Opinion
No. CV 09-6006082S
August 5, 2010
MEMORANDUM OF DECISION
This action arises out of a dispute between an owner of a condominium unit and a unit owners' association, and principally concerns the settlement of a property insurance claim. On February 16, 2010, the plaintiff, Louis Pasquariello, filed a six-count revised complaint (complaint) against the defendant, Castle Rock Owners Association, Inc. Only the fourth and sixth counts of the complaint are presently at issue. In the fourth count, labeled "misappropriation of funds," the plaintiff alleges the following facts. The plaintiff is the owner of a condominium unit (unit) in the Castle Rock Condominium Complex (complex), and the defendant is a unit owners' association that is comprised of the unit owners of the condominium, including the plaintiff. The defendant is incorporated in Connecticut, and is governed by bylaws that, for example, provide for the existence of corporate officers and a board of directors. The bylaws also spell out a number of the defendant's duties and obligations, including the duty to maintain, repair and manage the complex, and to carry property insurance that insures the common and individual elements within the complex against risks that are "commonly insured against."
In the first through sixth counts, the plaintiff alleges breach of fiduciary duty, negligence, conversion, misappropriation of funds, statutory theft and violations under the Connecticut Unfair Trade Practices Act, respectively.
Although both parties refer to the defendant as a "common interest association" or "condominium association," the Condominium Act and the Common Interest Ownership Act, which govern the organization of condominiums, do not include such references. Instead, the proper statutory term is "association of unit owners" or "unit owners' association." See General Statutes §§ 47-68a, 47-202.
On or about January 19, 2009, a water leak in the plaintiff's ceiling damaged his premises. The plaintiff claims that, as a member of the defendant association, he is entitled to be covered for his loss under the defendant's insurance policy. Nevertheless, he alleges that the defendant's "control" over the insurance settlement proceeds has prevented him from repairing and occupying his unit, which has since declined in value. The plaintiff also alleges that the defendant failed to adequately represent his interests during the insurance settlement process. Specifically, he alleges that because the defendant failed to name the plaintiff as an "additional insured" under its insurance policy, as required by its bylaws, the defendant was able to negotiate the settlement of the claim without requiring the plaintiff's authorization, and without having to consider his best interests. Lastly, the plaintiff alleges that the defendant failed to disclose a number of facts to him during the settlement process, including its receipt, and subsequent use, of the insurance proceeds. In the sixth count, the plaintiff further alleges that the defendant's conduct amounts to unfair or deceptive practices in violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. Seeking relief, he prays for, among the most relevant, money damages, attorneys fees and punitive damages.
On March 1, 2010, the defendant filed a motion to strike as to the fourth count of the complaint, on the ground that "misappropriation of funds" is not a cognizable cause of action, and the sixth count of the complaint, on the ground that the plaintiff has failed to allege conduct on the part of the defendant involving any "trade or commerce" within the meaning of CUTPA. The defendant also moved to strike the prayer for relief corresponding with both counts. In support of its motion, the defendant submitted a memorandum of law. On May 20, 2010, the plaintiff filed an objection to the motion to strike, and submitted a memorandum of law.
Practice Book § 10-39(a) provides, in relevant part: "Whenever any party wishes to contest . . . the legal sufficiency of the allegations of any complaint . . . or of any one or more counts thereof, to state a claim upon which relief can be granted, or . . . the legal sufficiency of any prayer for relief in any such complaint . . . that party may do so by filing a motion to strike the contested pleading or part thereof." "It is fundamental that in 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, 990 A.2d 206 (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, 693 A.2d 293 (1997); at the same time, it must "construe the complaint in the manner most favorable to sustaining its legal sufficiency." (Internal quotation marks omitted.) American Progressive Life Health Ins. Co. of New York v. Better Benefits, LLC, 292 Conn. 111, 120, 971 A.2d 17 (2009). Finally, the Connecticut Supreme Court "will not uphold the granting of [a] motion to strike on a ground not alleged in the motion . . ." Blancato v. Feldspar Corp., 203 Conn. 34, 44, 522 A.2d 1235 (1987).
