Opinion
No. CV04-0184235S
August 11, 2005
MEMORANDUM OF DECISION
The plaintiff's Amended Complaint dated April 7, 2005 made claims against several defendants alleging a failed septic system on property he purchased from the defendant James Harlamon d/b/a Harlamon Homes at 115 Lexington Drive, Watertown, Connecticut on August 18, 2003. At the close of the plaintiff's case, the court granted oral motions to dismiss pursuant to Connecticut Practice Book § 15-8 as to the defendants Realty Group of New England, LLC and Frank Talarico Son, Inc. What remains of the case are Counts 1, 3 and 6 each against James Harlamon d/b/a Harlamon Homes claiming respectively Fraudulent Misrepresentation, Negligent Misrepresentation and a violation of the Connecticut Unfair Trade Practices Act.
As to each count the plaintiff claims that the defendant Harlamon to induce the plaintiff to purchase the property represented "that the septic system of 115 Lexington Drive, Watertown, Connecticut was in working order and that it may only need minor repairs including an additional leeching field installed and/or additional loam deposited onto the existing leeching fields."
The property in question, a 3-bedroom residence was on November 15, 2002 owned by the Estate of Helen Allen, who was then residing in a nursing home. The house was over 40 years old, was in poor condition and was vacant when it was listed for sale on November 15, 2002 at a price of $217,000. Based upon the poor condition of the property, the defendant Harlamon negotiated a price reduction to $170,000 which figure was approved by the Probate Court. A contract of sale at that figure was executed between the parties by December 12, 2002.
The defendant Harlamon on his own had the well and pumping CT Page 11889-ev system and the septic system inspected by companies of his choice. As to the well system, the cost of the repair and upgrading was estimated to be $5,065. (See Plaintiff's Exhibit 3.) Connecticut Septic System through its principal Richard Dallaire did the septic inspection on December 24, 2002 and prepared a report to Mr. Harlamon which is a part of Plaintiff's Exhibit 3 and which concludes as follows:
1) The tank and system are 41 years old and well past the expected life of 25-35 years;
2) Upon inspection it was not possible to inspect the inlet and outlet baffles as the water level was above the outlet invert indicating the septic fields are probably in failure.
3) Excessive nitrogen feed was evident over the fields indicating the system was operating at maximum capacity.
4) Based on what I was able to observe in addition to the age of the system, it is my opinion that this system if not in failure now, has a very high probability of failure.
Mr. Dallaire testified that on his inspection he could not say that the system was in failure pursuant to the State Health Code because the water was not backing up into the house or breaking out of the ground.
Mr. Harlamon also had Keith Keegan of Engineered Construction, LLC give him a price to replace the system. Keegan gave him a proposal dated January 3, 2003, which is also contained in Plaintiff's Exhibit 3, estimating the total cost of a new system at $28,500. Apparently Mr. Harlamon forwarded the two estimates to repair the well system and septic system to Linda Mayo, the attorney for the Seller. She wrote the Probate Court advising it that it would cost the estate of Helen Allen $34,000 to remedy the well and septic system. She recommended that the purchase price be reduced from $170,000 to $140,000, which the court approved. Thus Harlamon received a direct benefit of $30,000 for the problems with the well and septic system. A new contract dated January 7, 2003 and a new selling price of $140,000 was executed by the parties. CT Page 11889-ew
Harlamon Homes as of May 7, 2003 listed the subject property for sale at a price of $249,900 (See Plaintiff's Exhibit 7). Although Harlamon made many improvements to the home, he did nothing to repair or improve the septic system. Attached to the listing agreement was a partially filled out Property Condition Disclosure Report filled out by Mr. Harlamon wherein he checked the box (UNKN) to the inquiry as to septic system problems. Based on his own earlier inspection and estimates that was clearly false.
The plaintiff, Steve Ciarlo, observed a realty sign on the property at 115 Lexington Drive, Watertown in March of 2003 and signed a sales agreement with Harlamon Homes for $249,900 on April 23, 2003. He claims Harlamon spoke generally about the septic system, said one of the leeching fields may be bad, but it should be good for another 7 years. Harlamon never disclosed to him the existence or content of the inspection by Mr. Dallaire or the estimate of Mr. Keegan. In the sales contract, Plaintiff's Exhibit 7, Harlamon provided Ciarlo a credit of $5,000 towards future septic repair. Ciarlo testified that he knew nothing of the credit until he saw the contract. He claims he thought this was a sufficient amount to cover the repairs.
