Eastern Savings Bank v. Cynthia Cortese et al. (2013)

MEMORANDUM OF DECISION

The named defendant “the defendant” owned a parcel of property known as Lot 7 at 28 Meeting House Road which is located partly in Greenwich and partly in Stamford.   On December 3, 2002 she executed a promissory note in conjunction with entering into a “loan facility agreement” of the same date in order to borrow $2,500,000 from the plaintiff.   The loan was secured by “open ended mortgage deed and security agreement” on Lot 7 (the first mortgage).   On the same date in conjunction with entering into a “building loan agreement” the defendant executed a “secured construction promissory note” in the amount of $2,600,000 in favor of the plaintiff which was secured by an “open ended construction mortgage on the same property,” (the second mortgage).   By its terms this mortgage was subordinate in lien to the $2,500,000 first mortgage.   In addition, this building loan agreement was intended to provide a source of funds for debt service payments due under a forbearance agreement which was entered into by the parties in connection with a foreclosure action affecting Lot 6, Meeting House Road which the plaintiff had commenced against the defendant James Lacata, her husband, earlier in 2002 in Connecticut Superior Court.   The next loan document which the defendant executed on that date was a “cash collateral interest reserve agreement” which created a fund of $475,000 which the plaintiff advanced to the defendant to enable her to service the first and second mortgage loans referenced above.   The fund was also intended to assist her in complying with a forbearance agreement created to facilitate avoidance of the foreclosure on Lot 6 which belonged to her husband.   The loan facility agreement had the sole purpose of providing for a “loan fee” which the plaintiff would charge against the interest reserve fund each time the defendant drew down against the first mortgage created under the “cash collateral interest reserve agreement.”   Also set aside was the balance of the loan funds remaining in the amount of $859,423.15 to fund a line of credit.   All draw downs were governed by the loan facility agreement.

As of December 3, 2002 the defendant and James Licata were the owners of Pomona Holdings, LLC (“Pomona”) which owned commercial property (“the Pomona property”) in Newark, New Jersey.   That property was also subject to two mortgages in favor of the plaintiff which were guaranteed by James Licata.   On January 23, 2002 the plaintiff instituted proceedings in New Jersey Superior Court to foreclose the first of these two mortgages for nonpayment.   On December 3, 2002 as part of the package of loan documents that were executed on that date, Pomona, the plaintiff and Park Town Enterprises, Inc. (“Parkton”) executed a “deed agreement” whereby Pomona agreed to convey to Parkton as a subsidiary of the plaintiff, all of its interest in the Newark property and pursuant to which Parkton agreed to hold the conveyance unrecorded until April 15, 2003 to afford Pomona an opportunity to market the property so that it could satisfy its debt to the plaintiff on the mortgage that was under foreclosure.   By the express terms of this agreement the conveyance was complete upon delivery of the deed with the withholding of recording being recognized by the parties as an “accommodation to Pomona.”   The executed deed was delivered simultaneously with the deed agreement.   The sale-by date of April 15, 2003 was expressly made “time of the essence.”   Ultimately, the property was not sold to a third person by April 15, 2003.   On May 8, 2003 the plaintiff filed its motion for judgment in the New Jersey foreclosure.   The court entered judgment of foreclosure by sale ¹ on July 2, 2003 and the property was sold on October 1, 2003 to the highest bidder for $785,000.²  On the same date, to complete this convoluted and interlocking financial transaction the defendant assigned to the plaintiff as additional collateral for the $2,500,000 mortgage on the Connecticut property, a second mortgage in the original principal amount of $500,000 which she held on the Pomona property in her individual capacity.   The defendant never made a payment on either of the mortgages which are the subject of this proceeding.   Consequently, the plaintiff has declared the loan in default.

During the life of the first mortgage on the Connecticut property and the “cash collateral and interest reserve agreement,” and in the exercise of her right to do so on demand, the defendant drew down a total of $883,063.67 in principal and $143,867.69 in interest reserve for a total of $1,026,931.30.   On the second mortgage (construction loan) there were no draw downs except for $100,000 disbursed to pay closing costs and loan fees.

In her answer, the defendant has left the plaintiff to its proof with respect to the substantive allegations of the complaint except for due execution of the documents which the defendant has admitted.   Notwithstanding this admission, in her testimony at trial, the defendant has attempted to disavow her signature on one of the loan documents because it only contained her first name.   The court is not persuaded.

