Opinion
FSTCV156026422S
03-28-2018
WELLS FARGO BANK, N.A. v. Craig B. REISS et al.
UNPUBLISHED OPINION
OPINION
Hon. Kevin Tierney, Judge Trial Referee
This one-count foreclosure complaint dated September 2, 2015 was met by a May 27, 2016 Answer as well as seven Special Defenses. (# 117.00.) There are only three parties to this litigation; the plaintiff, Wells Fargo Bank, N.A., and the two individual homeowners, Craig B. Reiss and Scott W. Reiss. The Motion for Summary Judgment as to liability only was argued before this court on February 1, 2018.
This court has applied all the requisite standards for decisions by trial courts in motions for summary judgment without the need to restate those standards in this Memorandum of Decision. Covello v. Darien, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket Number FST CV 08-5008909 S (October 22, 2010, Tierney, JTR) ; Forrest v. Sothebys International Realty, Inc. et al., Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket Number FST CV 11-6010200 S (January 9, 2013, Tierney, JTR).
The operative complaint is the original complaint dated September 2, 2015. It alleges that on March 18, 2005 the defendants, Craig B. Reiss and Scott W. Reiss, executed a Note to Wachovia Mortgage Corporation in the amount of $933,000.00. On that same date to secure that loan a mortgage deed was executed and delivered to Mortgage Electronic Registration Systems, Inc. as Nominee for Wachovia Mortgage Corporation. The complaint further alleges the assignment of the mortgage to the current plaintiff, Wells Fargo Bank, N.A., in 2012. Paragraph 4 alleges; " The Plaintiff, Wells Fargo Bank, N.A., is the holder of said Note." A default and the later acceleration of the balance due on said Note was alleged. The complaint concludes by alleging that Craig B. Reiss and Scott W. Reiss are the owners of the real property located at 5 Dartmouth Road, Greenwich, Connecticut 06807. To that complaint the defendants, by current counsel of record, submitted an Answer and Special Defenses dated May 27, 2016 (# 117.00). In that Answer the defendants admit that they executed and delivered the Note in the original principal amount of $933,000.00. They further admit ownership of the real property in question. This foreclosure action commenced on September 12, 2015. See Return of Service in court file.
The seven Special Defenses alleged in that May 27, 2016 Answer and Special Defenses are res judicata and collateral estoppel by reason of a previous foreclosure action entitled Universal Master SVCG v. Reiss, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket Number FST CV 09-5012083 S; failure to mitigate damages; statute of limitations; Gen. Stat. § 42a-3-118 et seq., laches; failure to properly apply subject payments; equitable estoppel; and breach of covenant of good faith and fair dealings. (# 117.00.) The plaintiff has not filed a responsive pleading nor a Reply to any of the above seven Special Defenses.
The plaintiff supports its February 16, 2017 Motion for Summary Judgment, with an included Memorandum of Law (# 118.00), a three-page October 20, 2016 Affidavit with four attached documents; Exhibit A, a copy of the March 18, 2005 $933,000.00 Note to the lender, Wachovia Mortgage Corporation, Exhibit B, the March 18, 2005 Open-End Mortgage Deed from Craig B. Reiss and Scott W. Reiss to Mortgage Electronic Registration Systems, Inc. as a Nominee for the lender, Wachovia Mortgage Corporation, in the face amount of $933,000.00, Exhibit C, Corporate Assignment of Mortgage from Mortgage Electronic Registration Systems, Inc. to the plaintiff, Wells Fargo Bank, N.A., dated August 17, 2012, and Exhibit D, a letter from Wells Fargo Home Mortgage dated April 9, 2015 to Craig B. Reiss and Scott W. Reiss that contains a barcode and transmittal information. The Defendants’ opposition documents includes an Objection to Motion for Summary Judgment dated April 25, 2017 (# 128.00), a Memorandum in Objection to Motion for Summary Judgment dated April 25, 2017 (# 129.00), a twelve-page Affidavit of Craig B. Reiss dated April 24, 2017 (# 130.00), and thirty-two separate Exhibits marked from Exhibit A through and including Exhibit FF consisting of seventy-eight pages (# 131.00). The defendants filed a redacted version of these thirty-two Exhibits on May 12, 2017 (# 132.00). The plaintiff submitted on December 6, 2017 a further two-page Affidavit dated November 29, 2017 that is an amended version of the previous Affidavit containing the aforementioned Exhibits marked Exhibit A through and including Exhibit D (# 134.00). Two supplemental briefs were filed by both parties the day before the hearing addressed to an October 31, 2017 decision of the Appellate Court, (AC 39219), U.S. National Association, Trustee v. Blowers, 177 Conn.App. 622 (2017) (# 135.00, # 136.00). The court will discuss the Blowers case and its later Petition for Certification granted on February 17, 2018 in 328 Conn. 904-05. Neither party objected to the above documents being considered by this court in rendering a decision on the Motion for Summary Judgment. (# 118.00.)
