Opinion
No. FSTCV 04-4001641 S
October 25, 2006
MEMORANDUM OF DECISION ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (No. 148)
This is an action for foreclosure of a first mortgage on premises at 11 Harding Lane, Westport, Connecticut owned by the defendant Bess Gilmore. The plaintiff claims to be the holder of a $375,000 promissory note signed by the defendant Bess Gilmore on February 5, 1999, which note is claimed to be secured by a mortgage executed on the same day by defendant Gilmore and thereafter recorded on the Westport land records. The promissory note is alleged to be in default for nonpayment of installments of principal and interest as provided in the note, and the plaintiff claims to have accelerated the full principal balance of the note together with interest thereon and other sums due under the provisions of the note. In her Revised Answer the defendant denies that the note is in default or that the plaintiff has accelerated the unpaid balance of the note. The defendant has also alleged five special defenses, and a counterclaim against the plaintiff premised on alleged violations of the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § 42-110a et seq. ("CUTPA"). Now before the court is the plaintiff's Motion for Summary Judgment dated April 14, 2006 by which the plaintiff seeks summary judgment against the defendant Bess Gilmore as to liability only on the complaint, and summary judgment for the plaintiff on the CUTPA counterclaim. The parties have submitted affidavits and memoranda of law supporting and opposing the motion for summary judgment.
Discussion
The standards for granting summary judgment are well settled. "Pursuant to Practice Book § 17-49, 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. Mytych v. May Dept Stores Co., 260 Conn. 152, 158-59 (2002). In deciding whether or not there is no genuine issue of material fact, the evidence is reviewed in the light most favorable to the nonmoving party. BD Associates, Inc. v. Russell, 73 Conn.App. 66, 69 (2002); Yancey v. Connecticut Life Casualty Ins. Co., 68 Conn.App. 556, 558 (2002)." Faigel v. Fairfield University, 75 Conn.App. 37, 39-40 (2003). "In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact . . . Although the party seeking summary judgment has the burden of showing the nonexistence of any material fact . . . a party opposing summary judgment must substantiate its adverse claim by showing that there is a genuine issue of material fact together with the evidence disclosing the existence of such an issue." (Internal quotation marks omitted.) Golden v. Johnson Memorial Hospital, Inc., 66 Conn. App. 518, 522-23, cert. denied, 259 Conn. 902, 789 A.2d 990 (2001). A material fact is a fact that will make a difference in the result of the case. Buell Industries, Inc. v. Greater New York Mutual Insurance Company, 259 Conn. 357 556 (2002). In ruling on a motion for summary judgment, it is customary for the court to review documentary proof submitted by the parties to demonstrate the existence or nonexistence of issues of material fact. Practice Book § 17-45." Drew v. William W. Backus Hospital, 77 Conn.App. 645, 650 (2003).
Defendant Bess Gilmore's Liability on the Complaint.
The plaintiff has alleged in ¶ 5 of its complaint, and the defendant has denied in her answer that the note signed by the defendant Bess Gilmore is in default and that the plaintiff as the owner and holder of the note and mortgage has elected to accelerate the balance due on the note. The allegation of default under the note is an essential allegation of plaintiff's complaint which must be proved by a preponderance of the evidence in order for the plaintiff lender to prevail and to become entitled to a foreclosure of the mortgage. "[A] foreclosure complaint must contain certain allegations regarding the nature of the interest being foreclosed. These should include allegations relating to the parties and terms of the operative instruments, the nature of the default giving rise to the right to foreclosure, the amount currently due and owing, the name of the record owner and of the party in possession, and appropriate prayers for relief." (Emphasis added.) New England Savings Bank v. Bedford Realty Corp., 246 Conn. 594, 610 (1998) quoting from D. Canon, Connecticut Foreclosures: An Attorney's Manual of Practice and Procedure (3d Ed. 1997) § 4.09. P. 106. On this crucial issue, the April 6, 2006 affidavit of Melanie Colton, Senior Vice President of Saxon Mortgage Services, Inc. plaintiff's servicing agent, says:
8. The defendant has failed to make monthly mortgage payments as required by the loan documents since the payment due for May 1, 2004 and each and every month thereafter.
