HSBC USA v. Marinete Benevides (2011)

MEMORANDUM OF DECISION ON DEFENDANT'S MOTION TO STRIKE

FACTUAL BACKGROUND

On November 25, 2009, the plaintiff, “HSBC Bank USA, National Association, as Trustee under the Pooling and Servicing Agreement dated as of February 1, 2005, Fremont Home Loan Trust 2005-A,” filed an amended complaint alleging the following facts.   Marinete Benevides, the current owner of 25 Dahl Avenue in Stratford (the premises), signed an adjustable rate note ¹ on November 15, 2004 promising to pay Fremont Investment & Loan (Fremont) $242,250 plus interest, in return for a loan.   To provide security for the note, Benevides mortgaged the premises to Mortgage Electronic Registration Systems, Inc. (MERS) in its capacity as a “nominee” for Fremont.²  Benevides failed to pay the installment of principal and interest due on June 1, 2008, and has failed to pay such an installment due on every month thereafter.   The plaintiff, now the owner of the note and mortgage by assignment from MERS, seeks to foreclose on the mortgage and gain immediate possession of the premises.

On April 28, 2010, Benevides and her cosigner on the mortgage, Luana Fernandes,³ filed an amended answer admitting that Benevides is an owner of the premises and in possession thereof.   Benevides and Fernandes (the defendants),⁴ however, deny the remaining material allegations of the amended complaint.   The defendants also raise seven special defenses to the plaintiff's action and allege three counterclaims through which they seek damages, costs, attorneys fees and an injunction preventing the plaintiff from proceeding with foreclosure.

The plaintiff filed on June 1, 2010 a motion to strike all of the defendants' special defenses and counterclaims.⁵  In support of its motion, the plaintiff filed a memorandum of law.   In reply, the defendants filed a memorandum in opposition and two “supplements” to their memorandum.

DISCUSSION

Practice Book § 10-39(a) provides in relevant part:  “Whenever any party wishes to contest ․ the legal sufficiency of the allegations of any complaint, counterclaim or cross claim, or of any one or more counts thereof, to state a claim upon which relief can be granted ․ that party may do so by filing a motion to strike the contested pleading or part thereof.”   In addition, “a plaintiff can [move to strike] a special defense ․” Nowak v. Nowak, 175 Conn. 112, 116, 394 A.2d 716 (1978).

“It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted.”   (Internal quotation marks omitted.)   Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252-53, 990 A.2d 206 (2010).  “In ruling on a motion to strike, the court is limited to the facts alleged in the complaint;” (internal quotation marks omitted) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997);  and must “construe the complaint in the manner most favorable to sustaining its legal sufficiency.” ⁶  (Internal quotation marks omitted.)  American Progressive Life & Health Ins. Co. of New York v. Better Benefits, LLC, 292 Conn. 111, 120, 971 A.2d 17 (2009).   Furthermore, our Supreme Court “will not uphold the granting of [a] motion to strike on a ground not alleged in the motion ․” Blancato v. Feldspar Corp., 203 Conn. 34, 44, 522 A.2d 1235 (1987).

I

SPECIAL DEFENSE ONE (UNCONSCIONABILITY)

In their first special defense, the defendants allege that the note is unconscionable because (1) the initial fixed interest rate on the note exceeded the “average contract rate on thirty year fixed rate conventional home mortgage commitment as quoted by Freddie Mac” by 2.33 percent;  (2) the adjustable rate on the note exceeded the Freddie Mac rate by 4.87 percent;  and (3) the adjustable rate exceeded the initial fixed rate by 2.64 percent.   The defendants also allege that they were unaware of the loan terms until final loan documents were delivered to their attorney one business day before the closing was scheduled.   By that time, the defendants claim, they could not obtain alternate financing.⁷  The defendants further claim that “due to a delay” by Fremont, the closing was postponed over three weeks, “during which time the defendants were under intense pressure from the seller to close.”   Additionally, they allege that Benevides has limited proficiency of English and never received a good faith estimate as required by law.

The plaintiff maintains that the adjustable rate complied with existing law, was fully disclosed in the loan documents and that the loan documents were signed by the borrower.   The plaintiff also argues that the defendants failed to provide credible allegations that they were unfairly surprised or that there was an absence of meaningful choice on the part of one of the parties.   Finally, the plaintiff argues that Fremont's failure to provide the defendants with a good faith estimate prior to closing does not render the loan unconscionable, and that any such claim should be raised under truth in lending laws.   The defendants argue that their allegations sufficiently show that the defendant was unfairly surprised by the terms of the note, demonstrate unequal bargaining power between the parties and that the note's terms were unreasonable compared with the current market rates.

