Hudson City Savings Bank et al. v. Christopher Matchett (2013)

RULING ON PLAINTIFF'S MOTION TO STRIKE (# 137)

The issue before the court is whether to grant the plaintiff's motion to strike the defendants' special defense alleging unclean hands in this mortgage foreclosure action.   The motion to strike is granted.

I

FACTS

On March 15, 2013, the plaintiff, Hudson City Savings Bank, filed an amended complaint against the defendants, Christopher Matchett and Rebecca Matchett, seeking foreclosure of a mortgage on property located at 200 Kenmont Road a/k/a Gay Road in South Kent, Connecticut.   The plaintiff alleges that it is the owner and holder of the note and mortgage.   As part of the foreclosure action, the parties engaged in the court sponsored mediation program, which proved unsuccessful.   On May 15, 2013, the defendants filed an amended answer and a special defense of unclean hands.

The plaintiff filed the present motion to strike the defendants' special defense on May 20, 2013.   The defendants filed an objection to the motion to strike on June 21, 2013.   The matter came before the court and was heard at short calendar on July 8, 2013.

II

DISCUSSIONAMotion to Strike Standard

“A party wanting to contest the legal sufficiency of a special defense may do so by filing a motion to strike.   The purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action ․ In ruling on a motion to strike, the court must accept as true the facts alleged in the special defenses and construe them in the manner most favorable to sustaining their legal sufficiency.”  (Citations omitted;  internal quotation marks omitted.)  Barasso v. Rear Still Hill Road, LLC, 64 Conn.App. 9, 13, 779 A.2d 198 (2001).  “[A] motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court.”  (Internal quotation marks omitted.)  Lestorti v. DeLeo, 298 Conn. 466, 472, 4 A.3d 269 (2010).   It “admits all facts well pleaded;  it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings.”  (Emphasis omitted;  internal quotation marks omitted.)   Faulkner v. United Technologies Corp., 240 Conn. 576, 588, 693 A.2d 293 (1997).  “A motion to strike is properly granted if the [special defense] alleges mere conclusions of law that are unsupported by the facts alleged.”   (Internal quotation marks omitted.)  Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).

B

Analysis

The plaintiff concedes that the doctrine of unclean hands may be asserted as a special defense in a foreclosure action.   However, the plaintiff moves to strike the defendants' special defense on the grounds that it fails to attack the making, validity or enforcement of the note and mortgage, fails to allege wilful misconduct with regard to the creation of the note and mortgage, and improperly alleges conduct that occurred in mediation during settlement negotiations.   According to the plaintiff, the only conduct alleged by the defendants is that the plaintiff failed to obtain and provide the defendants with an appraisal, as discussed during the mediation.   According to the plaintiff, this conduct clearly occurred after the default and after the commencement of the foreclosure action.

In contrast, the defendants argue that the special defense contains multiple actions taken by the plaintiff since the commencement of the foreclosure action, which sufficiently allege wilful misconduct.   Moreover, the defendants assert that the misrepresentations are not pertinent to the substance of settlement negotiations or the mediation program and, therefore, are admissible.

The defendants' special defense alleges that the subject property is a unique estate for which it is highly unlikely that there is any comparable property upon which to fashion a fair market value.   As a result of the latter situation, the defendants, in the course of the mediation program, requested a copy of any and all appraisals in the possession of or to be produced by the plaintiff.   During the course of mediation, the plaintiff requested access to the property in order to inspect the property and/or prepare an appraisal.   The defendants granted the plaintiff access and believed that the plaintiff intended to prepare an appraisal for purposes of evaluation and good faith negotiation of a settlement offer that had been presented to the plaintiff by the defendants.   The plaintiff allegedly agreed to provide the defendants with a copy of the appraisal but failed to do so.¹  The defendants claim that the plaintiff summarily rejected the defendants' settlement offer, allegedly exhibiting intentional and wilful misconduct with respect to the litigation.

“The party seeking to invoke the clean hands doctrine to bar equitable relief must show that his opponent engaged in wilful misconduct with regard to the matter in litigation.”  (Internal quotation marks omitted.)  Monetary Funding Group, Inc. v. Pluchino, 87 Conn.App. 401, 407, 867 A.2d 841 (2005).   “A successful unclean hands defense to a foreclosure action may be asserted in situations where a lender takes advantage of an unsophisticated borrower, unrepresented by counsel, such as by charging significant fees or an arbitrarily high interest rate ․ Similarly, where a lender misleads an unsophisticated borrower, a foreclosure of the note held by the lender may be barred by unclean hands ․ The lender's misdeeds must, however, arise to ‘intentional misconduct with respect to the various transactions' and be undertaken to gain some improper advantage, such as generating ‘excessive fees and costs' for the lender.”  (Citations omitted;  internal quotation marks omitted.)   PHH Mortgage Corp. v. Cameron, Superior Court, judicial district of Hartford, Docket No. CV 10 6012369 (January 10, 2012, Robaina, J.);   see Monetary Funding Group, Inc. v. Pluchino, supra (affirming trial court's determination that unclean hands barred enforcement of the loan where lender attempted to take advantage of borrower, who was unsophisticated, misled and unable to comply with the terms of the note, in order to charge arbitrarily high fees as part of a transaction structured by the lender for that purpose);  Rockville Bank v. Southington Hospitality Group, LLC, Superior Court, judicial district of Hartford, Docket No. CV 10 6012854 (May 12, 2011, Aurigemma, J.) (unclean hands special defense was insufficient to defeat foreclosure action because defendants did not allege that they were unsophisticated borrowers, unrepresented by counsel or that lender engaged in sharp lending practices, such as charging excessive fees);  Gerstenfeld v. Bradley Court, LLC, Superior Court, judicial district of Hartford, Docket No. CV 09 6004536 (July 8, 2010, Aurigemma, J.).

In other words, “a defense of unclean hands is proper in a mortgage case when the plaintiff ․ require[s] the aid of the illegal transaction to make out his case ․ [T]he unclean hands defense is proper if the plaintiff would not be able to bring the action but for its improper conduct.”  (Citations omitted;  internal quotation marks omitted.)   LaSalle Bank National Ass'n v. Bardales, Superior Court, judicial district of New London, Docket No. CV 08 5007137 (April 14, 2009, Devine, J.).

In the present case, the defendants do not allege that they were unsophisticated borrowers, unrepresented by counsel, or that the plaintiff engaged in sharp lending practices, such as charging excessive fees.   Even taking the defendants' allegations in a light most favorable to the defendants, as this court must, the defendants have not alleged that the plaintiff engaged in wilful or intentional misconduct in order to gain some improper advantage in its dealings with the defendants.   The defendants' only argument is that the plaintiff's actions thwarted good faith settlement negotiations in mediation.   Even if such conduct were true, the plaintiff still would have been able to bring the foreclosure action.   The act of withholding the appraisal was not necessary in order to bring the foreclosure action.   Consequently, the motion to strike is granted.

So ordered.

John A. Danaher, III

FOOTNOTES

FN1. At the court's request and absent an objection by the plaintiff, the plaintiff provided the defendants with a copy of the appraisal at the short calendar hearing.   Regardless, the defendants insisted that the court address their objection to the motion to strike..  FN1. At the court's request and absent an objection by the plaintiff, the plaintiff provided the defendants with a copy of the appraisal at the short calendar hearing.   Regardless, the defendants insisted that the court address their objection to the motion to strike.

Danaher, John A., J.