Opinion
No. CV03-0177537S
November 22, 2005
MEMORANDUM OF DECISION RE MOTION TO STRIKE
The plaintiffs filed a four-count complaint against the defendants, RJ Properties and its member, Joseph Cuda. Before the court is the defendants' motion to strike the entire complaint as to plaintiff LES Realty, LLC, counts one and four as to the plaintiff LESMSD, and the corresponding prayers for relief.
FACTS
In their complaint, the plaintiffs allege that LESMSD operates a gas station, delicatessen and convenience store on property it leased from RJ. Pursuant to the terms of the lease LESMSD and RJ entered into on November 1, 1995, LESMSD paid RJ twenty-five thousand dollars as consideration for an option to purchase the premises. The lease provided that RJ would hold LESMSD harmless from loss, damage, claims, costs, etc. that existed or occurred prior to LESMSD taking control of the premises. According to paragraph 17(f), RJ agreed that it would as soon as possible engage a firm of qualified environmental engineers and consultants for the purpose of having a Phase I Environmental Site Assessment (ESA) of the premises performed and, unless the Phase I ESA conclusively established no contamination at the site, have a Phase II ESA performed. Despite the provisions of paragraph 17(f), RJ failed, refused and neglected to obtain an ESA. On or about November 15, 1999, LESMSD gave RJ notice of its election to exercise its option to purchase the premises. LES Realty was formed for the purpose of taking title to and owning such premises. The parties worked toward a closing of a purchase and sale, but on September 16, 2002, RJ sent a notice to LESMSD and LES Realty purporting to terminate the option to purchase as of October 22, 2002. In March of 2003, RJ caused notices to quit the premises to be served on LESMSD and LES Realty.
Count one of the complaint asserts that the defendants committed fraud by intentionally misrepresenting material facts, withholding information revealed in a prior ESA report completed about five months prior to the execution of the lease, and failing to fulfill their obligations under the lease. Count two alleges breach of contract. In count three, the plaintiffs seek specific performance of the lease terms. Count four alleges a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes §§ 42-110a through 42-110g.
DISCUSSION
"The purpose of a motion to strike as 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 Conservatory, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). The court "take[s] the facts to be those alleged in the complaint . . . and [it] construe[s] 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 . . . Thus, [the court] assume[s] the truth of both the specific factual allegations and any facts fairly provable thereunder. In doing so, moreover, [it] read[s] the allegations broadly, rather than narrowly." (Internal quotation marks omitted). Larobina v. McDonald, 274 Conn. 394, 400, 876 A.2d 522 (2005). "[W]hat is necessarily implied [in an allegation] need not be expressly alleged." (Internal quotation marks omitted.) Commissioner of Labor v. C.J.M. Services, Inc., 268 Conn. 283, 292, 842 A.2d 1124 (2004).
STANDING
The defendants move to strike all four counts as to plaintiff LES Realty. They argue that LES Realty has no standing because it has no interest in the action and has suffered no injury. They note that the facts as alleged do not show that LES Realty was a party to the lease, a third-party beneficiary, or an assignee. They further argue that any injury suffered by LES Realty was wholly derivative of harm suffered by LESMSD. The plaintiffs argue that LES Realty has suffered an injury because it "was formed for the purpose of taking title to and owning" the defendants' property and the actions of the defendants prevented this.
"Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he [or she] has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy . . . Standing is established by showing that the party claiming it is authorized by statute to bring an action, in other words statutorily aggrieved, or is classically aggrieved . . . The fundamental test for determining [classical] aggrievement encompasses a well-settled twofold determination: [F]irst, the party claiming aggrievement must successfully demonstrate a specific, personal and legal interest in [the challenged action] . . . Second, the party claiming aggrievement must successfully establish that this specific personal and legal interest has been specially and injuriously affected by the [challenged action] . . . Aggrievement is established if there is a possibility, as distinguished from a certainty, that some legally protected interest . . . has been adversely affected." (Citations omitted; internal quotation marks omitted.) Eder Bros., Inc. v. Wine Merchants of Connecticut, Inc., 275 Conn. 363, 369-70, 880 A.2d 138 (2005) "The question of standing may be raised by any of the parties, or by the court, sua sponte, at any time during judicial proceedings." (Internal quotation marks omitted.) Connecticut Carpenters Benefit Funds v. Burkhard Hotel Partners II, LLC, 83 Conn.App. 352, 355, 849 A.2d 922 (2004).
