LLC v. Jack Socha (2010)

MEMORANDUM OF DECISION

FACTS AND PROCEDURE:

The plaintiff (hereinafter also “Dade”) is a company that for many years has dealt in providing second mortgages and sometimes first mortgages to borrowers located, at least in the past, in the West Hartford area.   The manager and owner with his family of the plaintiff is Attorney Edwin Baum (hereinafter also “Baum”).   The defendant Jack Socha, a.k.a. John Socha, (herainafter also “Socha”) is a retired real estate broker in the greater Hartford area and was a licensed real estate broker at the time of the events hereinafter described.   Socha is not and has not been a licensed real estate appraiser.

In June of 2007 Socha brought to Baum one Romer Fernandez (hereinafter also “Fernandez”) who was seeking an $85,000 second mortgage for property he owned at 27-29 Bond Street in Hartford which consisted of six apartment units.   The mortgage, plaintiff's Exhibit Four, was to be behind a first bank mortgage of $195,000.   Baum asked Socha to give him a Competitive Market Analysis (“CMA”) in place of an actual appraisal as to the value of the Bond Street premises.   Socha rendered to the plaintiff a CMA of $370,000, and according to Baum, Socha told him that the internal conditions of the building had been or were in the process of being rehabilitated, and that there was full occupancy and Fernandez had good credit.   On the basis of the CMA, the plaintiff granted the second mortgage to Fernandez.   Subsequently, in January of 2008 the first mortgagee began a foreclosure action.   On April 14, 2008, at the time of the strict foreclosure of the first mortgage, the Court, Freed, JTR found the fair market value of the premises at $226,508.11.   The appraisal at that time for the court was $240,000.   The debt to the first mortgagee totaled with costs $231,384.91.   The plaintiff determined that there was no equity and, therefore, did not redeem the premises.   This meant a loss of $84,886.07.   The plaintiff then brought suit against Fernandez and obtained a judgment lien of $84,886.07 and placed them on five properties owned by Fernandez.   However, there was insufficient equity on those properties, and the plaintiff decided not to redeem on the judgment liens.

The plaintiff had lost $84,886.07 and brought suit against the defendant claiming in effect that the $370,000 CMA was incorrect and since the plaintiff had relied on the CMA from Socha, the plaintiff claimed damages of $84,886.07.   Trial was held before this Court on June 30, 2010 and July 8, 2010.   Simultaneous briefs by the parties were filed per agreement on or about July 29, 2010 with no reply briefs.

STANDARD OF REVIEW:

“The plaintiffs in a civil case sustain their burden of proof as to any essential element in their cause of action if the evidence, considered fairly and impartially, induces in the mind of the trier, a reasonable belief that it is more probable than otherwise that the facts involved in that element are true.”  Busker v. United Illuminating Co., 156 Conn. 456, 458 (1968).   This is also known as proof by a preponderance of the evidence.

In addition, this Court evaluates the credibility of the witnesses based upon their appearance and demeanor on the witness stand, the consistency or inconsistency of their testimony, their memory or lack thereof of certain events, whether they were candid and forthright or evasive and incomplete, their manner in responding to questions and their interest or lack of interest in the case as well as the exhibits in the case.

Also, the Court evaluates general credibility on the basis of other testimony in this case as well as documents in evidence as to their consistency or inconsistency with other evidence.

ISSUES AND FINDINGS:

1. Was there Consideration to Socha for Providing the CMA?

The short answer is No.

Baum originally claimed that he had told Socha to collect his fee for the CMA from Fernandez, and didn't know anything further about it.   Subsequently, on the second day of trial, Baum remembered that Socha had told him that he had collected the fee from Fernandez.

Socha, in his testimony, denied that he had ever been paid by Fernandez or the plaintiff for providing the CMA. Marked into evidence was the closing statement created by the plaintiff for the second mortgage which showed that although the plaintiff had been paid for the mortgage, nothing had been taken out to pay Socha.   Additionally, Socha was deposed on March 23, 2010, and the following excerpt was entered into evidence in this trial.   Under questioning by Attorney Rosenblit, plaintiff's attorney, Socha denied ever being paid.   The colloquy went like this on pages 26 and 27:

Q. you were paid for doing the CMA for Attorney Baum;  were you not?

A. No, I didn't receive any money from Romer Fernandez.   Ed asked me to collect from him a finder's fee or a fee and I told him I would but I don't recall getting any money from anybody except what he paid our office for his real estate class that he took from us that was the only thing.

