Opinion
No. CV 93 0307873 S
August 7, 2003
MEMORANDUM OF DECISION
I
STATEMENT OF THE CASE
The plaintiff, Doran Construction Company, Inc. instituted this action against the defendants, William Finkelstein and Revena Finkelstein. As to the complaint, the only claim remaining for disposition is the plaintiff's claim against the defendants for unjust enrichment. In response to the complaint, the defendants have filed two special defenses. The defendants have also filed three counterclaims. The counterclaims seek damages for injuries allegedly suffered by the defendants when the plaintiff filed and then refused to release a lis pendens.
When the suit was instituted, the Federal Deposit Insurance Corporation, as receiver for the Norwalk Bank, was also a named defendant. The plaintiff has since withdrawn the action against this defendant.
Pursuant to Practice Book § 19-2A et seq., the case was referred to an attorney trial referee (ATR). The ATR held a trial, and pursuant to Practice Book § 19-4, he was required to file his report within 120 days after completion of the trial. However, after the trial was completed, the parties filed a stipulation agreeing to extend the time for the ATR to file his report. After the ATR's report was filed, the defendants objected to its acceptance by the court. One objection was premised on the fact that the ATR filed the report more than 120 days after the trial was completed. With reservation, the court sustained the defendants' objection pursuant to Ficara v. O'Connor, 45 Conn. App. 626, 697 A.2d 696 (1997). The court then revoked the reference and scheduled the matter for a bench trial. This trial having been held, the court issues the following decision.
Although the bench trial before the court has now been completed, the court respectfully addresses the issue in this case relating to the holding of Ficara v. O'Connor, 45 Conn. App. 626, 697 A.2d 696 (1997). As previously stated, Practice Book § 19-4 requires the ATR to file a report within 120 days after the completion of trial. In Ficara, the Appellate Court held that this requirement cannot be waived by the parties. Although the 120 day requirement is clearly mandatory, there is nothing in the express language of Practice Book § 19-4, or in the history of its drafting, to indicate that this mandate cannot be waived by mutual consent of the parties. The Appellate Court's conclusion to the contrary appears to conflict with the acknowledged public policy of our courts to promote consensual, alternative resolutions of disputes between litigants. See generally, Wachter v. UDV North America, Inc., 75 Conn. App. 538, 543-44, 816 A.2d 668 (2003). In addition, it appears to conflict with the principle that because the procedures of the Practice Book are designed to facilitate business, these rules should be liberally construed to avoid surprise or injustice. Practice Book § 1-8. Thus, even at this late date, the parties could mutually agree to resolve this dispute in accordance with the ATR's decision and to have judgment enter based on such a stipulation. It is an anomaly that the parties still retain the authority to mutually agree to adopt the ATR's decision, but they lacked the authority to agree to extend the time to receive the decision and to be bound by it under the rules of practice.
The salient facts of this matter are undisputed. On February 10, 1989, the parties entered into a purchase and sales agreement pursuant to which the plaintiff agreed to build a house at 43 Brambley Hedge Circle, Fairfield, Connecticut (43 Brambley Hedge Circle), and then sell it to the defendants. The contract provided for a purchase money note CT Page 8894-z (Finkelstein note) from the plaintiff to the defendants in the amount of $300,000, to be secured by a mortgage on the property. The note was due and payable in full on June 22, 1992. To facilitate the loan to the defendants, the plaintiff executed in favor of Norwalk Bank, a "Commercial Note and Loan Agreement (Secured)" in the amount of $250,000 (Doran note). The interest rates and terms of these two notes were the same, except that the interest rate on the Doran note was payable quarterly while the interest on the Finkelstein note was payable annually. The Doran note contained a provision stating that "This loan is secured by a Note and Mortgage on property located at 43 Brambley Hedge Circle, Fairfield, Connecticut . . . Assignment of Mortgage dated June 22, 1989." The plaintiff endorsed the Finkelstein note, "Pay to the order of THE NORWALK BANK."
