Opinion
No. CV09 500 11 57S
February 10, 2009
MEMORANDUM RE THE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (#120)
By return date, on July 11, 2006, the plaintiff, WM Specialty Mortgage, LLC, instituted a foreclosure action against the defendant, Ronald Brandt. On June 13, 2006, the defendant attempted to answer the complaint and alleged special defenses and counterclaims. These special defenses and counterclaims were subsequently amended and revised three times under dates of July 21, 2006, June 15, 2007, and August 2, 2007. In the second revised affirmative defenses, the defendant alleges misrepresentation of the interest rate and prepayment penalty, fraudulently misrepresentation of the interest rate, predatory lending practice, and failure to advise of a right to cancel. The revised counterclaims allege lack of capacity, fraud and predatory lending practice.
On September 19, 2007, the plaintiff filed a motion for summary judgment, with a memorandum in support, on the grounds that there are no genuine issues of material fact that the defendant is in default and that the special defenses and counterclaims are legally insufficient. On November 1, 2007, the defendant filed a memorandum in opposition. On December 11, 2007, the plaintiff filed a reply memorandum in support.
"As a preliminary matter, we set forth the appropriate standard of review. In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law. The courts hold the movant to a strict standard. To satisfy his burden the tnovant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact. As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent. When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue. Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § [17-45]." (Internal quotation marks omitted.) Zielinski v. Kotsoris, 279 Conn. 312, 318-19, 901 A.2d 1207 (2006).
I. The Foreclosure Complaint
The plaintiff argues that there is no genuine issue of material fact that the defendant is in default of the loan and that his property is subject to foreclosure. In support of this argument, the plaintiff relies on the pleadings and an affidavit by Margarita Guerrero, an employee of Ameriquest Mortgage Company (Ameriquest), the original mortgagee, that included copies of the promissory note, the mortgage, the mortgage assignment to the plaintiff, the notice of the intention to foreclose, and the defendant's responses to the plaintiff's request to admit. The defendant argues that there is an issue as to whether the defendant made payments after the foreclosure action had commenced.
"To make out its prima facie case, [the mortgagee has] to prove by a preponderance of the evidence that it was the owner of the note and mortgage and that [the mortgagor has] defaulted on the note." (Internal quotation marks omitted.) Ocwen Federal Bank, FSB v. Charles, 95 Conn.App. 315, 319, n. 5, 898 A.2d 197, cert. denied, 279 Conn. 909, 902 A.2d 1069 (2006). The plaintiff presents the following evidence in support of its allegation that the loan was in default: On July 28, 2004, the defendant executed and delivered a note for $131,000 to Ameriquest. (Guerrero Affidavit ¶ 3.) This note was endorsed in blank and given to the plaintiff, thereby assigning the note to the plaintiff (Guerrero Affidavit ¶ 3.) The note was given to the plaintiff's counsel to commence a foreclosure action. (Guerrero Affidavit ¶ 3.) Also on July 28, 2004, the defendant conveyed to Ameriquest by mortgage deed an interest in his real property at 75 Myrtle Ave., Ansonia, Connecticut. (Guerrero Affidavit ¶ 4.) The mortgage was recorded on August 5, 2004 in the Ansonia Land Records. (Guerrero Affidavit ¶ 4.) The mortgage was assigned to the plaintiff on June 9, 2006, and was subsequently recorded in the Ansonia Land Records on June 19, 2007. (Guerrero Affidavit ¶ 4.) Although the defendant was required to make mortgage payments on the first day of each month, beginning on October 4, 2004, until the maturity date of September 1, 2034, the defendant stopped making the required payments on January 1, 2006. (Guerrero Affidavit ¶¶ 5-6.) The defendant was given notice of his default in a letter dated April 27, 2006. (Guerrero Affidavit ¶ 8; Exhibit D.) This evidence supports the plaintiff's foreclosure claim.