The only injury to LES Realty that the plaintiffs allege is that it was prevented from owning the premises currently owned by the defendant and leased by LESMSD. Although the complaint alleges that LES Realty was formed for the purposes of owning the property, it does not allege a factual basis giving LES Realty a legal interest in the property. The complaint identifies LESMSD as the tenant of the lease and the holder of the option to buy the property. The complaint does not suggest that it was the intent of both parties at the time they signed the lease that the defendants would assume a direct obligation to LES Realty thus, LES Realty is not a third-party beneficiary. See Grigerik v. Sharpe, 247 Conn. 293, 312, 721 A.2d 526 (1998) (emphasizing that both contractual parties must intend to confer enforceable rights in a third party in order for it to be able to enforce the contract as a third-party beneficiary). Finally, the complaint does not allege that the option to purchase was ever assigned to LES Realty. Because the plaintiffs have failed to allege that some legally protected interest of LES Realty's was injuriously affected by the defendants' conduct, the motion to strike all four counts as to plaintiff LES Realty is granted.
FRAUD AS TO LESMSD
The defendants move to strike count one on the following grounds: 1) the plaintiff has failed to allege specific acts or representations constituting fraudulent misrepresentation; 2) a failure to perform lease obligations does not amount to fraud unless coupled with a present intent not to fulfill the obligations when the lease was signed; and 3) the defendants had no duty to disclose the information revealed in the Phase I ESA conducted prior to the execution of the lease. The plaintiff argues that the first count when read in its entirety supports a cause of action for fraud.
"The essential elements of an action in fraud . . . are: (1) that a false representation was made as a statement of fact; (2) that it was untrue and known to be untrue by the party making it; (3) that it was made to induce the other party to act on it; and (4) that the latter did so act on it to his injury." (Internal quotation marks omitted.) Updike, Kelly Spellacy, P.C. v. Beckett, 269 Conn. 613, 643, 850 A.2d 145 (2004). "Where a claim for damages is based upon fraud, the mere allegation that a fraud has been perpetuated is insufficient; the specific acts relied upon must be set forth in the complaint." Maruca v. Phillips, 139 Conn. 79, 81, 90 A.2d. 159 (1952); see also Chase Manhattan Mortgage Corp. v. Machado, 83 Conn.App. 183, 188, 850 A.2d 260 (2004) (citing Maruca).
Because fraud must be pleaded with specificity, the plaintiff's allegation that the defendants "intentionally misrepresented material facts" is by itself not sufficient to support a cause of action for fraud. See Chestnut v. Kent, Superior Court, judicial district of Fairfield, Docket No. CV 97 0346653 (April 17, 1998, Skolnick, J.) ( 22 Conn. L. Rptr. 29, 31) (granting motion to strike where the plaintiff made only "general assertions of fraudulent misrepresentations" and where there were no "particular facts demonstrating what the representations were or how they were false"); see also St. Denis v. De Toledo, Superior Court, judicial district of Stanford-Norwalk, Docket No. CV 00 0180606 (April 5, 2002, Downey, J.) (following Chestnut).
The plaintiff contends that the defendants' covenants in the lease to conduct Phase I and Phase II ESAs and to hold LESMSD harmless from loss, damage, claims, costs, etc. that existed or occurred prior to LESMSD taking control of the premises amounted to misrepresentations. "Although the general rule is that a misrepresentation must relate to an existing or past fact, there are exceptions to this rule, one of which is that a promise to do an act in the future, when coupled with a present intent not to fulfill the promise, is a false representation." Paiva v. Vanech Heights Construction Co., 159 Conn. 512, 515, 271 A.2d 69 (1970). The plaintiff in the present case has not alleged that the defendants had a present intent not to fulfill their lease obligations when they entered the lease. The plaintiff asserts that the reason why the defendants did not perform the ESAs was because they were already aware of an ESA report dated April 17, 1995 and a supplemental letter report dated May 26, 1995, about five months prior to RJ entering the lease with LESMSD. According to the complaint, that report reflected that there was an abandoned underground storage tank on the premises and that contamination of the soil or ground water might exist. Construing the allegations in the manner most favorable to sustaining the legal sufficiency of the complaint, it is not reasonable to infer that the defendants had a present intent not to fulfill their promise to conduct further inspections from the fact that they were aware of the prior Phase I report. The plaintiff has failed to allege that the covenants in the lease amounted to fraudulent misrepresentations.
