Opinion
HHDCV156057590S
02-05-2019
AMERICAN TAX FUNDING, LLC v. FIRST EAGLE CORPORATION
UNPUBLISHED OPINION
OPINION
Cobb, J.
This is a collection action initiated by the plaintiff, American Tax Funding, LLC, a Florida limited liability corporation, to recover unpaid municipal taxes assessed on property located at 40 John Street in Hartford, previously owned by the defendant, First Eagle Corporation, for tax years 2006, 2007, and 2008. The defendant has denied the essential allegations of the complaint and asserted several special defenses. In particular, the defendant asserts that: (1) the plaintiff’s claims or right of recovery are barred on account of payment and/or satisfaction of the debt; (2) the plaintiff’s claims are barred by the judgment of strict foreclosure on an assigned lien for tax year 2005; and (3) the plaintiff’s claims are barred by equitable and judicial estoppel and laches. The court finds for the defendant on its first and second special defenses. Specifically, the court finds that the assigned tax liens at issue were extinguished by the judgment of strict foreclosure, and, therefore, there exists no liens or debt for the plaintiff to collect upon in this case. In addition, the plaintiff recovered the entire debt amount, on all of the tax liens, through the foreclosure action and is not entitled to a double recovery on the same debt. Thus, judgment shall enter in favor of the defendant.
This action was heard by the court on September 14, 2018, at which hearing the parties presented oral and documentary evidence. The parties filed post-trial briefs and reply briefs, which addressed a number of issues raised by the court during argument. Based on the evidence presented, the court finds the following facts.
The defendant, First Eagle Corporation, was the owner of property located at 40 John Street in Hartford (the property). The property is a commercial building comprised of 2, 915 square feet.
The defendant failed to pay its property taxes on the property for a number of years including, and at issue here, tax years 2005, 2006, 2007, and 2008, which resulted in statutory tax liens favoring the City of Harford for each tax year, in the amounts of $ 12, 100.55, $ 10, 360.15, $ 9, 465.50 and $ 10, 723.31, respectively. On June 26, 2008, June 18, 2009, and June 25, 2010, pursuant to General Statutes § 12-195h, the City of Hartford assigned to the plaintiff its rights in the four tax liens and any rights the City would have under law to collect on those liens. In particular, the assignments provided that the plaintiff was assigned "all of the City’s right, title and interest in and to certain liens created by law in favor of the City of Hartford, Connecticut to allow the tax collector of such City to secure unpaid taxes on real property as provided under the provision of Chapter 205 of the Connecticut General Statutes ..." The assignments further provide: "By execution of the Assignment, the City is assigning and the Assignee is assuming all of the rights at law or in equity, obligations, powers and duties as the City of Hartford and the City’s tax collector would have with respect to the above liens, if the liens had not been assigned with regard to precedence and priority of such liens, the accrual of interest, charges fees and expenses of collection, pursuant to Connecticut General Statutes § 12-195h, as in effect on the date hereof." (Emphasis in original.)
At the time of the assignments of the tax liens, § 12-195h contained different language. Prior to the passage of No. 13-276 of the 2013 Public Acts, § 12-195h provided: "The assignee shall have the same rights to enforce such liens as any private party holding a lien on real property including, but not limited to, foreclosure." In 2013, the legislature added the language "and a suit on the debt." Cases decided prior to the 2013 amendment to § 12-195h, interpreted the statute to limit private assignees to the remedy of foreclosure under General Statutes § 12-181 only, and did not allow private assignees to bring collection actions. See Middletown v. P&G Enterprises, L.P., 45 Conn.Supp. 435, 718 A.2d 90 (1998) ; Connecticut Tax Liens 1, LLC v. Lee, Superior Court, judicial district of Hartford, Docket No. CV-12-6031406, 2013 WL 4779615, *2 (August 19, 2013, Robaina, J.) . Upon the court’s inquiry, the defendant states in its brief that it is a question of first impression as to whether the 2013 amendment now permits private assignees to bring collection actions. The defendant did not assert or brief this issue and does not argue that the court should apply the version of § 12-195h that was in effect at the time the City assigned the liens to the plaintiff. Thus, the court does not do so. Paoletta v. Anchor Reef Club at Branford, LLC, 123 Conn.App. 402, 406, 1 A.3d 1238, cert. denied, 298 Conn . 931, 5 A.3d 491 (2010) ("[A]nalysis, rather than mere abstract assertion, is required in order to avoid abandoning an issue by failure to brief the issue properly ... The parties may not merely cite a legal principle without analyzing the relationship between the facts of the case and the law cited" [internal quotation marks omitted]).
