Opinion
No. FST CV 09 6002552 S
March 24, 2011
MEMORANDUM OF DECISION RE MOTION TO STRIKE #117
On November 23, 2009, the plaintiff, JP Morgan Chase Bank National Ass'n., commenced a foreclosure action against Terence Q. O'Neil (the defendant), alleging that the defendant is in default on a mortgage delivered in June 2003 to the plaintiff's predecessor in interest, Washington Mutual Bank, FA, which the plaintiff acquired in September 2008. The plaintiff alleges that the mortgage on the defendant's property at 45 Baldwin Farms South (the property) in Greenwich was delivered to secure a note for a loan of $1,657,500. The plaintiff also named the following parties as defendants, alleging that they have an interest in the property prior in right to the mortgage being foreclosed: First Bank of Greenwich, Soundworks Security LLC and Ring's End, Inc. On August 31, 2010, the plaintiff moved for a motion for judgment of strict foreclosure.
On July 23, 2009, the First Bank of Greenwich instituted its own foreclosure action pertaining to the property against this defendant. First Bank of Greenwich v. O'Neil, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 09 5012236. A judgment of strict foreclosure was entered in that action on June 22, 2010.
On September 28, 2010, the defendant filed his disclosure of defense, claiming that the plaintiff has "unclean hands as a result of its inequitable conduct" and has violated the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a, et seq. (CUTPA), and that the defendant will challenge the action in various ways. On October 4, 2010, the defendant filed his answer, three special defenses and four counterclaims. The special defenses are (1) unclean hands, (2) equitable estoppel, and (3) violation of CUTPA. The four counterclaims are (1) breach of contract, (2) fraudulent misrepresentation, (3) negligent misrepresentation, and (4) violation of CUTPA. Each of the special defenses and counterclaims shares the same factual allegations, as recited in the following five paragraphs.
In his special defenses and counterclaims, the defendant alleges as follows. The defendant contacted the plaintiff in December 2009 after missing mortgage payments "as the result of a series of financial hardships." Intending to inquire about modifying his mortgage, the defendant spoke with Aaron McCarty, a representative in the plaintiff's loss mitigation department working out of an office in Jacksonville, Florida. The defendant explained to McCarty that he wanted to keep his home but was going through a period of financial hardship. To that effect, the defendant told McCarty that he had heard about the Home Affordable Modification Program (HAMP) and that he wished to apply for a mortgage modification through this program.
The defendant and McCarty had several phone conversations that lasted a total of about two hours. During these calls, McCarty told the defendant that he qualified for a HAMP modification and "would need to provide detailed financial information" to determine the terms of the modified plan. The defendant provided the requested data to McCarty, after which McCarty informed him that based on this information, he was eligible for a "trial loan modification under HAMP" that would entail a monthly payment of $5,200. McCarty explained to the defendant "that the modified payment consisted of three . . . components: (i) property tax escrow of $2,833.00 per month, (ii) homeowner's insurance escrow of $500 per month and (iii) interest only payments on the outstanding principal balance of approximately $1,600,000 at a rate of 1.4%." McCarty further informed the defendant that this would be a three-month trial plan, and that if the defendant made the three payments and supplied documents confirming the financial information he communicated by phone, the plaintiff "would permanently modify his mortgage loan under the same terms."
The defendant told McCarty that he would like the terms of this offer of modification to be put into writing, but McCarty responded "that due to the volume of modification requests, Chase was no longer sending such written offers." After some insistence from the defendant, McCarty sent him "a one-page payment coupon referencing the Defendant's enrollment in the trial modification and directing that such coupon be used when making the trial period plan payments." McCarty further assured the defendant that he "would be guaranteed a permanent modification under the same terms as provided" in the trial modification if he provided the necessary financial information and made the three payments.
