Background
Underwood Towers Limited Partnership leased land from the city of Hartford to construct Park Place Towers. After defaults on project financing, Underwood executed a second mortgage and two notes, Note A and Note B. LPP Mortgage, Inc., the substitute plaintiff, later acquired the mortgage and notes but received only a lost note affidavit for Note B because the original had previously been lost.
LPP commenced this foreclosure action in 2006. The trial court determined that LPP owned the debt and could pursue equitable foreclosure even though it could not enforce lost Note B under the Uniform Commercial Code. The Appellate Court affirmed and remanded to set new law days. On remand, Underwood and its management agent, CDC Management Corporation, again moved to dismiss for lack of standing, arguing that the Connecticut Supreme Court’s intervening decision in Bank of New York Mellon v. Tope had changed the governing law. The trial court rejected that argument, awarded attorney’s fees, and again rendered a judgment of strict foreclosure.
The Court’s Holding
The Connecticut Supreme Court held that res judicata barred Underwood and CDC from relitigating LPP’s standing to foreclose. The defendants had already presented their UCC-based standing argument in the prior appeal, and the Appellate Court had expressly considered and rejected it. The standing issue therefore had been fully and finally resolved.
The court further held that Tope did not overrule New England Savings Bank v. Bedford Realty Corp. or otherwise change the governing law. Unlike Bedford Realty and this case, Tope was not a lost-note case and did not address foreclosure based on secondary evidence of debt ownership. The limited opening of the earlier foreclosure judgment to reset law days and consider attorney’s fees also did not eliminate its finality as to standing. The Supreme Court affirmed the judgment and remanded for further proceedings according to law.
Key Takeaways
- Res judicata may operate within the same case to bar renewed litigation of an issue finally resolved in an earlier appeal.
- Tope did not displace Bedford Realty’s rule that ownership of the debt may support equitable foreclosure even when the plaintiff cannot enforce a lost note under the UCC.
- Opening a strict-foreclosure judgment for the limited purposes of resetting law days and considering attorney’s fees does not reopen issues already finally decided.
Why It Matters
The decision preserves a distinction in Connecticut law between enforcing a promissory note under the UCC and pursuing the equitable remedy of foreclosure as the owner of the underlying debt. It also confirms that an intervening decision defeats claim preclusion only when it actually changes the governing law.
Although it affirmed the strict-foreclosure judgment, the Supreme Court remanded for further proceedings, including resetting the law days. Its remand also permits the trial court to address an identified error involving approximately $76 million associated with Note A, whose indebtedness is subordinate to other priorities of record.