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UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT WINTHROP HOUSE ASSOCIATION, INC. v. BROOKSIDE ELM ASSOCIATES LIMITED PARTNERSHIP, ET AL : : : : : CIV. NO. 3:00CV328 (AHN) : : : : : OPINION
This matter was referred for decision on the following question: Did the Declarant properly exclude the implied warranties and/or express warranties?
I.
PROCEDURAL BACKGROUND
On February 18, 2000, Winthrop House Association, Inc. (the "Association") filed an action against Brookside Elm Associates Limited Partnership; Collins Properties, LLC; Collins Enterprises, LLC; and Arthur Collins, II (referred to collectively as "the defendants"),1 arising from the conversion of a six story apartment building located in Greenwich, Connecticut, into a condominium complex. Plaintiff alleges
Defendant Preiss Breismeister Architects, P.C. notified the Court, by letter dated August 7, 2001, that it did not intend to file a brief on this question, stating in part that it believed that this question did "not concern the conduct of Preiss Breismeister." [Doc. #31, under seal]. Preiss Breismeister reserved the right to file a reply brief "in the event that plaintiff or any other party does in fact allege liability on the part of Preiss Breismeister with respect to the issues presented." Id. No reply brief was filed by Preiss Breismeister.
1
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construction defects and/or code violations and seeks damages. The parties agreed to submit the matter to mediation, and on May 20 and 21, 2001, the parties met with a mediator, Attorney Robert Rubin, for the purposes of touring Winthrop House and mediating the issues raised by the Association in its Amended Complaint. During the course of the mediation it became apparent to the mediator and the parties that advice on issues relating to the exclusion of various alleged warranties would be instructive to move mediation forward. This matter was referred for an This is not an advisory
"advisory opinion" on June 27, 2001. opinion.
Church of Scientology of California v. United States, ("It has long been settled that a federal
506 U.S. 9, 12 (1992)
court has no authority to give opinions upon moot questions or abstract propositions, or to declare principles or rules of law which cannot affect the matter in issue in the case before it."); Barr v. Matteo, 355 U.S. 171, 172 (1957) ("[A]n advisory opinion cannot be extracted from a federal court by agreement of the parties."). Rather, the parties have submitted this question of
law for decision with the belief that the decision may facilitate the mediation of their dispute. The parties filed their position papers under seal on August 7, 2001. [Doc. ##33, 34, 35, 36]. Reply briefs were filed on Oral argument was held on
September 18, 2001. [Doc. ##37, 38]. February 6, 2003.
Leave to file supplemental motions was granted The parties submitted their
on March 12, 2003 [Doc. #46].
supplemental briefing on March 28 and April 17, 2003. [Doc. ##49, 2
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50].
II.
FACTUAL BACKGROUND2
The Winthrop House opened in 1938 as an apartment building at 25 West Elm Street in downtown Greenwich, Connecticut. The
building originally housed fifty-three apartments on six floors. In 1993, Brookside Elm purchased Winthrop House, intending to convert it to a condominium and perform certain renovations. Renovations began on the building in 1994, with most work completed by 1997. Winthrop House now consists of forty-eight
individual residential units, as several apartments were combined to make larger units during the renovations. Brookside Elm is the Declarant. Collins Properties was the Collins Enterprises was
Management Company for the condominium.
the original construction manager for the Winthrop House renovations. However, when the scope of planned work increased, Collins Enterprises turned over specific responsibilities as general contractor to Wernert Associates, Inc.
Plaintiff
The following facts are provided as background and are undisputed for purposes of this opinion. 3
2
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The exterior facade including lintels, balconies, windows, window caulking and trim, brickwork and the chimney; roof; HVAC system; elevator; plumbing and electrical; water damage; code violations & safety omissions; fire doors, fire extinguishers, fire pump system/sprinkler; carbon monoxide gas systems; emergency phone; PTAC pipes and valves; water tanks; pump systems; drainage systems; and dryer vents. [Compl. Ex. BB]. The Master Punch List also includes actual Association costs to date and estimated Association costs to repair for each category. The Master Punch List was prepared by
counsel to summarize its experts< findings of alleged defects to the property. Actual repair cost to the Association as of April
2000 was $153,169. The Association
Town of Greenwich Permits/Code Compliance The Town of Greenwich Building Department issued more than 54 permits for the repair and renovation work. Permits were
pulled and certificates of occupancy were issued on a unit-byunit basis, including buyer generated customizing changes, as well as for common areas, exteriors, and site improvements. Building Department has not cited the defendants for any The
For purposes of this ruling, the Court has not considered the expert reports plaintiff appended to its complaint and has not considered the alleged deficiencies. The Court notes that the Master Punch List was created in April 2000, nearly four and a half years after the first units were sold. 4
3
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unremediated code violations and has issued certificates of occupancy. [Doc. #34 at 4-5; Def. Ex. E]. The boilers and the elevators were inspected and passed by the State of Connecticut authorities. [Def. Ex. B]. The Deputy
Fire Marshal confirmed compliance with the Connecticut Fire Safety Code. [Def. Ex. C].
The Public Offering Statement Pursuant to the Connecticut Common Interest Ownership Act, Conn. Gen. Stat. §§47-200 et seq. ("CIOA"), Brookside Elm, as Declarant, prepared a Public Offering Statement (the "POS") in April 1995 for the purpose of submitting Winthrop House as a condominium. Each prospective purchaser of a unit was provided The following provisions were designated
with a copy of the POS.
