KLGL LLC v. Water Damage Drying Services, Inc. (2014)

MEMORANDUM OF DECISION ON MOTIONS FOR SUMMARY JUDGMENT (# 110 and # 113) ¹ and on OBJECTION TO MOTION FOR SUMMARY JUDGMENT (# 112)

Plaintiff moves for a summary judgment.

I. Nature of the Case

By way of background, it is undisputed that on January 14, 2005, the plaintiff corporation sold a Servicemaster cleaning business franchise to the defendant (hereafter, WDDS).  Of the total purchase price of $277,000, $180,000 came in the form of a promissory note providing for monthly payments of principal and interest, and maturing on August 1, 2012.

The one-count complaint is captioned “Breach of Contract.”   Paragraphs one and two, both admitted by defendant, set forth the details of the note described in the preceding paragraph.   Paragraph 3 alleges that defendant has defaulted in payment of the note.   To this proposition, defendant's answer replies that it has insufficient knowledge upon which to form a belief as to accuracy, and thus leaves plaintiff to its proof.   The answer admits paragraph 4's allegation of demand made by plaintiff, professes insufficient information to respond to paragraph 5's allegation of failure to respond to that demand, and denies paragraph 6's contention that WDDS is therefore indebted to KLGL. What ought to be paragraph 7 is instead labeled paragraph 6, and alleges that plaintiff remains the holder of the note;  the so-called paragraph 7, really number 8, alleges damages as a result of defendant's failure to pay.   Defendant professes insufficient knowledge to permit a reply to paragraph “6” (7), and denies “7” (8).

In addition, defendant pleads a single special defense labeled “Fraud in the Inducement” which claims that plaintiff knowingly made false and material misstatements as to the business volume preceding the sale, thus “superficially (sic;  the court will construe this as “substantially”) inflating the value of the business” to defendant's detriment.   Plaintiff denies this allegation.

By way of a four-count counterclaim, defendant pleads (1) intentional misrepresentation;  (2) breach of contract;  (3) breach of covenant of good faith and fair dealing;  and (4) unjust enrichment.   Plaintiff denies the material allegations of these claims.

The thrust of the present motion is not to litigate the merits of the special defense or the counterclaims.   Rather, plaintiff argues that each is subject to certain statutes of limitations, and all of the limitation periods have expired well before the answer date of November 21, 2012.   According to plaintiff, this should result in this court's effectively barring defendant from raising any of these issues by way of defense or an affirmative claim against plaintiff.   If defendant is prevented from raising these issues, plaintiff contends, there are no genuine issues of fact standing in the way of its achieving a judgment in its favor on the complaint.

II. Legal Standards

Recently, in Marinos v. Poirot, 308 Conn. 706 (2013), at pages 711–712, the Supreme Court articulated how deliberations on a motion for summary judgment must proceed:

Practice Book § 17–49 provides that summary judgment “shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”   A party moving for summary judgment is held to a “strict standard.”   To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact ․ As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent ․ When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue ․ Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue ․ It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue.   Mere assertions of fact ․ are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § 17–45 (citations omitted).

This court has utilized that process in its review of this motion so as to require of plaintiff a showing excluding any real doubt as to any issue of material fact as to its right to a judgment on the allegations of its complaint, and so as to require of defendant a showing establishing that its special defense or counterclaims address material factual issues and are sufficient to show that such issues are genuinely disputed.

III. Discussion

Since defendant has admitted the existence and execution of the 2005 promissory note in the terms alleged by plaintiff, the remaining questions plaintiff must answer in order to warrant the entry of a judgment in its favor are whether those instruments are in default, and, if so, what amount is owed to plaintiff on the note.   There is a substantial problem with plaintiff's motion in this respect—defendant has not admitted its allegations of a breach and a debt owed.  Practice Book § 17–45 prescribes that a motion for summary judgment “shall be supported by such documents as may be appropriate, including but not limited to affidavits, certified transcripts of testimony under oath, disclosures, written admissions and the like.” § 17–46 sets forth with particularity the formal requisites of such an affidavit.   No affidavit or any of the other enumerated forms of proof accompany the motion.   Defendant has not admitted the debt owed.   Plaintiff relies exclusively upon the insufficiency of the defenses, and has not met its burden of proving its own entitlement to a judgment;  see, Romprey v. Safeco Insurance Company, 310 Conn. 304, 315 (2013) (“[t]he party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law”).   Plaintiff cannot prevail on its motion regardless of the merits of its argument on the statutes of limitations.

While this deficiency blocks a judgment at the present time, the court anticipates that plaintiff's ability to cure this defect will cause the same legal issues to reassert themselves at a later date.   Considerations of judicial economy persuade this court to address the applicability of the statutes of limitations to the special defense and counterclaims at this moment because both parties have briefed the matter.²

Plaintiff essentially argues that any action in contract or tort based upon a contract formed on January 14, 2005, would have had to be brought by January 14, 2008, if in tort, or by January 14, 2011, if in contract.   It cites as authority for these assertions §§ 52–577 (“No action founded upon a tort shall be brought but within three years from the date of the act or omission complained of”) and 52–576 (“No action for an account, or on any simple or implied contract, or on any contract in writing, shall be brought but within six years after the right of action accrues ․”), respectively.   The answer date of November 21, 2012, lies outside of the parameters of either statute, so it is unnecessary to determine whether one might apply, but not the other.   As of January 15, 2011, its argument implies, defendant was shorn of any remaining defenses to an action to collect upon the note, and relying upon Haggerty v. Williams, 84 Conn.App. 675 (2004), maintains (correctly, although the case is otherwise inapposite) that summary judgment may be an appropriate vehicle for adjudication of statute of limitations issues.

