Opinion
No. CV07 500 98 17 S
August 22, 2011
MEMORANDUM OF DECISION ON DEFENDANTS' MOTION TO DISMISS
On August 13, 2007, the plaintiff, the Bank of New York as Trustee for the Certificate Holders CWABS, Inc. Asset-Backed Certificates, Series 2006-11 filed a complaint for foreclosure against the defendants, Otto Veglio and Ottavia Veglio. Therein, the plaintiff alleges the following facts. As of May 25, 2006, the defendants owed Countrywide Home Loans, Incorporated d/b/a America's Wholesale Lender (Countrywide) $300,000 on a promissory note. The defendants' mortgage on their house located at 10 Woodbine Circle in Bridgeport was held by the Mortgage Electronic Registration Systems, Incorporated as nominee for Countrywide and recorded in the Bridgeport Land Records on June 5, 2006. The plaintiff is the holder of the note and mortgage for an unpaid balance on the note in the amount of $299,374.94 as of April 1, 2007 plus interest. The defendants are the owners of record and in possession of the premises. The note and mortgage are in default and the plaintiff exercised its option to declare the entire balance due and payable. Taxes owed to the town of Bridgeport are an encumbrance on the property that is prior in right to that of the plaintiff. There are no encumbrances subsequent to the plaintiffs. The plaintiff is seeking foreclosure of the mortgage, immediate possession of the premises, a deficiency judgment, the appointment of a receiver, reasonable attorneys fees and costs and such other relief as may be required.
The mortgage for the property was assigned to the plaintiff and recorded in Volume 7618 at page 251 of the Bridgeport Land Records.
On June 9, 2008, the defendants filed a motion to dismiss on the ground that the court does not have subject matter jurisdiction of this action because "[t]he plaintiff trustee lacks standing." No memorandum of support was submitted with the motion until July 14, 2011, On June 10, 2011, the plaintiff filed an objection and memorandum of law in opposition to the motion to dismiss. The matter was heard at short calendar on July 18, 2011 at which time the defendants abandoned all of their claims except for the failure of the plaintiff to register as trustee with the secretary of state.
Along with the motion, the defendants submitted numerous cases. Although the defendants state in their motion that they included a memorandum of law, none was filed until July 14, 2011. The memorandum, however, is dated June 6, 2008.
DISCUSSION CT Page 17842
"A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction." (Internal quotation marks omitted.) Wilcox v. Webster Ins., Inc., 294 Conn. 206, 213, 982 A.2d 1053 (2009). "In general, a motion to dismiss is the proper procedural vehicle to raise a claim that the court lacks subject matter jurisdiction over the action." Bellman v. West Hartford, 96 Conn.App. 387, 392, 900 A.2d 82 (2006). "Subject matter jurisdiction [implicates] the authority of the court to adjudicate the type of controversy presented by the action before it." (Internal quotation marks omitted.) Burton v. Commissioner of Environmental Protection, 291 Conn. 789, 802, 970 A.2d 640 (2009) "[T]he plaintiff bears the burden of proving subject matter jurisdiction, whenever and however raised." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. New London, 265 Conn. 423, 430 n. 12, 829 A.2d 801 (2003). "[I]t is the burden of the party who seeks the exercise of jurisdiction in his favor . . . clearly to allege facts demonstrating that he is a proper party to invoke judicial resolution of the dispute." (Internal quotation marks omitted.) Wilcox v. Webster Ins. Co., supra, 213-14.
"The issue of standing implicates subject matter jurisdiction and is therefore a basis for granting a motion to dismiss. Practice Book § 10-31(a)." (Internal quotation marks omitted.) Id., 213. "[S]tanding is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he [or she] has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy . . . [W]hen standing is put in issue, the question is whether the person whose standing is challenged is a proper party to request an adjudication of the issue and not whether the controversy is otherwise justiciable, or whether, on the merits, the [party] has a legally protected interest [that may be remedied] . . . Standing requires no more than a colorable claim of injury . . . [W]hether a party has standing, based upon a given set of facts, is a question of law for the court . . . Although . . . facts [may] remain in dispute, [the court's] jurisdictional determination [may] not [depend] on the resolution of these issues . . . It is well established that, in determining whether a court has subject matter jurisdiction, every presumption favoring jurisdiction should be indulged." (Citations omitted; internal quotation marks omitted.) Morgan v. Wright, 122 Conn.App. 253, 256-57, 988 A.2d 247 (2010).
