Whitney v. J.M. Scott Associates, Inc. ( 2016 )

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WALTER WHITNEY v. J.M. SCOTT
ASSOCIATES, INC., ET AL.
(AC 36912)
Lavine, Keller and Pellegrino, Js.
Argued November 30, 2015—officially released April 12, 2016
(Appeal from Superior Court, judicial district of
Litchfield, Danaher, J.)
Kenneth J. Bartschi, with whom were Karen L. Dowd
and, on the brief, Bruce L. Elstein, for the appellants-
appellees (defendant James M. Scott, Jr., et al.).
Ann H. Rubin, with whom were Sarah Healey, and,
on the brief, Anne D. Peterson, for the appellee-appel-
lant (plaintiff).
Opinion
PELLEGRINO, J. The defendants James M. Scott, Jr.,
and Scott Swimming Pools, Inc. (corporation),1 appeal
from the judgment of the trial court rendered in favor
of the plaintiff, Walter Whitney. We affirm in part and
reverse in part the judgment of the trial court.
On appeal, the defendants claim that the trial court
(1) improperly determined the measure of damages for
breach of the parties’ stock option purchase agreement,
(2) erroneously failed to order the plaintiff to return
his shares of stock as provided in that agreement, (3)
erroneously based its award of common-law punitive
damages on a lodestar analysis, (4) improperly altered
its decision in response to a motion for articulation
by taking evidence and making new findings, and (5)
improperly ordered prejudgment interest pursuant to
General Statutes § 37-3a. We conclude that the trial
court properly determined the measure of damages for
breach of the stock option purchase agreement, but
that the court erroneously failed to order the plaintiff to
return his shares of stock, calculated punitive damages,
and ordered prejudgment interest. We also conclude
that the defendants’ articulation claim is moot.
The following facts as found by the trial court inform
our review. This case arises out of a business relation-
ship between Scott and the plaintiff. Scott is the presi-
dent and the majority stockholder of the corporation.
On March 20, 2002, the plaintiff entered into three
agreements with the defendants: (1) an employment
agreement; (2) a stock option purchase agreement; and
(3) a supplemental letter agreement. The agreements
documented an arrangement under which the plaintiff
became the owner of twenty shares of corporation
stock and he would work for the corporation for five
years, after which time Scott would retire and the plain-
tiff would have the right to purchase the remainder
of Scott’s shares in the corporation. The employment
agreement set out the plaintiff’s duties at the corpora-
tion and his compensation structure. The employment
agreement provided that beginning July 1, 2002, the
plaintiff could be terminated from employment only for
adequate cause, which was defined in the agreement.2
If the plaintiff were terminated for adequate cause and
he disputed the termination, the employment
agreement provided that the dispute shall be settled by
arbitration. The employment agreement also provided
that if the plaintiff was terminated without adequate
cause, the corporation would pay liquidated damages
and buy back the plaintiff’s twenty shares of stock
for $26,000.3
Under the stock option purchase agreement, after
five years of employment with the defendants, the plain-
tiff would acquire the right to purchase the balance
of the corporation stock from Scott for $1.27 million,
payable over ten years at 7 percent interest. That
agreement provided that the plaintiff would employ
Scott as a consultant for up to five years. Both the
employment agreement and the stock option purchase
agreement were supplemented by a letter setting forth
additional terms. Before entering into the agreements,
the plaintiff reviewed the corporation’s financial state-
ments, tax returns, and corporate records. The defen-
dants, however, concealed information relating to the
financial statements, including deferred compensation
liabilities owed to Scott, which exceeded $1.6 million.
The agreements were executed in March, 2002, and
the plaintiff began his employment for the corporation.
The plaintiff received bonuses throughout his employ-
ment, but he was never given a performance review or
evaluation. In August, 2006, Scott informed the plaintiff
that he no longer intended to sell the corporation stock
to the plaintiff. In October, 2006, over the course of
one day, Scott sent seven memoranda to the plaintiff,
all criticizing the plaintiff’s work. In December, 2006,
approximately three months before the plaintiff was to
have purchased the corporation stock, Scott terminated
the plaintiff’s employment. Scott used the memoranda
sent to the plaintiff in an effort to establish that the
defendants had adequate cause to terminate the plain-
tiff’s employment for poor job performance.
