Opinion
FBTCV156052778
10-18-2017
Richard Lopez et al. v. Advanced Funding, LLC et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
Alfred J. Jennings, Judge Trial Referee.
This is a civil action brought by purchasers of a home in Norwalk against their limited liability company seller and the principal member of the seller. The case was tried to the court sitting without a jury on March 21, 22, 23, and 28, 2017. At the conclusion of the plaintiff's case when the plaintiffs had rested on March 28, 2017 the defendants Advanced Funding LLC and Jonathan Feldman, through counsel, made an oral motion to dismiss all three counts of the Amended Complaint pursuant to Practice Book § 15-8 on the ground that the plaintiffs had failed to make out a prima facie case. The court reserved decision on the motion to dismiss until the both parties had rested and the post-trial briefs had been submitted. The motion shall be considered in conjunction with the court's overall decision of the case. The parties have submitted pretrial and post trial memoranda. This is the court's memorandum of decision on the case.
As originally brought, the plaintiff's home inspector Homecheck Real Estate Services, Inc. d/b/a ProCheck Platinum Plus Home Inspections was also a defendant, but the fourth and fifth counts against Homecheck d/b/a Pro Check were withdrawn before trial.
Factual Background
This is an action related to the purchase and sale of residential real property known as 21 Silk Street, Norwalk, Connecticut (The " Property"). Plaintiffs Richard and Tania Lopez are the present owners of the Property, having purchased the Property from the defendant Advanced Funding, LLC (" Advanced Funding") on or about October 15, 2014 for the sum of $340,000. The following facts are undisputed.
Advanced Funding had purchased the Property in October 2013 through a " short sale process." Advanced Funding is a closely-held limited liability company with offices in Greenwich, Connecticut. Defendant Jonathan Feldman and his family own the membership interests in the company. Advanced Funding is engaged in the business of buying and renovating homes for resale. When Advanced Funding acquired the Property at 21 Silk Street it entered into an oral agreement with Dwayne Lawler (not a party to this lawsuit) to undertake at the expense of Advanced Funding the construction management process and to hire contractors to do what was necessary to renovate the Property for re-sale. As part of that agreement Advanced Funding agreed to pay to Lawler 25% any profits net of expenses at the time of re-sale. At the time that Advanced Funding purchased the Property it did not engage anyone to do a formal inspection of the Property. Jonathan Feldman visited 21 Silk Street once before it was purchased. Advanced Funding did receive a Residential Condition Property Disclosure Report and Mold or Mold Forming Report from the former owners, Mr. And Mrs. Anderson who stated in the 2013 disclosures that they had been resident in the Property for 11 years. In the disclosure reports the Andersons denied any condition (Damp Basement, Roof Leaks, Ice Dams, Plumbing Leaks, Flooding, Sewer Leaks) or other condition affecting the Property during their period of ownership and further denied any Foundation/slab settling, Basement Water/ Seepage Dampness or any other condition that is prescribed to be disclosed under Connecticut General Statutes Section 20-327b. At the time that the Property was first seen by Dwayne Lawler, it was clear to him that the property needed a new roof, that there was a " horrible mess" in the basement, and that " some of the plumbing in the basement looked questionable (by the water heater). He claims that he did not see any type of issue with the foundation or with water seepage in the basement. Lawler arranged for a contractor to replace the roof of the Property at the expense of Advanced Funding. He also arranged for the construction of a new peak-roofed portico over the front door, renovated both bathrooms with new fixtures, driveway repaving and drain installation, some electrical work, and repainting of the entire interior and exterior of the house. Mr. Lawler also did some work himself consisting of general cleanup of debris, some of the interior painting, the installation of a new granite sink in the kitchen, installation of a new dishwasher, oven, microwave, washer, dryer, and dehumidifier. He also replaced a set of bookshelves which he built in the then-finished portion of the basement.
The Plaintiffs made an offer in the summer of 2014 to purchase the Property as renovated fro Advanced Funding. After some negotiation though brokers a $340,000 offer was accepted. In and around June 2014 Advanced Funding completed a State of Connecticut Department of Environmental Protection Residential Property Condition Disclosure Report (" Disclosure Report") prepared by Dwayne Lawler and signed by defendant Jonathan Feldman on behalf of Advanced Funding. In response to Question 16 of the Disclosure Report which provides: " Foundation/slab problems settling? If yes, explain" Advanced Funding checked the " no" box. In response to Question 17 of the Disclosure Report which provides: " Basement/water/seepage/dampness? If yes, explain amount, frequency, and location, " Advanced Funding checked the " unknown" box. In Response to Question 20 of the Disclosure Report, which provides: " Interior Wall/ceiling problem? If yes, explain, " Advanced Funding checked the " no" box. In response to Question 21 of the Disclosure Report, which provides: " Exterior siding problems? If yes, explain" Advanced Funding checked the " no" box. In response to Question 22 of the Disclosure Report which provides: " Floor problems? If yes, explain" Advanced Funding checked the " no" box. In response to Question 25 of the Disclosure Report, report, which provides " Patio/deck problems? If yes, explain, " Advanced Funding checked the " no" box. In response to Question 27 of the Disclosure Report, which provides: " Termite/insect/rodent pest infection problems? If yes, explain, " Advanced Funding checked the " no" box. In response to Question 29 of the Disclosure Report, which provides: " 'Rot and water damage problems'? If yes, explain, " Advanced Funding checked the " unknown" box. In response to Question 30 of the Disclosure Report which provides: " Water drainage problems? If yes, explain, " Advanced Funding checked the " no" box.
Plaintiffs received a copy of the Disclosure Report before entering into a Residential Real Estate Sales Agreement dated August 20, 2014 (the " Sales Agreement") with Advanced Funding for purchase of the Property. A copy of the Disclosure Report was attached to the Sales Agreement as a " Rider" and is referenced therein and made a part thereof.
