Opinion
No. CV03-0477039S
August 29, 2008
MEMORANDUM OF DECISION ON DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT
In this case the plaintiff has brought an action against the defendants Terrace Heights Condominium Association and Myers Northeast Property Management. Myers is alleged to be the agent of Terrace Heights.
The first cause of action is based on the alleged negligence of Terrace Heights in discharging the statutory obligations set forth in Section 47-270 of the General Statutes, the second cause of action is based on an alleged violation of the Connecticut Unfair Employment Practices Act, § 42-110a et seq. Both defendants have filed motions for summary judgment "based on the fact that the determinative issues underlying both of the plaintiff's claims were necessarily decided in prior actions between the parties. Therefore as a matter of law, the plaintiffs are precluded from relitigating the issues underlying the present claims" (Terrace Heights brief), same argument in Myers brief.
The standards for deciding a motion for summary judgment are well-known. If there is a disputed issue of material fact, such a motion should not be granted since parties have a constitutional right to a jury trial. However, if no such dispute exists, the court should grant such a motion to save the parties from the burden and expense of continued litigation.
(1)
Both defendants set forth what they claim are the undisputed facts. In large part the court will paraphrase and quote from these summaries.
Terrace Heights is an association of unit owners for Terrace Heights Condominium. The plaintiff became a unit owner of four units in June 2001 and on June 22, 2001 Terrace Heights, through its agent Myers, prepared and gave to Ms. Fisher resale certificates as provided for in § 47-270. The plaintiffs allege "the information in the resale certificates was a critical part of the decision to finalize the purchase of the condominium units" but they did not contain information as to so-called "aged payables" which are past due bills of Terrace Heights "and the need for a special assessment to pay them." The plaintiffs claim that § 47-270 required that this information be disclosed. On September 21, 2001 Terrace Heights notified plaintiffs that their units were subject to a special assessment to pay for the aged payables. The assessment was due on October 1, 2001. The plaintiffs claim damages arising out of the levying of the special assessment on these undisclosed aged payables.
The defendants then ask the court to take judicial notice of four separate foreclosure actions against the four units, each of the cases is entitled Terrace Heights Condominium Association v. New Start Rentals, LLC. Patricia Fisher is a member of New Start Rentals and they were the beneficial owners of the four units. All the expenses and obligations related to the condominium ownership were paid by Fisher as a member of New Start Rentals, LLC from the time of purchase to the date strict foreclosure judgments were entered.
The following is then alleged:
11, In each of the four foreclosure actions, an appearance was filed on behalf of New Start Rentals, LLC by Berdon, Young Margolis, P.C. which notably is the same law firm representing the plaintiffs in the present action. Accordingly, the plaintiffs were on notice of the foreclosure actions and, pursuant to the rules of practice, received a copy of all pleadings filed in those actions. ( Affidavit of attorney for Terrace Heights.)
12. The foreclosures were based on the liens arising from the plaintiffs' failure to pay the special assessment due October 1, 2001.
14. This fact is also reflected clearly in the pleadings of the respective foreclosure actions.
13. On August 5, 2002, Terrace Heights filed a Demand for Disclosure of Defense against New Start Rentals, LLC in each of the foreclosure actions.
14. The plaintiffs failed to raise any defenses in the four foreclosure actions, and therefore were accordingly defaulted for failure to disclose a defense.
15. On January 13, 2003, the court entered a judgment of strict foreclosure in each of the foreclosure actions.
As a further preliminary matter, the court would note that § 47-270(a) provides in relevant part that a unit owner of a condominium must provide to a purchaser a certificate containing "(2) a statement setting forth the amount of the periodic common expense assessment and any unpaid common expense or special assessment currently due and payable from the selling unit owner." Subsection (b) of the statute says that a "unit owner is not liable to the purchaser for any erroneous information provided by the association and included in the certificate." Subsection (e) provides that "a purchaser is not liable for any unpaid assessment or fee greater than the amount set forth in the certificate prepared by the association." Section 47-270 is included in Part IV of the Common Interest Ownership Act which is entitled "Part IV. Protection of Purchasers."
