Opinion
No. CV08-5011625S
May 5, 2009
MEMORANDUM OF DECISION RE PETITION FOR DISCHARGE OF MORTGAGE
This matter arises out of a foreclosure of mortgage action brought by the plaintiff, New England Home Buyers, LLC, hereinafter known as New England against the defendants, David and Nancy Rossi hereinafter known as Rossi and DMR Home Builders, LLC, hereinafter known as DMR. The foreclosure action was commenced on December 23, 2008, to foreclose a note and mortgage executed by the defendants on October 29, 2007, in the amount of ($60,000.00) Sixty Thousand Dollar's due and payable in full on October 29, 2008. As security for the note, the defendant DMR executed a mortgage on real property located at 145 Highland Ave., Waterbury Connecticut.
D.M.R. Home Builders, LLC is a Connecticut Limited Liability Company, whose members are the co-defendants David and Nancy Rossi.
On April 1, 2009, pursuant to § 49-13 of the Connecticut General Statutes, the defendants filed a Petition for Discharge of Mortgage, along with a memorandum of law in support thereof dated April 21, 2009. The plaintiff filed an objection to the discharge dated April 8, 2009 and a supplemental objection dated April 15, 2009. On April 28, 2009, the court heard oral argument on these motions. As part of the April 28, 2009 hearing, the parties filed a joint stipulation of facts.
This application was filed in the foreclosure action, along with a counterclaim and special defenses. It was not brought as a separate action.
BACKGROUND
On or about April 25, 2005, David and Nancy Rossi formed D.M.R. Home Builders, LLC, a Connecticut Limited Liability Company, with a place of business at 100 Idlewood Road, Wolcott, Connecticut. On May 26, 2006, DMR acquired title to 145 Highland Ave. Waterbury, Connecticut for the purpose of constructing a single family dwelling. In May of 2006, the Rossi's occupied 100 Idlewood Road as their principal residence. In May 2007, the Rossi's were insolvent and 100 Idlewood was being foreclosed upon by the first mortgage holder Bank of New York as Trustee for Encore Credit Receivables. At that time, the property at 145 Highland Ave., Waterbury was debt free. In October 2007, the Rossi's, through a third party Brad Michaels, a Mortgage broker put them in contact with a Paul Kaplan, who is believed to be the sole member of New England Home Buyers, LLC. At that time, the Rossi's needed approximately $25,000.00 to reinstate their mortgage with the Bank of New York. Mrs. Rossi then met with Mr. Kaplan at 145 Highland Ave., and as a result of that meeting, New England agreed to provide financing to the Rossi's. The Rossi's understanding from Mr. Michaels was that the loan would be for $45,000.00 at an annual interest rate of (12%). The law firm of Palumbo DeLaura, 258 Chapel Street was engaged by New England to prepare the documents. On October 29, 2007, the closing of this loan took place at the office of Palumbo DeLaura. The Rossi's were unrepresented at this closing. At that time, the Rossi's were presented with a note reflecting a principal amount of $60,000.00. Out of this loan, a loan origination fee of Six (6) points ($3,600.00); A Mortgage Brokers fee of six (6) points ($3,600.00); one (1) years prepaid interest at Twelve (12%) ($7,200.00); an Attorneys fee of ($1,000.00); together with costs related to title searches, title insurance and recording fees were deducted. The net check to the Rossi's was in the amount of $45,020.00. The note was executed by the Rossi's and DMR. DMR at that time executed a mortgage to New England upon the property at 145 Highland Ave. Waterbury, Connecticut which is recorded in Volume 6252 at page 309 of the Waterbury Land Records. The Rossi's immediately paid the Bank of New York as Trustee the sum of approximately $26,000.00 to reinstate the mortgage on their principal residence. The note and mortgage on 145 Highland Avenue was due and payable in full on October 29, 2008. On October 29, 2008, the Rossi's defaulted on the note as the property at 145 Highland Ave., which had been completed was still unsold. On or about November 20, 2008, by Writ, Summons and Complaint, New England commenced this foreclosure action.
