author: Dannehy, J.

text:
    West Haven Sound Development Corporation v. City of West Haven
    (12624)
    Peters, C. J., Shea, Dannehy, Callahan and Novack, Js.

      Argued May 7
    decision released August 26, 1986

      Irving H. Perlmutter, with whom were Gary P. Sklaver, Louis Smith Votto, corporation counsel, and, on the brief, Jonathan J. Einhorn, former corporation counsel, for the appellant (defendant).

      Charles A. Sherwood, with whom was Joseph R. Mirrione, for the appellee (plaintiff).
   Dannehy, J.

The plaintiff, West Haven Sound Development Corporation, brought this action against the defendant, city of West Haven, to recover damages for an alleged breach of contract. A jury found for the plaintiff and awarded damages of $3,100,000. The defendant appealed from the judgment rendered on the verdict.

The parties to this appeal have been involved in litigation for more than eleven years. The facts leading up to the alleged breach have been clearly and adequately set forth in the cases of West Haven v. Impact, 174 Conn. 160, 384 A.2d 353 (1978), and New Haven Savings Bank v. West Haven Sound Development, 190 Conn. 60, 459 A.2d 999 (1983). We will, therefore, limit ourselves to a brief discussion of the facts relevant to the defendant’s claims on appeal.

The jury could reasonably have found that the plaintiff, then doing business under the name of Phyllis’, the defendant, and the West Haven Redevelopment Agency entered into a contract early in 1973. Under the terms of the contract, the defendant conveyed to the plaintiff a parcel of land by a deed containing the condition that the land be used in accordance with the defendant’s urban renewal plan (the plan) for the Savin Rock area of West Haven. The plan, which was also incorporated by reference into the contract, provided that a substantial portion of the land in the Savin Rock area would be developed for commercial, recreational and apartment use. The parties to the contract expressly agreed that there could be no modification of the plan affecting the rights of the redevelopers without their consent. The plaintiff constructed a restaurant facility on its parcel, at a cost of approximately $1,700,000. The restaurant opened for business in December, 1973.

On October 17,1974, a referendum initiated by a civic organization called Impact was passed by the voters of West Haven. The referendum required the city to reverse its course and turn the remaining undeveloped Savin Rock property into a public park. The West Haven redevelopment agency then informed all of the existing redevelopers of the referendum and sought their consent to the proposed “modification” of the plan. The plaintiff was one of several redevelopers who withheld consent. Unsure of how next to proceed, the city of West Haven sought a declaratory judgment to determine whether the referendum in fact constituted a modification of the plan within the meaning of General Statutes § 8-136. The trial court concluded that the referendum was not a modification of the original plan and that the city could enforce it without the redevelopers’ approval. On appeal to this court that decision was reversed. See West Haven v. Impact, supra.

Between the passage of the referendum and our decision in Impact, redevelopment in the Savin Rock area was at a standstill. In May, 1977, the plaintiffs business closed. The plaintiff then filed this action, alleging that its business had failed because the defendant had breached its contract with the plaintiff by modifying the original redevelopment plan. At trial, the jury found for the plaintiff and awarded damages of $3,100,000. The defendant subsequently moved to set aside the verdict, and for judgment notwithstanding the verdict. The motions were denied.

On appeal, the defendant claims that the trial court erred: (1) in failing to find that the city of West Haven was not the proper defendant; (2) in failing to find that the defendant was excused from fulfilling its contractual obligations under the doctrine of impossibility of performance; (3) in not setting aside the verdict as excessive; and (4) in allowing certain expert testimony regarding the value of the plaintiffs business. We affirm the trial court’s ruling with respect to the defendant’s liability under the contract; we find error, however, on the issue of damages and remand that issue for further proceedings.

I

Liability

The defendant’s first contention is that the trial court should have found as a matter of law that the city of West Haven was not liable for any failure to implement the plan. The defendant’s contention is premised on the notion that the redevelopment agency, created through a state enabling statute; see General Statutes § 8-126; is an agency of the state, and that under the urban renewal statutes in chapter 130, responsibility for redevelopment rests with the agency. From this premise it argues that any failure to implement the plan should be viewed solely as a breach by the redevelopment agency, an entity which the defendant claims is separate and distinct from the city of West Haven.

The defendant’s argument fails for several reasons. First, the city of West Haven was a separate party to the contract itself, and thus even if the redevelopment agency were to be considered a state agency, the town could still be held liable for breach of contract as a principal obligor. In addition, the fact that the West Haven redevelopment agency was created in accordance with a state enabling statute does not necessarily make it an agency of the state. General Statutes § 8-126 authorizes municipalities to create a redevelopment agency, but unlike local boards of education which are considered state agencies; see Fowler v. Enfield, 138 Conn. 521, 86 A.2d 662 (1952); the creation of a redevelopment agency is not mandated. In addition, language throughout chapter 130 speaks of a “municipality, acting by and through its redevelopment agency.” See General Statutes §§ 8-134, 8-135. Finally, while redevelopment agencies are granted broad powers under chapter 130 to propose and implement redevelopment plans; see General Statutes §§ 8-127, 8-128, 8-137; ultimate authority to approve a plan, to make substantial modifications in such a plan, and to approve land disposition agreements under a plan remains with the municipality. See General Statutes §§ 8-127, 8-136, 8-137.

The jury heard evidence that the West Haven redevelopment agency was created by the city of West Haven and that its members were appointed by city officials. The jury had before it the contract for the sale of the land to the plaintiff. The parties to the contract were “the West Haven Redevelopment Agency, an agency of the City of West Haven, Connecticut . . . the City of West Haven . . . and The Phyllis’s Incorporated.” (Emphasis added.) The deed of conveyance specifically refers to the West Haven redevelopment agency as “an agency of the City of West Haven, Connecticut, not being a distinct and separate corporate entity.” Extensive evidence was also presented regarding the respective duties of the agency and the city in proposing, approving, implementing and modifying a plan of redevelopment. From all of the evidence presented, it would have been reasonable for the jury to have found that the relationship between the defendant and the redevelopment agency was one of agency, and that the defendant was liable for the breach of contract.

Ordinarily, the question of agency is one of fact to be determined by the trier of fact. Cohen v. Meola, 184 Conn. 218, 220, 439 A.2d 966 (1981); Botticello v. Stefanovicz, 177 Conn. 22, 26, 411 A.2d 16 (1979); Cleaveland v. Gabriel, 149 Conn. 388, 394-95, 180 A.2d 749 (1962). In this case, however, the trial court effectively removed that issue from the jury’s consideration by directing the jury to find that the West Haven redevelopment agency was an agent of the city of West Haven. The trial court instructed the jury that “the plaintiff has made certain allegations in its complaint which have been responded to by the defendant in the answer. These allegations made by the plaintiff are not disputed because they have been admitted by the defendant.” The court then went on to identify the specific allegations in the complaint which had been admitted by the defendant. Among those were “the allegations of paragraph four to the effect that the plaintiffs previously existing restaurant facility was taken by the defendant, demolished, and that the plan as adopted by the defendant through its agent, the West Haven Redevelopment Agency, did set forth the manner and fashion that said redevelopment of Savin Rock Urban Renewal Project was to proceed, and especially the type and nature of the development contemplated thereby.” (Emphasis added.) The court then instructed the jury that these allegations were “admitted by the defendant’s answer and are therefore binding upon the defendant and relieve the plaintiff from the necessity of proving the facts as alleged.”

The trial court’s charge was correct. “Factual allegations contained in pleadings upon which the cause is tried are considered judicial admissions and hence irrefutable as long as they remain in the case.” Dreier v. Upjohn Co., 196 Conn. 242, 248, 492 A.2d 164 (1985); Griffin v. Nationwide Moving & Storage Co., 187 Conn. 405, 406 n.l, 446 A.2d 799 (1982); Rodearmel v. Rodearmel, 173 Conn. 273, 275, 377 A.2d 260 (1977); Lutkus v. Kelly, 170 Conn. 252, 257, 365 A.2d 816 (1976); Jones Destruction, Inc. v. Upjohn, 161 Conn. 191, 199, 286 A.2d 308 (1971); see Tait & LaPlante, Connecticut Evidence (1976) § 6.7 (a). The defendant admitted agency in its answer, and at no time during the trial of this case did it seek to have its admission “ ‘withdrawn, explained or modified.’ ” Dreier v. Upjohn Co., supra, 249 n.2. Moreover, the defendant did not except to this, or any other portion of the trial court’s charge. The trial court did not err in failing to find “as a matter of law” that the city of West Haven was not liable on the contract.

The defendant’s second contention is that the court erred in failing to find as a matter of law that performance of the contract had been rendered impossible by the passage of the referendum and by the subsequent trial court decision that the referendum did not effect a modification of the plan. The concepts of impossibility or impracticability of performance have been recognized in various decisions of this court; see Grenier v. Compratt Construction Co., 189 Conn. 144, 454 A.2d 1289 (1983); Hess v. Dumouchel Paper Co., 154 Conn. 343, 225 A.2d 797 (1966); in the Restatement (Second) of Contracts, §§ 261 through 272, and in various legal treatises. See 6 Corbin, Contracts §§ 1320 through 1372; 18 Williston, Contracts (3d Ed. Jaeger) §§ 1931 through 1979. Section 261 of the Restatement (Second) of Contracts provides: “Where, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the nonoccurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.” A “governmental regulation or order” which makes performance of a duty impracticable “is an event the non-occurrence of which was a basic assumption on which the contract was made.” 2 Restatement (Second), supra, § 264.

