LLC v. Michael K. Flash et al. (2013)

MEMORANDUM OF DECISION ON PLAINTIFF'S MOTION TO SUBSTITUTE PARTY PLAINTIFF;  DEFENDANTS' OBJECTION AND DEFENDANTS' MOTION TO DISMISS

This case is an action to foreclose a mortgage on property owned by the defendants, Michael K. Flash and Sandra A. Bartley.   The action was commenced by the plaintiff, Aurora Loan Services, LLC. Pending before the court is the plaintiff's motion to substitute party plaintiff (Doc. No. 143.00) and the defendants' objection thereto (Doc. No. 145.00).   The defendants also have filed a motion to dismiss (Doc. No. 148.00).   Defendants' challenges concern, inter alia, the plaintiff's standing to sue.   For the following reasons, the motion to substitute party plaintiff is granted.   The objection is overruled.   The motion to dismiss is denied.

I

“Standing is the legal right to set judicial machinery in motion.   One cannot rightfully invoke the jurisdiction of the court unless he [or she] 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 ․ When standing is put in issue, the question is whether the person whose standing is challenged is a proper party to request an adjudication of the issue ․ Standing requires no more than a colorable claim of injury;  a [party] ordinarily establishes ․ standing by allegations of injury.   Similarly, standing exists to attempt to vindicate arguably protected interests ․” (Citation omitted;  internal quotation marks omitted.)  St. Germain v. LaBrie, 108 Conn.App. 587, 591, 949 A.2d 518 (2008).   When a question regarding the plaintiff's standing to prosecute a foreclosure action is raised, the court should hold a hearing to resolve the issue.   See Equity One, Inc. v. Shivers, 125 Conn.App. 201, 206, 9 A.3d 379 (2010), cert. granted in part, 300 Conn. 936, 17 A.3d 474 (2011);  LaSalle Bank v. Bialobrzeski, 123 Conn.App. 781, 790, 3 A.2d 176 (2010);  Deutsche Bank v. Bialobrzeski, 123 Conn.App. 791, 800, 3 A.3d 183 (2010).  “The burden of demonstrating that a party has standing to bring an action is on the plaintiff.”  (Citation omitted.)  Park Nat'l Bank v. 3333 Main, LLC, 127 Conn.App. 774, 779, 15 A.3d 1150 (2011).

The defendants are self-represented.   This is their seventh and eighth motions challenging, inter alia, standing.   See, Doc. Nos. 107.00, 109.00, 114.00, 137.00, 136.00 and 139.00.   Although the issue of standing can be raised at any time and cannot be waived, having had an opportunity to raise the issue of standing in the past, the defendants do not have an unlimited right to make repeated challenges.   See Investment Associates v. Summit Associates, Inc., 132 Conn. 192, 198, 31 A.3d 820 (2011), cert. granted in part, 303 Conn. 921, 34 A.3d 396 (2012).   Nevertheless, in the instant case, the court will revisit the issue because the plaintiff has caused the facts to change somewhat.

II

The defendants' challenges essentially focus on three issues:  (A) Whether the proposed substitute plaintiff is a mere servicer without standing to sue (B) Whether the original lender was licensed to make loans, and (C) Whether the note was signed by the defendant, Bartley?   The issues are resolved seriatim.

A

The first issue focuses on the status of the proposed substitute plaintiff.   Plaintiff alleges that Nationstar Mortgage, LLC, should be substituted as plaintiff because the note, mortgage and cause of action have recently been assigned to Nationstar.   By way of background, the evidence adduced at hearing shows that Sandra A. Bartley borrowed $238,500 from GN Mortgage, LLC on January 17, 2006, as evidence by a fixed rate note between the borrower and lender of even date.   As security for the note, Sandra A. Bartley and Michael K. Flash gave an open-end mortgage to MERS as nominee for the lender (GN Mortgage) and lender's successors and assigns on January 17, 2006 for property known as 109–111 Evergreen Avenue, Hartford, CT. That note was eventually endorsed in blank and it was eventually assigned to Aurora Loan Service, LLC, the original plaintiff, and prior to the commencement of this suit on September 6, 2011.   Accordingly, the court previously resolved that Aurora had standing to bring this action when suit commenced.   See Ruling on Doc. No. 133.00.   Subsequently, the note and mortgage were assigned to Nationstar Mortgage, LLC, on July 1 and June 29, 2012, respectively.

The source of the dispute is that in the fall of 2012, while Aurora was arguing that it had standing to prosecute this foreclosure, it had, in fact, assigned its rights to Nationstar.   Moreover, it now appears that Aurora is using that same assignment, in part, as grounds for substituting Nationstar as the proper plaintiff with standing to prosecute this foreclosure.   To further confound matters, by letters dated July 15, 2012, Nationstar wrote to the defendants notifying them that Nationstar had been assigned the servicing rights to their loan and that the owner of the debt was Citibank, N.A., Trustee, LXS Series 2006–5.   Thus, the identity of the proper party to enforce the note and mortgage and prosecute the foreclosure action appears to be a moving target.   Defendants contend, inter alia, that Aurora never had standing, and neither does Nationstar, because it is a mere servicer.   A mere servicer of a debt does not have standing to prosecute a foreclosure.   See PHH Mortgage v. Cameron, 130 Conn.App. 238, 240, 22 A.3d 1282 (2011).

