RCN Capital, LLC v. Sunford Props. & Dev., LLC

196 Conn.App. 823

231 A.3d 201

RCN CAPITAL, LLC

v.SUNFORD PROPERTIES AND DEVELOPMENT, LLC, ET AL.

AC 42184

Appellate Court of Connecticut.

Argued October 15, 2019

Officially released April 14, 2020

Edward Bona, for the appellants (defendants).

Jon C. Leary, Bristol, for the appellee (plaintiff).

Lavine, Alvord and Lavery, Js.

LAVERY, J.

In this action to foreclosure two mortgages and to collect on a personal guarantee, the defendants Sunford Properties & Development, LLC (Sunford) and Janny Lam¹ appeal from the judgment of the trial court, rendered in favor of the plaintiff, RCN Capital, LLC. The defendants claim that the trial court improperly (1) allowed the plaintiff to pursue a claim for monetary damages against Lam that was more than the amount to which the parties had stipulated to be the amount of the deficiency and (2) rendered judgment against all defendants, holding them jointly and severally liable on Lam's guarantee.² We affirm the judgment of the trial court.

The following facts and procedural history are relevant to this appeal. On June 28, 2012, Sunford executed and delivered to the plaintiff a commercial promissory note in the amount of $600,000, which was later modified to $800,000. In conjunction with this note, Sunford also executed and delivered a commercial mortgage deed and security agreement for 352 Main Street, Norwich (Main Street property). At the same time, Kwok L. Sang guaranteed repayment of the sums due on the note executed by Sunford by way of a guarantee agreement and mortgage deed for 86-92 Water Street, Norwich (Water Street property). Meanwhile, Lam personally guaranteed all sums due under the note, including costs and attorney's fees, by way of a guarantee agreement.

On January 14, 2015, the plaintiff commenced this action by writ of summons and complaint. In its second revised complaint dated December 10, 2015, the plaintiff sought, in count one, to foreclose on the Main Street property; in count two, to foreclose on the Water Street property, with a specific request for repayment of sums due under the note guaranteed by the limited guarantee agreement entered into by Sang; and, in count three, to collect on any outstanding sums pursuant to Lam's personal guarantee. On May 16, 2016, the court rendered a judgment of strict foreclosure as to both the Main Street property and the Water Street property.³

On October 27, 2016, the plaintiff filed a motion for a deficiency judgment against Sunford. The motion was granted on March 8, 2017, and, on that same date, the parties stipulated that there was a deficiency in the amount of $449,441.88, which included appraisal and attorney's fees. On October 31, 2016, the plaintiff moved for summary judgment as to count three of its complaint, which was brought against Lam for the personal guarantee of the promissory note. The defendants filed an objection to the plaintiff's motion for summary judgment and a supporting memorandum of law, in which Lam, in particular, contended that the plaintiff had failed to obtain a proper deficiency judgment and, therefore, was barred from recovery pursuant to General Statutes §§ 49-1 and 49-14.⁴ Lam further argued that "[a]lthough ... [Lam] was named as a party [to the foreclosure action] ... [the plaintiff] appears to seek the collection of excess amounts due under the note postforeclosure. The record also reflects that it has been more than [thirty] days since the plaintiff obtained title to the properties ...."

Shortly after their objection was filed on November 15, 2016, the defendants moved to dismiss count three of the complaint. Asserting similar arguments to those raised in the objection, the defendants argued that the plaintiff's claim had been rendered moot by operation of §§ 49-1 and 49-14, and, therefore, the court lacked subject matter jurisdiction. The court heard oral argument on the plaintiff's motion for summary judgment and the objection thereto on December 5, 2016.

On February 17, 2017, the court granted the plaintiff's motion for summary judgment as to the personal liability of Lam under count three of the complaint. Addressing the defendants’ arguments from their motion to dismiss, the court explained that the plaintiff is not barred from holding Lam personally liable because § 49-1 does not apply to a guarantor of a debt. Citing to JP Morgan Chase Bank, N.A. v. Winthrop Properties, LLC , 312 Conn. 662, 677, 94 A.3d 622 (2014), the court stated that, "due to the separate and distinct liability of a guarantor ... in the absence of a statute expressly pertaining to guarantors, such secondary obligors are not proper parties to a claim seeking the foreclosure of a mortgage and their obligations are not limited by the extinguishment of the mortgagor's rights and obligations." (Internal quotation marks omitted.) The court concluded that § 49-1 had no effect on the plaintiff's ability to recover monetary damages from Lam following the judgment of strict foreclosure. Thus, the court concluded that the defendants’ contention that § 49-1 was a bar to the plaintiff's claim was inapplicable and insufficient to rebut the plaintiff's prima facie case as to its entitlement to recover from Lam.

