Suffield Bank v. Berman
| Decision Date | 22 March 1994 |
| Docket Number | No. 14779,14779 |
| Citation | 228 Conn. 766,639 A.2d 1033 |
| Court | Connecticut Supreme Court |
| Parties | SUFFIELD BANK v. William W. BERMAN, et al. |
Richard P. Weinstein, West Hartford, for appellants (named defendants et al.).
William H. Narwold, with whom were Charles D. Ray and, on brief, David D. Legere, Hartford, for appellee (F.D.I.C.).
Before PETERS, C.J., and BERDON, NORCOTT, KATZ and PALMER, JJ.
The defendants William W. Berman, James J. Luzzi and Thomas E. Kohanski appeal from the judgments for deficiency after strict foreclosure had been entered against them. 1 The defendants argue that the trial court's judgments must be reversed because the trial court improperly: (1) refused, at the hearing on the motions for deficiency judgment, to allow them to challenge, on a mitigation of damages theory, the accrual of interest on the affidavit of debt; (2) concluded that the Federal Deposit Insurance Corporation (for purposes of this opinion, referred to as the plaintiff), as receiver of the insolvent Suffield Bank (bank), could assert the attorney-client privilege that originally existed between the bank and its attorneys; and (3) accepted into evidence a missing page to the appraisal after the close of the evidence. 2 We affirm the judgments of the trial court.
The following undisputed facts are pertinent to this appeal. In May, 1987, the bank made two commercial loans to the defendants, secured by two properties located on Farmington Avenue in Farmington. 3 In connection with the loans, the defendants signed promissory notes obligating them to make monthly interest payments to the bank and ultimately to repay the principal. 4 In October, 1989, the defendants defaulted on their monthly interest payments, and thereafter, in April, 1990, the bank filed two identical actions to foreclose the mortgages on the properties securing the notes.
On May 1, 1990, pursuant to Practice Book § 236, 5 the bank filed a written demand for disclosure of defense in each case. Subsequently, when the defendants did not file any defenses, 6 the bank filed written motions for default against the defendants in each case for their failure to disclose a defense. 7 On August 28, 1990, after defaults had been entered, the bank filed motions for judgments of strict foreclosure.
On November 9, 1990, the trial court, Maloney, J., held a hearing on the motions. 8 At the hearing, the bank submitted an affidavit as proof of the defendants' debt, 9 to which the defendants objected, claiming that their obligation to pay interest had been discharged in February, 1990, because the bank had failed at that time to accept their codefendant's offer to convey the properties in satisfaction of the secured indebtedness. The trial court overruled the defendants' objection to the affidavit of debt, rendered judgments of strict foreclosure in favor of the bank based on the affidavit of debt, 10 and set law days for December 12, 1990.
The defendants appealed from the trial court's judgments of strict foreclosure, claiming, inter alia, that the trial court improperly had prevented them from contesting the amount of the mortgage debt. On July 30, 1991, the Appellate Court affirmed the decision of the trial court and remanded the cases for the purpose of setting new law days. Suffield Bank v. Berman, 25 Conn.App. 369, 594 A.2d 493 (1991). The Appellate Court reasoned that the defendants' proffered evidence contesting the amount of the debt went to the issue of their liability for interest, and, therefore, constituted a defense to the debt that was required to be disclosed under Practice Book § 236. Id., at 373-74, 594 A.2d 493. In the absence of such disclosure, the Appellate Court held that the trial court had properly refused to hear the proffered evidence. Id., at 374, 594 A.2d 493. We denied the defendants' subsequent petition for certification to appeal the decision of the Appellate Court. Suffield Bank v. Berman, 220 Conn. 913, 914, 597 A.2d 339, 340 (1991).
On September 6, 1991, the trial court entered an order declaring the bank insolvent and appointing the plaintiff as its receiver. On January 6, 1992, the trial court, Satter, J., set new law days of March 6, 1992, and June 16, 1992, for the properties. The properties were not redeemed, the titles were transferred to the plaintiff on March 17, 1992, and June 17, 1992, and, thereafter, the plaintiff filed motions for deficiency judgment in both cases. 11
The trial court, Aurigemma, J., held a hearing on the motions for deficiency judgment. 12 At the hearing, the defendants objected to the plaintiff's motions for deficiency judgment on the grounds that: (1) their rights to due process had been violated because they had had no opportunity to challenge the amount of the debt at a meaningful time; and (2) the doctrines of unjust enrichment and equitable estoppel required the trial court to deny the motions for deficiency judgment because the bank had acted in bad faith by attempting to influence the appraiser who had performed an appraisal of the mortgaged properties and by failing to take appropriate actions to minimize the amount of the deficiency.
