Pateley Associates, LLC v. U.S. Bank, N.A.

Pateley Associates, LLC dba Pateley Associates I, LLC, Pateley Associates Limited Partnership et al. v. U.S. Bank, N.A. et al

No. FSTCV126015568S

Superior Court of Connecticut, Judicial District of Stamford-Norwalk, Stamford

March 17, 2017

UNPUBLISHED OPINION

MEMORANDUM OF DECISION

Hon Kevin Tierney, Judge Trial Referee.

In this lawsuit returnable on September 24, 2012, the plaintiffs are seeking money damages from the defendants on a variety of legal theories based on claims of overcharges made by the defendants in the mortgage payoff of two commercial mortgages located in Newtown, Connecticut and Stamford, Connecticut. The trial commenced on May 13, 2015 and ended sixteen trial days later on September 1, 2016. One hundred and forty-eight exhibits were offered. A number of premarked exhibits were not placed in evidence and thus are not before this court. The last numbered plaintiffs' full exhibit was 130 and the last defendants' full exhibit was BBBBBBBB.

The operative complaint is the Third Revised Complaint dated June 30, 2015 (#200.00). Ten documents were attached to the complaint consisting of the Stamford and Newtown notes mortgages and assignment of mortgage, default letters dated May 31, 2011 and August 11, 2011 and payoff letters dated May 31, 2012 and June 5, 2012 (#104.00). Each of the four named plaintiffs are named plaintiffs in each of the seven counts of the Third Revised Complaint. Each of the four named defendants are named as defendants in each of the seven counts of the Third Revised Complaint. The seven counts alleged: (1) violation of Connecticut Unfair Trade Practices Act; (2) Breach of Contract as to the Newtown, Connecticut property; (3) Breach of Contract as to the Stamford Connecticut property; (4) Conversion; (5) Statutory Theft in violation of Gen. Stat. § 52-564; (6) Breach of the Implied Covenant of Good Faith and Fair Dealing as to the Newtown property; and (7) Breach of the Implied Covenant of Good Faith and Fair Dealing as to the Stamford property. No lawyers or law firms are parties to this complaint.

The operative Answer and Special Defenses to Third Revised Complaint filed by all four defendants is dated July 15, 2015 (#203.00). The Answer contained five Special Defenses. The First Special Defense is addressed to the breach of contract claim as to the Newtown property (Count Two) and the breach of the implied covenant of good faith and fair dealing claim as to the Newtown property (Count Six) and alleges that any damages were caused by the plaintiffs' failure to comply with their own contractual obligations pursuant to the Newtown Note and Mortgage. The Second Special Defense is addressed to the breach of contract claim as to the Stamford property (Count Three) and the breach of the implied covenant of good faith and fair dealing claim as to the Stamford property (Count Seven) and alleges that any damages suffered by the plaintiffs were caused by their failure to comply with their own contractual obligations under the Note and Mortgage. The Third Special Defense is addressed to Count One of CUTPA, Count Four of conversion and Count Five of statutory theft and alleges that any damages suffered by the plaintiffs was due to their failure to comply with their own contractual obligations as to the Stamford Note and Mortgage and the Newtown Note and Mortgage. The Fourth Special Defense alleges that the plaintiffs failed to mitigate their damages by failing to comply with their own contractual obligations pursuant to the Newtown and Stamford Notes and Mortgages and by failing to tender full payment of the amounts due and owning. The Fifth Special Defense alleges: " The alleged actions of Defendants are made to enforce Notes 1 and 2 and to protect their interests in the Newtown and Stamford properties. Defendants were justified in acting as they did and, as a result, cannot be held liable for Plaintiffs' damages, if any." Each of these five Special Defenses were replied to by a general denial dated August 3, 2015 (#206.00).

The plaintiffs' Third Revised Complaint seeks money damages interest, attorneys fees pursuant to the CUTPA statute and the terms of the Notes, punitive damages pursuant to the CUTPA statute, and treble damages pursuant to Gen. Stat. § 52-564 Statutory Theft.