by the parties as relevant to the present matter. Paragraph 2(c) of the POS provides: (c) Rehabilitation Work: The buildings are currently being operated as residential apartment buildings. The Declarant will undertake repair and rehabilitation work with respect to all Units except those whose present tenants-in-possession have a statutory right to remain in their Units as tenants and any Unit purchased by a present tenant-in-possession who requests that repair and rehabilitation work not be done in his Unit. Such repair and rehabilitation work may include the renovation of kitchens, the upgrading of electrical systems, the upgrading of some plumbing systems, and the painting of Units. It is also possible that fireplaces will be added to one or more Units. The Declarant has also begun to have repaired and rehabilitated portions of the Common Elements including the painting of hallways, the reconstruction of the front 5
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entrance, the repainting and recaulking of windows, and the reconstruction of the building parapet. All repair and rehabilitation work will be done at the sole discretion of the Declarant. The Declarant makes no representation as to the specific repair and rehabilitation work to be done or as to the date of completion of any such work. Rehabilitation work on common areas has commenced. Individual Units will be repaired and rehabilitated as they are vacated by current tenants. The Declarant discloses that there is no schedule of such rehabilitation. [Def. Ex. A, POS ¶2(c) (emphasis added)]. Paragraphs 10A.1, 10A.2, and 10A.3 describe the creation of express warranties of quality, implied warranties of quality, and exclusion or modification of implied warranties of quality pursuant to CIOA, Conn. Gen. Stat. §§47-274, 47-275, and 47-276, respectively. [Def. Ex. A, POS ¶¶10A.1, 10A.2 and 10A.3]. Paragraph 10A.3 of the POS states, Section 47-276. Exclusion or Modification of Implied Warranties of Quality. (a) Except as limited by subsection (b) of this section with respect to a purchaser of a unit that may be used for residential use, implied warranties of quality: (1) May be excluded or modified by agreement of the parties; and (2) are excluded by expression of disclaimer, such as "as is", "with all faults", or other language that in common understanding calls the purchaser's attention to the exclusion of warranties. (b) With respect to a purchaser of a unit that may be occupied for residential use, no general disclaimer of implied warranties of quality is effective, but a declarant may disclaim liability in an instrument signed by the purchaser for a specified defect or class of defects or specified failure to comply with applicable law, if the defect or failure entered into and became a part of the basis 6
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of the bargain. Similarly, paragraph 10B creates express and implied warranties under the New Homes Warranties Act (NHWA), Conn. Gen. Stat. §§47-116 ,"Definitions"; 47-117, "Express Warranties"; 47118, "Implied Warranties"; 47-119, "Vendor Not to Evade by Intermediate Transfer"; and 47-120, "Warranties Created by Chapter 827 Additional to Any Other Warranties." Section 47-118 of the NHWA states, Implied warranties (a) In every sale of an improvement by a vendor to a purchaser, except as provided in subsection (b) of this section or excluded or modified pursuant to subsection (d), warranties are implied that the improvement is: (1) Free from faulty materials; (2) constructed according to sound engineering standards; (3) constructed in a workman-like manner, and (4) fit for habitation, at the time of the delivery of the deed to a completed improvement, or at the time of completion of an improvement not completed when the deed is delivered. (b) The implied warranties of subsection (a) of this section shall not apply to any condition that an inspection of the premises would reveal to a reasonably diligent purchaser at the time the contract is signed. (c) If the purchaser, expressly or by implication, makes known to the vendor the particular purpose for which the improvement is required, and it appears that the purchaser relies on the vendor's skill and judgment, there is an implied warranty that the improvement is reasonably fit for the purpose. (d) Neither words in the contract of sale, nor the deed, nor merger of the contract of sale into the deed is effective to exclude or modify any implied warranty; provided, if 7
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the contract of sale pertains to an improvement then completed, an implied warranty may be excluded or modified wholly or partially by a written instrument, signed by the purchaser, setting forth in detail the warranty to be excluded or modified, the consent of the purchaser to exclusion or modification, and the terms of the new agreement with respect to it. (e) The implied warranties created in this section shall terminate: (1) In the case of an improvement completed at the time of the delivery of the deed to the purchaser, one year after the delivery or one year after the taking of possession by the purchaser, whichever occurs first; and (2) in the case of an improvement not completed at the time of delivery of the deed to the purchaser, one year after the date of the completion or one year after taking of possession by the purchaser, whichever occurs first. Paragraph 10B also sets forth the limitations on warranties which are part of each purchase agreement. The Limitations of
Warranties section is set forth in large, upper case type as follows: LIMITATIONS ON WARRANTIES PURSUANT TO SECTIONS 47-276(b) AND 47-118(d) OF THE CONNECTICUT GENERAL STATUTES, THE DECLARANT WILL INCLUDE IN ITS PURCHASE AGREEMENT THE FOLLOWING PARAGRAPHS WHICH PROVIDE THAT CERTAIN OF THE WARRANTIES DESCRIBED ABOVE ARE EXCLUDED: 1. THE IMPLIED WARRANTIES OF SECTIONS 47275(b) AND 47-118(A) THAT THE IMPROVEMENTS ARE: (1) FREE FROM FAULTY AND/OR DEFECTIVE MATERIALS, (2) CONSTRUCTED IN ACCORDANCE WITH APPLICABLE LAW AND ACCORDING TO SOUND ENGINEERING AND CONSTRUCTION STANDARDS, (3) CONSTRUCTED IN A WORKMANLIKE MANNER, AND (4) FIT FOR HABITATION ARE EXCLUDED TO THE EXTENT THE IMPROVEMENTS ARE COMPLETED AS OF THE DATE OF THE PURCHASE AGREEMENT. SPECIFICALLY, THE DECLARANT MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT TO ANY STRUCTURAL COMPONENT OF THE BUILDING; THE EXTERIOR 8
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FACADE OF THE BUILDING; THE ROOF; THE BOILERS OR ANY OTHER PART OF THE HEATING SYSTEM; THE ELECTRICAL SYSTEM, THE HOT WATER SYSTEM, OR THE PLUMBING SYSTEM OR ANY PART OF ANY SUCH SYSTEMS; OR WITH RESPECT TO ANY KITCHEN CABINETS, CARPETING, TILING, WALLPAPER, PAINT OR OTHER SURFACE FINISHINGS OF ANY KIND, WOODWORK, BATHROOM FIXTURES, OR UTILITY FIXTURES OR OUTLETS. 2. THE DECLARANT MAKES NO WARRANTIES AS TO THE CONDITION OF ANY HOT WATER HEATER, AIR CONDITIONER, KITCHEN EQUIPMENT OR APPLIANCES OR OTHER ITEMS CONSIDERED CONSUMER PRODUCTS UNDER THE MAGNUSEN-MOSS FEDERAL TRADE COMMISSION ACT. THE DECLARANT WILL DELIVER TO BUYER ANY MANUFACTURER
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basis, except for a legally required electrical upgrade, to purchasers bargaining for such a conveyance if (1) the present tenant in possession elects to purchase his Unit and requests such an arrangement, or (2) the present tenant in possession has a statutory right to remain in possession as a tenant. [Def. Ex. A, POS ¶19(a), (emphasis added)]. Exhibit G to the POS consists of a document entitled "Architect/Engineering Survey," dated October 1994, prepared by Preiss Breismeister P.C. Architects. Exhibit G describes the
then-current condition of 38 various building components and their replacement costs. Many of the building components were
described as being in poor condition, and the survey notes that, for many components, their condition varied. Preiss Breismeister
opined the cost of replacement to be $7,390,500. The Architects noted that the "report [was] based upon observations of the visible and apparent condition of the building and its major components on the date of inspection." They further warned that,
"[t]here may be other hidden or partially hidden problems with the building structure and/or systems." [Def. Ex. A, POS-Ex.G]. Every prospective purchaser of a unit signed a document acknowledging that he or she reviewed and agreed to the terms of the POS. [Doc. #34 at 10].
