Opinion
No. CV04 0287794-S
October 3, 2005
MEMORANDUM OF DECISION RE MOTION TO STRIKE #107
I PROCEDURAL HISTORY
The plaintiff, Oxford Real Estate Services Group, Inc., a licensed real estate broker in the state of Connecticut, filed a two-count complaint on June 2, 2004, against the defendant, Tartaglia/Salce, LLC, an owner of commercial property known as "Clock Tower Plaza" located in Monroe, Connecticut. In count one of the complaint, the plaintiff has alleged the following facts. On May 24, 2004, the plaintiff executed an agreement with the defendant entitled "Listing Agreement Lease of Commercial Property" (agreement), which appointed therein the plaintiff as the exclusive listing broker. The agreement was to lease the defendant's Clock Tower Plaza property. The parties extended the terms of the agreement until December 26, 1995. During the time the agreement was in place, the plaintiff procured a tenant known as "Simply Baby, Inc.," to lease a portion of the defendant's property. The lease was entered into in November 1994, for a period of five years with one successive option term of five additional years. The defendant paid the plaintiff the appropriate commissions due under the initial lease agreement.
Simply Baby renewed the lease and continues to occupy the premises at the Clock Tower Plaza. Based on the agreement, the defendant is entitled to 2.5 percent of the rents paid by Simply Baby upon renewal of its lease. The plaintiff made a demand on the defendant for this amount. The defendant has not paid the plaintiff. As to paragraph 14 of the agreement, the defendant is responsible for payment of the costs of collection, including reasonable attorneys fees and 12 percent interest per annum. In count two of the complaint, the plaintiff alleges the same cause of action against the defendant based on the plaintiff's procurement of a tenant known as "Kwan Ho Maeng doing business as Tower Cleaners" for the Clock Tower Plaza.
On June 20, 2004, the defendant filed its Answer, Special Defenses, Recoupment and Setoff and Counterclaim. On October 20, 2004, the defendant filed another Answer, Special Defenses, Recoupment and Setoff and Counterclaim.
On October 28, 2004, the plaintiff filed a motion to strike the defendant's second, third and fourth special defenses; counts two, three and four of the defendant's counterclaims; and counts two, three and four of the defendant's recoupments. The plaintiff has filed a memorandum of law in support of its motion. On November 12, 2004, the defendant filed a memorandum of law in opposition to the motion to strike. The motion was heard on the short calendar on February 28, 2005.
On June 6, 2005, the parties herein filed a joint motion requesting the court to suspend ruling on the plaintiff's motion to strike and to waive their respective rights to have a decision entered within 120 days of argument. Following the hearing at the short calendar, the parties appeared for a pretrial and agreed that a mediation session with the court would be helpful in resolving the issues. The mediation session was scheduled for and held on July 18, 2005.
II DISCUSSION
Practice Book § 10-39(a)(5) provides that a motion to strike may be used to contest "the legal sufficiency of any answer to any complaint, counterclaim . . . or any part of that answer including any special defenses . . ." In ruling on a motion to strike, "the trial court [is obligated] to take the facts to be those alleged in the special defenses and to construe the defenses in a manner most favorable to sustaining their legal sufficiency." Connecticut National Bank v. Douglas, 221 Conn. 530, 536, 606 A.2d 684 (1992). See also Ocwen Federal Bank v. Rivas, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 99 0368135 (February 21, 2002, Stevens, J.). The motion to strike "admits all facts well pleaded; it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings." Mingachos v. CBS, Inc., 196 Conn. 91, 108, CT Page 13691 491 A.2d 368 (1985). "In deciding upon a motion to strike . . . a trial court must take the facts to be those alleged in the [pleadings] . . . and cannot be aided by the assumption of any facts not therein alleged." (Citations omitted; internal quotation marks omitted.) Liljedahl Bros., Inc. v. Grigsby, 215 Conn. 345, 348, 576 A.2d 149 (1990). The court must construe the special defense or counterclaim, however, "in [a] manner most favorable to sustaining its legal sufficiency . . ." Bouchard v. People's Bank, 219 Conn. 465, 471, 594 A.2d 1 (1991). Where the facts provable under the allegations would not support a special defense or counterclaim, then the motion to strike must be granted. Alarm Applications Co. v. Simsbury Volunteer Fire Co., 179 Conn. 541, 545, 427 A.2d 822 (1980); see also Heim v. California Federal Bank, 78 Conn.App. 351, 359, 828 A.2d 129 (2003); The Frederick Corp. v. Scheckter, Superior Court, judicial district of Litchfield, Docket No. CV 01 0084350 (April 26, 2001, Cremins, J.).
