For
Plaintiff: Richard L. Gemma, Esq.
For
Defendant: William K. O'Donnell, Esq.; Timothy J. Morgan,
Esq.
DECISION
SILVERSTEIN, JUDGE
Before
the Court for decision is Plaintiff Bank of America,
N.A.'s (Plaintiff or BOA) motion for partial summary
judgment against Defendants Timothy G. Fay (Fay) and David N.
Patrick (Patrick) (collectively, Defendants). Specifically,
Plaintiff seeks an order dismissing Defendants' several
Affirmative Defenses and finding that the Defendants are
liable to BOA under the signed Guaranty. Plaintiff also seeks
to establish the indebtedness of Defendants as of November 8,
2017-the date when title to the Connecticut Property vested
in Plaintiff following foreclosure action in Connecticut.
This Court exercises jurisdiction pursuant to G.L. 1956
§ 8-2-13.
I
Facts and Travel
On May
15, 2008, Stonestreet Hospitality Realty Company, LLC
(Stonestreet), a Connecticut Limited Liability Company,
executed and delivered to Plaintiff a Promissory Note (the
Note) evidencing a loan in the original principal amount of
$21, 808, 000 in concert with the construction of a 176 room
Hyatt Place Mohegan Sun Hotel in Montville, Connecticut (the
Property). The Note was secured by a first position mortgage
covering the Property. On May 15, 2008, Stonestreet also
executed and delivered to BOA a Senior Construction and
Interim Loan Agreement (Loan Agreement) associated with the
Promissory Note.[1] The same day, Defendants, in connection
with the Original Loan Agreement, further executed and
delivered a Guaranty of the loan. Both Fay and Patrick were
principals of Stonestreet owning seventy percent and thirty
percent of the membership interests, respectively;
Defendants, however, executed the Guaranty in their
individual capacities.
Per the
Loan Agreement, payment of the Note in full was due on
November 21, 2014 (the Maturity Date). Stonestreet failed to
fulfill its obligation to make such payment. As a result, BOA
demanded immediate payment from Stonestreet and Defendants,
as Guarantors. Following Stonestreet's non-payment, the
parties entered into a Loan Forbearance Agreement
(Forbearance Agreement) on September 2, 2015. Under the
Forbearance Agreement, Stonestreet and Defendants
acknowledged Stonestreet's failure to pay the Note on the
Maturity Date as required by the Loan Agreement. Moreover,
the Forbearance Agreement provided that the Guaranty is
enforceable and that the terms and conditions of the Loan
Agreement remain in effect. The Forbearance Agreement further
included a new Maturity Date of December 15, 2015.
Stonestreet again failed to pay the Note by the December 15,
2015 deadline.[2]
Plaintiff
filed a foreclosure complaint on May 31, 2016 in Connecticut
Superior Court (the Connecticut Court) seeking to foreclose
its mortgage encumbering the Property. Pursuant to this
action, the Connecticut Court granted BOA's motion for
partial summary judgment and entered a Judgment of Strict
Foreclosure[3] finding the debt owed to BOA to be $23,
108, 768.17, as of September 25, 2017.[4] On November 8,
2017 (the Ownership Transfer Date), following the Connecticut
Court's Judgment, BOA recorded a Certificate of
Foreclosure to memorialize the transfer of title. The
Connecticut Court later conducted a two-day hearing on
February 15 and 27, 2018 to determine the value of the
Property on the date of the transfer of ownership from
Stonestreet to BOA. In its April 20, 2018 decision, the
Connecticut Court concluded that the value of the Property on
the Ownership Transfer Date was $18, 400, 000.
Plaintiff
filed the within Complaint on April 12, 2016 against
Defendants. Both Defendants answered the Complaint on June 1,
2016. Plaintiff now moves for partial summary judgment
against Defendants finding, inter alia, Defendants
as Guarantors' with joint and several liability under the
Guaranty, establishing the amount of the outstanding
indebtedness due from Defendants as of the Ownership Transfer
Date, and setting forth the appropriate mathematical equation
for the entry of final judgment. BOA alleges in its motion
that, as of the Ownership Transfer Date, the outstanding
indebtedness consists of the unpaid principal in the amount
of $21, 245, 589.14, plus unpaid, accrued default interest in
the amount of $2, 194, 256.12. Plaintiff further asserts
other costs such as late charges, costs and expenses
including attorney's fees. In total, Plaintiff alleges
the outstanding debt of Defendants as of the Ownership
Transfer Date is $23, 439, 845.26, excluding attorney's
fees and expenses. The parties have filed numerous memoranda
in support of their respective positions.
II
Standard of Review
"It
is a fundamental principle that '[s]ummary judgment is a
drastic remedy, and a motion for summary judgment should be
dealt with cautiously.'" Takian v.
Rafaelian, 53 A.3d 964, 970 (R.I. 2012) (alteration in
original) (quoting Emp'rs Mut. Cas. Co. v. Arbella
Prot. Ins. Co., 24 A.3d 544, 553 (R.I. 2011)). With that
in mind, in ruling on a motion for summary judgment, the
Court is instructed to "review[] the evidence and draw[]
all reasonable inferences in the light most favorable to the
nonmoving party," id. at 970 (citation omitted)
(internal quotation marks omitted), and to "'look
for factual issues, not determine them.'"
Steinhof v. Murphy, 991 A.2d 1028, 1032-33 (R.I.
2010) (quoting Steinberg v. State, 427 A.2d 338, 340
(R.I. 1981)). However, summary judgment is appropriate
"'if there exists no genuine issue of material fact
and the moving party is entitled to judgement as a matter of
law.'" Takian, 53 A.3d at 970 (quoting
Classic Entm't & Sports, Inc. v. Pemberton,
988 A.2d 847, 849 (R.I. 2010) (internal citation omitted));
see Super. R. Civ. P. 56(c).
III
Discussion [5]
A
Applicability of Connecticut General Statutes (C.G.S.) §
49-1
Defendants
argue that C.G.S. § 49-1 bars collateral action for a
deficiency against guarantors who were not named in the
foreclosure action if they could have been made parties to
that action and the guarantee was secured by the mortgage.
Defendants assert that they clearly could have been made
parties to the Connecticut Foreclosure action and because
they were not, § 49-1 bars further recovery. They
further contend that, at minimum, there is a genuine issue of
material fact with regard to whether the Guaranty was secured
by the Mortgage or if § 49-1 is applicable in the
current matter. Conversely, Plaintiff contends that
Defendants are not within the purview of § 49-1 because
they (1) are not directly liable under the Mortgage or Note
and (2) do not possess an interest in, and concomitant legal
and equitable right to redeem the property. Additionally, BOA
asserts that the Guaranty was not secured by a mortgage in
this instance. BOA concedes, however, that the
borrower-Stonestreet-pledged a mortgage to secure the
promissory note, but contends that neither the Guarantors,
nor either of them jointly or separately, mortgaged property
to secure the Guaranty in this instance.
Section
49-1 provides that:
"[t]he foreclosure of a mortgage is a bar to any further
action upon the mortgage debt, note or obligation against the
person or persons who are liable for the payment thereof who
are made parties to the foreclosure and also against any
person or persons upon whom service of process to constitute
an action in personam could have been made within this state
at the commencement of the foreclosure; but the foreclosure
is not a bar to any further action upon the mortgage debt,
note or obligation as to any person liable for the payment
thereof upon whom service ...