DocketNumber: No. CV 96-0385225-S
Citation Numbers: 1996 Conn. Super. Ct. 7165
Judges: CELOTTO, JUDGE TRIAL REFEREE.
Filed Date: 12/2/1996
Status: Non-Precedential
Modified Date: 7/5/2016
Count one alleges that Madison defaulted on the note and mortgage and, despite Benham's demand for payment, there is now due and owing the principal sum of $20,748,291.73, plus interest and late charges.2
Count two incorporates the allegations of count one relating to the execution of the note and mortgage and alleges that, as additional security for the note. Madison granted to People's Bank a security interest in all personal property used, owned and operated in connection with the mortgaged premises. Count two further alleges that Madison failed and neglected to pay periodic installments due under the note and that Benham has exercised its option to declare the entire principal balance and accrued interest due and payable in full.
Benham seeks a judgment of strict foreclosure of the mortgage or foreclosure by sale; immediate possession of the mortgaged premises; appointment of a receiver to collect rents and profits accruing from the mortgaged premises; the costs and expenses of this action, including reasonable attorney's fees; foreclosure of the security interest; and any other equitable relief that may pertain.
On July 12, 1996, Madison filed an answer, five special defenses and a three count counterclaim.
On July 26, 1996, Benham filed a motion to strike and a memorandum in support thereof. Benham moves to strike Madison's first, second, third, fourth, and fifth special defenses, and Madison's first and second counterclaims. On August 7, 1996, Madison filed a memorandum in opposition to Benham's motion to strike. This motion to strike is presently before the court.
The function of a motion to strike "is to test the legal sufficiency of a pleading." (Internal quotation marks omitted.)RK Constructors, Inc. v. Fusco Corp.,
A motion to strike "admits all facts well pleaded; it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings" (Emphasis omitted.) Mingachos v. CBS,CT Page 7167Inc.,
A. Defendant's First Special Defense
The first special defense claims that "[t]he second count of the plaintiff's complaint is stayed by operation of law, and in particular, by Sections
Practice Book § 164 defines the parameters of a valid special defense and provides in pertinent part that "[n]o facts may be proved under either a general or special denial except such as show that the plaintiff s statements of fact are untrue. Facts which are consistent with such statements but show, notwithstanding, that he has no cause of action, must be specially alleged. . . ." "The purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action." Grant v. Bassman,
General Statutes §
The second special defense asserts that count two is stayed by operation of law, it does not plead facts which show that the plaintiff has no cause of action. Therefore, Benham's motion to strike is granted as to Madison's first special defense.
B. Defendant s Second, Third, Fourth, and Fifth Special Defenses
Benham moves to strike the second third, fourth and fifth special defenses on two grounds. First, Benham claims that these special defenses are legally insufficient because they are not related to the making, validity or enforcement of the note or mortgage, and they rely entirely on factors outside the note and mortgage. Madison responds that the second, third, fourth, and fifth special defenses do attack the making validity and enforcement of the note or mortgage, and therefore, are valid special defenses. In addition, Benham moves to strike on the ground that Madison lacks standing to assert these defenses.
1. Proper Foreclosure Defenses
"At common law, the only defenses to an action of [foreclosure] . . . would have been payment, discharge, release or satisfaction; . . . or, if there had never been a valid lien." (Internal citation omitted.) Petterson v. Weinstock,
Accordingly trial courts have permitted defendants to raise several additional equitable defenses in foreclosure actions, including "equitable estoppel, CUTPA, laches breach of the implied covenant of good faith and fair dealing, tender of deed in lieu of foreclosure, refusal to agree to a favorable sale to a CT Page 7169 third party usury, unconscionability of interest rate, duress, coercion, material alteration, and lack of consideration."Teachers Insurance v. Broad and Hanrahan, Superior Court judicial district of Stamford-Norwalk at Stamford, Docket No. 132304 (June 28, 1995, Hickey, J.); Berkeley Federal Bank Trust v.Phillips, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. 317957 (January 23, 1996, West, J.)
Nonetheless, there are limits as to which equitable defenses and counterclaims may be raised in a foreclosure action. Special defenses to foreclosure "are proper only when they attack the making, validity, or enforcement of the note or mortgage, rather than some act or procedure of the mortgagee." National MortgageCo. v. McMahon, Superior Court, judicial district of New Haven at New Haven, Docket No. 349246 (February 18, 1994, Celotto, J.);Berkeley Federal Bank Trust v. Phillips, supra. "Courts have not been receptive to foreclosure defendants who have asserted defenses and counterclaims based on factors outside of the note or mortgage." Shoreline Bank Trust v. Leninski, Superior Court, judicial district of New Haven at New Haven, Docket No. 335561 (March 19, 1993, Celotto, J.). "The rationale behind this is that counterclaims and special defenses which are not limited to the making validity or enforcement of the note or mortgage fail to assert any connection with the subject matter of the foreclosure action and as such do not arise out of the same transaction as the foreclosure action National Mortgage v. McMahon, supra; DimeSavings Bank v. Albir, Superior Court, judicial district of Stamford-Norwalk, Docket No. 132582 (February 7, 1995, D'Andrea, J.).
a. Defendant's Second Special Defense
The second special defense claims that" [t]he transaction referenced in the plaintiff's complaint is incidental to the transaction which violates the antitrust provision of Connecticut law, as made and provided, and is unenforceable."
