LPP Mortgage, Inc. v. Underwood Towers Limited Partnership

• Decision Date: 13 December 2018
• Docket Number: HHDCV075007994S
• Court: Connecticut Superior Court
• Parties: LPP MORTGAGE, INC. v. UNDERWOOD TOWERS LIMITED PARTNERSHIP et al.

LPP MORTGAGE, INC. v. UNDERWOOD TOWERS LIMITED PARTNERSHIP et al.

No. HHDCV075007994S

Superior Court of Connecticut, Judicial District of Hartford, Hartford, Complex Litigation Docket

December 13, 2018

UNPUBLISHED OPINION

OPINION

Carl J. Schuman, Superior Court Judge.

In this commercial foreclosure case, plaintiff LPP Mortgage, Inc. the mortgagee, moves for partial summary judgment on the first count of the original complaint (complaint), which was filed on December 22, 2006, and for summary judgment on the first, second, fourth, fifth, sixth, ninth, and tenth special defenses. Defendants Underwood Towers Limited Partnership (Underwood), the mortgagor, and CDC Management Company (CDC) (collectively, the defendants) move for summary judgment on counts two through ten of the complaint as well as a ruling in limine excluding certain portions of the plaintiff’s evidence.^[1]

I

This case has a long and tortuous history. The court will only summarize it here. The undisputed facts begin in 1985 with the formation of Underwood as the owner of and landlord for a 451-unit residential apartment complex in Hartford (the Project).^[2] The funding for the construction of the Project came from a $35 million first mortgage loan given to Underwood by Connecticut National Bank. The mortgage was insured by the United States Department of Housing and Urban Development (HUD). To obtain the mortgage insurance Underwood entered into a Regulatory Agreement with HUD (Regulatory Agreement) that governed the management of the Project and its revenue.

In 1990, following a payment default, Underwood executed a second mortgage and a second mortgage note, known as Note A in favor of HUD. Underwood defaulted again in 1996 and executed an additional mortgage note with HUD, known as Note B, and agreed to modifications to the second mortgage. The combined original principal amount of the two promissory notes exceeded $30 million.

HUD sold the second mortgage to PAMI MidAtlantic, LLC in 2002 which assigned it back to HUD in 2005. In the 2002 assignment, HUD filed a lost note affidavit with respect to Note B. HUD sold the mortgage to Beal Bank (Beal) in 2005. The sale was documented by, among other papers, a Loan Sale Agreement. The plaintiff acquired the second mortgage in January 2006 from Beal.

The plaintiff declared a default on Note B in March 2006. In May 2006, Underwood filed suit against Beal and the plaintiff seeking a declaration of the rights of the parties in the first count and liability and damages in two additional counts. See Underwood Towers, Ltd. v. Beal Bank, Docket No. HHD-CV06-5004189S. That case remains informally stayed pending the outcome of the present case.

The plaintiff filed the present action for foreclosure and damages in 2007. The parties tried the case to the court, Miller, J., beginning in February 2009. Testimony proceeded intermittently and did not end until January 2011. There were then extensive briefs and delays that postponed full submission of the case until January 2017. Unfortunately, Judge Miller then sought numerous extensions of the 120-day decisional period. By June 1, 2018, the defendants declined to consent to further extensions and instead moved for a mistrial. On July 25, 2018, the court, Pittman, J.T.R., granted the motion for a mistrial.

A retrial of the case will start in January 2019. In the meantime, both parties have filed motions for partial summary judgment and/or rulings in limine. The plaintiff claimed at oral argument that the value of the property at the previous trial was approximately $28 million and that the current total indebtedness on Note A was approximately $70 million and on Note B was approximately $30 million. Because Note B is senior in priority to Note A, this case, in the first instance, addresses issues involving Note B.

II

The court applies the accepted standards governing summary judgment motions. "Practice Book § [17-49] requires that 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. A material fact is a fact that will make a difference in the result of the case ... The facts at issue are those alleged in the pleadings ...

"In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law. The courts hold the movant to a strict standard. To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact ... As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent ...

