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JPMorgan Chase Bank, National Association v. Virgulak

Court of Appeals of Connecticut

September 17, 2019

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION ET AL.
v.
ROBERT J. VIRGULAK ET AL.

          Argued January 14, 2019

         Procedural History

         Action to foreclose a mortgage on certain real property of the defendant Theresa Virgulak, and for other relief, brought to the Superior Court in the judicial district of Stamford-Norwalk; thereafter, the plaintiff withdrew the action as to the named defendant; subsequently, the court, Heller, J., granted the motion to substitute Manufacturers and Traders Trust Company as the plaintiff; thereafter, the case was tried to the court, Hon. David R. Tobin, judge trial referee; judgment in part in favor of the defendant Theresa Virgulak; subsequently, court, Hon. David R. Tobin, judge trial referee, denied the motion for regargument filed by the substitute plaintiff, and the substitute plaintiff appealed to this court. Affirmed.

          Brian D. Rich, with whom, on the brief, were Laura Pascale Zaino and Peter R. Meggers, for the appellant (substitute plaintiff).

          Alexander H. Schwartz, for the appellee (defendant Theresa Virgulak).

          Sheldon, Keller and Bear, Js. [*]

          OPINION

          KELLER, J.

         In this foreclosure action, the plaintiff, Manufacturers and Traders Trust Company, also known as M&T Bank (M&T Bank), [1] appeals from the judgment of the trial court in favor of the defendant Theresa Virgulak.[2] The plaintiff claims that the trial court improperly (1) failed to exercise its discretion in considering the plaintiff's foreclosure claim as a stand-alone claim independent from its other causes of action and failed to grant the plaintiff the equitable remedy of foreclosure, (2) declined to reform the mortgage deed, (3) denied its motion to amend its responses to the defendant's requests for admission, (4) concluded that its admissions limited its recovery under its unjust enrichment count, and (5) denied its motion for reargument. We disagree and affirm the judgment of the trial court.

         The following procedural history and facts, which either are undisputed in the record or were found by the trial court in its memorandum of decision, are relevant to our resolution of this appeal. On or about December 11, 2006, Robert J. Virgulak (Robert), the defendant's husband, executed and delivered to JPMorgan Chase Bank, National Association (JPMorgan Chase) a note for a loan in the principal amount of $533, 000 (note). The defendant was not a signatory on the note. On the same date, the defendant signed a document titled ‘‘Open-End Mortgage Deed'' (mortgage) for residential property she owns at 14 Bayne Court in Norwalk (property). The mortgage recited that it was given to secure a note dated December 11, 2006, and recited that the note was signed by the defendant as ‘‘Borrower'' in the amount of $533, 000. The term ‘‘Borrower'' is defined in the mortgage deed as ‘‘THERESA VIRGULAK, MARRIED.'' The mortgage did not reference Robert. The defendant did not sign any guarantee.

         On or about February 1, 2010, after JPMorgan Chase failed to receive payments in accordance with the terms of the note, the note went into default and JPMorgan Chase elected to accelerate the balance due. On January 3, 2011, notices of default were sent to both the defendant and Robert and, in February, 2013, JPMorgan Chase commenced this foreclosure action against the couple. The action sought to foreclose the mortgage that JPMorgan Chase claimed to have on the property. In September, 2014, JPMorgan Chase withdrew the foreclosure action against Robert, as he had filed for bankruptcy and been granted an unconditional discharge of the debt.

         Thereafter, JPMorgan Chase filed a motion to substitute party plaintiff, stating that it had assigned the subject mortgage deed and note to Hudson City Savings Bank (Hudson). This motion was granted by the court on August 18, 2015.

         On September 25, 2015, the defendant filed a motion for summary judgment arguing that Hudson was precluded from foreclosing the mortgage. In particular, she argued that she had not defaulted under the terms of the note because she was never a party to a promissory note with the plaintiff or any of its predecessors-in-interest. The motion was denied by the court on January 14, 2016, on the basis of the court's determination that an issue of material fact remained with respect to whether the mortgage deed provided reasonable notice to third parties that the defendant was securing Robert's obligation.

         On March 18, 2016, the defendant served Hudson with requests for admission. On May 6, 2016, Hudson filed notice with the court that it had responded to the defendant's requests.

