Opinion
No. CV 03 0080383
August 15, 2006
MEMORANDUM OF DECISION JOINT MOTION FOR SPECIFIC PERFORMANCE OR IN THE ALTERNATIVE FOR FORFEITURE OF DEPOSIT
In this action for the partition of three tracts of real property located in Somers, the plaintiff, Martha Chase, and the defendant, Diana Smith, have filed a joint motion for specific performance of the judicial sale of tracts 2 and 3 to the successful bidder, Michael Bernier. The court, Scholl, J., in its April 27, 2005 order confirming the sale, ordered that the sale occur within thirty days. The plaintiff and the defendant filed their motion for specific performance on February 6, 2006, asserting that the sale has not been completed due to Bernier's refusal to complete the purchase. Bernier has filed an objection to the motion for specific performance in which he asserts that the plaintiff and defendant committed fraud by failing to disclose certain information relating to the generation of hazardous waste on the property.
The original plaintiff, Everett Wilson, died on January 8, 2004. On June 28, 2004, the court, Scholl, J., granted Chase's motion to be substituted as party plaintiff. Chase is the administratrix of Wilson's estate.
Specifically, Bernier argues that he is entitled to an evidentiary hearing at which he may present evidence of fraud because the plaintiff and the defendant failed to disclose in the bid documents that the property is an "Establishment" under the Transfer Act, General Statutes § 22a-134 et seq. The plaintiff and defendant argue that no such hearing is necessary because the undisputed facts defeat any claim of fraud as a matter of law.
General Statutes § 22a-134(3) provides in relevant part: "`Establishment' means any real property at which or any business operation from which . . . on or after November 19, 1980, there was generated, except as the result of remediation of polluted soil, groundwater or sediment, more than one hundred kilograms of hazardous waste in any one month . . ."
Bernier argues correctly that litigants are generally entitled to an evidentiary hearing where issues of fact are in dispute. See, e.g. Tyler E. Lyman, Inc. v. Lodrini, 78 Conn.App. 684, 687, 828 A.2d 681, cert. denied, 266 Conn. 917, 833 A.2d 468 (2003). It is clear from the case law in various contexts, however, that no issue of fact exists, and thus no hearing is required, where the party requesting the hearing does not proffer any facts that, if proven at an evidentiary hearing, would entitle that party to relief. See, e.g., Buell Industries, Inc. v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556, 791 A.2d 489 (2002) (party seeking to avoid summary judgment and go to trial must bring forth evidentiary facts to demonstrate fact issue); Capasso Restoration, Inc. v. New Haven, 88 Conn.App. 754, 761-62, 870 A.2d 1184 (2005) (no evidentiary hearing required on motion to dismiss where facts undisputed and plaintiff failed to make offer of proof of additional facts despite opportunity); State v. Marsala, 59 Conn.App. 135, 142, 755 A.2d 965 (where offer of proof by criminal defendant indicates defense is insufficient as matter of law, court may refuse to allow presentation of evidence regarding defense), cert. denied, 254 Conn. 948, 762 A.2d 905 (2000). Here, Bernier has essentially made an offer of proof through his objection and memoranda of law. Accordingly, the court herein examines the undisputed facts and the facts proffered by Bernier in his various filings, viewing them in the light most favorable to Bernier, to determine whether there are any issues of fact requiring an evidentiary hearing.
The following facts are undisputed. The sale was coordinated by a broker approved by the court. Under the procedures proposed by the plaintiff and the defendant, and approved by the court, the broker sent bid packages to prospective buyers. The bid package contained the following statement: "All information is from sources deemed reliable however it is submitted subject to errors, omission, change and withdrawal from the market, all without notice. No representations or warranties are made and all interested parties are encouraged to make an independent investigation." The bid instructions included in the package contained the following additional language: "The Property is to be sold `as is, where is' and subject to all leases, rights, easements, covenants and restrictions in effect and applicable to the Property. No representation or warranty has been, is hereby, or will be made with respect to the condition of the Property in any respect."
Also included in the bid package was a detailed environmental investigation report prepared by GeoQuest, Inc. Section 3.5 of the report, "Hazardous Materials," included, inter alia, the following information: "In August 2001, Martha Bekeney coordinated the removal of several drums and containers of oil, water, and other materials from the site with CYN Environmental Services, Inc. (CYN) of Stoughton, Massachusetts. The contents of the drums were reportedly generated by the former tenant that leased the garage in the barn for tractor and automobile repair. The drum and containers were discovered by the [State of Connecticut Department of Environmental Protection] during a site inspection conducted in April 2001.