On February 17, 2015, the plaintiff initiated a foreclosure action against the defendant in which it sought to foreclose on the 2005 tax lien only, in the amount of $ 9, 183.69. That action was entitled American Tax Funding, Inc. v. First Eagle Corp., Docket No. HHD CV 15 6057375S. Although Practice Book § § 10-69 and 10-70 require that all encumbrances of record should be pleaded in the complaint, the complaint in the foreclosure action did not identify the 2006, 2007, or 2008 tax liens it held, but did identify tax liens held by the City of Hartford for tax years 2013 and 2014.
The court takes judicial notice of the foreclosure action and its contents. See Conn. Code of Evid. § 2-1; see also State v. Gaines, 257 Conn. 695, 705 n.7, 778 A.2d 919 (2001). In addition, the defendant submitted as exhibits in this case a number of relevant pleadings from the foreclosure action.
On or about February 17, 2015, the plaintiff initiated this action seeking to collect the taxes on the assigned tax liens for tax years 2006, 2007, and 2008, which were not pleaded in the foreclosure action.
On June 12, 2015, the plaintiff moved for a judgment of strict foreclosure in the foreclosure action and filed its appraisal, affidavit of debt and foreclosure worksheet, as well as other documents. The plaintiff’s affidavit of debt stated the amount of the debt as $ 23, 810.15. The plaintiff submitted an appraisal of the property and an affidavit of appraiser, which established the fair market value of the property as $ 105, 000. The plaintiff’s foreclosure worksheet, required to be filed by plaintiffs in all foreclosure actions, also represented the fair market value of the property at $ 105, 000.
The plaintiff now disavows its own appraisal that it filed, through its counsel, in the foreclosure action and asked that court to adopt when it entered a judgment of strict foreclosure for the plaintiff. Although the plaintiff asked the foreclosure court to rely on that appraisal, the plaintiff appears to argue now that this court should not rely on its foreclosure appraisal because the appraiser never spoke to the plaintiff directly, the appraisal was submitted by its counsel not the plaintiff, and the appraisal failed to take into account certain environmental issues on the property. The court finds these claims disingenuous. The only credible evidence of the value of the property at the time that the judgment of strict foreclosure entered was the plaintiff’s uncontested appraisal. This filing is a judicial or an evidentiary admission as to the value of the property at the time of the foreclosure judgment, upon which this court may and does rely. See E. Prescott, Tait’s Handbook of Connecticut Evidence (6th Ed. 2018) § 8.13, pp. 520-53. That the appraisal was filed by the plaintiff’s counsel supports the court’s finding that the appraisal is an admission by the plaintiff. A lawyer is the quintessential agent of his client and statements made by a party’s lawyer are admissible against the party. See id., p. 541.
On June 29, 2015, the court heard and granted the plaintiff’s motion for judgment of strict foreclosure and entered the following orders based on the plaintiff’s filings:
Debt: $ 23, 810.15
Fair Market Value: $ 105, 000
Counsel Fee: $ 6, 750
Appraiser Fee: $ 1, 500
Title Fee: $ 225
Law Day: 8/24/2015, for the owner of equity of redemption and subsequent encumbrancers in the inverse order of priorities.
The plaintiff’s foreclosure worksheet listed the total amount of encumbrances on the property prior to the plaintiff’s lien of $ 65, 332.03, which amount was equal to the three other tax liens on the property. The plaintiff filed a certificate of foreclosure on August 28, 2015.