The second special defense asserts that the note and mortgage are unenforceable because they are incidental to a transaction which violates Connecticut antitrust law. Essentially, Madison is claiming that the note and mortgage are unenforceable because they are related to a separate agreement which allegedly violates Connecticut antitrust law. Benham counters that this separate agreement, to which the note and mortgage are allegedly incidental, is a certain "Restriction Agreement," which was CT Page 7170 entered into on May 13, 1992 by Madison and the Stop Shop Companies. (Memorandum of Law in Support of Plaintiff's Motion to Strike, p. 6).
In Bristol Savings Bank v. Miller, Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. 512558 (October 19, 1992, Aurigemma, J.), Miller, a foreclosure defendant, filed two special defenses based upon interrelated loans and business dealings between the parties. The court struck Miller's special defenses because they did "not address the making, validity or enforcement of the notes and mortgages which are the subject of the complaint. Rather they allege the nonperformance, breach, and misrepresentation with respect to agreements and dealings which are separate from the notes and mortgages referred to in the complaint." Id.
The motion to strike is granted as to the second special defense because the second special defense does not attack the making, validity, or enforcement of the note or mortgage, and because it is based on an agreement separate from, and outside of the note or mortgage. See Bristol Savings Bank v. Miller, supra;National Mortgage Co. v. McMahon, supra, ("[s]pecial defenses to foreclosure "are proper only when they attack the making, validity or enforcement of the note or mortgage, rather than some act or procedure of the mortgagee."); Shoreline Bank Trust v.Leninski, supra, ("[c]ourts have not been receptive to foreclosure defendants who have asserted defenses and counterclaims based on factors outside of the note or mortgage.").
b. Defendant's Third Special Defense
The third special defense states that "[t]he plaintiff is a wholly-owned subsidiary of People's Bank, which is the plaintiff's predecessor in regard to the instruments referenced in its complaint. The plaintiff's Predecessor, People's Bank, knowingly entered into the transactions referenced in its complaint, which are in furtherance of a restraint of trade in favor of the Stop Shop Companies, and accordingly are unenforceable and against the antitrust provisions of the Connecticut General Statutes as made and provided."
The third special defense claims that the note and mortgage are unenforceable because the plaintiff's predecessor participated in separate activities that violate Connecticut CT Page 7171 antitrust law. The motion to strike the third special defense is granted for the same reasons set forth with respect to the second special defense.
c. Defendant's Fourth Special Defense
The fourth special defense states that "[f]or the reasons set forth in the Second and Third Special Defenses, the plaintiff and its predecessor lack clean hands in which to maintain said foreclosure."
This court has held that the defense of unclean hands is properly stricken where the allegations of unclean hands do not address the making, validity or enforcement of the note or mortgage, or where the allegations address a behavior of the mortgagee, or factors outside of the note or mortgage. NationalMortgage Co. v. McMahon, supra; see also Great Country Bank v.Kiely, Superior Court, judicial district of Ansonia-Milford at Milford, Docket No. 047460 (October 19, 1995, Curran, J.). Furthermore, "[t]he defense of unclean hands to a mortgage foreclosure has generally been disallowed in this state."Mechanics Farmers Savings Bank, FSB v. Delco Development Co.,
In the present case, the allegations of unclean hands are based on the alleged antitrust violations. These alleged violations are separate from, and outside of, the note and mortgage. The defense of unclean hands does not address the making, validity or enforcement of the note or mortgage itself, instead, it relies on factors outside of the note or mortgage. Therefore, the motion to strike the fourth special defense is granted. See National Mortgage Co. v. McMahon, supra; GreatCountry Bank v. Kiely, supra.
d. Defendant's Fifth Special Defense
The fifth special defense states that "[f]or the reasons set forth in the Second and third Special Defenses, the plaintiff and its predecessor are guilty of violating the Connecticut Unfair Trade Practices Act ("CUTPA") C.G.S. §
CUTPA is a valid defense in a foreclosure action. FirstFederal Savings and Loan, Rochester v. Nielsen, Superior Court, judicial district of New Haven at New Haven, Docket No. 326502 (September 16, 1992, Celotto, J.); Hans L. Levi, Inc. v. Kovacs, Superior Court, judicial district of Litchfield, Docket No. 056101 (November 4, 1991, Pickett, J.). However, the alleged CUTPA violation must still go to the making, validity or enforcement of the note or mortgage. Berkeley Federal Bank Trustv. Rotko, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. 318648 (January 25 1996, West J.).