In moving to strike the fourth count of the complaint, the defendant argues that "misappropriation of funds," which is the label affixed to the count, is not a judicially recognized cause of action in Connecticut. Instead, the defendant contends, misappropriation of funds is merely a fact that has already been alleged in other parts of the complaint. The plaintiff counters that the defendant fails to provide any legal authority for its position, and cites two Superior Court cases purporting to hold that misappropriation of funds is a cause of action in Connecticut.
Specifically, the defendant asserts that misappropriation of funds is a fact that could be a basis for conversion and statutory theft, which are the labels assigned to counts three and five, respectively.
As a threshold issue, the defendant, through this motion, contests the legal sufficiency of the fourth count on the basis of the label affixed to it. "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." (Emphasis added; internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). "In the context of a motion to strike, the factual allegations of the count, and not the label placed on the count, are dispositive. See, e.g., Barbiero v. Chiocca, Superior Court, judicial district of New Haven, Docket No. CV 05 4013929 (January 31, 2006, Corradino, J.) [ 40 Conn. L. Rptr. 694] (striking count because it was labeled with incorrect cause of action would exalt form over substance); Stavola v. Costa, Superior Court, judicial district of Danbury, Docket No. 03 0350462 (January 18, 2005, Moraghan, J.) [ 38 Conn. L. Rptr. 530] (substance of allegations, not label affixed to them, governs motion to strike); see also Pickering v. Aspen Dental Management, Inc., 100 Conn.App. 793, 799 [ 919 A.2d 520] (2007) (label placed on count not relevant to motion to strike); Louis Gherlone Excavating, Inc. v. McLean Construction Co., Superior Court, judicial district of New Haven, Docket No. CV 04 0490449 (May 20, 2005, Martin, J.) (if facts alleged constitute cause of action, failure to recite `magic words' will not subject count to motion to strike)." (Emphasis added.) Lattanzio v. WVIT NBC-30, Superior Court, judicial district of New London, Docket No. 05 5000082 (May 15, 2007, Martin, J.). In Lattanzio, the court denied the defendant's motion to strike a count of the plaintiff's complaint, because the defendant failed to address the legal sufficiency of the allegations in that count. See Lattanzio v. WVIT NBC-30, supra, Superior Court, Docket No. 05 5000082.
In the present case, the defendant seeks to strike the entire fourth count, but fails to address the legal sufficiency of the allegations within the count. In addition to facts incorporated from the prior counts, these allegations include the claim that the defendant fraudulently concealed its receipt, and subsequent use, of the insurance settlement at issue. Even if these allegations do not comport with the label assigned to the count, numerous Superior Court decisions have held that the court will look to the allegations, and not the label, in deciding on a motion to strike. As such, the defendant's failure to address these allegations is fatal to the motion. Therefore the motion to strike as to the fourth count is denied. Furthermore, because the defendant moves to strike the corresponding prayer for relief "to the extent count four is deemed legally insufficient," motion to strike is also denied as it relates to the corresponding prayer for relief, as well.
The defendant next argues that the sixth count should be stricken from the complaint because the plaintiff fails to allege conduct on the part of the defendant involving any "trade or commerce" within the meaning of General Statutes § 42-110b. Specifically, the defendant asserts that management of a condominium complex by a unit owners' association does not arise to "trade or commerce." Although the plaintiff concedes that the mismanagement of condominiums by unit owners' associations generally does not violate CUTPA, he also claims that this rule does not apply here. The plaintiff contends that the defendant's conduct in the present case extends beyond "mere mismanagement," because the defendant failed to name him as an insured person in its insurance policy, which enabled the defendant to settle the insurance claim without his input and approval, and because the defendant "converted" the settlement money.
Section 42-110b(a), which states the prohibition at the heart of CUTPA, 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." "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 federal trade commission 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] . . . In order to enforce this prohibition, CUTPA provides a private cause of action to [a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a [prohibited] method, act or practice . . ." (Internal quotation marks omitted.) Harris v. Bradley Memorial Hospital Health Center, Inc., 296 Conn. 315, 350-51, 994 A.2d 153 (2010).
