Opinion
No. CV 05 4002848
January 27, 2006
MEMORANDUM OF DECISION
This is a motion to strike four special defenses which have been filed in this mortgage foreclosure action. For the reasons given below, the motion to strike must be granted as to the first and fourth special defenses, and denied as to the second and third special defenses.
The plaintiff, New Century Mortgage Corporation, alleges that the defendants, Gary R. Reynolds and Wendy A. Reynolds, owned real estate, known as 317-19 W. Lake Street ("property"), located in Winchester, Connecticut. The defendants executed and delivered a note to The Anyloan Company ("Anyloan") for a loan in the original principal sum of $132,600 on or about November 14, 2003. To secure the note, the defendants executed and delivered to Anyloan a mortgage on the property. This mortgage was dated November 14, 2003, and was recorded on November 19, 2003, in the Winchester land records. Anyloan later assigned this mortgage to the plaintiff by an assignment of mortgage, which was dated November 21, 2003, and recorded on April 25, 2005, in the Winchester land records. The plaintiff is the owner and holder of both the note and mortgage.
The plaintiff alleges that the defendants defaulted on the note and although the plaintiff gave the defendants written notice of the default as per the note and mortgage, the defendants did not cure the default. The plaintiff "has elected to accelerate the balance due on said Note, to declare said Note to be due in full and to foreclose the Mortgage securing said Note."
On August 2, 2005, the plaintiff filed a motion for a judgment of strict foreclosure. In its preliminary statement of debt, the plaintiff claimed the principal balance of $131,198.50 and "accrued interest thereon from March 1, 2005, plus late charges, escrow advances for taxes and insurance, counsel fees and court costs."
The defendants have filed four amended special defenses. The plaintiff's motion to strike each special defense will be discussed separately after a brief statement of the applicable legal principles.
"The purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action." (Internal quotation marks omitted.) Louis Gherlone Excavating, Inc. v. McLean Construction Co., 88 Conn.App. 775, 781, 871 A.2d 1057, cert. granted in part, 274 Conn. 909, 876 A.2d 1201 (2005). "The fundamental purpose of a special defense, like other pleadings, is to apprise the court and opposing counsel of the issues to be tried, so that basic issues are not concealed until the trial is underway." (Internal quotation marks omitted.) Almada v. Wausau Business Ins. Co., 274 Conn. 449, 456, 876 A.2d 535 (2005). "Generally, in any affirmative or special defense, the burden of proof rests with the defendant." Lumbermens Mutual Casualty Co. v. Scully, 3 Conn.App. 240, 245 n. 5, 486 A.2d 1141 (1985).
"A party wanting to contest the legal sufficiency of a special defense may do so by filing a motion to strike . . . In ruling on a motion to strike, the court must accept as true the facts alleged in the special defenses and construe them in the manner most favorable to sustaining their legal sufficiency." (Citations omitted; internal quotation marks omitted.) Barasso v. Rear Still Hill Road, LLC, 64 Conn.App. 9, 13, 779 A.2d 198 (2001).
"A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court." (Internal quotation marks omitted.) Ventres v. Goodspeed Airport, LLC, 275 Conn. 105, 154, 881 A.2d 937 (2005). "A motion to strike admits all facts well pleaded; it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings." (Emphasis in original; internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 588, 693 A.2d 293 (1997).
First Special Defense
In the first special defense, the defendants allege that the plaintiff has alleged that the mortgage was recorded on November 9, 2003, a date five days prior to its signing. Thus, the defendants allege that "[a]n unsigned mortgage is invalid as a matter of law." Both parties agree that there was typographical error in the original complaint which has now been corrected. In their memorandum of law, the defendants concede that this court may strike this special defense. Therefore, the motion to strike the first special defense is granted.
Second Special Defense
The defendants' second special defense alleges that the plaintiff failed to provide the defendants with written notice of its intent to accelerate the mortgage despite the fact that the mortgage deed obligated the plaintiff to provide the defendants with written notice "of its intention to accelerate the mortgage prior to so doing."
