Summary
adjudicating named defendant's special defense asserting that holders of note and mortgage misstated principal, amounts of installment payments, interest and late charges
Summary of this case from JPMorgan Chase Bank v. MalickOpinion
No. CV02-0467401
May 23, 2007
MEMORANDUM OF DECISION
PROCEDURAL BACKGROUND
August 1, 2002, the plaintiff, Ingomar Limited Partnership, filed a foreclosure action against the defendant, Curtis Packer. On September 12, 2002, the defendant filed a motion to dismiss the action for lack of standing, which was denied by the court, Celotto, J., on October 17, 2003. The defendant filed an answer, special defenses, offsets and counterclaims, some of which were premised in part on the plaintiff's lack of standing. On August 2, 2004, the plaintiff filed a motion to strike the defendant's special defenses, counterclaims and offsets, and the court, Pinkus, J., granted the motion as to counterclaims and offsets while denying it as to special defenses. The court then entered a partial judgment on the counterclaims.
The plaintiff filed a revised two-count complaint on November 30, 2005. On January 12, 2006, the defendant filed an answer to the revised complaint asserting seven special defenses. The plaintiff filed a reply in which it denied the essential allegations of the special defenses, and a certificate of closed pleadings. A trial was held by this court over six days ending on January 4, 2007. On February 26, 2007, both parties filed post-trial briefs with the court.
FACTS
From the evidence presented at trial, the court finds the following facts. On December 14, 1992, the defendant executed a note to the Bank of New Haven in the original amount of $77,760.
To secure the note, the defendant executed a mortgage on his real property known as 501 Blatchley Avenue, New Haven, to the Bank of New Haven. Both the note and mortgage were recorded in the New Haven land records on December 15, 1992, in volume 4552 at page 85. The defendant failed to make the payment due in October of 2000, and subsequent payments.
On April 30, 2001, Citizens Bank of Connecticut, successor to the Bank of New Haven, assigned both the note and mortgage to SN Commercial, LLC, which then assigned the note and mortgage to Foothill Capital Corporation. These assignments were recorded on the New Haven land records in volume 6021 at page 333-35. In order to purchase the note and mortgage, SN Commercial borrowed money from Foothill Capital. This loan was paid off on November 20, 2001.
Beginning on April 30, 2001, SN Servicing Corporation has assumed loan servicing duties for the defendant's note. These duties include communicating with the borrower, accepting and applying payments and making necessary escrow disbursements. On May 14, 2001, SN Servicing sent a notice to the defendant to inform him that it had assumed servicing responsibilities for the subject loan.
By letter dated January 16, 2002, SN Servicing provided the defendant with notice that he was in default and that it intended to accelerate the loan. On July 23, 2002, the plaintiff commenced this foreclosure action by serving the summons and complaint on the defendant. On August 22, 2002, Foothill Capital executed the assignment of the note and mortgage to the plaintiff. This assignment was recorded in volume 6567 at page 21 of the New Haven land records on September 29, 2003
DISCUSSION I Standing
In its revised complaint, the plaintiff alleges that it has been the beneficial owner of the note and mortgage prior to the commencement of this action and at all relevant times to this action and that it became the owner and holder of the note and mortgage by the August 22, 2002 assignment from Foothill Capital. It argues in its post-trial brief that, as the beneficial owner of the note and mortgage, it has the right to enforce the note and mortgage.
In the first, fifth and sixth special defenses, the defendant asserts the defense of lack of standing. In the first special defense, he claims that the plaintiff lacks standing to bring this action because the plaintiff was not the holder of the note and mortgage when it commenced this action, since the assignment from Foothill Capital to the plaintiff was not executed until August 22, 2002, a month after this action was commenced. In the fifth special defense, he claims that the plaintiff lacked the power to enforce the note and mortgage when it commenced this action. In the sixth special defense, he claims that the note and mortgage was held by a third party at the time of the commencement of this action.
"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 . . . Standing is not a technical rule intended to keep aggrieved parties out of court; nor is it a test of substantive rights. Rather it is a practical concept designed to ensure that courts and parties are not vexed by suits brought to vindicate non-justiciable interests and that judicial decisions which may affect the rights of others are forged in hot controversy, with each view fairly and vigorously represented." (Internal quotation marks omitted.) West Farms Mall, LLC v. West Hartford, 279 Conn. 1, 11, 901 A.2d 649 (2006).
A Ownership of the Note and Mortgage
The defendant argues that the plaintiff failed to prove that it held a legal or equitable right to enforce the note and mortgage at the time it commenced this action. He argues that the plaintiff failed to establish that it was the holder of the note and mortgage under General Statutes § 42a-1-201(b)(21) because it did not physically possess the note when this action was commenced. He further argues that under § 42a-3-203, a transfer of the instrument does not occur until the instrument is delivered, and that a person who has only an ownership right of an instrument without physical possession is not entitled to enforce the instrument.
General statutes § 42a-1-201(b)(21) provides: "(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; (B) The person in possession of a negotiable tangible document of title if the goods are deliverable either to bearer or to the order of the person in possession; or (C) The person in control of a negotiable electronic document of title."
General Statutes § 42a-3-203 provides in relevant part: "(a) An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. (b) Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument . . ."
