Opinion
No. CV04 0287795-S
September 7, 2005
MEMORANDUM OF DECISION RE MOTION TO STRIKE #109
I PROCEDURAL HISTORY
The plaintiff, Oxford Real Estate, a real estate broker, filed a one-count complaint on June 2, 2004, against the defendant, Remo Tartaglia, the owner of Shoppers Plaza in Bridgeport, Connecticut. The plaintiff alleges the following therein. The plaintiff and defendant entered into a listing agreement on November 28, 1994, to lease Shoppers Plaza. The agreement appointed the plaintiff as the exclusive listing broker. The parties extended the listing agreement though March 1, 1998. Prior to February 1997, the plaintiff procured a tenant for the plaza, PRCC, Inc., which subsequently executed a lease agreement with the defendant to operate a grocery store under the name of Shop Rite. The lease agreement "recognized the plaintiff as [the defendant's] broker." The defendant paid the plaintiff the appropriate commissions due and owing as a result of the execution of the lease. The initial term of the lease was for five years with the option of extending the lease for three additional five-year terms followed by one additional term of ten years. PRCC renewed the initial lease and, as required by the listing agreement, the plaintiff alleges it is entitled to 2.5 percent of the rental due from PRCC under this first renewal. The plaintiff has made a demand upon the defendant for the commission due but the defendant has refused to pay it. The plaintiff's complaint alleges a breach of the real estate brokerage contract for a commission due and owing.
On July 20, 2004, the defendant filed an answer, special defenses, recoupment, and setoff and counterclaim, which was subsequently revised. In his first special defense, first recoupment and first counterclaim, the defendant alleges in each that the plaintiff was paid a substantial commission in excess of what was due and payable in correction with a tenancy known as Tutor Time. In the second special defense, second recoupment and second counterclaim, the defendant alleges in each that at the times alleged in the complaint, the plaintiff was a real estate broker for the defendant and owed to him the responsibilities of a fiduciary, of good faith and fair dealing; that he signed a lease with Tutor Time, a prospective tenant, and paid the plaintiff a substantial commission; that the plaintiff knew or should have known that Tutor Time was insolvent but failed to advise the defendant of this fact. The defendant further alleges in each that he made substantial payments to improve the property to accommodate Tutor Time but has not been paid the amount of rent owed it before Tutor Time went bankrupt. In the third special defense, third recoupment and third counterclaim, the defendant alleges the following. He owns a shopping center in Branford for which he attempted to obtain zoning approval for a prospective tenant, another Tutor Time, but the zoning application was denied. The defendant's assignor, a limited liability company owned by the defendant, also owns a shopping center in West Haven. This different Tutor Time, which was a tenant of the defendant's assignor in West Haven, failed to pay the defendant the rent it owed sending instead the payment to the plaintiff as commission. The acceptance of that payment by the plaintiff was unauthorized and constitutes a conversion of the defendant's property. The defendant realleges that at the time of the complaint, the plaintiff, as real estate broker for the defendant, breached its duty as a fiduciary, of good faith and fair dealing. Finally, in the fourth special defense, fourth recoupment and fourth counterclaim, the defendant alleges that all of the transactions, as enumerated in his prior special defenses, recoupment counts and counterclaims, constitute unfair and deceptive actions in violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. because the plaintiff received and accepted funds not due it and failed to investigate and/or advise and warn the defendant of the insolvency and financial difficulties of Tutor Time.
On October 28, 2004, the plaintiff filed its motion to strike the second, third and fourth special defenses; first, second, third and fourth recoupments and first, second, third and fourth counterclaims as legally insufficient The defendant filed a memorandum of law in opposition to the motion to strike on November 12, 2004. At short calendar, the defendant withdrew the third special defense, third recoupment and third counterclaim.