On March 19, 2009, the defendants filed a counterclaim, an answer and several special defenses in the foreclosure action wherein the defendants claim that the underlying loan was usurious, commercially unconscionable, and the product of fraud in violation of state and federal statutes. On April 10, 2009, the defendants filed amended special defenses.
On March 19, 2009, counsel for the defendants sent a letter to counsel for the plaintiff requesting a written payoff statement of this loan. (Exhibit C of the stipulation of facts). This letter also indicates that this request in no way waives any of the defendant's rights, either express or implied. On March 25, 2009, counsel for the plaintiff provided a written response to the defendants, wherein a payoff figure ($67,210.42) was provided. (Exhibit D of Stipulation.) On March 31, 2009, counsel for the defendants sent a check in the requested payoff amount and requested a release of the mortgage. In this communication counsel for the defendants again reiterated the defendant's position that this loan was a product of fraud and that "nothing herein shall be construed as an admission or waiver of my client's rights all of which are expressly reserved." (Exhibit E of Stipulation.) Plaintiff's counsel, upon receipt of this letter and after consulting with his client, refused the tender and returned the check to defendant's counsel. On April 1, 2009, defendants' counsel filed the pending Petition for Discharge. It should be noted that on March 30, 2009, DMR, by warranty deed, sold the property at 145 Highland Ave. to Annette M. McLaren for ($155,000.00) (Plaintiff's Exhibit A.)
LAW AND DISCUSSION
The defendants' argument is that pursuant to Connecticut General Statute § 49-8(a)(1) (2) which provides: "The mortgage or a person authorized by law to release the mortgage shall execute and deliver a release to the extent of the satisfaction tendered before or against receipt of the release: (1) Upon satisfaction of the mortgage; (2) upon a bona fide offer to satisfy the mortgage in accordance with the terms of the mortgage deed upon execution of a release. In relevant part, § 49-10a of the Connecticut General Statutes provides that "(a) A mortgagee shall, upon written request of the mortgagor or the mortgagor's attorney or other authorized agent provide a payoff statement or reinstatement payment statement in writing to the person requesting the payoff statement or reinstatement payment statement on or before the date specified in the request, provided such request date is at least seven business days after the receipt of the written request." The defendant's position is that by tendering a check in the full amount requested, they are entitled to a release of the mortgage.
The plaintiff in its objection raises six defenses to the petition. For the purpose of deciding the issue in question, the court needs only address three of these defenses. The plaintiff's first objection is that the defendants do not have standing to request a release of the mortgage. The plaintiff's argument is that pursuant to General Statute § 49-13(a)(E)(3) which reads in pertinent part "the owner of the property, or the equity in the property, may bring a petition to the superior court for the judicial district in which the property is situated, setting forth the facts and claiming a judgment as provided in this section" precludes the defendants from bringing this petition. Since the petition was filed on April 1, 2009, two days after the defendants sold the property on March 30, 2009, they are no longer the owners of the property, and thus, the court does not have subject matter jurisdiction to hear the defendants' petition. It is well-established law that "[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." Esposito v. Specyalski, 268 Conn. 336, 348, 844 A.2d 211 (2004). "Standing is established by showing that a party claiming it is authorized by statute to bring suit or is classically aggrieved . . . The Fundamental test for determining aggrievement encompasses a well-settled twofold determination: first, the party claiming aggrievement must successfully demonstrate a specific, personal and legal interest in [the subject matter of the challenged action], as distinguished from a general interest, such as is the concern of all members of the community as a whole. Second, the party claiming aggrievement must successfully establish that this specific personal and legal interest has been specially and injuriously affected by the [challenged action] . . . Aggrievement is established if there is a possibility, as distinguished from a certainty, that some legally protected interest . . . has been adversely affected." May v. Coffey, 291 Conn. 106, 112 (2009).
