Opinion
No. CV 03-0082734 S
December 22, 2004
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT AS TO LIABILITY ONLY (#125) AND OPPOSITION TO MOTION FOR SUMMARY JUDGMENT (#126)
Introduction
In this action the Plaintiff, Four J. Funding, LLC, claims in the First Count of the Amended Complaint that it is the owner of a note and mortgage from the Defendant, The Land Preserve LLC, and that the Defendant has defaulted on the repayment of the indebtedness evidenced by the note and mortgage.
In the Second Count of the Amended Complaint, the Plaintiff claims that the Defendant, Frank L. Hastings, executed and delivered to it a Guaranty in which he guaranteed the full and faithful performance of all The Land Preserve, LLC's obligations to Four J. Funding, LLC. The Plaintiff claims that the Defendant, The Land Preserve, LLC, has defaulted on its obligations and that the guarantor, despite demand, has failed, neglected and refused to make payment.
The Plaintiff demands, among other claims for relief, a strict foreclosure of the mortgage and a deficiency judgment against both Defendants and money damages against Frank L. Hastings.
In their answer and special defenses the Defendants claim: 1) The Plaintiff failed to give The Land Preserve, LLC, notice of its right to extend the mortgage note and mortgage; 2) the mortgage note and mortgage are usurious; 3) the interest rate of 24% after maturity is unconscionable; 4) the provision of the mortgage note calling for attorneys fees in the amount of 15% of the outstanding principle balance is unconscionable; and 5) the Plaintiff is not registered with the Connecticut Department of Banking as a lender, broker, or correspondent lender.
The Plaintiff has moved for summary judgment claiming that there is no genuine issue of material fact with respect to any of the Defendants' special defenses.
Discussion
The standards for granting summary judgment are well settled. "Pursuant to Practice Book § 17-49, 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. Such questions of law are subject to plenary appellate review." (Citation omitted; internal quotation marks omitted.) Faigel v. Fairfield University, 75 Conn.App. 37, 39-40 (2003). "In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party . . . The party moving for summary judgment has the burden of showing the absence of any genuine issue of material fact and that the party is, therefore entitled to judgment as a matter of law . . . The test is whether a party would be entitled to a directed verdict on the same facts." (Citations omitted; internal quotation marks omitted.) Vaillancourt v. Latifi, 81 Conn.App. 541, 545 (2004). "A material fact is a fact that will make a difference in the result of the case . . . The facts at issue are those alleged in the pleadings." (Emphasis in original.) Id.
"In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law. The courts hold the movant to a strict standard. To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact . . . As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent . . . When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue. Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § 380 [now § 17-45)." (Citations omitted; internal quotation marks omitted.) Allstate Ins. Co. v. Barron, 269 Conn. 394, 405-06 (2004).
In support of the motion, the Plaintiff submits copies of the mortgage note, open-end mortgage, and the transcript of the deposition of Frank Hastings. The Defendants have submitted no evidence in opposition to the motion.
The undisputed facts reveal that on December 6, 2001 The Land Preserve, LLC, of which Frank Hastings is the sole member, signed a mortgage note in favor of Four J. Funding, LLC in the principal amount of $350,000. The note was payable in monthly installments until December 6, 2002 when the entire principal balance and final interest payment became due and payable. The note was secured by a mortgage on land located on Babcock Hill Road and Pucker Street in Coventry, Connecticut. The Land Preserve, LLC, is in default under the note.
In response to the Plaintiff's motion, the Defendants first argue that a motion for summary judgment directed only to special defenses is improper and cite a number of trial court decisions to this effect. Other recent trial courts have similarly noted that: "The majority view in Connecticut Superior Courts is that `a motion for summary judgment as to special defenses is improper.' Verderame v. Anderson Sunnyside Farm Ass'n, Superior Court, judicial district of New Haven, Docket No. CV 97 0406638 (May 1, 2003, Arnold, J.). Section 17-44 of the Rules of Practice specifically refers to complaints, counterclaims and cross complaints; it does not mention special defenses." Orthopedic Suite v. Jacob, Superior Court, judicial district of Litchfield at Litchfield, Docket No. CV 01-0085366 (Brunetti, J., May 26, 2004); see also, Eight Fifty Five RT v. Gaynor, Superior Court, judicial district of New London at Norwich, Docket No. 124994 (Martin, J., January 27, 2004). The Plaintiff claims that it is seeking summary judgment on the complaint as well as the special defenses. In considering a motion for summary judgment Practice Book § 17-49 provides that "[t]he judgment sought 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." Thus the court can determine the motion for summary judgment here and consider the allegations of the complaint as well as the special defenses. The Defendants agree when they cite: "Where a motion for summary judgment shows that there are no facts in dispute with respect not only to the special defenses but also the underlying complaint, summary judgment may be appropriate. Most Superior Court judges who have considered the issue, however, have concluded that a motion for summary judgment solely as to special defenses is procedurally improper. Bycoski v. Gagne, Superior Court, judicial district of Tolland, at Rockville, Docket No. 52555 (August 18, 1994, Hammer, J.) ( 12 Conn. L. Rptr. 433); Ney v. Brandi, Superior Court, judicial district of New Haven at New Haven, Docket No. 0368932 (September 27, 1995, Hodgson, J.)." Smith v. National Grange Mutual Ins. Co., Superior Court, judicial district of New Haven at Meriden, Docket No. CV95-0250908S (Silbert, J. August 29, 1996) ( 17 Conn. L. Rptr. 522).
