Opinion
FSTCV166028185S
11-19-2018
U.S. BANK N.A., as Trustee v. John DIMENNA, Jr.
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT (# 211.00)
Technically, # 211.00 is a motion for permission to file summary judgment. When the motion for permission was granted, the parties treated the attached motion for summary judgment (and exhibits filed roughly contemporaneously with the motion for permission), as the operative/substantive motion.
POVODATOR, J.T.R.
This is one of a number of cases currently pending in this court, arising from the collapse of a number of Seaboard-related real estate entities, primarily as a result of "alleged" malfeasance by defendant John DiMenna, a principal in the various entities as well as the prime actor. Mr. Kelly and Mr. Merritt were the other two principals in most Seaboard-related entities and projects-Mr. DiMenna reportedly was the sole owner of at least one Seaboard-related management entity, consistent with the general deference of the other two individuals with respect to operational and management activities.
Mr. DiMenna reportedly pleaded guilty to federal charges arising from Seaboard-related activities and has been sentenced to serve time in a federal prison. It is not a matter of record in this case as to whether any aspect of his guilty plea encompassed any of the activities underlying this action.
Procedural History/General Background
This action was started with a return date of April 26, 2016, and the original defendants were John DiMenna, William Merritt, and Thomas Kelly. The primary allegations were that the individuals were guarantors of certain financial obligations of a Seaboard-related entity, and in addition to seeking to recover on the guarantee, the plaintiff also asserted unjust enrichment due to the financial benefits that had been received by the individual defendants as a result of the plaintiff’s provision of funds for the underlying real estate project.
No appearance has been filed on behalf of Mr. DiMenna. Defendants Kelly and Merritt filed answers and special defenses, and the defenses included an assertion of the statute of frauds based on the contention that notwithstanding the existence of purported signatures on the guarantee documents, they actually had never signed the guarantee.
The plaintiff filed a reply to the defenses, including an affirmative assertion that the defendants were precluded from relying on the statute of frauds based on the doctrines of equitable estoppel and ratification.
On or about December 9, 2016, the plaintiff served the law firm of Berkowitz, Trager & Trager, LLC (BTT) (then a non-party) with subpoenas, seeking depositions including the production of documents relating to the law firm’s involvement in the underlying transaction (believed to have served as counsel for the three then-existing defendants as well as the Seaboard-related entity in that transaction).
In May of 2017, two attorneys who were partners in BTT (Attorney Elizabeth Brower and Attorney Steven Siegelaub), were deposed pursuant to the plaintiff’s discovery efforts. During the course of ongoing discovery, on March 1, 2017, defendants Merritt and Kelly moved to implead BTT as a party who may be liable to them for the plaintiff’s claims against Merritt and Kelly.
On or about June 5, 2017 BTT was served with the Third-Party Complaint. In the Third-Party Complaint, Merritt and Kelly asserted claims for breach of fiduciary duty and negligence against BTT based on, among other things, the allegation that Merritt and Kelly were unaware that BTT was acting as their counsel and BTT never communicated with them about the loan transaction, including the guarantee.
On June 27, 2017, counsel for BTT filed an appearance in this action. Pursuant to C.G.S. § 52-102a(c), the plaintiff had the right to file an amended complaint, asserting its own claims against the new third-party defendant, but instead of doing so, the plaintiff and BTT entered into a Confidential Tolling Agreement, the agreement provided, in relevant part:
All limitations periods and other applicable time deadlines shall be suspended and tolled such that the period of time from and including the effective date of this Tolling Agreement until and including the Termination Date [as defined therein] shall not be included in the computation of time for determining any such limitations periods and other applicable time deadlines concerning any Claims.
Prior to the expiration of the tolling agreement, as extended by the parties, the plaintiff filed its second amended complaint (on January 18, 2018), the currently-operative complaint, which included direct claims by the plaintiff against BTT. The plaintiff’s claims directed to BTT are fraudulent misrepresentation (Third Count) and negligent misrepresentation (Fourth Count). Anticipating a defense of the statute of limitations, plaintiff also included allegations asserting that the statute of limitations had been tolled. Subsequently, third-party defendant BTT did file special defenses to both of the counts directed to it, claiming that the statute of limitations barred any recovery by the plaintiff against it. The plaintiff, in turn, filed a reply, denying the defense, and further asserting that the statute of limitations had been tolled both by the parties’ tolling agreement and the doctrine of fraudulent concealment.
Shortly thereafter, BTT filed its motion for summary judgment, the motion currently before the court.
Focusing more precisely on the underlying loan transaction and events leading up to this litigation: The underlying loan transaction originally involved a non-party as borrower (300 Main Owner, LLC). The original loan was in a principal amount of $11,500,000, and the plaintiff was not the original lender. The loan was secured by a mortgage, assignment of rents and leases, and a guarantee. The plaintiff subsequently became the owner/possessor/holder of the note and associated loan documents.
In 2013, the plaintiff as owner/holder of the note, the original borrower, and a Seaboard-related entity created for the purpose of acquisition of the property (300 Main Street Associates, LLC) negotiated a transaction whereby 300 Main Street would become the new obligor (and owner of the property). On September 10, 2013, 300 Main Street executed a note and mortgage assumption agreement, and as part of the transaction, additional documents involving the individual defendants were executed and/or provided at the closing. Of particular importance is that the plaintiff was provided with documentation that appeared to represent personal guarantees executed by the individual defendants, with notarizations for each of the signatures.
