DeMartino v. Schloss, No. 04 4001313 S (CT 6/1/2005)
| Decision Date | 01 June 2005 |
| Docket Number | No. 04 4001313 S,04 4001313 S |
| Court | Connecticut Supreme Court |
| Parties | Dominick DeMartino v. Stuart Schloss Opinion No.: 89061 |
The defendant has moved for summary judgment in this declaratory judgment action involving the "Perfect Tender in Time Rule." Both parties agree that there are no contested issues of fact. Rather, the granting of summary judgment depends on whether the Perfect Tender in Time Rule, which has long been the law in Connecticut, will be enforced in this case to prevent the plaintiffs from prepaying the amount due under a commercial mortgage note.
On November 20, 2001, the plaintiff, D.F.C. of Orange, LLC, executed a promissory note ("Promissory Note") which provided, in pertinent part:
FOR VALUE RECEIVED, the undersigned, D.F.C. of Orange, LLC, of Wallingford, Connecticut (hereinafter referred to as the" Maker"), promises to pay to the order of STUART SCHLOSS, of Fairfield, Connecticut (hereinafter referred to as "Lender") . . . the sum of ONE MILLION SEVENTY-FIVE THOUSAND ($1,075,000.00) DOLLARS, with interest on the unpaid principal balance at the rate of Seven (7%) percent per annum, not in advance, ("Interest"), together with all taxes assessed upon said sum against the Holder, and any costs and expenses, including reasonable attorneys fees, incurred by the Holder in the collection hereof, or in protecting or sustaining any mortgage deed securing this Note ("Mortgage") or in any litigation or controversy arising from or connected with said Mortgage and/or other document between the Maker and Lender of even date herewith (collectively hereinafter referred to as the" Indebtedness").
Monthly Payment: Commencing January 1, 2002 and on the first day of each successive month thereafter until maturity, the Maker shall pay the Holder the sum of EIGHT THOUSAND THREE HUNDRED THIRTY-FOUR AND 48/100 ($8,334.48) DOLLARS, the same to be applied to Interest and the balance to principal.
The Promissory Note also contains language in which the Maker certifies that the note is part of a commercial transaction and waives all rights under sections 52-278a through 52-278g of the Connecticut General Statutes () and similar statutes.
The maturity date of the Promissory Note is December 1, 2021.
The plaintiff, Dominick DeMartino, unconditionally guaranteed the payment of all sums due under the Promissory Note (the "Guaranty") and also agreed "to pay all costs of collection including a reasonable attorneys fee incurred by Stuart Schloss in the enforcement of his rights under this Guaranty."
Practice Book §17-49 (formerly §384) provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fojtik v. Hunter, 265 Conn. 385, 389, 828 A.2d 596 (2003); Mytych v. May Dept Stores Co., 260 Conn. 152, 158-59, 793 A.2d 1068 (2002); Home Ins. Co. v. Aetna Life & Casualty Co., 235 Conn. 185, 202, 663 A.2d 1001 (1995). Although the party seeking summary judgment has the burden of showing the nonexistence of any material fact; D.H.R. Construction Co. v. Donnelly, 180 Conn. 430, 434, 429 A.2d 908 (1980); a party opposing summary judgment must substantiate its adverse claim by showing that there is a genuine issue of material fact, together with the evidence disclosing the existence of such an issue. Practice Book §§17-45, 17-46; Burns v. Hartford Hospital, 192 Conn. 451, 455, 472 A.2d 1257 (1984). In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party. Town Bank & Trust Co. v. Benson, 176 Conn. 304, 309, 407 A.2d 971 (1978); Strada v. Connecticut Newspapers, Inc., 193 Conn. 313, 317, 477 A.2d 1005 (1984). The test is whether a party would be entitled to a directed verdict on the same facts. Batick v. Seymour, 186 Conn. 632, 647, 443 A.2d 471 (1982); New Milford Savings Bank v. Roina, 38 Conn.App. 240, 243-44, 659 A.2d 1226 (1995).
