Opinion
No. CV10 601 10 34
January 19, 2011
MEMORANDUM OF DECISION ON PLAINTIFF'S MOTION TO STRIKE DEFENDANT'S SPECIAL DEFENSES AND SET-OFF
FACTUAL BACKGROUND
The plaintiff, TD Bank, N.A., commenced this foreclosure action by service of process against the defendants, SM Phoenix Merritt 8, LLC and Merritt-Stratford, LLC, on June 28, 2010. The plaintiff's complaint alleges the following facts. On May 4, 2007, the defendant mortgaged property located at 99 Hawley Lane in Stratford (property) and assigned its leases, property income and rentals as collateral to the plaintiff in order to secure notes executed on that date in the respective amounts of $17,933.580.16 (note 1) and $4,400,000.00 (note 2), both of which are payable to the order of the plaintiff with interest. The defendant defaulted under the obligations of the mortgage and notes, and the plaintiff, as holder in due course of the mortgage and notes, exercised its option to declare the entire balance due on both notes. The city of Stratford, Aquarion Water Company and Merritt Eight Corporate Park Association, Inc. have interests in the property that are prior in right to the plaintiff's interest. Merritt-Stratford, LLC has an interest in the property that is subsequent in right to the plaintiff's interest. Attached to the complaint as exhibits are copies of the mortgage and notes.
Because SM Phoenix Merritt 8, LLC is the only defendant involved in the present motion, the court hereafter will refer to it as the defendant.
The defendant filed its answer, special defenses and setoff claim on August 20, 2010. The defendant alleges the following facts in support of all of its special defenses. On June 26, 2003, the plaintiff loaned $21,000,000.00 to Merritt 8 Acquisitions, LLC. The defendant assumed the loan after the plaintiff promised to make occasional future advances through note 2 not exceeding $4,400,000.00 in total for the purpose of making leasehold improvements. The plaintiff also tried to induce the defendant to assume the loan by discussing the possibility of extending the time during which the defendant could borrow money under note 2. The defendant told the plaintiff that it was relying on the proceeds from note 2 in order to assume the loan, purchase the property and invest the additional capital necessary to make improvements to the property that would attract tenants. The defendant would not have assumed the loan without access to the proceeds from note 2. The defendant thus relied upon the plaintiff's representations when it signed the mortgage and notes on May 4, 2007. Despite its knowledge of the defendant's reliance, the plaintiff refused to make future advances to the defendant in or around May 2009, in contradiction of their understanding. The plaintiff continued to represent that it would make future advances to the defendant as recently as the first and second calendar quarters of 2010, but it never followed through. As a result of the plaintiff's wrongful actions and representations, the defendant lost leasing opportunities, which in turn negatively impacted its ability to pay the plaintiff in accordance with note 1.
The defendant raises eight special defenses. The first special defense sounds in equitable estoppel. The second special defense sounds in unclean hands. The third special defense sounds in breach of the covenant of good faith and fair dealing. The fourth special defense sounds in failure to provide notice. The fifth special defense sounds in fraud. The sixth special defense sounds in innocent misrepresentation. The seventh special defense sounds in negligent misrepresentation. Finally, the eighth special defense sounds in fraudulent misrepresentation. The defendant also alleges that, to the extent that it is found to owe any amounts to the plaintiff, it is entitled to a setoff equal to amounts due to it from the plaintiff.
The plaintiff filed the present motion to strike and a memorandum of law in support thereof on August 30, 2010. The defendant in turn filed an objection to the motion and a memorandum of law in support thereof on October 13, 2010. The court heard the matter on November 24, 2010.
