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Citibank, N.A. v. Stein

Court of Appeals of Connecticut

November 27, 2018

CITIBANK, N.A., TRUSTEE
v.
LAURA A. STEIN ET AL.

          Argued September 7, 2018

         Procedural History

         Action to foreclose a mortgage on certain real property of the named defendant et al., and for other relief, brought to the Superior Court in the judicial district of Stamford and tried to the court, Heller, J.; judgment of strict foreclosure; thereafter, the court granted the plaintiffs motion to substitute Wilmington Trust, N.A., as the plaintiff, and the defendant Brian Stein appealed to this court. Affirmed.

          Brian Stein, self-represented appellant (defendant Brian Stein).

          Crystal L. Cooke, for the appellee (substitute plaintiff).

          Lavine, Sheldon and Bright, Js.

          OPINION

          LAVINE, J.

         The present appeal concerns the foreclosure of real property located at 983 New Norwalk Road in New Canaan (property). The self-represented defendant, Brian Stein, [1] appeals from the judgment of strict foreclosure rendered in favor of the substitute plaintiff, Wilmington Trust, N.A. (Wilmington Trust), as successor trustee to the plaintiff, Citibank, N.A. (Citibank), as trustee of the holders of Bear Stearns Alt-A Trust 2006-6, Mortgage Pass-Through Certificates, Series 2006-6. On appeal, the defendant claims that the trial court, Heller, J., (1) erred by denying his motion to dismiss, (2) abused its discretion by denying his motion to reargue and for reconsideration, (3) abused its discretion by refusing to consider, after the June 2015 trial, documents the defendant considered newly discovered evidence, (4) erred in finding that the mortgagor had defaulted on the note and default notice, and (5) erred under J.E. Robert Co. v. Signature Properties, LLC, 309 Conn. 307, 71 A.3d 492 (2013), in concluding that Citibank had proven its right as a nonholder in possession to bring the foreclosure action.[2] We affirm the judgment of the trial court.

         In its memoranda of decision issued on January 7, 2016, and on February 21, 2017, the trial court set forth the following relevant facts and procedural history. On July 7, 2006, Laura A. Stein, the defendant's then wife, [3]executed and delivered an interest only adjustable rate note to Countrywide Bank, N.A. (Countrywide Bank), in the principal amount of $1, 650, 000. Countrywide Bank endorsed the note to Countrywide Home Loans, Inc. (Home Loans). Home Loans, thereafter, endorsed the note in blank and provided it to Citibank. To secure the note, the defendant and Laura Stein executed in duplicate a mortgage[4] on the property and delivered it to Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for Countrywide Bank. MERS assigned the mortgage to Citibank on November 25, 2009.

         The court also found, pursuant to paragraph 3 (A) of the note, that Laura Stein was to make monthly payments of interest only on the first day of each month, commencing on September 1, 2006. She and the defendant last made a monthly payment on the note on July 16, 2008. On September 16, 2008, Home Loans, which was the servicer of the loan on behalf of the holder of the note at that time, sent a letter to Laura Stein advising her that the loan was in default and of the amount required to cure the default and reinstate the loan.[5]Laura Stein and the defendant failed to cure the default. Citibank elected to accelerate the balance due on the note, declare the note due in full, and foreclose the mortgage securing the note.[6] Citibank commenced the present foreclosure action by service of process on July 13, 2009.[7] The complaint alleges, in relevant part, that Citibank, as trustee, is the holder of the note and mortgage.

         The defendant and Laura Stein filed an answer and special defenses on March 19, 2010. Their special defenses alleged that Citibank lacked standing as a trustee under General Statutes § 52-106, but that if Citibank had standing, it was required to modify the mortgage pursuant to an agreement between the Connecticut Attorney General and Countrywide Bank. They also alleged that Citibank did not provide the original note, and, therefore, could not commence the action, and that the complaint failed to establish that Citibank was the current holder and owner of the note and mortgage. Citibank pleaded a general denial in response to the special defenses.

         On September 27, 2010, Citibank filed a motion for summary judgment as to liability only. The defendant and Laura Stein objected to the motion for summary judgment on the ground that there were genuine issues of material fact as to whether Citibank was the holder of the note and mortgage. The court, Mintz, J., sustained the defendant's objection to the motion by granting additional time for discovery on the issue of Citibank's standing and ordering that the motion for summary judgment be set down for argument on November 17, 2014. Judge Heller found that Citibank's motion for summary judgment was never argued.

