Opinion
FSTCV126014840S
05-26-2016
Dovenmuehle Mortgage, Inc. v. Frank Janniello
UNPUBLISHED OPINION
MEMORANDUM OF DECISION re MOTION TO DISMISS (#134.00)
Kenneth B. Povodator, J.
On March 20, 2014, the then-self-represented defendant Frank Janniello filed a motion to dismiss this foreclosure proceeding (#134.00). Attached to the motion was an affidavit of lost note, in which a representative of the plaintiff stated, under oath, that the plaintiff was the holder of the note but had lost the original.
The motion to dismiss filed by the defendant was brief, and therefore can be quoted in full:
The Defendant moves that the court dismiss this action because:
The Plaintiff is not the owner and holder in due course of the note in contravention of their claims in the complaint as stated on page 4.
Attachment-Affidavit of Lost Note.[As already noted, attached to the motion was a copy of the affidavit of lost note.]
The court could not find a reference to status as a holder in due course on the fourth (unnumbered) page of the complaint. Paragraphs 4 and 5, however, on the second page of the complaint, assert that the plaintiff is the holder of the note and mortgage.
The plaintiff filed an objection (#137.00), the defendant filed a reply (#139.00), and then after a two-year hiatus, each side filed an additional memorandum (#165.00 filed by the plaintiff, and #168.00 filed on behalf of the defendant (now represented by counsel)).
Prior to argument on April 4, 2016, the plaintiff filed a request to amend the complaint (#169.00), to which the defendant objected (#171.00). The parties were given an opportunity to file additional memoranda after the hearing on April 4, 2016, relating to whether the court could consider the amendment prior to ruling on the motion to dismiss, and both sides did submit post-hearing memoranda. At the hearing, the court contemplated the possible need for further proceedings after the issue of the amendment was resolved, but for the reasons stated below, no further argument appears to be necessary or appropriate.
The relevant change in the proposed amended complaint appears to be the deletion in ¶ 4 of the reference to the plaintiff as the holder of the note and mortgage, replacing it by an allegation that the plaintiff is entitled to enforce the note and mortgage. (There is no change to the allegation in ¶ 5; see, footnote 1, above.)
The defendant correctly cites authorities for the proposition that once subject matter jurisdiction has been raised as a potential issue, the jurisdictional issue must be resolved before the case can proceed further.
[O]nce the question of lack of jurisdiction of a court is raised . . . [it] must be disposed of no matter in what form it is presented . . . and the court must fully resolve it before proceeding further with the case . . . Subject matter jurisdiction involves the authority of the court to adjudicate the type of controversy presented by the action before it . . . [A] court lacks discretion to consider the merits of a case over which it is without jurisdiction . . . The subject matter jurisdiction requirement may not be waived by any party, and also may be raised by a party, or by the court sua sponte, at any stage of the proceedings, including on appeal. Emerick v. Freedom of Information Commission, 156 Conn.App. 232, 236, 113 A.3d 458 (2015) (internal quotation marks, omitted).
The defendant also correctly notes that some limited exceptions to the jurisdiction-first rule have been recognized. For example, they correctly note that substitution of a proper (or more proper) party is generally recognized as an exception, even if a motion to dismiss is pending. Youngman v. Schiavone, 157 Conn.App. 55, 115 A.3d 516 (2015). Discovery in aid of resolution of the jurisdictional issue also is a recognized exception. Standard Tallow Corp. v. Jowdy, 190 Conn. 48, 459 A.2d 503 (1983).
Substitution of a new party is quite common in foreclosure actions, where the underlying debt and mortgage often are assigned/transferred during the pendency of the action and the new owner/possessor/holder needs to be substituted for the transferor. See, e.g, MERSCORP Holdings, Inc. v. Malloy, 320 Conn. 448, 131 A.3d 220 (2016) (discussing, inter alia, the frequency of transfers of mortgages and associated notes, in connection with the secondary market for such obligations).
Assuming without deciding that the fact that the plaintiff now does not have the original note but instead is relying upon an affidavit of lost note implicates its right to proceed as a holder, and that the proposed amendment attempts to correct that defect by changing the status of the plaintiff, the court concludes that the change being sought is analogous to--but lesser in magnitude than--a substitution of a party. As noted above, the defect implicates the status of the plaintiff as a plaintiff and an attempt is being made to correct--or identify more precisely--the basis on which the plaintiff claims it has the right to proceed (enforce the note). Metaphorically, the plaintiff is simply changing the " hat" that it is wearing as it is attempting to proceed to enforce the note and to foreclose the mortgage, precisely the same outcomes as have been sought since the initiation of these proceedings. This is less of a change than substitution of parties when dealing with successors, and less of a change than correction of an incorrectly-identified party; see, e.g. Fairfield Merrittview Limited Partnership v. City of Norwalk, 320 Conn. 535, 538, 133 A.3d 140 (2016) (proceedings commenced in the name of a limited partnership with later addition of similarly-named (but legally distinct) limited liability company).