"According to documentation generated by CYN, eight drums and/or containers of wastewater/flammable liquid-solvent mixtures, three drums of non-hazardous water, seven containers of oil with less than 10% water, a `waste aerosol,' and a paint/ink liquid drum were removed from the property in August 2001. Reportedly, one of the used oil drums was located outside the barn, and it was open and/or leaking . . . Laboratory analyses performed on samples of the contents of the drums in August 2001 detected acetone, barium, benzene, chloroform, chromium, ethyl acetate, ethylbenzene, lead, methyl ethyl ketone (MEK [i.e. 2-butanone]), methyl isobutyl ketone, PCE, propyl alcohol, TCE, toluene, 1,1,1-TCA, and xylenes (total)."
Bernier asserts that over 100 kilograms of hazardous waste were removed from the property in August 2001, and that the property therefore is "an establishment" as that term is defined by the Transfer Act General Statutes § 22a-134(3). Bernier further asserts that the seller failed to tell him that the property was an establishment, and that the omission induced him to bid on property and to accept the condition that the property would be accepted "as is." The court accepts these allegations as true for purposes of the present inquiry.
Bernier does not specify who he means by the term "seller." The court will assume that the term encompasses the plaintiff, the defendant and the broker.
"A judicial sale is one made as a result of judicial proceedings by a person legally appointed by the court for the purpose . . . The court is the vendor, and the person appointed to make the sale is the mere agent of the court. The sale is not absolute until confirmed." (Internal quotation marks omitted.) Raymond v. Gilman, 111 Conn. 605, 613-14, 151 A. 248 (1930); see also Citicorp Mortgage, Inc. v. Burgos, 227 Conn. 116, 120, 629 A.2d 410 (1993). Where a successful bidder defaults upon a judicial sale prior to confirmation, the court has considerable discretion to craft an appropriate remedy; see Mariners Savings Bank v. Duca, 98 Conn. 147, 155-56, 118 A. 820 (1922); see also Citicorp Mortgage, Inc. v. Burgos, supra, 121; but "[f]ollowing confirmation of the sale, a judicial sale generally will not be set aside in the absence of fraud, mistake or surprise. The rule of caveat emptor is generally applicable to judicial sales . . . When relaxation of this rule is granted it is on the theory that the purchaser bids on the assumption that there are no undisclosed defects." (Internal quotation marks omitted.) Citicorp Mortgage, Inc. v. Burgos, supra, 120-21.
Bernier argues that he should not be bound to complete the sale in the present case because the "seller" committed fraud by omitting to tell him that the property is an "establishment" under the Transfer Act. The plaintiff and defendant argue, however, that because the property was sold "as is," and because Bernier was provided with information prior to the sale regarding the removal of hazardous waste from the property, their failure to mention the word "establishment" is irrelevant. The court agrees with the plaintiff and the defendant.
The Supreme Court addressed the effect of a contract provision indicating that a purchaser accepts the property "as is" in Holly Hill Holdings v. Lowman, 226 Conn. 748, 628 A.2d 1298 (1993). In that case, the sellers of certain real property, which previously had been used as a gasoline station, allegedly failed to disclose to the buyers certain environmental information required by state regulations. Id., 750-51. The buyers knew when they agreed to purchase the property that there were four underground gasoline storage tanks on the property. Id., 751. The relevant regulations, however, required written notification to the buyer. Id. The contract specified that the buyers were taking the property "as is." Id.
The court held that, in light of the "as is" provision, the failure to give written notification could not form the basis of a claim against the sellers, nor could it support a special defense in a foreclosure brought by the sellers, who had retained a mortgage interest in the property. The court stated that the freedom to contract "includes the right to contract for the assumption of known or unknown hazards and risks that may arise as a consequence of the execution of the contract." Id., 755-56. Consequently, the court noted, "the parties to a contract for the sale of real property are free to disclaim responsibility for known environmental risks." Id., 756. The court rejected the buyers' claim that the "as is" language should not be given effect because they were mistaken about the extent of the environmental hazard. Specifically, the court noted that "the purpose and effect of an `as is' clause is to shift the burden of such a mistake to the accepting party." Id., 757. In addition, the court cited as support its statement in Pacelli Bros. Transportation, Inc. v. Pacelli, 189 Conn. 401, 408, 456 A.2d 325 (1983), that "[w]here a party realizes he has only limited information upon the subject of a contract, but treats that knowledge as sufficient in making the contract he is deemed to have assumed the risk of a mistake."
