Opinion
CV136019881
07-28-2016
Everbank v. Catherine Engelhard et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE MOTION TO STRIKE
MARK H. TAYLOR, J.
I
BACKGROUND
The question presented in this motion to strike is whether the performance of an oral modification to a written promise to modify a mortgage is enforceable as an exception to the statute of frauds. The court concludes that that exception applies, but only where the mortgagor alleges compliance with all other terms of the written agreement.
The plaintiff, Everbank, filed this action to the defendant's mortgage on June 21, 2013. In the complaint the plaintiff alleges that the note and mortgage were in default because the defendant failed to make her monthly payments on the mortgage, as previously modified on November 26, 2012.
The defendant alleges that the plaintiff subsequently offered a written Modification Trial Period Plan to the defendant, conditioned upon the satisfactory completion of a trial payment period. To qualify for a permanent modification, the defendant was specifically required to make three trial payments of $1,413.83 each on the first day of September, October and December of 2014. The defendant would be eligible for a modification if, in addition to successful completion of the trial payment period, she met all other " applicable qualification requirements." Exhibit A, Defendant's Answer.
The defendant did not accept the plaintiff's offer until September 23, 2014 and therefore missed the September 1 payment. Based upon the allegations made in the special defenses and counterclaims, the plaintiff orally agreed to accept two trial payments in October 2014, as well as a third payment in December 2014. The defendant further alleges that she sent in the late payments, as agreed. Although the December payment was initially accepted by the plaintiff, it was subsequently rejected as unacceptable and the plaintiff's agent stated that it would be returned. The defendant alleges that the payment was not returned and that the plaintiff failed to honor the oral modification agreement.
The defendant alleges that this was done through " the agent, representative, employee or servant of the plaintiff." In its motion to strike, both Green Tree Servicing, LLC and DiTech, its successor, appear to be identified by the plaintiff as its agent.
Based on these allegations, the plaintiff asserts special defenses for 1) equitable estoppel, 2) violation of the Connecticut Unfair Trade Practices Act (CUTPA), 3) breach of fiduciary duty, 4) breach of the covenant of good faith and fair dealing, 5) vicarious liability, and 6) unclean hands. She has also asserted counterclaims for 1) breach of the alleged loan modification agreement, 2) breach of the duty of good faith and fair dealing, 3) breach of the duty of " loyalty and care, " and 4) violation of CUTPA.
II
DISCUSSION
A
Motion to Strike
The court will begin with the legal standard applicable to motions to strike. Practice Book § 10-39 provides: in relevant part: " (a) A motion to strike shall be used whenever any party wishes to contest: (1) the legal sufficiency of the allegations of any complaint, counterclaim or cross claim, or of any one or more counts thereof, to state a claim upon which relief can be granted . . ." " The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).
When deciding a motion to strike, the court must " take the facts to be those alleged in the complaint . . . [and] construe the complaint in the manner most favorable to sustaining its legal sufficiency . . . Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied . . . Moreover . . . [w]hat is necessarily implied [in an allegation] need not be expressly alleged . . . It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted . . . Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252-53, 990 A.2d 206 (2010).
The plaintiff moves the court to strike all of the defendant's special defenses and counterclaims because they either fail as a matter of law or are factually insufficient. The court will begin its analysis with the plaintiff's primary argument that a claim for breach of an oral loan modification agreement is barred by the statute of frauds and, in addition, that it is not a contract because it lacks consideration.
B
Statute of Frauds
The plaintiff cites Deutsche Bank Trust Co. Americas v. DeGennaro, 149 Conn.App. 784, 788, 89 A.3d 969 (2014) in support of two prongs of its attack on the enforceability of the alleged oral modification, the first of which is based upon the statute of frauds. " A modification of a written agreement [for a loan exceeding $50,000] must be in writing to satisfy the statute of frauds." Id. 788, citing Union Trust Co. v. Jackson, 42 Conn.App. 413, 419, 679 A.2d 421 (1996); see also General Statutes § 52-550(a)(6) (no action may be maintained upon loan agreement exceeding $50,000 unless agreement made in writing).
