Summary
observing that TILA is available as a defense to foreclosure under Connecticut law
Summary of this case from Nationstar Mortg. LLC v. DadiOpinion
CV126014902S
01-05-2016
Wells Fargo Bank, N.A. v. Sandra Caldrello
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE PLAINTIFF'S MOTION TO STRIKE (No.221)
Emmet L. Cosgrove, J.
The plaintiff, Wells Fargo Bank, N.A., has filed a motion to strike the defendant, Sandra Caldrello's, revised counterclaims, asserting that all thirty-two counterclaims are legally insufficient. The defendant opposes this motion.
PROCEDURAL HISTORY
On September 18, 2012, the plaintiff commenced this foreclosure action via a single count complaint alleging the following facts. On February 9, 2007, the defendant secured a $480,000 debt with World Savings Bank, FSB with a mortgage on 939 Pequot Avenue, New London, of which she is the owner of record and in possession. The plaintiff is the successor by merger to Wachovia Mortgage, FSB, formerly known as World Savings Bank, FSB. On May 2, 2012, the plaintiff became entitled to collect the subject debt and enforce the subject mortgage, which are now both in default. There are no subsequent interests on the mortgaged property and the only encumbrance thereon is outstanding taxes due to the City of New London.
On May 20, 2015, the defendant filed her revised counterclaims. On August 4, 2015, the plaintiff filed its motion to strike the defendant's revised counterclaims on the ground that all thirty-two counterclaims alleged therein are legally insufficient and therefore should be stricken. The plaintiff submitted a memorandum of law in support of its motion and, on October 5, 2015, the defendant filed a memorandum in opposition to the motion.
On October 23, 2015, the defendant filed an addendum to her counterclaims. This addendum was filed after the plaintiff's motion to strike, and is thus not considered by that motion or by the court in this memorandum of decision.
On October 7, 2015, the plaintiff filed a request to amend her memorandum in opposition, requesting the court to provide her with an additional thirty days to amend and permission to exceed the number of pages allowed by Practice Book § 4-6. The plaintiff objected to this request on October 13, 2015, which the court sustained on October 26, 2015.
DISCUSSION
This court has reviewed the defendant's revised counterclaims, as well as the memoranda in support and in opposition to the plaintiff's motion to strike. While the court does not address each argument in the extensive pleadings individually, failure to do so does not indicate a lack of consideration.
" 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). " A motion to strike tests the legal sufficiency of a cause of action and may properly be used to challenge the sufficiency of a counterclaim." Fairfield Lease Corp. v. Romano's Auto Service, 4 Conn.App. 495, 496, 495 A.2d 286 (1985); see also Practice Book § 10-39(a)(5).
" It is fundamental that in determining the sufficiency of a [pleading] challenged by a [party'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.) Violano v. Fernandez, 280 Conn. 310, 318, 907 A.2d 1188 (2006). The challenged pleading must be construed " in the manner most favorable to sustaining its legal sufficiency." (Internal quotation marks omitted.) New London County Mutual Ins. Co. v. Nantes, 303 Conn. 737, 747, 36 A.3d 224 (2012). " [I]f facts provable in the [pleading] would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Batte-Holmgren v. Commissioner of Public Health, 281 Conn. 277, 294, 914 A.2d 996 (2007).
In its memorandum in support of its motion to strike, the plaintiff argues that almost all of the defendant's counterclaims are legally insufficient based on three legal principles: (1) the defendant has not met the fact pleading standard required by the Practice Book; (2) the statute of limitations has expired on many of the defendant's claims; and (3) many of the defendant's claims are improper because they do not relate to the making, validity, or enforcement of the subject note. In addition, it argues that many of the counterclaims fail to state a claim upon which relief can be granted.
