Opinion
No. CV-05-4015844S
December 28, 2006
MEMORANDUM OF DECISION
The plaintiff bank seeks to foreclose a mortgage provided by the named defendant to secure a $507,500 promissory note on premises known as 2 Prospect Hill Road and/or 3 Prospect Hill Road and/or 306 Thimble Islands Road in Branford. It contends that it owns a note and mortgage, which were recorded on the Branford Land Records on January 13, 2003 in Volume 797 at Page 723, and that as of the date of the amended complaint in this matter, June 22, 2006, it is owed the unpaid principal balance of $510,953.51 plus interest from May of 2005, late charges, attorneys fees and costs of collection.
The named defendant, Jack J. Spitzer, is deceased, and his widow and heirs, Charlotte V. Spitzer, Jill Spitzer-Fox and Robert B. Spitzer, have been cited in defendants. The defendant Kate McCabe, nÉe Spitzer, is currently residing in the premises. The United States and the Internal Revenue Service were originally made defendants, but the parties have established to the government's satisfaction that the tax liens on the property were inappropriately directed at the other defendants in this case. The governmental defendants have therefore elected not to participate in the trial of this case and make no claims with regard to the court's judgment.
The widow and heirs filed an answer and special defenses, but although represented at the trial, they did not participate actively. At the close of evidence, they withdrew their special defenses. McCabe filed an answer denying certain of the plaintiff's claims. Trial was held before the undersigned on December 7 and December 20, 2006.
At an earlier point in the proceedings, McCabe was represented by Attorney William Cashman, who handled the real estate closing regarding the mortgage and note at issue in this case. Patricia Guarino, who works for Cashman, testified that she recognized the mortgage deed in question (plaintiff's exhibit 11) and that she in fact had prepared it and taken the acknowledgements of the signatures, which included that of Attorney Vincent Avallone, who shared space with Cashman and who signed on behalf of Spitzer pursuant to a duly executed power of attorney in his favor. Guarino noted, however, that references to Avallone, including his signature and her acknowledgement of it, had been crossed out on the document as actually recorded, and that Spitzer's signature had been substituted. She testified adamantly that at the time the deed was signed, Spitzer was not present in the room and that it was Avallone who signed on his behalf pursuant to the power of attorney. She had no idea how Spitzer's name was substituted, but she is certain that it was definitely not on the deed on the time of the closing.
Attorney Vincent Avallone confirmed Guarino's testimony that he had acted on Spitzer's behalf pursuant to a power of attorney to sign the closing documents for the loan in question. He had personally confirmed Spitzer's willingness to do this by telephone in a conversation that occurred a day or two prior to the closing. At the time of the closing, he was the only signatory to the note, acting on Spitzer's behalf and Spitzer's signature did not appear on the mortgage at that time, nor does he have any idea how Spitzer's name eventually appeared on the document. He himself did not draw the lines through his name and signature.
Attorney William Cashman, who represented McCabe throughout earlier proceedings involving this property, also testified for the plaintiff. In particular, he had represented McCabe at a closing which occurred in January of 2000 in which she had quitclaimed all of her residual interest in the subject property to Spitzer. The idea had been that McCabe might eventually improve her fortunes so that she could repurchase her interest, and a deed that would have accomplished that return was in fact executed by Spitzer and placed in escrow by Cashman. McCabe's fortunes did not, however, improve sufficiently, the plan to quitclaim the property back to McCabe never came to fruition, and the deed, which remains in escrow with Cashman, was never recorded.
Cashman also confirmed the testimony of Guarino and Avallone that it was only Avallone who signed the documents at his office on the date of the closing pursuant to a power of attorney executed by Spitzer. He has no idea who crossed Avallone's name off of the document and when Spitzer's name appeared on it.
Attorney Joseph San Filippo, the owner of a title and abstract company that does title searches in Connecticut, testified that he searched the title to the subject property and produced a sequence of deeds which traced the chain of title back to its root in 1920. Although one of the exhibits introduced by the plaintiff (plaintiff's exhibit 9), purported to be a quitclaim deed from McCabe dated November 1, 2005, San Filippo opined that this deed was not a part of the chain of title because by that date she no longer had any interest in the subject premises left to convey, having previously quitclaimed all of her right, title and interest in it to Jack Spitzer in January of 2000 (plaintiff's exhibit 8).
The description in plaintiff's exhibit 11, the one identified by Guarino as the deed she witnessed (although only with Avallone's signature, not Spitzer's) is identical to the property description recited in plaintiff's exhibit 8 and those in exhibits 2, 3 and 4. In short, at the time of the execution of the May 2002 mortgage that is at issue in this case, only Jack Spitzer had title to the property. Because, in San Filippo's opinion, McCabe had no interest left to convey in November 2005, that deed had no effect on the title.
According to San Filippo, the property at issue is a single parcel, although Prospect Hill Road divides it at one point. It is his opinion that the running of the road through the properly is of no moment in determining the extent of the property, as the root title and subsequent deeds do not mention the road itself, saying only . . . and consistently . . . that the only southern boundary of the property is Long Island Sound.
