Ocwen Loan Servicing, LLC v. Mordecai

209 Conn.App. 483

268 A.3d 704

OCWEN LOAN SERVICING, LLC

v.Michael A. MORDECAI et al.

AC 43295

Appellate Court of Connecticut.

Argued September 16, 2021

Officially released December 28, 2021

Jeremy E. Baver, for the appellants (defendants).

Christopher J. Picard, Hartford, for the appellee (plaintiff).

Prescott, Alexander and Suarez, Js.

PRESCOTT, J.

The defendants, Michael A. Mordecai and Elizabeth M. Keyser, appeal from the judgment of

strict foreclosure rendered by the trial court in favor of the substitute plaintiff Wilmington Savings Fund Society, F.S.B., D/B/A Christiana Trust, not individually but as trustee for Pretium Mortgage Acquisition Trust (Wilmington).¹ The defendants claim that the court (1) abused its discretion by denying their request to amend their special defenses, (2) improperly granted summary judgment as to liability because a genuine issue of material fact existed regarding whether they had defaulted on the note, and (3) misapplied Practice Book § 23-18 (a)² in rendering a judgment of strict foreclosure because they had asserted a defense regarding the amount of the debt owed. We agree with the defendants that the court abused its discretion by not allowing them to amend their special defenses and, consequently, also improperly granted the motion for summary judgment as to liability and rendered a judgment of strict foreclosure without due consideration of those defenses.³ Accordingly, we reverse the judgment of the court and remand for further proceedings consistent with this opinion.

The record reveals the following relevant undisputed facts and procedural history. In 2007, the defendants

purchased residential property in Fairfield. They executed a promissory note in favor of Taylor, Bean & Whitaker Mortgage Corporation (TB&W) in the principal amount of $340,000 (note). As security for the note, the defendants executed a mortgage on the Fairfield property in favor of Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for TB&W (mortgage).⁴ TB&W later endorsed the note in blank.

In August, 2011, Ocwen Loan Servicing, LLC (Ocwen), as successor in interest to TB&W, commenced the underlying mortgage foreclosure action. In its complaint, Ocwen alleged that the mortgage had been "assigned to [it] by virtue of an assignment of mortgage," and that it was "the holder of [the] note and mortgage." Ocwen further alleged that the note was in default and that it had elected to accelerate the balance due on the note, declare the note due in full, and foreclose the mortgage securing the note.

For more than four years, the parties participated in court-sponsored foreclosure mediation.⁵ The defendants, however, were unable to obtain a loan modification, and the mediation was terminated by order of the court on January 22, 2016.

On April 11, 2016, Ocwen filed a motion to default the defendants for failure to plead. It also filed a demand for a disclosure of defenses. The clerk initially granted the motion for default. That same day, however, the defendants filed a disclosure of defenses and a request to revise the complaint. As a result, the clerk vacated the default against the defendants. One of the revisions sought by the defendants was for Ocwen to provide more factual details regarding its allegation that it currently was the holder of the note. Ocwen filed an objection, which the court sustained.

Soon thereafter, however, Ocwen filed a motion to substitute Nationstar Mortgage, LLC (Nationstar), as the plaintiff. Ocwen stated in its motion that it had assigned the subject mortgage deed and note to Nationstar. Attached to the motion to substitute was a copy of a page from the Fairfield land records showing that an assignment of mortgage from Ocwen to Nationstar had been executed on October 29, 2013, and subsequently recorded on November 18, 2013.⁶ The defendants objected to the substitution, arguing, inter alia, that the assignment only referred to the mortgage and not the note. Further, the defendants argued that, in objecting to their request to revise, Ocwen had made admissions to the court about its own status as the holder of the note and that it had the right to enforce the mortgage that appeared to conflict with the assignment attached to the motion to substitute. The court sustained the defendants’ objection and denied the motion to substitute, stating: "There is no indication that Nationstar is the holder or owner of the note."

On October 26, 2016, Ocwen filed a motion for judgment of strict foreclosure and a preliminary statement of the debt calculated as of October 5, 2016. According to that statement, the principal and accrued interest on the note totaled $481,708.53. Ocwen simultaneously filed an appraisal that indicated that the fair market value of the subject property was $430,000. Ocwen also filed a second motion to default the defendants for failure to plead.

