Opinion
No. FST CV05-4005882S.
December 26, 2006.
Memorandum of Decision on Plaintiff's Motion for Summary Judgment (No. 128.00)
Factual Background
The plaintiff holder of the first mortgage of record has commenced this foreclosure action against the residence of the named defendants at 10 Carlin Street in Norwalk. Now before the court is the plaintiff's motion for summary judgment as to liability. The issues raised center around as a priority dispute between the plaintiff and the substitute defendant Bank One, N.A., as Trustee for Registered Holders of the Structured Asset Securities Corporation Amortizing Residential Collateral Trust Mortgage Pass Through Certificates, Series 2002-BC7, holder of a mortgage in record second position. Although plaintiff's mortgage was recorded on May 24, 2002 and defendant bank recorded its mortgage on June 11, 2002, defendant bank is now claiming on equitable grounds that it should be granted first lien status for purposes of this foreclosure. Defendant bank admits that an unexplained error was made by its title agent when the title was run down on June 11, 2002 from the May 20, 2002 effective date of its title search, in that the plaintiff's mortgage, properly recorded in that interval, was not discovered. Defendant bank nonetheless asks for equitable relief and a declaration of first lien status on the property.
For convenience, Bank One and/or its predecessor MERS will be referred to collectively as "defendant bank."
Defendant bank has filed seven special defenses related to the priority dispute: equitable subrogation, marshaling of assets, unclean hands, failure to mitigate damages, equitable subordination, equitable estoppel, and unjust enrichment.
Other than priority of respective encumbrances there is no dispute as to the essential allegations of plaintiff's revised complaint concerning its note and mortgage and default by the defendant homeowners.
Procedural Issues CT Page 23432
Defendant Bank has raised two procedural objections to the motion for summary judgment. The first point is that the motion for summary judgment is directed to special defenses that no longer exist and is therefore moot. Defendant bank filed its initial Answer and Special Defenses on March 21, 2006. On March 23 the plaintiff filed a request to revise special defenses to which defendant bank objected. The court overruled those objections on May 22, 2006. Defendant bank filed its Revised Answer and Special Defenses with the requested revisions on June 20, 2006. The instant motion for Summary Judgment, however, was filed on June 2, 2006 when the initial Answer and Special Defenses were still in effect. The Revised Answer and Special Defenses supplanted the initial Answer and Special Defenses which therefore ceased to exist on June 20. This chronology, however, did not moot the motion for summary judgment. Although motions for summary judgment at one time could not be filed until the pleadings were closed, that has not been the case since 1992 when former Section 379 of the Practice Book was amended to provide that a motion for summary judgment can be filed "at any time", which is reflected in the current rule, Practice Book § 17-44. The result is that a motion for summary judgment is no longer tied necessarily to issues framed by the pleadings. It has been held that a defendant may move for summary judgment on the grounds of statute of limitations even prior to pleading statute of limitations as a special defense. Girard v. Weiss, 43 Conn.App. 397 (1996), where the Appellate Court said at p. 416:
If we were to hold that a motion for summary judgment cannot be made prior to pleading a statute of limitations as a special defense, we would negate that portion of § 379 that provides that a motion for summary judgment can be made "at any time" without the necessity of closing the pleadings.
Since this motion for summary judgment, then, could have been filed even before any special defenses had been filed, with the issues framed by affidavits and documents accompanying the moving and opposing papers per Practice Book § 17-46, the filing of revised special defenses while the motion for summary judgment was pending does not moot the motion. And, from a more practical point of view, except for plaintiff's initial supporting memorandum of law which accompanied the motion, the parties have extensively briefed and argued this motion with reference to the revised special defenses which are in essence the same special defenses as originally stated, albeit with more detailed factual allegations.
