Opinion
No. CV 06 4023267
December 10, 2007
MEMORANDUM OF DECISION RE MOTION FOR DEFAULT AND JUDGMENT (#117)
Vincent Metro LLC moves the court to default the defendants and enter a judgment against them on the ground that they have failed to comply with a judicial order because they did not file a statement of claim in response to the court's interlocutory judgment of interpleader, but instead filed an answer and counterclaim. The defendants respond that Vincent's motion should be denied because the motion for judgment is procedurally improper under Practice Book § 17-32.
According to Practice Book § 23-44: "No trial on the merits of an interpleader action shall be had until (1) an interlocutory judgment of interpleader shall have been entered; and (2) all defendants shall have filed statements of claim, been defaulted or filed waivers. Issues shall be closed on the claims as in other cases." While the defendants did move the court to release the funds and filed an answer and counterclaim in response to the complaint and subsequent interlocutory judgment, they did not file a "statement of claim" until July 2, 2007.
Vincent bases his motion upon Practice Book § 17-19, which provides in relevant part: "If a party fails to comply with an order of a judicial authority . . . the party may be nonsuited or defaulted by the judicial authority." Section 17-19 may be applicable because courts treat express orders that defendants file statements of claim as court orders. See, e.g., Hennings v. Hoag, Superior Court, judicial district of Litchfield, Docket No. CV 02 0088592 (October 13, 2006, Pickard, J.) ("[t]he court granted the interpleader . . . and ordered the parties to state their respective claims as to the assets of the trust"); Evans, Feldman Boyer, LLC v. Moffett, Superior Court, judicial district of New Haven, Docket No. CV 00 045080 (September 20, 2001, Zoarski, J.T.R.) ("the court granted the plaintiff's motion for interlocutory judgment of interpleader and ordered all defendants to file their statements of claim (or waivers)").
The use of the word "may" invokes the discretionary power of the court. Bongiovanni v. Saxon, 99 Conn.App. 221, 225, 913 A.2d 471 (2007). "In reviewing claims that the trial court abused its discretion, great weight is given to the trial court's decision and every reasonable presumption is given in favor of its correctness . . . We will reverse the trial court's ruling only if it could not reasonably conclude as it did." Terracino v. Fairway Asset Management, Inc., 75 Conn.App. 63, 73, 815 A.2d 157, cert. denied, 263 Conn. 920, 822 A.2d 245 (2003).
The modified standard of review set forth in Millbrook Owners Assn., Inc. v. Hamilton Standard, 257 Conn. 1, 17-18, 776 A.2d 1115 (2001), applies to party's failure to comply with a court order. Although Millbrook concerned a party's failure to comply with a trial court's discovery order, the Millbrook standard has been applied to parties' failure to comply with other judicial orders. In McHenry v. Nusbaum, the Appellate Court asserted: "Because the nonsuit here was a penalty for the plaintiff's failure to close the pleadings, we apply the modified standard of review set forth by our Supreme Court in Millbrook . . . First, the order to be complied with must be reasonably clear. In this connection, however, we also state that even an order that does not meet this standard may form the basis of a sanction if the record establishes that, notwithstanding the lack of such clarity, the party sanctioned in fact understood the trial court's intended meaning . . . Second, the record must establish that the order was in fact violated . . . Third, the sanction imposed must be proportional to the violation. This requirement poses a question of the discretion of the trial court that we will review for abuse of that discretion." (Citation omitted; internal quotation marks omitted.) McHenry v. Nusbaum, 79 Conn.App. 343, 351-52, 830 A.2d 333, cert. denied, 266 Conn. 922, 923, 835 A.2d 472, 473 (2003); see also Burton v. Dimyan, 68 Conn.App. 844, 846-47, 793 A.2d 1157, cert. denied, 260 Conn. 925, 797 A.2d 520 (2002).
Case law offers little guidance on how strictly the requirement that an interpleader defendant file a "statement of claim" is applied. In People's Bank 401(K) S.P. v. Petro, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 01 0382741 (February 5, 2003, Doherty, J.), two defendants in an interpleader action failed "to file a response to the complaint or statement of claim," and consequently the court determined that, "the claims of other defendants were taken as admitted." See also Goring v. Orlins Michaud, Superior Court, judicial district of New London, Docket No. CV 98 0547193 (June 23, 1999, Purtill, J.T.R.) ("[a]n interlocutory judgment of interpleader having been entered and defendants having failed to file any responsive pleading when default entered, the court may proceed to a final judgment of interpleader").
