Opinion
No. CV08 502 4048S
September 18, 2009
MEMORANDUM OF DECISION RE MOTION TO STRIKE #103
The defendant, Ultimate Brands, Inc., has filed a motion to strike the negligent infliction of emotional distress and Connecticut Unfair Trade Practices Act (CUTPA) counts that the plaintiffs, Karen and Harry Leonardo, have brought against it.
The defendant, Ultimate Brands, Inc., has filed a motion to strike. On October 27, 2008, the plaintiffs filed a four-count complaint and a petition to discharge a mortgage, note and notice of lis pendens against the defendants, Ultimate Brands, Inc. and Linda De Luca (a.k.a. Linda Bonwill). On December 30, 2008, the plaintiffs filed a four-count amended complaint, bringing claims for negligent infliction of emotional distress and violations of CUTPA against Ultimate Brands, Inc. (the defendant) and Linda De Luca.
The plaintiffs allege the following facts. On December 1, 1989, Karen Leonardo executed a promissory note in the amount of $19,000, payable to Miklin Investments, Inc. and secured by a mortgage on property located in East Haven, Connecticut. Pursuant to the terms of the mortgage and note, Karen Leonardo was to make monthly payments to Miklin Investments, Inc. beginning on January 1, 1990 and continuing for 360 months (i.e., 30 years) until paid in full.
On April 9, 2007, Linda De Luca assigned the mortgage and note to herself as president of Miklin Investments, Inc. for no consideration, despite that the fact that she had no "legal authority or capacity" to do so, given that Miklin Investments, Inc. "was dissolved and forfeited by the state of Connecticut on July 31, 1992." The defendant knew that the plaintiffs had not made payments on the note and mortgage for seventeen years and that De Luca "did not have the legal capacity to assign the note and mortgage to herself and on the same day to the defendant." Nevertheless, on that day, the defendant purchased the mortgage and note from De Luca for $19,000. On April 11, 2007, the defendant issued a bank check in the amount of $19,000 to De Luca, Miklin Investments, Inc. (which had previously been dissolved), and "an unknown entity, East Haven Mgt."
On April 17, 2007, the defendant recorded the assignment of mortgage it received from De Luca in the East Haven land records. The defendant subsequently "sent a written notice to the plaintiffs seeking payment of the original note and an alleged amount of accrued interest," recorded a lis pendens in the East Haven land records and brought a foreclosure action in this judicial district (docket no. CV 07 5012314). The defendant withdrew the action on the date that it was scheduled for trial.
On January 13, 2009, the defendant filed a motion to strike, arguing that the plaintiffs' negligent infliction of emotional distress and CUTPA counts should be stricken because they fail to allege legally cognizable causes of action. On December 29, 2008, the plaintiffs filed a motion for default for failure to appear against the defendant, Linda De Luca, which the court granted on January 29, 2009. On July 20, 2009, the plaintiffs filed an objection to the defendant's motion to strike.
The defendant attached the complaint from the foreclosure action to its motion to strike. However, a "speaking motion to strike," "one improperly importing facts from outside the pleadings," has "long been forbidden by our practice." Mercer v. Cosley, 110 Conn.App. 283, 292 n. 7, 955 A.2d 550 (2008). Accordingly, this court will consider the defendant's motion to strike "within the confines of the pleadings" and will not consider these "external documents." Zirinsky v. Zirinsky, 87 Conn.App. 257 n. 9, 268, 865 A.2d 488, cert. denied, 273 Conn. 916, 871 A.2d 372 (2005).
Count One — Negligent Infliction of Emotional Distress
In the plaintiffs' negligent infliction of emotional distress count against the defendant, they allege (1) that the defendant "created an unreasonable risk of causing the plaintiffs emotional distress in that it knew or should have known that it was purchasing a note [on which] the plaintiffs had valid defenses and reasons for not making payments;" (2) "the plaintiffs' distress was foreseeable in that the defendant brought [a] foreclosure action seeking to foreclose the plaintiffs' interest in their home and leave them homeless;" (3) "the emotional distress was severe enough that it might result in illness and bodily harm;" and (4) "the defendant's conduct was the cause of the plaintiffs' distress."