In support of their motion to dismiss, the defendants maintain that the plaintiff does not have standing, and, therefore, the court lacks subject matter jurisdiction to adjudicate this action. The defendants argue that the plaintiff, as trustee of a foreign corporation of New York, failed to register with the secretary of state as required by General Statutes § 45a-206 (right of foreign corporation to be trustee) and has not demonstrated that it is qualified to act as trustee in this state based upon reciprocal qualification in which the trustee is domiciled. The defendants have submitted a number of exhibits, including a copy purporting to be from the secretary of the state of Connecticut rejecting the plaintiff's business filing of a generic appointment as trustee, a copy of a ruling from a Superior Court, other than the one which is presently hearing this action, granting a motion to dismiss and copies of several out-of-state court decisions and federal bankruptcy court decisions.
The following arguments were raised in the defendants' memorandum of law in support of the motion to dismiss, but abandoned at short calendar: (1) As required by General Statutes § 49-17 (foreclosure by owner of debt without legal title), the plaintiff failed to allege it is the owner of the note when the action was commenced; (2) The plaintiff as a trustee of an out-of-state corporation transacted business in this state in violation of General Statutes § 36a-425 (excepted activities of foreign banks not to transact business in Connecticut); and (3) The plaintiff, as trustee, acted on behalf of a trust in collecting a debt that is owned and owed to another, which is in violation of General Statutes § 36a-801 (consumer collection agencies).
In response, on June 10, 2011, the plaintiff filed an objection and memorandum of law to the motion to dismiss. As to the merits of the defendants' motion, the plaintiff counters that it is in compliance with § 45a-206 and has registered with the secretary of the state of Connecticut as its agent for service. The plaintiff further argues that the Connecticut statutes contain "no law stating or implying that a corporation acting as trustee creates an independent entity, and as such, [the plaintiff] should not be and is not statutorily required to repeat the appointment process for each individual trust in which [the plaintiff] holds the position of trustee." Lastly, the plaintiff maintains that since § 45a-206 refers to a Probate Court procedure, it is not relevant to the present foreclosure action. Submitted with the plaintiff's response is the affidavit of Melissa Saucedo, a litigation specialist of BAC Home Loan Servicing L.P., who serviced the mortgage loan account of the parties in the present case and has identified the copy of the adjustable rate note between the defendants and Countrywide. The plaintiff has also provided a copy that purports to be an Internet "Business Inquiry" into the Bank of New York with its business details that include a "Business Summary" naming the secretary of the state of Connecticut as "Agent Name" and identifying Hartford as the "Agent Business Address."
The plaintiff points out to the court that inasmuch as the defendants failed to include a memorandum of law in support of their motion as required by the rules of practice; Practice Book § 10-31(a); the motion should be dismissed.
The plaintiff's response to the other arguments raised are: The plaintiff is not transacting business for purposes of this foreclosure action, and, therefore, it is in full compliance with the relevant statutory requirements of § 36a-425; acting as a trustee is not transacting business for purposes of the statutory requirements for registration; even if the plaintiff is transacting business by bringing a foreclosure action, the plaintiff has registered with the secretary of state and, consequently is in compliance with General Statutes § 33-920; the plaintiff is the holder of the note, which provides ownership of the note, and is the record owner of the mortgage, which gives the plaintiff standing to sue; and the plaintiff is not a consumer debt collector subject to § 36a-801 nor is it a consumer collection agency as defined in General Statutes § 36a-800.
Although the plaintiff has failed to show that the document is a true and accurate representation of what it purports to be; Conn. Code Evid. § 9-1; the defendants have not objected to the admissibility of this evidence. Therefore, it lies within the discretion of the court to consider this document. See Barlow v. Palmer, 96 Conn.App. 88, 92, 898 A.2d 835 (2006).
General Statutes § 45a-206
The defendants rely on § 45a-206, which sets forth the requirements for a foreign corporation to act as an executor or trustee of a decedent's estate in the state of Connecticut, and on Equitable Trust Co. of New York v. Plume, 92 Conn. 649, 103 A. 940 (1918), for the proposition that the "Plaintiff Trustee is not authorized and cannot act in this state" because as a foreign corporation of New York, it "has failed to register with the Secretary of State pursuant to the [statute]."
