Opinion
No. CV 09-5027946S
October 14, 2010
MEMORANDUM OF DECISION ON MOTION TO DISMISS
In a revised complaint dated January 10, 2010 the plaintiff asserts a claim against Patriot National Bank in one count and a separate claim against Bank of America. Both defendants have filed motions to dismiss based on lack of subject matter jurisdiction. The revised complaint in count one alleges Mr. Speciale operated a specialty food business and hired a Linda Davis to assist him. It is claimed that Ms. Davis wrote checks against the plaintiff's accounts at Patriot National Bank (PNB) and Bank of America (BOA). It is further alleged PNB allowed many unauthorized transactions leading to a large financial loss to the plaintiff. It is claimed in allowing these transactions PNB created liability for itself by failing to ascertain checks were forged, permitted cash withdrawals from the plaintiff's accounts when it knew or should have known the transactions were fraudulent and unauthorized, failed to inquire of the plaintiff of the authenticity of transactions that were suspect, and improperly charged the plaintiff's accounts for unauthorized charges violating § 42a-4-401 of the general statutes.
Count two makes the same factual allegations involving the opening of accounts and the activity of Davis in regard thereto against BOA. The claim is that numerous unauthorized transactions were allowed by BOA causing great loss to Mr. Speciale and BOA is liable for this loss because its actions in permitting them was "careless and/or negligent, violated article 4(b) of the Uniform Commercial Code and our state's banking laws."
These two defendants have now filed motions to dismiss based on lack of subject matter jurisdiction because of a lack of standing. The grounds of the motion are similar in each case. They both say that the accounts in the respective banks were owned by Oesse Foods Inc., a Connecticut corporation and/or by 169 Olive Street LLC, a Connecticut Limited Liability Company. The defendants, for the purpose of these motions only, do not contest the fact that there were unauthorized transactions with regards to these accounts. As stated in PNB's motion to dismiss, in an observation BOA adopts: "The plaintiff Oreste Speciale lacks legal standing to maintain this action in his individual capacity and has not suffered a direct injury sufficient to confer standing upon him. If he has been injured at all, Mr. Speciale's injury and harm are derivative of and to . . . the alleged injury to . . ." Oesse Foods Inc. and 169 Olive Street LLC, or as BOA says: "if there were in fact any unauthorized transactions with regard (to the accounts at issue), the party directly injured by such unauthorized transactions would be the owner of the (accounts)."
In St. George v. Gordon, 264 Conn 538, 544 (2003) the court said: "The issue of standing implicates subject matter jurisdiction and is therefore a basis for a motion to dismiss. If there is no standing and thus subject matter jurisdiction, the court has no authority to hear and determine the case." Or as said in Smith v. Snyder, 267 Conn. 456, 460 (2004): "when standing is put in issue, the question is whether the person whose standing is challenged is a proper party to request an adjudication of an issue." It is also true that once subject matter jurisdiction is raised, the court must address it and the issue "must be passed upon before (the court) can move one further step in the cause . . ." Windell v. Schaller Subaru Inc., 277 Conn. 526, 537 (2000).
On the other hand it has been the rule in our state that: "it is well established that, in determining whether a court has subject matter jurisdiction, every presumption favoring jurisdiction should be indulged." Novak v. Levin, 287 Conn 71, 79 (2008).
Another matter must be briefly referred to in any general discussion which the court will try to address more fully later in this opinion and which is occasioned by Mr. Speciale's request to amend his complaint coupled with an affidavit filed a few days before the hearing on the motion to dismiss. Mr. Speciale claims that both at PNB and BOA he had personal accounts that Ms. Davis pilfered from as a result of the defendant's negligence and wishes to add these claims to the complaint. Mr. Speciale does not dispute that in the original complaint the allegations were made regarding accounts only in the name of the business entities mentioned.
That aspect of the motion to dismiss directed toward the original complaint which allege loss occasioned by Davis's acts due to the claimed negligence of PNB and BOA presents a different question than the propriety of permitting the motion to amend raising loss as to Speciale's personal accounts.
(1)
To oppose the motion to dismiss, a motion to substitute parties by bringing suit in behalf of the business entities and a proposed amended complaint to reflect this have been filed. Section 52-190 of the general statutes is relied upon which is tracked in PB § 9-20.
Section 52-190 reads "when any action has been commenced in the name of the wrong person as plaintiff, the court may, if satisfied that it was so commenced through mistake, and that it is necessary for the determination of the real matter in dispute so to do, allow any other person to be substituted or added as plaintiff."
