LLC v. Harry Hirsch (2010)

MEMORANDUM OF DECISION RE MOTION TO STRIKE (NO.126)

I

FACTS

On September 1, 2010, the plaintiff, Aurora Loan Services, LLC, filed an amended seventeen-count complaint against the defendants, Harry Hirsch, Esq., Geoffrey C. Williams, Xenia Kamberos, Connecticut Attorneys Title Insurance Company, Thomas E. Gallagher, Autumn Appraisers, LLC (Autumn Appraisers) and Sterling Lending Group, Inc.¹ The plaintiff's amended complaint alleges the following facts.   At all relevant times, Gallagher was a certified general real estate appraiser, and the managing member of Autumn Appraisers, for whom he acted as the servant, agent and/or employee.   The property at issue is located at 52B Mardie Lane, Groton, Connecticut (the property).   The property was originally identified as being situated on lot number fourteen in a subdivision map.   On July 20, 2000, Mardie Lane Homes, LLC (Mardie Lane), the owner of lot number fourteen, was issued a building permit by the town of Groton for the construction of a two-family dwelling, identified on the permit as 14A and 14B, the latter of which identifies the property.   Mardie Lane was required to complete certain public improvements by October 27, 2003, and after failing to do so, the Groton planning commission voted to expire the subdivision plan on November 10, 2003.   The two-family dwelling was conditionally spared the consequences of the subdivision plan's expiration if the access road was improved to meet the town's standards, and the structure was completed in conformity with the town's building and zoning requirements.

On March 13, 2007, the defendants submitted a written appraisal report opining that the value of the property was $385,000.   On March 28, 2007, Kamberos purchased the property, and executed a note with First Magnus Financial Corporation (First Magnus), dated May 9, 2007, in the original principal amount of $365,750.   The note was secured by a mortgage on the property, recorded on May 10, 2007, in Volume 191 at Page 979 in the Groton land records.   The plaintiff became the owner of the note and mortgage pursuant to an assignment, dated July 9, 2008, by MERS, Inc., as nominee for First Magnus.   At the time of the appraisal, the defendants were aware of the information compromising the property's condition and value, but failed to disclose such information for purposes of misleading the mortgage lender and its subsequent assignees.   As a result, the plaintiff's subsequent acquisition of the property's title through foreclosure is to a piece of property with little or no value.   Counts thirteen and fourteen, which are at issue in the present motion, are brought against the defendants, alleging claims for fraud and a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110b, respectively.

On July 21, 2010, the defendants filed a motion to strike counts thirteen and fourteen of the plaintiff's complaint on the grounds that the plaintiff's claims are legally insufficient.²  The defendants filed a memorandum of law in support of their motion.   On September 2, 2010, the plaintiff filed an objection and memorandum of law in opposition to the defendants' motion.

II

DISCUSSION

“The purpose of a motion to strike is to contest ․ the legal sufficiency of the allegations of any complaint ․ to state a claim upon which relief can be granted.”  (Internal quotation marks omitted.)  Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).  “A motion to strike challenges the legal sufficiency of a pleading ․ and, consequently, requires no factual findings by the trial court.”  (Internal quotation marks omitted.)   Batte-Holmgren v. Commissioner of Public Health, 281 Conn. 277, 294, 914 A.2d 996 (2007).  “It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted.”  (Internal quotation marks omitted.)  Violano v. Fernandez, 280 Conn. 310, 318, 907 A.2d 1188 (2006).  “The court must construe the facts in the complaint most favorably to the plaintiff.”  Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997).

A

Count Thirteen-Fraud

The defendants argue that count thirteen of the plaintiff's complaint should be stricken on the grounds that the plaintiff fails to plead the requisite elements of a claim for fraud.   Specifically, the defendants argue that the plaintiff does not allege that the defendants knew that the appraisal was false, or that the plaintiff relied on the false representations.   The plaintiff counters that it has properly pleaded a cause of action for fraud by nondisclosure.

“Fraud involves deception practiced in order to induce another to act to her detriment, and which causes that detrimental action ․ The four essential elements of fraud are:(1) that a false representation of fact was made;  (2) that the party making the representation knew it to be false;  (3) that the representation was made to induce action by the other party;  and (4) that the other party did so act to her detriment ․ Fraud by nondisclosure, which expands on the first three of these four elements, involves the failure to make a full and fair disclosure of known facts connected with a matter about which a party has assumed to speak, under circumstances in which there is a duty to speak.”  (Citation omitted;  internal quotation marks omitted.)  Pospisil v. Pospisil, 59 Conn.App. 446, 450, 757 A.2d 655, cert. denied, 254 Conn. 940, 761 A.2d 762 (2000).

