Ulbrich v. Groth, No. 18815.

• Court: Supreme Court of Connecticut
• Writing for the Court: VERTEFEUILLE
• Citation: 310 Conn. 375,78 A.3d 76
• Parties: Frederick C. ULBRICH, et al. v. Kelly J. GROTH, et al.
• Docket Number: No. 18815.
• Decision Date: 12 November 2013

310 Conn. 375
78 A.3d 76

Frederick C. ULBRICH, et al.
v.
Kelly J. GROTH, et al.

No. 18815.

Supreme Court of Connecticut.

Argued Nov. 27, 2012.
Decided Nov. 12, 2013.

[78 A.3d 83]

Allan B. Taylor, with whom was Jeffrey P. Mueller, Hartford, for the appellants-appellees (defendant TD Banknorth, N.A., et al.).

Richard P. Weinstein, West Hartford, with whom was Nathan A. Schatz, for the appellee-appellant (named plaintiff).

Donald E. Frechette and Tara L. Trifon, Hartford, filed a brief for the American Bankers Association as amicus curiae.

Martin J. Newhouse, John Pagliaro and Margaret A. Little, Stratford, filed a brief for the New England Legal Foundation as amicus curiae.

ROGERS, C.J., and NORCOTT, PALMER, ZARELLA, EVELEIGH, HARPER and VERTEFEUILLE, Js.^*

VERTEFEUILLE, J.

[310 Conn. 381]The defendant TD Banknorth, N.A. (bank), held mortgage and security interests in real and personal property located in Wallingford and Meriden and owned by the defendants Groth Family Limited Partnership, the Mountainside Corporation and/or James A. Groth (collectively, debtors). The real property was operated as a commercial special events facility and the personal property consisted of items used to operate the facility. The named plaintiff, Frederick C. Ulbrich, was the successful bidder at a combined foreclosure sale of the real estate and secured party auction of the personal property conducted pursuant to article 9 of the Connecticut Uniform Commercial Code (UCC), General Statutes § 42a–9–101 et seq. (article 9). The plaintiff Ulbrich Properties, LLC (Ulbrich Properties), is the current owner of the real and personal property.¹ The defendant Tranzon Auction Properties (Tranzon) conducted the auction.² After Ulbrich purchased the property, the plaintiffs discovered that there were conflicting claims as to the ownership of the personal property auctioned and that, as a result, the plaintiffs would not receive many of the

[78 A.3d 84]

items that [310 Conn. 382]Ulbrich had believed were included in the sale. Thereafter, the plaintiffs brought this action against the defendants alleging, inter alia, that their failure to inform the plaintiffs that there were conflicting claims to the property constituted negligence and negligent misrepresentation, breach of the warranty of title, and a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42–110a et seq. The jury returned a verdict for the plaintiffs on four of their counts and awarded compensatory damages of $462,000, which the trial court reduced to $417,000. The trial court also awarded attorney's fees of $274,128 and punitive damages of $1,251,000 pursuant to CUTPA, as well as postjudgment interest pursuant to General Statutes § 37–3a. The defendants then filed this appeal ³ in which they raise numerous challenges to the judgment of the trial court. Ulbrich cross appealed from a number of the court's adverse rulings. We conclude that the trial court improperly determined that: (1) the defendants had a common-law duty to the plaintiffs to properly identify the personal property that was subject to the secured party sale; and (2) it lacked the authority to grant the plaintiffs' request for nontaxable costs pursuant to CUTPA. We affirm the judgment in all other respects.

The jury reasonably could have found the following facts. The bank made a loan to the debtors that was secured by certain real and personal property that they owned in Meriden, including the special events facility and the personal property used to operate the facility. When the debtors defaulted on the loan, the bank initiated a foreclosure action against them in which it sought to foreclose both the real and personal property. Thereafter, the bank sought the trial court's permission to [310 Conn. 383]sell the real and personal property together, “as a whole ... so as to achieve the highest total price at the auction sale,” which the court ordered.⁴

The trial court in the foreclosure action also authorized Bruno Morasutti, who had been appointed as the committee of sale, to hire an auctioneer to conduct the auction sale of the real and personal property. Ultimately, Tranzon was retained to conduct the auction.⁵ Before the auction, Tranzon provided prospective bidders with an auction brochure that contained a list of the types of personal property that were

[78 A.3d 85]

to be sold. ⁶ The list was prefaced by the statement: “Personal [310 Conn. 384][p]roperty to be sold, as an entirety, with the special events facility.” The following disclaimer was set forth at the bottom of the list: “DISCLAIMER: While descriptions of the personal property listed above are believed to be accurate, no warranties or guarantees are being made, expressed or implied, regarding the quality, quantity, or usefulness for any purpose of those items. All items are being sold on an ‘AS IS, WHERE IS' basis with no warranty of merchantability. Item(s) may have been removed or added since the preparation of this list.” ⁷ The brochure also stated that the personal property had been assessed at $16,988 for property tax purposes.

