Ltd. v. Lynch

• Decision Date: 27 July 2010
• Docket Number: No. 29874.,29874.
• Court: Connecticut Court of Appeals
• Parties: LPP MORTGAGE, LTD. v. Joseph A. LYNCH et al.

122 Conn.App. 686

1 A.3d 157

LPP MORTGAGE, LTD.

v.Joseph A. LYNCH et al.

No. 29874.

Appellate Court of Connecticut.

Argued Nov. 18, 2009.

Decided July 27, 2010.

COPYRIGHT MATERIAL OMITTED.

COPYRIGHT MATERIAL OMITTED.

Frank W. Murphy, with whom, on the brief, was Donald F. Reid, Norwalk, for the appellants-appellees (named defendant et al.).

John F. Carberry, with whom, on the brief, was David T. Martin, Stamford, for the appellee-appellant (plaintiff).

FLYNN, C.J., and GRUENDEL and McDONALD, Js. ^*

GRUENDEL, J.

The defendants Joseph A. Lynch and Frances H. Lynch ¹ appeal from the judgment of foreclosure by sale rendered by the trial court in favor of the plaintiff, LPP Mortgage, Ltd. On appeal, the defendants claim that the court erred in awarding (1) interest on the principal amount they owed under the promissory note and (2) attorney's fees to the plaintiff under the note. On cross appeal, the plaintiff claims that the court erred in calculating the amount of (1) principal debt due under the note and (2) attorney's fees under the note. We affirm the judgment of the trial court.

The following facts and procedural history are relevant to our resolution of this matter. On December 18, 1992, the defendants' corporation, Birdseye Printing Company, ² executed and delivered a promissory note ³ in the amount of $650,000 to Business Loan Center, Inc. (lender), with the United States Small Business Administration acting as the lender's agent. The defendants, as individuals, signed the note. As security for the note, the defendants executed and delivered (1) a UCC-1 financing statement dated December 18, 1992, granting a security interest to the lender in Birdseye Printing Company's business equipment, (2) a first mortgage on real property located at 65 Stillman Avenue in Bridgeport (commercial property) and (3) a second mortgage on real property located at 2 Betmarlea Road, in Norwalk (home).

In 1998, the defendants defaulted on the promissory note, and they declared business and personal bankruptcies. Thereafter, the lender obtained a judgment of strict foreclosure on the commercial property, as well as a judgment of replevin of Birdseye Printing Company's business equipment, which culminated in the sale of that equipment through auction. ⁴ The money obtained from those sales was applied toward the defendants' debt under the promissory note.

On August 31, 2000, the plaintiff acquired the promissory note and mortgage from the lender by way of assignment and, on May 19, 2005, instituted a foreclosure action against the defendants' home in Norwalk to collect the balance owed under the note. Pursuant to General Statutes § 52-434(a)(4) and Practice Book § 19-2A, the matter was referred to an attorney trial referee, who conducted a trial and submitted a report, dated September 21, 2005, as required by Practice Book § 19-8, in which he found, inter alia, that the promissory note signed by the defendants and payable to the plaintiff as an assignee remained in default. He further recommended that judgment enter in favor of the plaintiff in the principal amount of $224,486 with an interest rate of 8.75 percent from February 24, 1999, until the date of judgment. Thereafter, the plaintiff and the defendants objected to the attorney trial referee's report and recommendation. ⁵ The court, Hon. William B. Lewis, judge trial referee, issued a memorandum of decision, filed February 22, 2006, in which it overruled those objections, accepted the attorney trial referee's report and recommendation and rendered judgment in favor of the plaintiff. ⁶ The court further ordered a hearing to determine the value of the subject premises, the type of foreclosure, the amount of attorney's fees and other matters associated with the foreclosure of the mortgage. Subsequently, upon the plaintiff's motion for a judgment of strict foreclosure, the court, Nadeau, J., rendered judgment of foreclosure by sale in favor of the plaintiff, awarding $224,486 in principal, with an interest rate of 8.75 percent and attorney's fees in the amount of $44,640.27. The defendants filed an appeal, and the plaintiff filed a cross appeal from that judgment, both of which were dismissed by this court for lack of a final judgment. On April 15, 2008, the matter was referred back to the court, Nadeau, J., and judgment again was rendered in favor of the plaintiff, awarding $224,486 in principal, an interest rate of 8.75 percent from the date of default until the date of judgment and $51,168.27 in attorney's fees. From that judgment, the defendants now appeal and the plaintiff cross appeals.

