ZARELLA, J.
In this certified appeal,
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.
"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
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
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 addition, "the fact that a creditor sues only some of several [coguarantors], or recovers judgment against fewer than all of them, does not excuse those not sued or not included in the judgment from paying their part of the joint debt. Accordingly, as a rule, one or more of the [coguarantors] against whom the judgment is recovered may, upon paying the creditor, compel contribution from all other [coguarantors]." Id., at 44, § 35.
A coguarantor, however, is not entitled to contribution for any amount paid to the creditor toward the common debt. Rather, under Connecticut law, a guarantor's right of contribution from a coguarantor arises only when the guarantor "has paid in excess of his share of the whole [outstanding] obligation," and the amount of contribution he is entitled to collect is limited to "the amount he has paid in excess of his share of the whole [outstanding] obligation."
This rule is echoed in the Restatement (Third) of Suretyship and Guaranty,
In the present case, the Appellate Court concluded that Wachovia's failure to properly serve and obtain personal jurisdiction over the plaintiff in the foreclosure action, and subsequent inability to obtain a deficiency judgment against him pursuant to General Statutes § 49-1, "[f]unctionally... allowed a limitations period to expire against the plaintiff...." Lestorti v. DeLeo, supra, 114 Conn.App. at 55, 968 A.2d 941. The Appellate Court further concluded that "[n]o right of recourse [was] applicable. Wachovia [thus] 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. Accordingly, 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.
We conclude that the Appellate Court's conclusions were improper because (1) the court did not apply the theory of implied contract to the defendant's claim for contribution, and (2) they contradict the express terms of the parties' guaranty agreement. First, under the theory of implied contract, the defendant's right of recourse and, more specifically, his right of contribution from the plaintiff was not impaired by Wachovia's failure to obtain jurisdiction over the plaintiff in the foreclosure action because Wachovia was not a party to the implied contract between the plaintiff and the defendant and, therefore, could not unilaterally impair the right of contribution between them. See, e.g., 18 Am.Jur.2d 42, supra, at § 32. Because the defendant continued to have a right of recourse against the plaintiff, no part of the defendant's obligations to Wachovia
The Appellate Court's conclusions also contradict the express terms of the guaranty agreement between the parties and Wachovia. The guaranty agreement provided that Wachovia could, "without impairing or releasing the obligations of [any] [g]uarantor ... [a]dd, release, settle, modify or discharge the obligation of any... guarantor ... for any of the [l]iabilities" or "[t]ake any other action which might constitute a defense available to, or a discharge of ... any other ... [g]uarantor...." Because the defendant contractually agreed that the release of a coguarantor would not result in a corresponding release of his own obligations under the guaranty agreement, the Appellate Court's conclusion to the contrary was improper.
The defendant's second claim is that the Appellate Court's decision is improperly based on an assumption of a fact that is not part of the record. As an alternative ground for affirming the trial court's decision to grant the plaintiff's motion to strike, the Appellate Court stated 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. His payment of $275,000 would not appear in the circumstances to be anything other than a portion of his own contributive share. [Therefore]... the defendant is not entitled to reimbursement from the plaintiff." Lestorti v. DeLeo, supra, 114 Conn.App. at 56, 968 A.2d 941. The defendant claims that the Appellate Court's determination that, at the time of the deficiency judgment, the defendant's contributive share of the obligation was more than $1,050,000 is not supported by the allegations of his counterclaim or applicable law. The defendant argues that, although Wachovia may have claimed a deficiency of more than $2 million, no deficiency judgment ever was established in that amount, and, therefore, there was no basis in fact or law for the Appellate Court to conclude that the stipulated deficiency judgment of $275,000 was anything other than the full outstanding balance due on the note. We agree with the defendant that the Appellate Court improperly concluded that the defendant's contributive share of the outstanding obligation was more than $1,050,000. We disagree, however, with the defendant to the extent that he claims that the stipulated deficiency judgment either establishes or represents the full outstanding balance due on the note for purposes of determining whether the defendant has paid more than his contributive share and, therefore, is entitled to contribution.
The defendant alleged in his counterclaim that, "[o]n or about August 8, 2005, the court [rendered] a judgment of strict foreclosure in the Pond Place action in favor of [Wachovia]. At the time of the judgment, the court found that the debt owing to [Wachovia], not including fees and costs, was $2,400,834.96 and that, based on [certain] appraisals, the value of the property being foreclosed was $295,000." The defendant further alleged that, "[i]n order 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," and that, "on or about August 15, 2006, the court [rendered] a stipulated deficiency judgment [in accordance with the settlement] in the Pond Place action...."