DISCUSSION
Practice Book § 10-39 provides in relevant part: "(a) Whenever any party wishes to contest . . . (5) the legal sufficiency of any answer to any complaint . . . or any part of that answer including any special defense contained therein, that party may do so by filing a motion to strike the contested pleading or part thereof." "In . . . ruling on the . . . motion to strike, the trial court recognize[s] its obligation to take the facts to be those alleged in the special defenses and to construe the defenses in the manner most favorable to sustaining their legal sufficiency." Connecticut National Bank v. Douglas, 221 Conn. 530, 536, 606 A.2d 684 (1992). Indeed, in determining the sufficiency of a pleading challenged by a motion to strike, the pleading "must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 253, 990 A.2d 206 (2010). "[T]he total absence of any factual allegations" specific to the dispute "renders [the special defense] legally insufficient." U.S. Bank National Ass'n. v. Ascenzia, Superior Court, judicial district of New Haven, Docket No. CV 08 5022527 (July 30, 2009, Abrams, J.) ( 48 Conn. L. Rptr. 345, 346).
The court will first address how the plaintiff moves to strike all eight special defenses on the ground that they fail to address the making, validity or enforcement of the mortgage or notes. The plaintiff specifically argues that neither its refusals in May 2009 nor its representations at the beginning of 2010 constitute conduct related to the making, validity or enforcement of the mortgage or notes, because note 2 only allowed the defendant to receive proceeds under it from May 4, 2007 (the date of the note) to April 30, 2009 (the day immediately prior to the note's latest regular conversion date of May 1, 2009). The plaintiff further argues: "[T]he defendant makes no allegation that it actually requested any monies pursuant to [n]ote 2 or that the plaintiff violated terms for any such advances or that the defendant was denied advances during the effective term of [n]ote 2." The defendant objects to the motion by arguing that it has addressed the making, validity or enforcement of the mortgage or notes because the plaintiff's decision to renege on its representations relates to the enforcement of the mortgage and notes. The defendant also objects to the motion by arguing in the alternative that the plaintiff's false and wrongful representations predate the mortgage and notes and therefore relate to their making, validity and enforcement.
"[A] foreclosure action constitutes an equitable proceeding . . . In an equitable proceeding, the trial court may examine all relevant factors to ensure that complete justice is done . . . The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court . . . Historically, defenses to a foreclosure action have been limited to payment, discharge, release or satisfaction . . . or, if there had never been a valid lien . . . The purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action . . . A valid special defense at law to a foreclosure proceeding must be legally sufficient and address the making, validity or enforcement of the mortgage, the note or both . . . Where the plaintiff's conduct is inequitable, a court may withhold foreclosure on equitable considerations and principles . . . Furthermore, if the mortgagor is prevented by accident, mistake or fraud from fulfilling a condition of the mortgage, foreclosure cannot be had." (Citations omitted; internal quotation marks omitted.) LaSalle National Bank v. Shook, 67 Conn.App. 93, 96-97, 787 A.2d 32 (2001).
The plaintiff's argument ignores the defendant's allegations that it relied on the plaintiff's misrepresentations of continued access to funds under note 2 when it signed the mortgage and notes on May 4, 2007. These allegations, when taken as admitted and viewed in the light most favorable to the defendant, can be read to relate to the making of the mortgage and notes. The plaintiff's argument also ignores the defendant's allegation that the plaintiff refused to make future advances "in or around May 2009." The allegation can be read to refer to a time before the end of the drawdown period, in which case the plaintiff's conduct could be read to relate to the enforcement of note 2 and the mortgage deed, which expressly provides for future advances. The court thus rejects the plaintiff's motion to strike the defendant's eight special defenses on the ground that they do not relate to the making, validity or enforcement of the mortgage or notes. The court will now address how the plaintiff moves to strike the special defenses and setoff claim on the alternate ground that the defendant has not alleged legally sufficient facts for each of them.
A
First Special Defense: Equitable Estoppel
The defendant alleges in its first special defense that the plaintiff is equitably estopped from bringing the present action because of its conduct. The plaintiff moves to strike the first special defense on two grounds. First, the defendant has not alleged that the plaintiff's conduct was calculated or intended to induce the defendant into taking action. Second, promises, such as the alleged representations, cannot serve as the basis for an equitable estoppel special defense. The defendant objects to the motion by arguing that it has alleged facts sufficient to state its equitable estoppel special defense.
