49 Conn. App. 563 | Conn. App. Ct. | 1998
Opinion
The defendants
The following facts are relevant to this appeal. On or about April 14,1987, Home Bank and Trust Company issued a mortgage commitment letter (commitment letter) to the defendant Anthony H. Gallicchio, a partner in the defendant P & G Enterprises Limited Partnership (P & G), indicating that Home Bank and Trust Company had approved P & G’s application for a mortgage loan in the amount of $2,100,000, subject to the various terms and conditions as set forth in the letter. On June 10, 1987, Shawmut Home Bank, successor in interest to Home Bank and Trust Company, loaned $2,100,000 to P & G. This loan was evidenced by a promissory note (note) executed by the three general partners of P & G. The note was secured by a mortgage of real property located at 306 Industrial Park Road in Middletown. An assignment of leases and rentals was also executed, and each of the three individual defendants personally guaranteed the note.
Shawmut Home Bank eventually merged into Connecticut National Bank, which changed its name to Shawmut Bank Connecticut N.A. Shawmut Bank Connecticut N.A., now Fleet Bank, transferred the required payments on the loan from P & G’s checking account to the bank on a monthly basis. Monthly statements were rendered to P & G reflecting all payments. Shawmut Bank Connecticut N.A. sold the P & G loan to the
The trial court held that the plaintiff was a holder in due course for value received and was entitled to enforce the note and mortgage, and that there was a default of payment on the note. The court rendered a judgment of strict foreclosure of the mortgage on April 10, 1997. In a subsequent articulation, the court found the principal amount of the debt to be $1,911,694.71, accrued interest to be $476,420.47, late charges in the amount of $23,474.56 and reasonable attorney’s fees of $35,000, and established 12 percent as the applicable rate of interest upon default.
I
The defendants first claim that the plaintiff failed to establish properly its entitlement to enforce the note because the allonge,
The note in this case is made payable to Shawmut Home Bank, and no endorsement to the plaintiff appears on the note. The plaintiff claims to have acquired its ownership of the note by way of an allonge,
The following additional facts are necessary to a proper resolution of this claim. A witness for the plaintiff, Russell Church, testified that he worked as an asset manager for Archon Group, the entity responsible for servicing all of the assets of the plaintiff. In that position, Church testified that he personally became responsible for the P & G loan some time during the summer of 1996. Church further testified that he first; saw the original note with the attached allonge two weeks before trial, when the plaintiffs counsel presented it to him, and that he had no personal knowledge regarding the execution of the allonge or how or when it came to be attached to the note.
The defendants objected to the admissibility of the allonge on the ground that Church could not testify as to its authenticity. The trial court admitted the allonge conditionally, indicating that the defendants could move to strike the exhibit if the plaintiff failed to tie the allonge properly to the note. Church testified, over objection, that the loan from P & G was acquired by the plaintiff in 1993 as part of a pool of loans purchased from Shawmut Bank Connecticut N.A. He further testified that he was not an officer or employee of the plaintiff, and that he was not involved in any way with the acquisition of the note from Shawmut. No other documents were introduced into evidence regarding the purchase of the loans. At the close of the plaintiff’s evidence, the defendants moved to strike the allonge. The trial court denied the defendants’ motion and determined, on the basis of the allonge, that the note was endorsed and delivered properly to the plaintiff, making the plaintiff a holder in due course entitled to enforce the note.
It is undisputed that the defendant P & G borrowed $2,100,000 from Shawmut Home Bank and that P & G executed a promissory note in favor of Shawmut Home Bank. It is further undisputed that P & G has not paid in full the obligation owed on the note and that the outstanding debt remains owed to the legal holder of the note.
The trial court concluded on the evidence that the plaintiff was a holder in due course. That finding is a question of fact. We must determine whether that conclusion was warranted on the basis of the subsidiary facts of this case. If the finding is not clearly erroneous, it cannot be disturbed.
A holder in due course must prove his taking of the instrument for value, in good faith, and “ ‘without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person.’
“The possession by the bearer of a note indorsed in blank imports prima facie that he acquired the note in good faith for value and in the course of business, before maturity and without notice of any circumstances impeaching its validity. The production of the note establishes his case prima facie against the makers and he may rest there. ... It was for the defendant to set up and prove the facts which limit or change the plaintiffs rights.” (Citations omitted.) Garris v. Calechman, 118 Conn. 112, 115, 170 A. 789 (1934).