I

THE DEFENDANTS' APPEAL

A

The defendants first claim that the court erred in awarding the plaintiff interest on the principal amount of debt owed under the terms of the promissory note. We disagree.

The following additional facts are necessary for our discussion. At trial before the attorney trial referee, the plaintiff introduced evidence purporting to show that the defendants owed it various amounts under the note, ranging from $390,863 to $539,323.11. The attorney trial referee concluded that the plaintiff had failed to satisfy its burden in establishing the defendant's debt under the promissory note and recommended judgment of foreclosure to enter in favor of the plaintiff in the amount of $224,486.37. Thereafter, the defendants objected to the attorney trial referee's report and recommendation on the ground that it recommended that interest be added to the principal amount of debt from February 24, 1999, to the date of judgment. The court overruled that objection and accepted the attorney trial referee's report and recommendation. Subsequently, the defendants filed a motion to reargue their objection. The court denied that motion. ⁷

On appeal, the defendants contend they were denied a meaningful opportunity to raise the issue of the plaintiff's entitlement to interest. Specifically, they allege that all issues other than the plaintiff's right to foreclosure and the calculation of the correct amount of principal debt were reserved for further proceedings. Additionally, the defendants contend that the plaintiff acted inequitably in allegedly artificially inflating the principal amount that the defendants owed under the promissory note, preventing them from refinancing their mortgage and paying off their debt. Specifically, they argue that the plaintiff made no effort to justify the amount that it alleged was due to it from the defendants. As such, they aver that interest should not have been awarded for the period between August 1, 2000, when they assert that they would have refinanced their mortgage, and the date of judgment.

We begin by setting forth our standard of review. “A reviewing authority may not substitute its findings for those of the trier of the facts. This principle applies no matter whether the reviewing authority is the Supreme Court ... the Appellate Court ... or the Superior Court reviewing the findings of ... attorney trial referees.... This court has articulated that attorney trial referees and [fact finders] share the same function ... whose determination of the facts is reviewable in accordance with well established procedures prior to the rendition of judgment by the court....

“The factual findings of a[n] [attorney trial referee] on any issue are reversible only if they are clearly erroneous.... [A reviewing court] cannot retry the facts or pass upon the credibility of the witnesses.... A finding of fact is clearly erroneous when there is no evidence in the record to support it ... or when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed....

“Although it is true that when the trial court reviews the attorney trial referee's report the trial court may not retry the case and pass on the credibility of the witnesses, the trial court must review the referee's entire report to determine whether the recommendations contained in it are supported by findings of fact in the report. It is also true that the trial court cannot accept an attorney trial referee's report containing legal conclusions for which there are no subordinate facts.” (Citations omitted; internal quotation marks omitted.)

Post Road Iron Works, Inc. v. Lexington Development Group, Inc., 54 Conn.App. 534, 540-41, 736 A.2d 923 (1999).

We first consider whether the defendants were denied a meaningful opportunity to establish factually the basis on which interest should not have been equitably awarded. Our review of the record convinces us that the defendants reasonably could have expected prejudgment interest to be a matter decided by the attorney trial referee for the following reasons. First, the promissory note provides in relevant part that “the undersigned promises to pay ... Six Hundred Fifty Thousand ... dollars, with interest on unpaid principal computed from the date of each advance to the undersigned at the initial rate of 8.75 percent per annum.... Holder is authorized to declare all or any part of the indebtedness immediately due and payable upon the happening of ... (1) Failure to pay any part of the indebtedness when due....” The note also provides in relevant part: “ The term ‘Indebtedness' as used herein shall mean the indebtedness ... including principal, interest, and expenses.... ” (Emphasis added.) Notably, at the May 19, 2005 hearing before the attorney trial referee, counsel for the plaintiff stated that “there's an issue as to what the true amount of the debt is.” (Emphasis added.) Similarly, in addressing counsel for the defendants, the attorney trial referee inquired: “[Y]ou're in agreement that this [exhibit] accurately states ... the plaintiff's claim as to what the indebtedness is?” ⁸ Second, the defendants' assertion that the parties stipulated that all issues other than the plaintiff's right to foreclosure and the calculation of the...