"Equitable estoppel is the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed . . . as against another person, who has in good faith relied upon such conduct, and has been led thereby to change his position for the worse . . . Its two essential elements are that one party must do or say something which is intended or calculated to induce another to believe in the existence of certain facts and to act on that belief, and that the other party, influenced thereby, must change his position or do some act to his injury which he otherwise would not have done." (Citations omitted; internal quotation marks omitted.) Bozzi v. Bozzi, 177 Conn. 232, 241-42, 413 A.2d 834 (1979).
In support of the present motion, the plaintiff cites to Banknorth, N.A. v. Blackrock Realty, LLC, Superior Court, judicial district of Fairfield, Docket No. CV 09 6002566 (April 14, 2010, Hartmere, J.), in which this court granted the plaintiff mortgagee's motion to strike the defendant mortgagor's equitable estoppel special defense. The alleged conduct at issue was the plaintiff's failure to keep its promise that it would "provide notice of nonpayment and an opportunity to cure before accelerating the note and declaring a default." Id. This court held that the alleged conduct was an insufficient basis for the defendant's equitable estoppel special defense because the defendant did not allege that the promise was a "false or material misstatement of fact at the time the loan was made." Id.
In contrast, the defendant in the present action has alleged that the plaintiff's representations of its willingness to extend the term of and make future advances under note 2 were calculated or intended to induce the defendant to sign the mortgage and notes. Trial courts have sustained equitable estoppel special defenses in foreclosure actions based upon promises that could be construed to have been calculated or intended to induce the defendant to take action. See, e.g., 365 Cherry, LLC v. 12 Willard, LLC, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 09 6001885 (July 20, 2010, Adams, J.) (denial of summary judgment where defendant raised equitable estoppel special defense based on promises of increased funding and note modification); Fleet Bank, N.A. v. Polites, Superior Court, judicial district of Hartford, Docket No. CV 90 0387118 (April 1, 1992, Aronson, J.) ( 6 Conn. L. Rptr. 228) (denial of motion to strike equitable estoppel special defense based upon promises to modify or restructure note if payment problems arose).
Paragraph two of the first special defense provides: "In order to induce the defendant to assume the [o]riginal [l]oan, the plaintiff promised to make advances to the defendant, from time to time, in an amount not to exceed $4,400,000 for the specific purpose of making leasehold improvements through a [m]ortgage [n]ote ("[n]ote 2" or the "[i]nducement"). By way of further inducement, as early as May 2007, the plaintiff began discussing with the defendant the extension of the date on which the right of the defendant to borrow monies under [n]ote 2 would expire." Paragraph three provides: "Prior to entering the transaction, the defendant advised the plaintiff that it was relying on the proceeds from [n]ote 2 in order to assume the [o]riginal [l]oan, to agree to purchase the property and in order to invest the additional capital necessary to complete a substantial renovation of the lobby and other common areas in an effort to secure tenants at the property." These allegations, when taken as admitted and viewed in the light most favorable to the defendant, can be read to state that the plaintiff's representations were calculated or intended to induce the defendant to believe that the plaintiff would make future advances under note 2 and act upon that belief by assuming the loan and signing the mortgage and notes, which it would not have done otherwise. The plaintiff does not challenge the defendant's allegation that it changed its position to its injury in reliance upon the plaintiff's conduct. The defendant has therefore alleged facts sufficient to state its equitable estoppel special defense, and the court denies the plaintiff's motion to strike it.
B
Second Special Defense: Unclean Hands
The defendant alleges in its second special defense that the plaintiff has brought the present action with unclean hands due to its misrepresentations of its willingness to extend the term of and make future advances under note 2. The plaintiff moves to strike the second special defense on the ground that the defendant has not alleged wilful misconduct, which is a required element of an unclean hands special defense. The defendant objects to the motion by arguing that it has alleged such conduct.
