Drofnas Trust et al. v. III (2009)

MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT AS TO THIRD-PARTY COMPLAINT

The third-party defendant, Joseph Sanford, seeks summary judgment against the third-party plaintiffs, Burton and Barbara Tremaine, as to the second, third and sixth counts of the third-party complaint on the basis that no genuine issues of material fact exist.

The second count alleges a breach of the covenant of good faith and fair dealing, the third count alleges a breach of the contract 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 third-party defendant now seeks summary judgment on these counts.

The third-party defendant, Joseph Sanford, trustee of the Drofnas Trust, commenced this action to obtain a refund on a deposit for the purchase of real estate located in Essex, Connecticut.   Specifically, the third-party defendant entered into a real estate purchase contract with the third-party plaintiff to obtain real 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 third-party defendant's realtor, Coldwell Banker Residential Real Estate, LLC. The contract also provided a specific condition precedent to closing regarding the third-party defendant'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.   It should be noted that said appraisal was not accompanied by an affidavit.   As a result, the third-party defendant 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 appraisal contingency clause was sent by e-mail from the plaintiff's attorney to the defendant Tremaines' attorney dated June 30, 2008.   The third-party plaintiffs' attorney had also previously advised of the failure to the appraisal contingency and supplied a copy of the same on May 28, 2008.

The third-party plaintiffs filed an eight-count counterclaim against the third-party defendant, Drofnas Trust, Joseph Sanford, trustee, sounding in intentional misrepresentation, fraud in the inducement, the Connecticut Unfair Trade Practices Act, breach of covenant of good faith and fair dealing with regard to two purchase and sales agreements, breach of contract, violation of 18 U.S.C. § 1001 for false statements on a mortgage application, and civil conspiracy.   The third-party plaintiff's then filed a third-party complaint against the plaintiff, Joseph Sanford, in his individual capacity alleging that he failed to separate his identity and conduct in his individual capacity from his identity and conduct as trustee of the Drofnas Trust.

“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 third-party plaintiffs' complaint and claim of breach of covenant of good faith and fair dealing, the third-party defendant contends that this count concerns the creation and execution of certain contracts and that the allegations contained therein relate to actions taken before the contract was signed.   Therefore, he contends that the count is legally insufficient based on the facts alleged and the law.   The third-party defendant 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.   Further, the third-party defendant 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.

The third-party plaintiff alleges in this count that the third-party defendant'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.”

In response, the third-party plaintiffs submit that count two of the third-party complaint alleges that the third-party defendant 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, and clearly alleges breach of covenant of good faith and fair dealing with regard to conduct after the formation of the April 30, 2008 agreement.   Specifically, count two alleges that Joseph Sanford 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 third-party plaintiffs further argue that the third-party defendant's contention that its amended counterclaim only alleges misrepresentations made prior to the formation of the contract is misplaced because they have alleged that the third-party defendant's conduct prior to, current with and subsequent to the formation of the subject agreement is in dispute.   The third-party plaintiffs assert that the third-party defendant failed to make good faith efforts to obtain a mortgage in the amount of $1.2 million as agreed upon pursuant to the April 30, 2008 purchase and sales agreement as alleged in the second count of the third-party complaint and they therefore conclude that questions of fact exist as to the legitimacy of the mortgage application and denials.   The third-party plaintiffs further contend that the third-party defendant's alleged 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.

In light of these allegations, and after reviewing the supporting documents filed with their objection, it is clear to the court that there are issues of material fact that need to be decided by the trier of fact.  “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. Rear Still Hill Road, LLC, 81 Conn.App. 798, 806, 842 A.2d 1134 (2004).

The third-party defendant further contends that Joseph Sanford was not a party to the subject contract.   He argues that the Drofnas Trust was the buyer and therefore, he cannot be found to have breached a contract to which he was never a party.

The third-party plaintiffs respond that Joseph Sanford's conduct as an individual is impossible to separate from his capacity as trustee of Drofnas Trust.   The third-party plaintiffs submit several exhibits in support of their argument including the Uniform Residential Loan application completed by the third-party defendant which lists “Joseph Sanford” as the borrower with no reference to the Drofnas Trust or Joseph Sanford as trustee of the Drofnas Trust.   Likewise, the credit denials issued with regard to the April 30, 2008 contract list “Joseph Sanford” as the borrower.   In addition, the Exclusive Right to Represent Buyer Contract executed between the plaintiff and his real estate agent lists “Joseph Sanford” as the buyer and is signed by Joseph Sanford with no reference to the Drofnas Trust or as trustee for the Drofnas Trust.

