Opinion
No. CV 05-4015021S
April 12, 2006
MEMORANDUM OF DECISION
This motion requires the court to consider whether the defendants' motion to strike should be granted, (1) as to the entire complaint, on the wound that it is "fatally flawed" because it is based on the plaintiff's "misunderstanding and improper reliance on" General Statutes § 36a-498a, or (2) as to counts one, three and four on the ground that the plaintiff has failed to state a claim upon which relief may be granted. For the reasons discussed below, the motion to strike the entire complaint is granted on the first ground and, accordingly, the court needs not address the second.
On August 3, 2005, the plaintiff filed a four-count complaint against the defendants, Ameriquest Mortgage Company and Argent Mortgage Company, LLC, arising out of allegedly excessive prepaid finance charges and a prepayment penalty paid as a result of refinancing the mortgage on her West Hartford residence. In the complaint, the plaintiff alleges that these charges were incurred as a result of the defendants' breach of covenants of good faith and fair dealing (count one), negligent misrepresentation (count two), negligence per se (count three) and intentional misrepresentation (count four).
In count one of the complaint, the plaintiff alleges, inter alia, the following facts: The defendants are corporations that are in the business of providing initial financing and subsequent refinancing for residential property purchasers. Argent is a wholly owned subsidiary of Ameriquest. On March 20, 2002, the plaintiff had originally financed the mortgage on her West Hartford residence though Ameriquest. During 2003, she sought to refinance that mortgage. Argent contacted her though a mortgage broker, with whom she was working at the time, and offered to refinance her mortgage at a more favorable rate than that which she had been paying. The plaintiff accepted Argent's offer and a closing was held on September 15, 2003.
"As a result of this closing, [she] was required to pay Argent $11,788.47 as `settlement costs' and a pre-payment penalty to Ameriquest of $11,686.60." (Complaint, count one, ¶ 6.) After the September 15, 2003 closing, Argent notified the plaintiff that her refinanced mortgage had been assigned to Ameriquest. On January 22, 2004, the defendants entered into an agreement with the Connecticut banking department, in which they agreed to refund to customers such as the plaintiff prepaid finance charges in excess of those allowed by General Statutes § 36a-498a. All of the allegations in count one have been incorporated into counts two, three and four.
On September 8, 2005, the defendants filed a motion to strike the entire complaint on the ground that it is "fatally flawed because it is based on [the plaintiff's] misunderstanding of and improper reliance on . . . § 36a-498a." Alternatively, the defendants have moved to strike counts one, three and four on the ground that those counts fail to state a claim upon which relief may be granted. In accordance with Practice Book § 10-42, the defendants filed a memorandum of law in support. On October 5, 2005, the plaintiff filed an objection to the motion and a memorandum in opposition. The defendant filed a reply memorandum on October 27, 2005.
In this alternative ground in its motion to strike, the defendants simply state that "the Defendants seek to strike Counts One, Three and Four of the Complaint for failure to state a claim upon which relief may be granted." Because the defendants did not specify the distinct reasons for the claimed insufficiency of counts one, three and four in its motion, the motion is "fatally defective" under Practice Book § 10-41 notwithstanding the defendants' inclusion of such reasons in its supporting memorandum. Bouchard v. People's Bank, 219 Conn. 465, 468 n. 4, 594 A.2d 1 (1991). Although the court has discretion to consider that part of defendants' motion in the form presented due to the plaintiff's failure to object to its form and the non-jurisdictional nature of § 10-41; Bouchard v. People's Bank, supra, 219 Conn. 468 n. 4; it is not necessary to reach these additional grounds as the motion is granted on the first ground.
"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, 815 A.2d 1188 (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.) Larobina v. McDonald, 274 Conn. 394, 400, 876 A.2d 522 (2005). "It is fundamental that in determining the sufficiency of 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." (Internal quotation marks omitted.) Commissioner of Labor v. C.J.M. Services, Inc., 268 Conn. 283, 292, 842 A.2d 1124 (2004). "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, 693 A.2d 293 (1997). "[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Larobina v. McDonald, 274 Conn. 394, 400, 876 A.2d 522 (2005).
