Opinion
HHDCV156060522S
11-08-2016
FEC Enterprises, LLC v. Lin Mare, LLC
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE MOTION TO STRIKE AND/OR SEVER (#123)
Sheila A. Huddleston, Judge.
The plaintiff, FEC Enterprises, LLC, brought this action to foreclose on a commercial property owned by the defendant, Lin Mare, LLC, which is alleged to be in default of a commercial note and mortgage. The defendant filed an answer that included six special defenses and a six-count counterclaim. The plaintiff has moved to strike all special defenses and all counts of the counterclaim. In the alternative, the plaintiff seeks to sever any counts of the counterclaim that survive the motion to strike. The defendant objects to the motion to strike and the alternative motion to sever. For the reasons discussed below, the motion to strike is granted as to all special defenses and as to the first, fifth and sixth counts of the counterclaim. The motion to strike is denied as to the second, third, and fourth counts of the counterclaim. The alternative motion to sever the counterclaim is denied without prejudice.
Facts Alleged in the Complaint
The plaintiff alleges that on June 23, 2010, the defendant owed the plaintiff $130,000, evidenced by a commercial note of the same date, payable to the plaintiff. The plaintiff further alleges that to secure the note, the defendant mortgaged to the plaintiff real estate known as 80-82 West Center Street, Manchester, Connecticut. The mortgage was recorded in the Manchester land records. The mortgage was modified by a written agreement dated July 15, 2011, recorded in the Manchester land records. The plaintiff further alleges that the defendant has not paid the note in accordance with its terms and the plaintiff has exercised its option to declare the entire balance due and payable.
Copies of the promissory note, mortgage, and modification agreement were attached as exhibits to the complaint. The note was made by the defendant Lin Mare, LLC, and Linda Marotta, a member of Lin Mare, LLC who is not a named defendant in the foreclosure action. The mortgage securing the note was made only by Lin Mare, LLC, through Linda Marotta. The note and mortgage had a maturity date of July 23, 2011, with interest payments due monthly between September 1, 2010, and the maturity date, and a balloon payment of all outstanding principal and interest due on the maturity date.
The mortgage modification agreement, dated July 15, 2011, declared that the entire principal of $130,000 was still owing and that the interest was paid through June 1, 2011. The modification agreement extended the maturity date of the note and mortgage from July 23, 2011, to January 23, 2012.
Applicable Legal Standards
A motion to strike tests the legal sufficiency of a pleading, including special defenses and counterclaims. Practice Book § 10-39. It requires no factual findings by the trial court. JP Morgan Chase Bank, N.A. v. Winthrop Properties, LLC, 312 Conn. 662, 670, 94 A.3d 622 (2014). The court construes the pleading in the light most favorable to sustaining its sufficiency. Coppola Construction Co. v. Hoffman Enterprises Ltd Partnership, 309 Conn. 342, 350, 71 A.3d 480 (2013). All well-pleaded facts and those facts necessarily implied by the allegations are taken as admitted. Id. Pleadings must be construed broadly and realistically, not narrowly and technically. Id. A motion to strike admits all well-pleaded facts, but it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings. Faulkner v. United Technologies Corp., 240 Conn. 576, 588, 693 A.2d 293 (1997). A motion to strike may properly be granted if the pleading at issue alleges mere conclusions of law that are unsupported by the facts alleged. Santorso v. Bristol Hospital, 308 Conn. 338, 349, 63 A.3d 940 (2013).
Practice Book § 10-39(a) provides, in relevant part: " A motion to strike shall be used whenever any party wishes to contest: (1) the legal sufficiency of any complaint, counterclaim or cross claim . . . to state a claim upon which relief can be granted; or . . . (5) the legal sufficiency of any answer to any complaint, counterclaim or cross claim, or any part of that answer including any special defenses contained therein."
