Opinion
No. FBT CV 09-4027725 S
February 17, 2010
MEMORANDUM OF DECISION
The plaintiffs in this matter are Lofts on Lafayette Condominium Association, Inc. ("Lofts"), and the owners of 46 condominium units in the Lofts on Lafayette Condominium. The defendants are Lancaster Gate, LLC. ("Lancaster"), the builder of the Lofts on Lafayette Condominiums, Garfield Spencer, the owner of Lancaster, and his wife, Rebecca Spencer. In various counts, the plaintiffs claim that the defendants performed substandard work in constructing both condominium units and common elements within the Lofts on Lafayette condominium. Presently before the court is the defendants' motion to strike dated September 25, 2009. That motion seeks to strike counts eight through fifty-three of the plaintiffs' first amended complaint on the ground that the claims of the forty-six unit owner plaintiffs set forth in those counts have been misjoined. (#108.) In their motion, the defendants also seek to strike counts seven and fifty-five on the ground that they fail to state a cause of action against defendants Garfield Spencer and Rebecca Spencer in their individual capacities. The plaintiffs have filed an objection to the motion to strike dated October 29, 2009. (#110.)
The first count alleges violations of the Common Interest Ownership Act ("CIOA") by Lancaster. The second count claims violations of General Statutes § 47-275 (Implied Warranty of Quality) by Lancaster. The third count alleges breach of fiduciary duty, against Garfield Spencer. The fourth count alleges fraud against Garfield Spencer and Lancaster. The fifth count alleges conversion. The sixth count claims unjust enrichment. The seventh count alleges a breach of the obligation of good faith by Lancaster and Garfield Spencer. The eighth through fifty-third counts contain the allegations of individual unit owners against the defendants for violating the New Homes Warranty Act, General Statutes § 47-118. The fifty-fourth count alleges CUTPA violations. The fifty-fifth count alleges breach of fiduciary duty by Rebecca Spencer. The fifty-sixth count alleges violations of General Statutes § 47-267.
FACTS
The amended complaint alleges the following facts: Lofts is a condominium unit owners association organized to manage and direct the affairs of the Lofts on Lafayette Condominium (condominium complex) consisting of eight buildings with 140 residential condominium units and the surrounding grounds. Garfield Spencer is a resident of Connecticut and is a registered new home construction contractor. Lancaster is a limited liability company organized under Connecticut law. At all relevant times, Garfield Spencer was the sole and the managing member of Lancaster and maintained sole control over its finances and business policies.
Lofts is a residential common interest community association and a Connecticut non-stock corporation. Lofts was an unincorporated association as defined under General Statutes § 47-243 between January 3, 2005 and March 29, 2007.
Pursuant to General Statutes § 47-262, et seq., Lancaster drafted a public offering statement to be presented to all unit purchasers at Lofts. Each of the individual plaintiffs purchased individual condominium units as well as an undivided interest in the common elements at the condominium complex and are liable for common charges which are required to pay for the costs of maintenance of and repairs to the common elements of the condominium. The plaintiffs claim that Lancaster impliedly warranted to unit purchasers that improvements would be reasonably fit for the intended purpose and that they were constructed in accordance with applicable construction standards.
Lofts was created on January 3, 2005, in compliance with the requirements of General Statutes § 47-243, when Garfield Spencer conveyed the first condominium unit. Garfield Spencer appointed himself to the Lofts executive board until board control was transferred to unit owners. As a board member, Garfield Spencer was subject to a duty of care and a duty of loyalty required of a trustee pursuant to General Statutes § 47-245. Garfield Spencer also appointed his wife, Rebecca Spencer, to the Lofts board of directors and she accepted the fiduciary responsibilities of that office.
The plaintiffs claim that Lancaster's carelessness, recklessness and negligence resulted in significant construction defects in the condominium complex. The defects in materials or workmanship were identified by unit owners within the first year of ownership and that, despite repeated requests, Lancaster failed, refused or neglected to repair the defects. The plaintiffs allege that Lancaster's behavior has directly resulted in substantial damages to Lofts and individual unit owners, which the plaintiffs will continue to suffer until the repair, replacement and remediation of these defects. Among the defects claimed are improper construction of roofing, faulty roof drainage, water infiltration through doors, walls and windows, inoperative and unsafe elevators, multiple wall penetrations with no fire stop material, water infiltration under building four and rusted steel support beams.
