Opinion
No. 09-5009907
May 5, 2010
MEMORANDUM OF DECISION RE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (NO. 118)
FACTS
In this foreclosure action, the plaintiff, Deutsche Bank National Trust Company, filed this one-count complaint alleging that they are the holder of a note and mortgage executed by the defendant, Percy Lobaton, on or about June 3, 2005. In its complaint, the plaintiff alleges the following facts. On June 3, 2005, the defendant executed a note in the amount of $199,900 that was secured by a mortgage on a property known as 111-13 Connecticut Avenue, New London, Connecticut. The note and mortgage was later assigned to the plaintiff on or about January 5, 2006.
The plaintiff alleges that the note is in default and that, despite having been given proper notice, the defendant has not cured the default. As a result, the plaintiff elected to accelerate the balance due on the note, declare the note to be due in full and foreclose on the mortgage. The plaintiff commenced this action on December 24, 2008.
On June 11, 2009, the defendant filed an answer and asserted the following special defenses: misrepresentation as to the terms of the mortgage by the loan originator, fraudulent inducement by the loan originator, unconscionability, equitable estoppel, CUTPA violations, breach of fiduciary duty, unclean hands and mistake. The defendant also filed several counterclaims under the Real Estate Settlement Procedures Act, CUTPA, misrepresentation and breach of the covenant of good faith and fair dealing.
On September 29, 2009, the plaintiff filed the present motion for summary judgment seeking judgment as to all of the defendant's special defenses and counterclaims as well as for liability under the loan documents. The plaintiff supported this motion for summary judgment with a memorandum and supporting affidavits. On November 12, 2009, the defendant filed a memorandum in opposition to summary judgment that was supported by an affidavit and other documentary evidence.
LAW AND ANALYSIS I. Special Defenses
As to the plaintiff's claims that the court should summarily decide the defendant's special defenses, this court has previously stated that it is improper to move for summary judgment with regard to special defenses. "`Although there is no Connecticut appellate authority, [t]he decisions of the Connecticut Superior Court are almost in unanimous agreement that a motion for summary judgment as to a special defense is improper. Such a motion is improper because Practice Book § 17-44 does not provide for summary judgment on special defenses . . . Summary judgment on a special defense is also improper because [e]ven if the special defenses were all to fail . . . the plaintiff's motion and supporting documents do not remove from disputed facts relevant to determining whether they are entitled to judgment as a matter of law on the complaint itself . . ." (Citation omitted; internal quotation marks omitted.) Sound Post, LLC v. New Harvest Coffee Roasters, Inc., Superior Court, housing session at Bridgeport, Docket No. BRSP 056336 (May 6, 2005, Skolnick, J.); see also Lehman Bros. Bank, FSB v. Bridges, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 04 0200206 (August 14, 2006, Jennings, J.) ( 41 Conn. L. Rptr. 821)." Ameriquest v. Sievers, Superior Court, judicial district of New London, Docket No. 4002637 (November 13, 2006, Devine, J.). Accordingly, the plaintiff's motion for summary judgment is denied with regard to the defendant's special defenses.
II. Counterclaims
As to the plaintiff's motion for summary judgment with regard to the defendant's counterclaims, "[a]ny party may move for summary judgment upon any counterclaim or cross complaint as if it were an independent action." Practice Book § 17-44. "Because a counterclaim is a separate and distinct action . . . a party seeking summary judgment on both a complaint and a counterclaim must file an appropriate motion addressed to each." (Citations omitted; internal quotation marks omitted.) Miller v. Bourgoin, 28 Conn.App. 491, 500, 613 A.2d 292, cert. denied, 223 Conn. 927, 614 A.2d 825 (1992).
However, while a motion for summary judgment can be the proper vehicle for challenging the sufficiency of a counterclaim, it is not appropriate in all cases. "[T]he use of a motion for summary judgment instead of a motion to strike [to challenge the legal sufficiency of a complaint] may be unfair to the nonmoving party because [t]he granting of a defendant's motion for summary judgment puts the plaintiff out of court . . . [while the] granting of a motion to strike allows the plaintiff to replead his or her case." (Internal quotation marks omitted.). Larobina v. McDonald, 274 Conn. 394, 401, 876 A.2d 522 (2005). Accordingly, "the use of a motion for summary judgment to challenge the legal sufficiency of a complaint is appropriate when the complaint fails to set forth a cause of action and the defendant can establish that the defect could not be cured by repleading." Id. In the present case, the plaintiff has not yet filed a motion to strike and has failed to demonstrate that the defendant could not cure any defects in his counterclaims by repleading. As such, deciding the counterclaims summarily would be inappropriate and the plaintiff's motion for summary judgment is denied as to the defendant's counterclaims.
