Opinion
FBTCV146044519S
12-07-2016
Deutsche Bank National Trust Company v. Mona Cascella
UNPUBLISHED OPINION
MEMORANDUM OF DECISION ON MOTION FOR SUMMARY JUDGMENT
Edward T. Krumeich, J.
Plaintiff Deutsche Bank National Trust Company (" Deutsch Bank") has moved for summary judgment on liability against defendant Todd Cascella. Defendants Mona Cascella and Todd Cascella are mortgagors of certain property in Easton, Connecticut; the mortgage was assigned to Deutsche Bank, which also is the holder of a promissory note signed by Mona Cascella, but not Todd Cascella, who is only party to the mortgage. Summary judgment as to liability was previously entered as against Mona Cascella. Todd Cascella argues that summary judgment may not enter against him because there are genuine issues of material fact concerning two special defenses he has raised in his answer: predatory lending practices and unclean hands. For the reasons stated below, the court disagrees and summary judgment may enter as to liability only against Mr. Cascella.
On August 11, 2005, defendant Mona Cascella signed a promissory note for $850, 000.00 in connection with a real estate purchase loan secured by the mortgage. The note was modified on January 1, 2011, and the unpaid principal balance was increased to $947, 210.70 by loan modification agreement. On August 29, 2016, Judge Gilardi granted summary judgment as to liability only as to Mona Cascella.
The Standards for Deciding a Motion for Summary Judgment
" The standards . . . [for] review of a . . . motion for summary judgment are well established. Practice Book [§ 17-49] provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law . . . In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party . . . The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law . . . and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact . . . A material fact . . . [is] a fact which will make a difference in the result of the case . . ." DiPietro v. Farmington Sports Arena, LLC, 306 Conn. 107, 115-16, 49 A.3d 951 (2012), quoting H.O.R.S.E. of Connecticut, Inc. v. Washington, 258 Conn. 553, 558-60, 783 A.2d 993 (2001) (citations omitted).
Defendant Has Failed to Demonstrate There Are Genuine Issues of Material Fact Concerning His Predatory Lending Defense
In Bank of America, N.A. v. Aubut, 167 Conn.App. 347, 375-82, 143 A.3d 638 (2016), the Appellate Court upheld predatory lending practices as a special defense in a mortgage foreclosure action. The court noted that there is a split in authority in the Superior Court as to whether predatory lending practice was a stand-alone special defense, but the court held that the defense alleged fit within settled equitable defenses in mortgage foreclosure actions including fraud, unconscionability, equitable estoppel and unclean hands. In that case defendants alleged in detail that the lender knew their financial circumstances were so precarious that the loan would fail on the terms set forth in the note and mortgage. " . . . [T]he allegations fairly put the . . . plaintiff on notice that, on equitable grounds, the defendants intended to challenge the making of the note, mortgage, or both. As we've explained previously, a special defense of such nature is legally valid." 167 Conn.App. at 382.
" 'A foreclosure action is an equitable proceeding.' . . . '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.' . . . 'Historically, defenses to a foreclosure action have been limited to payment, discharge, release or satisfaction . . . or [lien invalidity] . . . [Connecticut courts, however] have permitted several equitable defenses to a foreclosure action.'" Bank of America, N.A. v. Aubut, 167 Conn.App. at 371-72 (citations omitted). The Appellate Court did not decide the issue of whether predatory lending was a stand-alone special defense but resolved the issue practically by analyzing the facts alleged under traditional equitable defenses that all could be said to fall under the rubric " predatory lending practices, " which is a similar approach to that of Judge Hartmere in Onewest Bank, FSB v. Reinoso, 2012 WL 2044807 *7 (Conn. Super. 2012) (Hartmere, J.) and National City Mortgage Co. v. Lederman, 2011 WL 1169037 *3-4 (Conn.Super. 2011) (Hartmere, J.) (collecting cases).
