TD v. LLC (2012)

Caption Date:

MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT

FACTS

On November 12, 2010, the plaintiff, TD Bank, N.A., submitted a two-count complaint against the defendants, School Street Plaza, LLC (School Street) and Samuel Brach (Brach).   The complaint sounds in a foreclosure action against School Street in count one and against Brach as guarantor in count two.

In count one, the plaintiff alleges the following relevant facts.   On January 30, 2008, School Street made out a promissory note to the plaintiff in which it promised to pay the sum of fourteen million four hundred thousand ($14,400,000) dollars.   Also on January 30, 2008, School Street mortgaged all of its rights, title and interest in the subject property, identified as 265 Ellington Road, East Hartford, Connecticut, to the plaintiff to secure the note.   As further security on the note, School Street granted a assignment of leases and rentals to the plaintiff.   School Street has defaulted under the obligations of the note and mortgage and the plaintiff has exercised its option to declare the entire balance due on the note.   Despite due demand, School Street has failed, refused and neglected to pay the balance due and owing.   The plaintiff remains the holder and owner of the note, mortgage and collateral assignment of leases and rentals, while School Street remains owner of the subject property.

In count two, the plaintiff incorporates the allegations of count one and alleges the following additional relevant facts.   On January 30, 2008, Brach unconditionally guaranteed the prompt payment and performance from or by School Street of any obligations as memorialized by the note, mortgage and collateral assignment of leases and rentals.   Despite due demand, Brach has failed, refused and neglected to pay the balance due and owing under the note.

School Street filed an answer and four special defenses which sounded in conversion, intentional interference with a contract, unclean hands and impaired property value.   Brach also filed an answer and two special defenses which set forth the same arguments as set forth in School Street's special defenses.

The plaintiff subsequently filed the present motion for summary judgment.

DISCUSSION

“Summary judgment is a method of resolving litigation when 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 ․ The motion for summary judgment is designed to eliminate the delay and expense of litigating an issue when there is no real issue to be tried.”  (Citations omitted.)  Wilson v. New Haven, 213 Conn. 277, 279, 567 A.2d 829 (1989).  “However, since litigants ordinarily have a constitutional right to have issues of fact decided by a jury ․ the moving party for summary judgment is held to a strict standard ․ of demonstrating his entitlement to summary judgment.”  (Citation omitted;  internal quotation marks omitted.)   Kakadelis v. DeFabritis, 191 Conn. 276, 282, 464 A.2d 57 (1983).   “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.”  (Internal quotation marks omitted.)  Sherman v. Ronco, 294 Conn. 548, 553–54, 985 A.2d 1042 (2010).  “Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically.”   (Internal quotation marks omitted.)   Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252–53, 990 A.2d 206 (2010).

“[S]ummary judgment is appropriate only if a fair and reasonable person could conclude only one way ․ [A] summary disposition ․ should be on evidence which a jury would not be at liberty to disbelieve and which would require a directed verdict for the moving party ․ [A] directed verdict may be rendered only where, on the evidence viewed in the light most favorable to the nonmovant, the trier of fact could not reasonably reach any other conclusion than that embodied in the verdict as directed.”  (Citations omitted;  emphasis in original;  internal quotation marks omitted.)  Dugan v. Mobile Medical Testing Service, Inc., 265 Conn. 791, 815, 830 A.2d 752 (2003).

“[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 facts at issue [in the context of summary judgment] are those alleged in the pleadings.”  (Internal quotation marks omitted.)  Keller v. Beckenstein, 117 Conn.App. 550, 557, 979 A.2d 1055, cert. denied, 294 Conn. 913, 983 A.2d 274 (2009).  “ ‘Issue of fact’ encompasses not only evidentiary facts in issue but also questions as to how the trier would characterize such evidentiary facts and what inferences and conclusion it would draw from them.”  United Oil Co. v. Urban Development Commission, 158 Conn. 362, 379, 260 A.2d 596 (1969).  “In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather determine whether any such issues exist.”  Nolan v. Barkowski, 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.   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 ․ 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 under Practice Book § [17–45].”  (Internal quotation marks omitted.)  Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 10–11, 938 A.2d 596 (2008).

I

LIABILITY AS TO SCHOOL STREET

In the motion for summary judgment, the plaintiff argues that there are no genuine issues of material fact that the note and mortgage are valid instruments;  that School Street defaulted on the note;  that the plaintiff sent School Street a notice of default;  and that School Street failed to and continues to fail to cure the default.