The defendant has concluded her answer with an assertion that the plaintiff is not entitled to the remedy of foreclosure because it is unable to prove that the balance of equities lies with it.³  “It is well established that a foreclosure action constitutes an equitable proceeding.”  Harbour Landing Development Corporation v. Herman, 27 Conn.App. 98, 101, (1992).  “In an equitable proceeding, the trial court may examine all relevant factors to ensure that complete justice is done ․ The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court.”  (Citations omitted;  internal quotation marks omitted.)  Id., 101–02;  see also Banca Commerciale Italiana Trust Co. v. Westchester Artistic Works, 109 Conn. 23, 26 (1929);  Mariners Savings Banks v. Duca, 98 Conn. 147, 152 (1922).”  (Alternate citations omitted.)  Citicorp Mortgage, Inc. v. Burgos, 227 Conn. 116, 120 (1993).

In accordance with this principle, “balancing of the equities” is present in every foreclosure proceeding because in every such proceeding the determination of what equity requires is a matter for the discretion of the trial court.   Rosenblit v. Williams, 57 Conn.App. 788, 792 (2000).

The defendant denies that the plaintiff is entitled to relief and further denies that the plaintiff can satisfy its burden of proving that on the balance of the equities the plaintiff is entitled to the equitable remedy of foreclosure.

In a mortgage foreclosure action, “[t]o make out its prima facie case, [the foreclosing party] had to prove by a preponderance of the evidence that it was the owner of the note and mortgage and that [the mortgagee] had defaulted on the note.”  Webster Bank v. Flanagan, 51 Conn.App. 733, 750–51 (1999).  “At common law, the only defenses to an action of this character would have been payment, discharge, release or satisfaction ․ or, if there had never been a valid lien.”  (Emphasis added;  internal quotation marks omitted.)   Southbridge Associates, LLC v. Garafalo, 53 Conn.App. 11, 15, cert. denied, 249 Conn. 919 (1999).  (Alternate citations omitted.)  Franklin Credit Management Corp. v. Nicholas, 73 Conn.App. 830, 838 (2002).   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.   La Salle National Bank v. Shook, 67 Conn.App. 93, 96–96 (2001).

“[T]he term prima facie case has been utilized, according to [one commentator on the law of evidence] ․ where the proponent, having the burden of proving the issue ․ has not only removed by sufficient evidence the duty of producing evidence to get past the judge to the jury, but has gone further, and, either by means of a presumption or by a general mass of strong evidence, has entitled himself to a ruling that the opponent should fail if he does nothing more in the way of producing evidence.  (Emphasis in original;  internal quotation marks omitted.)  Berchtold v. Maggi, 191 Conn. 266, 270–71 (1983)” (Alternate citation omitted.)  Franklin Credit Management Corp. v. Nicholas, 73 Conn.App. at 842.

Applying these principles the court concludes that the plaintiff has proved by a preponderance of the evidence each of the elements essential to obtaining a judgment of foreclosure.

On the other hand, the defendant has asserted a special defense of unclean hands.   The special defense reads as follows:

“The plaintiff has unclean hands, pleading in the alternative, for some one or more of the factual reasons set forth below:

(1) The plaintiff/counterdefendant breached the implied covenant of good faith and fair dealing by either negligently or fraudulently, pleading in the alternative, inducing the defendant to pledge additional security as cross-collateral for a loan involving Pomona Holdings which was already in default and subject to foreclosure.   This was equity skimming.

(2) The plaintiff counterdefendant further breached the implied covenant of good faith and fair dealing by negligently or fraudulently, pleading in the alternative, misrepresenting (through nondisclosure) on the closing statement the payment of an extra half percent on top of that which was entirely unauthorized.

(3) The plaintiff/counterdefendant further breached the implied covenant of good faith and fair dealing by negligently or fraudulently, pleading in the alternative, misrepresenting on the closing statement the payment of an extra half percent of interest on draws and then charged an extra half percent on top of that which was entirely unauthorized and fraudulently presented in an affidavit of debt to this court in this foreclosure case attempting to hide the character of the extra charges and conceal the fraud.

(4) The plaintiff/counterdefendant further breached the implied covenant of good faith and fair dealing by negligently or fraudulently, pleading in the alternative, not disclosing the financial benefits of the cross-collateralized Pomona Holdings mortgage and not crediting those amounts to the debt claimed to be owed by the defendant/counterclaimant.”

