ABS 2006 HE8 v. Charles Ayers et al. (2011)

MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT (# 130)

This is a mortgage foreclosure action commenced by the plaintiff, Deutsche Bank National Trust Company, as trustee for Morgan Stanley ABS Capital I Inc., Trust 2006–HE8, against the debtor defendant, Charles Ayers, in which 1st Alliance Lending, LLC (1st Alliance), and Terese Messina are also named as defendants.   The plaintiff alleges that Ayers is in default on a note he executed to 1st Alliance, secured by a mortgage, which was assigned to the plaintiff.   The plaintiff seeks foreclosure of the mortgage.   Ayers filed an answer in which he asserts two special defenses and a counterclaim alleging a violation of the Connecticut Unfair Trade Practices Act (CUTPA), codified at General Statutes § 42–110a et seq.

In the present motion for summary judgment, the plaintiff seeks judgment as a matter of law on Ayers' counterclaim as well as the complaint.   As to the counterclaim, the plaintiff argues that (1) the counterclaim is misjoined to this foreclosure action and (2) there is no genuine issue of material fact and, as a matter of law, the plaintiff did not violate CUTPA.   As to the complaint, the plaintiff argues that it is entitled to judgment as a matter of law as to liability only because (a) Ayers is already in default for failure to disclose a defense and (b) there is no genuine issue of material fact and, as a matter of law, Ayers is in default on the note.   For the following reasons, the motion for summary judgment is denied in its entirety.

I

BACKGROUNDAAllegations

In the complaint, the plaintiff alleges as follows.   Ayers executed a note to 1st Alliance in June 2006 for $253,200.   Such note was secured by a mortgage on a parcel of real property owned by Ayers and located at 68 Anne Road, Southington, Connecticut (property).   Through an assignment, the plaintiff became the holder of the note and mortgage.   Ayers thereafter defaulted on the note.   Despite receiving written notice of the default from the plaintiff, Ayers has failed to cure said default.   The plaintiff then elected to accelerate the balance due and to foreclose on the mortgage.

By way of special defense, Ayers alleges the following relevant facts.   With respect to the servicing of the loan evidenced by the note, Saxon Mortgage Services, Inc. (Saxon), held itself out as the plaintiff's agent.   On February 29, 2008, Saxon indicated to Ayers that the default could be cured if he paid it $13,223.89 by March 3, 2008.   Ayers tendered the requested amount on March 1, 2008, but Saxon refused to accept his payment, informing him of its decision on March 7, 2008.   Moreover, on March 31, 2008, Saxon informed Ayers by telephone that the default would be cured if he paid to it $15,500 by April 3, 2008.   That same day, Ayers sent Saxon a cashier's check in the amount of $15,500 via UPS next day air.   Saxon rejected Ayers' cashier's check via letter dated April 3, 2008.

In his counterclaim, Ayers alleges the same facts he alleged in his special defenses.   In addition he alleges that Saxon improperly refused to accept proof that he had the requisite valid insurance policy on the property and thereafter unjustifiably purchased its own insurance, charging Ayers with payment of the exorbitant premiums.

B

Procedural History

The plaintiff filed the present motion for summary judgment on March 7, 2011.   In opposition, Ayers filed a “reply” (# 131) and a memorandum of law (# 132) on March 28, 2011.   The court took the motion under consideration on the papers on March 28, 2011.   Subsequently, with the permission of the court, Ayers filed an affidavit in opposition to the motion (# 140 and # 141) on April 21, 2011.   The plaintiff filed a reply memorandum (# 143) on April 26, 2011.

II

DISCUSSION

Practice Book § 17–49 provides:  “[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.”  “[S]ummary judgment is appropriate only if a fair and reasonable person could conclude only one way ․ [A] summary disposition ․ should be on evidence which a jury would not be at liberty to disbelieve and which would require a directed verdict for the moving party ․ [A] directed verdict may be rendered only where, on the evidence viewed in the light most favorable to the nonmovant, the trier of fact could not reasonably reach any other conclusion than that embodied in the verdict as directed.”  (Citations omitted;  emphasis omitted;  internal quotation marks omitted.)  Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 815, 830 A.2d 752 (2003).

“[T]he moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law ․ To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact ․ As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent ․ When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue ․ Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue.”  (Internal quotation marks omitted.)  Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 10–11, 938 A.2d 576 (2008).

