DocketNumber: No. CV 94 0066261
Citation Numbers: 1995 Conn. Super. Ct. 14486
Judges: PICKETT, J.
Filed Date: 12/22/1995
Status: Non-Precedential
Modified Date: 4/18/2021
On September 1, 1994, the plaintiff, FGB Realty Advisors, Inc., commenced the present action seeking a foreclosure of a mortgage on property located in Washington, Connecticut, against the defendants Seven Winds Realty and Spiros Milanos. The complaint is in two counts, one directed against each defendant. On November 16, 1994, the defendants filed an answer to the complaint alleging a special defense as to both counts of the complaint. The special defense is as follows:
1. The note that is the subject of this action was payable to the order of The First Womens Bank of New York, New York in the principal sum of $1,000,000.00 and required payment in full on August 20, 1992. By its maturity date, the promissory note was owned not by The First Womens Bank, but instead by First New York Bank for Business which agreed and confirmed in writing that such note could be extended an CT Page 14487 additional five years to August 20, 1997, during which time the defendants herein would pay interest only with the principal sum to be due at the expiration of the extended period in August of 1997.
2. The plaintiff herein subsequently purchased the note and the mortgage securing it with knowledge of the foregoing agreement, but refuses to honor such agreement and instead has brought a foreclosure action notwithstanding the fact the expiration date of August 1997 has not yet arrived. Furthermore, the plaintiff has refused to accept the defendants' tender of interest due in accordance with the agreement by which the note was extended. As a result, of the foregoing, an accord and satisfaction bars plaintiff from pursuing this action; furthermore, plaintiff is estopped from pursuing this action, plaintiff seeks to foreclose this mortgage with unclean hands and is accordingly barred from the equitable relief sought.
The plaintiff filed a motion for summary judgment on May 24, 1995. As required by Practice Book § 204, the plaintiff has filed a memorandum in support of its motion for summary judgment. In accordance with Practice Book § 380, the plaintiff has also filed documents in support of its motion, including a copy of the Promissory Note and Mortgage Deed, both signed by the defendant, Spiros Milanos in his capacity as president of Seven Winds Realty (Exhibit 1 Schedules A and B respectively), the guaranty of Spiros Milanos, affidavits of Melissa Froman and Joseph A. Zebzda, the defendants' interrogatory responses regarding information relative to the alleged agreement to extend the loan, a copy of the assignment of the note and mortgage by the Federal Deposit Insurance Corporation in its capacity as receiver for the First New York Bank for Business f/k/a The First Women's Bank to Kidder Peabody Mortgage Capital Corporation by virtue of an Assignment of Mortgage dated December 21, 1993, and a copy of the assignment of the note and mortgage by Kidder Peabody Mortgage Capital Corp. to FGB Realty Advisors, Inc. dated May 27, 1994. Both assignments of the mortgage were duly recorded in Volume 127 of the Washington, Connecticut land records at pages 375 and 381 respectively.
The defendants timely filed an objection to the plaintiff's motion for summary judgment and a memorandum in opposition as well as the affidavits of Spiros Milanos and former Chairman of the Board of Directors of First New York Bank, John CT Page 14488 Catsimatisdis. The defendants filed additional documentation in support of their opposition to summary judgment including, a letter from the former vice president of First New York Bank for Business dated November 9, 1992, which indicated that the Board of Directors of the Bank approved an extension of the loan agreements and would be hiring an attorney to draft the necessary documents. The defendants and plaintiff filed supplemental memoranda and presented oral argument to this court at short calendar on November 13, 1995. With respect to the arguments presented to the court, the defendants requested that the court consider their request regarding the remedy in this case. Specifically, the defendants seek to postpone foreclosure until August 1997, should the court determine summary judgment on the issue of liability in favor of the plaintiff.
The plaintiff argues that because the allegations of the complaint are either admitted by the defendants or proven by affidavits, there is no genuine issue of fact as to any of the allegations contained in the plaintiff's complaint. The plaintiff further argues that the special defense alleged by the defendants is inadequate as a matter of law. In support of this argument, the plaintiff contends that (a) the alleged modification agreement is unenforceable for lack of consideration; (b) the special defense is barred by the statute of frauds; and (c) the special defense is barred by the common law D'Oench Duhme
doctrine codified at
The defendants argue that FGB failed to sustain its burden of demonstrating it is the owner of the mortgage that is the subject of this foreclosure action and that the plaintiff has failed to establish that it is entitled to judgment as a matter of law.