The second procedural point raised by defendant bank is that ". . . the decisions of the Connecticut Superior Court are almost in unanimous agreement that a motion for summary judgment as to a special defense is improper." Duborg v. Osborne, Superior Court, Judicial District of Litchfield at Litchfield, Docket No. CV94-0065070 (July 5, 1995, Pickett, J.), 1995 Conn.Super. 751, LEXIS 1956, citing Gianetti v. National Grange Insurance, Docket No. CV91-02908545, Superior Court, Judicial District of Fairfield at Bridgeport (March 8, 1994, Freedman, J.), 1994 Ct.Sup. 2401, 11 Conn. L. Rptr. 234; Benjamin v. Nunes, Docket No. 102738, Superior Court, Judicial District of Waterbury (May 21, 1993, McDonald, J.), 9 Conn. L. Rptr. 143; Espowood v. Springfield Terminal Railway Co. Docket No. 285076, Superior Court, Judicial District of New Haven at New Haven (August 5, 1993, Stanley, J.), 1993 Ct.Sup. 7361, 8 CSCR 978, 9 Conn. L. Rptr. 547; Conlam, Inc. v. Heritage Kitchens, Ltd., Docket No. CV91-0364435 Superior Court, Judicial District of Ansonia/Milford at Milford (May 13, 1992, Flynn, J.), 1992 Ct.Sup. 4332, 6 Conn. L. Rptr. 406; and Rogers v. Daley Development Co., Inc., Docket No. 047304, Superior Court, Judicial District of Litchfield at Litchfield (December 19, 1990, Pickett, J.), 1990 Ct.Sup. 4618, 3 Conn. L. Rptr. 76. Other Superior Court cases are cited in the Benjamin v. Nunes opinion, supra. This court's agreement with that majority position is stated in Lehman Brothers Bank, FSB v. Bridges, Docket No. CV04-0200206S, Superior Court, Judicial District of Stamford/Norwalk at Stamford (August 7, 2006, Jennings, J.), 2006 Ct.Sup. 14877, 41 Conn. L. Rptr. 821. All of the foregoing cases are premised on Practice Book § 17-44 or its predecessor § 379 which specifies that motions for summary judgment ". . . shall be applicable to counterclaims and cross complaints, so that any party may move for summary judgment upon any counterclaim or cross complaint as if it were an independent action." As stated by Judge Pickett in Doubourg, supra: "Such a motion [a motion for summary judgment directed to a special defense] is improper because Practice Book § 379 does not provide for summary judgments on special defenses." Another reason advanced is the uncertainty of the allowable remedy if a motion for summary judgment were to be granted as to a special defense: "Judgments are rendered on complaints or counterclaims, or on specific counts or counterclaims, but there is no provision under Connecticut practice for a `judgment' to be entered on a special defense." (Citation and internal quotation marks omitted.) Kogers v. Daley Development Co., Inc., supra. There is also a minority position which either disagrees with the majority or strictly limits the majority rule to situations where the motion for summary judgment is based solely on one or more special defenses. See, People's Bank v. BMI Industries, 3 CSCR 450 (April 26, 1988, Hennessey, J.) (Allowing motion for summary judgment to challenge legal sufficiency of special defense when pleadings are closed.); GE Capital Mortgage Services v. Miller, No. CV94-0056950S, Superior Court Judicial District of Tolland at Rockville, (August 23, 1995, Hammer, J.) [ 15 Conn. L. Rptr. 213] (Plaintiff in a foreclosure action may properly seek a judgment as to liability where the motion is based on the allegations of the complaint itself rather than being directed solely to the special defenses asserted by the defendant.); Centerbank v. Silvermine Land Investment, Docket No. 92-122942S, Superior Court, Judicial District of Stamford/Norwalk at Stamford (December 16, 1992, Lewis, J.) [ 8 Conn. L. Rptr. 61], 1992 Ct.Sup. 11244, 8 CSCR 126 (". . . the issue in deciding this motion is whether there are genuine issues of material fact, not whether special defenses have been filed. Under defendants' theory summary judgment could never enter once a defendant files special defenses . . . If plaintiff was seeking summary judgment solely on defendant's special defenses, Judge Rush's decision [a case holding that a motion for summary judgment directed to a special defense is improper] would be on point, but since the plaintiff seeks judgment on its complaint [the foregoing decision] is inapplicable. "); and Aetna Life Casualty v. Mark, Docket No. CV91-0702459, Superior Court, Judicial District of Hartford-New Britain at Hartford (July 21, 1993, Hennessey, J.), 