LPP Mortg. Ltd. v. Underwood Towers Ltd.

• Decision Date: 20 July 2021
• Docket Number: AC 43542, (AC 43575)
• Citation: 260 A.3d 521,205 Conn.App. 763
• Parties: LPP MORTGAGE LTD. v. UNDERWOOD TOWERS LIMITED PARTNERSHIP et al.
• Court: Connecticut Court of Appeals

205 Conn.App. 763

260 A.3d 521

LPP MORTGAGE LTD.

v.UNDERWOOD TOWERS LIMITED PARTNERSHIP et al.

AC 43542, (AC 43575)

Appellate Court of Connecticut.

Argued April 6, 2021

Officially released July 20, 2021

Richard P. Weinstein, for the appellants in Docket No. AC 43542 (named defendant et al.).

David S. Hoopes, with whom was Jay R. Lawlor, for the appellant in Docket No. AC 43575 (defendant city of Hartford).

Wesley W. Horton, with whom were Thomas W. Witherington and J. David Folds, pro hac vice, and, on the brief, Nicholas P. Vegliante and John G. McJunkin, pro hac vice, for the appellee in Docket Nos. AC 43542 and AC 43575 (substitute plaintiff).

Cradle, Alexander and Lavine, Js.

CRADLE, J.

In these related appeals arising from a commercial foreclosure action, the defendants Underwood Towers Limited Partnership (Underwood), CDC Management Corporation (CDC), and the city of Hartford (city),¹ appeal from the judgment of the trial court, rendered after a court trial, in favor of the substitute plaintiff, LPP Mortgage, Inc.² In Docket No. AC 43542, Underwood and CDC claim that the trial court erred in concluding that the plaintiff had standing to foreclose the mortgage because it was not entitled to enforce the promissory note; in relying on the provisions of a regulatory agreement between Underwood and the United States Department of Housing and Urban Development (HUD) to conclude that Underwood had defaulted on the mortgage, and in calculating the amount of the debt owed to the plaintiff; in concluding that foreclosure was an equitable remedy in this case; in awarding monetary damages in addition to the judgment of strict foreclosure; and in awarding damages to the plaintiff under a theory of unjust enrichment. In Docket No. AC 43575, the city challenges the trial court's conclusion that the plaintiff had standing to foreclose on the ground that New England Savings Bank v. Bedford Realty Corp ., 238 Conn. 745, 680 A.2d 301 (1996) ( Bedford Realty ), the Supreme Court case on which the trial court relied in so concluding, has been overruled sub silentio, or, in the alternative, was improperly decided. We affirm the judgment of the trial court.

The following facts, set forth by the trial court in its memorandum of decision, provide the relevant background to these appeals. In 1985, Underwood entered into a ground lease with the city for approximately six acres of property on which Underwood would construct Park Place Towers, a high-rise apartment complex (project). The project was financed by Underwood with a $35 million mortgage that was insured by HUD. To obtain that mortgage insurance, Underwood entered into a regulatory agreement with HUD that governed the management of the project and regulated the use of its revenues. In 1990, after Underwood failed to make payments on the loan, it executed a second mortgage and a second mortgage note, Note A, in favor of HUD. Underwood defaulted again in 1996 and executed an additional mortgage note with HUD, Note B.

In 2002, HUD sold the second mortgage to PAMI Mid-Atlantic, LLC (PAMI). Instead of providing PAMI with the original Note B, HUD provided an affidavit averring that the note had been lost (lost note affidavit). In 2005, PAMI assigned the second mortgage, along with the lost note affidavit, back to HUD. Later in 2005, HUD sold the mortgage and both notes to Beal Bank. Beal Bank, in turn, sold the mortgage and both notes to the plaintiff in 2006. Neither Beal Bank nor the plaintiff possessed the original Note B; however, both of those transfers were accompanied by lost note affidavits for Note B.

By letters to Underwood dated March 28 and May 2, 2006, the plaintiff declared defaults on Note B, and demanded payment from Underwood in the amounts of $419,246 and $1,146,245.98, respectively.

On June 14, 2006, the plaintiff notified Underwood that, because the defaults had not been cured, it had accelerated the debt, and demanded payment of the entire principal amounts due under Notes A and B—approximately $68 million.

In December, 2006, the plaintiff commenced this action. By way of its ten count, revised, second amended complaint, dated November 29, 2018, the plaintiff sought a judgment of strict foreclosure. Additionally, as to Underwood, the plaintiff sought damages for breach of contract, breach of the covenant of good faith and fair dealing, conversion, statutory theft pursuant to General Statutes § 52-564, and unjust enrichment. As to CDC, the plaintiff sought damages for unjust enrichment and fraudulent conveyance. As to both Underwood and CDC, the plaintiff sought damages for fraud and violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq.

