Bank of America, N.A. v. Gary DiLuca et al. (2013)

MEMORANDUM OF DECISION ON THE DEFENDANTS' MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION DATED JULY 5, 2012 (# 131.00)

The question raised by this Motion to Dismiss:  Does the plaintiff's failure to allege ownership in a mortgage foreclosure complaint deprive the court of subject matter jurisdiction due to the plaintiff's lack of standing?   There is a corollary question to the above;  Is it sufficient for the plaintiff to allege that it is a holder of the note relying on the RMS Residential Properties, LLC v. Miller, 303 Conn. 224, 231–32 (2011), presumption that a holder is the owner, leaving the defendant with the burden of rebutting that presumption?

The defendants' Motion to Dismiss states as follows:  “Pursuant to P.B. §§ 10–30 and 10–33, defendants, Gary DiLuca and Melissa Makris, move to dismiss the action for lack of subject matter jurisdiction because plaintiff lacks standing to bring the action.” (# 131.00)

An evidentiary hearing was held.   The plaintiff called David Endara, a research officer for JP Morgan Chase Bank, N.A. Mr. Endara was cross-examined.   Neither party produced any further witnesses.   Six exhibits were offered.   The court heard oral argument and the matter was submitted to this court for a written memorandum of decision.

The operative complaint is the original complaint dated March 25, 2009.   The plaintiff, Bank of America, NA, alleged that on April 20, 2006 the defendant, Gary DiLuca, executed and delivered to Washington Mutual Bank, FA a note in the original amount of $780,000 secured by a first mortgage on property located in Westport, Connecticut.   Paragraph 4 of the complaint alleges:  “Said Mortgage was assigned to Bank of America, NA by virtue of an Assignment of Mortgage to be recorded on the Westport Land Records.   The Plaintiff, Bank of America, NA, is the holder of said Note and Mortgage.”   The complaint contains no allegations that the plaintiff, Bank of America, NA, is the owner of either the note or the mortgage.

On April 29, 2009 the defendants, Gary DiLuca and Melissa Makris, filed an Answer and Special Defenses (# 103.00).   These are six Special Defenses.   The First Special Defense states:  “The complaint fails to state a claim upon which relief may be granted because plaintiff alleges in paragraph 4 and 5 that it is merely the ‘holder’ of the Note and a mere ‘holder’ of the Note is without the right to foreclose the Mortgage.”   The Second Special Defense claims that the Note has been lost or stolen and the plaintiff does not have the right of a holder in due course because of that fact.   The Third Special Defense denies the “authenticity of, and the authority to make, each signature on the Note, or any paper affixed to the Note.” The Fourth Special Defense alleges that the plaintiff is a “consumer collection agency” and is precluded by Connecticut statutes and the express terms of the Mortgage from foreclosing this Mortgage.   The Fifth Special Defense alleges that the plaintiff is barred by the doctrine of unclean hands by reason of the facts contained in the Fourth Special Defense.   The Sixth Special Defense states as follows:  “The complaint fails to state a claim upon which relief may be granted because plaintiff alleges in paragraph 4 that it is an assignee of solely the Mortgage and a mere assignee of solely the Mortgage is without the right to foreclose the Mortgage.”

The plaintiff filed a July 22, 2009 Motion for Summary Judgment (# 106.00).   This motion (# 106.00) and its supporting Memorandum (# 107.00) were both withdrawn by the plaintiff on December 27, 2011 (# 123.00).   The plaintiff then filed a second Motion for Summary Judgment on December 27, 2011 (# 124.00).   That Motion for Summary Judgment has yet to be argued.

