Lisa Horne-Marino v. David Denhup et al. (2011)

MEMORANDUM OF DECISION

The plaintiffs, Lisa Horne-Marino and Rose Horne, filed a five-count complaint against the defendants, David Denhup, Colleen Denhup, Leonard Addario, JMJ Builders, LLC and Mortgage Electronic Registration Systems, Inc., on April 5, 2010.¹  The defendant, David Denhup, filed a disclosure of defenses on May 11, 2010.²  The defendant filed the present motion for summary judgment as to count one of the plaintiffs' complaint on July 16, 2010.

The plaintiffs allege the following facts in count one of their complaint, which states as to each defendant a cause of action for foreclosure.   On or about October 19, 2005, the plaintiffs loaned $150,000 to the defendant, JMJ Builders, LLC, then the owner of certain real property situated at 75 Herbert Street in the city of Milford.   In consideration for their loan, the plaintiffs received a promissory note signed by the defendant, Addario, on behalf of JMJ Builders, LLC, and a mortgage securing the 75 Herbert Street property.   On or about the same date, the defendant, Addario, signed a personal guaranty in favor of the plaintiffs, in which he agreed to pay “the principal, interest and all sums related to the note” signed by the defendant, JMJ Builders, LLC. The mortgage and promissory note were thereafter duly recorded in the city of Milford land records.

The plaintiffs allege further that the defendant, JMJ Builders, LLC, made interest payments on the note, but never paid the principal.   The plaintiffs allege that at some time during 2006, the defendant, Addario, misrepresented to the plaintiffs that the 75 Herbert Street property had become subject to foreclosure in order to obtain a release from the plaintiffs.³  The plaintiffs allege that the defendant, Addario's, misrepresentation was fraudulent and deliberate in light of the allegation that Addario was in the process of refinancing the property, and required the plaintiffs' release in order to obtain the refinancing.

Subsequently, the defendant, JMJ Builders, LLC, transferred title to the 75 Herbert Street property to the defendant, Addario, by a quit claim deed recorded in the city of Milford land records on August 17, 2007.   Thereafter, Deutsche National Bank Trust, a nonparty to the present action, foreclosed on the 75 Herbert Street property and took title by a certificate of foreclosure recorded in the city of Milford land records on February 19, 2008.   The defendants, David and Colleen Denhup, purchased the 75 Herbert Street property from Deutsche National Bank Trust by a special warranty deed recorded in the city of Milford land records on April 2, 2008.

The plaintiffs allege that their note and mortgage on the 75 Herbert Street property remain valid because they released the defendant, Addario, in reliance on an alleged fraudulent misrepresentation.   In count one of their complaint, the plaintiffs seek to “accelerate the balance due on said note, to declare said note to be due in full, plus interest from the date of default and to foreclose the mortgage securing said note.”   The plaintiffs allege that their interest in the 75 Herbert Street property is first in priority and that the interests owned by the defendants, David and Colleen Denhup and Mortgage Electronic Registration Systems, Inc., are subsequent to their own.

The defendant submitted, as exhibits to the present motion for summary judgment, an affidavit of Carol J. Faherty, the attorney for the defendant, David Denhup;  a document entitled “release of mortgage,” dated December 26, 2006; ⁴  a document entitled “release of mortgage,” dated December 19, 2006; ⁵  and an affidavit of David Denhup dated July 7, 2010.

The plaintiffs filed an objection to the defendant's motion for summary judgment on July 16, 2010.   The plaintiffs submitted as an exhibit in support thereof an affidavit of the plaintiff, Horne-Marino, dated October 13, 2010.

The court heard argument on the defendant's motion for summary judgment at short calendar on October 18, 2010.⁶

“Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.   In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party ․ The party moving for summary judgment has the burden of showing the absence of any genuine issue of material fact and that the party is, therefore, entitled to judgment as a matter of law.”  (Internal quotation marks omitted.)  Southwick at Milford Condominium Assn., Inc. v. 523 Wheelers Farm Road, Milford, LLC, 294 Conn. 311, 318, 984 A.2d 676 (2009).   “The party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact.”  Washington v. Blackmore, 119 Conn.App. 218, 221, 986 A.2d 356, cert. denied, 296 Conn. 903, 991 A.2d 1104 (2010).  “A material fact has been defined adequately and simply as a fact which will make a difference in the result of the case.”   (Internal quotation marks omitted.)  Buell Industries, Inc. v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556, 791 A.2d 489 (2002).

