Hirschfeld v. Machinist

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HIRSCHFELD v. MACHINIST—DISSENT
FLYNN, J., dissenting. This case presents an
important issue concerning whether delay in the perfor-
mance of a contractual promise that causes loss to
another party to the contract is properly the responsibil-
ity of the delaying party to the extent she caused it. In
my opinion, under the particular facts of this case and
based on the implied covenant of good faith and fair
dealing, the court properly found that it was. Accord-
ingly, I respectfully dissent and would affirm the deci-
sion of the court.
When the parties to this dissolution action could not
agree on whether the losses suffered by the defendant,
Robert B. Machinist, due to the delay in selling their
property in St. Barthelemy should be shared by the
plaintiff, Caroline Hirschfeld, the defendant filed a
motion with the court requesting that it make a determi-
nation as to the proper allocation of funds held by the
couple in escrow. He later amended this motion to
seek attorney’s fees and other legal and equitable relief
as warranted.
As part of a signed separation agreement, which pur-
suant to their request, the court approved and incorpo-
rated into the decree of dissolution of their marriage,
the plaintiff and defendant agreed that they had two
lines of credit. The one from First Republic Bank that
was unsecured in the amount of $990,400 is in contro-
versy on appeal. Paragraph 6.1 of the separation
agreement provided that the parties owned three prop-
erties, located, respectively, in Greenwich, Vermont,
and St. Barthelemy in the French West Indies. Para-
graph 6.8 of the separation agreement provided that:
‘‘Upon the sale of any or all of the properties, all closing
costs shall be paid 55 [percent] by the Wife and 45
[percent] by the Husband, including any mortgage bal-
ances, home equity line balances, real estate taxes,
attorney fees, recording fees, typical and customary
expenses for sale as determined in the jurisdiction
where the property has been located.’’
After the Greenwich and Vermont properties were
sold, the defendant filed a motion with the court to
determine how $45,468.27 remaining in escrow with the
closing attorney should be distributed in light of the
defendant’s claim that there was an unpaid balance
incurred by him in costs of collateralizing the First
Republic Bank loan. He later amended this motion to
request that the court award attorney’s fees and any
other legal or equitable relief. The court found that: ‘‘As
to the Republic line, the original principal balance has
been paid, however, there remains an outstanding bal-
ance due in the amount of $26,774, together with inter-
est to date, which balance is due mainly to the husband’s
efforts to extend this line prior to the sale of the Green-
wich property.’’
The defendant presented evidence that the plaintiff
serially disrupted the sale of the properties ‘‘over a
period of three and a half years.’’ He offered evidence
that because of these delays, he was required by First
Republic Bank to secure the note and did so by mortgag-
ing other property he owned. The court found that:
‘‘In viewing the Separation Agreement as a whole, in
particular Articles 6.8 and 6.9, it is clear that the parties
contemplated the payment of the loans from the ulti-
mate sale of the marital properties as and when each
sold. The parties also clearly agreed to divide both the
principal, as well as the carrying costs, on a 55/45 basis.
The husband was given the responsibility for main-
taining these loans, with the understanding that he
would be reimbursed for 55 [percent] of his expendi-
tures. Given the considerable length of time it took
to market and sell the properties, much of the delay
attributable to the actions of the wife, this court finds
that the husband’s actions were reasonable and not
beyond the contemplation of the parties at the time of
the original agreement.’’
As the defendant noted in his brief, on appeal, the
plaintiff does not claim that the court’s finding with
respect to her part in causing delay is ‘‘clearly errone-
ous.’’ Instead her claim is that the court improperly
found her responsible for a share of the costs and
expenses of extending the First Republic Bank line of
credit by granting it the security for its unsecured note
that it demanded because of the delays in selling the
properties, thus going beyond the plain language of the
agreement. We generally review a case on the theory
upon which it was tried and decided in the trial court.
Lashgari v. Lashgari, 197 Conn. 189, 196, 496 A.2d 491(1985). ‘‘It is equally true that we need not address other
issues raised on appeal if the trial court has correctly
decided an issue that is sufficient to sustain the judg-
ment.’’ (Emphasis in original.) Id.In interpreting divorce judgments that incorporate
written separation agreements, our courts look to con-
tract principles. See Hirschfeld v. Machinist, 137 Conn.
App. 690, 694–95, 50 A.3d 324, cert. denied, 307 Conn.