         On August 9, 2016, the plaintiff, M&T Bank, into which Hudson had merged, filed a motion to substitute itself as the party plaintiff and requested leave to amend the complaint in order to add two additional causes of action. The court granted the motion on August 15, 2016. In the first count of the plaintiff's three count amended complaint, the plaintiff sought a judgment of foreclosure against the defendants. In the second count, it sought equitable reformation of the note in order to include the defendant as a borrower on the note.[3] In the third count, the plaintiff pleaded that the defendant had been unjustly enriched because (1) the proceeds of the note were used to pay off loans which she was obligated to pay and (2) she had free use of the subject property without satisfying the terms of the mortgage, which she had executed.

         On December1, 2016, the defendant filed an amended answer denying the essential allegations of the amended complaint regarding her liability for the debt and the claim of unjust enrichment. She also set forth eight special defenses.

         On December 5, 2016, the defendant filed a motion in limine seeking to have the trial court order that all of the plaintiff's earlier admissions in response to her March 18, 2016 requests for admissions ‘‘be conclusively established at trial.'' The trial court indicated subsequently that it would rule on the motion in limine during the course of trial ‘‘when a context develop[ed] that require[d] [its] ruling.''

         The parties tried the case before the court on December 6, 2016. The plaintiff presented three witnesses, including Wilkin Rodriguez, a mortgage banking research officer at JPMorgan Chase, the defendant, and Robert. After the plaintiff rested, the defendant did not present additional evidence; she relied instead on the testimony and exhibits introduced during cross-examination of the witnesses called by the plaintiff. The next day, the court met with the parties to discuss the issues it believed to be germane to its decision and set a briefing schedule. As noted in the court's memorandum of decision, the court requested that the parties address the following issues in their briefs: (1) ‘‘Is the plaintiff entitled to foreclose the mortgage against [the defendant's] property without first reforming the mortgage note to make her a maker or guarantor of the note and/ or reforming the mortgage deed to alter the description of the debt secured by the mortgage?''; (2) ‘‘If the answer to #1 is negative, is there sufficient evidence to support equitable reformation of the mortgage note and/or deed?''; (3) ‘‘If the answer[s] to both #1 and #2 are negative, is the plaintiff entitled to recover, by way of a claim of unjust enrichment, any of the following: [use and occupancy of the property, property taxes paid by the plaintiff for the property, or property insurance premiums paid by the plaintiff for coverage of the property?]''; (4) ‘‘If the plaintiff is otherwise entitled to recover under #1, #2, or #3, is such recovery precluded by [the] plaintiff's responses to the requests for admissions . . . which included the admission that the defendant did not owe any money to the plaintiff?''; (5) ‘‘If [the] plaintiff is otherwise entitled to recover under #1, #2, or #3, is there adequate evidence to support any of the defendant's special defenses?''

         On December 21, 2016, approximately two weeks after the conclusion of the trial, the plaintiff filed a motion seeking to withdraw and amend its responses to the requests for admissions that it had previously provided to the defendant. On December 27, 2016, the court entered orders stating that it would not entertain arguments on the plaintiff's motion until all of the post-trial briefs it had ordered had been filed by the parties.

         On April 12, 2017, the court issued its memorandum of decision. The court found in favor of the defendant on the foreclosure and reformation counts of the complaint. In particular, the court stated, among other things, that ‘‘[t]he court finds that the plaintiff has not sustained its burden of proving, by clear and convincing evidence, that it [was] entitled to the equitable remedy of reformation of the mortgage deed . . . . Accordingly, the court finds the issues on the second count for [the defendant] and against the plaintiff. Since the plaintiff failed to present any authority to the court which would allow the plaintiff to prevail on the first count [foreclosure claim] in the absence of reformation of the mortgage deed, the court [also] finds the issues on the first count for [the defendant] and against the plaintiff.''