Plaintiffs' Post-Trial Brief dated December 1, 2006 (#213.00) succinctly outlines nine separate claims as to the conduct of the defendants that caused the plaintiffs' damages. " The facts and evidence adduced at trial prove that the Defendants' conduct was unfair, unscrupulous and deceptive because the Defendants: (i) prematurely issued a notice of default in order to file an insurance claim; (ii) altered payoff statements to require the Borrower to pay for legal fees which the Insurer was refusing to pay; (iii) charged the Borrower an exorbitant amount of attorneys fees for what should have been a straightforward foreclosure action; (iv) charged the Borrower for attorneys fees incurred in connection with the insurance claim which were not provided for under the Loan Documents; (v) pursued the Foreclosure Action against the Borrower when the properties were over-secured, which action interfered with the sale of the Newtown property; (vi) commenced the Foreclosure Action despite having received a payment check from the insurer and despite the fact that the Newtown property was under contract of sale; (vii) unlawfully continued to pursue payment of the insurance claim after the debt was fully satisfied; (viii) failed to return sums to the Borrower after the payoff of the Notes; and (ix) failed to provide an accounting of sums paid at closing." (#213.00, pages 6 and 7.)

All four plaintiffs are claiming CUTPA damages, attorneys fees and punitive damages pursuant to Gen. Stat. § 42-110g(a) and § 42-110g(d). The plaintiffs are relying on the following well-known statement as to CUTPA claims.

It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the [F]ederal [T]rade [C]ommission for determining when a practice is unfair: (1) [W]hether 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] . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three . . . Thus a violation of CUTPA may be established by showing either an actual deceptive practice . . . or a practice amounting to a violation of public policy . . .

Ulbrich v. Groth, 310 Conn. 375, 409-10, 78 A.3d 76 (2013).

Neither party argued the applicability of the current Federal Trade Commission Rulings as now being Connecticut's CUTPA law despite a number of written admonitions by Justices of the Connecticut Supreme Court that our CUTPA law has changed. Naples v. Keystone Building and Development Corporation, 295 Conn. 214, 238-39, 990 A.2d 326 (Zarella, concurring) (2010). Both parties argued the " cigarette rule." Both parties relied on the well-known CUTPA rules. Votto v. American Car Rental, Inc., 273 Conn. 478, 484, 871 A.2d 981 (2005); Forrest v. Southeby's International Realty, Inc., Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket Number FST CV11-6010200 S, (January 9, 2013, Tierney, J.T.R.); Artie's Auto Body, Inc. et al. v. The Hartford Fire Insurance Company, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket Number X08-CV 03-0196141 S, (September 22, 2009, Jennings, J.); Artie's Auto Body, Inc. et al. v. The Hartford Fire Insurance Company, 317 Conn. 602, 622, fn.13, 119 A.3d 1139 (2015).

" Review of those authorities indicates that a serious question exists as to whether the cigarette rule remains the guiding rule utilized under federal law . . . Because, in the present case, neither party has raised or briefed this issue, and both have briefed the issue applying the cigarette rule, we decline to address the issue of the viability of the cigarette rule until it squarely has been presented to us." DiTeresi et al. v. Stamford Health System, Inc., Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket Number FST CV 06-5001340 S, (September 2, 2011, Tierney, J.T.R.). This court will apply the cigarette rule.

The plaintiffs have alleged two separate counts for breach of contract; one arising out of loan documents for the Newtown property and the second arising out of loan documents for the Stamford property. To establish a breach of contract a party must demonstrate the formation of an agreement, performance by one party, breach of the agreement by the other party, and damages. Bouchard v. Sundberg, 80 Conn.App. 180, 189, 834 A.2d 744 (2003). A promissory note such as that contained in these two commercial loan transactions is a contract, the breach of which can result in an award of money damages. Am. Express Centurion Bank v. Head, 115 Conn.App. 10, 15-16, 971 A.2d 90 (2009).

The plaintiff has filed two separate counts; One for the Newtown property and the other for the Stamford property for breach of the implied covenant of good faith and fair dealing.

[I]t is axiomatic that the . . . duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship . . . In other words, every contract carries an implied duty requiring

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