Opinion
CV126013415.
12-06-2012
CT NORWICH, LLC v. EASTERN ENERGY SERVICES, LLC.
UNPUBLISHED OPINION
COSGROVE, J.
FACTS
On May 16, 2012, the plaintiff, CT Norwich, LLC, commenced this action for common-law and statutory vexatious litigation, CUTPA violations and tortious interference with business expectancies by service of process on the defendant, Eastern Energy Services, LLC (Eastern Energy). In paragraphs one through fifteen of each count in its four-count complaint, CT Norwich alleges the following facts. On July 21, 2010, CT Norwich's predecessor in interest, Bank of Smithtown, filed an action to foreclose on property in Norwich, Connecticut. Eastern Energy was named as a defendant in the foreclosure action because it had a mechanic's lien on the property subordinate to that of CT Norwich's mortgage.
To clarify the issue before it in this motion to dismiss, the court takes judicial notice of additional facts and allegations in the various pleadings of the prior action, Bank of Smithtown v. PRA at Norwich, LLC, Superior Court, judicial district of New London, Docket No. CV 10 6005315, as those issues relate to the present case.
Following the beginning of the foreclosure proceedings, on or about November 30, 2010, Bank of Smithtown merged with and into People's United Bank. From this merger, People's United Bank acquired the note, mortgage, and building loan agreement for the property subject to foreclosure and became a plaintiff to the prior action. On or about March 31, 2011, People's United sold the note for mortgage in the prior action to CT Norwich, a sale by which CT Norwich acquired the rights, duties and obligations of the prior holders. See Eastern Energy's Counterclaim against Second Substitute Plaintiff, # 178, Bank of Smithtown v. PRA at Norwich, LLC, Superior Court, judicial district of New London, Docket No. CV 10 6005315 (June 7, 2011). On May 13, 2011, CT Norwich entered an appearance as a plaintiff in the foreclosure action.
On June 7, 2011, Eastern Energy filed a counterclaim against CT Norwich, alleging unjust enrichment for the work covered by the lien. According to Eastern Energy, it had furnished renovated and improved the property " under an agreement by or with consent of PRA Norwich and [CT Norwich], and/or its predecessors-in-interest ..." Eastern Energy's Counterclaim against Second Substitute Plaintiff, # 178, Bank of Smithtown v. PRA at Norwich, LLC, Superior Court, judicial district of New London, Docket No. CV 10 6005315 (June 7, 2011). Eastern Energy knew, however, that it would be unable to be successful in the matter because, inter alia, it knew it had not detrimentally relied on CT Norwich's conduct, it had not had either contact or a relationship with either CT Norwich or its predecessors in interest prior to the commencement of the Norwich Foreclosure and it was aware that liability for any payment for its work could not be attributed to CT Norwich or its predecessors in interest. Despite these impediments to its success on the counterclaim, Eastern Energy maintained the counterclaim to vex and trouble CT Norwich by causing delay and expense to it in the foreclosure in order to extract payment that Eastern Energy was not entitled.
On June 22, 2011, CT Norwich filed a motion to strike Eastern Energy's counterclaim. In the supporting memorandum of law, CT Norwich argued that Eastern Energy's unjust enrichment claim was improper for two reasons: first, that it was not the proper subject matter for a counterclaim under Practice Book § 10-10 because it arose from activities arising after the execution of the note and mortgage with a party not in privity with CT Norwich; and second, the claim was insufficient as a matter of fact and law because Eastern Energy had alleged no facts claiming that either CT Norwich or its predecessors in interest sought to have Eastern Energy perform the work forming the basis of the unjust enrichment claim and Connecticut law does not deem the mortgagee as the de facto owner of a mortgaged property. CT Norwich's Memorandum of Law in Support of Motion to Strike Counterclaim of Defendant Eastern Energy, LLC, # 194, Bank of Smithtown v. PRA of Norwich, LLC, Superior Court, judicial district of New London, Docket No. CV10 6005315 (June 22, 2011).
