BAC LP v. Roberta M. Longo et al. (2013)

MEMORANDUM OF DECISION RE MOTION TO STRIKE

I

BACKGROUND AND ALLEGATIONS

The plaintiff has filed a motion to strike the defendants' four special defenses and four counterclaims.   In support of the motion to strike, the plaintiff asserts that the special defenses are not valid defenses to foreclosure and are otherwise improperly pleaded.   The plaintiff therefore asserts that the defendants' counterclaims are legally insufficient.   The court agrees, in part, and disagrees, in part.

The following facts have been asserted by the defendants in all of their special defenses and counterclaims.¹  The plaintiff sent the defendants a notice dated May 7, 2010, which indicated a current delinquent balance of $22,601.27.   It is alleged that this notice induced the defendants to believe that if the current delinquent balance was paid, they would be current on their debt.   As a result of the plaintiff's actions and statements, the defendants paid the delinquent balance by a check dated June 4, 2010, in the amount of $23,000.   It is further alleged that the plaintiff's employee accepted the check and represented that the current delinquent balance would be paid off by the defendants' check.   However, after accepting the defendants' check, the plaintiff's employee told the defendants that they owed an additional $13,000.   The plaintiff stopped sending regular monthly mortgage statements to the defendants and proceeded with this foreclosure action claiming nonpayment from February 1, 2010, and thereafter.

II

DISCUSSIONA. Motion to Strike

The court will begin with the standard applicable to a motion to strike.   Practice Book § 10–39 provides in relevant part:  “(a) Whenever any party wishes to contest (1) the legal sufficiency of the allegations of any complaint, counterclaim or cross claim, or of any one or more counts thereof, to state a claim upon which relief can be granted ․ that party may do so by filing a motion to strike the contested pleading or part thereof.”

“The purpose of a motion to strike is to contest ․ the legal sufficiency of the allegations of any complaint ․ to state a claim upon which relief can be granted.”  (Internal quotation marks omitted.)  Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).   When deciding a motion to strike the court must “take the facts to be those alleged in the complaint ․ [and] construe the complaint in the manner most favorable to sustaining its legal sufficiency ․ Thus [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied ․ Moreover ․ [w]hat is necessarily implied [in an allegation] need not be expressly alleged ․ It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted ․ Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically.”  (Internal quotation marks omitted.)   Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252–53, 990 A.2d 206 (2010).

B. Special Defenses

“As a general rule, facts must be pleaded as a special defense when they are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action ․ No facts may be proved under either a general or special denial except such as to show that the plaintiff's statements of fact are untrue.   Facts which are consistent with such statements but show, notwithstanding, that the plaintiff has no cause of action, must be specially alleged ․ If a party seeks to introduce evidence under a denial which is consistent with a prima facie case, but nevertheless would tend to destroy the cause of action, the ‘new matter’ must be affirmatively pleaded as a special defense.”  (Citations omitted;  emphasis added;  internal quotation marks omitted.)  Mitchell v. Guardian Systems, Inc., 72 Conn.App. 158, 166–67, 804 A.2d 1004, cert. denied, 262 Conn. 903, 810 A.2d 269 (2002);  see Practice Book § 10–50.

“[O]ur courts have permitted several equitable defenses to a foreclosure action.  [I]f the mortgagor is prevented by accident, mistake or fraud, from fulfilling a condition of the mortgage, foreclosure cannot be had ․ Other equitable defenses that our Supreme Court has recognized in foreclosure actions include unconscionability ․ abandonment of security ․ and usury.”   (Internal quotation marks omitted.)  TD Bank, N.A. v. J & M Holdings, LLC, 143 Conn.App. 340, 343–44, 70 A.3d 156 (2013).   The list of defenses identified in TD Bank, N.A., however, is not an exhaustive list of all the defenses which may be applicable to foreclosure.

