Opinion
No. FST CV 06 4008739 S
April 30, 2008
MEMORANDUM OF DECISION
The plaintiff brought this action claiming damages as the result of the defendant's alleged recording of a forged mortgage on property owned by the plaintiff. The plaintiff's amended complaint alleged slander of title; breach of the defendant's duty of good faith and fair dealing and abuse of process in connection with the improper filing of a lis pendens. In a count entitled "Money Damages," the plaintiff alleged that when he obtained financing for the project, he was required to borrow and place in escrow the sum of $150,000 to protect a construction lender against the lien of the forged mortgage. The complaint demanded an injunction releasing and discharging the mortgage, damages and attorneys fees. The defendant's answer denied the allegations of the complaint and set forth two special defenses and counterclaims seeking a declaratory judgment as to the validity of a $150,000 note allegedly executed by the plaintiff in favor of the defendant, damages for alleged breaches of the escrow agreement and claims of breach of the duty of good faith and fair dealing.
The matter was tried before an attorney trial referee pursuant to General Statutes § 52-434(a)(4) and Practice Book § 19-2A. The report of the attorney trial referee, dated January 25, 2008, recited the following facts which were largely undisputed. The plaintiff and the defendant were co-investors in projects to purchase and develop real property located at 53 Park Avenue in Old Greenwich, Connecticut. On February 26, 2004, the plaintiff and defendant entered into a written agreement in which the parties agreed that the defendant's right to participate in the profits from the sale of 53 Park Avenue was transferred to another property owned by the plaintiff at 23 West End Avenue, Old Greenwich. The agreement further provided that the defendant's participation would be fixed at $150,000, payable upon sale of 23 West End Avenue and secured by a mortgage on that property. The purpose of the February 2004 transactions was to "end the business dealings" between the parties, leaving only the plaintiff's obligations to make the $150,000 payment to the defendant upon the sale of 23 West End Avenue.
The February 26, 2004 agreement contemplated that the plaintiff would need to secure construction financing in order to obtain funds to improve 23 West End Avenue. The agreement provided that the mortgage securing the defendant's $150,000 profit participation would be placed in escrow with an attorney and not recorded until a construction mortgage was obtained and recorded. The mortgage deed placed in escrow recited that it was securing a promissory note dated February 26, 2004 and that the amount of the debt was $150,000. The mortgage deed bears the signature of two witnesses and was acknowledged in Connecticut before the attorney who was to act as the escrow agent.
Over fifteen months later, on June 8, 2005, the defendant caused a mortgage to be recorded encumbering 23 West End Avenue. The terms of the mortgage were identical to the terms of the one being held in escrow. However, it bore the signatures of different witnesses and the acknowledgment was purportedly taken before a notary public in Westchester County, New York. The plaintiff's complaint alleged that the recorded mortgage was a forgery which constituted a slander of his title and that he had suffered damages as a result of thereof. The plaintiff claims to have learned of the forged mortgage in the fall of 2005 when he was in the process of obtaining construction financing.
The forged mortgage was released by the defendant on January 22, 2007 during the pendency of this action. However, on January 19, 2007 the defendant placed a lis pendens on the land records claiming that his cross complaint "may effect certain real property and improvements located at 23 West End Avenue, Greenwich, Connecticut." After the recording of the release of the forged mortgage the construction lender released the $150,000 that it was holding in escrow. Pursuant to the plaintiff's motion the lis pendens was ordered released by the court, Tobin, J., on May 29, 2007.
The attorney trial referee found that the defendant had admitted liability for the improper filing of the forged mortgage and for filing the lis pendens. The attorney trial referee further found that the mortgage deed was in fact forged and that the defendant knew or had reason to know that it was not valid. He also found that the New York notary who purportedly took the plaintiff's acknowledgment on the forged mortgage was an employee of the defendants. The attorney trial referee also rejected the testimony of two other individuals employed by the defendant who offered testimony to try to mitigate, in some measure, the defendant's responsibility for the production and recording of the forged mortgage.
