Opinion
No. FST CV 09 6001196 S
March 18, 2010
MEMORANDUM OF DECISION
On February 9, 2009, the plaintiff, Three Sixty Five (365) Cherry LLC, filed a foreclosure complaint against the defendants, Siseman LLC (Siseman), Kurt J. Wittek, and Callenan International Inc. On November 20, 2009, the plaintiff filed a motion for summary judgment. The defendants filed an opposition to the motion for summary judgment on December 30, 2009, in response to which the plaintiff filed a reply on January 7, 2010. The defendants filed a response to the reply on January 11, 2010, and the matter was heard on January 21, 2010.
On March 30, 2009, the plaintiff filed a withdrawal of the action as to the defendant Callenan International Inc. Accordingly, the memorandum will refer to the remaining defendants Siseman and Wittek, collectively as the defendants.
The plaintiff alleges in its complaint, that the matter arises out of a credit grid promissory note (promissory note) dated October 3, 2007, by which Siseman promised to pay to the order of the plaintiff the principal sum of $9,400,000, payable with interest thereon as provided in the note. By open end mortgage deed of that date October 3, 2007, Siseman, to secure the promissory note, mortgaged to the plaintiff all right, title and interest in and to a certain ground lease by way of lease deed, pertaining to a certain piece or parcel of land, situated in the city of Norwalk, and known and designated as 145 Woodward Avenue f/k/a/ 151 Woodward Avenue. On or about October 3, 2007, the plaintiff began advancing certain sums against the promissory note and as of the date hereof the entire sum of $9,400,000 has been disbursed to Siseman. The promissory note, guarantees and mortgage are now owned and held by the plaintiff. Pursuant to the terms of the promissory note, Siseman was obligated to pay the monthly installments of interest only thereunder commencing on December 1, 2007, and continuing monthly thereafter until July 1, 2009, when the entire principal balance, together with accrued and outstanding interest, costs and fees were due and payable. Siseman has failed to pay monthly amounts due under the note. Demand was made upon Siseman, and on or about September 11, 2008, a default was declared by the plaintiff and all amounts due and owing were accelerated by the plaintiff. All amounts due under the promissory note, including principal amount of $9,400,000, plus interest, default interest, costs, attorneys fees and other amounts due are currently due and payable. Neither Siseman, nor any other person or entity have paid said note, and all amounts due thereunder are now due and payable and in default.
"Practice book § 17-49 provides that summary judgment shall be rendered forthwith if 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).
"In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any such issues exist." Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988). "In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law." (Internal quotation marks omitted.) Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 10-11, 938 A.2d 576 (2008).
"The courts hold the movant to a strict standard. To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact . . . As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent . . . When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue." (Internal quotation marks omitted.) Id., 11.
"A motion for summary judgment shall be supported by such documents as may be appropriate, including but not limited to affidavits, certified transcripts of testimony under oath, disclosures, written admissions and the like." Practice Book § 17-45. "[Section 17-46] sets forth three requirements necessary to permit the consideration of material contained in affidavits submitted in a summary judgment proceeding. The material must: (1) be based on personal knowledge; (2) constitute facts that would be admissible at trial; and (3) affirmatively show that the affiant is competent to testify to the matters stated in the affidavit." (Internal quotation marks omitted.) Barrett v. Danbury Hospital, 232 Conn. 242, 251, 654 A.2d 748 (1995).
"Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court [in support of a motion for summary judgment]." (Internal quotation marks omitted.) Gold v. East Haddam, 290 Conn. 668, 678, 966 A.2d 684 (2009). "Such assertions are insufficient regardless of whether they are contained in a complaint or a brief . . . Further, unadmitted allegations in the pleadings do not constitute proof of the existence of a genuine issue as to any material fact." (Internal quotation marks omitted.) Karwowsky v. Fardy, 118 Conn.App. 480, 485, 984 A.2d 776 (2009). The court, however, may consider not only the facts presented by the parties' affidavits and exhibits, but also the "inferences which could be reasonably and logically drawn from them . . ." United Oil Co. v. Urban Redevelopment Commission, 158 Conn. 364, 381, 260 A.2d 596 (1969).
