Opinion
No. CV 09 5011214-S
February 22, 2010
MEMORANDUM OF DECISION RE MOTION TO STRIKE, #109
The defendants, Louis T. Cimmino and Louis T. Cimmino Appraisal Company, move to strike counts one, two and three of the plaintiff's substitute complaint, dated September 28, 2009. Specifically, the defendants contend that General Statutes § 36a-755(d) provides a statutory defense with respect to the plaintiff's claims of negligence, misrepresentation, and third-party beneficiary, as no privity exists between the plaintiff and the defendants, and that the plaintiff has failed to provide a sufficient factual basis to support his claims. The defendants are also asking that the prayer for injunctive relief be stricken because the plaintiff has failed to provide a sufficient factual basis to support his claims.
I FACTUAL BACKGROUND
The plaintiff filed the present action against the Louis T. Cimmino Appraisal Company and Louis Cimmino, individually, (Cimmino), in connection with his purchase of property located at 201 Marion Avenue, Plantsville, Connecticut, (the "Property"), for misrepresentation and negligence, stemming from an appraisal performed by the defendants on the Property. On September 15, 2009, the court granted the defendants' motion to strike the complaint in its entirety, finding that the defendants did not owe the plaintiff a duty of care as there was no privity of contract between the parties, and thus, there could be no reliance. In addition, the court noted that General Statutes § 36a-755(d) precluded liability. (Pittman, J.)
The plaintiff filed a substitute complaint, dated September 28, 2009, in four counts: count one — intentional misrepresentation, count two — actionable negligence, count three-third party beneficiary, and count four — trespass.
In count one, the plaintiff alleges that on January 12, 2007, he was the high bidder at a foreclosure sale on the Property. He applied for a loan with Sikorsky Financial Credit Union, Inc., (SFCU), which contracted with the defendants to perform an appraisal on the Property. On March 9, 2007, the plaintiff signed the loan documents for the purchase of the Property. He alleges that the defendants in their appraisal report made false representations about the condition of the Property, and that he relied upon such representations in proceeding to purchase the Property. He subsequently discovered that the house would require considerable repairs and renovations before it could be habitable. The plaintiff alleges a duty on behalf of the defendants to recommend further investigation from their findings, as well as requiring further due diligence on various working functions of the Property. He makes a blanket statement that the defendants' finding of "average overall condition at best admits and rises to intentional misrepresentation." (Count one, ¶ 9.)
In count two, actionable negligence, the plaintiff realleges the claims in count one. He alleges a breach of duty of care by the defendants, and sets forth in greater detail the deficiencies in the appraisal report as it relates to the Property. The plaintiff claims that this negligence was a proximate cause of damages to him.
Count two, ¶ 12 recites five areas of the appraisal that the plaintiff alleges the defendants either failed to report properly in its appraisal report, or reported incorrectly: heating system, roof, copper plumbing, bathroom fixtures, and electrical.
The complaint does not provide a connection between the appraisal and the plaintiff's claim of monetary damages. From what the court can discern from the plaintiff's memorandum in opposition to the motion to strike, the mortgage contained an owner occupancy provision in that he would occupy the Property as his primary residence within sixty days of the date of the mortgage, and continue to occupy it for one year thereafter. On or about July 25, 2008, he was informed by a mortgage representative that he was in violation of the owner occupancy clause in the mortgage, and immediate payment of the mortgage was demanded. The plaintiff attempts to make a connection between the alleged faulty appraisal and his inability to occupy the Property.
In count three which the plaintiff titles "Third Party Beneficiary," the plaintiff realleges the claims in count one. He further alleges that he is a "third party beneficiary" of the contract between SFCU and the defendants as set forth in paragraph 23 of the appraisal which states:
The borrower, another lender at the request of the borrower, the mortgagee or its successors and assigns, mortgage insurers, government sponsored enterprises, and other secondary market participants may rely on this appraisal report as part of any mortgage finance transaction that involves any one or more of these parties.
The plaintiff claims the defendants, through their intentional misrepresentation and "actionable negligence," has "breached the contract with [SFCU] and plaintiff," and as a result, SFCU has instituted a foreclosure action against the plaintiff, causing the plaintiff to suffer monetary damages. The defendants move to strike counts one, two, and three of the substitute complaint on the grounds that such claims of negligence and third-party beneficiary are impermissible and must be stricken, and that the plaintiff has failed to state sufficient facts to support a claim of intentional misrepresentation.
