Astoria Fed. Mortg. Corp. v. Genesis Holdings, LLC
| Decision Date | 04 August 2015 |
| Docket Number | AC 36590 |
| Court | Connecticut Court of Appeals |
| Parties | ASTORIA FEDERAL MORTGAGE CORPORATION v. GENESIS HOLDINGS, LLC, ET AL. |
Beach, Alvord and Mullins, Js.
(Appeal from Superior Court, judicial district of Ansonia-Milford, Hon. John W. Moran, judge trial referee.)
Jane I. Milas, for the appellant (defendant Professional Services Group, Inc.).
Frank B. Velardi, Jr., for the appellee (substitute plaintiff).
In October, 2009, this action was commenced by the named plaintiff, Astoria Federal Mortgage Corporation (bank), to foreclose a mortgage on property in Derby owned by the named defendant, Genesis Holdings, LLC (debtor). The defendant Professional Services Group, Inc., was named as an additional defendant because it claimed an interest in the property by virtue of a mechanic's lien recorded in the Derby land records.1 During the pendency of the action, the bank assigned its interest in the property to Bellmore Partners, Inc., which was thereafter substituted as the plaintiff in this matter.2 On July 19, 2010, the debtor filed a chapter 11 bankruptcy petition, which automatically stayed the foreclosure action. See 11 U.S.C. § 362. On April 12, 2012, the United States Bankruptcy Court for the District of Connecticut entered an order granting relief from the automatic stay for the "limited purpose of determining the extent, validity and priority" of the defendant's mechanic's lien. On June 10, 2013, the plaintiff filed a motion for summary judgment against the defendant, which was granted by the court on February 4, 2014.
On appeal, the defendant claims that the court improperly rendered summary judgment in favor of the plaintiff because (1) a genuine issue of material fact exists with respect to the validity of the defendant's mechanic's lien, and (2) the court improperly concluded that the defendant's opportunity to foreclose its mechanic's lien had expired.3 The plaintiff claims, as an alternative ground for affirmance of the court's judgment, that the defendant's claims are barred by the doctrine of collateral estoppel. We conclude that the court erroneously exceeded the terms of the order granting relief from the stay as ordered by the Bankruptcy Court. We also conclude that the defendant was not collaterally estopped from raising its claims before the trial court. Accordingly, we reverse the judgment of the trial court.
The following procedural history and undisputed facts, as provided in the pleadings and the evidence submitted by the parties in conjunction with the plaintiff's motion for summary judgment and the defendant's opposition thereto, are relevant to the disposition of the defendant's appeal. On November 4, 2005, the debtor executed an open-end mortgage in favor of the bank on commercial property in Derby to secure the payment of a promissory note in the principal amount of $360,000. The bank instituted the present foreclosure action in October, 2009, against the debtor, alleging nonpayment of the debt. The defendant's mechanic's lien, in the principal amount of $315,000, was recorded in the Derby land records on September 8, 2009. The complaint alleged that the defendant's interest was subordinate in right to the interest of the bank.
On December 28, 2009, the defendant filed a disclosure of defense, stating that its mechanic's lien was a claim prior in right to that of the bank. The defendant filed its answer and a special defense on January 7, 2010. In its special defense, the defendant similarly alleged that its lien was a claim prior in right to that of the bank. On July 19, 2010, the debtor filed a chapter 11 bankruptcy petition. On September 29, 2010, the bank assigned its interest in the subject note, mortgage and related loan documents to the plaintiff. On May 14, 2012, Bellmore Partners, Inc., was substituted as the plaintiff in the foreclosure action. See footnote 2 of this opinion.
The foreclosure action was automatically stayed by the filing of the bankruptcy petition.4 In its petition, the debtor listed several creditors, including the plaintiff and the defendant. The only asset of the bankruptcy estate was the Derby property and its rental income. On February 13, 2012, the plaintiff moved for relief from the automatic stay. The next day, Lawyers Title Insurance Company (company), claiming to be a party in interest by virtue of a title policy it had issued insuring the priority of the plaintiff's mortgage, filed a request for a status conference to obtain guidance from the Bankruptcy Court regarding the disputed priority of the defendant's mechanic's lien over the plaintiff's mortgage. In its request, the company asserted that the defendant had not filed a proof of claim, and, therefore, there was "confusion" as to whether an adversary proceeding could be scheduled to determine "the validity, priority, or extent of a lien or other interest in [the] property."5 (Internal quotation marks omitted.) A status conference was held on February 22, 2012, at which time the Bankruptcy Court scheduled a hearing for March 20, 2012, to consider the plaintiff's motion for relief from the automatic stay.
