LLC v. Joyce Decormier (2015)

MEMORANDUM OF DECISION RE PLAINTIFF'S MOTION TO STRIKE (# 218)

At its core, this case is about agency theory.   The claims made by the defendant, homeowner Joyce Decormier, in her November 3, 2014 Revised Amended Special Defenses Per Plaintiff's Motion to Strike (# 214) can be summarized by a single proposition:  the conduct of a broker can be imputed to a lender because the broker is an agent of the lender.   The plaintiff, Nationstar Mortgage, LLC, moves to strike the defendant's revised amended special defenses and counterclaims, arguing that they are legally insufficient because they fail to allege facts that the plaintiff knowingly participated in the alleged wrongdoing, among other arguments.

In reading the twenty-six-page Revised Amended Special Defenses Per Plaintiff's Motion to Strike, it is clear that although the allegations against the broker relate to alleged representations made prior to the execution of the subject note and mortgage, the defendant has failed to allege sufficient facts demonstrating that an agency relationship of any kind existed between the broker, Charlene Day, or her employer, Guaranty Mortgage and Financial Services, Inc., and one of the plaintiff's predecessors in interest, GreenPoint Mortgage Funding, Inc. For this reason and the foregoing reasons, the court grants the plaintiff's motion to strike in its entirety.

PROCEDURAL HISTORY

On October 21, 2009, the then-plaintiff, Aurora Loan Services, LLC (Aurora), commenced this foreclosure action.   In the single-count complaint, Aurora alleged the following facts.   On or about January 4, 2007, GreenPoint Mortgage Funding, Inc. (GreenPoint), Aurora's predecessor in interest, loaned the defendant, Joyce Decormier, $204,000.   The defendant secured the loan with a mortgage on her property, 640–642 Old Hartford Road, Colchester, Connecticut (the property).   On September 28, 2009, the mortgage was assigned to Aurora and such assignment was recorded on October 9, 2009.   The defendant defaulted under the terms of the note and mortgage held by Aurora.   Aurora identified the Town of Colchester as a party that may claim a prior-in-right interest in the property by way of inchoate liens for real estate taxes owing on October 1, 2002 and thereafter.   Aurora also caused a lis pendens to be recorded on the land record of the property.

On December 6, 2010, the case was referred to the foreclosure mediation program, where it remained until May 30, 2012, when the mediation period terminated.   On December 4, 2012, Aurora filed a motion to substitute Nationstar Mortgage, LLC as the party plaintiff because it assigned Nationstar Mortgage, LLC ¹ the subject mortgage and note.   On August 22, 2014, the defendant filed revised amended special defenses and counterclaims.

On October 3, 2014, the plaintiff filed a request to revise the defendant's special defenses and counterclaims, and, in response, on November 3, 2014, the defendant filed another set of special defenses and counterclaims, without objection.   The following is a distillation of the facts alleged by the defendant therein.   In November of 2006, a broker for Guaranty Mortgage and Financial Services, Inc., Charlene Day, contacted the defendant about refinancing with a loan from GreenPoint with a fixed low interest rate that would increase after five years.   Day told the defendant that she attended a lecture at a forum where GreenPoint, through a spokesperson, promoted this loan.   The defendant alleged that the spokesperson's description of the loan as a fixed low interest loan was false, inaccurate, and the only way to sell it to a potential customer.   Day also told the defendant that she herself was refinancing with the same loan and that after the five years, she and GreenPoint would refinance the defendant's loan when the interest rates increased.²  On December 8, 2006, the defendant applied for a loan of $203,000,³ which she believed had a low fixed rate for the first five years.⁴  GreenPoint finalized the terms and production of the note and mortgage on January 4, 2007.   The finalized loan was an ALT A, ten-year, interest only, negative amortizing 6.875% loan, with an initial five-year, partial interest feature and thereafter, twenty years of full amortization and a three-year prepayment penalty rider.⁵  The note also contained options for the payment of interest, of which the defendant alleged she was unaware, and the interest rate was adjustable every six months after the first five years.   On or about May 1, 2009, the defendant realized that her principal was increasing with every payment and stopped paying the loan.⁶  The defendant alleged that she has suffered damages, losses, and injuries as a result of entering into the subject loan.⁷

