Opinion
No. CV06-5003463S
September 9, 2008
MEMORANDUM OF DECISION RE MOTION TO STRIKE (#122)
This action arises out of a fire that damaged rental property owned by the first-party plaintiff, Starview Ventures, Ltd., LLC (Starview), and concerns, the third-party defendant, United Adjusters, LLC's (United), March 24, 2008 motion to strike count two of the defendant, Wachovia Bank, N.A.'s (Wachovia), November 1, 2007 cross claim against it. A brief history of the case is necessary.
On March 28, 2007, Starview submitted a motion to cite in Wachovia as a defendant. On the same date, in its third amended complaint, Starview added counts eleven and twelve against Wachovia for common-law and statutory conversion. Starview alleged the following facts. On April 13, 2004, there was a fire on the premises of a building it owned in New Haven. At that time, first-party defendant, D.N.M. Autocare, LLC (DNM), leased space in the building from Starview to operate its automotive repair business. DNM obtained an insurance policy from first-party defendant Underwriter at Lloyd's, London (Lloyd's) that covered the property and garage liability. he policy listed Starview "as the mortgagee" and Starview's agent, Horizon Properties, LLC, as the certificate holder.
Additional first-party defendants Matthew Humphrey, Dwight Fowlin and Geoffrey Lyn, operated DNM, and signed the lease with Starview.
Acadia Ins. Co. (Acadia), another first-party defendant, issued a commercial property insurance policy to Starview insuring the premises for damages and other casualty. Acadia's role in the initial action has no bearing on the current motion to strike.
In the wake of the fire, Lloyd's, through its representative or agent, first-party defendant Joseph Krar and Associates, Inc. (Krar), "issued settlement funds [in the amount of $86,966.62] for said loss and said funds were sent to the adjuster of its insured, namely [United], and were made payable to [DNM, United and Starview] on or about November 22, 2004." On November 29, 2004, United and DNM endorsed the settlement check, but did not obtain Starview's endorsement despite its status as a co-payee. DNM and United then presented the check to Wachovia who paid them, despite the absence of Starview's endorsement. Starview alleges it did not receive any of the settlement funds. On March 28, 2007, Starview filed a motion to cite in Wachovia as a defendant, along with its third amended complaint.
Starview alleges that the check failed to name Starview's public adjuster, Biller Associates Tri-State, LLC, as a payee, preventing Starview from receiving notice of the check being issued.
The check was written on Krar's trust account with Webster Bank (Webster), which he maintained for the benefit of Lloyd's in his capacity as their agent or representative. Webster accepted the check, despite the missing signature, and debited Krar's account. On January 18, 2007, Lloyd's and Krar filed a motion to implead Webster and United, which was granted on May 21, 2007.
On November 1, 2007, Wachovia filed a cross claim against United in count two. Wachovia claims that any loss to Starview was "the result of United Adjusters' [e]ndorsement of the settlement check and its failure to properly distribute the proceeds . . ." Wachovia also claims that it "was obligated to pay the properly [e]ndorsed settlement check," and did not control the distribution of the proceeds from the check because the check was "payable in care of United . . ." Wachovia demands that United indemnify it, should Wachovia be found liable for any loss Starview is found to have suffered.
Count one of the cross claim is against DNM and the three individuals who ran the business.
On March 24, 2008, United filed a motion to strike Wachovia's count two cross claim against it, along with a memorandum of law in support of its motion. United argues that count two should be stricken because Connecticut does not recognize common-law indemnification for intentional torts, such as conversion, and that Wachovia has not alleged all of the elements required for common-law indemnification. On April 28, 2008, Wachovia filed a memorandum of law in opposition to United's motion to strike.
