Opinion
No. CV 03 0090461
June 1, 2005
MEMORANDUM OF DECISION
This matter came before the court on May 2, 2005 on a motion for summary judgment filed by defendant William Taff. For the reasons stated below, the motion is denied.
FACTS
On May 21, 2003, the plaintiffs, Louden Legal Group, LLC (Louden) and Carlo Forzani, LLC (Forzani) filed a one-count complaint against William Taff and several other defendants, Katherine Webster-O'Keefe, James C. Taff (individually and as the trustee of the estate of Elizabeth C. Warren), Frederick S. Taff, David Taff and Secor, Cassidy McPartland. The sole count of the complaint seeks foreclose on notes and mortgages held by the plaintiffs on certain property in the defendants' possession.
The court notes that, subsequent to the motion for summary judgment, the plaintiff filed a request to revise the complaint. The court will address this motion for summary judgment based on the original complaint only.
On November 5, 2004, William Taff filed a motion for summary judgment accompanied by a memorandum of law in support. On February 22, 2005, the plaintiffs filed a memorandum of law in opposition to William Taff's motion for summary judgment. In support of their memorandum, the plaintiffs submitted the following: the affidavit of Forzani; correspondence between the plaintiffs and William Taff; promissory notes and mortgages given to the plaintiffs by William Taff; an excerpt of William Taff's deposition; the affidavit of Elizabeth Bozzuto; correspondence between Bozzuto and William Taff; the affidavit of Robert P. Hanahan; correspondence between Hanahan and William Taff; correspondence between Secor, Cassidy McPartland and Hanahan; a temporary restraining order and order to show cause filed by Secor, Cassidy McPartland against William Taff; an order granting prejudgment remedy filed by Secor, Cassidy McPartland against William Taff; financial documents; the affidavit of Katherine Webster-O'Keefe; the affidavit of Margaret Holon; an excerpt of the court transcript in the matter of Louden, Forzani Katz v. Taff, Docket No. CV 97 0073970; and an articulation of the court's decision to dismiss the matter of Louden, Forzani Katz v. Taff. On April 28, 2005, William Taff filed the following documentation in support of his motion for summary judgment: the affidavit of William Taff; a letter from Forzani to William Taff; a summary of billings; and responses to requests for admission filed in the matter of Louden, Forzani Katz v. Taff.
The plaintiffs argue that the motion for summary judgment should be denied on the grounds that it does not comply with Practice Book § 17-45 in that it was not accompanied by any documentation at the time of filing. The defendant filed his motion for summary judgment on November 5, 2004, but filed supporting documentation on April 28, 2005. While Practice Book § 17-45 places a duty on the party opposing a motion for summary judgment to file opposing affidavits "at least five days before the date the motion is to be considered on the short calendar," no such time requirement specifically is placed on the proponent of the motion for summary judgment. As such, the court will decide the motion based on the merits.
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 . . . The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law . . . and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact." (Citations omitted; internal quotation marks omitted.) Barrett v. Montesano, 269 Conn. 787, 791-92, 849 A.2d 839 (2004).
William Taff (herein after the defendant) moves for summary judgment based on the reasons set forth in his special defenses and counterclaims. The first argument advanced by the defendant is that the claim is barred by the statute of limitations and that the plaintiffs are guilty of laches. The defendant claims that the plaintiffs have waited for over six years to commence this action and that such a delay is inexcusable. Also, the defendant argues that the doctrine of res judicata applies as these claims were heard before Judge Moraghan during a three-day trial at the conclusion of which the case was dismissed. The defendant claims that the prior case filed in 1997, Louden, Forzani Katz v. Taff, involved the same parties in interest and the same notes were at issue. In the alternative, the defendant claims that this action is barred by the doctrine of collateral estoppel as these claims were unsuccessfully brought by the plaintiffs' assignors in the case noted above. Finally, the defendant states that Forzani violated Rule 1.8 of the Rules of Professional Responsibility by engaging in two prohibited transactions with his client, thus making the notes and mortgages unenforceable.