In January, 2007, the plaintiff claimed a right to arbi-
trate the dispute with the defendants, pursuant to the
employment agreement and the stock option purchase
agreement. Arbitration began in September, 2007, and
continued until August, 2009, when Scott claimed that
he lacked funds to continue arbitration. The plaintiff
then commenced the present action and filed the opera-
tive complaint in June, 2012.
The complaint alleged, inter alia, common-law fraud,
breach of contract, breach of the covenant of good faith
and fair dealing, and a violation of the Connecticut
Unfair Trade Practices Act (CUTPA), General Statutes
§ 42-110a et seq. In response, the defendants’ alleged
multiple special defenses and a multicount counter-
claim, which alleged claims of, inter alia, breach of
the employment agreement, breach of the stock option
purchase agreement, and abuse of process.
A trial to the court began in May, 2013, and the court
found in favor of the defendants on the CUTPA claim
and in favor of the plaintiff on the other claims. The
court also found in favor of the plaintiff on all counts
of the defendants’ counterclaim. The court further
found that the plaintiff was terminated from his employ-
ment without adequate cause, as defined in the employ-
ment agreement, and that the defendants engaged in
common-law fraud. The court based the fraud finding
on the fact that the defendants deliberately failed to
disclose the deferred compensation obligation, which
exceeded $1.6 million, when the plaintiff requested
access to the corporation’s financial statements and
records prior to entering into the agreements with
the defendants.
The court awarded the plaintiff breach of contract
damages, liquidated damages, arbitration costs, puni-
tive damages, and prejudgment interest. This appeal
followed. Additional facts will be set forth as necessary.
I
The defendants first claim that the trial court applied
an improper measure of damages when it calculated
damages for the defendants’ breach of the stock option
purchase agreement. The court calculated damages
under a ‘‘benefit of the bargain’’ theory. The defendants
argue that the calculation under that theory was
improper and that the only proper measure of damages
is the difference between the purchase price of the
stock and the value of the stock. We do not agree. The
measure of damages as determined by the trial court
under the ‘‘benefit of the bargain’’ theory was proper,
and we, therefore, affirm the court’s damages award.
The following additional facts, as found by the trial
court, are necessary for our resolution of this issue.
The plaintiff testified that he planned to own the corpo-
ration for ten years. His plan was to work for five years
as owner of the corporation. After five years, he would
replicate what Scott had done with him, in that he would
find an individual to succeed him, train the individual
for an additional five years, and then convey the corpo-
ration to the individual under the same terms that Scott
was to convey the corporation to him. Thus, he planned
to own the corporation for a total of ten years.4 He
also testified that while he owned the corporation, he
expected to receive ten years of salary at $175,000 annu-
ally, the rate he was receiving when he was terminated.
In proving damages for the breach of the stock option
purchase agreement, the plaintiff presented a ‘‘benefit
of the bargain’’ calculation, which the court used as the
basis for the breach of contract damages award. This
calculation was based on the annual salary the plaintiff
was paid during his employment with the corporation,
plus benefits, for the ten year period he planned to own
the corporation, reduced by the earnings he acquired
from substitute employment and unemployment com-
pensation.
The trial court found that while he was employed by
the corporation, the plaintiff received an annual salary
of $142,153, plus benefits valued at $32,850, for a total
annual compensation of $175,003. That figure over ten
years equaled $1,750,030. The plaintiff’s substitute
employment and unemployment compensation after his
employment was terminated totaled $408,970.60. That
figure subtracted from $1,750,030 equals $1,341,059.40.
The court found this latter figure to be an appropriate
measure of the ‘‘benefit of the bargain’’ damages the
defendants owed to the plaintiff due to their breach of
the stock option purchase agreement. We agree.
We set forth the standard of review applicable to
challenges of damages awards. ‘‘[T]he trial court has
broad discretion in determining damages. . . . The
determination of damages involves a question of fact
that will not be overturned unless it is clearly errone-
ous.’’ (Internal quotation marks omitted.) Russell v.
Russell, 91 Conn. App. 619, 643, 882 A.2d 98, cert.
denied, 276 Conn. 924, 925, 888 A.2d 92 (2005). ‘‘When,
however, a damages award is challenged on the basis
of a question of law, our review [of that question] is
plenary.’’ (Internal quotation marks omitted.) Robert v.
Scarlata, 96 Conn. App. 19, 22, 899 A.2d 666 (2006).
