TD v. LLC (2012)

MEMORANDUM OF DECISION ON MOTION FOR SUMMARY JUDGMENT AS TO LIABILITY ONLY

The plaintiff has moved for summary judgment as to liability only against the defendants, The Murray Realty Group, LLC, the Murray Group, LLC, Thomas M. Murray and Mary Pat Murray.

Factual and Procedural Background

The plaintiff commenced this action with a writ, summons and complaint dated May 23, 2012 with a return date of June 26, 2012.   The action seeks the foreclosure of an Open–End Commercial Mortgage (“Mortgage”) executed by the defendant, The Murray Realty Group, LLC and a deficiency judgment against the defendants, The Murray Realty Group, LLC, The Murray Group, LLC, Thomas M. Murray and Mary Pat Murray.

By its Secured Commercial Variable Rate Note (“Note 1”) dated September 19, 2007, as amended pursuant to Amendment to Secured Commercial Variable Rate Note (“Amended Note”) the defendants, The Murray Realty Group, LLC and The Murray Group, LLC (“Borrowers”) promised to pay to the order of TD Banknorth, N.A., now known as TD Bank, N.A. (“Bank”), the principal sum of $475,000 payable with interest thereon as provided in the Note 1 and Amended Note.

By its Revolving Line of Credit Note (“Note 2”) dated September 19, 2007, the Borrowers promised to pay to the order of TD Banknorth, N.A., now known as TD Bank, N.A., the principal sum of $150,000 or the aggregate unpaid principal amount of all advances or re-advances made by Bank to Borrowers.

On September 19, 2007, the defendant, The Murray Realty Group, LLC, to secure said Notes 1 & 2 mortgaged (the “Mortgage”) to Bank all of its right, title and interest in a certain piece or parcel of land more particularly identified as 341 East Main Street, Clinton, Connecticut (the “Property”).   Under the terms of the Mortgage, the Bank required the Borrowers to provide Flood Insurance covering the Property.   The Mortgage provided in pertinent part:

Paragraph 4 INSURANCE

The Mortgagor shall at its sole expense obtain for, deliver to, assign and maintain for the benefit of the Mortgagee, during the life of this mortgage, insurance policies in such amounts as the Mortgagee may require, insuring the mortgaged property against fire and all other insurable hazards, casualties and contingencies ․ and the Mortgagor shall pay promptly when due all premiums on such insurance policies and on all renewals thereof ․ In the event that the Mortgagor shall for any reason fail to keep said premises so insured or premiums thereon within 30 days of the due date, the Mortgagee, if so elects, may have such insurance written for its benefit alone and pay the premiums thereon and any premiums paid shall be secured by this mortgage and shall be repaid by the Mortgagor upon demand together with interest at the rate then chargeable under the Notes secured hereby.

Paragraph 37 FLOOD INSURANCE

In addition to the requirements set forth in Paragraph 4 above, the Mortgagor shall provide flood insurance policies to the Mortgagee, in which the Mortgagee is named as the first loss payee and named insured, for all improvements which are located in a flood hazard area, as depicted on the FEMA flood hazard maps for the area of Clinton, Connecticut, which includes the mortgaged property.

Paragraph 9c EVENTS OF DEFAULT

At the option of the Mortgagee, the entire indebtedness hereby secured shall immediately become due and payable without necessity for demand or notice to the Mortgagor upon the occurrence of any of the following events of default:

Failure by the Mortgagor to pay fire or any other insurance premiums for each insurance policy required by the terms of this mortgage or any other Loan Documents for the benefit of the Mortgagee.

Emphasis added.

Note 1 states in pertinent part:

7.  APPLICATION OF PAYMENTS.   All payments received by the Bank under this note and under the terms of the mortgage securing this note shall be applied by the Bank, first, to payment of interest accrued on any advance paid by it in accordance with the terms of this note and mortgage securing same;  second, to the payment of all sums which may be advanced by the Bank, including reasonable attorneys fees and costs of collection;  third to the payment of late charge then due, if any;  fourth to the payment of interest due on the unpaid principal balance;  and, finally, to the reduction of the principal balance.

The Borrower obtained flood insurance covering the mortgaged premises commencing on September 19, 2007.   The flood insurance covering the mortgage premises expired on September 30, 2010.   As a result, the Bank was compelled to purchase forced placed flood insurance for the Property.   The Bank notified the Borrower three separate times in writing starting in June 2011 that the forced placed flood insurance policy was about to lapse and directed the Borrower to obtain flood insurance but the Borrower failed to do so.

The defendants have failed to make full payment due under Note 1 on December 19, 2011 and each and every month thereafter and failed to make payments due under Note 2 on March 19, 2012 and each and every month thereafter.

