Ass. For Apartment Owners of the Cliff v. Concepcion

Opinion

222 OCT 2 AM O: 52 J J

IN THE SUPERIOR COURT OF GUAM BY: ASSOCIATiON FOR THE APARTMENT Superior Court Case No. CVO14$-22 OWNERS Of THE CLIFF,

Plaintiff, DECiSION AND ORDER RE MOTION VS. TO DISMISS COUNTERCLAIM AND MOTION TO STRIKE AFFIRMATIVE MANUEL I. CONCEPCION, NATIONAL DEFENSES UNION FiRE iNSURANCE CO., OF PITTSBURGH, PA. and DOES 1-10, INCLUSIVE

Defendants.

In this partition action, the Court reviews whether to dismiss or strike affirmative

defenses and counterclaims raised by Defendant Manuel I. Concepcion. The Court determines

that Concepcion’s counterclaim is subject to dismissal as it was a compulsory counterclaim in a

related case, CV0287-19. Further, the Court finds that all but one affirmative defense has been

sufficiently pled and STRIKES the insufficiently pled affirmative defense.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. CV0287-19

In 2019, the Association filed CVO2$7-19 against Concepcion and Anna Marie Cruz for

breach of the obligation to pay homeowners’ association (HOA) assessments for Apartment No.

303--a unit they own as tenants in common at The Cliff Apartments. Two years later, the

Association dismissed all claims against Cntz. CVO2$7-19 (Stip. Dismiss with Prej. & Order

(Mar. 30, 2021)). The case remains active against Concepcion only, and a summary judgment

motion filed by the Association is pending. in that motion, the Association contends that

Cr (‘_ rr CV0148-22 DECISION AND ORDER RE MOTION TO DISMISS COUNTERCLAIMS AND Page 2 MOTION TO STRIKE AFFIRMATIVE DEFENSES

Concepcion failed to respond to certain discovery requests and that he has admitted to breaching

his obligation to pay the assessments and is liable for all such assessments. CV0287-19 (Pl.’s

Mot. Surnm. J. (Dec. 14, 2020)).

B. CV0148-22

In March 2022, the Association filed this lawsuit against Concepcion and National Union

for the partition of Apartment No. 303. The Association alleges that it has obtained Cniz’s

fonrier 50% interest in the property. Compl. ¶ 8, Ex. A (Mar. 17, 2022).

Concepcion filed an Answer and listed the following “Affirmative Defenses,” among

others: (1) failure to state a claim; (2) laches; (3) entitlement to a setoff (4) failure to give notice

of a settlement against a joint tortfeasor, thereby prohibiting a collection against Concepcion; (5)

equitable estoppel; (6) unclean hands; (7) unconscionability; and (8) lack of standing and fraud.

Answer at 3-4 (May 2, 2022).

Concepcion also filed a counterclaim against Individual Does 1-10. He claims that those

persons or entities purporting to act as the Association are frauds and lack standing. Further,

Concepcion alleges that the entities purporting to act as the Association wrongfully attempted to

collect money from him. Answer at 5-6. Finally, he seeks an award of exemplary damages.

Answer at 6.

The Association moves to strike the affirmative defenses and dismiss the Counterclaim as

well as Concepcion’s request for punitive damages.

II. LAW AND DISCUSSION

A. Motion to Strike Affirmative Defenses

1. Standard for a Motion to Strike

Under Guam Rule of Civil Procedure 1 2(f, the Court may strike any matter that contains

an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. Guam CVOI4$-22 DECISION AND ORDER RE MOTION TO DISMISS COUNTERCLAIMS AND Page 3 MOTION TO STRIKE AFFIRMATIVE DEFENSES

Rule of Civil Procedure 12(f) is identical to Federal Rule of Civil Procedure 12(f); therefore, the

Court can look to the federal rule for additional guidance. Hatlers v. Yottng, CV0299-19, at 3

(Super. Ct. Guam Sept. 3, 2019); Benavente v Taitano, 2006 Guam 15 ¶ 48. A Rule 12(f)

motion aims to “avoid unnecessary expenditures of time and money that arise throughout

litigation by eliminating spurious issues prior to trial.” Ukau v. Wang, 2012 WL 1503325, at

* 1—2 (D. Guam). However, Rule 12(f) motions are “disfavored and infrequently

granted.. .unless it is clear that the matter to be stricken would have no possible bearing on the

subject matter of the litigation.” Id. (internal quotes omitted).

2. Affirmative Defense No. 1 (Failure to State a Claim)

Concepcion states as an affirmative defense that the Association failed to state a claim for

relief. The Association correctly contends that this does not qualify as an affirmative defense.

