Toro Credit Co. v. Zeytoonjian

341 Conn. 316

267 A.3d 71

TORO CREDIT COMPANY

v.Betty Anne ZEYTOONJIAN, Trustee, et al.

SC 20534

Supreme Court of Connecticut.

Argued February 25, 2021

Officially released November 9, 2021^*

William S. Fish, Jr., Hartford, with whom was Sara J. Stankus, Hartford, for the appellants (defendants).

Jeffrey R. Babbin, New Haven, with whom were Matthew C. Brown, Hartford, and, on the brief, Sean M. McAuliffe, New Haven, for the appellee (plaintiff).

McDonald, D'Auria, Mullins, Kahn and Ecker, Js.

D'AURIA, J.

In this appeal, we are asked to determine whether the trial court abused its discretion when it ordered a foreclosure by sale as to two parcels of land owned by the defendants, Betty Anne Zeytoonjian, as trustee of the Nubar Realty Trust, and Three Z Limited Partnership,¹ and secured by a blanket mortgage given to the plaintiff, Toro Credit Company. The parties’ mortgage agreement contains a remedies provision that provides that, in the event the defendants default on the mortgage, the plaintiff could seek a foreclosure by sale as to both parcels. The trial court determined that the remedies provision was not binding on it but, nonetheless, considered this contractual provision as one factor in its balancing of the equities under General Statutes § 49-24.² The defendants claim that the trial court abused its discretion by ordering a foreclosure by sale as to their two properties because (1) the court should not have considered the remedies provision at all, and (2) it was inequitable for the court to order a foreclosure by sale as to both parcels when a strict foreclosure as to one parcel would have fully satisfied the debt. We conclude that the trial court did not abuse its discretion when it granted the plaintiff's request for a foreclosure by sale under these circumstances. Accordingly, we affirm the trial court's order of foreclosure by sale.

The record reveals the following undisputed facts and procedural history. The defendants operated Turf Products, LLC, and acted as the plaintiff's New England distributor. In 2003, the parties restructured $14 million of debt the defendants owed the plaintiff. As part of the restructuring, the defendants granted the plaintiff various mortgages on several properties to secure a portion of the overall debt. The only mortgage at issue in this case encumbered undeveloped land, comprised of two adjacent parcels, each approximately 33 acres in area, in Enfield. The parcels were identified in the mortgage as parcel A and parcel B. This mortgage secured a promissory note in the principal amount of $1,662,500.

The mortgage contains a remedies provision, which states that, upon default, the defendants "[authorize] and fully [empower]" the plaintiff to foreclose the mortgage "by judicial proceedings or by advertisement, or render any power of sale ... or by such other statutory procedures available in the state in which the [p]remises are located, at the option of [the plaintiff], with the full authority to sell the [p]remises at public auction. ..." The provision states that, out of the proceeds of the sale, the plaintiff was entitled to "retain the principal, repayment fee, if any, and interest due on the [n]ote ...."

The defendants subsequently defaulted on the promissory note, and the plaintiff initiated this foreclosure action. The defendants never have disputed that the plaintiff is entitled to a judgment of foreclosure because of their default. The parties disagree about the appropriate form of foreclosure. The trial court conducted a trial to determine whether to order a strict foreclosure or a foreclosure by sale and concluded that foreclosure by sale was the most appropriate equitable remedy. The court made the following factual findings in support of this determination.

First, the trial court found that, as of April 5, 2019, the total unpaid debt claimed by the plaintiff was $902,447.12, which continued to accrue with per diem interest. Each party had an appraiser value the two parcels. Both appraisers valued parcel A at $950,000; the plaintiff's appraiser valued parcel B at $850,000, whereas the defendants’ appraiser valued parcel B at $840,000.

In balancing the equities, the trial court considered that the plaintiff "successfully bargained for the right to select its remedy" of foreclosure by sale, that the plaintiff might not be made whole if there was only a strict foreclosure of parcel A, that it is "generally ... an abuse of discretion to fail to order a sale" when the fair market value of the property substantially exceeds the debt, and that the other available foreclosure options were inequitable as to one party over another. The trial court ordered the parcels sold, either bundled together or sequentially, at the defendants’ choice, to protect "the plaintiff's interest in its security while ensuring that any value realized in excess of the amount owed to the plaintiff would redound to the defendants’ benefit."