In this case, the trial court never expressly ordered the defendants to file a statement of claim. Moreover, even if Practice Book § 23-44 is construed to impose such a requirement on the defendants, it does not contain a mandatory time limit for filing such claims. Here, the defendants did file a statement of claim, although they did not do so until after Vincent filed his motion for default and judgment. Finally, Practice Book § 1-8 provides: "The design of these rules being to facilitate business and advance justice, they will be interpreted liberally in any case where it shall be manifest that a strict adherence to them will work surprise or injustice."
In its reply to the defendants' objection to the motion for default and judgment, Vincent argues that the statement of claim is inadequate because the defendants do not address each other's claim to the funds and Rose Fitzpatrick has neither stated nor waived her potential claim pursuant to Windsor Locks Building and Loan Assn. v. Butler, 6 Conn.Sup. 284, 286 (1938). It should also be noted that the pleadings are not closed because Vincent has not answered the counterclaim.
The defendants argue that Practice Book § 17-32 controls, not Practice Book § 17-19, and that once they filed their answer, the default is properly set aside. Practice Book § 17-32 applies when a party fails to plead. Practice Book § 10-6 lists the types of pleadings allowed, statements of claim are not amongst them.
Practice Book § 17-32 provides: "(a) Where a defendant is in default for failure to plead pursuant to Section 10-8, the plaintiff may file a written motion for default which shall be acted on by the court clerk upon filing, without placement on the short calendar. (b) If a party who has been defaulted under this section files an answer before a judgment after default has been rendered by the judicial authority, the clerk shall set aside the default. If a claim for hearing in damages or a motion for judgment has been filed the default may be set aside only by the judicial authority. A claim for a hearing in damages or a motion for judgment shall not be filed before the expiration of fifteen business days from the date of notice of issuance of the default under this subsection."
Because Vincent has moved for judgment as well as default in its motion, the motion would be procedurally incorrect if Practice Book § 17-32 controlled due to the fifteen-day waiting period.
Conclusion
The court finds that the filing of the statement of claim is sufficient to resolve this aspect of the case. Accordingly, the motion for default and judgment is denied.
MEMORANDUM OF DECISION RE MOTION TO DISMISS COUNTERCLAIM (#116)
This case, and its multifaceted procedural history, arises from a failed sale of real estate. Unless otherwise noted, the following facts are undisputed. In July 2005, the plaintiff, Vincent Metro, LLC, and the defendant, Yah Realty, LLC, entered into an agreement whereby Vincent would act as a real estate broker for a property Yah wished to sell. According to the agreement, if the property were sold through Vincent's efforts, Vincent would receive a commission based on the purchase price. Vincent procured a buyer for the property, defendant John Fitzpatrick. Yah and Fitzpatrick entered into a purchase and sales agreement in late 2005, and John Fitzpatrick's mother, defendant Rose Fitzpatrick, gave Vincent $20,000 as a deposit in January 2006. Vincent placed these funds into its real estate trust account.
Yah and John Fitzpatrick were unable to complete the sale and, in September 2006, officially terminated the deal.
Yah and John Fitzpatrick requested that Vincent return the deposit in October 2006 Vincent alleges that both Yah and John Fitzpatrick separately demanded that the funds be returned, and that Yah refused to allow the funds to be released to Fitzpatrick. The defendants contend that they informed Vincent, that by mutual agreement, the funds should be released to Yah. Furthermore, they allege that Vincent demanded a commission as a condition of releasing the funds.
Vincent commenced this action for interpleader on November 6, 2006, in which it seeks an order determining the rights of the defendants to the funds and an order discharging it from any obligation to the defendants arising out of their claims to the funds, plus reasonable attorneys fees and cost of the suit. On December 12, 2006, the court, Licari, J., entered an interlocutory judgment of interpleader. Vincent deposited the funds with the clerk of the court on December 29, 2006. The defendants entered their appearance on January 26, 2007.
Practice Book § 23-44 provides: "No trial on the merits of an interpleader action shall be had until (1) an interlocutory judgment of interpleader shall have been entered; and (2) all defendants shall have filed statements of claim, been defaulted or filed waivers. Issues shall be closed on the claims as in other cases."
The interpleader statute, General Statutes § 52-484, provides: "Whenever any person has, or is alleged to have, any money or other property in his possession which is claimed by two or more persons, either he, or any of the persons claiming the same, may bring a complaint in equity, in the nature of a bill of interpleader, to any court which by law has equitable jurisdiction of the parties and amount in controversy, making all persons parties who claim to be entitled to or interested in such money or other property. Such court shall hear and determine all questions which may arise in the case, may tax costs at its discretion and, under the rules applicable to an action of interpleader, may allow to one or more of the parties a reasonable sum or sums for counsel fees and disbursements, payable out of such fund or property; but no such allowance shall be made unless it has been claimed by the party in his complaint or answer."