The matter was submitted to mediation.   The mediation terminated after three years as per the Mediator's Final Report on May 16, 2012 (# 129.00).   The plaintiff then filed certain affidavits and documents seeking to proceed with the foreclosure.   Almost immediately thereafter the defendants filed the instant Motion to Dismiss on July 5, 2012 (# 131.00).   The defendants filed a Memorandum in support of its Motion to Dismiss on July 5, 2012 (# 132.00).   The plaintiff objected to the Motion to Dismiss by documents and Memorandum filed on September 14, 2012 (# 135.00).   The defendants filed a further Memorandum on September 20, 2012 (# 136.00).   Despite the claims raised in the defendant's six Special Defenses and this Motion to Dismiss, the plaintiff has chosen not to amend its original March 25, 2009 complaint that was returnable to the Superior Court on April 14, 2009.

The plaintiff is relying on the following language of the Supreme Court's December 13, 2011 decision in RMS Residential Properties, LLC v. Miller:  “The defendant contends, however, that the holder of the note's power to enforce is merely at law (i.e., the right to enforce personal liability) and that a note holder must demonstrate ownership of the underlying debt to exercise the equitable power of foreclosure.  New England Savings Bank v. Bedford Realty Corp., 238 Conn. 745, 759–60, 680 A.2d 301 (1996) (mere holder of promissory note, if not owner of underlying debt, cannot exercise equitable power of foreclosure).   We agree.   We also, however, agree with the plaintiffs' contention that a holder of a note is presumed to be the owner of the debt, and unless the presumption is rebutted may, foreclose the mortgage under § 49–17.”  Id. 231–32.

The court makes the following findings of facts and legal conclusions:

Plaintiff's witness, David Endara, has been a research officer for JP Morgan Chase Bank for 10 years.   Three exhibits were marked as trial exhibits.   By agreement the original note was offered into evidence.   The court examined the original note and by agreement of the parties a photocopy of the original note was marked Exhibit 1. The original note was returned to plaintiff's counsel.   A certified copy of the recorded mortgage deed was Exhibit 2. A copy of the assignment of the mortgage was marked as Exhibit 3. Mr. Endara testified that he was familiar with those three documents as well as all the business and computer records regarding this loan.   He noted that the original of the Note is a preprinted form entitled Adjustable Rate Note. It is dated April 20, 2006 in the amount of $780,000.   The “Borrower” is the defendant, “Gary DiLuca.”   The “Lender” is “Washington Mutual Bank, FA.” The initial interest rate is 6.275% and the Note's Maturity Date is May 1, 2036.   On the last page of the Note below the signature line appears a stamp.   The stamp states:

Pay to the order of

Without Recourse

WASHINGTON MUTUAL BANK, FA

By_

CYNTHIA RILEY

VICE PRESIDENT

A signature of Cynthia Riley appears above the line in this endorsement.   There is a blank space after the phrase “Pay to the order of.”   No names or words have been inserted in this blank space.   The court finds that the $780,000 note that is the subject of this foreclosure has been endorsed in blank by the Lender, Washington Mutual Bank, FA.

This lawsuit was commenced by the writ, summons, and complaint dated March 26, 2009.   The file contains a return of service indicating that the complaint was served on March 26, 2009.   The Mortgage Deed is dated April 20, 2006.   Exhibit 2. The “Lender” is “Washington Mutual Bank, FA.” The “Borrower” are “Gary DiLuca” and “Melissa Makris,” the two defendants.   The Mortgage Deed was recorded in the Westport Land Records in Book 2672 Page 001.

Exhibit 3 is an Assignment of Mortgage from “Washington Mutual Bank, f/k/a Washington Mutual Bank, FA,” to the plaintiff, “Bank of America, NA.” The assignment itself and the acknowledgment on the assignment are both dated April 14, 2009.   That assignment was executed by JP Morgan Chase Bank, National Association, as Successor–in–Interest to Washington Mutual Bank, f/k/a, Washington Mutual Bank, FA acting therein by Christina Allen, Attorney in Fact. The assignment was recorded on the Westport Land Records on June 3, 2009 in Book 2991 Page 193.   The court concludes that this assignment from Washington Mutual Bank f/k/a Washington Mutual Bank, FA to Bank of America, NA was executed and recorded after the commencement of this lawsuit.