Mr. Harlamon testified that prior to the contract signing on April 23, 2003 he spoke to the plaintiff generally about the septic system, told him he would have to rely on his own inspection, that he could make no representations as to the septic system and that he would make no improvements to the system at the contract price. He further testified that he rehabed the property over 5 months and he and his workers used the toilets and sinks on the premises without a problem. He further claims he saw no evidence of water backing up into the house and above the ground in the yard. Mark Carroll, the adjoining owner to 115 Lexington Drive, testified that he had a conversation with James Harlamon in June of 2003 where Harlamon admitted that he bought the property for $140,000 because of the septic system, that it was no good and that he didn't know whether he would replace it or leave it for the next guy to worry about it.
On July 15, Ciarlo and Harlamon signed a new sales agreement basically reducing the purchase price to $243,000 by incorporating the $5,000 credit for septic repairs into the purchase price. The closing took place on August 18, 2003. The plaintiff moved into the premises in late August or early CT Page 11889-ex September 2003.
Soon after he moved in the plaintiff experienced septic problems. In early September during heavy rains water and sewage backed up into a bathtub on the first floor. On September 24, he had the septic tank cleaned by American Rooter, LLC and on its invoice, Plaintiff's Exhibit 13, it noted, "Believe septic system needs to be replaced."
Mr. Ciarlo had a new system designed by Gary Giordano. Mr. Giordano was not hired to evaluate the old system, but to design a new one. His fee was $2,200. His work was done in October of 2003. He designed a system for a 4-bedroom home instead of a 3-bedroom home because the plaintiff was then using a portion of the garage for a fourth bedroom. That did add some cost to the project that will be discussed hereafter.
The new system was installed by Anthony Amorosso, who originally gave an estimate for $29,280 for the new system. It was actually built for $24,230. He testified that when he inspected the septic system in the Fall of 2003, it had completely failed.
The court concludes that the plaintiff has met his burden of proof as to Counts One and Three. The defendant received a substantial reduction in the sale price he paid for the subject property based on the condition of the septic system. He used the Keegan estimate for a new system to negotiate a $30,000 reduction in price. He then hid that fact and the content of his two reports concerning the septic system from the plaintiff.
Judgment shall enter for the Plaintiff as to Counts One and Three in the amount of $17,035. That figure is arrived at by taking the invoices for system replacement, engineering services, septic tank pumping plus top soil in the total amount of $26,935 and deducting from it the sum of $9,900 including a septic system credit in the contract in the amount of $5,000, $4,500 for a 4-bedroom system in place of the existing 3-bedroom system and $400 for a 1,250 gallon tank instead of a 1,000 gallon tank.
The remaining issue is Count Six claiming a violation of CUTPA. All of the previous facts are significant and material to a finding of an unfair trade practice. In addition, in the second contract between this defendant and the Estate on January 7, 2003, reflecting the purchase price of $140,000 it specifically CT Page 11889-ey said in Paragraph 12: "The parties acknowledge that the Buyer's inspection of the premises disclosed problems with the septic system. The Buyer acknowledges that the purchase price takes into consideration the condition of the premises and the result of said inspection report. Furthermore, in view of the reduced purchased price, Buyer has agreed to undertake at its expense any and all necessary repair/replacement of the well and septic system and agrees to indemnify and hold Seller harmless for same."
The defendant never undertook repairs or replacement of the septic system after getting a large credit for it and never disclosed any of these facts to the plaintiff.
Pursuant to Connecticut General Statutes § 42-110(a)(4) trade and commerce means "the advertising, the sale or rent or lease, the offering for sale or rent or lease, or the distribution of any services and any commodity, or thing of value in the state." When a purchaser seeks to impose liability on a seller under CUTPA, the question is whether the sale of homes is defendant's "trade or commerce."
In the present case, the trial testimony and evidence reveals that the Defendant, Jay Harlamon dba Harlamon Homes, is in the business of new home construction along with buying and selling homes that he remodels. The Defendant's sale of the home and the circumstances surrounding the sale were not merely incidental to his trade; rather, the sale of real estate was his business. Wherefore, Mr. Harlamon acted within the meaning of "trade or commerce" for purposes of CUTPA.
Recent caselaw holds that a plaintiff need not prove more than a single instance of unfair trade or commerce in order to sustain CUTPA coverage. In its analysis of the legislative intent and history, the court in Johnson Electric Co. v. Salce Contracting Ass'n, 72 Conn.App. 342, 349-53 (2002), held that CUTPA applies to a single act of misconduct. The court there analyzed CUTPA as follows:
In describing the kinds of conduct that CUTPA forbids, the legislature naturally described such conduct in the plural. When it came to defining the terms of the conduct that was actionable, the legislature naturally was more precise. It not only used the word "act" in the singular but also provided CT Page 11889-fz relief for a "practice."
CUTPA provides in relevant part that, "no person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." C.G.S. § 42-110b(a). For a trade practice to be considered deceptive, "it must have a tendency and capacity to deceive."