We conclude that the Appellate Court improperly determined that the outstanding debt at the time of the deficiency judgment was the difference between $2,400,834.96 and $295,000, or approximately
Nonetheless, we disagree with the defendant to the extent that he claims that the stipulated deficiency judgment either establishes or represents the full outstanding balance due on the note for purposes of determining whether the defendant has paid more than his contributive share and, therefore, is entitled to contribution. In the present case, the amount of the deficiency or outstanding obligation was never litigated by the defendant or Wachovia, or determined by the trial court in the foreclosure action. Rather, the defendant and Wachovia agreed to settle Wachovia's claim against the defendant in the amount of $275,000. Moreover, the defendant expressly alleged in his counterclaim that, "[i]n order 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." (Emphasis added.) Thus, the defendant acknowledges in his counterclaim that the outstanding deficiency was actually "much larger" than $275,000. Accordingly, we disagree with the defendant to the extent that he claims that the
As a final matter, we conclude that, in order for a coguarantor to state a claim for contribution, he must allege that he has paid more than his contributive share of the whole outstanding obligation. The defendant's counterclaim does not contain such an allegation. Nevertheless, in light of the fact that the defendant did not have the benefit of our decision in the present case when he drafted his counterclaim and the fact that the plaintiff did not raise this ground in his motion to strike, we decline to affirm the Appellate Court's judgment on this alternative ground. See Meredith v. Police Commission, 182 Conn. 138, 140-41, 438 A.2d 27 (1980) (declining to affirm trial court's decision to strike complaint on ground of nonjoinder of necessary party, when such ground was not raised by defendant in motion to strike). On remand, the defendant shall be given an opportunity to replead the necessary allegations in accordance with this decision.
In order to recover any amount of contribution from the plaintiff, the defendant will have the burden of proving that he has paid more than his contributive share of the whole outstanding obligation to Wachovia. The defendant thus must prove that the value of the subject property as of December 12, 2005, was not $295,000 but, rather, was greater than $1,850,834.96,
The judgment of the Appellate Court is reversed and the case is remanded to that court with direction to reverse the judgment of the trial court and to remand the case to the trial court for further proceedings according to law.
In this opinion KATZ and McLACHLAN, Js., concurred.
ROGERS, C.J., with whom PALMER, J., joins, concurring and dissenting.
The majority concludes that the Appellate Court properly concluded that the defendant
In support of its conclusion that the defendant is entitled to equitable contribution only for amounts paid in excess of his contributive share, the majority relies in part on the Restatement (Third), Suretyship and Guaranty § 55(1), p. 236 (1996), under which, "[a]s between cosureties for the same underlying obligation, each cosurety is a principal obligor to the extent of its contributive share ... and a secondary obligor as to the remainder of its duty pursuant to its secondary obligation." Accordingly, a cosurety's right of contribution against the other cosureties does not arise unless it has paid more than its contributive share, and its right to contribution is limited to the amount that is in excess of its contributive share.
The majority concludes that this court previously has adopted the theory expressed in § 55 of the Restatement (Third) of Suretyship and Guaranty, that a coguarantor is entitled to equitable contribution only for amounts paid in excess of its contributive share. In support of this conclusion, it quotes this court's statement in Waters v. Waters, 110 Conn. 342, 345, 148 A. 326 (1930), that, under Connecticut law, a guarantor's right of contribution from a coguarantor arises only when the guarantor "has paid in excess of his share of the whole [outstanding] obligation." (Emphasis added.) The majority also quotes this court's statement in Bristol Bank & Trust Co. v. Broderick, 122 Conn. 310, 315, 189 A. 455 (1937), that "[a] guarantor, as between himself and his co-guarantors, is a principal for the portion of the debt which he ought to pay and is a surety [or secondary obligor] for the remainder...." On the basis of these statements, the majority concludes that it is settled under Connecticut law that, "when a coguarantor has made a payment to the creditor in an amount that is less than his share of the whole outstanding obligation, he has no right to contribution from the other coguarantors." (Emphasis in original.) Even if the majority's interpretation of Waters is correct,
I see no equitable or policy reasons why, if two coguarantors are jointly and severally liable to an obligee, and one coguarantor pays less than his contributive share and the other coguarantor pays nothing because his obligation to the obligee has been discharged by operation of law, we should maintain the legal fiction that the nonpaying coguarantor was not jointly liable for the amount paid for purposes of equitable contribution. Rather, I believe that it is more equitable to allow the paying coguarantor to seek equitable contribution under these circumstances; see Estate of Dresser v. Maine Medical Center, supra, 960 A.2d at 1207-1208 (plaintiff was entitled to contribution from defendant even though injured party's claims against defendant had not been formally released because claims were barred by statute of limitations);
I concur with the majority's conclusion that we should reverse the judgment of the
Chief Justice Rogers, in contravention of the language of the Restatement of the Law of Restitution, claims that the paying coobligor need not secure a full release from the creditor or confer any benefit on the nonpaying coobligor in order to be entitled to contribution for amounts paid that do not exceed the paying coobligor's contributive share when the nonpaying coobligor is released from his obligations by operation of law. In support of this argument, Chief Justice Rogers relies on 18 Am.Jur.2d 16, supra, at § 6, and the dissenting opinion in Estate of Dresser v. Maine Medical Center, 960 A.2d 1205, 1209 (Me.2008) (Mead, J., dissenting). Neither of these sources, however, supports Chief Justice Rogers' claim.