In response, the defendant opposes the plaintiff's argument that her counterclaims are legally insufficient. The defendant's predominant argument for legal sufficiency, which is referenced throughout her memorandum, is that the plaintiff lacks standing to bring the underlying action against the defendant because the plaintiff does not own the subject note, the defendant was not aware of the sale of the note to the plaintiff, and the plaintiff fraudulently concealed documentation as to the note's true owner. Another prominent argument in the defendant's memorandum is that the plaintiff breached its contract with the defendant by changing the terms of the open-ended deferred interest pick-a-pay mortgage and by accelerating the note before the defendant reached the maximum aggregate principal balance. Further, the defendant argues that the plaintiff has engaged in a predatory and continuing course of conduct, which includes such acts as committing fraud; coming to this action with unclean hands; providing false documentation to the court; conspiring against the defendant; misappropriating funds; and failing to prove ownership of the loan; failing to act in good faith; failing to disclose information; and failing to cooperate with the defendant.
I
While the plaintiff's lack of standing to foreclose is a theme throughout the defendant's counterclaims, counterclaim six explicitly alleges that the subject loan was sold and that the plaintiff has not proven ownership of the loan; therefore, it lacks standing to foreclose. Further, the plaintiff alleges that the defendant is under the Pool Servicing Agreement and is not the actual owner. The plaintiff argues that counterclaim six should be stricken pursuant to the law of the case doctrine because the court denied the defendant's motion to dismiss on March 23, 2015, after the plaintiff produced the original note for the court's and the defendant's inspections and the court concluded that the plaintiff had standing to invoke the jurisdiction of the court. Further, there are no new or overriding circumstances that would lead to a determination that the plaintiff lacks standing. In response, the defendant argues that the plaintiff duped the court into believing it had standing by presenting the note. Further, she argues that there was not an assignment of the note itself that the sale of the note was concealed from the defendant; and that the defendant could not use the sale information in her motion to dismiss because the plaintiff concealed ownership of the note from her.
" 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.) Bysiewicz v. DiNardo, 298 Conn. 748, 758, 6 A.3d 726 (2010). " Where a party is found to lack standing, the court is consequently without subject matter jurisdiction to determine the cause." (Internal quotation marks omitted.) Monroe v. Horwitch, 215 Conn. 469, 473, 576 A.2d 1280 (1990). Ultimately, it is the plaintiff's burden to prove standing. Wells Fargo Bank N.A. v. Strong, 149 Conn.App. 384, 398, 89 A.3d 392, cert. denied, 312 Conn. 923, 94 A.3d 1202 (2014).
" [General Statutes § ]49-17 codifies the well established common-law principle that the mortgage follows the note, pursuant to which only the rightful owner of the note has the right to enforce the mortgage." RMS Residential Properties, LLC v. Miller, 303 Conn. 224, 230, 32 A.3d 307 (2011). " In order to establish a prima facie case in a mortgage foreclosure action, the plaintiff must prove by a preponderance of the evidence that it is the owner of the note and mortgage, that the defendant mortgagor has defaulted on the note and that any conditions precedent to foreclosure, as established by the note and mortgage, have been satisfied." (Internal quotation marks omitted.) Wells Fargo Bank N.A. v. Strong, supra, 149 Conn.App. 392. " Being the holder of a note satisfies the plaintiff's burden of demonstrating that it is the owner of the note because under our law, the note holder is presumed to be the owner of the debt, and unless the presumption is rebutted, may foreclose the mortgage under § 49-17." (Internal quotation marks omitted.) American Home Mortgage Servicing, Inc. v. Reilly, 157 Conn.App. 127, 133, 117 A.3d 500, cert. denied, 317 Conn. 915, 117 A.3d 854 (2015).
" [The law of the case] doctrine refers to the binding effect of a court's prior ruling in the same case." (Internal quotation marks omitted.) Bowman v. Jack's Auto Sales, 54 Conn.App. 289, 292-93, 734 A.2d 1036 (1999). " The law of the case is not written in stone but is a flexible principle of many facets adaptable to the exigencies of the different situations in which it may be invoked . . . In essence it expresses the practice of judges generally to refuse to reopen what has been decided and is not a limitation on their power." (Citation omitted.) Breen v. Phelps, 186 Conn. 86, 99, 439 A.2d 1066 (1982). " Where a matter has previously been ruled upon interlocutorily, the court in a subsequent proceeding in the case may treat that decision as the law of the case, if it is of the opinion that the issue was correctly decided, in the absence of some new or overriding circumstance." Id. " The general rule is that the denial of a motion to dismiss is an interlocutory ruling . . ." (Internal quotation marks omitted.) Conboy v. State, 292 Conn. 642, 645 n.5, 974 A.2d 669 (2009).