On April 12, 2012, the Bankruptcy Court, Shiff, J., issued an "Order Regarding Limited Relief from the Automatic Stay" (order). In that order, Judge Shiff stated that "the parties [have] requested limited relief . . . to allow the parties to move forward with proceedings in Connecticut Superior Court as to the extent, validity and priority of the [defendant's] mechanic's lien" and that "cause exist[ed] to grant limited relief from stay as requested by the parties . . . ." Judge Shiff entered the following order: "[R]elief from the automatic stay is granted, for cause, pursuant to 11 U.S.C. § 362 (d) (1), to allow the parties to move forward with proceedings in Connecticut Superior Court for the limited purpose of determining the extent, validity and priority of the [defendant's] Mechanic's Lien . . . ." Judge Shiff further ordered that "relief from the automatic stay is also granted to allow the parties to proceed in Connecticut State Court with any appeals from any decision of the Connecticut Superior Court as to theextent, validity and priority of the Mechanic's Lien . . . ."
The plaintiff then served interrogatories and requests for production, dated June 27, 2012, on the defendant. On June 10, 2013, the plaintiff filed a motion for summary judgment, claiming that the defendant's mechanic's lien had been extinguished as a matter of law because the defendant did not commence an action to foreclose that lien within thirty days of the April 12, 2012 Bankruptcy Court order granting limited relief from the automatic stay. Referring to 11 U.S.C. § 108 (c),6 the plaintiff argued that the defendant failed to comply with the time limitation set forth in that provision, thereby resulting in the expiration of the mechanic's lien. In its memorandum of law filed in support of its motion for summary judgment, the plaintiff made the additional argument that the defendant's claims were barred by the doctrine of collateral estoppel: "On September 20, 2012, in the companion case [of] Bellmore Partners, LLC v. Genesis Ltd. Partnership & Professional Services Group, Inc., Superior Court, judicial district of Ansonia-Milford, Docket No, CV-09-6001340S, Judge Moran7 ruled that the defendant's lien, also recorded on September 8, 2009, was extinguished due to the defendant's failure to commence a foreclosure action on its lien within thirty days of the lifting of the bankruptcy stay on April 12, 2012."
The defendant filed an objection to the plaintiff's motion for summary judgment on June 27, 2013, with accompanying exhibits that included an affidavit by Nicole Liguori Micklich, the defendant's attorney in the bankruptcy proceeding. In its objection, the defendant argued that the order of the Bankruptcy Court granted limited relief from the stay, and that it did not terminate the stay to allow the defendant to commence an action to foreclose its mechanic's lien. The defendant further argued that the doctrine of collateral estoppel did not apply because the alleged "companion case" addressed "a different mechanic's lien, different mortgages, and different property."8 The defendant also stated that the decision in the other case did "not make any ruling with respect to the arguments advanced by [the plaintiff] in its present motion for summary judgment."
Micklich, in her affidavit, averred that the debtor's counsel had contacted her on March 20, 2012, to inform her that the Bankruptcy Court had inquired if the "parties would stipulate that any question regarding the priority of the Mechanic's Lien should be resolved by the Connecticut State Court and not by the Bankruptcy Court." Micklich also averred that after she conferred with the defendant, she spoke again with the debtor's counsel and told him that the defendant "would stipulate that the State Court could determine the limited issue of priority of the Mechanic's Lien, as long as the parties agreed that no party would seek an order of theState Court distributing the property of the [bankruptcy] estate and that no party would seek to confirm the [chapter 11] plan until after the State Court ruled on the priority."
The trial court held a hearing on the plaintiff's motion for summary judgment on November 4, 2013, and counsel for the parties presented their arguments. On January 13, 2014, the trial court held a "status conference" on the record, explaining that it had additional questions regarding the matter. When the plaintiff's counsel repeated his argument that the defendant's claims previously were determined in the alleged "companion case," the court responded:
The conference proceeded and, during the discussion as to the meaning of the Bankruptcy Court order, the defendant's counsel...
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