In response, the plaintiffs state that the statute of limitations on a foreclosure action is fifteen years from the date of default and that they are well within that time period. Also, the plaintiffs claim that they are not guilty of laches as they have continually tried to communicate with the defendant for a number of years. Additionally, they argue that res judicata does not apply because the prior matter to which the defendant refers was not decided on the merits. It was dismissed on a non-substantive ground. The plaintiffs argue that collateral estoppel does not apply because collateral estoppel precludes parties from relitigating issues and facts determined in an earlier proceeding. As the earlier proceeding in question was not decided on the merits, the plaintiffs conclude, this action cannot be collaterally estopped. With regard to the argument that a violation of the Rules of Professional conduct precludes enforcement of the notes and mortgages, the plaintiffs state that the Appellate Court ruling in Ankerman v. Mancuso, 79 Conn.App. 480, 830 A.2d 388 (2003) held that an attorney's violation of Rule 1.8 in the negotiating of notes and mortgages with his client for the payment of fees is not a defense to a suit on those notes. The plaintiffs state that the Supreme Court later upheld that ruling. Finally, the plaintiffs contend that whatever defenses the defendant claims to have regarding these transactions may be barred by the unclean hands doctrine as the defendant has engaged in a pattern of fraud as to his major creditors since 1992. The court will take each of the arguments presented by the parties in turn.
Statute of Limitations
The defendant argues that General Statutes § 52-576 provides a six-year statute of limitations for an action to recover on an account or contract in writing, thus barring this action as the notes and mortgages were executed in 1993 and 1994 and the 1997 action clearly shows that it has been more than six years since the notes and mortgages have been considered non-performing. The plaintiffs respond that the statute of limitations for a foreclosure action is fifteen years from the date of default pursuant to General Statutes § 52-575.
General Statutes § 52-576 states in relevant part: "No action for an account, or on any simple or implied contract, or on any contract in writing, shall be brought but within six years after the right of action accrues . . ."
General Statutes § 52-575(a) states: "No person shall make entry into lands or tenements but within fifteen years next after its right or title to the same first descends or accrues or within fifteen years next after such person or persons have been ousted from possession of such land or tenements; and every person, not entering as aforesaid, and his heirs, shall be utterly disabled to make such entry afterwards; and no such entry shall be sufficient, unless within such fifteen-year period, any person or persons claiming ownership of such lands and tenements and the right of entry and possession thereof against any person or persons who are in actual possession of such lands or tenements, gives notice in writing to the person or persons in possession of the land or tenements of the intention of the person giving the notice to dispute the right of possession of the person or persons to whom such notice is given and to prevent the other party or parties from acquiring such right, and the notice being served and recorded as provided in sections 47-39 and 47-40 shall be deemed an interruption of the use and possession for any length of time thereafter, provided an action is commenced thereupon within one year next after the recording of such notice. The limitation herein prescribed shall not begin to run against the right of entry of any owner of a remainder or reversionary interest in real estate, which is in the adverse possession of another, until the expiration of the particular estate preceding such remainder or reversionary estate."
General Statues § 52-575 pertains to adverse possession and has been applied to foreclosures by analogy. The Supreme Court in Arnold v. Hollister, 131 Conn. 34, 37 A.2d 695 (1944) stated: "[T]he [s]tatute of [l]imitations which will ordinarily be followed in foreclosure actions is [52-575], which provides, `No person shall make any entry into any lands or tenements but within fifteen years next after his right or title to the same shall first descend or accrue' provided the limitation herein prescribed shall not begin to run against the right of entry of any owner of a remainder or reversionary interest in real estate, which is in the adverse possession of another, until the expiration of the particular estate preceding such remainder or reversionary estate.' . . . [Foreclosure] being an equitable action the statute is recognized only by analogy." Id., 39. More recently, the Appellate Court has stated: "[T]he rule in Connecticut, as far back as the early nineteenth century, is that a statute of limitations does not bar a mortgage foreclosure." Federal Deposit Ins. Corp. v. Owen, 88 Conn.App. 806, 815 (2005). As such, the plaintiffs have commenced this action within the appropriate time frame and have not exceeded the statute of limitations.
Laches
The defendant argues that the plaintiffs are guilty of laches as there has been an inexcusable delay in this action which is evidenced by the fact that the statute of limitations has expired. The defendant contends that this delay has prejudiced him by placing a cloud over his title on the property. The plaintiffs respond that they have been trying to collect on this debt continuously and they are therefore not guilty of laches. The plaintiffs further state that the defendant has submitted no evidence to support the argument that any delay was inexcusable and that he suffered prejudice as a result.