The defendant moves for summary judgment on the grounds that there are no genuine issues of material fact and that he is entitled to judgment as a matter of law.   The plaintiffs reply that the defendant has failed to meet his burden.   The plaintiffs maintain that they would not have entered into the release agreement with respect to their interest in the 75 Herbert Street property had they been aware of the alleged fraudulent acts of the defendant, Addario.   The plaintiffs' recitation of this allegation, and support thereof with the affidavit of the plaintiff, Horne-Marino, however, does not create a genuine issue of material fact with respect to the plaintiffs' cause of action for foreclosure against the defendant, Denhup, in count one of their complaint.   Accordingly, the defendant has demonstrated his entitlement to summary judgment, and the plaintiffs have failed in their rebuttal.

A

The December 26, 2010 Release

In his memorandum of law in support of his motion for summary judgment, the defendant argues that “[i]t is indisputable that [the] plaintiffs released and forever discharged a mortgage they held on property located at 75 Herbert Street.”   Therefore, according to the defendant, the plaintiffs' “foreclosure count against [the defendant] must fail because [the] plaintiffs are attempting to foreclose upon a mortgage that was released and therefore no longer has any legal effect.”

In their memorandum of law in support of their objection to the defendant's motion for summary judgment, the plaintiffs argue that the defendant's reliance on the release recorded in the Milford land records is misplaced, because, “under [General Statutes § 47-10] recordation only perfects title and does not prove validity.”   The plaintiffs further contend that the court should not find that the defendant is a bona fide purchaser for value because “[i]t appears that those without adequate capabilities are simply discharged of their ownership or liens by more powerful, or more deceptive practices, and the practices of validating these transfers because the subsequent purchaser is a bona fide purchaser would only make these deceptions acceptable and unfortunately a part of our process.”   The crux of the plaintiffs' argument is that the court, sitting in equity, should reinstate their mortgage and note because they released the defendant, Addario, in reliance on his alleged fraudulent misrepresentation.  “[F]oreclosure is peculiarly an equitable action.”  Federal Deposit Ins. Corp. v. Hillcrest Associates, 233 Conn. 153, 170, 659 A.2d 138 (1995).  “[T]he balancing of the equities, is a matter for the discretion of the trial court.”  (Internal quotation marks omitted.)   Connecticut Bank & Trust Co. v. Winters, 225 Conn. 146, 162, 622 A.2d 536 (1993);  Hartford Federal Savings & Loan Ass'n. v. Lenczyk, 153 Conn. 457, 463, 217 A.2d 694 (1966).  “It has always been the policy of our law that the land records should be the authentic oracle of title on which a bona fide purchaser or attaching creditor might safely rely ․ Indeed the whole system of registering deeds of land would become of no value if a purchaser could not rely upon the records as he finds them.  [H]omeowners should not have to wake up to find their property encumbered by a resurrected lien.   Property owners, prospective purchasers, potential lenders, title searchers and title insurers alike must each be able to rely confidently on the integrity of the land records.”  (Citations omitted;  internal quotation marks omitted.)  Lucas v. Deutsche Bank National Trust Co., 103 Conn.App. 762, 768-69, 931 A.2d 378, cert. denied, 284 Conn. 934, 935 A.2d 151 (2007).

“[A] fraudulent release or assignment of a debt may be treated by the creditors of the releasor or assignor as void;  and such debt may be attached and held by them, though as to the releasor or assignor, it is forever beyond his reach.”  Litchfield Bank v. Peck, 29 Conn. 384, 386 (1860).  “The general rule is that a bona fide purchaser or encumbrancer from a fraudulent grantee acquires good title and takes the property discharged of the fraud so that he has priority over the fraudulent grantor's creditors ․ The rights of a purchaser ․ from a fraudulent transferee are superior to those of the ․ transferor's creditors only if such purchaser ․ is an innocent purchaser ․ for value.   Where it appears that he had knowledge or notice of the fraudulent transfer, he will be held to have acquired the title subject to the rights of the ․ transferor's creditors.   His right is inferior to that of the creditors where it appears that he knew ․ of the fraudulent transfer.”  (Citations omitted;  internal quotation marks omitted.)  Virginia Corporation v. Galanis, 223 Conn. 436, 444, 613 A.2d 274 (1992).

Assuming, arguendo, that the plaintiffs in the present case executed their release of the defendant, Addario, in reliance on his fraudulent misrepresentation, the court cannot invalidate the release of December 26, 2006, and reinstate the plaintiffs' mortgage on 75 Herbert Street property.   The defendant avers in his affidavit of July 12, 2010, that he has “no knowledge regarding the allegations in the [plaintiffs'] complaint regarding the alleged fraud perpetrated upon [the][p]laintiffs.”   Moreover, the defendant testifies in the same affidavit that “[p]rior to purchasing the [p]roperty, a title search was performed and it indicated that the mortgage formerly held by the plaintiffs was released by [the][p]laintiffs on [December 26, 2006].”   The present case is not one in which the defendant assisted in the alleged fraud, nor was he willfully blind to the co-defendant, Addario's, alleged fraudulent acts.   Rather, the defendant is an innocent third party who is a bona fide purchaser for value of the 75 Herbert Street property.