1993 Ct.Sup 6877 (". . . the defendant states in his motion that he `moves for summary judgment' and provides the second special defense as the basis for his motion. Accordingly, the defendant is not moving for summary judgment on a special defense, but rather is moving for summary judgment on plaintiff's complaint, based on the allegations of his special defense. Therefore, the court may properly consider the merits of the motion for summary judgment.") Under the majority rule, and even under some of the minority cases (limiting the prohibition to cases where the motion for summary judgment is based solely on the allegations of the special defense[s]), the plaintiff's motion for summary judgment in this case is not permitted by Practice Book § 17-44 because it is based entirely on disputing the special defenses. The plaintiff's claims alleged in the revised complaint against its borrowers, the Jean-Charles defendants, (who have admitted each and every allegation of the revised complaint in their answer and have disclosed that they have no defense to the foreclosure complaint) are simply not at issue. The motion for summary judgment is totally unnecessary as to them. They can be defaulted at any time for failure to disclose a defense under Practice Book § 13-19. The motion for summary judgment is entirely directed to the priority dispute between the plaintiff and the defendant bank. The seven special defenses are all based on two sets of facts which are not alleged or referenced in any way in the complaint: the payoff from the proceeds of defendant bank's loan of two mortgages and two other liens on 10 Carlin Street prior to the plaintiff's mortgage (which is the basis of the defenses of equitable subrogation, equitable subordination, equitable estoppel and unjust enrichment) and transactions relating to property at 18 Munroe Street in Norwalk formerly owned by a limited liability company named Jean-Charles Enterprises, LLC, also encumbered by a mortgage to plaintiff securing the same debt as the subject mortgage on 10 Carlin Street (which is the basis of the defenses of marshalling of assets, equitable subordination, failure to mitigate damages, and unjust enrichment.) The issues vigorously contested at oral argument and in the extensive briefs filed by the parties in this case all relate exclusively to those two sets of facts which are foreign to the complaint. This, then, is a case where the motion for summary judgment goes solely to contesting the special defenses, which is improper under the majority rule of decided Superior Court cases.
Discussion
But, because the majority position barring a motion for summary judgment directed to special defenses is not supported by appellate authority and has its genesis in cases decided prior to the October 1, 1992 amendment to Practice Book § 379 largely disconnecting motions for summary judgment from filed pleadings (e.g. Conlam, Inc., v. Heritage Kitchens, supra, and Rogers v. Daley Development Co., Inc., supra), the court, as an alternate ground of decision, finds that there is at least one material issue of fact outstanding which would prevent summary judgment from entering on the plaintiff's complaint. Since there is no such thing as a judgment on a special defense, Rogers, supra, the plaintiff's motion for summary judgment on its complaint can only be granted if there is no material issue of fact as to the issues raised by all seven special defenses. Such is not the case here.
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." "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[s] him to a judgment as a matter of law." (Internal quotation marks omitted.) Socha v. Bordeau, 277 Conn. 579, 585-86 (2006). "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.) Morris v. Congdon, 277 Conn. 565, 569 (2006).
"[T]he `genuine issue' aspect of summary judgment requires the parties to bring forward before trial evidentiary facts, or substantial evidence outside the pleadings, from which the material facts alleged in the pleadings can warrantably be inferred . . . A material fact has been defined adequately and simply as a fact which will make a difference in the result of the case." (Citation omitted; internal quotation marks omitted.) Buell Industries, Inc. v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556, (2002). "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.) Socha v. Bordeau, supra, 277 Conn. 586.