We conclude that the plaintiff has established its standing or right to sue on the note, and that the court correctly admitted the note and its allonge and correctly concluded that the plaintiff was a holder in due course. See Donnelly v. Garvan, 111 Conn. 626, 630, 151 A. 168 (1930).
II
The defendants next claim that the trial court improperly overruled their special defenses that were based on the unexplained discrepancies between the terms
There are two primary differences between the terms of the commitment letter and the terms of the note with respect to the interest rate to be applied to the loan. Both the commitment letter and the note specify that the loan would bear a fixed interest rate of 10 percent per year for the first five years of the ten year term and that beginning in the sixth year and then every year thereafter, the rate would be adjusted to prime plus 2.25 percent per year with a ceiling of 13 percent. The note, however, also provided for an interest rate floor of 10 percent and a yearly cap of 2 percent on the amount the rate could change from the prior year, neither of which were provided for in the commitment letter.
The trial court ruled that the defendants’ special defense relating to the variance as to the interest rate was “without merit . . . because all parties signed the note, which is evidence of the debt. The commitment letter is not evidence of any debt, but of the parties’ general contemplations at the time it was issued. The terms of the note are unambiguous, clear and in accordance with the parties’ agreement at the time it was signed.”
The terms of the note clearly and unambiguously set forth the interest rate provisions of the loan, including the interest rate floor and rachet. The defendants signed the note without objecting to the interest rate provisions. Although the commitment letter stated that the loan was “subject to the following terms and conditions,” those conditions included the preparation of the note and mortgage deed. Further, while the commitment letter provides for the survival of its terms,
“[A] promissory note is nothing more than a written contract for the payment of money” and, as such, contract law applies. Appliances, Inc. v. Yost, 181 Conn. 207, 210, 435 A.2d 1 (1980). There is no ambiguity in the interest rate terms in the note, and any contrary intent on the part of the parties that could be impliedly construed from the terms of the commitment letter because of the absence of a rate interest floor or the absence of a rate interest rachet cannot alter the terms of the written contract, the note, as it was subsequently executed. See Greene v. Scott, 3 Conn. App. 34, 36, 484 A.2d 474 (1984).
The defendants’ argument that the commitment letter itself constituted a contract between the parties that was breached when the lender charged interest in accord with the terms of the note rather than the terms of the commitment letter is also to no avail. First, the commitment letter clearly anticipated the preparation of further loan documents and was conditioned on the parties’ execution of those documents in the future. Second, while the commitment letter authorized the loan to the defendants “subject to the following terms and conditions,” there was no requirement that the commitment letter contain all of the terms and conditions regarding the loan or that no other terms could be added. The defendants, who were represented by counsel at the closing, signed the note that unambiguously set forth the interest terms of the loan. The commitment letter provided in paragraph sixteen, titled, “Documentation,” that all documents, including but not limited to the mortgage deed and note, shall be “reviewed by borrower’s counsel,” giving his name and telephone number.
We agree with the trial court that the note is an enforceable contract between the parties, which sets
III
The defendants next claim that the trial court lacked competent evidence to determine the amount of the mortgage debt properly. The trial court based its findings regarding the amount of the debt on the following evidence.
The plaintiff offered the testimony of David Stem, an asset analyst with the Archon Group, and introduced through Stem a computer generated document reflecting the amount of the debt. The computer document showed a total outstanding balance as of March 13,1997, as follows: a principal balance of $1,911,694.17; interest owed of $436,819.47, with a per diem rate of $557.58; and late charges of $23,474.56. Stern testified that the computer generated loan history was prepared in the ordinary course of business, that it was the ordinary course of business to make such records and that it was made contemporaneously with the events described therein. Stern further testified, however, that he was not responsible for the development or input of the computer information, nor was he responsible for supervising the computer input or handling the accuracy of the information. Stern testified that the loan servicing department of the Archon Group is responsible for entering the data into the computer and generating the payment histoiy documents.