The plaintiff argues that there is no genuine issue as to any material fact in the complaint, addressing the defendants' four special defenses: (1) agreement to forbear; (2) equitable estoppel; (3) breach of implied covenant of good faith and fair dealing; and (4) failure to mitigate damages. The plaintiff argues that there was no agreement to forbear, neither written nor oral, and that the only agreement between the parties is contained in the note and the other loan documents. The plaintiff further argues that the defendants fail to provide evidentiary support for equitable estoppel, breach of implied covenant of good faith and fair dealing, and the failure to mitigate damages. In support of its motion for summary judgment, the plaintiff submits the affidavit of Michael Goldberg, the plaintiff's operating manager, dated November 16, 2009.
The defendants respond that they have pleaded valid equitable special defenses to the foreclosure action initiated by the plaintiff. The defendants further argue that a written contract may be modified by a parol agreement made after its execution, despite a provision in the contract providing that it may not be changed except in writing. Moreover, the defendants argue that one exception to the statute of frauds requirement that a land contract be in writing is the doctrine of part performance. Further, the defendants argue that there are factual issues in dispute as to whether the plaintiff and the defendants reached a parol agreement for the repayment of the indebtedness due under the note in lieu of foreclosure, and as to whether the defendants partly performed under the agreement triggering the statute of frauds exception to the requirement that a land contract be in writing.
In support of their opposition, the defendants submit their answer and special defenses dated March 20, 2009, and the affidavit of Wittek, the managing member of the defendant Siseman, dated December 29, 2009. The defendants also submit the affidavit of Goldberg, dated April 6, 2009, attached to which, as exhibits, are a letter, dated September 11, 2008, from plaintiff's counsel to the defendant Siseman, a newspaper article, and a copy of the case detail. Finally, the defendants submit an excerpt of the deposition of Wittek, dated December 16, 2009, and cases.
The date on top of the affidavit is December 28, 2009, however it was signed and dated on December 29, 2009.
The plaintiff replies that there was no oral agreement to forbear. Specifically, the loan documents are definite, so the defendants must overcome that presumption, and no oral "agreement" was formed by the basic tenants and black letter law regarding contract formation, as there were no discussions between the parties, and there were uncertain terms and no mutual assent. The plaintiff further argues, as to the defendants' remaining claims, that there is no exception to the statute of frauds, and that the remaining claims of unclean hands, equitable estoppel, and breach of the implied covenant of good faith and fair dealing, are not legally sufficient defenses based on the mere fact that such defenses are recognizable under the law. In support of its reply, the plaintiff submits the deposition of Wittek, dated December 16, 2009, and the affidavit of Goldberg, dated January 6, 2010.
There are three different affidavits by Goldberg. One from April 6, 2009, one from November 16, 2009, and one from January 6, 2010.
The defendants respond that the plaintiff's reply highlights additional factual issues in dispute between the parties to be determined by the trier of fact, citing the various issues. The defendants further argue that the plaintiff, by and through Goldberg, does acknowledge, in writing, that an agreement was reached by the parties for the purpose of avoiding foreclosure. In support of their response, the defendants submit the email from Goldberg to Wittek, dated November 3, 2009.
"[B]efore a document may be considered by the court [in connection with] a motion for summary judgment, there must be a preliminary showing of [the document's] genuineness, i.e., that the proffered item of evidence is what its proponent claims it to be. The requirement of authentication applies to all types of evidence, including writings . . . Documents in support of or in opposition to a motion for summary judgment may be authenticated in a variety of ways, including, but not limited to, a certified copy of a document or the addition of an affidavit by a person with personal knowledge that the offered evidence is a true and accurate representation of what its proponent claims it to be." (Citation omitted; internal quotation marks omitted.) Gianetti v. Anthem Blue Cross Blue Shield of Connecticut, 111 Conn.App. 68, 73, 957 A.2d 541 (2008), cert. denied, 290 Conn. 915, 965 A.2d 553 (2009).