Plaintiffs also arranged for a professional home inspection by Homecheck Real Estate Services, Inc. d/b/a ProChek Platinum Plus Home Inspections (" Pro Chek). The inspection was performed on July 30, 2104 by Dee Fletcher, a licensed home inspector employed by Pro Chek. ProChek issued its 29 page written inspection report (Pl. Ex. 6) to the Plaintiffs shortly after the inspection. There was also a six page Summary Report (Def. Ex. U) issued to the Plaintiffs. The Summary Report is a summarized version of the full Inspection Report.
Plaintiffs discovered issues with the Property subsequent to the closing which have been pleaded in the Amended Complaint and will be discussed below to the extent they were advanced at the trial.
There are other, contested, issues of fact which the court will address and adjudicate in this Memorandum of Decision.
Findings of Fact/Conclusions of law
First Count
The Amended Complaint is brought against defendants in three counts. The First Count alleges Breach of Contract (the Sales Agreement) against Advanced Funding only. The plaintiffs allege the answers given by Advanced Funding to the Disclosure Report, Questions 16, 17, 20, 21, 22, 25 27, 29, and 30 and the answers given to Mold or Mold Forming Conditions questions, and that the Disclosure Report is a Rider attached to and incorporated into the Sales Agreement. Plaintiffs further allege that they entered into the Sales Agreement in reliance upon the foregoing answers to the Disclosure Report which is attached as a Rider to and made a part of the Sales Agreement. Plaintiffs further allege that subsequent to the closing they discovered issues with the Property which place Advanced Funding in breach of the sales Agreement and the Disclosure Report incorporated therein. Although some fifteen post-closing conditions are alleged in the Amended Complaint plaintiffs admit that by the time of trial they were litigating and claiming damages for only three conditions claimed to constitute breaches of the Sales Agreement through the Disclosure Report which became part and parcel of the Sales Agreement. The three remaining issues for trial purposes are:
1. There are large cracks in the foundation in the interior of the basement in the area of what was formerly the finished basement.
2. The rear portion on of the Property consisting of a kitchen on the first floor and a bedroom on the second floor is " sinking" and separating from the rest of the house on the Property (the " Kitchen Addition"). The Kitchen Addition lacks a footings and a frost barrier. There is a separation between the Kitchen addition foundation wall and the original foundation wall which does not appear to be anchored. The siding is cracking and separating in the area where the kitchen addition meets the rest of the house, presumably because the kitchen Addition is 'sinking' and separating from the rest of the house. Interior walls of the house in the Kitchen addition are cracking and have damage, presumably because the Kitchen Addition is " sinking" and separating from the rest of the house.
3. In the area of what was formerly the finished basement, water infiltrates and seeps into the basement, and the masonry block foundation is water damaged.(Plaintiff's Pretrial Memorandum of Law, pp. 2-3.)
The wall paneling, flooring, and built-in bookshelves which made up the " finished" portion of the basement were demolished by plaintiff's contractor in or about August 2015 due to deteriorating condition.
Plaintiff's Post-Trial Brief at pp. 11-20 goes into extensive detail as to the three after-discovered conditions with reference to the photographic exhibits and the trial testimony of the plaintiff Tania Lopez and the plaintiffs' two expert witnesses. The water penetration in the finished basement is said to have been first noticed about two months after the closing when Tania Lopez went downstairs to the basement to place a book on the newly constructed bookcase and noticed that there was water on the bookshelves and the book on the shelf, and there was a musty moldy smell not previously noticed. (TR 3/21/17 AM p. 56.) She further observed that the wood had begun to warp and paint had begun to peel on the shelves. (Id., 56-57.) In the following month Ms. Lopez observed a lot of water penetration in the area of what was the finished basement. Wood continued to warp, rot, and peel. (Id., 57.) Exhibit 27 contains photographs taken in or about August 2015 (ten months post-closing) depicting water issues in the area of the right basement wall. She further testified that the Lopez family has experienced water penetration during heavy rains when water accumulates and creates puddles. (TR 3/21/17 PM p. 13.) Steven Trinkhaus, P.E. testified as an expert hydrologist on water penetration. He opined that flaking of paint off the walls of the masonry block foundation in the formerly finished basement was indicative of water coming through the wall. He observed a vertical crack on the right basement wall beneath the window which was additional evidence of water penetration (Id., p. 84) and opined that the vertical crack was caused by " [a] fairly long-term exposure of moisture coming through the wall (Id., 98-99) and that the water infiltration problem was a " longstanding condition" (Id., 89-90).
Plaintiff's other expert witness Nic Cuoco, PE, SE, SECB (A certified Professional Structural Engineer) confirmed in his opinion that the flaking on the cinderblock wall indicates moisture penetration through the wall. He observed flaking on the right wall in the area below the pipe and the evidence of flaking increased the lower you went on the wall. (TR 3/223/17, p. 71.) Cuocco identified a horizontal crack in the right wall of the basement, depicted in photographs, Exhibit 17, as a " structural failure." (TR 3/23/17, p. 62.) He defined " structural failure" as " It basically has exceeded the allowable structural capacity of whatever the material is, and has either torn, broken, or failed . . ." (TR 4/23/17 p. 65.) He testified that the Kitchen Addition basically lacks footings and lacks a frost barrier which would prevent the addition from settling. He observed that the Kitchen Addition leans " pretty substantially" toward the back and that the slab inside the Kitchen Addition underneath in the crawl space is significantly deteriorated and cracked, and that there were visible gaps between the original house foundation and the addition foundation. (TR 3/23/17, p. 41.)
