Opinion
No. CV 06 4023267
December 20, 2010
MEMORANDUM OF DECISION RE MOTIONS FOR SUMMARY JUDGMENT (#133 #135), MOTION TO DISMISS (#146)
FACTS
On November 2, 2006, the plaintiff, Vincent Metro, LLC, commenced the present interpleader action by service of process against the defendants, Yah Realty, LLC (Yah Realty), John Fitzpatrick and Rose Fitzpatrick, pursuant to General Statutes § 52-484. In its one-count complaint, the plaintiff alleges the following facts. At all times relevant hereto, the plaintiff acted as a listing agent for Yah Realty relative to certain property located in the town of Hamden. On December 13, 2005, Yah Realty entered into an agreement to sell the property to John Fitzpatrick. On January 6, 2006, the plaintiff received a deposit in the amount of $20,000 from John Fitzpatrick in the form of a check drawn by Rose Fitzpatrick on her account. The plaintiff deposited the funds into its real estate trust account pursuant to General Statutes § 20-324k(c). The property was never conveyed by Yah Realty to John Fitzpatrick and the two have purportedly terminated the contract. No party has alleged that there has been a breach of contract. On October 24, 2006, John Fitzpatrick executed a release indicating that the funds should be returned to him. Yah Realty refused to sign the release or permit the plaintiff to return the funds to John Fitzpatrick. Furthermore, Rose Fitzpatrick has a colorable claim to the funds, while the plaintiff is a disinterested stakeholder with no claim to the funds. The plaintiff sought:(1) an order determining the rights of the defendants to the $20,000 deposit; (2) an order discharging the plaintiff from any obligation to the defendants arising out of their claims to the funds; and (3) reasonable attorneys fees and costs.
While not referred to as such in the complaint, subsequent pleadings refer to the property as Corporate Ridge.
Section 20-324k(c) provides in relevant part: "Any broker who, in the course of his real estate business and in connection with any transaction, accepts from any principal, client or other person any moneys to which he is not personally and legally entitled . . . shall deposit such moneys in his escrow or trust account [maintained pursuant to General Statutes § 20-324k(a)] within three banking days of the date the agreement evidencing such transaction is signed by all necessary parties to such transaction, pending final legal disposition of such moneys in accordance with the instructions of the person legally entitled to such moneys."
On December 12, 2006, the court, Licari, J., entered an interlocutory judgment of interpleader and the plaintiff, pursuant to General Statutes § 20-324k(d), deposited the funds with the clerk of the court on December 29, 2006. On March 2, 2007, the defendants filed a motion for an order to release the funds to Yah Realty. On May 21, 2007, the court, Licari, J., denied the motion without prejudice on the ground that the plaintiff had filed a motion for judgment upon default on May 15, 2007. On May 16, 2007, the defendants filed a joint answer and a five-count counterclaim. In their answer, the defendants deny that John Fitzpatrick executed a release or that Yah Realty refused to permit the plaintiff to return the funds to him. On February 7, 2008, the plaintiff filed an answer to the defendants' amended counterclaim. On March 13, 2008, the defendants filed a joint statement of claim in which Yah Realty claimed that the funds in the hands of the plaintiff be paid to itself, and John and Rose Fitzpatrick claimed that the funds in the hands of the plaintiff be paid to him and herself.
Section 20-324k(d) provides in relevant part: "Upon motion, the court may order a party to an action who is a broker holding funds in trust in connection with a real estate transaction to deposit with the court certified funds in an amount not to exceed the funds held in trust . . ."
The motion included two letters. The first letter dated September 25, 2006 and acknowledged by John Fitzpatrick, states that John Fitzpatrick terminated the contract and that, by mutual agreement, the deposit should be turned over and made payable to Yah Realty. The second letter, dated October 19, 2006 and signed by John Fitzpatrick, requests that the plaintiff turn over the deposit to Yah Realty.