Based on these alleged facts, the defendant asserted the following special defenses:  (1) fraud in the factum, (2) fraudulent inducement by intentional misrepresentation, (3) negligent misrepresentation, (4) unconscionability, (5) unclean hands, and (6) the subject note is not a negotiable instrument and as such, the plaintiff cannot be the holder or holder in due course of the note.   Additionally, she asserted the following counterclaims:  (1) the plaintiff is responsible to the defendant for her pecuniary, physical, and emotional damages suffered from enduring this action, (2) fraudulent inducement, and (3) imposition and enforcement of an unconscionable loan.

On December 15, 2014, the plaintiff filed a motion to strike the November 3, 2014 revised amended special defenses and counterclaims;  however, the motion was denied without prejudice on February 2, 2015 because of a procedural defect.   On March 10, 2015, the plaintiff filed another motion to strike the defendant's November 3, 2014 revised amended special defenses and counterclaims on the ground that they are legally insufficient.   A memorandum of law accompanied the motion.   On April 10, 2015, the defendant filed an amended memorandum of law in opposition to the plaintiff's motion to strike.   The court took the matter on the papers after it was heard during short calendar on April 27, 2015.

DISCUSSION

Practice Book § 10–39 provides in pertinent part:  “(a) A motion to strike shall be used 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;  or ․ (5) the legal sufficiency of any answer to any complaint, counterclaim or cross complaint, or any part of that answer including any special defense contained therein.”   In ruling on a motion to strike, “[t]he role of the trial court [is] to examine the [pleading], construed in favor of the [nonmovant], to determine whether the [pleading party has] stated a legally sufficient cause of action.”  (Internal quotation marks omitted.)  Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997).  “A motion to strike 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).   Specifically, where the facts provable under the allegations would not support a special defense or a counterclaim, then the motion to strike must be granted.   See Alarm Applications Co. v. Simsbury Volunteer Fire Co., 179 Conn. 541, 545, 427 A.2d 822 (1980).

The plaintiff's motion to strike is grounded on the argument that the defendant's special defenses and counterclaims are legally insufficient.   First, the plaintiff argues that the first, third, and fifth special defenses are legally insufficient because the defendant alleges only conclusory statements that fail to allege facts that support the elements of the respective claims of fraud in the factum, negligent misrepresentation, and unclean hands.   Specifically, the plaintiff argues that the defendant failed to plead facts demonstrating that the plaintiff, or any other entity, knowingly participated in any fraud against her in the first special defense, and that the defendant failed to allege that the plaintiff engaged in wilful misconduct in the fifth special defense.   Further, the plaintiff argues that the defendant's second and sixth special defenses should be stricken because they were not revised following the plaintiff's request to revise.   Alternatively, the plaintiff argues that the defendant's second special defense should be stricken because it fails to allege specific facts that support either a defense of fraudulent inducement or misrepresentation, and that the defendant's sixth special defense should be stricken because the legal theory underlying the allegations is unclear.   Furthermore, the plaintiff argues that the defendant's fourth special defense is legally insufficient because the defendant has not plead facts that demonstrate that the mortgage was unconscionable.

As to the counterclaims, the plaintiff argues that they all are legally insufficient because they relate to the conduct of the plaintiff's predecessors in interest and the defendant has failed to allege that the plaintiff expressly assumed liability for any claims that the defendant might have against its predecessors in interest.   Alternatively, the plaintiff argues that the defendant's first counterclaim is legally insufficient because it improperly joins two or more causes of action not properly united, and that the defendant's first and second counterclaims are legally insufficient because they were not revised following the plaintiff's request to revise.   Finally, the plaintiff alternatively argues that the defendant's third counterclaim is legally insufficient because the defendant's request for a hearing on damages to establish a set off is without basis in fact or procedure.

