Court Opinion

ID: 6317973
Source: CourtListenerOpinion
Date Created: 2022-02-28 13:02:02.740974+00
Date Added: 2024-06-11T09:01:33.969589
License: Public Domain

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            FAIRLAKE CAPITAL, LLC v. PETER
                  LATHOURIS ET AL.
                      (AC 43872)
                Bright, C. J., and Cradle and DiPentima, Js.

                                  Syllabus

The plaintiff sought to recover damages from the defendants for, inter alia,
   the alleged breach of a guaranty agreement. The plaintiff alleged that
   C Co. extended a loan to L Co., evidenced by a note executed on behalf
   of L Co. by the defendant L, acting as attorney-in-fact for the defendant
   S, the president of L Co. The note was secured by a mortgage on certain
   real property located in New York. Additionally, L, individually and as
   attorney-in-fact for S, executed a guaranty agreement, guaranteeing the
   debt under the note. L Co. defaulted on its payments, and C Co. com-
   menced an action in New York to foreclose on the property. Thereafter,
   L Co. filed for bankruptcy, and the Bankruptcy Court issued an order
   approving the sale of the property pursuant to an approved bankruptcy
   plan. C Co. assigned its claims against L Co. to the plaintiff, and the
   plaintiff alleged that the defendants were liable under the guaranty for
   all amounts remaining due under the note. The defendants filed a motion
   for summary judgment in which they argued that the plaintiff’s claims
   were barred by the doctrine of res judicata and that, pursuant to New
   York statute (N.Y. Real Prop. Acts. Law § 1371), it was necessary for
   the plaintiff to move for a deficiency judgment in order to recover under
   the guaranty. The trial court denied the motion, concluding that § 1371
   did not apply because the property was not sold in a foreclosure action,
   and the defendants appealed to this court. Held that the trial court did
   not err in denying the defendants’ motion for summary judgment, as
   the plaintiff’s claims were not barred by the doctrine of res judicata:
   by its terms, § 1371 applies only when a foreclosure sale occurs, and,
   because the property was sold pursuant to a bankruptcy plan, rather
   than a foreclosure sale, § 1371 did not require the plaintiff to seek a
   deficiency judgment, the defendants had not filed for bankruptcy and
   were not parties to L Co.’s bankruptcy proceedings, and, thus, there
   was no reason for the Bankruptcy Court to address whether there was
   any deficiency from the sale that would trigger the defendants’ obliga-
   tions under the guaranty; moreover, although the Bankruptcy Court
   determined the amount that L Co. owed the plaintiff after the sale of
   the property, the parties agreed to litigate claims arising out of the
   guaranty agreement in Connecticut state court; furthermore, this court
   was not satisfied that the plaintiff had an adequate opportunity to litigate
   its breach of guaranty claims against the defendants in L Co.’s bank-
   ruptcy proceeding, and this court was unaware of a case in which a
   plaintiff has pursued a breach of guaranty claim in a bankruptcy court
   against a guarantor who was not the subject of the underlying bankruptcy
   proceeding.
      Argued November 17, 2021—officially released March 1, 2022

                             Procedural History

  Action seeking damages for, inter alia, breach of a
guaranty agreement, and for other relief, brought to
the Superior Court in the judicial district of Stamford-
Norwalk, where the court, Lee, J., denied the defen-
dants’ motion for summary judgment, and the defen-
dants appealed to this court. Affirmed.
  Todd R. Michaels, with whom, on the brief, were Ann
H. Rubin and Drew J. Cunningham, for the appellants
(defendants).
   Yan Margolin, pro hac vice, with whom was Patrick
McCabe, for the appellee (plaintiff).
                         Opinion

  DiPENTIMA, J. The defendants, Peter Lathouris and
Patricia Spanos Lathouris,1 appeal from the judgment
of the trial court denying their motion for summary
judgment against the plaintiff, Fairlake Capital, LLC.
The defendants claim that the trial court erred in deny-
ing their motion for summary judgment because the
plaintiff’s breach of guaranty claims against them are
barred by the doctrine of res judicata. We disagree and,
accordingly, affirm the judgment of the trial court.
   The following facts, viewed in the light most favor-
able to the plaintiff, and procedural history are relevant
to this appeal. The plaintiff commenced the underlying
action on April 26, 2017. The plaintiff filed its second
amended complaint, which is the operative complaint,
on June 26, 2018. Counts one and two of that complaint
allege claims of breach of guaranty against Peter and
Patricia, respectively, and count three alleges a claim
of unjust enrichment against both defendants.
