Johnson v. Vita Built, LLC ( 2022 )

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RAY C. JOHNSON ET AL. v.
VITA BUILT, LLC, ET AL.
(AC 45123)
Prescott, Seeley and Eveleigh, Js.
Syllabus
The plaintiff property owners brought an action against the defendants, a
contractor and an architect, alleging, inter alia, breach of contract. The
plaintiffs owned real property in Westport and hired the defendants to
design and build a new home on the property with the goal of selling
the redeveloped property for a profit. During the course of their working
relationship, the parties executed a contract for the construction of the
new residence. Pursuant to the construction contract, the defendants
agreed to design and construct the new home and provide related ser-
vices for a fee. Later that month, the defendants agreed, by letter, as a
part of the parties’ ongoing discussions, to reduce their fees (fee reduc-
tion letter). More than one year later, the parties entered into a separate
agreement titled ‘‘Additional Fee and Profit Sharing Agreement’’ (2019
agreement), which incorporated by reference the construction contract
and the fee reduction letter. The 2019 agreement included a section
titled ‘‘Additional Fee and Profits/Losses,’’ which provided that the par-
ties would share in ‘‘all profits . . . and all losses’’ associated with the
sale of the property, defined ‘‘profits’’ as net profits and set forth in detail
how net profits would be calculated, and provided that the previously
reduced fees would be reinstated and that, after certain enumerated
expenses were paid, any remaining funds would be allocated among
the parties on a percentage basis. The 2019 agreement did not contain
language defining the term ‘‘losses’’ or explaining how losses, if any,
would be determined and calculated or apportioned among the parties.
The property was ultimately sold at a loss, and the parties disagreed
about what effect this shortfall meant relative to the parties’ financial
stakes as expressed in their contracts. The defendants claimed that they
had no obligation under the terms of the 2019 agreement to share in
any shortfall. The plaintiffs took the position that the ‘‘net profit’’ calcula-
tion, if made in accordance with the intent of the 2019 agreement,
resulted in a negative number or ‘‘losses,’’ which the parties had intended
to share at the same percentages that they would have shared with
respect to net profits. After the plaintiffs filed their application for a
prejudgment remedy and commenced this action, the defendants
asserted a counterclaim against the plaintiffs for breach of contract; in
addition, they filed their own application for a prejudgment remedy. The
trial court denied the plaintiffs’ application for a prejudgment remedy,
finding that there was no ambiguity in the contract language and that,
read as a whole, it did not require the defendants to share in the loss
attributed to the sale of the property. The court concluded that the
defendants had shown probable cause that they would prevail on their
counterclaim and granted the defendants’ application for a prejudgment
remedy. In the alternative, the court found that, even if there was ambigu-
ity in the 2019 agreement, the parol evidence offered by the parties
also supported a conclusion that the contract could not be interpreted
reasonably to require the sharing of losses. In reaching its alternative
conclusion, the court relied heavily on its factual finding that, as part
of the 2019 agreement, the defendants agreed to risk, and ultimately
lost, the fees owed to the defendants under the construction contract
as modified by the fee reduction letter. On the plaintiffs’ appeal to this
court, held:
1. The trial court improperly concluded that the 2019 agreement unambigu-
ously provided that the parties would share only in net profits and did
not reflect an intent to share in all losses resulting from the sale of the
property: although the 2019 agreement contained no definition for the
term ‘‘losses’’ and was silent as to how the parties would treat a situation
in which the proceeds from the sale of the property were insufficient
to satisfy each of the enumerated categories of expenses, the parties’
use of express language that the parties would share in all profits and
all losses associated with the property and their failure to define pre-
cisely what they intended by that language created a clear ambiguity in
the contract that necessitated looking beyond the four corners of the
contract to determine the parties’ intent and, accordingly, the trial court’s
conclusion could not stand as a basis for finding that the defendants
would prevail on their counterclaim.
2. The trial court relied on clearly erroneous factual findings in support
of its alternative conclusion that, even if the contract was ambiguous
regarding the parties’ intent, the parol evidence offered by the parties
established probable cause that the defendants would prevail on their
counterclaim: there was no dispute that, contrary to the trial court’s
findings, the fees owed to the defendants under the construction contract
as modified by the fee reduction letter never were at risk and, in fact,
were paid in full to the defendants; moreover, although the defendants
pointed to other extrinsic evidence in the record that may have supported
the trial court’s alternative holding, there was no indication in that
court’s decision to what extent, if any, that court considered or credited
any other extrinsic evidence and, accordingly, because the court relied
primarily on its erroneous factual finding in reaching its alternative
conclusion, not the evidence advanced by the defendants, this court
was left with no confidence in the trial court’s assessment of probable
cause that the defendants would prevail on their counterclaim; accord-
ingly, the prejudgment remedy awarded could not stand and a new
hearing on the defendants’ application was warranted.