(2) (a)
The defendants categorize the basis of their respective motions as res judicata/collateral estoppel. These concepts are clearly laid out in Volume 47, 47 Am.Jur.2d, "Judgments" pp. 20-21, where it notes there are two branches of res judicata (1) claim preclusion also known as res judicata and (2) issue preclusion also known as collateral estoppel. The distinction between the two concepts is fully elaborated in the following language:
Fundamentally, under both res judicata and collateral estoppel, a right, question or fact distinctly put in issue and directly determined by a court of competent jurisdiction cannot be disputed in a subsequent suit between the same parties or their privies. More specifically, "res judicata" or "claim preclusion" refers to the effect of a prior judgment in preventing a litigant from reasserting or relitigating a claim that has already been decided on the merits by a court of competent jurisdiction, whether relitigation of the claim raises the same issues as the earlier suit. "Collateral estoppel" or "issue preclusion," on the other hand, generally refers to the effect of a prior judgment in limiting or precluding relitigation of issues that were actually litigated in the previous action, regardless of whether the previous action was based on the same cause of action as the second suit.
The article goes on to say that "under `claim preclusion' a judgment forecloses litigation of a matter that should have been advanced in an earlier suit, while under `issue preclusion' a judgment forecloses relitigation of a matter that has been litigated and decided." Our courts agree with these general definitions and particularly the distinction between res judicata and collateral estoppel. Powell v. Infinity Ins. Co., 282 Conn. 594, 600-03 (2007), In re Application for Petition, 272 Conn. 653, 661 (2005). Bidoae v. Hartford Golf Club, 91 Conn.App. 470, 480-81 (2005).
The issue here seems to be one of collateral estoppel, the foreclosure suits involved entirely different claims than the claims advanced here. The argument of the defendants is that "determinative issues underlying . . . the plaintiffs' claims were necessarily decided" in the prior foreclosure actions or as Restatement (2d) Judgment puts it at Section 27, "Issue Preclusion — General Rule":
When an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.
The "actually litigated" language of Section 27 underlines a difference of opinion among the jurisdictions. The Restatement appears to take the position that where a judgment is entered by default, it is not "actually litigated" — see comment e at page 257. Other jurisdictions take the position that a judgment may be final for res judicata or collateral estoppel purposes if it is entered by default, see 47 Am.Jur.2d § 523, page 82, Fuller v. Pacific Medical Collections, 891 P.2d 300, (Haw., 1995), also see Mac's Car City, Inc. v. Americans National Bank, 40 Conn.Sup. 467, 469-70 (Wagner, J. 1986) which cites De Blaseo v. Aetna Life Casualty, 186 Conn. 398, 400 (1982).
The final general observation also has some relevance to the issues raised by this case as to the application of the doctrine, the Am.Jur. article at § 502, page 62 says: at least as to res judicata: . . ." a defendant will not be permitted in a later action to assert as an affirmative claim, a defense which, if asserted and proved as a defense in the former action, would have barred the judgment entered in the plaintiff's favor," cf. Mac's Car City, Inc. v. American National Bank, supra 40 Conn.Sup. at 469-70, also see Stafford v. Country of Bladen, 163 N.C.App. 149, 151-52 (2004) applying rule in collateral estoppel context, and compare § 22 of Restatement (2d) of Judgments, subsection (2).
The next matter to be discussed is how and under what circumstances is the doctrine of collateral estoppel applied and the manner in which the courts have restricted its application.
(b)
In Aetna Casualty Surety Co. v. Jones, 220 Conn. 285, 297 (1991) the court said:
In order for collateral estoppel to bar the relitigation of an issue in a later proceeding, the issue concerning which relitigation is sought to be estopped must be identical to the issue decided in the prior proceeding. To establish whether collateral estoppel applies, the court must determine what facts were necessarily determined in the first trial and must then assess whether (the party) is attempting to relitigate those facts in the second proceeding, State v. Hope, supra.
State v. Hope 215, Conn. 570, 584 (1990).
Several courts have adopted this "necessarily determined" language, Powell v. Infinity Ins. Co., 282 Conn. 594, 600 (2007). The issues determination must be "essential to the judgment," Gladysz v. Planning Zoning Commission, 256 Conn. 249, 260 (2001). In this regard it is important to keep in mind the observation in comment (h) to § 27 of the Restatement (2d) Judgments where it says: "If issues are determined but the judgment is not dependent upon the determinations, relitigation of those issues in a subsequent action between the parties is not precluded."
The appropriate ambit of res judicata must also be considered in light of its purposes which are "(1) to promote judicial economy by minimizing repetitive litigation; (2) to prevent inconsistent judgments which undermine the integrity of the judicial system; and (3) to provide repose by preventing a person from being harassed by vexatious litigation," Cumberland Farms, Inc. v. Groton, 262 Conn. 45, 59 (2002), Powell v. Infinity Ins. Co., 282 Conn. 594, 601 (2007). The latter case quotes from an earlier case after repeating these purposes by saying that "The judicial doctrines of res judicata and collateral estoppel are based on the public policy that a party should not be able to relitigate a matter which it already has had an opportunity to litigate," Id.
