Opinion
No. CV-09-6005193
January 6, 2011
RULING ON STATE OF CONNECTICUT'S MOTION FOR ORDERS
The State of Connecticut, which holds a lien which is subsequent to that of the plaintiff, has moved this court to enter various orders, including an indefinite stay of this action, an order that the plaintiff's counsel appear at a hearing and explain its role in the submission of alleged improper and fraudulent documents, an order that the plaintiff submit various certifications concerning the accuracy of its documents and an order that the plaintiff refrain from imposing any costs, expenses, fees, or other charges on the mortgagor and toll the accrual of further interest as a result of its submission of improper or fraudulent documents in this action.
The plaintiff and its counsel, Hunt Leibert, object to the motion on the grounds that there is no evidence that any affidavit in this case was improper or fraudulent, that there is no evidence that the mortgagor is not in default under the terms of the Mortgage Note and Deed, that the State is improperly seeking relief which the Chief Court Administrator has already denied, that plaintiff is voluntarily cooperating with investigations concerning improper documents, that the State seeks to impose unwarranted and unprecedented duties on Hunt Leibert and, most importantly, that the plaintiff has voluntarily moved to open the judgment in this case to review all documents underlying the judgment to make sure that they are accurate and proper.
Factual and Procedural History
The plaintiff commenced this action for foreclosure of a first mortgage on residential property owned by the defendant, Robert Stenhouse, in Granby, Connecticut (the "Property"), which secured a note executed by the defendants, Robert and Debra Stenhouse (the "Borrowers"), by serving a complaint on the Borrowers on October 19, 2009. When the complaint was filed, the Borrowers were advised of their rights to enter into the court's mediation program under which mediators assist borrowers in reaching agreements to modify the terms of the mortgages, thereby avoiding foreclosure. The Borrowers did not avail themselves of the court's mediation services.
The complaint named as defendants the Borrowers and the State of Connecticut Department of Social Services (the "State") as a subsequent encumbrancer by virtue of a support lien recorded on July 10, 2006. The State failed to respond to a Demand for Disclosure of Defense and never filed a responsive pleading. On May 4, 2010, the plaintiff moved for a judgment of strict foreclosure.
On May 12, 2010 the plaintiff filed an affidavit of debt which calculated that the mortgage debt was $135,080.43 as of May 17, 2010. The plaintiff also filed an appraisal of the Property which indicated that it had a fair market value of $163,000. Neither the Borrowers nor the State objected to the affidavit of debt or the appraisal or interposed any defense to the complaint.
On May 17, 2010 this court entered a judgment of strict foreclosure with the first law day scheduled for June 22, 2010. Thereafter the plaintiff filed three motions to extend the law day so that it could explore options with the Borrowers to help them keep the Property. On October 14, 2010 the plaintiff filed a motion to open and vacate the judgment "in order to address potential document execution issues which may impact this matter." The court granted the motion and vacated judgment on October 25, 2010.
On October 1, 2010 the State, through the Office of the Attorney General, requested that the Chief Court Administrator issue a standing order freezing all foreclosures in Connecticut for a period of 60 days and instituting new requirements with respect to submission of foreclosure affidavits. The State specifically requested that Judge Quinn issue a standing order applicable to all foreclosure cases filed in Connecticut requiring that "[a]ll affidavits filed in foreclosures after the date of the order must contain a specific factual description of the basis of the affiant's claimed personal knowledge of the facts alleged in the affidavit."
By letter dated October 14, 2010, Judge Quinn denied the State's request for both a foreclosure freeze and additional affidavit requirements after careful consideration, stating:
I believe that instituting a blanket freeze on all foreclosure actions would be overly broad and not prudent, as it would unfairly impact foreclosure cases that are not affected by the structural and procedural issues your letter discusses.
While I am cognizant of the seriousness of the issues you raise, I am confident that those issues can be addressed in the context of individual cases before the courts. As you know, judges deal with the cases and controversies before them and review in detail the specifics of all claims made in those cases. Those judges presiding over residential mortgage foreclosure cases are keenly aware of their obligation to take necessary action to protect the integrity of the judicial process, including careful consideration of any motions that raise issues regarding the reliability of submitted affidavits of debt or the affiant's personal knowledge of the underlying documents establishing the chain of title of the debt.
