Opinion
FSTCV095011591S
07-08-2016
Residential Funding Company, LLC v. Thomas J. LaCasse
UNPUBLISHED OPINION
MEMORANDUM OF DECISION ON PLAINTIFF'S MOTION TO STRIKE DEFENDANT'S AMENDED THIRD SPECIAL DEFENSE DATED MAY 4, 2016 (#342.00)
Kevin Tierney, Judge Trial Referee.
This is a contested residential foreclosure based on a $650,000 Weston, Connecticut first mortgage dated January 30, 2006. The instant Motion to Strike addresses the defendant's Third Special Defense dated February 8, 2016 (#335.00).
The court has applied the general rules regarding decisions on motions to strike without the need to restate those rules in this memorandum of decision. Vossbrinck v. Accredited Home Lenders, Inc., Superior Court judicial district of Waterbury at Waterbury, Docket No. CV 12-5016343 S, (December 1, 2015, Taylor, J.); Webster Bank v. Linsley, Superior Court judicial district of New Haven at New Haven, Docket No. CV 97-0260406 S, (August 14, 2001, Booth, J.).
On October 6, 2015 the defendant, by his counsel of record, filed an Amended Answer and Special Defense of Thomas J. LaCasse (#322.00). There were five Special Defenses. Of relevance to the current Motion to Strike is the following allegations which comprised the October 6, 2015 Third Special Defense:
Third Special Defense
The defendant asserts that the mortgage security instrument he granted to Mortgage Electronic Registration Systems (" MERS") as mortgagee of record acting as a third party neutral standing between himself and the alleged lender, on January 30, 2006, was unlawfully transferred to Residential Funding Corporation n/k/a Residential Funding Company, LLC., by the unauthorized signature of Jeffery Stephan purporting to be an assistant vice president of MERS.
Upon information and belief, Mr. Stephan had no authority to act on behalf of, and/or execute documents on behalf of Mortgage Electronic Registration Systems.
Upon information and belief, the assignment of the mortgage security instrument from MERS, to any other party without the authority of Mortgage Electronic Registration Systems, or arguably Homecomings Financial Network, Inc., was a void and fraudulent conveyance.
Upon information and belief, any such further assignments based upon this unlawful assignment are void ab initio .
As a result the former plaintiff Residential Funding Corporation n/k/a Residential Funding Company, LLC, and the substitute plaintiff HSBC Bank USA N.A. as Trustee do not hold a valid mortgage security instrument or assignment thereof.
The plaintiff lacks standing to pursue the remedy of foreclosure as there is no valid mortgage security instrument in their favor.
To the October 6, 2015 Amended Answer and Special Defense of Thomas J. LaCasse (#322.00) the plaintiff filed a November 2, 2015 Plaintiff's Motion to Strike Defendant's Amended Special Defenses addressed to each of the five Special Defenses contained in that pleading (#327.00). After argument the court issued a written order granting the Motion to Strike as to the First, Second and Third Special Defenses and denied plaintiff's Motion to Strike as to the Fourth and Fifth Special Defenses. That decision was issued on February 8, 2016 (#327.01).
On that same date the defendant replead each of the five Special Defenses with the understanding that the Fourth and Fifth Special Defenses had withstood an attack on the Motion to Strike. The First, Second and Third Special Defenses were pled over by the defendant as a matter of right. P.B. § 10-44. The plaintiff first addressed that new pleading by filing plaintiff's Motion for Order Regarding Entry No. 335.00 dated March 17, 2016 (#337.00) addressed to each of the February 8, 2016 five Special Defenses. The court treated the March 17, 2016 Motion for Order as a Request to Revise and found that the language of the First and Second Special Defenses were identical. Royce v. Westport, 183 Conn. 177, 182, 439 A.2d 298 (1981). The court granted the Request to Revise deleting the First and Second Special Defenses alleged in the February 8, 2016 pleading. Doe v. Marselle, 38 Conn.App. 360, 363-64, 660 A.2d 871 (1995). The court further found that the defendant's Fourth and Fifth Special Defenses had withstood the Motion to Strike and permitted those two Special Defenses to remain. The court then noted that the Third Special Defense was stricken on February 8, 2016 and the defendant had elected to plead over by adding two new paragraphs to the Third Special Defense, and partially modifying the last paragraph of the former Third Special Defense. The court noted that the first five unnumbered paragraphs of the October 6, 2015 Third Special Defense were identical to the first five unnumbered paragraphs of the current February 8, 2016 pleading (#335.00, #322.00). The court therefore permitted the plaintiff to file a late Request to Revise and/or a late Motion to Strike addressed to the February 8, 2016 Third Special Defense. The above mentioned orders were contained in this court's two-page Memorandum of Decision dated April 26, 2016 (#337.02).
The plaintiff thereafter filed this instant Motion to Strike addressed to the February 8, 2016 Third Special Defense (#342.00), as alleged:
Third Special Defense
The defendant asserts that the mortgage security instrument he granted to Mortgage Electronic Registration Systems (" MERS") as mortgagee of record acting as a third party neutral standing between himself and the alleged lender, on January 30, 2006, was unlawfully transferred to Residential Funding Corporation n/k/a Residential Funding Company, LLC., by the unauthorized signature of Jeffery Stephan purporting to be an assistant vice president of MERS.