"Laches consists of two elements. First, there must have been a delay that was inexcusable, and, second, that delay must have prejudiced the defendant . . . Lapse of time, alone, does not constitute laches. It must result in prejudice to the defendant . . ." (Citation omitted; internal quotation marks omitted.) LaSalle National Bank v. Shook, 67 Conn.App. 93, 98-99, 787 A.2d 32 (2001). Though he states in his memorandum of law in support of his motion for summary judgment that he has been prejudiced, the defendant has submitted no evidence to show that he was in any way prejudiced by an inexcusable delay.
Res Judicata
The defendant contends that this action is barred by the doctrine of res judicata because the case was already heard by the court in Louden, Forzani Katz v. Taff, Superior Court, judicial district of Litchfield, Docket No. CV 97 0073970 (June 13, 2002, Moraghan, J.). The defendant argues that the same parties were involved, the same transactions were at issue and the same relief was sought in that case as in the current action. The plaintiffs respond that Louden, Forzani Katz v. Taff was not decided on the merits, but rather dismissed because the court was not satisfied that the proper parties were before it. As such, the plaintiffs argue, res judicata does not apply.
"The doctrine of res judicata holds that an existing final judgment rendered upon the merits without fraud or collusion, by a court of competent jurisdiction, is conclusive of' causes of action and of facts or issues thereby litigated as to the parties and their privies in all other actions in the same or any other judicial tribunal of concurrent jurisdiction . . . If the same cause of action is again sued on, the judgment is a bar with respect to any claims relating to the cause of action which were actually made or which might have been made . . . Res judicata, as a judicial doctrine . . . should be applied as necessary to promote its underlying purposes. These purposes are generally identified as being (1) to promote judicial economy by minimizing repetitive litigation; (2) to prevent inconsistent judgments which undermine the integrity of the judicial system; and (3) to provide repose . . ." (Citation omitted; internal quotation marks omitted.) Efthimiou v. Smith, 268 Conn. 499, 506, 846 A.2d 222 (2004).
"In determining whether [to grant a motion to dismiss], the inquiry usually does not extend to the merits of the case . . . The decision [granting a motion to dismiss] is rendered in the form of a final judgment dismissing the action . . . [H]owever, only the present action has been terminated and no decision on the merits have been made. In some situations, the plaintiff by amendment may cure the defect and have the case reinstated. In others, the plaintiff can proceed only by initiating a new action." (Citations omitted; emphasis in original; internal quotation marks omitted.) Southport Manor Convalescent Center, Inc. v. Foley, 216 Conn. 11, 16-17, 578 A.2d 646 (1990). In Louden, Forzani Katz v. Taff, Judge Moraghan granted the defendant's motion to dismiss after a three-day trial because it was unclear whether the notes and mortgages were actually held by Louden, Forzani Katz as a legal entity. The motion to dismiss was not rendered based on the merits of the case, but rather because of a lack of standing. As the decision in the prior action was not based on the merits, the doctrine of res judicata does not apply
Collateral Estoppel
The defendant argues that the plaintiff's claims are barred by the doctrine of collateral estoppel because the same claims were brought by the plaintiffs' assignors in previous litigation, namely Louden, Forzani Katz v. Taff. As they were denied recovery in that action, the defendant contends, the plaintiffs are estopped from relitigating the same issues. The plaintiffs contend that because the prior action was dismissed on a non-substantive ground, issues of fact were not actually determined and therefore collateral estoppel does not apply.
"[C]ollateral estoppel precludes a party from relitigating issues and facts actually and necessarily determined in an earlier proceeding between the same parties or those in privity with them upon a different claim . . . An issue is actually litigated if it is properly raised in the pleadings or otherwise, submitted for determination, and in fact determined . . . An issue is necessarily determined if, in the absence of a determination of the issue, the judgment could not have been validly rendered . . . If an issue has been determined, but the judgment is not dependent upon the determination of th[at] issue, the parties may relitigate the issue in a subsequent action. Findings on nonessential issues usually have the characteristics of dicta." (Internal quotation marks omitted.) DaCruz v. State Farm Fire Casualty Co., 268 Conn. 675, 686, 846 A.2d 849 (2004). "To assert successfully the doctrine of [collateral estoppel], therefore, a party must establish that the issue sought to be foreclosed actually was litigated and determined in the prior action between the parties or their privies, and that the determination was essential to the decision in the prior case." Rocco v. Garrison, 268 Conn. 541, 555, 848 A.2d 352 (2004).
As noted above, the prior action between the parties was dismissed. The issue the defendant seeks to preclude was not actually or necessarily determined by the prior action as a result. Therefore, the doctrine of collateral estoppel does not apply.
