Opinion
No. HHD CV X04 07 5026084 S
March 1, 2010
MEMORANDUM OF DECISION ON MOTIONS TO STRIKE COUNTERCLAIMS
I
The court heard argument on January 7, 2010 concerning the plaintiff Shaw's New London, LLC's (SNL) motions to strike the defendants' counterclaims (##270, 274). After considering the parties' arguments, the court issues this memorandum of decision. For the reasons set forth below, the motions are granted.
The defendants/counterclaimants are Signature Properties, LLC, Stephanie Lord Drake, Andrew J. Julian, Maureen Julian, and Michael Murray.
I BACKGROUND
This matter, which was filed in court in August 2007, concerns a note, a mortgage of commercial property located in New London, Connecticut, a guaranty, and related instruments. On April 13, 2005, defendant Signature Properties, LLC (Signature) agreed, pursuant to a Fixed Rate Note, to pay to JPMorgan Chase Bank, N.A. (JP Morgan) the principal sum of $8,800,000.00, with interest (Note). To secure the Note, Signature executed a Mortgage And Security Agreement (Mortgage), with respect to commercial property known as 6 Shaw's Cove, New London, Connecticut, a three-story office building. Copies of the Note and Mortgage are annexed to and incorporated by reference in the defendants' counterclaims. See Exhibit A to revised counterclaim of defendant/plaintiff Maureen Julian (#244). On July 29, 2005, the Note, Mortgage, and Guaranty were assigned by JPMorgan to LaSalle National Bank Association, as Trustee, which, in October 2007, assigned them to SNL.
In its previous memorandum of decision, dated February 3, 2010 (#349), the court granted SNL's motion for partial summary judgment as to liability, concerning counts one through four of its first amended complaint, dated March 4, 2008 (#116). In summary, the court found that Signature defaulted in its payment obligations; that Signature breached Sections 4.3 and 8.2 of the Mortgage; that the nonrecourse provisions of Section 10(a) of the Note are null and void, the Note is a full recourse obligation of Signature, SNL is not limited to the security interests granted by Signature, Signature is fully liable for any deficiency judgment which SNL may obtain; and that the Guarantor defendants (Maureen Julian, Andrew J. Julian, Michael Murray, and Stephanie Lord Drake) are jointly and severally liable for Signature's full recourse obligation under the Note and Mortgage, including any deficiency judgment. A copy of SNL's amended complaint is annexed to the defendants' counterclaims as Exhibit B.
The defendants' original counterclaims were filed in March and April 2009. In their revised counterclaims, which are discussed in more detail below, they allege that part of the office building was leased to Electric Boat Corporation (Electric Boat), pursuant to which Electric Boat could terminate its lease, and that Electric Boat did so, effective on December 31, 2006. They also allege that, in April 2005, Signature entered into a Parking License Agreement, which granted Signature a license for parking rights on a parcel of land adjacent to 6 Shaw's Cove, which was to end on December 31, 2008, unless otherwise terminated by operation of its terms. The court discussed this agreement in its February 3, 2010 decision.
The defendants allege that, after the termination of Electric Boat's lease, the loan went into default, and this action was begun. In their counterclaims, the defendants allege that SNL and/or its predecessors were negligent in making the loan and in investigating environmental conditions at 6 Shaw's Cove; breached the Mortgage's covenant of good faith and fair dealing, by failing to take possession of the collateral and allowing interest to accrue, asserting claims seeking recourse against them, and asserting claims of breach of an Environmental Indemnity Agreement; and that such conduct violated the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq. (CUTPA).
Additional references to the allegations in the defendants' counterclaims are set forth below.
II STANDARD OF REVIEW
The standard of review on a motion to strike is well established. "[A] motion to strike challenges the legal sufficiency of a pleading . . . We take the facts to be those alleged in the complaint . . . and we construe the complaint in the manner most favorable to sustaining its legal sufficiency . . . Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied . . . [W]hat is necessarily implied [in an allegation] need not be expressly alleged . . . It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted . . . Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Violano v. Fernandez, 280 Conn. 310, 317-18, 907 A.2d 1188 (2006).
