Summary
holding trial-like evidentiary hearing not necessary to determine whether plaintiff has standingto bring foreclosure action provided procedures followed by trial court are adequate under circumstances
Summary of this case from Torrington Sav. Bank Mortg. Servicing Co. v. ChanceOpinion
No. 18775.
2013-09-3
EQUITY ONE, INC. v. Thomas J. SHIVERS.
Robert J. Wichowski, with whom was David F. Borrino, Farmington, for the appellant (plaintiff). J. Hanson Guest, for the appellee (defendant).
Robert J. Wichowski, with whom was David F. Borrino, Farmington, for the appellant (plaintiff). J. Hanson Guest, for the appellee (defendant).
ROGERS, C.J., and NORCOTT, PALMER, ZARELLA, EVELEIGH and McDONALD, Js.
PALMER, J.
In this certified appeal, the plaintiff, Equity One, Inc., as servicer for Nomura Home Equity Loan, Inc., appeals from the judgment of the Appellate Court, which reversed the judgment of strict foreclosure rendered by the trial court in favor of the plaintiff. The plaintiff claims that the Appellate Court incorrectly concluded that the trial court improperly had failed to conduct an evidentiary hearing to determine whether the plaintiff had standing to bring this action after the defendant, Thomas J. Shivers, challenged the plaintiff's standing. We agree with the plaintiff and, accordingly, reverse the judgment of the Appellate Court.
The following facts and procedural history, some of which are set forth in the opinion of the Appellate Court, are relevant to our disposition of this appeal. On November 28, 2006, the defendant executed a promissory note in favor of ResMAE Mortgage Corporation in the principal amount of $201,600. That note was secured by a mortgage deed on property located at 27 Mountain Street in the town of Vernon, which the defendant also executed on November 28, 2006, and delivered to Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for ResMAE Mortgage Corporation. On June 27, 2007, the plaintiff commenced this action, seeking to foreclose on the mortgage. The plaintiff alleged that, because the defendant had failed to make payments as required by the note, the plaintiff, as the holder of the note and mortgage, had elected to declare the entire balance of the note due and payable and to foreclose on the mortgage. “On July 19, 2007, the plaintiff filed a motion for default for the defendant's failure to file a responsive pleading and a motion for a judgment of strict foreclosure. On July 23, 2007, the court granted the plaintiff's motion for default. On September 24, 2007, the court rendered a judgment of foreclosure by sale, with a sale date of January 5, 2008. The sale date was extended twice: the first time it was extended to May 3, 2008, at the request of the plaintiff; the second time it was extended to May 10, 2008, at the request of the committee appointed to conduct the sale. The May 10, 2008 foreclosure sale did not go forward because the defendant filed a bankruptcy petition on May 8, 2008.
“As one court has explained, MERS does not originate, lend, service, or invest in home mortgage loans. Instead, MERS acts as the nominal mortgagee for the loans owned by its members. The MERS system is designed to allow its members, which include originators, lenders, servicers, and investors, to assign home mortgage loans without having to record each transfer in the local land recording offices where the real estate securing the mortgage is located....
“The benefit of naming MERS as the nominal mortgagee of record is that when the member transfers an interest in a mortgage loan to another MERS member, MERS privately tracks the assignment within its system but remains the mortgagee of record. According to MERS, this system saves lenders time and money, and reduces paperwork, by eliminating the need to prepare and record assignments when trading loans....
“If, on the other hand, a MERS member transfers an interest in a mortgage loan to a non-MERS member, MERS no longer acts as the mortgagee of record and an assignment of the security instrument to the non-MERS member is drafted, executed, and typically recorded in the local land recording office.” (Internal quotation marks omitted.) Chase Home Finance, LLC v. Fequiere, 119 Conn.App. 570, 572 n. 2, 989 A.2d 606, cert. denied, 295 Conn. 922, 991 A.2d 564 (2010); see also Jackson v. Mortgage Electronic Registration Systems, Inc., 770 N.W.2d 487, 490–91 (Minn.2009).
“[Thereafter, on October 9, 2008, the automatic stay that had been imposed following the defendant's bankruptcy filing was lifted.] After the bankruptcy stay was lifted, the plaintiff filed a motion to reopen and to reenter the judgment on November 7, 2008. On November 21, 2008, the defendant filed an objection to the foreclosure, asserting that he was no longer in default and ... that the plaintiff did not have standing to foreclose the mortgage. The defendant also filed a motion to compel, [in] which [he] requested that the court direct the plaintiff to produce the original note to prove that the plaintiff had standing to institute the foreclosure action. On November 24, 2008, the court ... heard argument from the parties [on] the motion to reopen and to reenter the judgment. At the conclusion of that hearing, the court [found that the plaintiff had standing to institute the action and] rendered judgment of strict foreclosure with the law days commencing on January 12, 2009.” Equity One, Inc. v. Shivers, 125 Conn.App. 201, 203–204, 9 A.3d 379 (2010).
The defendant appealed to the Appellate Court from the judgment of the trial court, claiming, inter alia, that the trial court improperly had failed to conduct an evidentiary hearing to ascertain whether the court had subject matter jurisdiction after the defendant raised the issue of the plaintiff's standing. Id., at 204, 9 A.3d 379. In agreeing with the plaintiff, the Appellate Court explained that, “[w]hen issues of fact are necessary to the determination of a court's jurisdiction, due process requires that a trial-like hearing be held, in which an opportunity is provided to present evidence and to cross-examine adverse witnesses.” (Internal quotation marks omitted.) Id., at 205, 9 A.3d 379. The Appellate Court further explained: “The [trial] court never held an evidentiary hearing to determine whether the plaintiff was the holder of the note at the time that it instituted the foreclosure action. The only hearing that the [trial] court held was in November, 2008, in response to the plaintiff's motion to reopen and to reenter [the] judgment.... [The court's] conclusion [that the plaintiff had standing] ... was based on a brief colloquy between the court and the plaintiff's counsel in which the plaintiff's counsel presented an original copy of the note to the defendant and stated that he believed that the note was provided to the court at the time of the original judgment. The court did not find specifically that the plaintiff was the holder of the note at the time that [the plaintiff] instituted the action.” Id., at 206, 9 A.3d 379.
