TD v. Salemme Development (2010)

MEMORANDUM OF DECISION

FACTUAL BACKGROUND

On December 4, 2007, the plaintiff, TD Banknorth, N.A. (TD Bank), brought a two-count complaint against the defendants, Salemme Development, LLC and Alexander Salemme III (Salemme).   The two-count complaint makes the following allegations.   TD Bank provided Salemme Development with a $500,000 note secured by a mortgage annexed to property at Crystal Lane in Shelton, Connecticut (the property).   By a guaranty dated November 3, 2003, Salemme guaranteed payment and performance of the obligations.   After the note was executed Salemme Development became record owner over the mortgaged premises.   In count one the plaintiff alleges that Salemme Development failed to pay the installment of principal and interest which became due under the terms of the note and mortgage on October 5, 2006 and each subsequent month.   The plaintiff claims that $223,483.55 together with interest and expenses is owed.   In the second count, it is alleged that Salemme, as guarantor of the note, owes the plaintiff for the obligations of Salemme Development.   The plaintiff attached to the complaint the “Commercial Open End Mortgage,” a property description of the mortgaged property and a “Guaranty Agreement.”   The plaintiff seeks foreclosure of the mortgage, immediate possession of the mortgaged premises, a deficiency judgment, monetary damages, attorneys fees, costs and interest.

On August 15, 2008, the plaintiff filed a motion for summary judgment.   The court, Doherty, J., granted the motion, on October 1, 2008, as to liability only.   Subsequently, the plaintiff brought a motion for judgment of strict foreclosure on January 12, 2009, which included an affidavit of debt, an affidavit of an appraiser and an appraisal report.   The court granted strict foreclosure on April 13, 2009 and set July 14, 2009 as the law day.

On December 23, 2009, the plaintiff filed the current motion before the court, a motion for judgment on damages, as to count two of the complaint against the named defendant Salemme.   On January 5, 2010, Salemme filed an objection arguing that the motion should be denied.

DISCUSSION

Practice Book § 17-1 provides:  “In all actions, whether the relief sought be legal or equitable in its nature, judgment may be given for or against one or more of several plaintiffs, and for or against one or more of several defendants;  and the judicial authority may grant to a defendant any affirmative relief to which the defendant may be entitled, and may determine the rights of the parties on each side as between themselves insofar as a consideration of the issues between them is necessary to a full adjudication as regards the claim stated in the complaint.”

In the present motion, the plaintiff seeks damages on count two from the defendant, Salemme.   Specifically, the plaintiff argues that based on an appraisal, the property is worth $50,000, and Salemme owes the plaintiff $253,113.02.   He argues that because Salemme signed the contract of guaranty Salemme has an independent obligation from the borrower Salemme Development.   The plaintiff has attached to the motion a property description of 4 Crystal Lane, Shelton, Connecticut, a construction mortgage note between Salemme Development and Hudson United Bank, a guaranty agreement on the note between Salemme Development and Hudson United Bank with the undersigned being Salemme, Judge Doherty's prior decision on the defendants' objection to the motion for summary judgment and an affidavit of Diane Whitten, president of the plaintiff's commercial workout department, attesting to Salemme's debt.

Salemme argues that the plaintiff can only recover the remainder of the note through a deficiency judgment.   He argues that General Statutes §§ 49-1 ¹ and 49-14 ² require the plaintiff to bring a deficiency action within 30 days of the law day and because the law day in this case was July 14, 2009 the plaintiff is barred from bringing a deficiency action.   As a result, Salemme argues that the current motion before the court is improper and does not give the defendant the opportunity to contest the appraisal or cross examine the appraiser.

General Statutes § 49-1 in relevant part provides that “[t]he foreclosure of a mortgage is a bar to any further action upon the mortgage debt, note or obligation against the person or persons who are liable for the payment thereof who are made parties to the foreclosure.  Section 49-14 in relevant part provides that “[a]t any time within thirty days after the time limited for redemption has expired, any party to a mortgage foreclosure may file a motion seeking a deficiency judgment.”  “Under General Statutes § 49-1, a judgment of strict foreclosure extinguishes all rights of the foreclosing mortgagee on the underlying note, except those enforceable through the use of the deficiency judgment procedure delineated in General Statutes § 49-14.”  First Bank v. Simpson, 199 Conn. 368, 370, 507 A.2d 997 (1986).

“Because the entry of judgment of foreclosure precluded any further common law proceedings upon the note, the legislature, in Public Acts 1833, c. 18, §§ 1, 2, created the remedy of the deficiency judgment as the only available means of satisfying a mortgage debt when the security is inadequate to make the plaintiff whole ․

“Before rendering a deficiency judgment, the court must have a mechanism for establishing the value of the subject property to determine whether and to what extent a deficiency exists.   While a foreclosure by sale automatically establishes the value of the property, a strict foreclosure does not have this secondary consequence.   Only a proceeding for a deficiency judgment following a strict foreclosure establishes the amount of remaining indebtedness.”   Fairfield Plumbing and Heating Supply Corp. v. Kosa, 220 Conn. 643, 647-49, 600 A.2d 1 (1991).

