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U.S. Bank National Association v. Eichten

Court of Appeals of Connecticut

September 18, 2018

U.S. BANK NATIONAL ASSOCIATION, TRUSTEE
v.
KARIN C. EICHTEN ET AL.

          Argued January 25, 2018

         Procedural History

         Action to foreclose a mortgage on certain of the named defendant's real property, and for other relief, brought to the Superior Court in the judicial district of New Haven, where the named defendant filed a counter-claim; thereafter, the court, Avallone, J., granted the plaintiff's motion for summary judgment as to liability on the complaint and the counterclaim; subsequently, the court rendered judgment of strict foreclosure, from which the named defendant appealed to this court; thereafter, the court, Avallone, J., issued an articulation of its decision. Reversed; new trial.

          Loraine Martinez, with whom were David F. Lavery and, on the brief, Sarah E. White, for the appellant (named defendant).

          Pierre-Yves Kolakowski, with whom, on the brief, was Zachary Grendi, for the appellee (plaintiff).

          Alvord, Keller and Bright, Js.

          OPINION

          KELLER, J.

         In this foreclosure action, the defendant Karin C. Eichten[1] appeals from the judgment of strict foreclosure rendered by the trial court in favor of the plaintiff, U.S. Bank National Association, as trustee, successor in interest to Bank of America, National Association as trustee as successor by merger to LaSalle Bank, National Association as trustee for Washington Mutual Mortgage Pass-Through Certificates WMALT 2007-HY2. The defendant claims that, in rendering summary judgment as to liability in the plaintiff's favor with respect to the plaintiff's foreclosure complaint, the court erred in concluding that a genuine issue of material fact did not exist with respect to her special defenses of equitable estoppel, breach of the covenant of good faith and fair dealing, promissory estoppel, unclean hands, and breach of contract, all of which pertain to the conduct of the plaintiff's loan servicer, Chase Home Finance, LLC (Chase), in denying the defendant's application for a loan modification under the federal Home Affordable Modification Program (HAMP).[2] Additionally, the defendant claims that the court improperly rendered summary judgment in the plaintiff's favor on her counterclaim sounding in breach of contract. We reverse the judgment of the trial court.

         ‘‘In February, 2009, faced with a nationwide foreclosure crisis, the Secretary of the Treasury and the Director of the Federal Housing Finance Agency exercised their authority under the Emergency Economic Stabilization Act, the American Recovery and Reinvestment Act, and the Troubled Asset Relief Program, 12 U.S.C. §§ 5201-5253, and created [HAMP].'' Belyea v. Litton Loan Servicing, LLP, United States District Court, Civil Action No. 10-10931-(DJC), 2011 WL 2884964, *2 (D. Mass. July 15, 2011). HAMP was a national home mortgage modification program aimed at helping at-risk homeowners who were in default or at imminent risk of default by reducing monthly payments to sustainable levels through the restructuring of their mortgages without discharging any of the underlying debt. Id. It was designed to create a uniform loan modification process governed by federal standards that could be used by any loan servicer that chose to participate. Id. ‘‘As an incentive for servicers to participate in HAMP, the federal government awards servicers three annual $1, 000 payments for each permanent mortgage loan that [was] successfully modified . . . .'' Id.

         On August 28, 2013, the plaintiff commenced this action against the defendant to foreclose on its mortgage on the defendant's property at 630 Cook Hill Road in Cheshire. The defendant filed a substitute answer and special defenses. The defendant alleged in her special defenses that (1) the plaintiff is equitably estopped from proceeding with the foreclosure action because the plaintiff instructed her to default on her note and mortgage obligations, resulting in her credit rating being negatively impacted; (2) the plaintiff breached the covenant of good faith and fair dealing by instructing her to default on her note and mortgage obligations without informing her that a default would result in adverse consequences such as acceleration of the debt; (3) the plaintiff is precluded by promissory estoppel from pursuing a foreclosure action because the plaintiff induced the defendant to default and promised her the offer of a loan modification if she made three trial period payments, [3] and the defendant relied on that promise to her detriment because she never received the promised offer; (4) the plaintiff is guilty of unclean hands because, although she qualified for a loan modification upon completion of her trial period payments, the plaintiff did not offer her a loan modification, but instead, placed her in a forbearance program without her consent; and (5) the plaintiff breached a contract between the parties by failing to offer the defendant a loan modification after she performed her part of the bargain by making the three agreed upon trial period payments.[4]