   In its memorandum of decision denying the defen-
dants’ motion for summary judgment, the trial court
summarized the allegations of the operative complaint
as follows: ‘‘[O]n or about July 7, 2006, [Patricia] exe-
cuted a statutory short form power of attorney appoint-
ing her husband, [Peter], her attorney-in-fact. On August
1, 2006, Carlyle Financial, LLC (Carlyle) extended a
loan to Lagoon Development Corporation (Lagoon) in
the amount of $1,500,000, evidenced by a note executed
on behalf of Lagoon by [Peter], acting as attorney-in-
fact for [Patricia], [the] president of Lagoon. The note
was secured by and made subject to the terms of a
commercial mortgage on real property located in
Bronx, New York. Additionally, [Peter], individually and
as attorney-in-fact for [Patricia], executed a guaranty
agreement, guaranteeing the debt under the note. Pursu-
ant to the note, Lagoon was required to make monthly
interest payments commencing on September 1, 2006,
with the entire principal balance and all interest due and
payable in full on February 1, 2007. Lagoon defaulted
on its payments, and Carlyle accelerated the entire debt.
On or about October 9, 2009, Carlyle commenced an
action in the Supreme Court of the State of New York for
Bronx County to foreclose on the mortgaged property.
  ‘‘The plaintiff further alleges that on or about October
31, 2013, [before the foreclosure case went to judg-
ment], Lagoon filed for Chapter 11 protection in [the]
Bankruptcy Court. In an assignment of claim, dated
February 12, 2016 . . . Carlyle assigned its claims
against Lagoon in the bankruptcy action, as well as the
mortgage and guaranty agreement to the plaintiff. The
assignment was recorded in Bronx County. The Bank-
ruptcy Court approved the sale of the mortgaged prop-
erty for $5,000,000, said sale being consummated on
December 20, 2016. At the time of the sale, Lagoon owed
the plaintiff $4,160,850, yet the plaintiff only received
$1,862,631.54 from the sale of the property, resulting
in a shortfall of $2,167,604.57. The plaintiff alleges that
the defendants are liable under the guaranty for all
amounts due and owing under the note on account
of Lagoon’s failure to make the payments when they
became due.’’2
   On October 31, 2018, the defendants filed a motion for
summary judgment in which they argued that ‘‘[t]here
[was] no genuine issue as to any material fact,’’ and
that they were entitled to judgment as a matter of law
because, among other things, ‘‘[the] plaintiff’s claims in
counts one and two are barred by the doctrine of res
judicata and New York Real Property Actions and Pro-
ceedings Law § 1371 . . . .’’3 Specifically, the defen-
dants contended that the plaintiff had an opportunity
to raise a claim for a deficiency judgment in the foreclo-
sure or bankruptcy proceedings but failed to do so. In
support of the motion, the defendants filed a memoran-
dum of law, various exhibits and the signed and sworn
affidavit of Peter. On February 15, 2019, the plaintiff
filed an objection to the defendants’ motion along with
various exhibits. On March 8, 2019, the defendants filed
a reply memorandum.
   In their memorandum of law, the defendants first
argued that New York law applied to the plaintiff’s
claims, and that § 13714 required the plaintiff to obtain
a deficiency judgment. Because the plaintiff did not
move for a deficiency judgment in accordance with
§ 1371, they argued, the proceeds from the sale of the
property constituted a full satisfaction of Lagoon’s debt
to the plaintiff, and the plaintiff was barred from seeking
recovery under the guaranty. The defendants further
argued that the plaintiff’s breach of guaranty claims in
counts one and two of the operative complaint were
barred by res judicata because the issue of ‘‘whether
any amount is owed by Lagoon under the note’’ could
have been litigated in the foreclosure action or the
bankruptcy proceedings. In making this argument, the
defendants again relied on § 1371, stating that ‘‘New
York law requires that [a] deficiency judgment be
sought in the same action as the foreclosure (or in the
bankruptcy) within ninety days of the sale.’’5
   On April 8, 2019, the trial court held a hearing on the
defendants’ motion for summary judgment. On August
13, 2019, the trial court issued a memorandum of deci-
sion, denying the motion in its entirety. Before reaching
the defendants’ res judicata argument, the trial court
addressed their argument that it was necessary for the
plaintiff to obtain a deficiency judgment pursuant to
§ 1371. The trial court stated in relevant part:
‘‘[A]lthough Carlyle did foreclose on the mortgage, there
was no foreclosure sale, either in the foreclosure action
or in the bankruptcy proceeding. Instead, the property
was sold pursuant to 11 U.S.C. § 363, as provided for
in the approved bankruptcy plan. . . . The terms of
the [New York Real Property Actions and Proceedings
Law], therefore, do not apply because the property was
not sold in a New York foreclosure action pursuant to
New York law.’’ The trial court concluded that,
‘‘[b]ecause the property was not sold pursuant to a
foreclosure action, § 1371 is inapplicable and the plain-
tiff was not required to seek a deficiency judgment.’’
