Opinion
No. DBD CV09-5008016 S
June 28, 2011
MEMORANDUM OF DECISION RE MOTION TO STRIKE #173
FACTS AND PROCEDURAL HISTORY FACTS
The plaintiff, TD Bank, N.A., brought the instant action by virtue of a writ, summons and complaint dated July 7, 2009, with a return date of August 4, 2009. The plaintiff's complaint seeks, inter alia, the foreclosure of a mortgage executed by the defendant, Georgetown Land Development Company and a deficiency judgment as against the defendant guarantors, Rocco Trotta, Thomas Broderick, Scott Harrison, Joseph Schmitz, Peter Joseph, Jeffrey Serkes, Edward Asvazadourian, Mark Javello and Stephen Soler (the defendants). The defendant, PMJ Capital Corp., claims an interest in said premises by virtue of various liens which are either subordinated to the plaintiff's mortgage or subsequent in right.
On or about August 12, 2010, the plaintiff filed the operative revised complaint. On or about August 27, 2010, the defendants filed an answer and special defenses to the plaintiff's revised complaint. On September 1, 2010, the plaintiff filed a motion to strike the special defenses. On October 15, 2010, the defendants filed an objection.
The Answer and Special Defenses to Third Amended Revised Complaint Dated August 12, 2010 was filed by the defendants, PMJ Capital Corp., Rocco Trotta, Thomas Broderick, Scott Harrison, Joseph Schmitz, Peter Joseph, Jeffrey Serkes, Edward Asvazadourian and Mark Javello. However, the defendants fail to specify which defendants are filing the purported special defenses with respect to each count of the plaintiff's complaint. However, with respect to Count One, only the defendant PMJ Capital Corp. is a named defendant, so it is assumed that said special defense was filed by PMJ Capital Corp., only. To the extent that said special defenses were filed by the defendants, Rocco Trotta, Thomas Broderick, Scott Harrison, Joseph Schmitz, Peter Joseph, Jeffrey Serkes, Edward Asvazadourian and Mark Javello, the grounds relied on by the plaintiff in its Motion to Strike are equally applicable. Likewise, with respect to Count Two, PMJ Capital Corp. is not a defendant, so it is assumed that the special defenses were filed by Rocco Trotta, Thomas Broderick, Scott Harrison, Joseph Schmitz, Peter Joseph, Jeffrey Serkes, Edward Asvazadourian and Mark Javello. To the extent that said special defenses were filed by the defendant, PMJ Capital, Corp., the grounds relied on by the plaintiff in its Motion to Strike are equally applicable.
DISCUSSION
"A party wanting to contest the legal sufficiency of a special defense may do so by filing a motion to strike. The purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action . . . In ruling on a motion to strike, the court must accept as true the facts alleged in the special defenses and construe them in a manner most favorable to sustaining their legal sufficiency." (Citations omitted; internal quotation marks omitted.) Barasso v. Rear Still Road, LLC, 64 Conn.App. 9, 13, 779 A.2d 198 (2001). "It is fundamental that in determining the sufficiency of a [pleading] challenged by a [party's] motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted." (Internal quotation marks omitted.) Commissioner of Labor v. C.J. M. Services, Inc., 268 Conn. 283, 292, 842 A.2d 1124 (2004).
