Opinion
No. CV 00-0596398
August 17, 2006
MEMORANDUM OF DECISION
This is an action commenced by Bank of America against the defendant, Robert E. Coleman, Jr., to collect $161,145.38 due on a note and fixed loan agreement executed by the defendant on November 18, 1993. The note was originally payable to Shawmut Bank. Bank of America f/k/a Fleet National Bank, is the successor in interest to Fleet Bank, N.A., which is the successor by merger to Shawmut Bank. In his answer dated December 1, 2005, the defendant denied the plaintiff's allegations that the loan was in default and asserted the special defenses of: (1) payment; (2) release; and/or (3) accord and satisfaction. The defendant attached to his answer letters sent by the plaintiff to the defendant stating that the loan had been paid in full on September 28, 1999 followed by notice that the security had been released. In its reply to the special defenses, the plaintiff claimed that the letters were sent by mistake. Trial was held on June 21, 2006 with post-trial briefs submitted by both parties on July 7, 2006.
I.
Although a good deal of attention was given to the failure of the plaintiff to produce the original promissory note and the authentication of Fleet Bank as holder of the note, the defendant's answer and the letter of Mr. Shipman, Attorney for defendant, dated June 17, 1999, acknowledging the indebtedness, together with a copy of the note is sufficient to establish defendant's obligation to Fleet.
To make out its prima facie case, the plaintiff had to prove by a preponderance of the evidence that it was the owner, or holder, of the note and that the defendant had defaulted on the note. See Webster Bank v. Flanagan, 51 Conn.App. 733, 750-51, 725 A.2d 975 (1999). In Cadle Co. v. Errato, 71 Conn.App. 447, 458-59, CT Page 14521 802 A.2d 887, cert. denied, 262 Conn. 918, 812 A.2d 861 (2002), the Appellate Court not only stated that "the failure to present the original [does] not preclude a finding that the plaintiff [is] a holder in due course of the note," it also noted that "this court has held on previous occasions that the production of a photocopy of a note, rather than the original, may suffice to establish a plaintiff's status as a holder in due course."
When assessing whether the plaintiff met his burden with regard to possession of the note, the Appellate Court not only looked at the evidence introduced by the plaintiff, it also evaluated the defendant's failure to challenge or contradict the terms contained in the copy of the note or to present any evidence casting doubt on the plaintiff's status as a holder in due course. Id., 458. In the present case, the defendant similarly failed to challenge the terms contained in the copy of the note introduced or to present evidence demonstrating that the plaintiff was not in possession of the note.
II.
Practice Book § 10-50 provides that payment and release are special defenses that must be specially pleaded. In any special defense, the burden of proof generally rests with the defendant. Lumbermens Mutual Casualty Co. v. Scully, 3 Conn.App. 240, 245, 486 A.2d 1141 (1985). The defendant contends that the plaintiff's letters confirming that the loan was paid in full on September 28, 1999, and the subsequent signed release of the loan collateral are prima facie evidence that the loan was either 1) paid, 2) released, or 3) that the parties negotiated an accord and satisfaction.
Ordinarily, canceled checks, signed receipts, or the testimony of the debtor are offered to prove that a debt has been paid. Here, however, no such evidence was presented. In fact, in the present case the defendant did not appeal as a witness and therefore never stated that he paid the loan, he merely asserts that the plaintiff sent a letter stating that the loan was paid in full. This letter standing alone is insufficient evidence to make out a conclusive case of payment.
III.
Defendant argues nevertheless that the communications sent by plaintiff's predecessors prove his defense of payment.
A closer look at this evidence indicates that on September 28, 1999, a printed unsigned letter was sent by Fleet to defendant to "confirm that the above referenced installment loan has been paid in full." On September 30, 1999 Fleet sent defendant a signed letter stating that the security interest on defendant's automobiles, securing the loan, had been "hereby released and discharged."