“Because a mortgage foreclosure action is an equitable proceeding, the trial court may consider all relevant circumstances to ensure that complete justice is done.”  Reynolds v. Ramos, 188 Conn. 316, 320, 449 A.2d 182 (1982).   “[One of the] equitable defenses that our Supreme Court has recognized in foreclosure actions include unconscionability ․” (Internal quotation marks omitted.)  Fidelity Bank v. Krenisky, 72 Conn.App. 700, 706, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002).

“The purpose of the doctrine of unconscionability is to prevent oppression and unfair surprise ․ As applied to real estate mortgages, the doctrine of unconscionability draws heavily on its counterpart in the Uniform Commercial Code which, although formally limited to transactions involving personal property, furnishes a useful guide for real property transactions ․ As Official Comment 1 to § 2-302 of the Uniform Commercial Code suggests, [t]he basic test is whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract ․ Unconscionability is determined on a case-by-case basis, taking into account all of the relevant facts and circumstances.”  (Internal quotation marks omitted.)  Monetary Funding Group, Inc. v. Pluchino, 87 Conn.App. 401, 411, 867 A.2d 841 (2005).

“The element of unfair surprise has frequently been termed by commentators and courts as ‘procedural unconscionability’ and is implicated by bargaining improprieties in the contract formation process.   The element of oppression has been termed ‘substantive unconscionability’ and is implicated by overly harsh contract terms.”  Emlee Equipment Leasing Corp. v. Waterbury Transmission, Inc., 31 Conn.App. 455, 463 n.12, 626 A.2d 307 (1993).

Viewed in the light most favorable to sustaining legal sufficiency, the defendants have adequately pleaded their special defense of unconscionability.   The facts supporting a claim of procedural unconscionability, which implicates bargaining improprieties and unfair surprise, include:  (1) Benevides was an unsophisticated, first time home buyer with limited proficiency in English;  (2) she was deprived of the legally required good faith estimate for her loan;  (3) the defendants were unaware of the final loan terms until one business day before the scheduled closing;  and (4) the defendants were placed under intense pressure to close quickly and were subject to penalties due to delays caused by Fremont.   In support of a claim of substantive unconscionability, which is implicated by overly harsh contract terms and characterized by the element of oppression, the defendants have alleged (1) facts relating to the relative disparity in bargaining power between the parties to this transaction;  (2) that an unsophisticated party was subject to penalties for delays that were caused by Fremont;  and (3) that the fixed and adjustable interest rates on the note were significantly higher in comparison with the thirty-year fixed conventional home mortgage rate as quoted by Freddie Mac.

The facts alleged in the first special defense pertain to improprieties in the formation of the note and the harshness of its terms.   As they sufficiently support a defense of unconscionability, the motion to strike this defense will be denied.

II

SPECIAL DEFENSE TWO (UNCLEAN HANDS)

The second special defense incorporates the facts from the first special defense and asserts the doctrine of unclean hands.   The defendants allege that “Fremont wilfully and with intent to injure the defendants failed to provide any meaningful disclosure of essential loan terms until the delivery of the closing package.”   The plaintiff moves to strike this defense on the ground that the defendants fail to allege that the plaintiff engaged in wilful misconduct or intended to injure the defendants.

“We reiterate that foreclosure 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 clean hands doctrine is applied not for the protection of the parties but for the protection of the court ․ It is applied ․ for the advancement of right and justice ․ 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.”   (Emphasis added;  internal quotation marks omitted.)  Monetary Funding Group, Inc. v. Pluchino, 87 Conn.App. 401, 407, 867 A.2d 841 (2005).

“Our Supreme Court defines ‘wilful misconduct’ as ‘intentional conduct’ with ‘the design to injure either actually entertained or to be implied from the conduct and circumstances ․ Not only the action producing the injury but the resulting injury also must be intentional.’  “ Witczak v. Gerald, 69 Conn.App. 106, 116, 793 A.2d 1193 (2002), quoting Dubay v. Irish, 207 Conn. 518, 533, 542 A.2d 711 (1988).

