Lestorti v. Deleo

• Decision Date: 28 September 2010
• Docket Number: No. 18393.,18393.
• Citation: 298 Conn. 466,4 A.3d 269
• Court: Connecticut Supreme Court
• Parties: James C. LESTORTI v. Ralph J. DeLEO et al.

298 Conn. 466

4 A.3d 269

James C. LESTORTI

v.Ralph J. DeLEO et al.

No. 18393.

Supreme Court of Connecticut.

Argued April 21, 2010.

Decided Sept. 28, 2010.

COPYRIGHT MATERIAL OMITTED.

COPYRIGHT MATERIAL OMITTED.

Richard P. Weinstein, West Hartford, with whom were Nathan A. Schatz and, on the brief, Kerry M. Wisser, West Hartford, for the appellant (defendant Louis A. Lestorti, Jr.).

ROGERS, C.J., and KATZ, PALMER, ZARELLA and McLACHLAN, Js.

ZARELLA, J.

In this certified appeal, ¹ the defendant Louis A. Lestorti, Jr., ² appeals from the judgment of the Appellate Court, which affirmed the trial court's decision to grant the motion of the plaintiff, James C. Lestorti, to strike the defendant's counterclaim for equitable contribution. Lestorti v. DeLeo, 114 Conn.App. 50, 51, 57, 968 A.2d 941 (2009). On appeal to this court, the defendant claims that the Appellate Court's decision (1) conflicts with well established Connecticut law concerning the rights of coguarantors to contribution, and (2) is improperly based on an assumption of a fact that is not part of the record. We reverse the judgment of the Appellate Court.

The following relevant facts and procedural history are set forth in the opinion of the Appellate Court. “In April, 2006, the plaintiff instituted an action in multiple counts alleging, inter alia, fraud against the defendant, among others. That action subsequently was transferred to the Complex Litigation Docket in the judicial district of Hartford. On February 23, 2007, the defendant filed a counterclaim, alleging a cause of action for equitable contribution.

“In his counterclaim, the defendant alleged the following facts. In a guaranty agreement dated June 11, 2001 ... the plaintiff, the defendant and [Otto Paparazzo and OJP Development Corporation] each agreed jointly and severally to guaranty the liability of Pond Place Development II, LLC (Pond Place), to First Union National Bank under a note in the amount of $7,875,000. ³ The note was secured by a mortgage. On or about August 31, 2004, Wachovia Bank, N.A. (Wachovia), ⁴ the successor to First Union National Bank, commenced a foreclosure action against, inter alia, Pond Place, the principal obligor, and the plaintiff and the defendant, secondary obligors, under the terms of the guaranty agreement. This foreclosure action arose out of a default on the promissory note. Although both the plaintiff and the defendant were initially named as defendants in the foreclosure action by virtue of their joint and several liability on the guaranty, the action was dismissed on May 3, 2006, as to the plaintiff because Wachovia [had] failed to make proper service on him. The defendant was found to be liable for the amount of the deficiency judgment.

“When the court rendered judgment of strict foreclosure [on August 8, 2005], it found that the debt [owed] to Wachovia, not including fees and costs, was $2,400,834.96 and that [on the basis of appraisals] the value of the property being foreclosed was $295,000. [Neither the plaintiff nor the defendant redeemed the property in connection with the foreclosure action. Thus, on December 12, 2005, titled vested in Wachovia.] To avoid the substantial risk of liability for a much larger deficiency judgment, the defendant negotiated and settled Wachovia's deficiency claim for $275,000 by virtue of a stipulated deficiency judgment. Subsequently, the defendant paid Wachovia $275,000 and obtained a satisfaction of judgment. In his counterclaim, the defendant alleged that, as a joint obligor under the guaranty of the promissory note, the plaintiff was liable to him for $137,500, [which represents] the plaintiff's proportionate and equitable share of the defendant's payment to satisfy the deficiency judgment.

“On April 13, 2007, the plaintiff filed a motion to strike the defendant's counterclaim. The plaintiff argued that, as a matter of law, the defendant had no right of contribution against him because the deficiency judgment rendered in the foreclosure action, for which the defendant sought contribution, was not a joint obligation. The defendant subsequently filed an objection to the motion to strike.

