Icha G. Bell et al. v. Chris Afentoulides et al. (2011)

MEMORANDUM OF DECISION

The plaintiffs, Icha Bell and Dean Bell, commenced this action on July 18, 2009 by service of process upon the defendants, Chris Afentoulides and Vasilios Afentoulides.   In their operative complaint, the plaintiffs allege the following facts.   On June 22, 2006, the plaintiffs, as buyers, and the defendants, as sellers, entered into an agreement for the sale and purchase of real property located at 1 Kellogg Street, Norwalk, Connecticut for a $600,000 price.   The defendants conveyed the property by a warranty deed that was recorded on the Norwalk land records.   The plaintiffs received a Notice of Violation & Cease & Desist dated April 27, 2009 from the Zoning Commission of Norwalk stating that the property had been converted from a two-family to a three-family residence in violation of Norwalk's Building Zone Regulations.

In view of the foregoing, the plaintiff alleges in the first count of their amended complaint that “the [d]efendants breached the warranty covenants of the Warranty Deed ․ by representing the premises as a legal three family house when they knew or should have known that the property lacked the required permits to convert the premises to a legal three-family residence in a two family zone.” ¹  The claim is one for a breach of the warranty against encumbrances.

The plaintiff allege in the second count, claiming a breach of contract, that:  (1) the defendants represented that the property was a legal three-family residence;  (2) the defendants breached the contract by conveying to the plaintiffs property that was in violation of certain regulations of Norwalk;  and (3) the value of the property as a legal two-family house was approximately $450,000.

The third count and fourth counts set forth claims for negligent misrepresentation and intentional misrepresentation, respectively.²  The plaintiffs seek the relief of money damages, rescission of the conveyance, attorneys fees and costs and other equitable relief as the court deems appropriate.

In response to the amended complaint, the defendants filed an answer, four special defenses applicable to all counts of the complaint and a counterclaim.   In their special defenses, the defendants allege that the plaintiffs requested on July 6, 2006, and received on July 10, 2006, a written representation from the defendants that the defendants had maintained the premises as a three-family residence for the duration of their ownership, had not received communication from the city of Norwalk questioning such use and in the future would not make statements to anyone concerning its use as a three-family residence.   The first through third special defenses assert waiver, estoppel and modification of the contract, respectively, based upon request for and receipt of this written representation.   The defendants assert in their fourth special defense that the plaintiff, Dean Bell, lacks standing because he was not a party to the contract.   In their counterclaim, the defendants contend that any representations in the contract and affidavit did not survive delivery of the deed and they generally deny the allegations in the complaint.   The defendants further allege that, pursuant to the contract, the defendants are entitled to reasonable attorneys fees and court costs if they prevail in defending against the complaint.

“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.)  Sherman v. Ronco, 294 Conn. 548, 553–54, 985 A.2d 1042 (2010).  “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.”  (Internal quotation marks omitted.)  Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 11, 938 A.2d 576 (2008).  “As the party moving for summary judgment, the [movant] is required to support its motion with supporting documentation, including affidavits.”  Heyman Associates No. 1 v. Ins. Co. of Pennsylvania, 231 Conn. 756, 796, 653 A.2d 122 (1995).  “The existence of the genuine issue of material fact must be demonstrated by counteraffidavits and concrete evidence.”  (Internal quotation marks omitted.)  Gianetti v. Health Net of Connecticut, Inc., 116 Conn.App. 459, 465, 976 A.2d 23 (2009).

The defendants move for summary judgment on the first count claiming that there is no genuine issue of material fact that the alleged violations of Norwalk's Building Zone Regulations that were in existence at the time of property was conveyed to the plaintiffs are not encumbrances in breach of the defendants' covenant against encumbrances in the warranty deed.   The defendants cite to the case of Frimberger v. Anzellotti, 25 Conn.App. 501, 594 A.2d 1029 (1991) for the proposition that the term “encumbrances” does not include latent property conditions that are in violation of municipal regulations.³

The defendants move for summary judgment on the second count asserting that there is no genuine issue of material fact regarding whether they breached the sales agreement.   The defendants maintain that the language of the sales agreement provides that no representations survived the delivery of the deed, and that the intent of the sales agreement was to qualify any representations made by the defendants as having been made to the best of their knowledge and belief.

In opposing summary judgment on the first count, the plaintiffs contend that the defendants “knew of the zoning violation and that the violation therefore became an encumbrance affecting title, in violation of the warranty deed.”   The plaintiffs oppose summary judgment on the second count claiming that the defendants cannot rely on provisions of the sales agreement that extinguish representations made in the agreement upon delivery of the deed if the defendants had knowledge of a zoning violation and withheld that information from the plaintiffs.   The plaintiffs assert that there is evidence that the defendants did have such knowledge.

