Opinion
No. TTD-116003181-S
September 14, 2011
MEMORANDUM OF DECISION
This is a foreclosure action in which the plaintiff, CitiMortgage, Inc., seeks foreclosure of mortgage for the property located at 1 Hall Hill Road in Willington, Connecticut. The foregoing opinion relates to a Motion to Strike filed by the plaintiff in this action.
FACTS
On March 30, 2011, the plaintiff, CitiMortgage, Inc., filed a two-count foreclosure action against the defendant, Brent J. Claricoates. The plaintiff alleges that the defendant owed Home Loan Center, Inc., doing business as Lending Tree Loans, $135,000, plus interest, as a result of a January 11, 2007 promissory note for that sum. The defendant mortgaged 1 Hall Hill Road in Willington, Connecticut to Mortgage Electronic Registration Systems, Inc. (MERS) to secure the note. The defendant's mortgage was assigned to the plaintiff on March 9, 2011, and the plaintiff became entitled to collect the debt on the note as of February 25, 2011. As of July 1, 2010, the defendant had an unpaid balance, late charges and collection costs in the amount of $112,043.94 plus interest. The note and mortgage are now in default and the plaintiff is exercising its option to declare the note due and payable. In count one, the plaintiif seeks to reform a clerical error in the description of the subject property. In count two, the plaintiff seeks to foreclose the mortgage as reformed.
The defendant filed an answer, special defenses and a counterclaim on April 21, 2011. The defendant asserts two special defenses that attack the plaintiff's standing. The defendant also asserts three counterclaims. Count one alleges a breach of contract, count two alleges a claim for intentional or negligent misrepresentation and count three alleges a claim for a violation of the Connecticut Unfair Trade Practices Act (CUTPA).
On May 25, 2011, the plaintiff filed a motion to strike the defendant's special defenses and the counterclaim. The defendant filed an objection to the motion to strike on June 30, 2011. The following is a discussion of the Court's decision on the Motion to Strike.
DISCUSSION I MOTION TO STRIKE STANDARD
Practice Book § 10-39 provides in relevant part: "(a) Whenever any party wishes to contest (1) the legal sufficiency of the allegations of any . . . counterclaim . . . or of any one or more counts thereof, to state a claim upon which relief can be granted, or . . . (5) the legal sufficiency of . . . any part of that answer including any special defense contained therein, that party may do so by filing a motion to strike the contested pleading or part thereof." "A motion to strike admits all facts well pleaded; it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings." (Emphasis in original; internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 588, 693 A.2d 293 (1997).
"It is well established that a motion to strike must be considered within the confines of the pleadings and not external documents . . . We are limited . . . to a consideration of the facts alleged in the complaint." (Internal quotation marks omitted.) Zirinsky v. Zirinsky, 87 Conn.App. 257, 268 n. 9 865 A.2d 488, cert. denied, 273 Conn. 916, 871 A.2d 372 (2005). "A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).
II THE DEFENDANT'S SPECIAL DEFENSES
"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." (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).
A The Defendant's First Special Defense
In his first special defense, the defendant asserts that the plaintiff lacks standing to bring this action because it represented that it was only the "servicer" of the mortgage and not its owner. The plaintiff moves to strike the defendant's first special defense on the ground that it is legally insufficient because the plaintiff does not need to be the owner of the note in order to enforce it. In his memorandum in opposition, the defendant argues that his first special defense is proper because "a mere servicer does not have the rights of a holder," and he "has pleaded facts sufficient to assert this defense and is entitled to force [the] Plaintiff to prove it is the true holder of the debt or otherwise has the rights to enforce it."
Specifically, the defendant pleads: "On various occasions prior to the commencement of this foreclosure action, the Plaintiff represented to the Defendant that it was the servicer and not the owner of its mortgage. As such servicer, the Plaintiff represented to the Defendant that it was the servicer and not the owner of its mortgage. As such servicer, the Plaintiff lacks standing to bring this action as it is not the real party in interest."
