Martin Craemer et al. v. Rehman Mahmood et al. (2010)

MEMORANDUM OF DECISION RE MOTIONS FOR SUMMARY JUDGMENT, # s 178, 180 AND 188

Before this court are three motions for summary judgment.   In the first, filed on June 2, 2010, Prudential Connecticut Realty (“Prudential”) and Sherry Borgeson seek judgment against the plaintiffs, Martin and Rose Craemer (# 178).   In the second, filed on the same date, Prudential and Borgeson seek judgment against Rehman Mahmood as to his cross-complaint against them (# 180).   In the third, filed on June 4, 2010, Molex Incorporated seeks judgment against the plaintiffs (# 188).   The plaintiffs filed their memorandum in opposition on June 30, 2010.   Mahmood, appearing pro se, filed his opposition to the motion on July 8, 2010.   The parties appeared for oral argument on July 12, 2010.   In this decision, the court will address all three motions and additional facts will be set forth as needed.

The Craemers filed suit against Mahmood, Borgeson and Prudential seeking rescission of a contract for the purchase of property located at 72 Bascom Road in Lebanon, Connecticut (the subject property).   They allege that Mahmood, Borgeson and Prudential failed to disclose the existence of wetlands prior to their purchase of the property.   Subsequently, Molex Incorporated was added as a defendant and Mahmood filed a cross complaint against Molex, Borgeson and Prudential.   Mahmood is the former owner of the subject property who was relocated by his employer, Molex, from Connecticut to Arkansas in June 2006.   Pursuant to the relocation agreement between Molex and Mahmood, Molex purchased the property from Mahmood in February 2007.   Molex then resold it to the plaintiffs, with the assistance of Prudential and its agent, Borgeson.   Real estate agent, Borgeson represented both the Craemers and Mahmood at the closing according to the plaintiffs;  and she referred the plaintiffs to their real estate lawyer, Mark Balaban.   The plaintiffs also offered evidence that Borgeson and Attorney Balaban were previously acquainted through a prior real estate transaction involving Borgeson's son.

Prudential, Borgeson and Molex argue that they are entitled to judgment as a matter of law because there is no dispute that the plaintiffs' closing attorney, Balaban, was aware of the existence of wetlands on the property prior to the closing.   They argue that this knowledge is imputable to the plaintiffs, who are legally charged with knowledge of the existence of wetlands on the property.   Additionally, they argue that the plaintiffs had constructive notice of the existence of wetlands on the property from recorded deeds and subdivision maps.   Prudential and Borgeson make the same argument in support of their motion for summary judgment as to Mahmood's cross-complaint.

In opposition to the motions, the plaintiffs argue that they were entitled to rely upon the representations of Mahmood in the Uniform Property Condition Disclosure report, which stated that the property was not in a flood plain or an area containing a wetland.   Further, the plaintiffs argue that even if the knowledge of their attorney is imputable to them, this case falls within one of the exceptions to the general rule of imputation.   The plaintiffs deny that their attorney ever actually informed them of the wetland conditions on the property, and assert that they would not have purchased the property had they known of the conditions.

For reasons more fully set forth herein, this court denies all the motions for summary judgment.

“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.   In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.”  (Internal quotation marks omitted.)  Provencher v. Enfield, 284 Conn. 772, 790-91, 936 A.2d 625 (2007).

The law in Connecticut provides that, generally, and subject to enumerated exceptions, “the knowledge and admissions of an attorney are imputed to his client ․” (Internal quotation marks omitted.   Citations omitted.)  Friezo v. Friezo, 281 Conn. 166, 195, 914 A.2d 533 (2007).   Therefore, the information which the attorney gathers in his capacity as legal representative of the principal is generally chargeable to the principal.

The defendants contend that there is no question that Attorney Balaban was hired by the plaintiffs to represent them at the closing.   They further maintain that there is no dispute that Attorney Balaban acquired information about the wetland conditions during the course of his representation of the plaintiffs.   Specifically, they cite to his deposition testimony, given on April 8, 2010, in which Attorney Balaban testified that he was hired by the plaintiffs to represent them at the closing, which took place on April 30, 2007;  that a few days prior to the closing, he received a proposed warranty deed of Mahmood from Mahmood's attorney;  that he reviewed the proposed warranty deed prior to the closing for accuracy and completion;  and that he knew that the property his clients were purchasing had wetlands and a watercourse on it.   Additionally, Balaban testified that some time after March 7, 2007, he received a title report which also confirmed the existence of the wetlands on the property.   Prudential, Borgeson and Molex also provide the title report derived from the Lebanon land records, which contains a legal description of the property which shows that there are wetlands on the property.   Finally, Prudential, Borgeson and Molex also include a faxed copy of an executed warranty deed from Mahmood's attorney to Balaban, dated April 18, 2007, which reconfirmed that the property was being conveyed subject to “Wetlands, notations and conditions as shown on said map.”

From this evidence, the court can conclude that there is no factual dispute that the plaintiffs' attorney had knowledge of the wetland conditions on the property prior to the closing date.   Were the inquiry to end here, the movants would all be entitled to judgment as a matter of law, because the court could impute the knowledge of the attorney to the plaintiffs.   However, the plaintiffs argue that such imputation does not give rise to an inference that the attorney actually informed them of the condition in this case, because the adverse interest exception applies.