Accordingly, the defendant, David Denhep's, motion for summary judgment as to count one of the plaintiffs' complaint is granted.   The defendant, David Denhep, is not awarded costs or attorneys fees.

John W. Moran, Judge Trial Referee

FOOTNOTES

FN1. The defendant, Colleen Denhup, has not filed an appearance in the present case.   Accordingly, “Denhup” and “the defendant” refer to the moving defendant, David Denhup..  FN1. The defendant, Colleen Denhup, has not filed an appearance in the present case.   Accordingly, “Denhup” and “the defendant” refer to the moving defendant, David Denhup.

FN2. The Practice Book does not recognize a disclosure of defenses as a pleading.   However, for the purposes of the present motion for summary judgment, the court will treat the defendant's disclosure of defenses as though it is an answer and special defenses filed properly under Practice Book §§ 10-46 and 10-50..  FN2. The Practice Book does not recognize a disclosure of defenses as a pleading.   However, for the purposes of the present motion for summary judgment, the court will treat the defendant's disclosure of defenses as though it is an answer and special defenses filed properly under Practice Book §§ 10-46 and 10-50.

FN3. General Statutes § 49-9 provides in part:  “(a) A mortgage of real or personal property ․ may be released by an instrument in writing executed, attested and acknowledged in the same manner as deeds of land, setting forth that the mortgage ․ is discharged or that the indebtedness or other obligation secured thereby has been satisfied.   That instrument vests in the person or persons entitled thereto such legal title as is held by virtue of the mortgage.”.  FN3. General Statutes § 49-9 provides in part:  “(a) A mortgage of real or personal property ․ may be released by an instrument in writing executed, attested and acknowledged in the same manner as deeds of land, setting forth that the mortgage ․ is discharged or that the indebtedness or other obligation secured thereby has been satisfied.   That instrument vests in the person or persons entitled thereto such legal title as is held by virtue of the mortgage.”

FN4. In the document, the plaintiff, Horne-Marino, agrees to release, “for good and valuable consideration received to releasor's full satisfaction from Leonard Addario” the property at 75 Herbert Street, Milford, “from the lien and operation of said Mortgage Deed dated October 19, 2005 and recorded in Volume 3036 at Page 55 of the Milford Land Records.”   The document goes on to state that the release applies only to the 75 Herbert Street property and “is not intended to effect the lien and operation of said Mortgage Deed as it pertains to the remainder of the premises.”   The document is subscribed to by two witnesses and notarized..  FN4. In the document, the plaintiff, Horne-Marino, agrees to release, “for good and valuable consideration received to releasor's full satisfaction from Leonard Addario” the property at 75 Herbert Street, Milford, “from the lien and operation of said Mortgage Deed dated October 19, 2005 and recorded in Volume 3036 at Page 55 of the Milford Land Records.”   The document goes on to state that the release applies only to the 75 Herbert Street property and “is not intended to effect the lien and operation of said Mortgage Deed as it pertains to the remainder of the premises.”   The document is subscribed to by two witnesses and notarized.

FN5. The content of the December 19, 2006 document is essentially the same as the December 26, 2006, document, but pertains to certain real property situated in the city of Milford “commonly known as 76 Herbert Street.”   Document is signed by the plaintiff, Horne, dated December 19, 2006, subscribed to by two witnesses and notarized..  FN5. The content of the December 19, 2006 document is essentially the same as the December 26, 2006, document, but pertains to certain real property situated in the city of Milford “commonly known as 76 Herbert Street.”   Document is signed by the plaintiff, Horne, dated December 19, 2006, subscribed to by two witnesses and notarized.

FN6. The defendant developed a statute of limitations defense in his memorandum of law in support of his motion for summary judgment.   The defendant did not, however, plead the statute of limitations defense in his disclosure of defenses.   Therefore, the court will not entertain argument on the statute of limitations defense..  FN6. The defendant developed a statute of limitations defense in his memorandum of law in support of his motion for summary judgment.   The defendant did not, however, plead the statute of limitations defense in his disclosure of defenses.   Therefore, the court will not entertain argument on the statute of limitations defense.

Moran, John W., J.T.R.