"Facts must be pleaded as a special defense when they are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action . . . The fundamental purpose of a special defense, like other pleadings, is to apprise the court and opposing counsel of the issues to be tried, so that basic issues are not concealed until the trial is underway." (Citation omitted; internal quotation marks omitted.) McCann Real Equities Series XXII, LLC v. David McDermott Chevrolet, Inc., 93 Conn.App. 486, 490, 890 A.2d 140, cert. denied, 277 Conn. 928, 895 A.2d 798 (2006). Foreclosures are equitable proceedings. Reynolds v. Ramos, 188 Conn. 316, 320, 449 A.2d 182 (1982). "Connecticut law recognizes only limited defenses to a foreclosure action. The traditional defenses available to a foreclosure defendant are payment, discharge, release, satisfaction or invalidity of a lien . . . Additional defenses available to a foreclosure defendant are mistake, accident, unclean hands, breach of implied covenant of good faith and fair dealing, equitable estoppel, laches, CUTPA, and refusal to agree to a favorable sale to a third party." (Citations omitted; internal quotation marks omitted.) Antonio v. Johnson, Superior Court, judicial district of New London, Docket No. CV 05 4103360 (October 23, 2007, Devine, J.). These special defenses have been recognized as valid special defenses where they were legally sufficient and addressed the making, validity or enforcement of the mortgage and/or note. Lafayette Trust Co. v. D'Addario, Superior Court, judicial district of Fairfield, Docket No. 293534, 10 Conn. L. Rptr. 224 (October 7, 1993) (Maiocco, J.); Shoreline Bank Trust Co. v. Leninski, Superior Court, judicial district of New Haven at New Haven, Docket No. 335561, 8 Conn. L. Rptr. 522, 524 (March 19, 1993) (Celotto, J.); Bristol Savings Bank v. Miller, Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. 512558, 7 Conn. L. Rptr. 517, 518 (October 19, 1992) (Aurigemma, J.). "The rationale behind this is that . . . special defenses which are not limited to the making, validity or enforcement of the note or mortgage fail to assert any connection with the subject matter of the foreclosure action and as such do not arise out of the same transaction as the foreclosure action." (Internal quotation marks omitted.) Dime Savings Bank v. Albir, supra. See also The Bank of Darien v. Wake Robin Inn, Inc., supra; Eastrich Multiple Investor Fund v. Hewitt, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. 136598, 13 Conn. L. Rptr. 479 (January 23, 1995, D'Andrea, J.).
I. FIRST SPECIAL DEFENSE AS TO COUNT ONE AND THE SECOND SPECIAL DEFENSE TO COUNT TWO OF CREDIT/SET-OFF
PMJ's first special defense to count one and the individual defendants' second special defense to count two assert that they are entitled to a set-off or credit in the amount of any settlement or compromise which the plaintiff should recover. The plaintiff asserts the said defendants' allegations do not set forth a cognizable special defense because they are not consistent with the allegations of the plaintiff's complaint and do not address the making, validity or enforcement of the note and mortgage issue. The defendants argue that this defense is in accordance with Practice Book § 10-50 because it is consistent with the plaintiff's complaint and shows that the plaintiff has no cause of action.
"A set-off is made where the defendant has a debt against the plaintiff . . . and desires to avail himself of that debt, in the existing suit, either to reduce the plaintiff's recovery, or to defeat it altogether, and, as the case may be, to recover a judgment in his own favor for a balance." (Internal quotation marks omitted.) Hope's Architectural Products, Inc. v. Fox Steel Co., 44 Conn.App. 759, 762, 692 A.2d 829, cert. denied, 241 Conn. 915, 696 A.2d 985 (1997). Claims for "[s]et-offs can be based either in law or in equity." Godiksen v. Miller, 6 Conn.App. 106, 109, 503 A.2d 617 (1986); see also Savings Bank of New London v. Santaniello, 130 Conn. 206, 210-11, 33 A.2d 126 (1943). The law of set-off is governed by General Statutes § 52-139. The relevant portion of that statute provides: "In any action brought for the recovery of a debt, if there are mutual debts between the plaintiff . . . and the defendant . . . one debt may be set off against the other." General Statutes § 52-139(a). "A condition precedent to [General Statutes § 52-139] application is that it shall be in answer to a suit on a debt. Savings Bank of New London v. Santaniello, supra, 130 Conn. 211; see also Hope's Architectural Products, Inc. v. Fox Steel Co., supra, 44 Conn.App. 762; Elis v. Rogers, supra, 15, Conn.App. 365.
In Savings Bank of New London v. Santaniello, supra, 130 Conn. 211, the Supreme Court found that "[t]he plaintiff's action was not a suit on a debt but one for strict foreclosure." "The right of setoff, whether legal or equitable, has always been confined to rights of action arising from contract." Downing v. Wilcox, 84 Conn. 437, 441, 80 A. 288 (1911). In the present case, the defendant does not allege that the amount of the set-off is one generated from a mutual debt in relation to the amount sought by the plaintiff. TD Bank v. SM Phoenix Merritt 8, Superior Court, judicial district of Fairfield at Fairfield, Docket No. 6011034 (January 19, 2011, Hartmere, J.) Furthermore, there is no suggestion that the claimed set-off is in relation to a contract. Thus, the court concludes that the defendants' set-off defenses do not fall within the ambit of General Statutes § 52-139. Additionally, the defendant's special defense does not address the making, validity or enforcement of the note and mortgage. The plaintiff's motion to strike the defendants' first special defense as to count one and the second special defense as to count two is therefore granted.