The Supreme Court held that the former General Statutes § 49-14 violated due process because of the “failure of the statute in effect at the time to mandate a hearing before the trial court where the defendant could present evidence as to value and cross-examine witnesses deprived the defendant of his constitutional right of confrontation.”  Society for Savings v. Chestnut Estates, Inc., 176 Conn. 563, 576-77, 409 A.2d 1020 (1979).  “In 1979, the legislature amended the procedure for calculating a deficiency in a strict foreclosure action in response to a decision by this court holding the existing procedure unconstitutional ․ The only change wrought by the amendment contained in § 49-14(a) is the procedure by which the valuation of the mortgaged property is accomplished.   Following the amendment, if a motion for deficiency judgment is filed within thirty days after the time limited for redemption, the court hears evidence on the value of the property from both parties and then establishes a conclusive valuation of the property.”   Fairfield Plumbing and Heating Supply Corp. v. Kosa, supra, 220 Conn. 649.

In the present matter, the court, on April 13, 2009, granted the plaintiff's motion for strict foreclosure on the Shelton property.   Over five months after the law date, which was set as July 14, 2009, the plaintiff brought the current motion, on December 23, 2009, a motion for judgment on damages for the difference in value of the foreclosed property and the mortgage plus interest.   By bringing a motion for judgment, the plaintiff's motion bypasses the procedures set up under § 49-14(a).³  Here, the plaintiff attached an appraisal and an appraiser's affidavit to the plaintiff's motion for strict foreclosure.   The appraiser determined the Shelton property to be worth $50,000.   This process does not provide Salemme with the procedural safeguards established under the revised § 49-14.

The court in Society for Savings held the former § 49-14 to be unconstitutional, as the procedures available to the defendant were inadequate.   In particular the court stated “to pass the test of constitutionality, § 49-14 must require an effective opportunity to be heard and proper notice thereof.   Lack of the requirement of such a hearing and of such notice to the parties whose rights are to be affected denies them an opportunity to be heard ‘at a meaningful time and in a meaningful manner.’   “ Society for Savings v. Chestnut Estates, Inc., supra, 176 Conn. 563.   Here, Salemme has not been afforded “an effective opportunity to be heard and proper notice thereof.”   In Society for Savings the plaintiff provided the court with an appraisal where “[a]t no time before the report [was] returned [were] the appraisers' factual findings probed by the parties for accuracy.”   Id. Similarly, here the plaintiff has attached an appraiser's report and findings to a motion for judgment, which fails to give Salemme the opportunity to probe the report for accuracy or cross examine the appraiser on his findings.

Furthermore, the revised § 49-14 mandates a hearing where the court “shall hear the evidence, establish a valuation for the mortgaged property and shall render judgment for the plaintiff for the difference, if any, between such valuation and the plaintiff's claim.”   In the present case, there has been no hearing where the court has the opportunity to make a determination of the value of the property and the remaining debt on the note.   If the court were to grant the present motion it would run counter to the safeguards guaranteed through a hearing and violate the statutes that govern strict foreclosures and deficiency judgments.   Ultimately, Salemme has not been given an opportunity to probe the appraisal report for accuracy, bring his own evidence before the court, cross examine the appraiser or establish his own value to the foreclosed property.

For all of the foregoing reasons, the court will deny the plaintiff's motion for judgment on damages.

HARTMERE, J.

FOOTNOTES

FN1. Section 49-1, in whole, provides:  “The foreclosure of a mortgage is a bar to any further action upon the mortgage debt, note or obligation against the person or persons who are liable for the payment thereof who are made parties to the foreclosure and also against any person or persons upon whom service of process to constitute an action in personam could have been made within this state at the commencement of the foreclosure;  but the foreclosure is not a bar to any further action upon the mortgage debt, note or obligation as to any person liable for the payment thereof upon whom service of process to constitute an action in personam could not have been made within this state at the commencement of the foreclosure.   The judgment in each such case shall state the names of all persons upon whom service of process has been made as herein provided.”.  FN1. Section 49-1, in whole, provides:  “The foreclosure of a mortgage is a bar to any further action upon the mortgage debt, note or obligation against the person or persons who are liable for the payment thereof who are made parties to the foreclosure and also against any person or persons upon whom service of process to constitute an action in personam could have been made within this state at the commencement of the foreclosure;  but the foreclosure is not a bar to any further action upon the mortgage debt, note or obligation as to any person liable for the payment thereof upon whom service of process to constitute an action in personam could not have been made within this state at the commencement of the foreclosure.   The judgment in each such case shall state the names of all persons upon whom service of process has been made as herein provided.”