Q. To the best of your recollection, you never got paid for your work?

A. To the best of my recollection, right.

Socha also testified in court that he had never been paid for any CMA done for the plaintiff.   Fernandez was not brought to court but his brother Luis Rodriquez, did testify, but for some reason was never asked whether his brother had paid for the CMA.

The Court has no reason to doubt the testimony of Attorney Baum or the testimony of Socha even though they appear contrary to each other.   It is a “he said” “he said” situation.   The problem for the plaintiff, therefore, is that as stated in the Standard of Review, the burden is on the plaintiff to prove his case by a preponderance of the evidence.   The Court, therefore, concludes that the plaintiff has not sustained its burden of proving that consideration was given to Socha for the CMA. Accordingly, there was no breach of contract by Socha because the contract, if it existed, was without consideration and there was no malpractice by the defendant.¹

2. Was there any Duty on the Part of Socha to Give an Accurate CMA?

The short answer is No.

There was no evidence introduced as to the standard for a real estate broker to give a CMA or an appraisal.   Socha was not a licensed appraiser.   In order for him to be negligent, there has to be a duty on his part to the plaintiff.   Without being paid and without having a standard for him with which to comply, there is no duty on the part of Socha to the plaintiff, and, therefore, no negligence.

3. Was the CMA of $370,000 Accurate?

The short answer is Yes.

The Court found the testimony of John LaMonte, a licensed real estate appraiser who testified for the defendant to be more credible and reliable than that of the plaintiff's appraiser who testified, Peter Vimini.   Mr. LaMonte's analysis and experience was more impressive than that of Mr. Vimini.   Mr. Vimini's appraisal was for $210,000 as of June 6, 2007, and Mr. LaMonte's was $360,000 as of the same date.   That is still $10,000 less than the defendant's $370,000, but both appraisers testified that the market was starting to decrease within six months when foreclosure was initiated by the first mortgagee, Vimini 20% decline and LaMonte 10 to 12% decrease by January 2008.   Even at the figure of 10%, by January 2008 the amount would have been $333,000.   In any event, the Court finds, based upon the testimony and appraisal of Mr. LaMonte of $360,000 as of June 6, 2007 that the defendant's CMA of $370,000 was sufficiently accurate so that the plaintiff is not entitled to any recovery from the defendant.

CONCLUSION:

For the foregoing reasons, judgment is entered for the defendant on the counts (1) malpractice (2) intentional misrepresentation and (3) negligent misrepresentation.

Rittenband, JTR

FOOTNOTES

FN1. There was no evidence from Rodriguez or anyone else that Socha had been paid for any other CMA. It seems to this Court that it would have been the lender's (plaintiff's) responsibility to pay the fee because the plaintiff allegedly hired Socha to do the CMA. At the very least, the fee should have been taken out at the closing and paid to Socha.   The Court is well aware of the secondary financing business and realizes that investigations are not as thorough as those done by major lending institutions such as banks.   However, there seems to be more urgency to make the loan on a second mortgage than on a bank mortgage, and that, of course, carries certain risks with that type of mortgage..  FN1. There was no evidence from Rodriguez or anyone else that Socha had been paid for any other CMA. It seems to this Court that it would have been the lender's (plaintiff's) responsibility to pay the fee because the plaintiff allegedly hired Socha to do the CMA. At the very least, the fee should have been taken out at the closing and paid to Socha.   The Court is well aware of the secondary financing business and realizes that investigations are not as thorough as those done by major lending institutions such as banks.   However, there seems to be more urgency to make the loan on a second mortgage than on a bank mortgage, and that, of course, carries certain risks with that type of mortgage.

Rittenband, Richard M., J.T.R.