The Limited Warranty Administration Program Exhibit L to the Connecticut POS and the New York Supplement is entitled "Limited Warranty Administration Program for Winthrop House." The Administration Program consists of four Warranty 10
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Work Request Forms, to be submitted by the buyer of a unit to Brookside Elm at closing, 14 days after closing, 60 days after closing and 1 year after closing. The forms reiterate that the
buyer, by signing, accepts the warranty terms described in the POS and Purchase Agreement.4 Each buyer was given the
opportunity to list any items for which the buyer was requesting repair or completion. [POS Ex. L].
The New York Supplement Pursuant to New York law, prospective purchasers residing in New York State were provided both the Connecticut POS and a New York Supplement (the "Supplement"), which together comprise the Offering Plan.5
4
Each Warranty Work Request Form states, Pursuant to the Warranty Program described in our Purchase Agreement and the Public Offering Statement, the terms of which (I) (We) hereby accept and agree to, (I) (We) request completion or repair of the following warranty items, without limiting our rights to submit subsequent requests under the Warranty Program.
[Def. Ex. L to POS].
5
The cover page of the Supplement states in capital letters, THIS IS A SUPPLEMENT TO AND IS ONLY TO BE USED IN CONJUNCTION WITH THE PUBLIC OFFERING STATEMENT FOR WINTHROP HOUSE, GREENWICH, CONNECTICUT. PURCHASERS WITH REGARD TO WHOM THIS OFFERING IS MADE IN OR FROM THE STATE OF NEW YORK MUST RECEIVE BOTH THE PUBLIC OFFERING STATEMENT AND THIS SUPPLEMENT.
[Def. Ex. D]. 11
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Part I(A) entitled "Special Risks," paragraph 4, states, 4. The Declarant plans to repair and rehabilitate most of the units. However, the Declarant has reserved the right to convey units on an as-is basis except for a legally required electrical upgrade (100 amp service to each unit), to purchasers bargaining for such a conveyance if (a) the present tenant in possession elects to purchase his unit as is and requests such an arrangement, or (b) the present tenant in possession has a statutory right to remain in possession as a tenant. Existing tenants have certain rights to purchase, or continue to lease, their respective units under Connecticut law (See Section F-Rights of Existing Tenants). The Declarant will undertake repair and rehabilitation work with respect to all units except as set forth above. Such repair and rehabilitation work may include the renovation of the kitchen, the upgrading of electrical systems, the upgrading of some plumbing systems, and the painting of units. It is also possible that fireplaces will be added to one or more of the units. In addition, the Declarant has also begun to have repaired and rehabilitated portions of the common elements. All repair and rehabilitation will be done at the sole discretion of the Declarant. The Declarant makes no representation as to the specific repair and rehabilitation work to be done or as to the date of the completion of any such work. Rehabilitation work on common areas has commenced. Individual units will be repaired and rehabilitated as they are vacated by current tenants or when under contract at the Declarant
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13. The Declarant is performing the rehabilitation work on the condominium with the proceeds of a mortgage loan from The Hong Kong and Shanghai Banking Corporation Limited, New York branch. No assurances are given that these proceeds shall be sufficient to complete all contemplated rehabilitation work or that the proceeds will be fully advanced. In the event that the Declarant defaults pursuant to such mortgage, the mortgagee is not obligated to complete any such work. The Supplement further states, at page 8, that it "is not directed to, nor shall it create, any rights in or obligations to any other person other than a New York purchaser." Section F to the Supplement, "Rights of Existing Tenants," states in part, The Declarant plans to repair and rehabilitate most of the units. However, the Declarant has reserved the right to convey one or more units on an "as is" basis except for a legally required electrical upgrade (100 amp service to each unit), to purchasers bargaining for such a conveyance if (1) the present tenant in possession elects to purchase his unit as is and requests such an arrangement, or (2) the present tenant in possession has a statutory right to remain in possession as a tenant under Connecticut law. (Emphasis added). Section X to the Supplement, "Sponsor
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plumbing systems, and the painting of Units. It is also possible that fireplaces will be added to one (1) or more Units. The Declarant will also repair and rehabilitate portions of the common elements, including the painting of hallways, the reconstruction of the front entrance, the repainting and recaulking of windows, and the reconstruction of the building parapet. All repair and rehabilitation work will be done at the sole discretion of the Declarant, and the Declarant makes no representation as to the specific repair and rehabilitation work to be done or as to the date of completion of any such work, but it is anticipated that the repair and rehabilitation work to be done with respect to the common elements will be competed within approximately one (1) year of the date of this Supplement. There are presently not [sic] certificates of occupancy for the building comprising the Condominium or the individual Units, because the building predates the requirement for certificates of occupancy. [emphasis added]. Preiss Breismeister Letter Attached to the revised survey is an unsigned memorandum on Preiss Breismeister letterhead, dated November 14, 1995, and addressed "to whom it may concern." [Pl. Ex. F]. The memorandum lists 11 areas of improvements the writer indicated would be made. In the Architect
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contained in the certification are premised on and limited to such visual inspection." "Certificate"]. The New York Supplement was amended twice. Both Amendments [Def. Ex. D, Supplement, §AF, (viii)
are labeled "First Amendment." The May 2 Amendment corrected certain internal references to sections and pages, added some information regarding payment of deposits and attached a new form Purchase Agreement. The December 31 Amendment attached another
new form Purchase Agreement, which superseded the form attached to the May 2 Amendment.