"For the purpose of ruling upon a motion to strike, the facts alleged in a complaint, though not the legal conclusions it may contain, are deemed to be admitted." (Internal quotation marks omitted.) Murillo v. Seymour Ambulance Association, Inc., 264 Conn. 474, 476, 823 A.2d 1202 (2003).
A motion to strike may be utilized to "trigger the trial court's determination of a dispositive question of law." Vertex v. Waterbury, 278 Conn. 557, 564, 898 A.2d 178 (2006). Whether the plaintiff properly has alleged the elements of a claim is a question of law that should be resolved by a motion to strike. See Marr v. WMX Technologies, Inc., 244 Conn. 676, 681, 711 A.2d 700 (1998).
III Discussion A Negligence 1. First Count
Based on the statute of limitations, SNL seeks to strike the first and fourth counts of the counterclaims, each of which is premised on negligence. In their first count, the defendants allege that SNL and its predecessors were negligent in lending $8.8 million in April 2005, in various ways, all related to Electric Boat's tenancy and its right to terminate its lease at 6 Shaw's Cove. As a result, the defendants claim to have suffered damages, including that SNL is seeking damages against Signature and against the Guarantor defendants personally, placing their income and assets at risk; affecting their credit and loan worthiness; obligating them to defend against SNL's claims, when they relied on the fact that SNL's predecessor had made a non-recourse loan to Signature; and, as to Signature, hindering its ability to attract tenants and harming its reputation.
"The purpose of [a] statute of limitation or of repose is . . . to (1) prevent the unexpected enforcement of stale and fraudulent claims by allowing persons after the lapse of a reasonable time, to plan their affairs with a reasonable degree of certainty, free from the disruptive burden of protracted and unknown potential liability, and (2) to aid in the search for truth that may be impaired by the loss of evidence, whether by death or disappearance of witnesses, fading memories, disappearance of documents or otherwise." (Internal quotation marks omitted.) Neuhaus v. DeCholnoky, 280 Conn. 190, 206-07, 905 A.2d 1135 (2006).
"The question of whether a party's claim is barred by the statute of limitations is a question of law . . ." (Internal quotation marks omitted.) Certain Underwriters At Lloyd's, London v. Cooperman, 289 Conn. 383, 407, 957 A.2d 836 (2008). "[O]rdinarily, [a] claim that an action is barred by the lapse of the statute of limitations must be pleaded as a special defense, not raised by a motion to strike . . . This is because a motion to strike challenges only the legal sufficiency of the complaint and might . . . deprive a plaintiff of an opportunity to plead matters in avoidance of the statute of limitations defense." (Citations omitted; internal quotation marks omitted.) Greco v. United Technologies Corp., 277 Conn. 337, 344-45 n. 12, 890 A.2d 1269 (2006). Exceptions to this general rule have been recognized, including where the movant raises the statute of limitations issue and, as is the case here, no respondent has raised opposition to the court's consideration of the issue. In effect, the parties have agreed that the counterclaims "set forth all pertinent facts. Accordingly, the court should decide this motion on the grounds argued for by the parties. See Doe v. Board of Education, 76 Conn.App. 296, 299 n. 6, 819 A.2d 289 (2003) (deviation from ordinary procedure permitted where nonmovant fails to object to defendant's use of motion to strike for adjudication of otherwise improperly pleaded grounds)." Wright v. DB Co., Superior Court, judicial district of New Haven at New Haven, Docket No. CV 0486068 (May 3, 2007, Licardi, J.), n. 2. See Forbes v. Ballaro, 31 Conn.App. 235, 239-40, 624 A.2d 389 (1993) (noting two exceptions, (1) where the parties agree that the complaint sets forth all the facts pertinent to the question of whether the action is barred by the statute of limitations; and (2) where a statute gives a right of action which did not exist at common law, and fixes the time within which the right must be enforced).