"A motion to strike challenges the legal sufficiency of a pleading and, consequently, requires no factual findings by the trial court." (Internal quotation marks omitted.) Batte-Holmgren v. Commissioner of Public Health, 281 Conn. 277, 294, 914 A.2d 996 (2007). "The proper procedural vehicle to challenge the legal sufficiency of a proposed pleading is a motion to strike . . ." Rizzuto v. Davidson Ladders, Inc., 280 Conn. 225, 256, 905 A.2d 1165 (2006). "(a) Whenever any party wishes to contest (1) the legal sufficiency of the allegations of any complaint, counterclaim or cross claim, or of any one or more counts thereof, to state a claim upon which relief can be granted . . . that party may do so by filing a motion to strike the contested pleading or part thereof." Practice Book § 10-39. The role of the trial court in ruling on a motion to strike is "to examine the [complaint], construed in favor of the [plaintiff], to determine whether the [pleading party has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997). "In ruling on a motion to strike, the court is limited to the facts alleged in the complaint." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997).
United moves to strike count two of Wachovia's cross claim on the ground that Connecticut does not recognize a claim of common-law indemnification, based on an intentional tort, as the underlying claim. United argues that the Connecticut superior courts "have overwhelmingly found that third party claims for indemnification are not recognizable when the underlying claim is an intentional tort." Wachovia counters by arguing that because it "alleges that it acted pursuant to [United's directions, its] cross claim sufficiently states a cause of action for common law indemnity." Wachovia further argues that its cross claim "equally fits within the indemnification claim permitted by Commentary k of the Restatement (Second) Torts § 886B. [The Restatement] provides, in relevant part, that indemnification claims may be brought where `two parties are guilty of different types of tortious conduct or are held to different standards of care.'"
"[I]ndemnity involves a claim for reimbursement in full from one on whom a primary liability is claimed to rest . . . Ordinarily there is no right of indemnity . . . between joint tort-feasors . . . [W]e have distinguished between `active or primary negligence,' and `passive or secondary negligence.' . . . Indemnity shifts the impact of liability from passive joint tortfeasors to active ones." (Citation omitted; emphasis in original; internal quotation marks omitted.) Crotta v. Home Depot, Inc., 249 Conn. 634, 641-42, 732 A.2d 767 (1999). In other words, a "third party plaintiff who is only secondarily negligent may still recover from a third party defendant whose negligence is primary." Weintraub v. Richard Dahn, Inc., 188 Conn. 570, 573, 452 A.2d 117 (1982).
In determining "whether, under the applicable law, a third party defendant may be liable to the defendant for the claims asserted against the defendant by the plaintiff, it is important to recognize the nature of a third party action, and the natural consequences thereof. A third party complaint is premised on the plaintiff prevailing against the defendant third party plaintiff . . . Thus, for the purposes of a motion to strike the third party complaint on the ground that the third party defendants cannot, as a matter of law, be liable to the defendant for the claims by the plaintiff, it is necessary to assume that the jury found that the plaintiff established the elements of the cause or causes of action in the first party complaint against the defendant." Hartt v. Schwartz, Superior Court, judicial district of New Haven, Docket No. 331912 (October 20, 1995, Martin, J.).
"See Weintraub v. Richard Dahn, Inc., 188 Conn. 570, 573, 452 A.2d 117 (1982) (concluding that the finding of the jury in the first-party action that the defendant third-party plaintiff was negligent was binding upon the defendant third-party plaintiff in the third-party action for indemnification); Kaplan v. Merberg Wrecking Corp., 152 Conn. 405, 413-15, 207 A.2d 732 (1965) (in an action for indemnification, the court is correct in looking to the opinion of the first action to ascertain the basis on which the plaintiff/alleged-indemnitee was found liable, because an indemnitee, in his action to recover from the indemnitor the amounts paid in satisfaction of a judgment obtained against him by an injured person, is bound by all findings without which the judgment could not have been rendered . . .); Preferred Accident Ins. v. Musante, Berman Steinberg, 133 Conn. 536, 541, 52 A.2d 862 (1947) (plaintiff was found liable for injuries to a third person; in a subsequent action for indemnification against a codefendant in the first action, the court took judicial notice of the basis upon which the plaintiff was held liable in the first action because such a fact is a matter of law.)" (Internal quotation marks omitted.) Hartt v. Schwartz, supra, Superior Court, Docket No. 331912.
