City of Hartford v. McKeever, No. 33027.

• Citation: 55 A.3d 787,139 Conn.App. 277
• Decision Date: 27 November 2012
• Docket Number: No. 33027.
• Court: Appellate Court of Connecticut
• Parties: CITY OF HARTFORD v. Brian McKEEVER et al.

139 Conn.App. 277

55 A.3d 787

CITY OF HARTFORD

v.Brian McKEEVER et al.

No. 33027.

Appellate Court of Connecticut.

Argued April 26, 2012.

Decided Nov. 27, 2012.

Catharine H. Freeman, assistant corporation counsel, for the appellant (plaintiff).

Christopher M. Reeves, Bristol, for the appellee (named defendant).

GRUENDEL, SHELDON and SCHALLER, Js.

SHELDON, J.

The plaintiff, the city of Hartford, appeals from the judgment rendered by the trial court in favor of the defendant Brian McKeever ¹ awarding him $195,909 in damages on his counterclaim to recoup moneys overpaid by him to the plaintiff and other prior holders of two notes secured by mortgages on his property in Hartford. The plaintiff claims that the trial court erred in finding that the plaintiff, as the most recent assignee and current holder of the defendant's note, could be held liable to repay the defendant for sums he overpaid on the note, not only to itself but to other prior holders thereof.² We agree with the plaintiff and thus reverse the judgment of the trial court.

The following factual and procedural history is relevant to this appeal. In May, 1983, the defendant owned a building in Hartford, known as 206–208 Hamilton Street (property). The property contained multiple units that the defendant rented to tenants. On May 5, 1983, the defendant borrowed a total of $143,065 in two separate loans from the Community Development Corporation (corporation). In one loan transaction (loan one), the defendant and the corporation entered into a promissory note agreement with a principal amount of $28,879. In the other loan transaction (loan two), the defendant and the corporation entered into a promissory note agreement with a principal amount of $114,186. Each loan was secured by a separate mortgage on the property. At the time they entered into the loan agreements, the defendant and the corporation also entered into a separate agreement, entitled “Collateral Assignment of Leases and Rentals” (assignment of rents agreement), pursuant to which the corporation was empowered to collect rent directly from the defendant's tenants if he defaulted on his obligation to make payments on the notes.

Although the corporation immediately assigned its interest in the notes to Colonial Bank,³ which later became State Street Bank & Trust Company of Connecticut (State Street Bank), the corporation continued to service the loans. In July, 2001, State Street Bank assigned loan two to the plaintiff for the sum of one dollar. By that time, the defendant had fully paid loan one, but the plaintiff determined that the defendant had defaulted on his payment obligations as to loan two. Accordingly, in 2003, the plaintiff brought an action against the defendant to foreclose on the property.

On April 21, 2003, the defendant filed a five count counterclaim against the plaintiff, claiming: (1) violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42–110a et seq.; (2) violation of the Connecticut Creditors' Collection Practices Act, General Statutes (Rev. to 1993) § 36–243a; (3) breach of the implied covenant of good faith and fair dealing; and (4) breach of a modification agreement previously agreed to by himself and the plaintiff. He also sought, in the fifth count, an accounting as to all payments that his tenants had made under the assignment of rents agreement.⁴

The plaintiff subsequently withdrew its foreclosure complaint, conceding that the defendant had overpaid loan two by $17,397.93. Accordingly, it offered to compensate him in that amount. The defendant, however, declined the plaintiff's offer, electing instead to proceed to trial on his counterclaim to recover what he claimed to have been an overpayment of $195,909 on loan two. The plaintiff filed an answer to the counterclaim,⁵ denying its essential allegations, and pleaded as a special defense that CUTPA does not apply to municipalities.

After a five day trial, the court issued a memorandum of decision in which it concluded that the plaintiff was liable to the defendant for the total amount he claimed to have overpaid on loan two to the plaintiff and all other prior holders of the note. The court therefore awarded him damages of $195,909, albeit without specifying the count of the counterclaim under which it made that award. On October 7, 2011,⁶ approximately eleven months after the court's November 9, 2010 decision, the plaintiff filed a motion for articulation, requesting for the first time that the court explain, inter alia, under which count of the counterclaim it had found in the defendant's favor. The court responded that, without having access to the court file, it was unable to identify the specific count of the counterclaim under which it had found in the defendant's favor. This appeal followed.

The plaintiff claims that the trial court erred in concluding that, as an assignee, it was liable for the defendant's overpayments, if any, to its assignor, State Street Bank, or to any other prior holders of the note. We agree.⁷

Because the claim challenges the trial court's conclusions of law, our review is plenary. See Pequonnock Yacht Club, Inc. v. Bridgeport, 259 Conn. 592, 598, 790 A.2d 1178 (2002); Olson v. Accessory Controls & Equipment Corp., 254 Conn. 145, 156, 757 A.2d 14 (2000); Hunnicutt v. Commissioner of Correction, 67 Conn.App. 65, 68, 787 A.2d 22 (2001).

