People's United Bank v. Anne Torrance et al. (2015)

MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT # 137

FACTS

The plaintiff, People's United Bank, commenced this action on November 21, 2011.   In its complaint it seeks to foreclose on property owned by the defendants, Anne Torrance and Jeffery Torrance, located at 197 Upper Pattagansett Road in East Lyme (the property).   The plaintiff now seeks summary judgment against the defendants on the underlying note and mortgage.

The submissions of the parties establish the following facts.   On October 24, 2006, the defendant, Anne Torrance, executed a note payable to the plaintiff and secured by a mortgage in favor of Mortgage Electronic Registrations Systems, Inc. On May 6, 2011, the note and mortgage were transferred by assignment to the plaintiff.   On August 1, 2011, the defendants defaulted upon the note and mortgage and have since remained in default for nonpayment.   By letter dated September 15, 2011, the plaintiff exercised its option under the note and mortgage to accelerate the debt.   During the pendency of the suit, in order to stave off foreclosure, the defendants sought (1) to modify the existing loan by submitting a request for loan modification directly with the plaintiff, and (2) to subdivide the property into three lots, the remaining two of which the defendants intended for sale and the net proceeds of which were to be used to reduce the overall debt owed on the note and mortgage.   On September 1, 2012, the defendants received a letter from the plaintiff denying the request for loan modification.   Omitted from the letter was notice of the defendants' right to appeal the decision by completing and submitting a loss mitigation application ninety days or more before a scheduled foreclosure date.   As of the date of this decision, no appeal of the denial of the loan modification request has been taken nor has any foreclosure date been scheduled.   Regarding the defendant's request to subdivide the property, the defendants maintain that their proposal was sent to the plaintiff in March of 2013 for approval, but that the plaintiff failed to provide any response.   The plaintiff, however, denies receiving any such proposal or request.

The plaintiff's complaint alleges that it is entitled to foreclose upon the property since the defendants are currently in default upon the note and mortgage for nonpayment.   By way of an amended answer, the defendants assert the following special defenses:  (1) the plaintiff is equitably estopped from foreclosing on the property;  and (2) the plaintiff failed to mitigate damages by failing to approve the defendants' plan to subdivide the property.¹  The plaintiff now moves for summary judgment on the grounds that there remain no genuine issues of material fact and that it is entitled to judgment of foreclosure as a matter of law.

DISCUSSION

“Summary judgment shall be rendered forthwith if the pleadings, affidavits and 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.”  (Citation omitted;  internal quotation marks omitted.)  Vendrella v. Astriab Family Ltd. Partnership, 311 Conn. 301, 313, 87 A.3d 546 (2014).  “The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law.”  (Internal quotation marks omitted.)  Robinson v. Cianfarani, 314 Conn. 521, 524 (2014).  “[I]t is only [o]nce [the moving party's] burden in establishing his entitlement to summary judgment is met [that] the burden shifts to [the nonmoving party] to show that a genuine issue of fact exists justifying a trial.”  (Internal quotation marks omitted.)  Romprey v. Safeco Ins. Co. of America, 310 Conn. 304, 320–21, 77 A.3d 726 (2013).

The plaintiff argues that the exhibits submitted on its behalf, namely copies of the note, mortgage, and assignment of mortgage as well as the affidavit of Ed Herford, a Senior Collector for People's United Bank, and the default and acceleration letter dated September 15, 2011, establish that it is entitled to judgment of foreclosure as a matter of law.  “In order to establish a prima facie case in a mortgage foreclosure action, the plaintiff must prove by a preponderance of the evidence that it is the owner of the note and mortgage, that the defendant mortgagor has defaulted on the note and that any conditions precedent to foreclosure, as established by the note and mortgage, have been satisfied ․ Thus, a court may properly grant summary judgment as to liability in a foreclosure action if the complaint and supporting affidavits establish an undisputed prima facie case and the defendant fails to assert any legally sufficient special defense.”  (Internal quotation marks omitted.)  Wells Fargo Bank, N.A. v. Strong, 149 Conn.App. 384, 392, 89 A.3d 392 (2014).

The defendants do not dispute that the plaintiff has established the necessary requirements to foreclosure.   Rather, the defendants maintain that there remains a genuine issue of material fact regarding whether the plaintiff should be entitled to summary judgment in light of the defendant's remaining special defenses.   First, the defendants argue that a material fact exists as to whether the plaintiff is equitably estopped from foreclosing on the property since notice of the right to appeal the denial of the loan modification request was never provided to the defendants.   Second, the defendants argue that a material fact exists as to whether the plaintiff was required to mitigate its damages by approving the defendants' request for the subdivision and sale of the property in order to reduce the defendants' overall debt owed on the note and mortgage.