The clerk denied the motion for default, noting that, on November 1, 2016, the defendants filed a motion to strike the foreclosure complaint. In their motion to strike, the defendants argued, in relevant part, that the complaint failed to state a cause of action for foreclosure because Ocwen had failed to adequately plead regarding its status as the holder of the note or to identify the precise nature of the alleged default. Ocwen filed an opposition to the motion to strike and also renewed its motion to substitute Nationstar as the plaintiff. The renewed motion to substitute contained a representation that Nationstar, through its counsel, was in possession of the note, which was endorsed in blank, and, thus, Nationstar was the current holder of the note.

On January 5, 2017, the court granted the defendants’ motion to strike the foreclosure complaint, agreeing with the defendants that the original complaint lacked sufficient allegations regarding "prima facie elements of a cause of action for foreclosure of a mortgage ...." The court also granted Ocwen's motion to substitute Nationstar as the plaintiff by virtue of Ocwen's allegation that it had assigned the subject mortgage to Nationstar on October 29, 2013, and that Nationstar, through its counsel, was in possession of the note endorsed in blank. Nationstar then filed an amended complaint on January 11, 2017, which is the operative complaint in this action.

The defendants filed a timely answer to the amended complaint on February 2, 2017. The defendants also asserted four special defenses at that time.⁷

On June 22, 2017, Nationstar filed a motion for summary judgment as to liability only. On July 6, 2017, the defendants filed a motion to dismiss the foreclosure action in which they argued that the court lacked subject matter jurisdiction because Nationstar was neither the owner of the debt nor the holder of the note. Nationstar sought and was granted an extension of time to respond to the motion to dismiss, following which, on August 22, 2017, it filed a motion to substitute Wilmington as the plaintiff, stating that it had assigned the subject mortgage to Wilmington, which currently was in possession of the note. A copy of the assignment of mortgage from Nationstar to Wilmington was attached and showed that the assignment had been executed on July 6, 2017, the day the defendants filed their motion to dismiss.

The court granted the motion to substitute Wilmington as the plaintiff on September 14, 2017. On January 21, 2018, the court denied the defendants’ motion to dismiss. Over the next several months, the parties exchanged discovery and litigated several discovery disputes. The parties argued their outstanding discovery disputes to the court, Hon. Alfred J. Jennings, Jr. , judge trial referee, on May 29, 2018, which issued a ruling on September 23, 2018. Among the issues to be resolved was Wilmington's inability to locate and produce loan

payment history records for a period of more than two years starting from the loan origination date through August 19, 2009. Judge Jennings stated in his discovery ruling that the defendants have provided a payment history that "admittedly has a gap or gaps," and that Wilmington "is unable to find payment history records for the gap period(s)." In relevant part, the court ordered Wilmington to provide the defendants with additional discovery regarding its search efforts to locate the missing loan payment records.

On December 26, 2018, following the completion of discovery, the defendants filed a request to amend their answer and special defenses. The attached proposed amended pleading contained seven special defenses, the primary basis of which were to address the incomplete payment records and related issues regarding changes in the amount of escrow payments. The first and second amended special defenses alleged unclean hands, asserting generally that Wilmington and its predecessors in interest knew about the incomplete payment history, and that the amount of the claimed debt was inaccurate, which unduly prejudiced the defendants both during mediation and in defending against the foreclosure action. The third special defense asserted that the defendants had not been given proper notice of the alleged default or other requisite statutory notice requirements. The fourth special defense sounded in payment pursuant to General Statutes § 42a-3-602 and alleged that the defendants "were current on the correctly calculated mortgage payment amounts." The fifth special defense alleged a failure to comply with regulations promulgated under the federal Real Estate Settlement Procedures Act of 1974 (RESPA), in particular 12 C.F.R. § 1024.38, which requires loan servicers to provide borrowers with accurate and current information regarding a borrower's mortgage loan. The sixth special defense sounded in fraud. The seventh

special defense asserted, inter alia, that the note was endorsed in blank by someone "not authorized to endorse the instrument."

The defendants also filed a separate caseflow request that sought a continuance to respond to...