701 MAIN STREET, LLC ET AL. v. RLS DESIGN BUILD, LLC ET AL.

2008 Ct. Sup. 18404
No. FBT CV 08-5016969 SConnecticut Superior Court Judicial District of Fairfield at Bridgeport
November 20, 2008

[EDITOR’S NOTE: This case is unpublished as indicated by the issuing court.]

MEMORANDUM OF DECISION
DAVID R. TOBIN.

The plaintiffs in this matter, 701 Main Street, LLC (701 Main Street) and Elizabeth Reisman, commenced this action by service of process on the defendants, RLS Design Build, LLC (RLS), Robert Wynne Barrett and Robert L. Small on June 26, 2008.[1] In their complaint, the plaintiffs allege that on January 23, 2007, RLS entered into a written contract with Reisman, where RLS agreed to act as the manager for a construction project to build a retail music store and teaching studio on property located at 701 Main Street in Monroe, Connecticut. The subject property is owned by plaintiff 701 Main Street, and plaintiff Reisman is a member and director of 701 Main Street. Defendants Barrett and Small serve as members of RLS. Notably, Resiman only signed this contract in her individual capacity, not as a member of 701 Main Street. According to the terms of the contract, RLS agreed to achieve substantial completion of the work by June 27, 2007, and the project had a guaranteed maximum price of $825,000. By August 2007, however, 701 Main Street had already made progress payments of $706,000, and the project was nowhere near completion. During the same time period, an accounting revealed that approximately $246,000 was missing from the funds that 701 Main Street had paid RLS, and defendant Barrett admitted that RLS had used some of the progress payments for purposes not related to this construction contract. Consequently, on October 9, 2007, Reisman terminated the contract between the parties. The plaintiffs’ nine-count complaint states the following claims: (1) breach of contract (against RLS), (2) breach of contract (against Barrett), (3) fraudulent misrepresentation (against all defendants), (4) conversion (against all defendants), (5) violations of the Connecticut Civil Theft Statute (against all defendants), (6) violations of the Connecticut Unfair Trade Practices Act (against all defendants), (7) breach of the covenant of good faith and fair dealing (against RLS), (8) breach of the covenant of good faith and fair dealing (against Barrett) and (9) fraudulent conveyance (against Barrett and J. Barrett).

On September 9, 2008, defendant Barrett filed a timely motion to CT Page 18405 dismiss counts one, two, seven and eight and memorandum of law in support of the motion. As grounds, Barrett argues a lack of standing and subject matter jurisdiction to allow these claims to proceed as to plaintiff 701 Main Street. The plaintiffs filed a memorandum of law in opposition on September 29, 2008, which included the sworn affidavit of Resiman. This matter was heard at Short Calendar on October 27, 2008.

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, the court is without jurisdiction.” (Internal quotation marks omitted.) Beecher v. Mohegan Tribe of Indians of Connecticut, 282 Conn. 130, 134 (2007). “When a . . . court decides a jurisdictional question raised by a pretrial motion to dismiss, it must consider the allegations of the complaint in their most favorable light . . . In this regard, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader.” (Internal quotation marks omitted.) Cogswell v. American Transit Ins. Co., 282 Conn. 505, 516 (2007). “Pursuant to the rules of practice, a motion to dismiss is the appropriate motion for raising a lack of subject matter jurisdiction.” St. George v. Gordon, 264 Conn. 538, 545 (2003). Moreover, “[t]he issue of standing implicates subject matter jurisdiction and is therefore a basis for granting a motion to dismiss.” Id., 544. As a result, “[t]he proper procedural vehicle for disputing a party’s standing is a motion to dismiss.” (Internal quotation marks omitted.)D’Eramo v. Smith, 273 Conn. 610, 615 n. 6 (2005). Finally, “[t]he plaintiff bears the burden of proving subject matter jurisdiction, whenever and however raised.” (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. New London, 265 Conn. 423, 430 n. 12 (2003).

In his memorandum of law, Barrett argues that 701 Main Street cannot bring the claims found in counts one, two, seven and eight because plaintiff Reisman signed the contract in her individual capacity as opposed to her role as a member of 701 Main Street. Barrett contends that, as a non-party to the subject contract, 701 Main Street lacks standing to bring these claims and therefore the court lacks subject matter jurisdiction. In response, the plaintiffs argue that 701 Main Street is an intended third-party beneficiary of the contract between Reisman and RLS.