Mr. Endara testified that JP Morgan Chase Bank is the loan servicer for this loan.   He further testified that the Bank of America, NA has been the owner of this loan since February 1, 2007 and that JP Morgan Chase Bank has been the loan servicer of this loan since September 2008.   Mr. Endara testified that since February 1, 2007 the Bank of America, NA has not transferred this loan to any other entity.   He indicated that the loan number ended in the following four digits ․ 2633.   That number ․ 2633 appears on the first page of the Mortgage Deed. Exhibit 2. Mr. Endara further testified that as of the date of his testimony the original loan documents are in the possession of JP Morgan Chase Bank as the servicer of the loan.

From this credible testimony the court finds that Bank of America, NA is the owner of the Note and Mortgage and has been the owner of the Note and Mortgage since February 1, 2007 to date.

Three other exhibits were offered into evidence but were not the subject of testimony by Mr. Endara, the only witness.   Exhibit 4 is a seven-page printout from the court's computer Edison program from the trial court records of RMS Residential Properties, LLC et al. v. Miller et al., Superior Court, judicial district of New Haven at New Haven, Docket Number NNH CV 08–6002796 S. This case is identified as a foreclosure lawsuit returnable September 23, 2008.   The last pleading as of this court's December 14, 2012 printout in evidence is a June 21, 2012 Motion for Deficiency Judgment (# 165.00).   Of note is pleading # 154.00 dated December 13, 2011 entitled “Appellate Court Decision No Error.”   Pleading # 154.00 references the Supreme Court's decision reported at 303 Conn. 224.   Both counsel agree that Exhibit 4 is the trial record of RMS Residential Properties, LLC v. Miller, supra, 303 Conn. 224.   Exhibit 5 is a copy of the September 9, 2008 Complaint in RMS Residential Properties, LLC v. Miller.   These two exhibits verify that the foreclosure trial and appeal was based on the original complaint filed and no amended or revised complaints were filed.   Exhibit 4, page 2 line 2, “9/16/2008.”

The last exhibit was offered by the defendants in the hearing on this Motion to Dismiss.   It was marked as Exhibit 6. Exhibit 6 consists of the plaintiff's first Motion for Summary Judgment dated July 22, 2009 (# 106.00), a Memorandum of Law in Support of Plaintiff's Motion for Summary Judgment dated July 22, 2009 (# 107.00) and the following six exhibits attached to the Memorandum (# 107.00);  (1) the defendant's April 29, 2009 Answer and Special Defenses (# 103.00), (2) a six-page June 18, 2009 affidavit signed by a Vice President of JP Morgan Chase Bank, National Association, (3) the $780,000 April 20, 2006 Note marked as Exhibit 1 in this hearing, (4) the Mortgage Deed marked as Exhibit 2 in this hearing, (5) the Assignment of Mortgage marked as Exhibit 3 in this hearing along with a request to record letter to the Westport Town clerk and a check for the recordation fee, and (6) a two-page Notice of Default letter from Washington Mutual to Gary DiLuca dated December 23, 2008.

It has already been noted that this first Motion for Summary Judgment was never argued or decided.   This first Motion for Summary Judgment dated July 22, 2007 (# 106.00) and the Supporting Memorandum (# 107.00) together with the six attached exhibits were withdrawn by plaintiff on December 27, 2011 (# 123.00).   The plaintiff's second Motion for Summary Judgment dated December 27, 2011 (# 124.00) has yet to be argued.

Both counsel argued certain facts that emanated from the trial record of RMS v. Miller.   They agreed that its trial record is found in the Superior Court, judicial district of New Haven, at New Haven, Docket Number NNH CV 08–6002796 S entitled RMS Residential Properties, LLC et al. v. Anna M. Miller et al.   The court examined the complaint in the RMS v. Miller case and compared it with paragraphs 4 and 5 of the current complaint before this court.   Both contain two separate allegations of “holder” in both paragraphs 4 and 5. The court took judicial notice on the record of the trial court file of RMS v. Miller as is expressed in the Superior Court's Edison computer program, a printout of which is Exhibit 4. The allegations in both complaints are virtually identical.   The RMS v. Miller complaint was submitted before and decided by the Supreme Court on December 13, 2011.   Ex. 5. Paragraphs 4 and 5 of the RMS v. Miller complaint contain no allegations of ownership.   Ex. 5.

