Opinion
HHDCV186104534S
08-01-2019
Henry Robert, LLC v. Samuel Carroll et al.
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Dubay, Kevin G., J.
MEMORANDUM OF DECISION
Dubay, J.
FACTS
In this foreclosure action, the plaintiff, Henry Robert, LLC, seeks to foreclose on a $300,000 mortgage and note against the defendants, Samuel Carroll and Vediawattie Carroll, for real property located at 1 Kimberly Drive, Manchester. The plaintiff alleges that, on January 13, 2014, the parties entered into an agreement for the purchase of that property and the defendants executed a note and mortgage. The note is in default and the plaintiff seeks to foreclose on the mortgage.
Kelly Arthurs is also a named defendant because, by quitclaim deed dated April 8, 2018, Samuel Carroll deeded the property to her. Further, Vediawattie Carroll has been defaulted for failure to plead. For purposes of this memorandum, "the defendants" refers to Samuel Carroll and Kelly Arthurs.
On December 11, 2018, the plaintiff filed its complaint. On January 14, 2019, the defendants filed their answer, special defenses, and counterclaims. On February 11, 2019, the plaintiff filed a motion to strike the special defenses and counterclaims on the ground that they are insufficiently pleaded or fail to state a claim upon which relief may be granted. On April 1, 2019, the defendants filed their objection to the motion to strike. On May 6, 2019, the court heard oral argument at short calendar.
The defendants’ objection is untimely pursuant to Practice Book § 10-40(a). Nevertheless, the court, in its discretion, considers it. See Holt v. Adams, Superior Court, judicial district of Hartford, Docket No. CV-16-6070761-S (April 4, 2017, Dubay, J.) .
DISCUSSION
A motion to strike shall be used whenever any party wishes to contest the legal sufficiency of the allegations of any special defense and counterclaim. Practice Book § 10-39(a). The purpose of a motion to strike is to contest the legal sufficiency of the allegations of any counterclaim to state a claim upon which relief can be granted. Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). A motion to strike challenges the legal sufficiency of a pleading and, consequently, requires no factual findings by the trial court. Geysen v. Securitas Security Services USA, Inc., 322 Conn. 385, 398, 142 A.3d 227 (2016). The court construes the counterclaim in the manner most favorable to sustaining its legal sufficiency. Id. If any facts provable under the express and implied allegations in the pleadings support a cause of action, the pleadings are not vulnerable to a motion to strike. Bouchard v. People’s Bank, 219 Conn. 465, 471, 594 A.2d 1 (1991).
Special Defenses
The plaintiff first moves to strike the defendants’ eight special defenses on the ground that are insufficiently pleaded. The defendants object, arguing they pleaded sufficient allegations.
"The purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action." (Internal quotation marks omitted.) Danbury v. Dana Investment Corp., 249 Conn. 1, 17, 730 A.2d 1128 (1999). A special defense may not be used to plead facts inconsistent with facts laid out in a complaint. See Mitchell v. Guardian Systems, Inc., 72 Conn.App. 158, 167, 804 A.2d 1004, cert. denied, 262 Conn. 903, 810 A.2d 269 (2002). "[A] defendant’s failure to specially allege facts in support of a special defense is a ground for that defense to be stricken." Vendor Residential Management v. Estate of Zackowski, Superior Court, judicial district of Middlesex, Docket No. CV-17-6016941-S (August 10, 2017, Vitale, J.). "A valid special defense at law to a foreclosure proceeding must be legally sufficient and address the making, validity or enforcement of the mortgage, the note or both." LaSalle National Bank v. Shook, 67 Conn.App. 93, 96-97, 787 A.2d 32 (2001). Nevertheless, our courts permit equitable defenses to a foreclosure action. TD Bank, N.A. v. M.J. Holdings, LLC, 143 Conn.App. 322, 327-28, 71 A.3d 541 (2013).
The defendants allege eight special defenses: (1) lack of consideration; (2) lack of any agreement; (3) misrepresentation; (4) fraud; (5) violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110b et seq.; (6) breach of contract; (7) unjust enrichment; and (8) breach of the implied covenant of good faith and fair dealing. Beginning with the first special defense, lack of consideration, the defendants allege that there was no contemporaneous exchange of consideration because the plaintiff refused to transfer the property to them after receiving their money. "Lack of consideration is on its face a valid defense in a foreclosure action." (Internal quotation marks omitted.) Vanderbilt Mortgage & Financial, Inc. v. Caccamo, Superior Court, judicial district of Hartford, Docket No. CV-17-6083000-S (December 3, 2018, Dubay, J.). Here, the defendant’s facts sufficiently allege a defense that, if true, go to the invalidity of the note and mortgage. Therefore, the court denies the motion to strike the first special defense.
