Gmat Legal Title Trust 2014-1, U.S. Bank, Nat'l Ass'n v. Catale

221 Conn.App. 90

300 A.3d 1218

GMAT LEGAL TITLE TRUST 2014-1, U.S. BANK, NATIONAL ASSOCIATION, LEGAL TITLE TRUSTEE v. Vito CATALE et al.

AC 45332

Appellate Court of Connecticut.

Argued April 12, 2023

Officially Released August 15, 2023

Douglas R. Steinmetz, for the appellants (named defendant et al.).

Paul N. Gilmore, Hartford, with whom, on the brief, was Olivia L. Benson, for the appellee (substitute plaintiff).

Alvord, Clark and DiPentima, Js.

CLARK, J.

This residential mortgage foreclosure action returns to this court for a second time. ¹ This time, the defendants Vito Catale (Vito) and Maria Catale ² appeal from the judgment of strict foreclosure rendered by the trial court in favor of the substitute plaintiff RMS Series Trust 2020-1. ³ They claim that the judgment of strict foreclosure must be reversed because (1) the plaintiff did not "lay the foundation required to rely on the hearsay evidence of the loan's history provided by the plaintiff's predecessors in interest" and, therefore, the judgment is premised entirely on inadmissible evidence, and (2) the court improperly struck their "key special defenses," including, inter alia, their defenses of unclean hands, bad faith settlement practices, and the inapplicability of the accidental failure of suit statute. For the reasons that follow, we reverse the judgment of the trial court only with respect to the granting of the motion to strike the defendants' special defense claiming the inapplicability of the accidental failure of suit statute because that special defense was not ripe for adjudication. We affirm the judgment in all other respects.

The record reveals the following facts and procedural history. In 2006, Vito executed a promissory note in favor of WMC Mortgage Corporation (WMC) in the original principal amount of $600,000. As security for the note, the defendants executed a mortgage in favor of WMC on property that they own in Monroe. The note and mortgage have been subject to a series of assignments.

In 2011, Consumer Solutions, LLC, one of the plaintiff's predecessors in interest, brought an action to foreclose on the mortgage (first foreclosure action). See Consumer Solutions, LLC v. Catale , Superior Court, judicial district of Fairfield, Docket No. CV-11-6018401-S. That action, however, was dismissed for dormancy in January, 2017. See id.

On August 1, 2017, GMAT Legal Title Trust 2014-1, U.S. Bank, National Association, as Legal Title Trustee (GMAT), commenced the present action via a one count complaint seeking to foreclose on the mortgage. The complaint also sought a deficiency judgment. With respect to the request for a deficiency judgment, the complaint alleged, inter alia, that the request was not time barred because of the accidental failure of suit statute; see General Statutes § 52-592 ; or, alternatively, because of the defendant's acknowledgement of the debt within six years of the commencement of the action. See General Statutes § 42a-3-118 ; see also Cadle Co. v. Errato , 71 Conn. App. 447, 461, 802 A.2d 887 ("[a] general acknowledgment of an indebtedness may be sufficient to remove the bar of the statute [of limitations]"), cert. denied, 262 Conn. 918, 812 A.2d 861 (2002).

On July 30, 2018, the defendants filed their answer and special defenses in which they asserted eight special defenses, including, inter alia, that Consumer Solutions, LLC, engaged in bad faith settlement practices and had unclean hands stemming from the mediation process in the first foreclosure action and that the accidental failure of suit statute did not apply because the trial court dismissed the first foreclosure action due to the inexcusable failure of Consumer Solutions, LLC, to prosecute the action.

On August 22, 2018, GMAT filed a motion to strike all eight of the defendants' special defenses. It then filed a motion for summary judgment as to liability on November 20, 2018, relying in part on the arguments and authorities set forth in its memorandum in support of its previously filed motion to strike the defendants' special defenses that had not yet been decided.

On March 13, 2020, the court, Spader, J. , granted the motion to strike as to seven of the defendants' special defenses. The court explained that, although the plaintiff had also moved for summary judgment and the court believed that GMAT had set forth a prima facie case, it could not adjudicate GMAT's summary judgment motion at that time because the defendants were permitted an opportunity to file a revised answer and special defenses pursuant to Practice Book § 10-44.

