Butler Capital Corp. v. Brian Lynch (2010)

MEMORANDUM OF DECISION RE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

On April 16, 2009, the plaintiff, Butler Capital Corporation, filed a complaint bringing a foreclosure action against Brian Lynch and Donna Lynch, as well as Reynvale Enterprises, LLC (Reynvale).¹  In the complaint, the plaintiff alleges the following.   On November 21, 2007, Reynvale borrowed $175,000 from the plaintiff and executed a promissory note in the original principal amount of $175,000, payable to the plaintiff's order.   On the same date, Brian Lynch and Donna Lynch, personally guaranteed payment of the note by executing separate written guarantee and security agreements.   To secure this debt, on January 2, 2008, Brian Lynch and Donna Lynch mortgaged their property at 212 Chase Road, Thompson, Connecticut and the plaintiff recorded the mortgage in the Thompson land records.   The mortgage was conditioned upon, inter alia, payment of the note.   On March 28, 2008, the parties modified the note and mortgage to increase the principal loan amount to $199,910.   The defendants subsequently failed to make the required monthly payments.   Consequently, pursuant to the provisions of the note and mortgage, the entire balance of the loan became due and remains unpaid.

On June 2, 2009, the court, Potter, J., granted the plaintiff's motion for default against the defendants for failure to disclose a defense.   The court, Riley, J., on April 5, 2010, granted the defendants' motion to open default and on April 8, 2010, the defendants filed an answer and special defense.   In their answer, the defendants admit that Reynvale executed a promissory note payable to the plaintiff's order for the principal sum of $175,000 and that Brian Lynch and Donna Lynch personally guaranteed payment of the note by executing separate written agreements.   The defendants also admit to secure this debt, Brian Lynch and Donna Lynch mortgaged their property at 212 Chase Road to the plaintiff and that the mortgage was conditioned upon payment of the note.   Finally, the defendants admit that the note and mortgage were later modified to increase the loan amount to $199,910.   As to all other allegations in the complaint, the defendants leave the plaintiff to its proof.   By way of special defense, the defendants allege that the plaintiff previously brought the same claim in the circuit court of Maryland for Baltimore county and on October 20, 2009, the court entered a judgment on the note against them.

The plaintiffs filed the present motion for summary judgment on July 21, 2010, as to liability only.   The motion is accompanied by a memorandum of law.   In support of its motion, the plaintiff submits the following evidence:  (1) an affidavit of Robert E. Polak, senior vice president for the plaintiff;  (2) a copy of the promissory note and mortgage;  (3) a copy of the guarantees by Brian Lynch and Donna Lynch and (4) a copy of the modification agreement.   On August 25, 2010, the defendants filed a memorandum of law in opposition to the motion for summary judgment.   In support of their memorandum of law, the defendants submit a copy of an order from case 03-C-09-12560 in the circuit court of Maryland for Baltimore county.

“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 moving for summary judgment has the burden of showing the absence of any genuine issue of material fact and that the party is, therefore, entitled to judgment as a matter of law.”  (Internal quotation marks omitted.)  Weiss v. Weiss, 297 Conn. 446, 458, 998 A.2d 766 (2010).

“[T]he ‘genuine issue’ aspect of summary judgment requires the parties to bring forward before trial evidentiary facts, or substantial evidence outside the pleadings, from which the material facts alleged in the pleadings can warrantably be inferred ․ A material fact has been defined adequately and simply as a fact which will make a difference in the result of the case.”   (Citation omitted;  internal quotation marks omitted.)  Buell Industries, Inc. v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556, 791 A.2d 489 (2002).  “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.”  (Internal quotation marks omitted.)  Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 11, 938 A.2d 576 (2008).

“Once the moving party has presented evidence in support of the motion for summary judgment, the opposing party must present evidence that demonstrates the existence of some disputed factual issue ․ It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue.   Mere assertions of fact ․ are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court ․” (Internal quotation marks omitted.)  Byrne v. Burke, 112 Conn.App. 262, 267-68, 962 A.2d 825, cert. denied, 290 Conn. 923, 966 A.2d 235 (2009).   When a party moves for summary judgment “and there [are] no contradictory affidavits, the court properly decide[s] the motion by looking only to the sufficiency of the [movant's] affidavits and other proof.”   Heyman Associates No. 1 v. Ins. Co. of Pennsylvania, 231 Conn. 756, 795, 653 A.2d 122 (1995).

