Astoria Fed. Mortg. Corp. v. Genesis Ltd.

• Decision Date: 26 July 2016
• Docket Number: AC 37754
• Court: Connecticut Court of Appeals
• Parties: ASTORIA FEDERAL MORTGAGE CORPORATION v. GENESIS LIMITED PARTNERSHIP ET AL.

ASTORIA FEDERAL MORTGAGE CORPORATION v. GENESIS LIMITED PARTNERSHIP ET AL.

AC 37754

COURT OF APPEALS OF THE STATE OF CONNECTICUT

Argued February 11, 2016

July 26, 2016

Keller, Mullins and Norcott, Js.

(Appeal from Superior Court, judicial district of Ansonia-Milford, Hon. John W. Moran, judge trial referee.)

Jane I. Milas, with whom, on the brief, was Jaime Paoletti, for the appellant (defendant Professional Services Group, Inc.).

Stephen G. Walko, with whom were Frank Velardi and, on the brief, Julia E. Braun, for the appellee (substitute plaintiff).

Opinion

KELLER, J. In this foreclosure action, the defendant Professional Services Group, Inc.,¹ appeals from the trial court's judgment granting the motion filed by the plaintiff, Bellmore Partners, Inc.,² to dismiss the defendant's cross claim. The defendant claims that the court erred by granting the plaintiff's motion to dismiss because it improperly concluded that the defendant lacked standing. We agree and accordingly reverse the judgment of the court.

The following procedural history is relevant to this appeal. On October 15, 2009, Astoria Federal Mortgage Corporation (Astoria) filed a four count complaint against Genesis Limited Partnership (Genesis) and the defendant, seeking, inter alia, foreclosure of two mortgages that Genesis had executed and delivered to Astoria for property located at 89 Minerva Street in Derby (Derby property). In the complaint, Astoria alleged that it was in possession of two notes that were secured by two mortgages on the Derby property: (1) a note dated May 14, 2004, wherein Genesis had promised to pay Astoria $210,000; and (2) a note dated June 20, 2005, wherein Genesis had promised to pay Astoria $165,000. Furthermore, Astoria acknowledged that the defendant maintained an encumbrance of record on the Derby property, which it alleged was subordinate in right to the claimed mortgages, "by virtue of a [m]echanic's [l]ien in the original principal amount of [$293,800] dated September 8, 2009, and recorded in volume 589 at page 253 of the Derby land records." On October 23, 2009, Astoria filed a motion for default against the defendant for its failure to appear, which the court denied on October 27, 2009. On December 10, 2009, Astoria filed a demand for disclosure of defense against the defendant.

On December 21, 2009, the defendant filed its disclosure of defense and its answer and special defense. In its disclosure of defense and as a special defense, the defendant asserted that it held a valid mechanic's lien on the Derby property, which was security for construction work on the Derby property that it had commenced on March 12, 2002, and which it alleged was a claim prior in right to the mortgages claimed by Astoria.

On July 19, 2010, Genesis filed a chapter 11 bankruptcy petition in the United States Bankruptcy Court for the District of Connecticut.

During the pendency of Genesis' bankruptcy proceedings, the defendant, on August 13, 2011, assigned its mechanic's lien on the Derby property to Viking Acquisitions, LLC (Viking). On September 30, 2011, this assignment was recorded at volume 633, page 273 of the Derby land records.

On April 12, 2012, the Bankruptcy Court issued an "Order Regarding Limited Relief from the AutomaticStay," which stated the following: "The court having held a hearing on March 20, 2012, with respect to the motion for relief from stay filed by [the plaintiff] on January 10, 2011 . . . and the motion for immediate order of relief from stay for violation of court ordered stipulations filed by [the plaintiff] on February 13, 2012 . . . the parties having requested limited relief at the hearing to allow the parties to move forward with proceedings in Connecticut Superior Court as to the extent, validity, and priority of the mechanic's lien . . . allegedly held by [the defendant] on [the Derby property]; and the court having determined that cause exists to grant limited relief from stay as requested by the parties, it is hereby

"Ordered that relief 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]; and it is hereby 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 the extent, validity, and priority of [the defendant's mechanic's lien] . . . ."³

On April 18, 2012, Astoria moved to substitute the plaintiff in the foreclosure proceeding. The court granted Astoria's motion on May 14, 2012.

