ARS Investors II 2012-1 HVB, LLC v. Crystal, LLC , 324 Conn. 680 ( 2017 )

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ARS INVESTORS II 2012-1 HVB, LLC v.
CRYSTAL, LLC, ET AL.
(SC 19661)
Rogers, C. J., and Palmer, Eveleigh, McDonald, Espinosa and Robinson, Js.
Argued November 15, 2016—officially released February 28, 2017
James M. Nugent, with whom, on the brief, was
James R. Winkel, for the appellant (named defendant).
Gerald L. Garlick, for the appellee (substitute
plaintiff).
Opinion
McDONALD, J. In this appeal, we consider whether
a trial court may render a judgment of foreclosure on
mortgaged property that consists of parcels of land
within a subdivision that has not been approved by
municipal zoning authorities. We conclude that our law
permits a trial court to order foreclosure in such circum-
stances.
I
The parties stipulated to the facts relevant to this
appeal, which we summarize as follows. The named
defendant, Crystal, LLC, is the owner of real property
located at 314 Wilson Avenue in Norwalk.1 After acquir-
ing ownership of the property, Crystal filed a site plan
application with the city of Norwalk to consolidate
numerous preexisting parcels within the property into
two parcels. The city approved the site plan and Crystal
filed a map reflecting the site plan on the city’s land
records.2
Approximately twelve years later, Crystal filed a sub-
division map on the land records that purported to
subdivide the property into three new parcels, identified
as tracts I, II, and III (revised subdivision map).3 Crystal,
however, did not obtain permission from city planning
and zoning authorities before filing the revised subdivi-
sion map. Two months later, Crystal obtained a mort-
gage loan in the amount of $6 million from a
predecessor-in-interest to the substitute plaintiff, HVB-
CT SUB, LLC.4 The mortgage loan was secured by a
mortgage on tracts I and III, as depicted in the revised
subdivision map, and the parties executed a mortgage
deed that described the mortgaged property by refer-
ence to the revised subdivision map on file.5
After the closing of the mortgage loan, however, the
city notified Crystal that it had not approved the revised
subdivision map and ordered Crystal to refile on the
land records the earlier site plan map depicting the
previous division of the property. Crystal refiled the
earlier site plan map, although the revised subdivision
map depicting tracts I, II, and III also remains filed on
the city’s land records.
Several years later, Crystal defaulted on the mortgage
loan, and the plaintiff’s predecessor-in-interest com-
menced this action to foreclose on the mortgage. The
promissory note and mortgage deed were later assigned
to the plaintiff, who was substituted as the plaintiff in
the foreclosure action.
Crystal objected to the foreclosure by way of special
defenses. In a pretrial memorandum, Crystal principally
argued that the trial court, as a matter of law, could
not foreclose a mortgage deed that mortgaged a parcel
of real property in an unapproved subdivision.
According to Crystal, a judgment of foreclosure would
have the effect of ‘‘validating’’ an illegal subdivision of
property. Because, as Crystal asserted, the mortgage
deed was invalid as executed, Crystal argued that the
plaintiff could not foreclose on the mortgage without
first asking the trial court to reform the mortgage deed,
such that the boundaries of the mortgaged property
conformed to the parcels in the original, approved site
plan map.
The plaintiff disagreed and in its pretrial memoran-
dum argued that the tracts of land could properly be
the subject of a foreclosure judgment because they
existed in fact and were adequately described in the
revised subdivision map, as incorporated into the mort-
gage deed. According to the plaintiff, whether the tracts
were part of an approved subdivision was relevant only
for zoning purposes, and did not affect whether those
tracts could be mortgaged and subject to foreclosure.
The plaintiff also argued that, because it was clear that
the parties intended to mortgage tracts I and III, and
that such a mortgage is valid, it had no need to seek
reformation of the mortgage deed.
