Opinion
No. CV-08-5016702
July 27, 2009
MEMORANDUM OF DECISION ON MOTION TO STRIKE (#123)
The defendant, Wells Fargo Bank, has moved to strike two counts of the plaintiffs' complaint. The defendant provided a construction mortgage to the plaintiffs for the construction of a new home in Woodbridge. The complaint alleges that the home was poorly constructed with allegedly inferior materials and the work failed to conform to the architect's drawings and specifications. Count twelve alleges negligence, and count thirteen alleges breach of a fiduciary duty by the mortgagee/defendant. The defendant claims as to count twelve that the economic loss rule prevents any recovery and as to both twelve and thirteen, that they owed no duty to the plaintiffs under the terms of the construction loan.
The purpose of a motion to strike is to contest the legal sufficiency of any complaint or any count thereof to state a claim upon which relief can be granted. Peter-Michael, Inc. v. Sea Shell Associates, 244 Conn. 269, 270 (1998). In ruling on such a motion, the court is limited to the facts alleged in the complaint and the court must construe the facts alleged most favorably to the plaintiff. Waters v. Autuori, 236 Conn. 820, 825 (1996). The court must accept as true the facts alleged in the complaint. Pamela B. v. Ment, 244 Conn. 296, 325 (1998). However, the motion to strike does not admit legal conclusions or the truth or accuracy of opinions states in the pleadings. Faulkner v. United Technologies Corp., 240 Conn. 576, 588 (1997).
As a preliminary matter, the court will address the usage of the economic loss rule in Connecticut. A review of decisions in Connecticut shows that the economic loss rule is not widely recognized in this state. The one appellate decision that refers to the rule, Flagg Energy Development Corp. v. General Motors Corp., 244 Conn. 126 (1988) indicated the Supreme Court's agreement with the proposition that commercial losses arising out of the defective performance of contracts for the sale of goods cannot be combined with negligent misrepresentation claims because the parties are both sophisticated corporations familiar with the type of services rendered. The present case does not involve the sale of goods. Nor are both parties herein sophisticated corporations. The majority of the superior court cases do not adopt the economic loss rule. Accordingly, this court will not apply the rule in this case.
The existence of a duty, however, is a question that is amenable to a decision on a motion to strike because the question embodies a matter of law to be decided by the court. Bennett v. Connecticut Hospice, Inc., 56 Conn.App. 134, 137 (1999). The plaintiffs' complaint alleges that the defendant's duty arises from the terms of the construction mortgage. With respect to the negligence count, plaintiffs allege that "as a result of its position of trust, the defendant, Wells Fargo, had a duty to the plaintiff to proceed in a manner that was commercially reasonable and not detrimental to the plaintiffs' well-being."
There is ample caselaw that holds that a mortgagee does not owe a duty of care over the condition of the property to the mortgagor when it is not in possession of the premises. Zuccari v. Antares Yale Towne SPE, LLC, Docket No. X08 CV06-5002096 (Superior Court JD Stamford/Norwalk) Jennings, J. 7/22/08 [ 46 Conn. L. Rptr. 87]. The plaintiffs argue, however, that because this is a construction mortgage that involved the advance of money if "work progressed in accordance with the plans on file and after inspection of the work progress by the defendant" the defendant's duty was thus established. In Connecticut Bank Trust v. Carriage Lane Associates, 219 Conn. 772 (1991), the court considered the question of a construction loan and duties arising therefrom. The loan in that case provided that the lender could advance proceeds as construction progressed but that the time and amount was essentially at the sole discretion of the lender. The Supreme Court held that the provisions on disbursement were for the lender's own benefit and that, even if the provision had been violated, the construction lender did not owe any duty to a third party [there, the holder of a junior mortgage] purportedly damaged by the negligent disbursement of funds. Id., 781. Here, the plaintiffs allege the legal conclusion that the defendant owed them a duty, but they have not alleged sufficient facts to establish that duty. The defendant's argument from short calendar is well taken; because the lender seeks to inspect the construction before the advancement of monies does not serve to guarantee to plaintiffs that the work is not being done with inferior materials. The mortgagee is not the building inspector. There was some argument about whether the poor workmanship was in the nature of a gross defect but the complaint does not allege those facts. Whether that fact would create a difference in the existence of the duty is a question for another day. The motion to strike court twelve is granted.
The defendant also argues that there is no fiduciary duty created by the provision allowing inspection prior to disbursement of monies. The plaintiffs allege in their complaint that the construction mortgage created a relationship with a unique degree of trust and confidence and that Wells Fargo had greater knowledge, skill or expertise in financing, therefore putting the defendant in the position of a fiduciary to the plaintiff.
"The law on the obligations of a fiduciary is well settled. `A fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other . . . The superior position of the fiduciary or dominant party affords him great opportunity for abuse of the confidence reposed in him.'" Utzler v. Braca, 115 Conn.App. 261 (2009) (citations omitted).
The question of the existence of a fiduciary duty raises a different question than a duty under a negligence theory. Here, the plaintiffs have alleged that the defendant has greater knowledge, skill or expertise in the area of financing construction mortgages. The defendant retained for itself in the construction mortgage the discretion to release funds after inspection to ensure that the construction progressed in accordance with the plans on file. The plaintiffs are certainly entitled to rely on the fact that the defendant would not advance monies for further construction if the work was not progressing in accordance with the plans. It is common sense that both parties to a construction mortgage want a completed construction project that has value concomitant to their respective investments. The complaint adequately alleges a breach of a fiduciary duty by the defendant, and the motion to strike count thirteen is denied.
Accordingly, based on the foregoing, the motion to strike count twelve is GRANTED and the motion to strike count thirteen is DENIED.