939, 56 A.3d 950 (2012). The court found that the defen-
dant’s actions in collateralizing the First Republic Bank
note, as the bank requested, given the delays in its
repayment, were not beyond the contemplation of the
parties at the time of the original agreement. If the
plaintiff had delayed the sale for one day, it is doubtful
that either the parties or this court would be concerned.
However, if she had delayed the sale for twenty years,
requiring that the defendant undergo the additional
expense of collateralizing the loan with other property,
should it be the defendant’s sole responsibility to pay
that cost caused by the plaintiff’s delay because there
was no express contractual provision providing for
that? My point is that the length of the plaintiff’s delay
in fulfilling her performance of the separation
agreement can reach a point where it deprives the
defendant of what he had the right to expect under the
contract’s terms.
‘‘[E]very contract carries an implied duty requiring
that neither party do anything that will injure the other
to receive the benefits of the agreement.’’ (Internal quo-
tation marks omitted.) De La Concha of Hartford, Inc.
v. Aetna Life Ins. Co., 269 Conn. 424, 432, 849 A.2d 382(2004). This principle is called the implied covenant of
good faith and fair dealing.1 The implied covenant of
good faith and fair dealing exists in every contract,
although not expressed, precisely because no written
agreement can ever contemplate every possible way
that a party’s performance can injure the right of the
other party to receive the benefits of the agreement.
The separation agreement provided that three marital
properties were to be sold, and that after the note obli-
gation and expenses of sale were satisfied, the parties
would split the net proceeds on a 55 percent to 45
percent basis. It presumed that each party would act
in good faith and fairly in the performance of the con-
tract. If the plaintiff did not so act, and was responsible
for much of the three and a half year delay, causing
the defendant expense, it would not be fair to require
the defendant to bear that expense solely, because it
would diminish the return he was entitled to receive
under section 6.8 of the parties’ separation agreement
from the equity in these properties. Where a short delay
would be de minimis, given a three and one half year
delay here, the court held that the defendant’s actions
in collateralizing the note were not beyond the contem-
plation of the parties when they executed their separa-
tion agreement.
Paragraph 6.9 of the separation agreement provided
that after payment of the closing costs set out in para-
graph 6.8, the net proceeds remaining shall be divided 55
percent to the plaintiff and 45 percent to the defendant.
From these net proceeds, the defendant was to pay
First Republic Bank $445,680 and the plaintiff was to
pay First Republic Bank $544,720. The plaintiff’s posi-
tion is that although the court found her responsible
for delaying her performance in connection with the
sale of the marital real estate, she should not be obli-
gated to pay any of the additional collateralization costs
incurred by the defendant. She maintains this position,
even though the court found that after the execution
of the contract, she had delayed her performance of
that very contract, causing detriment to the defendant
compensable in money damages.
Although the defendant-appellee did not brief the
implied covenant of good faith and fair dealing, I believe
that this doctrine correctly resolves the present case.
Where the trial court has decided a particular case
properly, I know of no case which stands for the propo-
sition that the prevailing party as appellee can ‘‘aban-
don’’ the grounds of the court’s decision by some
claimed lack of reference in its brief to the principle
of justice that guided the court. A trial court’s proper
ratiocination is relevant and is entitled to review.
Although the appellee has not briefed the covenant of
good faith and fair dealing, there could be no surprise
to the parties by its invocation because it is a covenant
that is implied in all contracts, of which the trial judge
is presumed to know and which exactly fits within the
court’s factual findings. Moreover, an aggrieved party
appeals from the judgment of the trial court, which is
what we review; the arguments advanced by counsel
are not necessarily dispositive of this court’s scope of
review. A trial court cannot be ambushed if it is affirmed
on the basis of the principles that guided its judgment,
regardless of the arguments advanced by an appellee
in defending that court’s judgment. Any concern that
the plaintiff-appellant has not had an opportunity to
address this doctrine could be accommodated by giving
both parties the opportunity to brief it before judgment
enters on the appeal.
The trial court in the present case did not specifically
mention the implied covenant of good faith and fair
dealing in its decision. However, we have previously
held that courts are presumed to know the law, unless
something of record indicates otherwise. Fenton v. Con-
necticut Hospital Assn. Workers’ Compensation Trust,
58 Conn. App. 45, 54–55, 752 A.2d 65, cert. denied, 254
Conn. 911, 759 A.2d 504 (2000). ‘‘Effect must be given
to that which is clearly implied as well as to that which
is expressed.’’ (Internal quotation marks omitted.)