"The proper procedural vehicle for disputing a party's standing is a motion to dismiss." (Internal quotation marks omitted.) D'Eramo v. Smith, 273 Conn. 610, 615 n. 6, 872 A.2d 408 (2005). "The plaintiff's standing to enforce the promissory note is set forth by the provisions of the Uniform Commercial Code as adopted in General Statutes § 42a-1-101 et seq. Under these statutes, only a `holder' of an instrument or someone who has the rights of a holder is entitled to enforce the instrument . . . The `holder' is the person or entity in possession of the instrument if the instrument is payable to bearer . . . When an instrument is endorsed in blank, it becomes payable to bearer and may be negotiated by transfer of possession alone . . . Furthermore, [t]he possession by the bearer of a note indorsed in blank imports prima facie that he acquired the note in good faith for value and in the course of business, before maturity and without notice of any circumstances impeaching its validity. The production of the note establishes his case prima facie against the makers and he may rest there . . . It [is] for the [makers] to set up and prove the facts which limit or change the [bearer's] rights." (Citations omitted; internal quotation marks omitted.) Chase Home Finance, LLC v. Fequiere, 119 Conn.App. 570, 577-78, 989 A.2d 606, cert. denied, 295 Conn. 922, 991 A.2d 564 (2010).
The court grants the defendant's first special defense for two reasons. First, the allegations in the defendant's first special defense are inconsistent with the allegations of the complaint. The plaintiff alleges that the mortgage was assigned to it and that it is entitled to enforce the debt. Nowhere in the complaint does the plaintiff allege that it was the servicer of the mortgage. Thus, the defendant's first special defense interjects new facts that are inconsistent with the complaint and are therefore improperly raised in a special defense. Second, based on the law cited in their memoranda, both parties agree that a holder or a nonholder with rights of a holder can enforce a negotiable instrument. As previously noted, the plaintiff alleges in its complaint that it is a party entitled to enforce the defendant's debt. Although the defendant challenges the plaintiff's status as holder, and thus, its standing in his special defense, the proper way to challenge a plaintiff's standing is on a motion to dismiss. For these reasons, the court strikes the defendant's first special defense.
B The Defendant's Second Special Defense
In his second special defense, the defendant asserts that the plaintiff lacks standing to bring this action because the assignment was not recorded on the land records before the plaintiff brought this action. The plaintiff moves to strike the defendant's second special defense on the ground that an assignment need not be recorded on the land records in order for it to be enforced. In his memorandum in opposition, the defendant argues that because he has sufficiently pleaded that the defendant does not own the note or mortgage, "he is entitled to force [the] Plaintiff to prove it is the true holder of the debt or otherwise has the rights to enforce it."
Specifically, the defendant pleads: "At the time of the commencement of this civil action, [no] assignment purporting to transfer the mortgage described in the Complaint into the name of the Plaintiff was ever recorded on the land records. At all relevant times, the Plaintiff is without authority or standing to enforce the debt or the mortgage securing the same."
"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 . . . Our legislature, by adopting § 49-17, has provide[d] an avenue for the holder of the note to foreclose on the property when the mortgage has not been assigned to him." (Internal quotation marks omitted.) Deutsche Bank National Trust Co. v. Bialobrzeski, 123 Conn.App. 791, 797, 3 A.3d 183 (2010).
The court strikes the defendant's second special defense. First, as previously stated, the appropriate way to challenge a party's standing is on a motion to dismiss which the defendant failed to do in this case. Second, substantive law provides that a holder has standing to foreclose on property even before the corresponding mortgage has been assigned to that holder. Thus, it follows that if an assignment need not occur before a holder can bring a foreclosure action, then an assignment need not be recorded on the land records before a holder can bring a foreclosure action. For these reasons, the defendant's second special defense is stricken.
III THE DEFENDANT'S COUNTERCLAIMS
Just as special defenses in a foreclosure action must relate to the making, validity or enforcement of the mortgage or note, "a counterclaim [in a foreclosure action] must [also] relate to the making, validity or enforcement of the mortgage note in order properly to be joined with the complaint." JP Morgan Chase Bank, Trustee v. Rodrigues, 109 Conn.App. 125, 133, 952 A.2d 56 (2008). "This requirement . . . is nothing more than an application of Practice Book § 10-10 . . ." (Internal quotation marks omitted.) Deutsche Bank Trust Co. America v. Walters, Superior Court, judicial district of New London, Docket No. CV 562858 (April 28, 2004, Martin, J.). "This section is a common-sense rule designed to permit the joinder of closely related claims where such joinder is in the best interests of judicial economy." (Internal quotation marks omitted.) JP Morgan Chase Bank Trustee v. Rodrigues, supra, 131. "Conduct on the part of the party seeking foreclosure that occurred after the loan documents were executed and not necessarily directly related solely to enforcement of the note . . . properly has been found not to arise out of the same transaction as the complaint." Id., 134-35.