SNL contends that General Statute § 52-584 is the applicable statute of limitations. In their opposing papers, the defendants refer both to § 52-584 and to the general tort statute of limitations/repose, General Statutes § 52-577, which provides, "[n]o action founded upon a tort shall be brought but within three years from the date of the act or omission complained of." As explained below, since both statutes require that an action must be commenced within three years from the date of the alleged negligent conduct, the outcome is the same regardless of which statute applies. However, § 52-577 is applicable here.
Section 52-584 provides, "No action to recover damages for injury to the person, or to real or personal property, caused by negligence, or by reckless or wanton misconduct, or by malpractice of a physician, surgeon, dentist, podiatrist, chiropractor, hospital or sanatorium, shall be brought but within two years from the date when the injury is first sustained or discovered or in the exercise of reasonable care should have been discovered, and except that no such action may be brought more than three years from the date of the act or omission complained of except that a counterclaim may be interposed in any such action any time before the pleadings in such action are finally closed."
The defendants also refer to General Statutes § 52-576, which concerns actions for account or on simple or implied contracts. This statute is not applicable to the first and fourth counts of their counterclaims, both of which sound in negligence.
In contrast to § 52-577, § 52-584 specifically applies only to actions to "recover damages for injury to the person, or to real or personal property . . ." See Lombard v. Edward J. Peters, Jr., P.C., 79 Conn.App. 290, 297, 830 A.2d 346 (2003). "[W]here the plaintiffs' claim is predicated on injury to . . . personal property caused by negligence, it is clear that [he/she has] brought a claim within the purview of § 52-584." Id., 299.
Here, in their counterclaims, the defendants seek to recover, not for injury to the person or to real or personal property, but for economic loss arising from a commercial transaction. "[T]he three-year limitation of 52-577 is applicable to all actions founded upon a tort which do not fall within those causes of action carved out of 52-577 and enumerated in 52-584 or another section." (Internal quotation marks omitted.) Travelers Indemnity Co. v. Rubin, 209 Conn. 437, 441, 551 A.2d 1220 (1988).
The counterclaim exception in § 52-584, quoted above, is not applicable since it only applies where the plaintiff's cause of action sounds in tort and is governed by § 52-584. See Mulcahy v. Mossa, 89 Conn.App. 115, 125-26, 872 A.2d 453, cert. denied, 274 Conn. 917, 872 A.2d 453 (2005). Here, based on a commercial loan transaction, SNL seeks foreclosure, a deficiency judgment, and to recover based on contracts of guaranty.
"Section 52-577 is a statute of repose in that it sets a fixed limit after which the tortfeasor will not be held liable and in some cases will serve to bar an action before it accrues." (Internal quotation marks omitted.) Rosenfield v. Rogin, Nassau, Caplan, Lassman, Hirtle, LLC, 69 Conn.App. 151, 159, 795 A.2d 572 (2002). See Barrett v. Montesano, 269 Conn. 787, 794, 849 A.2d 839 (2004) ("court often has used the term `statute of limitations' to refer to other statutes that technically function more like statutes of repose," citing § 52-577.).
"In construing our general tort statute of limitations [, General Statutes § 52-577,] . . . we have concluded that the history of that legislative choice of language precludes any construction thereof delaying the start of the limitation period until the cause of action has accrued or the injury has occurred . . . The date of the act or omission complained of is the date when the . . . conduct of the defendant occurs . . . [Section] 52-577 is an occurrence statute and . . . its limitation period does not begin when the plaintiff first discovers an injury[.]" (Citations omitted; internal quotation marks omitted.) Certain Underwriters at Lloyd's, London v. Cooperman, supra, 289 Conn. 408.
The language of the two statutes is similar as applied to the outside deadline for bringing an action: in § 52-577, "[n]o action founded upon a tort shall be brought but within three years from the date of the act or omission complained of;" in § 52-584, "no such action may be brought more than three years from the date of the act or omission complained of."