The plaintiff counters that it produced sufficient testimonial and documentary evidence showing that it has been the beneficial owner of the note and mortgage prior to its commencement of this action. It further argues that, as the beneficial owner of the note and mortgage, it is the party who has a real interest in the outcome of this foreclosure action.
"General Statutes § 49-17 permits the holder of a negotiable instrument that is secured by a mortgage to foreclose on the mortgage even when the mortgage has not yet been assigned to him . . . The statute 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. New Milford Savings Bank v. Jajer, 244 Conn. 251, 266, 708 A.2d 1378 (1998)." (Citation omitted; internal quotation marks omitted.) Bankers Trust Co. Of California v. Vaneck, 95 Conn.App. 390, 391, 899 A.2d 41 (2006). A party, however, has no standing to foreclose on the mortgage "without ever having been assigned the note" unless it presents evidence proving that it has a legal or equitable interest in the note and mortgage. Fleet National Bank v. Nazareth, 75 Conn.App. 791, 794-95, 818 A.2d 69(2003).
The Uniform Commercial Code (UCC) defines the term "holder" as "[t]he 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-1-201(b)(21). Section 42a-3-301 provides that "the holder of the instrument" or "a non-holder in possession of the instrument who has the rights of a holder" is "entitled to enforce" an instrument. To determine whether a party is a non-holder in possession of an instrument who has the rights of a holder, reference must be made to § 42a-3-203, which defines the rights acquired by a transferee of a negotiable instrument. Section 42a-3-203(a) provides: "An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument." Section one of the official comment to § 42a-3-203 states that a person may not be a person entitled to enforce an instrument until he obtains possession of the instrument even if he has an ownership right in the instrument.
The official comment to § 42a-3-203 states in relevant part: "Moreover, a person who has an ownership right in an instrument might not be a person entitled to enforce the instrument. For example, suppose X is the owner and holder of an instrument payable to X. X sells the instrument to Y but is unable to deliver immediate possession to Y. Instead, X signs a document conveying all of X's right, title, and interest in the instrument to Y. Although the document may be effective to give Y a claim to ownership of the instrument, Y is not a person entitled to enforce the instrument until Y obtains possession of the instrument. No transfer of the instrument occurs under Section 3-203(a) until it is delivered to Y."
The restrictions that the UCC imposes on the enforceability of a note where the party bringing a foreclosure action is not in possession of the note, however, do not bar an equitable action of foreclosure. "[A] foreclosure action constitutes an equitable proceeding . . . In an equitable proceeding, the trial court may examine all relevant factors to ensure that complete justice is done . . . The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court." (Internal quotation marks omitted.) Northeast Savings, F.A. v. Hintlian, 241 Conn. 269, 275, 696 A.2d 315 (1997).
In New England Savings Bank v. Bedford Realty Corp., 238 Conn. 745, 759, 680 A.2d 301 (1996), rev'd after remand, 246 Conn. 594, 717 A.2d 713 (1998), the defendant argued that §§ 42a-3-301 and 42a-3-309 precluded the plaintiff from obtaining a judgment of strict foreclosure since the plaintiff was not in possession of the note. In that case, the Supreme Court held that "whatever restrictions §§ 42a-3-301 and 42a-3-309 might put upon the enforcement of personal liability based solely upon a lost note, they do not prohibit [a plaintiff] from pursuing an action of foreclosure to enforce the terms of the mortgage." New England Savings Bank v. Bedford Realty Corp., supra, 238 Conn. 760. The court also held that, where a plaintiff "has chosen to pursue the equitable action of foreclosure of the mortgage, rather than a legal action on the note, the fact that [the plaintiff] never possessed the lost promissory note is not fatal to its foreclosure of the mortgage." Id., 759-60. Similarly, in Connecticut National Bank v. Marland, Superior Court, judicial district of New Haven at Meriden, Docket No. CV 95 0249406 (October 29, 1996, Dorsey, J.T.R.), where the defendants argued that "the Uniform Commercial Code §§ 42a-3-203(a) and 42a-3-309 prohibited a foreclosure where delivery of the note cannot be proved," the court held that "the Uniform Commercial Code §§ 42a-3-203a and 42a-3-309 was inapplicable to th[e] equitable proceeding of foreclosure." Accordingly, the defendant's argument that the plaintiff lacked standing because it was not a holder of the note and mortgage under § 42a-3-203 when it commenced the present foreclosure action is not supported by the law.
In the present case, the parties do not dispute that the assignment of the note and mortgage to the plaintiff was not executed until August 22, 2002, approximately one month after July 23, 2002, when this action was commenced. The defendant disputes, however, the plaintiff's contention that it was the beneficial owner of the note and mortgage prior to the August 22, 2002 assignment. The court finds that the plaintiff produced sufficient evidence to prove that it was the beneficial owner of the note and mortgage prior to the commencement of this action and, as such, it is the party who has a real interest in this foreclosure action. William Fogleman, in-house counsel for SN Servicing, testified to the effect that the assignment from SN Commercial to Foothill Capital was given as security for financing the purchase of the defendant's note and mortgage; that the ownership of the note and the risk of loss remained with SN Commercial; that SN Servicing continued to act as the mortgage servicer after the assignment to Foothill Capital; that SN Commercial was obligated to repay Foothill Capital for its loan regardless of the receipt of payments from the defendant; and that SN Commercial's obligation to Foothill Capital was repaid in November of 2001, and, from that time on, the defendant's note was owned by the plaintiff. The defendant testified that, since April of 2001, no entity other than the plaintiff has either attempted to collect the defendant's debt or brought a foreclosure action against him.
