Opinion
No. CV 06-5001276 S
April 23, 2007
MEMORANDUM OF DECISION
This is a decision on the defendant's motion to strike the plaintiff's complaint, dated May 22, 2006. On February 15, 2006, the plaintiff, Maryalice K. Cooke, filed a three-count complaint against the defendant, Wendy Everett Cooke. This action arises out of the transfer of property by Maryalice Cooke's former husband, Richard Cooke, to Richard Cooke's current spouse, Wendy Cooke.
The complaint alleges the following facts. On February 18, 1992, Maryalice Cooke entered a separation agreement, under duress, with her husband, Richard Cooke, as part of the dissolution of their marriage, to transfer to him a one-half interest in 1123 Sasco Hill Road, Fairfield, Connecticut in exchange for the sum of $72,500 payable when the property is sold. At that time, Richard Cooke represented that he was going to sell the property. Maryalice Cooke transferred her one-half interest to Richard Cooke who, shortly thereafter, married his present wife, Wendy Cooke.
The complaint alleges that Richard Cooke then took a number of steps to defraud Maryalice Cooke out of the payment due for her interest in the house. Rather than sell the property, he filed for Chapter 11 bankruptcy. As part of the bankruptcy, he filed a statement of intention to keep the property.
When the attempt at bankruptcy reorganization failed, Wendy Cooke's stepfather paid off the second and third mortgages on the property, obtained relief from the bankruptcy stay and obtained title to the property through strict foreclosure. The stepfather then transferred the full interest in the property to the Everett Reed Trust. The trust then transferred the property to the defendant, Wendy Cooke, who later transferred a one-half interest back to Richard Cooke.
About seven years later, Maryalice Cooke filed a judgment lien on the property for $278,000. Richard Cooke, on September 15, 2004, then transferred his one-half interest in the property back to Wendy Cooke. This is the transfer claimed to be fraudulent in this action.
On December 7, 2005, the United States Bankruptcy Court for the District of Connecticut found that Richard Cooke "by false pretenses, false representations, and actual fraud, intended to get and keep control of the property without paying [Maryalice Cooke] for it. To accomplish that scheme, he wove a series of insider transactions that accommodated the path between his February 18, 1992 implicit promise to sell the property and his December 22, 1992 Statement of Intention in which he reported his plan to retain it for himself." The court held that the $72,500 debt was not dischargeable and ordered Richard Cooke to pay that sum to Maryalice Cooke.
Count one of the complaint is based on General Statutes § 52-552b and alleges that Wendy Cooke is a creditor of Richard Cooke who made an actual fraudulent conveyance of his interest in the property to Wendy Cooke with the actual intent to hinder, delay and defraud his creditors, including Maryalice Cooke. Count two is also based on the fraudulent conveyance act and alleges that Richard Cooke made a constructive fraudulent conveyance of his interest in the property to Wendy Cooke. The count further alleges that Richard Cooke did not receive reasonably equivalent value in exchange for transferring his one-half interest and that he was insolvent at the time. Count three alleges that Wendy Cooke is unjustly enriched by her interest in the property, and that she holds her interest in the property by way of unconscionable conduct and questionable means. The count alleges that Wendy Cooke should not hold an interest in the property and should hold the property under a constructive trust.
Wendy Cooke filed a motion to strike all three counts of the complaint on the grounds that counts one and two assert contradictory claims and do not properly allege the transfer of an asset, and count three does not allege the elements of a constructive trust. Maryalice Cooke filed an objection to the motion to strike on June 8, 2006. Wendy Cooke also filed a reply memorandum on June 19, 2006. The matter was heard on short calendar on January 16, 2007.
I
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). In ruling on a motion to strike, the trial court examines the complaint "construed in favor of the [plaintiff], to determine whether the [pleading party has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997). "[T]he court is limited to the facts alleged in the complaint." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997).
