Opinion
No. CV-09-6004927
August 11, 2010
RULING ON MOTION TO STRIKE DEFENDANTS' REVISED COUNTERCLAIMS
The plaintiff, Wells Fargo Bank, N.A., as Trustee for the Registered Holder of GMAC Commercial Securities, Inc., Commercial Pass-Through Certificates, Series, 2004-C3, has moved to strike the Revised Counterclaims dated April 8, 2010 on the grounds that the counterclaims fail as a matter of law because they do not go to the making, validity, or enforcement of the note or mortgage that is the subject of this action and because some of them fail to state a claim upon which relief can be granted.
Allegations of the Counterclaims
The counterclaims allege that in August 2004 the defendant, Riverview East Windsor, LLC ("Riverview") purchased the property which is the subject of this action, an apartment complex located at 225-226 South Water Street, East Windsor (the "Property"). In order to finance the purchase of the Property, Riverview gave a promissory note and mortgage to Deutsch Bank. The note and mortgage were ultimately assigned to the plaintiff. At the end of May 2009, Riverview informed the master servicer of the loan that Riverview would no longer be able to make payments on the note as of June 1, 2009 "because of financial concerns that had arisen with respect to the Subject Property, in significant part due to the historically difficult economic times." Counterclaim ¶ 6. Riverview alleges that it was current on its loan payments through May 2009. However, it does not allege that it has made any payments on the loan since that time.
The allegations of the counterclaim pertain to the conduct of the plaintiff's assignor, CW Capital Asset Management LLC with respect to failure to negotiate a workout of the loan. It also alleges that CW Capital Asset Management LLC failed to negotiate a workout "in good faith" because it improperly considered the involvement of a principal of the defendant, Michael Belfonti, in other loans on unrelated properties. The four counterclaims are all based on the plaintiff's alleged refusal to negotiate a loan modification and its decision to proceed with the foreclosure action. None of the counterclaims pertain to the making, validity or enforcement of the note and mortgage at issue.
Discussion of the Law and Ruling
It is well established in Connecticut that defenses and counterclaims in a foreclosure action must relate to the making, validity, or enforcement of the mortgage note. Southbridge Associates, LLC v. Garofalo, 53 Conn.App. 11, 15, 728 A.2d 1114 (1999). Practice Book § 10-10 provides that a defendant may file a counterclaim against a plaintiff provided that "each such counterclaim . arises out of the transaction or one of the transactions which is the subject of the plaintiff's complaint."
The purposes underlying § 10-10 are "judicial economy, avoidance of multiplicity of litigation and avoidance of piecemeal disposition of what is essentially one action." Wallingford v. Glen Valley Associates, Inc., 190 Conn. 158, 161, 459 A.2d 525 (1983). In determining whether claims made in a complaint and counterclaim are essentially "one action," a court must consider whether a substantial duplication of effort would result if each claim was tried separately. Id.
The counterclaims do not relate to the making, validity, or enforcement of the note or the mortgage which is the subject of the complaint. Instead, the counterclaims allege agreements, failures to agree, and other actions by the plaintiff which post-dated the aforementioned note and which were wholly separate and distinct from the rights and obligations of the parties under the note and mortgage.
The counterclaims at their core pertain to the plaintiff's conduct after the execution of the note and mortgage at issue, and after the defendants' default. Such conduct has been held not to arise from the same transaction as the foreclosure complaint. JP Morgan Chase Bank v. Rodrigues, 109 Conn.App. 125, 134-35, 952 A.2d 56 (2008); Lyman v. Stevens, 123 Conn. 591, 598, A.2d (1937); Citicorp Mortgage, Inc. v. Ribera, 1995 Conn.Super. LEXIS 2627, at *5 (Pickett, J., September 21, 1995); Great Country Bank v. Kiely, 1995 Conn.Super, LEXIS 2921 (Curran, J., October 19, 1995).
The counterclaims must also be stricken on substantive grounds. A claim for breach of the covenant of good faith and fair dealing is not available in a foreclosure action where such claim is based on the lender's insistence upon asserting its legal rights under the loan documents. Southbridge Associates, LLC v. Garofalo, 53 Conn.App. 11, 15, 728 A.2d 1114 (1999).
In Southbridge Associates the defendant borrower defaulted on a mortgage that had been assigned by the lender after execution. Upon default, the mortgage was again assigned to the plaintiff. The borrower offered to purchase the notes from the plaintiff at a higher price than the plaintiff paid for them. The plaintiff rejected this offer and commenced a foreclosure action. The defendant filed a special defense of the breach of the implied duty of good faith and fair dealing based on the plaintiff's failure to accept the defendant's offer to purchase the notes. The Appellate Court held that there was no breach of the duty of good faith and fair dealing because the holder of a note and mortgage has no legal obligation to sell them at a discount to the borrower and the loan documents did not require negotiations between the mortgagor and mortgagee prior to the enforcement of the mortgagee's foreclosure rights.
Counts Two and Three of the Counterclaim allege that the plaintiff should be barred from foreclosing on the Property and should pay damages because Wells Fargo Bank received government funds under the Troubled Asset Relief Program ("TARP") and failed to pass the benefit of such funds on to its customers, including the defendants.
These counterclaims fail to state a claim on which relief can be granted because there is no private right of action under the Emergency Economic Stabilization Act ("EESA"), 12 U.S.C. § 5201 et seq., nor under the programs promulgate pursuant thereto such as TARP. Pantoja v. Countrywide Home Loans, Inc., 640 F.Sup.2d 1177, 1184-85 (N.D.Cal. 2009); Regions Bank v. Homes by Williamscraft, Inc., 2009 U.S. dist LEXIS 103574, at *6.8 (N.D.Ga., Nov. 6, 2009).
For foregoing reasons, the motion to strike the counterclaims is granted.