Opinion
No. CV 01-0086006S
August 22, 2003
Memorandum of Decision Re Plaintiff's Motion to Strike Defendant's First And Fourth Special Defenses (#166)
This decision addresses whether someone may justifiably rely on fraudulent representations about title to property when contrary information is on the land records. The plaintiff's three-count complaint sounds in fraud, tortious interference with contractual relations, and conspiracy. It alleges that the defendant, an attorney, while representing Ronald Scalzo, who owed the plaintiff money, knowingly misrepresented to the plaintiff during negotiations about payment of the debt both the status of title and the equity in certain property that the defendant told plaintiff would be used to satisfy Scalzo's debt. Two of the defendant's special defenses claim that the plaintiff had constructive notice from the land records of information contrary to the alleged misrepresentations and that Chapman's failure to examine those records constitutes an intervening or superceding cause as to liability. For the following reasons, the motion to strike both special defenses is granted.
The purpose of a motion to strike is to test the legal sufficiency of an opponent's claim. Practice Book § 10-39(a). "In ruling on a motion to strike, the court is limited to the facts alleged in the [contested pleading]"; (internal quotation marks omitted) Faulkner v. United Technologies Corporation, 240 Conn. 576, 580, 693 A.2d 293 (1997); and construed "in the manner most favorable to sustaining its legal sufficiency." (Citations omitted; internal quotation marks omitted.) Vacco v. Microsoft Corporation, 260 Conn. 59, 64-65, 793 A.2d 1048 (2002).
The material allegations of the complaint are as follows: Scalzo owed the plaintiff $43,935.44 for materials he purchased, plus interest, attorneys fees and costs of collection. In January and February 2000 Scalzo told David Chapman, president of the plaintiff, that "at the closing of the sale of property I own located at 37 Padanaram Road, Danbury, CT, Chapman Lumber will be paid the amount of $43,935.44." The plaintiff therealler forebore furher collection attempts. The following month, unbeknownst to the plaintiff, defendant quitclaimed the property, as recommended by the defendant, to Stephen Martino, with whom defendant had a business relationship. Martino promptly recorded his deed on the land records. Two months later, the defendant began representing Scalzo in negotiations with the plaintiff for a promissory note and mortgage on that same property. During those negotiations, the defendant became aware that Scalzo had already quitclaimed the property to Martino, but continued to tell plaintiff that Scalzo owned and had sufficient equity in the property to cover his debt to the plaintiff; that there was a buyer for the property, and that plaintiff would be paid after closing details had been worked out, all for the purpose of deceiving the plaintiff and preventing plaintiff from otherwise collecting on its bill. In June, Scalzo signed such a mortgage deed in the presence of the defendant, who then sent it to the plaintiff. All three counts have as their basis this allegation of fraudulent misrepresentation by the defendant.
The defendant's first special defense claims that plaintiff had constructive notice of the quit claim deed from Scalzo to Martino by virtue of its having been filed on the Danbury land records. Hence, defendant claims, the plaintiff cannot establish the element of justifiable reliance on a misrepresentation that is necessary to recover for fraudulent misrepresentation. See Williams Ford, Inc. v. Hartford Courant Company, 232 Conn. 559, 575, 657 A.2d 212 (1995). His argument relies on the venerable proposition that, under Connecticut law, land records are notice to the entire world of deeds recorded there.
It has ever been the policy of our laws, to make every man's title to his real estate, as far as practicable, appear of record. When a deed is lodged with the town clerk, it is constructive notice to all the world. Under our recording system a deed duly recorded is constructive notice to all the world; and the law conclusively presumes that every person interested has knowledge, not only of the deed, but of its precise language. Whatever in fact appeared upon the records, they were, so far as his legal title is concerned, conclusively presumed to know.
(Citations omitted; internal quotations omitted.) Beach v. Osborne et al, 74 Conn. 405, 412, 50 A. 1019 (1902). By virtue of such constructive notice, the defendant argues, the plaintiff was
conclusively presumed to know those facts which are apparent upon the land records concerning the chain of title of the property described in the conveyance, and (2) that this presumption of knowledge is for all legal purposes the same in effect as actual knowledge.
Id. The logical implication of this argument is that any reliance by plaintiff on misrepresentations here would not be reasonable or justifiable because it was constructively deemed to know that they were not true.
In Noth v. Wynn, 59 Ohio App.3d 65, 571 N.E.2d 446 (1988), the court agreed with the defendant's proposition here that constructive notice provided by land records precludes a claim of justifiable reliance on the defendant's alleged misrepresentations. Connecticut, however, along with the vast majority of other jurisdictions and legal authorities, follows a contrary rule. In Loverin v. Kuhne, 94 Conn. 219, 108 A. 554 (1919), the court long ago rejected the argument advanced here by the defendant that constructive notice provided by land records defeats a claim for fraud. In that case, a husband falsely represented that his wife had no interest in land he was conveying to plaintiff. The court held that the doctrine of constructive notice would not shield the husband from a claim for fraud:
Whether the courts of that state still follow such a rule is unclear, however. Compare Rose v. Zaring Homes, 122 Ohio App.3d 739, 702 N.E.2d 952 (Ohio 1997), with Layman v. Binns, 35 Ohio St.3d 176, 519 N.E.2d 642 (1988).