In addition to challenging the legal sufficiency of a complaint or counterclaim, a party may use a motion to strike to challenge the legal sufficiency of a special defense. See Practice Book § 10-39; GMAC Mortgage, LLC v. Ford, 144 Conn.App. 165, 179-80, 73 A.3d 742 (2013). As a general rule, facts must be pleaded as a special defense when they are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action. Almada v. Wausau Business Ins. Co., 274 Conn. 449, 456, 876 A.2d 535 (2005). The fundamental purpose of a special defense is to apprise the court and opposing counsel of the issues to be tried. Id. Whether facts must be specially pleaded depends on the nature of those facts in relation to the contested issues. Id. In ruling on a motion to strike a special defense, the court must take the facts alleged in the special defense as true and must construe the defense in the manner most favorable to sustaining its legal sufficiency. Connecticut National Bank v. Douglas, 221 Conn. 530, 536, 606 A.2d 684 (1992). The total absence of any factual allegations specific to the dispute renders a special defense legally insufficient. Ferraiuolo v. Dean, Superior Court, judicial district of New Haven, Docket No. CV-14-6047444-S (February 26, 2015, Nazzaro, J.) (59 Conn.L.Rptr. 829, ).
Special defenses to foreclosure actions have historically been limited to payment, discharge, release, satisfaction, and the absence of a valid lien. Fidelity Bank v. Krenisky, 72 Conn.App. 700, 705, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002). " A valid special defense at law to foreclosure proceeding must be legally sufficient and address the making, validity or enforcement of the mortgage, the note or both." (Internal quotation marks omitted.) Id. Our courts have, however, also recognized a number of equitable defenses to foreclosure actions, including claims that the mortgagor was prevented by accident, mistake or fraud from fulfilling a condition of the mortgage and claims of unconscionability, abandonment of security, and usury. Id., 705-06.
Discussion
First Special Defense: Unclean Hands
In its first special defense, the defendant alleges that the plaintiff has unclean hands by virtue of its demands for payment, before and after the acceleration of the note, in that the sums it has demanded that the defendant must pay are not provided by or in accordance with the note and mortgage. The plaintiff argues that this defense is legally insufficient because it does not address the making, validity or enforcement of the note or mortgage and because it does not allege any facts that, if true, would show that the plaintiff has no cause of action. The court agrees with the plaintiff's second argument.
Generally, the doctrine of unclean hands does not constitute a valid defense to a foreclosure action unless it directly attacks the making, validity or enforcement of the note or mortgage. See CitiMortgage, Inc. v. Rey, 150 Conn.App. 595, 603, 92 A.3d 278, cert. denied, 314 Conn. 905, 99 A.3d 635 (2014). Occasionally, however, the doctrine may apply in circumstances not related to the making, validity or enforcement of the note. See Thompson v. Orcutt, 257 Conn. 301, 316-18, 777 A.2d 670 (2001) (doctrine of unclean hands applicable to bar plaintiff's foreclosure action because fraud in bankruptcy court allowed him to retain interest in mortgage). Nevertheless, a bare assertion of " unclean hands" without specific factual allegations is legally insufficient because, without further factual allegations, the court cannot infer that there was inequitable conduct before the acceleration of the debt that might constitute a valid special defense. The motion to strike is therefore granted as to the first special defense.
Second Special Defense: Rejected. Lost, or Misplaced Payments
The defendant's second special defense is that the plaintiff improperly rejected, lost, or misplaced payments made by the defendant before the plaintiff accelerated the debt. The plaintiff argues that this is not a proper special defense because it deals with the administration of the loan and because it is inconsistent with the facts alleged in the complaint. The defendant argues that payment is a valid special defense in a foreclosure action.