The plaintiff also added a fourth count, sounding in trespass, to his revised complaint, which is not addressed in the motion to strike.
II DISCUSSION A General Statutes § 36a-755(d) and Appraiser Liability for Negligent Misrepresentation Privity of Contract
The plaintiff alleges that the defendants engaged in both negligent and intentional misrepresentation. The plaintiff claims that the defendants prepared an appraisal report for SFCU — not him. Connecticut's statutory law precludes the plaintiff's negligence cause of action.
General Statutes § 36a-755(d), which addresses appraiser liability, provides: "Any person who prepares such appraisal report shall not be liable to any person with whom the preparer has not contracted to make such appraisal report for opinions or facts stated in or omitted from such appraisal report, unless such statement or omission results from intentional in is representation." (Emphasis added.)
The statute plainly requires privity in order for a third party to successfully bring a claim against an appraiser for negligent misrepresentation. In the absence of privity, the only claim a third party can bring is one for intentional misrepresentation. Black's Law Dictionary defines privity of contract as "[t]he relationship between the parties to a contract, allowing them to sue each other but preventing a third party from doing so." Black's Law Dictionary (7th Ed. 1999). In this case, the plaintiff is not a party to the contract between the mortgage broker and the appraiser, and, therefore, there is no privity of contract.
In Tackling v. Shinerman, 42 Conn.Sup. 517, 630 A.2d 1381 (1993) [ 9 Conn. L. Rptr. 91], the court found that privity is not a prerequisite for bringing a claim against a real estate appraiser for negligently performing her inspection. In Tackling, the court addressed the defendant appraiser's motion for summary judgment on the grounds that there was no privity of contract between her and the plaintiffs. The case involved a suit by the purchaser of a home against an appraiser who failed to alert the plaintiffs to the presence of lead paint poisoning. The plaintiffs had purchased a HUD home, and HUD regulations required the appraiser to make a determination about lead paint. In the absence of appellate authority regarding an appraiser's liability to third parties, the court looked at what the higher courts have held regarding liability of other professionals in similar relationships.
The court cited Coburn v. Lenox Homes, Inc., 173 Conn. 567, 378 A.2d 599 (1977), a case involving a defectively built home. In that case, the Supreme Court held that "[t]here is no sound reason why he [the purchaser] should be prevented from recovering for property damage or personal injury merely because he is not in privity with the builder or contractor responsible for such work. We therefore hold that a builder or contractor may be liable for injuries or damage caused by his negligence to persons with whom he has no contractual relation and even though his work is completed and accepted by the owner before the injuries or damage occurred." (Internal quotation marks omitted.) Id., 575.
The court then turned to Zapata v. Burns, 207 Conn. 496, 542 A.2d 700 (1988). In Zapata, "the court recognized that the negligence standard . . . logically extends to architects and engineers. Furthermore, such liability, regardless of privity, has been extended to attorneys; Krawczyk v. Stingle, 208 Conn. 239, 543 A.2d 733 (1988); to accountants; Twin Mfg. Co. v. Blum, Shapiro Co., 42 Conn.Sup. 119, 602 A.2d 1079 (1991) [ 6 Conn. L. Rptr. 53]; and to surveyors; Simics v. Sharpe, Superior Court, judicial district of Ansonia-Milford, Docket No. 33261 (May 13, 1991) [ 4 Conn. L. Rptr. 83]." Tackling v. Shinerman, supra, 42 Conn.Sup. 521. The court also noted that "[o]ther courts have held appraisers liable to third parties. See Larsen v. United Federal Savings Loan Ass'n., 300 N.W.2d 281 (Iowa 1981); Stotlar v. Hester, 92 N.M. 26, 582 P.2d 403 (1978); but see Gay v. Broder, 109 Cal.App.3d 66, 167 Cal.Rptr. 123 (1980)." Id., 522.
While rejecting the privity requirement, the Tackling court firmly established the necessity of foreseeability, concluding that "the negligence analysis applied to contractors, builders, architects and surveyors logically extends to appraisers. Whether the appraiser owed a duty to use care to the plaintiffs in the present case depends upon the resolution of the issue of foreseeability, which involves a two-tier inquiry: (1) is it reasonably foreseeable that the plaintiffs would rely on the appraiser's report; and (2) is it reasonably foreseeable that harm of the general nature of that suffered would result if the duty to use care was not exercised." Tackling v. Shinerman, supra, 42 Conn.Sup. 522. The court conspicuously failed to mention General Statutes § 36a-755(d) at all in its analysis.
