Opinion
CV176014675S
12-01-2017
WEBSTER BANK, NATIONAL ASSOCIATION v. John J. VOGLER et al.
UNPUBLISHED OPINION
OPINION
Hon. John D. Moore, Judge
This matter arises from a debt on a note. The plaintiff, Webster Bank, National Association (Webster Bank or the plaintiff), moved for judgment after default on June 28, 2017 (# 115). The defendants, John J. Vogler (Vogler) and Cynthia Keefe, filed an objection to the same on July 5, 2017 (# 116). The plaintiff filed a reply to the objection on July 7, 2017 (# 117). The motion and objection were argued at short calendar on August 21, 2017. At short calendar, the defendants stipulated as to liability and both parties now rely on their briefs to decide the amount of damages due. For the reasons set forth below, the court sustains the objection in part, overrules the objection in part, and provides further instruction to the plaintiff to submit a revised proof of damages.
I
PROCEDURAL BACKGROUND
This case was originally brought as a foreclosure action. The plaintiff was the second mortgagee on the defendant Vogler’s property located at 70 Beech Hill Road in Colebrook (property). This second mortgage secured an obligation in the amount of $205,000 arising from a home equity line of credit (the note) taken out by the defendants. After the defendants defaulted on that note, the plaintiff brought this action to foreclose. The nature of this action changed after the following: (1) the first mortgagee, also Webster Bank, acting as servicer thereof, secured a judgment of foreclosure (# 118) in a previously filed matter, Webster Bank v. Vogler, Superior Court, judicial district of Litchfield, Docket No. CV-166014627-S (the foreclosure action), on the first mortgage on the property, on February 21, 2017, and (2) the plaintiff, as second mortgagee and defendant in the foreclosure action, redeemed the property on its law day, March 21, 2017 (please see # 122, satisfaction of judgment, in the foreclosure action). Shortly thereafter, on May 23, 2017, the plaintiff in this case requested leave to amend its complaint (# 114), to convert this matter from a foreclosure into an action on the debt. No objection was filed and the amended complaint became the operative complaint in this case.
The plaintiff’s amended complaint alleges the following facts: (1) the plaintiff is the owner and holder of the note; (2) the amount of the note, $205,000, is payable to the plaintiff in full, together with any costs, expenses or attorneys fees incurred in collection of the note; (3) the defendants have defaulted in their monthly payments; (4) the plaintiff has exercised its right to declare the entire amount of the note due and payable; and (5) $59,216.81 plus interest, costs of collection and reasonable attorneys fees are now due. Along with those items of alleged damage, the plaintiff also claims postjudgment interest pursuant to General Statutes § 37-1.
General Statutes § 37-1 provides: " (a) The compensation for forbearance of property loaned at a fixed valuation, or for money, shall, in the absence of any agreement to the contrary, be at the rate of eight per cent a year; and, in computing interest, three hundred sixty days may be considered to be a year, (b) Unless otherwise provided by agreement, interest at the legal rate from the date of maturity of a debt shall accrue as an addition to the debt."
There have been two different affidavits submitted as to the fair market value of the property. Webster Bank, as servicer of the first mortgage and plaintiff in the foreclosure action, filed one in that case. Webster Bank, as second mortgagee and as plaintiff in this case, filed the second appraisal in this action. In the foreclosure action, the oath of appraiser opined that the fair market value of the property was $168,000 as of January 31, 2017. In that action, the court, Schuman, J., in accordance with the oath of appraiser, found the fair market value of the property to be that amount, $168,000 and set the initial law day as March 20, 2017. While the instant action was still a foreclosure case, the plaintiff submitted a subsequent oath of appraiser (# 109) opining that, as of February 27, 2017, the fair market value of the property was $190,000. The plaintiff filed the $190,000 appraisal with the court on March 8, 2017, twelve days before the running of the initial law day and thirteen days before March 21, 2017, the law day for Webster Bank as second mortgagee and the day on which the plaintiff in this case redeemed the property.