Upon information and belief, Mr. Stephan had no authority to act on behalf of, and/or execute documents on behalf of Mortgage Electronic Registration Systems.
Upon information and belief, the assignment of the mortgage security instrument from MERS, to any other party without the authority of Mortgage Electronic Registration Systems, or arguably Homecomings Financial Network, Inc., was a void and fraudulent conveyance.
Upon information and belief, any such further assignments based upon this unlawful assignment are void ab initio .
As a result the former plaintiff Residential Funding Corporation n/k/a Residential Funding Company, LLC, and the substitute plaintiff HSBC Bank USA N.A. as Trustee do not hold a valid mortgage security instrument or assignment thereof.
Most interesting is the transfer of the Mortgage deed from Residential Funding Company to HSBC was done during the pendency of Residential Funding's bankruptcy, without leave of court or any purported authority from the bankruptcy court, or the trustee to authorize such transfer. In re Residential Capital, LLC, Case No. 12-12020 (MG), U.S. Bankruptcy Court, S.D.N.Y.
Notably, the La Casse note and mortgage, nor the Trust involved in this case appears as an asset on any schedule filed in that bankruptcy.
Upon information and belief, and subject to further discovery, the defendant believes the plaintiff may lack standing to pursue the remedy of foreclosure as there may be no valid or enforceable mortgage security instrument in their favor.
The body of the plaintiff's current Motion to Strike addressed to the February 8, 2016 amended Third Special Defense states:
" The Third Special Defense should be stricken because Defendant lacks standing to challenge the assignment of his mortgage, because the Third Special Defense is not properly raised in the form of a special defense, because it fails to state a claim as a matter of law, and because it is barred by C.G.S. § 47-36aa(b)(10)." (#342.00 first page). The parties appeared before the undersigned by counsel of record on May 27, 2016 and furnished oral argument. Briefs supporting the respective positions of the parties were filed.
At common law, the only defenses to an action of [foreclosure] would have been payment, discharge, release or satisfaction . . . or, if there had never been a valid lien. Moreover, our courts have permitted several equitable defenses to a foreclosure action. [I]f the mortgagor is prevented by accident mistake or fraud from fulfilling a condition of the mortgage, foreclosure cannot be had . . . Other equitable defenses that our Supreme Court has recognized in foreclosure actions include unconscionability . . . abandonment of security . . . and usury." (Citations omitted; internal quotation marks omitted.) Southbridge Associates, LLC v. Garofalo, 53 Conn.App. 11, 15-16, 728 A.2d 1114, cert. denied, 249 Conn. 919, 733 A.2d 229 (1999). In recognition that a foreclosure action is equitable in nature, courts have also allowed equitable estoppel, CUTPA, laches, breach of the implied covenant of good faith and fair dealing, tender of deed in lieu of foreclosure, a refusal to agree to a favorable sale to a third party, and lack of consideration, to be pleaded as special defenses. See, e.g., Mercantile Bank v. Hurowitz, Superior Court, judicial district of New Haven at New Haven, Docket No. 381-091, (May 2, 2000, Celotto, J.); Norwest Mortgage v. Edwards, Superior Court, judicial district of Ansonia-Milford at Milford, Docket No. CV97-0057496 S (May 4, 1998) (Curran, J.T.R.) [22 Conn.L.Rptr. 123, ].
The Supreme Court has long held that equitable defenses to mortgage foreclosure must be limited to the making, validity or enforcement of the note and mortgage. See Boretz v. Segar, 124 Conn. 320, 323-24, 199 A. 548 (1938) (equitable defense to mortgage foreclosure is limited to " the transaction under consideration" or " the matter in litigation"); see also Thompson v. Orcutt, 59 Conn.App. 201, 205-06, 756 A.2d 332 (same), cert. granted on other grounds, 254 Conn. 934, 761 A.2d 758 (2000).Webster Bank v. Linsley, Superior Court, judicial district of New Haven at New Haven, Docket Number CV 97-0260406 S, (August 14, 2001, Booth, J.).
At oral argument the plaintiff claimed four separate reasons why the Motion to Strike should be granted; (1) The language of the Third Special Defense that previously had been stricken has only been slightly modified and is virtually repleading the same special defense that has already been stricken by this court; (2) The validating act, Gen. Stat. § 47-36aa(b)(10), prevents an attack on the assignments; (3) Wells Fargo Bank v. Strong, 149 Conn.App. 384, 396, 89 A.3d 392 (2014) prevents special defenses based upon a violation of pooling and servicing agreements; and (4) Even if the mortgage had not been validly assigned, the plaintiff is entitled to foreclose the mortgage under Connecticut law.
The court will address each of the above four reasons as required by P.B. § 10-43.