The defendant argues that this claim "fails to allege a legally cognizable cause of action" because (1) "the plaintiffs have failed to allege and/or show that the defendant owes a duty . . . to the plaintiffs; " (2) "the plaintiffs have failed to establish that the defendants created an unreasonable risk [of] causing the plaintiffs emotional distress; " (3) it was "unforeseeable that the plaintiffs would suffer emotional distress beyond that which is associated with being foreclosed on one's home; " and (4) "[a]ny emotional distress suffered by the plaintiffs was due to their own failure to pay the $19,000 note currently owned by the defendant, not by any act of the defendant."
The plaintiffs counter that they have "properly alleged a cause of action for negligent infliction of emotional distress" because (1) "it was clearly foreseeable that the attempt to enforce payment on a note that was purchased from an individual that cannot be a holder in due course and a note that had not been paid on in seventeen years would cause the plaintiff's emotional distress; " and (2) "public policy would clearly recognize a duty of care in such a transaction."
"To establish a claim of negligent infliction of emotional distress, a plaintiff must prove the following elements: (1) the defendant's conduct created an unreasonable risk of causing the plaintiff emotional distress; (2) the plaintiffs distress was foreseeable; (3) the emotional distress was severe enough that it might result in illness or bodily harm; and (4) the defendant's conduct was the cause of the plaintiff's distress." Murphy v. Lord Thompson Manor, Inc., 105 Conn.App. 546, 552, 938 A.2d 1269, cert. denied, 286 Conn. 914, 945 A.2d 976 (2008). In addition, the plaintiff must allege that the defendant owed the plaintiff a duty to prevent the plaintiff from experiencing emotional distress. See Perodeau v. Hartford, 259 Conn. 729, 754, 792 A.2d 752 (2002); see also Zamstein v. Marvasti, 240 Conn. 549, 564, 692 A.2d 781 (1997) (concluding "trial court properly struck" plaintiff's negligent infliction of emotional distress claim based on lack of duty).
The central allegation of the plaintiffs' negligent infliction of emotional distress claim is that the defendant attempted to enforce the note in the prior foreclosure action, even though it "knew or should have known" that "the plaintiffs had valid defenses" to the enforcement of the note. The court agrees with the defendant's argument that the plaintiffs fail to allege a legally cognizable negligent infliction of emotional distress claim, as the duty element of the claim is not met. See Sunset Mortgage v. Agolio, Superior Court, judicial district of New London, Docket No. CV 05 69833 (June 14, 2005, Jones, J.) (granting plaintiff's motion to strike defendant's CUTPA counterclaim in foreclosure action because "[t]he defendant does not allege what duty the plaintiff breached in attempting to enforce the note and/or mortgage"); see also Torniero v. Allingtown Fire District, Superior Court, judicial district of New Haven, Docket No. CV 06 5006174 (March 17, 2008, Robinson, J.) [ 45 Conn. L. Rptr. 298] ("Because the plaintiff fails to establish the defendants owed her a legal duty pursuant to her negligent infliction of emotional distress claim, the defendants are entitled to judgment on Count Two").
Under these circumstances, the most relevant cause of action seems to be "vexatious litigation," which "permits a [plaintiff] who has been wrongfully sued to recover damages" where the plaintiff proves "want of probable cause, malice and a termination of suit in the plaintiff's favor." (Internal quotation marks omitted.) Bernhard Thomas Building Systems, LLC v. Dunican, 286 Conn. 548, 553-54, 944 A.2d 329 (2008). Nevertheless, such a claim would not be convincing, as the plaintiffs' allegations do not demonstrate that the defendant lacked probable cause in bringing the prior action or that it was terminated in the plaintiff's favor.
