Opinion
No. CV 05-4002820S
February 13, 2008
MEMORANDUM OF DECISION-JUDGMENT
The plaintiffs, Helen Zenon and William Zenon, Trustees of BG Zenon Realty Trust, brought an action against the defendant, J.A. Mossy, on a promissory note which the defendant had made payable to the plaintiffs in the amount of $37,500. The underpinnings of this action go back to 2001 when the defendant began negotiations through her husband, David Mossy, to purchase a parcel of land owned by the plaintiffs and located on the easterly side of East Thompson Road and the northerly side of Roy Road in the town of Thompson, CT. Mr. Mossy, the defendant's husband, had some prior experience as a builder and land developer. He was interested in purchasing the property and then subdividing it for the development of two residential lots. He acted as the defendant's agent in the negotiations for and purchase of the property. The plaintiffs, especially William Zenon, was an experienced real estate broker and developer who had been in the real estate business for many years. He was licensed as a real estate broker in Massachusetts and had originally purchased the subject property in 1986 through a real estate development company he owned before transferring it in 1993 to the BG Zenon Realty Trust.
Mr. Mossy and Mr. Zenon met several times prior to the execution of the promissory note. These meetings included site visits to the property. Mr. Mossy claims that during one of these visits, Mr. Zenon assured him that no "perc" testing had ever been done on the parcel. They ultimately reached an agreement for the sale and purchase of the property. The sale price of the property was $40,000. The defendant prepared a "Purchase Agreement" signed by both Helen Zenon, the seller, and J.A. Mossy, the buyer. Although the respective wives signed the Purchase Agreement, all negotiations as well as the terms of the contract were agreed upon between William Zenon and David Mossy. A Promissory Note was also executed. The buyer paid the sum of $2,500 as a down payment with a balance being due of $37,500. The agreement was unusual in that it provided for the transfer of the property to the buyer who would then undertake the necessary efforts to take the property through subdivision and develop the parcel into two approved buildings lots. The buyer would be responsible for all costs associated with this process. The Purchase Agreement, dated July 3, 2001 provided that the balance due of $37,500 on the Promissory Note dated August 31, 2001 would be payable "upon the first sale of either lot." The sale was "contingent on a free split obtained by buyer in order to create two building lots." If the property could not be subdivided, the property would be deeded back to the plaintiffs, and the plaintiffs would refund the down payment.
The parties have used the term "subdivided" to refer to the "free split" to obtain two building lots. This use by the parties is not to be confused with the definition of "subdivision" as it is used in § 8-18 of the General Statutes.
The defendant, beginning in July of 2001, made three unsuccessful attempts to subdivide the property via submissions to the Northeast District Department of Health, acting on behalf of the Town of Thompson. The defendant utilized two engineering firms in the process of attempting to obtain the necessary approvals, but all of the applications were rejected upon findings that the site was just not suitable for either subdivision into two lots or development of a single residential lot.
The property was conveyed to J.A. Mossy by Warranty Deed on August 31, 2001.
Mr. Mossy contacted Mr. Zenon several times prior to commencement of this lawsuit to inform him that the property had failed to garner subdivision approval and that he wished to exercise the contingency in the Purchase Agreement and return the property to Mr. Zenon. Mr. Zenon refused, and eventually brought this action to collect the balance due on the note.
The defendant appeared, eventually filing an answer, amended special defenses and a five-count counterclaim. These documents are the operative pleadings in this matter.
The defendant's special defenses set forth the following defenses to the plaintiffs' action on the note: 1. Breach of Contract; 2. Equitable estoppel based upon fraud; 3. Equitable estoppel based upon fraudulent non-disclosure; and 4. Breach of contractual implied duty of good faith and fair dealing.
The defendant's counterclaims allege the following: 1. Breach of Contract; 2. Misrepresentation; 3. Fraudulent Non-Disclosure; 4. Breach of Implied Contractual Duty of Good Faith and Fair Dealing; and 5. Unfair Trade Practices Violation (CUPTA).
