inc., is orga-
nized for the benefit of its resident-owners, or members.
. . . The most important part of the cooperative is the
individual member. The cooperative has been created
for his benefit in conjunction with that of his fellow
members. . . . When a dwelling unit is available for
occupancy, the member enters into an occupancy
agreement with his cooperative corporation. This
agreement specifically defines the member’s right to
occupancy of his apartment. The occupancy agreement
. . . establishes certain limitations required for the
benefit of the entire community.’’
More specifically, the occupancy agreement itself
specifically anticipated future regulations. Article 14 of
the 1965 occupancy agreement provided that members
were to abide by ‘‘the Charter, Regulatory Agreement
between the Corporation and the Federal Housing Com-
missioner, By-Laws, rules and regulations of the Corpo-
ration and any amendments thereto . . . . The
Member hereby ratifies all agreements executed by the
Cooperative Corporation on or before the date hereof.’’
(Emphasis added.)
The literal language of the occupancy agreement,
then, required the plaintiff to abide by future regula-
tions. A limitation must be placed upon the obligation:
in order to compel obedience, the regulation must be
reasonable and not materially inconsistent. See Weldy
v. Northbrook Condominium Assn., Inc., supra, 279
Conn. 741–42 (regulation consistent with condominium
declaration). We examine the language of the contrac-
tual documents in their entirety to determine whether
the regulation regarding payment for the labor involved
in painting the exterior of units was consistent with the
underlying documents, and thus an appropriate exer-
cise of regulatory authority, or inconsistent, thus requir-
ing ratification by two thirds of the defendant’s
membership. We apply traditional standards for the
interpretation of contracts. ‘‘In ascertaining the contrac-
tual rights and obligations of the parties, we seek to
effectuate their intent, which is derived from the lan-
guage employed in the contract, taking into consider-
ation the circumstances of the parties and the
transaction. . . . We accord the language employed in
the contract a rational construction based on its com-
mon, natural and ordinary meaning and usage as applied
to the subject matter of the contract. . . .
‘‘[A] contract is unambiguous when its language is
clear and conveys a definite and precise intent. . . .
The court will not torture words to impart ambiguity
where ordinary meaning leaves no room for ambiguity.
. . . Moreover, the mere fact that the parties advance
different interpretations of the language in question
does not necessitate a conclusion that the language is
ambiguous. . . . In contrast, a contract is ambiguous
if the intent of the parties is not clear and certain from
the language of the contract itself. . . . [A]ny ambigu-
ity in a contract must emanate from the language used
by the parties. . . . The contract must be viewed in
its entirety, with each provision read in light of the
other provisions . . . and every provision must be
given effect if it is possible to do so.’’ (Citation omitted;
emphasis added; internal quotation marks omitted.)
Harbour Pointe, LLC v. Harbour Landing Condomin-
ium Assn., Inc., 300 Conn. 254, 260–61, 14 A.3d 284(2011). We will not construe a contract’s language in
such a way that it would lead to an absurd result. See
Waesche v. Redevelopment Agency, 155 Conn. 44, 51,
229 A.2d 352 (1967).
We conclude that, in the context of the entire contrac-
tual structure, the regulation regarding payment for the
labor involved in painting the exterior of the units was
reasonable and foreseeable. The structure of the a coop-
erative corporation is fundamentally different from a
landlord and tenant relationship conducted at arm’s
length. The painting in the present case had to be either
paid for by someone or accomplished voluntarily by
the member. If the defendant were to provide the labor,
payment would have to be provided ultimately by the
members.11 If the members were to supply the labor,
they would do so either by paying for the service or
doing it themselves. The regulation, then, ultimately did
not impose a new cost, but rather allocated payment
for labor directly to the members rather than indirectly
through the defendant.12
Recognizing the validity of the regulation avoids an
unworkable or absurd result as well. The standard occu-
pancy agreements were amended from time to time.
The parties stipulated that since 1983, the occupancy
agreements have expressly provided that each member
was responsible for the labor costs for painting the
exterior of the units. If the plaintiff’s view was adopted,
then other members would bear the cost of providing
for her unit, while she would not be contributing toward
the cost of their units. The certificate of incorporation
states that there ‘‘shall be but one class of members.’’
The contractual documents are to be read as a whole
and bizarre results are to be avoided. See Harbour
Pointe, LLC v. Harbour Landing Condominium Assn.,
Inc., supra, 300 Conn. 261.
We conclude that because (1) applying the regulation
to the plaintiff complies with the literal language of the
occupancy agreement, (2) the regulation is not neces-
sarily fundamentally inconsistent with the occupancy
agreement and provides a reasonable method of allocat-
ing the relevant costs, and (3) application of the regula-
tion to the occupancy agreement avoids a bizarre and
unworkable result, the trial court’s conclusion that the
defendant breached its contract with the plaintiff must
be reversed.
The court also based its finding of a breach of con-
tract on unconscionability under General Statutes § 47-
210.13 We agree with the defendant that the court’s find-
ing cannot stand. First, we have determined that the
defendant did not breach the contract. Second, uncon-
scionability was never alleged by the plaintiff in her
amended complaint or in her posttrial brief. ‘‘It is funda-
mental in our law that the right of a plaintiff to recover
is limited to the allegations [in] his complaint. . . . A
complaint must fairly put the defendant on notice of
the claims . . . against him. . . . The purpose of the
complaint is to limit the issues to be decided at the
trial of a case and is calculated to prevent surprise.
. . . Only those issues raised by the [plaintiff] in the
latest complaint can be tried before the jury.’’ (Internal
quotation marks omitted.) White v. Mazda Motor of
America, Inc., 313 Conn. 610, 621, 99 A.3d 1079 (2014).
II
The defendant next claims that the court erred in
concluding that the defendant breached the implied
covenant of good faith and fair dealing. We agree.