The plaintiffs allege that Garfield and Rebecca Spencer knew or should have known of the defects resulting from Lancaster's improper construction practices. Lancaster or Garfield Spencer concealed structural and other defects at the condominium complex in spite of the disclosure requirements of the Common Interest Ownership Act, sold units at prices that did not reflect the cost of future remediation, breached implied warranties to purchasers by failing to comply with applicable standards and regulations and failed to employ appropriate practices that proximately resulted in the defects and deficiencies to the condominium complex. In addition, the plaintiffs claim that Garfield Spencer and Lancaster perpetrated a fraud in nearly 140 condominium sales by materially misrepresenting how they intended to remediate the defective work on the buildings by concealing matters of material importance to each condominium purchaser. The plaintiffs also claim that Garfield and Rebecca Spencer failed, neglected or refused to take action and protect the interests of the unit owners in their capacity as members of the Lofts board of directors.
The defendants' motion to strike seeks to strike counts eight through fifty-three of the plaintiffs' first amended complaint on the grounds that the forty-six plaintiffs named in those counts (unit owners) have been misjoined. The motion also seeks to strike counts seven and fifty-five on the grounds that the plaintiffs have not alleged sufficient facts to establish either that Garfield Spencer acted in bad faith or that Garfield or Rebecca Spencer should be personally liable for Lancaster's actions. The defendants filed a memorandum of law in support of their motion. In their objection to the motion to strike, the plaintiffs their claims are properly joined in a single lawsuit and that they have pleaded sufficient facts to support their claims of a breach of fiduciary duty by Garfield and Rebecca Spencer and to pierce Lancaster's corporate veil and hold Garfield Spencer individually liable for Lancaster's actions. The court heard oral arguments on the matter at short calendar on December 14, 2009.
DISCUSSION
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498 (2003). "A motion to strike admits all facts well pleaded; it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings." (Emphasis in original; internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 588 (1997). The court must "construe the complaint in the manner most favorable to sustaining its legal sufficiency." (Internal quotation marks omitted.) American Progressive Life Health Ins. Co. of New York v. Better Benefits, LLC, 292 Conn. 111, 120 (2009). "The exclusive remedy for misjoinder of parties is by motion to strike." (Internal quotation marks omitted.) CT Page 5038 Hilton v. New Haven, 233 Conn. 701, 723 n. 23, (1995); see also Practice Book § 11-3.
I. Joinder of claims of individual unit owners as plead in counts Eight through Fifty-Three with the claims asserted by the condominium association.
The defendants argue that counts eight through fifty-three of the plaintiff's amended complaint should be stricken because these individual claims of forty-six unit owners have been misjoined. Specifically, the defendants argue that the unit owners' individual claims do not arise from the same transaction or series of transactions, do not present common questions of law or fact as required by Practice Book § 9-4 and that a single trial would confuse the jury and unduly prejudice the defendants' right to a fair trial. In their objection to the defendants' motion to strike, the plaintiffs argue that the forty-six unit owner plaintiffs are properly joined to this action because the plaintiffs are all seeking to resolve the same controversy and joinder is in the best interests of judicial economy. Specifically, the plaintiffs argue that most of the material facts of their claims are common and the timing of the unit owners' obtaining title to their units is not determinative of their right to be joined.
"`All persons may be joined in one action as plaintiffs in whom any right of relief in respect to or arising out of the same transaction or series of transactions is alleged to exist either jointly or severally when, if such persons brought separate actions, any common question of law or fact would arise . . .' General Statutes § 52-104; Practice Book § 9-4. The joinder of plaintiffs permitted by the statute and practice book is a form of permissive joinder. The pertinent language, `arising out of the same transaction or series of transactions,' also appears in General Statutes § 52-97(7) and Practice Book § 10-21(7), which govern permissive joinder of causes of action. The court may look to cases interpreting these provisions and their predecessors to discern the meaning of the quoted language . . ." Balog v. Shelton Restaurant, LLC, Superior Court, judicial district of Ansonia-Milford at Derby, Docket No. CV 04 0084313 (August 2, 2004, Lager, J.) ( 37 Conn. L. Rptr. 659). "Permissive joinder of closely related occurrences is also allowed in order to serve the commonsense purposes of judicial economy, avoidance of multiplicity of litigation, and avoidance of piecemeal disposition of what is essentially one action . . ." (Internal quotation marks omitted.) Id.
