Home Loan Investment Bank v. LLC (2012)

RULING ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

This case is a foreclosure action by the plaintiff, Home Loan Investment Bank (“Home Loan”), against the defendants, Seetaram, LLC and Daya Singh.   Home Loan seeks to foreclose on a commercial loan and mortgage concerning property located at 2 Grove Street, Putnam, CT. There is a gasoline station and convenience store on the property.   Seetaram is the mortgagor, and Singh is the guarantor on the note.   Pending before the court is the plaintiff's motion for summary judgment.   For the following reasons, the motion is denied because the defendants have raised genuine issues of material fact as to the special defenses.

I

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 ․ A material fact is a fact that will make a difference in the outcome of the case ․ 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 under Practice Book [§ 17–45] ․ The movant has the burden of showing the nonexistence of such issues but the evidence thus presented, if otherwise sufficient, is not rebutted by the bald statement that an issue of fact does exist ․ To oppose a motion for summary judgment successfully, the nonmovant must recite specific facts ․ which contradict those stated in the movant's affidavits and documents.”  (Citations omitted;  internal quotation marks omitted.)  Yancey v. Connecticut Life & Casualty Ins. Co., 68 Conn.App. 556, 558–59, 791 A.2d 719 (2002).

The courts hold the movant to a strict standard.   To satisfy his burden the movant must make a showing that 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.  Rockwell v. Quintner, 96 Conn.App. 221, 227–29, 899 A.2d 738, cert. denied, 280 Conn. 917, 908 A.2d 538 (2006).

Further, because the plaintiff seeks summary judgment in a foreclosure action, which is an equitable proceeding, “the trial court may examine all relevant factors to ensure that complete justice is done ․ The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court.”  (Citations omitted;  internal quotation marks omitted.)  LaSalle National Bank v. Freshfield Meadows, LLC, 69 Conn.App. 824, 833, 798 A.2d 445 (2002).

Because the defendants have asserted various special defenses, the legal principles regarding defenses to foreclosure actions must also be set forth.   “Historically, defenses to a foreclosure action have been limited to payment, discharge, release or satisfaction ․ or, if there had never been a valid lien ․ The 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 ․ Where the plaintiff's conduct is inequitable, a court may withhold foreclosure on equitable considerations and principles ․ [O]ur courts have permitted several equitable defenses to a foreclosure action.  [I]f the mortgagor is prevented by accident, mistake or fraud, from fulfilling a condition of the mortgage, foreclosure cannot be had ․ Other equitable defenses that our Supreme Court has recognized in foreclosure actions include unconscionability ․ abandonment of security ․ and usury.”  (Citation omitted;  internal quotation marks omitted.)  Id., 833–34.

II

Both sides have filed affidavits and exhibits in support of their respective positions.   Their submissions are sufficient to support the following facts:  The defendant, Daya Singh, is a principal of Seetaram, LLC. Seetaram is the title owner of a parcel of real estate with a gasoline station and a convenience store located at 2 Grove Street, Putnam, CT.

On or about January 25, 2008, Seetaram executed and delivered a promissory note in favor of the plaintiff, Home Loan Investment Bank, F.S.B., in the original principal amount of $525,000.   At the same time, Singh executed and delivered to the bank an unconditional guarantee, thereby promising and guaranteeing to pay any and all obligations due under the terms of the note.   To secure the debt, Seetaram, also at the same time, executed and delivered a mortgage deed in favor of the bank for the Putnam property.

In or about May 2008, Singh contends that he entered into an agreement with the bank whereby the bank agreed to finance his purchase and development of a property located in Middleton, MA, for the construction of another gasoline station and convenience store.   Whether that agreement was verbal or written or conditional is unstated.   Nevertheless, Singh claims that in reliance on that agreement, he executed a purchase and sales agreement, paid a nonrefundable deposit in the amount of $31,500, and expended substantial sums of money to develop the Middleton property, including, but not limited to, hiring an excavator, an engineering consultant, an environmental consultant, and an attorney to secure various municipal permits and approvals.   In March 2009, he contends that the bank refused financing in violation of the agreement and caused him to fail to close on the deal, causing him monetary loss.   The bank disputes these claims.

Despite the failure of the Middleton deal, Singh went with a representative of the bank to look at property with a gas station in Agawam, MA that the bank was selling following a foreclosure.   Singh met with the bank's chief executive officer to discuss the sale.   At that meeting, Singh claims that unnamed bank representatives acknowledged that the bank had caused him to lose approximately $100,000 in the failed Middleton deal, and, therefore, offered to sell the Agawam property to him for approximately $100,000 less than the asking price.   In June 2009, Singh entered into a purchase and sale agreement with the bank for the Agawam property, and paid a $14,000 deposit to the bank.   He also claims that the bank agreed to finance his purchase of the property and remodeling of the gas station.   Whether that agreement was verbal or written or conditional is unstated.   Nevertheless, Singh claims that in reliance on the agreement, he paid substantial sums to purchase and develop the Agawam property, including hiring an excavator, an engineering consultant and an environmental consultant.   He also secured a loan from Irving Oil Marketing, Inc., in the amount of $150,000 for the purpose of developing the Agawam property.   That loan was secured by another mortgage on the Putnam property.

