169 OLIVE STREET, LLC v. SHARYN D’URSO ET AL.

2010 Ct. Sup. 15221, 50 CLR 394
No. CV 09 5029796 SConnecticut Superior Court Judicial District of New Haven at New Haven
July 23, 2010

[EDITOR’S NOTE: This case is unpublished as indicated by the issuing court.]

MEMORANDUM OF DECISION RE MOTION TO DISMISS (#108)
WILSON, J.

PROCEDURAL AND FACTUAL BACKGROUND
On June 15, 2009, the plaintiffs, 169 Olive Street, LLC and Oesse Foods, Inc., filed a three-count complaint against the defendants, Sharyn D’Urso (D’Urso) and the Law Office of Sharyn D’Urso. In count one, Olive Street alleges that the defendants breached a written lease agreement, entered into on December 1, 2006, for the use and occupancy of the premises located at 169 Olive Street, first floor, New Haven, claiming damages in the amount of $5,756.[1] In count two, Oesse Foods alleges that the defendants converted to their own use a $6,287 check, which was “fraudulently issued by the [p]laintiff to the [defendants] and deposited into the [defendants’] checking account by a former employee of [Oesse Foods]” on April 17, 2006, without Oesse Food’s authorization, knowledge or consent. In count three, Oesse Foods realleges the claims in count two and further alleges a claim for unjust enrichment.

On July 7, 2009, the defendants filed an appearance, answer, five special defenses and four-count counterclaim. The plaintiffs filed an answer to the counterclaim on July 10, 2009. On April 12, 2010, the defendants filed a motion to dismiss the plaintiffs’ complaint on the ground that the court lacks subject matter jurisdiction. The motion is accompanied by a memorandum of law, dissolution of marriage judgment and a separation agreement. On April 15, 2010, the plaintiffs filed an objection to the defendants’ motion to dismiss. The motion was heard at short calendar on May 3, 2010.

DISCUSSION
“A motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court A motion to dismiss tests, inter alia, whether, on the face of the record, CT Page 15222 the court is without jurisdiction.” (Internal quotation marks omitted.)Caruso v. Bridgeport, 285 Conn. 618, 627, 941 A.2d 266 (2008). In the present case, the defendants filed a motion to dismiss on the ground that this court lacks subject matter jurisdiction and argue that the doctrines of res-judicata and/or collateral estoppel implicate the court’s jurisdiction.[2] “Res judicata is not included among the permissible grounds on which to base a motion to dismiss . . . [because it] does not itself raise a jurisdictional question.” Zizka v. Water Pollution Control Authority, 195 Conn. 682, 687, 490 A.2d 509 (1985). Nor does collateral estoppel “implicate a court’s subject matter jurisdiction . . . [mandating] dismissal of a case.” State v. T.D., 286 Conn. 353, 360 n. 6, 944 A.2d 288 (2008). “Collateral estoppel, like res judicata, must be specifically pleaded by a defendant as an affirmative defense.” Carnese v. Middleton, 27 Conn.App. 530, 537, 608 A.2d 700 (1992); see also Practice Book § 10-50. Thereafter, “the issue may . . . be resolved by way of summary judgment.” Zizka v. Water Pollution Control Authority supra, 687. Therefore, to the extent that either doctrine applies, they should have been pleaded as special defenses[3] and raised in a motion for summary judgment.[4] Since a motion to dismiss is the improper procedural vehicle in which to raise res judicata and/or collateral estoppel, the defendants’ motion to dismiss on this basis is denied.

Even if the court were willing to entertain the defenses of res judicata or collateral estoppel, as presented within the improper procedural context of a motion to dismiss, the court would still deny the motion. The defendants contend that Oreste Speciale (Speciale), as an agent of the plaintiffs, entered into a separation agreement with D’Urso on June 18, 2008, which was incorporated by reference into a dissolution of marriage judgment. The defendants argue that the issues before the court, namely breach of the lease agreement, conversion and unjust enrichment, should be “precluded as they were already resolved by the separation agreement in the divorce action.” The plaintiffs counter that they were not parties to the separation agreement entered into by Speciale and D’Urso and that Speciale entered into the agreement, “not wearing the hat as agent for the [plaintiffs], but under the hat of a husband in a divorce proceeding.” Moreover, the plaintiffs contend that the judgment, which incorporated the separation agreement, did not deal with the issues before the court.