"Our Appellate Court has enunciated a `lenient standard' for determining if a plaintiff had probable cause to commence an action," and "[t]hose which lack probable cause are the least meritorious of all meritless suits." See Byrne v. Banta, Superior Court, judicial district of Tolland at Rockville, Docket No. CV 03 0082603 (November 6, 2006, Klaczak, J.T.R.); see also Falls Church Group, Ltd. v. Tyler, Cooper Alcorn, LLP, 281 Conn. 84, 103, 912 A.2d 1019 (2007) ("[p]robable cause may be present even where a suit lacks merit"). "This lenient standard for bringing a civil action reflects the important public policy of avoiding the chilling of novel or debatable legal claims and allows attorneys and litigants to present issues that are arguably correct, even if it is extremely unlikely that they will win." (Internal quotation marks omitted.) Falls Church Group, Ltd. v. Tyler, Cooper Alcorn, LLP, supra, 281 Conn. 101-02.
Allowing a negligent infliction of emotional distress claim based on these allegations "would subject the courts to a flood of collateral actions . . . and would effectively chill the vigorous representation of clients by their attorneys." Larobina v. McDonald, 274 Conn. 394, 411, 876 A.2d 522 (2005) (concluding that "the trial court properly rendered judgment for the defendants on the plaintiff's negligent infliction of emotional distress claim"). Moreover, the plaintiffs provide no relevant authority supporting their argument that their allegations give rise to a negligent infliction of emotional distress claim, and the court could find none. Accordingly, the plaintiffs' negligent infliction of emotional distress claim is legally insufficient.
The plaintiffs cite two Connecticut Supreme Court decisions in an attempt to support their argument that they have sufficiently pled their negligent infliction of emotional distress claim. However, neither case is on point.
A court is "not required to review issues that have been improperly presented to [it] though an inadequate brief; " "[a]nalysis, rather than mere abstract assertion, is required in order to avoid abandoning an issue by failure to brief the issue properly." (Internal quotation marks omitted.) State v. Colon, 272 Conn. 106, 153 n. 19, 864 A.2d 666 (2004) cert. denied, 546 U.S. 848 (2005).
Count Two — CUTPA
In the plaintiffs' CUTPA violation count against the defendant, they allege that (1) the defendant's "conduct of allegedly purchasing a note and mortgage from an individual on the same day that the individual assigned the note and mortgage to herself for no consideration from a corporation that had been dissolved and forfeited by the Secretary of State fifteen years prior to the assignment is a violation of [CUTPA] in that [this conduct is] offensive to public policy [as well as] immoral, unethical, oppressive and unscrupulous; " and (2) "[a]s a result of the defendant's violation of [CUTPA], the plaintiffs have suffered money damages for attorneys fees and costs of litigation."
The defendant argues that this claim "fails to allege a legally cognizable cause of action" because (1) the defendant's "purchasing of the note is not a practice which offends public policy as established by statute, the common law or some other concept of unfairness; " (2) "[t]he plaintiffs have failed to cite any statute, law or other concept or unfairness to support this claim; " (3) "[t]he plaintiffs have failed to allege how this practice offends public policy; " (4) "the mere purchase of the note cannot be said to be immoral, unethical, oppressive or unscrupulous; " and (5) "[t]here was no representation, omission or other practice by [the defendant] to mislead the plaintiffs." The defendant further argues that "[t]his case is simply not a CUTPA case . . . [r]ather, the facts as alleged in the plaintiffs' complaint [comprise] the plaintiffs' defenses to the enforcement of the note and the plaintiff's reasons for not making payments on the note."
Additionally, at short calendar, the defendant argued that its conduct was not deceptive, but simply a "bad business decision."
The plaintiffs counter that (1) the defendant "could not prevail in a foreclosure action" because, under the "Doctrine of Laches," "a delay of seventeen years is inexcusable in demanding payment on the debt and offends public policy; " (2) the defendant's conduct of "purchas[ing] a note and mortgage from an individual with unclean hands," knowing "that the assignor had unclean hands, and of attempting to "enforce payment on the note" "offend[ed] public policy" and was "immoral and unethical; " (3) the defendant is not a "holder in due course" because De Luca "did not take the note for value" and in good faith, and the defendant "had notice of the defenses the plaintiffs have to the note resulting in the instrument being void and unenforceable."