"Section 52-584 requires . . . actions to be brought `within two years from the date when the injury is first sustained or discovered or in the exercise of reasonable care should have been discovered . . .' The statute also establishes a repose period under which `no such action may be brought more than three years from the date of the act or omission complained of . . .' [T]he relevant `date of the act or omission complained of,' as that phrase is used in § 52-584, is `the date when the negligent conduct of the defendant occurs and . . . not the date when the plaintiff first sustains damage.'" (Internal quotation marks omitted.) Grey v. Stamford Health System, Inc., 282 Conn. 745, 750-51, 924 A.2d 831 (2007). "[A]n action commenced more than three years from the date of the negligent act or omission complained of is barred by the statute of limitations contained in § 52-584, regardless of whether the plaintiff had not, or in the exercise of [reasonable] care, could not reasonably have discovered the nature of the injuries within that time period." (Internal quotation marks omitted.) Neuhaus v. DeCholnoky, supra, 280 Conn. 201.
In the first count of their counterclaims, the defendants allege that SNL and its predecessors were negligent in making the loan to Signature on April 13, 2005. Thus, unless the statute of limitations was tolled, their claims of negligent lending were time-barred three years later in April 2008. The defendants first filed counterclaims in this action in March and April 2009, more than three years after the loan was made. The court need not consider whether their claims in their first counts were time-barred earlier.
In addition, the defendants allege that Signature's tenant, Electric Boat, terminated its lease at 6 Shaw's Cove, effective on December 31, 2006, and that, thereafter, the loan went into default. See revised counterclaim of Andrew Julian and Michael Murray, first count, ¶¶ 27, 30; revised counterclaim of Signature, ¶¶ 26, 29. They allege that SNL took no action, upon default, to take possession of the premises, as was its remedy under a non-recourse loan agreement, even after having been offered the premises by Signature, and that this action was commenced in August 2007. They also allege that the Parking License Agreement lapsed on December 31, 2008. See revised counterclaim of Andrew Julian and Michael Murray, first count, ¶¶ 31, 36; revised counterclaim of Signature, ¶¶ 30, 35.
The defendants argue that SNL's conduct was of a continuing nature, including the filing of its amended complaint seeking to recover against them on a recourse basis. They contend that the continuing course of conduct doctrine tolls the operation of the statute of limitations concerning the first count.
"In its modern formulation, we have held that in order [t]o support a finding of a continuing course of conduct that may toll the statute of limitations there must be evidence of the breach of a duty that remained in existence after commission of the original wrong related thereto. That duty must not have terminated prior to commencement of the period allowed for bringing an action for such a wrong . . . Where we have upheld a finding that a duty continued to exist after the cessation of the act or omission relied upon, there has been evidence of either a special relationship between the parties giving rise to such a continuing duty or some later wrongful conduct of a defendant related to the prior act . . . The continuing course of conduct doctrine reflects the policy that, during an ongoing relationship, lawsuits are premature because specific tortious acts or omissions may be difficult to identify and may yet be remedied." (Internal quotation marks omitted.) Bednarz v. Eye Physicians of Central Connecticut, P.C., 287 Conn. 158, 170, 947 A.2d 291 (2008). "[T]o establish a continuous course of conduct, the defendant must have: (1) committed an initial wrong upon the plaintiff; (2) owed a continuing duty to the plaintiff that was related to the alleged original wrong; and (3) continually breached that duty." Id., 170-71 n. 10. Tolling under the continuing course of conduct doctrine is "intended as an exception to the clear legislative mandate . . ." Neuhaus v. DeCholnoky, supra, 280 Conn. 207.