On March 17, 2010, the bank issued a financial commitment letter, subject to conditions, for a $1,025,000 loan to Speedy, Co. for the purpose of purchasing and developing the Agawam property.   Singh was to be the guarantor on the loan.   The loan was to be secured by mortgages on the Agawam property, the Putnam property, and others.   Singh claims that the bank violated that agreement by failing to provide the financing, and thereby caused the failure of that deal, causing him monetary loss.   The bank disputes the claims.

Singh next claims that an employee of the bank, also named Singh, contacted him and apologized for the bank for having caused him further financial losses, and invited him to submit copies of his expenses for the Agawam property, and promised to reimburse him for the same.   The bank also authorized him to skip five monthly payments on the Putnam property, without recourse or penalty.   After settlement negotiations failed, the bank accelerated the debt and commenced the above-captioned foreclosure action.   The bank disputes the claims.

The bank has established by affidavit and copies of records that the defendants have made no monthly payments on their note since the payment due for October 1, 2010, and each and every month thereafter to date.   It commenced this action by service on May 13, 2011.   There is no dispute that the bank is the owner and holder of the note and mortgage in issue.

In their Answer filed September 29, 2011, the defendants admit default, but allege four special defenses to prevent the foreclosure, and they allege seven counterclaims.   The special defenses are:  First Special Defense, off-set for damages awardable under their counterclaims;  Second Special Defense, inequitable conduct, equitable estoppel, laches and/or unclean hands;  Third Special Defense, unconscionable conduct, contrivance, accord and satisfaction;  Fourth Special Defense, unconscionable conduct accident, mistake or fraud.   The counterclaims are:  Count One, breach of contract re:  the Middleton deal;  Count Two, breach of implied contract re:  the Middleton deal;  Count Three, breach of contract re:  the Agawam deal;  Count Four, breach of implied contract re:  the Agawam deal;  Count Five, fraud;  Count Seven, unjust enrichment;  Count Eight, violation of the Connecticut Unfair Trade Practices Act. There is no Count Six.

III

“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 [is] the owner [or holder] of the note and mortgage and that [the mortgagor] ha [s] defaulted on the note.”  (Citations omitted;  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 136 (2003);  see also Webster Bank v. Flanagan, 51 Conn.App. 733, 750–51, 725 A.2d 975 (1999).  “[A] foreclosure complaint must contain certain allegations regarding the nature of the interest being foreclosed.   These should include allegations relating to the parties and terms of the operative instruments, the nature of the default giving rise to the right to 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).  “To establish a prima facie case of entitlement to recover on [a][g]uaranty ․ plaintiff must show (1) that it is owed a debt from a third party;  (2) that defendant made a guaranty of payment of the debt;  and (3) that the debt has not been paid by either the third party or defendant.”  (Citation omitted.)   North American Bank v. Biebel, Superior Court, judicial district of New Britain, Doc. No. CV 03–522575 (August 16, 2005, Berger, J.) [40 Conn. L. Rptr. 59].  “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, Doc. No. CV 549266 (July 13, 2000, Martin, J.) aff'd, 67 Conn.App. 93, 787 A.2d 32 (2001).

Based on the filings of the parties, the plaintiff has provided sufficient evidence to show that it can establish a prima facie case to permit it to foreclose on the subject property.   The issue is whether the defendants can and have raised sufficient issues of material facts in dispute on its defenses to prevent a summary judgment.

Plaintiff argues that the defendants' proffers of evidence in support of their special defenses cannot be considered because the defendants did not request leave to amend their answer to add special defenses.   Indeed, the file shows that the first answer in this case was filed by Singh, without an attorney, for himself and Seetaram on May 31, 2011, and it alleged no special defenses.   Subsequently, counsel appeared for both defendants, and she filed the above described answer with special defenses and counterclaims on September 29, 2011, without first seeking leave to amend.   Plaintiff argues that the answer can not be amended without first seeking leave pursuant to Practice Book § 10–60.   While that ordinarily is the rule, the court believes that no request was required in this case because plaintiff filed an amendment to its complaint on June 10, 2011, permitting the defendants to plead over without first seeking leave to amend.   See Practice Book § 10–61.

Next, plaintiff argues that the materials cannot be considered because they were filed in court less than five days before the plaintiff's motion for summary judgment was heard on short calendar.  Practice Book § 17–45 requires that such opposition papers be filed at least five days before the short calendar hearing.   In this case the opposition materials were apparently filed electronically so late on Friday, December 30, 2011, that they did not appear in the electronic file until the morning the matter was heard—on January 3, 2012.   That was clearly too late.   However, it has been held that this practice book rule dictates no particular consequence for non-compliance, and, therefore, it is not a jurisdictional bar to the court considering the materials.   See Pepe v. City of New Britain, 203 Conn. 281, 287, 524 A.2d 629 (1987).   The court is satisfied that there will be no unfairness to the plaintiff if the court considers the defendants' late filed materials in this case.   The plaintiff was aware of the defendants' defenses when the defendants filed their disclosure of defense pleading on June 29, 2011, in this case.   Also, the court gave the parties additional time after the hearing to address certain new issues in writing.

