Opinion
No. CV 10-6005957 S
October 5, 2011
MEMORANDUM OF DECISION ON MOTION FOR PARTIAL SUMMARY JUDGMENT
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
On December 4, 2010, the plaintiff, COMM 2006-C8 Asylum Street, LLC, filed an action for foreclosure against the defendants, Northland Cityplace II, LLC (Northland), Northland Portfolio, LP (Northland LP) and Northland Investment Corporation (Northland Corp.). In its complaint, the plaintiff alleges the following facts. On November 30, 2006, Northland executed a promissory note in favor of Deutsche Banc Mortgage Capital, LLC (Deutsche Capital) for an original principal amount of $25,000,000. As security for the $25,000,000 loan, Northland delivered to Deutsche Capital an "Open-End Leasehold Mortgage and Security Agreement," dated November 30, 2006, promising to make monthly payments on the loan through December 1, 2011 and to repay the loan in full on that date. The note was further secured by various security interests in real and personal property and indemnification agreements executed by Northland LP and Northland Corp. as detailed in the plaintiff's complaint. Deutsche Capital, the original lender, is the plaintiff's predecessor in interest. The plaintiff is the present holder and owner of the note and mortgage executed by borrower Northland.
The three-count complaint filed by the plaintiff requests foreclosure mortgage (count one), enforcement of the note (count two) and enforcement of the guaranty (count three). The defendants are referred to individually as Northland, Northland LP and Northland Corp. and collectively as "the defendants."
The property is commonly known as City Place II, 151-163 Asylum Street, Hartford, Connecticut.
On or about June 1, 2009, Northland ceased making payments due under the terms of the note and mortgage. Northland has been in default of its payment obligations since that time. On August 17, 2009, the plaintiff notified Northland of the default and made a demand on Northland to comply with its payment obligations. By letter dated September 3, 2009, Deutsche Capital notified Northland that the loan had been accelerated and made demand on Northland for payment in full. By letter dated October 6, 2009, Deutsche Capital notified Northland LP and Northland Corp. of their liability as guarantors and made demand on Northland LP and Northland Corp. for payment in full of that liability.
The plaintiff claims that Northland LP and Northland Corp. are fully and personally liable for up to $2,000,000 of the principal balance of the loan pursuant to a "Guaranty and Indemnity," dated November 30, 2006 (exhibit G to the affidavit of Dennis van der Reis), wherein Northland LP guaranteed certain recourse obligations of Northland as borrower and a "Reaffirmation, Consent to Transfer and Substitution of Indemnitor," dated February 8, 2008 (exhibit P to the affidavit of Dennis van der Reis), wherein Northland LP and Northland Corp. assumed all obligations of the original guarantor, Northland LP.
On March 2, 2011, the plaintiff filed a motion for partial summary judgment against the defendants (No. 128), seeking summary judgment of foreclosure against borrower Northland and entry of a $2,000,000 monetary judgment against guarantors Northland LP and Northland Corp. The motion was denied. On June 1, 2011, the plaintiff filed a renewed motion for partial summary judgment, (No. 144) which is presently before the court, and a reply memorandum (No. 153). It seeks partial summary judgment on all of the counts in its complaint: count one, foreclosure; count two, enforcement of the note; count three, an entry of a monetary judgment against Northland, LP and Northland Corp. It does not seek summary judgment on the defendants' special defenses.
In support of its renewed motion for partial summary judgment, the plaintiff submitted the affidavit of Dennis van der Reis, dated May 23, 2011 (No. 145), with the following exhibits attached: a $25,000,000 promissory note issued by Northland, dated November 30, 2006 (exhibit A); a mortgage issued by Northland, dated November 30, 2006 (exhibit B); an indenture of lease (exhibit C); an assignment of leases and rents ("ALR") by Northland, dated November 30, 2006 (exhibit D); a UCC financing statement ("fixture filing"), recorded in the Hartford land records November 30, 2006 (exhibit E); a UCC financing statement ("SOS filing") filed with the Delaware secretary of state December 1, 2006 (exhibit F); a guaranty and indemnity agreement executed by Northland LP, dated November 30, 2006 (exhibit G); an environmental indemnity agreement executed by Northland and Northland LP, dated November 30, 2006 (exhibit H); a subordination of management agreement executed by Northland and Northland Corp., dated November 30, 2006 (exhibit I); an assignment of open-end leasehold mortgage, security agreement, and ALR by Deutsche Capital to LaSalle Bank National Association as trustee for registered holders of Comm 2006-08 commercial mortgage pass-through certificates, recorded in the Hartford land records February 22, 2007 ("LaSalle loan assignment") (exhibit J); a UCC financing statement recorded in the Hartford land records on February 22, 2007 ("LaSalle fixture filing assignment") (exhibit K); a UCC financing statement amendment filed with the Delaware secretary of state on March 15, 2007 ("LaSalle SOS assignment") (exhibit L); an assignment of open-end leasehold mortgage, security agreement, and ALR by LaSalle to Wells Fargo Bank, NA as trustee for registered holders of Comm 2006-08 commercial mortgage pass-through certificates ("Trustee"), recorded in the Hartford land records on April 11, 2008 ("Trustee loan assignment") (exhibit M); a UCC financing statement recorded in the Hartford land records on April 11, 2008 ("Trustee fixture filing assignment") (exhibit N); a UCC financing statement amendment filed with the Delaware secretary of state on March 27, 2008 ("Trustee SOS assignment") (exhibit O); a consent to transfer and substitution of indemnitor executed by Northland LP and Northland Corp., dated February 8, 2008 ("substitution of indemnitor") (exhibit P); a limited power of attorney issued by Trustee to LNR Partners, Inc., dated February 20, 2008 and recorded in the Hartford land records on November 24, 2009 ("LPOA") (exhibit an assignment of open-end leasehold mortgage, security agreement, and other loan documents by Trustee to Comm 2006-C8 Asylum Street, LLC ("the plaintiff"), dated November 12, 2009 and recorded in the Hartford land records on November 24, 2009 ("2009 loan assignment") (exhibit R); an assignment of leases and rents by Trustee to the plaintiff, dated November 12, 2009 and recorded in the Hartford land records on November 24, 2009 ("2009 ALR assignment") (exhibit S); a UCC financing statement recorded in the Hartford land records on November 24, 2009 ("2009 fixture filing assignment") (exhibit T); a UCC financing statement amendment filed with the Delaware secretary of state on November 30, 2009 ("2009 SOS assignment") (exhibit U); an August 17, 2009 letter informing Northland of its default (exhibit V); a September 3, 2009 letter informing Northland of its continued default and demanding payment (exhibit W); an October 6, 2009 letter informing guarantors Northland LP and Northland Corp. of their respective liabilities (exhibit X); a lis pendens recorded in the Hartford land records on December 2, 2009 (exhibit Y); and a transcript of the deposition of Steven P. Rosenthal (exhibit Z).