The defendants did not initially appear in this case. As a result, the plaintiff filed a motion for default for failure to appear that was granted on February 16, 2017. The plaintiff filed the instant motion for judgment on the default on June 28, 2017. Shortly after, on July 5, 2017, the defendants filed an appearance through counsel. The defendants’ attorney then filed the above referenced objection to the instant motion and the plaintiff’s reply followed.
This motion appeared on the August 21, 2017, short calendar. After the court pointed out that the defendants’ appearance automatically opened the default for failure to appear, the defendants stipulated, through counsel, to a judgment of liability on the note in exchange for the right to advance the arguments set forth in the objection as to the amount owed. In doing so, the defendants’ attorney cited to the fact that the defendants " need to have this done ... they’ve moved out of state, they need to have no responsibility for this property as soon as possible."
II
DISCUSSION
The plaintiff claims that the defendants owe it $59,530.19 in damages on the note. The plaintiff derives the $59,530.19 figure as follows. The principal balance owed on the note prior to redemption was $125,000. Interest from June 25, 2016 to the date of redemption, March 21, 2017, at the note rate, totaled $3,332.17. Late charges to the date of acceleration were $94.78, and there was a recoverable balance of $20. Adding these numbers together yields a sum of $128,446.95. To this amount, the plaintiff adds $98,679.86 for the redemption amount it paid on the property, yielding a total of $227,126.81. From this sum, the plaintiff subtracts the fair market value of the property at the time of judgment, $168,000, resulting in a post-redemption debt of $59,126.81. The post-redemption rate of interest from March 22, 2017, through June 12, 2017, at the note rate, eighty-three days at $4.86 per day, totals $403.38. Adding this amount to the pre-redemption debt brings the figure owed to $59,530.19.
The defendants object to plaintiff’s calculation of damages on the following grounds. The defendants claim that the amended complaint is silent as to a claim for reimbursement of the amount the plaintiff expended in its redemption of the property in the foreclosure action, an action that the defendants term a " voluntary payment [the plaintiff] made to preserve its ability to pursue a foreclosure under the HELOC [home equity line of credit] in the instant action." As a result, the defendants claim improper notice of the claim that the redemption charge should be an element of damages in this case. The defendants also object to the use of the original appraised value of the property, $168,000, as opposed to the later appraised value, $190,000, because the latter figure would have resulted in a larger set-off for the defendants as to both the principal and related charges, as well as to interest incurred on the post-redemption debt. Finally, although this objection is not fully formed, the defendants argue that the plaintiff should have moved for a deficiency judgment in the foreclosure action, in lieu of amending this action into one brought solely on the note. The court shall address each of the defendants’ objections to the plaintiff’s claim for damages below.
A. The Claimed Failure to Place Defendants on Notice of a Claim for the Amount Needed to Redeem the Property
The defendants argue that they were not afforded adequate notice from the plaintiff as to the redemption charge, and, on that basis, the redemption charge should not be included as an element of damages in this case. This argument is unpersuasive. The amended complaint is broad enough to place the defendants on notice of the claim for reimbursement of the redemption amount. Although the amended complaint does not expressly allege that the plaintiff is seeking to recover the amount it expended in redeeming the property, the first paragraph of the amended complaint alleges that the defendants owe the plaintiff, along with the debt principal, " any costs, expenses ... incurred in collection of said note, or in foreclosing any mortgage securing the same." This allegation contemplates a claim for recovery of the amount incurred when the plaintiff redeemed the property at a time when it was still pursuing foreclosure on the second mortgage.
Further, both the fact of the plaintiff’s redemption of the property and the amount of the redemption are matters of public record. The court’s file in the foreclosure action reveals, in the satisfaction of judgment (# 122), that the plaintiff, as second mortgagee, redeemed the property. The foreclosure judgment (# 119) evidences the debt, attorneys fees, appraisal fee and title search fee owed, thereby making publically available the approximate amount needed to redeem the property. Had the defendant Vogler appeared in the foreclosure action, he would have received notice of the plaintiff’s redemption of his property and of the approximate amount needed for such redemption. Even in the absence of such an appearance, however, this information is available to all members of the public through the court’s electronic filing system.