DISCUSSION
"In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any such issues exist." Nolan v. Borkowski,
The moving party "has the burden of showing the absence of any genuine issue as to all material facts which, under the applicable principles of substantive law, entitle him to a judgment as a matter of law. . . ." (Citations omitted; internal quotation marks omitted.) Suarez v. Dickmont Plastics Corp., supra,
The Appellate Court has summarized the obligations of the nonmovant in a motion for summary judgment: (i) the party opposing summary judgment must substantiate its claim to the contrary by showing that there is a genuine issue of material fact, and must disclose the evidence establishing the existence of such an issue; (ii) "[i]t is not enough that one opposing a motion for a summary judgment claims that there is a genuine issue of material fact; some evidence showing the existence of such an issue must be presented in the counter affidavit;" (iii) "[i]t is not enough . . . merely to assert the existence of such a disputed issue . . . [instead] the genuine issue aspect requires the party to bring forward before trial evidentiary facts, or substantial evidence outside of the pleadings, from which the material facts alleged in the pleadings can warrantably be inferred;" (iv) "[m]ere statements of legal conclusions or that an issue of fact does exist are not sufficient to raise the issue;" and (vi) "[m]ere statements of legal conclusions . . . and bald assertions, without more, are insufficient to raise a genuine issue of material fact capable of defeating summary judgment." (Citations and internal quotation marks omitted).Wadia Enterprises, Inc. v. Hirschfeld,
I. Consideration
The plaintiff argues that there is no genuine issue of material fact as to the allegations of the complaint as all allegations have been either admitted or proved by the its affidavits. The plaintiff further argues that the modification agreement alleged in the defendants' special defense is unenforceable for lack of consideration. The plaintiff argues that the modification agreement lacked consideration because the defendants were already under an obligation to pay the full value of the subject note, thus the payment of the $275,000 that the CT Page 14490 defendants claim was the additional consideration paid for the extension of the loan to 1997 was nothing more than the fulfillment of a pre-existing duty. "A modification of an agreement must be supported by valid consideration and requires a party to do, or promise to do, something further than, or different from, that which he is already bound to do."Thermoglaze, Inc. v. Morningside Gardens Co.,
Based upon the above rule, the $275,000 payment made by the defendants on the August 20, 1987 note is insufficient consideration because the defendants were already obligated to pay that amount on the maturity date of the loan. As alleged in paragraph one of the defendants' special defense, and as argued by the defendants, the bank agreed to forbear from exercising its right to collect the principal due on the loan for an additional five years provided the principal sum was reduced by $275,000.1 During the five year period the defendants agreed to pay interest only, with the principal sum to be due at the expiration of the extended period in August of 1997. The defendants state that they were under "no obligation to enrich the bank by paying interest on the outstanding principal sum due for an additional five years" and that payment of same constitutes valid consideration. (Defendants' memorandum in CT Page 14491 opposition to summary judgment p. 11.) The defendants also argue that the bank received the benefit of receipt of additional interest for a period of five years, and the detriment of postponing collection of the principal sum loaned. Also, the defendants contend that they received the benefit of postponing payment of the principal sum originally borrowed in exchange for the detriment of paying interest for an additional five year term. (Defendants' memorandum in opposition to summary judgment p. 11.)