Much later, after the Seaboard-related entities’ problems had become manifest and the loan underlying this transaction had gone into default, defendants Merritt and Kelly stated that the signatures on the purported guarantees (sometimes referred to as the "Joinder Agreement") were not theirs, such that they claimed not to have any guarantee-related obligations with respect to this transaction. It is claimed by the plaintiff, plausibly, that the transaction would have never taken place but for the existence of adequate guarantees, particularly since the new owner of the underlying property had been created for the purpose of this transaction such that it had no appreciable other assets (if any).
As a result of the previously-mentioned default, foreclosure proceedings were commenced. The combination of the foreclosure proceedings, information discovered during the foreclosure proceedings, and a subsequent bankruptcy filing by 300 Main Street, facially triggered guarantor liability under the existing loan documents. This action was commenced by the plaintiff, in an effort to recover against the parties who, based on the operative loan documents, were guarantors of the loan obligation. It was in that context that the plaintiff learned that defendants Merritt and Kelly denied having signed the documents purportedly creating guarantor liability.
BTT had represented the Seaboard-related interests (300 Main Street and purportedly the individual defendants) with respect to the closing whereby 300 Main Street had become the new owner of the property and the new obligor for the then-existing loan, and had provided an opinion letter in connection with the transaction. Again, the closing had taken place in September 2013, and the plaintiff claims/relies upon lack of any knowledge of any wrongdoing by BTT until sometime in 2017. Therefore, it is necessary to focus on the relevant conduct of BTT.
On July 1, 2006, defendants Merritt and Kelly had filed an answer and special defense, in which they denied-both in the answer and in the special defense-having signed any documents creating guarantor-liability. The plaintiff now is claiming, with respect to BTT, that it relied upon the opinion letter provided by BTT which included representations that the documents submitted for the closing (loan documents) had been properly executed.
At this juncture, it is important to recognize that the court is required to view the evidence in a light most favorable to the non-moving party. Therefore, the court is relying relatively heavily upon the factual presentation of the plaintiff, to the extent that its version of events and facts is supported by references to transcripts and other information properly considered by the court.
As noted earlier, 300 Main Street was formed for purposes of acquiring the subject property, and defendants Merritt and Kelly were investors in that entity. As had been the case in other Seaboard-related ventures, they relied upon Mr. DiMenna to find prospective investments, to take necessary steps to acquire the property, and to take all functional responsibility for completing the transaction. To that end, Mr. DiMenna retained the services of attorney Siegelaub and BTT to represent the interests of 300 Main Street as the prospective acquirer of the property and new obligor, as well as the interests of the individual defendants as pertained to the transaction. (Another attorney at BTT, attorney Brower, worked with attorney Siegelaub on the project.)
Over the course of months, culminating in the September 2013 closing, BTT and counsel for the plaintiff were in communication about the transaction, negotiating terms of the various documents comprising the new loan agreement and exchanging drafts for proposed documents. Knowing that the plaintiff insisted on replacement guarantors as part of the loan assumption aspect of the transaction, BTT told plaintiff’s counsel that the individual defendants would serve as guarantors of the loan being assumed by 300 Main Street.
Again, of particular import is that BTT provided the plaintiff with purportedly-signed (notarized signatures) documents and an opinion letter. BTT also participated in the closing, on behalf of all Seaboard-related parties (300 Main Street and the individual defendants).
The closing took place on September 10, 2013, approximately two months later than the original anticipated closing in July. The documents signed or purportedly signed by the individual defendants were dated in July, or to be more accurate, signature pages dated in July (inferentially executed in anticipation of the original schedule for closing) were attached to final versions of the documents at or around the time of the closing in September. Both by way of the opinion letter provided and other representations, BTT assured the plaintiff that defendants Merritt and Kelly had signed appropriate documents consenting to guarantor status, and that the law firm was acting as "special counsel" to them. BTT also represented in its opinion letter that it had made reasonable/diligent inquiry as to the representations contained in that opinion letter. BTT further represented that it believed the individual defendants were bound as guarantors by the various documents exchanged at the closing. The opinion letter further stated that BTT understood that the plaintiff would be relying upon the representations made, and the court has been asked to accept the contention that the plaintiff did, in fact, so rely.
The plaintiff contends that it was not until 2017 that it first learned of the erroneous information and representations provided by or through BTT, relating to the underlying 2013 transaction/closing. It was not until the spring, or later, of 2017, that it first claims to have learned that defendants Merritt and Kelly had been unaware that BTT had represented that it was acting as their attorneys with respect to the 2013 transaction; that BTT had never discussed the transaction with them; that BTT had never discussed guarantor liability with them; that they had never entered into any retainer agreement with BTT or otherwise authorized BTT to act on their behalf; that BTT had never sent them documents for execution and especially relating to a purported guarantee and as a corollary, had never executed any guarantee. Related, the plaintiff claims to have first learned that virtually all involvement of Mr. Kelly and Mr. Merritt in the underlying transaction was through Mr. DiMenna-all communications to them was through Mr. DiMenna and especially, request for signed/executed documents were made through him and the executed documents were provided to BTT by Mr. DiMenna. To the extent that BTT was representing Mr. Merritt and Mr. Kelly, or believe that it was representing them, it had been at the behest of Mr. DiMenna. BTT never advised Mr. Kelly and Mr. Merritt, nor sought their assent, prior to attaching the July-executed signature pages to the final version of documents in September, at or immediately prior to the closing. With respect to the preparation of the opinion letter, BTT never inquired of Mr. Kelly or Mr. Merritt as to the accuracy of representations contained in that opinion letter that directly or indirectly related to them.