The plaintiff executed an Assignment of Mortgage dated June 22, 1989. This Assignment states the following in relevant part:
Know All Men By These Presents, That DORAN CONSTRUCTION CO., INC. . . . in consideration of the sum of One ($1.00) Dollar and other valuable considerations in hand paid by THE NORWALK BANK . . . the receipt whereof if hereby acknowledged, do by these presents give, grant, bargain, sell, assign, transfer and set over unto the said THE NORWALK BANK a certain Mortgage, made and executed by William and Revena Finkelstein in favor of Doran Construction Co., Inc. . . . together with the debt, note and obligation therein described, and the money due or to become due thereon with the interest thereon. To have and to hold the same unto the said THE NORWALK BANK and unto its successors and assigns forever, without recourse, subject only to the proviso in said Mortgage mentioned.
Before the Finkelstein note became due, Mr. Finkelstein informed the plaintiff's president, John Doran, that he was unable to pay the full balance of the Finkelstein note. Thereafter, the parties entered into discussions which resulted in the execution of a modification and subordination agreement, dated April 20, 1992. This agreement was executed by the parties and Norwalk Bank. The modification agreement stated that Norwalk Bank was the "owner" of the Finkelstein mortgage by virtue of an assignment of mortgage from Doran Construction Co., Inc. The modification agreement provided that the defendants would make a $150,000 payment on the Finkelstein note, and that the maturity date of the note would be extended to May 11, 1993. The defendants made this $150,000 payment, and upon receipt by the Norwalk Bank, the bank applied the proceeds to the Doran note and to other obligations the plaintiff owed to the bank. Thus, as of April 16, 1992, the principal balance due on the Doran note was $154,767.41 and the principal balance due on the Finkelstein note was $170,000.00.
Based on the foregoing facts, the court finds that the plaintiff has proven by a preponderance of the evidence, that the plaintiff, defendants and Norwalk Bank contemplated and anticipated that under the terms of the modified agreements, on May 11, 1993, the defendants would pay to the plaintiff $170,000, the principal balance of the Finkelstein note. The plaintiff in turn would pay to Norwalk Bank, $154,767.41, the principal balance of the Doran note. In making this finding, the court relies not only on the testimony of John Doran and William Finkelstein, but also on the testimony of John Tranquilli, a Vice-President of Norwalk Bank during the times in question.
On or about April 24, 1992, Norwalk Bank failed and it was taken over by the Federal Deposit Insurance Corporation (FDIC). Through October 1992, the defendants gave the plaintiff two interest payments on the CT Page 8894-aa Finkelstein note. Shortly thereafter, the FDIC notified the parties that upon review, it had determined that the assignment of the Finkelstein mortgage to Norwalk Bank was an absolute assignment and was not given as security for the Doran note. In a letter dated May 4, 1993, the FDIC informed the defendants through their counsel that as of May 11, 1993, the maturity date of the Finkelstein note, the defendants would have to pay the FDIC, $154,767.41, plus interest in order to acquire a release of this note. The payoff amount the FDIC demanded was not the $170,000 that the defendants owed under the Finkelstein note, but was the amount that the plaintiff owed under the Doran note. On September 16, 1993, the defendants paid the FDIC the amount demanded and received a release of the Finklestein note and mortgage.
On September 8, 1993, the plaintiff filed a lis pendens on the land records against the property located at 43 Brambley Hedge Circle. This lien affected a mortgage refinancing that the defendants were planning on the property. On September 9, 1993, as a condition precedent to completing the refinancing, the defendants entered into an indemnification agreement with the lender's title company. Under this indemnity agreement, the defendants were required to deposit $15,000 into a non-interest bearing account in order to acquire the title insurance policy despite the lien on the property. On September 10, 1993, the plaintiff received the defendants' demand that the plaintiff release the lis pendens. The parties have stipulated that the lis pendens has not been released.
Initially, the plaintiff brought this action against both the FDIC and the defendants. In its claim against the FDIC, the plaintiff sought to have the Finkelstein note and mortgage reassigned from the FDIC to the plaintiff. The plaintiff withdrew its action against the FDIC, however, and filed an amended complaint. Under the amended complaint as indicated in its post-trial memorandum, the plaintiff seeks relief only on the ground of unjust enrichment.