Neither complaint contains an allegation of ownership of the note and/or mortgage.   Paragraph 4 of RMS v. Miller states in its last sentence:  “The Plaintiff, RMS Residential Properties, LLC is the holder of said Note and Mortgage.”   Paragraph 4 of the March 25, 2009 operative complaint before this court states in the last sentence:  “The Plaintiff, Bank of America, NA, is the holder of said Note and Mortgage.”   Paragraph 5 of RMS v. Miller states in paragraph 5:  “Said Note is in default and the Plaintiff, RMS Residential Properties, LLC as the holder of said Mortgage and Note has elected to accelerate the balance due on said Note, to declare said Note to be due in full and to foreclose the Mortgage securing said Note.” Paragraph 5 of the March 25, 2009 operative complaint before this court states:  “Said Note is in default and the plaintiff, Bank of America, NA as the holder of said Mortgage and Note has elected to accelerate the balance due on said Note, to declare said Note to be due in full and to foreclose the Mortgage securing said Note.”

This court finds that the Supreme Court had before it in RMS v. Miller an operative complaint in which the Supreme Court held that the allegations of “holder” was sufficient for a foreclosure to continue.  Id. 227.   Ex. 5.

Based upon this court's review of the pleadings in RMS v. Miller at the trial level and the allegations of this current complaint, the court finds that this case is controlled by the presumption of RMS v. Miller.

A trial court is required to follow the prior decisions of an appellate court to the extent that they are applicable to facts and issues in the case before it, and the trial court may not overturn or disregard binding precedent.

Potvin v. Lincoln Service & Equipment Co., 298 Conn. 620, 650 (2010).

There was no requirement in RMS v. Miller that a foreclosing plaintiff plead ownership of the note.   The plaintiff is permitted to plead that it is the “holder” and rely on the presumption set forth in RMS v. Miller.   This is exactly the legal and factual position that the plaintiff is relying on to defeat this Motion to Dismiss.   The defendants' arguments are not supported by either the trial record of RMS v. Miller nor the appellate record.   No other appellate decision requires the pleading of ownership.   This court concludes that if the defendant is correct and that the plaintiff is required to plead ownership, the plaintiff then would have the burden of proof of demonstrating from the evidence that the plaintiff is the actual owner.   If the defendant is correct then RMS is no longer the law and the presumption rule of RMS v. Miller is being overruled by a trial court.   This court is a trial court and is bound to follow Supreme Court precedent.

RMS Residential Properties, LLC v. Miller did not change Connecticut law concerning the burden of proof by a plaintiff seeking foreclosure.   It is the obligation of the plaintiff to prove that it was the owner of the note and the mortgage, that there was default in the note and mortgage, and that all conditions of the note and mortgage have been satisfied.  Franklin Credit Management Company v. Nicholas, 73 Conn.App. 830, 838 (2002);  Webster v. Flanagan, 51 Conn.App. 733, 750–51 (1999).  RMS v. Miller did not change these requirements.   It merely added the presumption provision to assist the plaintiff in proving that it is the owner of the note.   It is up to the defendants to rebut that presumption.   In this case the defendants called no witnesses and furnished no credible evidence before this court to support their position that the plaintiff lacks standing.  “A holder of a note is presumed to be the owner of the debt, and unless the defendant rebuts that presumption, a holder of the note is entitled to foreclose the mortgage.”  RMS Residential Properties, LLC v. Miller, supra, 303 Conn. 228–29.