9. The Defendant is in default under the loan documents for failure to make payments as required by the terms of the Note and Mortgage.
10. The Defendant was duly notified in writing by the Plaintiff in accordance with the terms of the Note and Mortgage of the default and that the failure to cure the default may result in acceleration of the debt. The Defendant has failed and neglected to cure the default. A true and accurate copy of the default letter is attached hereto as Exhibit E.
11. Thereafter the Note was accelerated and the remaining unpaid principal balance, plus interest, attorneys fees and costs are due and owing to the Plaintiff.
Exhibit "E" to the Colton affidavit is a copy of a letter of July 6, 2004 from Saxon Mortgage Services, Inc. To the defendant Bess P. Gilmore, advising her that the note was $11,156.70 in default and giving her a period of 30 days from July 6, 2004 to cure.
As to the same issue, the defendant Bess P. Gilmore, in her affidavit of May 15, 2006, says:
12. Regardless, as of December 8, 2003 [the date that a previous foreclosure case between the parties was withdrawn] I considered any dispute to be resolved and I continued to make regular payments in accordance with the loan documents.
13. Then, on February 10, 2004, for reasons unbeknownst to me, I was again placed in default and was told I owed $11,150.96. A true and correct copy of this Notice of default is attached hereto as Exhibit E.
14. I am unaware as to how the Plaintiff calculated such an inaccurate and excessive amount, and the plaintiff never gave me an explanation or itemization of these amounts. To this very date, they have never provided an explanation.
15. Upon contacting the Plaintiff by both telephone and mail, its representative could not determine how the $11,150.96 figure was calculated, and could not identify any reason whatsoever for such a charge . . . I repeatedly reminded them that the loan had already been reinstated and paid current . . .
16. I am unaware as to how, after resolving the prior dispute with the Plaintiff as of December 8, 2003, and after several months of making the proper payments pursuant to the terms of the loan documents, I can be placed in default again, receive a bill for $11,150.96, and not receive any response from the plaintiff as to how such an amount was calculated.
17. I received additional Notices of default on March 12, 2004 and July 7, 2004 indicating that the past due amount was $11,158.91 and $11,163.70, respectfully [sic.] . . .
18. I continued to make tender of proper payments to the Note and Mortgage, but the Plaintiff continued to reject my payments, demanding payments of even larger amounts than those demanded in the February 10, 2004, March 12, 2004, and July 7, 2004 Notices of Default. a) on July 28, 2006 [sic.], after the return of my June mortgage payments which was the alleged cause of this case, the Plaintiff's employee Mr. Ali called from Saxon and said I owed over $600 in fees in addition to my June and July mortgage payments . . .
Exhibit "H" to the defendant's Objection to Plaintiff's Motion for Summary Judgment is a copy of a July 7, 2004 letter from Saxon Mortgage Services, Inc. to Bess P. Gilmore, which reads, in part, "You have defaulted on your obligation to pay your monthly mortgage payments as scheduled. The enclosed payment has been rejected due to the status of your loan. Your immediate attention is required. You may remedy this situation by remitting the total amount due, as shown above [$11,163.70] before your next due date . . ." The enclosure to that letter is check no. 14631 on the checking account of Community Club Awards, Inc., dated June 28, 2004 and signed by Bess Gilmore, drawn to the order of "Saxon Mortgage" in the amount of $4,805.82 with a reference to "Loan #0011068298" (which is the same loan number referenced in the letter).
