KMRA LLC v. CDI LLC (2013)

MEMORANDUM OF DECISION

This is a foreclosure action brought by a single-person LLC against another single-person LLC. The individual plaintiff Christine Bonomo has created what appears to be an indebtedness from the defendant, CDI Fund, LLC and her husband Gary Bonomo by advancing various sums of money to the defendants, beginning in April 2006 and continuing through July 10, 2007 (Plf's Exh. 2).¹  On July 10, 2007 the defendant CDI issued a promissory note to the plaintiffs as creditors for the total debt of 1.5 million.

The advancement of these sums of money was for the purpose of developing a condominium project known as Fox Hollow Condominium in Naugatuck, Connecticut in which Mr. Bonomo had a controlling interest.   Both plaintiff and defendant set up LLC entities respectively in July 2005:  KMRA, LLC for plaintiff Christine Bonomo and CDI Fund, LLC for Gary Bonomo.   A mortgage against three (3) parcels in the Fox Hollow project was executed by the defendant on December 21, 2009 and recorded in the Naugatuck Land Records on May 5, 2010, approximately two years and ten months after the last installment/advancement was made by the plaintiff to the defendant under the terms of the said note.

The intervening defendants Antoinette Lenkowski and Anthony and Patricia Teta put the defendant CDI on notice by way of a letter from their attorney (Defs' Exh. D) claiming defective workmanship concerning their particular condominium units.   They initiated in May 2010 the arbitration process and they were awarded certain amounts as damages ² which was confirmed by the Court ³ and were converted into judgment liens for recording purposes.   The intervening defendants perfected their respective judgment liens by recording them on the Naugatuck Land Records against the defendant CDI on November 16, 2011.

The respective judgment creditors as intervening defendants seek relief from the court claiming that the subject mortgage between the plaintiff and defendant is invalid and unenforceable and that foreclosing their respective judgment liens would be inequitable and unfair.

The underlying issue in this matter involves the transfer of certain property between the individual plaintiff and defendant as husband and wife.   The issue raised concerns as to whether or not, there is valid consideration being transferred between mortgagee and mortgagor.   The intervening defendants have introduced certain Defendant's Exhibits, A, B & C that indicate certain property in New Fairfield, Connecticut as being purchased by Gary Bonomo, then transferred from the defendant Gary Bonomo to the Plaintiff Christine Bonomo and sold by Christine Bonomo to a third party.⁴  This third party sale (Exh. C) reflects a substantial capital gain over the original purchase by the defendant Gary Bonomo in August of 1998.

The issue raised by the intervening defendants is whether or not spousal transfers can become valid consideration for a subsequent mortgage, securing the plaintiff wife's transfers of cash to the defendant husband through their respective LLCs.⁵

The plaintiffs' alleged motive for making such a financial arrangement with her husband's company may be a valid desire to protect his/her assets and by implication familial assets for the benefit of other family members to obviously include any offspring.   There is nothing improper for individuals to protect liquid assets by way of trusts and/or business entities.   The intervening defendants wish the court to draw certain inferences that there was a further improper motive involved in this particular case in which the mortgagees (plaintiffs) are protecting the mortgagor's (defendant) assets presumably from his creditors.   The cases go back some years in which the Court is required to use a particular level of scrutiny, where a spousal partner enables such a shield, legal or otherwise to be raised.

It is true that where any case like the present one is on trial, where a transaction in which a husband and wife re engaged, and in which it is claimed that the wife is colluding with her husband to conceal his property in her hands so as thereby to defraud his creditors, is the subject of inquiry, it should be examined with all reasonable diligence to discover if such fraud exists.   The community of interest between husband and wife is such, the opportunities for frauds of this kind between them are so convenient, the temptations are so great, and the instances in which embarrassed husbands have resorted to this kind of proceeding for the purpose of withdrawing their property from the reach of their creditors and preserving it in their own hands are so frequent, that all such transactions would be subjected to a rigorous scrutiny.

Throckmorton v. Chapman et ux, 65 Conn. 444, 454 (1895).

The failure of consideration in such transactions between spouses becomes more inferential.   Whether this is truly an “arms-length” transaction with actual consideration passing between parties within a business context is not apparent on its face.