A

Motion for Summary Judgment on the Counterclaim

“[A] counterclaim is a cause of action existing in favor of the defendant against the plaintiff and on which the defendant might have secured affirmative relief had he sued the plaintiff in a separate action.”  Ameriquest Mortgage Co. v. Lax, 113 Conn.App. 646, 969 A.2d 177, cert. denied, 292 Conn. 907, 973 A.2d 103 (2009).   Under Practice Book § 17–44, “[a]ny party may move for summary judgment upon any counterclaim ․ as if it were an independent action.”

1

Misjoinder

The plaintiff first contends that the counterclaim is misjoined to this action because it fails the “transaction test” of Practice Book § 10–10.¹  This argument is inappropriate for a motion for summary judgment.   The Appellate Court has held that a motion to strike is the proper vehicle for asserting the misjoinder of a counterclaim.²  See JP Morgan Chase Bank v. Rodrigues, 109 Conn.App. 125, 130–33, 952 A.2d 56 (2008).   A motion to strike is intended as a means for a party to, among other things, “contest the legal sufficiency of any answer to any complaint ․ or any part of that answer ․” (Emphasis added.)  Id., 130, quoting Practice Book § 10–39(a)(5).   By contrast, as stated above, summary judgment tests whether the movant is entitled to judgment as a matter of law on the merits of a claim.   Even if the counterclaim is misjoined to this action, the fact of such misjoinder would not entitle the plaintiff to judgment as a matter of law as to the merits of the counterclaim.

2

Merits of CUTPA Claim

The plaintiff argues that it is entitled to summary judgment because Saxon did not violate CUTPA as a matter of law.   The plaintiff contends that Saxon's purchase of insurance was explicitly authorized by the note and was not illegal or in violation of public policy.   It further contends that Saxon rightfully refused the payments made by the defendant in an attempt to cure the default because they were untimely.   The defendant disagrees with the plaintiff's arguments.

“[General Statutes § ]42–110b(a) provides that [n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.   It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair:  (1)[W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness;  (2) whether it is immoral, unethical, oppressive, or unscrupulous;  (3) whether it causes substantial injury to consumers, [competitors or other businesspersons] ․ All three criteria do not need to be satisfied to support a finding of unfairness.   A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three ․ Thus a violation of CUTPA may be established by showing either an actual deceptive practice ․ or a practice amounting to a violation of public policy ․ In order to enforce this prohibition, CUTPA provides a private cause of action to [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 [prohibited] method, act or practice ․” (Internal quotation marks omitted.)  Harris v. Bradley Memorial Hospital & Health Center, Inc., 296 Conn. 315, 350–51, 994 A.2d 153 (2010).  “Whether a practice is unfair and thus violates CUTPA is an issue of fact.”  (Internal quotation marks omitted.)  Willow Springs Condominium Ass'n., Inc. v. Seventh BRT Development Corp., 245 Conn. 1, 43, 717 A.2d 77 (1998).

One of the bases for Ayers' CUTPA claim is that Saxon, as agent for the plaintiff, on two separate occasions informed him what sum of money would be sufficient to cure default and when such payment would be due but thereafter refused to accept tender in accordance with such requirements.   This factual claim suggests dishonest and immoral conduct on the part of Saxon that could possibly, if proven, constitute an unfair trade practice.   The evidence presented by the parties shows that the facts with respect to this issue are very much in doubt.

The plaintiff provides the affidavit of Ken Lee, an employee of the current loan servicer with personal knowledge of the loan history.   Lee states that, in February of 2008, “Ayers was advised that the amount required to reinstate his loan was $13,223.89” and that “[t]hat amount was good through the end of February.”  (Plaintiff's Memorandum of Law, Exhibit A, ¶ 19.)   Lee then avers that Ayers did not tender that amount until March 3, 2008, by which time “the March payment had come due and the amount paid was insufficient to reinstate the loan.”  (Id., ¶ 20.)   With respect to the second attempted tender of payment, Lee states that, in March of 2008, Ayers was informed that the amount required to cure the default was $15,515.88 and that “[t]hat amount was good though the end of March.”  (Id., ¶ 21.)   Next, Lee asserts that Ayers paid $15,500.00 on April 1, 2008, an amount insufficient to cure default.   Finally, Lee states that Ayers made no further attempts to correct the default.

In opposition to summary judgment, Ayers provides his own affidavit.   In his affidavit, he incorporates by reference the statements contained in his special defenses and counterclaim reprinted as Exhibit IV to his affidavit,³ stating that they are correct based on his personal knowledge.   Ayers avers that, on February 29, 2008, Saxon informed him that he could cure default by paying $13,223.89, if such payment was received by Saxon on March 3, 2008.   Ayers then states that he tendered payment of the requested funds via Western Union on March 1, 2008, but that on or about March 7, 2008, Saxon refused the payment.   As to the second payment, Ayers states that Saxon told him via telephone that he could cure default if Saxon received a payment of $15,500.00 by April 3, 2008.   Ayers then avers that he sent a cashier's check for $15,500.00 via UPS next day air to Saxon on March 31, 2008.   Finally, Ayers asserts that Saxon returned the cashier's check on April 3, 2008.