         In her substitute counterclaim, the defendant alleged that the plaintiff breached a contract between the parties when it failed to offer her a loan modification after the defendant performed her obligations under the contract by making her three trial period payments and continued to meet all program eligibility requirements during the trial period. The plaintiff filed an answer to the defendant's counterclaim on September 29, 2015, in which it posited that the alleged contract did not comply with the statute of frauds, and that the counterclaim is legally insufficient and barred by the doctrines of waiver and estoppel. On November 12, 2015, the plaintiff moved for summary judgment as to liability on its complaint, claiming that the defendant's special defenses are insufficient because they are not supported by any evidence and cannot defeat the plaintiff's prima facie showing that it is entitled to foreclose on the subject property. The plaintiff also argued that the defendant's counterclaim is barred by the statute of frauds and has no factual basis.

         In support of its motion for summary judgment, the plaintiff provided the court with the affidavit of Michael Piz, a document control officer with the plaintiff's subsequent loan servicer, Select Portfolio Servicing, Inc., [5]the contents of which are summarized as follows. On December 15, 2006, the defendant executed an adjustable rate note to pay Washington Mutual Bank, FA (Washington Mutual), the principal sum of $480, 000, payable with interest, including late charges, costs, and expenses. The indebtedness evidenced by the note was secured by a mortgage, which also is dated December 15, 2006, on the defendant's property at 630 Cook Hill Road in Cheshire. Washington Mutual endorsed the note in blank and on or about September 9, 2009, the Federal Deposit Insurance Corporation, as receiver of Washington Mutual, executed an assignment of the mortgage to the plaintiff. The assignment later was corrected due to a clerical error in the name of the plaintiff in the original assignment. Copies of the note, mortgage, assignment, and corrected assignment were annexed to the plaintiff's motion for summary judgment as exhibits.

         In 2009, the defendant defaulted pursuant to the terms of the note and mortgage, and the plaintiff notified her of the default. The notice of default advised that if the amount required to cure the default was not received within sixty days, immediate acceleration of all moneys due under the note and mortgage could be declared without further notice or demand. Piz further avers that the defendant failed to cure her default and, as a result, the plaintiff elected to accelerate the total amount of the indebtedness due and owing by commencing this action. No part of the outstanding indebtedness has been paid by the defendant. Subsequently, the defendant received multiple notices of her default, including notices on November 30, 2009, January 21, 2010, and May 10, 2010.

         Piz further alleges that the plaintiff is in physical possession of the original loan documents, including, without limitation, the original note endorsed in blank, and was in possession of the same at the time this action was commenced.[6]

         Piz also addresses in his affidavit what transpired regarding the defendant's application for a HAMP loan modification. On July 15, 2010, the plaintiff sent the defendant a letter offering her a trial period plan (TPP). A copy of this letter is annexed to the motion for summary judgment. It reads, in pertinent part: ‘‘You are approved to enter into a [TPP] under [HAMP]. This is the first step toward qualifying for more affordable mortgage payments. . . . To accept this offer, you must make new monthly ‘trial period payments' in place of your normal monthly mortgage payment. . . . After all trial period payments are timely made and you continue to meet all program eligibility requirements, your mortgage would then be permanently modified. You will be required to execute a permanent mortgage modification agreement that we will send you before your modification becomes effective. Until then, your existing loan and loan requirements remain in effect and unchanged during the trial period. If each trial payment is not received by us in the month in which [it] is due, this offer will end and your loan will not be modified under [HAMP].'' (Emphasis omitted.) The letter also includes answers to ‘‘frequently asked questions, '' one of which advised the borrower that ‘‘[y]our credit score may be affected by accepting a [TPP] or modification.'' In response to a question, ‘‘[w]hen will I know if my loan can be modified permanently and how will the modified loan balance be determined?'' the letter provided, ‘‘[o]nce we confirm you are still eligible for [HAMP] and you make all of your trial period payments on time, we will send you a modification agreement detailing the terms of the modified loan.''[7]

         Piz further avers in his affidavit that in or about May and June, 2011, the defendant sent the plaintiff evidence of her combined income with her then ‘‘spouse, ''[8] and that, on the basis of the defendant's profit and loss statement and pay stubs, the plaintiff calculated that the defendant and her ‘‘spouse'' had a combined monthly income of $13, 826.35 and a total housing expense of $3423.94. Thus, the defendant's ‘‘housing ratio, ''or housing expense as a percentage of household income, was 24.76 percent. Under the then applicable HAMP guidelines, the borrower's current monthly mortgage payment could not be less than 31 percent of the borrower's household monthly gross income to qualify for a loan modification.