Even though the defendant submitted the documents that McCarty asked for, the plaintiff did not complete its review of his loan modification during the three-month period. The plaintiff made numerous requests for additional documents, including documents already submitted, and instructed the defendant to make payments beyond the three-month trial period. The defendant made six $5,200 payments, after which the plaintiff informed him "that he was being denied a permanent loan modification." The plaintiff told the defendant that he was ineligible for HAMP because his "loan exceeded the maximum principal loan amount program limit of $729,750." After the defendant stopped sending trial payments, the plaintiff twice invited him to apply for a HAMP modification.
The defendant alleges that the plaintiff engaged in fraudulent and/or negligent misrepresentation when it told him he would be eligible for a permanent HAMP modification in spite of the plaintiff knowing the amount of his loan. The purpose of the misrepresentations was to induce the defendant to make trial payments for six months, and his reliance on these misrepresentations resulted in prejudice and harm. In his special defenses, the defendant claims that due to its behavior, the plaintiff is estopped from denying him a permanent loan modification and from foreclosing on the mortgage. The defendant seeks compensatory damages for each of his four counterclaims along with punitive damages and attorneys fees for count two (fraudulent misrepresentation) and count four (violation of CUTPA).
On November 12, 2010, the plaintiff moved to strike all of the special defenses and counterclaims on the following grounds: (1) the allegations violate the statute of frauds; (2) the allegations violate the parol evidence rule; (3) "the special defenses fail to plead allegations consistent with the complaint which would destroy the plaintiff's causes of action, and the claims and defenses fail to state a claim upon which relief can be granted as a result; (4) "the claims fail to allege a valid cause of action for fraudulent or negligent misrepresentation and rely on causes of actions for statutes which contain no private rights of action"; and (5) the CUTPA claim "is precluded by public policy and established legal authority."
"Whenever any party wishes to contest . . . the legal sufficiency of the allegations of any complaint, counterclaim or cross claim, or of any one or more counts thereof, to state a claim upon which relief can be granted . . . that party may do so by filing a motion to strike the contested pleading or part thereof." Practice Book § 10-39(a). "[I]n determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted." (Internal quotation marks omitted.) Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252-53 (2010). "In ruling on a motion to strike, the court is limited to the facts alleged in the complaint." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580 (1997). The court must "construe the complaint in the manner most favorable to sustaining its legal sufficiency . . . [I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Sturm v. Harb Development, LLC, 298 Conn. 124, 130, (2010).
The plaintiff moves to strike count one of the defendant's counterclaim, which sounds in breach of contract, on the ground that no enforceable agreement could have arisen from the defendant's alleged conversations with McCarty due to the statute of frauds and the parol evidence rule. In his objection, the defendant does not discuss whether or not the statute of frauds bars his claim. Rather, he argues that the statute of frauds is an improper ground for a motion to strike and that a ruling on whether or not the alleged contract falls within the statute of frauds must await trial. Accordingly, the court must first decide whether this ground can be raised at all.
General Statutes § 52-550(a) is the Connecticut statute of frauds and provides in relevant part: "No civil action may be maintained in the following cases unless the agreement, or a memorandum of the agreement, is made in writing and signed by the party, or the agent of the party, to be charged: . . . (4) upon any agreement for the sale of real property or any interest in or concerning real property . . . (6) upon any agreement for a loan in an amount which exceeds fifty thousand dollars."
In support of his objection, the defendant cites ALI, Inc. v. Veronneau, Superior Court, judicial district of Waterbury, Docket No. 126431 (October 11, 1996, Kulawiz, J.) ( 17 Conn. L. Rptr. 677). In Veronneau, the plaintiff alleged that the defendants were in default on two mortgage notes and sought foreclosure on the mortgage property. Id., 677. The defendants filed three special defenses, one of which the court construed "as alleging a modification of the terms of Note I." Id., 678. The plaintiff moved to strike this special defense, arguing, among other grounds, that the defense was barred by the statute of frauds because the defendants had failed to produce evidence of a writing memorializing the alleged modification. Id. In denying the motion to strike, the court ruled as follows: "In passing on a motion to strike, it is not proper for the court to consider whether the challenged allegations would withstand a defense such as failure to comply with the requirements of the (s)tatute of (f)rauds. The defendants are not required to plead evidence. Perhaps they will produce a writing confirming the alleged agreement. Perhaps the evidence will show that the terms of the agreement did not affect an interest in land. Without hearing the evidence, which is not the court's function on a motion to strike, the court cannot decide whether the alleged agreement is violative of the (s)tatute of (f)rauds." (Internal quotation marks omitted.) Id., 679. The court also noted that the fact that the defendants alleged that partial or full performance satisfied the statute of frauds counseled against granting the motion to strike. Id.
