LLC v. Sherif M. Lawendy (2013)

MEMORANDUM OF DECISION

This is a Memorandum of Decision issued in the final portion of this bifurcated contested foreclosure trial.   During the trial, the court bifurcated the proceedings.   The first portion was tried on three days:  September 5, 2012;  November 16, 2012;  December 18, 2012.   It issued a Memorandum of Decision dated January 9, 2013 (# 138.00).   Page 8 of this nine-page Memorandum of Decision the court stated as follows:

“This court has bifurcated the proceedings in this matter and a continued trial has been scheduled for February 22, 2013 to determine matters such as attorney fees.   The defendant has requested that the court furnish the defendant an opportunity to tender the debt found by this court prior to the conclusion of this foreclosure trial.”

Based upon this court's experience, most contested foreclosure cases are tried in a bifurcated fashion with the first portion of the trial relating to the issues of liability and the consideration of special defenses, if any.   If liability is determined, the second and final portion of the foreclosure trial is usually assigned to the regular foreclosure docket in order to determine such matters as the amount of attorneys fees, disbursements, the fair market value of the real property, and whether the foreclosure is to be a strict foreclosure or foreclosure by sale.   This court has exercised its discretion in entering the orders of bifurcation.  Carrillo v. Goldberg, 141 Conn.App. 299, 313 (2013);  Lydall, Inc. v. Ruschmeyer, 282 Conn. 209, 253 (2007);  Reichhold Chemicals, Inc. v. Hartford Accident & Indemnity Co., 243 Conn. 401, 423 (1997);  Gen.Stat. § 52–205.

On February 22, 2013 the parties appeared and offered evidence, testimony, exhibits and oral argument.

At the February 22, 2013 hearing, the defendant withdrew any claims made by his March 13, 2012 Offer of Compromise (# 120.00).   The plaintiff withdrew its November 27, 2012 Motion to Terminate Stay (# 136.00).   On February 6, 2013 the plaintiff filed a Motion to Reargue, Correct, and/or Reconsider Interlocutory Decision dated January 9, 2013 (# 139.00).   On February 22, 2013 the court heard the above Motion # 139.00. It divided that Motion into three parts.   It denied the first part;  the Motion to Correct.   It denied the second part;  the Motion to Reargue.   It granted that portion of the Motion entitled Motion to Reconsider and offered the plaintiff the opportunity to prosecute the Motion to Reconsider at the February 22, 2013 hearing.   The court permitted the parties to offer testimony and evidence on the Motion to Reconsider (# 139.86).   The February 22, 2013 hearing was held on the Plaintiff's Motion to Reconsider dated February 6, 2013 (# 139.00) as well the other bifurcated issues not then decided in the January 9, 2013 Memorandum of Decision (# 138.00).

On March 14, 2013 the plaintiff filed an updated foreclosure worksheet (# 143.00).   The figures set forth in that March 14, 2013 foreclosure worksheet created a template for some of the issues that were before the court in this bifurcated hearing.   The evidentiary hearing concluded on its second day, March 14, 2013, and both parties submitted oral argument.   No post-hearing briefs were filed.

The March 14, 2013 foreclosure worksheet (# 143.00, line 1) stated that the “Fair market value of property being foreclosed” was $1,050,000.   The parties had stipulated on September 5, 2012 in open court on the first day of trial that the fair market value of the real property in question is $1,050,000.   That stipulation remains in effect.   The court finds that the current fair market value of the real property is $1,050,000.

The parties also agreed that the total encumbrances on the property prior to the plaintiff's lien was $750,000.   This figure is noted on line 3 of the March 14, 2013 foreclosure worksheet.   The court finds that the encumbrances on the real property prior to the plaintiff's mortgage are $750,000 (# 143.00, line 3).

The third issue before the court is whether there is substantial equity in the property regardless of the amount of debt that would be found by this court.   As of March 14, 2013 the parties had substantial disagreement concerning the amount of the underlying debt based on the promissory note and mortgage subject to this foreclosure.   The plaintiff's March 14, 2013 foreclosure worksheet claims that the “updated” debt is $94,235.14 (# 143.00, line 3).   The defendant claims that the “updated” debt is $0. The court finds that regardless of the amount of the underlying debt, there is substantial equity in the real property.