The court denied summary judgment because "[t]here is a genuine issue of material fact as to whether it is reasonably foreseeable that the plaintiffs, the buyers of a home purchased with a mortgage backed by HUD, and insured by the FHA, would rely on a HUD approved appraiser's determination of the existence or nonexistence of lead paint. This is particularly so if, as alleged by the plaintiffs, the appraisal was a prerequisite to the plaintiffs obtaining a mortgage backed by HUB, and if the appraiser was required to determine the existence or absence of lead paint. There is also a genuine issue of material fact regarding whether it is reasonably foreseeable that the negligent performance of the appraiser's duty would result in the general harm that the plaintiffs allege: lead poisoning and decreased property value." Tackling v. Shinerman, supra, 42 Conn.Sup. 523.
Meanwhile, other courts have also not required privity, although under facts distinguishable from those in Tackling. See Cooke v. Nitz Associates, Inc., Superior Court, judicial district of New Haven, Docket No. CV 00 0437049 (October 10, 2002) ( 33 Conn. L. Rptr. 223) (applying forseeability as laid out in Tackling, and not requiring privity, while also addressing General Statutes § 36a-755(d) by way of footnote, determining that it is inapplicable because the appraisal was not performed for a mortgage lender, but rather to effect a sale of property to the town of Wallingford); Najda v. Sheiman, Superior Court, judicial district of Milford, Docket No. CV 95 052292 (September 6, 1996) ( 17 Conn. L. Rptr. 535) (court not analyzing General Statutes § 36a-755(d), presumably because the case was against an attorney who performed a title search in connection with a property closing, and not an appraiser. In analyzing foreseeability, the court distinguished Tackling, stating that "[i]n Tackling, HUD regulations required the appraisal and the plaintiffs paid the defendant to do the appraisal, and the HUD regulations made clear that the plaintiffs were members of that class of people meant to be protected by the regulations").
Other Superior Courts have rejected Tackling's conclusion that no privity is required for actions against appraisers sounding in negligence. In Depamphilis v. Casey, Superior Court, judicial district of New Britain, Docket No. CV 93 0531526 (May 5, 1995) ( 14 Conn. L. Rptr. 232), the defendant appraiser brought a motion for summary judgment on the grounds that it had agreed to perform its service only for the plaintiff's mortgage company, and in light of General Statutes § 36a-755(d), the absence of privity foreclosed the plaintiff's claim. The plaintiff tried to get around the privity requirement by representing himself as a third-party beneficiary, "which imposes liability upon a contracting party for injuries sustained by a non-party." The court concluded that "[b]y advancing its idea of a `common law right to bring suit' . . . the plaintiff ignores the very purpose behind § 36a-755 (d): to abrogate the common law rule and require privity as a requirement to recovery. Though there very well might be a question as to whether the plaintiff is a third party beneficiary, this inquiry is immaterial given the express exclusion in § 36a-755(d) of parties not in privity including third party beneficiaries from those who may seek redress against an offending appraiser." Id., 233. The court found Tackling unpersuasive, stating that "[t]hough on its face Tackling provides support for the plaintiff's common law argument, the court in Tackling did not address § 36-9h(d), the identical predecessor to § 36a-755(d)." Id.
"The law regarding the creation of contract rights in third parties in Connecticut is . . . well settled . . . [T]he ultimate test to be applied [in determining whether a person has a right of action as a third party beneficiary] is whether the intent of the parties to the contract was that the promisor should assume a direct obligation to the third party [beneficiary] and . . . that intent is to be determined from the terms of the contract read in the light of the circumstances attending its making, including the motives and purposes of the parties . . . Although we explained that it is not in all instances necessary that there be express language in the contract creating a direct obligation to the claimed third party beneficiary . . . we emphasized that the only way a contract could create a direct obligation between a promisor and a third party beneficiary would have to be, under our rule, because the parties to the contract so intended." (Citations omitted; internal quotation marks omitted.) Dow Condon, Inc. v. Brookfield Development Corp., 266 Conn. 572, 580-81, 833 A.2d 908 (2003).