The plaintiff also presented the following documentary evidence to the court to prove its ownership of the note prior to the August 22, 2002 assignment: the payment coupon dated December 4, 2001 (plaintiff's exhibit 13), which instructs the defendant that any payment check should be made payable to the plaintiff and mailed to the plaintiff; the notice of default and intent to accelerate dated January 18, 2002 (plaintiff's exhibit 18) that the plaintiff sent to the defendant, which demonstrates that the plaintiff is the creditor of the note; the asset information sheet dated June 6, 2002 (plaintiff's exhibit 14) and the asset detail log (plaintiff's exhibit 17), which refer to the plaintiff as the investor of the note and indicate that the plaintiff is the owner of the note; and the original loan documents and certified copies.
"[W]hen the issue of title or ownership is directly involved, the proper way to prove title is by the production of the original documents or certified copies from the record." (Internal quotation marks omitted.) Socha v. Bordeau, 277 Conn. 579, 587, 893 A.2d 422 (2006). The court finds that this documentary evidence, combined with Fogleman's testimony, establishes that the plaintiff was the beneficial owner of the note and mortgage when it commenced this action. Accordingly, the court concludes that the plaintiff has standing to bring this foreclosure action because, as the beneficial owner of the note and mortgage, it has a real, equitable interest in this action even if the note and mortgage were not formally assigned to the plaintiff at the time it commenced this action.
B Validity of Assignments 1 Assignment from Citizens Bank to SN Commercial, LLC
The defendant also argues that the plaintiff was not the owner of the note and mortgage at the time it commenced this action because the assignment from the original mortgagee or its successor to SN Commercial was invalid. Specifically, he argues that the assignment from Citizens Bank to SN Commercial, LLC was not valid because it was conditioned on another separate contract referred to in the assignment as the "purchase agreement," and the court cannot determine the nature and extent of the assignment without knowing the terms of the separate purchase agreement. He argues that the plaintiff failed to present the purchase agreement or any evidence pertaining to its terms, except for Fogleman's testimony that the purchase agreement exists. As a consequence, he argues that the plaintiff failed to establish that Citizens Bank's assignment of the note and mortgage gave SN Commercial the right to enforce the instruments or to transfer them to its assigns.
General Statutes § 49-10(b) provides in relevant part: "Whenever any mortgage debt is assigned by an instrument in writing containing a sufficient description to identify the mortgage . . . given as security for the mortgage debt, and that assignment has been executed, attested and acknowledged in the manner prescribed by law for the execution, attestation and acknowledgment of deeds of land, the title held by virtue of the mortgage . . . shall vest in the assignee." "Generally, to constitute an assignment there must be a purpose to assign or transfer the whole or a part of some particular thing, debt, or chose in action, and the subject matter of the assignment must be described with such particularity as to render it capable of identification." (Internal quotation marks omitted.) Schoonmaker v. Lawrence Brunoli, Inc., 265 Conn. 210, 227, 828 A.2d 64 (2003). "[I]t is a general rule that an assignment of a mortgage must identify the mortgage assigned. For this purpose, a description which gives the names of the mortgagor and mortgagee and the book and pages of the record where the mortgage is recorded is sufficient. In addition, the assignment must contain the name of the assignee." (Internal quotation marks omitted.) Nationsbank of Virginia v. Micci, Superior Court, judicial district of Ansonia-Milford, Docket No. 95 0049046 (June 17, 1998, Curran, J.).
In the present case, the plaintiff introduced the original assignment as plaintiff's exhibit 7 to show that the assignment from Citizens Bank to SN Commercial was properly executed on April 30, 2001. The document shows Citizens Bank's intent to assign all rights and interests in the note and mortgage to SN Commercial and describes with particularity the names of the mortgagor and mortgagee and the book and pages of the record where the mortgage is recorded. Although the document does refer to another transaction, the defendant has not provided the court with authority for his position that an otherwise valid assignment is invalid if it was made in conjunction with a separate purchase agreement that was not presented to the court. Accordingly, the court concludes that the April 30, 2001 assignment from Citizens Bank to SN Commercial constituted a valid assignment even if the plaintiff failed to enter into evidence the purchase contract that provides the specific purchase terms of the assignment.
In addition, the defendant's claims of lack of standing based on invalid assignments fail because those issues are not dispositive to determining whether the plaintiff has the right to enforce the note in a foreclosure action. In Connecticut National Bank v. Marland, 45 Conn.App. 352, 359 n. 8, 696 A.2d 374, cert. denied, 243 Conn. 907, 701 A.2d 328 (1997), the defendant argued that "due to the claimed improper assignments of the note . . . [the plaintiff] was never in possession of the note and, therefore, could not enforce the note against the defendant." In that case, the court, relying on the holding of New England Savings Bank v. Bedford Realty Corp., supra, 238 Conn. 745, held that "[b]ecause [the plaintiff] brought an equitable action to foreclose the mortgage, the issue of possession of the note is of no consequence to [the] case." Id.
