Opinion
FBTCV126029126S
07-17-2017
HSBC Bank USA, National Association as Trustee for PHH 2007-1 v. Wilner Joseph et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION ON DEFENDANT'S MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION (NO. 154) AND ON PLAINTIFF'S OBJECTION TO DEFENDANT'S MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION (NOS. 151/157)
Alfred J. Jennings, Judge Trial Referee.
A. Plaintiff's Motion to Dismiss
This foreclosure case was commenced returnable August 14, 2012 by plaintiff. HSBC Bank USA National Association as Trustee for PHH 2007-1 against defendants Wilner Joseph, Gerline Benaime and Mortgage Electronic Registration Systems, Inc. (MERS) (as the holder of a second mortgage). The defendant Gerline Benamime has been defaulted for failure to plead. The defendant Wilner Joseph filed an Answer admitting the allegations of the foreclosure complaint except paragraph 6 which alleges that the plaintiff sent written notice of default to the defendants, that they failed to cure the default, and that the plaintiff accelerated the balance due under the Note. No special defenses were filed. On June 16, 2015 the plaintiff moved for summary judgment as to liability relying on the admissions made by the defendant in his Answer and the affidavit of Felicia Polk as Assistant Vice President of plaintiff, with attached exhibits, attesting that defendants signed on October 17, 2006 a $265,000 promissory Note payable to PHH Mortgage Corporation; that the Note was endorsed to Bishop's Gate Residential Trust by PHH Mortgage Corporation, and then endorsed in blank by Bishop's Gate Residential Trust making it a bearer instrument; that " the plaintiff and/or its agents were in possession of the original note at the time of the commencement of instant foreclosure action; and that the plaintiff is the party entitled to enforce the underlying note and mortgage." (Para. 5.) The affidavit further attests that the Mortgage was assigned by MERS as nominee for PHH Mortgage Corporation on May 11, 2010 to HSBC Bank USA National Association as Trustee for PHH Alternative Mortgage Trust Series 2007-1; and that the Mortgage was further assigned on June 25, 2014 by HSBC Bank USA National Association as Trustee for PHH Alternative Mortgage Trust Series 2007-1 to the plaintiff HSBC Bank USA National Association as Trustee for PHH 2007-1 which is the holder of the Note and Mortgage. (Para. 8.) (The names of the two assignee trust beneficiaries differ in that the four words " Alternative Mortgage Trust Series" are present in the first but absent in the second.) The affidavit further attests that the Note has been in default of monthly payments continuously since the payment due on December 1, 2006, that written notice of default was given, that the default was not cured, and that the plaintiff has accelerated the indebtedness of the Note. Attested copies of the Note, the Mortgage, each Assignment of Mortgage, and the Default Letters are attached as exhibits to the affidavit.
The defendant failed to object to plaintiff's Motion for Summary Judgment and submitted no counter affidavit or other evidence to contradict the Felicia Polk affidavit. The court granted plaintiff's Motion for Summary Judgment as to liability on July 13, 2015. Thereafter the court entered a judgment of strict foreclosure on February 22, 2016 with law days commencing May 24, 2016. On May 24, 2016 the law day was extended to August 23, 2016. On August 23, 2016 the law day was extended to September 27, 2016. On September 27, 2016 defendant Wilner Joseph filed a Motion to Dismiss for Lack of Subject Matter Jurisdiction which motion was subsequently stricken by the court as filed by counsel in violation of his limited appearance. On September 27, 2016 defendant Wilner Joseph also filed in the United States Bankruptcy Court a Petition for Protection under Chapter 13 of the Bankruptcy Code (which was dismissed by the Bankruptcy Court on November 10, 2016).
