Opinion
No. X04-CV 89-0125327 S
October 24, 2003
MEMORANDUM OF DECISION RE DEFICIENCY JUDGMENT
This foreclosure case has a long and convoluted legal background and is again before the trial court, now for determination and entry of a deficiency judgment. On December 31, 2002, title to the properties being foreclosed became absolute in the plaintiff. After title vested, the present plaintiff, Republic Credit Corporation, hereafter "Republic," timely filed a motion for deficiency judgment, which was contested. As set forth in detail below, the court finds there to be a deficiency and finds the total amount now due the plaintiff to be $4,090,825.38.
The defendants executed a mortgage and note in favor of First Constitution Bank on November 22, 1988 for $2.2 million. First Constitution started its foreclosure action based on nonpayment by the defendants in August 1989 and judgment entered on 9/8/1992. Upon the Bank's insolvency, the FDIC was appointed its receiver and secured a judgment of strict foreclosure on October 7, 1999. The appellate court affirmed, see Federal Deposit Ins. Corp. v. Caldrello, 68 Conn. App. 68, 789 A.2d 1005, cert. denied, 260 Conn. 903, 793 A.2d 1088, cert. denied, 537 U.S. 824, 123 S.Ct. 111, 154 L.Ed.2d 35 (2002). Republic Credit Corporation is now the plaintiff by virtue of an assignment to it. In addition, this foreclosure action case is one of seven proceedings involving claims between these parties based on the original loan.
I DISCUSSION
A judgment of strict foreclosure entered on October 7, 1999 in favor of the Federal Deposit Insurance Corporation. The appellate court affirmed the foreclosure judgment on January 25, 2002. Federal Deposit Ins. Corp. v. Caldrello, 68 Conn. App. 68, 789 A.2d 1005, cert. denied, 260 Conn. 903, 793 A.2d 1088, cert. denied, 537 U.S. 824, 123 S.Ct. 111, 154 L.Ed.2d 35 (2002). Subsequently, the original judgment was modified on October 23, 2002, (McLachlan, J.), providing the holders of the equity of redemption, the defendants, Joseph and Sandra Caldrello, a law date of November 18, 2002. They did not redeem and title vested in Republic, the successor in interest to First Constitution Bank, by virtue of an assignment from the Federal Deposit Insurance Corporation, the bank's receiver upon its insolvency.
Connecticut General Statutes § 49-14 governs Connecticut's deficiency judgment procedure. Despite the separate provisions, the "statutory procedure . . . is part of, and complimentary to, the traditional and equitable common law action of strict foreclosure." Federal Deposit Insurance Corporation v. Hillcrest Associates, 233 Conn. 153, 172, 659 A.2d 138 (1995). Pursuant to the statute's mandate, it becomes the court's obligation to determine the value of the mortgaged properties and the amount of the debt at any such deficiency hearing. The value of the properties is determined as of the date title vests in the foreclosing party, in this instance December 31, 2002.
Sec. 49-14. "Deficiency judgment: (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 . . . 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."
A. Fair Market Value
The various parcels of real estate subject to this foreclosure action were appraised in 1999 at the time of the entry of strict foreclosure. The total value was then found to be $1,112,000. The court finds that the defendants failed to redeem their equity of redemption and that the plaintiff, Republic, holds title to the properties in question which are known and described as:
1. Lots 3-8 Osprey Estates, Pequot Avenue, New London, Connecticut
2. 929 Pequot Avenue, New London, Connecticut
3. 939 Pequot Avenue, New London, Connecticut
The court finds, based on the reports and testimony of the plaintiff's real estate appraiser, that the fair market value of the properties as of December 31, 2002, is as follows:
1. Lots 3-8 Osprey Estates, a total value of $483,000
The respective values of the lots individually, the appraiser testified are; lot 3-4 $125,000; Lot 5 $125,000; Lot 6 $225,000; lot 7-8 $215,000. The court specifically finds the appraiser's combination of the smaller lots into two lots, due to zoning requirements, to be reasonable and to reflect their highest and best use for purposes of determining their market value. In addition, the court concludes taking these individual values into account with a discount for their aggregate sale or development is proper.
2. 929 Pequot Avenue, a total value of 714,000
3. 939 Pequot Avenue, a total value of 366,000
Total Value of all properties as of December 31, 2002 $1,563,000
While no expert appraiser testified on behalf of the defendants, the Caldrellos disputed all opinions as to fair market value; and in particular those for the residence located at 929 Pequot Avenue. They introduced evidence that the cost of construction and all improvements had been in excess of $1 million dollars. But the costs of construction and improvements, no matter how important to those who choose them, do not, without more, establish fair market value on the date in question. In a deficiency judgment proceeding:
[t]he determination of [a property's] value by a court is the expression of the court's opinion aided ordinarily by the opinions of expert witnesses, and reached by weighing those opinions in light of all the circumstances in evidence bearing upon value and its own general knowledge of the elements going to establish it. [T]he determination of the credibility of expert witnesses and the weight to be accorded their testimony is within the province of the trier of facts, who is privileged to adopt whatever testimony he reasonably believes to be credible . . .
(Internal quotation marks and citations omitted.) Bank of S.E. Conn. v. Nazarko Realty Group, 49 Conn. App. 452, 456, 714 A.2d 722 (1998).
