Opinion
No. CV 106002453
October 4, 2011
MEMORANDUM OF DECISION RE MOTION TO STRIKE DEFENDANTS' COUNTERCLAIM (#157)
The plaintiff in the above-entitled matter, Connecticut Housing Finance Authority (hereinafter "plaintiff"), has filed a motion to strike the counterclaims of the appearing defendants, Luis R. Cedeno and Damel Cedeno (hereinafter "defendants"). The parties filed briefs and argument was heard by the court on August 15, 2011, at a short calendar hearing.
BACKGROUND
By note dated June 27, 2003 (hereinafter "the note"), Grised Ramos-Cedeno promised to pay order of First Eastern Mortgage Corporation the sums of one hundred fifty-five thousand three hundred dollars ($155,300.00) with interest. The note was secured by a Mortgage Deed (hereinafter "the mortgage") to First Eastern Mortgage Corporation for 89 Garfield Avenue, New London, Connecticut. First Eastern Mortgage assigned (hereinafter "the assignment") the mortgage to Connecticut Housing Finance Authority on January 13, 2010, (recorded January 13, 2010 in the New London land records). Grised Ramos-Cedeno died on September 4, 2005, naming her spouse, Luis R. Cedeno, a beneficiary and executor of her estate. The defendants have defaulted in their obligation to pay installments of principal and interest due under the note. As a result of the defendants' default, the plaintiff has exercised its opinion to declare the entire balance due on this note.
The defendants have been provided notice of their default, in accordance with the note and have neglected or refused to cure the default. This case has been in mediation since April of 2010, including an extension of mediation period in February of 2011. The defendants in this matter did not file an answer and counterclaims until April 25, 2011. The mediation period was terminated shortly thereafter on May 13, 2011.
MOTION TO STRIKE
A motion to strike is the proper vehicle to contest the legal sufficiency of the allegations of any complaint, counterclaim or cross complaint, or of any prayer of relief. Practice Book § 10-39; Eskin v. Castiglia, 253 Conn. 516, 522-23, 753 A.2d 927 (2000). "Whenever any party wishes to contest . . . the legal sufficiency of any prayer for relief in any . . . complaint, counterclaim or cross complaint . . . that party may do so by filing a motion to strike the contested pleading or part thereof." Practice Book § 10-39(a). "The function of a motion to strike is to test the legal sufficiency of a pleading; it admits all facts well pleaded." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1977). "It does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 588, 693 A.2d 293 (1997). "The role of the trial court, [then], is to examine the [pleading], construed in favor of the [pleading party], to determine whether the [pleading party has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Co., supra, 242 Conn. 378. Conclusions of law, absent sufficient alleged facts to support them, are subject to a motion to strike. Fortini v. New England Log Homes, Inc., 4 Conn.App. 132, 135-36, 492 A.2d 545, cert. denied, 197 Conn. 801, 495 A.2d 280 (1985).
"Practice Book § 10-10 allows a defendant to file a counterclaim against any plaintiff provided that each such counterclaim . . . arises out of the transaction or one of the transactions which is the subject of the plaintiff's complaint. Under that test, CUTPA counterclaims to foreclosure complaints have been disallowed because they do not relate to the making, validity or enforcement of the note and mortgage, and, therefore, do not arise out of the same transaction as the complaint." (Internal quotation marks omitted.) JP Morgan Chase v. Gilmore, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 04 4001641 (October 25, 2006, Jennings, J.). Allegations which relate "entirely to [the acts] and procedures of the plaintiff after the execution of the note and mortgage rather than the making, validity or enforcement of the note and mortgage" do not arise from the same transaction as the complaint and are invalid as counterclaims under Practice Book § 10-10. Ocwen Federal Bank FSB v. Stawski, Superior Court, judicial district of New London, Docket No. CV 05 52683 (April 25, 2000, Martin, J.). It is within the court's discretion to conclude that plaintiff's conduct was not part of the same transaction as alleged in the complaint. JP Morgan Chase v. Rodrigues, 109 Conn.App. 125, 135, 952 A.2d 56 (2008) (striking a CUTPA counterclaim in a foreclosure action). Typically, counterclaims in foreclosures are raised by the defendant-borrower and assert claims in an effort to thwart the foreclosure of the mortgage and the loss to the defendant of its property. In the instant case, however, the counterclaims being raised against the plaintiff are asserted by heirs and/or devisees of the mortgage who were not parties to the underlying transaction between the plaintiff and the defendant-borrower and who have failed to pay the monthly mortgage payments.
"In a foreclosure action, the relevant factors for a court to consider in determining whether the [aforementioned] `transaction test' has been met by the counterclaim includes: (1) whether the counterclaim is based on factors outside of the note or mortgage; (2) whether different issues of fact and law are presented by the complaint and counterclaim; and (3) whether separate trials would involve a substantial duplication of effort." (Internal quotation marks omitted.) Eastern Federal Bank v. Krondes, Superior Court, judicial district of New London, Docket No. CV 07 5007447 (September 28, 2008, Martin, J.).
