Deutsche Bank National Trust Co. v. Rafael Segarra et al. (2011)

MEMORANDUM OF DECISION ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

The issue presented in plaintiff's motion for summary judgment is whether a special defense under the federal Truth in Lending Act survives the death of an obligor who was the sole individual who granted a mortgage and whether the defense can subsequently be asserted by the obligor's heirs, who are named as the defendants.

BACKGROUND

On September 10, 2008, the plaintiff, Deutsche Bank National Trust Co., filed a complaint against the defendants, Rafael Segarra ¹ and Oliphant Financial Corporation, regarding the default of a home loan.   On November 7, 2010, the plaintiff filed an amended complaint to reflect that Segarra had passed away and that his heirs replaced him as the defendants.   The amended complaint, which is the operative complaint, alleges the following facts.   Segarra signed a mortgage on his home dated January 6, 2006, which was assigned to the plaintiff on November 20, 2008.   The mortgage note is in default because Segarra failed to make payment.   The plaintiff elected to accelerate the balance, make the balance due in full and foreclose the mortgage securing note.   Oliphant Financial Corporation may claim an interest in the property because of a judgment lien.   The defendants each may claim an interest in the property as an heir of Segarra's estate.

On April 1, 2011, the defendants filed their amended answer, special defenses and counterclaims.   The special defenses and counterclaims mirror those filed by Segarra on February 19, 2009.   Specifically, the special defenses are rescission, setoff and right of recoupment and the counterclaims fall under the federal Truth in Lending Act (TILA) for failure to make material disclosures in the prescribed manner, Connecticut Truth in Lending Act and Connecticut Unfair Trade Practices Act. On July 29, 2011, the plaintiff filed this motion for summary judgment and a memorandum of law on the grounds that it has established a prima facie case for foreclosure and ownership of the note and that the defendants' special defenses and counterclaims are legally insufficient.   On August 25, 2011, the defendants filed an objection to the motion and a memorandum of law.   On October 3, 2011, this matter was heard at short calendar.

DISCUSSION

“[Practice Book] § 17–44 states that a motion for summary judgment may be filed ‘at any time’ prior to assignment for trial.”  Emmerson v. Super 8 Motel–Stamford, 59 Conn.App. 462, 469, 757 A.2d 651 (2000).  “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.”  (Internal quotation marks omitted.)  Brooks v. Sweeney, 299 Conn. 196, 210, 9 A.3d 347 (2010).

The plaintiff argues in its motion for summary judgment that it has established a prima facie case for foreclosure and ownership of the note and that the defendants' special defenses and counterclaims are legally insufficient on the grounds that the defendants lacked standing to assert them on their own behalf or on Segarra's behalf and that TILA allows only obligors the right to rescind.   The defendants argue in their objection that TILA claims survive the death of the claimant who had made the claim before his death.

In order for non-obligors to assert properly a TILA claim after the obligor has passed away, they need standing.   This court has found no Connecticut Appellate decision as to whether a TILA claim survives the death of the obligor.   As there is no controlling Connecticut case law on point, the court looks to federal law as persuasive authority.   The Fifth and Seventh circuits have ruled that a TILA claim is governed by federal law, rather than state law, because it is a federal cause of action.   See, e.g., James v. Home Construction Co. of Mobile, Inc., 621 F.2d 727, 729 (5th Cir.1980) and Smith v. No. 2 Galesburg Crown Finance Corp., 615 F.2d 407, 413 (7th Cir.1980).   Some courts have held that TILA is a remedial statute and therefore survives the death of the obligor.   See, e.g., Perry v. Beneficial Finance Co. of New York, Inc., 88 F.R.D. 221, 222 (W.D.N.Y.1980) and Smith v. No. 2 Galesburg Crown Finance Corp., supra, 415.   The Fifth and Seventh Circuits, as well as several district courts, have ruled that a TILA claim can be maintained obligor.²  See, e.g., Smith v. No 2 Galesburg Crown Finance Corp., supra, 413 (TILA cause of action survived in favor of the administrator of a deceased obligor's estate);  James v. Home Construction Co. of Mobile, Inc., supra, 730 (reversed district court ruling that a successor could not bring a suit for rescission) and Abel v. Knickerbocker, 846 F.Sup. 445, 448 (D.Md.1994) (obligor's son, who was also personal representative of estate, was entitled to rescind loan transaction).