Turning to the second special defense of lack of any agreement, the defendants allege that the plaintiff failed to tender a purportedly executed warranty deed to the defendants. The defendants lacked the opportunity to review the deed or agree to its terms. This defense is inconsistent with the complaint because the complaint specifically alleges there was a contract between the parties. Thus, the court grants the motion to strike the second special defense.
As to the third special defense of misrepresentation, the defendants allege that the warranty deed represented that the plaintiff transferred title to the defendants subject only to the town’s rules and regulations and taxes owed on the "list of October 1, 2011." However, the plaintiff owed taxes prior to the 2011 list and failed to disclose that to the defendants. "[T]o establish the claim of negligent misrepresentation as a defense in [a] foreclosure action, the defendants [have] to establish (1) that the [plaintiff] made a misrepresentation of fact (2) that the [plaintiff] knew or should have known was false, and (3) that the [defendants] reasonably relied on the misrepresentation, and (4) suffered pecuniary harm as a result." (Internal quotation marks omitted.) Johnnycake Mountain Associates v. Ochs, 104 Conn.App. 194, 201, 932 A.2d 472 (2007), cert. denied, 286 Conn. 906, 944 A.2d 978 (2008).
Here, although the defendants fail to allege the second element of the action, the court infers that the plaintiff knew its representation was false. Assuming the truth of the allegations, the defendants sufficiently allege a claim of negligent misrepresentation in that the plaintiff misrepresented the status of taxes on the property, knew it was false, and that the defendants reasonably relied on to their detriment. The third special defense remains.
As to the fourth special defense, fraud, the court notes that it "is an equitable defense to a foreclosure action." Chase Manhattan Mortgage Corp. v. Machado, 83 Conn.App. 183, 188, 850 A.2d 260 (2004). "To establish liability for fraud, a plaintiff must be able to show by clear and convincing evidence that: (1) a false representation was made [by the defendant] as a statement of fact; (2) the statement was untrue and known to be so by [the defendant]; (3) the statement was made with the intent of inducing reliance thereon; and (4) the other party relied on the statement to his detriment." (Internal quotation marks omitted.) Stuart v. Freiberg, 316 Conn. 809, 821, 116 A.3d 1195 (2015). "[U]nder certain circumstances, there may be as much fraud in a person’s silence as in a false statement ... Mere nondisclosure, however, does not ordinarily amount to fraud ... It will arise from such a source only under exceptional circumstances ... To constitute fraud on that ground, there must be a failure to disclose known facts and, in addition thereto, a request or an occasion or a circumstance which imposes a duty to speak." (Internal quotation marks omitted.) DiMichele v. Perrella, 158 Conn.App. 726, 731, 120 A.3d 551, cert. denied, 319 Conn. 927, 125 A.3d 203 (2015).
In the present case, there are insufficient facts to show a representation by the plaintiff to show fraud or a failure to disclose facts. The defendants do not allege that the plaintiff represented any untruthful statement or that it knew such representation was false. At best, they allege that the plaintiff failed to disclose its tax obligations. However, there are no facts stating that the defendants asked about the plaintiff’s tax situation or that there was a duty for the plaintiff to make such a disclosure. Absent such allegations, the fraud special defense is legally insufficient. Thus, the court grants the plaintiff’s motion to strike the fourth special defense.
Turning to the fifth special defense, CUTPA, a CUTPA violation may not be asserted as a special defense to a foreclosure action. Bank of America, N.A. v. Aubut, 167 Conn.App. 347, 374, 143 A.3d 638 (2016); accord Bayview Loan Servicing, LLC v. Park City Sports, LLC, 180 Conn.App. 765, 779 n.5, 184 A.3d 1277, cert. denied, 330 Conn. 901, 192 A.3d 426 (2018). Thus, the court grants the motion to strike the fifth special defense.
