Opinion
No. CV 03 0196219 S
June 8, 2004
MEMORANDUM OF DECISION ON PLAINTIFF'S APPLICATION FOR PREJUDGMENT REMEDY AND DEFENDANT'S MOTION TO MODIFY OR VACATE RESTRAINING ORDER
This is an action by the purchaser of property in Norwalk against her seller for alleged violation of the covenant against incumbrances contained in the April 1, 1998 warranty deed from the defendant, Angela O. Carr to the plaintiff, Janice Anne Kosinski. The alleged breach of the covenant against incumbrances stems from restrictions contained in a 1955 warranty deed in the chain of title to the property which prohibits the subdivision of the property. The plaintiff claims that she has been damaged in that the property is worth less incumbered by the restriction than it would be worth without the restriction, and that she has expended money in attempting unsuccessfully to subdivide the property. The plaintiff seeks a prejudgment remedy to secure claimed damages of $117,000.00.
Procedural Background
On July 22, 2003 this Court issued a restraining order restraining the defendant, Angela Carr from conveying, assigning, encumbering or otherwise disposing of her interest in the $215,000 purchase-money mortgage from the plaintiff and the promissory note secured thereby, or of funds on deposit in a certain account number 096 343825 in the name of Angela Carr, held by A.G. Edwards Sons, Inc. 2960 Post Road Southport, Connecticut 06890. The plaintiff had also applied for a prejudgment remedy against the assets of the defendant by application dated July 11, 2003. On December 17, 2003 the defendant moved to modify or vacate the foregoing restraining order to which the plaintiff objected. The motion to modify or vacate the restraining order appeared on the foreclosure short calendar of January 26, 2004 at which time counsel for both parties asked the court to hear evidence on the plaintiff's application for prejudgment remedy, with the understanding that the restraining order would be modified to coincide with any prejudgment remedy that the court might order. The court heard evidence on January 26 and February 9, 2004 and the parties submitted briefs dated February 16 (defendant) and February 23 (plaintiff), 2004.
Findings
After review of the evidence and assessment of the credibility of witnesses the court finds probable cause that the following facts have been established.
1. The property in question known as 94 Maywood Road, Norwalk, Connecticut, consists of 2.186 acres more or less, and has located upon it one single-family home.
2. On October 20, 1955, by an executor's deed recorded in Volume 443 at Page 584 of the Norwalk Land Records the property was conveyed from the Executors of the Estate of John Sherman Hoyt to Howard W. Carr and Mabel C. Carr as joint tenants with the right of survivorship (Plaintiff's Exhibit 2).
3. The foregoing executor's deed conveyed the property subject to certain restrictions including a restriction that: (1) "no building shall be erected on the premises . . . except one single family dwelling house"; and (3) "the premises hereinabove conveyed shall not be subdivided for the purposes of sale . . ."
4. Thereafter Mabel C. Carr died and Howard W. Carr became the owner of the premises as the surviving joint tenant. Howard W. Carr thereafter married the defendant who became the sole owner of the premises upon the death of Howard C. Carr.
5. The defendant now lives and has lived for some time in Louisiana.
6. The plaintiff and her husband Robert Kosinski occupied the premises for about two and one-half years as the tenants of the defendant, prior to the plaintiff purchasing the premises from the defendant.
7. The plaintiff purchased the premises from the defendant on April 1, 1998 for a purchase price of $260,000 which was paid, in part, by giving back to the defendant a $215,000 purchase-money mortgage payable over 20 years at an interest rate of 8.5%. The payments on the mortgage have been made at least up until the final date of the evidentiary hearing. As of February 9, 2004 the principal balance of the mortgage was about $186,000.
8. In connection with the April 1, 1998 sale of the premises from the defendant to the plaintiff, each party was represented by her own separate Connecticut counsel.
9. Prior to the April 1, 1998 closing the plaintiff's attorney did not perform or obtain a title search of the property, nor did the plaintiff herself obtain a title search, or title insurance.
10. At the April 1, 1998 closing the defendant delivered to the plaintiff a Connecticut warranty deed to the property, recorded on the Norwalk Land Records at Volume 348 Page 315. (Plaintiff's Exhibit 1).
11. The foregoing warranty deed, prepared by the defendant-seller's attorney, contains standard Connecticut conveyancing covenants that the seller was conveying "a good indefeasible estate in FEE SIMPLE . . . free from all incumbrances whatsoever except as herein stated."