"Trade" and "commerce" are defined as "the advertising, the sale or rent or lease, the offering for sale or rent or lease, or the distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value in this state." General Statutes § 42-110a(4).
"[The] enactment of CUTPA was directed at a perceived failure of the law governing commercial transactions, in some circumstances, either to provide relief or to provide adequate relief where conduct was actionable. To remedy these problems, CUTPA was written in very broad terms. This has required, and continues to require, development and application of doctrine across an extraordinarily wide range of very complex legal principles." R. Langen, J. Morgan D. Belt, 12 Connecticut Practice Series: Unfair Trade Practices (2003) § 2.1, p. 11. Nevertheless, "[b]ecause CUTPA applies only to acts `in the conduct of any trade or commerce,' there is a significant limitation on the reach of the Act." Id., § 3.1, p. 57. Therefore, "[i]n order to allege a CUTPA violation properly, the plaintiff must allege, inter alia, that the acts complained of were performed in a trade or business." (Internal quotation marks omitted.) Pergament v. Green, 32 Conn.App. 644, 655, 630 A.2d 615, cert. denied, 228 Conn. 903, 634 A.2d 296 (1993).
Our Supreme Court has affirmed and expressly adopted a trial court's conclusion that the management activities of a condominium unit owners' association do not constitute "trade or commerce" within the meaning of CUTPA. Rafalowski v. Old County Road, Inc., 245 Conn. 504, 508, 714 A.2d 675 (1998); see also Twin Oaks Condominium Assn., Inc. v. Jones, Superior Court, judicial district of Hartford, Docket No. CV 04 4004140 (January 22, 2010, Bentivenga, J.); Cliffside Condominium Assn., Inc. v. Cushman, Superior Court, judicial district of Hartford, Docket No. CV 03 0827483 (October 18, 2006, Hale, J.T.R.); Huntington Condominium v. Jackson, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 01 0384036 (October 10, 2002, Stevens, J.). The court in Sargis v. Seventy Grove Hill Condominium Assn., Inc., Superior Court, judicial district of Hartford-New Britain at New Britain, Docket No. CV 88 0430590 (July 19, 1990, Aronson, J.) [ 2 Conn. L. Rptr. 152], provided a rationale for this rule: "The relationship between the plaintiffs [who were unit owners] and defendants [who included a unit owners' association and several of its directors and officers] does not appear to be one involving persons engaged in trade or commerce and consumers, but rather, akin to the relationship between shareholders of a corporation and the corporation's officers and directors. As such, it is not within the scope of CUTPA."
For the trial court's decision, see Rafalowski v. Old County Road, Inc., 45 Conn.Sup. 341, 354, 719 A.2d 84 (1997).
Nevertheless, some Superior Court decisions have acknowledged that, under some circumstances, the conduct of a unit owners' association could amount to "trade or commerce." In Depot Square Business Center Condominium Assn., Inc. v. Charbonneau, Superior Court, judicial district of Waterbury, Docket No. CV 04 0184471 (April 12, 2005, Agati, J.), the court noted that "there is a possible question of whether the actions of a commercial condominium association constitute trade or commerce . . ." Yet, the court did not adjudicate that question. See id. In Walker v. Warner Village Condominium Assn., Superior Court, judicial district of New Haven, Docket No. CV 03 0477670 (June 28, 2006, Devlin, J.), the court declined to strike a CUTPA claim brought by condominium unit owners against the defendants in that case, who included a unit owners' association. The court in Walker observed that "the plaintiffs allege not merely mismanagement, but rather mismanagement and poor maintenance as tactics to effectuate a strategy of the defendants to easily purchase the remaining units of [the condominium complex] that they did not already own. This activity is entrepreneurial and within the ambit of CUTPA." (Emphasis added.) Id.