2 Assignment from SN Commercial, LLC to Foothill Capital Corporation
The defendant also denies the validity of the assignment from SN Commercial to Foothill Capital on the ground that (1) the signature of Sandra Austin, vice president of SN Servicing Corporation, on the document is not in ink and appears to be a stamp and (2) the acknowledgment, which is on a separate page, was executed on August 15, 2001, over three months after April 30, 2001, the effective date on the assignment. Additionally, the defendant argues that the parties to the assignment intended to convey all rights and interest in the note and mortgage to Foothill Capital, as evidenced by the clear and unambiguous language in the assignment. He argues that Fogleman's testimony alone is insufficient to establish that the assignment was intended only to be a security, rather than a transfer of all rights in the note and mortgage.
To be valid, an assignment of a mortgage debt must be "executed, attested and acknowledged in the manner prescribed by law for the execution, attestation and acknowledgment of deeds of land." General Statutes § 49-10(b). General Statutes § 47-5 prescribes the manner for the execution, attestation and acknowledgment of deeds of land, providing: "All conveyances of land shall be: (1) In writing; (2) if the grantor is a natural person, subscribed . . . by the grantor with his own hand or with his mark with his name annexed to it or by his attorney authorized for that purpose . . . or, if the grantor is a corporation, limited liability company or partnership, subscribed by a duly authorized person; (3) acknowledged by the grantor, his attorney or such duly authorized person to be his free act and deed; and (4) attested to by two witnesses with their own hands." In sum, an assignment of a mortgage deed must be "in writing, signed by the grantor, acknowledged by the grantor to be his free act and deed, and attested to by two witnesses." Ricard v. Stygar, Superior Court, judicial district of Windham, Docket No. CV 03 0071075 (June 16, 2004, Swienton, J.).
An improper acknowledgment does not, however, invalidate an assignment of a mortgage debt because certain defective assignments can be cured by § 47-36aa. Section 47-36aa(a) validates an assignment of a mortgage debt containing defects such as a "defective acknowledgment," recorded after January 1, 1997, "as if it had been executed without the defect unless an action challenging the validity of that instrument is commenced and a notice of lis pendens is recorded in the land records of the town . . ."
General statutes § 47-36aa(a) provides in relevant part: "Any deed, mortgage, lease, power of attorney, release, assignment or other instrument made for the purpose of conveying, leasing, mortgaging or affecting any interest in real property in this state recorded after January 1, 1997, which instrument contains any one or more of the following defects or omissions is as valid as if it had been executed without the defect or omission unless an action challenging the validity of that instrument is commenced and a notice of lis pendens is recorded in the land records of the town or towns where the instrument is recorded within two years after the instrument is recorded: (1) The instrument contains a defective acknowledgment or no acknowledgment . . ."
In the present case, the plaintiff introduced into evidence the original assignment document as plaintiff's exhibit 9 to demonstrate that the assignment from SN Commercial to Foothill Capital was properly executed. As to the defendant's argument that Austin's signature is not in ink, the court finds, after a close scrutiny of the document, that Austin's signature on the assignment is in ink. The defendant's argument that the assignment was improperly notarized also fails because § 47-36aa (a) validates the defective assignment. There is no indication that the defendant has instituted an action challenging the validity of the assignment and a notice of lis pendens has been recorded. Accordingly, the court concludes that the assignment from SN Commercial to Foothill Capital was validly executed.
The defendant next argues that the court must find that the assignment to Foothill Capital extinguished all rights of SN Commercial to the note and mortgage in light of the clear language of the assignment, and, therefore, the plaintiff had no right to enforce the note and mortgage prior to the August 22, 2002 assignment. The court is unpersuaded. Whether the plaintiff is the rightful owner of the note and mortgage under the circumstances of the present case is an issue that the court should decide under the equitable principles. After considering all the relevant factors and evidence produced by the parties, the court has determined that the plaintiff, as the beneficial owner of the note and mortgage, has the right to enforce the note and mortgage. The defendant's argument, which is based on the law of contract interpretation, does not persuade the court to change the decision. Accordingly, the court concludes that the plaintiff has standing to bring this foreclosure action.
II Notice of Assignment
In count one of the revised complaint, the plaintiff alleges that the defendant is in default on the note, and that it has elected to accelerate the balance due and has provided a written notice of the default to the defendant. In its brief, the plaintiff argues that the defendant did not make proper payments to Citizens Bank. It also argues that the defendant was provided with a sufficient notice of the assignment from Citizens Bank to SN Commercial.
In the second special defense, the defendant claims that, after he was notified by SN Commercial that it was the holder of the note and mortgage, he requested that entity to provide him with a reasonable proof of the assignment from Citizens Bank. Because no such proof was provided to him, he continued to pay Citizens Bank until it refused to accept his payments. He claims, therefore, that the plaintiff is not entitled to any interest that accrued from the time of the assignment to SN Commercial until he was provided with reasonable proof of the assignment.
"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. [I]f the mortgagor is prevented by accident, mistake or fraud, from fulfilling a condition of the mortgage, foreclosure cannot be had." (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).