12. The foregoing warranty deed of April 1, 1998 made no reference to the foregoing restrictive covenants contained in the Executor's Deed of October 22, 1955.
13. The plaintiff had no actual knowledge of the foregoing restrictive covenants.
14. The plaintiff purchased the property with the intent that she and her husband would subdivide it into two parcels.
15. But for the foregoing restrictive covenants, the property was legally capable of being subdivided into two parcels under the Norwalk planning zoning and subdivision regulations and the plaintiff's husband and/or the plaintiff's attorney were so advised by a representative of the City of Norwalk Zoning Department.
16. The plaintiff's husband planned to do the subdivision application on behalf of the plaintiff seeking to convert the property into two parcels. He spent about $17,000 for surveying, soil analysis and engineering services, making all payments from a joint checking account in the name of himself and the plaintiff.
17. The subdivision application was approved by the Norwalk Conservation Commission and the Norwalk Zoning Commission but, before the final subdivision map was filed, the plaintiff's husband was told by certain neighbors of the property about the restrictive covenants contained in the foregoing 1955 Executor's Deed.
18. The plaintiff's husband obtained a copy of the 1955 Executor's Deed and reviewed the foregoing restrictive covenants, and thereafter ceased all efforts to subdivide the property based on a threat of a lawsuit from neighboring property owners.
19. The plaintiff would not have purchased the property for $260,000 if she had known about the 1955 restrictive covenants.
20. On April 1, 1998 when the plaintiff purchased the property from the defendant, the property had a fair market value of $280,000 valued as a single house on a single lot with excess acreage, not capable of subdivision, as testified to by Mr. Peter Vimini, a licensed appraiser having a MA1 designation.
21. If the plaintiff had been able to split off a second lawful building lot on the premises at the time in question, that one-acre lot would have been worth $140,000, but the value of the remaining (reduced) parcel would have been reduced by $40,000, as testified to by plaintiff's appraiser, Patrick LaBella.
Discussion and Ruling
The court finds probable cause that the plaintiff would prevail in her claim for damages for breach of the covenant against incumbrances as contained in the April 1, 1998 warranty deed. The 1955 recorded restrictions are an "incumbrance" upon the property, not carved out of the covenant of the 1998 warranty deed and not otherwise known to the plaintiff. An incumbrance is defined as "every right to or interest in land which may subsist in third persons, to the diminution of the value of the land, but consistent with the passing of the fee by the conveyance." Kelsey v. Remer, 43 Conn. 129, 138 (1875); or as "lawful claims impairing the estate granted." Reed v. Stevens, 93 Conn. 659, 663 (1919). In this case the right of neighboring property owners having the same restrictions in their chains of title would be the third parties having a claim, right, or interest to block subdivision of the property and cause a diminution of its value as compared to subdividable property (Mr. Peter Vinini testified that these same restrictions incumbered other properties in the area that he used as comparable sales).
Defendant claims that the plaintiff cannot prevail because she had constructive knowledge of the 1955 restrictive covenants because the 1955 deed was recorded in the chain of title to the property. It is true that the plaintiff was bound by the restrictive covenants of the 1955 deed even though she was unaware of them, and those covenants could have been enforced against her by neighboring property owners under the doctrine that when a deed is recorded on the land records, the law presumes that every interested party has knowledge of the deed and its contents. Mannweiler v. LaFlamme, 65 Conn. App. 26, 34 (1991). But the doctrine of constructive notice cannot relieve the defendant of her responsibility voluntarily and expressly undertaken by the covenant against incumbrances in the 1998 warranty deed (Plaintiff's Exhibit 1) which provides that the grantor (defendant) shall ". . . WARRANT AND DEFEND the premises hereby conveyed . . . against all claims and demands whatsoever, except as herein stated." Indeed it has been held that ordinarily, a breach of the covenant against incumbrances is established because of the existence of some outstanding interest of record which is not disclosed in the deed and expressly excepted from the operation of the covenant. Jones v. Carlson, 17 Conn. Sup. 109 (1950). The recording of the 1955 deed does not bar the plaintiff from her damage claim, nor does the fact that it was plaintiff's husband Robert Kosinski (not an owner of the subject premises) who did the work connected with the attempted subdivision of the property. The court finds that Robert Kosinski was acting in conjunction with and on behalf of the plaintiff Janice Kosinski and that the expenses of the attempted subdivision application were paid from their joint bank account.