On March 23, 2015, this court ruled that the plaintiff had standing to invoke the court's jurisdiction, and denied the defendant's motion to dismiss challenging the plaintiff's standing to foreclose. The defendant has not alleged any new or overriding circumstances in counterclaim six, or in any of her counterclaims, that changes the court's opinion that the standing issue in the defendant's motion to dismiss was correctly decided. Further, the defendant's allegation that the plaintiff is not the actual owner of the note because it is under a Pool Servicing Agreement--i.e., the validity of its status as the owner of the note--" implicates the merits of the present foreclosure action, not the plaintiff's standing to bring the action." Wells Fargo Bank N.A. v. Strong, supra, 149 Conn.App. 400. For these reasons, the court grants the plaintiff's motion to strike the plaintiff's counterclaim six.
II
The plaintiff argues that the defendant has failed to plead sufficient facts in counterclaims one through five, twelve through twenty-nine, thirty-one, and thirty-two; these counts, it argues, consist entirely of legal conclusions. " Each pleading shall contain a plain and concise statement of the material facts on which the pleader relies . . ." Practice Book § 10-1. " A motion to strike is properly granted if the [counterclaims allege] mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Santorso v. Bristol Hospital, 308 Conn. 338, 349, 63 A.3d 940 (2013).
While the court does not address each of the subject counterclaims individually, nor each of the plaintiff's or the defendant's arguments in support of or in opposition to the present motion, it has reviewed the pleadings extensively. The court concludes that the defendant has failed to plead sufficient facts to support the elements of the causes of action for concealment of errors in count one; conspiracy in count two; infliction of emotional distress in count three; breach of fiduciary duty in counts four, twenty-two, and twenty-five; unjust enrichment in count five; wire fraud in count twelve; violation of Racketeer Influenced and Corrupt Organization Act (RICO) in count thirteen; violation of General Statutes § 49-2 or nonconforming loan in count fourteen; unclean hands or fraudulent concealment in count fifteen; violation of the Home Ownership and Equity Protection Act (HOEPA) in count sixteen; violation of General Statutes § 53-379a, violation of the Real Estate Settlement Procedures Act (RESPA), and residential mortgage fraud in count seventeen; violation of General Statutes § 49-10 or failure to register mortgage assignments in count eighteen; violation of General Statutes § 36a-493 and failure to maintain records in count nineteen; violation of General Statutes § 36a-545 or failure to register mortgage in count twenty; contributory negligence, fraud, tortious interference, or unviable loan in count twenty-one; fraudulent concealment in counts twenty-three and twenty-six; failure to offer loan modification in count twenty-four; breach of contract or unjust enrichment in count twenty-seven, negligence in count twenty-eight; false affidavit of debt in count twenty-nine; and failure to provide notice of right to cancel in count thirty-two. For this reason, the court grants the plaintiff's motion to strike counterclaims one through five, twelve through twenty-nine, thirty-one, and thirty-two.
Counterclaim thirty-one states, in its entirety, " Wells Fargo Bank, N.A. claims that they are the originator of the loan in this action." While this counterclaim fails to plead facts sufficient to support any cause of action, it implicates the defendant's standing argument. As with counterclaim six, counterclaim thirty-one, to the extent that it alleges the plaintiff did not have standing to bring this foreclosure action, is precluded by the law of the case doctrine. See Part I, supra .
III
The remaining counterclaims are seven through eleven, and thirty. Specifically, counterclaim seven alleges a violation of the Truth-in-Lending Act (TILA), and counterclaim thirty further alleges a right to recession pursuant to TWA. Counterclaims eight, nine, and ten allege violations of TWA, the Real Estate Settlement Procedures Act (RESPA), and the Connecticut Unfair Trade Practices Act (CUTPA). The plaintiff argues that the statute of limitations has expired on counts seven through ten, and thirty. In conjunction, it contends that its statute of limitations claims are properly pleaded in its motion to strike because the statutes at issue give rights of action that did not exist at common law and fix the time within which the right must be enforced. In response, the defendant argues that these counterclaims are not time barred because the plaintiff's fraudulent concealment of the true owner of the note and mortgage, and of its sale or transfer, tolls the statute of limitations.
