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Sargent, Sargent & Jacobs, LLC v. Thoele

Citation: Not availableDocket: AC44397

Court: Connecticut Appellate Court; August 2, 2022; Connecticut; State Appellate Court

Original Court Document: View Document

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The "officially released" date on opinions indicates when they are published in the Connecticut Law Journal or issued as slip opinions, establishing the timeline for filing post-opinion motions and certification petitions. This date is definitive for these purposes. Opinions may undergo modifications before being officially published in the Connecticut Reports and Connecticut Appellate Reports. In cases of discrepancies between advance release versions and the published versions, the latter is authoritative. The accompanying syllabus and procedural history in the Connecticut Law Journal and official reports are copyrighted and cannot be reproduced without permission from the relevant state commission.

In the case of SARGENT, SARGENT. JACOBS, LLC v. ALAN THOELE ET AL., the plaintiff, an escrow agent, sought a determination of rights to funds deposited by the purchaser under a 2018 purchase agreement for the seller's property. The purchaser discovered a prior neighbor agreement, which included a sewer easement, that was not disclosed in the purchase agreement. Consequently, the title insurance company refused coverage, prompting the purchaser to invoke a clause in the agreement regarding title encumbrances and ultimately terminate the contract when the seller failed to remedy the issue. The escrow agent then filed an interpleader action regarding the deposit. Cross claims ensued, with the seller attempting to introduce a 2016 letter of intent referencing the sewer easement, which the purchaser objected to based on the parol evidence rule due to an integration clause in the purchase agreement. The trial court admitted the letter, clarifying it would not affect the contract's interpretation but could pertain to other claims like fraudulent inducement.

The trial court found that the seller breached the purchase and sale agreement, entitling the purchaser to a return of the deposit, and ruled in favor of the purchaser. The seller's appeal raised several points: 

1. The court rejected the seller's argument that the purchaser could not invoke a specific clause (9(b)) of the agreement or claim that the omission of the neighbor agreement constituted a material breach. The court noted that the letter of intent demonstrated the purchaser's awareness of the neighbor agreement and potential sewer easement at the agreement's signing. The trial court correctly determined that the seller's reliance on the letter of intent to modify the understanding established in the purchase agreement was impermissible under the parol evidence rule, as the agreement explicitly stated no easements existed.

2. The court declined to address the seller's claim regarding the neighbor agreement not being an encumbrance per clause 9(b) because the seller inadequately briefed this argument, failing to provide legal support or analysis.

3. The court also did not consider the seller's assertion that the trial court erred in finding the failure to disclose the neighbor agreement was a material breach. Since the trial court identified multiple breaches by the seller, including the failure to return the deposit and misrepresentations, the seller's liability for breach remained, regardless of any potential court agreement with the seller's claim regarding material breach. 

The case stemmed from an interpleader action regarding funds held in escrow related to a real estate transaction, and following trial, judgment was issued favoring the defendant Merwin, LLC, on its cross claim against the named defendant, who subsequently appealed.

The judgment in favor of Merwin, LLC, the purchaser, in an interpleader action involving a failed commercial real estate transaction with Alan Thoele, the seller, has been affirmed. The seller appealed on four grounds: (1) the trial court's application of the parol evidence rule, preventing the consideration of a 2016 letter of intent; (2) the court's finding that the purchaser lacked actual knowledge of a potential sewer easement; (3) the classification of the sewer easement as an encumbrance on the property; and (4) the determination that the seller’s non-disclosure of the potential sewer easement constituted a material breach of the purchase agreement. The trial court's findings, which included the context of the transaction and obligations outlined in a neighbor agreement regarding a sewer line easement, were upheld. The seller had previously sought a zoning modification for the property and entered into a neighbor agreement that included conditions for the sewer easement, which were not recorded in the land documents. Negotiations for the sale of the property began in 2016, leading to the formal agreement in 2018.

Sewer easement for Cottage Lane exists on the property and runs with the land for access and egress. Early drafts and the 2018 purchase and sale agreement did not explicitly reference this easement, despite clauses addressing known easements and denying undisclosed rights. On January 22, 2018, the parties executed the purchase and sale agreement, which included relevant sections: Section 9(b) allows the seller a 30-day "Cure Period" to address title objections or additional encumbrances discovered after the title search. An objection is defined as one that prevents the title insurance company from issuing a marketable title policy or is recognized as an objection under Connecticut Bar Association standards. Section 16(m) states the seller is not aware of any claims for easements or rights over the property, aside from those disclosed.