II. A.
Wendy Cooke moves to strike counts one and two on numerous grounds. She argues that Maryalice Cooke fails to state that she had a claim, or that she was a creditor under the Uniform Fraudulent Transfer Act (UFTA) because counts one and two contain contradictory claims and do not sufficiently allege the transfer of an asset. She argues that, on the one hand, Maryalice Cooke seeks an interest in the property because of the alleged invalidity of her 1992 divorce agreement and, on the other hand, Maryalice Cooke seeks $72,500 pursuant to the same divorce judgment. Because Maryalice Cooke fails to distinguish between such contradictory positions, Wendy Cooke argues that this makes the allegations unintelligible and insufficient as a matter of law.
Wendy Cooke also argues that counts one and two do not allege the transfer of an "asset" under General Statutes § 52-552b(2) because there is no allegation that the property is not encumbered. She asserts that § 52-552b(2) does not apply to encumbered property and that it must be pleaded that the property is not subject to liens.
Maryalice Cooke argues that her complaint sufficiently alleges that she had a claim and that she was a creditor of Richard Cooke when he transferred his one-half interest to Wendy Cooke. She asserts that General Statutes § 52-552b(3) does not require that a claim be undisputed. She relies on the ruling by the bankruptcy court, holding that the $72,500 debt was not dischargeable.
Maryalice Cooke also contends that the UFTA does not require a litigant to plead the value of an asset transferred for purposes of a fraudulent transfer allegation. She agrees that the amount of any liens reduce the value of the asset transferred but that the amount of liens need not be pleaded.
B.
General Statutes § 52-552e(a) provides that "[a] transfer made . . . by a debtor is fraudulent as to a creditor, if the creditor's claim arose before the transfer was made . . . and if the debtor made the transfer . . . (1) [w]ith actual intent to hinder, delay or defraud any creditor of the debtor . . ." The statute further provides that a transfer is fraudulent "if the debtor made the transfer . . . (2) without receiving a reasonably equivalent value in exchange for the transfer . . . and the debtor . . . (B) intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due." General Statutes § 52-552f(a) provides that "[a] transfer made . . . by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made . . . if the debtor made the transfer . . . without receiving a reasonably equivalent value in exchange for the transfer . . . and the debtor was insolvent at that time . . ." The statute further provides that "(b) [a] transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time and the insider had reasonable cause to believe that the debtor was insolvent."
Both counts one and two are based on the premise that Maryalice Cooke was a creditor who had a claim against Richard Cooke. General Statutes § 52-552b(3) defines a claim as "a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or insecured." General Statutes § 52-552b(4) defines creditor as "a person who has a claim."
Both counts clearly state sufficient facts that Maryalice Cooke was a creditor with a claim against Richard Cooke. Either the finding and order of the Bankruptcy Court, the original separation agreement or the judgment lien would present sufficient facts that Maryalice Cooke was a creditor with a claim. The argument, made by Wendy Cooke, that the allegation that the separation agreement was entered "under duress," presents an alternative, irreconcilable theory of recovery, has no basis. The plaintiff never seeks to invalidate the separation agreement or her divorce and never uses her allegation of duress for that purpose. There is nothing irreconcilable about the allegations of either count. There is nothing pleaded that would affect her status as a creditor having a claim. Therefore, the motion to strike counts one and two on this basis is denied.
See paragraph five of the complaint.
C.
General Statutes § 52-552b(2)(A) defines an asset as "property of a debtor, but the term does not include . . . [p]roperty to the extent it is encumbered by a valid lien . . ." "Thus, a transfer cannot be considered fraudulent if, at the time of the transfer, the transferred property is encumbered by valid liens exceeding the property's value because the property would no longer be considered an asset under § 52-552(b)(2), and only assets may be transferred fraudulently." National Loan Investors, L.P. v. World Properties, LLC, 79 Conn.App. 725, 732, 830 A.2d 1178 (2003), cert. denied, 267 Conn. 910, 840 A.2d 1173 (2004). Although it is clear that the amount of a valid lien would reduce the value of an asset transferred, and that property may be encumbered to such an extent that it loses its value as an asset, the statute does not require a plaintiff in a fraudulent transfer case, to plead the amount of any liens on the property transferred.
In Dietter v. Dietter, 54 Conn.App. 481, 737 A.2d 926, cert. denied, 252 Conn. 906, 743 A.2d 617 (1999), the court did not find that a fraudulent transfer was made because the property was encumbered. The court stated: "The defendant neither claims, nor does the record disclose, that the trustee transferred . . . any assets that were not encumbered by a valid lien." Id., 494. No appellate holding has been found imposing a burden on the plaintiff that unless the plaintiff pleads the amount of all liens, the pleading will be insufficient for failing to plead that an asset was transferred.
