Opinion
CV176065487S
09-17-2019
U.S. BANK, NATIONAL ASSOCIATION, as Trustee, Successor-in-Interest to Wachovia Bank, N.A. as Trustee for JP Morgan 2005-A7 v. Lee MONCHO et al.
UNPUBLISHED OPINION
OPINION
HARTMERE, JTR
The plaintiff, U.S. Bank National Association ("U.S. Bank"), commenced this action by complaint dated June 23, 2017. The plaintiff filed a one-count revised complaint dated May 15, 2018 which seeks foreclosure of the defendants, ’ Lee and Karen Moncho’s, mortgage and possession of the property. The defendants filed their amended answer, special defenses and counterclaim on April 24, 2019. On February 11, 2019 the plaintiff filed its revised affirmative defenses to the defendants’ counterclaim. A previous action seeking foreclosure of the mortgage had been commenced by the plaintiff on or about March 2, 2009, but that case was dismissed under the dormancy program. A court trial on the operative complaint was commenced before the undersigned on April 30, 2019 and concluded on May 1, 2019. Thereafter, the plaintiff filed its reply to the defendants’ special defenses on June 18, 2019 and the parties filed post-trial briefs and reply briefs.
At trial, the evidence established that the defendants Lee Moncho and Karen Moncho borrowed the sum of $966,999 (the "loan") which was secured by a mortgage on their property located at 245 High Meadow Road, Southport, Connecticut (the "property"). Diane Weinberger, a director in the contested default department for Select Portfolio Servicing, Inc. ("SPS"), the plaintiff’s loan servicer, testified that she was familiar with the business records of the loan and that she was able to review the original documents and records on SPS’ electronic systems pertaining to the loan. SPS is the sub-servicer for the plaintiff and JP Morgan Chase Bank, N.A. ("JPMCB") is the master servicer. Richard J. Massa, a licensed real estate appraiser, testified as to the present fair market value of the property.
The evidence established that on July 29, 2005, the defendants executed an Interest First Adjustable Rate Note (the "note"), pursuant to which they promised to pay to the order of JPMCB the principal sum of nine hundred sixty-six thousand nine hundred ninety-nine dollars ($966,999), payable with interest thereon, late charges, costs and expenses. The indebtedness evidenced by the note was secured by an open-end mortgage deed also dated July 29, 2005 (the "mortgage"), pursuant to which the defendants mortgaged to JPMCB their property. JPMCB endorsed the note in blank and the mortgage was subsequently assigned to the plaintiff. The plaintiff is in physical possession of the original note endorsed in blank and the mortgage and was in possession of the note and mortgage at the time this action was commenced. The court examined those documents during the trial, as had the court during a proceeding in the prior action.
Subsequently the defendants defaulted pursuant to the terms of the note and mortgage in that they failed to make monthly payments of principal and interest due on November 1, 2008 and every month thereafter. The defendants were sent letters dated January 4, 2009 to the property address which gave notice to the defendants of their default and advised that if the amount required to cure the default was not received within thirty-two days immediate acceleration of all monies due under the note and mortgage would be declared without further notice or demand. The defendants failed to cure the default and the total amount of the indebtedness due and owing was accelerated. No part of the outstanding indebtedness has been paid by the defendants.
The evidence established that the outstanding principal balance remains $966,999.00, the interest due on the note through April 30, 2019 is $483,493.37, and the total escrow advances through April 30, 2019 were $229,526.01. The total amount due as of April 30, 2019 is $1,680,018.38. According to the uncontested appraisal of the property, the fair market value of the property as of April 7, 2019 is $1,000,000.00.