The plaintiff first moves to strike the second special defense on the grounds that this special defense is merely a legal conclusion unsupported by fact and "[i]t fails to show that the Plaintiff has no cause of action because it does not address the making, validity, or enforcement of the mortgage but rather the conduct of the mortgagee subsequent to the Defendants' default." This first claim must be rejected because the defense is more than a mere legal conclusion, and, furthermore, if the plaintiff wanted more specific allegations of fact, it could have filed a request to revise to obtain these allegations. See Bristol Savings Bank v. EFA Acceptance Corp., Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. CV 91 0515249 (June 1, 1993, Aurigemma, J.).
The plaintiff's further argument that this special defense is not legally sufficient as "it fails to address the making, validity or enforcement of the note and mortgage," presents an issue on which there appears to be limited appellate authority and a split of Superior Court authority. A brief review of the available appellate authority is necessary before turning to the Superior Court cases.
"Notices of default and acceleration are controlled by the mortgage documents. Construction of a mortgage deed is governed by the same rules of interpretation that apply to written instruments or contracts generally, and to deeds particularly. The primary rule of construction is to ascertain the intention of the parties. This is done not only from the face of the instrument, but also from the situation of the parties and the nature and object of their transactions . . . A promissory note and a mortgage deed are deemed parts of one transaction and must be construed together as such." (Internal quotation marks omitted.) Webster Bank v. Oakley, 265 Conn. 539, 547, 830 A.2d 139 (2003), cert. denied, 541 U.S. 903, 124 S.Ct. 1603, 158 L.Ed.2d 244 (2004).
In Northeast Savings, F.A. v. Scherban, 47 Conn.App. 225, 226, 702 A.2d 659 (1997), cert. denied, 244 Conn. 907, 714 A.2d 2 (1998), the defendants mortgagors appealed from the trial court's judgment of strict foreclosure in favor of the plaintiff mortgagee. In that case, the plaintiff notified the defendants by letter "that the [promissory] note was in default and that failure to cure the deficiency within thirty days might result in the acceleration of the debt." Id., 227. The plaintiff sent the defendants a second letter informing them that the note was still in default and that the defendants had thirty days to cure the default. Id. After the second letter was sent, the defendants were again informed "that their account was in default and that, unless they remitted the full amount past due by August 2, 1993, foreclosure proceedings would commence." Id. The plaintiff later commenced a foreclosure action. Id.
On appeal, the defendants claimed that the plaintiff did not give the defendants adequate notice of the debt's acceleration. Id., 226-27. The defendants claimed that because the plaintiff did not provide them with proper notice, "a condition precedent to a foreclosure action"; id., 227; the foreclosure judgment was void. Id.
The Appellate Court examined the operative agreement between the plaintiff and the defendants, which provided in relevant part: "[T]he lender shall give notice to borrower prior to acceleration . . . which shall specify the default, the action required to cure the default, a date not less than thirty days within which to cure the default and that failure to cure the default may result in acceleration . . ." (Internal quotation marks omitted.) Id., 227-28.
The Appellate Court stated that "[t]he use of `shall' in the note creates a condition precedent that must be satisfied prior to foreclosure. See Citicorp Mortgage, Inc. v. Porto, 41 Conn.App. 598, 602, 677 A.2d 10 (1996)." Id., 228. The Appellate Court further stated that "[t]he condition precedent under the note is the notice of the default, and it is clear that the defendants were timely notified of the default." Id. The Appellate Court also stated: "[T]he first notice of default stated that failure to cure might result in an acceleration of the debt, language similar to that contained within the note itself. We conclude that the note did not require that notice regarding the acceleration of the debt be a document separate from the notice of default.
"We further conclude that the notice of default satisfied the notice requirement contained in the note because it notified the defendants of the default and the possibility of acceleration. The note provision required only that the plaintiff give notice of the default and notice that failure to cure the default `may result in acceleration.'" Id. Therefore, the Appellate Court held that the contract provisions pertaining to notice were satisfied and therefore, the judgment of strict foreclosure was proper. Id.
