Opinion
No. NNH CV-08-5024807-S
August 4, 2011
MEMORANDUM OF DECISION REGARDING PLAINTIFF'S SEPTEMBER 3, 2010 MOTION FOR SUMMARY JUDGMENT
This is a foreclosure action that was instituted by the plaintiff against the defendant by Summons and Complaint dated November 25, 2008. The defendant filed a July 28, 2010 Answer, five Special Defenses and a Three-Count Counterclaim. The plaintiff has not filed a Reply to the Special Defenses, nor an Answer to the Counterclaim, but has instead filed the September 3, 2010 Motion for Summary Judgment.
In support of its Motion for Summary Judgment, the plaintiff has filed a copy of the Promissory Note (endorsed in blank and is therefore bearer paper), the recorded Mortgage, recorded Assignment of Mortgage, written notices of loan default and acceleration of payment obligations and a detailed Affidavit in support of the Motion for Summary Judgment, which, inter alia, states that the plaintiff is the holder of the Note and Mortgage and details the defendant's default under the terms of the Promissory Note and failure to cure after written notice of the default was sent by the plaintiff to the defendant and an election by the plaintiff to accelerate the payment obligations as allowed by the Note.
The plaintiff has established a prima facie case through the above-described documents: a Promissory Note, owned and/or held by the plaintiff at the inception of the instant litigation, the recorded Mortgage and recorded Assignment, the written notices of default sent by the plaintiff to the defendant, together with the Notice of Acceleration and the Affidavit establishing the defendant's default and indebtedness, together with his failure to cure the underlying default after notice was provided with the terms of the Promissory Note. These facts established by the plaintiff through competent evidence do state a prima facie case. See Webster Bank v. Flanagan, 51 Conn.App. 733, 750-51 (1999).
The defendant, having raised five Special Defenses, has the burden of proof with respect to establishing that any of those Special Defenses raise a genuine issue of material fact as to whether, notwithstanding the allegations of the Complaint, that the plaintiff has no cause of action, Connecticut Practice Book § 10-50.
The defendant's First Special Defense asserts that the plaintiff failed to provide the defendant with notice of the claim's default, and the right to cure it in accordance with the provisions of the subject Mortgage.
The defendant's only support for his claim that he did not receive notice of the default and right to cure, in accordance with the provisions of the loan documents, is his own Affidavit, dated November 5, 2010, Exhibit A to the defendant's November 10, 2010 Objection to Motion for Summary Judgment.
Within said Affidavit, the defendant asserts that he was not living at 35 Ramblewood Drive, Branford, Connecticut (the property subject to the instant mortgage) on October 10, 2008. He further asserts that he never received a copy of the Notice of Intention to Foreclose attached to the plaintiff's Memorandum in Support of its Motion for Summary Judgment.
The defendant's above-described assertions do not address the issue of whether the notice provisions contained within the subject loan documents were fulfilled.
Paragraph 15 of the subject Mortgage requires that any notice sent by lender to borrower as provided for in the Mortgage "shall be deemed to have been given to Borrower when mailed by first class mail, or when actually delivered to Borrower's notice address if sent by other means . . . The notice address shall be the Property Address unless Borrower has designed a substitute notice address by notice to Lender."
The plaintiff has established through its documentation that written notice was mailed first class to the Property Address (see Exhibit D attached to plaintiff's Motion for Summary Judgment) and a second copy of which was sent and delivered via certified mail. The first notice is dated October 7, 2008 addressed to the defendant at the property address noted above and is entitled "Notice of Intention of Foreclosure." Said Notice provides that the Promissory Note was then in default due to nonpayment, provided a notice of the right to cure the default by paying the sum of money required by a particular date (cure deadline).
"Where the question whether proper notice was given depends upon the construction of a written instrument or the circumstances that such as lead to only one reasonable conclusion, it will be one of law . . ." City Corp. Mortgage, Inc. v. Porto, 41 Conn.App. 598, 602 (1996).
