U.S. Bank Nat'l Ass'n v. Eichten

Decision Date18 September 2018
Docket NumberAC 39679
Citation196 A.3d 328,184 Conn.App. 727
CourtConnecticut Court of Appeals
Parties U.S. BANK NATIONAL ASSOCIATION, Trustee v. Karin C. EICHTEN, et al.

Loraine Martinez, with whom were David F. Lavery, Hartford, and, on the brief, Sarah E. White, Macon, GA, for the appellant (named defendant).

Pierre-Yves Kolakowski, Greenwich, with whom, on the brief, was Zachary Grendi, New York, NY, for the appellee (plaintiff).

Alvord, Keller and Bright, Js.

KELLER, J.

In this foreclosure action, the defendant Karin C. Eichten1 appeals from the judgment of strict foreclosure rendered by the trial court in favor of the plaintiff, U.S. Bank National Association, as trustee, successor in interest to Bank of America, National Association as trustee as successor by merger to LaSalle Bank, National Association as trustee for Washington Mutual Mortgage Pass-Through Certificates WMALT 2007-HY2. The defendant claims that, in rendering summary judgment as to liability in the plaintiff's favor with respect to the plaintiff's foreclosure complaint, the court erred in concluding that a genuine issue of material fact did not exist with respect to her special defenses of equitable estoppel, breach of the covenant of good faith and fair dealing, promissory estoppel, unclean hands, and breach of contract, all of which pertain to the conduct of the plaintiff's loan servicer, Chase Home Finance, LLC (Chase), in denying the defendant's application for a loan modification under the federal Home Affordable Modification Program (HAMP).2 Additionally, the defendant claims that the court improperly rendered summary judgment in the plaintiff's favor on her counterclaim sounding in breach of contract. We reverse the judgment of the trial court.

"In February, 2009, faced with a nationwide foreclosure crisis, the Secretary of the Treasury and the Director of the Federal Housing Finance Agency exercised their authority under the Emergency Economic Stabilization Act, the American Recovery and Reinvestment Act, and the Troubled Asset Relief Program, 12 U.S.C. §§ 5201 – 5253, and created [HAMP]." Belyea v. Litton Loan Servicing, LLP , United States District Court, Civil Action No. 10-10931-(DJC), 2011 WL 2884964, *2 (D. Mass. July 15, 2011). HAMP was a national home mortgage modification program aimed at helping at-risk homeowners who were in default or at imminent risk of default by reducing monthly payments to sustainable levels through the restructuring of their mortgages without discharging any of the underlying debt. Id. It was designed to create a uniform loan modification process governed by federal standards that could be used by any loan servicer that chose to participate. Id."As an incentive for servicers to participate in HAMP, the federal government awards servicers three annual $1,000 payments for each permanent mortgage loan that [was] successfully modified ...." Id.

On August 28, 2013, the plaintiff commenced this action against the defendant to foreclose on its mortgage on the defendant's property at 630 Cook Hill Road in Cheshire. The defendant filed a substitute answer and special defenses. The defendant alleged in her special defenses that (1) the plaintiff is equitably estopped from proceeding with the foreclosure action because the plaintiff instructed her to default on her note and mortgage obligations, resulting in her credit rating being negatively impacted; (2) the plaintiff breached the covenant of good faith and fair dealing by instructing her to default on her note and mortgage obligations without informing her that a default would result in adverse consequences such as acceleration of the debt; (3) the plaintiff is precluded by promissory estoppel from pursuing a foreclosure action because the plaintiff induced the defendant to default and promised her the offer of a loan modification if she made three trial period payments,3 and the defendant relied on that promise to her detriment because she never received the promised offer; (4) the plaintiff is guilty of unclean hands because, although she qualified for a loan modification upon completion of her trial period payments, the plaintiff did not offer her a loan modification, but instead, placed her in a forbearance program without her consent; and (5) the plaintiff breached a contract between the parties by failing to offer the defendant a loan modification after she performed her part of the bargain by making the three agreed upon trial period payments.4

In her substitute counterclaim, the defendant alleged that the plaintiff breached a contract between the parties when it failed to offer her a loan modification after the defendant performed her obligations under the contract by making her three trial period payments and continued to meet all program eligibility requirements during the trial period. The plaintiff filed an answer to the defendant's counterclaim on September 29, 2015, in which it posited that the alleged contract did not comply with the statute of frauds, and that the counterclaim is legally insufficient and barred by the doctrines of waiver and estoppel. On November 12, 2015, the plaintiff moved for summary judgment as to liability on its complaint, claiming that the defendant's special defenses are insufficient because they are not supported by any evidence and cannot defeat the plaintiff's prima facie showing that it is entitled to foreclose on the subject property. The plaintiff also argued that the defendant's counterclaim is barred by the statute of frauds and has no factual basis.