Argued October 5—officially released December 20, 2022
Procedural History
Action to recover damages for breach of contract,
and for other relief, brought to the Superior Court in
the judicial district of Stamford-Norwalk, where the
defendants filed a counterclaim; thereafter, the court,
Kavanewsky, J., granted the defendants’ application
for a prejudgment remedy and denied the plaintiffs’
application for a prejudgment remedy and rendered
judgment thereon, from which the plaintiffs appealed
to this court. Reversed in part; further proceedings.
William N. Wright, for the appellants (plaintiffs).
John J. Ribas, with whom, on the brief, was Bruce
L. Elstein, for the appellees (defendants).
Opinion
PRESCOTT, J. In this contract action arising out of
the redevelopment and sale of residential property in
Westport, the plaintiff property owners, Ray C. Johnson
and Indre L. Johnson, appeal from the judgment of the
trial court granting an application for a prejudgment
remedy filed by the defendants, Vita Built, LLC (Vita
Built), and Vita Design Group, LLC (Vita Design), after
finding probable cause that the defendants will prevail
on their breach of contract counterclaim against the
plaintiffs.1 The plaintiffs claim on appeal that the court
improperly (1) misconstrued the relevant contract as
unambiguously providing that the parties intended to
share only in potential profits resulting from the sale
of the redeveloped property, despite express contradic-
tory language in the contract indicating that the parties
would share in all profits and losses, and (2) relied
upon clearly erroneous factual findings in reaching its
alternative conclusion that, even if the contract lan-
guage is ambiguous, the extrinsic evidence presented
to the court favored the defendants’ interpretation that
the parties did not intend to share in all potential losses.
We agree that the court improperly concluded that
the contract unambiguously provided that the parties
would share only in net profits and did not reflect an
intent to share in all losses resulting from the sale of
the property. We also agree with the plaintiffs that the
court made clearly erroneous factual findings in support
of its alternative conclusion that, even if the contract
is ambiguous regarding the parties’ intent, the parol
evidence established probable cause that the defen-
dants would prevail on their counterclaim. Accordingly,
we reverse the judgment of the court granting the defen-
dants’ application for a prejudgment remedy and
remand for a new prejudgment remedy hearing.
The following facts, as found by the court or that
are otherwise undisputed in the record, and procedural
history are relevant to our resolution of this appeal.
The plaintiffs owned residential property located at 281
Compo Road South in Westport. They acquired the
property in 2007 for $2,428,000. By 2016, the plaintiffs
had begun to formulate a plan to demolish the existing
residence on the property, which, at that time, was
valued at approximately $1,840,000, and to construct a
new home with the hopes of selling the redeveloped
property for a profit. In late 2016, the plaintiffs met
with Lucien Vita to discuss their redevelopment plans.
Vita was the controlling principal of the two defendant
companies: Vita Built, a licensed new home construc-
tion and home improvement contractor, and Vita
Design, an architectural firm specializing in residential
properties. During their ongoing negotiations, the plain-
tiffs suggested to Vita that the defendants’ involvement
in the redevelopment would provide the defendants
with positive publicity and marketing opportunities and
that the parties should discuss an agreement that
reflected those benefits to the defendants.
In September, 2017, although the parties continued
to negotiate some of the details of their financial
arrangements, they executed a contract for the con-
struction of the new residence. Pursuant to the con-
struction contract, Vita Built agreed to construct the
new home and provide related management services
for a fee of $197,000, and Vita Design agreed to provide
architectural plans and related services for an addi-
tional $197,000, for a total of $394,000. Later that month,
the defendants, by letter, agreed as a part of the parties’
ongoing discussions to reduce their fees as set forth in
the construction contract (fee reduction letter). Specifi-
cally, each defendant agreed to reduce its fee by
$63,000. As a result, the plaintiffs agreed to pay the
defendants a combined total of $268,000. The fee reduc-
tion letter further provided that the estimated budget
for the project was $2,300,700, which sum included the
defendants’ reduced fees.
On February 2, 2019, the parties entered into a sepa-
rate agreement that was titled ‘‘Additional Fee and
Profit Sharing Agreement’’ (2019 agreement). The plain-
tiff Indre L. Johnson drafted the 2019 agreement using
as a template an earlier version of a profit sharing agree-
ment drafted by the defendants’ attorney. The 2019
agreement incorporates by reference both the construc-
tion contract and the fee reduction letter. It also
includes an integration or merger clause that provides
that ‘‘[the 2019 agreement] represents the entire agree-
ment and understanding of the [p]arties with respect
to the subject matter hereof, absent further agreement.’’
Section 7 of the 2019 agreement is the critical provi-
sion at issue in the present appeal. In relevant part, it
provides: ‘‘Additional Fee and Profits/Losses. In consid-
eration of the additional work and responsibilities asso-
ciated with finalizing design and construction plans and
details for marketing new construction to potential buy-
ers under the Listing Agreement, Owner2 has agreed to
reinstate the fee reduction agreed to in the Fee Reduc-
tion Letter,3 paying Architect and Builder the additional
$63,000 in fees each, for a total of $126,000, according
to the distribution which will be outlined below, at the
time of closing of sale. Owner has also agreed to offer
profit sharing should profits exist after distribution
according to the allocation outlined below.