See Satanic Temple, Inc. v. City of Scottsdale, 423 F. Supp. 3d 766, 778 (D. Ariz. 2019) (striking

affirmative defense because “[c]ourts generally hold that failure to state a claim is not an

affirmative defense.”). Moreover, because Concepcion filed an Answer rather than moved to

dismiss the Complaint for its failure to state a claim for relief, he waived this argument. See

GRCP 12(b) (“A motion making any of these defenses shall be made before pleading if a further

pleading is permitted.”). The Court therefore STRIKES the First Affirmative Defense.

3. Affirmative Defense Nos. 2 (Laches), 5 (Equitable Estoppel), 6 (Unclean Hands), 7 (Unconscionability), and 8 (Lack of Standing and Fraud)

Citing federal law, the Association contends that Concepcion must supply fair notice of

sufficient facts in any asserted affirmative defense and that he failed to do so for his specified

affirmative defenses of laches, equitable estoppel, unclean hands, unconscionability, and lack of

standing and fraud. In response, Concepcion asserts that the Guam Supreme Court has rejected a

heightened standard for pleadings. Moreover, he argues that he complied with Rule 8(b) which CVOI4$-22 DECISION AND ORDER RE MOTION TO DISMISS COUNTERCLAIMS AND Page 4 MOTION TO STRIKE AFFIRMATIVE DEFENSES

states that a defense shall be stated in short and plain terms, and 8(c), which indicates that

affirmative defenses shall be set forth in a pleading.

In M-Etec. Corp. v Phil-Gets (Guam) Int’l Trading Corp., 2016 Guam 35, the Guam

Supreme Court determined that an affimative defense need not be pleaded in specific terms.

Instead, a court may examine the totality of the circumstances and make a practical, common

sense assessment about whether Rule 8(c)’s core purpose of protecting against surprise and unfit

prejudice has been served.

Concepcion’s affirmative defenses of laches, equitable estoppel, unclean hands,

unconscionably, and lack of standing are all pleaded in specific terms and therefore meet the test

provided in M-Electric Corp. Having notice of such defenses, the Association cannot claim

unfair surprise or lack of notice. The Motion to strike these affirmative defenses is therefore

DENIED.

4. Affirmative Defense No. 3 (Entitlement to a Setoft)

Concepcion lists as an affirmative defense that “to the extent that the allegation[s] [of] the

Complaint state a cause of action, Concepcion is entitled to the relief for his counterclaim, and

such must be set-off against any relief sought by Plaintiff.” Answer at 3. The Association

moves to strike this affirmative defense because there is no mutuality of debt—the Association

does not owe any debt to Concepcion, and Concepcion has an unliquidated debt that cannot be

set off. See Mot. at 16-17 (May 23, 2022) (citing Waathdad e. CyfredLtcL, 2021 Guam 24).

Concepcion seems to admit he has an unliquidated claim against the Association but asks that he

be allowed to amend his Answer.

A Rule 12(1) motion is not to be granted

unless it appears to a certainty that plaintiffs would succeed despite any state of the facts which could be proved in support of the defense. Moreover, even when the facts are not disputed, several courts have noted that a motion to strike for CV0148-22 DECISION AND ORDER RE MOTION TO DISMISS COUNTERCLAIMS AND Page 5 MOTION TO STRIKE AFFIRMATIVE DEFENSES

insufficiency was never intended to furnish an opportunity for the determination of disputed and substantial questions of law. This is particularly so when, as here, there has been no significant discovery.

E.E.O.C. v. Bay Ridge Toyota, Inc., 327 F. Supp. 2d 167, 170 (E.D.N.Y. 2004). In this case, the

Association’s argument references facts about the non-mutuality of debts--facts not yet

established in this phase of the case. Despite Concepcion’s admission that he has unliquidated

claims against the Association, Rule 12(f) does not necessarily provide the authority to dispose

of a defense even when the facts are undisputed. The Court, therefore, DENIES the motion to

strike the setoff affirmative defense and will allow the parties to establish a record for the Court’s

consideration of the sufficiency of the legal and factual issues.

5. Affirmative Defense No. 4 (Failure to Give Notice of a Settlement Against a Joint Tortfeasor, Thereby Prohibiting a Collection Against Concepcion)

Concepcion asserts the affirmative defense that “the obligations for which the claimed

interest was taken were joint and indivisible debts of Concepcion and Cruz and as such the

taking of title to any portion of the property from Cniz extinguished the debt.” Answer at 3-4.

Concepcion further contends that because the Association failed to give notice of a settlement

against a joint tortfeasor, it is prohibited from collecting against Concepcion. Answer at 3.

The Association seeks to strike this affirmative defense on the grounds that Concepcion

incorrectly asserts joint tortfeasor status and instead is alleged to be a co-obligor under an HPR

contract. The Association also contends that the defense of joint and indivisible debts” is not

recognized under Guam law. finally, the Association argues that this is a partition action and not

a collection case, so the defense is legally insufficient.