The court finds that the plaintiff has failed to meet its initial burden of demonstrating the nonexistance of a material issue of fact. From the foregoing recitations from the supporting and opposing affidavits and exhibits it is clear that there are genuine issues of fact as to the essential element in this or any other foreclosure case as to the ". . . nature of the default giving rise to the right to foreclosure . . ." New England Savings Bank v. Bedford Realty Corp., supra. The plaintiff states in the Colton affidavit that the default on which this case is based is the defendant's failure to make monthly mortgage payments as required by the loan documents since the payment due for May 1, 2004 and each and every month thereafter. The defendant states in her affidavit that, after the loan was reinstated and brought current as of December 8, 2003, she "continued to make regular payments in accordance with the loan documents" which payments at some point began to be rejected and returned by the plaintiff. She also states that she began receiving unexplained default notices in February and March 2004 (several months before the May 1, 2004 loan payment was even due.) The plaintiff's Colton affidavit totally fails to address those earlier 2004 notices of default. Although the plaintiff purports to base its claim of default on the defendant's failure to make the May 2004 and subsequent note payments, the $11,167.70 default claimed as of July 6, 2004 (Ex. "H," supra) does not equate to that position, since the earlier default notices in February and March 2004, per the defendant's affidavit, recite approximately the same monetary amount of default. If the defendant had defaulted on the May 2004 loan payment, it would seem that the amount claimed to be in default would have increased accordingly between February and July. There are issues and inconsistencies presented by the affidavits and documentation as to when the default occurred and the nature of the payment or other obligation that was not timely performed. Summary judgment should be granted when the moving party would be entitled to a directed verdict on the same facts. Batick v. Seymour, 186 Conn. 632, 647 (1982). The court would not direct a verdict for the plaintiff on the issue of liability on these facts.
These factual issues go to an essential element of the prima facie case that a foreclosure plaintiff must plead and prove. "In a mortgage foreclosure action [t]o make out its prima facie case, [the foreclosing party] has to prove by a preponderance of the evidence that it [is] the owner of the note and mortgage and that [the mortgagor] ha[s] defaulted on the note." (Internal quotation marks omitted.) Franklin Credit Management Corp. v. Nicholas, 73 Conn.App. 830, 838 (2002), cert. denied 262 Conn. 937 (2003). Summary judgment as to liability on the allegations of the complaint is therefore not appropriate as there are triable issues of fact.
Plaintiff's Liability on the Counterclaim
The plaintiff has also moved for summary judgment on the counterclaim. The defendant in her Substitute Answer Special Defenses and Counterclaim of February 7, 2006 has pleaded CUTPA counterclaim by incorporating allegations from her second and third special defenses (both claiming breach of a loan agreement and breach of the note and deed by the plaintiff) and from her fourth special defense (claiming breach of the covenant of good faith and fair dealing). From those allegations the defendant concludes that "The Plaintiff's actions as aforesaid constitute illegal, deceptive, and unscrupulous actions prohibited by the Connecticut Unfair Trade Practices Act (CUTPA) . . ." and that "As a result of the Plaintiff's actions as aforesaid, the Defendant has sustained substantial damages, including fees and expenses for which the Plaintiff is liable, plus punitive damages." The factual allegations incorporated from the special defenses are that the plaintiff improperly rejected and returned defendant's payments, illegally attempted to charge excessive fees and interest and illegally attempted to declare the defendant in default on ten separate occasions between January 24, 2001 and July 7, 2004; that the plaintiff acknowledged its improper, illegal actions as evidenced by the fact that it previously commenced a foreclosure action against the defendant in 2003 and then withdrew the case shortly after filing it; that after the plaintiff rejected the defendant's lawful payment in July 2004, the plaintiff demanded without explanation payments of larger amounts than was demanded in its rejection letter of July 7, 2004; that the plaintiff thereafter demanded an amount $2,000 less than the amount demanded in the rejection letter of July 7, 2004 and thereafter demanded yet another amount of money which included illegal fees and charges; and that the plaintiff thereafter demanded yet another $2,000 in order to arrange a payment plan despite the absence of any such provision in the note or mortgage.
In moving for summary judgment on the counterclaim the plaintiff does not contest the nonconclusory allegations of the counterclaim or claim that there is no material issue of fact as to those allegations. The plaintiff, instead, argues that the counterclaim as pleaded is legally insufficient essentially for two reasons: (1) that it goes to matters beyond the making, validity, and enforcement of the note and mortgage and therefore does not arise out of the same transaction as the plaintiff's complaint; and (2) that it fails to satisfy the three criteria for a CUPTA violation. These very same arguments were raised by plaintiff's motion to strike dated January 6, 2006. (No. 137.) That motion was directed to thee defendant's five special defenses and to the counterclaim. The court (David Tobin, J.) Granted the motion to strike as to the second, third, and fourth special defenses and denied it as to the first and fifth special defenses, but failed to rule on the portion of the motion to strike directed to the counterclaim. Rather than seeking an articulation of that ruling to include a ruling on the counterclaim, and after having answered and pleaded special defenses to the counterclaim as set forth in defendant's re-pleaded answer, the plaintiff now advances the very same arguments of insufficiency of the counterclaim as part of its motion for summary judgment. In fact the defendant has submitted a memorandum of law on this point which is virtually a reprint of the memorandum of law submitted to Judge Tobin with respect to the motion to strike.