On September 20, 2012, the court granted the plaintiff's motion for a determination of priorities and ordered the following: "The court finds the priorities to be (1) the first mortgage dated May 14, 2004, and (2) the second mortgage dated June 20, 2006. No further determination is made."⁴

On October 12, 2012, Viking assigned the defendant's mechanic's lien back to the defendant, but this assignment was not recorded in the Derby land records until June 26, 2014.

On March 18, 2014, the bankruptcy court dismissed Genesis' chapter 11 bankruptcy case.

On April 16, 2014, the defendant filed a cross claim against Genesis, in which it sought, inter alia, to foreclose the mechanic's lien that it held on the Derby property. In its cross claim, the defendant alleged that it had "furnished materials and rendered services to Genesis in the construction, raising, removal or repairs to the property owned by Genesis," and that it had "commenced to furnish materials and render services on or about March 12, 2002, and ceased furnishing materials and rendering services on August 20, 2009."

On June 17, 2014, the plaintiff filed a motion to dismiss the defendant's cross claim. In the motion, theplaintiff asserted that the defendant's cross claim should be dismissed because "[a]t the time the cross claim was filed, [the defendant] was not the holder of the [mechanic's] lien and therefore [did] not have standing to pursue foreclosure." In its memorandum of law in support of the motion, which was also filed on June 17, 2014, the plaintiff argued, inter alia, that the defendant did not have standing to foreclose its mechanic's lien on the Derby property because it had failed to record the October 12, 2012 assignment whereby Viking assigned the mechanic's lien back to the defendant. Therefore, the plaintiff argued, the defendant did not have standing because it was not the record holder of the lien on April 16, 2014, which was the date on which it filed its cross claim seeking foreclosure of the lien.

On July 15, 2014, the defendant filed its opposition to the plaintiff's motion to dismiss, wherein it argued that it did have standing to bring its cross claim against Genesis because the October 12, 2012 assignment was valid despite the defendant's failure to record the assignment prior to its commencement of the foreclosure action. The defendant also asserted that on June 26, 2014, it had recorded the October 12, 2012 assignment in volume 696, page 51 of the Derby land records. The defendant attached a copy of the recorded assignments to its opposition.

On October 14, 2014, the court held a hearing on the plaintiff's motion to dismiss.⁵ On January 22, 2015, the court issued a memorandum of decision wherein it granted the plaintiff's motion to dismiss the defendant's cross claim. In its memorandum of decision, the court stated the following: "On April 16, 2014, the defendant . . . filed a cross [claim] against codefendant Genesis . . . seeking to foreclose a mechanic's lien, dated September 8, 2009, against Genesis . . . .

"Prior thereto, [the defendant] assigned its mechanic's lien to Viking . . . on August 13, 2011. On September [30], 2011, at 12:13 p.m., this assignment⁶ was recorded at volume 633, page 273, of the Derby land records.

"Subsequently, on October 12, 2012, Viking . . . assigned the same mechanic's lien back to [the defendant]. This second assignment was not recorded until 4:01 p.m. on June [26], 2014, at volume 696, page 51, of the Derby land records.

"[The plaintiff], successor to Astoria . . . by virtue of a valid assignment of a note and mortgage, dated September 29, 2010, challenges the standing of [the defendant] to file the present cross claim. It argues that [the defendant] did not own or possess the mechanic's lien as [the defendant] had assigned its mechanic's lien to Viking . . . and Viking . . . was the owner of record of the mechanic's lien on April 16, 2014. . . .

"Reference to General Statutes § 47-10 (a) provides resolution of the issue of standing here. Section 47-10 (a) provides in relevant part: 'No conveyance shall be effectual to hold any land against any other person but the grantor and his heirs, unless recorded on the records of the town in which the land lies. . . .' The failure to record renders an assignee without standing to maintain an action against any party except the grantor and his heirs. . . . This court finds that the assignment of the mechanic's lien, dated October 12, 2012, but not recorded until June 26, 2014, was not effectual against any [party] except Viking . . . and that [the defendant] did not have standing to file the April 16, 2014 cross claim.

"The motion of [the plaintiff] to dismiss the April 16, 2014 cross claim is granted." (Citation omitted; footnote in original.)

On February 11, 2015, the defendant filed a motion to reargue with respect to the plaintiff's motion to dismiss. The court denied the defendant's motion on the same date. This appeal followed.

We address the defendant's claim that the court erred in granting the plaintiff's motion to dismiss because it improperly concluded that the defendant lacked standing as a result of its failure to record, prior to filing its cross claim, the October 12, 2012...