Plaintiffs claim past and future damages caused by Advanced Fundings' alleged breaches of contract and claim an award for attorneys fees and court costs pursuant to Paragraph 29 of the Sales Agreement which provides " Except as otherwise expressly provided herein, in the event of any litigation brought to enforce any material provision of this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys fees and court costs from the other party." Plaintiffs claim, alternatively, a refund of all amounts paid to Advanced Funding, under Paragraph 26 of the Sales Agreement which provides: " In the event Purchaser shall establish that any representations of the Seller contained herein or in any Rider shall be untrue or incorrect, the Seller's sole obligation shall be to return to the Purchaser all sums Paid hereunder."
The defendants have filed their Answer, Special Defenses, and Counterclaim (for an award of counsel fees) to the Amended Complaint. With respect to the First Count of the Amended Complaint defendant Advanced Funding answers " Denied" as to all the allegations of its Answers to the Questions in the Disclosure Report, but then, as to each Question alleges " The Residential Condition Property Disclosure Report was completed on behalf of Advanced Funding." Since the Disclosure Report is in evidence as a Rider attached to the Sales Agreement (Plaintiff's Exhibit 7) and the allegations of the Amended Complaint exactly track Advanced Fundings' answers to the various questions, the court takes the Answer as an admission of those allegations. Advanced Funding denies the reliance allegation of Paragraph 15 because of a non-reliance provision of paragraph 18 of the Sales Agreement, and denies the allegation of paragraph 16 of the Amended Complaint which alleges that the Disclosure Report is " attached to the Purchase Contact as a 'Rider, ' " although Paragraph 18 of the Sales Agreement specifically states: " Attached hereto as a Rider is the Property Condition Disclosure Form . . ." Advanced Funding pleads no knowledge as to plaintiffs' allegations of discovery of post-closing defects and leaves plaintiffs to their proof, and denies plaintiffs' allegations of damages and all claims for relief.
Defendant Advanced Funding pleads five Special Defenses to the First Count: (1) that the plaintiff's claim of breach of contract cannot be made because the Sales Agreement specifically provides that no claim may be had following the closing and passage of title, citing Paragraphs 18 and 26 of the Sales Agreement (Merger by Deed and Estoppel); (2) that paragraph 18 by its express terms provides that the Purchaser may not rely on the representations made in the Residential Property Disclosure Form (Waiver/Estoppel); (3) that by the express terms of the Sales Agreement the Plaintiffs as purchasers were to rely on their own inspections in evaluating the condition of the Premises (Purchase Agreement Paragraph 18 (Waiver/Estoppel); (4) " Lopez, [surname of both plaintiffs] has failed to properly plead a cause of action that would lead to a remedy of rescission of contract because of the Merger by Deed principle. Further, there is no proper basis for an award of interest or punitive damages as no cause of action for intentional tort can be had against Lopez [Feldman??] and Advanced Funding"; and (5) that plaintiffs' claims of detrimental reliance [on the Disclosure Report answers of Advanced Funding] is misplaced and was justified against the former defendant Homecheck Real Estate Services, Inc. d/b/a Pro Check.
The Special Defenses will be addressed first since, if proved to be valid, they would be a bar to all the claims pleaded against Advanced Funding in the First Count.
The First Special Defense is based on the doctrine of merger by deed. The following provisions of the Sales Agreement are relevant to this special defense.
18. Property Condition Disclosure Form. Attached hereto as a rider is the Property Condition Disclosure Form required by Section 20-327b of the Connecticut General Statutes . . . If the Seller has furnished a Property Disclosure Form, the Purchaser acknowledges that no representation contained therein constitutes a warranty and that no such representation shall survive the closing. Furthermore, the Purchaser hereby acknowledges that he has not relied on the representations made in said Form, but rather on the Purchaser's own inspections in evaluating the condition of the Premises.
25. Acceptance of Deed. The delivery and acceptance of the deed herein described shall be deemed to constitute full compliance with all the terms, conditions, covenants and representations contained herein, or made in connection with this transaction, except as may herein be expressly provided and except for the warranties of title.
26. Representations. Unless otherwise specified in writing to the contrary, none of the representations made in this Agreement including all attachments shall survive delivery of the deed and all Representations by SELLER are made to the best of SELLER's knowledge and belief and without duty of inquiry.
There are no provisions of the Sales Agreement or the Disclosure Report that are stipulated to survive the closing of title or the delivery of the deed. The Disclosure Report provides in Part III as required by Conn. Gen. Stat. § 20-327b(d)(2)(D) that " Any representation made by the seller on this report shall not constitute a warranty to the buyer."
It is undisputed that all the allegations of breach of contract alleged by plaintiffs were discovered and asserted after the October 15, 2014 closing of title and delivery of the deed from Advanced Funding to the plaintiffs. " Subsequent to the closing, Plaintiffs discovered issues with the Property . . ." (Amended Complaint, First Count, Paragraph 18.) As such all the claims of breach of contract are barred by the doctrine of merger by deed.
Under the principle of merger by deed the terms of the deed . . . automatically replace and supercede the terms of the underlying contract, absent a reservation of collateral rights. Mongillo v. Commissioner of Transportation, 214 Conn. 225, 231, 571 A.2d 112 (1990). Our case law provides examples where the terms of an underlying agreement no longer bound the parties because they merged with the deed upon conveyance of title . . . In this case the buyers reference the language of § 8 of the contract " Encumbrances" to support their provision that the terms of the this provision were breached when title was conveyed to them without a certificate of occupancy having been issued for part of the premises . . . Fatal to this claim, however, is the fact that the terms and provisions of § 8 were merged with, superceded and replaced by the terms of the deed at the time of closing because § 8 contained no express language indicating that it would survive conveyance of title.Biro v. Matz, 132 Conn.App. 272, 280-81, 33 A.3d 742 (2011).
