Drofnas Trust et al. v. III (2009)

MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT AS TO DEFENDANTS' COUNTERCLAIM

The plaintiff, Drofnas Trust, Joseph C. Sanford, trustee, has filed a motion for summary judgment against the defendants with respect to the second, third and sixth counts of the defendant's counterclaim on the basis that there exists no genuine issue of material fact and, therefore, the plaintiff is entitled to judgment as a matter of law.

The plaintiff commenced this action to obtain a refund on a deposit paid to obtain real estate located in Essex, Connecticut.   Specifically, the plaintiff entered into a real estate purchase contract with the defendants, Burton Tremaine and Barbara Tremaine, for the purchase of property located at 33 Mallard Point Road in Essex.   The contract provided for a purchase price of $1,500,000 and for an initial deposit of $50,000 towards the purchase price.   The deposit was to be held in escrow by the Tremaines' realtor, the defendant Coldwell Banker Residential Real Estate, LLC. The contract also provided a specific condition precedent to closing regarding the plaintiff's ability to obtain a conventional fixed rate mortgage on or before June 3, 2008.   In addition, the contract contained a separate addendum dated April 30, 2008 which included the additional contingency that “the property must appraise for [the] contract price or higher.”   An appraisal of the subject property was performed by a licensed and certified real estate appraiser on behalf of Noreast Mortgage Services.   The property appraised for the total sum of $1,147,700, or $352,000 less than the purchase price.   As a result, the plaintiff claims that because the property did not appraise at a value equal or higher than the purchase price, the contract is void.   Notice of the failure of the subject property to appraise at a value equal to the purchase price, in accordance with the appraisal contingency clause, was sent by e-mail from the plaintiff's attorney to the Tremaines' attorney on June 30, 2008.   The plaintiff's attorney had also previously advised the defendants' attorney of the failure of the appraisal contingency and supplied her with a copy of the appraisal on May 28, 2008.   The defendants filed an amended counter-claim against the plaintiff.   The second count of the counterclaim alleges a breach of contract, the third count alleges a breach of the covenant of good faith and fair dealing and the sixth count alleges that the plaintiff violated 18 U.S.C. § 1001, a federal statute criminalizing false statements on a mortgage application.   The plaintiff now seeks summary judgment on these counts.

“Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”  (Internal quotation marks omitted.)  Provencher v. Enfield, 284 Conn. 772, 790-91, 936 A.2d 625 (2007).  “In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any such issues exist.”  Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988).  “In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact.   The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law.   The courts hold the movant to a strict standard ․ Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue ․ It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue.   Mere assertions of fact ․ are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § [17-45].”  (Internal quotation marks omitted.)  Zielinski v. Kotsoris, 279 Conn. 312, 318-19, 901 A.2d 1207 (2006).

Turning to the second count of the defendants' counterclaim based on a breach of contract, the plaintiff seeks summary judgment because the property did not appraise for the contract price, and therefore, the appraisal contingency in the contract was not met.   The plaintiff argues that he gave the defendants timely notice of the failure of the conditions precedent to the contract.   The plaintiff contends that because the appraisal contingency clause represents a condition precedent, it must be satisfied before there is any right on the part of the defendant seller to demand performance under the contract or to claim the deposit.   The plaintiff relies on the case of Lach v. Cahill, 138 Conn. 418, 85 A.2d 481 (1951).   That case involved a mortgage contingency clause where the seller attempted to keep a deposit when the purchaser was unable to obtain a mortgage to purchase the property.  Id., 419-20.   The court noted that “[w]hether a provision in a contract is a condition the nonfulfillment of which excuses performance depends upon the intent of the parties, to be ascertained from a fair and reasonable construction of the language used in the light of all of the surrounding circumstances when they executed the contract.”  Id., 420.

The defendants contend that the plaintiff's arguments as to the second count are substantively identical to the arguments made by the plaintiff in its prior summary judgment motion which was denied by this court on March 31, 2009.   Again, the defendants agree that the April 30, 2008 purchase and sales agreement specifically included an appraisal provision that required the property to appraise for the purchase price of $1.5 million dollars.   The defendants contend that the plaintiff knew, however, before signing the April 30, 2008 purchase and sale agreement that the property would not appraise for the purchase price, and despite this knowledge still entered into the purchase and sales agreement with the defendants.   They base this argument on an appraisal conducted by the plaintiff's son-in-law prior to the signing of the purchase and sale agreement.   The legitimacy of this appraisal is also challenged.   The defendants further challenge the plaintiff's second appraisal performed by James Khoubyar, which was conducted upon the signing of the April 30, 2008 purchase and sales agreement on the ground that it was performed at the request of the plaintiff's mortgage brokerage company, Noreast Mortgage Services, not at the request of a lender, and it failed to value the property for a sum sufficient to meet the mortgage and appraisal contingencies.   The defendants also argue that the mortgage company participated by giving out false information on a mortgage application.