Architect/Engineering Survey Part II of the N.Y. Supplement, referenced in Section X quoted above, contains both the Architect/Engineering Survey, dated October 1994, at Exhibit G, and the Architect/Engineering Report dated October 1994, revised November 14, 1995, at Section AC. The October 1994 Architect/Engineering Survey is located at
Exhibit G to the POS. Both the revised survey and the original survey, which are identical, list the condition of various building components. However, the revised survey includes some additional notes. One
note indicates that some units show leakage at window sills and jams, and there is evidence of older leaks at the ceiling, which the architect assumed were inactive. [Def. Ex. D, Supplement, §AC, "Units, General"]. observed in the basement. Active water leaks and water damage were [Def. Ex. D, Supplement, §AC, 15
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"Basement, General"]. The roof was found to be in poor condition generally. [Def. Ex. D, Supplement, §AC, "Roof, General"].
The remaining notes in the revised survey are identical to the notes in the original survey, with the exception of some additional information regarding lot line windows, installation of a new boiler, an elevator inspection, and boiler inspection. The revised report, like the original report, was based on a visual survey of the building only, and indicated that there might be hidden or partially hidden problems with the building structure or systems. Note"]. [Def. Ex. D, Supplement, §AC, "Please
Purchase Agreements The purchase agreement provided that the buyer accepted those portions of the unit, common elements, and limited common elements that had already been completed "as is," in their existing condition subject to normal wear and tear. [Def. Ex. D, part II, §Y, ¶12 "Limited Warranties"]. According to the purchase agreement, the only warranties are those described and limited in the Limited Warranty Administration Program set forth in the POS. Id. All implied warranties are hereby disclaimed and excluded with respect to defects which exceed the specific standards of the Limited Warranty Administration Program, (the "Warranty Standards"), and Buyer consents to the exclusion of implied warranties exceeding said specific standards from whatever source. Buyer agrees that the price paid contemplates this exclusion. 16
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Id. The purchase agreement incorporates the POS by reference and makes it a part of the agreement. [Def. Ex. D. Part II, §Y, ¶1 "Unit"]. Throughout the purchase agreement, reference is made to
the terms and conditions of the POS, id. ¶¶3, 12, 20, 22, 26. By signing the purchase agreement, buyers acknowledged that they received and accepted the terms of the POS. Id. ¶¶24, 27.
A "Winthrop House New York Rider to Purchase Agreement" was incorporated into the purchase agreements for New York residents only, pursuant to New York General Business Law. [Def. Ex. D, Part II, §Y, at 14, "Winthrop House New York Rider to Purchase Agreement"]. relevant part, Prior to my execution of the Purchase Agreement and this New York Rider to it, I have been presented with both the Public Offering Statement for Winthrop House and the New York Supplement. I understand that together the Public Offering Statement and the New York Supplement are referred to as the "Offering Plan". I understand that the documents comprising the Offering Plan, including all exhibits and schedules, are incorporated in this Purchase Agreement by Reference and are made a part of this Purchase Agreement with the same force and effect as if fully set forth herein. In the event of any inconsistency between the terms of this Purchase Agreement and the terms of the Offering Plan, the terms of the Offering Plan shall govern. [Id. at 14 (emphasis added)]. Paragraph 1 of the New York Rider states, in
17
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The Sorrow Rider II On or about April 23, 1996, Jerry W. Sorrow and Pamela B. Sorrow entered into a Purchase Agreement for Winthrop House Unit No. 55. [Amend. Compl. Ex. QQ]. Attached to the Sorrow Purchase
Agreement are two undated documents, labeled "Rider" and "Rider II." "Rider" consists primarily of a list of finishes for the "Rider II"
unit and work to be completed, identified as A-H. contains 9 numbered paragraphs.
Plaintiff argues that the Sorrow
Rider II created "unconditional" express warranties and relies on its paragraphs 1, 3, 4 and 7(a),(b),(e) and (h). 18-19]. The Sorrow Rider II states in its introduction, This Rider is attached to an Agreement between BROOKSIDE ELM ASSOCIATES LIMITED PARTNERSHIP, Seller and JERRY W. SORROW and PAMELA B. SORROW, Purchaser and is incorporated into said Agreement as if set forth therein. In the event that there is a conflict between the terms of the Agreement and the terms of the Rider, the terms of the Rider shall control: Plaintiff relies on the following language contained in the Sorrow Rider II. Paragraph 1, Seller represents that at the time of delivery of the deed and possession, there shall exist no violations of governmental (including zoning and planning rules), regulations or limitations . . . . In addition, Seller represents that all construction on and improvement to said property has been in accordance with applicable zoning ordinances and building codes of the Town or City where the premises are located and State of Connecticut . . . . 18 [Doc. #33 at
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Paragraph 3 states, Seller expressly guarantees the Unit renovations constructed or to be constructed on said premises together with the fixtures and systems located thereon against defects in workmanship and material for a period of one (1) year from the date of the delivery of the deed, reasonable wear and tear excepted. Seller further warrants that the Building and Unit and all renovations and improvements constructed or to be constructed on the premises were constructed in a workmanlike manner and that all materials and fixtures used in the construction (or to be used) were (or will be) of new and marketable quality. Paragraph 4 states, In the event of a material defect in the renovation of the Building and the Unit performed by Seller, its systems or fixtures, Purchaser shall give notice to Seller and Seller shall remedy such defect at Seller
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seepage into the building as described in the Public Offering Statement; any warranty for such repointing and repair shall run to the Association. (d) the elevator will be repaired to insure accurate leveling at each floor and smooth ride on or before issuance of the final Certificate of Occupancy for the Building, and all such repair work shall be completed in a good and workmanlike manner; the requisite inspection of such elevator is current and the elevator otherwise has passed inspection by the engineer. (e) all repairs recommended in the Public Offering Statement relating to the central boiler and heating system have been completed and any and all warranties will run to the Association. (h) all work to be completed by Seller shall be completed in a good and workmanlike manner and shall be of a quality consistent with the first floor model unit used by Seller in the Building. III. ANALYSIS This matter was referred for a decision on the following question: Did the Declarant properly exclude the implied warranties and/or express warranties? The plaintiff Association contends that the defendants warranted the condition of every building component and system, by virtue of the warranty provisions provided in the Connecticut New Homes Warranties Act ("NHWA"), Conn. Gen. Stat. §§47-116 et seq., and the Common Interest Ownership Act ("CIOA"), Conn. Gen. Stat. §§47-200 et seq. Memorandum, Pl. Ex. BB. See Association
to properly exclude the implied warranties and/or express 20
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warranties under the NHWA and CIOA.