Unless the contract expressly provides that certain terms shall survive, 'it is axiomatic that a deed supercedes the underlying contract. Powers v. Olson, 252 Conn. supra, at 106, 74 A.2d 799 " Acceptance of a deed in pursuance of articles of agreement for a conveyance of land is prima facie the completion of the contract, and all stipulations contained therein . . . are merged in the deed although omitted therefrom." Id. quoting Knight v. Breckheimer, 3 Conn.App. 487, 490, 489 A.2d 1066 (1985).Biro v. Matz, supra, at 278-79.
Plaintiffs cite Hull v. Fonck, 122 Conn.App. 286, 291, 999 A.2d 775 (2010) for the proposition that merger by deed only applies to bar claims of innocent misrepresentation, not intentional or negligent misrepresentation claims. That case deals with the law of the torts of negligent misrepresentation and innocent misrepresentation. It is not a breach of contract case and makes no reference to the defense of merger by deed.
The deed of conveyance of the Property from Advanced Funding to the Plaintiff has not been submitted, and plaintiffs make no claim that any warranty of that deed has been breached. The First Special Defense has been proved to be a complete defense to the First Count of the Amended Complaint under the doctrine of merger by deed.
The Second and Third Special Defenses sounding in waiver and estoppel to the First Count have also been proved and established as valid defenses to the First Count. The plaintiff allege in the First Count, paragraph 15 that they entered into the Sales Agreement " [i]n reliance upon the representations in the Disclosure Report in and around August 2014." That reliance, however, was waived and bargained away by the express provisions of the Sales Agreement. After plaintiff's inspection report by Pro Check had been shared with Advanced Funding, Advanced funding agreed in the Sales Agreement, paragraph 38 to make certain repairs and to provide paid receipts by the time of closing; and additionally agreed in paragraph 39 to provide to the Buyer (the Lopez plaintiffs) a $1,500 one-time non recurring closing cost credit. An additional $500 credit was allowed at closing with respect to new glass for a basement window. Any reliance on the representations of the Disclosure Report was expressly waived under paragraphs 18, 25, and 26 of the Sales Agreement, quoted above, and paragraph 8 of the sales Agreement which provides, in part:
CONDITION OF PREMISES [THIS AGREEMENT IS NOT SUBJECT TO ANY INSPECTION CONTINGENCIES] The BUYER agrees that he has inspected said Premises, is satisfied with the condition thereof and agrees to accept at closing the Premises in their present condition, subject to the provisions of Paragraph 11 hereof [Risk of Loss by Fire or other casualty].
Having expressly waived the right to rely on any representations made in the Disclosure Report but rather to rely only on their own inspections of the Property, the plaintiffs are estopped from their breach of contract claim against defendant Advanced Funding based on representations made in the Disclosure Report.
The Fourth Special Defense to the First Count is also validly proved. Paragraph 26 (bolded part) of the sales Agreement providing for full refund of all sums paid by the purchaser (plaintiffs herein) has been merged into and superceded by the deed of conveyance under the doctrine of merger by deed.
The Fifth Special Defense to the First Count of the Amended Complaint is not a valid special defense under Practice Book § 10-50.
Having found that the First Count is barred by proof of four valid special defenses, it is not necessary to review or evaluate the Plaintiffs' liability claims of the First Count (Breach of Contract) against Advanced Funding. Defendant Advanced Funding's Motion to Dismiss for failure to make out as prima facie case is granted as to First Count of the Amended Complaint.
Second Count
The Second Count and the Third Counts are brought as claims in tort, unlike the First Count which was for breach of contract.
The Second Count is brought against both defendants, Advanced Funding and its member Jonathan Feldman, sounding in Intentional Misrepresentation and Fraud. The plaintiff incorporates from the First Count the Answers to the questions Nos. 16, 17, 20, 21, 22, 25 27, 29, and 30 of the Disclosure Report and further alleges that Feldman signed the Disclosure Report and the Purchase Contract on behalf of Advanced Funding (Para. 21); that " The representations made by Feldman and Advanced Funding in the Purchase Agreement and the Report as alleged herein were made to induce the plaintiffs to execute the Purchase Agreement." (Para. 22); and that " The representations made by Feldman and Advanced Funding in the Purchase Agreement and the Report as alleged herein were false and Feldman and Advanced Funding knew them to be false." (Para. 23.) Paragraph 24 alleges that " Plaintiffs have incurred damages and will continue to incur damages as a result of Feldman's and Advanced Funding's intentional misrepresentations." The defendants denied paragraphs 21, 23, and 24 and pleaded lack of knowledge as to paragraph 22. The defendant Jonathan Feldman has plead one special defense to the Second Count, which alleges that " By placing his signature on a Purchase Agreement, as manager of a limited liability company, without some other affirmative act or intentional failure to act, Jonathan Feldman, individually, cannot be said to have committed an intentional tort because he has not committed or participated in the commission as alleged in the Second Count of the Plaintiff's Complaint."