The second edition of American Jurisprudence provides in relevant part that "[c]ontribution actions are based [on] principles of natural justice, which require that persons under a common burden bear responsibility in equal proportions and that one party not be required to bear more than his or her just share to the advantage of his or her co-obligors." (Emphasis added.) When a nonpaying coobligor, like the plaintiff in this case, is released from his obligations by operation of law, he reaps no advantage from the paying coobligor's payment to the creditor. 18 Am. Jur.2d 16, supra, at § 6. Thus, § 6 does not support Chief Justice Rogers' claim.
Chief Justice Rogers' reliance on Estate of Dresser also is misplaced. Unlike the present case, Estate of Dresser involved the right of contribution between joint tortfeasors, as opposed to coobligors. See Estate of Dresser v. Maine Medical Center, supra, 960 A.2d at 1206. In addition, Estate of Dresser does not discuss the Restatement of the Law of Restitution and does not conclude that a coobligor who has paid less than his contributive share is entitled to contribution when the nonpaying coobligor is released from his obligations by operation of law. Rather, that case discusses whether Maine should adopt § 23 of the Restatement (Third) of Torts, Apportionment of Liability, which requires extinguishment of claims by joint tortfeasors as a precondition for a contribution action. Restatement (Third), Torts, Apportionment of Liability § 23, p. 284 (2000); see Estate of Dresser v. Maine Medical Center, supra, at 1207-1208. Estate of Dresser, therefore, has no relevance to the facts or issues in the present case.
Finally, we note that, regardless of whether we adopt the unique interpretation of the exception contained in § 82 of the Restatement of the Law of Restitution, as Chief Justice Rogers urges, the defendant's allegations in his counterclaim are insufficient to invoke that exception because the defendant has not alleged that he had secured a full release from Wachovia, that the plaintiff otherwise had been released from his obligations on the note, or that the defendant had conferred any benefit on the plaintiff resulting in the plaintiff's unjust enrichment. When we review an appeal from a trial court's decision on a motion to strike, "our analysis is ... limited only to those well-pleaded facts and those facts necessarily implied from the allegations...." (Internal quotation marks omitted.) Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 262 n. 20, 990 A.2d 206 (2010). Rather than looking solely at the allegations in the counterclaim, however, Chief Justice Rogers bases her analysis and conclusions wholly on the trial court's acceptance of a stipulated fact submitted by the parties, namely, that the plaintiff was released from his obligations on the note by operation of § 49-1. Although this could be appropriate in the context of a motion for summary judgment, it is not appropriate in the context of a motion to strike. "[A] motion to strike challenges the legal sufficiency of a pleading and, consequently, requires no factual findings by the trial court ...." (Emphasis added.) Id., at 252, 990 A.2d 206. Because the defendant's counterclaim, even when construed liberally and viewed in the broadest manner possible, is devoid of any allegations that invoke the exception, there is no basis to apply it in the present case.
"(b) Discharge, under section 42a-3-604, of the obligation of a party to pay an instrument does not discharge the obligation of an endorser or accommodation party having aright of recourse against the discharged party.
"(c) If a person entitled to enforce an instrument agrees, with or without consideration, to an extension of the due date of the obligation of a party to pay the instrument, the extension discharges an endorser or accommodation party having a right of recourse against the party whose obligation is extended to the extent the endorser or accommodation party proves that the extension caused loss to the endorser or accommodation party with respect to the right of recourse.