In the present case, the defendants allege in their second special defense that pursuant to the mortgage deed and note, the plaintiff was obligated to provide the defendants with written notice of its intent to accelerate the mortgage prior to doing so. The mortgage, which was attached to the plaintiff's complaint, states that "[l]ender shall give notice to Borrower prior to acceleration . . ." Notwithstanding the language of the mortgage itself, pursuant to Barasso v. Rear Still Hill Road LLC, supra, 64 Conn.App. 13, this court must assume that the note and mortgage deed required that the plaintiff provide the defendants with notice of its intent to accelerate. Furthermore, pursuant to Webster Bank v. Oakley, supra, 265 Conn. 547, if the note and mortgage deed required the plaintiff mortgagee to notify the defendant mortgagors of its intent to accelerate, then the plaintiff was required to provide such notice. Nevertheless, pursuant to Northeast Savings, F.A. v. Scherban, supra, 228 and the mortgage language, the plaintiff in the present case was required to notify the defendants of the possibility of acceleration before it accelerated the debt, according to Northeast Savings, F.A. v. Scherban, supra, 228 and the mortgage language, this notice pertaining to the debt's acceleration did not have to be in a document separate from the default notice as long as the default notice stated that failing to cure the default could result in the debt's acceleration.
Can an allegation of lack of required notice of acceleration of the debt be raised as a proper special defense? "Historically, defenses to a foreclosure action have been limited to payment, discharge, release or satisfaction . . . or, if there had never been a valid lien . . ." (Internal quotation marks omitted.) Loricco Towers Condominium Ass'n. v. Pantani, 90 Conn.App. 43, 51, 876 A.2d 1211 (2005). "A valid special defense at law to a foreclosure proceeding must be legally sufficient and address the making, validity or enforcement of the mortgage, the note or both." (Internal quotation marks omitted.) Louis Gherlone Excavating, Inc. v. McLean Construction Co., supra, 88 Conn.App. 781. "Where the plaintiff's conduct is inequitable [however] a court may withhold foreclosure on equitable considerations and principles." (Internal quotation marks omitted.) Loricco Towers Condominium Ass'n. v. Pantani, supra, 51. "[O]ur courts have permitted several equitable defenses to a foreclosure action. [I]f the mortgagor is prevented by accident, mistake or fraud, from fulfilling a condition of the mortgage, foreclosure cannot be had . . . Other equitable defenses that our Supreme Court has recognized in foreclosure actions include unconscionability . . . abandonment of security . . . and usury." (Internal quotation marks omitted.) Fidelity Bank v. Krenisky, 72 Conn.App. 700, 705-06, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002).
In one line of Superior Court cases, the court granted motions to strike the special defense of lack of notice on the ground that notice is not a valid special defense even when it was alleged that notice was required by the note or mortgage. For example, in Shoreline Bank Trust Co. v. Leninski, supra, 8 C.S.C.R. 570, the defendant mortgagors alleged as a special defense that the foreclosure was invalid because the plaintiff mortgagee did not provide the defendants with "adequate notice as required by the note." The plaintiff moved to strike this special defense on the ground that the plaintiff substantially complied with the mortgage terms. Id. In opposition to the motion to strike, the defendants argued that their special defenses were valid special defenses to a foreclosure action and that they possessed the equitable right to allege some of their defenses. Id.
The court granted the motion to strike this special defense and stated: "The . . . special defense, that [the plaintiff] failed to provide adequate notice, is a defense based on the note, and therefore allowable in a foreclosure action. The plaintiff's failure to plead that it has given notice as required by a note is a ground for a court to deny a foreclosure proceeding . . . However, the purpose of a special defense is to defeat a plaintiff's entire right to bring a cause of action despite the plaintiff's pleadings. Practice Book [§ 10-50]. The issue in this case is not whether [the plaintiff] lacks the right to bring the foreclosure. Rather, the issue is whether [the plaintiff] has plead[ed] that it provided the required notice to the mortgagors. A special defense is an improper vehicle by which to challenge the sufficiency of the pleadings." (Citation omitted.) Id., 571.
Practice Book § 10-50 provides: "No facts may be proved under either a general or special denial except such as show that the plaintiff's statements of fact are untrue. Facts which are consistent with such statements but show, notwithstanding, that the plaintiff has no cause of action, must be specially alleged. Thus, accord and satisfaction, arbitration and award, coverture, duress, fraud, illegality not apparent on the face of the pleadings, infancy, that the defendant was non compos mentis, payment (even though nonpayment is alleged by the plaintiff), release, the statute of limitations and res judicata must be specially pleaded, while advantage may be taken, under a simple denial, of such matters as the statute of frauds, or title in a third person to what the plaintiff sues upon or alleges to be the plaintiff's own."