The trial court rejected an order of a strict foreclosure as to both parcels, as the "fair market value of the two parcels very substantially exceeds the outstanding debt" and would yield an inequitable windfall to the plaintiff. The trial court also rejected the defendants’ request that it order a strict foreclosure as to only parcel A because that would "[rob] the plaintiff of a measure of the security which it was granted," namely, a mortgage on both properties. Additionally, the trial court was concerned that strict foreclosure of parcel A would "leave the risk of a shortfall entirely" on the plaintiff after taking title to the property and then selling it. Last, the trial court rejected a "forced sale of the combined parcels ...." The trial court reasoned that, while the sale of both parcels would generate the most value, it would eliminate the possibility that the defendants could retain parcel B if the sale of parcel A satisfied the debt.³

From the trial court's order of foreclosure by sale, the defendants appealed to the Appellate Court, and the appeal was transferred to this court pursuant to General Statutes § 51-199 (c) and Practice Book § 65-1.

I

After oral argument before this court, we sua sponte ordered the parties to file supplemental briefs addressing whether the defendants had appealed from a final judgment. See General Statutes § 52-263. Clearly, because the trial court's ruling did not end the case, it was not a "final judgment" in that sense, and we have on many occasions indicated that orders that are "a step along the road to final judgment" are not appealable. (Internal quotation marks omitted.) Abreu v. Leone , 291 Conn. 332, 339, 968 A.2d 385 (2009). Nevertheless, there are areas of our law in which we have held that certain steps along that road, although not literally final, inasmuch as the case goes on, are considered final judgments for purposes of appellate jurisdiction under § 51-199. Foreclosure is one such area. Recently, we stated that there are three appealable determinations in a case involving a foreclosure by sale: "the judgment ordering a foreclosure by sale, the approval of the sale by the court and the supplemental judgment [in which proceeds from the sale are distributed]." (Internal quotation marks omitted.) Saunders v. KDFBS, LLC , 335 Conn. 586, 592, 239 A.3d 1162 (2020). "The first determination is deemed final if the trial court has determined the method of foreclosure and the amount of the debt." Id. at 593, 239 A.3d 1162. Because the trial court in the present case determined the method of foreclosure (foreclosure by sale) and the amount of the debt ($902,447.12),⁴ we conclude that the defendants appealed from a final judgment. The fact that the trial court's decision contemplated further orders regarding the details of the sale does not affect the finality of the judgment under these circumstances. See, e.g., Benvenuto v. Mahajan , 245 Conn. 495, 501, 715 A.2d 743 (1998) (judgment of strict foreclosure is final for purposes of appeal, even though recoverability or amount of attorney's fees for litigation, and, thus, total amount of debt, remained to be determined); Bank of New York Mellon v. Mazzeo , 195 Conn. App. 357, 362 n.6, 225 A.3d 290 (2020) ("[a] judgment ordering a foreclosure by sale is a final judgment for purposes of appeal even if the court has not set a date for the sale"); Willow Funding Co., L.P. v. Grencom Associates , 63 Conn. App. 832, 836–38, 779 A.2d 174 (2001) (same); see also Moran v. Morneau , 129 Conn. App. 349, 357, 19 A.3d 268 (2011) (postjudgment orders contemplated by trial court's decision were interlocutory decisions), overruled in part on other grounds by Saunders v. KDFBS, LLC , 335 Conn. 586, 239 A.3d 1162 (2020).

II

In support of their claim that the trial court abused its discretion by ordering a foreclosure by sale as to the two parcels,⁵ the defendants argue that (1) strict foreclosure is the general rule in Connecticut, and strict foreclosure of only parcel A would have satisfied the debt, (2) foreclosure by sale exposes them to a loss in value as to parcel B and a deficiency judgment if parcel A sells for less than its appraised value, and (3) in exercising its equitable discretion, the trial court should not have considered the remedies provision of the mortgage. We are not persuaded and conclude that the trial court did not abuse its discretion by ordering a foreclosure by sale.

In foreclosure matters, this court reviews the trial court's exercise of its equitable powers for an abuse of discretion. See, e.g., JPMorgan Chase Bank, National Assn . v. Essaghof , 336 Conn. 633, 639, 249 A.3d 327 (2020). "In determining whether the trial court has abused its discretion, we must make every reasonable presumption in favor of the correctness of its action." (Internal quotation marks omitted.) Deutsche Bank National Trust Co . v. Angle , 284 Conn. 322, 326, 933 A.2d 1143 (2007). "Although we ordinarily are reluctant to interfere with a trial court's equitable discretion...