There is no "special relationship" between the parties here giving rise to a continuing duty. The Mortgage, which was incorporated by reference in the counterclaims, expressly disclaims that such a relationship exists. Section 6.11, page 22, states, "[t]he relationship between [Signature] and Lender is solely that of debtor and creditor, and Lender has no fiduciary or other special relationship with [Signature], and no term or condition of any of the Note, this Security Instrument and the other Loan Documents shall be construed so as to deem the relationship between [Signature] and Lender to be other than that of debtor and creditor." Similarly, Section 6.2, page 22, provides that "[t]he partners, members, principals and . . . beneficial owners of [Signature] are experienced in the ownership and operation of properties similar to the Property, and [Signature] and Lender are relying solely upon such expertise and business plan in connection with the ownership and operation of the Property. [Signature] is not relying on Lender's expertise, business acumen or advice in connection with the Property."
A commercial relationship, between contracting parties, is insufficient, for the purposes of the continuing course of conduct doctrine, to establish that a "special relationship" existed. While a "bank, as a mortgagee lender, may be the fiduciary of the mortgagor borrower when the bank becomes the borrower's financial advisor," Southbridge Associates, LLC v. Garofalo, 53 Conn.App. 11, 18, 728 A.2d 1114, cert. denied, 249 Conn. 919, 733 A.2d 229 (1999), there is no such allegation here. Rather, as discussed above, it was agreed in the Mortgage that such was not the case. "A lender has the right to further its own interest in a mortgage transaction and is not under a duty to represent the customer's interest . . . Generally there exists no fiduciary relationship merely by virtue of a borrower-lender relationship between a bank and its customer." (Citation omitted.) Id., 19. See Bellemare v. Wachovia Mortgage Corp., 94 Conn.App. 593, 608-09, 894 A.2d 335 (2006), affirmed, 284 Conn. 193, 931 A.2d 916 (2007) (no special relationship found between mortgagor and mortgagee). In Home Loan Investment Bank, F.S.B. v. Sebjan, Superior Court, judicial district of Danbury, Docket No. CV 97 0329603 (July 24, 2000, Moraghan, J.), cited by the defendants, the court did not find that a lender-borrower relationship was a "special relationship" under the continuing course of conduct doctrine. Rather, the court found that there was evidence of later wrongful conduct.
As to the second aspect of the doctrine, while the defendants plead conduct which occurred after the loan in April 2005, they have not shown that it amounted to later wrongful conduct related to the prior act. As discussed above, the prior negligence here is alleged to be the making of the loan itself. Two instances of claimed later wrongful conduct may fairly be said to be alleged in the first count.
First, the defendants allege that SNL took no action, upon default, to take possession of the premises, as was its remedy under a non-recourse loan agreement, even after having been offered the premises by Signature. The allegation that taking possession of the premises was SNL's remedy is a legal conclusion, which is not deemed to be admitted, and is unsupported by and contradicted by the terms of the Mortgage. Article 10 of the Mortgage (a copy of which was annexed to and incorporated by reference in the counterclaims), page 30, expressly provides that, upon default, the lender "may take such action . . . as it deems advisable to protect and enforce its rights against [Signature] and in and to the Property, including, but not limited to, the following actions, each of which may be pursued concurrently or otherwise, at such time and in such order as Lender may determine, in its sole discretion, without impairing or otherwise affecting the other rights and remedies of Lender . . ." Included among the several enumerated remedies are the rights to possession and to acceleration of the debt to declare the entire unpaid balance due and payable. See Mortgage, Section 10, pp. 30-36. The remedies are specified as cumulative and concurrent, and may be pursued "separately, successively, or concurrently," in the lender's sole discretion. See Mortgage, Section 10(1), p. 35. Since SNL was not limited to accepting the tender of the premises as its sole remedy, the allegations concerning the failure to take possession of the premises do not amount to later wrongful conduct which tolls the statute of limitations.
Second, the defendants argue that SNL's claims seeking recourse against them are an improper attempt to rewrite the terms of the loan. As discussed in the court's February 3, 2010 decision, the court has found that SNL is entitled to partial summary judgment against the defendants based on claims made in its amended complaint, the filing of which was, as a matter of law, not later wrongful conduct. See Zeller v. Consolini, 59 Conn.App. 545, 553, 758 A.2d 376 (2000) (act of filing a non-sham lawsuit not a CUTPA violation).
