Opinion
No. CV00-0506061S
August 8, 2003
MEMORANDUM OF DECISION
The plaintiffs, Roosevelt Building Products, Inc. (RBP) and Roosevelt Morin, RBP's president and major shareholder, seek damages against the defendants, Webster Financial Corporation and Webster Bank, alleging that the defendants' refusal to release a mortgage resulted in the failure of RBP's business. The defendants have moved for summary judgment.
The plaintiffs alleged in their second revised complaint that in 1993, RBP received a loan from a predecessor of Webster, guaranteed by the Small Business Administration (SBA). The SBA documents at the closing required a mortgage to be placed on the home of the individual plaintiff, Morin. When Morin objected, he was orally assured by a loan officer of the bank, that if RBP kept to its repayment schedule over the next two years, then Morin's mortgage would be released on request. The second revised complaint further alleged that in 1998, Morin contacted bank officers of the defendants on numerous occasions, explaining to them that release of the mortgage on his home was necessary to obtain new financing, but that the defendants refused to furnish the release. The result was that RBP was unable to complete the construction of a new building for its operations and was obliged to liquidate its business to avoid insolvency.
RBP alleged that this refusal was a breach of contract, part of a negligent misrepresentation that the release would be forthcoming, a violation of the implied contract of fair dealing, and a violation of the Connecticut Unfair Trade Practices Act (CUTPA). The plaintiff Morin, adopted the facts alleged by RBP, and relied on legal grounds identical to RBP, merely noting that the actions of the defendants caused him to suffer damage. This is the complaint to which the defendants addressed their motion for summary judgment.
Immediately prior to the filing of the defendants' motion for summary judgment, the plaintiff's attorney moved to withdraw and the court granted his motion. The subsequent attorney for the plaintiffs, in addition to responding to the motion for summary judgment as filed by the defendants, has requested permission to submit a third amended complaint that changes the factual allegations regarding the agreement made in 1993 at the closing of RBP's loan.
The proposed third amended complaint alleges that there were oral assurances given by a bank officer that the mortgage on Morin's home would be released after two years if the RBP loan was not in default. The bank officer made no statement to indicate that the release would be issued only on the submission of substitute collateral. This complaint also alleges that there was a written agreement signed at the closing that imposed additional conditions for the release, including the need for substitute collateral, and that these additional conditions conflict with the oral representations. The defendants objected to the court's granting the plaintiffs' motion to amend.
Since, if the court permitted the filing of the third amended complaint, portions of the motion for summary judgment would have to be re-briefed to meet the new allegations, the court determined that it would consider only two issues applicable to both the second revised complaint and the third amended complaint: (1) Whether Morin had standing to pursue his causes of action, and (2) Assuming that the defendants had violated RBP's rights in not furnishing the release, did RBP suffer damages through the defendants' actions.
These include those sections of the defendants' brief that project the contemplation of the parties in signing the post-closing agreement, that contend that the parol evidence rule applies to the postclosing agreement, and that the statute of frauds applies to any oral representations of the bank officer.
In deciding whether summary judgment should be granted on these issues, the court follows well-established principles. "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. Practice Book § 17-49. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Citation omitted; internal quotation marks omitted.) Barry v. Quality Steel Products, Inc., 263 Conn. 424, 450 (2003). "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. 424, 450 (1988). "It was the plaintiff's burden to file an affidavit reciting relevant evidentiary matter to establish the existence of a genuine issue as to a material fact." Taricani v. Nationwide Mutual Ins. Co., 77 Conn. App. 139, 152 (2003). "Simply, the granting of summary judgment is appropriate only if a fair and reasonable person could conclude only one way." (Citation omitted; internal quotation marks omitted.) Kopacz v. Day Kimball Hospital, 64 Conn. App. 263, 267 (2001).
