Federal Deposit Ins. Corp. v. Owen, 25216.

• Citation: 873 A.2d 1003,88 Conn.App. 806
• Decision Date: 10 May 2005
• Docket Number: No. 25216.,25216.
• Court: Appellate Court of Connecticut
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Receiver of Saybrook Bank and Trust Company v. Joseph E. OWEN et al.

873 A.2d 1003

88 Conn.App. 806

FEDERAL DEPOSIT INSURANCE CORPORATION, Receiver of Saybrook Bank and Trust Company v. Joseph E. OWEN et al.

No. 25216.

Appellate Court of Connecticut.

Argued February 15, 2005.

Decided May 10, 2005.

James M. Nugent, Milford, for the appellants (named defendant et al.).

Donald E. Frechette, Hartford, for the appellee (substitute plaintiff RFC Property I, Inc.).

DRANGINIS, FLYNN and GRUENDEL, Js.

DRANGINIS, J.

The primary issues in this mortgage foreclosure action are governed by an "ancient" rule that distinguishes a lender's rights at law from those in equity. "That no action at law will lie upon these notes, if the statute of limitations is pleaded, cannot be doubted. Nor can it be claimed, that this statute ... shall operate in a court of equity." Belknap v. Gleason, 11 Conn. 160, 162 (1836).

Here, the defendants Joseph E. Owen and Geraldine E. Owen¹ appeal from the judgment of strict foreclosure, raising issues as to whether (1) certain notes were enforceable, (2) the action was time barred and (3) the trial court abused its discretion with respect to its award of attorney's fees.² We affirm the judgment of the trial court. The court found this case to be a mortgage foreclosure action involving three mortgages evidencing security interests held by the substitute plaintiff, RFC Property I, Inc.,³ in real property known as 300 Old Coach Lane, Stratford (property), where the defendants reside. Specifically, the court found that the mortgages involved are "[a] mortgage dated July 1, 1988, to the Saybrook Bank and Trust Company as security for a demand note in the amount of $315,000 (Note 1); a mortgage dated July 2, 1988, to the Saybrook Bank and Trust Company, August 2, 1988, as security for a demand note in the amount of $25,000 to the Saybrook Bank and Trust Company (Note 2); a mortgage to the Whitney Bank and Trust Company, dated April 6, 1989, as security for a home equity line of credit in the amount of $45,000 (Note 3). The mortgages to the Saybrook Bank and Trust Company are subject to modification agreements dated May 18, 1990." (Emphasis added.)

The court found the debt due as of February 20, 2003, not including attorney's fees, as follows:

Note 1 Principal balance $315,000.00 Interest $284,167.19 Note 2 Principal balance $24,874.91 Interest $22,440.11 Note 3 Principal balance $44,715.06 no interest charges Taxes paid by Federal Deposit Insurance Corporation $55,214.38 Taxes paid by plaintiff $40,540.26 Appraisal fees $200.00 Title search $150.00 Total debt $787,301.91

The court also found the fair market value of the property to be $550,000.

In August, 1995, the Federal Deposit Insurance Corporation, the court-appointed receiver of the failed banks, Saybrook Bank and Trust Company and Whitney Bank and Trust Company, and the defendants entered into a settlement agreement, which consisted of several mortgage modification agreements. Pursuant to the settlement agreement, the defendants were to deliver $215,000 to the Federal Deposit Insurance Corporation as a condition precedent to the transfer of its interest in the property. The $215,000 payment was never made. The settlement agreement also contained a provision waiving the rights of the defendants to object to foreclosure in any counterclaims or defenses they might have.

After citing the rules for awarding reasonable attorney's fees established pursuant to Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983); Kirsch v. Fleet Street, Ltd., 148 F.3d 149, 172-73 (2d Cir.1998); Steiger v. J.S. Builders, Inc., 39 Conn.App. 32, 38, 663 A.2d 432 (1995); the court awarded the plaintiff attorney's fees of $155,635.88. The court further found interest to February 20, 2004, at the rate of $43.18 per diem on Note 1 and $3.80 per diem on Note 2 for a total of $18,954.45. The court ordered a strict foreclosure of the property and set a law day of March 23, 2004.