Defendants argue that "no
express warranties were created with respect to the building systems and components complained about and that, in addition, they have excluded and/or disclaimed the implied and express warranties . . . ." [Doc. #34 at 19].
Does the NHWA apply? No. The Court finds that the Association and subsequent purchasers do not meet the statutory definition of "purchaser" under §47-116. NHWA §47-116 "Vendor" Under §47-116 of the NHWA, express warranties pursuant to §47-117 can only be created by a "vendor" and only run to a "purchaser." Defendants argue "only Brookside Elm fits within
the definition of "vendor" as set forth in §47-116."6 [Doc. #34 at 20]. They contend that "Collins Enterprises acted as construction manager only during the initial renovation phase dealing with cosmetic improvements, and not during the renovation work with which the plaintiff takes issue." Id. While plaintiff
argues that this argument is "not relevant to the issue of the
6
A "vendor" is defined as any person engaged in the business of erecting or creating an improvement on real estate, any declarant of a conversion condominium, or any person to whom a completed improvement has been granted for resale in the course of his business.
Conn. Gen. Stat. §47-116. 21
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effectiveness of the disclaimers" [Doc. #38 at 22], plaintiff asserts that "Mr. Collins, along with his three alter ego entities, were continually active and controlling parties with respect to the Declarant (and precisely fit the definition of an "affiliate of a declarant," . . . [and] are jointly and severally liable with the Declarant with regard to the Association
NHWA §47-116 "Purchaser" Under §47-116 of the NHWA, "purchaser" is defined as "the original buyer, his heirs or designated representatives of any improved real estate . . . ." Defendants correctly assert that
the Association is not a "purchaser" under the NHWA and thus "has no independent warranty rights under this Act." Defendants
represent that "[a]t least 10 of the original purchasers have sold their units . . . [and] subsequent unit owners are not "purchasers" under the Act and cannot claim the benefit of any warranty under the Act." [Doc. #34 at 21]. While claiming that
this argument is also not relevant to the issue before the Court, plaintiff does not address whether the Association is a "purchaser" under the NHWA and does not address the application of the NHWA to subsequent buyers. [Doc. #38 at 18-19, 21-22].
Under Conn. Gen. Stat. §47-117, express warranties run from 22
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the "vendor" to the "purchaser." "Vendor" is defined to mean the declarant of the conversion condominium and "purchaser" means the original buyer, his heirs, or designated representatives. Gen. Stat. §47-116. Conn.
Under §47-274(c), "[a]ny conveyance of a
unit transfers to the purchaser all express warranties of quality made by previous sellers only to the extent such a conveyance would transfer warranties pursuant to Chapter 827" [Conn. Gen. Stat. §47-116, et seq.]. Under §47-119 of Chapter 827,
warranties are not transferred to subsequent purchasers except in the case of a vendor conveying an improvement to an intermediate purchaser to evade the provisions of the NHWA, a situation not applicable here. Conn. Gen. Stat. §47-119.
There is no case law addressing this issue and the legislative history provides no guidance.7 Moreover, the NHWA
does not have a statutory provision defining "Association", as does the CIOA at Section 47-244(a)(4). See Starfish Condominium
Assoc. v. Yorkridge Service Corp., Inc., 295 Md. 693, 702-03 (Md. Connecticut
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App. 1983) (holding "each of the original purchasers of condominium units from the Joint Venture obtained from the Joint Venture the implied warranties as described in [Maryland
1781846, *3 (Conn. Super. Ct. Nov. 8, 2000) ("By its terms, the [NHWA] applies in situations where the vendor constructs the improvement on real estate owned directly or indirectly by the vendor and subsequently conveys the improved real estate to the purchaser."); see Jablonsky v. Klemm, 377 N.W. 2d 560 (N.D.
1985) (affirming trial court decision apportioning damages between the individual unit owners and denying recovery to those subsequent owners who purchased their units with notice of the defective retaining wall).
Maryland's Real Property §11-109(d)(4) provides that a council of unit owners has the power: (4) to sue and be sued, complain and defend, or intervene in litigation or administrative proceedings in its own name on behalf of itself or two or more unit owners on matters affecting the condominium. Connecticut's CIOA contains a similar provision at §47-244(a)(4), whereas the NHWA does not contain such a provision. 24
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Does the CIOA Apply? Yes. CIOA §47-244(a)(4) "Association" Section 47-244(a)(4) of the CIOA states that an Association may "[i]nstitute, defend or intervene in litigation or administrative proceedings in its own name on behalf of itself or two or more unit owners on matters affecting the common interest community." Plaintiff contends that §47-244(a)(4) provides the Association with full statutory rights to represent the Unit Owners in a breach of warranty action [Doc. #38 at 18], citing, Candlewood Landing Condo. Assoc., Inc. v. Town of New Milford, 44 Conn. App. 107 (1997) (holding Conn. Gen. Stat. §47-244(a)(4) includes right of Association to take tax appeals on behalf of unit owners); and Caswell Cove Condo. Assoc., Inc. v. Milford Partners, Inc., 58 Conn. App. 217 (2000) (condominium association has standing to bring quiet title action against land development company). Clearly, §47-244(a)(4) of the CIOA does not confer
independent express warranty rights under the CIOA on the Association, as express warranties do not run to the Association, Conn. Gen. Stat. §§47-117, 47-274(a). Nevertheless, "§47-
244(a)(4) contains no limitations on a condominium association
Assoc. Inc., 44 Conn. App. at 111; Caswell Cove Condo. Assoc. Inc., 58 Conn. App. at 224 (Section 47-244(a)(4) "contains no exceptions or limitations on a condominium association
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authority to act on behalf of the unit owners as long as at least two unit owners agree.").