During the trial, Mr. Zenon claimed that there was no subdivision contingency in the contract — that the contract was for the sale of the parcel on Roy Road in Thompson and that payment was to take place upon either the sale of the property by the Mossys or three years — whichever occurred first. The plaintiffs brought suit after the expiration of the three year period on August 21, 2004. Mr. Zenon testified that Mr. Mossy was required to perform any and all testing on the property prior to the closing date and that the contract was clear that the return of the property by the buyer was not an option once the closing had taken place.
It is this court's conclusion, after a review of the Purchase Agreement and relevant evidence that the sale was contingent upon a "free split" being obtained by the buyer in order to "create two building lots." Although payment would be due, at the latest, three years from the date of the Purchase Agreement, the entire agreement required that the subdivision of the property was a condition precedent to the obligation of the buyer to make payment to the seller.
Nowhere is it indicated in the Purchase Agreement or the Promissory Note that prior attempts to subdivide the property had been made. While this may not be of significance with regard to the operation of the contingency, it is important with regards to other claims being made by the defendant in his special defenses and counterclaims. The court finds, from the evidence presented at trial, that the plaintiff, after initially purchasing the property, had attempted to take it through subdivision with the town of Thompson. The document sent to him subsequent to hearing (Plaintiff's Exh. 16) clearly indicates under "Design Recommendations" that the site was "unsuitable for sewage disposal." The plaintiffs' own surveyor, Mr. Normandin, testified to this effect as did Maureen Marcoux, a registered sanitarian from the Northeast District Department of Health. This test was performed solely for the construction of a single family, three bedroom home on the lot, not for subdivision of the lot into two building lots. This testing was performed on September 26, 1986. When similar testing was again performed by the defendant in 2001, it was again determined that the site was unsuitable for onsite septic disposal for even a single dwelling.
The better evidence indicates that the plaintiffs failed to reveal to the defendant that the property had previously failed a perc test for construction of a single family home during the negotiations for the purchase of the property prior to the execution of the Purchase Agreement. The defendant stated that had the plaintiff told him of this situation when he inquired about it, that he would have walked away from the deal and never signed the Purchase Agreement or Promissory Note. Instead, he went ahead with the deal and incurred significant monetary costs doing repeat testing on the property which yielded the same result as that received by the plaintiff back in 1986 — that the lot was not suitable for onsite septic disposal.
Generally, the terms of a contract for the sale of land are merged into the deed and the terms of the deed are considered the final agreement of the transaction. See, generally, Knight v. Breckheimer, 3 Conn.App. 487 (1985). This rule, however, is subject to exceptions. One of those exceptions is where the intent of the parties indicates otherwise. Here a review of the documents and surrounding circumstances indicates to this court that the merger doctrine does not apply and that the contingency . . . return of the property to the seller if a "free split" would not be obtained became operative. That contingency required the seller to accept a re-conveyance of the property from the buyer and a return to the buyer of the down payment of $2,500.
With regard to the issues presented to the court under the plaintiff's lawsuit and the defendant's special defenses thereto the court finds the issues in favor of the defendant and hereby orders that the plaintiff accept a re-conveyance of the property and return the defendant's deposit of $2,500.
The defendant has brought her counterclaims in five Amended Counts dated April 13, 2007. Those counts appear to seek the following relief for the following:
1. Count 1 Damages Recision/Breach of Contract
2. Count 2 Common Law Fraud/Misrepresentation
3. Count 3 Recision of the Contract/Fraudulent Non-Disclosure
4. Count 4 Specific Performance of the Contract. Implies Duty of Good Faith and Fair Dealing
5. Count 5 Punitive Damages pursuant to § 42-110g(a) and Reasonable Attorneys fees and costs pursuant to § 42-110g(d) (CUTPA)
The court has discerned these claims from a review of each count and its comparison to the Prayer for Relief as well as reference to the defendant's Post Trial Brief. No relief is specifically claimed with reference to any individual count in the pleading itself. From this review it would appear that the first part of this court's decision requiring the plaintiff to accept reconveyance of the property and return of the deposit would render moot the relief requested in Count 3 and Count 4. That would leave Counts 1, 2 and 5 for the court to decide.
