Opinion
No. CV-98 0411764 S
June 20, 2007
MEMORANDUM OF DECISION
I. Procedural History
The defendant, Robert Errato, is seeking to reopen a judgment entered on October 12, 1999. The defendant claims that the judgment was obtained by fraud.
A. Events Prior to Entry of Judgment on October 12, 1999.
This action stems from the plaintiff's attempt to collect on a debt. In 1991, the defendant signed a commercial promissory note in the principal amount of $93,000 in favor of the Bank of New Haven. Shortly after executing the note, the defendant defaulted on payments.
Originally, there were two defendants, however before the start of trial the co-defendant was released from liability. All references to the defendant in this case are to Robert Errato.
On September 15, 1994, the Bank of New Haven sold the note to the plaintiff, the Cadle Co.
On April 14, 1998, the plaintiff commenced suit seeking to collect the debt. On July 20, 1998, the defendant filed an answer in which he admitted that he executed a promissory note in favor of the Bank of New Haven. The defendant also filed a special defense, alleging that the action was barred by the Statute of Limitations.
On August 24, 1999, the matter was tried to the court (Zoarski, J.). At the time of trial, the plaintiff introduced a copy of the note, rather than the original note. Plaintiff's attorney represented to the court that the original was in the home office and was not available at that moment.
The defendant argued that without the original note, the plaintiff could not prove its case. The court allowed the plaintiff to introduce the copy over the objection of the defendant.
On August 30, 1999, the plaintiff filed a motion requesting that the plaintiff's case be reopened to offer additional evidence. In the motion, the plaintiff represented to the court that it was seeking to reopen the case "for the limited purpose of allowing the original Promissory Note and the original Loan Sale Agreement to be admitted into evidence as full exhibits. Said documents are attached hereto and incorporated herein."
On October 6, 1999, the court denied the motion.
On October 12, 1999, the court filed its memorandum of decision in which it found in favor of the plaintiff. The court found that the plaintiff was a holder in due course of the note and entitled to recover payment. The court also found that on September 15, 1994, the plaintiff entered into a purchase and sale agreement with the Bank of New Haven for the purchase of its loans. The note which is the subject of this litigation was part of the sale.
B. Appellate History of the Case
The defendant appealed the decision of the trial court. In Cadle Co. v. Errato, 71 Conn.App. 447, 802 A.2d 887 (2002), the Appellate Court affirmed the trial court's decision. The Appellate Court held that "the copies [of the note] were properly admitted into evidence regardless of the best evidence rule." The court also noted that "the defendant offered no evidence that the copy was not accurate, nor, in fact, did he dispute the contents of the copy."
Regarding the defendant's claim that the plaintiff did not prove that he was a holder in due course because it did not establish the necessary requirement of possession of the note, the Appellate Court held that "although the plaintiff presented only a copy of the note, under the circumstances of this case, the failure to present the original did not preclude a finding that the plaintiff was a holder in due course of the note and thus the plaintiff met the requirements for a prima facie case."
The Appellate Court made reference to the trial testimony of Nicholas Valorie, an account manager and a representative of the plaintiff. The court noted that in his testimony, Mr. Valorie provided the background regarding the plaintiff's purchase of the promissory note in question. The court reviewed Mr. Valorie's testimony in which he stated that he knew that the plaintiff was the owner of the note and that if the plaintiff had "assigned the note to another party, he would have been informed about the transaction."
The court also made reference to the testimony of Joanne Miller, a representative of the Bank of New Haven, who testified that the Bank had sold the note to the plaintiff. The court held that "despite the absence of the original note, sufficient evidence existed, through the copy of the note presented, the testimony of Valerie and a copy of the loan and sale agreement with the bank, to support a finding that the plaintiff possessed the note. . . Moreover, our conclusion here is further buttressed by the fact that at the conclusion of the trial, the plaintiff filed a motion to reopen the evidence to introduce the original note." Id., 459.
The defendant petitioned the Supreme Court for certification. His petition was denied in Cadle Co. v Errato, 262 Conn. 918, 912, 812 A.2d 861 (2002).