(1) Although this court did not outline its reasoning on February 8, 2016 for striking the Third Special Defense, the court now has the opportunity to state that reason. The last unnumbered subparagraph of the October 6, 2015 Third Special Defense stated: " The plaintiff lacks standing to pursue the remedy of foreclosure as there is no valid mortgage security instrument in their favor." That paragraph was stricken by this court since it alleges lack of standing. Lack of standing should be raised by a Motion to Dismiss not a Motion to Strike. " The proper procedural vehicle for disputing a party's standing is a motion to dismiss." D'Eramo v. Smith, 273 Conn. 610, 615, fn. 6, 872 A.2d 408 (2005). " The question of standing is properly tested by a motion to dismiss and not by a special defense." HSBC Bank USA, N.A. v. Oakes, Superior Court, judicial district of New Britain, Docket Number HHB CV 11-6009207 S (August 7, 2010, Sheridan, J.) [54 Conn.L.Rptr. 556, ].
The current Third Special Defense has modified the last paragraph to read as follows: " Upon information and belief, and subject to further discovery, the defendant believes the plaintiff may lack standing to pursue the remedy of foreclosure as there may be no valid or enforceable mortgage security instrument in their favor." The specific claim of lack of standing no longer forms the sole basis for the filing of the Third Special Defense. The court finds that the defendant has modified the Third Special Defense to eliminate the deficiency upon which this court originally had granted the Motion to Strike on February 8, 2016. (#327.01)
(2) The plaintiff cites the validating act, Gen. Stat. § 47-36aa(b)(10), as a reason for the Motion to Strike. That validating act is not cited in the February 8, 2016 Third Special Defense nor is it alluded to by any language contained in the Third Special Defense. " When deciding a motion to strike, the court must take the facts to be those alleged in the complaint . . . and construe the complaint in the matter most favorable to sustaining its legal sufficiency." Connecticut Coalition For Justice In Educational Funding, Inc. v. Rell, 295 Conn. 240, 252-53, 990 A.2d 206 (2010). In effect by pleading the validating act as a reason for the Motion to Strike, the plaintiff exceeds the scope of the defendant's pleadings. " We are limited, however, to a consideration of the facts alleged in the complaint. A speaking motion to strike (one importing facts outside the pleadings) will not be granted." Liljedahl Brothers, Inc. v. Grigsby, 215 Conn. 345, 348, 576 A.2d 149 (1990). The plaintiff's claim is treated by this court as a speaking motion to strike. The plaintiff is attempting to improperly import facts from outside the pleadings. Mercer v. Cosley, 110 Conn.App. 283, 292, fn. 7, 955 A.2d 550 (2008).
(3) Wells Fargo Bank v. Strong, supra, 149 Conn.App. 396 stands for the proposition that in the main trial courts cannot consider a violation of pooling and servicing agreements when there is no evidence that the borrower is a named party to or has otherwise executed the pooling and servicing agreement. The February 8, 2016 Third Special Defense does not mention any pooling and servicing agreement. The plaintiff has again filed a speaking motion to strike. In addition the pleadings do not indicate that Mr. LaCasse did or did not execute or was or was not a party to the underlying pooling and servicing agreement. These are facts outside the pleadings and not appropriate for ruling by this court on a Motion to Strike. Zirinsky v. Zirinsky, 87 Conn.App. 257, 269 fn. 9, 865 A.2d 488 (2005) Finally, this court is not satisfied that all the facts of the pooling and servicing agreement, the analysis of the New York trust law, and other circumstances relating to the securitization of mortgages were fully spread upon the record before the trial court and the appellate court in Wells Fargo Bank v. Strong, supra, 149 Conn.App. 396. The defendant should be given an opportunity to be able to spread that information upon the record at trial. The February 8, 2016 Third Special Defense offers the defendant that opportunity.
(4) Plaintiff rightly argues that even if a mortgage had not been assigned under most circumstances the foreclosure still can go forward. That is a correct statement of Connecticut law. Fleet National Bank v. Nazareth, 75 Conn.App. 791, 795, 818 A.2d 69 (2003); Gen. Stat. § 49-17. The plaintiff's complaint is not limited to this claim. The plaintiff has pled extensive facts in its complaint outlining the entirety of the securitization transactions. Those allegations are not found in the Third Special Defense but are part of the pleadings in this case. The operative complaint is the July 30, 2015 Revised Verified Amended Complaint (#275.00). It is a one-count complaint seeking the usual remedies in a residential foreclosure. The complaint is 33 paragraphs in length and references by attachment and incorporation the entire history of the loan including assignments and securitizations. As part of the complaint the plaintiff has attached Exhibits A through N, coded in as pleadings #276.00 through and including #290.00. The plaintiff, by filing those allegations, has broadened the scope of this ordinary residential foreclosure case.
The defendant argues that a January 29, 2014 Joint Stipulation signed by the plaintiff and the defendant may very well prevent this foreclosure action from going to judgment without proof of a valid assignment. The Joint Stipulation is a pleading in this case and it states: " Residential Funding Company, LLC was not the owner of the subject note at the time of commencing this foreclosure action." (#171.00.) The resolution of this matter is best left for the trial court upon the adjudication of all the relevant facts instead of the narrow consideration of a Motion to Strike.
For the above reasons, the Plaintiff's Motion to Strike Defendant's Amended Third Special Defense dated May 4, 2016 (#342.00) is denied.