Finally, although the defendants protest that they " only discovered Plaintiff’s strategy to include in this action [the value of redemption paid] when reviewing the Affidavit of Debt filed by Plaintiff in support of its motion for judgment, " that discovery provided the defendants with plenty of time in which to include this notice argument in their objection to the motion for judgment.
For the foregoing reasons, the court finds that the defendants had notice of the claim for recoupment of the redemption and that an act of due diligence on the defendants’ part, namely consulting publically available records, would have provided them with evidence of the amount of such a claim. Therefore, the court does not agree with the defendants’ contention that lack of notice of the claim for redemption amounts expended should foil the plaintiff’s ability to recover these amounts.
B. The Plaintiff May Recover for Its Redemption Expense
The defendants next argue that the plaintiff should not be allowed to recover under this note the amount it expended to redeem the property. The court disagrees. Compelling the plaintiff to forgo recouping its redemption payment would provide an unfair windfall to the defendant. If the plaintiff had not spent money to redeem the property, the plaintiff would not have obtained the equity in the property that will ultimately benefit the defendants by being credited against their debt on the note. Furthermore, the redemption payment satisfied the judgment against the defendant Vogler in the foreclosure action, thereby relieving the defendant of that obligation. " Since a mortgage foreclosure is an equitable proceeding, either a forfeiture or a windfall should be avoided if possible. In a foreclosure proceeding, the trial court must exercise its discretion and equitable powers with fairness not only to the foreclosing mortgagee, but also to subsequent encumbrancers and the owner." (Internal quotation marks omitted.) Farmers & Mechanics Savings Bank v. Sullivan, 216 Conn. 341, 354, 579 A.2d 1054 (1990). The very same equitable considerations extend to this proceeding even though it is not technically a foreclosure action. See A & M Realty v. Dahms, 217 Conn. 95, 102, 584 A.2d 466 (1991) (" the plaintiff cannot now claim that equity is powerless to act in a second action involving two of the parties to the prior action, when the second action implicates a similar security interest created by the same defendant in the same property").
Furthermore, " [t]he general rule of damages in a breach of contract action is that the award should place the injured party in the same position as he would have been in had the contract been performed." Rametta v. Stella, 214 Conn. 484, 492, 572 A.2d 978 (1990). In calculating the credit against the debt, excluding the redemption payment set off from the fair market value of the property would not put the plaintiff in the same position as if the defendants had satisfied their obligations under the note, but would, instead, short the plaintiff in the amount it expended to redeem the property.
Using the amount of the redemption to set off the fair market value credit is also supported by the doctrine of equitable subrogation. " Equitable subrogation ... is a legal fiction entitling a person to reimbursement for discharging the debt or obligation for one who should have paid it." (Internal quotation marks omitted.) Thornton v. Syracuse Savings Bank, 961 F.2d 1042, 1046-47 (2d Cir. 1992). " The aim of equitable subrogation is to prevent the unjust enrichment of another person ... while not causing that person to suffer inequity ... This doctrine is not static, but so elastic as to take within its remedy cases of first instance which fairly fall within it and secure its primary object by compelling payment of a debt by him who bought in equity and good conscience to pay it." (Citations omitted; internal quotation marks omitted.) Coffiero v. Ifkovic, 35 Conn.App. 682, 695-96, 647 A.2d 9, cert. denied, 231 Conn. 938, 651 A.2d 262 (1994). The doctrine of equitable subrogation therefore supports the plaintiff’s application of the redemption payment to offset the fair market value of the property.
For all of the reasons set forth supra in this section, the defendants’ credit for the fair market value of the property should be reduced by the redemption amount paid by the plaintiff.
