June Hearrell v. Janis Hearrell (2012)

MEMORANDUM OF DECISION REGARDING JULY 15, 2011 MOTION TO DISMISS

I. STATEMENT OF THE CASE

The plaintiff filed an August 17, 2010 complaint seeking to foreclose a mortgage securing the payment of a promissory note executed by the defendant in favor of the plaintiff.   Said mortgage deed and underlying promissory note was signed by the defendant contemporaneously with the plaintiff's execution of a warranty deed transferring ownership interests, subject to a reserved life use estate, in a property known as 15 Fence Creek Drive, Madison, CT (hereinafter “Fence Creek”) to the defendant.   The defendant appeared and filed a July 15, 2011 Motion to Dismiss.   Later defendant filed memoranda in support of her motion to dismiss.   The plaintiff filed an August 15, 2011 Objection to the defendant's Motion to Dismiss, together with supporting memoranda in opposition to the Motion to Dismiss.

The court held a series of evidentiary hearings in connection with the Motion to Dismiss on October 6, November 18, December 5, December 12 and December 19, 2011.   The court and counsel noted that the same parties were concurrently and simultaneously engaged in a summary process action arising out of the same underlying set of facts in a case entitled June Hearrell v. Janis Hearrell, NHSP–105801.   Counsel agreed that the evidence in the above-mentioned hearings should be used by this court in determining both the Motion to Dismiss in the Summary Process case and in the Motion to Dismiss in the foreclosure case.   The parties agreed to be bound by the facts determined by the court from the aforementioned evidentiary hearings in both cases.

II. FINDINGS OF FACT

1. June Hearrell, the plaintiff, owned 15 Fence Creek Drive, Madison, CT with her husband from 1975 through the date of his death in 1996.   Thereafter, she was the sole owner of the property until March of 2001.   See Trial Transcript (hereinafter “T.”) October 6, 2011, ¶ 35, and plaintiff's Exhibit 1.

2. By Warranty Deed on March 1, 2001, June D. Hearrell conveyed all her right, title and interest in Fence Creek to her daughter, Janis L. Hearrell, except she reserved a life use onto herself.   Plaintiff's Exhibit 1.

3. The Warranty Deed provided “said premises are subject to and the Grantor reserves for herself life use until such time as the Grantor remarries or until such time as demand is made for the repayment of the note executed on this date and secured by a mortgage of even date herewith and such note is paid in full by the Grantee following such demand.”   Plaintiff's Exhibit 1, ¶ 2.

4. The Warranty Deed described the purchase price as $398,000.   Plaintiff's Exhibit 1. The Real Estate Conveyance Tax Form described the purchase price as $398,000.   Plaintiff's Exhibit 3.

5. Janis Hearrell executed a Promissory Note in the principal amount of $338,000.00, payable on demand, with annual interest of 7% on March 1, 2001 in connection with said purchase.   Janis L. Hearrell was the maker of said note and June D. Hearrell was the holder/payee of said note.   Plaintiff's Exhibit 4.

6. Janis L. Hearrell executed a Mortgage Deed in favor of June Hearrell to secure the aforementioned Promissory Note, conveying unto June Hearrell a security interest in the property at Fence Creek.   Plaintiff's Exhibit 5.

7. Both June Hearrell and Janis Hearrell executed a document known as an Agreement Regarding Life Use on March 1, 2001 contemporaneously with a property conveyance, note and mortgage described above.   Said document describes June Hearrell as the Seller and Janis Hearrell as the Purchaser noting that the subject property was Fence Creek, that the Seller conveyed her interest in said property to the Purchaser while reserving a life use.   The Agreement also notes the existence of the aforementioned note and mortgage and the same limitations and reservations in the Agreement regarding life use as it appeared in the Deed.

8. The law firm of Attorneys Richard J. Beatty and Jeffrey T. Beatty represented both the Purchaser and the Seller in the aforementioned transaction.   Attorney Jeffrey Beatty testified that he recalled the transaction, recalled preparing or having the above described documents prepared at his direction, describing and explaining the terms and conditions of the transaction with both Purchaser and Seller.  “T.” November 18, 2011, ¶¶ 81–85.   Attorney Beatty prepared a one-page Economic Summary of the transaction, indicating the purchase price of $398,000, various credits and adjustments in favor of both Seller and Purchaser.   See Plaintiff's Exhibit 7. Attorney Beatty testified that the figures that appear in Plaintiff's Exhibit 7 were discussed with both parties.  “T.” November 18, 2011, ¶¶ 84–85.