The rule of damages for breach of the covenant against incumbrances is the loss actually sustained by the grantee because of the breach of covenant as measured by the difference in value of the property unencumbered by the incumbrance in question as compared to the value of the property as so encumbered. Aczas v. Stuart Heights, Inc., 154 Conn. 54 (1966). In this case the Court has found the value of the premises as of April 1, 1998 as a single lot with a single house encumbered by the restriction against subdivision to be $280,000. The Court has also found that if the property were not encumbered by the restrictions against subdivision, a second one-acre lot could have been split off having a resale value of $140,000, but the value of the remaining land, then smaller in acreage, would have been reduced by $40,000. Without the restrictions, then, the combined two parcels would have had a net value of $380,000 ($280,000 minus $40,000 plus $140,000). The difference in value is therefore $100,000. The plaintiff claims $17,000 in subdivision expenses in addition to the value differential. The defendant claims that the expenses should be deducted from the value differential. The court finds that the expenses of subdivision would have been incurred even in the event of a successful subdivision in order to create the higher combined value of two lots, and therefore should not be added to the value differential of $100,000. But the expenses were actually paid by the plaintiff from her joint checking account with her husband after the April 1, 1998 closing and therefore should not be deducted from the value differential. The court therefore finds that the plaintiff has established probable cause that she would recover $100,000 in damages, plus taxable costs.
ORDER
Whereas, the plaintiff in the above-entitled action has made application for a prejudgment remedy to attach the goods or estate of the defendant and,
Whereas, this Court (Tierney, J.) on July 22, 2003 entered a restraining order, restraining the defendant, Angela O. Carr, also know as Angela Rosser, from conveying, assigning, encumbering or otherwise disposing of her interest in the mortgage evidenced by that certain mortgage deed from Janice Anne Kosinski, as Grantor, to Angela O. Carr, also known as Angela Rosser, as Grantee, which mortgage deed is recorded on the Norwalk Land Records at Volume 3488 Page 316, and the promissory note secured thereby, or all funds on deposit in a certain account number 096 343285 in the name of Angela Carr held by A.G. Edwards Sons, Inc., 2960 Post Road, Southport, Connecticut 06890; and
Whereas, after due hearing held on January 26, and February 9, 2004, at which the plaintiff and defendant appeared and were fully heard, it is found that there is probable cause to sustain the validity of the plaintiff's claim against the defendant and that the application should be granted;
Whereas, plaintiff is indebted to the defendant and this indebtedness is memorialized in a Note, dated April 1, 1998, and is secured by a Mortgage Deed from plaintiff to defendant which Mortgage Deed is dated April 1, 1998, and recorded on the Norwalk Land Records on April 1, 1998 at Volume 3488 Page 316 (which Note and Mortgage Deed are hereafter referred to jointly as the "Mortgage Interest"); and
Whereas, defendant has a certain account number 096 343825, in the name of Angela Carr, held by A.G. Edwards Sons, Inc., 2960 Post Road, Southport, Connecticut 06890 ("A.G. Edwards Account");
Now, therefore, it is hereby ORDERED that:
(1) the plaintiff is entitled to an attachment in the amount of $102,500;
(2) the defendant is restrained from conveying, encumbering or otherwise disposing of her Mortgage Interest;
(3) the plaintiff's obligation to make payments on the Mortgage Interest shall be suspended at such time as the principal balance due on the Mortgage Interest is equal to the amount of the attachment herein granted;
(4) the plaintiff shall not be subject to default for nonpayment of the Mortgage Interest during such period of time as the plaintiff's payment obligation is suspended;
(5) the payment schedule and final maturity date of April 1, 2018 in the Mortgage and related Note shall be extended during such period that the plaintiff's payment obligation is suspended; and
(6) except as provided in part 2 of this Order, supra, the Temporary Restraining Order of July 22, 2003 is vacated.
Notwithstanding the foregoing, it is FURTHER ORDERED that if the plaintiff tenders payment-in-full to satisfy defendant's Mortgage Interest by depositing said funds in the A.G. Edwards Account, the plaintiff will be entitled to an attachment on assets in the A.G. Edwards Account sufficient at all times while this action is pending to fully secure the sum of the attachment, as noted above.
BY THE COURT:
Jennings, J.