C. Events Subsequent to the Denial of Certification by the Supreme Court.
On September 9, 2003, the defendant filed the pending motion to reopen. In this motion, the defendant alleges that the original note was never filed in court, contrary to the representations made in the plaintiff's motion to reopen dated August 30, 1999. Furthermore, the defendant alleges that the promissory note was not owned by the plaintiff at the time of trial, although the plaintiff made sworn assertions that it did own the note.
The defendant argues that as a result of these two assertions, the judgment entered on October 12, 1999, was procured by fraud and the only way to remedy the situation is to hold an evidentiary hearing to examine the allegations. Upon a thorough examination and determination of the facts regarding these claims, the defendant believes that the court will be convinced that the judgment must be set aside.
On January 14, 2004, the plaintiff filed an objection to the defendant's motion to open the judgment. Included within the objection itself is a memorandum of law citing the reasons that the judgment should not be reopened. The plaintiff also attached three affidavits to the objection.
The first affidavit is that of Nicholas Valorie, the plaintiff's representative. In this affidavit dated September 16, 2003, Mr. Valorie sets forth the steps that he took to obtain the original note so that it could be filed with the motion to reopen the plaintiff's case in 1999.
Exhibit A to this affidavit is a copy of a phone log kept by Mr. Valorie setting forth his conversations regarding obtaining the original note so that it could be filed in court and Exhibit B to the affidavit is a copy of the Federal Express bill indicating that once he received the original note from the home office, he sent it overnight express to the plaintiff's trial attorney.
The second affidavit is that of Attorney Paul N. Gilmore. Attorney Gilmore was not counsel of record during the trial in 1999; however he filed his appearance in the matter in July 26, 2000 and has been representing the plaintiff since.
In his affidavit dated December 31, 2003, Attorney Gilmore represents that, sometime in December 2000 he personally went to the New Haven Superior Court Clerk's office to determine whether or not the original note was affixed to the motion to reopen, as was represented in the motion. Attorney Gilmore avers that his inspection of the court file "disclosed that the original promissory note was indeed affixed to the Additional Evidence Motion in the court file as document number 118."
The third affidavit attached to the plaintiff's objection is the affidavit of Attorney Bruce Gelston, the plaintiff's trial counsel. In his affidavit dated December 31, 2003, Attorney Gelston avers that once he received the original note from Mr. Valorie, he "affixed the original promissory note to the original Additional Evidence Motion (as I represented in said motion) and filed the same with the Clerk of the Superior Court."
On April 30, 2004, in further support of his objection to the motion to reopen, the plaintiff filed the affidavit of Daniel C. Cadle. Mr. Cadle describes himself as holding the dual position of President of Cadle Co. as well as the President of Cadleway Properties, Inc. To his affidavit, Mr. Cadle attaches, as Exhibit A, a Ratification Agreement entered into between Cadleway Properties, Inc. and the Cadle Co. on April 28, 2004.
According to the Ratification Agreement, Cadleway Properties, Inc. and the Cadle Company entered into the agreement on April 28, 2004 in order to ratify all of the actions previously taken by the parties. The Ratification Agreement recites the history of the relationship between Cadle Company and Cadleway Properties, Inc. It states that the Cadleway Properties, Inc. was incorporated in July 1994. (The articles of incorporation as well as the Certificate of Incorporation are attached to the Ratification Agreement and marked as Exhibits A and B).
Upon its incorporation in July 1994, the Cadleway Properties, Inc. and the Cadle Company entered into a Loan-Servicing Agreement. In this agreement, the Cadle Company agreed to service and to collect certain loans for, and on behalf of, the Cadleway Properties, Inc.
In September of 1994, The Cadle Company purchased a portfolio of loans from the Bank of New Haven. The note, which is the subject of this litigation, was among the loans in the portfolio.
