Family Financial Services, Inc. v. Spencer
| Decision Date | 18 June 1996 |
| Docket Number | No. 14541,14541 |
| Citation | 41 Conn.App. 754,677 A.2d 479 |
| Court | Connecticut Court of Appeals |
| Parties | FAMILY FINANCIAL SERVICES, INC. v. Carmen SPENCER. |
William H. Cashman, New Haven, filed a brief for appellants (plaintiff et al.).
Lori Welch-Rubin, New Haven, with whom, on the brief, was Barry Sigal, West Hartford, for appellee (named defendant).
Before DUPONT, C.J., and SCHALLER and SPEAR, JJ.
The plaintiff, Family Financial Services, Inc., 1 appeals from the judgment of the trial court rendered in favor of the defendant, Carmen Spencer, on the plaintiff's complaint. The plaintiff, together with the counterclaim defendants, Aglino Masotta and Edward Masotta, also appeal from the judgment rendered against them in favor of the defendant on the defendant's counterclaims. The plaintiff and the Masottas 2 claim that the trial court improperly (1) found that the Masottas were the makers of the loans rather than investors in the loans, (2) concluded that the mortgage assignment needed to be recorded, (3) concluded that the loan was unconscionable, (4) concluded that Public Acts 1993, No. 93-130, § 1(8), 3 did not apply, (5) concluded that the federal Truth in Lending Act (TILA) 4 negates the common law requirement of tender back necessary effectively to rescind a transaction, and (6) failed to hold an evidentiary hearing before awarding attorney's fees. We affirm the trial court's judgment except as to the issue of attorney's fees, which we remand for further proceedings.
The relevant facts are as follows. The defendant is the owner of a three-family house in Bridgeport. When the defendant needed a loan to repair a leaking roof, she was referred to the plaintiff to apply for a second mortgage. On July 16, 1990, the plaintiff and the defendant entered into a loan agreement secured by a second mortgage. The amount of the loan was $30,000 with an interest rate of 20 percent. The note required eleven monthly payments of $500 with a final balloon payment of $30,500 on July 20, 1991. In the defendant's loan application, she stated that her monthly income was $1126.67 and that she owed a monthly amount of $1011 to Peoples Bank on a first mortgage. The plaintiff placed the defendant in a class C category that did not require income verification. When the defendant was unable to make the balloon payment in July, 1991, the plaintiff arranged to rewrite the loan.
On July 17, 1991, the parties entered into another loan agreement that allowed the defendant to fulfill her obligation of repayment under the July, 1990 mortgage. The amount of the note in this transaction was $44,000 with an interest rate of 20 percent. The defendant was required to make eleven monthly payments of $733.33 with a final balloon payment of $44,733.33 on July 22, 1992. Both mortgage transactions required the defendant, as a condition of credit, to pay one year's interest in advance. 5 On July 22, 1992, the defendant was unable to make the required balloon payment.
On November 9, 1992, the plaintiff brought a foreclosure action. The defendant filed special defenses, alleging that the mortgage was a scheme to defraud, was unconscionable, lacked consideration because the plaintiff failed to release the July 16, 1990 mortgage, and violated General Statutes (Rev. to 1991) § 36-224l. 6 The defendant also pleaded as special defenses that she had rescinded the loan after learning that the mortgage violated TILA, that the plaintiff had fraudulently concealed that it was acting as a broker, and that the plaintiff had made assignments of the mortgage to defraud the defendant of ownership of her property. The defendant also filed counterclaims alleging that the plaintiff and the Masottas violated General Statutes (Rev. to 1991) §§ 36-224l, 37-4, 7 37-9, 8 TILA, and the Connecticut Unfair Trade Practices Act (CUTPA). 9
The trial court found that the Masottas were the real parties in interest and that the plaintiff lacked standing to maintain the foreclosure action and, therefore, dismissed the plaintiff's claim. The trial court further found that the mortgage transaction was both procedurally and substantively unconscionable. The trial court also found that the plaintiff and the Masottas violated TILA because they had failed to include the future assignment recording fees as a part of the finance charge. Based on the TILA violation, the trial court found that the defendant had executed a timely rescission pursuant to 15 U.S.C. § 1635(a), which had terminated the plaintiff's and the Masottas' security interest in the property. The trial court determined that because the plaintiff and the Masottas had failed to accept the defendant's rescission pursuant to the procedures of 15 U.S.C. § 1635(b), the plaintiff and the Masottas were barred from foreclosing on the mortgage.
