ACCREDITED HOME LENDERS, INC. v. McLARDY, No. CV-07-6000337S (Apr. 14, 2008)

ACCREDITED HOME LENDERS, INC. v. JACQUELINE M. McLARDY ET AL.

2008 Ct. Sup. 6258
No. CV-07-6000337SConnecticut Superior Court Judicial District of New London at New London
April 14, 2008

[EDITOR’S NOTE: This case is unpublished as indicated by the issuing court.]

MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT #114
ROBERT A. MARTIN, JUDGE .

The plaintiff, Accredited Home Lenders, Inc., filed its complaint in this foreclosure action against the defendants, Jacqueline McClardy and Mortgage Electronic Registration System, Inc. (MERS), on February 16, 2007.[1] On July 16, 2007, McClardy filed an answer with special defenses and a counterclaim. She asserts the following special defenses: misrepresentation, fraudulent inducement, unconscionability, equitable estoppel, violation of CUTPA, breach of fiduciary duty, unclean hands, mistake and denial of the allegations as to the of debt and its calculation. In her four-count counterclaim, McClardy alleges violation of Real Estate Settlement Procedures Act (RESPA) (count one), violation of CUTPA (count two), misrepresentation (count three) and breach of covenant of good faith and fair dealing (count four). On September 26, 2007, the plaintiff filed a motion for summary judgment as to liability on the complaint, the special defenses and the counterclaim with respect to McClardy.[2] On December 12, 2007, McClardy filed a memorandum of law in opposition to the motion for summary judgment.[3]

“Practice Book [§ 17-49] provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law . . . In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.” (Citation omitted; internal quotation marks omitted.) Morris v. Congdon, 277 Conn. 565, 568-69, 893 A.2d 413 (2006). “[T]he trial court does not sit as the trier of fact when ruling on a motion for summary judgment . . . [Its] function is not to decide issues of material fact, but rather to determine whether any such issues exist.” (Internal quotation marks omitted.) Barasso v. Rear Still Hill Road, LLC, 81 Conn.App. 798, 803, 842 A.2d 1134 (2004).

“In a mortgage foreclosure action, [t]o make out its prima facie case, [the foreclosing party] ha[s] to prove by a preponderance of the CT Page 6259 evidence that it was the owner of the note and mortgage and that [the mortgagee] ha[s] defaulted on the note.” (Internal quotation marks omitted.) Franklin Credit Management Corp. v. Nicholas, 73 Conn.App. 830, 838, 812 A.2d 51 (2002), cert. denied, 262 Conn. 937, 815 A.2d 136
(2003). “Only one of [a defendant’s] defenses needs to be valid in order to overcome [a] motion for summary judgment. [S]ince a single valid defense may defeat recovery, [a movant’s] motion for summary judgment should be denied when any defense presents significant fact issues that should be tried.” (Internal quotation marks omitted.) Union Trust Co. v. Jackson, 42 Conn.App. 413, 417, 679 A.2d 421 (1996).

“It is well established that a foreclosure action constitutes an equitable proceeding . . . In an equitable proceeding, the trial court may examine all relevant factors to ensure that complete justice is done . . . The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court.” (Internal quotation marks omitted.) Johnnycake Mountain Associates v. Ochs, 104 Conn.App. 194, 208, 932 A.2d 472 (2007).

“Historically, defenses to a foreclosure action have been limited to payment, discharge, release or satisfaction . . . or, if there had never been a valid lien . . . A valid special defense at law to a foreclosure proceeding must be legally sufficient and address the making, validity or enforcement of the mortgage, the note or both . . . Where the plaintiff’s conduct is inequitable, a court may withhold foreclosure on equitable considerations and principles . . . [O]ur courts have permitted several equitable defenses to a foreclosure action. [I]f the mortgagor is prevented by accident, mistake or fraud, from fulfilling a condition of the mortgage, foreclosure cannot be had . . . Other equitable defenses that our Supreme Court has recognized in foreclosure actions include unconscionability . . . abandonment of security . . . and usury.” (Internal quotation marks omitted.) Fidelity Bank v. Krenisky, 72 Conn.App. 700, 705-06, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002). “In recognition that a foreclosure action is an equitable proceeding, courts have allowed mistake, accident[,] fraud, equitable estoppel, CUTPA, laches[,] breach of the implied covenant of good faith and fair dealing, tender of deed in lieu of foreclosure and a refusal to agree to a favorable sale to a third party to be pleaded as special defenses.” (Internal quotation marks omitted.) LLP Mortgage, LTD v. FR, LLC, Superior Court, judicial district of New London, Docket No. CV 01 0558476 (January 31, 2002, Martin, J.).