"The doctrine of unclean hands expresses the principle that where a plaintiff seeks equitable relief, he must show that his conduct has been fair, equitable and honest as to the particular controversy in issue . . . Unless the plaintiff's conduct is of such a character as to be condemned and pronounced wrongful by honest and fair-minded people, the doctrine of unclean hands does not apply." (Internal quotation marks omitted.) Thompson v. Orcutt, 257 Conn. 301, 310, 777 A.2d 670 (2001). "The party seeking to invoke the clean hands doctrine to bar equitable relief must show that his opponent engaged in wilful misconduct with regard to the matter in litigation." (Internal quotation marks omitted.) Ridgefield v. Eppoliti Realty Co., Inc., 71 Conn.App. 321, 335, 801 A.2d 902, cert. denied, 261 Conn. 933, 806 A.2d 1070 (2002). "Wilful misconduct requires intentional conduct with the design to injure either actually entertained or to be implied from the conduct and circumstances . . . Not only the action producing the injury but the resulting injury almost must be intentional." (Internal quotation marks omitted.) TD Banknorth, N.A. v. Genesis Properties, LLC, Superior Court, judicial district of Danbury, Docket No. 08 5004597 (January 15, 2009, Sommer, J.); see also Banknorth, N.A. v. Blackrock Realty, LLC, supra, Superior Court, Docket No. CV 09 6002566.
The defendant in the present action has not directly or inferentially alleged that the plaintiff made its misrepresentations and refusals with the intent to injure the defendant. The second special defense is therefore legally insufficient, and the court grants the plaintiff's motion to strike it.
C
Third Special Defense: Breach of the Covenant of Good Faith and Fair Dealing
The defendant alleges in its third special defense that the plaintiff's misrepresentations of its willingness to extend the term of and make future advances under note 2 constitute a breach of the covenant of good faith and fair dealing that excuses the defendant's performance under the notes, which is the basis for the present action. The plaintiff moves to strike the third special defense on the ground that a breach of the covenant of good faith and fair dealing is not a valid special defense in a foreclosure action. The defendant objects to the motion by arguing that the plaintiff is incorrect and that it has alleged facts sufficient to state its breach of the covenant of good faith and fair dealing special defense.
"Every contract carries an implied covenant of good faith and fair dealing requiring that neither party will do anything that will injure the right of the other to receive the benefits of the agreement." Habetz v. Condon, 224 Conn. 231, 238, 618 A.2d 501 (1992). "[S]pecial defenses . . . alleging a breach of an implied covenant of good faith and fair dealing . . . are not equitable defenses to a mortgage foreclosure." (Internal quotation marks omitted.) Fidelity Bank v. Krenisky, 72 Conn.App. 700, 716, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002). The court rejects the defendant's argument that the Fidelity Bank court's conclusion is limited to situations where mortgagees have acted in accordance with rights set forth in loan documents, because the defendant's argument ignores the manner in which the Fidelity Bank court incorporated the facts of the case: " Even if a breach of the implied covenant of good faith and fair dealing were an equitable defense to a mortgage foreclosure, the clear language of the mortgage and the note fails to support the defendant's claim that the plaintiff breached such an implied covenant . . . because the plaintiff has acted in accordance with its rights as set forth in those documents." (Citation omitted; emphasis added; internal quotation marks omitted.) CT Page 3383 Id., 716-17.
Although "[s]ome recent decisions of the Superior Court . . . have . . . concluded that the special defense of a breach of the implied covenant of good faith and fair dealing is not automatically barred in a foreclosure action . . . absent further appellate review . . . the rule appears to remain that . . . a breach of the implied covenant of good faith and fair dealing . . . [is] not an equitable [defense] to mortgage foreclosure." (Citations omitted; internal quotation marks omitted.) TD Bank, N.A. v. JM Holdings, LLC, Superior Court, judicial district of Windham, Docket No. CV 10 6001479 (November 29, 2010, Potter, J.T.R.) (citing cases). The defendant's third special defense is therefore legally insufficient as a matter of law, and the court grants the plaintiff's motion to strike it.
