Opinion
No. CV08-6000736 S
October 2, 2008
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT #102
BACKGROUND
On April 4, 2008, the plaintiff, Michael Brady, filed a three-count complaint seeking damages against the defendant, John J. Phelan. The first count is founded on the failure of the defendant to make payment in accordance with the terms of a promissory note executed by the parties; the second count is founded on the failure of the defendant to make payment in accordance with the terms of a mortgage note executed by the parties; and the third count is as to the defendant's failure to record a mortgage against property at 94 Ivy Hill Road, Ridgefield as called for by the mortgage note. On May 16, 2008, the plaintiff filed a motion for summary judgment as to the second count. With his motion the plaintiff included an affidavit from Henry H. Moy, the plaintiff's counsel, and an affidavit from himself, which included a copy of the mortgage note and the assignment of mortgage note. On June 13, 2008, the defendant filed a memorandum in opposition to the motion with a supporting affidavit. The matter was heard at short calendar on June 16, 2008.
Separate documents entitled "promissory note" and "mortgage note" were executed by the parties to memorialize the amount of the loan and its terms.
Although the plaintiff submitted plain copies of the "mortgage note" and "assignment of mortgage," no evidence was submitted with the motion by affidavit or otherwise that a mortgage deed was ever executed by the parties so as to secure either note.
In his complaint, the plaintiff alleges that on December 30, 2004, the defendant executed a mortgage note that was payable to plaintiff and plaintiff's brother, Patrick E. Brady, in exchange for monies lent to the defendant in the amount of $450,000. On March 25, 2008, Patrick E. Brady assigned all of his interest in the mortgage note to the plaintiff. The plaintiff alleges that under the mortgage note the entire unpaid principal of $450,000 and all accrued interest thereon became due and payable on December 31, 2005. The mortgage note provides for a post-maturity interest rate of twenty-four percent (24%) or the maximum rate allowed by law, whichever is less.
The plaintiff contends that there can be no dispute that the loan is due, and that after accounting for all monies paid by defendant, there are monies due from the defendant based on the post-maturity interest rate of twenty-four percent (24%). The defendant argues that there is a genuine issue of material fact regarding the terms of the loan in that there had been several oral modifications of their loan arrangement. He further contends there is a genuine issue of material fact as to the amount of the payments made on the loan as well as to the calculation of the outstanding debt claimed by the plaintiff. Finally, the defendant argues that the plaintiff has not offered sufficient evidence to prove the loan was made for "commercial" pursuits pursuant to General Statutes § 37-9(4)(B) or that there was a "bona fide mortgage of real property" pursuant to General Statutes § 37-9(3), either of which statutory provisions would allow the plaintiff to seek enforcement of a loan agreement with an interest rate of greater than the twelve percent (12%) limit set forth in General Statutes § 37-4.
DISCUSSION
"Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Durrant v. Board of Education, 284 Conn. 91, 99-100 n. 7, 931 A.2d 859 (2007).
In support of his motion, the plaintiff's affidavit states that the defendant failed to make the required payments on the mortgage note. The defendant, however, states in his affidavit: "The terms of the Mortgage Note underwent numerous oral modifications and amendments, mutually agreed to by all parties to the Mortgage Note including the Plaintiff, subsequent to December 30, 2004." At oral argument, the plaintiff pointed out that the note's merger clause precludes such subsequent oral modifications. The mortgage note provides, in pertinent part: "This Note, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Maker or Payee, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought."
"Although ordinarily the question of contract interpretation, being a question of the parties' intent, is a question of fact . . . [when] there is definitive contract language, the determination of what the parties intended by their . . . commitments is a question of law." Bristol v. Ocean State Job Lot Stores of Connecticut, 284 Conn. 1, 7, 931 A.2d 837 (2007). "[A] merger clause inserted into an agreement establishes conclusive proof of the parties' intent to create a completely integrated contract, and the court is forbidden from considering extrinsic evidence on the matter unless there was unequal bargaining power between the parties." Benvenuti Oil Co. v. Foss Consultants, Inc., 64 Conn.App. 723, 728, 781 A.2d 435 (2001). In this case the defendant drafted the terms of the notes executed by him.
As the mortgage note in the present case contained an unambiguous merger clause, the defendant's assertion of various oral modifications has no effect. In Tradesource, Inc. v. Kemper Construction, Inc., 96 Conn.App. 806, 904 A.2d 210 (2006), the Appellate Court was faced with a similar situation as that at issue in this case and, in concluding the modification was ineffective, stated: "[A] merger clause on the final page [of the contract] stipulated that the contract was the entire agreement of the parties and could not be modified except in writing signed by both parties. Such a modification was never effectuated . . ." Id., 813. Consequently, there is no genuine issue of material fact created by the supposed oral modifications to the contract.