II DISCUSSION
Practice Book § 10-39(a)(5) provides that a motion to strike may be used to contest "the legal sufficiency of any answer to any complaint, counterclaim or any part of that answer including any special defenses . . ." In ruling on a motion to strike, "the trial court [is obligated] to take the facts to be those alleged in the special defenses and to construe the defenses in a manner most favorable to sustaining their legal sufficiency." Connecticut National Bank v. Douglas, 221 Conn. 530, 536, 606 A.2d 684 (1992). See also Ocwen Federal Bank v. Rivas, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 99 0368135 (February 21, 2002, Stevens, J.). The 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." Mingachos v. CBS, Inc., 196 Conn. 91, 108, 491 A.2d 368 (1985). "In deciding upon a motion to strike a trial court must take the facts to be those alleged in the [pleadings] and cannot be aided by the assumption of any facts not therein alleged." (Citations omitted; internal quotation marks omitted.) Liljedahl Bros., Inc. v. Grigsby, 215 Conn. 345, 348, 576 A.2d 149 (1990). The court must construe the special defense or counterclaim, however, "in [a] manner most favorable to sustaining its legal sufficiency . . ." Bouchard v. People's Bank, 219 Conn. 465, 471, 594 A.2d 1 (1991). Where the facts provable under the allegations would not support a special defense or counterclaim, then the motion to strike must be granted. Alarm Applications Co. v. Simsbury Volunteer Fire Co., 179 Conn. 541, 545, 427 A.2d 822 (1980); see also Heim v. California Federal Bank, 78 Conn.App. 351, 359, 828 A.2d 129 (2003); The Frederick Corp. v. Scheckter, Superior Court, judicial district of Litchfield, Docket No. CV 01 0084350 (April 26, 2001, Cremins, J.).
A. Special Defenses
The plaintiff moves to strike the second and fourth special defenses on the ground that they allege causes of action for damages which do not qualify as valid special defenses under § 10-50 of the Practice Book. Specifically, the plaintiff argues that, except for the first special defense, which is not at issue in this motion and seeks a setoff or recoupment, each of the others raises a separate claim for damages based on allegedly tortious conduct of the plaintiff toward the interests of the defendant, wholly unrelated to the subject matter of the plaintiff's complaint and do not involve allegations of "mutual debts." It is the plaintiff's position that a claim for damages, except for the setoff, is not a proper special defense under the rules of practice because it does not preclude the plaintiff's recovery.
Because the defendant alleges a CUTPA violation in his fourth special defense, it is discussed later in this memorandum of decision.
Section 10-50 of the rules of practice provides: "No facts may be proved under either a general or special denial except such as show that the plaintiff's statements of fact are untrue. Facts which are consistent with such statements but show, notwithstanding, that the plaintiff has no cause of action, must be specially alleged. Thus, accord and satisfaction, arbitration and award, coverture, duress, fraud, illegality not apparent on the face of the pleadings, infancy, that the defendant was non compos mentis, payment (even though nonpayment is alleged by the plaintiff), release, the statute of limitations and res judicata must be specially pleaded, while advantage may be taken, under a simple denial, of such matters as the statute of frauds, or title in a third person to what the plaintiff sues upon or alleges to be the plaintiff's own."
In response, the defendant argues that in his special defenses, he has addressed the relationship between him and the plaintiff under the real estate contract and the plaintiff's responsibilities under that contract. The defendant further argues that the reason he alleged his claims as special defenses, recoupment counts and counterclaims is that each entitles him to different types of relief. For example, the defendant points out that a counterclaim entitles him to affirmative relief, a recoupment of the amount claimed by the plaintiff and the special defenses allow the trier to conclude that the plaintiff is not entitled to recovery at all. The defendant further maintains that the claims alleged by the plaintiff and the claims he has alleged in his special defenses, recoupment counts and counterclaims arise from the same transaction, the real estate contract, as well as the same set of facts, and, therefore, the plaintiff's interpretation of what constitutes the same transaction is too narrow. Under the plaintiff's interpretation, the defendant reasons that two lawsuits would have to be filed for the two commissions owed under the contract. The defendant asserts that in fairness to him and for the sake of judicial economy, he should be able to go forward with the counterclaims, recoupment counts and special defenses because "all arise from the conduct of the plaintiff daring the contract by which it seeks to hold the defendant liable"; that "[s]ome of the defenses . . . alleging the plaintiff's failure to abide by its fiduciary relationship to the defendant essentially set forth why the plaintiff should not be paid even if it is owed anything"; and that the other defenses "bring into play how the parties conducted themselves under the same contract sued upon by the plaintiff."
"The fundamental purpose of a special defense, like other pleadings, is to apprise the court and opposing counsel of the issues to be tried, so that basic issues are not concealed until the trial is underway." Bennett v. Automobile Insurance Co. of Hartford, 230 Conn. 795, 802, 646 A.2d 806 (1994). "The pleading of special defenses is governed by Practice Book § [10-50], which provides: `Facts which are consistent with [the plaintiff's] statements but show, notwithstanding, that he has no cause of action, must be specially alleged.' If the existence of a fact does not negate the existence of the plaintiff's allegations but independently destroys liability, then evidence of that fact may be admitted only under a special defense. Pawlinski v. Allstate Ins. Co., 165 Conn. 1, 7, 327 A.2d 583 (1973)." Emlee Equipment Leasing Corp. v. Waterbury Transmission, Inc., 41 Conn.Sup. 575, 576, 595 A.2d 951 (1991) ( 3 Conn. L. Rptr. 71); see also Homecomings Financial Network, Inc. v. Starbala, 85 Conn.App. 284, 288-89, 857 A.2d 366 (2004).