In its January 9, 2013 Memorandum of Decision (# 138.00, page 8) the court found:  the principal and interest due as of January 9, 2013 is $78,608.06.   The court further found that the per diem interest on the $70,871.80 principal at 6.0% per annum interest based upon a 360–day year from and after January 10, 2013 is $11.81.   Exhibit 20 offered at the February 22, 2013 hearing is a January 18, 2013 Treasurer's Check drawn on the Darien/Rowayton Bank payable to Noroton Properties, LLC in the amount of $78,714.35.   The court calculated the principal and interest on the record.   Both counsel agreed that Exhibit 20 reflects the principal and interest due as of January 9, 2013 in the amount of $78,608.06 plus an additional nine days of per diem interest at the per diem rate of $11.81.   This court therefore finds that on January 18, 2013 the defendant paid to the plaintiff the principal sum due of $70,871.80 plus 6.0% interest thereafter through and including January 18, 2013.   This amount totals $78,714.35, the exact amount of the check.   Ex. 20.   It is by reason of the Exhibit 20 payment of $78,714.35 that the defendant argues that the debt is $0. The plaintiff accepted the Exhibit 20 check and cashed the $78,714.35 check.

The plaintiff, on the other hand, claims that the debt is $94,235.14 and has placed that figure on line 2 of its March 13, 2013 foreclosure worksheet (# 143.00).   The following five figures add up to the $94,235.14;  (1) $70,871.80 principal due, the exact figure of principal due found by this court on January 9, 2013;  (# 138.00 page 8);  (2) one additional monthly payment in the amount of $537.26, for a check tendered but not cashed;  (3) late charge of $7,140.92 pursuant to the mortgage note;  (4) $7,842.55 being 6.0% interest on the $70,871.80 principal due;  and (5) $7,842.55 being additional 6.0% interest based upon the 12.0% penalty or default interest set forth in the note.   Those five figures add up $94,235.14.   The plaintiff concedes that the defendant has paid three of those sums on January 18, 2013 in Exhibit 20;  (1) principal of $70,871.80;  (2) 6.0% interest through and including January 18, 2013 on said principal in the amount of $7,842.55;  and (3) $537.26 paid by a separate January 18, 2013 check also part of Exhibit 20.   Subtracting those three figures from the $94,235.14, all parties and the court agree that the difference is $14,983.53.   The court and the parties noted a six cent difference in the above mathematical calculations caused by referring to the Exhibit 20 check as $537.26 when the check was in the amount of $537.32.   The plaintiff cashed the $537.32 check.   The court and the parties agreed on the record that this six cent difference is de minimus and will not affect this court's decision.

The plaintiff is claiming a real estate appraisal fee of $2,750;  title search fee of $275;  and attorneys fees of $29,960.75 as per the foreclosure worksheet March 14, 2013 (# 143.00, lines 7, 8 and 9).   This is in addition to the above mentioned short fall in principal and interest of $14,983.53.

The court makes the following findings of fact and legal conclusions:

In its January 9, 2013 Memorandum of Decision, (# 138.00, page 8) the court made the following findings:  “The court finds that the plaintiff has failed to prove that the defendant was in default of the Mortgage Note.” This court has carefully reviewed its five days of trial notes, all trial exhibits, the testimony and evidence offered on February 22, 2013 and March 14, 2013, the legal and factual claims of the parties, the terms and conditions of the Note and Mortgage, and its January 9, 2013 Memorandum of Decision.   Based upon that analysis, the court confirms its findings of January 9, 2013 and finds that the plaintiff has failed to prove that the defendant was in default of the Mortgage Note. Therefore, the Motion for Reconsideration dated February 6, 2013 (# 139.00) is denied as to the issue of default.

