Opinion
No. HHB CV054005479 S
March 20, 2006
MEMORANDUM OF DECISION RE MOTION TO STRIKE SPECIAL DEFENSES AND COUNTERCLAIMS
I. BACKGROUND AND PROCEDURAL HISTORY
The plaintiffs in this action are the father (Donald Reiff) and brother (Douglas Reiff) of the defendant. All the parties were the beneficiaries of a trust of which the brother (plaintiff) and sister (Marcy D'Angelo, defendant) were trustees. As trustees they deeded a property known as 1 Madison Lane, Avon, Connecticut to the defendant. The plaintiff father was to retain a life use in the property, and if sold during his lifetime, was to receive the net proceeds of the sale. If he were to predecease the sale, then the net proceeds were to be divided between the brother and sister.
In an eight-count Amended Complaint, the plaintiffs allege that on November 29, 2001, with the knowledge and consent of the plaintiffs, the defendant borrowed $220,000 from a lender and granted it a mortgage against the property. Subsequently, the plaintiffs requested that the defendant refinance the mortgage in order to withdraw approximately $100,000 more from the equity in the property. Later, the defendant borrowed $340,000 against the property without the knowledge of the plaintiffs. They also claim that the defendant utilized the mortgage proceeds to pay off many of her personal debts. Based on these allegations the plaintiffs claim the defendant's actions constitute a breach of contract, breach of fiduciary duty, conversion, civil theft and a violation of the Connecticut Unfair Trade Practices Act, General Statute §§ 42-110a et seq. ("CUTPA").
In response to the complaint, the defendant has filed five special defenses and five counterclaims. The plaintiffs have filed a Motion to Strike (#137) four of the five special defenses and all of the counterclaims. The defendant has filed a memorandum in opposition to the Motion to Strike. Each of the special defenses and counterclaims will be addressed below individually.
II. LAW
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted" (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). "[A] counterclaim is a cause of action existing in favor of the defendant against the plaintiff and on which the defendant might have secured affirmative relief had he sued the plaintiff in a separate action . . . A motion to strike . . . may properly be used to challenge the sufficiency of a counterclaim." (Citations omitted; internal quotation marks omitted.) Fairfield Lease Corp. v. Romano's Auto Service, 4 Conn.App. 495, 496, 495 A.2d 286 (1985). The role of the trial court in ruling on a motion to strike is "to examine the [pleading], construed in favor of the [pleading party], to determine whether the [pleading party has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Szczapa v. United Parcel Service, Inc., 56 Conn.App. 325, 328, 743 A.2d 622, cert. denied, 252 Conn. 950, 748 A.2d 299 (2000). In considering a motion to strike the court must accept as true all well pleaded facts. Peter-Michael, Inc. v. Sea Shell Associates, 244 Conn. 269, 270, 709 A.2d 558 (1998); Commissioner of Labor v. C.J.M Services, Inc., 268 Conn. 283, 292, 842 A.2d 1124 (2004). The court is not required to make factual findings. Vacco v. Microsoft Corp., 260 Conn. 59, 65, 793 A.2d 1048 (2002). All allegations are to be construed in the light most favorable to the pleader. Suffield Development Associates Ltd. Partnership v. National Loan Investors, L.P., 260 Conn. 766, 772, 802 A.2d 44 (2002).
III. DISCUSSION OF DEFENDANT'S SPECIAL DEFENSES A. FIRST SPECIAL DEFENSE
The defendant has alleged in her first special defense that the First through Fifth Counts of plaintiff's Amended Complaint fail to set forth a claim upon which relief can be granted as to the Plaintiff Douglas Reiff. Both in her memorandum and at oral argument the defendant did not oppose the Motion to Strike as to this special defense. Accordingly, the Motion to Strike is granted as to the First Special Defense.
B. SECOND SPECIAL DEFENSE
The defendant has alleged in her second special defense that the First through Eighth Counts of plaintiff's Amended Complaint fail to set forth a claim upon which relief can be granted as to the Plaintiffs Douglas Reiff or Donald Reiff. Both in her memorandum and at oral argument the defendant did not oppose the Motion to Strike as to this special defense. Accordingly, the Motion to Strike is granted as to the Second Special Defense.