FN2. Section 49-14(a)-(c) provides:  “(a) At any time within thirty days after the time limited for redemption has expired, any party to a mortgage foreclosure may file a motion seeking a deficiency judgment.   Such motion shall be placed on the short calendar for an evidentiary hearing.   Such hearing shall be held not less than fifteen days following the filing of the motion, except as the court may otherwise order.   At such hearing the court shall hear the evidence, establish a valuation for the mortgaged property and shall render judgment for the plaintiff for the difference, if any, between such valuation and the plaintiff's claim.   The plaintiff in any further action upon the debt, note or obligation, shall recover only the amount of such judgment.“(b) Upon the motion of any party and for good cause shown, the court may refer such motion to a state referee, who shall have and exercise the powers of the court with respect to trial, judgment and appeal in such case.“(c) Any party to a mortgage foreclosure who has moved for an appraisal of property for the purpose of obtaining a deficiency judgment, but has not been granted a deficiency judgment, or has not received full satisfaction of any deficiency judgment obtained subsequent to the filing of such motion, may make a motion to the court for a deficiency judgment as set forth in subsection (a) of this section.   If such motion is made on or before November 1, 1979, such moving party shall be deemed to have complied with all of the requirements of subsection (a) of this section and shall be entitled to the benefit of any deficiency judgment rendered pursuant to said subsection (a).”.  FN2. Section 49-14(a)-(c) provides:  “(a) At any time within thirty days after the time limited for redemption has expired, any party to a mortgage foreclosure may file a motion seeking a deficiency judgment.   Such motion shall be placed on the short calendar for an evidentiary hearing.   Such hearing shall be held not less than fifteen days following the filing of the motion, except as the court may otherwise order.   At such hearing the court shall hear the evidence, establish a valuation for the mortgaged property and shall render judgment for the plaintiff for the difference, if any, between such valuation and the plaintiff's claim.   The plaintiff in any further action upon the debt, note or obligation, shall recover only the amount of such judgment.“(b) Upon the motion of any party and for good cause shown, the court may refer such motion to a state referee, who shall have and exercise the powers of the court with respect to trial, judgment and appeal in such case.“(c) Any party to a mortgage foreclosure who has moved for an appraisal of property for the purpose of obtaining a deficiency judgment, but has not been granted a deficiency judgment, or has not received full satisfaction of any deficiency judgment obtained subsequent to the filing of such motion, may make a motion to the court for a deficiency judgment as set forth in subsection (a) of this section.   If such motion is made on or before November 1, 1979, such moving party shall be deemed to have complied with all of the requirements of subsection (a) of this section and shall be entitled to the benefit of any deficiency judgment rendered pursuant to said subsection (a).”

FN3. Prior to foreclosure, in the prayer for relief, the plaintiff sought a deficiency judgment as a remedy against both defendants.   However, under § 49-14(a) the specified time period for filing a motion seeking a deficiency judgment “[a]t any time within thirty days after the time limited for redemption has expired.”  Practice Book § 23-19(a) provides that “[w]henever a deficiency judgment is claimed in a foreclosure action, the party claiming such judgment shall file with the clerk of the court within the time limited by statute a written motion setting forth the facts relied on as the basis for the judgment, which motion shall be placed on the short calendar for an evidentiary hearing.   Such hearing shall be held not less than fifteen days following the filing of the motion, except as the judicial authority may otherwise order ․” Despite these requirements and time constraints the plaintiff never filed a written motion for a deficiency judgment.   Rather he filed only a motion for judgment of damages.   Even had this been a motion for deficiency judgment it was not filed within the statutory time period required under § 49-14(a)..  FN3. Prior to foreclosure, in the prayer for relief, the plaintiff sought a deficiency judgment as a remedy against both defendants.   However, under § 49-14(a) the specified time period for filing a motion seeking a deficiency judgment “[a]t any time within thirty days after the time limited for redemption has expired.”  Practice Book § 23-19(a) provides that “[w]henever a deficiency judgment is claimed in a foreclosure action, the party claiming such judgment shall file with the clerk of the court within the time limited by statute a written motion setting forth the facts relied on as the basis for the judgment, which motion shall be placed on the short calendar for an evidentiary hearing.   Such hearing shall be held not less than fifteen days following the filing of the motion, except as the judicial authority may otherwise order ․” Despite these requirements and time constraints the plaintiff never filed a written motion for a deficiency judgment.   Rather he filed only a motion for judgment of damages.   Even had this been a motion for deficiency judgment it was not filed within the statutory time period required under § 49-14(a).

Hartmere, Michael, J.