The closing date was initially set for March 8, 2018; however, the purchaser learned of a neighbor agreement regarding a sewer line installation after the purchase agreement was signed. The title insurance company subsequently refused to issue a policy due to this agreement. On February 28, 2018, the purchaser's attorney invoked the cure provision concerning the easement granted to neighbors in 2011. Despite ongoing communications, the seller insisted on closing, initially on March 8, then April 7, 2018. The purchaser did not attend the closing and formally declared the contract unenforceable, citing the seller's failure to resolve the title issue as a breach of the agreement, asserting their right to terminate the contract.

A deposit of $325,000 was made to the plaintiff as escrow agent under a purchase and sale agreement, intended to secure performance of the contract. Upon title transfer, the deposit would go to the seller as part of the purchase price; however, if the purchaser failed to fulfill contractual obligations, the deposit would serve as liquidated damages for the seller. If the sale did not occur due to the seller's noncompliance, the deposit would be returned to the purchaser. An interpleader action was allowed for disputes regarding the deposit's disposition.

The seller claimed the purchaser breached the contract by failing to close and by not instructing the escrow agent to release the deposit as liquidated damages. The seller also asserted a breach of the covenant of good faith and fair dealing. Conversely, the purchaser argued it was entitled to the return of its deposit, asserting it properly terminated the agreement due to the seller’s failure to disclose a neighbor agreement and potential sewer easement. The purchaser additionally claimed fraud in the inducement for the seller's nondisclosure.

The case was tried over three days in October 2019, with post-trial briefs submitted by both parties. The seller argued the purchaser could not invoke a specific clause (9(b)) because it did not discover the sewer easement post-title search and had acknowledged it in a letter of intent. The seller contended that the easement did not impact property value or marketability and was not a material breach since it was acknowledged in prior communications. The seller maintained they were entitled to retain the deposit due to the purchaser's inability to rescind the agreement.

The purchaser, in its post-trial brief, asserted it was entitled to the deposit based on a proper request for cure under 9(b), arguing the seller breached the agreement by failing to disclose the neighbor agreement and not returning the deposit. The court ruled in favor of the purchaser on its breach of contract and deposit return claims in a memorandum of decision issued on November 13, 2020.

The court ruled in favor of the seller regarding the purchaser's fraud in the inducement claim but favored the purchaser on the seller's claims. On appeal, the seller argued that the court erred by (1) applying the parol evidence rule to exclude the 2016 letter of intent regarding the purchaser's awareness of a neighbor agreement, (2) concluding the purchaser lacked knowledge of the neighbor agreement until informed by a neighbor, (3) determining the neighbor agreement constituted an additional encumbrance on the property under section 9(b) of the purchase and sale agreement, and (4) finding that the seller's failure to disclose the neighbor agreement amounted to a material breach of the agreement. The court disagreed with all of these claims.

The court addressed the seller's assertions that the letter of intent should have been considered to prove the purchaser's knowledge of the neighbor agreement and the potential sewer easement. The seller contended that the purchaser's agent's signature on the letter in 2016 indicated actual knowledge at the time of signing the purchase and sale agreement in 2018, thus negating the applicability of section 9(b) and the claim of material breach. However, the purchaser's attorney objected to the use of the letter based on the parol evidence rule and the integration clause within the purchase and sale agreement. The court admitted the letter into evidence, stating that it would not be used to alter the contract's terms but could be relevant for non-contract claims.

During the trial, evidence was presented that the purchaser's representatives visited the property after signing the letter and inquired about the sewer connection, reinforcing the seller's position. In post-trial briefs, the seller argued that the letter indicated the purchaser's awareness of the easement, while the purchaser maintained that such evidence could not contradict the integrated agreement's clear terms. The court's memorandum of decision first analyzed the purchaser's knowledge regarding the neighbor agreement and the potential sewer easement before addressing the parol evidence rule.

