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Saxon Mortgage Serv. v. Aguinaldo

Connecticut Superior Court Judicial District of Stamford-Norwalk at Stamford
Jun 8, 2010
2010 Ct. Sup. 12194 (Conn. Super. Ct. 2010)

Opinion

No. CV 09 5011567 S

June 8, 2010


MEMORANDUM OF DECISION RE MOTIONS TO STRIKE #113.00 and #115.00


On May 14, 2009, the plaintiff, Saxon Mortgage Services, Inc., filed a five-count complaint against the defendants, Arnel Aguinaldo, Fair Home Lending Financial Inc. (Fair Home Lending), Mary Ellen Warner (Ms. Warner), and Donald Warner (Mr. Warner). The plaintiff filed an amended five-count complaint on August 6, 2009, adding Wofsey Rosen Kwenskin Kuriansky LLP (Wofsey Rosen) as a defendant, and a revised amended complaint on November 6, 2009, which is the operative complaint. The defendant, Ms. Ellen Warner, filed a motion to strike counts two and three of the plaintiff's revised amended complaint on November 23, 2009. The defendant Wofsey Rosen joined Ms. Warner's motion to strike by filing a motion to strike on the same day. In count two the plaintiff alleges the existence of an equitable mortgage, and in count three unjust enrichment as to Ms. Warner. In response, the plaintiff filed a memorandum in opposition on December 15, 2009, and the defendant, Ms. Warner, filed a reply on April 5, 2010. The matter was heard at short calendar on April 19, 2010.

Fair Home Lending Financial Inc. and Donald Warner are nonappearing.

The plaintiff alleges the following facts. On or about November 22, 2006, Aguinaldo borrowed $460,000 from Fair Home Lending and executed and delivered to Fair Home Lending a note and a mortgage deed securing the note, conveying a mortgage interest in the subject property. The plaintiff is the owner and holder of the note and mortgage. Aguinaldo failed to make payments when due and is, therefore, in default under the note, as a result of which default the plaintiff commenced a foreclosure action against Aguinaldo, which is currently pending (Saxon Foreclosure).

Saxon Mortgage Services, Inc. v. Aguinaldo, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 08 5006635.

The history of the subject property is alleged to be as follows. At the time of the Warners' divorce, June 28, 2000, they were joint owners of the equity of redemption in the property. The divorce decree provided that Ms. Warner would own the equity of redemption in the property, subject to an existing first mortgage in the approximate amount of $242,000 and a second mortgage in favor of Mr. Warner in the amount of $80,000. On September 24, 2003, Ms. Warner executed and delivered a note, in the original principal amount of $318,000, and mortgage to Ameripath Mortgage Corporation (Ameripath), the proceeds from which were used to pay off the original mortgage. Thereafter, the Warners defaulted on the Ameripath mortgage, and Ameripath commenced a foreclosure action against the Warners (Ameripath Foreclosure). A sale date was set for March 12, 2005, and on March 10, 2005, Ms. Warner transferred her interest in the property to Mr. Warner by quitclaim deed, and Mr. Warner borrowed $400,000 from Freemont Investment Loan (Freemont) secured by a first mortgage on the property (Freemont Mortgage), the Ameripath Mortgage was paid in full with the proceeds, and Mr. Warner released the $80,000 mortgage obligation in his favor. The Freemont Mortgage was assigned to HSBC Bank USA, National Association (HSBC), and when Mr. Warner defaulted on the Freemont Mortgage, HSBC commenced foreclosure (HSBC Foreclosure), and the foreclosure auction took place on the property on October 14, 2006. Prior to the foreclosure auction sale, Mr. Warner sold and transferred the property to Aguinaldo for $575,000 by warranty deed. The Saxon mortgage satisfied the debt of the HSBC Mortgage. In December 2007, Aguinaldo commenced a summary process action against Ms. Warner, who was still occupying the property with her son, and in which action Ms. Warner alleged that Aguinaldo was not the legal owner of the property because the quitclaim deed transferring title from her to Mr. Warner was forged.

Ameripath Mortgage Corp. v. Warner, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 04 0199921.

Aguinaldo v. Warner, Superior Court, judicial district of Stamford-Norwalk at Norwalk, Housing Session, Docket No. SNSP 034562.

Ms. Warner and Wofsey Rosen argue that the plaintiff's equitable mortgage claim must fail because none of the defendants ever granted or could grant an equitable mortgage of any kind to the plaintiff and the defendant Aguinaldo granted only a legal mortgage and could never have granted an equitable mortgage on the property. The plaintiff responds that it has sufficiently stated a claim for declaratory judgment that it has an equitable mortgage on the property. Ms. Warner replies that the plaintiff's opposition brief demonstrates that, if anything, the plaintiff has a legal, not an equitable, mortgage by virtue of its mortgage from Aguinaldo.