After a trial to the court on stipulated facts and exhib-
its, the trial court rendered judgment in favor of the
plaintiff and ordered a strict foreclosure of tracts I and
III, as depicted in the revised subdivision map. In an
articulation of the basis for its decision, the court
explained that it had concluded that it could order fore-
closure because the land consisting of tracts I and III
existed in fact and was sufficiently described in the
mortgage deed. The court further explained that ‘‘[t]he
fact that the land described in the mortgage deed may
not constitute a legal lot under local zoning regulations
is not relevant to the plaintiff’s right to foreclose. The
court is unaware of any legal precedent [that] bars the
holder of an otherwise valid mortgage from foreclosing
on land [that] is not in compliance with local zoning
regulations.’’ Lastly, the court explained that it had
rejected Crystal’s argument that the plaintiff was
required to seek reformation of the mortgage deed
before seeking foreclosure because reformation was
unnecessary under the circumstances. The trial court
also noted that if Crystal had truly thought reformation
was required, it could have sought that relief itself, but
had chosen not to do so.
Crystal appealed from the judgment of the trial court
to the Appellate Court, and we transferred the appeal
to this court. See General Statutes § 51-199 (c); Practice
Book § 65-1.
II
On appeal, Crystal renews its argument that the trial
court was barred from rendering a judgment of foreclo-
sure as a matter of law because the mortgaged property
consists of parcels in an unapproved subdivision. We
reject this claim.
Before turning to the reasons for our conclusion,
we first set forth our standard of review. An action to
foreclose on a mortgage is an equitable proceeding, and
the trial court enjoys broad discretion in considering
whether to grant a mortgagee the remedy of foreclosure
for the default of a mortgage loan. New Milford Savings
Bank v. Jajer, 244 Conn. 251, 256 and n.11, 708 A.2d
1378 (1998). We thus ordinarily review a trial court’s
decision to grant foreclosure for an abuse of discretion.
Reynolds v. Ramos, 188 Conn. 316, 320, 449 A.2d 182
(1982). When, however, the claims on appeal are not
targeted at the trial court’s exercise of discretion, but
at a subsidiary legal conclusion, our review is plenary.
See, e.g., Commissioner of Correction v. Coleman, 303
Conn. 800, 810, 38 A.3d 84 (2012) (‘‘[h]ow a court bal-
ances the equities is discretionary but if, in balancing
those equities, a trial court draws conclusions of law,
our review is plenary’’ [internal quotation marks omit-
ted]). In the present case, Crystal’s challenge to the trial
court’s conclusion that the court may order a foreclo-
sure notwithstanding the unapproved subdivision of the
property attacks a legal conclusion by the trial court,
and thus presents a question of law. Our review of this
claim is, therefore, plenary.
A
In support of its claim on appeal, Crystal relies on
General Statutes § 8-25 (a), which provides in relevant
part that ‘‘the filing or recording of a subdivision plan
without [approval by the city] shall be void.’’ According
to Crystal, because the subdivision on which the mort-
gage was based was not approved by the city, § 8-25
(a) renders the subdivision void as a matter of law for
all purposes. As a consequence, Crystal claims, any
parcels of land created by that map cannot legally exist,
and thus cannot be subject to foreclosure. To allow
such a foreclosure, Crystal claims, would effectively
validate an illegal subdivision of property. We disagree.
Section 8-25 does not prohibit the mortgaging of par-
cels in an unapproved subdivision or prevent the court
from ordering a foreclosure of those parcels. Looking
to the text of § 8-25 (a), we agree that by its plain
language; see General Statutes § 1-2z; the statute ren-
ders an unapproved subdivision plan ‘‘void.’’ We dis-
agree, however, that this nullification applies beyond
the context of municipal zoning purposes to also pre-
clude the transfer of ownership in an unapproved subdi-
vision. As a general matter, the zoning statutes and
municipal zoning regulations govern the use of prop-
erty, but do not prevent its transfer to a new owner.
Grillo v. Zoning Board of Appeals, 206 Conn. 362, 368,
537 A.2d 1030 (1988) (‘‘[t]he zoning regulations do not
purport to restrict transfers of land, but only the uses
to be conducted thereon’’). Section 8-25 is no exception.