The defendants also introduced evidence of the advertised values for which Republic is offering the properties for sale. Those advertised amounts total $2,515,000, with the property at 929 Pequot Avenue listed at $850,000, the property at 939 Pequot Avenue at $795,000 and the lots at $870,000. In addition, the real estate broker's advertising flyer lists the total real estate, if all parcels are purchased together, at a discount for a total of $2,000,000. The court concludes these amounts do not establish fair market value as of December 31, 2002. If the costs of advertising, the costs associated with holding the properties for a period of time, including taxes and insurance and the commission to be paid the real estate brokers are taken into account, the advertised prices are not disproportionately greater than the appraised values above stated. The court concludes that the opinions of the plaintiff's real estate appraiser reflect a reasonable fair market value as of December 31, 2002, taking into account all the circumstances.
B. Computation of Debt
The second task of the court is to compute the total amount of the debt, which includes principal amounts due, interest, disbursements for the maintenance and protection of the properties, costs and legal fees. As noted, the plaintiff, Republic, is the holder of the note and mortgage by virtue of an assignment to it by the Federal Deposit Insurance Corporation. It retains all the rights and obligations which the FDIC had, flowing from the note and mortgage originally entered into between the Caldrellos and First Constitution Bank.
The assignment, recorded in Volume 1157 at page 46 of the City of New London Land Records, specifically states "all right, title and interest in, if any, that certain open end mortgage . . ."
Some of the amounts due the plaintiff have previously been established in the judgment of 10/7/99. These amounts are the starting point for the establishment of the current full amount of the debt. The total amount found in 1999 was $4,562,723.38, broken down as follows:
a. Principal as of 10/7/99 $2,193,336.31 CT Page 11074
b. Interest at a per diem rate of $418.87 1,707,882.15
c. Legal fees awarded to 9/8/1992 68,804.92
d. Taxes advanced 590,000.00
e. Appraisal expenses 2,700.00
Total Amount $4,562,723.38
Additional legal fees were claimed, but none were awarded.
Of the amounts claimed by the plaintiff now to be due, the legal fees were contested by the defendants. In City Savings Bank of Bridgeport v. Miko, 1 Conn. App. 30, 37, 467 A.2d 929 (1983), the court found that legal fees, although not expressly mentioned in the deficiency judgment statute, were expressly authorized by § 49-7, which validates, in the context of foreclosure proceedings, the collection of legal fees established by agreement. The court held that "[t]he judgment is inclusive of such fees where appropriate."
Republic is seeking in this instance not only the legal fees in connection with the foreclosure action and the deficiency judgment motion, but all fees incurred in connection with matters involving the Caldrellos, based on the express language of the executed promissory note with the Caldrellos. While the court does not dispute that the note provides it this right, § 49-7 of the statute permits the court to "determine the amounts to be allowed for those expenses and attorneys fees, even though the agreement may specify a larger sum." The court finds it reasonable, in the context of this case and its ability to analyze those matters before it in detail, to allow only those fees directly incurred in connection with the instant action for foreclosure and deficiency judgment. The court leaves for another day and to another trier of fact the determination of legal fees in the other pending actions.
The court finds that the plaintiff is entitled to the following legal fees including those from the original judgment of 9/8/1992, those claimed by the FDIC in 10/9/99 and all those now claimed. These amounts are, respectively; $68,804.92 in the original judgment of 9/08/1992; $47,832.00 claimed in 1999; and $176,508.90 now found by the court to be due for Republic's work in the matter since 2000. The court has reviewed the affidavits presented by Republic which contain a breakdown of the work performed including the hourly rates of all attorneys who have performed legal work in this matter. The court finds the charges to be reasonable. The total amount awarded for legal fees since the inception of this foreclosure action in 1989 is $293,145.82.
An affidavit for the total FDIC fees was again filed with the court under oath.
The total amounts now due the Plaintiff are:
(1) Principal balance $2,193,336.31
(2) Interest — at a per diem rate of 418.87 through 10/24/2003, the court
This amount was established by previous court judgment and remains unchanged.
hereby awards additional per diem
interest of 68,603.41
for a total including the amounts previously found 2,396,085.56
In addition, per diem interest continues until the debt has been paid in full or otherwise satisfied.
(3) Legal Fees 293,145.82
(4) Real estate taxes paid 753,894.26
This includes previously established amounts of $590,000 and the current amounts of $163,894.26.
(5) Other costs and expenses 11,213.43
Paid by Republic as costs to the firm of Cole-Chu and Cipparone.
(6) Appraisal costs and fees 6,150.00
Report fees of $2,700 per the judgment, $2,700 for the deficiency hearing and additional time and court testimony $750.00.
Total all amounts $5,653,825.38
As the total debt without question far exceeds the fair market value of the real estate as of December 31, 2002, the plaintiff has established its entitlement to a deficiency judgment. Deducting from the total amount of the debt found the value of the real estate the plaintiff now owns by virtue of the strict foreclosure, the court finds that the amount of the deficiency is $4,090,825.38. Judgment may enter for the plaintiff in this amount, together with statutory costs.
BY THE COURT
BARBARA M. QUINN, Judge