On April 5, 2011, the defendants filed an objection to the plaintiff's first motion for summary judgment and a memorandum in opposition (No. 136). They submitted the affidavit of Steven P. Rosenthal, dated April 5, 2011 (No. 137), together with the following attached exhibits: a letter by Charles R. Bennett, Jr. to Katherine A. Burroughs, dated December 11, 2009; a letter by Charles R. Bennett, Jr. to Katherine A. Burroughs, dated December 22, 2009; a letter of summary intent for landlord and/or lender consideration by John McCormick to Joel Grieco, dated December 14, 2009; and a letter by Charles R. Bennett, Jr. to Katherine A. Burroughs, dated February 10, 2011. On June 30, 2011, the defendants filed a response (No. 151) which incorporates the arguments in their memorandum in opposition to the plaintiff's first motion for summary judgment (No. 136).
ANALYSIS I SUMMARY JUDGMENT STANDARD
"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).
II PARTIAL SUMMARY JUDGMENT
The defendants argue that partial summary judgment for foreclosure liability is not available. The plaintiff argues that partial summary judgment for foreclosure liability is available.
As this Court recently held: "Connecticut Practice Book § 17-50 authorizes the entry of partial summary judgment, as to liability, where there is a genuine issue as to damages only. Pursuant to this rule, judges of the Superior Court may grant motions for partial summary judgment as to liability in foreclosure actions. See, e.g., Bank of New York v. Sebastian Mangiafico, Superior Court, judicial district of Hartford, Docket No. CV 08 5022713 (October 21, 2010, Aurigemma, J.) (granting summary judgment as to liability in foreclosure action); U.S. Bank National Assn. v. Joseph, Superior Court, judicial district of Hartford, Docket No. CV 10 6007164 (September 9, 2010, Aurigemma, J.) (granting summary judgment of foreclosure); Chase Home Finance, LLC v. Fequiere, Superior Court, judicial district of Fairfield, Docket No. CV 09 6004786 (October 25, 2010, Hartmere, J.) (outlining conditions precedent to grant of summary judgment in foreclosure actions); U.S. Bank National Assn. v. 3060 Main, LLC, Superior Court, judicial district of Fairfield, Docket No. CV 08 5019806 (July 6, 2010, Hartmere, J.) (granting summary judgment as to liability in foreclosure action). See also Danzig v. PDPA, Inc., 125 Conn.App. 242, 9 A.3d 382 (2010) (affirming trial court's entry of summary judgment in foreclosure action), appeal denied, 300 Conn. 920, 14 A.3d 1005 (2011)." COMM 2006-C8 Asylum Street, LLC v. Northland CityPlace II, LLC, Superior Court, judicial district of Hartford, Docket No. CV 10 6005957 (May 9, 2011, Sheldon, J.).
Connecticut Practice Book § 17-50 provides: "A summary judgment, interlocutory in character, may be rendered on the issue of liability alone, although there is a genuine issue as to damages. In such case the judicial authority shall order an immediate hearing before a judge trial referee, before the court, or before a jury, whichever may be proper, to determine the amount of the damages. If the determination is by a jury, the usual procedure for setting aside the verdict shall be applicable. Upon the conclusion of these proceedings, the judicial authority shall forthwith render the appropriate summary judgment."
Under the foregoing authorities, partial summary judgment as to liability is appropriate in a foreclosure action.
III RENEWED MOTION FOR SUMMARY JUDGMENT
The defendants argue that Practice Book § 17-50 is silent on a movant's right to file a renewed motion for partial summary judgment, but our Supreme Court has stated that, under Practice Book § 17-44, there is no prohibition against a second summary judgment on a different ground. The defendants contend that the plaintiff has not alleged any new evidence; it has only added additional foundation for its evidence. Their position is that because the plaintiff's present motion relies on exactly the same ground as its first motion for partial summary judgment, the plaintiff has turned the Court's decision on the first motion for summary judgment into an advisory opinion, and this motion must be denied.
The plaintiff argues that our Supreme Court has held that it is within the trial court's discretion to consider a renewed motion for summary judgment where new or additional evidence has been submitted, that was not before the trial court in ruling on the earlier motion. The plaintiff contends that the new affidavits of van der Reis and Golinsky are new evidence.