On January 22, 2008, the defendants filed an amended five-count counterclaim. In particular, the revised counterclaim asserted claims for: (1) breach of contract; (2) negligent misrepresentation; (3) reckless misrepresentation; 4) violations of the Connecticut Unfair Trade Practices Act; and (5) breach of fiduciary duty.
Previously, on July 2, 2007, Yah Realty and John Fitzpatrick filed a joint statement of claim, which did not include a statement of claim from Rose Fitzpatrick.
On May 20, 2008, the plaintiff filed a motion for summary judgment as to its interpleader action and the defendants' counterclaims and a memorandum of law in support thereof. On July 25, 2008, the defendants filed an objection to the plaintiff's motion for summary judgment and a cross motion for summary judgment on the plaintiff's interpleader action. Along with their motion for summary judgment, the defendants filed a stipulation stating that all three defendants had agreed that an order for release of the funds should be entered, releasing all funds contained in escrow to Yah Realty. On December 4, 2008, the court, Robinson, J., declined to rule on the motions on the ground that the stipulation rendered the issue of which party is entitled to the funds moot and, sua sponte, dismissed the interpleader action [ 46 Conn. L. Rptr. 766]. The court also requested further briefing and argument on the plaintiff's motion for summary judgment as to the defendants' counterclaims. See footnote 7. The plaintiff appealed the trial court's dismissal of the interpleader action to the Appellate Court, and the Supreme Court transferred the appeal to its court pursuant to General Statutes § 51-199(c) and Practice Book § 65-1. On appeal, the Supreme Court concluded that the dismissal of the plaintiff's interpleader action was improper because "the agreement was not conclusive as to the plaintiff's obligations toward the defendants, and the trial court therefore could have afforded practical relief to the plaintiff by affirmatively discharging the plaintiff from liability or directing the disposition of the funds or both." (Emphasis in original.) Vincent Metro, LLC v. Yah Realty, LLC, 297 Conn. 489, 500-01, 1 A.3d 1026 (2010).
On December 31, 2008, pursuant to an order of the court, Robinson, J., the defendants filed a supplemental objection to the plaintiff's motion.
On remand, the plaintiff filed a motion to dismiss the defendants' counterclaims on July 22, 2010. This motion, along with the plaintiff's motion for summary judgment, previously filed on May 20, 2008, and the defendants' motion for summary judgment, previously filed on July 25, 2008, were heard at short calendar on October 25, 2010.
DISCUSSION
"Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." (Internal quotation marks omitted.) Provencher v. Enfield, 284 Conn. 772, 790-91, 936 A.2d 625 (2007). "The Connecticut Supreme Court has held that . . . [summary] judgment is procedurally improper in an interpleader action without the prior entry of an interlocutory judgment of interpleader and the filing of the respective parties' claims." Paine Webber, Inc. v. Chapman, Superior Court, judicial district Fairfield, Docket No. CV 92 0290715 (September 7, 1994, McGrath, J.) (granting defendant's motion for summary judgment where defendant's charging lien had priority over other claims).
"In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue." (Internal quotation marks omitted.) Zielinski v. Kotsoris, 279 Conn. 312, 318-19, 901 A.2d 1207 (2006). "In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any such issues exist." Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988). Moreover, the "court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Provencher v. Enfield, supra, 284 Conn. 791.