Indeed, the dissent largely focused on the fact that no attempt had been made to substitute the correct plaintiff but instead the case proceeded based on the original (seemingly standing-less) plaintiff as supplemented by an arguably belated addition of the proper plaintiff.
As noted by the plaintiff, it is not clear (not a matter of record) when the plaintiff lost the original; there is no evidence before the court to indicate whether the loss occurred before this action was commenced or occurred after it was commenced. At all times, however, the plaintiff has claimed to have the authority to enforce the note (whether as an original note or sworn copy), and absent evidence to the contrary, that is sufficient for standing.
Standing is not a technical rule intended to keep aggrieved parties out of court; nor is it a test of substantive rights. Rather it is a practical concept designed to ensure that courts and parties are not vexed by suits brought to vindicate nonjusticiable interests and that judicial decisions which may affect the rights of others are forged in hot controversy, with each view fairly and vigorously represented. These two objectives are ordinarily held to have been met when a complainant makes a colorable claim of direct injury he has suffered or is likely to suffer, in an individual or representative capacity. Such a personal stake in the outcome of the controversy . . . provides the requisite assurance of concrete adverseness and diligent advocacy. Standing [however] requires no more than a colorable claim of injury . . . Citibank v. Lindland, 310 Conn. 147, 161-62, 75 A.3d 651 (2013) (Internal quotation marks and citations, omitted.)
The defendant relies on the fact that the plaintiff filed an affidavit of lost note, which is claimed to negate the plaintiff's status as a holder entitled to enforce the note. There is, however, a distinction between the ability to prove a substantive right by a preponderance of the evidence, and the ability to establish standing so as to be allowed an opportunity to proffer such proof. In AS Peleus, LLC v. Success, Inc., 162 Conn.App. 750, 133 A.3d 503 (2016), the court noted the oft-stated requirement that in order to challenge standing, one must do more than raise questions but rather must actually offer evidence; see, especially, 162 Conn.App. at 755-56. The fact that the plaintiff is relying upon an affidavit of lost note is not, itself, evidence that it did not possess the note at the time of commencement of this proceeding, and in light of the affidavit of lost note is not evidence that at any relevant time, the plaintiff was not the proper party to pursue remedies under the note and mortgage. Nothing has been presented to the court, sufficient to raise a factual issue requiring an evidentiary hearing. Conboy v. State, 292 Conn. 642, 974 A.2d 669 (2009); Cuozzo v. Orange, 315 Conn. 606, 615-17, 109 A.3d 903 (2015); nothing has been presented that might negate the existence of a colorable claim by the plaintiff to a right to enforce the instrument despite the loss of the original. Is that not part of the purpose of General Statutes § 42a-3-309, i.e. recognizing/establishing a procedure for enforcement despite loss of the original instrument?
The plaintiff has submitted proof that it is the owner of the note (more precisely, the debt memorialized by the note), albeit without the original ink-signed version. Whether it will be able to prove that it is the owner/holder and was the owner/holder at the time this action was commenced will be determined at trial; that is the appropriate time and place to test substantive rights.
The court believes that the defendant has placed too much emphasis on the assertion in the original complaint that the plaintiff was the holder of the note. Status as a holder was asserted as a means of asserting the right to enforce the note. The fact that the plaintiff may only have, or only be able to prove, an alternate and perhaps less (presumptively) convincing route to that same result, does not implicate standing if the alternate avenue--amenable to proof--still authorizes enforcement of the note. By analogy, see, Kortner v. Martise, 312 Conn. 1, 11-14, 91 A.3d 412 (2014) (assuming conservator of daughter lacked standing to commence action, substitution of same person in capacity of administratrix of daughter's estate, cured any jurisdictional flaws). Here, there is no change in a legally-created status (conservator to administratrix) but with less formality, the same individual is asserting the same rights under a different mechanism for proof.
A bill or note is not a debt; it is only primary evidence of a debt; and where this is lost, impaired or destroyed bona fide, it may be supplied by secondary evidence . . . The loss of a bill or note alters not the rights of the owner, but merely renders secondary evidence necessary and proper. Silicon Valley Bank v. Miracle Faith World Outreach, Inc., 140 Conn.App. 827, 833, 60 A.3d 343 (2013) (internal quotation marks omitted).