“A summary judgment, interlocutory in character, may be rendered on the issue of liability alone, although there is a genuine issue as to damages ․” Practice Book § 17-50.   The well established rule is “that a summary judgment rendered upon the issue of liability only, without deciding damages, is not a final judgment from which an appeal lies.”  Balf Co. v. Spera Construction Co., 222 Conn. 211, 212, 608 A.2d 682 (1992).  “[J]udgment is not completed until damages have been assessed.”  Tureck v. George, 44 Conn.App. 154, 157, 687 A.2d 1309, cert. denied, 240 Conn. 914, 691 A.2d 1080 (1997).

The plaintiff argues that there is no genuine issue of material fact with respect to the defendants' liability and it is entitled to judgment as a matter of law.   Specifically, the plaintiff contends that it has established a prima facie case for mortgage foreclosure against the defendants because its evidence demonstrates that it is the owner of the note and mortgage, and that the defendants have defaulted under the terms of the note.   In their memorandum of law, the defendants' make no argument to dispute the plaintiff's contention that it has satisfied the elements of a prima facie case for mortgage foreclosure and admit that the plaintiff was within its rights to initiate this action for foreclosure.   The defendants allege by way of special defense, however, that the doctrine of res judicata precludes the plaintiff from foreclosing on the mortgage.

“In a mortgage foreclosure action, [t]o make out its prima facie case, [the foreclosing party] ha[s] to prove by a preponderance of the evidence that it was the owner of the note and mortgage and that [the mortgagee] ha[s] defaulted on the note.”  (Internal quotation marks omitted.)  Franklin Credit Management Corp. v. Nicholas, 73 Conn.App. 830, 838, 812 A.2d 51 (2002), cert. denied, 262 Conn. 937, 815 A.2d 163 (2003).  “Furthermore, the foreclosing party must demonstrate that all conditions precedent to foreclosure, as mandated by the note and mortgage, have been satisfied.   See Bank of America, FSB v. Hanlon, 65 Conn.App. 577, 581, 783 A.2d 88 (2001).”  Bank of New York v. Conway, 50 Conn.Sup. 189, 194, 916 A.2d 130 (2006).

In the present case, the plaintiff's evidence, as well as the defendants' admissions in their answer establish that the plaintiff is the holder of the note and mortgage executed by the defendants.   Moreover, the defendants do not refute the plaintiff's allegations and admit in their memorandum of law to defaulting on their payment obligations pursuant to the terms of the note and mortgage.   As a result, the plaintiff has sufficiently shown there is no genuine issue of material fact with respect to its ownership of the note and mortgage and that the defendants have defaulted on the note.   The plaintiff, therefore, has established a prima facie case for foreclosure.

“When a complaint and supporting affidavits establish an undisputed prima facie case for a foreclosure action, a court must only determine whether [a] special defense is legally sufficient before granting summary judgment.”   LaSalle National Bank v. Shook, Superior Court, judicial district of New London, Docket No. 549266 (July 13, 2000, Martin, J.), aff'd, 67 Conn.App. 93, 787 A.2d 32 (2001).  “If a plaintiff in a foreclosure action has shown that it is entitled to foreclose, then the burden is on the defendant to produce evidence supporting its special defenses in order to create a genuine issue of material fact ․” WM Specialty Mortgage, LLC v. Brandt, Superior Court, judicial district of Ansonia-Milford, Docket No. CV 09 5001157 (February 10, 2009, Moran, J.).

The defendants raise the special defense of res judicata and assert that the plaintiff has already obtained a judgment against them on the note and guarantees in Maryland.   The defendants contend that their liabilities on the note and guarantees have therefore merged with the judgment and the plaintiff's rights on the instruments were extinguished by electing to first obtain the Maryland judgment.   The plaintiff responds that the mortgage secures the underlying debt, not the note and guarantees, and maintains that res judicata does not bar this foreclosure action because the Maryland judgment was on the note, rather than the debt.   Therefore, it is entitled to pursue the present action to collect the remaining debt by foreclosing on the mortgage.

“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 ․” (Internal quotation marks omitted.)  New England Estates, LLC v. Branford, 294 Conn. 817, 842, 988 A.2d 229 (2010) “[T]he elements of res judicata are (1) a final judgment on the merits in an earlier suit, (2) sufficient identicality between the causes of action asserted in the earlier and later suits, and (3) sufficient identicality between the parties in the two suits.”   HSBC Bank USA v. Palacios, Superior Court, judicial district of Windham, Docket No. CV 08 5002566 (July 16, 2010, Potter, J.T.R.).