Lastly, as to the sixth (breach of contract), seventh (unjust enrichment), and eighth (breach of the implied duty of good faith and fair dealing) special defenses, these defenses are mere legal conclusions without sufficient facts to support them. Moreover, "special defenses and counterclaims alleging a breach of an implied covenant of good faith and fair dealing and a breach of fiduciary duty are not equitable defenses to a mortgage foreclosure." (Footnote omitted.) New Haven Savings Bank v. LaPlace, 66 Conn.App. 1, 10, 783 A.2d 1174, cert. denied, 258 Conn. 942, 786 A.2d 426 (2001); Rosenblit Enterprises, LLC v. Dadi, Superior Court, judicial district of Hartford, Docket No. CV-18-6099509-S (February 11, 2019, Dubay, J.); RKL Financial Corp. v. DeLuco, Superior Court, judicial district of Hartford, Docket No. CV-16-6069888-S (August 21, 2018, Dubay, J.) (66 Conn.L.Rptr. 919, 921); People’s United Bank v. Balsome, Superior Court, judicial district of Hartford, Docket No. CV-14-6048926-S (May 10, 2017, Dubay, J.) (64 Conn.L.Rptr. 489, 491).
Therefore, the court grants the motion to strike as to the second, fourth, fifth, sixth, seventh, and eighth special defenses. The court denies the motion as to the first and third special defenses.
Counterclaims
The plaintiff next moves to strike the defendants’ counterclaims on the ground that they are insufficiently pleaded or fail to state a claim upon which relief may be granted. The defendants object, arguing that their claims are sufficient.
The plaintiff also argues that the defendants’ counterclaims are barred by the three-year statute of limitations pursuant to General Statutes § 52-577. This argument fails for two reasons. First, § 52-577 does not apply to counterclaims three, four, and five because they sound in contract, not tort. Second, it is not clear to the court that the parties agree that the complaint and counterclaims sets forth all the facts pertinent to the question of whether the action is barred by § 52-577 and that, therefore, it is proper to raise that question by a motion to strike. See Forbes v. Ballaro, 31 Conn.App. 235, 239, 624 A.2d 389 (1993).
"[A] counterclaim is a cause of action existing in favor of the defendant against the plaintiff and on which the defendant might have secured affirmative relief had he sued the plaintiff in a separate action ... A motion to strike tests the legal sufficiency of a cause of action and may properly be used to challenge the sufficiency of a counterclaim." (Internal quotation marks omitted.) JP Morgan Chase Bank, Trustee v. Rodrigues, 109 Conn.App. 125, 131, 952 A.2d 56 (2008). "[T]he general rule is that [a] counterclaim should be pleaded in exactly the same way the claim would be pleaded in the complaint in an independent action." (Internal quotation marks omitted.) Home Oil Co. v. Todd, 195 Conn. 333, 341, 487 A.2d 1095 (1985). "In assessing the legal viability of a counterclaim ... the claims must have a sufficient closeness that the trial of the complaint and counterclaim will not imperil judicial economy." CitiMortgage, Inc. v. Rey, 150 Conn.App. 595, 606, 92 A.3d 278, cert. denied, 314 Conn. 905, 99 A.3d 635 (2014).
The defendants allege five counterclaims: (1) fraud; (2) violation of CUTPA; (3) breach of contract; (4) unjust enrichment; and (5) breach of the implied covenant of good faith and fair dealing.
Beginning with the first counterclaim, fraud, the defendants allege that the plaintiffs committed fraud when it failed to record the deed to the property until more than two years after the alleged transfer, failed to pay taxes that it owed despite stating so in the contract, refused to remedy the situation when confronted, and allowed the property to go into a tax foreclosure, and failed to give consideration at the time of the purchase of the property. "To establish liability for fraud, a plaintiff must be able to show by clear and convincing evidence that: (1) a false representation was made [by the defendant] as a statement of fact; (2) the statement was untrue and known to be so by [the defendant]; (3) the statement was made with the intent of inducing reliance thereon; and (4) the other party relied on the statement to his detriment." (Internal quotation marks omitted.) Stuart v. Freiberg, supra, 316 Conn. 821.
In the present case, there are insufficient facts to show a representation by the plaintiff to show fraud or a failure to disclose facts. The defendants do not allege that the plaintiff represented any untruthful statement or that it knew such representation was false. At best, they allege that the plaintiff failed to disclose its tax obligations. However, there are no facts stating that the defendants asked about the plaintiff’s tax situation or that there was a duty for the plaintiff to make such a disclosure. Absent such allegations, the fraud counterclaim fails.