The court will address the Jonathan Feldman Special Defense first. The only allegation and the only evidence of tortious conduct by defendant Feldman is that he signed the Disclosure Report, and the Sales Agreement into which the Disclosure Report is incorporated, on behalf of the defendant Advanced Funding, LLC, which is a Connecticut limited liability company, and that Advanced Funding, LLC gave intentionally false answers to Questions within that Report. There is no claim or evidence that Feldman prepared that Report. In fact, there is evidence, and the court finds that Dwayne Lawler (not a party to this lawsuit) prepared the report on behalf of Advanced Funding and submitted the Report to Jonathan Feldman as the authorized signatory of the Report on behalf of Advanced Funding, LLC. Although Feldman alleges in his Special Defense that he signed, " as manager" the Agreement which is in evidence as Plaintiff's Exhibit 7 shows that he signed the Sales Agreement on behalf of Advanced Funding, LLC without listing any title or officer status; and that he signed the Disclosure Report (copy attached as a Rider to the Sales Agreement, Pl. Ex. 7) on or about June 23, 2014 on a line designated for a " Seller" signature. (The " Seller" is identified on the front page of the form by the typed name " Advance Funding, LLC") Plaintiffs argue that Feldman is individually liable as a person who participated in the torts alleged in the Amended Complaint, making reference to Judge Wenzel's Memorandum of Decision dated July 26, 2016 denying the defendants' Motion to Strike all three counts of the Amended Complaint in this case. The argument for striking the Second Count was that Mr. Feldman signed the Disclosure Report solely in a representative capacity as a member of the limited liability company. The motion was denied because there was no allegation in the Amended Complaint that Feldman was a member of Advanced Funding, LLC or held any particular office or had any status within Advanced Funding, and the court deciding a motion to strike could not consider information supplied by defendants extraneous to the complaint. The argument is now being made in the context of a full trial on the merits where this court has heard evidence from Mr. Feldman that he and possibly some trusts for his wife and children own all of the membership interests in the limited liability company. (TR 3/28/17 p. 106.) The denial of the Motion to Strike has no bearing on this trial issue.
Conn. Gen Stat. § 34-133(a), part of the Connecticut Limited Liability Act as it then existed prior to the 2017 Revised Act, provides:
Except as provided in subsection (b) of this section [regarding the personal liability of members of a professional limited liability company for wrongful acts or misconduct in rendering professional services] a person who is a member or a manager of a limited liability company is not liable, solely by reason of being a member or manager, under a judgment, decree or order of a court, or in any other manner, for a debt, obligation, or liability of the limited liability company, whether arising in contract, tort, or otherwise, or for the acts or omissions of any other member, agent, manager or employee of the limited liability company.
Focusing on the word " solely" our Supreme Court has held that the statute does not exclude individual tort liability of a LLC member or manager who " commits" a tort, even if he is acting on behalf of the LLC. The rule, known as the " common law tort exception" applies to one who commits the tortious act or orders, supervises, engages in. or participates in the commission of the tort even in the absence of facts sufficient to pierce the corporate or limited liability company veil. Sturm v. Harb Development, LLC, 298 Conn. 124, 2 A.3d 859 (2010). Sturm cites and relies on Scribner v. O'Brien, Inc., 169 Conn. 389, 363 A.2d 160 (1975) where the trial court had held the president of a construction company personally liable for the negligence of the company in dealing with lack of proper drainage at a newly constructed home. In affirming, the Supreme Court took note of the active role played by the individual in the negligent acts. It is clear that O'Brien was present at the property on a daily basis, that he undertook to supervise the construction, and that he failed to act with reasonable care in that undertaking. Whether O'Brien was acting in his individual capacity or as an officer or agent of the named defendant, he is still liable to the plaintiff for his participation in the negligence complained of. 169 Conn. at 403-4.
The role of Jonathan Feldman in the present case is a different situation. He was not present at 21 Silk Street on a daily basis. In fact he was hardly there at all in the period of approximately one year that Advanced Funding owned the Property. He testified, and the court finds, that he visited the site only twice: once to look at the house before Advanced Funding bought it, and once to see the renovations that Lawler had completed. He did not " supervise" Lawler's work at all. His role was strictly financial. His only role in the alleged tort of intentional misrepresentation is that he signed as the authorized member of Advanced Funding, LLC the State of Connecticut Property Condition Disclosure Report which Advanced Funding was required by law to provide to the Lopez purchasers. He thought that the form had been prepared by the real estate broker (TR 3/28/17, p. 111), but in fact the form had been completed by the project manager Dwayne Lawler, and needed an authorized signature on behalf of Advanced Funding, LLC as the selling entity. Advanced Funding had no ability to execute documents except through the signature of a member, manager, or agent. Feldman was told by the broker that " I needed to sign it or else be fined $500." (Id. P. 112.)
Under these circumstances the court holds that Jonathan Feldman did not commit or participate in the commission of a tort against the plaintiffs. His role was strictly on behalf of the company. His role was limited and strictly within his function as the member of the company. In fact it is difficult to imagine how the sole member of a single member or family held limited liability company could ever take advantage of the statutory liability limitation of the Limited Liability Company Act if the mere signing of a required document on behalf of the company is deemed to be personal participation in the commission of a tort. The Disclosure Report is binding on Advanced Funding, LLC, but it is not binding personally on Jonathan Feldman under the " common law tort exception." See, also, D'Angelo Development and Construction Corporation v. Cordovano, 121 Conn.App. 165, 189, 995 A.2d 79 (2010). (President of construction corporation did not participate in the commission of a tort in the absence of any evidence that any of his actions were done in his individual capacity as opposed to his corporate capacity. Scriber v. O'Brien distinguished.) The Motion of Defendant Jonathan Feldman to Dismiss for failure to make out as prima facie case against him is granted as to Second Count of the Amended Complaint.
The remaining issue is whether or not the Plaintiffs have proved the tort of intentional misrepresentation against the defendant Advanced Funding, LLC. Although this count has been dismissed as alleged against the defendant Feldman, the court will also examine, as an alternate ground of decision, whether or not intentional misrepresentation has been proved against him.