The first issue is whether Morin has standing to bring his causes of action. As a general rule, "[as] a shareholder, [a plaintiff] does not acquire standing to maintain an action in his own right when the alleged injury is inflicted upon the corporation." Guild v. Exxon Corporation, 81 F. Sup.2d 377, 380 (D.Conn. 1999). When all that is claimed is an injury to stock values, a shareholder does not have standing to sue a third party, except through a derivative action under General Statutes § 52-572j. Lazaros v. West Haven, 45 Conn. Sup. 11, 20 (1994). "An individual, nonderivative action, is only appropriate if the injury is one to the plaintiff as a stockholder, and to him individually, and not to the corporation and if the injury has affected the plaintiff directly." (Citations omitted; quotation marks omitted). Id.
In Farragut Mortgage Co., Inc. v. Anderson, Superior Court, Commonwealth of Massachusetts, Docket No. 95-6231-B (August 1999, Burnes, J.), a corporation and its shareholders attempted to sue KPMG for negligently rendering and misrepresenting accounting advice. The court first stated that "[t]he general principles of corporate law provide that a shareholder may not sue either the corporation or some other wrongdoer if the only injury alleged is a diminution of the corporation's net worth. In such circumstances the corporation is the injured party, and it alone may sue the wrongdoer for the damage caused." (Citation omitted.) Id. The court further relied on the case of Burger v. McCoy Hillard Parks, 488 S.E.2d 215, 219 (N.C. 1997), summarizing its holding as follows: "A shareholder may maintain an individual action against a third party for an injury that directly affects the shareholder, even if the corporation also has a cause of action arising from the same wrong, if the shareholder can show that the wrongdoer owed him a special duty or that the injury suffered by the shareholder is separate and distinct from the injury sustained by the other shareholders or the corporation itself." The court granted summary judgment in this matter as the shareholders were unable to demonstrate that their claims were not merely those of the corporation itself. Cf. Yanow v. Teal Industries, Inc., 178 Conn. 262, 282 (1979) (distinct injury), with Yoney v. Hospital of St. Raphael, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV90-271006 (July 10, 1992, Katz, J.) ( 7 Conn.L.Rptr. 660) (shareholder's rights are merely derivative and can be asserted only through corporation).
Morin does not contend that his action qualifies as a derivative action by a shareholder under § 52-572j. Such suits may only be brought when the corporation "fails to enforce a right which may properly be asserted by it." The statute implies that, as a prerequisite, a demand must have been made by the shareholder and either refused or ignored by the board of directors of the corporation. M. Ford, Connecticut Corporation Law Practice, 2d ed. 2000, at 4-90.
Morin contends that his causes of action are "manifestly personal." Plaintiff's brief at 10. He argues that the promise made by the bank officer was made directly to him in his individual capacity and that he was obliged to put his personal residence under a mortgage restriction. On the other hand, Morin did not file a counter-affidavit. The postclosing document, exhibit 10 to defendant's motion, was addressed to the "borrower" and signed by Morin as president of RBP. The transcript references do not indicate that the promise to release the mortgage was made to Morin personally. "The existence of the genuine issue of material fact must be demonstrated by counter-affidavits and concrete evidence." (Internal quotation marks omitted.) Pion v. Southern New England Telephone Co., 44 Conn. App. 657, 663 (1997).
As indicated, in the second revised complaint, this is alleged as an oral promise and in the proposed third amended complaint, is alleged as both oral and written promises.
When a party "move[s] for summary judgment . . . and there [are] no contradictory affidavits, the court . . . [decides] the motion by looking only to the sufficiency of the [movant's] affidavits and other proof." Heyman Associates No. 1 v. Insurance Co. of Pennsylvania, 231 Conn. 756, 795 (1995). "A conclusory assertion [in an affidavit] does not constitute evidence sufficient to establish the existence of a disputed material fact for purposes of summary judgment. Hoskins v. Titan Value Equities Group, Inc., 252 Conn. 788, 793-94 (2000); see also Gupta v. New Britain General Hospital, 239 Conn. 574, 583 (1996).
