R.S. Silver Enterprises, Inc. v. Pascarella , 148 Conn. App. 359 ( 2014 )

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R.S. SILVER ENTERPRISES, INC. v. HENRY
PASCARELLA ET AL.
(AC 34601)
Sheldon, Keller and Flynn, Js.
Argued October 24, 2013—officially released February 25, 2014
(Appeal from Superior Court, judicial district of
Stamford-Norwalk, Downey, J. [motion to strike]; Hon.
Alfred J. Jennings, Jr., judge trial referee [judgment].)
Wesley W. Horton, with whom were Steven D. Ecker,
and, on the brief, Kenneth J. Bartschi, Brendan J.
O’Rourke, and Daniel W. Moger, Jr., for the appellant
(named defendant et al.).
William F. Gallagher, with whom were Stephen P.
Wright, and, on the brief, Hugh D. Hughes, for the
appellee (plaintiff).
Opinion
SHELDON, J. In this breach of contract action, the
defendants, Henry Pascarella and Riversedge Partners,1
appeal from the judgment rendered by the trial court,
Hon. Alfred J. Jennings, Jr., judge trial referee, follow-
ing a court trial, in favor of the plaintiff, R.S. Silver
Enterprises, Inc. On appeal, the defendants claim, inter
alia, that the trial court, Downey, J., erred in striking
certain of their special defenses. Specifically, the defen-
dants challenge the trial court’s orders striking: their
second special defense, in which they alleged that the
plaintiff is barred from pursuing this action as a matter
of public policy because reinstatement of the plaintiff
as a corporation by the Secretary of State in order to
pursue this case was made possible only because of the
plaintiff’s defrauding of the Commissioner of Revenue
Services; their fourth special defense, in which they
alleged that the plaintiff is barred from pursuing this
action as a matter of public policy because it engaged
in bankruptcy fraud when it entered into the contract
here at issue; their sixth special defense, in which they
challenged the plaintiff’s legal capacity to bring the
instant action in 2006 on the ground that it was barred
from obtaining reinstatement after 1994 pursuant to
General Statutes § 33-995; and their twenty-first special
defense, in which they alleged that before this action
was commenced, the plaintiff had assigned to a non-
party its rights under the contract which it claimed the
defendants had breached.2 The defendants also claim
that the trial court’s judgment is ‘‘ineffective because
it was issued 966 days after the completion of trial in
violation of General Statutes § 51-183b.’’ We conclude
that the allegations of the defendants’ twenty-first spe-
cial defense state a claim which, if duly proven, would
defeat the plaintiff’s cause of action against them. More
importantly, however, we conclude that proof of those
allegations would establish that the plaintiff had no
standing to bring this action, and thus that the trial
court had no subject matter jurisdiction to entertain it.
Accordingly, the trial court should have resolved the
jurisdictional issue raised by the twenty-first special
defense before reaching and deciding any other issues
in this case. Because the jurisdictional issue was never
decided in the trial court, and resolution of the issue
requires findings of fact, we must remand this case to
the trial court to resolve that issue before, if necessary,
we decide any of the other issues before us on appeal.
The following facts and procedural history, ascer-
tained from the pleadings, are relevant to the issue
before us. On April 28, 1997, the plaintiff entered into
a ‘‘participation agreement’’ with the defendants, under
which the plaintiff invested $1,250,000 in a partnership
formerly known as SPD Associates (SPD), and now
known as Riversedge Partners, involving owning and
managing a commercial building in Greenwich. Pursu-
ant to that agreement, the plaintiff, in exchange for its
investment, was given the contractual right to partici-
pate ‘‘in any increase in the economic value’’ and ‘‘future
economic enhancement’’ of the building. More specifi-
cally, the agreement entitled the plaintiff to split equally
all amounts received by the defendants in connection
with the building after the making of certain priority
payments.
On October 11, 2006, the plaintiff commenced this
action, alleging that the defendants had failed to split
with it any amounts they had received in connection
with the building, and, in fact, had never paid the plain-
tiff anything pursuant to the agreement. The plaintiff
also sought an accounting of the business and affairs
of SPD and alleged breach of fiduciary duty.3 In
response, the defendants filed an answer and twenty-
two special defenses.4 On August 19, 2008, the plaintiff
filed a motion to strike all but two of the defendants’
special defenses, in response to which the defendants
filed an objection. On September 26, 2008, the plaintiff
responded to the defendants’ objection by filing a reply
memorandum of law. On September 29, 2008, Judge
Downey orally granted the plaintiff’s motion to strike
several of the defendants’ special defenses, including
the defendants’ second, fourth, sixth and twenty-first
special defenses, which are the subject of the defen-
dants’ appeal. In so doing, the court noted simply, with-
out further explanation, that the special defenses it was
striking ‘‘are either not recognized under Connecticut
law or are not appropriately drafted such that they
would survive a motion to strike.’’ The court then stated:
‘‘I adopt the foundation for my decision all the argu-
ments advanced in [the plaintiff’s] brief of August 19,
[2008] and September 26, [2008].’’5
The case was then tried before Judge Jennings on
various dates in early 2009. At the conclusion of trial,
the defendants sought to withdraw their counterclaims,
but the court, having determined that no good cause
existed to permit the withdrawal, instead dismissed the
counterclaims. The court ultimately rendered judgment
in favor of the plaintiff on its breach of contract claim,
awarding it damages in the amount of $1,782,848, plus
prejudgment interest in the amount of $819,475, for a
total award of $2,602,323. The court ruled in favor of
the defendants on the plaintiff’s claims for an account-
ing and for breach of fiduciary duty. The defendants
appealed and the plaintiff filed a cross appeal from the
court’s judgment on its breach of fiduciary duty claim.
