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Connecticut: Foreclosing Plaintiff's Right to Enforce an Instrument under UCC

Posted By USFN, Wednesday, June 4, 2014
Updated: Tuesday, October 13, 2015

June 4, 2014


by Robert Wichowski
Bendett & McHugh, P.C. – USFN Member (Connecticut, Maine, Vermont)

With its decision in U.S. Bank, N.A., Trustee v. Ugrin, AC 35266, the Connecticut Appellate Court has further discounted the defense bar’s argument that a foreclosing plaintiff is required to be the owner of the underlying debt and, instead, has again held that a foreclosing plaintiff’s establishment of its right to enforce an instrument under the Uniform Commercial Code is sufficient to establish standing in Connecticut.

Prior to the institution of the action, the defendant requested validation of the debt, which the plaintiff provided. Along with the debt validation, the plaintiff also provided a copy of the note, which was endorsed in blank. After a judgment of foreclosure by sale had entered, the defendant filed a motion to dismiss attacking the plaintiff’s standing. The trial court conducted a hearing in which the original note was presented to the court for inspection. The defendant argued that the note was not endorsed in blank but was specially endorsed to the plaintiff, which amounted to an unauthorized alteration of the document. The defendant claimed the inconsistency between the document presented in response to the validation of debt request and the note being specially endorsed to the plaintiff as presented to the trial court as his basis to assert an “illegal” alteration of the note, thereby implicating the plaintiff’s standing.

In opposition to the defendant’s motion, the plaintiff presented an affidavit of the loan servicer averring that the note was specially endorsed to the plaintiff and that the plaintiff was the holder of the note prior to the commencement of the action. After supplemental briefing, the trial court denied the defendant’s motion, finding that the plaintiff demonstrated it was the holder of the note and, further, holding that the defendant failed to present evidence to contradict this finding. The defendant appealed, contending that the trial court erred in not holding a full evidentiary hearing and further failed to hold a second hearing to address the defendant’s claim that there was a material factual dispute regarding the plaintiff’s standing.

The appellate court held that “[t]he plaintiff’s possession of a note endorsed in blank is prima facie evidence that it is a holder and is entitled to enforce the note, thereby conferring standing to commence a foreclosure action.” The defendant claimed that the appearance of a special endorsement on the note to the plaintiff alone required that the trial court hold a second hearing. The appellate court interpreted a recent Connecticut Supreme Court decision (Equity One v. Shivers, 310 Conn. 127 (2013)) to stand for the proposition that a court is not required to order a full evidentiary hearing to determine standing if, after being presented with the original note, the court finds there is evidence that the plaintiff possessed the note at the time the action was commenced and the defendant has not offered any evidence to the contrary.

The appellate court determined that the trial court did not err when it concluded that the plaintiff possessed the note endorsed in blank prior to the commencement of the action and that the defendant’s claim that the note was altered when it was specifically endorsed to the plaintiff does not refute the plaintiff’s prima facie evidence. The appellate court further held that the addition of a special endorsement is not, on its own, an unauthorized alternation of the document purporting to modify an obligation of a party.

The defense bar has repeatedly attempted to advance the argument that a foreclosing plaintiff needs to be the owner of the debt, citing ambiguous language in several recent appellate court cases in Connecticut. This case clarifies again that so long as the plaintiff can establish that it was the holder of the note, or otherwise entitled to enforce the instrument pursuant to the UCC, there is no ownership requirement for a foreclosing plaintiff in a mortgage foreclosure action in Connecticut and illustrates the importance of being able to prove possession of the original note prior to the commencement of the action.

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