U.S. Bank National Ass'n.
v.
3060 Main

Connecticut Superior Court Judicial District of Fairfield at BridgeportJul 6, 2010
2010 Ct. Sup. 13908 (Conn. Super. Ct. 2010)

No. CV08 501 98 06S

July 6, 2010


MEMORANDUM OF DECISION


FACTUAL AND PROCEDURAL BACKGROUND

In this commercial foreclosure action, the plaintiff, U.S. Bank National Association, as trustee of the Lehman Brothers Small Balance Commercial Mortgage Pass Through Certificates, 2007-3, has brought suit against the defendants, 3060 Main, LLC (3060 Main), 3044 Main, LLC (3044 Main) and Dahill Donofrio. The plaintiff's operative pleading, which is the amended complaint dated July 28, 2009, alleges the following facts. 3060 Main and 3044 Main are the owners of real property located at 3060 Main Street in Stratford. On April 30, 2007, 3060 Main, acting through its member, Donofrio, executed and delivered a $948,000 mortgage promissory note to Greenpoint Mortgage Funding, Inc. (Greenpoint). 3060 Main then executed and delivered an "Open-End Mortgage Deed, Assignment of Rents and Security Agreement" to Greenpoint. This mortgage was dated April 30, 2007, and it was recorded on the Stratford land records. On this same date, Donofrio also executed and delivered to the plaintiff a guaranty, in which he agreed to be held personally liable for the indebtedness of 3060 Main. Greenpoint subsequently assigned the note and mortgage to Lehman Brothers Bank, FSB (Lehman Brothers) by an assignment of mortgage dated May 4, 2007. This assignment was recorded on the Stratford land records on October 10, 2008. Lehman Brothers then assigned the note and mortgage to the plaintiff by an assignment of mortgage dated August 19, 2008, which was recorded on the Stratford land records on October 10, 2008.

Donofrio has not filed an appearance in this matter. A motion for default for failure to appear was entered against him on January 5, 2009.

On September 23, 2009, which is the same day that this motion for summary judgment was filed, the plaintiff filed a request for leave to amend its complaint. 3060 Main filed an objection to this amended complaint on October 7, 2009. This objection was sustained by the court, Hartmere, J., on November 10, 2009. Accordingly, the operative complaint is the plaintiff's amended complaint dated July 28, 2009.

In its amended complaint, the plaintiff alleges that it is currently the owner and holder of the subject mortgage note and that the defendants are in default on their payments under the terms of the note. Consequently, the plaintiff has elected to accelerate the balance due on the note and foreclose the mortgage. 3060 Main filed an amended answer on June 17, 2009. 3044 Main also filed an amended answer on July 15, 2009. In their respective answers, 3060 Main and 3044 Main each generally denied the allegations of the plaintiff's amended complaint, and interposed three special defenses: (1) the court's lack of subject matter jurisdiction; (2) that the plaintiff is not a proper party in interest to initiate this lawsuit and (3) the plaintiff's lack of standing.

On September 23, 2009, the plaintiff filed a motion for summary judgment on its amended complaint as to all of the defendants in this action. The plaintiff moves for summary judgment as to liability only. Attached to the plaintiff's motion are: (1) the sworn affidavit of John Kullerstrand, who purports to be a vice president of Aurora Bank, FSB (Aurora Bank), formerly known as Lehman Brothers; (2) a copy of the subject promissory note dated April 30, 2007; (3) a copy of the guaranty issued by Donofrio dated April 30, 2007; (4) a copy of the mortgage dated April 30, 2007; (5) a copy of a document assigning the mortgage from Greenpoint to Lehman Brothers dated May 4, 2007; (6) a copy of a document assigning the mortgage and loan documents from Lehman Brothers to the plaintiff dated August 19, 2008 and (7) a letter from Lehman Brothers to 3060 Main dated July 8, 2008 indicating that the mortgage was in default. On December 3, 2009, 3060 Main filed a memorandum of law in opposition. 3060 Main did not attach any documents to its memorandum of law in opposition. In response, the plaintiff filed a reply memorandum on May 19, 2010. Attached to the plaintiff's reply memorandum are: (1) a certified copy of a transcript of proceedings involving 3060 Main before the United States Bankruptcy Court and (2) a legal opinion letter from the law firm of Collimore and Collimore dated April 30, 2007. At this point in time, 3044 Main has not filed any opposition to the plaintiff's motion for summary judgment.