The plaintiff offered two affidavits of attorney fees;  December 5, 2011 (# 114.00) and February 15, 2013 (# 140.00) also marked as Ex. 21.   The foreclosure worksheet (# 143.00) claims attorney fees of $29,960.75.   The plaintiff argues that these two affidavits and the testimony of the plaintiff's attorney at the second bifurcated hearing support that $29,960.75 claim.   Smith v. Snyder, 267 Conn. 456, 477, 479 (2004).

The plaintiff makes two arguments in favor of its claim for $29,960.75 attorneys fees:  (1) that the court was incorrect in its finding that there was a default in the terms of the mortgage note or in the alternative, (2) despite the court's finding of no default, the language of the mortgage documents entitle the plaintiff to be awarded attorneys fees.

As to the first claim, the court has already confirmed its findings and legal conclusions as to the claimed defendant's default reached in its January 9, 2013 Memorandum of Decision (# 138.00).   Since this court confirms its finding of no default, the plaintiff's first argument for an award of attorney fees is rejected.   Therefore, the Motion for Reconsideration dated February 6, 2013 (# 139.00) is denied as to the issue of attorney fees.

As to the second argument, the plaintiff refers to two sections of March 20, 2009 Mortgage Note, Ex. 1. The first section is as follows:

Upon the failure of the Maker timely to make any payment due hereunder after any applicable grace period or upon the happening of any “Event of Default” under the Mortgage, the entire Amount of Note, or so much thereof as may be outstanding, together with accrued interest and all other expenses payable by Maker under this Note including but not limited to, reasonable attorneys fees for legal services incurred by the holder hereof in collecting or enforcing payment hereof, whether or not suit is brought, and if suit is brought, then through all appellate actions, shall immediately become due and payable at the option of the holder of this Note, notwithstanding the Maturity Date set forth herein.

MORTGAGE NOTE dated March 20, 2009, Exhibit 1, page 2.

The mortgage and the note are contracts and their language is to be interpreted by using general rules of contract.  Sunset Mortgage v. Agolio, 109 Conn.App. 198, 202–3 (2008);  Citicorp Mortgage, Inc. v. Porto, 41 Conn.App. 598, 602 (1996).

Although ordinarily the question of contract interpretation, being a question of the parties' intent, is a question of fact;  Gurliacci v. Mayer, 218 Conn. 531, 567, 590 A.2d 914 (1991);  Finley v. Aetna Life & Casualty Co., 202 Conn. 190, 199, 520 A.2d 208 (1987);  “[w]here there is definitive contract language, the determination of what the parties intended by their contractural commitments is a question of law.  Thompson & Peck, Inc. v. Harbor Marine Contracting Corp., 203 Conn. 123, 131, 523 A.2d 1266 (1987).  (Internal quotation marks omitted.)  Mulligan v. Rioux, 229 Conn. 716, 740, 643 A.2d 1226 (1994) ․ It is the general rule that a contract is to be interpreted according to the intent expressed in its language and not by an intent the court may believe existed in the minds of the parties.  Id.;  Barnard v. Barnard, 214 Conn. 99, 110, 570 A.2d 690 (1990);  Powel v. Burke, 178 Conn. 384, 387, 423 A.2d 97 (1979).   When the intention conveyed by the terms of an agreement is “clear and unambiguous, there is no room for construction.”   Gino's Pizza of East Hartford, Inc. v. Kaplan, 193 Conn. 135, 138, 475 A.2d 305 (1984).  “[A] court cannot import into [an] agreement a different provision nor can the construction of the agreement be changed to vary the express limitations of its terms.”  Hatcho Corp. v. Della Pietra, 195 Conn. 18, 21, 485 A.2d (1985);  see also Bank of Boston Connecticut v. Schlesinger, 220 Conn. 152, 159, 595 A.2d 872 (1991) “[i]t is not within the power of courts to create new and different agreements.”);  Jay Realty, Inc. v. Ahearn Development Corp., 189 Conn. 52, 55, 453 A.2d 771 (1983) (same);  Cirrito v. Turner Construction Co., 189 Conn. 701, 706–07, 458 A.2d 678 (1983) (“[i]n interpreting a contract courts cannot add new or different terms”);  Powel v. Burke, supra, 388.  “The court will not torture words to impart ambiguity where ordinary meaning leaves no room for ambiguity.  Downs v. National Casualty Co., 146 Conn. 490, 494, 152 A.2d 316 [1959].   The circumstances surrounding the making of the contract, the purposes which the parties sought to accomplish and their motives cannot prove an intent contrary to the plain meaning of the language used.  Connecticut Co. v. Division, 425, 147 Conn. 608, 616–17, 164 A.2d 413 [1960] ․ It is axiomatic that a party is entitled to rely upon its written contract as the final integration of its rights and duties.”  (Citations omitted.)  Zullo v. Smith, 179 Conn. 596, 601, 427 A.2d 409 (1980);  see Sturman v. Socha, 191 Conn. 1, 12, 463 A.2d 527 (1983).   “Similarly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms.”  Reese v. First Connecticut Small Business Investment Co., 182 Conn. 326, 327, 438 A.2d 99 (1980).