In First Union National Bank v. Shaver, Superior Court, judicial district of Ansonia Milford, Docket No. CV 98 0063097 (September 3, 1998, Curran, J.), the defendant alleged in his first special defense "that the plaintiff [mortgagee] has failed to satisfy conditions precedent to the commencement of the foreclosure action since it has failed to give proper notice of the default and acceleration as required under the note or mortgage and `has not allowed for or responded to defendant's requests for reinstatement and information relative to same as provided for in the subject note and therefore should be denied the relief it is seeking in this matter.'" In moving to strike this special defense, the plaintiff argued "that the special defense fails to allege sufficient facts and therefore is insufficient as a matter of law." Id. The court granted the motion to strike this special defense and stated: "This court has previously held that lack of proper notice of default in a foreclosure action `does not attack the making, validity, or enforcement of the mortgage, nor does it show that the plaintiff has no cause of action. Furthermore, the . . . special defense is not a recognized equitable defense.' Bank of New Haven v. Liner, [Superior Court, judicial district of Ansonia-Milford, Docket No. CV 91 0034516 (April 2, 1993, Curran, J.)]." Id. See also Greenpoint Mortgage Corp. v. Ruisi, Superior Court, judicial district of Danbury, Docket No. CV 0333106 (June 1, 1999, Moraghan, J.) (granting motion to strike special defense alleging plaintiff mortgagee did not provide defendant mortgagor with "proper notice" of default).
While it is unclear whether the defendant in Greenpoint Mortgage Corp. v. Ruisi, supra, Superior Court, Docket No. CV 0333106 actually alleged that either the note or mortgage required the plaintiff to provide the defendant with notice of the default, it is clear that the defendant does allege that the plaintiff failed to provide him with "proper notice of the default."
Nevertheless, in another line of authority, the Superior Court has also denied motions to strike the special defense of lack of proper notice when it was alleged that such notice was required by the mortgage. For example, in Webster Bank v. Eierweiss, Superior Court, judicial district of New Haven, Docket No. CV 96 0395181 (June 26, 1997, Celotto, S.T.R.) ( 19 Conn. L. Rptr. 627, 628), the defendant mortgagors alleged as a special defense to a foreclosure action that the acceleration notice was noncompliant with the mortgage deed's provisions. The ground for the plaintiff's motion to strike this special defense was "that it is legally insufficient because it attacks acts of the mortgagee outside of the making of the note and mortgage, and thus, is not a recognizable defense to a foreclosure action." Id., 628. In response, the defendants asserted "that the failure to provide proper notice of default is a `mandatory condition precedent to an action of foreclosure.'" Id.
The Superior Court held that this special defense went "to the enforcement of the promissory note because the holder must follow the provision for proper notice before bringing the foreclosure action." Id., 629. The court further stated: "The . . . special defense sufficiently alleges that [the plaintiff] did not comply with the notice provisions of the acceleration clause before bringing this action. Accordingly, the . . . special defense sufficiently alleges a recognizable defense to the foreclosure action because if [the defendants] can show that the default notice was insufficient they can demonstrate that the present foreclosure action was premature." Id. Therefore, the court denied the plaintiff's motion to strike this special defense. Id.