WDDS objects on two grounds.   First, it posits that while the statutes bar a party from making a claim after the specified period, that bar does not apply to the raising of such issues defensively.   Secondly, it maintains that plaintiff's continuing course of conduct tolled the applicable statute of limitations.

Taking that second issue first, the factual basis for its invocation by defendant is that plaintiff, “by accepting payments under the promissory note, engaged in a continuous and ongoing fraud perpetrated against” it, thus affording WDDS the benefit of the rule of three cases it relies upon, namely Bednarz v. Eye Physicians of Central Connecticut, P.C., 287 Conn. 158 (2008);  Martinelli v. Fusi, 290 Conn. 347 (2009);  and Flannery v. Singer Asset Fin. Co., 128 Conn.App. 507 (2011).   As the Supreme Court had pointed out earlier in Blanchette v. Barrett, 229 Conn. 256, 276 (1994), the doctrine at issue is “conspicuously fact-bound.”   Both the Bednarz and the Martinelli cases, and, perhaps not coincidentally, many of the reported decisions involving the continuous course of conduct principle, sound in medical malpractice and were concerned with the ongoing duty of a physician to report a misdiagnosis or other example of malpractice to a patient.   The factual chasm separating the facts of that sort of case from those present in the case at bar is substantial.

Flannery involved a business deal gone sour, and may be authoritative in a manner not contemplated by defendant.   In the trial court, plaintiff Flannery's claims of violation of the provisions of the Connecticut Unfair Trade Practices Act, C.G.S. § 42–110, et seq., in the course of an asset purchase succumbed to defendant's motion for summary judgment raising the statute of limitations (in that case, § 42–110g(f), applicable to CUTPA claims) as a shield against his action.   On appeal, he argued that the court had applied the statute in error, contending that a claimed fiduciary relationship between the parties gave rise to a constructive duty on defendant's part to alert plaintiff to the existence of a basis for an actionable claim founded upon the original sale transaction.   This is highly similar to defendant's claim here, but for the allegation that the receipt of monthly payments on the note created or at least intensified that fiduciary duty.   In affirming the trial court, the Appellate Court noted that Flannery was not claiming that his defendant had concealed the existence of the plaintiff's cause of action (emphasis in original, 128 Conn.App. 507, 517).   WDDS here suffers from the same deficit.   At this juncture, since there is ample cause upon which to deny plaintiff's motion on other grounds, this court will not decide if the continuing payments premise alters the result dictated by Flannery;  suffice it to say that it will be the burden of WDDS going forward not only to prove that it lacked knowledge of the potential for the claims it asserts in its counterclaims until 2012, but also, if provable, that such fact is materially significant in tolling the statute of limitations.

The other argument defendant raises is that a statute such as 52–576 or 52–577 may bar the initiation of an action after a given time period, but that the facts which might once have sustained a cause of action may still be pleaded defensively against a plaintiff who has waited until those statutes expired before filing its own claims.   In the words of defendant's brief, “that statute (referring to 52–576, but presumably applicable to 52–577 also) only bars actions, not defenses.”   This is an interesting proposition, but defendant has cited not a single case even supporting this assertion, let alone applying it to the cause at hand.   Fortunately for defendant, that lapse is not fatal at this juncture.   Should the claim continue to be made, however, the court will expect more depth in its explanation of the authority for this argument and how it applies here.

IV. Conclusion and Orders

The court concludes that the plaintiff has not at this time set forth a sufficient basis upon which to conclude that defendant is liable to it upon the current allegations of its complaint.   The motion for summary judgment is denied.

Boland, J.

FOOTNOTES

FN1. There are indeed two pending plaintiff motions for summary judgment.   The first is dated August 29, 2013.   Defendant filed an objection on December 13, and the plaintiff filed its second motion on December 16, the day of oral argument.   At that argument, defendant stipulated that the only difference between the two motions is the latter's discussion of a statute plaintiff contends is pertinent.   Defendant's objection addresses this issue, and thus it did not object to the filing of the second motion.   The court will deem the August version to be moot..  FN1. There are indeed two pending plaintiff motions for summary judgment.   The first is dated August 29, 2013.   Defendant filed an objection on December 13, and the plaintiff filed its second motion on December 16, the day of oral argument.   At that argument, defendant stipulated that the only difference between the two motions is the latter's discussion of a statute plaintiff contends is pertinent.   Defendant's objection addresses this issue, and thus it did not object to the filing of the second motion.   The court will deem the August version to be moot.

FN2. Neither party's brief includes page numbers.   Every modern word processing program makes it simple to add page numbers to a document by utilizing the “insert page numbers” tab on the toolbar.   Doing so would have expedited the court's review of these filings, and would be greatly appreciated in the future..  FN2. Neither party's brief includes page numbers.   Every modern word processing program makes it simple to add page numbers to a document by utilizing the “insert page numbers” tab on the toolbar.   Doing so would have expedited the court's review of these filings, and would be greatly appreciated in the future.

Boland, John D., J.