The attorney trial referee found that the $150,000 note purportedly signed by the plaintiff was a genuine document. He found that the plaintiff "testified weakly about the lack of authenticity of his signature." He further found that the "existence of the note is consistent with the other closing documents and that it is valid." The attorney trial referee considered and rejected the plaintiff's claim that his obligation to pay the defendant $150,000 was contingent, not only on the sale of 23 West End Avenue, but also on the defendant's obtaining construction financing for the project. The attorney trial referee noted that the escrow agreement contemplated that the defendant's mortgage would not be recorded until "[the plaintiff] has secured construction financing." In addition the attorney trial referee noted that the additional condition was not reflected in any of the documents executed by the parties in February 2004.
On the plaintiff's first and fourth counts, the attorney trial referee found that the plaintiff suffered no lasting damage as a result of the slander of title or the abuse of process and awarded him damages in the amount of $1.00. On the second count, he found that the defendant had breached his duty of good faith and fair dealing, but that the damages were subsumed under those awarded on the third count. On the third count, he awarded damages in the amount of $15,000 for the loss of use of money which the plaintiff was required to place in escrow to cover the lien of the forged mortgage.
The attorney trial referee rejected the defendant's special defenses, but recommended that judgment enter in favor of the defendant on two of his counterclaims: 1) declaring the $150,000 note to be valid, and 2) directing an escrow agent to release the authentic mortgage to the defendant for recording. With respect to the plaintiff's demand for attorneys fees, the report of the attorney trial referee states:
The undersigned has considered the plaintiff's request for an award of both attorneys fees and punitive damages in his various counts and finds that the evidence adduced at trial is insufficient to support such awards in any of the four counts.
Presently at issue is the plaintiff's objection to the acceptance of the report and recommendations of the attorney trial referee dated March 7, 2008. In that objection the plaintiff claims that the attorney trial referee failed to consider and/or allow the plaintiff's claims for attorneys fees as part of his damages. The plaintiff further claims that the evidence does not support the finding that the $150,000 note held by the defendant was valid. The court will first consider the plaintiff's claims with regard to the $150,000 note.
DEFENDANT'S COUNTERCLAIM — VALIDITY OF THE $150,000 NOTE
In his objection to the acceptance of the attorney trial referee's report, the plaintiff claims that the construction of the agreements between the parties is a matter of law. The plaintiff urges the court to find that the attorney trial referee inappropriately found that the plaintiff's obligations to the defendant under the February 26, 2004 agreement were not contingent upon the defendant performing his obligation to find financing for 23 West End Avenue which was purportedly brought forward from the parties' original agreement concerning the 53 Park Avenue property. In resolving the plaintiff's challenge to the attorney trial referee's report the court must determine whether findings and conclusions of the report are reasonably supported by the record. Finch v. Earl, 104 Conn.App. 515, 519 (2007). When the interpretation of a contract requires the consideration of both written language and the circumstances surrounding the execution of a document the matter is a mixed question of law and fact. Frantz v. Romaine, 93 Conn.App. 385, 395, cert. denied, 277 Conn. 932 (2006).
The court finds that the attorney trial referee's determination that the defendant had no obligation to procure construction financing is well supported in the transcript and in the documents executed by the parties. As noted above, the escrow agreement clearly contemplates that the plaintiff rather than the defendant would find construction financing for 23 West End Avenue. The transcript shows that following the closing on February 26, 2004, it was the defendant who made repeated inquiries regarding the status of the plaintiff's financing efforts. The record reflects no evidence of inquiries by the plaintiff consistent with his claim that the parties had placed the responsibility for finding such financing on the defendant. The court finds that the conclusions of the attorney trial referee with respect to the validity of the $150,000 note are supported in the record. The plaintiff's objection to that aspect of the report is overruled.
ATTORNEYS FEES
The plaintiff claims that the record shows that the plaintiff expended $19,822 in attorneys fees in connection with his efforts to have the forged mortgage and improper lis pendens removed from the land records. He argues that the attorney trial referee should not have overlooked these "damages" in determining that the plaintiff suffered no lasting damage from the defendant's improper actions. The plaintiff also argues that the attorney trial referee inappropriately failed to recommend that the court award attorney's fees to the plaintiff.
