Lasalle Bank National Association v. Sergio Bautista (2010)

MEMORANDUM OF DECISION RE MOTION TO STRIKE [# 121]

FACTS

On March 10, 2009, the plaintiff, LaSalle Bank National Association, as trustee under the Pooling and Servicing Agreement dated as of May 1, 2006, GSAMP Trust 2006-HE3, filed a revised complaint in the present foreclosure action against the defendants, Sergio S. Bautista, Jose A. Hernandez (Jose), Rolando A. Hernandez (Rolando) and Mortgage Electronic Registration Systems, Inc. as nominee for SouthStar Funding, LLC (Mortgage Electronic).¹  In its complaint, the plaintiff alleges the following facts.   Bautista, Jose and the defendant own property located at 135 Blydenburg Avenue, New London, Connecticut by virtue of a deed dated November 22, 2005, and recorded November 30, 2005, in Volume 1594 at Page 269 of the New London Land Records (the property).   On November 29, 2005, Bautista and Jose executed a note pursuant to which they became obligated to repay SouthStar Funding, LLC the principal amount of $212,000, payable with interest thereon as provided in the note.   To secure the note, Bautista, Jose and the defendant executed and delivered a mortgage deed to Mortgage Electronic, which was recorded on November 30, 2005, in Volume 1594 at Page 271 of the New London land records.   The plaintiff now owns the note and mortgage pursuant to an assignment from Mortgage Electronic dated November 17, 2008, and to be recorded with the New London land records.   The installment of principal and interest due on August 1, 2008, and for each and every month thereafter, has not been paid.

On April 9, 2009, the defendant filed his answer, six special defenses and cross complaint.   The defendant's six special defenses allege a lack of consideration, a contract of adhesion, violation of General Statutes § 52-550, the statute of frauds, failure to provide notice, fraud and misrepresentation in the inducement to enter into a contract and unclean hands, respectively.   On January 19, 2010, the plaintiff filed a motion to strike all six of the defendant's special defenses, together with its memorandum of law.   The defendant filed an objection to the plaintiff's motion to strike on February 23, 2010.

DISCUSSION

“Whenever any party wishes to contest ․ the legal sufficiency of any answer to any complaint ․ or any part of that answer including any special defense contained therein, that party may do so by filing a motion to strike ․” Practice Book § 10-39(a).  “[A] plaintiff can [move to strike] a special defense ․” Nowak v. Nowak, 175 Conn. 112, 116, 394 A.2d 716 (1978).   “In ․ ruling on the ․ motion to strike, the trial court recognize[s] its obligation to take the facts to be those alleged in the special defenses and to construe the defenses in the manner most favorable to sustaining their legal sufficiency.”  Connecticut National Bank v. Douglas, 221 Conn. 530, 536, 606 A.2d 684 (1992).

I

FIRST SPECIAL DEFENSE

The defendant's first special defense states as follows:  “The defendant ․ borrowed no money from the plaintiff or its predecessor;  he did not sign, endorse or guarantee the promissory note, subject to this action nor did he agree to be obligated to the plaintiff or its predecessor for the debt which is subject of this action.   As such, the security agreement lacks consideration and is unenforceable against the defendant ․” The plaintiff argues that the defendant executed the mortgage deed, and consideration existed for that agreement.

“To be enforceable, a contract must be supported by valuable consideration ․ The doctrine of consideration is fundamental in the law of contracts, the general rule being that in the absence of consideration an executory promise is unenforceable.”  (Citation omitted;  internal quotation marks omitted.)   Connecticut National Bank v. Voog, 233 Conn. 352, 366, 659 A.2d 172 (1995).  “Nevertheless, the doctrine of consideration does not require or imply an equal exchange between the contracting parties ․ The general rule is that, in the absence of fraud or other unconscionable circumstances, a contract will not be rendered unenforceable at the behest of one of the contracting parties merely because of an inadequacy of consideration.”  (Internal quotation marks omitted.)  Christian v. Gouldin, 72 Conn.App. 14, 23, 804 A.2d 865 (2002).

In the present case, the defendant does not allege fraud or other unconscionable circumstances in his first special defense.   Therefore, the defendant's allegations in his first special defense do not support a defense for lack of consideration, and as a result, the plaintiff's motion to strike the defendant's first special defense is granted.

II

SECOND SPECIAL DEFENSE

The defendant's second special defense alleges that the mortgage deed is an adhesion contract because “it is a document prepared by the plaintiff's agent or attorney, the content, terms and conditions at which were non-alterable by the defendant ․ and it was knowingly prepared with misrepresentations as to the true facts of the transactions, i.e. that the defendant ․ was a ‘borrower.’   Such misrepresentation is a material misrepresentation voiding the terms and conditions of the instruments, as to the defendant ․”

The plaintiff argues that, pursuant to the mortgage deed, the defendant is a borrower and granted a security interest in the property to the plaintiff, but is not liable for the underlying debt under the note.   The defendant counters that he neither speaks nor reads the English language, and he was not informed that by executing the mortgage deed he would be deeding title to his interest in the property, which he acquired by investing his own money, as security for the debt of the property's co-owners, Bautista and Jose.