At the court hearing on February 1, 2018, plaintiff’s counsel furnished to the court for its inspection the blue ink Note dated March 18, 2005 in the face amount of $933,000.00 with the property address of 5 Dartmouth Road, Cos Cob, Connecticut 06807 with the lender being Wachovia Mortgage Corporation executed by Craig B. Reiss and Scott W. Reiss. This Note is a preprinted form with numbers and names typed therein. It is three pages in length. The court and counsel inspected this three-page Note on the record as well as a photocopy of the note. The photocopy was offered into evidence by the plaintiff. The court marked the photocopy of the note as Exhibit 1 and returned the three-page blue ink Note to plaintiff’s counsel. This procedure satisfied the court’s inspection obligations. Equity One, Inc. v. Shivers, 310 Conn. 119, 124, 131 (2013); Countrywide Home Loans Servicing, L.P. v. Creed, 145 Conn.App. 38, 43 (2013). The court and defendant’s counsel also examined the Open-End Mortgage Deed and the August 17, 2012 Corporate Assignment of Mortgage as described previously in this Memorandum of Decision. The defendants admitted the execution of the mortgage documents as well as the allegations of default. The court finds that this foreclosure action was commenced September 12, 2015 in accordance with the Return of Service in the court file (# 100.10) and at that time plaintiff’s counsel had possession of the note. The court finds that a September 11, 2014 Affidavit of Federal Loss Mitigation was filed on September 21, 2015 with this court in conformity with the law (# 101.00). The court finds that the plaintiff satisfied the Emergency Mortgage Assistance Program requirements under Connecticut General Statutes § 8-265ee (# 119.00, Exhibit D, # 134.00, Exhibit D).
The court finds that a notice of default that complied with the requirements of both the Note and the Open-End Mortgage Deed was furnished the plaintiff on April 9, 2015 (# 119.00, Exhibit D, # 134.00 Exhibit D). The court further finds that the commencement of this lawsuit on September 12, 2015 accelerated the mortgage. The court finds that the plaintiff, Wells Fargo Bank, N.A., has standing to commence and maintain this foreclosure lawsuit since it is the holder and in possession of the Note. GMAC Mortgage, LLC v. Ford, 144 Conn.App. 165, 177 (2013). The court further finds that the plaintiff has sustained its burden of proof to demonstrate a prima facia case for foreclosure. U.S. Bank, National Association, Trustee v. Schaeffer, 160 Conn.App. 138, 150 (2015). The burden now shifts to the defendants to show that either someone else or another entity is the owner of the note. Id., 150. In addition the defendants have the burden to prove one or more of their Special Defenses. Both burdens must comply with the usual Summary Judgment standards.
At the February 1, 2018 oral argument, the defendants proposed the use of the statute of limitations, Gen. Stat. § 42a-3-118, in a fashion not set forth in their Third Special Defense nor in their Memorandum of Law in Opposition to the Motion for Summary Judgment. (# 129.00.) The defendants used the statute of limitations as a springboard to argue that all of the equitable defenses set forth in the remaining Special Defenses should be considered by this court. The basis of that argument is that any lawsuit on the promissory note is an action at law and would be barred by the statute of limitations, Gen. Stat. § 42a-3-118, by reason of the prior acceleration of the note that occurred when the previous foreclosure action was commenced. To that end the defendant argues the applicability of the following section of Gen. Stat. § 42a-3-118(a): " Except as provided in subsection (e), an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date." The defendants acknowledge that the underlying $933,000.00 Note is dated March 18, 2015 and according to the terms of the Note the maturity date is thirty years hence. The defendants concede that the commencement of this action on September 12, 2015 as stated in the Return of Service in the court file, complied with the first section of the above statute of limitations: " commenced within six years after the due date." The defendants argue though that the second provision of the statute is applicable since there was a previous acceleration; " if a due date is accelerated, within six years after the accelerated due date." The defendants point to Universal Master SVCG v. Craig B. Reiss et al., Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket Number FST CV 09-5012083 S, the previous foreclosure action on this same March 18, 2005 $933,000.00 note. That first foreclosure action was commenced by a Return of Service on June 22, 2009. The defendants claim that the commencement of the Universal Master SVCG foreclosure was the act that accelerated the March 18, 2015 $933,000 Note. The defendants then point to the Return of Service in this instant foreclosure action dated September 12, 2015. The defendants then argue that this instant lawsuit was brought more than six years after the " accelerated due date," being June 29, 2009, the commencement of the prior Universal Master SVCG foreclosure.