" A claim that an action is barred by the lapse of the statute of limitations must be pleaded as a special defense, not raised by a motion to strike." Forbes v. Ballaro, 31 Conn.App. 235, 239, 624 A.2d 389 (1993); see also Practice Book § 10-50. " In two limited situations, however, we will allow the use of a motion to strike to raise the defense of the statute of limitations. The first is when the parties agree that the complaint sets forth all the facts pertinent to the question whether the action is barred by the [s]tatute of [l]imitations and that, therefore, it is proper to raise that question by [a motion to strike] instead of by answer . . . The second is where a statute gives a right of action which did not exist at common law, and fixes the time within which the right must be enforced, the time fixed is a limitation or condition attached to the right--it is a limitation of the liability itself as created, and not of the remedy alone." (Citation omitted; internal quotation marks omitted.) Forbes v. Ballaro, supra, 239-40.
" The federal Truth in Lending Act, as amended in particular by the Truth-in-Lending Simplification Reform Act of 1980, was enacted as part of the Consumer Credit Protection Act of 1968, and is codified at 15 U.S.C. § 1601 et seq." Cheshire Mortgage Service, Inc. v. Montes, 223 Conn. 80, 96-97, 612 A.2d 1130 (1992). The purpose of TILA is to promote the informed use of consumer credit. 12 C.F.R. § 1026.1. In order to carry out this purpose, Regulation Z, codified at 12 C.F.R. § 1026 et seq., was promulgated. See 15 U.S.C. § 1604(a) (2015). Civil liability under TILA is codified at 15 U.S.C. § 1640, subsection (e) of which limits actions under this section to within one year from the date of the occurrence of the violation, except in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action. Trial courts have noted that the Connecticut legislature has enacted the state's own truth in lending act, which is generally coextensive with the federal TILA and codified at General Statutes § 36a-675 et seq. See GMAC Mortgage, LLC v. Tornheim, Superior Court, judicial district of New London, Docket No. CV-09-6001296-S, (March 24, 2010, Devine, J.). General Statutes § 36a-683(e) likewise provides that any action under this section shall be brought within one year from the date of the occurrence of the violation, except in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action.
Title 12 of the Code of Federal Regulations, § 1026.1(b), provides, in pertinent part, as follows: " The purpose of this part is to promote the informed use of consumer credit by requiring disclosures about its terms and cost."
Title 15 of the United States Code, § 1604(a), provides, in pertinent part, as follows: " The Bureau shall prescribe regulations to carry out the purposes of this title [15 U.S.C. § 1601 et seq.]."
Title 15 of the United States Code, § 1604(e), provides, states, in pertinent part, the following: " Except as provided in the subsequent sentence, any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation . . . This subsection does not bar a person from asserting a violation of this title [15 U.S.C. § 1601 et seq.] in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action, except as otherwise provided by State law."
General Statutes § 36a-683(e) states the following: " Time limit for bringing action. Any action under this section shall be brought in any court of competent jurisdiction within one year from the date of the occurrence of the violation. This subsection does not bar a person from asserting a violation of sections 36a-675 to 36a-685, inclusive, in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action."
While the Connecticut Appellate Courts have not yet interpreted whether the defense of statute of limitations against a claim for a violation of TILA falls into the second exception to the general rule that statute of limitations arguments are not properly before a court on a motion to strike, Connecticut trial courts have. See Larobina v. First Union National Bank, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV-99-0170845-S, (December 13, 2001, Karazin, J.) (" TILA is a creature of statute designed to protect borrowers from entering into lending agreements without being aware of their rights. The right to have a rate of interest based on a publicly available index rate is not a right that existed at common law, but rather was created by 15 U.S.C. § 1647. Therefore, the defendant's statute of limitations argument is properly before the court on a motion to strike."). The right of a person to bring a civil action for liability against a creditor that does not comply with the requirements imposed by TILA is not a right that existed at common law. Further, both 15 U.S.C. § 1640(e) and General Statutes § 36a-683(e) fix the time within which the right shall be enforced. Therefore, the court concludes that it can consider the plaintiff's statute of limitations arguments regarding TILA as to counterclaims seven through ten, and thirty on its motion to strike.