In response to the amended complaint, the defendants have filed two special defenses and a three-count counterclaim. In the first special defense, the defendants allege that the plaintiff lost all rights or interests it had in the debt as a result of its absolute assignment of the debt. In the second special defense, the defendants allege that the debt was paid and satisfied as a result of the FDIC's release.
The first count of the defendants' counterclaim alleges that by filing the lis pendens, the plaintiff intentionally and maliciously interfered with the defendants' "contractual refinance rights." The second count of the counterclaim alleges that the plaintiff failed to comply with CT Page 8894-ab statutory requirements when it filed the lis pendens, and failed to release the lis pendens after the defendants demanded its release. The defendants seek damages under General Statutes §§ 49-8 or 49-51 based on the plaintiff's failure to release the lis pendens. The third count of the counterclaim alleges that the plaintiff's refusal to release the lis pendens constitutes a violation of Connecticut Unfair Trade Practices Act, (CUTPA), General Statues § 42-110 et seq.
II DISCUSSION A THE COMPLAINT AND SPECIAL DEFENSES
"Unjust enrichment applies wherever justice requires compensation to be given for property or services rendered . . . A right of recovery under the doctrine of unjust enrichment is essentially equitable, its basis being that in a given situation it is contrary to equity and good conscience for one to retain a benefit which has come to him at the expense of another . . . With no other test than what under a given set of circumstances, is just or unjust, equitable or inequitable, conscionable or unconscionable, it becomes necessary in any case where the benefit of the doctrine is claimed, to examine the circumstances and the conduct of the parties and apply this standard . . . Unjust enrichment is, consistent with the principles of equity, a broad and flexible remedy . . ." (Citations omitted; internal quotation marks omitted.) Hartford Whalers Hockey Club v. Uniroyal Goodrich Tire Co., 231 Conn. 276, 282-83, 649 A.2d 518 (1994). "The . . . three basic requirements (for unjust enrichment) are that (1) the defendant was benefitted, (2) the defendant unjustly failed to pay the plaintiff for the benefits, and (3) the failure of payment was to the plaintiff's detriment." Gagne v. Vaccaro, 255 Conn. 390, 409, 766 A.2d 416 (2001).
After reviewing the circumstances and the conduct of the parties, as established by a preponderance of the evidence, the court agrees with the plaintiff that the defendants have received an unjust windfall, which should not be countenanced or enforced by a court of equity. The defendants executed the Finkelstein note in order to fully pay the plaintiff for the costs of constructing the defendants' residence and for the sale of this residence to them. More specifically, the defendants were benefitted by the work and materials the plaintiff supplied for this construction. The defendants were also benefitted by the purchase money note, which the plaintiff supplied to help the defendants satisfy the CT Page 8894-ac purchase price of their residence.
When the defendants paid the FDIC less than what they duly owed under the Finkelstein note, they avoided full payment for the benefits they received from the plaintiff. This court is unpersuaded that the plaintiff divested itself of all legal and equitable right to full payment of the benefits provided to the defendants. If the FDIC, through Norwalk Bank, truly "owned" the Finkelstein note, it is unclear why the FDIC did not demand the full amount that was actually due under this note. In other words, if the plaintiff, in full satisfaction of its obligation to Norwalk Bank, had unconditionally sold or transferred its Finkelstein note to the bank, then one realistic scenario would have been for the plaintiff to have received a full release of the Doran note at the time of the assignment, and for the bank in turn to have received full control and benefit of the Finkelstein note and mortgage. Certainly, this is only one possible scenario, but it illustrates that the parties and Norwalk Bank treated the assignment as security for the Doran note and not as an absolute transfer.