The defendant's assertion that he was not living at the subject address and did not receive the Notice of Intention of Foreclosure does not raise a genuine material issue of fact as to whether the plaintiff complied with the notice provisions within the subject Mortgage which required notice to be given to the borrower at the property address. The plaintiff has established that there is no genuine issue of material fact but that it did provide notice in accordance with the agreement of the parties as described in the Mortgage Deed.
The Second Special Defense asserted by the defendant is that the subject Note and Mortgage were secured through abusive and predatory lending practices in that the lender extended credit to the defendant based upon inflated income numbers that were submitted to the plaintiff's assignor by a mortgage broker acting on defendant's behalf. The Special Defense concludes that the plaintiff, or its assignor, failed to verify the defendant's income to confirm the defendant could afford the payments set forth in the Note and Mortgage.
In support of this Special Defense, the defendant offers only his Affidavit of November 5, 2010, Paragraphs 7 and 8. In Paragraph 7, the defendant asserts that his monthly income was not $8,500.00 at the time he took his loan and was substantially less. However, the plaintiff offers Exhibit E1 and E2 which are documents entitled Uniform Residential Loan Application signed by the defendant in connection with his Applications for the instant loan on March 6, 2007, in which the defendant represents on each of the documents that his income is $8,500.00 per month. The defendant signed those Applications and initialed the pages where the representation of his income is made.
The defendant's November 5, 2010 Affidavit flatly contradicts the defendant's above-cited Uniform Residential Loan Applications made in connection with this very loan. The defendant does not deny his signatures on the Uniform Residential Loan Applications.
The defendant asserts, without any legal citation, that the plaintiff or its assignors' failure to discover that the defendant has misrepresented his income, and/or expenses, in order to secure these loans constituted an abusive or predatory lending practice by the plaintiff.
In fact, predatory lending is "making unaffordable loans based on the assets of the borrower rather than on the borrower's ability to repay an obligation; inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced or flipped; or engaging in fraud or deception to conceal the true nature of the loan obligation or ancillary products from an unsuspected or unsophisticated borrower." WM Specialty Mortgage, LLC. v. Brandt, 209 Conn.Super. LEXIS 355 (February 10, 2009, Moran, JTR).
There is no factual allegation of predatory lending as defined above. The misrepresentations sought to be discouraged by the concept of predatory lending were apparently, in this case, made by the defendant in securing the loan.
The defendant offers no legal citation for the legal proposition that the plaintiff or its assignors' failure to discover the defendant's misrepresentations of his income and/or expenses constituted an abusive or predatory lending practice.
In fact, the defendant's Affidavit offers no substantiation or documentation of the assertions contained in Paragraphs 7 and 8: the amount of the defendant's monthly income at the time he took this loan or monthly expenses of the defendant related to another property that he owned.
The defendant's assertions that he misstated his income and his expenses and that the plaintiff's assignor, or the plaintiff, failed to detect these misrepresentations is not evidence of abusive and predatory lending practices, as defined above, by the plaintiff or its assignor.
The defendant offers no competent evidence or witness to describe or state the standard of care applicable to a lender, or its assignee, under the circumstances described in the defendant's Affidavit and Second Special Defense. Further, the defendant offers no competent evidence that the plaintiff or plaintiff's assignor breached the applicable standard of care for a lender by failing to discover the alleged misrepresentations of income and expenses contained in the defendant's loan applications.
Lastly, and this principle of law is applicable to the Second, Fourth and Fifth Special Defenses in this particular case, "In the absence of an express provision, an assignee is not required to assume the original responsibilities of the assignor. This is true both for claims of breach of contract and for claims that the assignor committed fraud or misrepresentation." Deutsche Bank National Trust Company v. Ganci, 2006 Conn.Super. LEXIS 1023, 3-4 (Conn.Super.Ct. 2006).
For all the reasons noted above, the defendant's affidavit in support of the Second Special Defense fails to create a genuine issue of material fact as to whether, notwithstanding the prima facie case of the plaintiff, the allegations of abuse and predatory lending practices existed in this case and consequently that the plaintiff has no cause of action.
The Third Special Defense is a bald assertion of a legal conclusion, "the defendant has exercised his right to rescind the transaction."