" '[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.' . . . 'Practically speaking . . . neither this court nor our Supreme Court has ever expressed a finite list of equitable defenses available in a foreclosure action. Typically, [t]he assertion of equitable defenses to a mortgage foreclosure requires that the defenses . . . challenge the making, validity and enforcement of the loan note and mortgage. This principle was . . . considered to include events leading up to the execution of the loan documents, exclusive of issues involving administration of the loan, such as misapplication of payments . . . Nevertheless, given the equitable nature of a foreclosure action, events subsequent to the execution of the loan documents also have been considered.' . . .
Here, Mr. Cascella argues that he and his wife were misled by their attorney Maurizio Lancia, who also acted as mortgage broker on the transaction, and represented that broker fees and attorneys fees were waived, as stated in the " Good Faith Estimate of Closing Cost" provided by the lender; the HUD 1 form reported the lender paid the broker $8, 500 as a " yield spread premium, " which defendant argues inflated the interest rate and was contrary to his attorney's representation that no broker's fees and attorneys fees were to be paid.
Defendant appended to his memorandum a copy of the federal criminal indictment of his former attorney, Mauricio Lancia, in connection with his activities as a mortgage broker and closing agent in various fraudulent real estate transactions. None of the allegations in the indictment appear to relate to defendants' transaction, although the lender was among those victimized by the scheme to defraud mortgage lenders. Similarly the plea agreement appended to defendant's memorandum does not indicate that Mr. Lancia's plea related to defendants' transaction.
Plaintiff argues that defendant Todd Cascella lacks standing to complain about alleged predatory lending practices because he was not party to the promissory note. Defendant asserts that the " yield spread premium" paid to the broker affected the interest rate charged therefore it was a material fact that should have been disclosed. Defendant argues the representation there were no broker fees and attorneys fees paid to the mortgage broker was material and induced defendants to agree to the mortgage, of which he was a party with an interest as property owner. Assuming that defendant has standing to allege predatory lending practices, see e.g., Ulster Savings Bank v. 28 Brynwood Lane, Ltd., 134 Conn.App. 699, 705, 41 A.3d 1077 (2012), a bigger problem with his theory is that the " yield spread premium" paid to the broker was disclosed on the HUD 1 signed by defendants. That the good faith estimate of closing costs indicated that broker and attorneys fees were " waived" (i.e. that defendants did not have to pay them) was entirely consistent with the fact that the lender paid the broker in the form of the " yield spread premium disclosed on the HUD 1 form. Defendant asserts that if the broker had " waived the $8, 500 yield spread premium along with the other fees, the interest rate would have been substantially less." Defendant has not alleged that the rate was increased from the agreed rate, but only argued that the hypothetical charged rate would have been less than the agreed rate if the spread premium had not been paid. No reasonable jury could conclude that defendants were unaware that $8, 500 would be paid to the broker by the lender. Nor could a jury find on the evidence submitted that the rate would have been reduced from the agreed rate. To the contrary, the evidence suggests defendants knew or should have known that the agreed rate would reflect the disclosed payment to the mortgage broker. Compare, Ulster Savings Bank, 134 Conn.App. at 712-13.
Mona Cascella, who was party to the promissory note in the original 2005 mortgage loan, did not raise these special defenses.
The disclosure of the payment in the HUD 1 and the lack of change in the agreed interest rate distinguishes this case from Deutsche Bank Nat. Trust Co. v. Medina, 2011 WL 383943 * (Conn.Super. 2011) (Mintz, J.), in which the court denied summary judgment because of a material change in the loan terms at the last minute: " [r]ead in the light most favorable to the defendants, the special defenses allege that the original lender engaged in a pattern of misrepresenting and altering the terms of the loan in order to induce the defendant to enter into the loan transaction at terms that were less favorable than the defendants were led to believe they would be receiving."
Moreover, defendant has submitted no affidavit or other evidence to support his special defenses. It was incumbent on defendant " to provide some evidentiary basis to support . . . [his] special defenses." Onewest Bank, FSB v. Reinoso, 2012 WL 2044807 *3. " Mere assertions of fact" in a brief or at oral argument without supporting evidence is not sufficient to create a genuine issue of material fact to defeat a properly supported summary judgment motion. Bank of America, N.A. v. Aubut, 167 Conn.App. at 358.
The special defenses in the answer are alleged in conclusory fashion with no predicate facts.
