Opinion
No. CV 06 500 7027
February 6, 2008
MEMORANDUM OF DECISION RE MOTION TO STRIKE #113
The plaintiffs, Cynthia Ennis and Ennis Property Management, Inc. (Ennis, Inc.), claim to hold a note and mortgage on the defendants' property and seek to foreclose on the property. In seeking the foreclosure, the plaintiffs claim that the defendants, Efrat Nizan and Ennis Management, LLC (Ennis, LLC), have not made the required payments since May 1, 2001. In a revised complaint filed on December 4, 2006 the plaintiffs claim the right to exercise their option to declare the balance on the note due and payable.
The defendants responded to the complaint on December 19, 2006 with the filing of their Answer, Special Defenses, and Counterclaims. On December 27, 2006 the defendants successfully moved to implead Robert Ennis, a former employee of Ennis, LLC, as a third-party defendant. On April 2, 2007 the defendants filed an amended version of the Answer, Special Defenses, and Counterclaims in which they made counterclaims against Robert Ennis, Cynthia Ennis, and Ennis, Inc., as well as special defenses regarding allegations in the plaintiffs' complaint. The plaintiffs then filed a motion to strike the defendants' first, second, third, fourth, fifth, eighth, and ninth counterclaims, as well as the defendants' special defenses of unclean hands and laches. The first counterclaim asserts a violation of Revised Article 9 of the Uniform Commercial Code, codified at General Statutes § 42a-9-101 et seq. The other counterclaims alleged, in order, conversion of the defendants' property by Ennis, Inc., breaching of a fiduciary duty by Robert Ennis, that Cynthia Ennis aided and abetted the alleged breach of fiduciary duty, that Robert Ennis and Cynthia Ennis aided and abetted the conversion of defendants' property by Ennis, Inc., that Robert Ennis, Cynthia Ennis, and Ennis, Inc. conspired to violate § 42a-9-101 et seq. and, in converting defendants' property, that this constituted a violation of the Connecticut Unfair Trade Practices Act (CUTPA). The memorandum in support of the motion to strike asserted that the statute of limitations bars the first, second, third, fourth, fifth, eighth, and ninth counterclaims, that the first and ninth counterclaims are mere conclusions of law and are not supported by facts, and that counterclaim eight is barred because of the employer/employee relationship between Ennis, LLC and Robert Ennis, and that the special defenses of unclean hands and laches are disallowed or improperly pled by the defendants. In response, the defendants filed a memorandum opposing to the motion to strike.
"A motion to strike challenges the legal sufficiency of a pleading . . . and, consequently, requires no factual findings by the trial court." (Internal quotation marks omitted.) Batte-Holmgren v. Commissioner of Public Health, 281 Conn. 277, 294, 914 A.2d 996 (2007). Section 10-41 of the Practice Book states, in relevant part, that a motion to strike claims based on legal insufficiency "shall separately set forth each such claim of insufficiency and shall distinctly specify the reason or reasons for each claimed insufficiency." Before addressing the legal arguments set forth by the parties, it is noted that the motion to strike considered here did not comply with the proper form set forth in § 10-41. "Motions to strike that do not specify the grounds of insufficiency are fatally defective and, absent a waiver by the party opposing the motion, should not be granted . . . [A]nd that Practice Book § [10-42], which requires a motion to strike to be accompanied by an appropriate memorandum of law citing the legal authorities upon which the motion relies, does not dispense with the requirement of [Practice Book § 10-41] that the reasons for the claimed pleading deficiency be specified in the motion itself." (Internal quotation marks omitted.) Stuart v. Freiberg, 102 Conn.App. 857, 861, 927 A.2d 343 (2007). Here, the plaintiffs' motion merely states they moved to strike particular counterclaims and special defenses. What they did not include in the motion was any statement of the grounds upon which the motion to strike was based. However, the defendants failed to raise this point. Thus, the example set by the Supreme Court provides this court with an avenue by which it may still consider the motion to strike and the legal arguments stated in the supporting memoranda: "We . . . consider the defendant's motion in the form presented to the trial court due to the plaintiff's failure to object to its form and the nonjurisdictional nature of [§ 10-41]." (Internal quotation marks omitted.) Bouchard v. People's Bank, 219 Conn. 465, 468 n. 4, 594 A.2d 1 (1991).
