SOVEREIGN BANK v. JAMES LICATA et al., SC 18477

Judicial District of Stamford-Norwalk

 

Defenses; Statute of Frauds; Whether the Statute of Frauds as Adopted in General Statutes 52-550 Bars a Cause of Action in Tort for Negligent Misrepresentation that Relies Upon the Terms of an Oral Agreement Pertaining to an Interest in Real Property. The defendant, Cynthia Licata, granted Sovereign Bank a first mortgage on certain property to secure a loan. The mortgage went into default, and Sovereign Bank commenced this action to foreclose on the loan. It subsequently assigned the note and mortgage to Seven Oaks Partners, LP (Seven Oaks), and Seven Oaks entered into a forbearance agreement with the defendant. The agreement, which was oral, provided that Seven Oaks would forestall the foreclosure if the defendant satisfied certain conditions. When the defendant failed to comply with the condition requiring her to pay the mortgage loan balance by a specific date, Seven Oaks successfully moved to be substituted as the plaintiff and continued the foreclosure action. The defendant counterclaimed, alleging negligent misrepresentation. She specifically asserted that Raymond Chodos, the managing partner of Seven Oaks, advised her not to pay off the loan as contemplated in the forbearance agreement and, instead, persuaded her to sign a sales contract to sell the property for a price insufficient to pay the encumbrances on the property. She further asserted that as a result of Chodos' advice and her reliance on it, she was unable to sell her property, to pay the encumbrances and to refinance her home as contemplated in the forbearance agreement. The trial court ultimately rendered a judgment of strict foreclosure against the defendant, and it rendered a judgment in her favor on the negligent misrepresentation counterclaim. Seven Oaks appealed to the Appellate Court, arguing that the defendant's negligent misrepresentation claim was barred by the statute of frauds. It contended that because the claim relied on an oral forbearance agreement that pertained to an interest in real property, the claim was barred by General Statutes 52-550, which requires agreements relating to real property or any interest in real property to be in writing. The Appellate Court (116 Conn. App. 483) disagreed and affirmed the judgment on the negligent misrepresentation claim. In so ruling, it stated that the policies of the statute of frauds will not be undermined by affording plaintiffs who can prove a claim of negligent misrepresentation the opportunity to do so. It indicated that a negligent misrepresentation action does not seek to enforce the underlying contract but, instead, seeks damages for reliance on misrepresentations that may have been made in relation to that contract. It determined that this critical distinction sets a tort action apart from a contract action and makes the tort claim worthy of independent review. It thus concluded that because the defendant's claim for negligent misrepresentation sounded in tort and not in contract, the statute of frauds did not bar the claim. Moreover, it indicated that to find otherwise would unjustly extend the reach of the statute of frauds. In this appeal, the Supreme Court will determine whether the Appellate Court properly concluded that the statute of frauds did not bar the defendant's negligent misrepresentation claim.