The plaintiff’s version of events/facts, as recited in its submission and summarized above, is more detailed than that of the defendant. Implicitly recognizing that denying the substantive accuracy of the claims made by the plaintiff as to events, etc., would not demonstrate the absence of any material issue of fact, instead BTT relies upon the regularity and ordinariness of its reliance upon Mr. DiMenna as the intermediary between the law firm and Mr. Kelly and Mr. Merritt, bolstering its claim of a lack of knowledge or notice that anything was amiss in that regard until years after the transaction had closed. Perhaps the one substantive piece of evidence upon which BTT relies, essentially contradicting factual/event representations made by the plaintiff, is set forth in a letter submitted to the court as part of # 227.00, challenging the plaintiff’s contention that it did not know that anything was amiss until 2017. That letter, dated February 22, 2016 (more than a year prior to the time that plaintiff claims it first learned of the extent of misrepresentations by BTT) and sent by counsel for the plaintiff to BTT, states that the plaintiff is aware of the denials by Mr. Kelly and Mr. Merritt of execution of the guarantees purportedly executed by them, and that such denials, if actually true, would constitute a breach of the opinion letter. (The plaintiff then goes on to demand that BTT’s insurance carrier be put on notice of the claim.)
Legal Standards/Principles
The general principles guiding the court in deciding a motion for summary judgment are sufficiently well-established as not to require any lengthy recitation. See, e.g., Martinez v. Premier Maintenance, Inc., 185 Conn.App. 425, 434-35 (2018). This case, however, involves certain finer details of the process, and the parties (and case law) are not free from doubt as to application of such "nuances" in the summary judgment process.
One of the issues is the extent to which a defendant, moving for summary judgment on the basis of a special defense, must not only establish prima facie applicability of the defense itself but also must address (negate) matters in avoidance of that defense. A refinement of this issue, also potentially applicable here, is the extent to which such a moving defendant must anticipate matters in avoidance of the defense, even if not affirmatively asserted as a matter of record.
There are appellate-level cases suggesting and seemingly requiring that a moving party must negate matters that have been or might be advanced by the adversary. Bank of New York Mellon, Trustee v. Mauro, 177 Conn.App. 295, 309-10 (2017) ("In the absence of evidence demonstrating the existence of a genuine issue of material fact as to any essential element of the plaintiff’s prima facie case; GMAC Mortgage, LLC v. Ford, supra, 144 Conn.App. 176; or, in the alternative, as to any recognized special defense-and here there is none-the defendants’ claim of error as to the granting of the plaintiff’s motion for summary judgment on the issue of their liability for foreclosure is completely devoid of merit, and must therefore be rejected"). See, also, Wells Fargo Bank, N.A. v. Henderson, 175 Conn.App. 474, 485 (2017) ("The court did not, as the defendant contends, improperly decline to review the merits of several of her amended special defenses in its memorandum of decision granting summary judgment. The court correctly observed that all but one of the defendant’s amended special defenses were, substantively, nearly identical to ones that previously were struck by the court. See Practice Book § 10-39. The court was therefore permitted to summarily dispose of those special defenses in ruling on the motion for summary judgment").
There are appellate-level cases, however, that explicitly state that in the context of a claim of equitable tolling of the statute of limitations, the moving party does not have the burden of negating equitable tolling as part of an initial summary judgment submission (implying that in other situations, there is such a burden). See, Flannery v. Singer Asset Financial Co., LLC, 312 Conn. 286, 311 n.24, 94 A.3d 553, 569 (2014), distinguishing Allstate Ins. Co. v. Barron, 269 Conn. 394, 405 n.9, 848 A.2d 1165, 1172 (2004).
In Iacurci v. Sax, 313 Conn. 786, 799, 99 A.3d 1145 (2014), the Supreme Court applied this type of analysis to a claim of tolling based on § 52-595. Therefore, "[w]hen the plaintiff asserts that the limitations period has been tolled by an equitable exception to the statute of limitations, the burden normally shifts to the plaintiff to establish a disputed issue of material fact in avoidance of the statute. Put differently, it is then incumbent upon the party opposing summary judgment to establish a factual predicate from which it can be determined, as a matter of law, that a genuine issue of material fact exists." (Internal quotation marks and citation, omitted.)
There is no dispute as to the period of time between the closing on the transaction underlying this dispute, and of the initial filing of a claim by the plaintiff against BTT. If there is no applicable extension of the statute of limitations, whether based on tolling or fraudulent concealment or otherwise, the plaintiff appears to concede that its claimant would be barred. The plaintiff does assert that there are bases for extending the applicable limitations period such that its claim was timely filed (or, more precisely for the context of this motion, that there is at least a factual issue as to whether it was timely filed).