The defendants Thomas M. Murray and Mary Pat Murray entered into an Unconditional Guarantee Agreement (“Guaranty”) under the terms of which they guaranteed all monies due together with the costs of collection and attorneys fees, with respect to the Notes 1 and 2. By Notice dated May 26, 2012, the Bank notified the Borrower and Guarantors of the defaults, and accelerated the loans.

In response to the Motion for Summary Judgment, the defendants have produced an affidavit from Thomas M. Murray, which admits that the defendants had purchased flood insurance, but then determined that the flood insurance was not necessary.   The affidavit also admits that the Bank “diverted” mortgage payments to “unnecessary flood insurance,” thereby causing a default in the Mortgage and Notes.   This “determination” apparently was made notwithstanding the 3 letters from the Bank in 2011 which advised the defendants that the Mortgage required flood insurance.   The defendants do not deny receiving those letters.   The defendants also appended to their Objection, a purported Status assessment from a surveyor, which indicated that as of June 2012, long after the alleged default, the Property was not located within a flood zone.   The plaintiff objects to this document as being inadmissible hearsay.   This matter was argued on September 10, 2012.   More than a month after the oral argument, on October 22, 2012, the defendants filed a Letter of Map Amendment Determination from the Federal Emergency Management Agency dated October 4, 2012.   This purports to state that the Property is not in a flood area.   The plaintiff objects to this letter as being hearsay unaccompanied by any appropriate affidavit.   Moreover, the letter states:  “However, the lender has the option to continue the flood insurance requirements to protect its financial risk on the loan.”

Discussion of the Law and Ruling

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.  Fojtik v. Hunter, 265 Conn. 385, 389, 828 A.2d 596 (2003);  Mytych v. May Dept. Stores Co., 260 Conn. 152, 158–59, 793 A.2d 1068 (2002);  Home Ins. Co. v. Aetna Life & Casualty Co., 235 Conn. 185, 202, 663 A.2d 1001 (1995).   Although the party seeking summary judgment has the burden of showing the nonexistence of any material fact;  D.H.R. Construction Co. v. Donnelly, 180 Conn. 430, 434, 429 A.2d 908 (1980);  a party opposing summary judgment must substantiate its adverse claim by showing that there is a genuine issue of material fact, together with the evidence disclosing the existence of such an issue.  Practice Book §§ 17–45, 17–46;  Burns v. Hartford Hospital, 192 Conn. 451, 455, 472 A.2d 1257 (1984).   In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.  Town Bank & Trust Co. v. Benson, 176 Conn. 304, 309, 407 A.2d 971 (1978);  Strada v. Connecticut Newspapers, Inc., 193 Conn. 313, 317, 477 A.2d 1005 (1984).   The test is whether a party would be entitled to a directed verdict on the same facts.  Batick v. Seymour, 186 Conn. 632, 647, 443 A.2d 471 (1982);  New Milford Savings Bank v. Roina, 38 Conn.App. 240, 243–44, 659 A.2d 1226 (1995).

Summary judgment should only be granted if the pleadings, affidavits and other proof submitted demonstrate that there is no genuine issue as to any material fact.  Scinto v. Stam, 224 Conn. 524, 530, cert. denied, 114 S.Ct. 176, 126 L.Ed.2d 136 (1993);  Connell v. Colwell, 214 Conn. 242, 246, 571 A.2d 116 (1991).   Summary judgment is “designed to eliminate the delay and expense of litigating an issue where there is no real issue to be tried.”  Wilson v. City of New Haven, 213 Conn. 277, 279, 567 A.2d 829 (1989).

The plaintiff has established that the Mortgage required that the defendants maintain flood insurance on the Property.   Contrary to the defendants' arguments, the Mortgage documents did not provide that such insurance was only required until such time as FEMA or some other entity determined that the Property was no longer in a flood zone.   To the extent the documents presented by the defendants are admissible, which is questionable, they establish only that the Property was not in a flood zone after June 2012.   This was long after the alleged defaults had occurred.

The evidence shows that the defendants failed to obtain flood insurance when their policy expired, the Bank had to obtain same, the Bank applied the defendants' mortgage payments first to the amounts it had to expend for flood insurance, which resulted in a default under the Notes.   Both the requirement to maintain flood insurance and the Bank's application of payments are clearly authorized under the Mortgage and Notes.   The defendants have failed to produce any evidence which creates any material issue of fact.

Summary judgment as to liability only may enter in favor of the plaintiff against the defendants.

By the Court,

Aurigemma, J.

Aurigemma, Julia L., J.