The defendant’s position is that it should be excused from performing its contractual obligations because the passage of the referendum and the trial court ruling were “governmental orders” which rendered its performance impossible. The defendant recognizes that for a party successfully to utilize the “impracticability by act of law” defense, that party must not be at fault in the sense of having created or contributed to that impracticability. 2 Restatement (Second), supra, §§ 261, 264, comment a; 17 Am. Jur. 2d § 418. Arguing that it had no power to curtail the actions of the group sponsoring the referendum and no authority to rule on the legality of the referendum, the defendant contends that it was not “at fault” for the impossibility that resulted. We perceive this argument as fundamentally flawed because it artificially separates the city of West Haven and the administrators who act on its behalf from the individuals who comprise the electorate.

Under § 1 of the charter of the city of West Haven, “the inhabitants dwelling in the territorial limits of the Town of West Haven . . . shall be a body politic and corporate under the name of the City of West Haven.” The municipality as an entity represents the interests of its inhabitants. Keating v. Patterson, 132 Conn. 210, 213 n.l, 43 A.2d 659 (1945). The West Haven charter also delineates the powers of the mayor and the city councilpersons who act on behalf of the citizens of West Haven. In signing the contract at issue in this appeal, the mayor, acting in his official capacity, bound the city to sell the parcel of land to the plaintiff and to observe all of the contractual obligations involving the Savin Rock redevelopment plan. When such obligations were unfulfilled, it was the city that was sued.

The charter also gives the people of West Haven the right to propose ordinances to the city council and if an ordinance is not passed by the council, the people may approve the ordinance by a majority of votes. The referendum at issue in this case was proposed by a group of West Haven citizens belonging to an organization called “Impact” and was approved by the majority of West Haven voters. The parties agree that upon its passage, the Impact referendum automatically became a city ordinance, and that the city council could not have refused to enact it. An ordinance is a legislative enactment of a municipality; Aaron v. Conservation Commission, 183 Conn. 532, 537, 441 A.2d 30 (1981); Duplin v. Shiels, Inc., 165 Conn. 396, 398, 334 A.2d 896 (1973); and the fact that this ordinance was sponsored by popular referendum does not mean that it was not a legislative enactment by the municipality. The Impact referendum can only be viewed as the action of the city of West Haven, the same entity which, through its elected and appointed representatives, had entered into the contract with the plaintiff. The city should not be allowed to escape its contractual obligations by a vote of its citizens that rendered performance of the contract impossible.

The Maine Supreme Court faced a similar issue in Elsemore v. Hancock, 137 Me. 243, 18 A.2d 692 (1941). There, the plaintiff had contracted with the defendant town to teach in its public high school. When the inhabitants of the town voted to close the school, the court held that the doctrine of impossibility did not relieve the town of liability for breach of the teaching contract. The court explained, “[ajssuming authority to be vested in the voters of a town to discontinue a free high school at will, where no contract rights are involved, we do not believe it should be permitted, as one of the parties to a valid contract, to avoid its contractual obligations by such roundabout action.” Id., 250. Like the town in Elsemore, the city of West Haven should not be allowed to utilize the impossibility defense when it was itself responsible for the referendum, the action that created the impossibility. “To hold otherwise would be to overlook reality and the facts in the case.” West Haven v. Impact, supra, 165.

II

Damages

As previously stated, the jury returned a general verdict in favor of the plaintiff in the amount of $3,100,000. The defendant challenges the damage award on the grounds that: (1) there was insufficient evidence that the breach of contract was the cause of the plaintiff’s loss; (2) the trial court erred in allowing Ronald Jordan, the plaintiff’s expert witness, to testify to the value of the plaintiff’s restaurant business at the time of the breach; and (3) the plaintiff failed to prove the amount of its damages with the degree of certainty required by law. Although we do not agree precisely with the claims as presented by the defendant, we nonetheless remand this case for a redetermination of damages.

We first address the defendant’s claim that there was insufficient evidence that the breach of contract caused the failure of the plaintiff’s restaurant business. Causation was a question of fact for the jury to determine. We must presume that the jury by its general verdict found the issue of causation in favor of the plaintiff. Sanderson v. Steve Snyder Enterprises, Inc., 196 Conn. 134, 142 n.5, 491 A.2d 389 (1985); Matthews v. F.M.C. Corporation, 190 Conn. 700, 706, 462 A.2d 376 (1983). The plaintiff in this case presented evidence that by 1974 there were at least seven developers in the Savin Rock area of West Haven. The jury could reasonably have concluded that these individuals would have proceeded with redevelopment, but for the defendant’s breach of contract. The jury could further have determined that the surrounding development would have revitalized the entire area, resulting in increased patronage of the plaintiff’s restaurant. We believe that the evidence was sufficient to support the jury’s determination that the breach of contract caused the plaintiff to suffer damages in this case.

The defendant also claims that the trial court erred in allowing Jordan, a certified public accountant, to testify to the value that the plaintiff’s restaurant would have had had the defendant not breached its contract to permit redevelopment of the Savin Rock area. On the basis of certain econometric projections as to future revenues and costs, Jordan predicted the profits that the restaurant would likely have earned had redevelopment of the area proceeded as originally contemplated by the contracting parties. Jordan then computed the net present value of these future earnings, using a rate of capitalization appropriate to the restaurant business, to arrive at a valuation of the plaintiffs restaurant in 1974 at the time of the breach. Jordan testified that in his opinion the capitalized value of the plaintiffs projected earnings was $1,900,000 at the time of the breach.

The defendant contends that Jordan should not have been allowed to value the plaintiffs restaurant on the basis of econometric predictions of future revenues and costs because actual data was available which showed that the restaurant had operated at a loss in 1974 and 1975. The defendant argues that Jordan’s projections as to the restaurant’s profitability were faulty being contradicted by the actual profit record in 1974 and 1975. It is undisputed that the plaintiff’s restaurant lost $76,831.53 in 1974 and $70,151.79 in 1975. The defendant thus concludes that Jordan should not have been allowed to testify to his opinion as to the restaurant’s value, because that opinion was based on his allegedly faulty profit projections.

The trial court did not err in allowing Jordan to testify to the restaurant’s value based on the economic situation as it reasonably appeared before the breach of contract. The plaintiff opened its restaurant in December, 1973. The parties have stipulated that the breach occurred, if at all, on October 17,1974, the date of the referendum precluding further development of the Savin Rock area. The restaurant eventually closed its doors in May, 1977. Jordan testified as to what he believed the business would have earned, and what it would have been worth, had the breach not occurred. The fact that the restaurant actually operated at a loss after the breach is certainly not fatal to Jordan’s prediction of what might have occurred had the contract been performed. See Turgeon v. Turgeon, 190 Conn. 269, 273, 460 A.2d 1260 (1983). We can agree with the defendant that the actual profit data was a relevant consideration against which Jordan might have checked the accuracy of his projections. This was a proper subject of cross-examination, and the defendant in fact questioned Jordan in detail as to whether he had evaluated the actual data. We do not believe, however, that Jordan should have been precluded from using econometric projections to predict future profits merely because those projections were contradicted by the restaurant’s actual profit performance after the breach.

The defendant also argues that Jordan should not have been permitted to give his opinion as to the restaurant’s value because that opinion was based on the existence of future profits which, the defendant contends, were speculative and uncertain to occur. The plaintiff had operated its business in the Savin Rock area since 1945, beginning with a hot dog stand. As its business improved, the plaintiff built an addition to its establishment, and later moved into a larger facility. In 1961, the plaintiff built a new, larger restaurant, where the enterprise continued to grow and prosper. The plaintiff in 1970 unsuccessfully resisted the condemnation of its establishment pursuant to the defendant’s plan of redevelopment. Thus, when the plaintiff built its new restaurant in 1973, it was not without a sustained history of profitable operation in the Savin Rock area.

The plaintiff does not appear to have sought to recover damages for “lost profits” as such from the defendant’s breach of contract. Rather, the plaintiff theorized that it had been forced to go out of business by the defendant’s breach, and thus, that it was entitled to recover the value of its business as damages for breach of contract. Consequently, the plaintiff sought to establish the “going concern” value of its restaurant, instead of its “book” or “net asset” value, as the appropriate measure of compensation for what it had lost. The plaintiff therefore produced Jordan to testify to the going concern value of its business at the time of the breach. As it happens, however, Jordan determined the value of the plaintiffs business by estimating future profits, and then by capitalizing those expected profits to their net present value at an appropriate interest rate. Thus, although the plaintiff may not technically have attempted to recover its lost future earnings, i.e., its lost profits, it is clear that Jordan’s “value” figure of $1,900,000 is nothing more than his computation of expected future earnings capitalized to their present value in 1974. Since Jordan’s opinion as to the restaurant’s “going concern” value was directly based upon his econometric projections of lost profits, we may facilitate our review of the defendant’s claim of error by treating it as though it were a straight challenge to the plaintiffs recovery of lost profits for breach of contract.