The relevant determinations to be made at this time are whether the plaintiff has properly set forth its prima facie case for foreclosure, whether the terms of the assignment grants the plaintiff the right to collect rents, and whether the assignment has any legal effect on the plaintiff's ability to set forth its prima facie foreclosure case.

“In a mortgage foreclosure action, [t]o make out its prima facie case, [the foreclosing party has] to prove by a preponderance of the evidence that it [is] the owner of the note and mortgage and that [the mortgagor has] defaulted on the note ․ Furthermore, the foreclosing party must demonstrate that all conditions precedent to foreclosure, as mandated by the note and mortgage, have been satisfied.”  (Citation omitted;  internal quotation marks omitted.)   Bank of New York v. Conway, 50 Conn.Sup. 189, 193–94, 916 A.2d 130 (2006).   “[A] foreclosure complaint must contain certain allegations regarding the nature of the interest being foreclosed.   These should include allegations relating to the parties and the terms of the operative instruments, the nature of the default giving rise to the right of foreclosure, the amount currently due and owing, the name of the record owner and of the party in possession, and appropriate prayers for relief ․ The terms of the mortgage determine the necessary elements of the plaintiff's prima facie case.”  (Citation omitted;  internal quotation marks omitted.)  New England Savings Bank v. Bedford Realty Corp., 246 Conn. 594, 610–11, 717 A.2d 713 (1998).

In the present case, the plaintiff argues that it is the holder of a note made by School Street.   To support this position, the plaintiff submits the Bronson affidavit which incorporates by reference a copy of the note at issue.   The language of the note demonstrates that it is made out to the plaintiff and that School Street is the maker.   The plaintiff also argues that School Street mortgaged the subject property to the plaintiff to secure the note that School Street made out to the plaintiff.   The Bronson affidavit incorporates by reference a copy of the mortgage at issue.   The language of the mortgage demonstrates that School Street mortgaged the subject property to the plaintiff to secure the note that School Street made out to the plaintiff.   The plaintiff further argues that School Street defaulted on the note.   In support of this position, the plaintiff submits the Bronson affidavit which attests that School Street defaulted on the note when it failed to make the monthly payment due on August 10, 2010, and the monthly payment due every month thereafter.   As further support, the Bronson affidavit incorporates by reference a copy of the notice of default that the plaintiff sent to Brach, guarantor for School Street, and the notice of default by School Street that directs all commercial tenants of the subject property to send all rents to the plaintiff instead of sending the rents to School Street.   The evidentiary support provided by the plaintiff demonstrates that School Street made a note out to the plaintiff, that School Street mortgaged the subject property to the plaintiff to secure the note and that School Street subsequently defaulted on the note by not making the August 2010 payment or any subsequent payments.   Therefore, the court concludes that the plaintiff properly set forth its prima facie foreclosure case by demonstrating that it is the owner of the note and mortgage and that School Street defaulted on the note.

“An assignment is a contract between the assignor and the assignee, and is interpreted or construed according to rules of contract construction ․ [W]here there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law.”   Schoonmaker v. Lawrence Brunoli, Inc., 265 Conn. 210, 227, 828 A.2d 64 (2003).

In the present case, the plaintiff argues that the terms of the assignment granted the plaintiff the right to collect rents from the tenants of the subject property.   In support of this position, the plaintiff submits the Bronson affidavit in which Bronson attests that School Street assigned the right to collect rents to the plaintiff.   In further support, the plaintiff attaches a copy of the assignment, incorporated by reference.   The language in the assignment demonstrates that School Street assigned to the plaintiff all of the interests that School Street held in the subject property as landlord.   Among the interests assigned, the plaintiff received the right to “all rents, income and profits arising from the leases” on the subject property “upon or at any time after the occurrence of an Event of Default.”   The assignment also demonstrates that the assignment was made to secure payment of the note that School Street made out to the plaintiff.