At times, the plaintiff refers to the tolling agreement entered into by the plaintiff and BTT that was effective July 17, 2017. The relevant consequence of that agreement, however, is to move the effective end-date for the appropriate limitations period to July 17, 2017, rather than the actual later date of filing of a complaint directed to BTT (since the plaintiff filed a complaint directed to BTT prior to the expiration of the tolling period defined (and as extended) by that agreement). That shortened interval is still in excess of three years (September 2013 to July 2017). Therefore, unless the plaintiff can articulate a factual issue as to the appropriate commencement date for the running of any applicable statute of limitations, that interval in excess of three years would be fatal to any claim governed by § 52-577 or § 52-584.
With respect to unarticulated matters in avoidance to a defense, there are two procedurally-distinct scenarios. Under the current rules of practice, the pleadings do not need to be closed before a motion for summary judgment can be filed. Therefore, a motion for summary judgment can be filed even before an answer is filed, such that a plaintiff would not have an opportunity to assert a matter in avoidance, even if it wished to do so-there may not be any asserted special defense to which there might be an asserted matter in avoidance. The other scenario involves the common if not technically proper practice of parties simply filing a reply that denies the allegations of a special defense, not recognizing that an affirmative avoidance needs to be explicitly alleged.
It is clear, then, that depending on circumstances, a court may entertain a matter in avoidance despite the fact that it has not been affirmatively alleged (as it should have been). A particularly egregious example, although not arising in the context of summary judgment, was set forth in the fourth appellate decision in Haynes v. City of Middletown, 314 Conn. 303, 306-07, 101 A.3d 249, 251-52 (2014). After a jury verdict for the plaintiff, "[t]he defendant then filed a motion to set aside the verdict and to render judgment for the defendant on the ground of governmental immunity, which the trial court granted. The plaintiffs appealed to the Appellate Court, which affirmed the judgment of the trial court on the alternative ground that the plaintiffs had not pleaded the imminent harm to an identifiable person (or class of persons) exception in its reply to the defendant’s special defense." The Supreme Court reversed that initial Appellate Court decision, directing that the parties be given an opportunity to brief and argue the issue. On remand, the Appellate Court addressed the sufficiency of evidence of identifiable victim status, and the Supreme Court reversed that decision as well.
In its submission, BTT identified and addressed a possible matter in avoidance, continuing course of conduct, which has certain similarities to fraudulent concealment in the context of this case. However, the plaintiff has not pursued such a matter in avoidance in its submission, and therefore the court need not address the propriety of considering an unarticulated matter in avoidance, or the merits thereof, in this case.
There is also a somewhat academic dispute with respect to identification of the appropriate statute of limitations for each of the counts directed to BTT. It is clear that the general tort statute of limitations (General Statutes § 52-577) is applicable to the claim of fraudulent misrepresentation. The parties do not seem to be in agreement as to the applicable statute of limitations for negligent misrepresentation. The plaintiff claims that the appropriate statute is General Statutes § 52-584, whereas BTT contends that the proper statute probably is § 52-577.
Perhaps simplistically, the plaintiff’s argument is that because negligent representation, by definition, implicates concepts of negligence, the statute of limitations generally applicable to negligence must be applicable to this situation. BTT, however, notes that the "negligence statute of limitations" only applies, at least according to the statutory text, to matters involving "injury to the person, or to real or personal property, caused by negligence." This case does not appear to involve personal injury or injury to real property or injury to personal property.
This distinction was recognized in Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 581, 657 A.2d 212, 223 (1995) in connection with determining the proper scope of application of General Statutes § 52-572h(b), which contains similar language:
In § 52-572h(b), the limiting language is "personal injury, wrongful death or damage to property."
We agree with the Courant that the reference in § 52-572h(b) to "property damage" does not include purely commercial losses, unaccompanied by damages to or loss of the use of some tangible property. We disagree, however, with the Courant’s argument that any amount of negligence on the part of the plaintiff should act as a complete bar to recovery in a negligent misrepresentation action where alleged damages are solely such commercial losses. We conclude rather that the policy underlying § 52-572h(b) ought to apply to negligent misrepresentation as a matter of common law.
There is a critical distinction that seems to have been overlooked by the plaintiff and some trial court decisions upon which it relies-the court did not hold that the statutory language was applicable, but rather that as a matter of common law, the principles of the statute should be applicable to negligence-based cases that do not come within the statutorily-defined limits. Given the parallel linguistic structure, the negligence statute of limitations does not apply, but there is no common-law analog to invoke. As § 52-584 carves out an area from the otherwise general applicability of § 52-577 to torts, inapplicability of the former leaves the latter statute in control.
Thus, while the ultimate result would appear to be the same-three years under § 52-577 and two years extended to three years under § 52-584-the claimed misrepresentations made by BTT did not cause injury to real or personal property such that it would seem that the general tort statute of limitations would be applicable. See, also, Lombard v. Edward J. Peters, Jr., P.C., 79 Conn.App. 290, 830 A.2d 346 (2003).
There also appears to be some level of uncertainty as to the appropriate standard for evidence sufficient to defeat a motion for summary judgment based on fraudulent concealment. The plaintiff correctly notes, at page 25 of its memorandum, that BTT seemingly states in its memorandum (at page 17) that the applicable standard is "clear, precise and unequivocal evidence." (Citation omitted.) The plaintiff correctly notes that that is the standard at trial. The plaintiff then goes on, however, to articulate another-also seemingly erroneous-standard.
