Country Bank v. Richard Girouard (2013)

MEMORANDUM OF DECISION RE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (# 116)

The plaintiff brings this action to collect amounts due pursuant to a promissory note executed by the defendant in favor of the plaintiff's assignor.   The plaintiff has filed this motion for summary judgment claiming that there is no genuine issue of material fact that the defendant is indebted to the plaintiff.   The defendant's objection thereto raises the following issues:  (1) whether the plaintiff's exhibits are admissible as business records;  (2) whether the affidavit of the defendant is sufficient to raise a genuine issue of material fact regarding the special defense of breach of fiduciary duty;  and (3) and whether the plaintiff is a holder in due course.

FACTS

On June 21, 2011, the plaintiff, Country Bank, filed a complaint against the defendant, Richard Girouard, for breach of its home equity note and account agreement (the note).   In that complaint, the plaintiff alleges the following facts.   On July 12, 2006, the defendant executed the note, pursuant to which he promised to pay to the order of USA Bank the principal sum of $535,000, payable with interest thereon (the loan).   The loan was secured by an open-end mortgage deed, by which the defendant mortgaged to USA Bank property located at 10 Woodland Road in Norwalk, Connecticut.

On April 30, 2007, USA Bank “conveyed, granted, bargained, sold, assigned, transferred and/or set over” its rights and interest in the note and mortgage to the plaintiff (Country Bank).   The defendant failed to make timely and complete monthly payments.   Therefore, on January 21, 2011, the plaintiff demanded payment;  however, the defendant has paid no part of the outstanding debt.

On April 16, 2013, the plaintiff filed the present motion for summary judgment and supporting memorandum of law on the ground that there are no genuine issues of material fact and the plaintiff is entitled to summary judgment as a matter of law.   Additionally, the defendant's special defenses are conclusory, factually unsupported, and legally insufficient, and therefore do not preclude summary judgment.   In support of the motion, the plaintiff submitted the following:  the affidavit of John Komar, a chief credit officer of Country Bank;  the note pursuant to which the defendant promised to pay to the order of USA Bank the principal sum of $535,000 plus interest (exhibit A);  the mortgage of 10 Woodland Road in Norwalk, Connecticut, securing the defendant's debt (exhibit B);  A master endorsement and assignment (the master assignment) evidencing the sale, transfer, assignment and endorsement of the note and mortgage (exhibit C);  an assignment of mortgage (the assignment) evidencing the conveyance, sale, assignment and/or transfer of the mortgage, together with all rights, as recorded in the Norwalk Town Clerk's Office (exhibit D);  and a default and acceleration notice letter to the defendant (exhibit E).

In response, on June 11, 2013, the defendant filed an objection to the plaintiff's motion for summary judgment, as well as the defendant's supporting affidavit.   On June 26, 2013, the plaintiff filed a reply to the defendant's objection.

DISCUSSION

“Practice Book § 17–49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.   In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.”  (Internal quotation marks omitted.)  Brooks v. Sweeney, 299 Conn. 196, 210, 9 A.3d 347 (2010).  “The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law.   The courts hold the movant to a strict standard ․ When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue ․ Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue.”  (Internal quotation marks omitted.)  Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 11, 938 A.2d 576 (2008).

In its memorandum of law in support of the motion for summary judgment, the plaintiff argues that it has asserted a prima facie claim as to the defendant's liability under the note because the evidence reveals that the defendant has failed to make timely and complete payments to the plaintiff, despite the defendant's obligation to do so.   Additionally, the defendant's special defenses are legally insufficient and lack merit, and should not preclude summary judgment.   This is because USA Bank did not breach a fiduciary duty to the defendant, and the plaintiff is a holder in due course.

The defendant counters first that the court should not consider the documents generated by USA Bank because those documents are inadmissible.   Specifically, Komar's affidavit does not lay a sufficient foundation to admit the documents under the business record exception to hearsay because Komar, an employee of the defendant, Country Bank, is not familiar with USA Bank's record keeping.   Second, USA Bank breached its fiduciary duty to the defendant because it “compelled the defendant to execute the note against the defendant's interests and then transferred the note to a third party ․” The defendant states that “[t]he plaintiff is responsible for its predecessor's breach of its fiduciary duties against the predecessor's principal, the defendant, regardless of its status as holder in due course.”

I

ADMISSIBILITY OF PLAINTIFF'S EXHIBITS

Regarding the defendant's argument that USA Bank's documents are inadmissible under the business record hearsay exception, Connecticut General Statutes § 52–180 (admissibility of business entries and photographic copies) states:  “(a) Any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible as evidence of the act, transaction, occurrence or event, if the trial judge finds that it was made in the regular course of any business, and that it was the regular course of the business to make the writing or record at the time of the act, transaction, occurrence or event or within a reasonable time thereafter. (b) The writing or record shall not be rendered inadmissible by (1) a party's failure to produce as witnesses the person or persons who made the writing or record, or who have personal knowledge of the act, transaction, occurrence or event recorded or (2) the party's failure to show that such persons are unavailable as witnesses.   Either of such facts and all other circumstances of the making of the writing or record, including lack of personal knowledge by the entrant or maker, may be shown to affect the weight of the evidence, but not to affect its admissibility.”