I. Motion to Strike Counterclaims
A motion to strike is an appropriate method for attacking a counterclaim. "[A] counterclaim is a cause of action existing in favor of the defendant against the plaintiff and on which the defendant might have secured affirmative relief had he sued the plaintiff in a separate action . . . A motion to strike tests the legal sufficiency of a cause of action and may properly be used to challenge the sufficiency of a counterclaim." (Citations omitted; internal quotation marks omitted.) Fairfield Lease Corp. v. Romano's Auto Service, 4 Conn.App. 495, 496, 495 A.2d 286 (1985). In this matter the plaintiffs move to strike seven of the defendants' counterclaims.
For the second, third, fourth, fifth, eighth, and ninth counterclaims, the plaintiffs argue that the claims are time barred by statutes of limitations. "[A] claim that an action is barred by the lapse of the statute of limitations must be pleaded as a special defense, not raised by a motion to strike . . . This is because a motion to strike challenges only the legal sufficiency of the complaint and might . . . deprive a plaintiff of an opportunity to plead matters in avoidance of the statute of limitations defense . . . An exception to this general rule exists, however, when a statute gives a right of action which did not exist at common law, and fixes the time within which the right must be enforced, the time fixed is a limitation or condition attached to the right — it is a limitation of the liability itself as created and not of the remedy alone." (Citations omitted; internal quotation marks omitted.) Greco v. United Technologies Corp., 277 Conn. 337, 344-45 n. 12, 890 A.2d 1269 (2006). For the exception to apply in this instance the plaintiffs must have shown that the defendants' counterclaims do not stem from common law. The second, third, fourth, fifth and eighth counterclaims arise out of the legal concepts of conversion and fiduciary duties. These concepts are recognized as stemming from common law. See, e.g., Coleman v. Francis, 102 Conn. 612, 615, 129 A. 718 (1925) (discussing conversion as rooted in common law); Mangiante v. Niemiec, 82 Conn.App. 277, 282, 843 A.2d 656 (2004) (indicating the common-law basis of fiduciary relationships). Thus, for the plaintiffs to adequately challenge these particular counterclaims as being barred by § 52-577 they should have made their assertions in the form of a special defense.
The second, third, fourth, fifth and eighth counterclaims are governed by the statute of limitations codified by General Statutes § 52-577: "No action founded upon a tort shall be brought but within three years from the date of the act or omission complained of." Whereas, the defendant's ninth counterclaim is governed by the statute of limitations governing CUTPA claims, § 42-110g(f): "An action under this section may not be brought more than three years after the occurrence of a violation of this chapter."
The ninth counterclaim, a CUTPA claim, does, however, fall within the exception described in Greco v. United Technologies Corp. "The statute of limitations defense for CUTPA actions falls under the second exception to the general rule that the statute of limitations may not be raised on a motion to strike . . . CUTPA is a statutory cause of action which did not exist at common law." (Citation omitted; internal quotation marks omitted.) S.A. Candelora Enterprises v. Wild, Superior Court, judicial district of New Haven at New Haven, Docket No. CV 01 0447877 (February 4, 2002, Thompson, J.) [31 Conn. L. Rptr. 397]. It is proper for the plaintiffs to raise the statute of limitations issue on this claim via a motion to strike. In arguments opposing the motion, the defendants argue that the statute of limitations on this counterclaim is tolled for two reasons. The first is that the exact dates of particular events are, as of yet, unknown to the defendant and require further discovery. The second reason offered is that some courts have applied the continuing course of conduct doctrine to claims based on CUTPA.