In determining the damages for a breach of contract,
the applicable principles are well established. ‘‘It is axi-
omatic that the sum of damages awarded as compensa-
tion in a breach of contract action should place the
injured party in the same position as he would have been
in had the contract been performed [by the breaching
party].’’ (Internal quotation marks omitted.) Russell v.
Russell, supra, 91 Conn. App. 643. ‘‘[C]ontract damages
are ordinarily based on the injured party’s expectation
interest and are intended to give him the benefit of the
bargain by awarding a sum of money that will, to the
extent possible, put him in as good a position as he
would have been in had the contract been performed.’’
(Internal quotation marks omitted.) Keefe v. Norwalk
Cove Marina, Inc., 57 Conn. App. 601, 610, 749 A.2d
1219, cert. denied, 254 Conn. 903, 755 A.2d 881 (2000).
‘‘In determining the proper measure of damages, we
are guided by the purpose of compensatory damages,
which is to restore an injured party to the position he
or she would have been in if the wrong had not been
committed.’’ (Internal quotation marks omitted.) Day
v. Gabriele, 101 Conn. App. 335, 346, 921 A.2d 692, cert.
denied, 284 Conn. 902, 931 A.2d 262 (2007).
We conclude that the damages awarded by the court
was a legitimate exercise of the court’s broad discre-
tion. The stock option purchase agreement contained
no provision for liquidated damages in the event of a
breach, unlike the liquidated damages clause in the
employment agreement. Thus, the court had the discre-
tion to determine the measure of damages. The court
explained that it was fashioning a remedy to award the
plaintiff ‘‘an appropriate measure of the ‘benefit of the
bargain’ owed to the plaintiff as damages resulting from
the defendants’ breach of the [stock option purchase
agreement]’’ and the court relied on the correct princi-
ples of law in determining contract damages. In its
memorandum of decision, the court stated in pertinent
part: ‘‘ ‘It is axiomatic that the sum of damages awarded
as compensation in a breach of contract action should
place the injured party in the same position as he would
have been in had the contract been performed. . . .
The injured party . . . is entitled to retain nothing in
excess of that sum which compensates him for the
loss of his bargain. . . . Guarding against excessive
compensation, the law of contract damages limits the
injured party to damages based on his actual loss caused
by the breach. . . . In such circumstances, the amount
of the cost saved will be credited in favor of the wrong-
doer . . . that is, subtracted from the loss . . . caused
by the breach in calculating [the injured party’s] dam-
ages.’ . . . Hees v. Burke Construction, Inc., 290 Conn
1, 7–8, 961 A.2d 373 (2003). It is also well established
‘that the burden of proving damages is on the party
claiming them. . . . When damages are claimed they
are an essential element of the plaintiff’s proof and
must be proved with reasonable certainty.’ . . . FCM
Group, Inc. v. Miller, 300 Conn. 774, 804, 17 A.3d 40(2011).’’
It was in the court’s discretion to calculate an amount
of damages that it considered sufficient to place the
plaintiff in the same position as he would have been in
if the contract had not been breached. We agree with
the court’s approach. The award of ten years salary
was factually supported because it was based on the
plaintiff’s actual earnings prior to and at the time of
the breach. Furthermore, it was legally correct insofar
as it resulted from the court’s determination of the
benefit of the bargain owed to the plaintiff and what
was necessary to put him in as good a position as he
would have been in had the contract been performed.
We therefore conclude that the defendants’ claim is
without merit and affirm the court’s damages award.
II
The defendants next claim that the court erroneously
failed to enforce the stock option purchase agreement,
which required the plaintiff to return his shares of stock
if he was terminated from employment. We agree with
the defendants.
The following additional facts are necessary for our
resolution of this issue. Pursuant to the stock option
purchase agreement, on March 20, 2002, the plaintiff
obtained twenty shares of stock in the corporation.
The stock option purchase agreement provided that the
plaintiff must return his stock in the corporation if his
employment was terminated.
Section 2.3 of the stock option purchase agreement
states in pertinent part: ‘‘(a) If [the plaintiff’s] employ-
ment by the Company terminates or [the plaintiff] termi-
nates his employment with the Company for any reason
other than death, then [the plaintiff] shall be obligated
to sell his Common Stock, and the Company and Scott
shall be jointly and severally obligated to [the plaintiff]
to purchase all his Common Stock, as provided below.