The question presented is whether § 52-109 can be relied upon to permit the requested substitution of parties. First it is necessary to examine the theory behind the notion that dismissal should be granted here without taking into account the motion to substitute and the request to amend the complaint. The reason is set forth in that most general of reference works in 59 Am.Jur.2d, "Parties" at § 320, page 746 it states that the common law "prohibits an entire change of plaintiffs by the substitution of new parties in the place of those who originally brought suit. The reason for the general rule is that an entire change of plaintiff is in effect a change in the cause of action." If that is the case, the original plaintiff obviously had no standing to bring the suit and therefore the court has no subject matter jurisdiction. Once this is raised, the court can go no further and cannot consider a motion to amend — i.e. there is nothing to amend. As this court noted in Wilson v. Zemba, 49 Conn.Sup. 542, 546 [ 38 Conn. L. Rptr. 272] (2009):
Some common law cases, however, took a more beneficent and understandable approach. Thus in New York Evening Post Co. v. Chaloner, 265 F. 204, 213 (2d Cir.), cert. dismissed, 252 U.S. 591, 40 S.Ct. 396, 64 L.Ed. 731 (1920), the court observed that: "At common law an entire change of plaintiffs is not allowable, being in effect regarded as a change of the cause of action . . . The reason for the rule indicates its qualification, and where there is no change in the cause of action and the party substituted bears some relation of interest to the original party and to the suit the substitution is allowed. Thus a trustee may be substituted for his beneficiary . . . And when an action is brought by a person who has the beneficial interest in the subject-matter, the person who has the legal right to sue may and should be substituted. (Citations omitted.)
It is the court's opinion that § 52-109 was passed to avoid the harsh common-law dictate. As Judge Sheldon notes the purpose of the statute would be "completely undermined by any rule requiring the immediate dismissal for lack of subject matter jurisdiction of any action commenced in the name of the wrong person as plaintiff." As he points out "the statute, as an exercise of the legislature's constitutional authority to determine the court's jurisdiction . . . must be seen as an extension of that jurisdiction for the limited purpose of deciding a proper motion to substitute," DiLieto v. County Obstetrics Gynecology Group 26 Conn. L. Rptr. 657, (Sheldon J., 2000). Judge Sheldon cited FDIC v Retirement Management Group, 31 Conn.App. 80 (1993) (cert denied 226 Conn. 908 (1933)). There the court said:
"General Statutes § 52-109 and [what is now] Practice Book § [9-20] allow a substituted plaintiff to enter a case [w]hen any action has been commenced in the name of the wrong person as plaintiff . . . Both rules, of necessity, relate back to and correct, retroactively, any defect in a prior pleading concerning the identity of the real party in interest. In the context of analogous rules of federal civil procedure, it has been observed that [when] the change is made on the plaintiff's side to supply an indispensable party or to correct a mistake in ascertaining the real party in interest, in order to pursue effectively the original claim, the defendant will rarely be unfairly prejudiced by letting the amendment relate back to the original pleading. As long as [the] defendant is fully apprised of a claim arising from specified conduct and has prepared to defend the action, his ability to protect himself will not be prejudicially affected if a new plaintiff is added . . . Thus, an amendment substituting a new plaintiff will relate back if the added plaintiff is the real party in interest," id. pp 84-85.
This case also noted that the substitution of the real party in interest as plaintiff would cure the lack of standing of the original plaintiff.
In effect the reasoning of a case like New York Evening Post Co. v. Chaloner, 265 F. 204, 213 (CA 2, 1920), has been adopted which held that: Where there is no change in the cause of action and the party substituted bears some relation of interest to the original party, substitution should be allowed.
The rules of federal civil procedure the court in FDIC v. Retirement Management Group was referring to was Federal Rule 15c(1)(c). The relevant subsections read as follows:
(1) When an amendment relates back: An amendment to a pleading relates back to the date of the original pleading when: . . .
(c) the amendment changes the party or the naming of the party against whom a claim is asserted, if Rule 15(c)(1)(B) is satisfied and if, within the period provided by Rule 4(m) for serving the summons and complaint, the party to be brought in by amendment:
(i) received such notice of the action that it will not be prejudiced in defending on the merits; and
(ii) knew or should have known that the action would have been brought against it, but for a mistake concerning the proper party's identity.
In Federal Practice and Procedure Wright, Miller, and Kane, Vol. 6A, § 1501 it discusses the rule and says; "as long as defendant is fully appraised of a claim arising from specified conduct and has prepared to defend the action, defendant's ability to protect itself will not be prejudicially affected if a new plaintiff is added, and defendant should not be permitted to invoke a limitations defense," pp. 212-13 and further states: "Courts deciding whether to allow amendments changing plaintiffs to relate back to the filing of the original complaint seem to concentrate on the notice and identity-of-interest factors," id. p. 215.
Section 52-190 and the Federal Rules simply adopted the liberal common-law view in the Chaloner case. Or to put it another way if § 52-190 does not allow plaintiff substitution where there is an identity of interest between the original plaintiff and the proposed substituted plaintiff and a mistake in naming of the plaintiff coupled with no showing of prejudice to the defendants it is difficult to understand why they were enacted.