“ ‘[W]hile Connecticut's appellate courts do not appear to have had an occasion to consider precisely the issue of the liability of an assignee for pre-assignment breaches by the assignor, numerous other courts have ruled that to be liable for the assignor's nonperformance of duties under a contract, the assignee must have expressly assumed liability for the prior breaches.’   SCP Corp. v. Bank Boston, Superior Court, judicial district of Waterbury, Docket No. X[0]1 CV 98 0116198 (March 18, 1999, Hodgson, J.) (24 Conn. L. Rptr. 304) ․ Therefore, [a] defendant may not assert the special defense of ․ unclean hands [when] the allegations contained in this special defense relate to the conduct of the assignor ․” Deutsche Bank v. Gregory-Boutot, Superior Court, judicial district of Windham, Docket No. CV 08 5003138 (July 15, 2009, Potter, J.T.R.);   see also Indymac Bank, F.S.B. v. Khan, Superior Court, judicial district of Fairfield, Docket No. CV 08 5016789 (April 16, 2010, Hartmere, J.);   Fremont Investment & Loan v. Santiago, Superior Court, judicial district of New London, Docket No. CV 06 5001151 (January 13, 2010, Martin, J.);   WM Specialty Mortgage, LLC v. Brandt, Superior Court, judicial district of Ansonia-Milford at Milford, Docket No. CV 09 5001157 (February 10, 2009, Moran, J.T.R.).

The defendants do not allege, nor can it be fairly implied from the allegations in the second special defense, that the plaintiff had any desire or intent to injure the defendants.   The court cannot impute any “wilful” acts intended to injure the defendants by Fremont to the current plaintiff.   Because the defendants have failed to plead that the plaintiff engaged in acts of wilful misconduct that would render its hands unclean, the allegations of the second special defense are legally insufficient.   For the foregoing reasons, the court will grant the motion to strike the second special defense.

III

SPECIAL DEFENSE THREE (UNCLEAN HANDS)

The third special defense, like the second, incorporates the facts from the first defense and asserts the doctrine of unclean hands.   Specifically, the defendants allege that the plaintiff “wilfully and with intent to injure” did not provide them with written notice of the interest rate adjustment even though this was required under § 4(F) of the note.   The plaintiff moves to strike the third special defense on the ground that the defendants allege a legal conclusion.

“A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged.”  (Internal quotation marks omitted.)  Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).   The mere allegation that one's conduct was “wilful,” without any supporting facts, is a legal conclusion subject to a motion to strike.   See Wells Fargo Bank v. Lewis, Superior Court, judicial district of Fairfield, Docket No. 07 5006088 (February 18, 2010, Maiocco, J.T.R.) (“[t]he defendant's allegation that the plaintiff engaged in ‘wilful misconduct’ is a legally conclusory statement, and cannot assist the court in determining whether facts exist which, if proved, would show that the plaintiff acted wilfully”);  Connecticut Environmental Associates, Inc. v. Resources Recovery Authority, Superior Court, judicial district of New Haven, Docket No. CV 96 0393991 (July 23, 1997, Zoarski, J.) (20 Conn. L. Rptr. 174, 176 n.3) (allegations that conduct was “wanton or wilful” were legal conclusions);  Pascarelli v. Corning Clinical Laboratories, Inc., Superior Court, judicial district of Danbury, Docket No. 325312 (March 25, 1997, Moraghan, J.) (19 Conn. L. Rptr. 82, 84) (“solely alleging that the defendant's conduct was ‘wilful,’ merely states a legal conclusion, not an allegation of fact”).

In the present case, the defendants do not plead any facts supporting their allegation that the plaintiff acted “wilfully.”   Although the defendants allege that the plaintiff possessed an “intent to injure” them, this merely states the definition of wilfulness;  see Witczak v. Gerald, supra, 69 Conn.App. 116;  and is itself conclusory.   Contrary to the defendants' contention, wilfulness cannot be “inferred from the fact that loan servicers make more money from foreclosing on a property than they do from loan modifications and workouts”;  in any event, this “fact” is not alleged in the third special defense.   Thus, the motion to strike the third special defense will be granted.

IV

COUNTERCLAIM TWO (BREACH OF CONTRACT)

Incorporating the facts alleged in third special defense, the second counterclaim alleges that the plaintiff's failure to send written notice of the rate change as required by the mortgage note produced a chain of events that caused the defendant Benevides to default on the note and resulted in this foreclosure action.   The plaintiff moves to strike the second counterclaim on the ground that the allegations contained therein do not relate to the making, validity or enforcement of the note because its alleged conduct occurred after the execution of the loan documents.   The defendants respond that their allegations pertain to the plaintiff's failure to perform its contractual duties and thus directly relate to the plaintiff's right to enforce the note.