I

The court will first address the defendants' claim that the court should grant summary judgment on the first count because a latent violation of a municipal regulation that existed at the time of the conveyance does not constitute an encumbrance in a breach of the covenant against encumbrances in the warranty deed between the parties.

“Under General Statutes § 47–36d,⁴ a warranty deed contains the following four covenants:  (1) the covenant of seisin;  (2) the covenant of the right to convey;  (3) the covenant against encumbrances;  and (4) the covenant of warranty.”   Dowd v. D'Addeo, Superior Court, judicial district of Middletown, Docket No. CV 99 0088165 (January 13, 2000, Arena, J.).  General Statutes § 47–36e provides:  “In any conveyance of real property the words ‘with warranty covenants' have the full force, meaning and effect of the following words:  ‘The grantor covenants with the grantee that he is lawfully seized in fee simple of the granted premises;  that the same are free from all encumbrances except as therein set forth, that he has good right, full power and lawful authority to sell and convey the same to the grantee and that the grantor shall, and his heirs, executors and administrators shall, warrant and defend the same to the grantee and his heirs and assigns forever against the claims and demands of all persons except as therein set forth.’ “

“The covenant against encumbrances is a guarantee that there is no right or interest in the land conveyed which may subsist in a third person to the diminution of the value of the land, but consistent with the passing of the fee by the conveyance.”  (Internal quotation marks omitted.)  Aczas v. Stuart Heights, Inc., 154 Conn. 54, 60, 221 A.2d 589 (1966).  “All encumbrances may be classed as either (1) a pecuniary charge against the premises, such as mortgages, judgment liens, tax liens, or assessments, or (2) estates or interests in the property less than the fee, like leases, life estates or dower rights, or (3) easements or servitudes on the land, such as rights of way, restrictive covenants and profits ․ It is important to note that the covenant against encumbrances operates in praesenti and cannot be breached unless the encumbrance existed at the time of the conveyance.”  (Citation omitted.)   Frimberger v. Anzellotti, supra, 25 Conn.App. 405.

The case of Frimberger v. Anzellotti, supra, 25 Conn.App. 501, is controlling on the issue.   In Frimberger, the Appellate Court noted that “the issue of whether a latent violation of a restrictive land use statute or ordinance, that exists at the time the fee is conveyed, constitutes a breach of the warranty deed covenant against encumbrances” was one of first impression.   Id., 406.   In that case, the violation involved an area of property near tidal wetlands that was filled without obtaining the necessary statutory permits.  Id., 404–05.   In the ensuing litigation, the trial “court found that the defendant had breached the warranty against encumbrances and had innocently misrepresented the condition of the property by allowing the plaintiff to purchase the property in reliance on the defendant's warranty against encumbrances” and awarded damages to the plaintiff.  Id., 404–05.

The Appellate Court reversed the trial court's judgment in favor of the plaintiff and held that “the concept of encumbrances cannot be expanded to include latent conditions on the property that are in violation of statutes or government regulations.”  Id., 409.   Our Appellate Court reasoned that if such violations were deemed to be encumbrances it “would create uncertainty in the law of conveyances, title searches and title insurance.   The parties to a conveyance of real property can adequately protect themselves from such conditions by including protective language in the contract and by insisting on appropriate provisions in the deed.”  Id. In reaching its decision, the Court followed the reasoning of the New Jersey Supreme Court in Fahmie v. Wulster, 81 N.J. 391, 397, 408 A.2d 789 (1979) (“To expand the concept of encumbrance as urged by plaintiffs would create uncertainty and confusion in the law of conveyancing and title insurance.   A title search would not have disclosed the violation, nor would a physical examination of the premises.   The better way to deal with violations of governmental regulations, their nature and scope being as pervasive as they are, is by contract provision which can give the purchaser full protection in a situation such as is here presented”).

The plaintiffs claim that the present action is distinguishable from Frimberger because there is a factual question as to whether the plaintiffs knew of the violations of the municipal regulations.   The essence of their argument is that a latent condition on property that is in violation of government regulations and of which a seller has knowledge at the time of the conveyance constitutes a breach of the warranty deed covenant against encumbrances.   The court disagrees.

