Nat'l Grps., LLC v. Nardi, 34998.

145 Conn.App. 189

75 A.3d 68

The NATIONAL GROUPS, LLC

v.Charles NARDI et al.

No. 34998.

Appellate Court of Connecticut.

Argued May 16, 2013.

Decided Aug. 27, 2013.

Richard P. Weinstein, West Hartford, with whom, on the brief, was Nathan A. Schatz, for the appellant (plaintiff).

Michael D. Goldfarb, with whom was Robert E. Kaelin, Hartford, for the appellees (defendants).

LAVINE, SHELDON and PELLEGRINO, Js.

PELLEGRINO, J.

The plaintiff, The National Groups, LLC, appeals from the judgment in favor of the defendants, Charles Nardi and Marie Nardi, on a claim of negligent misrepresentation. On appeal, the plaintiff contends that the trial court improperly determined that the plaintiff did not actually or reasonably rely on the terms of the parties' contract. We disagree and affirm the judgment of the trial court.

The record reflects the following undisputed facts and procedural history. The defendants, lessees pursuant to a ground lease, own an office building on property located in Glastonbury.¹ From 2008 to 2011, the defendants were engaged in litigation with the ground lessor, Grunberg 628 Hebron, LLC (ground lessor), regarding the amount of parking available under the terms of the ground lease (pending litigation).² The plaintiff, owned in part by Lori Arute, was interested in acquiring the defendants' office building for the purpose of relocating its business.

On March 4, 2009, Kenneth Gruder, the plaintiff's attorney, telephoned Daniel Mara, the defendants' attorney, and expressed the plaintiff's interest in acquiring the property. During this conversation, Gruder also stated that the plaintiff was concerned about the pending litigation.³ Gruder and Mara facilitated the parties' negotiations and collaboratively drafted the operative lease agreement and option to buy the office building (agreement). The plaintiff and the defendants executed the agreement on March 16, 2009, despite the fact that the pending litigation had not yet been resolved.

Mara prepared the initial draft of the agreement based on a form contract that included a provision stating that the defendants had “no ... knowledge, information or notice ... of any pending, threatened or contemplated judicial or administrative action, relating to the Premises, any part thereof, or the present or [the plaintiff's] intended uses thereof.” This misstatement escaped the attention of both Mara and Gruder, and the provision inadvertently was included as paragraph 10(d) in the agreement signed by both parties. When the pending litigation concluded, the defendants were entitled to use only forty-eight of the eighty-eight available parking spaces. Consequently, this left the plaintiff with insufficient parking for its employees, and, thus, when the agreement ended, the plaintiff did not exercise its option to buy the property.

The plaintiff filed a complaint alleging, inter alia, negligent misrepresentation arising out of the assertion in paragraph 10(d) that there was no pending litigation related to the property. Following a court trial, the court concluded that the plaintiff did not prove that it actually or justifiably had relied on the defendants' admitted misstatement.⁴ The court based its decision primarily on the fact that the plaintiff, through Gruder, had actual knowledge of the pending action. Charged with this knowledge, the plaintiff could not claim actual or justifiable reliance on paragraph 10(d). Although the court found Arute's testimony that she was unaware of the pending litigation credible, it did not credit Arute's testimony that she had relied on the relevant provision when entering into the agreement. The court cited the inconspicuous nature of paragraph 10(d) in relation to the seventy-five page agreement. The court reasoned that “[t]he testimony did not satisfy the court that [Arute, as principal for the plaintiff] read this rather generic paragraph and, from that reading, assured herself that there was no pending litigation over parking at the property,” and rendered judgment in favor of the defendants. This appeal followed.

On appeal, the plaintiff claims that (1) the court improperly concluded as a matter of law that it did not rely on paragraph 10(d), and, in the alternative, (2) the court's finding that the plaintiff did not actually or justifiably rely on paragraph 10(d) was clearly erroneous. We disagree.

We begin by setting forth the legal principles applicable to this appeal. “Our Supreme Court has long recognized liability for negligent misrepresentation.... The governing principles [of negligent misrepresentation] are set forth in similar terms in § 552 of the Restatement Second of Torts (1977): One who, in the course of business, profession, or employment ... supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.” (Emphasis in original; internal quotation marks omitted.) Savings Bank of Manchester v. Ralion Financial Services, Inc., 91 Conn.App. 386, 389–90, 881 A.2d 1035 (2005). Even an innocent misrepresentation can give rise to liability if the speaker reasonably should have known the truth. Glazer v. Dress Barn, Inc., 274 Conn. 33, 72–73, 873 A.2d 929 (2005). In order to prevail, however, the plaintiff is required to prove reasonable reliance on the defendant's misrepresentation. Visconti v. Pepper Partners Ltd. Partnership, 77 Conn.App. 675, 682, 825 A.2d 210 (2003).

