Bayview Loan Servicing, LLC v. Gallant

• Citation: 209 Conn.App. 185,268 A.3d 119
• Decision Date: 14 December 2021
• Docket Number: AC 43835
• Parties: BAYVIEW LOAN SERVICING, LLC v. Real M. GALLANT et al.
• Court: Connecticut Court of Appeals

209 Conn.App. 185

268 A.3d 119

BAYVIEW LOAN SERVICING, LLC

v.Real M. GALLANT et al.

AC 43835

Appellate Court of Connecticut.

Argued September 23, 2021

Officially released December 14, 2021

John L. Giulietti, Vernon, for the appellant (named defendant).

Christopher J. Picard, Hartford, for the appellee (plaintiff).

Alexander, Clark and Pellegrino, Js.

PER CURIAM.

The defendant Real M. Gallant¹ appeals from the judgment of foreclosure by sale² rendered by the trial court and from the court's denial of his motion to dismiss this foreclosure action, which had been commenced by the original plaintiff, Bayview Loan Servicing, LLC (Bayview), the assignee of a note and mortgage that had been executed by the defendant with respect to certain real property located in Brooklyn. The defendant claims that (1) the trial court, after holding an evidentiary hearing on the motion to dismiss, improperly determined that the substitute plaintiff, U.S. Bank Trust, N.A., as trustee for LSF9 Master Participation Trust (U.S. Bank), has standing to maintain this action, even though the original note was not produced in court, and that the requirements of General Statutes § 42a-3-309, which governs lost instruments, had been satisfied because "all reasonable attempts" had been made to locate the lost note before a lost note affidavit was created,³ and (2) a fraud was perpetrated on the trial court, which necessitates a reversal of the foreclosure judgment. We disagree and affirm the judgment of the trial court.

The following facts and procedural history are relevant to our resolution of the claims on appeal. On February 2, 2006, the defendant executed a note in the amount of $322,800 in favor of VirtualBank, a division of Lydian Private Bank. The note was secured by an open-end mortgage in favor of Mortgage Electronic Registration Systems, Inc., as nominee for VirtualBank, which encumbered certain real property located in Brooklyn. Subsequently, the note and mortgage were assigned to JPMortgage Chase Bank, National Association, which, in turn, assigned the note and mortgage to Bayview on September 6, 2014. After the defendant defaulted on his obligations under the loan, Bayview commenced this foreclosure action on May 14, 2015. On September 29, 2015, the defendant was defaulted for failure to appear,⁴ after which the defendant filed for bankruptcy protection. Thereafter, on January 12, 2017, Bayview assigned the note and mortgage to U.S. Bank. Relief from the bankruptcy stay was granted in November, 2017, and U.S. Bank was substituted as the plaintiff in this action on December 11, 2017.

On February 26, 2018, the trial court rendered judgment of foreclosure by sale, and a sale date was set for June 2, 2018. At the time it rendered the foreclosure judgment, the court had before it a lost note affidavit that had been executed by an employee of Bayview on January 5, 2016, stating that the original note had been lost and that Bayview had made a diligent search to locate the note but was unable to find it. The foreclosure sale proceeded, with U.S. Bank being the successful bidder. On June 5, 2018, U.S. Bank filed a motion to confirm the committee sale, but before the sale could be confirmed, the defendant, again, sought bankruptcy protection. The bankruptcy proceeding, however, was dismissed on October 31, 2018, and, on November 30, 2018, the defendant filed a motion to dismiss, which is the subject of this appeal. In his motion, he alleged, inter alia, that there was "no evidence in the record of anyone having physical possession of the original note at the time of the commencement of this foreclosure action," or at any time during this action, and that the lost note affidavit did not satisfy the requirements of § 42a-3-309. (Emphasis in original.)

A hearing was held on the defendant's motion to dismiss on August 27, 2019. At the hearing, U.S. Bank represented that the original note had been lost and could not be found, and that Bayview had possessed the original note at the time it commenced this action and when the note was lost. Thereafter, the court proceeded to review the evidence and testimony presented by U.S. Bank in support of its claim and concluded that "Bayview ... had standing to prosecute this foreclosure action" at the time of its commencement.