Levine v. Massey, 232 Conn. 272, 277–79 (1995).

This first section of the Note on page 2 permits the court to award reasonable attorneys fees.   Ex. 1 page 2. This clause contains two conditions.   The first condition is:  “Upon the failure of the Maker timely to make any payment due hereunder after any applicable grace period.”   In this Note there were two sets of dates upon which payments were to be made.   The first payments were periodic on the 20th day of each calendar month commencing on April 20, 2009 each in the amount of $537.32.   A portion of that $537.32 was attributable to interest and the remaining portion to the reduction of principal.   The second payment was a balloon payment on the “Maturity Date.” The note contains a ten day grace period.   In its January 9, 2013 Memorandum of Decision (# 138.00, page 4) the court found that the defendant was not in arrears in any of the monthly payments due on the 20th day of each month in the amount of $537.32.  “Both parties agree that the defendant made each and every monthly payment of $537.32 on time included the monthly payments due from April 20, 2009 February 20, 2011.”   Ex 3. The court further found that the maturity date set forth in the note of March 20, 2011 was extended by the defendant tendering and the plaintiff accepting an additional payment of $537.32 (# 138.00, page 6).   The court found that within the ten-day grace period:  “At that April 29, 2011 closing the defendant was ready, willing and able to pay the principal due of $70,871.80 together with six (6.0%) percent interest therein from March 21, 2011 to April 29, 2011.   The defendant produced credible testimony at trial that he was ready, willing and able to make that payment on April 29, 2011.   The defendant supported that credible testimony with documentary evidence.   Ex. 8.” (# 138.00, p. 7.) The court further found that as of April 29, 2011 the plaintiff insisted on an additional 6.0% interest plus the 10.0% late charge as well as attorneys fees.   This court having confirmed its findings of law and legal conclusions issued in its January 9, 2013 Memorandum of Decision cannot find sufficient facts to satisfy the first claimed condition under the Mortgage Note;  “Upon the failure of the Maker timely to make any payment due hereunder after applicable grace period.”   The plaintiff has not proven by credible evidence that the defendant failed to make any payment.

The second condition for the claim for attorneys fees under the first section of Note on page 2 calling for attorneys fees is:  “ ․ upon the happening of any ‘Event of Default’ under the Mortgage.”   This court has examined the terms of the Mortgage deed.   The plaintiff has failed to prove any “Event of Default” in the payment of the Mortgage deed or any other provision of the mortgage deed.   Ex. 2. Based upon the findings that the court has already made, the court further finds that the plaintiff has failed to prove that the defendant was in default of the terms of the Note. There is no “Event of Default” section of the Mortgage Note. The court therefore concludes that the plaintiff is not entitled to attorneys fees under this first section of the mortgage note.

The second section of the Note that mentions attorneys fees is as follows:

Should the indebtedness represented by this Note, or any part hereof, be collected at law or in equity, or in bankruptcy, receivership or any other court proceedings, (whether at the trial or appellate level), or should this Note be placed in the hands of attorneys for collection upon default, the Maker agrees to pay, in addition to the principal and interest due and payable hereunder, all costs of collection or attempting to collect this Note, including reasonable attorneys fees and expenses.