The motion now before the court is Defendant's Motion to Dismiss for Lack of Subject Matter Jurisdiction dated December 4, 2016 (No. 154) filed by counsel under an unrestricted full appearance in which defendant asserts lack of subject matter jurisdiction for lack of standing and fraud. Although defendant requests an evidentiary hearing on his claims of lack of standing and fraud, he has presented no affidavit or other evidence in support of those claims, and relies entirely on facts and claimed inconsistencies set forth by plaintiff in the complaint, the Polk affidavit, and the exhibits attached thereto. There is no contested issue of jurisdictional fact that would call for an evidentiary hearing, and the motion can be decided on the allegations of the complaint (admitted by the defendant with the sole exception of the sending of a notice of default) supplemented by the undisputed facts evidenced in the record. Conboy v. State, 292 Conn. 642, 650-51, 974 A.2d 669 (2009).
Defendant's first two arguments are rejected as unsupported by any legal authority: that the note was endorsed by allonges rather than by placing the endorsements on the note itself when there was space to do so; and that there is allegedly a typographical error at paragraph 5 of the Polk affidavit describing the plaintiff HSBC Bank USA National Bank as Trustee for PHH 2007-1 as " HSBC Bank USA National Bank as Trustee for PHH 200701" (a claimed error the court has been unable to locate); Defendant also argues that the default letter of March 19, 2012 (Exhibit F to the Polk affidavit) comes from PHH Mortgage Corp after MERS had assigned the Mortgage to HSBC Bank, Trustee on May 11, 2010. Without analysis or citation of authority defendant concludes: " There is no valid cure letter, and thereby the instant foreclosure fails." The Mortgage Deed at sections 18 and 22 does require that " Lender" shall send borrower a notice of default prior to acceleration but defendant's conclusion ignores the definitions section of both the Note (Exhibit A to the Polk affidavit) and the Mortgage Deed (Exhibit B) which define the term " Lender" as " PHH Mortgage Corporation." The default letter therefore follows exactly the protocol of the loan documents and is not invalidated by the fact that PHH Mortgage Corp was the sender.
The Motion to Dismiss challenges plaintiff's standing by reference back to the ruling on summary judgment and plaintiff's Felicia Polk affidavit of June 11, 2015. The affidavit at paragraph 7 states: " The Note and the Mortgage were thereafter affected by a Loan Modification dated January 1, 2011 and recorded February 4, 2011 in volume 3454 at Page 2504 of the Stratford Land Records. A True and accurate copy of the Loan Modification Agreement is attached as Exhibit C." Examination of the Loan Modification Agreement confirms that it was entered into as of January 1, 2011 between the two individual defendants and PHH Mortgage Corporation (the original lender) with reference to MERS as holder of the Mortgage. The defendants and PHH Mortage Corp. actually signed the agreement. MERS is described therein as " Mortgagee" which " is a separate corporation acting solely as nominee for Lender and Lender's successors and assigns" but did not sign the agreement. With reference to the previously discussed evidence in the Polk affidavit that MERS had assigned the Mortgage to HSBC Bank USA, National Association as Trustee for PHH Alternative Mortgage Trust Series 2007-1 on May 11, 2010, some eight months prior to the Loan Modification Agreement, defendant argues that the Loan Modification Agreement " . . . is not only a junk document but blatantly fraudulent and certainly not a valid modification." The description of the non-signatory MERS in the Loan Modification Agreement is out of date and inaccurate, but defendant has cited no authority that this error deprives the plaintiff of standing to foreclose a Mortgage which defendant has admitted in his Answer that he signed, admitted that plaintiff is the holder of the underlying Note and Mortgage signed by him, admitted that the underlying loan was modified, and has admitted that he has been in default of the loan before and after modification since December 1, 2006. The Loan Modification issue fails to establish lack of standing, and the error in describing the status of the non-signatory MERS to a modification agreement made six years after the loan was made and the Note went into default is not fraud. There is no claim or evidence that the error was relied upon to any detriment of the defendant.
