Harry R. Traystman v. KOA LLC (2013)

MEMORANDUM OF DECISION ON PLAINTIFF'S MOTION TO STRIKE SPECIAL DEFENSES AND CLAIM OF SETOFF

FACTS

The complaint in this case, filed on December 24, 2012, is for collection of a $67,000 promissory note alleged to have been executed by the defendant, KOA, LLC, on or about January 12, 2012, payable to the plaintiff, Harry R. Traystman, and to be in default.   On April 8, 2013, the defendant filed an answer, two special defenses and a claim of setoff.   The two special defenses appear to be intended to allege, respectively, fraud and estoppel.   On April 19, 2013, the plaintiff moved to strike both defenses and the setoff for lack of standing.   The defendant filed an objection on May 15, 2013.   The matter was argued on May 28, 2013.

DISCUSSION

The purpose of a motion to strike is to contest the legal sufficiency of the allegations of a pleading to state a claim upon which relief can be granted.   Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).   A special defense is a proper subject of a motion to strike.   Practice Book § 10–39(a)(5).   The party who makes a claim has the burden of proving standing to do so.  Seymour v. Region One Board of Education, 274 Conn. 92, 104, 874 A.2d 742, cert. denied, 546 U.S. 1016, 126 S.Ct. 659, 163 L.Ed.2d 526 (2005).   In ruling on a motion to strike, the court must accept as true all well pleaded facts and construe them in the light most favorable to the pleader.  Lestorti v. DeLeo, 298 Conn. 466, 472, 4 A.3d 269 (2010).   If facts provable in the special defense would support a defense, the motion to strike must be denied.   See Vacco v. Microsoft Corp., 260 Conn. 59, 65, 793 A.2d 1048 (2002).   The court cannot rely on facts outside of the pleadings.   Liljedahl Bros., Inc. v. Grigsby, 215 Conn. 345, 347–48, 576 A.2d 149 (1990).   Grounds not specified in the motion may not be considered.  Gazo v. Stamford, 255 Conn. 245, 259, 765 A.2d 505 (2001).

The entire first defense is as follows:

The Plaintiff was the managing partner at Traystman & Coric, LLC and its predecessor.   During that time and as more specifically set out in CV 13 6016261 breached his fiduciary duty to his fellow partners by paying fees earned by the firm from the IOLTA account for himself, his relatives, and employees.   Despite the breach of his duty, the Plaintiff went on to negotiate the sale of the Granite Street property to his son and Drzislav Coric without revealing his breach and committed fraud when he entered into said Note claiming indebtedness by the two or their business entity.

Though repleading pursuant to Practice Book § 10–44 may eliminate the defendant's pleading problems, the first defense best illustrates those problems:  it lacks well pleaded facts showing the defendant KOA, LLC's, connection to the allegations against the plaintiff.   For example, what is the connection between the defendant and Traystman & Coric, LLC? What facts “set out in CV 13 6016261” are meant to be incorporated by that reference? ¹  What is the precise nature of the fiduciary duty the plaintiff is alleged to have had?   By what act or omission is the plaintiff alleged to have breached that duty?   What is the connection between “his fellow partners” and the defendant?  (Though the defendant's setoff and brief in opposition to the present motion identify the principals/members of the defendant, the court is here limited to the allegations in the defense.   See Liljedahl Bros., Inc. v. Grigsby, supra, 215 Conn. 347–48.)   What is “the Granite Street property” and what does it have to do with the defendant?   Most fundamentally, if the first defense is meant to allege fraud, what facts does the defendant allege fulfill the four elements of fraud?   See Reid v. Landsberger, 123 Conn.App. 260, 281, 1 A.3d 1149, cert. denied, 298 Conn. 933, 10 A.3d 517 (2010) (elements of fraud);  SNET Information, Inc. v. Prime One/Prime Direct, Inc., Superior Court, judicial district of New Haven, Docket No. CV 07 5008131 (August 7, 2009, Robinson, A., J.) (at part XIV, striking a special defense for failure to allege facts supporting all elements of fraud).   The allegations of the first special defense are insufficient to show that the defendant has standing to defend against the complaint based on the plaintiff's conduct, fraudulent or otherwise.

The second defense is even more cryptic than the first:  “The Plaintiff is estopped from asserting a claim under the Note given his fraudulent dealings with the principals of the Defendant and concealment of said fraud.”   The second defense lacks allegations sufficient to show that the defendant has standing to pursue the defense of estoppel.

Turning to the defendant's setoff, it alleges as follows:  “The Defendant claims any recovery in this matter should be set off against the funds Traystman & Coric, LLC, Gary Traystman and Drzislav Coric are seeking in CV 13 6016261.   The principals of KOA, LLC, Gary Traystman and Drzislav Coric were the victims of the Plaintiff's fraudulent behavior in both instances.”   Although Practice Book § 10–54 permits a setoff to be pleaded in an answer,² a setoff is not a defense.   It is a cancellation of one debt, in whole or in part, by a liquidated debt the creditor owes to the debtor.   See 225 Associates v. Connecticut Housing Finance Authority, 65 Conn.App. 112, 121, 782 A.2d 189 (2001).  General Statutes § 52–139(a) governs setoffs.  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).  Section 52–139(a) provides:  “In any action brought for the recovery of a debt, if there are mutual debts between the plaintiff or plaintiffs, or any of them, and the defendant or defendants, or any of them, one debt may be set off against the other.”   It is elementary that the alleged debt of the plaintiff, as prospective judgment creditor, which is sought to be set off against the alleged debt of the defendant must be a debt owed by the plaintiff to the defendant.  Section 52–139(a) cannot reasonably be interpreted as permitting setoff of a debt of the plaintiff to a third party—even a principal of the defendant.   The setoff in this case fails to allege facts showing that whatever debt the plaintiff is alleged to owe is a debt to the defendant.   Therefore, the allegations of the setoff are also insufficient to show the plaintiff has standing to allege that setoff.

For the foregoing reasons, the plaintiff's motion to strike is granted.

Cole–Chu, J.

FOOTNOTES

FN1. References to other documents cannot be considered unless they are served and filed pursuant to Practice Book § 10–29(c).  See Tracy v. New Milford Public Schools, 101 Conn.App. 560, 566, 922 A.2d 280, cert. denied, 284 Conn. 910, 931 A.2d 935 (2007)..  FN1. References to other documents cannot be considered unless they are served and filed pursuant to Practice Book § 10–29(c).  See Tracy v. New Milford Public Schools, 101 Conn.App. 560, 566, 922 A.2d 280, cert. denied, 284 Conn. 910, 931 A.2d 935 (2007).

FN2. Practice Book § 10–54 provides:  “Pleading of Counterclaim and Setoff.In any case in which the defendant has either in law or in equity or in both a counterclaim, or right of setoff, against the plaintiff's demand, the defendant may have the benefit of any such setoff or counterclaim by pleading the same as such in the answer, and demanding judgment accordingly;  and the same shall be pleaded and replied to according to the rules governing complaints and answers.  (See General Statutes §§ 52–139 to 52–142.).  FN2. Practice Book § 10–54 provides:  “Pleading of Counterclaim and Setoff.In any case in which the defendant has either in law or in equity or in both a counterclaim, or right of setoff, against the plaintiff's demand, the defendant may have the benefit of any such setoff or counterclaim by pleading the same as such in the answer, and demanding judgment accordingly;  and the same shall be pleaded and replied to according to the rules governing complaints and answers.  (See General Statutes §§ 52–139 to 52–142.)

Cole–Chu, Leeland J., J.