“Typically, [t]he assertion of equitable defenses to a mortgage foreclosure requires that the defenses [also] challenge the making, validity and enforcement of the loan note and mortgage.   This principle was ․ considered to include events leading up to the execution of the loan documents, exclusive of issues involving administration of the loan, such as misapplication of payments.   D. Caron & G. Milne, Connecticut Foreclosures (4th Ed.2004) § 28.05A, p. 612.   Nevertheless, given the equitable nature of a foreclosure action, events subsequent to the execution of the loan documents also have been considered.”  (Internal quotation marks omitted.)  TD Bank, N.A. v. M.J. Holdings, LLC, 143 Conn.App. 322, 328, 71 A.3d 541 (2013).   See Mortgage Electronic Registration Systems v. Goduto, 110 Conn.App. 367, 369 n.2, 955 A.2d 544, cert. denied, 289 Conn. 956, 961 A.2d 420 (2008) (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).

1. Equitable Estoppel

The first special defense raised by the defendants, challenged by the plaintiff's motion to strike, is equitable estoppel.   Contrary to the plaintiff's assertion, “[e]quitable estoppel is a recognized defense in a foreclosure action.”  TD Bank, N.A. v. J & M Holdings, LLC, supra, 143 Conn.App. 350;  see Barasso v. Rear Still Hill Road, LLC, 81 Conn.App. 798, 805, 842 A.2d 1134 (2004).  “Equitable estoppel is a doctrine that operates in many contexts to bar a party from asserting a right that it otherwise would have but for its own conduct ․ In its general application, we have recognized that [t]here are two essential elements to an estoppel—the party must do or say something that is intended or calculated to induce another to believe in the existence of certain facts and to act upon that belief, and the other party, influenced thereby, must actually change his position or do some act to his injury which he otherwise would not have done.”  (Citations omitted;  internal quotation marks omitted.)  Glazer v. Dress Barn, Inc., 274 Conn. 33, 60, 873 A.2d 929 (2005).

Based upon the pleading filed, the motion to strike the special defense of equitable estoppel is denied.   After evaluating the allegations of the defendants' first special defense, the court concludes that it is adequately pleaded.   The defense alleges that the defendants were induced by the plaintiff to believe that if the current delinquent balance was paid, they would be current on their debt.   The defendants further allege that the plaintiff accepted payment in excess of the amount owed and nonetheless commenced this action to foreclose their mortgage.

In evaluating a motion to strike, the court is instructed to “construe the complaint in the manner most favorable to sustaining its legal sufficiency ․ Thus [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied ․ Moreover ․ [w]hat is necessarily implied [in an allegation] need not be expressly alleged.”  Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, supra, 295 Conn. 252.   Applying this rule of construction in the present case, although the pleading does not specifically allege that the plaintiff intended or calculated that payment of the delinquency by the defendants would be to their detriment, it is implied.   Specifically, by accepting the delinquency payment, it is implied that the plaintiff intended for the delinquency to be paid, for which the defendants received nothing in return to their detriment.

2. Good Faith and Fair Dealing

The second special defense challenged by the plaintiff's motion to strike is for breach of the implied covenant of good faith and fair dealing.   The plaintiff asserts that this defense is inapplicable to foreclosure and, if the court concludes otherwise, it is inadequately pleaded by the defendants in the present case.   For reasons set forth below, the motion to strike is granted.

Unfortunately, “our Appellate Court has not clearly and consistently held that special defenses and counterclaims alleging a breach of an implied covenant of good faith and fair dealing may never serve as a defense in foreclosure actions.”  (Internal quotation marks omitted.)   Dime Loan Servicing Corp. v. Walter, Superior Court, judicial district of New London, Docket No. CV–10–6002295–S (April 5, 2013, Devine, J.).   See Barasso v. Rear Still Hill Road, LLC, supra, 81 Conn.App. 807 (a violation of the implied covenant of good faith and fair dealings is not a recognized special defense to a foreclosure action);  TD Bank, N.A. v. J & M Holdings, LLC, supra, 143 Conn.App. 348 (recognizing a breach of the covenant of good faith and fair dealing as a special defense in a foreclosure action, but finding the defendants did not sufficiently allege the claim);  Ulster Savings Bank v. 28 Brynwood Lane, Ltd., 134 Conn.App. 699, 713–14, 41 A.3d 1077 (2012) (although affirming the trial court's decision that the defendant's claim of violation of covenant of good faith and fair dealing could not survive summary judgment, nevertheless recognized the defense).   Therefore, before determining whether the defense of good faith and fair dealing is a defense to foreclosure, the court will begin by examining this contractual cause of action.