"Under the law of contract, a promise is generally not enforceable unless it is supported by consideration. E. Farnsworth, Contracts (1982) § 2.9, p. 89; A. Corbin, Contracts (1963) § 193, p. 188." D'Ulisse-Cupo v. Board ofDirectors of Notre Dame High School,
The law of promissory estoppel was recently discussed by the appellate court as follows:
"Our law is well established that any claim of estoppel must be predicated on proof of two essential elements: (1) the party against whom estoppel is claimed must do or say something calculated or intended to induce another party to believe that certain facts exist and to act on that belief; and (2) the other party must change its position in reliance on those facts, thereby incurring some injury. Lunn v. Tokeneke Assn., Inc.,
In summary, the defendants, did not incur any additional detriment nor did the plaintiff receive any additional benefit. The defendants were already obligated to repay the plaintiff all of the outstanding principal upon maturity of the note. A promise to do that which one is already bound to do does not constitute valid consideration for a new agreement. Thermoglaze, Inc. v.Morningside Gardens Co., supra,
II. Accord and Satisfaction
The defendants' special defense states in pertinent part "The plaintiff herein subsequently purchased the note and the mortgage securing it with knowledge of the foregoing agreement, but refuses to honor such agreement and instead has brought a foreclosure action notwithstanding the fact that the expiration date of August 1997 has not yet arrived. Furthermore, the plaintiff has refused to accept the defendants' tender of interest due in accordance with the agreement by which the note was extended. As a result, of the foregoing, an accord and satisfaction bars plaintiff from pursuing this action. . . ." (Answer and Special Defense dated November 14, 1994). "The defense of accord and satisfaction requires the defendant to allege and prove a new contract based upon a new consideration."Crucible Steel Co. v. Premier Mfg. Co.,
III. Statute of Frauds
General Statutes §
The enforcement of the provisions alleged in the defendants' special defense is prohibited by each of the foregoing provisions of the statute of frauds. In The Glastonbury Bank and TrustCompany v. Corbett Construction Co., Inc., Superior Court, judicial district of New London at New London, Docket No. 521355 (October 15, 1992, Walsh, J.,
Relying on the case of Sweeney v. Simon,
The defendants argue that even if the statute of frauds applies, the statute of frauds would not render the extension agreement unenforceable. The defendants argue that the extension agreement exited by virtue of the letter dated November 9, 1992, from the former vice president of The First Bank for Business. The letter states that the Board of Directors approved the extension and that the matter was being referred to an attorney to draft the necessary modification and extension documents. Unfortunately for the defendants, the bank failed four days later and the modification and extension documents were never formalized nor finalized. The letter itself, does not indicate what the board approved and fails to provide the terms of the agreement such as the time frame of the extension. To the end, the defendant submitted the affidavit of the former Chairman of the Board of Directors of First New York Bank, John CT Page 14494 Catsimatisdis, which indicates that the extension of the loan for an additional five years was approved and that such, to the best of his belief, should be recorded in the minutes of the board meeting. This however, does not substitute for an actual agreement and would not meet the requirement of D'Oench, Duhme as will be discussed below.
The defendants also argue that their payment of $275,000 and periodic interest payments, constitutes part performance of the modification agreement and that this conduct takes the oral agreement out of the statute of frauds. The plaintiff, on the other hand, argues that the defendants' conduct can not in any way be construed as part performance.
"[T]he acts of part performance generally must be such as are done by the party seeking to enforce the contract, in pursuance of the contract, and with the design of carrying the same into execution, and must also be done with the assent, express or implied, or knowledge of the other party, and be such acts as alter the relations of the parties. The acts also must be of such a character that they can be naturally and reasonably accounted for in no other way than by the existence of some contract in relation to the subject matter in dispute . . . ." (Citations omitted; internal quotation marks omitted.) Ubysz v. DiPietro,
The defendants argue that their payment of $275,000 and interest payments is indicative of part performance. However, the defendants were already obligated to repay the entire principal balance. Consequently, the payments can be naturally and reasonably accounted for by the existence of the written promissory notes. The payments are consistent with the written promissory agreements and guaranty and therefore do not, as a matter of law, take the alleged extension agreement out of the statute.
IV. D'Oench Duhme Doctrine
The plaintiff argues that the letter and the special defense based thereon, are unenforceable unless the defendants can establish that the letter meets the requirements of
The letter is unenforceable against the FDIC, or an acquirer of the asset from the FDIC, under the D'Oench Duhme doctrine, which was created as a matter of federal common law by the United States Supreme Court and is often referred to as the common law counterpart to
"Pursuant to the common-law D'Oench Duhme doctrine, as CT Page 14496 codified in
The defendants have presented no evidence that any final written agreement referred to in the November 7, 1992 letter was made part of the bank's official records. Therefore, underD'Oench Duhme it is not enforceable against the plaintiff as an assignee of the FDIC.