Did the Public Offering Statement Comply with Connecticut Law? Yes. Connecticut law requires that, "before offering any interest in a unit to the public, [a declarant of a common interest community or condominium conversion] shall prepare a public offering statement conforming to the requirements of sections 47264 to 47-267."9 Section 47-264(a)(2) requires that a POS "shall contain or fully and accurately disclose," among other things, "[a] general description of the common interest community, including to the extent known, the types, number and declarant
for Winthrop House, at paragraph 2(c), "Rehabilitation Work," states, in relevant part, "[a]ll repair and rehabilitation work will be done at the sole discretion of the Declarant. The
Declarant makes no representation as to the specific repair and rehabilitation work to be done or as to the date of completion of any such work." [Def. Ex. A, ¶2(c)] (emphasis added). Section 47-264(a)(10) also requires that a POS contain
See The Common Interest Ownership Act, Part IV, entitled "Protection of Purchasers," Conn. Gen. Stat. §47-263(a). 26
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"[t]he terms and significant limitations of any warranties provided by declarant, including statutory warranties and limitations on the enforcement thereof or on damages." Gen. Stat. §47-264(a)(10). Conn.
The POS for Winthrop House at
paragraph 10(A) sets out the statutory warranties under the Connecticut Common Interest Ownership Act, in full text, as follows: (1) Section 47-274, "Express Warranties of Quality"; (2) Section 47-275 "Implied Warranties of Quality"; (3) Section 47276, "Exclusion or Modification of Implied Warranties of Quality"; (4) Section 47-277, "Statute of Limitation for Warranties". Paragraph 10(B) of the Winthrop House POS provides
a "second statutory warranty" from the New Home Warranties Act, in full text, as follows: (1) Section 47-116, "Definitions"; (2) Section 47-117, "Express Warranties"; (3) Section 47-118, "Implied Warranties"; (4) Section 47-119, "Vendor Not to Evade by Intermediate Transfer; and (5) "Warranties Created by Chapter 827 Additional to Any Other Warranties.
Limitations on Warranties In compliance with Conn. Gen. Stat. §47-264(a)(10), the Winthrop House POS contains a section in paragraph 10, entitled "LIMITATIONS ON WARRANTIES," which states, PURSUANT TO SECTIONS 47-276(b) [exclusion or modification of implied warranties of quality] AND 47-118(d) [exclusion or modification of implied warranties] OF THE CONNECTICUT GENERAL STATUTES, THE DECLARANT WILL INCLUDE IN ITS PURCHASE AGREEMENT THE FOLLOWING PARAGRAPHS WHICH PROVIDE THAT CERTAIN OF THE WARRANTIES DESCRIBED ABOVE ARE EXCLUDED: 1. THE IMPLIED WARRANTIES OF SECTIONS 4727
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275(b) AND 47-118(a) THAT THE IMPROVEMENTS ARE: (1) FREE FROM FAULTY AND/OR DEFECTIVE MATERIALS, (2) CONSTRUCTED IN ACCORDANCE WITH APPLICABLE LAW AND ACCORDING TO SOUND ENGINEERING AND CONSTRUCTION STANDARDS, (3) CONSTRUCTED IN A WORKMANLIKE MANNER, AND (4) FIT FOR HABITATION ARE EXCLUDED TO THE EXTENT THE IMPROVEMENTS ARE COMPLETED AS OF THE DATE OF THE PURCHASE AGREEMENT. SPECIFICALLY, THE DECLARANT MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT TO ANY STRUCTURAL COMPONENT OF THE BUILDING; THE EXTERIOR FACADE OF THE BUILDING; THE ROOF; THE BOILERS OR ANY OTHER PART OF THE HEATING SYSTEM; THE ELECTRICAL SYSTEM, THE HOT WATER SYSTEM, OR THE PLUMBING SYSTEM OR ANY PART OF ANY SUCH SYSTEMS; OR WITH RESPECT TO ANY KITCHEN CABINETS, CARPETING, TILING, WALLPAPER, PAINT OR OTHER SURFACE FINISHINGS OF ANY KIND, WOODWORK, BATHROOM FIXTURES, OR UTILITY FIXTURES OR OUTLETS. 2. THE DECLARANT MAKES NO WARRANTIES AS TO THE CONDITION OF ANY HOT WATER HEATER, AIR CONDITIONER, KITCHEN EQUIPMENT OR APPLIANCES OR OTHER ITEMS CONSIDERED CONSUMER PRODUCTS UNDER THE MAGNUSEN-MOSS FEDERAL TRADE COMMISSION ACT. THE DECLARANT WILL DELIVER TO BUYER ANY MANUFACTURER
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NO ADDITIONAL EXPRESS OR IMPLIED WARRANTIES, UNLESS REQUIRED BY LAW, ARE MADE BY THE DECLARANT. [Def. Ex. A, POS ¶10B].