Thereafter, we granted the plaintiff's petition for certification, limited to the following issue: “Did the Appellate Court properly determine that the trial court should have conducted an evidentiary hearing when the defendant challenged the plaintiff's standing to bring the action?” Equity One, Inc. v. Shivers, 300 Conn. 936, 17 A.3d 474 (2011). In support of its contention that a full evidentiary hearing was not required, the plaintiff argues that, by presenting the note endorsed in blank at both the September 24, 2007 and the November 24, 2008 foreclosure hearings, a presumption of standing was thereby created, which the defendant was required but failed to rebut. The plaintiff further contends that, even if the transcripts of the foreclosure hearings do not expressly refer to the plaintiff's presentation of the note to the trial court, a presumption exists that the court acted in accordance with the legal requirements pertaining to mortgage foreclosures, including the requirement that the court inspect both the note and mortgage prior to rendering a judgment of foreclosure. The defendant contends that the Appellate Court correctly determined that a trial-like evidentiary hearing was necessary to resolve the standing issue that the defendant had raised in the trial court. We agree with the plaintiff because the record establishes, consistent with the trial court's finding, that the plaintiff had standing to commence this action, and the defendant has failed to demonstrate, either at the time of the foreclosure hearings or on appeal, that the finding was flawed or that the procedure that the trial court followed was inadequate.
We note that the defendant raised an additional, nonjurisdictional claim in the Appellate Court that that court did not reach in view of its favorable resolution of the defendant's standing claim, namely, that the trial court improperly had rendered judgment in violation of a bankruptcy stay. See Equity One, Inc. v. Shivers, supra, 125 Conn.App. at 203, 9 A.3d 379. In light of our decision to reverse the judgment of the Appellate Court on the standing issue, the Appellate Court, on remand, will be required to consider that remaining claim.
“Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he [or she] has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy.” (Internal quotation marks omitted.) Wilcox v. Webster Ins., Inc., 294 Conn. 206, 214, 982 A.2d 1053 (2009). “[When] a party is found to lack standing, the court is consequently without subject matter jurisdiction to determine the cause.... We have long held that because [a] determination regarding a trial court's subject matter jurisdictionis a question of law, our review is plenary.” (Citation omitted; internal quotation marks omitted.) RMS Residential Properties, LLC v. Miller, 303 Conn. 224, 229, 32 A.3d 307 (2011). In addition, because standing implicates the court's subject matter jurisdiction, the issue of standing is not subject to waiver and may be raised at any time. E.g., Burton v. Dominion Nuclear Connecticut, Inc., 300 Conn. 542, 550, 23 A.3d 1176 (2011).
Several general principles concerning mortgage foreclosure procedure also guide our analysis. “[S]tanding to enforce [a] promissory note is [established] by the provisions of the Uniform Commercial Code.... [See] General Statutes § 42a–1–101 et seq. Under [the Uniform Commercial Code], only a ‘holder’ of an instrument or someone who has the rights of a holder is entitled to enforce the instrument. General Statutes § 42a–3–301. The ‘holder’ is the person or entity in possession of the instrument if the instrument is payable to bearer. General Statutes § 42a–1–201 (b)(21)(A). When an instrument is endorsed in blank, it ‘becomes payable to bearer and may be negotiated by transfer of possession alone....’ General Statutes § 42a–3–205 (b).” (Footnotes added.) Chase Home Finance, LLC v. Fequiere, 119 Conn.App. 570, 577, 989 A.2d 606, cert. denied, 295 Conn. 922, 991 A.2d 564 (2010). In addition, General Statutes § 49–17 allows the holder of a note to foreclose on real property even if the mortgage has not been assigned to him. See, e.g., RMS Residential Properties, LLC v. Miller, supra, 303 Conn. at 230, 32 A.3d 307 (“[o]ur legislature, by adopting § 49–17, created a statutory right for the rightful owner of a note to foreclose on real property regardless of whether the mortgage has been assigned to him”); Chase Home Finance, LLC v. Fequiere, supra, at 576, 989 A.2d 606 ( § 49–17 “codifies the common-law principle of long standing that the mortgage follows the note, pursuant to which only the rightful owner of the note has the right to enforce the mortgage” [internal quotation marks omitted] ). This court also has recently determined that a loan servicer for the owner of legal title to a note has standing in its own right to foreclose on the real property securing the note. J.E. Robert Co. v. Signature Properties, LLC, 309 Conn. 307, 311, 317, 71 A.3d 492 (2013).
.General Statutes § 42a–3–301 provides: “ ‘Person entitled to enforce’ an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 42a–3–309 or 42a–3–418 (d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.”
.General Statutes § 42a–1–201 (b) provides in relevant part: “(21) ‘Holder’ means:
“(A) The person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession....”
.General Statutes § 42a–3–205 provides in relevant part: “(b) If an endorsement is made by the holder of an instrument and is not a special endorsement, it is a ‘blank endorsement’. When endorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially endorsed....”
.General Statutes § 49–17 provides: “When any mortgage is foreclosed by the person entitled to receive the money secured thereby but to whom the legal title to the mortgaged premises has never been conveyed, the title to such premises shall, upon the expiration of the time limited for redemption and on failure of redemption, vest in him in the same manner and to the same extent as such title would have vested in the mortgagee if he had foreclosed, provided the person so foreclosing shall forthwith cause the decree of foreclosure to be recorded in the land records in the town in which the land lies.”