The court interprets these allegations to include the defense of unclean hands based upon a claimed breach of the implied covenant of good faith and fair dealing.   As a threshold matter the court notes that such a defense is not recognized in our foreclosure jurisprudence.  “The defendants also alleged, as a special defense, that the plaintiff breached the covenant of good faith and fair dealing.  ‘We recently stated that special defenses and counterclaims alleging a breach of an implied covenant of good faith and fair dealing ․ are not equitable defenses to a mortgage foreclosure ․ Accordingly, the defendants' special defense is legally insufficient and is not a valid legal or equitable defense to a foreclosure action.’  (Citation omitted;  internal quotation marks omitted.)  Fidelity Bank v. Krenisky, 72 Conn.App. 700, 716–17, cert. denied, 262 Conn. 915 (2002).”  Barasso v. Rear Still Hill Road, LLC, 81 Conn.App. 798, 807, n.5 (2004).

The court recognizes that the viability of this long standing prohibitory rule was cast in some doubt by our Appellate Court's decision in Atlantic Mortgage & Investment Comp. v. Stephenson, 86 Conn.App. 126 (2004).   There is no question that the court seemed to abandon the rule in favor of permitting the assertion of the breach of the implied covenant defense in a foreclosure action.   A close examination of the opinion and subsequent action by the court, however, reveals that such is not the case.

In Stephenson, the issue before the court was not the availability of the defense of breach of the implied covenant because the plaintiff did not contest the finding or the legal conclusion of the trial court as they related to its breach of the implied covenant.  Id. at 141–42.   Thus, the issue before the court was “the propriety of the court's award of damages in an amount equal to the outstanding legal bills of the defendant.”

As this court reads the opinion, the court recited the well established rule governing breach of the implied covenant of good faith only as a prelude to its adjudication of the actual issue before it, namely the determination of appropriate damages.   In other words, the court viewed the case as one in which both parties accepted the applicability of the doctrine to the case, right or wrong.

As evidence of the continued viability of the prohibitory rule, three months later in Monetary Funding Group, Inc. v. Pluchino, 87 Conn.App. 401, 404, n.3 (2005), the same court with Judges Lavery and Bishop comprising a majority of the panel in both cases, restated the prohibitory rule in no uncertain terms:  “We note that ‘special defenses and counterclaims alleging a breach of an implied covenant of good faith and fair dealing ․ are not equitable defenses to a mortgage foreclosure ․ Accordingly, the defendants' special defense is legally insufficient and is not a valid legal or equitable defense to a foreclosure action.  (Internal quotation marks omitted.)  Barasso v. Rear Still Hill Road, LLC, 81 Conn.App. 798, 807 n.5, (2004).  (Alternate citation omitted.)   Thus, despite the confusion which has been generated among judges of the Superior Court, see e.g., Bayview Loan Servicing, LLC v. Yoney Realty Corp., CV 11–6016983, Superior Court, judicial district of Fairfield (April 4, 2012, Hartmere, J.);   Dime Loan Servicing Corp. v. Walter, CV 10–6002295, Superior Court, judicial district of New London (April 5, 2013, Devine, J.), the prohibition remains alive and well.

Nevertheless, there is no sound reason why the facts, if any, which the defendant relies on in proof of the allegation of breach of the implied covenant of good faith and fair dealing cannot be utilized by the court to determine whether the plaintiff has come to court with unclean hands.

But contrary to plaintiff's contention as to where the burden of proof lies, as in any case, the defendant bears the burden of proving her special defense.  “The party seeking to invoke the clean hands doctrine to bar equitable relief must show that his opponent engaged in willful misconduct with regard to the matter in litigation.”   Richfield v. Eppoliti Realty Co., 71 Conn.App. 321, 335 (2002).

The special defense breaks down into three parts which the court will address in turn.   First it is alleged alternatively that the plaintiff engaged in either negligent or fraudulent inducement in demanding that the defendant mortgage the Greenwich property as additional security for the loan which had been made on the Pomona property.   The defendant refers to this practice as “equity skimming.”

