People's United Bank v. Edward Kudej (2011)

MEMORANDUM OF DECISION

The plaintiff, People's United Bank d/b/a the Bank of Western Massachusetts, filed this application for prejudgment remedy against the defendant, Edward Kudej, on May 24, 2010.¹  The application alleges that there is probable cause that a judgment will enter in favor of the plaintiff and against the defendant in an amount of at least $115,000 and that the defendant has no valid defenses, counterclaims or set-offs that can be made with respect to the amount claimed.   The plaintiff seeks to secure this probable judgment by attaching various assets of the defendant.   Specifically, the plaintiff claims to hold a promissory note that was issued to Advanced Back & Neck Center of Massachusetts, P.C. (AB & N) and a guarantee executed by the defendant covering all indebtedness, obligations and liabilities of AB & N. On February 5, 2007, AB & N executed an assumption agreement wherein the plaintiff agreed to the assumption of AB & N's debts, including the note, by Advanced Medical Group, Inc. (AMG).  This assumption did not release AB & N from liability.   The note subsequently fell into default and the plaintiff, after determining the assets of AB & N securing the note were of inconsequential value, now seeks to recover from the defendant based upon the guaranty.

After filing an appearance on June 18, 2010, the defendant submitted a memorandum in opposition to the application on August 13, 2010, arguing that under Massachusetts law ² the defendant may still prevail on legal and equitable defenses even where, as here, the guarantee includes a waiver clause.   The defendant specifically argues that the plaintiff did not act in a commercially reasonable manner because it allowed AB & N to transfer its debts and obligations to AMG without the involvement of the defendant, whom the bank knew was a principal of AB & N.³ The defendant further argues it has the right to challenge the plaintiff's disposition of AB & N's collateral, which took place at the time of the 2007 assumption, and that if the defendant had learned of the 2007 assumption agreement he could have ensured AB & N assets were used to pay the note.

The matter was heard in open court on September 29, 2010.   In response to the court's order, the defendant filed a supplemental memorandum in opposition on October 6, 2010, to which the plaintiff replied with an additional memorandum in support on October 20, 2010.

“The purpose of the prejudgment remedy of attachment is security for the satisfaction of the plaintiff's judgment, should he obtain one ․ It is primarily designed to forestall any dissipation of assets by the defendant and to bring [those assets] into the custody of the law to be held as security for the satisfaction of such judgment as the plaintiff may recover ․ The adjudication made by the court on [an] application for a prejudgment remedy is not part of the proceedings ultimately to decide the validity and merits of the plaintiff's cause of action.   It is independent, of and collateral thereto ․” (Emphasis in original;  internal quotation marks omitted.)   Marlin Broadcasting, LLC v. Law Office of Kent Avery, LLC., 101 Conn.App. 638, 646-47, 922 A.2d 1131 (2007).

“A prejudgment remedy means any remedy or combination of remedies that enables a person by way of attachment, foreign attachment, garnishment or replevin to deprive the defendant in a civil action of, or affect the use, possession or enjoyment by such defendant of, his property prior to final judgment ․ General Statutes § 52-278a(d).  A prejudgment remedy is available upon a finding by the court that there is probable cause that a judgment in the amount of the prejudgment remedy sought, or in an amount greater than the amount of the prejudgment remedy sought, taking into account any defenses, counterclaims or set-offs, will be rendered in the matter in favor of the plaintiff ․ General Statutes § 52-278d(a)(1) ․ Proof of probable cause as a condition of obtaining a prejudgment remedy is not as demanding as proof by a fair preponderance of the evidence ․ The legal idea of probable cause is a bona fide belief in the existence of the facts essential under the law for the action and such as would warrant a man of ordinary caution, prudence and judgment, under the circumstances, in entertaining it ․ Probable cause is a flexible common sense standard.   It does not demand that a belief be correct or more likely true than false.”  (Citations omitted;  internal quotation marks omitted.)  TES Franchising, LLC v. Feldman, 286 Conn. 132, 136-37, 943 A.2d 406 (2008).