Article eight of the Ratification Agreement (Exhibit A to Mr. Cadle's affidavit) states that although the July 1994 "Loan Servicing Agreement provides that all suits to collect on a commercial note was to be commenced and prosecuted in the name of Cadleway Properties, Inc. purchase and sale agreement" for reasons presently unknown, the Note was never negotiated by the Cadle Company to Cadleway Properties, Inc., with the Cadle Company consequently retaining possession of the Note and remaining the endorsee/payee of the Note, and with suit being commenced and prosecuted in the name of the Cadle Company."
On June 21, 2004, the court (Zoarski, J.) held a hearing on the motion to reopen. On that date, the defendant filed a response to the plaintiff's objection. On June 25, the plaintiff filed its rejoinder to the defendant's response. On July 13, 2004, the defendant filed a post-hearing brief which included a response to the Plaintiff's Rejoinder Memorandum. The plaintiff responded to this brief on July 15, 2004; it filed a rejoinder to the defendant's post-hearing brief.
On November 1, 2004, the defendant filed motion #176, asking the court to reassign the matter to another judge. On November 10, 2004, the plaintiff filed an objection. On November 24, 2004, the motion to reassign the matter to another judge was granted by the presiding judge (Robaina, J.).
On September 5, 2005, the matter was assigned to the undersigned. This court assigned the matter for an evidentiary hearing on December 14, 2005. The parties objected to the date, asserting that oral argument to determine if an evidentiary hearing was required, should be held first.
The court acquiesced in the request and scheduled oral argument for April 10, 2006. On that date, the defendant filed a hearing brief (#169.03) and a memorandum of law supporting the motion to reopen the judgment (#169.02).
At the conclusion of the hearing held on April 10, 2006, the court assigned a date for an evidentiary hearing. By agreement of the parties, the original date was changed on numerous occasions due to conflicts in counsel's schedule.
On April 28, 2006, plaintiff filed a response (#169.01) to the defendant's hearing brief.
The matter was finally heard on March 6, 2007. At this hearing, the court heard the testimony of Mr. Cadle and that of Attorney Gelsten. The court also received numerous exhibits into evidence.
DISCUSSION
"The authority to open and vacate a judgment is within the inherent power of the trial courts." (Internal quotation marks omitted.) Yaremich v. Lam, 71 Conn.App. 650, 653, 803 A.2d 369 (2002). "The principles that govern motions to open or set aside a civil judgment are well established. Within four months of the date of the original judgment, Practice Book § [17-4] vests discretion in the trial court to determine whether there is a good and compelling reason for its modification or vacation." (Internal quotation marks omitted.) Dimmock v. Allstate Ins. Co., 84 Conn.App. 236, 241, 853 A.2d 543, cert. denied, 271 Conn. 923, 859 A.2d 577 (2004). "Because of the important consideration of finality of judgments. . . a judgment should not be opened without a strong and compelling reason. . . The motion should be granted only when there appears cause for which the court acting reasonably would feel bound in duty so to do." (Citations omitted; internal quotation marks omitted.) Martin v. Martin, 99 Conn.App. 145, 156, 913 A.2d 451 (2007).
"Whether proceeding under the common law or a statute, the action of a trial court in granting or refining an application to open a judgment is, generally, within the judicial discretion of such court, and its action will not be disturbed on appeal unless it clearly appears that the trial court has abused its discretion." (Internal quotation marks omitted.) Nelson v. Charlesworth, 82 Conn.App. 710, 713, 846 A.2d 923 (2004).
Practice Book § 17-4(a) provides in relevant part: "Unless otherwise provided by law and except in such cases in which the court has continuing jurisdiction, any civil judgment or decree rendered in the superior court may not be opened or set aside unless a motion to open or set aside is filed within four months succeeding the date on which notice was sent. The parties may waive the provisions of this subsection or otherwise submit to the jurisdiction of the court."
In the present case, there is no claim that the motion to open was untimely, rather the only claim is that the judgment was obtained by fraud. The court is therefore required to determine whether the alleged fraud presents a "strong and compelling reason" to open the judgment.