On August 26, 2015, the total combined amount of the four tax liens assigned to the plaintiff was $ 93, 260.19, and the total payoff amount, including attorneys fees and costs was $ 105, 259.
On August 27, 2015, prior to the passage of title to the property to the plaintiff, the plaintiff assigned the judgment to a nonparty entity, City Shelter, LLC. The plaintiff did not substitute City Shelter, LLC as the plaintiff in the foreclosure action. No party redeemed the property. The certificate of title, filed by the plaintiff, indicates that title passed to City Shelter, LLC, not the plaintiff, on August 29, 2015.
Our rules of practice allow liberal substitution of plaintiffs in foreclosure actions even after judgment enters. See Federal Deposit Ins. Corp. v. Retirement Management Group, Inc., 31 Conn.App. 80, 84, 623 A.2d 517, cert. denied, 226 Conn . 908, 625 A.2d 1378 (1993). The court inquired of the parties about the effect, if any, of the failure to substitute City Shelter, LLC as the plaintiff in the foreclosure action. Neither party argues that it has any material effect as to the matters before the court in this case, and neither party makes any argument related to this assignment.
On April 8, 2016, City Shelter, LLC sold the property for $ 63, 000, receiving a net of 44, 933.81, after expenses. The plaintiff states in its brief that it "released the liens" when title to the property was "conveyed by City Shelter." It further states that, "even though it relinquished its rights, it proceeded with this case."
Both prior to and subsequent to the foreclosure judgment and transfer of title, the parties engaged in negotiations aimed at the defendant purchasing the property. The parties did not reach any type of resolution.
DISCUSSION
By this action, filed at the same time as the foreclosure action, the plaintiff seeks to collect on the assigned tax liens for tax years 2006, 2007, and 2008. The plaintiff’s position appears to be that it has not been made whole with regard to the tax lien debt because, despite the fact that it obtained a judgment of strict foreclosure of the property, which was valued at $ 105, 000, the property was sold by its assignee approximately a year later for $ 63, 000, which was less than the total value of the liens. As assignee of the City of Hartford’s tax liens, the plaintiff has only those rights and remedies that the City would have under the circumstances. The law of municipal foreclosure actions simply does not support the plaintiff’s attempt to obtain a double recovery on the liens and, therefore, the court finds for the defendant on its special defenses.
At trial, the plaintiff’s president admitted that their goal in this action was to obtain a double recovery, that is, the property valued at $ 105, 000 and an $ 85, 000 money judgment.
It is well established that a municipality is a "creature of the state" and "can exercise no powers except those which are expressly granted to it or are necessary to enable it to discharge the duties and carry into effect the objects and purposes of its creation." Bredice v. Norwalk, 152 Conn. 287, 292, 206 A.2d 433 (1964). Chapter 205 of the General Statutes governs municipal tax liens and allows municipalities to assign those liens to third parties, as was done in this case. See Municipal Funding, LLC v. Galullo, 72 Conn.App. 755, 761, cert. denied, 262 Conn. 915, 811 A.2d 1292 (2002). Section 12-195h permits a municipality to assign "any and all liens filed by the tax collector to secure unpaid taxes ..." Such assignments grant to the assignee, the plaintiff in this case, only those rights and remedies to collect the tax that the municipality had under the law and no more. See Municipal Funding v. Galullo, Superior Court, judicial district of Waterbury, Docket No. CV-00-0161141, 2001 WL 496893, *5 (April 30, 2001, Rogers, J.) , aff’d, 72 Conn.App. 755, 806 A.2d 601, cert. denied, 262 Conn. 915, 811 A.2d 1292 (2002). In particular, § 12-195h provides that the assignee shall have "the same powers and rights at law or in equity as such municipality and municipality’s tax collector would have had if the lien had not been assigned with regard to the precedence and priority of such lien, the accrual of interest and the fees and expenses of collection and of preparing and recording the assignment." Section 12-195h further provides that "[t]he assignee shall have the same rights to enforce such liens as any private party holding a lien on real property including, but not limited to, foreclosure and a suit on the debt."