Before turning to the merits of the plaintiff's appeal, we first set forth certain additional facts that are necessary to our resolution of the plaintiff's claim that, contrary to the determination of the Appellate Court, the trial court was not required to conduct a trial-like evidentiary hearing because the procedure that the trial court followed was adequate under the circumstances. At the September 24, 2007 foreclosure hearing, the plaintiff's counsel provided both the court and the defendant, who was self-represented, with copies of the affidavit of debt. At that time, the court asked the defendant whether he had any questions with respect to the affidavit, and the defendant responded that he had a question concerning the escrow balance. After a brief colloquy between the court and the defendant, the court found that the value of the property exceeded the amount of the defendant's indebtedness and rendered a judgment of foreclosure by sale. In addition, at that time, the defendant requested ninety days to list the property for sale with a realtor. The court granted that request without objection, and set a sale date of January 5, 2008. At no time during that hearing did the defendant challenge the plaintiff's standing to bring the action.
We note that a subsequent appraisal submitted in connection with the November 24, 2008 hearing revealed that the property value then was less than the total amount due under the note.
Although the record does not expressly indicate that the plaintiff also provided the trial court with a copy of the note and mortgage at this hearing, the plaintiff was required to do so under Practice Book § 23–18(a) in order to prove the debt. Practice Book § 23–18(a) provides in relevant part: “In any action to foreclose a mortgage where no defense as to the amount of the mortgage debt is interposed, such debt may be proved by presenting to the judicial authority the original note and mortgage, together with the affidavit of the plaintiff ... stating what amount, including interest to the date of the hearing, is due, and that there is no setoff or counterclaim thereto.”
Following the termination of the bankruptcy stay, the plaintiff filed a motion to reopen and reenter the judgment. The defendant filed an objection to the foreclosure, asserting that he no longer was in default and that the plaintiff “may not have standing” to foreclose on the property. The defendant also filed a motion to compel production of the original note in order to establish that the plaintiff was the holder of the note when it commenced the present action in June, 2007. A hearing on the plaintiff's motion to reopen and reenter the judgment was held on November 24, 2008. At the commencementof the hearing, the plaintiff's counsel presented the court and the defendant with an updated affidavit of debt and reminded the court that the defendant had filed a motion to compel. When the court inquired as to the nature of that motion, the plaintiff's counsel explained that it was a motion to compel “production of the ... original note ... that was handed up at the time of ... the original judgment.... I do also have it in my hand, if Your Honor would like me to show it to [the] defendant, I'd be happy to.” The court responded that counsel should go ahead and show the note to the defendant. Immediately beforehand, the court recounted the procedural history of the case, observing that the original judgmentwas rendered on September 24, 2007, and that the judgment was opened and modified on January 3, 2008, and on April 21, 2008. The court then asked the defendant if he had any questions with respect to the updated affidavit of debt. The defendant responded that he did not believe that any of the mortgage companies listed on the affidavit had standing to bring the action. The court stated that it already had rendered “judgments previously on this matter with the plaintiff being Equity One [Inc.]. This is simply a termination of the stay in bankruptcy.” The defendant responded that he nevertheless wished to object to the foreclosure on the ground that the plaintiff was not the “actual note holder at the time the action was commenced.” Specifically, the defendant stated: “I'm not sure who ... actually [is] the plaintiff right now. It says Equity One [Inc.], servicer for Nomura Home Equity [Loan, Inc.]. And then on the—it says the—is J.P. Morgan [Mortgage Acquisition Corporation]. None of these [is] my mortgage compan[y]. I'm not sure if they have legal standing to foreclose.... I'd like to object to the foreclosure for the reason that I don't think the ... plaintiff has ... standing ... to institute this action. I don't believe the plaintiff was the actual note holder at the time the action was commenced.”
At this point, the plaintiff's counsel stated that the plaintiff already had obtained numerous judgments against the defendant, including a default judgment for failure to plead. The trial court responded that “standing implicates subject matter jurisdiction, which can be raised at any time,” and asked the plaintiff's counsel whether he had all of the original mortgage documents with him. The plaintiff's counsel responded that he did, and the record reflects that the court reviewed a certified copy of the original mortgage to MERS and the assignment of the note and mortgage from MERS to the plaintiff. After examining the documents, the court stated: “All right. So under the mortgage, [MERS] was the [original] mortgagee.... And then MERS assigned [the mortgage] to [the plaintiff] ... as servicer for Nomura Home Equity Loan, Inc. And that was on June 7, 2007.... So it appears we have a complete chain here.... [B]ased on the information that has been provided, I'm going to find that ... [the plaintiff], as servicer for Nomura Home Equity Loan [Inc.] ... does have standing.” The defendant did not thereafter contest the authenticity of the note or the mortgage, did not dispute the representations of the plaintiff's counsel, offered no evidence or argument challenging the sufficiency or propriety of the trial court's finding, and did not request a further hearing. At the conclusion of the hearing, the court rendered a judgment of strict foreclosure.
“A default admits the material facts that constitute a cause of action ... and entry of default, when appropriately made, conclusively determines the liability of a defendant.... If the allegations of the plaintiff's complaint are sufficient on their face to make out a valid claim for the relief requested, the plaintiff, on the entry of a default against the defendant, need not offer evidence to support those allegations.... Therefore, the only issue before the court following a default is the determination of damages.... A plaintiff ordinarily is entitled to at least nominal damages following an entry of default against a defendant in a legal action.” (Citations omitted; internal quotation marks omitted.) Tang v. Bou–Fakhreddine, 75 Conn.App. 334, 337–38, 815 A.2d 1276 (2003).
In light of the foregoing history, we find no merit in the defendant's contention that the plaintiff failed to produce the original mortgage note at the November 24, 2008 hearing, or that the hearing conducted on that date was inadequate for purposesof demonstrating that the plaintiff was the holder of that note when it commenced the action. In fact, the record clearly reflects that, in response to the defendant's motion to compel and assertion that the plaintiff was not “the actual note holder at the time the action was commenced,” the plaintiff's counsel produced all of the pertinent documents, including a copy of the original note, which was endorsed in blank, as well as a certified copy of the mortgage and an assignment of the note and mortgage from MERS to the plaintiff, dated June 7, 2007. On the basis of these documents, the court reasonably and properly found that the plaintiff had standing to commence the action, and the defendant did not dispute that finding or object to the procedure that the trial court followed for purposes of resolving the jurisdictional issue.
