Opinion
No. CV X06 08 4016022 S
May 19, 2010
RULING ON MOTION FOR SUMMARY JUDGMENT FILED BY DEFENDANTS TD BANKNORTH, N.A. AND TRANZON AUCTION PROPERTIES
In light of the recent filing of the defendants' motion for summary judgment and the imminent commencement of jury selection, the court provides herein a summary disposition of the defendants' motion.
1. Count 7 — Negligence against Banknorth, Count 9 — Negligence against Tranzon, and Count 15 — CUTPA against Banknorth. The defendants' motion for summary judgment as to counts seven, nine and fifteen are denied.
The court notes that during oral argument and in their memorandum in opposition to the motion for summary judgment, the plaintiffs argued that counts seven and nine of the complaint allege both negligence and fraud, and therefore, the fraud claims must also be addressed as part of any consideration of the defendants' motion for summary judgment on these counts. During oral argument, the court rejected the plaintiffs' argument and reiterates that position here. These counts are not sufficiently framed to reasonably or fairly apprise the defendants that an intentional misrepresentation or a fraudulent omission is being claimed. A claim of fraud should not be assumed, nor should it have to be discerned, from unclear, imprecise pleading. Negligence is the only term used in these counts to articulate the cause of action being asserted. The law is established that fraud must be alleged clearly and with particularity. See Maruca v. Phillips, 139 Conn. 79, 90 A.2d 159 (1952) ("Where a claim for damages is based upon fraud, the mere allegation that a fraud has been perpetrated is insufficient; the specific acts relied upon must be set forth in the complaint"). Furthermore, the rules of practice require claims of negligence and fraud to be pleaded in separate counts. See Practice Book § 10-26.
The court rejects the defendants' argument that as a matter of law no common-law duty of care may be found to exist against the defendants under the circumstances of this case. This court, relying on Lombard v. Edward J. Peters, Jr., P.C., 252 Conn. 623, 749 A.2d 630 (2000), rejected this argument in its decision denying the defendants' motion to dismiss and this ruling of the court is hereby reaffirmed.
Although a closer question, the court also rejects the defendants' contention that the common law is displaced by the provisions of General Statutes §§ 42a-1-103(b) and 42a-9-610(d) and (e). Section 42a-9-610(d) provides that a contract for sale of collateral includes warranties "which by operation of law accompany a voluntary disposition of property of the kind subject to the contract"; and § 42a-9-610(e) provides that such warranties may be disclaimed by the secured creditor "in a manner that would be effective to disclaim . . . warranties in a voluntary disposition of property of the kind subject to the contract of disposition." Section 42a-9-610(e) provides that disclaimers of warranties may be acquired by broad rather than specific language. As indicated by the language of these provisions, and as reflected in the official commentary, these provisions do not appear structured to displace the common law by creating or imposing either warranties or disclaimers, but merely appear to acknowledge the applicability of such warranties or disclaimers in accordance with existing law. Cf. Jacobs v. Healey Ford-Subaru, Inc., 231 Conn. 707, 652 A.2d 496 (1995) (alternative remedies are not displaced by the UCC absent express mandate or clear conflict).
See Official Commentary, Uniform Commercial Code, § 9-610, ¶ 11: "Law other than this Article determines whether such other warranties apply to a disposition under this section. Other law also determines issues relating to disclaimer of such warranties."
As a general rule, under Connecticut common law, general disclaimers of warranties or representations in contracts do not preclude causes of action based on negligent misrepresentation. Martinez v. Zovich, 87 Conn.App. 766, 867 A.2d 149 (2005). In Martinez the Appellate Court held that "[a] claim that a seller's . . . negligent misrepresentation caused a buyer to enter into a contract for the sale of property is a valid cause of action, even if the contract that the parties entered into constituted the entire agreement between the parties and the contract included a clause disclaiming any representations by the seller as to the condition of the property." Id., 778. The defendants' reliance on out-of-state cases reaching a different conclusion is therefore misplaced.
The following explanation was provided by the court in Ridgefield Professional Office Park v. ASML US, Inc., Superior Court, complex litigation docket at Waterbury, Docket No. X06 CV 06 5007184 (December 8, 2008, Stevens, J.) [ 46 Conn. L. Rptr. 758]: "In comparing New York and Connecticut law on this issue, the District Court in Intellivision v. Microsoft Corp., Docket No. 07 Civ. 4079 (JGK) (S.D.N.Y.; August 20, 2008), stated the following: `Under New York law, where a party specifically disclaims reliance upon a particular representation in a contract, that party cannot, in a subsequent action for common-law fraud, claim it was fraudulently induced to enter into the contract by the very representation it had disclaimed reliance upon. Under Connecticut law, however, such a disclaimer may bar claims for innocent misrepresentation, but does not act as a bar to either fraudulent or negligent misrepresentation.'" Id. n. 3.
The holding of Martinez is not so broad as to eviscerate the general rule that parties are free to determine voluntarily the nature and terms of their contract. This holding reflects a more specific concern that disclaimers of one's own negligent conduct should be made through language that is express and explicit, rather than broad and general.