Our Supreme Court has noted that “[t]he most salient feature [of adhesion contracts] is that they are not subject to the normal bargaining processes of ordinary contracts and that they tend to involve a standard form contract prepared by one party, to be signed by the party in a weaker position, usually a consumer, who has little choice about the terms.”  Rearden v. Windswept Farm, LLC, 280 Conn. 153, 162-63, 905 A.2d 1156 (2006).  “The concept that a contract of adhesion should be interpreted and enforced differently from an ordinary contract has evolved from cases which have involved contractual provisions drafted and imposed by a party enjoying superior bargaining strength-provisions which unexpectedly and often unconscionably limit the obligations and liability of the party drafting the contract.”  (Internal quotation marks.)   Votto v. American Car Rental, Inc., Superior Court, judicial district of New Haven, Docket No. CV 01 0456354 (June 16, 2003, Berdon, J.T.R.) (35 Conn. L. Rptr. 17, 18).

In the present case, the defendant's second special defense allegations, if proven, could affect the validity of the mortgage deed terms and conditions.   Construing the allegations in a manner most favorable to the defendant, the defendant's second special defense alleging a contract of adhesion is legally sufficient.   As a result, the plaintiff's motion to strike the defendant's second special defense is denied.

III

THIRD SPECIAL DEFENSE

The defendant's third special defense states as follows:  “The foreclosure of the defendant's right of redemption, wherein the defendant has not obligated himself for the repayment of a debt, and wherein the defendant ․ is not a party to the mortgage note which is being sued upon, is a violation of the statute of frauds ․ General Statutes § 52-550, in that it is an attempt to make the defendant ․ responsible for the debt of a third party, where there is not sufficient writing to set forth the essential terms of the agreement at issue, i.e. that the defendant ․ agreed to subject his property as security for the payment of a third party's debt.”   The plaintiff argues that pursuant to the mortgage deed, the defendant is a borrower and granted a security interest in the property to the plaintiff.   The plaintiff further concedes that the defendant is not liable for the underlying debt under the note.

As a preliminary matter, the court must determine whether it may consider the mortgage deed attached to the plaintiff's motion to strike when ruling on the merits of the motion.  “[A] motion to strike is essentially a procedural motion that focuses solely on the pleadings ․ It is, therefore, improper for the court to consider material outside of the pleading that is being challenged by the motion ․ Nonetheless, [a]ny plaintiff desiring to make a copy of any document a part of the complaint may, without reciting it or annexing it, refer to it as Exhibit A, B, C, etc., as fully as if it had been set out at length;  but in such case the plaintiff shall serve a copy of such exhibit or exhibits on each other party to the action forthwith upon receipt of notice of the appearance of such party and file the original or copy of such exhibit or exhibits in court with proof of service on each appearing party ․ A complaint includes all exhibits attached thereto.”  (Citations omitted;  internal quotation marks omitted.)  Tracy v. New Milford Public Schools, 101 Conn.App. 560, 566, 922 A.2d 280, cert. denied, 284 Conn. 910, 931 A.2d 935 (2007).   In the present case, because the plaintiff identified the mortgage deed as “Exhibit B” in its complaint, it became part of the pleading.   Accordingly, the court may consider the mortgage deed in ruling upon the present motion.

General Statutes § 52-550(a) provides in relevant part:  “No civil action may be maintained ․ unless the agreement ․ is made in writing and signed by the party ․ to be charged ․ upon any agreement for the sale of real property or any interest in or concerning real property.”   Pursuant to the terms of the mortgage deed, which the defendant signed, “any [b]orrower who co-signs this [s]ecurity [i]nstrument but does not execute the [n]ote ․ is cosigning this [s]ecurity [i]nstrument only to mortgage, grant and convey the co-signer's interest in the [p]roperty under the terms of this [s]ecurity [i]nstrument [and] is not personally obligated to pay the sums secured by this [s]ecurity [i]nstrument ․” Therefore, contrary to the defendant's allegations, there exists a signed writing in which the defendant agreed to subject his property to the plaintiff as security for the payment of the co-owners' debt under the note.   As a result, the defendant's third special defense alleging a violation of General Statutes § 52-550 is legally insufficient, and the plaintiff's motion to strike the defendant's third special defense is granted.

IV

FOURTH SPECIAL DEFENSE

The defendant's fourth special defense alleges that the plaintiff failed to provide the defendant with notice “of its intention to commence an action, default the defendant ․ [and] give the defendant ․ an opportunity to cure or to accelerate the underlying note.”   The plaintiff argues that notice of the default and the right to cure the default was sent to Bautista and Jose, and therefore, pursuant to the mortgage deed, sufficient notice was provided to the defendant.