In response, the defendant cites Red Buff Rita, Inc. v. Moutinho, 151 Conn.App. 549, 554, 96 A.3d 581 (2014), wherein the Appellate Court held that " [t]he doctrine of part performance . . . is an exception to the statute of frauds . . . This doctrine originated to prevent the statute of frauds from becoming an engine of fraud." In explaining this exception, the Appellate Court cited Glazer v. Dress Barn, Inc., 274 Conn. 33, 873 A.2d 929 (2005), stating that " our Supreme Court clarified and explained the circumstances in which a contract may be enforced despite its noncompliance with the statute of frauds. It also concluded that part performance and equitable estoppel are not separate and independent exceptions to the statute of frauds, but, rather, that part performance is an essential element of the estoppel exception to the statute of frauds . . . [T]he elements required for part performance are: (1) statements, acts or omissions that lead a party to act to his detriment in reliance on the contract; (2) knowledge or assent to the party's actions in reliance on the contract; and (3) acts that unmistakably point to the contract . . . Under this test, two separate but related criteria are met that warrant precluding a party from asserting the statute of frauds . . . First, part performance satisfies the evidentiary function of the statute of frauds by providing proof of the contract itself . . . Second, the inducement of reliance on the oral agreement implicates the equitable principle underlying estoppel because repudiation of the contract by the other party would amount to the perpetration of a fraud." (Citations omitted; internal quotation marks omitted.) Red Buff Rita, Inc. v. Moutinho, supra, 151 Conn.App. 549.
The pleading alleges that the late payments were made by oral agreement and were accepted by the plaintiff. Although the December payment was subsequently rejected, it was not returned. The court concludes that, based upon the allegations made, the oral modification is adequately pled and survives the motion to strike as an exception to the statute of frauds for part performance.
C
Consideration
The plaintiff's second challenge to the validity of an oral modification is there is inadequate consideration in paying an existing obligation, citing, again, Deutsche Bank Trust Co. Americas v. DeGennaro, supra, 149 Conn.App. 784. " A modification of an agreement must be supported by valid consideration and requires a party to do, or promise to do, something further than, or different from, that which he is already bound to do . . . Payment of an existing obligation does not constitute valid consideration." (Citations omitted; internal quotation marks omitted.) Id., 789; see Willamette Management Associates, Inc. v. Palczynski, 134 Conn.App. 58, 72-73, 38 A.3d 1212 (2012).
In its brief, the plaintiff asserts that the defendant " had a pre-existing obligation to make her mortgage loan payments" and that an oral modification " made for reduced mortgage payments . . . is insufficient consideration . . . as a matter of law." The court disagrees.
In the present case, the court infers from the facts alleged in the pleadings that the mortgage was in default and had been accelerated. Therefore, no contract existed for monthly payments on the mortgage obligation. The contractual rights of the parties, therefore, allowed for redemption by the defendant or foreclosure by the plaintiff, in combination with the possibility of a deficiency judgment. The plaintiff, instead, made a written offer to enter into a trial modification plan, allegedly accepted with orally modified terms, which were performed and accepted, initially, by the plaintiff's agent.
Both DeGennaro and Palczynski, cited herein, are distinguishable from the present case in that they both involved an existing obligation in a written agreement. In DeGennaro, the parties entered into a trial period plan in July 2009. Deutsche Bank Trust Co. Americas v. DeGennaro, supra, 149 Conn.App. 790. The plaintiff subsequently declared bankruptcy on July 31, 2009 and asserted an oral modification of the written agreement. Id., 791. " The defendant stated in her affidavit that she was advised to skip the July 2009 regular payment and to make three consecutive payments of $1,456.23 in August, September, and October of 2009. The total payments the defendant state[d] that she was required to make under the alleged modification total $4,368.69, which is less than the amount she was required to pay for that four month period under the terms of the loan agreement, which, at $1,315.92 per month, totaled $5,263.68." Id., 789.