In opposition to the State's Motion for Order, the plaintiff claims that as of October 1, 2010, the loan's servicer, Bank of America Corp. ("Bof A"), has voluntarily suspended foreclosure judgments in the 23 states that require judicial review of foreclosures, including Connecticut, while it completes a review of its foreclosure procedures. One week later Bof A extended its foreclosure suspension nationwide as it launched a voluntary review of its foreclosure process in all 50 states. On October 13, 2010 all 50 states announced a coordinated inquiry into whether banks and loan servicers submitted defective affidavits to justify foreclosures. Bof A has pledged its cooperation with the 50-state inquiry and has participated in numerous meetings with the executive committee representing all of the attorneys general.
The plaintiff's motion to open and vacate the judgment in this case, where there is no claim of any actual impropriety, was consistent with its pledge of cooperation. Surprisingly, rather than commend the plaintiff for its cooperation, the office of Attorney General chose to use the language of the motion to open ("potential document execution issues") against Bof A, seizing upon that language to form the basis of the Motion for Order now under consideration.
Discussion of the Law and Ruling
Both the plaintiff and Hunt Leibert Jacobson, P.C. ("Hunt Leibert") have filed Objections to the State's Motion for Order. The plaintiff argues 1) the State lacks standing to attack the plaintiff's documents, 2) the State's concerns have been addressed by the plaintiff's vacating the existing judgment, and 3) the State improperly seeks the system-wide relief which Judge Quinn rejected. Hunt Leibert argues 1) the relief requested will be moot in this case when a substitute affidavit is filed, 2) the State is attempting to secure in this case a stay or "freeze" which Judge Quinn has already elected not to grant, 3) the Borrowers do not dispute that their note and mortgage are in default and any irregularity in the original documents will not save the Borrowers' home, and 4) conducting an investigation of Hunt Leibert's practices and procedures absent any cause to believe that there was any impropriety by Hunt Leibert is unnecessary, potentially harmful to Hunt Leibert and unprecedented.
Standing
The plaintiff argues that the State has no standing to question the accuracy of the plaintiff's documents. It relies primarily on the case of PNC Bank, N.A. v. Kelepecz, 289 Conn. 692 (2008), where the Court held that a junior encumbrancer had no standing to challenge the enforceability of an earlier-filed judgment lien by asserting that the borrowers' rights had been violated under Connecticut General Statutes § 52-351a. However, the first issue in PNC Bank was whether the same judgment lien was invalid under Connecticut General Statutes § 52-380a because it failed to state the original amount of the debt. The same junior encumbrancer raised the first issue and the Court never mentioned that she had no standing to do so.
Based on the amount of the debt owed to the plaintiff and the fair market value of the Property, the State's lien may have value only if the plaintiff's mortgage is invalid. Therefore, the State does have standing, or "a specific, personal and legal interest" in the issues surrounding the validity of the plaintiff's mortgage, including the adequacy of the plaintiff's affidavit of debt. See PNC Bank, N.A. v. Kelepecz, supra, at 706.
Existing Judgment has been Vacated
The State has pointed to no specific defect or impropriety in any document used by the plaintiff to secure the foreclosure judgment in this case. Nevertheless, the plaintiff has voluntarily moved to open and vacate the foreclosure judgment "in order to address potential document execution issues." There will be no new foreclosure judgment entered until Bof A has submitted a new affidavit prepared in accordance with its revised procedures that will ensure that the affidavit is properly verified and executed. Once the plaintiff files a substitute affidavit of debt, the existing affidavit will cease to be of any relevance to this case and inquiring into how the existing affidavit was executed could result in no "practical relief" for the State or anyone else. See CT Page 2723 Reveron v. Board of Firearms Permit Examiners, 123 Conn.App. 475, 477-78 (2001). Any ruling on this moot issue would be merely advisory. State v. Campbell, 84 Conn.App. 648, 650 (2004).