“In a foreclosure action, a counterclaim must relate to the making, validity or enforcement of the mortgage note in order properly to be joined with the complaint.”   JP Morgan Chase Bank, Trustee v. Rodrigues, 109 Conn.App. 125, 133, 952 A.2d 56 (2008).  “This requirement ․ is nothing more than an application of Practice Book § 10-10 ․” ⁸ (Internal quotation marks omitted.)   Deutsche Bank Trust Co. America v. Walters, Superior Court, judicial district of New London, Docket No. CV 562858 (April 28, 2004, Martin, J.).   “This section is a common-sense rule designed to permit the joinder of closely related claims where such joinder is in the best interests of judicial economy.”  (Internal quotation marks omitted.)  JP Morgan Chase Bank Trustee v. Rodrigues, supra, 131.  “Conduct on the part of the party seeking foreclosure that occurred after the loan documents were executed and not necessarily directly related solely to enforcement of the note ․ properly has been found not to arise out of the same transaction as the complaint.”   (Emphasis added.)  Id., 134-35.

Viewing the facts of the second counterclaim in a manner most favorable to sustaining its legal sufficiency, the plaintiff's alleged failure to comply with the notice requirement relates to the enforcement of the note.   Section 4(F) of the note provides:  “The Note Holder will deliver or mail to me a notice of any changes in my interest rate and the amount of my monthly payment before the effective date of any change.   The notice will include information required by law to be given to me and also the title and telephone number of a person who will answer any question I may have regarding the notice.”   The Superior Court has held that “[t]he notice requirements of a mortgage note and deed create conditions precedent ⁹ to institution of a foreclosure suit.”   Deutsche Bank National Trust Co. v. Seplowitz, Superior Court, judicial district of Tolland, Docket No. CV 07 5001419 (September 12, 2007, Sferrazza, J.).   See also North American Bank & Trust Co. v. Lionetti, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 94 0138865 (July 25, 1995, D'Andrea, J.) (“[c]ompliance with the provisions of the mortgage is a condition precedent to a foreclosure”);  cf.  Northeast Savings, F.A. v. Scherban, 47 Conn.App. 225, 228, 702 A.2d 659 (1997) (“the use of ‘shall’ in the note creates a condition precedent that must be satisfied prior to foreclosure”), cert. denied, 244 Conn. 907, 714 A.2d 2 (1998).   Thus, if it can be proved that satisfaction of § 4(F) is a condition precedent to foreclosure and that the plaintiff has not met this requirement, then the plaintiff may not enforce the mortgage note.   Because the defendants' allegations bear directly on the note's enforcement, this counterclaim is properly joined to the complaint.   Accordingly, the motion to strike the second counterclaim will be denied.¹⁰

V

FOURTH SPECIAL DEFENSE (UNCLEAN HANDS), SEVENTH SPECIAL DEFENSE (CONTRACT MODIFICATION), FIRST COUNTERCLAIM (BREACH OF CONTRACT) AND THIRD COUNTERCLAIM (CUTPA)

The fourth special defense incorporates the facts alleged in the first defense and asserts the doctrine of unclean hands.   In this defense the defendants allege that the plaintiff's loan servicing agent, Litton Loan Servicing (Litton), entered into a servicer participation agreement (SPA) with the Federal National Mortgage Association (Fannie Mae).   Under the SPA, Litton was allegedly required to “use reasonable efforts” to offer “HAMP modifications to its borrowers.” ¹¹  The defendants claim that “Litton, wilfully and intending to harm the defendants,” failed to use reasonable efforts to offer them a HAMP modification, or in the alternative, that “Litton, wilfully and intending to harm the defendants failed to apply the standards for review required under the HAMP program to the defendants' case.”

The seventh special defense, first counterclaim and third counterclaim adopt the facts in the fourth special defense.   The seventh special defense asserts that the note between Benevides and Fremont was modified such that its enforcement is prohibited until Litton complies with the terms of the SPA. The defendants allege in the first counterclaim that they are “intended beneficiaries” under the SPA and that Litton failed to satisfy its “contractual duty” to them.   The defendants allege in the third counterclaim that the plaintiff's failure to comply with the SPA violated the Connecticut Unfair Trade Practices Act, General Statutes § 42-110b et seq.

The plaintiff presents a number of grounds on which it claims that the fourth special defense, seventh special defense, first counterclaim and third counterclaim should collectively be stricken:  (1) the defendants' allegations in those defenses and counterclaims do not relate to the making, validity or enforcement of the note;  (2) the defendants are not third-party beneficiaries under the SPA;  (3) the Emergency Economic Stabilization Act, 12 U.S.C. § 5201 et seq., does not create a private right of action for the defendants;  (4) borrowers are not entitled to loan modifications under HAMP;  and (5) the defendants allege legal conclusions.¹²

The plaintiff argues that the allegations contained in the fourth special defense, seventh special defense, first counterclaim and third counterclaim do not relate to the making, validity or enforcement of the mortgage note.   Specifically, the plaintiff argues that because the alleged conduct occurred after the note was executed and concern documents other than the mortgage note, the defendants' allegations “are not proper matters for adjudication in a foreclosure action.”   Furthermore, the plaintiff contends that the defendants' allegation that the note was modified is a legal conclusion unsupported by the facts alleged.   The defendants counter that the modification, “which affected the enforceability of the note,” was sufficiently alleged.