"In Ulster Savings Bank v. 28 Brynwood Lane, Ltd, [Superior Court, complex litigation docket at Stamford-Norwalk at Stamford, Docket No. X08 CV 05 4007323 (January 11, 2010, Jennings, J.T.R.)], the court noted that: `There have been many and varied interpretations of the `making, validity and enforcement' requirement by Connecticut Superior Court decisions.' There is a line of cases which interprets the phrase very strictly to mean the execution and delivery of an enforceable instrument, and not the occurrences that may arise between the parties during the course of their loan relationship.' Id.; see Federal National Mortgage v. Mallozzi, Superior Court, Judicial District of Stamford-Norwalk at Stamford, Docket No. 165698 (February 10, 1999, Hickey, J.); Ocwen Federal Bank FSB v. Weinberg, Superior Court, Judicial District of New London, Docket No. 547629 (August 11, 1999, Mihalakos, J.). A second line of cases, however, interprets the `making, validity, and enforcement' requirement less rigidly. See Liberty Bank v. New London Limited Partnership, [Superior Court, Judicial District of New London, Docket No. 4005236 (May 1, 2007, Devine, J.) ( 43 Conn. L. Rptr. 326, 326)]; Ocwen Federal Bank FSB v. Rivas, Superior Court, Judicial District of Fairfield, Docket No CV 99 0368135 (February 21, 2002, Stevens, J.)." CT Page 20168 Bank of America, N.A. v. Groton Estates, LLC, Superior Court, Judicial District of New London, Docket No. CV 09 6001697 (July 13, 2010, Devine, J.). These cases take the position that "post-execution actions or positions of a lender can relate to the enforcement of a note and mortgage." Id. This court favors the strict interpretation of the `making, validity or enforcement' requirement.
In the present matter, all of the counts of the defendant's counterclaims relate to post-execution actions. The court's holdings in Ulster Savings Bank and Mallozzi cases therefore warrant that the defendant's three counterclaims be stricken without consideration of the merits of the defendant's counterclaims. In the present matter, even a liberal interpretation of the `making, validity, and enforcement' requirement warrants that the defendant's counterclaims be stricken.
A Count One: Breach of Contract
In count one, the defendant asserts that the plaintiff breached a contract to modify his mortgage. The plaintiff moves to strike count one of the defendant's counterclaim on the ground that the parties never formed a contract to modify the defendant's mortgage, and the defendant has failed to allege facts that indicate that the plaintiff intended to be bound to any contract or agreement to modify the defendant's mortgage. In fact, the plaintiff notes that the defendant's own pleading recognizes that the plaintiff sent the defendant a letter in which it stated that the defendant "might" qualify for a loan modification. In his memorandum in opposition to the motion to strike, the defendant quotes parts of the trial modification offer letter, and attaches the letter to his memorandum. The defendant claims that the letter states that the plaintiff "will" provide him with a modification if he is compliant with the trial period plan. The defendant asserts that he complied with all of the plaintiff's requests during the trial period, and thus, he should have been approved for the modification, as promised.
Specifically, the defendant alleges: "In early 2010, Citi began to direct correspondence and other correspondence to [the defendant] advising him that he may be eligible for the Home Affordable Modification Program . . . By letter dated February 26, 2010, Citi again advised [the defendant] that he might qualify for home affordable modification trial period plan by providing Citi with certain things including a reduced mortgage payment not later than April 1, 2010 . . . [The defendant] timely delivered to Citi the material sought from him in its letter of February 26, 2010 including the modified monthly mortgage payment. On various occasions after February 26, 2010, [the defendant] was repeatedly contacted by one or more representative of Citi and requested to furnish more information, often the same information, while he continued to make his modified mortgage payments. Between April 1, 2010 and January 1, 2011, [the defendant] continued to tender the modified payment to Citi. Notwithstanding this and notwithstanding [that the defendant] had repeatedly complied with Citi's requests for further information, by letter dated September 17, 2010, Citi advised [the defendant] that he was being denied a Mortgage Modification for the reason `request incomplete.' We are unable to offer you a Home Affordable Modification because you did not provide us with the documents we requested . . . [The defendant] by accepting Citi's offer to modify the loan, gave rise to a contract to modify his mortgage valid and enforceable in land or in equity. By its actions, Citi has breached the contract for a modification and as a result thereof, [the defendant] has sustained substantial damages and if deprived of his home will be without an adequate remedy at law."
