Opinion
No. CV-09-5012402
May 18, 2010
MEMORANDUM OF DECISION RE DEFENDANTS' MOTION TO STRIKE — #117
I. Nature and History of the Proceedings
On February 3, 2010, the plaintiff, David Gray, filed a five-count substituted complaint (#113) against the defendants, Sullivan Real Estate, Inc. (Sullivan Real Estate), Kelley J. Sullivan (Kelley Sullivan) and Shannon C. Sullivan dba Sherlock Home Inspections arising out of the purchase of his home located at 27 Woodcrest Drive, Unit #1, in Burlington, Connecticut. Count one is a claim for breach of contract against Sullivan Real Estate. The plaintiff alleges the following facts. Kelley Sullivan is the president of Sullivan Real Estate, Inc. Shannon Sullivan is a home inspector doing business as Sherlock Home Inspections. In June of 2004, the plaintiff contracted with Sullivan Real Estate to represent him exclusively to find a home to purchase. The contract provided that the defendant would disclose all material information to the plaintiff. Sullivan Real Estate found a condominium known as 27 Woodcrest Drive, Unit #1, Burlington, Connecticut. After the closing, the plaintiff discovered that the condominium was infested with mold. In paragraph #10 of said count, the plaintiff alleges that "Sullivan Real Estate knew the extent of the damage due to the mold infestation." The plaintiff further alleges that the agency had a duty to disclose all material facts regarding the property. The plaintiff claims damages as a result of its failure to do so.
At oral argument on the motion to strike, in response to a question from the court, the court was informed by counsel for the defendants that Kelly Sullivan and Shannon Sullivan are brothers, the latter having filed for bankruptcy protection on March 4, 2009. See #102.
In count two, which incorporates all twelve paragraphs of the first count, the plaintiff claims breach of contract against Shannon Sullivan dba Sherlock Home Inspections based upon his failure to disclose the mold infestation.
In count three, which incorporates all twenty paragraphs of the second count, the plaintiff claims negligent misrepresentation as to Kelley Sullivan, alleging that he knew or should have known about the mold in the condominium but failed to disclose it. The plaintiff further alleges that he relied on Kelley Sullivan's representation that everything went fine with the inspection, and thereafter purchased the condominium.
In count four, which incorporates all twenty-seven paragraphs of the third count, the plaintiff claims a violation of the Connecticut Unfair Trade Practices (CUTPA) on the part of Sullivan Real Estate. He alleges that Sullivan Real Estate and Kelley Sullivan, acting in his individual capacity, have been engaged in trade or commerce in the state of Connecticut and their conduct constitutes deceptive acts or practices within the meaning of General Statutes § 42-110b "in that the misrepresentations alleged were material and were likely to and did mislead the plaintiff to rely on his representations and such conduct was in violation of [CUTPA]." In count five, the plaintiff claims a CUTPA violation on the part of Shannon Sullivan dba Sherlock Home Inspections who, as noted, has filed a petition in bankruptcy.
On February 16, 2010, Sullivan Real Estate and Kelley Sullivan filed their motion to strike counts three and four of the substituted complaint (#117), supported by a memorandum of law (#118). On March 9, 2010, the plaintiff filed his objection to the defendants' motion to strike (#123), along with a supporting memorandum of law (#124).
After an extensive review of the court file, in particular, the allegations contained in the plaintiff's complaint, the memoranda and accompanying documents filed by each of the parties, the cases cited by each and giving due consideration to the arguments of counsel, the court will, for reasons hereinafter stated: (1) DENY the defendants' motion to strike count three for negligent misrepresentation as to Kelley Sullivan; and (2) DENY the defendants' motion to strike count four for CUTPA as to Sullivan Real Estate.
II. Motion to Strike
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498 (2003). "A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court." (Internal quotation marks omitted.) Suffield Development Associates Ltd. Partnership v. National Loan Investors, L.P., 260 Conn. 766, 771 (2002). "A motion to strike admits all facts well pleaded; it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings." (Emphasis in original; internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 588 (1997). The role of the trial court in ruling on a motion to strike is "to examine the [complaint], construed in favor of the [plaintiff], to determine whether the [pleading party has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378 (1997). "Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied . . . It is fundamental that in determining the sufficiency of a complaint [or a count in a complaint] challenged by a defendant's motion to strike, all well pleaded facts and those facts necessarily implied from the allegations are taken as admitted." Doe v. Board of Education, 76 Conn.App. 296, 299-300 (2003).