Plaintiff claims that these communications were sent out by mistake. In evidence is an internal bank document dated June 5, 2000, authorizing litigation to collect the balance due, explaining that the loan was originally "a business loan converted to a personal loan" and booked on the consumer loan system with a maturity date of June 18, 1999. In September 1999 this loan was transferred to the Managed Asset Division "due to delinquent payment and maturity," and set up on the Commercial Loan System. "In error, the Bank's consumer department sent a paid in full notice to the Borrower, when the loan was converted to the commercial loan system."
Moreover, the Bank's records in evidence indicate a balance of $161,145.38 due through at least March 18, 2002, with regular notices sent to defendant though that date.
On November 10, 1999, Matthew Hyland, the managed asset officer for the bank, made a written request to hire legal services to collect the balance because "Borrower received notice from the Bank that this loan was paid in full — Notice was sent in error. Borrower being uncooperative."
General Statutes § 42a-3-604(a) provides: "A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument (i) by an intentional voluntary act, such as surrender of the instrument to the party, destruction, mutilation, or cancellation of the instrument, cancellation or striking out of the party's signature, or the addition of words to the instrument indicating discharge, or (ii) by agreeing not to sue or otherwise renouncing rights against the party by a signed writing." However, the plaintiff cites SKW Real Estate, Ltd. Partnership v. Gallicchio, 49 Conn.App. 563, 574, 716 A.2d 903 (1998), to argue that the letters, which were sent to the defendant in error, have no legal effect because a promissory note is a written contract and release from a contract requires mutual agreement and consideration.
Although, under § 42a-3-604(a)(i), a clerical error does not have the legal effect of canceling an existing debt or discharging an instrument; Guaranty Bank Trust Co. v. Dowling, 4 Conn.App. 376, 379, 494 A.2d 1216 (1985); our Appellate Court has held that a letter sent by mistake can in some circumstances discharge a debt under 42a-3-604(a)(ii) provided that the document constitutes a "signed" writing. Franklin Credit Management Corp. v. Nicholas, 73 Conn.App. 830, 842 (2002), cert. denied, 262 Conn. 937 (2003).
In Franklin, the Appellate Court held that an IRS form 1099-C, notice of debt cancellation, that was mistakenly sent to the defendant constituted a signed writing discharging the defendant's debt under § 42a-3-604(a)(ii). In that case, defendant and his wife executed and defaulted on a note in favor of the plaintiff and after the wife individually filed a petition in bankruptcy listing the note as a debt to be discharged. The plaintiff bank mistakenly issued the IRS form 1099-C to both the wife and the defendant notifying them that it had discharged the debt. The defendant subsequently reported the cancellation of the debt in his 1995 income tax returns and incurred tax consequences. The court found that the form was "signed" and that the form was prima facie evidence that the debt had been discharged because "[t]he form is used in the ordinary course of business to inform debtors of the cancellation of debt."
In the present case, although the letters may be found to be signed under § 42a-1-201(39), they do not provide convincing evidence that the debt was discharged. The first letter states: "This letter will confirm that your above referenced installment loan has been paid in full, and we would like to take this opportunity to say `Thank You.'" The letters releasing the loan security state: "This is to certify that the above stated lienholder's security interest in the above described vehicle has been fully satisfied, and further states that the lien or other encumbrance is hereby released and discharged." (Emphasis added.) Because these letters, unlike the 1099-C in Franklin, referred to the payment and satisfaction of the note as opposed to its discharge, they fail to meet the requirements of 42a-3-604(a)(ii).
IV. There is ample evidence in this case to persuade this court that the Bank made a mistake in sending out its discharge letters; not only were there repeated subsequent notices indicating that the balance claimed was outstanding, but not a scintilla of evidence was advanced by defendant substantiating any payment or other consideration justifying such discharge. Defendant in no way relied on the notice of discharge as did the defendant in Franklin, supra.It is concluded that plaintiff has proven that its predecessor's loan to defendant has not been paid, that the notices of discharge were sent by mistake and that the defendant is indebted to the plaintiff in the amount of $161,145.38.
Judgment is entered for the plaintiff.