The plaintiff has invoked General Statutes § 42a-3-309 (Uniform Commercial Code provision relating to lost notes), which explicitly provides for the enforcement of lost notes: " A person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person's right to enforce the instrument. If that proof is made, section 42a-3-308 applies to the case as if the person seeking enforcement had produced the instrument."
Through the cross reference to § 42a-3-308, if the plaintiff carries its burden under that statute, there is a further cross reference to status as a person entitled to enforce the instrument under § 42a-3-301. The path to enforcement might be more direct if the plaintiff were a holder, but subject to proof as required by the statute, the plaintiff still is entitled (if less directly) to enforcement.
In effect, an allegation that the plaintiff is the " holder" of the note is the equivalent of an allegation that the plaintiff is entitled to enforce the note because it is the holder. The plaintiff is now editing that implied allegation to remove a non-essential allegation, but retaining the legally essential allegation that it is entitled to enforce the note. Status as a holder is not essential to proof on the merits or standing. Standing is a practical concept and the court sees only hypertechnicality, not practicality, in the argument that the plaintiff lacks standing because it may not be the holder, despite its representation that it can establish a different factual basis for pursuing these remedies (possessor of a now-lost note).
(To the extent that the loss of the original instrument may require recourse to secondary evidence, the court notes that in addition to reliance on the affidavit, the plaintiff also has submitted a loan modification agreement, signed by both Janniello defendants, which, inter alia, reaffirms the existence of an original obligation from 2003 as of the modification in 2010. (Exhibit B to #165.00.))
To the extent that the defendant has identified an earlier foreclosure proceeding in which there was a different plaintiff (Mellon Financial Corp. v. Janniello, FSTCV085008503S), the loan modification document submitted identifies Dovenmuehle Mortgage, Inc. as the lender/servicer (not Mellon Financial), and that was 2 years after that earlier proceeding had been commenced and 2 years prior to commencement of this proceeding.
Conclusion
Fairfield Merrittview and General Statutes § 52-109 authorize substitution or addition of a wholly distinct (proper) plaintiff if an initial plaintiff lacks standing; Kortner recognizes the propriety of substituting the same person but with a proper representative status (assuming that the initial representative status was insufficient for standing); here, there is no change of entity nor change in legal status but merely a change in the evidentiary route by which the plaintiff claims that it can prove its entitlement to relief. The identity of the plaintiff remains unchanged and the relief sought also is essentially unchanged; at all times, the plaintiff has claimed a right to enforce the same note. The court declines to use the overly-technical approach to standing advanced by the defendant, rather than the practical one mandated by appellate precedent.
Again, it is not enough for the defendant to raise questions, in order to obtain dismissal based on lack of standing (or even warrant an evidentiary hearing), AS Peleus, supra, " It is well established that, in determining whether a court has subject matter jurisdiction, every presumption favoring jurisdiction should be indulged . . ." Ed Lally and Associates, Inc. v. DSBNC, LLC, 145 Conn.App. 718, 728, 78 A.3d 148 (2013); see, also, One Country, LLC v. Johnson, 314 Conn. 288, 298, 101 A.3d 933 (2014).
The plaintiff may well be embarrassed by its loss of the original note, compounded by the failure to scan and save the final page of the note prior to its loss; an ultimate finder of fact may (or may not) find such problems difficult to ignore. For purposes of standing--the legal right to set judicial machinery in motion, Citibank v. Lindland, supra, 310 Conn. at 161--the affidavit of lost note, coupled with the reaffirmation by the defendants of the existence of the original debt as reflected by the modification documents, are sufficient to establish a colorable claim, in turn establishing the plaintiff's right to have an opportunity to vindicate that claim by way of a trial, id.
The court does not believe that the absence of the original note, in the context of a statutory affidavit relating to the loss of that note, implicates standing. Even if it does implicate standing, the change sought by the plaintiff is analogous to (if substantially lesser in magnitude than) a substitution/addition of a legally-distinct proper party ( Fairfield Merrittview and § 52-109) or a change in legal status for a representative (Kortner ).
For all of these reasons, then, the motion to dismiss is denied.
Concurrent with the release of this decision, the court is overruling the objection to the request to amend. As noted earlier, at the hearing on April 4, 2016, the court contemplated the possible need for a further hearing. For the reasons stated above, the court sees no reason to delay resolution of this issue with the attendant possibility of a delay in the trial, currently scheduled for the end of July (just 3 days short of 4 years after the return date).