Defendant further seeks dismissal of this action on the alleged ground that the trust beneficiary PHH 2007-1 " does not exist and the court cannot enter a judgment in favor of a non-existing plaintiff." Defendant claims that the proper plaintiff should be " PHH Alternative Mortgage Trust Series 2007-1, " which is legally incorrect. PHH Alternative Mortgage Trust Series 20017-1 is the beneficiary of the trust to whom the mortgage was assigned on May 11, 2010 by MERS. But the beneficiary of an express trust holding a mortgage is not the proper party to foreclose. Only the trustee of the trust is the proper party. " An executor, administrator or trustee of an express party may sue or be sued without joining the person or persons represented by him and beneficially interested in the action. Conn.Gen. Stat. § 52-106. Section 52-106 provides the trustee of an express trust with " the statutory right to sue" in its own capacity. Chase Home Finance, LLC v. Fequiere, 119 Conn.App. 570, 989 A.2d 606, cert. denied, 295 Conn. 922, 991 A.2d 564 (2010). If defendant meant to say that the proper plaintiff should be HSBC Bank USA, National Association as Trustee for PHH Alternative Mortgage Trust Series 2007-1, that argument is foreclosed by the court's order granting summary judgment in favor of Plaintiff HSBC Bank USA, National Association as Trustee for PHH 2007-1, based on the statement in the Polk Affidavit and the copy of the Assignment verifying that that the Mortgage had been assigned on June 25, 2014 from HSBC Bank USA National Association as Trustee for PHH Alternative Mortgage Trust Series 2007-1 having an address at 95 Washington St., Buffalo, N.Y. 14207 to HSBC Bank USA National Association as Trustee for PHH 2007-1, having an address at 542 Fifth Avenue, New York, N.Y. 10018. Defendant's position is that the beneficiary " PHH-2007-1" of the plaintiff trust " does not exist" and the case should be dismissed because the plaintiff has not proved that it does exist. In fact the burden of proof on that issue is on the defendant and it is he who has failed to meet his burden of proof.
By affidavit the plaintiff HSBC Bank USA National Association as Trustee for PHH 2007-1 was in possession of the original Note endorsed in blank when this action was commenced (Polk affidavit, para 5); and the plaintiff was the holder of the note and became the assignee of the mortgage on June 25, 2014. (Polk affidavit, para. 8.) Defendant admits in his Answer that the plaintiff was the holder of the Note when this action was commenced. Under those circumstances there is a rebuttable presumption that the plaintiff is the owner of the debt and, unless that presumption is rebutted, may foreclose the mortgage under Conn. Gen. Stat. § 49-17. RMS Residential Properties v. Miller, 303 Conn. 224, 231, 32 A.3d 307 (2011). Here, the defendant Joseph has put forth not a scintilla of evidence that Plaintiff HSBC Bank USA National Association as Trustee for PHH 2007-1 is not the owner of the debt evidenced by the Note. His claim that trust beneficiary " PHH 2007-1 " does not exist" is factually unsupported. Counsel's verbal representation that he and his client had tried unsuccessfully to find the existence of an entity known as PHH 2007-1 on the internet is not competent evidence and does not create a controverted fact calling for an evidentiary hearing. And his claim that the chain of endorsements set forth in the Polk affidavit omits a step required by the Pooling and Servicing Agreement of the securitization process likewise fails to create a controverted relevant fact. Under Connecticut law, parties such as defendant Joseph, who were not parties to the securitization process and not third-party beneficiaries of a pooling and servicing agreement have no right to enforce the Pooling and Servicing Agreement or raise its provisions in defense of a foreclosure action. Wells Fargo Bank, N.A. as Trustee v. Robert Strong, 149 Conn.App. 384, 89 A.3d 392 (2014) cert. denied. 312 Conn. 923, 94 A.3d 1202 (2014) .