Res judicata and collateral estoppel operate only against “the same parties [to the prior action] or those in privity with them . . .”Mazziotti v. Allstate Ins. Co., 240 Conn. 799, 812, 695 A.2d 1010
(1997). “Privity is not established by the mere fact that persons may be interested in the same question or in proving or disproving the same set of facts. Rather, it is, in essence, a shorthand statement for the CT Page 15223 principle that [res judicata or] collateral estoppel should be applied only when there exists such an identification in interest of one person with another as to represent the same legal rights so as to justify preclusion.” Id., 814.

In the present case, the plaintiffs are in privity with Speciale, a party to the dissolution action, because Speciale is the owner of the plaintiff companies. The separation agreement expressly states that Speciale “owns real property located at 169 Olive Street,” and “shall also receive his business known as Oesse Foods, Inc.” As a consequence, the interests of Speciale are the same as the interests of the plaintiffs. Therefore, the plaintiffs are bound by the dissolution action and separation agreement to the same extent as Speciale.

“Because [res judicata and collateral estoppel] are judicially created rules of reason that are enforced on public policy grounds . . . we have observed that whether to apply either doctrine in any particular case should be made based upon a consideration of the doctrine’s underlying policies, namely, the interests of the defendant and of the courts in bringing litigation to a close . . . and the competing interest of the plaintiff in the vindication of a just claim.” (Citation omitted; internal quotation marks omitted.) Weiss v. Weiss, 297 Conn. 446, 460 (2010). Nevertheless, “[a]lthough res judicata and collateral estoppel often appear to merge into one another in practice, analytically they are regarded as distinct.” Id., 458.

“For an issue to be subject to collateral estoppel, it must have bee fully and fairly litigated in the first action. It also must have been actually decided and the decision must have been necessary to the judgment . . . An issue is actually litigated if it is properly raised in the pleadings or otherwise, submitted for determination, and in fact determined . . . An issue is necessarily determined if, in the absence of a determination of the issue, the judgment could not have been validly rendered . . . If an issue has been determined, but the judgment is not dependent upon the determination of the issue, the parties may relitigate the issue in a subsequent action.” (Citations omitted; emphasis in original; internal quotation marks omitted.) Delahunty v. Massachusetts Mutual Life Ins. Co., 236 Conn. 582, 600, 674 A.2d 1290 (1996). Moreover, our Supreme Court has concluded that, with regard to a dissolution . . . action, “we will not require all . . . issues between married persons to be litigated . . .” (Emphasis in original.) Id., 602.

“[The] interpretation of a separation agreement that is incorporated into a dissolution decree is guided by the general principles governing the construction of contracts . . . A contract must be construed to CT Page 15224 effectuate the intent of the parties . . . Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms.” (Citation omitted; internal quotation marks omitted.) Eckert v. Eckert, 285 Conn. 687, 692, 941 A.2d 301 (2008). “[W]hen interpreting a contract, [a court] must look at the contract as a whole, consider all relevant portions together and, if possible, give operative effect to every provision in order to reach a reasonable overall result.” (Internal quotation marks omitted.) Ahmadi v. Ahmadi, 294 Conn. 384, 391, 985 A.2d 319 (2009).

Here, the separation agreement did not consider the issues currently before the court, namely the plaintiffs’ claims for breach of a written lease agreement, conversion and unjust enrichment. There is no reference to the lease or the alleged conversion whatsoever. While the separation agreement considers that the parties intended to make a “definite, final and permanent settlement relating to all of their past and future respective property rights” collateral estoppel requires that the issues be “actually litigated and necessarily determined.” To the extent that the separation agreement considers rights to the 169 Olive Street property, it fails to consider the defendants’ lease on the property. In fact, part of Olive Street’s claims concerning breach of the lease agreement are for rent and utilities that accrued after the separation agreement was signed. The defendants argue that Speciale agreed to hold D’Urso harmless from any liability on the property, however, the context of this paragraph of the separation agreement concerned the mortgage on the property, which Speciale agreed to pay. If the parties agreed upon anything concerning the lease, it was that it would continue after the separation agreement and that D’Urso would continue to be liable for it. In particular, D’Urso agreed “that all existing obligations or debts, incurred by her shall be and are her sole responsibility.” She further agreed “to keep [Speciale] free, harmless and indemnified of and from any and all debts, charges and liabilities heretofore and hereafter contracted by her.”

