Opinion
MMXCV126008253S
12-01-2016
Jenzack Partners, LLC v. Stoneridge Associates, LLC et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
Edward S. Domnarski, J.
The plaintiff, Jenzack Partners, LLC, commenced this two-count action by service of process on the defendants on August 24, 2012. In count one of the amended complaint, the plaintiff seeks a judgment of strict foreclosure on a residential property mortgage that the defendants Jennifer Tine (Jennifer) and Joseph Tine (Joseph) granted to the plaintiff's predecessor in interest as security for certain previously executed guaranty agreements. The plaintiff also names Webster Bank, N.A. (Webster), as a defendant in count one on the ground that Webster may claim an interest in the mortgaged property that is subsequent in right to the plaintiff's. In count two, the plaintiff seeks judgment upon a note made by the defendant Stoneridge Associates, LLC (Stoneridge), and also seeks judgments upon associated guaranties made by the defendants Premier Building & Development, Inc. (Premier), Ronald Gattinella, and Patrick Snow.
Statement of Case and Procedural History
The following facts are common to both counts. On July 13, 2006, Stoneridge executed a promissory note in the amount of $1,650,000 in favor of the plaintiff's predecessor in interest, Sovereign Bank (Sovereign). Pl.'s Ex. 1. The note was subsequently modified on December 23, 2008, and again in 2009 and 2010. On July 13, 2006, Premier, Gattinella, Joseph, and Snow each executed guaranties in favor of Sovereign guaranteeing repayment of the sums due under the note. These four defendants subsequently executed reaffirmations of their guaranties on December 23, 2008. On the same date, Jennifer executed for the first time a limited guaranty in favor of Sovereign. Pl.'s Ex. 9. Additionally, on December 23, 2008, in order to secure their respective guaranties, Joseph and Jennifer executed a mortgage in favor of Sovereign on their residential property located at 8 Blackbirch Drive in Cromwell (Cromwell property), which mortgage was recorded in volume 1279, page 213 of the Cromwell land records. Pl.'s Ex. 10. Jennifer is now the sole record owner of the Cromwell property. On August 27, 2009, Premier, Gattinella, Joseph, Snow, and Jennifer executed reaffirmations of their guaranties. Gattinella and Jennifer again executed reaffirmations on May 6, 2010. Sovereign subsequently assigned its mortgage and its interests in the note to the plaintiff. The plaintiff has established that the note and guaranties are in default and that it has exercised its option to declare due the entire principal balance and accrued interest.
On October 3, 2012, Stoneridge, Premier, and Gattinella were defaulted pursuant to Practice Book § 17-20 for failure to appear. Webster was defaulted for failure to plead on August 16, 2016. These defendants have thus effectively admitted the truth of the facts alleged in the plaintiff's amended complaint. See Abbott Terrace Health Center, Inc. v. Parawich, 120 Conn.App. 78, 79, 990 A.2d 1267 (2010) (" [t]he entry of a default constitutes an admission by the defendant of the truth of the facts alleged in the complaint" [internal quotation marks omitted] [quoting DeBlasio v. Aetna Life & Casualty Co., 186 Conn. 398, 400, 441 A.2d 838 (1982)]). By answer filed February 13, 2013, Snow admitted the truth of the plaintiff's allegations regarding the execution and modifications of the note and his own execution of the guaranty agreement and subsequent reaffirmations. Jennifer filed an answer on April 26, 2013, but denied the substance of the complaint and asserted as special defenses lack of consideration, unclean hands, and equitable estoppel. On May 1, 2013, Joseph also filed an answer and various special defenses, but the plaintiff's action against him has been automatically stayed by virtue of Joseph's filing of a bankruptcy petition in the United States Bankruptcy Court for the District of Connecticut, and, thus, at trial, the plaintiff proceeded with count two only against Stoneridge, Premier, Gattinella, and Snow.
Snow was also defaulted for failure to appear, but he subsequently filed an appearance on October 15, 2012, thus automatically setting aside the default under Practice Book § 17-20(d). On November 20, 2012, however, the court granted the plaintiff's motion for default against Snow for failure to disclose a defense pursuant to Practice Book § 13-19. Nevertheless, the plaintiff is not entitled to judgment on this basis because it never filed a motion for judgment upon default. Practice Book § 13-19 (" If no disclosure of defense has been filed, the judicial authority may order judgment upon default to be entered for the plaintiff at the time the motion [for default] is heard or thereafter, provided that in either event a separate motion for such judgment has been filed. The motions for default and for judgment upon default may be served and filed simultaneously but shall be separate motions").