In the present case, all affidavits submitted are properly sworn and signed, and properly authenticate any attached materials. Further, the answer and special defenses is admissible as a court document, and the deposition is properly sworn. The email message, however, is not authenticated by an affidavit. Accordingly, all evidence submitted, with the exception of the email, is admissible and may be considered. Moreover, because the defendants fail to object to any of the evidence presented, including the email, whether authenticated or not, any objection as to those is deemed waived and the other documents are admissible within the court's discretion. Holmes v. John M. Glover Agency, Inc., Superior Court, judicial district of Fairfield, Docket No. CV 07 5006575 (January 29, 2009); Barlow v. Palmer, 96 Conn.App. 88, 92, 898 A.2d 835 (2006).
Addressing the first special defense, the defendants argue that there was an oral modification of the written contract in the form of an agreement to forbear, and that the resulting foreclosure action instituted by the plaintiff was in breach of that oral agreement. As a mortgage note is an agreement, contract rules apply. Generally, the law states: "A written contract can be modified by a subsequent parol agreement if that is the intention of the parties . . . because the parties to a written contract retain the power to alter or vary or discharge any of its provisions by a subsequent agreement . . . It does not make any difference that the original written contract provided that it should not subsequently be varied except by writing. This stipulation itself may be rescinded by parol and any oral variation of the writing which may be agreed upon . . ." (Citations omitted; internal quotation marks omitted.)." New England Petroleum Corp. v. Groppo, 214 Conn. 444, 450, 572 A.2d 970 (1990).
Because a mortgage note is an agreement about real property, it is subject to the statute of frauds. "[T]he statute of frauds requires any modification to the note and mortgage to be in writing." (Internal quotation marks omitted.) Saunders v. Stigers, 62 Conn.App. 138, 143, 773 A.2d 971 (2001); General Statutes § 52-550. "Connecticut's modern statute of frauds is codified at § 52-550 . . . General Statutes § 52-550(a) provides in relevant part: `No civil action may be maintained . . . (4) upon any agreement for the sale of real property or any interest in or concerning real property' unless `the agreement . . . is made in writing and signed by the party, or the agent to the party, to be charged.'" Battalino v. Patten, 100 Conn.App. 155, 164, 917 A.2d 595, cert. denied, 282 Conn. 924, 925 A.2d 1102 (2007). "Attempted oral modifications of prior existing valid contracts have been held to be subject to the statute of frauds, unless partial performance takes the oral modification out of the statute of frauds." Id.
"[T]he acts of part performance generally must be such as are done by the party seeking to enforce the contract, in pursuance of the contract, and with the design of carrying the same into execution, and must also be done with the assent, express or implied, or knowledge of the other party, and be such acts as alter the relations of the parties . . . The acts must also be of such a character that they can be naturally and reasonably accounted for in no other way than the existence of some contract in relation to the subject matter in dispute . . ." (Internal quotation marks omitted.) McNeil v. Riccio, 45 Conn.App. 466, 470, 696 A.2d 1050 (1997).
In Phanh v. Palmer, Superior Court, judicial district of Litchfield, Docket No. 046064 (May 25, 1990, Dranginis, J.), "[t]he defendant claim[ed] that the plaintiffs' failure to comply with the written contract . . . constitute[d] material breaches by the [plaintiffs] which thereby negate all breach of contract claims." "The defendant asserted that subsequent oral modifications . . . are unenforceable." Id. The court reasoned that "it [was] clear [however] that the plaintiffs relied on these oral modifications and acted in good faith," holding that "[w]here a plaintiff is shown to rely on oral representations relating to the contract, the contract need not comply with the statute of frauds. [ Heyman v. CBS, Inc., 178 Conn. 215, 220, 423 A.2d 887 (1979)] (reliance provides a basis for removing contract from statute of frauds)." Id. The court continued to hold that "the defendant cannot seek to escape liability by asserting the statute of frauds when [the defendant] has previously agreed to oral modifications. DeLuca v. C.W. Blakeslee and Sons., Inc., 174 Conn. 535, 544, [ 391 A.2d 170] (1978); First Connecticut Small Business Investment Co. v. Arba, Inc., 170 Conn. 168, 174, [ 365 A.2d 100] (1976) (both cases holding that the statute of frauds cannot be used as an instrument to accomplish a fraud)." Id.