‘‘Owner, Architect and Builder will share in all Profits
(as hereinafter defined) and all losses associated with
the Property as set forth herein. As used in this Agree-
ment, ‘Profits’ shall be deemed the net profits with
respect to the Property, calculated as the final sales
price of the Property . . . less [certain enumerated
expenses]4 . . . the payoff of the reinstated fees of
$63,000 each to Architect and Builder (for a total of
$126,000); and . . . the Owner’s basis in the Property
of $1,450,000.00. Any remaining funds shall be divided
as follows: twenty percent (20%) of the remaining funds
shall be disbursed to the Owner, forty percent (40%)
of the remaining funds shall be disbursed to the Builder
and forty percent (40%) of the remaining funds shall be
disbursed to the Architect.’’5 (Emphasis added; foot-
notes added.) Although the 2019 agreement explicitly
provides that the parties would share in ‘‘all losses,’’ it
contains no language defining the term losses or
explaining how losses, if any, would be determined and
calculated. It also does not specify how the losses, if
any, would be apportioned among the parties.
The new home was completed in the early part of
2019. The plaintiffs, in consultation with the defendants,
listed the property for sale at a price of $5,879,000. It
sold on August 3, 2019, for $4,900,000, which was nearly
one million dollars less than the original listing price.
Calculating the ‘‘net profit’’ of the sale in accordance
with the terms of the 2019 agreement, which included
taking deductions for the $126,000 in additional fees
that the plaintiffs had agreed to pay the defendants
(reinstated fees) and the plaintiffs’ $1,450,000 basis in
the property, the result was a deficit of $563,530. The
parties disagreed about what effect this shortfall in
anticipated proceeds meant relative to the parties’
financial stakes as expressed in their contracts. The
defendants’ position was that the sale had generated
sufficient proceeds to satisfy the $126,000 in reinstated
fees as agreed to by the plaintiffs and that they had no
obligation under the terms of the 2019 agreement to
share in any shortfall that prevented a full reimburse-
ment of the plaintiffs’ basis in the property. The plain-
tiffs took the position that the ‘‘net profit’’ calculation,
if made in accordance with the intent of the 2019 agree-
ment, resulted in a negative number or ‘‘losses,’’ which
the parties had intended to share at the same percent-
ages that they would have shared with respect to net
profits.
On December 24, 2019, in anticipation of litigation
to resolve the parties’ dispute, the plaintiffs filed with
the court an application for a prejudgment remedy,
which subsequently was served on the defendants. The
application sought to attach $324,824 in assets of the
defendants, which is the amount that the plaintiffs cal-
culated that they were owed by the defendants as their
share of the net loss from the sale of the property.6
The plaintiffs later commenced the present action by
service of process on March 13, 2020. In their one count
initial complaint, the plaintiffs characterized the 2019
agreement as a ‘‘joint venture agreement’’ in which the
parties had agreed to share fully in both profits or losses
associated with the redevelopment and sale of the prop-
erty. The plaintiffs alleged that the defendants had
breached the 2019 agreement by refusing to accept
responsibility for their share of the net loss of the rede-
velopment project. According to the plaintiffs, each
defendant owed the plaintiffs $162,412.
The defendants filed a joint answer in which they
denied the substantive allegations of the complaint and
asserted a counterclaim against the plaintiffs for breach
of contract. According to the defendants, the parties
did not intend by entering into the 2019 agreement that
the defendants would be responsible for sharing in any
and all losses resulting from the sale of the property.
The defendants alleged that the plaintiffs breached the
parties’ agreements by ‘‘fail[ing] to pay the defendants
in accordance with the schedule for the payment as set
forth in the [2019 agreement] as intended by the par-
ties,’’ which entitled each defendant to a payment of
$63,000 from the sale proceeds, the amount of the rein-
stated fees.
The defendants also filed their own application for
a prejudgment remedy. They argued that there was
probable cause that they would prevail on their counter-
claim against the plaintiffs and sought permission to
attach real and personal property of the plaintiffs in
the amount of $126,000.
The plaintiffs, thereafter, filed the operative amended
complaint in which they added a second count that
sought reformation of the 2019 agreement. Specifically,
the plaintiffs asked the court to reform the term ‘‘funds,’’
as used in the previously quoted Section 7, to read
‘‘profits,’’ which is defined in the agreement to mean
‘‘net profits.’’ The plaintiffs maintain that reformation
is necessary so that the contract’s language conforms
to the actual intention of the parties to share in both
potential profits or losses.
The court conducted a remote hearing on the parties’
competing applications for prejudgment remedies over
two days, beginning on March 23, 2021, and ending on
April 5, 2021. The court heard testimony from Indre
L. Johnson and Vita. The parties also each submitted
various documentary evidence. At the close of evidence,
the court instructed the parties to file simultaneous
postargument briefs followed by simultaneous reply
briefs. Briefs and reply briefs were filed by both parties,
following which the court issued a memorandum of
decision in which it granted the defendants’ application
for a prejudgment remedy and denied the plaintiffs’
application for a prejudgment remedy.