Reliance on a statement may become reasonable based on context, the statement's formal nature, the relationship between the parties; see Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 580, 657 A.2d 212 (1995); or when the statement is made by an individual with specialized knowledge; Richard v. A. Waldman & Sons, Inc., 155 Conn. 343, 346–47, 232 A.2d 307 (1967). “We have consistently held that reasonableness is ... determine[d] based on all of the circumstances.” Williams Ford, Inc. v. Hartford Courant Co., supra, at 580, 657 A.2d 212. Reliance on a contractual term or a writing is not automatically reasonable—a court still must give due consideration to the surrounding circumstances. Savings Bank of Manchester v. Ralion Financial Services, Inc., supra, 91 Conn.App. at 391–92, 881 A.2d 1035 (plaintiff's knowledge regarding facts underlying contractual term relevant); see Petitte v. DSL.net, Inc., 102 Conn.App. 363, 373, 925 A.2d 457 (2007) (unreasonable to rely on employment offer letter because letter did not guarantee employment and employment was at-will).

The plaintiff's knowledge is particularly relevant to determining whether, under all the circumstances, reliance was reasonable. See Gibson v. Capano, 241 Conn. 725, 733–34, 699 A.2d 68 (1997) (innocent misrepresentation); Visconti v. Pepper Partners Ltd. Partnership, supra, 77 Conn.App. at 683–84, 825 A.2d 210. Knowledge of the fact misrepresented can preclude a claim that reliance on a contrary representation was reasonable. Gibson v. Capano, supra, at 734, 699 A.2d 68 (plaintiffs' knowledge of underlying facts precludes claim they were “induced to agree to the clause as a result of the defendants' misrepresentation”); Savings Bank of Manchester v. Ralion Financial Services, Inc., supra, 91 Conn.App. at 391–92, 881 A.2d 1035 (trial court could not have found plaintiff relied on language in agreement because of plaintiff's knowledge to contrary). Even if the misrepresentation forms part of a binding agreement, a plaintiff cannot reasonably rely on a contractual term he knows to be false. Savings Bank of Manchester v. Ralion Financial Services, Inc., supra, at 391–92, 881 A.2d 1035; see Glazer v. Dress Barn, Inc., 274 Conn. at 55–56, 76–78, 873 A.2d 929 (binding agreement can support cause of action for negligent misrepresentation, but no cause of action due to lack of damages). The trier of fact considers all relevant circumstances in determining whether reliance is reasonable. Williams Ford, Inc. v. Hartford Courant Co., supra, 232 Conn. at 580, 657 A.2d 212. The plaintiff's knowledge of the misrepresentation carries significant weight. See Gibson v. Capano, supra, at 733–34, 699 A.2d 68;Savings Bank of Manchester v. Ralion Financial Services, Inc., supra, at 391–92, 881 A.2d 1035;Visconti v. Pepper Partners Ltd. Partnership, supra, at 683–84, 825 A.2d 210.

I

The plaintiff first claims that the parol evidence rule bars the court from using the March 4, 2009 communication between Mara and Gruder to determine whether the plaintiff's reliance was reasonable.⁵ We find the parol evidence rule inapplicable here.

“[T]he parol evidence rule is not a rule of evidence, but a substantive rule of contract law”; (internal quotation marks omitted) Heyman Associates No. 1 v. Ins. Co. of State of Pennsylvania, 231 Conn. 756, 779, 653 A.2d 122 (1995); that prevents parties from using extrinsic evidence to vary the terms of an otherwise clear and unambiguous contract. This rule does not bar extrinsic evidence from being used for other purposes, such as proving mistake or fraud. Id., at 780, 653 A.2d 122. Parties may introduce evidence extrinsic to the contract to disprove the elements of negligent misrepresentation, despite the parol evidence rule. See Warman v. Delaney, 148 Conn. 469, 474, 172 A.2d 188 (1961) (“[T]he plaintiffs are not seeking to add to, subtract from or alter the terms of the written contract itself.... Th[e] action is concerned solely with material misrepresentation in the inducement of the contract.”); see also Martinez v. Zovich, 87 Conn.App. 766, 778, 867 A.2d 149, cert. denied, 274 Conn. 908, 876 A.2d 1202 (2005); cf. Gibson v. Capano, supra, 241 Conn. at 733, 699 A.2d 68( Warman inapplicable to innocent misrepresentation claims). The court, therefore, properly disregarded the parol evidence rule when examining whether the...