"It is a well-established general rule that. . . a judgment rendered by the court. . . can subsequently be opened. . . if it is shown that. . . the judgment, was obtained by fraud. . ." (Internal quotation marks omitted.) Nelson v. Charlesworth, 82 Conn.App. 710, 713, 846 A.2d 923 (2004). "The power of the court to vacate a judgment for fraud is regarded as inherent and independent of statutory provisions authorizing the opening of judgments; hence judgments obtained by fraud may be attacked at any time." (Internal quotation marks omitted.) Billington v. Billington, 220 Conn. 212, 218, 595 A.2d 1377 (1991).
"Fraud is defined as [d]eceit, deception, artifice, or trickery operating prejudicially on the rights of another, and so intended, by inducing him to part with property or surrender some legal right. . . Anything calculated to deceive another to his prejudice and accomplishing the purpose, whether it be an act, a word, silence, the suppression of the truth, or other device contrary to the plain rules of common honesty." (Internal quotation marks omitted.) Nelson v. Charlesworth, supra, 82 Conn.App. 714. "The four essential elements of fraud are (1) that a false representation of fact was made; (2) that the party making the representation knew it to be false; (3) that the representation was made to induce action by the other party; and (4) that the other party did so act to her detriment." (Internal quotation marks omitted.) Whitaker v. Taylor, 99 Conn.App. 719, 730, 916 A.2d 834 (2007). "All of these ingredients must be found to exist. . . Additionally, [t]he party asserting [fraud] must prove the existence of the first three of [the] elements by a standard higher than the usual fair preponderance of the evidence. . ." (Internal quotation marks omitted.) Duplisse v. Devino, 96 Conn.App. 673, 681, 902 A.2d 30, cert. denied, 280 Conn. 916, 908 A.2d 536 (2006). "[T]he elements of fraud must be proved by clear and convincing evidence. . ." Dockter v. Slowik, 91 Conn.App. 448, 453-54, 881 A.2d 479, cert denied, 276 Conn. 919, 888 A.2d 87 (2005). "The party claiming fraud. . . has the burden of proof. . . Whether that burden has been met is a question of fact. . ." (Internal quotation marks omitted.) Duplissie v. Devino, supra, 96 Conn.App. 680.
"In equity, as in law, misrepresentation, to constitute fraud, must be material. . . That is to say, the representation must prejudice the party relying upon it." (Internal quotation marks omitted.) McCann Real Equities Series XXII, LLC v. David McDermott Chevrolet, Inc., 93 Conn.App. 486, 519, 890 A.2d 140, cert. denied, 277 Conn. 928, 895 A.2d 798 (2006). Furthermore, in order to prove that the misrepresentation was fraudulent as opposed to merely negligent, the party asserting fraud must prove the element of intent, i.e., that the misrepresentation "was made to induce the action by the other party." (Internal quotation marks omitted.) Whitaker v. Taylor, 99 Conn.App. 730.
"[A]n action for negligent misrepresentation requires the plaintiff to establish (1) that the defendant made a misrepresentation of fact (2) that the defendant knew or should have known was false, and (3) that the plaintiff reasonably relied on the misrepresentation, and (4) suffered pecuniary harm as a result." Nazami v. Patrons Mutual Ins. Co., 280 Conn. 619, 626, 910 A.2d 209 (2006).
In the present case, in order to prevail on its motion to open the judgment, the defendant must meet the burden of proof by clear and convincing evidence, that the representation of fact made by the plaintiff during the trial was false, that the plaintiff knew it to be false, that the representation was made to induce the court to find for the plaintiff and that the representation actually induced the court to find for the plaintiff. In order to show that the plaintiff's misrepresentation was material, the defendant must prove that the court relied on the plaintiff's representation in making its decision.
The defendant contends that the judgment entered on October 12, 1999, was procured by fraud based on two assertions: that the original promissory note was never filed in court, contrary to the representations made in the plaintiff's motion to reopen the case dated August 30, 1999, and that the promissory note was not owned by the plaintiff at the time of trial, although the plaintiff made sworn assertions that it did own the note.