Although the text of the plaintiff's motion indicates that it is moving for summary judgment on the amended complaint dated September 23, 2009, the court notes that the operative complaint in the present case is the amended complaint dated July 28, 2009.

As a preliminary matter, 3060 Main challenges the admissibility of the Kullerstrand affidavit offered in support of the plaintiff's motion for summary judgment. 3060 Main first argues that this affidavit is unreliable because there is no basis for Kullerstrand's personal knowledge regarding his assertions that the plaintiff owns the subject note and mortgage. Specifically, 3060 Main states: "John Kullerstrand explains that he is employed as a Vice President with Aurora Bank, FSB. Aurora Bank, FSB is not a party to this matter and we learn only through Mr. Kullerstrand, that Aurora Bank, FSB was formerly known as Lehman Brothers Bank, FSB . . . How John Kullerstrand knows what happened at Lehman Brothers Bank, FSB, when the Note, Mortgage and Guaranty were purportedly assigned/transferred is totally unclear."

The requirements for affidavits offered in support of a summary judgment motion are set forth in our rules of practice. "Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein. Sworn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto." Practice Book § 17-46.

In his affidavit, Kullerstrand attests: "I am employed as a VICE PRESIDENT with Aurora Bank, FSB, formerly known as Lehman Brothers Bank, FSB. In my capacity as PORTFOLIO MGR I am personally familiar with and have personal knowledge of the books and records of Greenpoint Mortgage Funding, Inc., Lehman Brothers Bank, FSB, and US Bank National Association as Trustee of Lehman Brothers Small Balance Commercial Mortgage Pass-Through Certificates 2007-3, as they apply to the account of the Defendants 3060 Main, LLC and Dahill Donofrio." Below Kullerstrand's signature is a notation indicating that Aurora Bank is the plaintiff's servicing agent. With these attestations, Kullerstrand avers that he is an employee of Aurora Bank, formerly known as Lehman Brothers, and that he obtained personal knowledge of 3060 Main and Donofrio's account through his review of company records. Our Appellate Court has determined that attestations similar to these are sufficient to provide a basis for an affiant's personal knowledge in an affidavit used to support a judgment of strict foreclosure. The Appellate Court stated: "The affidavit asserted that the affiant was employed by the servicing agent for the substitute plaintiff, a relationship strong enough to establish a foundation for the affiant's claims that she was familiar with the books and records regarding the defendant's indebtedness." Bank of America, FSB v. Franco, 57 Conn.App. 688, 695, 751 A.2d 394 (2000). As Kullerstrand attests that he is employed by the plaintiff's servicing agent and that he has personally reviewed the books and records relating to 3066 Main and Donofrio's mortgage, Kullerstrand's affidavit establishes a sufficient foundation for his personal knowledge such that the affidavit can be used to support the plaintiff's summary judgment motion.

Next, 3060 Main argues that Kullerstrand's affidavit fails to satisfy the requirements that would allow the plaintiff's supporting documentation to be admitted under the business records exception to the hearsay rule. General Statutes § 52-180 provides: "(a) Any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible as evidence of the act, transaction, occurrence or event, if the trial judge finds that it was made in the regular course of any business, and that it was the regular course of the business to make the writing or record at the time of the act, transaction, occurrence or event or within a reasonable time thereafter." "To be admissible under the business record exception to the hearsay rule, a trial court judge must find that the record satisfies each of the three conditions set forth in . . . § 52-180. The court must determine, before concluding that it is admissible, that the record was made in the regular course of business, that it was the regular course of such business to make such a record, and that it was made at the time of the act described in the report, or within a reasonable time thereafter . . . In applying the business records exception . . . [§ 52-180] should be liberally interpreted." (Internal quotation marks omitted.) Connecticut Light Power Co. v. Gilmore, 289 Conn. 88, 116, 956 A.2d 1145 (2008). "The witness introducing the document need not have made the entry himself or herself, nor have been employed by the organization during the relevant time period . . . In addition, [t]here is no requirement in § 52-180 . . . that the documents must be prepared by the organization itself to be admissible as that organization's business records." (Citation omitted; internal quotation marks omitted.) New England Savings Bank v. Bedford Realty Corp., 246 Conn. 594, 603, 717 A.2d 713 (1998).