The plaintiff has established a prima facie claim for foreclosure. "In order to establish a prima facie case in a mortgage foreclosure action, the plaintiff must prove by a preponderance of the evidence that it is the owner of the note and mortgage, that the defendant mortgagor has defaulted on the note and that any conditions precedent to the foreclosure, as established by the note and mortgage, have been satisfied." Wells Fargo Bank, N.A. v. Strong, 149 Conn.App. 384, 392 (2014). There is a rebuttable presumption that the holder of the note is the owner of the debt. RMS Residential Properties, LLC v. Miller, 303 Conn. 224, 231-32 (2011). "[A] holder of a note is presumed to be the owner of the debt, and unless the presumption is rebutted, may foreclose the mortgage under section 49-17. The possession by the bearer of a note [e]ndorsed in blank imports prima facie that he acquired the note in good faith for value and in the course of business, before maturity and without notice of any circumstances impeaching its validity. The production of the note establishes his prima facie case against the makers and he may rest there ... It [is] for the defendant to set up and prove the facts which limit or change the plaintiff’s rights." Equity One, Inc. v. Shivers, 310 Conn. 119, 135 (2013).
Here, the plaintiff established that it was the holder of the note because the plaintiff is in physical possession of the note endorsed in blank, which endorsement was set forth on an original allonge executed by Alisha Young, assistant vice president of JPMCB and stapled to the note. Connecticut General Statutes section 42a-3-204(a) provides, in pertinent part, that an" ‘Endorsement’ means a signature, other than that of a ... maker ... that alone or accompanied by other words is made on an instrument for purpose of ... negotiating the instrument ... For the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a part of the instrument." The plaintiff established that it was in physical possession of the note, with the affixed allonge which endorsed the note in blank, prior to the commencement of this action on July 3, 2017.
Although the defendants introduced several other signed and unsigned allonges, no evidence was offered to show that any of these other allonges were ever affixed to the note. The plaintiff did present credible evidence which demonstrated that the Young allonge was affixed to the note several years before the commencement of this action, and remained so affixed right up to and including the date of the trial.
Upon the defendants’ default for failure to make timely monthly payments, the plaintiff satisfied the conditions precedent to the enforcement of the mortgage and note by timely mailing notices of default and acceleration warnings to the defendants. Thus, the plaintiff did prove a prima facie case for its mortgage foreclosure.
However, the defendants did file five special defenses and a counterclaim to the plaintiff’s complaint. In their post-trial brief the defendants contend that the court must accept as admitted all of the defendants special defenses since the plaintiff had not filed an answer to the defendants’ special defenses, although it did file a reply to the counterclaim. Subsequent to trial, the defendants did file an answer to the defendants’ special defenses on June 18, 2019. The defendants argue that the special defenses are deemed to be admitted pursuant to Practice Book Section 10-19 which provides, in pertinent part, that "[e]very material allegation in any pleading which is not denied by the adverse party is deemed to be admitted ...."
The defendants filed no pretrial motions addressing the plaintiff’s failure to plead to their special defenses. Likewise, during the trial the defendants did not raise an issue concerning the plaintiff’s failure to file a reply to their special defenses or otherwise notify the court or the plaintiff that they intended to claim implied admissions. The Appellate Court addressed a similar situation in Birchard v. City of New Britain, 103 Conn.App. 79, cert. denied, 284 Conn. 920 (2007). In Birchard, the plaintiff failed to raise an issue as to the sufficiency of the pleadings or otherwise claim the effect of implied admissions under section 10-19 during the trial. The appellate court stated "[t]he question before us ... is whether a trial court is bound by an implied admission pursuant to practice book section 10-19 that is not brought to [the trial court’s] attention at any stage of the proceedings. We conclude that it is not." Birchard v. City of New Britain, 103 Conn.App. at 85. In Prichard, the Appellate Court cited the Supreme Court’s decision in Reese v. First Connecticut Small Business Investment Co., 182 Conn. 326 (1980) which held that failure to file a pleading is not properly considered an implied admission if not raised at trial. Following that rationale, this court finds that it would be inequitable in the circumstances here to hold that the failure to file an answer to the special defenses should be considered an implied admission. Since the defendants failed to challenge the plaintiff’s non-pleading or otherwise make a request for an implied admission at trial, the defendants’ claim of implied admissions must fail.