To the extent that the separation agreement attempts to include a compromise as to “all of [the parties’] claims and all of their differences,” collateral estoppel again requires that the issues be “actually litigated and necessarily determined.” The dissolution action, through incorporation of the separation agreement, does not make any definitive findings of fact that would demonstrate that issues regarding the alleged breach of the written lease agreement or alleged conversion of a fraudulently issued check had previously been considered or determined. See Delahunty v. Massachusetts Mutual Life Insurance Co. supra, 236 Conn. 601 (concluding that “definitive findings of fact . . . would demonstrate resolution of [an] issue”). The separation agreement is CT Page 15225 unambiguous in this regard. There is simply no basis upon which to conclude that the parties intended to consider and determine issues related to the alleged breach of the lease agreement or the alleged fraudulent conversion as a part of their separation agreement.

Regarding the defendant’s special defense of res judicata, “[t]he doctrine of res judicata provides that [a] valid, final judgment rendered on the merits by a court of competent jurisdiction is an absolute bar to a subsequent action between the same parties . . . upon the same claim or demand . . . Moreover, [res judicata] prevents the pursuit of any claims relating to the cause of action which . . . were actually made or might have been made [in the prior action] . . . [T]he essential concept of the modern rule of claim preclusion is that a judgment against [the] plaintiff is preclusive not simply when it is `on the merits’ but when the procedure in the first action afforded plaintiff a fair opportunity to get to the merits.” (Citations omitted; emphasis altered; internal quotation marks omitted.) Weiss v. Weiss, supra, 459. The Supreme Court “has adopted a transactional test for determining whether an action involves the same claim as a prior action such that it triggers the doctrine of res judicata . . . [T]he claim [that is] extinguished includes all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose. What factual grouping constitutes a transaction, and what groupings constitute a series, are to be determined pragmatically, giving weight to such considerations as whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties’ expectations or business understanding or usage.” (Citations omitted; internal quotation marks omitted.) Id., 461. “In applying the transactional test, we compare the complaint in the second action with the pleadings and the judgment in the earlier action.” Delahunty v. Massachusetts Mutual Life Ins. Co., supra, 236 Conn. 590.

The Supreme Court, however, has concluded that “it would be an inappropriate application of the principles of res judicata to require tort actions based on claims arising between married persons to be litigated in a dissolution proceeding.” Id., 592. In particular, “[a] tort action, the purpose of which is to redress a legal wrong by an award of damages, is not based on the same underlying claim as an action for dissolution, the purpose of which is to sever the marital relationship, to fix the rights of the parties with respect to alimony and child support, and to divide the marital estate.” Id.

Nevertheless, “when a party had the opportunity to raise the claim and the dissolution proceeding provided the proper forum for the resolution CT Page 15226 of that claim, res judicata may bar litigation of a subsequent action.”Weiss v. Weiss, supra, 464. In Weiss, the plaintiff brought an action for breach of contract, breach of fiduciary duties, fraudulent representation, conversion and theft, “based on the contention that the defendant [was] withholding funds to which the plaintiff [was] entitled pursuant to the [separation] agreement.” Id., 462. The separation agreement provided that the plaintiff would receive one-third of the fees earned by the defendant in his “personal injury cases.” The plaintiff argued that “personal injury cases” included “workers’ compensation cases.” The Supreme Court barred the plaintiff’s claim and concluded tha Delahunty was inapplicable “because although the plaintiff’s claim sounds in tort and contract, it is, in substance, a claim regarding the meaning of a phrase in the [separation] agreement . . . [and that] the meaning of terms in the agreement and the division of the marital estate were squarely . . . at issue in the dissolution proceeding.” Id., 468. Weiss
did not contravene the holding in Delahunty but concluded that the “application of res judicata and Delahunty to subsequent actions between parties in a dissolution proceeding necessarily turns on the precise nature and substance of the second action.” Id., 469.