9. Janis L. Hearrell paid off a New Haven Savings Bank existing mortgage on Fence Creek with the sum of $59,419.14.   After various credits and deductions, including a Purchase Money Mortgage in the amount of $338,000 as described above, the Seller was owed $40.89.   Exhibit 7.

10. June Hearrell testified credibly that she has never transferred, sold or assigned the aforementioned Promissory Note and that she remains the owner thereof.   She testified that her daughter began to make regular monthly payments to her starting the month after the aforementioned March 2001 real estate closing and continued to make those payments until October of 2009.

11. After the closing on the above-mentioned real estate transaction, June Hearrell received the original note and mortgage documents.   She put them in a container on a shelf in her bedroom.   Shortly after the closing, Janis Hearrell began a whole-house renovation at Fence Creek that lasted for many months.   In 2008, June Hearrell left the Fence Creek property and her personal belongings were moved by Janis Hearrell into storage.   Since that time, June Hearrell has been unable to locate the original note or mortgage.   However, June Hearrell is clear that she had not transferred the ownership, possession and control of the note, nor was the same lawfully seized from her.   She is unable to produce the same as the whereabouts cannot be determined, but she is clear that she has not released any of the obligations created by the note or secured by the mortgage.

12. June Hearrell has not remarried since March 1, 2001.

13. June Hearrell has made demand for payment of the aforementioned Promissory Note and the debt has not been paid in full as a consequence of that demand.

14. Janis Hearrell disputes that she voluntarily agreed to purchase Fence Creek from her mother in exchange for $398,000.   The court rejects that testimony.   The credible evidence in the case establishes that the purchase price between the parties was $398,000.   See Exhibit 1, the Warranty Deed, Exhibit 3, the Real Estate Conveyance Tax Form, and Exhibit 7, the Economic Summary sheet of the transaction prepared by Attorney Beatty and the conduct of Ms. Janis Hearrell in paying off the $59,419.14 mortgage that encumbered Fence Creek prior to the March 1, 2001 transaction and her execution of the $338,000.00 Promissory Note concurrently with the aforementioned mortgage pay-off.

15. Janis Hearrell disputes that she purchased said property subject to a contingent life use in her mother.   The court rejects that claim.   See Exhibit 1, Warranty Deed, See February 5, 2001 email from Janis Hearrell to her brother, Jeffrey Hearrell, Plaintiff's Exhibit 2, third sentence, and Plaintiff's Exhibit 6, the Agreement Regarding Life Use signed by Janis L. Hearrell, Plaintiff's Exhibits 8 and 9, emails from Janis Hearrell to Jeffrey Beatty.

16. Janis Hearrell produced documents marked Defendant's Exhibits A, B, C, D, F, G, H and K that the court finds unreliable and unauthentic, and believes were probably created by or on behalf of Janis Hearrell for the specific purpose of seeking to avoid the obligations she undertook in connection with the aforementioned real estate transaction more fully described in Plaintiff's Exhibits 1, 4 and 5.

17. The court does find that the recitation of payments described in Defendant's Exhibit J are probably accurate and reflect payments by Janis Hearrell to June Hearrell pursuant to the obligations described in the Promissory Note, Plaintiff's Exhibit 4, in the amount of $281,542.26.   The court has not included the mortgage payoff, previously noted as $59,419.14, in the $281,542.26 total as the mortgage payoff was not a payment of the obligations undertaken in the Promissory Note.

18. The court has made no effort to calculate the applicable interest that would have accrued on the Promissory Note compared to the payments described by the Defendant's Exhibit J. However, the court notes that the original principal balance of the Promissory Note was $338,000 on March 1, 2001 and the Note provided for interest at the rate of 7% per annum.   Payments totaling $281,542.26 have been made by the defendant to the plaintiff.   The court notes that however one might allocate the $281,542.26 to principal and interest, the full amount of the original principal of the Promissory Note has not been paid.

19. The Promissory Note, Plaintiff's Exhibit 1, did require the Maker to pay the principal balance on demand of the Holder.   On June 3, 2010, June Hearrell, the Holder of the Note, through counsel, made demand for payment of the principal balance of the Note, to Janis Hearrell.   Janis Hearrell failed to make timely payment of the balance of the Note. Ex. I.

III. DEFENDANT'S JULY 15, 2011 MOTION TO DISMISS

The defendant's July 15, 2011 Motion to Dismiss asserts that plaintiff lacks standing to prosecute the instant action because the plaintiff does not possess or have the right to enforce the obligations created by the promissory note signed by the defendant.   This assertion properly raises the issue of whether the court has jurisdiction over the subject matter pursuant to Practice Book § 10–31(a)(1).