The elements of intentional or fraudulent misrepresentation which the plaintiff must prove, are that (1) a false representation was made as a statement of fact; that the statement was untrue and known to be untrue by the party making it; the statement was made to induce the other party to act upon it; and (4) the plaintiffs acted upon and relied on the alleged false representation to their collective injury. Cadle Co. v. Ginsberg, 70 Conn.App. 748, 769, 802 A.2d 137 (2002), citing Jaser v. Fischer, 65 Conn.App. 349, 358, 783 A.2d 28 (2001). " In contrast to a negligent misrepresentation, [a] fraudulent misrepresentation is one that is knowingly untrue, or made without belief in its truth, or recklessly made and for the purpose of inducing action upon it." Sturm v. Harb Development, LLC, supra, 298 Conn. at 142. " This is so, because fraudulent misrepresentation is an intentional tort." Kramer v. Petisi, 285 Conn. 674, 684, n.9, 940 A.2d 800. Furthermore, a party asserting a claim of fraudulent misrepresentation " must prove the existence of a cause of action by a standard higher than the usual fair preponderance of the evidence, which higher standard we have described as clear and satisfactory, or clear, precise, and unequivocal." McCann Real Equities Series XXII, LLC v. David McDermott Chevrolet, Inc., 93 Conn.App. 486, 518, 890 A.2d 140 (2006), cert. denied, 277 Conn. 928, 895 A.2d 798 (2006).
The court finds that the plaintiffs have not proved by clear, precise, and unequivocal evidence that Advanced Funding, LLC or Jonathan Feldman made representations in the answers to the questions posed by the Residential Property Condition Disclosure Report that they knew to be untrue when that form was signed and delivered on June 23, 2014. Focusing just on the three alleged problems with the Property discovered post-closing by the plaintiffs on which they went to trial, namely cracks in the foundation wall in the area of the finished basement, lack of foundation and frost barrier under the Kitchen Addition, and water infiltration into the basement and masonry block foundation damage, the Disclosure Report answers at issue are: Question 16, Foundation/Slab problems settling? Answer " No"; Question 17, Basement/water/seepage dampness? Answer " Unknown"; Question 20: Interior wall/ceiling problem? Answer " No"; Question 22 of the Disclosure Report which provides: Floor problems? If yes, explain" Answer " No."; Question 25, Patio/deck problems? Answer " No."; Question 29, Rot and water damage problems? Answer " Unknown"; Question 30, Water drainage problems? Answer " No." The Answers to Questions 16, 17, 29, and 30 would relate to the cracks in the foundation wall and the water infiltration/foundation damage in the formerly finished area of the basement. The Answer to Question 30 would relate to the lack of foundation and frost barrier in the foundation to the Kitchen Addition which allegedly caused wall and ceiling cracks in the interior of the kitchen Question 22 would also relate to the Kitchen Addition since Plaintiffs are claiming that the kitchen floor has slanted. Question 25 would also relate to the lack of foundation and frost barrier in that there is an elevated deck off the back of the kitchen. After review of all the trial evidence the court finds that the plaintiffs have failed to prove that the defendants had any actual knowledge of conditions at the Property which would demonstrate clearly, precisely, and unequivocally that the answers to the foregoing questions in the Disclosure Report were knowingly false. Plaintiffs' theory of liability is that Lawler, acting on behalf of Advanced Funding (and Feldman), intentionally concealed known water infiltration and foundation wall cracking problems in the basement by tearing out the bookcases and wall paneling in the finished basement, thereby exposing the problems, and then constructing new bookcases and installing new wall paneling to cover up the problems he discovered. The evidence does not support that argument.
The photographic evidence shows that the so-called right-hand wall of the finished basement was bisected horizontally by a pipe running along a wooden " soffit" at approximately the mid-height of the wall. The wall above the pipe had been " finished" by installation of beaded wood paneling affixed directly to the wall. The wall below the pipe had been " finished" by a previous owners' installation of bookcases. The " backing" of the bookcases was wood paneling affixed to the back edge of the bookcase shelving such that the block wall was not visible when the bookcases were in place against the wall. The evidence adduced by plaintiff shows that most of the alleged cracking and damage to the block basement wall was above the level of the pipe. Photographs taken by plaintiffs after the upper paneling had been demolished confirm that most of the cracking and evidence of water infiltration was above the pipe. (See Exhibits 17 #2, 20, 21.)
Lawler testified, and the court finds, that upon Advanced Funding's purchase of the Property in 2013, he found the basement to be " a mess" --" looked like a junk pile" with boxes and clothes and wires and magazines everywhere. (TR 3/22/17, p. 104.) After arranging for the roof to be replaced by a roofing contractor early in 2014, and having the bathrooms and kitchen refurbished all with new appliances and fixtures and having a contractor build a wholly new peak-roofed portico at the front door entrance, Mr. Lawler decided to undertake on his own some " superficial, cosmetic" repairs to the house, including the replacement of the basement bookshelves which ran along the entire right hand wall of the basement and almost the entire front wall at a height of 3.5 to 4 feet off the floor, which he considered " shoddily made." He determined to re-make them to be " nicer." (TR 3/22 17 pp. 122-26.) He demolished the old bookcases and rebuilt them with new wood to replicate as closely as possible the old bookcases, including new backing attached to the back of the shelving and a new soffit to enclose and support the pipe. He replaced the bookcases in the same location as the previous demolished bookcases. While the bookcases were being constructed, the block wall beneath the pipe was exposed. Lawler testified that he did not observe anything along the area where he installed the bookshelves to indicate that there was any issue with regard to moisture or water infiltration at that location. (TR 3/22/17, p. 129.) (He did admit on cross examination that he had testified at deposition that he didn't remember what he saw on the lower wall.)
Lawler also testified, contrary to plaintiff's theory of deliberate concealment, that he at no time removed the paneling above the pipe where the cracking and damage was later discovered . . . (Id., P. 128.) He said that he had the upper paneling painted but had not removed it, which is confirmed by Defendant's exhibit N-3 which shows the upper paneling around the air conditioner installed in the basement window of the right hand wall, with some of the original color visible beneath the light-colored paint at the top of the window. These factors, coupled with the fact that Plaintiffs' Home Inspector Pro-Check under the heading " Basement/Water Penetration--Drainage" reported " None Present" (Ex 6, p.15; Exhibit U, p. 3) refute plaintiff's theory of intentional concealment. Although the Inspection report then goes on to note dampness on the floor at the front corner where the water meter is enclosed, water stains at front wall, and decay at front wood pipe soffit in garage, none of those locations correspond with plaintiffs' current allegations of water seepage and block wall cracking at the right-hand wall of the basement.