On March 2, 2007, the defendants filed a motion for an order to release the funds. This motion was denied without prejudice by the court, Licari, J., on May 21, because Vincent had filed a motion to default the defendants for failure to plead, pursuant to Practice Book § 17-32, on May 1, 2007. Vincent's motion to default the defendants was granted on May 4.
On May 15, 2007, Vincent filed a motion for final judgment of interpleader after default. The next day, the defendants filed an answer and five-count counterclaim.
On June 28 Vincent filed the instant motion to dismiss the defendants' counterclaim on the ground of mootness. On July 2, defendants filed an objection to the motion for default and judgment to which Vincent filed replies.
Motion to Dismiss
"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." (Internal quotation marks omitted.) Cox v. Aiken, 278 Conn. 204, 210-11, 897 A.2d 71 (2006). "Mootness implicates [the] court's subject matter jurisdiction and is thus a threshold matter for [the court] to resolve." (Internal quotation marks omitted.) Private Healthcare Systems, Inc. v. Torres, 278 Conn. 291, 298, 898 A.2d 768 (2006). "Pursuant to the rules of practice, a motion to dismiss is the appropriate motion for raising a lack of subject matter jurisdiction." St. George v. Gordon, 264 Conn. 538, 545, 825 A.2d 90 (2003). "[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).
Vincent moves to dismiss the defendants' entire counterclaim on the ground that the claims raised therein are moot. Vincent asserts that it been adjudicated a disinterested stakeholder pursuant to the interlocutory judgment of interpleader and has deposited the contested funds with the court. Thus, no controversy between Vincent and the defendants still exists and the defendants "may have the funds as soon as they file statements of waiver or claim pursuant to Practice Book § 23-44." (Vincent's Memorandum, p. 5.) The defendants did not file an objection to this motion.
"[A] case becomes moot when due to intervening circumstances a controversy between the parties no longer exists." (Internal quotation marks omitted.) Dept. of Public Safety v. Freedom of Information Commission, 103 Conn.App. 571, 584-85 (2007).
First, Vincent contends that its conduct in depositing the funds with the court is an intervening event that has ended the controversy between the parties such that "there is no longer a `controversy' for the court to adjudicate with respect to the Defendants' claims that they have been injured by virtue of the Plaintiff's alleged refusal to release the funds, rendering the Defendants' claims moot." (Vincent's Memorandum, p. 4.)
If the defendants were merely seeking to recover the funds in their counterclaim, Vincent's assertion that their counterclaim is moot would be correct, as they could not sue Vincent for funds it no longer possesses. The defendants have, however, alleged additional, independent claims against Vincent, namely, claims for breach of contract, negligent and reckless misrepresentation, violation of CUTPA and breach of fiduciary duty. In this context, the court is not called upon to address the legal sufficiency or the merits of the defendants' claims. Pratt v. Old Saybrook, 225 Conn. 177, 185, 621 A.2d 1322 (1993). Furthermore, "[w]hen a court . . . decides a jurisdictional question raised by a pretrial motion to dismiss, it must consider the allegations of the [challenged pleading] in their most favorable light . . . In this regard, a court must take the facts to be those alleged in the [pleading], including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader." (Internal quotation marks omitted.) Cox v. Aiken, supra, 278 Conn. 211.
The defendants' counterclaims, because they seek more than recovery of the funds, present a live controversy and are not moot. See Dawson v. Farr, 227 Conn. 780, 782-83, 632 A.2d 41 (1993) ("[t]he continued existence of unresolved collateral disputes suffices . . . to prevent a controversy from becoming moot"). Moreover, this court may hear these claims in the context of this action. "Interpleader is a procedural device which enables a `person holding money or property which is claimed by two or more other people to bring together all adverse claimants in a single proceeding for a complete adjudication of the matters in controversy . . . Interpleader is a broad joinder device to facilitate consolidation of related claims as to avoid multiple litigation as well as protection against multiple liability.' E. Stephenson, Connecticut Civil Procedures 263 p. 1088 (2d Ed. 1971, as updated to 1981)." Triangulum Associates v. Harrison Conference Center, Superior Court, judicial district of Waterbury, Docket No. 0099881 (May 16, 1995, Pellegrino, J.) ( 14 Conn.L.Rptr. 183).
