Opinion
No. FST CV 07 5003421 S
September 17, 2010
MEMORANDUM OF DECISION
On February 16, 2007, the plaintiff, Anice Timolien (Mr. Timolien), commenced an action by way of prejudgment remedy, against the defendants, Cabitha Timolien (Ms. Timolien), Katia H. Garcon, Lamercie Thomas, Marie Berrouet, Mortgage Electronic Registration Systems, Inc. (MERS), and Lenders Direct Capital Corporation (Lenders Direct). On the same date, Mr. Timolien also filed a proposed writ, summons, and ten-count complaint. On November 26, 2007, Mr. Timolien filed a motion to cite in Merrill Lynch Mortgage Lending, Inc., as an additional defendant. On December 17, 2007, Mr. Timolien filed a motion to cite in La Salle Bank, N.A. as trustee for the MLMI Trust Series (La Salle), as an additional defendant. Mr. Timolien filed an amended ten-count complaint on March 13, 2008, to which the defendants, La Salle, MERS, and Lenders Direct, filed an answer on March 10, 2009.
Merrill Lynch Mortgage Lending, Inc. was not added as a defendant, and is not part of the amended complaint, which is the operative complaint.
Mr. Timolien alleges theft against Timolien in count one, treble damages for theft against Timolien pursuant to General Statutes § 52-564 in count two, forgery against Timolien and Garcon in count three, double damages for forgery against Timolien and Garcon pursuant to General Statutes § 52-565 in count four, conversion against Timolien, Garcon, Thomas, and Berrouet in count five, conspiracy to convert plaintiff's property against Timolien, Garcon, Thomas, and Berrouet in count six, common-law fraud against Timolien, Garcon, Thomas, and Berrouet in count seven, claim to set aside conveyances against Timolien, MERS, Lenders Direct, and La Salle in count eight, quiet title claim pursuant to General Statutes § 47-31 in count nine, and statutory liability of notary in count ten.
The underlying facts, as alleged by Mr. Timolien, are as follows. By warranty deed recorded October 13, 1998, plaintiff and Ms. Timolien acquired title to the subject property as joint tenants with right of survivorship. Mr. Timolien and Ms. Timolien mortgaged the property in connection with a loan in the amount of $244,000 on June 26, 2001, which mortgage was recorded. On June 2004, Ms. Timolien forged a quitclaim deed, purportedly conveying plaintiff's interest in the property to Ms. Timolien. The forged deed was dated June 10, 2004 and recorded by Ms. Timolien on June 14, 2004. Mr. Timolien did not sign, nor was present when Ms. Timolien forged the deed to be executed, nor did he have notice of or authorized the execution of the forged deed. By recording the forged deed, Ms. Timolien wrongfully sought to deprive Mr. Timolien of his interest. The witnesses to the signing of the forged deed were defendants Garcon, Thomas, and Berrouet. Subsequent to recording the forged deed, Ms. Timolien purportedly conveyed the property to defendant MERS as nominee for defendant Lenders, pursuant to an open-end mortgage deed dated September 11, 2006, and recorded on September 15, 2006, in the principal amount of $485,000. This fraudulent mortgage was recorded, and thereafter, assigned to LaSalle as trustee for the MLMI trust series 2007-HE3, by instrument dated December 4, 2007. Ms. Timolien represented to the defendants MERS and Lenders that she was the sole owner of the property in connection with the loan secured by the fraudulent mortgage.
The court already entered judgment as to liability against the defendants Berrouet (March 17, 2008), Ms. Timolien (March 17, 2008), Thomas (March 17, 2008), and Garcon (May 27, 2008). Accordingly, the only issue remaining before the court is that of the amount of damages.
Mr. Timolien argues that he is entitled to the value of his interest in the property as if the fraud had never been committed, and consequential damages as a result of the defendants' fraud. Further, Mr. Timolien argues that the defendants' intentional violation of Mr. Timolien's rights entitles Mr. Timolien to punitive damages, that Mr. Timolien's cause of action did not accrue until he discovered the fraud, and that the Restatement (Second) of Torts permits recovery based on the highest market value of the converted property. Finally, Mr. Timolien argues that his settlement with the bank did not fully compensate him for the losses suffered as a result of Ms. Timolien's theft, and that the allegations of the complaint sufficiently allege the requisite intent necessary to state a cause of action for civil theft.
The defendants Timolien, Garcon and Thomas argue that the fair market value of the subject property on the filing date of the quitclaim deed is the date upon which damages are measured. Further, the defendants argue that the default judgment for civil theft is legally deficient and, therefore, an award of treble damages must be denied. Finally, the defendants argue that Mr. Timolien's settlement with defendants MERS and Lenders Direct vitiates any further claim for damages.
As both sides aptly state, there is no case law directly on point addressing the issue of damages in such an action, however because the transfer of property was fraudulent, damages law based on fraud actions is relevant. Mr. Timolien cites to Davidson v. O'Connell, 114 Conn. 116, 122, 158 A.2d 207 (1932), which provides that "the plaintiff, upon discovery of the fraud, had two remedies open to him, either to disaffirm the transaction and return the money received by [him] therefor and then recover back her property, or to affirm the transaction and recover damages suffered by [him] for the fraud. [He] could not pursue both remedies." (Emphasis added.) Id. This indicates that what is relevant in the calculation of damages in a fraud action, is the timing of the discovery of the fraud. Further, in the calculation of damages, "[t]he general rule in Connecticut in awarding damages in cases of this kind is that the plaintiff purchaser is entitled to recover the difference in value between the property actually conveyed and the value of the property as it would have been if there had been no false representation, i.e., `the benefit of the bargain' damages, together with any consequential damages resulting directly from the fraud." Miller v. Appleby, 183 Conn. 51, 57, 438 A.2d 811 (1981).