As to the allegations of the First Count of the Amended Complaint, there is no dispute that the Defendant, The Land Preserve, LLC, executed the mortgage deed and note and that it is presently in default.
As to the First Special Defense, the Plaintiff claims that it was not the obligation of the Plaintiff to notify the Defendants of their right to extend the note and mortgage. The mortgage note states: "Borrower may extend the term of this Note for an additional year to December 6, 2003 upon at least 60 days prior written notice to the Lender provided Borrower is not in default of the Note and further provided Borrower pays a renewal fee equal to 5% of the then outstanding principal balance no later than 30 days prior to December 6, 2002." Thus the First Special Defense is without merit.
As to the Second Special Defense, the Plaintiff claims that Connecticut law exempts mortgages from the usury statutes. General Statutes § 37-4 provides: "No person and no firm or corporation or agent thereof, other than a pawnbroker as provided in section 21-44, shall, as guarantor or otherwise, directly or indirectly, loan money to any person and, directly or indirectly, charge, demand, accept or make any agreement to receive therefor interest at a rate greater than twelve per cent per annum." General Statutes § 37-9 states, however, that: "The provisions of sections 37-4, 37-5 and 37-6 shall not affect: . . . (3) any bona fide mortgage of real properly for a sum in excess of five thousand dollars . . ." Thus the appellate courts have held that the defense of usury is unavailable in a suit for foreclosure of a mortgage. Iamartino v. Avallone, 2 Conn.App. 119, 124; cert. den. 194 Conn. 802 (1984); Associated East Mortgage Co. v. Highland Park Inc., 172 Conn. 395, 405 (1977).
As to the Third Special Defense, although the Defendants claim that unconscionability is a valid defense to a foreclosure action, the Plaintiff claims that the Defendants had a meaningful choice and executed the documents after consultation with their attorney. The Defendants have submitted no evidence which puts these facts in dispute. "`The doctrine of unconscionability contains both substantive and procedural aspects, and whether a contract or clause is unconscionable is to be decided by the court against the background of the contract's commercial setting, purpose and effect . . .' (Citation omitted.) Sablosky v. Edward S. Gordon Co., 73 N.Y.2d 133, 138, 535 N.E.2d 643, 538 N.Y.S.2d 513 (1989). `A determination of unconscionability generally requires a showing that the contract was both procedurally and substantively unconscionable when made — i.e., some showing of an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party . . .' (Citation omitted; internal quotation marks omitted.) Gillman v. Chase Manhattan Bank, N.A., supra, 73 N.Y.2d 10." Hottle v. BDO Seidman, LLP, 268 Conn. 694, 719-20 (2004). The note here provides for payment in one year and during that one-year period interest only is paid. The note also provides that it could be prepaid without penalty after six months. Interest on the note is 15.5% per year. After maturity interest accrues at 2% per month. The Defendants cite this provision as unconscionable. The court does not agree. The note and mortgage were executed after the Defendant, Frank Hastings, reviewed them with his attorney. If the note was timely paid then the 2% rate would not come into effect. The Defendants had a reasonable choice to not agree to these terms or to pay the note in a timely manner and not incur the additional interest costs. They chose to do neither.
As to the Fourth Special Defense, the Plaintiff claims that it will not seek the 15% attorneys fees allowed by the mortgage but instead rely upon the provisions of General Statutes § 52-249. That statute provides: "The plaintiff in any action of foreclosure of a mortgage or lien, upon obtaining judgment of foreclosure, when there has been a hearing as to the form of judgment or the limitation of time for redemption, shall be allowed the same costs, including a reasonable attorneys fee, as if there had been a hearing on an issue of fact." Since the Plaintiff is not pursuing the 15% attorneys fees allowed by the mortgage, the Fourth Special Defense need not be addressed.
As to the Fifth Special Defense, the Plaintiff claims that it is unaware of any Connecticut statute, case or banking regulation that requires a private lender to be registered with the Department of Banking. The Defendants cite General Statutes § 36a-486(a). That statute states: "No person shall engage in the business of making first mortgage loans or act as a first mortgage broker in this state unless such person has first obtained the required license in accordance with the provisions of sections 36a-485 to 36a-498, inclusive. A first mortgage correspondent lender shall not be deemed to be acting as a first mortgage lender if such first mortgage correspondent lender makes a loan utilizing its own funds in a situation where another person does not honor such person's commitment to fund the loan." For purposes of this section, General Statutes § 36a-485(6) states: "`First mortgage loan' means a loan or an extension of credit, including, but not limited to, an extension of credit pursuant to a contract or an assigned contract for the sale of goods or services, made to a natural person, the proceeds of which are to be used primarily for personal, family or household purposes, and which is secured by a first mortgage upon any interest in one-to-four-family residential owner-occupied real property located in this state which is not subject to any prior mortgages and includes the renewal or refinancing of an existing first mortgage loan." Pursuant to the loan documents here the loan was not made to a natural person but to a limited liability company. The open-end mortgage also specifically deletes references to the borrower's occupancy of the property as a residence. In fact the property securing the mortgage is the subject of a plan to develop it as an active adult community. Therefore the Plaintiff was not required to be licensed pursuant to General Statutes § 36a-486(a) in order to make the mortgage loan at issue here.
Conclusion
For the reasons stated above, summary judgment shall enter in favor of the Plaintiff on the First Count of the Amended Complaint as to liability only. Summary judgment is denied as to the Second Count since no evidence was submitted regarding this count.
Jane S. Scholl, J.