But as § 490 of the Am.Jur. article indicates at 47 Am.Jur.2d pp. 50-51:
Collateral estoppel is an equitable doctrine. It is founded on principles of fundamental fairness, and fairness is its overriding concern. Consequently, courts have held that even where the threshold elements for the application of the defense are met, a court must analyze each case on its facts.
The section goes on to say that a court must consider whether preclusion would "result in manifest injustice" and should "not apply the doctrine in circumstances where its purposes would not be served . . ." Our court has explicitly taken these considerations into account when applying res judicata or collateral estoppel, Powell v. Infinity Ins. Co., supra at 282 Conn. Page 602, Aetna Casualty Surety Co. v. Jones, 220 Conn. 285, 306 (1991).
The Powell court went on to say that "in establishing exceptions to the general application of preclusion doctrines, we have identified several factors to consider, including: (1) whether another public policy interest outweighs the interest of finality served by the preclusion doctrines . . .; (2) whether the incentive to litigate a claim or issue differs as between the two forums . . .; (3) whether an opportunity to litigate the claim or issue differs as between the two forums . . .; (4) whether the legislature has evinced an intent that the doctrine should not apply . . ." 282 Conn. at page 603.
3 (a)
The court will try to decide the issues before it based on the foregoing discussion.
First, it is necessary to examine the pleadings in the foreclosure cases and the present complaint. As said in Powell v. Infinity Insurance Co., supra, 282 Conn. at 601, 602 and indicated above, issue preclusion "prohibits relitigation of an issue"; to determine if there was actual litigation, a court must examine if the issue was raised in the pleadings of the prior action or otherwise (court relied on comment (d) to Section 27 of Restatement 2d Judgments).
If one examines the prior foreclosure actions, it is clear that the complaint bases its request for foreclosure on the claim that: "the defendant failed to pay the special assessment due October 1, 2001 and has failed to make certain common assessment payments due thereafter." The defendants filed demands for disclosure of defense. No such disclosure was made and default was granted in each foreclosure file. Judgment of strict foreclosure was then entered in each of the files involving the four units in question.
In entering judgment of strict foreclosure it was "necessarily decided" that the assessment was due and this determination was "essential to the judgment." This, despite the fact that in paragraphs 11 and 12 of her affidavit filed in this litigation, the plaintiff sets forth facts that would have, if true, have entitled her to a defense by way of denial or special defense under § 47-270 to the imposition of any special assessment. In fact, in the complaint in this litigation, the plaintiff alleges that through their negligence the defendants did not comply with Section 47-270 of the General Statutes.
Under collateral estoppel the issue of whether the special assessment was appropriate cannot be relitigated, this issue was decided in the defendants' favor.
But that does not mean summary judgment is warranted; the appropriate defense here is not res judicata or claim preclusion, but collateral estoppel or issue preclusion. Given this, it is necessary to examine the claim in this suit in order to determine whether the claim actually made here is precluded by the fact that the special assessment issue cannot be relitigated. The first count is based on negligence. Paragraph 6 alleges by their negligence an improper resale certificate was delivered to Fisher and New Start Rentals, LLC which omitted material information "including but not limited to disclosure of aged payables and the need for special assessment to pay them," all of which was required by § 47-270. As a result of this paragraph 7, the plaintiffs claim they suffered monetary damage in that:
a. They were induced into purchasing a condominium unit that they would have otherwise not purchased had the information been provided to them as required by law;
b. They became liable for additional expenses associated with ownership of the condominium unit incurred before they even took title;
c. They have been forced to expend sums to defend against a foreclosure action seeking payment of the special assessment.
Although it is true that the special assessment was levied after the units were purchased and there is reference to the poor financial condition of the association, there is nothing to indicate that the basis of any harm suffered by the plaintiffs had anything to do with any other factors than the possibility of and the actual imposition of the special assessment. The "additional expense" referenced to in paragraph 7b is the imposition of the special assessment. Paragraph 7a raises the specter of adverse financial information that raised the possibility of a special assessment. Paragraph c talks about the expenditure of funds to defend a foreclosure action where a default was entered for failure to raise a statutory defense against the special assessment. Paragraphs 11 through 13 of Patricia Fisher's affidavit in opposition to these motions only underlines this analysis of the plaintiffs' complaint. There it says:
11. (The defendants) were or should have been aware at the time it issued the resale certificates that it had significant financial difficulties that would require a special assessment or, at least, a provision within the current operating budget to address the past due accounts.