In its analysis, the court first agreed with the defen-
dants that there is no ambiguity in the contract language
and that, read as a whole, it does not require the defen-
dants to share in the loss attributed to the sale of the
property. The court rejected the plaintiffs’ contrary
assertion that the contract unambiguously provides for
loss sharing, characterizing it as ‘‘not viable.’’ The court
made note of the language in Section 7 that provides
that the ‘‘Owner, Architect and Builder will share in all
Profits (as hereinafter defined) and all losses associated
with the Property as set forth herein.’’ (Emphasis
added.) The court, however, rejected the plaintiffs’ view
that this language is an unambiguous statement about
the parties’ intent to share in both profits and losses
or that it imparts any ambiguity into the contract.
Rather, the court deemed it significant that ‘‘the term
‘profits’ is meticulously defined’’ but that ‘‘the agree-
ment is notably silent in defining the term ‘losses.’ Fol-
lowing the extensive list of expenses that would be
used to arrive at a ‘net profit,’ the parties chose to refer
to a distribution of remaining ‘funds.’ The court cannot
rewrite the agreement, and it cannot import any defini-
tional term.’’7
Although the court first concluded that there was no
ambiguity in the contract regarding the sharing of
losses, it went on to conclude in the alternative that,
even if there is ambiguity in the 2019 agreement, ‘‘the
more credible evidence decidedly leads to an interpreta-
tion favoring the defendants.’’ In other words, the parol
evidence also supported a conclusion that the contract
could not be interpreted reasonably to require the shar-
ing of losses.
The court explained: ‘‘In September, 2017, the parties
entered into the original construction contract. Very
soon thereafter, the defendants agreed to a substantial
fee reduction, from $197,000 to $134,000 each. Con-
struction was not completed and the home was not
listed until February, 2019. By that time, the residential
market had darkened. The 2019 agreement specified
that the architect, Vita, would have increased responsi-
bility in marketing the property. The court finds that
he substantially fulfilled those new duties. But what
the court believes is even more telling concerns the
continued evolvement of the fee structure of the defen-
dants. While the 2019 agreement provided for a fee
reinstatement of $63,000 for each defendant, as an
‘above the line’ expense, the defendants now agreed to
put their remaining $134,000 each as a ‘below the line’
fund distribution payable only after a calculation of the
‘net profit.’ In short, the defendants agreed to take on
a substantial risk (here, a risk and a loss that material-
ized) that they would never recover those monies. The
plaintiffs’ position, then, that they would have never
agreed to a fee reinstatement unless the defendants
had concomitantly agreed to share in losses is without
merit. In fact, the defendants had already agreed to
‘share the pain’ as the market worsened.’’ The court
concluded: ‘‘[T]he plaintiffs have not shown probable
cause that they will prevail in their action. The court
denies their request for a prejudgment remedy . . . .
The defendants have shown probable cause that they
will prevail on their counterclaim and will recover dam-
ages of $126,000. The court grants their request for a
prejudgment remedy in that amount . . . . The court
also grants the defendants’ motion for disclosure of
assets . . . and it orders that the plaintiffs comply with
said motion within thirty days.’’ This appeal followed.8
The plaintiffs claim on appeal that the court improp-
erly granted the defendants’ application for a prejudg-
ment remedy. The plaintiffs’ claim is twofold. They first
claim that the court improperly determined that the
2019 agreement unambiguously provided that the par-
ties would share only in any profits realized from the
sale of the redeveloped property, not losses. Second,
they claim that the court relied on clearly erroneous
factual findings in reaching its alternative conclusion
that, even if the relevant contractual language is ambig-
uous, the extrinsic evidence offered by the parties
favored the defendants’ interpretation. We agree with
both claims and address them in turn.
We begin our discussion by setting forth relevant
legal principles, including our standard of review. As
provided for in our prejudgment remedy statutes, Gen-
eral Statutes § 52-278a et seq., ‘‘[a] prejudgment remedy
means any remedy or combination of remedies that
enables a person by way of attachment, foreign attach-
ment, garnishment or replevin to deprive the defendant
[or counterclaim defendant] in a civil action of, or affect
the use, possession or enjoyment by [that party] of, his
property prior to final judgment . . . . A prejudgment
remedy is available upon a finding by the court that
there is probable cause that a judgment in the amount
of the prejudgment remedy sought, or in an amount
greater than the amount of the prejudgment remedy
sought, taking into account any defenses, counterclaims
or setoffs, will be rendered in the matter in favor of
the plaintiff [or counterclaimant] . . . . Proof of prob-
able cause as a condition of obtaining a prejudgment
remedy is not as demanding as proof by a fair prepon-
derance of the evidence. . . . The legal idea of proba-
ble cause is a bona fide belief in the existence of the
facts essential under the law for the action and such
as would warrant a man of ordinary caution, prudence
and judgment, under the circumstances, in entertaining
it. . . . Probable cause is a flexible common sense
standard. It does not demand that a belief be correct
or more likely true than false. . . .