Appellate decisions addressing the factual adequacy of the special defense of payment in a foreclosure action are not easily applied. In Fidelity Bank v. Krenisky, supra, 72 Conn.App. 705, the Appellate Court acknowledged that payment has historically been recognized as a special defense to a foreclosure action. In the same decision, however, it affirmed the striking of a special defense of accord and satisfaction on the ground that the defendant had not alleged sufficient facts to support the special defense. Id., 718. In that case, the defendants had alleged that on a certain date, " the plaintiff, by one Lisa Murry [a loan counselor for the plaintiff and defendants entered into an accord, satisfaction and agreement, which resolves same, " and it had provided an affidavit alleging payment. Id. The court concluded that the mere assertion that an accord and satisfaction had occurred was insufficient in the absence of supporting facts, and it further concluded that the defendant's affidavit regarding payment of back mortgage payments was insufficient to raise a triable issue of fact. Id., 718-19. In Homecomings Financial Network, Inc. v. Starbala, 85 Conn.App. 284, 289, 857 A.2d 366 (2004), in contrast, the Appellate Court reversed a trial court's striking of a special defense of payment where the defendants alleged that they tendered timely payment of the mortgage to a previous note holder that was refused. The court observed: " Although the plaintiff cites cases addressing the need to set forth a cause of action adequately, it has not provided authority for the proposition that the special defense here is pleaded inadequately." Id.
In this case, the second defense alleges in full: " Prior to any alleged declaration of default or acceleration of the sums due and owing with respect to the note and mortgage, the Plaintiff improperly and wrongfully rejected, lost or misplaced payments made by the Defendants." The court concludes that this allegation does not fall under Starbala because it fails to allege that the defendant tendered timely and adequate payments to the plaintiff. It merely alleges that some unspecified payments, which might or might not have been timely or adequate, were rejected, lost or misplaced. While the defendant may be able to replead additional facts that would bring the second special defense within the Starbala holding, the defense as currently pleaded is factually insufficient.
Third Special Defense: Equitable Estoppel
In the third special defense, the defendant alleges that members of the plaintiff and defendant met in May 2015, and modified the note and mortgage. At and following that meeting, agents of the plaintiff allegedly represented that the defendant was not in default. In reliance on that representation, the defendant did not seek counsel or further advice on the note as modified or continue to pursue loss mitigation options. In June 2015, the defendant's member was incarcerated. The plaintiff thereafter commenced this action rather than honoring the modification agreement. Based on these allegations, the third special defense asserts that this action is barred by the doctrine of equitable estoppel.
The plaintiff argues that, in a foreclosure action, alleged special defenses of equitable estoppel and unclean hands must relate to the making, validity, or enforcement of the note or mortgage. The defendant argues that the special defenses are valid equitable defenses and that the defendant is not required to plead evidentiary facts to support its special defense.
In general, as courts have repeatedly held, special defenses to a foreclosure action must " directly attack" the making, validity or enforcement of the note or mortgage. CitiMortgage, Inc. v. Rey, supra, 150 Conn.App. 603. For that reason, courts have generally held that " defenses dealing with conduct of the lender after execution of the mortgage may not be asserted in a foreclosure as a defense, as such assertions do not deal with the making, validity or enforcement of the note." (Internal quotation mark omitted.) Equicredit Corp. of America v. Pelizari, Superior Court, judicial district of Tolland, Docket No. CV 02-0077555, (April 4, 2003, Scholl, J.) In at least one case, however, the Appellate Court has held that a claim of breach of a valid modification agreement was a proper special defense in a foreclosure action. See TD Bank, N.A. v. M.J. Holdings, LLC, 143 Conn.App. 322, 338-39, 71 A.3d 541 (2013). In that case, the defendant pleaded, as a special defense, that it had agreed to sell certain of its property and to pay the net proceeds to the plaintiff, in exchange for which the plaintiff agreed to modify the loans that were the subject of the foreclosure action to interest only, allowing the defendant to stay current on its obligations. Id., 325-26. The defendant further alleged that it performed its part of the modification agreement, sold certain of its property, and forwarded the proceeds to the plaintiff, which then breached its agreement to modify the loans. In another special defense, the defendant incorporated essentially the same allegations to support a special defense of equitable estoppel. The trial court had rejected both defenses. The Appellate Court, construing the second special defense as a breach of a modification agreement, reversed the trial court as to that special defense, but concluded that the breach of the agreement did not support an equitable estoppel defense. In so ruling, it discussed both the requirements for a modification defense to a foreclosure action and the distinction between a promissory estoppel claim and an equitable estoppel defense. Because the third special defense in this case is characterized as an " equitable estoppel" defense but contains factual allegations regarding breach of a loan modification agreement, the court will consider whether it adequately pleads a special defense under either analysis in M.J. Holdings .