Summary judgment should only be granted if the pleadings, affidavits and other proof submitted demonstrate that there is no genuine issue as to any material fact. Scinto v. Stam, 224 Conn. 524, 530, cert. denied, 114 S.Ct. 176, 126 L.Ed.2d 136 (1993); Connell v. Colwell, 214 Conn. 242, 246, 571 A.2d 116 (1991). Summary judgment is "designed to eliminate the delay and expense of litigating an issue where there is no real issue to be tried." Wilson v. City of New Haven, 213 Conn. 277, 279, 567 A.2d 829 (1989).
The complaint requests a declaratory judgment determining that the plaintiff, D.F.C. of Orange, LLC, can anticipate or pay off the Promissory Note prior to maturity. The defendant has alleged in his special defense that the Promissory Note contained a no prepayment provision, and that prepayment was, therefore, barred under the "Perfect Tender in Time Rule."
The Perfect Tender in Time Rule was first recognized in 1829 in the case of Abbe v. Goodwin, 7 Conn. 377, 384 (1829). Abbe involved four promissory notes, none of which contained a prepayment provision. The Court held that without a prepayment provision, a maker of a note could not compel a mortgagee to accept payment or to discharge the mortgage before maturity.
In 1973 the Supreme Court reaffirmed Connecticut's adherence to the Perfect Tender in Time Rule in Dugan v. Grzybowski, 165 Conn. 173, 332 A.2d 97 (1973), stating:
In the discussion of general principles applicable to this dispute, both parties cite Abbe v. Goodwin, 7 Conn. 377, 384. That case entailed a mortgage secured by four promissory notes maturing on different dates. None of the notes contained a prepayment provision, and this court simply held that without a prepayment clause, the mortgagor could not compel the mortgagee to accept payment or to discharge the mortgage before it is due. That rule, which is not questioned here, is elementary. See Trahant v. Perry, 253 Mass. 486, 489, 149 N.E. 149; Peter Fuller Enterprises, Inc. v. Manchester Savings Bank, 102 N.H. 117, 152 A.2d 179; cf. Bloomfield Savings Bank v. Howard S. Stainton & Co., 60 N.J.Super. 524, 159 A.2d 443. See generally, 2 Jones, Mortgages (8th Ed.) 1137; 3 Powell, Real Property, p. 656 n.4; 59 C.J.S. 695, Mortgages, 447(a). [fn2]
The Perfect Tender in Time Rule is the majority rule in this country. Promenade Towers Mutual Housing Corp. v. Metropolitan Life Insurance Co., 324 Md. 588 (1991). "[The rule is], and for a long time has been, that, absent special agreement, the mortgagor in an unregulated transaction who promises to repay the loan, in installments at specified times or at a specified date, does not have a right to compel the creditor to accept prepayment." Promenade Towers, supra. at 592. See also, Dietz, Silence is Not Always Golden: Mortgage Prepayment in The Commercial Loan Context, 22 U. Balt L. Rev. 297, 307 (1993), where the author points out that "Consumer lending laws and the policies of many purchasers of residential mortgage loans, the FHA and VA, for example, serve to insulate most lending transactions from the common-law rule." Id. at 299
The rationale behind the rule is that the " Dugan, supra, at 176, n.2.
The plaintiffs have argued that the rule is archaic, and, therefore, should be changed. However, none of the cases they rely on explicitly deal with a commercial note such as the one at issue. They also do not deal with a note which contains language which suggests that the mortgagee intends that there not be a prepayment provision. Skyles v. Burge, 789 S.W.2d 116 (Mo.App. 1990); Acord v. Jones, 211 Ga.App. 682, 440 S.E.2d 679 (1994) (Georgia Court of Appeals); Hatcher v. Rose, 407 S.E.2d 172 (1990); and Mahoney v. Furches, 503 Pa. 60, 468 A.2d 458 (1983).
In Skyles the issue before the Court on appeal was "whether prepayment is prohibited, in residential real estate transactions, where the note does not by specific language either prohibit or permit prepayment." In the present case the Promissory Note explicitly pertains...
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