But see The Cadle Company v. Gabel, Superior Court, judicial district of Middlesex, Docket No. CV00 0091155 (July 31, 2001, Gilardi, J.).
Although evidence of the value of any lien must be considered in determining the value of any asset transferred, either as part of a summary judgment determination or at the time of trial, the value of all liens need not be pleaded in the complaint. A defendant can always introduce evidence of the value of liens in excess of the value of the property transferred to support an argument that the property is not a viable asset. This, however, is an evidentiary matter and not a pleading requirement.
In addition, the plaintiff has pleaded that Wendy Cooke's stepfather paid off the second and third mortgages, took title by strict foreclosure and, through a series of transactions, transferred the property back to Richard Cooke. Richard Cooke then made the alleged fraudulent transfer. When interpreting pleadings, "[t]he burden [is] upon the pleaders to make such averments that the material facts should appear with reasonable certainty; and for that purpose [pleaders are allowed] to use their own language. Whenever that language fails to define clearly the issues in dispute, the court will put upon it such reasonable construction as will give effect to the pleadings in conformity with the general theory which it was intended to follow . . ." (Emphasis in original: internal quotation marks omitted.) Dietter v. Dietter, supra, 54 Conn.App. 489. In construing the complaint in the manner most favorable to sustaining its legal sufficiency, the court finds that the complaint does sufficiently state that the property has value, such that it is considered to be an asset for fraudulent transfer purposes. Therefore, the motion to strike counts one and two on this basis is denied.
III.
Wendy Cooke moves to strike count three on the ground that Maryalice Cooke does not allege the required elements of a constructive trust. She argues that count three does not allege that Richard Cooke possessed the requisite intent, does not allege that Maryalice Cooke failed to pay consideration for Richard Cooke's one-half interest in the property and does not allege the elements of unjust enrichment.
Maryalice Cooke argues that the allegations of the count sufficiently plead actual or constructive fraud, duress or abuse of confidence, and the commission of a wrong. Accordingly, Maryalice Cooke concludes that count three is sufficient.
Although Maryalice Cooke frames this count as a claim for a constructive trust, a constructive trust is not a cause of action, but is merely a remedy requested from the court. See Macomber v. Travelers Property Casualty Corp., 261 Conn. 620, 623 n. 3, 804 A.2d 180 (2002).
"A constructive trust arises contrary to intention and in invitum, against one who, by fraud, actual or constructive, by duress or abuse of confidence, by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either has obtained or holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy . . . A constructive trust arises whenever another's property has been wrongfully appropriated and converted into a different form . . . [or] when a person who holds title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it . . . The issue raised by a claim for a constructive trust is, in essence, whether a party has committed actual or constructive fraud or whether he or she has been unjustly enriched." (Citation omitted; internal quotation marks omitted.) Stornawaye Properties, Inc. v. O'Brien, 94 Conn.App. 170, 175-76, 891 A.2d 123 (2006).
Count three alleges the legal conclusions that Wendy Cooke holds her interest by way of unconscionable conduct and questionable means and that she was unjustly enriched by the interest. Although certain paragraphs of the complaint are incorporated by reference into count three, paragraph twenty-seven, which provides that "Richard Cooke did not receive reasonably equivalent value in exchange for the transfer," is not incorporated. However, the plaintiff does allege that Richard Cooke committed fraud in his insider transactions with the property and that the defendant now "holds and enjoys said interest" in the property and is unjustly enriched.
After examining the third count, and construing the same in a light most favorable to the plaintiff, the court concludes that the plaintiff has sufficiently pled a claim for a constructive trust. The plaintiff has claimed a fraudulent conveyance and that the defendant will be unjustly enriched by being allowed to retain the property. Those allegations are sufficient to support a constructive trust, and the allegations are definitive enough to notify the court and opposing counsel that such a claim is being made. Therefore, the motion to strike count three is denied.
IV.
In conclusion, the plaintiff's motion to strike is denied in its entirety.