In response, the defendant argues that the plaintiff's motion to strike should be denied as to her special defenses because they are well pleaded and contain facts that make them legally sufficient.   First, the defendant argues that her first special defense is legally sufficient because it alleged facts relating to Day's conduct that support the material elements of fraud in the factum and fraud, and because the plaintiff had full knowledge and notice of its predecessors' wrongdoing and benefitted from it.   Second, the defendant argues that her second special defense adequately alleged facts relating to Day's and GreenPoint's conduct that demonstrate the material elements of fraudulent inducement and intentional misrepresentation, that the plaintiff had notice of such wrongdoing, and that its predecessors in interest cooperated to deceive the defendant.

Third, the defendant argues that her third special defense is legally sufficient because it alleged that Day owed the defendant a duty of care, which she violated by making a false and inaccurate description of the loan and by failing to make the note available to the defendant before closing;  that Day encouraged the defendant's reliance on her representations;  that Day's statements were unreasonably inaccurate;  and that the plaintiff bears the responsibility for the actions of its predecessors in interest and their agents.   Fourth, the defendant argues that her fourth special defense is legally sufficient because it alleged the material and factual elements necessary for unconscionability by stating that the true terms of the loan were misrepresented and concealed by Day and therefore GreenPoint;  that the defendant felt shocked and violated upon learning how the loan operated;  that the plaintiff's predecessors in interest cooperated together to defraud the defendant;  and that the plaintiff knew of, contributed to, and benefitted from the wrongdoing of its predecessors in interest.   Fifth, the defendant argues that her fifth special defense adequately alleged that the plaintiff lacked clean hands because of its contractual relationship with Aurora, its knowledge of Day's and GreenPoint's wrongdoing, and its benefit from the loan.

Sixth, the defendant argues that her sixth special defense is legally sufficient because it alleged that the note does not contain a fixed amount of money, and thus is not a negotiable instrument, because:  (1) of the disclaimer at the top of the instrument that states that the interest rate and monthly payments may increase and that the maximum amount that could be due is $234,600;  (2) the minimum monthly payment is insufficient to cover the interest earned each month and calls for the accrued but unpaid interest to be added to the principal;  and (3) the defendant had the choice of payment option:  partial interest, full interest, or full amortization, which allowed the plaintiff to unpredictably determine the monthly payments and final amount to be paid.   Further, the defendant argues that because the note is not a negotiable instrument, the plaintiff cannot be a holder or a holder in due course.   Alternatively, the defendant argues that even if the court finds the note to be a negotiable instrument, the plaintiff cannot be a holder in due course because it knew of its predecessors' misconduct.

Finally, the defendant does not contest the plaintiff's motion to strike the defendant's counterclaims.   This court addresses each argument in turn and, for the reasons set forth below, concludes that the defendant's special defenses and counterclaims are legally insufficient.

I.

SPECIAL DEFENSES

“[A] plaintiff can [move to strike] a special defense ․” Nowak v. Nowak, 175 Conn. 112, 116, 394 A.2d 716 (1978).  “Historically, defenses to a foreclosure action have been limited to payment, discharge, release or satisfaction ․ or, if there had never been a valid lien ․ 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 ․ [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.)  Fidelity Bank v. Krenisky, 72 Conn.App. 700, 705–06, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002).

In the context of assignments, the general rule is that the plaintiff, as assignee of a mortgage, stands in the shoes of his assignor, with the same rights.  Hartford v. McKeever, 139 Conn.App. 277, 285, 55 A.3d 787 (2012), aff'd, 314 Conn. 255, 101 A.3d 229 (2014).  “[T]he assignee takes the mortgage subject to the state of accounts between the [defendant] and the [assignor] as at the time of the assignment ․ Therefore, an assignee of a contract takes it subject to all defenses which might have been asserted against the assignor ․” (Citations omitted;  emphasis in original;  internal quotation marks omitted.)  Id., 285–86.

A.