A. Second and Third Special Defenses
The plaintiff argues in support of its motion to strike that the second, third and fourth special defenses allege causes of action for damages which do not qualify as valid special defenses under Practice Book § 10-50, and, therefore, are legally insufficient. Specifically, the plaintiff states that its complaint alleges that the plaintiff is a real estate broker and the defendant is an owner of commercial property in Monroe. The plaintiff contends that the parties entered into an agreement for the leasing of space at the Monroe property and that it procured two tenants, Simply Baby and Tower Cleaners, each of whom entered into a lease with the defendant, and thus the plaintiff is owed additional real estate commissions under the agreement based on each of these tenants having renewed its original tenancy. The plaintiff further asserts that the second, third and fourth special defenses raise a separate claim for damages unrelated to the subject of the complaint and that they do not qualify as "mutual debts" for purposes of a setoff.
Section, 10-50 provides: "No facts may be proved under either a general or special denial except such as show that the plaintiff's statements of fact are untrue. Facts which are consistent with such statements but show, notwithstanding, that the plaintiff has no cause of action, must be specially alleged. Thus, accord and satisfaction, arbitration and award, coverture, duress, fraud, illegality not apparent on the face of the pleadings, infancy, that the defendant was non compos mentis, payment (even though nonpayment is alleged by the plaintiff), release, the statute of limitations and res judicata must be specially pleaded, while advantage may be taken, under a simple denial, of such matters as the statute of frauds, or title in a third person to what the plaintiff sues upon or alleges to be the plaintiff's own."
In response, the defendant argues that the plaintiff violated its responsibilities under the agreement and, in order, to receive the type of relief to which the defendant is entitled, it must allege these special defenses. The defendant, without citation or analysis, states that if it is successful, then the trier of fact can conclude that the plaintiff is not entitled to recovery. In its conclusion, the defendant reiterates that the special defenses "rest on the same contract upon which the [p]laintiff sues . . . [and] [t]o separate them into distinct actions would be wasteful and . . . deprive the trier of this case from seeing the full picture of the contract."
"As a general rule, facts must be pleaded as a special defense when they are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action. Practice Book § [10-50] . . . The fundamental purpose of a special defense, like other pleadings, is to apprise the court and opposing counsel of the issues to be tried, so that basic issues are not concealed until the trial is underway." (Citation omitted.) Bennett v. Automobile Insurance Co. of Hartford, 230 Conn. 795, 802, 646 A.2d 806 (1994). "If the existence of a fact does not negate the existence of the plaintiff's allegations but independently destroys liability, then evidence of that fact may be admitted only under a special defense. Pawlinski v. Allstate Ins. Co., 165 Conn. 1, 7, 327 A.2d 583 (1973)." Emlee Equipment Leasing Corp. v. Waterbury Transmission, Inc., 41 Conn.Sup. 575, 576, 595 A.2d 951 (1991) ( 3 Conn. L. Rptr. 711); see also Homecomings Financial Network, Inc. v. Starbala, 85 Conn.App. 284, 288-89, 857 A.2d 366 (2004).
In the second and third special defenses, the defendant is seeking damages for the allegedly negligent conduct of the plaintiff in permitting the defendant to lease space to a prospective tenant known as Tutor Time without notifying the defendant that Tutor Time was insolvent and that the plaintiff as real estate broker for the defendant breached its duty of good faith and fair dealing and the responsibility of a fiduciary. At issue in the complaint is an alleged breach of the exclusive listing agreement between the plaintiff and the defendant with respect to Clock Tower Plaza and the commission owed to the plaintiff for the renewal of the subsequent lease agreement between the plaintiff and Simply Baby (count one) and Tower Cleaners (count two) from which the plaintiff maintains it did not receive its commission.