. . . (f) If [the plaintiff’s] employment is found to have
been terminated without Adequate Cause and he is paid
the damages provided for in Section 8.4 of the Employ-
ment Agreement5 between [the plaintiff] and the Com-
pany of even date herewith, the shares shall be returned
to Scott. The purchase price for such shares shall be
$26,000 plus the amount of any taxes due upon transfer
of such shares. The purchase price shall be in addition
to the amount of damages set out above. Upon delivery
of such payment to [the plaintiff], [the plaintiff] shall
deliver his Common Stock as directed by Scott and
the Company.’’
In count two of the defendants’ counterclaim, the
defendants sought specific performance of § 2.3 of the
stock option purchase agreement. The court found that
the defendants could not prevail on count two of their
counterclaim because the court found that the plaintiff’s
termination was fraudulent.6 The court cited Phoenix
Leasing, Inc. v. Kosinski, 47 Conn. App. 650, 654, 707
A.2d 314 (1998), for the proposition that the court will
not enforce a contractual provision when the party
seeking enforcement of that provision engaged in fraud.
The defendants argue that because the court found
that the plaintiff had been terminated without adequate
cause and ordered the liquidated damages provided for
in § 8.4 of the employment agreement, under the plain
language of the stock option purchase agreement, the
plaintiff was required to return the twenty shares of
corporation stock he acquired in 2002 upon payment
of the liquidated damages and payment of $26,000 as
provided in § 2.3 (f) of the stock option purchase
agreement. We agree.
The plaintiff chose to enforce the stock option pur-
chase agreement and seek damages for its breach. Thus,
that agreement remains in force. ‘‘A defrauded party
has the option of seeking rescission or enforcement of
the contract and damages. Fraud in the inducement
of a contract ordinarily renders the contract merely
voidable at the option of the defrauded party, who also
has the choice of affirming the contract and suing for
damages. . . . If he pursues the latter alternative, the
contract remains in force . . . .’’ (Internal quotation
marks omitted.) Harold Cohn & Co. v. Harco Interna-
tional, LLC, 72 Conn. App. 43, 49–50, 804 A.2d 218,
cert. denied, 262 Conn. 903, 810 A.2d 269 (2002).
Accordingly, ‘‘[w]here the language of the contract
is clear and unambiguous, the contract is to be given
effect according to its terms. . . . Although ordinarily
the question of contract interpretation, being a question
of the parties’ intent, is a question of fact . . . [w]here
there is definite contract language, the determination
of what the parties intended by their contractual com-
mitments is a question of law. . . . Our standard of
review, therefore, is plenary.’’ (Citations omitted; inter-
nal quotation marks omitted.) ARB Construction, LLC
v. Pinney Construction Corp., 75 Conn. App 151, 154–
55, 815 A.2d 705 (2003).
The principles governing contract interpretation are
well settled. ‘‘The intent of the parties as expressed
in a contract is determined from the language used
interpreted in the light of the situation of the parties
and the circumstances connected with the transaction.
. . . [T]he intent of the parties is to be ascertained by
a fair and reasonable construction of the written words
. . . .’’ (Internal quotation marks omitted.) Sullo Invest-
ments, LLC v. Moreau, 151 Conn. App. 372, 380, 95 A.3d
1144 (2014)
The liquidated damages clause in the employment
agreement stated that damages shall be the lesser of
the plaintiff’s actual damages or $150,000, plus ‘‘the
amount of the purchase price provided for in Section
2.3 (f) of the Stock Option Purchase Agreement . . . .’’
Section 2.3 of the stock option purchase agreement
clearly and unequivocally states that if the plaintiff’s
employment is terminated without adequate cause and
he is paid the liquidated damages provided for in § 8.4
of the employment agreement, then the shares of stock
shall be returned to Scott for a purchase price of
$26,000. The trial court found the plaintiff’s termination
to be without adequate cause and awarded him liqui-
dated damages in the amount of $138,461.77. Conse-
quently, the plaintiff was required to return his shares
of stock upon receipt of a $26,000 payment from the
defendants.
In finding that the plaintiff was not required to return
the stock because the plaintiff’s termination was fraudu-
lent, the court relied on Phoenix Leasing, Inc. v. Kosin-
ski, supra, 47 Conn. App. 654. Such reliance is
misplaced. Phoenix Leasing, Inc., concerned the
enforcement of a choice of forum clause, not the reme-
dies for a breach of contract. In recognizing the due
process concerns when personal jurisdiction was at
issue, this court stated ‘‘[a]bsent a showing of fraud or
overreaching, such forum clauses will be enforced by
the courts.’’ (Internal quotation marks omitted.) Id. The
procedural question at issue in Phoenix Leasing, Inc.,
is thus not applicable to the contractual provision at
issue here.
