Opinion
No. CV-08-5018505
March 12, 2010
MEMORANDUM OF DECISION
The plaintiff, Deutsche Bank National Trust Company, as trustee for the certificate holders of Soundview Home Loan Trust 2006-OPT1, brings this foreclosure action against the defendants, Rafael Segarra, Jr. (the defendant) and Oliphant Financial Corporation (Oliphant). The following facts alleged in the plaintiff's complaint are relevant to the court's decision. On January 6, 2006, the defendant executed and delivered a mortgage note in the amount of $180,700 to Option One Mortgage Corporation (Option One) concerning property located at 70 Dewhirst Street in Bridgeport. The mortgage was subsequently assigned to the plaintiff. The plaintiff alleges that the defendant has defaulted on his payment obligations on the note, and, as holder of the note, the plaintiff has elected to accelerate the balance due and foreclose the mortgage. Additional facts will be set forth as necessary in this decision.
The plaintiff is only moving for summary judgment against the defendant Segarra, not Oliphant. As such, this memorandum will refer to Segarra as "the defendant." Oliphant is a defendant in the case because it claims an interest on the subject property based on a judgment lien in the amount of $2,476.50.
The defendant filed an answer denying the material allegations of the plaintiff's complaint, along with three special defenses and three counterclaims. The defendant alleges the following special defenses: (1) rescission of the loan transaction; and, consequently, he further claims rights of (2) set-off and recoupment pursuant to General Statutes § 36a-683 and(3) set-off and recoupment pursuant to 15 U.S.C. § 1640. In his counterclaims, in which he seeks a rescission of the transaction, as well as compensatory and other damages, the defendant alleges that the plaintiff violated: (1) the federal Truth in Lending Act, 15 U.S.C. § 1601 et seq. (TILA), (2) the Connecticut Truth-in-Lending Act, General Statutes § 36a-675 et seq. and (3) the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. The defendant's special defenses and counterclaims are based on his claim that Option One violated truth-in-lending laws by only providing the defendant with one copy of the notice of the right to rescind, as opposed to the two notices required by the applicable statute. As a result, the defendant alleges that he had a three-year time frame within which to rescind the subject mortgage, as opposed to a three-day period, and that he timely and effectively exercised his right.
On May 22, 2009, the plaintiff filed a motion to dismiss these special defenses on the ground that they were legally insufficient and could not be cured by repleading. The court, Doherty, J., denied this motion on September 10, 2009.
The plaintiff moves for summary judgment on the grounds that it has established a prima facie case for foreclosure of a mortgage, and the defendant's special defenses and counterclaims are legally insufficient and fail to present genuine issues of material fact. In support of its motion, the plaintiff attaches a notarized affidavit from Carolyn White, who is the assistant secretary of American Home Mortgage Servicing, Inc., the plaintiff's servicer and attorney-in-fact. In her affidavit, White purports to set forth facts establishing a prima facie foreclosure case, and to support the plaintiff's claims concerning the legal sufficiency of the defendant's special defenses and counterclaims, through the following attached documents: (1) a copy of the adjustable rate mortgage note for the defendant's property; (2) a copy of the open-end mortgage document for the subject premises; (3) a copy of the document assigning the mortgage from Option One to the plaintiff; (4) a copy of a "notice of right to cancel" signed by the defendant on January 6, 2006; (5) an uncertified affidavit of settlement agent Anthony P. DiCrosta dated January 6, 2006; (6) a copy of a series of letters from Option One to the plaintiff dated June 3, 2008, March 5, 2008, February 4, 2008, January 3, 2008, December 4, 2007 and November 5, 2007; (7) a copy of a letter from American Home Mortgage Servicing, Inc. to Attorney Gary L. Seymour dated January 26, 2009; (8) a copy of a letter from Attorney Gary L. Seymour dated January 5, 2009; (9) a copy of American Home Mortgage Servicing, Inc.'s "customer account activity statement" for the defendant; (10) a copy of the defendant's answer, special defenses and counterclaims and (11) a copy of the complaint in the present action. The defendant filed his own affidavit in opposition to the motion.
I
The defendant initially challenges the admissibility of the affidavit of White offered in support of the plaintiff's motion for summary judgment. The defendant asserts that White's affidavit is wholly inadmissible because: (1) it is hearsay; (2) "there is no authentication by Plaintiff that Ms. White is who she says she is, that she actually has personal knowledge of the matters set forth" and (3) the affidavit has "a variety of legal conclusions . . . yet no evidence has been offered to show that she is an expert in such field." The defendant also contends that "[t]he affidavit is otherwise defective in that, in the very first paragraph she states `I am of American Home Mortgage Servicing.' She is not able or otherwise fails to provide her title or otherwise how she is able to make the claims that she makes." These claims merit little discussion.