Before the auction, the defendants learned that the debtors did not own many of the items of personal property that were used to operate the special events facility, but had leased them, and, therefore, it was possible that the items were not subject to the bank's [310 Conn. 385]security interest.⁸ On October 25, 2006, the attorney for the debtors sent a letter to Morasutti stating that the auction brochure made “no mention of the fact that a substantial portion of the personal property is subject to leases. Since we have not reviewed these documents, we cannot advise you whether it is our conclusion that these are ‘true’ leases or ‘finance’ leases.” In addition, Morasutti wrote that “Mountainside [Corporation] does own the critical personal property although [t]he

[78 A.3d 86]

Groth Family Limited Partnership owns some of the larger equipment and the leases are in the name of a third entity, Festivals, [Incorporated].” On October 31, 2006, the bank's attorney sent an e-mail to the debtors' attorney and Morasutti stating that “[t]he buyers will of course inquire as to what personal property is being conveyed. The only property at the site that is not subject to the [b]ank's security interest would be property that is not owned by [the debtors], including any property subject to a true lease. I would kindly suggest that the [debtors] identify any property that they claim is not owned by [them]. The committee would then have to alert buyers of the property that is not included in the auction.” The defendants did not inform potential bidders that some of the personal property on the site did not belong to the debtors and was not being conveyed at the auction.

Also before the auction, Ulbrich walked through the property with James A. Groth, whom he had known for many years. Ulbrich had reached an informal agreement [310 Conn. 386]with Groth and the other debtors that they would continue to operate the special events facility if he was the successful bidder at the auction. Groth led Ulbrich to believe that virtually all of the personal property at the site was included in the auction sale.

The auction took place on November 9, 2006. Before the bids were placed, the auctioneer informed the bidders verbally that the personal property list “is for informational purpose[s] to give you some sense [of] what has been used in the operation of this business and again we are not making representations as to any one item or the quality and quantity of any one item.” Ulbrich successfully bid $1.65 million for the real and personal property.⁹ At the sale closing, which took place in January, 2007, the bank provided two bills of sale for the personal property, each of which stated that the bank “hereby sells and transfers to [Ulbrich] ... all of the [bank's] right, title and interest, as such [bank] has or may have in and to the personal property described on [e]xhibit ‘A’ attached hereto....” ¹⁰ In addition, the [310 Conn. 387]bills of sale provided: “THE SECURED PARTY MAKES NO WARRANTIES OR REPRESENTATIONS OF

[78 A.3d 87]

ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE COLLATERAL. THE ASSETS ARE SOLD ‘AS IS' AND ‘WHERE IS' AND THE SECURED PARTY SPECIFICALLY DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE WHATSOEVER.”

After the auction, the plaintiffs discovered that much of the personal property at the site was not included in the sale because it was not owned by the debtors. As a result, the plaintiffs were required to engage in extensive litigation to determine who was entitled to possession and ownership of the items of personal property.

In December, 2007, the plaintiffs commenced this action alleging, among other claims, negligence and negligent misrepresentation against the bank and Tranzon, breach of the warranty of title against the bank, and violation of CUTPA against the bank. In addition, the plaintiffs raised a breach of contract claim against the bank for its alleged failure to pay the plaintiffs the proceeds from a life insurance policy belonging to the debtors that the plaintiffs claimed was included in the sale. During the trial, the trial court rendered a directed verdict for the defendants on the breach of contract claim. The court denied the defendants' motion for a directed verdict on the negligence and negligent misrepresentation claims and the CUTPA claim against the bank based on the economic loss doctrine. Thereafter, the jury returned a verdict in favor of the plaintiffs on the negligence and negligent misrepresentation claims against both the bank and Tranzon and the breach of [310 Conn. 388]warranty and CUTPA claims against the bank, and awarded $462,000 in compensatory damages. The trial court subsequently denied the defendants' motion for judgment notwithstanding the verdict and their motion to set aside the verdict. The court also denied...