COLONY INS. CO. v. ORACLE LOUNGE, INC., No. CV07-4029107S (May 1, 2008)

BARBARA N. BELLIS, JUDGE.

The case presently before the court is a declaratory judgment action brought by Colony Insurance Company ("Colony") against Oracle Lounge, Inc., dba Oracle or Oracle Resto-Lounge ("Oracle"), Strive Network, LLC ("Strive"), and Corey Andrews. The matter arises out of tragic events of October 5, 2006 when, according to the allegations of the complaint, Juan Villanueva and Raymond Morales died following a head-on collision with a tractor trailer truck. The complaint alleges that on or about October 4, 2006, into the early morning hours of October 5, 2006, Juan Villanueva, Morales, and Raymond Nunez were patrons of Oracle and Hopkins nightclubs, and that Morales was sold alcohol while intoxicated. The complaint further alleges that thereafter, Morales, operating his vehicle in which Villanueva was a passenger, was traveling in the wrong direction on I-95, when the head-on collision occurred. According to the complaint, two lawsuits, currently pending in the New Haven Judicial District, resulted: one by Villanueva against Oracle and Hopkins, and one on behalf of Morales against Oracle, Hopkins, Strive and Andrews. Colony seeks to have the court construe its policy of insurance with Oracle/Strive and declare that it is not obligated to provide a defense and/or indemnify Oracle/Strive in those actions.

The summons lists Oracle, Strive, and Andrews as defendants. The complaint also refers to Juan L. Villanueva, Jr., Executor of the Estate of Juan L. Villanueva, III ("Villanueva") and Hopkins Restaurant Corporation, dba Alchemy Nightclub and Lounge 215 ("Hopkins") as defendants; that appears to be a scrivener's error, as neither Villanueva nor Hopkins were served with the lawsuit, nor are they listed CT Page 6967 on the summons.

On February 5, 2008, Villanueva moved to intervene in the present matter as a defendant, as a matter of right, or in the alternative, with permission from the court. Colony objected to the Motion to Intervene on February 15, 2008; Villanueva filed a Reply Brief on March 11, 2008 and oral argument was heard on that day.

Villanueva bases its motion on C.G.S. § 52-107, and Practice Book § 9-18, which essentially deal with necessary parties to litigation. However, "[b]ecause this is a declaratory judgment action, the determination is not whether [one] is a necessary party to [the] action, but simply whether the outcome of [the] action may affect [one's] interests . . ." AIU Insurance Company v. Brown, 42 Conn.App. 363, 369-70 (1996). As the parties did brief and argue the issue of whether Villanueva has a direct or substantial interest, the court will proceed and base its decision on the applicable statute and Practice Book sections dealing with declaratory judgment actions.

C.G.S. Section 52-29 provides as follows.

(a) The Superior Court in any action or proceeding may declare rights and other legal relations on request for such a declaration, whether or not further relief is or could be CT Page 6963 claimed. The declaration shall have the force of a final judgment.

(b) The judges of the Superior Court may make such orders and rules as they may deem necessary or advisable to carry into effect the provisions of this section.

Connecticut Practice Book § 17-54 et seq. sets forth, inter alia, the scope, conditions, and procedure for declaratory judgment actions. Significantly, § 17-56(b) provides that "[a]ll persons who have an interest in the subject matter of the requested declaratory judgment that is direct, immediate and adverse to the interest of one or more of the plaintiffs or defendants in the action shall be made parties to the action or shall be given reasonable notice thereof." In the present matter, while Villanueva was not made a party to the action by Colony, Colony did provide the requisite notice to Villanueva, as evidenced by the certificate of notice appended to the complaint.

The certificate of notice states that Colony, "pursuant to Practice Book Section 17-56(b) hereby gives notice that all interested persons have been joined as parties to the foregoing action or have been given reasonable notice thereof," including notice to Villanueva.

