Brian Banning et al. v. LLC (2011)

MEMORANDUM OF DECISION MOTION TO STRIKE

The plaintiffs, residents of Connecticut, have filed an action containing three counts alleging:  (1) fraud by non-disclosure;  (2) breach of fiduciary duty;  and (3) violation of the Connecticut Unfair Trade Practices Act (“CUTPA”).   The defendant, “Right Choice,” has moved to strike the plaintiffs' complaint dated June 24, 2010, in its entirety, on the grounds that:  (1) each of the plaintiffs' causes of action is barred by the statute of limitations based on the facts pleaded;  (2) plaintiffs' claim of fraud by non-disclosure fails, as the plaintiffs have not alleged the defendant owed the plaintiffs a duty of disclosure;  and (3) the plaintiffs' Connecticut Unfair Trade Practices Act (“CUTPA”) claim fails as the alleged conduct was not trade or commerce occurring in Connecticut.¹

The complaint alleges that the defendant, a Connecticut limited liability company, employed Jeffrey Kopp as a real estate agent.²  In 2006, Kopp and the plaintiff Brain Banning agreed to be partners in the purchase of investment real estate in North Carolina and traveled to North Carolina to inspect potential investment properties.   Thereafter, during 2006, the plaintiffs, acting on the advice and representations of Kopp, purchased several properties in North Carolina.   In April 2010, the plaintiffs learned the defendant received real estate commissions on those properties without the knowledge or consent of the plaintiffs.   The plaintiffs claim they have sustained financial losses as a result of purchasing the North Carolina properties.

The plaintiffs allege that Kopp did not disclose that he was working as a real estate agent for the purchases of the North Carolina properties, and the plaintiffs, therefore, were not aware of Kopp's conflict of interest.   They further allege that as the plaintiff's broker for the purchases of the North Carolina properties, the “defendant was obligated to act in the plaintiffs' best interests and to disclose material information.”   Accordingly, “the defendant breached its duty by failing to disclose its involvement in the purchases of the North Carolina properties.”   Lastly, the plaintiffs allege that the defendant's conduct was “unfair, deceptive and oppressive” and constituted an unfair trade practice in violation of CUTPA, General Statutes § 42-110 et seq.

I. Standard of Law:  Motion to Strike

“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.”  Mingachos v. CBS, Inc., 196 Conn. 91, 108, 491 A.2d 368 (1985).   A motion to strike shall be granted if “the plaintiff's complaint [does not] sufficiently [state] a cognizable cause of action as a matter of law.”  Mora v. Aetna Life and Casualty Ins. Co., 13 Conn.App. 208, 211, 535 A.2d 390 (1988).

A motion to strike “admits all facts well pleaded;  it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings” (Emphasis omitted.)  Id. “A motion to strike is properly granted where a plaintiff's complaint alleges legal conclusions unsupported by facts.”  Id. “In ruling on a motion to strike, the court is limited to the facts alleged in the complaint.”  Gordon v. Bridgeport Housing Authority, 208 Conn. 161, 170, 544 A.2d 1185. (1988).  A motion to strike “is to be tested by the allegations of the pleading demurred to, which cannot be enlarged by the assumption of any fact not therein alleged.”  (Internal quotation marks and citations omitted.)   Alarm Applications Co. v. Simsbury Volunteer Fire Co., 179 Conn. 541-50, 427 A.2d 822 (1980).

Upon deciding a motion to strike, the trial court must construe the “plaintiff's complaint in [a] manner most favorable to sustaining its legal sufficiency.”  Bouchard v. People's Bank, 219 Conn. 465, 471, 594 A.2d 1 (1991).  “The allegations of the pleading involved are entitled to the same favorable construction a trier would be required to give in admitting evidence under them and if the facts provable under its allegations would support a defense or a cause of action, the motion to strike must fail.”  Mingachos v. CBS, Inc., supra, 196 Conn.108-09. However, if the plaintiff has alleged mere conclusions of law unsupported by the requisite facts, the motion to strike should be granted.  Cavallo v. Derby Savings Bank, 188 Conn. 281, 285, 449 A.2d 986 (1982).

Ordinarily a claim that an action is barred by the lapse of the statute of limitations must be pleaded by a special defense and not raised by a motion to strike.  Practice Book § 10-50;  Mac's Car City, Inc. v. DiNigris, 18 Conn.App. 525, 528, 559 A.2d 712 (1989).   However, a motion to strike may be used to raise the defense of the statute of limitations when the parties agree that the complaint sets forth all the facts pertinent to the question whether the action is barred by the statute of limitations.  Vilcinskas v. Sears, Roebuck & Co., 144 Conn. 170, 171-72, 127 A.2d 814 (1956).