An owner of a parcel in an unapproved subdivision
might be prevented from certain uses of the property
as a result of its unapproved status, but nothing in § 8-25
otherwise prohibits or voids the sale of an unapproved
parcel. To the contrary, § 8-25 expressly contemplates
that lots in an unapproved subdivision might neverthe-
less be transferred, permitting a fine of up to $500 for
each parcel sold. General Statutes § 8-25 (a) (‘‘[a]ny
person, firm or corporation making any subdivision of
land without the approval of the commission shall be
fined not more than five hundred dollars for each lot
sold’’ [emphasis added]). Despite allowing for a fine,
§ 8-25 prescribes no other consequence. Because § 8-
25 accepts that unapproved parcels may be transferred,
and does not bar such transfers, we discern no basis
in the text of § 8-25 to limit either the ability of an
owner of such a parcel from mortgaging it, or the ability
of a mortgagee to foreclose on an unapproved parcel.
Indeed, a different statute, commonly known as a
validating act, explicitly validates any mortgage on a
parcel of land in an unapproved subdivision. General
Statutes § 47-36aa provides in relevant part: ‘‘(b) Insub-
stantial defects. Any . . . mortgage . . . made for the
purpose of . . . mortgaging . . . any interest in real
property in this state recorded after January 1, 1997,
which instrument contains any one or more of the fol-
lowing defects or omissions is as valid as if it had been
executed without the defect or omission . . . (4) The
instrument conveys an interest in a lot or parcel of land
in a subdivision that was not submitted for approval
or that was submitted for approval but was not
approved . . . .’’
Because the legislature has expressly validated such
mortgages, it would strain reason to conclude that this
purported defect nevertheless prevents a mortgagee
from foreclosing on its valid mortgage interest. Such a
conclusion would altogether defeat the effect of this
validating provision, and we do not construe statutes
in a manner that will render them ineffective. See, e.g.,
Rainforest Cafe, Inc. v. Dept. of Revenue Services, 293
Conn. 363, 377–78, 977 A.2d 650 (2009).
Nor is it of any consequence that the mortgage deed
identified the mortgaged property by reference to an
unapproved subdivision map. Here again, § 47-36aa (b)
expressly validates such mortgages. That section pro-
vides in relevant part that a mortgage deed remains
valid even if ‘‘[t]he instrument transfers an interest in
land by reference to a filed map or subdivision plan
and the map or plan does not comply as to preparation,
form, certification, approval or filing with any require-
ment of any special or general law, municipal ordinance
or regulation . . . .’’ General Statutes § 47-36aa (b) (3).
Under the express language of this section, the plain-
tiff’s mortgage on tracts I and III remains valid despite
the parties’ reference to an unapproved subdivision
map. Thus, although the map may be void inasmuch as it
indicates that the property is part of a valid subdivision,
§ 47-36aa (b) (3) nevertheless expressly permits its use
as a means to identify the location of the mortgaged
property.
We therefore conclude that the trial court may render
a judgment of foreclosure on a mortgage deed even
though it transfers an interest in parcels in an unap-
proved subdivision of land.
B
In further support of its claim to the contrary, Crystal
also relies on two cases from the Appellate Court, but
those cases are inapposite to the present circum-
stances.
Crystal first relies on Redding v. Elfire, LLC, 74 Conn.
App. 491, 812 A.2d 211 (2003). In that case, the town
sought to foreclose a tax lien to recover unpaid property
taxes on a parcel of property. Id., 492–93. The parcel
was part of a subdivision, and the location of the parcel
was depicted on an approved subdivision map filed on
the land records. Id., 493. In its assessment and in its
amended foreclosure complaint, however, the town
used a description of the property from a different,
unapproved subdivision map, which depicted a differ-
ent location for the subject parcel. Id., 494. Despite
this discrepancy, the town sought, and the trial court
ordered, a foreclosure in accordance with the property
description in the unapproved map. Id., 495.
On appeal to the Appellate Court, the defendant
argued that the judgment of foreclosure must be
reversed because of the discrepancy in the property’s
description. Id., 495–97. Specifically, the defendant
argued that the unapproved map did not depict the true
boundaries of the subject parcel, and thus the town
could not rely on it for tax assessment purposes. Id.,
496–97. The defendant asserted that, by permitting fore-
closure using the description from the unapproved map,
rather than the approved description, the trial court
had essentially allowed the town to foreclose on the
wrong property, using a map not valid for tax assess-
ment purposes. Id.