In their memoranda, the defendants also argue that SNL's failure to "discover" facts related to 6 Shaw's Cove until 2007 was, under the continuing course of conduct doctrine, later, related wrongful conduct. However, no facts concerning this contention are pleaded. The continuing course of conduct exception to the statute of limitations does not apply to the first count.
2. Fourth Count
In their fourth count, the defendants incorporate the allegations of the first count, discussed above, and add allegations concerning SNL's predecessor, J.P. Morgan's retention of EBI Consulting to undertake an environmental assessment of 6 Shaw's Cove, which was provided on February 22, 2005. See revised counterclaim of Andrew Julian and Michael Murray, ¶ 55, revised counterclaim of Signature, ¶ 53. The defendants allege that SNL and/or its predecessors were negligent in hiring EBI and in relying on the EBI assessment, which did not identify that 6 Shaw's Cove formerly had been the site of a coal gasification plant; and in failing to properly research and assess environmental issues prior to making the loan in April 2005. See revised counterclaim of Andrew Julian and Michael Murray, ¶ 66, revised counterclaim of Signature, ¶ 64. In addition, the defendants allege that, absent its reliance on the EBI assessment and failure to properly research the New London public records, SNL would not have assumed the mortgage. See revised counterclaim of Andrew Julian and Michael Murray, ¶ 67, revised counterclaim of Signature, ¶ 65.
As with their first count, the negligence alleged in the first count is premised on events which culminated in the April 2005 loan. Unless the statute of limitations was tolled, by April 2008, three years later, before the filing of the counterclaims in 2009, the claims in the fourth count were time-barred.
The defendants have not alleged facts showing that the lender, SNL or its predecessors, had a duty to inquire as to environmental conditions at the premises. In the absence of such a duty, they cannot avail themselves of the continuing course of conduct doctrine to toll the limitations period. See Bednarz v. Eye Physicians Of Central Connecticut, P.C., supra, 287 Conn. 170-71 n. 10 (defendant must have owed a continuing duty to the plaintiff that was related to the alleged original wrong).
As discussed above, in the Mortgage, Section 6.1, Signature acknowledged that there was no special relationship; and in Section 6.2, Signature and its principals acknowledged that they were not relying on the Lender's expertise, business acumen or advice in connection with the Property.
Also, the defendants have annexed to their revised counterclaims, as Exhibit D, a copy of the Environmental Indemnity Agreement, dated April 13, 2005, which was provided by Signature to JP Morgan. This agreement provides that it was Signature, not the lender, which undertook to make environmental representations and warranties. See Environmental Indemnity Agreement, Article 2. In the recitals, paragraph C, page 1, it was stated that JP Morgan was "unwilling to make the Loan unless [Signature] agree[d] to provide the indemnification, representations, warranties, and covenants and other matters described in this Agreement for the benefit of Indemnified Parties."
In Article 2, beginning on page 3, Signature made representations and warranties based on written report(s) resulting from environmental assessment of the Property (collectively referred to as the Environmental Report), and on "information that [Signature] knows or reasonably should have known . . ." In Section 2.9, page 5, Signature stated that it had "taken all reasonable steps necessary to determine, and has determined, that no Hazardous Substances are or have been generated, treated, stored, used, disposed of or released on, under, from, or about the Property, except in compliance with applicable Environmental Laws or except as defined in the Environmental Report." Further, in Section 12.1, page 10, Signature acknowledged that the terms of the Environmental Indemnity Agreement were "for the sole and exclusive protection and use of [the lender and other indemnified parties]." The terms of the Environmental Indemnity Agreement contradict the defendants' argument that the lender's selection of EBI to provide an environmental assessment created a special relationship, as contemplated by the continuing course of conduct doctrine, under which SNL or its predecessors owed a duty of inquiry concerning environmental conditions at 6 Shaw's Cove.
As with the first count, the defendants' arguments concerning the continuing course of conduct doctrine are unavailing as to the fourth count. The first and fourth counts are time-barred. Accordingly, they are stricken. In view of this determination, the court need not consider SNL's other arguments concerning these counts.