The court, Devine, J., found that the unjust enrichment claim neither related to the validity, making and enforcement of the note and mortgage nor did privity exist between Eastern Energy and either CT Norwich or its predecessors in interest; therefore, the court found that the unjust enrichment claim did not meet the transaction test as required to be a proper counterclaim under Practice Book § 10-10. Further, albeit in dicta, the court noted that hearing this unjust enrichment claim, as well as the same or similar claims that the other junior lienors might have against the plaintiffs, would " make the mortgage foreclosure against a defunct corporate defendant owner hostage to the claims of and appeals by junior lienholders." Memorandum of Decision, # 214, Bank of Smithtown v.. PRA at Norwich, LLC, Superior Court, judicial district of New London, Docket No. 10 6024727 (September 15, 2011, Devine, J.) [ 52 Conn. L. Rptr. 608]. For these reasons, the court granted the motion to strike on September 15, 2011. On September 22, 2011, Eastern Energy filed a motion for reconsideration of CT Norwich's motion to strike. The motion for reconsideration was denied on December 14, 2011, and Eastern Energy did not replead.
Following the commencement of the present action, Eastern Energy filed on June 28, 2012, a motion to dismiss all four counts of the complaint on the ground that the court lacks subject matter jurisdiction due to a lack of ripeness. Eastern Energy submitted a memorandum of law in support of its motion and attached, as a supporting exhibit, the decision in the previous action granting CT Norwich's motion to strike Eastern Energy's counterclaim. On August 7, 2012, CT Norwich filed a memorandum of law in opposition to Eastern Energy's motion to dismiss. The court heard oral arguments on August 13, 2012.
In its motion to dismiss, Eastern Energy argues that the court lacks subject matter jurisdiction due to CT Norwich's lack of standing. In the memorandum of law supporting its motion to dismiss, however, Eastern Energy argues that CT Norwich's lack of standing is premised on CT Norwich not having received a favorable, final termination in the previous action and that therefore the vexatious litigation claim was not yet ripe.
DISCUSSION
" In general, a motion to dismiss is the proper procedural vehicle to raise a claim that the court lacks subject matter jurisdiction over the action." Bellman v. West Hartford, 96 Conn.App. 387, 392, 900 A.2d 82 (2006). " [R]ipeness is a sine qua non of justiciability ... An issue regarding justiciability ... must be resolved as a threshold matter because it implicates [the] court's subject matter jurisdiction ... If it becomes apparent to the court that such jurisdiction is lacking, the [cause of action] must be dismissed." (Internal quotation marks omitted.) Liberty Mutual Ins. Co. v. Lone Star Industries, Inc., 290 Conn. 767, 812, 967 A.2d 1 (2009).
" [T]he plaintiff bears the burden of proving subject matter jurisdiction, whenever and however raised." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. New London, 265 Conn. 423, 430 n. 12, 829 A.2d 801 (2003). " [I]n determining whether a court has subject matter jurisdiction, every presumption favoring jurisdiction should be indulged." (Internal quotation marks omitted.) Dayner v. Archdiocese of Hartford, 301 Conn. 759, 774, 23 A.3d 1192 (2011). " When a trial court decides a jurisdictional question raised by a pretrial motion to dismiss on the basis of the complaint alone, it must consider the allegations of the complaint in their most favorable light ... In this regard, a court must take the facts to be those alleged in the complaint including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader." (Internal quotation marks omitted.) Conboy v. State, 292 Conn. 642, 651, 974 A.2d 669 (2009). " In contrast, if the complaint is supplemented by undisputed facts established by affidavits submitted in support of the motion to dismiss ... other types of undisputed evidence ... and/or public records of which judicial notice may be taken ... the trial court, in determining the jurisdictional issue, may consider these supplementary undisputed facts and need not conclusively presume the validity of the allegations of the complaint." (Citations omitted; emphasis in original; internal quotation marks omitted.) Id., at 651-52.
In the present case, Eastern Energy seeks to dismiss all four counts of CT Norwich's complaint on the grounds that each claim is premised on vexatious litigation allegations that are not ripe because the underlying litigation has not terminated in the plaintiff's favor. CT Norwich challenges Eastern Energy's use of the motion to dismiss, arguing that the motion to strike is the proper procedural tool for challenging the sufficiency of CT Norwich's allegations with respect to the favorable termination requirement. The court must, therefore, first address whether Eastern Energy's motion to dismiss CT Norwich's complaint is proper.