In his affidavit, Kullerstrand attests: "The books and records are kept in the ordinary course of business and said books and records were made at or about the time described therein. It is the regular course of business for mortgage lenders to maintain such records when originating and/or servicing a mortgage loan." Kullerstand's affidavit then specially references each of the exhibits attached to his affidavit and he attests that the documents are all "true and accurate" copies. In its memorandum of law, 3060 Main argues that these attestations do not satisfy the standards for the business records exception because "nowhere does it state that [it is] the regular course of business for the Plaintiff or Lehman Brothers Bank, FSB or Greenpoint Mortgage Funding, Inc. to maintain such records." 3060 Main further notes that there is nothing in Kullerstrand's affidavit indicating that he is an expert with the ability to opine about the practices of the entire mortgage industry. Although it is true that Kullerstrand's affidavit does not explicitly state that it is the regular course of business for Aurora Bank to maintain these records, our Supreme Court has clearly stated that the business records exception should be liberally construed. If it is the regular course of business for mortgage lenders to maintain the records attached to the plaintiff's motion for summary judgment (a contention that 3060 Main does not dispute), then it can reasonably be inferred that Aurora Bank would keep such records in the ordinary course of their business. As a vice president for Aurora Bank, it seems reasonable that Kullerstrand would have the personal knowledge to attest to the record keeping practices of his organization. It is also immaterial that these records may have been kept by a company that is not the plaintiff in this action, because § 52-180 does not require that an organization keep the records itself in order to introduce them under the business records exception. For all of these reasons, Kullerstrand's affidavit provides a sufficient foundation such that the attached documentary evidence can be examined by the court under the business records exception to the hearsay rule. Accordingly, the court will consider all of the plaintiff's evidence offered in support of its motion.

DISCUSSION

"Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Provencher v. Enfield, 284 Conn. 772, 790-91, 936 A.2d 625 (2007). "[S]ummary judgment is appropriate only if a fair and reasonable person could conclude only one way . . . [A] summary disposition . . . should be on evidence which a jury would not be at liberty to disbelieve and which would require a directed verdict for the moving party." (Citations omitted; internal quotation marks omitted.) Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 815, 830 A.2d 752 (2003). The burden is on the moving party to demonstrate an absence of any triable issue of material fact and "[t]o satisfy his burden the movant 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 . . . 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). When a party moves for summary judgment "and there [are] no contradictory affidavits, the court properly decide[s] the motion by looking only to the sufficiency of the plaintiff's affidavits and other proof." Heyman Associates No. 1 v. Insurance Co. of Pennsylvania, 231 Conn. 756, 795, 653 A.2d 122 (1995).

In its memorandum of law in support of its motion for summary judgment, the plaintiff argues that there are no genuine issues of material fact that it is the owner and holder of the note and that the defendants are in default on their payments under the terms of the mortgage agreement. Accordingly, the plaintiff contends that it has stated its prima facie case for foreclosure, and the burden shifts to the defendants to raise a legally valid defense.

3060 Main argues in opposition that the plaintiff's summary judgment evidence is "fatally deficient." Specifically, 3060 Main argues that the plaintiff has failed to demonstrate that it is the holder of the note, and, therefore, whether the plaintiff is legally entitled to foreclose the mortgage. 3060 contends that the plaintiff does not provide any documentary evidence demonstrating when it was assigned the subject note and there is no evidence establishing that the "other loan documents" were assigned to the plaintiff. 3060 Main contends that the plaintiff must demonstrate when and how it became the holder of the note because these issues implicate the court's subject matter jurisdiction. In its reply memorandum, the plaintiff contends that its evidence adequately demonstrates standing and that 3060 Main implicitly admitted that the plaintiff owned the loan when it stipulated to the debt in proceedings before the United States Bankruptcy Court.

"In a mortgage foreclosure action, [t]o make out its prima facie case, [the foreclosing party] ha[s] to prove by a preponderance of the evidence that it was the owner of the note and mortgage and that [the mortgagee] had defaulted on the note." (Internal quotation marks omitted.) Franklin Credit Management Corp. v. Nicholas, 73 Conn.App. 830, 838, 812 A.2d 51 (2002), cert. denied, 262 Conn. 937, 815 A.2d 163 (2003). 3060 Main does not dispute the plaintiff's contention that it has defaulted under the terms of the note. Therefore, the sole issue presented in this motion is whether the plaintiff is the holder of the note and is a proper party to initiate foreclosure proceedings. Indeed, all three of 3060 Main's special defenses involve the question of whether the plaintiff has standing to bring this action.