In the present case, Madison's CUTPA defense arises out of Benham s alleged antitrust violations. The fifth special defense does not address the making, validity, or enforcement of the note or mortgage; rather it is premised on factors outside of the note and mortgage. Accordingly, the motion to strike fifth special defense is granted
2. Standing
Benham's second ground for moving to strike Madison's second, third fourth and fifth special defenses is that Madison lacks standing to assert these antitrust based special defenses. In the present case, however, this court need not determine whether Madison has standing to assert its antitrust based special defenses and counterclaims because Madison's second, third, fourth, and fifth special defenses and first and second counterclaims fail because they do not attack the making, validity, or enforcement of the note or mortgage.
When construing Connecticut antitrust laws, Connecticut courts must look to interpretations by federal courts of the federal antitrust laws. General Statutes §
In Waterford Parkade, Inc. v. Picardi, supra, Judge Aurigemma applied the factors set forth in Southaven and McCready, and after an extensive review of the pertinent federal case law held that a land developer did not have antitrust standing to sue a supermarket for alleged antitrust violations. In Southaven LandCo., Inc. v. Malone Hyde, Inc., supra,
Conversely, in Serfecz v. Jewel Food Stores,
C. The Defendant's First and Second Counterclaims
Benham moves to strike Madison's counterclaims on two grounds. First, Benham claims that Madison lacks standing to assert these antitrust based counterclaims.3 Second, Benham claims that these antitrust based counterclaims do not arise out of the transaction which is the subject of Madison's action.
Practice Book § 116 provides in pertinent part, "[i]n any action for legal or equitable relief, any defendant may file counterclaims against any plaintiff . . . provided that each such counterclaim . . . arises out of the transaction . . . which is the subject of the plaintiff's complaint. . . ." "[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." (Citation omitted.) Wallingford v. Glen ValleyAssociates, Inc.,
1. Defendant's Counterclaim. First Count
Count one of the counterclaim alleges that Madison People's Bank, and Stop Shop Companies entered into an agreement whereby Stop Shop sought to limit business competition and that this agreement violated Connecticut antitrust laws. Count one also CT Page 7175 alleges that as a result of this agreement, the note and mortgage are void as against public policy and Madison is entitled to a refund of the money it has paid to People's Bank under the note and mortgage.
Benham's complaint arises out of the December 1993 note and mortgage. The first count of Madison's counterclaim arises out of the alleged May 1992 Restriction Agreement. The first count of the counterclaim alleges antitrust violations on the part of Benham in connection with an agreement which is an entirely separate agreement from the note and mortgage. Accordingly, the motion to strike count one of the counterclaim is granted because it does not arise out of the same transaction that is the subject of Benham's complaint. See Union Trust v. Hamilton Branford LTD., Superior Court judicial district of New Haven at New Haven, Docket No. 325651 (August 27, 1993, Celotto, J.).
2. Defendant's Counterclaim Second Count
Count two of the counterclaim incorporates the allegations of count one and alleges that Benham has violated the Connecticut Unfair Trade Practices Act by acting in an immoral, oppressive, unethical, and unscrupulous manner, which has caused substantial injury to consumers, competitors, and other businessmen.
CUTPA "is the basis for a claim for damages and so [is] properly . . . pleaded as a counterclaim." GE Capital Mortgage v.Klett, supra. However, the CUTPA-based counterclaim must still arise from the same transaction that gives rise to the complaint The second count of the counterclaim, like the first count, is premised on a transaction (the Restriction Agreement) which is separate from the transaction (the note and mortgage) which is me basis of Benham s complaint Accordingly the motion to strike the second count of the counterclaim is granted because the complaint and counterclaim do not arise out of the same transaction. SeeUnion Trust v. Hamilton Branford LTD., supra.
CONCLUSION
Based upon the above reasoning, the motion to strike is granted as to first, second, third fourth, and fifth special defenses and the motion to strike is granted as to the first and second counterclaims as well.
Donald W. Celotto, J.T R. CT Page 7176
Southaven Land Co., Inc. v. Malone & Hyde, Inc. , 715 F.2d 1079 ( 1983 )
Wallingford v. GLEN VALLEY ASSOCIATES, INC. , 190 Conn. 158 ( 1983 )
Reynolds v. Ramos , 188 Conn. 316 ( 1982 )
Petterson v. Weinstock , 106 Conn. 436 ( 1927 )
Nowak v. Nowak , 175 Conn. 112 ( 1978 )
Hamm v. Taylor , 180 Conn. 491 ( 1980 )
Zenith Radio Corp. v. Hazeltine Research, Inc. , 89 S. Ct. 1562 ( 1969 )
Associated General Contractors of California, Inc. v. ... , 103 S. Ct. 897 ( 1983 )