         The court then proceeded to address the plaintiff's unjust enrichment claim, noting that the defendant had been benefitted in several respects as a result of the loan that Robert had obtained, but determining that, prior to ruling on the unjust enrichment claim, it needed to determine whether the plaintiff was entitled to withdraw and amend its responses to the defendant's requests for admissions. The court ultimately found that, pursuant to Practice Book § 13-24 (a), a motion to withdraw and amend responses to requests for admissions could not be filed following trial, as was done here, because § 13-24 (a) required the court to find (1) that ‘‘the presentation of the merits of the action will be sub-served thereby'' and (2) the party who obtained the admission will not be prejudiced ‘‘in maintaining his or her action or defense on the merits.'' The court concluded that it was unable to find ‘‘that ‘the presentation of the merits of the action will be sub-served' by the granting of the plaintiff's motion'' after trial. It further found that it would be ‘‘hard to imagine how the defendant would not be prejudiced at the time the case was tried because defense counsel had every reason to believe that the plaintiff's admissions were both operative and binding.'' The court, therefore, denied the plaintiff's motion to withdraw and amend, which it had filed on December 21, 2016.[4] The court ultimately determined that the plaintiff's responses to the requests for admissions precluded any recovery on its unjust enrichment claim, except for the property tax payments that the defendant conceded that she owed to the plaintiff.

         On May 1, 2017, the plaintiff filed a motion for reargument. The court summarily denied the motion for reargument on May 4, 2017. This appeal followed.[5] Additional facts will be set forth as necessary.

         I

         The plaintiff first argues that the court committed reversible error by refusing to exercise its discretion in considering the plaintiff's foreclosure claim as a standalone claim independent from its other causes of action. The plaintiff also argues that ‘‘[a]side from the trial court's failure to properly consider the plaintiff's argument that foreclosure is warranted, even without reformation, extant legal authority . . . dictates that result.'' We disagree.

         A

         Our Supreme Court has made clear that when a ‘‘trial court is properly called upon to exercise its discretion, its failure to do so is error.'' State v. Martin, 201 Conn. 74, 88, 513 A.2d 116 (1986); see also Meadowbrook Center, Inc. v. Buchman, 328 Conn. 586, 609, 181 A.3d 550, 565 (2018) (remand for hearing was appropriate because trial court failed to exercise its discretion); Costello v. Goldstein & Peck, P.C., 321 Conn. 244, 256, 137 A.3d 748 (2016) (‘‘the court's failure to recognize its authority to act constituted an abuse of discretion''). In a foreclosure proceeding, ‘‘the determination of what equity requires is a matter for the discretion of the trial court. . . . In determining whether the trial court has abused its discretion, we must make every reasonable presumption in favor of the correctness of its action. . . . Our review of a trial court's exercise of the legal discretion vested in it is limited to the questions of whether the trial court correctly applied the law and could reasonably have reached the conclusion that it did.'' (Internal quotation marks omitted.) AJJ Enterprises, LLP v. Jean-Charles, 160 Conn.App. 375, 394- 95, 125 A.3d 618 (2015). We thus address the plaintiff's claim that the court committed reversible error by refusing to exercise its discretion in considering its foreclosure claim as a stand-alone claim.

         In support of its argument, the plaintiff directs us to the trial court's memorandum of decision, which states in relevant part: ‘‘In its January 27, 2017 posttrial brief . . . the plaintiff does not argue that the law would permit the plaintiff to foreclose a mortgage on 14 Bayne Court without first obtaining equitable reformation of the mortgage note and/or deed. Accordingly, the court will first address the plaintiff's second count which requests reformation.'' The plaintiff argues that the court's statement is ‘‘simply wrong, '' and that the plaintiff properly requested that the court consider the foreclosure count as an independent claim irrespective of the other two causes of action it advanced.

         The plaintiff further contends that it gave the court multiple opportunities to correct this purported error by way of motions for reargument, articulation, and rectification, but it failed to do so. Specifically, it contends that the court improperly ignored its claim for foreclosure. Our review of the record, however, suggests otherwise. After the court issued its memorandum of decision, the plaintiff filed numerous motions with the court to which the court responded. In particular, the plaintiff filed with the court a motion for articulation and a motion for rectification raising this same argument that it presses on appeal. With respect to the motion for articulation, the court addressed the plaintiff's arguments in a four page response. In relevant part, the court stated: ‘‘In its first posttrial brief dated January 27, 2017 . . . the plaintiff addressed the merits of the first two counts of its August 9, 2016, amended complaint . . . under one heading [titled] ‘Plaintiff has Met its Burden to Recover under its Claim of Foreclosure and Reformation.' In that section of its brief, the plaintiff provided no authority whatsoever supporting the plaintiff's right to foreclose its mortgage without reforming either the mortgage deed (to state that it was Robert's debt under a promissory note that was secured by the mortgage) or the mortgage note (to state that [the defendant] was a maker or guarantor of the note.) The court recognizes that the plaintiff recited some general propositions of law in that brief and in its post-trial reply brief . . . to the effect that mortgage foreclosures are equitable proceedings. . . .