The claim of concealment of the lack of footings and frost barrier at the foundation of the Kitchen Addition by installing lattice in the area underneath the deck along the driveway is even more tenuous. Lawler testified that the lattice (which is perpendicular to the a foundation area where it is alleged that the foundation defect was concealed, See Ex. 3, final picture) was installed at the suggestion of one of the workmen for aesthetic reasons to shield the area under the deck where the previous owners kept their garbage cans. (TR 3/22/17, p. 129.) There is no contrary evidence. The plaintiff Tania Lopez complained of building materials and debris and cinder blocks underneath the deck which interfered with a clear view of the rear foundation wall at the time of her own inspection and the Pro-Check home inspection. Lawler testified that there were some materials left under the deck but they were not right up against the foundation wall and did not obstruct a clear view (See Ex. 22) and, in any event, were removed prior to the closing. The Plaintiff's Home Inspection Report (Ex. 6) mentions nothing about the lack of footings or a frost barrier beneath the Kitchen Addition. Even if there were some materials making it difficult or inconvenient to examine the rear foundation wall, there is no evidence of any request that those materials be removed. Lawler testified and the court finds that his painters were able to access the area in front of the block wall and painted the wall right to the " dirt line." (TR 3/22/17, p. 131.)
There was uncontroverted evidence that Pro-Check's contract with the Plaintiffs offered to come back for a final inspection before closing (when the debris and materials reportedly had been removed) but the Plaintiffs failed to take advantage of that offer. The lack of footings and frost barrier were subsurface conditions not available for inspection prior to closing by the defendants or the plaintiffs. These problems were discovered post-closing when Plaintiffs began to notice wall cracking and molding separations in the kitchen. There is no evidence, let alone clear, precise, and unequivocal evidence that the defendants' Answers to the Questions of the Disclosure Report were intentionally or knowingly false when made. Accordingly, the court enters judgment for the defendant Advanced Funding, LLC on Count 2, and would enter judgment for the defendant Jonathan Feldman on Count 2 if the claim against him in Count 2 were not dismissed.
Third Count
The Third Count of the Amended Complaint Alleges the tort of negligent misrepresentation against the defendants Advanced Funding, LLC and Jonathan Feldman. The Third Count as pleaded incorporates the allegations of paragraphs 1-21 of the First Count and additionally alleges: " 22. The representations Feldman and Advances Funding in the Purchase Comtract and the Report as alleged herein were false and Feldman and Advanced Funding LLC knew or should have known them to be false, " and " 23. Plaintiffs have incurred damages and will continue to incur damages as a result of Feldman's and Advance Fundings' negligent misrepresentations." (The complaint is identical to the allegations of intentional misrepresentation in the Second Count, except that it alleges " knew or should have known" instead of simply " knew the representations in the Purchase Contract to be false.") There are no specifications of acts or omissions claimed to be negligent.
Advanced Funding has pleaded a First Special Defense to the Third Count alleging that the plaintiffs have " failed to state a cause of action upon which relief can be granted and [have] posited a legally insufficient prayer for relief when claiming 'Negligent Misrepresentation' as to Advanced Funding because no duty was triggered under the contract and no reliance could be had based on the specific bargained-for contractual terms."
Both defendants have pleaded a Second Special Defense to the Third Count alleging that the plaintiffs were contributorily negligent by failing to read their home inspection report and follow up with recommendations made by the inspector with regard to areas of concern before waiving their building inspection contingency in the contract."
The defendant Jonathan Feldman has filed a Third Special Defense to the Third Count alleging that plaintiffs have " failed to state a cause of action upon which relief can be granted and has posited legally insufficient prayer for relief when claiming 'Negligent Misrepresentation' as to Jonathan Feldman' because Feldman, as an individual, did not make any statements or representations in his individual capacity and no duty was triggered under the contract and no reliance could be had based on bargained-for contractual terms."
Since the Third Count incorporates all the allegations of the Second Count as to the signing of the Disclosure Report by Feldman on behalf of Advanced Funding in order to induce the plaintiffs to sign the Purchase Contract, the issue of individual liability of a member of a limited liability company for statements made on behalf of the company under the doctrine of the " common law tort exception" is presented exactly as it was in the Second Count. The court therefore rules the same here. The Motion of Defendant Jonathan Feldman to Dismiss for failure to make out as prima facie case against him is granted as to Third Count of the Amended Complaint.
The remaining issue is whether or not the Plaintiffs have proved the tort of negligent misrepresentation against the defendant Advanced Funding, LLC. Although this count has been dismissed as alleged against the defendant Feldman, the court will also examine, as an alternate ground of decision, whether or not negligent misrepresentation has been proved against him if he were found to be personally liable for representations made on behalf of Advanced Funding.
The governing principles of negligent misrepresentation are: " 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 on the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information." Restatement (Second) of Torts § 522 as quoted in Hull, III v. Fonck, 122 Conn.App. 286, 290, 999 A.2d 775 (2010). Defendant's First Special Defense alleges that because no duty was triggered under the contract and no reliance could be had based on the specific bargained-for contractual terms. The essential elements of a cause of action in negligence are well established, duty, breach of duty, causation, and actual injury . . . Although it is said that no universal test for duty has ever been formulated, . . . our threshold inquiry has always been whether the specific harm alleged by the plaintiff was forseeable to the defendant . . . Furthermore, a duty to use care may arise from a contract, from a statute, or from circumstances which a reasonable person, knowing what he knew or should have known, would anticipate that harm of the general nature of that suffered was likely to result from his act or failure to act . . . Only if such a duty is found to exist does the trier of fact then determine whether the defendant violated that duty. In the particular situation at hand. If the court determines as a matter of law that a defendant owns no duty to a plaintiff, the plaintiff cannot recover in negligence from the defendant. (Citations and internal quotation marks omitted.) D'Angelo Development and Construction Co. v. Cordovano, supra, 995 A.2d at 90-91.
