Opinion
HHDCV176084900S
07-09-2019
DEUTSCHE BANK TRUST CO. AMERICAS v. Marlene BAIM
UNPUBLISHED OPINION
Dubay, J.
I
FACTS AND PROCEDURAL HISTORY
The plaintiff, Deutsche Bank Trust Co. Americas as Indenture Trustee for the Registered Holders of Saxon Asset Securities Trust 2004-2 Mortgage Loan Asset Backed Notes, Series 2004-2, initiated this foreclosure action by service of summons and complaint on November 9, 2017, against the defendant, Marlene Baim. In its complaint, filed on November 20, 2017, the plaintiff alleges the following facts. On August 9, 2004, the defendant executed a promissory note for $280,000 with Guaranteed Home Mortgage Company that was secured through a mortgage on 176 Stanley Drive, Glastonbury, Connecticut. The mortgage was recorded in the Glastonbury Land Records on August 16, 2004. Subsequently, the Plaintiff came into possession of the note on approximately June 16, 2017; however, for reasons unknown Guaranteed Home Mortgage Company neglected, failed, or refused to formally assign the note to the plaintiff. The defendant failed to make payments beginning on November 1, 2016, and defaulted on the note. The plaintiff asserts that it has possession of the note, and therefore, has the right to foreclose on the subject property. As the note is now in default, the plaintiff has elected to accelerate the balance due.
The plaintiff also named Guaranteed Home Mortgage Company as a defendant in its complaint, pursuant to General Statutes § 49-17, which requires that the plaintiff name all those with an interest in the mortgage that is the subject of the foreclosure in the complaint. Guaranteed Home Mortgage Company never made an appearance. As a result, all references to the defendant in this memorandum are to Marlene Baim.
On May 4, 2018, the defendant filed an answer, asserting six special defenses, and a counterclaim complaint sounding in two counts. The defendant’s special defenses are as follows: (1) the plaintiff has failed to provide proof of ownership or possession over the note; (2) equitable estoppel, due to the plaintiff’s failure to prove ownership or possession over the note; (3) the plaintiff is not the holder of the note according to the note’s allonge; (4) the plaintiff does not have standing to bring the instant action; (5) unfair debt collection practices; and (6) breach of the implied covenant of good faith and fair dealing. The defendant also asserts the following counterclaims: (1) breach of the implied covenant of good faith and fair dealing, and unfair debt collection practices; and (2) violation of CUTPA.
On February 19, 2019, the plaintiff moved to strike the defendant’s special defenses and counterclaims on the basis that they are legally insufficient for various, independent reasons. On March 21, 2019, the defendant filed an objection to the plaintiff’s motion to strike. The matter was heard during short calendar on April 22, 2019.
II
DISCUSSION
"[O]ur rules of practice provide that a party may challenge by way of a motion to strike the legal sufficiency of an answer, including any special defenses contained therein ..." (Internal quotation marks omitted.) U.S. Bank National Assn., Trustee v. Blowers, 177 Conn.App. 622, 628, 172 A.3d 837 (2017), cert. granted, 328 Conn. 904, 177 A.3d 1160 (2018); Practice Book § 10-39. "The role of the trial court in ruling on a motion to strike is to examine the [pleading], construed in favor of the [plaintiff], to determine whether the [pleading party has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Coe v. Board of Education, 301 Conn. 112, 117, 19 A.3d 640 (2011). "In ruling on a motion to strike, the court must accept as true the facts alleged in the [pleadings] and construe them in the manner most favorable to sustaining their legal sufficiency." (Internal quotation marks omitted.) Doe v. Hartford Roman Catholic Diocesan Corp., 317 Conn. 357, 398, 119 A.3d 462 (2015).
A.
Special Defenses
The plaintiff moves to strike the defendant’s first, second, third, fourth, fifth, and sixth special defenses on the basis that they are legally insufficient. The court addresses each of the defendant’s special defenses in turn.
1.