The fourth special defense, which alleges a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq., will be discussed later in this memorandum of decision.
The basis of the plaintiff's allegations in its complaint arise from an alleged breach of the listing agreement between it and the defendant. The allegations pleaded by the defendant in the second and third special defenses allege that the transaction arises from the same listing agreement between the parties but for a different prospective tenant known as Tutor Time and not for Simply Baby and Tower Cleaners as the tenants. The defendant alleges that, as to Tutor Time, the plaintiff was paid a commission greater than what was owed to it. These two special defenses pertain to the exclusive listing agreement, the foundation of the plaintiff's cause of action, and that the plaintiff has been paid a commission in excess of what it is owed under that contract. As such, the second and third special defenses do not negate the existence of a commission owed to the plaintiff but independently affect the underlying liability of the plaintiff. Therefore, the court finds that they are legally sufficient and the plaintiff's motion to strike the second and third special defenses are denied.
B. Counts Two and Three of the Recoupment Claims
As to the defendant's second and third recoupment claims, the plaintiff argues that they are wholly unrelated to the transaction that is the subject of the complaint (the listing agreement), and, as a result, do not properly qualify as a recoupment as well as that each is legally insufficient. In opposition to the motion to strike, the defendant argues that it is seeking in the recoupment counts a reduction of the amount claimed by the plaintiff because of the plaintiff's breach of contract or duty owed in the "transaction." "Connecticut has no statute concerning recoupment, but the state courts have long recognized the ancient equitable defense . . . Recoupment's distinguishing feature is that the defense arises out of the same transaction on which the plaintiff's claim is based. The defense exists as long as the plaintiff's cause of action exists." (Citation omitted.) St. Mary's Hospital v. Torres, 33 Conn.Sup. 201, 203, 370 A.2d 620 (1976).
The defendant has not clarified in its answer whether the recoupment claims are being alleged as a special defense or a counterclaim. "Recoupment is more properly filed as a special defense and not an independent action; it is essentially a defense . . . In recoupment, a defendant may cut down to the full amount of plaintiff's claim, but may not recover for any balance due . . . The test in each case must therefore be whether the pleading of the defendant is purely defensive or whether affirmative relief is demanded." (Internal quotation marks omitted.) The Frederick Corp. v. Scheckter, supra, Superior Court, Docket No. CV 01 0084350. "The defense of recoupment has two characteristics: (1) the defense arises out of the transaction constituting the plaintiff's cause of action; and (2) it is purely defensive, used to diminish or defeat the plaintiff's cause, but not as the basis for an affirmative recovery . . . It rests on the principle that both sides of a transaction should be settled at one time in order to prevent circuitry of actions." (Citation omitted.) Genovese v. J.N. Clapp Co., 4 Conn.App. 443, 445-46, 495 A.2d 1079 (1985). "Our courts [have] recognized the right of a person sued in an action upon contract, to recoup or cut back the amount which the plaintiff might recover, by showing a right of action for damages in himself arising out of the same contract or, in a qualified sense, transaction. Boothe v. Armstrong, 76 Conn. 530, 531, 57 A. 173 (1904). For-a valid contract defense such as recoupment to be asserted, however, there first must be an enforceable contract between the parties. It is well settled in this state that there must be mutuality of obligation between the parties to a contract for the contract to be enforceable." (Internal quotation marks omitted.) Sloan v. Kubitsky, supra, 48 Conn.App. 839. Specifically, "[t]he intention of the parties manifested by their words and acts is essential to determine whether a contract was entered into and what its terms were . . . This determination requires a finding of mutuality of obligation." (Citation omitted; internal quotation marks omitted.) Hydro-Hercules Corp. v. Gary Excavating, Inc., 166 Conn. 647, 652-53, 353 A.2d 714 (1974). "Although a defendant should clearly claim recoupment by special defense, and caption its allegations by way of recoupment only . . . a counterclaim is sufficient as long as the counterclaim is within the recoupment exception and arises out of the plaintiff's main cause of action." (Internal quotation marks omitted.) The Frederick Corp. v. Scheckter, supra, Superior Court, Docket No. CV 011 0084350. The Connecticut Supreme Court stated in Capitol Coal Co. v. Greenberg, 114 Conn. 422, 424, 158 A. 883 (1932) that "[u]nder our present practice, recoupment is to be pleaded as a counterclaim and requires a prayer for affirmative relief . . ." Id., 424. The court, therefore, will address the defendant's recoupment counts as both a special defense and counterclaim.
