Bank of America, N.A. v. Nachimuthu Socrates et al. (2011)

MEMORANDUM OF DECISION ON MOTION TO STRIKE

In this action, the plaintiff, Bank of America, N.A., seeks to collect sums due under a loan agreement and guaranty against the defendant, East West General Traders, Inc., and its guarantor Nachimuthu Socrates.   The defendants, acting jointly, filed two special defenses.   On December 10, 2010 the plaintiff moved to strike these special defenses.

I

The first special defense is:  “The subject Loan Agreement and Guaranty executed by the defendant(s) mandate that any contractual disputes of the parties be resolved by mandatory arbitration and therefore the court is without jurisdiction.”   Defendant has not alleged that it requested arbitration.

“The mere agreement to arbitrate, standing alone, does not give rise to the necessary implication that arbitration is a condition precedent to an action in court.”  Multi–Service Contractors, Inc., v. Vernon, 181 Conn. 445, 448, 435 A.2d 983 (1980).   That court ruled that a contract that stated “disputes and other matters in question ․ shall be decided by arbitration” was not sufficient to make arbitration a condition precedent to court action.  Id., 446, 449.   Here, given the dearth of facts alleged in the first special defense, the court cannot find that the allegations are sufficient to support a finding that the contract language specifically states or necessarily implies that arbitration is a condition precedent to filing suit.

In Whipple v. Sound Homes & Restoration, LLC, Superior Court, judicial district of New London, Docket No., CV 09–5011786 (April 21, 2010, Cosgrove, J.), the court granted a motion to strike a special defense in a case in which arbitration was similarly considered optional.   The court stated that “[the defendant] has not alleged that the parties intended arbitration to be a condition precedent to bringing an action before this court.   Furthermore, the defendant has not alleged that it has previously sought to arbitrate the matter only to be denied the opportunity by the plaintiffs ․ The defendants may raise the issue of arbitration by filing a motion to compel arbitration with the court or by realleging facts that demonstrate why arbitration should be a special defense to the present action.”  Id. The better view would seem to require the defendant to allege facts that demonstrate it requested arbitration and was denied.   This special defense, as alleged, appears to be insufficient.

II

The second special defense states:  “The Loan Agreement and Guaranty executed by the defendant(s) have been modified and superseded by a Forbearance Agreement and other financing documents executed subsequent to the execution of the agreement.   Upon information and belief, some of the terms of said agreement may have been amended, superseded or waived so that either or both of the defendants may not be in default of their obligations thereunder.”

“Waiver is the intentional relinquishment or abandonment of a known right or privilege ․ [V]arious statutory and contract rights may be waived.”  C.R. Klewin Northeast, LLC v. Bridgeport, 282 Conn. 54, 87, 919 A.2d 1002 (2007).

In the present case, the defendants state that the plaintiff waived certain rights by entering into a forbearance agreement.   Despite plaintiff's claim that this amounts to a denial of its claim, the defendants sufficiently allege that a forbearance agreement exists and it acts as a waiver of certain contractual rights contained in the loan agreement and guaranty, which may prevent recovery by the plaintiff.   The defendants have alleged facts, which, while not extensive, are legally sufficient to withstand this motion to strike.

Motion to strike first special defense granted.

Motion to strike second special defense denied.

Wagner, J., J.T.R.

Wagner, Jerry, J.T.R.