Craig Bettencourt, senior financial specialist at Wachovia, described the "Pegasus" system that the bank uses on a daily basis to access account information. A review of Wachovia's records for Jack Spitzer utilizing that system reflects that Spitzer made payments on the note in question only through February of 2005, and that there is now a principal balance due of $510,953.51. With interest in the amount of $76,469.24 plus late charges of $246.09, the bank claims a debt of $587,668.84.
In FDIC v. M.F.P. Realty Associates, 870 F.Sup. 451, 455 (D.Conn., 1994), the District Court concluded that a plaintiff may not recover late charges once demand for payment has been made upon the defendants on the theory that "while a note may provide for a lender to collect late charges when an installment is not received by a due date, those installments are no longer `due' after the lender has accelerated the note and made demand upon the borrower." In light of that decision, the court is denying the claim for the $246.09 in late charges.
Mark A. Russo, a certified appraiser, has done a total of three appraisals on the property in question. The first, undertaken prior to the litigation in this case, was in 2003, at which time he valued the property at $2,250,000.00. The next appraisal, which was undertaken in connection with this litigation, was performed on November 21, 2005, at which time Russo valued the property at $1,750,000.00, with $1,500,000.00 of that attributable to the land and $250,000.00 attributable to the improvements. He then reappraised the property on August 8, 2006, and revised that number somewhat downward, appraising the property for a total value of $1,700,000.00. He also did a December 2006 update in connection with the present proceeding, looking at comparable sales in the area and confirming his August appraisal of $1,700,000. His fee for the two appraisals and update is $1150, and he seeks an additional $250 for his in-court testimony.
Although the defendant McCabe questions the fairly substantial drop in value over the period of time covered by the appraisals and suggests that the plaintiff's appraiser has intentionally reduced the value for purposes of the pending litigation, she offered no evidence on this point and did not produce an appraisal of her own. In light of the available evidence, the court finds the Russo appraisal to be reasonable and adopts it as representing the fair market value of the property.
The parties have stipulated that Jack Spitzer is in fact deceased. The court concludes that it is his heirs who are therefore responsible for the debt. The parties have also stipulated that there is a first mortgage in the amount of $1.1 million dollars, with interest that has accrued at the rate of 18% per annum. Because of the size of the first mortgage and accrued interest the defendants do not oppose, in the event that judgment is granted in favor of the plaintiff, a judgment of strict foreclosure rather than a judgment of foreclosure by sale. In light of the fact that the present value of the property does not exceed the amounts presently outstanding on the two mortgages, and absent any persuasive equitable arguments to the contrary, a strict foreclosure indeed appears appropriate. See, Fidelity Trust Co. v. Irick, 206 Conn. 484, 538 A.2d 1027 (1998). The parties have further stipulated that the plaintiff will not pursue any possible deficiency judgment against the estate and its heirs.
It is true that there is one very puzzling aspect of this case, mainly how and why Avallone's signature was deleted from the mortgage documents and Spitzer's signature substituted for it, but while this is a matter of considerable curiosity, it does not affect the fact that the note was signed either by Avallone acting on behalf of Spitzer, which is what all of the evidence shows, or by Spitzer himself, and that the document was duly recorded on the land records. The mortgage became valid as soon as it was delivered, and in the absence of a challenge to the validity of the mortgage for the two years following the consummation of the transaction, its validity may not be challenged. General Statutes § 47-36aa requires that any challenge to the validity of a deed or other instrument made for the purpose of conveying title to real property must be commenced within two years after recording. McCabe's challenge comes too late, and, in any event, appears not to have been accompanied by the filing of the required lis pendens. Curious as the circumstances surrounding the signing and recording of the mortgage deed may be, therefore, the court must, and does, consider the deed (plaintiff's exhibit 11) to be a valid mortgage deed.
Additionally, it is also clear from the evidence that the defendant McCabe had deeded all of her interest in the property back to Spitzer in January of 2000. The deed that might someday have returned her interest to her remains in escrow to this day and was never delivered for recording or otherwise given effect. Therefore, other than the fact that she currently resides on the property, McCabe has no legal interest in the property in question relevant to the disposition of this case. Although she has made an effort to have the court conclude that there is a separate parcel of land known as "3 Prospect Hill," which includes that portion of the property bordering Long Island Sound beyond the roadway and which is somehow not subject to this foreclosure action, it is clear from the evidence that there is no such separate parcel, that all of the property relates back to the root title found in the deed that has been admitted as plaintiff's exhibit 1, that all of her interest in that property was quitclaimed by her to Spitzer in the deed admitted as plaintiff's exhibit 8, and that the same property was conveyed to the bank in the mortgage deed admitted as plaintiff's exhibit 11.
In sum, the court finds that the plaintiff has proved a debt in the amount of $587,422.75, including principal and interest, but no late charges. The value of the property is found to be $1,700,000. The defendant McCabe's claims of ownership to some or all of the property in question are found to be without merit. The plaintiff is also entitled to $1,400 in fees for the appraiser, $150 for a title search fee, legal fees in the amount of $16,000, plus any additional costs to be taxed by the clerk. A judgment of strict foreclosure will enter with a law day of February 26, 2007.