Opinion
No. CV09 500 80 92S
June 22, 2010
MEMORANDUM OF DECISION RE MOTION TO STRIKE #107
On August 24, 2009, two of the defendants in this action, BLW Holdings, LLC (BLW) and Universal Precast, LLC (Universal), who are both Connecticut limited liability companies, filed a motion to strike. The motion seeks to strike counts four, six, seven and eight of a revised complaint filed by the plaintiffs, David and Barbara Robinson, as well as corresponding portions of the prayer for relief. For the following reasons, the motion to strike is granted as to count six, but is denied as to counts four, seven, eight and the relevant portions of the prayer for relief.
Because the pending motion to strike pertains only to counts directed at BLW and Universal, this memorandum of decision often refers to these two parties collectively as "the defendants."
The instant motion expressly asks the court to strike count five of the plaintiffs' revised complaint. It is clear, however, that this was a scrivener's error, and that the motion is actually intended to target count six. Count five asserts a cause of action against BLW sounding in unjust enrichment, while count six sets forth a claim against BLW for violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. Both the motion to strike and portions of the accompanying memorandum of law filed by the defendants mistakenly refer to count five as setting forth a cause of action against BLW for violation of CUTPA, and the memorandum of law contains argument relating only to CUTPA, with no mention of Connecticut law as it pertains to unjust enrichment. Additionally, the plaintiffs' memorandum of law in opposition recognizes that the defendants' motion actually targets the CUTPA claim against BLW found in count six, and sets forth argument pertaining to CUTPA, with no reference to an unjust enrichment theory. It is clear then that the plaintiffs were aware of the scrivener's error and have proceeded accordingly. As such, the court interprets the defendants' motion to strike as targeting count six of the plaintiffs' revised complaint, not count five.
I. Background
At the center of this dispute is an alleged oral agreement between the plaintiffs and their daughter and son-in-law, Kelly and Brian Weymer (collectively, "the Weymers"), who are also named as defendants in this action. In the revised complaint, which was filed on August 6, 2009, the plaintiffs make the following allegations regarding this agreement and the circumstances surrounding it.
At some point in 2006, the plaintiffs agreed to provide the Weymers with $150,000 for the purpose of constructing a new, two-story home, which was to be built on a parcel of property in Oxford, Connecticut known as 61 Donovan Road (the property). At all relevant times, the property was owned by BLW. However, prior to the oral agreement, the Weymers resided in a single-family residence on the property, and Brian Weymer, as the sole manager and member of BLW and Universal, operated both companies from this residence. In consideration of the $150,000 contribution made by the plaintiffs, the Weymers agreed to tear down the existing structure and see to the construction of a new two-story home in its place. This new home was to include a large "in-law" apartment on the first floor that the plaintiffs would then occupy, leaving the second floor as the Weymers' new residence. In addition, the Weymers promised to have the oral agreement memorialized in writing by an attorney, and to deliver a copy to the plaintiffs.
In accordance with their obligations under the agreement, the plaintiffs contributed $150,000 to the construction project by virtue of a series of payments made in the form of cash and personal checks. Some of these payments were made directly to Brian Weymer, while others were made to "companies controlled by [Brian] Weymer, including Universal, and suppliers of labor and materials to the construction project."
Construction of the new structure went forward. Along the way, Universal "provided labor and materials to the construction project, and accepted payment [in return] from the [plaintiffs] . . ." Still, the plaintiffs were never provided with a written agreement, although the Weymers repeatedly assured them that the first floor of the new home would be constructed in accordance with the terms of the oral agreement. In February of 2008, however, David Robinson visited the construction site "and discovered that the upper portion of the structure, where the Weymers . . . planned to live, was substantially completed while the in-law apartment on the lower level had no work done on it at all and was simply an uninhabitable shell." At that point, the plaintiffs demanded return of their funds, and continued to make such demands through September of 2008. All demands were refused, which precipitated the commencement of this lawsuit on January 9, 2009. The plaintiffs now contend, in part, that, although they continued to accept payments from the plaintiffs and offer them assurances throughout the construction process, at no point in time did the Weymers ever actually intend to build the in-law apartment.