In its memorandum of decision dated January 27, 1993, the trial court rejected the defendants' arguments and thereafter rendered judgments for deficiency after strict foreclosure in the aggregate amount of approximately $2.3 million plus statutory interest. 13 The defendants appealed from the judgments of the trial court to the Appellate Court, and we transferred the appeal to this court pursuant to Practice Book § 4023 and General Statutes § 51-199(c). Additional facts will be set forth as necessary.
The defendants first claim that the trial court, in violation of their due process rights, improperly refused to allow them to challenge the accrual of interest on the affidavit of debt, based on the defense of mitigation of damages, at the hearing on the motions for deficiency judgment. A more detailed review of the procedural facts is necessary for the disposition of this claim. As previously stated, on November 9, 1990, the trial court held a hearing on the bank's motions for judgment of strict foreclosure. At that hearing, after noting that there had been no notice of defenses interposed, the bank offered into evidence, pursuant to Practice Book § 527, 14 an affidavit of debt executed by an officer of the bank that set forth the amount of the defendants' debt on the smaller of the two loans in question. The defendants objected to the bank's proffered evidence, stating their intention to challenge the amount of the debt with respect to the accrual of interest. Specifically, the defendants sought to argue that their obligation to pay interest on the debt had been discharged in February, 1990, by virtue of the bank's refusal at that time to accept the offer of one of the equity owners of the mortgaged properties to convey the properties to the bank in satisfaction of the debt.
The bank objected to the evidence proffered by the defendants in support of their proposed defense. The trial court sustained the bank's objection, refused to admit the defendants' proffered evidence and rendered judgments of strict foreclosure in favor of the bank, based on the affidavit of debt. The defendants thereafter appealed.
On appeal from the entry of the judgments of strict foreclosure to the Appellate Court, the defendants claimed that the trial court had improperly prevented them from contesting the amount of the mortgage debt at the hearing. Suffield Bank v. Berman, supra, 25 Conn.App. at 370, 594 A.2d 493. In asserting their claim, the defendants relied on Burritt Mutual Savings Bank of New Britain v. Tucker, 183 Conn. 369, 439 A.2d 396 (1981). In Burritt, this court held that when the defendant had challenged the accuracy of the calculations of principal, interest, taxes and late charges shown on the affidavit of debt presented at a hearing on a motion for judgment of strict foreclosure, the trial court relied improperly on the affidavit of debt to establish the amount of the debt. Id., at 374-75, 382, 439 A.2d 396. The Appellate Court in Berman distinguished Burritt by noting that the issue in Burritt involved the accuracy of the calculations in the affidavit of debt, whereas, in the case before it, the defendants contested their liability to pay a certain portion of the debt. Suffield Bank v. Berman, supra, 25 Conn.App. at 373-74, 594 A.2d 493. The Appellate Court stated: "In short, defenses relating to the mathematical calculation of the debt need not be disclosed but defenses that go to the issue of the defendant's liability for the debt must be disclosed." Id., at 374, 594 A.2d 493. Accordingly, the Appellate Court affirmed the judgment of the trial court and held that the defendants' failure to disclose a defense in a timely manner under Practice Book § 236, barred them from later contesting liability at the strict foreclosure hearing. We denied the defendants' petition for certification to appeal.
Notwithstanding the ruling of the Appellate Court in Berman and our subsequent denial of certification to appeal the issue, at the hearing on the motions for deficiency judgment, the defendants asserted, inter alia, that the trial court should deny the motions because the defendants had been precluded from challenging the amount of the debt at the prior hearing on the motions for strict foreclosure. In its memoranda of decision on the motions, the trial court noted that the factual basis of the defendants' argument was identical to their unsuccessful claim previously raised in their appeal of the judgments of strict foreclosure. Accordingly, the trial court stated that it was "bound by the holding of the Appellate Court on this issue." We agree with the trial court and, consequently refuse to reach the defendants' argument.
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