Opinion
No. CV 10 6024727
September 15, 2011
MEMORANDUM OF DECISION MOTION TO STRIKE COUNTERCLAIM OF DEFENDANT (#193) EASTERN ENERGY, LLC
BACKGROUND
Plaintiff's predecessor in interest, Bank of Smithtown, filed this foreclosure action by way of complaint dated July 20, 2010, with a return date of August 10, 2010. Defendant, Eastern Energy Services, LLC ("Eastern Energy"), asserts in its counterclaim that it furnished labor and materials to the property which is the subject of the plaintiff's mortgage foreclosure. Defendant, Eastern Energy, has filed a mechanic's lien claiming that $286,225.00 remains due and owing for work done at the property subsequent to the recording of the mortgage. The plaintiff's note and mortgage were dated July 31, 2007, and the mortgage was recorded in the Norwich land records on July 31, 2007, several months prior to the work commencement date asserted in Eastern's mechanic's lien. Eastern Energy was named as a defendant in the foreclosure as a result of its mechanic's lien. Eastern Energy has now filed a counterclaim asserting that substitute-plaintiff and its predecessors have "been unjustly enriched" by the receipt of the "labor, materials and equipment provided by Eastern Energy" for which Eastern Energy has not been paid.
MOTION TO STRIKE
A motion to strike is the proper vehicle to contest the legal sufficiency of the allegations of any complaint, counterclaim or cross complaint, or of any prayer of relief. Practice Book § 10-39; Eskin v. Castiglia, 253 Conn. 516, 522-23 (2000). "Whenever any party wishes to contest . . . the legal sufficiency of any prayer for relief in any . . . complaint, counterclaim or cross complaint . . . that party may do so by filing a motion to strike the contested pleading or part thereof." Practice Book § 10-39(a). "The function of a motion to strike is to test the legal sufficiency of a pleading; it admits all facts well pleaded." Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378 (1977). It does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings. Faulkner v. United Technologies Corp., 240 Conn. 576, 588 (1997). The role of the trial court, then, is to examine the pleading, construed in favor of the pleading party, to determine whether it is legally sufficient. Dodd, supra. Conclusions of law, absent sufficient alleged facts to support them, are subject to a motion to strike. Fortini v. New England Log Homes, Inc., 4 Conn.App. 132, 135 (1985).
"Practice Book § 10-10 allows a defendant to file a counterclaim 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." Under that test, counterclaims which do not relate to the making, validity or enforcement of the note and mortgage have been disallowed because they do not arise out of the same transaction as the complaint. JP Morgan Chase v. Gilmore, 2006 WL 3290608. Allegations which relate "entirely to the acts and procedures of the plaintiff after the execution of the note and mortgage [emphasis supplied], rather than making, validity or enforcement of the note and mortgage" do not arise from the same transaction as the complaint and are invalid as counterclaims under Practice Book § 10-10. Ocwen Federal Bank FSB v. Stawski, 2000 WL 573155. It is within the court's discretion to conclude that plaintiff's conduct was not part of the same transaction as alleged in the complaint. JP Morgan Chase v. Rodrigues, 109 Conn.App. 125, 135 (2008) (striking a CUTPA counterclaim in a foreclosure action). Typically, counterclaims in foreclosures are raised by the defendant-borrower and assert claims in an effort to thwart the foreclosure of the mortgage and the loss to the defendant of its property. In the instant case, however, the counterclaim being raised against the plaintiff is asserted by a subsequent encumbrancer which was not a party to the underlying transaction between the plaintiff and the defendant-borrower and the defendant-guarantor.
"In a foreclosure action, the relevant factors for a court to consider in determining whether the [aforementioned] `transaction test' has been met by the counterclaim includes: (1) whether the counterclaim is based on factors outside of the note or mortgage; (2) whether different issues of fact and law are presented by the complaint and counterclaim; and (3) whether separate trials would involve a substantial duplication of effort." (Citations omitted; internal quotation marks omitted), Eastern Federal Bank v. Krondes, 2008 WL 4515668.
ANALYSIS
The allegations of Eastern Energy concern actions occurring well after the execution of the note and mortgage. This court concludes that the actions of Eastern Energy are not related to the underlying loan transaction that is subject to the present foreclosure action. Eastern Energy had a contractual relationship with the owner of the property in supplying the labor and materials at the subject site.
In reviewing the counterclaim filed by Eastern Energy, this court concludes that its counterclaim does not relate to the validity, making and enforcement of the note and mortgage in question. Connecticut Practice Book § 10-10. The transaction test has not been met. JP Morgan Chase v. Rodrigues, 109 Conn.App. 125, 135 (2008). Furthermore, there is no privity of contract between Eastern Energy and the underlying transaction between the plaintiff and defendant-borrower and/or guarantors.
The allegations clearly show that alleged conduct that has occurred after the execution of the note, mortgage and guarantees involves a contractual relationship between Eastern Energy and the owner of the property. The claim for work performed is not related to the loan transaction, therefore, Eastern Energy has failed to state a proper counterclaim to this mortgage foreclosure action according to the transaction test.
Eastern Energy further argues that it has alleged a proper claim for unjust enrichment against the plaintiff based on the facts alleged in spite of the transaction test requirement cited above. To establish a claim for unjust enrichment, one must prove (1) the plaintiff was benefitted; (2) that the plaintiff unjustly did not pay Eastern Energy for its benefits; and (3) the failure of payment was to Eastern Energy's detriment. Vertex, Inc. v. City of Waterbury, 278 Conn. 557, 573 (2006); citing Hartford Whalers Hockey Club v. Uniroyal Goodrich Tire Co., 231 Conn. 276 (1994). Eastern Energy makes these allegations in paragraphs 21-24 or its counterclaim. It cites as its authority for its counterclaim for unjust enrichment based upon the unreported trial court decision in Bank of America, et al v. AGCPP Greenwich Atrium Owner, LLC, Superior Court, judicial district of Stamford, Docket No. CV 09002438 (November 5, 2010, Brazzel-Massaro, J.) ( 51 Conn. L. Rptr 45).
In that case, the plaintiff bank filed a motion for summary judgment against a mechanics lienor who claimed that even though it was junior to the plaintiff's mortgage, the plaintiff was unjustly enriched by work performed and materials supplied. In that case, the trial court found that "the plaintiff had not only had some control over the financing and payment for the work to increase the value for sale of the property." Bank of America, at p. 10.) The court denied the motion for summary judgment as to the unjust enrichment counterclaim.
The counterclaim alleged by Eastern Energy, in this case, should be handled in a separate suit against the plaintiff and its predecessors based upon the alleged conduct of the parties. It would appear that all of the mechanics lienors (all junior to the plaintiff's mortgage) may have the same or comparable claims against the plaintiffs. The plaintiff in this foreclosure action should be able to proceed to judgment against the parties based upon each lienor's order of priority. The unjust enrichment claim should be pled by Eastern Energy in a separate case against the plaintiffs. To permit otherwise would be to make the mortgage foreclosure against a defunct corporate defendant owner hostage to the claims of and appeals by junior lienholders. The subject property, a partially completed hotel would sit fallow growing weeds, rather than catering to the needs of potential customers. Equity requires that the subject foreclosure action go to trial while the plaintiff and Eastern Energy litigate the unjust enrichment case in a separate action.
ORDER
The plaintiff's motion to strike Eastern Energy's counterclaim (#193) is hereby granted.