We conclude that he trial court’s decision not to
enforce § 2.3 of the stock option purchase agreement
and not to require the plaintiff to return the stock was
erroneous, and, therefore, we reverse the judgment in
that respect and remand the case with direction to
order the plaintiff to return the stock upon receipt of
a payment of $26,000 from the defendants.
III
The defendants next claim that the court erroneously
based its award of common-law punitive damages on a
lodestar analysis. The defendants argue that the proper
measure of damages is the plaintiff’s actual litigation
costs plus attorney’s fees. We agree that the court
improperly determined the punitive damages award and
remand the case for a hearing on punitive damages.
The following additional facts inform our review. The
court found in favor of the plaintiff on his common-
law fraud count and awarded him $250,000 in punitive
damages, without articulating the basis of that sum.
Although the court indicated that the defendants would
have an opportunity to challenge the amount of attor-
ney’s fees in a posttrial hearing, the court did not afford
the defendants the opportunity to do so. The defendants
filed a motion for articulation, asking the court to set
forth the legal and factual basis for the $250,000 punitive
damages award. In its articulation, the court indicated
that the plaintiff had introduced an exhibit at trial that
showed attorney’s fees billings of $138,616.19 up to June
19, 2013. The court further noted that the trial was not
complete as of that date, so it did not reflect the total
attorney’s fees and ordinary litigation expenses in the
case. Therefore, the court awarded the plaintiff
$250,000 in punitive damages, which, ‘‘in the court’s
opinion, were reasonable fees for the entirety of the
legal services provided to the plaintiff, through to com-
pletion of the trial and posttrial briefing.’’
We first set forth the relevant standard of review and
the legal principles that inform our analysis. ‘‘Appellate
courts review the trial court’s decision to award attor-
ney’s fees for abuse of discretion. . . . This standard
applies to the amount of fees awarded . . . and also
to the trial court’s determination of the factual predicate
justifying the award. . . . Under the abuse of discre-
tion standard for review, [an appellate court] will make
every reasonable presumption in favor of upholding the
trial court’s ruling and only upset it for a manifest abuse
of discretion. . . . [Thus] review of such rulings is lim-
ited to the questions of whether the trial court correctly
applied the law and reasonably could have reached
the conclusion that it did.’’ (Internal quotation marks
omitted.) Perez v. D & L Tractor Trailer School, 117
Conn. App. 680, 701–702, 981 A.2d 497, cert. denied,
294 Conn. 923, 985 A.2d 1062 (2009).
With respect to common-law causes of action, ‘‘[t]o
furnish a basis for recovery of punitive damages, the
pleadings must allege and the evidence must show wan-
ton or wilful malicious misconduct, and the language
contained in the pleadings must be sufficiently explicit
to inform the court and opposing counsel that such
damages are being sought.’’ (Internal quotation marks
omitted.) Label Systems Corp. v. Aghamohammadi,
270 Conn. 291, 335, 852 A.2d 703 (2004). ‘‘It is clear in
our law that an award of punitive damages cannot
exceed the amount of the plaintiff’s expenses of litiga-
tion in the suit, less his taxable costs.’’ (Internal quota-
tion marks omitted.) R.I. Pools, Inc. v. Paramount
Concrete, Inc., 149 Conn. App. 839, 876, 89 A.3d 993,
cert. denied 312 Conn. 920, 94 A.3d 1200 (2014). ‘‘[T]he
initial estimate of a reasonable attorney’s fee is properly
calculated by multiplying the number of hours reason-
ably expended on the litigation times a reasonable
hourly rate. . . . The courts may then adjust this lode-
star calculation by other factors [outlined in Johnson
v. Georgia Highway Express, Inc., 488 F.2d 714, 717–19
(5th Cir. 1974)]. . . . The Johnson factors may be rele-
vant in adjusting the lodestar amount, but no one factor
is a substitute for multiplying reasonable billing rates
by a reasonable estimation of the number of hours
expended on the litigation.’’ (Footnote omitted; internal
quotation marks omitted.) Carrillo v. Goldberg, 141
Conn. App. 299, 317–18, 61 A.3d 1164 (2013).
