ASTORIA FEDERAL MORTGAGE CORPORATION v. GENESIS HOLDINGS, LLC, ET AL.
AC 36590
Appellate Court of Connecticut
August 4, 2015
Beach, Alvord and Mullins, Js.
Argued February 4—officially released August 4, 2015
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(Appeal from Superior Court, judicial district of Ansonia-Milford, Hon. John W. Moran, judge trial referee.)
Frank B. Velardi, Jr., for the appellee (substitute plaintiff).
Opinion
BEACH, J. In October, 2009, this action was commenced by the named plaintiff, Astoria Federal Mortgage Corporation (bank), to foreclose a mortgage on property in Derby owned by the named defendant, Genesis Holdings, LLC (debtor). The defendant Professional Services Group, Inc., was named as an additional defendant because it claimed an interest in the property by virtue of a mechanic’s lien recorded in the Derby land records.1 During the pendency of the action, the bank assigned its interest in the property to Bellmore Partners, Inc., which was thereafter substituted as the plaintiff in this matter.2 On July 19, 2010, the debtor filed a chapter 11 bankruptcy petition, which automatically stayed the foreclosure action. See
On appeal, the defendant claims that the court improperly rendered summary judgment in favor of the plaintiff because (1) a genuine issue of material fact exists with respect to the validity of the defendant’s mechanic’s lien, and (2) the court improperly concluded that the defendant’s opportunity to foreclose its mechanic’s lien had expired.3 The plaintiff claims, as an alternative ground for affirmance of the court’s judgment, that the defendant’s claims are barred by the doctrine of collateral estoppel. We conclude that the court erroneously exceeded the terms of the order granting relief from the stay as ordered by the Bankruptcy Court. We also conclude that the defendant was not collaterally estopped from raising its claims before the trial court. Accordingly, we reverse the judgment of the trial court.
The following procedural history and undisputed facts, as provided in the pleadings and the evidence submitted by the parties in conjunction with the plaintiff’s motion for summary judgment and the defendant’s opposition thereto, are relevant to the disposition of the defendant’s appeal. On November 4, 2005, the debtor executed an open-end mortgage in favor of the bank on commercial property in Derby to secure the payment of a promissory note in the principal amount of $360,000. The bank instituted the present foreclosure action in October, 2009, against the debtor, alleging nonpayment of the debt. The defendant’s mechanic’s lien, in the principal amount of $315,000, was recorded in the Derby land records on September 8, 2009. The complaint alleged that the defendant’s interest was subordinate in right to the interest of the bank.
On December 28, 2009, the defendant filed a disclosure of defense, stating that its mechanic’s lien was a claim prior in right to that of the bank. The defendant filed its answer and a special defense on January 7, 2010. In its special defense, the defendant similarly alleged that its lien was a claim prior in right to that of the bank. On July 19, 2010, the debtor filed a chapter 11 bankruptcy petition. On September 29, 2010, the bank assigned its interest in the subject note, mortgage and related loan documents to the plaintiff. On May 14, 2012, Bellmore Partners, Inc., was substituted as the plaintiff in the foreclosure action. See footnote 2 of this opinion.
The foreclosure action was automatically stayed by the filing of the bankruptcy petition.4 In its petition, the debtor listed several creditors, including the plaintiff and the defendant. The only asset of the bankruptcy estate was the Derby property and its rental income. On February 13, 2012, the plaintiff moved for relief from the automatic stay. The next day, Lawyers Title Insurance Company (company), claiming to be a party in interest by virtue of a title policy it had issued insuring the priority of the plaintiff’s mortgage, filed a request for a status conference to obtain guidance from the Bankruptcy Court regarding the disputed priority of the defendant’s mechanic’s lien over the plaintiff’s mortgage. In its request, the company
On April 12, 2012, the Bankruptcy Court, Shiff, J., issued an ‘‘Order Regarding Limited Relief from the Automatic Stay’’ (order). In that order, Judge Shiff stated that ‘‘the parties [have] requested limited relief . . . to allow the parties to move forward with proceedings in Connecticut Superior Court as to the extent, validity and priority of the [defendant’s] mechanic’s lien’’ and that ‘‘cause exist[ed] to grant limited relief from stay as requested by the parties . . . .’’ Judge Shiff entered the following order: ‘‘[R]elief from the automatic stay is granted, for cause, pursuant to
extent, validity and priority of the Mechanic’s Lien . . . .’’