The statute, 12 U.S.C. § 1283(e), codifying the D'Oench Duhme
doctrine, provides in pertinent part: "No agreement which tends to diminish or defeat the interest of the corporation [FDIC] in any asset acquired by it under this section or 1821 of this title, either as security for a loan or by purchase or as receiver of any insured depository institution, shall be valid against the corporation [FDIC] unless such agreement (1) is in writing, (2) was executed by the depository institution and any person claiming and adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the depository institution, (3) was approved by the Board of Directors of the depository institution or its loan committee, which approval shall be reflected in the minutes of said board or committee, and (4) has been continuously, from the time of its execution, an official record of the depository institution."
Where an agreement fails to meet any one of § 1823(e)'s requirements it is not valid against the FDIC. Mechanics Farmers Savings Bank, FSB v. Delco Development Co.,
The defendants contend that a foreclosure action is an equitable proceeding, and thus the trial court should consider all relevant circumstances in determining whether to grant the foreclosure remedy, including the fact that the FDIC appeared to recognize the letter and act in accordance with the alleged extension agreement by not foreclosing immediately. In support of the equitable arguments, the defendants contend argue that FGB has likewise acted in conformity with the alleged modification agreement and submitted documents including account records which indicate the maturity date of the loan was 1997. Connecticut has recognized accident, mistake and fraud as valid defenses to a foreclosure action. Boretz v. Segar,
The Supreme Court in Langley v. FDIC, supra,
Additionally, the defendants contend that the FDIC's knowledge of the alleged modification agreement renders the agreement valid as against the FDIC and therefore, its assigns. "If a side agreement does not meet the requirements of § 1823(e), the FDIC's knowledge of the terms of that side agreement does not render it valid against FDIC or estop FDIC from enforcing the agreement as contained in the failed bank's records." FDIC v. Merchants National Bank of Mobile,
V. Chain of Title
The argument of the defendants, that FGB has not demonstrated that it is the owner of the mortgage and note at issue, is without merit. FGB has submitted ample evidence to support the fact that it is the owner of the mortgage at issue including a copy of a certificate of amendment of the organization certificate of The First Women's Bank whereby it changed the name of the bank to The First New York Bank for Business. Further documentation was submitted to prove that The First New York Bank for Business was taken over by the FDIC which assigned the CT Page 14499 mortgage and note at issue in this case to Kidder Peabody which in turn assigned the mortgage and note to FGB.
Finding no genuine issue of material fact as to the complaint, and the special defense invalid as a matter of law, this court grants plaintiff's motion for summary judgment as to liability on the plaintiff's complaint. As to the requested remedy, a law day in August of 1997, the equitable argument can not prevail and thus, the court can not grant the remedy requested by the defendants.
PICKETT, J.
Langley v. Federal Deposit Insurance , 108 S. Ct. 396 ( 1987 )
lillian-lincoln-howell-and-lincoln-television-inc , 655 F.2d 743 ( 1981 )
Olean v. Treglia , 190 Conn. 756 ( 1983 )
Dahl v. Edwin Moss & Son, Inc. , 136 Conn. 147 ( 1949 )
Blakeslee v. Board of Water Commissioners , 106 Conn. 642 ( 1927 )
Boretz v. Segar , 124 Conn. 320 ( 1938 )
Harold v. Beighley v. Federal Deposit Insurance Corporation,... , 868 F.2d 776 ( 1989 )
federal-deposit-insurance-corporation-merchants-asset-management , 892 F.2d 47 ( 1989 )
Federal Deposit Insurance Corporation v. Kurtis Krause, ... , 904 F.2d 463 ( 1990 )
Sweeney v. Simon , 2 Conn. Supp. 109 ( 1935 )
Brian Construction & Development Co. v. Brighenti , 176 Conn. 162 ( 1978 )
Gruber v. Klein , 102 Conn. 34 ( 1925 )
Crucible Steel Co. of America v. Premier Manufacturing Co. , 94 Conn. 652 ( 1920 )
Simone v. Kirschner , 100 Conn. 427 ( 1924 )
Mechanics & Farmers Savings Bank, FSB v. Delco Development ... , 43 Conn. Super. Ct. 408 ( 1993 )