In the second special defense, the defendant is seeking damages for the allegedly negligent conduct of the plaintiff in permitting the defendant to lease space to a prospective tenant known as Tutor Time without notifying the defendant that Tutor Time was insolvent and that the plaintiff as real estate broker for the defendant breached its duty of good faith and fair dealing and the responsibility of a fiduciary. At issue in the complaint is an alleged breach of the exclusive listing agreement between the plaintiff and the defendant with respect to Shoppers Plaza and the commission owed to the plaintiff for the renewal of the subsequent lease agreement between the plaintiff and PRCC from which the plaintiff maintains it did not receive its commission.
In its complaint, the plaintiff has alleged that "[p]ursuant to the aforesaid listing agreement between the plaintiff and the defendant the plaintiff is entitled to 2.5% of the rental due from PRCC . . . under the first renewal [of the lease agreement]" and "[p]ursuant to [p]aragraph 14 of the listing agreement executed by the plaintiff and the defendant [that] the defendant is responsible for all costs of collection, including reasonable attorneys fees incurred by the plaintiff to enforce the listing agreement [and] for 12% interest on all sums due and owing thereunder." The basis of the plaintiff's allegations in its complaint arise from an alleged breach of the listing agreement between it and the defendant. The allegations pleaded by the defendant in the second special defense relate to the same listing agreement but not for PRCC as the tenant but rather for a different prospective tenant, Tutor Time, for which the defendant alleges that the plaintiff was paid a commission greater than what was owed to it. The second special defense pertains to the exclusive listing agreement, the foundation of the plaintiff's cause of action, and that the plaintiff has been paid a commission in excess of what it is owed under that contract. As such, this second special defense does not negate the existence of a commission owed to the plaintiff but independently affects the underlying liability of the plaintiff. Therefore, the court finds that this special defense is legally sufficient and the plaintiff's motion to strike it is denied.
B. Recoupment Counts One, Two and Four CT Page 12280
As to the defendant's first, second and fourth recoupment claims, the plaintiff argues that these claims also are wholly unrelated to the transaction that is the subject of the complaint (the listing agreement), and, as a result, do not qualify as recoupment defenses. As the defendant argues in opposition to the motion to strike, he is seeking in the recoupment counts a reduction of the amount claimed by the plaintiff. "Connecticut has no statute concerning recoupment, but the state courts have long recognized the ancient equitable defense . . . Recoupment's distinguishing feature is that the defense arises out of the same transaction on which the plaintiff's claim is based. The defense exists as long as the plaintiff's cause of action exists." (Citation omitted.) St. Mary's Hospital v. Torres, 33 Conn.Sup. 201, 203, 370 A.2d 620 (1976).The defendant has not made it clear in his answer whether he is alleging his recoupment claims as a special defense or a counterclaim. "Recoupment is more properly filed as a special defense and not an independent action; it is essentially a defense . . . In recoupment, a defendant may cut down to the full amount of plaintiff's claim, but may not recover for any balance due him . . . The test in each case must therefore be whether the pleading of the defendant is purely defensive or whether affirmative relief is demanded." (Internal quotation marks omitted.) The Frederick Corp. v. Scheckter, supra, Superior Court, Docket No. CV 01 0084350. "The defense of recoupment has two characteristics: (1) the defense arises out of the transaction constituting the plaintiff's cause of action; and (2) it is purely defensive, used to diminish or defeat the plaintiff's cause, but not as the basis for an affirmative recovery. It rests on the principle that both sides of a transaction should be settled at one time in order to prevent circuitry of actions." (Citation omitted.) Genovese v. J.N. Clapp Co., 4 Conn.App. 443, 445-46, 495 A.2d 1079 (1985). "Our courts [have] recognized the right of a person sued in an action upon contract, to recoup or cut back the amount which the plaintiff might recover, by showing a right of action for damages in himself arising out of the same contract or, in a qualified sense, transaction. Boothe v. Armstrong, 76 Conn. 530, 531, 57 A. 173 (1904). For a valid contract defense such as recoupment to be asserted, however, there first must be an enforceable contract between the parties. It is well settled in this state that there must be mutuality of obligation between the parties to a contract for the contract to be enforceable." (Internal quotation marks omitted.) Sloan v. Kubitsky, supra, 48 Conn.App. 839. Specifically, "[t]he intention of the parties manifested by their words and acts is essential to determine whether a contract was entered into and what its terms were . . . This determination requires a finding of mutuality of obligation." (Citation omitted; internal quotation marks omitted.) Hydro-Hercules Corp. v. Gary Excavating, Inc., 166 Conn. 647, 652-53, 353 A.2d 714 (1974). "Although a defendant should clearly claim recoupment by special defense, and caption its allegations by way of recoupment only a counterclaim is sufficient as long as the counterclaim is within the recoupment exception and arises out of the plaintiff's main cause of action." (Internal quotation marks omitted.) The Frederick Corp. v. Scheckter, supra, Superior Court, Docket No. CV 01 0084350. The Connecticut Supreme Court stated in Capitol Coal Co. v. Greenberg, 114 Conn. 422, 424, 158 A. 883 (1932) that "[u]nder our present practice, recoupment is to be pleaded as a counterclaim and requires a prayer for affirmative relief . . ." Id., 424. The court, therefore, will address the defendant's recoupment count as a special defense and counterclaim.