Section 45a-206 is part of Title 45a, "Probate Courts and Procedure," Chapter 802a, "Fiduciaries' Right and Responsibilities in General" and provides in relevant part: "(a) Any foreign corporation authorized by its charter to act as executor or trustee in the state where it is chartered, and named as executor or trustee by any resident of this state, or by any nonresident owning property within this state, or so named by any person or persons holding a power to appoint an executor or trustee, or so named by any corporation, may qualify and act as such executor or trustee in this state, if similar domestic corporations which have the power under the law of this state to act as executor or trustee, or both, in this state are permitted to act in like capacity in the state where such foreign corporation has its domicile.
"(b) Such corporation shall not act in such capacity until it has appointed in writing the Secretary of the State and his or her successors in office to be its attorney, upon whom all process in any action or proceeding against it may be served in any action or proceeding relating to its activities in such capacity. In such writing, such corporation shall agree that any process against it which is served on the Secretary of the State shall be of the same legal force and validity as if served on such corporation, and that such appointment shall continue as long as any liability on account of such activities remains outstanding against the corporation in this state . . ."
This type of statute authorizes a foreign bank to act as an executor or trustee to administer a trust. G. Bogert, Trusts Trustees (2d Ed. 1984 2010 Cum. Sup.) § 132, p. 429. The kind of trust that it is authorized to administer is one created by a will, known as a testamentary trust. Id. Section 45a-206 authorizes the foreign corporation, however, to administer the testamentary trust only if the state in which the foreign corporation is organized extends a similar privilege to a corporation of the local state. Id. The statute also attaches a condition to designate the secretary of state as its agent for purposes of service of process within the state that must be met by the foreign corporation. Id. 439.
Research has revealed no cases in Connecticut interpreting this statute. In the annotated section of the statute, reference is made to Morgan v. Bicknell, 18 Conn.Sup. 439 (1953), which involves the negligent operation of a motor vehicle in this state and substituted service on the nonresident defendants. The court cites to General Statutes § 6979 (1949 Rev.), a predecessor statute of § 45a-206 as an example of providing for service of process on nonresident fiduciaries. Id., 441. The annotation also cites to Equitable Trust Co. of New York v. Plume, supra, 92 Conn. 649, and states that under a 1903 Public Act, the appointment of a foreign trust company as an ancillary executory, which failed to make the secretary of state its attorney for service of process, was unauthorized to act. This ruling was based on a prior corporation statute, which did not permit domestic corporations to act as an executor or administrator. Therefore, foreign corporations were denied the privilege of "transacting such business [as an executor or administrator] within the State." Id., 655.
Three opinions of the attorney general have discussed this statute. In 1943, the question was posed as to whether an Illinois trust company, acting as a testamentary trustee in Connecticut, had to register as a corporation doing business in this state or could act as a trustee by simply appointing in writing the secretary of state as its attorney upon whom process in any action or proceeding against it may be served. 22 Op. Atty. Gen. 108-09 (April 2, 1943). The attorney general opined that the Illinois corporation did not come within General Statutes § 4903 (Rev. 1930) (now § 45a-206) to act as a testamentary trustee in Connecticut, because the Illinois Act was not reciprocal to § 45a-206 in that a Connecticut trust company did not qualify to act as trustee in Illinois without qualifying therein to do business as a foreign corporation. Id., 110. The second opinion issued involved a similar question but from a New Jersey corporation. It asked whether it qualified as an executor or testamentary trustee in Connecticut under § 4903 inasmuch as it was authorized by its charter to act as an executor or trustee in the state of New Jersey. 24 Op. Atty. Gen. 237 (February 15, 1946). The conclusion was the same. The attorney general opined that a New Jersey corporation could not qualify and act in Connecticut as an executor or trustee named in the will of a resident of this state or of any nonresident leaving property in this state. Id. 239. The condition of reciprocity contemplated by § 4903 was not fulfilled by any New Jersey corporate law. Id. The third opinion addressed the same issue but of a Vermont Trust Company and whether it could qualify as executor or trustee in Connecticut under General Statutes § 6979 (Rev. 1949). 26 Op. Atty. Gen. 268, 269). Again, the conclusion was the same. The Vermont statute was not reciprocal with Connecticut on the right of a foreign corporation to act as executor or trustee of a decedent's estate in Connecticut.
