Associated East Mortg. Co. v. Highland Park, Inc.

• Decision Date: 15 February 1977
• Citation: 172 Conn. 395,374 A.2d 1070
• Parties: ASSOCIATED EAST MORTGAGE COMPANY v. HIGHLAND PARK, INC., et al.
• Court: Connecticut Supreme Court

Page 1070

374 A.2d 1070

172 Conn. 395

ASSOCIATED EAST MORTGAGE COMPANY v. HIGHLAND PARK, INC., et al.

Supreme Court of Connecticut.

Argued Nov. 10, 1976.

Decided Feb. 15, 1977.

Alexander Winnick, New Haven, for appellants (named defendant).

Richard G. Adams, Hartford, with whom, on the brief, was Samuel J. Henderson, Hartford, for appellee (plaintiff).

Before HOUSE, C. J., and LOISELLE, BOGDANSKI, LONGO and BARBER, JJ.

HOUSE, Chief Justice.

This is an appeal from the judgment rendered by the Superior Court in an action brought to foreclose a mortgage on a parcel of land located in the town of Cheshire. The court found the allegations in the complaint true, that the sum of $1,900,456 in principal, plus interest of $383,760.21 to February 28, 1975, plus interest at the rate of $18,212.70 per month and $598.77 per diem thereafter to date of payment or redemption, plus itemized costs of collection was due the plaintiff by the named defendant and the defendant guarantors on the debt, and fixed the law day for the named defendant as November 18, 1975.

The defendants Highland Park, Inc., the mortgagor, and Leonard Intelisano, Jr., and Clare Intelisano, guarantors of the mortgage debt, appealed from the judgment, assigning numerous claims of error. Some of these have not been briefed and are considered abandoned. Gebrian v. Bristol Redevelopment Agency, 171 Conn. 565, 570, 370 A.2d 1055. The assignments of error which have been briefed raise four issues: (1) Did the court err in concluding that the plaintiff had no obligation to forbear from foreclosing on the date this action was commenced? (2) Can a domestic, commercial corporation borrow $2,000,000, secure the loan with a mortgage on real estate with interest at a rate never exceeding 15 percent per year and still raise the defense of usury? (3) If the corporate borrower cannot raise the defense of usury, can the guarantors on the note independently raise that defense? (4) Is a variable interest rate based on the prime rate vague or definite?

Before attempting to summarize the relevant facts, it is pertinent to refer to the assignments of error related to the court's finding. The defendants assigned as error the court's refusal to find 122 paragraphs of their draft finding, asserting that the facts stated in those paragraphs were admitted or undisputed. They also attacked 31 paragraphs of the court's finding as having been made without evidence. We consider these wholesale attacks on the finding to have been abandoned since the defendants' brief contains nothing in support of the claims and although the appendix to their brief contains in narrative form a summary of the testimony of individual witnesses none of it is keyed to the attack on the finding. It serves no useful purpose to support a claim that a fact is admitted or undisputed merely by including in an appendix testimony which would support a finding differing from that filed by the trial court. A fact is not admitted or undisputed merely because it has not been contradicted. Since the question of credibility is for the trier, "(t)o secure an addition to the finding, an appellant must point to some part of the appendix, the pleadings, or an exhibit properly before us which discloses that the appellee admitted that the fact in question was true or that its truth was conceded to be undisputed. Practice Book § 628(a); Martin v. Kavanewsky, 157 Conn. 514, 515, 255 A.2d 619; Maltbie, Conn.App.Proc. § 158." Malarney v. Peterson, 159 Conn. 342, 344, 269 A.2d 274, 275; William G. Major Construction Co. v. DeMichely, 166 Conn. 368, 370, 349 A.2d 827. As to the claims that the court found certain facts without evidence, the brief of the plaintiff, in the manner suggested by Maltbie, Conn.App.Proc. § 328, contains keyed reference to evidence, pleadings, and exhibits which support each of the findings claimed by the defendants to have been made without supporting evidence.

In these circumstances the efforts of the defendants to alter the court's finding of facts cannot succeed. In testing the court's conclusions we test them by that finding, not by the evidence, and those conclusions must stand unless they are legally or logically inconsistent with the facts found or unless they involve the application of some erroneous rule of law material to the case. Roby v. Connecticut General Life Ins. Co., 166 Conn. 395, 397, 349 A.2d 838; Connecticut Bank & Trust Co. v. Bovey, 162 Conn. 201, 205-206, 292 A.2d 899.

