CitiMortgage, Inc. v. Rey

• Decision Date: 03 June 2014
• Docket Number: No. 35539.,35539.
• Citation: 92 A.3d 278,150 Conn.App. 595
• Court: Connecticut Court of Appeals
• Parties: CITIMORTGAGE, INC. v. Migdalia REY.

150 Conn.App. 595

92 A.3d 278

CITIMORTGAGE, INC.

v.Migdalia REY.

No. 35539.

Appellate Court of Connecticut.

Argued Feb. 20, 2014.

Decided June 3, 2014.

Renata Strause and Christian Mott, law student interns, with whom were J.L. Pottenger, Jr., Jeffrey Gentes, and, on the brief, Nathan J. Robinson and Lev Menand, law student interns, for the appellant (defendant).

Donald E. Frechette, with whom was Tara L. Trifon, Hartford, for the appellee (plaintiff).

LAVINE, SHELDON and BISHOP, Js.

BISHOP, J.

This appeal calls upon the court to decide whether, in a residential foreclosure action in which the parties have participated in court-sponsored forbearance mediation and in which a final forbearance agreement has been reported to the court, a defendant may counterclaim for damages allegedly caused by the plaintiff's subsequent pursuit of the foreclosure complaint in an alleged breach of the forbearance agreement. Because, in the particular factual and procedural circumstances of this case, we answer that question in the affirmative, we reverse the judgment of the trial court.

In this residential foreclosure action, the defendant, Migdalia Rey, appeals from the judgment rendered against her on the basis of her claim that the trial court incorrectly struck all counts of her counterclaim because, in the court's view, it did not relate to the making, validity or enforcement of the mortgage or note on which this foreclosure action is based.

The following procedural overview and undisputed factual underlayment set the context for our analysis. By complaint dated June 2, 2008, the plaintiff, CitiMortgage, Inc., as a mortgage assignee and holder of the associated promissory note, sought to foreclose on a residential home mortgage secured by property owned by the defendant on the basis of its claim that she was in default on the promissory note she had executed in favor of the original mortgagee, The Connecticut National Bank. In response, the defendant appeared and filed a petition to participate in the court's foreclosure mediation process, and in conjunction with that petition, made application, pursuant to General Statutes § 49–31f, for protection and a stay of the foreclosure action. Pursuant to these requests by the defendant, the matter was referred to the court-sponsored foreclosure mediation program for possible resolution.¹ On November 24, 2008, the court's foreclosure mediator, Karen Zarkades, filed a document captioned, “Mediator's Final Report” with the court, which indicated that the matter had been settled. As to disposition, the report indicated that the action was to be withdrawn “within 90 days, or dismissed by the Court after successful completion of three (3) payments under the parties' Forbearance Plan.” On November 7, 2008, before the filing of this report by Zarkades, the parties had executed a document captioned, “Stipulated Special Forbearance Agreement,” which contained several recitals dealing, inter alia, with the parties' anticipation that the foreclosure action would be put on hold pending the defendant's fulfillment of the obligations undertaken pursuant to the stipulation, the total amount of the debt, the three monthly payments to be made by the defendant, and a provision requiring the defendant to either pay the loan in full or resubmit updated financial information to the plaintiff by February 1, 2009, for a review of further loss mitigation options. The defendant made the three monthly payments as required by the stipulation and thereafter recommenced making monthly payments in the amount required by the underlying promissory note.²

Notwithstanding the filing of this mediation report and for reasons not readily apparent from a review of the record, the plaintiff sought to continue with the foreclosure litigation by reclaiming its motion for a judgment of strict foreclosure on October 26, 2009, and again on December 14, 2009. The defendant, in turn, filed her answer, three special defenses, and a five count counterclaim on March 12, 2010. Generally, in her answer, the defendant asserted that she was not in default on the note on the basis of her claim that she had complied fully with the terms of the parties' forbearance agreement. By way of special defense, the defendant alleged that: (1) she had made payments pursuant to the terms of the parties' forbearance agreement and that, by accepting those payments, the plaintiff had waived its rights to declare her in default on the note and to foreclose in the mortgage; (2) by pursuing the defendant in contravention to the terms of the forbearance agreement the plaintiff was acting with unclean hands and thus was not entitled to the equitable remedy of foreclosure; and (3) the plaintiff's pursuit of the remedy of foreclosure constituted a breach of its duty of acting in good faith and fair dealing. By way of a counterclaim, the defendant alleged that the plaintiff's pursuit of the remedy of foreclosure in contravention of the terms of the parties' forbearance agreement: (1) constituted a breach of contract; (2) was negligent; (3) negligently inflicted emotional distress on her; (4) constituted a breach of its duty of good faith and fair dealing; and (5) was a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42–110a et seq.