Specifically, in the context of mortgage notes, the court in Brady v. Phelan, Superior Court, judicial district of Danbury, Docket No. CV 08 6000736 (October 2, 2008, Shaban, J.), discussed the validity of oral modifications: "`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 [ Brady] the defendant drafted the terms of the notes executed by him . . .
"As the mortgage note in [ Brady] contained an unambiguous merger clause, the defendant's assertion of various oral modifications [had] 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, [the court held in Brady] there [was] no genuine issue of material fact created by the supposed oral modifications to the contract." Brady v. Phelan, Superior Court, judicial district of Danbury, Docket No. CV 08 6000736 (October 2, 2008, Shaban, J.).
In the present case, the mortgage note is an agreement for real property, which is subject to the statute of frauds. Moreover, the mortgage note in the present case also contains a waiver clause, which states in paragraph eleven: "No amendment, modification or waiver of any provision of this Note nor consent to any departure by the Borrower shall be effective, irrespective of any course of dealing, unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose given." The paragraph goes on to state that "[t]his Note cannot be changed or terminated orally or by estoppel or waiver or by any alleged oral modification regardless of any claimed partial performance referable thereto." (Emphasis added.) Moreover, paragraph twenty, entitled "No Oral Modifications," states: "This note may not be changed or terminated orally." Brady v. Phelan, supra, Superior Court, Docket No. CV 08 6000736, appears to be right on point, specifically addressing mortgage notes. The present case differs from Brady in two important point, however. First, the note in the present case does not contain a merger clause, as in Brady, stating that this is the entire agreement, although it does contain similarly strong language as to modification in its waiver clause stating that oral modifications are not permitted. Under general contract law, oral modifications of written contracts are permissible. New England Petroleum Corp. v. Groppo, supra, 214 Conn. 450. Even agreements subject to the statute of frauds, including contracts specifically stating that there cannot be any oral modification, may be modified, provided there is sufficient evidence showing part performance or reliance. Battalino v. Patten, supra, 100 Conn.App. 164; McNeil v. Riccio, supra, 45 Conn.App. 470; Phanh v. Palmer, supra, Superior Court, Docket No. 046064, citing to Heyman v. CBS, Inc., supra, 178 Conn. 220. Moreover, Brady does not contain a discussion of reliance, as is alleged in the present case. The plaintiff in the present case should not have the option to enforce a written agreement against the defendants if the plaintiff's conduct incited the defendants' part performance in reliance on that conduct. Accordingly, as part performance and reliance can justify an oral modification, the existence of an oral agreement, and any evidence pertaining to it, is put directly at issue in the present case.
The mortgage states that it "may not be changed or terminated orally." Further, the guaranty states that it "embodies the whole agreement of the parties and may not be modified except in writing, by the parties to change or modify this Guaranty."
There are issues of fact as to the existence of the agreement, the terms of the agreement, and, finally, whether there was part performance on the part of the defendants to take them out of the statute of frauds. Specifically, Goldberg's affidavit from April 6, 2009, states: "At no time [during either of the two meetings with the plaintiff] did Mr. Wittek or anyone on behalf of Defendant Sisem[e]n, LLC, orally or in writing, request any cancellation of the default and acceleration nor forbearance of the amounts owed." Specifically addressing the existence of a forbearance agreement, Goldberg states: "No such letter, memorandum, draft agreement, email, or any other indicia or evidence of any agreement was ever received by Plaintiff from or on behalf of Defendants claiming or requesting such agreement."
Wittek, in his affidavit, directly contradicts these statements, swearing that "[d]uring the course of the meetings that took place . . . Plaintiff made an agreement with Siseman and Wittek in which Plaintiff agreed, inter alia, to allow Siseman and Wittek to implement a global plan for the repayment of monies due Plaintiff under the Note, Mortgage and Gurantee, in lieu of foreclosure . . ." Wittek states in his affidavit that the agreement provided several tasks the defendants would fulfill in lieu of foreclosure, and that the defendants "took steps in furtherance of the terms of the Agreement." Wittek again reiterates in his affidavit, that the negotiations that took place in the fall of 2008, "culminated into the Agreement," and "[h]ad Siseman and Wittek known that Plaintiff would breach the Agreement and commence foreclosure, they would have closed on the refinance loan with TD BankNorth to reduce the indebtedness due Plaintiff and as a consequence would also have reduced the exposure for a deficiency."