I Plaintiff's Motion for Summary Judgment
In its memorandum of law in support of its motion for summary judgment, the plaintiff argues that it is entitled to summary judgment with respect to its interpleader action because the defendants admit that they each have separate and competing claims to the funds deposited with the court and, therefore, as a matter of law, "there is no way to determine which [d]efendant is entitled to the deposit without the [d]efendants litigating the matter separately among themselves." The plaintiff further argues that the defendants' counterclaims are barred by the doctrines of res judicata and collateral estoppel because, as a matter of law, the court's interlocutory judgment of interpleader was a final appealable order that determined that, by its very nature, the plaintiff acted in good faith in handling the funds at issue and that the plaintiff incurred no independent liability to the defendants. In support of its motion, the plaintiff has submitted: (1) the affidavit of Vincent Engingro, managing member of the plaintiff; (2) the affidavit of Elizabeth Cruz, legal secretary at the law offices of Peter E. Ricciardi; (3) a copy of the exclusive listing agreement between Yah Realty and the plaintiff, dated July 18, 2005; (4) a copy of a contract of sale between Yah Realty and John Fitzpatrick, dated December 13, 2005; (5) a copy of a check drawn from the account of Rose Fitzpatrick, dated January 6, 2006; (6) a copy of a letter from Yah Realty to Engingro, dated September 25, 2006; (7) a copy of a release from an executed sales agreement, signed by John Fitzpatrick and dated October 23, 2006; and (8) a copy of the defendants' statements of claim, dated June 29, 2007 and March 12, 2008, respectively.
The defendants counter that, with respect to the plaintiff's interpleader action, all material issues have not been resolved and, although the defendants have made conflicting claims to the deposited funds, courts should be cautious about granting summary judgment in cases where motive, intent or state of mind are at issue. The defendants further argue that res judicata and collateral. estoppel do not bar the defendants' counterclaims because "[j]udgment through interpleader does not automatically dispose of all the issues to be litigated in a case" and that "[t]here are sufficient issues as to material facts regarding the negligent and reckless misrepresentations and breaches of duty performed by the [p]laintiff in this matter." The defendants further argued that the interlocutory judgment only resolves the stakeholder issue and not the entire action, wherefore, the court has the power to entertain the counterclaims.
A. Plaintiff's Interpleader Action
"Whenever any person has, or is alleged to have, any money or other property in his possession which is claimed by two or more persons, either he, or any of the persons claiming the same, may bring a complaint in equity, in the nature of a bill of interpleader, to any court which by law has equitable jurisdiction of the parties and amount in controversy, making all persons parties who claim to be entitled to or interested in such money or other property . . ." General Statutes § 52-484. "It is well established that the primary purpose of an interpleader action is to shield the stakeholder from conflicting claims to funds controlled by the stakeholder . . . Accordingly, interpleader actions are proper only when a stakeholder faces two or more adverse claims to the same property." (Citations omitted.) Vincent Metro, LLC v. Yah Realty, LLC, supra, 297 Conn. 496. "Actions pursuant to § 52-484 involve two distinct parts, the first of which is an interlocutory judgment of interpleader . . . [which] traditionally precedes adjudication of the claims." (Internal quotation marks omitted.) Id., 497; see also Yankee Millwork Sash Door Co. v. Bienkowski, 43 Conn.App. 471, 473-74, 683 A.2d 743 (1996) ("In an interpleader proceeding, therefore, `there are, in effect, two separate and distinct suits, the first suit . . . [determining] whether there shall be a decree of interpleader, and the second . . . [determining] who shall get the fund or thing in dispute.'").
Practice Book § 23-44 provides: "No trial on the merits of an interpleader action shall be had until (1) an interlocutory judgment of interpleader shall have been entered; and (2) all defendants shall have filed statements of claim, been defaulted or filed waivers . . ."
"An interlocutory judgment of interpleader . . . determines whether interpleader lies . . ." (Internal quotation marks omitted.) Vincent Metro, LLC v. Yah Realty, LLC, supra, 297 Conn. 497. It also "concludes the rights of the parties on the stakeholder issue." Kerite Co. v. Alpha Employment Agency, Inc., 166 Conn. 432, 437, 352 A.2d 288 (1974) (concluding that interlocutory judgment of interpleader was appealable as to the stakeholder issue). "If the interpleader is not proper, the complaint . . . will be dismissed. If proper, the court will order the other parties to interplead . . ." 2 E. Stephenson, Connecticut Civil Procedure (3d Ed. 2002) § 225(g), p. 579. "It is well established, however, that, even following an interlocutory judgment of interpleader, a trial court must take some action to absolve a disinterested stakeholder of responsibility. Generally, this effect is accomplished by discharging the stakeholder from the suit." Vincent Metro, LLC v. Yah Realty, LLC, supra, 497-98. "[I]f the stakeholder admits the debt and disclaims personal interest in the fund, he or she should be discharged and dropped from the suit at this point." 2 E. Stephenson, supra, § 225(g); see also Vincent Metro, LLC v. Yah Realty, LLC, supra, 498.