Further, trial courts have held that " [t]he statute of limitations defense for CUTPA actions falls under the second exception to the general rule that the statute of limitations may not be raised on a motion to strike . . . CUTPA is a statutory cause of action which did not exist at common law." Matza v. West, Superior Court, judicial district of Waterbury, Docket No. CV-00-0160324-S, (July 9, 2001, Rogers, J.) (collecting Connecticut Superior Court cases). " [T]he private cause of action created by CUTPA reaches conduct well beyond that proscribed by any common law analogue." Associated Investment Co. Ltd. Partnership v. Williams Associates IV, 230 Conn. 148, 159, 645 A.2d 505 (1994). " An action [for a violation of CUTPA] may not be brought more than three years after the occurrence of a violation of [CUTPA]." General Statutes § 42-110g(f). Therefore, the court concludes that the plaintiff's statute of limitations arguments regarding CUTPA as to counterclaims eight through ten are properly before the court on the present motion to strike.
Like with TILA, the Connecticut Appellate Courts have not ruled on whether the second exception to the rule that statute of limitations arguments are not proper on motions to strike applies to claims brought under RESPA. " It is the purpose of [RESPA] to effect certain changes in the settlement process for residential real estate that will result (1) in more effective advance disclosure to home buyers and sellers of settlement costs; (2) in the elimination of kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services; (3) in a reduction on the amounts home buyers are required to place in escrow accounts established to insure the payment of real estate taxes and insurance; and (4) in significant reform and modernization of local recordkeeping of land title information." 12 U.S.C. § 2601(b) (2015). Essentially, " RESPA is a consumer protection statute. See 12 U.S.C. § 2601[(a) 2015] ('[t]he Congress finds that significant reforms in the real estate settlement process are needed to insure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges caused by certain abusive practices that have developed in some areas of the country[.]')." EMC Mortgage Corp. v. Shamber, Superior Court, judicial district of Tolland, Docket No. CV-07-5001252-S, (November 12, 2009, Sferrazza, J.).
RESPA provides for two statutes of limitations in 12 U.S.C. § 2614: within three years from the date of the occurrence of a violation of 12 U.S.C. § 2605 and within one year from the date of the occurrence of a violation of 12 U.S.C. § 2607 or 2608. Like with TILA, the right to bring a civil action for violations of RESPA provisions is not a right that existed at common law. Further, 12 U.S.C. § 2614 fixes the time within which this right shall be enforced. Therefore, the court concludes that it can consider the plaintiff's statute of limitations arguments regarding RESPA as to counterclaims eight through ten on its motion to strike.
Title 12 of the United States Code, § 2614, provides, the following: " Any action pursuant to the provisions of . . . [12 U.S.C. § 2605, 2607, or 2608] may be brought in the United States district court or in any other court of competent jurisdiction, for the district in which the property involved is located, or where the violation is alleged to have occurred, within 3 years in the case of a violation of . . . [12 U.S.C. § 2605] and 1 year in the case of a violation of . . . [12 U.S.C. § 2607 or 2608] from the date of the occurrence of the violation . . ."
Turning to counts seven through ten, according to the plaintiff's complaint in the present case, the note and the mortgage were executed on February 9, 2007. Therefore, the statute of limitations pursuant to TILA expired on February 9, 2010, which is more than three years before August 31, 2012, when the plaintiff filed its complaint. The same expiration date applies to the defendant's claims in counterclaims eight through ten regarding CUTPA and RESPA, which each also have a statutes of limitation of three years. Furthermore, the court concludes that the defendant has failed to plead facts sufficient to demonstrate fraudulent concealment in counterclaims seven through ten, which might otherwise toll the statute of limitations. Therefore, counterclaims seven through ten are stricken because they are barred by the statute of limitations under TILA, RESPA, and CUTPA and because they fail to plead facts sufficient to demonstrate a fraudulent concealment cause of action.