Although the record of the November 24, 2008 hearing does not expressly reflect that the court reviewed the note, as distinguished from the mortgage and the assignment of the note and mortgage, necessary to the court's finding that the plaintiff had standing to enforce the note is the subsidiary or threshold finding that the plaintiff was, in fact, the holder of that instrument, as the plaintiff alleged in its complaint. See General Statutes § 42a–3–301. Indeed, as we have explained; see footnote 8 of this opinion; under Practice Book § 23–18, the court was required to review the note, mortgage and affidavit of debt before finding that the debt exceeded the value of the property and ordering strict foreclosure. It is well established that, “under the law of evidence, it is presumed, unless the contrary appears, that judicial acts and duties have been duly and regularly performed, the presumption of regularity attending the acts of public officers being applicable to judges and courts and their officers.... The general rule that a judgment, rendered by a court with jurisdiction, is presumed to be valid and not clearly erroneous until so demonstrated raises a presumption that the rendering court acted only after due consideration, in conformity with the law and in accordance with its duty.... The correctness of a judgment of a court of general jurisdiction is presumed in the absence of evidence to the contrary. We do not presume error. The burden is on the appellant to prove harmful error.” (Citations omitted; internal quotation marks omitted.) Brookfield v. Candlewood Shores Estates, Inc., 201 Conn. 1, 6–7, 513 A.2d 1218 (1986); see also Rosenblit v. Danaher, 206 Conn. 125, 134, 537 A.2d 145 (1988) (“we are entitled to assume, unless it appears to the contrary, that the trial court ... acted properly”). Consequently, in the absence of any evidence or other indication to the contrary, it is reasonable to presume that the trial court acted in accordance with law and examined the note and mortgage prior to rendering judgment of strict foreclosure.
The dissenting justice asserts that this conclusion “exalts the presumption over the facts of the case....” We disagree with the dissenting justice's assertion that, in light of the facts and circumstances of the present case, it is somehow improper to indulge in a presumption that the court acted in conformity with the law. Our disagreement with the dissenting justice as to the applicability of this oft-relied on presumption stems largely from the fact that the defendant consistently has failed to demonstrate, by way of proffer or otherwise, why it is unfair or otherwise inappropriate to invoke the presumption.
Moreover, it was proper for the court, at the November 24, 2008 hearing, to rely on the representation of the plaintiff's counsel that the note he produced at that hearing was the note that the plaintiff held at the time of the commencement of the action. In the absence of any fact based challenge to counsel's representation, such reliance was proper not only because the plaintiff's counsel is an officer of the court; see, e.g., Certo v. Fink, 140 Conn.App. 740, 752–53, 60 A.3d 372 (2013) (trial court properly relied on representations of plaintiff's counsel that he provided defendant with requested documents); but also because the assignment of the note and mortgage from MERS to the plaintiff, which the court examined at the November 24, 2008 hearing, concededly was executed twenty days prior to the commencement of the foreclosure action.
In addition, at no time during the November 24, 2008 hearing did the defendant proffer any evidence to support his assertion that the plaintiff did not have standing to bring the action because it did not possess the note when it commenced the action in June, 2007. See RMS Residential Properties, LLC v. Miller, supra, 303 Conn. at 234–35, 32 A.3d 307 (“having failed to present any evidence rebutting the presumption that [the plaintiff] was the rightful owner of the debt at the time that it commenced the foreclosure action, the defendant has failed to satisfy her burden of providing any evidentiary foundation to demonstrate the existence of a genuine issue of material fact [as to the plaintiff's standing]”); Conboy v. State, 292 Conn. 642, 652, 974 A.2d 669 (2009) (“[i]f ... the defendant submits either no proof to rebut the plaintiff's jurisdictional allegations ... or only evidence that fails to call those allegations into question ... the plaintiff need not supply counteraffidavits or other evidence to support the complaint, but may rest on the jurisdictional allegations therein” [citations omitted] ); HSBC Bank USA, N.A. v. Navin, 129 Conn.App. 707, 712, 22 A.3d 647 (because defendant offered no evidence to contest plaintiff's assertion that it possessed note when it commenced foreclosure action, plaintiff was deemed to have standing), cert. denied, 302 Conn. 948, 31 A.3d 384 (2011); Chase Home Finance, LLC v. Fequiere, supra, 119 Conn.App. at 577, 989 A.2d 606 (in rejecting defendant's claim that plaintiff was not proper party to bring foreclosure action, court stated that “[t]he defendant ha[d] failed to offer any evidence to counter the plaintiff's claim that it [was] a bona fide holder of the promissory note secured by the mortgage on the defendant's property,” that “the plaintiff offered a copy of the promissory note that was endorsed in blank,” and that it was “undisputed that the plaintiff [was] also in possession of the note”).
In fact, even on appeal, the defendant refers to no evidence indicating that the plaintiff was not actually in possession of the note when it commenced the action. The defendant simply argues that the trial court failed to make an express finding to that effect. As we have explained, we reject this contention because a review of the record reveals that the court did, in fact, necessarily make such a finding when, upon examining the pertinent documents, the court concluded that the plaintiff had standing as the assignee of MERS.
In support of his claim on appeal, the defendant speculates that, because the automatic stay that had been imposed after his bankruptcy filing was lifted on the basis of a motion filed by J.P. Morgan Mortgage Acquisition Corporation (J.P. Morgan), perhaps J.P. Morgan, and not the plaintiff, “is the real party in interest in this action” and, therefore, that the plaintiff may lack standing. We disagree. The defendant's sole claim on appeal is that the plaintiff failed to demonstrate that it had standing when it commenced the action because the record did not establish that the plaintiff was the holder of the note at that time. For the reasons previously set forth in this opinion, the trial court properly determined that the plaintiff did hold the note when it commenced the action and, therefore, had standing to do so. The record is clear that any interest that J.P. Morgan had or presently may have in the note and mortgage was obtained after commencement of this action and, consequently, has no bearing on whether the plaintiff had standing to commence the action in June, 2007. Moreover, as the plaintiff notes, J.P. Morgan, as an assignee of rights under the note and the mortgage, has the option of seeking to substitute itself as the plaintiff or maintaining the action in the plaintiff's name. See Dime Savings Bank of Wallingford v. Arpaia, 55 Conn.App. 180, 184, 738 A.2d 715 (1999) (“General Statutes § 52–118 ... provides in relevant part that ‘[an] assignee ... may sue ... in his own name....’ Conversely ... an assignee also has the option ‘to maintain [an] action in the name of his assignor.’ ”).