As a result of the court's ruling on the plaintiff's motion, on September 6, 2018, the plaintiff filed a motion for judgment as to the personal liability of Lam under the third count of the complaint, seeking monetary damages in the amount of $531,938.98. On September 21, 2018, the court granted the plaintiff's motion and rendered judgment in favor of the plaintiff in the amount of $449,441.88 in damages and $82,497.10 in prejudgment interest, for a total of $531,938.98. This appeal followed. Additional facts and procedural history will be set forth as necessary.

On appeal, Lam claims that the trial court's judgment on count three of the complaint, as to Lam's personal liability, should be reversed because the plaintiff was barred from recovery pursuant to §§ 49-1 and 49-14. Specifically, Lam argues that the plaintiff is barred because it (1) agreed to a stipulated deficiency judgment prior to the court's ruling on the motion for a deficiency judgment and (2) failed to file a motion seeking a deficiency judgment against Lam, personally, within the statutorily mandated time frame. We disagree and conclude that the trial court properly enforced Lam's personal guarantee.

The issues set forth on appeal require this court to interpret and apply the statutory language of §§ 49-1 and 49-14. "The interpretation and application of a statute ... involves a question of law over which our review is plenary." (Internal quotation marks omitted.) Griswold v. Camputaro , 177 Conn. App. 779, 791, 173 A.3d 959 (2017), aff'd, 331 Conn. 701, 207 A.3d 512 (2019).

Before we address the merits of Lam's claim, we set forth certain fundamental principles concerning real property in regard to foreclosure actions. "The purpose of [a] foreclosure is to extinguish the mortgagor's equitable right of redemption that he retained when he granted legal title to his property to the mortgagee following the execution of the mortgage." JP Morgan Chase Bank, N.A. v. Winthrop Properties, LLC , supra, 312 Conn. at 673, 94 A.3d 622. It is well established that, when a mortgagor defaults on an underlying note, "the plaintiff is entitled to pursue its remedy at law on the [note], or to pursue its remedy in equity upon the mortgage, or to pursue both." Hartford National Bank & Trust Co. v. Kotkin , 185 Conn. 579, 581, 441 A.2d 593 (1981). When a plaintiff pursues a remedy for foreclosure, "Connecticut follows the title theory of mortgages, which provides that on the execution of a mortgage on real property, the mortgagee holds legal title and the mortgagor holds equitable title to the property. ... As the holder of equitable title, also called the equity of redemption, the mortgagor has the right to redeem the legal title on the performance of certain conditions contained within the mortgage instrument." (Internal quotation marks omitted.) Ocwen Federal Bank, FSB v. Charles, 95 Conn. App. 315, 322–23, 898 A.2d 197, cert. denied, 279 Conn. 909, 902 A.2d 1069 (2006).

One such remedy at law for a default on the mortgage is the enforcement of the underlying note. See New Milford Savings Bank v. Jajer , 244 Conn. 251, 265–66 n.23, 708 A.2d 1378 (1998). "A promissory note is simply a written contract for the payment of money." (Internal quotation marks omitted.) Ankerman v. Mancuso , 271 Conn. 772, 777, 860 A.2d 244 (2004). Therefore, any deficiency judgment sought by a plaintiff in conjunction with a foreclosure is a result of the contractual obligation between the parties to the promissory note. See Eichman v. J & J Building Co. , 216 Conn. 443, 453, 582 A.2d 182 (1990) ("deficiency judgment hearings more closely resemble suits for collection")

In addition to remedies against a mortgagor, when the payment of a promissory note is safeguarded by a separate guarantee, the mortgagee may initiate a claim against the guarantors to recover the remaining debt of the mortgagor. See Bank of Boston Connecticut v. Schlesinger , 220 Conn. 152, 157–58, 595 A.2d 872 (1991). "[A] guarantee is a promise to answer for the debt, default or miscarriage of another."

Regency Savings Bank v. Westmark Partners , 59 Conn. App. 160, 164, 756 A.2d 299 (2000). This obligation is "separate from the contractual agreement between the lender and borrower, a guarantee imports the existence of two different obligations: the obligation of the borrower and the obligation of the guarantor." JP Morgan Chase Bank, N.A. v. Winthrop Properties, LLC , supra, 312 Conn. at 675, 94 A.3d 622. "[Guarantees] are ... distinct and essentially different contracts; they are between different parties, they may be executed at different times and by separate instruments, and the nature of the promises and the liability of the promisors differ substantially .... The contract of the guarantor is his own separate...