The Plaintiff’s Lack of Standing
In her first, third, and fourth special defenses, the defendant essentially argues that the plaintiff may not properly bring this foreclosure action because it has failed to prove its ownership over the mortgage note. The defendant specifically pleads that either the plaintiff does not have standing to bring the instant action because it has not provided any proof of ownership over the subject note and did not sign the note’s allonge. The plaintiff moves to strike these special defenses on the ground that a special defense is not a proper procedural vehicle to raise an issue of standing; instead, the defendant should have attacked the plaintiff’s standing, in a motion to dismiss. In response, the defendant argues that raising the plaintiff’s standing in a special defense is proper because it places the plaintiff on notice of what the defendant intends to raise as issues at trial.
According to our courts, "[t]he proper procedural vehicle for disputing a party’s standing is a motion to dismiss." D’Eramo v. Smith, 273 Conn. 610, 615 n.6, 872 A.2d 408 (2005); see also Burton v. Dominion Nuclear Connecticut, Inc., 300 Conn. 542, 550, 23 A.3d 1176 (2011). In Connecticut Housing Financing Authority v. Delgado, Superior Court, judicial district of Danbury, Docket No. CV-13-6012730-S (March 17, 2015, Russo, J.), the court struck a special defense that attacked the plaintiff’s standing to foreclose on the defendant’s mortgage on the basis that a plaintiff’s standing may only be attacked by way of a motion to dismiss. Similarly, it is submitted that this court should hold that the defendant’s first, third, and fourth special defenses are legally insufficient because they improperly attack the plaintiff’s standing.
Because the defendant has raised the plaintiff’s standing, the court shall briefly address it. According to our statutes, the plaintiff’s standing to enforce the subject note is unaffected by the fact that original holder of the note, Guaranteed Home Mortgage, did not formally assign it to the plaintiff. See Chase Home Finance, LLC v. Fequiere, 119 Conn.App. 570, 576, 989 A.2d 606, cert. denied, 295 Conn. 922, 991 A.2d 564 (2010) (providing our state follows the common-law principle that "the mortgage follows the note"). According to General Statutes § 49-17: "When any mortgage is foreclosed by the person entitled to receive the money secured thereby but to whom the legal title to the mortgaged premises has never been conveyed, the title to such premises shall ... vest in him in the same manner and to the same extent as such title would have vested in the mortgagee if he had foreclosed ..." Our courts have interpreted § 49-17 to "[provide] an avenue for the holder of the note to foreclose on the property when the mortgage has not been assigned to him." Fleet National Bank v. Nazareth, 75 Conn.App. 791, 795, 818 A.2d 69 (2013). Thus, in accordance with § 49-17, the plaintiff has standing to collect on the defendant’s note by virtue of its mere possession of it.
2.
Equitable Estoppel
Similarly, in her second special defense, the defendant alleges that the plaintiff is estopped from enforcing the note due to its failure to provide evidence of its ownership over it. The plaintiff moves to strike this special defense on the basis that it is legally insufficient because the plaintiff’s failure to provide proof of ownership does not meet all the required elements of estoppel; namely, she does not allege that the plaintiff took an affirmative act, and that the defendant relied upon the act, and acted to her detriment. In opposition, the defendant asserts that her special defense alleges facts sufficient to meet all of the required elements of equitable estoppel.
According to our Appellate Court, "[t]he 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 ... [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." (Emphasis added; internal quotation marks omitted.) TD Bank, N.A. v. M.J. Holdings, LLC, 143 Conn.App. 322, 337-38, 71 A.3d 541 (2013).
In applying the aforementioned law to the present case, the court determines that the defendant has failed to plead the required elements of equitable estoppel. In her special defense, the defendant alleges that the plaintiff is barred from enforcing the note because it has failed to provide proof of its ownership. Nevertheless, the failure to provide evidence is not an affirmative act; instead, the plaintiff’s alleged failure to prove its ownership over the note is more properly classified as an omission. Even assuming that the plaintiff did affirmatively act, perhaps by "falsely" alleging in its complaint that it had ownership over the defendant’s note, the defendant has not alleged how this induced her to act to her detriment. Nowhere in her special defense does the defendant allege that she relied upon the plaintiff’s statement that it had ownership over the note, and accordingly, changed her position or acted to her detriment. As a result, the defendant’s second special defense is legally insufficient on the basis that it does not allege sufficient facts to support a claim of equitable estoppel.