"`[T]he law does not favor contract provisions which relieve a person from his own negligence . . .' (Internal quotation marks omitted.) Reardon v. Windswept Farm, LLC, 280 Conn. 153, 159, 905 A.2d 1156 (2006). `[T]he law's reluctance to enforce exculpatory provisions of this nature has resulted in the development of an exacting standard by which courts measure their validity. So, it has been repeatedly emphasized that unless the intention of the parties is expressed in unmistakable language, an exculpatory clause will not be deemed to insulate a party from liability for his own negligent acts . . . Put another way, it must appear plainly and precisely that the limitation of liability extends to negligence or other fault of the party attempting to shed his ordinary responsibility . . .' (Internal quotation marks omitted.) Roman v. Bristol, 101 Conn.App. 491, 498, 922 A.2d 310 (2007). `Not only does this stringent standard require that the drafter of such an agreement make its terms unambiguous, but it mandates that the terms be understandable as well. Thus, a provision that would exempt its drafter from any liability occasioned by his fault should not compel resort to a magnifying glass and lexicon . . . Of course, this does not imply that only simple or monosyllabic language can be used in such clauses. Rather, what the law demands is that such provisions be clear and coherent.' (Internal quotation marks omitted.) Hanky v. Powder Ridge Restaurant Corp., 276 Conn. 314, 322, 885 A.2d 734 (2005)." Schneeloch v. Glastonbury Fitness Wellness, Inc., Superior Court, judicial district of Hartford, Docket No. CV 06 5007348 (February 2, 2009, Domnarksi, J.) [ 47 Conn. L. Rptr. 183].
Whether the general applicability of the UCC in conjunction with the economic loss rule, as articulated in Flagg Energy Development Corp. v. General Motors Corp., 244 Conn. 126, 709 A.2d 1075 (1998), operate to preclude the plaintiffs' tort and CUTPA claims is an even closer question. The holding of Flagg "preclude[s] tort claims seeking economic losses in cases involving the sale of goods governed by the provisions of the UCC." State v. Maximus, Inc., Superior Court, complex litigation docket at Waterbury, Docket No. X06 CV 07 5011488 (April 1, 2009, Stevens, J.) ( 47 Conn. L. Rptr. 642). The plaintiffs' first argument is that Flagg is inapplicable because the holding of Flagg concerns Article 2 and the present action is governed by Article 9 of the UCC. The problem with this argument is that the plaintiffs cite no authority in support of it and the court is unaware of any. Indeed, the majority of the superior court cases construing Flagg reason that its holding is not limited to the UCC and applies to all commercial contracts seeking economic damages. In Maximus, this court adopted a minority rule indicating that Flagg should be limited to its facts, and that its recognition of the economic loss rule should be restricted to contracts governed by the UCC. A fair question is raised whether the reasoning of Maximus limiting the economic loss doctrine to the UCC should be applied to limit the doctrine further to the sale of goods under Article 2 or whether it should be viewed more broadly to apply the doctrine to other UCC articles. The UCC provides extensive regulation of the sale of goods under Article 2. On the other hand, under Article 9, the UCC primarily concerns the relationship or obligations between the secured creditor and the debtor regarding the sale of collateral (see General Statutes §§ 42a-9-610 through 9-628), rather than the relationship or obligations between a secured creditor and the buyer of collateral (see General Statutes §§ 42a-9-610 and 9-617). The parties have not fully or squarely addressed this issue, and therefore, for this reason, as well as for the following, the court reserves decision on the defendants' argument on the economic loss doctrine.
The plaintiffs also allege that at least some of the wrongful conduct of the defendants is independent of or outside the scope of any claimed breach of contract. There is authority supporting the proposition that tortious conduct outside the scope of the contract is not barred by the economic loss rule. See, e.g., HTP v. Lineas Aereas Costarricenses, 685 So.2d 1238, 1239 (Fla. 1996) ("The economic loss rule has not eliminated causes of action based upon torts independent of the contractual breach even though there exists a breach of contract action. Where a contract exists, a tort action will lie for either intentional or negligent acts considered to be independent from acts that breached the contract"); cf. Am. Progressive Life v. Better Ben., LLC, 292 Conn. 111, 119, 971 A.2d 17 (2009) (declining to consider the economic loss issue when the plaintiff agreed that the economic loss rule would not bar a claim for tortious conduct that clearly fell outside the scope of the contract). It is difficult to discern from the complaint whether all of the plaintiffs' negligence claims are intertwined with the defendants' performance of the sale transaction.
Furthermore, it does not appear that Tranzon had any contract with the plaintiffs on which the economic loss doctrine can be premised. The parties do not squarely or fully address this question either.
Additionally, Banknorth further argues that the CUTPA count against it should also be dismissed because as a matter of law, allegations of negligence alone are insufficient to state a claim under CUTPA. The court rejects this blanket proposition and concludes that in this case issues of fact preclude summary judgment on the count alleging violation of CUTPA.