In response, Goldberg submitted another affidavit, dated January 6, 2010, reiterating that "[t]he Plaintiff did not intend and in fact did not enter into any oral agreement to forbear acting on the note, mortgage or guaranty," that "Wittek's objectives of exploring alternate financing and additional collateral were self-serving and not the foundation of any agreement," and that the statement that Wittek "acted in reliance on the alleged oral agreement by offering Plaintiff the net proceeds of a loan commitment and that [Goldberg] told him not to close on said document," is "untrue as defendant had no choice but to either obtain Plaintiff's consent to subordinate to additional proposed first priority debt or pay off the Plaintiff's loan in full."
The statements contained in the admissible evidence submitted by the parties, clearly create an issue of material fact as to the existence of a valid oral modification of the written contract. Accordingly, the motion for summary judgment should be denied.
The defendants further claim that the plaintiff should be equitably estopped from pursuing the foreclosure based on alleged unfair and inequitable conduct. "The standards governing the application of equitable estoppel are well established. There are two essential elements to an estoppel — the party must do or say something that is intended or calculated to induce another to believe in the existence of certain facts and to act upon that belief; and the other party, influenced thereby, must actually change his position or do some act to his injury which he otherwise would not have done." (Internal quotation marks omitted.) O'Connor v. Waterbury, 286 Conn. 732, 757, 945 A.2d 936 (2008).
In the present case, the same issues of fact supporting a denial of summary judgment under the special defense of unclean hands, addressing the alleged agreement to forbear, also apply to equitable estoppel special defense. Specifically, the issues are whether an agreement to forbear existed between the parties, and whether the defendants justifiably relied upon it, when rendering their alleged part performance. Accordingly, because the alleged agreement to forbear is disputed, this creates an issue of material fact, and summary judgment should be denied.
The defendants also claim that the plaintiff breached the covenant of good faith and fair dealing by continuing the foreclosure action. "Every contract carries an implied covenant of good faith and fair dealing requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement . . . Bad faith means more than mere negligence; it involves a dishonest purpose . . . Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive." (Citations omitted; internal quotation marks omitted.) Hudson United Bank v. Cinnamon Ridge Corp., 81 Conn.App. 557, 576-77, 845 A.2d 417 (2004).
In the present case, the same issues of fact supporting a denial of summary judgment under the special defense of unclean hands, addressing the alleged agreement to forbear, also apply to the breach of the covenant of good faith and fair dealing special defense. Specifically, the issue is whether an agreement to forbear existed between the parties, without which there cannot be any breach of the alleged oral agreement. Accordingly, because the alleged agreement to forbear is disputed, this creates an issue of material fact, and summary judgment should be denied.
Finally, the defendants claim that the plaintiff failed to mitigate damages. "It is axiomatic that the plaintiff has a duty to mitigate damages. See, e.g., Ann Howard's Apricots Restaurant, Inc. v. Commission on Human Rights Opportunities, 237 Conn. 209, 229, 676 A.2d 844 (1996) (`[this court has] often said in the contracts and torts contexts that the party receiving a damage award has a duty to make reasonable efforts to mitigate damages')." Cweklinsky v. Mobil Chemical Co., 267 Conn. 210, 223, 837 A.2d 759 (2004).
In the present case, the same issues of fact supporting a denial of summary judgment under the special defense of unclean hands, addressing the alleged agreement to forbear, also apply to the failure to mitigate damages special defense. Specifically, whether an agreement to forbear existed between the parties, without which the plaintiff's alleged duty to mitigate never arose, as there would have not been any damages to mitigate. Accordingly, because the alleged agreement to forbear is disputed, this creates an issue of material fact, and summary judgment should be denied.
As there are remaining genuine issues of material fact in dispute, regarding the existence of an oral modification to the written agreement, which forms the basis for all of the defendants' special defenses, the plaintiff's motion for summary judgment is denied.