‘‘As for our standard of review, [our Supreme Court
has] stated: [An appellate court’s] role on review of the
granting of a prejudgment remedy is very circum-
scribed. . . . In its determination of probable cause,
the trial court is vested with broad discretion which is
not to be overruled in the absence of clear error. . . .
Under the clear error standard, we review the record
with a heightened standard of deference that exceeds
the level of deference afforded under the abuse of dis-
cretion standard and will overrule the granting of a
prejudgment remedy only if we are left with the definite
and firm conviction that a mistake has been commit-
ted.’’ (Citations omitted; internal quotation marks omit-
ted.) Valencis v. Nyberg, 160 Conn. App. 777, 782–83,
125 A.3d 1026 (2015). Even under this deferential stan-
dard, however, our review of a trial court’s conclusions
regarding questions of law will be plenary. See Levco
Tech, Inc. v. Kelly, 214 Conn. App. 257, 283, 279 A.3d
248, cert. denied, 345 Conn. 918, A.3d (2022).
Because the court’s probable cause determination in
the present case turned on its interpretation of the
parties’ contract, we turn next to a discussion of the
law governing the construction of contracts. ‘‘[If] a party
asserts a claim that challenges the trial court’s construc-
tion of a contract, we must first ascertain whether the
relevant language in the agreement is ambiguous. . . .
If a contract is unambiguous within its four corners,
intent of the parties is a question of law requiring ple-
nary review. . . . [If] the language of a contract is
ambiguous, the determination of the parties’ intent is
a question of fact, and the trial court’s interpretation
is subject to reversal on appeal only if it is clearly
erroneous. . . . A contract is ambiguous if the intent
of the parties is not clear and certain from the language
of the contract itself. . . . Accordingly, any ambiguity
in a contract must emanate from the language used in
the contract rather than from one party’s subjective
perception of the terms. . . .
‘‘[W]e accord the language employed in the contract
a rational construction based on its common, natural
and ordinary meaning and usage as applied to the sub-
ject matter of the contract. . . . [If] the language is
unambiguous, we must give the contract effect
according to its terms. . . . [If] the language is ambigu-
ous, however, we must construe those ambiguities
against the drafter. . . . Moreover, in construing con-
tracts, we give effect to all the language included
therein, as the law of contract interpretation . . . mili-
tates against interpreting a contract in a way that ren-
ders a provision superfluous. . . .
‘‘In ascertaining the intent of contracting parties, we
are also mindful that a court’s interpretation of a con-
tract must also be informed by whether the terms of
the contract are contained in a fully integrated writing.
This is important because [t]he parol evidence rule pro-
hibits the use of extrinsic evidence to vary or contradict
the terms of an integrated written contract. . . . The
parol evidence rule does not apply, however, if the
written contract is not completely integrated. . . .9
‘‘An integrated contract is one that the parties have
reduced to written form and which represents the full
and final statement of the agreement between the par-
ties. . . . Accordingly, an integrated contract must be
interpreted solely according to the terms contained
therein. Whether a contract is deemed integrated often-
times will turn on whether a merger clause exists in
the contract. . . . The presence of a merger clause in
a written agreement establishes conclusive proof of the
parties’ intent to create a completely integrated contract
and, unless there was unequal bargaining power
between the parties, the use of extrinsic evidence in
construing the contract is prohibited. . . .
‘‘We long have held that when the parties have delib-
erately put their engagements into writing, in such
terms as import a legal obligation, without any uncer-
tainty as to the object or extent of such engagement,
it is conclusively presumed, that the whole engagement
of the parties, and the extent and manner of their under-
standing, was reduced to writing. After this, to permit
oral testimony, or prior or contemporaneous conversa-
tions, or circumstances, or usages [etc.], in order to
learn what was intended, or to contradict what is writ-
ten, would be dangerous and unjust in the extreme.
. . . Although there are exceptions to this rule, we con-
tinue to adhere to the general principle that the unam-
biguous terms of a written contract containing a merger
clause may not be varied or contradicted by extrinsic
evidence. . . . Courts must always be mindful that par-
ties are entitled to the benefit of their bargain, and the
mere fact it turns out to have been a bad bargain for
one of the parties does not justify, through artful inter-
pretation, changing the clear meaning of the parties’
words.’’ (Citations omitted; emphasis added; footnote
added; internal quotation marks omitted.) EH Invest-
ment Co., LLC v. Chappo, LLC, 174 Conn. App. 344,
358–60, 166 A.3d 800 (2017); see also 2 Restatement
(Second), Contracts § 204, comment (e), p. 98 (1981)
(‘‘[if] there is complete integration and interpretation
of the writing discloses a failure to agree on an essential
term, evidence of prior negotiations or agreements is
not admissible to supply the omitted term’’). With the
foregoing principles in mind, we turn to the plaintiffs’
claims on appeal.
I
The plaintiffs first claim that the court improperly
determined that the 2019 agreement unambiguously
provided that the parties would share only in any poten-
tial profits generated by the sale of the redeveloped
property, not losses. According to the plaintiffs, the
court’s decision effectively ignores or reads out of the
contract the parties’ express inclusion of the term
‘‘losses’’ in expressing that the parties would ‘‘share in
all [p]rofits . . . and all losses associated with the
[p]roperty . . . .’’ The defendants counter that, read
as a whole, the agreement is only susceptible to one
reasonable interpretation; namely, that the parties
intended only to engage in profit sharing. We agree with
the plaintiffs that the 2019 agreement is ambiguous
regarding whether the parties intended to share in all
losses.