III. Count Three as to Kelley Sullivan: Negligent Misrepresentation A. Claims of the Parties
The defendants state in their motion that the plaintiff's claim for negligent misrepresentation fails to allege a basis for Kelley Sullivan's duty to know the actual condition of the property, specifically, how or why Kelley Sullivan had the means of knowing, ought to know, or had the duty of knowing the truth. They assert that Kelley Sullivan was not the home inspector, but rather a real estate broker, and as such, did not have an independent duty to ascertain the condition of the property. According to the defendants, Kelley Sullivan's only duty was to accurately convey the home inspector's findings to the plaintiff; the plaintiff does not allege that Kelley Sullivan miscommunicated those findings. They conclude that because Kelley Sullivan had no duty to inspect the home, the plaintiff has failed to state a claim for negligent misrepresentation.
The plaintiff responds that he has properly alleged a cause of action in negligent misrepresentation because Kelley Sullivan made a statement of fact that the inspection went fine and the condominium was in good condition. "The defendant supplied this false information to the plaintiff for the plaintiff's guidance upon which he relied to buy the condominium." The plaintiff also states that Kelley Sullivan had a duty to disclose the mold, and lays out the requirements for finding the existence of a legal duty to do so. The plaintiff also contends that Section 20-328-5a of the Regulations of Connecticut State Agencies expressly states that a real estate broker must disclose material facts and by not disclosing that the condominium was infested with mold, Kelley Sullivan violated the regulation.
Subparagraph (a) of that regulation provides, "A licensee shall not misrepresent or conceal any material facts in any transaction."
B. Applicable Law CT Page 10656
"[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 (2006). Our Supreme Court has also "held that even an innocent misrepresentation of fact may be actionable if the declarant has the means of knowing, ought to know, or has the duty of knowing the truth . . . The governing principles [of negligent misrepresentation] are set forth in similar terms in § 552 of the Restatement (Second) of Torts (1977): One who, in the course of his business, profession or employment . . . supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information." (Emphasis added; internal quotation marks omitted.) Kramer v. Petisi, 285 Conn. 674, 681 (2008).C. Discussion
In his second count for breach of contract as to Shannon Sullivan dba Sherlock Home Inspections, which was fully incorporated into the third count, the plaintiff alleges that "[t]he defendant, Sullivan Real Estate Inc., chose a home inspector, Shannon C. Sullivan dba Sherlock Home Inspections, to inspect the premises and report the condition of the property before the closing . . . The plaintiff was told to be present for the home inspection on January 21, 2005 . . ." Paragraphs #15 states: "The plaintiff arrived on time on January 21, 2005, but the inspection was already complete with only the defendant Shannon C. Sullivan dba Sherlock Home Inspections and an agent or employee of the defendant Sullivan Real Estate Inc. present." The plaintiff then alleges that the defendant Shannon C. Sullivan dba failed to disclose the mold infestation in the property and did not report that the property was infested with mold. He further alleges in count three that "defendant Kelley Sullivan knew or should have known about the mold in the condominium, yet did not disclose the condition to the plaintiff and that Kelley Sullivan hired/retained the home inspector, Shannon Sullivan, to inspect the condominium." Paragraph #24 alleges that: "The defendant Kelley J. Sullivan relayed information to the plaintiff that he received from the Home inspector Shannon Sullivan and as the Broker defendant Kelley Sullivan had the means and he knew that there was mold infestation, but he did not disclose the mold infestation to the plaintiff." In paragraph #25, the plaintiff further alleges that: "In reliance of the defendant Kelley J. Sullivan's representations, that everything went fine with the inspection, and that the condominium was in good condition, the plaintiff relied on that representation and purchased the condominium." (Emphasis added.)
In addition to claiming that Kelley Sullivan "knew" (actual knowledge) or "should have known" (constructive knowledge) of the mold infestation, the plaintiff has alleged both a failure to disclose, as well as an affirmative misrepresentation, specifically, that everything was fine with the inspection. In Bank of Boston Connecticut v. Schlichting, Superior Court, judicial district of Danbury, Docket No. 324106 (April 3, 1997, Stodolink, J.), the defendants alleged in their special defense that " an agent of the plaintiff appraised the property in question `at an inflated price,' that the plaintiff intended the defendants to rely on the appraisal, and that the defendants, to their detriment, relied on the appraisal in signing the mortgage note." The court denied the plaintiff's motion to strike, finding that the facts alleged by the defendants, if proven, could state a defense of negligent misrepresentation, that "while the defendants do not allege that the plaintiff knew the appraisal was `inflated,' the allegation that the appraisal was done by the plaintiff's agent adequately asserts that the plaintiff had the means and the duty to know the truth." (Emphasis added.) Id. Here, while the plaintiff has not alleged an agency relationship between Kelley Sullivan and Sherlock Home Inspections, the plaintiff has alleged that Sherlock Home Inspections did the home inspection and knew about the mold. Because Sullivan Real Estate's agent was allegedly present during the entire home inspection, Kelley Sullivan, as the company's president, would have or could have learned about the mold. Similar to Schlichting, then, the allegation that Sullivan Real Estates' agent was present during the inspection adequately demonstrates that Kelley Sullivan, president of Sullivan Real Estate, through his agent, had the means and duty to know the truth. In that regard, given the broad interpretation that this court must apply to the plaintiff's allegations, whether Kelley Sullivan or his agent had actual or constructive knowledge of the infestation, for the purposes of this motion to strike, is not a factor. As to duty, the plaintiff has also alleged that the contract he entered into with Sullivan Real Estate required it to disclose the mold, thereby creating the requisite duty to disclose.