A plaintiff in a foreclosure action must have standing at the commencement of suit.  Park Nat'l Bank v. 3333 Main, LLC, supra, 127 Conn.App. 779, 774, 15 A.3d 1150 (2011).   This court previously found that Aurora had standing at the commencement of suit.   There is no justification for upsetting that finding due to the subsequent events.   In the fall of 2012, there was insufficient evidence for the court to conclude that the circumstances had changed or that any party other than Aurora had superior rights.   On the other hand, at the recent hearings conducted on March 11 and April 29, 2013, the plaintiff clearly established that Nationstar is currently the holder of the note and mortgage.   The undisputed bearer of the promissory note endorsed in blank has standing to foreclose.  Deutsche Bank v. Shiver, 52 Conn.Sup. 358, 360, 48 A.3d 143 [49 Conn. L. Rptr. 679] (2010), aff'd, 136 Conn.App. 291, 44 A.3d 879, cert. denied, 307 Conn. 938, 56 A.3d 950 (2012);  Chase Home Finance, LLC v. Fequiere, 119 Conn.App. 570, 576–78, 989 A.2d 606, cert. denied, 295 Conn. 922, 991 A.2d 564 (2010).

It has been held 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 [General Statutes] § 49–17.”  RMS Residential Properties, LLC v. Miller, 303 Conn. 224, 231–32, 32 A.3d 307 (2011).   In this case, Nationstar is currently the holder, but the evidence also showed that Citibank, N.A., Trustee, LXS Series 2006–5 is the owner.   Nevertheless, it has also been held that an agent for the owner, with authorization to bring the foreclosure action, may enforce the note and foreclose on the mortgage that was security for that note, where that agent is also the holder of the note.   Under those circumstances, “[A]s a matter of law, the plaintiff [is] not merely a collection agent for the principal lenders.”  Kennedy Funding, Inc. v. Greenwich Landing, LLC, 135 Conn.App. 58, 64, 43 A.3d 664 (2012).   In this case, plaintiff's witness testified that Nationstar is the holder of the note and, under the servicing agreement, Nationstar has the right to foreclose under its own name as opposed to suing in the name of the owner.   Thus, Nationstar has established its standing to pursue this foreclosure action.   Accordingly, the court must resolve this issue in favor of the substitute plaintiff, Nationstar.

B

The second issue concerns the defendants' contention that the note cannot be enforced because the original lender, GN Mortgage LLC, was not licensed by the Connecticut Department of Banking to lend in Connecticut.   The evidence at hearing showed that GN Mortgage, LLC is, in fact, not a licensee of the Connecticut Department of Banking.   However, GN Mortgage, LLC was a wholly owned subsidiary of Guaranty Bank. Guaranty Bank was a national bank regulated by the federal Office of the Comptroller of the Currency.   Those facts necessarily raise the issue of whether GN Mortgage, LLC is not required to be licensed by the statute under the doctrine of preemption.   See Wachovia Bank, N.A v. Burke, 414 F.3d 305, 309 (2nd Cir.2005), cert. denied, 550 U.S. 913 (2007).   The defendants do not address the specific facts or legal issues involved.   The court will not speculate as to their position.   Accordingly, they have failed to persuade the court that the transaction was illegal.

The final issue concerns the authenticity of the note.   The plaintiff introduced into evidence an original note and mortgage from the closing in this case.   The note had the signature of the defendant, Sandra A. Bartley.   The mortgage had the signature of the defendant, Sandra A. Bartley and the defendant, Michael K. Flash.   Both instruments were dated January 17, 2006.   However, when Sandra took the witness stand, she testified that the signature on the note was not hers—that she signs her name Sanga A. Bartley.   She introduced into evidence a copy of her Connecticut driver's license showing her name as Sanga A. Bartley, and a copy of her Jamaican passport showing her name as Sanga Bartley Flash.   She testified that she signs her name Sanga, not Sandra.   She also introduced into evidence a purported copy of the note that she claimed she signed at the closing on January 17, 2006, showing the signature Sanga A. Bartley.   She testified that she signed the note as Sanga, but then signed the mortgage as Sandra because she was told to do it that way because the mortgage document had already been prepared for her signature as Sandra.   She did not claim that the plaintiff's note was a forgery, but insisted that she only signed the note as Sanga.

The court finds that her testimony, purporting to cast doubt on the authenticity of the bank's note, is without credibility.   Her claim that she signs her name Sanga is refuted by the fact that, in the instant case, she signed her appearance as Sandra, and all of her signatures on all of the numerous pleadings, briefs and affidavits in the case are signed as Sandra.   Moreover, and aside from the name difference, the copy of the note she introduced is identical, in all material respects, to the plaintiff's note, except that the signature line below her name on her copy has two interruptions.   Those interruptions are in the same locations as where the letter “y” from her surname, Bartley, on the bank's version of the note crossed the signature line twice.   Thus, it appeared that the signature from the plaintiff's copy with the name, Sandra A. Bartley, had been redacted and then re-signed, Sanga A. Bartley.   The witness denied that scenario, but that conclusion is inescapable.   Therefore, the court finds the plaintiff's note to be authentic.

III

For all of the foregoing reasons, the motion to substitute party plaintiff (Doc. No. 143.00) is granted.   The objection (Doc. No. 145.00) is overruled.   The motion to dismiss (Doc. No. 148.00) is denied.

Robert F. Vacchelli

Judge, Superior Court

Vacchelli, Robert F., J.