In a case cited by both parties, the Appellate Court held that: "Just as the plaintiff stepped into the shoes of the municipality as an assignee for purposes of precedence and priority, it also is bound by the extinguishment provision of General Statutes § 12-195." Municipal Funding, LLC v. Galullo, supra, 72 Conn.App. 763. Section 12-195 expressly provides that: "When any municipality acquires real estate by foreclosure ... of a tax or an assessment lien or liens thereon ... [t]he acquisition of such real estate by the municipality shall be deemed a cancelation by such municipality of all of its claims against the tax collector for unpaid taxes and assessments, interest or lien fees assessed against such real estate." "Accordingly, by acquiring the property through the foreclosure judgment, the plaintiff lost its rights to collect on all of its liens ..." Municipal Funding, LLC v. Galullo, supra, 763. So too here, as a result of the judgment in the foreclosure action and the subsequent title transfer, the 2006, 2007, and 2008 tax liens have been extinguished.
The propriety of this outcome is reinforced by the fact that, although municipalities are authorized by law to pursue, in their discretion, varying remedies to collect property taxes (i.e., an action to foreclose on the property under General Statutes § 12-181, a collection action under General Statutes § 12-161, a summary foreclosure proceeding under General Statutes § 12-182 et seq., and tax warrants under General Statutes § 12-135), this does not mean that municipalities may recover more than once on a single debt. Double recovery goes against the "simple and time-honored maxim that [a] plaintiff may be compensated only once for his just damages for the same injury." Haynes v. Yale-New Haven Hospital, 243 Conn. 17, 22 n.6, 699 A.2d 964 (1997). This maxim applies equally in both the tort and contract law context. See Gionfriddo v. Gartenhaus Café, 211 Conn. 67, 74 n.9, 557 A.2d 540 (1989). Accordingly, "[o]nce a municipality decides to enforce its lien rights against a property through foreclosure, it can only look to the liened property for payment of its taxes. The property owner, or another lien holder, can redeem the lien, but if they do not, the City cannot maintain a collection action against any parties who may have been legally liable for the tax assessment. The ability to obtain a deficiency judgment is statutory ..." (Footnote omitted.) New Haven v. Y & H Investments, LLC, Superior Court, judicial district of New Haven, Docket No. CV-18-6078155, 2018 WL 4373823, *2 (August 20, 2018, Spader, J.) . The remedy of deficiency judgment is not available to a municipality. Winchester v. Northwest Associates, 255 Conn. 379, 389, 767 A.2d 687 (2001).
At the time of the foreclosure judgment, the plaintiff’s four liens had a monetary value, with interest, of approximately $ 93, 000, an amount just below the fair market value of the property of $ 105, 000. Therefore, as the result of the foreclosure judgment, the plaintiff received title to property that had a greater value than the four liens. Thus, the defendant’s debt to the plaintiff, resulting from the assigned tax liens, was essentially satisfied by the transfer of the title to the property to the plaintiff or its assignee. The plaintiff cannot now recover again in this action.
In its brief, the plaintiff states that it brings this action "not on the lien" but on the "underlying debt." The court does not understand how this argument helps the plaintiff’s cause, as under law and the assignment, it was the statutory tax lien that was assigned to the plaintiff not the underlying debt. See § 12-195h.
The plaintiff claims that like a note and mortgage holder, it had the choice to foreclose the mortgage or collect on the debt. Arguments relating itself to a note and mortgage holder are unavailing. The plaintiff was assigned a municipal tax lien, not a note and mortgage. The assignment is limited by its terms and by law to authorize only certain remedies and relief to collect on outstanding tax liens. As explained above, subsequent municipal tax liens arc extinguished upon the foreclosure judgment. In addition, the deficiency judgment remedy available to private parties, is not available to municipalities. See Winchester v. Northwest Associates, supra, 255 Conn. 389; see also General Statutes § 49-14.
CONCLUSION
For the foregoing reasons, the court finds for the defendant on two of its three special defenses, that the tax liens were extinguished by the judgment in the foreclosure action and that the plaintiff recovered all it was due in the foreclosure action.
Thus, judgment shall enter for the defendant.
So ordered.