C. THIRD SPECIAL DEFENSE
The defendant claims a setoff is available to her against any amounts that may be found to be due the plaintiffs. Specifically, defendant "claims a setoff in excess of $326,000, which as [sic] already been paid for the benefit of Donald Reiff." Typically a setoff may be claimed where the plaintiff has brought an action to recover a debt due from the defendant and the defendant also is owed a debt from the plaintiff. Hope's Architectural Products, Inc. v. Fox Steel Co., 44 Conn.App. 759, 762, 692 A.2d 829, cert. denied, 241 Conn. 915, 696 A.2d 985 (1997). As noted above, plaintiffs have alleged breach of contract (regarding defendant's duties as a trustee), breach of fiduciary duty, conversion, civil theft and a violation of CUTPA. Here, none of the eight counts of plaintiffs' Amended Complaint seek the collection of a contractually incurred debt that is due from the defendant to the plaintiff.
Moreover, defendant fails to allege the existence of any contract obligating plaintiff to make payment to the defendant of a sum certain for a specific purpose. There is no identity of the essential terms of any agreement between the parties calling for the payment of a debt. For example, there is no reference to the date of any agreement, whether it was oral or written, its terms, the consideration for it, or the date for performance thereof. Accordingly, there can be no claim of setoff by the defendant as no mutual debts exist between the parties. Mariculture, Pro. v. Certain Underwriters, Lloyd's, 84 Conn.App. 688, 704, 854 A.2d 1100 (2004). Therefore, the Motion to Strike the Third Special Defense is granted.
D. FOURTH SPECIAL DEFENSE The plaintiffs do not challenge this special defense. E. FIFTH SPECIAL DEFENSE
The defendant claims that by giving her specific instructions on applying for, obtaining and disbursing the proceeds of a mortgage against the Avon, Connecticut property, the plaintiffs have "abandoned any and all claims for Breach of Contract, Fiduciary duty and theft or conversion.""Abandonment . . . has been defined as the voluntary relinquishment of ownership of property without reference to any particular person or purpose[.]" Favorite v. Miller, 176 Conn. 310, 313, 407 A.2d 974 (1978). It implies a voluntary and intentional renunciation. Bianco v. Darien, 157 Conn. 548, 556, 254 A.2d 898 (1969). In her brief, defendant argues that because the plaintiffs' allegations center on the defendant's misuse of equity in the Avon property, the instructions given by the plaintiffs regarding the mortgaging of the property establish an abandonment of any ownership interest they may have claimed to it.
Her reliance on abandonment as a special defense is misplaced as she has related it to the voluntary relinquishment of property as distinguished from the relinquishment of a right to bring an action. As worded, the Fifth Special Defense fails to allege any express or implied intent on the part of the plaintiffs to abandon any right to bring an action they may have against the defendant. Those few cases that do exist on the concept of abandonment consistently deal with the possession or ownership interests of personal or real property. Favorite v. Miller, supra; Bianco v. Darien, supra; Miller Co. v. Grussi, 90 Conn. 555, 98 A. 90 (1916); Stankiewicz v. Hawkes, 33 Conn.Sup. 732, 369 A.2d 253 (1976). In effect, the defendant has tried to use abandonment as a special defense to claims that would otherwise be addressed by a defense of waiver, discharge or release. The court notes that the defendant has already raised waiver, discharge and release in her Fourth Special Defense. Hence, the substance of her allegations in the Fifth Special Defense, while clothed in the terminology of "abandonment," is in effect identical to the Fourth Special Defense and is therefore duplicative.
While the defendant may argue that the plaintiffs' real property interests were abandoned when they instructed the defendant to refinance the property for the purpose of using its equity and dispensing the proceeds therefrom, such action by the plaintiffs does not create a voluntary relinquishment of their right to bring an action. The allegations raised by the defendant do not constitute a special defense of abandonment relative to the plaintiffs' claims.