Here the revised complaint filed some two months after the original complaint identifies by number the accounts involved in the thefts and even the original March 2009 complaint. Oreste Speciale is named as the plaintiff and pilfering from "his" accounts is alleged. It is difficult to believe that these large banks with the sophisticated technology and computer system they have could not locate ab initio the accounts in question.
Also it is difficult to see how it can be said how there is not an identity of interest between Oreste Speciale and the interests sought to be advanced by substituting the business entities as plaintiffs where as it is conceded Speciale is the sole owner of those entities or guarantor of their commercial loans. Ganim v. Smith Wesson Corp., 238 Conn. 313 (2001), is cited for the proposition that, given the facts of this case, Oreste Speciale was not directly injured by the activities of Davis qua his personal identity as Oreste Davis. But that is not the issue before the court; when a § 52-190 {P.B. § 9-20} motion to substitute is filed that is a given — i.e. the purported plaintiff received no direct injury which necessitates the motion to substitute into the case parties who were directly injured. Of course § 52-190 cannot be so liberally read as to allow some idle interloper to bring suit then move to substitute someone who really suffered harm as a result of wrongful conduct. Here Speciale was in fact the sole owner of the businesses sought to be brought into the litigation.
The other requirements under the language of § 52-190 are that the original action listed the incorrect plaintiff by "mistake." Here that is not a difficult hurdle — of course listing Oreste Speciale as owner of these accounts was a "mistake."
Also under the statute, to allow substitution, it must be done because it is necessary to determine the real matter in dispute. Here if substitution is permitted: The real matters in dispute remain the same after substitution is made because the very same factual allegations to establish damages. There can be no claim, and none has been offered, that allowing the substitution will prejudice the defendants in any practical way in the business of defending themselves against the factual allegations of the complaint just referenced.
Finally the court will discuss Johndrow v. State, 24 Conn.App. 719 (1991), which the defendants cite to support their position that once subject matter jurisdiction is raised one must go directly to it, putting aside § 52-109 and motions under P.B. § 9-20 and its relaxation of janein applications of the concept of subject matter jurisdiction. Horton and Knox in their commentary to PB § 9-20 seem to agree when they say "This section cannot be used where there is no jurisdiction as to the original plaintiff . . ." Vol 1 of Connecticut Practice Series, page 461, 2010 edition. But let us look at the relevant language of Johndrow closely; at page 722 it says, commenting on PB § 101, the predecessor of P.B. § 9-20:
The trial court was also correct in not considering Hartford's motion to substitute Nutmeg as intervenor. When the issue of subject matter jurisdiction is brought to the attention of the trial court, it must decide the question of jurisdiction before it proceeds any further with the case. Valley Cable Vision, Inc. v. Public Utilities Commission, 175 Conn. 30, 32, 392 A.2d 485 (1978). Having decided the issue of jurisdiction by holding that Hartford had no standing to intervene, the trial court correctly concluded that Hartford's motion to substitute was moot and that it need not be considered on its merits . . .
We note Practice Book § 101 which contemplates a motion to substitute the plaintiffs where substitution "is necessary for the determination of the real matter in dispute." The real issue disputed in this action is the defendant's liability in tort and not the indemnification of another. Accordingly, this section does not apply to this case.
The footnote assumes substitution is appropriate in circumstances where PB § 9-20 applies albeit the original plaintiff had no standing where the requirements of PB § 9-20 have been met, also see comments of Judge Sheldon in Dilieto on Johndrow.
The motions to dismiss are denied insofar as it is directed against allegations of loss sustained in accounts specified in the revised complaints against these defendants, the motion to substitute having been granted to allow the previously mentioned business entities to proceed as plaintiffs regarding the losses in these accounts.
2
The court has more difficulty with regards to that aspect of the proposed amended complaint, directed against either of these defendants and advanced by Oreste Speciale as an individual which seek to recover for losses sustained by Mr. Speciale in previously unmentioned personal accounts. The plaintiff cannot have it both ways, filing a motion to substitute which in effect removes him as a named personal plaintiff as to the original allegations and then trying to rely on the relation back doctrine to add new and separate allegations because of the fact that suit was originally and incorrectly brought in his personal name. It strikes the court as unfair. In the revised complaints specific accounts were mentioned as being subject to the larcenous activity of Ms. Davis-should the bank have been expected to look into every account otherwise owned by Speciale and his immediate family to see if suspicious activity might occurred in these accounts? As to these new claims why should he not be treated as any other litigant and be required to initiate separate litigation from this litigation as to these personal accounts which could be subjected to separate defenses such as the statute of limitations?