On the other hand, in Breen v. Phelps, 186 Conn. 86, 87 (1982), the Connecticut Supreme Court noted, without any mention of procedural defect, that a trial court granted a motion to strike on the ground of statute of frauds. Though the Court ultimately ruled that it was error to grant the motion to strike because the complaint contained allegations consistent with the part performance exception to the statute of frauds, id., 96-97, the Court did not rule that the statute of frauds was an improper ground for a motion to strike per se. Some Superior Court decisions have interpreted Breen to stand for the assertion that "[t]he defense of the statute of frauds may be raised by a motion to strike." Sayers v. Sayers, Superior Court, judicial district of Danbury, Docket No. SP 05 11886 (May 24, 2005, Bellis, J.) (citing Breen); see also Palmieri v. Scaniffe, Superior Court, judicial district of New Haven, Docket No. CV 02 0466486 (December 8, 2004, Arnold, J.) (same). Many of the decisions that do allow motions to strike to be heard on these grounds, however, have cautioned that "[t]he statute of frauds is permitted to be raised by a motion to strike only when the alleged agreement falls squarely within those categories of agreements required to be in writing." (Internal quotation marks omitted.) DeMars v. Chatelle, Superior Court, judicial district of Windham, Docket No. CV 08 5002561 (July 31, 2008, Potter, J.T.R.); see also Sayers v. Sayers, supra, Superior Court, Docket No. SP 05 11886. The court deems that the statute of frauds is an allowable ground for bringing a motion to strike.
Furthermore, in a per curiam decision, the Connecticut Appellate Court affirmed a trial court's granting of a motion to strike on the ground "that the documents in question did not satisfy the statute of frauds." Tallman v. Gawel, 11 Conn.App. 801, 802 (1987) (per curiam); see also H. Pearce Real Estate Co. v. Kaiser, 176 Conn. 442, 445 (1979) (per curiam) (affirming a demurrer sustained on the ground of the statute of frauds).
This court has already held that modifications to mortgages generally must be in writing. Three Sixty Five (365) Cherry LLC v. Siseman, LLC, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 09 6001196 (March 18, 2010, Mintz, J.). The counterclaim alleges that the plaintiff's agent offered to modify the mortgage, yet the defendant admits that the offer to modify was not put into writing and necessarily implies that the purported modification agreement was also not in writing. Construing the complaint in a manner most favorable to sustaining its legal sufficiency, however, the court notes that the defendant's monthly payments of $5,200 pursuant to the trial modification might constitute part performance that would take the oral modification agreement outside the statute of frauds. See, e.g., Breen v. Phelps, supra, 186 Conn. 96-97; Harley v. Indian Spring Land Co., 123 Conn.App. 800, 827-28 (2010). The defendant also alleges the existence of a payment coupon that might be relevant for the statute of frauds analysis. The defendant has pled sufficient facts to bring the agreement outside the statute of frauds.
