Connecticut Nat. Bank v. Rytman

• Citation: 694 A.2d 1246,241 Conn. 24
• Decision Date: 20 May 1997
• Docket Number: No. SC,SC
• Court: Supreme Court of Connecticut
• Parties: , RICO Bus.Disp.Guide 9278 CONNECTICUT NATIONAL BANK v. Julius RYTMAN et al. 15563.

Page 1246

694 A.2d 1246

241 Conn. 24, RICO Bus.Disp.Guide 9278

CONNECTICUT NATIONAL BANK v. Julius RYTMAN et al.

No. SC 15563.

Supreme Court of Connecticut.

Argued Feb. 21, 1997.

Decided May 20, 1997.

Donald R. Beebe, Norwich, with whom were Janis M. Small, Wallingford, and Susan B. Carr, Westerly, for the appellants (defendants and intervening defendants).

Joseph J. Cassidy, Briedgeport, with whom were Edward W. Gasser, West Hartford, and, on the brief, Austin J. McGuigan, Hartford, Mark E. Block, Norwich, and John M. Wolfson, Hartford, for the appellees (plaintiff and third party defendants).

Before CALLAHAN, C.J., and BORDEN, PALMER, McDONALD and PETERS, JJ.

PETERS, Justice.

The principal issue in this appeal is the preclusive effect on state litigation of the removal and subsequent federal court dismissal of a private claim under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq. In 1987, the plaintiff, the Connecticut National Bank, brought this action against the defendants, Julius and Dora Rytman (Rytmans), ¹ to foreclose on certain mortgaged property. Thereafter, the Rytmans filed a substitute counterclaim against the plaintiff. In addition, the Rytmans cited in, and filed an amended cross complaint against, the third party defendants, Kofkoff Egg Farm Limited Partnership (Kofkoff Egg Farm), Fitchville Realty, Inc. (Fitchville Realty), Samuel Kofkoff, Robert Kofkoff, Joseph Fortin, Norwich Savings Society (Norwich Savings), Milton Jacobson, Glenn Gordon, and the law firm of Brown, Jacobson, Jewett and Laudone, P.C. (Brown, Jacobson). ² The plaintiff and the third party defendants then filed a motion for summary judgment on the substitute counterclaim and amended cross complaint, respectively. The trial court, Silbert, J., granted summary judgment as to the substitute counterclaim in its entirety and as to certain counts of the amended cross complaint. The Rytmans appealed from the judgment of the trial court to the Appellate Court, and we transferred the appeal to this court pursuant to Practice Book § 4023 and General Statutes § 51-199(c). We reverse the judgment of the trial court.

The following facts can be gleaned from the pleadings and various motions. ³ Beginning in the 1960s and extending into the late 1980s, the Rytmans, owners and operators of an egg and grain business in Connecticut, entered into a series of loan agreements with the plaintiff. The loans were secured by the Rytmans' real and personal property. Norwich Savings, one of the third party defendants, participated in one of these loan agreements. Also during the late 1970s and the 1980s, the Rytmans entered into a series of egg sales and distribution agreements with Kofkoff Egg Farm and Colchester Foods, Inc. (Colchester Foods), entities owned by Samuel Kofkoff, Robert Kofkoff and Fortin, also third party defendants. In conjunction with these agreements, Colchester Foods lent approximately $500,000 to the Rytmans. ⁴

In part as a result of the failure of the egg sales and distribution agreements, the Rytmans were not able to make payments on their loans to the plaintiff, to Norwich Savings, or to Colchester Foods. Consequently, the plaintiff assumed control over the financial management of the Rytmans' business, and Colchester Foods assumed control over its day-to-day operation.

In October, 1987, the plaintiff and the Rytmans entered into a work-out agreement in order to satisfy the Rytmans' debts through a distribution of assets. Also participating in this work-out agreement were Colchester Foods, Kofkoff Egg Farm, Fitchville Realty, Samuel Kofkoff, Robert Kofkoff, Fortin and Norwich Savings. The Rytmans entered into this agreement on the advice of their counsel, Jacobson, Gordon and Brown, Jacobson. In accordance with the agreement, the plaintiff immediately instituted these foreclosure proceedings on the Rytmans' property.

The Rytmans do not deny having entered into the work-out agreement, but they challenge its validity as the culmination of a collective effort on the part of the plaintiff and third party defendants to drive them out of business and to seize their assets. Advised by new counsel, they opposed the plaintiff's foreclosure proceedings and filed a nineteen count substitute counterclaim (counterclaim) alleging, inter alia, breach of fiduciary duty, breach of a covenant of good faith and fair dealing, economic duress, fraud, conspiracy, tortious interference, and infliction of emotional distress. ⁵ Although the Rytmans sought to try the counterclaim to a jury, the trial court, Hendel, J., struck the foreclosure proceeding, and with it the counterclaim, from the jury list.