Both federal and state courts frown upon counterclaims premised solely on a plaintiff's decision to file an interpleader action and are quick to eliminate them, though not for lack of subject matter jurisdiction. In U.S. Trust Co. of New York v. Alpert, 10 F.Sup.2d 290 (S.D.N.Y. 1998), the court granted summary judgment in favor of an interpleader plaintiff — the defendant's counterclaims failed as a matter of law because they were based on the plaintiff having brought a valid interpleader action. See also American International Life Assurance Co. of New York v. Burger, United States District Court, Docket No. 06-1267 (E.D.Mich., December 1, 2006) (counterclaims dismissed for failure to state a claim); Underwriters Group, Inc. v. Clear Creek Independent School District, United States District Court, Docket No. G-05-334 (S.D.Tex. 2006) (counterclaims resulting from plaintiff utilizing protections afforded by interpleader can not constitute independent cause of action); Northwestern v. Greathouse, Superior Court, judicial district of Stamford-Norwalk, Docket No. CV 98 0164835 (April 10, 2000, D'Andrea, J.) (court — noting that unlike cases in which federal courts held that a party can not he held liable for asserting an interpleader, defendant's counterclaims were not premised solely on plaintiff's decision to file interpleader action — found that plaintiff did not show that defendant's counterclaims were legally insufficient and denied motion to strike); National Savings Bank v. Cable, 73 Conn. 568, 48 A. 428 (1901) (finding counterclaim to an interpleader complaint to be demurrable (suggesting the court had subject matter jurisdiction)).
Second, Vincent contends that the defendants' counterclaims are moot because once the interlocutory judgment of interpleader was entered, it can no longer be held liable for any claim arising out of the dispute: "As per the court's interlocutory judgment of interpleader, the Plaintiff has deposited the funds with the court and has assumed the status of a disinterested stakeholder . . . the Defendants have no grounds to claim that they are injured as a result of the Plaintiff's alleged failure to withhold the funds." (Vincent's Memorandum, p. 5.) This interlocutory judgment is, according to Vincent, "a final order adjudicating the Plaintiff a disinterested stakeholder with respect to the funds." Id., 3.
In an interpleader action "there are, in effect, two separate and distinct suits, the first . . . [to determine] whether there shall be a decree of interpleader, and the second . . . [to determine] who shall get the fund or thing in dispute." (Internal quotation marks omitted.) Yankee Millwork Sash Door Co. v. Bienkowski, 43 Conn.App. 471, 473-74, 683 A.2d 743 (1996). In Kerite Co. v. Alpha Employment Agency, Inc., 166 Conn. 432, 437, 352 A.2d 288 (1974), which Vincent cites, our Supreme Court explained that "[i]n rendering the judgment of interpleader, the trial court decided that the plaintiff is a stakeholder . . . It thereby concludes the rights of the parties on the stakeholder issue. The judgment is final in that it establishes the right of the plaintiff to proceed as a disinterested stakeholder in spite of the defenses pleaded by the defendants."
Kerite, nevertheless, is distinguishable as the question facing the court in Kerite was whether an interlocutory judgment of interpleader is a final judgment on the stakeholder issue, id., 437; and not whether the defendants' counterclaims were moot. In the present context, this issue may implicate the doctrines of collateral estoppel and res judicata. Neither collateral estoppel nor res judicata are proper grounds for a motion to dismiss. See Zizka v. Water Pollution Control Authority, 195 Conn. 682, 687, 490 A.2d 509 (1985) (res judicata may not be raised by motion to dismiss); Rosenfeld v. McCann, 33 Conn.App. 760, 762, 638 A.2d 631 (1994) (same); see also Jackson v. R.G. Whipple, Inc., 225 Conn. 705, 712, 627 A.2d 374 (1993) (summary judgment is appropriate method for resolving claim of res judicata or collateral estoppel).
"Claim preclusion (res judicata) and issue preclusion (collateral estoppel) have been described as related ideas on a continuum." (Internal quotation marks omitted.) Powell v. Infinity Ins. Co., 282 Conn. 594, 600, 922 A.2d 1073 (2007). Collateral estoppel, or issue preclusion, "means simply that when an issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties in any future lawsuit . . . Issue preclusion arises when an issue is actually litigated and determined by a valid and final judgment, and that determination is essential to the judgment." (Internal quotation marks omitted.) Corcoran v. Dept. of Social Services, 271 Conn. 679, 689, 859 A.2d 533 (2004). "An issue is actually litigated if it is properly raised in the pleadings or otherwise, submitted for determination, and in fact determined." (Internal quotation marks omitted.) LaBow v. Rubin, 95 Conn.App. 454, 461, 897 A.2d 136 (2006). As noted supra, a interpleader action in effect comprises two suits. Yankee Millwork Sash Door Co. v. Bienkowski, supra, 43 Conn.App. 474. "The principles underlying the doctrine of res judicata, or claim preclusion, are well settled. [A] valid, final judgment rendered on the merits by a court of competent jurisdiction is an absolute bar to a subsequent action between the same parties, or those in privity with them, upon the same claim or demand." (Internal quotation marks omitted.) Sotavento Corp. v. Coastal Pallet Corp., 102 Conn.App. 828, 833-34, 927 A.2d 351 (2007).