FIRST THROUGH FIFTH SPECIAL DEFENSES

“Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.”   1 Restatement (Second), Agency § 1(1) (1958).   The one for whom the action is taken is the principal and the one who is to perform the action is the agent.  Id., (2) and (3).  “[T]he three elements required to show the existence of an agency relationship include:  (1) a manifestation by the principal that the agent will act for him;  (2) acceptance by the agent of the undertaking;  and (3) an understanding between the parties that the principal will be in control of the undertaking.”  Botticello v. Stefanovicz, 177 Conn. 22, 25, 411 A.2d 16 (1979).  “The existence of an agency relationship is a question of fact.”   Id., 26.

“Some of the factors listed by the Second Restatement of Agency in assessing whether such a relationship exists include:  whether the alleged principal has the right to direct and control the work of the agent;  whether the agent is engaged in a distinct occupation;  whether the principal or the agent supplies the instrumentalities, tools, and the place of work;  and the method of paying the agent.”  (Internal quotation marks omitted.)  Beckenstein v. Potter & Carrier, Inc., 191 Conn. 120, 133, 464 A.2d 6 (1983).  “Our Supreme Court has held that [a]n essential ingredient of agency is that the agent is doing something at the behest and for the benefit of the principal.”  (Internal quotation marks omitted.)  Cefaratti v. Aranow, 154 Conn.App. 1, 30, 105 A.3d 265 (2014), cert. granted, 315 Conn. 919, 107 A.3d 960 (2015) (granting plaintiff's appeal limited to question of whether Connecticut Appellate Court properly concluded that doctrine of apparent agency does not apply to tort actions).  “Finally, the labels used by the parties in referring to their relationship are not determinative;  rather, a court must look to the operative terms of their agreement or understanding.”  (Internal quotation marks omitted.)  Beckenstein v. Potter & Carrier, Inc., supra, 133–34.

“[I]t is a general rule of agency law that the principal in an agency relationship is bound by, and liable for, the acts in which his agent engages with authority from the principal, and within the scope of the agent's employment ․ An agent's authority may be actual or apparent ․ Actual authority exists when [an agent's] action [is] expressly authorized ․ or ․ although not authorized, [is] subsequently ratified by the [principal] ․ In contrast, [a]pparent authority is that semblance of authority which a principal, through his own acts or inadvertences, causes or allows third persons to believe his agent possesses ․ Consequently, apparent authority is to be determined, not by the agent's own acts, but by the acts of the agent's principal ․ The issue of apparent authority is one of fact to be determined based on two criteria ․ First, it must appear from the principal's conduct that the principal held the agent out as possessing sufficient authority to embrace the act in question, or knowingly permitted [the agent] to act as having such authority ․ Second, the party dealing with the agent must have, acting in good faith, reasonably believed, under all the circumstances, that the agent had the necessary authority to bind the principal to the agent's action.”  (Citation omitted;  internal quotation marks omitted.)  Ackerman v. Sobol Family Partnership, LLP, 298 Conn. 495, 508–09, 4 A.3d 288 (2010).   “The liability of the principal is determined in any particular case, however, not merely by what was the apparent authority of the agent, but by what authority the third person, exercising reasonable care and prudence, was justified in believing that the principal had by his acts under the circumstances conferred upon his agent.”  (Internal quotation marks omitted.)   Cefaratti v. Aranow, supra, 154 Conn.App. 36.

The actions of a lender's agent may give rise to a defense of fraud.   FV–1, Inc. v. Forgey, Superior Court, judicial district of New London, Docket No. CV–07–5002447–S (May 22, 2008, Martin, J.).   Courts generally, however, will not invalidate a mortgage agreement against the lender unless it in some way participated in or knew of the fraud.  First Charter National Bank v. Ross, 29 Conn.App. 667, 672, 617 A.2d 909 (1992), cert. granted, 225 Conn. 903, 621 A.2d 286 (1993), appeal dismissed, 228 Conn. 203, 635 A.2d 796 (1994).