From the evidence produced at trial the defendant has proven that Mr. Zenon was very much aware that the property had failed to be granted subdivision approval by the Town of Thompson prior to the execution of the contract for sale, the "Purchase Agreement" with the defendant. The defendant has also proven that Mr. Zenon not only failed to disclose this fact known to him but, upon inquiry, went further and made a false representation to the defendant's agent, David Mossy, that the property had in fact not been perc tested previously. This statement was made to induce the defendant to act upon it and the defendant did in fact act upon it by purchasing the property and then attempting to take it through subdivision.
The general rule is that the silence of a vendor with reference to facts affecting the value or desirability of property sold cannot give rise to an action by the vendee to set aside the transaction as fraudulent. This is certainly true as to all facts which are open to discovery upon reasonable inquiry by the vendee. See, generally, Franchey v. Hannes, 152 Conn. 372 (1965). A vendor who does decide to speak, however, must make a full and fair disclosure as to the matters about which he assumes to speak. He must then avoid a deliberate nondisclosure. Franchey, supra. Mr. Zenon, in responding to Mr. Mossy's inquiry responded in an untruthful and deceptive manor that no testing had been performed.
With respect to fraudulent failure to disclose, the essential elements of an action in common law fraud are that: 1) a false representation was made as a statement of fact; 2) it was untrue and known to be untrue by the party making it; 3) it was made to induce the other party to act upon it; and, 4) the other party did so act upon that false representation to his injury. See, generally, Parker v. Shaker Real Estate, Inc., 47 Conn.App. 489 (1997). Additionally, "the party asserting such a cause of action must prove the existence of the first three elements of fraud by a standard higher than the usual fair preponderance of the evidence, which higher standard is `clear and satisfactory' a `clear, precise and unequivocal.'" Parker, supra. It should be noted that although the elements of fraud must be proven by clear and convincing evidence, damages may be proved by the preponderance of the evidence. Kildiff v. Adams, Inc., 219 Conn. 314, CT Page 2537 329 (1991).
The method by which damages are measured in a fraud action usually depends upon whether the plaintiff was a buyer or seller. If the plaintiff was a buyer, courts apply the benefit of the bargain measure of damages which is 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." On the other hand, if the plaintiff was a seller, courts apply the out-of-pocket measure of damages, which is "the difference between the price received by the plaintiff for the property and its actual value at the time of sale." Leisure Resort Tech, Inc. v. Trading Cove Associates, 277 Conn. 21, 32-35 (2006). Here, because of the unusual nature of the parties' transaction, neither one of these measures would be able to be applied. The purpose of these damages is to make the plaintiff whole as a result of the defendant's fraudulent conduct. See, Dockter v. Stavik, 91 Conn.App. 448 (2005). It would be appropriate, therefore, to award to the defendant the amounts that she is out-of-pocket. That would be the cost of performing testing on the property as well as the cost of attorneys fees and related costs. The defendant has proven the elements of fraudulent misrepresentation by clear and convincing evidence. With regard to damage, the evidence provided at trial has shown that the testing and related costs were $12,827.09 (Defendant's Exh. H), the attorneys fees to date are $14,530.00. This amount does not include any fees for or subsequent to September 12, 2007. These damages may be supplemented by evidence at another hearing. Prejudgment interest on taxes is $962.40. The total damages awarded by the court at this time under the 2nd Count of the defendant's counterclaim is, therefore, $13,789.49. No award is made to the defendant under the 1st Count of the Counterclaim as to general damages, as these amounts are included in the court's award under the 2nd Count. Court costs are to be determined by the Clerk.