The trial court, relying on that conclusion, denied the
defendants’ motion for summary judgment, concluding
that the breach of guaranty claims against them were
not barred by res judicata.
  On September 3, 2019, the defendants filed a ‘‘motion
to reargue/reconsider summary judgment.’’ On January
10, 2020, the trial court denied that motion in all respects
relevant to this appeal. On January 29, 2020, the defen-
dants appealed to this court.
   On March 18, 2020, the defendants filed a motion for
articulation with the trial court ‘‘so that [they] and the
Appellate Court [could] understand the basis of the trial
court’s decision denying [their] motion for summary
judgment on res judicata grounds.’’ On September 8,
2020, the trial court issued an articulation in which it
stated in relevant part: ‘‘[T]he court held that [§] 1371
was inapplicable because the defendants removed the
proceedings to Bankruptcy Court. As a result, there
was no foreclosure sale, which is a condition precedent
to an application for a deficiency judgment under New
York law . . . . The failure to apply for a deficiency
judgment in the [§] 1371 proceeding cannot support a
res judicata finding because it was not only an unneces-
sary component of the proceeding, it was precluded
by the defendants’ removal to Bankruptcy Court. The
defendants cannot have it both ways. They cannot derail
the foreclosure proceeding by removal, and then escape
liability because the plaintiff did not obtain a foreclo-
sure sale.’’ Additional facts and procedural history will
be set forth as necessary.
  The defendants claim that the trial court erred in
denying their motion for summary judgment because
the plaintiff’s breach of guaranty claims against them
are barred by res judicata. We disagree.
   We begin by setting forth the applicable legal princi-
ples and standard of review governing this claim. An
interlocutory appeal may be taken from the denial of
a motion for summary judgment based on res judicata
or collateral estoppel. Deutsche Bank AG v. Sebastian
Holdings, Inc., 331 Conn. 379, 383 n.3, 204 A.3d 664
(2019). ‘‘The doctrine of res judicata holds that an
existing final judgment rendered [on] the merits without
fraud or collusion, by a court of competent jurisdiction,
is conclusive of causes of action and of facts or issues
thereby litigated as to the parties and their privies in
all other actions in the same or any other judicial tribu-
nal of concurrent jurisdiction. . . . If the same cause
of action is again sued on, the judgment is a bar with
respect to any claims relating to the cause of action
[that] were actually made or [that] might have been
made. . . .
   ‘‘The applicability of the [doctrine] of . . . res judi-
cata presents a question of law that we review de novo.
. . . Because [the doctrine is a] judicially created [rule]
of reason that [is] enforced on public policy grounds
. . . we have observed that whether to apply [the] doc-
trine in any particular case should be made based [on]
a consideration of the doctrine’s underlying policies,
namely, the interests of the defendant and of the courts
in bringing litigation to a close . . . and the competing
interest of the plaintiff in the vindication of a just claim.
. . . These [underlying] purposes are generally identi-
fied as being (1) to promote judicial economy by min-
imizing repetitive litigation; (2) to prevent inconsistent
judgments [that] undermine the integrity of the judicial
system; and (3) to provide repose by preventing a per-
son from being harassed by vexatious litigation. . . .
The judicial [doctrine] of res judicata . . . [is] based
on the public policy that a party should not be able to
relitigate a matter [that] it already has had an opportu-
nity to litigate. . . . Stability in judgments grants to
parties and others the certainty in the management of
their affairs [that] results when a controversy is finally
laid to rest. . . .