Section 52–180 “should be liberally interpreted in favor of admissibility ․ The witness introducing the document need not have made the entry himself or herself, nor have been employed by the organization during the relevant time period ․ In addition, [t]here is no requirement in § 52–180 ․ that the documents must be prepared by the organization itself to be admissible as that organization's business records.”  (Citations omitted;  internal quotation marks omitted.)  New England Savings Bank v. Bedford Realty Corp., 246 Conn. 594, 603, 717 A.2d 713 (1998).  “It is generally held that business records may be authenticated by the testimony of one familiar with the books of the concern ․ that the offered writing is actually part of the records of the business.”  (Internal quotation marks omitted.)  Id., 604.

For example, in First Union National Bank v. Woermer, 92 Conn.App. 696, 887 A.2d 893 (2005), cert. denied 277 Conn. 914, 895 A.2d 788 (2006), a paralegal's testimony regarding a master record report (indicating the balance of the mortgagors' loan at the time the mortgagee acquired the loan through a bulk purchase of loans) was sufficient to allow the report to be admitted under the business records hearsay exception in a foreclosure action, even though she testified that she had no personal knowledge about the circumstances surrounding the creation of the document, had no independent information as to when the document was created, and initially was not involved in setting up the loan.  Id. Her testimony that the mortgagee used the information in the master record in creating its own computer records on the mortgagors' loan, and that the creation of a document such as the master record report was typical in a transaction involving the purchasing of loans from another holder, was sufficient.  Id.

The Woermer court also cited Crest Plumbing & Heating Co. v. DiLoreto, 12 Conn.App. 468, 473–76, 531 A.2d 177 (1987), in which the Court “determined that the trial court improperly refused to admit into evidence the periodic progress reports of the construction mortgagee's engineer that had been sent to the mortgagee bank and kept as bank records ․ The trial court had concluded the reports were inadmissible under § 52–180 because they were not the business records of the bank, but were business records of another entity.   The bank, through the testimony of one of its officers, established that the bank kept a record of those reports in its general course of business.   This court concluded that [t]here is no requirement in § 52–180 ... that the documents must be prepared by the organization itself to be admissible as that organization's business records.   All that is required is that it be in the regular course of the business to make the writing or record.   We believe the keeping of a report in a bank's file that serves as a basis of whether the bank will pay out money under a loan agreement satisfies the statutory requirement of record and that such a record could reasonably be found to have been made in the course of the bank's business.”  (Citations omitted;  internal quotation marks omitted.)  Woermer, supra, 92 Conn.App. 710–11.

In the present case, Country Bank did not prepare the documents in question, and John Komar (chief credit officer of Country Bank) does not have personal knowledge of USA Bank's policies and procedures in creating the documents.   However, neither is required under the business record hearsay exception.   Rather, it is sufficient that Komar (“one familiar with the books of the concern”) stated in his affidavit that the documents were “kept in the course of Country Bank's regularly conducted business activities” and that “[i]t is the regular practice of Country Bank to keep and maintain such records.”   Based on the foregoing, and based on the fact that § 52–180 “should be liberally interpreted” in favor of admissibility, this court will consider the Komar affidavit as admissible in ruling on the motion for summary judgment.

II.

BREACH OF FIDUCIARY DUTY

The defendant next argues that the affidavit of the defendant in support of his special defense (that USA Bank breached its fiduciary duty to the defendant) precludes the court from granting summary judgment for the plaintiff.   The defendant claims that USA Bank breached its fiduciary duty by compelling the defendant to execute the note against the defendant's interests, and then transferring the note to a third party (the plaintiff) without the defendant's knowledge.

The court will first examine whether a fiduciary relationship existed between USA Bank and the defendant.  “Connecticut courts have specifically refused to define a fiduciary relationship in precise detail and in such a manner as to exclude new situations ․ Instead, a fiduciary relationship exists where there is a justifiable trust confided on one side and a resulting superiority and influence on the other ․ A fiduciary relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interest of the other ․ The superior position of the fiduciary or dominant party affords him great opportunity for abuse of the confidence reposed in him ․ A bank, as a mortgagee lender, may be the fiduciary of the mortgagor borrower when the bank becomes the borrower's financial advisor.”  (Citations omitted;  internal quotation marks omitted.)  Southbridge Associates, LLC v. Garofalo, 53 Conn.App. 11, 18, 728 A.2d 1114 (1999).   Furthermore, “[a] lender has the right to further its own interest in a mortgage transaction and is not under a duty to represent the customer's interest ․ Generally there exists no fiduciary relationship merely by virtue of a borrower-lender relationship between a bank and its customer.”  (Citation omitted.)  Id., 19.