Furthermore, as of the date of this decision, “the doctrine of apparent authority cannot be used to hold a principal liable for the tortious actions of its alleged agent ․” L & V Contractors, LLC v. Heritage Warranty Ins. Risk Retention Group, Inc., 136 Conn.App. 662, 670, 47 A.3d 887 (2012).

In Cefaratti, the plaintiff brought an action for medical malpractice against a surgeon for leaving a surgical sponge inside the plaintiff's abdomen during surgery, as well as against the surgeon's professional corporation, and the hospital where the surgery took place.  Cefaratti v. Aranow, supra, 154 Conn.App. 5–6.   On appeal, the plaintiff argued that the trial court improperly granted the hospital's motion for summary judgment because genuine issues of material fact existed as to whether there was an actual or apparent agency relationship between the surgeon and the hospital.  Id., 6. In its agency theory analysis, the Connecticut Appellate Court upheld the trial court's holding that the plaintiff did not present any evidence indicating that the hospital had the right to control the surgeon's conduct, nor any agreement to that effect.  Id., 33–34.   In addition, it upheld the trial court's holding that the hospital could not be held vicariously liable for the surgeon's alleged negligence based on a theory of apparent agency because of the binding precedent of L & V Contractors, LLC, which followed its holdings in previous cases that the doctrine of apparent agency cannot be used to hold a principal liable for the tortious actions of its alleged agent.  Id., 45.

In the present case, the defendant's first through the fifth special defenses against the plaintiff stem from the alleged fraudulent conduct of the broker, Day, or her employer Guaranty Mortgage and Financial Services, Inc., in brokering the mortgage deal, which, for purposes of this motion, the court takes as true.   In her revised amended special defenses, the defendant's only allegation connecting Day with GreenPoint, one of the plaintiff's predecessors in interest, is that Day told the defendant that she had attended a lecture at a forum where GreenPoint, through a spokesperson, promoted the loan that the defendant purchased as a fixed low interest loan.   This one allegation is not enough to allege that either an actual or an apparent agency relationship existed between Day, or her employer, and GreenPoint.   Moreover, this court is currently bound by L & V Contractors, LLC, which followed its holdings in previous cases that “the doctrine of apparent authority cannot be used to hold a principal liable for the tortious actions of its alleged agent ․” L & V Contractors, LLC v. Heritage Warranty Ins. Risk Retention Group, Inc., supra, 136 Conn.App. 670.   Finally, the defendant has failed to allege facts that the plaintiff, or its predecessors in interest, knew of or participated in the alleged fraud perpetrated by Day.⁸ Therefore, these special defenses are legally insufficient and based on this conclusion, the court does not need to consider the plaintiff's alternative arguments.   The plaintiff's motion to strike the first through the fifth special defenses is granted.

B.

SIXTH SPECIAL DEFENSE

Pursuant to General Statutes § 42a–3–104, a negotiable instrument is an “unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order ․” ⁹ “Thus, the amount payable must be definite, and an instrument ․ which simply states the maximum amount of liability, is not negotiable.”   11 Am.Jur.2d 463, Bills and Notes § 84 (2009).   Furthermore, “[i]nterest may be stated in an instrument as a fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates.” ¹⁰  General Statutes § 42a–3–112(b).  Finally, despite consensus that option adjustable rate mortgages, like the mortgage at issue, contributed to the conditions leading up to the 2008 financial crisis;  Wells Fargo Bank, N.A. v. Pinsky, Superior Court, judicial district of New Haven, Docket No. CV–12–6032136–S (March 31, 2015, Ecker, J.) [60 Conn. L. Rptr. 116];  notes for this type of mortgage are nonetheless negotiable if they establish a definitive, fixed sum and comply with the other elements of negotiable instruments.   Bank of New York v. Baldwin, Superior Court, judicial district of Fairfield, Docket No. CV–08–5019044–S (August 13, 2009, Doherty, J.) (finding option adjustable rate mortgage was negotiable because it contained definite amount and did not contain “open-ended contemplation of multiple, future and repeat advances”).