In their first special defense the defendants allege that the plaintiff lacks standing on two grounds. First, the defendants allege that Alisha Young, the JPMCB officer whose signature appears on the allonge, did not execute the endorsement. This allegation is based "[u]pon information and belief, ’ and at trial the defendants did not present any evidence in support of this claim. The second ground alleged is that additional signed and unsigned allonges "call into question [the] applicability and validity" of the Young allonge. The credible evidence presented by the plaintiff proved that the Young allonge was affixed to the note several years before the commencement of this action and continued through this trial. The defendants failed to produce evidence which demonstrated that any other allonges were ever affixed to the note. Unless an allonge is affixed to an instrument, it fails to operate as an endorsement of the instrument under Connecticut General Statutes section 42a-3-204. See Adams v. Madison Realty & Dev., Inc., 853 F.2d 163, 165-69 (3rd Cir. 1988). Moreover, the mere existence of additional allonges does not rebut the presumption of the plaintiff’s entitlement to enforce the note. "To rebut the presumption that the holder of the note endorsed specifically or to bearer is the rightful owner of the debt, the defending party must prove that another party is the owner of the note and debt. Id. Without such proof, the foreclosing party may rest its standing to foreclose the mortgage on its status as the holder of the note." J.P. Morgan Chase Bank, National Ass’n v. Simoulidis, 161 Conn.App. 133, 146 (2015) citing U.S. Bank National Ass’n v. Schaeffer, 160 Conn.App. 138, 147 (2015). In the present case, the defendants failed to offer evidence which shows that the note is not owned by the plaintiff. Thus, the defendants have failed to prove their first special defense.
In the second special defense, the defendants claim that the plaintiff is precluded from bringing suit on the note, or seeking a deficiency judgment under the note, due to the passing of the applicable statute of limitations. To the extent that the defendants assert that a statute of limitations bars this foreclosure, such claim is unavailing, since a mortgage foreclosure action is an equitable proceeding. "The rule in Connecticut, as far back as the early 19th century, is that a statute of limitations does not bar a mortgage foreclosure." FDIC v. Owen, 88 Conn.App. 806, 815 (2005). As to the applicability of the defendants’ statute of limitations claim to a deficiency judgment, the plaintiff has not made a motion for deficiency judgment to this point in the proceedings and, therefore, this defense is premature and may be addressed during any subsequent proceedings. Thus, the defendants’ statute of limitations special defense must fail at this time.
The defendants’ third special defense alleges that the plaintiff has failed to establish that it has complied with all the requirements of the securitization document necessary for the subject note to be part of the J.P. Morgan 2005-A-7 Securitized Trust and for the plaintiff to be the proper trustee of that trust. The defendants claim that the plaintiff lacks standing to prosecute this action. The defendants offered no evidence to establish the requirements of the securitization and how the plaintiff allegedly failed to comply with those requirements. The defendants have failed to meet their evidentiary burden on their claim. Moreover, the law is clear that claims of noncompliance with requirements concerning securitization do not implicate subject matter jurisdiction or otherwise deprive a foreclosing plaintiff of its entitlement to enforce the note. Wells Fargo v. Strong, 149 Conn.App. 384, 398-401 (2014). Thus, the defendants’ third special defense must fail.
The defendants’ fourth special defense alleges that "[t]he plaintiff failed to provide proper notice of default and acceleration as required under the mortgage for various reasons, including that the alleged notice provided was not sent by the Plaintiff, but rather by Chase Home Finance, LLC a stranger to the loan." A notice of acceleration was sent to each of the defendants on January 4, 2009. The defendants do not argue that they did not receive the notice of acceleration or were otherwise unaware of the possibility that they faced foreclosure. Rather the defendants claim that since the notice of default was sent by Chase Home Finance, LLC and not the plaintiff itself, the notice was improper and the plaintiff failed to satisfy a condition precedent.
Chase Home Finance, LLC was not a "stranger to the loan." The introductory letter provided to the defendants at the closing of the loan on July 29, 2005 directs the defendants to submit their payments to Chase Home Finance, LLC and to direct any inquiries to that entity. The defendants were made aware from the very start that Chase Home Finance, LLC was acting as a servicing agent with respect to the loan. Indeed, a mortgage servicer, properly authorized, can exercise rights on behalf of the mortgagee far greater than simply issuing default notices including instituting a foreclosure action in its own name to enforce a note held by the party which it services. J.E. Robert Co. v. Signature Props., LLC, 309 Conn. 307, 313 fn.4 (2013).