The term “equity skimming” is not one of widespread use in Connecticut foreclosure law.   In Cheshire Mortgage Services, Inc. v. Montes, 223 Conn. 80, 123 (1992), the dissent (Berdon, J.) described the practice as a loan based not on a person's ability to repay but on the amount of equity in the home.   The loan is made “with the intention of foreclosing upon the homeowner and reaping a profit through the equity in the home.”   As this court understands it, an essential element of the practice is that the borrower not have the financial ability to repay the loan.  “Under our practice when a defendant pleads a special defense, the burden of proof on the allegation contained therein is on the defendant.”  DuBose v. Carabetta, 161 Conn. 254, 262 (1971).   Thus, the defendant was obligated to allege and prove the essential elements of the torts of negligent and/or fraudulent misrepresentation.

“Traditionally, an action for negligent misrepresentation requires the plaintiff to establish (1) that the defendant made a misrepresentation of fact (2) that the defendant knew or should have known was false, and (3) that the plaintiff reasonably relied on the misrepresentation, and (4) suffered pecuniary harm as a result.  Glazer v. Dress Barn, Inc., 274 Conn. 33, 73 (2005).”  (Alternate citation omitted) Nazami v. Patrons Mutual Ins. Co., 280 Conn. 619, 626 (2009).

“In order to plead a cause of action for fraud, a plaintiff must allege that:  ‘(1) a false representation was made [by the defendant] as a statement of fact;  (2) the statement was untrue and known to be so by [the defendant];  (3) the statement was made with the intent of inducing reliance thereon;  and (4) the other party relied on the statement to his detriment.’  Weinstein v. Weinstein, 275 Conn. 671, 685 (2005).   Furthermore, when ‘a claim for damages is based upon fraud, the mere allegation that a fraud has been perpetrated its insufficient;  the specific acts relied upon must be set forth in the complaint.’  Maruca v. Phillips, 139 Conn. 79, 81, 90 (1952).”  (Alternate citations omitted.)  Nazami v. Patrons Mutual Ins. Co., 280 Conn. at 628.

It is clear from the Nazami case that the defendant must set forth the specific acts of negligent misrepresentation and/or fraud of which she complains.   The defendant specifies only a single act of misrepresentational conduct on the part of the plaintiff, viz:  “nondisclosure on the closing statement the payment of an extra half percent interest on draws and then charged and (sic) extra half percent on top of that which is entirely unauthorized.” ⁴

To understand this claim it is necessary to examine paragraph # 7 of the loan facility agreement (Ex. 10) which states:

“7. Upon each draw of the Loan by Borrower, Borrower shall pay a loan fee equal to one/half (1/2%) percent of each draw to and such fee shall be deducted from such draw, including draws upon the Interest Reserve, which have been advanced and funded on the date hereof.”

From the testimony it is apparent that the plaintiff applied this “loan fee” to each amount which the defendant drew down from the line of credit which she was given pursuant to the loan documents.   Abby Kaminski (Simmons), Manager of the Loan Servicing Department at the bank and a twenty-four year employee, explained the process as follows:  referring to the plaintiff's “journal” or record of the defendant's draw downs (Ex. 12) the December 24, 2002 draw of $27,500 was used as an illustration.   The sum of $27,500 was divided by a factor of .995 yielding a result of $27,638.19.   Of this sum $138.19 represented the loan fee.   The court notes that the same result is obtained by multiplying $27,500 by .005 (1/2 percent), yielding $137.50 and then multiplying that figure by .005 (1/2 percent), yielding, $.6875.   When the two 1/2 percents are added together they produce $138.19 which is precisely the same figure obtained by dividing the draw by a factor of .995.

Notwithstanding that the plaintiff has expressly waived collection of these charges both in its documents and testimony at trial, the court will address the defendant's argument, whether or not it is waived because the allegations of negligent and/or fraudulent misrepresentation go to the very validity of the transaction.

