Bailey Hill Lending Trust et al. v. Edward R. Eramian et al. (2011)

Memorandum of Decision on Motion to Dismiss (No. 152)

Factual/Procedural Background

This action seeking nonpayment of promissory notes allegedly made or guaranteed by the defendants was commenced by the Bailey Hill Lending Trust, the Pine Banks Nominee Lending Trust, and the Slater Hill Lending Trust as plaintiffs against the defendants Edward R. Eramian, Joel S. Greene, and Bailey Hill Management, LLC. On July 13, 2010 those plaintiffs filed a motion to substitute plaintiffs pursuant to Conn. Gen.Stat. § 52-109 and the parallel provision of the Practice Book, § 9-20, seeking permission to substitute the trustee Mark D. Savage as the plaintiff in lieu of Bailey Hill Lending Trust and Slater Hill Lending Trust, and the trustee Charles J. Housman as plaintiff in lieu of Pine Banks Nominee Lending Trust.   An amended complaint pursuant to Practice Book § 10-59 was filed simultaneously, naming the individual trustees as plaintiffs in lieu of their respective trusts.   The defendants objected to the motion to substitute plaintiffs on July 22, 2010.   On the same date the defendants filed the instant motion to dismiss with supporting memorandum of law, claiming that the court lacks subject matter jurisdiction because the original plaintiffs-the three trusts-lacked standing to bring or maintain this action.   The motion to substitute plaintiffs was granted conditionally ¹ by the court (Wentzel, J.) on July 26, 2010 rejecting the defendants' objection that the named plaintiffs' lack of standing prevented operation of Conn. Gen.Stat. § 52-109.   On August 10, 2010 the plaintiffs filed a second amended complaint in compliance with Judge Wentzel's order.   Defendants continue to press their motion to dismiss even though the substitution of parties has been allowed and has taken effect, claiming that under Connecticut law none of the three trusts was a legal entity with the power to commence litigation, thereby rendering this action as a nullity from the outset.   The plaintiffs oppose the motion to dismiss by claiming that the substitution of the individual trustees as plaintiffs pursuant to § 52-109 has saved this case from dismissal and given the court subject matter jurisdiction from the outset.

Discussion

“A motion to dismiss ․ properly attacks the jurisdiction of the court, essentially asserting that a plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court.”  (Internal quotation marks omitted.)  Bacon Construction Co. v. Dept. of Public Works, 294 Conn. 695, 706 (2010) “a motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction.”  (Internal quotation marks omitted.)   Wilson v. Webster Ins. Co., 294 Conn. 206, 213 (2009).   The issue of standing implicates subject matter jurisdiction and is therefore a basis for granting a motion to dismiss.  Id. “The plaintiff bears the burden of proving subject matter jurisdiction, wherever and however raised.”  Fort Trumbull Conservancy, LLC v. New London, 265 Conn. 423, 430 n.12 (2003).   And it is well established that, in determining whether a court has subject matter jurisdiction, every presumption favoring jurisdiction should be indulged.   Wilcox v. Webster Ins. Co., supra.

Conn. Gen.Stat. § 52-109 and Practice Book § 9-20 each provide under the heading “Substituted plaintiff” that:  “When any action has been commenced in the name of the wrong plaintiff, the court may, if satisfied that it was so commenced through mistake, and that it is necessary for the determination of the real matter in dispute so to do, allow any other person to be substituted or added as plaintiff.”   It is important to note that in this case the § 52-109 substitution has already occurred.   The very arguments made and cases cited by defendants for dismissal for lack of standing and the inapplicability of § 52-109 to save this case from dismissal were made in the brief submitted to the court in opposition to the motion to substitute plaintiffs (which brief has been reviewed by this court), and rejected by Judge Wentzel when he granted the motion to substitute.   The propriety of the individual trustees as substituted plaintiffs in lieu of the three trusts over which they have control is now part of the law of this case.

Defendant's argument that the motion to dismiss should be granted even though the substitution of plaintiffs has already occurred is premised on their position that a case commenced by a trust, which is not a legal entity with the power to commence or maintain a lawsuit, is always a nullity and there was no legally recognized entity for which there could be a substitute.   It is true that there is no appellate authority in Connecticut holding that a trust is a legal entity, and the Superior Court opinions are divided on the issue,² but it is not necessary for present purposes to decide that issue here.   This court is not ruling on the motion to substitute.   The substituted plaintiffs, the individual trustees of the trust, are now the only plaintiffs in the case.   The issue to be decided is whether or not their substitution under § 52-109 has cured whatever standing defect their predecessor plaintiffs, the three trusts, may have presented.   This court holds that § 52-109 makes no distinction between categories of lack of standing and gives the court the discretion to allow the substitution and cure of whatever element of standing the original plaintiffs lacked, even if that defect was lack of being a recognized legal entity, provided only that the two conditions of § 52-109 are satisfied.   In this case the two conditions (action commenced in the name of the wrong plaintiff by mistake and necessity of substitution to determine the real matter in dispute) have already been determined to be satisfied, so that the only issue now to be ruled on is the reach of an order of substitution under § 52-109.

