FMM Bushnell, LLC v. MSW Properties, LLC

FMM BUSHNELL, LLC v. MSW PROPERTIES, LLC

No. KNLCV176032506S

Superior Court of Connecticut, Judicial District of New London, New London

August 28, 2019

UNPUBLISHED OPINION

OPINION

Knox J.

The principal issue in this postjudgment motion for deficiency judgment is the determination by the court of the fair market value of real property located at 32 Walden Avenue in New London, Connecticut.

Background and Procedure

This current foreclosure action was returnable to the Superior Court, judicial district of New London, on December 19, 2017. The operative complaint, filed on December 7, 2017, alleges that the defendant, MSW Properties, LLC,^[1] executed a promissory note secured by a mortgage on the subject property and recorded on April 1, 2008, in volume 1775 at page eleven of the New London land records. The original mortgage and note were held by Banco Popular North America. Under the terms of the promissory note, MSW Properties, LLC promised to pay Banco Popular North America the original principal amount of $340,000, payable with interest thereon, together with all costs, including reasonable attorneys fees, incurred in connection with collection of any payment due there under the note.

The defendant, Scott Weston, unconditionally guaranteed the repayment of all monies due owing under the note, mortgage and related loan documents by executing a commercial guarantee dated March 31, 2008. Subsequently Banco Popular North America assigned the subject mortgage and an assignment of rents to FMM Bushnell, LLC. The assignment was recorded on March 7, 2014, in volume 2058 at page thirty of the New London land records.

The complaint alleges that MSW Properties, LLC defaulted by nonpayment of principal and interest under the note and mortgage. In a three-count complaint, FMM Bushnell, LLC seeks strict foreclosure under count one, demand of the entire balance under the terms of the note, mortgage, and guarantee from the guarantor-defendant Weston under count two, and demand of the entire amount due under the terms of the note from MSW Properties, LLC under count three. In the request for relief, FMM Bushnell, LLC was seeking strict foreclosure and a deficiency judgment, plus additional claims for relief. The defendants disclosed two defenses. First, the defendants claimed that FMM Bushnell, LLC breached its forbearance agreement with the defendants. Second, the defendants claim that FMM Bushnell, LLC engaged in unfair practices with respect to its treatment of the defendants’ principal, interest, and escrow payments.

In January of 2018, FMM Bushnell, LLC’s motion for judgment of strict foreclosure (#108.00) was assigned to the foreclosure docket and was granted by the court (Cosgrove, J.) (#108.01) on January 28, 2019. On January 28, 2019, the court (Cosgrove, J.) also granted FMM Bushnell, LLC’s motion to substitute FMMB Big Lakes, LLC as the plaintiff in this action. The notice of judgment of strict foreclosure entered with a law date set for March 5, 2019. The judgment of strict foreclosure entered as follows: the debt of $357,530.28 plus attorneys fees totaled $361,378.93. The judgment also included an award for appraisal and title search fees. The judgment further found the fair market value to be $250,000, the land was valued at $30,000 and the improvement was valued at $220,000. The law day passed and no appeal was filed. The defendants failed to redeem by their law day. On March 6, 2019, title vested in the substituted plaintiff, FMMB Big Lakes, LLC, for the real property at 32 Walden Street in New London, Connecticut.

Immediately thereafter, FMMB Big Lakes, LLC filed its motion for deficiency judgment on March 6, 2019 (#123.00). The motion was assigned to this court and an evidentiary hearing was conducted on August 19, 2019. At the hearing, FMMB Big Lakes, LLC called one witness, a real estate appraiser. The defendants called one witness, Weston, who was the guarantor and owned a fifty percent interest in MSW Properties, LLC. At the end of the hearing, counsel for FMMB Big Lakes, LLC and defendants furnished oral argument and there was no request for a briefing schedule.

DISCUSSION

General Statutes § 49-14(a) provides: "At any time within thirty days after the time limited for redemption has expired, any party to a mortgage foreclosure may file a motion seeking a deficiency judgment. Such motion shall be placed on the short calendar for an evidentiary hearing. Such hearing shall be held not less than fifteen days following the filing of the motion, except as the court may otherwise order. At such hearing the court shall hear the evidence, establish a valuation for the mortgaged property and shall render judgment for the plaintiff for the difference, if any, between such valuation and the plaintiff’s claim. The plaintiff in any further action upon the debt, note or obligation, shall recover only the amount of such judgment."

