Southbridge Associates, LLC v. Garofalo

• Decision Date: 27 April 1999
• Docket Number: (AC 18248)
• Citation: 728 A.2d 1114,53 Conn. App. 11
• Court: Connecticut Court of Appeals
• Parties: SOUTHBRIDGE ASSOCIATES, LLC v. ALBERT A. GAROFALO ET AL.

53 Conn. App. 11

728 A.2d 1114

SOUTHBRIDGE ASSOCIATES, LLC v. ALBERT A. GAROFALO ET AL.

(AC 18248)

Appellate Court of Connecticut.

Argued November 6, 1998.

Officially released April 27, 1999.

Lavery, Spear and Kulawiz, Js. James T. Shearin, with whom was Aimee J. Wood, for the appellants (named defendant et al.).

Theodore J. Whitehead, with whom was Thomas D. Goldberg, for the appellee (plaintiff).

Opinion

KULAWIZ, J.

The defendants Albert A. Garofalo and Pequot Motor Inn, Inc. (Pequot), appeal from the judgment rendered in favor of the plaintiff following that court's granting of the plaintiffs motion for summary judgment.¹ The defendants claim that the trial court improperly (1) granted the plaintiff's motion for summary judgment, (2) denied the defendants' motion for an order of compliance with discovery requests and (3) granted the plaintiffs motion for a judgment of foreclosure. We affirm the judgment of the trial court.

On July 18, 1986, Garofalo borrowed $3,000,000 from Connecticut Bank and Trust (CBT) pursuant to a note and secured by a mortgage to CBT. On October 2, 1990, Garofalo borrowed an additional $300,000 from CBT pursuant to a note and secured by a mortgage to CBT. Garofalo used the funds to purchase the Bridgeport Motor Inn in Fairfield and a residential lot in Fairfield and to make improvements to the Pequot Motor Inn in Southport. CBT subsequently assigned the notes and mortgages to Fleet National Bank (Fleet).

In late 1995, Garofalo, an eighty-seven year old attorney licensed to practice in Connecticut, was admitted to a nursing home. Thereafter, beginning in November, 1995, he defaulted on the notes, making no payments until March, 1996, when Fleet accelerated the notes and demanded full payment of the outstanding balances.

Following acceleration, Fleet assigned the notes and mortgages to the plaintiff. Garofalo offered to purchase the notes from Fleet at a price that he claimed was higher than the amount that the plaintiff had paid. On November 21, 1996, the plaintiff brought an action seeking a foreclosure against the defendants. The defendants filed an answer and special defenses. The trial court subsequently granted the plaintiffs motion for summary judgment as to liability and then rendered judgment of foreclosure by sale. This appeal followed.

I

The defendants first claim that the trial court improperly granted summary judgment. Specifically, the defendants contend that summary judgment was improper because there were genuine issues of material fact as to whether (1) a fiduciary relationship existed between Garofalo and the plaintiffs predecessors in interest, CBT and Fleet, (2) CBT and Fleet breached an implied covenant of good faith and fair dealing, (3) the plaintiff is barred by waiver and estoppel from recovering in excess of what it paid for the notes and (4) the defendants' counterclaims were proper. We disagree.

Practice Book § 17-49 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." A material fact is one that would alter the outcome of the case. Hammer v. Lumberman's Mutual Casualty Co., 214 Conn. 573, 578, 573 A.2d 699 (1990); Budris v. Allstate Ins. Co., 44 Conn. App. 53, 56, 686 A.2d 533 (1996). The trial court, in deciding a motion for summary judgment, must view the evidence in a light most favorable to the nonmoving party. Mingachos v. CBS, Inc., 196 Conn. 91, 111, 491 A.2d 368 (1985). "The test is whether a party would be entitled to a directed verdict on the same facts." (Internal quotation marks omitted.) Connell v. Colwell, 214 Conn. 242, 247, 571 A.2d 116 (1990). The party seeking summary judgment has the burden of presenting evidence showing the absence of any genuine issue of material fact and that it is entitled to judgment as a matter of law, and the party opposing the motion must provide an evidentiary foundation to demonstrate that a genuine issue over a material fact actually exists. Bruttomesso v. Northeastern Connecticut Sexual Assault Crisis Services, Inc., 242 Conn. 1, 5-6, 698 A.2d 795 (1997).