CUTPA, General Statutes § 42-110a et seq., prohibits "unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." General Statutes § 42-110b(a). "It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other businesspersons]." (Internal quotation marks omitted.) Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 19, 938 A.2d 576 (2008).
The plaintiffs essentially allege that the defendant's attempt to enforce a note that it purchased from De Luca "on the same day that" De Luca "assigned the note and mortgage to herself for no consideration from a corporation that had been dissolved and forfeited by the Secretary of State fifteen years prior to the assignment is a violation of [CUTPA] in that [this conduct is] offensive to public policy [as well as] immoral, unethical, oppressive and unscrupulous." The court agrees with the defendant's argument that the plaintiffs' allegations do not indicate that the defendant's conduct "offend[ed] public policy as establish by statute, the common law or some other concept of unfairness," or that it was "immoral, unethical, oppressive or unscrupulous."
The plaintiffs allege that the defendant's conduct of "purchasing a note and mortgage" from De Luca under these circumstances subjects them to liability under CUTPA. However, the plaintiffs' allegations imply that the actionable conduct in the present case was the defendant's attempt to enforce the note, rather than the simple purchase of the note from De Luca (which could not have harmed the plaintiffs in any conceivable way). "[W]hat is necessarily implied [in an allegation] need not be expressly alleged . . . It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted." (Internal quotation marks omitted.) Violano v. Fernandez, 280 Conn. 310, 318, 907 A.2d 1188 (2006).
The plaintiffs have not sufficiently pled a CUTPA claim because their allegations indicate that the defendant acted negligently, but not willfully, and merely negligent conduct is not unfair within the meaning of CUTPA. See A-G Foods, Inc. v. Pepperidge Farm, Inc., 216 Conn. 200, 216, 579 A.2d 69 (1990) ("we conclude that Pepperidge Farm's negligence was not an unfair practice within the meaning of CUTPA"); Silk, LLC v. Cowles Connell, Superior Court, judicial district of Middlesex, Complex Litigation Docket at Middletown, Docket No. X04 CV 03103524 (May 25, 2004, Quinn, J.) ( 37 Conn. L. Rptr. 152, 153) (striking plaintiff's CUTPA claim and holding "negligent conduct, without more, cannot be the basis of a CUTPA claim").
Moreover, while the institution of an action without a proper basis may give rise to CUTPA liability under some circumstances, the plaintiffs have not alleged that the defendant's prior action was a "sham" (i.e., objectively baseless or brought in bad faith). See Ancona v. Manafort Bros. Inc., 56 Conn.App. 701, 715, 746 A.2d 184, cert. denied, 252 Conn. 953, 749 A.2d 1202 (2000) ("filing a single non-sham lawsuit . . . cannot form the basis of a claim under CUTPA"); Cornerstone Family Services, Inc. v. Royce, Superior Court, judicial district of Stamford-Norwalk, Complex Litigation Docket, Docket No. X08 CV 01 0184443 (August 21, 2003, Adams, J.) ("the law in Connecticut is that the filing of a single non-sham lawsuit is not a basis for a CUTPA claim").
"A sham lawsuit is one instituted by [a] plaintiff in bad faith, on grounds so flimsy that no reasonable prudent person could hold a bona fide belief in the existence of facts necessary to prove the case." Classic Limousine Airport Service, Inc. v. Alliance Limousine LLC, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 99 0174911 (August 13, 2002, D'Andrea, J.T.R.). "[S]ham litigation [is] one which is objectively baseless in that no reasonable litigant could realistically expect success on the merits and which lawsuit conceals an effort to interfere improperly with the defendant's rights." Royce v. Willowbrook Cemetery, Inc., Superior Court, judicial district of Stamford-Norwalk, Complex Litigation Docket, Docket No. X08 CV 01 0185694 (February 3, 2003, Adams, J.).