The requirements of notice and reasonable proof of assignments are governed by § 49-10(d), which provides: "(d) If a mortgage debt is assigned, a party obliged to pay such mortgage debt may discharge it, to the extent of the payment, by paying the assignor until the party obliged to pay receives sufficient notice in accordance with subsection (f) of this section that the mortgage debt has been assigned and that payment is to be made to the assignee. In addition to such notice, if requested by the party obliged to pay, the assignee shall furnish reasonable proof that the assignment has been made, and until the assignee does so, the party obliged to pay may pay the assignor. For purposes of this subsection, `reasonable proof' means (1) written notice of assignment signed by both the assignor and the assignee, (2) a copy of the assignment instrument, or (3) other proof of the assignment as agreed to by the party obliged to pay such mortgage debt."
Section 49-10(f) provides: "(f) Notice of assignment is sufficient for purposes of subsections (d) and (e) of this section if the assignee notifies a party obliged to pay the mortgage debt (1) by mailing to the party obliged to pay, at the party's last billing address, a notice of the assignment identifying the instrument and mortgage debt assigned, the party obliged to pay such debt, the names of the assignor and assignee, the date of the assignment, and the name and address of the person to whom payments should be made, (2) by giving notice of the assignment pursuant to 12 USC Section 2605, Section 6 of the Federal Real Estate Settlement Procedures Act of 1974 and the regulations promulgated pursuant to said section, as from time-to-time amended, or (3) by giving actual notice of the assignment, reasonably identifying the rights assigned, in any other manner. No signature on any such notice is necessary to give sufficient notice of the assignment under this subsection and such notice may include any other information."
Section 49-10 does not state that an insufficient notice of an assignment excuses performance on the part of the mortgagor under the terms of the note and mortgage. It merely allows a mortgagor to continue to pay the assignor until he receives sufficient notice or reasonable proof of the assignment. The defendant has provided the court with no legal authority for his proposition that a plaintiff cannot prevail in a foreclosure action unless he proved that all notices of assignments were given to the mortgagor as required by § 49-10, and research revealed no such authority. Giving sufficient notice of assignments pursuant to § 49-10 is not a condition precedent that must be satisfied prior to bringing a foreclosure action.
In the seventh special defense, the defendant asserts that the note was not default because he continued to pay Citizens Bank in accordance with General Statutes § 49-10(d), as no reasonable proof of the assignment of the note was presented to him. He argues that the letter of notice sent by the plaintiff was incorrectly addressed through a mistake, that he did not receive the letter of notice, and that the plaintiff's failure to give sufficient notice of the assignments, as required by § 49-10, is fatal to the plaintiff's foreclosure action.
The defendant cites LaSalle National Bank v. Shook, 67 Conn.App. 93, 787 A.2d 32 (2001), to support his argument. The defendant's reliance on LaSalle is, however, misplaced. In that case, the defendants argued that the plaintiff's failure to provide a correct payment address is a valid equitable defense to a foreclosure action. Id., 97. LaSalle is inapposite to the facts of the present case in that, in the present case, the plaintiff's mistake did not prevent the defendant from performing his duty to continue to pay the assignor until he received a sufficient notice or a reasonable proof of assignment. The equitable defense of mistake cannot be asserted unless the particular mistake prevented the mortgagor from fulfilling his duty to make payments. Accordingly, the court concludes that the defendant's special defenses based on insufficient notice have no merit.
The defendant also argues that he is not liable for any interest charges from the date of his last payment to Citizens Bank to the present because Citizens Bank refused to accept his payment when he tendered payments. To support his argument, the defendant relies on § 42a-3-603(c), which provides: "(c) If tender of payment of an amount due on an instrument is made to a person entitled to enforce the instrument, the obligation of the obligor to pay interest after the due date on the amount tendered is discharged. If presentment is required with respect to an instrument and the obligor is able and ready to pay on the due date at every place of payment stated in the instrument, the obligor is deemed to have made tender of payment on the due date to the person entitled to enforce the instrument."
"[A] tender of payment is not the equivalent of payment itself. Refusal of a tender of payment, however, while it does not discharge a debt, discharges any further accrual of interest if the purchaser keeps the tender . . ." State v. Lex Associates, 248 Conn. 612, 629, 730 A.2d 38 (1999). "If the debtor does not tender full payment, the holder retains the right to reject any partial payment and to collect the interest that continues to accrue until the tender of the entire amount due." Chrustebsen v. Cutaia, 211 Conn. 613, 621, 560 A.2d 456 (1989). "If the mortgage agreement provides for monthly payment by installment . . . the mortgagee is obligated to accept a properly tendered installment payment, that is, timely payment of the full amount due." Atlantic Mortgage Corp. v. Linsley, Superior Court, judicial district of New Haven at Meriden, Docket No. CV 97 0260406 (July 3, 2001, Booth, J.). "[T]he burden is upon [the party] to show, not only that a tender was made, but that it was validly made . . ." Josephson v. Ginsburg Realty Co., 169 A.D. 189, 191, 154 N.Y.S. 533, 535 (N.Y.A.D. 1915).