As a second ground for striking count one of the counterclaim, the plaintiff invokes the parol evidence rule, arguing that "[t]he alleged oral agreement cannot be used to alter or vary the written contract, namely the note and mortgage." The parol evidence rule "is premised upon the idea that when the parties have deliberately put their engagements into writing, in such terms as import a legal obligation, without any uncertainty as to the object or extent of such engagement, it is conclusively presumed, that the whole engagement of the parties, and the extent and manner of their understanding, was reduced to writing. After this, to permit oral testimony, or prior or contemporaneous conversation, or circumstances, or usages [etc.], in order to learn what was intended, or to contradict what is written, would be dangerous and unjust in the extreme." (Internal quotation marks omitted.) Palozie v. Palozie, 283 Conn. 538, 548 n. 8 (2007). The defendant's allegation is that a subsequent oral agreement modified the original written mortgage and note. "It is . . . well settled that the parol evidence rule does not have any application to subsequent agreements." (Internal quotation marks omitted.) Greene v. Scott, 3 Conn.App. 34, 36 (1984); see also New England Savings Bank v. Quarry Trail Development Corp., Superior Court, judicial district of New London, Docket No. 515760 (Hendel, J., June 4, 1992) ("the plaintiff's additional argument that the alleged oral modification violates the parol evidence rule is unavailing, since the parol evidence rule does not have any application to subsequent agreements"). The plaintiff's argument regarding the parol evidence rule has no merit.
Accordingly, the motion to strike count one of the counterclaim is denied.
The plaintiff moves to strike the second count of the defendant's counterclaim on three separate grounds, namely that the plaintiff did not make a fraudulent misrepresentation, that no private right of action exists under HAMP and that the defendant's claim is barred by a lack of damages. The court will address these arguments in that order.
In relation to the first ground, the plaintiff argues that "[t]here is nothing . . . within the MHA [Making Home Affordable] or HAMP programs that forbids a party from being placed onto a trial loan modification plan, which results in a forbearance of the foreclosure action" and "[t]hus, by the very regulations of the program, the [p]laintiff did not make any fraudulent misrepresentation." The plaintiff further claims that federal guidelines do not prohibit lenders from giving trial modifications under HAMP to creditors who request modifications but do prohibit final loan modifications if the creditor has not met all HAMP prerequisites. Thus, according to the plaintiff, the defendant has not alleged "a statement that was untrue and known to be untrue by any party to this action."
The parties have stipulated in their briefs that Billington v. Billington, 220 Conn. 212, 217 (1991), is applicable to count two of the counterclaim. Pursuant to Billington, a cause of action for fraudulent misrepresentation contains the following elements: "(1) a false representation was made as a statement of fact; (2) the statement was untrue and known to be so by its maker; (3) the statement was made with the intent of inducing reliance thereon; and (4) the other party relied on the statement to his detriment." Id. The defendant argues that he has alleged each element of the cause of action. The court agrees.
The plaintiff's first ground is essentially a claim that the defendant has not alleged facts to support the first two prongs of the four-prong test for fraudulent misrepresentation. The plaintiff's argument pertaining to what MHA and HAMP allow and prohibit are not supported by any citations or exhibits within the brief. The plaintiff has attached to its memorandum an uncertified and unauthenticated Exhibit B, which appears to be a printout from the Federal Deposit Insurance Corporation website that explains the eligibility criteria of the Making Home Affordable Program. "Where the legal grounds for . . . a motion [to strike] are dependent upon underlying facts not alleged in the plaintiff's pleadings, the defendant must await the evidence which may be adduced at trial, and the motion should be denied." (Internal quotation marks omitted.) Commissioner of Labor v. C.J. M. Services, Inc., 268 Conn. 283, 293 (2004). This court will not grant a speaking motion to strike. See, e.g., Albert D. Phelps, Inc. v. All County Pest Control, Inc., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 96 0154064 (August 28, 1997, Mintz, J.). Accordingly, the court cannot grant the motion to strike count two of the counterclaim on the ground of failure to state a claim for fraudulent misrepresentation.
The plaintiff's second ground is that HAMP does not create or contemplate a private right of action on behalf of parties who are accepted into a trial plan but subsequently denied a permanent modification of their loan. According to the plaintiff, "the [d]efendant is attempting to rewrite the terms of the statute to create a private cause of action against a lender for loan modification discussions, a perversion of the intent and scope of the MHA program." While the cases cited by the defendant support this contention of law, see, e.g., Zoher v. Chase Home Financing, United States District Court, Docket No. 10-14135-CIV-MOORE/SIMONTON (S.D. Fla. October 15, 2010), the argument has no bearing on the present case because the defendant brings his counterclaim under Connecticut common law and not under the federal program. Had the defendant brought his counterclaim alleging violations of the federal program, the analysis would be different. See, e.g., Mingachos v. CBS, Inc., 196 Conn. 91, 110 (1985) (because neither state nor federal law allows violations of Occupational Safety and Health Administration regulations to be the basis of a private cause of action, a complaint that only alleges a violation of those regulations is subject to a motion to strike).