"The party opposing a motion for summary judgment must present evidence that demonstrates the existence of some disputed factual issue ... The movant has the burden of showing the nonexistence of such issues but the evidence thus presented, if otherwise sufficient, is not rebutted by the bald statement that an issue of fact does exist ... To oppose a motion for summary judgment successfully, the nonmovant must recite specific facts ... which contradict those stated in the movant’s affidavits and documents ... The opposing party to a motion for 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 ... The existence of the genuine issue of material fact must be demonstrated by counteraffidavits and concrete evidence ..." (Citations omitted; internal quotation marks omitted.) Morrissey-Manter v. Saint Francis Hospital & Medical Center, 166 Conn.App. 510, 517-18, 142 A.3d 363, cert. denied, 323 Conn. 924, 149 A.3d 962 (2016).

THE PLAINTIFF’S SUMMARY JUDGMENT MOTION

I

The plaintiff’s motion for summary judgment (Dkt. # 602.00) first requests "partial summary judgment with respect to the First Count of its Complaint ...", a count that seeks foreclosure of the mortgage. The court denies this portion of the motion for two reasons. The first reason is that it is not properly briefed. Although the introduction to the plaintiff’s memorandum in support of its summary judgment motion does state that the plaintiff moves for "partial summary judgment on Count I," in the argument portion of its brief the plaintiff states that it seeks: "(i) a determination that it is the owner of the loans and the mortgage under the Second Mortgage; (ii) a determination that Underwood is in default under the subject loan documents; and (iii) a judgment in favor of LPP on Defendants’ First Second, Fourth, Fifth, Sixth, Ninth, and Tenth Special Defenses." (Memorandum in Support of Plaintiff’s Partial Motion for Summary Judgment (Dkt. # 603.00) (Pl. Mem.) pp. 1 11).) (See also Pl. Mem., p. 15: "LPP seeks a determination that Underwood is in default under the loan documents based on three categories of default ...") The conclusion similarly seeks these "determinations" without requesting any sort of partial summary judgment on the first count. (Pl. Mem., p. 35.) The plaintiff’s principal brief also fails to quote or cite the standard for granting summary judgment on liability in a foreclosure case.^[3]

The "determinations" that the plaintiff seeks are more appropriate in a declaratory judgment action and are not equivalent to making the case for summary judgment of liability. Therefore, because the plaintiff does not properly seek partial summary judgment on the foreclosure count, the court cannot grant such relief.

The second reason for the denial of summary judgment of liability on the foreclosure count is that the matter ultimately involves triable issues of fact.^[4] The plaintiff identifies three reasons for default: the defendants made monthly payments to CDC that exceeded the $8, 000 fixed payment allowed under the loan documents; the defendants allowed a partner to reside in a penthouse apartment without paying rent; and the defendants used rents to pay more than $250, 000 to their attorneys to fund their litigation strategy. Although many of the historical facts concerning these three reasons seem undisputed, the defendants have raised various equitable considerations such as the reasons for the actions taken, the relative size of the alleged defaults compared to the value of the property, and the hardship to the defendants and their tenants that would result from foreclosure. These equitable considerations are important because "[a]n action of foreclosure is peculiarly equitable and ... the court exercises discretion in ensuring that justice [is] done ..." National City Real Estate Services, LLC v. Tuttle, 155 Conn.App. 290, 295, 109 A.3d 932 (2015). "Furthermore, if the mortgagor is prevented by accident, mistake or fraud, from fulfilling a condition of the mortgage, foreclosure cannot be had ..." (Internal citations omitted; internal quotation marks omitted.) LaSalle National Bank v. Shook, 67 Conn.App. 93, 97, 787 A.2d 32 (2001). The court cannot resolve these equitable issues without hearing all the facts and seeing the witnesses. Accordingly, the court denies the plaintiff’s motion for summary judgment on liability for the foreclosure count.

The plaintiff claims that its motion for summary judgment of liability on the foreclosure count also encompasses the defendants’ fifth special defense. That defense alleges that "[t]he plaintiff...