In considering the issue before them, our Appellate Court in Frimberger noted that “[t]here is ․ persuasive and authoritative weight in the legal literature and the case law of other jurisdictions to support the proposition that such an exercise of police power by the state does not affect the marketability of title and should not rise to the level of an encumbrance.”   Frimberger v. Anzellotti, supra, 25 Conn.App. 406.   It is clear from Frimberger and the cases cited therein that a grantor's knowledge of such a violation does not make it an encumbrance in breach of the warranty deed covenant against encumbrances.   See, e.g., McCrae v. Giteles, 253 So.2d 260, 262 (Fla.App.1971) (court “concluded that a building code violation of which the vendor has notice is not an encumbrance within the meaning of the covenant against encumbrances”);  Monti v. Tangora, 99 Ill.App.3d 575, 580–82 425 N.E.2d 597 (1981) (court rejected the plaintiff buyer's claim that the covenant against encumbrances “was breached when the sellers, with notice of building code violations, conveyed the premises to buyer”);  Silverblatt v. Livadas, 340 Mass. 474, 164 N.E.2d 875 (1960) (contingent or inchoate lien which might result from building code violation not an encumbrance).

In the present case, the claimed violations of the Building Zone Regulations of Norwalk relating to the conversion of a two-family residence to a three-family residence do not give rise to a claim for breach of the warranty against encumbrances in the warranty deed delivered by the defendants to the plaintiffs.   Therefore, the defendants' motion for summary judgment on the first count is granted.

II

The court will next discuss the defendants' claim that they are entitled to summary judgment on the second count alleging a breach of the sales and purchase agreement.   In the second count of their amended complaint, the plaintiffs claim that “the [d]efendants breached [the] contract by agreeing to convey to the [p]laintiffs real estate that was in fact in violation of the zoning laws of the City of Norwalk.” ⁵  In support of their motion for summary judgment on that count, the defendants maintain that the agreement provides that no representations survived the delivery of the deed and that any such affirmative representations would merge with the deed when the title was conveyed.   The plaintiffs oppose on the second count maintaining that there are issues of material fact concerning the defendants' knowledge of the violations of the regulations.

“Unless the contract expressly provides that certain terms shall survive, “it is axiomatic that a deed supersedes the underlying contract ․ [A]cceptance of a deed in pursuance of articles of agreement for the conveyance of land is prima facie the completion of the contract;  and all stipulations contained therein ․ are merged in the deed although omitted therefrom ․” (Internal quotation marks omitted;  citations omitted.)  Biro v. Matz, 132 Conn.App. 272, 278–79 (2011).

It is undisputed that the agreement at issue provides that no representations survived the delivery of the deed unless the parties otherwise specified in writing, and that there is no such writing.   Our Appellate Court, however, has held that the doctrine of merger by deed does not apply where there is a claim of innocent or intentional misrepresentation in the inducement in the contract.  Matyas v. Minck, 37 Conn.App. 321, 337, 655 A.2d 1155 (1995).   That case involved a claim against the Matyases by their subsequent purchasers for breach of contract and misrepresentation based on the Matyases' representations concerning the location of the septic system on the property that was conveyed.  Id., 324.   The Matyases claimed on appeal “that the alleged misrepresentation did not survive the closing of title.”  Id., 337.  “Essentially, the Matyases are claiming that the terms of the sales contract were merged into and superseded by the deed, and, thus, there can be no action on a breach of contract.”  Id. The Court disagreed for the reason that “the plaintiffs are not seeking to add to, subtract from or alter the terms of the written contract itself.   They are claiming that they were induced to enter into the contract by misrepresentations of material facts.   This action is concerned with material misrepresentations in the inducement of the contract.”  Id. The Court held “that the trial court properly refused to charge the jury on the doctrine of merger.”  Id.

In opposition to the summary judgment motion, the plaintiffs have submitted an affidavit of the plaintiff Icha Bell, in which she asserts the following:  (1) The property was advertised on the Multiple Listing Service as a three-family residence;  (2) the defendants' broker, Michael Dinshaw, provided her a package of information, including an advertisement that indicated that the property was a three-family residence and a listing information sheet that indicated that the property was a three-family dwelling;  (3) on July 31, 2006, the plaintiffs purchased the property for $600,000, and the defendants had purchased the property nine weeks prior for $370,000;  (4) one month prior to purchasing the property, the defendant Vasilios Afentoulides had assisted the prior owner in applying for a certificate of zoning compliance for three-family use, yet no certificate was ever issued.   In addition to Icha Bell's affidavit, the plaintiffs submitted the following:  (1) An advertisement from the defendants' broker representing the property as a three-family home;  (2) a listing information sheet representing the property as a three-family home with existing month to month leases for all but the vacant first floor unit;  (3) statutory form warranty deed showing sale of the property by Lazaros Zinovis to the defendants for $370,000 on May 23, 2006;  (4) an application for zoning approval and zoning compliance for three-family use dated April 13, 2006,⁶ bearing Lazaros Zinovis' name;  and (5) four pages of a deposition transcript of the defendant Vasilios Afentoulides, dated July 7, 2010, in which he states that he assisted Zinovis in trying to verify three-family usage.   The defendant states that he relied on the word of the zoning department's representative that “[e]verything looks good” to mean that the property was approved for three-family use, without receiving anything in writing from the city of Norwalk.