Only possession of the note is necessary to commence a foreclosure action. See Bankers Trust Co. of California, N.A. v. Vaneck, 95 Conn.App. 390, 391, 899 A.2d 41, cert. denied, 279 Conn. 908, 901 A.2d 1225 (2006); see also General Statutes § 49-17.
The defendant argues that a payment was due on October 1, 2006, four months after the foreclosure action was commenced. The defendant does not cite any evidence in support. The only reference to October 1, 2006, is on the sixth page of the plaintiff's memorandum in support of its motion for summary judgment, that states "[t]he Affidavit in Support of the Motion for Summary Judgment [the Guerrero Affidavit] demonstrates that the Defendant has not made a payment on this loan since the payment due October 1, 2006." This appears to be a typographical error because the Guerrero Affidavit, and all other cites to this date in the memorandum, say that the defendant stopped paying on January 1, 2006, well before the foreclosure commenced. (Guerrero Affidavit ¶ 6; Memorandum in Support pgs. 5, 11.) A typographical error in a memorandum in support, unsupported by any other evidence, does not create a genuine issue of material fact. The defendant has failed to cite any other evidence to contradict the evidence presented by the plaintiff.
The court finds that there is no genuine issue of material fact that the defendant is in default of its loan, and that the plaintiff was entitled to foreclose.
II. The Special Defenses
The plaintiff argues that the defendant's special defenses are legally insufficient because they do not allege sufficient facts to support an affirmative defense of fraud. To support this argument, the plaintiff relies on the pleadings, the affidavit of Margarita Guerrero and the defendant's responses to the plaintiff's request to admit. The defendant argues that he has made legally sufficient allegations and has provided the affidavit of the defendant, Ronald Brandt, in support.
A plaintiff in a foreclosure action can challenge a special defense by summary judgment in three ways. The first way to challenge a special defense is to argue that the special defense does not address the making, validity and enforcement of the mortgage. Chase Manhattan Mortgage Corp. v. Machado, 83 Conn.App. 183, 188, 850 A.2d 260 (2004). "An often cited explanation of the `making, validity or enforcement' limitation is as follows: While courts have recognized equitable defenses in foreclosure actions, they have generally only been considered proper when they attack the making, validity or enforcement of the lien, rather than some act or procedure of the lienholder . . . The rationale behind this is that counterclaims and special defenses which are not limited to the making, validity or enforcement of the note or mortgage fail to assert any connection with the subject matter of the foreclosure action and as such do not arise out of the same transaction as the foreclosure action. Moreover, courts have held that defenses to foreclosure are recognized when they attack the note itself rather than some behavior of the [mortgagee] . . ." (Emphasis in original; internal quotation marks omitted.) 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, 332 n. 2); see also Southbridge Associates, LLC v. Garofalo, 53 Conn.App. 11, 16, 728 A.2d 1114, cert. denied, 249 Conn. 919, 733 A.2d 229 (1999) (upholding the decision of the trial court that the "special defense . . . did not attack the making, validity or enforcement of the note and mortgage and thus raised no issue of material fact that would warrant a trial"); New Haven Savings Bank v. LaPlace, 66 Conn.App. 1, 11, 783 A.2d 1174 (2001) (upholding the decision of the trial court in part because "defendant's fiduciary duty defenses and counterclaims are irrelevant to the foreclosure issue because they do not attack the making, validity or enforcement of the note or mortgage").