Section 540 of the Restatement (Second) Torts, "Duty To Investigate," states as follows: "The recipient of a fraudulent misrepresentation of fact is justified in relying upon its truth, although he might have ascertained the falsity of the representation had he made an investigation." Comment b and the illustration thereto explain the rule further:
The rule stated in this Section is applicable even though the fact that is fraudulently represented is required to be recorded and is in fact recorded. The recording acts are not intended as a protection for fraudulent liars. Their purpose is to afford a protection to persons who buy a recorded title against those who, having obtained a paper title, have failed to record it. The purpose of the statutes is fully accomplished without giving them a collateral effect that protects those who make fraudulent misrepresentations from liability.
Illustration:
1. A, seeking to sell land to B, tells B that the land is free from all incumbrances. By walking across the street to the office of the register of deeds in the courthouse, B could easily learn that there is a recorded and unsatisfied mortgage on the land. B does not do so and buys the land in reliance upon A's misrepresentation. His reliance is justifiable.
3 Restatement (Second) Torts § 540, p. 881 (1977). See also W. Prosser W. Keaton, Torts (5th Ed.) § 108, p. 752 ("The plaintiff is not required . . . to examine public records to ascertain the true state of title claimed by the defendant."); 37 Am.Jur.2d Fraud and Deceit § 258 at 281 (2001) ("The law of constructive notice will not be applied to relieve a party from responsibility for actual misstatements and frauds. Thus, the fact that a victim had constructive notice of the truth from public records is not a defense to fraud.")
constructive knowledge arising from the contents of public records is not for all purposes the equivalent of actual knowledge. It is such equivalent in the determination of the character and extent of the landowner's title and interest, but when it comes to the creation of purely personal rights unrelated to title to or interest in land, the situation is very different. The doctrine of constructive notice does not apply to serve as a shield of protection from accountability for one who makes false representations to another's damage.
Id., 225-26. Similarly, in Aksomitas v. Aksomitas, 205 Conn. 93, 529 A.2d 1314 (1987), public records on file with the probate court showed that defendant had lacked title to property he had purportedly conveyed to plaintiff. Although the defendant had made no affirmative misrepresentations to the plaintiff, the court held that constructive notice provided by the land records did not trump a fiduciary duty he owed plaintiff to disclose the true situation.
The Ohio cases rely on the doctrine of caveat emptor in defining the duties of parties to a land transaction. See, e.g., Noth v. Wynn, supra, 59 Ohio App.3d 67, 571 N.E.2d 448. Connecticut courts, on the other hand, have long held that a party to a transaction who deems to speak "must make a full and fair disclosure as to the matters about which he assumes to speak [and] avoid a deliberate nondisclosure." Franchey v. Hannes, 152 Conn. 372, 379, 207 A.2d 268 (1965).
As the defendant correctly notes in his supplemental memorandum, the legal doctrine that land records provide constructive notice of interests recorded there arises from General Statutes § 47-10, which provides that "[n]o conveyance shall be effectual to hold any land against any other person but the grantor and his heirs, unless recorded on the records of the town in which the land lies." Grantees in Connecticut take their interests in real property subject to claims on that property of which they have record notice. The purpose of our recording statutes is "to alert prospective purchasers to the status of the property and to provide security in land transactions." Cabinet Realty, Inc. v. Planning Zoning Commission, 17 Conn. App. 344, 350-51, 552 A.2d 1218 (1989). As Comment b to § 541 of the Restatement, Torts (Second) notes, the purpose of the recording statutes "is fully accomplished without giving them a collateral effect that protects those who make fraudulent misrepresentations from liability."
The defendant also argues that constructive notice provided by the land records, inconsistencies in the alleged misrepresentations, and plaintiff's representation by counsel during the negotiations with Scalzo and the defendant imposed a duty upon the plaintiff to investigate the veracity of the defendant's representations by inspecting the land records. Such an inspection would have revealed the duplicity of the defendant's alleged representations, upon which, hence, the plaintiff would not have been justified in relying. This argument relies on the principle that "[t]he recipient of a fraudulent misrepresentation is not justified in relying upon its truth if he knows that it is false or its falsity is obvious to him." 3 Restatement (Second) Torts § 541 (1977).
"The plaintiff's reliance on the alleged fraudulent representations by the defendant was not justifiable because the plaintiff and plaintiff's counsel would be bound, by common prudence, to examine the condition of the record concerning the subject property prior to becoming a mortgagee." Def's Mem. of Law, at 11.
At oral argument, the defendant's attorney pointed to the following paragraphs of the complaint as examples of such inconsistencies:
Paragraph seven alleges that Scalzo sent plaintiff a letter dated February 17, 2000, stating that the debt would be paid at the closing of the sale of the Padanaram Road property.