    ‘‘We also have recognized, however, that the applica-
tion of [the] doctrine has dramatic consequences for
the party against whom it is applied, and that we should
be careful that the effect of the doctrine does not work
an injustice. . . . Thus, [t]he [doctrine] . . . should be
flexible and must give way when [its] mechanical appli-
cation would frustrate other social policies based on
values equally or more important than the convenience
afforded by finality in legal controversies.’’ (Citation
omitted; internal quotation marks omitted.) Wellswood
Columbia, LLC v. Hebron, 327 Conn. 53, 65–66, 171
A.3d 409 (2017). ‘‘Generally, for res judicata to apply,
four elements must be met: (1) the judgment must have
been rendered on the merits by a court of competent
jurisdiction; (2) the parties to the prior and subsequent
actions must be the same or in privity; (3) there must
have been an adequate opportunity to litigate the matter
fully; and (4) the same underlying claim must be at
issue.’’ Wheeler v. Beachcroft, LLC, 320 Conn. 146, 156–
57, 129 A.3d 677 (2016). An ‘‘adequate opportunity to
litigate’’ does not include a situation in which a court
in prior litigation clearly does not have jurisdiction or
clearly would have declined to exercise jurisdiction
over a claim pursued by a plaintiff in subsequent litiga-
tion before a different court. See Connecticut National
Bank v. Rytman, 241 Conn. 24, 44, 694 A.2d 1246 (1997)
(‘‘[i]f . . . the court in the first action would clearly not
have had jurisdiction to entertain the omitted theory
or ground (or, having jurisdiction, would clearly have
declined to exercise it as a matter of discretion), then
a second action in a competent court presenting the
omitted theory or ground should [be held not] pre-
cluded’’ (emphasis in original; internal quotation marks
omitted)).
   The defendants argue that the plaintiff could have
pursued its claims under the guaranty agreement6 in
prior litigation. In their brief to this court, they state
that ‘‘res judicata applies when a plaintiff has the oppor-
tunity to assert a claim in prior litigation, regardless
of whether there is a requirement to do so.’’ (Emphasis
in original.) The prior litigation referred to is the New
York Supreme Court foreclosure action as to the Bronx
property against Lagoon and the Chapter 11 bankruptcy
action filed by Lagoon. The crux of the defendants’
argument is that because the plaintiff had the opportu-
nity to raise its claims in the present case in the prior
litigation, but did not, res judicata should bar it from
raising those claims now. In response, the plaintiff dis-
putes the applicability of res judicata to this case.
   The following additional facts and procedural history
are relevant. On December 15, 2016, the Bankruptcy
Court issued an ‘‘order approving plan administrator’s
sale of property and proposed distribution of proceeds
pursuant to plan.’’ That order stated in relevant part
that 33.87 percent of the proceeds from the sale of the
property shall be distributed to the plaintiff, ‘‘which
sum is less than the Allowed Amount of its Class 2C
Claim7 of $4,156,300 . . . .’’ (Footnote added.) The
plaintiff argues that the Bankruptcy Court determined
that Lagoon owed it $4,156,300 when it approved the
‘‘allowed amount’’ in its claim.8 (Internal quotation
marks omitted.) In its brief to this court, the plaintiff
states: ‘‘To the extent this court is persuaded that the
plaintiff had to determine the amount owed to it at
bankruptcy in order to proceed against the guarantor
(which is not the law), the sale order calculated this
amount [to be $4,156,300 minus the proceeds from
the sale].’’
   The defendants rely primarily on two bankruptcy
cases to argue that the plaintiff ‘‘had an adequate oppor-
tunity to address its indebtedness claim against Lagoon
in Lagoon’s bankruptcy.’’9 First, in Crossland Federal
Savings Bank v. LoGuidice-Chatwal Real Estate
Investments Co., 159 B.R. 413, 420 (Bankr. S.D.N.Y.
1993) (LoGuidice-Chatwal), a bankruptcy court con-
firmed the foreclosure sale of certain real property and
entered a deficiency judgment against the defendants
after finding the market value of the property. The
named defendant owned property on which an apart-
ment building was constructed. Id., 414. Upon comple-
tion of the building, the named defendant obtained a
mortgage, and it was unable to make the mortgage
payments to the plaintiff. Id. After the plaintiff initiated
a foreclosure action against the property, the named
defendant filed for bankruptcy. Id. The Bankruptcy
Court rendered a judgment of foreclosure and sale of
the property. Id. A foreclosure sale was held pursuant
to § 1371, and the plaintiff, as the highest bidder, pur-
chased the property. Id. The plaintiff then sought from
the Bankruptcy Court a deficiency judgment against
the defendants for the difference between the amount
owing on the mortgage and the sale price. Id., 414–15.