" The filing of a bankruptcy petition with the Bankruptcy Court operates as a stay, applicable to all actions or proceedings against the debtor." JP Morgan Chase Bank v. Gianopoulos, 131 Conn.App. 15, 17 n.2, 30 A.3d 697, cert. denied, 302 Conn. 947, 30 A.3d 2 (2011).
The plaintiff's action was tried before the court on August 16, 2016. The plaintiff and Jennifer each filed post-trial briefs on September 20, 2016.
Discussion
I.
Count One
Before determining the merits of the mortgage foreclosure claim alleged in count one, the court first addresses Jennifer's contention that the court lacks subject matter jurisdiction.
A
Subject Matter Jurisdiction
In her post-trial brief, Jennifer argues that the plaintiff is without standing to foreclose on the Cromwell property mortgage because there is no evidence that the underlying guaranties were ever assigned to the plaintiff, she thus contends that the court lacks jurisdiction over the subject matter of count one. In her brief, Jennifer discusses extensively the relationship between a note--i.e., the debt--and a mortgage--i.e., the security--and the consequences of transferring one but not the other. She points out that the assignee of a mortgage who has not been assigned the note lacks standing to foreclose. See, Fleet National Bank v. Nazareth, 75 Conn.App. 791, 794-95, 818 A.2d 69 (2003) (holding that assignee of mortgage lacked standing to foreclose where assignee was never assigned the note). Jennifer analogizes her guaranty to a note or debt and asserts that the plaintiff was assigned only the security without being assigned the debt and thus lacks standing to foreclose the mortgage. Jennifer does not cite to any case law that directly supports her position, nor does she cite any treatise or other secondary authority.
In response, the plaintiff does not dispute that there was no formal assignment of the guaranty documents. Instead, the plaintiff maintains in its post-trial brief that the assignment of a note and mortgage operates as an assignment of any rights against a secondary obligor, i.e., a guarantor like Jennifer. For this position the plaintiff relies on the § 13(5) of the Restatement (Third) of Suretyship and Guaranty (1996), which was recently discussed by the Vermont Supreme Court in Wells Fargo Bank Minnesota, N.A. v. Rouleau, 191 Vt. 302, 46 A.3d 905 (2012).
In Rouleau, the Vermont Supreme Court considered the issue of " whether the assignment of a personal guaranty follows, as a matter of law, the assignment of a promissory note." Wells Fargo Bank Minnesota, N.A. v. Rouleau, supra, 191 Vt. 306. The defendant in that case had argued that, " because the guaranty is an independent contract, [the plaintiff] needed to prove that it was assigned not just the note and the mortgage, but also the guaranty itself." Id. The court rejected this argument: " Personal guaranties are contracts governed by general principles of contract law. See Restatement (Third) of Suretyship and Guaranty § 7 (stating that principles of contract formation apply to formation of secondary obligations). Under contract law, [a]n assignment agreement must clearly reflect an intent to assign the right in question . . . [S]ee also Restatement (Second) of Contracts § 324 (1981) (providing that assignment of contractual right requires obligee to 'manifest an intention to transfer the right to another person'). Personal guaranties are also secondary obligations, however, and parties' rights and duties under a guaranty derive from the principal obligation . . .
" Because of a guaranty's link to the principal obligation, it follows that an obligee's assignment of the principal obligation is sufficient to manifest the requisite intent to assign the guaranty. Restatement (Third) of Suretyship and Guaranty § 13(5). As explained in the Restatement: 'A secondary obligation, like a security interest, has value only as an adjunct to an underlying obligation. It can usually be assumed that a person assigning an underlying obligation intends to assign along with it any secondary obligation supporting it. Thus, unless there is agreement to the contrary or assignment is prohibited . . . assignment of the underlying obligation also assigns the secondary obligation.' [Restatement (Third), supra, § 13, comment (f)]." (Citations omitted; internal quotation marks omitted.) Wells Fargo Bank Minnesota, N.A. v. Rouleau, supra, 191 Vt. 306-07.