In deciding whether United's motion to strike Wachovia's cross claim should be granted, the first-party plaintiff, Starview, would be assumed to have made a valid claim for conversion against Wachovia in its third amended complaint. Starview, in counts eleven and twelve of its third amended complaint, alleges that Wachovia committed common-law and statutory conversion by allowing the settlement check to be cashed without Starview's endorsement. Specifically, in count eleven of its third amended complaint, Starview claims that "Starview . . . was a co-payee on the settlement check and the settlement check was not properly payable without the endorsement of all payees . . . [The] defendant's, Wachovia Bank, N.A.'s, actions in paying the settlement check without the endorsement of the plaintiff, Starview . . . constituted an unauthorized assumption of the property of the plaintiff to the exclusion of the property rights of the plaintiff." In count twelve Starview alleges that the "actions of the defendant, Wachovia . . . constitute conversion of an instrument pursuant to General Statutes § 42a-3-420."
A majority of superior court cases support United's argument that Wachovia's cross claim against it for indemnity has to be stricken due to the fact that Starview's underlying allegations against Wachovia arise out of an intentional tort. See Brian's Floor Covering Supplies, LLC v. Spring Meadow Elderly Apartments, Superior Court, judicial district of Fairfield, Docket No. CV 00 0375810 (March 22, 2006, Richards, J.) (conversion is an intentional tort). In Stevens v. Alan Barry Associates, Superior Court, judicial district of Danbury, Docket No. CV 98 0333206 (December 29, 1999, Radcliffe, J.) [26 Conn. L. Rptr. 212], the court granted one codefendant's motion to strike a cross claim brought against it by another codefendant. The court held that the codefendant bringing the cross claim would be unable to meet the test for common-law indemnification because the first-party plaintiff's underlying claims against the nonmoving codefendant alleged the intentional torts of vexatious suit and abuse of process.
The only case that seems to question that majority is Shelby Ins. Co. v. Castellon, Superior Court, judicial district of New Haven, Docket No. CV 98 0416779 (May 26, 2000, Devlin, J.). In that case the court stated, "[it] is true that the principal modern cases in Connecticut that have considered indemnification have done so in the active/passive negligence context . . . Those cases do not, however, explicitly limit common law indemnification to negligence actions only. More importantly, the Restatement (Second) Torts does not contain this limitation. See Restatement (Second) Torts § 886B. Indeed, comment k of § 886B recognizes that cases have permitted indemnity in situations where the parties are guilty of different types of tortious conduct including those in which a negligent party seeks indemnification from a party who acted recklessly . . .
"Where a claim for indemnification is grounded in tort, reimbursement is warranted only upon proof of the active or primary negligence of the party against whom reimbursement is sought." (Citations omitted.) Shelby Ins. Co. v. Castellon, supra, Superior Court, Docket No. CV 98 0416779.
In Royal Ins. Co. v. Padula, Superior Court, judicial district of Hartford, Docket No CV 94 0540730 (May 8, 1997, Hale, J.T.R.), the court denied the third-party defendant's motion to strike the third-party plaintiff's complaint against it. As in Stevens v. Alan Barry Associates, supra, Superior Court, Docket No. CV 98 0333206, the first-party plaintiff pleaded intentional tort claims against the defendant/third party plaintiff. Nevertheless, the court held that the motion to strike should be denied because the first-party plaintiff made an additional claim against the defendant/third-party plaintiff for a tort arising out of negligence. No similar scenario exists in this case. The only allegation made against Wachovia in the first-party complaint is for conversion, an intentional tort.
The court stated, "[w]hile it is true that the claims against Padula set forth in the first party plaintiff's complaint include intentional tort and breach of contract (Complaint, Counts One and Two), count four alleges that the defendant/third party plaintiff, Padula, breached a duty to safely keep and accurately account for all monies belonging to Royal that were in Padula's care and control, which sounds in negligence. Therefore, since negligence was alleged by the first party plaintiff, Royal, as to the defendant/third party plaintiff, Padula, then the third party complaint is legally sufficient because Padula alleges that Aetna's negligence, rather than her own negligence, caused Royal's injuries. In the court's opinion the defendant/third party plaintiff, Padula, has drawn her third party complaint to sufficiently allege circumstances to give rise to common law indemnification against the third party defendant, Aetna." Royal Ins. Co. v. Padula, supra, Superior Court, Docket No. CV 94 0540730.