There is a bona fide question whether the FDIC was legally correct CT Page 8894-ak in its position that the assignment of the note and mortgage was absolute. On one hand, the language of the assignment indicates that the transfer was unconditional, and the modification agreement indicates that the bank was the "owner" of the mortgage. Moreover, the plaintiff endorsed the Finkelstein note, "Pay to the order of THE NORWALK BANK, with recourse." On the other hand, the Doran note clearly stated, "This loan is secured by a Note and Mortgage on property located at 43 Brambley Hedge Circle, Fairfield, Connecticut." (Emphasis added.) Comparing the language in the note with the language in these other documents, it is reasonable to conclude that the language of the note has more probative weight because it evidences the obligation. Thus, it may follow that the language of Doran note, especially when coupled with the parties' conduct supports the position that the provisions in the assignment simply fail to reflect the true intent of the plaintiff and Norwalk Bank. Nevertheless, as discussed above, the court concludes that it is unnecessary to decide whether or not the Finkelstein note and mortgage were unconditionally assigned. The more determinative issue for the plaintiff's unjust enrichment claim is that the parties and the Norwalk Bank never treated the Finkelstein note and mortgage as anything other than security for the Doran note. A court of equity may intervene and award relief for unjust enrichment precisely in those cases where the note evidencing the underlying legal obligation is unenforceable or uncollectible. See generally, Gagne v. Vaccaro, 255 Conn. 390, 401, 766 A.2d 416 (2001) ("Indeed, lack of a remedy under the contract is a precondition for recovery based upon unjust enrichment"); Sidney v. DeVries, 215 Conn. 350, 351-52 n. 1, 575 A.2d 228 (1990) (unjust enrichment is one of the common-law principles of restitution; it is a noncontractual means of recovery without valid contract).
In any event, the question whether the assignment was absolute will not be determined here. Under the circumstances presented, determining whether the assignment was absolute does not control the plaintiff's equitable claim for unjust enrichment. This is so because in either event, the court finds from the evidence presented that the parties and the Norwalk Bank did not treat the assignment as absolute and they did not intend the assignment to change the amount that the defendants owed under the Finkelstein note. In short, the controlling point here is that nothing in any of the documents, the actions of the Norwalk Bank, or the actions or intentions of the parties gave the defendants any expectation other than that they were obligated to pay the full amount owed under the Finkelstein note. The assignment was for the accommodation or benefit of the Norwalk Bank, and was not for the benefit of the defendants.
In summary, the plaintiff has established the elements of unjust enrichment. The defendants knew that they were obligated to make the payments required under the terms of the Finkelstein note. The defendants' failure to pay the plaintiff the full value of the Finkelstein note clearly operated to the plaintiff's financial detriment and constituted an unjust benefit to the defendant. The amount that the defendants paid to the FDIC was no arbitrary figure. Instead, it was premised on the amount owed under the Doran note. This amount was less than the amount the defendants owed under the Finkelstein note; and this note, in turn, evidenced the benefits provided by the plaintiff to the defendants so that they could have their residence built and purchased. Equity and good conscience require the defendants to compensate the plaintiff for the CT Page 8894-ad benefits received by them at the plaintiff's expense. The defendants are attempting to take unfair advantage of the entirely fortuitous circumstance that the FDIC entered the scene, assumed control over the Finkelstein note, and then demanded payment for less than what the defendants actually owed. The vagaries of federal law may allow the FDIC to impose itself as it has with impunity, but a court of equity is not required to allow the defendants to become unjustly enriched as a result.
The court rejects the defendants' argument that they may avail themselves of the D'Oench, Duhme doctrine, as substantially codified by 12 U.S.C. § 1823 (e)(1), which may have been available to the FDIC if it had remained a defendant in this case. Under federal law, this doctrine operates to shield the FDIC from certain common-law equitable claims, and the doctrine has been extended to the Federal Saving and Loan Insurance Corporation; see, e.g., Newton v. Uniwest Financial Corp., 967 F.2d 340 (9th Cir. 1992); and the FDIC's assignees; see, e.g., Kilpatrick v. Riddle, 907 F.2d 1523, 1528 (5th Cir. 1990). However, the doctrine has not been extended to persons in the defendants' position, and there is no indication that Congress intended the D'Oench, Duhme doctrine to be used as a personal defense as asserted by the defendants. The defendants have not cited any case law to the contrary and the court has not located any.