For the foregoing reasons, the defendants' motion to strike count three for negligent misrepresentation as to Kelley Sullivan is denied.
IV. Count Four as to Sullivan Real Estate: CUTPA A. Claims of the Parties
As to count four, the defendants state in their motion that the CUTPA claim as to Sullivan Real Estate is legally insufficient on four different grounds, namely: "(1) the plaintiff's allegations neither set forth a claim for a per se CUTPA violation, nor do they satisfy the cigarette rule applicable to CUTPA claims; (2) allegations of mere breach are insufficient to form the basis of a CUTPA claim; (3) allegations of mere negligence are insufficient to form the basis of a CUTPA claim; and (4) the facts alleged do not indicate a general business practice, but rather an isolated occurrence, requiring the court to scrutinize the plaintiff's allegations more carefully, and apply a heightened standard, when evaluating the sufficiency of the plaintiff's CUTPA count."
The plaintiff responds that our Supreme Court has stated that there is no special pleading standard for a CUTPA claim. Therefore, the defendants' suggestion that the plaintiffs in count four did not rephrase their pleadings to conform to the three prongs of the cigarette rule, and that the CUTPA cause of action is factually unsupportable is incorrect.
B. Applicable Law
CUTPA provides: "No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." General Statutes § 42-110b(a). "It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the [F]ederal [T]rade [C]ommission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other businesspersons] . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three.' (Internal quotation marks omitted.) Votto v. American Car Rental, Inc., 273 Conn. 478, 484 (2005)." Naples v. Keystone Building Development Corp., 295 Conn. 214, 227-28 (2010).
C. Discussion 1. In General
As noted, the plaintiff has incorporated into the fourth count each and every preceding paragraph in each and every preceding count. Thus, in the CUTPA claim against Sullivan Real Estate, Inc., the plaintiff incorporates both breach of contract and negligence allegations. The defendants have chosen not to pursue a revision of this count. Again, the court is obligated to deem all of the plaintiff's allegations as true and to interpret them broadly and liberally. The court will, therefore, address separately the underlying tort and contract claims that form the basis of the fourth count.
2. Violation of CUTPA Claim Based in Negligence
The defendants argue that the plaintiff has failed to adequately plead a cause of action for negligent misrepresentation in the third count, and even if he did, CUTPA requires an allegation of fraudulent misrepresentation at the very least.
The plaintiff's count four can be interpreted as a CUTPA claim based in negligence. In it, he alleges that "[t]he conduct of . . . Sullivan Real Estate Inc. and Kelley Sullivan constitute deceptive acts or practices within the meaning of [Connecticut General Statutes] § 42-110b in that the misrepresentations alleged were material and were likely to and did mislead the plaintiff to rely on his representations and such conduct was in violation of the Connecticut Unfair [Trade] Practices Act."
Our Supreme Court has addressed negligence claims in the context of CUTPA, holding that "the first prong [of the cigarette rule], by itself, is insufficient to support a CUTPA violation, at least when the underlying claim is grounded solely in negligence . . . Negligent acts, in general, are not inherently immoral, unethical, oppressive, or unscrupulous. Negligent conduct supporting CUTPA claims usually involves negligent misrepresentation, see, e.g., Prishwalko v. Bob Thomas Ford, Inc., 33 Conn.App. 575 (1994). CUTPA deals with actions that cause unjustified consumer injury rather than a personal injury based upon negligence. A-G Foods, Inc. v. Pepperidge Farm, Inc., 216 Conn. 200, 217." (Emphasis added.) Anzellotti v. National Amusements, Superior Court, judicial district of New Britain, Docket No. 546129 (February 20, 1996, Hennessey, J.).