The subject loan was originated on March 6, 2007. The three-day period during which the right of rescission existed lapsed on March 9, 2007. The defendant's November 5, 2010 Affidavit in support of his Objection to the Motion for Summary Judgment offers Exhibits A and B which are defendant's correspondence dated August 6, 2009 and some date thereafter in which the defendant ineffectively asserts a right to rescind the transaction.
Nowhere does the defendant in his Affidavit or in his supporting Objection cite any legal citation for the proposition that the defendant maintained or had the right to exercise a right of rescission in connection with this transaction after March 9, 2007.
The Court finds the defendant has failed to raise a genuine issue of material fact that the defendant timely exercised his right to rescind the subject transaction with regard to the Third Special Defense.
The Fourth Special Defense asserts violations of the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) in that all fees paid by the defendant were not properly disclosed and that the defendant's rescission rights were not properly disclosed. Again, the defense consists of simply a legal conclusion with no supporting facts. The defendant offers no competent evidence to support the assertions contained in the Fourth Special Defense. Though defendant's counsel in their skillfully written legal memorandum objecting to the instant Motion for Summary Judgment assert that an examination of the loan documents reveals incorrect, false and misleading information, there is no evidence offered in support of these assertions. There is no Affidavit in support of those assertions, nor is any analysis suggested to the Court from which the Court can independently determine that the documents reveal such a factual pattern or raise a genuine issue of material fact on that issue.
The Court is unable to see that there is any evidentiary support that raises a genuine issue of material fact to support the Fourth Special Defense.
The Fifth Special Defense asserts that the plaintiff, or its assignor, "engaged in misconduct in securing the subject Note and Mortgage and therefore enforcement is barred by the Doctrine of Unclean Hands."
Again, the allegations of the Special Defense do not state a factual basis but merely state legal conclusions. Apparently, Paragraphs 11 and 12 of the defendant's November 5, 2010 Affidavit is meant to support the vaguely stated claims for equitable Doctrine of Unclean Hands.
The defense of unclean hands is generally not recognized as a valid Special Defense in Connecticut. Mechanics and Farmers Savings Bank v. Velco Development Company, Inc., 43 Conn.Sup. 408, affirmed, 232 Conn. 494 (1995).
In order to evoke the Doctrine of Unclean Hands, there must be willful misconduct on the part of the party against whom the doctrine is being invoked. Great Country Bank v. Kiely,
195 Conn.Super. LEXIS 2921 (Superior Court, October 1995, Curran, J.)
Willful misconduct has been defined as intentional conduct designed to injure for which there is no just cause or excuse . . ."Its characteristic element is designed the design to injure either actually entertained or to be implied by from conduct or circumstances . . . Not only the action producing the injury but the resulting injury must also be intentional . . ." Dubay v. Irish, 207 Conn. 518, 533 (1988). There is insufficient competent evidence offered by the defendant from which the Court could deduce that the plaintiff or its assignor engaged in willful misconduct, as defined above. The defendant's Affidavit, Paragraphs 11 and 12, apparently are offered in support of this concept. These paragraphs indicate that the defendant "demanded information from American Home Mortgage Servicing, Inc. requesting information relating to my loan transaction." Paragraph 12 of the Affidavit indicates "I did not receive a response to my written request for information." The requests for information described in the defendant's Affidavit purport to be sent on February 26, 2009 and June 18, 2009, respectively.
The loan was originated in March of 2007. The instant lawsuit filed in November of 2008 with the Notice of Default for nonpayment, right to cure and Notice of Acceleration having been sent to the defendant on October 7, 2008. In sum, the defendant's assertion that the plaintiff's assignors' failure to respond to demands for information dated in February and June of 2009, well after the default for failure to pay the monthly mortgage, the Notice of Default, the Notice of Right to Cure, and the Notice of Acceleration and Intent to Foreclose were sent to the defendant. The subject lawsuit was filed several months prior to the defendant's claim that he demanded information from the mortgage servicer. In sum, the defendant has not raised a genuine issue of material fact as to whether any action, or inaction, of the plaintiff, or its assignor, in failing to respond to the defendant's demand for information resulted in injury to the defendant, much less that any suggestion of injury to the defendant was intended by the conduct of the plaintiff's assignor.