D
Fourth Special Defense: Failure to Provide Notice
The defendant alleges in its fourth special defense that the plaintiff failed to provide notice to the defendant in accordance with the terms of the loan documents. The plaintiff moves to strike the fourth special defense on the ground that the defendant waived its right to receive notice by signing the loan documents, which state: "Further, to the extent allowed under applicable law, maker and each endorser and guarantor hereof hereby waive demand, presentment for payment, protest, notice of protest, notice of dishonor, diligence in collection, notice of nonpayment of this note and any and all notices of a like nature." The defendant objects to the motion by arguing that the plaintiff was obligated to provide proper notice once it decided to provide notice, regardless of the waiver provisions in the loan documents. In support of its argument, the defendant cites to North American Mortgage Co. v. Sierpina, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 01 0182757 (September 26, 2007, Tierney, J.).
North American Mortgage Co., however, is inapposite to the present action. The court in North American Mortgage Co. denied the plaintiff mortgagee's motion for summary judgment for the reason that genuine issues of material fact existed with respect to the defendants' special defense that the plaintiff had not provided them with proper notices of foreclosure. To this end, the court noted, inter alia: "Paragraph 19 of the mortgage deed states: `Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument . . . The notice shall specify . . .' — Paragraph 29 of the mortgage deed states: `Lender is not required to give me any notice before taking any action to protect the Property or Lender's rights in the Property as to make an inspection of the Property.' On the face of this language, the issue of notice is a question of fact. Testimony and further documentation is needed to determine these factual issues." Id.
In the present action, there is no provision in the loan documents that is contrary to the waiver provision relied upon by the plaintiff. Paragraph ten of note 1 and paragraph sixteen of note 2 provide: "In the event that any payment hereunder is not made within ten (10) days of its due date, or upon an Event of Default as defined in the Loan Agreement or the Other Agreements, (all the foregoing being referred to herein as an `Event of Default'), and in addition to any other rights and remedies provided for in the Loan Agreement and the Other Agreements, Holder may, at its option, accelerate Maker's obligations hereunder and declare the entire unpaid Principal Amount, together with accrued interest and all other amounts then due which are evidenced by this Note, to be immediately due and payable, without the necessity for demand or additional notice." Paragraph 3.01 of the mortgage deed similarly provides: "After the occurrence of any Event of Default, Mortgagee, at its option and without demand or notice, may declare the outstanding Indebtedness (or, at Mortgagee's option, any part thereof) to be due and payable immediately. Upon such declaration, the Indebtedness (or such part thereof) shall immediately become and be due and payable without demand."
"Notices of default and acceleration are controlled by the mortgage documents. Construction of a mortgage deed is governed by the same rules of interpretation that apply to written instruments or contracts generally, and to deeds particularly. The primary rule of construction is to ascertain the intention of the parties. This is done not only from the face of the instrument, but also from the situation of the parties and the nature and object of their transactions . . . A promissory note and a mortgage deed are deemed parts of one transaction and must be construed together as such." (Citation omitted; internal quotation marks omitted.) Citicorp Mortgage, Inc. v. Porto, 41 Conn.App. 598, 602, 677 A.2d 10 (1996).
Both the mortgage and notes in the present action clearly provide that the plaintiff may declare the amounts due under the notes due and payable without demand or notice to the defendant. Furthermore, "according to the terms of the loan, the [defendant] waived [its] right to notice of default. If a party had any objections to the provisions of a contract he signed, he should have refused to make it. Having executed it, his mouth is closed against any denial." (Internal quotation marks omitted.) Bank of New Haven v. Liner, Superior Court, judicial district of Ansonia-Milford, Docket No. 91 0345 16 (April 1, 1993, Curran, J.). The defendant thus has failed to allege facts sufficient to state the special defense of failure to provide proper notice, and the court grants the plaintiff's motion to strike it.
E
Fifth Special Defense: Fraud
Eighth Special Defense: Fraudulent Misrepresentation
The court will address the defendant's fifth special defense of fraud and eighth special defense of fraudulent misrepresentation together. The two special defenses have similar criteria, the plaintiff moves to strike both of them on the same ground and the defendant addresses them together in objecting to the present motion.