Finally, we disagree with the defendant's contention that he is entitled to an evidentiary hearing on the issue of the plaintiff's standing because a party seeking to foreclose a mortgage necessarily “must do more to prove standing than simply present a note endorsed in blank.” “[A] holder of a note is presumed to be the owner of the debt, and unless the presumption is rebutted, may foreclose the mortgage under § 49–17. The possession by the bearer of a note [e]ndorsed 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 [is] for the defendant to set up and prove the facts which limit or change the plaintiff's rights.” (Internal quotation marks omitted.) RMS Residential Properties, LLC v. Miller, supra, 303 Conn. at 231–32, 32 A.3d 307; see also id., at 232, 32 A.3d 307 (“because the defendant offered no evidence to impeach the validity of [the plaintiff's] evidence that it possessed the note at the time that it commenced the [foreclosure] action or to rebut the presumption that [it] owns the underlying debt, and as a matter of law the mortgage follows the note, we conclude that [the plaintiff] was authorized by statute to commence [the] ... action”); Donnelly v. Garvan, 111 Conn. 626, 630, 151 A. 168 (1930) (“[i]n thus setting up that she was the ‘holder,’ the plaintiff stated all that was necessary, prima facie, to establish her right to sue and recover”); Chase Home Finance, LLC v. Fequiere, supra, 119 Conn.App. at 578, 989 A.2d 606 (concluding that presentation of note endorsed in blank established plaintiff's standing to foreclose when defendant “failed to present even a scintilla of evidence demonstrating that the plaintiff was not in possession of the promissory note” when it commenced foreclosure action).
In sum, under the facts and circumstances presented, the defendant has not demonstrated that he was entitled to a full evidentiary hearing on the issue of the plaintiff's standing. It is apparent that the trial court reviewed the pertinent documents at the hearing on November 24, 2008, and at other hearings prior thereto, and that those documents fully support the trial court's determination, predicated on the plaintiff's status as the holder of the note, that the plaintiff had standing to commence this action. Moreover, at no time during the pendency of the trial court proceedings or on appeal has the defendant suggested any reason to question the trial court's finding. We therefore conclude that the Appellate Court incorrectly concluded that the trial court had deprived the defendant of a fair hearing concerning whether the plaintiff had standing to bring the present action.
We do not suggest, of course, that a trial-like evidentiary hearing is never required when the issue of standing is raised in the context of a foreclosure action. On the contrary, when there is a genuine dispute as to jurisdictional facts and an evidentiary hearing is necessary to resolve that dispute, such a hearing ordinarily will be required.
We note that the dissenting justice highlights certain facts in the record that the defendant might have raised in the trial court in support of his belated standing claim. The defendant, however, relied on nothing more than a characterization of the record that incorrectly presumed error in the absence of express judicial findings, and failed to bring any other facts or evidence to the attention of the trial court, just as he has failed even to identify them on appeal. If the defendant had raised the same questions with reference to the same facts that the dissenting justice now poses for the very first time, the trial court might have agreed to conduct an evidentiary hearing, even though none of those facts creates any serious doubt as to the plaintiff's standing. In any event, in relying on claims and evidence that never were brought to the attention of the trial court, the dissenting justice creates a record for purposes of his dissent that bears little resemblance to the record before the trial court.
As we have noted, the defendant was not represented by counsel in the trial court proceedings that preceded his appeals to the Appellate Court and to this court. We recognize, of course, that “[i]t is the established policy of the Connecticut courts to be solicitous of [self-represented] litigants and when it does not interfere with the rights of other parties to construe the rules of practice liberally in favor of the [self-represented] party.” (Internal quotation marks omitted.) Ajadi v. Commissioner of Correction, 280 Conn. 514, 549, 911 A.2d 712 (2006). The sole issue in the present case, however, is whether it was necessary for the trial court to conduct a trial-like evidentiary hearing on the issue of standing. Under the facts and circumstances of this case, the self-represented status of the defendant has no bearing on our analysis or resolution of that issue.
Finally, as the dissenting justice notes, the recent mortgage foreclosure crisis may have resulted in an increase not only in the number of standing challenges in foreclosure actions due to mortgage securitization practices, but also in an increase in deficiencies in foreclosure practices. In contrast to the dissenting justice, however, we do not believe that these considerations have any material bearing on the proper resolution of this appeal.
The judgment of the Appellate Court is reversed and the case is remanded to that court with direction to address the defendant's remaining claim. In this opinion ROGERS, C.J., and NORCOTT, ZARELLA and EVELEIGH, Js., concurred.
McDONALD, J., dissenting.
See footnote 2 of this opinion.
The majority determines that the record was sufficient to establish the standing of the plaintiff, Equity One, Inc., as servicer for Nomura Home Equity Loan, Inc. (Nomura), to bring the present foreclosure action. The record, however, does not actually reveal a single factual finding by the trial court or any evidence that affirmatively establishes the requisite facts necessary to support the plaintiff's standing. Instead, the majority's conclusion rests on inferences from evidence in the record that is legally and factually insufficient from which to infer that the plaintiff established its rights at the dispositive point in time and on unwarranted assumptions that procedures under our rules of practice necessarily must have been followed.