The defendant in the instant matter is actually the plaintiff and the plaintiff the defendant for purposes of the Counterclaims.
The court is not making an award of attorneys fees as a part of this decision. The defendant's attorney's Affidavit with regard to attorneys fees in the amount of $14,530 was submitted to the court on December 6, 2007. It was not submitted as an exhibit at trial as was the Statement of Expenses-Exh. H. Such an award must be supported by an appropriate evidential showing. Barco Auto Leasing Corporation v. House, 202 Conn. 106, 120-21 (1987).
The court has thus far addressed the claims made under the plaintiff's Complaint and the defendant's Answer and Special Defenses as well as the claims made by the defendant's Counterclaim, Counts 1-4 and the plaintiff's Answers to both the Counterclaim and Special Defenses. The only claim remaining is the 5th Count of the defendant's Counterclaim. In this count the defendant has asserted a claim against the plaintiff for damages pursuant to § 42-110g(a) and § 42-110g(d). These damages are claimed pursuant to Chapter 735 of the Conn. Gen. Statutes, the Fair Trade Act generally referred to by the acronym "CUTPA." Such damages become available, generally, upon proof that the defendant engaged in "unfair or deceptive acts or practices in the conduct of any trade or commerce." Gen Statutes § 42-110b(a). It is not necessary that the conduct at issue violate some other law to constitute a CUTPA violation, but the plaintiffs must prove wrongful conduct. See, Emands v. Cuno, Inc., 277 Conn. 425, 449-52 (2006), and cases cited therein. "CUTPA reflects a policy that favors remedying wrongs that may not be actionable under other bodies of law." Emands, supra, 451 citing Willow Springs Condominium Ass'n., Inc. v. Seventh BRT Development Corp., 245 Conn. 1, 43 (1998). The court finds that the plaintiff was engaged in a trade or business at all times mentioned in the pleadings and evidence.
In this action the defendant in her Counterclaim, has made claim for damages based upon fraudulent misrepresentation and has already been awarded such damages by the court for her costs of litigation and other expenses. Under Connecticut law the purpose of punitive damages is to compensate the plaintiff for injuries, and therefore, the amount of punitive damages that the plaintiff is permitted to recover under CUTPA is limited to the plaintiff's expenses of litigation less taxable costs. Waterbury Petroleum Products, Inc. v. Canaan Oil Fuel Co., 193 Conn. 208, 234-38 (1984).
Although CUTPA allows the recovery of "actual damages" [§ 42-110g(a)] the Act does not set forth the method by which to measure damages. The common law presents different measures of damages for different wrongs. Most jurisdictions, including Connecticut, have adopted a measure of damages with the objective of placing the plaintiff in the position he would have been in if the representations had been true. See, Connecticut Practice Series, Unfair Trade Practices, Vol. 12, Langer, Morgan, Belt, § 6.8. This is commonly called the "loss of the bargain" rule.
These damages as reviewed by the court, are the same damages which the defendant sought and which the court has already awarded.
The court finds that an award of CUTPA punitive damages in this case, where the plaintiff was acting in the capacity of a real estate broker in the sale of real property, is appropriate. See, Tompiengso v. Tasto, 72 Conn.App. 817 (2002). Such an award would be duplicative of the damages previously awarded. This would, therefore, result in a windfall to the defendant rather than award to make her whole. Such action by the court would be inappropriate. See, Haynes v. Yale-New Haven Hospital, 243 Conn. 17, 27-32 (1997).
In summary the court has granted the following relief to the plaintiff:
1. Rescission of the contract. The plaintiff is to accept a reconveyance of the property and return the defendant's deposit of $2,500.
2. The Promissory Note is cancelled.
3. The defendant, on the Counterclaim Count 2, is awarded the sum of $13,789.49.
4. The defendant is awarded attorneys fees although the amount thereof will need to be delineated at a subsequent evidential hearing and will be a supplement to this Memorandum of Decision-Judgment.