The money owed, which the defendant alleges under recoupment, in counts two and three of his answer, arose out of the same transaction and set of events that the plaintiff alleges in its complaint, that is, the listing agreement between the plaintiff and the defendant for the rental of Clock Tower Plaza. As the plaintiff points out in its memorandum in support of the motion to strike, the defendant allegedly owes the plaintiff a commission due to their exclusive listing agreement and subsequent rental agreement between the defendant and Simply Baby and the Tower Cleaners on the basis of the language within the listing agreement. The transactions with the tenant known as Tutor Time are also subject to that same listing agreement. Here, the defendant has alleged facts sufficient to establish that the recoupment counts two and three stem from the same initial transaction, and, therefore, the motion to strike these two counts is denied.
C. Second and Third Counterclaims
In the defendant's second and third counterclaims, the plaintiff argues that each arises from a transaction or occurrence that is separate and distinct from the allegations in the complaint regarding the commissions due as a result of the rental agreement with Simply Baby and Tower Cleaners. The plaintiff maintains that the defendant has pleaded a series of events and transactions that are unconnected with those of the complaint and which pertain to conduct occurring with respect to a different tenant. It is this lack of a connection, both legal and factual, to the allegations of the complaint that the plaintiff argues requires that the counterclaims should be stricken. With respect to the defendant's second and third counterclaims, the plaintiff argues in its memorandum of law that because these claims arise from a transaction that is separate from the allegations in the complaint, they are legally insufficient. The defendant responds that his claims arise from the same transaction, the agreement between the parties, and, thus, they are legally sufficient.
A counterclaim is "a cause of action existing in favor of a defendant against a plaintiff that a defendant pleads to diminish, defeat or otherwise affect a plaintiff's claim and also allows recovery by the defendant." (Internal quotation marks omitted.) Home Oil Co. v. Todd, 195 Conn. 333, 341, 487 A.2d 1095 (1985). Generally, Practice Book § 10-10 delineates the boundaries of counterclaims. It provides that "[i]n any action for legal or equitable relief, any defendant may file counterclaims against any plaintiff . . . provided that each such counterclaim . . . arises out of the transaction or one of the transactions which is the subject of the plaintiff's complaint . . ." Practice Book § 10-10. "The transaction test [of § 10-10] is one of practicality . . ." (Internal quotation marks omitted.) Southbridge Assoc., LLC v. Garofalo, 53 Conn.App. 11, 21, 728 A.2d 1114, cert. denied, 249 Conn. 919, 733 A.2d 229 (1999). See also Ocwen Federal Bank v. Rivas, supra, Superior Court, Docket No. CV 99 0368135. In Morgera v. Chiappardi, 74 Conn.App. 442, 813 A.2d 89 (1977), relied on by the defendant, the court concluded that under the transaction test the related acts arose prior to or during the development of the note and mortgage and that the defendant's counterclaim arose from the plaintiff's fraudulent representations which caused her to make the note and mortgage on one property but which was part of a package of conveyances or property represented to be legal, income-producing multifamily properties. Id., 450. The court further stated that Morgera involved the conveyance of three properties in which the seller failed to notify the defendant that there were numerous housing violations on each of the properties and her counterclaim, which was upheld, was for fraudulent misrepresentation.
The transaction at issue in the present case is the exclusive listing agreement between the plaintiff and defendant and the procurement of Simply Baby and Tower Cleaners as tenants for the property known as Clock Tower Plaza owned by the defendant all of which resulted in a lease agreement between the defendant and these two tenants from which the plaintiff is claiming it is owed a commission. The plaintiff challenges the counterclaims on the basis that each pertains to the conduct of the parties in relation to a different tenant, Tutor Time, and to a different location, and, therefore, under the transaction test, the counterclaims are legally insufficient. The court finds that the second and third counterclaims arise out of the listing agreements at issue and are legally sufficient. Therefore, the plaintiff's motion to strike these counterclaims is denied.