The money owed, which the defendant alleges under recoupment, in counts one and two of his answer, arose out of the same transaction and set of events that the plaintiff alleges in its complaint, that is, the listing agreement between the plaintiff and the defendant for the rental of Shoppers Plaza. As the plaintiff points out in its memorandum in support of the motion to strike, the defendant allegedly owes the plaintiff a commission due to their exclusive listing agreement and subsequent rental agreement between the defendant and PRCC on the basis of the language within the listing agreement. The transactions with the tenant known as Tutor Time are also subject to that same listing agreement. Here, the defendant has alleged facts sufficient to establish that the recoupment counts one and two, stem from the same initial transaction, and, therefore, the motion to strike these two counts is denied.
C. Counterclaims
In the defendant's first, second and fourth counterclaims, the plaintiff argues that each arises from a transaction or occurrence that is separate and distinct from the allegations in the complaint regarding the commission due as a result of the rental agreement with PRCC. The plaintiff maintains that the defendant has pleaded a series of events and transactions that are unconnected with those of the complaint and which pertain to conduct occurring with respect to different matters at different locations. It is this lack of a connection, both legal and factual, to the allegations of the complaint that the plaintiff argues requires the special defenses, the counterclaims and recoupment counts to be stricken. With respect to the defendant's first and second counterclaims, the plaintiff argues in its memorandum of law that these claims arise from a transaction that is separate from the allegations in the complaint, and, as a result, these counterclaims should be stricken. The defendant responds that his claims arise from the same transaction and are legally sufficient to withstand a motion to strike.
A counterclaim is "a cause of action existing in favor of a defendant against a plaintiff that a defendant pleads to diminish, defeat or otherwise affect a plaintiff's claim and also allows recovery by the defendant." (Internal quotation marks omitted.) Home Oil Co. v. Todd, 195 Conn. 333, 341, 487 A.2d 1095 (1985). Generally, Practice Book § 10-10 delineates the boundaries of counterclaims. It provides that "[i]n any action for legal or equitable relief, any defendant may file counterclaims against any plaintiff — provided that each such counterclaim . . . arises out of the transaction or one of the transactions which is the subject of the plaintiff's complaint . . ." Practice Book § 10-10. "The transaction test [of § 10-10] is one of practicality . . ." (Internal quotation marks omitted.) Southbridge Assoc., LLC v. Garofalo, 53 Conn.App. 11, 21, 728 A.2d 1114, cert. denied, 249 Conn. 919, 733 A.2d 229 (1999). See also Ocwen Federal Bank v. Rivas, supra, Superior Court, Docket No. CV 99 0368135. In Morgera v. Chiappardi, 74 Conn.App. 442, 813 A.2d 89 (1977), relied on by the defendant, the court concluded that under the transaction test the related acts arose prior to or during the development of the note and mortgage and that the defendant's counterclaim arose from the plaintiff's fraudulent representations which caused her to make the note and mortgage on one property but which was part of a package of conveyances or property represented to be legal, income-producing multifamily properties. Id., 450 The court further stated that Morgera involved the conveyance of three properties in which the seller failed to notify the defendant that there were numerous housing violations on each of the properties and her counterclaim, which was upheld, was for fraudulent misrepresentation.