The defendant alleges in its fifth and eighth special defenses that the plaintiff's misrepresentations of its willingness to extend the term of and make future advances under note 2 constitute fraud and fraudulent misrepresentation, respectively. The plaintiff moves to strike the fifth and eighth special defenses on the ground that the defendant has not alleged that the plaintiff made false representations or that the plaintiff intended to make false representations, because the alleged representations were only promises, not statements of fact. The defendant objects to the motion by arguing that unfulfilled promises can be characterized as actionable misrepresentations when the wrongful intent of the promisor can be reasonably inferred from them.
"Fraud is an equitable defense to a foreclosure action . . . Fraud involves deception practiced in order to induce another to act to her detriment, and which causes that detrimental action . . . The four essential elements of fraud are (1) that a false representation of fact was made; (2) that the party making the representation knew it to be false; (3) that the representation was made to induce action by the other party; and (4) that the other party did so act to her detriment." (Citation omitted; internal quotation marks omitted.) Chase Manhattan Mortgage Corp. v. Machado, 83 Conn.App. 183, 188, 850 A.2d 260 (2004). A claimant must meet the same criteria in order to make a fraudulent misrepresentation claim. See Sturm v. Harb Development, LLC, 298 Conn. 124, 142, 2 A.3d 859 (2010). "[A] fraudulent representation . . . is one that is knowingly untrue, or made without belief in its truth, or recklessly made and for the purpose of inducing action upon it . . . This is so because fraudulent misrepresentation is an intentional tort." (Citation omitted; internal quotation marks omitted.) Id.
"Although the general rule is that a misrepresentation must relate to an existing or past fact, there are exceptions to this rule, one of which is that a promise to do an act in the future, when coupled with a present intent not to fulfill the promise, is a false representation." Paiva v. Vanech Heights Construction Co., 159 Conn. 512, 515, 271 A.2d 69 (1970). When taken as admitted and viewed in the light most favorable to the defendant, the plaintiff's alleged representations in May 2007, combined with the plaintiff's alleged refusals in or around May 2009, sufficiently state that the plaintiff did not intend to extend the term of or make future advances under note 2 when it promised that it would do so at the time that the defendant signed the mortgage and notes. The plaintiff does not challenge the defendant's allegations that the plaintiff's representations were made for the purpose of inducing action by the defendant and that the defendant relied upon the plaintiff's representations to its detriment. The defendant therefore alleges facts sufficient to state its fraud and fraudulent misrepresentation special defenses, and the court denies the plaintiff's motion to strike them.
F
Sixth Special Defense: Innocent Misrepresentation
Seventh Special Defense: Negligent Mispresentation
The court will address the defendant's sixth special defense of innocent misrepresentation and seventh special defense of negligent misrepresentation together. The two special defenses have similar criteria, the plaintiff moves to strike both of them on the same ground and the defendant addresses them together in objecting to the motion.
The defendant alleges in its sixth and seventh special defenses that the plaintiff's misrepresentations of its willingness to extend the term of and make future advances under note 2 constitute innocent misrepresentation and negligent misrepresentation, respectively. The plaintiff moves to strike the sixth and seventh special defenses on the ground that the defendant has not alleged that the plaintiff made representations for the purpose of inducing the defendant to act or that the plaintiff intended to make such representations. The defendant objects to the motion by arguing that unfulfilled promises can be characterized as actionable misrepresentations when the wrongful intent of the promisor can be reasonably inferred from them.
"[T]o establish the claim of negligent misrepresentation as a defense in [a] foreclosure action, the [defendant has] to establish (1) that the [plaintiff] made a misrepresentation of fact (2) that the [plaintiff] knew or should have known was false, and that (3) the [defendant] reasonably relied on the misrepresentation, and (4) suffered pecuniary harm as a result." Johnnycake Mountain Associates v. Ochs, 104 Conn.App. 194, 200, 932 A.2d 472 (2007), cert. denied, 286 Conn. 906, 944 A.2d 978 (2008). "This court has long recognized liability for negligent misrepresentation. We have held that even an innocent misrepresentation of fact may be actionable if the declarant has the means of knowing, ought to know, or has the duty of knowing the truth." (Internal quotation marks omitted.) Barton v. Bristol, 291 Conn. 84, 102, 967 A.2d 482 (2009). "The elements of misrepresentation are (1) a representation of material fact (2) made for the purpose of inducing [action], (3) the representation is untrue, and (4) there is justifiable reliance by the plaintiff on the representation by the defendant and (5) damages." Frimberger v. Anzellotti, 25 Conn.App. 401, 410, 594 A.2d 1029 (1991).