On April 17, 2013, the plaintiff withdrew its cross appeal,
leaving only the defendants’ appeal from the trial court’s
judgment on the plaintiff’s breach of contract claim for
our consideration. Additional facts will be set forth
as necessary.
We begin by setting out the well established standard
of review in an appeal from the granting of a motion
to strike. ‘‘Because a motion to strike challenges the
legal sufficiency of a pleading and, consequently,
requires no factual findings by the trial court, our review
of the court’s ruling . . . is plenary. . . . We take the
facts to be those alleged in the [pleading] that has been
stricken and we construe the [pleading] in the manner
most favorable to sustaining its legal sufficiency. . . .
Thus, [i]f facts provable in the [pleading] would support
a [special defense], the motion to strike must be denied.
. . . Moreover, we note that [w]hat is necessarily
implied [in an allegation] need not be expressly alleged.
. . . It is fundamental that in determining the suffi-
ciency of a [pleading] challenged by a . . . motion to
strike, all well-pleaded facts and those facts necessarily
implied from the allegations are taken as admitted. . . .
Indeed, pleadings must be construed broadly and realis-
tically, rather than narrowly and technically.’’ (Internal
quotation marks omitted.) Violano v. Fernandez, 280
Conn. 310, 317–18, 907 A.2d 1188 (2006).
Practice Book § 10-50, which sets forth the basic
parameters for special defenses, provides: ‘‘No 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 the plaintiff
has no cause of action, must be specially alleged. Thus,
accord and satisfaction, arbitration and award,
coverture, duress, fraud, illegality not apparent on the
face of the pleadings, infancy, that the defendant was
non compos mentis, payment (even though nonpay-
ment is alleged by the plaintiff), release, the statute of
limitations and res judicata must be specially pleaded,
while advantage may be taken, under a simple denial,
of such matters as the statute of frauds, or title in a
third person to what the plaintiff sues upon or alleges
to be the plaintiff’s own.’’
In their twenty-first special defense, the defendants
alleged the occurrence of a transaction that purportedly
resulted in the transfer of all of the plaintiff’s rights
under the participation agreement to a third party. Spe-
cifically, the defendants alleged that the plaintiff, for-
merly known as R.S. Silver & Co., Inc., transferred its
rights to R.S. Silver & Co., LLC, a limited liability com-
pany formed by Robert S. Silver and two other individu-
als. ‘‘A valid assignment transfers to the assignee
exclusive ownership of all of the assignor’s rights to
the subject assigned and extinguishes all of those rights
in the assignor.’’ (Internal quotation marks omitted.)
Bozelko v. Milici, 139 Conn. App. 536, 539, 57 A.3d 762(2012), cert. denied, 308 Conn. 914, 61 A.3d 1101 (2013).
If proven, the facts set forth in the defendants’ twenty-
first special defense would establish that the plaintiff
had no right to sue the defendants for breach of the
participation agreement. Because such allegations were
not inconsistent with the allegations of the plaintiff’s
complaint, but, nevertheless, if proven, would have
defeated the plaintiff’s claims against them, the trial
court improperly struck that special defense.
Moreover, if the plaintiff assigned its rights and inter-
ests under the participation agreement to a third party,
it would not have had a specific, personal and legal
interest in this action, and thus would not have been
sufficiently aggrieved by the defendants’ breach of con-
tract to have standing to bring suit upon it. See id.,
540. When an issue affecting the court’s subject matter
jurisdiction comes to its attention, the court is obliged
to decide that issue before taking one step further to
adjudicate other matters pending before it in the action.
See New Hartford v. Connecticut Resources Recovery
Authority, 291 Conn. 511, 518–19, 970 A.2d 583 (2009).
Here, because the defendants pleaded facts challenging
the trial court’s subject matter jurisdiction, that jurisdic-
tional issue should have been resolved by the trial court
before proceeding any further on the merits of the plain-
tiff’s claims. Where, as here, the jurisdictional issue
cannot be decided without making factual determina-
tions, the resolution of which is beyond our province,
the trial court must resolve the jurisdictional issue
before we can proceed one step further to resolve the
other issues decided in the trial court that are before
us on appeal.
The case is remanded for a determination of the juris-
dictional issue raised by the defendants’ twenty-first
special defense, as set forth herein. We retain jurisdic-
tion over the case, however, in order to resolve, if neces-
sary, the remaining claims presented in this appeal.
Further proceedings on those issues, which have been
fully briefed and argued, are stayed until such time as
the jurisdictional issue is resolved.
In this opinion the other judges concurred.
1
Although NLI Commercial Mortgage Fund, LLC, initially was a named
defendant in this action, the plaintiff withdrew its claims against it on March
13, 2008.
2
The trial court struck sixteen of the defendants’ special defenses, but
the defendants challenge the order striking only four of them.
3
The plaintiff also had alleged breach of a certain ‘‘Letter Agreement’’ of
March 3, 1997, but the court dismissed that claim at the conclusion of the
plaintiff’s case.
4
The defendants also filed counterclaims, which are not subject of this
appeal.
5
This court previously criticized Judge Downey’s practice of adopting a
party’s reasoning as its own. See Gillon v. Bysiewicz, 105 Conn. App. 654,
657–58 n.6, 939 A.2d 605 (2008). In the present case, the plaintiff raised
various arguments in seeking to strike each special defense; it did not make
only one argument as to each special defense. In the absence of a motion
to articulate, which the defendants never filed, we are left to speculate as
to which, if just one or all, of the plaintiff’s arguments the court relied upon
in striking the special defenses. Because our review of the granting of a
motion to strike is plenary, however, the defendants’ failure to seek an
articulation, although unwise, is not fatal to their challenges to the
court’s rulings.