II. Discussion

A. Statutes of Limitation

The positions of the respective parties differ as to whether a motion to strike is the proper procedural pleading to assert a statute of limitations claim in this matter.   The defendant claims that all of the facts necessary to determine a statute of limitations defense have been “unambiguously pled” in the plaintiffs' complaint.   The defendant argues that the complaint alleges that the North Carolina properties were purchased “throughout the course of 2006”, and the complaint was not served on the defendant until “June 2010.” ³ defendant states that the fraudulent non-disclosure claim, the breach of fiduciary duty claim and the CUTPA claim are each governed by a three-year statute of limitations, as set forth in General Statutes §§ 52-577 (torts) ⁴ and 42-110g(f) (CUTPA).⁵

The plaintiffs claim that it is inappropriate to allow the use of a motion to strike with regard to the plaintiffs' claims, as additional facts could be pleaded to support the legal sufficiency of the pleadings.   See. Greco v. United Technologies Corp., 277 Conn. 337, 344-45 n.12 (2006).   The plaintiffs do not agree that all facts pertinent to the statute of limitations defense are before the court and that the plaintiff could plead additional facts upon completion of the discovery process.   Specifically, the plaintiffs claim they have learned of a sale that occurred in September 2007.   The plaintiffs also claim they could plead additional facts that could toll the applicable statutes of limitations under a “continuing course of conduct” theory and/or General Statutes § 52-595.⁶

“Ordinarily, [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.   An exception to this general rule exists, however, when 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, the time fixed is a limitation or condition attached to the right-it is a limitation of the liability itself as created, and not of the remedy alone.  (Internal quotation marks omitted;  internal citations omitted.)  Greco v. United Tech. Corp. supra, 277 Conn. 337, 344 n. 12 (2006);  see also Practice Book § 10-50.

Counts One and Two allege fraudulent non-disclosure and breach of fiduciary duty.   They are not statutory actions.   The parties do not agree that all facts pertinent to the statute of limitations defense are before the court.   Thus, defendant's statute of limitations claims must be raised by way of special defenses to those counts.   However, Count Three is an action brought pursuant to CUTPA, a statutory right of action that did not exist at common law.   General Statutes § 42-110g(f) provides for a three-year statute of limitations.   The occurrence of the alleged CUTPA violation was during 2006.   However, the subject legal action was instituted by way of a complaint dated June 24, 2010, bearing a return date of July 20, 2010.   Service on the defendant was effectuated by service on its agent for service by the state marshal on July 6, 2010.   Each of these events occurred more than three years after the occurrence complained of by the plaintiffs.   The limitation period for a CUTPA cause of action is triggered upon the occurrence of the alleged violation, not the discovery of the alleged practice.  Independence Ins., Service Corp. v. Hartford Life & Ins., Co., 472 F.Sup. 183, 190 (D.Conn.2007).   Accordingly, the motion to strike is proper to raise the statute of limitations defense, as it applies to Count Three.   The motion to strike Count Three is granted.

The court's analysis does not end here, as the defendant also claims that the plaintiffs have not set forth in their complaint the necessary elements regarding their claims alleging fraud by nondisclosure and breach of fiduciary duty.

B. Fraudulent Non-Disclosure

“To constitute fraud by non-disclosure or suppression, there must be a failure to disclose known facts and, as well, a request or an occasion or circumstance which imposes a duty to speak.”  Ceferatti v. Boisvert, 137 Conn. 280, 281, 77 A.2d 82 (1950).   The elements of an action in fraud are as follows:  (1) A false representation made as a statement of fact;  (2) the statement was untrue and known to be untrue by the party making it;  (3) the statement was made to induce the other party to act on it and the other party acted on it to his injury.⁷  Id., 282-83;  Dockter v. Slowik, 91 Conn.App. 448, 453-54, 881 A.2d 479 (2005).  “Usually, mere non-disclosure does not amount to fraud ․ Non-disclosure may, however, amount to fraud when there is a failure to disclose known facts under circumstances that impose a duty to speak ․” Dockter v. Slowik supra, 91 Conn.App. 458.   In addition, once one undertakes to speak on a subject, one must then make a full and fair disclosure as to that subject.”  (Citations omitted.)  Id.

The defendant argues that the plaintiffs have not alleged that the defendant had a duty to disclose information to the plaintiffs and without the requisite element of duty the claim regarding fraudulent non-disclosure must fail.   See, Ceferatti v. Boisvert, supra, 137 Conn. 281, 77 A.2d 82 (1950).   The defendant states that while the plaintiffs allege that the defendant did not make disclosure, the plaintiffs never allege the defendant was under a duty to speak.

For mere non-disclosure to amount to fraud, there must be a duty to speak, as where a fiduciary relationship exists between the parties, or where the circumstances are such that the effect of the silence is actually to produce a false impression in the minds of the other parties and the making of the agreement or doing of some other act may in itself lead the other parties to the transaction to believe that a certain fact exists and so amount to an affirmation of it.  Egan v. Hudson Nut Products, Inc., 142 Conn. 344, 346, 114 A.2d 213 (1955).