Additionally, General Statutes § 42a–1–201(21)(A) defines a “holder” as a person in possession of a negotiable instrument.¹¹  Further, General Statutes § 42a–3–302(a)(1) and (2) elevates a holder to a holder in due course status when the instrument bears no apparent evidence of forgery or alteration, is not apparently inauthentic, and the holder took the instrument for value, in good faith, and without notice of any defect, wrongdoing, claim, or defense.¹²

In the present case, the defendant has failed to allege facts that the subject note does not contain a fixed amount of money.   While the defendant alleged that the note contains provisions allowing for changes to the interest rate and monthly payments,¹³ that the accrued but unpaid interest would be added to the principal, and that the note's payment options caused unpredictable monthly payments and an unpredictable principal amount, these allegations do not sufficiently allege that the note does not contain a fixed amount money.   In fact, the defendant states in this special defense that the subject note calls for an initial loan amount of $204,000.   Without facts demonstrating that the note does not contain a fixed amount of money, the defendant's sixth special defense is legally insufficient and is stricken.¹⁴  Alternatively, the defendant has failed to plead facts sufficient to demonstrate that the plaintiff had notice of its predecessors' alleged wrongdoing when it was assigned the defendant's mortgage and note, and therefore, has failed to allege facts sufficient to show that the plaintiff is not a holder in due course.   For these reasons, the defendant's sixth special defense is stricken.

II.

COUNTERCLAIMS

“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.”  Fairfield Lease Corp. v. Romano's Auto Service, 4 Conn.App. 495, 496, 495 A.2d 286 (1985).  “In any action for legal or equitable relief, any defendant may file counterclaims against any 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 ․” Practice Book § 10–10.  “In a foreclosure action, the transaction at issue is the execution of a note and mortgage and the subsequent default ․ This court has therefore previously concluded that [a] counterclaim brought by a defendant in a foreclosure action ․ must address the making, validity or enforcement of the note and mortgage ․ [T]he rationale behind this is that counterclaims ․ which are not limited to the making, validity or enforcement of the note or mortgage fail to assert any connection with the subject matter of the foreclosure action and as such do not arise out of the same transaction as the foreclosure action ․” (Internal quotation marks omitted.)   Deutsche Bank Trust Co. America v. Walters, Superior Court, judicial district of New London, Docket No. CV–04–562858–S (April 27, 2004, Martin, J.).   Further, while “an assignee of a [mortgage] contract takes it subject to all defenses which might have been asserted against the assignor”;  (Emphasis in original;  internal quotation marks omitted.)  Hartford v. McKeever, supra, 139 Conn.App. 286;  the same assignee “does not take it subject to affirmative claims against the assignor arising from the assignor's prior conduct without express assumption of such liability by the assignee.”  (Emphasis in original.)  Id.

The defendant did not contest the plaintiff's challenge to her counterclaims, and the court concludes that they are legally insufficient and should be stricken.   In each of her counterclaims, the defendant has failed to allege facts that the plaintiff, who is the second assignee of the subject mortgage, expressly assumed liability for any claims that the defendant may have had against the plaintiff's predecessors in interest.   In each of the three counterclaims, the defendant merely alleges the conclusory statement that the plaintiff bears responsibility as assignee of the former plaintiff, Aurora.   Because none of the counterclaims allege facts that the plaintiff expressly assumed liability, they are all legally insufficient and are thus stricken.   Consequently, the court does not need to address the plaintiff's other arguments for striking the defendant's counterclaims.

CONCLUSION

For the foregoing reasons, the plaintiff's motion to strike is granted as to the defendant's special defenses and counterclaims.

Cosgrove, J.

FOOTNOTES

FN1. Nationstar Mortgage, LLC is hereinafter referred to as the plaintiff..  FN1. Nationstar Mortgage, LLC is hereinafter referred to as the plaintiff.

FN2. The defendant alleged that she paid Day a commission for her service as her broker and that Day also received a special fee in addition to the commission payment..  FN2. The defendant alleged that she paid Day a commission for her service as her broker and that Day also received a special fee in addition to the commission payment.