In this case the contract between the parties incorporates and attaches the Residential Property Disclosure Report required to be delivered prior to contract and then incorporated into any purchase and sale agreement by Conn. Gen. Stat. § 20-327b. The disclosure duty therefore comes ultimately from the statute. The disclosure duty of a seller under § 20-327b is to disclose truly and accurately " to the extent of his knowledge." (§ 20-327b(d)(2)(B). " The representations made by the seller pursuant to section 20-327b or 20-327c shall be construed only to extend to the seller's actual knowledge of the property and no constructive knowledge shall be imputed to the seller." (§ 20-327e) There is no duty to obtain information for purposes of the disclosure. " No provision of section 20-327b or 20-327c: (1) shall be construed to create any new implied or express warranties on behalf of he seller of the property; or (2) shall be construed to require the seller of the property to secure inspections, tests, or other methods of determining the physical condition of the property." (20-327d.)
Actions for negligent misrepresentation regarding real property are common-law actions, not regulated by section 20-327b. Giametti v. Inspections, Inc. . 76 Conn.App. 352, 361, 824 A.2d 1 (2003) The issue in Giametta was the propriety of the trial court's conclusion that the defendant should have discovered and disclosed that her house was infested with ants before she signed the 20-327b Disclosure Report. In reversing that holding the Appellate Court found no basis for the reliance aspect of a common law action for negligent misrepresentation. Noting that Section 20-327b emphasizes the significance of an independent professional inspection by urging a purchaser to hire a professional to inspect the property despite the representations made by the seller in a 20-327b Disclosure Report, the court held:
We may invoke § 20-327b even though even though it does not govern common-law misrepresentation because it is reasonable to conclude that the legislature's statement of policy has carryover relevance to the common law. We presume that the legislature enacts legislation that " renders the body of the law coherent and consistent. Rather than contradictory and inconsistent . . . [and that] courts must discharge their responsibility, in case by case adjudication, to assure that the body of the law--both common and statutory--remains coherent and consistent . . . Under suitable circumstances, our Supreme Court has relied on statutory policy to inform common-law adjudication . . . This is another such circumstance . . . The relationship of the policy of § 20-327b and the common law of negligent misrepresentation persuades us that, in the absence of any other evidence of actual reliance by the plaintiff, he cannot prevail in his misrepresentation claim . . .
We conclude, therefore, that the findings of fact supporting the court's judgment plaintiff were insufficient to support the judgment. Specifically, the record does not reveal any evidence that the plaintiff, despite the professional inspection, was justified in relying on the statements the defendant made in the § 20-327b report.Giametta, 76 Conn.App. 365-66.
The same result is applicable here. The Lopez plaintiffs hired their own professional inspection of the house at 21 Silk Street by Pro-Check Platinum Plus Home Inspections. A detailed Report was issued and available before the Sales Agreement was signed. In fact, plaintiffs used the Inspection Report to negotiate several work and dollar concessions and credits into the contract. The Inspection Report (Ex. 6) at page 15 under the heading Basement & Crawl Space, states: " General condition is acceptable at the time of inspection" as to Walls-Ceiling, Stairs/Railings, and Ventilation. With respect to Water Penetration--Drainage, the inspector reports: " None Present. Front Corner where water meter is enclosed appears damp on floor. Water stains at front wall, and decay at front wood pipe soffit is decayed in garage. Evidence of prior water penetration is noted" Under " NOTE": the report further states, " Water marks and efflorescence was noted. This indicated water has entered the area in the past. Be sure that all exterior grades pitch away from the foundation and carry roof drainage away from the structure. NOTE: Recommend the continued use of a dehumidifier to aid in controlling excess moisture."
The defendants have certified the condition of the basement to the extent of their actual knowledge as required by law. They were not required to get a professional inspection, nor did they get one. In accordance the recommendation of Section 20-327b the plaintiffs obtained a professional inspection with a detailed written report. Plaintiffs allege generally that the plaintiffs' responses to the 20-327b responses were false and defendants should have known them to be false, but there are no specifications of negligence as to how or why or when the defendants were careless or what standard of care they violated. They also presented no evidence why, despite their professional inspection, they were justified in relying on the answers the defendant made in the § 20-327b report. Without justified reliance their case for negligent misrepresentation fails.
The court enters judgment for the defendant Advanced Funding, LLC on the Third Count. (The judgment would also be in favor of the defendant Jonathan Feldman if his motion dismiss had not been granted.)
Judgment
The Defendant Advanced Funding, LLC's Motion to Dismiss for failure to make out a prima facie case is granted as to the First Count. The Defendant Jonathan Feldman's Motion to Dismiss for failure to make out a prima facie case is granted at to Count Two and Count Three. Judgment is entered in favor of the Defendant Advanced Funding, LLC as to Count Two and Count Three.
Attorneys Fees
The Sales Agreement has a provision (Paragraph 29) for a award of attorneys fees and court costs in favor of the prevailing party. The Defendants have filed a counterclaim asking for such an award it was agreed at trial that any claims for attorneys fees would be taken up separately post-trial. Any Motion for an Award of Attorneys Fees and Costs shall be filed within thirty days from the date of this judgment, together with a detailed affidavit and a memorandum of law. The court will then schedule a hearing.