"(d) If a person entitled to enforce an instrument agrees, with or without consideration, to a material modification of the obligation of a party other than an extension of the due date, the modification discharges the obligation of an endorser or accommodation party having a right of recourse against the person whose obligation is modified to the extent the modification causes loss to the endorser or accommodation party with respect to the right of recourse. The loss suffered by the endorser or accommodation party as a result of the modification is equal to the amount of the right of recourse unless the person enforcing the instrument proves that no loss was caused by the modification or that the loss caused by the modification was an amount less than the amount of the right of recourse.
"(e) If the obligation of a party to pay an instrument is secured by an interest in collateral and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of an endorser or accommodation party having a right of recourse against the obligor is discharged to the extent of the impairment. The value of an interest in collateral is impaired to the extent (i) the value of the interest is reduced to an amount less than the amount of the right of recourse of the party asserting discharge, or (ii) the reduction in value of the interest causes an increase in the amount by which the amount of the right of recourse exceeds the value of the interest. The burden of proving impairment is on the party asserting discharge.
"(f) If the obligation of a party is secured by an interest in collateral not provided by an accommodation party and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of any party who is jointly and severally liable with respect to the secured obligation is discharged to the extent the impairment causes the party asserting discharge to pay more than that party would have been obliged to pay, taking into account rights of contribution, if impairment had not occurred. If the party asserting discharge is an accommodation party not entitled to discharge under subsection (e), the party is deemed to have a right to contribution based on joint and several liability rather than a right to reimbursement. The burden of proving impairment is on the party asserting discharge.
"(g) Under subsection (e) or (f), impairing value of an interest in collateral includes (i) failure to obtain or maintain perfection or recordation of the interest in collateral, (ii) release of collateral without substitution of collateral of equal value, (iii) failure to perform a duty to preserve the value of collateral owed, under article 9 or other law, to a debtor or surety or other person secondarily liable, or (iv) failure to comply with applicable law in disposing of collateral.
"(h) An accommodation party is not discharged under subsection (c), (d) or (e) unless the person entitled to enforce the instrument knows of the accommodation or has notice under section 42a-3-419(c) that the instrument was signed for accommodation.
"(i) A party is not discharged under this section if (i) the party asserting discharge consents to the event or conduct that is the basis of the discharge, or (ii) the instrument or a separate agreement of the party provides for waiver of discharge under this section either specifically or by general language indicating that parties waive defenses based on suretyship or impairment of collateral."
The majority points out that under 18 Am. Jur.2d 16, supra, at § 6, a paying coguarantor must show that he has acted "`to the advantage'" of the nonpaying coguarantor and interprets this to mean that the coguarantor's actions must have reduced or eliminated the nonpaying coguarantor's actual liability to the creditor in order to obtain contribution. I disagree. Just as the majority concludes that, because a nonpaying coguarantor has implicitly agreed that he will reimburse the paying coguarantor for sums paid in excess of the paying coguarantor's equitable share, a coguarantor who has paid more than his contributive share is entitled to contribution even if the nonpaying coguarantor has been discharged, I would conclude that, because a coguarantor has implicitly agreed that he will pay his proportionate share of any amounts that are paid to the creditor under the joint obligation, any payments by other coguarantors are to his "`advantage'" under 18 Am. Jur.2d 16, supra, at § 6, regardless of whether the creditor could have recovered the amounts from the nonpaying coguarantor.
I recognize that this court's statement in Bristol Bank & Trust Co. v. Broderick, supra, 122 Conn. at 315, 189 A. 455, that "[a] guarantor, as between himself and his co-guarantors, is a principal for the portion of the debt which he ought to pay and is a surety for the remainder" supports the majority's interpretation of Waters. This statement—which was made well after this court's decision in Waters—was dictum, however, and the case has never been cited by this court or the Appellate Court. Accordingly, I do not agree with the majority that the question is clearly settled under Connecticut law.
The majority states that there is no reason to decide in the present case whether to adopt an exception to the general rule that a coguarantor must pay more than his contributive share in order to seek contribution because the defendant did not allege a necessary factual premise for the exception, namely, that the plaintiff has been discharged from his debt. The trial court found, however, that the plaintiff's "liability was extinguished by the foreclosure obtained by Wachovia's successor in interest" pursuant to § 49-1. That finding has not been challenged on appeal.