C. The Higher Appraised Value of the Property Will Be Used to Calculate the Amount of the Defendants’ Debt
The defendants also argue that they should be allowed to employ the higher appraised value of the property in the calculation of the debt owed by them to the plaintiff under the note. The court agrees.
As mentioned above, Webster Bank, acting as servicer of the first mortgage and, thereafter, as second mortgagee, submitted two separate oaths of appraiser with different values for the property. The first oath of appraiser, submitted in the foreclosure action on February 16, 2017, pinned the value of the property at $168,000 as of January 31, 2017. After reviewing the first oath of appraiser, the court, Schuman, J., found that $168,000 was the fair market value of the property. The second oath of appraiser, submitted by the plaintiff in this action on March 8, 2017, valued the property at $190,000. The plaintiff submitted the second affidavit prior to title vesting under the foreclosure judgment. The plaintiff argues that the $168,000 fair market value should be used to offset the debt the defendants owe under the note. The defendants contend that $190,000 appraisal should be used. The calculation of damages in this matter then, depends partly on the date on which the court determines the fair market value of the property.
Although there does not seem to be case law precisely on point, the weight of authority suggests that, under these circumstances, the date for calculating the fair market value of a property is the date on which title vests. In A&M Realty v. Dahms, 217 Conn. 95, supra, 98-99, our Supreme Court accepted the court’s calculation of the fair market value as of the redemption date, the date upon which title vested, stating that " the trial court determined that the property’s value at the time of redemption exceeded the amount paid by the plaintiff to redeem and, therefore, the defendants were entitled, under the appropriation doctrine, to an equitable credit on the sums owing on the note" and upholding the trial court’s determination in that respect.
Additionally, although this is not a deficiency judgment, it is an action to effect the same kind of determination between the value of the foreclosed property and the debt. Under such circumstances, the date used to calculate the fair market value of the property for deficiency judgment purposes is suggestive of the correct date for calculating any deficiency in the amount owed on the note. " 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." (Internal quotation marks omitted.) Eichman v. J &J Building Co., 216 Conn. 443, 449, 582 A.2d 182 (1990). " The deficiency hearing concerns the fair market value of the subject property as of the date title vests in the foreclosing plaintiff." United of Omaha Life Ins. Co. v. Connecticut Student Loan Foundation, 718 F.Supp.2d 277, 279 (D.Conn. 2010).
For all of the reasons posited in this section, the court concludes that the date for calculating the fair market value of the property is the date upon which title vested, which in this case was the redemption date, March 21, 2017. As mentioned supra, on March 8, 2017, thirteen days prior to the redemption date, March 21, 2017, the plaintiff submitted an appraisal valuing the property at $190,000. This appraisal was not only submitted after the appraisal in the foreclosure action, but was also performed after the first appraisal. Had no such document been filed prior to redemption, this court would have found that the fair market value of the property to be $168,000 for the purpose of calculating a set-off to the defendants for amounts owed under the note. However, in this case, counsel for the plaintiff filed with the court a second " oath of the appraiser" after the first oath of appraiser and before redemption. The second oath of appraiser (1) stated clearly that the appraiser had been previously sworn, (2) recited several facts in support of the appraiser’s expertise and ability to value real estate for the court, (3) indicated that he performed this appraisal at the request of the plaintiff’s attorney, and (4) opined that the property’s value was $190,000. This oath of appraisal was submitted to court by the plaintiff prior to the date of redemption as evidence of the value of the property in this case.
Under circumstances such as those set forth above, the United States Supreme Court has held that a party cannot have its cake and eat it, too. In considering an affidavit that a party utilized for one purpose in litigation and then wanted to distance itself from in the same litigation, the United States Supreme Court held that " [h]aving affirmed that [the affidavit] was credible when used for one purpose, defendant will not be permitted to repudiate [the affidavit] when offered for another purpose." National S.S. Co. v. Tugman, 143 U.S. 28, 32, 12 S.Ct. 361, 36 L.Ed. 63 (1892).