When the court awarded the plaintiff $250,000 in puni-
tive damages, it provided no numerical analysis of how
it reached that number. At the time of the award, the
court only had evidence of attorney’s fees billings of
$138,616.19, which reflected billings up to June 19, 2013.
The court provided no analysis of how it reached an
award of an additional $111,383.81, other than stating
that it was based on ‘‘reasonable fees for the entirety
of the legal services provided to the plaintiff . . . .’’
This does not comport with the proper way of doing a
lodestar analysis under our case law. See Laudano v.
New Haven, 58 Conn. App. 819, 822–23, 755 A.2d 907(2000). We conclude that the $250,000 punitive damages
award was erroneous, and, therefore, the judgment is
reversed in that respect and the case is remanded for
a new hearing on punitive damages.
IV
The defendants next claim that the court improperly
took evidence and made findings as to the plaintiff’s
litigation costs in a hearing on the defendants’ motion
for articulation. The defendants argue that the court
lacked authority to make new findings in response to
the motion for articulation, and, therefore, its findings
as to the plaintiff’s actual litigation costs should be
disregarded. Because we hold that the court’s punitive
damages award was improper and remand the case for
a new hearing on punitive damages, this issue is moot.
‘‘[I]t is not the province of appellate courts to decide
moot questions, disconnected from the granting of
actual relief or from the determination of which no
practical relief can follow.’’ (Internal quotation marks
omitted.) Wells Fargo Bank, N.A. v. Cornelius, 131
Conn. App. 216, 219, 26 A.3d 700, cert. denied, 302 Conn.
946, 30 A.3d 1 (2011).
V
The defendants’ final claim is that the trial court erred
when it awarded prejudgment interest on the damages
for the breach of the stock option purchase agreement
and the breach of the arbitration provisions found in the
employment and the stock option purchase agreements
(arbitration agreement).7 The defendants argue that
such interest is only appropriate where damages are
liquidated, and here, the damages were not liquidated,
but instead are intended to make the plaintiff whole
for the breach of contract found by the court. We agree
with the defendants.
The following facts are pertinent to our resolution
of this issue. In addition to breach of contract damages
for the breach of the stock option purchase agreement,
the court also awarded the plaintiff $65,000 for his arbi-
tration costs because the court found that the defen-
dants had breached the arbitration agreement. The
court initially awarded the plaintiff interest pursuant
to § 37-3a (a) at the rate of 10 percent annually. The
defendants filed a motion for articulation asking that
the court indicate the date on which interest was to
start, as well as the legal and factual basis for that
date. In its articulation, the court explained that the
defendants breached the contract at various points
beginning on the date the employment agreement was
signed on March 20, 2002, when the defendants did not
supply the plaintiff with the complete financial informa-
tion that he had requested prior to signing that
agreement. The court further explained that it intended
for interest on damages to begin on March 1, 2007—
the date on which the plaintiff sought to have statutory
interest commence as provided in its posttrial memo-
randum—and interest on punitive damages to begin on
the date of judgment and continue until the judgment
was paid. The court noted its award was based on
the authority provided by § 37-3a (a) and DiLieto v.
Country Obstetrics & Gynecology Group, Inc., 310
Conn. 38, 49 n.11, 74 A.3d 1212 (2013).
We begin by setting forth the standard of review.
‘‘Parties claiming damages for breach of contract must
have a statutory basis for a claim of interest. . . . We
must, therefore, determine whether as a matter of law,
such a basis existed here.’’ (Citations omitted.) Foley
v. Huntington Co., 42 Conn. App. 712, 739, 682 A.2d
1026, cert. denied, 239 Conn. 931, 683 A.2d 397 (1996).
The decision to grant interest pursuant to § 37-3a is
reviewed under an abuse of discretion standard. Sosin
v. Sosin, 300 Conn. 205, 227, 14 A.3d 307 (2011).
Section 37-3a (a) provides in relevant part: ‘‘Except
as provided in section 37-3b, 37-3c and 52-192, interest
at the rate of ten per cent a year, and no more, may be
recovered and allowed in civil action . . . as damages
for the detention of money after it becomes payable.
