Arthur DiCesare et al. v. Steven P. Burke (2011)

MEMORANDUM OF DECISION

In this action, plaintiffs Arthur DiCesare and B & D Properties, LLC (“B & D”) allege that defendant Stephen P. Burke has no membership interest in B & D, despite the defendant's claims to the contrary.   In their March 23, 2010 complaint, the plaintiffs allege that B & D is a Connecticut limited liability company that owned or continues to own real property in Westport (“the property”) in fee simple.   In count one of their two-count complaint, the plaintiffs allege that DiCesare was a member of B & D during the relevant period, that the defendant is not a member, and that the legal rights of the parties with regards to their membership interests are in dispute.   In that count, the plaintiffs appear to request a declaratory judgment that would resolve this dispute in DiCesare's favor by nullifying any claims the defendant might have in or to B & D.

In Count two, which is an action in quiet title pursuant to General Statutes § 47–31, the plaintiffs allege that on April 23, 2009, the defendant, “purportedly acting as a member of B & D, executed and recorded a mortgage note and deed from B & D to himself,” thereby encumbering B & D-owned property in Westport.   At the time that the defendant executed and recorded this note and deed, he had no authorization or right to do so and was not a member of B & D, according to the plaintiffs, who further allege in count two that “the defendant's said mortgage deed is adverse to the title in B & D.” On August 4, 2010, the defendant filed an answer, special defenses and counterclaims.   In the answer, the defendant admitted most of the allegations of count one, including the claim that DiCesare was a member of B & D during the relevant time, but denied that the defendant had no interest in B & D. The defendant further denied the allegation that he was not a member of B & D at the time that he executed and recorded the mortgage note and deed, and denied having no right or authorization to do so.   In his three special defenses, the defendant alleges that DiCesare lacks standing to bring this case on behalf of B & D, that DiCesare is guilty of laches and that through his conduct, DiCesare “waived any claim that the defendant is not a 50% owner in B & D ․”

The defendant also pleaded five counterclaims.   In the first counterclaim, which does not specify a cause of action, the defendant indicates that he brings his counterclaims pursuant to General Statutes § 52–572j on behalf of himself and on behalf of B & D.¹ The defendant claims that he and DiCesare each own half of the membership interest in B & D, and that prior to January 2009, they each “occupied equal space in the [property] together with other tenants” and “contributed equally to the cash needs of [B & D].” In January 2009, DiCesare vacated the property, after which the defendant sent him monthly statements indicating B & D's cash needs and shortfall between income and expenses, according to the first counterclaim.   Beginning with that month, however, DiCesare “has failed to contribute any sums towards the management and expenses needed to run [B & D],” and the defendant has funded the expenses by himself.   Towards the end of 2009, the defendant found himself unable to make payments on a mortgage with Patriot Bank (Patriot), and on December 28, 2009, Patriot commenced foreclosure proceedings.   Thereafter, in February 2010, the defendant paid money and reinstated the mortgage.   The defendant alleges that DiCesare “has breached his obligation[s] to the defendant to share equally in the expenses of' B & D and that this alleged breach has caused him to suffer various damages, including the payment of money, the expense of labor and impaired credit.

The second counterclaim, titled “breach of duties,” incorporates and realleges the first counterclaim in its entirety and further alleges that between 2003 and 2005, DiCesare withdrew a total of $54,000 from B & D as a “loan advance” without notifying the defendant and without the defendant's agreement.   Despite demands, DiCesare has failed to repay this money, according to the counterclaim.   The defendant further alleges that in February 2010, Patriot “indicated a willingness” to modify its mortgage on favorable terms, including a lower interest rate, and required DiCesare and the defendant to provide certain financial information.   DiCesare, however, “refused and neglected” to supply any response to this request for information, as a result of which no modification took place.   The defendant then alleges that after January 2009, DiCesare threatened to evict the defendant on behalf of B & D and claimed that the defendant “should pay more than fair value for the space.”   DiCesare breached duties he owed to the defendant and to B & D, and these breaches caused actual damage to both the defendant and B & D, according to the second counterclaim.

Counterclaims three through five do not allege any new substantive facts but rather reallege the factual allegations of count two.   Those three counterclaims allege breach of fiduciary duties, conversion, and violation of Connecticut Unfair Trade Practices Act, General Statutes §§ 42–110b et seq., respectively.