"With regard to the first prong of the `cigarette rule,' the Connecticut Supreme Court has long recognized liability for negligent misrepresentation. [It has] held that even an innocent misrepresentation of fact may be actionable if the declarant has the means of knowing, ought to know, or has the duty of knowing the truth." (Internal quotation marks omitted.) Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 575 (1995). Under the second prong of the `cigarette rule' `[a]llegations that the [plaintiff] knew or should have known facts that he did not disclose, if proven, may be concluded to be unethical, immoral, oppressive, and unscrupulous.' Schur v. David Ogilvy and Associates, Inc., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. 175461 (April 26, 2000, D'Andrea, J.) ( 27 Conn. L. Rptr. 103); see also Christensen v. Water Air, Inc., Superior Court, judicial district of Tolland, Docket No. 065366 (March 16, 1998, Sullivan, J.) [ 21 Conn. L. Rptr. 411]. Moreover, `knowledge of falsity, either constructive or actual, need not be proven to establish a violation of CUTPA.' (Internal quotation marks omitted.) Kim v. Magnotta, 249 Conn. 94, 108 (1999). For these reasons, this court concludes that a CUTPA claim can be based on a theory of negligent misrepresentation." Communications Systems, Inc. v. Cerruzzi, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 96 0153343 (January 17, 2002, Mintz, J.).
In Abrams v. Riding High Dude Ranch, Superior Court, judicial district of Fairfield, Docket No. CV 97 0345046 (February 5, 1998, Skolnick, J.), the court held that "[t]he plaintiffs have alleged sufficient facts to demonstrate that the defendants were engaged in wrongful conduct, because the plaintiffs need only allege a single act of misconduct to bring a claim under CUTPA. See Cordtz v. Arbor National Mortgage, Superior Court, judicial district of Fairfield, Docket No. 317401 (March 10, 1995, Freedman, J.) (single act may support a legally sufficient CUTPA claim, as this view is consistent with the remedial nature of CUTPA)." The court found that " the plaintiffs . . . sufficiently alleged the elements of negligent misrepresentation and . . . therefore alleged more than a simple negligence claim . . ." (Emphasis added.) Id.
Pursuant to case law, a claim for negligent misrepresentation is more than one for mere negligence, and can be the basis for a CUTPA claim. The plaintiff has alleged a claim for negligent misrepresentation; therefore, the court finds that the plaintiff has alleged facts to properly state a CUTPA claim.
3. Violation of CUTPA Claim Based in Contract
The defendants also contend that a simple breach of contract cannot support a CUTPA claim, and the plaintiff has not alleged a continuing course of intentional wrongdoing by Sullivan Real Estate.
"A claim under CUTPA must be pleaded with particularly to allow evaluation of the legal theory upon which the claim is based." (Internal quotation marks omitted.) S.M.S. Textile Mills, Inc. v. Brown, Jacobson, Tillinghast, Lahan King, P.C., 32 Conn.App. 786, cert. denied, CT Page 10661 228 Conn. 903 (1993). "[N]ot every contractual breach rises to the level of a CUTPA violation." Hudson United Bank v. Cinnamon Ridge Corp., 81 Conn.App. 557, 571 (2004). Although "the same facts that establish a breach of contract claim may be sufficient to establish a CUTPA violation"; Greene v. Orsini, 50 Conn.Sup. 312, 315 (2007); "[a] breach of contract claim can make out a legally sufficient CUTPA claim [only] as long as there are substantial aggravating circumstances." (Internal quotation marks omitted.) Alliance Food Management v. Gem Sensors, Superior Court, judicial district of Waterbury, Docket No. CV 06 5002996 (June 12, 2007, Gallagher, J.).
"Where a complaint alleges that a defendant made a misrepresentation during the course of the defendant's business practice, with or without the intent to deceive or fraud, and that misrepresentation led a plaintiff to lose money or property, that plaintiff has alleged a cause of action under CUTPA. In the present case, the complaint alleges that the defendants presented the plaintiff with information which the defendants failed to confirm prior to passing the incorrect information on to the plaintiff. Despite the lack of intent to misrepresent the information to the plaintiff the complaint alleges that the defendants' negligent misrepresentations led the plaintiff to suffer monetary losses. Negligent misrepresentation suffices as a basis for a CUTPA claim and as an aggravating factor making a breach of contract action also the basis of a CUTPA claim." (Emphasis added.) Friedlander Limited Partnership v. Cohen, Superior Court, judicial district of Fairfield, Docket No. CV 04 0412547 (April 15, 2005, Skolnick, J.).