In the present case, the property value changed significantly between the fraudulent transfer of the property, and Mr. Timolien's discovery thereof, as well as between the discovery and the present time. Specifically, the value increased between the fraudulent transfer and Mr. Timolien's discovery, and decreased by a lesser amount between Mr. Timolien's discovery and the most recent appraisal in April 2010. Taking into account the case law acknowledging that a cause of action of fraud accrues with the discovery of the fraud, Mr. Timolien is entitled to be compensated as of the date of the discovery, or the filing of the prejudgment remedy on February 16, 2007, as well as receive consequential damages resulting directly from the fraud, such as the inability to sell the property at its highest value, and the subsequent decrease of value.
Further, in fraud actions, the court is entitled to award Mr. Timolien with punitive damages. In his prayer for relief in the amended complaint, Mr. Timolien asks the court for punitive damages on account of the perpetrated fraud. "In an action for fraud, the plaintiffs are entitled to punitive damages, in addition to general and special damages . . . The [purpose] of awarding punitive damages is not to punish the defendant for his offense, but to compensate the plaintiff for his injuries . . . The rule in this state as to torts is that punitive damages are awarded when the evidence shows a reckless indifference to the rights of others or an intentional and wanton violation of those rights." (Internal quotation marks omitted.) Whitaker v. Taylor, 99 Conn.App. 719, 730, 916 A.2d 834 (2007). As the purpose of punitive damages is not to punish, but to compensate, and Mr. Timolien should be fully compensated for his loss by way of the benefit of the bargain, and consequential damages, it appears that punitive damages would be excessive in the present case.
Although, as Mr. Timolien acknowledges, this case law addressing fraud claims is not quite on point, the defendant provides nothing contrary to Mr. Timolien's finding that in a fraud action, the discovery of the fraud is the relevant point in the time line for the purpose of determining damages. Instead, the defendant merely discusses the law as pertaining to conversion.
Although the present case does not concern a simple conversion, but rather a fraudulent transfer of property, even if conversion law is applied, the same result is reached. Specifically, the defendants cite to § 927(1) of the Restatement (Second) of Torts for the proposition that "[w]hen one is entitled to a judgment for the conversion of a chattel or the destruction or impairment of any legally protected interest in land or other thing, he may recover . . . the value of the subject matter or of his interest in it at the time and place of the conversion, destruction or impairment . . ." The plaintiff, however, correctly notes that comment f, entitled "additions or improvements," provides an exception, stating that "[w]hen a converter has made additions to or otherwise improved the chattel, the owner may in some cases be able to recover the value of the chattel as thus increased. This is also true when the converter has otherwise enhanced the value of the chattel by his own labor or expenditures . . . Whether the enhanced value can be recovered will depend upon the state of mind of the converter at the time that he does the acts that increase the value." Specifically, "[i]f the converter's conduct is not in good faith, as when he knows that the chattel is not his when he originally converts it or when he acquires the knowledge before he improves it, a special rule of damages awards to the owner the increase in value that the converter has contributed to the chattel." As the defendants in the present case acquired the subject property by fraud, this rule would apply, and the plaintiff should be awarded the increased value of the property.
Finally, the court will address the two remaining arguments made by the defendants, arguing, one, that Mr. Timolien's settlement with the bank fully compensated him, and two, that Mr. Timolien insufficiently alleged his civil theft cause of action. The former, whether Mr. Timolien has been fully compensated, will depend on the final accounting, however based upon the law guiding the determination of damages, it does not appear that Mr. Timolien has been fully compensated thus far. As to the civil theft claim, it is too late at this point in the proceedings, postjudgment, for the defendants to make insufficiency arguments. In fact, the court has already entered default judgment against the defendants due to their failures to appear and/or file answers. Further, the defendants merely claim that the default judgment for civil theft is legally deficient, citing to law that intent must be pleaded. The defendants fail to, however, make an actual argument as to how Mr. Timolien's pleading is insufficient, and why the court should consider the argument. Accordingly, the court will not entertain any arguments claiming insufficiency of a count, which has already been ruled upon as to liability.
As the closest applicable case law in the present case highlights the discovery of the fraud as the relevant point in the time line pertaining to the determination of damages, the court holds that the value determining damages is the one on the date of the discovery, or in this case, the date of the filing of the prejudgment remedy, February 16, 2007, at which point the property was appraised as $575,000. Alternatively, even if conversion law is applied, the determinative value, with the plaintiff benefitting from the increase in value, remains to be $575,000. Further, as Mr. Timolien is entitled to consequential damages as a result of the fraud, even if the court were to determine that he is entitled to damages according to the present value of the property, he would still be entitled to compensation for the loss in value consequential to the fraud, resulting in $575,000 remaining to be the determinative value. Finally, the court does not award punitive damages to Mr. Timolien, as he will be sufficiently compensated, and the court does not intend to punish the defendants. Accordingly, the court holds that damages shall be calculated as of the date that Mr. Timolien discovered the fraud, on which date the property was valued at $575,000.
CT Page 18841