In the present case, the defendant's testimony and the memo from Citizens Bank (defendant's exhibit L) shows that the defendant visited the bank to make his monthly payment on May 1, 2001, but the bank could not accept his payment because there was no record of his loan on the computer system. However, the defendant failed to establish that his tender of installment payment was proper and timely. The loan payment history (plaintiff's exhibit 16) indicates that the defendant failed to make monthly payments from October of 2000. The defendant's printout of payments history (defendant's exhibit H) shows that he did not pay his debt from November of 2000 to March of 2001. The defendant testified that he made payments in cash during those months, but he failed to produce any evidence to prove those cash payments. The court finds that there is no credible evidence to support the defendant's claim that he made payments in cash from October of 2000 to March of 2001. Accordingly, the court concludes that the defendant's tender of payment was untimely since he had already defaulted on his installment payment at the time of his tender and, therefore, his tender in May of 2001 should not discharge his obligation to pay interest.
III Validity of the Note
The defendant has denied the validity of the original note that was entered into evidence as plaintiff's exhibit 4. He argues that the plaintiff's exhibit 4 is not the note that he signed on December 14, 1992, because the terms in the note are different from the terms of the commitment letter that he signed at the closing.
"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." (Internal quotation marks omitted.) Emigrant Mortgage Corp. v. D'Agostino, 94 Conn.App. 793, 802, 896 A.2d 814, cert. denied, 278 Conn. 919, 901 A.2d 43 (2006). In the present case, the defendant testified at trial that plaintiff's exhibit 4 looks cleaner than the original note that he signed on December 14, 1992; that it appears to have been printed from an inkjet printer, which was not available in 1992; and that Citizens Bank did not possess the original note after a flood in 1995, because it lost the original note in the flood. The defendant's theory appears to be that the plaintiff lost the note in the 1995 flood and forged a new note. The court finds that the defendant's testimony is not credible. The court also finds that the commitment letter introduced as defendant's exhibit F shows a summary of the terms in the note and, in essence, the terms in the letter are not different from the terms in the note since they are identical in terms of the total amount of debt, interest rate, the description of the mortgage, payment schedule, maturity date, late charges, and so forth. Accordingly, the court finds that the note is the original loan document that the defendant signed on December 14, 1992.
The defendant also argues that the note was improperly admitted into evidence because the plaintiff failed to authenticate the signatures on the note. "For a writing to be admitted into evidence, it must first be authenticated. A writing may be authenticated by identifying the signature contained in the document . . . A signature can be authenticated by a signatory to the document by acknowledgment. A signature can additionally be proved by a witness to the execution of the document or by a witness who is familiar with the signature in question and attests that it is genuine." (Citations omitted; internal quotation marks omitted.) Webster Bank v. Flanagan, 51 Conn.App. 733, 737, 725 A.2d 975 (1999). "There may be a presumption that a written signature on an instrument was written by the purported signer and where there is a presumption that an instrument was duly signed, one who alleges want of due signature has the burden of proving his claim." (Internal quotation marks omitted.) Water View Resolution Corp. v. LF Credit Corp., Superior Court, judicial district of Danbury, Docket No. CV 00034 0614 (September 17, 2002, Moraghan, J.T.R.).
In the present case, the defendant testified that his signature on the note had been forged even if it looked like his. The defendant did not, however, successfully offer any evidence to corroborate this testimony. The defendant also failed to provide sufficient evidence to support his theory that the plaintiff lost the original note when there was a flood in 1995. The court's function, as the trier of fact, is to determine "the credibility of witnesses and the weight to be accorded their testimony." (Internal quotation marks omitted.) State v. Iban C., 275 Conn. 624, 634, 881 A.2d 1005 (2005). The court does not find that the defendant's testimony on this issue to be credible. Accordingly, the court concludes that the note was properly admitted into evidence.
IV The Amount of Debt A Payment History of Citizens Bank and SN Commercial
In the third special defense, the defendant asserts that the holders of the note and mortgage have misstated the principal, the amounts of the installments, the interest, and the late charges. In his brief, he argues that the plaintiff has the burden of establishing the proper balance of the note at each time when the note and mortgage was assigned to a new owner. He argues that Barbara Ogbomo, the keeper of the records for Citizens Bank, had no knowledge as to the validity of the starting balance on the Citizens Bank payment records and could not ascertain the amount of interest being charged on the note. The defendant argues that Ogbomo failed to provide any testimony that plaintiff's exhibit 2 was the records for the mortgage that is the subject of the present action while he provided sufficient evidence to show that the Citizens Bank payment records are inaccurate. He further argues that Citizens Bank payment history and the testimony of Ogbomo have such low probative value that they fail to support the finding that the debt set forth in the payment records is the debt claimed as due by the plaintiff. As to SN Servicing's records, the defendant indicates that the closing balance on the Citizens Bank records differs from the opening balance on the SN Servicing's records. Finally, the defendant indicates that no evidence was provided on any debt amount due prior to September 21, 1998, even if the note is dated December 14, 1992.