Viewed in the light most favorable to McClardy, her affidavit and supporting documentation raises several areas in which factual CT Page 6260 determinations may control the outcome. Specifically, the evidence establishes the existence of a genuine issue of material fact as to whether McClardy was induced by fraudulent representation to sign the note to her detriment. This defense addressed the making and validity of the note. “Fraud in the inducement to enter a contract is a well established equitable defense . . . Fraud and misrepresentation cannot be easily defined because they can be accomplished in so many different ways. They present, however, issues of fact . . . Our Supreme Court has stated that the summary judgment procedure is particularly inappropriate where the inferences which the parties seek to have drawn deal with questions of motive, intent and subjective feelings and reactions . . . It is only when the witnesses are present and subject to cross-examination that their credibility and the weight to be given to their testimony can be appraised.” (Citations omitted; emphasis added; internal quotation marks omitted.) Barasso v. Rear Still Hill Road, LLC, supra, 81 Conn.App. 806. In addition, it is unclear whether the mortgage originator acted as an agent of the plaintiff. “The existence of an agency and whether a person is acting within the bounds of his authority as an agent are questions of fact.” Id., 805. McClardy has raised several special defenses that are intertwined with the agency question, including equitable estoppel[4] and unclean hands.[5]

Therefore, the court finds that genuine issues of material fact exists as to whether the plaintiff was fraudulently induced to sign the note and as to whether mortgage originator was an agent of the plaintiff, which in turn raises genuine issues of material fact as to whether representations were made by the mortgage originator to the plaintiff that would constitute fraud in the inducement or permit the application of equitable estoppel and the doctrine of unclean hands. Those questions may be answered only by the trier of fact. For that reason, summary judgment in this case is inappropriate. See Barasso v. Rear Still Hill Road, LLC, supra, 81 Conn.App. 807.

Accordingly, the plaintiff’s motion for summary judgment as to liability is denied.

[1] In its complaint, the plaintiff alleges the following facts: McClardy is an owner of real property located at 20 Lincoln Court in New London; on January 27, 2006, McClardy executed and delivered to the plaintiff a note for a loan in the original principal amount of $217,600, secured by a mortgage on the property; the mortgage was delivered to Mortgage Electronic Registration System, Inc. as nominee for the plaintiff; this mortgage was assigned to the plaintiff; the plaintiff is the owner and holder of the note and mortgage; the note is in default and the plaintiff has elected to accelerate the balance due CT Page 6261 on the note, to declare the note to be due in full and to foreclose the mortgage securing the note; McClardy is the owner of the equity of redemption and is in possession of the property; and the plaintiff has provided the written notice of the default to McClardy in accordance with the note and the mortgage but she failed to cure the default.

[2] In support of its motion, the plaintiff submitted a memorandum of law, an affidavit by the plaintiff, a copy of the adjustable rate note, a copy of an open-end mortgage deed, a copy of a notice of intent to foreclose, a copy of broker’s mortgage originator agreement and a copy of an occupancy agreement.

[3] In support of her opposition, McClardy submitted, inter alia, a copy of the page one of the contract for sale, copies of the TILA statements, a copy of the loan application and of the tenant/landlord leases, copies of the closing instruction and the disclosures from the lender, a copy of the listings of loans and her affidavit with a copy of a broker price opinion attached.

[4] The doctrine of equitable estoppel “requires proof that the party against whom estoppel is claimed must do or say something calculated or intended to induce another party to believe that certain facts exist and to act on that belief; and the other party must change its position in reliance on those facts, thereby incurring some injury.” (Internal quotation marks omitted.) Barasso v. Rear Still Hill Road, LLC, supra, 81 Conn.App. 805.

[5] “The doctrine of unclean hands holds that one who seeks to prove that he is entitled to the benefit of equity must first come before the court with clean hands . . . and must therefore show that his conduct has been fair, equitable and honest as to the particular controversy in issue.” (Citation omitted; internal quotation marks omitted.)Barasso v. Rear Still Hill Road, LLC, supra, 81 Conn.App. 806 n. 4. “Application of that doctrine, which requires a weighing of facts, rests within the sound discretion of the trial court.” Id., 806-07.

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