  The defendants in LoGuidice-Chatwal argued that
the ‘‘ ‘fair and reasonable market value’ ’’ of the property
was higher than the sale price and sought a finding of
this value from the Bankruptcy Court. Id., 415. The
Bankruptcy Court held a trial in which the plaintiff
and the defendants presented evidence regarding their
appraisals of the property. Id. The court then found the
market value of the property and entered a deficiency
judgment against the defendants pursuant to § 1371.
Id., 420.
   The facts of LoGuidice-Chatwal are easily distin-
guishable from those of the present case. Although
LoGuidice-Chatwal illustrates that bankruptcy courts
can enter deficiency judgments, they can do so only
when a property is sold pursuant to a foreclosure sale.
As the trial court noted in its memorandum of decision,
there was no foreclosure sale in the present case. Never-
theless, the defendants argue that ‘‘LoGuidice-Chatwal
demonstrates that there is no substantive difference
between the bankruptcy and the foreclosure as it per-
tained to the sale of the Lagoon Property and [the plain-
tiff’s] ability to pursue the indebtedness claim to obtain
a deficiency judgment.’’ In making this argument, the
defendants appear to borrow from the requirements
regarding deficiency judgments that are set forth in
§ 1371 and seek to apply them in the context of a bank-
ruptcy sale. The defendants contend that the plaintiff
‘‘had an adequate opportunity to fully litigate its claim
against Lagoon’’ by requesting a deficiency judgment
from the Bankruptcy Court once the property was sold.
The defendants have not cited any case in which a
bankruptcy court has entered a deficiency judgment
when a property is sold through a bankruptcy sale,
rather than a foreclosure sale. They also do not explain
what procedure the Bankruptcy Court would employ
for doing so, or why the Bankruptcy Court would have
an interest in making such a determination when the
defendants were not parties to Lagoon’s bankruptcy
case.
  The second case on which the defendants rely, In re
Futterman, 602 B.R. 465, 468 (Bankr. S.D.N.Y. 2019)
(Futterman), involved a deficiency claim by RWNIH-
DL 122nd Street 1, LLC (RWN), a creditor, in the bank-
ruptcy case of Hans Futterman, a real estate developer.
The deficiency claim arose out of the bankruptcy cases
of Ladera Parent, LLC, and Ladera, LLC (Ladera debt-
ors). Id. Futterman signed a personal guaranty for loans
to the Ladera debtors to develop certain real property.
Id., 468–69. The loans were secured by, among other
things, priority mortgage liens and security interests on
the real property and other development rights and
interests Futterman had in certain other entities (Ladera
properties). Id., 469. The Ladera debtors defaulted on
the loans, and both entities filed for bankruptcy. Id.
The Ladera properties were sold at auction pursuant
to a bankruptcy sale. Id., 470. Around the same time,
Futterman filed a personal bankruptcy petition, and
RWN subsequently filed a claim in his case asserting a
right to recover approximately $10 million pursuant to
the guaranty. Id.
   In disputing RWN’s claim, Futterman relied in part
on § 1371 and argued that he was entitled to a hearing
to determine the fair market value of the Ladera proper-
ties. Id., 472–73. The court noted that § 1371 was inappli-
cable because no foreclosure judgment had entered,
and no foreclosure sale had occurred. Id., 473. Rather,
the Ladera properties were sold pursuant to a plan
of reorganization. Id. The court reasoned that, even
if § 1371 were applicable, ‘‘[t]he relevant ‘foreclosure’
action . . . would have been the proceedings that
occurred in the Ladera [d]ebtors’ cases, and it would
have been in those cases (not . . . Futterman’s bank-
ruptcy case) that the amount of a deficiency judgment
against the Ladera [d]ebtors would have been deter-
mined. The [c]ourt did make a determination, in the
Ladera [d]ebtors’ cases, of the amount of the deficiency
claim for which the Ladera [d]ebtors themselves were
liable.’’ Id., 474. Furthermore, the RWN plan of reorgani-
zation provided that RWN would have an ‘‘RWN Defi-
ciency Claim’’ against the Ladera debtors with a set
formula as to how the deficiency would be calculated.
(Internal quotation marks omitted.) Id. Thus, the court
reasoned, in this hypothetical scenario, RWN would be
able to hold Futterman liable for the deficiency calcu-
lated in the Ladera debtors’ bankruptcy cases.