IV. THE PLAINTIFF'S OBJECTION TO THE MOTION TO DISMISS

The plaintiff objects to the Motion to Dismiss, indicating that the plaintiff does possess and/or have the right to enforce the obligations created by the loan made to the defendant memorialized by the promissory note executed by the defendant and secured by the mortgage deed executed by the defendant in favor of the plaintiff.

V. LEGAL STANDARDS

“Jurisdiction over the subject matter is the court's power to hear and decide cases of the general class to which the proceedings at issue belong.”  Haigh v. Haigh, 50 Conn.App. 456, 460–61, 717 A.2d 837 (1998);  Koskoff v. Planning & Zoning Commission, 27 Conn.App. 443, 446, 607 A.2d 1146, cert. granted, 222 Conn. 912, 608 A.2d 695 (1992) (appeal dismissed November 10, 1992).   Once the question of lack of jurisdiction of a court is raised, it “must be disposed of no matter in what form it is presented.”  Carten v. Carten, 153 Conn. 603, 610, 219 A.2d 711 (1966).  “Whenever a court finds that it has no jurisdiction, it must dismiss the case, without regard to previous rulings.”  Cross v. Hudon, 27 Conn.App. 729, 732, 609 A.2d 1021 (1992).

“In determining whether a court lacks subject matter jurisdiction, the inquiry usually does not extend to the merits of the case ․ Nevertheless, the court must determine whether it has the power to hear the general class [of cases] to which the proceedings in question belong ․ Because the elements of subject matter jurisdiction are dependent upon both law and fact ․ in some cases it may be necessary to examine the facts of the case to determine if it is within a general class the court has power to hear ․ Further, [w]hen issues of fact are necessary to the determination of a court's jurisdiction, due process requires that a trial-like hearing be held, in which an opportunity is provided to present evidence and to cross-examine adverse witnesses.”  (Citations omitted;  internal quotation marks omitted.)  Id., 733.   Additionally, “a party must have standing to assert a claim in order for the court to have subject matter jurisdiction over the claim ․ Standing is the legal right to set judicial machinery in motion.   One cannot rightfully invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy.”  (Internal quotation marks omitted.)  Fleet National Bank v. Nazareth, 75 Conn.App. 791, 793, 818 A.2d 69 (2003)(.)”  Equity One v. Shivers, 125 Conn.App. 201, 204–05 (2010).

“Trial courts addressing motions to dismiss for lack of subject matter jurisdiction pursuant to [Practice Book] § 10–31(a)(1) may encounter different situations, depending on the status of the record in the case.   As summarized by a federal court discussing motions brought pursuant to the analogous federal rule [i.e., Fed.R.Civ.P. (12)(b)(1) ], [l]ack of subject matter jurisdiction may be found in any one of three instances:  (1) the complaint alone;  (2) the complaint supplemented by undisputed facts evidenced in the record;  or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts ․ Different rules and procedures will apply, depending on the state of the record at the time the motion is filed.”   (Internal quotation marks omitted.)  Conboy v. State, 292 Conn. 642, 650–51, 974 A.2d 669 (2009).

“[I]f the complaint is supplemented by undisputed facts established by affidavits submitted in support of the motions to dismiss ․ the trial court, in determining the jurisdictional issue, may consider these supplementary undisputed facts and need not conclusively presume the validity of the allegations of the complaint ․ [W]here a jurisdictional determination is dependent on the resolution of a critical factual dispute, it cannot be decided on a motion to dismiss in the absence of an evidentiary hearing to establish jurisdictional facts.”  (Citations omitted;  emphasis in original;  internal quotation marks omitted.)  Id., 651–52.”  Park National Bank v. 333 Main Street, LLC, 127 Conn.App. 774, 799–99 (2011).

As noted above, evidentiary hearing were held, with the agreement of counsel that the court could rely upon the evidence for decisions on pending motions to dismiss in a summary process case between these same parties and the instant foreclosure case.

In a December 12, 2011 oral argument, Ms. Janis Hearrell's counsel agreed that his client did not wish to offer further evidence in connection with the motion to dismiss, though he indicated that there was no agreement about the amount of any claimed debt and that topic may require further evidence.   Ms. June Hearrell's counsel also agreed that his client did not wish to offer further evidence in connection with the instant motion to dismiss.