Relying on Macellaio v. Newington Police Dept., 145 Conn.App. 426, 433, 75 A.3d 78 (2013) and trial court decisions relying on Macellaio, BTT claims that the standard is "probable cause" that there was fraudulent concealment. Such an interpretation of the language used, however, relies on what appears to have been an erroneous reading of precedent. The following passage does appear in that decision:
Fraudulent concealment must be proved by the more exacting standard of clear, precise, and unequivocal evidence. Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, 281 Conn. 84, 105, 912 A.2d 1019 (2007). The issue, however, is not whether the plaintiff established fraudulent concealment but, rather, whether there was probable cause to believe that the test might be satisfied.
The problem can be traced to what appears to have been a misreading of underlying authority. Falls Church, upon which Macellaio relies, does contain language similar to that quoted above, but the context was so distinct as to make it inapplicable for use in a case involving summary judgment based on a statute of limitations defense, such as this. The most obvious distinction is that Falls Church was after a trial on the merits on a claim of vexatious suit, where there were repeated references to the underlying litigation; the only mentions of "summary judgment" were in connection with the underlying action rather than the one currently before the court. The concept of an "underlying action" was key, because in that vexatious suit claim against attorneys who had brought the underlying action, a necessary element of proof was that they had lacked probable cause to commence that earlier action. It is that combination that led to the language paraphrased and seemingly inappropriately incorporated into Macellaio-where the underlying action had been resolved by way of summary judgment, based on expiration of the applicable statute of limitations, given the standard of "probable cause" applicable in determining whether a prior lawsuit was vexatious, did the law firm have probable cause to believe that there had been fraudulent concealment of the underlying action sufficient to have made it reasonable for that law firm to have pursued that underlying action? In short, the issue in Falls Church had not been application of a claim of fraudulent concealment, or the elements required to establish fraudulent concealment, but rather whether in an underlying matter, the plaintiff’s attorneys had had probable cause to believe that fraudulent concealment might have been applicable to save an action otherwise facially barred by the statute of limitations. Perhaps simplistically, the issue of probable cause of fraudulent concealment was the central issue as to the merits of the claim in Falls Church (had it been vexatious to bring the earlier suit after expiration of the statute of limitations, or had there been probable cause that there had been fraudulent concealment sufficient to make the earlier action non-vexatious) rather than an issue concerning applicability of a defense of the statute of limitations.
Therefore, the standard to be applied does not incorporate a probable cause qualification; it is the existence of a material issue of fact with respect to applicability of the fraudulent concealment statute to the statute of limitations defense, barring the moving party from judgment in its favor, as a matter of law. If the evidence could be believed by a fact finder, and if that evidence establishes the existence of a material issue of fact, the fact that the evidence may not constitute sufficient evidence to establish probable cause in the mind of the court would be of no consequence-in connection with summary judgment, the court is not engaged in weighing of evidence, whether as to a probable cause standard or otherwise.
Discussion
There is no dispute as to the period of time between the closing on the transaction underlying this dispute, and of the initial filing of a claim by the plaintiff against BTT, and that that period exceeds three years. If there is no applicable extension of the statute of limitations, whether based on tolling or fraudulent concealment or otherwise, the plaintiff appears to concede that its claimant would be barred. The plaintiff does assert that there are bases for extending the applicable limitations period such that its claim was timely filed (or, more precisely for the context of this motion, that there is at least a factual issue as to whether it was timely filed).
At times, the plaintiff refers to the tolling agreement that was executed in July 2017. The effect of that agreement, however, simply moves the effective end-date for the appropriate limitations period to July 2017, rather than the actual (later) date of filing of a complaint directed to BTT. That shortened interval is still in excess of three years (September 2013 to July 2017). Therefore, unless the plaintiff can articulate a factual issue as to the appropriate commencement date for the running of any applicable statute of limitations, that interval in excess of three years would be fatal to any claim governed by § 52-577 or § 52-584.
Section 52-595 provides that "[i]f any person, liable to an action by another, fraudulently conceals from him the existence of the cause of such action, such cause of action shall be deemed to accrue against such person so liable therefore at the time when the person entitled to sue thereon first discovers its existence." The parties generally are in agreement as to the appropriate elements for establishing fraudulent concealment under the statute: actual awareness, rather than imputed knowledge, of the facts necessary to establish the plaintiff’s cause of action; intentional concealment of those facts from the plaintiff; and concealment of those facts for the purpose of obtaining delay in the filing of a complaint on the underlying cause of action. Bartone v. Robert L. Day Co., 232 Conn. 527, 533 (1995); Iacurci, supra.
The parties are not in agreement as to the universe of facts that the court is required to consider, in evaluating this motion and the positions of the parties. The plaintiff contends that the court should look at the conduct of BTT itself, all of which as a matter of tautology was known to BTT. BTT, however, contends that it is the conduct of defendant DiMenna that should be the focus of attention, and in particular his behind-the-scenes conduct that was unknown to anyone, until after this underlying loan was in default and the Seaboard-related enterprises were in a state of collapse.