The defendant's position simply is that the above mathematical exercise (a) was not disclosed to her at the loan closing, and (b) charging the second 1/2 percent was unauthorized and therefore unlawful.   The court's analysis of these claims begins with the fact that there was no evidence that the plaintiff made any preclosing disclosure of the charge such as is required by federal law for certain residential mortgage loans.⁵  Nor was any claim made that a disclosure was mandated by New York law where the closing took place or Connecticut law where the mortgaged property was located.   Additionally, the defendant makes no claim in her pleadings, in the evidence at trial or in oral argument that any of these laws applied to her mortgage loans for the simple reason that they were purely commercial and not residential in nature because they were inspired by the need to provide funding for the Pomona mortgage debt which was in foreclosure at the time and which itself was made for a commercial purpose.   In short, the defendant has failed to point to any legal mandate that imposes a duty on a commercial lender to make preclosing written disclosures of all of the charges and expenses that will be incurred by the borrower in a commercial transaction.  (See discussion, infra at P. 14–17.)   The plaintiff is therefore relegated and limited to the common law causes of action of negligent and fraudulent misrepresentation.   As stated above, none of the essential elements of either tort has been alleged in the special defenses.   Moreover, no evidence was produced at trial which would support such allegations even if they had been made.   Having heard the defendant's testimony it is inconceivable that the defendant was unaware of the imposition of the loan fee prior to the closing or that she did not understand how it would be applied at the time that she signed the loan documents.   Not only was she represented by counsel at the closing but both she and her husband were and are today highly experienced, sophisticated real estate investors.   The defendant testified that she owned a one-half interest in several real property limited liability companies with her husband, that she “owned over 24 real estate holdings consisting of apartment buildings and commercial properties.”   Her husband, James Licata, testified that these properties included four hotels and numerous apartment houses.   It is highly improbable that the defendant did not understand how the loan fee would be applied to her draw.⁶  No claim has been made that the plaintiff intentionally withheld this information for the purpose of inducing the defendant to enter into these numerous interconnected and complicated transactions.  Morgera v. Chiappardi, 74 Conn.App. 442, 451 (2003).   The court rejects that testimonial claim as unrealistic and an attempt to delude the court.

The second claim, that the charging of interest on the loan fee in addition to interest on disbursed principal was unauthorized and therefore illegal, is likewise unfounded.   Since the loan facility agreement is a contract, interpretation of the words used in paragraph 7 is guided by well established principles of contract construction.   In construing a written contract, “the intention of the parties, which must be gathered from the language of the instrument in light of the circumstances existing at the time of its execution, is controlling, the ordinary meaning of language must be followed unless a technical or special meaning is clearly intended ․” and when the plain meaning and intent of the language is clear, a clause ․ cannot be enlarged by construction.   There is no room for construction where the terms of a writing are plain and unambiguous, and it is to be given effect according to its language.”  Collins v. Sears Roebuck, & Co., 164 Conn. 369, 373–74 (1973).   The language employed in the present case makes it clear that a loan fee was to be applied not only to principal amounts disbursed but also to “draws upon the interest reserve” which were advanced and funded for the defendant's account at the closing.   It is a sensible and logical interpretation of the words since the defendant used the plaintiff's money and not her own to pay the loan fee.   The plaintiff was clearly entitled to interest on the loan fee which it advanced.   As Thomas Kennedy, the plaintiff's associate general counsel stated:  “Had the defendant used her own money to pay the loan fee or paid by a check there would have been no second charge of 1/2 per cent.”

The allegation of fraud stems from the claim that at the time the judgment of foreclosure was entered in the present case (it having been opened on November 3, 2011, Mintz, J.) the plaintiff presented a fraudulent affidavit of debt in which it attempted “to hide the character of the extra charges and conceal the fraud.”

The elements of fraudulent misrepresentation have been set forth earlier in this opinion.   The defendant bears a formidable burden of proof of these elements by clear and convincing evidence.  Kilduff v. Adams, Inc., 219 Conn. 314, 330 (1991).   In view of the above discussion there was nothing unauthorized or illegal in the plaintiff charging the specified loan fee on the interest which it advanced on the principal amount of each draw made by the defendant simply because the loan fee was the plaintiff's money and not the defendant's.   The defendant has utterly failed to prove her claim of fraud by identifying any false representation of material fact.

Finally, the defendant charges the plaintiff with “not disclosing the financial benefits of the cross collaterized Pomona Holdings mortgage and crediting those amounts to the debt” owed by the defendant.   The defendant does not identify the “financial benefits” to which she was entitled and none were identified at trial.   In fact no evidence was offered discrete to this point.   Therefore, the court is unable to determine whether and to what extent the plaintiff has wrongfully deprived the defendant of “benefits” to which she was entitled.

The court now turns to the counterclaim which realleges the claims made in the special defense and introduces a cause of action based upon CUTPA.   In foreclosure actions, a mortgagee's conduct in the making of the mortgage note has been held to constitute a violation of CUTPA.   JP Morgan Chase Bank Trustee v. Rodrigues, 109 Conn.App. 125, 134 (2008).