Whether contractual language is ambiguous presents
a question of law subject to this court’s plenary review.
See Cruz v. Visual Perceptions, LLC, 311 Conn. 93,
101–102, 84 A.3d 828 (2014). To reiterate, ‘‘a contract
is ambiguous if the intent of the parties is not clear and
certain from the language of the contract itself. . . .
[A]ny ambiguity 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. . . . If
the language of the contract is susceptible to more than
one reasonable interpretation, the contract is ambigu-
ous.’’ (Citation omitted; internal quotation marks omit-
ted.) Id., 103.
The language at issue in the present case is found in
Section 7 of the 2019 agreement, the complete text of
which we set forth previously in this opinion. Section
7 is entitled ‘‘Additional Fee and Profits/Losses.’’
(Emphasis added.) Section 7 first provides that the
plaintiffs, for due consideration, agree to pay the defen-
dants the $63,000 that each defendant had agreed to
give up in the fee reduction letter and that the plaintiffs
‘‘also agreed to offer profit sharing should profits exist
after distribution according to the allocation outlined
below.’’ Section 7 then continues, in relevant part:
‘‘Owner, Architect and Builder will share in all Profits
(as hereinafter defined) and all losses associated with
the Property as set forth herein.’’ (Emphasis added.)
The section defines profits as net profits and sets forth
how net profits will be calculated. Specifically, it pro-
vides that expenses associated with the acquisition and
development of the property, including construction
and sale related costs and fees, will be deducted from
the sale proceeds, with ‘‘[a]ny remaining funds’’ after
this allocation of expenses distributed following clos-
ing. Unlike the term ‘‘profits,’’ the contract contains no
definition for the term ‘‘losses.’’ In fact, Section 7 is
silent as to how the parties would treat a situation in
which the proceeds from the sale of the property were
insufficient to satisfy each of the enumerated categories
of expenses. Nevertheless, the contract contains
express language that the parties would ‘‘share in all
[p]rofits . . . and all losses associated with the [p]rop-
erty . . . .’’ (Emphasis added.) It is the parties’ use of
this language that creates an ambiguity as to how the
parties intended to distribute funds in the event of a
net loss rather than a net profit, the precise situation
that they now face.
On the one hand, Section 7 could be read to suggest
that any ‘‘losses’’ resulting from a lower than anticipated
sale price simply would be allocated through the inabil-
ity of the diminished sale proceeds to satisfy, in the
order enumerated in the ‘‘waterfall,’’ each category of
expenses. Because reimbursement of the plaintiffs’
$1,450,000 equity in the land was the last of these enu-
merated expenses, Section 7 could be read effectively
to allocate the risk of a potential loss, with the greatest
risk assigned to the plaintiffs. The waterfall could also
be read, however, to require a purely mathematical
calculation of ‘‘net profit’’ that contemplates not fully
satisfying each of the enumerated expense categories
and thus potentially resulting in a negative number or
‘‘losses.’’ Such losses could then be shared by the parties
in accordance with the same percentages that would
have applied if funds remained.
For purposes of our review, it is not relevant which
of these scenarios is the more plausible or if there may
be other logical readings of Section 7. Instead, what is
important is that the parties, through express language,
indicated that they would share in all profits and all
losses, and their failure to define precisely what they
intended by that language creates a clear ambiguity in
the contract that necessitates looking beyond the four
corners of the contract to determine the parties’ intent.
The only way that the trial court properly could have
construed the language of the contract as unambigu-
ously providing only for the sharing of profits was either
by ignoring the parties’ inclusion of the phrase ‘‘and all
losses’’ in the contract, which it is not permitted to
do under our canons of contract construction, or by
interpreting the contract as having effectively incorpo-
rated the concept of loss sharing, as it was understood
by the parties, into the ‘‘waterfall’’ provision and the
calculation of net profits, an explanation that the court
failed to give. On the basis of our plenary review, we
conclude that Section 7 of the 2019 agreement, read in
context, reasonably could be interpreted as evincing
the parties’ intent to share only in profits, if any were
realized from the sale of the redeveloped property, or
their intent to share in both potential profits or losses.
Because the contract language in Section 7, read as
a whole, is susceptible to more than one reasonable
meaning, it is ambiguous. The trial court’s conclusion
to the contrary, therefore, cannot stand as a basis for
finding probable cause that the defendants will prevail
on their counterclaim.
Our conclusion regarding the plaintiffs’ first claim,
however, does not end our discussion because the court
also decided, in the alternative, that, even if the contract
language is ambiguous, the court would reach the same
result on the basis of the extrinsic evidence presented.
We therefore turn to the plaintiffs’ second claim chal-
lenging this independent basis for the court’s decision.