In a foreclosure action, the plaintiff must "establish the amount of the debt" that the defendant mortgagor owes. New England Savings Bank v. Bedford Realty Corp., supra, 238 Conn. 760. "[In] an equitable foreclosure action on the mortgage . . . the plaintiff is free to produce other reliable evidence to prove the amount of the debt." New England Savings Bank v. Bedford Realty Corp., supra, 246 Conn. 597 n. 3. "A bill or note is not a debt; it is only primary evidence of a debt it . . . may be supplied by secondary evidence." (Internal quotation marks omitted.) New England Savings Bank v. Bedford Realty Corp., supra, 238 Conn. 760. "In a mortgage foreclosure action, a defense to the amount of the debt must be based on some articulated legal reason or fact. See, e.g., Burritt Mutual Savings Bank of New Britain v. Tucker, [ 183 Conn. 369, 374-75, 439 A.2d 396 (1981)] (where defendant claimed that mortgage debt was inaccurately computed, that the bank waived late charges and that certain amounts had been advanced for taxes)." Connecticut National Bank v. N.E. Owen II., Inc., 22 Conn.App. 468, 472-73, 578 A.2d 655 (1990).
In the present case, the plaintiff entered into evidence Citizens Bank's history of the defendant's loan payments as plaintiff's exhibit 2. Ogbomo testified that the loan payment history shows the principal balance due on the loan as of February 22, 2001. Every cancelled check produced by the defendant is accounted for on the loan payment history and was applied to the defendant's debt. The numbers shown in exhibit 2 are consistent with the defendant's monthly payments and with the original principal balance of the loan. The plaintiff's debt records have produced an accurate debt figure. The court finds that the loan payment history tends to make it more probable that the defendant owed the plaintiff the amount of debt specified in it, and that Ogbomo's testimony provides more evidence that the history is accurate.
The asset information sheet (plaintiff's exhibit 14), the loan payment history (plaintiff's exhibit 16), the asset detail log (plaintiff's exhibit 17), and the notice of attempt to collect debt (plaintiff's exhibit 19), show the same principal balance due on the loan as $60,901.91. Plaintiff's exhibit 19 shows the total amount the plaintiff claims as of December 5, 2006, as follows:
Principal: $ 60,901.91 Interest: $ 30,496.62 Taxes: $ 14,337.97 Other (late charges): $ 3,893.82 Total: $109,630.32.Accordingly, the court concludes that the plaintiff provided sufficient evidence to establish the amount of debt, interest, and other charges owed by the defendant.
B Property Tax Payments
The plaintiff argues that the loan payment history (plaintiff's exhibit 16) and the asset detail log (plaintiff exhibit 17) demonstrate that it made advance payment on the property taxes assessed against the mortgaged property. The plaintiff argues that the city of New Haven advised the plaintiff that the city would be foreclosing its priority tax lien unless the plaintiff paid real estate taxes. It further argues that the asset detail log describes the tax payments in detail and that paragraph 2 of the mortgage deed (plaintiff's exhibit 5) provides that the borrower is obligated to pay the property taxes and that the lender has a right to pay them if the borrower does not.
The defendant counters that the alleged property tax payments were not made in accordance with the terms of the note and that the plaintiff failed to produce the best evidence of those tax payments. He also argues that the plaintiff failed to provide evidence to show that taxes were due and unpaid. In the fourth special defense, the defendant asserts that the plaintiff misapplied the money held in escrow with the mortgage payment to pay the taxes, thereby overcharging him.
"[I]t [is] a standard practice, statutorily sanctioned, for [a mortgagee bank] to require [a mortgagor] to deposit funds for payment of real estate into a tax escrow account maintained by [the bank] to ensure timely payment of real estate taxes on the mortgaged property." Narumanchi v. Mechanics Savings Bank, Superior Court, judicial district of New Haven, Docket No. 00 0434264 (September 20, 2000, Thompson, J.) ( 28 Conn. L. Rptr. 219, 220). "The obvious purpose for a bank mortgagee to require and maintain a tax escrow account is to protect the mortgagee's security interest in the property so that it will not be subject to a tax lien or tax sale by the municipality in case of nonpayment of real estate taxes. See Hartford Federal Savings Loan Ass'n. v. Tucker, 196 Conn. 172, 181-82, 491 A.2d 1084 (1985)." Narumanchi v. Mechanics Savings Bank, supra, 28 Conn. L. Rptr. 223 n. 4.
In the present case, the note and mortgage deed signed by the defendant obligates him to pay "all taxes" assessed upon the mortgaged property. Plaintiff's exhibits 16 and 17 show that the plaintiff paid such taxes. Fogleman testified that SN Servicing was informed that the property taxes were past due and that there was a foreclosure action taken for the collection of the taxes. The defendant argues that the plaintiff should not have paid any taxes until he notified it of his failure to pay taxes because paragraph 2 of the mortgage deed provides that, in the event of the defendant's failure to pay taxes, he "shall so advise [the plaintiff] in writing and [the plaintiff] may . . . make such payment . . ." Plaintiff's exhibit 5. This interpretation of the deed is unreasonable, however, because it will thwart the purpose of the provision that allows the plaintiff to pay taxes on the defendant's mortgaged property. Since the plaintiff's discretionary option to pay taxes is necessary to protect its security interest from a tax lien, this option should not be conditioned on the defendant's notification of his failure to pay taxes. Furthermore, the language of paragraph 2 of the deed supports the court's interpretation that it simply allows the mortgagee to make such payments when the mortgagor failed to pay such taxes. Accordingly, the court concludes that the plaintiff paid property taxes on behalf of the defendant in accordance with the terms of the note.