In light of the abovementioned evidence, there exist genuine issues of material facts as to whether or not the third-party defendant was a party to the subject contracts.   Therefore, summary judgment as to the second count is denied.

Turning to the third count of the third-party complaint which alleges a breach of contract, the third-party defendant contends that the alleged contract was never fully executed by the third-party plaintiffs because there was no final agreement as to the terms of the proposed seller financing.   The third-party defendant also contends that the alleged contract also violates the statute of frauds.   The third-party defendant further contends that he gave the third-party plaintiffs timely notice of the failure of the conditions precedent to the contract.   The third-party defendant argues that because the appraisal contingency clause represents a condition precedent, it must be satisfied before there is any right on the part of the third-party plaintiff/seller to demand performance under the contract or to claim the deposit.

With regard to the third-party defendant's claim that the alleged purchase and sales agreement dated June 30, 2009 violates the statute of frauds, the third-party plaintiffs contend that the agreement states all essential terms with certainty, i.e. the identity of the sellers, the identity of the buyer, the identity of the property to be transferred and the purchase price.   It also specifically references a seller financing addendum which is, therefore, incorporated by express reference into the signed June 30, 2008 purchase and sales agreement.   The seller financing addendum details the terms and conditions of the seller financing.   Further, the addendum describes the terms and conditions of owner financing in the amount of $250,000 and is signed by the third-party plaintiff.   The third-party defendant contends, however, that because he did not sign the addendum, the agreement is unenforceable pursuant to the statute of frauds.   Because the addendum was incorporated by reference, the court finds that it is a part of the contract and therefore, the statute of frauds is satisfied.  “In order to be in compliance with the statute of frauds, therefore, an agreement must state the contract with such certainty that its essentials can be known from the memorandum itself without the aid of parol proof ․ The statute of frauds is also satisfied [when] the contract or memorandum contains by reference some other writing or thing certain.”   (Citation omitted.)  SS-II, LLC v. Bridge Street Associates, 293 Conn. 287, 294, 977 A.2d 189 (2009).   Likewise, the terms of the seller financing were specified in the addendum, which was signed by the party to be charged.   Generally, modifications or addendums to a contract are binding if signed by the party to be charged.   See Kasper v. Anderson, 5 Conn.App. 358, 362, 498 A.2d 132, cert. denied, 197 Conn. 818, 501 A.2d 388 (1985) (“We also find no error in the trial court's conclusion that the letter seeking to modify the agreement did not satisfy the statute of frauds because it was not signed by the party or the agent of the party to be charged, and thus did not cure the defects originally found to exist in the contract”).   In this case the plaintiff in the underlying action, Drofnas Trust, has brought this action based on, among other things, a breach of contract claim which seeks to enforce the appraisal contingency clause of the addendum against the Tremaines.   Therefore the parties to be charged in this action are the Tremaines.   It should also be noted that the third-party defendant Drofnas Trust referenced the addendum on the June 16, 2008 Uniform Residential Loan Application by confirming that the third-party defendant had $250,000 in subordinate financing.   Upon review of the supporting documentation filed by the third-party plaintiff, the court finds that genuine issues of material fact exist as to whether or not there was final agreement as on the proposed seller financing.

Turning to count six of the third-party complaint, the third-party plaintiffs allege violations of 18 U.S.C. § 1001, et seq.   The third-party defendant argues that this count does not state a private cause of action upon which relief may be granted.   Count six alleges that a mortgage application form completed by the third-party defendant misrepresented the status of certain seller financing that was purportedly discussed between the parties.   The third-party plaintiffs further allege that “as a result of the [third-party defendant's] violations of the federal law, [they] have ascertainable damages including contract damages, attorneys fees and costs of defending this litigation.”   The third-party defendant 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 third-party plaintiffs have not filed an objection to the motion for summary judgment regarding this argument and, therefore, summary judgment is granted as to count six of the third-party complaint.   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, summary judgment is denied as to counts two and three of the third-party complaint.   Summary judgment is granted as to count six of the third-party complaint.

Burgdorff, J.

Burgdorff, Mary-Margaret D., J.