The April 30, 2008 purchase and sales contract also contained a mortgage contingency which required the plaintiff to apply for a mortgage.   However, the defendants argue that the only mortgage application signed by the plaintiff was dated June 16, 2008, two weeks after the purported denial of the mortgage application by Noreast Mortgage Services.   Two statements of credit denial were issued by Noreast Mortgage Services and the defendants contend that the plaintiff has offered no documentation from a lender in support of the legitimacy of the plaintiff's purported mortgage application and denial or denials in connection with the April 30, 2008 purchase and sales agreement.   In further support of its arguments, the defendants noted that they obtained an independent appraisal on May 22, 2008, conducted by Thomas Boyle, which appraised the subject property at $1.5 million, the purchase price agreed to pursuant to the April 30, 2008 purchase and sales agreement.   This appraisal directly contradicts the plaintiff's assertion that the property did not appraise for a sum sufficient to meet the appraisal contingency.   As such, the court agrees with the defendants that there exist genuine issues of material fact.   The motion for summary judgment as to count two of the amended counterclaim is denied.

Turning to the third count of the counterclaim, the plaintiff seeks summary judgment for the reason that the defendant's claim of breach of the covenant of good, faith and fair dealing is legally insufficient based on the facts alleged and the law, and that it fails to allege a claim upon which relief may be granted.   The plaintiff argues that the breach of the covenant of good faith and fair dealing must be tied to an alleged breach of a specific contract term and the defendants have not identified any specific term of the contract to that breach.   Further, the plaintiff contends that the claim of breach of covenant of good faith and fair dealing cannot be made for conduct occurring prior to, or during, the formation of a contract.

In response, the defendants argue that count three of their counterclaim alleges that the plaintiff breached the covenant of good faith and fair dealing with regard to the appraisal and mortgage contingencies agreed upon pursuant to the April 30, 2008 purchase and sales agreement by failing to obtain a legitimate appraisal in violation of the appraisal contingency and by failing to make legitimate and good faith efforts to obtain a mortgage from a bank or other institutional lender, in the amount of $1.2 million, as agreed upon in the April 30, 2008 purchase and sales agreement.   The defendant alleges in this count that the plaintiff's conduct “demonstrates that [he] entered into the April 30, 2008 agreement in bad faith with the intent to deceive the sellers and the intent to refuse to perform in good faith.”   Further, the defendants contend that the plaintiff's argument that the amended counterclaim alleges only misrepresentations made prior to the formation of the contract is misplaced in that the defendants have alleged that the plaintiff's conduct prior to, current with, and subsequent to, the formation of the subject agreement is in dispute.   Specifically, the defendants have alleged that the plaintiff's failure to make good faith efforts to obtain a legitimate appraisal of the subject property and to make good faith efforts to obtain a mortgage were deceptive acts done to keep the subject property off the real estate market during the prime summer selling months, in a declining market, in an effort to force the sellers into relinquishing the property below fair market value, conduct which allegedly occurred after the purchase agreement and addendum were signed.  “Fraud and misrepresentation cannot be easily defined because they can be accomplished in so many different ways.   They present, however, issues of fact ․ Our Supreme Court has stated that the summary judgment procedure is particularly inappropriate where the inferences which the parties seek to have drawn deal with questions of motive, intent and subjective feelings and reactions ․ It is only when the witnesses are present and subject to cross-examination that their credibility and the weight given to their testimony can be appraised.”  (Citation omitted;  internal quotation marks omitted.)  Barasso v. Hill, 81 Conn.App. 798, 806, 842 A.2d 1134 (2004).

The court finds that genuine issues of material fact exist as to the claim for breach of the covenant of good faith and fair dealing.   Therefore, summary judgment is denied as to the third count of the counterclaim.

Turning to count six of the counterclaim, the defendants allege violations of 18 U.S.C. § 1001, et seq., arising from the mortgage application form completed by the plaintiff, which they claim misrepresented the status of certain seller financing that was purportedly discussed between the parties.   The plaintiff contends that there are no factual allegations in the counterclaim that the plaintiff ever saw the subject form prior to litigation.   The plaintiff also notes that 18 U.S.C. § 1001 is a criminal statute and does not provide for a private cause of action or remedy of any kind.   The defendants have not objected to the motion for summary judgment as to count six of the counterclaim and, therefore, summary judgment is granted as to count six of the defendants' counterclaim.   Similarly, by not briefing this argument, the third-party plaintiffs have not met their burden to establish that a private cause of action exists.   It is a “well settled fundamental premise that there exists a presumption in Connecticut that private enforcement does not exist unless expressly provided in a statute.   In order to overcome that presumption, the [party bringing the cause of action] bears the burden of demonstrating that such an action is created implicitly in the statute.”  Provencher v. Enfield, supra, 284 Conn. 777-78.

Accordingly, the plaintiff's motion for summary judgment as to counts two and three of the defendants' counterclaim is denied.   The plaintiff's motion for summary judgment as to count six of the defendants' counterclaim is granted.

Burgdorff, J.

Burgdorff, Mary-Margaret D., J.