B Good Faith And Fair Dealing
In the second, third, and fifth counts, the defendants' claims are premised on alleged breaches of the covenant of good faith and fair dealing. These claims, respectively, allege that SNL and/or its predecessors, failed to take possession of the collateral for the loan and allowed interest to accrue; brought this action for breach of mortgage covenants without basis; and brought this action for breach of environmental indemnity without basis. Each of these claims alleges that the covenant that the parties would deal with one another and seek any remedies in accordance with their agreement in good faith and with fairness was implicit in the Mortgage, a copy of which is annexed to and incorporated by reference in the counterclaims as part of Exhibit A.
"[E]very contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement . . . The covenant of good faith and fair dealing presupposes that the terms and purpose of the contract are agreed upon by the parties and that what is in dispute is a party's discretionary application or interpretation of a contract term . . . To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith." (Internal quotation marks omitted.) Ramirez v. Health Net Of The Northeast, Inc., 285 Conn. 1, 16-17 n. 18, 938 A.2d 576 (2008).
"[A]n action for breach of the covenant of good faith and fair dealing requires proof of three essential elements, which the plaintiff must duly plead: first, that the plaintiff and the defendant were parties to a contract under which the plaintiff reasonably expected to receive certain benefits; second, that the defendant engaged in conduct that injured the plaintiff's right to receive some or all of those benefits; and third, that when committing the acts by which it injured the plaintiff's right to receive benefits it reasonably expected to receive under the contract, the defendant was acting in bad faith." (Internal quotation marks omitted.) Austrian v. United Health Group, Inc., Superior Court, judicial district of Waterbury, Complex Litigation Docket at Waterbury, Docket No. X06 CV 05 4010357 (July 17, 2007, Stevens, J.) ( 43 Conn.L.Rptr. 852).
"[B]ad faith is not simply bad judgment or negligence, but rather it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity . . . it contemplates a state of mind affirmatively operating with furtive design or ill will." (Internal quotation marks omitted.) PSE Consulting, Inc. v. Frank Mercede and Sons, Inc., 267 Conn. 279, 305, 838 A.2d 135 (2004). "Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive." (Internal quotation marks omitted.) Habetz v. Condon, 224 Conn. 231, 237, 618 A.2d 501 (1992).
1. Claims by Guarantor Defendants
Connecticut courts repeatedly have stated that " the existence of a contract between the parties is a necessary antecedent to any claim of breach of the duty of good faith and fair dealing." (Emphasis in original; internal quotation marks omitted.) Macomber v. Travelers Property Casualty Corp., 261 Conn. 620, 638, 804 A.2d 180 (2002).
Here, while the Guarantor defendants premise their claims of breach of the implied duty of good faith and fair dealing on the Mortgage, they were not parties thereto. In opposition to this aspect of SNL's motion, they assert that their counterclaims allege various agreements, and SNL's claims in its amended complaint in this action that the Guarantor defendants are obligated to satisfy unpaid amounts due under the Note. However, as pleaded, their good faith and fair dealing claims are based on an implied duty which they allege arises from the Mortgage, to which they were not parties. Accordingly, their claims of violation of such a duty, as set forth in their second, third, and fifth counts, are stricken.
2. Claims By Signature CT Page 6028
Signature was a party to the Mortgage. Review of the allegations in the second, third, and fifth counts of Signature's counterclaims shows that the allegations do not amount to claims of bad faith conduct. In Hudson United Bank v. Cinnamon Ridge Corp., 81 Conn.App. 557, 569, 845 A.2d 417 (2004), cited by Signature, the court considered a motion to set aside a jury verdict after trial, not a motion to strike. See id., 576-78. It did not address the legal sufficiency of the allegations concerning the covenant of good faith and fair dealing.In the second count, Signature incorporates by reference its allegations of negligence from its first count, and adds that SNL and/or its predecessors failed to take possession or to seek immediate possession of 6 Shaw's Cove after Signature's default, and allowed interest to accrue. No actual or constructive fraud; or a design to mislead or deceive another; or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive, is alleged. See PSE Consulting, Inc. v. Frank Mercede and Sons, Inc., supra, 267 Conn. 305; Habetz v. Condon, supra, 224 Conn. 237. These allegations do not amount to claims of bad faith conduct.