In Mark Sonder Music, Inc. v. Fusco Corp., Superior Court, judicial district of New Haven, Docket No. CV 03 0484571 (March 7, 2005, Devlin, J.) [4 Conn. L. Rptr. 179], the court stated that "the application of an active/passive negligence theory to indemnify for liability arising from [an] intentional tort is problematic." In Fortin v. Bok, Superior Court, judicial district of Fairfield, Docket No. CV 88 248237 (May 31, 1991, Ballen, J.) (6 C.S.C.R. 642), the first-party plaintiff's complaint against the defendant/third-party plaintiff involved the intentional tort of assault. The court stated, "[w]hile the Kaplan [ v. Merberg Wrecking Corp., 152 Conn. 405, 207 A.2d 732 (1965)] test applies to active-passive negligence situations, it does not apply to intentional torts." Fortin v. Bok, supra, 6 C.S.C.R. 642.
The Kaplan test "imposes an implied obligation of indemnity on a tortfeasor whose active negligence is primarily responsible for a plaintiff's injuries, thus superseding the indemnitee's passive negligence . . . To assert a claim for indemnification under Kaplan, an out-of-pocket defendant must show that: (1) the party against whom the indemnification is sought was negligent; (2) that party's active negligence, rather than the defendant's own passive negligence, was the direct, immediate cause of the accident and the resulting injuries and death; (3) the other party was in control of the situation to the exclusion of the defendant seeking reimbursement; and (4) the defendant did not know of the other party's negligence, had no reason to anticipate it, and reasonably could rely on the other party not to be negligent." (Citation omitted; emphasis in original.) Smith v. New Haven, 258 Conn. 56, 66, 779 A.2d 104 (2001).
In Regan v. Computers Plus Center, Inc., Superior Court, complex litigation docket at Hartford, Docket No. X09 CV 03 0823990 (May 15, 2008, Shortall, J.) [45 Conn. L. Rptr. 461], the first-party plaintiff alleged that defendants/third-party plaintiffs acted intentionally through fraud and unfair trade practices. The third-party plaintiff alleged that the third-party defendants made intentional misrepresentations. The court held that "[a]s the Supreme Court's statement of the [ Kaplan] rule indicates, the doctrine of indemnification applies to joint tortfeasors who are negligent . . . The language of the second element [of Kaplan] which a third party plaintiff must prove makes it clear that it is its negligence which is measured against the negligence of the third-party defendant in determining if indemnification is available . . .
And, while the court has been cited to and has found no Connecticut authority at the appellate level, every trial court decision has denied indemnification to parties . . . charged with intentional tortious conduct. See, e.g., Fortin v. Bok, [ supra, 6 C.S.C.R. 642]; Feen v. Benefit Plan Administrator, Superior Court, judicial district of New Haven, Docket No. CV 97 0406726, [(Jan. 13, 1999, Devlin, J.).] Cf. Wright v. Willington, Superior Court, [complex litigation docket at Hartford, Docket No. X09 CV 06 5008202 (Dec. 13, 2007, Shortall, J.) (44 Conn. L. Rptr. 724)] (contract to indemnify a party for its intentional or wilful acts unenforceable as against public policy)." (Citation omitted.) Regan v. Computers Plus Center, Inc., supra, Superior Court, Docket No. X09 CV 03 0823990.
The motion to strike is granted because Starview's only underlying claims against Wachovia arise out of the intentional tort of conversion. A defendant/third-party plaintiff, who is alleged by the first-party plaintiff to have committed an intentional tort against the first-party plaintiff, cannot then receive indemnification from a third-party defendant, for damages that might be awarded arising out of the alleged intentional tort.
United's motion to strike Wachovia's cross claim in count two is granted because Connecticut does not recognize common-law indemnification claims when the underlying claim is an intentional tort.