“On October 10, 2007, the [trial] court granted the plaintiff's motion to strike the defendant's counterclaim. The court noted that the plaintiff and the defendant had been jointly liable on the guaranty of the note underlying the ... mortgage but that liability was extinguished by the foreclosure obtained by Wachovia. The court concluded that because only the defendant was liable for the deficiency judgment, and the plaintiff was not, the defendant had no equitable right to contribution from the plaintiff for a portion of that deficiency judgment.” Id., at 51-53, 968 A.2d 941.

Thereafter, the trial court rendered judgment for the plaintiff on the defendant's counterclaim, from which the defendant appealed to the Appellate Court. Id., at 51, 968 A.2d 941. In his appeal to the Appellate Court, the defendant claimed that the trial court improperly had concluded that he had no right to equitable contribution from the plaintiff because the plaintiff was not liable under the deficiency judgment. Id., at 53, 968 A.2d 941. The Appellate Court disagreed. Id. In its decision, the Appellate Court concluded that Wachovia's failure to obtain personal jurisdiction over the plaintiff in the foreclosure action impaired the defendant's right to contribution from the plaintiff, and, therefore, under the principles set forth in the Restatement (Third) of Suretyship and Guaranty, “Wachovia ... was not entitled to collect from the defendant an amount greater than the defendant's contributive share of the guaranty, in this case, half.” Id., at 56, 968 A.2d 941. Thus, the Appellate Court determined that the defendant was not entitled to reimbursement from the plaintiff for any amount. The Appellate Court concluded that, “to the extent, if any, that the defendant's settlement with Wachovia reflected any payment of the plaintiff's obligation to Wachovia, the payment was gratuitous.” Id. The Appellate Court further determined that “the defendant's contributive share was presumptively half of the obligation, which, at the time of the deficiency judgment, was more than $1,050,000. [The defendant's] payment of $275,000 would not appear in the circumstances to be anything other than a portion of his own contributive share. Under either rationale, the defendant is not entitled to reimbursement from the plaintiff.” Id. Finally, the Appellate Court determined that “the defendant is not entitled to restitution on a theory of unjust enrichment because the plaintiff, being effectively discharged from his obligation to [Wachovia by virtue of General Statutes § 49-1], ⁵ owed nothing at the time of the defendant's payment and thus was not enriched, justly or otherwise, by the defendant's payment.” Id. Accordingly, the Appellate Court affirmed the judgment of the trial court. Id., at 57, 968 A.2d 941. This certified appeal followed.

Before addressing the defendant's claims, we set forth the applicable standard of review. “The standard of review in an appeal challenging a trial court's granting of a motion to strike is well established. A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court. As a result, 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.” (Internal quotation marks omitted.) Sullivan v. Lake Compounce Theme Park, Inc., 277 Conn. 113, 117, 889 A.2d 810 (2006).

The defendant's first claim is that the Appellate Court's decision conflicts with well established Connecticut law concerning a coguarantor's right of contribution when the coguarantor has made a payment on a joint obligation. Specifically, the defendant claims that the right of contribution between coguarantors is based on equitable principles and the theory of implied contract and, therefore, arises from the relationship between the coguarantors alone, and not the relationship between the creditor and the coguarantors. The defendant argues, on the basis of this principle, that it is irrelevant to the defendant's right of contribution that Wachovia failed to serve the plaintiff properly in the foreclosure action. The defendant claims that the Appellate Court's decision conflicts with this principle because that court attached significance to the fact that Wachovia was barred by § 49-1 from continuing to enforce the note against the plaintiff. We agree.

We begin our analysis by setting forth the legal principles that govern the right of contribution between coguarantors. Under Connecticut law, the right of contribution between coguarantors is based on the theory of implied contract. Waters v. Waters, 110 Conn. 342, 345, 148 A. 326 (1930). When two or more persons guarantee the debt of another, they simultaneously enter into “an implied promise on the part of each to contribute his share if necessary to meet the common obligation.” Id., at 346, 148 A. 326. “[T]his right is an existing obligation running from the inception of the relation [ship]....” Id. Nevertheless, “its enforcement does not accrue ... until the actual payment of the common debt.” Id.

The only parties to this implied contract are the coguarantors. The creditor is not a party. Indeed, “[t]he creditor has nothing to do with the right of the [coguarantors] for contribution among themselves, and has no right to do any act tending to impair it.” 18 Am.Jur.2d 42, Contribution § 32 (2004). Accordingly, “the discharge of one [coguarantor's] direct liability to the [creditor] will not relieve [him or her] from his or her liability to contribute to the other [coguarantors] ... whether the discharge results from contract or from operation of law.” Id., at 41-42. In...