The court finds that FMMB Big Lakes, LLC filed a timely motion for deficiency judgment "within thirty days after the time limited for redemption has expired." See General Statutes § 49-14(a). Neither party objected to the date of the hearing. The court finds the date of the hearing occurred with the consent of the parties in a timely manner as set forth in the statute.

The motion for deficiency judgment (#123.00) alleges that as of the date of judgment, the indebtedness due and owing to the substituted plaintiff, FMMB Big Lakes, LLC was found to be $357,530.28, with the total indebtedness found by the court to be $361,378.93. It is further alleged that at the time of vesting of title the subject property was believed to have a fair market value of $250,000. FMMB Big Lakes, LLC claims that there remains an outstanding sum due and owing of $111,378.93 after crediting the $250,000 value of the property. The court notes that the amounts of the total indebtedness and the value of the subject property are consistent with the amounts contained in the foreclosure judgment. The court further notes that the appraisal submitted to the court on the motion for judgment by strict foreclosure (#112.00) was not subject to cross examination or an intensive review at the January 8, 2019 hearing. Further, the appraisal at the time of the judgment of strict foreclosure had an effective date of November 15, 2018, and was based upon an exterior inspection, as the appraiser was unable to access the interior. (#112.00.) Based on the evidence presented, the court found the fair market value of the subject property to be $250,000.

The fair market value for the real property for the determination of a deficiency judgment is the fair market value as of the date that the plaintiff took title to the property, which would be March 6, 2019. See Brownstein v. Spilke, 117 Conn.App. 761, 765-67, 982 A.2d 198 (2009), cert. denied, 294 Conn. 927, 986 A.2d 1053 (2010); see also Aurora Loan Services, LLC v. Hirsch, 170 Conn.App. 439, 449-50, 154 A.3d 1009 (2017). The fair market value is the price at which a willing seller would be willing to purchase the property. See New Haven Savings Bank v. West Haven Sound Development, 190 Conn. 60, 71, 459 A.2d 999 (1983); see also New London v. Picinich, 76 Conn.App. 678, 684, 821 A.2d 782, cert. denied, 266 Conn. 901, 832 A.2d 64 (2003). The court’s obligation is to make an independent determination of fair market value based on all the evidence offered at the hearing on the motion for deficiency judgment conducted before the court on August 19, 2019. In making that determination of fair market value, the court may give whatever weight to the evidence and the testimony presented to it. See Eichman v. J & J Building Co., 216 Conn. 443, 451-52, 582 A.2d 182 (1990). In determining the fair market value the court must weigh the testimony of witnesses that appeared before it. See id.

"[I]mplicit in ... § 49-14 is the requirement that the party seeking a deficiency judgment satisfy her burden of proof regarding the fair market value of the property ..." (Internal quotation marks omitted.) Webster Bank, N.A. v. Frasca, 183 Conn.App. 249, 258, 192 A.3d 467 (2018). FMMB Big Lakes, LLC offered the testimony of the expert Alan Budkofsky, a licensed real estate appraiser, at the hearing on the deficiency judgment. The evidence demonstrates that the property includes a three-story, multi-residential building constructed in 1920. The building has a total of thirty rooms in 6,237 square feet of gross living area above grade. There are a total of six residential units, which include two- to three-bedroom units each with a living area, kitchen, and one bath.

A retrospective appraisal of 32 Walden Street completed by the appraiser provides a value of $110,000 for the property as of March 6, 2019. (Ex. 1.) Budkofsky had previously appraised the property on November 15, 2018, with a value of $250,000 (#112.00). In light of the significant difference in the valuation of the property, the court has carefully considered the testimony of the appraiser and carefully reviewed the appraisal report.

The evidence shows that in December of 2018, the property suffered significant water damage. A neighbor’s report to the New London Fire Marshal prompted an inspection of the subject property. The official report from the City of New London Fire Department shows that the fire department discovered water leaks throughout the building, with "water in the walls and ceilings from floor 3 to the basement." (Ex 3.) The fire department had the water turned off and notified gas and electric utilities to also shut down the remaining utilities at this property. FMMB Big Lakes, LLC submitted the City of New London Building Department’s certified report dated December 21, 2018, which "condemned as unsafe" the building. (...