“[I]t is axiomatic that the ․ duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship ․ In other words, every contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement.”  (Internal quotation marks omitted.)  Ulster Savings Bank v. 28 Brynwood Lane, Ltd., supra, 134 Conn.App. 713.  “The covenant of good faith and fair dealing presupposes that the terms and purpose of the contract are agreed upon by the parties and that what is in dispute is a party's discretionary application or interpretation of a contract term.”  (Internal quotation marks omitted.)  TD Bank, N.A. v. J & M Holdings, LLC, supra, 143 Conn.App. 348.   “The implied covenant of good faith and fair dealing requires faithfulness to an agreed common purpose and consistency with the justified expectation of the other party in the performance of every contract ․ Essentially, it is a rule of construction designed to fulfill the reasonable expectations of the contracting parties as they presumably intended.   The principle, therefore, cannot be applied to achieve a result contrary to the clearly expressed terms of a contract, unless, possibly, those terms are contrary to public policy.”   (Citation omitted;  internal quotation marks omitted.)  Southbridge Associates, LLC v. Garofalo, 53 Conn.App. 11, 16, 728 A.2d 1114, cert. denied, 249 Conn. 919, 733 A.2d 229 (1999).

“To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith.”  (Emphasis in original;  internal quotation marks omitted.)  TD Bank, N.A. v. J & M Holdings, LLC, supra, 143 Conn.App. 348.  “Bad faith has been defined in our jurisprudence in various ways.   Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive ․ Bad faith means more than mere negligence;  it involves a dishonest purpose ․ [B]ad faith may be overt or may consist of inaction, and it may include evasion of the spirit of the bargain.”  (Citations omitted;  internal quotation marks omitted.)  Landry v. Spitz, 102 Conn.App. 34, 42–43, 925 A.2d 334 (2007).

The implied covenant of good faith and fair dealing seems an imperfect special defense to foreclosure, generally.   In addition, the court finds that it is insufficiently pleaded as a defense in this case.   First, the implied covenant of good faith and fair dealing appears to be a cause of action more than a defense that would invalidate a contract.   If a successful action for this implied contract would result in a legal shield to the validity of the underlying note, then it would appear to be a proper legal defense to foreclosure.   Second, the implied covenant of good faith and fair dealing requires specific allegations of bad faith, which may involve fraud, but which may also involve allegations not amounting to fraud, but nonetheless involve a dishonest purpose.   Clearly, fraud is a legal defense to foreclosure.   However, bad faith seems to be something less and somewhat different, compared with the elements required for the classic foreclosure defense of fraud.   For this reason alone, the court hesitates to use this legal concept as a defense to foreclosure.

The court nonetheless concludes that the allegations made by the defendant do not amount to a dishonest purpose.   Although the court has implied intent in the defendants' pleading of equitable estoppel, the court will not do so here.   Claims of fraud, bad faith and dishonest purpose simply require more factual allegations than have been provided by the defendants in their second special defense.   The court therefore finds that the defendants have insufficiently alleged a special defense of bad faith.

3. Fraud

The defendants' third special defense is entitled “fraud” and alleges that the plaintiff “knew or should have known” its acts were false.  “Under the common law ․ it is well settled that the essential elements of fraud are:  (1) a false representation was made as a statement of fact;  (2) it was untrue and known to be untrue by the party making it;  (3) it was made to induce the other party to act upon it;  and (4) the other party did so act upon that false representation to his injury ․ All of these ingredients must be found to exist.”  (Internal quotation marks omitted.)  Capp Industries, Inc. v. Schoenberg, 104 Conn.App. 101, 116, 932 A.2d 453, cert. denied, 284 Conn. 941, 937 A.2d 697 (2007).