Violation of Rule 1.8 of the Rules of Professional Conduct
The defendant contends that it is an undisputed material fact that Forzani entered into two prohibited transactions with his client that violated Rule 1.8 of the Rules of Professional Conduct. The defendant further argues that such a violation renders the notes and mortgages unenforceable. The plaintiffs respond that both the Supreme Court and Appellate Court have held that a violation of Rule 1.8 in the negotiation of notes and mortgages is not a defense to a suit on those notes.
Rule 1.8 of the Rules of Professional Conduct states in relevant part: "(a) A lawyer shall not enter into a business transaction, including investment services, with a client or former client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client or former client unless: (1) The transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client or former client and are fully disclosed and transmitted in writing to the client or former client in a manner which can be reasonably understood by the client or former client; (2) The client or former client is advised in writing that the client or former client should consider seeking the advice of independent counsel in the transaction and is given a reasonable opportunity to do so; (3) The client or former client consents in writing thereto; (4) With regard to a business transaction, the lawyer advises the client or former client in writing either (A) that the lawyer will provide legal services to the client or former client concerning the transaction, or (B) that the lawyer will not provide legal services to the client or former client and that the lawyer is involved as a business person only and not as a lawyer representing the client or former client and that the lawyer is not one to whom the client or former client can turn to for legal advice concerning the transaction . . . (j) A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client except that the lawyer may: (1) Acquire a lien granted by law to secure the lawyer's fee or expenses; and (2) Contract with a client for a reasonable contingent fee in a civil case."
In Ankerman v. Mancuso, 79 Conn.App. 480, 830 A.2d 388 (2003), the Appellate Court held that "[a] violation of rule 1.8(j) of the Rules of Professional Conduct cannot be the sole basis to bar the enforcement of an otherwise valid promissory note and mortgage." Id., 488. The Supreme Court reframed the certified question, asking more specifically "whether a promissory note from a client to an attorney stating an obligation to pay attorneys fees is enforceable if it is secured by a mortgage of questionable ethical posture." Ankerman v. Mancuso, 271 Conn. 772, 777 (2004). The Supreme Court stated: "We need not decide in the present case whether the plaintiff's acquisition of a mortgage on the defendant's property violates rule 1.8(j) because the plaintiff in this action is seeking only to enforce the promissory note, and is not seeking to foreclose the mortgage. We conclude that the plaintiff's action to enforce the promissory note alone, an instrument separate from the mortgage, is not barred by rule 1.8(j)." Id. 780.
The Supreme Court specifically chose not to answer the question presented by this case, but noted that "there is a division of authority among other jurisdictions as to whether an attorney's taking of a security in a client's property that is the subject of litigation in which the attorney represents the client constitutes the acquisition of a proprietary interest in violation of the rule." Id., 779. "The gravamen of rule 1.8(j) lies in the prohibition of an attorney's acquisition of a `proprietary interest,' in the cause of action or subject matter of the litigation in which the attorney is representing the client." Id., 781. Forzani represented the defendant in a child custody dispute. The property mortgaged to secure payment of attorneys fees was not involved in that action. Therefore, it is unclear whether Forzani acquired a proprietary interest in the cause of action or subject matter of the litigation.
Furthermore, the defendant argues that it is an undisputed material fact that Forzani violated the Rules of Professional Conduct when he executed the notes and mortgages on the defendant's property to secure the payment of his attorneys fees. However, included in the evidence submitted by the defendant is a request for admission asking the plaintiffs to admit that Forzani violated Rule 1.8. That request for admission was denied by the plaintiffs. Given the requirement that the court must look at the evidence in the light most favorable to the nonmoving party and given that there is no clear precedent regarding whether a foreclosure action is barred by the violation of Rule 1.8, the court finds that genuine issues of material fact exist and therefore this action is inappropriate for summary adjudication.
CONCLUSION
The plaintiffs have not exceeded the applicable statute of limitations for a foreclosure action nor was any evidence presented by the defendant to show that the plaintiffs were guilty of laches. The previous litigation involving this matter was not decided on the merits and therefore the doctrines of res judicata and collateral estoppel do not apply. There are genuine issues of material fact regarding whether a violation of Rule 1.8 of the Rules of Professional Conduct bar an action for foreclosure on a mortgage and as such the issue is best left to the trial court. For the foregoing reasons, the motion for summary judgment is denied.
BY THE COURT,
Brunetti, J.