Moreover, a submission containing the opinion of an expert witness, such as the second appraisal in this case, constitutes an evidentiary admission that may be used against the party who submitted it. In Tuite v. Stop & Shop Cos., Inc., 45 Conn.App. 305, 696 A.2d 363 (1997), the plaintiff fell down twice within a matter of days, causing similar injuries in each fall, and then brought separate lawsuits concerning each fall. The Appellate Court held that the plaintiff’s disclosure of a physician as an expert witness in the first case constituted an admission in the second case because the expert disclosure in the first case constituted a prior pleading by the plaintiff in which she represented that the trauma from the earlier fall was a contributing factor to the plaintiff’s injuries. Id., at 316. The facts of this case comprise an even stronger case for deeming the second appraisal as an evidentiary admission against Webster Bank. In this very case, in support of its initial foreclosure claims, the plaintiff chose to submit an appraisal attesting to the value of the property prior to the redemption date. Such a submission clearly constitutes an evidentiary admission against the plaintiff for purposes of valuing the property.
Finally, as mentioned above, our Supreme Court has held that, in a case like this one, the court must take into account equitable considerations. See A & M Realty v. Dahms, supra, 217 Conn. 102, (" the plaintiff cannot now claim that equity is powerless to act in a second action involving two of the parties to the prior action, when the second action implicates a similar security interest created by the same defendant in the same property") ... It would be patently inequitable to allow the plaintiff to submit sworn evidence to the court prior to the date title vested as to the value of the property and then attempt to disclaim that evidence when it weakened the plaintiff’s position in claiming damages under the note.
The court must, therefore, conclude that the plaintiff, its counsel and its retained appraiser all valued the property to be worth $190,000 prior to the date of redemption. Accordingly, for all of these reasons, the court finds that the fair market value of $190,000 must be used for the purpose of calculating the set-off of the defendants’ obligations under the note.
D. The Plaintiff Need Not Have Brought a Deficiency Judgment in the Foreclosure to Collect on this Note
Lastly, the defendants argue that the plaintiff should have moved for a deficiency judgment in the foreclosure action, and failing to do so should prevent them from collecting on the note here. This argument is unpersuasive.
A plaintiff who was a subsequent encumbrancer defendant in a foreclosure action may pursue a deficiency judgment in that action to make itself whole if the security is insufficient to do so. General Statutes § 49-14(a), which governs deficiency judgments, provides, in pertinent part, as follows: " 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." (Italics added). However, unlike a foreclosure plaintiff, the subsequent encumbrancer is not limited to pursuing a deficiency judgment. Cases like People’s Bank v. Bilmor Building Corp., 28 Conn.App. 809, 822, 614 A.2d 456 (1992) and First Bank v. Simpson, 199 Conn. 368, 377, 507 A.2d 997 (1986) stand for the proposition that a foreclosure plaintiff may only avail itself of the mechanism of a deficiency judgment when the value of the mortgaged property is insufficient to satisfy the debt owed. However, " the [General Statutes] § 49-1 bar [to further action on a debt] applies only to a foreclosing mortgagee and ... does not affect the rights of a subsequent encumbrancer to pursue its remedies on the underlying obligation." Factor v. Fallbrook, Inc., 25 Conn.App. 159, 163, 593 A.2d 520, cert. denied, 220 Conn. 908, 597 A.2d 332 (1991). Thus the plaintiff in this action, as a subsequent encumbrancer, is not limited to a deficiency judgment under § 49-14, but rather, may seek to recover on the note. The plaintiff was, therefore, well within its rights to pursue the note as it has done in this case.
General Statutes § 49-1 provides, in relevant part: " 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."
For the above-stated reasons, the court overrules the defendant’s objection in part and sustains it in part. The court orders the plaintiff, on or before December 15, 2017, to submit new proposed orders using the $190,000 fair market value of the property to set off the amount owed by the defendants. These proposed orders should include interest calculations through November 30, 2017, as well as claims for attorneys fees and costs.
SO ORDERED.