Section § 52-97 and Practice Book § 10-21 provide, in pertinent part, that "[i]f several causes of action are united in the same complaint, they shall all be brought to recover, either . . . upon claims, whether in contract or tort or both, arising out of the same transaction or transactions connected with the same subject of action." "Transactions connected with the same subject of action within the meaning of subdivision (7) of [Practice Book § 10-21] may include any transactions which grew out of the subject matter in regard to which the controversy has arisen . . . These provisions are liberally construed." (Citations omitted; internal quotation marks omitted.) Rivera v. Ingenito, Superior Court, judicial district of New Britain, Docket No. CV 97 0479186 (September 29, 1997, Lager, J.) ( 20 Conn. L. Rptr. 451); see also Beveridge v. Bristol Spring Manufacturing Co., Superior Court, judicial district of New Britain, Docket No. CV 98 0491953 (February 7, 2000, Graham, J.) (denying motion to strike for misjoinder of two counts where plaintiff alleged a "time line of continued misconduct" by defendants that was sufficiently related to the complaint to satisfy Practice Book § 10-21(7)).
"Transaction is a word of flexible meaning . . . The transaction test is one of practicality and the trial court should consider the interests of judicial economy in applying the test . . . It is now an established principle in our law of civil procedure that two suits shall not be brought for the determination of matters in controversy between the same parties, whether relating to legal or equitable rights, or to both, when such determination can be had as effectually and properly in one suit . . . Moreover, there exists a general policy of our law which favors as far as possible the litigation of related controversies in one action." (Citations omitted; internal quotation marks omitted.) Slowick v. Morgan Stanley Co., Superior Court, Judicial District of New London, Docket No. CV 05 4003860 (February 21, 2006, Jones, J.).
"[For permissive joinder of plaintiffs to be proper,] [t]here must be some allegation of an interconnection between various acts complained of. For example, that they evidenced a common plan or design to perpetrate wrongful conduct. This is so because one of the primary purposes of permissive joinder is to achieve judicial economy by avoiding the presentation of overlapping evidence in a series of separate trials. Where there is an allegation of common plan or design against a corporate entity that must act through agents, then a legal framework is presented in the complaint to allow the benefits of permissive joinder to be apparent; the evidence of each plaintiff can be cumulatively considered to show common plan or design. In other words, whether some series of acts can be defined as arising out of the same transaction or series of transactions is arrived at as the end result of an analysis of the alleged operative facts for the purpose of determining whether permissive joinder would serve the purposes of judicial economy and the expeditious handling of cases." Zahedi v. Envirotest Systems, Superior Court, judicial district of New London, Docket No. CV 00 0552215 (February 25, 2000, Corradino, J.) ( 26 Conn. L. Rptr. 509) (granting motion to strike where plaintiffs' separate claims did not allege that defendants were pursuing a common plan or policy); see also Mascia v. Solhjoo, Superior Court, judicial district of Waterbury, Docket No. CV 05 4006397 (February 22, 2006, Gallagher, J.) [ 40 Conn. L. Rptr. 784] (denying motion to strike where joined plaintiff properly alleged defendant's acts were part of a common plan, scheme or policy).
The Zahedi court also noted the similarity between Practice Book § 9-4 and federal rule 20(a) on permissive joinder and provides a comprehensive overview of the federal case law on the scope of a "transaction" in permissive joinder. Zahedi recognized "that even though each plaintiff's allegations of abuse may be unique to that plaintiff, the allegation of a common scheme or plan raises questions of common fact regarding, among other things, the existence of such a policy . . ." (Citations omitted.) Mascia v. Solhjoo, supra, Docket No. CV 05 4006397.
Here, each of the unit owners has incorporated paragraphs 1-17 of the complaint into their individually alleged claims against the defendants. The first seventeen paragraphs allege that the unit owners are each part of a "common interest community association" in the condominium complex and own an "undivided interest in the common elements at the Lofts," that "pursuant to the construction and development of the common interest community . . . Lancaster constructed condominium units . . . and other structures within the condominium complex," that Lancaster is a "vendor" under General Statutes § 47-116, that all condominium units suffer from defects and damages resulting from "the negligence, carelessness and recklessness of Lancaster" and that Lancaster failed to remedy any of the defects.
General Statutes § 47-116 defines "vendor" as "any person engaged in the business of erecting or creating an improvement on real estate, any declarant of a conversion condominium, or any person to whom a completed improvement has been granted for resale in the course of his business."