The defendants also argue as to the RMS presumption:  “The presumption, however, is not available to a plaintiff who did not allege ownership.”   DiLuca and Makris Brief in Support of Their Motion to Dismiss for Lack of Subject matter Jurisdiction dated July 5, 2012 (# 132.00, page 13).   The defendants cite to no case for this statement that is dated after the issuance of RMS Residential Properties, LLC v. Miller on December 13, 2011.   This defendant's claim of failure to plead ownership is not supported by the examination of the complaint upon which RMS v. Miller was decided.   At trial the plaintiff must prove ownership.  Id. 228–29.

Although not raised in the Motion to Dismiss, at the hearing the defendants offered two other arguments in favor of their Motion to Dismiss.

Mr. Endara testified that JP Morgan Chase, NA was servicing the mortgage well before the commencement of the lawsuit and that the plaintiff, Bank of America, NA, was the owner and holder of the note as of February 1, 2007, well before the 2009 commencement of this lawsuit.   This testimony was based on his review of computer records described as “screen shots.”   A screen shot is the information that appears on the computer screen.   Copies can be made of screen shots.   The screen shots testified to by Mr. Endara were not offered into evidence either by the defendants on cross-examination nor by the plaintiff on direct or rebuttal.   The court finds that the plaintiff laid the proper foundation for Mr. Endara's computer search testimony, that he was conversant with the computer system, that he relied on its accuracy in performing his duties, and that he was familiar with the workings of the computer system.   American Oil Co. v. Valenti, 129 Conn. 349, 355–56 (1979).   Printouts from computer records are admissible.  Id. 356;  Silicon Valley Bank v. Miracle Faith World Outreach, Inc., 140 Conn.App. 827, 835–37 (2013);  Gilmore v. Public Storage, Inc., Superior Court, judicial district of Fairfield at Bridgeport, Docket Number CV 04–0409678 S (February 25, 2009, Bellis, J.).

The second argument made by defendants stems from a July 22, 2009 Memorandum of Law in Support of Plaintiff's Motion for Summary Judgment (# 107.00) marked in evidence in this hearing as Exhibit 6. On the 17th unnumbered page of Exhibit 6 and the 14th unnumbered page of the Memorandum, the following language appears:  “Furthermore, the Plaintiff in this action is an incarnation of the original lender who did not assign nor otherwise transfer ownership of the underlying loan documents to any third party or otherwise relinquish its rights as the owner of the loan instruments.”   The Memorandum was authored and signed by Andrew P. Barsom, Esq. of the law firm of Hunt Leibert Jacobsen, P.C. At all times the plaintiff, Bank of America, NA, has been represented in this foreclosure lawsuit by Hunt, Liebert Jacobsen, P.C.

This Memorandum (# 107.00) supported the plaintiff's July 22, 2009 Motion for Summary Judgment (# 106.00).   The Motion for Summary Judgment and the Memorandum were both withdrawn on December 27, 2011 (# 123.00) without the motion ever being decided or argued.   In substitution thereof the plaintiff filed a December 27, 2011 Motion for Summary Judgment with an attached supporting Memorandum of Law (# 124.00).   The above mentioned phrase does not appear in this later version of the plaintiff's Motion for Summary Judgment (# 124.00).

The defendant claims that this statement by counsel in a duly filed pleading is a judicial admission that Washington Mutual Bank, FA has always been the owner of the Note and Mortgage, that Bank of America, NA has never been the owner of the Note and Mortgage, that Bank of America, NA has no standing to commence and/or maintain this foreclosure lawsuit, and thus this court is deprived of subject matter jurisdiction.   The defendants argue that on this basis alone the Motion to Dismiss must be granted.

This court is not persuaded.

(1) The defendants have not furnished legal authority to this court that counsel's Memorandum is a “pleading” of the type that is subject to the judicial admission doctrine.   The admission of the truth of an allegation in a pleading is a judicial admission conclusive on the pleader.  Jones Destruction, Inc. v. Upjohn, 161 Conn. 191, 199 (1971).  “An admission in pleading dispenses with proof, and is equivalent to proof.”  Patchen v. Delohery Hat Co., 82 Conn. 592, 594 (1909).