As is required of a counterclaim, “[a] valid special defense at law to a foreclosure proceeding must be legally sufficient and address the making, validity or enforcement of the mortgage, the note or both.”  (Internal quotation marks omitted.)  Fidelity Bank v. Krenisky, supra, 72 Conn.App. 705;  see also JP Morgan Chase Bank Trustee v. Rodrigues, supra, 109 Conn.App. 133.  “The rationale behind this [requirement] is that counterclaims and special defenses which are not limited to the making, validity or enforcement of the note or mortgage fail to assert any connection with the subject matter of the foreclosure action and as such do not arise out of the same transaction as the foreclosure action ․ Moreover, courts have held that defenses to foreclosure are recognized when they attack the note itself rather than some behavior of the [mortgagee].”  (Internal quotation marks omitted.)   Thomaston Savings Bank v. Hardisty, Superior Court, judicial district of Litchfield, Docket No. CV 09 5006672 (September 13, 2010, Roche, J.);   Ameriquest Mortgage Co. v. Ruane, Superior Court, judicial district of Windham, Docket No. CV 04 4000885 (October 16, 2006, Booth, J.);   Liberty Bank v. New London Limited Partnership, Superior Court, judicial district of New London, Docket No. CV 06 4005236 (August 7, 2006, Devine, J.).

The defendants' allegations do not relate to the making, validity or enforcement of the mortgage note because they pertain to the plaintiff's conduct with respect to an entirely separate transaction involving different parties.   Under the SPA, the federal government and the plaintiff's loan servicing agent allegedly “intended” for the defendants to receive various benefits, including a “standardized review process” for a loan modification and “a promise on the part of servicers to use best efforts to remove” restrictions to such a modification.   To the extent that the defendants claim they are entitled to these benefits, however, these alleged rights do not arise from the note itself.   Rather, they arise from a separate transaction and therefore cannot be considered as part of the present transaction that is the subject of this foreclosure action.   See EMC Mortgage Corp. v. Shamber, Superior Court, judicial district of Tolland, Docket No. CV 07 5001252 (November 12, 2009, Sferrazza, J.) (“repayment agreement is a separate transaction from the execution of the note and mortgage and ․ is a separate transaction from the transaction that is the subject of the complaint”);  Prem, Inc. v. Agababian, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 04 0198807 (October 22, 2004, Jennings, J.) (“employment agreement between the parties is a separate transaction from the note and mortgage being foreclosed by the plaintiff and does-not go to the making, validity, or enforcement of the note”).

To the extent the defendants allege that the mortgage note was modified “such that the note could not be enforced without Litton first complying with the terms of the SPA,” the plaintiff correctly argues that this allegation is conclusory and wholly unsupported by any facts.   Specifically, the defendants allege that “by the action of Litton agreeing to the SPA, the terms of the defendant's note were modified.”   The defendants do not plead facts that, if proven, would establish a valid modification of the note, particularly as a result of Litton's participation in a separate transaction to which the defendants were not parties.¹³  “A motion to strike admits all facts well pleaded;  it does not admit legal conclusions ․” (Emphasis in original;  internal quotation marks omitted.)  Faulkner v. United Technologies Corp., 240 Conn. 576, 588, 693 A.2d 293 (1997).   Conclusory allegations, even as relating to the making, validity or enforcement of the note, are insufficient to support a defense in a foreclosure action.   See U.S. Bank N.A. v. Hollo, Superior Court, judicial district of New London, Docket No. 09 5010930 (December 2, 2009, Cosgrove, J.);   Home Savings of America, F.A. v. Santilli, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 93 0130634 (March 2, 1995, D'Andrea, J.).

Because the defendants' allegations pertain to a separate transaction involving different parties, and those allegations that do relate to the making, validity or enforcement of the mortgage note are conclusory, the motion to strike will be granted as to the fourth special defense, seventh special defense, first counterclaim and third counterclaim.