         Consequently, the plaintiff concluded that ‘‘[b]orrower [h]ousing [r]atio exceeds the maximum for our lending program.'' In addition, the plaintiff submitted a handbook for the HAMP program, version 3.2, which indicated that one of the requirements under the program was that ‘‘verified income documentation must confirm that the borrower's monthly mortgage payment ratio prior to the modification is greater than 31 percent.'' On July 15, 2011, the plaintiff sent the defendant a letter explaining that the defendant had been denied a permanent modification because her ‘‘housing ratio[9]exceeds the maximum allowed for the modification program.'' The plaintiff sent another letter to the defendant on July 28, 2011, explaining in greater detail why the defendant's housing ratio made her ineligible for a loan modification under HAMP. Although the reference in the July 15, 2011 letter to a ‘‘housing ratio that exceeds the maximum allowed'' is confusing, the July 28, 2011 letter clearly explains why the defendant's housing expense was not a large enough percentage of her household income to qualify for a loan modification.

         The defendant filed her objection to the motion for summary judgment on January 11, 2016, essentially asserting that the evidence relevant to her special defenses and counterclaim, which involve the plaintiff's course of conduct in considering and ultimately denying her loan modification application, creates a genuine issue of material fact as to whether the plaintiff should be permitted to proceed to foreclosure.

         The defendant attached her own affidavit to her objection to the motion for summary judgment, summarized as follows. She faithfully submitted her mortgage payments in a timely fashion and without incident until late 2009. In the beginning of 2009, she was laid off from her job and forced to use her cash reserves and savings to make her payments. She became concerned about her continued ability to make her payments. In the fall of 2009, she contacted her loan servicer, Chase, to discuss mortgage assistance options and was told by a representative that Chase would not speak to her unless or until she stopped making her payments. As a result of her reliance on this information, she stopped making any payments commencing on October 1, 2009. The plaintiff did not follow through with its promise to help her with mortgage assistance, and she had to retain a law firm to help her. Starting in March, 2010, and continuing until July, 2010, she supplied the plaintiff with all of the financial information it requested of her.

         The defendant attached additional documentation to her objection to the plaintiff's summary judgment motion, focusing on her participation in the TPP and the plaintiff's denial of her application for a loan modification. After the defendant retained counsel, the plaintiff finally sent the defendant a letter dated July 15, 2010, congratulating her and stating that she was ‘‘approved to enter into a [TPP] under the [HAMP] (program), '' and explaining that ‘‘[t]his is the first step toward qualifying for more affordable mortgage payments. . . . After all trial period payments are timely made and you continue to meet all program eligibility requirements, your mortgage would then be permanently modified. You will be required to execute a permanent mortgage modification agreement that we will send you before your modification becomes effective. Until then, your existing loan and loan requirements remain in effect and unchanged during the trial period.'' Under the plan, the defendant was to make three consecutive monthly payments of $3373.86 on August 1, September 1, and October 1, 2010.

         In her affidavit, the defendant avers that she timely made all three payments under the TPP and some additional trial payments into 2011.[10] The plaintiff continued to send her letters on different letterhead and from different locations, asking her for the same financial information and thanking her for her interest in a HAMP modification. According to the defendant, to be safe, she kept resending the requested information to the plaintiff. She also avers that she received two notices that her request for unemployment forbearance had been received even though she had never made any such request. Finally, the defendant avers that the plaintiff, approximately nine months after the TPP had ended, sent her a letter dated July 15, 2011, which stated that ‘‘[w]e received your request for a permanent loan modification . . . . We are unable to offer you a modification through the federal [program] . . . . This decision was confirmed through a second level of review. . . . We are unable to offer you a modification because your housing ratio exceeds the maximum allowed for the modification program.'' The letter also recommended other possible options for the defendant to avoid foreclosure.