On January 25, 2011, the plaintiff moved for summary judgment on liability. In support of its motion, the plaintiff attached an affidavit, which set forth the details of the parties' forbearance agreement and contained allegations regarding the manner in which the defendant purportedly had not fully complied with its terms. In short, the plaintiff argued in its motion for summary judgment that it was entitled to a judgment on liability not only on the basis of the original note and mortgage, but also on the basis of the defendant's alleged failure to fulfill her duties under the forbearance agreement.³

Thereafter, on April 23, 2012, the plaintiff withdrew its foreclosure complaint.⁴ Subsequently, on October 25, 2012, the plaintiff moved to strike the defendant's counterclaim as legally insufficient. Specifically, the plaintiff argued, inter alia, that: (1) the defendant's counterclaim should be stricken because it did not relate to the making, validity or enforcement of the note or mortgage; (2) the plaintiff had not breached the foreclosure agreement; (3) the defendant's claim for negligence should be stricken because the plaintiff owed the defendant no duty of care; and (4) the defendant's claim of breach of the covenant of good faith and fair dealing should be stricken because the defendant had failed to prove that the plaintiff acted in bad faith. In granting the plaintiff's motion to strike, the court stated as follows: “While courts have recognized equitable defenses in foreclosure actions, they have generally only been considered proper when they attack the making, validity or enforcement of the lien, rather than some act or procedure of the lienholder.... The rationale behind this is that counterclaims and special defenseswhich 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.... Eastern Savings Bank v. Mara, Superior Court, judicial district of Stamford–Norwalk, Docket No. CV–05–4006305, 2006 WL 1738326 (June 5, 2006) Dooley, J.). The court finds that insofar as all the allegations of [the defendant's] five count counterclaim arise from the execution and performance of the forbearance agreement they are not related to the making, validity or enforcement of the note [or] mortgage. For the foregoing reasons, the plaintiff's motion to strike the defendant the [defendant's] counterclaims in their entirety is hereby GRANTED.” (Internal quotation marked omitted.) Thereafter, on motion of the plaintiff, the court rendered judgment in favor of the plaintiff on all counts of the defendant's counterclaim. This appeal followed.

At the outset, we note that the parties are in dispute concerning our standard of review. The plaintiff claims that because the central question in this appeal is whether the court correctly applied the transaction test set forth in Practice Book § 10–10,⁵ which is applicable, generally, to counterclaims, our review should be deferential. To be sure, numerous opinions of this court and our Supreme Court support the proposition that a trial court's determination of whether a particular counterclaim fits within the parameters of Practice Book § 10–10 requires a reviewing court only to assess whether, in coming to its conclusions, the court abused its discretion. See, e.g., Wallingford v. Glen Valley Associates, Inc., 190 Conn. 158, 161, 459 A.2d 525 (1983) (“[t]he transaction test is one of practicality, and the trial court's determination as to whether the test has been met ought not to be disturbed except for an abuse of discretion” [internal quotation marks omitted] ). The defendant, on the other hand, claims that our review should be plenary given that the central question raised in this appeal is whether the court utilized the correct legal test in its analysis of the counterclaim's legal viability and not whether the court abused its discretion in its application of the correct criteria. We agree with the defendant in this regard. From our review of the court's decision, it is not apparent that the court considered the parameters of Practice Book § 10–10 in deciding to strike the counterclaim. To the contrary, the court expressly fastened its decision on whether the counterclaim met the “making, validity and enforcement” standard generally applicable to legal defenses in foreclosure actions. Because the defendant's claim that the court utilized the incorrect test raises a question of law, our review is plenary. See Wells Fargo Bank of Minnesota, N.A. v. Morgan, 98...