Implicitly if not explicitly, plaintiff does not claim that the relevant (alleged) misdeeds of Mr. DiMenna were known to BTT at any time around the closing on the underlying transaction, or for that matter, within the ensuing year or two. Therefore, the focus is on whether the plaintiff is correct, in arguing that the facts identified by the plaintiff (and claimed facts) were of a nature that could support a claim of negligent or fraudulent misrepresentation.
Part of the problem in assessing the significance of facts known to BTT, as alleged by the plaintiff, is that the plaintiff appears to have aimed for quantity over quality. The overwhelming majority of the facts identified by the plaintiff pertain to the indirect nature of the relationship between BTT and defendants Kelly and Merritt, and the related internal workings of BTT. On the one hand, attorney Brower was relatively new to the relationship with Seaboard enterprises, and seemingly was assisting attorney Siegelaub, who had had a relatively long-standing relationship with Mr. DiMenna and Seaboard. On what basis then, could it rationally be said that BTT was under some obligation to disclose that attorney Brower never had communicated with Mr. Kelly or Mr. Merritt, such that the failure to do so was a misrepresentation or otherwise culpable omission? The plaintiff emphasizes that BTT never communicated directly with Mr. Kelly or Mr. Merritt about the transaction, but fails to explain how or why that is something that should have been disclosed, or was a red flag given the history of Mr. DiMenna taking the lead in all Seaboard-related enterprises. Was there any obligation to personally observe Mr. Kelly and/or Mr. Merritt signing documents, or report the lack of personal observation to the plaintiff? The plaintiff states, on page 27 of its memorandum, that attorney Siegelaub "admitted that he could not recall ever communicating with Kelly and the last time he recalled communicating with Merritt was 10 years before the Transaction." Since the record reflects that attorney Siegelaub had been involved in other DiMenna-Seaboard transactions over the years, that statement simply reflects an ongoing manner of conducting business, rather than something that had been concealed or misrepresented (or an indicium of something being concealed or misrepresented).
Perhaps unintentionally confirming this point: on page 27 of the plaintiff’s memorandum, it cites to Mr. Merritt’s deposition where he is reported as "claiming he never worked with Siegelaub while at BTT and he did not know who Brower was," necessarily implying that he knew attorney Siegelaub and had worked with him prior to the attorney joining BTT. This is also confirmed by the reference on that same page to attorney Siegelaub having testified at his deposition that he had last communicated with Mr. Merritt some 10 years earlier.
In a sense, this highlights the problem with the efforts by the plaintiff to sever any references to Mr. DiMenna from the conduct upon which the plaintiff relies. He had been the intermediary between BTT (or attorney Siegelaub prior to his joining the firm) and the various Seaboard entities and the intermediary between BTT (or attorney Siegelaub prior to his joining the firm) and the other individual defendants.
One area of somewhat greater concern is the actual nature of the relationship between BTT and the two appearing defendants. BTT appears to have acknowledged that there was no formal retention agreement between it and those individuals, but nonetheless, it represented to the plaintiff that it represented them for purposes of this transaction as "special counsel." While situations arise in which an attorney may represent a party "related" to a party with a more formal relationship such that there may be no formal agreement and perhaps limited contact, e.g., an insurance-selected attorney to defend a motor vehicle accident, or an employer providing legal counsel to an employee sued for conduct within the scope of employment, it is a non-trivial concern-but the question is: is it the type of matter about which an adverse party is entitled to any information other than that representation is being provided? Because of some level of uncertainty, the court will not on any presumed non-materiality of that area of communication as the basis for its decision, although again, this is all in the pre-closing context such that it might be probative of a failure to disclose something that should have been disclosed, without any direct impact on the statute of limitations issues.
More generally, the court often has observed that informalities in business relationships often prevail until problems arise, at which point there is often much finger-pointing and invocation of technicalities. Here, the question is whether the failure to better define the relationship between BTT and the appearing defendants, both in terms of formal documentation as well as representations to the plaintiff, would/could give rise to a cause of action. Given that the ultimate problem was that the signatures on the closing documents, purporting to be those of Mr. Kelly and Mr. Merritt, now appear to have been forgeries, the background information not conveyed, that the plaintiff now claims to have been so important, seems to fit that pattern. If the signatures had been genuine, none of the facts upon which the plaintiff now claims to have relied likely would have been material to anything; they all would be secondary or tertiary facts, relating to the mechanics of how the underlying transaction was put together, almost certainly having nothing to do with the validity of the transaction. They would not seem to have constituted a basis for a cause of action, absent the lack of consent to be guarantors and lack of valid signatures to that effect on relevant documents.
There is another problem with the plaintiff’s presentation as discussed above, identified by the defendant. The various facts upon which the plaintiffs relies, are being asked to serve double duty-they are claimed to establish the misrepresentations constituting the basis on which the plaintiff seeks relief, but also are claimed to establish the concealment necessary to invoke § 52-595. This is best exemplified by the argument that the opinion letter is an act of concealment of all of the prior conduct described by the plaintiff, rather than a formal acknowledgment of all of the matters that previously had been expressed as well as a facial assurance that all was as it seemed, provided to the plaintiff in connection with the closing.