“[A] failure to disclose can be deceptive only if, in light of all the circumstances, there is a duty to disclose ․ Regarding the duty to disclose, the general rule is that ․ silence ․ cannot give rise to an action ․ to set aside the transaction as fraudulent.   Certainly this is true as to all facts which are open to discovery upon reasonable inquiry ․ A duty to disclose will be imposed, however, on a party insofar as he voluntarily makes disclosure.   A party who assumes to speak must make a full and fair disclosure as to the matters about which he assumes to speak.”  (Citations omitted;  internal quotation marks omitted.)  Macomber v. Travelers Property & Casualty Corp., 261 Conn. 620, 635-36, 804 A.2d 180 (2002).

In the present case, the plaintiff alleges that the defendants failed to disclose certain facts known to the defendants regarding the property's value at the time of the original sale for purposes of misleading the mortgage lender by concealing the property's compromised condition.   Specifically, the plaintiff alleges that the defendants failed to disclose that the property was fronted on an unfinished road, that the property was not finished, that the property did not have a certificate of occupancy and that the property failed to conform to the town's building and zoning requirements.   The plaintiff argues that the defendants had a duty to disclose such information because, as certified appraisers for the property, they voluntarily made disclosures as to the property's condition and value, and therefore were required to make a full and fair disclosure as to these matters on which they assumed to speak.   The plaintiff further alleges that the defendants knew that the appraisal would be materially relied upon by the mortgage lender, and that the plaintiff would not have purchased the loan if it had knowledge of the defendants' concealment.

Construing the allegations most favorably to the plaintiff, the court finds that the plaintiff's allegations for a claim of fraud by nondisclosure are sufficient to withstand the defendants' motion to strike.   As a result, the defendants' motion to strike count thirteen of the plaintiff's amended complaint on these grounds must be denied.

B

Count Fourteen-CUTPA

The defendants also argue that count fourteen of the plaintiff's complaint should be stricken because the plaintiff's CUTPA claim is predicated on the plaintiff's claim for fraud, which the court should deem legally insufficient.   The plaintiff counters that its fraud by nondisclosure claim is properly pleaded, and therefore the allegations may serve as the premise for the plaintiff's CUTPA claim.

In light of the court's determination that the plaintiff's allegations for fraud by nondisclosure are sufficient to withstand the defendants' motion to strike, the court finds that the defendants' argument to strike the plaintiff's CUTPA claim on this ground is unavailing.   Moreover, “[f]raudulent nondisclosure in a real estate situation is ample grounds for relief under both fraud and CUTPA.  Catucci v. Ouelette, 25 Conn.App. 56, 592 A.2d 692 (1991).”   Sullivan v. Mang, Superior Court, judicial district of Fairfield, Docket No. CV 00 0372972 (July 30, 2002, Gormley, J.).   As a result, the defendants' motion to strike count fourteen of the plaintiff's amended complaint must be denied.

CONCLUSION

Based on the foregoing, the court hereby denies the defendants' motion to strike counts thirteen and fourteen of the plaintiff's amended complaint.

Martin, J.

FOOTNOTES

FN1. Hirsch, Williams, Kamberos, Connecticut Attorneys Title Insurance Company and Sterling Lending Group, Inc. are not parties to the present motion.   Hereinafter, the term the defendants refers to Gallagher and Autumn Appraisers, collectively..  FN1. Hirsch, Williams, Kamberos, Connecticut Attorneys Title Insurance Company and Sterling Lending Group, Inc. are not parties to the present motion.   Hereinafter, the term the defendants refers to Gallagher and Autumn Appraisers, collectively.

FN2. The court recognizes that the plaintiff filed the operative complaint after the defendants filed their motion to strike.   Counts thirteen and fourteen in the amended complaint appear to be identical to counts thirteen and fourteen in the original complaint.   Furthermore, the defendants have not amended their motion to strike.   Therefore, the court will apply the motion to the plaintiff's amended complaint.  Practice Book § 10-61..  FN2. The court recognizes that the plaintiff filed the operative complaint after the defendants filed their motion to strike.   Counts thirteen and fourteen in the amended complaint appear to be identical to counts thirteen and fourteen in the original complaint.   Furthermore, the defendants have not amended their motion to strike.   Therefore, the court will apply the motion to the plaintiff's amended complaint.  Practice Book § 10-61.

Martin, Robert A., J.