" [I]f a pleading ... on its face is legally insufficient, although facts may indeed exist which, if properly pleaded, would establish a cause of action upon which relief could be granted, a motion to strike is required ... In contrast, [a] motion to dismiss ... properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court." (Citation omitted; internal quotation marks omitted.) In re Jose B., 303 Conn. 569, 576, 34 A.3d 975 (2012). In short, " [t]here is a significant difference between asserting that a plaintiff cannot state a cause of action and asserting that a plaintiff has not stated a cause of action, and therein lies the distinction between the motion to dismiss and the motion to strike." (Internal quotation marks omitted.) Id., at 577 n. 3.
In vexatious litigation claims, termination in the plaintiff's favor is not only essential to the claim's legal sufficiency, but also a prerequisite for a finding that the claim is ripe. See Keller v. Beckenstein, 122 Conn.App. 438, 444, 998 A.2d 838 (2010) (" for a vexatious litigation claim to be ripe for adjudication, the party must allege, among other facts, that the allegedly vexatious litigation has terminated in its favor"), rev'd on other grounds, 305 Conn. 523, 46 A.3d 102 (2012). In Keller v. Beckenstein, supra, 122 Conn.App. at 444, it was " uncontested" that the allegedly vexatious claim was being appealed and had not terminated in the plaintiff's favor when the action was commenced. Therefore, because the court held that the claim was not saved by the statute at issue, it found that the trial court had properly granted the motion to dismiss. Id., at 444-45. The Superior Court has similarly dismissed vexatious litigation claims on ripeness grounds when the previous action had not sufficiently terminated. See Branford v. Doyle, Superior Court, judicial district of New Haven, Docket No. CV 08 5022420 (May 6, 2011, Lager, J.) (dismissing the defendant's vexatious litigation counterclaim for lack of ripeness when the plaintiff intended to appeal the striking of the allegedly vexatious count after litigating the remaining counts); Bissonnette v. Highland Park Market, Inc., Superior Court, judicial district of Hartford, Docket No. CV 10 6014088 (March 16, 2011, Wagner, J.T.R.) (finding the vexatious litigation counterclaim premised on an administrative action unripe when the administrative board had released jurisdiction over the claim to the plaintiff and subsequently filed the claim in the Superior Court).
In the present case CT Norwich argues that the proper procedure to challenge a vexatious litigation claim on the basis of the favorable termination requirement is the motion to strike, not the motion to dismiss. CT Norwich relies primarily on one case for this assertion, Palmieri v. DiChello, Superior Court, judicial district of New Haven, Docket No. CV 360623 (January 5, 1995, Zoarski, J.), as well as the cases cited therein. In that case, the trial court stated: " The line of decisions that have addressed the essential allegations of a vexatious litigation claim have all done so in the context of a motion to strike, or, its predecessor, the demurrer." Both of the cases to which Palmieri and CT Norwich cite, however, did not address the issue of which procedural tool was more appropriate for evaluating the favorable determination requirement. Further, Palmieri was decided before Keller v. Beckenstein, which clarifies that the favorable termination requirement in vexatious litigation claims implicates the claim's ripeness. Ripeness, in turn, implicates the court's subject matter jurisdiction and subject matter jurisdiction is properly addressed by a motion to dismiss.
Finally and significantly, in its motion to dismiss, Eastern Energy relies on facts outside of the pleadings in arguing that CT Norwich's claims are not ripe. Specifically, it raises the uncontested fact that the court in the previous action had not dismissed the counterclaim on the merits, but instead did so for the purpose of allowing CT Norwich's foreclosure action to proceed by requiring Eastern Energy to file its claim as a separate action. Though the language of its motion does appear at times to challenge the complaint's legal sufficiency by suggesting that the alleged termination was not suitably favorable, Eastern Energy's primary assertion is that the underlying claim has not, in fact, been terminated. Eastern Energy is not arguing that CT Norwich has merely failed to allege facts on which a cause of action could be supported, but rather that it simply cannot allege such facts because those facts have yet to be determined. Therefore, a motion to dismiss is the proper procedural tool to address Eastern Energy's challenges to CT Norwich's complaint.