The plaintiff's third ground is that the defendant has not suffered any damages and has not pled detrimental reliance. To the contrary, the plaintiff claims that the defendant received a pecuniary gain from the trial modification due to "the benefit of a forbearance period to which he had no legal entitlement, and during which he made discounted payments on his mortgage." This is essentially an argument that the defendant has not alleged facts pertaining to the fourth prong of the fraudulent misrepresentation standard quoted above. Viewed in a light most favorable to the non-moving party, the second count of the counterclaim alleges that the defendant made reduced mortgage payments in the hope that he could keep his house permanently but instead received a temporary delay of foreclosure proceedings. The defendant admits to missing several regular mortgage payments prior to speaking to McCarty in the Jacksonville office. One can imply that without the offer of a trial modification and McCarty's promise to make it a permanent modification, the defendant might have found something else to do with his money rather than continuing to make payments on a home he could no longer afford. This is sufficient to satisfy the detrimental reliance prong of the standard for fraudulent misrepresentation. See, e.g., Bridgeport Harbor Place I, LLC v. Ganim, Superior Court, complex litigation docket at Waterbury, Docket No. X06 CV 040184523 (Alander, J., February 16, 2006) ( 40 Conn. L. Rptr. 764, 767) (allegations that "[t]he plaintiff relied on [the defendant's] statements by continuing to invest time and money in an 'unknowingly doomed' project" "are sufficient to establish that the plaintiff relied on the alleged misrepresentations to its detriment").
For these reasons, the court denies the plaintiff's motion to strike count two of the plaintiff's counterclaim.
In moving to strike count three of the defendant's counterclaim, which sounds in negligent misrepresentation, the defendant argues that the alleged representations were not fraudulent and that the defendant has not alleged that he suffered any detriment. "The governing principles [of negligent misrepresentation] are set forth in similar terms in § 552 of the Restatement (Second) of Torts (1977): One who, in the course of his business, profession or employment . . . supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information." (Internal quotation marks omitted.) Sturm v. Harb Development, LLC, supra, 298 Conn. 143-44. "In order to [state a] claim of negligent misrepresentation . . . [the plaintiff] must [allege] the following elements . . . 1) that the defendant made representations of fact to [the plaintiff] which it knew or should have known in the exercise of reasonable care to be false . . . 2) that it knew or should have known that [the plaintiff] would be guided by or would rely on those representations . . . 3) that [the plaintiff] justifiably relied on the information; and, 4) that [the plaintiff] suffered a detriment or damages as a result of such reliance." (Internal quotation marks omitted.) Federated Corporate Services, Inc. v. F.J. Sciame Construction Co., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 00 0180282 (March 19, 2001, Mintz, J.). Counts two and three of the defendant's counterclaim are premised on identical allegations of fact. As explained in the discussion of count two above, the defendant has adequately alleged fraudulent misrepresentation and detrimental reliance. Thus, the plaintiff cannot prevail on those grounds in moving to strike the negligent misrepresentation count.
In addition, in the bold heading to the section in its memorandum that addresses count three of the counterclaim, the plaintiff writes that "the defendant's counterclaim, third count . . . does not arise from the same transaction as the plaintiff's cause of action." This ground does not appear on the motion itself and is not briefed within the memorandum. "Where a claim is asserted in the statement of issues but thereafter receives only cursory attention in the brief without substantive discussion or citation of authorities, it is deemed to be abandoned." (Internal quotation marks omitted.) State v. T.R.D., 286 Conn. 191, 214 n. 18 (2008). Thus, the court will not consider this ground.