The defendants contend that the trial court improperly relied on this evidence to establish the amount of the debt because the evidence lacked proper foundation and was inadmissible hearsay. The trial court overruled this objection as going to the weight of the evidence and admitted the computer generated reconstructed
It is not improper to admit into evidence an adjustment sheet and computer printout as evidence of the principal due on a note. Shadhali, Inc. v. Hintlian, 41 Conn. App. 225, 227, 675 A.2d 3, cert. denied, 237 Conn. 926, 677 A.2d 948 (1996). A trial court has discretion to determine if General Statutes § 52-180 is satisfied, and an appellate court should construe the statute liberally when reviewing an abuse of discretion claim. River Dock & Pile, Inc. v. O & G Industries, Inc., 219 Conn. 787, 794-95, 595 A.2d 839 (1991).
Stem testified as to all of the statutory requirements for the business record exception to the hearsay mle. Lie stated that the computer records admitted were generated in the ordinary course of business, that it was the ordinary course of the business of the Archon Group to make such records and that the records were made contemporaneously with the transaction. Although Stern did not have personal knowledge of the generation of the report, he testified that he was familiar with the procedures used to generate the report, that he had conducted an extensive audit of the report to verify the accuracy of the information and that he used such records on a daily basis in his job. Stem further testified that the beginning balance used to generate the report came from the sales agreement between Shawmut Bank Connecticut N.A. and the plaintiff when the note was assigned to the plaintiff, and was in turn provided to the Archon Group in connection with the loan services it provided to the plaintiff. The court reasonably could have concluded that Shawmut Bank Connecticut N.A. had a legitimate business duty to provide the information used to generate the payment history. The failure of the plaintiff to produce a witness who
IV
The defendants finally claim that even if the trial court did have evidence before it sufficient to establish the amount of the debt, the court’s award of interest, late fees and attorney’s fees was not supported by the evidence or by applicable law.
A
The defendants claim that the note in this case does not support the trial court’s award of interest. The court applied the applicable interest rates set forth in the note and as indicated on the computer generated loan histoiy, and applied a 12 percent default interest rate as was required by the note. The court determined that the per diem interest charge to be applied was $637.73.
The note in this case has a variable interest rate that is tied to “the prime rate in effect at Shawmut Home Bank on the [annual] adjustment date.” Stem testified, however, that he had no knowledge as to whose prime rate was used after Shawmut Home Bank became Fleet Bank and was not certain if it was the prime rate of Fleet Bank. The computer records, however, which were admitted into evidence, do indicate the prime percentage rate that was applied. “When a variable interest rate is based on the rate of a failed institution, the trial court must determine whether the substitute rate is reasonable by examining the documents and testimony
The plaintiff argues that the law regarding an interest rate based on a failed institution does not apply here, where Shawmut Home Bank did not “fail” but merged with another bank. We conclude that this distinction is of no import. After the merger, or name change, the prime rate of Shawmut Home Bank no longer existed. Furthermore, even if the prime rate of the successor institution, Fleet Bank, is the proper rate to be applied, the trial court had no evidence before it that the rate of Fleet Bank was indeed the rate that was applied. In the present case, while the computer generated loan history admitted into evidence provided the trial court with evidence of the rate that was applied to the loan after Shawmut Home Bank merged with and eventually became Fleet Bank, there was no evidence offered regarding which institution’s prime rate was applied to compute the variable interest rate and no evidence as to the reasonableness of the rate that was used. Accordingly, the judgment of the trial court must be reversed on this issue and the case remanded to the trial court for a hearing to determine the proper prime rate to be applied to the loan after Shawmut Home Bank ceased to exist.
B
The defendants claim that the trial court improperly awarded late charges after the acceleration of the note.
C
The defendants claim that the trial court improperly awarded attorney’s fees when there was no claim for attorney’s fees in the plaintiffs complaint and no evidence with respect to the amount of attorney’s fees incurred by the plaintiff presented at trial. The trial court awarded the plaintiff $35,000 in attorney’s fees based on the representation of plaintiffs counsel in its posttrial brief.