“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.” Beckman v. Jalich Homes, Inc., 190 Conn. 299, 309, 460 A.2d 488 (1983); Lar-Rob Bus Corporation v. Fairfield, 170 Conn. 397, 404-405, 365 A.2d 1086 (1976); Bachman v. Fortuna, 145 Conn. 191, 194, 141 A.2d 477 (1958). It has traditionally been held that a party may recover “general” contract damages for 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.” Hadley v. Baxendale, 9 Ex. 341, 354, 156 Eng. Rep. 145 (1854); see Farnsworth, Contracts (1982) § 12.14, p. 874 n.5; McCormick, Damages (1935) § 138, pp. 564-65; Dobbs, Remedies (1973) § 12.3, p. 804; 3 Restatement (Second), supra, § 351 (2) (a); see also Heyman v. CBS, Inc., 178 Conn. 215, 229-30, 423 A.2d 887 (1979). This court has consistently applied the general damage formula of Hadley v. Baxendale to the recovery of lost profits for breach of contract, and it is our rule that “[u]nless they are too speculative and remote, prospective profits are allowable as an element of damage whenever their loss arises directly from and as a natural consequence of the breach.” Kay Petroleum Corporations. Piergrossi, 137 Conn. 620, 624, 79 A.2d 829 (1951); Stern & Co. s. International Harvester Co., 146 Conn. 42, 45, 147 A.2d 490 (1958), appeal after remand, 148 Conn. 527, 533, 172 A.2d 614 (1961); Tompkins, Inc. s. Bridgeport, 94 Conn. 659, 685, 110 A. 183 (1920); Maguire s. Kiesel, 86 Conn. 453, 461, 85 A. 689 (1913).

The plaintiff had operated a profitable restaurant for many years in the Savin Rock area of West Haven. The defendant appears to argue that the prospects of its continued success were speculative and uncertain merely because the plaintiff had recently relocated its business in a different, larger, and more expensive physical structure. This court has never held that a prior profit experience is essential to the recovery of prospective profits for breach of contract. Gordon s. Indusco Management Corporation, 164 Conn. 262, 274, 320 A.2d 811 (1973). Reasonable certainty of proof is all that is required, and “mere uncertainty as to the amount of lost profits may be dispelled by the same degree of proof as is required in other civil actions, that is, the amount may be determined approximately upon reasonable inferences and estimates.” Burr v. Lichtenheim, 190 Conn. 351, 360, 460 A.2d 1290 (1983); Bronson & Townsend Co. s. Battistoni, 167 Conn. 321, 326-27, 355 A.2d 299 (1974); Southern New England Contracting Co. v. State, 165 Conn. 644, 661, 345 A.2d 550 (1974); see 3 Restatement (Second), supra, § 352.

In the present case, Jordan based his profit projections, and hence, his opinion as to the restaurant’s value, on standard valuation procedures recognized in the accounting profession. Not only was Jordan a certified public accountant, but he also had been a university professor where he taught both graduate and undergraduate courses in finance and accounting. Moreover, Jordan had co-authored a college textbook on securities analysis and business valuation, the third edition of which had specifically dealt with valuation in the restaurant industry. In Stern & Co. v. International Harvester Co., supra, 46-48, we found reversible error in the refusal of the trial court to allow the plaintiffs expert accountant witness to testify to the value of the plaintiffs business allegedly lost as a consequence of the breach of contract. See also Doeltz v. Longshore, Inc., 126 Conn. 597, 601, 13 A.2d 505 (1940) (“since the only available evidence as to the value of the goodwill of a business is necessarily the opinion of a qualified witness, evidence of that character is accepted in such cases”). While Jordan’s opinion as to the value of the plaintiff’s restaurant before the breach was necessarily based on assumptions concerning the level of supportive development by other businesses in the Savin Rock area, Jordan qualified his opinion accordingly, and the jury was correctly instructed that it must reject the expert’s opinion if it failed to find the assumed facts to be proven. We find that Jordan’s opinion as to the going concern value of the plaintiffs restaurant business before the breach was based on reasonable estimates of lost profits.

We next consider the defendant’s related claims that the evidence was insufficient to support the amount of the damage award and that the damages awarded were excessive. The plaintiff in this case claimed various elements of damage which for convenience of analysis we have grouped into three general categories. The first category is that which we have previously discussed, i.e., compensation for loss of the going concern value of the plaintiffs restaurant business. According to the plaintiff, this element of damage amounted to $1,900,000, computed by Jordan as the net present value in 1974 of the restaurant’s projected profits under the assumption that redevelopment in the Savin Rock area would proceed as had been contemplated by the parties. The second category consists of the plaintiff’s investment in land, fixtures and in the cost of constructing its new restaurant. The plaintiff presented evidence that the cost of its building was $1,371,476.50, the cost of its land was $119,000, and that the cost of its fixtures and equipment was $226,462.07. The plaintiff’s investment in these capital assets was encumbered by a mortgage in the original amount of $1,100,000. The mortgage was foreclosed in 1977, and a deficiency judgment was entered against the plaintiff in the amount of $294,097.82. See New Haven Savings Bank v. West Haven Sound Development, 190 Conn. 60, 459 A.2d 999 (1983). Subtracting the original principal amount of the mortgage ($1,100,000) from the sum of its capital expenditures and the deficiency judgment ($2,011,036.39), the plaintiff values its loss of capital investment at $911,036.39. The third category of damages may be described as expenses incurred by the plaintiff after the breach in an attempt to keep its restaurant afloat. This category includes short term bank loans and loans from corporate officers used to meet operating expenses, e.g., payroll, etc., as well as accounts payable to suppliers. The plaintiff values these expenses in the approximate amount of $200,000. By aggregating all of these expenses, and including taxes and accrued interest on its deficiency judgment, the plaintiff claims to have offered evidence of damages in the amount of $3,303,091.20, a figure in excess of the $3,100,000 awarded it by the jury. The plaintiff thus concludes that the evidence was sufficient to sustain the jury’s verdict and that the verdict was not excessive.

As previously discussed, Jordan, the plaintiff’s expert witness, testified that the going concern value of the plaintiff’s restaurant before the breach was $1,900,000. It does not appear, however, that Jordan was ever asked for his opinion of the going concern value of the plaintiff’s business after the breach. As such, the jury had no evidence from which it might have determined the diminution in value of the plaintiff’s business caused by the breach. In this case, the plaintiff’s loss consisted of the difference between the value of the business had the contract been performed and the actual value of the business as a result of the breach. Johnson v. Healy, 176 Conn. 97, 104-107, 405 A.2d 54 (1978); Gordon v. Indusco Management Corporation, supra, 273. The plaintiff appears to have theorized that since it had been forced to go out of business, its business was worth nothing as a going concern as a result of the breach. Therefore, according to the plaintiff, it was entitled to receive as compensation the full value that its business would have had had the breach not occurred. We disagree.

While the plaintiff’s theory might have validity in certain circumstances, we find it inapplicable to the facts of this case in light of the factors considered by Jordan in determining the going concern value of the plaintiffs business before the breach. Jordan based his opinion as to the restaurant’s value on its anticipated potential to earn future profits. As he stated: “What you buy is a stream of earnings. . . . [Y]ou are looking at a future stream and trying to say what is that worth to me today; how much will I pay today for my piece of the action in the future.” In conceptualizing the factors which would generate the projected earnings stream, Jordan explained that he was valuing “the right to operate with the name of Phyllis’ either at that location or at another location, or perhaps even with the thought of franchising the business and using the recipes and whatever else that they had that was associated with the name Phyllis’, as opposed to valuing the common stock of the company; as opposed to valuing the real estate; as opposed to analyzing the personal property. It was really analyzing the business itself as distinct from the real estate and equipment.”

It is clear to us that many of the factors considered by Jordan in projecting the plaintiff’s future profit stream, and hence, the value of the “business itself” before the breach, were such as could not have been lost by the plaintiff in consequence of the breach. For example, assuming that the plaintiff was forced into bankruptcy by the breach, it would nonetheless retain the value of its name, its reputation, its experience in the restaurant business, its recipes, its right to franchise, etc. These quantities, very much the same as goodwill, were valuable assets which underlay, in part, Jordan’s opinion as to the value of the business as a going concern. It simply cannot be said that these assets were suddenly rendered valueless merely because the plaintiff was forced to close its doors. On the contrary, these elements of value remained with the plaintiff to be used or not as it chose, e.g., by reopening its business at a new location. Cf. Laurel, Inc. v. Commissioner of Transportation, 180 Conn. 11, 29, 428 A.2d 789 (1980). While we recognize that the location of a restaurant may be an important component of its value as a going concern, we think that its name, its reputation for good food and quality of service, the expertise of its management, are equally important components of value. Since Jordan had based his determination of value on these factors, he should have been asked to value the plaintiffs business in light of these factors after the breach. Because the plaintiff presented no evidence to establish the value of its business as a result of the breach, there was insufficient evidence to support the jury’s finding on damages.