MORTGAGE NOTE dated March 20, 2009, Exhibit 1, Page 2.

There are two conditions in the Note on this portion of page 2 for attorneys fees to be due.   Ex. 1 page 2. The first condition is:  “․ should this Note be placed in the hands of attorneys for collection upon default.”   It is clear from the evidence that the plaintiff placed this claim in the hands of his attorney prior to the institution of this lawsuit.   The court cannot read the phrase “upon default” out of that condition.   The court's finding that the defendant was not in default of either the terms of the Note or Mortgage is conclusive.   This first condition has not occurred.

The second condition is as follows:  “Should the indebtedness represented by this Note, or any part hereof, be collected at law or in equity, or in bankruptcy, receivership or any other court proceedings, (whether at trial or at appellate level) ․” This second condition requires a closer analysis by the court.   As of April 29, 2011 the defendant was willing to pay the principal of the note and the 6.0% interest.   He was not willing to pay the 12.0% default interest, the 10.0% late fee penalty or any attorneys fees.   The plaintiff, as of April 29, 2011, insisted on 12.0% default interest, the payment of attorneys fees as well as the 10.0% late fee.   Negotiations ensued between the parties but they were never able to reach an agreement as to the methodology for calculating the amount due nor the exact amount due.   It is for that reason that the defendant requested this court to furnish the defendant an opportunity to tender whatever debt the court found by this court prior to the conclusion of the foreclosure trial.   This court on January 9, 2013 made a finding that the defendant was not in default.   The court concluded that the defendant was obligated to pay the principal that the court had calculated to be due as well as an obligation to pay 6.0% interest on that unpaid principal to the date of actual payment.   The court's calculations are set forth in this Memorandum of Decision as well as in more detail in the January 9, 2013 Memorandum of Decision (# 138.00).   Therefore, this court rendered a decision in resolving the issues as to the amount that was due so the defendant could make payment.

The court notes that this was a bifurcated decision and its January 9, 2013 Memorandum of Decision was not a final appealable judgment.   The court finds that the defendant after receiving the calculations by this court on January 9, 2013 added the necessary interest and voluntarily paid the sum due.   The court finds that it was not necessary for this court to enter any orders.   The court therefore finds that this indebtedness was not “collected at law or in equity.”   There is no evidence of any “bankruptcy, receivership or any other court proceedings.”   The second condition has not occurred.

The court finds that there is no ambiguity in these two sections of the Note. Neither party offered any evidence or oral argument claiming any ambiguity.

Connecticut has adopted the American Rule. “With respect to the relevant legal principles, we have often explained that Connecticut adheres to the ‘American rule’ regarding attorneys fees.   Under the ‘American rule,’ in the absence of statutory or contractual authority to the contrary, a successful party is not entitled to recover attorneys fees or other ‘ordinary expenses and burdens of litigation ․’ (Internal quotation marks omitted.)  TES Franchising, LLC v. Feldman, 286 Conn. 132, 148, 943 A.2d 406 (2008), quoting Rizzo Pool Co. v. Del Grosso, 240 Conn. 58, 72, 689 A.2d 1097 (1997).”  Total Recycling Services of Connecticut, Inc. v. Connecticut Oil Recycling Services, Inc., 308 Conn. 312, 326–27 (2013).

There is no evidence of egregious misconduct.  CFM of Connecticut, Inc. v. Chowdhury, 239 Conn. 375, 393 (1996).   No statute has been furnished as authority for the collection of attorneys fees.   The terms of the Mortgage Deed and Note have been examined by this court and the court has found that no attorney fees are authorized other than in the two sections of the Note already discussed.   The court finds that the plaintiff is not entitled to an award of attorney fees.   Henson v. Pinkerton, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket Number FST FA 02–0188682 S (January 19, 2006, Tierney, J.).