In Federal Home Loan Mortgage v. Markovich, Superior Court, judicial district of Hartford, Docket No. CV 98 0579585 (February 17, 1999, Satter S.T.R.), the defendant mortgagor alleged in a special defense that the plaintiff mortgagee did not provide the defendant with notice of the note's acceleration even though the mortgage required such notice. The court in Federal Home Loan Mortgage v. Markovich, supra, Superior Court, Docket No. CV 98 0579585, adopted the court's reasoning in Webster Bank v. Eierweiss, supra, 19 Conn. L. Rptr. 627, in denying the motion to strike this special defense and stated: "The . . . special defense is a proper defense to a foreclosure action as it directly relates to the plaintiff's entitlement to enforce the mortgage by instituting foreclosure proceedings. The allegations made in the . . . special defense, which must be taken as true for purposes of ruling on a motion to strike, show that the plaintiff, in failing to satisfy a mandatory condition precedent to a foreclosure action, has no such cause of action. Thus, the defense complies with the Practice Book § 10-50." Federal Home Loan Mortgage v. Markovich, supra, Superior Court, Docket No. CV 98 0579585. See also Sovereign Bank v. Bradley, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 01 0184761 (March 26, 2002, Tobin, J.) ( 32 Conn. L. Rptr. 35, 36-38) (denying motion to strike special defense alleging that plaintiff mortgagee failed to comply with mortgage provision requiring that notice issued prior to foreclosure include information regarding mortgagors' rights to reinstate mortgage).
Having considered the apparent split within the Superior Court, I find myself in agreement with these cases which hold that an allegation of lack of required notice is a valid special defense. Therefore, the motion to strike the second special defense is denied.
Third Special Defense
In their third special defense, the defendants allege that on or about June 1, 2005, the defendants, via telephone check, tendered a payment of $2,161 to the plaintiff's agents and employees. This payment would have brought them current on their mortgage payments through June 30, 2005. The plaintiff's agent or employee acted negligently in entering the wrong checking account number. The defendants attached a copy of the invalid telephone check along with a copy of an actual check from the defendants' account to the special defenses as exhibit A. The defendants had made at least one payment by telephone check before and believed that the plaintiff authorized and approved of this method of payment. The defendants relied on the telephone check and did not make any further payments to the plaintiff until, without notice, the plaintiff commenced the present action on July 1, 2005.
The plaintiff's ground for striking the third special defense is that this special defense "fails to show that the Plaintiff has no cause of action because it does not address the making, validity, or enforcement of the mortgage but rather the conduct of the parties subsequent to the Defendants' default." The plaintiff asserts in its memorandum that a notice of default and acceleration, dated May 16, 2005, was sent to the defendants as per the terms of the note and mortgage and that the third special defense therefore pertains solely to the parties' conduct after the defendants defaulted. Because the third special defense exclusively addresses conduct that allegedly occurred after the default, if it occurred at all, the plaintiff contends that "it arises out of subject matter other than that which is the subject of the Plaintiff's complaint," and is therefore legally insufficient. In addition, the plaintiff maintains that this special defense fails to demonstrate that the plaintiff does not have a cause of action.
In their memorandum in opposition, the defendants argue that an allegation of payment is a defense that demonstrates that the plaintiff does not have a cause of action. While the defendants concede that they are not alleging that they made "full payment," they argue that the payment that they tendered was in compliance with the note's terms. As the defendants allegedly made payment in compliance with the note's terms, they assert that the plaintiff prematurely brought suit against them. In addition, the defendants assert that the plaintiff's alleged actions do pertain to the note and mortgage's enforcement because the plaintiff tried to enforce the note and mortgage by allegedly preventing the defendants from being current on their payments.
"Payment is a valid special defense in a foreclosure action." Homecomings Financial Network, Inc. v. Starbala, 85 Conn.App. 284, 289, 857 A.2d 366 (2004). In Homecomings Financial Network, Inc. v. Starbala, supra, 286, the defendants executed a promissory note in the sum of $280,000 in favor of Delta Funding Corporation (Delta) on November 29, 2000. The defendants secured the note by mortgaging property in Guilford. Id. Delta assigned both the note and mortgage to the plaintiff, Homecomings Financial Network, Inc. on December 4, 2000; id., 285-86; but Delta continued to service the loan and to accept the checks that the defendants mailed to it until September of 2001, although it stopped servicing the loan at an earlier date. Id., 286. Ocwen Federal Savings Bank (Ocwen) serviced the loan from approximately May of 2001 until August of 2001. Id. While the defendants kept sending their checks to Delta, Ocwen endorsed those checks. Id.