Lashgari v. Lashgari, supra, 197 Conn. 197. In applying
that prescription, our Supreme Court, in considering a
distinct issue, has held that while a court must consider
all of the criteria set forth in General Statutes § 46b-81
governing assignment of marital assets in dissolution
proceedings at the time of entry the decree of divorce,
it need not make explicit reference to them or make
express findings as to each statutory factor. Dombrow-
ski v. Noyes-Dombrowski, 273 Conn. 127, 137, 869 A.2d
164 (2005).
There is no good reason why a court should not also
be excused from making particular reference to the
principle of good faith and fair dealing in postjudgment
proceedings, either. This is particularly so where the
court has found that the plaintiff was responsible for
much of the postjudgment delays in performance.2 ‘‘The
covenant of good faith and fair dealing presupposes
that the terms and purpose of the contract are agreed
upon by the parties and that what is in dispute is a
party’s discretionary application of a contract term.’’
(Internal quotation marks omitted.) De La Concha of
Hartford, Inc. v. Aetna Life Ins. Co., supra, 269 Conn.
433. ‘‘Effect must be given to that which is clearly
implied as well as to that which is expressed.’’ (Internal
quotation marks omitted.) Lashgari v. Lashgari, supra,
197 Conn. 197. The plaintiff claims that the court
improperly ‘‘added terms to the agreement.’’ However,
a court does not ‘‘add’’ an implied covenant, which is
a part of every contract. Professor Corbin’s treatise
says succinctly: ‘‘Probably the most we can say is that
‘implied’ generally means ‘not express’, and that impli-
cation deals with things not expressly in the contract.’’
6 P. Linzer, Corbin on Contracts (Rev. Ed. 2010) § 26.1,
p. 397.
It is well settled that a breach of the implied covenant
of good faith and fair dealing is, in essence, a breach
of contract—and, therefore, subject to the general rules
governing the law of contracts. ‘‘The general rule in
breach of contract cases is that the award of damages
is designed to place the injured party, so far as can be
done by money, in the same position as that which he
would have been in had the contract been performed.
. . . Traditionally, consequential damages include any
loss that may fairly and reasonably be considered [as]
arising naturally, i.e., according to the usual course of
things, from such breach of contract itself.’’ (Citation
omitted; internal quotation marks omitted.) Sullivan v.
Thorndike, 104 Conn. App. 297, 303–304, 934 A.2d 827(2007), cert. denied, 285 Conn. 907, 908, 942 A.2d 415,
416 (2008).
This court addressed the specific issue of a party’s
breach of the implied covenant of good faith and fair
dealing in Landry v. Spitz, 102 Conn. App. 34, 925 A.2d
334 (2007). In that case, we held that: ‘‘[W]hen one party
performs the contract in a manner that is unfaithful to
the purpose of the contract and the justified expecta-
tions of the other party are thus denied, there is a breach
of the covenant of good faith and fair dealing, and hence,
a breach of contract, for which damages may be recov-
ered; reasonable or justified expectations, in turn, are
to be determined by considering the various factors
and circumstances that surround the parties’ relation-
ship and thereby shape or give contour to the expecta-
tions in the first instance. 23 S. Williston [Contracts
(4th Ed. Lord 2002)] § 63:22, p. 514.’’ (Internal quotation
marks omitted.) Landry v. Spitz, supra, 44–45; see also
Atlantic Mortgage & Investment Corp. v. Stephenson,
86 Conn. App. 126, 144, 860 A.2d 751 (2004) (‘‘nothing
in the contract [prohibits] an award of damages to
the defendants for the plaintiff’s breach of the implied
covenant, which is an implicit provision in every con-
tract’’ [emphasis in original]). Thus, ‘‘[a] claim for
breach of good faith and fair dealing is . . . nothing
more than a breach of contract claim and is analyzed
like a claim for the breach of any other contractual
duty.’’ (Footnote omitted.) 17B C.J.S. 274–75, Contracts
§ 826 (2011). The appropriate remedy for a breach of
the implied covenant of good faith and fair dealing,
therefore, is money damages.
In Landry, this court further considered how it
should review a trial court’s decision to award damages
for breach of the implied covenant of good faith and
fair dealing. ‘‘[T]he trial court has broad discretion in
determining damages. . . . The determination of dam-
ages involves a question of fact that will not be over-
turned unless it is clearly erroneous. . . . When,
however, a damages award is challenged on the basis
of a question of law, our review [of that question] is
plenary.’’ (Citation omitted; internal quotation marks
omitted.) Landry v. Spitz, supra, 102 Conn. App. 49–50;
see also Spilke v. Wicklow, 138 Conn. App. 251, 262, 53
A.3d 245 (2012), cert. denied, 307 Conn. 945, 60 A.3d
737 (2013).