         On September 10, 2014, Laura Stein filed a motion to dismiss in which she contended, among other things, that Citibank lacked standing to pursue the present action under General Statutes §§ 42a-3-301 and 52-106. She withdrew her motion to dismiss, however, on the first day of trial, stipulated to certain facts, and consented to the entry of summary judgment against her as to liability only.[8]

         On June 19, 2015, five days before trial, the defendant filed a motion to dismiss on the ground that Citibank lacked standing to pursue the action against him. After hearing from counsel for the parties, Judge Heller determined that she would hear and decide the defendant's motion to dismiss at the same time and, in connection with, the merits of Citibank's foreclosure case. The parties, all represented by counsel, appeared before the court for trial on June 24, 25 and 26, 2015.[9] On January 7, 2016, after the parties had submitted posttrial briefs, the court issued a memorandum of decision in which it denied the defendant's motion to dismiss and rendered a judgment of strict foreclosure in favor of Citibank.

         On January 19, 2016, the defendant filed a motion for a new trial and on January 27, 2016, filed a motion for reargument and reconsideration of the court's ruling on his motion to dismiss. Citibank objected to both motions. The court granted the motion for reargument, and counsel for Citibank and the defendant appeared for argument before the court on February 16, 2016.[10]The court reserved reconsideration of its ruling on the motion to dismiss and determined to open the record and take additional testimony from Citibank's witness, Johnny Nguyen of Nationstar Mortgage LLC (Nationstar), the servicer of the subject mortgage.[11]

         On August 29, 2016, Citibank filed a motion to substitute Wilmington Trust as the plaintiff because the mortgage had been assigned to Wilmington Trust after the present action was commenced. OnAugust30, 2016, the court heard additional testimony from Nguyen. Before commencing the hearing, the court granted Citibank's motion to substitute Wilmington Trust as the plaintiff. On September 19, 2016, the defendant filed a motion for reargument and reconsideration of Citibank's motion to substitute Wilmington Trust as the plaintiff. The court heard argument from counsel on the defendant's motion for reargument and reconsideration on November 28, 2016.[12] On February 1, 2017, counsel for the defendant filed a memorandum in further support of his motion to reargue the motion to substitute, and the defendant submitted a statement and memorandum of his own. Wilmington Trust filed an objection to the motion to reargue on February 15, 2017.

         On February 21, 2017, the court issued a memorandum of decision on the defendant's three pending motions before it, to wit, his motion for a new trial, filed on January 19, 2016; his motion for reargument on his motion to dismiss, filed on January 27, 2016; and his motion for reargument on Citibank's motion to substitute Wilmington Trust as the plaintiff, filed on September 19, 2016. The court denied all three of the defendant's reargument motions and opened the judgment of strict foreclosure previously entered for the purpose of setting the law days. The defendant timely appealed to this court.

         I

         The defendant first claims that the court erred in finding that Citibank had standing to bring this foreclosure action against him and, thus, that it had subject matter jurisdiction over the action. Specifically, he claims that the court (1) erred by denying his motion to dismiss because Citibank lacked standing to commence the action and (2) abused its discretion by failing to grant his motion to reargue and for reconsideration of his motion to dismiss.[13] We reject the defendant's claims.

         The defendant's claims require us to examine the court's memoranda of decision in detail. The court's decisions set forth the following facts and legal analyses.

         Prior to the start of trial in June, 2015, the defendant filed a motion to dismiss claiming that he had a good faith belief that Citibank lacked standing to pursue the action. In its January 7, 2016 memorandum of decision, the trial court found that the defendant had argued that Citibank lacked standing because (i) it was not the owner of the note and the debt at issue and/or it was not the holder of the note and (ii) it was not authorized by the owner of the note and the debt to prosecute the action on behalf of the owner. The defendant also argued that Citibank lacked standing under General Statutes § 52-106. Citibank contended that it had standing as both the holder of the note and as trustee.