The court finds that there are legitimate discrepancies with respect to what Saxon told Ayers in regards to the time and amount requirements for curing default.   Given that the determination of whether an unfair trade practice occurred is largely a case by case determination;  American Car Rental, Inc. v. Commissioner of Consumer Protection, 273 Conn. 296, 310 n.9, 869 A.2d 1198 (2005);  these factual discrepancies are significant.   Accordingly, the court finds that the plaintiff has failed to foreclose any genuine issue of material fact as to whether the plaintiff, through Saxon, committed an unfair trade practice in servicing Ayers' loan.

B

Motion for Summary Judgment as to Liability on the Complaint

The plaintiff first contends that, because Ayers was defaulted by order of the court for failure to disclose a defense, he may not contest liability.   The plaintiff concludes that it is therefore entitled to summary judgment on that basis.

Practice Book § 13–19 provides, in relevant part:  “If the defendant fails to disclose a defense ․ within ten days of the filing of such demand in any action to foreclose a mortgage, the plaintiff may file a written motion that a default be entered against the defendant by reason of the failure of the defendant to disclose a defense.   If no disclosure of defense has been filed, the judicial authority may order judgment upon default to be entered for the plaintiff at the time the motion is heard or thereafter, provided that in either event a separate motion for such judgment has been filed.   The motions for default and for judgment upon default may be served and filed simultaneously but shall be separate motions.”  (Emphasis added.)   Moreover, Practice Book § 17–33(b) provides that, “[s]ince the effect of a default is to preclude the defendant from making any further defense in the case so far as liability is concerned, the judicial authority, at or after the time it renders the default ․ may also render judgment in foreclosure cases ․ provided the plaintiff has also made a motion for judgment and provided further that any necessary affidavits of debt or accounts or statements verified by oath, in proper form, are submitted to the judicial authority.”  (Emphasis added.)   Accordingly, to obtain judgment on the basis of default, a party must file a motion for judgment upon default pursuant to §§ 13–19 and 17–33(b) rather than a motion for summary judgment.   See Ciccarello v. Cahill, Superior Court, judicial district of Middlesex, Docket No. 65497 (August 26, 1992, Higgins, J.) (7 Conn. L. Rptr. 263);  see also W. Horton & K. Knox, 1 Connecticut Practice Series:  Superior Court Civil Rules § 13–19, p. 674 (2011) (“A motion for summary judgment after default is not appropriate.”).

Although the court, Vacchelli, J., granted the motion for default for failure to disclose a defense on April 26, 2010, the plaintiff has not filed a motion for judgment upon default pursuant to §§ 13–19 and 17–33(b).  Instead the plaintiff is improperly attempting to seek judgment upon default via a motion for summary judgment.   The plaintiff, as explained above, is not entitled to summary judgment on the basis of default for failure to disclose a defense.

Second, the plaintiff argues that there is no genuine issue of material fact and, as a matter of law, Ayers is in default on the note and mortgage.   The defendant argues as follows:  “Defendant does not dispute the default of debt under the payments of [principal] on the mortgage and note.   The [c]ourt has granted this default on [April 16, 2010].   Defendant does and will dispute all aspects of the debt on escrow and reinstatement issues and the amounts due, and will request that [these] issues [be] determined in furtherance of this litigation.”  (Defendant's Memorandum of Law, p. 3.)

“A summary judgment, interlocutory in character, may be rendered on the issue of liability alone, although there is a genuine issue as to damages.”   Practice Book § 17–50.   Where the plaintiff in a foreclosure action brings a motion for summary judgment on liability only, the defendant may avoid summary judgment if he or she demonstrates a genuine issue of material fact as to at least one of his or her special defenses.   See Union Trust Co. v. Jackson, 42 Conn.App. 413, 417, 679 A.2d 421 (1996).

The present motion may be disposed of by reference to Ayers' special defenses.   He interposes two special defenses alleging inequitable conduct on the part of Saxon, as the plaintiff's agent.   In the first, Ayers alleges that Saxon refused to accept his first attempt to cure the default on the note in March 2008, despite the fact that the payment complied with the terms Saxon had previously described as sufficient to cure default.   In the second, he alleges the same as to his April 2008 attempt to cure the default.

