2011 Ct. Sup. 14619, 52 CLR 184
No. CV 10 6005315Connecticut Superior Court Judicial District of New London at New London
July 1, 2011
MEMORANDUM OF DECISION RE MOTION TO STRIKE #135
DEVINE, J.
Facts and Procedural History
The plaintiff, Bank of Smithtown, filed this foreclosure action on July 28, 2010. The plaintiff’s mortgage was dated and recorded in the Norwich land records on July 31, 2007. The defendant for the purposes of this decision, Eastern Energy Services, LLC, alleges that it filed a mechanic’s lien on or about February 23, 2010, against the property that is the subject of the plaintiff’s mortgage foreclosure. The defendant filed an answer and special defenses on September 8, 2010. The plaintiff filed a motion to strike the defendant’s two special defenses on January 18, 2011. The defendant filed its objection to the plaintiff’s motion to strike on May 26, 2011.
Discussion
“[A] motion to strike challenges the legal sufficiency of a pleading and, consequently, requires no factual findings by the trial court . . .” (Internal quotation marks omitted.) Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252, 990 A.2d 206
(2010). “[A] plaintiff can [move to strike] a special defense . . .”Nowak v. Nowak, 175 Conn. 112, 116, 394 A.2d 716 (1978).
“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, 221 Conn. 465, 472-73, 604 A.2d 814 (1992). Special defenses are intended “to apprise the court and opposing counsel of the issues to be tried, so that basic issues are not concealed until the trial is underway.” (Internal quotation marks omitted.) Whalen v. Gathoni, Superior Court, judicial district of New Haven, Docket No. CV 07 5012497 (February 8, 2010, Wilson, J.). “Connecticut is a fact pleading state.” Vejseli v. Pasha, Superior Court, judicial district of Waterbury, Docket No. CV 02 0172369 (July 21, 2004, Matasavage, J.), aff’d on other grounds, 282 Conn. 561, CT Page 14620 923 A.2d 688 (2007). “[T]he total absence of any factual allegations” specific to the dispute “renders [the special defense] legally insufficient.” U.S. Bank National Assn. v. Ascenzia, Superior Court, judicial district of New Haven, Docket No. CV 08 5022527 (July 30, 2009, Abrams, J.) (48 Conn. L. Rptr. 345, 346).
First Special Defense
In its first special defense, the defendant specifically alleges: “On or about February 23, 2010, within ninety (90) days from the time that Eastern Energy ceased to provide labor, materials and equipment to the Project which is the subject of Plaintiff’s Complaint, Eastern Energy caused a Certificate of Mechanic’s Lien to be recorded in the Land Records for the Town of Norwich against the Property described in the Complaint in Book 02601 at Page 0115 . . . Eastern Energy, is entitled to be paid for the labor, materials and equipment it furnished to the Project . . . Plaintiff’s alleged security interest in the subject property may be wholly or partially equitably subordinate to Defendant’s, Eastern Energy, Mechanic’s Lien by virtue of equitable subrogation principles arising from the history and timing of advances made by Plaintiff.”
The plaintiff argues that this special defense should be stricken because it does not address the making, validity, or enforcement of the mortgage. In addition, the plaintiff argues that it should be stricken because “vaguely referencing equitable subrogation `principles’ with no factual basis therefor is legally insufficient.” In its objection, the defendant contends it has made out a claim for “equitable subrogation, also called equitable estoppel.”
First, the court disagrees with the plaintiff that equitable subrogation is not a viable special defense to a foreclosure action. On the contrary, equitable subrogation has been pleaded as a special defense in a number of cases. See, e.g., Rosenbilt v. Williams, 57 Conn.App. 788, 792 n. 6, 750 A.2d 1131, cert. denied, 254 Conn. 206, 755 A.2d 882
(2000); Cottiero v. Ifkovic, 35 Conn.App. 682, 685, 647 A.2d 9, cert. denied, 231 Conn. 938, 651 A.2d 262 (1994); Blacker v. Crapo, Superior Court, judicial district of Litchfield, Docket No. CV 10 6001814 (June 25, 2010, Danaher, J.); Sovereign Bank v. 2d Family, LLC, Superior Court, judicial district of New London, Docket No. CV 09 5012519 (December 21, 2009, Devine, J.); Rosenblit v. Wadman, Superior Court, judicial district of New Britain, Docket No. CV 07 5004120 (May 26, 2009, Vacchelli, J.); AJJ Enterprises, LLC v. Herns, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 05 4005882 (December 26, 2006, Jennings, J.). CT Page 14621
For the following reasons, however, the court agrees with the plaintiffs that the defendant’s first special defense is vulnerable to its motion to strike. First, in pleading its special defense, the defendant specifically relies upon “equitable subrogation principles.” In its brief, however, the defendant discusses equitable estoppel. At the outset, the court is uncertain as to what the defendant is actually asserting.