ANALYSIS
The defendants in the first count of their counterclaim contend that the plaintiff violated CUTPA under General Statutes § 42a-110b. The defendants admit in their brief that they are not signatories of the note and, therefore, are not parties to the underlying transaction. Their counterclaims clearly fall outside of the transaction. The defendants, however, claim that they have been parties to the plaintiff's enforcement of the note and mortgage citing Liberty Bank v. New London Limited Partnership, Superior Court, judicial district of New London, Docket No. CV 06 4005236 (May 1, 2007, Devine, J.) ( 42 Conn. L.Rptr 326). The defendants contend that the court should consider the mortgagee's conduct throughout the course of the parties relationship. They further claim that the post-execution conduct of the plaintiff mortgagee meets the "cigarette rule" test under CUTPA. The cigarette rule lays out three criteria:
(1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise whether, in other words, it is within the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive or unscrupulous; (3) whether it causes substantial injury to consumers [competitors or other business]. Bank of America, NA. v. Groton Estates LLC, Superior Court, judicial district of New London, Docket No. CV 09 6001697 (July 13, 2010, Devine, J.).
"All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because the degree to which it meets one of the criteria or because to a lessor extent it meets all three. Thus violation of CUTPA may be established by showing either an actual deceptive practice or a practice amounting to violation of public policy." Id.
The plaintiff contends that the defendants' counterclaim does not contain the necessary connection to the validity and/or enforcement of the note. They are not signatories to the note and, therefore, are not party to the underlying transaction upon which the foreclosure action is based. The plaintiff further contends that the counterclaim for CUTPA is based upon allegations relating to the mediation process and, therefore, fall outside of the enforcement of the note and mortgage.
It is important to consider the fact that defendants, through no fault or conduct of the plaintiff, have failed to make the mortgage payments pursuant to the note and mortgage deed. The plaintiff has a right to foreclose on the mortgage upon default and compliance with the notice requirements. There is no law requiring the plaintiff to waive its rights under the mortgage and modify the loan. The essence of the defendants' claim is that the plaintiff has failed to negotiate during the mediation process.
The defendants rely on the equitable defenses raised in Liberty Bank v. New London Limited Partnership, supra, 43 Conn. L.Rptr 326. In that case, the court denied the plaintiff, Liberty Bank's, motion for summary judgment. The court found that there was a genuine issue of material fact as to the defendant mortgagor's claim of equitable estoppel and waiver. In Liberty Bank, the court found documentary evidence was submitted by the defendant concerning alleged conduct of plaintiff. Approximately (20) monthly payments were accepted by the plaintiff over a three-year period. The defendant, with knowledge by the plaintiff, made a $2,500,000 investment of capital to renovate and improve the subject property which raised issues of fact supporting the special defenses of equitable estoppel and/or waiver.
The facts of the present controversy are readily distinguishable from the Liberty Bank case. The defendants are not alleging that the plaintiff induced them by accepting late payment, nor is there any claim of capital improvements increasing the value of the house in question. The defendants failed to make the monthly mortgage payment and do not contest that the mortgage granted to the decedent is in default permitting the plaintiff to commence this foreclosure action. The defendants' counterclaims deal with alleged conduct during the mediation process. The defendants have failed to cite any case that the plaintiff is duty bound to modify, refinance and/or enter into a forebearance agreement under statutory and/or common law. The defendants are the ones who failed to make the mortgage payment. While it is true that the plaintiff may not invoke a "due-on-sale" clause and accelerate the loan under federal law ( 12 U.S.C. § 1701j-3(d)), the plaintiff has the legal right to foreclose upon default in payments by said heirs. The court does not find a violation of public policy by the plaintiff in the present controversy. The plaintiff has proceeded to foreclose pursuant to the terms of the mortgage note and deed.
SECOND COUNT
In its motion to strike the defendants' second counterclaim, the defendants contend that a contractual relationship has resulted from the conduct of the parties subsequent to the death of the mortgagor. The plaintiff alleges that the defendants have failed to plead sufficient facts to support the creation of a contractual relationship between the plaintiff and the defendants. The defendants allege in their counterclaim that Luis Cedeno, as a beneficiary, spouse and executor of the will of the decedent wife, made mortgage payments for four years under the terms and conditions of the mortgage note and deed. The defendants claim that by accepting the payments it, in fact, accepted the defendant, Luis Cedeno's, assumption of his wife's loan and further waived its right to object to an assumption of the loan assumed.
While defendant, Luis Cedeno, in fact, assumed the loan executed by his wife, he failed to make payment in accordance with its terms. The defendant has again failed to cite any statutory and/or common law forbidding the defendant to foreclose. The defendant has failed to allege a mutual understanding of the parties resulting in an enforceable contract. If there is no meeting of the minds, no contractual relationship exists. Geary v. Wentworth Labs, Inc., 60 Conn.App. 622, 627, 760 A.2d 969 (2000).