The note in this case expressly provided for the payment of attorney’s fees upon default. Further, the plaintiffs prayer for relief specifically requested “[s]uch other and further relief as this court deems just and equitable.” The defendants’ claim that the plaintiffs failure to make a specific demand for attorney’s fees in its prayer for relief is, therefore, to no avail. We agree, however, with the defendants that the plaintiff failed to
The judgment is reversed only as to the awards of late charges, interest and attorney’s fees and the case is remanded with direction to award late charges in the amount of $1908.30, and for further proceedings to determine the proper prime rate to be applied to the loan after Shawmut Home Bank ceased to exist, to make any corrections in the judgment as to interest that might be necessitated by the finding of the proper prime rate and to determine the amount of reasonable attorney’s fees.
In this opinion the other judges concurred.
The defendants in this case are Anthony H. Gallicchio, DanielR. Gallicchio, Bhupen N. Patel and P & G Enterprises Limited Partnership. The individual defendants are the partners of P & G Enterprises Limited Partnership.
The discrepancies related to a variance between the rates of interest in the promissory note and the commitment letter. In a separate action, filed in July, 1994, before the institution of this action, the defendants in this case sued the plaintiff in this case for recovery of any money arising from overpayment of interest. P & G Enterprises Ltd. Partnership v. SKW Real Estate Ltd. Partnership, Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. CV94-0539728S. That caséis stillpending. The claim that the interest was improperly calculated is raised by the defendants in this case in their firstspecialdefense,whichrefers to thependingsuitAsecondspecial defense that also refers to the prior case claims that the failure of the promissory note to adhere to the interest rate of the commitment letter is afraudulent inducement prohibiting recovery on the promissory note, and a third special defense
An allonge is defined as “ [a] piece of paper annexed to a negotiable instrument or promissory note, on which to write endorsements for which there is no room on the instrument itself. Such must be so firmly affixed thereto as to become a part thereof.” Black’s Law Dictionary (6th Ed. 1990). The allonge in this case was presented as a plaintiffs exhibit stapled to the original note and making it payable to the plaintiff.
The assignment of a promissoiy note evidencing a debt automatically assigns the mortgage deed that secures the debt. New Milford Savings Bank v. Jajer, 244 Conn. 251, 266, 708 A.2d 1378 (1998).
The original note was in the possession of the Archon Group as servicer for the plaintiff and was provided to the plaintiffs counsel by other individuals employed by the Archon Group.
The sticker on the allonge reads as follows:
“P0066 — Control #2106
*568 P and G Enterprises, Limited
6843299914/0000000026”
In a pending case; see footnote 2; the defendant, P & G, as plaintiff in that case, alleges in its complaint that“[u]poninformationandbelief, the [plaintiff in this case] obtained title to said obligation [the note] on June 24, 1993, by assignment from Shawmut Bank Connecticut, N.A., which was the successor to Shawmut Home Bank.” The pending case is based on the premise that the plaintiff in this case is the holder in due course of the note.
The trial court found this fact but did not conclude from it that the defendants had waived any right to assert that ownership was not in the plaintiff orthatthe defendants were equitably estopped to deny the ownership. Neither estoppel nor waiver, both of which are questions of fact, was argued to the trial court, and the trial court did not find either as an ultimate conclusion of fact.
General Statutes § 42a-3-302 provides: “Holder in due course, (a) Subject to subsection (c) and section 42a-3-106 (d), ‘holder in due course’ means the holder of an instrument if:
“(1) The instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and
“(2) The holder took the instrument (i) for value, (ii) in good faith, (iii) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, (iv) without notice that the instrument contains an unauthorized signature or has been altered, (v) without notice of any claim to the instrument described in section 42a-3-306, and (vi) without notice that any party has a defense or claim in recoupment described in section 42a-3-305 (a).
*570 “(b) Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of a defense under subsection (a), but discharge is effective against a person who became a holder in due course with notice of the discharge. Public filing or recording of a document does not of itself constitute notice of a defense, claim in recoupment or claim to the instrument.
“(c) Except to the extent a transferor or predecessor in interest has rights as a holder in due course, a person does not acquire rights of a holder in due course of an instrument taken (i) by legal process or by purchase in an execution, bankruptcy, or creditor’s sale or similar proceeding, (ii) by purchase as part of a bulk transaction not in ordinary course of business of the transferor, or (iii) as the successor in interest to an estate or other organization.
“(d) If, under section 42a-3-303 (a) (1), the promise of performance that is the consideration for an instrument has been partially performed, the holder may assert rights asaholderin due course oftheinstrumentonly to thefraction of the amount payable under the instrument equal to the value of the partial performance divided by the value of the promised performance.