Significantly, the question of whether the plaintiff presented the note during any of the foreclosure proceedings, which in fact the record does not disclose, would not necessarily, in and of itself, resolve the issue of standing in the present case. The specific question before us is whether the plaintiff was the holder of the note at the time it commenced the action. See RMS Residential Properties, LLC v. Miller, 303 Conn. 224, 226, 32 A.3d 307 (2011); Ulster Savings Bank v. 28 Brynwood Lane, Ltd., 134 Conn.App. 699, 710, 41 A.3d 1077 (2012). As the majority properly explains, under the theory advanced in the present case, the plaintiff would need to prove that it was in possession of the note and had the right to enforce it under its terms. For the reasons set forth subsequently in this opinion, it is clear that the record contains sufficient facts and omissions to give rise to a substantial question whether the plaintiff had standing to initiate this action. The existence of that question, in turn, required the trial court, at the very least, to conduct a further inquiry into this matter and to make specific findings on the record before rendering a judgment of strict foreclosure to the detriment of the self-represented defendant, Thomas J. Shivers.
The plaintiff invokes the Uniform Commercial Code (UCC); General Statutes § 42a–1–101 et seq.; as the pertinent law governing its right to enforce the note. Although “not every note used in a mortgage transaction is [necessarily] negotiable”; D. Whitman, “How Negotiability Has Fouled Up the Secondary Mortgage Market, and What to Do About It,” 37 Pepp. L.Rev. 737, 749 (2010); I assume, without deciding, that the note is a negotiable instrument and thus subject to the UCC provisions cited by the majority.
The record contains the following affirmative evidence, and more importantly, omissions, leading up to the original judgment of foreclosure by sale on September 24, 2007 (original judgment). In its complaint dated June 6, 2007, but filed on June 27, 2007, the plaintiff alleged that the defendant had executed a note payable to the order of ResMAE Mortgage Corporation (ResMAE) and had mortgaged certain property to secure that note to Mortgage Electronic Registration Systems, Inc. (MERS), solely as nominee for ResMAE. The complaint then alleged that the plaintiff is the holder of the note and mortgage. The complaint containedno allegations indicating on what basis the plaintiff had become the holder of a note payable to ResMAE. See General Statutes § 42a–1–201 (b)(21) (defining holder as person in possession of instrument payable to bearer or to identified person who is person in possession); General Statutes § 42a–3–205 (b) (defining instrument endorsed in blank as payable to bearer). Nothing in the complaint indicated any relationship between ResMAE and either the plaintiff or Nomura. Although the complaint indicated that an exhibit was attached thereto containing a description of the parcel of property on which foreclosure was sought, nothing indicated that either a copy of the note or any other documentation that would demonstrate the plaintiff's status as holder was similarly provided to the court.
The plaintiff's complaint sought both a judgment of strict foreclosure and a deficiency judgment, thus seeking to enforce its rights under the note, not simply its security interest in the mortgaged property.
At the hearing immediately preceding the trial court's original judgment, the defendant represented himself. The entire discussion at this hearing revolved around questions of the amount of the defendant's debt and attorney's fees. Nothing in the record indicates that the plaintiff presented to the court, or had in its possession, the original note at that time, that the note had been endorsed in a manner that would authorize a party other than ResMAE to enforce it, or that the plaintiff presented documentation to demonstrate that its right to enforce the note had otherwise been established. When asked by the plaintiff's counsel to verify that a default for failure to plead previously had been entered, the trial court simply responded that “[t]he clerk's notes indicate to me that it was granted.” (Emphasis added.) Accordingly, there is no affirmative evidence in the record leading up to entry of the original judgment to establish the plaintiff's standing at the commencement of the action, let alone at the time the original judgment was rendered.
Thus, at the November 24, 2008 hearing on the plaintiff's motion to open the judgment, there clearly was a valid basis for the defendant, again representing himself, to challenge the plaintiff's standing. Preceding that hearing, the defendant had filed an “Objection to Foreclosure,” questioning the plaintiff's standing and seeking production of the note to prove that “the plaintiff is the actual note holder, presently, and at the time the plaintiff commenced [the] action,” accompanied by a motion to compel production of the original note to prove standing. At the hearing on the plaintiff's motion to open the judgment, although the defendant's standing arguments were not stated in the clearest of terms, he did argue that the plaintiff was not the “actual note holder at the time the action was commenced.” In response to that claim, the plaintiff did not submit any evidence to prove that it was in possession of the note at the time it commenced the action. Instead, the plaintiff's counsel equivocally stated: “The production of the note, Your Honor. The original note. Your Honor, that was handed up at the time of—I believe the original judgment.” (Emphasis added.) Putting aside both the inconclusive nature of the comment by the plaintiff's counsel and the fact that the transcript of the original judgment hearing does not support the plaintiff's contention that the note was provided to the trial court, nothing in the transcript of the hearing on the motion to open the judgment put on the record the essential fact of when the note came into the plaintiff's possession and what that note reflected vis-á-vis the plaintiff's right to enforce it.
Lawrence Garfinkel, who was the plaintiff's counsel at the November, 2008 hearing, also represented the plaintiff at the September, 2007 hearing preceding the original judgment.
Other facts arising in that proceeding underscore the merit of the defendant's challenge. The trial court record contains no copy of the note to demonstrate that the plaintiff then was in possession of it. Although the plaintiff's counsel unequivocally stated that he had the original note in hand and offered to show it to the defendant to comply with his motion to compel, nothing in the record indicates that the note was presented to the court or, for that matter, to the defendant. The court did not invite counsel to approach the bench after the reference to the note was made, and the court did not make any comment to suggest that it actually had seen the note. Rather, the court simply responded, “[y]ou may do that,” meaning that counsel for the plaintiff was given permission to show the note to the defendant, and immediately the court turned to question the parties on the amount of debt. In fact, the first time any copy of the note appeared in the record of the proceedings of the present case was when it was submitted to the Appellate Court.
Even if the defendant was shown the note at the hearing on the motion to open the judgment, which he does not concede, it is clear that he had no meaningful opportunity to review it before the court ruled that the plaintiff had standing. The note is two and one-half pages of fine print. After the trial court agreed that the plaintiff's counsel could show the note to the defendant, the trial court immediately thereafter asked the defendant whether he wanted to comment on the affidavit concerning the amount of debt and inquired about other matters before ruling on the standing issue. Under these circumstances, fairness dictated, at the very least, giving the self-represented defendant an opportunity to review the note and to form specific objections to present to the court.