In support of its special defenses of marshalling of assets and equitable subordination the defendant bank has documented a May 24, 2002 conveyance of the property at 18 Munroe Street from Jean-Charles Enterprises, LLC to the plaintiff which, it is claimed, resulted in a full satisfaction of plaintiff's $195,000 note which underlies this foreclosure action. In support of that argument the defendant bank has submitted a certified copy of the May 24, 2002 quitclaim deed to the plaintiff signed by the defendant herein Herns Jean-Charles as the member of Jean-Charles Enterprises, LLC recorded on October 4, 2005, and a recent sworn report of appraisal evaluating 18 Munroe Street at $590,000. The plaintiff disputes in its reply brief that its May 24, 2002 acquisition of 18 Munroe Street was sufficient consideration to result in a payoff of its $195,000 note because of two mortgages to third parties in the amounts of $500,000 and $30,000 placed on the property by Jean-Charles Enterprises, LLC on May 24, 2002 and July 21, 2005 respectively. (Certified copies of the mortgages are attached to the brief.) There are issues of material fact and unresolved issues of law thereby presented. If that conveyance was not made in full or partial satisfaction of the plaintiff's $195,000 note, what was the consideration for the transfer? Jean-Charles Enterprises, LLC deeded the property to the plaintiff on the same day (May 24, 2002) that it signed the $500,000 mortgage (to First County Bank). Which instrument was first executed on that day? Who was present at the time of each execution? Although the quitclaim deed remained unrecorded for almost three and a half years, the plaintiff has not stated whether or not it gave or it has knowledge that others gave actual notice or knowledge to First County Bank of the existence of the quitclaim deed signed the same day. If First County Bank took its mortgage with actual notice of the quitclaim deed, plaintiff's interest in the property would not be subject to that mortgage. Burgey v. Bochinski, 16 Conn.Sup. 427 (1950), citing Newtown Savings Bank v. Lawrence, 71 Conn. 358, 364 (1899). The same can be said of the $30,000 mortgage (to EINA Realty Corp.) signed by the LLC three years and three months after it had quitclaimed the property to the plaintiff. Did the plaintiff or to plaintiff's knowledge someone else give that mortgagee actual notice or knowledge of the unrecorded deed to the plaintiff? When and under what circumstances was the May 24, 2002 quitclaim deed delivered to the plaintiff? Why did it remain unrecorded until October 4, 2005? There are simply too many missing pieces of this very complex puzzle for the court to say as a matter of fact and law that the $195,000 note was not fully or partially paid off by the May 24, 2002 quitclaim deed. By bringing out the existence of the May 24, 2002 quitclaim deed and the value of the Munroe Street property the defendant bank has raised issues of fact that go to the very essence of the case, which can only be resolved by a full exposition of all facts and circumstances to a trier of facts.
Plaintiffs argue that all issues as to relative priority of the liens of the plaintiff and the defendant bank on the house at 10 Carlin Street are irrelevant because the defendant bank has title insurance that indemnifies against any loss that it may suffer as a result of it having a mortgage in a junior position to that of the plaintiff. The circularity of this argument, of course, is that priority of liens is at issue and until there is a determination that the plaintiff does not have a first lien, any such insurance would not be obligated to indemnify. In any event, under the common-law collateral source rule, the plaintiff would not be entitled to the benefit of insurance purchased by the defendant bank for its own protection. Lashin v. Corcoran, 146 Conn. 512, 515 (1959).
The common-law collateral source rule has been legislatively abolished for personal injury actions. Conn. Gen Stat. § 52-225a et seq., but otherwise remains in effect. See Jones v. Kramer, 267 Conn. 336 (2004).
Order
For the foregoing reasons the plaintiff's motion for summary judgment as to liability is denied, and the defendant-bank's objection thereto is sustained.