The defendants recognize that a foreclosure action is an equitable proceeding. The defendants appeared to concede that there is no statute of limitations applicable to the commencement of a foreclosure action. They are claiming that the six-year statute of limitations under Gen. Stat. § 42a-3-118(a) has run on the suit on a note, which is an action at law. This leaves the plaintiffs with the only remedy, to sue in foreclosure. Under those circumstances the defendants claim that since this lawsuit is only an equitable action, all equitable defenses raised by the defendant in their May 27, 2016 Answer and Special Defenses (# 117.00) must be considered by this court. The defendant cites for support Ferrigno v. Cromwell Development Associates, 44 Conn.App. 439, 445-46 (1997) and Conway v. Wilton, 238 Conn. 653, 659 (1996).
The plaintiff answers that claim by citing to Connecticut law that most of the Special Defenses do not relate to the making, validity or enforcement of the mortgage and therefore are not valid Special Defenses to a foreclosure. U.S. Bank, National Association, Trustee v. Sorrentino, 158 Conn.App. 84, 97 (2015); Citimortgage, Inc. v. Rey, 150 Conn.App. 595, 603 (2014).
Further, the plaintiff cites to an October 31, 2017 decision of our Appellate Court, which held that defenses raising issues concerning post-default attempts to modify the loan are not valid Special Defenses in an equitable foreclosure action. U.S. Bank National Association, Trustee v. Blowers, 177 Conn.App. 622, 627 (2017).
In the present case, neither of the defendants’ special defenses at issue directly attacks the making, validity, or enforcement of the note or mortgage ... All events giving rise to the special defenses took place during the loan modification negotiation period or during foreclosure mediation. This court previously has held that alleged improper conduct occurring during mediation and modification negotiations lack any reasonable nexus to the making, validity or enforcement of the mortgage or note ... By contrast, if the modification negotiations ultimately result in a final, binding, loan modification, and the mortgagee subsequently breaches the terms of that new modification, then any special defenses asserted by the mortgagor in regard to that breach would relate to the enforcement of the mortgage. In the present case, however, no binding modification was ever agreed upon by the parties. Accordingly the special defenses raised by the defendants do not relate to the making, validity, or enforcement of the note or mortgage.U.S. Bank National Association, Trustee v. Blowers, supra, 177 Conn.App. 629.
The defendants argue that the Blowers decision is not binding on this court because a Petition for Certification has been filed with the Connecticut Supreme Court. (SC170348) At the time of the oral argument on February 1, 2018 the Connecticut Supreme Court had not yet acted on the Petition. The Supreme Court has now done so and has granted the petition limited to three issues.
The petition by the defendant Mitchell Piper for certification to appeal from the Appellate Court, 177 Conn.App. 622 (AC 39219), is granted, limited to the following issues;
1. Did the Appellate Court properly hold that (a) special defenses to a foreclosure action must directly attack the making, validity, or enforcement of the note or mortgage, and (b) counterclaims in a foreclosure action must also satisfy the making, validity, or enforcement requirement? See Practice Book § 10-10.
2. If the Appellate Court properly addressed the issues in the first question, did it properly hold that alleged postorigination misconduct concerns a plaintiff’s enforcement of a note or mortgage only if the plaintiff breaches a loan modification or other similar agreement that affects the enforceability of the note or mortgage?