In the present case, the defendants have submitted a copy of an order from the circuit court of Maryland for Baltimore County, in support of their special defense of res judicata.   Although the defendants assert in their memorandum of law, that the plaintiff has already obtained a judgment on the subject note and guarantee agreements in the amount of $278,991.50, the copy of the Maryland order does not sustain this assertion.   The order simply states, “a judgment by confession is entered in favor of the Plaintiff, Butler Capital Corporation, against the Defendants, Reynvale Enterprises, LLC t/a Lynch's Dry Cleaning, Brian R. Lynch and Donna R. Lynch, jointly and severally, for the principal sum of $199,146.97, and pre-judgment interest of $23,946.23, for a total of $223,093.20, plus attorneys fees of $55,773.30, and the costs of this suit which currently total $125.”   The order does not identify the underlying cause of action, or even the basis for the judgment.   Therefore, the defendants have not met their burden to produce evidence supporting their special defense of res judicata.

Even assuming, agruendo, that the Maryland judgment entered against the defendants is on the note and guarantee agreements, res judicata does not bar the present action.   There is a “fundamental difference between a promissory note and a mortgage securing the note.”  Ankerman v. Mancuso, 271 Conn. 772, 777, 860 A.2d 244 (2004).  “A note and a mortgage given to secure it are separate instruments, executed for different purposes ․ A promissory note is simply a written contract for the payment of money ․ A mortgage, however, is [a] conveyance of title to property that is given as security for the payment of a debt ․

“A promissory note and a mortgage securing the note thus give rise to separate causes of action.  [I]n this [s]tate action for foreclosure of the mortgage and upon the note are regarded and treated, in practice, as separate and distinct causes of action ․” (Citations omitted;  internal quotation marks omitted).   Id., 777-78.  “[T]he plaintiff is entitled to pursue its remedy at law on the notes, or to pursue its remedy in equity upon the mortgage, or to pursue both.”  (Internal quotation marks omitted.)  New Milford Savings Bank v. Jajer, 244 Conn. 251, 266-67, 708 A.2d 1378 (1998).

“The only restriction on the mortgagee's election of remedies is contained in General Statutes § 49-1, which 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 ․” (Internal quotation marks omitted.)   Federal Deposit Ins. Corp. v. Voll, 38 Conn.App. 198, 206, 660 A.2d 358, cert. denied, 235 Conn. 903, 665 A.2d 901 (1995).

“If, by an action solely on the note, the owner secures full payment on the debt, his right to enforce the mortgage is gone, or, if he secures payment in part, he can enforce the mortgage only to secure the payment of the balance ․ Where such a procedure is followed, the extent of the recovery, however, should not in any event exceed the amount of the debt.  Id.” (Citations omitted;  internal quotation marks omitted.)  Hartford National Bank & Trust Co. v. Kotkin, 185 Conn. 579, 581-82, 441 A.2d 593 (1981).   Therefore, “the right to enforce the mortgage is barred only if the debt is paid ․ If the debt is not paid, the property secured may be appropriated to satisfy the mortgage debt.”   Vaccaro v. Snyder, the judicial district of New Haven at Meriden, Docket No. CV 90 0235646 (March 15, 1991, Burns, J.) [3 Conn. L. Rptr. 339];  see also Chapman Lumber, Inc. v. Tager, 288 Conn. 69, 112, 952 A.2d 1 (2008) (“Double recovery is foreclosed by the rule that only one satisfaction may be obtained for a loss that is the subject of two or more judgments”).

The plaintiff's evidence in this case alleges that the debt has not been paid.   The defendants do not assert otherwise and because the plaintiff may also institute a separate action on the mortgage to secure payment of the remaining debt, an earlier judgment on the note does not bar this foreclosure action.   The defendant's special defense of res judicata is therefore legally insufficient to defeat the plaintiff's motion for summary judgment and no genuine issue of material fact remains.

For the foregoing reasons, the plaintiff's motion for summary judgment as to liability is granted.

THE COURT

POTTER, J.T.R.

FOOTNOTES

FN1. In this memorandum, Reynvale Enterprises, LLC, Brian Lynch and Donna Lynch will be referred to collectively as “the defendants.”.  FN1. In this memorandum, Reynvale Enterprises, LLC, Brian Lynch and Donna Lynch will be referred to collectively as “the defendants.”

Potter, Russell F., J.T.R.