Opinion
No. CV 04-4002067 S
October 26, 2005
MEMORANDUM OF DECISION
This action arises out of an alleged breach of a credit sales arrangement between the plaintiff, Tuxis-Ohr's Fuel, Inc., and the defendant, Trio Marketers, Inc. (Trio), and a subsequent personal guarantee for Trio's debts, entered into by the defendant Douglas Wenz. On December 17, 2004, the plaintiff filed an amended six-count complaint against the defendants, Trio, Douglas Wenz, Barbara Wenz and Robert Breunig.
The plaintiff filed a request for leave to amend its complaint on December 17, 2004. A party may amend its pleadings "[b]y filing a request for leave to file such amendment . . . [and] [i]f no objection thereto has been filed by any party within fifteen days from the date of filing CT Page 13351-mq said request, the amendment shall be deemed to have been filed by consent of the adverse party." Practice Book § 10-60(a)(3). On January 20, 1995, Barbara Wenz filed an objection to the plaintiff's request. Nevertheless, as the defendant did not object within fifteen days of the request for leave to amend, the amendment is deemed to have been filed by consent.
In count one, the plaintiff alleges that Trio has wrongfully detained monies due and owing the plaintiff pursuant to a credit account that the defendant maintained with the plaintiff and that Trio is indebted to the plaintiff in the amount of $973,578.35 plus interest, costs and attorney fees. In count two, the plaintiff alleges that in order to induce the plaintiff's continued extension of credit to Trio, Douglas Wenz guaranteed the debts of Trio pursuant to a written guaranty, by which Douglas Wenz became indebted to the plaintiff in the amount owed by Trio. In count three, the plaintiff alleges that Barbara Wenz participated in a fraud upon the plaintiff with Douglas Wenz. In count four, the plaintiff alleges that Douglas Wenz and Breunig engaged in fraudulent conspiracy. In count five, the plaintiff alleges a breach of the covenant of good faith and fair dealing by Trio, Douglas Wenz and Breunig. Count six sets forth an unjust enrichment claim against Trio and Barbara Wenz.
Count six originally contained an unjust enrichment claim against all defendants, but was stricken as against Douglas Wenz and Breunig by the court, Lacari, J., on January 18, 2005. A request for leave to amend the complaint was filed on June 17, 2005. The revised complaint includes a claim for damages of $995,808.88 plus interest, costs and attorneys fees and amends count six to allege fraud against Douglas Wenz and Trio. Barbara Wenz filed an objection to the request for leave to amend the complaint on June 22, 2005, within the fifteen-day period required by Practice Book § 10-60(a)(3). This request has not been ruled on by the court.
On March 9, 2005, Trio and Douglas Wenz filed an answer to the plaintiff's complaint, which includes a special defense. On June 20, 2005, the plaintiff filed a motion to strike Douglas Wenz's special defense, accompanied by a memorandum of law in support as required by Practice Book § 11-10(3). On July 6, 2005, Douglas Wenz filed a memorandum in opposition.
"A party wanting to contest the legal sufficiency of a special defense may do so by filing a motion to strike. The purpose of a special defense is to plead facts that are consistent with the allegations of the CT Page 13351-mm complaint but demonstrate, nonetheless, that the plaintiff has no cause of action . . . In ruling on a motion to strike, the court must accept as true the facts alleged in the special defenses and construe them in a manner most favorable to sustaining their legal sufficiency." (Citations omitted; internal quotation marks omitted.) Barasso v. Rear Still Road, LLC, 64 Conn.App. 9, 13, 779 A.2d 198 (2001).
In his answer, Douglas Wenz alleges one special defense: that "Douglas Wenz's guaranty is voidable either in whole or in part since it includes a waiver of the homestead exemption which violates public policy." On the face of the plaintiff's motion to strike, it states that its grounds for the motion are that the "special defense does not challenge the sufficiency of the complaint nor does it show that the plaintiff has no cause of action." In support of its motion, the plaintiff argues that 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. The plaintiff contends that the homestead exemption does not attack the making, validity or enforcement of the guaranty, nor does it show that the plaintiff has no cause of action in any other way. Thus, the plaintiff argues that the homestead exemption is not legally sufficient when pleaded as a special defense. Finally, the plaintiff notes that the applicable homestead exemption statutes contain no reference to restrictions on waiving the exemption, particularly in commercial transactions.