Paragraph eleven alleges that Scalzo told plaintiff he would executive a mortgage on the property to plaintiff and that plaintiff would be paid from the proceeds at the closing, as promised in the February 17, 2000, letter.
Paragraph fifteen alleges defendant told plaintiff that Scalzo had sufficient equity in the property to cover the debt.
Paragraph seventeen alleges that the defendant told the plaintiff that Scalzo had a buyer for the property, which would be sold as soon as certain closing details were worked out, and that plaintiff would then be paid.
Although the recipient of a fraudulent misrepresentation is not barred from recovery because he could have discovered its falsity if he had shown his distrust of the maker's honesty by investigating its truth, he is nonetheless required to use his senses, and cannot recover if he blindly relies upon a misrepresentation the falsity of which would be patent to him if he had utilized his opportunity to make a cursory examination or investigation. CT Page 9409
Id., comment a. The comment further notes that such a duty to investigate arises "only when the recipient of the misrepresentation is capable of appreciating its falsity at the time by the use of his senses." Id.
It has long been the law in Connecticut that the victim of a misrepresentation has no duty to investigate the truthfulness of the deceit:
I apprehend no authority can be found to warrant the doctrine, that a man must use diligence to prevent being defrauded, otherwise he shall be entitled to no remedy. The truth is, redress is most commonly wanted for injuries arising from frauds, which might have been prevented by due diligence . . .
Sherwood v. Salmon, 5 Day 439, 448 (1810) (Swift, J.). The defendant cites Ford v. Dubiskie Co., 105 Conn. 572, 577, 136 A. 560 (1927), and Gallon v. Burns, 92 Conn. 39, 42, 101 A. 504 (1917), for the doctrine that a party of equal footing and with equal means of knowledge as the party making the misrepresentation acts "at his own peril." Id. Yet neither of those cases, nor any other in Connecticut of which this court is aware, goes beyond the contours of comment a to Restatement § 541, which an example in Gallon v. Burns tracks:
If a person buys property having a defect known or visible to the buyer, it would be absurd to hold or find as a fact that he relied upon a statement in making the purchase that was contrary to what was known to him to be true.
Id., 43.
The court thus concludes that there is no legal basis for the defendant's first special defense. The plaintiff is not asserting any interest in the property about whose title it was deceived. Rather, the plaintiff seeks damages for fraud that, it claims, caused it harm. Under Connecticut law, land records do not immunize the defendant from such liability.
Noting that the plaintiff was seeking only damages occasioned by fraud, and was not attempting to establish title to the land, the court in Loverin [ supra, 94 Conn. 226,] rejected the defendants' claim and stated that [t]he doctrine of constructive notice does not apply to serve as a shield of protection from accountability for one who makes false representations to another's damage.
Aksomitas v. Aksomitas, supra, 205 Conn. 99. Nothing in the complaint or first special defense alleges, even read most favorably to the defendant, that the falsity of any misrepresentations here was known or visible to the plaintiff at the time so as to impose a duty to investigate. The complaint here alleges a course of continuing misrepresentations by the defendant and Scalzo that began before the quitclaim deed was recorded. The plaintiff would not have found the quitclaim deed on the land records had it inspected them when first induced to refrain from further collections efforts by Scalzo's promise in January and February 2000 to pay his debt upon sale of the property. The defendant's argument would impose on the plaintiff "the unreasonable burden of constantly having to monitor public records for any document that might affect his interest." Id. Under the circumstances of this case, the doctrine of constructive notice is inapplicable, and nothing pleaded here establishes a duty on plaintiff's part to investigate.
The fourth special defense, which asserts that the plaintiff's failure to examine those land records constitutes an intervening and superceding cause absolving defendant of liability, may be disposed of summarily. The recent case of Barry v. Quality Steel Products, Inc., 263 Conn. 424, 820 A.2d 258 (2003), abolished the doctrine of intervening superceding causation in cases, such as the present one, "wherein a defendant claims that its tortious conduct is superseded by a subsequent negligent act or there are multiple acts of negligence." Id., 439, fn. 16.
[T]he doctrine of superseding cause no longer serves a useful purpose in our jurisprudence when a defendant claims that a subsequent negligent act by a third party cuts off its own liability for the plaintiff's injuries. We conclude that under those circumstances, superseding cause instructions serve to complicate what is fundamentally a proximate cause analysis. Specifically, we conclude that, because our statutes allow for apportionment among negligent defendants; see General Statutes § 52-572h; and because Connecticut is a comparative negligence jurisdiction; General Statutes § 52-572o; the simpler and less confusing approach to cases, such as the present one, where the jury must determine which, among many, causes contributed to the plaintiffs' injury, is to couch the analysis in proximate cause rather than allowing the defendants to raise a defense of superseding cause.
Id., 439.
For the foregoing reasons, plaintiff's motion to strike the first and fourth special defenses of defendant's Revised Answer and Special Defenses is GRANTED.
BY THE COURT
STEPHEN F. FRAZZINI JUDGE OF THE SUPERIOR COURT