VI

SPECIAL DEFENSE FIVE (LACK OF STANDING) AND SPECIAL DEFENSE SIX (FAILURE TO JOIN REAL PARTY IN INTEREST)

The plaintiff moves to strike the fifth and sixth special defenses, which respectively allege that the plaintiff lacks standing and has failed to join a real party in interest, on the grounds that the defendants fail to state a claim upon which relief may be granted and that the court has already decided that the plaintiff has standing.   The plaintiff argues that the defendants have not stated a claim upon which relief may be granted because their allegations are merely speculative, not supported by facts and are conclusory statements of law.   In addition, the plaintiff argues that the court's (Maiocco, J.T.R.) statement that “the plaintiff has established that it is the holder [of the note],” issued when it denied the defendants' motion to strike the plaintiff's complaint, now constitutes the law of the case and conclusively determines that the plaintiff has standing to foreclose and is a real party in interest.

The defendants argue that they have alleged facts sufficient to show that the plaintiff does not possess the note, that only the master document custodian has the legal authority to possess the note under the pooling and servicing agreement, that claims relating to the pooling and servicing agreement are based on reasonably held beliefs and that the court's earlier ruling on the plaintiff's standing is not the law of the case because the court did not make any finding that the plaintiff was the holder of the note.

A

Failure to State a Claim

Practice Book § 10-1 provides that “[e]ach pleading shall contain a plain and concise statement of the material facts on which the pleader relies, but not of the evidence by which they are to be proved ․” “[T]he interpretation of pleadings is always a question [of law] for the court ․” Forte v. Citicorp Mortgage, Inc., 66 Conn.App. 475, 484, 784 A.2d 1024 (2001).   The phrase “on information and belief” has been found adequate for the purposes of meeting Connecticut's fact pleading requirements in a declaratory judgment action;  ABB Automation, Inc. v. Zaharna, 77 Conn.App. 260, 266-67, 823 A.2d 340 (2003);  and in a motion to strike special defenses.   United States National Bank Assn. v. Lewis, Superior Court, Docket No. CV 09 5011097 (November 12, 2009, Martin, J.).

Here, the allegations in the defendant's fifth and sixth special defenses are based “on information and belief” and set forth well pleaded factual allegations that the court must take as true in the context of a motion to strike.   The defendant has alleged that the plaintiff is not the proper party to bring this foreclosure action because, as a “trustee,” it cannot possess the note under the terms of the pooling and servicing agreement.   Instead, the pooling and servicing agreement requires a “master document custodian” to retain possession of the note, and possession is a necessary element for a party to have standing as the “holder.” ¹⁴  Likewise, if the master document custodian is the possessor of the note, then it is a real party in interest that the plaintiff has failed to join to this suit.   These allegations provide a sufficient basis upon which to allege the fifth and sixth special defenses.   Accordingly, the fifth and sixth special defenses should not be stricken for failure to state a claim, and the pleadings in support thereof are neither conclusory nor unsupported by facts.

B

Law of the Case

“The law of the case is not written in stone but is a flexible principle of many facets adaptable to the exigencies of the different situations in which it may be invoked ․ In essence it expresses the practice of judges generally to refuse to reopen what has been decided and is not a limitation on their power ․ New pleadings intended to raise again a question of law which has been already presented on the record and determined adversely to the pleader are not to be favored ․ But a determination so made is not necessarily to be treated as an infallible guide to the court in dealing with all matters subsequently arising in the cause ․ Where a matter has previously been ruled upon interlocutorily, the court in a subsequent proceeding in the case may treat that decision as the law of the case, if it is of the opinion that the issue was correctly decided, in the absence of some new or overriding circumstance.”  (Citations omitted;  internal quotation marks omitted.)   Breen v. Phelps, 186 Conn. 86, 99, 439 A.2d 1066 (1982).

The plaintiff's argument that the court (Maiocco, J.T.R.) already decided the issues raised here misconstrues the law of the case doctrine, the court's earlier ruling and the procedural posture of the present motion.   The court's February 18, 2010 ruling, in which the plaintiff claims the court established the law of the case, inured from the defendant's motion to strike the plaintiff's complaint.   After construing the challenged pleading in the manner most favorable to sustaining its legal sufficiency, the court found that the plaintiff had adequately pleaded that it was the holder of the note and could maintain its action.   Adequately pleading one's cause of action is a necessary and preliminary step for a party bringing a legal claim, but once this hurdle has been cleared the separate and distinct task remains of proving each element of a cause of action through the submission of evidence.   The court's earlier motion to strike dealt only with the legal sufficiency of the plaintiff's claim;  it did not and could not have addressed the merits of the arguments.   See American Progressive Life & Health Ins. Co. of New York v. Better Benefits, LLC, supra, 292 Conn. 120 (“[a] motion to strike challenges the legal sufficiency of a pleading”).   See also Deutsche Bank Natl. Trust Co. v. Bialobrzeski, 123 Conn.App. 791 (2010).