         The court credited the uncontroverted testimony of Nguyen that Citibank was the holder of the note that had been endorsed in blank. The court cited the statutory and common-law definitions of "holder." General Statutes § 42a-3-104 (a) provides, in relevant part, that a holder is "[t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession." "The holder is the person or entity in possession of the instrument if the instrument is payable to bearer. . . . When an instrument is endorsed in blank, it becomes payable to bearer and may be negotiated by transfer of possession alone . . . ." (Citations omitted; footnote omitted; internal quotation marks omitted.) Equity One, Inc. v. Shivers, 310 Conn. 119, 126, 74 A.3d 1225 (2013). The court concluded, therefore, that because Citibank was the holder of the note, it had proved that it was the owner because "the note holder is presumed to be the owner of the debt, and unless the presumption is rebutted, may foreclose the mortgage under [General Statutes] § 49-17." (Internal quotation marks omitted.) American Home Mortgage Servicing, Inc. v. Reilly, 157 Conn.App. 127, 133-34, 117 A.3d 500, cert, denied, 317 Conn. 915, 117 A.3d 854 (2015). Citing Anderson v. Litchfield, 4 Conn.App. 24, 28, 492 A.2d 210 (1985),[14] for the law regarding the burden necessary to rebut the presumption of ownership, the court found that the defendant had failed to offer sufficient and persuasive contradictory evidence to disprove the presumption that Citibank was the holder of the note.

         The defendant further argued that Nguyen's testimony alone was insufficient to prove that Citibank was authorized to commence and pursue the action without the relevant business records, particularly the pooling and service agreement, being offered into evidence. The court found that the defendant offered no evidence to contradict Nguyen's testimony, which was predicated on his personal knowledge of Nationstar's business records. It disagreed that Citibank was required to produce its business records to support its claim. "Appellate courts in this state have held that [the evidentiary] burden is satisfied when the mortgagee includes in its submission to the court a sworn affidavit averring that the mortgagee is the holder of the promissory note in question at the time it commenced the action." GMAC Mortgage, LLC v. Ford, 144 Conn.App. 165, 176, 73 A.3d 742 (2013).

         The court also concluded that Citibank had standing to prosecute the foreclosure action as holder of the note and as a trustee.[15] Section 52-106 provides, "[a]n executor, administrator, or trustee of an express trust may sue or be sued without joining the persons represented by him and beneficially interested in the action." "[T]he trustee's standing to sue arises out of its legal title to the trust res." (Internal quotation marks omitted.) Chase Home Finance, LLC v. Fequiere, 119 Conn.App. 570, 580, 989 A.2d 606, cert, denied, 295 Conn. 922, 991 A.2d 564 (2010). Moreover, "[o]ur appellate courts have not required a foreclosure plaintiff to produce evidence of ownership deriving from a pooling and servicing agreement in making its prima facie case . . . ." Wells Fargo Bank, N.A. v. Strong, 149 Conn.App. 384, 399, 89 A.3d 392, cert, denied, 312 Conn. 923, 94 A.3d 1202 (2014).

         "The relevance of securitization documents on a lender's standing to foreclose a mortgage is questionable. Simply put, a borrower has a contract-the note and mortgage-with the owner or holder of the loan documents. The borrower, however, is not a party to the pooling and servicing agreement, commonly referred to as a 'trust' document. . . . It is a basic tenet of contract law that only parties to an agreement may challenge its enforcement. . . . [C]lose scrutiny of trust documents and challenges to their veracity appear to offer little benefit to the court in determining the owner or holder of a note in a particular case. If admissible evidence of holder status has been presented, a borrower must then challenge those facts by competent evidence addressed to the delivery of the loan documents. In most instances, a borrower's challenge to the content of trust documents or other borrower claims appear to have little relevance to the issue of standing." (Internal quotation marks omitted.) Id., 393-94.

         The court continued quoting that "[t]he law of trusts limits the ability of a borrower to challenge whether conditions in the pooling and servicing agreement were satisfied. ... [A] stranger to a trust, when sued by the Trustee, cannot set up as a defense a violation of the rights of the Trust by the Trustee. . . . Generally, the parties to a pooling and servicing agreement are the certificate holders, who own interests in the mortgages, a trustee, a depositor of the assets, and a servicer. Borrowers, however, have no contractual privity with the parties to a pooling and servicing agreement." (Citations omitted; internal quotation marks omitted.) Id., 394. The court found that Citibank had standing to prosecute the present action and that the action was not barred by any of the defendant's remaining special defenses. The court, therefore, denied the defendant's motion to dismiss. After hearing appraisal evidence and the amount of debt, the court found that the debt far exceeded the fair market value of the property. It issued a judgment of strict foreclosure in favor of Citibank and set law days.