Both parties cite Mac's Car City, Inc. v. American National Bank, 205 Conn. 255, 262, 532 A.2d 1302 (1987), in which the Court held: "it is within the trial court's discretion to consider a renewed motion for summary judgment that has previously been denied where, as here, additional or new evidence has been submitted which was not before the court in ruling upon the earlier motion for summary judgment . . . We must caution, however, that our holding today should not be construed to condone future unnecessary piecemeal litigation brought on by the repeated filing of successive motions for summary judgment." As the plaintiff correctly points out, the renewed motion for summary judgment in Mac's Car City, Inc. was on the same ground, res judicata, as the original motion. Id., 258.
The defendants also cite Fiaschetti v. Nash Engineering Co., 47 Conn.App. 443, 706 A.2d 476, cert. denied, 244 Conn. 906, 714 A.2d 1 (1998). In Fiaschetti, the Court stated: "Our Supreme Court `found nothing in our rules of practice that prohibited the refiling [of a motion for summary judgment] and looked to the federal rules for guidance . . . [T]he federal courts have held that it is not an abuse of discretion or a violation of the doctrine of the "law of the case" for a trial judge to reconsider a motion for summary judgment that has previously been denied, particularly where new evidence has been presented which was not before the court at the time of the original motion, or a clarification of the law has since occurred.'" Mac's Car City, Inc. v. American National Bank, 205 Conn. 255, 260-61, 532 A.2d 1302 (1987).
"We discern no reason why a second motion for summary judgment, on a different ground, should not be considered. The only restriction on a party seeking a summary judgment . . . is that `the party must obtain the court's permission to file a motion for summary judgment after the case has been assigned to trial.'" Id., 446. Contrary to the defendants' position, the Fiaschetti court did not hold that a different ground was required for a second motion for summary judgment.
In the present case, the plaintiff has submitted new evidence. When it submitted its first motion for summary judgment, the van der Reis affidavit did not state whether the documents submitted as exhibits in support of the plaintiff's motion for summary judgment were: (1) made in the regular course of business; (2) that it was the regular course of business to make such records; or (3) that the documents were made when the act, transaction or event at issue occurred or shortly thereafter. The van der Reis affidavit therefore failed to satisfy the three requirements set forth in General Statutes § 52-180, and thus the documents could not be admitted pursuant to the business records exception to the hearsay rule or be considered in support of the plaintiff's motion for summary judgment.
"To be admissible under the business record exception to the hearsay rule, a trial court judge must find that the record satisfies each of the three conditions set forth in . . . § 52-180. The court must determine, before concluding that it is admissible, that the record was made in the regular course of business, that it was the regular course of such business to make such a record, and that it was made at the time of the act described in the report, or within a reasonable time thereafter . . . In applying the business records exception . . . [§ 52-180] should be liberally interpreted." (Internal quotation marks omitted.) Connecticut Light Power Co. v. Gilmore, 289 Conn. 88, 116, 956 A.2d 1145 (2008).
As support for the renewed motion for summary judgment, which is presently before the Court, the plaintiff submits a supplemental affidavit of van der Reis, in which he avers that the books and records appended to it, identified as exhibits A, B, C, D, E, F, G, H, I, J, K, L, M, N, O, P, Q, R, S, T, U, V, W, X, Y and Z, are true and exact copies of originals which ". . . were made in the regular course of business related to the Loan. It is the regular course of business for such records to be kept by LNR Partners, LLC and Plaintiff, and these books and records were made at or about the time stated therein."
The Court may properly consider a renewed motion for summary judgment where there is "additional or new evidence . . . which was not before the court in ruling upon the earlier motion for summary judgment." See Mac's Car City, Inc. v. American National Bank, supra, 205 Conn. 262. Since the newly authenticated exhibits attached to the supplemental van der Reis' affidavit constitute such new or additional evidence, the Court will entertain the instant motion.
IV PROPERTY VALUE
In their response to the plaintiff's motion for summary judgment (No. 136), the defendants argue that the motion must be denied because there is a material question of fact as to the value of the property. In its reply (No. 153), the plaintiff counters that it is not requesting a finding of money damages as to foreclosure, but only summary judgment as to liability for foreclosure.
"[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).
As discussed in part II, this Court recently held, in this very case, as follows:
"Connecticut Practice Book § 17-50 authorizes the entry of partial summary judgment, as to liability, where there is a genuine issue as to damages only. Pursuant to this rule, judges of the Superior Court may grant motions for partial summary judgment as to liability in foreclosure actions." COMM 2006-C8 Asylum Street, LLC v. Northland CityPlace II, LLC, supra, Superior Court, Docket No. CV 10 6005957.
For the foregoing reasons, the Court remains persuaded that it is not necessary to determine damages prior to ruling on a plaintiff's motion for summary judgment as to liability in a foreclosure action.
V PREPAYMENT PENALTY
In their response to the plaintiff's motion (No. 136), the defendants argue that a prepayment penalty cannot be enforced because the mortgage term providing for a prepayment penalty (page 51, ¶ 12.4) is silent as to whether it can be included in the mortgage debt in a foreclosure proceeding. In its reply (No. 153), the plaintiff argues that it is not requesting a finding of money damages for a prepayment penalty on this motion, but only summary judgment as to the defendants' liability for such a penalty. It contends that whether a prepayment penalty can be included in the mortgage debt depends upon the language in the note and upon whether the mortgagor defaulted with the intent to avoid the penalty.
Both parties cite Eastern Savings Bank, FSB v. Munson, 50 Conn.Sup. 374, 932 A.2d 1079 [ 43 Conn. L. Rptr. 354] (2007) in support of their positions on this question. At issue in that case was "whether a plaintiff mortgagee [was] entitled to a judgment in which a prepayment penalty is added to the mortgage debt." Id., 374. The Court there stated: "The short answer as to whether a prepayment penalty can be included in the mortgage debt in a foreclosure proceeding is that it depends on the language of the prepayment penalty provision in the note and whether the mortgagor defaulted with the intent to avoid the penalty." Id., 375. The note there at issue contained a prepayment provision that provided, in relevant part, that the borrower must pay a penalty "whether the prepayment is voluntary or involuntary, including any prepayment affected by the Note Holder's exercise of the acceleration provision of this note or the Security Instrument." Id.