The defendants first argue that the complaint must be stricken in its entirety because it is based upon the plaintiff's misunderstanding and misapplication of General Statutes § 36a-498a. They contend that the plaintiff has failed to plead the elements required to state a cause of action under that section. Noting that the Appellate Court and the Supreme Court have been silent as to the scope and application of § 36a-498a, they maintain that to state a claim based on a violation of that section, a plaintiff must allege (1) that the defendant is subject to the provisions of the statute, (2) the total amount of the loan, plus any "additional proceeds" received in the event of a refinancing, so that the maximum amount of permissible prepaid finance charges may be calculated and (3) the amount of prepaid finance charges as distinguished from the total settlement fees paid at the time of closing of the original loan and, if applicable, the amount of such fees paid at the time of the closing of the refinanced mortgage. They contend that the plaintiff has (1) failed to allege whether either defendant is subject to the provisions of § 36a-498a, (2) failed to identify the amounts of the existing mortgage principal or of any additional proceeds received as a result of the September 15, 2003, closing, (3) failed to distinguish between the amount of prepaid finance charges and actual settlement costs paid at the March 20, 2002 closing on the existing mortgage and (4) failed to distinguish between the amount of prepaid finance charges and actual settlement costs paid at the September 15, 2003, closing on the refinanced mortgage.
The defendants further maintain that "settlement charges" are not "prepaid finance charges" as that term is defined in General Statutes § 36a-746a(7). They contend that the plaintiff's allegation in paragraph nine of the complaint, that the amounts charged by Argent as "`settlement charges' during the September 15, 2003 refinancing constitute in reality `prepaid finance charges' which exceed the limits of . . . § 36a-497a, which a lender is entitled to charge in a mortgage refinancing," is a conclusory allegation of law that is not supported by fact, and, therefore, cannot survive the motion to strike.
General Statutes § 36a-746a(7) provides: "`Prepaid finance charge' means any finance charge determined in accordance with 12 CFR Section 226.4, as from time to time amended, that is paid separately in cash or by check before or at consummation of a loan or extension of credit or withheld from the proceeds of such transaction at any time, except the term includes any fees or commissions payable to the lender or broker in connection with the sale of credit life, accident, health, disability or unemployment insurance products or unrelated goods or services sold in conjunction with the loan or extension of credit when the cost of such insurance products or goods or services is prepaid with the proceeds of the loan or extension of credit and financed as part of the principal amount of the loan or extension of credit, and excludes premiums, fees and any other amounts paid to a governmental agency, any amounts required to be escrowed by a governmental agency and interim interest . . ."
The defendants next argue that the plaintiff has not pleaded a violation of § 36a-498a because the plaintiff in paragraph 10, has alleged that "Ameriquest was specifically barred by the two year time limitation, of . . . § 36a-498a from refinancing [the plaintiffs] original loan." They contend that the statute does not bar a lender from refinancing a loan within two years, but merely puts a cap on the amount of prepaid finance charges that may be assessed during the two-year period following the closing of a first mortgage. Consequently, the defendants assert that this allegation also cannot survive a motion to strike.
The defendants maintain that based on the plaintiff's misunderstanding and misapplication of § 36a-498a, as evidenced by the above, the plaintiff's "allegations fail to state a claim involving any improper conduct upon which a claim sounding in either contract or tort might arise." They also maintain that because the plaintiff has failed to allege facts establishing a violation of § 36a-498a, and because that statute is the "predicate" for each of the plaintiff's claims, the entire complaint must be stricken.
The plaintiff counters that it is not necessary for the complaint to allege the specific elements as set forth in the defendants' memorandum. She maintains that "[a] claim is not required to be stated within the framework of a cause of action, but may be stated in general terms." (Plaintiff's memorandum in opposition, p. 2.) She contends that paragraphs one through eleven meet the pleading requirements insofar as they provide a plain statement of the underlying facts and identify the statute, the violation of which forms the basis of her complaint.
As the defendants correctly note, the plaintiff supports this argument by citing Stanley v. Harper Buffing Machine Co., 28 F.R.D. 579 (D.Conn. 1961), a federal district court addressing rule 8(a)(2) of the Federal Rules of Civil Procedure, which does not pertain to the pleading requirements of the Connecticut Superior Court. In this state, fact pleading is required, which means that "each pleading [is required to] `contain a plain and concise statement of the material facts on which the pleader relies, but not of the evidence by which they are to be proved . . .'" (Internal quotation marks omitted.) Florian v. Lenge, 91 Conn.App. 268, 274, 880 A.2d 985 (2005), quoting Practice Book § 10-1. Accordingly, the court must examine the plaintiff's allegations to determine whether the plaintiff has misapplied § 36a-498a in a way that renders the entire complaint legally insufficient.
In the complaint, the plaintiff alleges two ways in which the defendants' acts or omissions resulted in harm to the plaintiff. First, in paragraph nine of count one, which is incorporated into each of the other counts, the plaintiff alleges that "[t]he amounts Defendant Argent charged [the plaintiff] as `settlement charges' during the September 15, 2003 refinancing constitute in reality `prepaid finance charges' which exceed the limits of . . . § 36a-498a, which a lender is entitled to charge in a mortgage refinancing." This allegation is legally insufficient because it is merely a legal conclusion and the plaintiff has not alleged any facts in support of this allegation. The plaintiff has not alleged any facts showing that the so-called "settlement charges" paid by the plaintiff at the September 15, 2003 closing were actually "prepaid finance charges," as that term is defined in § 36a-746a (7).
