Opinion
No. CV 08 5008672
December 8, 2010
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT (NO. 124)
The defendants' motion for summary judgment raises res judicata and collateral estoppel issues related to two separate foreclosure actions brought by the plaintiff against the same defendants. The plaintiff previously litigated a foreclosure action against the defendants in 2008, but foreclosure was denied based upon equitable principles after trial at the Superior Court. The defendants move for summary judgment on the ground that the current foreclosure action is barred by the doctrines of res judicata and collateral estoppel, due to the defendants previously gaining judgment in their favor in the previous action. For reasons stated below the court denies the defendants' motion for summary judgment.
FACTS
The present case arises out of a foreclosure action brought by the plaintiff, Tentech, LLC, against multiple defendants, including Nine Wisconsin Avenue, Win Holdings International, Victor Winogradow, and Carol Winogradow. In a previous case, New Alliance Bank v. Win Holdings Int'l., Superior Court, judicial district of New London, Docket No. CV 07 5002721 (February 27, 2008, Leuba, J.T.R.), the plaintiff litigated a foreclosure action against multiple parties, including the defendants in the present action. In the prior action, filed in January 2007, the plaintiff sought the foreclosure of properties in Norwich and Avon, Connecticut, as well as monies allegedly due under certain notes and guaranties. The plaintiff based each count on the alleged failure of the defendants to have made "timely payments of the periodic installments of principal and interest owed . . . for each and every monthly payment, beginning with the payment owed for December 2005 and continuing through the present date, and also failed to make any monthly payments for the months of November and December 2006 . . ."
These four parties have jointly filed the motion for summary judgment in this current action and are referred to as "the defendants." Others named in the complaint are Westminster Development Bank, Phillips Resource Group, DSP Holdings, State of Connecticut department of revenue services, United States of America Internal Revenue Service, Tyler Lyman, Polivy Taschner LLC, Neal Goldberg, Ann Thompson, and CACV of Colorado.
New Alliance Bank was the original plaintiff in the previous action, but on December 28, 2007, Tentech, LLC was assigned the mortgages and notes at issue, and was subsequently substituted as the plaintiff by the time of the previous trial. Thus, Tentech, LLC is referred to throughout as "the plaintiff."
The prior action proceeded to trial on January 10, 2008. In a detailed memorandum of decision issued February 27, 2008, the court found that there was "no dispute that a legally enforceable contractual relationship was established . . . as evidenced by the original notes, mortgages and personal guarantees . . ." New Alliance Bank v. Win Holdings Int'l., supra, Superior Court, Docket No. 07 5002721. Nor was there any dispute these documents established "a binding and enforceable agreement." The court further found that the defendants had in fact made all regular monthly payments owed through December 2006, but that the plaintiff, instead of applying the December 2006 payment to principal and interest, had credited that payment to reimburse itself for its payment of a tax bill. Id. The court found that the plaintiff "did not notify the obligors of the receipt of the tax bill. Nor did [the plaintiff] provide a written demand to the obligors to pay the tax bill before [the plaintiff] in fact paid it." Id. The court rendered judgment in favor of the defendants based upon equitable considerations and principles, holding that there was no technical default under the loan because, although failure to pay taxes could constitute default, the "complaint [did] not allege that the default was for the nonpayment of taxes." Id. Furthermore, the court held that withholding foreclosure under the circumstances was equitable because "[the plaintiff] took affirmative action to force default at a time that suited them by paying the taxes without any demand of the defendants to pay it and after depriving the defendants of even receiving the billing from the tax collector. This was done, the evidence shows, even while the obligors were making their regular monthly payments. Then, using the regular ordinary monthly payments to reimburse itself for the tax payment, the bank claimed a default for the alleged failure to make that very same monthly payment." Id. Based upon a balancing of the equities, the court withheld foreclosure because it would be "unconscionable to permit [the plaintiff] to benefit from a default which it contrived to create." Id.