In the third count, Signature alleges that its decision to allow the Parking License Agreement to lapse was economically and commercially reasonable, and that there is no diminution of value to 6 Shaw's Cove as a result of its termination. Signature alleges that SNL has no basis for alleging a breach of the mortgage covenants and, that, in bringing the present action for breach of mortgage covenants, SNL has breached the covenant of good faith and fair dealing. These allegations also fail to allege facts showing bad faith.
Similarly, the fifth count lacks such allegations. Therein, Signature incorporated by reference its allegations from the fourth count, discussed above, in which Signature alleges that SNL and/or its predecessors were negligent in hiring EBI and in relying on the EBI assessment, which did not identify that 6 Shaw's Cove formerly had been the site of a coal gasification plant; and in failing to properly research and assess environmental issues prior to making the loan in April 2005. Signature alleges that, given the EBI assessment, and the failure to properly research the New London public records, SNL has no basis for alleging a breach of the environmental indemnity agreement, and in bringing the present action, SNL has breached the covenant of good faith and fair dealing. This count lacks allegations of bad faith as it has been defined in the appellate decisions cited above.
Accordingly, the second, third, and fifth counts of Signature's counterclaims are stricken. In view of the above determinations concerning the Guarantor defendants' and Signature's allegations in the second, third, and fifth counts, the court need not consider SNL's other arguments concerning them.
C CUTPA
The sixth count of the counterclaims is premised on claimed violations of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq. (CUTPA). SNL contends that the sixth count is time-barred.
General Statutes § 42-110g(f), which governs CUTPA claims, provides: "[a]n action under this section may not be brought more than three years after the occurrence of a violation of this chapter." "Where . . . a specific limitation is contained in the statute that creates the right of action and establishes the remedy, then the remedy exists only during the prescribed period and not thereafter." Moore v. McNamara, 201 Conn. 16, 22-23, 513 A.2d 660 (1986). As discussed above, it is appropriate to challenge such a claim by motion to strike. See Forbes v. Ballaro, supra, 31 Conn.App. 239-40 (motion to strike proper where a statute gives a right of action which did not exist at common law, and fixes the time within which the right must be enforced). If the acts which "form the basis of the CUTPA claim occurred more than three years prior to the commencement of the action, that claim is time barred." Willow Springs Condominium Assn., Inc. v. Seventh BRT Development Corp., 245 Conn. 1, 46, 717 A.2d 77 (1998).
In their sixth counts, the defendants incorporate by reference their previous allegations, and allege that SNL and/or its predecessors (a) misrepresented that the terms of the loan were non-recourse, and (b) failed to disclose a copy of the EBI assessment prior to closing. These allegations are based on conduct which occurred no later than when the loan was made, April 2005. The counterclaims were not brought until more than three years later, in 2009.
In seeking to rely on the continuing course of conduct doctrine to toll the statute of limitations, the defendants rely on the same allegations discussed above concerning the first and fourth counts, which the court found unavailing. Also, as discussed above, in its February 3, 2010 decision, the court granted partial summary judgment as to SNL's recourse claims. The later filing of non-sham claims does not amount to later wrongful conduct which tolls the CUTPA statute of limitations. See Zeller v. Consolini, supra, 59 Conn.App. 553 (act of filing a non-sham lawsuit not a CUTPA violation).
The CUTPA claims in the sixth counts of the counterclaims are time-barred. Accordingly, they are stricken. In view of the these determinations, the court need not consider SNL's other arguments concerning them.
CONCLUSION
For the foregoing reasons, SNL's motions to strike the defendants' counterclaims are granted. It is so ordered.