3.
Unfair Debt Collection Practices
In her third special defense, the defendant pleads unfair debt collection practices on the grounds that the plaintiff failed to provide her an accounting of her mortgage upon her request, and charged her fees that "are neither reasonable and/or necessary to the administration or enforcement of the mortgage." See Def’s Answer, Special Defenses, and Counterclaims. The plaintiff moves to strike this special defense on the grounds that it does not eliminate the plaintiff’s cause of action, and does not relate to the making, validity, or enforcement of the note or mortgage. In her opposition, the defendant asserts that her third special defense does relate to the making, validity, or enforcement of the note because, broadly construed, it pertains to the plaintiff’s imposition of fees that were not authorized by the note. The defendant also contends that her special defense properly alleges facts that may equitably be considered by this court in determining whether to allow the plaintiff to enforce the note.
While the defendant does not specify what the fees were charged for, the plaintiff speculates in its motion to strike that the defendant is referencing various foreclosure fees including attorneys fees, foreclosure costs, and property inspection and preservation fees. The plaintiff argues in its motion to strike that the mortgage note contains clauses that expressly allow the plaintiff to charge such fees. Because it remains unclear what these fees are, the court will not speculate as to their nature, and accordingly, refuses to consider this argument by the plaintiff.
A.
The Special Defense Does Not Eliminate the Cause of Action
First, the plaintiff argues that the defendant’s fifth special defense is legally insufficient in that it does not properly challenge its ability to recover on its foreclosure action. Our Appellate Court has provided that "[t]he 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.) Fidelity Bank v. Krenisky, 72 Conn.App. 700, 705, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002); see also Practice Book § 10-50. "In a mortgage foreclosure action, [t]o make out its prima facie case, [the foreclosing party] [has] to prove by a preponderance of the evidence that it was the owner of the note and mortgage and that [the mortgagor] had defaulted on the note." (Internal quotation marks omitted.) Franklin Credit Management Corp. v. Nicholas, 73 Conn.App. 830, 838, 812 A.2d 51, cert. denied, 262 Conn. 937, 815 A.2d 136 (2002). On a similar note, our Supreme Court has already held that a defendant is not entitled to challenge costs and fees by way of a special defense in an action to foreclose on a municipal lien because the fees and costs do not bear on whether the plaintiff has a good cause of action. See Danbury v. Dana Investment Corp., 249 Conn. 1, 17, 730 A.2d 1128 (1999).
In the present case, the defendant’s fifth special defense alleges that the plaintiff improperly charged her unreasonable and unrelated fees, which does not bear on whether the plaintiff has a valid cause of action against her. Specifically, the plaintiff’s decision to charge the defendant fees of any kind does not relate to the two elements of a prima facie foreclosure action: (1) the plaintiff’s ownership of the note, and (2) the defendant’s default on said note. See Franklin Credit Management Corp. v. Nicholas, supra, 73 Conn.App. 838. Consequently, the defendant’s special defense is not a valid defense in avoidance of the plaintiff’s foreclosure action.
B.
The Special Defense Does Not Relate to the Making, Validity, or Enforcement of the Note
The plaintiff also argues that the defendant’s fifth special defense is legally insufficient because it does not relate to the making, validity, or enforcement of the mortgage note. Our Practice Book provides that a counterclaim or special defense can only be waged if it "[arises] out of the transaction or one of the transactions which is the subject of the plaintiff’s complaint ..." Practice Book § 10-10. In a foreclosure context, a counterclaim or special defense meets the "transaction test" when they raise claims that relate to the making, validity, or enforcement of the mortgage note. See U.S. Bank National Assn., Trustee v. Blowers, 177 Conn.App. 622, 634, 172 A.3d 837 (2017), cert. granted, 328 Conn. 904, 177 A.3d 1160 (2018); Citimortgage, Inc. v. Rey, 150 Conn.App. 595, 605-06, 92 A.3d 278, cert. denied, 314 Conn. 905, 99 A.3d 634 (2014).