Turning to the second counterclaim, CUTPA, the defendants allege that "[t]he plaintiff, by not transferring the property to the defendants and not disclosing the tax arrearage to the defendants is unfair, deceptive, immoral, unscrupulous and generally lacking in decency." Section 42-110b(a) provides: "No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." CUTPA is a remedial statute that seeks to "protect the public from unfair practices in the conduct of any trade or commerce ..." Eder Bros., Inc. v. Wine Merchants of Connecticut, Inc., 275 Conn. 363, 380, 880 A.2d 138 (2005). Whether a practice violates CUTPA is based on three criteria: (1) whether the practice offends public policy; (2) whether it is immoral, unethical, oppressive, or unscrupulous; and (3) whether it causes substantial injury to consumers, competitors or other businesspersons. Naples v. Keystone Building & Development Corp., 295 Conn. 214, 227, 990 A.2d 326 (2010). "All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three." (Internal quotation marks omitted.) Id., 227-28. "In foreclosure actions, the mortgagee’s conduct in the making of the mortgage note has been held to constitute a violation of CUTPA." JP Morgan Chase Bank, Trustee v. Rodrigues, supra, 109 Conn.App. 134.
In the present case, taking the allegations as true, the defendants sufficiently allege a CUTPA claim. The plaintiff’s failure to properly transfer the property or failure to disclose the tax arrearage are likely immoral practices that sufficiently satisfy CUTPA. Thus, the CUTPA counterclaim remains.
As to the third special defense, breach of contract, the defendants allege that, by not transferring the property and not disclosing the tax arrearage, the plaintiff breached the contract. "The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages." (Internal quotation marks omitted.) Chiulli v. Zola, 97 Conn.App. 699, 706-07, 905 A.2d 1236 (2006). Additionally, the defendants must prove that the plaintiff’s breach caused the defendants’ claimed damages. Meadowbrook Center, Inc. v. Buchman, 149 Conn.App. 177, 186, 90 A.3d 219 (2014). The contract must be viewed in its entirety, with each provision read in light of the other provisions and every provision must be given effect if it is possible to do so. Cruz v. Visual Perceptions, LLC, 311 Conn. 93, 103, 84 A.3d 828 (2014). The existence and terms of a contract are to be determined from the intent of the parties. Auto Glass Express, Inc. v. Hanover Ins. Co., 293 Conn. 218, 225, 975 A.2d 1266 (2009). "The parties’ intentions manifested by their acts and words are essential to the court’s determination of whether a contract was entered into and what its terms were." (Internal quotation marks omitted.) Id.
In the present case, taking the allegations as true, the defendants sufficiently allege a breach of contract claim. They allege that the contract stated that the taxes had been paid. Yet, the taxes were not paid, causing the defendants to pay over $70,000 to redeem the property in a tax foreclosure auction. Consequently, there was a contract that the plaintiff allegedly breached, causing damages to the defendants. Thus, the breach of contract claim remains.
Turning to the fourth special defense, unjust enrichment, the defendants allege that "{ b]y instituting a foreclosure action, the plaintiff is attempting to collect money that it is not entitled, thereby unjustly enriching itself." "Plaintiffs seeking recovery for unjust enrichment must prove (1) that the defendants were benefited, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the plaintiffs’ detriment." (Internal quotation marks omitted.) Horner v. Bagnell, 324 Conn. 695, 708, 154 A.3d 975 (2017). "A right of recovery under the doctrine of unjust enrichment is essentially equitable, its basis being that in a given situation it is contrary to equity and good conscience for one to retain a benefit which has come to him at the expense of another." (Internal quotation marks omitted.) Id., 707.
In the present case, taking the allegations as true, the defendants sufficiently allege an unjust enrichment claim. Alleging that the plaintiff is attempting to unjust enrich itself by instituting a foreclosure action is insufficient in itself. But, when coupled with the fact that the plaintiff did not properly pay taxes on the property, the allegations are that the plaintiff is attempting to gain a greater benefit than it is entitled to. Thus, for purposes of this motion, the unjust enrichment claim stands.
Lastly, as to the fifth special defense, breach of the duty of good faith and fair dealing, our courts hold that such a counterclaim is not permissible in a foreclosure proceeding. See New Haven Savings Bank v. LaPlace, supra, 66 Conn.App. 10; Rosenblit Enterprises, LLC v. Dadi, supra, Superior Court, Docket No. CV-18-6099509-S. Thus, the motion to strike the fifth special defense is granted.
Therefore, the court grants the motion to strike as to the first, second, and fifth counterclaims. The court denies the motion as to the third and fourth counterclaim.
CONCLUSION
Accordingly, the plaintiff’s motion to strike is granted in part and denied in part.