The Court explained: "Our courts have recognized the legal validity of prepayment penalties in mortgages. They are not against public policy . . . or in violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq. . . . They are specifically allowed, although limited, in the Connecticut Abusive Home Loan Lending Practices Act . . ."
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"Prepayment penalties are also recognized to serve an important commercial purpose. They `lock in' the financial yield for which the mortgagee bargained at the inception of the transaction and further compensate the mortgagee for losses that may adhere in a payment prior to maturity. Those losses include the administrative and legal costs of making a new loan and in some cases, additional tax liability . . . A number of cases confirm the justification of prepayment penalties to compensate lenders for the loss of the bargain if the loan is paid before a specified period of time . . .
"There are limitations, however, on the right to receive a prepayment penalty. The penalty will not be enforced if it is unconscionable . . . The penalty will not be allowed when the property is condemned by a government exercising its power of eminent domain and the mortgage loan is paid from the funds realized from the condemnation . . . Similarly, a payment penalty will not be imposed when the mortgage is paid off by an insurance company as a result of fire destroying the premises . . . Again, the rationale is lack of voluntary prepayment.
"The limitation on the enforceability of prepayment penalties carries over to foreclosure cases . . . Again, the lack of voluntary prepayment by reason of the acceleration of the note is a factor . . .
"The general rule is more broadly expressed as follows: when a mortgage note simply provides for a penalty if the note is paid before a specified date, the mortgagor defaults and the mortgagee brings an action to foreclose on the mortgage, a prepayment penalty is not permitted because the note is accelerated at the option of the holder." (Citations omitted.) Id., 376-78.
The Court continued: "The courts however recognize that there cannot be a per se rule that acceleration precludes a claim for a prepayment provision because a borrower may default intentionally and induce the acceleration and foreclosure in order to avoid prepayment liability . . . [T]he implausibility of a mortgagor's intentionally defaulting to defeat a prepayment penalty is further substantiated by the cost of the foreclosure . . ., including filing fees, counsel fees, appraisal fee, title fee and committee fee . . . in a foreclosure by sale. When there is clear evidence, however, that the mortgagor did intentionally default in order to avoid the prepayment penalty, the courts have no difficulty requiring that the prepayment penalty be added to the mortgage debt.
"Where the promissory note . . . expressly provides for imposition of a prepayment premium upon acceleration, that premium is required to be included in the final foreclosure judgment." (Citations omitted; emphasis in original.) Id., 380-81. Because the note contained an express provision providing for a prepayment penalty whether the prepayment was voluntary or involuntary, the Court held that the penalty was enforceable. Id., 382.
In the present case, the note (exhibit A to van der Reis' supplemental affidavit No. 145) provides, at section three: "This Note may not be prepaid in whole or in part at the option of the Maker except as provided in Section 12.4 of the Mortgage." The mortgage (exhibit B to van der Reis' supplemental affidavit No. 145) Article XII, section 12.4(c) provides, in pertinent part: "If after the Lockout Date the indebtedness evidenced by the Note shall have been declared due and payable by Mortgagee pursuant to the terms thereof or the terms hereof or the provisions of any other Loan Document due to a default by Mortgagor, then there shall also then be immediately due and payable upon such prepayment, a prepayment fee (the ` Post-Lockout Premium') in an amount equal to the greater of (I) the Yield Maintenance Amount (as hereinafter defined), or (ii) one percent (1%) of the unpaid principal balance of the Note at the time of such prepayment (alternatively, the ` Tender Date')."
Because the note and mortgage contain express provisions providing for a "prepayment fee" in the event that the debt has been declared due and payable by the mortgagee due to a default of the mortgagor, which are the present circumstances, the fee is enforceable as a penalty thereunder. Sufficient evidence exists to support the plaintiff's motion for summary judgment as to the defendants' liability for a prepayment penalty.
VI ADMISSIBILITY OF DEPOSITIONS
In their response to the plaintiff's motion for summary judgment (No. 151), the defendants argue that certified deposition transcripts are not acceptable as evidence to support a motion for summary judgment; and that the plaintiff cannot rely upon the deposition of Rosenthal (exhibit Z) without specifying the portions of the testimony on which it relies because the parties agreed to reserve their objections until trial.
"While [a party's] deposition testimony is not conclusive as a judicial admission . . . it is sufficient to support entry of summary judgment in the absence of contradictory competent affidavits that establish a genuine issue as to a material fact." Collum v. Chapin, 40 Conn.App. 449, 450 n. 2, 671 A.2d 1329 (1996). Where uncertified deposition transcripts are submitted without objection in support of or in opposition to a motion for summary judgment, the Court may, in its discretion, choose to consider or exclude them. Barlow v. Palmer, 96 Conn.App. 88, 92, 898 A.2d 835 (2006).
Practice Book § 13-31 provides, in pertinent part: "(a) Use of Depositions. At the trial of a civil action, probate proceeding or administrative appeal, or upon the hearing of a motion or an interlocutory proceeding, any part or all of a deposition, so far as admissible under the rules of evidence applied as though the witness were there present and testifying, may be used against any party who was present or represented at the taking of the deposition or who had reasonable notice thereof, in accordance with any of the following provisions:
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"(3) The deposition of a party or of anyone who at the time of the taking of the deposition was an officer, director, or managing agent or employee or a person designated under Section 13-27(h) to testify on behalf of a public or private corporation, partnership or association or governmental agency which is a party may be used by an adverse party for any purpose."