The holding in Citimortgage, Inc. v. Rey, 150 Conn.App. 595, 605, 92 A.3d 278, cert. denied, 314 Conn . 905, 99 A.3d 635 (2014), loosened the standard applied to counterclaims and special defenses in a foreclosure context. Prior to Citimortgage, the transaction test in a foreclosure context was "attack the making, validity, or enforcement of the note." See Southbridge Associates, LLC v. Garofalo, 53 Conn.App. 11, 17, 728 A.2d 1114, cert. denied, 249 Conn. 919, 733 A.2d 229 (1999).
Our Appellate Court has held on multiple occasions that "[c]onduct on the part of the party seeking foreclosure that occurred after the loan documents were executed and not necessarily directly related solely to enforcement of the note ... has been found not to arise out of the same transaction as the complaint." US. Bank National Assn v. Sorrentino, 158 Conn.App. 84, 97, 118 A.3d 607, cert. denied, 319 Conn. 951, 125 A.3d 530 (2015); JP Morgan Chase Bank, Trustee v. Rodrigues, 109 Conn.App. 125, 134-35, 952 A.2d 56 (2008).
Although widely held by our Appellate Court, our Supreme Court has never confirmed that counterclaims and special defenses in a foreclosure action must relate to the making, validity, or enforcement of the mortgage note. Nevertheless, in January of 2018, our Supreme Court granted certiorari in U.S. Bank National Assn., Trustee v. Blowers, 177 Conn.App. 622, 172 A.2d 837 (2017). In its decision granting certiorari, the Supreme Court stated its review included the above issue. See U.S. Bank National Assn., Trustee v. Blowers, 328 Conn. 904, 177 A.3d 1160 (2018). As of the date of this decision, our Supreme Court has yet to issue a decision on the matter.
In keeping with this application of the transaction test, "defenses to a foreclosure action have been limited to payment, discharge, release or satisfaction ... or, if there had never been a valid lien." Chase Manhattan Mortgage Corp. v. Machado, 83 Conn.App. 183, 187, 850 A.2d 260 (2004). Accordingly, our Superior Court has previously struck special defenses that challenge a mortgage holder’s decision to impose costs and fees during the course of a mortgage because the imposition of such fees does not relate to the making, validity, or enforcement of the note. See Home Savings of America, F.A. v. Newkirk, Superior Court, judicial district of Stamford-Norwalk, Docket No. CV-96-0150962-S (January 5, 1998, Hickey, J.) (striking special defense alleging violation of good faith and fair dealing on basis that plaintiff "improperly assessed late charges" and obtained insurance coverage for home at "excessive premium").
Here, the defendant pleads in her fifth special defense that the plaintiff engaged in unfair debt collection practices by charging "unreasonable and unnecessary" fees and by failing to provide her with an account history upon her request. Nevertheless, these allegations, even when construed in the light most favorable to the defendant, only attack alleged conduct that occurred after the parties had executed the subject note. In accordance with the foregoing law, the defendant’s fifth special defense cannot properly be brought in the instant foreclosure action because it relies upon facts that do not relate back to the making, validity, or enforcement of the mortgage note.
For the foregoing reasons, the defendant’s fifth special defense is legally insufficient as it does not eliminate the plaintiff’s cause of action, and does not meet the transaction test.
4
Breach of the Implied Covenant of Good Faith and Fair Dealing
The plaintiff also argues that the defendant’s sixth special defense is legally insufficient because it pleads a breach of the implied covenant of good faith and fair dealing, which is not a proper special defense to a foreclosure action. In so arguing, the plaintiff relies upon our Appellate Court’s holding in Fidelity Bank v. Krenisky, supra, 72 Conn.App. 716. In response, the defendant asserts that the special defense is proper because it alleges more than a breach of the implied covenant of good faith and fair dealing; the special defense also raises equitable concerns, which may be properly considered by this court in determining whether to enforce the mortgage note.