Reading and interpreting the plaintiffs' complaint broadly, as is required when acting on a motion to strike, the court finds that the allegations sufficiently allege a fiduciary relationship existed between Kopp, the defendant's employee, and the plaintiffs.   Eventually, whether a confidential or fiduciary relationship did exist between the plaintiffs and the defendant acting through its employee Kopp, will be a factual question for the trier of fact.   See. Jarvis v. Lieder, 117 Conn.App. 129, 143, 978 A.2d 106 (2009).   The motion to strike Count One alleging fraudulent non-disclosure is denied.

C. Breach of Fiduciary Duty

Count Two alleges a breach of fiduciary duty.  “The essential elements to pleading a cause of action for breach of fiduciary duty under Connecticut law are:  (1) That a fiduciary relationship existed which gave rise to (a) a duty of loyalty on the part of the defendant to the plaintiff, (b) an obligation on the part of the defendant to act in the best interests of the plaintiff, and (c) an obligation on the part of the defendant to act in good faith in any manner relating to the plaintiff;  (2) That the defendant advanced his or her own interests to the detriment of the plaintiff;  (3) That the plaintiff has sustained damages;  and (4) That the damages were proximately caused by the fiduciary's breach of his or her fiduciary duty.”   T. Merritt, 16 Connecticut Practice Series:  Elements of an Action (2010-2011 Ed.) § 8:1, p. 534;  See also, Everett v. Everett, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 10 6004013 S (Dec. 16, 2010, Adams, J.);   Ballard v. Hartford Life Ins. Co., Superior Court, judicial district of Hartford at Hartford, Docket No. CV 09 5031857 S (Jan. 18, 2011, Wagner, J.T.R.).

Upon deciding a motion to strike, the trial court must construe the “plaintiff's complaint in [a] manner most favorable to sustaining its legal sufficiency.”  Bouchard v. People's Bank, supra, 219 471.   Upon review of Count Two and the facts alleged in the complaint, the court finds the plaintiffs have sufficiently pleaded a cause for breach of fiduciary duty by the defendant, through its employee Kopp. The motion to strike Count Two is denied.

III. Summary

The motion to strike is denied as to Counts One and Two, alleging fraudulent non-disclosure and breach of fiduciary duty, respectively.   The motion to strike Count Three alleging a violation of CUTPA is granted, as said action is beyond the three-year statute of limitation set forth in General Statutes § 42-110g(f).

THE COURT

Judge Richard E. Arnold

FOOTNOTES

FN1. Sec. 42-110a.   Definitions.As used in this chapter:  (4) “Trade” and “commerce” means the advertising, the sale or rent or lease, the offering for sale or rent or lease, or the distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value in this state..  FN1. Sec. 42-110a.   Definitions.As used in this chapter:  (4) “Trade” and “commerce” means the advertising, the sale or rent or lease, the offering for sale or rent or lease, or the distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value in this state.

FN2. Kopp is not a named defendant in this action..  FN2. Kopp is not a named defendant in this action.

FN3. The complaint is dated June 24, 2010, and the action bears a return date of July 20, 2010.   Service on the defendant was effectuated by service on its agent for service by the state marshal on July 6, 2010..  FN3. The complaint is dated June 24, 2010, and the action bears a return date of July 20, 2010.   Service on the defendant was effectuated by service on its agent for service by the state marshal on July 6, 2010.

FN4. General Statutes § 52-577 regarding actions founded upon a tort reads as follows:“No action founded upon a tort shall be brought but within three years from the date of the act or omission complained of.”.  FN4. General Statutes § 52-577 regarding actions founded upon a tort reads as follows:“No action founded upon a tort shall be brought but within three years from the date of the act or omission complained of.”

FN5. General Statutes § 42-110g(f) regarding actions brought pursuant to CUTPA reads as follows:“(f) An action under this section may not be brought more than three years after the occurrence of a violation of this chapter.”.  FN5. General Statutes § 42-110g(f) regarding actions brought pursuant to CUTPA reads as follows:“(f) An action under this section may not be brought more than three years after the occurrence of a violation of this chapter.”

FN6. General Statutes § 52-595, “Fraudulent concealment of cause of action,” reads as follows:“If any person, liable to an action by another, fraudulently conceals from him the existence of the cause of such action, such cause of action shall be deemed to accrue against such person so liable therefore at the time when the person entitled to sue thereon first discovers its existence.”.  FN6. General Statutes § 52-595, “Fraudulent concealment of cause of action,” reads as follows:“If any person, liable to an action by another, fraudulently conceals from him the existence of the cause of such action, such cause of action shall be deemed to accrue against such person so liable therefore at the time when the person entitled to sue thereon first discovers its existence.”

FN7. It noted that although the elements of fraud must be proved by clear and convincing evidence, damages may be proved by the preponderance of the evidence.   See Kilduff v. Adams, Inc., 219 Conn. 314, 326-30, 593 A.2d 478 (1991)..  FN7. It noted that although the elements of fraud must be proved by clear and convincing evidence, damages may be proved by the preponderance of the evidence.   See Kilduff v. Adams, Inc., 219 Conn. 314, 326-30, 593 A.2d 478 (1991).

Arnold, Richard E., J.