Specifically, in his first claim, the defendant asserts that, in reviewing a copy of the plaintiff's August 30, 1999 motion to reopen the case which was purportedly filed for the purpose of allowing the original promissory note to be admitted into evidence, the defendant found that no copy of the promissory note was attached thereto. Thereafter, in August 2003, the defendant purportedly reviewed the court's file and discovered that the file did not contain the original or a copy of the promissory note, from which the defendant concluded that the original note was not filed with the Superior Court contrary to the plaintiff's representation.
The defendant argues that, although the court denied the plaintiff's August 30, 1999 motion to reopen the case, the plaintiff's misrepresentation that the original promissory note was attached to the motion might have influenced the court's belief that the plaintiff owned the note. The defendant further asserts that "the Appellate Court was persuaded that the plaintiff owned the note by virtue of the plaintiff having purportedly filed it with the Superior Court."
In its objection to the defendant's motion to open, the plaintiff argues that the defendant's assertion that the judgment was procured by fraud lacks merit. In support of its objection, the plaintiff submitted three affidavits. (The contents of each of these affidavits have been set forth in detail in the first part of this decision and will not be repeated here.)
It is a well-established rule that "the mere allegation that a fraud has been perpetrated is insufficient." (Internal quotation marks omitted.) Whitaker v. Taylor, supra, 99 Conn.App. 730. In the present case, the defendant failed to establish by clear and convincing evidence that the plaintiff fraudulently represented to the court that it attached the original promissory note to its August 30, 1999 motion to reopen the case. Specifically, the defendant failed to prove that the original promissory note was not in the court file because the plaintiff failed to attach it to its motion to reopen the case and, therefore, failed to prove the falsity element of the claim of fraud.
Even if this court were to find that the plaintiff made false representation, the defendant failed to submit sufficient evidence to show that the misrepresentation was material, specifically, that the court, in making its decision, relied on the plaintiff's representation that it had attached the original promissory note to the motion to reopen the case. While the defendant alludes to the possibility that the plaintiff's motion to reopen the case to allow additional evidence "might have influenced" the court's belief that the plaintiff was in possession of the note, the defendant failed to proffer any evidence that the court was so influenced.
Furthermore, the Appellate Court's decision in Cadle Co. v. Errato, 71 Conn.App. 447, 802 A.2d 887, cert. denied, 262 Conn. 918, 812 A.2d 861 (2002), affirming the trial court's finding that the plaintiff, as the holder in due course, was entitled to enforce the promissory note, was not based on the belief that "the plaintiff owned the note by virtue of the plaintiff having purportedly file it with the Superior Court." Although the Appellate Court pointed out that its decision was "buttressed by the fact that at the conclusion of the trial, the plaintiff filed a motion to reopen the evidence to introduce the original note"; id., 459; the court's decision was based on the following considerations: the plaintiff offered into evidence a copy of the promissory note and a copy of the loan and sale agreement for the purchase of the note between the plaintiff and the Bank of New Haven (the bank); "the defendant offered no evidence that the copy of the promissory note was not accurate, nor. . . did he dispute the contents of the copy"; id., 453; "the defendant actually testified that he. . . had signed a promissory note payable to the bank on May 17, 1991, in the amount of $93,000. . . the exact information contained in the copy of the note; " id., 453-54; "the defendant failed to proffer any evidence demonstrating that the copy of the loan and sale agreement was inaccurate, not did he present any evidence indicating that the bank did not enter into such an agreement with the plaintiff"; id., 454; Valorie testified that the plaintiff entered into a loan and sale agreement with the bank to purchase the note and that the plaintiff was the owner and possessor of the note; id., 458; and Miller testified that the bank sold the note to the plaintiff. Id.
Accordingly, the court finds that the defendant's assertion that the plaintiff fraudulently represented to the court that it attached the original promissory note to its August 30, 1999 motion to reopen the case, is without merit.
As an additional basis to reopen the judgment, the defendant also asserts that the plaintiff was not the owner or possessor of the promissory note at the time of trial, although the plaintiff made sworn assertions that it did own the note.
In its objection to this allegation, the plaintiff argues that that the defendant's claim is without merit because, at the time of the trial, the plaintiff was the holder of the note entitled to enforce it.