3. If the Appellate Court properly addressed the issues in the first and second questions, did it properly hold that the defendants’ allegations of the plaintiff’s misconduct and breach relating to a received immediate modification did not amount to an allegation that the plaintiff had agreed to a final, binding loan modification that affected the plaintiff’s ability to enforce the note or mortgage.U.S. Bank National Association, Trustee v. Blowers et al., 328 Conn. 904-05 (issued February 13, 2018). (SC170348)
It appears to this court that the Connecticut Supreme Court in granting the Petition for Certification is examining the issue that has puzzled a number of Superior Courts in foreclosure actions; Is the transaction test relating to counterclaims in Practice Book § 10-10 limited only to counterclaims in foreclosure actions or does it apply to foreclosure Special Defenses? That issue is not necessary for this court to decide since it is only the trial court. For the purposes of this Motion for Summary Judgment (# 118.00) and limited to this case only, this court will consider each of the stated seven Special Defenses as being applicable to this September 2015 foreclosure. Therefore this court need not determine whether the transaction test under Practice Book § 10-10 is applicable to foreclosure special defenses or whether or not the running of the six year statute of limitations, Gen. Stat. § 42a-3-118, affects the validity of any of the equitable Special Defenses offered in this foreclosure action.
The court will now turn to each of the seven Special Defenses.
(1) Res judicata and collateral estoppel by reason of Universal Master SVCG v. Reiss, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket Number FST CV 09-5012083 S.
This court agrees that a foreclosure action commenced returnable on July 14, 2009 to the Superior Court, judicial district of Stamford/Norwalk at Stamford. In that lawsuit the plaintiff sought to foreclose the same $933,000.00 Note and Open-End Mortgage Deed that is at issue in this instant foreclosure. The complaint in that earlier foreclosure lawsuit is dated June 26, 2009. It alleges: " Said Mortgage was assigned to Universal Master SVCG by an Assignment of Mortgage to be recorded on the (Cos Cob) Greenwich Land Records." The operative pleadings that were filed in this first foreclosure lawsuit from the first " Foreclosure Mediation" notice (# 101.00) to the Judgment of Dismissal on June 5, 2014 (# 116.55) consisted essentially of mediation filings, motions for continuances addressed to mediation, a Motion to Exempt From Dormancy dated August 26, 2010 (# 106.00) by reason of being in Court-Ordered Mediation, and finally a Motion to Correct Party Plaintiff filed by the plaintiff on May 14, 2014 (# 115.00). That Motion to Correct Party Plaintiff was heard by the court, Mintz, J., on June 5, 2014 and the motion was denied on June 5, 2014 (# 115.87). On that same date, June 5, 2014, the Superior Court Clerk entered a " Judgment of Dismissal Under PB 14-3." A JDNO of the Judgment of Dismissal was sent out to the two self-represented defendants, Craig B. Reiss and Scott W. Reiss, and the attorney of record for both Universal Master SVCG and Wachovia Bank. No proceedings occurred in the Universal Master SVCG foreclosure lawsuit after June 5, 2014 by any appearing party, any nonappearing party, any self-represented party, or any other person or entity. No pleadings of any kind were filed after the June 5, 2014 Judgment of Dismissal. No evidentiary hearings were ever held. The issues were not joined. No responsive pleadings were ever filed as to the original operative complaint dated June 26, 2009.
Although the First Special Defense raises both res judicata and collateral estoppel, these two Special Defenses should have been filed as two separate Special Defenses since they are different legal theories. The doctrine of res judicata provides that: " A valid final judgment rendered on the merits by a court of competent jurisdiction is an absolute bar to a subsequent action between the same parties ... upon the same claim or demand." Gaynor v. Payne, 261 Conn. 585, 595-96 (2002). Res judicata prevents a litigant from reasserting a claim that has already been decided on the merits. LaSalla v. Doctor’s Associates, Inc., 278 Conn. 578, 590 (2006). " Res judicata is based on the public policy that a party should not be able to relitigate a matter which it already has had an opportunity to litigate ... Where a party has fully and fairly litigated his claims, he may be barred from future actions on matters not raised in the prior proceeding." Weiss v. Weiss, 297 Conn. 446, 459-60 (2010); State v. Pecor, 179 Conn.App. 864, 874 (2018).
" In contrast, collateral estoppel precludes a party from relitigating issues and facts actually and necessarily determined in an earlier proceeding between the same parties or those in privity with them upon a different claim." Rocco v. Garrison, 268 Conn. 541, 555 (2004). " An issue is actually litigated if it is properly raised in the pleadings or otherwise, submitted for determination, and in fact determined ... If an issue has been determined, but the judgment is not dependent upon the determination of the issue, the parties may relitigate the issue in a subsequent action." Id., 555; Kimberly C. v. Anthony C., 179 Conn.App. 856, 863-64 (2018).