Before concluding our discussion of this category of the plaintiff’s damages, it is important to make two final points. The first concerns Jordan’s projection of the plaintiffs anticipated profits, which as stated, formed the basis of his opinion as to the restaurant’s value. It appears from his testimony that in determining the plaintiff’s future profits, Jordan did not subtract from projected revenues the salaries of the corporate officers. The plaintiff is a closely held, family-owned corporation. Its owners were its corporate officers, who worked at the restaurant and drew salaries. Therefore, the prospective profits of the restaurant, and hence, its value under Jordan’s formula, could not properly have been determined without considering the salaries paid to the corporate officers. Gordon v. Indusco Management Corporation, supra, 275. To the extent that prospective profits were determined without an appropriate deduction from revenues for imputed wages, the going concern value of the plaintiffs business before the breach, allegedly $1,900,000, was overstated for the purposes of assessing damages in a contract action. Id., 276.

Secondly, the trial court, over the defendant’s objection, allowed the plaintiff to ask Jordan for his opinion as to the value that the plaintiff’s restaurant would have had as of the date of trial, July 5, 1984, had it remained in business. Jordan responded that the business would have been worth $2,700,000. The plaintiff in its brief to this court glibly asserts that there is “no indication” that the jury considered this figure in its deliberations. We agree. We would also note, however, there is “no indication” of this or anything else that the jury might have considered in arriving at its $3,100,000 damage award. This unfortunate circumstance comes about, in part, because neither the plaintiff nor the defendant sought to have the jury instructed as to how they were to compute damages in the event that they found a breach of contract. The value that the plaintiff’s business might have had in 1984 was irrelevant to the issue of damages in this case. Jordan’s opinion as to the value of the restaurant in 1974 was based on his projections of future profits, not future value. The defendant’s objection to Jordan’s testimony as to the restaurant’s estimated value in 1984 should have been sustained.

We next consider the second category of damages claimed by the plaintiff, i.e., those consisting of its alleged loss of capital investment in land, its building and its fixtures. As previously noted, the plaintiff values its lost investment in capital assets at $911,036.39. The plaintiff claims that it undertook this level of capital investment in reliance on the contract, and that as a consequence of the breach its investment was lost.

We have no difficulty with the basic idea that a party injured by a breach of contract may under certain circumstances recover the cost of his reliance as part of his expectation interest. Dobbs, Remedies (1973) § 12.3, p. 811; Fuller & Perdue, “The Reliance Interest In Contract Damages,” 46 Yale L.J. 52, 78-84 (1936). “Based upon the elementary proposition that the measure of damages for a breach of contract is the loss which the injured party has thereby sustained, the rule in its more specific application embraces the two distinct elements of (1) expenditures already incurred ‘towards performance,’ and (2) ‘the profits that he would realize by performing the whole contract.’ ” Tompkins, Inc. v. Bridgeport, supra, 682, quoting United States v. Behan, 110 U.S. 338, 344, 4 S. Ct. 81 (1883); see 3 Restatement (Second), supra, § 344, illustrations 1 and 2. “There is no objection in theory to combining recovery measured by the reliance interest with recovery for such lost profits as are proved with sufficient certainty. The problem in practice is to avoid excessive recovery through overlapping items.” Farnsworth, supra, § 12.16, p. 891. In the present case, we think that the plaintiff’s reliance interest in its capital investment was included in Jordan’s valuation of the business as a going concern.

The plaintiff was entitled to recover the full value of what it had lost as a consequence of the breach of contract. As we have previously discussed, the plaintiff described an element of this loss as the value of its business as a going concern. Accordingly, the plaintiff produced Jordan, who valued the plaintiff’s business as a going concern at $1,900,000, essentially by projecting a stream of future profits, and then by capitalizing those profits, at an appropriate rate of capitalization, to their net present value. As Jordan clearly indicated in his testimony, the value figure which he derived was intended to represent the amount of money that a buyer would pay for the right to receive the anticipated income stream. We assume that Jordan’s hypothetical buyer would expect to receive for the purchase price of the plaintiff’s business not only the income stream, but the capital assets necessary to generate that income stream as well. “In the case of an operating company, the primary consideration in the valuation process . . . is generally considered to be not the net asset value, but rather the earning capacity of the business. . . . In valuing a going concern the ‘willing buyer’ will place primary emphasis on the earning capability of the assets he is considering buying.” Vass, “Factors That Are Presently Being Emphasized in Valuing a Closely-Held Corporation,” 38 J. Tax. 356 (1973). 1 Bonbright, Valuation of Property (1937) p. 244; 16 Proof of Facts 2d, Forensic Economics—Valuation of Businesses and Business Losses § 7, p. 271. Therefore, the plaintiff should not be permitted to recover both the capitalized value of its projected earnings and the lost value of the capital investment necessary to generate those earnings.

Furthermore, it appears that the plaintiff seeks to recover the diminution in value of its business as measured by two alternative approaches to valuation. While there are several different methods by which to determine the value of a closely-held corporation, these methods, and their variants, are of two general types: (1) capitalization of earnings, or the net present value of a future income stream; and (2) net asset value, or the present sale price of the business assets less its liabilities. Ronald v. 4-C’s Electronic Packaging, Inc., 168 Cal. App. 3d 290, 299, 214 Cal. Rptr. 225 (1985); In re Marriage of Hewitson, 142 Cal. App. 3d 874, 881-82, 191 Cal. Rptr. 392 (1983); 2 O’Neal, Close Corporations (1958) § 7.24; Lawinger, “Appraising Closely-Held Stock—Valuation Methods and Concepts,” 110 Trusts and Estates 816, 817-19 (1971); 2 Proof of Facts 2d, supra, § 1; see Uniroyal, Inc. v. Board of Tax Review, 174 Conn. 380, 386, 389 A.2d 734 (1978). While these alternate methods of valuation frequently yield different results; see, e.g., Turgeon v. Turgeon, 190 Conn. 269, 272-75, 460 A.2d 1260 (1983); they purport at least in theory to obtain the same object, i.e., the market value of the business. That different methods of valuation may yield different results, depending upon what exactly is being valued, does not mean that the results of the alternate methods can simply be summed to determine total value. One or the other, or the combined weighted average of each, will produce the best approximation of market value. Comment, “Valuation of Shares In a Closely Held Corporation,” 47 Miss. L. J. 715, 739-41 (1976); 16 Proof of Facts 2d, supra, § 8; Vass, supra, 358; Lawinger, supra, 817.

By claiming damages for the loss of its capital investment, the plaintiff utilizes nothing other than a variant of the net asset approach to the valuation of its business. Clearly, the plaintiff may not recover as damages the sum of the results obtained under alternative approaches to valuation. Since the plaintiff would not be entitled to recover both its loss of capital investment and the capitalized value of its projected lost earnings, the jury’s verdict of $3,100,000 finds no support in the evidence, and is therefore excessive.

We would add that should the plaintiff on remand elect to recover its loss in capital investment, rather than the capitalized value of its projected lost earnings, it will be incumbent upon the plaintiff to value its investment correctly. The plaintiff presently values the loss of its investment at $911,036.39, a figure it derives by aggregating the acquisition costs of its capital assets, subtracting the amount encumbered by mortgage, and then adding back in the amount of the deficiency judgment. The plaintiff’s proffered procedure does not produce the correct measure of contract damages. While the actual or out-of-pocket cost to the plaintiff of acquiring its capital assets may be evidence of value, the value of that investment at the time of the breach “was not necessarily the amount originally paid for it.” Gordon v. Indusco Management Corporation, supra, 273. The plaintiff undertook a certain level of capital investment in reliance on what it believed the property would be worth in view of the anticipated redevelopment of the Savin Rock area. It exchanged cash and long term notes for fixed assets. Perhaps the plaintiff paid too much, perhaps too little; but clearly, the value of what it acquired need not have equalled the amount it paid. If the plaintiff made a bad deal, i.e., the value of what it acquired was less than the value of what it paid, then the defendant cannot be held responsible for this amount. In order to determine the diminution in value of the plaintiffs capital investment, should the plaintiff on remand employ this approach, the value—and not merely the acquisition cost—of that investment before the breach will have to be ascertained. We assume that the full value of its investment after the breach has already been determined. New Haven Savings Bank v. West Haven Sound Development, supra. The difference between these two values, if any, will reflect the correct amount of the plaintiffs loss of investment in capital assets resulting from the breach of contract.

We now turn to the third and final category of damages claimed by the plaintiff. These damages include short-term bank loans, loans from corporate officers and individuals, accounts payable to suppliers, and related costs incurred by the plaintiff in an attempt to meet operating expenses and thus to remain in business after the breach. As noted, the plaintiff values the amount of this loss in the approximate amount of $200,000.

The plaintiff “clearly had a duty to exercise reasonable conduct to minimize the damages occasioned by the defendant’s breach; Brown v. Middle Atlantic Transportation Co., 131 Conn. 197, 199, 38 A.2d 677 [1944]; see Camp v. Cohn, 151 Conn. 623, 627, 201 A.2d 187 [1964]; Eastern Sportswear Co. v. S. Augstein & Co., 141 Conn. 420, 425, 106 A.2d 476 [1954]; and the court will measure damages as though [it] had acted reasonably. See 22 Am. Jur. 2d, Damages, § 203.” Willametz v. Goldfield, 171 Conn. 622, 627, 370 A.2d 1089 (1976). The logical corollary of this rule is that the plaintiff was entitled to recover the cost of its reasonable efforts to mitigate the damages occasioned by the breach. Farnsworth, supra, § 12.12, pp. 867-68; Dobbs, supra, § 9.2, p. 599. “The injured party is not precluded from recovery ... to the extent that he has made reasonable but unsuccessful efforts to avoid loss.” 3 Restatement (Second), Contracts § 350 (2) and comment h, and § 347, comment c.