Villanueva argues that it has a direct and substantial interest in the subject matter of this declaratory judgment action which cannot be protected unless it is made a party to this action, that its interests are not adequately protected by any other party to the litigation, and that as no appearances have been filed on behalf of the defendants to date, Colony may prevail without a true adversarial process.

Colony's position, on the other hand, is that Villanueva does not have a direct or substantial interest in this declaratory action, because it is not a party to the insurance contract, and because any interest is contingent and remote. Colony also claims that under Connecticut law, an injured third party has no standing to intervene in a declaratory judgment action between an insurer and its insured, and that therefore, Villanueva has no standing to intervene here.

It is somewhat disingenuous of Colony to now take the position that Villanueva in fact had no direct or substantial interest in the action, where, as noted above, Colony provided the notice of this action to Villanueva as an interested party pursuant to P.B. § 17-56(b).

The purpose of a declaratory judgment action is to secure adjudication of rights where there is substantial uncertainty of legal relations between the parties or a substantial question in dispute. Wilson v. Kelley, 224 Conn. 110, 115 (1992); Mannweiler v. LaFlamme, 232 Conn. 27, 33 (1995). The statute authorizing the courts to render declaratory judgments is to be liberally construed. Horton v. Meskill, 172 Conn. 615, 627-28 (1977). An interested person may claim a right to intervene under C.G.S. § 52-29 and Practice Book § 17-56. Electric Cable Compounds, Inc. v. Seymour, 95 Conn.App. 523, 529 (2006).

The declaratory judgment action is frequently used to determine issues CT Page 6964 of insurance coverage. E.g. Safeco Insurance Co. v. Vetre, 174 Conn. 329 (1978). Courts have routinely decided coverage issues in declaratory judgment actions where the person injured in the underlying action is a party to the declaratory judgment action. E.g. Hanover Insurance Co. v. Halfmann, Superior Court, judicial district of New Haven, Docket No. 0412888 (March 9, 1999, Zoarski, J.) (declaratory judgment action brought by insurer against both the insured and injured third party, denying injured party's motion to strike which posited that the issue of the insured's negligence would be best determined in the underlying action); Vermont Mutual Insurance Co. v. Westwood Condominium Association, Superior Court, judicial district of Hartford, Docket No. 03 0825593 (March 30, 2005, Wagner, J.T.R.) (declaratory judgment action brought by insurer against both the insured and injured third party, where insured cited in its prior insurer; denying the prior insurer's motion to dismiss, and stating "the declaratory judgment statute is sufficiently broad to permit the joining in of the two insurance companies for a judicial determination of which coverage applies and the consequent duty to defend or indemnify the insured"; Nationwide Insurance Company v. Bergeron, 8 Conn. L. Trib. No. 12, p. 13 (1981) (declaratory judgment action brought by insurer against its insured, the injured third party, and the third party's insurer; denying motions to strike, holding that an insurance carrier may bring a declaratory judgment action against another carrier to determine the validity of the latter's disclaimer of coverage for its insured).

Additionally, courts, when directly confronted with the issue of whether the injured person is a proper party to a declaratory judgment action determining coverage between an insurer and the insured tortfeasor, have permitted such participation. See Wynn v. Commercial Union Insurance Company, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket No. 93 0135153 (June 13, 1994, Lewis, J.) [12 Conn. L. Rptr. 51], (declaratory judgment action brought by injured third party against tortfeasor's insurers; denying motion to strike of insurer, and rejecting argument that injured party had no standing to bring the declaratory judgment action); Philadelphia Indemnity Insurance Co. v. Atlantic Risk Management, Superior Court, judicial district of New Haven, Docket No. 06 4018752 (September 20, 2006, Robinson, A., J.) (declaratory judgment action brought by insurer against its insured, granting motion to intervene filed by injured party/insurer which had paid over 4 million dollars to satisfy judgment resulting from the defendant's alleged mishandling of claims).