The Motion to Strike is therefore granted as to the Fifth Special Defense.
IV. DISCUSSION OF DEFENDANT'S COUNTERCLAIMS A. FIRST COUNTERCLAIM
Defendant's First Counterclaim alleges that "[t]he Plaintiff Douglas Reiff breached his agreement to guide and advise the Defendant as to the type and amount of loans to obtain and the use of the proceeds." (Paragraph 20, First Counterclaim.) Plaintiffs have argued that the First Counterclaim fails to allege any facts that set forth the claimed breach.
A review of the First Counterclaim reveals that there are references to two separate agreements. The first is set forth in Paragraph 6 which states that "[o]n July 21, 2001, Douglas Reiff and the Defendant, as co-trustees of the Trust, deeded a property known as 1 Madison Lane, Avon, Connecticut ("the Property"), from the Trust to the Defendant, for the consideration set forth in an Agreement ("the Agreement") of even date executed by the Plaintiffs and the Defendant." The counterclaim makes several additional allegations surrounding the mortgaging of the property by the defendant and the use of the fluids therefrom. However, there are no allegations regarding any of the other terms of this "Agreement." The only details of the Agreement alleged are that it was executed by the parties and that it was executed "of even date" (presumably the July 21, 2001 transfer date of the deed). The defendant states in her brief that the "counterclaim alleges an `Agreement' at paragraph 6" and goes on to provide additional details regarding the purposes of the Agreement. However, none of those additional details are made part of the allegations of the First (or any other) Counterclaim.
The second agreement referred to in the First Counterclaim is found in Paragraph 20 as noted above. The allegations regarding this agreement to "guide and advise" the defendant are barren of any reference to the date of execution, whether it was oral or written, the consideration paid, the date of breach and any other specifics regarding its term or the obligation for performance. Notably, the defendant makes reference in her brief to the "Agreement" in Paragraph 6 as being the subject of a breach of contract. (Memorandum in Opposition to the Plaintiff's Motion to Strike, p. 6.) Yet, in defendant's pleading, it is only the agreement in Paragraph 20 that is claimed to have been breached.
Both parties have cited the case of Rosato v. Mascardo, 82 Conn.App. 396, 411, 844 A.2d 893 (2004) for the proposition that "[t]he elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages." (Internal quotation marks omitted.) At oral argument, defendant conceded that the specifics regarding either agreement could not be recited, but claimed that they could be gleaned from a broad reading of the pleadings. Reading the pleadings in the light most favorable to the defendant, whether it be a cursory or intensely scrutinized reading, no such specific information can be discerned. Defendant's allegations, as worded, fail to allege the elements necessary to the formation of a contract to guide and advise the defendant. In that the defendant's breach of contract claim is specifically founded upon this alleged agreement, it cannot stand.
Accordingly, the Motion to Strike Defendant's First Counterclaim is granted.
B. SECOND COUNTERCLAIM
Defendant's Second Counterclaim seeks a rescission of the Agreement (referred to in Paragraph 6 of the First Counterclaim and incorporated by reference in the Second Counterclaim) and a reconveyance of the Avon, Connecticut property to the Defendant Donald Reiff.
There is no question the request for rescission relates to the "Agreement" referred to in Paragraph 6 as it both uses the abbreviated reference designated by the defendant to identify that Agreement, and, it is the Agreement which is generally referenced relative to the transfer of the Avon, Connecticut property.
See Section IV(A) above.