The revised complaint contains ten counts. Several are made against the Weymers, including a count for breach of the oral agreement and another for fraudulent inducement. However, the instant motion asks the court to strike only counts four, six, seven and eight. These counts pertain only to BLW and Universal. Counts four and seven set forth claims for fraud against BLW and Universal, respectively, while counts six and eight set forth claims for violation of CUTPA against BLW and Universal, respectively. The defendants argue that the fraud claims set forth against them in counts four and seven are legally insufficient because they fail to "set forth sufficient facts or allegations (other than unsupported conclusions of law) to impart liability upon" them as independent business entities. They further contend that counts six and eight are legally insufficient because they "refer only to one isolated incident, do not allege an ongoing repetitive violation of public policy, and do not contain factual allegations to support a conclusion that the defendants were engaged in `trade or commerce `as defined under CUTPA." They also argue that paragraphs two and three of the plaintiffs' prayer for relief must therefore be stricken because they seek statutory damages pursuant to CUTPA.
II. Discussion
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). "[F]or the purpose of a motion to strike, the moving party admits all facts well pleaded." RK Constructors, Inc. v. Fusco Corp., 231 Conn. 381, 383 n. 2, 650 A.2d 153 (1994); see also Ferryman v. Groton, 212 Conn. 138, 142, 561 A.2d 432 (1989). Accordingly, "[i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Batte-Holmgren v. Commissioner of Public Health, 281 Conn. 277, 294, 914 A.2d 996 (2007). On the other hand, "[a] motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).
The court must "construe the complaint in the manner most favorable to sustaining its legal sufficiency." (Internal quotation marks omitted.) Sullivan v. Lake Compounce Theme Park, Inc., 277 Conn. 113, 117, 889 A.2d 810 (2006). "[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Broadnax v. New Haven, 270 Conn. 133, 173, 851 A.2d 1113 (2004). "Moreover . . . [w]hat is necessarily implied [in an allegation] need not be expressly alleged . . ." (Citation omitted; internal quotation marks omitted.) Lombard v. Edward J. Peters, Jr., P.C., 252 Conn. 623, 626, 749 A.2d 630 (2000). Practice Book § 10-39 does allow "a claim for relief to be stricken . . . if the relief sought could not be legally awarded." Pamela B. v. Ment, 244 Conn. 296, 325, 709 A.2d 1089 (1998).
A. Counts Four Seven: Fraud
The defendants first contend that counts four and seven are legally insufficient to assert causes of action sounding in fraud because the allegedly fraudulent acts in question were committed by Brian Weymer and, as independent entities that are separate and distinct from him, the defendants cannot be held liable for these acts. The defendants cite to Litchfield Asset Management Corp. v. Howell, 70 Conn.App. 133, 148-49, 799 A.2d 298, cert. denied, 261 Conn. 911, 806 A.2d 49 (2002), for the proposition that a business entity may only be held liable for the fraud committed by an individual where the individual perpetrated the fraud in the name of the business entity. They contend that there are no allegations in the revised complaint suggesting that Brian Weymer perpetrated the alleged fraud in the name of the defendants, and that the fraud counts at issue are therefore legally insufficient.
The alleged fraudulent acts attributed to Brian Weymer include his continued assurances that the in-law apartment would be constructed according to the parties' agreement and a written agreement would be forthcoming, all of which were allegedly made in order to induce the plaintiffs to continue making payments to him and his companies. The plaintiffs allege that the oral agreement was made, the assurances were provided, and the payments were accepted all despite the fact that the Weymers never intended to honor the agreement.