Thus, a jury question was presented as to whether the expenses incurred by the plaintiff in an attempt to salvage its business after the breach were reasonable. We have no way of knowing to what extent the jury included these expenses in its award. On remand, the jury should be instructed that the plaintiff may recover only those expenses reasonably incurred in its efforts to mitigate damages occasioned by the breach of contract.

Before leaving this case a final caveat is in order. We have throughout this opinion set forth only standards by which the losses claimed by the plaintiff may be identified and valued. We emphasize that all of these losses are not necessarily compensable in an action for breach of contract. A significant limitation on the recovery of damages for breach of contract is stated in 3 Restatement (Second) of Contracts, § 351 (1). That section provides that “[djamages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made.” See Neiditz v. Morton S. Fine & Associates, Inc., 199 Conn. 683, 689 n.3, 508 A.2d 438 (1986). While the question whether a particular element of loss was reasonably foreseeable is a question of fact, we do not see how the jury could properly have considered the foreseeability of those elements of the plaintiff’s claim which were never identified, disentangled or explained. Upon proper instruction, the jury might reasonably have awarded the plaintiff some or all of the elements of loss discussed in this opinion. Without such instruction, however, the jurors were left to calculate damages in their largely unbridled discretion. In light of the complexity of this case, on remand the jury should be given detailed guidance by the trial court on the legal doctrines underlying the calculation of damages.

There is error and the case is remanded for further proceedings not inconsistent with this opinion.

In this opinion the other justices concurred.

       General Statutes § 8-136 provides: “A redevelopment plan may be modified at any time by the redevelopment agency, provided, if modified after the lease or sale of real property in the redevelopment project area, the modification must be consented to by the redeveloper or redevelopers of such real property or his successor or their successors in interest affected by the proposed modification. Where the proposed modification will substantially change the redevelopment plan as previously approved by the legislative body, the modification must similarly be approved by the legislative body.”

       General Statutes § 8-126 provides in part: “The legislative body of any municipality may designate as a redevelopment agency the housing authority of the municipality or the state commissioner of housing or other appropriate state agency, or may create a new redevelopment agency to consist of electors resident therein. The members of any redevelopment agency so created shall be appointed by the chief executive of a city or borough or by the board of selectmen of a town with the approval of the legislative body.”

       For example, upon cross-examination of the plaintiffs expert, Professor Janice Griffith, the following colloquy took place:

        “Q. Professor Griffith, you indicated I believe that the Redevelopment Agency is the one that performs the functions of redevelopment on behalf of a city?
      “A. Yes.
      “Q. Are you aware of who is a defendant in this case?
      “A. The City of West Haven.
      “Q. Are you aware that the New Haven, or the West Haven Redevelopment is not a defendant?
      “A. I believe I am aware of that, yes.
      “Q. And-
      “A. I have not looked directly at the caption, but in terms of my impression of the entire case, yes, it is against the City of West Haven.
      “Q. And the Redevelopment Agency is the one who is obligated to perform the various functions with regard to redevelopment.
      “A. Not all of the functions. The statute does provide for the City to approve the plan and to take other action. But the Redevelopment Agency is the agency which undertakes the specific redevelopment function.
      * ** *
      “Q. Did I understand your testimony to be that the City Council by statute has a vote in this redevelopment procedure also?
      “A. The specific statute, but my recollection is that the legislative body of the City of West Haven must approve the redevelopment plan and if there is any substantial modification to the plan they must also approve it.
      “Q. And must they not also approve any deeds or any land disposition agreements?
      “Mr. Sherwood: If you know.
      “A. I would know. I would have to look at the statute, but my recollection is, yes, they would have to.”

       The plaintiff itself Has not grouped or presented its damages in any organized fashion, and we stress that our categorization of damages is for convenience of analysis only. The same is true with respect to the dollar amounts assigned by us to these categories. While taken from actual figures proffered by the plaintiff in its brief, the values we have assigned to individual categories are, at best, approximations based on the limited information before us. On remand, the plaintiff is free to value and prove its damages, and under whatever theory, as it wishes. In short, the plaintiff on remand is not collaterally estopped by the dollar amounts or theories of recovery discussed in this opinion.

       It is important to recognize that the plaintiff, by capitalizing its projected earnings, effectively converted those earnings into property with a present value, according to the plaintiff, of $1,900,000. This valuable property must be conceptualized as consisting of its component elements, and we think those elements may imperfectly be described as capital and goodwill. This court does not attempt to apportion the relative contributions to earnings between the plaintiffs capital and its goodwill; see 1 Bonbright, Valuation of Property (1937) pp. 242-43; comment, “Valuation of Shares In a Closely Held Corporation,” 47 Miss. L.J. 715, 729 (1976); Vass, “Factors That Are Presently Being Emphasized in Valuing a Closely-Held Corporation,” 38 J. Tax. 356, 357 (1973); although we note that this—the combined value of its capital and goodwill—is what the plaintiff sought to value, and hence to recover as damages, when it chose to value its loss by capitalizing its projected earnings to a net present value of $1,900,000.
      Thus, viewing the plaintiffs capital and goodwill as property, it is clear that the plaintiff placed a value on this property only by valuing, under the capitalization of earnings method, the profit stream that this property would likely have produced. To the extent that any of this property remained, in whatever combination or proportion, after the breach, we assume that it retained at least some of its capacity to generate income, and therefore, that it must have had some value, even after the breach. As we have previously stated, we consider it highly unlikely that the plaintiff lost all of its goodwill in consequence of the breach, i.e., the value of its name, etc., and therefore, the plaintiff may be thought to have retained at least some of the income producing potential of its goodwill after the breach. Although we recognize that our assumption would not be valid if it were adequately shown that the breach had thrust the plaintiff into such abject financial condition as to be unable to profitably exploit the value of whatever goodwill may have survived the breach, we do not believe that the diminution in value of the plaintiffs business may adequately be determined without some attempt by the plaintiff to establish the before and after values of the business.
      In summary, we think that where a plaintiff in a contract action seeks to recover damages for the alleged loss of its business, and where the plaintiff elects to value its business by a method which relies on the capitalization of projected earnings (the capitalization of earnings method and its many variants), the plaintiff must place two values into evidence. The first is the value of the business based on the capitalized value of the profits the business would have earned if not for the breach. The second is the value of the business based on the capitalized value of the profits the business would reasonably be capable of producing after the breach. With regard to this latter value, we would note that a business is not necessarily incapable of producing profits merely because it has been forced temporarily to close its doors. The decision to close, like the decision not to reopen, may be based on a number of different factors, personal to the controlling shareholders or directors, not directly related to the economic environment created by the breach of contract. Therefore, we believe that substantive principles of contract recovery as well as the doctrine of avoidable consequences; see Farnsworth, Contracts (1982) § 12.12; require that the after-breach value of the business be determined by capitalizing the profits that the business is reasonably capable of producing, without regard to whether the business has actually reopened its doors. The difference between these two values will reflect the proper measure of recovery.


source: Caselaw Access Project

license: Public Domain

text:
    State of Connecticut v. Robert Ryerson
    (12698)
    Peters, C. J., Shea, Dannehy, Callahan and Stoughton, Js.

      Argued June 11
    decision released September 2, 1986

      Sue L. Wise, for the appellant (defendant).

      Roland D. Fasano, assistant state’s attorney, with whom, on the brief, was Arnold Markle, state’s attorney, for the appellee (state).
   Dannehy, J.

The defendant, after a jury trial, was found guilty of robbery in the first degree in violation of General Statutes § 53a-134 (a) (4). He was sentenced to imprisonment for fifteen years, with execution suspended after six years. On appeal the defendant claims that the trial court erred (1) in denying his motion to dismiss, and (2) in its instructions to the jury. We find no error.

On May 29, 1984, at approximately 4:40 p.m., the Bizarre Boutique Shop in West Haven was robbed. The owner of the boutique, Tina Nappi, testified that she was working in her store when a young man entered and asked for assistance in buying some clothes for his girlfriend. Nappi assisted the young man in selecting a pair of slacks and a shirt. As Nappi rang up the sale, the young man grabbed her, stating, “Open the drawer. I have a gun. I’ll blow your head off.” The young man took approximately forty dollars and departed.

As the perpetrator was leaving the store, Nappi, according to a pre-arranged signal, banged on the wall behind her to alert an employee of the adjacent Postal Instant Press that she was being robbed. That employee, Dawn Chonko, looked out the front window and saw a small blue vehicle speeding out of the parking lot. Chonko informed investigating officers that the vehicle’s license plate number was “4G1783,” although she was unsure whether the first character was a “4,” an “A” or a “V.” Detective James McDonough of the West Haven police department, realizing that under the Connecticut vehicle registration system the first character would necessarily be a letter, submitted twenty-six different alphabet combinations to the department of motor vehicles. The combination “VG-1783” came back as the registration number assigned to a blue 1980 Toyota Corolla owned by Maureen Murphy of North Haven. At approximately 8:30 p.m. that same evening, McDonough interviewed Maureen Murphy, who stated that she had loaned her car to the defendant at approximately 12 p.m., and that she had been expecting it back by 3 p.m. The car had as yet not been returned, and Murphy had not heard from the defendant.