Other Superior Courts have followed the reasoning in Depamphilis v. Casey, supra, 14 Conn. L. Rptr. 232. See Leonard-Anthony Assoc. v. Sherman Gardens, LLC, Superior Court, judicial district of New Haven, Docket No. CV 08 5018651 (June 29, 2009) ("The plaintiff in this case alleges intentional misrepresentation . . . If the defendant were alleging negligent misrepresentation, then the rationale of Depamphilis would be applicable here. The plain language of § 36a-755(d), however, and the interpretation of the statute by the court in Depamphilis . . . clearly provide an exception for claims based on intentional misrepresentation. To the extent that the defendant's alleged CUTPA violation is expressly based on a claim of intentional misrepresentation in the appraisal report, it is not barred by operation of § 36a-755(d)"); Heller v. Daniel J. LaPorte Associates, Superior Court, judicial district of Tolland, Docket No. CV 02 0079784 (November 10, 2003) (court finding that the plaintiffs must allege "intentional misrepresentation within the language of General Statutes § 36a-755 such as to take this action outside its preclusive effect"); Chang v. Novella, Superior Court, judicial district of Danbury, Docket No. 311569 (September 17, 1997) (court denying motion for summary judgment, finding that there existed a genuine issue of material fact as to whether the report completed by the defendant appraiser was actually an "inspection" report, which would take the plaintiff's claim for negligent misrepresentation outside the ambit of General Statutes § 36a-755).
In her memorandum of decision on the defendants' earlier motion to strike counts one and two of the original complaint, Loud v. Cimmino, Superior Court, judicial district of New Britain, Docket No. CV 09 5011214 (September 15, 2009, Pittman, J.), Judge Pittman made the following determination: "More significantly, the plaintiff does not allege that it was he who retained the appraiser, but rather that it was the lender SCFU that retained an appraiser in connection with the lender's decision to provide financing for the purchase. Since the plaintiff has alleged no privity between himself and the defendants as to the appraisal, there appears to be no rubric under which the defendants owed any duty to the plaintiff regarding the preparation of the appraisal. Any duty owed would run solely to the lender who retained him. Nor do the statutes regarding the duties of appraisers provide any help to the plaintiff." She then cites General Statutes § 36a-755 and continues: "The plaintiff does not allege that the defendants intentionally misrepresented facts about the condition of the property, only that they negligently did so. The plaintiff's allegation that the defendants owed a duty to him, sounding in either misrepresentation or simple negligence, is insufficient to support a cause of action. No such duty was owed under the facts of this complaint." Id. While there is a substitute complaint in operation, the plaintiff has kept his claim for negligent misrepresentation and added a claim for negligent misrepresentation. By way of footnote, she also states that "[l]ikewise, without privity between the plaintiff and the defendants, the plaintiff was not entitled to rely on the appraisal report for purposes of satisfying the "reliance" element of the tort of misrepresentation." Id.
It is important to note the 1996 decision of Tackling v. Shinerman, Superior Court, judicial district of New London, Docket No. 521012 (July 22, 1996), in which the court set the record straight regarding the applicability of General Statutes § 36a-755(d) to the plaintiffs' negligence claims. The court stated that "the issue of whether the plaintiffs' action against [the] defendant . . . is barred by the application of General Statutes § 36a-9h(d) was never raised nor addressed by the court in deciding the previous motion for summary judgment." It granted summary judgment because the plaintiffs alleged only negligent, not intentional, misrepresentations and/or omissions against the defendant, which are prohibited by the statute. Therefore, the case law makes clear that, in the absence of privity, the plaintiff's claim for negligent misrepresentation is precluded by the terms of General Statutes § 36a-755(d).
B Third-Party Beneficiary and Breach of Contract
In addition to the counts for misrepresentation, the plaintiff brings count three for breach of contract. In the absence of privity, if the plaintiff could establish that he is a third-party beneficiary to the contract, then conceivably his breach of contract claim could stand . . . but for General Statutes § 36a-755(d). The statute is clear that, absent privity of contract, the only claim that may be brought against the appraiser is one for intentional misrepresentation. As stated above, the court in Depamphilis v. Casey, supra, 14 Conn. L. Rptr. 233, the inquiry of "whether the plaintiff is a third party beneficiary . . . is immaterial given the express exclusion in § 36a-755(d) of parties not in privity — including third party beneficiaries — from those who may seek redress against an offending appraiser."