Lastly, the borrower who defaults on a loan obligation, as is present in this case, has unclean hands and cannot invoke the equitable powers of the court. Polverari v. Peatt, 29 Conn.App. 191 (1992).
In sum, the defendant's assertion, without factual basis that the plaintiff or its assignor engaged in misconduct and is therefore barred by the Doctrine of Unclean Hands, does not raise a genuine issue of material fact that, notwithstanding the establishment of a prima facie case by the plaintiff, would establish that the plaintiff has no cause of action as required by Connecticut Practice Book § 10-50.
COUNTERCLAIM: First Count:
The First Count of Prather's Counterclaim asserts a right of rescission of the subject loan. Paragraph 5 of the Counterclaim asserts "that on or about August 6, 2009, the Counterclaim plaintiff (Prather) rescinded the Transaction by written notice to the Counterclaim defendant." The November 5, 2010 Affidavit of Prather, Paragraph 10, asserts "on two occasions I sent written notice that I was rescinding the loan Transaction. A copy of each correspondence is attached hereto as Exhibit A and B."
Exhibit A is dated August 6, 2009 and Exhibit B is undated but refers to the August 6, 2009 correspondence and therefore the Court infers that Exhibit B is written some date after August 6, 2009.
The Counterclaim plaintiff fails to establish that he had any right of rescission other than during the three-day period immediately following the origination of this loan on March 6, 2007. That three-day period lapsed on March 9, 2007. In sum, the First Count of the Counterclaim must fail as the Counterclaim plaintiff (Prather) has not alleged any right, by statute, case law or contract that gave him a right to rescind this Transaction on and after August 6, 2009.
Second Count:
Count Two of the Counterclaim reiterates the allegations of the Second Special Defense, vis-a-vis an abusive or predatory lending based upon a theory that "Counterclaim plaintiff (Prather) or its agent, prepared a Mortgage Application that contained inflated income figures for the Counterclaim plaintiff." Count Two, Paragraph 3 of the Counterclaim.
As was alleged in the Second Special Defense, the Counterclaim defendant or its assignor is alleged to have never verified or investigated these "inflated income figures," Count Two, Paragraph 4 of the Counterclaim.
The Court incorporates all the reasoning described when addressing the Second Special Defense into the logic for rejecting Count Two of the Counterclaim.
Once again, Prather argues that he, or his mortgage broker, prepared a false and deceptive Loan Application overstating his income and understating his expenses and concludes that the original lender and its assignee had an obligation to "verify and investigate" these misstated figures. Prather offers the Court no competent evidence that the instant plaintiff had any obligation to investigate or verify, that whatever review the instant plaintiff undertook, failed to meet any applicable standard of review or that, having failed to investigate and review the loan would not have been otherwise extended to Prather.
Again, the Court reiterates that it accepts the reasoning of the line of cases holding that, uuder circumstances are at hand in the instant matter, any failing by the plaintiff's assignor to verify or investigate the income of the borrower (Prather) in this case is not imposed on the instant plaintiff. Prather has offered no competent evidence that the instant plaintiff undertook the obligation to verify or investigate Prather's loan application nor that the original lender acted as the agent, servant or employee of the instant plaintiff in the original Transaction.
Third Count:
The final Count of Prather's Counterclaim offers a blanket statement that the originating lender, or its assignee, the current plaintiff, "failed to provide the Borrower with all the notices and disclosure required by 12 U.S.C. § 2601 (RESPA)." There is no delineation of any particular notice or disclosure that is allegedly not provided. There is no competent evidence offered by Prather in support of the Third Count of the Counterclaim.
WHEREFORE, the Court finds that the plaintiff has established a prima facie case as noted above.
The Court finds that the defendant has failed to raise a genuine issue of material fact as to the validity of any of the Special Defenses or Counterclaims asserted.
WHEREFORE, judgment as to liability only issues in favor of the plaintiff.