   In the present case, the defendants rely on the Futter-
man court’s hypothetical discussion of § 1371 to argue
that ‘‘claims identical to [the plaintiff’s] indebtedness
claim can be addressed by the Bankruptcy Court,
regardless of whether . . . § 1371 applies.’’ Again, the
defendants fail to cite a case, and we have found none,
in which a bankruptcy court has entered a deficiency
judgment after a property is sold pursuant to a bank-
ruptcy sale. Furthermore, the facts of Futterman are
significantly distinguishable from the facts in the pres-
ent case. Futterman himself had filed for bankruptcy,
and, consequently, the Bankruptcy Court had reason
to determine his obligations to his creditors arising from
the guaranty. Id., 470. In the present case, however, the
defendants had not filed for bankruptcy and were not
parties to the Bankruptcy Court proceeding. Therefore,
there was no reason for the Bankruptcy Court to
address whether there was any deficiency from the sale
that would trigger their obligations under the guaranty.
   Accepting the defendants’ argument as correct, how-
ever, the record indicates that the Bankruptcy Court
did, in fact, determine the remaining amount that
Lagoon owed the plaintiff after the sale of the property
when it approved the ‘‘[a]llowed amount’’ in the plain-
tiff’s Class 2C claim. Although the defendants assert on
appeal that the Bankruptcy Court’s statement that the
allowed amount is $4,156,300 was in error or a misstate-
ment, we are in no position to resolve such a factual
question. Thus, the defendants’ suggestion, at most,
raises a question of fact that further undermines their
claim that they are entitled to summary judgment.
Regardless of the allowed amount recognized by the
Bankruptcy Court, however, pursuant to the terms of
the guaranty agreement, the parties were to litigate
claims arising under the agreement in Connecticut
state court.
   In the alternative, the defendants argue that the plain-
tiff could have obtained relief from the bankruptcy stay
to pursue its foreclosure action in New York state court.
Had the plaintiff pursued the foreclosure action, they
argue, the plaintiff could have obtained a deficiency
judgment from that court pursuant to § 1371. We reject
the notion that the plaintiff was required to do so in
order to avoid the application of res judicata.
   As the trial court noted, Carlyle commenced a fore-
closure action in New York state court, but, because
the defendants filed for bankruptcy and the property
was sold pursuant to a bankruptcy sale, there was no
foreclosure sale. By its terms, § 1371 only applies when
a foreclosure sale occurs. See, e.g., In re Futterman,
supra, 602 B.R. 473 (‘‘[§] 1371 only applies if a foreclo-
sure judgment is issued and if a foreclosure sale
occurs’’); Berkshire Bank v. Tedeschi, Docket No. 1:11-
CV-0767 (LEK/CFH), 2013 WL 1291851, *8–9 (N.D.N.Y.
March 27, 2013) (§ 1371 did not apply because defen-
dant sold property and no foreclosure sale occurred),
aff’d, 646 Fed. Appx. 12 (2d Cir. 2016); Hometown Bank
of Hudson Valley v. Colucci, 127 App. Div. 3d 702, 704,
7 N.Y.S.3d 291 (2015) (§ 1371 did not apply because no
foreclosure sale occurred). Thus, because the Lagoon
property was sold pursuant to the bankruptcy plan,
§ 1371 did not apply to require the plaintiff to seek a
deficiency judgment from the New York state court.
   Nevertheless, the defendants argue that the plaintiff
had the opportunity to litigate its ‘‘indebtedness claim’’
against Lagoon in the foreclosure action by seeking
relief from stay in the bankruptcy proceedings. In sup-
port of this argument, they repeatedly cite Steuben
Trust Co. v. Buono, 254 App. Div. 2d 803, 803–804, 677
N.Y.S.2d 852 (1998), and In re Pittsford Polo Club, Inc.,
188 B.R. 339, 344–45 (Bankr. W.D.N.Y. 1995), two cases
that illustrate that bankruptcy courts have the power
to lift automatic stays in order to allow parties to pursue
pending state court foreclosure actions against debtors’
real property. The foreclosure action against Lagoon
was never completed because Lagoon filed for bank-
ruptcy.10 Thus, the relevant proceeding here is the bank-
ruptcy proceeding, and the issue is whether the plaintiff
had the opportunity to fully litigate its breach of guar-
anty claims in that forum. By filing for bankruptcy,
Lagoon evinced its intention to avoid a foreclosure sale.