As to counterclaim thirty, there the plaintiff alleges that she has the right of rescission under recoupment pursuant to TILA and that the plaintiff failed to respond to her letter of rescission received on January 26, 2015, and has thus lost its right to foreclose on the property. Further, she alleges that her right of rescission is due to numerous errors, omissions and other fraudulent actions. The right to rescind in the foreclosure context under TILA is found in 15 U.S.C. § 1635(f), 15 U.S.C. § 1635 (i), and 12 C.F.R. § 1026.23. Subparagraph (i) of subdivision (3) of subsection 1026.23(a) provides that the consumer may exercise the right to rescind until midnight of the third business day following the consummation of the credit transaction, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last. 12 C.F.R. § 1026.23(a)(3)(i). Further, if the required notice or material disclosures are not delivered, the right to rescind shall expire three years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first. 12 C.F.R. § 1026.23(a)(3)(i). Finally, " § 1635(f) completely extinguishes the right of rescission at the end of the 3-year period." Beach v. Ocwen Federal Bank, 523 U.S. 410, 412, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998).
Title 15 of the United States Code, § 1635(f), provides, in pertinent part, the following: " An obligor's right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this chapter [15 U.S.C. § 1631 et seq.] have not been delivered to the obligor, except that if (1) any agency empowered to enforce the provisions of this title [15 U.S.C. § 1601 et seq.] institutes a proceeding to enforce the provisions of this section within three years after the date of consummation of the transaction, (2) such agency finds a violation of . . . [this section], and (3) the obligor's right to rescind is based in whole or in part on any matter involved in such proceeding, then the obligor's right of rescission shall expire three years after the date of consummation of the transaction or upon the earlier sale of the property, or upon the expiration of one year following the conclusion of the proceeding, or any judicial review or period for judicial review thereof, whichever is later."
Title 15 of the United States Code, § 1635(i), provides, in pertinent part, the following: " (1) In general. Notwithstanding . . . [15 U.S.C. § 1649], and subject to the time period provided in subsection (f), in addition to any other right of rescission available under this section for a transaction, after the initiation of any judicial or nonjudicial foreclosure process on the primary dwelling of an obligor securing an extension of credit, the obligor shall have a right to rescind the transaction equivalent to other rescission rights provided by this section, if--(A) a mortgage broker fee is not included in the finance charge in accordance with the laws and regulations in effect at the time the consumer credit transaction was consummated; or (B) the form of notice of rescission for the transaction is not the appropriate form of written notice published and adopted by the Bureau or a comparable written notice, and otherwise complied with all the requirements of this section regarding notice. (2) Tolerance for disclosures. Notwithstanding . . . [15 U.S.C. § 1605(f)], and subject to the time period provided in subsection (f), for the purposes of exercising any rescission rights after the initiation of any judicial or nonjudicial foreclosure process on the principal dwelling of the obligor securing an extension of credit, the disclosure of the finance charge and other disclosures affected by any finance charge shall be treated as being accurate for purposes of this section if the amount disclosed as the finance charge does not vary from the actual finance charge by more than $35 or is greater than the amount required to be disclosed under this title [15 U.S.C. § 1601 et seq.]. (3) Right of recoupment under State law. Nothing in this subsection affects a consumer's right of rescission in recoupment under State law . . ."
Title 12 of the Code of Federal Regulations, § 1026.23, provides, in pertinent part, the following: " (a) Consumer's right to rescind. (1) In a credit transaction in which a security interest is or will be retained or acquired in a consumer's principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction . . . (3)(i) The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first . . . (ii) For purposes of this paragraph (a)(3), the term " material disclosures" means the required disclosures of the annual percentage rate, the finance charge, the amount financed, the total of payments, the payment schedule, and the disclosures and limitations referred to in [12 C.F.R] § § 1026.32(c) and (d) and 1026.43(g)."