This third special defense alleges no facts that would constitute intentional misrepresentation or fraudulent conduct by the plaintiff.   Therefore, the court finds that the defendants have insufficiently alleged a special defense of fraud.   The defense as alleged, however, includes the allegation that the plaintiff “knew or should have known ” (emphasis added) its representations were false.   By including the terms “should have known” in the pleading, the court considers the scope of this special defense to include negligent misrepresentation.

Negligent misrepresentation is a common-law tort, long recognized by our Supreme Court.  Kramer v. Petisi, 285 Conn. 674, 681–82, 940 A.2d 800 (2008).  “[T]o establish the claim of negligent misrepresentation as a defense in [a] foreclosure action, the defendants had to establish (1) that the [plaintiff] made a misrepresentation of fact (2) that the [plaintiff] knew or should have known was false, and (3) that the [defendants] reasonably relied on the misrepresentation, and (4) suffered pecuniary harm as a result.”  (Internal quotation marks omitted.)  Johnnycake Mountain Associates v. Ochs, 104 Conn.App. 194, 201, 932 A.2d 472 (2007), cert. denied, 286 Conn. 906, 944 A.2d 978 (2008).   Although referred to and then rejected as an equitable defense to foreclosure under the facts in Johnnycake Mountain,² there is nonetheless a dearth of appellate authority on the circumstances under which negligent misrepresentation should be viewed as a special defense to foreclosure.

The court finds that negligent misrepresentation ought not be a legal defense to foreclosure under the facts alleged in the present case for two reasons.   First, equitable estoppel adequately covers the facts alleged in the present case and, second, the cause of action appears to be more of a sword for damages incurred than a legal or equitable shield to foreclosure.   For the reasons stated above, the motion to strike the defendants' third special defense is granted.

4. Payment

The defendants' fourth and final special defense is payment, asserting that they have paid the current delinquent balance in full and payment was accepted by the plaintiff.  “Payment is a valid special defense in a foreclosure action.”  Homecomings Financial Network, Inc. v. Starbala, 85 Conn.App. 284, 289, 857 A.2d 366 (2004) See New England Savings Bank v. Bedford Realty Corp., 246 Conn. 594, 606 n.10, 717 A.2d 713 (1998).   In commenting on this defense in their treatise on the law of foreclosure, Attorneys Caron and Milne state that “[t]he defense of payment is simple enough if in fact the loan has been paid in full ․” D. Caron & G. Milne, Connecticut Foreclosures (4th Ed.2004) § 28.02A, p. 603.   In addition, under our case law, “whether payment was tendered is a question of fact appropriately decided by the trier of fact.”  Homecomings Financial Network, Inc. v. Starbala, supra, 289.   Therefore, if the allegation is for timely payments made or payment in full of the loan, the defense of payment would clearly be applicable as satisfaction of the terms of the agreement of the parties.

Here, the claim is that the defendants paid the delinquent balance in full;  not the full amount due on the loan.   The delinquent amount owed was $22,601.27.   The amount paid by the defendants was $23,000.   After accepting this check as full payment, the plaintiff's employee informed the defendants that they owed an additional $13,000 and proceeded to foreclose.

There is no allegation of an express agreement between the parties allowing for reinstatement, notwithstanding default and acceleration, upon full payment of the delinquency alone.   However, special defenses to foreclosure are equitable in nature.   Under the facts alleged here, the defendants tendered their entire delinquent balance of approximately $23,000.   The tender of the delinquent balance was allegedly based upon a notice from the plaintiff.   More importantly, the tender of the entire delinquent balance due was accepted by the plaintiff.   Therefore, the motion to strike the special defense of payment is denied.

C. Counterclaims

The defendants have brought a four-count counterclaim, based upon the same general allegations of fact as their special defenses, discussed in section I, supra.   The plaintiff has filed a motion to strike these counterclaims as legally insufficient.

“[A] counterclaim is a cause of action existing in favor of the defendant against the plaintiff and on which the defendant might have secured affirmative relief had he sued the plaintiff in a separate action ․ A motion to strike tests the legal sufficiency of a cause of action and may properly be used to challenge the sufficiency of a counterclaim.”  (Citations omitted;  internal quotation marks omitted.)  Fairfield Lease Corp. v. Romano's Auto Service, 4 Conn.App. 495, 496, 495 A.2d 286 (1985).