The Appellate Court agreed with the defendant and
concluded that the trial court had improperly ordered
a foreclosure in light of the conflicting descriptions of
the property. Id., 497. The Appellate Court explained:
‘‘[T]his court declines to affirm the foreclosure judg-
ment because it is based on what appears to be an
incorrect description of the subject property in an illegal
map.’’ Id. In a footnote, the Appellate Court further
explained: ‘‘If we were to affirm the judgment, we would
be validating an illegal map and permitting an incorrect
description of the subject property to be placed in the
land records. That likely would mislead title searchers
and create title problems. Despite the plaintiff’s urging,
we decline to compromise the sanctity of title by cloud-
ing the marketable title of the property in that manner.’’
Id., 497 n.6.
In the present case, Crystal seizes upon the Appellate
Court’s concern for validating an illegal map to argue
that the trial court’s foreclosure judgment in the present
case also validates an illegal subdivision map, rendering
the judgment improper. Crystal further argues that
affirming the foreclosure judgment based on an unap-
proved map would create confusion about the proper-
ty’s location on the land records. We disagree with
both contentions.
First, contrary to Crystal’s arguments, the decision
in Elfire, LLC, does not establish that the foreclosure
judgment in the present case is improper. Elfire, LLC,
involved the foreclosure of a tax lien, and the town in
that case had improperly used a map that was not valid
for tax assessment purposes and contained an incorrect
property description, to nevertheless determine the
location of the property for assessment and, ultimately,
foreclosure. Id., 493–97. The Appellate Court was thus
concerned that allowing foreclosure would give recog-
nition to a map that was otherwise not a valid basis
for a tax assessment. Id., 496–97. The foreclosure action
in the present case, however, is based on a mortgage
deed, and the legislature has expressly validated mort-
gage deeds that mortgage parcels in an unapproved
subdivision and that rely on unapproved subdivision
maps to describe mortgaged property. General Statutes
§ 47-36aa (b) (3) and (4). The revised subdivision map
otherwise remains invalid for city zoning purposes, and
the trial court’s foreclosure judgment does not alter its
status for those purposes. A change in ownership alone
ordinarily does not effect a change in zoning status.
See Builders Service Corp. v. Planning & Zoning Com-
mission, 208 Conn. 267, 285, 545 A.2d 530 (1988)
(‘‘[z]oning is concerned with the use of property and
not primarily with its ownership’’ [internal quotation
marks omitted]). The plaintiff in the present case has
conceded in its brief and at oral argument that foreclo-
sure of the property will not require the city to recognize
the unapproved subdivision of the property or permit
the plaintiff to use the property as if it had been properly
subdivided. See General Statutes § 8-25 (requiring
municipal zoning approval for use of property as subdi-
vision).
Second, unlike in Elfire, LLC, the trial court’s foreclo-
sure judgment will not create confusion on the land
records. There is no evidence that the mortgage deed
or the revised subdivision map reflects an incorrect
description of the property. The parties have stipulated
that the mortgage deed identifies the mortgaged prop-
erty as tracts I and III on the revised subdivision map.
Neither party has claimed that the property description
based on the revised subdivision map is unclear, or that
the mortgaged property actually consists of property
other than that described as tracts I and III. Conse-
quently, the location of the property mortgaged and
subject to the foreclosure judgment is clear on the land
records. To the extent that the marketability or utiliza-
tion of the property is affected by the invalid subdivi-
sion, that problem was created by the parties, not the
trial court’s judgment of foreclosure.
Crystal also cites Voluntown v. Rytman, 21 Conn.
App. 275, 573 A.2d 336, cert. denied, 215 Conn. 818,
576 A.2d 548 (1990), in support of its claim, but the
circumstances in that case bear no resemblance to
those in the present case. In Rytman, a defendant in a
tax foreclosure action asked the trial court to order
foreclosure of only a portion of the defendant’s property
to satisfy a tax debt as an alternative to foreclosing on
the entire property. Id., 278. The trial court declined,
and instead ordered foreclosure of the entire property.