Nappi, who earlier that day had spent approximately fifteen minutes assisting the young man in the boutique before the robbery, gave McDonough a detailed physical description of the robber. McDonough compared Nappi’s description of the defendant with that given by Murphy, and found the two to be “consistent.” McDonough also acquired information that the defendant had been at his former place of employment, the Holistic Health Center, in Orange, at approximately 3 p.m. that day. The health center is located on the same road as the boutique, approximately two miles away. McDonough learned from Murphy that the defendant was presently employed as a door person at a nearby pub. McDonough called the pub, and the manager informed him that the defendant had not reported for work that evening. The defendant was supposed to have reported for work at 9 p.m. Finally, McDonough was informed by the New London police department that the defendant had recently completed a sentence of imprisonment for committing a number of convenience store robberies.

At 1:35 a.m. the following morning, police spotted Murphy’s blue Toyota in the driveway of the defendant’s residence in North Haven. McDonough at the time was in the process of typing a warrant for the defendant’s arrest. McDonough testified that he decided to arrest the defendant without a warrant because “otherwise [he] would have to go find a prosecutor and a judge and everything.” Nonetheless, McDonough testified that prior to leaving headquarters that morning he had determined that he would knock on the defendant’s door and arrest him only if he answered it, but that if the defendant refused to answer the door, McDonough would have the house surrounded by fellow officers while he went to obtain a warrant.

Thus, with the intention of arresting the defendant without a warrant should the opportunity present itself, McDonough and a cadre of officers from both the West Haven and North Haven police departments went to the defendant’s residence, at approximately 2 a.m. on the morning of May 30,1984. The defendant’s residence was a small converted farmhouse approximately 300 feet from the road. Police officers surrounded the house as McDonough drove up the driveway with his lights off. The front door to the house was unlocked, and McDonough, accompanied by two officers, walked in. Through the front door the officers entered a hallway, with two doors leading to the first floor apartment, and a staircase leading to the defendant’s upstairs apartment, all of which McDonough knew from a previous visit several hours before. McDonough walked up the stairway to the defendant’s apartment, leaving the other two officers at the base of the stairs. McDonough knocked on the door, identified himself, and said, “Bob, can you open the door?” The defendant responded, “Wait a minute, can I go to the bathroom first?” McDonough said, “No, could you open the door first, we would like to talk to you.” When the defendant then opened the door, McDonough showed him his badge and asked him to identify himself. The defendant stated his name, and McDonough immediately placed him under arrest. The time was 2:30 a.m.

I

We first address the defendant’s claim that the trial court erred in denying his motion to dismiss. The defendant claimed in the trial court that his warrant-less, predawn arrest in his apartment was unconstitutional, and that under State v. Licari, 153 Conn. 127, 214 A.2d 900 (1965), the charges against him should have been dismissed. The trial court denied the motion, and the defendant renewed his claim under State v. Licari in his initial brief to this court. After that brief had been filed, we overruled Licari in State v. Fleming, 198 Conn. 255, 257-63, 502 A.2d 886 (1986). Thereafter, we permitted the parties to file supplemental briefs to address the application of Fleming to the circumstances of this case.

In State v. Fleming, supra, 263, we held that “[wjhere the fairness of a subsequent prosecution has not been impaired by an illegal arrest, neither the federal nor the Connecticut constitution requires dismissal of the charges or a voiding of the resulting conviction.” An illegal arrest may impair the fairness of a subsequent prosecution only where evidence obtained as a direct consequence of that arrest is admitted against the defendant at trial. Id., 262; State v. Federici, 179 Conn. 46, 425 A.2d 916 (1979). In the present case the defendant concedes that the police obtained no evidence as a direct consequence of his arrest, and thus, that no “fruits” of that arrest were admitted into evidence against him. It would therefore appear that under Fleming the defendant’s motion to dismiss was properly denied, irrespective of the constitutionality of his arrest.

The defendant contends, however, that the methods employed by police to effectuate his arrest in this case require that his charges be dismissed. In urging an exception to our holding in Fleming, the defendant notes that the arrest was made at 2:30 a.m., in his apartment, and by a cadre of officers from two different police departments. He also notes the absence of exigent circumstances to justify the failure of the police to obtain a warrant: McDonough by his own admission would have gone to obtain a warrant had the defendant not answered his door. “It is these egregious circumstances,” he contends, “which cry out for judicial intervention which will not leave our citizenry powerless in the face of unrestrained police power.”

While we may not condone the methods employed by the arresting officers in this case, neither are we persuaded that the charges brought against the defendant should have been dismissed. The interests of justice demand that those accused of committing serious crimes at least be brought to trial. We do not believe that a bar against prosecution of this defendant would advance and not impair the legitimate state interest in bringing criminals to justice, and we must therefore reject the defendant’s claim that the circumstances of this case warrant an exception to Fleming.

The defendant also claims that our decision in Fleming should not be applied retroactively. This claim is plainly without merit. “As a rule, judicial decisions apply ‘retroactively.’ Robinson v. Neil, 409 U.S. 505, 507-508, 93 S. Ct. 876, 35 L. Ed. 2d 29 (1973). Indeed, a legal system based on precedent has a built-in presumption of retroactivity.” Solem v. Stumes, 465 U.S. 638, 642, 104 S. Ct. 1338, 79 L. Ed. 2d 579 (1984). “ ‘If a “new” constitutional doctrine is truly right, we should not reverse lower courts which have accepted it; nor should we affirm those which have rejected the very arguments we have embraced.’ ” United States v. Johnson, 457 U.S. 537, 555, 102 S. Ct. 2579, 73 L. Ed. 2d 202 (1982), quoting Desist v. United States, 394 U.S. 244, 259, 89 S. Ct. 1030, 22 L. Ed. 2d 248 (1969) (Harlan, J., dissenting).

It is clear that “[cjomplete retroactive effect is most appropriate where a new constitutional principle is designed to enhance the accuracy of criminal trials.” Solem v. Stumes, supra, 642; see Brown v. Louisiana, 447 U.S. 323, 100 S. Ct. 2214, 65 L. Ed. 2d 159 (1980); Hankerson v. North Carolina, 432 U.S. 233, 97 S. Ct. 2339, 53 L. Ed. 2d 306 (1977). Indeed, the defendant notes that we refused to accord retroactive effect to our decision in State v. Licari precisely because the Licari rule did not contribute to the “ ‘fairness of the trial’ ” or to the “ ‘integrity of the fact-finding process.’ ” Reed v. Reincke, 155 Conn. 591, 601, 236 A.2d 909 (1967), citing Linkletter v. Walker, 381 U.S. 618, 639, 85 S. Ct. 1731, 14 L. Ed. 2d 601 (1965). The defendant argues that the new rule announced in Fleming, overruling Licari, is similarly not designed to enhance the accuracy of the trial, and thus, that it should not be given retroactive effect.

We think that the defendant misconceives the nature of the exception to the general rule of retroactivity as applied in Reed v. Reincke, supra. When a new decision enlarges the constitutional rights of criminal defendants by overruling established precedent, the justifiable “reliance by law enforcement authorities on the old standards,” and the potentially disruptive “effect on the administration of justice by retroactive application of the new standards”; Stovall v. Denno, 388 U.S. 293, 297, 87 S. Ct. 1967, 18 L. Ed. 2d 1199 (1967); Solem v. Stumes, supra, 643, 645-46; may militate against retroactive application of the new rule. When a later decision restricts the rights of the accused, however, the reliance factor is absent. In the present case, for example, it cannot be argued that the defendant ordered his conduct in justifiable reliance on our decision in Licari. On similar reasoning, federal courts considering the issue have given retroactive effect to Illinois v. Gates, 462 U.S. 213, 103 S. Ct. 2317, 76 L. Ed. 2d 527 (1983), as providing the appropriate standards to decide the validity of searches conducted before the date of the Gates decision. United States v. Swingler, 758 F.2d 477, 487 (10th Cir. 1985); United States v. Coronel, 750 F.2d 1482, 1486 (11th Cir. 1985); United States v. Little, 735 F.2d 1049; 1054 (8th Cir. 1984); United States v. Estrada, 733 F.2d 683, 685 (9th Cir. 1984); United States v. Mendoza, 727 F.2d 448, 449-50 (5th Cir. 1984); see also United States v. Sager, 743 F.2d 1261,1263-65 (8th Cir. 1984) (“good faith” exception to exclusionary rule applied retroactively). We noted in Fleming that the Licari decision was “expressly derived from a misunderstanding” of federal caselaw. State v. Fleming, supra, 260. There is no reason to perpetuate that misunderstanding by refusing retroactive effect to what has always been a correct statement of law. Fleming himself was not entitled to a dismissal of charges based on the alleged illegality of his arrest. The defendant in the present case, whose arrest occurred nearly four years after Fleming’s, can fare no better. We therefore hold that Fleming is to be applied retroactively and that the trial court properly denied the defendant’s motion to dismiss.