II. SECOND SPECIAL DEFENSE TO COUNT ONE AND THE THIRD SPECIAL DEFENSE TO COUNT TWO
The defendant's second special defense as to count one and the third special defense to count two alleges: "The plaintiff has failed to properly establish the amount of its purported debt and, therefore, the plaintiff is not entitled to judgment in this matter." The plaintiff asserts that the defendants' allegations do not set forth a cognizable special defense because said facts are not consistent with the allegations of the plaintiff's complaint and do not address the making, validity and enforcement of the notes or mortgages.
The plaintiff's complaint sets forth the basis for its foreclosure action, including the fact that the instruments at issue are in default. The defendants' special defense does not address the making, validity or enforcement of the note and mortgage. The plaintiff's motion to strike the defendants' second special defense as to count one and the third special defense as to count two is granted.
III. FOURTH SPECIAL DEFENSE TO COUNT TWO CT Page 14397
The fourth special defense to count two of the complaint asserts that count two is unripe and in violation of General Statutes § 49-14, et seq. The plaintiff argues that the defendants' allegations do not set forth a cognizable special defense because the plaintiff's action was commenced in accordance with General Statutes §§ 49-1 and 49-14 and the defendants' special defense is not consistent with the allegations of the plaintiff's complaint. In response, the defendant asserts that the express language of General Statutes § 49-1 provides that the request for deficiency judgment should be made by motion within thirty days after the time limited for redemption has expired.
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 relevant 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."
"[A] judgment of strict foreclosure extinguishes all rights of the foreclosing mortgagee on the underlying note, except those enforceable through the use of the deficiency judgment procedure delineated in General Statutes § 49-14 . . . Section 49-14(a) provides in pertinent part that any party to a mortgage foreclosure may file a motion seeking a deficiency judgment. At the hearing on the motion, 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 . . . Such a deficiency judgment, in light of § 49-1, is, therefore, the only available means of satisfying a mortgage debt when the security is inadequate to make the foreclosing plaintiff whole . . . The value of the premises on the date that title becomes vested in the mortgagee determines whether the mortgagee is entitled to a deficiency judgment." (Citations omitted; internal quotation marks omitted.) Eichman v. JJ Bldg. Co., 216 Conn. 443, 448-49, 582 A.2d 182 (1990).
"Several trial courts have recognized that a plaintiff may, following a judgment of strict foreclosure entering on one count of a complaint, pursue a deficiency judgment against a guarantor in another count of the complaint. `Our courts do not enter a generic judgment in a multiple count complaint. They enter a judgment on each specific count . . . Entry of judgment in one count does not preclude the entry of a subsequent judgment on the second count of the complaint. This is the clear holding of our Appellate Court in Connecticut Commercial Lenders, LLC v. Teague, 105 Conn.App. 806, 940 A.2d 831 (2008).'" (Citations omitted.) TD Bank, N.A. v. Northern Expansion, LLC, Superior Court, judicial district of Waterbury, Docket No. CV 096001534 (November 22, 2010, Matasavage, J.).
Accordingly, the defendants' allegations do not set forth a cognizable special defense. The motion to strike the defendants' fourth special defense as to count two is therefore granted.
IV. FIRST SPECIAL DEFENSE TO COUNT TWO
The first special defense to count two asserts that the plaintiff is barred and estopped from proceeding against the defendant guarantors because the express precedent terms of the agreement have not been fulfilled. The plaintiff asserts that the defendants' special defense fails as a matter of law by virtue of the fact that the plaintiff only seeks a deficiency judgment against the defendant guarantors, which necessarily requires the plaintiff to complete the foreclosure process prior to seeking a deficiency judgment and because the defendants' special defense fails to allege facts consistent with the plaintiff's complaint. The defendant argues that the defense is proper because it alleges facts that are consistent with the plaintiff's allegations, but show that the plaintiff has no cause of action.
As previously noted, pursuant to § 49-14, the plaintiff must complete the foreclosure process and then proceed with its claim for a deficiency judgment. Thus, regardless of whether or not the conditions precedent contained in the guaranties have been met, the plaintiff must proceed with the foreclosure process prior to seeking any deficiency judgment. The motion to strike the first special defense as to count two is therefore granted.