As in LaSalle Bank v. Bialobrzeski, 123 Conn.App. 781 (2010), the key issue was whether the plaintiff legally entitled to enforce the promissory note,¹ signed by the defendant as noted above, at the time when the instant lawsuit was instituted.

C.G.S. “Section 49–17 codifies the well established common law principle that the mortgage follows the note, pursuant to which only the rightful owner of the note has the right to enforce the mortgage.   See New Milford Savings Bank v. Jajer, 244 Conn. 251, 266, 708 A.2d 1378 (1998);  Restatement (Third), Property, Mortgages § 5.4, p. 380 (1997).   Our legislature, by adopting § 49–17, created a statutory right for the rightful owner of a note to foreclose on real property regardless of whether the mortgage has been assigned to him.   See, e.g., HSBC Bank USA, N.A. v. Navin, supra, 129 Conn.App. 711;  Chase Home Finance, LLC v. Fequiere, 119 Conn.App. 570, 576–77, 989 A.2d 606, cert. denied, 295 Conn. 922, 991 A.2d 564 (2010);  Bankers Trust Co. of California, N.A. v. Vaneck, 95 Conn.App. 390, 391, 899 A.2d 41, cert. denied, 279 Conn. 908, 901 A.2d 1225 (2006);  Fleet National Bank v. Nazareth, 75 Conn.App. 791, 795, 818 A.2d 69 (2003).”  RMS Residential Properties, Inc. v Miller, 303 Conn. 224, 230 (2011).

Counsel submitted memoranda of law in support of their respective client's positions.

LEGAL ANALYSIS

1. The plaintiff does have standing to prosecute this foreclosure action because she has established that the defendant did borrow money from the plaintiff in order to purchase Fence Creek, that the defendant did execute a promissory note, payable on demand, evidencing a debt, initially $338,000.00 (three hundred and thirty-eight thousand dollars), in favor of the plaintiff.   Furthermore, plaintiff established that though demand for payment of the unpaid balance of the loan was made, full payment of the obligation created by the borrowing was not timely made by the defendant.

2. The court finds, after an extended evidentiary hearing, that June Hearrell was entitled to enforce the terms of the promissory note pursuant to C.G.S. § 42a–3–301 at the time she filed the subject foreclosure action though she could not produce the original note.   June Hearrell was the original owner/holder and payee on the subject promissory note.   June Hearrell had not transferred the ownership, possession and control of the note, nor was the same lawfully seized from her ² before she instituted the instant foreclosure action.   She is unable to produce the promissory note as the whereabouts cannot be determined, the court finds she has not released of the obligations/debt created during defendant's purchase of Fence Creek from the plaintiff, the note evidencing that debt and secured by the mortgage on Fence Creek which is the subject of the instant action.   Pursuant to C.G.S. § 42a–3–309 the court finds that June Hearrell has established that she is entitled to enforce the lost or misplaced note signed by the defendant Janis Hearrell.

3. The court finds that June Hearrell made timely demand on Janis Hearrell prior to the institution of the instant action for payment of the unpaid balance of the promissory note and underlying debt, but that Janis Hearrell has failed, neglected and/or refused to tender payment of the unpaid balance of the debt.

HOLDING

The Motion to Dismiss is denied.

BY THE COURT

ZEMETIS, T.

FOOTNOTES

FN1. C.G.S. 42a–3–301 “ ‘Person entitled to enforce’ an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 42a–3–309 or 42a–3–418(d).  A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.”.  FN1. C.G.S. 42a–3–301 “ ‘Person entitled to enforce’ an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 42a–3–309 or 42a–3–418(d).  A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.”

FN2. Sec. 42a–3–309.   Enforcement of lost, destroyed or stolen instrument.(a) A person not in possession of an instrument is entitled to enforce the instrument if (i) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred, (ii) the loss of possession was not the result of a transfer by the person or a lawful seizure, and (iii) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.(b) A person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person's right to enforce the instrument.   If that proof is made, section 42a–3–308 applies to the case as if the person seeking enforcement had produced the instrument.   The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument.   Adequate protection may be provided by any reasonable means..  FN2. Sec. 42a–3–309.   Enforcement of lost, destroyed or stolen instrument.(a) A person not in possession of an instrument is entitled to enforce the instrument if (i) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred, (ii) the loss of possession was not the result of a transfer by the person or a lawful seizure, and (iii) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.(b) A person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person's right to enforce the instrument.   If that proof is made, section 42a–3–308 applies to the case as if the person seeking enforcement had produced the instrument.   The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument.   Adequate protection may be provided by any reasonable means.

Zemetis, Terence A., J.