Douglas Wenz counters that he has sufficiently pled his special defense and that he has asserted a legally cognizable defense. He argues that his special defense advises the plaintiff of the facts he intends to prove, the particular clause of the contract at issue and that the plaintiff is not claiming lack of notice. He further contends that he has not asserted the homestead exemption as a special defense in and of itself. Moreover, he notes that the case relied on by the plaintiff, Pennie Edmonds v. Hill, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 95 0321668 (Tobin, J., September 11, 1995); is not on point because the defendant in that case asserted the homestead exemption as a special defense to a foreclosure action. The court held that "the homestead exemption is unnecessary and legally insufficient when pleaded as a special defense." (Internal quotation marks omitted.) Id. In this case, the defendant has not asserted the homestead exemption as a special defense. He argues that since the contract purports to waive the exemption, the contract is void in whole or in part since such a waiver violates the legislative intent and public policy behind the statute.
General Statutes § 52-352b(t) provides in relevant part that "[t]he homestead of [any natural person shall be exempt] to the value of CT Page 13351-mn seventy-five thousand dollars . . . provided value shall be determined as the fair market value of the real property less the amount of any statutory or consensual lien which encumbers it . . ." A homestead is defined as "owner-occupied real property . . . used as a primary residence." (Internal quotation marks omitted.) General Statutes 52-352a(e).
Although Practice Book § 10-1 requires that "each pleading shall contain a plain and concise statement of the material facts on which the pleader relies," Practice Book § 10-2 provides in relevant part that "contracts may be stated according to their legal effect, but in so doing the pleading should be such as fairly to appraise the adverse party of the state of facts which it is intended to prove." Douglas Wenz's allegations are sufficient to alert the plaintiff to the nature of the defense asserted. See Kallstrom v. Litwin, Superior Court, judicial district of Litchfield, Docket No. CV 03 0091281 (May 4, 2005, Pickard, J.) ("[t]he factual allegations . . . although spare, are sufficient to satisfy the requirements of Practice Book § 10-1 and 10-2 and to alert the plaintiffs to the nature of the claims"). Specifically, Douglas Wenz alleges that waiver of the homestead exemption is violative of public policy, thus making the contract void in whole or in part.
The court's determination that the defendant has alleged sufficient facts to notify the plaintiff of the intended special defense does not end the inquiry. "The purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action." (Internal quotation marks omitted.) Barasso v. Rear Still Road, LLC, supra, 64 Conn.App. 13. Accordingly, the court must determine whether the special defense, alleging a violation of public policy, demonstrates that the plaintiff has no cause of action.
"The principle that agreements contrary to public policy are void should be applied with caution and only in cases plainly within the reasons on which that doctrine rests; and it is the general rule . . . that competent persons shall have the utmost liberty of contracting and that their agreements voluntarily and fairly made shall be held valid and enforced in the court . . . The impropriety injurious to the interests of society which will relieve a party from the obligation he has assumed must be clear and certain before the contract will be found void and unenforceable." (Citation omitted; internal quotation marks omitted.) Collins v. Sears, Roebuck Co., 164 Conn. 369, 376-77, 321 A.2d 444 (1973). "The public policies that have been found to require the voiding of contracts that conflict with those policies are, for example, the policy of recognizing the inability of minors to enter into contracts . . CT Page 13351-mo . the statutory policy against enforcing wagering contracts . . . the policy of not allowing a party to a contract to relieve himself of liability for his own negligence . . . and various policies set forth in statutes." (Internal quotation marks omitted.) Deprimo v. Chiarelli, Superior Court, judicial district of New Haven, Docket No. CV 01 0454691 (February 9, 2004, Zoarski, J.T.R.). The Supreme Court has "recognized the inherent vagueness of the concept of public policy and the difficulty encountered when attempting to define precisely the contours of the public policy exception." (Internal quotation marks omitted.) Thibodeau v. Design Group One Architects, LLC, 260 Conn. 691, 699-700, 802 A.2d 731 (2002).
In the present case, the statute at issue concerns the ability to protect one's homestead against judgments. While the effect of waiving the homestead exemption in a contract of personal guaranty is not clear, General Statutes § 52-350f provides in relevant part that "[a] money judgment may be enforced against any property of the judgment debtor unless the property is exempt from application to the satisfaction of the judgment under section . . . 52-352b . . ." Read together, §§ 52-350f and 52-352b(t) set forth a public policy of protecting one's homestead up to a value of $75,000. Finally, the remarks of Representative Holbrook, speaking in favor of enacting the proposed homestead exemption, indicate that the exemption was enacted in an "effort to protect [people's] homes." 36 H.R. Proc., Pt. 30, 1993 Sess., p. 10856.