For these reasons, the plaintiff's motion to strike count three of the counterclaim is denied. The plaintiff moves to strike count four of the defendant's counterclaim on three separate grounds: (1) the allegations fit within the regulatory-administration exception to CUTPA, General Statutes § 42-110c(a)(1), (2) the counterclaim does not allege facts that demonstrate conduct that violates CUTPA, and (3) the defendant could have avoided the alleged injury. The court will address these claims in this order.
The first ground is based on one of the statutory exceptions to CUTPA liability. General Statutes § 42-110c(a)(1) provides that CUTPA shall not apply to "[t]ransactions or actions otherwise permitted under law as administered by any regulatory board or officer acting under statutory authority of the state or of the United States." Because HAMP regulations are allegedly issued by the United States Department of the Treasury, the plaintiff argues that HAMP is outside of the reach of CUTPA.
Banks have no right to a blanket exemption from CUTPA liability. Normand Josef Enterprises, Inc. v. Connecticut National Bank, 230 Conn. 486, 521 (1994).
The Connecticut Supreme Court has had occasion to apply Section 42-110c(a)(1). Danbury v. Dana Investment Corp., 249 Conn. 1, 19-20 (1999) (municipal real estate assessments and collection of unpaid taxes); Connelly v. Housing Authority, 213 Conn. 354, 361 (1990) (leasing or renting of housing by a municipal housing authority). Connecticut appellate courts, however, have not provided any specific guidance as to how the statutory exception would apply to CUTPA claims asserted against non-governmental entities. At least one Superior Court decision has closely examined the statutory exception. In State v. Tomasso, Superior Court, complex litigation docket at Waterbury, Docket No. X02 CV 04 4002651 (April 1, 2005, Schuman, J.) ( 39 Conn. L. Rptr. 127, 128, 129), where private contractors were accused of "unfair competition in the award of state contracts," the court ruled that "[t]he language of the exception suggests approval of specific actions by a specific decision-maker rather than supervision of the general activity by a state department." In examining the legislative history of the exception and the 1976 amendment that led to its current wording, the court noted that "[t]he stated purpose of the amendment was to prevent businesses from avoiding liability for 'pernicious . . . actions' by claiming that another agency administers its activities." Id., 130. The court also cited a decision of the Appeals Court of Massachusetts interpreting a statute virtually identical to the one in Connecticut. Id. The Massachusetts court ruled that "[t]he burden [of proving the statutory exception] is a difficult one to meet. To sustain it, a defendant must show more than the mere existence of a related or even overlapping regulatory scheme that covers the transaction. Rather, a defendant must show that such scheme affirmatively permits the practice which is alleged to be unfair or deceptive." (Emphasis in original; internal quotation marks omitted.) Bierig v. Everett Square Plaza Associates, 34 Mass.App.Ct. 354, 367 n. 14, 611 N.E.2d 720, review denied, 415 Mass. 1105, 616 N.E.2d 809 (1993). Accordingly, in order for the Section 42-110c(a)(1) exception to preclude CUTPA liability, "[t]he agency or official must engage in overt and affirmative action to approve the course of conduct which is claimed to be an unfair or deceptive trade practice." RW Group, Inc. v. PharmaCare Management Services, Inc., Superior Court, complex litigation docket at Tolland, Docket No. X07 CV 05 4003840 (April 27, 2006, Sferrazza, J.) ( 41 Conn. L. Rptr. 418, 423) (adopting the court's reasoning in Tomasso).
Massachusetts General Laws ch. 93A, § 3 provides in relevant part: "Nothing in this chapter shall apply to transactions or actions otherwise permitted under laws as administered by any regulatory board or officer acting under statutory authority of the commonwealth or of the United States."
In the present case, there is no allegation that any government agency approved the plaintiff's course of conduct in allegedly misrepresenting the defendant's eligibility for a HAMP modification. There is also no allegation that HAMP regulations affirmatively permit this type of misrepresentation. The plaintiff claims in its brief that it "was following directives issued by a government agency in the HAMP process." The complaint does not allege this. On a motion to strike, the court can only review the facts alleged in the complaint. Faulkner v. United Technologies Corp., supra, 240 Conn. 580. Accordingly, this court rules that Section 42-110c(a)(1) does not bar the defendant's CUTPA claim.