While the plaintiff does not make out a claim for breach of contract, namely, formation of an agreement, performance by one party, breach of the agreement by the other party and damages, as clearly as he might have; see American Express Centurion Bank v. Head, 115 Conn.App. 10, 15-16 (2009); a breach can certainly be implied from the allegations. The Plaintiff alleges a contractual duty on the part of Sullivan Real Estate to disclose all material information to the plaintiff, Sullivan Real Estate's knowledge or means of knowing about the mold, and the plaintiff's purchase of the property, only after which he discovered the mold on his own. It is clear that if the aforementioned allegations prove to be true, a trier of fact could find that the corporate realtor failed to honor its obligations, and breached the contract it had with the plaintiff.
To withstand a motion to strike the plaintiff's CUTPA claim based on contract, this court must determine whether the plaintiff has alleged sufficient aggravating factors beyond a mere simple breach of contract.
The negligent misrepresentation on the part of Kelley Sullivan alleged in count three serves as an aggravating factor to the breach of contract. The plaintiff also alleges an additional aggravating factor in count three: "The plaintiff, after numerous conversations over the course of a year from June of 2005 to around June of 2006 regarding reimbursement, and then subsequent refusal by defendant Kelley J. Sullivan to pay for the remediation, the plaintiff had to spend his money to fix the old infestation in his condominium." This allegation implies that Kelley Sullivan reassured the plaintiff that he would not have to pay for the mold damage, and then failed to follow through with reimbursement. In addition to the breach, then, Kelley Sullivan further misled the plaintiff that the problem would be rectified.
The court finds that plaintiff has alleged aggravating circumstances to properly bring his claim within the cigarette rule, and, therefore, to support a CUTPA claim based on breach of contract.
4. Violation of CUTPA Claim Based on Isolated Incident
Lastly, the defendants argue that a CUTPA claim based on a single instance of breach of contract caused by the negligence of a separate party, instead of a continuing course of conduct, cannot form the basis of a CUTPA claim, and, therefore, the court must apply a heightened standard when reviewing the plaintiff's allegations. They cite Bordieri v. Nelson, Superior Court, judicial district of Hartford, Docket No. CV 04 0834274 (September 28, 2006, Keller, J.), which states by way of a footnote that "[a] CUTPA claim relevant only to a single act or transaction is carefully scrutinized. Although a single transaction may be the proper subject of a CUTPA count, the essence of the act, despite its broad definition of `trade' and `commerce,' is its effort to provide a remedy for the unfair practices purpose of an existing or continuing enterprise, not misconduct that might occur in the course of a one-time transaction by a private individual. See Crescenzo v. Camarota, Superior Court, judicial district of New Haven, Docket No. CV 97 0396433, (June 9, 1997, Silbert, J.) ( 19 Conn. L. Rptr. 611)." However, in Bordieri, the plaintiffs' CUTPA count was brought against a defendant who built their home but who was not engaged in home construction as his primary trade or business. Here, there is no dispute that Kelley Sullivan, as president of Sullivan Real Estate, is engaged in the primary trade or business of real estate brokerage.
Furthermore, our Appellate Court has held that a single act of misconduct could constitute a CUTPA violation. See Johnson Electric Co. v. Salce Contracting Associates, Inc., 72 Conn.App. 342, 353, cert. denied, 262 Conn. 922 (2002); Hart v. Carruthers, 77 Conn.App. 610, 618-20 (2003).
Therefore, construing the allegations in the fourth count most favorable to the pleader, and for all the foregoing reasons, this court concludes that the plaintiff has sufficiently alleged a cause of action based on a CUTPA violation. Accordingly, the defendant's motion to strike count four as to Sullivan Real Estate is denied.
The defendants also argue in their memorandum of law, but neglect to state on the face of their motion, that Sullivan Real Estate did not fail to locate the hidden mold, the injury was caused by the home inspector's error, and that vicarious liability is not the proper basis for a CUTPA claim.
The plaintiff alleges that Sullivan Real Estate itself had the means of knowing about the mold, because its agent was present during the inspection, and the company had its own contractual duty to disclose the mold, which it impliedly knew about through its agent. The plaintiff is not alleging vicarious liability, but rather direct liability on the part of Kelley Sullivan, as president of Sullivan Real Estate, for breaching its contract with the plaintiff.
V. CONCLUSION
For the foregoing reasons, the defendants' motion to strike: (1) Count Three for negligent misrepresentation as to Kelley Sullivan is DENIED; and (2) Count Four for a CUTPA violation as to Sullivan Real Estate, Inc. is DENIED.