In the present case, the plaintiffs’ claims for breach of a written lease agreement, conversion and unjust enrichment are not precluded by res judicata. The present action is not based on the same underlying claim as the dissolution action, the purpose of which was to terminate the marriage and distribute the marital estate. Unlike the circumstances in the Weiss case, where the claim regarded the meaning of a phrase in the separation agreement concerning the distribution of the marital estate, the plaintiffs in this case are seeking damages for conduct that occurred both during and after the dissolution judgment.[5] Therefore, the reasoning in Weiss is inapplicable. Pursuant to Delahunty, the plaintiffs were not required to bring their claims in the dissolution action.

CONCLUSION
Accordingly, since a motion to dismiss is the improper procedural vehicle in which to raise res judicata and/or collateral estoppel, the defendants’ motion to dismiss on this basis alone is denied. Even if the court were to decide the motion based on the special defenses of res judicata or collateral estoppel raised by the defendants, the court would still deny the motion.

[1] Olive Street claims that the defendants owe $900 for the use and occupancy of the premises, which was due on or before March 1, 2009, and $4,856 for utility use of the premises from November 2007 through March CT Page 15227 15, 2009, in accordance with the terms of the lease agreement.
[2] It is unclear as to whether the defendants intended to raise res judicata, collateral estoppel or both as grounds for dismissal in their motion to dismiss. In their answer, the defendants pleaded res judicata as a special defense but not collateral estoppel. In their memorandum of law, the defendants argue that “the [p]laintiff should be collaterally estopped from pursuing this action.” As a consequence, the court will address both res judicata and collateral estoppel as grounds for dismissal.
[3] As previously discussed, the defendants pleaded res judicata as a special defense but only to Oesse Food’s claims of unjust enrichment and conversion, not to Olive Street’s claim of breach of a written lease agreement. The defendants failed to plead collateral estoppel as a special defense to any of the plaintiffs’ claims. Nevertheless, the plaintiffs have failed to object to the defendants’ motion to dismiss on the ground that the defendants did not specifically plead all of the defenses raised in their motion to dismiss. Therefore, the court will treat the plaintiffs’ failure to object as a waiver of the requirement that the defendants specifically plead all of their special defenses. See Carnese v. Middleton, supra, 537.
[4] It should be noted that our Supreme Court has stated that “a trial court can properly entertain a . . . motion to dismiss that raises collateral estoppel grounds.” Wilcox v. Webster Ins., Inc., 294 Conn. 206, 223, 982 A.2d 1053 (2009) (declining to address the collateral estoppel argument on the ground that the record was “devoid of the factual findings that are essential to the resolution of [such a] claim”). In doing so, Wilcox quoted Sullivan v. Thorndike, 104 Conn.App. 297, 311, 934 A.2d 827 (2007), cert. denied, 285 Conn. 907, 908, 942 A.2d 415, 416
(2008), but interestingly left out the language that considered the particular Practice Book § 15-8 motion for judgment of dismissal that was at issue in Sullivan. Since Wilcox failed to address the collateral estoppel claim on other grounds, it is unclear as to whether our Supreme Court intended to extend the rule outlined in Sullivan for a § 15-8
motion for judgment of dismissal to a Practice Book § 10-30 motion to dismiss, which is at issue in the present case. Nevertheless, because a § 10-30 motion to dismiss, unless it implicates subject matter jurisdiction, must be filed before pleading a special defense, pursuant to Practice Book § 10-6, and because res judicata and collateral estoppel must be specifically pleaded as a special defense in order to be raised, neither res judicata nor collateral estoppel can be raised properly in a motion to dismiss under our rules of practice.

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[5] In particular, the alleged fraudulent conversion occurred on April 17, 2006, before the dissolution judgment on June 18, 2008. The plaintiffs’ complaint is devoid of any allegation as to when the alleged breach of the written lease agreement occurred but at least a portion of the requested damages are for rent and utility use that accrued after the dissolution judgment.

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