On September 18, 2008, the present action was filed by the plaintiff. On January 21, 2009, the plaintiff filed an amended complaint containing a total of four counts against the defendants. In the first count, the plaintiff seeks foreclosure of a mortgage on property in Norwich, Connecticut based upon the alleged failure of the defendants to make timely payments of the periodic installments of principal and interest owed, alleging in particular that "the defaulted payments which are due and owing in connection with the loan documents are each monthly payment due for the period from January 2007 through the month of February 2008 . . ." In the second count, the plaintiff seeks foreclosure of a mortgage on property in Avon, Connecticut based upon the alleged failure of the defendants to make timely payments of the periodic installments of principal and interest owed, specifically alleging "there are 15 monthly payments outstanding which have not been paid and which are present due and owing." In the third and fourth counts, the plaintiff seeks monies due under certain notes and guaranty obligations on the ground that the defendants have defaulted due to the alleged failure "to make timely payments of the periodic installments of principal and interest owed . . ."
While the plaintiff's complaint claims default for the months that coincided with the pendency of the prior litigation, there are no allegations by the plaintiff that it is basing the defendant's default on nonpayment during the pendency of the prior action, but instead that default occurred due to insufficient payment once that decision was issued.
On February 9, 2009, the defendants filed an answer, and on February 10, 2009, filed an amended answer with special defenses asserting res judicata and collateral estoppel. The plaintiff filed a reply to the defendants' answer and special defenses on February 10, 2009.
On February 1, 2010, the defendants filed a motion for summary judgment on the ground that the plaintiff's present foreclosure action is barred by the doctrines of res judicata and collateral estoppel. The defendants filed a memorandum of law in support of their motion, accompanied by: (1) a copy of the amended complaint in the current action; (2) a copy of the amended complaint in the prior action; and (3) the memorandum of decision and judgment rendered in the defendants' favor in the prior action. On March 5, 2010, the plaintiff filed an objection to the motion. The plaintiff submitted a memorandum of law in opposition to the motion for summary judgment, along with the following evidence: (1) a sworn affidavit from a member of the plaintiff stating, inter alia, that after the decision in February of 2008, the defendants once again commenced monthly payments; (2) various copies of financial records and correspondence evidencing payment by the plaintiff upon the notes, mortgages and guaranties after the previous action was decided; (3) a copy of a motion of the plaintiff for relief from a stay in the defendants' bankruptcy proceeding; and (4) a copy of an order granting relief from the automatic stay. The motion was heard by the court on August 23, 2010.
DISCUSSION
"Summary judgment is a method of resolving litigation when 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 . . . The motion for summary judgment is designed to eliminate the delay and expense of litigating an issue when there is no real issue to be tried." (Citations omitted.) Wilson v. New Haven, 213 Conn. 277, 279, 567 A.2d 829 (1989). "However, since litigants ordinarily have a constitutional right to have issues of fact decided by a jury . . . the moving party for summary judgment is held to a strict standard . . . of demonstrating his entitlement to summary judgment." (Citation omitted; internal quotation marks omitted.) Kakadelis v. DeFabritis, 191 Conn. 276, 282, 464 A.2d 57 (1983). "As the party moving for summary judgment, the [movant] is required to support its motion with supporting documentation, including affidavits." Heyman Associates No. 1 v. Ins. Co. Of Pennsylvania, 231 Conn. 756, 796, 653 A.2d 122 (1995). Likewise, "[t]he existence of the genuine issue of material fact must be demonstrated by counteraffidavits and concrete evidence." (Internal quotation marks omitted.) Gianetti v. Health Net of Connecticut, Inc., 116 Conn.App. 459, 465, 976 A.2d 23 (2009).
"Because res judicata or collateral estoppel, if raised, may be dispositive of a claim, summary judgment [is] the appropriate method for resolving a claim of res judicata [or collateral estoppel]." Jackson v. R.G. Whipple, Inc., 225 Conn. 705, 712, 627 A.2d 374 (1993); see also Zanoni v. Lynch, 79 Conn.App. 325, 338, 830 A.2d 314, cert. denied, 266 Conn. 928, 837 A.2d 803 (2003). "Although the denial of a motion for summary judgment ordinarily is not appealable because it is not a final judgment, the denial of a motion for summary judgment on the basis of a claim of res judicata [or collateral estoppel] is a final judgment for purposes of appeal because it invokes the right not to go to trial on the merits." Sotavento Corp. v. Coastal Pallet Corp., 102 Conn.App. 828, 829 n. 2, 927 A.2d 351 (2007); see also Clukey v. Sweeney, 112 Conn.App. 534, 537 n. 1, 963 A.2d 711 (2009).