See footnote 2 of this opinion.
Second, in paragraph ten of count one, which is also incorporated into the remaining counts of the complaint, the plaintiff alleges that "[b]y using Argent, a wholly owned subsidiary Ameriquest accomplished indirectly what it could not accomplish directly, namely causing [the plaintiff] to pay a prepayment penalty in the amount of $11,686.00 to Ameriquest since Ameriquest was specifically barred by the two year time limitation of . . . § 36a-498a from refinancing [the plaintiff's] original loan." A review of § 36a-498a reveals that this allegation is legally insufficient for several reasons.
Section 36a-498a provides in relevant part: "No licensee under section 36a-489 and no person exempt from licensure under subdivisions (1), (5) and (6) of section 36a-487 making a first mortgage loan shall charge, impose or cause to be paid, directly or indirectly, prepaid finance charges that exceed in the aggregate, the greater of five percent of the principal amount of the loan or two thousand dollars. If the proceeds of the loan are used to refinance an existing loan, the aggregate of the prepaid finance charges for the current refinancing and any previous financings by such licensee or exempt person or affiliate of such licensee or exempt person within two years of the current refinancing shall not exceed the greater of five percent of the principal amount of the initial loan or two thousand dollars. The provisions of this section shall not prohibit such licensee or exempt person from charging, imposing or causing to be paid, directly or indirectly, prepaid finance charges in addition to those permitted by this section in connection with any additional proceeds received by the borrower in the refinancing, provided such prepaid finance charges on the additional proceeds shall not exceed five percent of the additional proceeds. For purposes of this section, `additional proceeds' has the meaning given to that term in subdivision (3) of section 36a-746e and `prepaid finance charge' has the meaning given to that term in subdivision (7) of section 36a-746a." (Emphasis added.)
Although no court in this state has interpreted § 36a-498a, the language of that section is clear and contains no prohibition against the conduct alleged in paragraph ten of the complaint. That section simply limits the amount of any prepaid finance charges that may be charged in connection with a first mortgage loan to the greater of two thousand dollars or 5 percent of the original loan amount plus five percent of any additional proceeds received by the borrower in the refinancing. Moreover, the provisions of § 36a-498a pertain only to prepaid finance charges, not prepayment penalties. Contrary to the allegations in paragraph ten of the complaint, § 36a-398a contains no prohibition against refinancing a loan within two years of the original loan and contains no provision pertaining to prepayment penalties. Consequently, paragraph ten of the complaint is legally insufficient because Ameriquest was not barred by § 36a-498a from refinancing the plaintiff's loan for any period of time, nor was it barred by that section from imposing a prepayment penalty.
The court notes that § 36a-498a contains no provision whatsoever concerning prepayment penalties. The definition of prepaid finance charges that applies to § 36a-498a is found in General Statutes § 36a-746a(7). See footnote 2 of this opinion. The applicable definition of "prepayment penalties" may be found in § 36a-746a(8), which provides in relevant part: "`Prepayment penalty' means any charge or penalty for paying all or part of the principal before the date on which the principal is due and includes computing a refund of unearned interest by a method that is less favorable to the borrower than the actuarial method . . ." These definitions are distinct from one another such that a prepayment penalty cannot also be a prepaid finance charge. The former is paid at the time the principal or a portion thereof is paid before it is due and the latter is paid at the time of closing on the loan.
The allegations in paragraphs nine and ten of count one form the basis of the plaintiff's allegations of harm in each of the four counts of the complaint. In count one, in which the plaintiff alleges that the defendants breached the covenants of good faith and fair dealing, the only allegations of harm are set forth in paragraphs nine and ten. "[A]n action for breach of the covenant of good faith and fair dealing requires proof of three essential elements, which the plaintiff must duly plead: first, that the plaintiff and the defendant were parties to a contract under which the plaintiff reasonably expected to receive certain benefits; second, that the defendant engaged in conduct that injured the plaintiff's right to receive some or all of those benefits; and third, that when committing the acts by which it injured the plaintiff's right to receive benefits it reasonably expected to receive under the contract, the defendant was acting in bad faith." (Emphasis added; internal quotation marks omitted.) Ruiz v. Dunbar Armored, Inc., Superior Court, judicial district of Fairfield, Docket No. CV 03 0404213 (July 19, 2005, Hiller, J.) ( 39 Conn. L. Rptr. 710, 712 n. 3). To state a claim for breach of the covenant of good faith and fair dealing, the plaintiff, therefore, must allege sufficient facts showing that the defendants' conduct injured her right to receive certain benefits. Because the plaintiff has not sufficiently alleged any harm in count one, that claim is legally insufficient.