Practice Book § 13-27(h) provides: "A party may in the notice and in the subpoena name as the deponent a public or private corporation or a partnership or an association or a governmental agency or a state officer in an action arising out of the officer's performance of employment and designate with reasonable particularity the matters on which examination is requested. The organization or state officer so named shall designate one or more officers, directors, or managing agents, or other persons who consent to testify on its behalf, and may set forth, for each person designated, the matters on which the person will testify. The persons so designated shall testify as to matters known or reasonably available to the organization. This subsection does not preclude the taking of a deposition by any other procedure authorized by the rules of practice."
The defendants do not provide the Court with any authority for their contention that a deposition cannot be used as evidence to support entry of summary judgment where the parties agreed to reserve their objections until trial. The defendants have, in fact, raised numerous objections to the plaintiff's evidence in their memorandums of law. Further, Rosenthal is the CEO of Northland Investment Corporation and an officer, president or other representative for many other Northland entities (exhibit Z, p. 13, lines 7-18) and the deposition transcript is certified.
Based on the foregoing authorities, all or any part of a deposition transcript is acceptable as evidence to support a motion for summary judgment; and the certified deposition transcript of Rosenthal is admissible.
VII ADMISSIBILITY OF EXHIBITS A Sufficiency of van der Reis Affidavit
In their original response (No. 136), the defendants argue that the van der Reis affidavit fails to establish a foundation for any of the attached exhibits. In the defendants' second response (No. 151), however, they concede that the supplemental van der Reis affidavit establishes his competency to lay a business record foundation in this matter.
"[O]nly evidence that would be admissible at trial may be used to support or oppose a motion for summary judgment, and the applicable provisions of our rules of practice contemplate that supporting [or opposing] documents . . . be made under oath or be otherwise reliable." (Internal quotation marks omitted.) Rockwell v. Quintner, 96 Conn.App. 221, 233 n. 10, 899 A.2d 738, cert. denied 280 Conn. 917, 908 A.2d 538 (2006). "Practice Book § 17-45 provides in relevant part that: `[a] motion for summary judgment shall be supported by such documents as may be appropriate, including but not limited to affidavits, certified transcripts of testimony under oath, disclosures, written admissions and the like . . .'"
"`Practice Book § [17-45], although containing the phrase "including but not limited to," contemplates that supporting documents to a motion for summary judgment be made under oath or be otherwise reliable . . . [The] rules would be meaningless if they could be circumvented by filing [unauthenticated documents] in support of or in opposition to summary judgment.'" New Haven v. Pantani, 89 Conn.App. 675, 678, 874 A.2d 849 (2005); see also Gianetti v. Anthem Blue Cross Blue Shield of Connecticut, 111 Conn.App. 68, 72-73, 957 A.2d 541 (2008), cert. denied, 290 Conn. 915, 965 A.2d 553 (2009).
"General Statutes § 52-180 provides: `(a) Any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible as evidence of the act, transaction, occurrence or event, if the trial judge finds that it was made in the regular course of any business, and that it was the regular course of the business to make the writing or record at the time of the act, transaction, occurrence or event or within a reasonable time thereafter.'"
"`To be admissible under the business record exception to the hearsay rule, a trial court judge must find that the record satisfies each of the three conditions set forth in . . . § 52-180. The court must determine, before concluding that it is admissible, that the record was made in the regular course of business, that it was the regular course of such business to make such a record, and that it was made at the time of the act described in the report, or within a reasonable time thereafter . . . In applying the business records exception . . . [§ 52-180] should be liberally interpreted.' (Internal quotation marks omitted.) Connecticut Light Power Co. v. Gilmore, 289 Conn. 88, 116, 956 A.2d 1145 (2008). `[I]t is not necessary . . . that the witness have been the entrant himself or in the employ of the business when the entry was made . . . It is sufficient for a witness to testify that it was the regular business practice to create a document within a reasonable time after the occurrence of the event.' (Citation omitted.) Calcano v. Calcano, 257 Conn. 230, 241, 777 A.2d 633 (2001). While there is no requirement in the business records exception to the hearsay rule that the documents be prepared by the organization itself to be admissible as that organization's business records; see, e.g., New England Savings Bank v. Bedford Realty Corp., 246 Conn. 594, 603, 717 A.2d 713 (1998); the witness whose testimony provides the foundation for the admission of a business record must testify to the three requirements outlined in General Statutes § 52-180. See, e.g., Calcano v. Calcano, supra, 257 Conn. 241; First Union National Bank v. Woermer, 92 Conn.App. 696, 709, 887 A.2d 893, cert. denied, 277 Conn. 914, 895 A.2d 788 (2005); Webster Bank v. Flanagan, 51 Conn.App. 733, 745, 725 A.2d 975 (1999)." COMM 2006-C8 Asylum Street, LLC v. Northland CityPlace II, LLC, supra, Superior Court, Docket No. CV 10 6005957.
The supplemental van der Reis affidavit contains an averment that it is made on his personal knowledge as an asset manager for LNR Partners, Inc., the non-member manager for the plaintiff and the special servicer for the loan, whose job duties include reviewing and maintaining loan documents, overseeing litigation, reviewing loan files, interacting with borrowers, master servicers and legal counsel. The affidavit further provides that it was "duly sworn" before a notary public, and contains the notary's signature and stamp. In the supplemental affidavit, van der Reis states: "These books and records were made in the regular course of business related to the Loan. It is the regular course of business for such records to be kept by LNR Partners, LLC and Plaintiff, and these books and records were made at or about the time stated therein." Van der Reis' affidavit then specifically references exhibits A, B, C, D, E, F, G, H, I, J, K, L, M, N, O, P, Q, R, S, T, U, V, W, X, Y and Z and attests that the documents are all "true and correct" copies of originals to which he has access as aforesaid.