CUTPA 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.”  General Statutes § 42–110b(a).   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 ․” General Statutes § 42–110g(a).

“The purpose of CUTPA is to protect the public from unfair practices in the conduct of any trade or commerce ․” Krawiec v. Blake Manor Development Corp., 26 Conn.App. 601, 607 (1992).   In determining whether certain acts constitute a violation of CUTPA, our Supreme Court has adopted the criteria set out in the Federal Trade Commission's “cigarette rule”:  “(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—whether, 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 businessmen].  (Internal quotation marks omitted.)  Journal Publishing Co. v. Hartford Courant Co., 261 Conn. 673, 695 (2002).”  (Alternate citations omitted.)   Soreign Bank v. Licata, 116 Conn.App. 493, supra.

Southington Savings Bank v. Rogers, 40 Conn.App. 23, 28–29 (1995), involved a claim of a deceptive practice by a bank in the management of a construction mortgage loan made to a real estate developer.   There, when the borrower fell in arrears, the lending bank placed a hold on $290,000 worth of the borrower's certificates of deposit in order to create further security for the loans without first informing the borrower.   Thereafter, the bank made an additional mortgage loan to the borrower without disclosing the existence of the hold.   When the borrower sought to withdraw a portion of these funds for his daughter's college education he learned of the hold for the first time and demanded that the funds be released.   The bank refused.   In the bank's action to foreclose the mortgage the borrower claimed that the bank's failure to disclose the hold before making the mortgage loan constituted a deceptive practice under CUTPA.   In rejecting that claim the court stated the following:

“The dispositive issue in this appeal is whether the plaintiff violated General Statutes § 41–110b by closing on the Mariondale mortgage to secure the unsecured notes without disclosing to the defendants the hold previously placed on their certificates of deposit.   In order to succeed on their CUTPA counterclaim, the defendants must show that the plaintiff's conduct was deceptive or violated public policy.”  Jacobs v. Healey Ford–Subaru, Inc., 231 Conn. 707, 726 (1995);  Vezina v. Nautilus Pools, Inc., 27 Conn.App. 810, 819 (1992).

An act or practice is deceptive if three conditions are met.  “ ‘First, there must be a representation, omission, or other practice likely to mislead consumers.   Second, the consumers must interpret the message reasonably under the circumstances.   Third, the misleading representation, omission, or practice must be material—that is, likely to affect consumer decisions or conduct.’   Caldo, Inc. v. Heslin, 215 Conn. 590, 597 (1990), cert. denied, 498 U.S. 1088 (1991);  see also Figgie International, Inc., 107 F.T.C. 313, 374 (1986).

We find, as a matter of law, that the plaintiff's conduct was not deceptive.   ‘A failure to disclose can be deceptive only if, in light of all the circumstances, there is a duty to disclose.’  (Emphasis added.)  Normand Josef Enterprises, Inc. v. Connecticut National Bank, 230 Conn. 486, 523 (1994).   The plaintiff will be liable under CUTPA only if there is a statutory or common law duty to disclose to a depositor the existence of a hold placed on the depositor's accounts.   We conclude that the plaintiff in this case had no duty to disclose to the defendants that it had placed a hold on the defendants' certificates of a deposit prior to closing on the Mariondale mortgage.”  Id. at 28–29.  (Alternate citations omitted.)   So too in Normand Joseph Enterprises, Inc. v. Connecticut National Bank, 230 Conn. 486, 523 (1994), our Supreme Court held that a nondisclosure by a bank cannot be a deceptive practice under CUTPA if there is no statutory or common law duty to disclose.

The defendant makes the additional claim that the plaintiff never disclosed that it was proceeding with the New Jersey foreclosure and that the defendant was misled into thinking that because title had passed by virtue of the deed of conveyance (see fn. 1) the foreclosure would not proceed to judgment.   The short answer to this is that the plaintiff was under no duty to make any disclosure that it intended to prosecute the foreclosure.   The defendant had every right to assert divestment of title as a defense in that action.