B. Defendant's Objection to Plaintiff's Motion to Dismiss
The plaintiff objects to defendant's Motion to Dismiss on the ground that it is not legally sufficient under the rule of Sousa v. Sousa, 322 Conn. 757, 143 A.3d 578 (August 30, 2016), in that there is a final judgment of strict foreclosure in place, and under the doctrine of finality of judgments as delineated in Sousa, the judgment under the circumstances of this case can no longer be collaterally attacked. The initial issue is whether or not there was a final operative judgment of strict foreclosure in effect when this Motion to Dismiss was filed on December 4, 2016. A judgment of strict foreclosure entered in this case on February 22, 2016 with law days commencing on May 4, 2016. The judgment was opened to extend the law days on two occasions resulting in a new first law day of September 27, 2016. Defendant filed a third Motion to Open Judgment on September 26, 2016, but failed to have it acted on by the court before the end of the law day. On September 27, 2016--the law day--the defendant, through counsel, electronically filed a Chapter 13 Bankruptcy petition seemingly activating an automatic stay on running of the law days under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a). On November 10, 2016, however, the Bankruptcy Court dismissed the Chapter 13 Petition for the defendant Wilner Joseph's failure to file a personally signed sworn petition as required by the Bankruptcy Code. A Copy of that Order of Dismissal as signed by Chief Judge Manning of the Bankruptcy Court is filed at position 148 in this court's file and has not at any time been questioned or challenged by the defendant. That " Order Dismissing Debtor's Chapter 13 Case" states in relevant part:
ORDERED, that the Debtor's Case is DISMISSED, and it is further, ORDERED that, to the extent that the automatic stay provisions of U.S.C. § 362 were in effect in the case, the automatic stay is annulled nunc pro tunc to September 27, 2016, due to the failure of the Debtor and Attorney Cayo to sign and file a voluntary petition as required by 11 U.S.C. § 301(a).
Under those circumstances the court finds that, for purposes of Sousa v. Sousa, there was a final operative judgment of foreclosure in effect when this Motion to Dismiss was filed on December 4, 2016, which final judgment has not been directly attacked on appeal at the time it was first rendered, or at the times when the law days were extended . . . Citing the 2004 decision of the Appellate Court in Urban Redevelopment Commission v. Katsetos, 86 Conn.App. 236, 860 A.2d 1233, cert denied. 272 Conn. 919, 866 A.2d 1289 (2005), and earlier Supreme Court decisions such as Vogel v. Vogel, 178 Conn. 358, 422 A.2d 271 (1979) which had embraced Section 12 of the Restatement (Second) of Judgments, and recognizing the caselaw stating that a challenge to subject matter jurisdiction may be made " at any time" the Sousa Court confirmed the " modern view of civil procedure" that there are boundaries to challenges concerning the issue of subject matter jurisdiction. Quoting from In re Shamika F., 256 Conn. 383, 408, 773 A.2d 347 (2001), the Sousa court said:
Section 12 of the Restatement (Second) of Judgments provides: " When a court has rendered a judgment in a contested action, the judgment precludes the parties from litigating the question of the court's subject matter jurisdiction in subsequent litigation except if: (1) the subject matter of the litigation was so plainly beyond the court's jurisdiction that its entertaining the action was a manifest abuse of authority; or (2) Allowing the judgment to stand would substantially infringe the authority of another tribunal or agency of government; or (3) The judgment was rendered by a court lacking capability to make an adequately informed determination of a question concerning its own jurisdiction and as a matter of procedural fairness the party seeking to avoid the judgment should have opportunity belatedly to attack the court's subject matter jurisdiction."
Unless a litigant can show an absence of subject matter jurisdiction that makes the prior judgment of a tribunal entirely invalid, he or she must resort to direct proceedings to correct perceived wrongs . . . A collateral attack on a judgment is a procedurally impermissible substitute for an appeal . . . At least where the lack of subject matter jurisdiction is not entirely obvious, the critical considerations are whether the complaining party had the opportunity to litigate the question of jurisdiction in the original action and, if he did have such an opportunity, whether there are strong policy reasons for giving him a second opportunity to do so. 322 Conn. at 771-72.