Furthermore, the plaintiff argues that the fourth count of the defendant's counterclaim does not satisfy the cigarette rule, the standard used by the Connecticut Supreme Court to evaluate the types of practices and acts that may lead to CUTPA liability. Specifically, the plaintiff argues that "[t]he mere assertion of a disputed issue as to purported misrepresentations of the federal loss mitigation program, for statements which are entirely compliant with the regulations of that program, does not transform the plaintiff's actions into a violation of CUTPA." The defendant argues in response that his allegations fall within the second prong of the cigarette rule.
General Statutes § 42-110g(a) provides in relevant part: "Any person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by section 42-110b, may bring an action . . ." "[General Statutes §] 42-110b(a) provides that [n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the [F]ederal [T]rade [C]ommission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other businesspersons] . . . All three criteria do not need to be satisfied to support a finding of unfairness." (Internal quotation marks omitted.) Harris v. Bradley Memorial Hospital Health Center, Inc., 296 Conn. 315, 350 (2010).
The defendant argues that the plaintiff's conduct was immoral, unethical, oppressive or unscrupulous. The factual allegations for the CUTPA count are the same as for the fraudulent misrepresentation and negligent misrepresentation counts of the defendant's counterclaim. This court has noted that "[u]nder the second prong of the 'cigarette rule,' [a]llegations that the [plaintiff] knew or should have known facts that he did not disclose, if proven, may be concluded to be unethical, immoral, oppressive, and unscrupulous." (Internal quotation marks omitted.) Communications Systems, Inc. v. Ceruzzi, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 96 0153343 (January 17, 2002, Mintz, J.). This court ruled "that a CUTPA claim can be based on a theory of negligent misrepresentation." Id. Having denied the plaintiff's motion to strike the negligent misrepresentation and fraudulent misrepresentation counts, supra, the court concludes that the plaintiff's motion to strike count four of the counterclaim on the ground of failure to allege facts demonstrating conduct violative of CUTPA must likewise be denied.
In its brief, the plaintiff argues that "the defendant has also failed to allege any facts that this action violates any public policy, statute, or common law." This argument pertains to the first prong of the cigarette rule. Harris v. Bradley Memorial Hospital Health Center, Inc., supra, 296 Conn. 350. As explained above, all three criteria of the cigarette rule do not need to be satisfied. Id. Furthermore, this court has previously explained that "with regard to the first prong of the 'cigarette rule,' the Connecticut Supreme Court 'has long recognized liability for negligent misrepresentation. [It has] held that even an innocent misrepresentation of fact may be actionable if the declarant has the means of knowing, ought to know, or has the duty of knowing the truth.'" Communications Systems, Inc. v. Ceruzzi, supra, Superior Court, Docket No. CV 96 0153343 (quoting Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 575 (1995)).
The plaintiff also argues that the defendant has not alleged facts that would demonstrate that the alleged injury is "an injury that consumers themselves could not reasonably have avoided." (Internal quotation marks omitted.) Hartford Electric Supply Co. v. Allen-Bradley Co., 250 Conn. 334, 368 (1999). The avoidability-of-injury analysis only pertains to the substantial injury standard, which is the third criterion of the cigarette rule. A-G Foods, Inc. v. Pepperidge Farm, Inc., 216 Conn. 200, 216 (1990). Having already determined that the defendant's allegations are sufficient under the second prong of the cigarette rule, the court declines to consider this additional argument.