In support of its motion for summary judgment, the plaintiff provided the court with the affidavit of Michael Piz, a document control officer with the plaintiff's subsequent loan servicer, Select Portfolio Servicing, Inc.,5 the contents of which are summarized as follows. On December 15, 2006, the defendant executed an adjustable rate note to pay Washington Mutual Bank, FA (Washington Mutual), the principal sum of $480,000, payable with interest, including late charges, costs, and expenses. The indebtedness evidenced by the note was secured by a mortgage, which also is dated December 15, 2006, on the defendant's property at 630 Cook Hill Road in Cheshire. Washington Mutual endorsed the note in blank and on or about September 9, 2009, the Federal Deposit Insurance Corporation, as receiver of Washington Mutual, executed an assignment of the mortgage to the plaintiff. The assignment later was corrected due to a clerical error in the name of the plaintiff in the original assignment. Copies of the note, mortgage, assignment, and corrected assignment were annexed to the plaintiff's motion for summary judgment as exhibits.

In 2009, the defendant defaulted pursuant to the terms of the note and mortgage, and the plaintiff notified her of the default. The notice of default advised that if the amount required to cure the default was not received within sixty days, immediate acceleration of all moneys due under the note and mortgage could be declared without further notice or demand. Piz further avers that the defendant failed to cure her default and, as a result, the plaintiff elected to accelerate the total amount of the indebtedness due and owing by commencing this action. No part of the outstanding indebtedness has been paid by the defendant. Subsequently, the defendant received multiple notices of her default, including notices on November 30, 2009, January 21, 2010, and May 10, 2010.

Piz further alleges that the plaintiff is in physical possession of the original loan documents, including, without limitation, the original note endorsed in blank, and was in possession of the same at the time this action was commenced.6

Piz also addresses in his affidavit what transpired regarding the defendant's application for a HAMP loan modification. On July 15, 2010, the plaintiff sent the defendant a letter offering her a trial period plan (TPP). A copy of this letter is annexed to the motion for summary judgment. It reads, in pertinent part: "You are approved to enter into a [TPP] under [HAMP]. This is the first step toward qualifying for more affordable mortgage payments.... To accept this offer, you must make new monthly ‘trial period payments’ in place of your normal monthly mortgage payment.... After all trial period payments are timely made and you continue to meet all program eligibility requirements, your mortgage would then be permanently modified. You will be required to execute a permanent mortgage modification agreement that we will send you before your modification becomes effective. Until then, your existing loan and loan requirements remain in effect and unchanged during the trial period. If each trial payment is not received by us in the month in which [it] is due, this offer will end and your loan will not be modified under [HAMP]." (Emphasis omitted.) The letter also includes answers to "frequently asked questions," one of which advised the borrower that "[y]our credit score may be affected by accepting a [TPP] or modification." In response to a question, "[w]hen will I know if my loan can be modified permanently and how will the modified loan balance be determined?" the letter provided, "[o]nce we confirm you are still eligible for [HAMP] and you make all of your trial period payments on time, we will send you a modification agreement detailing the terms of the modified loan."7

Piz further avers in his affidavit that in or about May and June, 2011, the defendant sent the plaintiff evidence of her combined income with her then "spouse,"8 and that, on the basis of the defendant's profit and loss statement and pay stubs, the plaintiff calculated that the defendant and her "spouse" had a combined monthly income of $13,826.35 and a total housing expense of $3423.94. Thus, the defendant's "housing ratio," or housing expense as a percentage of household income, was 24.76 percent. Under the then applicable HAMP guidelines, the borrower's current...

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