The D'Oench, Duhme doctrine is "a common law rule of estoppel precluding a borrower from asserting against the FDIC defenses based upon secret or unrecorded `side agreements' that altered the terms of facially unqualified obligations." Bell Murphy and Associates, Inc. v. Interfirst Bank Gateway, N. A., 894 F.2d 750, 753 (5th Cir. 1990). The doctrine was first described by the United States Supreme Court in D'Oench, Duhme Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942). Congress substantially codified the elements of the common-law D'Oench, Duhme doctrine in 12 U.S.C. § 1823 (e)(1), which provides in pertinent part:
No agreement which tends to diminish or defeat the interest of the [FDIC] in any asset acquired by it . . . as receiver of any insured depository institution shall be valid against the [FDIC] unless such agreement (A) is in writing, (B) was executed by the depository institution and any person claiming an adverse interest thereunder, CT Page 8894-al including the obligor, contemporaneously with the acquisition of the asset by the depository institution, (C) was approved by the board of directors of the depository institution or its loan committee, which approval shall be reflected in the minutes of said board or committee, and (D) has been, continuously, from the time of its execution, an official record of the depository institution.
Although the court does not reach the issue, in light of the existence and language of the Doran note, the court notes that the applicability of a defense under 12 U.S.C. § 1823 (e) is unclear. The Doran note indicates that the plaintiff's debt was merely "secured" by the defendants' note and mortgage. The evidence does not indicate whether or not this note was formally approved and maintained by the Norwalk Bank in conformity with 12 U.S.C. § 1823 (e).
The court also rejects the other defenses that the defendants have asserted in their post-trial memoranda. The defendants' argument that the plaintiff's claim is barred by the statute of frauds, General Statute §§ 52-550 (a)(4) and (6), fails because the plaintiff is not attempting to enforce, through its unjust enrichment claim, any oral agreement that would run afoul of the statute of frauds. See generally, Willow Funding Co., L.P. v. Grencom Associates, 63 Conn. App. 832, 848-49, 779 A.2d 174 (2001) ("Our courts have been assiduous to prevent the statute of frauds from becoming an instrument of fraud"). The defendants' parol evidence argument is similarly inapposite because the plaintiff is not attempting to collect under the Finkelstein note, but is seeking equitable relief based on the unjust and inequitable results of the enforcement and release of this note.
The court also notes that the defendants have argued in their post-trial memoranda that the plaintiff has come to court with "unclean hands." The defendants, however, have failed to assert this claim as a special defense. Moreover, the defendants support this claim solely by emphasizing that the plaintiff made no interest payments on the Doran note after the FDIC took over the bank, thereby causing the note to go into default. This emphasis is of no consequence here because any such CT Page 8894-ae default did not affect the defendant's obligations under the Finkelstein note, particularly since both notes matured in May 1993 and there is no evidence that the FDIC declared the Doran note in default and accelerated the indebtedness prior to this maturity date. As previously stated, the defendants paid the FDIC on the Finkelstein note after this maturity date.
The court credits the plaintiff's evidence and finds that as of September 16, 1993, the date of the defendants' last payment on the Finkelstein note, the remaining unpaid amount was $9,550.29. The court further finds that these funds were retained and unpaid after they became due, and that an appropriate exercise of the court's discretion would be to award interest at the rate of 10 per cent a year pursuant to General Statutes § 37-3a. From the period September 16, 1993 to August 7, 2003, this interest is calculated to be $9,440.92.
