Caseflicks

Connecticut Appellate Court • 1991

Frimberger v. Anzellotti

25 Conn. App. 401 | 594 A.2d 1029 | 1991 Conn. App. LEXIS 279

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Takeaway

In short, this case holds that an undiscovered regulatory violation is not automatically an encumbrance; absent a present, enforceable governmental interest, buyers must protect themselves through investigation and express contractual allocation of the risk.

Background

In 1978, the defendant's predecessor filled part of a waterfront lot adjoining tidal marshland and built a bulkhead, apparently without the wetlands permit required by Connecticut law. The predecessor later conveyed the property to the defendant, and in 1985 the defendant conveyed it to the plaintiff by warranty deed. The deed warranted that the property was free of encumbrances, subject to listed building, zoning, easement, and recorded restrictions.

After purchasing the property, the plaintiff sought to repair the bulkhead and filled area. At his request, the Department of Environmental Protection (DEP) surveyed the wetlands boundary and concluded that the fill and bulkhead, and possibly part of the house, encroached on tidal wetlands. DEP advised the plaintiff to submit an application showing why the existing bulkhead and fill should remain. The plaintiff never filed that application, and DEP never issued an order requiring restoration, abatement, or other corrective action.

Instead, the plaintiff sued the defendant for breach of the deed's covenant against encumbrances and innocent misrepresentation. The trial court found that the unpermitted fill violated the wetlands statute, held that the defendant had breached the warranty and innocently misrepresented the property's condition, and awarded $47,792.60 for anticipated corrective costs and diminution in the property's value. The defendant appealed. The separate injunctive relief entered on the plaintiff's trespass claim was not challenged and remained undisturbed.

Issues

Issue #1

Whether a latent, unrecorded wetlands-law violation existing when land is conveyed constitutes an encumbrance that breaches a warranty deed's covenant against encumbrances.

Holding

No. A latent violation of a land-use statute or governmental regulation is not an encumbrance under the covenant against encumbrances where it is unrecorded, unknown to the seller, and has not resulted in official enforcement action or a recordable interest in the property.

Reasoning

An encumbrance is a third party's right or interest in land that diminishes its value while remaining consistent with passage of title. Traditional encumbrances include pecuniary charges such as liens, lesser estates such as leases or dower rights, and easements or servitudes. The covenant against encumbrances operates at the moment of conveyance, so a qualifying encumbrance must already exist when the deed is delivered.

The court adopted the approach of Fahmie v. Wulster and similar authorities: a need to repair or alter property to comply with a statute or regulation does not itself create an encumbrance. Treating every latent regulatory violation as an encumbrance would inject substantial uncertainty into conveyancing and title insurance, because ordinary title searches—and often even physical inspections—would not reveal such conditions.

Here, the alleged wetlands violation was not recorded, was unknown to the defendant, and came to light only after the plaintiff sought permission to undertake new work near the wetlands. DEP had not ordered the plaintiff to remove the fill, restore the wetlands, or otherwise correct the condition at the time of the sale or by the time of trial. The alleged violation therefore had not ripened into a present, recordable governmental interest or a real and substantial probability of litigation or loss affecting marketability at conveyance.

The court emphasized that buyers and sellers may allocate the risk of latent regulatory violations by contract or deed language. This plaintiff, an attorney and experienced waterfront developer aware of wetlands regulation, could have required a wetlands survey before closing or bargained for indemnity or other express protection.

Issue #2

Whether the deed's warranty against encumbrances supported the plaintiff's claim for innocent misrepresentation.

Holding

No. Because the warranty was not false, it was not a false representation of material fact and could not establish innocent misrepresentation.

Reasoning

Innocent misrepresentation requires a material factual representation made to induce the purchase, falsity, justifiable reliance, and resulting damages. The trial court identified no statement concerning the wetlands area apart from the deed's warranty that the property was free of encumbrances.

Because the latent wetlands condition was not an encumbrance, the warranty was not untrue. Without a false representation, the plaintiff could not prove innocent misrepresentation, regardless of whether he relied on the deed's language in purchasing the property.

Issue #3

Whether the plaintiff could recover anticipated remediation costs and diminution-in-value damages based on the alleged wetlands violation.

Holding

No. The asserted damages were speculative because DEP had not required corrective action and the plaintiff had not sought approval for the existing condition.

Reasoning

DEP suggested that the plaintiff submit an application to justify retaining the bulkhead and fill, but the plaintiff did not file one. As a result, there was no administrative decision defining what corrective work, if any, would be required, and no agency order from which the plaintiff could seek review.

The trial court's award rested on projected costs under a proposed application and an anticipated loss in value from the unresolved wetlands issue. Given the absence of an enforcement order, an application, or any imminent litigation or loss, those claimed damages were too uncertain. In any event, because the deed covenant and misrepresentation claims failed, the damages award on those claims could not stand.