“Historically, defenses to a foreclosure action have been limited to payment, discharge, release or satisfaction ․ or, if there had never been a valid lien ․ The purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action ․ 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 ․ Where the plaintiff's conduct is inequitable, a court may withhold foreclosure on equitable considerations and principles ․ [O]ur courts have permitted several equitable defenses to a foreclosure action.”  (Internal quotation marks omitted.)  Fidelity Bank v. Krenisky, 72 Conn.App. 700, 705–06, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002).

One such defense is the doctrine of unclean hands.   See Thompson v. Orcutt, 257 Conn. 301, 310, 777 A.2d 670 (2001).  “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 ․ Unless the plaintiff's conduct is of such a character as to be condemned and pronounced wrongful by honest and fair-minded people, the doctrine of unclean hands does not apply.”  (Internal quotation marks omitted.)  Id.

By contrast, “if a party's claim grows out of or depends upon or is inseparably connected with his own prior fraud, a court of equity will, in general, deny him any relief ․ Indeed, [the Supreme] [C]ourt has applied the doctrine to preclude a litigant from recovering in equity if his or her conduct has been inequitable with respect to the subject of the action.”  (Citation omitted;  internal quotation marks omitted.)  Id., 312.

The court finds, based on the evidence discussed above with respect to the counterclaim, that there is an issue of fact as to whether dishonest conduct of the plaintiff, through Saxon, prevented Ayers from properly curing the default and thereby avoiding the present foreclosure action.   Accordingly, there are genuine issues of material fact relevant to the issue of whether foreclosure should be denied to the plaintiff due to its inequitable conduct.

III

CONCLUSION

On the basis of the above analysis, the court hereby denies the motion for summary judgment in its entirety.

Tanzer, J.T.R.

FOOTNOTES

FN1. Practice Book § 10–10 provides in relevant part:  “In any action for legal or equitable relief, any defendant may file counterclaims against any plaintiff and cross claims against any codefendant provided that each such counterclaim and cross claim arises out of the transaction or one of the transactions which is the subject of the plaintiff's complaint ․”.  FN1. Practice Book § 10–10 provides in relevant part:  “In any action for legal or equitable relief, any defendant may file counterclaims against any plaintiff and cross claims against any codefendant provided that each such counterclaim and cross claim arises out of the transaction or one of the transactions which is the subject of the plaintiff's complaint ․”

FN2. New Haven Savings Bank v. LaPlace, 66 Conn.App. 1, 783 A.2d 1174, cert. denied, 258 Conn. 942, 786 A.2d 426 (2001), cited by the plaintiff, does not suggest otherwise.   In that case, the only motion for summary judgment at issue was on the foreclosure complaint itself, not the counterclaims;  the plaintiff contended that the special defenses and counterclaims were insufficient to defeat its foreclosure claim.   See id., 5. The Appellate Court essentially treated the counterclaims as special defenses and agreed with the trial court that none of them defeated the motion for summary judgment.   See id., 9, 11..  FN2. New Haven Savings Bank v. LaPlace, 66 Conn.App. 1, 783 A.2d 1174, cert. denied, 258 Conn. 942, 786 A.2d 426 (2001), cited by the plaintiff, does not suggest otherwise.   In that case, the only motion for summary judgment at issue was on the foreclosure complaint itself, not the counterclaims;  the plaintiff contended that the special defenses and counterclaims were insufficient to defeat its foreclosure claim.   See id., 5. The Appellate Court essentially treated the counterclaims as special defenses and agreed with the trial court that none of them defeated the motion for summary judgment.   See id., 9, 11.

FN3. Although the plaintiff does not object to Ayers' incorporation of his pleading into his affidavit, it should be noted that “[a]n affidavit may incorporate by reference other papers on file in the same action.”   2A C.J.S., Affidavits § 38, p. 242 (2003).   Thus, the court will deem to be averred statements any allegations in the incorporated pleading that “[are] made on personal knowledge ․ set forth such facts as would be admissible in evidence, and ․ [for which it is shown] affirmatively that the affiant is competent to testify to the matters stated therein.”  Practice Book § 17–46..  FN3. Although the plaintiff does not object to Ayers' incorporation of his pleading into his affidavit, it should be noted that “[a]n affidavit may incorporate by reference other papers on file in the same action.”   2A C.J.S., Affidavits § 38, p. 242 (2003).   Thus, the court will deem to be averred statements any allegations in the incorporated pleading that “[are] made on personal knowledge ․ set forth such facts as would be admissible in evidence, and ․ [for which it is shown] affirmatively that the affiant is competent to testify to the matters stated therein.”  Practice Book § 17–46.

Tanzer, Lois, J.T.R.