Morin does not allege any more than he was injured by the defendants' actions in either the second revised complaint or the proposed third amended complaint. He incorporates by reference the pleadings with regard to RBP that the defendants' actions "forced RBP out of business" (see second revised complaint, count one, paragraph 50); or that the defendants' forced "the cessation of business operations of RBP." (Proposed third amended complaint, count one, paragraph 19.) In his brief, Morn tries to expand these allegations into a personal action for breach of contract.
Even if these allegations had been put in affidavit form, "[A]ffidavits are not pleadings . . . and a plaintiff cannot, under the guise of fortifying the complaint, present an entirely new cause of action or expand the scope of his cause of action by means of a counter-affidavit . . . The issue must be one which the party opposing the motion is entitled to litigate under his pleadings and the mere existence of a factual dispute apart from the pleadings is not enough to preclude summary judgment." (Internal quotation marks omitted.) Collum v. Chapin, 40 Conn. App. 449, 453 (1996); Beebee v. East Haddam, 48 Conn. App. 60, 70 (1998). Therefore the court grants summary judgment on counts two, four, six and eight of the second revised complaint as Morin lacks the requisite standing.
The second question concerns whether there is a genuine issue of material fact over whether RBP suffered any damages from the defendants' alleged actions. "Damages are an essential element of the plaintiff's proof before he is entitled to recover . . . They must be proved with reasonable certainty." Braithwaite v. Lee, 125 Conn. 10, 14 (1938). A court may grant summary judgment when the plaintiff fails to produce evidence as to damages because for a court to construe evidence in favor of the plaintiff, "it must be given evidence to construe." (Citation omitted.) A.M. Capen's Co., Inc. v. American Trading Products, 973 F. Sup. 247 (D. Puerto Rico, 1997); See also Hamline Park Plaza Partnership v. Northern States Power Co., Minn. Court of Appeals, Docket No. C8-98-881 (1998) (affirming summary judgment on failure of the plaintiffs to prove damages in negligent misrepresentation); McGuire v. Citicorp Retail Services, 147 F.2d 232 (2d Cir. 1998) (applying Connecticut law, summary judgment appropriate in CUTPA suit for failure to prove damages).
Here the defendants have filed documents to refute any claim that "but for" its actions, RBP would have survived business collapse. (Morin Transcript, pp. 129-30, 161-64, Exhibit 21.)
To survive the motion for summary judgment, RBP must raise a genuine issue of material fact. Pion v. Southern New England Telephone Co., supra. RBP has not filed an affidavit which sets forth under oath the existence of an oral commitment by a bank other than Webster or any difficulty in lending raised by any bank due to the mortgage. At his deposition, Morin mentions that Nations Bank of Florida had given an oral promise to provide a loan, but he does not know any details. He does not indicate that Nations Bank had reservations based on the Webster mortgage, only that he decided that he could not complete the arrangements with the mortgage on the property. See Transcript at 129-30; He mentions that Hayden Associates, local mortgage brokers, were looking into obtaining financing, but does not indicate that Hayden considered the mortgage was an impediment. Transcript at 161-64. A possible loan from Liberty Bank on the new construction fell through, but he was not certain whether the failure related to the outstanding mortgage. Transcript at 148-49. In other words, there is no issue of material fact that RBP suffered any damage due to the refusal of the defendants to give the release as requested.
The additional documents submitted by the plaintiff consist of nothing more than applications filed with Nations Bank, Fleet Bank, Liberty Bank and Webster Bank seeking a construction loan or a possible loan on the headquarters building when completed. The application to Liberty Bank is that of Morin personally and he does not disclose the existence of the mortgage on his residence. This lack of candor may be the reason why Liberty Bank rejected the loan. See Transcript of Morin Deposition at 149.
The party opposing a motion for summary judgment must "provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact." Appleton v. Board of Education, 254 Conn. 205, 209 (2000). Since the plaintiffs have failed to meet that standard here, summary judgment is appropriate in this action.
In lieu of summary judgment, the plaintiff is entitled to nominal damages on the alleged breach of contract claim. See Muroff v. Dill, 386 So.2d 1281 (Fla.App. 1980).
Henry S. Cohn, Judge