The plaintiffs' allegations indicate that De Luca acted wrongfully and in bad faith, but not that the defendant did so. This is insufficient to give rise to CUTPA liability. See PHH Mortgage Corp. v. Traylor, Superior Court, judicial district of New London, Docket No. CV 07 5004315 (November 13, 2008, Martin, J.) (granting plaintiff's motion to strike defendant's CUTPA defense because "the defendant's factual allegations relate solely to the conduct of the plaintiff's predecessor in interest" and not to "any conduct by the plaintiff").
The plaintiffs argue, without citing authority, that the defendant acted unfairly by bringing the foreclosure action against the plaintiffs because the defendant knew or should have known that (1) the doctrine of laches and unclean hands would have barred the defendant from proceeding with the action; and (2) given that the defendant was not a holder in due course, the note was "void and unenforceable" and the defendant was "not entitled to payment." This argument fails for the following reasons.
First, a plaintiff need not be a holder in due course to enforce a note. See Ninth RMA Partners, L.P. v. Krass, 57 Conn.App. 1, 6, cert. denied, 253 Conn. 918, 755 A.2d 215 (2000) ("To prevail in an action to enforce a negotiable instrument, the plaintiff must be a holder of the instrument or a nonholder with the rights of a holder"). "[H]older status, contrasted with holder in due course status, is not inherently a source of infirmity or limitation upon the right to collect under the terms of the instrument." (Internal quotation marks omitted.) 5 Harold Weisblatt, Checks, Drafts and Notes (2007) § 116.02[2], p. 116-16. "A holder can enforce an instrument, but is subject to claims and defenses that a holder in due course may be able to cutoff or avoid." Id., § 118.02[2] n. 3, p. 118-13; see also Cadle Co. v. Ginsburg, 51 Conn.App. 392, 396, 721 A.2d 1246 (1998), cert. denied, 247 Conn. 963, 724 A.2d 1125 ("Only a holder in due course may enforce a negotiable instrument without regard to a maker's assertion of a personal defense."); First Federal Bank v. Realty Capitol Ass'n., Superior Court, judicial district of New Haven, Docket No. CV 90 0304321 (December 8, 1993, Hodgson, J.) ("Pursuant to § 42a-3-305(b) C.G.S., a holder in due course is not subject to defenses `that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract.'").
"The question of whether a holder is a holder in due course will generally be in issue only if the obligor on the instrument (drawer, maker, or acceptor) asserts one or more defenses to payment. Defenses known as real defenses may be asserted against any holder, while other defenses, commonly referred to as personal defenses, are not available against a holder in due course." 5 Harold Weisblatt, Checks, Drafts and Notes (2007) § 118.02[1], p. 118-5.
Second, although the plaintiffs could have asserted laches or unclean hands as special defenses in the prior action, the plaintiffs cite no law suggesting that the applicability of either doctrine gives rise to a CUTPA action, and a court is "not required to review issues that have been improperly presented to [it] through an inadequate brief." (Internal quotation marks omitted.) State v. Colon, 272 Conn. 106, 153 n. 19, 864 A.2d 666 (2004) cert. denied, 546 U.S. 848 (2005).
"The defendants' special defense[] of . . . laches [is an] affirmative defenses, and the defendants had the burden of proving [it]." Cleary v. Zoning Board of Stamford, 153 Conn. 513, 518, 218 A.2d 523 (1966); see also U.S. Bank National Association v. Reynoso, Superior Court, judicial district of New London, Docket No. CV 07 5004312 (July 17, 2008, (Martin, J.) ( 45 Conn. L. Rptr. 872, 872) ("In recognition that a foreclosure action is an equitable proceeding, courts have allowed . . . laches . . . to be plead[] as [a] special defense"). Additionally, "the unclean hands doctrine may be asserted as a special defense in a foreclosure action." Monetary Funding Group, Inc. v. Pluchino, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 01 0382851 (September 3, 2003, Stevens, J.), aff'd, 87 Conn.App. 401, 867 A.2d 841 (2005); see also Kosinski v. Carr, 112 Conn.App. 203, 209 n. 6, 962 A.2d 836 (2009) (holding the defendant was "required to plead" "the special defense of `unclean hands'" "as a special defense").