In the present case, an interlocutory judgment of interpleader was entered by the court, Licari, J., on December 12, 2006. In its complaint, the plaintiff alleged that it is a disinterested stakeholder and has no claim to the funds. The Supreme Court, in the present case, recognized that the plaintiff asserted no interest in the disputed funds. See Vincent Metro, LLC v. Yah Realty, LLC, supra, 498 n. 9. In its complaint, the plaintiff further sought an order discharging itself from any obligation to the defendants arising out of their claims to the funds. In its order of an interlocutory judgment of interpleader, the court did not discharge the plaintiff from the suit. See id., 500. Because the plaintiff has admitted the debt and disclaimed personal interest in the fund, it should have been discharged from the present action after the interlocutory judgment of interpleader entered. Nevertheless, it was not discharged and the defendants have subsequently filed five counterclaims against it. Therefore, the court needs to address the defendants' counterclaims before it can grant any relief to the plaintiff or discharge it from the suit.
In their revised counterclaim, the defendants alleged that the plaintiff "demanded a commission as a condition of returning the deposit." The plaintiff asserted and the defendants conceded at oral argument, however, that the plaintiff did not make a demand for a commission.
B Defendants' Counterclaims
As previously discussed, the plaintiff argues that the defendants' counterclaims are barred by the doctrines of res judicata and collateral estoppel because the court's interlocutory judgment of interpleader was a final appealable order that determined that the plaintiff incurred no independent liability to the defendants. The defendants counter that the interlocutory judgment only resolves the stakeholder issue and not the entire action, wherefore, the court has the power to entertain the counterclaims.
"Although res judicata and collateral estoppel often appear to merge into one another in practice, analytically they are regarded as distinct." Weiss v. Weiss, 297 Conn. 446, 458-59, 998 A.2d 766 (2010). "The doctrine of res judicata [or claim preclusion] provides that [a] valid, final judgment rendered on the merits by a court of competent jurisdiction is an absolute bar to a subsequent action between the same parties . . . upon the same claim or demand." (Internal quotation marks omitted.) Id., 459. "[A] judgment is final if no further judicial action by [the] court rendering judgment is required to determine [the] matter litigated." (Internal quotation marks omitted.) Marone v. Waterbury, 244 Conn. 1, 12, 707 A.2d 725 (1998). "A judgment on the merits is . . . based on legal rights as distinguished from mere matters of practice, procedure, jurisdiction or form . . . A decision with respect to rights and liabilities of the parties is on the merits where it is on the ultimate fact or state of facts disclosed by the pleadings or evidence, or both, and on which the right of recovery depends." (Citations omitted; internal quotation marks omitted.) Rosenfield v. Cymbala, 43 Conn.App. 83, 91-92, 681 A.2d 999 (1996).
"[C]ollateral estoppel, or issue preclusion, prohibits the relitigation of an issue when that issue was actually litigated and necessarily determined in a prior action . . . For an issue to be subject to collateral estoppel, it must have been fully and fairly litigated in the first action. It also must have been actually decided and the decision must have been necessary to the judgment . . . An issue is actually litigated if it is properly raised in the pleadings or otherwise, submitted for determination, and in fact determined . . . An issue is necessarily determined if, in the absence of a determination of the issue, the judgment could not have been validly rendered." (Citations omitted; internal quotation marks omitted.) New England Estates, LLC v. Branford, 294 Conn. 817, 838-39, 988 A.2d 229 (2010).