In her affidavit, White states, in relevant part, the following: "I make this Affidavit based upon my personal review of the computer business records of the Plaintiff as they relate to this case. These records are made at or near the time of occurrence of the event(s) and they reflect and are kept in the ordinary course of the Plaintiff's business by persons having a business duty to make such records on behalf of the Plaintiff. As such, I am fully familiar with the facts set forth herein and submit this Affidavit in support of the Plaintiff's Motion for Summary Judgment and accompanying Memorandum of Law."
The plaintiff submits White's affidavit for the limited purpose of attempting to establish a sufficient foundation for the admissibility of the exhibits attached to, and referenced in, the affidavit under the business records exception to the hearsay rule. "[General Statutes § ]52-180 sets forth an exception to the evidentiary rule otherwise barring admission of hearsay evidence for business records that satisfy express criteria . . . The rationale for the exception derives from the inherent trustworthiness of records on which businesses rely to conduct their daily affairs . . .
"To be admissible under the business record exception to the hearsay rule, a trial court judge must find that the record satisfies each of the three conditions set forth in . . . § 52-180. The court must determine, before concluding that it is admissible, that the record was made in the regular course of business, that it was the regular course of such business to make such a record, and that it was made at the time of the act described in the report, or within a reasonable time thereafter." (Citations omitted; internal quotation marks omitted.) Margolin v. Kleban Samor, P.C., 275 Conn. 765, 780, 882 A.2d 653 (2005).
"We have stated that § 52-180 should be liberally interpreted in favor of admissibility . . . The witness introducing the document need not have made the entry himself or herself, nor have been employed by the organization during the relevant time period . . . In addition, [t]here is no requirement in § 52-180 . . . that the documents must be prepared by the organization itself to be admissible as that organization's business records." (Citations omitted; internal quotation marks omitted.) New England Savings Bank v. Bedford Realty Corp., 246 Conn. 594, 603, 717 A.2d 713 (1998).
Notwithstanding the plaintiff's claims to the contrary, the court concludes that the affidavit is admissible for the limited purpose offered by the plaintiff. The statements made by White in her affidavit provided the foundation necessary for the entry of the documents under the business records hearsay exception. The affidavit identifies White as an assistant secretary of the servicer of the plaintiff and states that she personally reviewed the records. The fact that White did not personally produce the documents or have personal knowledge of the underlying transaction "may be shown to affect the weight of the evidence, but not to affect its admissibility." General Statutes § 52-180(b). Finally, despite the defendant's opposite claim, the affidavit does not set forth any expert opinions of White, and, in any event, it is not offered for that reason.
General Statutes § 52-180(b) provides that a record "shall not be rendered inadmissible by (1) a party's failure to produce as witnesses the person or persons who made the writing or record, or who have personal knowledge of the act, transaction, occurrence or event recorded or (2) the party's failure to show that such persons are unavailable as witnesses. Either of such facts and all other circumstances of the making of the writing or record, including lack of personal knowledge by the entrant or maker, may be shown to affect the weight of the evidence, but not to affect its admissibility."
Having concluded that the documents are admissible under § 52-180, the court must next consider whether they are properly authenticated. Under, Connecticut law, "before a document may be considered by the court in support of a motion for summary judgment, there must be a preliminary showing of [the document's] genuineness, i.e., that the proffered item of evidence is what its proponent claims it to be." (Internal quotation marks omitted.) New Haven v. Pantani, 89 Conn.App. 675, 679, 874 A.2d 849 (2005). Despite this rule, a court has discretion to consider unauthenticated documentary evidence when no objection has been raised by the opposing party. Barlow v. Palmer, 96 Conn.App. 88, 92, 898 A.2d 835 (2006). As the defendant has not raised the issue as to the authenticity of the documentary evidence, the court will consider the documents in deciding the plaintiff's motion.
II
The plaintiff claims that there is no question of material fact that it has established a prima facie case for foreclosure of its mortgage, and, as a result, summary judgment should be rendered in its favor. Although the court agrees that the plaintiff has made out a prima facie case, the court disagrees that such a case entitles the plaintiff to summary judgment. The plaintiff must also show that the defendant's special defenses to the foreclosure action are legally insufficient.