"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.) Sherman v. Ronco, 294 Conn. 548, 553-54, 985 A.2d 1042 (2010).
The defendants argue that they are entitled to summary judgment because the plaintiff's claims in the present foreclosure action are identical to the prior case, and as such, are barred by the doctrines of res judicata and collateral estoppel. The defendants, in particular, claim that "a judgment on the merits in favor of the defendant in a foreclosure action is a bar to a subsequent action on the same underlying mortgage and/or promissory note." The defendants argue that the present action involves the "same promissory notes, mortgages and guaranties" as in the prior case, and that "a court has already determined that the plaintiff is not entitled to foreclose on the mortgages or collect on the notes and guaranties." Thus, the defendants contend that the "issues presented in this action were therefore determined by the judgment in the prior action, which is entitled to preclusive effect in this action." Furthermore, the defendants claim that Connecticut case law holds that "monthly installments which are otherwise due under the terms of a promissory note are no longer due after the lender has accelerated the note and made demand upon the borrower to pay the entire balance." (Emphasis in original.)
The plaintiff in its opposition memorandum counters that "the present action is not the same cause of action as claimed in the prior action" because the present action "consists of a different group of facts . . ." Specifically, the plaintiff claims that the "present complaint alleges defaults resulting in the defendants' failure to pay installments on the note due for the period from January 2007 through February 2008, which are payments different from those alleged in the prior action." Further, the plaintiff claims that "[s]ince the decision in the prior action, the defendants have made numerous and substantial payments on the mortgage indebtedness beginning in March of 2008 and ending in September 2008." The defendants argue that, despite the plaintiff's contention that monthly payments were no longer due because of the prior action's attempted foreclosure, that these payments made after the decision in the prior action "are strong and convincing evidence that the mortgage debt is a valid and enforceable one . . ."
"[C]ollateral estoppel, or issue preclusion, prohibits the relitigation of an issue when that issue was actually litigated and necessarily determined in a prior action . . . For an issue to be subject to collateral estoppel, it must have been fully and fairly litigated in the first action. It also must have been actually decided and the decision must have been necessary to the judgment . . . The doctrine of collateral estoppel is based on the public policy that a party should not be able to relitigate a matter which it already has had an opportunity to litigate." (Internal quotation marks omitted.) New England Estates, LLC v. Branford, 294 Conn. 817, 838, 988 A.2d 229 (2010). "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." (Citations omitted; internal quotation marks omitted.) Carol Management Corp. v. Board of Tax Review, 228 Conn. 23, 32-33, 633 A.2d 1368 (1993).
"In order for collateral estoppel to bar the relitigation of an issue in a later proceeding, the issue concerning which relitigation is sought to be estopped must be identical to the issue decided in the prior proceeding . . . The court must determine what facts were necessarily determined in the first trial, and must then assess whether the party is attempting to relitigate those facts in the second proceeding." (Internal quotations marks omitted.) New England Estates, LLC v. Branford, supra, 294 Conn. 839.
"The doctrine of res judicata, or claim preclusion, provides that a former judgment on a claim, if rendered on the merits, is an absolute bar to a subsequent action on the same claim." (Internal quotation marks omitted.) Delahunty v. Massachusetts Mutual Life Ins. Co., 236 Conn. 582, 589, 674 A.2d 1290 (1996). "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." (Internal quotation marks omitted.) Powell v. Infinity Ins. Co., 282 Conn. 594, 600, 922 A.2d 1073 (2007).
"We have adopted a transactional test as a guide to determining whether an action involves the same claim as an earlier action so as to trigger operation of the doctrine of res judicata. The claim that is extinguished by the judgment in the first action includes all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose . . . In applying the transactional test, we compare the complaint in the second action with the pleadings and the judgment in the earlier action." (Citations omitted; internal quotation marks omitted.) Fink v. Golenbock, 238 Conn. 183, 191-92, 680 A.2d 1243 (1996). In the present case, the defendants have not met their burden of demonstrating their entitlement to summary judgment based upon either collateral estoppel or res judicata.