Although the present case involves a judicial sale, "[t]he confirmation by the court of a judicial sale is the equivalent of a valid contract of sale." 47 Am.Jur.2d 577, Judicial Sales § 201 (2006).
While the court in Holly Hill Holdings was presented with a claim of mistake rather than fraud, its comments are equally applicable to the present case. As in that case, the buyer in this case entered into the agreement to purchase property with knowledge that activities on the property had involved hazardous materials. In fact, Bernier had been given specific information indicating that a number of drums of toxic materials, at least one of which was open or leaking, had been removed from the property. The risk that the property might well be contaminated and therefore subject to statutory and regulatory requirements was a risk known to Bernier. Nevertheless, he chose to enter into an agreement to take the property "as is." As Holly Hill Holdings indicates, a party who enters into such an "as is" agreement with the knowledge of a particular hazard thereby assumes the risk that the extent of the hazard will be greater. The operation of the "as is" provision is the same, regardless of whether the claim is labeled as "mistake" or "fraudulent nondisclosure," as is made clear by the Appellate Court's reliance on Holly Hill Holdings in a subsequent case specifically dealing with fraudulent nondisclosure. See Visconti v. Pepper Partners Ltd. Partnership, 77 Conn.App. 675, 684-86, 825 A.2d 210 (2003) (rejecting fraudulent nondisclosure claim because buyer "had the opportunity to investigate possible environmental hazards before the transfer of the property but chose not to make the relevant inquiries"). For all the foregoing reasons, even when the proffered facts are viewed in the light most favorable to Bernier, his claim of fraudulent nondisclosure is insufficient as a matter of law and does not provide him with a basis to avoid the confirmed judicial sale. Accordingly, no evidentiary hearing is required on the issue of fraud.
Bernier has also objected to the motion for specific performance because "the plaintiff and the defendant are presently not prepared to comply with the provisions of the Transfer Act and to provide . . . Bernier a signed form required by the Act wherein they (sellers) agree to clean up the property." In his initial memorandum of law in support of the objection, Bernier elaborates on this claim, stating that "[t]his noncompliance underscores the fact that the plaintiff and defendant either fraudulently or negligently failed to disclose the fact that the property contained enough hazardous waste to qualify as an establishment under the Transfer Act." Thus, it appears that Bernier is presenting this issue not as a separate ground for avoiding the sale, but simply as further evidence of his fraud claim, which the court rejects as set forth in the body of this memorandum. Moreover, even if this is a separate ground, Bernier cannot prevail on it; the Appellate Court held in Visconti v. Pepper Partners Ltd. Partnership, supra, 77 Conn.App. 675, that where the parties have allocated to the purchaser the risk associated with hazardous waste, a claim based upon noncompliance with the provisions of the Transfer Act must fail as a matter of law. Cf. Holly Hill Holdings v. Lowman, supra, 226 Conn. 748 (in light of "as is" language in contract, noncompliance with environmental disclosure rules did not provide basis for private cause of action or defense to foreclosure).
The remaining question the court must resolve, therefore, is whether specific performance is the appropriate remedy under these circumstances. "[T]he seller who has not yet conveyed is generally granted specific performance on breach by the buyer." 3 Restatement (Second), Contracts § 360, comment (e) (1951); see also DiBella v. Widlitz, 207 Conn. 194, 199 n. 4, 541 A.2d 91 (1988). The rationale for permitting specific performance under such circumstances is "that, because the value of land is to some extent speculative, it may be difficult for [the seller] to prove with reasonable certainly the difference between the contract price and the market price of the land. Even if he can make this proof, the land may not be immediately convertible into money and he may be deprived of funds with which he could have made other investments." 3 Restatement (Second), Contracts § 360, comment (e) (1951). The court sees no reason why there should be an exception in the present case to the general rule permitting specific performance under these circumstances.
Accordingly, the plaintiff and defendant's joint motion for specific performance is hereby granted.