From a more technical perspective, the opinion letter could not have been concealment of a cause of action, because the cause of action did not accrue until after the opinion letter was provided, and the opinion letter itself was an integral part of that cause of action. Misrepresentation as a basis for a tort recovery requires that the plaintiff had relied upon the misrepresentation, to its detriment. The reliance in this case was consummation of the transaction, and the opinion letter appears to have been a condition (precedent) for that transaction. The opinion letter specifically recognizes that the plaintiff will be relying upon the letter-clearly that was for the benefit of the plaintiff, rather than BTT, or any of the individual defendants, or the new borrower, and that reliance was going forward with the transaction.
Conversely, as aptly pointed out by BTT, if the alleged misrepresentations themselves also could be characterized as acts of concealment, then there effectively is no statute of limitations for fraudulent misrepresentation in the absence of further conduct by the allegedly-misrepresenting party. From an alternative perspective, the plaintiff is asking the court to recognize that in connection with a claim of misrepresentation, there is an affirmative and continuing duty of the misrepresenting-concealing party to disclose its misconduct. In Maslak v. Maslak, No. LLICV 126006437, 2013 WL 5663798, at *7 (Conn.Super.Ct. Sept. 27, 2013) (and cases cited therein), the court concluded that more than the underlying misrepresentations would be required to constitute an act of concealment for purposes of tolling the statute of limitations.
Again, the context of the transaction and the participation of Mr. Merritt and Mr. Kelly need to be kept in mind. There does not appear to be any serious dispute as to whether explicitly or tacitly, they had authorized Mr. DiMenna to take the necessary steps to consummate the transaction, implicitly/necessarily obtaining such legal assistance as might be required for that purpose. The existence or absence of a formal retention agreement between BTT and the two appearing defendants, or an informal arrangement, or merely an understanding that the firm would take care of legal matters, is not material. If Mr. Kelly and Mr. Merritt had admitted that the signatures were theirs, or that the signatures had been authorized, there would not seem to have been any basis for BTT to have been made a party, at least from the perspective of the plaintiff-there would not seem to be any basis for a cause of action against BTT under such circumstances.
The court agrees that there must be some affirmative showing of concealment. Definitions and synonyms for "conceal" include: to keep from being observed or discovered; to hide; to keep secret; to obstruct or block; to bury; to obfuscate; to disguise or mask. These definitions imply if not require affirmative conduct, rather than simple passive failure to disclose. To an extent, this bleeds over into the issue of intent, but it is the existence of conduct from which intent could be inferred that would allow a party to satisfy the obligation of establishing intent.
In Falls Church, discussed earlier, the court recognized that for situations involving a fiduciary, there is an affirmative duty to disclose. While avoiding statement of an absolute rule for non-fiduciary situations, the court believes that a fair inference is that, in the absence of special circumstances such as fiduciary status, there is no affirmative obligation to disclose such that silence is the equivalent of concealment, and there is no tolling of the statute of limitations until such time as the claimant independently learns of the misconduct or the misrepresenting party makes known its prior misconduct.
The language in Falls Church, and especially the language immediately after the excerpt quoted by the plaintiff at page 31 of its brief, tends to confirm this assessment. The relevant passage, including the passage quoted by the plaintiff, suggests that the court, while avoiding a categorical statement as to the general issue not before it, recognized that authorities generally requiring an affirmative act of concealment were persuasive:
Under the second factor, the law firm had to consider whether it could establish Retirement Centers’ intentional concealment from the plaintiffs of the facts necessary to establish the plaintiffs’ cause of action. Bartone v. Robert L. Day Co., supra, 232 Conn. at 533, 656 A.2d 221. This court "has not yet decided whether affirmative acts of concealment are always necessary to satisfy the requirements of § 52-595." (Internal quotation marks omitted.) Connell v. Colwell, 214 Conn. 242, 250 n.6, 571 A.2d 116 (1990). As the Appellate Court also recognized, however, "federal case law existed at the time the law firm initiated the underlying action, suggesting that although fraudulent concealment generally requires an affirmative act of concealment, nondisclosure is sufficient when the defendant has a fiduciary duty to disclose material facts." Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, supra, 89 Conn.App. at 478, 874 A.2d 266; see, e.g., Hamilton v. Smith, 773 F.2d 461, 468 (2d Cir. 1985) ("[t]o establish fraudulent concealment under Connecticut law, a plaintiff must show [inter alia ] that ... absent a fiduciary relationship, the defendant was guilty of some affirmative act of concealment"); Martinelli v. Bridgeport Roman Catholic Diocesan Corp., 10 F.Supp.2d 138, 145 (D.Conn. 1998) (plaintiff can avail itself of fraudulent concealment tolling doctrine notwithstanding absence of acts of intentional concealment by defendant if defendant violated fiduciary duty to disclose material information to plaintiff), aff’d in part, vacated and remanded in part, 196 F.3d 409 (2d Cir. 1999). 281 Conn. 107-08.
Finally, as to the existence of evidence of intent to delay, it would appear to be an "anti-tautology"-if there was no conduct after the closing that constituted concealment, there could not have been any such conduct from which there might be an inference of intentional delay. The plaintiff relies solely on the principle that intent generally is an issue of fact, based on inferences, but there must be evidence from which inferences could be drawn. Again, no one was aware that any cause of action might exist until such time as 300 Main Street was in default and the appearing defendants went on record as denying having agreed to act as guarantors (and denying the validity of their signatures). There was nothing that BTT could have intended to delay, and no conduct or other circumstances that might support a reasonable inference of intent to delay.