Under the Uniform Commercial Code (UCC), General Statutes § 42a-3-301, a "person entitled to enforce" a negotiable instrument is "(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 42a-3-309 or 42a-3-418(d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument." (Emphasis added.) General Statutes § 42a-3-301. Therefore, a person does not have to be an owner of a promissory note to be entitled to enforce it.
General Statutes § 42a-1-201(21) defines "holder" as "(A) The person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession; (B) The person in possession of a negotiable tangible document of title if the goods are deliverable either to bearer or to the order of the person in possession; or (C) The person in control of a negotiable electronic document of title." In addition, a "holder in due course" is "the holder of an instrument if. . . (2) The holder took the instrument (i) for value, (ii) in good faith, (iii) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, (iv) without notice that the instrument contains an unauthorized signature or has been altered, (v) without notice of any claim to the instrument described in section 42a-3-306, and (vi) without notice that any party has a defense or claim in recoupment described in section 42a-3-305(a)." General Statutes § 42a-3-302(a)(2).
Moreover, General Statutes § 42a-3-205 provides in relevant part: "(a) If an endorsement is made by the holder of an instrument, whether payable to an identified person or payable to bearer, and the endorsement identifies a person to whom it makes the instrument payable, it is a `special endorsement.' When specially endorsed, an instrument becomes payable to the identified person and may be negotiated only by the endorsement of that person." (Emphasis added.) General Statutes § 42a-3-201(a) defines "negotiation" as "a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder. In addition, General Statutes § 42a-3-201(b) provides that "if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its endorsement by the holder." Therefore, if the note is payable to a party and the endorsement by the previous holder identifies that party as a party to whom it makes the instrument payable, then, if that party transfers the note without endorsing it, the transferee of the note does not become a holder of the note, even though it might be its owner.
In the present case, the evidence shows that the plaintiff was a holder in due course of the promissory note when it purchased the note from the bank. The plaintiff presented a copy of loan and sale agreement, a copy of promissory note, the testimony of Miller stating that the bank sold the note to the plaintiff and the testimony of Valorie that the plaintiff entered into a loan and sale agreement to purchase the note from the bank. Furthermore, the defendant admitted that he had signed a promissory note payable to the bank on May 17, 1991, in the amount of $93,000. This evidence demonstrates that the plaintiff took the promissory note for value, in good faith and without notice of any claims or defenses. It also establishes that the note was endorsed, i.e., negotiated, by the bank to the plaintiff, that the plaintiff never negotiated it to Cadleway Properties, Inc., and that, therefore, Cadleway Properties, Inc. was never the holder of the note.
Based on the evidence presented at trial, specifically, the copies of the promissory note and of the loan and sale agreement, the testimonies of Miller and Valorie and the defendant's own admissions, the trial court found, and the Appellate Court affirmed, that the plaintiff was in possession of the promissory note. Therefore, in order to prove that the plaintiff obtained the judgment by fraud, the defendant must prove by clear and convincing evidence that Valorie's testimony regarding the plaintiff's ownership and possession of the note was false, that Valorie knew that it was false and that he falsely testified to induce the court to find for the plaintiff. In addition, the defendant must prove that the decisions of the trial court and the Appellate Court were based primarily on Valorie's false testimony.
The court finds that the defendant failed to meet his burden of proof. Even if Valorie's testimony regarding the ownership of the note was a misrepresentation, the defendant failed to establish that it was intentional or fraudulent misrepresentation, i.e., that Valorie knew that the representation was false and that he made it to induce the court to find for the plaintiff. Moreover, the review of the decisions of the trial court and the Appellate Court indicates that Valorie's testimony was just one of the many considerations on which the courts relied. Hence, even if this court were to find that the fraudulent misrepresentation was made, the plaintiff failed to prove that the misrepresentation was material.
Accordingly, the court finds that the defendant failed to meet his burden of proof that the judgment entered on October 12, 1999, was obtained by fraud.
For the reasons stated above, the court denies the defendant's motion to open judgment.