         As part of her objection to the plaintiff's motion for summary judgment, the defendant also submitted internal documents of the plaintiff and a number of other letters sent to her by the plaintiff. The plaintiff does not dispute the existence or accuracy of these documents or letters, which reveal the following. In or about June and July, 2010, the defendant submitted to the plaintiff a loan modification application with supporting documents. The plaintiff reviewed these submissions, which included bank statements from the defendant's business from February through May, 2010, and a contribution letter and pay stubs from the defendant's fiancé from May and June, 2010.[11] The analysis, called an ‘‘MOD Summary Report, '' revealed that the defendant's housing ratio was 37.892 percent, which was within HAMP's limits for approval of a loan modification. As a result, the plaintiff forwarded the defendant a letter offering her a TPP. In August, 2010, the plaintiff sent the defendant a letter requesting a packet of financial information regarding her loan modification request. In September, 2010, the plaintiff sent the defendant another letter stating that it was still waiting for the requested package of information to be returned. In and about February and March, 2011, according to an updated MOD Summary Report, the plaintiff again reviewed the defendant's application, determined that her housing ratio was 31.208 percent, which was still within HAMP limits, and, the defendant claims, approved her pending application for a loan modification. On March 10, 2011, the plaintiff entered the following messages into its Loss Mitigation Tracking Steps system: ‘‘Final Review Complete, '' ‘‘Order/Prepare Mod Docs, '' and ‘‘QA Final Approved, '' which corresponded to a charge of $2838.92 to the defendant's bank account. There is no dispute that the plaintiff never sent the defendant any permanent loan modification documents. The Loss Mitigation Tracking Steps later reflect that on July 11, 2011, the defendant was found ineligible for a loan modification.[12]

         In its reply to the defendant's opposition to the motion for summary judgment, the plaintiff claimed that despite the defendant's allegations of the plaintiff's internal generation of alleged final loan modification documents, the defendant admits she never received or accepted the final loan modification documents. The plaintiff also argued that the defendant's special defenses do not relate to the making, validity or enforcement of the note, and that her counterclaim does not have a sufficient connection to the making, validity or enforcement of the note and mortgage to satisfy the ‘‘transaction test'' in Practice Book § 10-10.[13]

         On May 23, 2016, the court held a hearing on the plaintiff's motion for summary judgment. After oral argument, the defendant filed a supplemental brief in opposition to the motion for summary judgment on May 23, 2016. Following the hearing, the court summarily granted the plaintiff's motion for summary judgment. On July 8, 2016, the defendant filed a motion for clarification of whether the court's order granting the summary judgment motion pertained to her counterclaim. The court issued an order on September 8, 2016, stating that its ruling included rendering summary judgment on the defendant's counterclaim. On September 12, 2016, the court rendered judgment of strict foreclosure with a law day of December 5, 2016. This appeal followed.

         Thereafter, on October 27, 2016, the defendant filed a motion for articulation of the court's granting of the plaintiff's motion for summary judgment. The defendant requested that the court articulate its ‘‘findings of fact and conclusions of law upon which the trial court relied in granting the motion for summary judgment as to the special defenses and counterclaim of the defendant . . . .'' (Emphasis omitted.) On February 15, 2017, the court issued an articulation. In its articulation, the court determined that ‘‘the plaintiff has established the absence of a genuine issue of material fact regarding the prima facie case for foreclosure, '' and that none of the defendant's special defenses raised a genuine issue of material fact that might defeat the plaintiff's cause of action. The court also concluded that summary judgment was appropriate on the defendant's breach of contract counterclaim. The court determined that the undisputed facts show that the parties did not enter into a new contract and that the defendant's counterclaim regarding the denial of her application for a loan modification did not present an issue that satisfied the transaction test in Practice Book § 10-10. Finally, the court ruled that even if the transaction test were satisfied, the counterclaim was barred by the statute of frauds, General Statutes § 52-550, because the amount due on the note was $480, 000, which exceeds the threshold amount of $50, 000 for loan agreements in the statute, and thus any contract for a modification needed to be in writing.

         We first set forth the applicable standard of review. ‘‘In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. . . . Although the party seeking summary judgment has the burden of showing the nonexistence of any material fact . . . a party opposing summary judgment must substantiate its adverse claim by showing that there is a genuine issue of material fact together with the evidence disclosing the existence of such an issue.'' (Internal quotation marks omitted.) Rosenfield v. I. David Marder & Associates, LLC, 110 Conn.App. 679, 684, 956 A.2d 581 (2008). A material fact is one that makes a difference in the outcome of a case. Catz v. Rubenstein, 201 Conn. 39, 48, 513 A.2d 98 (1986).