The court found that the letter of intent was signed on behalf of the purchaser by an individual with limited English skills, and the purchaser's principal did not recall reading it before or after its signing. While an authorized signature could imply knowledge for the entity, it did not confirm actual awareness in 2018. The purchaser's actions after discussing sewer rights with neighbors indicated a lack of actual knowledge regarding those rights at that time. The court determined that whether the principal forgot prior knowledge or never knew about the sewer rights was irrelevant to interpreting the sale contract and the seller's representations. The purchaser objected to the admission of the letter of intent under the parol evidence rule, but the court allowed it for other claims, particularly fraudulent inducement. The contract expressly negated any non-identified easements or rights that could cloud the title, and any imputed knowledge from the letter could not alter the contract’s terms. The court noted that even if the seller discussed the sewer easement with Franco Iannone, it would not change the contract's clarity regarding known rights. The purchaser's prompt efforts to seek easement documentation after the 2018 encounter supported the conclusion that Iannone had no current knowledge of such rights. The court emphasized that knowledge from 2016 did not necessarily imply the rights still existed in 2018, especially given the contract's affirmative statements to the contrary. On appeal, the seller claimed that the letter of intent demonstrated the purchaser's knowledge of the neighbor agreement, thus barring claims under section 9(b). The purchaser countered that section 16(m) of the agreement stated the seller was unaware of any claims regarding easements, reinforcing that any evidence to counter this knowledge was inadmissible under the parol evidence rule.

The court affirms the trial court's decisions regarding evidence admissibility, emphasizing that such rulings receive deference unless there is clear abuse of discretion. The parol evidence rule is clarified not as an exclusionary rule but as a substantive contract law principle, meaning it allows for plenary review. The rule assumes that written agreements encapsulate the parties' complete understanding, prohibiting oral or extrinsic evidence from altering or contradicting the contract's terms. Parol evidence remains relevant if it can clarify ambiguities, prove collateral agreements, add missing terms, or demonstrate mistakes or fraud. 

In this case, the seller acknowledges the purchase and sale agreement's integration but claims the letter of intent did not seek to alter its terms. The court found that the seller improperly relied on this letter to modify the 2018 agreement, which explicitly stated that the property was free of easements. Attempts to reference prior discussions regarding easements were thus deemed attempts to revise the established understanding. The seller's arguments concerning the purchaser's awareness of a potential sewer easement also relied solely on the letter of intent, constituting an impermissible attempt to alter the 2018 agreement. Lastly, the seller's claim that the neighbor agreement constituted an additional encumbrance under the purchase and sale agreement was addressed, allowing the purchaser to request a cure or terminate the agreement due to the seller's failure to rectify the issue.

The seller contends that the trial court misinterpreted the requirement of section 9(b) regarding title objections, asserting that both a refusal of title insurance and a qualifying encumbrance under Connecticut Bar Association standards are necessary for action. However, the court found the contractual language ambiguous and evaluated the seller's interpretation, concluding that treating 'or' as disjunctive does not lead to irrational outcomes or contradict the parties' intent. Consequently, it ruled that the purchaser's title insurer's refusal to issue coverage due to a neighbor agreement justified the invocation of cure provisions. On appeal, the seller claimed that both conditions must be met for the purchaser to request a cure, emphasizing that a seller must address only objections affecting marketability. The appeal was dismissed because the seller's arguments were inadequately briefed, lacking legal support and coherent analysis. The court highlighted that issues raised without substantive discussion or authority are deemed abandoned. Additionally, the seller's claim regarding the court's finding of a material breach due to non-disclosure of the neighbor agreement was rendered moot by the court's determination that the seller breached the agreement by not returning the deposit after termination.

The seller's appeal regarding a breach of contract claim is limited to contesting the court's finding that its failure to disclose the neighbor agreement constituted a breach. However, the court had also determined that the seller breached the contract by failing to return the deposit after the purchaser requested a cure. Since the seller does not contest this latter finding, it remains liable for breach of the purchase and sale agreement regardless of the outcome of the disclosure issue. Consequently, no practical relief can be afforded to the seller, leading to an affirmation of the judgment. 

The case involves an interpleader complaint by the escrow agent, Sargent, Sargent, Jacobs, LLC, against the seller and purchaser, with the plaintiff claiming no interest in the funds and seeking a ruling on rightful claims. The contract in question is the third version of the agreement, with prior versions terminated due to environmental issues. The seller's argument that the purchaser was aware of the neighbor agreement prior to signing the contract was rejected by the court, which found no evidence that the purchaser knew about the easement at that time.

Additionally, the seller contended that the neighbor agreement did not impact the property's marketability, but the court deemed the seller's briefing inadequate to compel a review of this claim. The decision indicates that the seller's failure to disclose and the refusal to return the deposit both constitute breaches, solidifying its liability under the purchase and sale agreement.