         ‘‘On page 5 of its May 1, 2017 motion for reargument/ reconsideration . . . the plaintiff cited no less than nine cases in support of its claim that the court had the power, in equity, ‘to fashion any order aimed at achieving the interest of justice.' None of those cases addressed the question of whether a mortgage deed which purportedly secured a nonexistent debt could be foreclosed without reforming at least one of the mortgage documents. . . .

         ‘‘If, in its memorandum of decision, the court failed to address the first count independently of the remedy of reformation claimed in the second count, it was because the plaintiff did not (and probably could not) present the court with any authority supporting the first count as an independent cause of action.''

         The court further addressed the claim in the court's five page response to the plaintiff's motion for rectification. In a section titled ‘‘Plaintiff's ‘Stand-Alone' Foreclosure Claim, '' the court stated: ‘‘Following extensive oral argument and review of the plaintiff's brief, the court concluded that the plaintiff had offered no authority for the proposition that the plaintiff was entitled to foreclose its mortgage, which, on its face, purported to secure an obligation that did not exist, without first reforming either the mortgage note or the mortgage deed. The plaintiff correctly points out that foreclosure actions invoke the court's equitable powers. In its memorandum of decision at pages 11 through 18, the court addressed the plaintiff's equitable claim that the mortgage deed should be reformed to reflect that the obligation being secured by the mortgage was not [the defendant's] debt, but rather her husband Robert's debt. The court concluded that the plaintiff did not meet the standards required by case law for the reformation of the mortgage deed.

         ‘‘The plaintiff offered no legal authority to support the notion that a court, in the exercise of its equitable powers, can change the obligations of a party to a written instrument without meeting the standards for reformation of the instrument. If the court ignored the plaintiff's ‘stand-alone' claim it was because it was inadequately briefed and, in the absence of reformation, without merit.'' (Emphasis added.).

         With this as our backdrop, we reject the plaintiff's claim that the court ‘‘ignore[d] the plaintiff's claim for foreclosure'' and conclude that the court did in fact exercise its discretion. With respect to that claim, the court explained that it believed that the plaintiff's claim was inadequately briefed and was unsupported by any citation of authority to support its contention. It made clear that the plaintiff's claim that the mortgage could be foreclosed without first reforming the mortgage was ‘‘without merit.'' As such, we reject the plaintiff's claim and conclude that the court did not ignore the plaintiff's claim for foreclosure, as it clearly exercised its discretion in declining to grant foreclosure of the defendant's property.

         B

         The plaintiff also argues that ‘‘[a]side from the trial court's failure to properly consider the plaintiff's argument that foreclosure is warranted, even without reformation, extant legal authority . . . dictates that result.'' The plaintiff contends that the record in the present case required the court to grant foreclosure because the evidence demonstrates that the mortgage signed by the defendant was intended to secure the note that was executed solely by Robert.

         The defendant contends that the plaintiff did not provide either the trial court or this court with any authority to support a claim that a court can foreclose a mortgage that secures a nonexistent debt. Furthermore, the defendant argues that there is no authority in Connecticut to support the proposition that a court can, sua sponte, or at the request of one party to a commercial transaction, rewrite a promissory note or mortgage to materially change the terms of the transaction they describe without first reforming the document. The defendant contends that the proper vehicle by which the plaintiff could obtain relief is by seeking reformation of the mortgage, which the plaintiff did in count two of its complaint. The defendant ultimately argues that the trial court correctly exercised its discretion in refusing to foreclose a mortgage that secured a nonexistent debt. We agree with the defendant.