"An equitable mortgage may be enforced between the parties to [an] agreement . . ." (Internal quotation marks omitted.) Novastar Mortgage, Inc. v. Smith, Superior Court, judicial district of New Haven at Meriden, Docket No. CV 05 4004777 (November 16, 2007, Taylor, J.) ( 44 Conn. L. Rptr. 558, 561). Specifically,

[a]n equitable mortgage may be constituted by any writing from which the intention to create a lien on specific real property as security for a debt is shown . . . Such a mortgage may arise by (1) an attempt to create a mortgage, though imperfectly executed; (2) by an agreement to charge described property as security for money advanced; and (3) where the plaintiff advanced the sum of money to the defendant on the condition that the defendant would execute and deliver a mortgage and defendant failed to do so . . .

In Connecticut the issue of equitable mortgage has arisen when a party has argued that a land transaction or deed absolute was not a conveyance, but rather a security instrument . . . In Franchi [ v. Farm Holme, Inc., 191 Conn. 201, 214-16, 464 A.2d 35 (1983)], the court said that whether a deed might be considered an equitable mortgage must be determined by examining the intention of the parties, ascertained in view of all the circumstances, as to the purpose which the transaction is to effectuate . . .

In Lynch v. Moser, 72 Conn. 714 [ 46 A. 153] (1900), a woman, married prior to 1877, agreed in writing for good consideration to assume a mortgage. The agreement was not signed by her husband, which at that time was necessary to make it enforceable. The court said [that] "[t]here was an agreement in writing for good consideration to assume a mortgage. As against Mrs. Moser, the mortgage so assumed became a good mortgage. It was in equity the same as though she had herself given the mortgage." [ Id.,] 720 . . .

In all of these cases the essential fact given rise in equity to what is called an equitable mortgage is the lending of money or giving of credit in reliance upon the agreement that the property involved be security for such loan or debt.

(Citations omitted; internal quotation marks omitted.) Nelson v. Catalano, Superior Court, judicial district of Hartford, Docket No. CV 03 0824431 (April 3, 2007, Satter, J.T.R.) ( 43 Conn. L. Rptr. 788, 790).

Additionally, "[t]he rule of law in Connecticut is that where the conveying instrument is void even a bona fide purchaser or mortgagor for value and without notice will not acquire an estate or interest as against the owner. If, however, instead of being void the transfer is merely voidable, a bona fide purchaser or mortgagor would retain an interest on the property which ceases to exist only upon satisfaction [of] the loan . . . A bona fide purchaser is a buyer who pays a full and fair price for the property without notice that a third party has an interest in that property . . . A transfer is void when the transferor does not have the authority to effectuate the transfer." (Citations omitted; internal quotation marks omitted.) Demars v. Chatelle, Superior Court, judicial district of Windham, Docket No. CV 08 5002561 (July 31, 2008, Potter, J.T.R.); see also Graham v. Zimmerman, 181 Conn. 367, 378, 435 A.2d 996 (1980); Clean Corp. v. Foston, 33 Conn.App. 197, 202, 635 A.2d 1200 (1993); Sobasko v. Rywolt, 18 Conn.Sup. 104, 106 (1952); Salahshourian v. Ferrante, Superior Court, judicial district of Fairfield, Docket No. 0258370 (August 12, 1992, Levine, S.T.R.).

In the present case, there cannot be an equitable mortgage for the following reasons. If the quitclaim deed is determined to not have been fraudulent, then a valid and intact mortgage is in place, upon which the plaintiff may foreclose. If, however, the quitclaim deed is determined to have indeed been fraudulent, then Aguinaldo never owned a valid property interest, and because one cannot mortgage a property that one does not own, the executed note and mortgage, would be invalid. The issue in the present case does not, however, concern a security interest, or a promised mortgage, or an imperfectly executed mortgage. Rather, it concerns a perfectly executed mortgage, utilizing property that may not have been owned by the mortgagor. This scenario does not qualify as one for which Connecticut courts have intended an equitable mortgage. Accordingly, the remedy of an equitable mortgage is inapplicable in the present factual scenario, and the court hereby grants Ms. Warner's motion to strike count two of the plaintiff's revised amended complaint. The same argument also applies to the defendant Wofsey Rosen, so the court hereby also grants Wofsey Rosen's motion to strike count two of the plaintiff's revised amended complaint.