In the present matter, Segarra was the sole obligor for the mortgage and originally asserted the TILA special defense.   The defendants were added as parties to the case after Segarra's death because they were beneficiaries of his estate and they asserted the same special defense.   The defendants were not named on the mortgage documents and did not sign them, but they inherited an interest in the property.   The defendants' TILA claims should survive the obligor because TILA is a federal statute which has a remedial purpose.   Though there is a split in authority regarding whether a TILA claim can be asserted by a non-obligor, this court holds that the claims can be asserted, particularly by individuals who handled the obligor's estate.   By virtue of having an interest in the property, even though the defendants were not parties to the mortgage, the defendants should be able to assert the same special defense to TILA that Segarra was able to assert.³  Consequently, TILA claims survive the death of the claimant and can be asserted by the claimant's heirs, in this case, the defendants.

CONCLUSION

For the foregoing reasons, this court holds that the special defense under TILA survives the obligor and that the defendants can assert the defense on the ground that they held an interest in the property.   Accordingly, the plaintiff's motion for summary judgment is denied.

HARTMERE, J.

FOOTNOTES

FN1. Rafael Segarra passed away on May 24, 2010 and by motion, the plaintiff added Segarra's heirs, Margarita Segarra, Rafael Segarra IV, Joshua Segarra and Erica Roman, as the defendants.   The motion adding his heirs as parties to the action was granted by the court on October 25, 2010.   In this memorandum, the heirs will be collectively referred to as “the defendants.”   Rafael Segarra will be referred to as “Segarra.”.  FN1. Rafael Segarra passed away on May 24, 2010 and by motion, the plaintiff added Segarra's heirs, Margarita Segarra, Rafael Segarra IV, Joshua Segarra and Erica Roman, as the defendants.   The motion adding his heirs as parties to the action was granted by the court on October 25, 2010.   In this memorandum, the heirs will be collectively referred to as “the defendants.”   Rafael Segarra will be referred to as “Segarra.”

FN2. In unreported decisions, California trial courts have held that TILA claims cannot be asserted by a non-obligor.   See Wilson v. JP Morgan Chase Bank, United States District Court, Docket No. CIV. 2:09–863 WBS GGH (E.D.Cal. June 25, 2010) (plaintiff has no standing to request rescission because she was “not a party to the loan contract”) and White v. Deutsche Bank National Trust Co., United States District Court, Docket No. 09 CV 1807 JLS (JMA) (S.D.Cal. August 30, 2010) (plaintiffs did not have standing under TILA because they were not owners of the property encumbered by the loan)..  FN2. In unreported decisions, California trial courts have held that TILA claims cannot be asserted by a non-obligor.   See Wilson v. JP Morgan Chase Bank, United States District Court, Docket No. CIV. 2:09–863 WBS GGH (E.D.Cal. June 25, 2010) (plaintiff has no standing to request rescission because she was “not a party to the loan contract”) and White v. Deutsche Bank National Trust Co., United States District Court, Docket No. 09 CV 1807 JLS (JMA) (S.D.Cal. August 30, 2010) (plaintiffs did not have standing under TILA because they were not owners of the property encumbered by the loan).

FN3. It is interesting to note that in the unreported California cases that the plaintiff cited ruling that non-obligors could not bring a TILA claim, the cases had the opposite configuration in that the TILA claim was brought by the plaintiffs, who did not have interest in the properties involved.   In the present matter, the obligor's heirs are the defendants regarding the mortgage foreclosure, demonstrating that their interest in the property was similar to Segarra's..  FN3. It is interesting to note that in the unreported California cases that the plaintiff cited ruling that non-obligors could not bring a TILA claim, the cases had the opposite configuration in that the TILA claim was brought by the plaintiffs, who did not have interest in the properties involved.   In the present matter, the obligor's heirs are the defendants regarding the mortgage foreclosure, demonstrating that their interest in the property was similar to Segarra's.

Hartmere, Michael, J.