The plaintiff then served interrogatories and requests for production, dated June 27, 2012, on the defendant. On June 10, 2013, the plaintiff filed a motion for summary judgment, claiming that the defendant’s mechanic’s lien had been extinguished as a matter of law because the defendant did not commence an action to foreclose that lien within thirty days of the April 12, 2012 Bankruptcy Court order granting limited relief from the automatic stay. Referring to
The defendant filed an objection to the plaintiff’s motion for summary judgment on June 27, 2013, with accompanying exhibits that included an affidavit by Nicole Liguori Micklich, the defendant’s attorney in the bankruptcy proceeding. In its objection, the defendant argued that the order of the Bankruptcy Court granted limited relief from the stay, and that it did not terminate the stay to allow the defendant to commence an action to foreclose its mechanic’s lien. The defendant further argued that the doctrine of collateral estoppel did not apply because the alleged ‘‘companion case’’ addressed ‘‘a different mechanic’s lien, different mortgages, and different property.’’8 The defendant also stated that the decision in the other case did ‘‘not make any ruling with respect to the arguments advanced by [the plaintiff] in its present motion for summary judgment.’’
Micklich, in her affidavit, averred that the debtor’s counsel had contacted her on March 20, 2012, to inform her that the Bankruptcy Court had inquired if the ‘‘parties would stipulate that any question regarding the priority of the Mechanic’s Lien should be resolved by the Connecticut State Court and not by the Bankruptcy Court.’’ Micklich also averred that after she conferred with the defendant, she spoke again with the debtor’s counsel and told him that the defendant ‘‘would stipulate that the State Court could determine the limited issue of priority of the Mechanic’s Lien, as long as the parties agreed that no party would seek an order of the
State Court distributing the property of the [bankruptcy] estate and that no party would seek to confirm the [chapter 11] plan until after the State Court ruled on the priority.’’
The trial court held a hearing on the plaintiff’s motion for summary judgment on November 4, 2013, and counsel for the
The conference proceeded and, during the discussion as to the meaning of the Bankruptcy Court order, the defendant’s counsel provided her interpretation and claimed that the order allowed the parties to participate in an evidentiary hearing with respect to the mechanic’s lien: ‘‘Was it filed; was it served; is the amount correct? All of those issues that go to the validity of a lien. That is what would have gone on in the adversary proceedings.’’ According to the defendant’s counsel: ‘‘The argument is that the motion for relief from stay was for the purpose of having the equivalent of the adversary hearing, i.e., the evidentiary hearing in state court rather than in Bankruptcy Court . . . .’’ The defendant’s counsel claimed that after the evidentiary hearing in state court, the matter would ‘‘[go] back to Bankruptcy Court for further proceedings under the plan with respect to this mechanic’s lien [that] now has been established as being for X amount, X date, and then the planned confirmation continues.’’
After confirming that the Derby property was the only asset of the debtor in the bankruptcy estate, the trial court asked: ‘‘How long would it take to get a clarification from Judge Shiff regarding his order?’’ Following counsel’s response to that question, the court stated to the defendant’s counsel: ‘‘If you’d like to file a motion with Judge Shiff clarifying his order . . . I’ll give you two weeks to do so. Otherwise, I’ll make a ruling.’’ In concluding the hearing, the court advised that if the defendant’s counsel did not file a motion for clarification in the Bankruptcy Court within two weeks, it would render judgment granting the plaintiff’s motion for summary judgment.