In count two, which incorporates all of the allegations in count one, the plaintiff alleges that the defendants' negligent misrepresentation caused the plaintiff to suffer "substantial damages by reason of Defendant's negligent omission to state material facts and negligent misstatement of material facts." (Complaint, paragraph 16.) When read in conjunction with the allegations of count one, which are incorporated therein, the "substantial damages" referenced in paragraph sixteen are the same as those more fully set forth in paragraphs nine and ten. "The cause of action for negligent misrepresentation lies when: (1) defendant had a duty to use reasonable care in giving information; (2) defendant supplied false information; (3) upon which the plaintiff relied; (4) to its damages." Beck v. Pare, Superior Court, judicial district of Hartford, Docket No. CV 02 081954 (May 23, 2003, Wagner, J.T.R.). Since damages is an essential element of a claim for negligent misrepresentation and that element has not been sufficiently alleged in paragraphs nine, ten or sixteen of the complaint, count two is legally insufficient.
Count three, which incorporates all of the allegations in counts one and two, purports to set forth a claim for negligence per se. "To prove a claim of negligence or negligence per se, the defendant [must] prove by a preponderance of the evidence each of the following elements: duty, breach, proximate cause and damages." (Internal quotation marks omitted.) Shritah v. Stop Shop Cos., 54 Conn.App. 273, 275, 734 A.2d 1035 (1999). In paragraph nineteen of count three, the plaintiff alleges, "Defendants Ameriquest and Argent doing business as separate corporate entities when they were really the same had the effect of causing Plaintiff to incur unnecessary prepayment penalties in the September 15, 2003 refinancing of her mortgage and Argent's charging pre-paid finance charges in excess of those allowed by . . . § 36-498a constitute unfair and deceptive acts in violation of [General Statutes] § 42-110b." The allegations of damages in count three are essentially the same as those alleged in paragraphs nine and ten of count one, which, for the reasons discussed above, are not legally sufficient. Because damages, an essential element of a claim of negligence per se, has not been alleged adequately in paragraphs nine, ten or nineteen of the complaint, count three is legally insufficient.
Moreover, the allegation that the defendants violated § 42-110b is not legally sufficient because the plaintiff has not alleged enough facts to establish a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. "Section 42-110b(a) provides that `[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.' It is well settled that in determining whether a practice violates CUTPA [the Supreme Court has] adopted the criteria set out in the cigarette rule by the federal trade commission 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." (Citations omitted; internal quotation marks omitted.) Hartford Electric Supply Co. v. Allen-Bradley Co., 250 Conn. 334, 367-68, 736 A.2d 824 (1999). Although a plaintiff need not allege conduct that meets all three criteria, the allegations in count three do not meet any of these criteria because the allegations of wrongdoing in that count are based on the plaintiff's misapplication of § 36a-498a. Accordingly, the allegations in count three are legally insufficient.
Count four, which incorporates all of the allegations in counts one, two and three, is characterized as a claim for intentional misrepresentation. Damages is also an element of a claim for intentional misrepresentation. See Marron Sipe Building Contracting Corp. v. Flor, 22 Conn.App. 689, 709-10, 580 A.2d 508 (1990) (claimant has burden of proving damages for intentional misrepresentation). "A cause of action for intentional misrepresentation is essentially a claim of fraud." CT Page 7038 Martinez v. Zovich, 87 Conn.App. 766, 778, 867 A.2d 149, cert. denied, 274 Conn. 908, 876 A.2d 1202 (2005). "The essential elements of an action in fraud, as [the Supreme Court has] repeatedly held, are: (1) that a false representation was made as a statement of fact; (2) that it was untrue and known to be untrue by the party making it; (3) that it was made to induce the other party to act on it; and (4) that the latter did so act on it to his injury." (Emphasis added; internal quotation marks omitted.) Updike, Kelly Spellacy, P.C. v. Beckett, 269 Conn. 613, 643, 850 A.2d 145 (2004). In count four, the plaintiff alleges that she "has suffered substantial damages by reason of the omission to state material facts by Defendants and intentional misstatements of material facts by Defendants." (Complaint, paragraph 23.) Again, these damages are the same damages alleged in paragraphs nine and ten of count one, which is incorporated into each of the other counts. Consequently, count four is also legally insufficient because the plaintiff has failed to allege sufficiently that the defendants' alleged conduct caused her to suffer injury.
For the foregoing reasons, the motion to strike is granted as to the entire complaint.