II

We next address the defendant’s assorted claims that the trial court erred in its charge to the jury. The defendant first claims that the trial court erroneously refused his request to charge the jury that “[p]roof beyond a reasonable doubt means that the State must convince each juror to a subjective state of near certitude of the guilt of the accused. If you are not convinced in your mind to a mental state of near certitude of the guilt of the accused, then the State has not convinced you beyond a reasonable doubt.” As authority for his request to charge the defendant relied on State v. DelVecchio, 191 Conn. 412, 419, 464 A.2d 813 (1983), in which we quoted Jackson v. Virginia, 443 U.S. 307, 315, 99 S. Ct. 2781, 61L. Ed. 2d 560, reh. denied, 444 U.S. 890, 100 S. Ct. 195, 62 L. Ed. 2d 126 (1979), for the observation that “ ‘by impressing upon the fact-finder the need to reach a subjective state of near certitude of the guilt of the accused, the [reasonable doubt] standard symbolizes the significance that our society attaches to the criminal sanction and thus to liberty itself.’ ” The defendant contends that the “near certitude” language quoted above has been “adopted” by the United States Supreme Court, and by this court, and hence is a required instruction to the jury in a criminal case. We disagree.

In attempting to elucidate in finer detail the transcendent aims of our criminal justice system, we did not intend, in State v. DelVecchio, supra, to issue an edict for a new jury instruction required in all future criminal cases. Nor do we think that our use of language in State v. DelVecchio, or that of the United States Supreme Court in Jackson v. Virginia, is reasonably susceptible to interpretation as mandating a new jury instruction. In DelVecchio, the trial court in its charge to the jury had analogized the state’s burden of proof to various yardlines on a football field, ultimately instructing the jury, “[y]ou got to go somewhere, I suppose, beyond the fifty yard line; where it is in there is up to you to decide.” State v. DelVecchio, supra, 418. We discussed the reasonable doubt standard only insofar as was necessary to explain why such an analogy was inappropriate, and why the instruction would constitute reversible error. We also noted, however, that “ ‘[attempts to explain the term “reasonable doubt” do not usually result in making it any clearer to the minds of the jury’ ”; id., 420, quoting Miles v. United States, 103 U.S. 304, 312, 26 L. Ed. 481 (1881); and that “ ‘judicial attempts to clarify the meaning of the phrase “reasonable doubt” by explanation, elaboration or illustration . . . more often than not tend to confuse or mislead.’ ” State v. DelVecchio, supra, quoting United States v. Pinkney, 551 F.2d 1241, 1244 (D.C. Cir. 1976). We intended no more that these extractions be theretofore incorporated into jury instructions than we did the “near certitude” language proposed by the defendant in his request to charge.

In the present case the trial court instructed the jury in accordance with the standard charge on reasonable doubt. The defendant’s burden with respect to this claim of error is thus “ ‘especially heavy because no erroneous instruction was given.’ ” State v. Kurvin, 186 Conn. 555, 563, 442 A.2d 1327 (1982), quoting Henderson v. Kibbe, 431 U.S. 145, 155, 97 S. Ct. 1730, 52 L. Ed. 2d 203 (1977). We have stated many times that although a legally accurate and properly submitted request to charge should be accepted by the trial court, the refusal to do so is not a ground for reversal if the substance of the request is adequately conveyed to the jury in other portions of the charge. State v. Shindell, 195 Conn. 128, 143, 486 A.2d 637 (1985); State v. Gabriel, 192 Conn. 405, 418, 473 A.2d 300 (1984); State v. Falcone, 191 Conn. 12, 26, 463 A.2d 558 (1983); State v. Cooper, 182 Conn. 207, 211, 438 A.2d 418 (1980); State v. Maresca, 173 Conn. 450, 460, 377 A.2d 1330 (1977); State v. Bennett, 172 Conn. 324, 330, 374 A.2d 247 (1977); State v. Avila, 166 Conn. 569, 574, 353 A.2d 776 (1974). While the defendant’s request in this case did not contain an inaccurate statement of law, we believe that the standard charge on reasonable doubt as given by the trial court adequately conveys the degree of certitude required of the jury in order to return a guilty verdict. The trial court did not err in refusing the defendant’s request to charge.

The defendant also claims that the trial court erred in refusing his request to charge on the unreliability of eyewitness identification. In particular, the defendant argues that the “unreliability” instruction should have been given with respect to the identification testimony of Nappi, the robbery victim. On the evening of May 30, 1984, Nappi had been shown a photographic array containing a black and white photograph of the defendant taken earlier that day during processing at the West Haven police department. Although Nappi was positive in her description of the perpetrator, she only tentatively identified the defendant’s photograph in the array because she thought that the perpetrator had been a little thinner and that his nose had not been as wide as appeared in the defendant’s photograph. When she asked if there were any other photographs to view, McDonough had produced four color photographs of the defendant taken by the New London police department in 1983. Nappi immediately identified the defendant from the color photographs, and McDonough then informed her that the black and white photograph she had tentatively identified from the array depicted the same person as did the color photographs from which she had identified the defendant. The trial court found that the photographic identification procedure was unnecessarily suggestive, but not unreliable. It therefore denied the defendant’s motion to suppress Nappi’s out-of-court identification of the defendant. See State v. Parker, 197 Conn. 595, 598, 500 A.2d 551 (1985); State v. Austin, 195 Conn. 496, 499, 488 A.2d 1250 (1985); State v. Fullwood, 193 Conn. 238, 243-44, 476 A.2d 550 (1984). At trial, Nappi was permitted to testify as to the circumstances surrounding the out-of-court identification, and she also made an identification in court.

The defendant filed an appropriate request to charge based on language taken from Simmons v. United States, 390 U.S. 377, 383-84, 88 S. Ct. 967, 19 L. Ed. 2d 1247 (1968), and quoted with approval by this court in State v. Tinsley, 181 Conn. 388, 393-94, 435 A.2d 1002 (1980), cert. denied, 449 U.S. 1086, 101S. Ct. 874, 66 L. Ed. 2d 811 (1981). The defendant contends that the finding by the trial court that the identification procedure was unnecessarily suggestive would strongly support his request to charge on the unreliability of identification testimony. While we tend to agree with the defendant, we would also note that the trial court found, under the totality of the circumstances, that Nappi’s identification had been reliable. Since the defendant has not challenged the denial of his motion to suppress the pretrial identification, we must conclude for purposes of review that Nappi’s identification of the defendant was reliable. Thus, despite the fact that the reliability of Nappi’s identification had cured the suggestivity of the procedure, the trial court instructed the jury that it might consider “the circumstances of [the] earlier identification procedure ... in determining the reliability of the witness’ identification which was made in the courtroom.” Viewing the charge as a whole, we believe that the substance of the defendant’s request to charge was adequately conveyed to the jury. State v. Shindell, supra. We therefore find no error in the trial court’s denial of the defendant’s request to charge on the unreliability of eyewitness identification.

The defendant next contends that the trial court erred in charging the jury on alibi witnesses. Scott Weins, the defendant’s former employer at the Rustic Oak Restaurant in North Haven, testified that the defendant had been with him at the restaurant from 4:40 p.m. until 5 p.m. on May 29, 1984, when the robbery of the Bizarre Boutique allegedly occurred. The trial court charged the jury that “frequently, evidence relating to a claimed alibi will consist of testimony of a witness or witnesses who are friends of or associates of the accused and who may, therefore, be held to be, in a greater or lesser degree, interested. Liability of the human mind to make honest mistakes as to dates or hours of the day or night when certain events occurred is often noted. Interested persons sometimes jump very quickly to the time of an occurrence when such a time would be favorable to some desirable end, or persons may, at a later date, be led to mistake when memory is no longer certain with respect to the day or the hour of the day.” The defendant took a proper exception to this portion of the charge.

“ ‘On numerous occasions this court has stated that the trial court in a criminal case may, in its discretion, make fair comment on the evidence and particularly on the credibility of witnesses. See State v. Tropiano, 158 Conn. 412, 428, 262 A.2d 147 [1969]; State v. LaFountain, 140 Conn. 613, 620, 103 A.2d 138 [1954]; State v. Pecciulis, 84 Conn. 152, 158, 79 A. 75 [1911]. In addition, we have also declared that an instruction on the credibility of alibi witnesses similar to that challenged by this assignment of error is both proper and fair when weighed in the light of the other paragraphs of the charge. State v. Groos, 110 Conn. 403, 410, 148 A. 350 [1930]; State v. Cianflone, 98 Conn. 454, 466, 120 A. 347 [1923] .... It is well recognized that the credibility of alibi witnesses is a subject as to which fair comment by the court to the jury is allowed. See Sullivan v. Scafati, 428 F.2d 1023 (1st Cir. [1970]), cert. denied, 400 U.S. 1001, 91 S. Ct. 478, 27 L. Ed. 2d 452 [1971]; Surridge v. State, 239 Ark. 581, 393 S.W.2d 246 [1965]; Commonwealth v. Sullivan, 354 Mass. 598, 239 N.E.2d 5 [1968], cert. denied, 393 U.S. 1056, 89 S. Ct. 697, 21 L. Ed. 2d 698 [1969]; State v. Griffin, 336 S.W.2d 364 (Mo. [I960]); Commonwealth v. Gates, 392 Pa. 557, 141 A.2d 219 [1958]; Rogers v. State, 455 S.W.2d 182 (Tenn. Crim. App. [1970]); Bolin v. State, 219 Tenn. 4, 405 S.W.2d 768 [1966].’ ” State v. Bennett, 172 Conn. 324, 329-30, 374 A.2d 247 (1977), quoting State v. Cari, 163 Conn. 174, 182, 303 A.2d 7 (1972); see also State v. Stepney, 191 Conn. 233, 246-49, 464 A.2d 758 (1983), cert. denied, 465 U.S. 1084, 104 S. Ct. 1455, 79 L. Ed. 2d 772, reh. denied, 466 U.S. 954, 104 S. Ct. 2163, 80 L. Ed. 2d 547 (1984); State v. Jonas, 169 Conn. 566, 577-78, 363 A.2d 1378 (1975), cert. denied, 424 U.S. 923, 96 S. Ct. 1132, 47 L. Ed. 2d 331 (1976); State v. Malley, 167 Conn. 379, 382, 355 A.2d 292 (1974). “We find no error in this portion of the charge to the jury.” State v. Bennett, supra, 330.