The court next must address the merits of Eastern Energy's argument that CT Norwich's vexatious litigation action is not ripe because CT Norwich did not receive a favorable termination in the prior action. Specifically, Eastern Energy argues that the court striking the unjust enrichment counterclaim in the prior action does not qualify as a favorable termination because it merely changed the venue and did not address the merits. For this reason, Eastern Energy argues, CT Norwich's vexatious litigation claims in counts one and two are not ripe. Eastern Energy further argues that counts three and four, claiming CUTPA violations and tortious interference with business expectations, respectively, are also predicated on allegations of vexatious litigation and similarly not ripe. CT Norwich counters that the September 15, 2011 decision striking Eastern Energy's counterclaim and subsequent denial of the motion for reconsideration or, alternatively, the subsequent failure of Eastern Energy to replead or commence a separate action for the stricken unjust enrichment claim constitutes a final determination in CT Norwich's favor, allowing the court to exercise subject matter jurisdiction over its vexatious litigation claim.
" A vexatious suit is a type of malicious prosecution action differing principally in that it is based upon a prior civil action, whereas a malicious prosecution suit ordinarily implies a prior criminal complaint; " (Internal quotation marks omitted.) Falls Church Group Ltd. v. Tyler, Cooper LLP, 281 Conn. 84, 94, 912 A.2d 1019 (2007). " Vexatious litigation requires a plaintiff to establish that: (1) the previous lawsuit or action was initiated or procured by the defendant against the plaintiff, (2) the defendant acted with malice, primarily for a purpose other than that of bringing an offender to justice; (3) the defendant acted without probable cause; and (4) the proceeding terminated in the plaintiff's favor." Rioux v. Barry, 283 Conn. 338, 347 (2007). " A statutory action for vexatious litigation under General Statutes § 52-568 ... differs from a common-law action only in that a finding of malice is not an essential element, but will serve as a basis for higher damages." Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, supra, at 94.
" [T]he elements of malicious prosecution and common-law vexatious litigation essentially are identical." Bhatia v. Debek, 287 Conn. 397, 405, 948 A.2d 1009 (2008). " The first element, the requirement that the plaintiff establish that the defendant initiated or procured the institution of criminal proceedings against him, is the only element that distinguishes the tort of malicious prosecution from the tort of vexatious litigation." Id.
" [F]or a vexatious litigation claim to be ripe for adjudication, the party must allege, among other facts, that the allegedly vexatious litigation has terminated in its favor." Keller v. Beckenstein, supra, 122 Conn.App. at 444. The Supreme Court in DeLaurentis v. New Haven described the applicable standard for analyzing when a favorable termination may be found: " Notwithstanding [the] recitation of the term ‘ favorable termination’ ... in [various cases, Connecticut courts] have never required a plaintiff in a vexatious suit action to prove a favorable termination either by pointing to an adjudication on the merits in his favor or by showing affirmatively that the circumstances of the termination indicated his innocence or nonliability, so long as the proceeding has terminated without consideration ... Instead, [the courts] have always viewed the issue of whether the prior outcome was " favorable' to the plaintiff as relevant to the issue of probable cause." (Citations omitted.) DeLaurentis v. Haven, 220 Conn. 225, 251, 597 A.2d 807 (1991). " [T]he trial courts are [therefore] to follow ... [an] approach [that], while nominally adhering to the favorable termination requirement, in the sense that any outcome other than a finding of ... liability is favorable to the accused party, permits a ... vexatious suit action whenever the underlying proceeding was abandoned or withdrawn without consideration, that is, withdrawn without ... a settlement favoring the party originating the action." (Internal quotation marks omitted.) J.M. Scott Associates, Inc. v. Whitney, Superior Court, judicial district of Litchfield, Docket No. CV 12 6006095 (September 6, 2012, Pickard, J.) , citing DeLaurentis v. New Haven, supra, at 250.
" Two concerns underlie the [favorable termination] requirement ... The first is the danger of inconsistent judgments if defendants use a vexatious suit ... as a means of making a collateral attack on the judgment against them or as a counterattack to an ongoing proceeding ... The second is the unspoken distaste for rewarding a ... ‘ guilty’ party with damages in the event that the party who instituted the proceeding did not at that time have probable cause to do so." (Citations omitted.) DeLaurentis v. New Haven, supra, 220 Conn. at 251-52. If neither of these concerns is implicated by the manner in which the prior action terminated, then the termination of the prior action was in the plaintiff's favor. See Bhatia v. Debek, 287 Conn. 397, 410, 948 A.2d 1009 (2008) (" [t]he question we must resolve, then, is whether the [termination of the prior action in this case] implicates either of these concerns").