Accordingly, no determination was made on the plaintiff's status as holder beyond the legal sufficiency of the plaintiff's pleading.   Therefore, the court's prior ruling does not bar the fifth and sixth special defenses alleged by the defendant.   For the foregoing reasons, the motion to strike the fifth and sixth special defenses will be denied.

CONCLUSION

Based on all of the foregoing, the court will grant the plaintiff's motion to strike (# 155) as to the second, third, fourth and seventh special defenses, and the first and third counterclaims.   The court will deny the motion to strike as to the first, fifth and sixth special defenses, and the second counterclaim.

HARTMERE, JUDGE

FOOTNOTES

FN1. A copy of the note is attached to the amended complaint as exhibit A..  FN1. A copy of the note is attached to the amended complaint as exhibit A.

FN2. A copy of the mortgage deed is attached to the amended complaint as exhibit B..  FN2. A copy of the mortgage deed is attached to the amended complaint as exhibit B.

FN3. Fernandes, however, did not cosign the note..  FN3. Fernandes, however, did not cosign the note.

FN4. Although the “United States of America, Department of Treasury-Internal Revenue Services” is also a named defendant in this action, it is not involved in the present motion.   Therefore, “the defendants” shall refer only to Benevides and Fernandes..  FN4. Although the “United States of America, Department of Treasury-Internal Revenue Services” is also a named defendant in this action, it is not involved in the present motion.   Therefore, “the defendants” shall refer only to Benevides and Fernandes.

FN5. The plaintiff's motion fails to set forth reasons for each of its claims of legal insufficiency.   See Practice Book § 10-41 (“[e]ach motion to strike raising any of the claims of legal insufficiency ․ shall separately set forth each such claim of insufficiency and shall distinctly specify the reason or reasons for each such claimed insufficiency”).   Although this failure renders the motion fatally defective, the defendants' failure to object to it was a waiver of the defect.   See Stuart v. Freiberg, 102 Conn.App. 857, 861-62, 927 A.2d 343 (2007)..  FN5. The plaintiff's motion fails to set forth reasons for each of its claims of legal insufficiency.   See Practice Book § 10-41 (“[e]ach motion to strike raising any of the claims of legal insufficiency ․ shall separately set forth each such claim of insufficiency and shall distinctly specify the reason or reasons for each such claimed insufficiency”).   Although this failure renders the motion fatally defective, the defendants' failure to object to it was a waiver of the defect.   See Stuart v. Freiberg, 102 Conn.App. 857, 861-62, 927 A.2d 343 (2007).

FN6. As with a motion to strike a complaint or counterclaim, the court must also “take the facts to be those alleged in the special defenses and ․ 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)..  FN6. As with a motion to strike a complaint or counterclaim, the court must also “take the facts to be those alleged in the special defenses and ․ 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).

FN7. The contract of sale for the premises allegedly imposed a penalty upon buyers for failure to close within five business days of the scheduled closing date..  FN7. The contract of sale for the premises allegedly imposed a penalty upon buyers for failure to close within five business days of the scheduled closing date.

FN8. Practice Book § 10-10 provides in relevant part:  “In any action for legal or equitable relief, any defendant may file counterclaims against any plaintiff ․ provided that each such counterclaim arises out of the transaction or one of the transactions which is the subject of the plaintiff's complaint ․”.  FN8. Practice Book § 10-10 provides in relevant part:  “In any action for legal or equitable relief, any defendant may file counterclaims against any plaintiff ․ provided that each such counterclaim arises out of the transaction or one of the transactions which is the subject of the plaintiff's complaint ․”

FN9. “A condition precedent is a fact or event which the parties intend must exist or take place before there is a right to performance ․ If the condition is not fulfilled, the right to enforce the contract does not come into existence.”  (Citations omitted.)  Lach v. Cahill, 138 Conn. 418, 421, 85 A.2d 481 (1951)..  FN9. “A condition precedent is a fact or event which the parties intend must exist or take place before there is a right to performance ․ If the condition is not fulfilled, the right to enforce the contract does not come into existence.”  (Citations omitted.)  Lach v. Cahill, 138 Conn. 418, 421, 85 A.2d 481 (1951).