The plaintiff argues that the failure of the defendants to disclose the prior ESA report before entering into the lease with LESMSD and receiving consideration for the option to purchase constituted a fraudulent misrepresentation. "Regarding the duty to disclose, the general rule is that . . . silence cannot give rise to an action . . . to set aside the transaction as fraudulent. Certainly this is true as to all facts which are open to discovery upon reasonable inquiry." (Internal quotation marks omitted.) Glazer v. Dress Barn, Inc., 274 Conn. 33, 84, 873 A.2d 929 (2005). "[M]ere nondisclosure . . . does not amount to fraud . . . 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." (Citation omitted; internal quotation marks omitted.) Duksa v. Middletown, 173 Conn. 124, 127, 376 A.2d 1099 (1977). Such a duty will be imposed "on a party insofar as he voluntarily makes disclosure. A party who assumes to speak must make a full and fair disclosure as to the matters about which he assumes to speak." (Internal quotation marks omitted.) Glazer v. Dress Barn, Inc., supra, 84-85.
The plaintiff asserts that the defendants had a duty to disclose pertinent and material information to the plaintiff. LESMSD does not, however, describe any request or occasion or circumstance from which this duty might have arisen. It does not allege that it ever requested information regarding prior ESAs or that the defendants ever voluntarily made a disclosure. Thus, the plaintiff has not alleged a factual basis giving rise to a duty to disclose the prior Phase 1 ESA report. See Kenney v. Healey Ford-Lincoln-Mercury, Inc., 53 Conn.App. 327, 333, 730 A.2d 115 (1999) (defendant's failure to disclose vehicle history not fraudulent where defendant did not make voluntary disclosure and plaintiff failed to make an inquiry). The motion to strike the first count is granted as to LESMSD because the plaintiff has not alleged sufficient facts to support a cause of action in fraud.
CUTPA AS TO LESMSD
In count four, the plaintiff alleges that the defendants' "fraudulent misrepresentations and failures to disclose material facts, the defendants' willful breaches of their contracts, the defendants' failures to fulfill their obligations to investigate, report and remediate environmental contamination at the premises and their misuse of summary process procedures in order to avoid their lawful obligations, constitute unfair, unscrupulous and deceptive acts and practices . . ." The defendants argue that the plaintiff alleges a simple breach of contract claim that does not amount to a CUTPA violation. They insist that they did not misuse the summary process procedures because the filing of a notice to quit is merely a condition precedent to bringing a summary process action and, because the lease had expired, the defendants had the right to initiate summary process proceedings in the event that the tenant held over. Finally, the defendants argue that the plaintiff could have avoided any alleged injury. The plaintiff counters that it has successfully pleaded all of the necessary elements of a CUTPA cause of action and that an "unavoidable injury" is not among them.
CUTPA 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." General Statutes § 42-110b(a). "It is well settled that in determining whether a practice violates CUTPA [Connecticut has] 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 business persons] . . . 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.) Updike, Kelly Spellacy, P.C. v. Beckett, 269 Conn. 655-56. "Thus, a violation of CUTPA may be established by showing either an actual deceptive practice . . . or a practice amounting to a violation of public policy . . . Whether a practice is unfair and thus violates CUTPA is an issue of fact." (Internal quotation marks omitted.) De La Conaha of Hartford, Inc. v. Aetna Life Ins. Co., 269 Conn. 424, 434, 849 A.2d 382 (2004).
"[N]ot every contractual breach rises to the level of a CUTPA violation." Hudson United Bank v. Cinnamon Ridge Corp., 81 Conn.App. 557, 571, 845 A.2d 417 (2004). "[A] [claimant] must show substantial aggravating circumstances attending the breach to recover under the Act . . . [A] misrepresentation can constitute an aggravating circumstance that would allow a simple breach of contract claim to be treated as a CUTPA violation; it would in effect be a deceptive act." (Internal quotation marks omitted.) Dunleavy v. Paris Ceramics USA, Inc., Superior Court, judicial district of Fairfield, Docket No. CV 02 0395709 (April 20, 2005, Richards, J.). "In enforcing CUTPA our courts look to the actions of the Federal Trade Commission for guidance. Under federal precedents and CUTPA decisions, a CUTPA plaintiff is not bound by the limitations on the common law action for misrepresentation when making that the basis of his or her claim. Such a plaintiff for example need not prove reliance on the misrepresentation or that the representation became part of the basis for the bargain . . . and knowledge of falsity either constructive or actual need not be shown." (Citation omitted.) Designs on Stone, Inc. v. John Brennan Construction Co., Inc., Superior Court, judicial district of Ansonia-Milford, Docket No. CV 97 059997 (April 9, 1998, Corradino, J.) (21 Conn L. Rptr. 659, 660).