Generally, counterclaims are limited in foreclosures.   The traditional test to be applied is whether the counterclaim relates to the underlying transaction.   Practice Book § 10–10 specifically provides that a defendant may file a counterclaim against a plaintiff provided that “each such counterclaim ․ arises out of the transaction or one of the transactions which is the subject of the plaintiff's complaint.”   The purpose of limiting counterclaims to the underlying transaction is “judicial economy, avoidance of multiplicity of litigation, and avoidance of piecemeal disposition of what is essentially one action ․” Wallingford v. Glen Valley Associates, Inc., 190 Conn. 158, 161, 459 A.2d 525 (1983).   In making such a determination, a court must consider whether a substantial duplication of effort would result if each claim was tried separately.  Id. It is well established that in Connecticut, defenses and counterclaims in a foreclosure action must relate to the making, validity, or enforcement of the mortgage and note.  Southbridge Associates, LLC v. Garofalo, supra, 53 Conn.App. 15.

Counterclaims in foreclosures are limited to the “making, validity or enforcement” of the note and mortgage.   The court concludes that this language encompasses the “enforcement” of notes and mortgages, which would inevitably occur after a mortgage closing, as is alleged in the present case.

1. Breach of Contract

“The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages.”  (Internal quotation marks omitted.)  Sullivan v. Thorndike, 104 Conn.App. 297, 303, 934 A.2d 827 (2007), cert. denied, 285 Conn. 908, 942 A.2d 416 (2008).   Based upon the allegations made in the present case, there is no basis to conclude there was an express agreement between the parties to cure the defendant's default by payment of the delinquent balance.   The allegation is that the plaintiff sent a notice to the defendant indicating a delinquency, which induced a payment of the delinquency in full.

The court cannot ignore the fact that this is an action to foreclose a mortgage.   Therefore, it is assumed there is a contract between the parties.   In this context, no express promise to reinstate the mortgage was alleged to have been made in exchange for the payment accepted by the plaintiff.   Further, if a modification of the default and acceleration provisions of the note and mortgage is to be implied, the allegations contained in the counterclaim are insufficient for such a contract to be implied in fact or at law.

The motion to strike the first counterclaim is therefore granted.

2. Good Faith and Fair Dealing

The defendants' second counterclaim alleges a breach of the implied covenant of good faith and fair dealing, the elements of which have been discussed, supra, and which require allegations of bad faith.  “Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive ․ Bad faith means more than mere negligence;  it involves a dishonest purpose ․ [B]ad faith may be overt or may consist of inaction, and it may include evasion of the spirit of the bargain.”  (Citations omitted;  internal quotation marks omitted.)  Landry v. Spitz, supra, 102 Conn.App. 42–43.

As previously determined by the court regarding the defendants' special defense of bad faith, claims of fraud, bad faith and dishonest purpose require more factual allegations than have been provided by the defendants in their second counterclaim.   The court therefore finds that the defendants have insufficiently alleged a breach of the implied covenant of good faith and fair dealing.   The motion to strike the second counterclaim is therefore granted.

3. Misrepresentation

The defendants' third counterclaim is for negligent misrepresentation, asserting that the plaintiff's acts were a misrepresentation that it knew or should have known was false and that the defendants reasonably relied on the misrepresentation and suffered pecuniary harm.

“[Our Supreme Court] has long recognized liability for negligent misrepresentation.  [It has] held that even an innocent misrepresentation of fact may be actionable if the declarant has the means of knowing, ought to know, or has the duty of knowing the truth.”  (Internal quotation marks omitted.)  Citino v. Redevelopment Agency, 51 Conn.App. 262, 273, 721 A.2d 1197 (1998), overruled on other grounds by Kaczynski v. Kaczynski, 294 Conn. 121, 981 A.2d 1068 (2009).   Allegations of negligent misrepresentation are governed by the principles set forth in “ § 552 of the Restatement Second of Torts (1977):  One who, in the course of his business, profession or employment ․ supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information ․ [T]he plaintiff need not prove that the representations made by the [defendant] were promissory.   It is sufficient ․ that the representations contained false information.”  (Citations omitted;  internal quotation marks omitted.)  Id., 273–74.