In M.J. Holdings, the Appellate Court held that breach of a modification agreement could properly be raised as a special defense in a foreclosure case, but that " in order to raise this defense, the defendants must allege a valid loan modification agreement that attacks the making, validity or enforcement of the original note and/or mortgage." Id., 331. To allege such a valid modification agreement, a defendant must allege facts showing a valid offer and acceptance, and it must allege all the definite and certain requirements of all essential terms. Id., 331-32. Moreover, for a valid modification to exist, " there must be mutual assent to the meaning and conditions of the modification and the parties must assent to the same thing in the same sense . . . Modification of a contract may be inferred from the attendant circumstances and conduct of the parties . . . A modification of an agreement must be supported by valid consideration and requires a party to do, or promise to do, something further than, or different from, that which is he is already bound to do." (Internal quotation marks omitted.) Id., 332. In M.J. Holdings, the defendant met that standard by pleading the terms of a definite and certain agreement (that it would sell certain property and give the plaintiff the net proceeds in exchange for a modification of other loans to an interest only status) that was supported by valid consideration (its sale of some property and tender of the proceeds, which was accepted). Id., 333. In this case, in contrast, the defendant's third special defense does not set out the terms of the purported modification agreement, nor does it allege facts to show that the purported agreement was supported by valid consideration. Although it alleges that the defendant did not hire counsel or explore loss mitigation alternatives as a result of its reliance on this purported agreement, it does not allege that the plaintiff bargained for its inaction as part of the purported modification agreement.
Nor do the allegations support a special defense of equitable estoppel that " directly attacks" the making, validity or enforcement of the note or mortgage. " Estoppel rests on the misleading conduct of one party to the prejudice of the other . . . Broadly speaking, the 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 fact are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) the intention, or least the expectation, that such conduct shall be acted upon by, or influence, the other party or other persons; and (3) knowledge, actual or constructive, of the real facts." Id., 338.
In this case, the defendant's third special defense alleges that the plaintiff agreed to some unspecified modification of the agreement and represented that the defendant was not in default at the time of the " modification meeting" in May 2015; The defendant does not allege what representations, if any, were made with respect to any future changes in circumstances, such as the subsequent incarceration of the defendant's member a month later. Because it does not allege any facts with respect to the nature of the modification of the agreement or representations by the plaintiff as to what actions it would take in the future, the third special defense does not support a claim of equitable estoppel.
Fourth Special Defense: Unclean Hands
The fourth special defense incorporates the same factual allegations as the third special defense and asserts that the action is barred by the doctrine of unclean hands. Foreclosure is an equitable proceeding. " It is a fundamental principle of equity jurisprudence that 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 not by way of punishment but on considerations that make for the advancement of right and justice . . . 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 . . . Unless the plaintiff's 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." (Citation omitted; internal quotation marks omitted.) Thompson v. Orcutt, supra, 257 Conn. 310. In Thompson, the defendant alleged that the plaintiff had misrepresented, to a bankruptcy trustee, that his interest in the subject mortgage had no value because of prior encumbrances. Id., 304. As a result of his fraudulent misrepresentation, the mortgage was not made an asset of the bankruptcy estate. Id. In those circumstances, the Supreme Court concluded that the plaintiff's fraudulent conduct was appropriately asserted as a special defense because (1) there was a strong public interest in the integrity of bankruptcy proceedings, and (2) but for the plaintiff's fraud in the bankruptcy court, the mortgage would have been an asset of the bankruptcy estate and the plaintiff could not have brought the foreclosure action. Id., 316. As a result, it was " directly and inseparably connected" with his foreclosure cause of action. (Internal quotation marks omitted.) Id., 313.
