Sovereign Bank v. Licata

• Decision Date: 18 August 2009
• Docket Number: No. 28286.,28286.
• Citation: 977 A.2d 228,116 Conn.App. 483
• Court: Connecticut Court of Appeals
• Parties: SOVEREIGN BANK v. James LICATA et al.

977 A.2d 228

116 Conn.App. 483

SOVEREIGN BANK v. James LICATA et al.

No. 28286.

Appellate Court of Connecticut.

Argued January 15, 2009.

Decided August 18, 2009.

Kenneth A. Votre, New Haven, for the appellant (substitute plaintiff Seven Oaks Partners, LP).

FLYNN, C.J., and BISHOP and GRUENDEL, Js.

BISHOP, J.

The substitute plaintiff, Seven Oaks Partners, LP (Seven Oaks), appeals from the judgment of the trial court, rendered after a jury verdict, in favor of the defendant Cynthia Licata¹ on her counterclaim alleging a violation of the Connecticut Unfair Trade Practices Act (CUTPA) General Statutes § 42-110a et seq.,² and negligent misrepresentation.³ Seven Oaks claims that the court improperly failed to grant its motions to set aside the verdict and for judgment notwithstanding the verdict with respect to the counts of the defendant's counterclaim alleging a violation of CUTPA and negligent misrepresentation. Additionally, Seven Oaks claims that the court incorrectly failed to order a remittitur of the jury's damage award on the misrepresentation claim, improperly failed to sustain its objection to the defendant's claim for a jury trial on her counterclaim and improperly permitted the defendant's expert to testify with respect to damages.⁴ We reverse in part and affirm in part the judgment of the trial court.

The following procedural and factual history sets the context for our discussion of the issues on appeal. The defendant owned a parcel of property located at 23 Meeting House Road (parcel A) in Greenwich, and her husband, James Licata,⁵ owned a vacant lot across the street (parcel B).⁶ On March 16, 2001, James Licata executed a promissory note in conjunction with entering into a loan agreement to borrow $2.5 million from the plaintiff, Sovereign Bank. The loan was secured by an open-ended mortgage deed and promissory note, by which the defendant and James Licata granted Sovereign Bank a first mortgage on the two parcels of land. As an additional assurance, First Connecticut Consulting Group, Inc. (First Connecticut), guaranteed payment of the loan by executing and delivering to Sovereign Bank a guaranty promising the due and punctual payment of the loan. James Licata failed to make timely monthly payments on the loan and eventually defaulted. In response, Sovereign Bank demanded payment in full of the sum due under the loan and, on March 19, 2002, commenced proceedings seeking a judgment of foreclosure and possession of both parcels, a deficiency judgment against James Licata and money damages against First Connecticut for its failure to pay the amount due under the guaranty.

On May 6, 2002, the defendant filed an answer and special defense, alleging that the open-ended mortgage and promissory note were invalid and not enforceable because she did not willingly and knowingly execute them, and that their execution was the result of Sovereign Bank's breach of the implied covenant of good faith and fair dealing.

On June 27, 2003, Sovereign Bank moved for summary judgment against the defendant, alleging that (1) there were no genuine issues of material fact concerning the allegations raised in its complaint, (2) the conclusions contained in the defendant's special defense were legally insufficient because they were not supported by factual allegations and (3) the allegation that Sovereign Bank violated the implied covenant of good faith and fair dealing was legally insufficient. The court granted Sovereign Bank's summary judgment motion as to liability on the note and mortgage as to parcel A.

On July 24, 2003, Sovereign Bank assigned the note, mortgage, guaranty and all related loan documents to Seven Oaks. James Licata had requested that Seven Oaks purchase the mortgage and note to avoid foreclosure and the attendant loss of the properties. That same day, the defendant and Seven Oaks entered into a forbearance agreement, which was memorialized in a letter of understanding. The agreement, which was signed by both parties, provided that the defendant would place a sum equal to twelve months of interest payments and closing costs into an escrow account and from that account she would pay interest on the outstanding principal of the mortgage to Seven Oaks. The defendant further agreed to pay the mortgage in full on or before July 24, 2004. For its part, Seven Oaks agreed to charge interest to the defendant at a rate equal to the default interest rate then being charged by Sovereign Bank or 6 percent, whichever was greater. The agreement further stated that by June 15, 2004, the defendant would make arrangements either to sell or refinance the property, and, if she failed to do so, Seven Oaks could foreclose immediately and the defendant would waive all objections, impediments or delays to foreclosure. On August 8, 2003, the defendant signed a letter of understanding indicating that she had deposited the sum of $185,773.67 into an escrow account for the purposes of funding the closing costs and it being drawn on for monthly interest payments in servicing the mortgage as contemplated by the July 24 agreement.