“Our Supreme Court has identified three sets of circumstances in which the typical presumption that an agent has informed his principal can be rebutted:  (1) Where it is not the duty of the agent to disclose;  (2) when the agent is acting adversely to the interest of his principal, whether for the interest of himself or a third party;  [and] (3) where the agent is acting in fraud of his principal.”  (Internal quotation marks omitted.)  Reider v. Arthur Andersen, LLP, 47 Conn.Sup. 202, 210, 784 A.2d 464 (2001).  “The general rule is that the knowledge of an agent will not ordinarily be imputed to his principal where the agent is acting adversely to the latter's interest.”  Resnik v. Morganstern, 100 Conn. 38, 42, 122 A. 910;  MacKay v. Aetna Life Ins. Co., 118 Conn. 538, 549, 173 A. 783.”  Mutual Assurance Co. v. Norwich Savings Bank, 128 Conn. 510, 513, 24 A.2d 477 (1942).

“The logic of the ‘adverse interest exception’ is completely consistent with that of the general rule imputing the knowledge and conduct of agents to their principals.   The general rule is based on the presumption that an agent will be loyal to his principal, and thus will faithfully report to the principal whatever he learns while acting for his principal and in reference to a matter in the course of his agency ․ The principal is thus charged with his agent's knowledge because it is presumed that the principal will actually receive and have the benefit of the agent's knowledge contemporaneously with the agent's actions.   The ‘adverse interest exception’ suspends the operation of the general rule when the circumstances are such as to raise a clear presumption that the agent will not perform [his] duty, and thus that the principal will not in fact receive and have the benefit of the agent's knowledge.”  (Citation omitted;  internal quotation marks omitted.)  Reider v. Arthur Andersen, supra, 47 Conn.Sup. 209-10.

The plaintiffs persuasively argue that there are genuine issues of material fact as to whether the “adverse interest exception” is applicable in the present case.   Specifically, the plaintiffs contend that Balaban was referred to them by Borgeson, who apparently had a pre-existing, friendly, professional relationship with him.   The plaintiffs offer the affidavits of Martin and Rose Mary Craemer, both dated June 29, 2010, in which they attest:  “Sherry Borgeson acted as the agent for [us] as buyers, and also as the agent for Rehan Mahmood ․ Borgeson referred Attorney Mark Balaban to [us] as our closing attorney ․ Borgeson indicated to us that she knew Attorney Balaban well, and in fact that he had previously represented her son and was very helpful ․ [A]t no time prior to or during the closing did Attorney Balaban, or anybody else, advise [us] that there were wetlands on the property ․ [We] did not become aware that wetlands existed on the property until after the closing.”

In a trial court decision addressing a somewhat analogous fact pattern, the court (Leuba, J.), sitting in the Judicial District of New London, declined to impute the knowledge of the attorney to the client.   See, Cheshire v. Lockwood, Superior Court, judicial district of New London, Docket No. CV 1221135 (June 9, 2005, Leuba, J.).   In that case, the real estate agent involved in the transaction represented both the plaintiff seller and the defendant buyer.   After a trial on the merits, the court found that the plaintiff and agent were acquainted for about 20 years prior to the transaction;  their relationship was both social and business related;  the agent had previously represented the plaintiff when he purchased the property;  and at some point, there was discussion between the plaintiff and the agent as to a possible partnership with regard to the property that did not materialize.   Significantly, the agent was aware of difficulties in the management of the property and the condemnation of some of the units because he regularly assisted in the management of the apartments by keeping the plaintiff's checking account to record the receipts and expenses for the property and had keys to all apartments and common areas on the property.

The court found that the knowledge of the agent concerning the condition and condemnation of the subject property was not imputed to the defendant.   It reasoned that “[t]his case falls squarely within the ‘adverse interest exception’ to the general rule which applies when the agent is acting adversely to the interest of his principal ․ [T]he defendant's real estate agent, had a duty to disclose to the defendant his knowledge concerning the condition and condemnation of the property ․ [The agent] acted adversely to the defendant's interest by not disclosing these material facts.   Clearly, the condition and condemnation of the property are facts that [the agent] knew or should have known would have reasonably affected the defendant's judgment if the defendant in fact was unaware of them.”  Id.

Though far less compelling than the facts in Cheshire, the plaintiffs have presented enough facts to call into question whether the adverse interest exception applies in this case.   Namely, they have presented facts regarding Balaban's relationship and history with the defendant real estate agent, an agent who purportedly represented both the Craemers and Mahmood in the transaction.   And, they claim that Attorney Balaban did not tell them of the existence of the wetland conditions prior to closing, though he had a legal duty to do so.   These facts, taken together, are sufficient to raise the issue of whether or not the adverse interest exception applies here.   For this reason, the court denies Prudential and Borgeson's motion for summary judgment against the plaintiffs (# 178);  Prudential and Borgeson's motion for summary judgment against Mahmood (# 180);  and Molex's motion for summary judgment against the plaintiffs (# 188).

Robinson, A., J.

Robinson, Angela C., J.