Id. The trial court reasoned that it did not have sufficient
information before it concerning the property to allow
it to divide the property for sale, noting that it had not
been provided adequate information about the property
or a subdivision plan approved by the town. Id., 280–81.
The Appellate Court affirmed the trial court’s exercise
of discretion for the reasons given by the trial court. Id.
Crystal relies on Rytman to argue that a court cannot
order foreclosure of a parcel in a larger piece of prop-
erty in the absence of an approved subdivision plan,
but Rytman does not stand for that proposition. It holds
only that a trial court may exercise its discretion to
decline to order partial foreclosure when it lacks suffi-
cient information to partition prudently the property—
an otherwise unremarkable conclusion given the broad
equitable discretion given to trial courts in considering
the remedy in foreclosure actions. New Milford Savings
Bank v. Jajer, supra, 244 Conn. 256; Reynolds v. Ramos,
supra, 188 Conn. 320. We therefore find this case also
to be unhelpful to Crystal’s claims.
C
Lastly, Crystal asserts that, as a prerequisite to fore-
closure, the plaintiff was required to seek reformation
of the mortgage deed. Specifically, Crystal claims that
because the mortgage was invalid, the plaintiff could
not obtain foreclosure without first seeking to reform
the mortgage deed to coincide with the approved subdi-
vision of the property. We disagree.
Reformation is appropriate only when the deed exe-
cuted by the parties does not reflect the agreement
the parties actually intended. ‘‘A cause of action for
reformation of a contract rests on the equitable theory
that the instrument sought to be reformed does not
conform to the real contract agreed upon and does not
express the intention of the parties and that it was
executed as the result of mutual mistake . . . . We
have held that this also applies to actions for reforma-
tion of a deed . . . the function of which is merely to
pass title to land, pursuant to the agreement of the
parties. . . . Reformation is not granted for the pur-
pose of alleviating a hard or oppressive bargain, but
rather to restate the intended terms of an agreement
when the writing that memorializes that agreement is
at variance with the intent of both parties . . . .’’ (Cita-
tions omitted; internal quotation marks omitted.)
Lopinto v. Haines, 185 Conn. 527, 531–32, 441 A.2d
151 (1981).
In the present case, Crystal has not provided any
evidence to show that the original parties to the mort-
gage deed intended anything other than the agreement
reflected in the mortgage deed. Moreover, as we have
explained, and contrary to Crystal’s assertions, the
mortgage deed was valid even though it conveyed par-
cels in an unapproved subdivision. See General Statutes
§ 47-36aa (b) (3) and (4). Although the parties to the
mortgage deed may have been unaware of the zoning
status of the property, the record demonstrates that
the parties entered into a valid agreement and that the
mortgage deed reflects the parties’ intended bargain,
even if that bargain failed to account for the property’s
zoning deficiencies. We therefore reject Crystal’s asser-
tion that reformation was a necessary, or even permissi-
ble, prerequisite to foreclosure.
The judgment is affirmed and the case is remanded
for further proceedings according to law, including set-
ting new law days.
In this opinion the other justices concurred.
1
The complaint also named Mario DeVivo, The Original Grasso Construc-
tion, Inc., Joseph M. Grasso and ARS Investors II 2012-1 HVB, LLC, as
defendants, but they are not parties to this appeal.
2
The site plan map was recorded on March 28, 1996, and is identified on
the city land records as map no. 11567.
3
The revised subdivision map was recorded on February 7, 2008, and is
identified on the city land records as map no. 13077.
4
The mortgage loan was made by Hudson Valley Bank to Crystal. Hudson
Valley Bank later assigned its mortgage interest to the named plaintiff, ARS
Investors II 2012-1 HVB, LLC, who in turn assigned the interest to the
substitute plaintiff, HVB-CT SUB, LLC. For simplicity, we refer to HVB-CT
SUB, LLC, as the plaintiff in this opinion.
5
Crystal granted a mortgage on tract II to Mario DeVivo, who is not a
party to this appeal. See footnote 1 of this opinion.