Further, even if the plaintiff were to argue that the equitable mortgage is not between the plaintiff and Aguinaldo, but rather between the plaintiff and Ms. or Mr. Warner, who potentially still own the property, the key element of intent is missing as to Ms. Warner. The plaintiff fails to allege specific intent by Ms. Warner as to the Saxon mortgage, and Ms. Warner claims a general lack of intent not only to have transferred the property, but also to have mortgaged the property to the plaintiff.

Ms. Warner and Wofsey Rosen further argue that the plaintiff's unjust enrichment claim must fail because the plaintiff is not alleged to have conferred any benefit whatsoever on Ms. Warner, which is a necessary element to any claim of unjust enrichment. The plaintiff responds that it has sufficiently stated a claim for unjust enrichment. Ms. Warner replies and reiterates that the plaintiff's unjust enrichment claim must fail because the claim of unjust enrichment is not an endlessly elastic principle.

It is well established "that lack of a remedy under the contract is a precondition for recovery based upon unjust enrichment . . ." (Citation omitted; internal quotation marks omitted.) Bridgeport v. Kasper Group, Inc., 278 Conn. 466, 472 n. 4, 899 A.2d 523 (2006). "Unjust enrichment applies wherever justice requires compensation to be given for property or services rendered under a contract, and no remedy is available by an action on the contract . . . A right of recovery under the doctrine of unjust enrichment is essentially equitable, its basis being that in a given situation it is contrary to equity and good conscience for one to retain a benefit which has come to him at the expense of another . . . With no other test than what, under a given set of circumstances, is just or unjust, equitable or inequitable, conscionable or unconscionable, it becomes necessary in any case where the benefit of the doctrine is claimed, to examine the circumstances and the conduct of the parties and apply this standard . . . Unjust enrichment is, consistent with the principles of equity, a broad and flexible remedy . . . Plaintiffs seeking recovery for unjust enrichment must prove (1) that the defendants were benefited, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the plaintiffs' detriment." (Internal quotation marks omitted.) Vertex v. Waterbury, 278 Conn. 557, 573, 898 A.2d 178 (2006).

In the present case, the plaintiff alleges that Ms. Warner benefited from the mortgage, in that the original mortgage of $242,000 and the mortgage by Mr. Warner of $80,000, as provided in the Warners' divorce decree, have been satisfied. Although the benefits were not conferred to her directly by the plaintiff, as the plaintiff dealt with Aguinaldo, who dealt with Mr. Warner, Ms. Warner received the financial benefit from the mortgage transaction. Therefore, according to the plaintiff's allegations, the plaintiff did indeed convey value to Ms. Warner, albeit not directly. Specifically, the plaintiff alleges that Ms. Warner was benefited in the amount of the proceeds of the Saxon mortgage, and that the plaintiff has suffered financial detriment as a result of Ms. Warner's failure to pay and/or her attempts to remove the Saxon mortgage as a valid first mortgage against the property. Although it may be determined later in the proceedings that Ms. Warner received no value from the mortgage transaction, for the purpose of the present motion to strike, the plaintiff sufficiently alleges unjust enrichment as to Ms. Warner. Accordingly, because unjust enrichment is an equitable remedy, and the case law does not explicitly require the plaintiff to have handed the financial benefit directly to the defendant, the court hereby denies Ms. Warner's motion to strike count three of the plaintiff's revised amended complaint. As count three, unjust enrichment, is only pleaded as against Ms. Warner, the court will not address the defendant Wofsey Rosen's motion to strike that count.

As a cause of action of equitable mortgage does not exist in Connecticut for the present case, Ms. Warner's and Wofsey Rosen's motion to strike count two of the plaintiff's complaint are granted. Further, as the plaintiff sufficiently alleges a cause of action for unjust enrichment as to Ms. Warner, her motion to strike count three of the plaintiff's complaint is denied.


Summaries of

Saxon Mortgage Serv. v. Aguinaldo

Connecticut Superior Court Judicial District of Stamford-Norwalk at Stamford
Jun 8, 2010
2010 Ct. Sup. 12194 (Conn. Super. Ct. 2010)
Case details for

Saxon Mortgage Serv. v. Aguinaldo

Case Details

Full title:SAXON MORTGAGE SERVICES, INC. v. AGUINALDO

Court:Connecticut Superior Court Judicial District of Stamford-Norwalk at Stamford

Date published: Jun 8, 2010

Citations

2010 Ct. Sup. 12194 (Conn. Super. Ct. 2010)