Jpmorgan Chase Bank, Nat'l Ass'n v. Virgulak

341 Conn. 750

267 A.3d 753

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION

v.Robert J. VIRGULAK et al.

SC 20403

Supreme Court of Connecticut.

Argued October 22, 2020

Officially released January 11, 2022^*

Brian D. Rich, with whom, on the brief, was Laura Pascale Zaino, Hartford, for the appellant (substitute plaintiff).

Alexander H. Schwartz, Southport, for the appellee (defendant Theresa Virgulak).

Jeffrey Gentes and J.L. Pottenger, Jr., and Chaarushena Deb, Sophie Laing, Zaria Noble, Stefanie Ostrowski and Emily Coady, law student interns, filed a brief for the Housing Clinic of the Jerome N. Frank Legal Services Organization as amicus curiae.

Robinson, C. J., and McDonald, D'Auria, Mullins, Kahn and Ecker, Js.

MULLINS, J.

The plaintiff, Manufacturers and Traders Trust Company (M&T Bank),¹ appeals from the judgment of the Appellate Court in favor of the defendant Theresa Virgulak.² On appeal, the plaintiff claims that the Appellate Court improperly affirmed the judgment of the trial court because (1) the trial court improperly declined the plaintiff's request to reform a mortgage deed to reference that the mortgage deed executed by the defendant was given to secure a note executed by her husband, Robert J. Virgulak (Robert), and (2) even if the trial court properly denied the request to reform the mortgage deed, it incorrectly determined that the plaintiff was not entitled to foreclose the mortgage executed by the defendant because the defendant was not a borrower on the note. We disagree with the plaintiff and affirm the judgment of the Appellate Court.

The opinion of the Appellate Court sets forth the following relevant facts and procedural history. "On or about December 11, 2006, Robert ... executed and delivered to JPMorgan Chase Bank, National Association (JPMorgan Chase), a note for a loan in the principal amount of $533,000 (note). The defendant was not a signatory on the note. On the same date, the defendant signed a document titled ‘Open-End Mortgage Deed’ (mortgage [deed]) for residential property she owns at 14 Bayne Court in Norwalk (property). The mortgage [deed] recited that it was given to secure a note dated December 11, 2006, and recited that the note was signed by the defendant as [the] ‘[b]orrower’ in the amount of $533,000. The term ‘[b]orrower’ is defined in the mortgage deed as ‘[Theresa Virgulak, married].’ The mortgage [deed] did not reference Robert. The defendant did not sign any guarantee.

"On or about February 1, 2010, after JPMorgan Chase failed to receive payments in accordance with the terms of the note, the note went into default and JPMorgan Chase elected to accelerate the balance due. On January 3, 2011, notices of default were sent to both the defendant and Robert, and, in February, 2013, JPMorgan Chase commenced this foreclosure action against the couple. The action sought to foreclose the mortgage that JPMorgan Chase claimed to have on the property. In September, 2014, JPMorgan Chase withdrew the foreclosure action against Robert, as he had filed for bankruptcy and been granted an unconditional discharge of the debt.

"Thereafter, JPMorgan Chase filed a motion to substitute party plaintiff, stating that it had assigned the subject mortgage deed and note to Hudson City Savings Bank (Hudson). This motion was granted by the [trial] court on August 18, 2015.

"On September 25, 2015, the defendant filed a motion for summary judgment, arguing that Hudson was precluded from foreclosing the mortgage. In particular, she argued that she had not defaulted under the terms of the note because she was never a party to a promissory note with [Hudson] or any of its predecessors in interest. The motion was denied by the court on January 14, 2016, on the basis of the court's determination that an issue of material fact remained with respect to whether the mortgage deed provided reasonable notice to third parties that the defendant was securing Robert's obligation." JPMorgan Chase Bank, National Assn. v. Virgulak , 192 Conn. App. 688, 692–93, 218 A.3d 596 (2019).

"On August 9, 2016, the plaintiff, M&T Bank, into which Hudson had merged, filed a motion to substitute itself as the party plaintiff and requested leave to amend the complaint in order to add two additional causes of action. The court granted the motion on August 15, 2016. In the first count of the plaintiff's three count amended complaint, the plaintiff sought a judgment of foreclosure against the [defendant]. In the second count, it sought equitable reformation of the note in order to include the defendant as a borrower on the note. In the third count, the plaintiff pleaded that the defendant had been unjustly enriched because (1) the proceeds of the note were used to pay off loans [that] she was obligated to pay and (2) she had free use of the subject property without satisfying the terms of the mortgage [deed], which she had executed.