On February 3, 2014, no motion for clarification having been filed in the Bankruptcy Court, the trial court issued the following memorandum of decision: ‘‘The plaintiff’s, Bellmore Partners, Inc., Motion for Summary Judgment is granted. There is no genuine issue of fact. It is unequivocal and unopposed that the defendant’s, Professional Services Group, Inc., opportunity to foreclose on its mechanic’s lien has long since expired.’’
This appeal followed.9
‘‘Our review of the trial court’s decision to render summary judgment is plenary, and in accordance with the standards set forth in
We first address the plaintiff’s alternative ground for affirmance of the court’s judgment because the doctrine of collateral estoppel, if applicable, would bar the defendant’s claims. ‘‘Collateral estoppel, or issue preclusion, is that aspect of res judicata which prohibits the relitigation of an issue when that issue was actually litigated and necessarily determined in a prior action between the same parties upon a different claim. . . . Collateral estoppel means simply that when an issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties in any future lawsuit. . . . Issue preclusion arises when an issue is actually litigated and determined by a valid and final judgment, and that determination is essential to the judgment.’’ (Emphasis added; internal quotation marks omitted.) Massey v. Branford, 119 Conn. App. 453, 465, 988 A.2d 370, cert. denied, 295 Conn. 921, 991 A.2d 565 (2010).
The trial court properly concluded that the doctrine of collateral estoppel was not applicable in the present case. The prior action involved a different debtor, different property, and different encumbrances. Moreover, the court in the prior case never directly addressed the issues raised in this case concerning the scope of the relief from stay granted by the Bankruptcy Court. Accordingly, the plaintiff’s claim fails.
We next address the defendant’s claim that the court improperly rendered summary judgment. Central to this appeal are the scope and the trial court’s interpretation of the April 12, 2012 Bankruptcy Court order, which expressly granted ‘‘limited relief . . . .’’ The automatic stay is comprehensive and generally prohibits any action taken to advance the proceedings in the underlying case subject to the stay.
[bankruptcy case] . . . .’’ ‘‘The automatic stay provision in . . .
‘‘The Bankruptcy Court has the power to grant relief from the automatic stay. See
The order of the Bankruptcy Court was clear and unambiguous:11 ‘‘[R]elief from the automatic stay is granted, for cause . . . to allow the parties to move forward with proceedings in Connecticut Superior Court for the limited purpose of determining the extent, validity and priority’’ of the defendant’s claimed mechanic’s lien. (Emphasis added.) As noted previously, orders releasing cases, wholly or partially, from bankruptcy proceedings are to be construed narrowly, and there was no permission to allow any party to foreclose its security interest. The order clearly contemplated the Superior Court’s deciding only the specifically referred issues; further disposition was to occur in the Bankruptcy Court. Because no party, nor the court, had the authority to proceed with foreclosure in these circumstances, the defendant could not lawfully have proceeded to foreclose its lien in any event. Because the court could not proceed with foreclosure at all, the time limitations provided in
The judgment is reversed and the case is remanded with direction to deny the motion for summary judg-
ment and for further proceedings to determine the extent, validity and priority of the mechanic’s lien.
In this opinion MULLINS, J., concurred.
foreclosure case
Notes
According to the plaintiff, the applicable nonbankruptcy law in this matter was General Statutes § 49-39.
It is undisputed that the defendant’s mechanic’s lien was recorded in the Derby land records on September 8, 2009. The debtor filed its bankruptcy petition on July 19, 2010, which was before the expiration of the one year period required for the defendant to commence an action to foreclose the lien. At that point, the defendant could not commence a foreclosure action because of the automatic stay provisions of the Bankruptcy Code. The plaintiff argued that the April 12, 2012 order of the Bankruptcy Court granted relief from that stay and that the defendant had to commence its foreclosure action within thirty days of that order, i.e., on or before May 12, 2012. The defendant argues that
It is undisputed that the defendant did not bring an independent action to foreclose its mechanic’s lien, file a motion to determine the priority of its lien or ask the Bankruptcy Court for clarification of its order within that thirty day period or at any relevant time thereafter.