(2) The judicial admission rule is limited to pleadings and statements made in open court.  Piantedosi v. Florida, 186 Conn. 275, 278 (1982).   Interrogatory answers are not subject to the judicial admission rule.  Id. 278;  Balboni v. Stonick, 2 Conn.App. 523, 529 (1984).   By reason of this limitation, it can be concluded that a Memorandum submitted by counsel is not a “pleading” subject to the judicial admission rule.  Hirsch v. Thrall, 148 Conn. 202, 206–07 (1961);  Esposito v. Wethered, 4 Conn.App. 641, 645 (1985);  Gen.Stat. § 52–200.

(3) Even if the Memorandum is a “pleading” subject to the admission rule, it no longer is a judicial admission since it was withdrawn on December 27, 2011 (# 123.00).  Dreier v. Upjohn Co., 196 Conn. 242, 244 (1985).

(4) A withdrawn pleading, at best, is only an evidential admission.  Id. 244.   The court can give such an evidential admission whatever weight it is entitled to O'Kane v. Puljic, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket Number FST CV 10–6005729 S (November 28, 2012, Tierney, J.T.R.).   Given that such statements have some probative value, we believe that the circumstances under which they are made, as with any other “admission,” go to the weight to be accorded the statements rather than their admissibility.  Stitham v. LeWare, 134 Conn. 681, 684 (1948).   Such admissions can be explained to the trier when the superseded pleading is admitted at trial.  Kucza v. Stone, 155 Conn. 194, 197–98 (1967).   This court hereby gives such withdrawn statement no weight.

(5) The Memorandum (# 107.00) contains a June 18, 2009 affidavit submitted on behalf of Bank of America, NA executed by a Vice President of JP Morgan Chase Bank, National Association, the servicer of the Note and Mortgage.   Paragraph 5 of this affidavit states:  “Plaintiff in this action, Bank of America, NA, is the owner and holder of said note and mortgage.”   The assignment to Bank of America, NA is also noted in paragraph 5 of this attachment.   These are the operative facts set forth in the Memorandum.   There are no facts contained anywhere in Exhibit 6 that refute these facts.   The conclusionary statement of Attorney Barsom does not refute the facts contained in this June 18, 2009 affidavit.   The court finds the facts contained in the June 18, 2009 affidavit controlling and credible.

(6) The Memorandum quotation is contained in the section of the plaintiff's argument claiming that a holder of the note has the ability to foreclose under Connecticut law and the defendants' First Special Defense to the contrary is not current Connecticut law.

(7) The sentence quoted fails to take into consideration other portions of that same 14th page and the following page where it is stated:  “Plaintiff is in fact the legal owner of the documents” and the “Plaintiff in this action is the holder of the Note.” The plaintiff in this pleading (# 107) (Exhibit 6) is the Bank of America, NA.

After reviewing the entire Memorandum and the attached Affidavit one could not be mistaken that the plaintiff, Bank of America, NA, was and is the owner of the Note at the commencement of this lawsuit.

The plaintiff alleges that it was and is the holder of the Note. The plaintiff relies on the RMS v. Miller presumption.   Although the defendants argue the above admission in counsel's later withdrawn Memorandum, the defendants offered no other evidence to rebut the presumption that a holder of the Note is the owner of the Note. The thin, very thin thread of this claimed evidential admission is insufficient to sustain the defendants' burden to rebut the presumption of ownership.   Wells Fargo Bank v. Clegg, Superior Court, judicial district of Fairfield at Bridgeport, Docket Number CV11–6019620 S (January 7, 2013, Hartmere, J.) [55 Conn. L. Rptr. 464].

The court finds that the defendants have failed to rebut the presumption of ownership by any evidence whatsoever.

The court finds that the defendants' Motion to Dismiss stating that the plaintiff has no standing because the plaintiff has failed to allege ownership, finds no support in either RMS Residential Properties, LLC v. Miller or any other appellate decision.

The Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction dated July 5, 2012 (# 131.00) is denied.

BY THE COURT

Hon. Kevin Tierney

Judge Trial Referee

Tierney, Kevin, J.T.R.