The purpose of the declaratory judgment notice rule is to ensure that all persons with direct interests are able to protect their interests by participating in the action. Batte-Holmgren v. Commissioner of Public CT Page 6965 Health, 281 Conn. 277, 288 (2007). "Anyone with an interest in the subject matter is entitled to reasonable notice and an opportunity to be heard, whether he supports the plaintiffs' or the defendants' position. This court has indicated a preference for joining interested persons as parties, rather than merely providing them with notice of the action. Simply notifying an interested person of the pendency of the action does not ensure that the person will be bound by the resulting judgment. In fact, the rules of practice, as amended in 2000, specifically provide that "[e]xcept as otherwise provided by law, no declaration shall be binding against any persons not joined as parties. If it appears to the court that the rights of nonparties will be prejudiced by its declaration, it shall order entry of judgment in such form as to affect only the parties to the action." Practice Book § 17-56(d). Thus, the notice requirement ensures that interested persons are aware of the requested declaratory relief and are able to move to intervene to protect their interests, should they choose to do so." Id. at 287-88 (citations omitted; internal quotations omitted).

In AIU Insurance Company v. Brown, supra, a declaratory judgment action brought by the insurer against its insured and the injured third party, our Appellate Court reversed the trial court, and held that the other insurer should be allowed to intervene as a defendant. The court stated.

Where [the interested persons] are reasonably within the reach of the process and are not so numerous that it would impose an unreasonable burden upon the plaintiff they should be made parties; but if they or some of them are not reasonably available for service or to summon them or all of them into the action would put upon the plaintiff a burden he ought not fairly to be asked to assume, the provision for reasonable notice applies . . .

Statutes and rules relating to the remedy of declaratory judgments are given liberal construction to effectuate their purposes. One great purpose of the statute is to enable parties to have their differences authoritatively settled in advance of any claimed invasion of rights, that they may guide their actions accordingly and often may be able to keep them within lawful bounds, and so avoid the expense, bitterness of feeling and disturbance of the CT Page 6966 orderly pursuits of life which are so often the incidents of law suits. Fully to carry out the purposes intended to be served by such judgments, it is sometimes necessary to determine rights which will arise or become complete only in the contingency of some future happening. Even if the right claimed . . . is a contingent one, its present determination may well serve a very real practical need of the parties for guidance in their future conduct. A construction of our statute and rules which would exclude from the field of their operation the determination of rights, powers, privileges and immunities which are contingent upon the happening or not happening of some future event would hamper their useful operation. Id. at 368-69. (Citations omitted; internal quotations omitted.)

In the present matter, Villanueva has exercised its right to intervene in this action, as provided for by both statute and our Rules of Practice. Practice Book § 17-56(b) gives "[a]ll persons" with an interest that is "direct, immediate and adverse to the interest of one or more of the plaintiff's or defendant's" certain rights. By virtue of its pending lawsuit against Oracle, Villanueva clearly has a direct, immediate and adverse interest to that of Oracle, one of the defendants in this declaratory judgment action. Our Appellate Courts, have made quite clear their preference that an interested person be joined in the declaratory judgment action, rather than merely being provided with notice of the action, and in those situations where an interested person has only been provided notice, they be permitted to intervene should they choose to do so. The same interests that compel notice to all interested persons militates in favor of allowing an interested person, once noticed, to exercise its right to participate in the action. Our case law dictates that Villanueva not be refused its right to participate in this declaratory judgment action.

The fact that the defendants are all non-appearing to date — and that Colony may prevail, unopposed — buttresses Villanueva's argument that it be permitted to protect its interests which remain unprotected. Because this court concludes, however, that Villanueva's claim to intervention is a matter of right pursuant to the provisions of C.G.S. § 52-29 and Practice Book § 17-54 et seq., the court does not need to consider the remaining claims of Colony.

For the foregoing reasons, Villanueva's Motion to Intervene is granted and Colony's Objection is overruled.

CT Page 6968