From the sparse law on this statute, it appears that it applies to situations in which a foreign corporation is named as a testamentary trustee or executor, acting as a fiduciary, of a decedent's estate for a resident of this state or for a nonresident owning property here. The corporation cannot act as a fiduciary until it has appointed the secretary of the state to be its attorney upon whom all process in any such action or proceeding may be served and there must exist a reciprocal statute where the foreign corporation has its domicile. The plaintiff, without providing authority or analysis as to why § 45a-206 is inapplicable, merely concludes that as a "[p]robate statute the regulation is not relevant to this current foreclosure action" but, even if it is, the plaintiff is "in compliance with [§]45a-206, because it has appointed the Secretary of State as its agent pursuant to the provisions of the statute," citing the copy of its Internet "Business Inquiry" document. Therefore, the plaintiff maintains that it is "not statutorily required to repeat the appointment process for each individual trust in which [it] holds the position of trustee."
The plaintiff argues instead that it is not transacting business as defined in General Statutes § 33-920 and is in full compliance with the statutory requirements in General Statutes § 36a-425(a) for foreign banking corporations. Section 36a-425(a) provides: "(a) Except as otherwise provided, in this title, no foreign banking corporation shall transact in this state the business authorized by its certificate of incorporation or by the laws of the state under which it was organized, unless empowered to do so by any provision of the general statutes or any special act of this state; provided, without excluding other activities which may not constitute transacting business in this state, no such foreign banking corporation shall be deemed to be doing or transacting business in this state for purposes of this section by reason of its acting as an investment adviser to the State Treasurer or by reason of its making loans whether secured or unsecured. For purposes of this section, `foreign banking corporation' means a banking corporation which is organized under the laws of or has its principal office in any state other than Connecticut or any foreign country. Notwithstanding the provisions of this subsection, a foreign banking corporation which transacts business in this state for the purposes of section 33-920 or section 33-1210 shall comply with the requirements of subsection (a) of section 33-920 or subsection (a) of section 33-1210."
Section 33-920 provides in relevant part: (a) A foreign corporation, other than an insurance, surety or indemnity company, may not transact business in this state until it obtains a certificate of authority from the Secretary of the State . . ."
Section 33-1210 provides in relevant part: "(a) A foreign corporation, other than an insurance, surety or indemnity company, may not conduct affairs in this state until it obtains a certificate of authority from the Secretary of the State. No foreign corporation conducting the affairs of a state bank and trust company, savings bank or building and loan association, railroad company, telegraph company, gas, electric, electric distribution or water company, or of any company requiring the right to take and condemn lands or to occupy the public highways of this state, and no foreign telephone company, shall conduct in this state affairs authorized by its certificate of incorporation or by the laws of the state under which it was organized, unless empowered so to do by some general or special act of this state . . ."
"If the trust has been established in a foreign state with a foreign corporation as trustee, state statutes frequently authorize the foreign corporation to transact limited types of business without qualifying to do business in the state." G. Bogert, Trusts Trustees, supra, p. 426. "Under the statutes of most states a foreign trustee established in a foreign state may sue to collect debts in the state, but upon filing suit is required to furnish proof of its authority to act in the state of its origin." Id., 427-28. While § 33-920 requires that a foreign corporation obtain a certificate of authority in order to transact business in the state, subsection (b) excludes from the definition of "transacting business" the maintenance, defense, or settling of any proceeding; the creating or acquiring of indebtedness, mortgages and security interests in real or personal property; and the securing or collecting debts or enforcing mortgages and security interests in property securing the debt.
Subsection (b) of § 33-920 provides: "The following activities, among others, do not constitute transacting business within the meaning of subsection (a) of this section: (1) Maintaining, defending or settling any proceeding; (2) holding meetings of the board of directors or shareholders or carrying on other activities concerning internal corporate affairs; (3) maintaining bank accounts; (4) maintaining offices or agencies for the transfer, exchange and registration of the corporation's own securities or maintaining trustees or depositaries with respect to those securities; (5) selling through independent contractors; (6) soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if the orders require acceptance outside this state before they become contracts; (7) creating or acquiring indebtedness, mortgages and security interests in real or personal property; (8) securing or collecting debts or enforcing mortgages and security interests in property securing the debts; (9) owning, without more, real or personal property; (10) conducting an isolated transaction that is completed within thirty days and that is not one in the course of repeated transactions of a like nature; (11) transacting business in interstate commerce."