It would be unfair to prevent the plaintiff from pursuing
the present action against the defendants merely
because the plaintiff did not take issue with having the
sale of the property occur in the venue of Lagoon’s
choosing.
   In sum, we conclude that the trial court correctly held
that the plaintiff’s breach of guaranty claims against
the defendants were not barred by the doctrine of res
judicata. On the basis of our review of the case law
and the record before us, we are unpersuaded that
the plaintiff should be precluded, on the basis of res
judicata, from bringing its claims in counts one and
two. First, we are not satisfied that the plaintiff had an
adequate opportunity to litigate its breach of guaranty
claims against the defendants in Lagoon’s bankruptcy
proceeding. We are unaware of a case in which a plain-
tiff has pursued a breach of guaranty claim in a bank-
ruptcy court against a guarantor who is not the subject
of the underlying bankruptcy proceedings. See Con-
necticut National Bank v. Rytman, supra, 241 Conn. 44
(plaintiff does not have adequate opportunity to litigate
when court in prior litigation would not have had juris-
diction over ground pursued by plaintiff in current liti-
gation).
   Furthermore, it was Lagoon, not the defendants, that
was the subject of the bankruptcy proceedings. Thus,
the Bankruptcy Court would not have had an interest
in any contractual dispute between the plaintiff and the
defendants, as guarantors, regarding the amount that
the defendants owed. The defendants have not pointed
to any relevant authority in which a guarantor has used
res judicata to preclude a creditor from pursuing claims
against it when it was not a party to the bankruptcy
proceedings against the debtor.
   We similarly conclude that the underlying principles
of the doctrine of res judicata would not be served by
precluding the plaintiff from bringing its claims in this
case. In our view, this would not reduce repetitive litiga-
tion or prevent inconsistent judgments, nor would it
provide repose to vexatious litigation. See Wellswood
Columbia, LLC v. Hebron, supra, 327 Conn. 66. Finally,
we conclude that the application of res judicata would
unfairly impede the plaintiff’s interest in the vindication
of a potentially just claim. Id.
     The judgment is affirmed.
     In this opinion the other judges concurred.
 1
     We will use the defendants’ first names when referring to them in their
individual capacities.
    2
      For clarity, we note that the second amended complaint alleges that
both defendants reside in Connecticut. Additionally, the guaranty agreement,
which the defendants filed as an exhibit with their motion for summary
judgment, provides in relevant part: ‘‘The undersigned acknowledge and
agree that the loan and this Guaranty have been made and entered into in
the State of Connecticut and do hereby agree and consent to in personam
jurisdiction and waive any claim of lack of in personam jurisdiction of the
courts of the State of Connecticut, and do further waive right to trial by
jury. . . .
    ‘‘This agreement is intended to take effect as a sealed instrument and its
validity and construction shall be determined by the laws of the State of
Connecticut.’’
    3
      The defendants also argued in their motion for summary judgment that
each count was barred by the applicable statute of limitations, that count
three must be dismissed for lack of subject matter jurisdiction because the
plaintiff lacked standing to assert a claim of unjust enrichment and that
count three failed as a matter of law because the defendants were not
unjustly enriched. The court rejected each of these arguments and denied
the defendants’ motion on those grounds as well. Those portions of the
court’s ruling are not at issue in this appeal.
    4
      Section 1371 of N.Y. Real Property Actions and Proceedings Law is titled
‘‘[d]eficiency judgment’’ and provides in relevant part: ‘‘(1) If a person who
is liable to the plaintiff for the payment of the debt secured by the mortgage
is made a defendant in the action, and has appeared or has been personally
served with the summons, the final judgment may award payment by him
of the whole residue, or so much thereof as the court may determine to be
just and equitable, of the debt remaining unsatisfied, after a sale of the
mortgaged property and the application of the proceeds, pursuant to the
directions contained in such judgment, the amount thereof to be determined
by the court as herein provided.
    ‘‘(2) Simultaneously with the making of a motion for an order confirming
the sale, provided such motion is made within ninety days after the date of the
consummation of the sale by the delivery of the proper deed of conveyance
to the purchaser, the party to whom such residue shall be owing may make
a motion in the action for leave to enter a deficiency judgment upon notice
to the party against whom such judgment is sought or the attorney who
shall have appeared for such party in such action. . . . Upon such motion
the court, whether or not the respondent appears, shall determine, upon
affidavit or otherwise as it shall direct, the fair and reasonable market value
of the mortgaged premises as of the date such premises were bid in at
auction or such nearest earlier date as there shall have been any market
value thereof and shall make an order directing the entry of a deficiency
judgment. Such deficiency judgment shall be for an amount equal to the
sum of the amount owing by the party liable as determined by the judgment
with interest, plus the amount owing on all prior liens and encumbrances
with interest, plus costs and disbursements of the action including the
referee’s fee and disbursements, less the market value as determined by
the court or the sale price of the property whichever shall be the higher.