“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.”  Nazami v. Patrons Mutual Ins. Co., 280 Conn. 619, 626, 910 A.2d 209 (2006).  “Since the rule of liability is based upon negligence, the [plaintiff] is subject to liability if, but only if, he has failed to exercise the care or competence of a reasonable man in obtaining or communicating the information.”  (Internal quotations marks omitted.)   Johnnycake Mountain Associates v. Ochs, supra, 104 Conn.App. 201.

Under the facts alleged, there is an inconsistency between the statements of the plaintiff's employee.   In accepting the $23,000 check, it is alleged that the plaintiff's employee stated that the current delinquent balance would be paid in full.   If this information was correct, it may provide the factual basis for the defendants' defense of payment, discussed above.   However, the plaintiff's employee subsequently told the defendants that they owed another $13,000.   Therefore, either the $23,000 check satisfied the stated delinquency, or the payment was insufficient.   If the payment made was insufficient, then there was a misrepresentation of fact by the plaintiff's employee.   Beyond this, the defendants generally assert that they reasonably relied upon the misrepresentation and suffered pecuniary harm as a result.

The court finds there are sufficient facts alleged to constitute a counterclaim for negligent misrepresentation.   Therefore, the motion to strike the defendants' third counterclaim for negligent misrepresentation is denied.

4. CUTPA

The defendants' fourth counterclaim asserts a violation of the Connecticut Unfair Trade Practice Act (CUTPA).   No additional facts are pleaded beyond those recited in section I, supra.   The plaintiff objects primarily because the facts alleged do not attack the making, validity or enforcement of the note and are otherwise insufficiently pleaded.   Here the court finds that although the allegations do not attack the validity or making of the note, they do relate to the enforcement of the note and mortgage.

CUTPA provides in General Statutes § 42–110b(a) 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 § 42–110g(a) also provides in relevant part that “[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 method, act or practice prohibited by section 42–110b, may bring an action ․ to recover actual damages.”

“Our jurisprudence regarding CUTPA is well settled.   It is remedial in character ․ and must be liberally construed in favor of those whom the legislature intended to benefit ․ The purpose of CUTPA is to protect the public from unfair practices in the conduct of any trade or commerce, and whether a practice is unfair depends upon the finding of a violation of an identifiable public policy.”  (Citations omitted;  internal quotation marks omitted.)  Eder Bros., Inc. v. Wine Merchants of Connecticut, Inc., 275 Conn. 363, 379–80, 880 A.2d 138 (2005).

“Connecticut courts, when determining whether a practice violates CUTPA, will consider (1) whether 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 (or competitors or other businessmen) ․ Thus, a violation of CUTPA may be established by showing either an actual deceptive practice ․ or a practice amounting to a violation of public policy ․ Whether a practice is unfair and thus violates CUTPA is an issue of fact ․ The facts found must be viewed within the context of the totality of circumstances which are uniquely available to the trial court ․ Additionally, our Supreme Court has stated that [a]ll three criteria do not need to be satisfied to support a finding of unfairness.   A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three.”   (Internal quotation marks omitted.)  Ulster Savings Bank v. 28 Brynwood Lane, Ltd., supra, 134 Conn.App. 714–15.

The court has previously concluded that there is no deceptive practice employed here by the plaintiff, based upon the allegations presented.   Similarly, there is nothing immoral, unethical, oppressive, or unscrupulous in a creditor accepting payment of a delinquency owed.³  However, by the plaintiff's acceptance of $23,000—an amount in excess of the delinquent balance—and then to proceed to foreclose the mortgage, as alleged, would be a violation of public policy in the court's view.   See Landmark Investment Group, LLC v. Chung Family Realty Partnership, LLC, 125 Conn.App. 678, 704, 10 A.3d 61 (2010);  cert. denied, 300 Conn. 914, 13 A.3d 1100 (2011) (a violation of CUTPA may be established by showing ․ a practice amounting to a violation of public policy).⁴  In addition, by the plaintiff accepting the payment and proceeding to foreclose the mortgage, as alleged, the court implies from the pleadings that this results in an ascertainable loss to the defendants, as it substantially attacks the sustainability of title to their property which they are now required to defend.

