Opinion
No. FST CV 09 5010958 S
July 30, 2010
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT
The plaintiff Deutsche Bank National Trust Company as Trustee under the Pooling and Servicing Agreement dated as of September 1, 2006, GSAMP Trust 2006-FM2 ("Deutsche Bank") has moved for summary judgment as to liability against the defendants in its action to foreclose a mortgage on property located at 10-12 Hervey Street, Greenwich, Connecticut.
On June 25, 2006, defendant Noemi E.F. Delarosa executed a note in favor of Fremont Investment and Loan ("Fremont") in the amount of $560,000.00 which the lender represented to be 70% LTV, thus attributing a property value of approximately $730,000.00. On said date Noemi E.F. Delarosa and Salvatore Delarosa executed a mortgage on property located at 10-12 Hervey Street to Fremont. Mortgage Electronic Registration Systems, Inc., as nominee for Fremont Investment and Loan Mortgage Electronic Registration Systems, Inc., assigned the subject mortgage to Deutsche Bank on June 10, 2009. Plaintiff served the subject complaint on the defendants on March 25, 2009 with a return date of April 7, 2009. By answer dated May 6, 2009, defendants have pleaded no knowledge to paragraphs 1-5 and 7-11 of the complaint and have denied paragraph 6. They have also pleaded two special defenses, first the terms of the mortgage and note in light of the circumstances surrounding their execution and the financial condition of the defendants at the time, are unconscionable and second that the subject note and mortgage violate the Federal Truth-in-Lending Act, 15 U.S.C. 1601 et seq. as amended.
In a foreclosure action special defenses must implicate or attack the making, validity, or enforcement of the note, mortgage or both to be considered a valid special defense. See Southbridge Associates, LLC v. Garofalo, 53 Conn.App. 11, 728 A.2d 1114 (1999); see also Fidelity Bank v. Krenisky, supra. According to Practice Book § 10-50 special defenses must be supported through statements and allegations of specific facts and cannot be mere legal conclusions or assertions. Furthermore, it is axiomatic that when pleading a special defense, "[t]he 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." (Internal quotation marks omitted.) Danbury v. Dana Investment Corp., 249 Conn. 1, 17, 730 A.2d 11228 (1999).
Although the special defenses as pleaded lack factual specificity, in opposition to the motion for summary judgment, defendant Noemi E.F. Delarosa submitted an affidavit setting forth numerous material facts. Some of these individually may be sufficient to support a claim of unconscionability including that she was not represented by an attorney, that the bank would refinance the loan in 12 months, that although she speaks Spanish, none of the documents were read or explained to her in Spanish and as a result she only later learned inter alia, that the application stated her monthly income was $12,000 when the bank's representative knew her only income was social security. Together, they raise further concerns beyond the scope of this court's decision on the plaintiffs' motion for summary judgment, but sufficient to satisfy the requirement of alleging material facts.
Plaintiffs' response is that as an assignee, it is not responsible for the wrongful, even unconscionable, conduct of its assignor. Plaintiff relies on Deutsche Bank National Trust Company v. Ganci, 2006 Conn.Super. LEXIS 1023, 3-4 (Conn.Super.Ct. April 5, 2006), for the position that ordinarily an assignee is not responsible for the acts of an assignor. Review of the court's decision in Ganci fails to provide any relevant application to the subject case. Whether commercial lenders and investors can engage in a scheme of multiple assignments to shield themselves from fraudulent and aggressive lending practices to the extreme prejudice of an unsuspecting borrower is an issue beyond the facts and analysis of Ganci, supra.
Plaintiff argues that the issue of unconscionability in a mortgage transaction is a question of law rather than fact, however acknowledging that "unconsionability is a matter of law to be decided by the court based on all the facts and circumstances of the case." Iamartino v. Avallone, 2 Conn.App. 119, 125 (1984). Not only does it appear that plaintiff would have the court reject a claim of unconscionability without referring to the facts and circumstances of the case, it also makes the further untenable assertion that a defense of unconscionability can never defeat a motion for summary judgment.
Plaintiff is correct that the first special defense lacks factual specificity. However, plaintiff has elected to move for summary judgment rather than avail itself of other pleadings such as a motion to strike. Our Supreme Court has previously addressed the impropriety of this strategy in the case of American Progressive Life Health Insurance Company of New York v. Better Benefits LLC, 292 Conn. 111, (2009), where it said, "the use of a motion for summary judgment instead of motion to strike may be unfair to the nonmoving party because the granting of a defendant's motion for summary judgment took the plaintiff out of court while the granting of the motion to strike allows the plaintiff to re-plead his or her case." Id. 121. Not only must the court view facts more favorably as to the non-movant, but defendant Noemi E.F. Delarosa has placed numerous material facts before the court in her affidavit. Having initiated the pleadings which require a factual response, the plaintiff cannot now demand that the court ignore those facts and that it is entitled to judgment as a matter of law. Emlee Equipment Leasing Corp. v. Waterbury Transmission, Inc., 31 Conn.App. 455 (1993), involving a commercial lease executed by two corporate entities does not provide any support for plaintiff. In fact, the Emlee court specifically recognized that:
There is no bright line test to establish when a contract is unconscionable. Official Comment 1 to § 2-302 of the Uniform Commercial Code (General Statutes § 42a-2-302) suggests, however, that the test is "whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract." Under that test, "the plaintiff's actions must be weighed against the defendant's business experience, the business practices of the community, and the relatively equal bargaining power of the parties." Edart Truck Rental Corporation v. B. Swirsky Co., 23 Conn.App. 137, 143, 579 A.2d 133 (1990). Unconscionability generally requires a demonstration of "an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party." Williams v. Walker-Thomas Furniture Co., 350 F.2d 445, 449 (D.C. Cir. 1965). Each case must be decided individually on its particular facts and circumstances. Cheshire Mortgage Service, Inc. v. Montes, supra, 89.