In U.S. Bank, N.A. v. Wadman, Superior Court, judicial district of New Britain, Docket No. CV 07 6000990 (September 28, 2009, Vachelli, J.), the plaintiff alleged that it should hold first priority position under the doctrines of equitable subrogation, equitable subordination, equitable estoppel and unjust enrichment, respectively. The court noted that: “All four theories rest on various equitable principles designed to prevent injustice. An action in foreclosure is an equitable action. City Savings Bank v. Lawlor, 163 Conn. 149, 155, 302 A.2d 252 (1972). Therefore, such considerations are appropriate. Because a mortgage foreclosure is an equitable proceeding, the trial court may consider all relevant circumstances to ensure that complete justice is done . . . [T]he determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court Reynolds v. Ramos, 188 Conn. 316, 320, 449 A.2d 182 (1982). The gravamen of all of these counts . . . derive[s] from the doctrine of equitable subrogation. That doctrine generally provides that one who advances money to discharge a prior lien on real or personal property and takes a new mortgage as security is entitled to be subrogated to the rights under the prior lien against the holder of an intervening lien of which he was ignorant. Home Owners’ Loan Corp. v. Sears, Roebuck Co., 123 Conn. 232, 237, 193 A. 769 (1937).” (Internal quotation marks omitted.) Id.
In Allstate Ins. Co. v. Palumbo, 296 Conn. 253, 259-60, 994 A.2d 174
(2010), the Supreme Court examined the general principles of equitable subrogation. “The object of [equitable] subrogation is the prevention of injustice. It is designed to promote and to accomplish justice, and is the mode which equity adopts to compel the ultimate payment of a debt by one who, in justice, equity, and good conscience, should pay it . . . As now applied, the doctrine of . . . equitable subrogation is broad enough to include every instance in which one person, not acting as a mere volunteer or intruder, pays a debt for which another is primarily liable, and which in equity and good conscience should have been discharged by the latter . . . There is no general rule to determine whether a right of subrogation exists. Thus, ordering subrogation depends on the equities and attending facts and circumstances of each case . . . The determination of what equity requires in a particular case, the CT Page 14622 balancing of the equities, is a matter for the discretion of the trial court.” Id.
“Equitable subrogation will, in limited circumstances, permit the rearrangement of the priorities of the parties, based upon fairness and justice.” Independence One Mortgage Corp. v. Katsaros, 43 Conn.App. 71, 73, 681 A.2d 1005 (1996). “The situation in which a party may assert the doctrine of equitable subrogation occurs when an intervening lien holder attempts to claim priority over a lien holder who had a prior interest in the subject property.” Id., 75. In Blacker v. Crapo, supra, Superior Court, Docket No. CV 10 6001814, the court noted: “In dealing with equitable subrogation claims, excusable ignorance must be pleaded and proven before relief can be granted.” In light of this, the Blacker
court granted a motion to strike on the grounds that the defendant “failed to plead a key element of equitable subrogation. It is because of the ignorance of intervening rights that, in appropriate cases, equitable subrogation may be available to provide relief. [The defendant] has made no such claim.” Id.
Indeed, a party claiming that it is entitled to equitable subrogation must assert ignorance of the intervening lien. See Equicredit Corp. of Connecticut v. Kasper, 122 Conn.App. 94, 98, 996 A.2d 1243, cert. denied, 298 Conn. 916, 4 A.3d 831 (2010) (facts presented did not necessitate an equitable solution when party admitted that it had actual or constructive notice of the mortgage and was not ignorant of the lien); Rosenbilt v. Williams, supra, 57 Conn.App. 793 (“In numerous cases it has been held that one who advances money to discharge a prior lien on real or personal property and takes a new mortgage as security is entitled to be subrogated to the rights under the prior lien against the holder of an intervening lien of which he was ignorant”); Flor v. R. Bourgeois Antiques, Superior Court, judicial district of Litchfield, Docket No. CV 08 5004882 (January 21, 2010, Pickard, J.) (denying summary judgment because there was a genuine issue of material fact as to whether the mortgage company’s nominee was ignorant of purported mortgagee’s alleged lien).