“(e) If (i) the person entitled to enforce an instrument has only a security interest in the instrument and (ii) the person obliged to pay the instrument has a defense, claim in recoupment or claim to the instrument that may be asserted against the person who granted the security interest, the person entitled to enforce the instrument may assert rights as a holder in due course only to an amount payable under the instrument which, at the time of enforcement of the instrument, does not exceed the amount of the unpaid obligation secured.
“(f) To be effective, notice must be received at a time and in a manner that gives a reasonable opportunity to act on it.
“(g) This section is subject to any law limiting status as a holder in due course in particular classes of transactions.”
We are aware that this case predates the Uniform Commercial Code, but its rationale has not been changed by the code.
The defendants’ special defenses were as follows: “FIRST SPECIAL DEFENSE: The plaintiff sought to wrongfully impose improper interest rate calculations in regard to the alleged debt, all of which is more particularly set forth in a certain case titled, P & G Enterprises Ltd. Partnership v. SKW Real Estate Ltd. Partnership, Docket No. CV-94-0539728S, all of which constitutes a breach of the contract between the parties.
“SECOND SPECIAL DEFENSE: The plaintiff sought to wrongfully impose improper interest rate calculations in regard to the alleged debt, all of which is more particularly set forth in a certain case titled, P & G Enterprises Ltd. Partnership v. SKW Real Estate Ltd. Partnership, Docket No. CV-940539728S, all of the aforesaid was an inducement for the defendants to enter into said transaction with the plaintiffs predecessor in title, and the failure of the plaintiff and the plaintiffs predecessor to adhere to the terms of said interest rate by virtue of the document actually executed represents a fraudulent inducement prohibiting recovery on said note.
“THIRD SPECIAL DEFENSE: The plaintiff is guilty of unclean hands.”
The commitment letter provided the following terms with respect to the interest rate: “The loan shallbear interest atafixed rate of 10.00% for the first 5 years of a 10 year term. At the beginning of the 6th year (Adjustment Date) and every year thereafter, the rate will be fixed at prime plus 2.25% with a ceiling of 13.00% through the tenth (10th) year . . . .”
The interest rate provision of the note provided as follows: “A. From the
“Notwithstanding anything contained hereinabove to the contrary: A. The rate of interest payable on this Note, in no event and at no time, shall be greater than thirteen percent (13%) nor less than ten percent (10%) per annum, and the maximum increase or decrease in the interest rate shall not be more than two (2%) percent over the rate of the prior year.”
The commitment letter states: “The parties hereto agree that this commitment shall survive the Loan closing, and that each and every one of the obligations and undertakings of Borrower and Guarantors shall be continuing obligations and shall not cease and terminate until the entire Loan has been paid in full.”
The business record exception to the hearsay rule is codified at General Statutes § 52-180, which provides in relevant part: “(a) Any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible as evidence of the act, transaction, occurrence or event, if the trial judge finds that it was made in the regular course of any business, and that it was the regular course of the business to make the writing or record at the time of the act, transaction, occurrence or event or within a reasonable time thereafter.
“(b) The writing or record shall not be rendered inadmissible by (1) a party’s failure to produce as witnesses the person or persons who made the writing or record, or who have personal knowledge of the act, transaction, occurrence or event recorded or (2) the party’s failure to show that such persons are unavailable as witnesses. Either of such facts and all other circumstances of the making of the writing or record, including lack of personal knowledge by the entrant or maker, may be shown to affect the weight of the evidence, but not to affect its admissibility. ..."
The defendants claimed at oral argument that a new trial, rather than a remand, would be necessary if there was a reversal as to any of the items of damages. In this case, we uphold the liability of the defendants to pay the note, and affirm the judgment of strict foreclosure and the finding as to the amount of the debt. This case does not come within the factual plane of those cases in which a new trial is necessitated because liability is inextricably intertwined with the issue of damages. A hearing as ordered here does not affect the judgment of strict foreclosure, the validity of the note or the amount of the debt, and a new trial is not warranted. See Wendland v. Ridgefield Construction Services, Inc., 190 Conn. 791, 462 A.2d 1043 (1983).