         ‘‘Summary judgment shall be granted if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

         . . . The trial court must view the evidence in the light most favorable to the nonmoving party. . . .

         ‘‘Appellate review of the trial court's decision to grant summary judgment is plenary. . . . [W]e must [therefore] decide whether [the trial court's] conclusions are legally and logically correct and find support in the facts that appear in the record.'' (Citations omitted; internal quotation marks omitted.) McFarline v. Mickens, 177 Conn.App. 83, 90, 173 A.3d 417 (2017), cert. denied, 327 Conn. 997, 176 A.3d 557 (2018).

         ‘‘In order to establish a prima facie case in a mortgage foreclosure action, the plaintiff must prove by a preponderance of the evidence that it is the owner of the note and mortgage, that the defendant mortgagor has defaulted on the note and that any conditions precedent to foreclosure, as established by the note and mortgage, have been satisfied. . . . Thus, a court may properly grant summary judgment as to liability in a foreclosure action if the complaint and supporting affidavits establish an undisputed prima facie case and the defendant fails to assert any legally sufficient special defense.'' (Internal quotation marks omitted.) Wells Fargo Bank, N.A. v. Strong, 149 Conn.App. 384, 392, 89 A.3d 392, cert. denied, 312 Conn. 923, 94 A.3d 1202 (2014).

         ‘‘[A] holder of a note is presumed to be the owner of the debt, and unless the presumption is rebutted, may foreclose the mortgage under [General Statutes § 49-17]. . . . It [is] for the defendant to set up and prove the facts which limit or change the plaintiff's rights.'' (Internal quotation marks omitted.) Equity One, Inc. v. Shivers, 310 Conn. 119, 135, 74 A.3d 1225 (2013).

         ‘‘[T]he party raising a special defense has the burden of proving the facts alleged therein.'' Wyatt Energy, Inc. v. Motiva Enterprises, LLC, 308 Conn. 719, 736, 66 A.3d 848 (2013). ‘‘If the plaintiff in a foreclosure action has shown that it is entitled to foreclose, then the burden is on the defendant to produce evidence supporting its special defenses in order to create a genuine issue of material fact . . . .'' WM Specialty Mortgage, LLC v. Brandt, Superior Court, judicial district of Ansonia-Milford, Docket No. CV-09-5001157-S, 2009 WL 567040, *4 (February 10, 2009); see Union Trust Co. v. Jackson, 42 Conn.App. 413, 417-20, 679 A.2d 421 (1996). Legally sufficient special defenses alone do not meet the defendant's burden. ‘‘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. . . . Further . . . [t]he applicable rule regarding the material facts to be considered on a motion for summary judgment is that the facts at issue are those alleged in the pleadings.'' (Citation omitted; internal quotation marks omitted.) Fidelity Bank v. Krenisky, 72 Conn.App. 700, 718, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002). ‘‘[B]ecause any valid special defense raised by the defendant ultimately would prevent the court from rendering judgment for the plaintiff, a motion for summary judgment should be denied when any [special] defense presents significant fact issues that should be tried.'' (Internal quotation marks omitted.) Ulster Savings Bank v. 28 Brynwood Lane, Ltd., 134 Conn.App. 699, 704, 41 A.3d 1077 (2012).

         I

         First, the defendant claims that the court improperly rendered summary judgment against her as to liability on the foreclosure complaint because genuine issues of material fact exist with respect to her special defenses of equitable estoppel, breach of the covenant of good faith and fair dealing, promissory estoppel, unclean hands, and breach of contract. We agree with the defendant that her special defense of unclean hands raises a genuine issue of material fact, and therefore, summary judgment in favor of the plaintiff should not have been rendered. We disagree, however, that the remainder of the defendant's special defenses precluded summary judgment in the plaintiff's favor.

         A

         The defendant claims in her fifth special defense that the plaintiff violated the doctrine of unclean hands and should be precluded from proceeding with the foreclosure action because the plaintiff did not offer her a permanent loan modification under the program despite the fact that, pursuant to regulations published by the United States Department of the Treasury, she was entitled to a permanent modification upon the completion of her three trial payments. She argues that instead, the plaintiff placed her into a mortgage forbearance program for which she did not apply. She contends that the plaintiff's internal records indicate that it approved her for a loan modification under the program in March, 2011, months before it mailed her the denial letter. She argues that a number of documents in evidence suggest that the plaintiff approved the defendant for a loan modification in March, 2011, when she had a housing ratio of 31.2 percent. She notes that the plaintiff only appended evidence to its motion for summary judgment that supported its version of the narrative while failing to make any argument or even reference to its own internal processes, evidence of which raises more questions than answers. We agree with the defendant.