The court in the present case is persuaded by the language in the Restatement (Third) of Suretyship and Guaranty and the holding in Roleau and concludes that it has subject matter jurisdiction over this action. It is undisputed that Jennifer executed the original limited guaranty and the subsequent reaffirmations guarantying payment of the sums due under Stoneridge's note. It is also undisputed that, although Jennifer's guaranties were never formally assigned to the plaintiff, the associated mortgage and underlying note were. It can thus be assumed that Sovereign, in assigning the note and mortgage to the plaintiff, intended to assign along with it all of the secondary obligations supporting it, including Jennifer's guaranties. No evidence was presented to the contrary, and, thus, the court finds that the assignment of the subject note and mortgage resulted in an assignment of the subject guaranties. The plaintiff therefore has standing to foreclose the mortgage that secured Jennifer's guaranties. The court thus moves on to consider whether the plaintiff has established a prima facie case for foreclosure.
B
Prima Facie Case
" In order to establish a prima facie case in a mortgage foreclosure action, the plaintiff must prove by a preponderance of the evidence that it is the owner of the note and mortgage, that the defendant mortgagor has defaulted on the note and that any conditions precedent to foreclosure, as established by the note and mortgage, have been satisfied." (Internal quotation marks omitted.) Wells Fargo Bank, N.A. v. Strong, 149 Conn.App. 384, 392, 89 A.3d 392, cert. denied, 312 Conn. 923, 94 A.3d 1202 (2014). Thus, in the present case, the plaintiff was required to prove that it is the owner of Jennifer's guaranty agreements and the mortgage, that Jennifer defaulted on her guaranty agreements, and that any conditions precedent to foreclosure, as established by the guaranty agreements and mortgage, have been satisfied. The court finds that the plaintiff has established a prima facie right to foreclose the subject mortgage.
As the court found in part IA of this memorandum of decision, the plaintiff owns Jennifer's guaranty agreements by virtue of its ownership of the mortgage and note. It is undisputed that the note is in default and that the plaintiff has declared the entire balance, and accrued interest, to be due and payable. Thus, per her original guaranty agreement, Jennifer was required upon default to pay this balance and interest. See Pl.'s Ex. 9, p. 1 (" [i]f Borrower shall at any time fail to make any such payments or performance . . . Guarantor shall make such payment or payments to Lender"). The parties do not dispute that Jennifer has failed to render such payment. As the guaranty agreements and the mortgage deed do not impose any condition precedent to foreclosure, the plaintiff has therefore proven its prima facie case. Before the court can render judgment on Jennifer's liability, however, it must consider Jennifer's special defenses.
C
Special Defenses
" A valid special defense at law to a foreclosure proceeding must be legally sufficient and address the making, validity or enforcement of the mortgage, the note or both . . . Historically, defenses to a foreclosure action have been limited to payment, discharge, release or satisfaction . . . or [lien invalidity] . . . [Connecticut courts, however] have permitted several equitable defenses to a foreclosure action." (Citation omitted; internal quotation marks omitted.) Bank of America, N.A. v. Aubut, 167 Conn.App. 347, 372, 143 A.3d 638 (2016). In the present case, Jennifer has alleged the special defenses of lack of consideration, unclean hands, and equitable estoppel. Because she has not pursued the unclean hands and equitable estoppel special defenses in her trial brief or post-trial brief, the court considers them abandoned and thus only takes up the issue of consideration. See, Conn. Light & Power Co. v. Dep't of Pub. Util. Control, 266 Conn. 108, 120, 830 A.2d 1121 (2003) (" [The Supreme Court] repeatedly [has] stated that [it is] not required to review issues that have been improperly presented to [it] through an inadequate brief . . . Analysis, rather than mere abstract assertion, is required in order to avoid abandoning an issue by failure to brief the issue properly . . . These same principles apply to claims raised in the trial court " [citation omitted; emphasis added; internal quotation marks omitted]).
In her testimony at trial and in her post-trial brief, Jennifer emphasized that she did not receive any money or benefit from the note modification transaction that occurred on December 23, 2008. Jennifer thus maintains that she received no consideration for the guaranty she executed in connection with that transaction. Jennifer additionally argues that there was not even consideration for the note modification agreement itself.
" [C]onsideration is [t]hat which is bargained-for by the promisor and given in exchange for the promise by the promisee . . . [T]he doctrine of consideration does not require or imply an equal exchange between the contracting parties . . . Consideration consists of a benefit to the party promising, or a loss or detriment to the party to whom the promise is made." (Internal quotation marks omitted.) General Electric Capital Corp. v. Transport Logistics Corp., 94 Conn.App. 541, 546-47, 893 A.2d 467 (2006). The court in General Electric Capital Corp . considered the issue of consideration in the specific context of a guaranty agreement executed by an individual in connection with a corporate obligation. The court concluded that the guaranty agreement there at issue had been supported by consideration, in that " [the guarantor's] signing the guarantee induced the plaintiff to lease equipment to the corporate defendant, and [thus] the plaintiff's continued leasing of equipment to the corporate defendant was consideration for [the guarantor's] guarantee." General Electric Capital Corp. v. Transport Logistics Corp., supra, 94 Conn.App. 547.