For these reasons, the plaintiff's motion to strike count four of the counterclaim is denied. "A motion to strike is the proper vehicle by which to contest the legal sufficiency of any special defense contained in an answer to the complaint." Doran v. Waterbury Parking Authority, 35 Conn.Sup. 280, 281 (1979). "In . . . ruling on the . . . motion to strike, the trial court recognize[s] its obligation to take the facts to be those alleged in the special defenses and to construe the defenses in the manner most favorable to sustaining their legal sufficiency." Connecticut National Bank v. Douglas, 221 Conn. 530, 536 (1992). "Historically, defenses to a foreclosure action have been limited to payment, discharge, release or satisfaction . . . or, if there had never been a valid lien." (Internal quotation marks omitted.) Chase Manhattan Mortgage Corp. v. Machado, 83 Conn.App. 183, 187 (2004). "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 . . . 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." (Internal quotation marks omitted.) Mortgage Electronic Registration Systems, Inc. v. Goduto, 110 Conn.App. 367, 369 n. 2 cert. denied, 289 Conn. 956 (2008).
In its motion to strike the special defenses, the plaintiff argues that "the special defenses fail to plead allegations consistent with the complaint which would destroy the plaintiff's cause of action." This argument is only directed at the special defenses and not at the counterclaims, which arise out of the same operative facts as the special defenses. Within its brief, the plaintiff discusses various other grounds for striking the three special defenses. The court will not reach those grounds because the ground of inconsistency with the complaint is dispositive of this motion to strike.
This court finds that its decision in Patriot National Bank v. Bobbi, Inc., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 08 5009026 (June 9, 2009, Mintz, J.) ( 47 Conn. L. Rptr. 851) is instructive. In Bobbi, the plaintiff alleged that a mortgage was in default due to the defendant's "failure to make payments when due at maturity." Id., 851. The defendant filed a special defense of unclean hands in which it alleged that it attempted to finish construction on the premises subject to the mortgage in order to sell the premises and pay off its debt, thereby exercising its equitable right of redemption. Id., 852. The defendant further alleged that after it began negotiating with a vendor for the completion of construction, the plaintiff got in touch with the vendor and falsely represented that the defendant no longer owned the premises. Id. According to the defendant, this false representation resulted in the vendor's and potential buyers' refusal to negotiate with the plaintiff. Id. In granting the plaintiff's motion to strike the special defense, this court reasoned as follows: "In the present case . . . the defendants do not allege that, but for the plaintiff's alleged misrepresentations, they would not be in default under the terms of the note, mortgage, guaranty, and first modification, and, thus, [the plaintiff] would be precluded from bringing the foreclosure action. As alleged in the amended complaint, the defendants are in default as a result of their failure to make payment upon maturity of the note. In their special defense, the defendants do not dispute that they were in default under the terms of the note and mortgage, rather they allege that, post-default, the plaintiff made misrepresentations to a third party vendor, and as a result, the vendor refused to negotiate with the defendants for the purposes of finishing construction of the premises and making them saleable. Thus, although the court finds that, in the present case, the plaintiff's alleged misrepresentations during the post-default period relate to the enforcement of the note and mortgage, the special defense, as alleged, must be stricken, as it does not allege facts that, if true, would bar the plaintiff's cause of action." (Emphasis in original.) Id., 853-54.
In the present case, the complaint alleging that the plaintiff is in default on a mortgage was filed on November 23, 2009 with a return date of December 1, 2009. The special defenses allege that the first conversations between the defendant and McCarty, the Chase representative in the Jacksonville office, took place in December 2009. Thus, the special defenses allege post-default conduct by the plaintiff. Like in Patriot National Bank v. Bobbi, Inc., supra, the defendant does not dispute that he was in default under the terms of the note and mortgage. Rather, the defendant alleges that the plaintiff made post-default mispresentations that the defendant relied upon in making further payments. This allegation, if true, would not bar the plaintiff's cause of action. Thus, the plaintiff's motion to strike the defendant's special defenses is granted.
In response to paragraph five of the plaintiff's complaint, which alleges that the note is in default, the defendant states the following in his answer: "Defendant lacks sufficient information or knowledge to admit or deny the truth of the matter asserted in paragraph 5 and therefore, leaves the plaintiff to its proof."
For the reasons stated above, the court denies the motion to strike each of the four counterclaims and grants the motion to strike each of the three special defenses.