Here, the defendant merely alleges “plaintiff’s alleged security interest in the subject property may be wholly or partially equitably subordinate to defendant’s . . . Mechanic’s Lien by virtue of equitable subrogation principles arising from the history and timing of advances made by plaintiff.” This vague allegation does not support a claim of equitable subrogation. If the defendant is indeed asserting that equitable subrogation should be applied in regard to the priority of its lien, it must allege that it was ignorant of the plaintiff’s lien. As a result, its first special defense is legally insufficient and vulnerable CT Page 14623 to the plaintiff’s motion to strike.
Second Special Defense
In its second special defense, the defendant alleges: “On or about February 23, 2010, within ninety (90) days from the time that Eastern Energy ceased to provide labor, materials and equipment to the Project which is the subject of Plaintiff’s Complaint, Eastern Energy caused a Certificate of Mechanic’s Lien to be recorded in the Land Records for the Town of Norwich against the Property described in the Complaint in Book 02601 at Page 0115 . . . Eastern Energy, is entitled to be paid for the labor, materials and equipment it furnished to the Project . . . Plaintiff’s alleged security interest in the subject property is wholly or partially equitably subordinate to Defendant’s, Eastern Energy, Mechanic’s Lien to the extent Plaintiff controlled the retainage fund that was required to be established pursuant to Connecticut’s Fairness and Financing Act; and which is the property of the subcontractors on the Project, including Eastern Energy.”
“[A] subcontractor has a right, independent of the right to file a mechanic’s lien, to seek payment directly from the owner. That right is set forth in General Statutes § 42-158j . . . which was also enacted as part of the Act Concerning Fairness in Financing in the Construction Industry.” Lindade Construction, Inc. v. Continental Casualty Co., Superior Court, complex litigation docket at Waterbury, Docket No. X10 CV 5008768, X10 CV 5008767 (February 25, 2009, Scholl, J.) (47 Conn. L. Rptr. 323, 328). Indeed, § 42-158j relates to payment disputes in commercial construction contracts and provides remedies for failure to make timely payments on a construction contract.
“Pursuant to § 42-158j(c)(4), when an owner on a project receives notice from a contractor, subcontractor, or supplier that it has not been paid, the owner is required to place the funds in at issue in an `interest-bearing escrow account . . .'” LVI Environmental Services, Inc. v. Yale University, Superior Court, judicial district of New Haven, Docket No. CV 09 6005098 (September 8, 2010, Abrams, J.) (50 Conn. L. Rptr. 553). In LVI Environmental Services, Inc. v. Yale University, the court held that a project owner, who did not have a direct contractual relationship with a subcontractor, was not obligated to place the disputed payment amount in an interest-bearing escrow account upon receipt of notice for nonpayment. See id., 553-54. Specifically, the court addressed a series of claims of non-payment on a construction project involving Yale University and SRI Fire Sprinkler, LLC (“SRI”), a subcontractor. In regard to SRI’s § 42-158j claim, the court found that “[t]here is no direct contractual relationship between CT Page 14624 Yale and SRI.” See id., 553. As a result, SRI’s claim that Yale’s failure to escrow funds constituted a violation of § 42-158j was legally insufficient, and the court was satisfied it should be stricken. See id., 554.
The defendant appears to be relying on this provision in its second special defense. The defendant, however, merely alleges that the plaintiff “controlled the retainage fund that was required to be established pursuant to Connecticut’s Fairness and Financing Act; and which is the property of the subcontractors on the Project, including Eastern Energy.” The defendant has failed to plead any facts to support a claim that the plaintiff had a direct contractual relationship with it and therefore, was obligated to place the disputed amount in an interest-bearing escrow account. As such, the defendant’s second special defense is also vulnerable to the plaintiff’s motion to strike.
Order
For all of the foregoing infirmities stated above, the plaintiff’s motion to strike the first and second defenses is hereby granted.
CT Page 14625