In Palczynski, there was an existing contract and a second novation, determined to be made without consideration because, " [a]t the time of the making of the second agreement, the first agreement was still in effect." Willamette Mgmt. Associates, Inc. v. Palczynski, supra, 134 Conn.App. 73. " The second agreement purported to reduce the amount owed by the defendant but did not alter the obligations of the plaintiff. Generally, a promise to do something which the promisor is already legally obligated to do does not constitute consideration sufficient to support a valid contract." (Internal quotation marks omitted.) Id.
D
Equitable Estoppel
The plaintiff's third challenge to the validity of the oral modification of the trial payment plan is that it is based on a promise of future conduct and that the defendant's reliance on the plaintiff's alleged statements did not cause her any injury.
The first special defense is for equitable estoppel, based upon the performance of an oral modification to the mortgage loan. The principle of equitable estoppel is intertwined with the exception to the statute of frauds for an oral modification to a written agreement for a loan in excess of $50,000. Red Buff Rita, Inc. v. Moutinho, supra, 151 Conn.App. 555; Glazer v. Dress Barn, Inc., supra, 274 Conn. 63.
The plaintiff asserts that a defense of equitable estoppel is not valid because it is based upon a promise of future conduct; namely, the future modification of the mortgage, citing TD Bank, N.A. v. M.J. Holdings, LIJC, 143 Conn.App. 322, 338-39, 71 A.3d 541 (2013). " On the one hand, the existence of a loan modification agreement is a valid defense in a foreclosure action regardless of the defendants' classification thereof as equitable estoppel. On the other hand, we recognize that our Supreme Court has underscored the fundamental difference between equitable estoppel and promissory estoppel . . . The representations at issue in promissory estoppel go to future intent while equitable estoppel involves statements of past or present fact . . . Whereas promissory estoppel is used offensively, to create a cause of action, equitable estoppel functions defensively to bar a party from . . . instituting an action that it is entitled to institute." (Citations omitted; emphasis in original.) Id., 339.
The court in M.J. Holdings, Inc. held that the defense of equitable estoppel was redundant to the defense of a valid modification agreement. Id., 338-39. In the court's view, equitable estoppel is properly pled in the present case as an element of the partial performance exception to the statute of frauds. This, however, does not end the court's inquiry into whether all the conditions of a promise for a modification agreement have been met.
E
Enforceable Modification
The focus of the parties has been on whether the modification of the payment schedule here is valid. Although the court concludes that it is, the promise of a modification must be pled as enforceable by the terms of the agreement. In reviewing the language of the special defenses, it is not asserted that the defendant has met all terms of the contract to modify her mortgage. In addition to successful completion of the trial payment period, as modified, the defendant's modification was conditioned upon her meeting all other " applicable qualification requirements." Exhibit A, Defendant's Answer. This allegation is not stated or implied in the language of the special defenses.
The language of the first counterclaim goes further than the language of the special defenses in paragraph thirteen by asserting that she " has fully performed all of her obligations under the modification trial." There is no assertion, however, that she has met all other " applicable qualification requirements." Absent the assertion of an otherwise valid and enforceable modification agreement, the motion to strike must be granted as to all special defenses and counterclaims, as they are derived from the allegation of an agreement to modify the mortgage.
The motion to strike is also granted as to the special defenses on technical grounds. In the defendant's first special defense, upon which the others apparently rely, the pleading alleges that she agreed to make a payment of $1,014.83 and, relying upon this oral representation, made a payment of $1,413.83. This inconsistency is, apparently, due to a typographical error. The motion to strike is also granted as to the second of two counterclaims, both identically identified as THIRD COUNTS, again apparently due to a typographical error.
III
CONCLUSION
For reasons stated in this memorandum of decision, the plaintiff's motion to strike is granted.