The defendant next argues that the plaintiff failed to produce the best evidence of the tax payments. In general, "the best evidence rule requires a party to produce an original writing, if it is available, when the terms of that writing are material and must be proved." (Internal quotation marks omitted.) State v. Abney, 88 Conn.App. 495, 500, 869 A.2d 1263 (2005). "The best evidence rule typically applies when attempting to prove the contents of instruments such as deeds, wills or contracts, where a slight variation of words may mean a great difference in rights." (Internal quotation marks omitted.) State v. Pearl, 28 Conn.App. 521, 533, 613 A.2d 304 (1992). "Where one testifies to what he has seen or heard, such testimony is primary evidence regardless of whether such facts are reduced to writing. While recordings might be more accurate and reliable evidence under ordinary circumstances than testimony from memory, the latter is not rendered incompetent by the fact of the existence of the former." State v. Moynahan, 164 Conn. 560, 583, 325 A.2d 199, cert. denied, 414 U.S. 976, 94 S.Ct. 291, 38 L.Ed.2d 219 (1973). In the present case, the best evidence rule is not applicable to the issue of the tax payments because the court finds that Fogleman's testimony provides credible primary evidence that the plaintiff paid property taxes for the defendant's mortgaged property.
V Agency Relationship
The defendant argues that the plaintiff did not provide any documentary evidence that SN Servicing was the agent of SN Commercial or the plaintiff. He further argues that Fogleman's testimony that SN Servicing was the plaintiff's agent is insufficient to establish that an agency relationship existed between these two entities.
"An agency relationship results when one entity, called the principal, authorizes another entity, called the agent, to act for the principal in dealing with third parties." Stockman Bank of Mont. v. AGSCO, Inc., 728 N.W.2d 142, 148-49, 2007 N.D. LEXIS 31 (N.D. 2007). "The existence of an agency relationship is a question of fact." (Internal quotation marks omitted.) Wesley v. Schaller Subaru, Inc., 277 Conn. 526, 543, 893 A.2d 389 (2006). "The burden of proving agency is on the party asserting its existence." Lee v. Duncan, 88 Conn.App. 319, 324, 870 A.2d 1 (2005). "[T]he three elements required to show the existence of an agency relationship include: (1) a manifestation by the principal that the agent will act for him; (2) acceptance by the agent of the undertaking; and (3) an understanding between the parties that the principal will be in control of the undertaking . . . [A]n essential ingredient of agency is that the agent is doing something at the behest and for the benefit of the principal . . . Finally, the labels used by the parties in referring to their relationship are not determinative; rather, a court must look to the operative terms of their agreement or understanding." (Internal quotation marks omitted.) Wesley v. Schaller Subaru, Inc., supra, 277 Conn. 543-44.
"Actual authority may be express or implied . . . Implied authority is actual authority circumstantially proved. It is the authority which the principal intended his agent to possess . . . Implied authority is a fact to be proven by deductions or inferences from the manifestations of consent of the principal and from the acts of the principal and [the] agent." (Citation omitted; internal quotation marks omitted.) Gordon v. Tobias, 262 Conn. 844, 850, 817 A.2d 683 (2003).
In the present case, the plaintiff alleged and provided evidence that SN Servicing has been the plaintiff's actual agent with respect to the collection of the defendant's debt. Fogleman testified that, as an affiliate of the plaintiff, SN Servicing has assumed servicing responsibility for the loan since April of 2001. The payment coupon dated December 4, 2001 (plaintiff's exhibit 13), which was sent to the defendant by SN Servicing for the benefit of the plaintiff indicates that SN Servicing was working as an actual agent of the plaintiff for purposes of collecting the defendant's loan and had authority to communicate with the defendant, accept loan payments from him, and perform other services necessary to collect any balances due from the defendant. Accordingly, in light of the testimonial and documentary evidence, the court determines that an agency relationship existed between SN Servicing and the plaintiff for purposes of collecting the defendant's debt.
CONCLUSION
The plaintiff established that it has standing to bring this action of foreclosure by proving that it has been the beneficial owner of the note and mortgage since 2001 and showing its chain of title through various assignments. The plaintiff also established that the defendant defaulted on the note, and that the amount of the debt, including accrued interest, late charges and other fees, was $109,630.32 as of December 5, 2006. The defendant's special defenses to this foreclosure action are legally insufficient or invalid. Accordingly, the court concludes that a judgment of foreclosure should he entered in favor of the plaintiff.
The plaintiff's appraiser valued the property at $100,000 on August 15, 2006. The defendant offered two figures: $115,000, without the presence of squatters, and $95,000 as there were squatters present at that time he inspected the property in February 2005.
The court finds the indebtedness to be $109,630.32, and the fair market value of the property to be $100,000. A judgment of strict foreclosure may enter. Counsel fees, arrived at per stipulation of the parties, are awarded in the amount of $21,690, through December 6, 2006. A title search fee of $225 is awarded and the appraiser's fees for the appraisal in the amount of $1,200 is allowed along with $500 for his court appearance and testimony.
The law day is set at July 23, 2007 for the owner of the equity of redemption and for subsequent days in the inverse order of their priority as set forth in the complaint.