"On December 1, 2016, the defendant filed an amended answer denying the essential allegations of the amended complaint regarding her liability for the debt and the claim of unjust enrichment. She also set forth eight special defenses." (Footnote omitted.) Id., at 693–94, 218 A.3d 596.

"The parties tried the case before the court on December 6, 2016. The plaintiff presented three witnesses, including Wilkin Rodriguez, a mortgage banking research officer at JPMorgan Chase, the defendant, and Robert. After the plaintiff rested, the defendant did not present additional evidence; she relied instead on the testimony and exhibits introduced during cross-examination of the witnesses called by the plaintiff." Id., at 694, 218 A.3d 596. The trial court ordered the parties to submit posttrial briefs.

"On April 12, 2017, the court issued its memorandum of decision. The court found in favor of the defendant on the foreclosure and reformation counts of the complaint. In particular, the court stated, among other things, that ‘[t]he court finds that the plaintiff has not sustained its burden of proving, by clear and convincing evidence, that it [was] entitled to the equitable remedy of reformation of the mortgage deed³ .... Accordingly, the court finds the issues on the second count for [the defendant] and against the plaintiff. [Because] the plaintiff failed to present any authority to the court [that] would allow the plaintiff to prevail on the first count [foreclosure claim] in the absence of reformation of the mortgage deed, the court [also] finds the issues on the first count for [the defendant] and against the plaintiff.’

"The court then proceeded to address the plaintiff's unjust enrichment claim, noting that the defendant had been benefited in several respects as a result of the loan that Robert had obtained .... The court ultimately determined that [Hudson's] responses to the requests for admissions precluded any recovery on [the plaintiff's] unjust enrichment claim, except for the property tax payments that the defendant conceded that she owed to the plaintiff."⁴ (Footnote added; footnote omitted.)

Id., at 695–97, 218 A.3d 596. Thereafter, the plaintiff appealed from the judgment of the trial court to the Appellate Court.

On appeal to the Appellate Court, the plaintiff claimed, inter alia, that the trial court (1) improperly failed to exercise its discretion to consider the plaintiff's foreclosure claim as independent from its other claims and failed to grant the plaintiff the equitable remedy of foreclosure, (2) improperly declined to reform the mortgage deed, and (3) incorrectly concluded that Hudson's admissions limited the plaintiff's recovery under its unjust enrichment count. See id., at 691–92, 218 A.3d 596. The Appellate Court affirmed the judgment of the trial court. Id., at 722, 218 A.3d 596. It concluded, inter alia, that the trial court (1) "did not ignore the plaintiff's claim for foreclosure"; id., at 700–701, 218 A.3d 596 ; (2) properly "declined to grant foreclosure of the mortgage without reformation because it determined that the mortgage [deed], as executed, was a nullity because it secured a nonexistent debt"; id., at 703, 218 A.3d 596 ; see id., at 705, 218 A.3d 596 ; (3) did not abuse its discretion by declining to reform the mortgage deed because the plaintiff did not meet its burden of proving by clear and convincing evidence that the mortgage deed did not conform to the parties’ agreement; see id., at 706, 218 A.3d 596 ; and (4) "did not abuse its discretion in limiting the award under the unjust enrichment count to the property taxes owed to the plaintiff." Id., at 721, 218 A.3d 596.

We granted the plaintiff's petition for certification to appeal, limited to the following issues: (1) "Did the Appellate Court properly uphold the trial court's decision declining the plaintiff's request to reform the mortgage deed to reference the fact that the mortgage [deed] executed by the defendant was given to secure a note executed by [Robert]?" And (2) "[i]f the answer to the first certified question is ‘yes,’ did the Appellate Court properly uphold the trial court's determination that the plaintiff was not entitled to foreclose the mortgage executed by the defendant because the defendant is not a borrower on the note?" JPMorgan Chase Bank, National Assn. v. Virgulak , 333 Conn. 945, 219 A.3d 375 (2019). Additional facts will be set forth as necessary.

I

We first consider whether the Appellate Court properly affirmed the judgment of the trial court declining to grant reformation of the mortgage deed. The plaintiff asserts that the trial court improperly did not find that the parties intended for the mortgage deed signed by the defendant to secure the note signed by Robert. Therefore, the plaintiff contends, the mortgage deed should be reformed to reflect the parties’ true agreement. The defendant counters that the trial court properly refused to reform the mortgage deed on the basis of the court's factual findings. We agree with the defendant.

"Reformation is appropriate only when the [contract] executed...