Bank of Stamford v. Alaimo

• Decision Date: 13 April 1993
• Docket Number: No. 10817,10817
• Citation: 31 Conn.App. 1,622 A.2d 1057
• Court: Connecticut Court of Appeals
• Parties: BANK OF STAMFORD v. Rosaria ALAIMO et al.

Page 1057

622 A.2d 1057

31 Conn.App. 1

BANK OF STAMFORD v. Rosaria ALAIMO et al.

No. 10817.

Appellate Court of Connecticut.

Argued Dec. 2, 1992.

Decided April 13, 1993.

Jules Lang, Norwalk, for appellant (named defendant).

Scott M. Harrington, with whom, on the brief, was Ellery E. Plotkin, Stamford, for appellee (substitute plaintiff).

Reuben S. Midler, Norwalk, for Richard Testa (defendant).

Before EDWARD Y. O'CONNELL, LAVERY and SCHALLER, JJ.

LAVERY, Judge.

The issue presented by this case is whether a defendant, in a hearing on a motion for deficiency judgment after a judgment of foreclosure has entered, the law days have passed, and title has vested, can raise defenses that could have been raised and decided in the foreclosure hearing, but were not. The trial court answered this question in the negative and we agree.

The plaintiff ¹ was the holder of a note that was signed by Charles Alaimo, his mother Rosaria Alaimo, the named defendant and the sole appellant, ² Alaimo Excavating & Blasting, Inc., and Richard Testa as obligors. The purpose of the loan was to finance equipment of Alaimo Excavating & Blasting, Inc. The plaintiff, pursuant to the terms of the loan, received as collateral a UCC-1 agreement concerning certain equipment and a second mortgage on the defendant's property at 16 Lounsbury Avenue in Norwalk. The defendant executed a mortgage deed and a subsequent modification that were both recorded. When all of the obligors on the note failed to make payments, the plaintiff's predecessor brought foreclosure proceedings against the defendant. On March 18, 1991, the trial court entered a default for failure to appear and rendered judgment of strict foreclosure. On May 6, 1991, attorneys entered an appearance for the defendant. Subsequent to the attorneys' appearance, the plaintiff moved to open the judgment and extend the law date and moved to cite in the tenants in possession on the premises being foreclosed so that ejectment could be pursued as part of the foreclosure action. The judgment was opened, and the law day was extended, and title passed to the plaintiff on August 8, 1991. During that period of time, the defendant was represented actively by counsel who represented the defendant in a prejudgment attachment, and on her behalf filed a cross complaint against Charles Alaimo and Richard Testa and initiated prejudgment attachment proceedings against them. The plaintiff timely moved for a deficiency judgment. At the time of the hearing on the motion for deficiency judgment on October 21, 1991, new counsel appeared for the defendant, and the defendant requested a continuance, which was granted.

The defendant filed an objection to the motion for deficiency judgment, a motion to disgorge title, and a motion to dismiss. She subpoenaed officers of the plaintiff bank to produce bank records pursuant to the motion to disgorge the title. In addition, the defendant filed a lis pendens on the foreclosed property, claiming title pursuant to the motion to disgorge title. The plaintiff filed an objection to the motions as well as a motion to quash the subpoena and to discharge the lis pendens.

In the motion to disgorge and the motion to dismiss, the defendant claimed that the mortgage and the mortgage modification were invalid and unenforceable because the documents had not been contemporaneously witnessed and acknowledged as required by General Statutes § 47-5, and because the defendant had executed the documents without knowledge of their contents while under duress and as a result of undue influence. In addition, the defendant claimed that since the plaintiff had failed to take steps to ensure that the documents were properly executed and part of a bona fide loan, and since it had improperly accepted the documentation without meeting the defendant or having the documents executed in its presence, the plaintiff should be required to restore the property to the defendant. The motion to dismiss alleges that the default judgment against the defendant was obtained on the basis of a faulty military affidavit of the deputy sheriff and a faulty return of service. The return stated that the abode of the defendant was the foreclosed premises when her abode was actually at Tierney Street, Norwalk. The defendant reasons that since process was never served at the place of abode or personally, the court lacked personal jurisdiction and the judgment was void.

The defendant made an offer of proof that the defendant did not enter into the transaction knowingly or with any understanding, that she had difficulty reading English, that she signed at her son's request, that her son told her that the property was not at risk, that she was afraid to say no to her son, that the defendant did not meet anyone at the bank and did not go to the bank, and that the defendant signed the papers in front of only her son at her house at 26 Tierney Street in Norwalk.