The defendants, in their memorandum of reply to the plaintiffs' motion, cite a Superior Court decision, Bridgeways Communications v. Time Warner, Superior Court, judicial district of Ansonia-Milford at Milford, Docket No. CV 95 050619 (September 4, 1998, Flynn, J.), as standing for the proposition that a plaintiff's motion to strike a defendant's counterclaim be denied when the defendant's counterclaim, due to lack of knowledge, failed to allege the dates necessary for a proper application of a statute of limitations. The court in Bridgeways Communications v. Time Warner, faced with a matter that also dealt with a CUTPA claim, stated it could not apply the statute of limitations because "[i]t is not clear from the allegations in the defendants' counterclaims exactly when the alleged violation of CUTPA occurred." A similar situation exists in the present matter as well. Because the defendant is not yet able, with any sort of specificity, to claim when certain alleged acts took place it would not be proper to apply a statute of limitations at this particular time. As for whether the doctrine of continuing course of conduct would also toll the statute of limitations on a CUTPA claim, it is necessary to have knowledge of particular dates. A more specific timeline is necessary for a fuller understanding of when a duty might have been owed to the defendants. Whether the statute of limitations or the doctrine of continuing course of conduct applies here is dependent upon a less vague understanding of when specific actions or events may have taken place.
To apply the continuing course of conduct doctrine it appears that it is necessary to find, with a certain degree of specificity, when certain acts or omissions took place and whether or not they coincided with a time when a particular duty was owed by one party to another. "[T]o support a finding of a continuing course of conduct that may toll the statute of limitations there must be evidence of the breach of a duty that remained in existence after commission of the original wrong related thereto. That duty must not have terminated prior to commencement of the period allowed for bringing an action for such a wrong . . . Where we have upheld a finding that a duty continued to exist after the cessation of the act or omission relied upon, there has been evidence of either a special relationship between the parties giving rise to such a continuing duty or some later wrongful conduct of a defendant related to the prior act." (Internal quotation marks omitted.) Sherwood v. Danbury Hospital, 252 Conn. 193, 203, 746 A.2d 730 (2000).
The plaintiffs also move to strike the first and ninth counterclaims, arguing that they are mere conclusions of law and unsupported by facts. "A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). "[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Batte-Holmgren v. Commissioner of Public Health, supra, 281 Conn. 294. "[W]e construe the complaint in the manner most favorable to sustaining its legal sufficiency." (Internal quotation marks omitted.) Sullivan v. Lake Compounce Theme Park, Inc., 277 Conn. 113, 117, 889 A.2d 810 (2006). "Moreover . . . [w]hat is necessarily implied [in an allegation] need not be expressly alleged . . . Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Violano v. Fernandez, 280 Conn. 310, CT Page 2153 318, 907 A.2d 1188 (2006). By applying the above standards, the defendants' claims are construed broadly and, though the descriptive language employed by the defendants may give the impression that they are asserting conclusions of law, the defendants do provide sufficient facts throughout the pleadings to support the counterclaims and overcome the plaintiffs' argument for the motion to strike.
The plaintiffs' final argument for striking a counterclaim centers on whether the defendants' counterclaim that plaintiffs violated CUTPA must be stricken because CUTPA precludes intracorporate claims. Under CUTPA "[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." General Statutes § 42-110b(a). "Although purely intracorporate conflicts do not constitute CUTPA violations, actions outside the scope of the employment relationship designed to usurp the business and clientele of one corporation in favor of another . . . fit squarely within the provenance of CUTPA." (Internal quotation marks omitted.) Ostrowski v. Avery, 243 Conn. 355, 379, 703 A.2d 117 (1997). In this matter the defendants allege that Ennis, Inc., via Robert Ennis and Cynthia Ennis, has in its possession accounts receivable and customer lists belonging to Ennis, LLC. It is further alleged that Ennis, Inc. used these materials in conducting its own business. Whether a CUTPA violation actually occurred is a matter for trial. What is apparent at this stage is that the defendant, at the very least, pleaded facts that could lead to a finding that a CUTPA violation occurred. As for the plaintiffs' contention that this was solely an intracorporate matter and that CUTPA does not apply, the defendants' pleadings allege enough facts that would potentially permit a factfinder to apply the employment exception discussed above in Ostrowski v. Avery.