In present case, the December 23, 2008 note modification agreement and Jennifer's original guaranty agreement establish consideration for both transactions. The modification agreement; see Pl.'s Ex. 6; was made with regard to the original July 13, 2006 note. See Pl.'s Ex. 1. That note, executed by Stoneridge, originally provided for interest-only payments through July 1, 2008, and, thereafter, monthly principal and interest payments to be made in accordance with a ten-year amortization schedule, making the maturity date of the loan July 1, 2018. Pl.'s Ex. 1, pp. 1-2. The modification agreement stated that the borrower, Stoneridge, had requested that the lender, Sovereign, make various modifications to the terms of the original note, including changing the date of maturity to September 1, 2009. Pl.'s Ex. 6, p. 2. The modification agreement went on to state, inter alia, that the parties agreed, " for and in consideration of the mutual promises and covenants [therein], and for other good and valuable considerations, " to substitute all references to the maturity date in the original note and loan documents with September 1, 2009, and to terminate the option in the original note and loan documents " to convert the loan . . . to a permanent loan." Pl.'s Ex. 6, p. 2. It is reasonable to infer from the foregoing that, because Stoneridge was not able to comply with the terms of the original promissory note, it requested Sovereign to modify the original terms of the note. Sovereign obviously agreed to the requested modifications. There therefore was bargained for consideration for the loan modification.
Jennifer also argues, however, that she received no money consideration for the execution of her original limited guaranty agreement. This argument lacks merit in view of the well established principle that consideration may take the form of a benefit to the promisor or a detriment to the promisee. In her limited guaranty agreement, Jennifer stated expressly that she was " desirous that [Sovereign] make the [l]oan to [Stoneridge], " that she would " benefit directly from such [l]oan, " and that she was " willing to enter into this [g]uaranty in order to enhance the qualifications of [Stoneridge] for the loan and as an inducement to and to fulfill the requirements of [Sovereign] for making the [l]oan." (Emphasis added.) Pl.'s Ex. 9, p. 3. It is reasonable to infer that the original lender, Sovereign, gave up and changed its rights under the original note and that this change in position gave rise to consideration on the part of Sovereign. There was, therefore, bargained for consideration for Jennifer's guaranty.
In sum, the plaintiff has proven a prima facie case of foreclosure and Jennifer has not established any viable special defenses. The court thus finds for the plaintiff as to Jennifer's liability. Before rendering a judgment of foreclosure, however, the court must also determine the amount of the debt and the terms of the judgment. See Bank of America, FSB v. Franco, 57 Conn.App. 688, 694, 751 A.2d 394 (2000) (" [o]nce the court determine[s] the defendant's liability, the only issue to be determined . . . [is] the amount of the debt and the terms of the judgment").
D
Amount of Debt
The note in the present case was endorsed by Sovereign, the original payee, to the plaintiff. At trial, the plaintiff did not call any witnesses directly connected with Sovereign, and it did not present any documents created by Sovereign related to the amount due on the note. To establish the amount of the debt, the plaintiff instead presented at trial the testimony of William Buland, an authorized representative of the plaintiff, and offered into evidence a computation of the amount due prepared by Buland. See Pl.'s Ex. 22. Jennifer objected to the admission of Buland's testimony and his prepared computation. The court overruled these objections, but Jennifer now argues in her post-trial brief that this evidence is insufficient to establish the amount of the debt because there was no evidence that Buland was authorized to testify on the plaintiff's behalf and the prepared computation was based on information received from Sovereign rather than Buland's own personal knowledge and therefore constitutes inadmissible hearsay. The court is not persuaded.
" [Our Appellate Court has] stated that § 52-180 should be liberally interpreted in favor of admissibility . . . The witness introducing the document need not have made the entry himself or herself, nor have been employed by the organization during the relevant time period . . . Also, [t]here is no requirement in § 52-180 . . . that the documents must be prepared by the organization itself to be admissible as that organization's business records. All that is required is that it be in the regular course of the business to make the writing or record. The liberal application of the statute is derived from the recognition that the trustworthiness of such documents comes from their being used for business and not litigation . . . Thus, the fact that the business relies on such records tends to establish their trustworthiness." (Citations omitted; internal quotation marks omitted.) Federal Deposit Ins. Corp. v. Carabetta, 55 Conn.App. 384, 393-94, 739 A.2d 311, cert. denied, 251 Conn. 928, 742 A.2d 362 (1999).