Analyzing these concerns, the Supreme Court in Bhatia found that the first concern was not implicated when the allegedly vexatious charge had been dismissed and there were " no ongoing ... proceedings for the plaintiff to attack collaterally through the present action ..." Id., at 410. Additionally, the court further found that the second concern, " the distaste for rewarding a guilty party with damages, " was not implicated " because the trial court had ample evidence to support its conclusion that the defendant lied when she reported to the department and the police that her daughter had told her that the plaintiff had sexually abused her. Under the circumstances of the present case, therefore, the fact that the jury was deadlocked on the ... charge [at issue] does not signify that the proceedings did not terminate in the plaintiff's favor." Id.
The case law concerning the favorable termination requirement has not addressed at precisely what point the inaction of the defendant in the present action in prosecuting its claim qualifies as an abandonment or withdrawal of the prior action. In many situations where the courts have found a favorable termination, the defendant of the vexatious litigation claim had taken a definite action to abandon or withdraw the underlying litigation. For example, in Gerard v. Keys, Superior Court, judicial district of Litchfield, Docket No. CV 07 5002666 (February 14, 2012, Danaher, J.), the withdrawal of claims that had been pending for three years just before the beginning of the trial terminated those claims in favor of the parties alleging vexatious litigation. The courts have also found that the entry of an apparently unconditional " nolle [prosequi] is sufficient to satisfy the ‘ favorable termination’ prong of [a] plaintiff's malicious prosecution claim." Hartney v.. Hurley, Superior Court, judicial district of New Haven, Docket No. CV 04 4003089 (January 12, 2007 Silbert, J.); see also See v. Gosselin, 133 Conn. 158, 160-61, 48 A.2d 560 (1946) (allegation that prosecution had nolled the case was sufficient to support malicious prosecution claim even though nolle was not bar to subsequent trial for same offense). Under this standard, however, inaction by the defendant has on occasion been found to meet the favorable termination requirement. In DeLaurentis, the mayor initiated proceedings against the plaintiff to remove him as parking commissioner, but the proceedings were later postponed and the mayor did not reopen them; additionally, the plaintiff's term expired and he was not reappointed. DeLaurentis v. New Haven, supra, 220 Conn. at 235-36. Under these circumstances, the court found that the favorable termination requirement was met. Id., at 252. Further, the Superior Court has found the favorable termination requirement met when the underlying action was dismissed due to the running of the statute of limitations. J.M. Scott Associates, Inc. v. Whitney, supra, Superior Court, Docket No. CV 12 6006095.
In the present case, the burden is on CT Norwich to demonstrate that subject matter jurisdiction exists. See Fort Trumbull Conservancy, LLC, supra, 265 Conn. at 430 n. 12. There has been neither an adjudication on the merits of Eastern Energy's unjust enrichment claim nor was the claim withdrawn by Eastern Energy. Because Eastern Energy's stricken counterclaim does not fall into either of these well defined categories, CT Norwich must show that the prior action does not implicate either of the concerns discussed in DeLaurentis v. New Haven to demonstrate that the prior proceeding terminated in its favor. The first concern, the danger of inconsistent judgments due to the use of a vexatious litigation suit by a plaintiff as a collateral attack on a judgment against him or as a counterattack to an ongoing proceeding, is implicated here. In granting the motion to strike in the previous action, the court granted the motion to strike with the specific understanding that doing so would allow Eastern Energy to bring its claims without holding the foreclosure action hostage. Furthermore, the foreclosure action is still pending and Eastern Energy remained a defendant in that action at the time this litigation was commenced.
The second concern, the distaste for rewarding a guilty party with damages, is also implicated by the facts as they exist in this case. There has been no adjudication on the merits establishing CT Norwich's liability to Eastern Energy for the latter's unjust enrichment, the potential of conflicting judgments creates the risk of rewarding the " guilty" party if this court were to grant judgment on the unresolved claims of Eastern Energy. For these reasons, CT Norwich has not demonstrated that the requirement that the prior action has terminated in its favor has been met and that its vexatious litigation claim is ripe for adjudication. Accordingly, the court lacks subject matter jurisdiction over CT Norwich's claims and the motion to dismiss must be granted.
CONCLUSION
For the foregoing reasons, Eastern Energy's motion to dismiss is granted.