III. Note and Mortgage
With regard to the plaintiff's motion for summary judgment as to the defendant's liability on the note and mortgage, the court finds that there are several issues of material fact that render summary judgment inappropriate. Specifically, several of the special defenses raised by the defendant are supported by affidavit and documentary evidence and could serve as valid defenses to foreclosure.
"Summary judgment in favor of the defendant is properly granted if the defendant in its motion raises at least one legally sufficient defense that would bar the plaintiff's claim and involves no triable issue of fact." (Internal quotation marks omitted.) Serrano v. Burns, 248 Conn. 419, 424, 727 A.2d 1276 (1999). "Only one of [a defendant's] defenses needs to be valid in order to overcome [a] motion for summary judgment. [S]ince a single valid defense may defeat recovery, [a movant's] motion for summary judgment should be denied when any defense presents significant fact issues that should be tried." (Internal quotation marks omitted.) Union Trust Co. v. Jackson, 42 Conn.App. 413, 417, 679 A.2d 421 (1996).
"Historically, defenses to a foreclosure action have been limited to payment, discharge, release or satisfaction . . . or, if there had never been a valid lien . . . The purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action . . . A valid special defense at law to a foreclosure proceeding must be legally sufficient and address the making, validity or enforcement of the mortgage, the note or both . . . Where the plaintiff's conduct is inequitable, a court may withhold foreclosure on equitable considerations and principles . . . [O]ur courts have permitted several equitable defenses to a foreclosure action." Chase Manhattan Mortgage Corp. v. Machado, 83 Conn.App. 183, 187-88, 850 A.2d 260 (2004). "Where the plaintiff's conduct is inequitable, a court may withhold foreclosure on equitable considerations and principles . . . [I]f the mortgagor is prevented by accident, mistake or fraud, from fulfilling a condition of the mortgage, foreclosure cannot be had . . . Other equitable defenses that our Supreme Court has recognized in foreclosure actions include unconscionability . . . abandonment of security . . . and usury." (Internal quotation marks omitted.) Fidelity Bank v. Krenisky, 72 Conn.App. 700, 705-06, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002). Further, our Supreme Court has stated that "[b]ecause a mortgage foreclosure action is an equitable proceeding, the trial court may consider all relevant circumstances to ensure that complete justice is done." Reynolds v. Ramos, 188 Conn. 316, 320, 449 A.2d 182 (1982).
In the present case, the exhibits and affidavit submitted by the defendant in opposition to summary judgment present several issues of material fact that directly attack the making of the note and mortgage in that they raise serious doubts as to the propriety of the mortgage originator's conduct. Specifically, the defendant avers that he was deliberately misled as to, among other things, the condition of the property, the possibility of refinance, the amount of the monthly payments, the relationship between the loan originator and the lender and the amount of each monthly payment that would go towards paying down the principal. If true, these allegations, could form the basis of a defense to foreclosure in that they undercut the foundation of the process by which the note and mortgage held by the plaintiff was maintained.
In its memorandum in support of summary judgment, the plaintiff argues that because it is merely the assignee of the note and mortgage, and not the original lender or mortgage originator, claims of improper conduct by the loan originator cannot be used as defenses to its foreclosure action. The court disagrees. "A promissory note is nothing more than a written contract for the payment of money, and, as such, contract law applies." (Internal quotation marks omitted.) Fidelity Bank v. Krenisky, supra at 707, 72 Conn.App., 700, 707, 807 A.2d 968 (2002). "Ordinarily, an assignee of a contract takes its subject to all defenses which might have been asserted against the assignor." Fairfield Credit Corp. v. Donnelly, 158 Conn. 543, 548, 264 A.2d 547 (1969). "[T]he general rule is that [t]he plaintiff, as assignee of the mortgage, [stands] in the shoes of his assignor, with the same rights . . ." Reynolds v. Ramos, supra at 319, 188 Conn. 316, 319 n. 5, 449 A.2d 182 (1982). As such, because the defendant's claims, if borne out, would vitiate the mortgage at its very route, special defenses that attack its very validity may be asserted against either the original lender, or its assignee, as defenses against foreclosure.