         It is well established that a mortgagee in a foreclosure action is entitled ‘‘to pursue its remedy at law on the notes, or to pursue its remedy in equity upon the mortgage, or to pursue both. A note and a mortgage given to secure it are separate instruments, executed for different purposes and, in this State, action for foreclosure of the mortgage and upon the note are regarded and treated, in practice, as separate and distinct causes of action, although both may be pursued in a foreclosure suit.'' (Internal quotation marks omitted.) New Milford Savings Bank v. Jajer, 244 Conn. 251, 266-67, 708 A.2d 1378 (1998). ‘‘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.'' (Internal quotation marks omitted.) Bank of America, N.A. v. Gonzalez, 187 Conn.App. 511, 514, 202 A.3d 1092 (2019).

         ‘‘Mortgage foreclosure appeals are reviewed under an abuse of discretion standard.'' (Internal quotation marks omitted.) Cliffside Condominium Assn., Inc. v. Cushman, 100 Conn.App. 803, 804, 921 A.2d 609 (2007). ‘‘A foreclosure action is an equitable proceeding. . . . The determination of what equity requires is a matter for the discretion of the trial court. . . . In determining whether the trial court has abused its discretion, we must make every reasonable presumption in favor of the correctness of its action. . . . Our review of a trial court's exercise of the legal discretion vested in it is limited to the questions of whether the trial court correctly applied the law and could reasonably have reached the conclusion that it did.'' (Internal quotation marks omitted.) Franklin Credit Management Corp. v. Nicholas, 73 Conn.App. 830, 838, 812 A.2d 51 (2002), cert. denied, 262 Conn. 937, 815 A.2d 136 (2003).

         In the present case, it is undisputed that the defendant did not sign the promissory note executed by Robert on which he defaulted, prompting this foreclosure proceeding. It is also undisputed that the subject mortgage signed by the defendant does not purport to secure a note executed by her husband, but rather identifies her as the borrower on the note. The subject mortgage does not expressly refer to any obligation for which the defendant is legally responsible. In reviewing the court's memorandum of decision and subsequent rulings on the plaintiff's motions, it is clear that it declined to grant foreclosure of the mortgage without reformation because it determined that the mortgage, as executed, was a nullity because it secured a nonexistent debt.[6]

         In arguing that the court should have foreclosed the mortgage despite this discrepancy and without reformation because foreclosure is an equitable remedy in and of itself, the plaintiff cites to numerous cases largely for the axiom that ‘‘[f]oreclosure is peculiarly an equitable action, and the court may entertain such questions as are necessary to be determined in order that complete justice may be done.'' See, e.g., Hartford Federal Savings & Loan Assn. v. Lenczyk, 153 Conn. 457, 463, 217 A.2d 694 (1966); Federal Deposit Ins. Corp. v. Hillcrest Associates, 233 Conn. 153, 170-71, 659 A.2d 138 (1995). The factual underpinnings of the cases relied upon by the plaintiff, however, are markedly different from the facts of the present case and, thus, we do not interpret them to suggest that a court can foreclose a mortgage that contains a material mistake without first concluding that the requirements for reformation of the mortgage have been satisfied. Although the plaintiff argues that the discrepancy at issue in the mortgage can best be described as a ‘‘scrivener's error'' or ‘‘an inadvertent technical error'' and that the equitable remedy of foreclosure is warranted even without reformation in order to ensure complete justice, our well established jurisprudence on reformation, also an equitable remedy, was the proper prerequisite in order for the plaintiff to correct the purported mistake in the mortgage document.

         The dissent ultimately agrees with the plaintiff and concludes that the trial court erred in declining to grant foreclosure of the mortgage. In the dissent's view, the trial court was required to foreclose the subject mortgage, without first reforming it, despite the fact that the mortgage did not purport to secure her husband's debt. The dissent cites to no case law in this state, or elsewhere, that holds that a court can foreclose a mortgage containing this type of material flaw without first satisfying the requirements to reform the document. Like the plaintiff, the dissent cites generally to case law for the proposition that ‘‘[f]oreclosure is peculiarly an equitable action . . . .'' See, e.g., Federal Deposit Ins. Corp. v.Hillcrest Associates, supra, 233 Conn. 170-71. On the basis of the equitable nature of foreclosure, the dissent concludes that ‘‘[w]hen the essence of a transaction is clear, as it is in this case, a court must look to its ...


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