There are genuine issues of material fact concerning the alleged representations made by the defendants to induce the plaintiffs to enter into the sale and purchase agreement.   Therefore, the defendants' motion for summary judgment on the second count is denied.

III

In view of the foregoing, the defendants' motion for summary judgment is granted on the first count and denied on the second count of the plaintiffs' complaint.

TYMA, J.

FOOTNOTES

FN1. Although the plaintiffs generally allege in the first count of their complaint that the defendants breached the covenants of the warranty deed, during oral argument on the present motion the plaintiffs limited the allegations of the first count to a claim for a breach of the covenant against encumbrances..  FN1. Although the plaintiffs generally allege in the first count of their complaint that the defendants breached the covenants of the warranty deed, during oral argument on the present motion the plaintiffs limited the allegations of the first count to a claim for a breach of the covenant against encumbrances.

FN2. On November 8, 2010, the court, Tyma, J., denied summary judgment as to the third and fourth counts of the complaint.   Therefore, the court need only address the defendants' motion for summary judgment on the first and second counts..  FN2. On November 8, 2010, the court, Tyma, J., denied summary judgment as to the third and fourth counts of the complaint.   Therefore, the court need only address the defendants' motion for summary judgment on the first and second counts.

FN3. At oral argument, the plaintiffs abandoned their claim that the alleged violation in the first count is a title defect.   Therefore, the court need not address the defendants' motion to the extent that it addresses that contention.   The defendants further assert in moving for summary judgment on the first count that under the warranty deed, the premises are conveyed subject to “[a]ny and all provisions of any municipal ordinance or regulation or public or private law with special reference to the provisions of any zoning regulations and regulations governing the said Premises ․” The court need not consider this claim for the reason that the defendants' claim that the violation does not constitute an encumbrance resolves the summary judgment motion on the first count..  FN3. At oral argument, the plaintiffs abandoned their claim that the alleged violation in the first count is a title defect.   Therefore, the court need not address the defendants' motion to the extent that it addresses that contention.   The defendants further assert in moving for summary judgment on the first count that under the warranty deed, the premises are conveyed subject to “[a]ny and all provisions of any municipal ordinance or regulation or public or private law with special reference to the provisions of any zoning regulations and regulations governing the said Premises ․” The court need not consider this claim for the reason that the defendants' claim that the violation does not constitute an encumbrance resolves the summary judgment motion on the first count.

FN4. Section 47–36d provides:  “A deed following the form entitled ‘Warranty Deed,’ when duly executed, has the force and effect of conveying title in fee simple to the grantee, with covenants on the part of the grantor to the grantee, for himself and for his heirs, executors and administrators;  (1) that at the time of delivery of the deed he is lawfully seized in fee simple of the granted premises, (2) that the granted premises are free from all encumbrances except as therein set forth, (3) that he has good right, full power and lawful authority to sell and convey the same to the grantee and (4) that the grantor shall, and his heirs, executors and administrators shall, warrant and defend the granted premises to the grantee and his assigns forever against the claims and demands of all persons, except as therein set forth.”.  FN4. Section 47–36d provides:  “A deed following the form entitled ‘Warranty Deed,’ when duly executed, has the force and effect of conveying title in fee simple to the grantee, with covenants on the part of the grantor to the grantee, for himself and for his heirs, executors and administrators;  (1) that at the time of delivery of the deed he is lawfully seized in fee simple of the granted premises, (2) that the granted premises are free from all encumbrances except as therein set forth, (3) that he has good right, full power and lawful authority to sell and convey the same to the grantee and (4) that the grantor shall, and his heirs, executors and administrators shall, warrant and defend the granted premises to the grantee and his assigns forever against the claims and demands of all persons, except as therein set forth.”

FN5. While the plaintiffs' complaint is not the model of clarity, the court construes the allegations of the second count as including a claim that the defendants breached the sale and purchase agreement by inducing the plaintiffs to enter into the contract by misrepresentations concerning the legality of the three-family residence that was conveyed.   As discussed, the plaintiffs have also asserted against the defendants claims for negligent and intentional misrepresentation based on the same facts..  FN5. While the plaintiffs' complaint is not the model of clarity, the court construes the allegations of the second count as including a claim that the defendants breached the sale and purchase agreement by inducing the plaintiffs to enter into the contract by misrepresentations concerning the legality of the three-family residence that was conveyed.   As discussed, the plaintiffs have also asserted against the defendants claims for negligent and intentional misrepresentation based on the same facts.

FN6. The date appears to be April 13, 2006, yet is only partially visible on the photocopy provided by the plaintiffs..  FN6. The date appears to be April 13, 2006, yet is only partially visible on the photocopy provided by the plaintiffs.

Tyma, Theodore R., J.