Thereafter, the defendants filed a motion for articulation asking the court to set forth the factual and legal basis for enforcing unsigned loan documents against them, why the plaintiff's claims were not time barred and the basis of the court's award of counsel fees. The court denied the motion for articulation. The defendants, however, did not file a motion for review with this court. See Practice Book § 66-6. On appeal, the defendants claim, generally, that the court abused its discretion in (1) rendering judgment in favor of the plaintiff because (a) the modification agreements were unenforceable, (b) the operative complaint did not refer to enforceable instruments and (c) the action is barred by General Statutes §§ 42a-3-118 and 52-576(a), and (2) awarding attorney's fees that are grossly excessive. The plaintiff argues that most of the defendants' claims are not reviewable due to the absence of an articulation.⁴

The action before the court was a foreclosure of three mortgages. "Our Supreme Court has held that a judgment of strict foreclosure of a mortgage is separate and distinct from an action on the underlying note.... It is well established [however] that the [mortgagee] is entitled to pursue its remedy at law on the notes, or to pursue its remedy in equity upon the mortgage, or to pursue both. A note and a mortgage given to secure it are separate instruments, executed for different purposes and in this State action for foreclosure of the mortgage and upon the note are regarded and treated, in practice, as separate and distinct causes of action, although both may be pursued in a foreclosure suit." (Citation omitted; internal quotation marks omitted.) L & R Realty v. Connecticut National Bank, 53 Conn. App. 524, 549-50, 732 A.2d 181, cert. denied, 250 Conn. 901, 734 A.2d 984 (1999).⁵ "If, by an action solely on the note, the owner secures full payment on the debt, his right to enforce the mortgage is gone, or, if he secures payment in part, he can enforce the mortgage only to secure the payment of the balance." Little v. United Investors Corp., 157 Conn. 44, 48, 245 A.2d 567(1968).

"The standard of review of a judgment of foreclosure by sale or by strict foreclosure is whether the trial court abused its discretion." (Internal quotation marks omitted.) Webster Bank v. Flanagan, 51 Conn.App. 733, 752, 725 A.2d 975 (1999). "A foreclosure action is an equitable proceeding.... The determination of what equity requires is a matter for the discretion of the trial court.... In determining whether the trial court has abused its discretion, we must make every reasonable presumption in favor of the correctness of its action.... Our review of a trial court's exercise of the legal discretion vested in it is limited to the questions of whether the trial court correctly applied the law and could reasonably have reached the conclusion that it did." (Citations omitted; internal quotation marks omitted.) Citicorp Mortgage, Inc. v. Conant, 54 Conn.App. 529, 532, 736 A.2d 928, cert. denied, 251 Conn. 909, 739 A.2d 264 (1999).

I

The defendants' first set of claims is that the court improperly rendered judgment in favor of the plaintiff because (a) the modification agreements were unenforceable, (b) the operative complaint does not refer to enforceable instruments and (c) the action is barred by the statute of limitations. We are unpersuaded. We conclude that the trial court did not abuse its discretion in rendering a judgment of strict foreclosure.

A

The defendants' claim that the modification agreements were unenforceable is premised on their assumption that certain unsigned notes attached to the agreements formed the basis of the court's judgment. There is nothing before us to indicate that the unsigned notes were the basis of the court's judgment. The court's memorandum of decision, in fact, makes no mention of notes attached to the agreements. More compelling, however, is the manner in which the court drafted its memorandum of decision, which leads us to infer that the court found the amount of the debt owing not on the basis of the unsigned notes, but pursuant to the original signed notes. In stating its factual findings, the court identified each of the original notes by date and amount, and parenthetically designated a shorthand reference for each note that it used within the memorandum. When the court made its findings with respect to the debt owed, it referred to the various notes by the shorthand designation. Although the defendants claim that any action on the original notes is time barred, they do not challenge the form of the notes.

B

As to the defendants' claim that the operative complaint does not refer to enforceable instruments, we also disagree.

"[T]he interpretation of pleadings is always a question of law for the court ...." (Internal quotation marks omitted.) Grimes v. Housing Authority, 242 Conn. 236, 249, 698 A.2d 302 (1997). "[T]he complaint must be read in its entirety in such a way as to give effect to the pleading with reference to the general theory upon which it proceeded, and do substantial justice between the parties." (Internal quotation marks omitted.) Parsons v. United Technologies Corp., 243 Conn. 66, 83, 700 A.2d 655 (1997). "[T]he modern trend, which is followed in Connecticut, is to construe pleadings broadly and realistically, rather than narrowly and technically." (Emphasis in original; internal quotation marks omitted.) DiLieto v. County Obstetrics & Gynecology Group, P.C., 265 Conn. 79, 104, 828 A.2d 31 (2003). Our review of the trial court's construction of the pleadings is plenary. Id. The operative complaint sounds in three counts, one for each of the two original notes and the line of credit and their respective mortgage deeds signed by the defendants. The first paragraph of each count contains allegations regarding the note or line of credit, and the second paragraph describes the corresponding mortgage deed. In its prayer for relief in the operative complaint, the plaintiff alleges...