The plaintiffs' memorandum in support of its motion to strike lists this as moving to strike defendants' eighth counterclaim, though it is defendants' ninth counterclaim that alleges a CUTPA violation. In the defendant's original Answer, Special Defenses, and Counterclaims filed on December 19, 2006 the CUTPA counterclaim was listed as the eighth counterclaim.
II. Motion to Strike Defendants' Special Defenses
The plaintiffs challenge two of the defendants' special defenses, specifically those defenses alleging that plaintiff acted with unclean hands and that the doctrine of laches applies concerning the notice of default. "It is axiomatic 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." (Internal quotation marks omitted.) New England Retail Properties, Inc. v. Maturo, 102 Conn.App. 476, 489, 925 A.2d 1151, cert. denied 284 Conn. 912, 931 A.2d 932 (2007). "A valid special defense at law to a foreclosure proceeding must be legally sufficient and address the making, validity or enforcement of the mortgage, the note or both." (Internal quotation marks omitted.) Emigrant Mortgage Corp. v. D'Agostino, 94 Conn.App. 793, 802, 896 A.2d 814, cert. denied CT Page 2154 278 Conn. 919, 901 A.2d 43 (2006).
"[A]n action to foreclose a mortgage is an equitable proceeding . . . It is a fundamental principle of equity jurisprudence that for a complainant to show that he is entitled to the benefit of equity he must establish that he comes into court with clean hands . . . The clean hands doctrine is applied not for the protection of the parties but for the protection of the court . . . It is applied not by way of punishment but on considerations that make for the advancement of right and justice." (Citations omitted; internal quotation marks omitted.) Thompson v. Orcutt, 257 Conn. 301, 310, 777 A.2d 670 (2001). "The party seeking to invoke the clean hands doctrine to bar equitable relief must show that his opponent engaged in wilful misconduct with regard to the matter in litigation . . . The trial court enjoys broad discretion in determining whether the promotion of public policy and the preservation of the courts' integrity dictate that the clean hands doctrine be invoked." (Internal quotation marks omitted.) Emigrant Mortgage Corp. v. D'Agostino, supra, 94 Conn.App. 804. The plaintiffs present two reasons for this special defense to be stricken. The first is that the defense of unclean hands is generally disallowed in a foreclosure action. On this point, however, the above caselaw readily demonstrates that such a defense is permitted at the discretion of the trial court. The second reason the plaintiffs argue is that the defendants' counterclaim solely concern post-default conduct and not the making, validity, or enforcement of the mortgage or note. But, this is not how the plain language of the defendants' counterclaim reads. The defendants allege unclean hands in that some combination of Robert Ennis, Cynthia Ennis, and Ennis, Inc. caused the defendants' default. Applying the making, validity, or enforcement standard from Emigrant Mortgage Corp v. D'Agostino to the present case could lead to the finding that the plaintiffs themselves may be responsible for the default, which, arguably, is an act that relates to the enforcement of the mortgage or note, or, at the very least, is an act that has its origins in pre-default conduct.
The defendants also pleaded the special defense of laches, claiming that the plaintiffs failed to notify them of the default on the mortgage for a period of five years following the alleged default despite supposed ample opportunity to make such a notification. The doctrine of laches has two elements. "First, there must have been a delay that was inexcusable and, second, that delay must have prejudiced the defendant . . . The defense of laches does not apply unless there is an unreasonable, inexcusable, and prejudic[ial] delay in bringing suit. Delay in itself is insufficient to bar a right, the delay in bringing suit must be unduly prejudicial." (Internal quotation marks omitted.) CT Page 2155 Dickinson v. Mullaney, 284 Conn. 673, 679 (2007). As for whether the delay resulted in the defendants being prejudiced, as well as being an unreasonable and inexcusable lapse in time, it appears that the allegations made thus far lay the groundwork for the introduction of evidence that might allow a court to find that the plaintiffs' acted in an improper manner and caused harm to the defendants. As such, it cannot be said that the defendants failed to properly plead the necessary facts required for asserting the special defense of laches.
For the foregoing reasons the motion to strike the first, second, third, fourth, fifth, eighth, and ninth counterclaims as well as the second and third special defenses is denied in its entirety.