On April 15, 2020, the defendants filed a substitute answer and special defenses, this time asserting five special defenses, including, inter alia, bad faith settlement practices, unclean hands, and the inapplicability of the accidental failure of suit statute. On April 28, 2020, GMAT filed a motion to strike all of the special defenses of the substitute answer.

On January 28, 2021, the court granted the motion to strike as to the defendants' bad faith settlement practices and unclean hands defenses, explaining that, although the allegations described a failed mediation between the plaintiff's predecessor in interest and the defendants, the allegations were insufficient to state a defense for bad faith or unclean hands. The trial court also struck the defendants' special defense that the accidental failure of suit statute did not apply on the basis that the first foreclosure action "was dismissed for dormancy and not on a substantive basis." The court denied the motion to strike the special defense asserting that GMAT was not a holder in due course of the note because the defendants had, in the court's view, alleged facts sufficient to state such a defense.

On April 16, 2021, the court rendered summary judgment in favor of GMAT as to liability, concluding that it had established a prima facie case for foreclosure and that the defendants had not set forth the existence of a genuine issue of material fact or a viable defense that would prevent the granting of the motion for summary judgment. The court rejected the defendants' objections that claimed that GMAT's affidavits were defective and contained inadmissible hearsay to which the business record exception did not apply.

The plaintiff, after being substituted for GMAT on August 23, 2021, filed a motion for a judgment of strict foreclosure on September 1, 2021. On December 2, 2021, and February 10, 2022, the court held a hearing on the plaintiff's motion for a judgment of strict foreclosure. On February 10, 2022, the trial court, Hon. Dale W. Radcliffe, judge trial referee , rendered a judgment of strict foreclosure and set the law day for April 26, 2022. This appeal followed. Additional facts and procedural history will be set forth as necessary.

I

The defendants first claim that the court erred in rendering a judgment of strict foreclosure because the court relied on inadmissible hearsay evidence to determine the date of default, the amount due on the note, interest accrued, and penalty calculations. Specifically, the defendants contend that the court incorrectly admitted into evidence certain records of Rushmore Loan Management Services, LLC (Rushmore), the plaintiff's current loan servicer, under the business records exception to the hearsay rule because the plaintiff did not "lay the foundation required to rely on the hearsay evidence of the loan's history provided by the plaintiff's predecessors in interest." They contend that the note and mortgage passed through many hands before they were assigned to the plaintiff and that the plaintiff "has no evidence generated by itself [concerning the defendants' payment history for the period of time prior to when] ... it took the loan [on] August 4, 2021." In their view, because Rushmore's loan history records contain information premised on information from prior holders or servicers, "controlling case law" required the plaintiff to present evidence from each and every prior owner or servicer of the note in order to demonstrate that each had a duty to transmit accurate information regarding the records to the next holder.

Although the defendants do not clearly identify in their principal appellate brief the specific records or portions of records that they are challenging on appeal, it appears, from their objections in the trial court, that their focus is on the admission of exhibits 18 and 19. ⁴ Exhibit 18 is a loan activity history for 2014 created by Rushmore. Exhibit 19 is a Rushmore "customer activity statement" for the period January, 2015, to October, 2017. ⁵ The plaintiff counters that the court properly admitted the business records of its loan servicer and that it was not required to lay a foundation in the manner advanced by the defendants. The plaintiff argues that it satisfied its burden under the business records exception to the rule against hearsay because it sufficiently demonstrated that the relevant data became part of its own business records through its transaction with the previous servicer, which had a business duty to transmit accurate information. We agree with the plaintiff.

General Statutes § 52-180, which has been incorporated as § 8-4 of the Connecticut Code of Evidence, is colloquially referred to as the business records exception to the hearsay rule. Section 52-180 (a) provides: "Any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible as evidence of the act, transaction, occurrence or event, if the trial judge finds that it was made in the regular course of any business, and that it was the regular course of the business to make the writing or record at the time of the act, transaction, occurrence or event or within a reasonable time thereafter." "To the extent [that admissibility] of evidence is based on an interpretation of the Code of Evidence,...