A copy of the note was submitted to the Appellate Court as an exhibit appended to an affidavit by the plaintiff's counsel in support of a motion to lift the stay pending appeal. The copy of the note has no court stamp on it, which further suggests that the note never was produced to the court.
By contrast, the record clearly reflects that the plaintiff not only offered to show the defendant a certified copy of an assignment of the mortgage to the plaintiff, but also produced that document to the court. The copy of the assignment in the record, unlike the copy of the note, bears a court stamp of November 24, 2008. The court expressly referred to the assignment, appearing in fact to have relied exclusively on it as the basis for its conclusion that the plaintiff had standing to bring the foreclosure action.
Although that assignment purports to assign the mortgage, “together with the mortgage note secured thereby” from MERS to the plaintiff as servicer for Nomura, there is nothing in the record indicating that ResMAE ever assigned the note to MERS or that the note was transferred from ResMAE to MERS, with or without a blank endorsement. These omissions likely explain why the plaintiff's brief to this court does not rely on the assignment as evidence of its right to enforce the note as its holder. Indeed, challenges to standing based on assignments by MERS without proper authority have commonly been made and have succeeded. See, e.g., Bank of New York v. Silverberg, 86 App.Div.3d 274, 281, 926 N.Y.S.2d 532 (2011) (“[A]s nominee, MERS's authority was limited to only those powers which were specifically conferred to it and authorized by the lender [see Black's Law Dictionary 1076 (8th Ed.2004) (defining a nominee as [a] person designated to act in place of another, [usually] in a very limited way) ]. Hence, although the consolidation agreement gave MERS the right to assign the mortgages themselves, it did not specifically give MERS the right to assign the underlying notes, and the assignment of the notes was thus beyond MERS's authority as nominee or agent of the lender [see Aurora Loan Services, LLC v. Weisblum, 85 App.Div.3d 95, 108, 923 N.Y.S.2d 609 (2011)....].” [Citations omitted; internal quotation marks omitted.] ); Bank of New York v. Silverberg, supra, at 283, 926 N.Y.S.2d 532 (“[B]ecause MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the corrected assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to the plaintiff. Consequently, the plaintiff failed to show that it had standing to foreclose.”); see also C. Peterson, “Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System,” 78 U. Cin. L.Rev. 1359, 1374–86 (2010) (making case that MERS does not hold legal title to mortgage as nominee for actual mortgagee and has no legal right to negotiate note).
It is important to point out that the only copy of the note in the record, submitted to the Appellate Court, reflects an undated endorsement in blank from ResMAE. Accordingly, even if the plaintiff was in possession of the note at the time of the hearing on the motion to open the judgment, there was no affirmative evidence before the trial court that the plaintiff had the right to enforce the note as its holder at the relevant point in time. In my view, the sum of these omissions in the record was sufficient to require the trial court to order an evidentiary hearing or, at the very least, to conduct a further inquiry at the hearing on the motion to open the judgment into the plaintiff's claimed status as holder of the note at the time it commenced the action. Therefore, I disagree with the majority that the defendant was obligated to come forward with additional proof to entitle him to a hearing.
The concerns raised by the record as to the plaintiff's status as holder, in fact, should have been heightened by the circumstances surrounding the motion to open the judgment. The plaintiff represented in the motion that “the plaintiff obtained relief from the automatic stay to proceed with the subject foreclosure action.” The order of the United States Bankruptcy Court appended to that motion, however, did not grant such relief to the plaintiff at all. Rather, the bankruptcy relief that was obtained was for the benefit of J.P. Morgan Mortgage Acquisition Corporation (J.P. Morgan) “and/ or its successors and assigns,” and nothing in the recordestablished any relationship between J.P. Morgan and the plaintiff. Under federal bankruptcy law, J.P. Morgan would have had to establish that it is a real party in interest in the foreclosure action to have obtained the stay. See In re Neals, 459 B.R. 612, 616–17 (Bankr.D.S.C.2011); In re Wilhelm, 407 B.R. 392, 401–402 (Bankr.D.Idaho 2009). Although the majority correctly points out that, even if J.P. Morgan held the right to enforce the note at the time the plaintiff filed the motion to open the judgment, the plaintiff may have been able to maintain the foreclosure action as J.P. Morgan's agent or to substitute J.P. Morgan as the proper party plaintiff, the evidentiary basis to support such an action was never provided to the trial court. Of course, the plaintiff could not be both the assignor of the note to J.P. Morgan, as it claims in its brief to this court, and a “successor” and/or “[assign]” of J.P. Morgan, as it would have to be to benefit in its own right from the bankruptcy court's order. Under these circumstances, the plaintiff's misrepresentationto the trial court that it had obtained relief from the stay should have bolstered the concerns raised by the defendant. Although the defendant did not draw the trial court's attention to the aforementioned specific omissions and inconsistencies, some of these matters should have been readily apparent to the trial court from the record before it; others might have been brought to the court's attention had the defendant been afforded an opportunity to review the note and to form specific objections before the court summarily rejected his standing claim on the basis of the assignment. See footnote 4 of this dissenting opinion.
Undoubtedly, our rules of practice would have permitted the plaintiff to prove its right to foreclose by presenting the original note and mortgage to the trial court in the original judgment. See Practice Book § 23–18. Rather than rely on a presumption that the trial court determined that the plaintiff had complied with this procedure, however, I believe that it is incumbent on the trial court to make the requisite findings on the record, especially when the issue of standing has been raised. No such findings were made in the present case. A contrary conclusion, such as the one reached by the majority, exalts the presumption over the facts of the case which belie the reality that nothing in the record supports the conclusion that the trial court ever viewed the note at any stage of this litigation, be it at the time of the original judgment or at the time of the final judgment, to ensure that the plaintiff had the right to enforce the note at the commencement of the action.