    ‘‘(3) If no motion for a deficiency judgment shall be made as herein
prescribed the proceeds of the sale regardless of amount shall be deemed
to be in full satisfaction of the mortgage debt and no right to recover any
deficiency in any action or proceeding shall exist. . . .’’ N.Y. Real Prop.
Acts. Law § 1371 (McKinney 2008).
    5
      We note that the defendants’ argument before the trial court focused
on § 1371 and how that statute applied in Lagoon’s bankruptcy proceedings.
Accordingly, the trial court’s memorandum of decision similarly focused on
the applicability of § 1371 and whether the plaintiff could have sought a
deficiency judgment pursuant to that statute in either the foreclosure court
or the Bankruptcy Court. On appeal to this court, the defendants do not
rely so heavily on § 1371. Instead, they have shifted their focus to the
‘‘indebtedness claim’’ that the plaintiff could have raised in Lagoon’s bank-
ruptcy proceedings, regardless of whether a foreclosure sale had taken
place. See footnote 6 of this opinion. In so doing, they attempt to borrow
the concept of a deficiency judgment from § 1371 and apply it in the context
of a bankruptcy sale.
    6
      In their brief to this court, the defendants state: ‘‘[The plaintiff’s] claim
against [the defendants in the present case] is premised on [the plaintiff’s]
assertion that, notwithstanding confirmation and completion of [the bank-
ruptcy plan] in Lagoon’s bankruptcy proceeding, which included selling the
mortgaged property and distributing the proceeds, Lagoon remains indebted
to [the plaintiff] in an amount of $2,167,604.57 (the ‘indebtedness claim’).’’
Throughout their brief, the defendants use the term ‘‘indebtedness claim’’
to refer to the breach of guaranty claims in the present case, as well as to
the request for a deficiency judgment that they argue the plaintiff could
have made in Lagoon’s foreclosure and bankruptcy cases. Essentially, they
use this term to assert that there is a single claim that the plaintiff had the
opportunity to raise prior to commencing the present action against them.
We disagree, as the claims in the present case allege breaches of the guaranty
agreement between the plaintiff and the defendants, rather than breaches
of an agreement with Lagoon.
   7
     Title 11 of the United States Code, § 1122, allows a proponent of a
bankruptcy plan to classify substantially similar claims in a particular class.
The plan of reorganization that was filed as part of Lagoon’s bankruptcy
proceedings lists each claim against Lagoon and its corresponding class
number. The claim that the plaintiff points to was classified as a Class
2C claim.
   8
     In its complaint, the plaintiff alleged that, at the time of the bankruptcy
sale, Lagoon owed it a total of $4,160,850. The record contains no explanation
for the relatively small discrepancy between that amount and the allowed
amount listed in the Bankruptcy Court’s sale order.
   9
     We disagree with the defendants’ characterization of the issue in the
present case. The real inquiry with regard to the defendants’ res judicata
argument is whether Lagoon’s bankruptcy proceedings provided the plaintiff
with an adequate opportunity to litigate the breach of guaranty claims against
the defendants in their individual capacities. In other words, it is not the
claim against Lagoon that the plaintiff should have litigated in the prior
proceedings but the plaintiff’s claim against the defendants as guarantors.
   10
      On May 16, 2013, the foreclosure court issued an amended order regard-
ing Carlyle’s motion for summary judgment in the foreclosure action against
Lagoon. That order provided that a referee would be appointed to determine
the amount owed, and, ‘‘on the confirmation of [the] [r]eferee’s report,
[Carlyle] shall have judgment of foreclosure and sale as prayed for in the
[c]omplaint . . . .’’ On October 31, 2013, Lagoon filed for bankruptcy and
the foreclosure action automatically was stayed pursuant to 11 U.S.C. § 362
(2012). The record does not indicate that the court ever rendered a judgment
of foreclosure. The record contains a ‘‘[c]ase [d]etail’’ for the foreclosure
action from the New York State Unified Court System that simply lists a
‘‘[d]isposition [d]ate’’ of September 20, 2018.