These exhibits are admissible under the business records exception to the hearsay rule, and thus may properly be considered on this motion for summary judgment.
B Vergano Signature
In their second response (No. 151), the defendants argue that the affidavit of Sandy Vergano is insufficient to authenticate the allonge that is attached to the note (exhibit A to both the van der Reis affidavit, No. 145 and the Vergano affidavit, No. 147) because the allonge is not dated and Vergano only states that the signature "appears" to be his or her signature.
The plaintiff responds that the Vergano affidavit is not offered to authenticate the allonge that is attached to the note (exhibit A to both the van der Reis affidavit, No. 145 and the Vergano affidavit, No. 147); but was submitted to refute the defendants' challenges.
As discussed in part VII, A, supra, the supplemental van der Reis affidavit is sufficient to authenticate the allonge.
Therefore, the Vergano signature is not necessary to establish a foundation for the admissibility of the allonge.
C Cassano Allonge
In their second response (No. 151), the defendants also argue that the plaintiff failed to establish the authenticity of the allonge assigning the interest of LaSalle Bank to Wells Fargo (page 8 of exhibit A to the van der Reis affidavit) because it has not submitted an affidavit to swear or affirm the authenticity of the signature of Karyn Cassano.
As discussed in part VII, A, the supplemental van der Reis affidavit is sufficient to authenticate the allonge.
Therefore, an affidavit from Cassano is not necessary to establish a foundation for the admissibility of the allonge.
VIII LIABILITY FOR FORECLOSURE AND ENFORCEMENT OF THE NOTE A. Elements of the Plaintiff's Claim of Liability
The plaintiff argues that it is entitled as a matter of law to foreclose the mortgage on the borrower's property because there are no genuine issues of material fact. In opposition, the defendants argue that the evidence submitted by the plaintiff is insufficient to support entry of summary judgment.
"`To obtain summary judgment in a foreclosure matter, the plaintiff must demonstrate the absence of a genuine issue of material fact as to its prima facie case. See Bank of New York v. Conway, 50 Conn.Sup. 189, 193-95, 916 A.2d 130 (2006). "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.) Id., 193-94.' Webster Square Investors, LLC v. Rebelo, Superior Court, judicial district of New Britain, Docket No. CV 08 5008381 (January 31, 2011, Shortall, J.T.R.). See also Ocwen Federal Bank, FSB v. Charles, 95 Conn.App. 315, 319 n. 5, 898 A.2d 197, cert. denied, 279 Conn. 909, 902 A.2d 1069 (2006) (`[t]o make out its prima facie case, [the mortgagee] had to prove by a preponderance of the evidence that it was the owner of the note and mortgage and that [the mortgagor] had defaulted on the note').
"`[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). U.S. Bank National v. Suvemay, Superior Court, judicial district of Fairfield, Docket No. CV 08 50143585 (October 4, 2010, Hartmere, J.)." COMM 2006-C8 Asylum Street, LLC v. Northland CityPlace II LLC, supra, Superior Court, Docket No. CV 10 6005957.
The exhibits to the supplemental van der Reis affidavit show an unbroken chain of ownership that ends with the plaintiff. Exhibit A is a promissory note showing that Northland promised to pay $25,000,000 plus interest to Deutsche Banc Mortgage Capital, LLC, the promise was secured by a leasehold mortgage and security agreement and an assignment of leases and rents, and the holder of the note is entitled to the benefits of the mortgage and the assignment. Attached to exhibit A is an allonge showing that Deutsche Bank Mortgage Capital, LLC assigned the note to LaSalle Bank National Association as trustee for the registered holders of COMM 2006-C8 Commercial Mortgage Pass Through Certificates. Also attached to exhibit A is another allonge showing that LaSalle Bank National Association as trustee for the registered holders of COMM 2006-C8 Commercial Mortgage Pass Through Certificates assigned the note to Wells Fargo Bank, N.A., as Trustee for the registered holders of COMM 2006-C8 Commercial Mortgage Pass Through Certificates. Additionally, attached to exhibit A is yet another allonge showing that Wells Fargo Bank, N.A., as Trustee for the registered holders of COMM 2006-C8 Commercial Mortgage Pass Through Certificates assigned the note to COMM 2006-C8 Asylum Street, LLC.
Exhibit B is a leasehold mortgage and security agreement showing that Northland mortgaged its leasehold interest in the real property commonly known as City Place II, 151-163 Asylum Street, Hartford, Connecticut to Deutsche Banc Mortgage Capital, LLC to secure the debt evidenced by the note.
Exhibit J is an assignment of the leasehold mortgage and security agreement from Deutsche Bane Mortgage Capital, LLC to LaSalle Bank National Association as trustee for the registered holders of COMM 2006-C8 Commercial Mortgage Pass Through Certificates.
Exhibit M is an assignment of the leasehold mortgage and security agreement from LaSalle Bank National Association as trustee for the registered holders of COMM 2006-C8 Commercial Mortgage Pass Through Certificates to Wells Fargo Bank, N.A., as Trustee for the registered holders of COMM 2006-C8 Commercial Mortgage Pass Through Certificates.
Exhibit R is an assignment of the leasehold mortgage and security agreement from Wells Fargo Bank, N.A., as Trustee for the registered holders of COMM 2006-C8 Commercial Mortgage Pass Through Certificates to COMM 2006-C8 Asylum Street, LLC to COMM 2006-C8 Asylum Street, LLC.