Neither res judicata nor collateral estoppel bar the defendants' counterclaims. With respect to res judicata, the interlocutory judgment of interpleader was not a final judgment on the merits because further action is required by the court to determine the rights and liabilities of the parties. In particular, the court must take some action to absolve the plaintiff of responsibility, beyond merely granting an interlocutory judgment of interpleader, such as discharging the plaintiff from the action. See Vincent Metro, LLC v. Yah Realty, LLC, supra, 297 Conn. 497-98. The court did not do so. See id., 500. With respect to collateral estoppel, the issue of the plaintiff's liability was not actually litigated and necessarily determined by the prior interlocutory judgment. As previously stated, the interlocutory judgment did not absolve the plaintiff of responsibility. It merely concluded the rights of the parties on the stakeholder issue. See Kerite Co. v. Alpha Employment Agency, Inc., supra, 166 Conn. 437 (with regard to stakeholder issue "recovery by one defendant necessarily results in the denial of payment to the other"). Nevertheless, the plaintiff's motion for summary judgment as to the defendants' counterclaims must be granted as a matter of law.
"Upon motion, the court may order a party to an action who is a broker holding funds in trust in connection with a real estate transaction to deposit with the court certified funds in an amount not to exceed the funds held in trust. Conditioned upon the receipt of such certified funds, the court shall also order the dismissal of any claim against the broker which claim is based solely on the broker's role as stakeholder of such funds." General Statutes § 20-324k(d).
On November 9, 2006, the plaintiff filed a motion to deposit the funds pursuant to § 20-324k(d). On December 12, 2006, the court, Licari, J., granted the motion. On December 29, 2006, the plaintiff filed a notice of deposit of the funds with the clerk of the court, which contained a copy of the check attached. Therefore, the court " shall . . . order the dismissal of any claim against the broker . . . based solely on the broker's role as stakeholder of such funds."(Emphasis added.) General Statutes § 20-324k(d).
In the present case, the defendants have filed a revised five-count counterclaim. In count one, the defendants allege that "[a]s a result of the [plaintiff's] refusal to return any part of the deposit, the [plaintiff] breached its contract with the [defendants]." In count two, entitled negligent misrepresentation, the defendants allege that the plaintiff knew or should have known that it "was required to release any deposit funds should the real estate fail to close," and that the defendants "relied on the representations that the subject deposit would be returned." The defendants further allege that the representations were made negligently. In count three, entitled reckless misrepresentation, the defendants reallege the claims from count two but instead allege that the representations were made recklessly. In count four, the defendants reallege the claims from count three and assert that the plaintiff's actions constitute unfair trade practices in violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq. In count five, the defendants reallege the claims from count four and assert a claim for breach of fiduciary duty. There is no genuine issue of material fact that all five claims are concerned expressly and exclusively with the plaintiff's failure to return the deposited funds and, as a result, are based exclusively on the broker's role as stakeholder of the funds. Therefore, the claims are prohibited by § 20-324k(d) and as a matter of law, the court must grant the plaintiff's motion for summary judgment as to all five of the defendants' counterclaims pursuant to this statute. Judgment is entered in favor of the plaintiff on all five counterclaims. The court discharges the plaintiff from further liability and considers whether to grant reasonable attorneys fees to the plaintiff pursuant to § 52-484.