Application of the Sousa three-part analysis to this case results in the conclusion that defendant Joseph's Motion to Dismiss for Lack of Subject Matter jurisdiction is an impermissible substitute for the appeals which were not filed.
First, it is not entirely obvious that this court lacked jurisdiction. The Supreme Court in Sousa stressed that to be entirely obvious that there was no jurisdiction, " the jurisdictional deficiency must amount to a fundamental mistake that is so plainly beyond the court's jurisdiction that its entertaining the action was a manifest abuse of authority." Id. at 773. In Sousa, for instance, although the court noted that the judgment when originally made could be directly attacked on appeal, it was not entirely obvious that the family court, a court of general jurisdiction, was without authority to hear the case. The same applies here in this foreclosure case in this court. The Superior Court is a civil court of general jurisdiction and the only court in Connecticut with authority to hear all matters of original jurisdiction, with the exception of probate matters. See Conn. Gen. Stat. § 51-164s. This is a foreclosure action over a property in Stratford, Connecticut. This Bridgeport seat of court is the appropriate venue to hear this action, See Conn. Gen. Stat. § § 51-344 and 51-345(b). It is not entirely obvious from the record that the court lacks subject matter jurisdiction in this case.
Second, it is clear that the defendant Wilner Joseph had abundant opportunity to litigate the issue of subject matter jurisdiction prior to the entry of final judgment of foreclosure. He appeared as a self-represented party even before the return date in 2012. He could have filed a motion to dismiss at any time during the three years prior to plaintiff's Motion for Summary Judgment. He could have raised lack of jurisdiction in opposition to the Motion for Summary Judgment (which he did not oppose at all). He could have challenged jurisdiction in the ten months between the granting of summary judgment and the granting of plaintiff's Motion for Judgment of Strict Foreclosure on May 24, 2016, but did not, even though he had access to legal advice as of February 3, 2016 when Atty. Cayo filed his limited appearance.
Third, there are no strong policy reasons for giving Mr. Joseph further opportunity to litigate the alleged lack of subject matter jurisdiction of the court. He admits that he signed the $256,000 Note and borrowed the money on October 17, 2006 and has been in default continuously since the very first monthly payment due on the Note on December 1, 2006. Until this postjudgment motion to dismiss was filed he presented no opposition other than requested extensions of law days. He did not move to reargue or give notice of intention to appeal the granting of summary judgment for the plaintiff, nor did he oppose the entry of judgment of strict foreclosure. After successfully delaying the law day on two occasions, he filed for bankruptcy on the September 27, 2016 law day without filing the required sworn statements. After the Chapter 13 proceeding was dismissed, so far as the record discloses, he made no effort to re-file for bankruptcy protection. It would be difficult to imagine how enforcement of the judgment of strict foreclosure at this juncture would be a miscarriage of justice.
In Connecticut the courts have recognized the foreclosing plaintiff's rights in the subject property and the need for an orderly foreclosure procedure that necessarily must conclude. See, First Nat'l Bank of Chicago v. Luecken, 66 Conn.App. 606, 785 A.2d 1148 (2001). The State's judiciary policy is to have foreclosure cases move as swiftly as possible through the court system. See Suffield Bank v. Berman, 25 Conn.App. 369, 373, 594 A.2d 493, cert. dismissed, 220 Conn. 913, 597 A.2d 339, cert. denied, 220 Conn. 914, 597 A.2d 340 (1991). To allow the defendant to litigate the issue of subject matter jurisdiction at this late stage would be offensive to the policy of finality of judgments.
ORDER
For the foregoing reasons, the defendant's Motion to Dismiss for Lack of Subject Matter Jurisdiction is denied, and Plaintiff's Objection to Defendant's Motion to Dismiss for Lack of Subject Matter Jurisdiction is sustained.