The trial court further ruled that the plaintiff and the Masottas violated § 36-224l by charging the defendant a prepaid finance charge in excess of 10 percent of the principal amount of the loan. As a result of this violation, the trial court ordered the plaintiff and the Masottas to pay $2975 to the defendant. The trial court ruled that the violations by the plaintiff and the Masottas of TILA and § 36-224l constituted a violation of CUTPA. The trial court awarded the defendant $20,000 in attorney's fees stemming from the CUTPA violation and granted the defendant an injunction "against Family Financial Services, Inc., and the Masottas from pursuing now or hereafter any relief or foreclosure of the mortgage and the mortgage debt...." This appeal followed.
The plaintiff and the Masottas first claim that the trial court improperly found that the Masottas were the makers of the loan. The plaintiff and the Masottas argue that the evidence does not support the trial court's finding. We disagree.
"[W]here the legal conclusions of the court are challenged, we must determine whether they are legally and logically correct and whether they find support in the facts set out in the memorandum of decision; where the factual basis of the court's decision is challenged we must determine whether the facts set out in the memorandum of decision are supported by the evidence or whether, in light of the evidence and the pleadings in the whole record, those facts are clearly erroneous." Pandolphe's Auto Parts, Inc. v. Manchester, 181 Conn. 217, 221-25, 435 A.2d 24 (1980). 10
The trial court found that "[b]oth Masottas are the real parties in interest, acting under the aegis of Family Financial Services, Inc." The trial court based that finding on the following evidence: (1) at trial, the attorney who had represented the plaintiff at the closing testified that the $44,000 loan amount came from Aglino Masotta and that none of it came from the plaintiff; (2) Andrew Forte, the plaintiff's vice president, responded to interrogatories by denying that the plaintiff ever sold or assigned the mortgage; and (3) Forte testified that the Masottas did not sign the document purportedly assigning their interest to the plaintiff and failed to swear before a notary public.
We conclude that the trial court's finding is supported by evidence produced at trial and is not clearly erroneous. On the basis of the trial court's findings and the record, we cannot conclude that the trial court improperly found that the Masottas were the makers of the loan in question.
The plaintiff and the Masottas next claim that the trial court improperly concluded that the mortgage assignment needed to be recorded. The plaintiff and the Masottas claim that General Statutes § 47-10 does not apply to mortgages. The plaintiff and the Masottas argue that the trial court improperly relied on § 47-10 to support its determination that the plaintiff lacked standing because it was not the holder of the mortgage debt. We disagree.
The following additional facts are relevant to this issue. On August 12, 1993, a pretrial hearing was held on the defendant's motion to dismiss in which she claimed that the plaintiff lacked standing. After the pretrial hearing, the plaintiff amended its complaint to allege that the plaintiff had assigned the mortgage note and deed to Aglino Masotta and that on September 14, 1993, he assigned the note and deed back to the plaintiff. When the trial resumed on March 29, 1994, the defendant challenged the purported assignment of September 14, 1993, as invalid because Forte had forged the signatures of Aglino and Edward Masotta on that assignment. Forte purportedly had a power of attorney to sign real estate documents for the Masottas. In addition, the assignment in question disclosed an acknowledgment by a notary public, who was an employee of the plaintiff, to the effect that the Masottas had appeared personally before him and acknowledged that the assignment was their free act and deed. The trial court found, in fact, that neither of the Masottas had appeared before the notary public to be sworn. The trial court also found that Forte had forged the signatures of the Masottas. Finally, the trial court found that Forte had neither signed nor acknowledged the assignment, and that he did not place the power of attorney on the land records together with the assignment of September 14, 1993, as required by General Statutes § 47-10.
General Statutes § 47-10 provides that: (Emphasis added.) ...
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