The defendant testified that she “never read” paragraph 7 of the loan facility agreement (Ex. 10).   While there was no evidence that the plaintiff explained to her how the loan fee provision would work, it is difficult for the court to accept the inference that she was not aware that she would be obligated to pay interest on money that was advanced to her by another, especially in view of her high level of business acumen.   This was not a case of an unsophisticated, inexperienced borrower in an abstruse commercial loan transaction who was not represented by counsel.   See Monetary Lending Group, Inc. v. Pluchino, 87 Conn.App. 401 (2005).   There was nothing immoral, unethical or unscrupulous in the manner in which the plaintiff managed these mortgages.   Therefore a judgment of foreclosure may enter for the plaintiff on both counts of the complaint.   A hearing to determine the form of judgment and fix the amount of the debt in each count will be held on May 22, 2013 at 11:30 AM.

A. WILLIAM MOTTOLESE, J.T.R.

FOOTNOTES

FN1. Neither party has offered any explanation of the propriety of a judgment of foreclosure in view of the fact that title to the property ostensibly vested in the plaintiff upon delivery of the deed (“conveyance complete upon delivery of the deed”).   At least in this jurisdiction title vests upon delivery of the deed of conveyance with intent to pass title, thus obviating the need for a judgment of foreclosure.  Bell v. Bloom, 146 Conn. 307 (1959).   In any event, this court is bound by the New Jersey foreclosure judgment and there is no evidence that the defendant was disadvantaged any more than she would have been had the plaintiff relied on the deed of conveyance..  FN1. Neither party has offered any explanation of the propriety of a judgment of foreclosure in view of the fact that title to the property ostensibly vested in the plaintiff upon delivery of the deed (“conveyance complete upon delivery of the deed”).   At least in this jurisdiction title vests upon delivery of the deed of conveyance with intent to pass title, thus obviating the need for a judgment of foreclosure.  Bell v. Bloom, 146 Conn. 307 (1959).   In any event, this court is bound by the New Jersey foreclosure judgment and there is no evidence that the defendant was disadvantaged any more than she would have been had the plaintiff relied on the deed of conveyance.

FN2. The net proceeds from the sale was actually $760,322.48 which was not enough to satisfy Pomona's indebtedness to the plaintiff..  FN2. The net proceeds from the sale was actually $760,322.48 which was not enough to satisfy Pomona's indebtedness to the plaintiff.

FN3. This assertion though not so labeled, is in the nature of a special defense and reads as follows:  “The defendant denies that the plaintiff is entitled to such relief and further denies that the plaintiff can satisfy the burden of proving that on the balance of the equities the plaintiff is entitled to the equitable remedy of foreclosure.”   See P.B. § 10–50..  FN3. This assertion though not so labeled, is in the nature of a special defense and reads as follows:  “The defendant denies that the plaintiff is entitled to such relief and further denies that the plaintiff can satisfy the burden of proving that on the balance of the equities the plaintiff is entitled to the equitable remedy of foreclosure.”   See P.B. § 10–50.

FN4. The court notes that the defendant has not pleaded the tort of innocent misrepresentation.   See Gibson v. Capano, 241 Conn. 725, 730 (1997), or innocent non-disclosure.   See Duksa v. Middletown, 193 Conn. 124, 128 (1997), or fraudulent concealment.   See Iacurci v. Sax, 39 Conn.App. 386, 400 n.4 (2012)..  FN4. The court notes that the defendant has not pleaded the tort of innocent misrepresentation.   See Gibson v. Capano, 241 Conn. 725, 730 (1997), or innocent non-disclosure.   See Duksa v. Middletown, 193 Conn. 124, 128 (1997), or fraudulent concealment.   See Iacurci v. Sax, 39 Conn.App. 386, 400 n.4 (2012).

FN5. Eg. Home Owner's Equity Protection Act (HOEPA), Real Estate Settlement Procedures Act (RESPA) and Truth In lending Act (TWA)..  FN5. Eg. Home Owner's Equity Protection Act (HOEPA), Real Estate Settlement Procedures Act (RESPA) and Truth In lending Act (TWA).

FN6. The defendant is no stranger to non-traditional mortgage financing.   See Sovereign Bank v. Licata, 116 Conn.App. 483 (2009), aff'd 303 Conn. 721 (2012)..  FN6. The defendant is no stranger to non-traditional mortgage financing.   See Sovereign Bank v. Licata, 116 Conn.App. 483 (2009), aff'd 303 Conn. 721 (2012).

Mottolese, A. William, J.T.R.