The court concluded that the defendant breached the
implied covenant of good faith and fair dealing ‘‘in . . .
ignoring the rights of the plaintiff by attempting to nul-
lify or unilaterally amend her contract rights and seek-
ing retribution for her claims by threatening monetary
penalties . . . .’’
‘‘The duty of good faith under . . . § 47-211 requires
that [e]very contract or duty governed by [the Common
Interest Ownership Act] imposes an obligation of good
faith in its performance or enforcement. The common-
law duty of good faith and fair dealing implicit in every
contract requires that neither party [will] do anything
that will injure the right of the other to receive the
benefits of the agreement. . . . Essentially it is a rule
of construction designed to fulfill the reasonable expec-
tations of the contracting parties as they presumably
intended. . . . To constitute a breach of [the implied
covenant of good faith and fair dealing], the acts by
which a defendant allegedly impedes the plaintiff’s right
to receive benefits that he or she reasonably expected
to receive under the contract must have been taken in
bad faith. . . . Whether a party has acted in bad faith
is a question of fact, subject to the clearly erroneous
standard of review.’’ (Citations omitted; internal quota-
tion marks omitted.) Harley v. Indian Spring Land
Co., 123 Conn. App. 800, 837, 3 A.3d 992 (2010).
The court based its finding of bad faith on the same
conduct that it found to be a breach of contract. For
the reasons set forth in part I of this opinion, the defen-
dant did not breach the 1965 occupancy agreement
or ‘‘ignore the rights of the plaintiff’’ by adopting the
regulation regarding the painting of the exterior of the
units and applying it to the plaintiff. Rather, the regula-
tion was reasonable and was not inconsistent with the
1965 occupancy agreement. Because the court’s finding
of a breach of the covenant of good faith and fair dealing
was premised on its conclusion that the defendant
breached the 1965 occupancy agreement by applying
the regulation to the plaintiff, its finding of a breach of
the implied covenant of good faith and fair dealing
cannot stand.
The judgment is reversed and the case is remanded
with direction to render judgment for the defendant.
In this opinion the other judges concurred.
1
The defendant also claims that the relief awarded by the court was
improper. Because we agree with the defendant on its other claims and
reverse the judgment, we need not address this claim.
2
The defendant’s bylaws recognized that occupancy agreements were
offered to members; the purchaser of a membership in the defendant was
entitled to an occupancy agreement. The occupancy agreement functionally
was a lease; it provided that ‘‘the [c]orporation hereby lets to the [m]ember,
and the [m]ember hereby hires and takes from the [c]orporation, dwelling
unit located at . . . .’’
3
The first set of ‘‘rules and regulations’’ was enacted by the board of
directors in 1974. These enactments had no bearing on the present dispute.
4
The parties stipulated that, apparently because of the dispute, the defen-
dant also ‘‘has not performed other maintenance and repair items’’ required
by the terms of the 1965 occupancy agreement.
5
General Statutes § 47-210 (b) provides: ‘‘The court, on finding as a matter
of law that a contract or contract clause was unconscionable at the time
the contract was made, may refuse to enforce the contract, enforce the
remainder of the contract without the unconscionable clause or limit the
application of any unconscionable clause in order to avoid an unconsciona-
ble result.’’ The court inadvertently referred to this section as § 47-10 (b);
it is clear that this was only a typographical error.
6
Section 52-251a permits the imposition of costs and fees, including attor-
ney’s fees, to be imposed on a defendant who has transferred the case from
small claims to the regular docket of the Superior Court and has not prevailed
in the action.
7
The court stated that the 1965 occupancy agreement was a bylaw and
also that it was ‘‘an extension of the bylaws.’’
General Statutes § 47-202 (5) provides that ‘‘ ‘[b]ylaws’ ’’ means the instru-
ments, however denominated, that contain the procedures for conduct of
the affairs of the association regardless of the form in which the association
is organized, including any amendments to the instruments.’’
8
The defendant raises additional grounds supporting its claim that the
court erred in concluding that it had breached the 1965 occupancy
agreement; the defendant also abandoned its plain error argument under
General Statutes § 47-249 at oral argument before this court. We do not
address the abandoned argument, and we need not address the defendant’s
other arguments because we agree that the court erred in finding a breach
of contract.
9
Although Weldy concerned a condominium association rather than a
cooperative, this difference does not affect the result in this case. The
Common Interest Ownership Act, the statutory backdrop for Weldy, applies
to all forms of common interest ownership. See General Statutes § 47-202
(9). Moreover, the comparison between the regulations, on the one hand,
and the organizing documents, on the other hand, is both obvious and
material to all forms of common ownership.
10
There is also a significant difference between the facts in Weldy and
the facts in this case. In Weldy, the declaration expressly provided that the
regulation in question could not be amended without a vote of two thirds
of the membership. In the present case, on the other hand, the contractual
agreement expressly provides that the agreement is subject to future regula-
tions. The subscribing member, then, objectively recognizes that the contrac-
tual relationship may be subject to reasonable regulations to be enacted in
the future.
11
Article 1 (g) of the 1965 occupancy agreement provided that the member
should pay ‘‘[t]he estimated cost of repairs, maintenance and replacement
of the Project property . . . .’’
12
Article 11 of the occupancy agreement required the member to pay for
some items, including ‘‘redecoration,’’ and the defendant was to pay for all
other repairs and maintenance. The term ‘‘redecoration’’ may be quite broad:
‘‘redecorate’’ is defined in Merriam-Webster’s Collegiate Dictionary (11th
Ed. 2003) as ‘‘to freshen or change in appearance.’’ Painting fits within that
definition, although we recognize that painting the exterior of a structure
may not commonly be considered redecorating.
13
See footnote 5 of this opinion.