II
The plaintiffs next claim that the court’s alternative
conclusion—that, even if the relevant contractual lan-
guage is ambiguous, the extrinsic evidence offered by
the parties favored the defendants’ interpretation—was
improper because, in reaching that conclusion, the
court relied on a clearly erroneous factual finding. Spe-
cifically, the plaintiffs contend that the court incorrectly
found that the defendants, in signing the 2019 agree-
ment, had placed at risk the $268,000 in fees owed to
them under the construction contract as modified by
the fee reduction letter whereas, in fact, the defendants
had been paid those fees and they were never at risk.
The defendants concede that the court misstated the
facts but point to a ‘‘substantial body of evidence’’ in
the record that demonstrates that the plaintiffs only
offered profit sharing and ‘‘never contemplated the
defendants paying for any losses.’’ Because the court
relied primarily on its erroneous factual finding in
reaching its conclusion, not the evidence advanced by
the defendants, we agree with the plaintiffs that the
court’s interpretation of the 2019 agreement was incor-
rect. Accordingly, a new hearing on the defendants’
application for a prejudgment remedy is warranted.
In applying the clearly erroneous standard of review,
‘‘we focus on the conclusion of the trial court, as well
as the method by which it arrived at that conclusion,
to determine whether it is legally correct and factually
supported.’’ (Emphasis added.) Pandolphe’s Auto
Parts, Inc. v. Manchester, 181 Conn. 217, 222, 435 A.2d
24 (1980). Here, the court arrived at its conclusion that
the parties had not intended to share in potential losses
based on its finding that the defendants, by agreeing
to the ‘‘waterfall’’ provision of the 2019 agreement, had,
in fact, placed in jeopardy the entirety of their fee.
Because the defendants had already accepted that level
of risk, the court reasoned, it was unlikely that the
defendants would have agreed to share in the possibility
of additional losses in the manner suggested by the
plaintiff. It was on this basis that the court agreed with
the defendants’ reading of the contract.
The court’s finding regarding the defendants’ risk,
however, is not supported by the record. The court
found that the defendants had ‘‘agreed to take on a
substantial risk’’ by agreeing to place their $268,000 in
‘‘remaining’’ fees ‘‘below the line’’ and thus payable
‘‘only after a calculation of the ‘net profit.’ ’’ The court
also characterized the risk taken as a ‘‘risk and a loss
that materialized.’’ There is no dispute, however, that
the $268,000 in fees owed under the construction con-
tract as modified by the fee reduction letter never were
at risk and, in fact, were paid in full to the defendants.
It was only the $126,000 in reinstated fees that the
defendants were not paid up front, and those fees were
to be paid out in accordance with the waterfall provi-
sion; they were not a ‘‘below the line’’ item and were
to be paid as part of the calculation of net profits,
not after.10
The defendants conceded the court’s factual error at
oral argument before this court. Although the defen-
dants hope to explain away the court’s error as inconse-
quential given other extrinsic evidence presented at the
hearing, the problem is that there is no indication in
the court’s decision to what extent, if any, the court
considered or credited any other extrinsic evidence.
Furthermore, even if we were to assume that the court
relied on other evidence in reaching its decision, this
would be of no avail to the plaintiffs because the trial
court’s assessment of this evidence would have been
viewed through the lens of its erroneous assessment
of the level of risk the defendants had undertaken.
Given the court’s erroneous determination that the
contract was unambiguous regarding the parties’ intent
to share in potential losses and its reliance on clearly
erroneous factual findings in reaching its alternative
conclusion that the extrinsic evidence presented
favored the defendants’ interpretation of the contract,
we are left with no confidence in the court’s assessment
of probable cause that the defendants will prevail on
their counterclaim. Accordingly, the prejudgment rem-
edy awarded cannot stand, and we remand the case to
the court for a new hearing on the defendants’ applica-
tion for a prejudgment remedy.
The judgment is reversed with respect to the granting
of the defendant’s application for a prejudgment remedy
and the case is remanded with direction to hold a new
hearing on that application; the judgment is affirmed
in all other respects.
In this opinion the other judges concurred.
1
Although the plaintiffs indicated on their appeal form that they also
sought to appeal from the court’s judgment denying their own application
for a prejudgment remedy, the plaintiffs have not raised or briefed any claim
of error as to that aspect of the court’s ruling and, thus, have abandoned
any such claim. See Deutsche Bank National Trust Co. v. Bertrand, 140
Conn. App. 646, 648 n.2, 59 A.3d 864, cert. dismissed, 309 Conn. 905, 68 A.3d
661 (2013).
2
As reflected in the opening paragraph of the 2019 agreement, the term
‘‘Owner’’ refers to the plaintiffs, ‘‘Architect’’ refers to the defendant Vita
Design, and ‘‘Builder’’ refers to the defendant Vita Built.
3
The phrase ‘‘to reinstate the fee reduction’’ is a non sequitur under the
circumstances of this case. Reinstating a fee reduction logically means giving
effect again to a reduction in fees, which would mean lowering the fees
due to the defendants. As is readily apparent from the concluding clause
of this sentence, however, the plaintiffs actually were agreeing to increase
the amount of the fees owed to the defendants by reinstating the fees that
the defendants previously had agreed to forgo in the fee reduction letter.