C Intentional Misrepresentation
The plaintiff alleges in count one that the defendants intentionally misrepresented the condition of the property, the representations were false or should have been known to the defendants to be false, and the plaintiff reasonably relied upon such representations in proceeding to close upon the residence. Since General Statutes § 36a-755(d) carves out an exception to its bar on the liability of one who prepares an appraisal report "if a statement of omission results from intentional misrepresentation," this count would survive so long as the plaintiff is able to establish a claim for intentional misrepresentation.
The defendants counter that the plaintiff has failed to allege facts to support any of the elements of an intentional misrepresentation claim. More specifically, the defendants argue that the plaintiff has no legal basis for his assertion that he relied to his detriment upon any alleged misrepresentation made by Cimmino. The appraisal was prepared after the plaintiff purchased the property, and thus the plaintiff cannot claim to have relied on it. Further, without any privity, there can be no reliance.
"`Intentional misrepresentation is synonymous with fraudulent misrepresentation.' St. Denis v. DeToledo, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 00 0180606 (April 5, 2002). `The essential elements of an action in [fraudulent or intentional misrepresentation] are (1) a false representation was made as a statement of fact; (2) it was untrue and known to be untrue by the party making it; (3) it was to induce the other party to act upon it; and (4) the other party did so act upon that false representation to his injury.' (Internal quotation marks omitted.) Cadle Co. v. Ginsberg, 70 Conn.App. 748, 769, 802 A.2d 137 (2002)." Kenney v. McClatchie, Superior Court, Judicial District of New Haven, Docket No. CV 01 0450368 (May 6, 2003).
In contrast to a negligent misrepresentation, `[a] fraudulent representation . . . is one that is knowingly untrue, or made without belief in its truth, or recklessly made and for the purpose of inducing action upon it." Clark v. Haggard, 141 Conn. 668, 673, 109 A.2d 358 (1954).
The defendants argue that the plaintiff's substitute complaint alleges that he successfully bid upon the Property prior to the date that SFCU retained the defendants, and therefore he cannot legally have a cause of action because the appraisal was conducted after he bid on and won the property at foreclosure. Further, the plaintiff had a duty to take additional steps to secure his own knowledge regarding the condition of the property prior to bidding upon the property and presumably to have the knowledge that he was purchasing the property "as is." In fact, the plaintiff acknowledges in his memorandum that he "fully understood that he had purchased the property as is . . ."
Connecticut courts recognize that a property sold at foreclosure is assumed to be sold "as is," and have noted that a bidder at foreclosure is assumed to have knowledge that there are no guarantees as to the condition of the property. See FDIC v. Masone, Superior Court, judicial district of Waterbury, Docket No. 109292, (March 28, 1995); CitiFinancial Mortgage Co., Inc. v. Skyers, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 02 389419 (February 27, 2003) [ 34 Conn. L. Rptr. 212]; Larson v. Miller, Superior Court, judicial district of Waterbury, Docket No. CV 07 5005171 (December 10, 2008); Cordtz v. Arbor Nat'l Mtg, Inc., Superior Court, judicial district of Fairfield at Bridgeport, Docket No. 940317401 (March 14, 1995).
Count one fails to set forth sufficient facts to establish that the plaintiff relied upon any alleged misrepresentations made by Cimmino, let alone that the purported representations were intentionally fraudulent. Accordingly, count one does not overcome the express exclusion for intentional misrepresentation set forth in General Statutes § 36a-755(d).
D Prayer for Injunctive Relief
The plaintiff in his substituted complaint seeks injunctive relief in that he requests a corrected appraisal of the Property. Because his substituted complaint does not contain allegations or facts to show that he suffered irreparable harm, and a lack of an adequate remedy at law, this request must be stricken. "The plaintiff must allege facts which, if proven, would establish irreparable injury and assume the burden of proving facts which will establish substantial and irreparable damage if they are to prevail in their request for injunctive relief." Scoville v. Ronalter, 162 Conn. 67, 74, 291 A.2d 222 (1971).
IV CONCLUSION
For the foregoing reasons, the defendants' motion to strike counts one, two, three, as well as prayer for injunctive relief is granted.