As Thompson demonstrates, the applicability of the doctrine of unclean hands in a foreclosure action is highly fact specific. Although it can apply in situations not relating to the making, validity or enforcement of a note or mortgage, it will only do so when the plaintiff's allegedly fraudulent or inequitable conduct is directly and inseparably connected with the foreclosure cause of action. The fourth special defense in the present case does not allege sufficient facts to imply inequitable conduct that is directly and inseparably connected with the foreclosure cause of action. The motion to strike is therefore granted as to the fourth special defense.
Fifth Special Defense: Failure to Mitigate Damages
In its fifth special defense, the defendant asserts that the plaintiff has failed to mitigate its damages. The plaintiff recognizes that trial court judges are divided in their opinion as to whether a failure to mitigate damages is properly asserted as a defense to a foreclosure action. See THCI Co., LLC v. Dickstein, Superior Court, judicial district of Tolland, Docket No. CV13-5005827-S, (June 9, 2014, Bright, J.). " Mitigation of damages is not a valid special defense because it does not allege that a plaintiff has no cause of action [e.g., infancy, statutes of limitation, fraud or duress], but only that the damages, if any, should be decreased." (Internal quotation marks omitted.) Id. Specifically with regard to foreclosure actions, courts have held that " [t]he concept of mitigation of damages is inapplicable to a mortgage foreclosure action where the damages consist of a sum certain, the repayment of which has been agreed to by the defendant maker of a promissory note." Rockville Bank v. Southington Hospitality Group, LLC, Superior Court, judicial district of Hartford, Docket No. CV-10-6012854, (May 12, 2011, Aurigemma, J.). This court agrees that mitigation of damages is not a proper special defense. The motion to strike is granted as to the fifth special defense.
Sixth Special Defense: Denial of Debt
The sixth special defense asserts: " The Defendant denies the Plaintiff's allegations as to the debt and calculation thereof and requests that the Plaintiff be required to produce witness testimony, subject to cross examination, as to the debt due and owing in lieu of any sworn financial affidavit that may be submitted by the Plaintiff." The plaintiff argues that this is not a special defense at all. The court agrees. Facts must be pleaded as special defenses " when they are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action." Almada v. Wausau Business Ins. Co., 274 Conn. 449, 456, 876 A.2d 535 (2005). Here, the defendant simply denies the facts alleged as to the debt. It does not allege payment that would reduce the debt, nor does it allege that the principal debt as claimed in the complaint is incorrect. Accordingly, the sixth special defense is stricken.
Counterclaim
The defendant's answer contains a six-count counterclaim. " [I]n assessing the legal viability of counterclaims to a foreclosure action, the court should employ the transaction test set forth in Practice Book § 10-10, and . . . although this test may require an assessment of whether the counterclaim in question relates to the making, validity or enforcement of the subject note and mortgage, there can be such a nexus even though the counterclaim may not directly attack the making, validity or enforcement of the mortgage and note which form the basis of the foreclosure complaint." CitiMortgage, Inc. v. Rey, supra, 150 Conn.App. 605-06. A " complete identity" of issues is not required; rather, " the claims must have a sufficient closeness that the trial of the complaint and counterclaim will not imperil judicial economy." Id., 606. " The transaction test is one of practicality, and the trial court's determination as to whether that test has been met ought not to be disturbed except for an abuse of discretion." (Internal quotation marks omitted.) Id., 607.
In this case, the individual counts are preceded by " general allegations" that are then expressly incorporated into each of the six counts. The defendant " generally alleges" that members of the plaintiff and defendant met in May 2015, and agreed to a modification of the note and mortgage. The material terms of the modification were put in writing by the plaintiff's member. At and following the meeting, the plaintiff's agents represented that the defendant was no longer in default. The defendant relied on that representation and did not seek legal advice on the repayment of the original note as modified or pursue other loss mitigation options. In June 2015, the defendant's member was incarcerated. The plaintiff instituted this foreclosure action rather than honoring its modification agreement.