The second way to challenge a special defense is to challenge its legal sufficiency. "A valid special defense at law to a foreclosure proceeding must be legally sufficient . . ." (Emphasis added.) Chase Manhattan Mortgage Corp. v. Machado, supra, 83 Conn.App. 188. The legal sufficiency of a special defense is typically challenged in a motion to strike; "[w]henever any party wishes to contest . . . (5) the legal sufficiency of any answer to any complaint, counterclaim or cross complaint, or 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." (Emphasis added.) Practice Book § 10-39(a). Courts, however, have allowed parties to challenge the legal sufficiency of a pleading on summary judgment, but often note that such challenges "may be unfair to the nonmoving party because [t]he granting of a [party's] motion for summary judgment puts the plaintiff out of court . . . [while the] granting of a motion to strike allows the plaintiff to replead his or her case." (Internal quotation marks omitted.) Larobina v. McDonald, 274 Conn. 394, 401, 876 A.2d 522 (2005). With regards to special defenses of a foreclosure action, the courts have often granted the harsh result of summary judgment when finding special defenses legally insufficient. See Chase Manhattan Mortgage Corp. v. Machado, supra, 83 Conn.App. 188-89 (upholding finding of summary judgment because defendant's special defense of fraud was legally insufficient); Connecticut National Bank v. Lewis, Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. CV 92 0703718 (May 19, 1994, Hennessey, J.) (granting summary judgment against defendant's three special defenses because the allegations are legally insufficient). The Supreme Court, however, has recently decided "that the use of a motion for summary judgment to challenge the legal sufficiency of a complaint is appropriate when the complaint fails to set forth a cause of action and the defendant can establish that the defect could not be cured by repleading." Larobina v. McDonald, supra, 274 Conn. 401. Although Larobina specifically dealt with summary judgment of legally insufficient complaints, the reasoning has been extended to considerations of summary judgment of legally insufficient special defenses in foreclosure actions. See The Bank of New York Trust Co. v. Gbeh, Superior Court, judicial district of Litchfield, Docket No. CV 07 5002495 (February 26, 2008, Marano, J.) (holding "that the rationale set forth in Larobina applies in circumstances where the defendants' special defenses would survive, given an opportunity to amend"). Therefore, if a plaintiff were to challenge the legal sufficiency of a special defense in a foreclosure action, it must show that the special defense is insufficient and cannot be replead.
The third way to challenge a special defense is to show that there is no genuine issue of material fact based on the evidence. "The presence . . . of an alleged adverse claim is not sufficient to defeat a motion for summary judgment. A party must substantiate his adverse claim by specifically showing that there is a genuine issue of material fact together with the evidence disclosing the existence of such an issue." Farrell v. Farrell, 182 Conn. 34, 39, 438 A.2d 415 (1980). Even if a special defense is a valid defense to a foreclosure action, and even if such a defense is sufficiently pled, the defendant still must produce sufficient evidence to support the defense in order to survive summary judgment. "There really can't be any practical claim or considerations of fairness which support a defendant's argument that in this situation he or she shouldn't be expected to support the special defense. The defendant would submit argument, affidavits, documents, and anything else permitted by the practice book to support the special defense. A contrary ruling would in effect mean that whenever a special defense is filed in a case it cannot be disposed of by way of summary judgment, at least as long as it raises factual issues." Mechanics Savings Bank v. Walker, Superior Court, judicial district of Hartford, Docket No. CV 91 0500701 (March 9, 1995, Corradino, J.) (14 Conn. L. Rptr. 129). If a plaintiff in a foreclosure action has shown that it is entitled to foreclose, then the burden is on the defendant to produce evidence supporting its special defenses in order to create a genuine issue of material fact; valid, legally sufficient special defenses alone do not.
The defendant in a foreclosure action is in an especially precarious position if the legal sufficiency of its special defenses are challenged in a motion for summary judgment. In order to successfully defend a claim of legal insufficiency, a defendant must argue that its special defenses can be replead, are valid special defenses to a foreclosure action, and must produce enough evidence in support of the special defense to create a genuine issue of material fact. Although no case directly says this, the defendant cannot logically argue that it can successfully replead a special defense, as required by Larobina, if the special defense is not proper in a foreclosure action and there is no evidence to support it. This is the exact problem facing the defendant in this case.