Emlee Equipment Leasing Corporation v. Waterbury Transmission, Inc., supra, 463-64.
In Hamon v. Taylor, 180 Conn. 491 (1980), the parties did not raise the issue of unconscionability of the terms of the note. Nonetheless, the trial court concluded the interest rate was unconscionable and reduced it in the decision. The Supreme Court stated, "Before a court strikes down as unconscionable the terms of a note that the legislature has deemed not to be illegal . . . the court should permit a factual showing of the circumstances that led to the inclusion of the challenged terms in the note or mortgage." The court relied in part on the Uniform Commercial Code's provision concerning unconscionability, General Statutes § 42a-2-302: When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.
Defendants rely primarily on Monetary Funding Group, Inc. v. Pluchino, 87 Conn.App. 401 (2005) which upheld the trial court's judgment in favor of the defendant based on a finding of unclear hands and violation of Connecticut Unfair Trade Practices Act (CUTPA). Defendants' defense in this case of unconscionability, not as to the interest rate alone, but as to the totality of circumstances under which the loan was issued, has certain factual parallels to Pluchino. These include the fact that it was evident that the defendants did not speak English, were not represented by counsel, lacked means to repay the loan or the $17,416.55 broker closing agent and related fees other than through the loan proceeds and were both non-wage earning and Mr. Salvatore was ill and the purpose of the loan may also have been known as well as other facts which support defendants' defense of unconscionability of the entire transaction.
If the further allegation of the purpose of the loan, to provide funds for Mr. Salvatore's medical care was known at the time of the loan, this adds further support to the unconscionability claim. However, even without such a finding, the documents in Exhibits C, D, and E submitted by the plaintiff in support of its motion for summary judgment raise potential factual issues on their face in addition to the adjustable rates.
As a general matter, we note it is well established in our jurisprudence that `[f]oreclosure is peculiarly an equitable action, and the court may entertain such questions as are necessary to be determined in order that complete justice may be done . . . [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." (Citations omitted; emphasis in original; internal quotation marks omitted.) Morgera v. Chiappardi, 74 Conn.App. 442, 456-57, 813 A.2d 89 (2003); see also Northeast Savings, F.A. v. Hintlian, 241 Conn. 269, 275, 696 A.2d 315 (1997); Moasser v. Becker, 78 Conn.App. 305, 324, 828 A.2d 115, cert. denied, 266 Conn. 910, 832 A.2d 70 (2003). Foreclosure may be withheld by the court on the grounds of equitable considerations and principles. LaSalle National Bank v. Freshfield Meadows, LLC, 69 Conn.App. 824, 833, 798 A.2d 445 (2002).
Monetary Funding Group, Inc. v. Pluchino, supra, 405.
Plaintiff submitted an affidavit in support of its motion for summary judgment signed by Christopher Spradling, Foreclosure Specialist of Litton Loan Servicing LLC, agent of plaintiff dated June 10, 2009. Mr. Spradling's affidavit itself raises factual issues. Among them, the purported assignment of mortgage by Mortgage Electronic Registration Systems, Inc., (MERS) as nominee for Fremont Investment and Loan to the plaintiff is also dated June 10, 2009. At the time of the assignment, Litton Servicing Default Administration Department had sent at least two Notices of Default and Intent to Accelerate dated September 16, 2008 and December 30, 2008 to defendants Noemi E.F. Delarosa and Salvatore C. Delarosa. This also coincides with the increase in monthly payments from $4,777 to approximately $6,000. Fremont, acting by MERS, assigned this loan to plaintiff nine months after serving defendant with notice of default and its intent to accelerate the loan months after plaintiff commences this foreclosure action.
As to the second special defense, whether nominally providing copies of Truth-in-Lending real estate documents to an unsophisticated, non English speaking borrower who is not represented, satisfies the requirements of the law requires factual finding to be determined in a subsequent proceeding.
Finally, plaintiff has not provided any viable argument or authority for the positions it urges in its September 25, 2009 reply as applied to the facts of this case.
Conclusion
1. Summary judgment is not the appropriate procedural motion to address adequacy of special defenses and is generally not permitted for this purpose. Plaintiff has waived its right to challenge their factual sufficiency by electing to file the motion for summary judgment.
2. Defendants have presented material facts which, if proven, challenge plaintiff's claim of insulation from actions of assignor.
3. Defendants have raised material facts in support of its claim of unconscionability which must be determined by a trier of fact in order to rule on the defense of unconscionability and the defense of violation of Truth-in-Lending disclosure requirements.
The Motion for Summary Judgment is denied.