In determining whether a practice violates CUTPA, the courts adhere to the "cigarette rule" as established by the Federal Trade Commission, as follows:
1) Whether 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 businesspersons.
However, all three criteria do not need to be satisfied to support a finding of a violation of CUTPA.
For purposes of CUTPA, a duty to disclose known information is imposed insofar as a party voluntarily makes a disclosure. Macomber et al. v. Travelers Property and Casualty Corporation et al., 261 Conn. 620, 636 (2002). However, "a party who assumes to speak must make a full and fair disclosure as to the matters about which he assumes to speak." In Alfred Catucci et al. v. Robert J. Ouellette, 25 Conn.App. 56 (1991), the defendant sold property to the plaintiff without disclosing that the defendant had been denied an application to construct a subsurface system. Prior to the sale, the defendant supplied the plaintiff with a list of builders to construct a home on the property. According to the trial court, providing the list of builders was a disclosure sufficient to generate a duty to disclose the defendant's knowledge of the subsurface system. The Appellate Court affirmed the trial court's finding of fraudulent nondisclosure and awarded damages accordingly.
In Tanpiengco v. Tasto, 72 Conn.App. 817 (2002), the defendant seller failed to disclose to the plaintiff that the CT Page 11889-fa property was surrounded by the former Killingworth landfill. The Appellate Court held that because the sellers knew the property abutted a former landfill, they had a duty to disclose this information to potential purchasers, and failure to do so constituted a fraudulent nondisclosure. Further the Appellate Court found no abuse of discretion in the award of punitive damages, attorneys fees, and costs under CUTPA.
Applying the foregoing principles, the court concludes that the Defendant, Jay Harlamon, violated CUTPA by fading to disclose and misrepresenting his knowledge regarding the condition of the septic system. Mr. Harlamon volunteered that there may be a problem with the septic system, he then had the duty to fully and fairly disclose the information that was known to him. Specifically, Mr. Harlamon had a duty to disclose that not only might there be a problem with the system, but that there was in fact a problem known to him, and that he had written reports from two septic inspectors that verified as much. He had a duty to disclose to the Plaintiff that he possessed a written quote from Mr. Keegan indicating that it would cost $28,500 to replace the system and that Mr. Dallaire had inspected the property and his written report indicated probable failure of the system. He had a duty to disclose that, based on these inspections, he negotiated a $30,000 price reduction in his purchase of the house. Instead, Mr. Harlamon kept this information to himself, providing it only to Attorney Mayo so that she could ask the Probate Court's permission for a price reduction. He pocketed the $30,000 and said nothing to the unsuspecting purchaser.
The representations made to the Plaintiff were material and deceptive. Mr. Harlamon had information about the septic system which he used to negotiate a fair purchase price for himself. He deliberately avoided disclosing that information to the Plaintiff, thereby placing himself in a superior bargaining position, and preying on the Plaintiff's ignorance.
Pursuant to Connecticut General Statutes § 42-110g(a), the court may, in its discretion, award punitive damages. Likewise, under § 42-110g(d), the court may award costs and reasonable attorneys fees. "In order to award punitive or exemplary damages, evidence must reveal a reckless indifference to the rights of others or an intentional and wanton violation of those rights." Gargano v. Heyman, 203 Conn. 616, 622 (1997).
Mr. Harlamon acted with complete disregard of the Plaintiff's CT Page 11889-fb rights. Based on the inspection reports he obtained, he negotiated for himself a $30,000 credit for septic repairs. He disclosed none of this information to either his real estate agent or the Plaintiff, who entered the transaction blind to the actual extent of the septic problems. He then passed on $5,000 to the Plaintiff for future septic repairs, making him believe that the septic could be repaired with the placement of a leaching field or regrading. Mr. Harlamon bragged to his neighbor, Mark Carroll, that he would pass on the septic problems to "the next guy," which he in fact did.
The statute grants trial courts great discretion in awarding punitive damages and attorneys fees. Mr. Harlamon intentionally withheld information known to him in the sale of the property at bar, in so doing, he acted with reckless disregard to the rights of the Plaintiff.
The court in its discretion will award a sum towards counsel fees and costs. The court has reviewed Plaintiff's Affidavit of Legal Fees. The legal services almost total $24,000. That figure cannot be justified in a case where the damages are under $18,000. However, the Court in the CUTPA claim Count Six will award as damages the amount of ten thousand dollars ($10,000) for counsel fees plus disbursements of $2,079.31 for reporter fees ($1,242.43) for marshal fees $611.90 and court filing fee of $225, for a total judgment for the plaintiff of $29,114.31.
GORMLEY, JTR CT Page 11889-fc