" Claim preclusion (res judicata) and issue preclusion (collateral estoppel) have been described as related ideas on a continuum." Weiss v. Weiss, supra, 297 Conn. 473.
The court finds that no factual or legal issues were litigated in the prior foreclosure. No evidentiary hearings were held. The prior foreclosure action was devoted only to court-supervised mediation. Only when the Motion to Correct was denied, did the court dismiss the foreclosure lawsuit for dormancy purposes some five years after this first foreclosure action was commenced. The dismissal was entered on the routine application of Practice Book § 14-3. There is no evidence in either the first or second foreclosure action of " procedural chicanery" or " gamesmanship." Marra v. Commissioner of Correction, 174 Conn.App. 440, 457, 461 (2017). This dismissal did not decide any legal or factual issues. The plaintiff was free to commence another foreclosure action, which it did just over one year later. The court finds that the existence of a material issue of facts as to res judicata or collateral estoppel has not been shown by the defendants. This finding is based on this court’s examination of the Universal Master SVCG file. No other facts in support of the res judicata and collateral estoppel have been brought to this court’s attention other than that contained in that earlier foreclosure file.
The court finds that the issues on the First Special Defense of res judicata and collateral estoppel do not raise a material issue of fact.
(2) The Second Special Defense claims failure to mitigate damages.
This Special Defense claims that from 2009 until the present, the plaintiff and its predecessors have been attempting to collect on this Note and failed to exercise reasonable diligence in doing so. This Special Defense notes the Motions for Exemptions from Dormancy, the Motions for Continuance and other matters already noted as contained in the Universal Master SVCG foreclosure file. The delay in commencing an action can be invoked as a defense, but the delay in the prosecution of a pending lawsuit is not such a defense. Wells Fargo Bank, N.A. v. Fitzpatrick, Superior Court, judicial district of Fairfield at Bridgeport, Docket Number FBT CV 14-6045996 S (November 15, 1997, Jennings, JTR) .
The Second Special Defense claims failure to mitigate damages. A duty to mitigate damages is a recognized defense under appropriate circumstances in breach of contract actions. See Connecticut Judicial Branch, Civil Jury Instructions Section 4.5-14. It can also be a defense to a negligence action in tort cases. See Civil Jury Instructions Section 3.4-8. The defendant’s brief has failed to cite any legal authority allowing mitigation of damages as a Special Defense in a foreclosure action. A number of Superior Court decisions have held that a failure to mitigate damages is not applicable to mortgage foreclosure actions since the damages consist of the sum certain set forth by the note and the payments terms agreed by the maker with the borrower for the repayment of that loan. A string of citations to that effect is contained in the latest decision holding that failure to mitigate damages is not a valid defense to a mortgage foreclosure action. Wells Fargo Bank, N.A. v. Fitzpatrick, Superior Court, judicial district of Fairfield at Bridgeport, Docket Number FBT CV 14-6045996 S (November 15, 2017 Jennings, JTR) .
Our civil dockets in Connecticut are replete with multiple actions of foreclosures being commenced in order to collect on a Note. This is permitted so long as the foreclosure actions were not pending at the same time. Bayer v. Showmotion, Inc., 292 Conn. 381, 397 (2009). Connecticut procedure permits multiple uses of the Superior Court for the purpose of foreclosing a single Note. No legal authority preventing multiple attempts to foreclosure has been brought to this court’s attention. U.S. Bank, National Association v. Devico, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket Number FST CV 12-6015328 S (March 31, 2017, Tierney, JTR). Gen. Stat. § 49-1 bars a subsequent foreclosure only when the prior foreclosure has gone to judgment.
The court finds that the issues on the Second Special Defense of failure to mitigate damages do not raise a material issue of fact.
(3) The Third Special Defense alleges the statute of limitations, Gen. Stat. § 42a-3-118.
This statute of limitations has been held to apply to the collection of promissory notes only when the final maturity date has passed. Fleet National Bank v. Lahm, 86 Conn.App. 403, 408 (2014). In this case the final maturity date is the year 2035. In addition Connecticut case law holds that this statute of limitations, Gen. Stat. § 42a-3-118, is not a defense to a foreclosure action. Federal Deposit Insurance Corporation v. Owen, 88 Conn.App. 806, 815 (2005). " The rule in Connecticut, as far back as the early nineteenth century, is that a statute of limitations does not bar a mortgage foreclosure. Markham v. Smith, 119 Conn. 355, 358 (1935)." FDIC v. Owen, supra, 88 Conn.App. 815.