Because the defendant claimed a breach of contract relative to an agreement to "guide and advise" the defendant as set forth in Paragraph 20, it cannot claim a remedy of rescission relative to a different agreement. "Rescission, simply stated, is the unmaking of a contract. It is the renouncement of the contract and any property obtained pursuant to the contract, and places the parties, as nearly as possible, in the same situation as existed just prior to the execution of the contract." (Internal quotation marks omitted.) Winchester v. McCue, 91 Conn.App. 721, 732, 882 A.2d 143, cert.denied, 276 Conn. 922, 888 A.2d 91 (2005); Wallenta v. Moscowitz, 81 Conn.App. 213, 240-41, 839 A.2d 641, cert. denied, 268 Conn. 909, 845 A.2d 414 (2004); see also Kavaraco v. T.J.E., Inc., 2 Conn.App. 294, 299, 478 A.2d 257 (1984). Because there has been no allegation of a breach of the "Agreement" referenced in Paragraph 6, there can be no claim for rescission. Even if the agreement referenced in Paragraph 20 were to be the basis of the defendant's claim for rescission, such remedy could not be allowed because, as noted in Section IV(A) above, the defendant's allegations are insufficient to establish the existence of such an agreement, and consequently, of any breach thereof.
The Motion to Strike Defendant's Second Counterclaim is granted.
C. THIRD COUNTERCLAIM
The Third Counterclaim alleges that "[t]he representations of the Plaintiff Douglas Reiff noted above [as set forth in footnote 1], were fraudulent and false and upon which the Defendant relied upon when following the Plaintiff, Douglas Reiff's instructions."
The essential elements of an action for fraud are: (1) a false representation was made as a statement of fact; (2) that it was untrue and known to be untrue by the party making it; (3) that it was made to induce the other party to act on it; and (4) that the latter did so act on it to his (or her) detriment. Kilduff v. Adams, Inc., 219 Conn. 314, 329, 593 A.2d 478 (1991); Miller v. Appleby, 183 Conn. 51, 54-55, 438 A.2d 811 (1981).
A review of the defendant's counterclaim reveals that the statements claimed as being false were the "instructions" provided by the Plaintiff Douglas Reiff regarding the mortgaging of the property and the disbursement of the proceeds therefrom. (Third Counterclaim, Paragraphs 22 and 23.) It is unclear whether in fact such "instructions" could be considered false statements of fact upon which the defendant relied. An "instruction" is simply a directive to an individual dictating or requesting a course of action. It is not a statement likely to be found to be true or false on its face. The person to whom the instruction is directed has the choice to agree to abide by the directive or to not follow it at all. However, the issue of whether such an instruction is a false statement is properly one that goes to the weight of the evidence before a trier of fact. It is not the function of the court to try the case upon a motion to strike. Vacco v. Microsoft, supra, 260 Conn. 65. Its sole function is to determine whether the defendant has pled a legally sufficient cause of action. Szczapa v. United Parcel Service, Inc., supra, 56 Conn.App. 328. Here, the defendant has alleged that the instructions constitute false representations upon which she relied. While the counterclaim is certainly not artfully pled, it is sufficient to put the Plaintiff Douglas Reiff on notice as to the nature of the claim against him.
The Motion to Strike the Third Counterclaim is denied.
D. FOURTH COUNTERCLAIM
The Fourth Counterclaim alleges that the Plaintiff Douglas Reiff breached the implied duty of good faith and fair dealing.
In order to pursue such a claim, a party must plead the existence of a contract between the parties. Hoskins v. Titan Value Equities Group, Inc., 252 Conn. 789, 793, 749 A.2d 1144 (2000); Forte v. Citicorp Mortgage, Inc., 66 Conn.App. 475, 484, 784 A.2d 1024 (2001), aff'd, 90 Conn.App. 727, 881 A.2d 386 (2005); Haven Health Center of Litchfield Hills, LLC v. Parente, Superior Court, judicial district of Litchfield, Docket No. CV 03 0091743 (July 25, 2005, Shaban, J.). "[T]he 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." (Citations omitted, internal quotation marks omitted.) Carford v. Empire Fire and Marine Ins. Co., 94 Conn.App. 41, 45, A.2d (2006). "[N]o claim of breach of the duty of good faith and fair dealing will lie for conduct that is outside of a contractual relationship." Id., 46. The implied covenant of good faith and fair dealing is in essence a contract claim. Giantis v. American Mortgage Services, L.P., Superior Court, judicial district of Middletown, Docket No. CV 00 0092711 (April 24, 2002. Shapiro, J.) ( 32 Conn. L. Rptr. 98).