The court found the following significant facts which, while lengthy in recital, we deem essential to an understanding of our decision on the merits of this appeal: On September 14, 1972, the defendant, Highland Park, Inc., by its president, Leonard Intelisano, Jr., executed a promissory note, payable to the order of the plaintiff, Associated East Mortgage Co., in the sum of $2,000,000. Interest on the principal sum was to be paid at the rate of either 81/2 percent per year or 3 percent per year above the "prime rate" as determined by the Chase Manhattan Bank, New York, New York, whichever was greater. The note also provided that interest rate changes would become effective on the first day of the month following any change in the "prime rate" as reported by the Chase Manhattan Bank and that the last rate established by that bank during the preceding month would be the "prime rate" upon which the interest rate would be based.

The note was secured by a mortgage on land located on Jarvis Street and Peck Lane in the town of Cheshire. In the mortgage deed, Highland Park, Inc., agreed to develop and improve the land and not to cease substantially the work of developing and improving it for any period of thirty consecutive days. Highland Park also agreed to construct, or cause to be constructed, streets, facilities for the distribution of electricity and water, facilities for telephone service, and storm sewers. It further agreed that, in the event of a default in the payment of the indebtedness when due, the plaintiff would be entitled to receive interest on the entire unpaid principal balance at the rate of either 111/2 percent or the highest rate of interest set forth in the note, whichever was greater. Interest was to be computed from the due date until the actual receipt and collection of the entire indebtedness. The effect of the default clause was that, for any month after default during which the prime rate was 81/2 percent or more, the interest would be the same as before default. In those situations where the prime rate dropped to below 81/2 percent, the after-default interest rate would be greater than the before-default interest rate.

The court further found that the term "prime rate," as used in the note and the deed, has the same meaning as that given to it by the country's financial community. It is, in general, the rate at which the best borrowers can borrow. Borrowers of lesser quality, with loans of greater risk, receive loans with interest rates greater than prime rate. The prime rate fluctuates with money market conditions so that the bank can charge a rate to borrowers which is consistent with the rates it is paying for using the money of its depositors.

When the note and mortgage deed were executed in September, 1972, the term "prime rate," as used in the note and mortgage deed, referred to that "prime rate" which was to be determined by the Chase Manhattan Bank of New York. The rate was ascertainable either by a phone call or on the basis of published lists which could be obtained upon request.

In April, 1973, seven months after the parties executed the note and deed, and from then until the end of January, 1975, a new concept and a new terminology in the banking community came into existence with the creation of a "dual rate" or "two-tier" prime rate, by reason of the creation of a new rate, called the "small business prime rate." This small business rate, a lower interest rate, under the criteria issued in April, 1973, by the committee on interest and dividends of the federal pay board, was available to the small borrower. A small borrower was defined as one who borrowed less than $350,000 and who had assets of $1,000,000 or less. In the present case, the defendant, Highland Park, Inc., borrowed $2,000,000, plus interest, and the value of the defendant's assets exceeded $1,000,000. Under the criteria established by the committee on interest and dividends of the federal pay board, Highland Park, Inc., would not have been considered a small borrower and, therefore, would not have been entitled to the small business rate.

After the creation of the "small business prime rate," what had previously been referred to simply as the "prime rate" was designated the "large business prime rate." The plaintiff borrowed exclusively on the basis of the "large business prime rate" and charged its borrowers on the same basis. From September, 1973, until February, 1975, interest payments were billed based upon the large business prime rate plus 3 percent. During that period of time, this prime rate fluctuated between 9 percent and 12 percent.

The mortgage deed contained a clause incorporating the note. The note provided that any default under the mortgage deed was a default under the note. The deed similarly provided that any default under the note was a default under the mortgage.

The defendants, Leonard Intelisano, Jr., and Clare Intelisano, together with Paul and Marion Casavina, in a separate instrument, executed a guarantee to the plaintiff unconditionally, jointly and severally, for the prompt payment of any and all sums due or to become due under the promissory note and further guaranteed the due performance of all the obligations of the defendant, Highland Park, Inc., and its covenants and agreements contained in either the mortgage note or the mortgage deed.

From September 14, 1972, to May 31, 1973, the plaintiff advanced a total of $1,900,456. Interest on the unpaid...