The court finds that the issues on the Third Special Defense of the statute of limitations do not raise a material issue of fact.
(4) The Fourth Special Defense alleges laches.
" The defense of laches, if proven, bars a plaintiff from seeking equitable relief ... First, there must have been a delay that was inexcusable, and, second, that delay must have prejudiced the defendant ... The burden is on the party alleging laches to establish that defense ... The mere lapse of time does not constitute laches ... unless it results in prejudice to the opposing party ... as where, for example, the opposing party is led to change his position with respect to the matter in question." Caminis v. Troy, 112 Conn.App. 546, 552 (2009); Cummings v. Tripp, 204 Conn. 67, 88 (1987). A mortgage foreclosure action constitutes an equitable proceeding. Fidelity Bank v. Krenisky, 72 Conn.App. 700, 705 (2002).
The defendants are again rearguing the five-year litigation of the Universal Master SVCG foreclosure action. The underlying Note is dated March 18, 2005. It is a thirty-year mortgage calling for equal monthly amortized payments of principal and interest for the thirty years. At any time during that thirty-year, the plaintiff is entitled to foreclose in the event that there is a default. The court can discern no inordinate delay. The defendants failed to prove prejudice to them by reason of the five-year delay that occurred in the Universal Master SVCG foreclosure case or in this litigation.
As already stated, the defendants are arguing that the five-year litigation in the Universal Master SVCG foreclosure action that was commenced on July 7, 2009 and dismissed for dormancy on June 5, 2014, a period of time of just less than five years. The allegations of the defendant’s Fourth Special Defense state: " the plaintiff and its predecessors in interest have not acted in a manner which is either vigilant or diligent in its attempt to enforce the obligations alleged to due it under the note and mortgage. As a result thereof, plaintiff’s claims are barred by the doctrine of laches." The defendant’s Memorandum of Law in Opposition comments on the almost five-year litigation in the Universal Master SVCG case.
Laches as a defense to a foreclosure action is limited to the delay in bringing suit. Wells Fargo Bank, N.A. v. Fitzpatrick, Superior Court, judicial district of Fairfield at Bridgeport, Docket Number FBT CV 14-6045996 S (November 15, 2017, Jennings, JTR). Therefore the delay in the prosecution of the Universal Master SVCG is not a consideration for laches. The allegations of the SVCG complaint do not state the exact date of the claimed nonpayment which is the act of default. It only alleges that the Note was dated March 18, 2005 and this action was served on June 29, 2009 by a complaint dated June 26, 2009. The evidence before this court is that the Universal Master SVCG case was dismissed on June 5, 2014 (# 116.55) and this instant second foreclosure was commenced by a complaint dated September 5, 2015, which was served on September 12, 2015. See Return of Service in court file. Both files are replete with efforts being made by the Reiss’ and the plaintiff to engage in court-supervised mediation. Inadequate evidence was offered to the court that there was an inordinate or inexcusable delay merely by the passage of time from the June 5, 2014 dismissal of the Universal Master SVCG case to the September 12, 2015 commencement of this foreclosure litigation. The mere passage of time is insufficient to satisfy the elements of laches.
The court finds that the issues on the Fourth Special Defense of laches do not raise a material issue of fact.
(5) The Fifth Special Defense is failure to properly apply subject payments.
The defendants claim the plaintiff " failed to apply at least two mortgage payments made in 2009." The defendants further claim that the plaintiff has " continually charged interest upon principal balance due under the note in amounts in excess of what they are due" and the " Plaintiff has claimed damages in excess of what they are due under the note."
Payment is a valid defense and is allowed by our Practice Book. PB § 10-50. Partial payment of a mortgage is not a defense to a foreclosure. Fidelity Bank v. Krenisky, 72 Conn.App. 700, 716, cert. denied 262 Conn. 915 (2002); Bank of America, N.A. v. Edwards, Superior Court, judicial district of Waterbury, Docket Number CV 13-6020920 S (August 12, 2016, Taylor, J.) (See footnote 5). In the event that the full payment of the Note was made in 2009 or at any other date, that would be an adequate defense and the Fifth Special Defense would have been proven. The burden is on the defendants to show that they made full payment and/or tendered full payment and the plaintiffs unreasonably rejected that payment. No such proof was furnished to this court. In the event that a foreclosure judgment is entered, the determination of the amount of the debt will properly take into account any partial payments made. The failure of the plaintiff to properly credit those partial payments can be offered by the defendants at the hearing on the amount of the debt in order to reduce plaintiff’s debt claim.