Furthermore, the assignment states that:  “Nothing herein contained and no act done or omitted by the [plaintiff] pursuant to the powers and rights granted it herein shall be deemed to be a waiver by the [plaintiff] of the rights and remedies under the Note, the Mortgage or any other Loan Document, but this Assignment is made and accepted without prejudice to any of the rights and remedies possessed by the [plaintiff] under the terms thereof.” ¹  Pursuant to Schoonmaker v. Lawrence Brunoli, Inc., the terms of the assignment govern the relationship and remedies available to the parties.  Id. The quoted language demonstrates that the parties did not intend for the plaintiff's exercise of its rights granted in the assignment to have a legal effect upon the plaintiff's ability to set forth a foreclosure action on the note.   The assignment prohibits School Street from contesting the plaintiff's institution of a foreclosure action on the basis any of the assignment terms.   Therefore, the court concludes that the plaintiff has the right to collect rents and that such collection of rents has no legal effect upon the plaintiff's ability to set forth its prima facie foreclosure case.  “Although the party seeking summary judgment has the burden of showing the nonexistence of any material fact ․ it [is] incumbent upon the party opposing summary judgment to establish a factual predicate from which it can be determined, as a matter of law, that a genuine issue of material fact exists.”  (Internal quotation marks omitted.)  Union Trust Company v. Jackson, 42 Conn.App. 413, 417, 679 A.2d 421 (1996).  “[S]ince a single valid [special] defense may defeat recovery, claimant's motion for summary judgment should be denied when any defense presents significant fact issues that should be tried.”  (Internal quotation marks omitted.)  Id. “[T]he purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action ․ A valid special defense at law to a foreclosure proceeding must be legally sufficient and address the making, validity or enforcement of the mortgage, the note or both.”  (Internal quotation marks omitted.)  Emigrant Mortgage Co. v. D'Agostino, 94 Conn.App. 793, 802, 896 A.2d 812, cert. denied, 278 Conn. 919, 901 A.2d 43 (2006).  “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.”   See LaSalle National Bank v. Shook, Superior Court, judicial district of New London, Docket No. CV 549266 (July 13, 2000, Martin, J.), aff'd, 67 Conn.App. 93, 787 A.2d 32 (2001).

In its answer dated December 14, 2010, School Street alleged four special defenses based upon the plaintiff's collection of rents from tenants of the subject property after School Street defaulted on the note.   School Street alleges the following facts which serve as the factual basis for three special defenses:  conversion, intentional interference with a contract and unclean hands.   School Street alleges that the plaintiff demanded rents from tenants of the subject property;  that School Street protested such collection, but the plaintiff continued and continues to collect the rents;  and that the plaintiff refused or failed to account to School Street for the rents collected.   For its precipitous decline of property value special defense, School Street incorporates the above allegations and additionally alleges that the plaintiff's actions have “made it more difficult if not impossible” to find replacement tenants for the subject property.

The factual allegations, upon which School Street bases each of its special defenses, occurred after School Street defaulted on the note.   School Street's allegations only address the plaintiff's actions as they pertain to the plaintiff's rights under the assignment.   School Street's allegations do not allege any facts that would put into question the making, validity or enforcement of the note or mortgage.   Because the factual allegations in School Street's special defenses do not address the making, validity or enforcement of either the mortgage or the note, School Street's special defenses are not valid special defenses to the plaintiff's foreclosure action.   Thus, the court concludes that the School Street's special defenses do not serve as a bar to the plaintiff setting forth its prima facie foreclosure case.   Therefore, the plaintiff is entitled to summary judgment as a matter of law on count one.

II

LIABILITY AS TO BRACH

“[A] guaranty is a promise to answer for the debt, default or miscarriage of another ․ It is simply a species of contract ․ More specifically, a guaranty is an undertaking by a guarantor to answer for payment of some debt, or performance of some contract, of another person in the event of default ․ Where the guaranty is absolute—that is, subject to no condition except the default of the principal debtor ․ the guarantor is primarily liable for the debt.   In that event, the creditor may maintain an action against the guarantor immediately upon default of the debtor, without demand upon the debtor for payment, and without first proceeding against the debtor ․” (Citations omitted;  internal quotations omitted.)   TD Bank, N.A. v. Northern Expansion, LLC, Superior Court, judicial district of Waterbury, Docket No. CV 09 6001534 (November 22, 2010, Matasavage, J.).   Although no appellate authority addresses this issue, several Superior Courts have held that “[t]o establish a prima facie case of entitlement to recover on [a][g]uaranty ․ [the] plaintiff must show (1) that it is owed a debt from a third party;  (2) that [the] defendant made a guaranty of payment of the debt;  and (3) that the debt has not been paid by either the third party or [the] defendant ․” (Citations omitted;  internal quotation marks omitted.)  Id.

In its motion for summary judgment, the plaintiff argues that there are no genuine issues of material fact that School Street defaulted on the note;  that Brach, as guarantor on the note, was obligated to cure any default by School Street;  and that Brach has failed and continues to fail to cure the default on the note.   In support of its position, the plaintiff submits the Bronson affidavit which incorporates by reference a copy of the guaranty, a copy of the notice of default addressed to Brach, and a copy of the demand for payment addressed to Brach.   In its opposition, Brach argues that ambiguity in the language of the guaranty raises a genuine issue of material fact as to the intentions of the parties regarding the extent of Brach's liability as guarantor.   Brach's supporting documents consist of Dana Vient's affidavit and Brach's affidavit.