In the present action, unlike Walker, the plaintiff has not alleged facts to support the conclusion that the defendant was engaged in "trade or commerce." In fact, the plaintiff has not alleged that the defendant's conduct was in the pursuit of anything other than its usual management responsibilities. In the first place, it is admitted that the defendant's duty to carry insurance on behalf of the unit owners arises from its own bylaws. As such, the plaintiff's allegation that the defendant controlled the insurance settlement proceeds points not to conduct in furtherance of trade or commerce, but pursuant to its management obligations. The plaintiff's various allegations that the defendant failed in its duties to him throughout the insurance settlement process also do not fall within the confines of CUTPA. Whether the defendant was negligent or in breach of its fiduciary duties is irrelevant to liability under CUTPA if the defendant was not engaged in trade or commerce. Here, the defendant's alleged failure to name the plaintiff as an insured person in its insurance policy, to consider his interests while settling the insurance claim and to disclose certain information to the plaintiff, does not indicate that it was engaged in trade or commerce, but rather, in management activities.
The plaintiff cites Ferraro v. Tamarac Ridge Condominium Assn., Inc., Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 08 5015500 (June 3, 2009, Bellis, J.) ( 47 Conn. L. Rptr. 670) in support of his argument that his cause of action presents an exception to the rule, and therefore survives this motion to strike. In that case, the court declined to strike a CUTPA claim brought by condominium unit owners against a management agency that was hired by its unit owners' association. Id. Hewing to the reasoning of the court in Sargis v. Seventy Grove Hill Condominium Assn., Inc., supra, Superior Court, Docket No. CV 88 0430590, specifically, that the relationship between unit owners of a condominium and the unit owners' association is similar to that between corporate shareholders and the corporation, and therefore the management activities of the unit owners' association is not "trade or commerce" under CUTPA, the court denied the motion to strike because "the plaintiffs do not appear to have a relationship with the management agency akin to that of shareholders in a corporation." Ferraro v. Tamarac Ridge Condominium Assn., Inc., supra, 47 Conn. L. Rptr. 674. Applied to the present case, Ferraro does not avail the plaintiff, because the defendant in Ferraro was not a unit owners' association, but rather a management agency that was hired by the association. The rationale that a unit owners' association does not engage in trade or commerce because it stands in a corporate relationship to its unit owners does not apply to a management agency.
In light of the above discussion, because the plaintiff has failed to allege facts supporting the conclusion that the defendant's actions were "in the conduct of any trade or commerce" within the meaning of CUTPA, and the defendant's motion to strike is therefore granted as to the sixth count of the complaint.
Finally, the defendant asserts that the motion to strike should also be granted as to the prayer for relief corresponding with the sixth count, because that count is legally insufficient. Specifically, the defendant argues that the plaintiff's claim for attorneys fees and punitive damages, which are provided under General Statutes § 42-110g, should be stricken because the plaintiff has failed to allege facts supporting a legally sufficient CUTPA claim. "Practice Book . . . § 10-39, allows for a claim for relief to be stricken only if the relief sought could not be legally awarded." Pamela B. v. Ment, 244 Conn. 296, 325, 709 A.2d 1089 (1998). Despite the defendant's reference to the prayer for relief "corresponding to" the sixth count, the plaintiff inserts his prayer for relief at the foot of the complaint, and does not identify, as to his individual claims for relief, the corresponding counts. Therefore, the court cannot infer that the plaintiff intends for his claims for attorneys fees and punitive damages to correspond only with the sixth count. Although the defendant moves to strike these claims from the complaint on the ground that the sixth count is legally insufficient, the defendant fails to demonstrate that the claims for attorneys fees and punitive damages would not be supported by any of the remaining five counts. Therefore, the defendant's motion to strike is denied as to the prayer for relief corresponding with the sixth count.
CONCLUSION
Based on the foregoing, the court denies the defendant's motion to strike as to the fourth count of the plaintiff's revised complaint, grants the defendant's motion to strike as to the sixth count of the plaintiff's revised complaint and denies the motion to strike as to the prayer for relief corresponding with both the fourth and sixth counts.