Conclusion
Although the precise parameters of the misconduct/malfeasance of Mr. DiMenna is unknown, for purpose of this motion, and indeed for purposes of the plaintiff’s claims against BTT, the working hypothesis is that he was responsible for unauthorized signatures being placed on the closing documents reflecting that Mr. Kelly and Mr. Merritt had agreed to be guarantors of the transaction, and for representing that they had agreed to act in that capacity. (More precisely, that he was responsible for unauthorized signatures being placed on signature pages that later were affixed to the final versions of the documents.) The plaintiff has not suggested that BTT knew of any such misconduct. Instead, the plaintiff faults BTT for having relied upon Mr. DiMenna as the intermediary for all dealings with the two appearing defendants with respect to this transaction, notwithstanding that that appears to have been how prior transactions were handled (by attorney Siegelaub, prior to his joining BTT).
The plaintiff has conceded that, absent a basis of tolling statute of limitations, more than three years elapsed between the closing-with the associated claimed misrepresentations) and the execution of the tolling agreement, which is the earliest possible end-date for any limitations period. In order to invoke § 52-595, the plaintiff was required to show that there is a material issue of fact relating to concealment of the cause of action that the plaintiff otherwise had against BTT.
While the plaintiff has attempted to focus on the knowledge of BTT (and its attorneys) relating to informalities and indirectness of dealing with Mr. Merritt and Mr. Kelly, those acts-and the associated knowledge-do not appear to be a basis for a claimed cause of action that might have been concealed. The representations upon which the plaintiff appears to have relied, and therefore which could form the basis for misrepresentation claims, related to the agreement of Mr. Merritt and Mr. Kelly to act as guarantors, and the validity of their signatures on the appropriate documents. There is no suggestion that BTT or any of its attorneys have reason to know-or actually knew-that Mr. Merritt and Mr. Kelly had not agreed to act as guarantors, and that their signatures on the relevant documents were not theirs (or at least were likely to be disclaimed by them).
The court need not rely on the proper choice of factual statements and omissions for purposes of this analysis, although as argued by BTT, it is a necessary starting point. The more significant and unambiguous problem is that there is no claimed conduct of BTT, post-closing, that might constitute concealment-the plaintiff appears to rely solely on the absence of any corrective communications. (Of course, this circles back to the issue of the facts needing to be considered-the plaintiff has not explained or even suggested why a party in the position of BTT might think it necessary to "correct" any impression that the plaintiff might have had about directness of communications, etc.) The court interprets Falls Church and the cases cited therein as requiring affirmative conduct in the nature of concealment, and there is no such conduct that has been identified. As something of a corollary, absent any such conduct, there is no evidence from which an intent to conceal could be inferred.
Intent may be inferred from the conduct of the parties. It is well established that the question of intent is purely a question of fact ... Intent may be, and usually is, inferred from the defendant’s verbal or physical conduct ... Intent may also be inferred from the surrounding circumstances ... The use of inferences based on circumstantial evidence is necessary because direct evidence of the accused’s state of mind is rarely available ... Intent may be gleaned from circumstantial evidence such as ... the events leading up to and immediately following the incident ... Furthermore, it is a permissible, albeit not a necessary or mandatory, inference that a defendant intended the natural consequences of his voluntary conduct. (Internal quotation marks and citations, omitted.) Valencis v. Nyberg, 160 Conn.App. 777, 793, 125 A.3d 1026 (2015).
The plaintiff has not identified any post-closing conduct, or any post-closing circumstances, that might possibly support an inference of intent to delay. There is no suggestion that BTT, or any of its attorneys or personnel, had any knowledge relating to the lack of consent of the appearing defendants to act as guarantors, prior to the insolvency of the borrower, 300 Main Street. They could not have intended to delay commencement of litigation, when they had no reasonable basis to know that such litigation might be available or contemplated. To the extent that the plaintiff claims that BTT delayed discovery of its involvement, when the plaintiff initially tried to take depositions of BTT and its personnel prior to BTT being brought into the proceeding, the plaintiff has indicated that it did not attempt such discovery until December 2016, more than three years after the closing. See, ¶ 4 of # 217.00. Therefore, even if the delays in depositions was blameworthy and might constitute active concealment, the limitations period had expired approximately three months earlier (September 2013 closing, December 2016 efforts at depositions).
The court notes that the opinion letter contains the following provision on page 7 of 8, as attached to BTT’s submission, negating any basis for expecting corrective action to be taken with respect to information subsequently coming to the attention of BTT:
I. this opinion is rendered as of the date hereof and is necessarily limited to laws, regulations, rulings and judicial decisions now in effect and facts and circumstances currently known to us. We are under no obligation to advise you or anyone else as to any changes in such laws, regulations, rulings and judicial decisions or of any facts or circumstances that occur or come to our attention after the date hereof, even though such changes may affect a legal analysis, conclusion, informational confirmation or opinion set forth herein.The quoted language focuses on new facts or circumstances coming to the attention of BTT rather than a possible realization that previously undisclosed information needs to be disclosed, but it reinforces the absence of any affirmative duty to update the plaintiff, absent a fiduciary or other special relationship.
For all of these reasons, then, the motion for summary judgment filed by BTT, directed to the claims of the plaintiff, is granted.