The Plaintiff's Corporate Capacity to Sue
The question before this court, however, is whether as a foreign corporation the plaintiff has the corporate capacity or standing to sue on a foreclosure debt. In United States Trust Co. of New York v. DiGello, 179 Conn. 246, 425 A.2d 1287 (1979), the defendant appealed from a denial of his motion to open the judgment in a foreclosure action to assert a special defense regarding the corporate capacity of the plaintiff to maintain the lawsuit. The court stated that "if a defendant intends to controvert the right of a plaintiff to sue as a corporation, he must raise that issue in his answer" and that "any claimed illegality not apparent on the face of the pleadings must be specifically pleaded." Id., 249. Thus, whenever a party wishes to challenge a corporation's capacity to sue, the challenge "must be raised by way of a special defense." Id.
In a recent Superior Court case, this procedure was reiterated. "[I]t is well established in our case law that a challenge to the plaintiff's right to sue without a certificate of authority to transact business in Connecticut does not go the subject-matter jurisdiction of the Court, but is a matter of defense that is waived by the defendant unless it is pleaded as special defense and proved at trial . . . Indeed, by the terms of the controlling statute [General Statutes § 33-921] the court before which a challenge to a foreign corporation's capacity to sue is duly pleaded `may stay a proceeding commenced by . . . [the] corporation until it determines whether the . . . corporation requires a certificate of authority. If it is so determined, the court may further stay the proceedings until the . . . corporation . . . obtains the certificate.' The existence of this statutory authority to stay an unauthorized action by a foreign corporation so that the plaintiff might procure the necessary certificate of authority before proceeding further is clear evidence that the lack of such a certificate does not defeat the subject-matter jurisdiction of the Court." (Citations omitted.) Mapei Corp. v. Bestflor Distributors, Inc., Superior Court, judicial district of Hartford, Docket No. CV 07 5010569 (June 29, 2009, Sheldon, J.); see also HSBC Bank USA v. Fequiere, Superior Court, judicial district of Fairfield, Docket No. CV 09 5024230 (August 10, 2010, Hartmere, J.) (defendant's failure to raise corporate capacity or standing to sue as a special defense is not a ground that will preclude a court from taking subject matter jurisdiction) and cases cited therein; Access International Advisors Ltd v. Argent Management Co., LLC, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 09 5012939 (June 1, 2010, Tierney, J.T.R.) ("The claimed defect that the plaintiff is and has been doing business in Connecticut without authorization, is not apparent on the face of the record. Such a defense must be formally raised by a special defense in the case in chief"); Sales Team Staffing, Inc. v. GHP Media, Inc., Superior Court, judicial district of Ansonia-Milford at Derby, Docket No. CV 09 6001329 (May 28, 2010, Bellis, J.) ( 50 Conn. L. Rptr. 18) ("It is . . . clear that an attack on the corporate capacity of a plaintiff to sue must be raised by way of special defense . . . Any defendant who intends to controvert the right of the plaintiff to sue as a corporation . . . shall deny the same in the answer specifically").
On September 18, 2007, the defendants in the present case filed an answer. Therein, they stated that they "have insufficient knowledge with which to form a belief" as to the allegations in the complaint, and "leave the plaintiff to its proof." The defendants did not raise by way of special defense the plaintiff's lack of corporate capacity or standing to sue. Since this court is one of general jurisdiction; Bank of Babylon v. Quirk, 192 Conn. 447, 449, 472 A.2d 21 (1984); Walkinshaw v. O'Brien, 130 Conn. 122, 123, 32 A.2d 547 (1943) ("the Superior Court . . . has general jurisdiction, civil or criminal, in all cases not placed by our statutes within the jurisdiction of some other court"); it has subject matter jurisdiction to hear the plaintiff's claims.
Accordingly, based on all of the foregoing, the defendants' motion to dismiss is denied.