An agreement modifying the note or mortgage that is at issue in the foreclosure action may, in certain instances, directly relate to the continued validity or enforcement of the original note and mortgage. See TD Bank, N.A. v. M.J. Holdings, supra, 143 Conn.App. 334 (alleged modification agreement directly attacked continuing validity or enforceability of subject mortgage); CitiMortgage, Inc. v. Rey, supra, 150 Conn.App. 608 (forbearance agreement entered into during foreclosure litigation sufficiently intertwined with allegations in complaint to satisfy transaction test). In this case, the general allegations do not, in and of themselves, constitute a counterclaim, but they do suggest the possibility that a sufficient nexus to the complaint exists to satisfy the transaction test. Whether the transaction test is satisfied depends on the specific allegations of each of the individual counts that incorporate these general allegations.
First Count: Breach of Contract
In the first count of the counterclaim, captioned breach of contract, the defendant further alleges that the May 2015 modification agreement was a contract for the repayment of debt. It modified the repayment terms and amounts owed under the original note and mortgage as modified. The defendant " agreed to perform its obligations" under the modification agreement, but the plaintiff breached the agreement by wrongfully instituting the foreclosure action, holding the defendant in default, and failing to apply the terms of the agreement to the defendant's account.
The plaintiff argues that the first count of the counterclaim is inadequate because it fails to allege all the requisite elements of a breach of contract claim and relies on conduct that does not relate to the making, validity or enforcement of the note or mortgage. The defendant asserts that its claim is adequately pleaded and has a sufficient relation to the making, validity or enforcement of the note and mortgage. The court agrees with the plaintiff that the count does not contain sufficient facts to assert a valid breach of contract claim.
" The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages." (Internal quotation marks omitted.) Chiulli v. Zola, 97 Conn.App. 699, 706-07, 905 A.2d 1236 (2006). In this case, the breach of contract count fails to identify the essential terms of the contract that allegedly modified the note and mortgage, and it fails to allege that the defendant actually performed its obligations under the modified agreement. In opposing the motion to strike, the defendant argues that the plaintiff prevented the defendant from performing its obligations, but that claim is not alleged in the counterclaim. Without identifying the essential terms of the alleged modification and without alleging performance by the defendant (or facts showing that the defendant was prevented from performing by the plaintiff), the defendant's breach of contract claim lacks essential allegations. Even construing it in the light most favorable to sustaining its sufficiency, the count fails to state sufficient facts to support a breach of contract claim.
Second Count: Promissory Estoppel
In the second count, captioned " promissory estoppel, " the defendant further alleges that the plaintiff promised that the defendant's attorney in fact, Andrew Marotta, could assume the mortgage; that the plaintiff would reduce the monthly payment and waive accrued interest; and that the defendant would no longer be in default. The defendant further alleges that the plaintiff should have reasonably expected that the defendant would change its financial position based upon the monthly payments due to the plaintiff every month, that the defendant would not pursue other avenues of loss mitigation, and that the defendant would not seek the advice of counsel. The defendant alleges that it justifiably relied on the plaintiff's promises and changed its position and was damaged as a result of its reliance on the plaintiff's promises.
The plaintiff argues that the second count should be stricken because it alleges a written agreement modifying the original note and mortgage, which is inconsistent with a promissory estoppel claim. The defendant argues that it has pleaded the essential elements of a claim for promissory estoppel. The court agrees with the defendant.
A claim of promissory estoppel requires proof of two essential elements: " the party against whom estoppel is claimed must do or say something calculated or intended to induce another party to believe that certain facts exist and to act on that belief; and the other party must change its position in reliance on those facts, thereby incurring some injury." (Internal quotation marks omitted.) Abbott Terrace Health Ctr., Inc. v. Parawich, 120 Conn.App. 78, 86-87, 990 A.2d 1267 (2010). Promissory estoppel is generally pleaded as an alternative to a contract claim when there is a question as to whether the alleged contract was supported by consideration. Our Supreme Court " has recognized . . . the development of liability in contract for action induced by reliance upon a promise, despite the absence of common-law consideration normally required to bind a promisor; see Restatement (Second), Contracts § 90 (1973) . . . Section 90 of the Restatement Second states that under the doctrine of promissory estoppel [a] promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise." (Citations omitted; internal quotation marks omitted.) D'Ulisse-Cupo v. Board of Directors of Notre Dame High School, 202 Conn. 206, 213, 520 A.2d 217 (1987).