A condition precedent to foreclosure is set out in the mortgage at Article XIV, section 14.1(c), which provides that in the event of a default the mortgagor has thirty days to cure "after written notice thereof from Mortgagee to Mortgagor." The plaintiff has shown that this condition precedent has been fulfilled by submitting the following exhibits: an August 17, 2009 letter informing Northland of its default (exhibit V) and a September 3, 2009 letter informing Northland of its continued default and demanding payment (exhibit W). Exhibit Z, the affidavit of Rosenthal, the CEO of Northland Investment Corporation, shows that the plaintiff stopped making payments on the note as of May 2009. (Exhibit Z, p. 51, lines 4-6.)
The foregoing exhibits show that the plaintiff is the owner of the note and mortgage, and all conditions precedent to foreclosure, as mandated by the mortgage, have been satisfied. See Webster Square Investors, LLC v. Rebelo, supra, Superior Court, Docket No. CV 08 5008381. See also Ocwen Federal Bank, FSB v. Charles, supra, 95 Conn.App. 319 n. 5. Thus, there is sufficient evidence before the Court to warrant granting the plaintiff's motion for a partial summary judgment as to liability on its claim for foreclosure of the mortgage, as pleaded in count one, and on its claim for enforcement of the note, as pleaded in count two, unless the defendants can be found to have raised a genuine issue of material fact in support of the existence of any viable special defense.
B The Defendants' Special Defenses
The defendants argue that it is procedurally improper to dispose of special defenses by summary judgment. That, however, is not the purpose of the plaintiff's pending motion. Instead, the plaintiff seeks a determination by this Court that it is entitled to judgment as a matter of law as to the defendants' liability on its claim for foreclosure, which requires it to establish that there is no genuine issue as to any material fact upon which the defendants' liability depends. Those material facts include both the essential elements of its own claim for foreclosure and the essential elements of any duly pleaded special defense which, if proved by the defendants at trial, would defeat the plaintiff's claim. To prevail on a motion for summary judgment on any claim as to which a special defense has been interposed, the plaintiff must demonstrate either that no competent evidence supporting that special defense has been placed before the Court or that the special defense, even if supported by some competent evidence, would be legally insufficient to defeat its claim as a matter of law.
As this Court recently held: "`Only after [the] initial burden is met does the court then determine whether any special defenses alleged are legally sufficient to defeat a claim for foreclosure. [ Bank of New York v. Conway, supra, 50 Conn.Sup. 195]; see also LaSalle National Bank v. Shook, Superior Court, judicial district of New London, [Docket No. CV 0549266 (July 13, 2000, Hurley, J.) ( 29 Conn. L. Rptr. 462)] ("When a complaint and supporting affidavits establish an undisputed prima facie case for a foreclosure action, a court must only determine whether the special defense is legally sufficient before granting summary judgment"), aff'd, 67 Conn.App. 93, 787 A.2d 32 (2001).' Webster Square Investors, LLC v. Rebelo, supra, Superior Court, Docket No. CV 08 5008381." COMM 2006-C8 Asylum Street, LLC v. Northland CityPlace II, LLC, supra, Superior Court, Docket No. CV 10 6005957.
In this action, the defendants have asserted three special defenses: (1) lack of evidence of ownership and assignment of the note and mortgage; (2) unclean hands; and (3) failure to state a monetary claim. The plaintiff maintains that summary judgment is warranted because the defendants' special defenses are factually unsupported, legally insufficient and do not relate to the making, validity or enforcement of the note.
1. First Special Defense: Deficient Evidence of Ownership and Assignment
The Court has already determined that the defendants' first special defense is not viable, for it has found sufficient evidence of the plaintiff's ownership of the note and mortgage in the supplemental affidavit of Dennis van der Reis and the duly authenticated loan documents attached thereto. The plaintiff is entitled to summary judgment notwithstanding the defendants' first special defense.
2. Second Special Defense: Unclean Hands
The defendants argue that the defendants have unclean hands because the plaintiff's claim for foreclosure depends on its own inequitable conduct after the execution of the note and mortgage. The plaintiff counters that the defense of unclean hands is only proper if the plaintiff would not be able to bring the foreclosure action but for its improper conduct.
"A successful unclean hands defense to a foreclosure action may be asserted in situations where a lender takes advantage of an unsophisticated borrower, unrepresented by counsel, such as by charging significant fees or an arbitrarily high interest rate. Monetary Funding Group, Inc. [v. Pluchino, 87 Conn.App. 401, 407-08, 867 A.2d 841 (2005)]. Similarly, where a lender misleads an unsophisticated borrower, a foreclosure of the note held by the lender may be barred by unclean hands. Id. The lender's misdeeds must, however, arise to `intentional misconduct with respect to the . . . transaction' and be undertaken to gain some improper advantage, such as generating `excessive fees and costs' for the lender. CT Page 21222 Id., 410. Accord, Rockville Bank v. Southington Hospitality Group, LLC, Superior Court, judicial district of Hartford, Docket No. CV 10 6012854 (May 12, 2011, Aurigemma, J.) (holding that the special defense of unclean hands was insufficient to defeat a foreclosure action because, "The defendants do not allege that they were unsophisticated borrowers, unrepresented by counsel, or that the plaintiff engaged in sharp lending practices, such as charging excessive fees").
Here, as in the above-quoted cases, the defendants "do not allege that they were unsophisticated borrowers, unrepresented by counsel, or that the plaintiff engaged in sharp lending practices, such as charging excessive fees." Id. Instead, the only complaint they raise is that the plaintiffs failed to negotiate an amicable settlement with them after they defaulted instead of bringing this action. Such a defense might be viable if the note itself required mediation as a precondition to the institution of judicial proceedings, but that is not the case here.