Also, plaintiff argues that the defendants' opposition, as pled in their September 29, 2011 Answer with Special Defenses and Counterclaims, cannot be considered because they were filed after the motion for summary judgment was filed.   The motion for summary judgment was filed on September 23, 2011.   This, also, is no bar inasmuch as Seetaram had requested an opportunity to re-plead before the motion for summary judgment was filed, and that motion was granted.   See Doc. No. 113.00.   Moreover, whether to allow a belated amended pleading after the filing of a motion for summary judgment is a matter within the discretion of the court.  Citizens Bank v. Hubney, 182 Conn. 310, 313, 438 A.2d 430 (1980).   An amended pleading is response to a motion for summary judgment does not constitute prejudice per se.  McNeil v. Riccio, 45 Conn.App. 466, 474, 696 A.2d 1050 (1997).   Under the circumstance of this case, particularly considering the necessity of considering the equities in a foreclosure, the court will consider defendants' opposition materials.

In their Second, Third and Fourth Special Defenses the defendants have argued and maintain, inter alia, that foreclosure should be denied because the plaintiff's conduct put the defendants into an inequitable position.   The defendants invoke a principle which our Supreme Court has often recognized;  Lettieri v. American Savings Bank, 182 Conn. 1, 12, 437 A.2d 822 (1980);  Hamm v. Taylor, 180 Conn. 491, 497, 429 A.2d 946 (1980);  Hartford Federal Savings & Loan Assn. v. Lenczyk, 153 Conn. 457, 463, 217 A.2d 694 (1966);  Glotzer v. Keyes, 125 Conn. 227, 231, 5 A.2d 1 (1939);  Brand v. Woolson, 120 Conn. 211, 214, 180 A. 293 (1935);  Mackey v. Dobrucki, 116 Conn. 666, 670, 166 A. 393 (1933);  Beach v. Isacs, 105 Conn. 169, 134 A. 787 (1926);  but which is not applicable except on an appropriate foundation of fact.  Hamm v. Taylor, supra;  Atlas Realty Corporation v. House, 120 Conn. 661, 671, 183 A. 9 (1936).   In this case, the defendants have raised sufficient issues of material fact on questions of whether it was the conduct of the plaintiff that put the defendants in financial jeopardy, and whether the plaintiff caused the default by excusing payment, then used that lack of payment as grounds for accelerating the debt and commencing foreclosure.   These are charges of inequitable conduct.  “Where the plaintiff's conduct is inequitable, a court may withhold foreclosure on equitable considerations and principles.”  (Citations omitted.)  Morgera v. Chiappardi, 74 Conn.App. 442, 457, 813 A.2d 89 (2003).   Defendants' second, third and fourth special defenses and their opposing affidavit and exhibits show that material facts are fairly raised and fairly in issue on these equitable defenses sufficient to prohibit summary disposition of this case.

This point is sufficient to deny the plaintiff's motion for summary judgment.   Therefore, it is unnecessary to resolve the other issues raised by the parties.  “Only one of [a defendant's] defenses needs to be valid in order to overcome [a] motion for summary judgment.  [S]ince a single valid defense may defeat recovery, [a movant's] motion for summary judgment should be denied when any defense presents significant fact issues that should be tried.”  (Internal quotation marks omitted.)  Union Trust Co. v. Jackson, 42 Conn.App. 413, 417, 679 A.2d 421 (1996).   Furthermore, “[w]here the plaintiff's conduct is inequitable, a court may withhold foreclosure on equitable considerations and principles.”  (Internal quotation marks omitted.)  Loricco Towers Condominium Ass'n. v. Pantani, 90 Conn.App. 43, 51, 876 A.2d 1211, cert. denied, 276 Conn. 925 (2005).

Plaintiff has raised issues concerning the legal sufficiency of some of the special defenses and counterclaims as currently pled, and it has raised issues as to whether they can even be considered in this case because they do not arise out of the same transaction pled in the complaint.   Those issues were raised in supplemental briefs, and were not in the original motion for summary judgment.   They were not raised earlier due to the fact that the motion for summary judgment was filed on September 23, 2011 and the Answer with Special Defenses and Counterclaims was not filed until September 29, 2011, and the defendants' opposition papers were not filed until after the motion for summary judgment had already been scheduled for hearing.   Due to this timing, this decision is without prejudice to the resolution of those other issues which can be raised in other appropriate pre-trial motions, if necessary.

IV

For all of the foregoing reasons, the plaintiff's motion for summary judgment is denied.

THE COURT

Robert F. Vacchelli

Judge, Superior Court

Vacchelli, Robert F., J.