“The plaintiff, as the moving party, must first establish that there is no genuine issues that it is owed a debt from the borrower.  [T]he liability of the guarantor is based on the liability of the debtor ․ [S]ince the guaranty contract secures a principal or primary obligation, the liability of the guarantor also depends upon a construction and application of the primary contract.”  (Citation omitted;  internal quotation marks omitted.)  Id.

In the present case, the plaintiff argues that School Street made out a note to the plaintiff and subsequently defaulted on the note.   In support of this position, the plaintiff submits the Bronson affidavit.   Bronson attests that School Street made out a note to the plaintiff and incorporates a copy of the note into his affidavit by reference.   The note demonstrates that School Street promised to pay the plaintiff a debt of fourteen million four hundred thousand dollars.   Bronson then attests that School Street defaulted on the note by failing to make the required monthly payments and further failed to cure the default.   Bronson incorporates the notice of default into the affidavit by reference.   The evidence demonstrates that School Street owes the plaintiff this debt.   Brach provides no documentary evidence to counter the plaintiff's evidence as to School Street owing the plaintiff this debt.   Therefore, there is no genuine issue of material fact that School Street owes the plaintiff this debt.

“The plaintiff must also establish that there is no genuine issue that the defendant made a guaranty of payment of the debt that is owed by the borrower.   As the party moving for summary judgment, the [movant] is required to [support] its motion with supporting documentation ․ [A] guaranty contract defines the obligations and rights of both the guarantor and the creditor, and contains any express conditions on the guarantor's liability.   Thus, the liability of a guarantor depends primarily on the construction and application of the guaranty contract ․ [O]ur Supreme Court has stated that where the guaranty of a note [is] unconditional or absolute default of the maker or endorser to pay the note promptly ․ [causes] the guarantor [to become] liable to the holder, and the relation of the debtor and creditor [is] at once established between the guarantor and the holder of the note ․” (Citation omitted;  internal quotation marks omitted.)  Id.

In the present case, the plaintiff argues that Brach made a guaranty of payment of the debt owed to the plaintiff by School Street.   In support of this position, the plaintiff submits the Bronson affidavit, a copy of the guaranty contract between the plaintiff and Brach and a copy of the plaintiff's demand for payment letter sent to Brach.   Bronson attests that Brach unconditionally guaranteed School Street's prompt payment of the note that it made out to the plaintiff.   The language of the guaranty contract also demonstrates that Brach unconditionally guaranteed School Street's payment of the note.   The copy of the guaranty further demonstrates that Brach's guaranty was a necessary condition to the plaintiff making the loan to School Street for the fourteen million four hundred thousand dollars that School Street used to purchase the subject property.   The copy of the demand for payment letter demonstrates that the plaintiff addressed Brach as guarantor and addressed Brach as a principal obligor.   The demand states that Brach is in default on the note.   As guarantor, Brach agreed to assume responsibility of the note in the place of School Street in the event of default by School Street.   The court expresses no opinion as to the amount for which Brach guaranteed payment of the note because the amount of Brach's liability is governed by the terms of the guaranty contract and the amount of Brach's liability is not at issue in the matter currently before the court.   Bronson's affidavit, the guaranty contract and the demand letter demonstrate that Brach made a guaranty of payment for the debt owed to the plaintiff by School Street.   Brach, however, provides no documentary evidence to counter the plaintiff's evidence as to Brach's guaranty of payment of the debt owed to the plaintiff by School Street.   Therefore, there is no genuine issue that Brach made a guaranty of payment for the debt owed to the plaintiff by School Street.

“Finally, the plaintiff must establish that the debt currently due and owing, and personally guaranteed by the [defendant], has not been paid by either the borrower or the [defendant].”  Id.

In the present case, the plaintiff argues that the debt is in default and has not been paid by School Street or Brach.   In support of this position, the plaintiff submits Bronson's affidavit which also incorporates by reference a copy of the notice of default and a copy of the demand for payment addressed to Brach as guarantor.   Bronson attests that School Street and Brach have failed to make payments on the note beginning with the payment due on August 10, 2010.   Bronson further attests that School Street and Brach continue in their failure to make payments on the note.   The copy of the notice of default and the copy of the demand for payment demonstrate that the failure to make payments caused the note to be in default.   This documentary evidence also demonstrates that School Street and Brach failed to cure the default and that the debt is still owing because it has not been paid by School Street or Brach.   Brach provides no counter evidence to demonstrate that the debt is no longer owing or that it has been paid by either School Street or Brach.   Therefore, there is no genuine issue of material fact that the debt is currently owing and that it has not been paid by either School Street or Brach.