Architect/Engineering Survey When the community interest ownership involves a building conversion, such as Winthrop House, Connecticut law sets additional requirements for the POS. 47-267(a) provides, The public offering statement of a common interest community containing any conversion building shall contain, in addition to the information required by section 47-264: (1) A statement by the declarant, incorporating a report prepared by a registered architect or engineer, describing the present condition of all structural components and mechanical and electrical installations material to the use and enjoyment of the building; (2) a statement by the declarant of the approximate dates of construction, installation and major repairs, and the expected remaining useful life of each item reported on in subdivision (1) of this subsection, together with the estimated cost, in current dollars, of replacing each of the same; and (3) a list of any outstanding notices from the municipality of uncured violations of building code or other municipal regulations, together with the estimated cost of curing those violations. The Winthrop House POS includes an Architect/Engineering Survey dated December 28, 1994, prepared for Brookside Elm by Preiss Breismeister P.C., Architects. [Def. Ex. G to the POS]. The Survey contains thirty-eight separate entries, "describing the present condition of all structural components and mechanical 29 Conn. Gen. Stat. Section
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and electrical installations material to the use and enjoyment of the building", including the following information required by Conn. Gen. Stat. §47-267(a): the present condition, approximate
date of construction/installation, approximate date of major repair, remaining useful life, current cost to replace. Survey estimates the total building replacement cost to be $7,390,500. Regarding building codes or municipal regulations, The
§47-267(a)(3), the Survey states, Electrically, the entire building should be upgraded, as well as the fire alarm and smoke systems. There are a number of issues which do not meet current codes, many of which would be considered to be "grandfathered" and allowed to remain unchanged provided there are no renovations to these portions of the building. There are certain life safety issues which may be required to be updated by code and by law (such as smoke detection). There are other issues which must be "repaired" such as the cracks, leaks, door operation, etc. Other repairs will be required very shortly and should be made as a part of a preventative maintenance program reroofing, plumbing traps, etc. [POS Ex. G].
The Survey further states, This report is based upon the observations of the visible apparent condition of the building and its major components on the date of inspection. Preiss Breismeister P.C. Architects makes no representation regarding latent or concealed defects which may exist and no warranty or guarantee is expressed or implied. . . . [POS Ex. G].
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The Purchase Agreement The Purchase Agreement at paragraph 12, Limited Warranties, states in relevant part, Portions of the Unit, Common Elements and Limited Common Elements have already been completed. Buyer has inspected those portions to the extent desired by Buyer and agrees to accept them, "as is," in their existing condition subject to normal wear and tear between now and the time of Closing. Seller makes no warranties except those specifically required under Sections 75 through 78 of the Act, Conn. Gen. Stat. Section 47-274-Section 47-277, if any, as more fully described and limited in the Limited Warranty Administration Program set forth in the Public Offering Statement at Exhibit H. THESE WARRANTIES ARE LIMITED TO THE DURATION SET FORTH IN THE STATUTE . . . All implied warranties are hereby disclaimed and excluded with respect to defects which exceed the specific standards of the Limited Warranty Administration Program, (the "Warranty Standards"), and Buyer consents to the exclusion of implied warranties exceeding said specific standards from whatever source. Buyer agrees that the price paid contemplates this exclusion. The Purchase Agreement at paragraph 24, Acknowledgments, states in relevant part, Buyer acknowledges that he has read this Agreement and that he understands its terms. Buyer further acknowledges that prior to the date hereof Buyer received a copy of the Public Offering Statement for Winthrop House, including the Declaration and the Bylaws. This Agreement, together with any exhibits attached hereto or to the Public Offering Statement, contains the entire Agreement of the parties and no oral representations or statements, whether by the Broker, its agents or employees, or otherwise, shall be considered binding upon either of the parties. Except as otherwise specifically 31
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provided herein, this Agreement shall not be terminated, modified or waived except by a writing signed by both parties . . . . The Purchase Agreement at paragraph 17, Important, states in relevant part, RECEIPT OF A COPY OF THE PUBLIC OFFERING STATEMENT FOR WINTHROP HOUSE NOT LATER THAN THE DATE SET FORTH ABOVE IS HEREBY ACKNOWLEDGED, AND BUYER UNDERSTANDS THAT THE STATEMENT SHOULD BE EXAMINED. . . . . IN THE EVENT THAT BUYER FAILS TO CANCEL THIS AGREEMENT, IT SHALL BE ACKNOWLEDGED THAT BUYER IS RELYING ON THE DISCLOSURES, DESCRIPTIONS, AND REPRESENTATIONS MADE IN THE PUBLIC OFFERING STATEMENT AND THIS AGREEMENT AS THE BASIS FOR THIS PURCHASE, AND NOT ANY REPRESENTATIONS, INFERENCES OR UNDERSTANDINGS NOT INCLUDED IN THESE DOCUMENTS. [Pl. Ex. DD; Def. Ex. D, §Y]. The Court finds, and the parties do not dispute, that the Winthrop House POS complied with the requirements of Conn. Gen. Stat. §§47-263 (preparation of public offering statement. Liability); 47-264 (public offering statement. General provisions and requirements); and 47-267 (requirements for public offering statement when community contains conversion building). The
warranty provision contained in paragraph 10 of the POS listed the statutory warranties available to each buyer under the NHWA and CIOA. The limitations on warranties, set forth in capital
letters, specify the statutory warranties that are excluded, stating, "the declarant makes no representation or warranty whatsoever with respect to any structural component of the building." [POS ¶10]. Declarant also stated there were no 32
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warranties as to several specific improvements and systems. Finally, declarant complied with the statutory requirement of section 47-267, requiring that the POS for a conversion condominium contain a statement by an architect or engineer describing the present condition of all the structural components and mechanical and electrical installations, major repairs, expected remaining useful life of each item reported, and estimated cost for replacement. The Architect/Engineering Report
served a second purpose, informing the buyer of the condition of the building based on a visual inspection of nearly all the systems about which the plaintiff is now complaining. See Pl. Ex. BB Master Punchlist. In addition to receiving the
Architect/Engineering Report, each prospective buyer was free to conduct his own inspection. The plain language of section 47-
118(b) warns that no implied warranties shall "apply to any condition that an inspection of the premises would reveal to a reasonably diligent purchaser at the time the contract is signed." Plaintiff, at a minimum, was on notice of the defects listed in the Report. Warranties"). Conn. Gen. Stat. §47-118(b) ("Implied
Were Express Warranties Created? Yes. Yes, as to the eleven improvements in the PreissBreismeister letter and the building plans only. 1. The New York Supplement
The Association asserts that express warranties were created 33
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by declarant in the Preiss Breismeister Letter10 dated November 14, 1995, and the Architect
a. Preiss Breismeister Letter "Special Risks" Plaintiff relies on the following passage in paragraph one of the Preiss Breismeister Letter as the first confirmation of express warranties. [Doc. #33 at 14]. As part of the renovation of Winthrop House . . . we will be making many repairs and upgrades to the building. This work will eliminate any "Special Risks" as defined for the New York State Offering Plan.11
This document is also referred to by plaintiff as the "Remediation Guaranty." Defendants strongly disagree that the unsigned Preiss Breismeister letter, dated November 14, 1995, is a "remediation guaranty." [Doc. #37 at 13-14]. "Special risks" are defined in the Martin Act regulations, 20 NYCRR §20.3(c), as follows: (c) Special risks. This section, if applicable, must be on a separate page following the table of contents. All features of a plan which involve significant risk or are reasonably likely to affect disproportionately or unusually the common charges or obligations of unit owners in future years of condominium operation must be conspicuously disclosed and highlighted. A brief description of the nature of the risk should be given in this section and a more thorough description should be given in a referenced later section. Uncertainties as to whether a risk should be described in this section would be resolved in favor or inclusion. 34
11
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Plaintiff argues that, because the "Special Risks" section of the N.Y. Supplement makes no reference to any remedial work to be done by the Association with regard to the defects, then "all remedial work detailed [in the Preiss Breismeister letter] would be undertaken by [Brookside Elm Association]." [Doc. #33 at 15]. Paragraph 5 Improvements Plaintiff relies on the following passage in paragraph five of the Preiss Breismeister Letter as the second confirmation of express warranties. [Doc. #33 at 15].