Our Appellate Courts have not yet directly addressed whether the plaintiff, as assignee, may be held liable for the alleged fraudulent conduct of an assignor occurring prior to the assignment. Several Superior Court cases have found that "to be liable for the assignor's nonperformance of duties under a contract, the assignee must have expressly assumed liability for the prior breaches." Fremont Investment Loan v. Santiago, Superior Court, judicial district of New London, Docket No. CV 06 5001151 (January 13, 2010, Martin, J.); Deutsche Bank v. Gregory-Boutot, Superior Court, judicial district of Windham, Docket CV 08 5003138 (July 15, 2009, Potter, J.T.R.); WM Specialty Mortgage, LLC v. Brandt, Superior Court, judicial district of Ansonia-Milford, Docket No. CV 09 5001157 (February 10, 2009; Moran, J.T.R.); SCP Corp. v. BankBoston, Superior Court, complex litigation docket at Waterbury, Docket No. X01 CV 980116198 (March 18, 1999, Hodgson, J.) [ 24 Conn. L. Rptr. 304]. Moreover, "[i]n the absence of an express provision, an assignee is not required to assume the original responsibilities of the assignor . . . This is true both for claims of breach of contract . . . and for claims that the assignor committed fraud, or misrepresentation." (Internal quotation marks omitted.) Deutsche Bank National Trust Co. v. Ganci, Superior Court, judicial district of Hartford, Docket No. CV 05 4017440 (April 5, 2006, Satter, J.T.R.).
Other Superior Court cases have found to the contrary, indicating that "[a]lthough many of the facts alleged concern the acts or omissions of the loan originator, the defenses and a counterclaim can be asserted against the plaintiff despite the fact that the plaintiff is an assignee of the note and the mortgage because the plaintiff stands in the shoes of the assignor and because the defendant's allegations are sufficient to show the existence of agency relationship between the loan originator and . . . the assignor." U.S. Bank National Assn. v. Garces, Superior Court, judicial district of New London, Docket No. CV 07 5004536 (July 17, 2008, Martin, J.); U.S. Bank National Assn. v. Reynoso, Superior Court, judicial district of New London, Docket No. CV 07 5004312 (July 17, 2008, Martin, J.).
This second line of decisions relies primarily on Connecticut Supreme Court case law indicating that "[o]rdinarily an assignee of a contract takes it subject to all defenses which might have been asserted against the assignor;" Fairfield Credit Corp. v. Donnelly, 158 Conn. 543, 548, 264 A.2d 547 (1969); and generally, "[t]he plaintiff, as assignee of the mortgage, [stands] in the shoes of his assignor, with the same rights." (Internal quotation marks omitted.) Reynolds v. Ramos, supra at 319, n. 5, 188 Conn. 316, 319 n. 5, 449 A.2d 182 (1982). See also Shoreline Communications, Inc. v. Norwich Taxi, LLC, 70 Conn.App. 60, 72, 797 A.2d 1165 (2002) (indicating that "[a]n assignee has no greater rights or immunities than the assignor would have had if there had been no assignment").
In Flemming v. Goodwill Mortgage Services, LLC., 648 F.Sup.2d 292, 297 (D.Conn 2009), the court stated that "[a]lthough the plaintiffs correctly assert that an assignee stands in the shoes of the assignor . . . they erroneously attempt to utilize this general principle as a basis for liability . . ." The court further noted that "[s]uch claims [of fraud or misrepresentation] may only be asserted against an assignee defensively, if at all." (Emphasis added; internal quotation marks omitted.) Id. The court indicated that unlike the assignees in the cases cited by the plaintiff, the defendant in that case "did not initiate this lawsuit, making it subject to all counterclaims and defenses that could be asserted against its assignor . . ." id.
In the present case, unlike in Flemming, the defendant's claim of fraudulent conduct is asserted as a defense to the assignee's action. While there is more existing case law supporting the first line of decisions, the Appellate Courts have not yet determined the issue. Therefore, following the rationale in the second line of decisions, and viewing the evidence in the light most favorable to the defendant, the case shall go to trial.
ORDER
Because the defendant has presented several issues of material fact with regard to the validity of the original note and mortgage that was assumed by the plaintiff, and for reasons stated in I and II above, summary judgment as to liability would be improper and the plaintiff's motion is denied.