The Rytmans also cited in, and filed a cross complaint against, the third party defendants. As amended, the cross complaint contained twenty-eight separate counts ⁶ and alleged causes of action based on common law and statutory grounds similar to those raised in the counterclaim. ⁷ In addition, the cross complaint alleged legal malpractice on the part of Jacobson, Gordon and Brown, Jacobson. The trial court, Hendel, J., severed the action on the cross complaint from the underlying foreclosure proceedings.

While this foreclosure action, including its counterclaim and cross complaint, was still pending, the Rytmans instituted a separate action against the plaintiff and third party defendants together. Relying on essentially the same operative facts that underlay their counterclaim and cross complaint, the Rytmans alleged in that separate action that the conduct of the plaintiff and third party defendants had violated RICO. Shortly thereafter, Norwich Savings, with the consent of the other third party defendants, and over the objection of the Rytmans, removed the RICO action to the United States District Court for the District of Connecticut. ⁸

In the District Court, the plaintiff and all third party defendants, with the exception of Norwich Savings, filed motions to dismiss the RICO action pursuant to Federal Rule of Civil Procedure 12(b)(6). ⁹ Norwich Savings independently filed a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56(b). ¹⁰ The District Court granted the motions to dismiss and the motion for summary judgment. Rytman v. Kofkoff Egg Farm Ltd. Partnership, United States District Court, Docket No. 2:91CV01146 (PCD) (D.Conn. September 3, 1992). On the Rytmans' appeal to the United States Court of Appeals for the Second Circuit, that court affirmed the judgment of the District Court. Rytman v. Kofkoff Egg Farm, 999 F.2d 537 2d Cir.1993). The Court of Appeals concluded that the Rytmans had failed to state a claim under RICO and had failed to adduce any material facts to demonstrate a violation thereof. Id. The United States Supreme Court denied the Rytmans' petition for certiorari.

Thereafter, the plaintiff and third party defendants filed separate motions for summary judgment in this state court action, contending that, under the doctrine of res judicata, the federal court disposition of the RICO action precluded the Rytmans from pursuit of their state court counterclaim and cross complaint. The trial court, Silbert, J., granted these motions, with respect to the counterclaim and all but five counts of the cross complaint, not on the basis of res judicata but on the basis of collateral estoppel.

On appeal, the parties primarily dispute the propriety of the summary judgment. The Rytmans contend that although the trial court, Silbert, J., properly refused to apply the doctrine of res judicata, it improperly determined that the legal issues raised in the RICO action were sufficiently identical to those raised in the counterclaim and cross complaint to warrant the application of collateral estoppel. The plaintiff and third party defendants, on the other hand, although supporting the trial court's use of collateral estoppel, contend, in the alternative, that the doctrine of res judicata also bars the state court litigation in its entirety. In addition, the Rytmans contend that the trial court, Hendel, J., improperly struck the foreclosure action from the jury list and also improperly severed their cross complaint from the underlying foreclosure proceedings.

I

Before considering the merits of the Rytmans' claims, we must first determine whether the trial court's partial summary judgment on the cross complaint constitutes a reviewable final judgment. ¹¹ The trial court, Silbert, J., granted summary judgment on the cross complaint with respect to counts four through twenty-one and twenty-three through twenty-seven, but denied summary judgment with respect to counts one, two, three, twenty-two and twenty-eight. See footnote 7. The plaintiff and third party defendant Norwich Savings contend that the court's denial of summary judgment on these five counts renders nonfinal and nonappealable the entire summary judgment on the rest of the cross complaint. See Practice Book § 4000. We disagree and conclude that, under Practice Book § 4002B, ¹² the partial summary judgment decision is final with respect to those parties not named in the five outstanding counts.

It is well established that appellate courts in this state do not have jurisdiction to entertain appeals not taken from final judgments. See General Statutes § 52-263; State v. Curcio, 191 Conn. 27, 30, 463 A.2d 566 (1983). The lack of a final judgment is a jurisdictional defect that mandates dismissal. See, e.g., Stroiney v. Crescent Lake Tax District, 197 Conn. 82, 86, 495 A.2d 1063 (1985).

Although the denial of a motion for summary judgment does not ordinarily constitute an appealable final judgment, Practice Book § 4002B recognizes that an appeal from a summary judgment on less than all counts of a cross complaint is permissible to the extent that the judgment "disposes of all causes of action ... brought ... against a particular party or parties." See State v. Curcio, supra, 191 Conn. at 31, 463 A.2d...