FN3. The $203,000 figure appears to be a typographical error because elsewhere in this pleading, the defendant refers to the original amount of her loan as $204,000, which matches the amount in the complaint..  FN3. The $203,000 figure appears to be a typographical error because elsewhere in this pleading, the defendant refers to the original amount of her loan as $204,000, which matches the amount in the complaint.

FN4. The defendant concedes that she did not read the application before signing it.   She has, however, attempted to read the note since the foreclosure action commenced and she cannot understand it.   She also alleged that the Truth in Lending Statement, which was presented to her during the closing, contained no reference to the negative amortizing feature, but disclosed the scheduled monthly payment increases..  FN4. The defendant concedes that she did not read the application before signing it.   She has, however, attempted to read the note since the foreclosure action commenced and she cannot understand it.   She also alleged that the Truth in Lending Statement, which was presented to her during the closing, contained no reference to the negative amortizing feature, but disclosed the scheduled monthly payment increases.

FN5. With this type of loan, the minimum monthly payments for the first five years are insufficient to pay the amount of interest accruing each month, so the accrued but unpaid interest is added to the principal.   The defendant further alleges that at the top of the subject note, there is a disclaimer stating that monthly payments and interest rates may change, which could result in a principal larger than the amount originally borrowed, but not more than $234,600..  FN5. With this type of loan, the minimum monthly payments for the first five years are insufficient to pay the amount of interest accruing each month, so the accrued but unpaid interest is added to the principal.   The defendant further alleges that at the top of the subject note, there is a disclaimer stating that monthly payments and interest rates may change, which could result in a principal larger than the amount originally borrowed, but not more than $234,600.

FN6. Concurrent with ceasing payment of her loan, the defendant sought the help of a homeowners help line, which, in exchange for $5,000, merely wrote a letter in July of 2009 to Aurora and retained Connecticut counsel for the defendant after Aurora filed its foreclosure action against her..  FN6. Concurrent with ceasing payment of her loan, the defendant sought the help of a homeowners help line, which, in exchange for $5,000, merely wrote a letter in July of 2009 to Aurora and retained Connecticut counsel for the defendant after Aurora filed its foreclosure action against her.

FN7. The court notes that the defendant makes allegations relating to the conduct of Day, Guaranty Mortgage and Financial Services, Inc., and the attorney who closed the loan, all of whom are not parties to this action.   The court does not consider the legal sufficiency of those allegations or whether they are time barred..  FN7. The court notes that the defendant makes allegations relating to the conduct of Day, Guaranty Mortgage and Financial Services, Inc., and the attorney who closed the loan, all of whom are not parties to this action.   The court does not consider the legal sufficiency of those allegations or whether they are time barred.

FN8. Furthermore, the court notes that the note was executed in January of 2007 and the defendant decided to stop payment in May of 2009, which was prior to GreenPoint's assignment of the note and mortgage to Aurora.   At that juncture, the defendant could have filed a timely claim against Day, Guaranty Mortgage and Financial Services, Inc., and GreenPoint for their alleged wrongdoing relating to the making of the note;  however, she failed to do so..  FN8. Furthermore, the court notes that the note was executed in January of 2007 and the defendant decided to stop payment in May of 2009, which was prior to GreenPoint's assignment of the note and mortgage to Aurora.   At that juncture, the defendant could have filed a timely claim against Day, Guaranty Mortgage and Financial Services, Inc., and GreenPoint for their alleged wrongdoing relating to the making of the note;  however, she failed to do so.

FN9. General Statutes § 42a–3–104 states, in pertinent part, as follows:  “(a) Except as provided in subsections (c) and (d), ‘negotiable instrument’ means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:  (1)[i]s payable to bearer or to order at the time it is issued or first comes into possession of a holder;  (2)[i]s payable on demand or at a definite time;  and (3)[d]oes not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor.”.  FN9. General Statutes § 42a–3–104 states, in pertinent part, as follows:  “(a) Except as provided in subsections (c) and (d), ‘negotiable instrument’ means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:  (1)[i]s payable to bearer or to order at the time it is issued or first comes into possession of a holder;  (2)[i]s payable on demand or at a definite time;  and (3)[d]oes not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor.”