Again, in the present case, the mortgage closing was on February 9, 2007. Counts eight through ten allege inaccurate material disclosures, as opposed to a failure to provide material disclosures, therefore, the defendant's right to rescind expired three days from the date of consummation or delivery of all material disclosures. While counts eight through ten allege inaccurate material disclosures, count seven alleges that the closing agent failed to provide copies of the signed closing documents. Even taking this fact in the light most favorable to the defendant--the closing agent is an agent of the plaintiff and the closing documents are material disclosures as defined by 12 C.F.R. § 1026.23 (a)(3)(ii)--the defendant's claim is still barred by 15 U.S.C. § 1635(f)'s statute of limitation. The plaintiff fails to allege any facts in counterclaims seven or thirty regarding the transfer of all of the defendant's interest in the property or the sale of the property, so the date of consummation remains the time measure. More than three years elapsed between February 9, 2007 and August 31, 2012. Further, while the defendant alleged that she has the right of rescission under recoupment pursuant to TILA, she has not alleged recoupment as a matter of defense, pursuant to 15 U.S.C. § 1640(e), but rather, as a counterclaim. Finally, equitable tolling does not apply to counterclaim thirty because " [§ ]1635(f) completely extinguishes the right of rescission at the end of the 3-year period." Beach v. Ocwen Federal Bank, supra, 523 U.S. at 412. For these reasons, the defendant's counterclaim thirty is barred by the statute of limitations and is thus stricken.
IV
The only remaining counterclaim is eleven for mail fraud. In counterclaim eleven, the defendant alleges that the plaintiff engaged in mail fraud and misappropriated funds when it issued a revised HUD settlement statement through the mail that contained a payoff to the Bank of Southern Connecticut (Bank) that was more than the amount the Bank demanded.
Misappropriation of funds is not a recognized cause of action in Connecticut. See D. Krisch & M. Taylor, Encyclopedia of Connecticut Causes of Action (2015).
The plaintiff argues that counterclaim eleven fails to state a claim for mail fraud because it does not allege that the plaintiff knew the subject HUD settlement statement was inaccurate; that the plaintiff intended to induce the defendant to do any act; or that the defendant relied on the statement to her detriment. In response, the defendant argues that the plaintiff committed mail fraud when it sent an extra $10,821.39 to the Bank, without the defendant's knowledge and to her financial detriment, for the use of a party unrelated to the mortgage as a payoff.
" The elements of a fraud action are: (1) a false representation was made as a statement of fact; (2) the statement was untrue and known to be so by its maker; (3) the statement was made with the intent of inducing reliance thereon; and (4) the other party relied on the statement to his detriment." Billington v. Billington, 220 Conn. 212, 217, 595 A.2d 1377 (1991). " The two necessary elements for violation of the mail fraud statute are formation of a scheme with intent to defraud and the use of mails in furtherance of that scheme." State v. McKenna, 188 Conn. 671, 677 n.12, 453 A.2d 435 (1982) (quoting United States v. Keane, 522 F.2d 534, 544 (7th Cir. 1975), cert. denied, 424 U.S. 976, 96 S.Ct. 1481, 47 L.Ed.2d 746 (1976)).
Upon review of counterclaim eleven, the court concludes that the defendant has failed to state a claim for mail fraud because she fails to allege facts that demonstrate that the plaintiff knowingly used mail communications to further a scheme to defraud the defendant. More broadly, the defendant does not allege facts demonstrating that the plaintiff knew that the statements in the revised HUD settlement were untrue, that the plaintiff intended to induce the defendant's reliance on those statements, or that she relied on those statements to her detriment. The fact stated in counterclaim eleven--" [t]he [p]laintiff issued a revised HUD settlement through the mail that contained a payoff to the [Bank] that was more than the [Bank] demanded" --fails to state a claim for fraud, let alone mail fraud. For these reasons, counterclaim eleven is stricken.
CONCLUSION
For the foregoing reasons, the plaintiff's motion to strike is granted as to the defendant's counterclaims.