The essential elements for a cause of action based on breach of contract are: (1) the formation of an agreement, (2) performance by one party, (3) breach of the agreement by the opposing party, (4) direct and proximate cause, and (5) damages. McCann Real Equities Series XXII, LLC v. David McDermott Chevrolet, Inc., 93 Conn.App. 486, 503-04, 890 A.2d 140, cert. denied, 277 Conn. 928, 895 A.2d 798 (2006).
Even construing the allegations in a light most favorable to the defendant, it is submitted that these allegations do not establish that the plaintiff and the defendant agreed to modify the mortgage in question. Rather, they can only be read to establish that the plaintiff invited the defendant to apply for a modification and allowed the defendant to make reduced payments pending a final determination. Moreover, although the defendant quotes parts of the trial modification letter in his memorandum in opposition to the motion to strike, he does not quote this letter in count one of his counterclaim, and the motion to strike standard requires the court to look at the pleadings alone. For these reasons, count one of the defendant's counterclaim is ordered stricken.
B Count Two: Intentional or Negligent Misrepresentation
In count two, which alleges a claim for intentional or negligent misrepresentation, the defendant incorporates the allegations from count one. In addition to the allegations that have already been quoted extensively, count two alleges the following from count one: "Since September 17, 2010, [the defendant] has repeatedly transmitted to Citi the information that it claims he did not submit but Citi continues to ignore him, instead furnishing periodic communications that make no sense, advising him to contact persons or phone numbers which are never available or never answered by the same human being and otherwise, subjecting him to a wonderland kind of process."
"After wrongfully refusing to modify [the defendant's] mortgage, Citi has advised him that he now owes the unpaid portion of the various monthly mortgage payments made at the reduced amount as instructed by Citi. In addition, Citi has reported to all three major credit reporting bureaus that [the defendant] is in default of his mortgage payments back to April 1, 2010 effectively rendering him unfinanceable [sic] in the current mortgage market."
"At the present time, [the defendant] has substantial equity in his home and could have otherwise refinanced on a substantially more attractive basis but for the fact that Citi has reported him as a credit risk when in fact [the defendant] was current in all of his obligations to Citi when he was offered the loan modification trial period and notwithstanding that he had duly, promptly and thoroughly complied with each request made of him by Citi during the trial period of purposes of evaluating him for a permanent Home Affordable Mortgage Modification [HAMP]. . ."
Upon information and belief, when Citi solicited [the defendant] to take part in a trial modification under the provisions of HAMP, it either had no intention of offering him a permanent modification or recklessly and indifferently failed to review his materials and ascertain his qualifications for participation in the program. Indeed, based upon [the defendant's] unemployed status, but including his unemployment compensation in the evaluation process, as Citi is required to do by HAMP regulations, [the defendant] has at all relevant times been entitled to the permanent modification under HAMP but Citi either intentionally or negligently had denied him that opportunity."
In count two, the defendant incorporates the above quoted allegations from count one and specifically alleges that: (1) the plaintiff was "engaged in the business of owning or administering residential loans in the State of Connecticut;" (2) the foregoing allegations constitute CUTPA violations under General Statutes § 42-110b; and (3) the plaintiff's failure "to properly evaluate [the defendant] for [a] modification of his mortgage under HAMP" was "part of the scheme to delude troubled homeowners in and about the State of Connecticut and was undertaken maliciously and in conscious disregard of the rights of persons that, due to the severe economic downturn already existing were in precarious financial circumstances."
"A claim of intentional misrepresentation is equivalent to a claim for fraudulent misrepresentation." Capellan v. Sullivan, Superior Court, Judicial District of Hartford, Docket No. CV 08 5020652 (March 9, 2001, Wagner, J.T.R.). "The essential elements of a cause of action in [fraudulent misrepresentation] are: (1) a false representation was made as a statement of fact; (2) it was untrue and known to be untrue by the party making it; (3) it was made to induce the other party to act upon it; and (4) the other party did so act upon the false representation to his injury." Phillips v. Phillips, 101 Conn.App. 65, 71, 922 A.2d 1100 (2007).
Additionally, "[o]ur Supreme Court has long recognized liability for negligent misrepresentation . . . The governing principles [of negligent misrepresentation] are set forth in similar terms in § 552 of the Restatement (Second) of Torts (1977): One who, in the course of his business, profession or employment . . . supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information." (Internal quotation marks omitted.) Rafalko v. University of New Haven, 129 Conn.App. 44, 52, 19 A.3d 215 (2011).