During a hearing on the proposed homestead exemption, Representative Farr specifically asked about the effect of waiving the homestead exemption. 36 H.R. Proc., Pt. 30, 1993 Sess., pp. 10851-53. In explaining the effect on statutory waiver and mortgages, Representative Samowitz stated that "[t]his amendment does not deal with any waiver of statutory language." 36 H.R. Proc., supra., p. 10851. Representative Farr tried to further clarify the issue of waiver. "If you were getting say a line of credit from a bank or a credit card. Could the lender put a provision in that document that says you waive all homestead exemptions and would that be effective even though they weren't putting a lien on at that time? Could you waive the homestead exemption and any loan agreements?" 36 H.R. Proc., supra., p. 10852. Representative Samowitz replied once again that "[t]he proposed bill does not deal with the statutory right of waiver." 36 H.R. Proc., supra., p. 10853. Emphasizing the uncertainty behind the effect of waiving the homestead exemption, Representative Farr responded that he "was hoping to get some more guidelines here. I am not sure what the effect. I understand the bill doesn't spell out any of those provisions, but I was hoping someone in the Chamber would have knowledge to the effect this law and what was going to happen in terms of the effect on consumers and attorneys practicing in Connecticut." 36 H.R. Proc., supra., p. 10853.
The Appellate Court has touched on a similar problem associated with allowing a blanket waiver of a statutory right at the inception of a contract. In Haggerty v. Williams, 84 Conn.App. 675, 676, 855 A.2d 264 (2004), the plaintiff signed a mortgage agreement containing a clause that waived the right to raise the statute of limitations as a defense against the enforcement of the mortgage. In finding that the waiver violated a clear public policy, the court noted that "[t]he [problem] . . . with this type of waiver, made at the inception of the contract . . . [is] that . . . if [the court] were to uphold the validity of such waivers in the original contract, such a stipulation would be inserted in every promissory note and similar instrument as a matter of routine. The door would be open to the very abuses the statute was designed to prevent, and the result would be an annihilation of the statute." Id. at 681-82. The purported waiver of the homestead exemption in the agreement in this case is analogous. If the court were to uphold the validity of a waiver of the homestead exemption, the result would be an annihilation of the statute since it would encourage the insertion of a waiver in every similar instrument as a matter of routine. Consequently, the waiver of the homestead exemption violates public policy and, therefore, is void. CT Page 13351-mp
The inquiry now turns on whether the invalidity of this waiver demonstrates that the plaintiff has no cause of action. See Barasso v. Rear Still Road, LLC, supra, 64 Conn. 13. Douglas Wenz's special defense claims that the purported waiver of the homestead exemption voids the contract in whole or in part. If the contract is only void in part, he has not demonstrated that the plaintiff has no cause of action since the basis of the plaintiff's claims, the remainder of the guaranty, remains in effect.
"[I]t is the general rule that a severable contract is one in its nature and purpose susceptible of division and apportionment . . . The determinative test is in ascertaining from the language used, read in the light of the surrounding circumstances, what was the intention of the parties . . . In determining the severability of the contract, the court looks to whether the contract's parts and its consideration are common to each other or independent of one another." (Internal quotation marks omitted.) DeMattia v. Mauro, 86 Conn.App. 1, 12, 860 A.2d 262 (2004); see also New Fairfield Board of Education v. Cortese, Superior Court, judicial district of Danbury, Docket No. CV 03 0349701 (January 24, 2005, Mintz, J.) ( 38 Conn. L. Rptr. 616) (declaring one part of a settlement agreement void as against public policy and allowing remainder to be severed and enforced).
Applying these principles to the present case, the contract is captioned as a "CONTINUING GUARANTEE — INDIVIDUAL." It is clear from the face of the document that the parties intended to create a continuing relationship in which Douglas Wenz, his executors, administrators and assigns, would guarantee Trio's indebtedness. Furthermore, the clause purporting to waive the homestead exemption does not appear to be integrated into other clauses of the contract; it appears as an independent clause that is susceptible to division and apportionment. The clause at issue is, therefore, severable; the remainder of the guarantee remains in effect. Since the plaintiff's cause of action relies on the existence of guarantee as a whole, and does not depend on the waiver of the homestead exemption, Douglas Wenz's special defense fails to show that the plaintiff has no cause of action and, therefore, is not a legally sufficient special defense.
Accordingly, the plaintiff's motion to strike the defendant Douglas Wenz's special defense is granted.