In setting forth the applicable legal standards, we acknowledge that there is a split of authority among our trial courts regarding an assignee's liability for affirmative claims against the assignor based upon the assignor's conduct prior to the assignment. Some of our trial courts have found that both defenses and counterclaims can be asserted against the assignee on the basis of the assignor's conduct prior to the assignment. See, e.g., GMAC Mortgage, LLC v. Tornheim, Superior Court, judicial district of New London, Docket No. CV–09–6001296, 2011 WL 5084226 (October 6, 2011); Deutsche Bank National Trust Co. v. Lobaton, Superior Court, judicial district of New London, Docket No. CV–09–5009907, 2010 WL 2681718 (May 5, 2010); U.S. Bank National Assn. v. Garces, Superior Court, judicial district of New London, Docket No. CV–07–5004536, 2008 WL 3307129 (July 17, 2008); U.S. Bank National Assn. v. Reynoso, Superior Court, judicial district of New London, Docket No. CV–07–5004312, 2008 WL 3307124 (July 17, 2008). Other trial courts have found that to be liable for the assignor's preassignment conduct, the assignee must have expressly assumed liability for such conduct. See, e.g., OneWest Bank, FSB v. Reinoso, Superior Court, judicial district of Fairfield, Docket No. CV–10–6006307–S, 2012 WL 2044807 (May 10, 2012); IndyMac Bank, F.S.B. v. Khan, Superior Court, judicial district of Fairfield, Docket No. CV–08–5016789–S, 2010 WL 2196451 (April 16, 2010); Fremont Investment & Loan v. Santiago, Superior Court, judicial district of New London, Docket No. CV–06–5001151, 2010 WL 398747 (January 13, 2010); Deutsche Bank v. Gregory–Boutot, Superior Court, judicial district of Windham, Docket No. CV–08–5003138–S, 2009 WL 2783500 (July 15, 2009); WM Specialty Mortgage, LLC v. Brandt, Superior Court, judicial district of Ansonia–Milford, Docket No. CV–09–5001157–S, 2009 WL 567040 (February 10, 2009); Deutsche Bank National Trust Co. v. Ganci, Superior Court, judicial district of Hartford, Docket No. CV–05–4017440–S, 2006 WL 1075159 (April 5, 2006); SCP Corp. v. BankBoston, Superior Court, judicial district of Waterbury, Complex Litigation Docket, Docket No. X01–CV–98–0116198, 1999 WL 185177 (March 18, 1999). For the following reasons, we adopt the latter conclusion.

“An assignment of a right is a manifestation of the assignor's intention to transfer it by virtue of which the assignor's right to performance by the obligor is extinguished in whole or in part and the assignee acquires a right to such performance.” 3 Restatement (Second), Contracts § 317, pp. 14–15 (1981). Although the general rule is that “[t]he plaintiff, as assignee of the mortgage, [stands] in the shoes of his assignor, with the same rights; ” (emphasis added; internal quotation marks omitted) Reynolds v. Ramos, 188 Conn. 316, 320 n. 5, 449 A.2d 182 (1982); “unless there has been an express assumption of liability, the assignee is not liable to the debtor for liabilities incurred by the assignor in connection with the subject matter of the assignment.” 6A C.J.S. 512, Assignments § 117 (2004). As such, “[i]n the absence of an express contract provision, an assignee generally does not assume the original responsibilities of the assignor, but he or she may be liable for breach of the terms of the assignment or for his or her failure to perform obligations of the assignor which he or she has assumed.” (Emphasis added.) Id., at § 115, p. 511.

However, the “[defendant] may set off any valid claim he or she may have against the [assignor], such as a payment made before the assignment, the rule in this respect being that the assignee takes the mortgage subject to the state of accounts between the [defendant] and the [assignor] as at the time of the assignment.” ⁸[139 Conn.App. 286]59 C.J.S. 470–71, Mortgages § 438 (2009). Therefore, “an assignee of a contract takes it subject to all defenses which might have been asserted against the assignor”; (emphasis added) Fairfield Credit Corp. v. Donnelly, 158 Conn. 543, 548, 264 A.2d 547 (1969); but 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. If, then, in defense of a foreclosure action brought against him by an assignee of his note and mortgage, the mortgagor defends on the basis that the value of the note at the time of the assignment was less than that claimed by the assignee, the mortgagor may be entitled to a setoff on the ground that the assignee took the note subject to the state of...