"General Statutes § 49-17 permits the holder of a negotiable instrument that is secured by a mortgage to foreclose on the mortgage even when the mortgage has not yet been assigned to him . . . The statute codifies the common-law principle of long standing that the mortgage follows the note, pursuant to which only the rightful owner of the note has the right to enforce the mortgage . . . Our legislature, by adopting § 49-17, has provide[d] an avenue for the holder of the note to foreclose on the property when the mortgage has not been assigned to him." (Citations omitted; internal quotation marks omitted.) Chase Home Finance, LLC v. Fequiere, 119 Conn.App. 570, 576-77, 989 A.2d 606, cert. denied, 295 Conn. 922, 991 A.2d 564 (2010). "The plaintiff's standing to enforce the promissory note is set forth by the provisions of the Uniform Commercial Code as adopted in General Statutes § 42a-1-101 et seq. Under these statutes, only a `holder' of an instrument or someone who has the rights of a holder is entitled to enforce the instrument. General Statutes § 42a-3-301. The `holder' is the person or entity in possession of the instrument if the instrument is payable to bearer. General Statutes § 42a-l-201(b)(21)(A). When an instrument is endorsed in blank, it `becomes payable to bearer and may be negotiated by transfer of possession alone . . .' General Statutes § 42a-3-205(b)." Id., 577. "[T]he possession by the bearer of a note indorsed in blank imports prima facie that he acquired the note in good faith for value and in the course of business, before maturity and without notice of any circumstances impeaching its validity. The production of the note establishes his case prima facie against the makers and he may rest there . . . It [is] for the [makers] to set up and prove the facts which limit or change the [bearer's] rights." (Internal quotation marks omitted.) Id., 578.

General Statutes § 49-17 provides: "When any mortgage is foreclosed by the person entitled to receive the money secured thereby but to whom the legal title to the mortgaged premises has never been conveyed, the title to such premises shall, upon the expiration of the time limited for redemption and on failure of redemption, vest in him in the same manner and to the same extent as such title would have vested in the mortgagee if he had foreclosed, provided the person so foreclosing shall forthwith cause the decree of foreclosure to be recorded in the land records in the town in which the land lies."

In his affidavit, Kullerstrand attests that the plaintiff "is the owner and holder of the Note, Mortgage, Guaranty and all related loan documents." This assertion is supported by the documents attached to the plaintiff's motion for summary judgment. As demonstrated by this evidence, on April 30, 2007, 3060 Main signed a note and mortgage for $948,000 with Greenpoint. This mortgage note was endorsed in blank. On this same date, Donofrio also signed a guaranty in which he agreed to be subject to personal liability for 3060 Main's indebtedness. Furthermore, on May 4, 2007, Greenpoint assigned the mortgage to Lehman Brothers. This fact is demonstrated by the plaintiff's exhibit D, which is a document titled "assignment of mortgage." Via a document dated August 19, 2008, Lehman Brothers then assigned the "mortgage and other loan documents" to the plaintiff. This document is the plaintiff's exhibit E. All of this evidence adequately establishes that, at the very least, the plaintiff is the holder of the subject mortgage note.

As the plaintiff became the holder of the note on August 19, 2008, and the present case was not commenced until November 24, 2008, the plaintiff had standing to bring this action, and, therefore, the court has subject matter jurisdiction to hear it. Moreover, 3060 Main's argument that there is no evidence that the "other loan documents" were assigned is incorrect. The document evidencing the August 19, 2008 assignment clearly states that "other loan documents" were assigned from Lehman Brothers to the plaintiff on that date. Accordingly, the plaintiff has sufficiently demonstrated its prima facie case for mortgage foreclosure, and 3060 Main's opposition fails to raise any facts that could establish a legally sufficient defense. Consequently, the court will grant summary judgment, on liability only, in favor of the plaintiff as to the defendants 3060 Main and Donofrio.

All of the evidence offered by the plaintiff in support of its summary judgment motion involves the liability of the defendants 3060 Main and Donofrio. In footnote one of its memorandum of law, the plaintiff states that "3044 Main, LLC is the grantee of a portion of the mortgaged property, which conveyance occurred subsequent to the mortgage closing. This transfer is a violation of paragraph 21(b)(i) of the mortgage. The plaintiff makes no such allegation in the operative complaint and the plaintiff offers no documentary evidence demonstrating this contention in the motion that is presently before the court. As a result, the plaintiff has failed to demonstrate that it is entitled to judgment as a matter of law against the defendant 3044 Main.