First, the defendants have not met their burden of showing there is no genuine issue as to any material fact, and that they are entitled to judgment as a matter of law, based upon the doctrine of collateral estoppel. The defendants' summary judgment evidence fails to show that the issues in the current proceeding were raised and are identical to the issues decided in the prior proceeding. Reading the memorandum of decision as a whole, the prior judgment rested on the finding of fact by the court that all regular payments had been made through December 2006 but monies were credited by the plaintiff toward tax arrears without providing notice to the defendants. It was on that issue, and factual finding, that the court based its denial of foreclosure under law and equity. The defendants have not demonstrated that the plaintiff is currently attempting to relitigate default for failure to make timely payments "for each and every monthly payment, beginning with the payment owed for December 2005" or the alleged failure "to make any monthly payments for the months of November and December 2006 . . ." Specifically, there is no reference in the current complaint to any alleged defaulted payments from December 2006 and earlier. Nor is there any current issue as to the defendants' failure to pay taxes during that time. Thus, the issues currently before the court were not raised by the prior action, were not rendered upon in the prior judgment, and thus, collateral estoppel does not have a preclusive effect in this case.
Similarly, a comparison of the pleadings in the present action, with the complaint and judgment in the prior action, demonstrate that they do not involve the same claim so as to trigger the operation of the doctrine of res judicata. The judgment in the prior action centered upon the claim of default during 2005 and 2006, especially analyzing whether there was nonpayment for December 2006. Viewing the evidence in the light most favorable to the nonmoving party, the present action is not based on the same underlying claim as the prior action. A plain reading of the current pleadings shows that it makes no specific claim to payments owed from either 2005 or 2006. In fact, the most precise claim among the present counts in the amended complaint specifically alleges nonpayment only for January 2007 through February 2008. Thus, the defendants have not shown that any claims related to the present cause of action were actually raised or could have been raised, were submitted for determination, and were in fact determined in the previous case.
The defendants' other arguments are similarly without merit. The defendants cite Rosenfield v. Cymbala, 43 Conn.App. 83, 681 A.2d 999 (1996), to argue that a judgment on the merits in favor of a defendant in a foreclosure action is a bar to any subsequent action on the same underlying mortgage and/or promissory note; regardless of whether it is for the same claim of default or not. That court's holding was not so broad as to encompass the defendants' proposition. In that foreclosure case, the court more precisely held that a judgment of dismissal, for failure to make out a prima facie case, is considered to be on the merits, so as to bar any subsequent action on the same claim of default. See Rosenfield v. Cymbala, supra, 43 Conn.App. 93. Importantly, the issue in Rosenfield was not as to whether the second action was based upon the same claim, but rather "whether the judgment of dismissal . . . in the prior action should be treated as a judgment rendered on the merits." Id., 88. There is no dispute in the present action that the first proceeding was decided on its merits. Thus, the holding does not support the defendants' broader argument. A subsequent action merely concerning the "same promissory notes, mortgages, and guaranties" that were involved in a prior judgment does not automatically equate to the relitigation of the same claim or issue. The plaintiff's current action is based upon separate allegations of default, and the current issues and claims were not decided, or raised, in the prior action. As such, the action is not precluded by the doctrines of res judicata or collateral estoppel.
Similarly, the defendants' argument that the payments were no longer considered due after the plaintiff's attempted acceleration of the debt, relying upon Federal Deposit Ins. Corp. v. Napert-Boyer Partnership, 40 Conn.App. 434, 671 A.2d 1303 (1996), is without merit. The holding in that case applied only to the imposition of late fees on monthly payments. Specifically, "a plaintiff may not recover late charges once the note has been accelerated and demand for payment has been made on the defendants." Id., 443. The court's holding cannot be reasonably construed to hold that an otherwise valid mortgage debt is cancelled and erased simply because foreclosure was once sought but denied. Further, the defendant submitted evidence showing that the plaintiff began to once again make payments upon the debt after the prior action was decided in its favor. This evidences an acknowledgment that, while the judgment in their favor precluded any further claim by the plaintiff of default for alleged non-payments from December 2006 and prior, a valid debt still existed for January 2007 and beyond; of which the plaintiff has now moved to foreclose upon for alleged default, and in which there are genuine issues of material fact to resolve at a trial on the merits.
Accordingly, the motion for summary judgment is denied because the defendants have not met their burden to show that there is no genuine issue as to any material fact, and that they are entitled to judgment as a matter of law.