“[A] hearing in probable cause is not intended to be a full scale trial on the merits of the [moving party's] claim.   The [moving party] does not have to establish that he will prevail, only that there is probable cause to sustain the validity of the claim ․ The court's role in such a hearing is to determine probable success by weighing probabilities ․” (Internal quotation marks omitted.)  Spilke v. Spilke, 116 Conn.App. 590, 593-94 n.6, 976 A.2d 69 (2009).

“At a probable cause hearing on a prejudgment remedy, a trial court may properly consider all evidence presented, including testimony of witnesses, documentary evidence, and affidavits.”  Fleet Bank of Connecticut v. Dowling, 28 Conn.App. 221, 610 A.2d 707, cert. granted on other grounds, 223 Conn. 921, 614 A.2d 821 (1992).

The relevant evidence submitted on this issue includes:  (I) a promissory note to pay AB & N $100,000 by the Bank of Western Massachusetts, signed on behalf of AB & N by Michael Spagnoli as president and the defendant as vice president and dated July 7, 1998;  (ii) a “guarantee of payment and performance obligations” of AB & N to the Bank of Western Massachusetts, signed by the defendant and dated August 20, 1995;  (iii) an assignment of the note and guarantee to People's United Bank, dated February 5, 2007, and signed by Michael Spagnoli on behalf of AB & N and AMC and by Kevin Bowler on behalf of the Bank of Western Massachusetts;  (iv) the affidavit of Kevin Bowler, filed May 24, 2010;  and (v) the testimony of Kevin Bowler, given on September 29, 2010.

Based on the aforementioned evidence, the court finds that there is probable cause that a judgment in the amount of the prejudgment remedy sought will be rendered in favor of the plaintiff.   Through its submission of the note, the guarantee, the assignment, and the testimony and affidavit of Kevin Bowler, the plaintiff has established “the existence of facts essential under the law” to enforce the note and that it may do so against the defendant as its guarantor.  TES Franchising, LLC v. Feldman, supra, 286 Conn. 37.   Furthermore, the affidavit and testimony of Kevin Bowler are sufficient to establish probable cause for the amount of the debt and that the Bank of Western Massachusetts merged into People's United Bank.

The defenses set forth by the defendant are insufficient to overcome the court's finding of probable cause.   The defendant's first defense, that he was prejudiced because of the plaintiff's delay in seeking payment, is unpersuasive considering that he signed a guarantee that “unconditionally guarantees ․ all indebtedness, obligations and liabilities, direct or indirect, matured or unmatured, primary or secondary, certain or contingent, of [AB & N] now or hereafter owing or incurred ․ This Guarantee is an absolute, unconditional and continuing guarantee of the full and punctual payment and performance ․” (Emphasis added).   By agreeing to a guarantee with such broad temporal language, the defendant could not reasonably be surprised that the plaintiff seeks to recover on the unpaid note, even after the passage of fifteen years.

Likewise the defendant's argument, that the plaintiff acted in a commercially unreasonable manner when it allowed AMG to assume the AB & N note without the defendant's involvement is not persuasive.   The defendant agreed to guarantee “all indebtedness ․ direct or indirect ․ primary or secondary ․ now or hereafter owing or incurred ․” Moreover, the guarantee expressly states that the plaintiff “shall be at liberty, without giving notice to or obtaining the assent of the guarantor ․ to deal with the Customer and with any other party who now is or after the date hereof becomes liable in any manner for any of the obligations, and ․ gives the bank full authority in its sole discretion to ․ extend credit;  make loans and afford other financial accommodations to the customer ․ vary the terms and grant extensions or renewals ․” In light of these provisions, AB & N's assignment of its obligation to AMG did not require that any notice be provided to the plaintiff and has no effect on the defendant's agreement to guarantee AB & N's promissory note.

The defendant's final argument is also unpersuasive.   The defendant asserts that he may challenge the plaintiff's 2007 disposition of AB & N's collateral, which the plaintiff determined was of little or no value, because this right is not waiveable under Massachusetts law.   This argument is undermined by the terms of the guarantee, which states that it is “an absolute, unconditional and continuing guarantee ․ and is in no way conditioned upon any requirement that the Bank first attempt to collect ․ any security or other means of obtaining payment ․” This provision allows the plaintiff to seek recovery from the guarantor/defendant without first redeeming any security or collateral.⁴  Having agreed to this provision, the defendant's right to challenge the disposition of the collateral appears unrelated to the plaintiff's ability to seek recovery of the debt guaranteed by the defendant.   Moreover, the terms of the guarantee provide that the plaintiff need not make any “disposition” of the collateral before seeking to recover under the guarantee.   Accordingly, the commercial reasonableness of any purported disposition of the collateral does not implicate the plaintiff's ability to enforce the guarantee.⁵

After considering the evidence and the defendant's defenses, the court finds that there is probably cause that the plaintiff will succeed in its claims.   For the foregoing reasons, the application for prejudgment remedy is granted.