"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." (Internal quotation marks omitted.) Provencher v. Enfield, 284 Conn. 772, 790-91, 936 A.2d 625 (2007). "[S]ummary judgment is appropriate only if a fair and reasonable person could conclude only one way . . . [A] summary disposition . . . should be on evidence which a jury would not be at liberty to disbelieve and which would require a directed verdict for the moving party." (Citations omitted; internal quotation marks omitted.) Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 815, 830 A.2d 752 (2003). The burden is on the moving party to demonstrate an absence of any triable issue of material fact and "[t]o satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue. Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § [17-45]." (Internal quotation marks omitted.) Zielinski v. Kotsoris, 279 Conn. 312, 318-19, 901 A.2d 1207 (2006).
In its memorandum of law, the plaintiff claims that it has established a prima facie case for mortgage foreclosure because the evidence submitted in support of its motion demonstrates that: (1) the defendant signed the note and mortgage; (2) the plaintiff owns the note and mortgage; and (3) the defendant is in default under the note and mortgage and has not cured this default.
"In a mortgage foreclosure action, [t]o make out its prima facie case, [the foreclosing party] ha[s] to prove by a preponderance of the evidence that it was the owner of the note and mortgage and that [the mortgagee] had defaulted on the note." (Internal quotation marks omitted.) Franklin Credit Management Corp. v. Nicholas, 73 Conn.App. 830, 838, 812 A.2d 51 (2002), cert. denied, 262 Conn. 937, 815 A.2d 163 (2003). "Furthermore, the foreclosing party must demonstrate that all conditions precedent to foreclosure, as mandated by the note and mortgage, have been satisfied." Bank of New York v. Conway, 50 Conn.Sup. 189, 194, 916 A.2d 130 (2006), citing Bank of America, FSB v. Hanlon, 65 Conn.App. 577, 581, 783 A.2d 88 (2001). "When a complaint and supporting affidavits establish an undisputed prima facie case for a foreclosure action, a court must only determine whether [a] special defense is legally sufficient before granting summary judgment." LaSalle National Bank v. Shook, Superior Court, judicial district of New London, Docket No. 549266 (July 13, 2000, Martin, J.), aff'd, 67 Conn.App. 93, 787 A.2d 32 (2001). Nevertheless, the opposing party only needs to demonstrate the applicability of one legally sufficient special defense in order to defeat a motion for summary judgment. See, e.g., FV-1, Inc. v. Forgey, Superior Court, judicial district of New London, Docket No. CV 07 5002447 (May 22, 2008, Martin, J.).
The documents submitted by the plaintiff in support of its summary judgment motion, along with the admissions of the defendant in the pleadings, demonstrate that the plaintiff is the owner of the subject note and mortgage, the defendant is in default under them and has failed to cure the default. As such, the plaintiff has demonstrated a prima facie case for foreclosure of its mortgage. The court must next determine, however, whether the defendant's special defenses are legally insufficient.
It is well settled that defenses to foreclosure actions "must relate to the making, validity or enforcement of the mortgage note in order properly to be joined with the complaint." JP Morgan Chase Bank, Trustee v. Rodrigues, 109 Conn.App. 125, 133, 952 A.2d 56 (2008). As such, "[t]he courts of our jurisdiction have held that special defenses and counterclaims alleging post-default conduct by the plaintiff are invalid because they do not relate to the making, validity and enforcement of the note and mortgage." Charter Oak Federal Credit Union v. Paige, Superior Court, judicial district of New London, Docket No. CV 07 5003656 (February 19, 2009, Devine, J.). Nevertheless, "TILA violations giving rise to a right to rescind do constitute a valid special defense to a mortgage foreclosure action because exercising the right to rescind bars enforcement of the mortgage." EMC Mortgage Corp. v. Shamber, Superior Court, judicial district of Tolland, Docket No. CV 07 5001252 (November 12, 2009, Sferrazza, J.), citing Cheshire Mortgage Service, Inc. v. Montes, 223 Conn. 80, 612 A.2d 1130 (1992). The court concludes the defendant's special defenses are legally sufficient.
The crux of the defendant's special defenses is that Option One violated TILA when it gave the defendant only one copy of the statutorily required notice of right to rescind, as opposed to the required two copies. The defendant contends that the failure of Option One to give him two copies of the required notice provided him with a three year period to rescind his mortgage. It is undisputed that the defendant executed the mortgage on January 6, 2006, and served the notice of rescission on January 5, 2009. Therefore, the defendant claims that he validly rescinded the mortgage.
The plaintiff claims that "[t]he extended right to rescind under TILA is only triggered by the creditor's failure to deliver a conspicuous Notice of the Right to Rescind," and not by the technicality of the number of such notices it must give to borrowers like the plaintiff. (Emphasis in original.). The plaintiff argues that it is entitled to summary judgment because it furnished a sufficiently conspicuous notice to the defendant, and, therefore, the defendant's special defenses alleging TILA violations are legally insufficient. The court disagrees.