FN10. The court rejects the plaintiff's contention that the defendants have not sufficiently alleged that the plaintiff's failure to provide notice caused Benevides to be in default.   The defendants allege that, having not received any notice of the interest rate change, Benevides continued to make monthly payments based on the original rate and, under the mistaken belief that these payments were being accepted by the plaintiff, “dissipated” any remaining funds available to make the required mortgage payments.   Viewing these facts in a light most favorable to sustaining legal sufficiency, the element of causation is sufficiently pleaded..  FN10. The court rejects the plaintiff's contention that the defendants have not sufficiently alleged that the plaintiff's failure to provide notice caused Benevides to be in default.   The defendants allege that, having not received any notice of the interest rate change, Benevides continued to make monthly payments based on the original rate and, under the mistaken belief that these payments were being accepted by the plaintiff, “dissipated” any remaining funds available to make the required mortgage payments.   Viewing these facts in a light most favorable to sustaining legal sufficiency, the element of causation is sufficiently pleaded.

FN11. The defendants allege that the “Home Affordability and Stability Plan (HAMP)” is a federal program an objective of which is the modification of certain eligible mortgages.   It offered mortgage servicers such as Litton incentive payments from the federal government for all successful mortgage modifications completed during the life of the program.   The defendants claim that Litton entered into the SPA in order to “stem the rising tide of foreclosures that threatened its business” and to “take advantage of the opportunity to earn incentive payments.”.  FN11. The defendants allege that the “Home Affordability and Stability Plan (HAMP)” is a federal program an objective of which is the modification of certain eligible mortgages.   It offered mortgage servicers such as Litton incentive payments from the federal government for all successful mortgage modifications completed during the life of the program.   The defendants claim that Litton entered into the SPA in order to “stem the rising tide of foreclosures that threatened its business” and to “take advantage of the opportunity to earn incentive payments.”

FN12. As a threshold matter, the plaintiff has attached a copy of the SPA to its motion to strike and relies on it to argue that the defendants are not third-party beneficiaries.   The defendants argue that in doing so the plaintiff has pleaded a “form of a special defense” and, under Practice Book § 10-7, has therefore “waived its right to strike the defendants' first counterclaim, third counterclaim, fourth special defense and seventh special defense.”   This argument is without merit.   A motion to strike is a procedural device allowing a party to contest the legal sufficiency of an adversary's allegations, not to plead any facts.   See Practice Book § 10-39(a).   Therefore, the plaintiff has not waived its opportunity to file a motion to strike as to any of the defendants' defenses or counterclaims..  FN12. As a threshold matter, the plaintiff has attached a copy of the SPA to its motion to strike and relies on it to argue that the defendants are not third-party beneficiaries.   The defendants argue that in doing so the plaintiff has pleaded a “form of a special defense” and, under Practice Book § 10-7, has therefore “waived its right to strike the defendants' first counterclaim, third counterclaim, fourth special defense and seventh special defense.”   This argument is without merit.   A motion to strike is a procedural device allowing a party to contest the legal sufficiency of an adversary's allegations, not to plead any facts.   See Practice Book § 10-39(a).   Therefore, the plaintiff has not waived its opportunity to file a motion to strike as to any of the defendants' defenses or counterclaims.

FN13. “For a valid modification to exist, there must be mutual assent to the meaning and conditions of the modification and the parties must assent to the same thing in the same sense.”  (Emphasis added;  internal quotation marks omitted.)  Herbert S. Newman & Partners v. CFC Construction Ltd. Partnership, 236 Conn. 750, 761-62, 674 A.2d 1313 (1996).  “A modification of an agreement must [also] be supported by valid consideration and requires a party to do, or promise to do, something further than, or different from, that which he is already bound to do.”  (Internal quotation marks omitted.)  Harley v. Indian Spring Land Co., 123 Conn.App. 800, 822, 3 A.3d 992 (2010)..  FN13. “For a valid modification to exist, there must be mutual assent to the meaning and conditions of the modification and the parties must assent to the same thing in the same sense.”  (Emphasis added;  internal quotation marks omitted.)  Herbert S. Newman & Partners v. CFC Construction Ltd. Partnership, 236 Conn. 750, 761-62, 674 A.2d 1313 (1996).  “A modification of an agreement must [also] be supported by valid consideration and requires a party to do, or promise to do, something further than, or different from, that which he is already bound to do.”  (Internal quotation marks omitted.)  Harley v. Indian Spring Land Co., 123 Conn.App. 800, 822, 3 A.3d 992 (2010).

FN14. General Statutes § 42a-1-201(21)(A) provides that a holder with respect to a negotiable instrument means “the person in possession.”.  FN14. General Statutes § 42a-1-201(21)(A) provides that a holder with respect to a negotiable instrument means “the person in possession.”

Hartmere, Michael, J.