Our Appellate Court has held that "special defenses and counterclaims alleging a breach of an implied covenant of good faith and fair dealing ... are not equitable defenses to a mortgage foreclosure." (Internal quotation marks omitted.) Fidelity Bank v. Krenisky, supra, 72 Conn.App. 716; accord Lasalle National Bank v. Freshfield Meadows, LLC, 69 Conn.App. 824, 835, 798 A.2d 445 (2002); see also New Haven Savings Bank v. LaPlace, 66 Conn.App. 1, 10, cert. denied, 258 Conn. 942, 786 A.3d 426 (2011). Accordingly, the defendant’s sixth special defense is legally insufficient in that it pleads a special defense that may not be properly brought in a foreclosure action.
B.
Counterclaims
The plaintiff also moves to strike the defendant’s first and second counts of her counterclaim complaint on the basis that they are legally insufficient. This memorandum will address each of the defendant’s counterclaims in turn.
1.
Unfair Debt Collection & Breach of the Implied Covenant of Good Faith and Fair Dealing
In her first counterclaim, the defendant pleads that the plaintiff has engaged in unfair debt collection practices and breached the implied covenant of good faith and fair dealing by charging unreasonable and unnecessary fees and failing to provide an accounting of her balance upon request, in violation of the expressed and implied covenants of the mortgage note. The plaintiff moves to strike this counterclaim on the grounds that it has a basis in events that occurred after the execution of the parties’ mortgage note, and therefore, does not relate back to the making, validity, or enforcement of the note. In her objection to the motion to strike, the defendant disputes the plaintiff’s assertion that post-execution conduct may never serve as the factual basis for a special defense or counterclaim in a foreclosure action. Moreover, the defendant argues that this counterclaim does in fact meet the transaction test as the act of charging fees, which artificially increases the amount due on the note, clearly relates to the enforcement of the note.
The plaintiff also argues that the defendant’s first counterclaim should be stricken because the facts alleged do not amount to a sufficient pleading of unfair debt collection practices or a breach of the implied covenant of good faith and fair dealing. The court is able to resolve the fate of this counterclaim on other grounds, as stated above. Accordingly, the court need not address these arguments.
Our Appellate Court has held that counterclaims, like special defenses, must still meet the transaction test, pursuant to Practice Book § 10-10. Nevertheless, as stated previously, the law provides that post-execution conduct does not relate back to the making, validity, or enforcement of a mortgage note. See Part II3B of this memorandum. Accordingly, special defenses and counterclaims that are based on facts that the mortgagee improperly assessed fees and obtained insurance for the property at an "excessive premium" do not relate back to the mortgage note. See Home Savings of America, F.A. v. Newkirk, supra, Superior Court, Docket No. CV-96-0150962-S.
In the present case, the defendant’s first counterclaim alleges a breach of the implied covenant of good faith and fair dealing and unfair debt collection practices that have a factual basis in post-execution actions of the plaintiff. Specifically, the defendant’s allegations that the plaintiff charged her "unreasonable and unnecessary fees" and failed to provide her with an account history are things that the plaintiff allegedly did, or failed to do, after the parties had already executed their mortgage note. Accordingly, the plaintiff’s first counterclaim is legally insufficient because it relies upon post-execution conduct, and thereby, fails to satisfy the transaction test.
2.
Violation of CUTPA
In her second counterclaim, the defendant alleges that the plaintiff’s attempt to collect unreasonable and unnecessary fees in foreclosure actions across Connecticut is a violation of CUTPA. The plaintiff moves to strike this counterclaim on the grounds that it fails to sufficiently plead a violation of CUTPA because it fails to specify what prong of the three-part cigarette test the plaintiff’s actions have violated, and does not allege how the plaintiff’s conduct offends public policy or how it caused substantial injuries to consumers, competitors, or other businessmen. In her objection, the defendant argues that her counterclaim is legally sufficient because unfair debt collection is against public policy, and has already been held to constitute a CUTPA violation.