The court finds that the issues on the Fifth Special Defense of failure to properly apply subject payments do not raise a material issue of fact.
(6) The Sixth Special Defense alleges equitable estoppel.
Classically equitable estoppel is a defense to the equitable action of a foreclosure. TD Bank, N.A. v. M.J. Holdings, LLC, 143 Conn.App. 322, 329, 337 (2013). " Our courts have permitted several equitable defenses to a foreclosure action. If 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 the foreclosure actions include unconscionability ... abandonment of security ... and usery." Fidelity Bank v. Krenisky, supra, 72 Conn.App. 705-06.
The doctrine of equitable estoppel is well established. [W]here one, by his words or actions, intentionally causes another to believe in the existence of a certain state of things, and thereby induces him to act on that belief, so as injuriously to affect his previous position, he is [precluded] from averring a different state of things as existing at the time ... Our Supreme Court ... stated, in the context of an equitable estoppel claim, that [t]here are two essential elements to an estoppel; the party must do or say something which is intended or calculated to induce another to believe in the existence of certain facts and to act upon that belief; and the other party, influenced thereby, must actually change his position or do something to his injury which he otherwise would not have done. Estoppel rests on the misleading conduct of one party to the prejudice of the other ... Broadly speaking, the essential elements of an equitable estoppel ... as related to the party to be estopped, are: (1) conduct which amounts to a false representation or concealment of material facts, or, at least, which is calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) the intention, or at least the expectation, that such conduct shall be acted upon by, or influenced, the other party or other persons; and (3) knowledge, actual or constructive, or the real facts. (Citations omitted; internal quotation marks omitted.) Johnnycake Mountain Associates v. Ochs, 104 Conn.App. 194, 208-09, 932 A.2d 472 (2007), cert. denied, 286 Conn. 906, 944 A.2d 978 (2008).TD Bank, N.A. v. M.J. Holdings, LLC, 143 Conn.App. 322, 327 (2013).
The defendants have the burden of proof to prove equitable estoppel. They are claiming that the plaintiff had agreed that " it would forebear or restructure the Defendants’ debt through modification." All of these alleged actions took place after the mortgage had closed on March 18, 2005.
The defendants have the obligation to prove that there are contractual rights that arose and that the inequitable conduct by the plaintiff prevented the defendants from fulfilling those contractual rights to the defendants’ detriment. Although thirty-two documents were presented to this court in support of the defendants’ opposition to the Motion for Summary Judgment, the court finds that they do not create a material issue of fact as to whether or not there was an agreement for a modification, forbearance or restructuring of the debt that would arise to the level of equitable estoppel.
This court has examined carefully each of the thirty-two exhibits attached to the opposition documents in order to make a determination as to whether there was any agreement post-closing for the modification, compromise, reduction and/or forbearance of the $933,000.00 loan. The court has examined those. documents through the lens as to whether or not they raise an issue of material facts sufficient to deny the Motion for Summary Judgment.
The law of Connecticut as it currently stands is that no such post-closing attempts at modification are valid special defenses unless an agreement was reached and the agreement was violated by the plaintiff. TD Bank, N.A. v. J and M Holdings, LLC, 143 Conn.App. 340, 346 (2013); TD Bank, N.A. v. Salce, 175 Conn.App. 757, 768 (2017); U.S. Bank, National Association, Trustee v. Blowers, supra, 177 Conn.App. 627. FEC Enterprises, LLC v. Lin Mare, LLC, Superior Court, judicial district of Hartford, Docket Number HHD CV 15-6060522-S (February 5, 2018, Dubay, J.).
The court finds that the issues in the Sixth Special Defense of equitable estoppel do not raise a material issue of fact.
(7) The Seventh Special Defense has also been labeled the Sixth Special Defense. It claims a breach of the covenant of good faith and fair dealings.
A promissory note supporting an Open-End Mortgage Deed is a contract. To prove a breach of covenant and good faith and fair dealing the defendants must show a " sinister motive." " Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one’s rights or duties, but by some interested or sinister motive ... Bad faith means more than mere negligence; it involves a dishonest purpose." Habetz v. Condon, 224 Conn. 231, 237 (1992); DeLaConcha of Hartford, Inc. v. Aetna Life Insurance Company, 269 Conn. 424, 433 (2004).