Therefore, this special defense is legally insufficient to defeat the plaintiff's motion for partial summary judgment as to the defendants' liability on its claims for foreclosure and enforcement of the note.
3. Third Special Defense: Failure to State a Monetary Claim
The defendants next interpose the special defense that, because all rental amounts net of the ordinary operating expenses have been held in a separate account, the motion should be denied. The plaintiffs correctly argue that this raises no genuine issue of material fact regarding the defendants' default on the note or the plaintiff's entitlement to foreclose on the mortgaged property and enforce the note as a result of that default. This special defense is therefore legally insufficient to defeat the plaintiff's claim for partial summary judgment as to the defendants' liability on its claim for foreclosure.
IX LIABILITY ON THE GUARANTY
In its reply (No. 153), the plaintiff argues that, because it has provided evidence of an ongoing default it is entitled to entry of a monetary judgment for $2,000,000 based on the express terms of the guaranty. The defendants contend that the motion for summary judgment on the liability of the guarantors is premature because it has not yet been determined whether the value of the property is insufficient to pay the judgment of foreclosure, and this is a material question of fact. They contend that the proper procedure for recovery against a guarantor is through a deficiency judgment in accordance with General Statutes §§ 49-1 and 49-14.
General Statutes § 49-1 provides: "The foreclosure of a mortgage is a bar to any further action upon the mortgage debt, note or obligation against the person or persons who are liable for the payment thereof who are made parties to the foreclosure and also against any person or persons upon whom service of process to constitute an action in personam could have been made within this state at the commencement of the foreclosure; but the foreclosure is not a bar to any further action upon the mortgage debt, note or obligation as to any person liable for the payment thereof upon whom service of process to constitute an action in personam could not have been made within this state at the commencement of the foreclosure. The judgment in each such case shall state the names of all persons upon whom service of process has been made as herein provided."
General Statutes § 49-14 provides, in pertinent part: "(a) At any time within thirty days after the time limited for redemption has expired, any party to a mortgage foreclosure may file a motion seeking a deficiency judgment. Such motion shall be placed on the short calendar for an evidentiary hearing. Such hearing shall be held not less than fifteen days following the filing of the motion, except as the court may otherwise order. At such hearing the court shall hear the evidence, establish a valuation for the mortgaged property and shall render judgment for the plaintiff for the difference, if any, between such valuation and the plaintiff's claim. The plaintiff in any further action upon the debt, note or obligation, shall recover only the amount of such judgment."
The plaintiff cites Citibank N.A. v. Skar, LLC, Superior Court, judicial district of Hartford, Docket No. CV 09 5028663 (December 4, 2009, Satter, JTR) [ 48 Conn. L. Rptr. 865], in which, under the language of the guaranty, the guarantors were required to pay the entire indebtedness of the principal debtors after foreclosure, not just the amount of any deficiency.
The defendants cite Cadle Co. of Connecticut, Inc. v. C.F.D. Development Corp., 44 Conn.App. 409, 413, 689 A.2d 1166 (1997), appeal dismissed, 243 Conn. 667, 706 A.2d 975 (1998), in which the Appellate Court stated that: ". . . the liability of the guarantor is based on the liability of the debtor." In that case, our Supreme Court granted certification on the following issue: "Under the circumstances of this case, did the Appellate Court properly conclude that the guarantors on the note held by the plaintiff were not liable on their guarantee?" (Internal quotation marks omitted.) Cadle Co. v. C.F.D. Development Corp., 241 Conn. 901, A.2d 303 (1997). The Court did not, however, decide the issue because it later dismissed the appeal due to "procedural irregularities." Cadle Co. v. C.F.D. Development Corp., 243 Conn. 667, 669, 706 A.2d 975 (1998).
In the present case, the language of the guaranty (exhibit G, pp. 2-3) provides, in relevant part: "Guarantor hereby unconditionally and irrevocably guarantees up to [$2,000,000] of the principal balance of the Loan until such time as (I) no Event of Default is continuing hereunder or under any of the other Loan Documents . . . This is a guaranty of payment and performance and not of collection. The liability of Guarantor under this Guaranty shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Borrower or any other person (including, without limitation, other Guarantors, if any), nor against the collateral for the Loan . . . If the indebtedness and obligations guaranteed hereby are partially paid or discharged by reason of the exercise of any of the remedies available to Lender, this Guarantee shall nevertheless remain in full force and effect, and Guarantor shall remain liable for all remaining indebtedness and obligations guaranteed hereby. Subject to the terms hereof, Guarantor shall be liable for those amounts guaranteed hereby in the event the full amount of the Indebtedness owing under the Loan Documents is not received by Lender after the receipt of any payments or after foreclosure of the Mortgage."
This language makes it clear that the guarantor's liability depends upon the amount of "remaining indebtedness," if any, "after foreclosure of the Mortgage." Because the plaintiff moves for summary judgment on liability only, the amount of the defendants' remaining indebtedness or deficiency, if any, has yet to be determined. This is a material question of fact that cannot be decided as a matter of law. Because the evidence is insufficient to support the plaintiff's motion for an entry of a monetary judgment on count three, liability for the guaranty, the motion must be denied as to that count.
CONCLUSION
The Court hereby concludes, for the above-stated reasons, that: (1) partial summary judgment must be GRANTED as to liability on the plaintiff's claim for foreclosure, as pleaded in count one; and (2) summary judgment must also be GRANTED as to liability on the plaintiff's claim for enforcement of the note and collection of a prepayment penalty, as pleaded in count two; but (3) summary judgment must be DENIED as to the plaintiff's claim for enforcement of the guaranty, as pleaded in count three.
IT IS SO ORDERED this 4th day of October 2011.