In this case, the defendant's second counterclaim alleges that the plaintiff promised to allow the defendant's attorney in fact to assume the obligations of the defendant's note and mortgage; that the plaintiff reasonably should have expected that the defendant would change its financial position as a result of the promise; that the defendant did rely on the plaintiff's promise and changed its financial position as a result, and did not seek legal counsel or further loss mitigation options as a result; and that injustice can only be avoided by enforcement of the promise. The defendant argues that it does not rely on the enforceability of the alleged modification agreement in this count, but bases the count instead on its detrimental reliance on the plaintiff's clear promise. For the purposes of a motion to strike, the court must construe the allegations of the counterclaim in the light most favorable to the pleader. Viewed in that light, the court concludes that the defendant has adequately alleged the elements of promissory estoppel, and because the subject of the promise is the plaintiff's promise to accept some form of substituted performance of the note and mortgage at issue in this case, it has a sufficient nexus to the plaintiff's complaint to satisfy the transaction test of Practice Book § 10-10. Accordingly, the motion to strike is denied as to count two of the counterclaim.
Third Count: Negligent Misrepresentation
The third count of the counterclaim incorporates the general allegations and further alleges that the plaintiff represented to the defendant that it was allowing the defendant's attorney in fact to assume the mortgage; that it was reducing the monthly payment and waiving accrued interest; and that the defendant would no longer be in default. The defendant further alleges that the plaintiff knew or should have known that its representations were false when they were made; that the defendant reasonably relied on the representations and suffered a loss thereby.
The plaintiff admits that the third counterclaim " alleges the required buzz words" for a negligent misrepresentation claim but argues that the claim is legally insufficient because it relates to representations made after the defendant was already in default of the original note and mortgage. In support of that argument, it relies on Webster Bank v. Linsley, Superior Court, judicial district of New Haven at Meriden, Docket No. CV 97-0260406S, (August 14, 2001, Booth, J.), which held that counterclaims in foreclosure actions were required to relate directly to the making, validity or enforcement of the original note or mortgage. The subsequent Appellate Court decision in CitiMortgage, Inc. v. Rey, supra, 150 Conn.App. 608, took a broader view of the transaction test of Practice Book § 10-10 and held that a forbearance agreement allegedly entered after the defendant defaulted on the original note and mortgage modified the terms of the original note and mortgage and should have restrained the plaintiff's pursuit of foreclosure. The court concludes, in light of CitiMortgage, Inc. v. Rey, that the defendant has adequately pleaded a negligent misrepresentation counterclaim with a sufficient nexus to the mortgage and note at issue as to withstand a motion to strike. The motion is therefore denied as to the third count of the counterclaim.
Fourth Count: Fraudulent Misrepresentation
In the fourth count, the defendant incorporates the general allegations and further alleges that the plaintiff falsely represented that it was allowing the defendant's attorney in fact to assume the mortgage; it was reducing the monthly payment and waiving accrued interest; and the defendant would no longer be in default and would keep her home. The defendant further alleges that the representations were made to induce the defendant to forego seeking counsel or exploring other loss mitigation options to address a foreclosure; that the defendant relied upon the representation in that it did not seek advice of counsel or pursue other loss mitigation options, and was injured thereby.
As with the third count, the plaintiff admits that the defendant has alleged the proper " buzz words" for a claim of fraudulent misrepresentation but argues that it is insufficient for the same reason advanced with respect to the negligent misrepresentation count. The court concludes, as with the third count, that the defendant has adequately alleged a fraudulent misrepresentation claim with a sufficient nexus to the original note and mortgage to withstand a motion to strike. See CitiMortgage, Inc. v. Rey, supra, 150 Conn.App. 608.