In the present case, Buland testified at trial that the plaintiff had purchased a pool of loans from Sovereign and that he had been the person whose responsibility it was to manage the plaintiff's books and records. Buland testified that he relied upon data provided by Sovereign to establish the outstanding principal balance and accrued interest on the note as of January 17, 2012--the starting date of the computation. Buland stated that Sovereign had attested to the balance due on the note as part of the transaction between Sovereign and the plaintiff. The prepared computation detailed the amount due under the note, which included the principal balance, interest charges, late charges, and payments. The computation shows that a $30,000 payment was credited to the note balance on June 17, 2014. As of August 16, 2016--the day of trial--the total amount due under the note was $495,487.12, which increases at a per diem rate of $104.40. None of the defendants presented any testimony or evidence that contradicted these figures. The court finds Buland's testimony to be credible and that the prepared computation is an admissible business record under General Statutes § 52-180 and § 8-4 of the Connecticut Code of Evidence.
E
Judgment of Foreclosure
From Buland's testimony and debt computation, the court finds that, as of December 1, 2016, the plaintiff is due the sum of $506,762.32. As to the value of the mortgaged property, the court credits the trial testimony of the plaintiff's witness Alan Budkofsky--a licensed real estate appraiser--and accepts his opinion that the Cromwell property has a fair market value of $440,000. See Pl.'s Ex. 23. (Budkofsky's written appraisal.) On the basis of these findings of debt and value, the court determines that Jennifer has no equity in the Cromwell property over and above the plaintiff's debt. A judgment of strict foreclosure may therefore enter in favor of the plaintiff, and the first law day is set for April 3, 2017. The court notes, however, that Jennifer's liability under her guaranty is limited to her interest in the Cromwell property; see Pl.'s Ex. 9, p. 1; and, thus, the plaintiff is not entitled to a deficiency judgment against her.
This amount is the sum of the debt as of August 16, 2016--$495,487.12--and the interest that accrued up to December 1, 2016, 108 days, at the rate of $104.40 per day--$11,275.20.
Despite plaintiff counsel's statement to the contrary, the court finds that Joseph-who has no interest in the subject property--is not entitled to a law day.
The plaintiff is awarded an appraisal fee of $350 and $300 for Budkofsky's testimony in court, for a total appraiser's fee of $650. The plaintiff has also submitted an affidavit detailing the attorneys fees it has incurred. At trial, the parties agreed that Jennifer is entitled to an evidentiary hearing on the plaintiff's requested attorney's fees. See, Smith v. Snyder, 267 Conn. 456, 479, 839 A.2d 589 (2004). The plaintiff is directed to file a motion for attorneys fees in accordance with Practice Book § 11-21, and the court will thereafter schedule a hearing.
II.
Count Two
In count two of its revised complaint, the plaintiff seeks money damages against Stoneridge, Premier, Gattinella, and Snow, arising out their obligations under the July 13, 2006 note and the related guaranties. Stoneridge, Premier, and Gattinella were previously defaulted for failure to appear. The court finds from the military affidavit on file that Gattinella is not in military service. Counsel for Snow was present at the trial but offered no evidence to contradict the plaintiff's evidence as to Snow's liability on his guaranty. The court finds that the plaintiff has proven the allegations contained in count two and is entitled to damages as per the court's earlier finding regarding the amount due under the note. Judgment may therefore enter in favor of the plaintiff against Stoneridge, Premier, Gattinella, and Snow in the amount of $506,762.32. Postjudgment interest is allowed at the rate of 6 percent per annum.
The plaintiff is also entitled to attorneys fees as to count two. To establish the amount of such fees incurred, the plaintiff has submitted the affidavit of its attorney. A review of the affidavit shows that it relates to all matters pertaining to all of the defendants, without a breakdown as to each individual defendant. The plaintiff is therefore directed to file a motion for attorneys fees as it pertains to the count two defendants, in accordance with Practice Book § 11-21, and the court will thereafter schedule a hearing.
III.
Pending Motions
The plaintiff has moved the court to make a special finding that Jennifer's defenses were brought without merit and not asserted in good faith. The motion for special finding is denied. The plaintiff also filed, prospectively, a motion to terminate any potential appellate stays that may apply. This motion is denied without prejudice and may be renewed if an appeal is filed.