On July 16, 2019, following a court trial that spanned eighteen days, and the submission of posttrial briefs, the court filed a memorandum of decision, in which it rejected the defendants' argument that the plaintiff did not have standing to foreclose the mortgage and rendered judgment of strict foreclosure. The court also ordered Underwood to pay the plaintiff $1,766,057 in damages for breach of contract and breach of the covenant of good faith and fair dealing.³ The court ordered CDC to pay the plaintiff $408,588 in damages for unjust enrichment.⁴ The court thereafter awarded the plaintiff postjudgment interest at the annual rate of 5 percent, with law days to commence on December 2, 2019. These appeals followed.

On appeal, the defendants claim that the court erred in concluding that the plaintiff had standing to commence this action and, thus, that the court improperly exercised subject matter jurisdiction over its claims. Underwood and CDC also claim that the court improperly relied on the provisions of the regulatory agreement to conclude that Underwood had defaulted on the mortgage and in calculating the amount of the debt owed to the plaintiff; erred in concluding that foreclosure was an equitable remedy in this case and in awarding monetary damages in addition to the judgment of strict foreclosure; and improperly awarded damages under a theory of unjust enrichment.

On the basis of our examination of the extensive record on appeal, and the briefs and arguments of the parties, we are persuaded that the judgment of the trial court should be affirmed. Because the court's memorandum of decision aptly addresses the arguments raised by Underwood and CDC in AC 43542, we adopt its thorough and well reasoned decision as a proper statement of the facts and applicable law on these issues. See LPP Mortgage Ltd. v. Underwood Towers Ltd. Partnership , Superior Court, judicial district of Hartford, Complex Litigation Docket, Docket No. X03-CV-07-5007994-S (July 16, 2019) (reprinted at 205 Conn. App. 763, 260 A.3d 521). It would serve no useful purpose for us to repeat the discussion contained therein. See Citizens Against Overhead Power Line Construction v. Connecticut Siting Council , 311 Conn. 259, 262, 86 A.3d 463 (2014) ; Phadnis v. Great Expression Dental Centers of Connecticut, P.C ., 170 Conn. App. 79, 81, 153 A.3d 687 (2017).

In AC 43575, the city asserts an additional argument in challenging the trial court's conclusion that the plaintiff had standing to foreclose, which the city did not raise before the trial court, and, thus, the court did not address in its memorandum of decision.⁵ The city argues that the case on which the trial court relied in concluding that the plaintiff had standing, Bedford Realty , has been overruled sub silentio or, in the alternative, was improperly decided. We are not persuaded.

In challenging the plaintiff's standing to foreclose the mortgage, Underwood and CDC argued to the trial court that the plaintiff was not entitled to enforce Note B, pursuant to General Statutes § 42a-3-309, because it was not in possession of the note when it was lost.⁶ The trial court rejected that argument, relying on Bedford Realty for the proposition that a 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 [s]tate [an] 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." (Internal quotation marks omitted.) New England Savings Bank v. Bedford Realty Corp. , supra, 238 Conn. at 759, 680 A.2d 301.

In deciding Bedford Realty , our Supreme Court observed that, because the plaintiff had chosen to pursue the equitable action of foreclosure of the mortgage, rather than a legal action on the note, the fact that the plaintiff never possessed the lost promissory note was not fatal to its foreclosure of the mortgage. Id., at 759–60, 680 A.2d 301. The court further held that, "whatever restrictions [General Statutes] §§ 42a-3-301 and 42a-3-309 might put upon the enforcement of personal liability based solely upon a lost note, they do not prohibit [a mortgagee] from pursuing an action of foreclosure to enforce the terms of the mortgage." Id., at 760, 680 A.2d 301. The court reasoned: "In pursuing the remedy of strict foreclosure, [the mortgagee] or its assignee nevertheless will have to establish the amount of the debt that [the mortgagor] owes. The loss of the note, however, does not preclude proof of the debt by other evidence [because a] note is not a debt; it is only primary evidence of a debt; and where this is lost, impaired or destroyed bona fide, it may be supplied by secondary evidence. ... [Accordingly] [t]he loss of a ... note alters not the rights of the owner, but merely renders secondary evidence necessary and proper. [The mortgagee] or its assignee is free to present reliable evidence other than the original promissory note to establish the amount of the debt." (Citations omitted; internal quotation marks omitted.) Id. On the basis of the foregoing ...