The plaintiff moves to strike the defendant's claim for intentional or negligent misrepresentation because the defendant has failed to allege facts that support the required elements of misrepresentation. In his memorandum in opposition to the motion to strike, the defendant argues that he has pleaded all of the required elements. As to the first element requiring false representations, the defendant argues that the following constitute the plaintiff's false representations: (1) unsolicited correspondence inviting him to apply for a loan modification when the plaintiff knew it had no intention of providing him with a permanently modified loan; (2) repeated requests for supplemental documents even though it had already received those documents; (3) repeated representations about the status of the requested documents and its need to possess those documents to evaluate the defendant for a modification.
Once again, even construing the allegations in a light most favorable to the defendant, it is submitted that the defendant has not pleaded a false representation or representations. Therefore, the defendant cannot state a cause of action for either intentional or negligent misrepresentation because a false representation is an element of both offenses. Although the defendant argues that the plaintiff invited the defendant to apply for a modification when it knew that it would not approve the defendant's modification request, the pleadings do not establish that the plaintiff made any definitive promises to the defendant. The defendant repeatedly states that the plaintiff claimed that the defendant "might" be eligible for a permanent modification. Moreover, although the defendant alleges that the plaintiff made repeated requests for information that the defendant had already sent, it is unclear how this representation "induced" the defendant to act to his detriment. Rather, he merely sent the same paperwork that he had allegedly sent earlier. For these reasons, the defendant's second counterclaim is ordered stricken.
C Count Three: Violation of the Connecticut Unfair Trade Practices Act (CUTPA)
In count three, the defendant incorporates the allegations of count two, which have already been quoted extensively, and asserts that the plaintiff's actions "violate the Connecticut Unfair Trade Practice Act [because such actions were] widespread, and have injured [the defendant] and caused [the defendant] an ascertainable loss of money or property." Moreover, the defendant alleges that the plaintiff's actions "were either deliberately designed to cause him loss, humiliation, emotional distress and ultimately, the loss of his home." Alternatively, the defendant alleges that the plaintiff's actions were "undertaken [in] complete disregard of [the defendant's] rights under his mortgage documents, HAMP and Connecticut consumer protection law."
General Statutes § 42-110b, also known as CUTPA, provides in subsection (a): "No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." In addition, General Statutes § 42-110g provides in relevant part: "(a) Any person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by section 42-110b, may bring an action . . . to recover damages." "The entire act is remedial in character . . . and must be liberally construed . . ." (Citations omitted; internal quotation marks omitted.) Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 492, 656 A.2d 1009 (1995).
"It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other businesspersons] . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three . . . Thus a violation of CUTPA may be established by showing either an actual deceptive practice . . . or a practice amounting to a violation of public policy." (Internal quotation marks omitted.) Harris v. Bradley Memorial Hospital Health Center, 296 Conn. 315, 350-51, 994 A.2d 153 (2010).
The plaintiff moves to strike the defendant's CUTPA claim on the ground that the defendant "has failed to allege with particularity any of the required elements of a CUTPA claim." In his memorandum in opposition to the motion to strike, the defendant argues, inter alia, that the plaintiff's actions offend public policy or are otherwise unfair because the plaintiff "has either intentionally or negligently enticed him to enter into an agreement." Additionally, the defendant asserts that the plaintiff's actions are "immoral, unethical, oppressive or unscrupulous" in that the plaintiff lured him and other homeowners into a trial modification period, only to drag out that period and scheme to delude homeowners in a malicious manner. Finally, the defendant argues that the plaintiff's actions have caused him substantial injury in that he paid money to the plaintiff that he could have used to "pursue other options of financial stabilization."
As discussed supra, the pleadings do not establish that the plaintiff intentionally or negligently enticed him to enter into an agreement. In fact, the pleadings do not establish that there was even an agreement between the parties. Although the defendant pleads that the plaintiff lured him into a trial modification scheme, this is nothing more than a conclusory allegation since the defendant also pleads that the plaintiff sent him letters extending him an offer to apply for a modification. Even construing the allegations in a light most favorable to the defendant, it is unclear how sending such letters can be characterized as a "scheme to delude homeowners," when the letters simply make an offer to apply for modification. For these reasons, the defendant's third counterclaim is ordered stricken.
CONCLUSION
For the foregoing reasons, the plaintiff's Motion to Strike is granted. Specifically, the defendant's first and second special defenses are ordered stricken and the counts one, two and three of the defendant's counterclaims are ordered stricken.
SO ORDERED.