Notwithstanding the terms of the parties' agreement, the defendant failed to pay the mortgage in full by July 24, 2004. Accordingly, on August 30, 2004, Seven Oaks moved to be substituted as the plaintiff in this action in place of Sovereign Bank, and, once this was accomplished, it then continued the foreclosure action.

On September 29, 2005, the defendant filed revised, amended special defenses and a counterclaim against Seven Oaks. The first special defense alleged that she and Seven Oaks had entered into a written and oral forbearance agreement in which Seven Oaks had agreed to forbear a claim for default and to withdraw the foreclosure action, and, in consideration, the defendant agreed to place $187,000 into an escrow account from which she would make monthly interest payments of $13,400. The defendant further alleged that even though she had fulfilled her obligations under the agreement, Seven Oaks had not withdrawn the foreclosure action. The second special defense alleged that Raymond Chodos was the managing partner of Seven Oaks and that he had solicited the defendant to become her paid financial adviser. It alleged that Chodos had gained the defendant's confidence and that she had come to rely on his advice. It further alleged that Chodos had advised the defendant not to pay off the loan under foreclosure as contemplated in the forbearance agreement and that he, instead, persuaded her to sign a sales contract to sell her home for a price insufficient to pay the encumbrances on her property. The defendant claimed that as a result of the advice she had received from Chodos and her reliance on it, she was unable to sell her home, to pay encumbrances, to clear an environmental lien and to refinance her mortgage as contemplated in the forbearance agreement. The defendant further claimed that Seven Oaks violated General Statutes § § 36a-498a et seq. and 36a-749b⁷ because its amended promissory note resulted in a high cost loan that exceeded 50 percent of the defendant's income. As a consequence of this behavior, the defendant claimed that Seven Oaks should be estopped from foreclosing on her property and from seeking money damages from her.

The defendant's counterclaim was in three counts. The first count repeated the factual allegations set forth in her special defenses and alleged that, as a consequence of Seven Oaks' conduct, she paid more interest than she should have; was unable to sell or refinance her property; incurred attorney's fees and costs, moving expenses and expenses for the rental of another property; and became nervous and upset with attendant loss of sleep. She alleged that the behavior by Seven Oaks constituted a violation of CUTPA. The second count of the counterclaim sounded in tort. It repeated the factual allegations of the special defenses and claimed that Seven Oaks made material misrepresentations to the defendant's detriment and damage. The third count of the counterclaim sounded in contract. It also repeated the factual allegations of the special defenses and alleged that Seven Oaks breached its duty of good faith and fair dealing with respect to its agreements with the defendant.

On February 15, 2006, Seven Oaks filed a reply and answer to the defendant's special defenses and counterclaim, denying the defendant's allegations. On September 13, 2006, a trial to the jury on the counterclaim commenced, and on September, 21, 2006, the court submitted the issues to the jury. In addition to verdict forms, the jury was given interrogatories to answer. Of relevance to our discussion are the following interrogatories and the jury's responses: "Did ... Seven Oaks, orally agree to [forbear] a claim for default and to withdraw Sovereign Bank's foreclosure?" The jury answered, "Yes." "During the year interest payments were made from the escrow, did Seven Oaks, by making material misrepresentations, mislead [the defendant] not to seek a loan to pay off the mortgage under foreclosure, but persuaded her to sell her home?" The jury responded, "Yes." "Was the conduct of Mr. Chodos, in dealing with [the defendant], outrageous and a breach of good faith and fair dealing?" The jury answered, "Yes." Additionally, the verdict form as to the counterclaim required the jury to respond to each count as to liability but permitted the jurors to determine damages in the aggregate for the second and third counts of the counterclaim if the jury found liability under either or both of those counts.⁸ In sum, the jury found in favor of the defendant on all three counts of her counterclaim and as to the second or third count, the jury awarded the defendant the sum of $500,000 as damages. The court accepted the verdict on September 27, 2006.

On October 5, 2006, judgment of strict foreclosure was entered against the defendant. The court also rendered judgment in favor of the defendant on the...