The plaintiffs cite one case, which is not relevant to the present case, in an attempt to support their argument that they have sufficiently pled a CUTPA cause of action.
Third, it is unlikely that laches would have operated to defeat the prior action, given that "the defense of laches does not apply unless there is an unreasonable, inexcusable, and prejudicial delay in bringing suit." (Internal quotation marks omitted.) John H. Kolb Sons, Inc. v. G L Excavating, Inc., 76 Conn.App. 599, 613, 821 A.2d 774, cert. denied, 264 Conn. 919, 828 A.2d 617 (2003); see also Riscica v. Riscica, 101 Conn.App. 199, 208, 921 A.2d 633 (2007) ("[t]he mere lapse of time does not constitute laches"); LLP Mortgage, Ltd. v. F R, LLC, Superior Court, judicial district of New London, Docket No. 558476 (January 30, 2002, Martin, J.) (striking defendant's special defense of laches to plaintiff's mortgage foreclosure action and concluding "[a]llegations of the time delay alone are insufficient to support a claim of laches"); cf. Fleet National Bank v. Squillacote, Superior Court, judicial district of New Britain, Docket No. CV 99 0497487 (October 30, 2003, Cohn, J.) ( 36 Conn. L. Rptr. 270, 277) ("defendants' claim is wholly conclusory and does not cite any case law to support the proposition that a delay in bringing a collection action is considered to be oppressive, immoral, unethical, or unscrupulous under the Connecticut court's interpretation of this criterion").
Although Miklin Investments, Inc. may have delayed in enforcing the note, there is no indication that the defendant in the present case did so. Moreover, given that the plaintiffs do not dispute that they failed to make payments on the note for seventeen years, they would have had difficulty demonstrating prejudice.
Nor is it likely that unclean hands would have barred the prior action, as "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." Monetary Funding Group, Inc. v. Pluchino, 87 Conn.App. 401, 407, 867 A.2d 841 (2005); see also Deutsche Bank National Trust v. Griffin, Superior Court, judicial district of Litchfield, Docket No. CV 07 5002285 (January 17, 2008, Pickard, J.) (concluding defendant's special defense of unclean hands in foreclosure action was legally insufficient because "the defendant [did] not allege, nor [could] it be fairly implied from the allegations, that the plaintiff had any desire or intent to injure the defendant").
"Our Supreme Court defines `willful misconduct' as `intentional conduct' with `the design to injure either actually entertained or to be implied from the conduct and circumstances . . . Not only the action producing the injury but the resulting injury also must be intentional.'" Witczak v. Gerald, 69 Conn.App. 106, 116, 793 A.2d 1193 (2002) (quoting Dubay v. Irish, 207 Conn. 518, 533, 542 A.2d 711 (1988)).
As explained above, the plaintiffs have alleged that the defendant acted negligently, rather than willfully. In addition, while the allegations may indicate that De Luca acted willfully, they do not indicate that the defendant did so.
Accordingly, the court concludes that the plaintiffs' CUTPA claim is legally insufficient. While CUTPA is remedial in nature and should be liberally construed, "it strains credulity to conclude that CUTPA is so formless as to provide redress to any person, for any ascertainable harm, caused by any person in the conduct of any trade or commerce." (Internal quotation marks omitted.) Vacco v. Microsoft Corp., 260 Conn. 59, 88, 793 A.2d 1048 (2002).
The court concludes that the plaintiffs' negligent infliction of emotional distress claim is legally insufficient because the facts alleged do not indicate the defendant owed the plaintiffs a duty. Additionally, the court concludes that the plaintiffs' CUTPA claim is legally insufficient because the plaintiffs' allegations do not indicate that the defendant's conduct offended public policy as established by statute, the common law or some other concept of unfairness; that the defendant's conduct was immoral, unethical, oppressive or unscrupulous; or that the defendant acted willfully or in bad faith. The defendant's motion to strike is granted.