. . .’’ ‘‘The statute, therefore, applies to claims involving
the wrongful detention of money after it becomes due
and payable.’’ (Emphasis in original.) Foley v. Hunting-
ton Co., supra, 42 Conn. App. 740. ‘‘To award § 37-3a
interest, two components must be present. First, the
claim to which the prejudgment interest attaches must
be a claim for a liquidated sum of money wrongfully
withheld and, second, the trier of fact must find, in its
discretion, that equitable considerations warrant the
payment of interest.’’ Ceci Bros., Inc., v. Five Twenty-
One Corp., 81 Conn. App. 419, 428, 840 A.2d 578, cert.
denied, 268 Conn. 922, 846 A.2d 881 (2004). When the
damages awarded to the plaintiff are for the loss of the
benefit of the bargain and do not involve liquidated
damages, § 37-3a does not apply and the plaintiff is not
entitled to prejudgment interest. Foley v. Huntington
Co., supra, 742.
In the present case, the damages at issue for the
breach of the stock option purchase agreement and the
arbitration agreement are not liquidated damages that
fall within the scope of § 37-3a. These damages were
uncertain at the time of the breach, and the defendants
could not know the amount owed until the court deter-
mined them. Accordingly, § 37-3a does not authorize
an award of prejudgment interest on these damages.
We conclude that the prejudgment interest award with
respect to damages for the breach of the stock option
purchase agreement and the arbitration agreement was
erroneous, and, therefore, the judgment is reversed as
to that award.
The judgment is reversed with respect to the defen-
dants’ counterclaim of specific performance of the
stock option purchase agreement, the award of punitive
damages and the award of prejudgment interest, and
the case is remanded with direction to render judgment
ordering specific performance of that agreement and
for a hearing on punitive damages. The judgment is
affirmed in all other respects.
In this opinion the other judges concurred.
1
All claims against the named defendant, J.M. Scott Associates, Inc., were
withdrawn or resolved, and it is not a party to this appeal. Accordingly, we
refer in this opinion to Scott and Scott Swimming Pools, Inc., collectively
as the defendants and individually by name when necessary.
2
Section 8.3 of the employment agreement states in relevant part: ‘‘ ‘Ade-
quate Cause’ for termination of [the plaintiff] is limited to conviction of or
a plea of guilty to a felony or misdemeanor, dishonesty, any other criminal
conduct against the Corporation, or a continued breach of the [plaintiff’s]
duties and obligations arising under this Agreement or of any written policy,
rule, or regulation of the Corporation, for a period of 5 days following his
receipt of written notice from the President specifying such breach. If the
Corporation terminates the [plaintiff] for ‘Adequate Cause’ and the [plaintiff]
disputes the termination, such dispute shall be settled by arbitration as set
out in Section 9 of this Agreement . . . .’’
3
The employment agreement provided that the plaintiff was to be paid
‘‘the purchase price provided for in Section 2.3 (f) of the Stock Option
Purchase Agreement.’’ The stock option purchase agreement specified a
purchase price of $26,000.
4
The plaintiff testified: ‘‘My plan was to work in the company for five
years, five years subsequent I would, as owner, work and benefit from
ownership of the company, and then in the final five years I would replicate
it, to the best of my ability, what Jim Scott had done, namely, find an
individual that could succeed me, train them over a period of five years,
convey the company to that individual under, for purposes of this calculation,
the same terms as were conveyed to me, just for the sake of clarity and
simplicity, and then at age 66, 65 and 66, I would retire and be in the same
condition of receiving a payout on a note for the same amount that Jim
Scott had sold the company to me for.’’
5
Section 8.4 of the employment agreement states: ‘‘If the [plaintiff] is
found to have been terminated without Adequate Cause, the amount of his
damages shall be limited to the lesser of his actual damages or the sum of
$150,000 plus the amount of the purchase price provided for in Section
2.3 (f) of the Stock Option Purchase Agreement among the President, the
[plaintiff] and the Corporation of even date herewith. The damages paid to
the [plaintiff] set out under this Section 8.4 shall be reduced by the amount
of the Unconditional Payment made by the Corporation to the [plaintiff] as
set forth in Section 8.3 above.’’
6
In addition to finding for the plaintiff on his common-law fraud claim
because the defendants did not disclose certain critical financial information
before the plaintiff signed the agreements, the court also found that Scott
engaged in fraud when he sent the plaintiff seven memoranda, all criticizing
the plaintiff’s work, over the course of one day in October, 2006, in an effort
to ‘‘paper the file’’ and to establish adequate cause for termination.
7
The defendants do not dispute the award of prejudgment interest as it
relates to the liquidated damages awarded for the breach of the employ-
ment agreement.