The court finds that the underlying claim and counterclaim relate to the same underlying transaction.   The court further finds that a substantial duplication of effort would result if these claims were tried separately.   Based upon these considerations and the allegations in count three of the defendants' counterclaim, the court finds that the transaction test has been met in the present case.   The motion to strike the CUTPA counterclaim is therefore denied.

III

CONCLUSION

For reasons set forth by the court above, the plaintiff's motion to strike is granted in part and denied in part.   The special defenses of bad faith and fraud are stricken, as are the counterclaims of breach of contract, and bad faith.

BY THE COURT

Mark H. Taylor, Judge

FOOTNOTES

FN1. For purposes of the motion to strike, the court relies upon the allegations made by the defendants.   Although the defendants attached an exhibit to the answer, defenses, and counterclaims filed with the court, the court relies upon the pleadings themselves..  FN1. For purposes of the motion to strike, the court relies upon the allegations made by the defendants.   Although the defendants attached an exhibit to the answer, defenses, and counterclaims filed with the court, the court relies upon the pleadings themselves.

FN2. The case of Johnnycake Mountain Associates, cited above, involved an unusual set of facts and procedural posture.   On the special defense of negligent misrepresentation, the trial court entered a judgment of strict foreclosure, yet reduced the principal debt on the note.   Both parties cross appealed and the matter was affirmed in part, reversed in part and remanded.   In its decision, the Appellate court identified the elements of the traditional tort of liability for negligent misrepresentation and indicated it was applicable as a defense to foreclosure.   The court then held the trial court's finding of negligent misrepresentation to be clearly erroneous and remanded the case for a recalculation of the debt on the note..  FN2. The case of Johnnycake Mountain Associates, cited above, involved an unusual set of facts and procedural posture.   On the special defense of negligent misrepresentation, the trial court entered a judgment of strict foreclosure, yet reduced the principal debt on the note.   Both parties cross appealed and the matter was affirmed in part, reversed in part and remanded.   In its decision, the Appellate court identified the elements of the traditional tort of liability for negligent misrepresentation and indicated it was applicable as a defense to foreclosure.   The court then held the trial court's finding of negligent misrepresentation to be clearly erroneous and remanded the case for a recalculation of the debt on the note.

FN3. In reaching this conclusion, the court has considered the fact that there is no allegation of a promise made by the plaintiff's employee not to foreclose, despite the apparent default.   Although it may be inequitable to foreclose under these allegations, it does not appear to be “immoral, unethical, oppressive, or unscrupulous.”.  FN3. In reaching this conclusion, the court has considered the fact that there is no allegation of a promise made by the plaintiff's employee not to foreclose, despite the apparent default.   Although it may be inequitable to foreclose under these allegations, it does not appear to be “immoral, unethical, oppressive, or unscrupulous.”

FN4. The Appellate Court has held that a single act of misconduct may constitute a violation of CUTPA.  Johnson Electric Co. v. Salce Contracting Associates, Inc., 72 Conn.App. 342, 344, 805 A.2d 735, cert. denied, 262 Conn. 922, 812 A.2d 864 (2002).”   See also Landmark Investment Group, LLC v. Chung Family Realty Partnership, LLC, supra, 125 Conn.App. 708..  FN4. The Appellate Court has held that a single act of misconduct may constitute a violation of CUTPA.  Johnson Electric Co. v. Salce Contracting Associates, Inc., 72 Conn.App. 342, 344, 805 A.2d 735, cert. denied, 262 Conn. 922, 812 A.2d 864 (2002).”   See also Landmark Investment Group, LLC v. Chung Family Realty Partnership, LLC, supra, 125 Conn.App. 708.

Taylor, Mark H., J.