“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.”  (Internal quotation marks omitted.)  TD Bank, N.A. v. J & M Holdings, LLC, 143 Conn.App. 340, 343, 70 A.3d 156 (2013).  “Only one of [a defendant's] defenses needs to be valid in order to overcome [a] motion for summary judgment.  [S]ince a single valid defense may defeat recovery, [a movant's] motion for summary judgment should be denied when any defense presents significant fact issues that should be tried.”  (Internal quotation marks omitted.)  Union Trust Co. v. Jackson, 42 Conn.App. 413, 417, 679 A.2d 421 (1996).  “A foreclosure action is an equitable proceeding.”   Wells Fargo Bank, N.A. v. Khatun, 146 Conn.App. 618, 620, 78 A.3d 222 (2013).  “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 ․ Where the plaintiff's conduct is inequitable, a court may withhold foreclosure on equitable considerations and principles ․ Furthermore, if the mortgagor is prevented by accident, mistake or fraud, from fulfilling a condition of the mortgage, foreclosure cannot be had ․” (Citations omitted;  internal quotation marks omitted.)  LaSalle National Bank v. Shook, 67 Conn.App. 93, 96–97, 787 A.2d 32 (2001).

“[T]raditional mortgage foreclosure standards ․ permit the assertion of certain special defenses, including that of equitable estoppel ․ The doctrine of equitable estoppel is well established.  [W]here one, by his words or actions, intentionally causes another to believe in the existence of a certain state of things, and thereby induces him to act on that belief, so as injuriously to affect his previous position, he is [precluded] from averring a different state of things as existing at the time ․ Our Supreme Court ․ stated, in the context of an equitable estoppel claim, that [t]here are two essential elements to an estoppel:  the party must do or say something which 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 something to his injury which he otherwise would not have done.   Estoppel rests on the misleading conduct of one party to the prejudice of the other ․ Broadly speaking, the essential elements of an equitable estoppel ․ as related to the party to be estopped, are:  (1) conduct which amounts to a false representation or concealment of material facts, or, at least, which is calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert;  (2) the intention, or at least the expectation, that such conduct shall be acted upon by, or influence, the other party or other persons;  and (3) knowledge, actual or constructive, of the real facts.”  (Citation omitted;  internal quotation marks omitted.)  TD Bank, N.A. v. M.J. Holdings, LLC, 143 Conn.App. 322, 337–38, 71 A.3d 541 (2013).

As a preliminary matter, the court notes that the defendants did not disclose in their amended answer the factual basis for their equitable estoppel claim.   The defendants merely allege that “[t]he plaintiff is estopped by its conduct from enforcing its right to foreclose the mortgage in question,” and that “on information and belief which will be verified by taking the deposition of the deponent” the basis for the claim will become apparent.   The defendants have since disclosed the basis for the claim in their objection to the present motion.   The defendants urge that the court's previous order denying the plaintiff's motion to strike as to this special defense must be construed as meaning that the claim as alleged is legally sufficient.   The court disagrees.   Although Connecticut courts “have recognized ․ that the use of a motion for summary judgment instead of a motion to strike may be unfair to the nonmoving party because the granting of a [moving party's] motion for summary judgment puts the [nonmoving party] out of court ․ [while the] granting of a motion to strike allows the [nonmoving party] to replead his or her case” (internal quotation marks omitted);  Larobina v. McDonald, 274 Conn. 394, 401, 876 A.2d 522 (2005);  “[the Supreme Court has] acknowledged that, [i]f it is clear [that a claim] is legally insufficient and that an opportunity to amend it would not help the [a party], we can perceive no reason why [an opposing party] should be prohibited from claiming that he is entitled to judgment as a matter of law and from invoking the only available procedure for raising such a claim after the pleadings are closed ․ [Indeed], [the Supreme Court] repeatedly has recognized that the desire for judicial efficiency inherent in the summary judgment procedure would be frustrated if parties were forced to try a case where there was no real issue to be tried.”  (Internal quotation marks omitted.)  Grenier v. Commissioner of Transportation, 306 Conn. 523, 535 n.10, 51 A.3d 367 (2012).   Accordingly, the court may properly review the legal sufficiency of the defendants' equitable estoppel claim and is not bound to find that the factual basis for the claim as later disclosed is legally sufficient.