In Larobina v. McDonald, 274 Conn. 394, 401-02, 876 A.2d 522 (2005), the court addressed the plaintiff's claim that a motion for summary judgment is an improper vehicle by which to test the legal sufficiency of a complaint. "With these authorities in mind, we conclude that the use of a motion for summary judgment to challenge the legal sufficiency of a complaint is appropriate when the complaint fails to set forth a cause of action and the defendant can establish that the defect could not be cured by repleading . . . 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, we can perceive no reason why the defendant should be prohibited from claiming that he is entitled to judgment as a matter of law and from invoking the only available procedure for raising such a claim after the pleadings are closed." (Citation omitted.) Id. Under the circumstances of this case, the plaintiff's summary judgment motion challenging the legal sufficiency of the defendant's special defenses and counterclaims is proper.
"The federal Truth in Lending Act . . . was enacted as part of the Consumer Credit Protection Act of 1968, and is codified at 15 U.S.C. § 1601 et seq. The purpose of TILA is to promote the informed use of consumer credit by requiring disclosures about its terms and cost . . . Title 15 of the United States Code, 1604 provides that `[t]he Board [of Governors of the Federal Reserve System] shall prescribe regulations to carry out the purposes of this title [ 15 U.S.C.S. 1601 et seq.]' That board has promulgated TILA regulations, known as Regulation Z, which are codified at 12 C.F.R. § 226.1 et seq. (Regulation Z)." (Citation omitted; internal quotation marks omitted.) Cheshire Mortgage Service, Inc. v. Montes, supra, 223 Conn. 96-97. "The Connecticut legislature has enacted a truth in lending act generally coextensive with the federal TILA, as General Statutes §§ 36a-677(c) and 36a-678(b) provide that Connecticut's TILA is subject to the federal TILA . . . to avoid duplication in administration and enforcement of statutes . . . Because the federal and Connecticut TILAs are generally coextensive, this court will incorporate federal case law interpreting relevant provisions of TILA where there is an absence of Connecticut authority." (Citation omitted; internal quotation marks omitted.) Bank of New York v. Conway, supra, 50 Conn.Sup. 197.
The defendant's rescission rights arise from Title 15 of the United States Code, § 1635(a), which provides, in relevant part, that: "the obligor shall have the right to rescind the transaction until . . . the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter . . . by notifying the creditor, in accordance with regulations of the Board, of his intention to do so." "An obligor's right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor . . ." 15 U.S.C. § 1635(f); see also General Statutes § 36a-683(1)(1). As more cogently stated by the Code of Federal Regulations, "[t]he consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first." 12 C.F.R. § 226.23(a)(3); see also General Statutes § 36a-683(j)(3).
"In a transaction subject to rescission, a creditor shall deliver two copies of the notice of the right to rescind to each consumer entitled to rescind (one copy to each if the notice is delivered in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act). The notice shall be on a separate document that identifies the transaction and shall clearly and conspicuously disclose the following:
(i) The retention or acquisition of a security interest in the consumer's principal dwelling.
(ii) The consumer's right to rescind the transaction.
(iii) How to exercise the right to rescind, with a form for that purpose, designating the address of the creditors place of business.
(iv) The effects of rescission, as described in paragraph (d) of this section.
(v) The date the rescission period expires." (Emphasis added.) 12 C.F.R. § 226.23(b)(1).
"To exercise the right to rescind, the consumer shall notify the creditor of the rescission by mail, telegram or other means of written communication. Notice is considered given when mailed, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor's designated place of business." 12 C.F.R. § 226.23(a)(2). "When an obligor exercises his right to rescind under subsection (a) of this section, he is not liable for any finance or other charge, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, down payment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has delivered any property to the obligor, the obligor may retain possession of it. Upon the performance of the creditor's obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value. Tender shall be made at the location of the property or at the residence of the obligor, at the option of the obligor. If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his part to pay for it. The procedures prescribed by this subsection shall apply except when otherwise ordered by a court." 15 U.S.C. § 1635(b); see also General Statutes § 36a-683(j)(1).
TILA mandates that a creditor furnish two copies of the notice of right to rescind to the debtor consumer, and, if the "required notice" is not given, the debtor has three years from the completion of the transaction with which to exercise his rescission rights. The plaintiff claims, however, that even if it only provided the defendant with one notice, TILA's extended right to rescind is triggered only by the creditor's failure to deliver a conspicuous notice and not by the technical failure to deliver two notices. The plaintiff argues that it delivered a clear notice of the right to rescind to the defendant and, consequently, the defendant only had a three-day rescission period and not the extended three-year period. The defendant asserts that the plaintiff's position is contrary to the plain language of TILA, which requires strict compliance. The court has been unable to find any Connecticut or Second Circuit cases involving similar facts, but courts in other jurisdictions have examined the issue of whether the extended right to rescind is triggered by the lender's failure to provide to the borrower with two notices of the right to rescind.
