No. CV 08 5004535 S
March 4, 2010
MEMORANDUM OF DECISION
"In a bench trial . . . the court sits as the trier of fact . . ." (Internal quotation marks omitted.) Knock v. Knock, 224 Conn. 776, 793, 621 A.2d 267 (1993). The court makes the following findings of fact.
This case arises out of the sale of a residential dwelling by the plaintiffs, Greg Piwko and Marzena Piwko, to the buyer, Peter F. Seidenberg, who is not a party in this action. The defendant, Barbara Morris, a realtor licensed by the state of Connecticut, acted as broker/realtor for both, the buyer and the seller.
On April 10, 2008, the plaintiffs filed a three-count complaint alleging the following: (1) breach of fiduciary duty; (2) breach of good faith and fair dealing; and (3) unfair and deceptive acts and practices as defined by General Statutes § 42-110a, et seq.
In their special defenses dated October 29, 2009, the defendant alleges that plaintiffs' action is barred by their own failure to mitigate their damages; by virtue of the doctrine of waiver; and by virtue of their own unclean hands.
This matter was tried to the court on November 24, 25 and December 8, 2009. The plaintiffs were self-represented and the defendant was represented by counsel. At trial, the court heard testimony from Greg and Marzena Piwko, Barbara Morris, Peter Seidenberg and the defendant's expert, James Quill. After considering the evidence and arguments of the parties, the court issues this memorandum of decision.
I. FINIDINGS OF FACT
The plaintiffs, Greg and Marzena Piwko, purchased real property located at 86 Pine Mountain Road, Ridgefield (the property) in 2002. The defendant, Barbara Morris, a friend of the plaintiffs and a realtor licensed by the state of Connecticut, acted as the broker for their purchase.
The property consisted of a building lot in which the prior structure was completely destroyed by fire. However, the well that served the original house, as well as the landscape, remained viable.
The plaintiffs intended to build a new house and occupy it as their primary residence. They built the house on the property acting as "homeowner-general contractor." However, due to a change in their economic circumstances, the plaintiffs were forced to put it on the market for sale. They engaged the defendant to do so via an exclusive right to sell listing contract dated May 28, 2005.
The defendant listed the property with the Connecticut Multiple Listing Service shortly thereafter. The defendant was explicitly instructed by the plaintiffs not to advertise the property as new construction nor to refer to any "new home warranty."
The defendant prepared a CMLS input sheet (Exhibit 3), initialed and signed by both of the plaintiffs, which indicated that the property was "not new construction" and that no warranty was being provided. Subsequent to the property being listed, the defendant procured a buyer, one Peter F. Seidenberg.
The defendant then acted as broker/realtor for both the buyer and the plaintiffs, and, on May 28, 2005, a dual agency consent agreement was executed.
Mr. Seidenberg and his wife subsequently purchased the property on or about July 4, 2006.
The court finds that the defendant was fully aware of the construction history of the property and the fact that the well dated back to the original structure. According to Mr. Seidenberg's testimony, which the court finds credible, he was told by the defendant that the house was built by the plaintiffs and that it had not been occupied. The defendant represented to Seidenberg that the plaintiffs were "reputable builders" and, although this was only the first house they constructed, they had previously designed other houses and "were the highest quality builders."
The plaintiffs claim that, despite their explicit instructions to the contrary, the defendant marketed the property to the buyers as "new construction." The court finds that the plaintiffs explicitly instructed the defendant to make full disclosure of the condition of the property but that there were no specific instructions given to her concerning the marketing of the preexisting well.
Prior to the closing, the plaintiffs, who were represented by legal counsel, signed a warranty in favor of the buyer at the buyer's insistence. In the document, it is explicitly clear that the property was not sold as "new construction." The plaintiffs voluntarily agreed to extend new home warranties to the sellers despite their earlier reservations against doing so.
The court finds that it was not disclosed to the buyers that the well was not new. Nevertheless, the buyer testified that even if he had known about the preexisting well, he and his wife would have purchased the property regardless, since they felt protected by the sellers' warranty (Exhibit H).
Shortly after the closing, the buyers notified the plaintiffs that there was an issue with the property's water supply and commenced a lawsuit against them asserting that the plaintiffs misrepresented both the quantity and quality of the water the well produced, and the fact that the well was "new." The sellers sought to enforce the new home warranties extended to them by the sellers due to the damages they suffered from a lack of a water supply.
The plaintiffs concede that they voluntarily agreed to give "new home" warranties to the sellers and, as a result, were obligated to the sellers. They allege, however, that it was the conduct of the defendant which caused them to be sued and held liable for damages.
The Seidenbergs filed suit against the plaintiffs in January 2007. The parties ultimately reached a settlement wherein the plaintiffs paid the buyers $41,000, and expended $25,000 in legal fees. The plaintiffs, who were represented by counsel, voluntarily chose to settle this lawsuit to avoid any further cost of litigation and any risks of trial in the event of a judgment. The settlement figure was the amount recommended by the court during a pretrial settlement conference.
II. LEGAL ANALYSIS Count One: Breach of Fiduciary Duty
In count one of the complaint, the plaintiffs set forth a claim for breach of fiduciary duty. The plaintiffs allege that the defendant misrepresented the property to the buyers by making statements that were contradictory to the plaintiffs' instructions.