That the relation of husband and wife gives special opportunities for fraudulent transfers of property, and that conveyances between them “should be subjected to a rigorous scrutiny,” are considerations to be addressed to the trier in passing upon the question of want of consideration.  Gilligan v. Lord, 51 Conn. 562, 567;  Norwalk v. Ireland, 68 Id. 1;  Throckmorton v. Chapman, 65 Id., 441;  Flishel v. Motta, 76 Conn. 197, 200 (1903).

“Historically, defenses to a foreclosure action have been limited to payment, discharge, release or satisfaction ․ or, if there had never been a valid lien.”  (Internal quotation marks omitted.)  Fidelity Bank v. Krenisky, 72 Conn.App. 700, 705–06, 807 A.2d 968, cert. denied, 262 Conn. 915 (2002).

“Because a mortgage foreclosure action is an equitable proceeding, the trial court may consider all relevant circumstances to ensure that complete justice is done ․ The determination of what equity actually requires in a particular case, a balancing of the equities, is a matter for the discretion of the trial court ․ Where the plaintiff's conduct is inequitable, a court may withhold foreclosure on equitable considerations and principles.”  (Citations omitted, internal quotation marks omitted.)  Southbridge Associates, LLC. v. Garofalo, 53 Conn.App. 11, 15, 728 A.2d 1114.

In this particular case no allegation of fraud was made by any party.   Therefore, the court cannot infer fraudulent conduct against either the plaintiffs or the defendants.   When the equities are balanced against the legal reality that the subject mortgage is prior in time to the judgment liens,⁶ there remains an evidentiary preponderance in favor of the mortgagees/plaintiffs over the judgment lienors.

Although the court has some reservations about this loan arrangement between the plaintiff and the defendant through their respective LLCs, equity will not allow the Court to deny the plaintiffs' right to foreclose their mortgage against the defendant, spousal relationships notwithstanding.

Therefore, a judgment as to liability may enter against the defendant CDI Fund, LLC in favor of the plaintiffs with the following conditions that require further evidence:

1. Plaintiff must provide to the Court an updated affidavit of appraisal or appraisal in chief of the foreclosed parcels with a clear showing of how any development rights were evaluated;

2. An updated affidavit of debt by the plaintiff;

3. An affidavit for fees and costs may be provided by the plaintiff;

4. Final judgment with appropriate motion is deferred until the updated appraisal is provided.

BY THE COURT

V. ROCHE, J.

FOOTNOTES

FN1. The first check of April 10, 2006 is not part of Exhibit 2..  FN1. The first check of April 10, 2006 is not part of Exhibit 2.

FN2. Lenkowski was awarded $57,872.86 against CDI and $33,826.52 was awarded to the Tetas against CDI..  FN2. Lenkowski was awarded $57,872.86 against CDI and $33,826.52 was awarded to the Tetas against CDI.

FN3. Under Connecticut General Statutes § 52–417 et seq., the Superior Court (Dooley, J.) confirmed these arbitration awards..  FN3. Under Connecticut General Statutes § 52–417 et seq., the Superior Court (Dooley, J.) confirmed these arbitration awards.

FN4. The initial purchase (Exh. A) by Gary Bonomo of said premises at 61 Sail Harbour Dr., New Fairfield was recorded August 27, 1998 for $1,950,000.The transfer to Christine Bonomo for “no monetary consideration” (Exh. B) of said premises was recorded December 19, 2002 by quit-claim deed.   The third transaction was the sale of said premises by Christine Bonomo (Exh C) for $3,500,000 to a third party recorded July 29, 2005..  FN4. The initial purchase (Exh. A) by Gary Bonomo of said premises at 61 Sail Harbour Dr., New Fairfield was recorded August 27, 1998 for $1,950,000.The transfer to Christine Bonomo for “no monetary consideration” (Exh. B) of said premises was recorded December 19, 2002 by quit-claim deed.   The third transaction was the sale of said premises by Christine Bonomo (Exh C) for $3,500,000 to a third party recorded July 29, 2005.

FN5. In Plaintiff's Exhibit 2 the plaintiff is issuing the loan checks on a People's checking account in her name with the LLC's name handwritten in..  FN5. In Plaintiff's Exhibit 2 the plaintiff is issuing the loan checks on a People's checking account in her name with the LLC's name handwritten in.

FN6. Judgment liens were recorded November 16, 2011..  FN6. Judgment liens were recorded November 16, 2011.

Roche, Vincent E., J.