In the present case, there is no evidence that USA Bank had “superiority and influence” over the defendant, or that USA Bank had “superior knowledge, skill or expertise and [was] under a duty to represent [the defendant's interests].”   Additionally, the borrower-lender relationship between USA Bank and the defendant does not constitute a fiduciary relationship.

Even assuming that a fiduciary relationship between USA Bank and the defendant existed, however, USA Bank was not in breach.   In support of its argument that USA Bank breached a duty to the defendant, the defendant analogized the present case to Springfield Oil Services, Inc. v. Conlon, 77 Conn.App. 289, 823 A.2d 345 (2003), which held that a general partner's breach of fiduciary duty was a defense to enforcement of promissory notes by the general partner's successor.  Id. However, in Springfield Oil Services, the defendant “alleged that the general partner breached its fiduciary duties to the limited partners by assigning the promissory notes to its affiliate ․ thereby attempting to obtain payment from the limited partners without accounting to the limited partners, by disposing of assets, including ․ the promissory notes, without adequate consideration actually received, by engaging in acts of self-dealing and by failing to keep the limited partners informed of the affairs of the partnership.”  Id., 294.   Nothing in the defendant's affidavit asserts similar claims.

By contrast, in the present case, the defendant had notice that the note and mortgage were assignable.   For example, as discussed by the defendant, paragraph 19 of the note signed by the defendant states that USA Bank could “sell or transfer [the defendant's] Account and any amounts owed by [him] to another creditor at any time.   If we do, this Account will still be in effect and you will be responsible for payment.”  (Komar Affidavit, Exhibit A.) Also, the first and second paragraphs of the mortgage signed by the defendant expressly recognize that all payments due under the Note are secured by the mortgage, which inures to the benefit of the “Lender, its successors and assigns forever ․” (Komar Affidavit, Exhibit B.) Finally, the mortgage states that “[a]ny reference herein to Lender shall be deemed to include its successors and assigns.”  (Id., 8.) The cases relied upon by the defendant such as Ostrowski v. Avery, 243 Conn. 355 (1997) involve usurpation of corporate opportunities by directors or officers.   Nothing in the defendant's affidavit suggests that USA Bank or its officers usurped a corporate opportunity, as in Ostrowski, or acted in a deceptive manner, as in Springfield Oil Services.   Rather the plain meaning of the defendant's affidavit is that the officers in question were pursuing the business of USA Bank on behalf of USA Bank.

Additionally, the Appellate Court in Southbridge Associates, LLC, supra, 53 Conn.App. 11, affirmed the Superior Court's decision to grant the plaintiff's motion for summary judgment in the context of a foreclosure action where the defendants claimed a breach of fiduciary duty.   In Southbridge Associates, the defendants claimed that “a fiduciary relationship was breached when [the mortgagee] assigned the notes and mortgages to the plaintiff because [the mortgagee was] committed to being [the defendant's] partner in his business dealings.”  Id., 17.   The Appellate Court reasoned:  “[T]he trial court properly concluded that ․ summary judgment was proper because ․ [a]ny fiduciary relationship claimed by the defendants would relate to the relationship between [the mortgagee], not the plaintiff, and [the defendant].   The plaintiff merely purchased the notes and mortgages after they were executed;  the plaintiff was not in any way involved in executing the documents.”  Id., 19.

Similarly, in the present case, the defendant claims that the initial mortgagee breached its fiduciary duty by assigning the defendant's note to a third party.   However, this assertion does not relate to the plaintiff's conduct;  rather, the plaintiff “merely purchased the notes and mortgages after they were executed.”   For all of the foregoing reasons, the court concludes that USA Bank did not breach a fiduciary duty to the plaintiff.

III

HOLDER IN DUE COURSE

The plaintiff asserts that even if USA Bank had a fiduciary duty to the defendant and breached it, the plaintiff is a holder in due course;  therefore, the plaintiff has the right to enforce the note without regard to the defendant's special defense.   Pursuant to § 42a–3–302(a), the holder of an instrument is a “holder in due course” if “(1) The instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity;  and (2) The holder took the instrument (i) for value, (ii) in good faith, (iii) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, (iv) without notice that the instrument contains an unauthorized signature or has been altered, (v) without notice of any claim to the instrument described in section 42a–3–306, and (vi) without notice that any party has a defense or claim in recoupment described in section 42a–3–305(a).”   The plaintiff's affidavits and documentary evidence sets forth a prima facie case that it is a holder in due course.   There are no factual assertions in the defendant's affidavit that raises a genuine issue of material fact as to the plaintiff's status in this regard.

CONCLUSION

In summary the court concludes that the Komar affidavit lays a sufficient foundation to admit the plaintiff's exhibits under the business record exception to hearsay and that there is no genuine issue of material fact that USA Bank did not breach a fiduciary duty to the defendant.   Nor has the defendant raised a genuine issue of material fact concerning the plaintiff's status as a holder in due course.   For all these reasons the plaintiff's motion for summary judgment is granted.

GENUARIO, J.

Genuario, Robert L., J.