There is an issue as to whether this court has the authority to award the plaintiff a $2,750 appraisal fee and a title search fee of $275.   Ex 21, Ex. 23, Ex. 25 (# 143.00, lines 7 and 9) (# 111.00).   No statutory authority has been furnished to the court for this court's power to order appraisal fees and title search fees in a foreclosure action when the court has found that the defendant is not in default.   The Note does not mention appraisal fees or title search fees ․ The Mortgage Deed in paragraph 23 states that:  “The mortgagor shall pay all fees and charges ․ including, without limitation ․ charges for appraisals and expenses related to examination of title ․ and in default thereof the mortgagee may pay the same and the mortgagor will repay the sum with interest at the Delinquency Rate and the same shall be added to the Indebtedness secured hereby and secured by this Mortgage.”   The language of the Note near the bottom of the second page is broad enough to include appraisal fees and the title search fees:  “․ all costs of collection or attempting to collect this Note, including reasonable attorneys fees and expenses.”   The court finds that the title search fee and the appraisal fee are reasonable “expenses” incurred by an attorney to seek collection of a mortgage note and a foreclosure of the mortgage.   Since no default was found and none of the two stated conditions of the Note allowing for attorneys fees have been complied with, the court rejects the plaintiff's claim for a $2,750 appraisal fee and a $275 title search fee.

10.0% late fee is covered by the following language of the Note;  “If any payment required under this Note is not made by the tenth (10th) day of the installment due date during any month, a late charge of ten (10%) percent of the payment due shall become immediately due to the Lender.”   Exhibit 1, page 1. The plaintiff is seeking that 10.0% late fee in this litigation.   This is the largest component of the $14,983.53.   In order for a late fee to be imposed the court must find that the payment required under this note was not made by the 10th day of the month.   The above section of the Note contains the 10–day grace period.   This court has already found that the plaintiff made demand upon the defendant for the payment of a sum larger than what the defendant was willing to pay.   The defendant was ready, willing and able to make the principal payment plus the 6.0% interest as of April 29, 2011.   The court has already found that the parties extended the maturity date by one month and the 10–day grace period falls within the April 29, 2011 date.   This court finds that this 10.0% late fee clause is unambiguous.   The court finds that 10.0% late fee is not due.

The 12.0% default interest rate is contained in the following language of the Note:  “Upon the stated or accelerated maturity of this Note or upon the occurrence of a default hereunder, beyond the expiration of any applicable notice and/or grace period expressly set forth herein or therein, the Maker agrees that this Note shall bear interest at a rate of twelve (12%) percent per annum or the maximum rate allowed to be charged by law, whichever is less.”   Exhibit 1, page 2. The parties agree that this is the 12.0% default interest rate clause.   They also agree that there is no “maximum rate allowed to be charged by law.”   No argument or legal authority to that effect has been furnished to this court.   The plaintiff claims that the stated Maturity Date of the note is March 20, 2011 and therefore the 12.0% interest is due for each payment thereafter.   This doubles the $7,842.55 interest calculated by this court using the 6.0% interest rate.

There are two conditions that are set forth in this clause.   The first is:  “Upon the stated or accelerated maturity of this Note.” The plaintiff argues that this date is March 20, 2011 and not any later date.   The court has already found that the parties extended the maturity date beyond March 20, 2011.   The second condition is:  “ ․ upon the occurrence of a default hereunder, beyond the expiration of any applicable notice and/or grace period expressly set forth herein or therein.”   The court has already found that there has been no default and that the tender of payment on April 29, 2011 was within the grace period.   For these reasons the court finds that the 12.0% default interest does not commence.

The court further has found that the parties, by accepting the monthly additional payment of $527.32, have mutually agreed to extend the maturity date.   The court found that the Maturity Date as stated in the Note of March 20, 2011 had been extended to April 20, 2011.   The 10–day grace period would extend that maturity date to April 30, 2011.   The defendant's tender occurred on April 29, 2011.   The court finds that this 12.0% interest rate clause is unambiguous.   For the reasons stated no default interest at the rate of 12.0% is due.

The court hereby enters judgment for the defendant, Sherif M. Lawendy.

BY THE COURT

Hon. Kevin Tierney

Judge Trial Referee

Tierney, Kevin, J.T.R.