The court rejects the plaintiff's argument and finds the defendants do have standing to bring this petition. The court finds that at the time the defendant, DMR requested the payoff figure and release, it was the owner of the property and more importantly, the defendants are aggrieved due to the fact DMR gave a warranty deed to the eventual buyer of the property it has a legally protected interest, that is, to provide clear and marketable title to the property, and if DMR is unable to provide clear title, DMR would be subject to litigation.
The plaintiff's second argument is that pursuant to § 49-13(b) "the petition shall be served upon all persons interested in the mortgage, attachment, lis pendens or other lien in the manner provided by law for the process of civil actions." The plaintiff's position is that any petition for a discharge must be brought as a separate action and service of process must be accomplished in accordance with General Statute § 52-45a. That, the failure to properly serve the petition deprives the court of jurisdiction. Counsel for the defendants indicated during argument that it was his original attention to bring the petition as a separate action. However, when he arrived at the Waterbury clerk's office to file the petition he, after consulting with the Deputy Clerk, was told to file it in the pending action, since there was already a pending case involving the same parties. Though, this may have not been the correct procedure in which to bring this matter before the court, the court finds that in the interest of judicial economy that this procedure was not improper and the court has jurisdiction.
The plaintiff's third and more persuasive argument deals with the conditions placed upon the release of the mortgage by the defendants. As indicated, the defendants' position is that once they tendered full payment, they are entitled to a release of the mortgage. The plaintiff, however, points to the language of the promissory note (Exhibit A of the stipulation) where on page 2, it reads; "The borrower further agrees to pay on demand, in addition to the principal sum and interest, any taxes or duties assessed upon this Note or the debt evidenced hereby and to pay all costs and expenses, including without limitation, reasonably attorneys fees incurred by the holder hereof in any proceeding for collection of the debt, any foreclosure of any mortgage or security agreement, or in any litigation or controversy arising after default from or connected with the Note and any mortgage, security agreement or pledge agreement securing the same." The plaintiff's position is that since it is clear from the correspondences from defendants' counsel that the defendants intend to pursue the counterclaim and special defenses. That, as a result the plaintiff will continue to incur legal fees in defending the counterclaim and special defenses which "is a controversy arising from or connected with the note and mortgage" and that these costs are recoverable in accordance with the terms of the note and mortgage. The plaintiff further argues that by releasing the mortgage they will be giving up the only security they have to insure full payment of the debt.
The court finds that the law in Connecticut is clear on this issue, in Hartford Federal Savings and Loan Ass'n. v. Tucker, 196 Conn. 172, 181, 491 A.2d 1084, cert. denied, 474 U.S. 920, 106 S.CT. 250, 88 L.Ed.2d 258 (1985), our Supreme Court stated that "[a] tender must be unconditional and unqualified" in Tucker where the tender was for less than the amount owed, the court held the mortgagee was not required to release the mortgage. Id. In Lind Larsen v. Fleet Nat. Bank of Connecticut, 84 Conn.App. 1, 12-13, 852 A.2d 799 (2004), our Appellate Court, quoting from New England Mortgage Realty Co. v. Rossini, 121 Conn. 214, 219, 183 A. 744 (1936), held that it is the law in this jurisdiction that "inherent in a mortgage is the right of the mortgagee to insist upon full payment before giving up his security." The court finds this language to be controlling on the issues presented here. Since the defendants tender was qualified and conditional, the plaintiff was within its rights to reject the tender by the defendants. The court finds the plaintiff's action in refusing the tender of payment did not violate Connecticut General Statute § 49-8. The court having found for the plaintiff on this ground, does not need to address the other defenses put forth by the plaintiff nor does the court make any findings as to the merits of any parties' other claims.
Accordingly, the defendants' petition to discharge the mortgage on 145 Highland Avenue, Waterbury, Connecticut is denied.