"Whether a practice is unfair and thus violates CUTPA is an issue of fact." (Internal quotation marks omitted.) Miller v. Guimaraes, 78 Conn.App. 760, 775, 829 A.2d 422 (2003). "It is well settled that in determining whether a practice violates CUTPA [Connecticut courts] have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1) [W]hether the practice . . . offends public policy as it has been established by the statutes, the common law, or otherwise . . . (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers [competitors or other businessmen] . . . All three criteria do not have to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent, it meets all three." (Internal quotation marks omitted.) Fink v. Golenbock, supra, 238 Conn. 183, 215, 680 A.2d 1243 (1996).
The bank is incorrect in its argument that negligent misrepresentation can never support a CUTPA claim, and its reliance on Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 599, 657 A.2d 212 (1995), is misplaced. In the Williams Ford case, the court held that the satisfaction of "the first prong [of the cigarette rule], standing alone, is insufficient to support a CUTPA violation, at least when the underlying claim is grounded solely in negligence." The court did not say that negligence could never constitute the basis for a CUTPA violation, but rather that meeting the first prong alone with nothing more than negligent acts could not support a CUTPA claim. In fact, in a footnote, the court clarified as follows: "We . . . need not decide whether negligence of the defendant alone, unaccompanied by contributory negligence of the plaintiff, will establish a CUTPA violation." Id., 591 n. 25.
In Miller v. Guimaraes, supra, 78 Conn.App. 760, the court held that the failure of a seller of a lot to disclose that he did not own the lot, but rather that a third party did, could violate CUTPA. The court noted that "a CUTPA violation need not involve fraud on the part of the violator . . ." (Internal quotation marks omitted.) Id., 776 n. 3; see also Web Press Services Corp. v. New London Motors, Inc., 203 Conn. 342, 363, 525 A.2d 57 (1987) ("we conclude that knowledge of falsity, either constructive or actual, need not be proven to establish a violation of CUTPA). Even an innocent misrepresentation may underlie a CUTPA claim. see, e.g., Prishwalko v. Bob Thomas Ford, Inc., 33 Conn.App. 575, 583, 636 A.2d 1383 (1994) ("It is not a prerequisite of a CUTPA violation to prove that a car dealer intended to deceive when an odometer reading is not accurate"). The court rejects the reasoning of lower court cases cited by Banknorth conflicting with this appellate precedent. See, e.g., Kawanobe v. Smith, Superior Court, judicial district of New Haven, Docket No. CV 08 5004343 (June 23, 2009, Fischer, J.).
The defendants also allege that the plaintiffs cannot prove reasonable reliance. This claim raises issues of material fact not amenable to summary disposition.
Thus, the defendants' motion for summary judgment as to counts seven, nine and fifteen is denied.
2. Count 12 — Breach of Warranty of Title under General Statutes § 42a-2-312 against Banknorth. The motion for summary judgment as to count twelve is granted.
First, because it appears from the undisputed facts that the predominant purpose of the transaction was to sell real property, rather than for the sale of goods, § 42a-2-312 does not apply. See generally State v. Maximus, Inc., supra, Docket No. X06 CV 07 5011488; see also Gulash v. Stylarama, Inc., 33 Conn.Sup. 108, 364 A.2d 1221 (1975); Epstein v. Ginnattasio, 25 Conn.Sup. 109, 197 A.2d 342 (1963); Midwest Mfg. Holding, LLC v. Donnely Corp., 975 F.Sup. 1061, 1063-64 (N.D.Ill. 1997). Second, assuming arguendo that warranties under either General Statutes § 42a-2-312 or the common law apply, under General Statutes §§ 42a-9-610(e) and (f), the disclaimers provided by the defendant were sufficient as a matter of law to disclaim any warranties of title.
3. Count 13 "Misappropriation" in Violation of the Bill of Sale and Count 14 Breach of the Covenant of Good Faith and Fair Dealing Against Banknorth. The motion for summary judgment as to counts thirteen and fourteen is denied.
Banknorth argues that the plaintiffs' claims under counts thirteen and fourteen must fail because Article 9 does not apply to life insurance policies. This argument in nonsensical and the cases cited by Banknorth are inapposite. There is nothing in the provisions of Article 9, or any other provision or rule cited by the bank or located by the court, precluding the bank from transferring its security interest in the insurance policy. There is nothing in the language of the insurance policy assignment itself precluding the bank from transferring or assigning this interest.
The court also notes the following. The assignment is not to Banknorth, but is in favor of "Southington Savings Bank," which suggests that Banknorth acquired its interest in the insurance policy by assignment. Indeed, the assignment itself states that it is in favor of "Southington Savings Bank, its successors and assigns."
Therefore, the question is, under the terms of the bill of sale, whether the transaction was limited to collateral secured under the provisions of Article 9 or whether this particular item of security was otherwise excluded from the sale. The court agrees with the plaintiffs that the language of the bill of sale is not clear and unambiguous on this question. Consequently, the question must be addressed at trial and cannot be resolved through summary judgment.
In conclusion, the defendants TD Banknorth and Transzon Auction Properties' motion for summary judgment is granted as to count twelve only and is otherwise denied.
So ordered this 18th day of May 2010.