B COUNTERCLAIMS 1
Tortious Interference with Contractual Rights
The defendants' first counterclaim alleges that by filing the lis pendens, the plaintiff tortiously interfered with the defendants' contractual rights in that it interrupted the refinancing of the mortgages on the subject property. "[I]n order to recover for a claim of tortious interference with business expectancies, the claimant must plead and prove that: (1) a business relationship existed between the plaintiff and another party; (2) the defendant intentionally interfered with the business relationship while knowing of the relationship; and (3) as a result of the interference, the plaintiff suffered actual loss." Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20, 32-33, 761 A.2d 1268 (2000); see generally, Elliot v. Staron, 46 Conn. Sup. 38, 59-60, 735 A.2d 902 (1997). This tort requires proof of "misrepresentation, intimidation or molestation . . . or that the defendant acted maliciously." (Citations omitted; internal quotation marks omitted.) Sportsmen's Boating Corp. v. Hensley, 192 Conn. 747, 754, 474 A.2d 780 (1984).
Applying this standard to the evidence here, the court finds that the defendants have failed to meet their burden of proof that the plaintiff tortiously interfered with the defendants' contractual relations. Specifically, the court finds that the defendants have failed to prove by CT Page 8894-af a preponderance of the evidence that when the plaintiff filed the lis pendens, the plaintiff, acting through its agents, committed any act that may be characterized as false, intimidating, or malicious. As previously discussed, when the plaintiff filed the lis pendens, there was a bona fide question about whether the FDIC could appropriately acquire control over the Finkelstein note and mortgage, and thereby allow the FDIC to release the defendants of their obligations to pay what they owed under the note. Moreover, the complaint in this action initially sought an "assignment" of the mortgage from the FDIC to the plaintiff, so as to reflect the language of the Doran note and the parties' expectations that this assignment was security for the plaintiff's obligations to Norwalk Bank. Thus the lis pendens was filed on the land records to evidence the existence of this controversy affecting the Finkelstein mortgage and its assignment. Consequently, the defendants have failed to prove that the plaintiff's filing of the lis pendens was done with any wrongful or malicious intent to interfere with the defendant's refinancing contract.
Therefore, the court finds in favor of the plaintiff and against the defendants on the first count of the counterclaim alleging tortious interference with contractual relations.
2
Failure to Release Lis Pendens
As previously discussed, when the plaintiff commenced this action, the FDIC was a defendant in the case. The plaintiff sought an "assignment" of the Finkelstein mortgage from the FDIC to the plaintiff so that the assignment would be formally recast as security for the Doran note and would not be reflected as an unconditional assignment of the mortgage. As part of the commencement of this action, the plaintiff filed a lis pendens on the defendants' property located at 382 Brambley Hedge Circle. On September 9, 1993, the defendants demanded, by certified letter, a release of this lis pendens. In this letter, the defendants demanded a release on the ground that the plaintiff recorded the lis pendens before serving the summons and complaint. Under the second count of the counterclaim, the defendants seek damages under General Statutes §§ 49-8 or 49-51 (a) for the plaintiff's failure to release the lis pendens after demand.
General Statute § 52-325 (a) provides in relevant part:
In any action in a court of this state . . . the plaintiff or his attorney, at the time the action is commenced or afterwards . . . if the action is intended to affect real property, may cause to be recorded in the office of the town clerk of each town in which the property is situated a notice of lis pendens . . .
General Statutes § 49-8, entitled "release of satisfied or partially satisfied mortgage or ineffective attachment, lis pendens or lien," provides in relevant part:
(b) The plaintiff or the plaintiff's attorney shall execute and deliver a release when an attachment has become of no effect pursuant to section 52-322 or section 52-324 or when a lis pendens or other lien has become of no effect pursuant to section 52-326. (c) The mortgagee or plaintiff or the plaintiff's attorney, as the case may be, shall execute and deliver a release within sixty days from the date a written request for a release of such encumbrance (1) was sent to such mortgagee, plaintiff or plaintiff's attorney at the person's last-known address by registered or certified mail, postage prepaid, return receipt requested or (2) was received by such mortgagee, plaintiff or plaintiff's attorney from a private messenger or courier service or through any means of communication, including electronic communication, reasonably calculated to give the person the written request or a copy of it. The mortgagee or plaintiff shall be liable for damages to any person aggrieved at the rate of two hundred dollars for each week after the expiration of such sixty days up to a maximum of five thousand dollars or in an amount equal to the loss sustained by such aggrieved person as a result of the failure of the mortgagee or plaintiff or the plaintiff's attorney to execute and CT Page 8894-am deliver a release, whichever is greater, plus costs and reasonable attorneys fees.