The plaintiffs, on the other hand, claim that they have properly alleged facts that, when accepted as true, would justify extending liability to the defendants for Brian Weymer's fraudulent acts pursuant to a "reverse veil piercing" theory. This is so, they argue, because the allegations of counts four and seven satisfy the so-called "instrumentality rule." They argue that Litchfield Asset Management Corp. v. Howell, supra, 70 Conn.App. 148-49, actually supports their argument.
In Howell, our Appellate Court recognized that, while "[i]n the usual veil piercing case, a court is asked to disregard a corporate entity so as to make available the personal assets of its owners to satisfy a liability of the entity," in some instances the theory may be applied in reverse to make the assets of the corporate entity answerable for the liabilities of the owner. Id., 149. The Appellate Court held that these "reverse piercing" cases are "not inconsistent with nor antithetical to the salutary purposes of traditional piercing" and "that the direction of the piercing [is] immaterial where the general tests supporting it . . . [are] met." (Internal quotation marks omitted.) Id., 149. It directed that courts should "avoid an over-rigid preoccupation with questions of structure . . . and apply the preexisting and overarching principle that liability is imposed to reach an equitable result." (Internal quotation marks omitted.) Id., 151. Thus, "when the elements of the identity or instrumentality rule have been established, a reverse pierce is a viable remedy that a court may employ when necessary to achieve an equitable result and when unfair prejudice will not result." Id.
In the present case, the plaintiffs argue that they have properly set forth allegations capable of satisfying the instrumentality rule. "The instrumentality rule requires, in any case but an express agency, proof of three elements: (1) Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; (2) that such control must have been used by the defendant to commit fraud or wrong, to perpetrate the violation of a statutory or other positive legal duty, or a dishonest or unjust act in contravention of plaintiff's legal rights; and (3) that the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of." (Emphasis removed; internal quotation marks omitted.) Id., 152.
The court finds that, although they contain many legal conclusions, counts four and seven do sufficiently set forth factual allegations capable of satisfying the instrumentality rule. These counts allege that the lone member and manager of both BLW and Universal was and is Brian Weymer, that Brian Weymer ignored formalities of corporate procedure in operating BLW and Universal, and that he operated both entities from the same property at which he resided. All of these allegations tend to at least suggest the defendants may have been dominated and controlled by Brian Weymer. See id., 152-53 (setting forth factors a court is to examine in determining whether a business entity was dominated and controlled). The revised complaint also alleges that the plaintiffs made some payments toward their $150,000 contribution directly to the defendants, rather than to Brian Weymer in his personal capacity. Furthermore, count four alleges that BLW owns the property upon which the improved structure was constructed, and therefore likely realized a financial benefit from the contributions made by the plaintiffs. Similarly, count seven alleges that Universal accepted payments and provided labor and materials for the allegedly fraudulent construction project, meaning that any profits realized by such a transaction may still be held by Universal. These averments, when considered together, sufficiently set forth allegations from which the trier of fact could reasonably determine that Brian Weymer used his control of the defendants to assist in the perpetration of a fraud that harmed the plaintiffs. They are, therefore, legally sufficient to satisfy the instrumentality rule and to potentially justify reverse piercing so that, should liability be found, assets rightly belonging to the plaintiffs would be made recoverable.
The court notes that the plaintiffs' revised complaint, including all counts relevant to the instant motion to strike, contains a recurring scrivener's error. The revised complaint is structured in such a manner that each subsequent count is clearly intended to incorporate all allegations from the preceding count. However, the paragraph that attempts this incorporation routinely and mistakenly states that the allegations of the same count are incorporated into itself. To illustrate, the first paragraph in count seven alleges as follows: "1-48. The plaintiffs repeat and re-allege each and every allegation of the [s]eventh [c]ount as if fully alleged herein." (Emphasis added.) Count six of the revised complaint contains exactly forty-eight paragraphs, so it is clear the plaintiffs intended to incorporate the allegations of that count into count seven. Furthermore, in their memorandum of law, the defendants recognize this mistake, state that they understand that the plaintiffs intended to incorporate the allegations of each preceding count, and present argument accordingly. The court therefore interprets each count of the plaintiffs' revised complaint as incorporating the allegations from the preceding count.