On September 27, 2010, the plaintiffs moved to dismiss the counterclaims on the ground that the defendant has no standing because he is not a member of B & D. The court (Jennings, J.) ruled that the defendant does have standing to pursue the counterclaims, and denied a motion to reargue the motion to dismiss on May 13, 2011.   Thereafter, on May 18, 2011, the plaintiff moved to strike the counterclaims on the ground that they violate Practice Book § 10–10 because the defendant's causes of action do not arise out of the same transaction as the plaintiff's claims.   The defendant filed an objection to the motion to strike on May 23, 2011.   On August 8, 2011, the court heard oral argument, and the plaintiff filed a reply memorandum on the same day.   Although the court granted the defendant permission to file another brief, the defendant did not do so.

STANDARD OF REVIEW

“Pursuant to Practice Book § 10–39(a)(5), when a party seeks to contest the legal sufficiency of any answer to any complaint, counterclaim or cross complaint, or any part of that answer including any special defense contained therein, the party may do so by filing a motion to strike the contested pleading or part thereof.   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 ․ [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 tests the legal sufficiency of a cause of action and may properly be used to challenge the sufficiency of a counterclaim.”  (Citation omitted;  internal quotation marks omitted.)   JP Morgan Chase Bank, Trustee v. Rodrigues, 109 Conn.App. 125, 130–31 (2008).

DISCUSSION

Practice Book § 10–10 provides in relevant part that “[i]n any action for legal or equitable relief, any defendant may file counterclaims against any plaintiff and cross claims against any codefendant provided that each such counterclaim and cross claim arises out of the transaction or one of the transactions which is the subject of the plaintiff's complaint ․” “The purpose of that section ․ is to enhance judicial economy, [to avoid] multiplicity of litigation, and [to avoid] piecemeal disposition of what is essentially one action ․” (Internal quotation marks omitted.)  Ceci Bros., Inc. v. Five Twenty–One Corp., 81 Conn.App. 419, 423 n.3, cert. denied, 268 Conn. 922 (2004).  “The transaction test is one of practicality, and the trial court's determination as to whether that test has been met ought not be disturbed except for an abuse of discretion.”  (Internal quotation marks omitted.)  JP Morgan Chase Bank, Trustee v. Rodrigues, supra, 109 Conn.App. 131–32.  “To arise out of the same transaction, the allegations of the counterclaim must be so connected with the matter in controversy that its consideration is necessary for a full determination of the rights of the parties relative to the matter in controversy under the complaint.”  (Citation omitted;  internal quotation marks omitted.)   Bochicchio v. Mellad, Superior Court, judicial district of Stamford–Norwalk at Stamford, Docket No. CV 05 4003048 (September 29, 2005, Dooley, J.).

Superior Courts in Connecticut have ruled on numerous motions to strike counterclaims in the context of disputes involving real property.   For instance, in 299 Welton, LLC v. Volpe Technologies, Inc., Superior Court, judicial district of New Haven, Docket No. CV 03 0483645 (March 31, 2005, Devlin, J.), which the court characterized as a “a dispute between two commercial landowners over whether a portion of one party's land is subject to a prescriptive easement in favor of the other,” the plaintiff alleged that it acquired an easement over the defendant's property but that the defendant obstructed the easement by building a fence.   Among the defendant's counterclaims were one claiming that the filing of the complaint is slander of title and another alleging tortious interference with contract, premised on an allegation that the filing of the complaint caused a third party to withdraw an offer to buy a part of the defendant's land.  Id. The plaintiff moved to strike those counts on the ground that they do not arise out of the same transaction as the underlying complaint, but the court disagreed, reasoning as follows:  “The heart of the plaintiff's case is that it obtained a prescriptive easement over a paved corner of the defendant's driveway.   The heart of the counterclaim is that the defendant holds absolute title in fee simple to that same paved corner.   The tort counts in both the complaint and counterclaim turn on the resolution of this disputed question of title.”  Id.