Although the defendants did not file an application to discharge the lis pendens in order to assert a claim for damages under General Statute § 49-51 (a), the defendants did cite this provision in their counterclaim and sought a "legal release" in their prayer for relief. General Statute § 49-51 (a) provides the following:
Any person having an interest in any real or personal property described in any certificate of lien, which lien is invalid but not discharged of record, may give written notice to the lienor sent to him at his last-known address by registered mail or by certified mail, postage prepaid, return receipt requested, to discharge the lien. Upon receipt of such notice, the lienor shall discharge the lien by sending a release sufficient under section 52-380d, by first class mail, postage prepaid, to the person requesting the discharge. If the lien is not discharged within thirty days of the notice, that person may apply to the Superior Court for such a discharge, and the court may adjudge the validity or invalidity of the lien and may award the plaintiff damages for the failure of the defendant to make discharge upon request. If the court is of the opinion that such certificate of lien was filed without just cause, it may allow, in its discretion, damages to any person aggrieved by such failure to discharge, at the rate of one hundred dollars for each week after the expiration of such thirty days, but not exceeding in the whole the sum of five thousand dollars or an amount equal to the loss sustained by such aggrieved person as a result of such failure to discharge the lien, which loss shall include, but not be limited to, a reasonable attorneys fee, whichever is greater.
The defendants' first argument is that the lis pendens was invalid and was required to be released because the lis pendens was recorded before service of the summons and complaint upon the defendants. The lis pendens statute provides that a lis pendens may be recorded on the land records "at the time the action is commenced or afterwards." General Statutes CT Page 8894-ag § 52-325 (a). The defendants reason that since an action is not commenced until service of the summons and complaint, the lis pendens in this case was recorded in a procedurally invalid manner because the recording took place before the action was commenced contrary to the provisions of General Statutes § 52-325 (a). Although the defendants' reasoning has some superficial, textual appeal, the Appellate Court precedent indicates that such technical arguments to invalidate lis pendens are disfavored at least when actual notice of the recording has been given to the property owners in accordance with the statutory provisions.
"The purpose of the lis pendens . . . [is] to give constructive notice to persons seeking to purchase or encumber property after the recording of a lien or the commencement of a [law] suit." (Internal quotation marks omitted.) First Constitution Bank v. Harbor Village Ltd. Partnership, 37 Conn. App. 698, 704, 657 A.2d 1110 (1995). "Section 52-325 (c) of the General Statutes provides in part that the lis pendens shall not be valid to constitute constructive notice unless the party recording such notice, not later than thirty days after such recording, serves a true and attested copy of the recorded notice of lis pendens upon the owner of record of the property affected thereby." (Internal quotation marks omitted.) Manaker v. Manaker, 11 Conn. App. 653, 660, 528 A.2d 1170 (1987).
As explained by the Appellate Court, "[s]ince a lis pendens under § 52-325 is a creature of statute, the party who invokes its provisions must comply with the statutory requirements. Nevertheless, the provisions of the statute should be liberally construed to implement reasonably and fairly its remedial intent of giving notice of claims pertaining to the real property which is the subject of the litigation See Dorr-Oliver, Inc. v. Willett Associates, 153 Conn. 588, 593, 219 A.2d 718 (1966) (garnishment statutes should be liberally construed)." Id., 660-61.
In Dorr-Oliver, Inc. v. Willett Associates, supra, 153 Conn. 588, the Appellate Court held that a lis pendens was not invalid merely because it was served before being recorded contrary to statutory provisions, rejecting an argument that strict conformity with the statute was required. Cf. Beier v. Wright, Superior Court, judicial district of Hartford, Docket No. CV 98-580410 (February 19, 1999, Mulcahy, J.) ( 24 Conn.L.Rptr. 210) (the court considered the validity of a lis pendens when it was recorded on May 8, 1998 and suit was filed on May 27, 1998). Consequently, the literal compliance with the lis pendens statute as advanced by the defendants is not required. The court finds that the lis pendens was recorded with sufficient contemporaneity with the commencement CT Page 8894-ah of the action to satisfy the provisions of General Statutes § 52-325.