The court now turns to the plaintiff's effort to enforce the collection of the mortgage note's post-maturity interest rate of twenty-four percent (24%) which facially violates General Statutes § 37-4. That statute provides in pertinent part: "No person . . . or agent thereof . . . shall, as guarantor or otherwise, directly or indirectly, loan money to any person and, directly or indirectly, charge, demand, accept or make any agreement to receive therefor interest at a rate greater than twelve per cent per annum." As noted above, however, the plaintiff asserts that this mortgage note falls under two of the exceptions to General Statutes § 37-4 contained in General Statutes § 37-9. Subsection (3) of that statute provides, in pertinent part: "The provisions of sections 37-4 . . . shall not affect . . . any bona fide mortgage of real property for a sum in excess of five thousand dollars." The defendant argues, however, that the plaintiff has not presented sufficient evidence to prove the mortgage note in this case is a "bona fide mortgage of real property." The mortgage note states: "The term `Mortgage' shall mean that certain Mortgage dated the date hereof in the principal amount of $450,000.00 affecting premises located at 94 Ivy Hill Road, Ridgefield, Connecticut, 06877." However, as noted in footnote 2 above, no evidence was submitted by the plaintiff that a mortgage securing the property was ever executed by the parties. Moreover, it is worth noting that the entire basis of the plaintiff's third count is that a mortgage for real property was never executed. It states: "Although [the] Defendant was to execute a mortgage in favor of Plaintiff and Patrick E. Brady and record same on the Ridgefield Land Records against said real property . . . Defendant failed to do so . . ." Thus, the plaintiff's own allegations imply that the language of the mortgage note alone is inadequate to create a bona fide mortgage for real property. The evidence reveals that there remains an issue relative to both the enforceability of the claimed interest rate under the mortgage note, and whether the mortgage note was a "bona fide mortgage for real property."
The plaintiff, however, also claims that the evidence clearly establishes that the terms of the mortgage note are enforceable as it was made to an individual for a commercial pursuit and that under such circumstances it is exempt from the twelve percent (12%) limitation of General Statutes § 37-4. Such exception is found in General Statutes § 37-9. It provides in pertinent part that: "The provisions of sections 37-4 . . . shall not affect: . . . (4)(B) any loan made to . . . any individual, provided such . . . individual is engaged primarily in commercial, manufacturing, industrial or nonconsumer pursuits and provided further that the funds received by such . . . individual are utilized in such entity's business or investment activities and are not utilized for consumer purposes and provided further that the original indebtedness to be repaid is in excess of two hundred fifty thousand dollars . . ." (Emphasis added.) A review of the plaintiff's second count fails to reveal any allegation that the defendant is or was engaged primarily in commercial pursuits. The plaintiff's affidavit states that the funds defendant received were to be used for "commercial investment." This, however, is inadequate. Nowhere does the plaintiff submit evidence establishing that the defendant is engaged primarily in commercial pursuits. As the court must "view the evidence in the light most favorable to the nonmoving party;" Durrant v. Board of Education, supra, 284 Conn. 99-100 n. 7; the plaintiff has failed to prove that the defendant is "engaged primarily in commercial . . . pursuits." Therefore there remains a genuine issue of material fact as to whether the exception found in General Statutes § 37-9(4)(B) to the interest rate limit of twelve percent (12%) would allow the enforcement of the terms of the mortgage note.
Furthermore, there remains another dispute between plaintiff and defendant that rises to the level of a genuine issue of material fact. The affidavit of the plaintiff states: "Since the date of maturity [December 1, 2005] through February of 2008, the defendant has paid various sums to Plaintiff and Patrick E. Brady. The plaintiff has applied these sums which total $283,394.06 toward the interest owed under the mortgage note." (Plaintiff's Affidavit ¶ 14.) Based on this figure, and utilizing a twenty-four percent (24%) interest rate, the plaintiff concludes that the defendant owed $476,685.94 on the mortgage note as of June 1, 2008. The affidavit of the defendant, however, states: "[In August 2006,] I made a payment of $100,000 to the Plaintiff and Patrick Brady, to be applied by the agreement of the parties to principal amount owed on the loan. Plaintiff has refused and/or failed to apply this payment in his Affidavit." (Defendant's Affidavit ¶ 7.) "Altogether, from December 2004 through March 2008, I have made payments in excess of approximately $475,000 towards repayment of the subject loan." (Defendant's Affidavit ¶ 9.)
CONCLUSION
There remains a genuine issue of material fact as to whether the mortgage note was made for a commercial pursuit and would therefore be exempt from the interest rate limitation of General Statutes § 37-4. There also remains an issue as to the amount of money paid by the defendant to the plaintiff as applied to any debt due under the mortgage note. Accordingly, the motion for summary judgment is denied.