As discussed in Section IV(A) above, the defendant has alleged the existence of a contract with the plaintiffs wherein they would "guide and advise" the defendant as to the type and amount of loans to obtain and how to use the proceeds. Having previously found that the defendant failed to sufficiently plead the formation and existence of such a contract, any claim for a breach of the implied duty of good faith and fair dealing based on that alleged contract must necessarily fail.
Accordingly, the Motion to Strike the Fourth Counterclaim is granted.
E. FIFTH COUNTERCLAIM
In her final counterclaim, the defendant asserts that there was a breach of a fiduciary duty owed by the plaintiffs to the defendant. The basis of the breach is alleged to be that the plaintiffs held themselves out as real estate developers with extensive knowledge of real estate financing, and that they used such superior knowledge (relative to the defendant) to advise and instruct her to obtain an unconventional mortgage loan and to disburse the proceeds thereof to the benefit of the plaintiffs.
Both parties have cited Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20, 41, 761 A.2d 1268 (2000) to note that "[t]he law will imply [fiduciary responsibilities] only where one party to a relationship is unable to fully protect its interests [or where one party has a high degree of control over the property or subject matter of another] and the unprotected party has placed its trust and confidence in the other." (Internal quotation marks omitted.) "It is well settled that a fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other." (Internal quotation marks omitted.) Id., 38. While discussing the elements necessary to create a fiduciary relationship, the court noted that superior skill and knowledge alone do not create a fiduciary duty among parties involved in a business transaction. (Internal quotation marks omitted.) Id., 42. Further, the court pointed out that
[i]n the seminal cases in which this court has recognized the existence of a fiduciary relationship, the fiduciary was either in a dominant position, thereby creating a relationship of dependency, or was under a specific duty to act for the benefit of another . . .
In the cases in which this court has, as a matter of law, refused to recognize a fiduciary relationship, the parties were either dealing at arm's length, thereby lacking a relationship of dominance and dependence, or the parties were not engaged in a relationship of special trust and confidence
(Citations omitted.) Id., 38-39. A review of the Fifth Counterclaim finds that the defendant has not alleged that the plaintiffs had superior skill or knowledge relative to the defendant. While alleging that the plaintiffs "held themselves out as being real estate developers and having extensive knowledge of real estate financing" (Paragraph 21, Fifth Counterclaim), there is nothing in the counterclaim alleging the superiority of this knowledge relative to the defendant. In fact, the allegations import knowledge to the defendant regarding issues of ownership, financing and valuation relative to the property sufficient to challenge the plaintiffs' proposed transactions involving the property. In Paragraphs 13-14, the defendant alleges that after being approached by the Plaintiff Donald Reiff to request a refinance of the property, that "as the condominium is in her name and it is her credit, [she] did not believe that the condo would support another loan and requested that the property be sold immediately. Donald Reiff refused." The defendant's allegations make clear that she was in a position to fully protect her interests and acted to do so.
Nor has she alleged that there was either a relationship of dependency, or that the plaintiffs were under a specific duty to act for her benefit. Moreover, the allegations of the counterclaim allege a familial relationship between the parties which involved interaction between them in the handling of the initial Trust, its eventual termination, and the transfer and subsequent financing of the real estate. These allegations, absent any claim of dominance by one party over the other, show the parties were dealing with one another at arm's length. As worded, the counterclaim does not allege that "the parties were engaged in a relationship of special trust and confidence." Id., 39.
The allegations of the Fifth Counterclaim fail to establish a cause of action for a breach of fiduciary duty on the part of the plaintiffs. The Motion to Strike the Fifth Counterclaim is granted.
V. CONCLUSION
Reading the allegations of the defendant's Special Defenses and Counterclaims in the light most favorable to her, the court finds that the Motion to Strike should be granted as to the First, Second, Third, and Fifth Special Defenses as well as the First, Second, Fourth and Fifth Counterclaims. The Motion is denied as to the Third Counterclaim. So ordered.