The court further rejects the defendants' argument that the lis pendens was filed in bad faith and without any legal basis. As previously discussed, the complaint as initially filed sought a reformation of the assignment of the defendants' mortgage, and therefore, the complaint sought to affect real property within the meaning of the lis pendens statute. Consequently, the court rejects the defendants' claim that the plaintiff was required to release the lis pendens when the defendants so demanded in September 1993.
General Statute § 52-325 (b) states:
actions "intended to affect real property" means (1) actions whose object and purpose is to determine the title or rights of the parties in, to, under or over some particular real property; (2) actions whose object and purpose is to establish or enforce previously acquired interests in real property; (3) actions which may affect in any manner the title to or interest in real property, notwithstanding the main purpose of the action may be other than to affect the title of such real property.
Notwithstanding the foregoing, on March 1, 1996, the plaintiff withdrew its claims against the FDIC and the only claim remaining in the case was against the defendants for unjust enrichment. This unjust enrichment claim did not "affect" the property within the meaning of the lis pendens statute, but the plaintiff still did not release the lis pendens after the FDIC was withdrawn from the action. According to the defendants, they are entitled to damages under General Statutes §§ 49-8 or 49-51 because the plaintiff failed to release the lis pendens after the FDIC was no longer in the case. The defendants did not assert this claim in the pleadings, but the more significant problem is that the defendants did not make another written demand for the plaintiff to release the lis pendens on this basis.
"Not unlike the dissolution of an attachment, the discharge of a lien is a `statutory proceeding' . . . The `essential condition' of an action under General Statutes [§§ 49-51 and 49-8] is written notice to the lienor sent to him at his last-known address by registered mail or by certified mail, postage prepaid, return receipt requested, to discharge the lien in the office where recorded." (Citation omitted; emphasis in original; internal quotation marks omitted.) Guilford Yacht Club Assn. v. Northeast Dredging, Inc., 192 Conn. 10, 13, 468 A.2d 1235 (1984).
Under General Statutes §§ 49-51 and 49-8, damages are calculated based on a written demand being made and not honored within a time period thereafter. Without such a demand, the court is without any basis to calculate damages as contemplated by these statutes. As the party moving for damages under this statute, the defendant has "the burden of establishing compliance with this statutory requirement"; Guilford Yacht Club Assn. v. Northeast Dredging, Inc., supra, 192 Conn. 13; and while a demand to release the lis pendens was made in 1993, the defendants have not provided any evidence that they made a proper, written demand for a release of the lis pendens based on the plaintiff's 1996 withdrawal of the action against the FDIC. The defendants apparently believe that a single demand for a release of the lis pendens is a continuing demand CT Page 8894-ai which does not need to be reasserted even if the initial demand is without merit and additional grounds for a release arise in the future. This position, however, does not square with the language of the statutes, and noncompliance with the statutory language in this instance is fatal. The defendants have not cited any authority to support such a position and the court has not found any.
3
The Connecticut Unfair Trade Practices Act
"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]." (Internal quotation marks omitted.) Fink v. Goldenbock, 238 Conn. 183, 215, 680 A.2d 1243 (1996). "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.) Id.
In support of their CUTPA claim, the defendants essentially rely on their allegations that the lis pendens was invalid when filed, interfered with their contractual relations, and was not released after demand. As the court has resolved these allegations averse to the defendants, the court further finds that the defendants have failed to prove that the plaintiff's actions violated CUTPA.
III CONCLUSION
Therefore, for the foregoing reasons, the court finds in favor of the plaintiff and against the defendants on both the complaint and the counterclaims. The plaintiff is awarded damages of $9,550.29, plus $9,440.92 in interest and costs.
So ordered this 7th day of August 2003.
STEVENS, J. CT Page 8894-aj