There is no genuine issue of material fact that School Street owes the debt to the plaintiff;  that Brach made a guaranty of payment of the debt;  and that the debt has not been paid by School Street or Brach.   Therefore, the plaintiff is entitled to summary judgment as a matter of law as to Brach's liability as guarantor on the note that School Street made out to the plaintiff.   Accordingly, it is appropriate to grant the plaintiff's motion for summary judgment as to Brach's liability as guarantor of the note.

“Although the party seeking summary judgment has the burden of showing the nonexistence of any material fact ․ it [is] incumbent upon the party opposing summary judgment to establish a factual predicate from which it can be determined, as a matter of law, that a genuine issue of material fact exists.”  (Internal quotation marks omitted.)  Union Trust Company v. Jackson, supra, 42 Conn.App. 417.  “[S]ince a single valid [special] defense may defeat recovery, claimant's motion for summary judgment should be denied when any defense presents significant fact issues that should be tried.”   (Internal quotation marks omitted.)  Id. “[T]he purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action ․ A valid special defense at law to a foreclosure proceeding must be legally sufficient and address the making, validity or enforcement of the mortgage, the note or both.”  (Internal quotation marks omitted.)  Emigrant Mortgage Co. v. D'Agostino, supra, 94 Conn.App. 802;  see also Southbridge Associates, LLC v. Garofalo, 53 Conn.App. 11, 17, 19, 728 A.2d 1114, cert. denied, 249 Conn. 919, 733 A.2d 229 (1999) (foreclosure action in which summary judgment granted as to defendants' liability because the special defenses did not relate to the making, validity or enforcement of the note despite special defenses being set forth by defendant guarantor).

In its answer dated December 14, 2010, Brach sets forth arguments labeled first special defense and second special defense.   Brach's special defenses are based upon the same factual scenario alleged in School Street's special defenses.   Brach's special defenses are the same as School Street's special defenses, with one exception.   Whereas School Street has four separate special defenses, Brach combines School Street's first three special defenses into one special defense:  Brach's first special defense.   School Street's fourth special defense is identical to Brach's second special defense.   Like School Street's special defenses, the allegations in Brach's special defenses do not allege any facts that would put into question the making, validity or enforcement of the note or mortgage.   Moreover, the allegations in Brach's special defenses do not allege any facts that would put into question the making, validity or enforcement of the guaranty on the note.   Thus, the court concludes that Brach's special defenses do not serve as a bar to the plaintiff setting forth its prima facie case of entitlement to recover on a guaranty.   Therefore, the plaintiff is entitled to summary judgment as a matter of law on count two.

CONCLUSION

For the foregoing reasons, the court concludes that the plaintiff has met its burden to demonstrate that there are no genuine issues of material fact as to School Street's liability on the note.   Thus, the plaintiff is entitled to summary judgment as a matter of law on count one and the court grants the plaintiff's motion for summary judgment as to School Street.   The court further concludes that the plaintiff has met its burden to demonstrate that there are no genuine issues of material fact as to Brach's liability as guarantor of the note.   Thus, the plaintiff is entitled to summary judgment as to count two and the court grants the plaintiff's motion for summary judgment as to Brach.

Robaina, J.

FOOTNOTES

FN1. Although the court concludes that the assignment has no bearing on the plaintiff setting forth its prima facie foreclosure case, School Street argues that the plaintiff breached the terms of the assignment, which is a contract.   The court acknowledges that this foreclosure action is not the proper vehicle in which to raise this claim, but School Street could seek a remedy for this alleged breach in a separate cause of action.   The court, however, expresses no opinion as to the legal sufficiency of the allegations in School Street's special defense regarding this alternative cause of action..  FN1. Although the court concludes that the assignment has no bearing on the plaintiff setting forth its prima facie foreclosure case, School Street argues that the plaintiff breached the terms of the assignment, which is a contract.   The court acknowledges that this foreclosure action is not the proper vehicle in which to raise this claim, but School Street could seek a remedy for this alleged breach in a separate cause of action.   The court, however, expresses no opinion as to the legal sufficiency of the allegations in School Street's special defense regarding this alternative cause of action.

Robaina, Antonio C., J.