In 2013 the Appellate Court discussed in detail the elements and facts necessary to prove in a foreclosure action the special defense of the breach of covenant of good faith and fair dealing regarding the post-closing modification and forbearance discussions. The court held that: " the alleged resulting modification of the loan agreement relates to the validity and enforcement of the mortgage and/or note and, thus, is a facially valid special defense." TD. Bank, N.A. v. M.J. Holdings, LLC, supra, 143 Conn.App. 346.
The defendants conclude the Seventh Special Defense by alleging: " Such reliance was reasonable and resulted in harm to the Defendants’ equity interest in the property and the ability to seek alternative remedies to the foreclosure action." The documents offered by the defendants in opposition to the Motion for Summary Judgment do not rise to the level of " bad faith" or " sinister motive" as necessary to be able to support the breach of a covenant of good faith and fair dealing. There is insufficient proof to show that there was any semblance of an agreement as to a modification or forbearance.
The court finds that the issues on the Seventh Special Defense, labeled by pleading # 117.00 as the Sixth Special Defense, citing breaches of the covenant of good faith and fair dealings do not raise a material issue of fact.
In the Sixth Special Defense of equitable estoppel and the Seventh Special Defense of the breach of covenant of good faith and fair dealings, the defendants are claiming that the costs incurred by the defendants in fulfilling its obligation under the $933,000.00 mortgage was affected by the plaintiff’s actions that fact amounts to both equitable estoppel and breach of the covenant of good faith and fair dealings. They allege among the other relief that the defendants would be entitled to certain monetary relief had those two types of breaches not occurred. They claim that they had: " foregone opportunities to seek an alternative remedy including, but not limited to: sale of their house during a more favorable market conditions, alternate lending arrangements, and tender lump sum payment aimed at reducing its total indebtedness and past due balance." (# 117.00).
A somewhat similar situation has been discussed by our Appellate Court in McKeever v. Fiore, 78 Conn.App. 783, 790 (2003). Applying the doctrine of unclean hands to an action where a first foreclosure case was brought and ultimately dismissed for dormancy followed by a second foreclosure action which resulted in a judgment of foreclosure, the doctrine of unclean hands was applied in the McKeever as to the award of mortgage interest that accrued during the lengthy period of litigation. McKeever citing Cohen v. Cohen, 182 Conn. 193, 201 (1980) and Sachs v. Sachs, 22 Conn.App. 410, 416 (1990) for the application of the unclean hands doctrine, the Appellate Court affirmed the reduced award of interest through the foreclosure process that involved two separate causes of action over a nine-year period of time. The trial court found that a full award of accrued interest would amount to a windfall for the plaintiff and allowed only one year of interest instead of the full nine years that had elapsed. This debt determination was affirmed an appeal.
Judge Jennings in Wells Fargo Bank v. Fitzpatrick previously cited also equitably reduced the full interest award to the plaintiff where the first action was commenced in 2009 and the second action was commenced in 2014. Judge Jennings found a gap of twenty-eight months and multiplied the 868 days times the per diem interest on the principal found and furnished to the defendants an interest credit in the amount of $46,004.00. The trial court proceeded to enter a foreclosure by sale because the United States Internal Revenue Service had a federal tax lien against the property. The trial court found the fair market value of the real property to $400,000.00 and found the total debt to be $579,547.83. It reduced that debt by the accrued interest credit of $46,004.00 and found the net total debt for the purposes of that foreclosure judgment to be $533,543.83.
Therefore, it appears to this court that the defendants may possibly be able to claim at the time of the determination of the debt, if any, a credit for accrued interest based upon the equitable facts set forth in their Special Defenses of equitable estoppel and breach of the covenant of good faith and fair dealing.
The defendants have failed to prove that there is a material issue of fact as to any of the seven Special Defenses. The defendants have failed to offer any evidence that another person or another entity is the holder or owner of this March 18, 2005 $933,000.00 Note. U.S. Bank, National Association v. Schaeffer, supra, 160 Conn.App. 150. The plaintiff has proven that there are no issues of material fact concerning this foreclosure.
The court grants the plaintiff’s Motion for Summary Judgment as to liability only dated February 16, 2017 (# 118.00).