The attorneys fees for which the plaintiff seeks reimbursement are evidenced by attorney fee affidavits annexed as exhibits to the plaintiff's post-trial memorandum. The submission of the affidavits and the attached bills in that format was approved by the attorney trial referee at the final hearing on August 3, 2007. The affidavit submitted by attorney John F. Lambert shows that he billed the plaintiff the sum of $14,455 between January 5, 2006, when he was first retained, to January 11, 2007, the date on which the plaintiff released the forged mortgage. Lambert's affidavit reflects legal charges of $3,540 for services rendered between January 11, 2007 and May 29, 2007, the date the lis pendens was ordered discharged and $12,510 for legal services rendered after May 29, 2007. An affidavit submitted by attorney David S. Shields, II claims that he billed the plaintiff $1,380 between January 18, 2006 and January 16, 2007, $1,260 between January 16, 2007 and May 29, 2007 and $3,720 for legal services rendered after May 29, 2007.
"[B]ecause the attorney trial referee does not have the powers of a court and is simply a fact finder, [a]ny legal conclusions reached by an attorney trial referee have no conclusive effect . . . The reviewing court is the effective arbiter of the law and the legal opinions of [an attorney trial referee], like those of the parties, though they may be helpful, carry no weight not justified by their soundness as viewed by the court that renders judgment." (Internal quotations marks omitted) Alliance Partners, Inc. v. Oxford Health Plans, Inc., 263 Conn. 191, 202 (2003); Mastroianni v. Fairfield County Paving, 106 Conn.App. 330, 335 (2008).
Whether a party is entitled to attorneys or counsel fees is a question of law. See Ravetto v. Triton Thalassic Technologies, Inc., 285 Conn. 716, 725, 941 A.2d 309 (2008) (noting that "[t]he plaintiffs' claim that they were entitled to . . . attorneys fees . . . presents a question of law"); see also Colorado Structures, Inc. v. Insurance Co. of the West, 161 Wn.2d 577, 586 167 P.3d 1125 (2007) (noting that "[a] party's entitlement to attorney fees is an issue of law").
Accordingly, the attorney trial referee may consider the request and make a recommendation to the trial court as to attorneys fees, but the court is not bound to follow it. See Colello v. Connecticut Lodge, Fraternal Order of Police, Inc., Superior Court, judicial district of Stamford-Norwalk, Docket No. CV-03-0194414 (June 30, 2005, Jennings, J.) (noting that the attorney trial referee did a thorough analysis of claim for attorneys fees and accepted that recommendation). If the issue was not sufficiently addressed by the attorney trial referee, a trial court, upon rendering judgment, may remand the case to the referee for consideration of the issue of attorneys fees. See A.P. Savino, LLC v. Cone, Superior Court, judicial district of Stamford-Norwalk, Docket No. CV 020188872 (February 14, 2005, Lewis, J.).
"The general rule of law known as the American rule is that attorneys fees and ordinary expenses and burdens of litigation are not allowed to the successful party absent a contractual or statutory exception . . . This rule is generally followed throughout the country . . . Connecticut adheres to the American rule . . . There are few exceptions. For example, a specific contractual term may provide for the recovery of attorneys fees and costs . . . or a statute may confer such rights . . . [Our Supreme Court] has also recognized a `bad faith' exception to the American rule, which permits a court to award attorneys fees to the prevailing party on the basis of bad faith conduct of the other party or the other party's attorney." (Citation omitted; internal quotation marks omitted.) Broadnax v. New Haven, 270 Conn. 133, 178 (2004); 12 Havemeyer Place Co., LLC v. Gordon, 93 Conn.App. 140, 160 (2006).
In Maris v. McGrath, 269 Conn. 834, 846-47 (2004), the Supreme Court made it clear that in order to justify the imposition of attorneys fees on the basis of bad faith, the bad faith had to arise out of the conduct of either the party or his counsel in the course of the prosecution or defense of a claim. See also CFM of Connecticut, Inc. v. Chowdhury, 239 Conn. 375, 393 (1996), overruled in part on other grounds by State v. Salmon, 250 Conn. 147, 155 (1999).