The transaction at issue in the present case is the exclusive listing agreement between the plaintiff and defendant and the procurement of PRCC as a tenant for the property known as Shoppers Plaza owned by the defendant all of which resulted in a lease agreement between the defendant and PRCC, from which the plaintiff is claiming it is owed a commission. The plaintiff challenges the counterclaims on the basis that each pertains to the conduct of the parties in relation to a different tenant, Tutor Time, and to a different location, West Haven, and, therefore, under the transaction test, the counterclaims are legally insufficient. The defendant argues that the counterclaims are governed by Practice Book § 10-10 and since he has withdrawn his third special defense, third recoupment count, and third counterclaim all of which refer to the West Haven location, that his counter demand in the remaining counterclaims should go forward, because each of these claims arise from the conduct of the plaintiff stemming from the listing agreement by which it seeks to hold the defendant liable. The court finds that the first and second counterclaims arise out of the listing agreement, at issue and are legally sufficient. Therefore, the plaintiff's motion to strike these counterclaims is denied.
D. The Defendant's Fourth Special Defense, Fourth Counterclaim and Recoupment Claim Count Four
In the defendant's fourth special defense, fourth counterclaim and count four of his recoupment claims, he alleges damages for a violation of CUTPA based on the plaintiff's unfair and deceptive actions and practices in receiving and accepting funds from Tutor Time in connection with the overpayment of a commission and failing to investigate, advise or warn the defendant of the insolvency of Tutor Time. In his counterclaim, the defendant alleges that the plaintiff engaged in a trade or practice as the terms are defined by CUTPA; that the plaintiff was engaged in commerce as that term is defined in CUTPA; and that the plaintiff engaged in unfair and deceptive actions and practices as these terms are defined in CUTPA by receiving and accepting funds not due it and failing to investigate and/or advise and warn the defendant of the insolvency and financial difficulties of Tutor Time. Therefore, the defendant is claiming that an alleged overpayment of a commission to the plaintiff in connection with Tutor Time as a prospective tenant and the allegedly negligent conduct of the plaintiff in procuring Tutor Time is a CUTPA violation. The plaintiff argues in its memorandum of law in support of the motion to strike that the underlying actions that form the basis of the CUTPA claims alleged in the fourth special defense, fourth recoupment count and fourth counterclaim is the purported lease with Tutor Time, not at issue in the complaint, and, therefore, each should be stricken. In response, the defendant asserts that the special defense, counterclaim and recoupment claim arises from the same transaction and the same set of operative facts, namely the listing agreement, and involves the plaintiff's tortious conduct during the contract. The court grants the motion to strike the fourth special defense and fourth recoupment count as they are not legally sufficient.
"[A] CUTPA violation cannot be asserted as a special defense." Monetary Funding Group, Inc. v. Pluchino, 87 Conn.App. 401, 404 n. 3, 867 A.2d 841 (2005). The weight of the Superior Court cases have held that CUTPA cannot be asserted as a special defense. Duffy Fasano v. Lena, Superior Court, judicial district of Waterbury, Docket No. CV 0109145 (December 2, 1992, Sylvester, J.) ("A CUTPA claim is an actionable right and therefore is more appropriately brought as a counterclaim and not as a special defense"); accord SNETCO v. Guardian Systems, Inc., Superior Court, judicial district of New Haven, Docket No. CV 94 0358589 (January 23, 1995, Martin, J.); Shawmut Bank v. Moser, Superior Court, judicial district of Tolland at Rockville, Docket No. CV 91 0049087 (September 2, 1992, McWeeny, J.); Connecticut National Bank v. Alliance Petroleum, Inc., Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. CV 0373623 (June 9, 1992, Hennessey, J.) ( 6 Conn. L. Rptr. 529, 530); Chrysler First Wholesale Credit, Inc. v. Spicer, Superior Court, judicial district of New London, Docket No. CV 0517727 (September 24, 1991, Mihalakos, J.). In addition, no cases could be found alleging a CUTPA claim as a recoupment count.
The plaintiff's argument as to why the CUTPA counterclaim is insufficient is devoid of any reasoning other than asserting that the underlying breach of the exclusive listing agreement involving the commission allegedly owed it arose out of a transaction unrelated to the lease with Tutor Time. Since it has been previously determined that the causes of action herein all involve the underlying listing agreement, this argument by the plaintiff fails. In addition, the plaintiff does not argue that the defendant failed to allege any of the elements necessary to state a cognizable claim for a CUTPA violation nor does it provide any case law to support its assertion. A court may not strike a claim for reasons not advanced in the motion to strike. Meredith v. Police Commission, 182 Conn. 138, 140-41, 438 A.2d 27 (1980). Therefore, the motion to strike the fourth counterclaim is denied.
III CONCLUSION
The court denies the motion to strike the second special defense, recoupment counts one and two, and the first, second and fourth counterclaim. The court grants the motion to strike the fourth special defense and fourth recoupment count.
So Ordered.
BY THE COURT
Peter Emmett Wiese, Judge