The defendant contested neither the value of the plaintiff's appraisal nor the stated debt. The court denied the defendant's motions and granted the plaintiff's motions to quash the subpoena and to discharge the lis pendens. The trial court ruled that the defenses should have been raised in an effort to defeat the judgment of foreclosure by attacking the underlying debt and mortgage rather than in the course of the deficiency proceedings. The court rendered a deficiency judgment in the amount of $222,411.04 from which this appeal was taken.

A mortgager who files a foreclosure suit and who intends to bring a deficiency judgment authorized by General Statutes § 49-14 ³ must allege facts sufficient, not only to justify the decree of foreclosure on the mortgage, but to support a judgment in personam against the particular defendant or defendants against whom a deficiency judgment will be sought. Smith v. Emerald Corporation, 6 Conn.Sup. 117, 121 (1938).

A defendant in a foreclosure action, against whom there appears in the complaint allegations sufficient to impose liability in personam based on the mortgage note, must interpose a defense to such complaint in the same manner as though he were served in a separate action to enforce such liability. Id., at 122. In Smith, a well crafted and learned opinion, Judge Cornell wrote: "It is believed that the general scheme of the statute buttresses this conclusion. Its dominant purpose is to eliminate the necessity of two separate suits.... The proceedings supplementary to judgment of foreclosure are directed to one purpose only, viz., to the determination of the amount of the deficiency judgment to be rendered, and that, in turn, is usually limited to the fixing of the value of the property, since the mortgage debt as ascertained in the decree of foreclosure will ordinarily coincide with the debt predicated on the mortgage note or other obligation. All this presupposes that all questions of liability shall have been theretofore determined. This is the conviction expressed by then Associate Justice George W. Wheeler in his dissenting opinion in Suisman v. Gorentz, 90 Conn. 618, 620 [98 A. 89 (1916) ], where it is said (p. 622, 98 A. 89) that in supplementary proceedings under the statute [General Statutes (1930 Rev.) § 5083] the court has 'no duty save to find the difference between the appraisal value and the plaintiff's claim ... and render judgment accordingly.' Consistently with this, Justice Wheeler also says, in effect, that any defense to personal liability on the debt, note or other obligation cannot be raised in such supplementary proceedings. In holding that a defense of fraud attending the execution and delivery of mortgage notes was not available to prevent the entering of a deficiency judgment, he noted (p. 622 : 'They failed to make it in the foreclosure actions....' While the majority failed to pass upon that question in the case mentioned, the dissenting opinion is significant." (Citation omitted.) Smith v. Emerald Corporation, supra, at 122.

Judge Cornell's analysis in Smith was echoed by a New York court in Griffo v. Swartz, 61 Misc.2d 504, 306 N.Y.S.2d 64 (1969). In that case, the defendant attempted to assert the defense of laches in a deficiency proceeding, claiming that the delay in conducting the foreclosure sale created the deficiency. The court held that "[a] judgment of foreclosure and sale having been entered against the defendant, all matters of defense which were or might have been put forth and litigated in the foreclosure action are concluded.... [F]indings of fact in a decree of foreclosure, showing defendants personally liable for any deficiency that may remain after a sale of the mortgaged premises, preclude defendants, on an application for a deficiency judgment, from presenting any defense which could or should have been interposed prior to the announcement of the decree, since the findings of fact in a mortgage foreclosure decree, on issues properly pleaded, are not reviewable on objections to a deficiency judgment...." (Internal quotation marks omitted.) Id., at 508-509, 306 N.Y.S.2d 64.

In First Bank v. Simpson, 199 Conn. 368, 373, 507 A.2d 997 (1986), our Supreme Court said that in the hearing contemplated under § 49-14 to obtain a deficiency judgment, the court, after hearing the party's appraisal, determines the value of the property and calculates any deficiency. This deficiency judgment procedure presumes the amount of the debt as established by the foreclosure judgment and merely provides for a hearing on the value of the property. The terms of the statute provide that if a deficiency is established, the court shall render "judgment for the plaintiff and that the plaintiff in any further action upon the debt, note or obligation shall recover only the amount of such judgment." See footnote 1, supra. The limited role of deficiency proceedings is also recognized by the New Jersey courts. "In the deficiency the only matters to be considered by the court are the...