To support its argument, the plaintiff attached copies of the notices sent to Bautista and Jose to its motion to strike.   As discussed herein, however, “[i]t is ․ improper for the court to consider material outside of the pleading that is being challenged by the motion.”  Tracy v. New Milford Public Schools, supra, 101 Conn.App. 566.   In the present case, unlike the mortgage deed, the copies of the notices were not made a part of the pleading.   See id.   As a result, the court may not consider the copies of the notices in ruling upon the present motion.   Construing the allegations in a manner most favorable to the defendant, the defendant's fourth special defense alleging failure to provide notice is legally sufficient.   Therefore, the plaintiff's motion to strike the defendant's fourth special defense is denied.

V

FIFTH SPECIAL DEFENSE

The defendant's fifth special defense states as follows:  “The plaintiff fraudulently induced the defendant ․ into signing the mortgage instrument by making statements that the defendant ․ would have no obligation to repay the promissory note or underlying debt, and by concealing from the defendant ․ that by signing the mortgage instrument that he was in fact conveying his interest in the subject property to the lender as security for the repayment of the note and debt.   That such misrepresentation on the part of the plaintiff did induce the defendant ․ into signing the instrument, all to his detriment and financial loss.”   The plaintiff counters that the defendant signed the mortgage deed, and his failure to read the contract before signing it cannot excuse his obligations thereunder.

“Fraud in the inducement to enter a contract is a well established equitable defense ․ Fraud and misrepresentation cannot be easily defined because they can be accomplished in so many different ways.   They present, however, issues of fact.”  (Citation omitted;  internal quotation marks omitted.)  Barasso v. Rear Still Hill Road, LLC, 81 Conn.App. 798, 806, 842 A.2d 1134 (2004).   “[I]t is well settled that the essential elements of fraud are:  (1) a false representation was made as a statement of fact;  (2) it was untrue and known to be untrue by the party making it;  (3) it was made to induce the other party to act upon it;  and (4) the other party did so act upon that false representation to his injury.”  (Internal quotation marks omitted.)  Ferris v. Faforo, 93 Conn.App. 679, 692, 890 A.2d 602 (2006).

Construing the allegations in a manner most favorable to the defendant, the court finds that the defendant has sufficiently asserted a special defense of fraud and misrepresentation in the inducement to enter into the mortgage deed.   Therefore, the plaintiff's motion to strike the defendant's fifth special defense is denied.

VI

SIXTH SPECIAL DEFENSE

The defendant's sixth special defense alleges that the plaintiff made “untrue and/or misrepresentations as to the nature and consequences of signing the mortgage instrument,” and therefore, “the plaintiff is not entitled to the equitable relief of foreclosure due to the lack of clean hands of the plaintiff.”   The plaintiff argues that the defendant's failure to read the mortgage deed is not a sufficient defense to the present action.

“[F]oreclosure is an equitable action.   Our jurisprudence has recognized that those seeking equitable redress in our courts must come with clean hands.   The doctrine of unclean hands expresses the principle that where a plaintiff seeks equitable relief, he must show that his conduct has been fair, equitable and honest as to the particular controversy in issue ․ The party seeking to invoke the clean hands doctrine to bar equitable relief must show that his opponent engaged in wilful misconduct with regard to the matter in litigation ․ The trial court enjoys broad discretion in determining whether the promotion of public policy and the preservation of the courts' integrity dictate that the clean hands doctrine be invoked.”  (Internal quotation marks omitted.)  Emigrant Mortgage Company, Inc. v. D'Agostino, 94 Conn.App. 793, 804, 896 A.2d 814, cert. denied, 278 Conn. 919, 901 A.2d 43 (2006).

The plaintiff's argument fails to undermine the legal sufficiency of the defendant's special defense of unclean hands.   While generally a contracting party's failure to read the terms of a contract before signing it cannot be used to excuse his obligations thereunder, exceptions exist for circumstances involving “accident, fraud, mistake or unfair dealing.”  Batter Building Materials Co. v. Kirschner, 142 Conn 1, 7, 110 A.2d 464 (1954).   The defendant alleges that the plaintiff made fraudulent misrepresentations concerning the nature and consequences of the mortgage deed.   Construing the allegations in a manner most favorable to the defendant, the defendant's second special defense alleging unclean hands is legally sufficient.   Therefore, the plaintiff's motion to strike the defendant's sixth special defense is denied.

CONCLUSION

Based on the foregoing, the court hereby grants the plaintiff's motion to strike the defendant's first special defense and third special defense.   The court hereby denies the plaintiff's motion to strike the defendant's second special defense, fourth special defense, fifth special defense and sixth special defense.

Martin, J.

FOOTNOTES

FN1. Bautista, Jose and Mortgage Electronic are not parties to the present motion.   Hereinafter, the term the defendant refers to Rolando..  FN1. Bautista, Jose and Mortgage Electronic are not parties to the present motion.   Hereinafter, the term the defendant refers to Rolando.

Martin, Robert A., J.