CT Page 18406 As a threshold matter, it is apparent that defendant Barrett is correct in his contention that 701 Main Street is not a party to this contract. On the front page of the contract which is attached to the complaint, it can be seen that the agreement is only between Reisman and RLS, and on the contract’s signature page there is no notation that Reisman was signing in her role as a member of 701 Main Street. “It is well settled that one who [is] neither a party to a contract nor a contemplated beneficiary thereof cannot sue to enforce the promises of the contract . . .” (Internal quotation marks omitted.) Dow Condon, Inc. v. Brookfield Development Corp., 266 Conn. 572, 579 (2003). Consequently, if 701 Main Street is going to be able to recover on counts one and two for breach of contract, it must be as an intended third-party beneficiary of the contract between Reisman and RLS. “The law regarding the creation of contract rights in third parties in Connecticut is . . . well settled . . . [T]he ultimate test to be applied [in determining whether a person has a right of action as a third-party beneficiary] is whether the intent of the parties to the contract was that the promisor should assume a direct obligation to the third party [beneficiary] and . . . that intent is to be determined from the terms of the contract read in the light of the circumstances attending its making, including the motives and purposes of the parties . . . [T]he only way a contract could create a direct obligation between a promisor and a third party beneficiary would have to be, under our rule, because the parties to the contract so intended.” (Citations omitted; internal quotation marks omitted.)Wasniewski v. Quick Reilly, Inc., 105 Conn.App. 379, 384 (2008), quoting Dow Condon, Inc. v. Brookfield Development Corp., supra, 580-81. If intent to benefit the third party is found, “[a] third party beneficiary may enforce a contractual obligation without being in privity with the actual parties to the contract . . . Therefore, a third party beneficiary who is not a named obligee in a given contract may sue the obligor for breach.” (Citations omitted.) Gateway Co. v. DiNoia, 232 Conn. 223, 230-31 (1995).

Similarly, in order for 701 Main Street to be able to recover under counts seven and eight for breach of the implied covenant of good faith and fair dealing, it needs to demonstrate an underlying contract. “[I]t is axiomatic that the . . . duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship . . . In other words, every contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement.” (Internal quotation marks omitted.) Landry v. Spitz, 102 Conn.App. 34, 42 (2007). So long as a “plaintiff has adequately alleged third party beneficiary status under the . . . contract . . . [the] breach of implied covenant of good faith and fair dealing . . . [claim is] legally sufficient.” Cirrito v. CT Page 18407 Crawford Co., Superior Court, judicial district of New Haven, Docket No. CV 01 0456052 (December 23, 2002, Zoarski, J.T.R.). Consequently, the analysis of whether 701 Main Street has standing to bring counts seven and eight for breach of the implied covenant of good faith and fair dealing is the same as counts one and two based in breach of contract.

While the complaint does not directly allege that 701 Main Street was a third-party beneficiary of the contract between Reisman and RLS, such an allegation can certainly be inferred from the circumstances surrounding the contract’s development. If viewed in a light most favorable to the pleader, as they must when considering a motion to dismiss, the allegations found in the plaintiffs’ complaint as well as Reisman’s affidavit attached to the plaintiffs’ memorandum in opposition provide ample support for the contention that 701 Main Street was an intended third-party beneficiary. For instance, the complaint alleges that the property where RLS began constructing this music center was owned by 701 Main Street and that 701 Main Street made numerous progress payments to RLS for the construction project. Further, according to Reisman’s affidavit, she had a personal relationship with Barrett, and as a result Barrett knew that the construction project was being completed on land owned by 701 Main Street. In her affidavit, Reisman also contends that Barrett was paid a deposit on a 701 Main Street check two weeks before the parties signed the contract. Since the purpose of this contract was to construct a building on land owned by 701 Main Street and 701 Main Street paid the construction costs, it is clear that both Reisman and Barrett intended 701 Main Street to benefit from this contract. Moreover, 701 Main Street has been directly harmed by the defendants’ alleged breach of contract because the incomplete construction of the music store occurred on property owned by 701 Main Street. The court finds that 701 Main Street is an intended third-party beneficiary of the contract between Reisman and RLS. Accordingly, defendant Barrett’s motion to dismiss for lack of standing and subject matter jurisdiction is denied.

[1] An additional defendant, Joanne Barrett, was also added to the case on August 11, 2008. For the sake of clarity, defendant Robert Wynne Barrett will be known as “Barrett” and defendant Joanne Barrett will be known as “J. Barrett” throughout this memorandum.

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