Through discovery the defendant obtained portions of the plaintiff's Credit Collections–Foreclosure Procedures Modification Process Manual.   In part this Manual provides:  “A Borrower may appeal a denial of the Loan Modification Program so long as the Borrowers complete a Loss Mitigation Application as received ninety days or more before a scheduled foreclosure date.”   The failure to notify the defendants of that right is of no import.   As previously noted, equitable estoppel requires conduct which amounts to a false representation or concealment of material facts with the intention or expectation that such conduct shall be acted upon or influence others.   The defendants maintain that the failure to disclose the right of appeal was an intentional attempt to prevent the defendants from appealing the denial of the loan modification request.   No foreclosure date, however, has been scheduled.   The plain language of the modification process manual makes clear that an appeal may still be filed.   The defendants, therefore, cannot claim estoppel premised on the fact that the failure to provide notice of that right to appeal prevented or induced the defendants not to file an appeal where that right, even now, may still be asserted.   The court need not reach the issue of whether the failure to provide notice of the right to appeal, by itself, amounts to a “false representation” or “concealment” for the purposes of an equitable estoppel claim.   Based on the foregoing, the circumstances relied upon by the defendants are legally insufficient to assert a claim for equitable estoppel and do not present a triable issue constituting a valid basis for denying the present motion for summary judgment.

The defendants also argue that the failure of the plaintiff to mitigate its damages by allowing the subdivision and sale of the property in order to reduce the overall debt owed presents a valid ground for denying summary judgment.   In support, the defendants provide the affidavit of Jeffery Torrance in which it states that a civil engineer aided in the preparation of a three-lot subdivision plan that was later forwarded to the plaintiff, but never approved.   The plaintiff, through the affidavit of Ed Herford, maintains, however, that no such request to subdivide the property or issue a partial release of the mortgage in exchange for a lump sum was ever received.

“We have often said in the contracts and torts contexts that the party receiving a damage award has a duty to make reasonable efforts to mitigate damages ․ What constitutes a reasonable effort under the circumstances of a particular case is a question of fact for the trier.”  (Citations omitted;  internal quotation marks omitted.)  Ann Howard's Apricots Restaurant, Inc. v. Commission on Human Rights and Opportunities, 237 Conn. 209, 229, 676 A.2d 844 (1996).  “[A] split among the superior courts [exists] as to whether failure to mitigate damages is a valid special defense.   Some courts have held that it is not because, even if proven, it does not defeat the plaintiff's cause of action ․ Other courts have held that failure to mitigate damages should be pled as a special defense to provide the plaintiff with notice of a claim to which it will have to respond.”  (Citations omitted.)   THCI Co. v. Dickstein, Superior Court, judicial district of Tolland, Docket No. CV–13–5005827–S (June 9, 2014, Bright, J.).   This court has previously held the latter view.   See People's United Bank v. E2A, LLC, Superior Court, judicial district of New London, Docket No. CV–13–6016368 (December 12, 2013, Cosgrove, J.) (57 Conn. L. Rptr. 425).  “[A]lthough the defendant need not specially plead [mitigation of damages], the defendant must bring forward evidence that the plaintiff could reasonably have reduced his loss or avoided injurious consequences, and he must finally convince the jury of this in order to succeed on this issue.  (Internal quotation marks omitted.)  Preston v. Keith, 20 Conn.App. 656, 663–64, 570 A.2d 214 (1990), aff'd, 217 Conn. 12, 584 A.2d 439 (1991).  “The conduct of a bank after default in a mortgage note may result in a diminution in the interest a bank may recover on a deficiency judgment.   See e.g., Citicorp Mortgage, Inc. v. Upton, 42 Conn.Sup. 302, 305, 616 A.2d 1179 [7 Conn. L. Rptr. 273] (1992).   However, it does not bar the bank from foreclosing the mortgage ․” Federal Deposit Insurance Corp. v. Swan, Superior Court, judicial district of Middlesex, Docket No. CV–94–0073991–S (October 6, 1995, Aurigemma, J.).

Accordingly, whether the plaintiff failed to reasonably mitigate its damages by allowing the subdivision of the property presents a triable issue which is in genuine dispute regarding damages and the remedy available to the plaintiff.

CONCLUSION

For the foregoing reasons the plaintiff's motion for summary judgment is denied.

Cosgrove, J.

FOOTNOTES

FN1. The defendants originally disclosed five special defenses in their amended answer dated March 19, 2013.   Following a motion to strike the special defenses, the court ordered the second, third, and fifth defenses stricken and denied the motion as to the two remaining defenses referenced above. (# 131.05, Cosgrove, J.)..  FN1. The defendants originally disclosed five special defenses in their amended answer dated March 19, 2013.   Following a motion to strike the special defenses, the court ordered the second, third, and fifth defenses stricken and denied the motion as to the two remaining defenses referenced above. (# 131.05, Cosgrove, J.).

Cosgrove, Emmet L., J.