         Because an action to foreclose a mortgage is an equitable proceeding, the doctrine of unclean hands may be applicable. ‘‘It is a fundamental principle of equity jurisprudence that for a complainant to show that he is entitled to the benefit of equity he must establish that he comes into court with clean hands. . . . The clean hands doctrine is applied not for the protection of the parties but for the protection of the court. . . . It is applied not by way of punishment but on considerations that make for the advancement of right and justice. . . . The doctrine of unclean hands expresses the principle that where a plaintiff seeks equitable relief, he must show that his conduct has been fair, equitable and honest as to the particular controversy in issue. . . . Unless the plaintiff's conduct is of such a character as to be condemned and pronounced wrongful by honest and fair-minded people, the doctrine of unclean hands does not apply.'' (Citation omitted; internal quotation marks omitted.) Thompson v. Orcutt, 257 Conn. 301, 310, 777 A.2d 670 (2001). ‘‘The party seeking to invoke the clean hands doctrine to bar equitable relief must show that his opponent engaged in wilful misconduct with regard to the matter in litigation. . . . The trial court enjoys broad discretion in determining whether the promotion of public policy and the preservation of the courts' integrity dictate that the clean hands doctrine be invoked.'' (Internal quotation marks omitted.) Monetary Funding Group, Inc. v. Pluchino, 87 Conn.App. 401, 407, 867 A.2d 841 (2005). ‘‘Wilful misconduct has been defined as intentional conduct designed to injure for which there is no just cause or excuse. . . . [Its] characteristic element is the design to injure either actually entertained or to be implied from the conduct and circumstances. . . . Not only the action producing the injury but the resulting injury also must be intentional.'' (Internal quotation marks omitted.) 19 Perry Street, LLC v. Unionville Water Co., 294 Conn. 611, 630-31 n.10, 987 A.3d 1009 (2010).

         This special defense questions the legitimacy of the plaintiff's processing of the defendant's application for a loan modification. It raises a question as to why the plaintiff failed to send the defendant a permanent loan modification agreement if she was approved for a loan modification in March, 2011. The court rejected the defendant's special defense of unclean hands and characterized it as another ‘‘inducement to default'' special defense, similar to the defendant's equitable estoppel special defense. We, however, conclude that the nature of the allegations in this special defense are distinguishable.

         The defendant submitted as evidence a copy of a supplemental directive issued on January 28, 2010, by the Treasury Department to provide guidance to loan servicers in making HAMP eligibility determinations for borrowers currently participating in a TTP. This directive notes a change from a prior directive issued in 2009, which gave loan servicers the option of placing a borrower into a TPP on the basis of verbal financial information obtained from the borrower, subject to later verification during the TPP. Effective on or after June 1, 2010, a loan servicer was instructed to evaluate a borrower for HAMP only after the servicer received an initial package that included a request for modification and an ‘‘affidavit (RMA) form, '' an Internal Revenue Service form 4506-T or 4506T-EZ to request transcripts of tax returns, and documentation of income that may not be more than ninety days old as of the date the initial package is received by the servicer. If the loan servicer received an incomplete initial package or needed additional documentation to verify the borrower's eligibility and income, the servicer had to send the borrower an ‘‘Incomplete Information Notice'' that lists the additional required verification documentation. Loan servicers were required to use a two step process for HAMP modifications. In referencing conversion from trial to permanent modification, the directive stated: ‘‘Following underwriting and a determination that the borrower qualifies for a HAMP trial modification, servicers will place qualified borrowers in a trial period plan by preparing and sending a [TPP] [n]otice to the borrower describing the terms of the trial modification and the payment due dates. Borrowers who make all trial period payments timely and who satisfy all other trial period requirements will be offered a permanent HAMP modification.''

         In this case, the plaintiff produced no evidence that it made a determination as to the defendant's eligibility for a HAMP modification at the end of her TPP, which was at the end of the month in which she made her third payment, October, 2010. Furthermore, there is evidence in the defendant's submissions that the defendant's application was approved by the plaintiff in March, 2011, and the plaintiff has produced no evidence to explain why it failed, at that time, to complete the process and forward to the defendant an offer of a permanent loan modification. In addition, there is no evidence that the plaintiff ever sent the defendant the required ‘‘Incomplete Information Notice'' that her documentation was incomplete, as required by the directive.

