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HSBC Bank USA, National Association, Trustee v. Nathan

Court of Appeals of Connecticut

January 14, 2020

HSBC BANK USA, NATIONAL ASSOCIATION, TRUSTEE
v.
LESLIE I. NATHANET AL.

          Argued January 15, 2019

         Procedural History

         Action to foreclose a mortgage on certain real property owned by the named defendant et al., brought to the Superior Court in the judicial district of Middlesex, where the defendant Gerri N. Russo was defaulted for failure to appear; thereafter, the defendant Webster Bank, National Association was defaulted for failure to plead; subsequently, the named defendant et al. filed an amended counterclaim; subsequently, the court, Aurigemma, J., granted the plaintiff's motion to strike the amended special defenses and counterclaim in part; thereafter, the named defendant et al. filed a second amended counterclaim; subsequently, the court granted the plaintiff's motion to strike the second amended special defenses and counterclaim; thereafter, the court, Domnarski, J., concluded that the plaintiff was entitled to enforce the note by foreclosing on the mortgage; subsequently, the court, Aurigemma, J., granted the plaintiff's motion for a judgment of strict foreclosure and rendered judgment thereon, from which the named defendant et al. appealed to this court; subsequently, this court dismissed, for lack of a final judgment, the portion of the appeal challenging the trial court's striking of the counterclaim as amended; thereafter, the court, Frechette, J., granted the plaintiff's motion for judgment on the stricken counterclaim as amended and the named defendant et al. filed an amended appeal; subsequently, this court, sua sponte, issued an order staying the appeal pending the final disposition by the Supreme Court in U.S. Bank National Assn. v. Blowers, 332 Conn. 656, 212 A.3d 226 (2019); thereafter, following the release of the opinion in Blowers, the Appellate Court lifted the stay and, sua sponte, ordered the parties to submit supplemental briefing, and the parties thereafter filed supplemental briefs. Reversed; further proceedings.

          Karen L. Dowd, with whom was Scott Garosshen, for the appellants (defendants).

          David M. Bizar, for the appellee (plaintiff).

          Bright, Moll and Harper, Js.

          OPINION

          MOLL, J.

         The defendants, Leslie I. Nathan, Lynne W. Nathan, and Lynne W. Nathan, Trustee of the Lynne W. Nathan Trust Agreement dated November 19, 2001, [1] appeal from the judgment of strict foreclosure and the judgment on their counterclaim, as amended, rendered by the trial court in favor of the plaintiff, HSBC Bank USA, National Association, Trustee.[2] On appeal, the defendants claim that the court erred in striking two of their special defenses, as amended, and their counterclaim, as amended.[3] We reverse the judgments of the trial court.

         The following facts and procedural history are relevant to our disposition of this appeal. In August, 2014, the plaintiff commenced this foreclosure action. In its complaint, the plaintiff alleged the following relevant facts. On or about April 12, 2007, Leslie and Lynne executed a promissory note, in the principal amount of $560, 000, in favor of Wells Fargo Bank, N.A. (Wells Fargo). To secure the note, the Lynne Trustee executed a mortgage on real property located at 115 Second Avenue in Westbrook. On April 17, 2007, the mortgage deed was recorded on the Westbrook land records. The mortgage was to be assigned to the plaintiff by virtue of an assignment to be recorded on the Westbrook land records, and the plaintiff was the holder of the note. Leslie and Lynne thereafter defaulted on the note, [4] and they failed to cure the default following receipt of written notice of the default from the plaintiff. Thereafter, the plaintiff elected to accelerate the balance due on the note, to declare the note to be due in full, and to foreclose the mortgage.

         On June 8, 2015, the defendants filed a first amended answer, special defenses, and counterclaim.[5] The defendants asserted three special defenses: (1) lack of standing; (2) laches; and (3) unclean hands. In the counterclaim, the defendants asserted the following twelve counts: (1) equitable reduction of interest on the ground that the plaintiff failed to mitigate its damages (count one); (2) the plaintiff was improperly pursuing attorney's fees and costs accrued in relation to a prior foreclosure action, with docket number MMX-CV-10-6002743-S (prior foreclosure action), which the plaintiff had commenced against the defendants in 2010 and which was dismissed in 2013 (count two); (3) intentional infliction of emotional distress (count three); (4) negligent infliction of emotional distress (count four); (5) breach of the covenant of good faith and fair dealing (count five); (6) unjust enrichment (count six); (7) violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (count seven); (8) violation of the Creditors' Collections Practices Act, General Statutes § 36a-645 et seq. (count eight); (9) vexatious litigation (count nine); (10) fraud (count ten); (11) negligence (count eleven); and (12) violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. (count twelve). As relief, the defendants sought, inter alia, compensatory damages and an equitable reduction in principal and interest.

         On July 8, 2015, the plaintiff filed a motion to strike the defendants' first amended special defenses and counterclaim, claiming, inter alia, that the defendants' claims and defenses did not relate to the making, validity, or enforcement of the note or mortgage. The defendants objected to the motion. On December 28, 2015, the trial court, Aurigemma, J., issued a memorandum of decision granting the motion to strike as to the first amended laches defense, unclean hands defense, and counterclaim in its entirety.[6]

         On January 12, 2016, the defendants filed a second amended counterclaim and special defenses. In the counterclaim, the defendants repleaded counts five, six, ten, and twelve of the first amended counterclaim. They did not replead counts one, two, three, four, seven, eight, nine, or eleven thereof. In addition, the defendants reasserted their first amended special defense asserting lack of standing, which had not been stricken by the court, and repleaded laches as a special defense, but they did not replead unclean hands as a special defense.

         On February 9, 2016, the plaintiff filed a motion to strike the defendants' second amended laches defense and counterclaim, claiming, inter alia, that the defendants' claims and second amended laches defense failed to satisfy the making, validity, or enforcement test. The defendants objected to the motion. On March 28, 2016, the court issued an order granting the motion to strike the second amended laches defense and counterclaim in its entirety.

         On August 25, 2016, following a one day court trial conducted on May 19, 2016, the court, Domnarski, J., issued a memorandum of decision concluding that the plaintiff was entitled to enforce the note by foreclosing the mortgage. The court also made findings regarding the debt and the value of the subject property. Thereafter, the plaintiff filed a motion for a judgment of strict foreclosure, which the court, Aurigemma, J., granted on February 21, 2017. This appeal followed.[7]

         On January 17, 2019, following oral argument held on January 15, 2019, this court, sua sponte, issued an order staying the appeal pending the final disposition by our Supreme Court of U.S. Bank National Assn. v. Blowers, 332 Conn. 656, 212 A.3d 226 (2019), in which the court resolved the dispositive certified question of whether special defenses and a counterclaim asserted in a foreclosure action must ‘‘directly attack'' the making, validity, or enforcement of the note or mortgage. On August 27, 2019, following the release of our Supreme Court's opinion in Blowers, this court lifted the appellate stay and, sua sponte, ordered the parties to submit supplemental briefs to address the impact, if any, of Blowers on the defendants' claims on appeal.[8] The parties thereafter filed supplemental briefs in accordance with this court's order.

         I

         Before reaching the merits of the defendants' claims on appeal, we first address the plaintiff's argument that the defendants abandoned (1) counts one, two, three, four, seven, eight, nine, and eleven of the first amended counterclaim (nonrepleaded counts) and (2) their first amended unclean hands defense, thereby forfeiting their appellate rights to challenge the court's decision striking them. We conclude that the defendants (1) preserved their appellate rights as to the nonrepleaded ...


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