C Attorneys Fees
"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 . . . [The Supreme Court] also has 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." (Internal quotation marks omitted.) ACMAT Corp. v. Greater New York Mutual Ins. Co., 282 Conn. 576, 582, 923 A.2d 697 (2007). With respect to statutory authorization, "[b]ecause we must respect the legislative prerogative of choosing the special circumstances under which [attorneys fees] awards may be made . . . we require a clear expression of the legislature's intent to create a statutory exception [to the rule]." Commissioner of Environmental Protection v. Mellon, 286 Conn. 687, 695, 945 A.2d 464 (2008). For an action in the nature of interpleader, a court "may allow to one or more of the parties a reasonable sum or sums for counsel fees and disbursements, payable out of such fund or property; but no such allowance shall be made unless it has been claimed by the party in his complaint or answer." General Statutes § 52-484. "It is well settled that this statute allows the court to award a stakeholder reasonable attorneys fees and expenses." Loda v. H.K. Sargeant Associates, Inc., 188 Conn. 69, 84, 448 A.2d 812 (1982).
In the present case, the plaintiff has asserted a claim for reasonable attorneys fees and costs. The statutory authorization is expressly set forth in § 52-484. Therefore, pursuant to this statute the court may award reasonable attorneys fees to the plaintiff. In his affidavit of attorneys fees, Peter Ricciardi, the plaintiff's attorney, attests that the plaintiff has incurred attorneys fees totaling $21,350. The plaintiff should have been discharged from the case in 2006, after the interlocutory judgment of interpleader on December 12, 2006, at which time a reasonable attorney fee would have been far less than incurred to date. Nevertheless, the plaintiff was not discharged and incurred expenses regarding a successful appeal. Taking all of these factors into account, and based upon a careful review of Ricciardi's affidavit, the court awards reasonable attorneys fees in the amount of $7,500.
II Defendants' Motion for Summary Judgment
In its motion for summary judgment, the defendants argue that there are no genuine issues as to any material facts because all three defendants have agreed and stipulated that Yah Realty should be the party to whom the deposited $20,000 should be released. The defendants further contend that "the court has determined through its interpleader that the [p]laintiff is a disinterested stakeholder, has subsequently already deposited the funds with the court and relinquished liability to the $20,000." Therefore, the defendants argue that the court should grant the defendants' motion as a matter of law. The plaintiff did not file a memorandum in opposition to the defendants' motion.
In the present action, the Supreme Court has held that the stipulation did not effectuate the purpose of interpleader "because it did not conclusively shield the plaintiff as a disinterested stakeholder from the possibility of continuing double liability on the debt for several reasons. First, the plaintiff was not a party to the stipulation. Second, although the defendants agreed therein that Yah Realty `should be the recipient of said funds,' the stipulation contained no express relinquishment of the rights of John Fitzpatrick and Rose Fitzpatrick to make a claim against the plaintiff with respect to the funds . . . In addition, the binding effect of the stipulation was uncertain because it was voluntary and was not signed or otherwise affirmed by any of the defendants . . . Indeed, the stipulation was inconsistent with the defendants' previously conflicting positions regarding the funds under the pleadings they had filed with the trial court." Vincent Metro, LLC v. Yah Realty, LLC, supra, 297 Conn. 500.
In the present case, there is a genuine issue of material fact as to whether Yah Realty should be the recipient of the funds because while the stipulation states that all defendants agree that the funds should be released to Yah Realty, it is not signed by the defendants. Moreover, in their statements of claim, John and Rose Fitzpatrick claimed that the funds in the hands of the plaintiff be paid to him or herself. Therefore, the defendants' motion is denied regarding who should receive the balance of the $20,000.
III Plaintiff's Motion to Dismiss
The court need not address the arguments raised in the plaintiff's motion to dismiss the defendants' counterclaims because all issues raised therein have been disposed of by way of the court's ruling on the plaintiff's Motion for Summary Judgment.
CONCLUSION
Accordingly, for the foregoing reasons, the court grants the plaintiff's motion for summary judgment with respect to the defendants' counterclaims and discharges the plaintiff from liability. In addition, the court awards reasonable attorneys fees to the plaintiff in the amount of $7,500. Furthermore the defendants' motion for summary judgment is denied and the defendants should proceed to trial on the interpleader action for a determination of which of them is entitled to the balance of the $20,000.