B. Counts Six Eight: Violation of CUTPA
The defendants next contend that counts six and eight are legally insufficient to set forth causes of action for violation of CUTPA. They first argue that nothing in those counts demonstrates that the defendants were conducting "trade or commerce" at the time they allegedly engaged in unfair or deceptive acts. The court agrees with this argument as it pertains to count six and the allegations made against BLW, but disagrees with it as it pertains to count eight and the allegations made against Universal.
In relevant part, CUTPA provides that "[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." General Statutes § 42-110b (a). The phrase "trade or commerce" is defined in § 42-110a to mean "the advertising, the sale or rent or lease, the offering for sale or rent or lease, or the distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value in this state." Nothing in count six suggests that BLW conducted trade or commerce at any time relevant to this action. The plaintiffs allege only that BLW owned the property upon which the new structure was constructed. Mere ownership of property alone does not constitute any of the activities described by the definition of "trade or commerce" found in § 42-110a. Therefore, count six does not properly allege facts demonstrating that BLW was involved in trade or commerce, and it is legally insufficient to support a claim for violation of CUTPA.
A different conclusion must be reached with regard to the allegations made against Universal in count eight, however. That count alleges that Universal "provided labor and materials to the construction project, and accepted payment for" these services from the plaintiffs. This allegation is sufficient to demonstrate that Universal conducted "trade or commerce," as that phrase is defined by § 42-110a.
The defendants next argue that count eight is legally insufficient because the plaintiffs "have not alleged any nexus between any unfair and deceptive practices allegedly engaged in by the business, as opposed to the Weymers, and any specific trade or commerce engaged in or conducted by [Universal]." The court disagrees with this contention. Count eight incorporates all the allegations of the preceding counts. See footnote four of this memorandum of decision. Included among these allegations are assertions of fact that, if proven, are capable of demonstrating that Brian Weymer dominated and controlled Universal in order to perpetrate a fraud upon the plaintiffs, in that he used the company to accept payments from the plaintiffs in return for services related to the construction of a new home that he represented would contain an in-law apartment for the plaintiffs to live in, even though he never had any intention of building such an apartment. See part II A of this memorandum of decision. The nexus between these activities and the alleged fraud is sufficient to support a claim for violation of CUTPA.
Finally, the defendants contend that count eight is legally insufficient because it relies on a breach of contract, which is not sufficient to establish a claim for violation of CUTPA. The court disagrees with this interpretation of count eight. As mentioned above, count eight is premised not just upon the Weymers' alleged breach of the oral agreement, but upon the aggravating factor of Brian Weymer's fraudulent misrepresentations as to his intention to honor the agreement and the progress of the new home's construction. While it is true that "a simple breach of contract, even if intentional, does not amount to a violation of CUTPA in the absence of substantial aggravating circumstances"; Greene v. Orsini, 50 Conn.Sup. 312, 315, 926 A.2d 708 (2007); decisions of the Superior Court have routinely found that fraudulent representations and acts that accompany a breach of contract can constitute a substantial aggravating circumstance capable of elevating a simple breach of contract to the status of a CUTPA violation. See, e.g., Tyson Roller Bearing, Inc. v. Accuride Corp., Superior Court, complex litigation docket at Hartford, Docket No. X03 CV 06 5009121 (May 7, 2008, Langenbach, J). The court finds that count eight is legally sufficient to state a claim for violation of CUTPA against Universal.
III. Conclusion
For the foregoing reasons, the defendants' motion to strike is granted as to count six. It is denied as to counts four, seven and eight. Furthermore, because paragraphs two and three of the plaintiffs' prayer for relief seek damages recoverable for violation of CUTPA, and because the CUTPA claim made against Universal remains, the motion to strike is also denied as it pertains to the prayer for relief.