The plaintiff challenges the legal sufficiency of the defendant's special defenses. "Fraud involves deception practiced in order to induce another to act to her detriment, and which causes that detrimental action . . . The four essential elements of fraud are (1) that a false representation of fact was made; (2) that the party making the representation knew it to be false; (3) that the representation was made to induce action by the other party; and (4) that the other party did so act to [its] detriment . . . Because specific acts must be pleaded, the mere allegation that a fraud has been perpetrated is insufficient." (Citations omitted; internal quotation marks omitted.) Chase Manhattan Mortgage Corp. v. Machado, supra, 83 Conn.App. 188. The plaintiff argues that there are no false representations regarding the mortgage terms because the defendant took the mortgage home, had an opportunity to review it, had a right to cancel and ultimately accepted the terms in order to refinance a previous mortgage and get a disbursement. Besides these arguments, the defendant's allegations do not specifically allege that the misrepresentations were intentional, that the misrepresentations were made to induce action by the defendant or that the defendant relied on these representations to his detriment.
Although the plaintiff also challenges the validity of the special defenses, allegations that Ameriquest fraudulently induced the defendant into creating the mortgage raises questions regarding the making of the note, and is a proper special defense to a foreclosure action. See Chase Manhattan Mortgage Corp. v. Machado, supra, 83 Conn.App. 188 (holding that "[f]raud is an equitable defense to a foreclosure action").
The sole evidence produced by the defendant is his own affidavit. In this affidavit, the defendant states that the terms of the loan were misrepresented to him and that the payment and interest on the loan were higher then what he was told. (Brandt Affidavit ¶ 4.) He also claims that he was not told he had a recision period. (Brandt Affidavit ¶ 10.) He believes that the mortgage lender made these false representations to take advantage of him given his illiteracy and mental incapacity. (Brandt Affidavit ¶ 11.) He also claims that if he had understood all the terms of the loan he would not have accepted it. (Brandt Affidavit ¶ 9.) These statements suggest that the defendant could make a legally sufficient claim of fraud in the inducement and that there is a genuine issue of material fact as to whether Ameriquest committed fraud. As a result, summary judgment is inappropriate at this time. Therefore, the plaintiff's motion for summary judgment regarding fraud in the inducement is denied.
III. The Counterclaim
The plaintiff argues that it is entitled to summary judgment with regards to the counter claims because, as an assignee, it is not responsible for the actions of the assignor. The defendant does not present any argument or facts to support its counterclaims.
"While Connecticut's appellate courts do not appear to have had an occasion to consider precisely the issue of the liability of an assignee for pre-assignment breaches by the assignor, numerous other courts have ruled that to be liable for the assignor's nonperformance of duties under a contract, the assignee must have expressly assumed liability for the prior breaches." SCP Corp. v. BankBoston, Superior Court, judicial district of Waterbury, Docket No. X01 CV 98 0116198 (March 18, 1999, Hodgson, J.) (24 Conn. L. Rptr. 304, 305); see also Deutsche Bank National Trust Co. v. Ganci, Superior Court, judicial district of Hartford, Docket No. CV 05 4017440 (April 5, 2006, Satter, J.T.R.) (holding "that an assignee is not responsible for the acts of an assignor").
The defendant has failed to allege or produce any evidence that the plaintiff, as an assignee, assumed the responsibility for the actions of Ameriquest, an assignor. Although the defendant alleges that the plaintiff committed acts that injured him, the counterclaims only specifically allege actions taken by Ameriquest. The defendant has failed to allege any facts that suggest the plaintiff committed any wrongs, or took responsibility for the wrongs committed by Ameriquest. The defendant has also failed to produce any evidence that would suggest that repleading could solve these deficiencies.
The defendant also claims that he is a victim of predatory lending. Predatory lending, by definition, 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 the 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 unsuspecting or unsophisticated borrowed." (Defendant's Trial Memorandum, p. 10, fn 5.)
The defendant's affidavit fails to satisfy the definition of predatory lending and therefore the claim is legally insufficient.
As a result, the plaintiff's motion for summary judgment against the defendant's counterclaims is granted.