"The plain intent of the notification requirements ... of the mortgage deed is to provide notice of a default to a [mortgagor] prior to the commencement of a foreclosure proceeding." Aurora Loan Services, LLC v. Condron, 181 Conn.App. 248, 272 (2018). Here, the defendants do not claim that they did not receive the notice of acceleration, but only that it was sent by an entity which differed from the plaintiff. That the notice of acceleration was sent by Chase Home Finance, LLC, the plaintiff’s servicer, and not by the plaintiff itself, resulted in no prejudice to the defendants. The plaintiff provided proper notice of default and acceleration as required under the mortgage. The defendants’ fourth special defense is unavailing.
The defendants’ fifth special defense is a single sentence which alleges that "[t]he Plaintiff comes to court with unclean hands and therefore it is barred from recovery." The defendants’ special defense is a conclusory one-sentence allegation completely devoid of any supporting factual representations. Additionally, the unclean hands special defense lacks support in the evidence. In their post-trial brief the defendants argue that the court must accept the facts in their fifth special defense as being admitted pursuant to the practice book because of the plaintiff’s failure to deny the special defenses. That argument was addressed and rejected by the court previously in this opinion. In their reply brief, the defendants argue that their defense of unclean hands was proved by the evidence of multiple unexplained allonges and an assignment of mortgage. The Supreme Court recently stated that "appellate case law recognizes that conduct occurring after the origination of the loan, after default, and even after the initiation of the foreclosure action may form a proper basis for defenses in a foreclosure action." United States Bank Nat’l Ass’n v. Blowers, 332 Conn. 656, 672 (2019). Here, the court has considered all of the evidence concerning allonges and finds that the credible evidence demonstrates that the Young allonge was stapled and affixed to the note at all pertinent times. The court concludes that the mere existence of other allonges and an assignment of mortgage not acted upon do not establish unclean hands on the part of the plaintiff. The defendants have failed to sustain their burden of proof concerning the special defense of unclean hands.
Finally, the defendants interposed a single-count counterclaim alleging a violation of CUTPA. Similarly to their second special defense, the defendants alleged that "upon information and belief’ Alisha Young did not execute the allonge and as a result, the plaintiff’s prosecution of the prior foreclosure and this action was and is improper. The defendants further alleged that the plaintiff committed unfair and/or deceptive trade practices by failing to comply with a production request in the prior foreclosure. The defendants failed to brief this CUTPA claim in either their post-trial brief or their reply brief and have, therefore, abandoned this counterclaim.
On the merits of the counterclaim, the defendants failed to offer credible evidence in support of their claims. The defendants failed to call a single witness at trial. Specifically, the defendants offered no credible evidence that Ms. Young did not execute the allonge. Similarly, the defendants did not offer any evidence to support their claim that the plaintiff failed to comply with production requests in the prior foreclosure. Finally, the defendants failed to offer any evidence establishing causation or an ascertainable loss as a result of the plaintiff’s alleged conduct. Connecticut General Statutes section 42-110g(a) provides, in relevant part, that "[a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by section 42-110b ..." may bring an action under CUTPA. Service Road Corporation v Quinn, 241 Conn. 630, 638-39 (1997). Again, the defendants failed to meet their burden of proof. The defendants failed to meet their burden of proof on their counterclaim and therefore, judgment on the counterclaim will enter for the plaintiff.
Based on all of the foregoing, judgment on the foreclosure complaint and on the counterclaim will enter for the plaintiff. The total amount due as of April 30, 2019 was $1,680,018.38. The fair market value of the property as of April 7, 2019 was $1,000,000.00. Therefore, a judgment of strict foreclosure will enter. Counsel for the plaintiff are ordered to submit an affidavit (or affidavits) of counsel fees on or before October 1, 2019. A hearing to establish and enter appropriate attorneys fees, appraisal fees, title search fees, any updated debt amounts, and to set law days is scheduled for October 8, 2019 at 10 A.M.
So ordered.