Taken together, construing the complaint in the manner most favorable to sustaining its legal sufficiency and utilizing the aforementioned flexible definition of "transaction," the unit owners' claims arose out the same transaction and are properly joined before the court. The unit owners' claims could be construed as several causes of action arising out of the same transaction "united in the same complaint . . . upon claims [in tort]" stemming from Lancaster's alleged "carelessness, reckless and negligence" in its construction of the condominium complex. Practice Book § 10-21. The unit owners' counts might also be construed as interconnected because they all relate to their collectively held "common interest community" in Lofts. In addition, if the court construes the entire complaint in relation to the motion to strike, the broad scope of the construction defects and the allegations of the defendants' intentional misrepresentations may be construed as a "common scheme or design" that would permit joinder. See Mascia v. Solhjoo, supra. Neither are the diverse times when the unit owners purchased their interest in Lofts an obstacle to joinder because the defendants' actions could be deemed a "timeline of continued misconduct." See Beveridge v. Bristol Spring Manufacturing Co., supra.
The unit owners' claims involve significant overlapping evidence and each individual claim relates to other counts in the underlying action to such a degree that holding separate trials for each unit owner would unnecessarily waste judicial resources. See Slowick v. Morgan Stanley Co., supra; and Zahedi v. Envirotest Systems, supra. The court finds that the motion to strike counts eight through fifty-three of the plaintiffs' amended complaint on the grounds of misjoinder is without merit. The motion to strike those counts is, accordingly denied.
II. Motion to strike Counts Seven and Fifty-Five for failure to state a cause of action.
The defendants argue that the court should strike counts seven and fifty-five of the plaintiffs' amended complaint because they fail to state a cause of action against Garfield Spencer and Rebecca Spencer in their individual capacities. As to count seven, the defendants argue that the plaintiffs make conclusory allegations and do not allege specific facts describing the nature of Garfield Spencer's bad faith conduct, which renders this count insufficient under Connecticut's fact pleading requirements.
In their memorandum in opposition to the motion to strike, the plaintiffs first argue that the pleadings in count seven are sufficient to establish a prima facie case against Garfield Spencer for breach of his statutory duty of good faith because the complaint alleges specific behavior by Garfield Spencer that constitutes bad faith under § 47-211 of the General Statutes, which imposes an obligation of good faith in the performance or enforcement of a contract covered by CIOA. The plaintiffs further argue that Rebecca Spencer's position on the Lofts board gave her the duty of care required of a trustee, and that she breached her duty to the plaintiffs by neglecting or refusing to secure their interests.
A. Breach of obligation of good faith as to Garfield Spencer CT Page 5042
General Statutes § 47-211, provides that "[e]very contract or duty governed by this chapter imposes an obligation of good faith in its performance or enforcement." "As a rule, whether bad faith is established is a question of fact." 12 Havemeyer Place Co., LLC v. Gordon, 93 Conn.App. 140, 156-57 (2006). "To prove a claim for bad faith under Connecticut law, the plaintiffs [are] required to prove that the defendants engaged in conduct design[ed] to mislead or to deceive . . . or a neglect or refusal to fulfill some duty or some contractual obligation not prompted by an honest mistake as to one's rights or duties . . . [B]ad faith is not simply bad judgment or negligence, but rather it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity . . . [and] contemplates a state of mind affirmatively operating with furtive design or ill will . . . [B]ad faith may be overt or may consist of inaction, and it may include evasion of the spirit of the bargain." (Internal quotation marks omitted.) Health Communications, Inc. v. Chicken Soup for Soul Publishing, LLC, Superior Court, complex litigation docket at Stamford, Docket No. X05 CV 08 4014539 (February 6, 2009, Blawie, J.).Count seven alleges the following: Garfield Spencer was the sole managing member of Lancaster during the construction of the Lofts condominiums, that he maintained sole and complete control over Lancaster's decisions, finances and business policies and that he initially appointed himself as a board director of Lofts. Garfield Spencer's role as a Lofts board director entailed the fiduciary duties of care and loyalty, and Garfield Spencer and Lancaster were subject to several implied warranties in the sale of the Lofts condominium units. Construction defects in the condominium complex resulted from Lancaster's negligence, carelessness and recklessness. The defendants "intentionally failed to inform purchasers of . . . serious structural and other defects" in the condominium units and sold condominium units at high "turn key" prices that did not reflect the condition of the units and outside the expectations of purchasers. When defects were discovered, Lancaster and Garfield Spencer misrepresented how they intended to remedy the defects, concealed information of material importance to unit purchasers and have refused to repair any defects in spite of repeated requests and their promises to do so. The purpose of Garfield Spencer's misrepresentations was to inflate profits to himself and Lancaster and foist the expense of remediation on condominium purchasers. These defects continued to create additional problems after the units were purchased.