Indeed, in considering the standing question before us in the present case, it is useful to consider the context in which this issue arose. The present foreclosure action was commenced in 2007, in the midst of the mortgage foreclosure crisis that overwhelmed courts around the country, including Connecticut's, during which time deficiencies in foreclosure practices were rampant. Around this same time, standing challenges in foreclosure actions were on the rise due to the securitizations of mortgages, wherein various parties to pooling and servicing agreements, including loan servicers, claimed to have standing to bring foreclosure actions. See J.E. Robert Co. v. Signature Properties, LLC, 309 Conn. 307, 313 n. 6, 71 A.3d 492 (2013). Inconsistencies between the pleading and proof commonly have been raised as issues in such cases. See generally Anderson v. Burson, 424 Md. 232, 35 A.3d 452 (2011); Bank of New York v. Raftogianis, 418 N.J.Super. 323, 13 A.3d 435 (2010). Against this backdrop, the present case commenced with a default judgment entered by the court clerk. The same trial court judge presided over all of the relevant proceedings in the case, but he never indicated, in response to the defendant's standing challenge, that he would not have entered the judgment of foreclosure without having confirmed the plaintiff's right to enforce the note. Therefore, an assumption that the plaintiff conformed with the rules of practice by presenting the original note to the trial court to establish its standing to bring the present foreclosure action seems particularly unwarranted under these circumstances.
See Connecticut Dept. of Banking, “Avoiding Foreclosure,” available at http:// www. ct. gov/ dob/ cwp/ view. asp? a= 2235& q= 386114 (last visited August 21, 2013) (copy contained in the file of this case in the Supreme Court clerk's office) (noting that “State of Connecticut Department of Banking Foreclosure Hotline was established on August 24, 2007, in response to the subprime mortgage crisis”); J. Hoctor, “Safe as Houses,” Hartford Advocate, December 16, 2010, p. 8 (“Connecticut foreclosures soared by 185 percent from January 2007 to January 2008, according to the CT Foreclosure News blog. Connecticut ranked eighth nationally for foreclosures per total number of houses at the start of its mandatory foreclosure mediation program.”); C. Haughney & J. Roberts, “Foreclosures Rise, With No End in Sight,” N.Y. Times, May 17, 2009, p. CT1 (“More than 27,000 homes in Fairfield, Hartford, Litchfield and New Haven Counties were in some stage of foreclosure between January 2005 and August 2008, according to an analysis by The New York Times of data from the Warren Group.... [T]here are indications that the foreclosure crisis could be worsening in Connecticut, based on statewide data on mortgage delinquencies showing that in March, 4.8 percent of the mortgages held by Connecticut homeowners were at least 90 days past due. That is up from 2.7 percent a year earlier. This gives Connecticut the 13th-highest delinquency rate among the 50 states....”).
See, e.g., A. Cha & B. Dennis, “Lost in the System That Took the House,” Washington Post, September 29, 2010, p. A1 (noting that Connecticut foreclosures by one major lender halted due to shoddy paperwork practices).
Securitization is a relevant consideration in the present case not simply because of the plaintiff's status as a loan servicer, but also because the mortgage and the note at issue in the present case purportedly were assigned to the plaintiff from MERS. The complaint alleges that MERS is the nominee of the loan originator. It is well documented that “[t]he [creation of the] MERS system facilitated the transfer of loans into pools of other loans which were then sold to investors as securities....” (Citation omitted.) Bank of New York v. Silverberg, 86 App.Div.3d 274, 278, 926 N.Y.S.2d 532 (2011).
“Securitization of residential mortgages, once a very lucrative practice, is denounced frequently now by the public and media, described as shoveling loans into trusts like coal into the Titanic's boilers. [G.] Morgenson, Guess What Got Lost in the Pool?, N.Y. Times, [March 1, 2009, p. BU1]. At best, it is a modern, fast-paced commercial practice that mis-aligns with some of the hoary law of negotiable instruments secured by realty. Yet only since the advent of the recent economic downturn have courts been called upon to consider the claims of borrowers challenging some of these industry practices and shortcomings.” (Internal quotations marks omitted.) Anderson v. Burson, 424 Md. 232, 235, 35 A.3d 452 (2011).
Just recently, this court addressed a challenge to a loan servicer's standing in which the loan servicer had alleged in the foreclosure complaint that it was the “owner” of the note, when in fact it was a nonholder/transferee in whom the note's owner and holder had vested the right to enforce the note, a status that called for different proof. See J.E. Robert Co. v. Signature Properties, LLC, supra, 309 Conn. at 313 n. 6, 71 A.3d 492.
Finally, further inquiry into a party's right to foreclose when such questions arise is consonant with sound policy. As one court noted in connection with a standing challenge implicating similar parties and concerns as in the present case: “[T]he law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership, to secure the dependable transfer of property, and to assure the enforcement of the rules that govern real property.” Bank of New York v. Silverberg, 86 App.Div.3d 274, 283, 926 N.Y.S.2d 532 (2011).
The concern articulated by the plaintiff that the Appellate Court's decision imposes an undue burden in foreclosure actions is overblown and hyperbolic. Fundamentally, it is never too burdensome to require that a plaintiff establish, firmly, its standing before it utilizes the courts of this state to foreclose a mortgage and dispossess a defendant from his or her property. A plaintiff readily could submit a verified complaint establishing the transfer history of the note, along with a copy of the note and mortgage, or could submit an affidavit in support of a motion for summary judgment. See, e.g., RMS Residential Properties, LLC v. Miller, supra, 303 Conn. at 227, 32 A.3d 307;HSBC Bank USA, N.A. v. Navin, 129 Conn.App. 707, 711–12, 22 A.3d 647, cert. denied, 302 Conn. 948, 31 A.3d 384 (2011). Indeed, in response to the defendant's motion to compel production of the note, the plaintiff could have produced the same affidavit of its counsel that was later filed in the Appellate Court.
I respectfully dissent.