Under Connecticut law, "[a] fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other." (Internal quotation marks omitted.) Cadle Co. v. D'Addario, 268 Conn. 441, 455, 844 A.2d 836 (2004). See also Konover Development Corp. v. Zeller, 228 Conn. 206, 219, 635 A.2d 798 (1994) (discussing the Connecticut Uniform Partnership Act and fiduciary duties owed between partners). A fiduciary relationship exists where the fiduciary is either in a "dominant position, thereby creating a relationship of dependency, or [is] under a special duty to act for the benefit of another." Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20, 38, 761 A.2d 1268 (2000). "The law will imply [fiduciary responsibilities] only where one party to a relationship is unable to fully protect its interests [or where one party has a high degree of control over the property or subject matter of another] and the unprotected party has placed its trust and confidence in the other." (Internal quotation marks omitted.) Id., 41. "The existence of a fiduciary duty is largely a factual determination and the extent of the duty and the resulting obligations may vary according to the nature of the relationship: the obligations do not arise as a result of labeling, but rather by analysis of each case." Hoffnagle v. Henderson, Superior Court, judicial district of Hartford, Docket No. CV 02 0813972 (April 17, 2003, Beach, J.). See also Konover Development Corp. v. Zeller, supra, 228 Conn. 222-23.
"A real estate broker is a fiduciary. As such, he is required to exercise fidelity and good faith, and cannot put himself in a position antagonistic to his principal's interest by fraudulent conduct, acting adversely to his client's interests, or by failing to communicate information he may possess or acquire which is or may be material to his principal's advantage . . . This rule requiring a broker to act with the utmost good faith towards his principal places him under a legal obligation to make a full, fair and prompt disclosure to his employer of all facts within his knowledge which are, or may be material to the matter in connection with which he is employed, which might affect his principal's rights and interests, or his action in relation to the subject matter of the employment, or which in any way pertains to the discharge of the agency which the broker has undertaken." Licari v. Blackwelder, 14 Conn.App. 46, 613, 539 A.2d 609 (1988).
At trial, the plaintiffs did not provide any evidence demonstrating that the defendant breached her fiduciary duty to them. The defendant followed the plaintiffs' wishes with regard to listing the property as "not new construction" and disclosing information regarding the property and its owners. The defendant's failure to convey information to the buyer regarding the status of the well as being from a previous structure did not constitute a breach of her duty, as she was not explicitly instructed to do so by the plaintiffs.
The plaintiffs have failed to prove this claim by a fair preponderance of the evidence. Consequently, judgment may enter for the defendant on the first count.
Count Two: Breach of Good Faith and Fair Dealing
In count two of the complaint, the plaintiffs set forth a claim of breach of good faith and fair dealing, alleging that the duty was breached by the defendant's conduct.
"[E]very contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement . . . The covenant of good faith and fair dealing presupposes that the terms and purpose of the contract are agreed upon by the parties and that what is in dispute is a party's discretionary application or interpretation of a contract term . . . To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith." (Internal quotation marks omitted.) Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 16 n. 18, 938 A.2d 576 (2008). "Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive . . . Bad faith means more than mere negligence; it involves a dishonest purpose." (Citation omitted; internal quotation marks omitted.) Habetz v. Condon, 224 Conn. 231, 237, 618 A.2d 501 (1992).
The plaintiffs have failed to show that the defendant acted in bad faith, or that there was any fraudulent conduct on her behalf. The defendant performed her job by obtaining a buyer for the plaintiff's property. The evidence does not show that she acted in bad faith or with any intent to harm the plaintiff's interests. The plaintiffs have demonstrated through their evidence that their damages resulted from the warranties that they, themselves, voluntarily extended to the buyer. Accordingly, the defendant's actions did not rise to the level of a breach of the implied covenant of good faith and fair dealing.
The plaintiffs have failed to prove this claim by a fair preponderance of the evidence. Consequently, judgment may enter for the defendant on the second count.
Count three: Violation of the Connecticut Unfair Trade Practices Act
The third count alleges a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq., based on the defendant's conduct.
"The essential elements to pleading a cause of action under CUTPA are: 1. That the defendant committed an unfair or deceptive act or practice (note: if the CUTPA claim is based upon a violation of another statute, that violation should also be alleged); 2. That the act complained of was performed in the conduct of trade or commerce; 3. That the prohibited act was the proximate cause of harm to the plaintiff." T. Merritt, 16 Connecticut Practice Series: Elements of an Action (2008), § 11:1, p. 530. "[General Statutes § ]42-110b(a) provides that [n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise-in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other business persons] . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three. Thus a violation of CUTPA may be established by showing either an actual deceptive practice . . . or a practice amounting to a violation of public policy." (Citation omitted; internal quotation marks omitted.) Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 18-19, 938 A.2d 576 (2008).
The defendant's actions were not proven to be the proximate cause of the plaintiffs' harm. Any damages incurred by the plaintiffs were a result of the warranties they had extended to the buyers and their decision to settle. The defendant did not commit any unfair or deceptive act in performing her duties. Therefore, plaintiffs have failed to prove this claim by a fair preponderance of the evidence. Consequently, judgment may enter for the defendant on the third count.
For the above-stated reasons, judgment may enter for the defendant on all counts.