In its memorandum of decision denying the defendant's motion to dismiss, the court stated: "To support [its] claim, U.S. Bank called James D'Orlando as its only witness. The defendant called no witnesses. U.S. Bank also offered, and the court admitted, six exhibits [which included a copy of the note with endorsements, a computer screenshot of loan information for the defendant, a mortgage deed, assignments of the mortgage, and the complaint]. ... The defendant introduced without objection [his] exhibit A, the lost note affidavit sworn to by Alejandro Diaz, a Bayview employee.

"The court found ... D'Orlando ... to be a competent and credible witness. ... D'Orlando has been a Bayview litigation manager for about six years. During that period, he has testified in about two to three hundred cases. His responsibilities include review of business records and working with local counsel. His total service with Bayview spans about sixteen years. ... D'Orlando was familiar with the loan Bayview serviced that is the subject of this litigation. Bayview serviced the defendant's loan for a few years. Bayview maintained business records relating to the defendant's loan. ... D'Orlando reviewed said business records.

"Relying on a screenshot of the computer file documenting the defendant's loan ... D'Orlando testified that Bayview received the subject loan and collateral file on September 16, 2014, when Bayview boarded said loan onto Bayview's computer system. ... If the note with endorsements were not included in the collateral file, Bayview would not board the subject loan onto its computer system, unless the collateral file included a lost note affidavit authored by the prior servicer. Bayview would not have serviced the loan without possessing the original note with endorsements or lost note affidavit. In this instance, Bayview possessed the original note with endorsements on September 16, 2014, and thereafter. ... D'Orlando’s review of the business records relating to this loan allowed him to conclude [that] the note with endorsements was not lost before Bayview commenced this action."

Accordingly, the court concluded, on the basis of D'Orlando’s testimony, which it found credible, that "Bayview possessed the original note with endorsements at the time [the] note was lost," that "Bayview was the ‘holder’ of [the] note, as it was the entity in possession of a note payable to bearer," and that the defendant "offered no credible evidence to rebut" the presumption that Bayview, as the holder of the note at the time this action was commenced, was the owner of the debt. The court concluded that, because "Bayview was also the holder of the mortgage via proper assignments ... at the time it commenced this litigation ... [it] had standing to prosecute this foreclosure action ...." (Citation omitted.) Therefore, the court rendered judgment denying the defendant's motion to dismiss on January 3, 2020, and this appeal followed. Thereafter, on January 7, 2020, U.S. Bank again filed a motion for approval of the committee sale, which was marked off by the court due to the defendant's filing of this appeal.

We first set forth our standard of review and the general principles of law that govern our resolution of this appeal. "The issue of standing implicates the trial court's subject matter jurisdiction and therefore presents a threshold issue for our determination. ... Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he [or she] has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy. ... We have long held that because [a] determination regarding a trial court's subject matter jurisdiction is a question of law, our review is plenary." (Internal quotation marks omitted.) U.S. Bank , National Assn . v. Fitzpatrick , 190 Conn. App. 773, 783, 212 A.3d 732, cert. denied, 333 Conn. 916, 217 A.3d 1 (2019). "The proper procedural vehicle for disputing a party's standing is a motion to dismiss. ... A motion to dismiss ... properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court. ... [O]ur review of the trial court's ultimate legal conclusion and resulting [denial] of the motion to dismiss will be de novo." (Citations omitted; internal quotation marks omitted.) Heinonen v. Gupton , 173 Conn. App. 54, 58, 162 A.3d 70, cert. denied, 327 Conn. 902, 169 A.3d 794 (2017).

Under our law governing standing in foreclosure matters, "[t]he ability to enforce a note in Connecticut is governed by the adopted provisions of the Uniform Commercial Code. Pursuant to General Statutes § 42a-3-301, a [p]erson entitled to enforce an instrument means ... the holder of the instrument .... When a note is endorsed in blank ... the note becomes payable to the bearer of the note. ... When a person or entity has possession of a note endorsed in blank, it becomes the valid holder of the note. ... Therefore, a party in possession of a note, endorsed in blank and thereby made payable to its bearer, is the valid holder of the note, and is entitled to enforce the note. ... [A] holder of a note is presumed to be the rightful owner of the underlying debt, and ... unless the party defending against the foreclosure action rebuts that presumption, the holder has standing to foreclose." (Citations omitted; emphasis omitted; footnote omitted; internal quotation marks omitted.) U.S. Bank , National Assn . v. Schaeffer , 160 Conn. App....