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Connecticut: Appellate Decision is another Step toward Reducing Litigation Based on Post-Default Actions of Lenders

Posted By USFN, Thursday, January 18, 2018
Updated: Thursday, January 18, 2018

January 18, 2018

by Karen Zak
McCalla Raymer Leibert Pierce, LLC – USFN Member (Connecticut, Florida, Georgia, Illinois)

The decision in the case of U.S. Bank National Association, Trustee v. Blowers, AC39219 (Conn. App. Ct. 2017), expanded on the holding in U.S. Bank National Association, Trustee v. Sorrentino, 158 Conn. App. 84, and supports the premises that:

(1) the actions of the mortgagee during mediation and other modification negotiations do not relate to the making, validity, or enforcement of the note and mortgage; and
(2) the transaction test as presented in Practice Book § 10-10 does not apply as to special defenses.

Practice Book § 10-10 provides, in relevant part, that “[i]n any action for legal or equitable relief, any defendant may file counterclaims against any plaintiff provided that each such counterclaim … arises out of the transaction or one of the transactions which is the subject of the plaintiff’s complaint ….” It has long been the view of the Connecticut courts in foreclosure matters that to satisfy this rule the counterclaim must relate to the making, validity, or enforcement of the note and/or mortgage. Further case law has also held that special defenses include such things as payments, discharge, release or satisfaction, among others. These defenses fall in line with the standard for counterclaims and must have some sort of nexus to the making, validity, or enforcement of the note and/or mortgage as well. See CitiMortgage, Inc. v. Rey, 150 Conn. App. 595, 603, 92 A.3d 278, cert. denied, 314 Conn. 905, 99 A.3d 635 (2014).

Defendant’s Claims against Plaintiff
In Blowers, the defendant presented allegations regarding the conduct of the plaintiff during the court’s foreclosure mediation program. The court held that if mediation or loan modification negotiations result in a final modification, which is subsequently breached, the conduct during that time can later be cited as being related to the making, validity, or enforcement of the note and/or mortgage. This holding should further assist lenders in defending litigation that is based solely on the post-default actions of lenders, particularly during participation in the court’s mediation program.

In addition, the defendant’s attempt to broaden Practice Book § 10-10 and the applicable case law to include not only counterclaims but special defenses as well, failed. The Practice Book is clear that § 10-10 applies specifically to counterclaims and makes no mention of special defenses. “The purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action.” Fidelity Bank v. Krenisky, 72 Conn. App. 700, 705, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002).

Closing Words
In Blowers, the court opines that it is not willing to wipe out years of precedent by applying the standards as asserted by the defendant. This is also a favorable decision for lenders as it further defines the special defenses and supports the equitable nature of the Connecticut courts.

© Copyright 2018 USFN and McCalla Raymer Leibert Pierce, LLC. All rights reserved.
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Note for consideration of the USFN Award of Excellence: This article is not a "Feature."


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