Concepcion retorts that the Association derives its claim from the HPR statute and not a

contract and is thereby bound by the provisions of that statute when it comes to pursuing a claim

against one of two debtholders. Concepcion, however, fails to point to any particular provision CVOI4$-22 DECISION AND ORDER RE MOTION TO DISMISS COUNTERCLAIMS AND Page 6 MOTION TO STRIKE AFFIRMATIVE DEFENSES

within the HPR statute that distinguishes why the treatment of Concepcion and Cruz as

co-obligors differentiates from their treatment as joint tortfeasors.

For the same reasons discussed in the preceding section, it is difficult for the Court to

render this defense insufficient at this phase of the case. The Association comes before this

Court, not in its capacity as a homeowner’s association seeking the payment of assessments but

as a co-owner with Concepcion over the same unit. Nonetheless, how the Association acquired

its interest from Cruz and what procedures it used relative to Cntz and Concepcion may still be

relevant to, among other issues, the Association’s underlying standing to file this action against

Concepcion. On this basis, the Court cannot state with definitiveness that Concepcion has

provided an insufficient defense meriting elimination at the pleadings stage.

B. Motion to Dismiss Counterclaim

Concepcion counterclaims against the Association that it has wrongfully attempted to

collect money (assessments) against him. He also states the persons purporting to be the

Association are, in fact, not the Association. Also, because they have not held regular annual

meetings or elections, they do not have the legal standing to file this case.

The Association moves to dismiss the Counterclaim because these issues belong under

CV0287-19 and are compulsory counterclaims therein, and Concepcion admitted to not paying

his assessments in the other case. In addition, the Association states that because Concepcion

believes that certain “Does” acting as the Association are the persons or entities wrongfully

pursuing Concepcion’s unpaid assessments, Concepcion is asserting a third-party claim.

Concepcion’s Opposition responds that he has met the test under Ukati.

Under Guam Rule of Civil Procedure 13(a), a counterclaim is compulsory when “it arises

out of the transaction or occurrence that is the subject matter of the opposing party’s claim.” The

Court can examine the “aggregate of connected operative facts that can be handled together CVOI4$-22 DECISION AND ORDER RE MOTION TO DISMISS COUNTERCLAIMS AND Page? MOTION TO STRIKE AFFIRMATIVE DEFENSES

conveniently for purposes of trial to determine if they were founded upon the same transaction,

arose out of the same nucleus of operative facts, and sought redress for essentially the same basic

wrong.” Presto v. Lftama, 2012 Guam 24 ¶ 39. Moreover, the failure to assert a compulsory

counterclaim results in precluding that counterclaim in subsequent proceedings. Id. ¶ 39.

CVO2$7-19 involves the Association’s attempt to collect unremitted HOA assessments.

CV0287-19 (Compi. (Mar. 21, 2019)). Concepcion admitted the Association’s allegation that he

“failed to timely pay assessments.” CV0287-19 (Compi. ¶ 6; Answer ¶ 6 (Apr. 17, 2019)).

While he also alleged affirmative defenses, he agreed to “pay in full [the] amount less interest

and less generator assessment fees.” CV0287-19 (Answer at 2). If Concepcion wished to

challenge the Association’s ability to collect against him, such issues could have and should have

been alleged in that collection action, CV0287-19. They were in the same nucleus of facts at

issue in CV0287-19. For that reason, any counterclaim for wrongful collection of funds was a

compulsory counterclaim in the companion case and cannot properly be raised here.

C. Motion to Strike Request for Punitive Damages

Concepcion seeks exemplary damages in his counterclaim. Answer at 6. The

Association moves to strike this request because Concepcion fails to allege any facts to support a

claim for punitive damages. Concepcion’s Opposition does not address this issue.

Because the request for damages stems from the counterclaim deemed compulsory in

CVO2$7-19, the Court also dismisses attending requests for damages.

III. CONCLUSION AND ORDER

The Court GRANTS the Motion to Strike the first affirmative defense of failure to state a

claim and DENiES the motion as to all other affirmative defenses. The Court GRANTS the

Motion to Dismiss the counterclaim and the accompanying request for punitive damages. CV0148-22 DECISION AND ORDER RE MOTION TO DISMISS COUNTERCLAIMS AND Page 8 MOTION TO STRIKE AFFIRMATIVE DEFENSES

SO ORDERED this 24th day of October 2022.

HON. ELYZE M. IRIARTE Judge, Superior Court of Guam

SERVICE VIA EMAIL acknowledge that an electronic copy of the odginal wane- ded to

Date: __Time:

JosepbBambaJt. ? Deputy Clerk, Superior Court of Guam

Appearing Attorneys: Jacques G. Bronze, Esq., Law Offices of Jacques G. Bronze, for Plaintiff Association for the Apartment Owners of the Cliff Curtis C. Van de Veld, Esq., The Vandeveld Law Offices, P.C., for Defendant Manuel I. Concepcion Louie J. Yanza, Esq., Law Office of Louie J. Yanza, for Defendant National Union Fire Insurance