Ocwen transferred the loan servicing functions to Litton Loan Servicing, L.P. (Litton) in August of 2001, and Ocwen purportedly notified the defendants about the transfer via certified mail, return receipt requested, dated August 1, 2001. Id. Litton purportedly sent the defendants a notice of default and intent to accelerate via certified mail, return receipt requested, which was dated October 22, 2001. Id. The plaintiff brought an action for strict foreclosure and the defendants asserted a special defense in which they alleged that they "`tendered timely payment of the mortgage payment to the previous Note holder which payment was refused.'" Id., 288.
The plaintiff filed a motion to strike this special defense, which the Superior Court granted. Id., 286-87. On appeal, one argument raised by the defendants is that the trial court's ruling was improper because they had asserted a proper special defense. Id., 287. The Appellate Court held that the Superior Court improperly granted the motion to strike and stated: "[T]he defendants' special defense alleges that they tendered timely payment of the mortgage to the previous note holder, and that such payment was refused. The plaintiff argues that this special defense was legally insufficient in its failure to allege the facts necessary to support the defense of payment. Although the plaintiff cites cases addressing the need to set forth a cause of action adequately, it has not provided authority for the proposition that the special defense here is pleaded inadequately. As noted, the defense of payment is a legally sufficient defense in a foreclosure action, and whether payment was tendered is a question of fact appropriately decided by the trier of fact. The defendants' special defense sets forth sufficient facts to allege the defense of payment." Id., 289.
Pursuant to Homecomings Financial Network, Inc. v. Starbala, supra, 85 Conn.App. 284, a special defense alleging timely payment is legally sufficient. Therefore, it must be determined whether the defendants' third special defense can be construed as a special defense of timely payment. The defendants do allege that they attempted to make a payment by telephone check on or about June 1, 2005, and had this payment been accepted, the defendants would have been current on their payment obligations through June 30, 2005. The defendants do not allege, however, that this June 1, 2005 payment was timely. But, construing this special defense in a manner most favorable to the defendants as per Barasso v. Rear Still Hill Road, LLC, supra, 64 Conn.App. 13, it is possible to construe the third special defense as an allegation of timely payment. This is so because the defendants, in their answer, deny that the note was in default at all. Therefore, one could conclude that it is the defendants' position that the note was not in default, and that the June 1, 2005 attempt at payment was timely. The motion to strike the third special defense is denied.
Fourth Special Defense
The fourth special defense alleges that the defendants attempted to make a payment after the commencement of the foreclosure action. The defendants allege the following: "On August 19, 2005, the defendants, through counsel, tendered full payment to the plaintiff's counsel . . ." The plaintiff did not accept this check. The defendants appended a copy of the check to the special defenses as exhibit B.
The plaintiff moves to strike the fourth special defense on the ground that this special defense "fails to show that the Plaintiff has no cause of action because it does not address the making, validity, or enforcement of the mortgage but rather the conduct of the parties subsequent to the Defendants' default." In its memorandum, the plaintiff argues that the defendants' fourth special defense is legally insufficient for several reasons. First, according to the plaintiff, this defense pertains to the parties' conduct after the default. Second, the plaintiff asserts that this special defense does not contain pertinent facts including whether the payment tendered was in an amount that was agreed upon or whether it was "in an acceptable form." Third, the plaintiff contends that this special defense does not state why the payment was refused.
Also, the plaintiff maintains that this special defense "lack[s] a sufficient factual predicate." In addition, the plaintiff maintains that even if this special defense was sufficiently pleaded, it still would not be a viable special defense because it exclusively pertains to the conduct of the parties after the default. Further, the plaintiff that argues that as the conduct alleged could only have occurred after the default, if it occurred at all, this special defense is not based on the subject matter of the complaint, and is, therefore, legally insufficient.
In their memorandum, the defendants cite case law in support of their assertion that "[p]ayment of a mortgage debt is a complete defense to a foreclosure action." The defendants further contend that the mortgagee is merely entitled to satisfaction of his debt. According to the defendants, once that debt is repaid to the mortgagee, the mortgagee is owed nothing more.
The fourth special defense cannot be construed as an allegation of timely tendered payment as the defendants allege that they attempted to tender payment after the commencement of the action against them. The defendants fail to allege anything that would make this alleged payment timely. Therefore, the plaintiff's motion to strike the fourth special defense must be granted.