The court agrees with the Superior Court cases holding that” ․ in spite of the ‘decide jurisdiction first’ rule, a case can be saved from dismissal for lack of subject-matter jurisdiction by the granting of a proper motion to substitute under General Statutes § 52-109 ․” and that “[b]oth rules [Conn. Gen.Stat. § 52-109 and its Practice Book equivalent, now § 9-20] relate back to and correct, retroactively, any defect in a prior pleading concerning the identity of the real party in interest.”  DiLieto v. County OB and GYN Group, Docket No. X02CV97-0150435S, Superior Court, Complex Litigation Docket at Waterbury (January 31, 2000, Sheldon, J.), 2000 Ct.Sup. 1350, 1355-56 [26 Conn. L. Rptr. 345], where the court said after an extensive analysis of mistaken pleading cases:

What the foregoing cases make clear is that a court may order substitution of plaintiffs in lieu of dismissal whenever the statute's conditions are met.   The legislature's provision of this statutory remedy would be completely undermined by any rule requiring the immediate dismissal for lack of subject-matter jurisdiction of any action commenced in the name of the wrong person as plaintiff.   The statute, as an exercise of the legislature's constitutional authority to determine this court's jurisdiction ․ must be seen as an extension of that jurisdiction for the limited purpose of deciding a proper motion to substitute.  (Emphasis added;  citation omitted.)  Id. at 1358.

See, also, The Vincent F. Miscia Profit Sharing Plan v. Bridgewater Funding, LLC et al., Docket No. X02CV09-5015827S, Superior Court, Complex Litigation Docket at Waterbury (January 29, 2010, Eveleigh, J.) (Motion to dismiss action commenced in the name of a profit sharing trust denied;  motion to allow the trustee to be substituted as plaintiff under Conn. Gen, Stat. § 52-109 granted, even though the court found that “a trust is not considered a separate entity for purposes of bringing suit ․”);  Marvin Wilson ppa Tyler Wilson v. Zemba, Docket No. CV03-0484071S, Superior Court, Judicial District of New Haven at New Haven (November 16, 2004, Corradino, J.) [38 Conn. L. Rptr. 272] (Suit brought in the name of next friend acting for infant not dismissed-motion to substitute infant suing through his next friend as plaintiff granted, citing DiLieto );  Stockwell v. Farias Barrett, Docket No. CV05-4004892, Superior Court, Judicial District of Waterbury (October 19, 2005, Matasavage, J.) [40 Conn. L. Rptr. 36] (suit brought in the name of minor plaintiff himself-who lacked capacity to sue-instead of minor plaintiff through parent or next friend not dismissed;  substitution allowed);  and Oreste Speciale v. Patriot National Bank et al., Docket No. CV09-5027946S, Superior Court, Judicial district of New Haven (October 14, 2010, Corradino, J.T.R.) 50 Conn. L. Rptr. 726 (Action brought against corporation's banks in the name of sole shareholder when it should have brought in the name of the corporation as a shareholder derivative action not dismissed-substitution allowed, citing DiLieto ).

Defendants cite SCG Capital Corporation Profit Sharing Trust v. Green, Docket No. CV09-5005139, Superior Court, Judicial District of Tolland, supra (fn2) where Judge Sferrazza dismissed an action commenced in the name of a profit sharing trust because the plaintiff as a common-law trust is not a legally cognizable entity, and refused to allow the substitution of the trustees under § 52-109 because “the reach of these types of savings provisions is limited to situations where the erroneously-named plaintiff is, itself, a legal entity capable of starting legal actions.”   One of the cases cited for that proposition, America's Wholesale Lender v. Pagano, 87 Conn.App. 474 (2005) is inapposite.   The substitution of plaintiffs in that case was not pursuant to § 52-109, but was a routine substitution of an assignee of the note and mortgage in a foreclosure case.   The purpose and intent of § 52-109 was not at issue.   In any event this court declines to follow SCG Capital and chooses instead to follow the better reasoned rulings of the DiLieto case and its progeny.

Order

For the foregoing reasons the motion to dismiss is denied.

Alfred J. Jennings, Jr.

Judge Trial Referee

FOOTNOTES

FN1. The condition of the order was that the plaintiffs amend the complaint to include the residences of the named trustees at the date of commencement, and that plaintiffs not object on the basis of timeliness to any motion by defendants to transfer venue based upon the residences of the newly named individual trustee plaintiffs..  FN1. The condition of the order was that the plaintiffs amend the complaint to include the residences of the named trustees at the date of commencement, and that plaintiffs not object on the basis of timeliness to any motion by defendants to transfer venue based upon the residences of the newly named individual trustee plaintiffs.

FN2. Compare, e.g., SCG Capital Corp. Profit Sharing Trust v. Green, Docket No. CV09-5005319S, Superior Court, Judicial District of Tolland, March 25, 2010, Sfrerazza, J.) 2010 WL 1665268 [49 Conn. L. Rptr. 555] ( ․ [T]he named plaintiff in the present case, a common law trust, possessed no capacity to sue.) with Silver v. Holtman, Docket No. 05-4016440S, Superior Court, Judicial District of Hartford (June 24, 2009, Rittenband, J.), 48 Conn. L. Rptr. 159 (“․ Connecticut is following the modern trend that a trust is a legal entity which can own property”)..  FN2. Compare, e.g., SCG Capital Corp. Profit Sharing Trust v. Green, Docket No. CV09-5005319S, Superior Court, Judicial District of Tolland, March 25, 2010, Sfrerazza, J.) 2010 WL 1665268 [49 Conn. L. Rptr. 555] ( ․ [T]he named plaintiff in the present case, a common law trust, possessed no capacity to sue.) with Silver v. Holtman, Docket No. 05-4016440S, Superior Court, Judicial District of Hartford (June 24, 2009, Rittenband, J.), 48 Conn. L. Rptr. 159 (“․ Connecticut is following the modern trend that a trust is a legal entity which can own property”).

Jennings, Alfred J., J.T.R.