FN10. General Statutes § 42a–3–112(b) states as follows:  “Interest may be stated in an instrument as a fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates.   The amount or rate of interest may be stated or described in the instrument in any manner and may require reference to information not contained in the instrument.   If an instrument provides for interest, but the amount of interest payable cannot be ascertained from the description, interest is payable at the judgment rate in effect at the place of payment of the instrument and at the time interest first accrues.”.  FN10. General Statutes § 42a–3–112(b) states as follows:  “Interest may be stated in an instrument as a fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates.   The amount or rate of interest may be stated or described in the instrument in any manner and may require reference to information not contained in the instrument.   If an instrument provides for interest, but the amount of interest payable cannot be ascertained from the description, interest is payable at the judgment rate in effect at the place of payment of the instrument and at the time interest first accrues.”

FN11. General Statutes § 42a–1–201(21) states, in pertinent part, as follows:  “ ‘Holder’ means:  (A) [t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession ․”.  FN11. General Statutes § 42a–1–201(21) states, in pertinent part, as follows:  “ ‘Holder’ means:  (A) [t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession ․”

FN12. General Statutes § 42a–3–302(a) states as follows:  “Subject to subsection (c) and section 42a–3–106(d), ‘holder in due course’ means the holder of an instrument if:  (1)[t]he 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)[t]he 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).”.  FN12. General Statutes § 42a–3–302(a) states as follows:  “Subject to subsection (c) and section 42a–3–106(d), ‘holder in due course’ means the holder of an instrument if:  (1)[t]he 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)[t]he 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).”

FN13. In the revised amended special defenses, the defendant purportedly quotes the note itself to demonstrate this allegation:  “The note contains provisions allowing for changes in the interest rate and the monthly payment.   The monthly payment increases will have limits which could result in the principal amount I must repay being larger than the amount I originally borrowed, but not more than $234,600.00.”.  FN13. In the revised amended special defenses, the defendant purportedly quotes the note itself to demonstrate this allegation:  “The note contains provisions allowing for changes in the interest rate and the monthly payment.   The monthly payment increases will have limits which could result in the principal amount I must repay being larger than the amount I originally borrowed, but not more than $234,600.00.”

FN14. While the court finds that the defendant's sixth special defense is legally insufficient as pleaded, it notes that in 2008, the General Assembly enacted General Statutes § 36a–760e, which states that loans containing a payment schedule with regular periodic payments that cause the principal balance to increase, like the subject loan, are void and unenforceable if the lender received the application for such a loan on or after October 1, 2009.   The defendant does not contend that General Statutes § 36a–760e applies to the subject loan.  General Statutes § 36a–760e states, in pertinent part, the following:  “(a) A lender shall not offer a nonprime home loan that contains:  ․ (4)[a] payment schedule with regular periodic payments that cause the principal balance to increase ․ (b) If a nonprime home loan contains a provision that violates subsection (a) of this section, that provision shall be void and unenforceable, provided the lender received the application for such nonprime home loan on or after October 1, 2009.”.  FN14. While the court finds that the defendant's sixth special defense is legally insufficient as pleaded, it notes that in 2008, the General Assembly enacted General Statutes § 36a–760e, which states that loans containing a payment schedule with regular periodic payments that cause the principal balance to increase, like the subject loan, are void and unenforceable if the lender received the application for such a loan on or after October 1, 2009.   The defendant does not contend that General Statutes § 36a–760e applies to the subject loan.  General Statutes § 36a–760e states, in pertinent part, the following:  “(a) A lender shall not offer a nonprime home loan that contains:  ․ (4)[a] payment schedule with regular periodic payments that cause the principal balance to increase ․ (b) If a nonprime home loan contains a provision that violates subsection (a) of this section, that provision shall be void and unenforceable, provided the lender received the application for such nonprime home loan on or after October 1, 2009.”

Cosgrove, Emmet L., J.