Fifth Count: Negligent Infliction of Emotional Distress
In the fifth count, the defendant incorporates the general allegations and further alleges that the plaintiff's conduct created an unreasonable risk of causing the defendant emotional distress, that the plaintiff should have foreseen that its conduct would cause the defendant emotional distress as it was aware that the defendant was going to be incarcerated and it was imperative that she work out a deal about the underlying note and mortgage. The defendant also alleges that the plaintiff's conduct created a reasonable fear and distress in the defendant that was severe enough that it might result in illness or bodily harm, and that the defendant suffered damages as a result.
As the plaintiff correctly argues, this count must be stricken because the sole defendant/counterclaimant is a limited liability company, not its member. Indeed, its member Linda Marotta is not a party to the action. It is obvious that a limited liability company is not a natural person and therefore cannot experience emotional distress. The motion to strike the fifth count of the counterclaim is therefore granted.
Sixth Count: Breach of the Covenant of Good Faith and Fair Dealing
The sixth count of the counterclaim incorporates the general allegations and further alleges that the plaintiff wilfully failed to adhere to the May 2015 modification agreement in an effort to take the property while the defendant was incarcerated. As a result of the plaintiff's " bad faith breach, " the defendant incurred damages.
The plaintiff cites to cases that have declared that an alleged breach of the covenant of good faith and fair dealing is not a valid counterclaim to a foreclosure complaint because such claims do not attack the making, validity or enforcement of the note or mortgage. See, e.g., Fidelity Bank v. Krenisky, supra, 72 Conn.App. 716-17. However, the Appellate Court's decision in CitiMortgage, Inc. v. Rey, supra, 150 Conn.App. 608-09, takes a broader view of the transaction test of Practice Book § 10-10 and indicates that a claim having a sufficient nexus to the original note and mortgage can be asserted as a counterclaim in a foreclosure action. More recently, in applying the principles discussed in CitiMortgage, Inc. v. Rey, the Appellate Court upheld a trial court's decision rejecting a counterclaim sounding in the breach of the covenant of good faith and fair dealing because the allegations at issue in that case concerned allegedly improper conduct in the court's foreclosure mediation program. See U.S. Bank National Association v. Sorrentino, 158 Conn.App. 84, 97, 118 A.3d 607, cert. denied, 319 Conn. 951, 125 A.3d 530 (2015).
The allegations in the sixth count of the counterclaim do not sufficiently establish a nexus to the plaintiff's complaint. Unlike the promissory estoppel and misrepresentation counts, the sixth count relies only on the facts asserted in the general allegations, which do not include specific allegations about representations made by the plaintiff to agree to the assumption of the mortgage by the defendant's attorney in fact. In the absence of factual allegations showing that the plaintiff had agreed to a specific modification or forbearance agreement that it then did not honor, the sparse " general allegations" are insufficient to show the required nexus to the original note or mortgage. For this reason, the motion to strike the sixth count of the counterclaim is granted.
Alternative Motion to Sever Counterclaim
The plaintiff moves, in the alternative, to sever any counts of the counterclaim that survived the motion to strike because they are primarily legal, not equitable, and are triable to a jury rather than the court. The defendant argues, in response, that the counterclaim arises out of an alleged modification of the note and mortgage that the plaintiff seeks to foreclose. The court agrees with the defendant. The counts of the counterclaim that survive are those that the court has held to have a nexus to the plaintiff's complaint because they involve alleged promises or representations regarding the plaintiff's enforcement of the note and mortgage. No jury claim has been advanced at this time. The court declines to sever the counterclaim at this time, without prejudice to the plaintiff's ability to renew the motion to sever if a jury claim is filed. This is not meant to suggest that equitable and legal claims cannot be tried in one proceeding, with the court deciding the equitable claims and the jury deciding the legal claims. It is, rather, that a determination to sever would be premature at this time and should be considered, if the motion is renewed, by the judge who is assigned to try the case.
Conclusion
For the reasons stated above, the motion to strike is granted as to all the special defenses and as to the first, fifth, and sixth counts of the counterclaim. The motion to strike is denied as to the second, third, and fourth counts of the counterclaim. The alternative motion to sever the counterclaim from the foreclosure action is denied without prejudice.