OWENS, J.T.R.

FOOTNOTES

FN1. The following documents were independently filed with the application for prejudgment remedy:  a notice of the application for prejudgment remedy;  a proposed writ, summons and complaint;  a pre-service order for hearing and notice;  a summons for hearing;  a motion for disclosure of assets;  and a supporting affidavit.In addition, the following two documents were attached as exhibits to the proposed writ, summons and complaint:  a promissory note for the principal sum of $100,000, dated July 7, 1998, listing Advanced Back & Neck Center, P.C. as borrower and the Bank of Western Massachusetts as lender;  and a guarantee, dated August 20, 1995, to the Bank of Western Massachusetts signed by Dr. Edward Kudej..  FN1. The following documents were independently filed with the application for prejudgment remedy:  a notice of the application for prejudgment remedy;  a proposed writ, summons and complaint;  a pre-service order for hearing and notice;  a summons for hearing;  a motion for disclosure of assets;  and a supporting affidavit.In addition, the following two documents were attached as exhibits to the proposed writ, summons and complaint:  a promissory note for the principal sum of $100,000, dated July 7, 1998, listing Advanced Back & Neck Center, P.C. as borrower and the Bank of Western Massachusetts as lender;  and a guarantee, dated August 20, 1995, to the Bank of Western Massachusetts signed by Dr. Edward Kudej.

FN2. The guarantee states that it is governed by Massachusetts law..  FN2. The guarantee states that it is governed by Massachusetts law.

FN3. The defendant's memorandum in opposition attached as an exhibit an assumption agreement dated February 5, 2007 between the plaintiff, AB & N, AMG, Chiromed and Associates, Inc. (Chiromed) and Michael A. Spagnoli.   Under the terms of the agreement, AMG assumed the debt owed to the plaintiff on outstanding promissory notes held by the other parties to the assignment.   The agreement is signed by Spagnoli on behalf of AB & N, AMG, Chiromed and Spagnoli.   Spagnoli is identified as President of AB & N, AMG and Chiromed..  FN3. The defendant's memorandum in opposition attached as an exhibit an assumption agreement dated February 5, 2007 between the plaintiff, AB & N, AMG, Chiromed and Associates, Inc. (Chiromed) and Michael A. Spagnoli.   Under the terms of the agreement, AMG assumed the debt owed to the plaintiff on outstanding promissory notes held by the other parties to the assignment.   The agreement is signed by Spagnoli on behalf of AB & N, AMG, Chiromed and Spagnoli.   Spagnoli is identified as President of AB & N, AMG and Chiromed.

FN4. All parties have stipulated that the plaintiff did not ever take possession of the collateral or conduct a sale thereof under the 1995 Security Agreement because the plaintiff deemed the collateral to be of inconsequential value..  FN4. All parties have stipulated that the plaintiff did not ever take possession of the collateral or conduct a sale thereof under the 1995 Security Agreement because the plaintiff deemed the collateral to be of inconsequential value.

FN5. The court further notes that even were it to accept the validity of the defendant's claim that it may challenge the plaintiff's disposition of its collateral as commercially unreasonable, the defendant has failed to state or provide evidence attaching a monetary value to the collateral at issue.   Without any monetary value attached to the collateral, the court cannot grant any set off and reduce the amount requested under this application..  FN5. The court further notes that even were it to accept the validity of the defendant's claim that it may challenge the plaintiff's disposition of its collateral as commercially unreasonable, the defendant has failed to state or provide evidence attaching a monetary value to the collateral at issue.   Without any monetary value attached to the collateral, the court cannot grant any set off and reduce the amount requested under this application.

Owens, Howard T., J.T.R.