The Sponsor will make the following improvements to correct defects noted in the [11/14/95] Architect
b.
Architect
Plaintiff contends that express warranties were also confirmed in the Architect
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§20.4. [Pl. Ex. C]. paragraphs:
Plaintiff relies on the following
We certify that the report based on our visual inspection: (iv) does not contain any untrue statement or a material fact. (v) does not contain any fraud, deception, concealment, or suppression. (vi) does not contain any promise or representation as to the future which is beyond reasonable expectation or unwarranted by existing circumstances. [Pl. Ex. C]. The certificate also contains a statement, not relied on by plaintiff, that "[w]e certify that the report and all documents
prepared by us disclose all the material facts which were then discernable for a visual inspection of the property." [Pl. Ex. C]. The architects also stated that "it is to be understood that
all aspects of the physical property cannot be determined by a visual inspection and that all statements contained in the certification are premised on and limited to such visual inspection" and that "[t]his statement is not intended as a guaranty or warranty of the physical condition of the property." Id.
c.
Declarant
Finally, plaintiff locates a fourth confirmation of the creation of express warranties in the Declarant
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appended to the New York Supplement. [Pl. Ex. A].
Plaintiff
relies on the following passages in support of its argument. We jointly and severally certify that the Offering Plan does, and that documents submitted hereafter by us which amend or supplement the Offering Plan will: (4) not contain any untrue statement of material fact; . . . . (6) not contain any promise or representation as to the future which is beyond reasonable expectation or unwarranted by existing circumstances; . . . . This certification is made under penalty of perjury for the benefit of all persons to whom this offer is made. [Pl. Ex. A]. Express warranties may be created by a written affirmation of fact or promise; by a written description of the improvement, including plans and specifications; or by sample or modes, all as provided in §47-274. Brookside Elm states that the Letter "lists 11 areas of improvements the writer indicated would be made." [Doc. #34 at 15]. The Court finds that the affirmative language
"will" followed by a list of eleven items to be worked on created express warranties under the CIOA §47-274(a)(2). Defendants point out that the N.Y. Supplement specifically states that it was "not directed to, nor shall it create, any rights in or obligations to any other person other than a New York purchaser." [Def. Ex. D at 8]. They argue, and the Court agrees, that "even assuming arguendo that the Press/Breismeister [letter] . . . created certain express warranties (a position Brookside Elm vigorously disputes) the alleged warranties would 37
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only run to the 6 New York Purchasers." [Doc. #37 at 15].
By
its terms, any express warranties created in the N.Y. Supplement do not run to the Association, would not run to subsequent purchasers, and would not run to purchasers who did not receive the N.Y. Supplement. N.Y. Suppl. at 8.
Defendants also argue that "[t]here were no express warranties made by Brookside Elm that Winthrop House would be made fully compliant with all current codes, and that every defect or every item requiring maintenance or repair work would be repaired, replaced, or rebuilt so that the building would be in "like-new" condition." [Doc. #37 at 13]. The Court agrees
that the unsigned Preiss Breismeister letter dated November 14, 1995 does not create an express warranty to rebuild the building in "like-new condition." Defendants also assert that the Preiss
Breismeister letter is not a "Remediation Guarantee," arguing that nowhere in the document is it referred to as a "Remediation Guarantee," and nowhere in the document "is there any guaranty or warranty with respect to the performance of any building system or component." [Doc. #37 at 13]. The Court agrees that the
letter is not a remediation guarantee as plaintiff contends. Indeed, plaintiff
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the Master Punchlist, or to remediate defects to a "like new" condition. The Court finds that, at best, the Letter created a promise to the six N.Y. purchasers to make "improvements to correct
defects" in the eleven items listed, the scope of which is described by Brookside Elm in the Preiss Breismeister Letter.12 Finally, Brookside Elm argues "no where in the [Letter] is there any indication that it overrides the clear, explicit, and oft-repeated language of the POS that, while some repairs are contemplated, Brookside Elm retains the right in its sole discretion to determine what repair, if any, will be made and to determine the scope of any repairs undertaken." [Doc. # 37 at 1415]. Defendants correctly point out that there is nothing in the [Doc. #34
Letter to negate this language contained in the POS.
12
The Court is unable to determine on this record whether Brookside Elm completed the eleven itemized improvements to Winthrop House as detailed in the Preiss Breismeister Letter. Nevertheless, plaintiff
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at 39]. The burden then shifts to defendants to show that, once they created the expectation that the eleven items listed in the Preiss Breismeister Letter
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