12. As the resale certificates provided by the association did not include any provision for the significantly past due accounts, the certificates were misleading and were not provided in good faith.
13. Acting on behalf of my mother, myself, and later New Start Rentals, LLC, I protested the action of the association in levying the special assessment as unfair because the need for such an assessment was not properly disclosed on the resale certificates or the current operating budget.
(All emphasis by this court.)
Because the imposition of the special assessment was necessarily upheld in the prior foreclosure actions, the negligence claim in this case is not viable under the principles of collateral estoppel. In effect, any defense under § 47-270 was waived and in any event, in light of the default and judgment entered in those actions, there is no harm even if negligence were established.
The claim under the Connecticut Unfair Trade Practices Act, §§ 42-110a et seq. seems to be similarly precluded by collateral estoppel. Paragraph 8 of the CUTPA claims states a violation of the act in that:
a. The defendants failed to disclose the aged payables and the need for a special assessment to pay for them when it had a duty to do so;
b. The defendants provided a resale certificate to the plaintiff containing information they knew to be false.
Again, nothing has been advanced to dispel the notion that the possibility of the imposition of a special assessment at the time resale certificates were delivered is the gravamen of the harm.
Perhaps more to the point, in order to establish a CUTPA claim and enforce the prohibitions of the act, a person making a claim under the act must show that he or she has suffered an "ascertainable loss of money or property real or personal, as a result of the use or employment of a (prohibited) method, act or practice . . ." Stevenson Lumber Co-Suffield, Inc. v. Chase Associates, Inc., 284 Conn. 205, 213-14 (2007), see § 42-110g of the General Statutes. In light of the necessarily litigated issue of the plaintiffs' responsibility for the special assessment, ascertainable loss cannot be shown. Also, the plaintiffs' reliance on Bartoli v. GMAC, CV04 0184926S (Matasavage, J., 2004) is not of any help to their position. Insofar as it conducts a res judicata or claim preclusion analysis it is not relevant to the collateral estoppel analysis that must be conducted in this case. When Bartoli does address the collateral estoppel or issue preclusion argument, it only rejects it because under the facts of that case, it could not conclude Bartoli had a full and fair opportunity to litigate the issues later precluded from litigation. In the next section the court will discuss the only "full and fair opportunity to litigate" objection to collateral estoppel that the plaintiffs appear to raise.
(b)
One other matter should be discussed. The plaintiffs take the position that in the prior foreclosure actions they would not have been entitled to a jury trial and thus "a party's jury right may be lost with respect to any remedies sought by way of counterclaim or special defense in a foreclosure action." Even if this is true, it is hardly a reason to justify not presenting the defense in the foreclosure action and if it had been presented and lost or if a default is entered as here, there is no case law the court is aware of or that has been cited to the effect that if the prior action is one before a court, collateral estoppel does not apply if the second action could be brought before a jury — in the second action would the party be precluded from changing his election from jury to court because of the risk that collateral estoppel would then apply?
In any event, the defendants cite Krondes v. Norwalk Saving Society, 53 Conn.App. 102, 119 (1999) for the contrary position — there a court entered judgment against Krondes on her special defense of breach of the covenant of good faith and fair dealing. In the second action the trial court was affirmed in precluding the claim of breach of the covenant by Krondes as plaintiff in the second jury trial action. However, it should be noted that the Krondes court did not explicitly address the full and fair opportunity to litigate claim which they basically make here with regard to their assertion of a right to a jury trial. But in any event, Restatement (2d) Judgments, which our court cites, supports the defendants' position. In comment (d) to Section 27 of Restatement (2d) Judgments says that: "The determination of an issue by a judge in a proceeding conducted without a jury is conclusive in a subsequent action whether or not there would have been a right to a jury trial in that subsequent action if collateral estoppel did not apply."
.............................
The basic problem in this case for the plaintiffs has reference to an earlier proposition discussed by the court — a defendant, consistent with the goals of res judicata, cannot be allowed in a later action when acting as plaintiff to assert as an affirmative claim, a defense which, if asserted and proved as a defense in the former action, would have barred the judgment in the then plaintiff's favor, see 47 Am.Jur.2d, § 502, page 62.
In any event, the court is constrained to grant the motions for summary judgment.
[ADDENDUM]
On September 2, 2008, I vacated the above decision, sua sponte, in light of the fact that I learned that Judge Lager, on July 31, 2008, had dismissed the action for failure to file a withdrawal of action within the time period allotted by the court. Vacating this decision is without prejudice to the right of the defendants to have it reinstated should Judge Lager's judgment of dismissal be opened.