Moreover, the court's existing rules provide sufficient methods by which interested parties may challenge the sufficiency of documents. If a borrower denies that his mortgage is in default, he may file an answer, and the plaintiff will be required to prove the fact of the default and the amount of the debt at trial. Section 23-18 of the Practice Book sets forth specific requirements for proof of debts in foreclosures. Where, as in this action, "no defense as to the amount of the mortgage debt is interposed, such debt may be proved by presenting to the judicial authority the original note and mortgage, together with the affidavit of the plaintiff or other person familiar with the indebtedness." Such an affidavit must state "what amount, including interest to the date of the hearing, is due, and that there is no setoff or counterclaim thereto." If a party disputes the amount of the debt, he may interpose a defense as to the amount of the debt, and the plaintiff cannot prove the debt by means of Practice Book § 23-18. Instead, the party asserting the defense is entitled to cross-examine the plaintiff. See National City Mortgage Co. v. Stoecker, 92 Conn.App. 787, 797-98 (2006).
The Relief Requested in Relation to Judge Quinn's Response to State's Request for Blanket Freeze
Unlike many states where a foreclosing bank need never present anything to a judge, see Mass. Gen. Laws ch. 244, §§ 11- 17C (allows a foreclosure by sale under the power of sale in a mortgage), Mass. Gen. Laws ch. 244, §§ 1, 2 (allows foreclosure by entry and continuous possession for three years), N.H. Rev. Stat. § 479:19 (allows various methods of non-judicial foreclosure), GA. Code Ann. § 44-14-162.2 (provides for foreclosure sale upon giving proper notice to borrowers), Connecticut does not allow non-judicial foreclosures. As set forth above, our Practice Book provides the protection of scrutiny by the court, which protection is not available in all states. Judge Quinn alluded to this when she refused to impose a Statewide freeze on foreclosures as requested by the State, saying that "judges deal with the cases and controversies before them and review in detail the specifics of all claims made in those cases." When Judge Quinn stated that judges would give "careful consideration of any motions that raise issues regarding the reliability of submitted affidavits of debt," she did not mean to invite the State to repeat its request for a blanket freeze on foreclosures. Rather, she meant that the court was well equipped to address any specific issues concerning documents on a case-by-case basis. Moreover, she demonstrated her confidence that the courts' existing practices in foreclosure cases are adequate to address possible document execution issues that might arise in individual cases. Since the State has raised no specific issues concerning fraud, or improper execution in this case, this case does not constitute the proper venue for judicial inquiry into such issues.
Impact on the Borrowers' Interests
The Borrowers have never interposed any defense in this case. In its Motion for Order, the State does not claim that there is a defense, or that the Borrowers are not in default. Therefore, even if this court granted the relief requested by the State, the ultimate outcome of this case will not change.
Relief Requested as to Hunt Leibert
The State's Motion seeks to have this court investigate Hunt Leibert's role in submitting what the State refers to generically as "improper and fraudulent documents." It also seeks to have Hunt Leibert certify steps it takes "to ensure the accuracy and validity of any substitute documents submitted in this action." As counsel, Hunt Leibert has no duty to review its client's records or independently verify the facts in its clients' affidavit and no duty to examine its client about the steps the client took to verify and execute the affidavit. Generally, lawyers are not charged with independently verifying the veracity of affidavits filed with the court. Lawyers practicing family law, for example, are not asked by the court independently to verify the veracity of their client's financial affidavits or the manner in which they were executed. Similarly, lawyers submitting their clients' affidavits in support of or in opposition to motions for summary judgment are not required to examine their clients to determine what that client did to verify the facts in the affidavit. Requiring lawyers representing plaintiffs in foreclosure actions to comply with the requirements sought by the State would impose new and unprecedented duties on those lawyers.
Connecticut lawyers are already held to strict standards in their dealings with the court. They are prohibited by Practice Book § 4-2(b) from submitting any pleading, motion, objection, or request without good grounds to support it. Lawyers are also bound by Rule 3.3(a)(1) and (3) of the Rules of Professional Conduct not to knowingly make a false statement of fact or law to the court or offer evidence that a lawyer knows to be false. There is absolutely no evidence in this case that Hunt Leibert or any of its lawyers violated either of these provisions or committed misconduct of any kind. Had they done so, the court could impose various remedies, including sanctions or referral to the grievance authority.
For the reasons set forth above, this court denies the State's Motion for Order.