The defendant’s final claim is that the trial court erred in giving the “Chip Smith” charge under the circumstances of this case. The defendant has not identified those circumstances in his brief. In any event, when the jury reported for the second time that it was unable to reach a verdict, the trial court gave the jury the “Chip Smith” charge.

Since State v. Smith, 49 Conn. 376, 386 (1881), the “Chip Smith” charge has consistently been upheld by this court. Only recently, in State v. O’Neill, 200 Conn. 268, 281-84, 511 A.2d 321 (1986), we upheld the charge against constitutional attack and ratified its continuing validity. The charge as given by the trial court in this case was not slanted in favor of either the state or the defendant, and on the whole, we think that it was quite fair. We therefore reject the defendant’s claim of error based on the “Chip Smith” charge.

There is no error.

In this opinion the other justices concurred.

       Tina Nappi described the perpetrator as a white male, approximately twenty-five years old, 5 feet, 10 inches tall, slender with a muscular build, with light brown or sandy blond hair and mustache, freckles or light acne on his face, a small turned up nose, and a clean cut, collegiate look. His eyes seemed glassy and bloodshot. He wore a bluejacket, windbreaker type, a green polo style shirt with small horizontal stripes, and a painter’s style cap, off-white with a logo or emblem on the front.

       “The law says that the State must not only prove him guilty but must prove him guilty beyond a reasonable doubt. It is not enough for the State to make out a case of probable guilt, but the burden on the State, which never shifts, is to prove the accused guilty beyond a reasonable doubt. It is not required that the State prove the defendant guilty beyond all possible doubt. The obligation is to prove his guilt beyond all reasonable doubt.
      “A reasonable doubt means this: It is a doubt for which a reasonable person can give a valid reason. The burden of proving his guilt beyond a reasonable doubt requires the State to produce sufficient evidence to create in your minds a strong and abiding conviction of the guilt of the accused. In other words, it is the law that the evidence must be so sufficient that it would leave no room in your mind for any reasonable hypothesis of the innocence of the accused. A reasonable doubt is not a doubt raised by one who questions for the sake of raising a doubt. A reasonable doubt is not a surmise or speculation, conjecture or an imaginary doubt. A reasonable doubt is not a captious or frivolous doubt, nor a doubt which is raised by the ingenuity of counsel or by a juror and unwarranted by the evidence, nor is it a doubt prompted by sympathy for the accused. A reasonable doubt is a real doubt, and an honest doubt, a doubt which has its foundation in the evidence offered in the case or lack of evidence.
      “Absolute certainty in the affairs of life is almost never attainable, and the law does not require absolute certainty to authorize a conviction. What it does require is that the guilt be established, as charged, beyond a reasonable doubt, which is one founded upon the evidence, one which you, as reasonable and prudent men and women, would be willing to act upon in the more weighty and important matters relating to your own affairs. It is proof wholly consistent with the defendant’s guilt and inconsistent with any other rational conclusion. If, upon any reasonable hypothesis, the evidence warrants a construction favorable to the accused, he is entitled to it and must be given the benefit of it by you, as his triers.”

       The defendant’s request to charge provided in part: “Dangers of suggestion, that is circumstances which draw attention to a particular person exist in any identification procedure. However, the suggestion used by the police may be so great that the witness identified someone, before trial, who is not in fact the person who committed the act charged. In determining the credibility of the witness’ identification, therefore, you may consider whether the identification procedure contained any elements of suggestion that would have a tendency in reason to affect the reliability of the identification. ‘It must be recognized that improper employment of photographs by police may sometimes cause witnesses to err in identifying .... Even if the police subsequently follow the most correct photographic identification procedures and show him the pictures of a number of individuals without indicating whom they suspect, there is some danger that the witness may make an incorrect identification. This danger will be increased if the police display to the witness only the picture of a single individual who generally resembles the person he saw, or if they show him the pictures of several persons among which the photograph of a single such individual recurs or is in some way emphasized. The chance of misidentification is also heightened if the police indicate to the witness that they have other evidence that one of the persons pictured committed the crime. Regardless of how the initial misidentification comes about, the witness thereafter is apt to retain in his memory the image of the photograph rather than of the person actually seen, reducing the trustworthiness of subsequent in-court identification.’
      “AUTHORITY: Simmons v. United States, 390 U.S. 377, 88 S. Ct. 967 [19 L. Ed. 2d 1247] (1968); United States v. Fernandez, 456 F.2d 638 (2d Cir. 1972) (Friendly, C. J.); State v. Tinsley, 181 Conn. 388 [435 A.2d 1002] (1980); State v. Harden, 175 Conn. 315 [398 A.2d 1169] (1978).”

       The trial court charged as follows: “Now, one of the primary issues in this case is the identification of the defendant as the perpetrator of the crime alleged here. The State has the burden of proving identity beyond a reasonable doubt. It’s not essential that the witnesses themselves be free from doubt as to the correctness of their identification. However, you, the jury, must be satisfied beyond a reasonable doubt of the accuracy of the identification of an accused before you can convict him. If you are not convinced beyond a reasonable doubt that the defendant, Robert Ryerson, was the person who committed the offense, then you must find him not guilty.
      “A witness’ opportunity to observe the perpetrator during the commission of the act charged is of great importance in determining the credibility of her identification, as are other factors about which I shall instruct you shortly. The testimony of the witness that she is positive of her identification may be considered by you, but it does not relieve you of the duty to carefully consider her identification testimony and to reject it if you find that it is not reliable.
      “Now, there has been testimony about an identification procedure in this case involving photographs. Where evidence has been introduced that a witness who has identified the defendant at trial has identified him on another occasion before trial, the circumstances of that earlier identification procedure may be considered by you in determining the reliability of the witness’ identification which was made in the courtroom. Identification testimony is an expression of belief or impression by the witness. Its value depends on many factors which are involved in the process of identification by an eyewitness. In assessing the reliability of the identification, you should consider the following: Did the witness have an adequate opportunity to observe the offender? Did the witness have the physical or emotional capacity to accurately observe the defendant? How accurate was the witness’ original description of the perpetrator? How long a time passed between the crime and the time the witness first identified the accused? Are you satisfied that the identification made by the witness was a result of her memory? You may also take into account the strength of the identification and the circumstances of the identification. You must consider the credibility of the identification witness in the same way as any other witness. Consider whether she is truthful, whether she had the opportunity and the capacity to make reliable observation on the matters covered in her testimony.
      “I emphasize, once again, that the burden of proof on the prosecutor extends to every element of the crime charged, and this specifically includes the burden of proving beyond a reasonable doubt the identity of the defendant as the perpetrator of the crime with which he stands charged. If, after examining the testimony, you have a reasonable doubt as to the accuracy and reliability of the identification, then you must find the defendant not guilty.”

       “Ladies and gentlemen of the panel, your note reads that you remain at an impasse; it appears impossible to reach a unanimous verdict. Under these kind of circumstances—This is not the first time, of course, this has occurred in the trial of a case; and under these circumstances, when the jury indicates what you have indicated in that note, rather than terminating the proceedings, I wish to give you further, additional instructions and ask you to return and to resume your deliberations. Now, although the verdict to which each juror agrees must, of course, be his or her own conclusion and not a mere acquiescence in the conclusions of his fellows, yet in order to bring six minds to a unanimous result, the jurors should examine with candor the questions submitted to them and with due regard and deference to the opinions of each other. In conferring together, the jury ought to pay proper respect to each other’s opinions and listen with candor to each other’s arguments. If much the larger number of the panel are for conviction, a dissenting juror should consider whether the doubt in his or her mind is a reasonable one which makes no impression upon the minds of so many other men and women equally honest, equally intelligent and who have heard the same evidence, with the same attention, and with equal desire to arrive at the truth, and under the same sanction of the same oath. On the other hand, if a majority are for acquittal, the minority ought seriously to ask themselves whether they may not reasonably, and ought not to, doubt the conclusion of a judgment which is not concurred in by most of those with whom they are associated on the jury and distrust the weight or sufficiency of that evidence which fails to carry conviction in the minds of their fellows.”