Defendant Has Failed to Demonstrate There Are Genuine Issues of Material Fact Concerning His Unclean Hands Defense
Similarly, defendant has submitted no evidence to support his unclean hands defense. The Appellate Court in Bank of America v. Aubut, 167 Conn.App. at 380, recognized unclean hands as an equitable defense in a foreclosure action:
'Our jurisprudence has recognized that those seeking equitable redress in our courts must come with clean hands. The doctrine of unclean hands expresses the principle that where a plaintiff seeks equitable relief, he must show that his conduct has been fair, equitable and honest as to the particular controversy in issue . . . For a complainant to show that he is entitled to the benefit of equity he must establish that he comes into court with clean hands . . . The clean hands doctrine is applied not for the protection of the parties but for the protection of the court . . . It is applied . . . for the advancement of right and justice . . . The party seeking to invoke the clean hands doctrine to bar equitable relief must show that his opponent engaged in wilful misconduct with regard to the matter in litigation . . . The trial court enjoys broad discretion in determining whether the promotion of public policy and the preservation of the courts integrity dictate that the clean hands doctrine be invoked.' (Citations omitted.)
As noted above, the " yield spread premium" paid by the lender to the mortgage broker was disclosed in the HUD 1 and is entirely consistent with the representation that broker fees and attorneys fees were " waived" so the Cascellas would not have to pay them to the broker. Defendant has introduced no evidence that the lender " engaged in willful misconduct with regard to the matter in litigation" to call in question protection of the integrity of the court and promotion of public policy, which are the goals of the unclean hands defense. Bank of America, N.A. v. Aubut, 167 Conn.App. at 380. See also Thompson v. Orcutt, 257 Conn. 301, 310, 777 A.2d 670 (2001) (" [u]nless the conduct is of such a character as to be condemned and pronounced wrongful by honest and fair-minded people, the doctrine of unclean hands does not apply").
In the proper case, a lender could be liable for predatory lending practices committed by an agent, see Nationstar Mortgage, LLC v. Decormier, 2016 WL 6393612 *1 (Conn.Super. 2016) (Cosgrove, J.), but no proof was submitted as to the alleged misrepresentation or that Lancia was acting as the lender's agent when he allegedly represented there would be no broker fees or that such representation was a material factor which induced defendants to enter into the loan transaction. Defendant's argument that the lender should be held responsible for misconduct by Attorney Lancia and the broker as the lender's agents based on unrelated criminal proceedings falls particularly flat considering the lender was a victim of the fraudulent scheme to employ strawmen as borrowers to induce lenders, including the lender here, to finance phony real estate purchases. Here, there is no proof that Lancia, as the lender's agent, engaged in any predatory lending practices or conduct that would indicate that the plaintiff came to court with unclean hands.
Even more telling is that the loan was refinanced in 2011 at a variable interest rate that was 2% less than the rate charged in 2005. Mr. Cascella's counsel conceded at oral argument that Attorney Lancia did not represent the Cascellas in connection with the mortgage refinance and the special defenses do not relate to that transaction.
Defendant presented no evidence to contradict the plaintiff's proof that Deutsche Bank is the owner of the note and mortgage, the loan is in default, and despite due notice of default, Mona Cascella has failed to cure the default, which satisfied the conditions precedent to foreclosure and lead to acceleration of the mortgage in accordance with the terms of the note and mortgage. Plaintiff proved its prima facie case and defendant failed to assert any legally sufficient special defense. See Bank of America, N.A. v. Aubut, 167 Conn.App. at 359. Deutsche Bank is entitled to summary judgment against defendant Todd Cascella as to his liability under the mortgage.
It is clear from our case law that, generally, a legally valid special defense in a foreclosure action, insofar as it relates to the making, validity, or enforcement of the loan, note and mortgage, is a means of asserting that a party who has commenced a foreclosure action may not prevail. Thus, a special defense operates as a shield, to defeat a cause of action, and not as a sword, to seek a judicial remedy for a wrong." Bank of America N.A., v. Aubut, 167 Conn.App. at 372-73 (citations omitted).