         As previously stated, the defendant filed a motion for reargument and reconsideration of his motion to dismiss. The defendant contended that following the hearing on the motion to dismiss and the foreclosure trial, he discovered new evidence to the effect that Citibank was not the owner of the note and debt at issue and had not been for some time. According to the defendant, Wilmington Trust was the owner. The defendant first raised the argument in his posttrial memorandum filed on August 24, 2015, in which he asked the court to take judicial notice of certain public documents that purportedly demonstrated that Wilmington Trust had succeeded Citibank as trustee for the Holders of Bear Stearns Alt-A Trust 2006-6. The court declined to do so, noting that even if it took judicial notice, as requested, the information would not have afforded a basis for dismissing the action. See footnote 15 of this opinion. The defendant also claimed that Wells Fargo Bank was the servicer of the mortgage, not Nationstar, thus calling into question the veracity of Nguyen's testimony.

         The court granted reargument on February 16, 2016, but reserved decision on reconsideration of the motion to dismiss. On May 26, 2016, the court decided to open the record to take further testimony from Nguyen to determine whether Citibank, Wilmington Trust, or some other entity was the trustee of the trust on June 25, 2015, when Nguyen testified at the foreclosure trial; whether Nationstar, Wells Fargo, or some other entity was the mortgage servicer for the defendant's mortgage when Nguyen testified; and if an entity other than Nationstar was the mortgage servicer, whether Nguyen was familiar with the books and records of such mortgage servicer at the time of trial and was authorized to testify on its behalf.

         The court heard further testimony from Nguyen on August 30, 2016. The court issued its decision in a memorandum of decision on February 21, 2017. The court credited Nguyen's testimony and made the following additional findings of fact. Nationstar has been the primary servicer of the mortgage since the beginning of 2014 and was the servicer on June 25, 2015, when Nguyen testified at the foreclosure trial and it continued to be the mortgage servicer. Citibank was the trustee and the holder of the note at the time the foreclosure complaint was served in 2009 and had authority to commence the action. Wilmington Trust became the trustee in 2012, was the trustee on June 25, 2015, and remained the trustee. It also was the holder of the note in June, 2015. Two assignments of the mortgage were admitted into evidence. Citibank assigned it to Nationstar on May 4, 2016, and Nationstar assigned it to Wilmington Trust on March 30, 2016.

         With respect to the defendant's motion for reconsideration of his motion to dismiss, the court stated that the ground of the defendant's motion for reconsideration was newly discovered evidence. The court cited the controlling law. "A party who wishes to reargue a decision or order rendered by the court shall, within twenty days from the issuance of notice of the rendition of the decision or order, file a motion to reargue setting forth the decision or order which is the subject of the motion, the name of the judge who rendered it, and the specific grounds for reargument upon which the party relies." Practice Book § 11-12 (a). "[T]he purpose of reargument is ... to demonstrate to the court that there is some decision or some principle of law which would have a controlling effect, and which has been overlooked, or that there has been a misapprehension of facts. . . . [Reargument] also may be used to address alleged inconsistencies in the trial court's memorandum of decision as well as claims of law that the [movant] claimed were not addressed by the court." (Citation omitted; internal quotation marks omitted.) Opoku v. Grant, 63 Conn.App. 686, 692-93, 778 A.2d 981 (2001).

         "Newly discovered evidence may warrant reconsideration of a court's decision. However, [f] or evidence to be newly discovered, it must be of such a nature that [it] could not have been earlier discovered by the exercise of due diligence." (Internal quotation marks omitted.) Durkin Village Plainville, LLC v.Cunningham,97 Conn.App. 640, 656, 905 A.2d 1256 (2006). The court found that the evidence the defendant offered fell short of this standard. In fact, the court stated, the defendant never sought to open the record to introduce evidence that Wilmington Trust was the ...


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