Moreover, Kerite does not foreclose the defendants from raising claims that Vincent is liable to them on the claims it raises in its counterclaim. The judgment of interpleader "concludes the rights of the parties on the stakeholder issue" and "between the plaintiff and the defendants it finally and irrevocably fixes the status and determines certain rights of each with respect to the main suit." Kerite Co., supra, 166 Conn. 437, 438. It does not "finally dispose of all the issues in the case." Id., 438. There is scant, post- Kerite case law addressing the impact of an interlocutory judgment of interpleader, which does not suggest that such a judgment, per se, renders defendant counterclaims moot. In Northwestern v. Greathouse, Superior Court, judicial district of Stamford-Norwalk, Docket No. CV98 0164835 (April 10, 2000, D'Andrea, J.), the court refused to strike a defendant's counterclaims because they were not premised solely on the plaintiff's use of an interpleader action, but rather on the plaintiff's conduct regarding the funds at issue. See also Triangulum Associates v. Harrison Conference Center, supra, 14 Conn.L.Rptr. 183, in which the court asserted that the interpleader statute is broad enough to include counter and cross-claims and noted that the federal interpleader statute allows counterclaims.
See also Practice Book § 10-10, which provides in relevant part: "In any action for legal or equitable relief, any defendant may file counterclaims against any plaintiff and cross claims against any codefendant provided that each such counterclaim and cross claim arises out of the transaction or one of the transactions which is the subject of the plaintiff's complaint." The federal interpleader statute is 28 U.S.C. § 1335.
Other jurisdictions offer somewhat more guidance. For example, in Citigroup Global Markets, Inc. v. KLCC Investments, LLC, United States District Court, Docket No. 06 Civ. 5466 (S.D.N.Y. January 11, 2007), a federal court sustained an interpleader action and discharged the stakeholder from liability for the funds deposited with the court, but did not dismiss the stakeholder from the case. See also Merrill Lynch, Pierce, Fenner Smith, Inc. v. Clemente, United States District Court, Docket No. 98 Civ. 1756 (S.D. N.Y. January 4, 2001) (same); Mitchell v. Burt, Vetterlein Bushnell, P.C., 164 Or.App. 154, 991 P.2d 47 (1999) (Oregon interpleader statute broad enough to encompass counterclaims — stakeholder may be released from liability with respect to funds but not from independent claims for relief); Farmers Mechanics Bank v. Walser, 316 Md. 366, 385-86, 558 A.2d 1208 (1989) (following Royal School Laboratories, Inc. v. Watertown, 358 F.2d 813, 817 (2d Cir. 1966), court may use three-step proceeding to handle logistical problems arising when defendant in an interpleader action alleges that plaintiff has incurred independent liability — plaintiff remains in suit through two-step interpleader proceeding instead of being discharged, then question of independent liability to defendant is addressed).
Vincent cites Lutheran Brotherhood v. Comyne, 216 F.Sup.2d 859, 862-63 (E.D.Wisc. 2002), to support his argument that the interlocutory judgment of interpleader releases him from liability for all related claims. While the interpleader plaintiff in Lutheran Brotherhood was released from the case and the counterclaims dismissed when the interlocutory judgment was rendered, this case may be distinguished from the case at hand and those cited above — not only were the counterclaims essentially claims against the plaintiff for bringing an interpleader action, but neither defendant objected to the release of the plaintiff.
Vincent has chosen the wrong procedural device for challenging the defendants' counterclaim. The defendants allege claims in which they seek more than the mere recovery of the funds, thus there is a live controversy between the parties. Furthermore, Vincent's argument that the counterclaims are moot because the interlocutory judgment of interpleader is a final order does not pertain to mootness, but rather to preclusion, and is not properly addressed by a motion to dismiss.
Conclusion
Accordingly, for the foregoing reasons, the motion to dismiss the counterclaim is denied.