The plaintiff's objection to the acceptance of the attorney trial referee's report does not claim that the plaintiff was entitled to attorneys fees by virtue of any statutory provision or under the terms of an agreement between the parties. The objection does not cite any Connecticut case authority for the proposition that in slander of title actions successful plaintiffs are entitled to punitive damages or attorneys fees. Instead the plaintiff relies on discussions of damages, punitive damages and attorneys fees set forth in 50 Am.Jur.2d, Libel and Slander (2006). In § 537, that treatise states: "Attorneys fees are a proper measure of damages in a slander of title action, but they are not mandated." Section 538 states: "A plaintiff is not entitled to punitive damages as a matter of right in an action for slander of title, such damages are subject to the court's discretion."
Having reviewed the transcript and the report of the attorney trial referee, the court finds that the conclusions of the attorney trial referee with respect to the plaintiff's entitlement to attorneys fees are not supported in the record. The attorney trial referee found the issues for the plaintiff on the first count which claimed slander of title. The Supreme Court recently summarized the nature of an action for slander of title. "Slander of title is a tort whereby the plaintiff's claim of title [to] land or other property is disparaged by a letter, caveat, mortgage, lien or some other written instrument . . ." A cause of action for slander of title consists of any false communication which results in harm to the interest of another having pecuniary value . . . In other words, slander of title is a falsehood published to third parties that is not withdrawn after a demand by the titleholder, which impugns the basic integrity or creditworthiness of an individual or a business . . . It follows, therefore, that A may bring an action for slander of title when B improperly records a mortgage against the deed to A's home and does not correct such an impropriety upon A's demand. Such an action lies in tort and is akin to an action for damages pursuant to General Statutes § 49-8. (Citations omitted, internal quotation marks omitted.) Bellemare v. Wachovia Mortgage Corp., 284 Conn. 193, 202 (2007).
The findings of the attorney trial referee included the fact that the recorded mortgage was a forgery, that the defendant and his employees were guilty of misconduct in the production of the forged document and that the plaintiff had repeatedly requested the defendant to release the forged mortgage. Under Connecticut common law, it is appropriate to award punitive damages to the plaintiff when the defendant is found to have committed an intentional tort. Such punitive damages are the expenses of bringing the legal action, including attorneys fees, less taxable costs. Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 517 n. 38 (1995).
The testimony of one of the defendant's employees was characterized by the attorney trial referee as "unpersuasive and not worthy of credit." The circumstances surrounding the execution of the forged mortgage were described as "nefarious."
In addition, the attorney trial referee found the issues for the plaintiff on the second count alleging breach of the duty of good faith and fair dealing and made the following findings of fact with respect to the defendant's conduct.
[T]he defendant's acknowledged actions in having inappropriately recorded and filed both a palpably invalid mortgage and a Lis Pendens, the plaintiff has met his burden of proof on this count. At the very least, the defendant, a licensed mortgage broker or banker, knowingly recorded an invalid mortgage deed containing a false statement by the notary — his employee — of the place of execution.
Standing alone a finding of breach of the duty to act in good faith does not permit an award of attorneys fees or punitive damages. The duty which is breached is a contractual one. Barry v. Posi-Seal International, Inc., 40 Conn.App. 577, 587-88, cert. denied, 237 Conn. 917 (1996). However, the findings of the attorney trial referee demonstrate bad faith on the part of the defendant, not only with respect to the recording of the forged mortgage, but also with respect to the defense of the plaintiff's action and the prosecution of the defendant's counterclaim. In particular the court notes that the defendant's filing of a lis pendens without probable cause may well be sufficient to bring he plaintiff's claim for attorneys fees within the "bad faith" exception under Maris, supra, and CFM of Connecticut Inc., supra.
The court orders that the case be remanded to the attorney trial referee for the purpose of making findings and recommendations regarding the possible entitlement of the plaintiff to attorneys fees for the defendant's intentional slander of the plaintiff's title and under the "bad faith" exception to the American Rule.