General Statutes § 42-110b(a) provides that "[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." "It is well settled that in determining whether a practice violates CUTPA [Connecticut courts] have adopted ... the cigarette rule ... (1) [W]hether the practice ... offends public policy as it has been established by statutes, the common law, or otherwise ... (2) whether it is immoral, unethical, oppressive, or unscrupulous; [and] (3) whether it causes substantial injury to consumers [competitors or other businessmen]." (Internal quotation marks omitted.) Fink v. Golenbock, 238 Conn. 183, 215, 680 A.2d 1243 (2009). "A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three ... Thus a violation of CUTPA may be established by showing either an actual deceptive practice ... or a practice amounting to a violation of public policy." (Internal quotation marks omitted.) Monetary Funding Group, Inc. v. Pluchino, 87 Conn.App. 401, 413, 867 A.2d 841 (2005).
"A claim under CUTPA must be pleaded with particularity to allow evaluation of the legal theory upon which the claim is based." S.M.S. Textile Mills, Inc. v. Brown, Jacobson, Tillinghast, Lahan & King, P.C., 32 Conn.App. 786, 797, 631 A.2d 340, cert. denied, 228 Conn. 903, 634 A.2d 296 (1993). If the pleadings fail to convey how the alleged actives meet any one of the three criteria of the cigarette test, they fail to sufficiently plead the required elements of a CUTPA claim, and they may be stricken. See JP Morgan Chase Bank v. Frank, Superior Court, judicial district of New London, Docket No. CV-09-6001296 (October 25, 2012, Devine, J.); GMAC Mortgage, LLC v. Tornheim, Superior Court, judicial district of New London, Docket No. CV-09-6001296 (March 24, 2010, Devine, J.).
In the present case, the plaintiff argues that the defendant’s second counterclaim should be stricken because it fails to sufficiently plead a CUTPA violation. The court agrees. In JP Morgan Chase Bank v. Frank, supra, Superior Court, Docket No. CV-09-5010809, our Superior Court struck a counterclaim alleging CUTPA on the grounds that the plaintiff engaged in an unfair and deceptive practice by initiating a foreclosure action against the defendant, even though it knew that the defendant never executed the said mortgage. In so holding, the court stated that the counterclaim was legally insufficient because it merely stated a bare legal conclusion, and failed to specifically plead how the plaintiff’s decision to foreclose on the defendant’s property is offensive to public policy, or is an unfair and deceptive practice. See id.; see also GMAC Mortgage LLC. v. Tornheim, supra, Superior Court, Docket No. CV-09-6001296 (striking counterclaim pleading violation of CUTPA because defendant failed to plead with particularity how alleged conduct is deceptive practice, or how practice is offensive to public policy).
Similar to the defendant in JP Morgan Chase Bank, the defendant here has only pleaded a bare legal conclusion: the plaintiff’s attempt to collect unreasonable and unnecessary fees in foreclosure actions across the state is a violation of CUTPA. The defendant does not specify what legal theory of the three-part cigarette test the plaintiff’s actions violate, nor does she allege what statutes, common-law principles, or public policy initiatives the plaintiff has offended. Consequently, the defendant’s counterclaim does not plead, with particularity, "how or in what respect the ... alleged activities are either immoral, unethical, unscrupulous or offensive to public policy," which is required for a sufficient pleading of CUTPA. See JP Morgan Chase Bank v. Frank, supra, Superior Court, Docket No. CV-09-5010809; GMAC Mortgage LLC. v. Tornheim, supra, Superior Court, Docket No. CV-09-6001296; see also S.M.S. Textile Mills, Inc. v. Brown, Jacobson, Tillinghast, Lahan and King P.C., supra, 32 Conn.App. 797 (striking counterclaim alleging CUTPA violation because defendant did not plead "with legally sufficient specificity"). Accordingly, the defendant’s second counterclaim is legally insufficient as it does not plead sufficient facts to amount to a CUTPA violation.
IV.
CONCLUSION
For the foregoing reasons, the court grants the plaintiff’s motion to strike in its entirety.