         The plaintiff's failure to establish that it adhered to the Treasury Department's directives, which appear to encourage that final determinations on whether to offer the borrower a loan modification be made before the end of the TPP, and the plaintiff's failure to provide an explanation as to its apparent internal approval of the loan modification in March, 2011, which was not communicated to the defendant, create a genuine issue of material fact as to whether the defendant can prevail on her special defense of unclean hands. When viewing the evidence in the light most favorable to the defendant, the unexplained length of time it took the plaintiff to deny the defendant an offer of a permanent modification, almost twenty months, commencing with the date it told her that the only way to explore modification of her loan was to stop paying in November, 2009, and ending with the date it denied her a modification, July 15, 2011, raises the question of whether the plaintiff treated the defendant in a fair, equitable and honest manner knowing that prolonged delay would place the defendant in an untenable financial situation, such that she could not possibly extricate herself to prevent foreclosure. We have no evidentiary basis to determine if wilful misconduct or simple negligence occurred in the plaintiff's handling of her application.

         We, therefore, conclude that the court erred in determining that there was no genuine issue of material fact as to whether the defendant can prevail on her special defense of unclean hands.

         B

         Having concluded that there is a genuine issue of material fact raised in the allegations in the defendant's unclean hands special defense, we next address the plaintiff's argument that this special defense is invalid because it does not relate to the making, validity, or enforcement of the note and mortgage.[14] The court did not expressly address or rely on this rationale, but we address it because it presents a question of law that is subject to plenary review. See, e.g., TD Bank, N.A. v. M.J. Holdings, LLC, 143 Conn.App. 340, 343, 70 A.3d 156 (2013) (issues concerning legal sufficiency of pleading subject to plenary review). In mortgage foreclosure cases, ‘‘courts require that a viable legal defense directly attack the making, validity or enforcement [of the note and mortgage].'' (Internal quotation marks omitted.) CitiMortgage, Inc. v. Rey, 150 Conn.App. 595, 603, 92 A.3d 278, cert. denied, 314 Conn. 905, 99 A.3d 635 (2014). ‘‘[S]pecial defenses which are not limited to the making, validity or enforcement of the note or mortgage fail to assert any connection with the subject matter of the foreclosure action and as such do not arise out of the same transaction as the foreclosure action.'' (Internal quotation marks omitted.) Id., 600.

         In U.S. Bank National Assn. v.Sorrentino, 158 Conn.App. 84, 97, 118 A.3d 607, cert. denied, 319 Conn. 951, 125 A.3d 530 (2015), this court concluded that counterclaims that addressed the plaintiff's alleged improper conduct concerning the defendants' qualification for a possible loan modification during a foreclosure mediation program that began after the execution of the note and mortgage did ‘‘not reasonably relate to the making, validity or enforcement of the note or mortgage, '' and, thus, could not be joined properly with the complaint. Recently, in U.S. Bank National Assn. v.Blowers, 177 Conn.App. 622, 625-26, 172 A.3d 837, cert. granted, 328 Conn. 904, 177 A.3d 1160 (2018), an appeal from a judgment of strict foreclosure, this court held that the trial court properly granted the plaintiff's motion to strike the defendants' special defenses and counterclaims. The counterclaims sounded in negligence; violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq.; and unjust enrichment. U.S. Bank National Assn. v.Blowers, supra, 626. The special defenses sounded in equitable estoppel, unjust enrichment and unclean hands. Id. The defendants in Blowers claimed that shortly after they had defaulted on their mortgage payments, a servicing agent for the plaintiff reached out to the defendants, offering a rate reduction. Id., 628. After the defendants successfully completed a three month trial modification period, however, the plaintiff withdrew its offer to modify the loan and ultimately commenced a foreclosure action. Id. The defendants essentially claimed that the plaintiff and its servicing agent failed to conduct themselves in a manner that was fair, equitable and honest during the court mediation and loan modification negotiation period. Id. Relying on U.S. Bank National Assn. v.Sorrentino, supra, 96, this court held that the alleged improper conduct occurring during mediation and modification negotiations lacked ‘‘a ...


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