Additional facts are necessary to our resolution of this claim. The plaintiff filed a motion for summary judgment claiming that it was entitled to judgment as a matter of law on all counts of the complaint because Garofalo defaulted on the note, and his defenses, counterclaims and setoffs would not defeat the plaintiffs claims. The defendants, in their "third special defense and counterclaim and set-off one" claimed that Fleet breached an implied covenant of good faith and fair dealing by selling the notes to the plaintiff for an "amount less than that which the Defendant Garofalo was willing to pay." The trial court, nonetheless, granted the motion for summary judgment because Garofalo admitted that he defaulted on the notes and his defenses failed to "attack the making, validity, or enforcement of the note or mortgage." We conclude that the trial court properly rendered summary judgment.

"Because a mortgage foreclosure action is an equitable proceeding, the trial court may consider all relevant circumstances to ensure that complete justice is done." Reynolds v. Ramos, 188 Conn. 316, 320, 449 A.2d 182 (1982). "The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court." Kakalik v. Bernardo, 184 Conn. 386, 395, 439 A.2d 1016 (1981); Federal Deposit Ins. Corp. v. Bombero, 37 Conn. App. 764, 773, 657 A.2d 668 (1995), appeal dismissed, 236 Conn. 744, 674 A.2d 1324 (1996). Where the plaintiffs conduct is inequitable, a court may withhold foreclosure on equitable considerations and principles. Hamm v. Taylor, 180 Conn. 491, 497, 429 A.2d 946 (1980).

"At common law, the only defenses to an action of this character would have been payment, discharge, release or satisfaction ... or, if there had never been a valid lien." (Citation omitted.) Petterson v. Weinstock, 106 Conn. 436, 441, 138 A. 433 (1927). Moreover, our courts have permitted several equitable defenses to a foreclosure action. "[I]f the mortgagor is prevented by accident, mistake or fraud, from fulfilling a condition of the mortgage, foreclosure cannot be had...." (Citations omitted.) Id., 442. Other equitable defenses that our Supreme Court has recognized in foreclosure actions include unconscionability; Hamm v. Taylor, supra, 180 Conn. 494-96; abandonment of security; Glotzer v. Keyes, 125 Conn. 227, 233, 5 A.2d 1 (1939); and usury. Atlas Realty Corp. v. House, 120 Conn. 661, 669-70, 83 A. 9 (1936), overruled in part on other grounds, Ferrigno v. Cromwell Development Associates, 244 Conn. 189, 202, 708 A.2d 1371 (1998).

A

The trial court granted the plaintiffs motion for summary judgment because Garofalo defaulted on the note and because the defendants'"third special defense, counterclaim and set-off one did not challenge the making, validity or enforcement of the notes and mortgages." The defendants argue, however, that the trial court improperly failed to exercise its equitable powers to deny summary judgment. We disagree.

After examining the facts in a light most favorable to the defendants, the trial court concluded that the special defense of breach of the implied covenant of good faith and fair dealing did not attack the making, validity or enforcement of the note and mortgage and thus raised no genuine issue of material fact that would warrant a trial.

The implied covenant of good faith and fair dealing requires faithfulness to an agreed common purpose and consistency with the justified expectation of the other party in the performance of every contract. Magnan v. Anaconda Industries, Inc., 193 Conn. 558, 566, 479 A.2d 781 (1984). "Essentially, it is a rule of construction designed to fulfill the reasonable expectations of the contracting parties as they presumably intended. The principle, therefore, cannot be applied to achieve a result contrary to the clearly expressed terms of a contract, unless, possibly, those terms are contrary to public policy." Id., 567. After a careful review of the record, we conclude that the trial court properly granted the motion for summary judgment as to the special defense of breach of the implied covenant of good faith and fair dealing. The loan documents do not contain a provision requiring a holder of the notes and mortgages to negotiate with or sell the notes to Garofalo prior to enforcing its foreclosure rights. Moreover, the defendants do not cite nor can we find any authority requiring a holder of a note and mortgage to sell them at a discount to the mortgagor under an implied covenant of good faith and fair dealing when the mortgagor defaults. Indeed, if Garofalo offered to purchase, this occurred well after the loan documents were executed and was therefore irrelevant to the propriety of the notes. Accordingly, the trial court properly granted the motion for summary judgment on the basis of its conclusion that the defense of breach of implied covenant failed to attack the making, validity or enforcement of the notes and mortgages.

B

The defendants, in their "fourth special defense, counterclaim and set-off two," argue that the trial court improperly granted the motion for summary judgment because there were genuine issues of material fact as to whether the plaintiff and its predecessors in interest breached their fiduciary duties to Garofalo. Specifically, the defendants claim that a fiduciary relationship was breached when Fleet assigned the notes and mortgages to the plaintiff because CBT and Fleet "were committed to being [Garofalo's] partner in his business dealings." The trial court, however, granted summary judgment because (1) the defendants failed to allege facts sufficient to establish a fiduciary relationship and (2) even if the...