In other words, read in context, the plaintiffs were offering to rescind, not
reinstate, the fee reduction.
4
The enumerated expenses listed in Section 7 of the 2019 agreement are
as follows: ‘‘a) a mutually agreed percent real estate commission and staging
expenses; b) state and local conveyance taxes; c) reasonable attorney’s fees
for the sale of the Property; d) the payoff of the note and mortgage to the
Owner’s construction lender; e) any reimbursements to Owner for build
costs (including, but not limited to: surveying, appraisal fees, architecture,
plans, engineering, tree removal and other landscaping expenses, site plan-
ning, construction costs and materials, utility expenses, maintenance and
upkeep expenses for the Property); [and] f) construction loan interest, build-
er’s risk and general liability insurance premiums for the Property, and real
estate taxes and sewer use charges for the Property incurred by the Owner
from the date the Owner vacated the Property to the time of the closing,
adjusted on a per diem basis . . . .’’
5
The parties refer to this as the ‘‘waterfall’’ provision, with the proceeds
generated from the sale of the property intended to flow from the top of
the enumerated list of deductions to the bottom, paying each category in
full and in order. As drafted, at the very bottom of the waterfall is the
plaintiffs’ $1,450,000 basis in the property, meaning that this is the item
most likely left unsatisfied, at least in part, if the property sells for less than
anticipated. Any proceeds remaining after the ‘‘waterfall’’ distribution would,
according to the 2019 agreement, be the ‘‘net profits’’ subject to the 20/40/
40 disbursement provision.
6
This figure is equal to 80 percent of the $563,530 purported loss less
$126,000, which was the amount of the reinstated fees owed to the defen-
dants.
7
Although count two of the operative amended complaint sought to reform
the 2019 agreement and, specifically, its use of the word ‘‘funds,’’ the court,
in denying the plaintiff’s application for a prejudgment remedy, concluded
that the plaintiffs had failed to show probable cause for a reformation under
the circumstances presented. The court stated: ‘‘Reformation is appropriate
in cases of mutual mistake—that is where, in reducing to writing an agree-
ment made or transaction entered into as intended by the parties thereto,
through mistake, common to both parties, the written instrument fails to
express the real agreement or transaction. . . . The evidence does not
support a basis for the reformation of this agreement. The plaintiffs have
not demonstrated that there was a mistake common to both of the parties.
In fact, the plaintiffs’ very own allegations suggest otherwise by stating that
the reference to ‘funds’ rather than ‘profits’ may have been the result of a
euphoric oversight and/or the simple scrivener’s error. There was no evi-
dence to support that the defendants signed the 2019 agreement because
of any gross misconception. Likewise, the evidence demonstrated that it
was the plaintiff Indre Johnson who drafted the agreement; further, the
evidence showed that she was thorough in her drafting of it.’’ (Citations
omitted; footnote omitted; internal quotation marks omitted.)
8
After the granting of their application for a prejudgment remedy and the
filing of this appeal, the defendants amended their counterclaim to include
additional counts alleging a breach of the implied covenant of good faith
and fair dealing and a violation of the Connecticut Unfair Trade Practices
Act, General Statutes § 42-110a et seq.
9
‘‘[I]t is well established that the parol evidence rule is not a rule of
evidence, but a substantive rule of contract law that bars the use of extrinsic
evidence to vary [or contradict] the terms of an otherwise plain and unambig-
uous contract. . . . The rule does not prohibit the use of extrinsic evidence
for other purposes, however, such as to prove mistake, fraud or misrepresen-
tation in the inducement of the contract.’’ (Citation omitted; internal quota-
tion marks omitted.) Zhou v. Zhang, 334 Conn. 601, 620–21, 223 A.3d 775(2020); see also TIE Communications, Inc. v. Kopp, 218 Conn. 281, 288–89,
589 A.2d 329 (1991) (explaining that, although use of parol evidence is
disallowed if offered solely to vary or contradict written terms of integrated
contract, parol evidence is permitted ‘‘(1) to explain an ambiguity appearing
in the instrument; (2) to prove a collateral oral agreement which does not
vary the terms of the writing; (3) to add a missing term in a writing which
indicates on its face that it does not set forth the complete agreement; or
(4) to show mistake or fraud’’ (internal quotation marks omitted)). A party’s
failure to object to evidence on the ground that it is inadmissible pursuant
to the parol evidence rule does not preclude us from considering on appeal
whether a court’s reliance on such evidence was proper. See Capp Indus-
tries, Inc. v. Schoenberg, 104 Conn. App. 101, 110 n.6, 932 A.2d 453, cert.
denied, 284 Conn. 941, 937 A.2d 696 (2007).
10
The court’s description of some items being ‘‘above the line’’ and others
‘‘below the line’’ is simply incongruous with the express language of the
waterfall provision, which contemplated the payment of all enumerated
expenses, including the $126,000 in reinstated fees, as part of the calculation
of net profits.