In its memorandum, the plaintiff repeats the argument that it made with respect to the defendant's fifth and eighth special defenses and moves to strike the sixth and seventh special defenses on the ground that the alleged misrepresentations are not actionable because they were only promises, not statements of fact. This is not the ground proffered by the plaintiff on the face of the present motion, however, and the court will not consider it in deciding whether to strike the defendant's sixth and seventh special defenses, because "grounds other than those specified should not be considered by the trial court in passing upon a motion to strike." (Internal quotation marks omitted.) Gazo v. Stamford, 255 Conn. 245, 259, 765 A.2d 505 (2001).
In paragraph two of the sixth and seventh special defenses, the defendant alleges: "In order to induce the defendant to assume the [o]riginal [l]oan, the plaintiff promised to make advances to the defendant, from time to time, in an amount not to exceed $4,400,000 for the specific purpose of making leasehold improvements through a [m]ortgage [n]ote ("[n]ote 2" or the "[i]nducement"). By way of further inducement, as early as May 2007, the plaintiff began discussing with the defendant the extension of the date on which the right of the defendant to borrow monies under [n]ote 2 would expire." These allegations, when taken as admitted and viewed in the light most favorable to the defendant, sufficiently state that the plaintiff made representations for the purpose of inducing the defendant to act. The plaintiff does not challenge whether the defendant has met the other criteria for innocent misrepresentation and negligent misrepresentation on the face of the present motion. The defendant has therefore alleged facts sufficient to state its innocent misrepresentation and negligent misrepresentation special defenses, and the court denies the plaintiff's motion to strike them.
G
Setoff Claim
The defendant alleges in its setoff claim: "Although defendant denies that it is in any way liable to plaintiff, the amounts due to defendant from plaintiff should be set off from any amounts found to be due from defendant to plaintiff." The plaintiff moves to strike the setoff claim on the ground that the defendant has not alleged a debt due to the defendant from the plaintiff. The defendant objects to the motion by arguing that its allegation is legally sufficient to withstand the present motion.
"Setoff is the right to cancel or offset mutual debts or cross demands . . . The concept of setoff allows [parties] that owe each other money to apply their mutual debts against each other, thus avoiding the absurdity of making A pay B when B in fact owes A." (Internal quotation marks omitted.) Mariculture Products Ltd. v. Certain Underwriters at Lloyd's of London, 84 Conn.App. 688, 703, 854 A.2d 1100, cert. denied, 272 Conn. 905, 863 A.2d 698 (2004). "A debt is defined as an `unconditional and legally enforceable obligation for the payment of money.' Ballantine's Law Dictionary (3d Ed.)." Id. "`Mutual debts . . . are cross debts in the same capacity and right and of the same kind and quality.'" (Internal quotation marks omitted.) Id., 704. "[T]hey must exist between the parties in their own right, and be of the same kind and quality, clearly ascertained and liquidated." General Consolidated, Ltd. v. Rudnick Sons, Inc., 4 Conn. Cir.Ct. 581, 586, 237 A.2d 386 (1967). "The right of setoff, whether legal or equitable, has always been confined to rights of action arising from contract." Downing v. Wilcox, 84 Conn. 437, 441, 80 A. 288 (1911).
The defendant in the present action does not directly or inferentially allege that the amount to be set off is a clearly ascertained and liquidated mutual debt in relation to the amount sought by the plaintiff in the present action or that the amount to be set off is based upon a right of action arising from a contract. The setoff claim is therefore legally insufficient, and the court grants the plaintiff's motion to strike it.
CONCLUSION
For the foregoing reasons, the court will grant the plaintiff's motion to strike with respect to the second, third and fourth special defenses and the setoff claim and deny the motion with respect to the first, fifth, sixth, seventh and eighth special defenses.