Our Supreme Court recently addressed the question of whether a motion for summary judgment may be used instead of a motion to strike to challenge the legal sufficiency of a complaint, and if, so, under what circumstances, in Larobina v. McDonald, 274 Conn. 394 (2005). The court recognized the potential unfairness of using a motion for summary judgment for that purpose because the granting of a 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. Recognizing that unfairness, the court held nonetheless that a motion for summary judgment is not improper if it is clear on the face of the complaint that it is legally insufficient and that an opportunity to amend it would not help the plaintiff. 274 Conn. at 401. Under this criteria, the plaintiff's first argument (counterclaim not part of same transaction) will be considered on its merits, as a repleading would not likely alter the result. The second argument (allegations of the counterclaim fail to satisfy the thee criteria of a CUTPA violation), is obviously the type of issue that could be repleaded. The court finds that it would be unfair to consider that argument in the present procedural context and possibly deprive the defendant of the right to plead over, especially given the history of the case where the counterclaim has previously withstood a motion to strike. Only the first argument, then, will be addressed herein.
Practice Book § 10-10 allows a defendant to file a counterclaim against any 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." Under that test, CUTPA counterclaims to foreclosure complaints have been disallowed because they do not relate to the making, validity or enforcement of the note and mortgage, and therefore do not arise out of the same transaction as the complaint. See, e.g. Ocwen Federal Bank, FSB v. Stawski, Superior Court, Judicial District of New London at New London, Docket No. 552683 (April 26, 2000, Martin, J.), 2000 Conn.Super LEXIS 1025. Other decisions have allowed CUTPA counterclaims to foreclosure actions, or have at least considered them on their merits without being stricken under Practice Book § 10-10. See, Lord Corp. v. Widewaters New Castle, Superior Court, Judicial District of Ansonia-Milford at Milford, Docket No. CV03-0083912 (July 1, 2005, Moran, J.), 2005 WL 1762065, citing Cheshire Mortgage Services, Inc. v. Montes, 223 Conn. 80, 105-15 (1992); Mortgage Electronic Registration Systems, Inc. v. Perfido, Superior Court, Judicial District of Stamford/Norwalk at Stamford, Docket No. CV03-0193829 (September 17, 2003, D'Andrea, JTR), 2003 Ct.Sup. 10879-cz ("A violation of CUTPA has been recognized as a valid counterclaim brought in a foreclosure action"); and American Business Credit, Inc. v. DL Auto Body Towing, Inc., Superior Court, Judicial District of New Britain at New Britain, Docket No. CV01-05076655 (November 14, 2002, Berger, J.), 200 Ct.Sup. 14556 ("The remaining allegations of the [CUTPA] counterclaim relate to the defendants' inducement to make the note and mortgage are therefore sufficiently related to the foreclosure action to withstand a motion to strike"). The court finds in this case that the CUTPA counterclaim, as pleaded, has sufficient connection with the foreclosure complaint that it survives the "same transaction" test and should not be stricken. As previously indicated the issues between the parties as to the complaint (which are largely the same issues pleaded in the counterclaim) go to an essential element of plaintiff's prima facie case: did the defendant default, and what was the nature of that default? It is also noted that the counterclaim does plead that the plaintiff has breached the provisions of the note and mortgage which documents are the very heart of the complaint.
Order
For the foregoing reasons the plaintiff's motion for summary judgment as to liability of the defendant on the allegations of the complaint is denied; and the plaintiff's motion for summary judgment on the counterclaim is also denied.
So Ordered.