The defendant-appellee did in fact offer evidence that
the expenses associated with collateralization had not
been paid off and his counsel argued before the trial
court that the $26,744 is an unpaid balance and on
appeal briefed the argument that the term ‘‘balance’’
means ‘‘any charges above and beyond the principal
and interest already accounted for in the agreement.
This would include the carrying costs and fees that the
[defendant] incurred in extending the First Republic
home equity line of credit pending the sale of the parties’
property.’’ The court rightly determined that ‘‘the hus-
band is entitled to be reimbursed by the wife 55 [per-
cent] of any interest and late fees that he expended for
both the First Republic Bank and Citi lines of credit,
and, in addition, the wife is responsible for 55 [percent]
of any outstanding balances on either or both lines of
credit.’’ This would include the unpaid fees and
expenses incurred by the defendant-husband to extend
the First Republic Bank loan.
In analyzing the foregoing, our law suggests that: (1)
the breach of the implied covenant of good faith and
fair dealing is one species of a breach of contract; (2)
the ordinary remedy for breach of contract is money
damages; and (3) the trial court has broad discretion
to fashion the appropriate measure of damages.
Applying this law to the present case, I conclude that
upon finding the plaintiff was responsible for much
of the delay, the court did not abuse its discretion in
awarding damages to the defendant for the plaintiff’s
failure to timely effectuate the sale of the couple’s
property.3
Did the written agreement concerning the sale permit
the plaintiff to neglect or delay to close the sale contrary
to the defendant’s justified expectations and pass the
costs of the attendant delay solely to the defendant?
The court found that it did not. I would affirm the
court’s judgment.
I respectfully dissent.
1
This principle provides: ‘‘Every contract imposed upon each party a duty
of good faith and fair dealing in its performance and its enforcement.’’ 2
Restatement (Second) Contracts, § 205 p. 99 (1981). Our Supreme Court
has applied this doctrine in a variety of contractual relationships and has
observed that ‘‘[t]he Restatement (Second) of Contracts similarly recognizes
an implied covenant of good faith and fair dealing in every contract without
limitation.’’ Magnan v. Anaconda Industries, Inc., 193 Conn. 558, 566, 479
A.2d 781 (1984).
The commentary to § 205 of the Restatement (Second) of Contracts pro-
vides: ‘‘[B]ad faith may be overt or may consist of inaction, and fair dealing
may require more than honesty. A complete catalogue of types of bad faith
is impossible, but the following types are among those which have been
recognized in judicial decisions: evasion of the spirit of the bargain, lack
of diligence and slacking off, willful rendering of imperfect performance,
abuse of a power to specify terms, and interference with or failure to
cooperate in the other party’s performance.’’ 2 Restatement (Second), supra,
§ 205, comment (d), pp. 100–101.
Our Supreme Court has held that ‘‘the covenant of good faith and fair
dealing only requir[es] that neither party [to a contract] do anything that
will injure the right of the other to receive the benefits of the agreement
. . . .’’ (Internal quotation marks omitted.) Capstone Building. Corp. v.
American Motorists Ins. Co., 308 Conn. 760, 795, 67 A.3d 961 (2013).
2
Our Supreme Court has, in a variety of circumstances, looked to the
merits of matters, even when magic words, labels, or talismanic phrases,
were not invoked by a court or a party. For some instances that are illustra-
tive, but not exhaustive, see, e.g., Gambardella v. Apple Health Care, Inc.,
291 Conn. 620, 637, 969 A.2d 736 (2009) (‘‘actual malice’’ for finding of
liability for libel or slander); State v. Robinson, 227 Conn. 711, 731, 631 A.2d
288 (1993) (inferred compliance with balancing test for prejudicial effect
of evidence); Struckman v. Burns, 205 Conn. 542, 555, 534 A.2d 888 (1987)
(formulaic words not necessary for admission of expert witness’s medi-
cal opinions).
3
The plaintiff also claims that the court improperly considered parol
evidence to vary the written terms of the agreement and that the court
impermissibly considered evidence of events occurring after the execution
of the agreement. I am not persuaded. Evidence of a party’s performance
always occurs after a party’s execution of an agreement, and it is relevant
if it consists of delays in performance causing loss to another party to
the agreement.