D. The Defendant's Fourth Special Defense, Fourth Counterclaim and Recoupment Claim Count Four
In the fourth special defense, fourth counterclaim and count four of the recoupment claim, the defendant alleges damages for a violation of CUTPA based on the plaintiff's unfair and deceptive actions and practices in receiving and accepting funds from Tutor Time in connection with the overpayment of a commission and failing to investigate, advise or warn the defendant of the insolvency of Tutor Time. In his counterclaim, the defendant alleges that the plaintiff engaged in a trade or practice as the terms are defined by CUTPA; that the plaintiff was engaged in commerce as that term is defined in CUTPA; and that the plaintiff engaged in unfair and deceptive actions and practices as these terms are defined in CUTPA; by receiving and accepting funds not due it and failing to investigate and/or advise and warn the defendant of the insolvency and financial difficulties of Tutor Time. The defendant contends that an alleged overpayment of a commission to the plaintiff in connection with Tutor Time as a prospective tenant and the allegedly negligent conduct of the plaintiff in procuring Tutor Time is a CUTPA violation. The plaintiff argues in its memorandum of law in support of the motion to strike that the underlying actions that form the basis of the CUTPA claims alleged in the fourth special defense, fourth recoupment count and fourth counterclaim is the purported lease with Tutor Time, not at issue in the complaint, and, therefore, each should be stricken. In response, the defendant asserts that the special defense, counterclaim and recoupment claim arises from the same transaction and the same set of operative facts, namely the listing agreement, and involves the plaintiff's tortious conduct during the contract.
"[A] CUTPA violation cannot be asserted as a special defense." Monetary Funding Group, Inc. v. Pluchino, 87 Conn.App. 401, 404 n. 3, 867 A.2d 841 (2005). The weight of the Superior Court cases have held that CUTPA cannot be asserted as a special defense. Duffy Fasano v. Lena, Superior Court, judicial district of Waterbury, Docket No. CV 0109145 (December 2, 1992, Sylvester, J.) ("A CUTPA claim is an actionable right and therefore is more appropriately brought as a counterclaim and not as a special defense"); accord SNETCO v. Guardian Systems, Inc., Superior Court, judicial district of New Haven, Docket No. CV 94 0358589 (January 23, 1995, Martin, J.); Shawmut Bank v. Moser, Superior Court, judicial district of Tolland at Rockville, Docket No. CV 91 0049087 (September 2, 1992, McWeeny, J.); Connecticut National Bank v. Alliance Petroleum, Inc., Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. CV 0373623 (June 9, 1992, Hennessey, J.) ( 6 Conn. L. Rptr. 529, 530); Chrysler First Wholesale Credit, Inc. v. Spicer, Superior Court, judicial district of New London, Docket No. CV 0517727 (September 24, 1991, Mihalakos, J.). In addition, no cases could be found alleging a CUTPA claim as a recoupment count. The court grants the motion to strike the fourth special defense and fourth recoupment count as they are not legally sufficient.
The plaintiff's argument as to why the CUTPA counterclaim is insufficient is devoid of any reasoning other than asserting that the underlying breach of the exclusive listing agreement involving the commission allegedly owed it arose out of a transaction unrelated to the lease with Tutor Time. Since it has been previously determined that the causes of action herein all involve the underlying listing agreement, this argument by the plaintiff fails. In addition, the plaintiff does not argue that the defendant failed to allege any of the elements necessary to state a cognizable claim for a CUTPA violation nor does it provide any case law to support its assertion. A court may not strike a claim for reasons not advanced in the motion to strike. Meredith v. Police Commission, 182 Conn. 138, 140-41, 438 A.2d 27 (1980). Therefore, the motion to strike the fourth counterclaim is denied.
III CONCLUSION
The court denies the motion to strike the second and third special defenses, recoupment counts two and three, and the second, third and fourth counterclaims. The court grants the motion to strike the fourth special defense and fourth recoupment count.
So ordered
BY THE COURT
Peter Emmett Wiese, Judge