The 299 Welton decision discussed above was distinguished in a later ruling, Ippagunta v. Weston, Superior Court, judicial district of Fairfield, Docket No. CV 08 5017354 (July 16, 2009, Doherty, J.) (48 Conn. L. Rptr. 256, 256–57).   In Ippagunta, the action was one for quiet title as to allegedly abandoned town land (“Parcel Y”), whereas the defendant's counterclaim alleged trespass, zoning violations, nuisance and encroachment on the defendant's right of way.   Id. While the court “agree[d] that both the complaint and the counterclaim ultimately require an answer to the question of ownership of ‘Parcel Y,’ “ it also held that “the ownership issue can be resolved without first considering the defendant's counterclaims.”  (Emphasis in original.)  Id., 257.   The court noted that in the 299 Welton decision, “the issue of ownership was brought in the defendant's counterclaim, not in the plaintiff's complaint.   In the instant case, the plaintiffs are the ones who brought the issue of ownership.   Consideration of the defendant's counterclaims is unnecessary to rule on the plaintiffs' cause of action.   If the court should find that the plaintiffs have, indeed, acquired title to the subject property, the defendant's counterclaims all fail and need not be heard and decided.”  Id., 257.

A similar conclusion was reached in Grant v. Lettieri, Superior Court, judicial district of New Haven, Docket No. CV 08 4034372 (December 10, 2009, Corradino, J.), where the plaintiff alleged that the defendants obstructed the right of way that was granted to him via an express easement.   In their counterclaims, the defendants alleged “that the plaintiff's dogs urinate and defecate on the respective defendant's properties” and “that the plaintiff continually leaves his house to walk his dogs and perform other activities in the plain view of the counterclaim defendants without wearing pants or underwear, typically wearing a sweater only.”  (Internal quotation marks omitted.)  Id. In ruling on whether the counterclaims satisfy the transaction test of Practice Book § 10–10, the court summarized the issue as follows:  “[I]f the plaintiff could crushingly rebut the allegations of the counterclaims how will this aid him in establishing his right of way claim or claim of interference with the right of way which have nothing to do with his dogs or how he is attired when walking them?”  Id. The court granted the motion to strike the counterclaims.  Id.

Accordingly, the relevant inquiry in this case is whether a decision on the counterclaims is necessary or even helpful to deciding the underlying actions for quiet title and declaratory judgment.   In order to succeed on the counterclaims, the plaintiff will need to disprove the defendant's claims of breach of duty or argue that the defendant has not met his burden.   One way that DiCesare can accomplish this is by proving that in the relevant time frame, the defendant had no interest in B & D, and thus, it was impossible for DiCesare to breach a duty to someone to whom he owed no duty.   In this scenario, DiCesare's successful defense on the counterclaims would aid him in establishing the underlying complaint's claim that the defendant is not a member of B & D.

Furthermore, the allegations of the complaint and the counterclaim not only concern the same piece of property but also cover overlapping periods of time.   The complaint alleges that the defendant executed a mortgage in April 2009, whereas the counterclaim alleges that DiCesare vacated the property in January 2009 and that foreclosure proceedings began in December 2009.   Determining the status of B & D membership throughout 2009, as necessitated by the counterclaims, will assist in ruling on the plaintiffs' claim that the defendant was not a member of B & D. See, e.g., Caro v. Meerbergen, Superior Court, judicial district of Stamford–Norwalk at Stamford, Docket No. CV 08 5009523 (March 30, 2011, Mintz, J.) (where the complaint and counterclaim involved the same financial accounts but “the underlying facts involved in the competing claims are from completely different time periods,” the transaction test is not satisfied).

In this case the court finds that the defendant's counterclaims arise out of the same transaction which is the gravamen of the claims asserted in the plaintiffs' complaint.   Moreover, the interests of judicial economy and justice will be served if the court avoids piecemeal disposition of essentially the same issues.   Accordingly, the court denies the plaintiffs' motion to strike.

David R. Tobin, J.

FOOTNOTES

FN1. Thus, B & D is purportedly both a plaintiff and a counterclaim plaintiff in the same action, yet represented by one counsel in the underlying complaint and by other counsel in the counterclaim, with these attorneys also representing the opposing individual parties in the dispute..  FN1. Thus, B & D is purportedly both a plaintiff and a counterclaim plaintiff in the same action, yet represented by one counsel in the underlying complaint and by other counsel in the counterclaim, with these attorneys also representing the opposing individual parties in the dispute.

Tobin, David R., J.