LPP Mortgage Ltd. v. Underwood Towers Ltd. Partnertship
AC43542, AC43575
| Conn. App. Ct. | Jul 20, 2021Background
- Underwood Towers leased city land and financed Park Place Towers with an HUD‑insured mortgage; after defaults it executed two additional mortgage notes (Note A and Note B).
- HUD sold the second mortgage; Note B was lost and transfers were accompanied by lost‑note affidavits rather than the original Note B.
- LPP Mortgage (substitute plaintiff) purchased the mortgage and notes (without the original Note B), declared defaults, accelerated the debt, and sued for strict foreclosure and related monetary claims.
- After an 18‑day court trial, the trial court ruled for LPP, concluding it had standing to foreclose despite not possessing the original Note B, and awarded strict foreclosure plus monetary damages against Underwood and CDC.
- The defendants appealed challenging standing, use of the HUD regulatory agreement to establish default and debt amount, the award of monetary damages alongside foreclosure, and unjust enrichment; the city separately argued the controlling precedent (Bedford Realty) had been overruled sub silentio or was wrongly decided.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to foreclose despite lost original Note B | LPP: note and mortgage are separate; foreclosure is equitable and loss of the note does not bar foreclosure if secondary evidence establishes the debt (Bedford Realty). | Underwood/CDC: without possession of Note B (per UCC §42a‑3‑309) plaintiff cannot enforce the note and lacks standing; thus jurisdiction is lacking. | Court: Affirmed Bedford Realty—loss of note does not deprive mortgagee of standing to pursue foreclosure; secondary evidence can prove the debt. |
| Whether Bedford Realty was overruled sub silentio by later UCC‑related cases | LPP: Bedford Realty remains controlling; later cases did not expressly overrule it. | City: J.E. Robert and Equity One apply UCC standing rules and are inconsistent with Bedford Realty, so Bedford was effectively overruled. | Court: Declined to find sub silentio overruling; absent clear Supreme Court intent, Bedford Realty stands and lower courts cannot overrule it. |
| Use of HUD regulatory agreement to establish default and calculate debt | LPP: the regulatory agreement and evidence support default and debt calculations. | Underwood/CDC: trial court improperly relied on the regulatory agreement to find default and compute the debt. | Court: Affirmed trial court’s factual findings and conclusions on default and debt amount (adopted trial court opinion). |
| Awarding monetary damages alongside strict foreclosure / unjust enrichment | LPP: equitable foreclosure does not preclude related monetary remedies when supported by proof; unjust enrichment against CDC supported by record. | Defendants: foreclosure is the exclusive remedy; monetary damages and unjust enrichment awards were improper or duplicative. | Court: Affirmed monetary awards (including breach of contract and unjust enrichment to extent supported); remanded to set new law days. |
Key Cases Cited
- New England Savings Bank v. Bedford Realty Corp., 238 Conn. 745 (1996) (mortgagee may pursue foreclosure despite loss of the original note; note and mortgage are separate; secondary evidence may establish debt)
- J.E. Robert Co. v. Signature Properties, LLC, 309 Conn. 307 (2013) (loan servicer for the note owner can have UCC‑based standing to foreclose)
- Equity One, Inc. v. Shivers, 310 Conn. 119 (2013) (servicer’s production of documents showing it was the note holder supports presumptive standing)
- JP Morgan Chase Bank, N.A. v. Winthrop Properties, LLC, 312 Conn. 662 (2014) (reiterated distinction between foreclosure and an action on the note)
- JPMorgan Chase Bank, N.A. v. Essaghof, 336 Conn. 633 (2020) (again affirmed the foreclosure vs. note‑enforcement distinction)