For example, in a case before the Court of Appeals of Michigan, the plaintiff borrowers brought an action against a lender's assignee for violations of TILA because, inter alia, the plaintiffs only received one copy each of the notice of right to rescind. The trial court determined that this was a technical violation of TILA, and, therefore, there was no extended right to rescind. The Court of Appeals of Michigan reversed this decision, and noted that: "We agree with the trial court that, because the plaintiffs received full disclosure and the various forms required by TILA, [the lender's] failure to provide a second copy of the notice of the right to rescind to each of the plaintiffs was a technical violation. Nevertheless, in view of the strong and consistent language of the federal courts in ruling on similar technical violations, we are constrained to hold that the failure to provide the second copy required by 12 C.F.R. § 226.23(b) extended the time during which the plaintiff had the right to rescind to three years after consummation." Kocsis v. Pierce, 192 Mich.App. 92, 99-100, 480 N.W.2d 598 (1991).
A similar result was reached by the Sixth Circuit Court of Appeals, which determined that: "Although we have not previously addressed the specific issue in this case, we have joined other federal courts of appeals in holding that Truth-in-Lending Act must be liberally construed in favor of the borrower in order to effectuate the purpose of the statute — to avoid the uninformed use of credit . . . Even technical or minor violations of the Act impose liability on the lender." Weeden v. Auto Workers Credit Union, Inc., United States Court of Appeals, Docket No. 97 3073 (6th Cir. March 19, 1999), cert. denied, 528 U.S. 1076, 120 S.Ct. 790, 145 L.Ed.2d 667 (2000). Although the Sixth Circuit acknowledged that recent changes in federal law have discouraged a "hypertechnical" reading of TILA, this observation does "not eliminate either the creditor's obligation to provide each borrower with two notices of the right to cancel or the three-year extension of the right to rescind upon failure to provide these notices." Id.; see also Seldon v. Home Loan Services, Inc., 647 F.Sup.2d 451, 464 (E.D.Pa. 2009) (stating that "a plaintiff provides a sufficient basis for a request for rescission under the TILA with allegations that a lender did not provide the proper number of copies of notice of right to rescind to each borrower").
The court finds these cases to be persuasive and concludes that the defendant's special defenses are legally sufficient. As such, there is a question of fact as to whether the defendant's three-year right of rescission was triggered by the plaintiff's alleged failure to provide him with two copies of the notice of right to rescind as provided for in 12 C.F.R. § 226.23(a)(2). Accordingly, the plaintiff's motion for summary judgment on this ground is denied.
The plaintiff also argues that the defendant's special defenses are legally insufficient because "mere delivery of a rescission notice does not rescind a mortgage as a matter of law," and that rescission must be ordered by a court. In its memorandum of law, the plaintiff cites numerous federal cases that supposedly stand for this proposition. Our Appellate Court, however, has held directly contrary to the plaintiff's position. As stated by the Appellate Court: "The sequence of rescission and tender set forth in § 1635(b) is a reordering of the common law rules governing rescission. Under common law rescission, the rescinding party must first tender the property that he has received under the agreement before the contract may be considered void . . . Once the rescinding party has performed his obligations, the contract becomes void and the rescinding party may then bring an action in replevin or assumpsit to insure that the non-rescinding party will restore him to the position that he was in prior to entering into the agreement, i.e., return earnest money or monthly payments and void all security interests . . . Under Connecticut law, as a condition precedent to rescission, the parties to a contract must be restored to their original position as nearly as possible . . . Under § 1635(b), however, all that the [obligor] need do is notify the creditor of his intent to rescind. The agreement is then automatically rescinded . . ." (Citations omitted; emphasis added; internal quotation marks omitted.) Family Financial Services, Inc. v. Spencer, 41 Conn.App. 754, 769-70, 677 A.2d 479 (1996).
The plaintiff additionally argues that it is entitled to summary judgment on the defendant's special defenses and counterclaims because there is no question of material fact that the rescission notice that it gave to the defendant clearly and conspicuously discloses the required information. As discussed, the court disagrees with the plaintiff's claim in this regard and denies the plaintiff's motion for summary judgment on this ground.
In view of the foregoing, the plaintiff's motion for summary judgment (121.00) is denied.