These facts, as pleaded by the plaintiffs, describe "conduct design[ed] to mislead or to deceive . . . or a neglect or refusal to fulfill some duty or some contractual obligation not prompted by an honest mistake as to one's rights or duties" and are sufficient to support a claim of bad faith. Health Communications, Inc. v. Chicken Soup for Soul Publishing LLC, supra. The plaintiffs have also pled facts "provable under the express and implied allegations in the plaintiff's complaint [to] support a cause of action" and therefore meet the fact pleading requirements and accordingly are not vulnerable to a motion to strike. Bouchard v. People's Bank, 219 Conn. 465, 471 (1991). The pleadings sufficiently allege that Garfield Spencer had a duty to the plaintiffs, either contractually, under an implied warranty or in his role on the Lofts board of directors. They further allege that defects existed in the condominium units that were either concealed or misrepresented to purchasers and that Lancaster has not remediated defects after leading purchasers to believe that they would be repaired. In addition, the purchasers will be forced to bear the cost of these misrepresentations and that the purpose of the defendants' actions was to profit Lancaster and Garfield Spencer. Accordingly, the court denies the motion to strike count seven on the grounds that the plaintiff has failed to allege facts describing the nature of Garfield Spencer's bad faith conduct.
B. Breach of fiduciary duty as to Rebecca Spencer
The defendants have moved to strike count fifty-five of the amended complaint on the grounds that Rebecca Spencer is being held personally liable for the conduct of "their company," a reference to Lancaster. The plaintiffs, however, have brought their claims against Rebecca Spencer in her role as a board member of Lofts with the fiduciary duty of a trustee. Nowhere in the amended complaint do the plaintiffs allege that Rebecca Spencer acted as an agent of Lancaster in her role as a Lofts board member. As the plaintiffs do not seek to hold Rebecca Spencer liable for Lancaster's actions, an analysis on piercing the corporate veil is unnecessary and the court need only address whether Rebecca Spencer breached her duty of loyalty as a trustee to Lofts.
"It is well settled that a fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other." Macomber v. Travelers Property Casualty Corp., 261 Conn. 620, 640 (2002). "[U]nless otherwise defined or unless otherwise required by the context, the term `fiduciary' includes an executor, administrator, trustee, conservator or guardian." General Statute § 45a-199. The COIA provides that "[i]n the performance of their duties, officers and members of the executive board appointed by the declarant shall exercise the degree of care and loyalty required by a trustee . . ." General Statutes § 47-245(a).
"`Declarant' means any person or group of persons acting in concert who (A) as part of a common promotional plan, offers to dispose of his interest in a unit not previously disposed of or (B) reserves or succeeds to any special declarant right." General Statutes § 47-202(12). The plaintiffs identify Lancaster as the declarant.
"The fiduciary duty comprises two prongs: a duty of care and a duty of loyalty. While the duty of care requires that fiduciaries exercise their best care and judgment, the duty of loyalty derives from the prohibition against self-dealing that inheres in the fiduciary relationship . . . A trustee must exclude all selfish interest and also all consideration of . . . third persons . . . A trustee commits a breach of trust . . . even if he does the best he can . . . if his best is not good enough . . . His duty is to exercise such care and skill as a person of ordinary prudence would exercise and he is liable for a loss resulting in his failure to comply with this standard . . . The superior position of the fiduciary or dominant party affords him great opportunity for abuse of the confidence reposed in him . . . Where . . . a breach of fiduciary duty is pled, the plaintiff has only the burden of proving the other party owed him/her a fiduciary duty. Once the plaintiff has demonstrated the existence of that duty, the burden is lifted from the plaintiff and placed on the fiduciary to prove his/her conduct was fair and equitable." (Citations omitted; internal quotation marks omitted.) Estate of Lintgeris v. Lintgeris, Superior Court, judicial district of Waterbury, Docket No. CV 08 50008846 (June 3, 2009, Sheedy, J.).
The plaintiffs have pleaded that Rebecca Spencer was appointed as a Lofts board member, and § 47-245 states that board members hold the fiduciary duties of trustees. The plaintiffs further allege that, because of her husbands' position as sole manager of Lancaster, that she breached her duty of loyalty because she knew or should have known of Lancaster's improper and fraudulent business practices and she failed to act to protect the unit owners' interests. The court finds that the allegations of count fifty-five are sufficient to state a cause of action for breach of fiduciary duty. The motion to strike count fifty-five is accordingly denied.