"[D]efendants [do] not violate CUTPA by failing to disclose information when they [are] under no legal obligation to disclose that information." Downes-Patterson Corp. v. First National Supermarkets, 64 Conn.App. 417, 427, 780. A.2d 967 (2001). "CUTPA liability should not be imposed . . . when a defendant merely has not delivered on a promise unless the defendant made a representation as to a future fact coupled with a present intent not to [fulfill] the promise . . . The court is not aware of a case that holds that a statement predictive of future conduct . . . somehow becomes a `misrepresentation' for CUTPA purposes simply when the party making the representation cannot deliver on the promise." (Internal quotation marks omitted.) Tinian Trust Holdings v. International Paper Company, Inc., Superior Court, judicial district of Hartford, Docket No. CV 05 4007049 (August 12, 2005, Shapiro, J.)
Here the plaintiff has alleged that the defendants' fraudulent misrepresentations, failure to disclose material facts, willful breaches of contract and misuse of summary process procedures constitute a violation of CUTPA. The plaintiff's allegations that the defendants wilfully breached their covenants in the lease by not causing Phase I and II ESAs to be performed are by themselves insufficient to support a CUTPA cause of action because, as discussed in above, the plaintiff has not alleged that the defendants had a present intent not to fulfill their promises when they signed the lease. See Tinian Trust Holdings v. International Paper Company, supra, Superior Court, Docket No. CV 05 4007049; Talbot v. Kirkup, Superior Court, judicial district of New London, Docket No. CV 551986 (September 20, 2000, Corradino, J.). The plaintiff's allegation that the defendants failed to disclose the Phase one ESA report completed prior to the execution of the lease is also by itself insufficient to establish a CUTPA claim because, as also discussed above, the plaintiff has not alleged a factual basis giving rise to a duty on the defendants' part to disclose the report. See Downes-Patterson Corp. v. First National Supermarkets, supra, 64 Conn.App. 427 (citing cases holding that defendants do not violate CUTPA by not disclosing information when they were under no legal obligation to disclose that information). Still further, the plaintiff's allegation that the defendants misused summary process procedures by filing a notice to quit may also be by itself insufficient to make out a CUTPA claim. See Ancona v. Manafort Bros., Inc., 56 Conn.App. 701, 715, 746 A.2d 184 (2000) (finding no authority supporting proposition that the filing of a civil action with probable cause could form the basis of a violation of CUTPA).
When read in the light most favorable to sustaining the complaint's legal sufficiency, however, the plaintiffs' allegation that the defendants "intentionally misrepresented material facts," is enough to withstand a motion to strike a CUTPA claim. Courts have found that a misrepresentation is a deceptive act that can constitute an aggravating circumstance that would allow a simple breach of contract action to be treated as a CUTPA violation. See Dunleavy v. Paris Ceramics USA, Inc., supra, Superior Court, Docket No. CV 02 0395709. The complaint in the instant case can be read as alleging that the defendants made misrepresentations other than the promises they made in the lease and other than their failure to disclose the 1995 ESA report. The plaintiff does not specifically allege what the representations were and how they were false as it must do in order to successfully plead a fraud claim, but "a CUTPA plaintiff is not bound by the limitations on the common law action for misrepresentation when making that the basis of his or her claim." Designs on Stone, Inc. v. John Brennan Construction Co., Inc., supra, 21 Conn L. Rptr. 660. Therefore, the motion to strike is denied as to plaintiff LESMSD.
The defendants argue that the plaintiff could have avoided any alleged injury and that there is no CUTPA violation if the plaintiff could have avoided its injury. The unavoidable injury analysis is used to analyze whether a practice causes substantial injury under the third prong of the cigarette rule. See Web Press Services Corp. v. New London Motors, Inc., 205 Conn. 479, 484, 533 A.2d 1211 (1987); A-G Foods, Inc. v. Pepperidge Farm, Inc., 216 Conn. 200, 216, 579 A.2d 69 (1990).
PUNITIVE DAMAGES AND ATTORNEYS FEES
The defendants also move to strike the plaintiff's prayer for punitive damages and attorneys fees. They argue that the facts as alleged do not establish wanton or malicious conduct. General Statutes § 42110g(a) and (d) give the court discretion to award punitive damages and attorneys fees to CUTPA plaintiffs. Therefore, the motion is denied as to the plaintiff LESMSD.
CONCLUSION
For the foregoing reasons, the motion to strike all counts as to LES Realty is granted. As to LESMSD, the motion to strike count one is granted and the motion to strike count four and the prayers for relief is denied.